NIP WUN LAN v. CHAN OI LING

1984 No. 1145

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff's claim is for rescission of a tenancy agreement or for damages on the ground of misrepresentation or, in the alternative, for damages on the ground of negligence. While the claim for damages on the ground of negligence was not expressly abandoned, counsel did not address themselves to this point in their speeches. In any event, I think that this claim so overlaps with the claim for damages for misrepresentation that if the latter fails the claim in negligence must necessarily fail also.

2. For her part, the defendant counterclaims for arrears of rent, mesne profits and damages for breach of contract.

3. In January 1983 the plaintiff sold her fast-food shop at Tai Koo Shing because it was too far from her home in Tsim Sha Tsui. She decided to look for suitable premises to carry on a food business nearer to her home. She discovered a shop space at the ground floor of No. 20, Minden Avenue (the premises). The same day, that was the 25th or 26th April, 1983, she called The Sun & Moon Estate Agency and arranged to visit the premises. At the premises she found a rectangular shape of about 500 sq. ft. which was in good condition, with a false ceiling extending throughout the premises and a good floor. The estate agent, a Mr. Wu, was unable to say whether the plaintiff might use the premises as a restaurant. Accordingly, a further visit was arranged for the following day when the landlord's agent would be present.

4. The plaintiff met the landlord's agent and daughter, a Madam HON Kwai-yu, at the premises the following day. Madam Hon had no objection to the plaintiff using the premises as a restaurant. Rent and the term of the tenancy were agreed. A tenancy agreement was signed in the office of Messrs. Yung, Yu, Yuen on 10th May, 1983.

5. The plaintiff then expended considerable sums of money in decorating and fitting out the premises as a restaurant. She opened for business on about 12th July. On 15th July, her husband who was sharing the business with her, formally applied to the Urban Council for a general restaurant licence. By letter of the same date the Urban Council in a proforma reply warned the plaintiff, or her husband, not to start work on the premises until details of Urban Council requirements had been sent to them, and not to start business before obtaining a licence. The procedure to be adopted by the Urban Council was also explained. By letter dated 16th August, 1983, which the plaintiff received a day or two thereafter, the Urban Council advised of the matters which needed to be remedied before they could consider issuing a licence. There were two matters of particular concern to the plaintiff. One was that the user of the premises was domestic and not business. The other was that the premises included an unauthorized extension.

6. The plaintiff contacted Madam Hon on the telephone and explained the problems. She said it would be necessary to get a professional person to negotiate with the Building Authority over the remedial work. Madam Hon told the plaintiff to go ahead and retain such a person as she was busy. The plaintiff or her husband retained an authorized person, Mr. Kotwall, to act on their behalf. However, before any real progress had been made, the Urban Council obtained a closure order against the plaintiff's restaurant in December 1983. The plaintiff was no longer able to carry on the restaurant business and consulted her solicitors.

7. The plaintiff complains that Madam Hon made misrepresentations as to the user and area of the premises, misrepresentations which were either express or implied by her conduct.

8. There is no dispute that Madam Hon knew that the plaintiff wanted to use the premises as a restaurant. Nor is there any dispute that the plaintiff knew that, whatever permission Madam Hon may have given, the plaintiff had to obtain a Restaurant Licence from the Urban Council. After some searching of her memory in cross-examination, the plaintiff said that Madam Hon told her;

                "You can use the premises for business purposes. No objection if you use it as a restaurant."

9. In her cross-examination, Madam Hon agreed that she told the plaintiff the premises could be used for business purpeses "because the premises had been let to many tenants before who all used it as shops for business or commerce since the 1960s". Madam Hon also said, and I accept her evidence on this, that she had no knowledge of the user specified in the Building Occupation Permit.

10. It is pertinent to note that both the Land Office and the Rating and Valuation Department have acknowledged the user of the premises for business purposes for many years. There was also agreed evidence that, if the Plaintiff had fulfilled the Urban Council's requirements, change of user would have been authorised.

11. It is clear to me that the plaintiff was principally concerned with whether Madam Hon had any objection to the premises being used as a restaurant. Earlier in her cross-examination the plaintiff agreed that it was up to the Urban Council to decide whether or not the premises could be used as a restaurant and said, "I meant if she (Madam Hon) agreed with me to use the premises as a restaurant, as some landlords do not like to use premises as apartment houses or restaurant. I had to ask for her consent to see if I could use it as a restaurant."

12. I am satisfied and so find that Madam Hon's representation related only to the user of the premises which she was prepared to tolerate and not to the user shown in the occupation permit and authorized by Government. However, even if the representation had been that for which the plaintiff contends, I have no doubt that it did not act as an inducement to the plaintiff to enter into the agreement. Hindon Avenue, as the plaintiff acknewledged and as the agreed bundle of photographs shows, consists of a number of buildings similar to that containing the premises, the ground floors of which are almost all used as shops or restaurants. Being in the heart of the Tsim Sha Tsui tourist area, the premises were ideally located for a restaurant. Seeing similar businesses flourishing in neighbouring buildings the plaintiff would, undoubtedly, have proceeded with her enterprise regardless of any knowledge of the authorized user of the building.

13. It is disputed whether the plaintiff's first meeting with Madam Hon took place at the premises or in the Sun & Moon offices. However, there is no question but that the premises were discussed wherever the meeting was held. The evidence of Madam Hon in relation to this meeting was somewhat vague and imprecise. The plaintiff was clear about what was discussed, gave her evidence in some detail and, in cross-examination on this point, she was, as on many other peints, commendably frank. I therefore accept her evidence on this.

That was hardly a firm assurance as to the size of the premises.

14. In cross-examination about the plans the plaintiff said,

15. Clearly the plaintiff recognized that Madam Hon had not given a definite answer as to whether the premises were in the same state and shape as when originally constructed. That hardly justifies a pleading that "the latter (Madam Hon) also replied in the affirmative". I find therefore that there was no express misrepresentation as to the area of the premises.

16. By re-amendment to the amended statement of claim the plaintiff pleaded that the defendant had, by conduct, represented to the plaintiff that the whole of the premises was lawfully erected, might be used for business or restaurant purposes, and contained no unauthorized erection, addition or extension. The conduct consisted of the fact that Madam Hon arranged a site inspection to show the plaintiff the premises and that negotiations for the tenancy agreement were carried out at the premises instead of at some other place.

17. For the plaintiff, Mr. Yuen, contended that Madam Hon showed the premises to the plaintiff and thereby conveyed to her an idea that the premises were of the apparent size with no unlawful extension and I think, although he did not expressly say so, that the premises could be lawfully used for business purposes.

18. I do not think that this conduct could amount to a representation as to user. Even if it did, I have no doubt that it would not have acted as an inducement to the plaintiff to sign the tenancy agreement. Having regard to the use to which the adjacent ground floor premises were being put, the plaintiff would undoubtedly have proceeded with her venture.

19. The implied representation as to area, however, is a different matter. It matters not, I think, whether the plaintiff was shown the premises personally by Madam Hon or whether she saw them in Madam Hon's absence but with her permission. In my judgment, the act of showing premises to a prospective tenant amounts to a warranty that the landlord has the title to and may let the whole of the premises shown and that the premises will not be diminished because of the need to remove some unauthorized addition or extension. Unfortunately for the plaintiff, however, she was, as she admitted in cross-examination, concerned to find out how big the premises were. She made enquiries of Madam Hon and as appears from the passage in cross-examination to which I have referred earlier, Madam Hon was vague and unable to give a definite answer. In my view that qualified what was represented to the plaintiff by simple conduct and put the plaintiff upon enquiry. Regrettably the plaintiff did not make any further enquiries and simply entered into a bad bargain. It may be that the plaintiff has, or had, a claim for breach of covenant of quiet enjoyment. However, that was neither pleaded nor argued. In the circumstances, the plaintiff's claim must fail and is dismissed with costs.

20. By amended counter-claim the defendant seeks arrears of rent and rates, mesne profits, damages for breach of contract and a declaration that the plaintiff's deposit be forfeited. For the plaintiff, Mr. Yuen did not seek to contest the counter-claim should the plaintiff's claim fail. Therefore, there will be judgment for the defendant for arrears of rent of $66,500 and arrears of rates in the sum of $1,835.66.

21. Mesne profits were claimed for the period from date of notice of termination until possession. There is, unfortunately, no clear evidence about when possession was delivered. However, the claim for arrears of rent is for the period September 1983 to March 1984 inclusive. As the plaintiff ceased business, on her own admission, in December 1983, this suggests that the defendant recovered possession in March at the latest. Accordingly, there will be no judgment for mesne profits and rates.

22. The claim for damages amounts to $126,000. This is based partly on the rent provided for in the tenancy agreement and partly on the difference between that rent and the rent at which the defendant was subsequently able to let the premises for the unexpired portion of the term of the agreement. I was referred to the case of Annie CHAN v. LAU Wai Kwong and others ⁽¹⁾ . In that case Mantell, J. ruled that the plaintiff was entitled to recoverdamages equal to the rent of the unexpired portion of a lease. It seems to me that that principle should apply in the present case. I award damages as claimed accordingly.

23. Finally, the defendant is entitled to a declaration that the plaintiff's deposit of $28,500 is forfeited.

24. The defendant will also have her costs.

(1) Action No. 5062 of 1982.