KADOORIE ESTATES LTD. v. GOODHEALTH CONCEPTS INTERNATIONAL LTD.

DCCJ7051/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 7051 OF 2001

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JUDGMENT

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INTRODUCTION

1. The Plaintiff is the landlord of the premises known as No.73 Kadoorie Avenue, Kowloon ( hereinafter called "the Premises"). By a tenancy agreement dated 19 May 2000, the Plaintiff let "the Premises" to the Defendant for a term of 2 years from 1 July 2000 to 30 June 2002 at a rent of HK$ 80,000.00 per month, payable in advance on the first day of every month.

2. The Defendant is a limited company formerly known as Fantics Development Limited ( FDL ) and now called Goodhealth Concepts International Limited ( GCIL) which is owned and controlled by the director and shareholder, Dr. Leung Sik Chiu( Dr. Leung), a medical doctor who signed the tenancy agreement on behalf of the Defendant. The Defendant also paid the Plaintiff a deposit of HK$ 240,000.00.

3. On 11 January 2001, the Plaintiff forfeited the tenancy for breach of covenant on the grounds that the Defendant had used the Premises otherwise than as a private dwelling, namely, as a medical clinic; and in so doing, the Defendant had caused nuisance, annoyance and inconvenience to the Plaintiff and to its neighbour. The Plaintiff also forfeited the deposit absolutely in accordance with the terms of the tenancy. The Defendant delivered up the possession of the Premises to the Plaintiff on 31 March 2001.

4. The plaintiff claims against the defendant a sum of HK$ 400,000.00 being 5 months ' arrears of rent and/or mesne profit from the period of November 2000 to March 2001 together with interests. The Defendant denies the breaches as alleged by the Plaintiff over the use of the Premises and seeks to set off the Plaintiff's claim by the amount of deposit as forfeited by way of counter-claim.

ISSUES

5. Whether or not the Defendant used, or permitted to be used, the Premises as a medical clinic? If so, the Defendant was in breach of the covenants contained in the tenancy agreement namely,

(a)- to use the Premises as a private dwelling for a single family;

(b)- not to do or permit to be done anything which may be a nuisance, annoyance or inconvenience to the Plaintiff or the occupiers of the other premises in the neighbourhood;

(c)- not to do or suffer any act which shall amount to a breach or non-observance of any provision of the Conditions/ Government Lease under which the Plaintiff holds the Premises.

EVIDENCE OF PLAINTIFF'S WITNESSES

PW1- Loreta Dela Cruz, the neighbour's maid

6. PW1 worked as domestic helper for PW2 who lived at the next house adjoining to the Premises. Both houses shared the same gate and a common courtyard and there was a driveway leading to the garage of each house. PW2 moved in sometime in August 2000, since then until the end of March 2001, PW1 noticed many visitors looking for Dr. Leung everyday. The appearance of those visitors was strange in that some were in wheelchairs who looked very sick, some pregnant women and a man with a tube attached to his nose etc.. PW1 could recognized some of them for they came everyday. One day in October 2000, PW1 met a lady at the main gate and asked what she was doing there, the lady replied that she was to report to work that day at 10:00 am and identified herself as a nurse and thereafter, she was seen as the usual person to open the main gate for the visitors. During the relevant period of time, many visitors to the Premises had wrongly pressed the doorbell of PW2's house and asked to see doctor. On one particular afternoon in December 2000, a man drove his car to the main gate and pressed the wrong doorbell. PW1 and PW2's wife, Mrs. So, went to answer and found out that the man was coming to see doctor. Mrs. So explained that there wasn't any doctor and asked the man to go, but the man insisted on going in as he had an appointment with a doctor. The matter was reported to police. PW1 also noticed a man who claimed himself to be Dr. Pang came to the Premises regularly at around 10:00 am and left around 7:00 pm everyday.

PW2- SO Yiu Kong, the neighbour

7. PW2 rented the house next to the Premises from the Plaintiff and moved in with his family in August 2000. From the first day he moved in till the end of March 2001, PW2 noticed many cars going in and out of the main gate and a lot of people, at least 5 or 6 groups per day, visiting the Premises everyday. The people visiting the Premises looked very much like patients; some came in wheelchairs, others had tubes attached to their nose. On 28 August 2000, a lady pressed his doorbell and asked for Dr. Leung saying that she had an appointment with him. Having explained to her the situation, she then went to the Premises and was let in. On the same day, PW2 saw a van unloading medical appliances and bottles of liquid into the Premises. It happened very often that visitors to the Premises pressed the doorbell of PW2's house.

8. PW2 also noticed that 2 men came to the Premises at around 9:30 am and left at around 7:00 pm everyday. There was rarely light on during nighttime and it did not seem to be someone staying in the Premises overnight. On 11 November 2000 in the small hours, PW2 was disturbed by noises coming from the Premises and went over to make a complaint, a man opened the door and identified himself to be Dr. Yew. PW2 had seen Dr. Yew on previous occasions and believed him to be one of the doctors who worked there. That night was one of the few nights when someone actually staying in the Premises.

9. PW2 was annoyed by the large number of visitors and cars coming to the Premises everyday and had written several complaint letters to the Plaintiff concerning the Premises being used as a clinic. PW2 was also worried about the possible infection that he and his family might get as a result of the Premises being used as a clinic.

PW3- Kwong Ho Kwai, estate manager of Plaintiff

10. One day in late August 2000, PW3 received a phone call from PW2 asking if the houses under the management of the Plaintiff could be used as a clinic and PW3 answered in the negative. On 1 September 2000, the Plaintiff received a formal complaint letter from PW2 alleging that his neighbour at the Premises was operating a clinic. Therefore, PW3 paid more attention to the Premises when patrolling the area. PW3 saw many visitors to the Premises at regular intervals and they looked very much like patients to him. PW3 once saw an old lady, who looked very pale and sick, with a tube attached to her nose coming to the Premises, and the old lady was accompanied by a couple who assisted her to walk to the Premises.

11. On 1 December 2000, PW3 received another complaint letter from PW2. Having seen the situation himself, PW3 decided to carry out an official inspection of the Premises on 11 December 2000, letter to that effect was sent to Dr. Leung on 5 December and confirmed by telephone on 8 December that the Dr. Leung consented to the inspection. On 11 December, PW3 went with a staff member taking with them a camera to the Premises to carry out the inspection. Upon arrival, they found that Dr. Leung was not in the Premises, there were 2 gentlemen inside who introduced themselves to be Mr. Yew and Mr. Pang respectively. Mr. Yew only allowed them to take photographs on the ground floor but not upstairs ( for photographs see P. 50 and P.51 of Bundle B). PW3 had the following observations:

(a)- in the living room, other than 8 black leather armchairs and 1 TV set, there was no other furniture;

(b)- in the dining room, there were only 2 desks on which there were one television and a computer;

(c)- one red two-seater sofa, 2 black chairs and an empty fish tank were in the patio;

(d)- in the kitchen, nothing was inside the cupboard. Only a few items, like some bottles, were found in the refrigerator. Other than 2 kettles on the stove, there was no other kitchenware;

(e)- the servant's room was used as storage for furniture, carton boxes and a computer;

(f)- there was no bed in the master bedroom, 3 armchairs were in the middle of the room and 2 exercise machines were besides the closet;

(g)- in the gym room, there was a clinical bed at the center of the room and nothing else was in the room;

(h)- in the No.2 room, there was one small bed at the corner of the room and a massage bed below the air-conditioner and nothing else was in the room;

(i)- in the No.3 room, there were bookshelves which had been installed by the previous tenant, a conference table and several chairs, a computer was on the table and a photocopier was also in the room.

12. During the inspection, Mr. Yew complained about the noises from the water pumps in the Premises; and therefore, PW3 went to have a check on 16 December, in the living room, he saw two men and a woman lying on the armchairs with their feet stretching out and resting on foot cushions.

PW4- Ronald Espirtusanto Rivera, private investigator

13. On 11 January 2001, PW4 was instructed by the Plaintiff to carry out investigation into the Premises to find out if the Premises were being used as a clinic. He conducted surveillance on the Premises on four days in February with a video camera. He compiled an investigation report on this matter ( see P.65(1) to P.65(10) ) and prepared some still picture from the videotape (see P.65(11) to P.65(106) ) of Bundle A). Basically, his observations were that he saw groups of people who appeared to be patients coming and going all day long; some came in by taxi and some other by private cars. He also saw people who looked like staff, such as nurse and doctor, leaving the Premises in the evening. He also found medical wastes from the rubbish dumped by the staff at the Premises, these included;

(a)- medical syringe needles, empty medical vial and documents with names and prescriptions on it (see P.65 (90) );

(b)- used sterile gauge packets;

(c)- plastic container with words " injection case" embedded in the plastic

(d)- assorted used pharmaceutical packets

(e)- medical label;

(f)- stickers with names on them;

(g)- used cotton swabs with traces of blood stain on them ;

(h)- finger tip " prickers";

(i)- various used laboratory slides with blood stain on them;

(j)- a purchase order for drugs and medical equipment(see P.65(79) to P.65(106).

EVIDENCE OF DEFENDANT WITNESSES

DW1- Dr. Leung Sik Chiu

14. Dr. Leung is the direction of the Defendant and a registered medical practitioner in Hong Kong. He rented the Premises from the Plaintiff for his sole occupation as his family had emigrated to Canada for many years. He has practised medicine for 27 years and has a medical clinic at Shanghai Street Yau Ma Tei. He usually worked in his clinic the whole day until late at night, then returned to the Premises; that is why it seemed no person lived at the Premises. Over the years, most of his patients have become his friends and when they knew about his new residence, they paid a visit to him for friendly talks and had discussions about their well-being.

15. On a day in September 2000, DW1 had a quarrel with PW2 over matters concerning visitors to the Premises pressed the doorbell of PW2 by mistake and parked their vehicles in the common area. On or about 21 September 2000, DW1 received a letter from the Plaintiff complaining about the use of the Premises as a clinic, he denied the allegations. On 5 December, DW1 again got a letter from the Plaintiff requesting for an inspection of the Premises on 11 December, DW1 agreed to it for that could prove that he did not use the Premises as a clinic. In view of the unhappy relationship between himself and his neighbour PW2, DW1 decided to move out and eventually vacant possession of the Premises was delivered up to the Plaintiff on 31 March 2001.

DW2-Pang Chi Man

16. DW2 was an assistant to DW1 and did not hold any professional qualification, except that he had 6 years of experience in the sale of drugs as he had worked as a sales person for a drug store before. He mainly worked at the Premises from Monday to Saturday 10:00 am to 7:00 pm for the period of October 2000 to March 2001. His duty was to assist in the research conducted by DW1 and Dr. Yew on health products.

17. There was one incident when a man came to visit the Premises, he wrongly pressed the doorbell of next door, woke up Mrs. So, wife of PW2, who disallowed the man parking his car inside the common area and called the police. After the police arrived, PW2 also came back from outside, having realised what happened, PW2 accused DW2 of bullying his wife. All along it was DW2 who handled the matter with police and PW2, Mr. Yew just stood by watching whilst DW1 remained inside doing the research.

18. On the day of inspection, Mr. Yew only told the Plaintiff's staff not to take photograph of the room where he slept for he did not like his privacy to be intruded. It was a misunderstanding on the part of the Plaintiff's staff when they thought they were not allowed to take picture anywhere upstairs.

ASSESSMENT OF EVIDENCE

19. Having heard all the evidence, I find all Plaintiff's witnesses to be truthful and reliable witness and am satisfied that the events took place as they described in evidence. In their evidence, they not only testified as to the facts they witnessed but also expressed opinion on them, however, insofar as their opinion is concerned, I attach no weight to it for this is a matter for Court to form its own opinion or to draw such reasonable inferences from the facts of which the Court find proved.

20. As far as the Defendant's witnesses are concerned, they do not impress me as honest witness. They have been increasingly untruthful in giving evidence, their reply to questions put to them by the Plaintiff's Counsel are evasive and sometimes na?ve. Here I'll just quote a few instances to illustrate the point. In DW1's statement, he describes those visitors to the Premises as his friends who were his former patients, they came for friendly talks and discussions about their well- being. But in his oral testimony, he told the Court for the first time that he and Dr. Yew had engaged in some kind of research on health food, the people who came round were to assist them in their research, they would take blood samples from them and put it on glass slides and add some re-agent to it. The process would take one to two hours during which data would be collected for analysis and they needed healthy as well as sick people for their research but he would not say too much about the research because it involved commercial secrets. I think all this is a tissue of lies. I believe DW1 was making this up about the so-called research as he realized the apparent absurdity of what he said in his statement about having so many friends coming for chit-chat during the times when he should have been in his clinic at Shanghai Street to see patients. Again in his statement, DW1 clearly states that he had a quarrel with PW2 over visitor mistakenly pressing the doorbell of PW2 and parking of car in the common area, however, in his oral testimony, he volunteered the evidence that he in fact did not have a quarrel with him but his friend did and he could not recall who that friend was. DW1 is a doctor, a well-educated professional, he couldn't have misunderstood the meaning of the phrase" having a quarrel with somebody" when he in fact did not have such quarrel. He is either lying in Court or in his statement. His veracity was further brought into question when he was asked by the Plaintiff's Counsel about a woman in one of those photos, he replied that the woman was hired by them as an amah who worked part-time from 2:00 pm to 6:00pm, but he twice agreed to Counsel's question that this lady came in the morning and left in the evening. When asked why he said she was part-time, he explained that he did not know what Counsel meant by morning and thought that since 2:00pm and morning were in the daytime, that was why he misunderstood it. It is highly incredible that an intelligent person like a doctor could have confused morning with afternoon. These are only a few instances of his untruthfulness. As a medical doctor, he holds a respectable position in society, I am very reluctant to pass any remarks which may cast doubt on his integrity, but in light of the evidence I heard, I am driven to the conclusion that he is a downright dishonest witness.

21. DW2 gave a very short statement (see P.70) which hardly mentioned anything relating to the issues of the case, however, when he was in the witness box, he could describe some incidents in great detail as if they happened yesterday. Regarding the "quarrel" incident, having listened to the evidence of DW1 in court, he told the court that he was the one who had the confrontation with PW2, Dr. Yew just stood by watching and DW1 was inside at the time. I don't believe it. DW1 in the witness box admitted that he never met PW2, even if he met his neighbour, he would not know who Mr. So (PW2) was. I think it is more likely that DW2 on seeing that DW1 changed his evidence, he went on to support him by making up a story that he had a quarrel with PW2. Again when DW2 was asked by the Plaintiff's Counsel as to why Dr. Yew disallowed the Plaintiff's staff to take picture on upstairs during inspection, he said that he heard Dr. Yew telling them not to take picture of his bedroom only, it was the Plaintiff's staff misunderstood him. I don't think this is a matter of misunderstanding. It is common ground that there isn't anything inside or outside the rooms upstairs to indicate Dr. Yew's bedroom. If the instructions were to allow them to take picture of any of the rooms except Dr. Yew's, surely the staff would ask Dr. Yew or DW2 which room was his so that they could take picture of the other rooms. I believe the reason that the staff had not taken any picture of upstairs was because they were not allowed to do so. In my view, DW2 is a careful witness but not an honest one, he would make up story whenever it suited him. The more he tried to explain away certain evidence, the more he exposed his untruthfulness.

FINDINGS OF FACTS

22. From the evidence of the case, I find the following facts to have been proved, namely,

(a)- in the weekdays during the relevant period of time, there were groups of visitors coming to the Premises at different time of the day and staying for some time before they left;

(b)- some came in on wheelchairs and some others had tube attached to their nose;

(c)- at least a woman on drip was assisted by another woman to walk around the courtyard of the Premises;

(d)- arrival in the morning of doctor, such as Dr. Yew, and staff and remaining in the Premises throughout the day;

(e)- there have been numerous occasions where the visitors to the Premises had wrongly pressed the doorbell of PW2's house;

(f)- some visitors had indicated their purpose of visit to Plaintiff's witnesses that they were there to see doctor.

(g)- waste relating to medical use was found in the rubbish from the Premises;

(h)- van delivering medical supplies to the Premises;

(i)- the Premises were rarely occupied during the night;

(j)- registration of the Premises as a business address for health care services.

23. It is true to say that there isn't any direct evidence as to the actual use of the Premises during the relevant period of time, all the evidence is circumstantial but from the facts I find proved, I can only come to the conclusion that the Premises were being used as a medical clinic.

24. Furthermore, even on the basis of the Defendant's own account ( which I reject), the main use of the Premises was for a commercial purpose i.e. conducting research of health food with a view to selling them to consumers, there is sufficient evidence before the Court to come to the conclusion that the Premises were being used otherwise than for the purpose of a private dwelling house.

CONCLUSION

25. Based on the reasons I set out above, I conclude that the Premises were being used as a clinic during the material times, and given the fact that the two houses were adjoining to each other and had the same entrance gate, the frequent and regular visits by patients did pose the risk of infection to the habitants of the neighbouring house, and not infrequent pressing the wrong doorbell and asking to see doctor did, in my view, constitute nuisance to PW2 and his family. I therefore find that the Defendant had breached the above-mentioned 3 covenants. In accordance with terms of the tenancy agreement, the Plaintiff had the right to forfeit the tenancy as they did on 11 January 2001 and the deposit absolutely as well.

26. The Plaintiff also claims interest for the entire period up to 31 March 2001, however, there is evidence to suggest that the Plaintiff had refused to accept payments from the Defendant for rents which became overdue for fear that it might prejudice its right to forfeiture. It is true to say that a demand made by the landlord or his agent with knowledge of the breach for rent due after the cause of the forfeiture operates as a waiver (Para. 510 of Halsbury's Law of England Vol. 27 (1) ). But there is nothing to prevent the Plaintiff from accepting rents on " without prejudice" basis. It is stated in the same paragraph of same volume of Halsbury that " merely entering into and continuing "without prejudice" negotiations does not necessarily constitute a waiver". Since the Plaintiff had taken such an attitude, there was nothing the Defendant could do in the circumstances but wait for the Plaintiff's action. It is not fair, in my view, for the Plaintiff to claim interest for this period of time. On the other hand, however, once the Plaintiff has taken out a writ to recover the arrears of rent, the Defendant could at least make payment into Court as this was not the issue in the case, but the Defendant did not do so. The Plaintiff is, therefore, entitled to interest as from the date of writ to the date of payment.

27. The orders that I make are as follows:

1. Judgment for the Plaintiff for the sum of HK$ 400,000.00;

2. The claim for interest up to 31 March 2001 in the sum of HK$ 11,703.99 be dismissed;

3. Interest on the sum of HK$ 400,000.00 at the rate of 11% per

annum (as claimed) from the date of writ until judgment and thereafter at judgment rate until payment;

4. Counter-claim of the Defendant be dismissed;

5. I make an order nisi that the Defendant do pay the Plaintiff the costs of this action with certificate for Counsel, such costs shall be taxed if not agreed, the order nisi is to be made absolute at the expiration of 14 days from the date of handing down judgment.