ZETA ESTATES LTD v. AHMAD, ZAHOOR

DCCJ 3965/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3965 OF 2015

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ASSESSMENT OF DAMAGES

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1.  This is an assessment of damages arising out of a tenancy dispute.

2.  The plaintiff is represented by Miss Pang Mei Ngan of Messrs Ford, Kwan & Company at the assessment.  The defendant has not been legally represented in these proceedings.  He is present at the assessment and acts in person.

Factual Background

3.  The property concerned is situated at Workshop No 24, 3^rd Floor, Oceanic Industrial Centre, No 2 Lee Lok Street, Hong Kong (“the Property”).  The plaintiff was the landlord and the defendant the tenant.  The Property was let by the plaintiff to the defendant under two consecutive tenancy agreements.  The first agreement was dated 27 February 2013 under which the Property was let for a term of about two years from 21 February 2013 to 28 February 2015.  The second agreement was dated 28 April 2015 under which the Property was let for another term of two years from 1 March 2015 to 28 February 2017.  These two tenancy agreements are referred to below as “the First Agreement” and “the Second Agreement” respectively and “the Agreements” collectively.

4.  Under the Agreements, the defendant agreed to pay (a) rent on a monthly basis, (b) management fee on a monthly basis, (c) rates on a quarterly basis, and (d) utility charges.  In the event of default in payment of any sum of money not received by the plaintiff within 15 days from the due day, the defendant should pay to the plaintiff interest on the arrears at a monthly rate of 3.5%.  See clauses 2(a), (b), (c) and (d) and Parts I and II of the Second Schedule of the First Agreement and clauses 1, 2.01.01, 2.01.02, 2.01.03, 2.03.01, 7.02 and Part 4 of the Schedule of the Second Agreement.

5.  Further, under the Agreements, the plaintiff held a decoration deposit of $2,000 and a security deposit of $57,052 as security for the performance of the defendant’s obligations – see clause 8.01 and Part 4 of the Schedule to the Second Agreement.

6.  The defendant started to make default on his payment obligations in about early January 2015.  Initially, he was late in paying rent and management fees.  But the situation got worse.  The defendant has failed to pay rent, management fee and rates since 1 July 2015, 1 April 2015 and 1 October 2015 respectively.  He has also failed to pay water charges since 31 December 2014.

7.  In light of the breaches of the defendant, the plaintiff commenced the present proceedings against the defendant on 27 August 2015. By the issuance of the writ of summons, the plaintiff sought to forfeit and terminate the tenancy.  Further, the plaintiff applied the decoration deposit and the security deposit to offset the sums owed by the defendant, including interest payable on default.  After such application, the plaintiff still holds the sum of $24,670.90, to which credit should be given in the present assessment exercise.

History of proceedings to date

8.  No notice of intention to defend was filed by the defendant.  Final and interlocutory judgment was entered against the defendant on 15 October 2015.  The defendant was ordered to pay to the plaintiff:-

(a) arrears of rent/mesne profit at the rate of $13,100 per month from 1 September 2015 to the date when vacant possession of the Property is delivered up;

(b) management fees at the rate of $1,064 per month from 1 September 2015 to the date when vacant possession of the Property is delivered up;

(c) damages for the defendant’s breach of the Agreements to be assessed; and

(d) costs.

9.  Possession proceedings were commenced by the plaintiff following the judgment.  In the end, on 15 November 2015, the defendant vacated and delivered up possession of the Property to the plaintiff by handing over the keys to the plaintiff.  On 16 November 2015, the plaintiff re-entered and recovered possession.   

10.  On 15 December 2015, the plaintiff issued a notice of appointment of assessment of damages.  Then followed a number of call-over hearings.  Pursuant to the order made by Master S P Yip at the last call-over hearing on 27 July 2016, if the defendant fails to file and serve any witness statement by 17 August 2016, he shall be debarred from calling any witness, including himself, to give oral evidence at the assessment hearing. No witness statement has been filed by the defendant to date.  Accordingly, the defendant has led no evidence in this assessment.

The plaintiff’s case on quantum

11.  The plaintiff has called one witness, Miss Au Wing Yee.  Miss Au works for the plaintiff and her title is Senior Sales and Leasing Officer. 

12.  The plaintiff’s case on quantum is straightforward. 

13.  The plaintiff is a company under the Chinachem Group.  It owns the whole building where the Property is situated save for 34 workshop units (out of a total of 597 workshop units in the building).  Miss Au and her team are responsible for letting out the units in the building as and when they become vacant.  Their job includes preparing vacancy list of the building and engaging estate agents to let out the units. 

14.  Since recovery of the Property, the plaintiff had tried to re-let the Property at the same rent as under the Second Agreement, ie, $13,100 per month.  The plaintiff updated its vacancy list to include the Property and forwarded it to various estate agents.

15.  Miss Au explained that the rental amount was slightly lower than the market rent of other comparable units in the building but the plaintiff was willing to re-let at this rent but it was not willing to go lower than that because any lower rent would adversely impact on the other units in the building. 

16.  Apart from seeking referrals from estate agents, the plaintiff also caused advertisements to be placed in newspapers and put on the building by way of posters, notices and banner.  Eventually, the plaintiff let out the Property in July 2016.  The new tenancy commenced on 6 July 2016, with a rent-free period of 15 days.  Hence, under the new tenancy, the plaintiff would be receiving rent from 21 July 2016.  The new tenant is, however, to pay management fees and rates from 6 July 2016 onwards. 

17.  Accordingly, the plaintiff makes claim under the following four heads:-

(a)     loss of rent from 16 November 2015 to 20 July 2016 in the sum of $106,701.61 (ie, $13,100 per month x [15/30 + 7 + 20/31] months);

(b)     loss of management fees from 16 November 2015 to 6 July 2016 in the sum of $8,185.94 (ie, $1,064 per month x [15/30 + 7 + 6/31] months);

(c)      loss of rates from 1 October 2015 to 6 July 2016 in the sum of $5,011.63 (ie, $1,635 per quarter x [3 + 6/92] quarters);

(d)     loss of water charges from 6 May 2015 to 2 September 2015 in the sum of $42.10.

18.  These four items amount to $119,941.28.  After credit is given to the sum of $24,670.90 still held by the plaintiff, the plaintiff now claims the sum of $95,270.38.

Legal principles

19.  Where a tenant defaults on payment and the tenancy is brought to an end by the landlord accepting the repudiatory breach, the latter’s entitlement to damages follows and is to be determined by general contractual principle.  Generally speaking, damages will include loss of rental, rates and fees stipulated in the tenancy agreement for the remainder of the term because had there been no breach, the tenancy would have run its full term.  This is subject always to the landlord’s duty to mitigate his loss.  He is expected to act reasonably and take such steps as are necessary to re-let the vacant premises at market rent.  See, eg, Sano Screen Manufacturers Limited v J & R Bossini Trading Limited [2003] HKC 216, Wing Siu Company Limited v Goldquest International Limited HCA 4145/2001, 18 August 2006 at paragraph 7, and Chan Annie v Lau Wai Kwong [1984] HKC 231 at 235G-H.

Decision

20.  The plaintiff’s case is simple and straightforward.  The defendant has not really been able to mount any serious challenge against it in cross-examination.  The defendant queried the claim for water charges that are alleged to be owed prior to the Second Agreement because he had cleared everything on the First Agreement prior to its renewal.  To that, Miss Au confirmed that according to the plaintiff’s records, those charges have remained outstanding.  I accept Miss Au’s evidence in this regard. As a professional landlord, the plaintiff’s records ought to be accurate.

21.  In my view, the items claimed by the plaintiff are in accordance with the terms of the Agreements.  I accept Miss Au’s evidence in its entirety and consider that the plaintiff has acted reasonably to mitigate its loss in the circumstances.

22.  Accordingly, I assess the damages in the sum of $95,270.38, as claimed by the plaintiff and award this sum to the plaintiff. The plaintiff is also entitled to interest on damages at the rate of prime rate plus 1% from the date of writ to today and thereafter at judgment rate until payment in full.

(Discussion re costs)

23.  I make the following order on costs.  The plaintiff do have costs of the assessment.  The costs of the action and the costs of assessment be summarily assessed at $70,000, payable by the defendant on or before 1 December 2016.