TSANG YUEN MUI v. CHOI SIM CHING

DCCJ 1347/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1347 OF 2008

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JUDGMENT

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1.  The Plaintiff, Tsang Yuen Mui (“Madam Tsang”) was a tenant of the premises at shops 6, 15, 16-17, Ground Floor, Waldorf Garden Shopping Arcade, Tuen Mun, New Territories, Hong Kong (“the restaurant premises”).  Madam Tsang and her ex-husband Mr Lee Yiu Fai (“Mr Lee”) operated the Akita Japanese Restaurant (“the restaurant”) at the restaurant premises from 1 April 2004 to 31 March 2007.  They are now operating the restaurant at shops 6, 16-17 Waldorf Garden Shopping Arcade.

2.  The Defendant Madam Choi Sim Ching (“Madam Choi”) is and was the registered owner of Flat 15, Ground Floor, Waldorf Garden Shopping Arcade (“the suit premises”).

3.  By a written Chinese tenancy agreement (“the tenancy agreement”) entered into between the Plaintiff and the Defendant, the suit premises was let by the Defendant to the Plaintiff for business purpose for a term of three years commencing from 1 April 2004 to 31 March 2007 at a monthly rental of $8,000 for the first 2 years and $8,800 for the third year exclusive of government rates and management fees.  In or around February or March 2007, the Plaintiff and the Defendant negotiated the renewal of the tenancy and the Plaintiff began to pay an increased monthly rental of $9,800 from 1 April 2007. 

4.  In the present proceedings, the Plaintiff claims against the Defendant for the return of the rental deposit of HK$17,600.  The Defendant, on the other hand, counterclaims for:-

(i) The sum of $9,800 as one month’s rental in lieu of notice to quit;

(ii) The sum of $9,969.43 including outstanding rental, management fee, government rates and air-conditioning fee on a pro rata basis from 1 October to 25 October 2007;

(iii) The sum of $91,300 incurred by the Defendant, including estimated cost for repair, reinstatement, removal, reconnection and replacement charges.

The Plaintiff’s Case

5.  According to the evidence of Lee Yiu Fai, the ex-husband and business partner of the Plaintiff, Madam Tsang Yuen Mui, the Plaintiff was the tenant of all four premises located on the ground floor of Waldorf Garden Shopping Arcade in Tuen Mun, namely shops 6, 15 and 16-17 between 1 April 2004 to 31 March 2007.  Shop 15 (“the suit premises”) is and was owned by the Defendant Madam Choi, who signed a written 3 year tenancy agreement with Madam Choi for the said period.  The Plaintiff paid to the Defendant two months rental as rental deposit for the tenancy amounting to $17,600. Under Clause 7 of the tenancy agreement, upon delivery of vacant possession, the landlord would return the rental deposit to the tenant.  On this basis, the Plaintiff claims for the return of the said deposit.

6.  Mr Lee claimed that in or about mid-March 2007, Madam Choi approached him to discuss the renewal of tenancy asking for an increase in rental at $9,800 a month after the expiry of the existing lease.  Mr Lee claimed that Madam Choi’s offer was not acceptable to him and Madam Tsang.  On behalf of Madam Tsang, he entered into an oral agreement with Madam Choi to extend the tenancy for a short period.  The terms of the oral agreement were:-

(a) The Plaintiff would deliver vacant possession of the suit premises on 30 September 2007;

(b) Between 1 April and 30 September 2007, the monthly rental of the suit premises would be $9,800;

(c) The Plaintiff would repair the air-condition unit installed in the suit premises;

(d) The Plaintiff shall reinstate the suit premises pursuant to clauses 17 and 18 of the tenancy agreement before delivery of possession to the landlord, namely, to set up a new wall and an electricity switch box.

(“the first oral agreement”)

7.  Mr Lee claimed that the reason for refusing to renew the tenancy of the suit premises for a term of three years was the increased monthly rental to $9,800 demanded by the landlord.  He claimed that Madam Choi did not require Madam Tsang to pay an extra $2,000 for the increase rental deposit and the parties did not discuss the execution of a new written tenancy agreement.  Madam Tsang began paying the monthly rental of $9,800 in April 2007 to Madam Choi.

8.  In or about August 2007, the Plaintiff and Mr Lee’s restaurant engaged the services of a contractor Leung Kee Water & Electrical Engineering Company (“Leung Kee”) to carry out renovation works at shops 6, 16 and 17.  Mr Lee claimed that neither Madam Tsang nor the contractor Leung Kee destroyed the interior of the suit premises.  He claimed the work conducted at the suit premises was pursuant to the terms of the tenancy agreement and the oral agreement.

9.  Mr Lee further claimed that on a day shortly before 30 September 2007 while the renovation work was underway, Madam Choi and her husband attended the suit premises.  She requested Madam Tsang to carry out certain extra works, including the demolition and removal of sundry items at the suit premises and all the tiles affixed on the wall.  Mr Lee turned down Madam Choi’s request.

10.  Mr Lee made a number of phone calls to Madam Choi on 30 September 2007, requesting her to repossess the suit premises, but the request was rejected by Madam Choi because some of the floor tiles had not been removed.  Mr Lee admitted that because of Madam Choi’s unreasonable request, he had kept the keys to the suit premises.

11.  In early October 2007, Mr Lee had a discussion with Madam Choi and her husband when they visited the suit premises.  They came to an agreement in respect of the delivery of possession of the suit premises (“the second oral agreement”).  The terms of the second oral agreement were:

(a) The Plaintiff would pay the cost of demolishing the tiles affixed to the floor of the suit premises;

(b) Immediately upon the conclusion of the second oral agreement, the Defendant would take possession of the premises; and

(c) The Defendant would return the rental deposit of HK$17,600 to the Plaintiff in due course.

12.  Mr Lee said, he had returned the set of keys in triplicate to Madam Choi on the same day.  Madam Choi in turn gave one set of keys to one of the decoration workers of Leung Kee and instructed him to demolish the floor tiles at the suit premises and payment would be settled by Madam Tsang or Mr Lee.  Mr Lee also claimed that Madam Choi had given one set of keys to a property agent located on the ground floor of Waldorf Garden in Tuen Mun.

13.  In answer to the Defendant’s counterclaim, the Plaintiff denied she damaged the wall, blocked the drainage outlet, destroyed the central air-conditioning system, the stove, water pipes and electricity wiring or wrongly redirected the water meter and the 3-phase electricity supply system at the suit premises.  The Plaintiff claimed the drainage system, the stove, water pipes and electricity system located at the premises did not belong to the Defendant because they were installed at the suit premises by the Plaintiff during the tenancy for the operation of the restaurant.  That the drainage system, water pipes, electricity system installed at the suit premises were the extension from the Plaintiff’s restaurant and the stove was installed by the Plaintiff when the suit premises was used as the restaurant’s kitchen. 

14.  Mr Lee claimed the electricity supply at the suit premises was controlled by a central electricity panel at the Waldorf Garden Shopping Arcade where the electricity meters for all the shops at the Arcade are located.  The central electricity panel is under the care and control of the management office of the Waldorf Garden. Mr Lee admitted that originally, each of shops 6, 15, 16-17 had an electricity switch box at their respective premises with electricity supplied from the central electricity panel.  When the restaurant was operating at shops 6, 15, 16-17, the electricity supplied by the China Light & Power (“CLP”) was registered under a single account.

15.  Mr Lee claimed that before the restaurant commenced business in August 1997, the restaurant had applied to Guardian Property and CLP for a 3-phase electricity supply to the restaurant which was duly approved and registered under shop 6. At the time, the CLP had installed an extra electricity cable for which the Plaintiff had to pay an additional deposit to CLP and Guardian Property, the deposit the Plaintiff paid to CLP was HK$29,000 while the deposit to Guardian Property was $4,000.  The Plaintiff therefore claimed that Madam Choi is not entitled to the deposit of $4,600 because Madam Choi did not pay the deposit for shop 15 to the CLP.

16.  Mr Lee further claimed that in or about August 1997 before the restaurant commenced business, the Plaintiff applied to Guardian Property for the installation of the drainage system as the tenant of shop 6.  It was approved by Guardian Property and a deposit to Guardian Property of $4,000 was paid by the Plaintiff.  He insisted that throughout the operation of the restaurant, the four units shared one single drainage system, and when the Plaintiff delivered vacant possession to Madam Choi, the Plaintiff had reinstated the suit premises to its original condition.

17.  On the central air conditioning supply, Mr Lee denied the Plaintiff had destroyed the air conditioning unit at shop 15.  He claimed that the Plaintiff had complied with clause 17 of the tenancy agreement and repaired the air conditioning at the suit premises.  Consequently, Madam Choi is not entitled to any damages under the counterclaim.

18.  Mr Lee further alleged that when the Plaintiff and he took over the restaurant from its former owner「東瀛居」, they had bought the right to use the drainage system installed by the former owner.  Consequently, they were entitled to block the drains outlet at the suit premises before the Plaintiff delivered vacant possession to Madam Choi.  He further claimed that he had reinstated the suit premises when he delivered vacant possession to Madam Choi in accordance with the tenancy agreement.

The Defendant’s Case

19.  It is the evidence of Madam Choi that she bought the suit premises in 1983 where she operated a stationery and gift shop with her husband.  Because of the power requirement for spot lights installed at the shop, she had obtained approval from China Light & Power to increase the electricity supply to 3-phase power loading. In 1991, Madam Choi and her husband closed the stationery and gift shop and let out the suit premises.  Prior to 1998, the suit premises was let out to a hairdresser.  Between 1 April 1998 to 31 March 2001, the suit premises was let to a Mr Leung Wing Cheung as one of four units used as a Japanese restaurant 「東瀛居」.  Mr Leung and his brother Mr Leung Kin Shing had operated a karaoke bar at shops 6, 16 and 17 before they took out the lease on the suit premises on 1 April 1998.  At the time, Mr Leung informed Madam Choi they would install a kitchen at the suit premises and they would install and connect the drainage and water pipes at the suit premises that the drains at the restaurant would be connected to the shopping arcade’s main drains through the underground drains outlet at the suit premises.  She was also informed by Mr Leung that he would install a new switch box to link up the four units replacing the switch box and meter of the suit premises.  Madam Choi said that was why she had specified in clause 18 of the tenancy agreement that on the expiry of the tenancy, the tenant would be required to reinstate the partition wall, the glass partition and the original electricity switch box and meter.

20.  On 18 January 1999, Mr Leung transferred the restaurant「東瀛居」to a new owner named Mr Hou Sze Heng who operated the restaurant under the name of 「秋田日本料理」(Akita Japanese Restaurant).  Madam Choi was only informed of the transfer in March 1999 and Mr Hou agreed to take over the existing lease Mr Leung had signed with Madam Choi and Mr Hou accepted the same conditions and terms of the 1998 tenancy agreement. Upon expiry of the lease on 31 March 2001, Mr Hou renewed the tenancy for a further three years up to 31 March 2004 at the same rent of $8,800 per month.  Madam Tsang, the Plaintiff, was a witness to the 1 April 2001 tenancy agreement.  Madam Choi was given to understand that Madam Tsang and Mr Hou were business partners.  Madam Choi claimed she had reminded Mr Hou Sze Heng that he was required to reinstate the suit premises as agreed under the previous tenancy agreement on the expiry of the new lease and Mr Hou agreed, consequently, to the inclusion of clauses 17 and 18 in the 1 April 2001 tenancy agreement.  She claimed that the same terms requiring Mr Leung in the previous agreement applied to Mr Hou under the new tenancy agreement including the reinstatement of the partition wall, the glass partition, the 3-phase electricity switch box and the requirement that the drainage system should not be removed.

21.  It was Madam Choi’s evidence that when the lease expired on 31 March 2004, she agreed to renew the lease with Madam Tsang for a period of three years on the same terms and conditions as in the previous leases with Mr Leung and Mr Hou.  At the request of Madam Tsang, Madam Choi agreed to reduce the monthly rental to $8,000 due to the effects on the economy caused by SARS in 2003.  Madam Choi claimed that Madam Tsang just as Mr Leung and Mr Hou before her, had agreed to the same conditions to reinstate the partition wall, the glass partition, the 3-phase electricity switch box and the retention of the drainage system.

22.  Madam Choi said, in or about February to March 2007, Madam Tsang telephoned her to discuss the renewal of the lease of the suit premises.  She informed Madam Tsang that the monthly rental of the suit premises would be increased to $9,800.  She claimed Madam Tsang had agreed to the increase of rental, and she had been paying the new rental since April 2007.  Madam Choi further claimed that even though the parties did not immediately sign a written tenancy agreement, it was her understanding that both she and Madam Tsang accepted that other than the increase of rental, all conditions and terms of the previous tenancy agreement remained the same and the renewed term of tenancy was for three years from 1 April 2007 to 31 March 2010.  According to Madam Choi, Madam Tsang should have paid a further $2,000 as rental deposit to make up the difference due to the increase of rental.  She did not ask for it because when the monthly rental was reduced by $800 in 2004, she had retained the extra $1,600 on the deposit as she had intended to increase the rental when the market recovered, for that reason, she did not ask for the extra $2,000 on the increased rental deposit in 2007.

23.  Madam Choi claimed that in May 2007, she visited the suit premises intending to sign a written tenancy agreement with Madam Tsang.  On that occasion, Madam Tsang told her she was busy and she would sign the agreement later when she was less busy.  Unfortunately, Madam Tsang never contacted her for the purpose and failed to call her back whenever she called.  As Madam Tsang had been paying the rental on time and as she was a long term tenant, Madam Choi did not insist. 

24.  Madam Choi visited the Plaintiff’s restaurant on 4 September 2007 to collect the September rental, she forgot to bring with her the rental receipt, Madam Tsang told her at the time to bring the receipt when she came to collect the October rental. However, on 25 September 2007 when she passed by the Plaintiff’s restaurant, she found the restaurant had ceased operation and the premises at shops 6, 16 and 17 was undergoing renovation.  Upon seeing Mr Lee coming out of the restaurant premises, Madam Choi approached him.  She was told by Mr Lee then that Madam Tsang intended to hand over possession of the suit premises to Madam Choi on 30 September 2007 and that Madam Tsang would not be renting shop 15 in October 2007.  Madam Choi was surprised by the information and told Mr Lee that Madam Tsang should give her prior notice.

25.  On or about 27 or 28 September 2007, Madam Choi visited the suit premises again to find the interior of the shop partly demolished with a big hole on the floor closed to the entrance, the glass partition facing the street was cracked, the wall tiles were broken and partly demolished, one of the two air conditioning fan coil units was taken down and left on the floor, the second one was missing and the drainage outlet blocked with cement.  She informed Mr Lee at the shop next door that he had to reinstate the suit premises before delivery of vacant possession, otherwise, she would retain the rental deposit.  Mr Lee agreed to her request.  On 30 September 2007, Mr Lee telephoned her to inform her that Madam Tsang was ready to deliver vacant possession of the suit premises.  However, Madam Choi found they had only replaced the glass partition, removed the broken tiles from the wall and filled in the hole at the entrance of the unit, furthermore, she found all electricity wiring and the electricity switch box had been removed and the drainage outlet blocked.  She refused to take possession of the suit premises and contacted Madam Tsang informing her that the suit premises had to be reinstated.

26.  On 6 October 2007, Madam Choi visited the suit premises intending to recover possession. She discovered that although the partitions had been restored, there was no electricity switch box or wiring at the suit premises, and the drainage outlet was still blocked.  She again requested Madam Tsang to unblock the drainage outlet and restored the original electricity supply at the suit premises. However, Madam Tsang claimed she had already reinstated the suit premises as agreed.

27.  Eventually Madam Tsang had only reconnected a single phase electricity switch box at the suit premises.  Madam Choi found the Plaintiff’s restaurant continued to operate at shops 6, 16 and 17 of the Waldorf Garden Shopping Arcade.  She claimed the restaurant had taken over the 3-phase power supply from the suit premises and transferred it to the Plaintiff’s restaurant.  Madam Choi further claimed that the drainage outlet at the suit premises was blocked because Madam Tsang had relocated the restaurant’s kitchen drains to shops 6, 16 and 17.  Madam Choi counterclaims against Madam Tsang for failure to reinstate the suit premises under the tenancy agreement and that the rental deposit should be set off against the costs of reinstatement. 

28.  Madam Choi claimed that she had to pay for the reinstatement herself which included the two central air-condition fan coil units, because when the suit premises was handed over to Madam Choi, only one air conditioning fan coil unit remained, the other had disappeared.  The remaining one did not work and was coated in grease.  Clause 17 of the tenancy agreement stipulated that the tenant was responsible for the repair and maintenance of the central air conditioning system.

Blocked Drains Outlet

29.  Madam Choi had to engage contractors to open up the floor at the entrance area of the suit premises to look for and unblock the drains outlet which was connected to the building’s main drainage outlet.  It took her contractor two attempts before it was found.

Reconnection of electricity switch box

30.  Madam Choi claimed that because the Plaintiff had failed to reconnect the electricity supply, she had to instruct Leung Kee to reconnect the electricity supply and installed a meter for the suit premises.  The work was completed on 25 October 2007. Madam Choi claimed that because of the work involved to reinstate the suit premises, Leung Kee completed the work and delivered four sets of new keys to her on 31 December 2007.

Wall Tiles and Wall Plaster

31.  Because the Plaintiff failed to remove the broken wall tiles, Madam Choi had to instruct Leung Kee to remove the wall tiles and replaster the wall at her own expense. 

Levelling the floor

32.  Madam Choi found the Plaintiff had removed all the drains and plumbings at the said property, she had obtained a quotation for the reinstatement of the plumbings at the suit premises at $45,000. 

33.  As soon as the reinstatement work was completed, Madam Choi had put up the suit premises for rental but it was not until April 2010 that she was able to let it out as a warehouse to「日昌發展有限公司」 at a monthly rental of $12,500 for a period of 2 years, inclusive of rates, management fees and air conditioning charges.

Issues of dispute

34.  The parties have agreed the issues of dispute as follows:-

(1) Whether there was an oral tenancy agreement in mid March 2007 between Mr Lee Yiu Fai and the Defendant for 6 months as alleged by the Plaintiff.

(2) Whether there was an oral agreement made in or about February and March 2007 between the Plaintiff and the Defendant for a renewal of the first written tenancy agreement of 3 years as alleged by the Defendant. If so, whether the terms of the first written tenancy agreement applied to the extension period.

(3) Whether the Defendant was entitled to deduct the amount equivalent to one month’s deposit in the sum of $9,800 pursuant to clause 1 of the first written tenancy agreement.

(4) The date of delivery of vacant possession of the suit premises, was it 30 September 2007 or 25 October 2007?

(5) Whether the Defendant is entitled to claim rent or mense profit, management fee, government rent and rates, and air conditioning fee for the period between 1 October 2007 and 25 October 2007 in the total sum of $9,969.43?

(6) Whether the premises should be reinstated, if so, whether the following items should be included?

(a) Reinstatement/repair of the drainage system;

(b) Reinstatement/repair of walls;

(c) Reinstatement/installation of water pipes;

(d) Reconnection/reinstatement of electricity wiring;

(e) Removal/demolition of the raised floor; and

(f) Replacement of the air condition units.

(7) Whether there was a second oral agreement made on 6 October 2007? If so, what are the terms of the second oral agreement? Has the Plaintiff discharged her duty under the second oral agreement?

Findings

(1)&(2) Whether there was an oral tenancy agreement in mid March 2007 between Mr Lee Yiu Fai and the Defendant for 6 months as alleged by the Plaintiff? Or whether there was an oral agreement in or about February or March 2007 for the renewal of the first written tenancy agreement for 3 years; if so, whether the terms of the first written tenancy agreement applied to the extension period?

35.  Section 3 of the Conveyancing and Property Ordinance Cap 219 requires all dispositions of land to be in writing and signed by the parties.  S. 6 of the Ordinance provides that:

“6. Creation of interest in land by parol

(1) All interests in land created by parol and not put in writing and signed by the persons creating the same, or by their agents thereunto lawfully authorized in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.

(2) Nothing in section 3 or 5 or in subsection (1) shall affect the creation by parol of leases taking effect in possession for a term not exceeding 3 years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without a premium.”

36.  Mr Chan, counsel for the Defendant, informed the Court at the hearing that the Defendant is no longer seeking the enforcement of the 3 year oral tenancy agreement. On that basis, this Court would only be required to determine whether the parties had agreed to a renewal of the lease for 6 months or for 3 years and its consequences. 

37.  After considering the witness evidence, I find the Plaintiff’s and Mr Lee’s evidence to be inconsistent and contradictory.  I find Madam Choi a reliable witness.  I accept Madam Choi did discuss the renewal of the lease for a further 3 years in or about February and March 2007 at a monthly rental of $9,800.  I am not convinced that Madam Choi would agree to a 6 months extension in the terms alleged by the Plaintiff as the “first oral agreement”.  Had she done so, she would not have been surprised by the sudden closure of the restaurant in September 2007.  Had the Plaintiff intended for an extension of 6 months, Madam Tsang would not have asked Madam Choi to give her the September rent receipt the following month when Madam Choi would come for the rent in October 2007.  I do not believe Madam Choi had made up that conversation on the rent receipt with Madam Tsang.  It has a ring of truth.

38.  I accept Madam Choi did not receive any prior notice from Madam Tsang or Mr Lee until 25 September 2007 when Madam Choi passed by the suit premises and found demolition work underway at the suit premises.  It was when she came across Mr Lee coming out of the restaurant premises that she was informed for the first time that the Plaintiff would be handing over the suit premises to Madam Choi at the end of September 2007.

39.  I accept Madam Choi’s evidence that when she and Madam Tsang discussed about the renewal of the lease of the suit premises in or about February and March 2007, Madam Choi had proposed an increase of rental to $9,800 per month for a period of 3 years up to 31 March 2010, Madam Tsang and her partner Mr Lee were reluctant to pay the increased rental but they had little choice when the lease was due to expire in March 2007 and Madam Choi stood her ground.  However, as neither party had put the oral agreement in writing and neither party had insisted on an immediate signing of a written tenancy agreement, Madam Choi had allowed Madam Tsang to drag the matter on.  I am not convinced the first oral agreement alleged by the Plaintiff was reached and consented to by Madam Choi.  I accept Madam Choi did request Madam Tsang to sign a written 3 years tenancy agreement from time to time, but it was clear Madam Tsang and Mr Lee were reluctant to do so.  Consequently, the existing tenancy was allowed to hold over and carry on as a tenancy at will.  As rental was paid on a monthly basis, it became a month to month tenancy on the same terms and conditions as in the first written tenancy agreement at a monthly rental of $9,800.  The month to month tenancy began on 1 April 2007 until Madam Tsang vacated the premises.

(3) Whether the Defendant was entitled to deduct the amount equivalent to one month’s deposit in the sum of $9,800 pursuant to clause 1 of the first written tenancy agreement

40.  According to Madam Choi’s evidence, she was only informed by Mr Lee on 25 September 2007 that Madam Tsang would no longer be renting the suit premises in October 2007 and that Mr Lee and Madam Tsang both admitted no formal notice to quit orally or in writing was given to Madam Choi.  Under the law, for a month to month tenancy, the tenant is required to give one month notice to quit.  If the tenant failed to give sufficient notice, then the tenant must pay the landlord rental in lieu of notice.  In this case, the notice being one month, the tenant is required to pay the landlord one month rental in lieu of notice.  Because the same terms of the first written tenancy agreement applies to the held over tenancy, clause 1 of the said tenancy agreement is binding on the tenant.  Therefore Madam Choi is entitled to deduct one month rental from the rental deposit under clause 1 as payment in lieu of notice.

Issues 4 and 7

(4) The date of delivery of vacant possession of the suit premises: was it 30 September 2007 or 25 October 2007?

(7) Whether there was a second oral agreement made on 6 October 2007? If so, what are the terms of the second oral agreement? Has the Plaintiff discharged her duty under the second oral agreement?

41.  It is the Plaintiff’s witnesses’ evidence that vacant possession of the suit premises was delivered on 30 September 2007, this was disputed by Madam Choi.  While Mr Lee claimed that he had requested Madam Choi to accept delivery of vacant possession of the suit premises on 30 September 2007, Madam Choi did not attend the premises claiming it was late at night and she was concerned for her safety.  Madam Choi did not visit the premises until 6 October 2007 when Mr Lee returned a set of keys belonging to the suit premises to her.  Madam Choi however denied the said premises was ready for repossession because it was full of rubbish and kitchen equipments belonging to the Plaintiff’s restaurant.

42.  Mr Lee claimed that there was a second oral agreement reached on that occasion between himself and Madam Choi on the reinstatement of the suit premises.  Madam Choi denied there was any such oral agreement.  She claimed she had required Madam Tsang and Mr Lee to remove the remaining tiles on the floor because the suit premises was full of rubbish with the floor partially covered in tiles, she therefore refused to take repossession.  She produced photographs taken in October 2007 showing various stages of repair at the suit premises during that month.  Mr Lee, under cross examination, admitted that a cooking pot in photo 12 (on page 101 of the bundle) belonged to the restaurant.  Based on such evidence, it is clear the suit premises was not ready for delivery of vacant possession to the landlord on 6 October, i.e. 6 days after the Plaintiff, Madam Tsang, said she had delivered vacant possession to the landlord.

43.  According to Mr Lee, he had instructed the contractor Leung Kee to do the following work at the suit premises in August 2007:

(1) erect a new partition wall;

(2) erect a new glass wall and glass door (at the entrance of the suit premises leading to the shopping arcade);

(3) remove all sundries at the ceiling of the suit premises;

(4) remove the tiles on the wall of the suit premises;

(5) erect a new electricity switch box and install two sets of lights at the suit premises;

(6) remove all articles and materials at the suit premises.

44.  It is obvious the work was not completed on or before 30 September 2007 and that some of the work was still not done by 6 October 2007 when Madam Choi visited the suit premises. She had demanded Madam Tsang and Mr Lee to reinstate the premises in accordance with the tenancy agreement on that occasion, in particular, the supply of electricity, water and air conditioning at the suit premises.  On 25 October, she brought with her a copy of her ID card intending to register with the building management for the electricity and water meter in her name.  However, she found only the partitions were restored but no electricity cable or switch box installed and the drainage outlet was still blocked, she then requested Madam Tsang to unblock the drainage outlet and restore the electricity and water supply to the suit premises.  Madam Tsang refused and they had a row on that day.

45.  I have carefully assessed the evidence of both the Plaintiff’s and the Defendant’s witnesses and examined the photographs taken of the suit premises, I found the evidence of Madam Choi credible, I accept the suit premises was not ready for hand over on 30 September or 6 October 2007.  Because of the unsatisfactory state of the reinstatement, Madam Choi was extremely unhappy the way the tenancy was terminated by the Plaintiff, the condition of the premises when the Plaintiff attempted to hand over at the end of September or in early October 2007.  I accept Madam Choi’s evidence that the suit premises was left in a dilapidated state with partially demolished tiles on the floor and on the wall, the air conditioning fan coil units were removed from the ceiling, the drains outlet blocked and the plumbings had disappeared from the suit premises.  Meanwhile, Madam Choi insisted that Madam Tsang should reinstate the suit premises in accordance with the terms and conditions of the tenancy agreement, but Madam Tsang and Mr Lee completely ignored her requests.  As the matter dragged on, the reinstatement work at the suit premises was delayed.  On the Plaintiff’s alleged second oral agreement, the tenant is bound by the covenant to repair under the terms of the tenancy agreement, should it be complied with the landlord has to return the deposit under the agreement.  There was no need for the parties to reach the second oral agreement because they were both bound to comply with the terms of the tenancy agreement.  I therefore, conclude there was no second oral agreement save that the Plaintiff had agreed to reinstate the suit premises under clauses 13, 14, 17 and 18 of the tenancy agreement.

(5) Whether the Defendant is entitled to claim rent or mense profit, management fee, government rent and rates, and air conditioning fee for the period between 1 October 2007 and 25 October 2007 in the total sum of $9,969.43

46.  Based on the aforesaid findings, the Defendant did suffer loss and damages as a result of the Plaintiff’s failure to deliver vacant possession under the terms and conditions of the tenancy agreement.  I allow the Defendant’s claim for payment of rent, mense profit, management fee, government rent and rates, air conditioning fee, on a pro rata basis, between 1 and 25 October 2007 in the sum of $9,969.43.

(6) Whether the suit premises should be reinstated, if so, whether the following items should be included:

Reinstatement or repair of:

(a) the drainage system;

(b) the walls;

(c) the water pipes;

(d) electricity wiring;

(e) the raised floor; and

(f) the air conditioning units.

47.  I find Madam Choi’s request for reinstatement under the tenancy agreement to be entirely reasonable.  It was a condition of the tenancy agreement under clauses 17 and 18 that the tenant should reinstate the partition wall, the glass partition and glass door as well as the plumbing and electricity wiring and meter and maintain the air conditioning units.  So far as the drainage outlet is concerned, I accept Madam Choi’s evidence that it was installed by the tenant who operated a hairdresser at the premises before the suit premises was let to Mr Leung as part of a restaurant.  Mr Leung had installed and extended the drainage system leading to the drainage outlet at the suit premises.  Consequently, the tenant who took over the tenancy after Mr Leung had in subsequent tenancy agreements accepted the reinstatement and the restoration of the suit premises in a state it was in when the restaurant took over those premises under clauses 10, 13, 14, 17 and 18 of the tenancy agreement.  Even though clauses 10, 13 and 14 were standard terms on a printed tenancy agreement form, Madam Choi did remind her tenants of those terms and the additional clauses 17 and 18 each time the tenancies were renewed.  Clauses 10, 13, 14, 17 and 18 stated:-

“(10) 該樓一切門窗，廚房及浴室之設備，如潔具，水喉，水渠等如有損壞，租客須負責修理或賠償。如租客因疏忽而毀壞本樓之設備，損及別人之傢具衣物或傷害其他人等，租客須負責賠償。租客須自投風災，水，火，盜竊及意外保險，租客如有任何損失，業主不負任何責任。……

(13) 租客搬進該樓宇時，裝修入牆間格窗花等，遷出時不得拆回以維持該樓原有之齊整。如得業主同意，租客方可拆回但必須將該樓完整修理。該樓宇內之電器設備包括／部熱水爐，／部冷氣機，水電分錶各一個，租客退租時，須要完整地交回業主。如租客故意損壞該等設備可被控告惡意破壞物品罪並須負責賠償。

(14) 該樓宇之電錶及水錶均屬業主名下登記，業主負責保養及維修水電錶。租客依照水電分錶耗量付款，如租客欠租超過十五天，或多次催促而仍未繳交水電費或管理費等，業主有權拒絕供應食水及電力給租客。……

(17) 雙方協議：舖內之中央冷氣於交舖時，租客必須負責維修。

(18) 雙方協議：(1) 如租客不租此舖時，需要原庒間好幅牆。(2) 玻璃間格要原庒做好給業主。(3) 要駁好電錶。”

48.  As to the extent and the cost of reinstatement, a number of authorities have been referred to me by the Plaintiff’s counsel, Ms Yung, on the right of the tenant to remove the tenant’s fixtures from the demised premises.  In the English Court of Appeal case of New Zealand Government Property Corporation v. H.M. & S. Limited [1982] 2 Weekly Report 837, the tenant occupied the demised premises as a theatre under a lease which expired on 30 September 1970.  Before the end of the old lease, the landlord decided to terminate the tenancy under the legislation and serve a notice followed by negotiations on the new lease.  A new lease for a term of 21 years from 1 October 1970 was executed at the rate of £25,000 per annum for the first seven years with the next seven years at open market rental.  The parties disagreed on the appropriate rental for the second seven years.  The dispute was referred to arbitration.  On appeal by the tenant, Woolf J. held that the rent was to be fixed on the basis that the tenant had removed all tenant’s fixtures annexed to the premises during the terms of the old or new leases. The Court of Appeal dismissed the appeal by the landlord and held that the tenant had the right to remove the tenant’s fixtures from demised premises so long as he was in possession as a tenant.

49.  The New Zealand Government Property Corporation case was decided based on very different background where the tenant had a long lease and had installed the equipments for a theatre at the leased property.  The case was on assessment of rental. In the present case, under the tenancy agreement, the landlord had stipulated a covenant of repair which the tenant had to comply with.  Clause 13 of the tenancy agreement stipulated that the tenant shall not remove the existing decoration, fixtures and windows when the tenant delivers vacant possession on expiry of the lease.  Under clauses 17 and 18, the tenant was required to maintain the air conditioning units and to reinstate the wall partitions, the glass wall and the electricity switch box. 

50.  In paragraph 235.303 at page 291 of the Halsbury’s Laws of Hong Kong Vol. 17(1) (2007 re-issue), the author stated:

“[235.303] Covenant construed with reference to original condition of premises. Every covenant to repair must be construed primarily according to the words used, but having regard to the age and nature of the premises at the commencement of the lease. In the case, however, of a covenant by the tenant for general repair, such as a covenant to repair the demised premises and to yield them up in good and substantial repair and condition, or to keep and leave them in good and tenantable order and repair, the particular form of words used is immaterial so long as it plainly expresses the intention that the premises are to be repaired, kept in repair and yielded up in repair. In each case the obligation upon the tenant is to keep and deliver up the premises he has taken in a state of repair proper for such premises; and the tenant may, therefore, be liable to put the premises into a better condition than they were in at the time of the letting.”

51.  In other words, the tenant cannot deliver up the premises in a dilapidated state under the common law and under the tenancy agreement’s terms and conditions, he has to return it in the state it was delivered to him at the beginning of the tenancy.  The tenant’s duty to deliver up possession to the landlord in good and tenantable order and repair under the tenant’s covenant to repair means he has to make the premises reasonably fit for occupation by a tenant who would have been likely to occupy it at the time of the demise even though the landlord may be expected to carry out minor redecorations before the start of every new letting.

52.  The standard of repair according to the author of Halsbury’s Laws of Hong Kong Vol. 17(1) at page 298 is:

“[235.309] Standard of repair. If he has expressly covenanted to put a house into tenantable repair and to keep it in such repair, and it is not in tenantable repair at the commencement of the tenancy, the tenant must do the necessary repairs, notwithstanding that the building is thereby put in a better condition than when the landlord let it. The effect is the same if, without expressly covenanting to put it into repair, the tenant covenants only to keep the house in tenantable repair. Such a covenant presupposes putting the house in such repair, and keeping it in repair during the term. The construction of the covenant is the same whether the covenant specifies ‘tenantable’ or ‘habitable’ or ‘good’ repair. A general covenant to repair without any such words is satisfied if the premises are kept in a substantial state of repair …..

Covenants of this nature must be reasonably construed. The landlord may not claim for slight defects, and under a covenant to repair and paint, the tenant is not bound to fill up cracks in plaster and holes made by nails within the period for redecorating. An actual omission to repair is not excused because the tenant has employed persons upon whom in good faith he relied to do the repairs. In general it is for the covenantor to decide how to carry out the repair. Thus, if one party covenants to repair a roof and it can reasonably be done either by patching or replacing it, the other party cannot complain at the method chosen.”

53.  On the subject matter of repair, the author of Halsbury’s Laws of Hong Kong Vol. 17(1) paragraph 235.304, said:

“[235.304] Subject matter of repair. What is to be repaired must be gathered from the terms of the covenant. Generally the obligation expressed will be to repair the premises demised which will include any fixtures present at the time of leasing. A covenant that a tenant shall be ‘solely responsible for the repair of doors, windows, kitchen and bathroom fittings, pipings, drains, etc’* is not a covenant to repair the whole premises, is vague and uncertain and should be construed strictly against the landlord‚*.

* This covenant is commonly found in printed forms of tenancy agreement in Hong Kong.

‚ Tat Ming Trading Co Ltd v Alpino Ltd, (unreported; HCA 1659 of 2004); Lai Kin On Jacky v Sajjad-Haider t/a New Kashmir Restaurant (unreported; DCCJ 5148 of 2004). Accordingly this covenant does not cover structural defects nor repair of a ceiling or a floor as a result of water seepage.”

Removal of water pipes and blockage of drains outlet

54.  I accept the drains outlet connected to the main drains of Wardorf Shopping Arcade from the said premises was first installed by the hairdresser tenant for the tenant’s use at the time.  The Plaintiff admitted the four shops shared one single drainage system at the time when the restaurant occupied shops 6, 15, 16 and 17.  The drainage system was moved to shops 6, 16 and 17 in September 2007 during the renovation, when the Plaintiff blocked the drains outlet with cement at the suit premises.  It was not necessary for the Plaintiff to deliberately block the drains outlet at the suit premises for the restaurant had installed a separate drainage system in 1997 when it operated a bar and karaoke at shops 6, 16 and 17.  The two drainage systems had existed side by side before the restaurant took over the suit premises and made used of the drains outlet.  The act reflected the cavalier attitude of the Plaintiff in respect of the reinstatement work.  As a result, the Defendant had great difficulties in finding the exact location of the drains outlet at the suit premises.  It took a number of attempts by the contractor to locate where the drains outlet was and breaking the floor slab which had been raised by the Plaintiff to cover the drainage system at the said premises when it was used as a kitchen. 

55.  When Madam Tsang and her partner Mr Lee took over the tenancy from the former tenant Mr Hou and operated the restaurant at the same four shops, not only did she take over the fixtures at the suit premises, she also inherited the liability of the former tenant.  Madam Choi’s evidence was she had painstakingly reminded Mr Leung when he and his brother first operated a Japanese restaurant at the suit premises on 1 April 1998 that the tenant should not remove the plumbings, drains and the outlet on delivery of vacant possession at the end of the lease.  In March 1999 when Mr Leung informed Madam Choi that Mr Hou would take over the restaurant and the lease of the suit premises, Mr Hou had agreed to take over the responsibility of all the existing conditions and terms under the tenancy agreement.  When the lease was renewed on 1 April 2001 for a period of three years, Madam Choi again reminded Mr Hou of the terms and conditions to reinstate the electricity supply mains, the partition walls etc, consequently, clauses 17 and 18 were included in the 1 April 2001 tenancy agreement.  I accept Madam Choi did remind Mr Hou of the conditions under the tenancy agreement that he should not remove the drainage system or the drains outlet. Therefore, when Madam Tsang took over the tenancy on 1 April 2004 from Mr Hou, she, as his partner and the witness to the previous 2001 to 2004 lease, must have knowledge of the conditions laid down by the landlord for the new lease from 1 April 2004 to 31 March 2007.  Furthermore, clauses 17 and 18 were again added to the first tenancy agreement between Madam Tsang and Madam Choi.

56.  I refer to the dictum of Sakhrani J. in the case of Timeless Software Limited v Glorious Limited (unreported; HCA 151 of 2007) at paragraph 97 where he held:

“The natural expectation in the absence of an express contrary intention is that the tenant is obliged to reinstate premises to their state as at the beginning of the tenancy.”

57.  Sakhrani J. further referred to paragraph 235.125 of Vol. 17(1) of Halsbury’s Laws of Hong Kong at paragraph 67 of his judgement where he held:

“I accept that fixtures which the tenant may not remove are usually referred to as ‘landlord’s fixture’ and includes fixtures attached to the premises at the date of the tenancy, those fixed by the landlord during the term and also those fixed by the tenant which he is not entitled to remove.”

58.  I find therefore the Defendant is entitled to recover the cost of reinstating the drainage system and the cost of locating the drains outlet.  However, since Madam Choi’s present tenant is using the suit premises as a warehouse, there is no urgent need for the drainage system to be reinstated, but the costs of locating and unblocking the drains outlet had been incurred, such costs should be allowed.

Raised floor

59.  It is Mr Lee’s evidence that he had agreed to Madam Choi’s request for the raised floor to be removed and he had arranged with Leung Kee that the Plaintiff would pay for the removal cost.  Consequently, this item should be allowed.

Wall tiles and damage to the walls

60.  The state of the suit premises at the end of September 2007 was such that only part of the tiles were removed rendering the walls at the suit premises unsightly and uninhabitable.  Mr Lee admitted in his evidence that removal of the remaining tiles was part of the second oral agreement on 6 October 2007.  He produced a quotation from Leung Kee in August 2007 that included the removal of wall tiles.  If that item was included in the quotation in August, why was it not done by 30 September 2007 and why was it repeated in the “second oral agreement”? This clearly showed the Plaintiff accepted the tiles should be removed and the walls at the suit premises should be made good rendering the suit premises to be tenantable as early as August 2007.

Electricity wiring

61.  Madam Choi had specified in each and every one of her written tenancy agreements the reinstatement of the electricity switch box at the suit premises under clause 18 of the agreement.  It is clear that at the time of her visits at the end of September and 6 October 2007, the electricity cabling connection to the mains was not reinstated to the original state.  The Defendant is entitled to have it reinstated.  Correspondences with the Waldorf Garden Management Office showed shop 15’s power supply was increased from 30 Amp to 60 Amp in July 1988 (p. 77, pp. 88-101 of the bundle), not the 100 Amp 3-phase system which was installed by the restaurant in 1997 at shop 6.  The reinstatement at the suit premises therefore should be to a 60 Amp power supply.

The air conditioning units

62.  Under the tenancy agreement, clause 17 stipulated that the tenant was responsible for the maintenance and repair of the units.  I accept Madam Choi’s evidence that one of the two fan coil units at the suit premises had disappeared and the other one was placed on the floor at the time of handing over.  The Plaintiff was clearly in breach of the tenancy agreement.  I allow this item of claim by the Defendant.

Conclusion

63.  I accept that the suit premises on 30 September 2007 was not ready to be handed over to the landlord until 25 October 2007, I therefore allow the following:-

(1)	Rental at $9,800 per month for 25 days	$7,903.23
(2)	Management fee for 1 October to 25 October 2007	$798.06
(3)	Government rent and rates for 1 October to 25 October	$258.06
(4)	Air conditioning fee for 1 October to 25 October 2007	$999.20
(5)	Cost for reinstating/repairing the drainage system on the floor of the suit premises	$2,800.00
(6)	Cost of reinstating/repairing the walls	$8,500.00
(7)	Cost of reconnecting electricity wiring	$4,500.00
(8)	Cost of demolishing the raised floor at the suit premises	$12,500.00
(9)	Cost of reinstating water pipes	$25,000.00
(10)	Cost of replacement of the air conditioning unit	$5,000.00

64.  I adopt the report of the jointly appointed expert John Yip Surveyors Limited for his assessment of costs on reinstatement.  The total reinstatement costs allowed is $68,258.55.

Set off

65.  The Defendant is allowed to set off the rental deposit of $17,600 from the costs of repair.  Consequently, the Plaintiff has to pay to the Defendant under the counterclaim in the sum of $50,658.55.

Interest

66.  Interests is payable from the date of the counterclaim to the date of judgment at half judgment rate and thereafter at full judgment rate until full payment.

Cost

67.  Costs to follow the event.  The Plaintiff shall pay the Defendant costs on the counterclaim, to be taxed if not agreed with certificate for counsel.