XCHRX LAI SIU HONG v. PEAK SKY INTERNATIONAL LTD. t/a QUICKLY

HCA11911/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A11911 OF 1999

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J U D G M E N T

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1. This is an appeal by the plaintiff against the decision of the master.

The tenancy

2. The plaintiff was the landlord and the defendant was the tenant of a commercial property ("the property"). The parties signed a tenancy agreement on 27 March 1999 for a term of three years, commencing from 1 May 1999 and terminating on 30 April 2002.

3. After entering into the tenancy agreement, the defendant discovered that there were three Building Orders registered by the Government against the property. Two of these orders were concerned with illegal rooftop structures on the building in which the property was situated. The third Building Order was in respect of an illegal extension outside the wall of the property itself. This order required the removal of extension on or before 29 August 1998.

4. On 27 April 1999, the defendant's solicitors, M/s Hui & Lam ("Hui & Lam"), wrote to the plaintiff alleging that he had made misrepresentation on the illegal construction and requiring him, amongst other things, to provide documentary evidence on or before 29 April to prove that the third Building Order had been complied with, failing which the defendant would rescind the tenancy agreement.

5. On 6 May 1999, the plaintiff's solicitors, M/s F. Zimmern & Co. ("Zimmern"), informed Hui & Lam that the demolition and reinstatement required by the Government had been completed. The letter stated that :

"Completion of the aforesaid work is observable from an inspection of the above property."

No written confirmation from the Building Authority was sent.

6. On 8 May 1999, Hui & Lam informed Zimmern that by reason of the plaintiff's misrepresentation and failure to provide the documentary evidence, the defendant would rescind the tenancy agreement. The key to the property was also returned to Zimmern.

7. The plaintiff claimed that the defendant had repudiated the agreement and seeks damages including rental from 1 May 1999 to 30 April 2002, and pursued an O.14 judgment against the defendant. The master refused the application.

Who was in breach

8. The central issue is : who was in breach of the tenancy agreement?

Misrepresentation

9. There are obviously dispute on facts on the question of misrepresentation. The defendant's case is that before the tenancy agreement was signed, the defendant's representative had noticed an internal staircase in the property, aluminium windows and extensions outside the wall of the property. She asked whether the windows and structures were illegal structures and whether there was breach of the Buildings Ordinance. The plaintiff's representative, who is the son of the plaintiff, informed the defendant's representative that the aluminium windows and the structures erected on the outside of the wall of the property were not illegal and there was no breach. The plaintiff had in fact submitted the drawings of the additional works to the Government and they were exempted from the Buildings Ordinance. These representation was repeated later on.

10. The defendant said that the costs of removing these additional structures were discussed by the parties and the plaintiff agreed to demolish the staircase, aluminium windows and outside structures. A supplemental agreement recording the plaintiff's agreement to carry out the work was signed by the parties.

11. The plaintiff's case is that he and his son had told the defendant that the property had some illegal structures but denied that he and his son had made the representation as alleged by the defendant. The dispute on facts cannot be resolved on affidavit evidence alone.

12. Mr Liu, Counsel for the plaintiff, submitted that the defence of misrepresentation is incredible because the supplemental agreement referred to illegal structures. I do not think that the use of such words would necessarily show that there was no misrepresentation at all. After all, it is conceded by the plaintiff that the supplemental agreement did not cover the extension outside the wall of the property. If there was in fact misrepresentation, then the agreement by the plaintiff to remove some of the illegal structures does not mean that this issue can no longer be raised. The presence of the third Building Order clearly is connected with the issue of misrepresentation.

Risk of enforcement

13. The risk of enforcement action by the Building Authority was obviously a real concern to the quiet enjoyment of the defendant of the property. Whether a visual inspection was sufficient to confirm that the Building Order had been complied with is not a matter that can be resolved in an O.14 application.

14. Clause 10 of the tenancy agreement enabled the plaintiff to enter the property and carried out repair work. The existence of the clause does not necessarily mean that the quiet enjoyment by the defendant as a tenant can somehow be overridden.

15. As to the question of short notice given to the plaintiff to come up with an answer whether the Building Orders had been complied with, I just cannot say at this stage that the matter was raised too late that I can safely ignore it. Certainly Zimmern had not asked for time to provide the evidence of compliance.

Completion of work relating to the staircase

16. Hui & Lam had also asked in the letter for evidence from the plaintiff that the work relating to the demolition of the staircase had been complied with. Zimmern did not deal with this matter in the correspondence. While the plaintiff stated that the work had been completed in mid April 1999, the defendant's case is that in mid April 1999 when she visited the property, she was surprised by the massive scale of the demolition work that had not been completed.

Appeal dismissed

17. There are sufficient triable issues raised in this case which require the case to go to the trial. The master is correct in refusing the judgment and the appeal is accordingly dismissed.