Your World of Legal Intelligence
 Hong Kong | 1-800-335-6202

Mega Yield International Holdings Ltd v Fonfair Co Ltd

Judgment Cited authorities 9 Cited in Precedent Map Related
Vincent
Judgment Date05 March 2013
Year2013
Judgement NumberHCA948/2009
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA948B/2009 MEGA YIELD INTERNATIONAL HOLDINGS LTD v. FONFAIR CO LTD

HCA 948 of 2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATION REGION

COURT OF FIRST INSTANCE

ACTION NO. 948 OF 2009

--------------------

BETWEEN

MEGA YIELD INTERNATIONAL HOLDINGS LIMITED Plaintiff
and
FONFAIR COMPANY LIMITED Defendant

-------------------

Before: Deputy High Court Judge Woo in Court
Date of Hearing: 21-23 and 26-30 November; 3-7 and 10 December 2012; 7 and 8 January 2013
Date of Judgment: 5 March 2013

-----------------------

J U D G M E N T

-----------------------

Introduction

1. The dispute in this case arose out of a tenancy agreement. By an agreement dated 24 January 2007 (“Pre-Lease”), the plaintiff was granted an option by the defendant, the registered owner of a site known as Yau Tong Marine Lots Nos. 2, 3 and 4 (“the Lot”), to obtain a tenancy of the Lot from the defendant for a period of two years commencing on 20 October 2008 or 20 December 2008. The purpose of the plaintiff in renting the Lot was to run a concrete batching plant on it and for such purpose, permission or waiver would have to be obtained from Government. A waiver of the Government lease provision restricting the user of the Lot was applied for and granted by Government so that the Lot could be used for concrete batching (“Waiver”). Pursuant to the Pre-Lease, a tenancy agreement dated 12 September 2008 (“Lease”) was signed between the parties to commence on 20 December 2008. However, the defendant was unable to deliver possession of the Lot to the plaintiff because the existing tenant on the Lot refused to have its tenancy agreement determined earlier than its natural expiration or to deliver up vacant possession of the Lot to the defendant prior to 20 December 2008 or even later.

Issues

2. There are three major areas in respect of which I need to make a decision:

(1) Whether there was a breach of the Lease and if so, who was responsible;

(2) If the answers to (1) are in the plaintiff’s favour, whether the plaintiff failed to mitigate loss; and

(3) Taking into account the answer to (2), be it yes or no, what is the amount of damages to which the plaintiff should be entitled?

3. If the answer to the first limb of issue (1) above is no, there is no need to go further: the plaintiff’s claim and the action will have to be dismissed.

4. If the plaintiff did fail to mitigate, the assessment of the damages to which it is entitled would have to reflect the failure. If the plaintiff did not fail to mitigate, the assessment of damages will be made as in any normal case of breach of contract.

The witnesses

5. Before I deal with specific facts and make findings, I should have a short discussion on the quality of the witnesses. There is hardly any dispute on Mr Keith Siu of RHL and Mr Vincent Wong of the plaintiff, whose respective evidence is of a very narrow scope. The protagonists for the parties are respectively Mr Derek Zen (“Mr Zen”), the managing director of the plaintiff and Mr Leung Yuet Keung (“Mr Leung”), a director of the defendant. I have had the advantage of observing these witnesses, especially Mr Zen and Mr Leung, for several days when they testified before me. Generally speaking, both witnesses are seasoned businessmen and were very intelligent. Both are university graduates and gave their evidence in English, for the interest of time. Mr Zen answered questions in direct and straight forward manner, but he was very alert, sometimes too much so, with anything that might be disadvantageous to the plaintiff or against the plaintiff’s interest. On the other hand, the same alertness was possessed by Mr Leung, but he tended to avoid answering questions straight, veered off from the question and tried not to answer it if not pressed. Mr Chua Guan-Hock SC, leading Mr Harry Liu, for the defendant, has the following description of Mr Leung in his Written Closing Submission:

“Mr Leung was obviously nervous in the box. His keenness to assist the Court with background details may have caused him to from time to time lose focus on the question; but at the end of the day, he is essentially an honest witness.” (Emphasis added.)

6. Had I not personally seen how Mr Leung gave evidence and closely observed his demeanour and way of answering questions, I might have been persuaded by this euphemistic explanation of Mr Leung’s behaviour in the witness box. In fact, when he was answering questions in chief, this “keenness to assist the Court with background details” did not find much expression, but it became more and more manifest and acute during cross-examination and as it progressed. My impression of him was that he was an evasive witness cleverly cloaked in attempting to provide details or to slightly misunderstand the question. What was apparent was that he was at times trying to hide things from the Court. A good example can be found later when I deal with his evidence regarding his granting of a tenancy agreement over the Lot to Good Swift Ltd (“GSL”) to start on 1 July 2009. I also find that Mr Leung made up evidence as he went along in cross-examination when he testified that he made oral complaints to both Mr Keith Siu of RHL and Mr John Lam of the plaintiff about the breach of their assurances after the granting of the Waiver by Government was delayed till 29 October 2008. These alleged complaints had never been mentioned before and were conspicuously absent from all contemporaneous documents. I have therefore approached Mr Leung’s evidence with caution and I do not rely on his evidence unless backed up by solid contemporaneous documents.

7. Based on my above view of the two main witnesses, whenever they differ, I prefer the evidence of Mr Zen to that of Mr Leung. Despite this view that I take, it does not mean that I accept every word fallen from the mouth of Mr Zen. Where I disagree with him or do not accept his evidence, it will be mentioned specifically in the course of this judgment.

Was there a breach of the Lease and, if so, who was responsible?

8. According to the Pre-Lease dated 24 January 2007 and the Lease dated 12 September 2008, the commencement of the term granted by the Lease was to be on 20 October 2008 or it could be deferred till 20 December 2008 at the choice of the plaintiff, the tenant. By signing the Lease, the parties agreed to start the term on 20 December 2008, but on that day the defendant failed to give vacant possession of the Lot to the plaintiff. There can hardly be anything more important than the possession of the premises let in an agreement for a tenancy. The failure to provide possession goes right to the root of the agreement that must be construed as breach of a condition and repudiation of the agreement that entitles the tenant to accept the repudiation and treat the agreement as at an end. By the issue of the writ of summons in this action on 31 March 2009, the plaintiff accepted the repudiation and treated the Lease as at an end.

9. The defendant alleges that by reason of the fact that the assurances given by the plaintiff or its consultant RHL (whose representative in all matters relevant to this action being Mr Keith Siu, its director) to the defendant which did not come to fruition, it disabled the defendant from recovering possession of the Lot from the sitting tenant Full Creation Development Ltd (“Full Creation”). In other words, it was the plaintiff who was responsible for the defendant’s failure to deliver possession by 20 December 2008 and the defendant was not and should not be liable for its breach of the Lease in failing to deliver possession.

10. The defendant also alleges that the plaintiff was guilty of a breach “of the implied condition of co-operation in the Lease” that the plaintiff would procure the offer letter for the Waiver from the District Lands Officer (“DLO”) on or before 30 September 2008 or have the same “backdated to 30.9.08” so as to enable the defendant to avoid any argument from Full Creation, the sitting tenant on the Lot, and evict it from the Lot by 20 December 2008.

11. The law on implied term is settled. Bokhary PJ stated In Kensland Realty v Whale View Investment Ltd & Anor (2001) 4 HKCFAR 381 at 391J-392B:

“23. In my view, any term to be implied in this context must comply with the conditions stated by Lord Simon of Glaisdale when delivering the advice of the majority in the Privy Council case of BP Refinery (Westernpoint Pty Ltd v Shire of Hastings (1978) 52 ALJR 20 at p. 26:

(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

12. On the duty to co-operate, in North Sea Energy Holdings NV v PTT [1977] 2 Lloyd’s Rep 418 at 430, Thomas J stated:

“… what is made clear in all the cases is that a duty to co-operate will only arise if a term can be implied to that effect. Thus the issue is whether the implied term … satisfies the legal test of strict necessity. In doing so, it is useful to apply the ‘officious bystander’ or the ‘business efficacy’ tests as an aid in this task … I must also have in mind the consideration that the law can enforce co-operation only in a limited degree and to the extent that is necessary to make the contract workable: see Mona Oil Equipment and Supply Co. Ltd. v Rhodesia Railways Ltd. (1949) 83 Ll.L.Rep. 178 at p. 187.”

13. Ribeiro PJ in Ying Ho Co ltd & Ors v Secretary for Justice...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT