Posts Tagged ‘estoppel’

Lease renewal slips: offer or invitation to treat?

March 31, 2014

In Shun Ho Energy Development Co Ltd v Golden Crown Industries Ltd ([2014] HKEC 446, LT) a tenant (T)’s leases of 3 shops expired. The landlords (L) served notices of expiry on T. These called upon T to state whether it would take new leases of the premises on the terms set out in the notice. If so, they were to return the reply slips. Some time after the deadline set out in the notice, T returned the reply slips. T’s representative had, in an earlier phone conversation, indicated that it was only prepared to pay certain lower rents. These counter-proposals were rejected by L’s representative.

The Lands Tribunal found that the return of the reply slips did not create binding leases. First, they were mere invitations to treat ([40]). Second, if they were offers, T’s counter-offer terminated the offer ([41]). Third, time was impliedly of the essence for returning the reply slips and T had replied after the express deadline ([43]).

When T’s representative agreed to pay L’s proposed rent for the new leases, L’s leasing manager replied ‘OK’. In the circumstances, however, it was clear as a matter of interpretation that this was not an acceptance of T’s offer to contract on the terms originally proposed by L. T had made it clear that she was acting as an intermediary and had no authority to conclude a lease ([45]).

T held over on expiry of the leases. L sent T a debit note calling on it to pay ‘rent’. Did this estop L from denying that it had agreed to new leases? It did not. There was no representation that new leases would be granted. The fact that the debit notes were generated automatically by a computer went a long way to undermining any suggestion that they were an accurate indicator of L’s intentions.

Michael Lower

Estoppel by deed

December 21, 2013

In Prime Sight Limited v Lavarello ([2013] UKPC 22, Privy Council) M assigned a long lease to Prime Sight (‘the company’) a company which was controlled by him. The deed of assignment acknowledged the payment and receipt of the consideration. No consideration had been paid. M’s trustee in bankruptcy sought payment of the consideration. When this was not forthcoming, L petitioned for the winding up of the company.

The company sought to have the petition struck out on the ground that the debt was disputed on substantial grounds.  The basis for the dispute was the company’s argument that M (and so the trustee) were estopped by the acknowledgement in the deed. The question was whether the company could rely on this acknowledgement when both parties knew it to be untrue.

The Privy Council concluded that the estoppel defence did amount to a substantial ground on which the debt was disputed and the winding up order that had been made at first instance was set aside.

First, it needed to be shown as a matter of construction that the statement was intended to bind either or both of the parties ([32]).

Lord Toulson approved this passage in in Spencer Bower on Estoppel by Representation 4th ed (2004) (at p. 197),

‘… an estoppel by convention need not involve any misleading of a representee by a representor, nor is it essential that the representee shall be shown to have believed in the assumed state of facts or law. The full facts may be known to both parties; but if, even knowing those facts to the full, they are shown to have assumed a different state of facts or law as between themselves for the purposes of a particular transaction, then a convention will be established. The claim of the party raising the estoppel is, not that he believed the assumed version of facts or law was true, but that he believed (and agreed) that it should be treated as true.’ (at [45]).

This statement also appled to estoppel by deed ([46]). The court may refuse to apply the convention in cases of fraud, illegality, mistake and misrepresentation or on the grounds that to apply it would be contrary to public policy ([47]). If the trustee wanted to argue that there was something illegal or contrary to public policy in the present case he would need to persuade the court that this was so ([51]).

Michael Lower

Lease: estoppel; Lands Tribunal’s jurisdiction to award specific performance

October 22, 2013

In Fordtime Industrial Ltd v Yip Shing Lam ([2013] HKEC 1613, LT) F had acquired a shop and the cockloft above it (which was a separate property). The acquisition of the cockloft was subject to a tenancy in favour of the previous owner of the shop. The tenancy had come to an end but the tenant refused to leave. The landlord sought vacant possession and mesne profits and was successful.

The tenant contended that the subject matter of the lease did not exist since the cocklofts were not referred to in the DMC. The judge found as a matter of fact that the cockloft did exist at the time of the execution of the DMC. The developer (as owner of all of the unassigned shares) was free to allocate a share to it. In any event, the tenant having enjoyed undisturbed possession during the lease term was estopped from denying the landlord’s title ([33] – [37]).

The landlord also sought an order for specific performance of the tenant’s covenant to reinstate the property by replacing the floor slab between the shop and cockloft at the end of the lease. The Lands Tribunal decided that it did not have jurisdiction to grant specific performance in an action for possession (see Lands Tribunal Ordinance ss. 8(8) and 8(9)).

Michael Lower

‘Waiver’ of notice to quit? New tenancy and estoppel

May 29, 2013

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