NG YIN NEI v. LEE CHICK CHOI

CACV 28/2013 & CACV 29/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 28 OF 2013

(ON APPEAL FROM DCCJ 563 OF 2010)

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AND

CIVIL APPEAL NO 29 OF 2013

(ON APPEAL FROM DCCJ 563 OF 2010)

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(HEARD TOGETHER)

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J U D G M E N T

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Hon Cheung JA:

1. I agree with the judgment of Barma JA and the orders he proposes to make.

Hon Kwan JA:

2. I agree with the judgment of Barma JA.

Hon Barma JA:

3. These appeals arose out of District Court proceedings before HH Judge Chow concerning a dispute between the plaintiff landlord and the defendant tenant.

4. By a tenancy agreement dated 10 June 2009, the plaintiff let to the defendant Flat F on the 7^th floor of Banyan Mansion in Taikoo Shing (“the premises”) for a period of two years from 25 June 2009 to 24 June 2011 at a monthly rental of HK$18,000.  There was a short rent-free period between 15 and 24 June 2009, during which the defendant and his family moved into the flat.

5. Less than a month later, the tenant alleged that there were defects relating to the flooring in the flat, with parts of the flooring having risen up resulting in the floor becoming uneven.  Correspondence between the parties ensued in July and August 2009 and again between October and December 2009.  The plaintiff’s husband inspected the premises on 25 July 2009, and the plaintiff herself inspected the premises on 2 August 2009 and again on 13 December 2009. Following an abortive attempt by the plaintiff to have some repairs done on 21 December 2009, which failed because the defendant refused to allow the plaintiff’s contractor access to the premises on the basis that there was no point in doing repairs without ascertaining the underlying cause of the problem, the defendant withheld payment of rent.

6. The plaintiff regarded the non-payment of rent as a repudiatory breach by the defendant of the tenancy agreement, and commenced these proceedings against the defendant.  By her Statement of Claim dated 12 February 2010, the plaintiff accepted the defendant’s repudiation of the tenancy agreement, and made a claim for possession of the property, arrears of rent up to the date of termination and mesne profits thereafter.  The defendant in turn counterclaimed for breaches of the tenancy agreement on the plaintiff’s part (in particular under clause 9 thereof, which required the plaintiff to keep the premises in proper repair), seeking damages totalling some HK$154,069.24 for various alleged losses.

7. The plaintiff obtained summary judgment in respect of her claims, so that the trial before the Judge was solely in respect of the defendant’s counterclaim. Following a six-day trial, the Judge found that the plaintiff had been in breach of the tenancy agreement, but considered that not all of the damages claimed had been made out. 

8. In his judgment, the Judge found that the premises were in a state of disrepair as at 2 August 2009, in that the condition of the flooring was defective and uneven to a significant extent.  He rejected the plaintiff’s case that the defects at that date were de minimis, and not such as to trigger the obligation to repair under clause 9 of the tenancy agreement.  He found that despite continued complaints from the defendant (in correspondence in August and from October to December 2009), the plaintiff took no steps to rectify the situation, and rejected an argument by the defendant that no sufficient notice of want of repair had been given between August and December 2009, holding that the plaintiff was in breach of her obligations under the tenancy agreement.  The Judge further rejected the plaintiff’s contention that the defendant had been unreasonable in refusing to permit her contractor access to the flat to carry out repairs on 21 December 2009, finding that the defendant was not acting unreasonably as the plaintiff was only intending to make repairs to the flooring without identifying the underlying cause of the problem.  Although the Judge rejected most of the items of damages for which the defendant sought compensation, he awarded some HK$56,676.74 for distress, inconvenience and loss of enjoyment of the premises, dividing this sum into HK$40,000 as general damages, and HK$16,676.74 for loss of use of rental areas in respect of parts of the flat which were said to have been affected.

9. He therefore awarded the defendant damages of HK$56,676.74.  He also awarded the defendant 80% of the costs of the counterclaim by way of a costs order nisi. In a subsequent ruling on an unsuccessful application by the defendant to vary the costs order nisi, the Judge explained that he considered that it was appropriate to award the defendant 80% of his costs because the time and costs spent on the items in respect of which the defendant was unsuccessful represented about 10% of the overall costs of the counterclaim, so that the defendant should recover 90% of his costs, but pay 10% of the plaintiff’s costs, resulting in an overall order requiring the plaintiff to pay 80% of the defendant’s costs of the counterclaim when these cross-orders as to costs were set off against each other.  He also ordered that the costs of the application to vary the costs order nisi should be paid as to 80% by the plaintiff to the defendant, apparently on the basis that they should be regarded as part of the costs of the trial.

10. From these orders, both parties appealed (leave to appeal having been granted on 5 February 2013). There were three aspects to the appeals:

(1)  The plaintiff’s appeal on liability (CACV 28/2013), by which the plaintiff contended that the defendant’s counterclaim should have been dismissed.

(2)  The defendant’s cross-appeal in relation to the costs order in respect of his counterclaim (Supplemental Respondent’s Notice in CACV 28/2013), by which he contended that he should have been awarded the whole, or alternatively 90%, of the costs of the counterclaim.  At the hearing, Ms Gwilt, appearing for him, indicated that the defendant would only seek 90% of his costs.  The defendant had also (when acting in person) cross-appealed seeking to increase the amount of damages he had been awarded, but this part of his cross-appeal was abandoned before the hearing of the appeals.

(3)  The plaintiff’s appeal on costs (CACV 29/2013), by which she sought to be awarded the costs of the hearing in respect of the defendant’s application to vary the costs order nisi.

11. Mr Lee, who appeared for the plaintiff before us and in the court below, submitted that the Judge had erred in the following respects:

(1)  The Judge was wrong to find that the flooring in the flat had become uneven to a serious or significant extent by 2 August 2009, and should have found that any undulations in the flooring were de minimis, and not such as to put a reasonable landlord on notice of any want of repair, so that the plaintiff was not in breach of her obligations by failing to take steps to repair the flooring immediately thereafter.

(2)  The Judge was also wrong to have rejected the plaintiff’s evidence that as at 13 December 2009, the only problems in the flat related to undulations in the flooring within the master bedroom, and that there was no problem with the flooring in the corridor leading to the master bedroom.

(3)  Further, the plaintiff was not in breach of the tenancy agreement between August and December 2009, as the parties were negotiating as to the engagement of a surveyor during that period, with a view to identifying the cause and extent of such problem as might have existed, and the defendant had not given proper notice of the need for repairs in this period.

(4)  Additionally, the plaintiff was not in breach of the tenancy agreement after 21 December 2009, because of the defendant’s unreasonable refusal to permit her contractor access to the flat in order to repair the flooring inside the master bedroom.

(5)  In any event, the plaintiff could not have been in breach of the tenancy agreement after 12 February 2010, as the tenancy agreement had been terminated on that date by her acceptance of the defendant’s repudiation of the tenancy agreement by failing to pay the rent.

(6)  As far as damages were concerned, the Judge had erred in a number of respects, namely:

(a)  He had failed to have regard to the defendant’s failure to mitigate his losses by refusing to allow repairs to be carried out in December 2009.

(b)  He was wrong to have awarded damages for a period up to 31 May 2010, when the tenancy had been terminated on 12 February 2010.

(c)  He was wrong to have awarded any damages for loss of use of rental areas, when this aspect of the damages claim had been abandoned by the defendant through his counsel, and when it would in any event have been erroneous to make any award for this, as it would overlap with the damages for distress and give rise to double recovery in respect of the same loss.

12. The first two of these points involve challenges to findings of primary fact by the Judge.  Mr Lee acknowledged that in order to succeed in such a challenge, it would be necessary for him to satisfy us that the finding was plainly wrong, in that it was unsupported by evidence, or could not stand in the light of the incontrovertible evidence before the court (see eg Ting Kwok Keung v Tam Dick Yuen [2002] HKCFAR 336; Tin Kwong International Enterprise Co Ltd v San Tung [2006] 2 HKLRD 185).  It is not sufficient that the Court of Appeal may harbour some doubts about the correctness of the finding by the court below, or that it would itself have come to a different conclusion on the evidence – if the challenged finding was one which it was open to the court below to reach on the evidence before it, the Court of Appeal will not interfere with it.

13. So far as the challenge to the Judge’s finding as to the state of the premises as at 2 August 2009 is concerned, Mr Lee submitted that:

(1)  It had always been the plaintiff’s case that there was some minor unevenness in the flooring near the balcony door of the flat, but that this was, and remained, de minimis until December 2009.  While the defendant had complained on 2 August 2009 about some other parts of the flooring, these did not involve any undulation, but merely sounded hollow.  Thus, as the premises were in the same condition as at the beginning of the lease, they were not in disrepair so as to trigger the landlord’s obligation to repair pursuant to clause 9 of the tenancy agreement.

(2)  The Judge’s conclusion that the extent of the problem was greater than at the commencement of the lease, and could properly be described as serious (and thus not de minimis), was based on unreliable or equivocal evidence, namely:

(a)  A video recording of the first inspection from which the Judge highlighted certain statements made by an estate agent who had acted for the plaintiff, Mr Frankie Yeung which the Judge considered demonstrated that there was such a problem, while failing to comment on other statements which Mr Lee submitted pointed the other way, and failing also to comment on what was visually recorded, which Mr Lee submitted did not show any serious or significant undulations in the flooring.

(b)  A letter from a Miss Irene Lau, the estate agent who showed the flat to the defendant, in which she states that she did not notice any unevenness in the flooring near the patio during the viewing, which Mr Lee submitted was not particularly reliable since it related to what would have been a routine viewing some two years previously, and there was no evidence as to what exactly Ms Lau had done by way of inspecting the premises on the occasion in question.

(3)  The Judge had failed to have regard to various unsatisfactory aspects of the defendant’s evidence which, it was said, cast doubt on the credibility of that evidence and suggested that it had been exaggerated both as to the extent of the problem and the extent of the inconvenience caused to the defendant and his family.

14. With respect to Mr Lee, I do not think that these arguments can lead to the conclusion that the Judge was plainly wrong in his finding as to the condition of the premises as at 2 August 2009, so as to justify this court in interfering with it.

15. We were not provided with a full transcript of the evidence at the trial, but from the available extracts of the evidence it was clear that the extent of the problem of which the defendant was complaining as at 2 August 2009 was not limited to the part of the flooring at the patio or balcony door, but extended to the flooring in the corridor leading from the living room towards the master bedroom.  Mr Lee quite properly acknowledged this in the course of his submissions, in which he also described the complaint about the area near the patio door as the “main” or “chief” complaint, implying (as he accepted) that there were complaints in respect of other areas as well, and that these were not limited to areas with no visual blemish, but which merely sounded “hollow”.

16. Further, so far as the video recording is concerned, the statements of Mr Yeung that the Judge referred to in the judgment (to the effect that the parties should see how to resolve the problem and that the present situation was not “too” serious) do seem to me to indicate the existence of a problem which required to be dealt with, while the statements relied on by Mr Lee (to the effect that Mr Yeung had seen the problem before, and that there were no indentations or things of that sort) do not rule out the existence of a problem of the nature described by the defendant (which was that the flooring had risen up or protruded).  Further, the extent of the problem is not clearly discernible from the visual evidence in photographs and the video which were before the Judge, so that such evidence was at best of limited assistance.

17. As to Miss Lau’s evidence, and the criticisms made of the defendant’s evidence, these are matters which are well within the scope of the weighing of conflicting evidence which it is quintessentially the role of the Judge to carry out.  Moreover, the argument that the defendant had exaggerated the extent of the problem was premised on the suggestion that the only area of unevenness was at the patio door, which was (as explained in paragraph 15 above) not the case.  In these circumstances, it cannot, in my view, be said that the Judge was plainly wrong in coming to the conclusion that the state of the premises at that stage was such as to trigger the plaintiff’s obligation to repair.

18. The position in relation to the question of the state of the premises as at 13 December 2009 is similar.  Mr Lee criticised the Judge’s conclusion that the state of the flat at this point was probably very similar to that shown in a surveyor’s report prepared by the defendant’s surveyor some 10 days later on 23 December 2009.  He submitted that the plaintiff’s case was that the only area observed to suffer from undulations in the flooring on 13 December 2009 was inside the master bedroom (and that this was the reason why she had agreed to have this area repaired).  He suggested that the reliance on the subsequent surveyor’s report was misplaced, because there was “uncontroverted evidence” that the state of the premises had deteriorated suddenly in December 2009.  He repeated his criticisms of the credibility of the defendant’s own evidence, and submitted that the Judge was wrong to accept that evidence.

19. Again, with respect, this complaint cannot get off the ground.  Given that the position in August 2009 was that the defects and undulations were in the corridor leading to the master bedroom, the Judge was perfectly entitled not to accept the plaintiff’s evidence that the only area affected in December was inside the master bedroom.  Nothing had been done in the intervening months about the problems identified in August, and there was therefore no reason to suppose that the unevenness in the corridor outside the master bedroom had somehow resolved itself.  Moreover, the surveyor’s evidence (which was not seriously challenged) was that the problem was caused by seepage of water over a period of time, and there was in any case no suggestion or evidence of any incident of flooding of the flat in December 2009 – this would suggest that the problem was a gradual one, which deteriorated over time, a state of affairs which supported the Judge’s view that the position as at 13 December 2009 was probably not much different from that on 23 December 2009.  This also tells against the claim that there was a sudden deterioration in December 2009.  For all of these reasons, I do not consider that the Judge can be faulted in respect of his conclusions as to the state of the premises as at 13 December 2009.

20. In the light of the Judge’s findings as to the state of the premises as at 2 August 2009 and 13 December 2009, which I would not disturb, the plaintiff was, at all material times after 2 August 2009, in breach of her obligation to keep the premises in repair, at least until 21 December 2009 – I shall deal below with the argument that the defendant’s refusal to allow the plaintiff’s contractor into the premises to effect repairs to the flooring in the master bedroom had the effect of relieving the plaintiff from that obligation from that point onwards (or meant that the defendant had failed to mitigate his losses by refusing to allow repairs to be carried out).

21. As to Mr Lee’s third point, Mr Lee accepted that it would not arise if we were satisfied that the Judge’s finding as to the state of the premises as at 2 August 2009 was justified.  Mr Lee accepted that the defendant’s letters prior to that date amounted to sufficient notice of a want of repair, if the premises were in such a state that repair was actually required.  As I would uphold the Judge’s findings in this respect, it follows that the necessary notice had been given, and it is not strictly necessary to deal with Mr Lee’s arguments in respect of this point.  However, for completeness, I shall do so briefly.

22. Mr Lee submitted that the defendant’s letters in August 2009 indicated that the defendant was proposing that a surveyor should be instructed to identify the scope of the problem and the works that needed to be carried out, and that the situation was therefore on all fours with the position in Al Hassani v Merrigan (1988) 20 HLR 238, in which the English Court of Appeal held that correspondence in which a tenant proposed that a surveyor should be appointed to advise as to what defects there were in the rented premises that might require to be repaired by the landlord amounted only to a proposal for investigations to be carried out so as to provide a basis for consideration of what, if any, works were required, and therefore did not amount to a notice that the property was in fact in disrepair (that issue being left over for further consideration in the light of the report to be obtained).  However, I do not think that that case is authority for the general proposition which Mr Lee put forward: that a proposal to instruct surveyors to investigate necessarily means that there is no adequate notice of disrepair.  The facts in Al Hassani were different to those in this case.  There had in that case been no prior notice or inspection of the premises.  More importantly, in the present case, the defendant had already given notice of the defects alleged to exist, and had already called upon the plaintiff to rectify them.  In the letter in which the defendant proposed to instruct surveyors, he commenced by reiterating his complaint that the property was in a state of disrepair, and made the proposal as a means of moving forward in the face of the plaintiff’s apparent reluctance to do anything about it.  It was not a suggestion that surveyors should be appointed to ascertain whether the premises were in disrepair, and if so, what should be done, but was a repetition of the complaint already made.  The appointment of the surveyor was to be made against that background and was for the more limited purpose of identifying the remedial works needed.  Thus, even if there had been no prior notice of disrepair (as there was in the correspondence prior to the 2 August 2009 inspection), which had been found to have been justified (given the Judge’s findings, which I would uphold, as to the actual state of the premises on the date of that inspection), I would have held that the subsequent letters in August 2009 were also sufficient notice to the landlord of the need to repair the premises.

23. As for Mr Lee’s fourth point, he submitted that as the defendant had initially agreed (following the inspection on 13 December 2009) that the plaintiff should arrange for repairs to be done to the master bedroom flooring, it was unreasonable for him to go back on that agreement and refuse entry to the plaintiff’s contractor when he attended at the premises on 21 December 2009, and that in consequence, the plaintiff should be released from any further obligation to repair the premises.  The background to this point is that while it appears that the defendant had indeed so agreed initially, on realising that the contractor was only to carry out repairs without seeking to ascertain the root cause of the problem, the defendant informed the plaintiff that the work should be postponed until after the defendant’s surveyor had investigated and reported on the cause of the problem.  Although the plaintiff asserted that it was intended and agreed that the contractor should investigate as well as carry out repairs, the Judge rejected this evidence, holding that it had not been agreed that the contractor should investigate the cause of the problems.  This finding was not challenged on appeal.  In these circumstances, it does not seem to me that the defendant, on realising that the scope of the work was to be limited to the master bedroom, and more importantly was not intended to get to the bottom of the problem by identifying the underlying cause of the defects, was acting unreasonably in declining such temporary measures at that stage.

24. Mr Lee’s fifth point was that in any event, the plaintiff’s obligation to repair must have come to an end when the lease was terminated on 12 February 2010.  Mr Lee submitted that in refusing to pay rent after December 2009, the defendant was in repudiatory breach of the tenancy agreement, which the plaintiff accepted by her issuance of the writ in these proceedings on that date.  He pointed out that although the defendant gave up possession on 31 May 2010, it was never the defendant’s case that the date of forfeiture was later than the date on which the writ in these proceedings was issued, or that the defendant was entitled to exercise a right of set off of his damages against the rental that was due, so as not to be in repudiatory breach of the tenancy agreement. Miss Gwilt accepted that the defendant had not advanced such a case below.  It would therefore seem that this point is well founded.  However, at the end of the day, it goes only to the extent of the damage suffered by the defendant.  Although Mr Lee contended that the damages should be reduced to take into account the shorter period for which they should be awarded, I do not think that this follows, for the reasons given below in relation to Mr Lee’s sixth set of arguments, in relation to the quantum of the defendant’s counterclaim.

25. So far as damages are concerned, the argument as to mitigation (see paragraph 11(6)(a) above) must be rejected for the reasons I have given in paragraph 23 above.  As to the argument summarised in paragraph 11(6)(c) above, Ms Gwilt agreed that the claim for loss of use of rental areas had been abandoned, but submitted that as the Judge expressly disavowed any intention to allow any element of double recovery, and the claim for damages in respect of inconvenience and distress was for general damages which were at large, the court should regard the Judge’s decision as being to award an overall amount of damages in the amount that he did, and to uphold the award on this basis.  So far as the argument that the period for which damages should be awarded fell to be reduced for the reasons given in the previous paragraph, Ms Gwilt submitted that the amount of damages in fact awarded was in any event an appropriate award in all the circumstances of this case.  Mr Lee responded that this last point had not been foreshadowed in the defendant’s respondent’s notice or submissions, but quite fairly accepted that the plaintiff could not point to any real prejudice if the point were now taken.  In my view, even though the route by which the Judge arrived at his final figure in respect of damages might be open to question, the amount awarded is nonetheless a reasonable one in the circumstances of this case, and I would not be disposed to disturb it.

26. For all of the foregoing reasons, I would dismiss the plaintiff’s appeal in CACV 28/2013 respect of liability and quantum.

27. Turning to the defendant’s cross-appeal in respect of the Judge’s refusal to vary his costs order nisi, it is clear from the reasons given by the Judge in his ruling on that application that he proceeded on the basis that he was making cross-orders as to costs in respect of those parts of the counterclaim on which the defendant had succeeded, and those parts on which he had failed.  While it is open to a court to make cross-orders in exceptional circumstances, there do not seem to me to be any exceptional circumstances in this case that would justify the making of cross-orders, and Mr Lee could not suggest that there were, other than the fact that the elements on which the defendant had failed were self-contained, separate and distinct.  But that is not, in my view, an exceptional circumstance.  There is, in truth, nothing particularly exceptional, still less unreasonable, in relation to the way in which the defendant formulated or litigated his counterclaim so as to justify going further than depriving him of his costs relating to the unsuccessful elements of his counterclaim.  I would therefore allow the cross-appeal and substitute for the Judge’s costs order, an order that the defendant should have 90% of his costs below.

28. Finally, so far as CACV 29/2013 is concerned, while I think Mr Lee was right to say that having dismissed the application to vary the costs order nisi, the Judge should have awarded the costs of that hearing to the plaintiff, rather than treating them as part of the costs of the main proceedings and therefore subject to the same order for costs as for the main proceedings (the position would have been different if the Judge had not made an order nisi at all, and had held a further hearing to determine the question of costs), given that I have concluded that the Judge should have varied the costs order nisi, it seems to me that this appeal is largely academic.  Given that the defendant has succeeded in improving his position in relation to costs (but to a slightly lesser extent than originally sought, in that he will recover 90% of his costs of the action rather than the whole of such costs), it seems to me that a fair result would be to leave the Judge’s order in respect of the costs of that hearing undisturbed.

29. Thus, I would dismiss the plaintiff’s appeals in both CACV 28 and 29/2013, but allow the defendant’s cross-appeal in CACV 28/2013 to the extent indicated above.  So far as the costs of these appeals are concerned, there is no reason why they should not simply follow the event, and I would therefore make a costs order nisi that the defendant is to have the costs of both appeals, to be taxed on the party and party basis if not agreed, and that the defendant being legally aided, his own costs should be taxed in accordance with the Legal Aid Regulations.

Hon Cheung JA:

30. Accordingly there shall be orders in terms of paragraph 29 above.