IP MING KIN v. WONG SIU LAN

DCCJ 1236/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1236 OF 2010

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J U D G M E N T

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1.  The plaintiff (“Ip”) as the landlord and the defendant (“Wong”) as the tenant entered into a tenancy agreement in respect of a shop in January 2010. Dispute arose soon after the signing of the agreement. The tenancy never got to commence; and both blame each other for wrongful repudiation of the agreement. Ip now claims for his loss and Wong puts forward her counterclaim for her loss.

BACKGROUND

2.  The property in question is Shop No.407 on the Ground Floor of Lok Hin Terrace, No. 350 Chai Wan Road, Hong Kong (“the Shop”).  Wong has been the registered owner of the Shop since 2007.

3.  Towards the end of 2009, Wong listed the Shop for letting through various estate agents.  One of those was Dung Kee Property Agency Limited, of which the agent in charge of the letting of the Shop was Madam Lam Wing (“Lam”).

4.  Through the introduction of Lam, Ip and Wong came to negotiate for a tenancy in respect of the Shop sometime towards the end of December 2009.  Ip planned to operate an interior design and decoration business there.  His first attempt to rent the Shop was not successful.

5.  2 to 3 weeks later, Ip made his second attempt.  It was eventually arranged that the parties would meet at the office of Lam on 13 January 2010 with a view to signing the contractual document.

6.  On 13 January 2010, the parties eventually signed a Chinese tenancy agreement (“the Tenancy Agreement”).  It was a tenancy for the term of 12 months from 15 March 2010 to 14 March 2011.  Upon the signing of the Tenancy Agreement, Ip gave and Wong received a cheque for the sum of HK$207,600 equivalent to 12 months’ rent.  Of that, 2 months’ rent in the sum of HK$34,600 was set aside as the tenancy deposit and the remaining sum of HK$173,000 served as advanced payment of 10 months’ rent.

7.  The parties were supposed to pay to Lam’s company their respective commission equivalent to half month’s rent (HK$8,650).

8.  The parties did not get to conclude any provisional tenancy agreement.

9.  A week later, on 19 January 2010, Wong unilaterally returned the money paid by Ip by depositing the same into Ip’s bank account without prior notice to Ip.  She also stopped the cheque for payment of commission to Lam.

10.  Nevertheless, by his then solicitors’ letter dated 6 February 2010, Ip informed Wong of his election to affirm the Tenancy Agreement; and tendered again a cheque in favour of Wong for the sum of HK$207,600 payable pursuant to the Tenancy Agreement. The cheque was eventually never presented.  Nor did the tenancy commence in any manner on 15 March 2010 or at all.

11.  By his then solicitors’ letter dated 19 March 2010, Ip complained to Wong that the latter has repudiated the Tenancy Agreement.  Ip accepted the repudiation, terminated the Tenancy Agreement and demanded compensation.

12.  On 24 March 2010, Wong attended the office of Ip’s solicitors and offered to deliver vacant possession of the shop.  The attempt was not a success.

13.  On 12 April 2010, Ip commenced the present action.

14.  On 20 August 2010, Ip caused the writ herein to be lodged with the Lands Registry, which was entered as a “deed pending registration”.  Upon the complaint by Wong through her solicitors, Ip eventually caused the writ to be withdrawn on 10 November 2010.

15.  The pleadings and evidence suggest that the above background is not in real dispute.

THE DISPUTE

16.  For the alleged failure to deliver vacant possession of the Shop and thus wrongful repudiation of the Tenancy Agreement on the part of Wong, Ip claims damages representing liquidated damages in the sum of HK$207,600 pursuant to the Tenancy Agreement; and agency fee paid by Ip to Lam in the sum of HK$8,650.

17.  By pleading, Wong explains that she returned the money paid by Ip and stopped the cheque for the estate agent’s commission mentioned above in January 2010 because she discovered that Ip had not signed the provisional tenancy agreement.  Subsequently possession of the Shop was neither delivered nor taken because Ip insisted on altering the interior of the Shop after taking possession of the Shop.

18.  Wong alleges that on the day before the signing of the Tenancy Agreement, the parties orally agreed that the interior of the Shop would not be altered and vacant possession of the Shop should be returned at the end of the tenancy in the condition as depicted in the photographs of the Shop to be taken when the tenancy commenced (“the Alteration Restriction”).  By expressing the intention to do the opposite, Ip was allegedly in breach of the oral agreement and/or the Tenancy Agreement.

19.  By way of counterclaim, Wong claims for her loss of the rent receivable pursuant to the Tenancy Agreement.  Wong also complains that the attempt to register the writ at the Lands Registry was wrongful and constituted a slander of title.  Due to that, she allegedly could not sell or re-mortgage the Shop and has as a result suffered loss and damage in the course of resolving her financial difficulty.

20.  There are the following major issues to be determined:

(1)  whether Ip was obliged to sign the provisional tenancy agreement given that he did sign the Tenancy Agreement;

(2)  whether there was the alleged oral agreement concerning the Alteration Restriction;

(3)  whether the termination of the Tenancy Agreement was due to which party’s fault;

(4)  if it is Wong who is liable, whether Ip is entitled to the remedies claimed, in particular, his claim in reliance of the compensation provision in the Tenancy Agreement;

(5)  if it is Ip who is liable, whether Wong is entitled to the remedies claimed;

(6)  whether Ip is liable to Wong for wrongful registration of the writ herein as lis pendens and slander of title.

THE PROVISIONAL TENANCY AGREEMENT

21.  There is no dispute that Lam received Wong’s telephone call about the agreement between Wong and Ip on the intended tenancy in respect of the Shop; and that arrangement was made for the parties to meet at the office of Lam on 13 January 2010 for the signing of the agreement.  According to Lam and Ip, and confirmed by Wong in court, that happened on the day before, i.e., 12 January 2010.

22.  There is also no dispute that Wong and Lam contemplated the signing of a provisional tenancy agreement, when the arrangement to meet on 13 January 2010 was made.  According to Wong, she arrived at the office of Lam on 13 January 2010 by the appointed time.  The provisional tenancy agreement was prepared and she signed it without waiting for Ip, who was late.  She took a walk.  When she returned, Ip was present and Lam was preparing a formal tenancy agreement.  She eventually signed it, which was the Tenancy Agreement.

23.  According to Wong, she expected Ip to also sign the provisional tenancy agreement. On the contrary, according to Lam and Ip, it was exactly because the parties agreed to go ahead with executing the Tenancy Agreement that the signing of the provisional agreement was dispensed with.

24.  Wong gave different versions of her case in this respect.  The pleaded case of Wong has always been that Ip had not signed the provisional tenancy agreement before signing the Tenancy Agreement.  In June 2011, she specifically introduced by way of amendment the allegation that she discovered Ip’s omission to sign the provisional tenancy agreement only on the day following the signing of the Tenancy Agreement.  In other words, she signed the Tenancy Agreement under the belief that Ip had also signed the provisional tenancy agreement on 13 January 2010.  On the contrary, according to her in court, when she met Ip at Lam’s office on 13 January 2010, she saw and realised that Ip was yet to sign the provisional tenancy agreement so that she actually requested Ip to do so.  Ip allegedly had to leave in a hurry and suggested to return to sign that later.

25.  As mentioned, Wong stopped the cheque for the commission payable to Lam’s company.  In her statement, Wong alleged that Lam’s company admitted its omission to get Ip to sign the provisional tenancy agreement and therefore agreed to waive the commission.  In court, and only during her cross-examination, Wong retracted such allegation.  Her explanation for the discrepancy was that she failed to really read her statement before signing it; and the alleged failure repeated before she affirmed its truth in court.

26.  To Wong, the provisional tenancy agreement was significant really because it allegedly contained the Alteration Restriction.  The provisional tenancy agreement was not available; and, according to Lam, had been destroyed after the signing of the Tenancy Agreement.  Wong referred to an agency agreement that she entered into with another estate agent during the similar period of time to support her persistent imposition of Alteration Restriction in letting the Shop. But the words to that effect are found in the oddest part of that agency agreement.

27.  A provisional tenancy agreement is provisional partly because it in the normal course of event provides for the signing of a formal agreement, and probably further payment upon that, in terms to be agreed between the landlord and the tenant on a future date.  In the present case, Ip came prepared as agreed to pay upfront an amount intended to cover the rent for the entire term of tenancy.  From the point of view of Ip, it made sense for the parties to dispense with the signing of the provisional tenancy agreement and proceeded to enter into the formal tenancy agreement.

28.  In court, Wong even suggested that as a matter of practice, the terms contained in the provisional tenancy agreement would not be included in the formal tenancy agreement.  That was apparently why she insisted that the provisional tenancy agreement should also be signed.  But the suggestion that a provisional and formal tenancy agreement should therefore be prepared and signed at the same time as well as co-exist as binding agreements thereafter defies common sense.

29.  I find Wong’s version in this respect to be problematic and difficult to accept.  In my judgment, whether the parties actually agreed to dispense with the signing of the provisional tenancy agreement or not, the need for the provisional agreement was overtaken by the actual conclusion of the formal tenancy agreement.  Wong was not in a position to insist and Ip was not obliged to enter into the provisional tenancy agreement as alleged.

30.  The return of the money paid Ip in performance of the Tenancy Agreement coupled with the insisting that Ip should also sign the provisional tenancy agreement could well be treated as conduct evincing an intention not to be bound by the Tenancy Agreement. Nevertheless, by his then solicitors’ letter dated 6 February 2010 and re-tendering of payment pursuant to the Tenancy Agreement, Ip affirmed the Tenancy Agreement and expected Wong to perform her part on 15 March 2010 as agreed.

THE ALLEGED ORAL AGREEMENT

31.  In the absence of a concluded agreement on the Alteration Restriction, whether in the form of the provisional tenancy agreement or the Tenancy Agreement, Wong resorts to suggest that it was nevertheless orally agreed before the signing of the Tenancy Agreement and thus binding on Ip.

32.  The pleading of the alleged oral agreement as an independently binding agreement did not come until very late.  In the re-amended defence and counterclaim filed in July 2011, reference to the alleged oral agreement was first made.  Then what was pleaded was that Ip was in breach of “the Tenancy Agreement pursuant to the terms of the Oral Agreement”.  Properly understood, this means no more than that the Tenancy Agreement, which was the written reduction of what the parties orally agreed, was the agreement binding on the parties.

33.  One year later and barely a week before the trial, Wong further amended her pleading.  In the re-re-amended defence and counterclaim filed in August 2011, the case now becomes that Ip was allegedly in breach of “the Oral Agreement and/or the Tenancy Agreement”.  In my view, the amendment turned what used to be capable of proper understanding into uncertainty.  When Miss Chan for Wong opened her case, it was further submitted that the tenancy agreement between the parties was partly oral and partly written.

34.  Whatever the parties might have verbally agreed by 13 January 2010, the parties obviously contemplated and intended nothing to be binding unless and until a written tenancy agreement incorporating the terms was signed on that day.  That explained why Wong instructed Lam to arrange a meeting with Ip and to prepare the written agreement in accordance with the terms verbally agreed.  This had to remain to be the understanding of the parties when they decided to sign the Tenancy Agreement instead of the provisional tenancy agreement on 13 January 2010.

35.  Further the alleged oral agreement, as pleaded, consisted of the following terms:

(1)  The monthly rent was HK$17,300 and the term of tenancy would commence in or about mid-March 2010.

(2)  Ip would make a lump sum payment of the rent for the entire 12-month term of the tenancy in advance.

(3)  The Alteration Restriction.

36.  According to Wong in court, she was reluctant to sign the Tenancy Agreement that was prepared on the basis of one of those standard form agreements generally available from the stationery shops.  She expected one prepared specifically for tenancy of commercial premises.  She agreed to sign merely out of sincerity.

37.  It may appear to be embarrassing for Lam as an estate agent to simply utilise one of those standard form tenancy agreements.  But once the parties chose to enter into such a form of agreement, why they did so no longer mattered.  Most importantly, deletion and addition were made to the standard form agreement.  Neither was prevented from having a say on the terms, let alone refusing to agree and to sign the agreement at all.  Eventually the Tenancy Agreement did contain the terms in respect of the monthly rent, term of tenancy and lump sum advance payment of 12 months’ rent.  Only the Alteration Restriction, if ever agreed on, was left out.

38.  As to why the Alteration Restriction was not spelt out in the Tenancy Agreement, Wong explained in court that it was not necessary because Ip did not say he wanted to make alteration at that time; and second, it was already provided for in the provisional tenancy agreement.  Again, she referred to the alleged practice that what was already contained in the provisional agreement would not be repeated in the formal agreement.  I need not repeat my observation above about such suggestion.

39.  In considering Wong’s evidence, I also have to bear in mind her background.  According to her, she has been retired for just about 4 years; but has worked as a nurse for about 12 years after finishing her secondary school education.  With her savings, she started to acquire real properties one after the after.  In early March 2010, she owned 5 shop premises.  All her shop premises were let; and she has had the experience in dealing with estate agents and entering into written agreements.  In her evidence, Wong also referred to her experience of taking the liberty to re-write document with the tenant or occupier in relation to the use of her premises because she found the original wordings failed to reflect the true situation or understanding.

40.  Ip denied that the Alteration Restriction was mentioned when he and Wong negotiated on the day before the signing of the Tenancy Agreement.  On balance, I prefer his evidence to that of Wong in this respect.  I find that the Alteration Restriction was not binding on Ip as alleged.

41.  In my view, the complaint that Wong now really is the alleged failure to incorporate the Alteration Restriction into the Tenancy Agreement.  However, as a matter of pleading, though revised many times, there is no issue of whether the Tenancy Agreement ought to be rescinded or set aside for the same was entered into as a result of mistake; or alternatively, whether the Tenancy Agreement should be rectified for the same failed to incorporate all the terms that had been agreed.

REPUDIATION OF THE TENANCY AGREEMENT

42.  There is dispute as to whether it was Wong who chased Ip to take possession of the Shop or Ip who chased Wong to deliver possession of the Shop on 15 March 2010. In her submission, Miss Chan for Wong questioned why Ip did not urge Wong to deliver vacant possession on 15 March 2010.

43.  I do not doubt that Ip was genuine about taking possession of the Shop and commencing the tenancy in March 2010 as agreed.  By re-tendering payment pursuant to the Tenancy Agreement in February 2010, Ip has done what he as tenant was contractually required to do.  There was no obligation on him to actively pursue Wong for taking possession.  Instead, it was for Wong to arrange to deliver vacant possession as agreed.  In the absence of agreement on a specific mode, had Wong been desirous of delivering vacant possession, she could have arranged to hand over the keys to Ip face to face or indirectly through Lam.

44.  According to Ip, Wong insisted that he undertook not to alter the interior of the Shop during the tenancy before he was allowed to take possession of the Shop.  I would not be surprised as this would actually be in line with the stance of Wong.  However any attempt to impose the Alteration Restriction after the signing of the Tenancy Agreement would have been unjustified and repudiatory in nature.

45.  According to Wong, Ip expressed his intention to alter the interior of the Shop.  Insofar as the intention to do that is concerned, Ip never denied that.  He explained that for the nature of his business, he would need to make the alterations, which would have entailed moving the internal staircase a bit towards the inner part of the Shop; but the cockloft would be unaffected.

46.  On this point, Ip borrowed assistance from the fact that clause 7 of the standard form of the tenancy agreement, now the Tenancy Agreement, was crossed out.  The clause says:

“乙方進屋時裝修入牆間格窗花電器等 乙方遷出時不得拆回 以維持該樓原有之齊整 如得甲方同意者 乙方才可拆回 但必須將該樓裝修完整。”

47.  Literally, the clause provided that in order to preserve the integrity of the premises, the tenant, when moving out, should not remove and retrieve any decorations, partitions, window frames, electrical installations, etc. from the premises.  If the landlord agreed, the tenant might remove and retrieve these items provided that the tenant should reinstate the premises.

48.  The clause restricted the tenant’s right to alter the interior condition of the rented premises at the end of the tenancy.  Assuming that the deletion of the restriction suggested the opposite effect, the resultant liberty would have had nothing to do with what the parties are arguing about, namely, whether the tenant might alter the interior of the Shop during the term of the tenancy.

49.  In my judgment, the fact was that there was no provision in the Tenancy Agreement regarding the alteration of the interior of the Shop or reinstatement.  In the circumstances, the parties would have to resort to the rights and obligations of the landlord and tenant that the law implies or imposes.  The concern of the landlord in these circumstances would be to see that the premises let would be maintained in a tenantable or reasonable condition (fair wear and tear normally excepted); and that the premises would be returned to the landlord at the end of the tenancy in like condition.

50.  In her submission, Miss Chan for Wong did suggested that the Alteration Restriction in any event bound the parties as an implied term of the Tenancy Agreement “as it was their true intention at the time of the contract”.  A term may be implied by reason of business efficacy, previous course of dealings, trade custom or law but not quite what counsel suggested.  I need to say no more on this because there is simply no pleading of reliance on implied term on whatever basis.

51.  Ip could not take possession of the Shop without the co-operation of Wong.  In my judgment, Ip did not manage to do so on 15 March 2010 because of Wong’s imposition of the Alteration Restriction, a condition that was not incorporated into the Tenancy Agreement.  By insisting, it was Wong who repudiated the Tenancy Agreement that led to its termination.

52.  On 24 March 2010, Wong attended the office of the then solicitors for Ip.  This was after the acceptance of repudiation and thus termination of the Tenancy Agreement was communicated to Wong by Ip by his solicitors’ letter dated 19 March 2010.

53.  Miss Chan submitted, in the absence of pleading, that it was her client who chose to affirm the Tenancy Agreement and kept it alive until early July 2010 when she accepted the repudiation by Ip and thus terminating the Tenancy Agreement.  She referred to Large Land Investments Ltd v Cheung Siu Kwai Pansy [2002] 4 HKC 652 and Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd [1971] 3 All ER 1226 in support.  In view of the above findings, this cannot be right as a matter of fact.

IP’S CLAIM

54.  It follows from the above that Wong is liable for the termination of the Tenancy Agreement.  Ip invokes the provision in the Tenancy Agreement that “業主如未能於15/3/2010將上述單位交吉給租客  需雙倍租金賠償” (“the Compensation Provision”).

The Compensation Provision

55.  There is dispute as to the correct construction of the Compensation Provision.  Literally, the Compensation Provision stipulated that Wong should compensate Ip by double amount of rent (“需雙倍租金賠償”) in the event of her default in delivering vacant possession of the Shop on 15 March 2010.  Ip contends that this means double amount of the 12 months’ rent in the sum of HK$207,600.  As Wong had not presented his cheque for the amount, Wong should now compensate him that amount.  Wong on the contrary contends that this means double amount of the monthly rent, i.e., HK$34,600.

56.  Unless the wordings of the contractual document are literally ambiguous, extraneous evidence is generally inadmissible to aid the construction of the document.  This is the cardinal rule of construction.  The amount of compensation was not specified.  Whether the rent under the provision was referring to the monthly rent or not is not literally clear.  Both parties gave evidence of what they allegedly agreed then.

57.  According to Wong, it was agreed that the compensation would be equivalent to 2 months’ rent; and she actually requested Lam to state the amount of HK$34,600 as part of the Compensation Provision in the Tenancy Agreement.  However, Lam did not do so because there was insufficient space in the Tenancy Agreement to accommodate the writing of the amount and she did not have any more spare form.

58.  What Lam may say about what Wong said above is unknown as the suggestion was made for the first time when Wong gave evidence.  But judging from the Tenancy Agreement (an agreed exhibit), one simply finds it difficult to believe that that was actually said by Lam to excuse the writing of merely an agreed figure in that part of the Tenancy Agreement as alleged.

59.  According to Ip, compensation was discussed with Wong on the day before the Tenancy Agreement. He was concerned about the event of non-delivery of vacant possession as agreed because this was his second attempt to conclude the deal and he would be paying the rent for the entire term of tenancy upfront.  In court, he mentioned that reference to that amount of HK$200,000 odd was made during the discussion.  Therefore the parties should realise that the compensation should be equivalent to the rent for the entire term to be paid in a lump sum, not the monthly rent.  On balance, I prefer Ip’s evidence to that of Wong in this respect.

60.  Indeed when the Tenancy Agreement was signed, 2 months’ rent paid was set aside as the tenancy deposit, thus leaving behind an effectively lump sum payment of 10 months’ rent.  However there is no dispute as to the parties’ understanding that Ip would have to make up the shortfall.  Insofar as the intention behind the Compensation Provision is concerned, I am convinced that the parties meant that by double amount of 12 months’ rent payable for the entire term of the tenancy.

Liquidated damages or penalty

61.  Then there is the dispute as to whether the Compensation Provision amounts to a penalty that will be unenforceable.  The principles are trite.  If the clause reflects a genuine attempt to estimate in advance the loss which the claimant would be likely to suffer from a breach of the obligation in question, the clause is enforceable irrespective of the loss actually suffered.

62.  In the often cited case of Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79, Lord Dunedin summed up the following propositions:

(1)  The expression adopted of the clause by the parties is not conclusive.  It is for the court find out whether it is a penalty or liquidated damages clause.

(2)  The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine pre-estimate of damage.

(3)  The question is one of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of at the time of the making of the contract, not as at the time of the breach.

(4)  Various tests have been suggested such as:

(a)  It will be held to be a penalty if the sum stipulated for extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

(b)  It will be held to be penalty if the breach only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid.

(c)   There is a presumption that it is a penalty when a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage.

(d)  It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost impossible.  On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties.

63.  The test is objective: see Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005] Build LR 271 (at 279).

64.  Miss Chan for Wong also referred to Polyset Ltd v Panhandat Ltd (2002) 5 HKCFAR 234 (at §8).  There the Court of Final Appeal described the fundamental aspects of the above principles as fairly well settled.  But care should be taken in noting the context of that case.  The issue in that case was the right of the vendor to forfeit deposit (paid to secure the performance of the agreement for the sale and purchase of property and as part payment of the purchase price) as opposed to liquidated damages.

65.  In question in the present case is an upfront payment of essentially the entire amount payable in performance of the Tenancy Agreement rather than a deposit to secure the performance.  There is also no question of the reasonableness of the amount forfeited as deposit.  If it were Ip who wrongfully refused to take possession of the Shop, Wong’s right to keep the amount paid, so long as she made the vacant possession of the Shop available to Ip, should have been undoubted.

66.  Applying the principles, I see no basis for suggesting that the parties to the Tenancy Agreement in respect of a commercial tenancy were somehow unequal in their bargaining position.  Both concluded the deal through the same estate agent.

67.  Ip had attempted once to rent the Shop at the end of December 2009.  According to him, he offered about HK$15,000 monthly rent but was eventually turned down by Wong.  This was his second attempt.  His concern about another failure, if due to Wong’s default, is understandable, particularly in view of the fact that he planned to secure a short term tenancy for 12 months for the commencement of business shortly; and he would be paying upfront the rent for the entire term.

68.  Ip also explained that this venture was intended to repeat his previous mode of business in 2009.  In that year, with a view to taking on contracts for design and decoration of the new public housing units at Lam Tin Estate, he with his partner opened a company in the vicinity.  He made a table illustrating the business income and expenses from that venture.  The profit was said to amount to just above HK$1,400,000.  Now the plan to rent the Shop was to operate a business with a view to taking on contracts for work for the new public housing units at Chai Wan Estate.  I accept his evidence in this respect.

69.  Ip projected that the income from the business operated at the Shop for the 12 months could have been about HK$2,800,000-HK$3,000,000 and the profit could have reached about HK$800,000-HK$1,000,000.  In my judgment, except for the similar mode of business venture, all the other factors that could affect the business performance were variables; and therefore one cannot project with certainty.

70.  Nevertheless, as mentioned, the question of whether the provision was a penalty or liquidated damages is one of construction to be decided upon the terms and the circumstances judged as at the time of making the contract, not as at the time of breach.  As at the time of the Tenancy Agreement, these circumstances, in my judgment, should be clear: Ip must have proceeded with a view to making the kind of profit that he managed to make in venture in Lam Tin Estate in 2009. He was after a short term tenancy; but time would be lost if he was not able to take possession as agreed and had to search for another premises.  Ip must have considered the Shop optimum for his purpose; and therefore repeated his attempt to rent it instead of any other in the vicinity and even offered to pay the rent for the entire term upfront.

71.  Even where the consequences of a breach are precisely ascertainable, a sum reserved by the contract may be intended by the parties as an agreed estimate of damage in order to avoid the expense and difficulty of assessment: see Chitty on Contracts (30^th ed) at §26-129.  The difficulty in projecting the loss with certainty at the time of the agreement may well support the genuine need to stipulate an agreed amount of damages, so long as the amount is not extravagant or unconscionable.  The amount in the present case in my judgment was neither extravagant nor unconscionable.

72.  Considering all the circumstances prevailing at the time of the Tenancy Agreement objectively, I am satisfied that the Compensation Provision specifying the agreed damages equivalent to double the amount of the rent for the 12-month term of tenancy was not a penalty.

73.  Wong alleges that Ip had rented another premises for his business and therefore has not suffered such loss as alleged.  As a matter of principle, the Compensation Provision, as a liquidated damages clause, is enforceable irrespective of the actual loss (as it may turn out to be).

74.  In any event, according to Wong, she allegedly learned about that from Ip’s solicitors, Mr Wai, during a telephone conversation in June 2010.  In other words, what she relied on was not actual evidence of the alleged fact but her understanding of information that could at most be hearsay.

75.  On the contrary, Wai gave evidence and confirmed no record or recollection of such content of the telephone conversation referred to.  He did not know at that moment whether in fact Ip had rented another premises.  Ip confirmed that he had not done so.  I accept their evidence.

Claim for damages

76.  This is the alternative claim for damages but pleading of the alleged loss or damage is in fact lacking.  I also doubt whether the alleged loss is proved by the evidence in hands.  Having said that, I say no more, in view of the above findings.

Claim for estate agency commission

77.  Ip had paid Lam’s company estate agency commission in the sum of HK$8,650.  As a result of Wong’s breach, the amount was wasted and thus his loss.

78.  As found above, the parties have agreed to the liquidate damages that Ip would be entitled to in the event of Wong’s failure to deliver vacant possession of the Shop as agreed.  This will be his agreed compensation irrespective of his actual loss incurred.  In the absence of any other agreement, I see no basis to award damages for his loss of the estate agency commission or in fact any other loss separately.

WONG’S CLAIM

Loss of rent

79.  As it was Wong’s wrongful repudiation that led to the termination of the Tenancy Agreement, her counterclaim on the basis of Ip’s alleged breach must fail.

80.  Wong claims for loss of the rent receivable pursuant to the Tenancy Agreement.  Despite contention by Ip that she had let the Shop after the termination of the Tenancy Agreement and various amendments to her pleading, her pleaded case remains that there was loss of rent for the whole term of the tenancy (until 14 March 2011) in the sum of HK$207,600 or at the monthly rate of HK$17,300 until a date to be assessed.

81.  Ip gave evidence that he saw the Shop was still occupied by a private tutorial centre when vacant possession was supposed to be delivered pursuant to the tenancy Agreement.  In November 2010, Ip actually visited the centre and managed to talk to a Mr Lee who, he understood, was the person in charge.  Ip obtained from him an enrolment form for courses at the centre.

82.  Ip further produced photographs that he personally took of the Shop during mid-May 2011.  The Shop was still displaying the same signboard of the private tutorial centre; and Ip managed to identify the person depicted in one of the photographs to be the same Mr Lee whom he met at the centre in November 2010.

83.  Wong denied the allegation.  According to her, the Shop was vacant and ready for delivery by 15 March 2010.  She produced what was said to be written acknowledgement of surrender of tenancy by the tutorial centre with effect on 12 March 2010 prior then commencement of the term of tenancy.  There was also a notification to the Business Registry of cessation of business of that centre with effect on the same day.  She explained that it was not until November 2010 when she managed to let the Shop to another private tutorial centre.  That other centre operated until June 2011 when it also surrendered the Shop to her.  She produced what was said to be such written notice given by that centre in March 2011.

84.  It could not be denied that notwithstanding the alleged change of tenant, the outside appearance particularly the signboard bearing the name of the first private tutorial centre remained unchanged during the period mentioned above. As to the person in charge of the allegedly 2 different tenants, Wong somehow claimed no idea whatsoever.  This was odd.

85.  Nevertheless Wong managed to produce the above documentary evidence and rental receipts in this respect.  She therefore admitted the receipt of rental income during the relevant period which has not been disclosed by pleading.  She would have had to give credit to such rental income from the Shop.  She received HK$13,500 in November 2010 and since then a monthly rent of HK$8,000 until the end of June 2011.  The term of the Tenancy Agreement would have ended in mid-March 2011.  Therefore, her loss of rent should at most be HK$(207,600 – 13,500 – 8,000 x 3.5 months) = HK$158,100.

Slander of title

86.  Wong’s claim for slander of title is an independent claim in the sense that irrespective of the merits of Ip’s claim, there remains the issue of whether his registration of the writ herein constituted slander of her title in the Shop.

87.  At the pre-trial review, I asked the parties to assist me on the question of accrual of the cause of action in the tort of slander of title, in view of the fact that the writ herein was lodged with the Lands Registry 4 months after the commencement of action.  Ip subsequently reacted by an application to strike out this part of the counterclaim.

88.  When the trial began, Mr Chan for Ip withdrew the application.  He further conceded that in the event the court finds that the registration of the writ herein was wrongful, his client would be liable for the costs and expenses incurred as prescribed by section 19 of the Land Registration Ordinance, Cap.128 (“LRO”). However he contested the claim for slander of title and damages.

89.  Section 1A of the LRO defines lis pendens as action or proceedings pending in a court or tribunal that relates to land or any interest in or charge on land. Interest means proprietary rights in land.  In the present action, Ip’s claim is for contractual damages net of the amount that he had paid by cheque (that had never been presented).  There is no question of any claim or right of lien that might gave rise to proprietary right in land.  The attempt to register the writ herein as lis pendens was wrongful.

90.  However Wong needs more for the purpose of her claim in the tort of slander of title. Miss Chan accepted that her client needs to prove malice on the part of Ip in seeking to register the writ: see Gatley on Libel and Slander (11^th ed) at §21.14.  The key to the constitution of malice in the present context is whether the registration was calculated to cause pecuniary damage to Wong.

91.  In court, Ip explained his concern whether Wong would be good for enforcement in the event of his success in this action; and what if she disposed of the Shop. After discussing with his solicitors, it was considered feasible to register the writ herein as lis pendens.  I accept Ip’s evidence in this respect. Whilst I regret to say that Ip’s concern was addressed by apparently bad legal advice, I would be slow in drawing the conclusion, or inference as Miss Chan invited me to draw, that all was done with the primary objective to causing pecuniary damage to Wong or exerting knowingly illegitimate pressure on her in the conduct of these proceedings.  As mentioned, Ip’s solicitors conceded that after heeding to the complaint by the solicitors for Wong; and withdrew the writ from the Land Registry.

92.  Section 19 of the LRO provides that the court may make an order for the vacating of the registration of the lis pendens; and may direct the party on whose behalf the registration was made to pay all the costs and expenses occasioned by the registration or the vacating thereof including the costs of the application to vacate, or may make such other order as to such costs or any of them at the court’s discretion.  Query whether it is accurate for Miss Chan to submit that her client’s entitlement would be one to damages other than the costs and expenses referred to in the section.

93.  In any event, there is in Wong’s pleading no claim for the costs and expenses occasioned by the registration or the vacating thereof pursuant to section 19 of the LRO.  Nor is there evidence of such costs and expenses.  Instead she claims for loss and damage as a result of the loss of rental income that should have been received pursuant to the Tenancy Agreement.

94.  Wong’s case in this respect is that because of the loss of rental income that should have been received pursuant to the Tenancy Agreement, she encountered financial difficulty.  In order to ease the difficulty, she had to re-mortgage or to sell the Shop.  She tried in vain, in view of the registration of the writ.  As a further result, she had to sell her public light bus and licence and has suffered loss. The loss allegedly took the form of unused portion of the licence fee, insurance premium and vehicle registration fee already paid.  The total amount was said to be HK$26,681.  She also claims for the loss of chance of capital value appreciation of the public light business licence as much as HK$1,300,000.

95.  Wong’s claim is subject to the principle of remoteness of the nature of loss recoverable.  Whilst it may be said that the encumbrance on the title of the Shop created by the registration naturally affected its alienation, the alleged chain of events was so out of the ordinary that liability for them could not be attributed to Ip in the absence of reasonable knowledge on his part about Wong’s special circumstances.  As a matter of fact, I do not find that such knowledge existed at the material time and thus liability of Ip for the alleged consequential loss.

96.  The claim in the tort of slander of title fails both on liability and quantum. Notwithstanding the above conclusion that the registration of the writ herein was wrongful, Wong has not sought to prove the costs and expenses occasioned by the registration and its vacation pursuant to section 19 of LRO.  In the circumstances, I can do no more than awarding nominal damages, say in the sum of HK$100.

CONCLUSION AND ORDER

97.  There should be judgment on the claim in favour of Ip against Wong in the sum of HK$207,600. There should be judgment on the counterclaim in favour of Wong against Ip in the sum of HK$100.

98.  In the premises, Wong shall pay damages to Ip in the sum of HK$207,500 with interest at 1% above HSBC prime rate from the date of writ until today and thereafter at the judgment rate until full payment.

99.  Considering the contest and the above outcome, I think a fair order will be that Wong shall pay Ip 95% of his costs of this action, including any costs reserved.  Costs shall be taxed, if not agreed, with (for clarity) certificate for counsel.  The costs order is nisi and shall become absolute in the absence of application within 14 days to vary.