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DCCJ 3026/2012
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 3026 OF 2012
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| BETWEEN |
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SUPER HAPPY INVESTMENT LIMITED |
Plaintiff |
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(歡卓投資有限公司) |
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and |
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TU XIU YING |
Defendant |
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(涂秀英) |
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| Before: Deputy District Judge Timon Shum in Court |
| Date of Hearing: 19, 20, 21, 24 February 2014 and 14 March 2014 |
| Date of Judgment: 13 January 2016 |
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JUDGMENT
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Introduction
1. This is a trial of the plaintiff’s claim and the defendant’s counterclaim for breaches of a licence granted by the plaintiff to the defendant pursuant to a letter of confirmation dated 7 September 2011.
Facts not in dispute
2. By a tenancy agreement dated 1 October 2011, the Hong Kong Housing Authority (“HA”) let the premises known as all that market area and Shop 2 on the Ground Floor, Tin Yan Shopping Centre, Tin Shui Wai, with a total internal floor area of 1,458 square metres (“the Premises”), to the plaintiff Super Happy Investment Limited (“SHIL”) for 3 years from 1 October 2011 to 30 September 2014 at the monthly rental of HK$238,000.
3. Pursuant to clause 19(c) in Section IV of the tenancy agreement, SHIL may grant licence to any third party to operate business on the premises.
4. By a letter of confirmation dated 7 September 2011 (“Confirmation Letter 2011”), SHIL granted a licence to the defendant Tu Xiu Ying (“Madam Tu”) for the use of stall no. 42 (“Stall 42”) of the Premises from 12 October 2011 to 30 September 2014. During the licensed period, Madam Tu shall pay SHIL licence fees HK$21,948.81, air-conditioning charges HK$4,233.15 and management charges HK$7,706.04, totalling HK$33,888, on a monthly basis.
5. Stall 42 consists of 3 levels, namely, the ground level, the 1st level and the 2nd level. It is expressly stated in the Confirmation Letter that the trade permitted to be carried on is a barber shop (剪髮店).
The plaintiff’s claim
6. SHIL’s claim is based on 2 grounds:
a. Madam Tu was only licensed to use the ground level of Stall 42. In breach of the licence, she is using the 1st and 2nd levels as well.
b. Madam Tu has breached the licence by carrying on a business of professional beauty services (閣樓專業美容) at Stall 42 which include the provision of massage and facial services
7. SHIL is seeking declaratory and injunctive reliefs against Madam Tu.
The defendant’s defence and counterclaim
8. Madam Tu’s grounds of defence to SHIL’s claim are:
a. She was licensed to use the ground level, the 1st level and the 2nd level of Stall 42.
b. The permitted trade of barber shop under Confirmation Letter 2011 should include the provision of beauty services.
9. Madam Tu says SHIL has breached the licence by unlawfully interfering with her right to use the 1st and 2nd levels of Stall 42 and counterclaims damages in the sum of HK$125,000.
Core issues
10. The core issues of this case, as I see it, are as follows:
a. Whether the licence granted under Confirmation Letter 2011 permits Madam Tu to use the 1st and 2nd levels of Stall 42?
b. Whether the permitted trade of a barber shop under Confirmation Letter 2011 includes the provision of beauty services?
c. Whether SHIL is deprived of its right to enforce Confirmation Letter 2011 by reason of estoppel, waiver or acquiescence?
d. Whether SHIL has unlawfully interfered with Madam Tu’s use of the 1st and 2nd levels of Stall 42?
The witnesses
11. At trial, SHIL called 2 witnesses, namely, Yeung Yuk Yiu and Chan Wing Chi. Madam Tu testified and called Choy Ngok Wan as witness.
Evidence of Yeung Yuk Yiu
12. Mr Yeung Yuk Yiu (“Yeung”) testified in court. He confirmed and adopted his witness statement dated 8 July 2013 and supplemental witness statement dated 21 November 2013.
The 1st Tenancy Agreement 2005
13. Yeung had been the director and general manager of SHIL since 1991. He deposed that by a tenancy agreement dated 30 September 2005 (“the 1st TA”), HA let the Premises to SHIL for 6 years from 1 October 2005 to 30 September 2011. Under the 1st TA, SHIL may grant licence to any third party to operate business on the Premises.
Licence Agreement 2008
14. By a licence agreement dated 13 August 2008 (“Licence Agreement 2008), SHIL granted a licence to Madam Tu for the use of stall no. 40 (“Stall 40”) of the Premises from 17 July 2008 to 30 September 2011. During the licensed period, Madam Tu shall pay SHIL monthly licence fees of HK$6,000 exclusive of rates, air-conditioning charges and management charges.
15. The permitted trade/business in Licence Agreement 2008 was barber shop (理髮店). The special conditions in the agreement further stated that the Madam Tu shall only carry on the trade/business of a barber shop at Stall 40 and except this, she shall not provide any hair washing, hair perming, hair styling, hair dyeing or hair treatment or any other services. In the original Chinese version, it was stated as follows:
“准用人(the Licensee)在該檔位經營的理髮店只可以提供剪髮服務。除此之外不得提供任何洗頭、電髮、染髮、恤髮，頭髮護理或其他服務；”
2nd Tenancy Agreement 2011
16. By another tenancy agreement dated 1 October 2011 (“the 2nd TA”), HA let the Premises to SHIL for 3 years from 1 October 2011 to 30 September 2014. Under the 2nd TA, SHIL may grant licence to any third party to operate business on the Premises.
Confirmation Letter 2011
17. Before the expiry of the 1st TA and Licence Agreement 2008 on 30 September 2011, SHIL had already agreed to grant a licence to use Stall 40 to a third party after the renewal of the tenancy agreement with HA. Madam Tu also knew that her licence for Stall 40 would not be renewed upon its expiry on 30 September 2011.
18. Around late August or early September 2011, Madam Tu went to the office of SHIL situated at 1/F of Tin Yan Shopping Centre and asked its Management Executive Chan Wing Chi (“Chan”) whether another stall could be licensed to her so that she could continue running her barber shop. Yeung was in the office at that time and overheard the conversation between Madam Tu and Chan. Yeung told Madam Tu that Stall 42 was a possibility but it was larger than Stall 40 and would be more expensive. He also told Chan to show a floor plan to Madam Tu so as to let her know the position of Stall 42. Apart from this occasion, Yeung did not have any other discussion regarding the grant of licence in respect of Stall 42 or any other stall.
19. After a few days’ negotiation, SHIL and Madam Tu agreed the monthly licence fees and miscellaneous charges would be HK$33,888 for Stall 42. Yeung told Chan to arrange Madam Tu to go to SHIL’s office for signing a new agreement.
20. By Confirmation Letter 2011, SHIL granted a licence to Madam Tu for the use of Stall 42 from 12 October 2011 to 30 September 2014. During the licensed period, Madam Tu shall pay SHIL licence fees HK$21,948.81, air-conditioning charges HK$4,233.15 and management charges HK$7,706.04, totalling HK$33,888, on a monthly basis.
21. Confirmation Letter 2011 stated that the trade permitted to be carried on is a barber shop (剪髮店) and the remarks thereof further stated under paragraph 6:
“if any goods or merchandise sold or services provided by the licensee at the stall is/are notthe goods, merchandise or services of the trade permitted to be carried on at the stall under the confirmation letter, SHIL’s staff or the management staff on site shall have the power to remove those goods, merchandise, things and objects relating to the trade not permitted to be carried out at the stall under the confirmation letter …”
Original Chinese version:
“…准用人於該檔位所出售之貨品或所提供的服務如非本合約內所准許經營行業貨品或服務，歡卓投資有限公司的職員或駐天恩冷氣街市的管理或執勤人員有權搬走在該檔位所有非本合約所准許經營行業貨品或物品…”
22. Apart from the business of a barber shop, SHIL had never permitted any other trade to be carried out at Stall 42.
23. Stall 42 consists of the ground level, the 1st level and the 2nd level. The 1st level is for housing the units of the air-conditioning system which supplies air-conditioning to Stall 42. The 2nd level is for housing the air-conditioning system and water pipes which serve the market area of Tin Yan Shopping Centre and provides a platform for repair and maintenance.
24. SHIL had never authorised Madam Tu to carry on any business on the 1st and 2nd levels or erect any structure there.
The defendant’s breaches
25. Around April 2012, HA informed SHIL that a complaint had been received that beauty services were provided at Stall 42. SHIL contacted Madam Tu asking for an inspection of Stall 42 by the staff of HA and SHIL. This took place on 18 April 2012.
26. During the inspection, Yeung discovered that Madam Tu had installed some partitions, a bed and some equipment for providing beauty services on the 1st level. There were some promotional materials which said that Madam Tu would provide “閣樓專業美容” including massage and facial treatment.
27. Therefore, Yeung said that Madam Tu had breached Confirmation Letter 2011 by:
a. using the 1st level of Stall 42; and
b. providing professional beauty services on the 1st level of Stall 42.
28. He pointed out that the conduct of Madam Tu would cause SHIL to breach the 2nd TA with HA.
29. Yeung added that he only became aware of the existence of the 1st and 2nd levels in April 2012. Enquiries were raised with Stall 42’s former licensee榮華中西藥房in April or May 2012. The person in-charge admitted that the 1st and 2nd levels were built by them in October 2005.
30. On 20 April 2012 and 2May 2012 respectively, SHIL wrote to Madam Tu asking her to remove all the illegal structures at Stall 42. On 11 July 2012, SHIL’s solicitors Messrs W K To & Co sent a demand letter to Madam Tu’s solicitors Messrs Cham & Co requesting Madam Tu to stop using the 1st and 2nd levels and to remove all promotional materials of “cockloft professional beauty services (閣樓專業美容)” and all other promotional materials about beauty services (美容).
31. There was not any positive response from Madam Tu and SHIL started these proceedings on 29 August 2012 by issuing the writ of summons.
Evidence of Chan Wing Chi
32. Ms Chan Wing Chi (“Chan”) testified in court. She confirmed and adopted her witness statement dated 10 July 2013.
33. Chan joined SHIL as an accounts clerk in May 2011. She had become the Management Executive of SHIL since September 2011 and had been responsible for the daily business affairs.
34. Around August or September 2011, SHIL had already agreed that the licence for use of Stall 40 would be granted to a third party upon the renewal of the tenancy agreement with HA. As such, Madam Tu knew that she could not continue to use Stall 40 as a barber shop upon the expiry of Licence Agreement 2008 on 30 September 2011.
35. In late August or early September 2011, Madam Tu went to the office of SHIL situated at 1/F of Tin Yan Shopping Centre and asked Chan whether another stall could be licensed to her so that she could continue running her barber shop. Yeung was in the office at that time and he told Madam Tu that Stall 42 was available but the licence fees would be higher. Following Yeung’s instructions, Chan gave a floor plan to Madam Tu so as to let her know the location of Stall 42. Madam Tu left SHIL’s office after obtaining the floor plan.
36. After a few days’ negotiation, SHIL and Madam Tu agreed the monthly licence fees and miscellaneous charges would be HK$33,888 for Stall 42. Chan then arranged Madam Tu to sign Confirmation Letter 2011 at the office of SHIL.
37. On 7 September 2011, Madam Tu went to SHIL’s office for signing Confirmation Letter 2011. Chan did not discuss with Madam Tu whether any other services could be provided at Stall 42 apart from barber service or whether the space above the ground level could be used. Chan said she had no authority or instructions to discuss these topics.
38. Stall 42 was handed over to Madam Tu on 12 October 2011. Chan said that Madam Tu arranged some renovation works to be carried out which were completed in mid November 2011. Then she started running her business there.
39. Chan said she did not know when Madam Tu started to provide beauty services at Stall 42 or when Madam Tu started using the space above the ground level and erected additional structures. It was in early April 2012 when HA informed SHIL a complaint had been received that she became aware of Madam Tu’s provision of beauty services.
Evidence of Tu Xiu Ying
40. Madam Tu confirmed and adopted her witness statement dated 29 July 2013.
41. Pursuant to Confirmation Letter 2011, Madam Tu took possession of Stall 42 in October 2011. She agreed that the ground level was used for provision of hairdressing services, the 1st level was for provision of beauty services and the 2nd level was used for storage. Regarding the beauty services, these would include facial and cosmetic beauty treatment. She said all these were authorised by SHIL.
Yeung’s representations
42. A few days before the signing of Confirmation Letter 2011, Yeung accompanied Madam Tu to visit Stall 42. During the inspection, it was found that Stall 42 consisted of 3 levels connected by a staircase at the back of the stall. Yeung told Madam Tu that she would be able to generate higher income by using the ground level for provision of hairdressing services and the 1st and 2nd levels for provision of beauty services.
43. On the day of signing Confirmation Letter 2011, Madam Tu confirmed with Yeung as to whether she could use the 1st and 2nd levels for provision of beauty services. Yeung replied in the affirmative. He further told her that fire safety devices had been installed and it would be safe for use.
44. Madam Tu said that she signed Confirmation Letter 2011 due to Yeung’s representations. It was all along a common understanding that she could use not just the ground level but also the 1st and 2nd levels and that she could provide hairdressing services and beauty services. On the 1st level, she had put some rattan partitions, beds, beauty equipment and objects for provision of beauty services. She did not erect any other structures on the 1st level.
Services provided at Stall 40
45. While running her barber shop at Stall 40 previously from 17 July 2008 to 30 September 2011, Madam Tu had already provided beauty services, such as facial hair treatment and facial skin treatment to customers. As the barber shop was run as a community business and the customers were mainly returning customers, it was customary practice to provide such services upon customers’ request.
46. Madam Tu said that the caretakers and staff of SHIL would inspect the market area of Tin Yan Shopping Centre from time to time. They should know about the provision of these services at Stall 40. But during the licensed period, SHIL had never requested her to stop such services.
47. For the same reason, the caretakers and staff of SHIL should have known about the provision of beauty services at Stall 42 since October 2011 but SHIL did not raise any objection until April 2012.
The plaintiff’s harassment
48. Madam Tu complained of 2 incidents of harassment by SHIL’s staff which resulted in a drop for her business.
49. On 3 April 2012, Chan, together with several persons including security guards, went to Stall 42 without any prior notification. They showed a letter dated 3 April 2012 to Madam Tu’s staff and requested for taking pictures of the 1st and 2nd levels. In the absence of Madam Tu, her staff allowed them to go to the upper levels. But upon Madam Tu’s return, she told the visitors that they were not supposed to take any pictures without her prior approval. Chan’s group then spoke loudly and said that the upper levels were dangerous and illegal structures. They also told Madam Tu to stop using the same for provision of beauty services which was not allowed in the first place.
50. On 18 April 2012, Chan, together with other persons from SHIL, went to Stall 42 again. SHIL only gave notification of this visit the day before. Upon arrival, Chan’s group barged to the 1st level and took pictures without Madam Tu’s approval. Madam Tu tried to stop them and this developed into an argument. SHIL’s group loudly said that the 1st level was a dangerous and illegal structure. They also said that HA would not allow the provision of beauty services there.
51. Madam Tu said her staff and customers could hear the allegations by SHIL’s staff on both occasions. As a result, Madam Tu’s business was adversely affected. There were rumours in the community that Madam Tu’s stall was being targeted by SHIL and HA and the provision of beauty services on the 1st level was dangerous and illegal. The monthly profit dropped by HK$25,000 on average. Madam Tu is counterclaiming this loss of profits from May to September 2012, totalling HK$125,000 (i.e. HK$25,000 x 5 months).
Evidence of Choy Ngok Wan
52. Madam Tu called Choy Ngok Wan (“Choy”) to be her witness. He confirmed and adopted his witness statement dated 29 July 2013.
Stall 40
53. Choy was a former employee of Madam Tu. Around 2010, he started working at Stall 40 as an assistant manager of the barber shop. He was responsible for the management of the barber shop. From time to time, he would assist with the provision of hairdressing services. There was provision of beauty services at Stall 40 such as facial hair treatment and facial skin treatment. But he had never heard of SHIL asking Madam Tu to stop such services.
Stall 42
54. Around October 2011, when Stall 42 was being renovated, Yeung came to the Stall on one occasion and made recommendations about the decorations and fittings. Yeung said that sufficient space should be reserved for the provision of beauty services on the 1st level. As such, Choy said that Yeung actually knew and approved the provision of beauty services on the 1st level.
55. After Madam Tu moved into Stall 42 and started running her barber shop in October 2011, Choy had never heard of SHIL asking Madam Tu to stop the provision of beauty services until April 2012.
The plaintiff’s harassment
56. Choy learned that there was a dispute between SHIL and Madam Tu regarding the use of the 1st and 2nd levels and the provision of beauty services at Stall 42 around April 2012.
57. On at least 3 occasions, around early to mid April 2012, Chan with some people went to Stall 42 and took pictures of the 1st and 2nd levels.
58. On 18 April 2012. Chan went to Stall 42 with 4 to 5 people. They barged to the 1st level for taking photographs. Choy was then providing hairdressing service to a customer on the ground level. He heard that Madam Tu was trying to stop the taking of pictures. There was an argument between the 2 sides which was loud enough to be heard. At that time, there were other staff members and customers on the ground level and the 1st level.
59. Chan’s group did not stay long. After they left, Choy saw Madam Tu crying. She said Chan’s group alleged that the upper levels of Stall 42 were dangerous and illegal structures and that HA would not allow the provision of beauty services there.
60. After the aforesaid incident, Madam Tu’s business suffered an obvious decline. There were rumours in the community that Madam Tu’s barber shop was being targeted by HA and the provision of beauty services was dangerous and illegal.
61. Choy left the employment with Madam Tu in August 2012.
Discussions
Confirmation Letter 2011 permits use of 1st & 2nd levels?
62. Madam Tu admitted that she was using the 1st level for provision of beauty services and the 2nd level for storage. I will address the first issue as to whether the licence granted under Confirmation Letter 2011 permits her to use the 1st and 2nd levels of Stall 42. I have come to the view that it does not.
63. Firstly, Confirmation Letter 2011 stated that the licensed area is Stall 42. If the parties had intended that the 1st and 2nd levels were to be included as part of the licensed area, there is no reason why this was not spelt out explicitly and clearly.
64. Secondly, Yeung said a floor plan was shown to Madam Tu when Stall 42 was first introduced her in late August or early September 2011. The floor plan indicated the location of Stall 42 and its size of 44 square metres. But there was nothing to show that it consisted of the 1st and 2nd levels. I accept that when parties signed Confirmation Letter 2011, they did not have the 1st and 2nd levels in mind.
65. Thirdly, SHIL’s authority to grant licences originated from the 2nd TA signed with HA. There was nothing in the 2nd TA showing that Stall 42 consisted of the 1st and 2nd levels. In its letter from HA to SHIL dated 19 April 2012, HA complained that the upper levels of Stall 42 consisted of illegal structures alleging that this was in violation with the 2nd TA and requested SHIL to rectify. In its further letter to SHIL dated 10 July 2012, HA reiterated its position. From this, it can be inferred that HA did not allow SHIL to use the upper levels. In such case, it would not be reasonable for SHIL to have agreed the granting of a licence to Madam Tu which covered the use of the upper levels.
66. Fourthly, under Licence Agreement 2008, the average monthly licence fees for Stall 40 were HK$623.38 per square metre (i.e. HK$6,000 x 1/9.625 square metres). For Stall 42, the average monthly licence fees were HK$498.84 per square metre if the area of 1st and 2nd levels is excluded (i.e. HK$21,948.81 x 1/44 square metres). But if the 1st and 2nd levels are included, the average monthly licence fees for Stall 42 would only be HK$166.28 per square metre (i.e. HK$21,948.81 x 1/132 square metres). There is no logical reason to explain why SHIL would be willing to grant the use of Stall 42 at average monthly licence fees which did not even reach 1/3 of those of Stall 40. This sounds even more unreasonable when Stall 42 is closer to the entrance to the market area and should be a better location than Stall 40.
Yeung’s representations
67. Madam Tu alleged that Yeung had visited Stall 42 with her a few days before the signing of Confirmation Letter 2011 and made representations about the permitted use of the 1st and 2nd levels for providing beauty services. Similar representations were also made by Yeung on 7 September 2011 when Madam Tu signed Confirmation Letter 2011.
68. Yeung denied that there was any such visit to Stall 42 as it was occupied by the previous licensee 榮華中西藥房 before 30 September 2011 which was not on good terms with SHIL. This visit would not have been allowed by them. Yeung also denied the representations alleged by Madam Tu. He said he was unaware of the existence of the 1st and 2nd levels until April 2012.
69. This conflict of versions needs to be resolved by a finding of facts. In this connection, I find what was stated by Deputy High Court Judge Eugene Fung SC in Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, as applied by His Honour Judge Andrew Li in Ricoh Hong Kong Limited v Wallbanck Brothers Securities (Hong Kong) Limited, DCCJ 2454/2013, instructive:
“76. In making my findings of fact in this case, I am guided by a number of general principles which judges apply as to fact finding and the assessment of credibility.
77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onasis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce). It is right to point out, however, that some of the documents in this case are alleged by the Son to be sham and those documents obviously cannot be used to assess the credibility of the parties.
78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) paragraph 39 (Chu J).
79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.
80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at paragraphs 36-37 (Bokhary PJ)) or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at paragraph 135 (Stock JA)).
81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyds’ Rep 1 at 57:
“Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.”
82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’ credibility features prominently in the court’s determination. They are particularly apposite in a case like the present where very serious allegations (akin to allegations of fraud) have been made by the Son against the defendants.”
70. I accept Yeung’s version that he did not visit Stall 42 with Madam Tu before the signing of Confirmation Letter 2011 by Madam Tu on 7 September 2011. I also accept that he did not make any representations about the use of the 1st and 2nd levels and the provision of beauty services before or at the time of the signing of Confirmation Letter 2011 by Madam Tu. My reasons are as follows:
a. According to Yeung, Stall 42 was still occupied by the previous licensee 榮華中西藥房 before 30 September 2011. There was no evidence contradicting this.
b. Madam Tu alleged that Yeung represented to her that the upper levels could be used for provision of beauty services. There was no reason for Yeung to express his views on a matter which simply did not concern him.
c. Madam Tu said that these representations were made to her not only during the visit to Stall 42 but also on 7 September 2011 when she sought confirmation from Yeung. If she was so concerned about the use of the upper levels for provision of beauty services, there was no reason why she did not insist this to be stated clearly in Confirmation Letter 2011.
d. There should be no reason for Yeung to make representations to Madam Tu about the use of the upper levels when there was no prior approval by HA. This might result in a breach of the 2nd TA by SHIL.
e. There should be no reason for Yeung to make representations to Madam Tu about the provision of beauty services at Stall 42. Under clauses 22 and 23 of the 2nd TA, SHIL’s uses of different stalls and any changes thereof needed to be approved by HA. In the absence of HA’s approval, I see no logic why Yeung would make such representations, thereby putting SHIL at the risk of breaching the 2nd TA.
f. Yeung said that he was not present when Madam Tu signed Confirmation Letter 2011 on 7 September 2011. He only signed it subsequently. Such a version is credible. According to the document, Madam Tu’s cheque for the upfront payment in the sum of HK$111,552 was dated 12 September 2011 and the day for payment was stated to be 12 September 2011. It made no commercial sense for Yeung to sign on 7 September 2011, thereby putting SHIL at risk of not being paid.
71. Choy said Yeung visited Stall 42 around October 2011 when it was being renovated. According to him, Yeung made recommendations about the decorations and fittings and said that sufficient space should be reserved for provision of beauty services on the 1st level. I do not accept Choy’s version which does not make sense. I see no reason why Yeung would give comments on a subject matter that did not concern him. Besides, such a visit in October 2011 was not mentioned in Madam Tu’s witness statement or Amended Defence & Counterclaim.
Estoppel
72. Counsel for Madam Tu raised the point that SHIL is estopped from enforcing the strict terms of Confirmation Letter 2011by reason of Yeung’s representations about the use of the 1st and 2nd levels prior to signing.
73. This argument does not stand in view of my finding that no such representations were made by Yeung. Furthermore, such representations were allegedly made before the signing of Confirmation Letter 2011. I do not see how such prior representations could result in estoppel of contractual rights which did not then exist. Chitty on Contracts (31st Edition), Volume 1, paragraph 3-088 is instructive on this aspect:
“Requirement of pre-existing legal relationship. It has, indeed, been suggested that the doctrine can apply where, before the making of the promise or representation, there is no legal relationship giving rise to rights and duties between the parties, or where there is only a putative contract between them: e.g. where the promisee is induced to believe that a contract into which he had undoubtedly entered was between him and the promisor, when in fact it was between the promisee and another person. But it is submitted that these suggestions mistake the nature of the doctrine, which is to restrict the enforcement by the promisor of previously existing rights against the promisee. Such rights can arise only out of a legal relationship existing between these parties before the making of the promise or representation. To apply the doctrine where there was no such relationship would contravene the rule (to be discussed in para. 3-098 below) that the doctrine creates no new rights.”
Waiver/Acquiescence
74. The issue of waiver or acquiescence was also raised on behalf of Madam Tu. The argument was that SHIL knew or ought to have known that Madam Tu had been using the 1st level of Stall 42 as early as 12 October but it only demanded her to cease this practice on 20 April 2012. SHIL’s inaction of over 7 months would mean that SHIL had waived its right under Confirmation Letter 2011 or had acquiesced Madam Tu’s use.
75. To succeed on the argument of waiver or acquiescence, it must be proved that SHIL’s staff were aware of Madam Tu’s use of the 1st level as early as 12 October 2011. Apart from Madam Tu’s bare allegation in her witness statement that SHIL knew or ought to have known, there was simply no objective evidence to prove knowledge. In her oral evidence, Madam Tu mentioned for the first time that SHIL’s staff had visited the 1st level of Stall 42 for repairs and maintenance of the air-conditioning system for 3 times in October, November and December 2011. If Madam Tu was relying on these 3 visits to establish knowledge on the part of SHIL, I see no reason why she would fail to mention such visits in her witness statement or Amended Defence & Counterclaim. I find Madam Tu’s version incredible.
76. Yeung’s version is that when榮華中西藥房’s person in-charge returned the keys of Stall 42 to SHIL’s staff on 12 October 2011, these were passed to Madam Tu on the same day. SHIL’s staff did not enter Stall 42 during the handover. SHIL purchased the cabinets from 榮華中西藥房as SHIL was opening another pharmacy on the Premises and these would be useful. But the cabinets were placed on the ground floor of Stall 42 and the collection and moving were done by an outside contractor. SHIL’s staff would not be aware of the existence of the 1st and 2nd levels. I accept Yeung’s explanation and believe Yeung and Chan became aware of the existence of the 1st and 2nd levels in April 2012.
77. There were 2 photos of the entrance of Stall 42 which displayed a written sign in Chinese “閣樓專業美容”. Such a sign might imply that Madam Tu was providing beauty service at the cockloft of Stall 42. But Madam Tu agreed that such a sign was only put up in May 2012 or thereafter. This was after SHIL’s letter dated 3 April 2012 demanding Madam Tu to stop the provision of beauty services on the upper levels. The sign could not impute any knowledge on the part of SHIL’s staff as early as 12 October 2011.
78. In view of Madam Tu’s failure to prove knowledge on the part of SHIL, I find that her argument based on waiver or acquiescence must fail. This approach is neatly stated in Chitty on Contracts (31st Edition), Volume 1, paragraph 28-140:
“Awareness of facts. The claimant must be aware of relevant facts (though he need not know of the exact nature of his rights) and therefore there is no question of laches while the claimant is under disability or undue influence. The principle that ignorance negatives laches may account for the fact that delay will not count against the claimant where the existence of the material cause of action has been concealed from him by fraud or unconscionable behaviour on the part of the defendant or where he is under a mistake. Alternatively, it could be said that in such circumstances, it would not be just or reasonable to deprive the claimant of the relief to which he would otherwise be entitled.”
Confirmation Letter 2011 permits the provision of beauty services?
79. I proceed to deal with another issue as to whether the provision of beauty services is permitted under Confirmation Letter 2011. The starting point must be the contents of the document itself.
80. Confirmation Letter 2011 expressly stated that the trade permitted to be carried on is a barber shop (剪髮店). There is nothing to indicate that provision of beauty services is allowed.
81. The remarks under paragraph 6 allow SHIL’s staff to remove items that are related to a trade not permitted under Confirmation Letter 2011. This clearly indicates that the parties intended that no other trade could be carried out at Stall 42 other than a barber shop. Otherwise, such remarks would not have been necessary.
82. One can also go back to Licence Agreement 2008 which is about Stall 40 for the purpose of ascertaining the parties’ intention under Confirmation Letter 2011. Such an approach had been adopted by Rix LJ in H.I.H. Casualty and General Insurance Ltd v New Hampshire Insurance Co [2001] 1 Lloyd’s Rep 190 where His Lordship said:
“In principle it would seem to me that it is always admissible to look at prior contracts as part of the matrix or surrounding circumstances of a later contract. I do not see how the parol evidence rule can exclude prior contracts, as distinct from mere negotiations. The difficulty of course is that, where the later contract is intended to supersede the prior contract, it may in the generality of cases simply be useless to construe the later contract by reference to the earlier one …”
83. Licence Agreement 2008 stated the permitted trade of Stall 40 as barber shop (理髮店). The special conditions under the agreement further provided that only haircutting service was allowed and hair washing, hair perming, hair styling, hair dyeing, hair treatment or any other services were not allowed.
84. If one compares the original Chinese words describing permitted trade under Licence Agreement 2008 “理髮店” and those under Confirmation Letter 2011 “剪髮店”, it can be seen that the former are wider in meaning. The latter should literally mean “haircutting” only, giving no room for provision of other hair services. But even under Licence Agreement 2008, the parties made it clear that the provision of other hair services would not be allowed. When the parties deliberately chose a more restrictive wording “剪髮店” in Confirmation Letter 2011, they must have contemplated that only haircutting service should be provided at Stall 42. If other kinds of hair services were to be excluded, the parties could not have intended that the provision of beauty services would be allowed at Stall 42.
85. Based on the above, it is sufficient for me conclude that the provision of beauty services is not permitted under Confirmation Letter 2011.
Ordinary trade and custom
86. It was argued on behalf of Madam Tu that it was ordinary trade and custom for a barber shop to provide beauty services to its customers. As such, the provision of beauty services should fall within the permitted trade under Confirmation Letter 2011.
87. Madam Tu did not call any evidence to establish such an ordinary trade and custom. I find that it was no more than a bare allegation on her part which is without any substance.
Estoppel
88. Similar arguments based on estoppel were raised on behalf of Madam Tu to justify the provision of beauty services at Stall 42 as a result of representations made by Yeung.
89. I have already pointed out that I do not accept such representations were made and that prior representations could result in estoppel of contractual rights which did not then exist.
Waiver/Acquiescence
90. Similar arguments based on waiver and acquiescence were raised on behalf of Madam Tu to justify the provision of beauty services at Stall 42. It was argued that SHIL knew or ought to have known that Madam Tu had been providing beauty services at Stall 42 as early as 12 October 2011 but it only demanded her to cease this practice when its solicitors Messrs W K To & Co sent a letter dated 11 July 2012. SHIL’s inaction for 9 months would mean that SHIL had waived its right under Confirmation Letter 2011 or had acquiesced Madam Tu’s conduct.
91. To succeed on the argument of waiver or acquiescence, it must be proved that SHIL’s staff were aware of Madam Tu’s provision of beauty services at Stall 42 as early as 12 October 2011. Both Yeung and Chan stated that they had knowledge only in April 2012. Apart from Madam Tu’s bare allegation in her witness statement that SHIL knew or ought to have known, there was simply no objective evidence to prove knowledge.
92. Madam Tu said that routine inspection and patrol of the Premises by the caretakers and staff of SHIL would reveal to them the provision of beauty services at Stall 42. Madam Tu said price lists were posted up at the entrance of Stall 42 listing out the services provided such as hair washing (洗頭), haircutting (剪髮), hair washing/cutting/drying (洗剪吹), hair perming (電髮), hair dyeing (染髮), negative ion straightening (負離子), hair treatment (焗油), face washing (洗面), eyebrow trimming (修眉), nutritional face masks (精華面膜), collagen face masks (骨膠原面膜), hydration face masks (水份面膜) and manicure (修甲). But such a material allegation could not be found in her witness statement or Amended Defence & Counterclaim. I see no reason why such an important aspect of her evidence would be left out. I do not find her evidence reliable especially when she was not specific about the time when such price lists were posted up.
93. Furthermore, I do not believe SHIL’s caretakers and staff would know about the actual services provided at Stall 42 unless they actually went into the stall and made enquiries. Routine inspection and patrol might not necessarily make them alert of what was going on inside.
94. Besides, Madam Tu’s own version is contradicted by her income and expenditure records for the beauty services. These records only cover the period from December 2011 to April 2012. If beauty services had been provided as early as 12 October 2011, there should be records for October and November 2011 as well. It is also incorrect for Madam Tu to say that SHIL raised complaint about the provision of beauty services only on 11 July 2012. As early as 3 April 2012, SHIL already issued a letter reminding her that provision of beauty services was not allowed.
95. Madam Tu’s version is full of inaccuracies and her allegations against SHIL are superficial. I do not accept her evidence on this aspect. I find that she had failed to prove knowledge on the part of SHIL. I accept the version of Yeung and Chan that they only came to know about the provision of beauty services at Stall 42 in April 2012.
Waiver/Acquiescence under Licence Agreement 2008
96. In the Amended Defence & Counterclaim, it was pleaded on behalf of Madam Tu that she had been providing hair washing, hair perming, hair styling, hair dyeing, hair treatment and other services at Stall 40 throughout the period of Licence Agreement 2008. Madam Tu also mentioned in the witness statement that she had been providing facial hair treatment and facial skin treatment to customers at Stall 40. SHIL knew about this but did not take any action. As such, SHIL had waived it right to enforce the special conditions under the Licence Agreement 2008 or had acquiesced the provision of such services.
97. Yeung denied that he or any staff of SHIL had knowledge of the provision of any other services apart from haircutting at Stall 40.
98. I do not accept Madam Tu’s argument that SHIL had waived its right or acquiesced the provision of such services. She said in evidence that there was a price list giving SHIL’s staff notice. But such a price list was not mentioned in her witness statement or Amended Defence & Counterclaim. I see no reason why such an important aspect of her evidence would be left out. I do not find her version reliable.
99. Furthermore, I do not believe SHIL’s caretakers and staff would know about the actual services provided at Stall 40 unless they actually went into the stall and made enquiries. Routine inspection and patrol might not necessarily make them alert of what was going on inside.
100. Even assuming SHIL had waived its rights and acquiesced the provision of such services at Stall 40 during the period from 17 July 2008 to 30 September 2011 under Licence Agreement 2008, such waiver or acquiescence does not extend to the licence granted under Confirmation Letter 2011 which is a separate agreement. Madam Tu’s argument does not assist her case at all.
Defendant’s counterclaim
101. Madam Tu’s counterclaim is based on 3 to 4 incidents of harassment but she could recall 2 of these which allegedly took place at Stall 42 on 3 April 2012 and 18 April 2012.
102. On 3 April 2012, SHIL’s representatives loudly said that the 1st and 2nd levels of Stall 42 were dangerous and illegal structures. They also said that Madam Tu was not allowed to provide beauty services on the 1st level and she should stop.
103. On 18 April 2012, SHIL’s representatives loudly said that the 1st and 2nd levels were dangerous and illegal structures and that HA would not allow Madam Tu to provide beauty services on the 1st level.
104. Madam Tu said the allegations by SHIL’s representatives amounted to wrongful representations to the customers at scene and breaches of Confirmation Letter 2011. As a result, Madam Tu said her business suffered a blow. This led to a decrease of monthly profit of HK$25,000 on average. She is counterclaiming the sum of HK$125,000 which represents her loss and damage from May to September 2012 i.e. HK$25,000 x 5 months.
Madam Tu’s inconsistencies
105. My first observation is that Madam Tu’s description of the 2 incidents in her witness statement is not specific. She did not identify the people who uttered the words which constituted the alleged harassment. She could only describe them as SHIL’s representatives.
106. But in her evidence in court, she said SHIL’s representatives on 3 April 2012 included Chan, Ms Choi, Ms Choi’s husband Ah Wah and other people, the number of which she could not recall. She said it was Chan who uttered the words that Madam Tu was operating illegally and that Stall 42 was in a structural danger. This part is not covered in her witness statement.
107. As to the incident on 18 April 2012, she described in the witness box that there were 6 people attending namely, HA’s manager with surname Chan, a lady who might be his secretary, Chan, Ms Choi, Ms Choi’s husband Ah Wah and a caretaker. It was Chan who said at scene that Madam Tu was operating illegally and told the customers not to use her services. Likewise, this part is missing in her witness statement.
108. Madam Tu said Chan was present on both occasions but Yeung was not.
Chan’s and Yeung’s versions
109. Chan said in evidence that she did not visit Stall 42 on 3 April 2012 or 18 April 2012. She only went there on 5 April 2012 for taking photos of the upper levels on the instruction of Yeung.
110. Regarding the incident on 18 April 2012, Yeung agreed that he went to Stall 42 with the staff of HA for inspection and taking photos. But he did not comment on the conditions of the 1st and 2nd levels. He said his colleague Chan was not present on that occasion.
Ruling on incidents of harassment
111. In view of the inconsistencies between Madam Tu’s witness statement and her evidence in court, I do not accept her evidence in relation to the alleged incidents of harassment. I find that she has not proved her allegations.
112. I accept the versions of Chan and Yeung.
Causation
113. In light of my finding that the allegations of harassment are not proved, that should be the end of Madam Tu’s counterclaim.
114. But I would add that even if the allegations of harassment are proved, there is insufficient evidence to establish that the drop in Madam Tu’s business was caused by the wrongful representations to the customers. The opening of another barber shop EC House around February or March 2012 on 2/F of the Premises which charged HK$50 for a haircut might also be the cause of the drop in business.
115. Furthermore, the income and expenditure records for the hairdressing business from the second half of October 2011 to December 2012 and for the beauty services from December 2011 to April 2012 produced by Madam Tu are only rough records without being supported by bank statements, tax statements or invoices. The records have not been audited. I have a great reservation in drawing any conclusion on Madam Tu’s business performance by relying on such records alone. I find that there is insufficient proof that there had been a drop in the monthly profit of HK$25,000 from May to September 2012.
Unlawful interference and/or malicious falsehood
116. A further argument was raised on behalf of Madam Tu that the incidents of harassment amounted to unlawful interference of her right to use Stall 42 or dissemination of false statements.
117. As I have already ruled that the alleged incidents of harassment are not proved, the argument based on unlawful interference and/or malicious falsehood must also fail.
118. If Madam Tu sought to rely on the warning letters issued by SHIL since April 2012 to establish the argument of unlawful interference or malicious falsehood, this would not succeed either. I have considered the letters issued by SHIL to Madam Tu respectively dated 3 April 2012, 20 April 2012, 2 May 2012 and 19 July 2012. The letters basically demanded Madam Tu to stop using the upper levels of Stall 42 and the provision of beauty services. SHIL made the demands because of the complaints raised by HA in its letters dated 3 April 2012 and 19 April 2012 and the inspections on 5 April 2012 and 18 April 2012 by Chan and Yeung respectively. Based on my earlier analysis, SHIL had every right to make such demands. I do not see how such letters could amount to unlawful interference or malicious falsehood.
119. For malicious falsehood, Madam Tu needs to prove malice on the part of SHIL. According to Hong Kong Wing On Travel Service Ltd v Hong Thai Citizens Travel Services Ltd [2001] 2 HKLRD 481 where Chu J applied Collins MR’s formulation in Dunlop Pneumatic Tyre Co Ltd v Maison Talbot & Others (1903-1904) 20 TLR 579, an act can be described as malicious when it is “done with the direct object of injuring that other person’s business. The mere fact that it would injure another person’s business was no evidence of malice.” I do not find sufficient evidence on this aspect.
Applications by defendant at trial
120. Before the start of the trial, counsel for Madam Tu made an application to re-amend the Amended Defence & Counterclaim. The proposed re-amendment included the pleading of an implied term that SHIL will not, without just and reasonable excuse, cause disturbance to Madam Tu’s business at Stall 42 or interfere with her quiet enjoyment. Another aspect of the proposed re-amendment related to raising the counterclaim amount from HK$125,000 to HK$525,000 so as to include loss and damage for 16 more months.
121. After hearing counsel for both sides, I refused the application for the following reasons:
a. The application was late by any standard.
b. When SHIL sought an amendment of its Statement of Claim 8 days before the start of trial, Madam Tu did not then make any application.
c. Counsel for SHIL said they might need to seek further and better particulars in relation to the re-amendment and the Reply to Defence & Defence to Counterclaim might need to be amended.
d. The trial schedule would be disrupted if the application was allowed.
122. After refusing Madam Tu’s application for re-amendment, I ordered that the costs of and arising from the application be paid to SHIL in any event, to be taxed on an indemnity basis, if not agreed. When I allowed SHIL’s late application for amending its Statement of Claim, I penalized it by indemnity costs. I saw no reason why a different standard should be applied to Madam Tu.
123. After hearing SHIL’s case and before the opening of Madam Tu’s case, counsel for Madam Tu made another application to adduce a photo allegedly taken on 23 October 2011 which depicted the entrance of Stall 42 and 2 posters showing the services available and the prices. After hearing counsel for both sides, I refused to admit the photo. I said I would give reasons when I handed down judgment. Now I do.
a. The application was late by any standard.
b. If Madam Tu would like to rely on this photo as support for her case, she should have made discovery earlier given that the photo was taken on 23 October 2011.
c. As early as 19 March 2013, solicitors for Madam Tu already confirmed in the Timetabling Questionnaire that there was no outstanding interlocutory application.
d. Counsel for SHIL indicated that they would need to make enquires whether the stall shown in the photo was really Stall 42.
e. The admission of this photo would lead to the recalling of SHIL’s witnesses Yeung and Chan, who had already finished their testimonies.
f. The trial schedule would be disrupted if the application was allowed.
Conclusion
124. In light of what I have said, I allow the plaintiff’s claim and enter judgment against the defendant and the counterclaim is dismissed.
125. I find it appropriate to grant declaratory and injunctive reliefs to the plaintiff as follows:
a. A declaration that the defendant is not entitled to use the 1st and 2nd levels of Stall 42;
b. A declaration that the defendant is not entitled to carry on the trade of beauty services or any other trade other than a barber shop (剪髮店) at Stall 42;
c. An order that the defendant do remove the partitions put up by her, her servants, employees or agents and all the goods, merchandise, beds, equipment, structures, things or objects placed by the defendant, her servants, employees, or agents on the 1st and 2nd levels of Stall 42;
d. An order that the defendant do remove from Stall 42 all promotional materials containing words “cockloft professional beauty services” or “閣樓專業美容” or words with similar meaning;
e. An injunction to restrain the defendant whether by herself, or by her servants, employees or agents howsoever from carrying on the trade of beauty services or any other trade other than a barber shop (剪髮店) at Stall 42; and
f. An injunction to restrain the defendant whether by herself, or by her servants, employees or agents howsoever from using or occupying the 1st and 2nd levels of Stall 42 or erecting and/or placing any goods, merchandise, beds, equipment, structures, things or objects on the 1st and 2nd levels of Stall 42.
126. Costs should follow the event. Save and except for previous costs orders made by the court, I make a costs order nisi that the defendant is to pay the costs of this action including the costs of the plaintiff’s claim and the costs of defending the counterclaim, to be taxed if not agreed, with certificate for counsel. The costs order nisi shall become absolute in the absence of application to vary within 14 days.
127. Lastly, I thank counsel for both sides for their assistance and thorough submissions. The plaintiff’s counsel’s written submissions consisted of 49 pages. The defendant’s counsel’s written submissions also consisted of 49 pages. A total of 32 authorities from decided cases and leading textbooks were submitted for my consideration. It is sufficient for me to say that their points had been duly considered before reaching my conclusion. It is unnecessary and counterproductive for me to set out each and every point taken by them. I believe the above analysis sufficiently disposes the matter.
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( Timon Shum ) |
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Deputy District Judge |
Mr Matthew Ho, instructed by Messrs W K To & Co, for the plaintiff
Mr Henry Cheng, instructed by Messrs Cham & Co, for the defendant
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