THE HONG KONG HOUSING AUTHORITY v. SUPER HAPPY INVESTMENT LTD

HCA 508/2017

[2018] HKCFI 2674

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 508 OF 2017

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JUDGMENT

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INTRODUCTION

1.  The present proceedings were commenced by Writ on 3^rd March 2017.  By an Interlocutory Judgement dated 26^th May 2017, judgement was entered against the Defendant with damages to be assessed and costs to be taxed.

2.  This is the hearing for assessment of damages.

3.  The Defendant was unrepresented and absent in the hearing on 14^th September 2018.  Ms. Prisca Cheung, Counsel for the Plaintiff, confirmed that all the relevant court documents and notice of assessment hearing had been duly served on the Defendant and that the Plaintiff had not received any return post.  The Plaintiff had also filed proper Affirmations of Services to prove due service of the relevant court documents and notice of assessment hearing on the Defendant.  Accordingly, I was satisfied that the Defendant had been given sufficient notice of the assessment hearing and it was appropriate to proceed with the hearing on 14^th September 2018 notwithstanding the Defendant’s absence.

FACTUAL BACKGROUND

4.  The Defendant is the former tenant of the premisesknown as “Market, l/F,Ching Long Shopping Centre” and the “Advertising Light Box No. SB-8 (Zone A) at the external facade of Ching Long Shopping Centre” (“the Premises”).

5.  The Plaintiff is the landlord of the Premises.

6.  By a “Tenancy Agreement” dated 12^th November 2014 entered into between the Plaintiff and the Defendant for the Premises, it was expressly provided that :-

(a)   The period of tenancy was from 1^st November 2014 to 15^th September 2019 (both days inclusive) (First Schedule Part II);

(b)   The rent payable was as follows (Second Schedule Part I) :

(i)   1^st November 2014 – 15^th September 2016: HKD1,283,000 per month

(ii)   16^th September 2016 – 15^th September 2019: HKD1,555,000 per month ( the “Old Rent”).

(c)   The Defendant as tenant was also responsible, inter alia, for paying the following items:

(iii)   Air-conditioning Charges at HKD45,729 per month, later revised to HKD37,956 per month (Clause 2; Second Schedule Part I);

(iv)   Employing cleaners of the Premises (Clause 14);

(v)   Management and security, including arranging a 24-hour security guard service in respect of the Premises (Clause 33);

(vi)   Re-instatement costs of the Premises and to give vacant possession of the Premises in a “shell condition” (Clause 38).

7.  In wrongful repudiation of the Tenancy Agreement, the Defendant defaulted in paying rent, rates and air-conditioning charges to the Plaintiff from June 2016 onwards. The Plaintiff therefore issued a Notice to Quit to the Defendant on 31^st August 2016 to terminate the Tenancy Agreement and for vacant possession of the Premises by 30^th September 2016.

8.  By a tenancy agreement dated 30^th November 2016, the Plaintiff successfully let the Premises to a “New Tenant”, Bright Lamp Industries Limited. The material facts of the “Replacement Tenancy” are as follows:

(a)   The period of tenancy was from 1^st December 2016 to 30^th November 2019;

(b)   The “New Rent” payable was as follows (Second Schedule Part I):

(i)   For Years 1-3 (from 1^st December 2016 to 30^th November 2019): HKD1,200,000 per month;

(ii)   For Years 4-6 (from 1^st December 2019 to 30^th November 2022): HKD1,300,000 per month.

(c)   A three-month “Rent-Free Period” would be granted from 1^st December 2017 to 28^th February 2018.

THE EVIDENCE

9.  By an Order of Master Wong dated 6^th April 2018, the parties’ signed witness statements as to quantum were ordered to stand as evidence-in-chief.

10.  The Defendant did not file any witness statement in this case.  The Plaintiff has one factual witness, namely Ms. Lai Wai Ling. Ms Lai made a witness statement dated 6^th December 2017 and she was called to give evidence in the hearing.  Ms. Lai confirmed the contents of her witness statement and gave evidence on the background information about the New and Replacement Tenancy and set out all relevant dates and facts relevant to the assessment of damages.  I accept the evidence of Ms. Lai in full.

11.  By an Order of Master J Wong dated 13^th December 2017, theparties were granted leave to adduce expert evidence on the issue of quantum regarding the prevailing market rent of the Premises at the date of 1^st December 2016, being the commencement date of the Replacement Tenancy.  The Plaintiff’s expert witness is Ms. Kwan Kit Ying Chloe who prepared a valuation report dated 12^th January 2018.  Ms. Kwan was called to give evidence and she confirmed the contents of the said valuation report in the hearing.  She testified that on 1^st December 2016 being the valuation date, she was of the opinion that the prevailing market rent (exclusive of rates and A/C charges) of Premises was HKD700,000 per month for the first 3 years and HKD810,000 per month for the next 3 years in a 6-year tenancy with 3-month rent free (the Monthly Equivalent was in the sum of HKD750,000 per month). I accept the contents Ms. Kwan’s valuation report and her evidence in full.

12.  The Defendant did not adduce any factual or expert evidence in the present proceedings.

LOSS AND DAMAGE SUFFERED BY THE PLAINTIFF

13.  The Plaintiff claims the following items against the Defendant, namely:

Head of Loss	Period	Calculation	Amount claimed
(1) Loss of Rental Income	01.10.16 to 30.11.16 = 2 months	Rent of $1,555,000/month x 2 months	$3,110,000.00
(2) Air-conditioning Charges	01.10.16 to 30.11.16 = 2 months	$37,956/month x 2 months	$75,912.00
(3) Cleaning, Security and Maintenance	01.10.16 to 30.11.16 = 2 months	$178,183.30/month x 2 months	$356,366.60
(4) Reinstatement Costs	N/A		$72,000.00
(5) Difference between Old Rent and the New Rent	(i) 01.12.16    to 30.11.17 = 12 months	(i) ($1,555,000 - $1,200,000) x 12 = 4,260,000	$15,492,500.00
	(ii) Rent Free: 01.12.17 to 28.2.18 = 3 months	(ii) $1,555,000 x 3 = 4,665,000
	(iii) 01.03.18 to 15.09.19 = 18.5 months	(iii) ($1,555,000 - $1,200,000) x 18.5 = 6,567,500
		GROSS TOTAL:	$19,106,778.60

		SET OFF: (i) A/C Charges (ii) Air- consumption charge	(i) ($23,406) (ii) ($1,316.60)
		(iii) Guarantee fund	(iii) ($148,000)
		NET TOTAL	$18,934,056

14.  The Defendant did not put in any evidence to dispute the above.  The Plaintiff’s Counsel submitted that, which I accept, as regards Item (5) of the above table, being the difference between the Old Rent of HKD1,555,000 per month and the New Rent of HKD1,200,000 per month, the Plaintiff had made all reasonable efforts to mitigate its loss.  Invitations to tender for tenancy of the Premises had been promptly sent out on 7^th September 2016,i.e. 7 days after the Notice to Quit was sent to the Defendant and before the Defendant had even vacated the Premises. It was Miss Lai’s evidence that the Plaintiff had entered into a Replacement Tenancy with the New Tenant because its proposed monthly tendered rent for the Premises was the highest amongst the six leasing proposals received from the prospective new tenants of the Premises i.e. that of HKD1,200,000 per month for the first three years. It was clear that the Plaintiff had managed to lease the Premises above its monthly market rent expediently. The market monthly rent for the Premises was only HKD700,000 per month according to the Expert, whereas the New Rent under the Replacement Tenancy was HKD1,200,000 per month.

15.  In the hearing, I questioned the basis of the Plaintiff’s claim for reinstatement cost of HKD72,000 under Item (4).  The Plaintiff’s Counsel submitted during the hearing that the Defendant had an obligation under Clause 38 of the Tenancy Agreement to reinstate the Premises and this sum was necessary to make good and rectify the damage and consequential safety concerns caused by the Defendant’s initial faulty demolition of a structural wall in the Premises.  Upon further clarification with the Plaintiff’s representatives during the hearing, the Plaintiff’s Counsel confirmed that such sum of HKD72,000 has not yet been incurred by the Plaintiff.  I requested the Plaintiff’s Counsel to further explain the basis of this claim for Reinstatement costs, the claim for loss of rental income and claim for interest with authorities.

16.  At the end of the hearing, I directed the Plaintiff’s Counsel to file further written submissions on or before 21^st September 2018 to address the Court on the following issues:

(a)   To clarify the basis for the claim of Reinstatement costs in the sum of HKD72,000;

(b)   To clarify the basis for the Loss of rental income: total loss for the two months the Plaintiff was seeking to re-let the Premises (Item 1 of the above Table) and partial loss, being the difference between the Old Rent and the New Rent, from the start of the New Tenancy to the end of the tenancy term of the old Tenancy Agreement, (Item 5 of the Table);

(c)   To clarify the amount of interest claimed by the Plaintiff; and

(d)   Submit a Statement of Costs for summary assessment of costs.

The Plaintiff has duly served the further written submission and the Statement of Costs for summary assessment of costs on the Defendant.

ASSESSMENT OF DAMAGES

17.  After considering all the evidence and submissions made in the hearing 14th September 2018 and the further written submissions filed by the Plaintiff’s Counsel on 21^st September 2018, I now turn to make assessment of the Plaintiff’s claims in these proceedings.

ARREARS IN RENT AND AIR-CONDITIONING CHARGES FOR JULY – SEPTEMBER 2016

18.  Although the Defendant defaulted in paying rent, rates and air-conditioning charges to the Plaintiff from July to September 2016, the Plaintiff has not claimed any arrears in rent, rates and air-conditioning charges in these proceedings and such claims were not included in the prayer for relief.  During the hearing, I asked the Plaintiff’s Counsel whether it would be necessary to set off the rental deposit and deposit paid by the Defendant from the claims.  The Plaintiff’s Counsel explained and confirmed that all outstanding arrears in rent, rates and air-conditioning charges had been set off against the rental deposit and deposit for air-conditioning charges paid by the Defendant in the total sum of HKD4,348,458 and such set off was made at the request of the Defendant.  The Plaintiff’s Counsel produced a letter dated 2^nd December 2016 issued by the Defendant to the Plaintiff to prove such set off.  As such, I do not need to deal with these claims.

TOTAL AND PARTIAL LOSS OF RENTAL INCOME

19.  The Old Rent (Part I of the Second Schedule of the Tenancy Agreement) is in the sum of HKD1,555,000 per month from 16^th September 2016 to 15^th September 2019.

20.  Under the Tenancy Agreement, there is no rent-free period (Part I of the Second Schedule), where the provisions relating to the rent-free period has been cancelled out.

21.  By reason of the Defendant’s breach of the Tenancy Agreement, the Plaintiff had issued a Notice to Quit to the Defendant on 31^st August 2016, and the Defendant has vacated the Premises thereafter on 30^th September 2016. 

22.  The Plaintiff submitted that in order to promptly mitigate any loss by reason of the Defendant’s wrongful repudiation of the Tenancy Agreement, on 7^th September 2016 (i.e. even before the Defendant had vacated the Premises), the Plaintiff had duly and promptly invited prospective tenants to submit rental tendering for the Premises by sending out invitations to tender.

23.  Out of all the responses received, the New Tenant’s proposed monthly tendered rent for the Premises was the highest.  In this connection, Miss Lai has duly explained the same in her evidence.

24.  The Plaintiff therefore signed the New Tenancy with the New Tenant, with the period of tenancy commencing on 1^st December 2016.  Under the New Tenancy Agreement, the New Rent payable from 1^st December 2016 to 30^th November 2019 is HKD1,200,000 per month. 

25.  There are two issues that arise at this juncture.  The first relates to Item 1 of the above Table (total loss of rental income for 2 months whilst the Premises was being re-let), whereas the second issue relates to Item 5 of the above Table (partial loss of rental income from the beginning of the term of the New Tenancy to the end of the term of the old Tenancy Agreement, i.e. the shortfall between the Old Rent and the New Rent). 

Item 1: Total loss of rental income for 2 months

26.  On the issue of total loss of rental income (Item 1 of the above Table), the Plaintiff took 2 months to re-let the Premises to the New Tenant.  During these 2 months, the Plaintiff suffered a total loss of rental income and is therefore claiming under Item 1 of the Table the sum of HKD1,555,000 (i.e. the Old Rent) x 2 months. 

27.  The period of 2 months to re-let the Premises was not challenged by the Defendant as being excessively or unreasonably long.  The burden of proof of establishing that mitigation has not taken place lies on the Defendant: see Wing Siu Co Ltd v Goldquest International Ltd (unrep., HCA 4145 and 3183/2001, 18 August 2006) at §7, the relevant passage of which is cited below and Postwell Ltd v Cheng Kap Sang (unrep., HCA 2799/1999, 23 September 2003) at § 25.

28.  The Plaintiff’s Counsel referred me to the following authorities:

(1)   Wing Siu Co Ltd v Goldquest International Ltd, supra, at §§7 and 8:

“7. An aggrieved landlord's entitlement to damages for wrongful repudiation of a tenancy agreement following general contractual principles is well established in cases such as Hop Woo Cheung Enterprises Ltd v Intergroup Industries Ltd [1982] HKC 436 and Sano Screen Mfrs v J & R Bossini [2000] 3 HKC 216. He can legitimately anticipate in the measure of damages to be awarded, such damages as reflecting the rental, service charges, rates and reinstatement cost stipulated in the tenancy and therefore payable were the agreement to be permitted to run its full course, subject always to a duty to minimize his loss: Chitty on Contracts, 29^thed. Vol. 1, at 26-094. He is, accordingly, expected to act reasonably and to take such steps as are necessary to re-let the vacant premises at a market rent: Merry "The Hong Kong Tenancy Law", 4^thed. at page 167-168. However, it falls upon the errant party to establish that mitigation has not taken place: Chan Annie v Lau Wai Kwong[1984] 1 HKC 231, 235G-H; Lai Hon Ming v Fong Wai Ching HCPI 994/2001, 21 Oct 2002, unreported.

8. The duty to mitigate is not onerous as the landlord is not required to do anything other than in the ordinary course of business: Chitty at 26-095; MacGregor on Damages 16^thed. paras. 322-323.”

(2)   Imagine Motion Ltd v Kalex Ltd (unrep., DCCJ 15855/2000, 24 December 2003) at § 40:

“40. Having said that, I find that it would be fair to say that even if the Defendant had taken all reasonable steps, it would still take a reasonable period of time to find a new tenant. The Defendant would lose the rental income for this reasonable period of time. In this case, from the time the Plaintiff started to view the Premises until the expiry of the rent-free period, almost 3 months had expired. Given the sluggish economy during the relevant period which this court can take judicial notice, I think it is fair to say it would have reasonably taken the Defendant at least 4 months to find a new tenant. In this connection, I award the Defendant damages for loss of rental income for 4 months ($27,000 x 4 = $108,000).”

(3)   Yiktown Properties Ltd v Jeon Bok Sool (unrep., HCA 2189/2007, 25 August 2011) at § 61:

“It seems to me that the plaintiff should be allowed a reasonable time to find a replacement tenant but, in my view, 8 months is excessive.”

29.  The Plaintiff’s Counsel submitted that 2 months represented a reasonable period for the Plaintiff to re-let the Premises and find a replacement tenant.  The invitations to tender dated 7^th September 2016 were sent as soon as the Notice to Quit was issued and even before the Defendant had vacated the Premises (on 30^th September 2016).  The deadline for responses to invitations to tender was 21^st September 2016, as reasonable time had to be given to the recipients of the tenders to respond.  The New Tenant’s tender for the Premises was received on 20^th September 2016, following which a reasonable period had to be given to the Plaintiff to process the responses received.  The New Tenancy Agreement was signed on 30^th November 2016.  I agree that the entire process which took 2 months from the date which the Defendant vacated the Premises on 30^th September 2016, represented a prompt, reasonable and responsible act of mitigation on the part of the Plaintiff.  Indeed, the Defendant who has the burden of proving otherwise, has not contended the contrary.

30.  I accept that the Plaintiff has taken all reasonable steps to promptly and duly mitigate the loss caused by the Defendant’s repudiation of the Tenancy Agreement.  I therefore allow the Plaintiff’s claim for total loss of rental for 2 months in the sum of $3,110,000 as claimed in full.

Item 2: Air - Conditioning Charges

31.  By reason of Part 1 of the Second Schedule of the Tenancy Agreement, the Defendant was obliged to pay the Air-Conditioning Charges of the Premises at a minimum charge of HKD45,279 per month.  According to a Memo issued by the Plaintiff dated 13^th September 2016, the Air-Conditioning Charges were adjusted downward from HKD45,729 to HKD37,956 per month.

32.  I allow the Plaintiff’s claim for Air-Conditioning Charges covering the period from 1.10.16 to 30.11.16 for two months in the sum of HKD75,912 as claimed in full.

Item 3: Cleaning, Security and Maintenance

33.  Pursuant to Clause 14 of Section II of the Tenancy Agreement, the Defendant is obliged to keep the Premises in a clean and sanitary state and condition and would at its expense employ cleaners to clean the Premises.  Clause 33 of Section II of the Tenancy Agreement provided that the Defendant had a duty to ensure the operation of the market in the Premises and that the management office for the market is adequately manned during the opening hours of the market, and that a 24-hour security guard service is maintained in respect of the Premises.

34.  Ms. Lai confirmed in her evidence that subsequent to the Defendant’s early termination of the Tenancy Agreement on 30^th September 2016, the Plaintiff had to maintain the Premises in good and tenantable condition and the Plaintiff had incurred expenses by retaining Good Excel Property Consultants Limited to provide cleaning, security and minor maintenance services in respect of the Premises for the period from 1^st October 2016 to 30^th November 2016.  The total sum incurred by the Plaintiff during that period was HKD356,366.60 (HKD178,183.30 per month x 2).  The same was supported by documents.

35.  I find such claim reasonable and I allow the Plaintiff’s claim for Cleaning, Security and Maintenance covering the period from 1.10.16 to 30.11.16 for two months in the sum of HKD356,366.60 as claimed in full.

Item 4: Reinstatement Costs

36.  The original amount of Reinstatement Costs claimed by the Plaintiff was HKD72,000.  However, in the Supplemental Submissions filed on 21^st September 2018, the Plaintiff’s Counsel confirmed that having further considered the fact that the reinstatement was still ongoing and that this sum has not yet been fully incurred, the Plaintiff would no longer be maintaining its claim on this head of loss.  As such, I shall disallow this head of claim accordingly.

Item 5: The difference between the Old Rent and the New Rent – Partial loss of rental income

37.  Although the New Rent in the sum of HKD1,200,000 per month is in fact higher than the unchallenged Expert’s opinion of what the market rent of the Premises should have been as of 1^st December 2016, the New Rent is still lower than the Old Rent of HKD1,555,000 per month.

38.  The Plaintiff is therefore claiming the difference between the Old Rent and the New Rent for the period of 1^st December 2016 (the start date of the New Tenancy) to 15^th September 2019 (the end date of the old tenancy under the old Tenancy Agreement with the Defendant), as well as total loss of rental income in the sum of HKD1,555,000 per month for the three-month rent free period granted to the New Tenant between 1^st December 2017 to 28^th February 2018 in accordance to Part 1 of the Second Schedule of the New Tenancy Agreement.

39.  I accept that the Plaintiff is entitled to be put in a position as if the Defendant had not repudiated the Tenancy Agreement.  The Plaintiff is entitled to be put back in the position as if the Defendant had not repudiated the Tenancy Agreement at all.  In the present proceedings, but for the Defendant’s breach of the Tenancy Agreement, the Plaintiff would have been able to continue renting the Premises at the Old Rent of HKD1,555,000 per month to the Defendant until 15^th September 2019, i.e. the original end date of the Defendant’s tenancy of the Premises.

40.  In Halsbury’s Laws of Hong Kong, Volume 36, at § [235.486], the learned editors write:

“Where the tenant abandons the premises during the term thus repudiating the tenancy and this is accepted by the landlord, the landlord is entitled to damages for the loss of the benefit of the term. In principle this will be the lost rental from the tenancy less any rental received form a substitute tenancy plus any expenses incurred. The landlord must however mitigate his loss by, for example, taking reasonable and expeditious steps to re-let the premises.”

41.  In Contender Ltd v Global Sonic Ltd (unrep., HCA 2894/2003, 7 February 2006), the Court of Appeal held in §§11 and 14 that the Plaintiff had successfully mitigated its loss by expeditiously and reasonably finding a new tenant after the defendant’s breach:

“11. The premises were eventually re-let under a new tenancy agreement… and the plaintiff therefore seeks to recover the shortfall in rental which it would have received in full had the defendant continued to abide by its obligation under the three-year tenancy agreement until the contractual expiry date……

14. I am satisfied that the plaintiff has acted expeditiously, reasonably and fairly in mitigation its loss… In any event, failure to mitigate is an onus which befalls the person who raises it – usually the defendant in this case – but the defendant has not appeared…”

42.  The Court of Appeal then allowed the plaintiff to recover the shortfall in rental which it would have received in full had the defendant continued to abide by its obligation under the tenancy agreement until the contractual expiry date.

43.  In Haw Hong International Ltd v Kei Oi Wah Linia and Others (unrep., HCA 3582/1989, 8 May 1990), the Court found that the Plaintiff had done all reasonable steps to mitigate its loss and held at § 5 that the Plaintiff could recover the difference between the old rent and the new rent:

“5. As the Plaintiff has elected to treat the lease agreement with the Defendants as terminated or discharged, it can pursue its remedy in damages being the contractual rent reserved by the lease less rental value of the premises at the time of the breach. Where, as in this case, the Plaintiff has relet the premises at a lower rent, which was all they could command at that date, the damages are to be assessed on the basis of the difference between the contractual rent under the terminated agreement [and] the new rent under the fresh lease.”

44.  In the present proceedings, but for the Defendant’s breach of the Tenancy Agreement, the Plaintiff would have been entitled to a rental income of the Premises at the Old Rent of HKD1,555,000 per month until 15^th September 2019, i.e. the original end date of the Defendant’s tenancy of the Premises.  However, because of the Defendant’s wrongful repudiation of the Tenancy Agreement, the Plaintiff had no choice but to terminate the tenancy and find a new tenant at a time when the market rent of the Premises had fallen.  Although the Plaintiff had, since 1^st December 2016, continuously received rental income for the Premises at HKD1,200,000 from the New Tenant, there is still a shortfall of HKD355,000 per month which the Plaintiff would not have been subjected to but for the Defendant’s breach. 

45.  In this regard, the Plaintiff had adduced expert evidence to prove to the Court that the New Rent in the sum of HKD1,200,000 is well above the market rent of the Premises.  The Defendant, who has the burden of contending otherwise, has not done so, nor has it put in any evidence, expert or factual, to the contrary.  I accept the Expert’s evidence on the market rent of the Premises put forward by the Plaintiff and find that the Plaintiff had fully mitigated its loss by renting the Premises above the market rent at the time the New Tenancy was signed (1^st December 2016).

46.  By reason of the foregoing, I am satisfied that the Plaintiff had done what could reasonably be done in mitigation, and allowed the Plaintiff to claim the loss of rental less the new rent received from the new tenants.  The Plaintiff should be allowed the difference between the Old Rent and the New Rent until the date on which the Defendant’s tenancy of the Premises should rightfully have ended (15^th September 2019), as well as total loss of rental income for the three months of contractual rent-free period granted to the New Tenant.  I therefore allow the claim of HKD15,492,500 as claimed under this head in full.

Set off

47.  I find that the Plaintiff is obliged to set off the sums of HKD23,406 as downward adjustment of Air-Conditioning Charges, downward adjustment of HKD1,316.60 as Air-consumption charge and HKD148,000 Guarantee Fund paid by the Defendant under Part IV of the Second Schedule of the Tenancy Agreement from the claim amount.

CONCLUSION ON LOSS AND DAMAGES

48.  Accordingly, the total amount of loss and damages that I award to the Plaintiff is in the sum of HKD18,862,056 with the following breakdown :-

Head of Loss	Period	Calculation	Amount Awarded
(1)Loss of Rental Income	01.10.16 to 30.11.16 = 2 months	$1,555,000 x 2	$3,110,000
(2)Air-Conditioning Charges	01.10.16 to 30.11.16 = 2 months	$37,956 x 2	$75,912
(3)Cleaning, Security and Maintenance	01.10.16 to 30.11.16 = 2 months	$178,183.30 X 2	$356,366.60
(4)Reinstatement Costs	NIL	NIL	NIL
(5)Partial Loss of Rental Income -Difference between Old Rent and New Rent	(i) 01.12.16 to 30.11.17 =12 months (ii) Rent free 01.12.17 to 28.2.18 = 3 months  (iii) 01.03.18 to 15.09.19 = 18.5 months	(i) ($1,555,000 - $1,200,000) x 12 =$4,260,000 (ii) $1,550,000 x 3 =$4,665,000  (iii) ($1,555,000 - $1,200,000) x 18.5 =$6,567,500	$15,492,500
		GROSS TOTAL	$19,034,778.60

	SET OFF (i)    Air-Conditioning Charges (ii)   Air-consumption charge (iii)  Guarantee Fund	SET OFF (i)   ($23,406) (ii)     ($1,316.60) (iii)   ($148,000)
		NET TOTAL	$18,862,056

PRE-JUDGMENT INTEREST

49.  Clause 3 of Section V of the Tenancy Agreement reads:

“If the Rent, the Charges or any part thereof shall be unpaid for fourteen days after the same shall become payable… the same shall become payable and the Tenant shall further pay to the Landlord interest at the rate of 2% per month on the amount of Rent, the Charges, rates in arrears and such interest shall be payable and calculated from the date upon which such payment in arrears fell due and not fourteen days thereafter until full payments are made…”

50.  For claim items 1,2,3 and 5 of the above Table, the Plaintiff relies on the above Clause 3 and prays for a contractual interest at 2% per month until the date of Judgment.  As regards items 1 and 5, the Plaintiff’s Counsel submits that the situation is not different from where the Defendant only made partial payment of rent of $1,200,000 to the Plaintiff leaving $355,000 of rent in arrears.  For arrears of rent, the Plaintiff is entitled to contractual interest for delay in payment under the old Tenancy Agreement.  Therefore, likewise, the Plaintiff claims pre-judgment interest at the same contractual rate (of 2% per month) for the damages representing the difference in rent of HKD355,000 per month and on all the items of claims.

51.  Alternatively, the Plaintiff asks for a pre-judgment interest at the rate of 2% per month for items 2 and 3 and interest rate of Prime + 1% for items 1 and 5 of the Table.  The Plaintiff contends that the rate of Prime + 1% has been well-established by authorities to be the applicable pre-judgment rate from the date when the loss has accrued to the date of Judgment.  The Plaintiff contends that there is no reason to, nor is there any evidence justifying the adoption of another starting point. 

52.  It remains within the discretion of the Court to determine what rate of interest should be given. I do not accept that the Plaintiff is entitled to claim the contractual interest rate of 2% per month on any of the claimed items as suggested by the Plaintiff’s Counsel.  The Plaintiff is claiming damages as a result of the breach and termination of the Tenancy Agreement which are not in the nature as overdue payment under the Tenancy Agreement.  The contractual interest rate should not apply.  After considering all the relevant legal authorities and the background of this case, in all fairness, I order that there be pre-judgement interest rate at Prime rate + 1% on the sums awarded (i.e. $18,862,056) from the date of the service of the Writ to the date of this judgment, and thereafter at judgment rate until full payment.

SUMMARY ASSESSMENT OF COSTS

53.  A Statement of costs for summary assessment under O 62 r 9A of the Rules of the High Court prepared by the Plaintiff’s Solicitors was lodged and filed together with the Supplementary Submission from the Plaintiff’s Counsel on 21^st September 2018 under my directions made during the hearing.  The Plaintiff had duly served these documents on the Defendant.

54.  In the Statement of costs for summary assessment, the Plaintiff claims the sum of HKD168,853.20 as costs in this action against the Defendant.

55.  Having reviewed the Plaintiff’s Statement of costs, I consider that the amount of Counsel’s fees and all miscellaneous items incurred are reasonable save that the claims for attendance on Counsel in the sum of HKD18,975 and preparation of documents in the sum of HKD35,640 appear slightly on the high side and I would reduce these two items of claim to the sum of HKD13,000 and HKD28,000 respectively.  As such, a total sum of HKD13,615 has to be deducted from the Statement of costs.

56.  I therefore summarily assess the amount of costs payable by the defendant to the plaintiff in the sum of HKD155,238.20.

57.  Despite having carried out the above costs assessment, I would make this an order nisi  to cater for the event that any Calderbank offers or sanctioned offers etc. may have been made, especially given the Defendant’s absence from the hearing.

58.  If there were no such matters capable of varying the parties’ liability on costs or no further application from the Defendant to vary the costs order, the order nisi shall become absolute within 14 days from the day of handing down of this judgment.

59.  In the premises, there be a costs order nisi that the costs of the assessment of damages, summarily assessed in the sum of HKD155,238.20, be paid by the Defendant to the Plaintiff.   In the absence of any application to vary within 14 days from today, the order nisi shall become absolute and such assessed costs shall be paid within a further 14 days thereafter.

60.  It remains for me to thank Ms. Prisca Cheung for the assistance she rendered to the Court.