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HCA001786/1999
HCA1786/1999
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO.1786 OF 1999
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| BETWEEN |
| FORTUNE GLOBAL DEVELOPMENT LIMITED |
Plaintiff |
| AND |
| SHUNG CHEONG FOOD TRADING LIMITED |
Defendant |
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Coram: Deputy High Court Judge Fung in Court
Dates of Hearing: 17 - 18, 21, 23 - 25, 29 January 2002
Date of Handing Down Judgment: 18 March 2002
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J U D G M E N T
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1. The plaintiff is the principal tenant of the premises known as Unit B, G/F, Kin Liong Mansion, 16-30 North Street, Kennedy Town, Hong Kong ("Unit B" and "the Building"). The defendant was the sub-tenant of Unit B. On 30 January 1999, the plaintiff commenced the present proceedings to recover vacant possession of Unit B and arrears of rent and/or menses profits from 1 October 1998 to the date of deliver up vacant possession.
2. On 21 December 1999, the defendant delivered up vacant possession of Unit B to the plaintiff. At the commencement of the trial, the Statement of Claim was amended to delete the claim for vacant possession. The plaintiff's claim was for rent and/or menses profits of 14 months and 21 days less the rental deposit of two months.
3. The defendant denied that it was liable to the plaintiff for any rent and/or menses profits at all. In short, the defendant alleged that towards the end of the decoration, Unit B was flooded with sewage and was never put to use by the defendant whereby the plaintiff orally agreed to suspend the payment of rent until the sewage problem was permanently solved. The defendant also counterclaimed a declaration that the Tenancy Agreement had been rescinded by the defendant by the delivering up of vacant possession or alternatively rescission on the ground of fraudulent misrepresentation, as well as repudiatory breach of the implied term of repair, the implied term of quiet enjoyment and the implied term of not to derogate from the grant, and to set off by way of defence damages thereof, and return of the rental deposit.
Background
4. The following facts are agreed between the parties :
(a) The plaintiff is the principal tenant of 11 units on the ground floor the Building under a lease dated 30 September 1996 with the landlord Kin Yick Liong Company Limited for a terms of eight years from 1 November 1996 to 31 October 2004 ("the Head Lease"). The terms of the Head Lease are not in dispute.
(b) A Deed of Mutual Covenant dated 3 September 1970 ("DMC") was registered with the Land Registry in respect of the Building. The terms of the DMC are not in dispute.
(c) Inside Unit B, there is a light well or hollow space ("Hollow Space") enclosing the sewage pipe ("Sewage Pipe") and a covered manhole ("Manhole"). The Hollow Space, Sewage Pipe and Manhole are not part of Unit B but are common parts of the Building. The only access to the Hollow Space is through Unit B.
(d) In December 1996 or January 1997, the plaintiff discovered overflow of sewage from the Manhole into Unit B. The overflow was caused by blockage of the Sewage Pipe.
(e) In January 1997, at the request of the plaintiff, the Incorporated Owners of the Building ("IO") sent workers into Unit B to clear the blockage of the Sewage Pipe.
(f) Thereafter, in order to prevent further overflow of sewage, the IO continued to send worker into Unit B once a week to inspect, and if necessary, clear the Manhole and Sewage Pipe.
(g) By a Chinese Tenancy Agreement dated 28 July 1998 ("Tenancy Agreement"), Unit B was sub-let to the defendant for a term of five years from 1 September 1998 at the rent of $28,000 per month. The terms of the Tenancy Agreement are not in dispute.
(h) The Landlord and Tenant (Consolidation) Ordinance (Cap.7) is not applicable to the tenancy.
(i) The defendant had paid the rental deposit of $56,000 and the plaintiff agreed to give credit thereof.
(j) There was a rent free period in respect of the month of September 1998.
(k) At the time the defendant inspected Unit B prior to the signing of the Tenancy and at the time when the defendant took possession of Unit B, there was no seepage from the Sewage Pipe and the Manhole in the Hollow Space.
(l) In about mid-September 1998, the plaintiff received a complaint from the defendant that there was seepage of sewage into Unit B.
(m) Since 1 October 1998, the defendant has failed to pay rent.
(n) On 30 January 1999, the plaintiff issued the Writ of Summons herein and forfeited the tenancy. The Writ was served on the defendant on 1 February 1999.
(o) In February 1999, Unit B was flooded with sewage.
(p) On 8 February 1999, GAB Robins Hong Kong Limited, Loss Adjusters engaged by the defendant inspected Unit B ("the 1st Survey"). The following were observed:
(i) Unit B was flooded by sewage of two to three inches;
(ii) two sewage pipes and a covered manhole were found inside a concrete enclosure (i.e. the Hollow Space);
(iii) sewage continued to flow out from the Hollow Space;
(iv) a terrible bad smell was emitted from the sewage;
(v) there were some boxes of bottles and construction materials inside Unit B and the bottom part had been stained by sewage;
(vi) the surveyors were of the opinion that the premises should be thoroughly dried and sterilized in order for use as a warehouse;
(vii) photographs taken are in pp.32 to 35 in the Defendant Bundle of Witness Statement.
(q) On 16 March 1999, the plaintiff applied for summary judgment. On 28 July 1999, the defendant was given unconditional leave to defend.
(r) On 17 September 1999, GAB Robins Hong Kong Limited inspected Unit B again ("the 2nd Survey"). The following were observed :
(i) a sewage pipe, a water pipe and a rainwater pipe were found inside the Hollow Space;
(ii) a new plastic pipe had been installed;
(iii) the pool of sewage found during the inspection in February 1999 had been cleared;
(iv) accumulation of water existed near the Hollow Space;
(v) water also accumulated near the rear of the unit;
(vi) water marks appeared on the floor;
(vii) no evidence of bursting of pipes was noted while viewing the area close to the Hollow Space;
(viii) a foul smell was still noted;
(ix) the surveyors were of the opinion that the premises could no longer be used as a warehouse for snacks.
(s) The defendant remained in possession of Unit B until 21 December 1999 when vacant possession was surrendered to the plaintiff.
5. Under clause 4 of the DMC :
"4. Each owner shall be bound and shall observe the following covenants provisions and restrictions:-
...
(c) It shall be the duty of the Manager to manage and provide services in respect of the said building and in particular the Manager shall arrange refuge disposal from each unit in the said building and from the common parts thereof and for the lighting ventilation of the common parts and repairing renewing maintaining and cleansing of the common parts services and facilities.
...
(l) The Manager shall have power and authority to do all or any of the following acts and things namely:-
...
(v) To repair renew maintain service clean and paint the said building or any of the common areas and common facilities thereof ...
...
(q) The common parts services and facilities referred to in this deed shall include the following:-
....
(ii) The sewers, gutters drains, watercourses cable, wells, pipes, pumps, tanks, wires, sanitary fitting ... used or installed for the benefit of the said building as part of the amenities thereof and not by any individual owner for his own use or purposes."
Plaintiff's case
6. Mr Chung Wai Cheung ("Chung") is a director of the plaintiff. He said the plaintiff rented a total of 7,000 square feet on the ground floor from the landlord and sub-divided into a number of units. The entrance of Unit B abutted Rock Hill Street (see Floor Plan (pink area), Bundle of Plaintiff's Documents ("BPD") p.58). Unit B was below street level and there were concrete steps at the entrance leading down to the premises. There was also a rear entrance. Unit B was never leased out since the plaintiff signed the Head Lease.
7. Chung said in about mid-July 1998, he inspected Unit B with Mr Cheng Wai Man ("Cheng") of the defendant. Cheng had probably told him Unit B was intended to be used for the storage of foodstuff. The inspection was at 3 to 4 p.m. The lighting in Unit B was switched on and there was also natural light. It was not bright but one could see. During the inspection, Chung saw the gate to the rear entrance was damaged and offered to repair it. He also agreed to level the flooring, repair some windows and relocate the toilet at the expense of the plaintiff.
8. Chung said Cheng opened the grey door to the Hollow Space (see photograph (b) in BPD p.59A) and saw the Sewage Pipe and Manhole. He explained to Cheng that they were common parts of the Building. In chief, Chung said he could not remember whether he mentioned the weekly inspection to Cheng. During cross-examination, Chung said during the inspection, he told Cheng there was overflowing of sewage in Unit B before and the IO would send worker to inspect the Sewage Pipe and Manhole weekly. He said Cheng did not find any problem and consented to the entry for inspection.
9. Mr Hui Hoi Ping ("Hui") is the cleaning worker employed by the IO. Every Monday, he would enter Unit B to inspect the Manhole and the Sewage Pipe. The Sewage Pipe served the whole Building and the blockage was caused by sanitary napkins flushed down from the toilets upstairs. The Manhole had a herb of 80 cm and could collect some sewage before overflowing. He would check if there were...
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