ZETA ESTATES LTD v. KAYA, SULEYMAN ERHAN

DCCJ 3761/2017

[2018] HKDC 433

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3761 OF 2017

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ASSESSMENT OF DAMAGES

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Introduction

1.  This is the assessment of damages (“AOD”) of the plaintiff’s claims.  At the AOD hearing, the plaintiff was represented by Ms M Pang (“Ms Pang”) of Messrs Ford, Kwan & Co.  The defendant acted in person and was absent.  I should add that the defendant had neither appeared in any of the court hearings prior to this hearing nor filed any documents in this action.

2.  A notice of trial dated 13 March 2018 had been issued by this court to the defendant to inform him of this AOD hearing.  Affirmation of service had also been filed by Messrs Ford, Kwan & Co to confirm that my Order dated 5 March 2018 (setting out, amongst other directions, the date and time of this AOD hearing), the AOD hearing bundle (the “AOD Bundle”), and the Opening Submissions and List of Authorities of the plaintiff, had all been served on the defendant in good time. 

3.  Pausing here, at the start of the hearing, Ms Pang informed me that the Completion Notice issued by Great Mind Engineering Limited (“Great Mind”) and its attachments were not included in the AOD Bundle.  She applied to add those documents to the AOD Bundle.  I allowed the application on the reasons that these documents are clearly relevant to the present AOD proceedings, and they had been disclosed in the List of Documents of the plaintiff.[1] I also considered, notwithstanding that the defendant had not received these documents prior to the AOD hearing, he would suffer no prejudice.  Completion of the reinstatement and repair works undertaken by Great Mind could be confirmed by its invoice and receipt, that are already included in the AOD Bundle.  In any event, Ms Pang undertook to serve the newly inserted documents to the defendant within 7 days from the date of hearing, and to file an affirmation confirming service of the same to the defendant within 7 days thereafter.

4.  In light of the above, I am therefore satisfied that the defendant was informed of this AOD hearing and had received from the plaintiff the AOD Bundle, save the newly inserted documents as mentioned in the above.  Upon the plaintiff’s application pursuant to Order 35, r 1(2) of the Rules of the District Court, Cap 336H (the “RDC”), I proceeded with this AOD hearing in the absence of the defendant.

Background

5.  By a specially indorsed writ of summons issued on 21 August 2017, the plaintiff claims against the defendant for outstanding rent, management fees and other charges, and for loss and damages to be assessed due to the pre-mature termination of a lease over the premises known as Workshop 22 on 21^st Floor, Oceanic Industrial Centre, No 2 Lee Lok Street, Hong Kong (the “Premises”).  The Premises was used primarily for industrial purpose.

6.  The plaintiff and the defendant, respectively as a landlord and tenant, entered into a tenancy agreement dated 15 November 2016, for a fixed term of 1 year from 5 November 2016 to 4 November 2017 (the “Tenancy Agreement”).[2]  The Tenancy Agreement was stamped on 21 November 2016.[3]

7.  Under the Tenancy Agreement, the defendant was to pay to the plaintiff a monthly rent of HK$15,000.00.[4]  On top of that, the defendant was also required to pay to the plaintiff a monthly management fee of HK$1,358.00 (which was increased to HK$1,453.00 since 1 January 2017),[5] and the rates in advance on the 1^st day of January, April, July and October.[6]

8.  Apart from the above, the Tenancy Agreement sets out the following obligations of the defendant, which are relevant to the Plaintiff’s claims:-

“5.2 Outgoings

(a) To pay all deposits and charges for the supply of water, electricity, telephone and other services to the Premises by the appropriate utility companies.

5.7 Repairs

(a) To keep the whole of the Premises clean and tidy and clear of rubbish and in good and substantial repair.

……

(d) To keep all interior windows and glass of the Premises clean and unobstructed and to replace any windows or glass broken or damaged from any cause whatsoever.

(e) To keep in good repair and where necessary replace all electricity cables and meters installed by the Tenant and to carry out any works required by the relevant utility company and for that purpose to use a contractor approved by the Landlord.

5.8 Yield Up

(a) At the expiration or sooner termination of the term to deliver up the Premises with vacant possession in good clean and tenantable repair and condition and to reinstate the Premises in accordance with the latest approved building plan(s) in respect of the Premises and to reinstate the Premises to “bare shell” condition as at the date when possession was given to the Tenant to the satisfaction of the Landlord, or, without prejudice to the foregoing, the Tenant shall at the Landlord’s discretion reinstate to the reasonable satisfaction of the Landlord such part or parts of the Premises as the Landlord shall specify and make good any damage resulting from the removal of any of the Tenant’s fixtures, fittings, machinery, fascia, signs;

(b) Upon the expiration or sooner determination of this Agreement, if the Tenant or previous occupier has made any alterations or additions or has installed any fixtures or fittings to the Premises with or without the Landlord’s consent, the Landlord may at its absolute discretion require the Tenant (i) at its own expense to reinstate the Premises in the manner as aforesaid and/or remove the said alterations, additions, fixtures or fittings or such part thereof as the Landlord may require and making good all damage caused thereby whether or not such alterations, additions, fixtures or fittings were made or installed by the Tenant; or (ii) to leave behind all or any such alterations, additions, fixtures or fittings at the Premises but without payment of any compensation for the same to the Tenant.

5.19 Interest on Arrears

If and whenever the Tenant shall fail to pay the rent or any other monies due under this Agreement within fourteen (14) days of the due date the Tenant shall if so required by the Landlord pay to the Landlord interest on such rent or other money from the date when it was due to the date on which it is actually paid.

1. Definitions

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“interest:

Interest at the rate of 3.5% per month during the period from the date on which the expenditure is incurred or from which the interest is to run to the date of payment as well before as after any judgment”

9.  Upon signing the Tenancy Agreement, a security deposit of HK$57,174.00 was paid by the defendant to the plaintiff (the “Deposit”).[7]

10.  Since 1 February 2017, the defendant had failed to pay rent and management fee to the plaintiff, and to pay the rates on 1 April 2017 as agreed.  In addition, the defendant had failed to pay the water charges since 23 December 2016.

11.  On 16 May 2017, the defendant vacated the Premises without consent of the plaintiff.  On the next day, the plaintiff re-entered the Premises and found that the same was not reinstated and lacked repair.

12.  By reason of the above, the plaintiff commenced the present action against the defendant.  In its Statement of Claim, the plaintiff first claims arrears and expenses accrued during the period prior to the defendant’s vacation of the Premises:-

(1)   Rent for the period between 1 February 2017 to 16 May 2017 in the sum of HK$52,741.94 plus interest at 3.5% per month.

(2)   Management fee for the period between 1 February 2017 to 16 May 2017 in the sum of HK$5,108.94 plus interest at 3.5% per month.

(3)   Rates for the period between 1 April 2017 to 16 May 2017 in the sum of HK$631.87 plus 3.5% interest per month.

(4)   Water charges from 23 December 2016 to 5 May 2017 in the sum of HK$43.50 plus 3.5% interest per month.

13.  The total sum claimed under paragraph 12 above amounted to HK$66,100.14. The same was reduced by the Deposit, with the balance of HK$8,926.14 (hereinafter collectively referred to as the “Pre-Vacation Claim”).

14.  Further to the above, the plaintiff also claims loss and damages after vacation of the Premises by the defendant:-

(1)   the sum of HK$94,900.00 as costs for the remedial works done to reinstate and repair the Premises;

(2)   loss of rent for the period between 17 May 2017 to 4 November 2017 in the sum of HK$84,258.06;

(3)   loss of management fees for the period between 17 May 2017 to 4 November 2017 in the sum of HK$8,161.80; and

(4)   loss of rates from 17 May 2017 to 4 November 2017 in the sum of HK$2,343.68.

15.  The total sum claimed under paragraph 14 above amounted to HK$189,663.54 (hereinafter collectively referred to as the “Post-Vacation Claim”).

16.  As the defendant had failed to give any notice of intention to defend, a Final and Interlocutory Judgment was entered against him on 10^th October 2017 (the “Judgment”).  It was adjudged therein that the defendant should pay the Pre-Vacation Claim together with interest to the plaintiff. The defendant should also pay the plaintiff the Post-Vacation Claim with quantum of the same to be assessed.

17.  In this AOD hearing, I am to assess on the amount of Post-Vacation Claim receivable by the plaintiff from the defendant.

The plaintiff’s case

18.  Ms Au Wing Yee (“Ms Au”), the Assistant Sales and Leasing Manageress of the Chinachem Group, was called to give evidence for the plaintiff.  At the AOD hearing, she adopted her witness statement as part of her evidence-in-chief.  In her witness statement, Ms Au first explained that the plaintiff is a company under the Chinachem Group.  Her duties include leasing of the plaintiff’s properties to tenants and matters incidental thereto.  Other parts of her witness statement are largely the same as the facts pleaded in the Statement of Claim.

19.  In relation to the claim for remedial works, Ms Au’s evidence was that, upon re-entry of the Premises on 17 May 2017, a number of problems were identified. These include the failure by the defendant:-

(1)   to remove the wall mounted furniture, ceiling and wall mounted lighting, and air-conditioning and heat dissipation platform, all electrical lighting system piping switches unit to the fuse unit;

(2)   to reinstate and keep in good repair the floor slab of the Premises;

(3)   to reinstate and keep in good repair the concrete floor slab outside the lavatory in the Premises;

(4)   to reinstate and keep in good repair the double leaf fire door at the front entrance of the Premises; and

(5)   to reinstate and keep in good repair the window panes.

20.  At the AOD hearing, Ms Au further elaborated on the problems identified above by reference to the photographs provided in the AOD Bundle.  Ms Au first referred this court to the photographs at pages 103 to 105 of the AOD Bundle.  These photographs showed the state and condition of the Premises prior to the Tenancy Agreement.  It could be seen from the same that the Premises was leased out on a bare shell basis.  There was no partition, no lightings mounted on the ceiling or the walls, and no air-conditioning was installed.  There was not even any electrical piping and switches inside the Premises.  The floor slab of the Premises was made of concrete and retained its natural colour.

21.  Ms Au then referred me to the photographs at pages 139 and 140.  These photographs showed the state and condition of the Premises on 17 May 2017.  It could be seen that there were lightings affixed to the ceiling, and they could be switched on.  The double leaf door was not the same double leaf door as shown in the photographs at AOD Bundle pages 103 to 105.  A decoration was affixed on the new double leaf door.  An air-conditioning unit was installed, with its condenser being placed on the heat dissipation platform located at the external wall of the Premises.  The floor of the Premises was painted in greyish blue colour.  There was also a small internal room being partitioned inside the Premises.  Ms Au explained that the “electrical lighting system piping switches unit to the fuse unit” referred to in her witness statement[8] was the electrical wirings installed in the Premises by the defendant which connected the lightings and air-conditioning unit to the electricity meter located outside the Premises.

22.  As to the damage to the floor slab just outside the toilet, Ms Au accepted that it could not be clearly shown from the photographs.  However, she had inspected the Premises after the defendant moved out, and she described, in court, that the damage was a crack on the floor which extended from the raised floor just outside the entrance of the toilet towards the floor slab of the Premises.

23.  In relation to the window panes, Ms Au confirmed that the damage could not be shown from the photographs as well.  She described that the glass of the window was broken, and the metal frame of the same window was also damaged.  She referred to the photograph at page 156-3 of the AOD Bundle, which showed that one window was being removed and placed on the ground by the workers of Great Mind.  She confirmed that this was the broken window which had to be replaced.

24.  As to the costs of the remedial works now claimed, quotation and receipt issued by Great Mind were provided.[9]  It is observed from the invoice[10] and the receipt that 5% of the remedial costs was retained by the plaintiff and had not been paid to Great Mind.  Upon inquiry, Ms Au confirmed that the 5% costs would be retained by the Plaintiff during the one-year guarantee period, counting from the date of completion of work.[11] It would be paid after expiry of the said period.

25.  As to the claims for loss of rent, management fees and rates, Ms Au’s evidence was mostly on the efforts that the plaintiff had taken to mitigate its loss.  In a nutshell, the plaintiff had placed the Premises in the list of properties of the plaintiff available for lease since 10 July 2017, after the Premises was reinstated.  The said list was sent out to various estate agents and at various times.[12] Nevertheless, the efforts bore no fruit in return.  Ms Au also explained in her witness statement the reason why the plaintiff adopted the same monthly rent, i.e. HK$15,000 as the asking rent for the Premises.

26.  At the AOD hearing, I had asked Ms Au as to whom the management fee was payable.  Ms Au explained that it would be paid to the management company of Oceanic Industrial Centre.  Ms Au also confirmed that, despite no demand note for rates had been tendered, she received information from the account department of the plaintiff when she set out the calculation of rates claimed in her witness statement.

Analysis

27.  I will start by saying that I have no reservation in accepting Ms Au’s evidence.  At the AOD hearing, apart from adopting her witness statement, Ms Au had also answered a series of questions raised by this court.  Although she was sometimes slow when answering my questions, it might be due to her effort to recollect the incident and details.  I must add that at the beginning of her evidence, she had via Ms Pang requested to use Punti when giving evidence.  I refused such request, as her witness statement was written in English, and the defendant is not a Chinese.  If there is any chance that he would be obtaining a transcript of this AOD hearing, he might not be able to understand what Ms Au had said.  Although she ultimately agreed to use English when giving evidence, I do appreciate that it was not a language she preferred.  It could also have led to her delayed response to my questions.

28.  Overall, I find her to be an honest and reliable witness.  Her evidence was clear and straight forward, and she was forthcoming with her answers, with no swerve or evasion.  Majority of her evidence was also supported by documentary evidence.

29.  I have also considered the documentary evidence adduced by the plaintiff in this case, and I give full weight to the same. 

30.  Ms Pang, in her submissions to the Court, have referred me to the principles set out in the cases of Chan Annie v Lau Wai Kwong,[13] Sano Screen Manufacturers v J&R Bossini,[14] Wing Siu Co Ltd v Goldquest International Ltd.,[15] and Silvercord Ltd v Ho Ching Yee t/a Crystal Plus.[16]  In short, these cases confirmed that, where a fixed term tenancy agreement was terminated pre-maturely, the innocent party could accept the repudiation and sued for damages, including the loss of rent, management fees and rates for the unexpired portion of the tenancy agreement, subject to the innocent party having mitigated his/her loss.  The landlord could also claim for costs expended on the reinstatement and repair of the premises.

Loss of Rent, Management Fees and Rates

31.  In light of the evidence before me and the principles in the above authorities, I find that the defendant had repudiated the Tenancy Agreement by vacating the Premises on 16 May 2017 before the term expired.  The plaintiff had accepted his repudiation on 17 May 2017 when it re-entered the Premises, and is entitled to claim for the loss of rent, management fees and rates during the unexpired portion of the Tenancy Agreement.  I also find that the plaintiff had sufficiently tried to mitigate its loss of rent, management fees and rates for the unexpired portion of the Tenancy Agreement.

32.  For the loss of rent, as stated in the above, it is for the period from 17 May 2017 to 4 November 2017, the latter being the last day of the fixed term period.  The amount claimed is based on the existing monthly rental of HK$15,000.00 under the Tenancy Agreement, and I see no problem with this in light of the judgment in the Silvercord case above. I would award this item in full.

33.  As to the management fees, it is based on a fixed sum provided for in the Tenancy Agreement.  I am satisfied that the plaintiff had to pay the same during the unexpired portion of the Tenancy Agreement to the management company of the building, despite that there is no documentary proof. I would allow this claim in full.

34.  Despite that no demand note is tendered by the plaintiff, I have no doubt that the plaintiff should have paid rates during the unexpired portion of the Tenancy Agreement.  Even though the amount payable for each quarter could have varied, such likelihood could be minimal.  In this regard, I also note that the plaintiff’s calculation for rates payable under both the Pre-Vacation Claim and Post-Vacation Claim are based on the same amount.  It is not a case where the plaintiff is claiming for a substantially higher amount of rates in the Post-Vacation Claim.  I would therefore allow this claim.

Costs of Reinstatement and Repair

35.  Based on the evidence before me, I find that the defendant had failed to reinstate the Premises to a bare-shell basis, and had failed to keep in good repair of the Premises in the manner as claimed by the plaintiff, and was therefore in breach of clauses 5.8(a) and (b), and clauses 5.7(a), (d) and (e) of the Tenancy Agreement.  The plaintiff is entitled to claim the costs for reinstating and repairing the Premises.

36.  In particular, I find that the defendant had installed lightings on the ceiling, and an air-conditioning unit with its condenser being affixed on the heat dissipation platform.  Electrical wirings were installed inside the Premises to connect the lightings and air-conditioning unit to the electricity meter outside the Premises.  I also find that the defendant had erected partition creating a small internal room inside the Premises.  In addition, I find that the defendant had painted the floor of the Premises.  I find the defendant had failed to reinstate all these alterations and additions made to the Premises when he vacated the same on 16 May 2017.

37.  As to the repair to the floor just outside the toilet door and the window panes, I find that they were both damaged as described by Ms Au.

38.  In relation to the floor slab outside the toilet, although the photographs could not show clearly the damage, one could see from the description in the quotation and completion notice[17] issued by Great Mind that the concrete floor needed to be repaired.  This is consistent with the description of Ms Au.

39.  Regarding the damage to the window panes, similarly, although the photographs could not show the damage on the same, I accept Ms Au’s evidence that the glass was broken and the metal frame was damaged.  As per the bottom right photograph at page 156-3 of the AOD Bundle, it could be seen that the glass was missing from the window frame.  Furthermore, quotation and completion notice from Great Mind showed that only one window was replaced.  If there was no damage to the window, there was no reason for its replacement.

40.  Finally, regarding the costs for reinstatement and repair, it is supported by the quotation, invoice and receipt issued by Great Mind. The reinstatement and repair works as shown in these documents tally with those required and pleaded by the plaintiff.  Notwithstanding that the invoice and receipt showed that 5% of the contract price has been retained by the plaintiff, I accept that such retention money would be payable to Great Mind ultimately.

Conclusion

41.  To recap, the items and their respective amount awarded are summarised below:-

ITEM	AMOUNT (HK$)
Loss of rent from 17th May 2017 to 4th November 2017	84,258.06
Loss of management fees from 17th May 2017 to 4th November 2017	8,161.80
Loss of rates from 17th May 2017 to 4th November 2017	2,343.68
Costs for reinstatement and repair	94,900.00
Total	189,663.54

42.  As to interest to be applied, the plaintiff is not seeking to adopt the contractual interest under Clauses 5.19 and 1 of the Tenancy Agreement.  I would therefore award interest on the sum of HK$189,663.54 at the rate of 8% per annum from the date of Writ (i.e. from 21^st August 2017) to the date of judgment and thereafter at judgment rate until payment in full.

43.  The plaintiff should get costs of this action, including all costs reserved and the costs of this AOD hearing, and so I award.  After considering the statement of costs submitted by Ms Pang, the costs payable by the defendant to the plaintiff is summarily assessed at HK$95,117.00.