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A A

DCCJ 1347/2008
B B
IN THE DISTRICT COURT OF THE
C C
HONG KONG SPECIAL ADMINISTRATIVE REGION

D CIVIL ACTION NO. 1347 OF 2008 D

E E

F BETWEEN F

G G
TSANG YUEN MUI Plaintiff
H and H

I CHOI SIM CHING 蔡嬋貞 Defendant I

J J

K Coram: Her Honour Judge H.C. Wong in Court K

Dates of Hearing: 29-31 August, 1 and 15 September 2011


L L
Date of Handing Down Judgment: 4 November 2011
M M

N JUDGMENT N

O O

P 1. The Plaintiff, Tsang Yuen Mui (“Madam Tsang”) was a tenant of the P

premises at shops 6, 15, 16-17, Ground Floor, Waldorf Garden Shopping


Q Q
Arcade, Tuen Mun, New Territories, Hong Kong (“the restaurant
R premises”). Madam Tsang and her ex-husband Mr Lee Yiu Fai (“Mr Lee”) R

operated the Akita Japanese Restaurant (“the restaurant”) at the restaurant


S S
premises from 1 April 2004 to 31 March 2007. They are now operating the
T restaurant at shops 6, 16-17 Waldorf Garden Shopping Arcade. T

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A A

B 2. The Defendant Madam Choi Sim Ching (“Madam Choi”) is and was the B

registered owner of Flat 15, Ground Floor, Waldorf Garden Shopping


C C
Arcade (“the suit premises”).
D D

3. By a written Chinese tenancy agreement (“the tenancy agreement”)


E E
entered into between the Plaintiff and the Defendant, the suit premises was
F let by the Defendant to the Plaintiff for business purpose for a term of three F

years commencing from 1 April 2004 to 31 March 2007 at a monthly rental


G G
of $8,000 for the first 2 years and $8,800 for the third year exclusive of
H government rates and management fees. In or around February or March H

2007, the Plaintiff and the Defendant negotiated the renewal of the tenancy
I I
and the Plaintiff began to pay an increased monthly rental of $9,800 from
J 1 April 2007. J

K K
4. In the present proceedings, the Plaintiff claims against the Defendant for
L L
the return of the rental deposit of HK$17,600. The Defendant, on the other

M
hand, counterclaims for:- M

N N
(i) The sum of $9,800 as one month’s rental in lieu of

O
notice to quit; O

P P
(ii) The sum of $9,969.43 including outstanding rental,

Q
management fee, government rates and air-conditioning Q
fee on a pro rata basis from 1 October to 25 October
R R
2007;

S S

T T

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A A
(iii) The sum of $91,300 incurred by the Defendant,
B including estimated cost for repair, reinstatement, B

removal, reconnection and replacement charges.


C C

D The Plaintiff’s Case D

E E
5. According to the evidence of Lee Yiu Fai, the ex-husband and business
F partner of the Plaintiff, Madam Tsang Yuen Mui, the Plaintiff was the F

tenant of all four premises located on the ground floor of Waldorf Garden
G G
Shopping Arcade in Tuen Mun, namely shops 6, 15 and 16-17 between
H 1 April 2004 to 31 March 2007. Shop 15 (“the suit premises”) is and was H

owned by the Defendant Madam Choi, who signed a written 3 year tenancy
I I
agreement with Madam Choi for the said period. The Plaintiff paid to the
J Defendant two months rental as rental deposit for the tenancy amounting to J

K
$17,600. Under Clause 7 of the tenancy agreement, upon delivery of K
vacant possession, the landlord would return the rental deposit to the
L L
tenant. On this basis, the Plaintiff claims for the return of the said deposit.

M M
6. Mr Lee claimed that in or about mid-March 2007, Madam Choi
N N
approached him to discuss the renewal of tenancy asking for an increase in

O
rental at $9,800 a month after the expiry of the existing lease. Mr Lee O
claimed that Madam Choi’s offer was not acceptable to him and Madam
P P
Tsang. On behalf of Madam Tsang, he entered into an oral agreement with

Q
Madam Choi to extend the tenancy for a short period. The terms of the oral Q
agreement were:-
R R

S (a) The Plaintiff would deliver vacant possession of the suit S


premises on 30 September 2007;
T T

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

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

E E
(d) The Plaintiff shall reinstate the suit premises pursuant to
F clauses 17 and 18 of the tenancy agreement before F

delivery of possession to the landlord, namely, to set up


G G
a new wall and an electricity switch box.
H (“the first oral agreement”) H

I I
7. Mr Lee claimed that the reason for refusing to renew the tenancy of the
J suit premises for a term of three years was the increased monthly rental to J

K
$9,800 demanded by the landlord. He claimed that Madam Choi did not K
require Madam Tsang to pay an extra $2,000 for the increase rental deposit
L L
and the parties did not discuss the execution of a new written tenancy

M
agreement. Madam Tsang began paying the monthly rental of $9,800 in M
April 2007 to Madam Choi.
N N

O
8. In or about August 2007, the Plaintiff and Mr Lee’s restaurant engaged O
the services of a contractor Leung Kee Water & Electrical Engineering
P P
Company (“Leung Kee”) to carry out renovation works at shops 6, 16 and

Q
17. Mr Lee claimed that neither Madam Tsang nor the contractor Leung Q
Kee destroyed the interior of the suit premises. He claimed the work
R R
conducted at the suit premises was pursuant to the terms of the tenancy

S agreement and the oral agreement. S

T T

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9. Mr Lee further claimed that on a day shortly before 30 September 2007
B while the renovation work was underway, Madam Choi and her husband B

attended the suit premises. She requested Madam Tsang to carry out
C C
certain extra works, including the demolition and removal of sundry items
D at the suit premises and all the tiles affixed on the wall. Mr Lee turned D

down Madam Choi’s request.


E E

F 10.Mr Lee made a number of phone calls to Madam Choi on 30 September F

2007, requesting her to repossess the suit premises, but the request was
G G
rejected by Madam Choi because some of the floor tiles had not been
H removed. Mr Lee admitted that because of Madam Choi’s unreasonable H

request, he had kept the keys to the suit premises.


I I

J 11.In early October 2007, Mr Lee had a discussion with Madam Choi and J

K
her husband when they visited the suit premises. They came to an K
agreement in respect of the delivery of possession of the suit premises (“the
L L
second oral agreement”). The terms of the second oral agreement were:

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

O O
(b) Immediately upon the conclusion of the second oral
P P
agreement, the Defendant would take possession of the

Q
premises; and Q

R R
(c) The Defendant would return the rental deposit of

S HK$17,600 to the Plaintiff in due course. S

T T

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12.Mr Lee said, he had returned the set of keys in triplicate to Madam Choi
B on the same day. Madam Choi in turn gave one set of keys to one of the B

decoration workers of Leung Kee and instructed him to demolish the floor
C C
tiles at the suit premises and payment would be settled by Madam Tsang or
D Mr Lee. Mr Lee also claimed that Madam Choi had given one set of keys D

to a property agent located on the ground floor of Waldorf Garden in Tuen


E E
Mun.
F F

13.In answer to the Defendant’s counterclaim, the Plaintiff denied she


G G
damaged the wall, blocked the drainage outlet, destroyed the central air-
H conditioning system, the stove, water pipes and electricity wiring or H

wrongly redirected the water meter and the 3-phase electricity supply
I I
system at the suit premises. The Plaintiff claimed the drainage system, the
J stove, water pipes and electricity system located at the premises did not J

K
belong to the Defendant because they were installed at the suit premises by K
the Plaintiff during the tenancy for the operation of the restaurant. That the
L L
drainage system, water pipes, electricity system installed at the suit

M
premises were the extension from the Plaintiff’s restaurant and the stove M
was installed by the Plaintiff when the suit premises was used as the
N N
restaurant’s kitchen.

O O
14.Mr Lee claimed the electricity supply at the suit premises was controlled
P P
by a central electricity panel at the Waldorf Garden Shopping Arcade

Q
where the electricity meters for all the shops at the Arcade are located. The Q
central electricity panel is under the care and control of the management
R R
office of the Waldorf Garden. Mr Lee admitted that originally, each of

S shops 6, 15, 16-17 had an electricity switch box at their respective premises S
with electricity supplied from the central electricity panel. When the
T T

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A A
restaurant was operating at shops 6, 15, 16-17, the electricity supplied by
B the China Light & Power (“CLP”) was registered under a single account. B

C C
15.Mr Lee claimed that before the restaurant commenced business in
D August 1997, the restaurant had applied to Guardian Property and CLP for D

a 3-phase electricity supply to the restaurant which was duly approved and
E E
registered under shop 6. At the time, the CLP had installed an extra
F electricity cable for which the Plaintiff had to pay an additional deposit to F

CLP and Guardian Property, the deposit the Plaintiff paid to CLP was
G G
HK$29,000 while the deposit to Guardian Property was $4,000. The
H Plaintiff therefore claimed that Madam Choi is not entitled to the deposit of H

$4,600 because Madam Choi did not pay the deposit for shop 15 to the
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CLP.
J J

K
16.Mr Lee further claimed that in or about August 1997 before the K
restaurant commenced business, the Plaintiff applied to Guardian Property
L L
for the installation of the drainage system as the tenant of shop 6. It was

M
approved by Guardian Property and a deposit to Guardian Property of M
$4,000 was paid by the Plaintiff. He insisted that throughout the operation
N N
of the restaurant, the four units shared one single drainage system, and

O
when the Plaintiff delivered vacant possession to Madam Choi, the Plaintiff O
had reinstated the suit premises to its original condition.
P P

Q
17.On the central air conditioning supply, Mr Lee denied the Plaintiff had Q
destroyed the air conditioning unit at shop 15. He claimed that the Plaintiff
R R
had complied with clause 17 of the tenancy agreement and repaired the air

S conditioning at the suit premises. Consequently, Madam Choi is not S


entitled to any damages under the counterclaim.
T T

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18.Mr Lee further alleged that when the Plaintiff and he took over the
B restaurant from its former owner「東瀛居」, they had bought the right to B

use the drainage system installed by the former owner. Consequently, they
C C
were entitled to block the drains outlet at the suit premises before the
D Plaintiff delivered vacant possession to Madam Choi. He further claimed D

E
that he had reinstated the suit premises when he delivered vacant E
possession to Madam Choi in accordance with the tenancy agreement.
F F

G
The Defendant’s Case G

H H
19.It is the evidence of Madam Choi that she bought the suit premises in

I
1983 where she operated a stationery and gift shop with her husband. I
Because of the power requirement for spot lights installed at the shop, she
J J
had obtained approval from China Light & Power to increase the electricity

K
supply to 3-phase power loading. In 1991, Madam Choi and her husband K
closed the stationery and gift shop and let out the suit premises. Prior to
L L
1998, the suit premises was let out to a hairdresser. Between 1 April 1998

M to 31 March 2001, the suit premises was let to a Mr Leung Wing Cheung as M
one of four units used as a Japanese restaurant 「東瀛居」. Mr Leung and
N N
his brother Mr Leung Kin Shing had operated a karaoke bar at shops 6, 16
O and 17 before they took out the lease on the suit premises on 1 April 1998. O

At the time, Mr Leung informed Madam Choi they would install a kitchen
P P
at the suit premises and they would install and connect the drainage and
Q water pipes at the suit premises that the drains at the restaurant would be Q

connected to the shopping arcade’s main drains through the underground


R R
drains outlet at the suit premises. She was also informed by Mr Leung that
S he would install a new switch box to link up the four units replacing the S

switch box and meter of the suit premises. Madam Choi said that was why
T T
she had specified in clause 18 of the tenancy agreement that on the expiry
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A A
of the tenancy, the tenant would be required to reinstate the partition wall,
B the glass partition and the original electricity switch box and meter. B

C C
20.On 18 January 1999, Mr Leung transferred the restaurant「東瀛居」to
D a new owner named Mr Hou Sze Heng who operated the restaurant under D

E
the name of 「秋田日本料理」(Akita Japanese Restaurant). Madam Choi E
was only informed of the transfer in March 1999 and Mr Hou agreed to
F F
take over the existing lease Mr Leung had signed with Madam Choi and Mr

G
Hou accepted the same conditions and terms of the 1998 tenancy G
agreement. Upon expiry of the lease on 31 March 2001, Mr Hou renewed
H H
the tenancy for a further three years up to 31 March 2004 at the same rent

I of $8,800 per month. Madam Tsang, the Plaintiff, was a witness to the 1 I
April 2001 tenancy agreement. Madam Choi was given to understand that
J J
Madam Tsang and Mr Hou were business partners. Madam Choi claimed

K she had reminded Mr Hou Sze Heng that he was required to reinstate the K
suit premises as agreed under the previous tenancy agreement on the expiry
L L
of the new lease and Mr Hou agreed, consequently, to the inclusion of

M clauses 17 and 18 in the 1 April 2001 tenancy agreement. She claimed that M
the same terms requiring Mr Leung in the previous agreement applied to
N N
Mr Hou under the new tenancy agreement including the reinstatement of
O the partition wall, the glass partition, the 3-phase electricity switch box and O
the requirement that the drainage system should not be removed.
P P

Q Q

21.It was Madam Choi’s evidence that when the lease expired on 31 March
R R
2004, she agreed to renew the lease with Madam Tsang for a period of
S three years on the same terms and conditions as in the previous leases with S

Mr Leung and Mr Hou. At the request of Madam Tsang, Madam Choi


T T
agreed to reduce the monthly rental to $8,000 due to the effects on the
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economy caused by SARS in 2003. Madam Choi claimed that Madam
B Tsang just as Mr Leung and Mr Hou before her, had agreed to the same B

conditions to reinstate the partition wall, the glass partition, the 3-phase
C C
electricity switch box and the retention of the drainage system.
D D

22.Madam Choi said, in or about February to March 2007, Madam Tsang


E E
telephoned her to discuss the renewal of the lease of the suit premises. She
F informed Madam Tsang that the monthly rental of the suit premises would F

be increased to $9,800. She claimed Madam Tsang had agreed to the


G G
increase of rental, and she had been paying the new rental since April 2007.
H Madam Choi further claimed that even though the parties did not H

immediately sign a written tenancy agreement, it was her understanding


I I
that both she and Madam Tsang accepted that other than the increase of
J rental, all conditions and terms of the previous tenancy agreement remained J

K
the same and the renewed term of tenancy was for three years from 1 April K
2007 to 31 March 2010. According to Madam Choi, Madam Tsang should
L L
have paid a further $2,000 as rental deposit to make up the difference due

M
to the increase of rental. She did not ask for it because when the monthly M
rental was reduced by $800 in 2004, she had retained the extra $1,600 on
N N
the deposit as she had intended to increase the rental when the market

O
recovered, for that reason, she did not ask for the extra $2,000 on the O
increased rental deposit in 2007.
P P

Q
23.Madam Choi claimed that in May 2007, she visited the suit premises Q
intending to sign a written tenancy agreement with Madam Tsang. On that
R R
occasion, Madam Tsang told her she was busy and she would sign the

S agreement later when she was less busy. Unfortunately, Madam Tsang S
never contacted her for the purpose and failed to call her back whenever
T T

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A A
she called. As Madam Tsang had been paying the rental on time and as she
B was a long term tenant, Madam Choi did not insist. B

C C
24.Madam Choi visited the Plaintiff’s restaurant on 4 September 2007 to
D collect the September rental, she forgot to bring with her the rental receipt, D

Madam Tsang told her at the time to bring the receipt when she came to
E E
collect the October rental. However, on 25 September 2007 when she
F passed by the Plaintiff’s restaurant, she found the restaurant had ceased F

operation and the premises at shops 6, 16 and 17 was undergoing


G G
renovation. Upon seeing Mr Lee coming out of the restaurant premises,
H Madam Choi approached him. She was told by Mr Lee then that Madam H

Tsang intended to hand over possession of the suit premises to Madam


I I
Choi on 30 September 2007 and that Madam Tsang would not be renting
J shop 15 in October 2007. Madam Choi was surprised by the information J

K
and told Mr Lee that Madam Tsang should give her prior notice. K

L L
25.On or about 27 or 28 September 2007, Madam Choi visited the suit

M
premises again to find the interior of the shop partly demolished with a big M
hole on the floor closed to the entrance, the glass partition facing the street
N N
was cracked, the wall tiles were broken and partly demolished, one of the

O
two air conditioning fan coil units was taken down and left on the floor, the O
second one was missing and the drainage outlet blocked with cement. She
P P
informed Mr Lee at the shop next door that he had to reinstate the suit

Q
premises before delivery of vacant possession, otherwise, she would retain Q
the rental deposit. Mr Lee agreed to her request. On 30 September 2007,
R R
Mr Lee telephoned her to inform her that Madam Tsang was ready to

S deliver vacant possession of the suit premises. However, Madam Choi S


found they had only replaced the glass partition, removed the broken tiles
T T
from the wall and filled in the hole at the entrance of the unit, furthermore,

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A A
she found all electricity wiring and the electricity switch box had been
B removed and the drainage outlet blocked. She refused to take possession of B

the suit premises and contacted Madam Tsang informing her that the suit
C C
premises had to be reinstated.
D D

26.On 6 October 2007, Madam Choi visited the suit premises intending to
E E
recover possession. She discovered that although the partitions had been
F restored, there was no electricity switch box or wiring at the suit premises, F

and the drainage outlet was still blocked. She again requested Madam
G G
Tsang to unblock the drainage outlet and restored the original electricity
H supply at the suit premises. However, Madam Tsang claimed she had H

already reinstated the suit premises as agreed.


I I

J 27.Eventually Madam Tsang had only reconnected a single phase J

K
electricity switch box at the suit premises. Madam Choi found the K
Plaintiff’s restaurant continued to operate at shops 6, 16 and 17 of the
L L
Waldorf Garden Shopping Arcade. She claimed the restaurant had taken

M
over the 3-phase power supply from the suit premises and transferred it to M
the Plaintiff’s restaurant. Madam Choi further claimed that the drainage
N N
outlet at the suit premises was blocked because Madam Tsang had

O
relocated the restaurant’s kitchen drains to shops 6, 16 and 17. Madam O
Choi counterclaims against Madam Tsang for failure to reinstate the suit
P P
premises under the tenancy agreement and that the rental deposit should be

Q
set off against the costs of reinstatement. Q

R R
28.Madam Choi claimed that she had to pay for the reinstatement herself

S which included the two central air-condition fan coil units, because when S
the suit premises was handed over to Madam Choi, only one air
T T
conditioning fan coil unit remained, the other had disappeared. The

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A A
remaining one did not work and was coated in grease. Clause 17 of the
B tenancy agreement stipulated that the tenant was responsible for the repair B

and maintenance of the central air conditioning system.


C C

D Blocked Drains Outlet D

E E
29.Madam Choi had to engage contractors to open up the floor at the
F entrance area of the suit premises to look for and unblock the drains outlet F

which was connected to the building’s main drainage outlet. It took her
G G
contractor two attempts before it was found.
H H

Reconnection of electricity switch box


I I

J 30.Madam Choi claimed that because the Plaintiff had failed to reconnect J

K
the electricity supply, she had to instruct Leung Kee to reconnect the K
electricity supply and installed a meter for the suit premises. The work was
L L
completed on 25 October 2007. Madam Choi claimed that because of the

M
work involved to reinstate the suit premises, Leung Kee completed the M
work and delivered four sets of new keys to her on 31 December 2007.
N N

O O

P P

Q Q
Wall Tiles and Wall Plaster
R R

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

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A A

B Levelling the floor B

C C
32.Madam Choi found the Plaintiff had removed all the drains and
D plumbings at the said property, she had obtained a quotation for the D

reinstatement of the plumbings at the suit premises at $45,000.


E E

F 33.As soon as the reinstatement work was completed, Madam Choi had put F

up the suit premises for rental but it was not until April 2010 that she was
G G
able to let it out as a warehouse to 「日昌發展有限公司」 at a monthly
H H
rental of $12,500 for a period of 2 years, inclusive of rates, management

I
fees and air conditioning charges. I

J J
Issues of dispute

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

M (1) Whether there was an oral tenancy agreement in mid M


March 2007 between Mr Lee Yiu Fai and the Defendant
N N
for 6 months as alleged by the Plaintiff.

O O
(2) Whether there was an oral agreement made in or about
P P
February and March 2007 between the Plaintiff and the

Q Defendant for a renewal of the first written tenancy Q


agreement of 3 years as alleged by the Defendant. If so,
R R
whether the terms of the first written tenancy agreement
S applied to the extension period. S

T T

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A A
(3) Whether the Defendant was entitled to deduct the
B amount equivalent to one month’s deposit in the sum of B

$9,800 pursuant to clause 1 of the first written tenancy


C C
agreement.
D D
(4) The date of delivery of vacant possession of the suit
E E
premises, was it 30 September 2007 or 25 October

F 2007? F

G (5) Whether the Defendant is entitled to claim rent or G

mense profit, management fee, government rent and


H H
rates, and air conditioning fee for the period between
I 1 October 2007 and 25 October 2007 in the total sum of I

$9,969.43?
J J

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

(a) Reinstatement/repair of the drainage system;


M M
(b) Reinstatement/repair of walls;
N (c) Reinstatement/installation of water pipes; N

(d) Reconnection/reinstatement of electricity wiring;


O O
(e) Removal/demolition of the raised floor; and
P (f) Replacement of the air condition units. P

Q Q

R R

(7) Whether there was a second oral agreement made on


S S
6 October 2007? If so, what are the terms of the second
T T

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A A
oral agreement? Has the Plaintiff discharged her duty
B under the second oral agreement? B

C C
Findings
D (1)&(2) Whether there was an oral tenancy agreement in mid March 2007 D

between Mr Lee Yiu Fai and the Defendant for 6 months as alleged by the
E E
Plaintiff? Or whether there was an oral agreement in or about February or
F March 2007 for the renewal of the first written tenancy agreement for 3 F

years; if so, whether the terms of the first written tenancy agreement
G G
applied to the extension period?
H H

35.Section 3 of the Conveyancing and Property Ordinance Cap 219


I I
requires all dispositions of land to be in writing and signed by the parties.
J S. 6 of the Ordinance provides that: J

K K
“6. Creation of interest in land by parol
L L
(1) All interests in land created by parol and not put in writing
and signed by the persons creating the same, or by their
M agents thereunto lawfully authorized in writing, have, M
notwithstanding any consideration having been given for
the same, the force and effect of interests at will only.
N N
(2) Nothing in section 3 or 5 or in subsection (1) shall affect
O the creation by parol of leases taking effect in possession O
for a term not exceeding 3 years (whether or not the lessee
is given power to extend the term) at the best rent which
P can be reasonably obtained without a premium.” P

Q 36.Mr Chan, counsel for the Defendant, informed the Court at the hearing Q

R
that the Defendant is no longer seeking the enforcement of the 3 year oral R
tenancy agreement. On that basis, this Court would only be required to
S S
determine whether the parties had agreed to a renewal of the lease for 6

T
months or for 3 years and its consequences. T

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A A

B 37.After considering the witness evidence, I find the Plaintiff’s and Mr B

Lee’s evidence to be inconsistent and contradictory. I find Madam Choi a


C C
reliable witness. I accept Madam Choi did discuss the renewal of the lease
D for a further 3 years in or about February and March 2007 at a monthly D

rental of $9,800. I am not convinced that Madam Choi would agree to a 6


E E
months extension in the terms alleged by the Plaintiff as the “first oral
F agreement”. Had she done so, she would not have been surprised by the F

sudden closure of the restaurant in September 2007. Had the Plaintiff


G G
intended for an extension of 6 months, Madam Tsang would not have asked
H Madam Choi to give her the September rent receipt the following month H

when Madam Choi would come for the rent in October 2007. I do not
I I
believe Madam Choi had made up that conversation on the rent receipt with
J Madam Tsang. It has a ring of truth. J

K K
38.I accept Madam Choi did not receive any prior notice from Madam
L L
Tsang or Mr Lee until 25 September 2007 when Madam Choi passed by

M
the suit premises and found demolition work underway at the suit premises. M
It was when she came across Mr Lee coming out of the restaurant premises
N N
that she was informed for the first time that the Plaintiff would be handing

O
over the suit premises to Madam Choi at the end of September 2007. O

P P
39.I accept Madam Choi’s evidence that when she and Madam Tsang

Q
discussed about the renewal of the lease of the suit premises in or about Q
February and March 2007, Madam Choi had proposed an increase of rental
R R
to $9,800 per month for a period of 3 years up to 31 March 2010, Madam

S Tsang and her partner Mr Lee were reluctant to pay the increased rental but S
they had little choice when the lease was due to expire in March 2007 and
T T
Madam Choi stood her ground. However, as neither party had put the oral

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A A
agreement in writing and neither party had insisted on an immediate
B signing of a written tenancy agreement, Madam Choi had allowed Madam B

Tsang to drag the matter on. I am not convinced the first oral agreement
C C
alleged by the Plaintiff was reached and consented to by Madam Choi. I
D accept Madam Choi did request Madam Tsang to sign a written 3 years D

tenancy agreement from time to time, but it was clear Madam Tsang and
E E
Mr Lee were reluctant to do so. Consequently, the existing tenancy was
F allowed to hold over and carry on as a tenancy at will. As rental was paid F

on a monthly basis, it became a month to month tenancy on the same terms


G G
and conditions as in the first written tenancy agreement at a monthly rental
H of $9,800. The month to month tenancy began on 1 April 2007 until H

Madam Tsang vacated the premises.


I I

J (3) Whether the Defendant was entitled to deduct the amount equivalent J

K
to one month’s deposit in the sum of $9,800 pursuant to clause 1 of the first K
written tenancy agreement
L L

M
40.According to Madam Choi’s evidence, she was only informed by Mr M
Lee on 25 September 2007 that Madam Tsang would no longer be renting
N N
the suit premises in October 2007 and that Mr Lee and Madam Tsang both

O
admitted no formal notice to quit orally or in writing was given to Madam O
Choi. Under the law, for a month to month tenancy, the tenant is required
P P
to give one month notice to quit. If the tenant failed to give sufficient

Q
notice, then the tenant must pay the landlord rental in lieu of notice. In this Q
case, the notice being one month, the tenant is required to pay the landlord
R R
one month rental in lieu of notice. Because the same terms of the first

S written tenancy agreement applies to the held over tenancy, clause 1 of the S
said tenancy agreement is binding on the tenant. Therefore Madam Choi is
T T

U U

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A A
entitled to deduct one month rental from the rental deposit under clause 1
B as payment in lieu of notice. B

C C
Issues 4 and 7
D (4) The date of delivery of vacant possession of the suit premises: was it D

30 September 2007 or 25 October 2007?


E E

F (7) Whether there was a second oral agreement made on 6 October 2007? F

If so, what are the terms of the second oral agreement? Has the Plaintiff
G G
discharged her duty under the second oral agreement?
H H

41.It is the Plaintiff’s witnesses’ evidence that vacant possession of the suit
I I
premises was delivered on 30 September 2007, this was disputed by
J Madam Choi. While Mr Lee claimed that he had requested Madam Choi to J

K
accept delivery of vacant possession of the suit premises on 30 September K
2007, Madam Choi did not attend the premises claiming it was late at night
L L
and she was concerned for her safety. Madam Choi did not visit the

M
premises until 6 October 2007 when Mr Lee returned a set of keys M
belonging to the suit premises to her. Madam Choi however denied the
N N
said premises was ready for repossession because it was full of rubbish and

O
kitchen equipments belonging to the Plaintiff’s restaurant. O

P P
42.Mr Lee claimed that there was a second oral agreement reached on that

Q
occasion between himself and Madam Choi on the reinstatement of the suit Q
premises. Madam Choi denied there was any such oral agreement. She
R R
claimed she had required Madam Tsang and Mr Lee to remove the

S remaining tiles on the floor because the suit premises was full of rubbish S
with the floor partially covered in tiles, she therefore refused to take
T T
repossession. She produced photographs taken in October 2007 showing

U U

V V
- 20 -

A A
various stages of repair at the suit premises during that month. Mr Lee,
B under cross examination, admitted that a cooking pot in photo 12 (on page B

101 of the bundle) belonged to the restaurant. Based on such evidence, it is


C C
clear the suit premises was not ready for delivery of vacant possession to
D the landlord on 6 October, i.e. 6 days after the Plaintiff, Madam Tsang, said D

she had delivered vacant possession to the landlord.


E E

F 43.According to Mr Lee, he had instructed the contractor Leung Kee to do F

the following work at the suit premises in August 2007:


G G

H (1) erect a new partition wall; H

(2) erect a new glass wall and glass door (at the entrance of
I I
the suit premises leading to the shopping arcade);
J (3) remove all sundries at the ceiling of the suit premises; J

K
(4) remove the tiles on the wall of the suit premises; K
(5) erect a new electricity switch box and install two sets of
L L
lights at the suit premises;

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

N N
44.It is obvious the work was not completed on or before 30 September

O
2007 and that some of the work was still not done by 6 October 2007 when O
Madam Choi visited the suit premises. She had demanded Madam Tsang
P P
and Mr Lee to reinstate the premises in accordance with the tenancy

Q
agreement on that occasion, in particular, the supply of electricity, water Q
and air conditioning at the suit premises. On 25 October, she brought with
R R
her a copy of her ID card intending to register with the building

S management for the electricity and water meter in her name. However, she S
found only the partitions were restored but no electricity cable or switch
T T
box installed and the drainage outlet was still blocked, she then requested

U U

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A A
Madam Tsang to unblock the drainage outlet and restore the electricity and
B water supply to the suit premises. Madam Tsang refused and they had a B

row on that day.


C C

D 45.I have carefully assessed the evidence of both the Plaintiff’s and the D

Defendant’s witnesses and examined the photographs taken of the suit


E E
premises, I found the evidence of Madam Choi credible, I accept the suit
F premises was not ready for hand over on 30 September or 6 October 2007. F

Because of the unsatisfactory state of the reinstatement, Madam Choi was


G G
extremely unhappy the way the tenancy was terminated by the Plaintiff, the
H condition of the premises when the Plaintiff attempted to hand over at the H

end of September or in early October 2007. I accept Madam Choi’s


I I
evidence that the suit premises was left in a dilapidated state with partially
J demolished tiles on the floor and on the wall, the air conditioning fan coil J

K
units were removed from the ceiling, the drains outlet blocked and the K
plumbings had disappeared from the suit premises. Meanwhile, Madam
L L
Choi insisted that Madam Tsang should reinstate the suit premises in

M
accordance with the terms and conditions of the tenancy agreement, but M
Madam Tsang and Mr Lee completely ignored her requests. As the matter
N N
dragged on, the reinstatement work at the suit premises was delayed. On

O
the Plaintiff’s alleged second oral agreement, the tenant is bound by the O
covenant to repair under the terms of the tenancy agreement, should it be
P P
complied with the landlord has to return the deposit under the agreement.

Q
There was no need for the parties to reach the second oral agreement Q
because they were both bound to comply with the terms of the tenancy
R R
agreement. I therefore, conclude there was no second oral agreement save

S that the Plaintiff had agreed to reinstate the suit premises under clauses 13, S
14, 17 and 18 of the tenancy agreement.
T T

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A A
(5) Whether the Defendant is entitled to claim rent or mense profit,
B management fee, government rent and rates, and air conditioning fee for B

the period between 1 October 2007 and 25 October 2007 in the total sum of
C C
$9,969.43
D D

46.Based on the aforesaid findings, the Defendant did suffer loss and
E E
damages as a result of the Plaintiff’s failure to deliver vacant possession
F under the terms and conditions of the tenancy agreement. I allow the F

Defendant’s claim for payment of rent, mense profit, management fee,


G G
government rent and rates, air conditioning fee, on a pro rata basis, between
H 1 and 25 October 2007 in the sum of $9,969.43. H

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

K
Reinstatement or repair of: K
(a) the drainage system;
L L
(b) the walls;

M
(c) the water pipes; M
(d) electricity wiring;
N N
(e) the raised floor; and

O
(f) the air conditioning units. O

P P
47.I find Madam Choi’s request for reinstatement under the tenancy

Q
agreement to be entirely reasonable. It was a condition of the tenancy Q
agreement under clauses 17 and 18 that the tenant should reinstate the
R R
partition wall, the glass partition and glass door as well as the plumbing

S and electricity wiring and meter and maintain the air conditioning units. So S
far as the drainage outlet is concerned, I accept Madam Choi’s evidence
T T
that it was installed by the tenant who operated a hairdresser at the

U U

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- 23 -

A A
premises before the suit premises was let to Mr Leung as part of a
B restaurant. Mr Leung had installed and extended the drainage system B

leading to the drainage outlet at the suit premises. Consequently, the tenant
C C
who took over the tenancy after Mr Leung had in subsequent tenancy
D agreements accepted the reinstatement and the restoration of the suit D

premises in a state it was in when the restaurant took over those premises
E E
under clauses 10, 13, 14, 17 and 18 of the tenancy agreement. Even though
F clauses 10, 13 and 14 were standard terms on a printed tenancy agreement F

form, Madam Choi did remind her tenants of those terms and the additional
G G
clauses 17 and 18 each time the tenancies were renewed. Clauses 10, 13,
H 14, 17 and 18 stated:- H

I I
“(10) 該樓一切門窗,廚房及浴室之設備,如潔具,水喉,
J
水渠等如有損壞,租客須負責修理或賠償。如租客因 J
疏忽而毀壞本樓之設備,損及別人之傢具衣物或傷害
其他人等,租客須負責賠償。租客須自投風災,水,
K 火,盜竊及意外保險,租客如有任何損失,業主不負 K
任何責任。……
L L
(13) 租客搬進該樓宇時,裝修入牆間格窗花等,遷出時不
得拆回以維持該樓原有之齊整。如得業主同意,租客
M 方可拆回但必須將該樓完整修理。該樓宇內之電器設 M
備包括/部熱水爐,/部冷氣機,水電分錶各一個,
N
租客退租時,須要完整地交回業主。如租客故意損壞 N
該等設備可被控告惡意破壞物品罪並須負責賠償。

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

Q Q
(17) 雙方協議:舖內之中央冷氣於交舖時,租客必須負責
維修。
R R

(18) 雙方協議:(1) 如租客不租此舖時,需要原庒間好幅牆。


S (2) 玻璃間格要原庒做好給業主。(3) 要駁好電錶。” S

T T

U U

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A A
48.As to the extent and the cost of reinstatement, a number of authorities
B have been referred to me by the Plaintiff’s counsel, Ms Yung, on the right B

of the tenant to remove the tenant’s fixtures from the demised premises. In
C C
the English Court of Appeal case of New Zealand Government Property
D Corporation v. H.M. & S. Limited [1982] 2 Weekly Report 837, the tenant D

occupied the demised premises as a theatre under a lease which expired on


E E
30 September 1970. Before the end of the old lease, the landlord decided
F to terminate the tenancy under the legislation and serve a notice followed F

by negotiations on the new lease. A new lease for a term of 21 years from
G G
1 October 1970 was executed at the rate of £25,000 per annum for the first
H seven years with the next seven years at open market rental. The parties H

I
disagreed on the appropriate rental for the second seven years. The dispute I
was referred to arbitration. On appeal by the tenant, Woolf J. held that the
J J
rent was to be fixed on the basis that the tenant had removed all tenant’s

K
fixtures annexed to the premises during the terms of the old or new leases. K
The Court of Appeal dismissed the appeal by the landlord and held that the
L L
tenant had the right to remove the tenant’s fixtures from demised premises

M
so long as he was in possession as a tenant. M

N N
49.The New Zealand Government Property Corporation case was decided

O
based on very different background where the tenant had a long lease and O
had installed the equipments for a theatre at the leased property. The case
P P
was on assessment of rental. In the present case, under the tenancy

Q agreement, the landlord had stipulated a covenant of repair which the tenant Q
had to comply with. Clause 13 of the tenancy agreement stipulated that the
R R
tenant shall not remove the existing decoration, fixtures and windows when

S the tenant delivers vacant possession on expiry of the lease. Under clauses S
17 and 18, the tenant was required to maintain the air conditioning units
T T

U U

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- 25 -

A A
and to reinstate the wall partitions, the glass wall and the electricity switch
B box. B

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

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

L 51.In other words, the tenant cannot deliver up the premises in a L


dilapidated state under the common law and under the tenancy agreement’s
M M
terms and conditions, he has to return it in the state it was delivered to him

N at the beginning of the tenancy. The tenant’s duty to deliver up possession N


to the landlord in good and tenantable order and repair under the tenant’s
O O
covenant to repair means he has to make the premises reasonably fit for

P occupation by a tenant who would have been likely to occupy it at the time P
of the demise even though the landlord may be expected to carry out minor
Q Q
redecorations before the start of every new letting.
R R
52.The standard of repair according to the author of Halsbury’s Laws of
S S
Hong Kong Vol. 17(1) at page 298 is:
T T

U U

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

Covenants of this nature must be reasonably construed. The


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

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

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

 This covenant is commonly found in printed forms of


Q Q
tenancy agreement in Hong Kong.

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

U U

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A A

B Removal of water pipes and blockage of drains outlet B

C C
54.I accept the drains outlet connected to the main drains of Wardorf
D Shopping Arcade from the said premises was first installed by the D

hairdresser tenant for the tenant’s use at the time. The Plaintiff admitted
E E
the four shops shared one single drainage system at the time when the
F restaurant occupied shops 6, 15, 16 and 17. The drainage system was F

moved to shops 6, 16 and 17 in September 2007 during the renovation,


G G
when the Plaintiff blocked the drains outlet with cement at the suit
H premises. It was not necessary for the Plaintiff to deliberately block the H

drains outlet at the suit premises for the restaurant had installed a separate
I I
drainage system in 1997 when it operated a bar and karaoke at shops 6, 16
J and 17. The two drainage systems had existed side by side before the J

K
restaurant took over the suit premises and made used of the drains outlet. K
The act reflected the cavalier attitude of the Plaintiff in respect of the
L L
reinstatement work. As a result, the Defendant had great difficulties in

M
finding the exact location of the drains outlet at the suit premises. It took a M
number of attempts by the contractor to locate where the drains outlet was
N N
and breaking the floor slab which had been raised by the Plaintiff to cover

O
the drainage system at the said premises when it was used as a kitchen. O

P P
55.When Madam Tsang and her partner Mr Lee took over the tenancy from

Q
the former tenant Mr Hou and operated the restaurant at the same four Q
shops, not only did she take over the fixtures at the suit premises, she also
R R
inherited the liability of the former tenant. Madam Choi’s evidence was

S she had painstakingly reminded Mr Leung when he and his brother first S
operated a Japanese restaurant at the suit premises on 1 April 1998 that the
T T
tenant should not remove the plumbings, drains and the outlet on delivery

U U

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- 28 -

A A
of vacant possession at the end of the lease. In March 1999 when Mr
B Leung informed Madam Choi that Mr Hou would take over the restaurant B

and the lease of the suit premises, Mr Hou had agreed to take over the
C C
responsibility of all the existing conditions and terms under the tenancy
D agreement. When the lease was renewed on 1 April 2001 for a period of D

three years, Madam Choi again reminded Mr Hou of the terms and
E E
conditions to reinstate the electricity supply mains, the partition walls etc,
F consequently, clauses 17 and 18 were included in the 1 April 2001 tenancy F

agreement. I accept Madam Choi did remind Mr Hou of the conditions


G G
under the tenancy agreement that he should not remove the drainage system
H or the drains outlet. Therefore, when Madam Tsang took over the tenancy H

on 1 April 2004 from Mr Hou, she, as his partner and the witness to the
I I
previous 2001 to 2004 lease, must have knowledge of the conditions laid
J down by the landlord for the new lease from 1 April 2004 to 31 March J

K
2007. Furthermore, clauses 17 and 18 were again added to the first tenancy K
agreement between Madam Tsang and Madam Choi.
L L

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

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

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

held:
S S

T “I accept that fixtures which the tenant may not remove are usually T
referred to as ‘landlord’s fixture’ and includes fixtures attached to
U U

V V
- 29 -

A A
the premises at the date of the tenancy, those fixed by the landlord
during the term and also those fixed by the tenant which he is not
B entitled to remove.” B

C C
58.I find therefore the Defendant is entitled to recover the cost of
D reinstating the drainage system and the cost of locating the drains outlet. D

However, since Madam Choi’s present tenant is using the suit premises as a
E E
warehouse, there is no urgent need for the drainage system to be reinstated,
F but the costs of locating and unblocking the drains outlet had been incurred, F

such costs should be allowed.


G G

H Raised floor H

I I
59.It is Mr Lee’s evidence that he had agreed to Madam Choi’s request for
J the raised floor to be removed and he had arranged with Leung Kee that the J

Plaintiff would pay for the removal cost. Consequently, this item should be
K K
allowed.
L L

Wall tiles and damage to the walls


M M

N 60.The state of the suit premises at the end of September 2007 was such N

that only part of the tiles were removed rendering the walls at the suit
O O
premises unsightly and uninhabitable. Mr Lee admitted in his evidence
P that removal of the remaining tiles was part of the second oral agreement P

on 6 October 2007. He produced a quotation from Leung Kee in August


Q Q
2007 that included the removal of wall tiles. If that item was included in
R the quotation in August, why was it not done by 30 September 2007 and R

why was it repeated in the “second oral agreement”? This clearly showed
S S
the Plaintiff accepted the tiles should be removed and the walls at the suit
T T

U U

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A A
premises should be made good rendering the suit premises to be tenantable
B as early as August 2007. B

C C
Electricity wiring
D D

61.Madam Choi had specified in each and every one of her written tenancy
E E
agreements the reinstatement of the electricity switch box at the suit
F premises under clause 18 of the agreement. It is clear that at the time of her F

visits at the end of September and 6 October 2007, the electricity cabling
G G
connection to the mains was not reinstated to the original state. The
H Defendant is entitled to have it reinstated. Correspondences with the H

Waldorf Garden Management Office showed shop 15’s power supply was
I I
increased from 30 Amp to 60 Amp in July 1988 (p. 77, pp. 88-101 of the
J bundle), not the 100 Amp 3-phase system which was installed by the J

K
restaurant in 1997 at shop 6. The reinstatement at the suit premises K
therefore should be to a 60 Amp power supply.
L L

M
The air conditioning units M

N N
62.Under the tenancy agreement, clause 17 stipulated that the tenant was

O
responsible for the maintenance and repair of the units. I accept Madam O
Choi’s evidence that one of the two fan coil units at the suit premises had
P P
disappeared and the other one was placed on the floor at the time of

Q
handing over. The Plaintiff was clearly in breach of the tenancy agreement. Q
I allow this item of claim by the Defendant.
R R

S Conclusion S

T T

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

following:-
C C

D (1) Rental at $9,800 per month for 25 days $7,903.23 D


(2) Management fee for 1 October to 25 October $798.06
E E
2007
(3) Government rent and rates for 1 October to $258.06
F F
25 October
G
(4) Air conditioning fee for 1 October to $999.20 G
25 October 2007
H (5) Cost for reinstating/repairing the drainage $2,800.00 H

system on the floor of the suit premises


I (6) Cost of reinstating/repairing the walls $8,500.00 I
(7) Cost of reconnecting electricity wiring $4,500.00
J (8) Cost of demolishing the raised floor at the suit $12,500.00 J

premises
K K
(9) Cost of reinstating water pipes $25,000.00
(10) Cost of replacement of the air conditioning unit $5,000.00
L L

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

O O

P P

Set off
Q Q

R 65.The Defendant is allowed to set off the rental deposit of $17,600 from R

the costs of repair. Consequently, the Plaintiff has to pay to the Defendant
S S
under the counterclaim in the sum of $50,658.55.
T T

U U

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A A
Interest
B B

66.Interests is payable from the date of the counterclaim to the date of


C C
judgment at half judgment rate and thereafter at full judgment rate until full
D payment. D

E E
Cost
F F

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

I I

J J
(H C Wong)
K
District Court Judge K

L L
Miss Eunice Yung instructed by Messrs. Eric Yu & Co. for the Plaintiff
M M
Mr. David Chan instructed by Messrs. Wong, Kwan & Co. for the
N Defendant N

O O

P P

Q Q

R R

S S

T T

U U

V V

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