In Kam Wing Property Investments Ltd v Koncord Ltd ([2005] HKEC 213, CA) T had the benefit of a periodic tenancy. L served notice to quit. T refused to leave and so L applied to the court for possession using the summary judgment procedure. T argued that L had ‘waived’ the notice to quit. This failed.

First, Deputy Judge A To pointed out that a notice to quit, once served cannot be withdrawn. The parties can agree to a new lease but there was no evidence of such an agreement here:

‘Technically, a notice to quit, once given, cannot be waived unilaterally by the party giving it. Even according to the evidence of the Defendant, the Plaintiff never expressly waived the notice to quit in the sense that it withdrew the notice. Instead, the documentary evidence consistently shows that the Plaintiff insisted on the notice. To the extent that “waiver” is used as a convenient misnomer, it requires the consensual agreement of the parties that the tenant remains in possession. As with any agreement in respect of disposition of interest in land, four certainties apply, namely certainty of parties, property, term and price. Even on the evidence of the Defendant there was no agreement as to the term of the new tenancy and the rental. The so called defence of “waiver” does not even get off the ground.’ ([13])

The possibility that the landlord might be estopped from relying on the notice was considered but there was no credible evidence of a representation that the notice would not be relied upon. L sought summary judgment but before a court would be persuaded that a full trial was necessary, T would need to ‘show that he has a fair or reasonable probability of showing a real or bona fide defence, i.e. that his evidence is reasonably capable of belief.’ ([16])

T had not succeeded in this.

Michael Lower

In Leung Chung Ting (No 2) v Tin Yat Co ([1963] HKLR 304) T held under a monthly periodic tenancy. L gave T notice ‘to quit and deliver up possession by 19 November, 1961, or on the last day of your tenancy which shall expire next after one calendar month from the date of service of the said notice to quit.’ T argued that the notice have two date and was therefore invalid on account of its ambiguity. This argument failed.

Several authorities, commentaries and published precedents used this formula (the formula was applied in a slightly garbled way in this case and should have referred to ‘the month of your tenancy’). In this case, the general wording referred to the same date as that specified but even if the effect of the formula were to identify two different dates the notice would be valid. If the first date was valid, the rest of the formula could be treated as surplusage ((310, Hogan C.J.).

Huggins J. said:

‘It is, therefore, clearly permissible to add such general words even though the result be (as it will be if the date expressed is wrong) to name two different dates for the giving up of possession. One knows that in practice practitioners almost invariably do include such general words and, speaking for myself, I would think that at the present day they would be lacking in prudence if they did not. The basis upon which the alternative date is allowed to be stated is no doubt to mitigate the strictness of the old law. No prejudice results to the tenant, because the form of the general words makes it abundantly clear to him that the landlord is merely guarding himself against the consequence of a mistake as to the date upon which the periodic tenancy commenced and that the date expressed is to be the operative date only if the tenancy may lawfully be determined on, that day.’ (315)

Michael Lower

In Sun Hing Company v Brilliant Investment Co Ltd ([1966] HKLR 310, FC) L and T entered into a provisional agreement for lease but no formal agreement was entered into (though the ‘provisional’ agreement envisaged that this would happen). The provisional agreement did not contain a forfeiture clause and T fell into arrears with the rent. The question was whether the provisional agreement (enforceable by virtue of Walsh v Lonsdale) included a forfeiture provision as a ‘usual’ covenant. It was held that a forfeiture clause for non-payment of rent is a usual covenant and was enforceable under the rule in Walsh v Lonsdale.

Stamp Duty had not been paid on the provisional agreement. The court had a duty to take notice of that fact and no order would be made until the landlord’s solicitors had undertaken to submit the agreement to the Inland Revenue and to pay the stamp duty.

Michael Lower

In Li Wing-Sun v Wu Man ([1978] HKLR 575, CA) L was a licensee of the Government. The licence prohibited any ‘transfer’. In breach of the licence terms, L granted a lease to T. The question was whether the lease was valid (the proceedings were L’s claim for rent arrears and mesne profits). The Court of Appeal pointed out it had been admitted that there was a tenancy so, on the face of it, the decision could not rest on the contention that there was not.

At the time that the tenancy agreement was entered into, however, it was an offence to occupy Government land without a permit. The lease clearly envisaged that T would occupy the land (even though it had no permit) and so was illegal. The tenancy was void and L could not recover rent or mesne profits.

Michael Lower

Lease: licence: exclusive possession

A right to possession granted in the context of the acquisition of some larger interest (such as a lease), as part of  the agreement in respect of that larger interest itself and pending the grant of the larger interest is a licence only (Cameron Limited v Rolls-Royce plc)

Lease: agreement for lease: usual covenants: forfeiture provision

A provision for forfeiture for non-payment of rent is a usual covenant in Hong Kong (Sun Hing Company v Brilliant Investment Co Ltd)

Lease: periodic tenancy: notice to quit

A valid notice to quit can adopt the formula recommended by A.L. Smith L.J. in Sidebotham v Holland (“or at the expiration of the year of your tenancy, which shall expire next after the end of one half-year from the service of this notice,”) ( Leung Chung Ting (No 2) v Tin Yat Co)

Once served, a notice to quit cannot be withdrawn (Kam Wing Property Investments Ltd v Koncord Ltd)

Lease: validity

A purported lease agreement was void when exercise of the tenant’s right to possession would be a criminal offence (Li Wing-Sun v Wu Man)

Tenancy at will: conveyance of reversion

‘The moment the tenant knows that the landlord has done an act which is inconsistent with the continuance of his will – which he has done when he has parted with the reversion, – that is a determination of the will, and the tenant must know that it is his duty to quit at once.’ (Alderson, B) (Doe d Davies v James Thomas)

In Chan Sang v Choy Yuk ([1963] HKLR 476) it was confirmed that a periodic tenant can grant a tenancy for a term that extends beyond a period of his tenancy but that it will cease to have effect if the periodic tenancy is determined:

‘It is not, I think, in dispute that a tenant holding under a periodic tenancy has an interest which would support the grant by him of a tenancy for a fixed term exceeding in length one period of his own tenancy. Nevertheless the interest of the sub lessee can subsist only so long as the head tenancy subsists’ (478, Huggins J.)

In Pang Kin Hang v Tsui Hung Restaurant Ltd ([1986] HKEC 12) T refused to leave the demised premises at the end of the term. L sought vacant possession and mesne profits by summary judgment. It was held that a full trial was needed as to whether or not there was an estoppel or oral agreement to grant a new tenancy.

The judgment contains this passage:

‘[I]t is well established that if a tenant whose lease has expired be permitted to continue in possession pending a treaty for a further lease, he is not a tenant from year to year, but a tenant strictly at will, until some other interest is granted to him.’ (Hon. Deputy Judge Saied)

Michael Lower

In Shum Tsing Fai v Chiap Heng Cheng (HK) Ltd ([2001] HKEC 296, CFI) a fixed term tenancy came to an end. The tenant had an option to renew for a further two years but did not exercise it. As the tenancy approached its end, the parties discussed a new tenancy and agreed a rent below that specified in the option. The parties were at cross-purposes: the landlord thought that the tenant was, in effect if not formally, exercising the option. The tenant intended the arrangement to be temporary until it had bought replacement premises. The tenant gave notice to quit after a few months and the question was whether it was entitled to do so or whether it was bound for the full term envisaged by the option. It was decided that the tenant was a periodic tenant and had been entitled to give notice to quit.

The court thought that the objective intention was for a temporary arrangement and rejected a tenancy at will or at sufferance. This left the periodic tenancy. It inferred, from the monthly rental payments, an intention to create a monthly periodic tenancy.

As to this, Cheung J. said:

‘Although reference is made [in Woodfall] to the word “presumption”, ultimately it is a matter of inference from all the circumstances of the case as to the nature of the tenancy.’

Michael Lower

In Pinhorn v Souster (155 E.R. 1560) one of the questions was whether a tenancy at will had been determined as a result of the assignment of the tenancy. Parke B, said:

‘[T]he assignment by the tenant at will of his interest to a third party is no determination of the tenancy, unless the lessor at will have notice.’ (1864 – 5)

In West Coast International (Parking) Ltd v Secretary for Justice ([2001] HKEC 442, CA) L granted T a lease for a two year fixed term. At the end of the two years, the agreement provided for the tenancy to continue from quarter to quarter until terminated by either party as provided for in the agreement. The lease gave the landlord the right to revise the rent at the end of the third year of the agreement. The landlord exercised this right. The tenant completed a reply slip indicating its willingness to pay the increased rent and to pay an additional deposit (the agreement provided for an increase in the rent but not in the amount of the deposit). Not long after, the landlord served a notice to quit. The question was whether the agreement as to the revised rent and increased deposit simply amounted to a variation of the terms of an ongoing periodic tenancy or amounted to the surrender of the lease and the grant of a new two year term that would later become a periodic tenancy.

As a matter of construction of the correspondence concerning the increase (in the context of the relevant terms of the tenancy) the Court of Appeal held that this was a variation of the terms of the existing periodic tenancy. Hence L was entitled to serve notice to quit.

Michael Lower

Lease: periodic tenancy: holding over

If a tenant whose lease has expired is allowed to continue in possession while negotiating a new lease, he is  a tenant at will, until some other interest is granted to him. (Pang Kin Hang v Tsui Hung Restaurant Ltd)

Lease: periodic tenancy: sub-lease for a term greater than one period

A periodic tenant can grant a tenancy for a term that extends beyond a period of his tenancy but it will cease to have effect if the periodic tenancy is determined (Chan Sang v Choy Yuk)

Lease: variation: surrender and re-grant?

An agreement to increase the amount of the rent and the rental deposit did not lead automatically to the conclusion that there had been a surrender and re-grant. It is compatible with an intention to continue the existing lease on revised terms (West Coast International (Parking) Ltd v Secretary for Justice)

Lease: tenancy at will: termination

The assignment by the tenant at will of his interest to a third party is no determination of the tenancy, unless the lessor at will have notice. (Pinhorn v Souster)

In Marks & Spencer plc v Bnp Paribas Securities Services Trust Company (Jersey) Ltd ([2013] EWHC 1279 (Ch)) a lease contained a break clause. If exercised, the lease would determine in between the quarter days on which rent payments were to be made. The tenants exercised the break clause. On the next quarter day, they paid a full quarter’s rent. After the lease had come to an end, the tenants argued that they were entitled to a repayment of that portion of the rent attributable to the period after the end of the lease.

The lease provided that rent was payable ‘yearly and proportionately for any part of a year by equal quarterly payments in advance on the Quarter Days.’

The tenants rested their argument for recovery on (i) the express words just mentioned, (ii) the presence of an implied term that such repayment would be made, and (iii) restitution. There was no express right of recovery ([29]). They succeeded on the second ground; there was an implied term to this effect ([35] – [37]). The court would not have ordered repayment under the heading of restitution since there had been no total failure of consideration ([42]).

The other ‘excess’ payments made (car park licence fee [47] and insurance charge [49] – [52]) were also recoverable.

The service charge clause provided for an advance payment and (once the accounts for the year were settled) a balancing charge or credit. It was held that the tenants were entitled to invoke the balancing mechanism in the service charge clause even though this was an exercise which would take place after the end of the lease. As a credit against future service charge payments was of no use to them, they were entitled to a refund of the ‘credit’. In fact, the landlords had conceded this point ([56]).

Returning to the recoverability of the excess basic rent payment attributable to the period after the lease came to an end, the court held that:

1. if there had been no break clause and the term had expired between quarters then the tenant would, as a matter of the express terms of the lease (‘proportionately for any part of a year’) have been obliged only to pay rent up to the end of the term . The same result could be reached based on a ‘common sense view’ even without these words ([27]); and

2. the same would be true if the lease had been brought to an end by the exercise of a break clause and it was certain from the outset that the notice was effective to determine the lease ([28]).

The effectiveness of the break clause in this case, however, was conditional so that prima facie rent had to be paid for the full quarter ([28]). There was no express right of recovery of the excess and the words ‘proportionately for any part of a year’ did not confer any such right ([29]).

There was, however, an implied term to the effect that a repayment of the excess rental payment would be made. The court referred to the amounts that would have been payable had it been certain that the lease would end when it did, in fact, end. This meant that a reasonable person would think that no rent was payable for the period after the lease had ended. This conclusion was reinforced by the fact that the tenants had to pay a capital sum if they exercised the break right and it seems unlikely that they were to get both this and rent for the period after the lease ended ([35]).

As a cross-check, the court considered whether the implication of the term was reasonable ([36]) and necessary to give business efficacy to the agreement ([37]). These cross-checks reinforced the conclusion that a term as to repayment was to be implied.

There would be no such implied term if the lease had come to an end as a result of forfeiture ([38]).

The same claim based on restitution would have failed: it was not possible to say that the consideration for the final quarter’s rent had totally failed ([42]).

Michael Lower

In Kim v Chasewood Park Residents Ltd ([2013] EWCA Civ 239, CA (Eng)) K was one of the flat owners at an estate called Chasewood Park (holding under the terms of a 125 year lease). The reversion (a much longer lease) came up for sale. Chasewood Park Residents Ltd was set up by the Residents’ Association to acquire the reversion. On 24th August 2006, the committee of the Residents’ Association sent out a circular letter to residents inviting them to contribute to the cost of acquisition. The letter summarised the benefits of the scheme and these were said to include the fact that those who participated would no longer need to pay the ground rent (then GBP100 annually) and that the 125 year terms could be extended to much longer terms at minimal extra cost.

K, believing that Chasewood Park would acquire the freehold and that a commonhold scheme would be established, agreed to participate. In fact, the reversion was a leasehold and what was proposed was an extension of the leases. Chasewood Park acquired the reversion and those who had agreed to participate were offered longer terms (as promised) but Chasewood Park said that a ground rent of GBP 100 would continue to be payable under the new leases.

K refused to pay the ground rent. In her defence to Chasewood Park’s claim for the rent arrears, she  argued that Chasewood Park was estopped from including a ground rent in the new leases since the circular letter contained statements that:

1. there would be no ground rent to pay following the purchase of the reversion; and

2. that participating residents would be able to extend their leases at no additional cost except a small fee.

The first, and as it happened determinative, issue was whether there had been a clear and unambiguous representation that participants would not have to pay a ground rent. On this, Patten L.J. said:

‘There is no doubt that in order to found a promissory estoppel (in the same way as any other estoppel based on a representation of fact) the representation or promise must be clear and unambiguous. But this principle raises a number of subsidiary questions. Does it mean that the estoppel cannot arise unless there is only one possible meaning of the words used or is the existence of other possible (but perhaps less probable) meanings not fatal to the creation of an estoppel where the Court can say that it was reasonable for the representee to have interpreted the words used in the way he did? There is also an issue about the test to be adopted by the Court. Few, if any, statements are not capable of being interpreted in more than one way. The Court’s usual role in construing, for example, a contract is to arrive at the legally correct meaning of the words. Their construction is a matter of law and the Court’s function is to resolve any ambiguities in reaching its conclusion. But it is arguable that in the case of estoppel it should not go any further than to identify the existence of any real ambiguities in the language. If the statement is open to more than one reasonable interpretation (one of which is fatal to the estoppel defence) then the representee was not entitled to rely on what was said without further clarification and there is no basis for an estoppel.’ ([23])

There was no clear and unambiguous statement here. The circular letter was simply a list of potential benefits. The suggestions were conditional and set out in an early stage in the scheme. They did not amount to the assurance contended for ([31] and [34]).

Nor had there been the necessary reliance since K had misunderstood the nature of the scheme. She had relied on her understanding that there would be a commonhold scheme and that she would not be a tenant at all. This was not merely a question of the legal mechanism to be put in place to give effect to an assurance. She had relied on an assurance that had not been made ([38] – [40]).

Patten LJ considered whether, had there been a promissory estoppel defence, its effect would have been merely suspensory. Would it have been unconscionable to withdraw any assurance that no ground rent was payable? It would not have been unconscionable. There was nothing to lead to such a conclusion. Chasewood Park had offered to reimburse K’s contribution but she had declined the offer. While Chasewood Park’s offer to reimburse K was not determinative, it reinforced the conclusion that it was not unconscionable to withdraw any assurance that no ground rent was payable ([42]).

Similar reasoning applied if one looked at the matter as a claim based on proprietary estoppel. The conclusion that any promissory estoppel would only be suspensory suggested that relief in proprietary estoppel should not take a form that would result in the permanent removal of a liability to pay ground rent. It would be inappropriate to grant relief in the form of a lease with no ground rent ([45]).

Michael Lower

A day to watch the Dragon Boats!

In Cheung Pak Chuen v Au Yeung Wing Chi ([2013] HKEC 721, CFI) C moved to Hong Kong to be with his father and step-mother. Encouraged by them, he brought his family to live in the property owned by the step-mother. He spent some money on the property and on the upkeep of his parents. In part, this was because of their assurance that the property would pass to him on their death provided he looked after them. Also at their suggestion, he gave up his employment and started his own business at the property. His father died. In her will, the step-mother left the property to her nephew rather than to C. After his step-mother’s death, C claimed that he had an interest in the property and he relied on proprietary estoppel.

The nephew argued that there was no reliance since all of C’s actions alleged to be the result of a reliance on the assurances were things that he would have done anyway as a good son. This failed since the assurances had been at least a partial cause of C’s actions (expenditure of money on the property and on looking after his parents).

The nephew also argued that there was no detriment since C had derived considerable advantages from being able to live at, and carry on his business from, the property. On balance, however, the court found that there was not merely a change of position but also detriment.

There is a summary of the law on proprietary estoppel at [72] – [81].

There was the necessary detrimental reliance in this case:

‘Looked at only in this way the detriment suffered by the Plaintiff is said by the Defendant not to be very substantial. Nevertheless, in my view, it is sufficient. He has spent money on the establishment of a business which, although no doubt primarily of benefit to himself and his own family, provided a basis on which he was able to reside with the Parents and, in due course, take care of them. He has provided financial support to the Parents via the “pocket money” some of which might well have been given in any event, but on the Plaintiff’s unchallenged evidence some not.’ ([86], Recorder Anthony Houghton SC)

When it came to the relief, the fact that there had been a clear assurance that the property would belong to C resulted in his being awarded outright ownership of the property ([93]).

Michael Lower

In Master Yield Ltd v Ho Foon Yung Anesis ([2013] HKEC 898, CA) L induced T to enter into a tenancy agreement by a misrepresentation to the effect that it would be possible to install air-conditioning units on the external walls of the property. In fact, the consent of the incorporated owners was needed for this. Had they known, T would not have taken the lease and it was reasonable for T to take that attitude. The question was whether or not the misrepresentation was material and had induced the contract.

Lam JA said:

‘The ultimate question is whether a representee was induced by the representation and it is a question of fact to be asked in respect of this particular representee (as opposed to an objective reasonable bystander). The effect of a representation on an objective reasonable bystander is only relevant in terms of onus of proof.’ ([22])

That is, it is enough that the representee was subjectively influenced. If an objective reasonable bystander would have been influenced, the burden of proof shifts to the representor to show that there was no influence ([21]).

The representation need not have been the only factor influencing the representee to enter into the contract, just one of the factors ([26]).

Since in this case a reasonable, objective bystander would have been influenced and L had not shown that the representation had not influenced T, the misrepresentation claim succeeded. T was entitled to damages under section 3 of the Misrepresentation Ordinance.

Michael Lower

Contract: misrepresentation

A misrepresentation is material if it is one of the factors that induced the representee to enter into the contract. It is enough that, as a matter of fact, the representee was actually influenced by the representation. If a reasonable objective bystander would have been influenced it is for the representor to show that the representee was not influenced (Master Yield Ltd v Ho Foon Yung Anesis)

Leases: break clause: excess rent (for period after the date specified in an effective notice)

If rent is payable quarterly in advance  (for example) and the lease term expires between quarters the tenant need only pay rent calculated to the end of the term. The same is true if the lease ends because of the exercise of a break right and it is clear from the outset that the notice will certainly be effective (there is no outstanding condition). If the effectiveness of the notice is conditional then there will often be an implied right to recover the excess advance rent once the lease has actually come to an end. This is all subject to the general principles of contractual interpretation (Marks & Spencer plc v Bnp Paribas Securities Services Trust Company (Jersey) Ltd)

Proprietary estoppel

The detriment for proprietary estoppel purposes need not be substantial but it must be real and incurred in reliance on the relevant assurance (Cheung Pak Chuen v Au Yeung Wing Chi)

If the statement said to constitute an assurance or representation for promissory or proprietary estoppel purposes  is open to more than one reasonable interpretation (one of which is fatal to the estoppel defence) then the representee is not entitled to rely on what was said without further clarification and there is no basis for an estoppel. (Kim v Chasewood Park Residents Ltd)

Deed of Mutual Covenant: incorporated owners; unauthorised structures

Incorporated owners are not liable to pay for the cost of replacing unauthorised structures that they have removed for some legitimate purpose (Lee Din Chun v Beverly Heights (IO))

Conveyancing: good title: encumbrance

‘In considering if a risk of litigation may constitute an encumbrance, the court will ask : are the facts and circumstances of the case so compelling to the mind of the court that the court concludes beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the encumbrance.’ (Ho Ching Group Ltd v Tsang Pui Lin [12] J Poon J).

Easements: prescription: implied easements following renewal and extension of Government leases

An easement can be acquired by prescription where the use has been for long enough and so on where the use was ‘on a reasonably regular basis’. Easements can be implied into the renewals and extensions of all Government leases in the New Territories in 1973 and 1999 on the basis of necessity, CPO s.16 and Wheeldon v Burrows where the relevant conditions are satisfied (Cheung Yuk Ying v Lo Koon Fuk)

In More Alliance Ltd v Shing Samuel ([2013] HKEC 629, CFI) V agreed to sell property to P. P refused to complete contending that a number of requisitions had not been satisfactorily answered and that V had not shown good title. P successfully sought an order confirming his right to rescind and to recover the deposits paid under the preliminary and formal agreements.

In 2008, an order had been made against the property under section 24(1) of the Buildings Ordinance requiring the demolition of a structure on the roof of the property. V made no attempt to respond to P’s requisition calling for evidence that the order had been discharged / released. This was a blot on title since V had done nothing to show beyond reasonable doubt that the order did not create a risk of a successful claim against P. Thus, V had failed to give good title ([35]). The argument that the order had been registered before the contracts and that the property was sold ‘as is’ did not help V ([31]).

The agreements had been signed by V’s mother pursuant to an undated power of attorney. P promptly raised a requisition seeking evidence as to the date of execution and this was never properly dealt with. Later, outside the contractual timetable for raising requisitions, V’s mother claimed that she was in possession and was the beneficial owner. P raised a requisition in this regard and, again, this was not fully answered. It was held that as the requisition concerning ownership went to the root of title and P had shown due diligence in raising requisitions, the contractual timetable could not be held against him. A simple denial that V’s mother had any claim was not sufficient in the circumstances ([55]). This too amounted to a failure to show good title ([56]).

Finally, the title deeds were not in V’s possession and there were genuine doubts as to whether he would be able to deliver them on completion and so give good title.

Michael Lower

In Chan Yuen Ka Crystal v Chu Cheong Kit Raymond ([2009] HKEC 1705, CFI) the provisional sale and purchase agreement provided that should the seller fail to complete the sale then he was to refund the deposits paid and pay an additional sum equivalent to the deposit as liquidated damages. The clause went on to provide that if the seller were to do this then the purchaser had no right to claim damages or seek specific performance.

The seller was unable to complete. The question was whether the buyer could require the seller to make the payment of liquidated damages just referred to.

There was no doubt that the deposit(s) had to be returned. Rogers V-P was of the view, however, that the buyer could not enforce the requirement to pay the equivalent sum as liquidated damages; this was a penalty unless the buyer could show that it was a genuine pre-estimate of damages.

Unless the buyer could do this, the seller had an option either (i) to comply with the clause (repay the deposits plus the additional sum) as an alternative method of performance of the contract or (ii) to return the deposit(s) and accept that the buyer might bring an action against him for damages for breach of contract ([31] – [32]).

Michael Lower