LAM SHU WING AND ANOTHER v. WONG SO KAU

DCCJ 4177/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 4177 OF 2011

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JUDGMENT

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Introduction

1.  This is a landlord and tenant dispute. The plaintiffs landlord and the defendant tenant (“Wong”) entered into a written Chinese tenancy agreement dated 25 May 2011 (“the Tenancy Agreement”) whereby the plaintiffs agreed to lease to Wong a property known as Shop A1, Winner Centre, 333 Chai Wan Road, Hong Kong (“the Shop”) at a monthly rent of HK$4,000 for a fixed term of 2 years starting from 8 June 2011.

2.  After the discovery of a water seepage problem in the course of renovation work of the Shop, Wong left the Shop and never paid the plaintiffs any rent under the Tenancy Agreement save the first month’s rent upon signing the same.

3.  The plaintiffs commenced this action on 1 November 2011 to claim against Wong for rent in arrears, outstanding management fees, mense profits and vacant possession. By way of a counterclaim, Wong claims rescission of the Tenancy Agreement and damages arising from the plaintiffs’ breach of the same in the total sum of HK$57,924.50.

4.  The plaintiffs’ summary application was disposed of by the Order of Master Chow dated 9 March 2012 (“the Order”) whereby Wong was ordered to pay the plaintiffs outstanding rent and management fees from 8 July 2011 to 9 March 2012 in the sum of HK$41,230 with costs summarily assessed at HK$8,000. Thereafter and until delivery of vacant possession of the Shop, Wong do pay the plaintiffs mense profits at the monthly rate of HK$4,000. Master Chow further granted a stay of execution of the above until the determination of Wong’s counterclaim.

5.  There is no appeal against the Order. This trial concerns Wong’s counterclaim only.

Background facts

6.  The Shop has been a business premises since 1981. It is about one hundred square feet in area and there is no water supplies inside the Shop. The plaintiffs became its registered owner in March 2011. The plaintiffs are a married couple and they intend to lease the Shop for rental income.

7.  Wong carries her business in domestic helpers agency service in Hong Kong. She decided to operate her business at the Shop when her lease with another premises expired in June 2011.

8.  Wong entered into the Tenancy Agreement with the 1^st named plaintiff Lam Shu Wing (“Lam”) on behalf of his wife and himself. The Tenancy Agreement was a Chinese pro-forma rental agreement and the parties made some additional handwritten terms. The following two additional terms are noteworthy.

Clause 11 provided:

“如舖內有滲漏水由業主負責修葺及費用.”

(English translation: If there is water seepage inside the Shop, the landlord should be responsible for repair and costs)

Clause 12 provided:

“舖內之水火險由租客自行購買.”

(English translation: The water and fire insurance of the Shop should be purchased by the tenant.)

9.  Wong was given vacant possession of the Shop in late May 2011 though the tenancy commenced only on 8 June 2011. She started renovation in late May 2011 but the renovation work was hampered by water seepage from the ceiling of the Shop.  

10.  From 27 June 2011 onwards, the parties exchanged emails relating to the water seepage problem in the Shop. Lam also wrote a lengthy letter to the management office of Winner Centre (“the Management Office”) to lodge a complaint. From all the correspondence, it can be seen that Lam also sought assistance from the Food and Environment Hygiene Department (“FEHD”).

11.  On or about 28 June 2011, Wong entered another tenancy agreement in respect of a business premises in Mongkok, Kowloon for her business (“New Tenancy”). The New Tenancy commenced on 8 July 2011 and lasted for two years. There was a break clause effective after the first year. Under the New Tenancy, Wong had to pay a monthly rent of HK$2,300 and she did not have to pay any management fee.

12.  On or about 3 July 2011, Wong vacated the Shop and has not returned ever since. 

13.  By a letter dated 5 August 2011 (“the Letter”), the FEHD reported to Lam on their investigation into the water seepage problem. It was stated that their staff inspected the Shop on 27 July 2011 and no water seepage was detected.

14.  By a document attached to an email to Lam dated 18 August 2011, Wong raised some queries about the findings of the FEHD without specific reference to the Letter though. She asked whether the FEHD could promise that the water seepage problem would not recur.

15.  By a letter dated 31 August 2011, Messrs Tang, Lai & Leung denied liability to the claims made of Wong in the said document. They further reiterated the validity of the Tenancy Agreement and demanded Wong to pay up the outstanding rent and management fee within 14 days thereof.

16.  By a letter dated 24 October 2011, the Management Office reported to Lam that extra attention was paid to monitor the water seepage problem of the Shop. Again they no longer found any water seepage inside the Shop.

The plaintiffs’ stance

17.  The plaintiffs accept as a fact that there was a water seepage problem from June to end of July 2011. It was however not due to any fault of the plaintiffs. It seems that the true culprit was the pipe above the ceiling of the Shop and the pipe was not the plaintiffs’ property. The plaintiffs have neither the right nor the obligation to repair the pipe. The plaintiffs say that they are not liable for the loss and damage suffered by Wong in tort as well as in contract.

18.  In any event, Lam in his testimony expressly offers to give credit to Wong for a sum comprising the June and July rent, i.e. HK$8,000 in any sum payable by Wong to the plaintiffs. This offer is made as a gesture of goodwill and of course without prejudice to the plaintiffs’ position.

The defendant’s stance

19.  Wong says that the water seepage problem was so serious that personal safety was jeopardised inside the Shop. All renovation work commissioned by her had to come to a halt in early July.

20.  As regards the New Tenancy, she explains that it was only rented on an ad hoc basis so that the documents relating to her business could be stored at the new office. She claims that once she was satisfied that the water seepage problem had been resolved and would not recur, she would relocate her business to be operated at the Shop.

21.  Wong is obviously unhappy with the way the plaintiffs handled the water seepage problem. She says they have done nothing to repair the Shop in contravention of the Tenancy Agreement. She has never inspected the Shop since she vacated the same in early July 2011. She claims that she has never received the Letter.

22.  Wong believes she could recover the loss and damage suffered by her as a result of the water seepage problem from the plaintiffs. First, she claims a sum of HK$5,900 being the costs of a glass panel and a glass door installed at the Shop on 2 June 2011. Second, she claims a sum of HK$355 being the costs of two fold of banners specially made for the Shop. Third, she claims a total sum of HK$948 consisting of costs of building materials and the transport costs incurred for relocation. Fourthly, she claims a sum of HK$2,000 as miscellaneous expenses incurred.

23.  Fifthly, she claims a sum of HK$25,200 being loss of profit of her business. The basis of this claim is that she used to afford to pay a monthly rent of HK$9,500 when her business was operated at her old shop premises on the ground level. She expects that she could still afford to pay the same amount when her business was operated at the Shop. Now she could only afford to pay a monthly rent of HK$3,200 at her new shop premises which is located above the ground floor. Hence she reckons her loss of profit attributable to her relocation up till summary judgment was entered against her on 9 March 2012 is HK$25,200 ($6,300/2 x 8 months).

24.  Finally, she asks for the return of the rental deposit of HK$5,133 paid to the plaintiffs, the two months’ rent and management fee amounting to HK$10,266 and her share of the stamp duty of the Tenancy Agreement in the sum of HK$122.50.

Issues
25.   Mr Wong, counsel for the plaintiffs, has formulated three issues for this court to determine. They are:

(1)   Whether the plaintiffs breached the contractual duty to rectify the water seepage problem. Incidentally I have to determine the extent of the contractual duty;

(2)   Whether the defendant suffered the loss and damage as alleged;

(3)   Whether the defendant has taken reasonable step to mitigate her loss.

26.  I note that the issue of Wong’s failure to mitigate her loss is not raised in the pleadings. It is not open to the plaintiffs to take this issue now: Hong Kong Civil Procedure 2013 Vol.1 §18/8/17AA at p.390.

Discussion

27.  Lam testified for the plaintiffs and Wong in addition to she herself called Mr Tong So Keung to testify. Mr Tong was the contractor to renovate the Shop for Wong. His evidence is not really relevant to the factual issues in dispute.

28.  Lam’s testimony is largely supported by contemporaneous documents and I find him to be a reliable witness. The same cannot be said about Wong. I believe that she made up her mind to vacate the Shop and abandon, rightly or wrongly, the Tenancy Agreement when she took up the New Tenancy. I do not accept her explanation that the New Tenancy was merely an ad hoc arrangement given its clear terms. I also reject her computation of her alleged loss of profits, which has no evidential basis. It is both illogical and illusory.

29.  There can be no real controversy about the occurrence of the water seepage problem. I accept the evidence of the plaintiffs that by 27 July 2011, the problem was rectified, as stated in the Letter. There is simply no contrary evidence. Wong did not bother to ask for an inspection and/or make one when requested by Lam. I find her demand that the plaintiffs and the FEHD should give a guarantee that there would not be any recurrence of the water seepage problem to be unreasonable. It was just an excuse to avoid the Tenancy Agreement.

30.  Any liability of the plaintiffs arising from the water seepage problem can only be tortious and/or contractual. Understandably, acting in person, Wong is unable to plead with clarity in her pleadings. Nor is she able to make any legal analysis by herself.

31.  For tortious liability, there is no suggestion let alone evidence that the plaintiffs caused and/or procured the water seepage problem by negligence or otherwise. I can find no negligence on the part of the plaintiffs.

32.  The water seepage problem, regardless of its severity or the lack of it, was a nuisance to Wong as an occupier of the Shop. Yet, as can be seen from the background facts, once the plaintiffs received the complaint from Wong, Lam made a reasonable effort to have it rectified. The plaintiffs cannot be held liable for the nuisance.

33.  I turn to the contractual duty of the plaintiffs under the Tenancy Agreement. It is more likely than not that the parties considered the possibility of a water seepage problem before entering into the Tenancy Agreement, as indicated by their addition of clause 11. By clause 11, the duty of the plaintiffs in respect of a water seepage problem is well-defined. The plaintiffs are not liable for the occurrence of such a problem and they are merely responsible for rectifying the same at their own expense.

34.  As rightly pointed out by Mr Wong, there is no direct evidence as to the cause of the water seepage problem and what the plaintiffs could and should have done to resolve the problem. The unchallenged evidence of the plaintiffs, which I accept, is that a contractor commissioned by the Management Office attended to this matter and the problem was rectified without the involvement of the plaintiffs and/or Wong. The source of the seepage was not within the Shop (and Wong does not suggest so) and most probably located above the false ceiling of the Shop. I do not think it was the plaintiffs’ duty to repair any structures not belonging to them and/or not demised to Wong: Peters v Prince of Wales Theatre (Birmingham) Ltd [1943] KB 73 (CA). Nor do I think it was within their authority or power to do so.   

35.  In the result, I find that the plaintiffs have not breached their covenant to repair under clause 11 of the Tenancy Agreement.  I conclude that they are not liable for the loss and damage suffered by Wong resulting from the water seepage problem. Wong has all my sympathy for the problem, which could be irritating. However, in my view, she should not have elected to avoid the Tenancy Agreement altogether. She should have resolved the problem within the bounds of the Tenancy Agreement.                                   

36.  That being the conclusion, I do not need to deal with the issue of quantum.

Order

37.  For the foregoing reasons, I dismiss Wong’s counterclaim.

I trust the plaintiffs would honour their promise to give credit to Wong for the rent payable for the two months when the problem persisted when enforcing the Order and the costs order I am going to make in their favour.

38.  Costs should follow the event. I make an order nisi that Wong do pay the plaintiffs costs of her counterclaim and this action excluding the costs of the plaintiffs’ summary application summarily assessed at HK8,000 (which has already been covered by the Order), to be taxed if not agreed. I am very much thankful for Mr Wong’s assistance but in view of the simplicity of this matter and the size of Wong’s claim, I do not allow certificate for counsel.

39.  Lastly, interpretation service in relation to this judgment can be provided to Wong if she so applies for.