LUCK GARDEN RESTAURANT LTD v. GILROY CO LTD

DCCJ 153/2023

[2026] HKDC 1312

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 153 OF 2023

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BETWEEN

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JUDGMENT

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INTRODUCTION

1.  This case can be described as a landlord and tenant dispute concerning a commercial property at 3^rd Floor, Causeway Bay Plaza 2, Hong Kong (the “Premises”). The Plaintiff was interested in leasing the Premises to carry on the business of a Chinese restaurant, and the Defendant, a company within the Lai Sun Group, was the landlord of the Premises.

2.  As explained by one of the Defendant’s witnesses, the Defendant is the holding company of the entire building at Causeway Bay Plaza 2 (“CWBP2”), for which one of its subsidiaries Lai Sun Real Estate Agency Limited (“LSREAL”) acts as the leasing agent. Throughout the proceedings, the name Lai Sun was often treated as being synonymous with the Defendant.

3.  The parties started negotiations for the lease of the Premises in July 2021 with the involvement of Bread Chow (“BC”) and Tony Yiu (“TY”) of Centaline Property Agency Limited (“Centaline”), leading to the signing of various documents, including most importantly a stamped document signed by both the Plaintiff and the Defendant (the “Stamped Letter”) and an earlier document signed by the Defendant which has been referred to as the Final Offer Letter (the “Final Offer Letter”). Subsequent to the signing of the aforementioned documents, there continued to be discussions between the Plaintiff and the Defendant in relation to the handover condition of the Premises.

4.  In the end, no tenancy was taken up by the Plaintiff and this dispute mainly concerns the payments totalling HK$2,557,057.83 paid by the Plaintiff to the Defendant and whether the Defendant is entitled to forfeit these amounts. The Plaintiff contends that no binding agreement was reached, and seeks a declaration that the Stamped Letter and the Final Offer Letter are not valid, and the return of the aforementioned sum. The Defendant contends that a binding agreement was reached and that it is entitled to retain the aforementioned sum. In addition, the Defendant counterclaims against the Plaintiff for loss of rental income as a result of the Plaintiff’s repudiatory breach, the quantum of which counterclaim has been capped at HK$3,000,000, on the basis that the forfeited amount can be applied in reduction of the amount of the counterclaim.

5.  The parties identified a total of 11 issues in dispute in the Agreed Statement of Issues in Dispute, which were as follows:-

(i) Whether Centaline acted as the agent of the Plaintiff in negotiating the terms and conditions of the potential tenancy of the Premises with the Defendant, or Centaline acted as the Defendant’s agent in negotiating the terms and conditions of the potential tenancy of the Premises with the Plaintiff.

(ii) Whether there was a condition precedent that a formal agreement was to be signed before formation of a lease as between the Plaintiff and the Defendant.

(iii) Whether the Defendant had agreed and was able to deliver the Premises on an “as is” basis.

(iv) In respect of the unauthorised building works of the then existing decorations of the Premises:

(a) Whether they were disclosed to the Plaintiff, and if so when;

(b) Whether they were made known to the Plaintiff, and if so since when;

(c) Whether such unauthorised building works were discovered and demolished by the Defendant at a later stage.

(v) Whether the Defendant, including through Centaline, made any of the representations to the Plaintiff which have been defined in the pleadings as D’s 13 July 2021 Representation, D’s 23 July 2021 Representation, D’s 29 July 2021 Representation and D’s 11 August 2021 Representation (which shall be more particularly described below and which are collectively referred to as the “Representations”):

(vi) Whether the Plaintiff signed the 4 sets of Temporary Letter (as defined below) in reliance on the Representations.

(vii) Whether the Plaintiff and the Defendant reached any conclusions from the negotiations in respect of the tenancy of the Premises. In particular:

(a) Whether the terms and conditions recorded in the Stamped Letter constitutes any binding agreement (“Agreement I”), or whether Agreement I would be void for uncertainty.

(b) Whether The Final Offer Letter would be void for uncertainty.

(viii) Whether the Plaintiff and the Defendant entered into any legally binding agreement in respect of the licence of the Premises (“Agreement II”), and if so, whether the terms and conditions of Agreement II are recorded in the “Licence Agreement” appended to the Stamped Letter (the “Licence Agreement”), or whether the Licence Agreement would also be void for uncertainty.

(ix) If the Plaintiff and the Defendant are bound by Agreement I and/or Agreement II, whether the Plaintiff’s refusal to execute the formal tenancy agreement and the licence agreement prepared by the Defendant amounted to repudiatory breach on the part of the Plaintiff, and if so whether the Defendant was entitled to accept the repudiatory breach of the Plaintiff, forfeit all deposits paid by the Plaintiff to the Defendant totalling HK$2,541,202.33, and/or claim compensation from the Plaintiff for the loss of rental income suffered by the Defendant taking into account the steps taken by the Defendant to mitigate its loss.

(x) Whether the sum of HK$2,557,057.83 being the money paid by the Plaintiff to the Defendant was paid in reliance on the Representations.

(xi) If there is no binding contract between the Plaintiff and the Defendant, whether the Defendant is liable to refund HK$2,557,057.83 to the Plaintiff being the money paid by the Plaintiff to the Defendant in reliance on various representations made by the Defendant.

6.  In addressing these issues, I have considered the extensive factual matrix of the dealings between the parties leading up to and beyond the execution of the documents in question.

THE WITNESS EVIDENCE

7.  There were a total of four witnesses who gave evidence at trial, two for the Plaintiff and two for the Defendant.

8.  For the Plaintiff, Ms Poon On Hiu (“Ms Poon”), the sole director of the Plaintiff, and Mr Yeung Kim Pang (“Mr Yeung”), one of the shareholders of the Plaintiff, gave evidence. Mr Yeung and Ms Poon are husband and wife. Apart from Mr Yeung, there were two other shareholders of the Plaintiff, Ms Chow Wun Ling (“Ms Chow”) and Mr Tsui Hung Yao (“Mr Tsui”), who did not give evidence although they were present at various meetings with Centaline and with the Defendant and signed various documents.

9.  For the Defendant, Leung Po Ki, Jackie (“Jackie Leung”), a senior property manager of the Defendant, and Lee Kin Shing, Kinson (“Kinson Lee”), a former assistant property manager of the Defendant who had worked under Jackie Leung, gave evidence.

10.  The principles in relation to the assessment of evidence and witness testimony are well established:-

(i) In assessing credibility of a witness, the court takes into account the following factors: (1) inherent probabilities or plausibility; (2) consistency with contemporaneous documents or evidence; (3) if a witness is found to be untruthful or unreliable on one matter, that may affect the witness’ credibility and reliability in other matters; (4) the demeanour of the witness; and (5) a witness’ motives - see Triunion (HK) Cereal & Oil Co Ltd v APAC Investment Holdings Ltd [2022] HKCFI 3326 at §48 per Recorder Victor Dawes SC.

(ii) If there are two competing theories of events before the court, rejection of one may justifiably lead to the acceptance of the other: see Triunion §62 per Recorder Victor Dawes SC.

(iii) The more serious the allegation, the more inherently improbable it is regarded, and the more compelling and cogent evidence is required to prove it on a balance of probabilities: see Koo Ming Kown v The Baptist Convention of Hong Kong [2024] HKCFI 2869 at §102 per K Yeung J (as he then was).

11.  Submissions were made by both Counsel as to the overall credibility of each of the witnesses. However, as is usual, many of the instances cited by both Counsel to cast doubt on the credibility of particular witnesses related to their evidence on matters which were not of central importance to the issues in dispute, or which could even be said to have been of no more than peripheral importance. To resolve the issues in dispute, I found it more helpful to consider the evidence of the witnesses in relation to specific issues where there was factual dispute, and to resolve any differences or conflicts in the evidence in relation to those specific issues, bearing in mind the contents of the contemporaneous documents which often spoke for themselves. I also took into account the witnesses’ motives and the seriousness of the allegations being made.

12.  That being the case, the following section only sets out the background of each witness based on the uncontroversial aspects of their evidence.

The Plaintiff’s Witnesses

13.  Ms Poon met Mr Yeung in 2012, when he had his own dried seafood business which operated out of rented premises in Sheung Wan. Ms Poon subsequently became a director of the dried seafood business.

14.  Ms Poon was locally educated and graduated from Baptist University with a bachelor’s degree in Religion and Philosophy. Ms Poon said that she could only read simple documents in English. However, given her background, from the way in which she answered questions during cross-examination about documents which were in English, and based on her own use of English in written communications with lawyers (referred to in greater detail below), I found that Ms Poon did seek to downplay her English proficiency.

15.  Ms Poon said that as a director of the dried seafood business she was required to sign off on company audit reports. She said that when she had to sign off on company audit reports, the auditors would go through the contents of the audit reports with her and that she would ask about anything which she did not understand. Ms Poon said that she and Mr Yeung had experience of tenancy agreements for the Sheung Wan premises, but every time they signed a tenancy agreement, they would involve lawyers to review the documents. Overall, Ms Poon gave me the impression that she was a careful person who would not sign anything which she did not understand without asking for assistance.

16.  Ms Poon said that she trusted BC because Mr Yeung trusted BC. Ms Poon said that even before she had met Mr Yeung, BC and her boss at Centaline had helped Mr Yeung to enter into tenancies, but this was the first time that they had dealt with BC without her former boss.

17.  Mr Yeung had only tendered a very short 2 page witness statement, and was unable to answer many of the questions put to him on the basis that he was unable to understand the documents which were in English and that he did not use email or any other written forms of communication, and he did not know what documents had been received or when they had been received.

18.  Mr Yeung said that he had started his own dried seafood business in 2009 and had made Ms Poon a director of that business because she was careful with money and he trusted her. Mr Yeung said that he had known BC for many years.

19.  Mr Yeung said that he, Mr Tsui and Ms Chow intended to partner together in the new restaurant business, and that it was always intended that they would own and operate the new restaurant business through a company. Mr Yeung, Mr Tsui and Ms Chow (the “3 Shareholders”) became the three shareholders of the Plaintiff after it was incorporated, with Ms Poon being the sole director.

20.  In their evidence, both Ms Poon and Mr Yeung were adamant that BC made the Representations as the Defendant’s agent, which was why they believed that the documents which they had signed were only temporary documents and were not intended to be legally binding. However, beyond that, it was clear from their evidence that they had a great sense of grievance against BC (and against the Defendant). Ms Poon asserted that BC only acted in the Defendant’s interests, that BC and the Defendant had colluded to deceive the 3 Shareholders/the Plaintiff in order to benefit the Defendant. Mr Yeung also repeatedly asserted that they had been deceived by the Defendant. Hence, I had to consider whether these witnesses exaggerated matters in their evidence due to their animosity towards BC and the Defendant.

The Defendant’s Witnesses

21.  Jackie Leung said that as a Senior Property Manager, she was the most senior person working on site at CWBP2 responsible for property management and leasing of CWBP2. Jackie Leung said that she had held an estate agent’s licence ever since the licensing regime began in around the year 2000.

22.  Jackie Leung also said that for the leasing of units at CWBP2, she reported to her boss who reported to the CEO of the Lai Sun Group. In terms of internal procedure, she would have to get approval of any lease terms from her superiors (by submitting the offer received from the prospective tenant) before entering into any agreement with the prospective tenant. Even her boss only had authority to approve terms for leases of up to HK$40,000 per month, and anything above that would have to go to the CEO for approval.

23.  Jackie Leung said she did not know either BC or TY before this transaction, and that she has not had any dealings with either BC or TY since this transaction.

24.  Jackie Leung did not give straight answers at times when questioned, and she was also prone to giving testimony to supplement or correct previous answers or to go into matters which were not in direct response to the question asked. However, this could partly be explained by the expansive nature of some of the questions she was asked, such as when she was questioned extensively about her company’s structure and her role and responsibilities.

25.  There was a submission by Mr Hui that Jackie Leung was not a credible witness and that her evidence should be disbelieved wherever it conflicted with the evidence of the Plaintiff. As indicated above, I considered it more helpful to consider Jackie Leung’s evidence in relation to specific issues where there was factual dispute and to resolve any differences or conflicts in the evidence in relation to those specific issues.

26.  Kinson Lee’s evidence was more straightforward as his involvement in the transaction was relatively limited and the scope of his evidence correspondingly narrow. Kinson Lee’s evidence mainly touched upon two factual matters in dispute, the first being to what extent the 3 Shareholders/the Plaintiff had had the opportunity to conduct site visits of the Premises, and the second being the events on a specific day, 24 September 2021. Kinson Lee’s evidence in relation to these two factual matters are analysed in the sections below dealing with those specific factual matters.

Those Who Did Not Give Evidence

27.  Although BC and TY were heavily involved in the negotiations between the parties for the leasing of the Premises, and the Plaintiff sought to rely on representations made to the 3 Shareholders/the Plaintiff by BC, neither BC nor TY gave evidence at trial. Both the Plaintiff’s witnesses and the Defendant’s witnesses were asked why their side had not called BC or TY to give evidence.

28.  Ms Poon and Mr Yeung said that they had not approached BC or TY about giving evidence in these proceedings. Ms Poon and Mr Yeung also accepted that the Plaintiff had not taken any form of action against BC, such as suing her and/or Centaline or making any complaint against her and/or Centaline to any regulatory body. Their explanation was that it was not necessary because BC was acting as the Defendant’s agent, and the Plaintiff was taking action against the Defendant. Furthermore, in many of Ms Poon’s and Mr Yeung’s answers in cross-examination, they treated BC as being part of the Defendant, and BC and Jackie Leung as being from one organization, which of course conflates and does not reflect the actual legal relationship between BC, Centaline and the Defendant.

29.  For the Defendant, Jackie Leung also said that the Defendant had not approached BC or TY about giving evidence in these proceedings.

30.  Since the Representations were made by BC to the 3 Shareholders and Ms Poon without the presence of the Defendant’s representatives, it is of course the case that without the evidence of BC or TY (who was present), the Defendant did not have any direct evidence to rebut the evidence of Ms Poon and Mr Yeung as to what representations had been made by BC to them. In this regard, Mr Hui submitted as the Defendant did not have any evidence to contradict the account given by the Plaintiff’s witnesses that BC had made the Representations to them, I should find that the Representations had been made by BC.

31.  Mr Cheung referred to the case of Shun Hing Electronic Trading Co Ltd v Sunrise Air-Conditioning Co Ltd [2021] HKCFI 1190, in which Deputy High Court Judge To stated at §27:-

“It is a well-established principle that in the absence of explanation, a party’s failure to call a witness who is expected to have evidence in support of his case or to contradict the opponent’s case, would entitle adverse inference to be drawn against that party. The general and usual inference is that the party knows that the evidence that witness will give will be adverse to his case or supportive of the opponent’s case. The effect of silence in the face of the opponent’s evidence may convert that evidence into proof in relation to matters which are, or likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence: see R v IRC, ex p TC Coombs & Co, per Lord Lowry.”

32.  Mr Cheung’s submission was that given that the Plaintiff did not have any documentary evidence to support their allegations that BC had made the Representations, the Plaintiff’s failure to call BC and/or TY to give evidence justified the drawing of an adverse inference against the Plaintiff, to the effect that the Plaintiff knew or suspected that the evidence of BC and/or TY would not assist the Plaintiff’s case and thus they were not called.

33.  It is certainly curious why, notwithstanding the reasons Ms Poon and Mr Yeung gave as to why they did not consider it necessary to ask BC and/or TY to give evidence in these proceedings, if they felt aggrieved that misrepresentations had been made to them by BC, they chose not to make any complaint about BC’s or Centaline’s conduct to the relevant regulatory authority.

34.  Be that as it may, the point about drawing adverse inferences is one which ultimately can cut either way, and both the Plaintiff and the Defendant could have called, or at least approached, BC and/or TY to give evidence in these proceedings, but chose not to do so. As a matter of fairness, I consider that no adverse inferences should be drawn against either the Plaintiff or the Defendant for the absence of BC and TY as witnesses, and that the issues can be determined by reference to the available evidence.

35.  This would also be a convenient juncture to address a matter of some relativity to the matter of drawing adverse inferences from the absence of witnesses. Mr Hui in his closing submissions submitted that there had been communications between Jackie Leung and Centaline which had been referred to in correspondence by the Defendant’s solicitors at the outset of the dispute but which had not been disclosed by the Defendant, and that the obvious inference to be drawn was that such materials had not been disclosed as they would damage the Defendant’s case. I did not find the point to rise above the level of speculation. Since the documents in question had been referred to by the Defendant’s solicitors in correspondence at the outset of the dispute, the Plaintiff had the opportunity to apply for discovery of those documents, but chose not to do so. Hence, I decline to draw any inference from the absence of such documents.

THE NEGOTIATIONS

36.  One of the complaints advanced by the Plaintiff was that many documents had been signed by its representatives during the course of the negotiations, and that it had been difficult for the Plaintiff’s representatives to piece together what had happened.

37.  To start the analysis of the evidence, I found it helpful to first identify what material documents were produced and/or signed by the parties, and to map out the shape and chronology of the negotiations between the parties (to the extent that they were not subject to any material factual dispute) against the backdrop of the various documents which were produced and/or signed by the parties during the course of their negotiations. Adopting some (but not all) of the defined terms used by the parties, the material documents are listed below in the chronological order of their creation:-

(i) The document titled “Offer Letter” being the first offer of the Defendant passed to Centaline (“D’s First Offer”)

(ii) The document titled “Offer Letter” signed by the 3 Shareholders on 26 July 2021 (the “26 July Document”)

(iii) The 2 documents both titled “Offer Letter” signed by the 3 Shareholders on 29 July 2021 (the “29 July Documents”)

(iv) The document titled “Offer Letter” signed by the 3 Shareholders on 11 August 2021 (the “11 Aug Document”)

(v) The document titled “Offer Letter” being the 11 Aug Document counter-signed by the Defendant (ie. the Final Offer Letter)

(vi) The stamped document titled “Offer Letter” executed by both the Plaintiff and the Defendant (ie. the Stamped Letter)

38.  All of the aforementioned documents took the basic form of an Offer Letter (which was the Defendant’s template), a detailed document of over 20 pages including various annexures (a 3 page statement of account showing the amounts payable upon signing and returning of the Offer Letter and the further amounts payable upon signing of a formal tenancy agreement, a 4 page Appendix A which set out the terms in relation to the determination and payment of turnover rent, 3 pages of photographs of the outdoor advertising space given to the tenant, and a 1 page floor plan), although some had handwritten revisions and different riders attached.

39.  The 26 July Document, the 29 July Documents and the 11 Aug Document, all of which were signed by the 3 Shareholders, have been referred to as “the 4 sets of Temporary Letter” at paragraph 13(ii) of the Plaintiff’s Statement of Claim. These earlier documents were signed by the 3 Shareholders at a time when the Plaintiff had not yet been incorporated.

40.  Only the Stamped Letter, which was executed after the incorporation of the Plaintiff, was executed by Ms Poon on behalf of the Plaintiff. As shall become apparent, although the documents signed by the 3 Shareholders form an integral part of the factual matrix of the negotiations, the crux of the dispute is whether the parties entered into a binding contract in the form of the Stamped Letter.

Early July 2021

41.  It is not in dispute that the 3 Shareholders first became aware of the Premises through BC and/or TY of Centaline in or around early July 2021. At the time the negotiations started, the Premises were leased to a tenant also operating a Chinese restaurant (the “Previous Tenant”), and the 3 Shareholders desired to rent the Premises with the then existing renovation and set up of the Previous Tenant. As shall become apparent, the condition of the Premises to be delivered (as opposed to terms such as the amount of rent) was something that featured heavily in the negotiations between the parties and was identified by the Plaintiff as the reason why it did not eventually take up a tenancy of the Premises.

12 July 2021 to 29 July 2021

42.  On 12 and 13 July 2021, after Jackie Leung had discussed the terms and conditions for the tenancy of the Premises with TY, the Defendant provided D’s First Offer to Centaline. The commercial terms set out in D’s First Offer were for a 3 year tenancy of the Premises with an option for the tenant to renew for another 3 years, at a monthly rent of HK$600,000 (plus turnover rent) with a rent-free period of 4 months and 15 days. It should be noted that in the Stamped Letter, which is the binding contract relied upon by the Defendant, these commercial terms largely remain unchanged (a fuller examination of the detailed terms of the Stamped Letter is set out below).

43.  D’s First Offer was described as an offer from the tenant to the landlord and was stated to be subject to acceptance by the landlord. It also stated that the offer if accepted by the landlord would form a binding contract between the parties. The document was not signed by the Defendant but was to be executed by LSREAL as agent for the Defendant.

44.  BC then met with the 3 Shareholders and Ms Poon on 13 July 2021 to discuss D’s First Offer. The Plaintiff alleges that at that meeting, BC on behalf of the Defendant made D’s 13 July 2021 Representation to the 3 Shareholders and Ms Poon, which were oral representations to the effect that the Defendant could deliver the Premises on an “as is” basis so that the Plaintiff could make use of the existing renovation and set up of the Previous Tenant.

45.  The Plaintiff also alleges that BC showed some documents to the 3 Shareholders and Ms Poon (which would appear to have been D’s First Offer) and invited them to sign the documents, saying that were only temporary documents signifying the 3 Shareholders’ interest in taking up a potential lease to be negotiated, and a formal agreement would be signed should the parties be successful in reaching agreement on terms.

46.  On 15 July 2021, TY sent a rider (“RIDER 1”) to Jackie Leung by email. In the covering email, TY said:

“I refer to the captioned matter and your offer letter related to the captioned Premises. The Tenant has the amendment in your said offer letter as marked as “RIDER 1” in clause 16(j) in page 5, copy of which is enclosed herewith for your approval. In this stage, the Tenant concerns the hand-over status as the decisive issue. Kindly advise!”

47.  Clause 16(j) of D’s First Offer was in the following terms:-

“The Premises are to be handed over on an “As is” basis together with all existing quantity of fan coil units or in the state and condition as the outgoing tenant is to deliver to the Landlord.” (emphasis added)

48.  As shall be seen below, a core feature to the Plaintiff’s case is the assertion that it would only agree to lease the Premises if the fixtures of the Previous Tenant could be retained and delivered to the Plaintiff, and had relied on representations to the effect that this would be the case. The Defendant, on the other hand, says that from the outset, it did not say that the fixtures of the Previous Tenant could be delivered to the Plaintiff, and in truth it had no ability to make any such commitment as it was up to the Previous Tenant to decide how much of the existing fixtures it would leave behind. The Defendant also relies on the fact that from the outset, the aforementioned Clause 16(j) made it clear that the Premises would be delivered by the Defendant either on an “as is” basis, or in such state and condition as Previous Tenant delivered. In the latter case, whether and how much of the existing fixtures would be delivered would depend on the Previous Tenant, and also on the Defendant’s ability to persuade to the Previous Tenant to leave behind some or all of the existing fixtures, and hence there could be a range of different scenarios.

49.  RIDER 1 sent by TY to Jackie Leung, which was a proposed amendment to Clause 16(i) of D’s First Offer, read as follows:

“PROVIDED THAT all existing fixture and fittings including the VRV installed on the fourth floor and the kitchen area should be maintained in the Premises upon handed over to the Tenant. The Tenant shall have right to rescind this Agreement without any compensation if the hand over status is not “as is” basis and the Tenant shall be entitled to recover all deposits and payments in advance paid by the Tenant hereunder (except government charges) but without interest, cost or compensation whatsoever and neither party shall have any claim against the other.”

50.  This was in effect a counter-proposal to add a term that in the event the Premises could not be delivered on an “as is” basis with all existing fixtures, the 3 Shareholders/the Plaintiff would be entitled to walk away and to have any deposits and payments refunded to them.

51.  It should be noted that in general, the Plaintiff’s witnesses denied that any of the communications between Centaline and the Defendant (including TY’s email of 15 July 2021 attaching RIDER 1) had been sent by Centaline upon their instructions, presumably to avoid what they said as being characterized as an admission that Centaline, or BC and/or TY, had been acting as their agent (who Centaline was acting as an agent for being a hotly contested issue in these proceedings which shall be explored below). At the same time, it was common ground that the 3 Shareholders/the Plaintiff and the Defendant did not negotiate directly and that all negotiations were through Centaline, hence it is unsurprising that Centaline would send any requests or counter-proposals from the 3 Shareholders/the Plaintiff to the Defendant (regardless of who they were acting as agent for).

52.  In any event, RIDER 1 was never accepted by the Defendant. However, the Plaintiff says that on 23 July 2021, BC on behalf of the Defendant made D’s 23 July 2021 Representation to the Plaintiff, which was that the Defendant had confirmed an offer of the lease to the Plaintiff with delivery of the Premises on an “as is” basis with the existing renovation and set up of the Previous Tenant. BC then met with the 3 Shareholders and Ms Poon on 26 July 2021 and provided documents to the 3 Shareholders to sign which the 3 Shareholders did sign (the 26 July Document). The Plaintiff says that at the meeting on 26 July 2021, BC also indicated to the Plaintiff that there would be a longer rent-free period.

53.  On 28 July 2021, BC sent by WhatsApp to Ms Poon a document totalling of 5 pages. The first 3 pages were pages extracted from D’s First Offer with mark-ups changing the term of the tenancy from 3 years to 4 years and the rent-free period from 4 months and 15 days to 12 months. The last 2 pages were a Rider which contained the same term as RIDER 1 but also added 4 more rider terms. Although no WhatsApp communications between BC and Ms Poon were disclosed, it appears that Ms Poon did use electronic means of written communication (the relevance of which will be explored later in this judgment, it being the evidence of the Plaintiff’s witnesses, Ms Poon and Mr Yeung, that in general they conducted all business on the telephone and did not use written communications).

54.  The next day, 29 July 2021, there was another meeting between the 3 Shareholders, Poon and BC, at which two documents were signed by the 3 Shareholders (the “29 July Documents”), being two different versions of D’s Offer Letter with different mark-ups. The first version had mark-ups changing the term of the tenancy from 3 years to 4 years and the rent-free period from 4 months and 15 days to 12 months, essentially a variation of the terms which BC had sent to Ms Poon on 28 July 2021. The second version had mark-ups changing the rent-free period from 4 months and 15 days to 8 months, but the term of the tenancy remained 3 years. In both versions, the rider relating to the hand-over condition of the Premises had been changed to “PROVIDED THAT all existing fixture and fittings including the VRV installed on the fourth floor and the kitchen area should be maintained in the Premises upon handed over to the Tenant.”, which was not the same as the rider in the document sent by BC to Ms Poon on 28 July 2021.

55.  It is alleged by the Plaintiff that the 3 Shareholders signed the 29 July Documents at the meeting with BC on 29 July 2021 in reliance upon D’s 29 July 2021 Representation which was made by BC on behalf of the Defendant, being oral representations that:-

(i) The Premises could be delivered on an “as is” basis;

(ii) The two versions of D’s Offer Letter had different rent free periods and were only temporary documents for further negotiation and discussion with the Defendant; and

(iii) The final terms would be set out in a formal agreement later on.

The 2 Cheques

56.  On 29 July 2021, the 3 Shareholders also delivered a cheque for the amount of HK$2,378,004.00 to BC (the “1^st Cheque”). The amount of the cheque corresponded to the amount stated in the statement of account appended to D’s Offer Letter as the amount payable upon signing and returning of the offer letter, comprising 3 months basic rent (at a rental of HK$600,000 per month), 3 months management fee and a/c charges, 3 months signage licence fee, 3 months promotion levy, 1 quarter’s rates and a half-share of the stamp duty payable. The statement of account also stated that an amount totalling HK$179,053.33 representing licence fees, management fees and other expenses was also due upon the signing and returning of the offer letter (which largely corresponded to the amount of another cheque delivered by the 3 Shareholders later on 12 August 2021 in the amount of HK$179,053.83, the “2^nd Cheque”).

57.  The amounts of HK$2,378,004.00 and HK$179,053.83 paid to the Defendant by the 1^st Cheque and the 2^nd Cheque (collectively the “2 Cheques”) constitute the payments totalling HK$2,557,057.83 which the Plaintiff seeks the return of.

58.  Although not pleaded, the Plaintiff’s witnesses said that the 2 Cheques were just earnest money and that it was never intended that the cheques be cashed. In Ms Poon’s evidence, Ms Poon said the 2 Cheques were “earnest money”. In his evidence, Mr Yeung said that BC had said that the 2 Cheques were just to show that the 3 Shareholders (or the Plaintiff) had the ability to take up the lease, that the amounts were dictated by BC, and that the 2 Cheques would not be cashed by the Defendant. Ms Poon also said that she was surprised when she found out the 1^st Cheque had been cashed by the Defendant.

59.  I did find the concept of the 2 Cheques being “earnest money” and as such that they were not intended to be cashed somewhat difficult to comprehend - it is difficult to see how the tendering of the 2 Cheques would help to show the financial ability of the 3 Shareholders/the Plaintiff to the Defendant if the Defendant did not actually cash the cheques. Furthermore, on any measure, the tendering of the 2 Cheques by the 3 Shareholders/the Plaintiff was a matter of some significance, given the amounts of money involved, as was the fact that on the evidence there was no protest from the 3 Shareholders/the Plaintiff when they realized that the 1^st Cheque had been cashed.

60.  It was the evidence of the Plaintiff’s witnesses that at the time of the 2 Cheques, the Plaintiff had yet to be incorporated, and that the 2 Cheques were issued by Mr Yeung’s dried seafood business. It was common ground between the parties that the amounts which were paid by the 2 Cheques were paid on behalf of the Plaintiff and that it is the Plaintiff who is entitled to claim for the return of the amounts paid by the 2 Cheques.

61.  In the Plaintiff’s closing submissions, it was argued (without the Plaintiff having pleaded such argument) that under the terms of the 29 July Documents, the Defendant was supposed to accept the 3 Shareholders’ offer within 14 days from the date the initial deposit was received, and that since the 29 July Documents were rejected by the Defendant, the Defendant ought to have returned the 1^st Cheque at that time. The Plaintiff further argued that according to the deposit clause under the terms of the Stamped Letter, the deposit was only due upon the signing and acceptance of the Stamped Letter, and that the 1^st Cheque could not have been payment of the deposit under the Stamped Letter. This argument is addressed further below in the discussion as to whether there was a binding agreement between the parties.

11 August 2021 to 25 September 2021

62.  On 11 August 2021, there was another meeting between the 3 Shareholders, Ms Poon and BC, at which a further document was signed by the 3 Shareholders (the “11 Aug Document”).

63.  It is alleged by the Plaintiff that at this meeting, BC told the 3 Shareholders and Ms Poon that the Defendant had rejected the terms of the 29 July Documents, and that the Plaintiff’s shareholders signed a further document in reliance upon D’s 11 August 2021 Representation which was made by BC on behalf of the Defendant, being oral representations that:-

(i) There would be a rent free period of 10 months in total;

(ii) The Premises would be leased on an “as is” basis;

(iii) Other than the duration of the rent free period, none of the essential terms had been changed from the documents signed by the 3 Shareholders on 29 July 2021; and

(iv) The further document would only be temporary in nature and the terms once finalized would be set out in a formal agreement later on.

64.  It was after the meeting on 11 August 2021 that the 2^nd Cheque in the amount of HK$179,053.83 was delivered to BC.

65.  On 20 August 2021, Jackie Leung sent an email to BC and TY, which read:

“Please find attached Offer Letter duly signed by Landlord for Tenant’s reference. The original duplicate will be sent to Tenant after stamping …”

66.  It is understood that Jackie Leung was confirming that LSREAL (on behalf of the Defendant) had also executed the document which the 3 Shareholders had signed on 11 August ie. the 11 Aug Document, which was essentially the same Offer Letter as D’s Offer Letter save for the addition of a 2 page rider which stated:-

“The Premises will be handed over to the Tenant on an “as is” condition with the following conditions … (e) the following existing fixtures and fittings left behind by the existing tenant in the state and condition that the existing tenant shall deliver to the Landlord (if any) will be retained at the Premises …”

67.  The rider went on to list out the existing fixtures and fitting which might be left behind by the Previous Tenant, which included the existing air-conditioning system, the existing ventilation pipes and wires for fan coil units, the existing mechanical, ventilation and electricity systems in the kitchen and the grease tank in the basement.

68.  This document ie. the Offer Letter signed by both the 3 Shareholders and the Defendant, is the document referred to as the Final Offer Letter. The Plaintiff’s witnesses denied that this document was passed by Centaline to the 3 Shareholders or Ms Poon.

69.  As indicated above, the Plaintiff was incorporated in September 2021, and this was communicated to the Defendant, resulting in arrangements being made for what has been termed the “re-signing” of the Final Offer Letter on 24 September 2021 by Ms Poon on behalf of the Plaintiff, leading to the creation of the document referred to as the Stamped Letter.

70.  At the same time, the 3 Shareholders/the Plaintiff were able to conduct site visits on 16 September 2021 and 20 September 2021 (after the Previous Tenant had vacated the Premises) accompanied by their technical advisers, and they were able to inspect the entire Premises including the kitchens.

71.  The events of 24 September 2021 are the subject matter of some dispute. What is not in dispute is that Ms Poon went to the Defendant’s offices that day and “re-signed” the Offer Letter ie. the same document as the 11 Aug Document and D’s Final Offer in the following manner:-

(i) On the first page, the name of the 3 Shareholders as the tenant was crossed out and replaced by the name of the Plaintiff, and the change was initialed by Ms Poon;

(ii) On each of the pages, including the annexures and the 2 page rider, where the 3 Shareholders had originally initiated each page, those initials were crossed out and replaced by the initials of Ms Poon, and the company chop of the Plaintiff was also affixed;

(iii) On the signature page, the signatures of the 3 Shareholders had been crossed out, and Ms Poon signed her name as the authorized signatory of the Plaintiff.

72.  It appears that the Defendant then arranged for this document to be stamped on 29 September 2021, resulting in the Stamped Letter.

The Stamped Letter

73.  The Stamped Letter contained, inter alia, the following provisions:-

“9. An amount of HK$2,362,149.00 being the full amount of Deposit equivalent to 3 month’s Basic Rent, 3 months’ Management Fee and Air-conditioning Charges, 3 months’ Signage Licence Fee, 3 months’ Promotion Levy, one quarter’s Rates (inclusive Signage) and Government Rent (if any) shall be paid to and retained by the Landlord and to be adjusted in accordance with revision of Basic Rent, Management Fee and Air-conditioning Charges, Signage Licence Fee, Promotion Levy, Rates (inclusive Signage) and Government Rent (if any) made from time to time during the Term of Tenancy … The Tenant shall pay the deposit of this Tenancy in an amount of HK$2,362,149.00 upon signing and confirming of this Offer Letter to secure the Tenant’s due performance and observance of the terms and conditions of the Tenancy Agreement …”[1]

“10. The standard formal Tenancy Agreement shall be signed by the Tenant without any amendment within fourteen (14) days from the date of receiving notice from Landlord or the Landlord’s solicitors that the Tenancy Agreement is ready for execution failing which the Landlord shall be entitled to determine this Agreement by serving to the Tenant a seven (7) days’ notice in writing and on the expiry of notice the Deposit paid shall be forfeited absolutely to the Landlord who shall also be entitled to claim against the Tenant for further loss and damages and to re-enter the Premises if possession has been delivered. In the event that the Tenant fails to sign the formal Tenancy Agreement on the commencement date of the tenancy, this Agreement shall continue to be a binding tenancy agreement between the parties or determined by the Landlord as aforesaid Provided that the handover of the Premises to the Tenant by the Landlord or acceptance of rent by the Landlord or any other condoning acts of the Landlord shall not operate as a waiver of the Landlord’s right to determine this Agreement as aforesaid.”

“16(j) The Premises are to be handed over on an “As-is” basis or in the state and condition as the outgoing tenant is to deliver to the Landlord …”

“This Offer Letter shall supersede all previous agreements whether parol or in writing express or implied between the parties thereto. No warranties or representations whatsoever relating to the Premises or the obligations of the Landlord whether express or implied have been made by the Landlord or by any third party or their behalf. If any warranty or representation express or implied has been made, the same is withdrawn immediately before the execution of this Offer Letter.” (the “Entire Agreements Clause”)

74.  The 2 page rider annexed to the Stamped Letter remained the same as the 11 Aug Document and stated “The Premises will be handed over to the Tenant on an “as is” condition with the following conditions … (e) the following existing fixtures and fittings left behind by the existing tenant in the state and condition that the existing tenant shall deliver to the Landlord (if any) will be retained at the Premises …”, before going on to list out the existing fixtures and fitting which might be left behind by the Previous Tenant, which included the existing air-conditioning system, the existing ventilation pipes and wires for fan coil units, the existing mechanical, ventilation and electricity systems in the kitchen and the grease tank in the basement.

75.  The Plaintiff argued that the Stamped Letter was not intended to create legal relations, that the signed documents were of a temporary nature and were only for negotiating purposes and of no binding legal effect (although strictly speaking the Plaintiff’s pleaded case, at paragraph 25 of the Plaintiff’s Statement of Claim, is that the Stamped Letter has no legal effect and is “void for uncertainty of any concrete terms mutually agreed by the parties”).

76.  The Defendant’s position is that the Stamped Letter has been executed by both the Plaintiff and the Defendant and contains all of the necessary terms to be a binding legal contract.

NON EST FACTUM

77.  In his Opening Submissions, Mr Hui suggested that he would also seek to rely on the doctrine of non est factum to argue that the Plaintiff executed the relevant documents intending them to be temporary documents expressing a desire to rent the Premises, as opposed to binding offers. However, as rightly pointed out by Mr Cheung, non est factum was not pleaded by the Plaintiff in its Statement of Claim, nor was it included as an issue in the list of issues agreed between the parties.

78.  The equitable principle of non est factum (being Latin for “it is not [my] deed”) is a defense available to someone who has been misled into executing a deed or signing a document which is fundamentally different from that which he intended to execute or sign. It is part of a special category of the law of mistake and is extremely narrow in scope. The mistake must have been as to the essential nature of the transaction, rather than as to its terms, and the burden of proving non est factum rests with the party seeking to disown their signature. For a person of full capacity, the application of the doctrine is kept within narrowly prescribed limits.

79.  As the Court of Appeal stated in Keswani Soshila v Keswani Motiram [2022] 2 HKLRD 822 at §§34-35:-

“34. For the defence of non est factum to apply, it has to be established that (i) the defendant was under a disability, whether permanent or temporary; (ii) the document he signed was fundamentally different from what he thought he was signing; and (iii) he was not careless in appending his signature to the document: Saunders v Anglia Building Society [1971] AC 1004. The defendant bears a heavy burden of proof and he must establish each of the three components.

35. As the Judge correctly noted, a person of full age and capacity is normally bound by his signature to a document. This point was highlighted by the Court of Final Appeal in Ming Shiu Chung & Others v Ming Shiu Sum & Others (2006) 9 HKCFAR 334 at [84] to [86]:

“84. … Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.

85. Thus, in Saunders v Anglia Building Society [1971] AC 1004 at 1016, Lord Reid warned against an approach, like that of the Court of Appeal, which inverts the general rule:

‘We find in many of the authorities statements that a man's deed is not his deed if his mind does not go with his pen. But that is far too wide. It would cover cases where the man had taken no precautions at all, and there was no ground for his belief that he was signing something different from that which in fact he signed. I think that it is the wrong approach to start from that wide statement and then whittle it down by excluding cases where the remedy will not be granted. It is for the person who seeks the remedy to show that he should have it.’

86. And in Bank of China (Hong Kong) Ltd v Fung Chin Kan (2002) 5 HKCFAR 515 at 533, Litton NPJ acknowledged:

‘... the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.’”

80.  It is well established as a matter of general law that when a person of full age and capacity signs a legal document, he or she is bound by the act of signature, and it is no defence to say that he or she did not understand the contents of a legal document. There is no doubt that people do sign documents without reading them or without actually knowing the terms (or all the terms) of the document signed, but they are held to the documents which they have chosen to sign, which they could have taken steps to read or to have explained to them.

81.  As was the case in Keswani Soshila v Keswani Motiram, the class of persons who can normally avail themselves of the defence of non est factum is very limited.

82.  Mr Hui submitted that non est factum was pleaded by the Plaintiff in paragraph 9(i) of the Statement of Claim. However, paragraph 9(i) simply states “On or about 29 July 2021, BC of the Agent on the Defendant’s behalf held another meeting at D’s CWB Office and took out 2 versions of documents both called Offer Letter to Ms Chow, Mr Tsui and Mr Yeung of the Plaintiff all of whom did not understand English.” (emphasis added) At most, the Plaintiff had made the averment that the 3 Shareholders did not understand English, whilst making no similar averment that Ms Poon (who signed the Stamped Letter on behalf of the Plaintiff) did not understand English.

83.  Mr Hui also submitted that it had all along been the Plaintiff’s case, as reflected in the Plaintiff’s witness statements, that the 3 Shareholders and Ms Poon executed the various documents intending them to be temporary in nature and did not believe that the documents were legally binding.

84.  However, on the facts of this case, it is only the Stamped Letter (which was executed by Ms Poon on behalf of the Plaintiff) which the Defendant asserts is the legally binding contract.

85.  As I have indicated above, Ms Poon is a university graduate and I found that she sought to downplay her English proficiency. There is no evidence (nor is it pleaded) that Ms Poon was unable to understand the Stamped Letter, or that she had any kind of disability and was not a person of full capacity.

86.  Mr Cheung relied in particular on one email chain which demonstrated Ms Poon’s English proficiency. In this email chain, after Nelson Yeung (the Defendant’s conveyancing lawyer) had emailed a draft formal tenancy agreement to Ms Poon, Ms Poon forwarded that email to Calvin Cheng (her own lawyer) on 5 October 2021 to seek advice. Calvin Cheng responded to Ms Poon with a fee quote for the review of the tenancy agreement, to which Ms Poon replied on 10 October 2021 “Dear Calvin, Thanks for your email. We agree to your quote, please process. Regards, Hilary Poon”. The advice which was received by Ms Poon from Calvin Cheng (which was disclosed by the Plaintiff) is also of some significance and will be revisited at a later juncture below.

87.  Given her level of English proficiency, Ms Poon would have at the very least realized the nature of the document which she was signing, being a document (which as indicated above was a detailed document of over 20 pages including various annexures) containing detailed terms for a tenancy of the Premises, and would not have thought that it was a document of a fundamentally different nature.

88.  As I have indicated above, I also found Ms Poon to be on the whole a careful person who would have sought assistance from professionals if she was asked to sign something she did not understand.

89.  Hence, the Plaintiff cannot establish any of the 3 components which are essential for the defence of non est factum to apply to negate the legally binding effect of a signed document ie. that (i) Ms Poon was under a disability; (ii) the document she signed was fundamentally different from what she thought she was signing; and (iii) she was not careless in failing to take reasonable precautions in the execution of the document.

90.  Accordingly, whilst I do not consider that the Plaintiff had properly pleaded a case of non est factum or that the Plaintiff was entitled to run such an argument at trial, even if I am wrong in this regard, on the evidence, any case of non est factum on the Plaintiff’s part simply falls far short of meeting the threshold required to negate the legally binding effect of the Stamped Letter.

WAS THERE A BINDING AGREEMENT?

91.  As stated in Chitty on Contracts (36^th ed) at §4-211:

“In the case of ordinary commercial transactions it is not normally necessary to prove that the parties to an express agreement in fact intended to create legal relations. There is a presumption that they so intend. Thus, the onus of proving that there was no such intention “is on the party who asserts that no legal effect is intended, and the onus is a heavy one” …”

92.  The Defendant contends that there was a binding agreement in the form the Stamped Letter, so it is the terms of and the circumstances relating to the execution of the Stamped Letter (which was executed by Ms Poon on behalf of the Plaintiff) which are the primary focus of this action.

93.  In Mr Hui’s closing submissions, he submitted that there was no basis for the Defendant to rebut the Plaintiff’s case on misrepresentation, lack of intention to create legal relations, and non est factum. However, this characterisation of the Plaintiff’s case is somewhat informal and imprecise. The starting point must be the Plaintiff’s pleaded case. The Plaintiff averred at §25 of its Statement of Claim that the Stamped Letter has no legal effect and is “void for uncertainty of any concrete terms mutually agreed by the parties”, and sought a declaration that the Stamped Letter is not valid. Strictly speaking, uncertainty of terms refers to the situation where a contract may be void for uncertainty if its essential terms are too vague or incomplete to be legally enforced, as opposed to the situation where the parties making an agreement did not intend for it to be legally binding, which is what lack of intention to create legal relations refers to. Also, in the Agreed Statement of Issues in Dispute, the Court was asked to determine “whether the Plaintiff and the Defendant reached any conclusions from the negotiations in respect of the tenancy of the Premises. In particular … Whether the terms and conditions recorded in the Stamped Letter constitutes any binding agreement (“Agreement I”), or whether Agreement I would be void for uncertainty.”. Hence, I will proceed on the basis that this is the primary question to be resolved.

94.  To the extent that the Plaintiff has raised arguments based on non est factum on the basis that it falls under the umbrella of the question of whether the Stamped Letter was void for uncertainty, I have already indicated that non est factum was not pleaded and that in any event on the evidence any case of non est factum on the Plaintiff’s part falls far short of meeting the threshold required to negate the legally binding effect of the Stamped Letter.

95.  To the extent that the Plaintiff has raised arguments based on misrepresentation, it should be noted that the Plaintiff’s claim was not for misrepresentation and that the Plaintiff did not seek remedies, for example to rescind the contract or to claim for damages, because of the Representations which were made by BC to the 3 Shareholders and Ms Poon. Furthermore, the Representations as pleaded only related to the signing of the 4 sets of Temporary Letter and not to the execution of the Stamped Letter.

96.  Nevertheless, since the parties did ask the Court in the agreed list of issues in dispute to determine whether the Defendant made the Representations and whether the Plaintiff signed the 4 sets of Temporary Letter in reliance on the Representations, I will deal with the issue of the Representations in determining the main question of whether there was a binding agreement.

97.  There were various other points raised or relied upon by the Plaintiff. To the extent that it was suggested by Mr Hui in his closing submissions that Jackie Leung or the Defendant was under an obligation to ensure that the 3 Shareholders/the Plaintiff fully understood the contents and effect of the documents provided to them for signature, no underlying legal principle was identified which was said to give rise to such an obligation at law, and I do not consider that the point requires any further consideration.

98.  The Plaintiff also raised the point that the use of the words “subject to contract” in some of the inter partes correspondence subsequent to the Stamped Letter means there was no intention to create legal relations by entering into the Stamped Letter, and I shall address this point below also.

99.  Mr Hui also argued that even if this Court did not accept the Plaintiff’s case that there was no intention to form a binding agreement, there was no proper acceptance of the alleged offer made by the Plaintiff, and that the Defendant had wrongfully retained the Plaintiff’s payment made by the 1^st Cheque. This point is also addressed below.

The Representations

100.  As indicated above the Representations were made by BC to the 3 Shareholders, and were to the effect that the Premises would be delivered on an “as is” basis and that the 4 sets of Temporary Letter (which were signed by the 3 Shareholders) were only temporary documents.

101.  The Representations were made by BC to the 3 Shareholders without the presence of the Defendant’s representatives, and neither BC or TY (who was present) gave evidence. Ms Poon was present on some but not all of those occasions. I accept the evidence of Ms Poon and Mr Yeung that BC had made the Representations on those occasions. However, this is entirely separate from the question of whether BC made the Representations as the Defendant’s agent.

The Agency Issue

102.  The Representations pleaded by the Plaintiff (ie. D’s 13 July 2021 Representation, D’s 23 July 2021 Representation, D’s 29 July 2021 Representation and D’s 11 August 2021 Representation) were all made by BC. As the Plaintiff’s case is that the Representations were made by BC as the Defendant’s agent, so the question of whether BC (or Centaline) acted as the Defendant’s agent or as the Plaintiff’s agent in this transaction assumed a degree of importance in this action.

103.  There was no evidence that either the 3 Shareholders/the Plaintiff or the Defendant had entered into any written agency agreement with Centaline. That being the case, it is a question of fact whether in the particular circumstances of this case Centaline (or its staff) were authorized by and therefore acting for a particular party, bearing in mind the characteristics of estate agency in Hong Kong.

104.  As was stated by the Court of Appeal in Bright Gold Ltd v Mega Well Development Ltd [2020] 4 HKLRD 26 at §§88-89:-

“88. Mr Ho SC (appearing with Mr Lee for Bright Gold) submitted that the Judge was erroneous in reaching such a conclusion as an estate agent is not an “agent” in its strict legal sense. He referred to ING Baring Securities (Hong Kong) Ltd v Commissioner of Inland Revenue (2007) 10 HKCFAR 417 at paragraphs 137-138, where Lord Millett NPJ stated as follows:

“137. In Kennedy v. De Trafford [1897] AC 180 Lord Herschell observed (at p.188) that “No word is more commonly and constantly abused than the word ‘agent’”. An agent properly so called is a person who acts on behalf of another, called the principal, so as to affect the principal’s legal relations with a third party: see the definition in Bowstead and Reynolds on Agency (op. cit.) p.1. Where a contract is entered into by an agent acting on behalf a principal, it is the principal who obtains rights and incurs liability under the contract, not the agent. In such a case it is not inaccurate to describe the contract as the contract of the principal and not the agent.

138. But many professional persons who act for clients and who are popularly described as agents are not agents in this sense at all. Estate agents are an obvious example. Stockbrokers are another. They transact business on the stock exchange as principals, not as agents for their clients. Stockbrokers are liable as principals on the contracts which they make with each other; their clients have no liability under those contracts. The only contractual liability which the client undertakes is to his own stockbroker under the contract between them in which each acts as principal.”

89. In the Hong Kong context, Godfrey J held on the facts in Cheng Kwok Fai v Mok Yiu Wah Peter [1990] 2 HKLR 440 at p.445F that the representation by an estate agent on the area of a property was not made on the vendor’s behalf, drawing a distinction between a broker and an agent in the legal sense. On the other hand, there are authorities stressing that whether there was an agency for providing information to purchasers is a question depending on the facts of the case. This is well explained by DHCJ S Kwan (as Kwan VP then was) in Yili Concepts (HKG) Ltd v Lee Wai Chuen HCA 12911/97 (unreported, 29 September 2000) at pp. 21-22:

“It is a question of fact in each case whether an estate agent is authorised by and therefore acting for a particular party in providing information relating to a property to another party. Although an estate agent in Hong Kong usually acts as a broker taking commission from both sides, he may assume different roles at different stages of the negotiation leading to the transaction…””

105.  Some salient basic principles which can be distilled from Bright Gold Ltd v Mega Well Development Ltd are that: (1) estate agents are not necessarily agents in the strict legal sense; (2) it is a question of fact in each case whether an estate agent is authorised by and therefore acting for a particular party in providing information relating to a property to another party; (3) although an estate agent in Hong Kong usually acts as a broker taking commission from both sides, he may assume different roles at different stages of the negotiation leading to the transaction.

106.  Bright Gold Ltd v Mega Well Development Ltd also cautions against attributing undue significance of the payment of commission. As stated at §§107-109 of the Court of Appeal’s judgment therein:-

“107. In our judgment, there is a distinction between promotion of the Development by Centaline and Centaline being instructed to act as Bright Gold’s agent in such promotion. As an estate agent in the sense of a broker, Centaline would naturally promote the Development to its customers when such properties fit the profile of properties the latter looked for. Such promotion would incidentally be beneficial to Bright Gold in terms of the marketing of the Development. But as observed by Allsop P in Tonto Home Loans Australia PTY Limited v Tavares & Others, supra, the performance of a task which is beneficial to another party would not necessarily constitute agency in the legal sense. Likewise, as held in Montrio Ltd v Tse Ping Shun David, supra, the expectation on the part of Bright Gold of such promotion being done by Centaline would not make the latter the agent of the former.

108. Similar analysis appears in the discussion on canvassing agent in Bowstead and Reynolds on Agency, at paragraph 1-020. The latest version can be found in the Second Cumulative Supplement to the 21^st Edn. Such intermediary is simply hired to introduce parties desirous of contracting and in effecting such introductions the intermediary is remunerated by commission. The learned editors said it is difficult to generalise because the extent of involvement of such a person may differ in different cases.

109. Hence, the mere payment of commission for someone who acted as an introducer is not sufficient for the purpose of establishing authority to make representations on the marketing of a property. It must depend on the function that the person was entrusted with.”

107.  For the Defendant, Mr Cheung submitted that Centaline was acting as such an introducer, and was not the Defendant’s agent.

108.  Ms Poon and Mr Yeung said that in all their meetings with BC, BC had said that she was acting on behalf of the Defendant. However, Counsel for both parties agreed that an agent cannot clothe himself with authority ie. the mere representation by the agent as to the extent of his authority cannot amount to a “holding out” by the principal. Therefore, the Court must examine the full course of the dealings which both sides had with Centaline and its staff, as well as whether the Defendant had directly held Centaline out to be its agent to the Plaintiff, in order to determine whether Centaline was acting as agent for either side.

109.  On the evidence, the only occasion on which Ms Poon and Mr Yeung say that the Defendant had acknowledged or held BC out to be its agent was at a meeting they had with Jackie Leung on 26 July 2021, and the events of 26 July 2021 will be examined below.

110.  In terms of the evidence of how Centaline first came to be involved, Jackie Leung said that the Defendant had been informed by the Previous Tenant in around May 2021 or June 2021 that they would not renew their lease when it ended in November 2021, thus the Defendant started to take steps to find a new tenant. Jackie Leung said that the Defendant’s usual practice was to put information out to all the big estate agencies including Centaline, and in this case, TY from Centaline came back quite quickly with an offer for a rent which the Defendant considered acceptable, so the Defendant went ahead with further negotiations. Jackie Leung said that she had not come across either TY or BC from Centaline before this transaction.

111.  Jackie Leung’s evidence in this regard is consistent with and corroborated by the email communications between BC/TY of Centaline and Jackie Leung. On 2 July 2021, Jackie Leung sent an email to BC attaching technical plans of the Premises. On 3 July 2021, TY sent an email to Jackie Leung stating “Please find the attached offer letter for lease of the captioned Premises for your company’s perusal and approval. Please feel free to contact our Bread Chow and me if you need further clarification”. It is possible that there were earlier communications but there was no evidence before this Court of the same.

112.  The offer letter attached to the 3 July 2021 was not produced this action. What was produced in this action were (i) the two subsequent emails in the email chain, both dated 6 July 2021 and both referring to a revised offer letter being attached by TY, and (ii) a 3 page document on Centaline’s letterhead, which was described as a revised offer letter dated 6 July 2021 and which must have been the revised offer letter described in one of TY’s emails of 6 July 2021.

113.  In this 3 page document, Centaline stated “We are glad to inform you that one of our substantial clients has already shown a great interest in renting the captioned premises under the following terms and conditions …”. Centaline went on to state that the “Intending Tenant” was a “Chinese Restaurant” and that the proposed rental was HK$600,000 per month for a 3 year lease with an option to renew for another 3 years, with a security deposit of 3 months rent and a rent-free period of 4 months and 15 days. It can be seen that these commercial terms were very similar to those which ended up in the Stamped Letter.

114.  The following aspects of the 3 page document are also noteworthy:-

(i) In the section headed “Agency fee”, Centaline stated “A sum equivalent to 1 month(s) rental shall be paid to Centaline Property Agency Limited by the Landlord and the Tenant upon signing the Formal Sale and Tenancy Agreement of the said premises. You are fully aware that we will reserve the right to charge fees from the Tenant and to this you have no objection.”

(ii) In the section headed “Status of vacant possession”, Centaline stated “The Tenant prefers to take the Premises at “as is” basis, but not the General Licence”.

(iii) The last page was a signature page which BC had signed for and on behalf of Centaline and where there was a space for the Defendant as Landlord to sign. The document shown to this Court was not signed by the Defendant and there is no evidence that it ever was signed by the Defendant.

115.  The following observations can be made:-

(i) There is no real doubt that the “Intending Tenant” and the “substantial client” which Centaline was referring to in this 3 page document was the 3 Shareholders.

(ii) At this juncture, Centaline was indicating to the Defendant that the 3 Shareholders had a “preference” to take the Premises on an “as is” basis.

(iii) In terms of how Centaline would be remunerated, Centaline was seeking to be paid an agency fee of 1 month’s rental by both the landlord and the tenant upon the successful signing of a formal tenancy agreement.

116.  For the Plaintiff’s part, in Mr Yeung’s evidence, Mr Yeung said that BC had first introduced him to the Premises in either late June 2021 or early July 2021, saying that there was no need to renovate the Premises for a restaurant. Mr Yeung said that this was important to him as it would save a lot of money on renovations and shorten the process of obtaining a licence.

117.  Since BC knew that Mr Yeung was looking for Premises to operate a restaurant, logic dictates that Mr Yeung had had prior discussions with BC in which he had told BC what he was looking for.

118.  Other than the 3 page document Centaline sent to the Defendant on 6 July 2021, the following are some of the more significant email communications between Centaline and the Defendant:-

(i) An email from Jackie Leung to BC and TY on 20 August 2021, which stated “Please find attached Offer Letter duly signed by Landlord for Tenant’s reference. The original duplicate will be sent to Tenant after stamping.”

(ii) An email from TY to Jackie Leung (which was copied to, inter alia, BC and Ms Poon) on 25 September 2021, which appended a one page document in Chinese dated 24 September 2021 signed by Ms Poon for and on behalf of the Plaintiff addressed to the Defendant concerning the condition of the Premises to be delivered to the Plaintiff. In summary, the Plaintiff confirmed that the Premises would be delivered in a “bare shell” condition but requested that the Defendant ask the Previous Tenant to leave certain fixtures behind.

(iii) An email from BC to Nelson Yeung (the Defendant’s conveyancing solicitor, which was copied to Ms Poon, Jackie Leung and Kinson Lee) which stated “I am instructed by the Tenant to request for a draft Formal Tenancy Agreement for their perusal prior to executing of the same at your earliest convenience!”.

(iv) An email from TY to Jackie Leung (which was copied to, inter alia, BC and Ms Poon) on 14 October 2021 which stated, inter alia, that the Plaintiff confirmed that the Premises should be delivered in a “bare shell” condition.

(v) An email from BC to Jackie Leung (which was copied to TY and Ms Poon) on 21 October 2021 which stated “I am instructed by the Tenant that the marked with pink circle as showed into the plans as per attached hereto was included into lease Premises! Kindly clarify!”.

119.  Based on the contents of the emails, which show the Plaintiff and the Defendant communicating with each other through Centaline, I do not consider that they can be said to strongly indicate that Centaline was acting as the agent for one side or the other.

120.  If anything, there were instances in the aforementioned documents and emails where Centaline referred to the 3 Shareholders/the Plaintiff as its client, or stated that it had been “instructed” by the 3 Shareholders/the Plaintiff to write to the Defendant, including emails which had been copied to Ms Poon.

121.  In her evidence, Ms Poon did not deny that the email addresses used therein were hers or that she had received the emails, although she sought to distance herself from those email communications, and to give the impression that she never read the emails at the time as she seldom conducted business by email. Ms Poon also suggested that as far as she was concerned, those email communications were purely internal discussions between the Defendant and its agent, but that of course does not make sense since she was copied on those discussions. Ms Poon said that she did not know why she had been copied in those emails, and accused BC and TY of sending these emails after the parties had started to fall out to create a favourable paper trail for the Defendant. Needless to say, this accusation was entirely unsupported by any evidence and I have no hesitation in rejecting it.

122.  Whilst I am not prepared to read too much into the fact that in some of the aforementioned communications, Centaline referred to the 3 Shareholders/the Plaintiff as its client, or stated that it had been “instructed” by the 3 Shareholders/the Plaintiff to write to the Defendant, at the same time, I approach with caution the Plaintiff’s assertions that Centaline (or its staff) were the Defendant’s agent where those assertions are based on Ms Poon’s and/or Mr Yeung’s own subjective impressions which are uncorroborated by other evidence.

123.  There was a hot dispute about whether a particular in-person conversation took place between Ms Poon and Jackie Leung on 26 July 2021 at D’s offices. It was common ground that the 3 Shareholders/Ms Poon and BC/TY had come to the Defendant’s offices at CWBP2 on that day. The significance of that meeting is that it is alleged that Jackie Leung had said words to the effect that BC was the Defendant’s agent.

124.  Both Ms Poon and Mr Yeung said that at that meeting, Jackie Leung said that BC was the Defendant’s agent and that if the 3 Shareholders/the Plaintiff wished to discuss anything with the Defendant they could go through BC. Jackie Leung denied that she had said that BC was D’s agent, and said that she had dropped by simply to say hello and had then left.

125.  The allegation that at the 26 July 2021 meeting Jackie Leung said that BC was the Defendant’s agent was neither pleaded by the Plaintiff nor set out in Ms Poon’s or Mr Yeung’s witness statements. In fact, Ms Poon did set out at §12 of her witness statement an account of what happened at the meeting, but she did not say that Jackie Leung had said that BC was the Defendant’s agent at that meeting. The allegation only came out in the oral evidence of the Plaintiff’s witnesses.

126.  Given the importance of the statement, if it had been made by Jackie Leung at the meeting, one would have expected it to have featured prominently in the Plaintiff’s pleadings as well as in the Plaintiff’s witness statements, and the fact that this was not the case is a significant factor when it comes to assessing Ms Poon’s and Mr Yeung’s credibility in making this allegation. It is also the case that no other persons who were present at the 26 July 2021 meeting, such as BC, TY, Mr Tsui or Ms Chow, have been called by the Plaintiff to give evidence about what happened at the meeting.

127.  That being the case, I find that whilst Jackie Leung may have said words to Ms Poon and Mr Yeung to the effect that if the 3 Shareholders/the Plaintiff wished to discuss anything with the Defendant they could go through BC (which is entirely plausible, although as I have indicated above neutral as to whether Centaline was the Defendant’s agent), Jackie Leung did not expressly say that BC was the Defendant’s agent. If Ms Poon and Mr Yeung were left with the impression that this was the case, this was an impression they had formed on their own and not because Jackie Leung had expressly said so. Also, the Plaintiff never sought to run any case that there was an implied representation such that a reasonable person would have inferred from the Defendant’s words and conduct that BC was the Defendant’s agent.

128.  The Plaintiff also relied on the fact that the 3 Shareholders/Ms Poon met with BC/TY on various occasions, including on 26 July 2021, at the Defendant’s offices, to assert that Centaline must have been acting as the Defendant’s agents.

129.  In this regard, Jackie Leung said that it was not that unusual for prospective tenants and their agents to ask to use the Defendant’s offices as they were in the same building as the leasing properties (CWBP2) and it was easy to access the leasing properties from there. The Plaintiff pointed to discrepancies between the evidence of Jackie Leung and Kinson Lee as to whether the Defendant’s representatives had to be present if the Defendant allowed its offices to be used by a third party, however I do not think that there is any doubt that whether the Defendant’s representatives were present in the room or not, any such use of the Defendant’s offices by third parties to hold meetings was with the knowledge and permission of the Defendant.

130.  I do not find the fact that the Defendant permitted Centaline to use its offices for meetings amounts to a holding out by the Defendant that Centaline was its agent, and again, the Plaintiff never sought to run any case that there was an implied representation such that a reasonable person would have inferred from the Defendant permitting Centaline to use its offices for meetings that Centaline was the Defendant’s agent.

131.  In support of its assertion that Centaline was the Defendant’s agent, the Plaintiff also sought to rely on the fact that BC had told the 3 Shareholders/Ms Poon that Centaline would be remunerated by D only and that Centaline would not charge P any commission. However, there was no evidence before the Court as to what discussions Centaline had had with either side about commission, other than the 3 page revised offer letter which TY of Centaline sent to Jackie Leung on 6 July 2021 which said that Centaline proposed to charge 1 month rent as commission from landlord and tenant.

132.  Jackie Leung confirmed that her company’s usual practice was to pay 1 month rent as commission if there was a successful transaction. If that was the case, then it appears that Centaline would not have needed the Plaintiff to pay any part of the commission. Whilst no commission was paid by the Defendant to Centaline in the end as the Plaintiff had not taken up the tenancy, I do not find the fact that all the commission would have been paid by the Defendant to Centaline upon a successful transaction showed that Centaline was the Defendant’s agent. As indicated in Bright Gold Ltd v Mega Well Development Ltd, brokers also get paid commission from clients, and as stated in Yili Concepts (HKG) Ltd v Lee Wai Chuen, an estate agent in Hong Kong usually acts as a broker taking commission from both sides. The fact is that Centaline could equally have requested the 3 Shareholders/the Plaintiff to pay commission, as Centaline’s reservation of the right to do so in the 3 page revised offer letter which TY of Centaline sent to Jackie Leung on 6 July 2021 indicated.

133.  Overall, I did not consider that Centaline had acted either as the Defendant’s agent or as the Plaintiff’s agent in the negotiations in this transaction. The evidence shows that BC was already well acquainted with Mr Yeung and also that the Defendant would send information about its rental properties to all major estate agencies including Centaline, but I do not find that those facts in themselves would have created an agency relationship either between the Plaintiff and Centaline or between the Defendant and Centaline. I find that Centaline’s role was essentially that of a broker or introducer, and that what it did was to convey offers and counteroffers in hope of bringing about a deal.

134.  Of course, the reason why the Plaintiff argues for the finding of an agency relationship between the Defendant and Centaline is that the Plaintiff wishes to establish that the Representations were made by BC on behalf of the Defendant, such that the Defendant is bound by the Representations. Whilst I have found that the Representations were made by BC, I do not find that they were made by BC as the Defendant’s agent or that BC had otherwise been expressly authorized by the Defendant to make the Representations.

135.  In reaching this conclusion, I also take into account the fact that from the outset, when the Defendant provided D’s First Offer to Centaline, it was clearly stipulated in Clause 16(j) that the Premises were to be handed over on an “As is” basis or in the state and condition as the Previous Tenant delivered to the Defendant. There were various counter-proposals to negotiate a variation of that term in the form of the riders, resulting in the agreement reflected in the Stamped Letter which had Clause 16(j) but which also had a 2 page rider stating that the Premises would be handed over to the Defendant on an “as is” condition subject to “the following existing fixtures and fittings left behind by the existing tenant in the state and condition that the existing tenant shall deliver to the Landlord (if any) will be retained at the Premises …”. So all along, the Defendant’s documents had stated that it was uncertain whether the existing fixtures and fittings would be left behind by the Previous Tenant and that it was a matter for the Previous Tenant to decide, which is consistent with Jackie Leung’s evidence that the Defendant had no ability to make any commitment that all of the existing fixtures and fittings of the Previous Tenant would be left behind as it was up to the Previous Tenant to decide how much of the existing fixtures it would leave behind.

136.  That being the case, it is highly inherently improbable that Jackie Leung would have authorized BC or Centaline to make the representation to the 3 Shareholders/Ms Poon that the Defendant could deliver the Premises on an “as is” basis so that the Plaintiff could make use of all the fixtures and fittings of the Previous Tenant.

137.  In this connection, I would mention that at one point during the trial, it was suggested by Mr Hui that the words “as is” in Clause 16(j) of the Offer Letter continued to be used by the Defendant in the agreement after it was clear that the Defendant would not be delivering the Premises with all of the existing fixtures and fittings of the Previous Tenant to deceive the Plaintiff. There was of course absolutely no basis for putting forward this serious allegation.

138.  In any event, the Representations were made to the 3 Shareholders/Ms Poon at the time when the 4 Sets of Temporary Letter were signed. The circumstances in which Ms Poon subsequently executed the Stamped Letter, which is the agreement which the Defendant seeks to enforce and which the Plaintiff seeks to resile from, were wholly different, and are examined further below.

The Inspection of the Premises

139.  Although not part of the agreed list of issues in dispute, the Plaintiff asked that the Court make factual findings as to when the Plaintiff had been allowed to conduct proper site visits, which it said had a bearing on the question of whether there had been a binding agreement, because the Plaintiff’s case was that it was simply unreasonable and illogical to suggest that the Plaintiff would have intended to enter into a binding agreement before inspecting the Premises properly.

140.  It was common ground that there were site visits on 16 September 2021 and 20 September 2021 after the Previous Tenant had vacated the Premises, at which the Plaintiff’s representatives were accompanied by technical advisers and were able to inspect the entire Premises including the kitchens.

141.  However, the parties did not agree whether what had happened on 27 July 2021 and 26 August 2021 (when the Previous Tenant had not yet vacated the Premises) constituted proper site visits. Mr Yeung’s evidence was that on 27 July 2021, he was only able to see the dining area of the Previous Tenant like a restaurant customer and was not able to see the rest of the Premises, including importantly the kitchen. Jackie Leung’s evidence was that she had specifically arranged with the Previous Tenant for the prospective tenant to have access to the whole of the Premises and that Mr Yeung did see the kitchen. However, in his evidence, Kinson Lee (who was present on both occasions) essentially agreed with the Plaintiff’s case that on 27 July 2021 and 26 August 2021, the Plaintiff’s representatives could only see the dining area like a restaurant customer. I prefer Mr Yeung’s evidence, as corroborated by Kinson Lee’s evidence, in this regard, and I find that although the Plaintiff’s representatives did visit the Premises on 27 July 2021 and 26 August 2021, they were not able to inspect the entire Premises including the kitchen on those occasions.

142.  The Plaintiff repeatedly asserted that the site visits on 16 September 2021 and 20 September 2021 had revealed the existence of unauthorized building works (“UBWs”). There was no evidence before the Court as to whether the UBWs alleged were in fact illegal structures or not. But what is of significance is that days after those site visits, the Plaintiff issued the one page document in Chinese dated 24 September 2021 (signed by Ms Poon for and on behalf of the Plaintiff) addressed to the Defendant confirming that the Premises would be delivered in a “bare shell” condition but requesting that the Defendant ask the Previous Tenant to leave certain fixtures behind. The aforementioned one page document in Chinese was quickly followed by detailed design drawings from the Plaintiff’s interior designers which were forwarded by TY by email on 27 September 2021 to Jackie Leung and Kinson Lee with copy to, inter alia, BC and Ms Poon.

143.  Subsequently, on 14 October 2021, TY sent an email to Jackie Leung (which was copied to, inter alia, BC and Ms Poon) in which TY said that he was instructed by “the Tenant” to take delivery of the Premises as a “bare shell”. Whilst Ms Poon denied in cross-examination that the email reflected any instruction given by the Plaintiff to Centaline, she also admitted that the Plaintiff had always had the possibility of not getting the fixtures left behind by the Previous Tenant in mind.

144.  The Plaintiff sought to argue that because the state of the Premises to be delivered was still changing constantly, there could not have been any intention to create legal relations when the Stamped Letter was executed by Ms Poon on 24 September 2021. However, given (i) the terms of the Stamped Letter (specifically Clause 16(j) and the 2 page rider) as to the Defendant’s obligations in terms of the condition of the Premises to be delivered to the Plaintiff, (ii) that site visits with technical advisers had taken place on 16 and 20 September 2021, and (iii) that shortly thereafter the Plaintiff had already made up its mind to take delivery of the Premises as a “bare shell” and had come up with design drawings for the Premises, I do not find any argument that the Stamped Letter was void for uncertainty due to any uncertainty about the state of the Premises to be delivered to be tenable.

What Documents Did The Plaintiff Have

145.  A recurring theme in the Plaintiff’s case was that the 3 Shareholders/Ms Poon did not receive any copies of the documents that they had signed, and were therefore in the dark and confused about whether there was any agreement and if so what the terms of that agreement were. In addition, Mr Yeung and Ms Poon gave evidence that they did not use written means of communication and maintained that they did not know what was going on.

146.  As indicated above, Ms Poon sought to distance herself from the email communications which she was copied on to disavow any knowledge or receipt of signed documents. This was coupled with the Plaintiff’s argument that Ms Poon was not given the opportunity to review the contents of the Stamped Letter when she went to the Defendant’s offices to sign the document on 24 September 2021 and that she had not received a copy of the Final Offer Letter prior to that date, such that she was not aware of the contents of the document when she signed it.

147.  However, as indicated above, Jackie Leung had sent an email on 20 August 2021 to BC and TY providing them with a copy of the Final Offer Letter (after it had just been signed by the Defendant). There is no conceivable reason why BC and TY would not have passed this document on to the 3 Shareholders/Ms Poon, and in fact in a letter from the Plaintiff’s lawyers to the Defendant’s lawyers dated 19 November 2021, the Plaintiff’s lawyers referred to the fact that “On 20 August 2021, Bread Chow returned to our clients copy of the August Letter [ie. the Final Offer Letter] …”, which Mr Cheung unsurprisingly placed heavy reliance on. There was no attempt by Mr Hui to resile from this confirmation, for example by saying that the Plaintiff’s lawyers had in fact gotten their facts wrong. For the foregoing reasons, to the extent that it has a material bearing on whether the Stamped Letter executed on 24 September 2021 by Ms Poon on behalf of the Plaintiff was a binding agreement, I find that Ms Poon did receive a copy of the Final Offer Letter prior to 24 September 2021 and would have had a reasonable opportunity to review and to take advice upon the contents of that document if she was minded to do so.

148.  However, at the end of the day, I do not consider that the Plaintiff’s complaints that they had not been provided with the signed documents or had otherwise not been keep informed of what was going on have any material bearing on the whether the Stamped Letter executed on 24 September 2021 by Ms Poon on behalf of the Plaintiff was a binding agreement.

The Execution of the Stamped Letter

149.  In her evidence, Ms Poon said that she had not come across an “offer letter” before and did not know what it was. Ms Poon said that BC had told them that they needed to sign the documents to show sincerity to negotiate with the Defendant so that the Defendant would ask the Previous Tenant to retain the fixtures.

150.  In relation what Ms Poon thought or knew at the time, there was a factual dispute about what had been said during a telephone conversation on 13 September 2021 between Ms Poon and Jackie Leung. In his closing submissions, Mr Hui asserted that:-

“Ms Poon also gave evidence that, on 13 September 2021, when Jackie Leung first called her by telephone, Jackie Leung told her to attend D’s office to sign further/counter-sign the temporary documents, so as to replace the names of the previous shareholders. Ms Poon’s evidence was that Jackie Leung explained that the temporary document would then be used, in the capacity of the newly incorporated company, for further negotiation with the landlord; and that the final tenancy agreement would subsequently be entered into between P, as the company, and the landlord.”

151.  However, what Ms Poon said in her oral evidence about the telephone conversation on 13 September 2021 has to be considered in light of what she said (or did not say) about it in her witness statements. Firstly, Ms Poon did not mention any telephone conversation with Jackie Leung on 13 September 2021 in her original witness statement. In fact, in her original witness statement, Ms Poon did not mention anything material as having happened between 12 August 2021, when the 3 Shareholders/the Plaintiff delivered the 2^nd Cheque, and 16 September 2021, when the 3 Shareholders/Plaintiff conducted a full site visit of the Premises together with their technical advisers.

152.  Then, upon the exchange of witness statements, Ms Poon would have seen the detailed account given by Jackie Leung at §30 of her original witness statement of what was discussed during the telephone call on 13 September 2021, which was as follows:-

“On 13 September 2021, I informed and explained to Ms Poon of the Plaintiff via telephone call that:

(a) The Plaintiff had to place its initials and affix the Plaintiff’s company chop on each page of the Stamped Letter as defined in paragraph 15 of the Statement of Claim (with corresponding amendments being made to the Final Offer Letter to reflect the substitution of the Plaintiff as the tenant of the Premises and before it was stamped) for a binding contract to be made between the Defendant and the Plaintiff, and the above had to be done by Ms Poon as the sole director of the Plaintiff;

(b) By doing so, the Plaintiff would be taken to have agreed to all the contents of the Stamped Letter;

(c) The Plaintiff could take the time to consider the Stamped Letter further if the Plaintiff wished to; and

(d) Upon signing of the Stamped Letter, the Defendant would proceed to arrange stamping of the Stamped Letter.”

153.  However, having seen §30 of Jackie Leung’s original witness statement, Ms Poon only denied Jackie Leung’s account of the telephone conversation at §15 of her supplemental witness statement, and did not say anything along the lines of “Jackie Leung explained that the temporary document would then be used, in the capacity of the newly incorporated company, for further negotiation with the landlord; and that the final tenancy agreement would subsequently be entered into between [the Plaintiff] and the landlord”.

154.  If Jackie Leung had indeed represented to Ms Poon that the Stamped Letter which she would be signing on behalf of the Plaintiff was only a temporary document and that a tenancy agreement would only be entered into after further negotiation between the parties, one would have thought that this was a very significant matter which would have been set out in the Plaintiff’s witness evidence and pleaded. However, it was not.

155.  As matters stand, there was no pleaded case that Ms Poon had been induced to execute the Stamped Letter on 24 September 2021 by any representations by Jackie Leung that the document was not intended to be a legally binding agreement. In fact, whilst the Defendant at §16 of its Amended Defence specifically averred what was stated at §30 of Jackie Leung’s original witness statement to have been said during the telephone call on 13 September 2021, the Plaintiff at §16 of its Amended Reply only stated in response to that averment: “… (iv) the new allegation that the Defendant and/or Jackie Leung had allegedly informed the Plaintiff could take the time to consider the Stamped Letter further if the Plaintiff wished to or that upon the signing of the Stamped Letter, the Defendant would proceed to arrange stamping of the Stamped Letter is strictly denied; (v) there was no face-to-face confirmation or any direct discussion with Jackie Leung as to such new allegation; …”. In short, the Plaintiff had every opportunity to pleaded the case that Ms Poon had been induced to execute the Stamped Letter on 24 September 2021 by representations made to her by Jackie Leung that the document was not intended to be a legally binding agreement, but did not do so.

156.  Given the foregoing, it is difficult to find Ms Poon’s evidence in the witness box about what had been said to her by Jackie Leung on 13 September 2021 credible, and I find that Jackie Leung did not say anything to Ms Poon along the lines that the document which she would be signing on behalf of the Plaintiff was only temporary in nature and that a tenancy agreement would only be entered into after further negotiation between the parties.

157.  The next controversy was in relation to what happened at the meeting on 24 September 2021, when Ms Poon went to the Defendant’s offices to sign the Stamped Letter. The gist of Ms Poon’s evidence is that she was under pressure from D’s staff to initial on each page and to sign without having any opportunity to read the document, and that she did not receive a copy of the signed document afterwards.

158.  I accept Kinson Lee’s evidence that the meeting, and the signing process, took place quickly. I also accept Kinson Lee’s evidence that after Ms Poon signed the Stamped Letter and he had made a photocopy, he handed that photocopy to his colleague rather than to Ms Poon directly. But there is little to the point of Ms Poon’s assertion that she did not receive a copy of the signed document on 24 September 2021 – even if she had not, it is clear (as shall be explained below) that she had it not long afterwards.

159.  As to other areas of disagreement between the parties as to what had happened at the 24 September 2021 meeting, Ms Poon did not set out any account as to what had happened at the 24 September 2021 meeting in her original witness statement, and even after seeing Jackie Leung’s account of what happened at the 24 September 2021 meeting at §31 of her witness statement, Ms Poon did not see fit to say anything about what happened at the 24 September 2021 meeting in her supplemental witness statement. Hence, anything new that Ms Poon had to say at trial about the 24 September 2021 meeting, such as the suggestion that she had signed under pressure or some sort of duress from the Defendant’s staff, ought to be viewed with caution.

160.  As indicated above, I have found that Ms Poon did receive a copy of the Final Offer Letter (after it had been signed by the Defendant) from the Defendant through BC/TY prior to 24 September 2021, and that she would have had a reasonable opportunity to review and to take advice upon the contents of that document if she was minded to do so. I have also found that Ms Poon did understand English and was a careful person who would not have signed any documents which she did not understand without asking for assistance.

161.  I referred earlier to some of the relevant terms of the Stamped Letter. From those terms, it is clear that the Stamped Letter sets out complete terms for a tenancy and contains all of the necessary terms to be a binding legal contract. It stated that it was an offer from the tenant to the landlord and that if the offer was accepted by the landlord it would form a binding contract between the parties.

162.  The terms of the Stamped Letter also made it clear that it was a binding tenancy agreement regardless of whether a formal tenancy agreement was executed or not - Clause 10 of the Stamped Letter mandated the Plaintiff to sign a standard form formal tenancy agreement without amendment, and said that “In the event that the Tenant fails to sign the formal Tenancy Agreement on the commencement date of the tenancy, this Agreement shall continue to be a binding tenancy agreement between the parties …”.

163.  In her evidence, Ms Poon was adamant that the documents signed by the 3 Shareholders could only be temporary as no site inspection had yet taken place and there was great uncertainty as to what condition the Premises could be delivered by the Defendant to the Plaintiff in. However, by the time of the 24 September 2021 meeting, the Plaintiff had conducted two detailed site inspections (on 16 and 20 September 2021). On the same day, Ms Poon signed a letter on behalf of the Plaintiff addressed to the Defendant confirming that the Premises would be delivered in a “bare shell” condition but requesting that the Defendant ask the Previous Tenant to leave certain fixtures behind. This letter was quickly followed by detailed design drawings from the Plaintiff’s interior designers which were forwarded by TY to Jackie Leung. None of this is inconsistent with Clause 16(j) of the Stamped Letter (or the 2 page rider thereto) which provided that the Premises were to be handed over on an “as-is” basis or in the state and condition as the Previous Tenant was to deliver to the Landlord.

164.  When asked about the 24 September 2021 letter from the Plaintiff to the Defendant, Ms Poon said that at that point, the Plaintiff accepted that the Premises would not come with the Previous Tenant’s fixtures, but thought it could negotiate for better terms (lower rent, more rent-free period) on the basis that the Premises would be delivered as a bare shell.

165.  However, there is no evidence that that was any further negotiation between the parties on the commercial terms, such as the monthly rent and the rent-free period, after 24 September 2021, and it is difficult to see what terms remained to be agreed, or were uncertain, after 24 September 2021. The Plaintiff’s witnesses gave the Court the clear impression that they refuse to accept the binding nature of the Stamped Letter because they thought that the Plaintiff ought to have been given some concessions on the commercial terms because they would not get the Previous Tenant’s fixtures.

166.  I find that the Plaintiff has not made out any sufficient case to displace the presumption that Ms Poon’s execution of the Stamped Letter on 24 September 2021 was intended to create legal relations, and that when Ms Poon executed the Stamped Letter on 24 September 2021, an agreement was entered into between the Plaintiff and the Defendant which contained all of the necessary terms and conditions for a binding agreement and was not void for uncertainty.

The Legal Advice Received By The Plaintiff

167.  Notwithstanding my finding that a binding agreement had been entered into between the Plaintiff and the Defendant when Ms Poon executed the Stamped Letter on 24 September 2021, what happened following the execution of the Stamped Letter remains noteworthy.

168.  On 4 October 2021, BC sent an email to the Defendant’s conveyancing lawyer to request a draft of the formal tenancy agreement. On 5 October 2021, Ms Poon forwarded the draft formal tenancy agreement to Calvin Cheng (her own lawyer) on 5 October 2021 to seek advice.

169.  In her evidence, Ms Poon said that the first time she received a copy of the document she had signed on 24 September 2021 ie. the Stamped Letter was at a meeting at the Defendant’s offices on 19 October 2021. She said that she could not understand why Jackie Leung took the position at that 19 October 2021 meeting that the Plaintiff could not change any of the terms, when the parties were still in negotiations and the Plaintiff did not know whether the Premises would be delivered on an “as is” basis, and did not know the term of the tenancy, how much the rental would be and how many months of rent-free the Plaintiff would receive.

170.  But prior to the 19 October 2021 meeting, Ms Poon had already received the following advice from Calvin Cheng by email on 11 October 2021:-

“I have perused the Formal Tenancy Agreement (“Agreement”) and the Offer Letter which you signed. I note that Clause 10 of the Offer Letter says that the Agreement is a standard one that is to be signed without amendments. Nevertheless, I wish to raise a few comments I have on the Agreement. These comments are in no way a material change from what has been agreed, but a mere clarification on the matter to be more consistent with the Offer Letter. Even if they refuse to make such changes, it would be useful to raise these issues and have it on record so that the parties’ can come to a mutual understanding on these terms.”

171.  So Ms Poon clearly had, and had provided a copy of, the Stamped Letter to Calvin Cheng prior to 11 October 2021, and by 11 October 2021, she had received legal advice which said that the Stamped Letter was legally binding and that the Plaintiff did not have the right to ask for any amendments to the terms in the formal tenancy agreement.

172.  Ms Poon was asked about the legal advice she had received. However, Ms Poon was adamant that despite that advice, the Plaintiff considered that the documents which had been signed were of a temporary nature and were not legally binding, apparently choosing to cling to that position than to accept what it had been advised by its own lawyer. In their evidence, Ms Poon and Mr Yeung both asserted that if any documents to be executed were to be legally binding, they would have consulted lawyers. But here was an instance where they had consulted lawyers and had been advised that what they had already signed was legally binding, but apparently refused to accept that advice.

173.  When it was put to Mr Yeung that there was nothing left to negotiate at this point, Mr Yeung disagreed and said that the 3 Shareholders/the Plaintiff had originally wanted the Premises on an “as is” basis. Mr Yeung was asked whether he accepted that the Defendant could only ever try to get the Previous Tenant to leave the fixtures, and had no obligation to deliver the fixtures to the 3 Shareholders/the Plaintiff if they were unsuccessful in doing so. Mr Yeung accepted that this was the case, but said that if the Defendant could not deliver the Previous Tenant’s fixtures, then the parties would have to re-negotiate, as the 3 Shareholders/the Plaintiff would want to lower the rent and increase the rent-free period. This can only be described as a unilateral desire on the part of the 3 Shareholders/the Plaintiff.

174.  Mr Yeung was also asked about the legal advice that Ms Poon had received from Calvin Cheng. Mr Yeung was clearly aware that Ms Poon had been advised that the signed Offer Letter was legally binding, but, like Ms Poon, rather than to accept that advice, he said that he and Ms Poon found the advice surprising.

175.  The insistence of Ms Poon and Mr Yeung in their evidence that at this juncture, the parties had not agreed on any material terms such as the term of the tenancy, or the rental, or the rent-free period, was not based on anything other than their own thinking. All of the necessary terms, including as to the condition of the Premises to be delivered, had already been set out in the Stamped Letter, which the Plaintiff had been advised was a legally binding agreement.

The Glorigate Point

176.  It was the Plaintiff’s contention that certain conduct on the part of the Defendant following the execution of the Stamped Letter by the Plaintiff on 24 September 2021, namely the use of the headings “Subject to Contract” and/or “Without Prejudice” on some of the written communications between the parties and Centaline, showed that the parties were still negotiating matters including the handover condition of the Premises, and reflected the Defendant’s own position that the negotiations remained subject to contract and that no legally binding agreement had yet been concluded.

177.  However, many of the emails which were sent from Jackie Leung which included the heading “subject to contract and without prejudice” were from the period after the Plaintiff had conducted their site visit on 16 September 2021 and the parties were communicating about the handover condition of the Premises. Hence, the use of these terms out of an abundance of caution in such dealings can be understood. For example, in an email from Jackie Leung to Ms Poon, BC and TY dated 21 October 2021, which was headed “subject to contract & without prejudice”, Jackie Leung indicated to Ms Poon that whilst the Previous Tenant was carrying out reinstatement works of the Premises, the anticipated completion date was 8 November 2021, which fell after the date the Plaintiff was to take over the Premises (2 November 2021), and asked Ms Poon “Please advise if you agree to allow current tenant to proceed work for reinstatement for “Change 2” in the Premises after Tenant takeover of the Premises on November 2, 2021”.

178.  The Defendant has referred to the case of Glorigate Ltd v Poon Siu Wo HCA 1176/2014 (unreported, 15.4.2015) where DHCJ B Chu found that the words “subject to contract” would not automatically invalidate any agreement reached by the parties. In Glorigate, the plaintiff’s letter of offer dated 14 February 2014 for a tenancy of 3 years had been countersigned by the defendants. Amongst other things, the defendants contended that the offer letter did not constitute any valid or enforceable agreement because it bore the words “subject to contract and availability”, and that they had decided not to proceed with the tenancy agreement due to illegal structures.

179.  In Glorigate, the learned judge found that the offer letter had contained all the essential terms of the tenancy which were agreed and had been signed by both the plaintiff as landlord and the defendants as tenant indicating acceptance of those terms, which was unaltered by the fact that the words “subject to contract and availability” appeared on the document.

180.  Mr Cheung submitted that the facts of the present case are not materially different from those in Glorigate, and that in the present case Defendant stands in a stronger position, as in Glorigate the words “subject to contract” were written on the agreement itself, which is not the case here. I agree that any use of the words “subject to contract and without prejudice” in any written communications between the parties subsequent to 24 September 2021 would not invalidate or alter the legally binding nature of the Stamped Letter.

No Acceptance By Defendant

181.  It was also argued by the Plaintiff that there was no proper acceptance of the alleged offer made by the Plaintiff. As indicated above, this argument was not pleaded, but as I understand it, the argument is that the 2 Cheques do not relate to the terms relating to deposit payments stated in the Stamped Letter. The Plaintiff says that the Defendant accepted the 1^st Cheque on 29 July 2021 treating it as the initial deposit under the 29 July Documents, however since the Defendant had rejected the 29 July Documents and no binding agreement had arisen then, the Defendant ought to have returned the 1^st Cheque to the 3 Shareholders/the Plaintiff, but instead wrongfully retained the payment made by the 1^st Cheque. The Plaintiff further argued that under Clause 9 of the Stamped Letter, the tenant was supposed to pay the initial deposit “upon signing and confirming of this Offer Letter”, and as such, the Plaintiff’s obligation to pay the initial deposit under the Stamped Letter only arose after the signing of the document. The Plaintiff’s argument was therefore essentially that the Plaintiff had not agreed to allow the Defendant to treat the 1^st Cheque as payment of the initial deposit under the Stamped Letter, and that the Plaintiff did not intend for the 1^st Cheque to be carried forward and treated as payment of the initial deposit under the Stamped Letter.

182.  The amounts of the 2 Cheques (HK$2,378,004.00 and HK$179,053.83) were significant. As indicated above, I did not accept that the 2 Cheques were just “earnest money” and that it was never intended that the cheques be cashed. It certainly would not have escaped the attention of the 3 Shareholders/the Plaintiff that the Defendant had retained these significant sums, and there was evidence that Mr Yeung and Ms Poon were aware that the 1^st Cheque had been cashed.

183.  To the extent that I need to deal with this argument, in view of the fact that there was no protest from the 3 Shareholders/the Plaintiff when they realized that the 1^st Cheque had been cashed, that the amounts of the 2 Cheques corresponded with the amount of the deposit payments due under the Stamped Letter, and that there was no demand from the Plaintiff for the return of the payments at any time up to the execution of the Stamped Letter, or indeed subsequent to the execution of the Stamped Letter until long after legal hostilities had begun, I infer that the Plaintiff permitted the Defendant to retain the payments made by the 2 Cheques and to hold such amounts and to treat them as the deposit payments under the Stamped Letter.

THE ANSWERS TO THE ISSUES IN DISPUTE

184.  For the aforesaid reasons, I answer the questions identified by the parties in the Agreed Statement of Issues in Dispute as follows.

Question 1: Whether Centaline acted as the agent of the Plaintiff in negotiating the terms and conditions of the potential tenancy of the Premises with the Defendant, or Centaline acted as the Defendant’s agent in negotiating the terms and conditions of the potential tenancy of the Premises with the Plaintiff.

185.  For the reasons aforesaid, I did not consider that Centaline had acted either as the Defendant’s agent or as the Plaintiff’s agent in the negotiations, and that Centaline’s role was that of a broker or introducer, conveying offers and counteroffers in hope of bringing about a deal.

Question 2: Whether there was a condition precedent that a formal agreement was to be signed before formation of a lease as between the Plaintiff and the Defendant.

186.  No. For the reasons aforesaid, I found the Stamped Letter to be a binding agreement, so it was not necessary for the Plaintiff and the Defendant to enter into a formal tenancy agreement before the formation of a lease.

Question 3: Whether the Defendant had agreed and was able to deliver the Premises on an “as is” basis.

187.  As indicated above, Clause 16(j) of the Stamped Letter provided that “The Premises are to be handed over on an “As-is” basis or in the state and condition as the outgoing tenant is to deliver to the Landlord …”, and the 2 page rider annexed to the Stamped Letter stated “The Premises will be handed over to the Tenant on an “as is” condition with the following conditions … (e) the following existing fixtures and fittings left behind by the existing tenant in the state and condition that the existing tenant shall deliver to the Landlord (if any) will be retained at the Premises …”. These were the terms as to the condition of the Premises to be delivered to the Plaintiff.

Question 4: In respect of the unauthorised building works of the then existing decorations of the Premises: (a) Whether they were disclosed to the Plaintiff, and if so when; (b) Whether they were made known to the Plaintiff, and if so since when; (c) Whether such unauthorised building works were discovered and demolished by the Defendant at a later stage.

188.  As indicated above, there was no evidence before the Court as to whether the UBWs alleged were in fact illegal structures or not, but regardless, they would have become known to the Plaintiff after it had conducted site visits with technical advisers on 16 and 20 September 2021. In any event, what happened was that following the Plaintiff’s site visits, the Plaintiff asked to take delivery of the Premises as a “bare shell” whilst requesting that the Defendant ask the Previous Tenant to leave certain fixtures behind.

Question 5: Whether the Defendant, including through Centaline, made any of the representations to the Plaintiff which have been defined in the pleadings as D’s 13 July 2021 Representation, D’s 23 July 2021 Representation, D’s 29 July 2021 Representation and D’s 11 August 2021 Representation (the “Representations”).

189.  As indicated above, I found that the Representations had been made by BC of Centaline, but I also found that Centaline were not acting as the Defendant’s agent in the negotiations between the parties, hence the Representations were not made by the Defendant.

Question 6: Whether the Plaintiff signed the 4 sets of Temporary Letter in reliance on the Representations.

190.  The 4 sets of Temporary Letter were signed by the 3 Shareholders, and as indicated above, I have found that the Representations were made by BC to the 3 Shareholders. However, since the operative binding agreement (which is the one relied upon by the Defendant) is the Stamped Letter executed by the Plaintiff (and not the 3 Shareholders), I do not think it is necessary, or would serve any useful purpose, for me to make any finding in this regard.

Question 7: Whether the Plaintiff and the Defendant reached any conclusions from the negotiations in respect of the tenancy of the Premises. In particular: (i) Whether the terms and conditions recorded in the Stamped Letter constitutes any binding agreement (“Agreement I”), or whether Agreement I would be void for uncertainty; (ii) Whether the Final Offer Letter (as defined in §21 of the Plaintiff’s Statement of Claim) would be void for uncertainty.

191.  There was a proliferation of different terms used to describe what was essentially the same document, but Agreement I refers to the Stamped Letter, which I have found to be a binding agreement between the Plaintiff and the Defendant, which is not void for uncertainty.

Question 8: Whether the Plaintiff and the Defendant entered into any legally binding agreement in respect of the licence of the Premises (“Agreement II”), and if so, whether the terms and conditions of Agreement II are recorded in the “Licence Agreement” appended to the Stamped Letter (the “Licence Agreement”), or whether the Licence Agreement would also be void for uncertainty.

192.  Agreement II refers to the terms relating to the licence of the Premises, which are in fact part and parcel of the Stamped Letter ie. Agreement I. Clause 25 of the Stamped Letter states “Subject to availability and hereinafter provided, the Landlord agrees to permit the Tenant to occupy the Premises for the period of 1 month and 15 days (“the Licence Period”) commencing from November 2, 2021 to December 16, 2021 (both days inclusive) …” and one of the annexures to the Stamped Letter is headed “Licence Agreement Statement of Account” and shows that HK$179,053.33 was to be paid upon signing and returning of the document. So insofar as Agreement II is defined as a separate agreement but comprising terms set out in the Stamped Letter, its existence stands and falls with the Stamped Letter, which I have found to be a binding agreement between the Plaintiff and the Defendant and which is not void for uncertainty.

Question 9: If the Plaintiff and the Defendant are bound by Agreement I and/or Agreement II, whether the Plaintiff’s refusal to execute the formal tenancy agreement and the licence agreement prepared by the Defendant amounted to repudiatory breach on the part of the Plaintiff, and if so whether the Defendant was entitled to accept the repudiatory breach of the Plaintiff, forfeit all deposits paid by the Plaintiff to the Defendant totalling HK$2,541,202.33, and/or claim compensation from the Plaintiff for the loss of rental income suffered by the Defendant taking into account the steps taken by the Defendant to mitigate its loss.

193.  It follows from the findings I have made above that the Plaintiff and the Defendant are bound by Agreement I and Agreement II, that the Plaintiff’s refusal to execute the formal tenancy agreement and the licence agreement prepared by the Defendant amounted to repudiatory breach on the part of the Plaintiff, and that the Defendant was entitled to accept the repudiatory breach of the Plaintiff and to forfeit the deposits paid by the Plaintiff to the Defendant.[2] I also find that the Defendant is entitled to claim compensation from the Plaintiff for the loss of rental income suffered by the Defendant taking into account the steps taken by the Defendant to mitigate its loss (see the section of this judgment dealing with the quantum of the Defendant’s counterclaim below).

Question 10: Whether the sum of HK$2,557,057.83 being the money paid by the Plaintiff to the Defendant was paid in reliance on the Representations.

194.  I have found that HK$2,557,057.83 (being the total of the amounts under the 2 Cheques) was paid by the Plaintiff to the Defendant as deposit payments under the Stamped Letter. I did not find that the Representations had anything to do with the entry of the Stamped Letter by the Plaintiff and the Defendant.

Question 11: If there is no binding contract between the Plaintiff and the Defendant, whether the Defendant is liable to refund HK$2,557,057.83 to the Plaintiff being the money paid by the Plaintiff to the Defendant in reliance on various representations made by the Defendant.

195.  I have found that there was a binding contract between the Plaintiff and the Defendant, in the form of the Stamped Letter, that the HK$2,557,057.83 was paid by the Plaintiff to the Defendant as deposit payments under the Stamped Letter, that the Plaintiff committed a repudiatory breach of that contract, and that the Defendant was entitled to accept the repudiatory breach of the Plaintiff and to forfeit the deposits paid by the Plaintiff to the Defendant. It follows that the Defendant is not liable to refund HK$2,557,057.83 to the Plaintiff.

THE DEFENDANT’S COUNTERCLAIM

196.  Jackie Leung was cross-examined about the Defendant’s counterclaim for loss and damage in the total amount of HK$9,607,977.50, brief particulars of which were set out in a one-page appendix to her witness statement under two headings, the first setting out the costs incurred by the Defendant in sub-dividing the Premises into Shop 3A and Shop 3B (HK$7,299,280) so that it could be rented out, and the second setting out the legal fees, promotional expenses and estate agency fees for letting out Shop 3A and Shop 3B (HK$2,308,697.50).

197.  Jackie Leung accepted that no supporting documents had been adduced by the Defendant to show, inter alia, the precise nature of the work done, who had performed the works and that money had actually been paid, and also accepted that at least some of the costs claimed had been incurred by the Defendant to perform works which would have been needed in any event and which had not been specifically incurred for the purpose of sub-dividing the Premises.

198.  I accept Mr Hui’s submission that there was insufficient evidence before the Court for the Court to find that these losses were proved or that they were attributable to the Plaintiff’s breach of contract. However, from the outset, the Defendant had confirmed that the quantum of its counterclaim was capped at HK$3,000,000 for the purposes of the District Court’s jurisdictional limit. Even without the aforementioned counterclaim for loss and damage in the total amount of HK$9,607,977.50, the Defendant can easily prove that it had suffered losses in excess of HK$3,000,000 by reason of the Plaintiff’s breach of contract.

199.  I accept Jackie Leung’s uncontested evidence that other than the Plaintiff and Sushiro, which eventually leased Shop 3A in June 2022, there were no other interested tenants who were able to take up the Premises either before or after sub-divisions in the period up to June 2022. In the end, after sub-division, the Defendant entered into a lease with Sushiro in respect of Shop 3A for a period of 3 years from 1 June 2022 to 31 May 2025 at a basic monthly rent of HK$280,000, and a lease with another tenant in respect of Shop 3B for a period of 3 years from 15 April 2023 to 14 April 2026 at a basic monthly rent of HK$200,000. I find that the Defendant had taken all reasonable steps to mitigate its loss.

200.  The Defendant (i) did not receive any rental income between 17 December 2021 (the commencement date of the tenancy under the Stamped Letter) and 1 June 2022 (the commencement date of the tenancy of Shop 3A), (ii) only received HK$280,000 basic monthly rent from Shop 3A between 1 June 2022 and 15 April 2023 (the commencement date of the tenancy of Shop 3B) ie. HK$320,000 per month less than the basic monthly rent under the Stamped Letter, and (iii) received HK$480,000 basic monthly rent from Shop 3A and Shop 3B between 15 April 2023 and 16 December 2024 (the last day of the tenancy under the Stamped Letter) ie. HK$120,000 per month less than the basic monthly rent under the Stamped Letter.

201.  Whilst the foregoing is only a very rough analysis which does not take into account the turnover rent provisions, the rent-free periods and other differences between the Stamped Letter and the tenancies entered into in respect of Shop 3A and Shop 3B, it can be readily seen that the loss and damage suffered by the Defendant during the period from 17 December 2021 to 16 December 2024, as represented by the difference between the rental income it would have received under the Stamped Letter and the rental income that it did in fact receive, would have been greatly in excess of HK$3,000,000. I do not therefore find it necessary to go beyond such an analysis to find that the Defendant has suffered loss and damage of at least HK$3,000,000.

202.  After setting off the amount of HK$2,541,202.33 already received by the Defendant, the additional sum which the Plaintiff should pay to the Defendant on the Defendant’s counterclaim is HK$458,797.67.

CONCLUSION

203.  I therefore dismiss the Plaintiff’s claim and find for the Defendant on its counterclaim, and order that the Plaintiff pay HK$458,797.67 to the Defendant on the Defendant’s counterclaim.

204.  I see no reason why costs should not follow the event and make a costs order nisi that the Plaintiff shall pay the Defendant’s costs of this action, to be taxed if not agreed, with certificate for Counsel. The costs order nisi shall be made absolute 14 days from the date of this Judgment.

205.  It remains for me to thank Mr Hui and Mr Cheung for their able assistance, for which I am most grateful.