XCHRX TALFORD GROUP LTD. v. SINOBEST INTERNATIONAL LTD.

HCA 4253/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4253 OF 1999

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REASONS FOR DECISION

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1. On 24 October 1999 Master Jones granted judgment in favour of the Defendant against the Plaintiff on its counterclaim for possession of the premises known as the 7th Floor, CNAC Group Building, No. 10 Queen's Road Central, Hong Kong and the sum of $792,740.30 being arrears of rent and/or mesne profit, rates, management and air conditioning fees, interest and reinstatement expenses. Master Jones also ordered a stay of execution of part of the judgment sum, namely $300,000.00 pending the trial of the action. The Plaintiff now appeals against the order of Master Jones.

2. The Defendant is the registered owner of the suit premises. By a tenancy agreement dated 14 March 1997, the Defendant let the suit premises to the Plaintiff for a period of 3 years commencing from 15 March 1997.

3. The Plaintiff purported to deliver vacant possession of the suit premises to the Defendant on or about 15 May 1999 without the payment of the rent, management and air conditioning fee since 1 November 1998. The Plaintiff also failed to pay the rates as from 1 January 1999.

4. It is the Plaintiff's case that the suit premises was not fit for occupation or use by reason of the seepage of rainwater from the curtain wall.

5. Apparently, the Plaintiff had made complaint about such defects shortly after taking possession of the premises in June 1997.

6. The Plaintiff seeks to rely on Clause 6 of the Tenancy Agreement which provides:

"Should the property or part thereof be rendered unfit for use and occupation by any cause not attributable to the negligence or default of the tenant, the rent or part thereof proportionate to the damage suffered by the property shall abate and cease to be payable until the property shall have been again rendered fit for occupation and, if already paid, shall be refunded by the landlord to the tenant without interest until the property shall again be rendered fit for habitation and use."

7. The Plaintiff suggests that the water seepage was due to the unauthorised construction of the curtain wall and or extension of the floor area.

8. The Plaintiff thus claims against the Defendant for the repayment of rent, management fee and air conditioning charges, rates set out in the present pleadings from 1 July 1998 as well as renovation cost, damage to furniture, fitting and equipment and loss of profit.

9. At the commencement of today's hearing, Mr So, on behalf of the Plaintiff, seeks to amend the Statement of Claim by a reduction in the amount of the claim. The court refuse to deal with that aspect because it is not relevant to the issues before the court today.

10. The Defendant, on the other hand, relies on Clause 3 of the Tenancy Agreement that the Plaintiff must pay the rent without any set off or deduction whatsoever. The Defendant in its Defence and Counterclaim suggests that the Plaintiff had failed and or refused to allow the Defendant or its agent to enter the suit premises to deal with the complaint raised by the Plaintiff.

11. Despite the wording of Clause 3(1) of the Tenancy Agreement, I am persuaded that if the suit premises or part thereof was indeed unfit for use and occupation, the Defendant would not be liable to pay the rent or at least part of it. That conclusion is inescapable in the light of the clear wordings of Clause 6 of the Tenancy Agreement.

12. But the assertion by the Plaintiff that the premises was unfit for occupation and use was a bare assertion and unsupported by any independent evidence. Indeed, as the court have observed in the course of counsel's submission that the Plaintiff's conduct was quite inconsistent with such an assertion.

13. As Mr Ho on behalf of the Defendant contends, if the premises or part of the premises had been rendered unfit for use or habitation, there are expressed mechanisms under Clause 6 for the Plaintiff to bring an end of the Tenancy Agreement. The Plaintiff, on the evidence, had not taken such a step.

14. The evidence adduced by the Plaintiff suggested that the complaint was confined to water leakage and it could not have affected the entire premises as such. It could presumably only affect the suit premises during a limited period and not the entire period in question.

15. On the evidence before this court, the Plaintiff had not taken any step to put forward any suggestion as to how much of the premises had been rendered unfit for use or occupation and how much of the rent ought to be abated in accordance with Clause 6 of the Tenancy Agreement. Indeed, it appears not in dispute that for commercial reason or otherwise, the Plaintiff continued to occupy the suit premises until May 1999, despite the suggestion that the water seepage problem began as early as June 1997 and that it was getting more serious in or about July 1998.

16. The Plaintiff may well be entitled to damages arising out of the defect of the curtain wall of the suit premises on the allegation that there was a breach of the covenant of repair and this aspect of the case can only be properly sorted out at the trial. In my view, there is no valid basis for the Plaintiff to invoke Clause 6 of the Tenancy Agreement and claims to be entitled not to pay any rent for the affected period.

17. I have considered the entire background of this case, as well as counsel's submission, I am persuaded that the Plaintiff's case on this aspect of this case is incredible and cannot possibly succeed.

18. The outstanding management fee, rates and ancillary expenses were of course paid and/or incurred by the Defendant on behalf of the Plaintiff. The Plaintiff must be liable for such expenses as long as it was in occupation of the suit premises and Mr So, on behalf of the Plaintiff, seems to have conceded on this aspect although he submit that the Plaintiff is entitled to set off the damages against such expenses.

19. As I have said, the Plaintiff may have a valid claim for loss or damages arising out of the alleged breach of covenant to repair and or covenant of quiet enjoyment but Clause 3 expressly prohibits the Plaintiff from setting off such claim against the rent payable under the tenancy agreement. The Plaintiff may have an arguable case on its claim but its liability to pay for the rent and the ancillary expenses, in my view, cannot be doubt and cannot be challenged.

20. I am also not persuaded that there is any valid basis to override the effect of Clause 3 in allowing a setting off of the claimed damages against the rent payable under the Tenancy Agreement in question.

21. In my view, Master Jones was right in ordering summary judgment against the Plaintiff in respect of the counterclaim by the Defendant.

22. There is undisputed evidence that at least at some stage there was in fact water seepage problem affecting the suit premises. There is indication that as a result of such water seepage, the Plaintiff did suffer some inconvenience and/or loss, although the precise nature and extent of the loss and damages in question can only be ascertained at the trial. There is, in my view, valid basis for the learned master to order the stay of execution of part of the judgment sum to the extent of $300,000.

23. In an appeal of this nature, the court should only alter the decision of a master if there is no valid basis upon which the master could have made the order as he did. In my view, there was in fact valid basis for the learned master to come to the conclusion as he did and there is no basis for me to interfere with his decision.

24. In the circumstances, the appeal has to be dismissed and I so order.