WAI KAM CHIU AND ANOTHER v. CHIM SIU FAN

DCCJ 830/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 830 OF 2006

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JUDGMENT

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1. The claim of the 1st and 2nd Plaintiffs arose in relation to a Provisional Tenancy Agreement dated 29 November 2005 in respect of certain shop premises. The 1st and 2nd Plaintiffs were named as Landlord in the Provisional Tenancy Agreement and the Defendant was named as Tenant. The parties had however never entered into the contemplated Formal Tenancy Agreement. The main thrust of the 1st and 2nd Plaintiffs' case was that the Defendant was in breach of the Provisional Tenancy Agreement in not taking up the lease. The 1st and 2nd Plaintiffs also pleaded that the Defendant by her servants or agents had after the signing of the Provisional Tenancy Agreement entered into the shop premises and demolished the "electrical appliances, equipments and decorations" therein without their consent. This was denied by the Defendant. Among other things, the Defendant contended that the Provisional Tenancy Agreement was not a binding contract. She also denied having effected the alleged demolition works.

2. The Defence was in Chinese and originally home made. It was subsequently amended twice under legal representation. It remains to be a masterpiece of ambiguity. The 1st and 2nd Plaintiffs however have never said that they were embarrassed by such ambiguity. Although they had objected to the amendments, the objections were raised on other grounds. They had threatened to make, but had actually never made, an application for further and better particulars. In the circumstances, I consider that on a fair reading of the Defence, at least the following things were pleaded.

3. It was pleaded that the Defendant had in the middle of November 2005 negotiated with the 1st Plaintiff through one Mr. Lo Yuen Hong (who is PW2) of an estate agency called Wallmate International Ltd. ("Wallmate") for the lease of the premises known as Ground Floor, No. 15 South Wall Road, Kowloon at Kowloon City ("the subject premises") for starting a restaurant business. PW2 was the agent of the 1st Plaintiff.

4. It was pleaded that in the process of negotiation, the Defendant noticed the presence of certain illegal structures at the subject premises which would adversely affect her application for a restaurant licence.

5. It was pleaded that the 1st Plaintiff had directly or indirectly through his agent PW2 assured the Defendant that the illegal structures could be dismantled in two days. The Defendant was further assured that the Provisional Tenancy Agreement in respect of the subject premises would not be binding until the occurrence of certain events. The Defendant was assured that the $25,000 cheque to be given by the Defendant to the 1st Plaintiff ("the said cheque") was to be taken as "earnest money" and would not be presented for payment until the occurrence of certain events.

6. Although the Defence did not employ the use of the expression “condition precedent”, it was in effect pleaded that there were conditions precedent for the presentation of the said cheque for payment. They were (1) demolition of all the illegal structures by the 1st Plaintiff; (2) the 1st Plaintiff's notifying the Defendant of the completion of such demolition; and (3) the Defendant's giving consent to the presentation of the said cheque for payment. I would pause to note that at law one cannot attach conditions to a cheque. The present claim is however not a claim on a dishonoured cheque. The Defendant could have, though actually she had not, pleaded that the cheque was delivered in escrow.

7. It was in effect pleaded that the conditions precedent for the Provisional Tenancy Agreement to become binding are the same conditions precedent for the presentation of the said cheque, plus the clearance of the said cheque. The Defendant was assured of all these.

8. Counsel for the Defendant submitted that the Defendant had pleaded a collateral agreement alongside the Provisional Tenancy Agreement. The collateral agreement contained the conditions precedent for the Provisional Tenancy Agreement to become binding. This was very much a live issue at trial.

9. In effect, the Defendant had also pleaded misrepresentation on the part of the 1st Plaintiff in similar fashion as she had pleaded the collateral agreement. The alleged misrepresentation was constituted by the abovementioned assurances. This was also a live issue at trial.

10. In the discussion below I would focus on the issue of the collateral agreement first. The 1st and 2nd Plaintiffs had denied making the abovementioned assurances. If there is no factual basis for the abovementioned assurances, there will also be no fact to support the alleged misrepresentation.

11. The 1st and 2nd Plaintiffs had filed a Reply. The Reply referred to the illegal structures the demolition of which was provided for in the Provisional Tenancy Agreement. The 1st and 2nd Plaintiffs pleaded that "Upon the signing of the Provisional Agreement, the Plaintiffs caused the said structure to be removed……". The 1st and 2nd Plaintiffs' pleaded case is that the illegal structures were removed before 14 December 2005.

12. Neither the 1st and 2nd Plaintiffs nor the Defendant saw fit to seek further particulars of the illegal structures referred to in the pleadings. On the 3rd day of the trial, it became apparent that they were at cross purposes in relation to the illegal structures.

13. The Defendant did not rely on mistake. It was not pleaded.

14. At trial, the Defendant did not contend that the signed Provisional Tenancy Agreement did not contain all the terms of the agreement. The contention was that there was a collateral agreement rendering the Provisional Tenancy Agreement inoperative. That was how the trial was run and that was the case that the 1st and 2nd Plaintiffs were called upon to meet at the trial.

15. There was a need to clarify the respective cases of the parties in relation to the illegal structures. This was done through submissions from the bar table with the handing up of drawings and written explanations.

The Case of the 1st and 2nd Plaintiffs in relation to the illegal structures

16. Solicitor for the 1st and 2nd Plaintiffs had submitted a copy of the drawing now marked as Exhibit P3 with certain parts highlighted in yellow to illustrate what the illegal structures were. There were explanatory notes attached thereto.

17. The original drawing was in fact prepared by PW3 and is now marked Exhibit P3.

18. The above drawing may be viewed together with the photograph at page 45 of Trial Bundle B (hereafter "B45", mutatis mutandis") for a better understanding.

19. It was not in dispute that at the rear of the subject premises there was a rear lane. The photograph shows that there was a wall ("the ground floor level rear external wall") separating the subject premises from the rear lane. The ground floor level rear external wall extended beyond the boundaries of the subject premises. The right side of the photograph shows the part of the ground floor level rear external wall that belonged to the subject premises. The left side of the photograph shows the part of the ground floor level rear external wall that belonged to the adjacent premises (Shop no. 17). Viewed from the left to the right, the photograph shows 3 windows (Window 1, Window 2 and Window 3 respectively) on the ground floor level rear external wall and then an iron gate. The area behind Window 1 and Window 2 belonged to Shop no. 17. The area behind Window 3 and the iron gate belonged to the subject premises. The dividing wall between Shop no. 17 and the subject premises (which of course is not shown in the photograph) was somewhere in the middle between Window 2 and Window 3.

20. Photograph B at B46 also shows the condition at the rear of the subject premises.

21. Photograph B at B46 shows that standing at the top of the ground floor level rear external wall, there were about 4 vertical metal poles (metal pole 1, 2, 3 and 4, from the left to the right, respectively). Metal pole 1 was white in colour. Metal poles 2, 3 and 4 were red in colour.

22. The metal poles supported a metal platform above. The metal platform was of some length and extended from the space above the rear portion of the subject premises to Shop no. 17 and perhaps even beyond that.

23. The metal platform had a flat bottom and was flanked on 3 sides by metal bars and iron mesh to about waist level.

24. Photograph B at B46 also shows that there were metal bars that formed a V-shape (the V-shape metal bars) affixed to the concrete wall (the inner façade wall) within the boundary of Shop no. 17. The inner façade wall was at a short distance behind the ground floor level rear external wall. The V-shaped metal bars were also affixed to the bottom of the metal platform providing support to the metal platform.

25. In photograph B at B46, the V-shaped metal bars were absent at the yellow coloured inner façade wall within the boundary of the subject premises. The yellow coloured inner façade wall was also at a short distance behind the ground floor level rear external wall of the subject premises.

26. The photographs show that there was a void underneath the metal platform within the boundaries of both the subject premises and Shop no. 17.

27. According to the 1st and 2nd Plaintiffs, the situation there was different from what is shown in photograph B at B46 before the removal of the illegal structures pertaining to the subject premises. Then, there were 3 walls (mezzanine level rear external walls 1, 2 and 3 respectively) above the top of the ground floor level rear external wall, as shown in Sketch B of Exhibit P3. Mezzanine level rear external wall 2 was aligned with the ground floor level rear external wall but of course, at a higher level. Mezzanine level rear external walls 1 and 3 were on the 2 sides of mezzanine level rear external wall 2, both at right angles. Mezzanine level rear external walls 1 and 3 extended inside. Mezzanine level rear external walls 1, 2 and 3 were all made of concrete/bricks. There was also a concrete ceiling at the space enclosed by the mezzanine level rear external walls 1, 2 and 3, beneath the bottom of the metal platform.

28. The case of the 1st and 2nd Plaintiffs is that the mezzanine level rear external walls 1, 2 and 3 were included in the illegal structures agreed to be removed under the Provisional Tenancy Agreement. The Defendant denied that.

29. Apart from the above, the layout plan shown in Sketch A of Exhibit P3 also shows enclosed within the ground floor level rear external wall and the mezzanine level rear external walls 1, 2 and 3 are three interior walls designated as interior walls 1, 2 and 3 respectively. Interior walls 2 and 3 marked off two areas respectively used as kitchen and toilet and a third area. The three areas were all located immediately behind the ground floor level rear external wall. The removal of the abovementioned illegal structures had necessitated the demolition of interior walls 1, 2 and 3.

30. It is the case of the 1st and 2nd Plaintiffs that after the removal of the three mezzanine level rear external walls, what was formerly enclosed behind them had become a void underneath the bottom of the metal platform above.

31. The metal platform belonged to the owner of the upper floor unit. It did not belong to the 1st and 2nd Plaintiffs.

The Defendant's Case in relation to the illegal structures

32. Counsel for the Defendant had also submitted a drawing to illustrate what the illegal structures were. There are also written explanatory notes.

33. In the drawing, the parts highlighted in yellow represent the illegal structures which the 1st Plaintiff had agreed to remove. This was disputed.

34. The illegal structures included the several vertical metal poles standing on the top of the ground floor level rear external wall at the boundary of the subject premises (i.e. metal poles 2, 3 and 4), the V-shaped metal bars affixed to the yellow coloured inner façade wall, the bottom of the metal platform (which at the time was in "one unbroken piece" in the sense that there were no alternating hollow gaps between the metal planks forming the bottom of the metal platform as shown in the photograph at B45), and also on the ground between the ground floor level rear external wall and the yellow coloured inner façade wall - the two room-like structures made of wood.

The witness statement of the Defendant

35. The two witness statements of the Defendant are obviously inadequate. By way of illustration, they do not contain an account of the meeting between the Defendant, the 1st Plaintiff and PW2 held at the subject premises prior to 29 November 2005. The existence of such a meeting was disputed by the 1st Plaintiff. By way of further illustration, the two witness statements do not contain a description of the scope of the illegal structures and their whereabouts. However, these matters were put to the witnesses of the 1st and 2nd Plaintiffs in cross examination. The evidence of the Defendant was thus anticipated at the trial if not earlier. Shortly after the Defendant had started her examination in chief, Counsel for the Defendant had given an outline of the scope of the Defendant's expanded evidence that she proposed to give in her examination in chief. The 1st and 2nd Plaintiffs could have recalled their witnesses for further examination. Although the situation was far from being ideal, in all the circumstances of this case I consider that there was no prejudice done to the 1st and 2nd Plaintiffs in my allowing the Defendant to expand on her evidence beyond the scope of her witness statements.

The law and its application

36. The parol evidence rule is that parol testimony cannot be received to contradict, vary, add to or subtract from the terms of a written contract or the terms on which the parties have deliberately agreed to record any part of their contract.

37. The parol evidence rule has no application until it is first determined that the terms of the parties' agreement are wholly contained in the written document. Whether the parties did so agree or intend is a matter to be decided by the court upon consideration of all the evidence relevant to the issue. It is therefore always open to a party to adduce evidence to prove that the document is not a complete record of the contract.

38. As noted earlier, the Defendant did not contend that the terms of the parties' agreement were not wholly contained in the Provisional Tenancy Agreement. The Defendant contended that there was a collateral agreement rendering the Provisional Tenancy Agreement inoperative.

39. Section 3 of the Conveyancing & Property Ordinance, Cap. 219 provides as follows: "Subject to section 6(2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other persons lawfully authorized by him for that purpose". Land contracts are required by law to be in writing. There are old authorities like Angell v. Duke (1875) L.R. 10 Q.B. 174 in which it appears that a collateral agreement affecting land will have to be in writing. I would take the view that a collateral agreement for the sale or other disposition of land will have to be evidenced in writing.

40. The law is that if a collateral agreement, not involving the acquisition of land, is entered into at or before the time of making a written contract concerning land, then the collateral agreement does not have to be evidenced in writing. Into which category does the alleged collateral agreement fall?

41. The alleged collateral agreement is concerned with, inter alia, the demolition of certain illegal structures. The degree of annexation of the illegal structures were such that they should be regarded as a part of the land. Is the supposed demolition of such illegal structures "disposition of land"? I have not been referred to any authority on this point and I have not been able to dig up any authority on this point. Using a common sense approach, I would hold that the supposed demolition of such illegal structures do not amount to a "disposition of land" within the meaning of Section 3 of the Conveyancing & Property Ordinance. I consider that the alleged collateral agreement does not have to be evidenced in writing on this account.

42. The purport of the alleged collateral agreement is to render the Provisional Tenancy Agreement inoperative until the conditions precedent were met. The Provisional Tenancy Agreement is of course a land contract. Is the alleged collateral agreement a "disposition of land" for this reason? Again, on a common sense approach, I would answer the question in the negative.

43. I would hold that the alleged collateral agreement does not have to be evidenced in writing to be operative.

The Land Search Record

44. At B39 is the land search record pertaining to the subject premises. It shows that the 1st and 2nd Plaintiffs were tenants in common of the subject premises each holding 1/2 share. They purchased the subject premises on 31 May 2000. At the time of the Provisional Tenancy Agreement, the subject premises were charged to a bank. A Building Order under Section 26 of the Building Ordinance ("the 1st Building Order") was registered against the subject premises on 14 February 2000. There is a letter of compliance dated 5 December 2000 issued by the Building Authority in respect of the 1st Building Order. See B10. Another Building Order ("the 2nd Building Order") was registered against the subject premises on 15 March 2004. A letter ofwithdrawal had been issued in respect of the 2nd Building Order, by the Building Authority, on 19 March 2005. See B14. There is no other Building Order shown in the land search record.

The Provisional Tenancy Agreement

45. The Provisional Tenancy Agreement is marked exhibit P1. It was made out on a printed form provided by Wallmate. Against the receipt clause at the bottom part of that one page instrument, the figure of "$26000" had been amended to read as "$25000". There was no signature or initial against that amendment. The phrase "to be (a) real (deal) when (the) cheque is cleared (支票過妥始作實)" was written to the right of the above figure. Again there is no signature or initial by the side of the phrase.

46. Clause 13 of the Provisional Tenancy Agreement was handwritten and contains three sub-clauses.  Clause 13(2) provides as follows: "One month rent free decoration period from 1 December 2005 to 31 December 2005 （免租裝修期一個月由1-12-05至31-12-05止）" whereas Clause 13(3) provides as follows: "The Landlord should demolish the relevant illegal structures at the lightwell of the unit  to facilitate the application for a food licence. The licence application would be a matter for the Tenant. If owing to the illegal structures at the lightwell the food licence cannot be obtained, then both parties agree to cancel the Tenancy Agreement. The Tenant has the right to get back the deposit （業主須負責清拆單位天井有關僭建物，方便申請食物牌照，但有關牌照申請須由租客自行負責，如因天井位僭建物影响不能獲得飲食牌照，則雙方同意取消租約，租客有權取回定金）"

Witnesses

47. On the side of the 1st and 2nd Plaintiffs, three witnesses were called. They were the 1st Plaintiff (PW1), Mr. Lo Yuen Hong of Wallmate (PW2) and Mr. Lui Wai Leung (PW3) of Leung Kwong Kee, a decorator. On the Defendant's side, only the Defendant herself (DW1) testified. An account of the more salient parts of their testimony will be given below.

The 1st Plaintiff (PW1)

48. The 1st Plaintiff was the father of the 2nd Plaintiff.

49. The 1st Plaintiff was well experienced in the restaurant business. He had been in the restaurant business for over 30 years. He owned 5-6 restaurants. He was well aware of the fact that the presence of illegal structures in shop premises would likely lead to the governmental authorities' refusal of the grant of a restaurant licence.

50. The 1st Plaintiff was also well experienced in rental matters. He had been collecting rent for over 10 years.

51. The two bills rendered by Lui Kwong Kee both dated 23 August 2001 for the sums of $50,000 (renovation works) and $55,000 (electrical works) were in respect of works which the 1st and 2nd Plaintiffs had instructed PW3 to carry out prior to the letting of the subject premises to the former tenant. The former tenant was a Chinese herbal doctor.

52. The Defendant had after the signing of the Provisional Tenancy Agreement sent workers to the subject premises and without the consent of the 1st and 2nd Plaintiffs wrongfully demolished the above renovation and electrical works. The 1st Plaintiff learnt of this from PW3.

53. Prior to the signing of the Provisional Tenancy Agreement, the Defendant did mention to the 1st Plaintiff of her need to have the illegal structures at the subject premises removed, in order to obtain a restaurant licence.

54. The 1st Plaintiff had signed the Provisional Tenancy Agreement. The 2nd Plaintiff had not signed it. The subject premises had been let out in the past in similar fashion without any problem.

55. The Provisional Tenancy Agreement was drafted by PW2 on 29 November 2005. However, at the bottom part of the document, the phrase "to be (a) real (deal) when (the) cheque is cleared (支票過妥始作實)" was written by the 1st Plaintiff and the figure of $26,000.00 in juxtaposition to the receipt clause was amended to $25,000.00 by him.

56. The Defendant handed the cheque of $25,000.00 to the 1st Plaintiff on that occasion instead of a cheque in the sum of $26,000.00.

57. The 1st Plaintiff merely faxed the Provisional Tenancy Agreement to his solicitors Messrs. Kam & Fan by way of giving instructions for the preparation of the Formal Tenancy Agreement, without more. The 1st Plaintiff had a course of dealing with the solicitors and the solicitors were accustomed to receiving and acting on his instructions in this fashion.

58. The 1st Plaintiff presented the cheque for clearance on 1 December 2005.

59. Before 29 November 2005, the 1st Plaintiff had already instructed PW3, the proprietor of Lui Kwong Kee, to dismantle some of the illegal structures at the subject premises.

60. The 1st Plaintiff instructed PW3 to dismantle the remaining illegal structures at the subject premises, after the signing of the Provisional Tenancy Agreement on 29 November 2005.

61. All the illegal structures at the subject premises were eventually dismantled.

62. The 1st Plaintiff said that the 3 items of work shown in the Invoice dated 12 December 2005 from Lui Kwong Kee were not all for the removal of illegal structures. Part of the works were for the building of certain structures necessitated by the Defendant's wrongful demolition of the things/structures installed in the subject premises.

63. The 1st Plaintiff had written the demand letter dated 16 December 2006 and asked PW2 to hand the same to the Defendant.

64. On 19 December 2005, the solicitors Messrs. Kam & Fan issued a bill to the 1st and 2nd Plaintiffs in respect of the costs for the preparation of the Formal Tenancy Agreement. The 1st and 2nd Plaintiffs had since settled the bill.

65. On 21 December 2005, the 1st Plaintiff issued a final demand letter to the Defendant by courier.

66. The 1st Plaintiff said that it was on about 16 February 2006 that the subject premises were let to a new tenant.

67. The Defendant had never told the 1st Plaintiff not to present the cheque for payment and the 1st Plaintiff had never agreed with the Defendant for the mutual release of obligations under the Provisional Tenancy Agreement.

68. Under cross examination, the 1st Plaintiff said things to the following effect.

Letter from the Building Authority

69. The 1st Plaintiff referred repeatedly to a letter/notice/order issued by the Building Authority ("the letter from the Building Authority") sometime before he instructed PW3 to proceed with the dismantling of the illegal structures. He gave confusing evidence about its date and content.

70. During the trial, the 1st and 2nd Plaintiffs were ordered to produce the letter from the Building Authority if it was in their possession. It was never produced.

71. The 1st Plaintiff said that the letter from the Building Authority was received prior to the departure of the former tenant. The letter from the Building Authority required the 1st and 2nd Plaintiffs to dismantle certain illegal structures at the subject premises.

72. The 1st Plaintiff said that he had shown the letter from the Building Authority to PW3.

The former tenant

73. The 1st Plaintiff gave vague evidence concerning the circumstances of the former tenant's departure. He said that he had asked the former tenant to dismantle certain illegal structures erected by the former tenant. The former tenant had dismantled the signage at the shop front. Later the 1st Plaintiff received the letter from the Building Authority.

74. The 1st Plaintiff gave ambiguous evidence about the date on which the former tenant vacated the subject premises. He said that it was about one month before the signing of the Provisional Tenancy Agreement. He said that the former tenant had given up the subject premises because the term of the tenancy had expired and he was going to increase the rent.

The illegal structures

75. The 1st Plaintiff gave evidence to the effect that he was unclear about the scope and location of the illegal structures at the subject premises. He said that he had not gone to the subject premise to view the illegal structures.

76. The 1st Plaintiff said that the metal platform above the rear portion of the subject premises belonged to the owner of the upper floor unit. He was unclear if the vertical metal poles supporting the metal platform were illegal structures or not.

Length of time required for the dismantling of the illegal structures

77. The 1st Plaintiff said that at the time of the signing of the Provisional Tenancy Agreement, he expected that the illegal structures could be dismantled by 1 December 2005. However, he denied having told the Defendant that the illegal structures would be dismantled by 1 December 2005.

78. The 1st Plaintiff said that he had heard from PW3 that by 1 December 2005, the illegal structures at the subject premises were duly dismantled. Later, he said that it was on about 6 December 2005 that PW3 informed him that the illegal structures were all removed. He then said that it was on about 6 December 2005 that the illegal structures were duly removed.

When did the 1st Plaintiff instruct PW3 to dismantle the illegal structures?

79. The 1st Plaintiff gave ambiguous evidence concerning the date on which he instructed PW3 to dismantle the illegal structures.

The works carried out by PW3

80. The 1st Plaintiff did not go to check how PW3 carried out the works nor did he do so after he was told that the works were completed. He was simply told by PW3 that the works were completed as per the Invoice dated 12 December 2005 (issued by Lui Kwong Kee, at B19) and he made payment to PW3 accordingly.

81. Of the 3 items of works set out in the above Invoice, the 1st Plaintiff gave vague and confusing evidence. The 3 items of works shown in the above Invoice were for the dismantling as well as the building of certain structures. The 1st Plaintiff said that the dismantling works were necessitated by the Defendant's building of certain structures in the subject premises. He also said that the building works carried out by PW3 were necessitated by the Defendant's demolition of the things in the subject premises.

Contact between the 1st Plaintiff and the Defendant before the signing of the Provisional Tenancy Agreement

82. The 1st Plaintiff said that it was on about 20 November 2005 that the negotiation with the Defendant for the subject letting started.

83. The 1st Plaintiff said that he had never been to the subject premises in the Defendant's presence. It was PW2 who took the Defendant to view the subject premises. On the date of the signing of the Provisional Tenancy Agreement on 29 November 2005, he did not go to the subject premises either. The Provisional Tenancy Agreement was signed in the 1st Plaintiff's office, in the presence of PW2 and the Defendant. It was their first meeting.

Business card of the Defendant

84. The 1st Plaintiff said that he had exchanged business cards with the Defendant on 29 November 2005. He gave inconsistent evidence as to whether the Defendant's business card contained her fax number.

The date on which the said cheque was banked in

85. The 1st Plaintiff gave ambiguous evidence as to the date of the banking in the said cheque.

Contact with the Defendant after the signing of the Provisional Tenancy Agreement

86. The 1st Plaintiff's evidence is that in the 2-3 days after 1 December 2005, he had tried to contact the Defendant by telephone without success as the Defendant did not answer his phone calls.

Alleged telephone conversation with the Defendant on 1 December 2005

87. The 1st Plaintiff denied that he had a telephone conversation with the Defendant on 1 December 2005. It was put to the 1st Plaintiff that the Defendant had informed him that she would not rent the subject premises nor sign the Formal Tenancy Agreement as the 1st Plaintiff had failed to complete the dismantling of the illegal structures by 1 December 2005. It was also put to the 1st Plaintiff that the Defendant had asked him not to present the cheque for clearance. These were all denied by the 1st Plaintiff.

Scheduled appointment on 1 December 2005 with Messrs. Kam & Fan

88. The 1st Plaintiff said that it was in the afternoon of 1 December 2005 that he called the staff of Messrs. Kam & Fan and learnt that the Defendant had not attended their office to sign the Formal Tenancy Agreement.

The Defendant's demolition of the things and structures installed in the subject premises

89. The 1st Plaintiff said that he was unclear for how long the Defendant's workers had been carrying out their works inside the subject premises. He said that it was 2-3 days after the workers sent by the Defendant had started the demolition works that PW3 first called and informed him of the situation. He said that he inferred that the workers carrying out the demolition works were sent there by the Defendant as they were not the workers engaged by PW3.

PW2

90. I accept that PW2 was the director and shareholder of Wallmate. He was an experienced estate agent. I accept that he did hand to the Defendant the 1st Plaintiff's letter of demand dated 16 December 2005. I accept that PW2 had known the 1st Plaintiff for about 10 years and the 1st Plaintiff had transacted business with him in relation to other properties. I accept that in the course of negotiation between the 1st Plaintiff and the Defendant, his role was no more than that of a conduit pipe, relating the communication from one to the other back and forth.

91. I would not dignify the evidence of PW2 by setting out a detailed account of his testimony in detail. He had been evasive and in the course of his cross examination had purposefully kept on making irrelevant speeches that bore no relation to the questions posed to him. Towards the end of his cross examination when he was questioned about the illegal structures inside the subject premises, PW2 said something like if he might pretend to be ignorant of the matter.

92. PW2 had given evidence to the effect that the 1st Plaintiff had not given the Defendant the assurances constituting the conditions precedent to the presentation of the cheque. I do not accept his evidence on such matters.

93. I consider the evidence given by PW2 in relation to the viewing of the subject premises not worthy of belief, in general.

94. I do not accept PW2's evidence to the effect that there was a discussion between the 1st Plaintiff and the Defendant that the Defendant would be allowed to proceed with the renovation of the subject premises at the same time when the 1st Plaintiff would be proceeding with the dismantling of the illegal structures.

95. PW2 was deliberately vague and evasive on the scope of the illegal structures. I do not accept his evidence on such matters both on account of his honesty and the accuracy of his recollection.

96. I accept that he had indeed taken a photograph of the condition at the rear of the subject premises with the Defendant depicted in the photograph. The purpose of taking the photograph was to be proof of the illegal structures agreed to be dismantled. The purpose of taking the photograph was also to show to the 1st Plaintiff what were the things that the Defendant would require to be demolished. I accept that the photograph that PW2 had taken was similar to the photograph taken by the Defendant at B45.

97. PW2 said that he was then using a digital camera and the photograph was automatically overwritten by subsequent photographs taken when the camera's memory capacity became full. I do not accept that. The photograph was never produced.

98. I accept that the Defendant had requested PW2 to ask the 1st Plaintiff to attend the subject premises to view and identify the illegal structures to be demolished. I accept his evidence to the effect that during the course of the viewing of the subject premises, the Defendant had made it explicit that it was important for her that the illegal structures at the subject premises were to be demolished.

99. I accept his evidence that the Defendant had in the course of viewing of the subject premises made it known that she would require the 1st Plaintiff to dismantle the vertical metal poles 2, 3 and 4 standing on the top of the ground floor level rear external wall of the subject premises.

100. I reject PW2's evidence that he had told the Defendant in general terms that the 1st Plaintiff would only dismantle illegal structures that belonged to the 1st Plaintiff but in respect of other illegal structures belonging to the other owner, the 1st Plaintiff would only try to get the other owner to agree to their demolition.

101. PW2 had distanced himself from what happened on 29 November 2005 when the Provisional Tenancy Agreement was signed at the office of the 1st Plaintiff. His evidence appeared to suggest that there might have been communication passing between the 1st Plaintiff and the Defendant on that occasion that he was not aware of. I find it rather odd.

102. I do not accept PW2's evidence that the phrase of ­­­"to be (a) real (deal) when (the) cheque is cleared (支票過妥始作實)" was added to the Provisional Tenancy Agreement after the 1st Plaintiff and the Defendant had already signed the same, on 29 November 2005.

103. I should perhaps note that in relation to the illegal structures allegedly agreed to be dismantled, there appears to be a slight variance between the Defendant's case as put to PW2 on the one hand and the Defendant's case on evidence and submission on the other.

PW3

104. PW3's witness statement was allowed to stand as his examination-in-chief. He produced the drawing now exhibited as P3.

105. PW3 confirmed that he had carried out the 3 items of works shown in the Invoice dated 12 December 2005. B19.

106. Item 1 of the Invoice refers to the dismantling of the interior walls 1, 2 and 3.

107. Item 2 of the Invoice refers to the dismantling of the mezzanine level rear external walls 1, 2 and 3 and the concrete ceiling thereof.

108. Item 3 of the Invoice refers to the building of a wall running across the entire width of the subject premises at the rear and marked in yellow in Sketch A of Exhibit P3.

109. PW3 said that it took him 10 days to complete the above works.

110. Under cross examination, PW3 said things to the following effect.

The date on which PW3 received instructions from the 1st Plaintiff

111. PW3 first said that it was on about 20 November 2005 that the 1st Plaintiff instructed him to proceed with the works. Later, he said that the works had commenced on about 15 November 2005 with a preparatory stage preceding the actual works. The actual works started on 20 November 2005.

The letter from the Building Authority

112. PW3 said that prior to his receiving instructions from the 1st Plaintiff, the 1st Plaintiff gave him the letter from the Building Authority, on about 15 November 2005, for him to read. PW3 did not recall the date of the letter from the Building Authority but he said that he had seen that kind of letters before. The letter was subsequently returned to the 1st Plaintiff, after the works were completed.

113. PW3 said that the letter from the Building Authority did not require the dismantling of the interior walls 1, 2 and 3 (Item 1 of the Invoice) although it did require the dismantling of the mezzanine level rear external walls 1, 2 and 3 and the ceiling thereof (Item 2 of the Invoice).

The process of the works

114. At the preparatory stage, PW3 had to first call for the original building plans kept by the Building Authority to ascertain what were the illegal structures. The preparatory stage started on about 15 November 2005. The 1st Plaintiff then gave him the keys to the subject premises.

115. PW3 initially said that he needed 10 days to complete the works. Later, he said that the actual execution of the works started on about 20 November 2005 and were completed on 6 December 2005.

Progress of the works

116. It was put to PW3 that on 20 November 2005, the mezzanine level rear external walls 1, 2 and 3 were already dismantled leaving only the vertical metal poles there standing on the top of the ground floor level rear external wall. PW3 said that he could not remember such details.

117. It was also put to PW3 that the bottom of the metal platform on 20 November 2005 was in "one unbroken piece" without any alternating hollow gaps between the metal planks. PW3 said that he could not remember such details.

118. It was also put to PW3 that the V-shaped metal bars on 20 November 2005 extended along the entire length of the inner façade wall of the subject premises and Shop no. 17. PW3 denied that.

119. It was put to PW3 that the yellow coloured inner façade wall was already in existence by 20 November 2005. PW3 could not remember such details.

120. It was also put to PW3 that there were 2 room like structures made of wood attached to the yellow coloured inner facade wall, on 20 November 2005. PW3 had no recollection of that.

121. I do not consider that the credibility of PW3 should depend on his memory on such details.

The Defendant's intrusion

122. PW3 said that he had informed the 1st Plaintiff of the fact of the Defendant's workers coming to the subject premises to demolish the things installed therein. The process took 2-3 days. He alerted the 1st Plaintiff of the situation on the 1st or 2nd day of such occurrence.

Illegal structures

123. It was put to PW3 that the four vertical metal poles shown in photograph B at B46 standing on the top of the ground floor level rear external wall were illegal structures. PW3 was unable to comment on that.

124. It was put to PW3 that of the above, the three red vertical metal poles were agreed to be dismantled. PW3 was unable to comment on that.

125. It was also put to PW3 that the bottom of the metal platform was also among the illegal structures agreed to be dismantled. Again PW3 could not comment on that.

The Defendant (DW1)

126. The Defendant had been in the restaurant business for 11 years. She was about 30 years old and she had been working since the age of 18. She was the proprietor of 5 Thai restaurants, all at Kowloon City. She was quite familiar with the Kowloon City district.

127. She saw an advertisement board displayed outside the subject premises advertising its availability for leasing. The advertisement gave the telephone number of Wallmate. She called and spoke to PW2 expressing her interest in viewing the subject premises. An appointment was thus made.

128. The next day she met PW2 at the subject premises. That was the 1st viewing of the subject premises. She could not remember the exact date but put it to be on a date between 10 to 20 November 2005 in relation to her 1st viewing of the subject premises. The subject premises were vacant at the time. She told PW2 that she intended to rent the subject premises to start a Thai restaurant. She viewed the condition at the rear of the subject premises and noticed the presence of illegal structures there. She indicated to PW2 that she would require the illegal structures to be removed. She appreciated that the presence of illegal structures would adversely affect her prospect of obtaining a restaurant licence from the government authorities. She informed PW2 that she would not rent the subject premises unless the illegal structures were removed. She told PW2 to relate what she said to the 1st Plaintiff. PW2 agreed to do so.

129. The Defendant gave evidence describing the illegal structures substantially in accordance with her case. There was a slight variance that related to the two room like structures. They were said to be located at the back of the inner façade wall whereas the Defendant's case on submission was that the two room like structures were located between the inner façade wall at the ground floor level and the ground floor level rear external wall. This became apparent in her cross examination.

130. There was a 2nd viewing of the subject premises. The Defendant viewed the subject premises again the following day bringing with her a Mr. Mo who was in the trade of helping people to make applications for restaurant licences. PW2 in their presence called the 1st Plaintiff informing the latter that unless the illegal structures were removed, the Defendant would not rent the subject premises. After the telephone conversation, PW2 told the Defendant that the 1st Plaintiff would identify the illegal structures and have them removed. The Defendant made an appointment with PW2 to attend the subject premises the following day for the purpose of taking a photograph of the illegal structures to be removed. The Defendant told PW2 to show the photograph to the 1st Plaintiff to indicate to him the illegal structures that she wanted him to remove.

131. There was a 3rd visit to the subject premises. On the following day, the Defendant and PW2 met at the subject premises for the third time. PW2 took the photograph. The photograph taken by PW2 is not before the Court. The Defendant said that the missing photograph depicted about the same things as shown in the photograph at B45 but she was in the photograph standing at a spot at the rear lane, outside the ground floor level rear external wall and pointing to the metal platform above. The Defendant told PW2 to show the photograph to the 1st Plaintiff. PW2 agreed to do so. The Defendant also requested PW2 to make an appointment for her to meet the 1st Plaintiff at the subject premises in order that she might explain to the 1st Plaintiff what were the illegal structures that she would require him to remove. PW2 did make the appointment with the 1st Plaintiff.

132. There was a 4th visit to the subject premises. PW2 arrived there first followed by the Defendant. The 1st Plaintiff came later. The three of them went to the rear of the subject premises. The Defendant told the 1st Plaintiff what were the illegal structures that she would require him to remove. The 1st Plaintiff said that he was prepared to have the illegal structures removed but he was also concerned that the Defendant might not rent the subject premises after the illegal structures were removed. The Defendant told the 1st Plaintiff that she was sincere about the deal and that she would certainly rent the subject premises when the illegal structures were removed. The 1st Plaintiff proposed that the Defendant should sign a Provisional Tenancy Agreement and pay a sum as earnest money. The Defendant said that she was prepared to sign a Provisional Tenancy Agreement only if it was not to have contractual force. It would be something to allay the 1st Plaintiff's worry of the Defendant's refusal to rent the subject premises. The 1st Plaintiff indicated agreement. The 1st Plaintiff then returned to the point about the earnest money. The Defendant said that she was prepared to pay the 1st Plaintiff the earnest money but that the 1st Plaintiff had to ensure that all the illegal structures were removed before the signing of the Formal Tenancy Agreement. The 1st Plaintiff indicated agreement. The Defendant asked if the 1st Plaintiff would accept a post-dated cheque issued by a friend of hers towards payment of the earnest money. The 1st Plaintiff indicated agreement. The 1st Plaintiff said that the Formal Tenancy Agreement should be signed on 1 December 2005. The Defendant asked if it was all right to have the cheque dated 1 December 2005. The 1st Plaintiff indicated agreement. The Defendant asked when she should sign the Provisional Tenancy Agreement and pay the earnest money. The 1st Plaintiff made an appointment with the Defendant on 29 November 2005 for doing that.

133. On 29 November 2005, the Defendant attended the office of the 1st Plaintiff with a view to sign the Provisional Tenancy Agreement. The Defendant, the 1st Plaintiff and PW2 were present on that occasion. There was a further discussion before the signing. The Defendant said to the 1st Plaintiff and PW2 that the Provisional Tenancy Agreement was not to be binding as it was made only to show the 1st Plaintiff her sincerity in the deal so that the 1st Plaintiff may have peace of mind to proceed with the removal of the illegal structures (in the sense that the 1st Plaintiff did not have to worry that the Defendant would not rent the subject premises after the illegal structures were removed). There was also a discussion concerning the rent free period.

134. The Defendant said that she would be giving the 1st Plaintiff a sum as earnest money. She would need to go to view the subject premises to verify that the illegal structures were in fact removed before she would inform the 1st Plaintiff that the cheque could be presented for payment. The Plaintiff then wrote on the Provisional Tenancy Agreement the phrase "to be (a) real (deal) when (the) cheque is cleared (支票過妥始作實)". That was before the signing of the Provisional Tenancy Agreement.

135. The Defendant also said that on that occasion she asked the 1st Plaintiff to inform her once the removal of the illegal structures was completed so that she could arrange funds to be put into the cheque account and have all the matters settled. The 1st Plaintiff indicated agreement.

136. It was in such circumstances that the parties signed the Provisional Tenancy Agreement.

137. On 30 November 2005, the Defendant went to view the situation at the subject premises. It was early in the morning. Nothing was done yet.

138. Then on the following day, on 1 December 2005, the Defendant went to view the subject premises again. All the illegal structures were still there.

139. The Defendant was upset. She called the 1st Plaintiff at about 11 am and remonstrated with him. She told the 1st Plaintiff that as he had broken his promise, she would not be renting the subject premises and she would not arrange for funds to be credited to the cheque account. She asked the 1st Plaintiff to return the cheque to her. The 1st Plaintiff was also irritated and told the Defendant that he would not be worrying about the letting of the subject premises. He was optimistic that other tenants would be forthcoming. The 1st Plaintiff said that he would return the cheque to the Defendant. It was agreed that the 1st Plaintiff would ask PW2 to hand back the cheque to the Defendant.

140. Subsequent to 1 December 2005, the Defendant telephoned the 1st Plaintiff time and again asking for the return of the cheque. The 1st Plaintiff said that he had already given the cheque to PW2. The Defendant also chased PW2 for the cheque.

141. The Defendant agreed that she had in fact received the letters dated 16 December 2005 and 21 December 2005 issued by the 1st Plaintiff to her.

142. The Defendant denied having sent anyone to the subject premises to carry out any demolition works there. She said that she had not been provided with the keys to the subject premises.

143. The Defendant was cross examined at some length. Under cross examination, the Defendant said things to the following effect.

144. According to her experience, it would take about a month's time to renovate the subject premises. Only when renovation was completed could an application for a restaurant be made. It normally took 1.5 month to obtain a temporary restaurant licence, and 3 months to obtain the full restaurant licence.

145. The Defendant was cross examined on her understanding of terms like "promise (承諾 )" and "earnest money (誠意金)". I am not surprised that she was unable to express herself with legal precision on such matters. She was not a lawyer. The Defendant was also cross examined on how she would reconcile the apparent contradictions in the provisions of the Provisional Tenancy Agreement. I am not surprised that she was unable to do so.

146. The Defendant said it was on about 15 November 2005 that she first saw the advertisement at the subject premises announcing the availability of the same for leasing. The Defendant said that of the 4 visits to the subject premises prior to the signing of the Provisional Tenancy Agreement, each visit was about 1-2 days apart from the other. She said that she could not remember how many days elapsed between the 4th viewing of the subject premises and the signing of the Provisional Tenancy Agreement.

147. The Defendant said that during the 1st viewing of the subject premises, she did not ask about the amount of rent that was asked for. There came a time, however, that PW2 told her that the amount of rent was to be $26,000.00 per month.

148. It was put to the Defendant that at the time when she first viewed the subject premises, the condition of the illegal structures were as per the case of the 1st and 2nd Plaintiffs. The Defendant denied that.

149. The Defendant said that Mr. Mo was from one Hang Tung Consultant Company ("Hang Tung") and this was the consultant company that she had referred to in her witness statement. She had asked Mr. Mo to check out for her the status of the illegal structures with the Building Authority. This took place at about the time of her viewing of the subject premises. At the time, Mr. Mo did not inform her of the two Building Orders registered against the subject premises. Mr. Mo also did not inform her of anything about the cancellation of any of the Building Orders.

150. Paragraph 7 of the witness statement of the Defendant dated 6 January 2007 in effect said that after the signing of the Provisional Tenancy Agreement, Hang Tung conducted a land search and found out that the Building Authority had registered the 1st Building Order against the subject premises which might cause the subject premises to be condemned as dangerous. She then became worried about whether she could obtain a restaurant licence. In Court, the Defendant confirmed that the above was true. She said that Hang Tung had never told her anything about the cancellation of the Building Orders.

151. The Defendant gave evidence to the effect that PW2 had very much acted as a conduit pipe between her and the 1st Plaintiff in the negotiation process. PW2 had never told her that he was authorised by the 1st Plaintiff to make any promise on the 1st Plaintiff's behalf.

152. The Defendant said that she could not recall when she took the photograph at B45, but it was after 1 December 2005 that she took the photograph. She took the photograph to be proof that the 1st Plaintiff had failed to remove the illegal structures.

153. The Defendant said that she had asked PW2 to provide her with a copy of the photograph which PW2 had taken with his own camera. PW2 refused to let her have it.

154. Questions were put to the Defendant to the effect that the metal platform above the rear portion of the subject premises would become unstable for the lack of support if the illegal structures were removed. The Defendant's answer was to the effect that she had no knowledge on engineering matters.

155. The Defendant said that in the course of her viewing of the subject premises, she did not see anyone carrying out any works at the subject premises.

156. The Defendant said that at the 4th viewing of the subject premises, there was a discussion about the signing of the Formal Tenancy Agreement. The 1st Plaintiff proposed 1 December 2005 to be the date for the signing of the Formal Tenancy Agreement. The 1st Plaintiff also proposed getting the sum of $25,000.00 from the Defendant as earnest money notwithstanding the amount of rent under discussion was at $26,000.00 per month. The Defendant did not remember if she had asked the 1st Plaintiff to come down to $25,000.00 per month. She denied preparing a cheque for $25,000.00 with a view to get the 1st Plaintiff's agreement to reduce the amount of rent to that amount.

157. The 1st Plaintiff also indicated agreement to receiving a cheque for that amount to be issued by the Defendant's friend instead of by the Defendant herself. The Defendant said that she did not have a cheque account and so she had to ask a friend to issue the cheque for her. The cheque was drawn by her friend before 29 November 2005. It was filled out except the information as to the payee. The Defendant said that she would have to pay her friend the money for the cheque. The Defendant also said that it was on about 1 December 2005 that she had asked her friend to countermand payment on the cheque.

158. The Defendant was fully aware of the contents of Clause 13 of the Provisional Tenancy Agreement when she signed it.

159. The Defendant had experience in the signing of tenancy agreements and contracts.

160. The Defendant agreed that when she viewed the subject premises on 30 November 2005 and 1st December 2005, she was unable to see the status of the two room like wooden structures inside the subject premises. She said that her main concern was the metal platform and the 3 vertical metal poles.

161. The Defendant admitted that she had not made any response in writing to the 1st Plaintiff in relation to the two letters which the 1st Plaintiff had issued to her after 1 December 2005. She said that she had responded to the allegations verbally over the telephone. She did not know English and had no recollection of receiving the demand letter dated 5 January 2006 issued by the solicitors for the 1st and 2nd Plaintiffs.

162. The Defendant had said that Hang Tung had provided service for her free of charge. Paragraph 6 of her witness statement dated 6 January 2007 is to the effect that she had enquired with Hang Tung the fees to be charged by the latter. She said that the witness statement contained an error there. Then she confirmed the truth of the contents of that paragraph 6.

Discussion and Findings

163. On the question of the credibility of the witnesses, there are pointers in either direction. The pointers are not easy to reconcile, as will be apparent from the account of the evidence of the witnesses given above. I do not think this is the sort of case where I should attempt to analyse every shred of evidence given by each witness so as to explain why one piece of evidence is preferred over the other. A broad brush approach is called for.

164. The undisputed evidence is that the parties had contemplated entering into a Formal Tenancy Agreement just two days after the signing of the Provisional Tenancy Agreement. That is an unusual arrangement. I think I am entitled to take judicial notice that the normal span of time between the signing of a Provisional Tenancy Agreement and a Formal Tenancy Agreement is often substantially longer than a span of just two days. That to me is something that calls for an explanation. How is that to be explained is something that is relevant to my assessment of the credibility of the conflicting versions of facts presented before me. I should be looking for a version of facts more in alignment with this special arrangement.

165. I have decided not to accept the evidence of the 1st Plaintiff when his evidence conflicts with the evidence given by the Defendant. Among other things, I consider it somewhat odd that the 1st Plaintiff had demonstrated such a "couldn't care less" attitude in relation to the issue of the illegal structures at the subject premises. His evidence also appears to be purposefully vague and ambiguous when compared to the clarity of the demand letters that he had caused to be sent to the Defendant. I find it rather odd that he should have merely stood by and allowed the Defendant's workers to enter into the subject premises to carry out demolition works when to his knowledge the Defendant had not entered into the Formal Tenancy Agreement. The 1st Plaintiff said that the phrase "to be (a) real (deal) when (the) cheque is cleared (支票過妥始作實)" was written by him after the parties had already signed the Provisional Tenancy Agreement. There is however no initial against this later "add-on". I find this rather odd.

166. As for the credibility of PW2, I have already noted my view on his credibility as a witness and I do not propose to repeat what I said earlier here.

167. As for PW3, I have also decided to reject his evidence when his evidence conflicts with the evidence of the Defendant. Again I find it rather odd that he should have merely stood by and allowed the Defendant's workers to enter into the subject premises to carry out demolition works inside.

168. There are features in the evidence of the Defendant that I find it uneasy to accept. By way of illustration, there is her evidence that she did not have a cheque account. There is also the evidence that she had failed to respond to the allegations contained in the demand letters issued by the 1st Plaintiff. Her testimony in Court is not entirely consistent with the contents of her prior witness statements.

169. Nevertheless, viewed broadly, I find the Defendant's version to be more in alignment with the provision in the Provisional Tenancy Agreement that the parties were to sign a Formal Tenancy Agreement in just two days after the signing of the Provisional Tenancy Agreement. I prefer her version of the story to the version of the story proffered by the 1st and 2nd Plaintiffs.

170. I find what actually happened was what the Defendant had testified to and as set out in paragraphs 126 to 142 above. I also accept the Defendant's evidence as to the scope of the illegal structures that were agreed to be dismantled. I find that the Defendant has never carried out any demolition works at the subject premises.

171. I find that there was a collateral agreement the effect of which was to render the Provisional Tenancy Agreement inoperative (i.e. not binding) until the conditions precedent as set out in paragraphs 6 & 7 above are met. The 1st and 2nd Plaintiffs have not dismantled the illegal structures as agreed and the Provisional Tenancy Agreement has never become binding. The 1st and 2nd Plaintiffs therefore cannot succeed on their claims.

172. On the authority of decisions like Cheuk Tze Kwok v. Leung Yin King & Another (1992) 2 HKC 179 and Shing Wei Enterprises Company Limited v. Wu Hsiu Miam, DCCJ 3033/2001, 28 September 2001 , there is a need to distinguish between a collateral agreement and an entirely different agreement. I find there was a collateral agreement, not a separate agreement.

173. If I were wrong on my finding that the Provisional Tenancy Agreement has never become binding, then I do not think the Defendant would succeed in her Defence grounded on misrepresentation. The assurances made by the 1st Plaintiff as set out in paragraphs 6 & 7 above were promises as to what would be done in the future. To succeed on misrepresentation, the Defendant would have to plead that the 1st Plaintiff did not have the intention of carrying out what were promised at the time when the promises were made. The Defendant has not pleaded that. I do not think that it is open for me to make such a finding on the state of the pleadings.

Order

174. The claim of the 1st and 2nd Plaintiffs is dismissed. There be an Order Nisi that the 1st and 2nd Plaintiffs do pay the Defendant's costs of this action to be taxed if not agreed. There shall be Certificate for Counsel. Unless an application to vary this Order Nisi is made, it will become absolute in 14 days.