SILVERCORD LTD v. HO CHING YEE t/a CRYSTAL PLUS

DCCJ 4428/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4428 OF 2007

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ASSESSMENT OF DAMAGES

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1.  Silvercord is one of the shopping mall cum commercial buildings in Canton Road, Tsimshatsui, Kowloon.  In these actions commenced on 5 October 2007, Silvercord claims against the following former tenants of 4 shop premises at vim (as it was called), Basement Floor of the mall for breach of their respective tenancy agreements.  On the following dates, interlocutory judgments were entered against these former tenants:  

Shop	Action No	Date of Judgment
BM55	4428/2007	15 November 2007
BM59	4429/2007	4 December 2007
BM63	4430/2007	19 March 2008
BM78	4432/2007	15 November 2007

2.  The former tenants have not appeared so far.  At the last hearing of the respective notices of appointment for assessment of damages, these 4 actions were ordered to be heard together.  Apparently the court’s notices of hearing have not been successfully served in DCCJ 4428/2007 and DCCJ 4430/2007.  However according to the affirmations of service and the chronology of service efforts made by the solicitors for Silvercord, other documents have been served on them at various stages including the trial documents and they have not been returned.  On balance, I am satisfied that Silvercord should not be prevented from proceeding with the assessment hearing.

Common circumstances and legal position

3.  The terms of the tenancy agreements between Silvercord and each of these former tenants were essentially identical, of course except for the particulars peculiar to each tenancy.  In each case, the former tenant has owed rent, service charges and rates in arrears.  On the basis that the former tenants have been in breach of their respective tenancy agreements, Silvercord has terminated the tenancy agreements and repossessed the shop premises.

4.  By the interlocutory judgments, Silvercord has already obtained judgments on the liquidated amounts in arrears with contractual interest.  What are left to be assessed are (1) damages for early termination of the tenancy agreements; and (2) costs.

5.  In respect of (1) above, Silvercord actually served notices on all its tenants at vim on the Basement Floor to terminate their tenancies with a view to a major overhaul of that part of the mall.  The termination took effect on 17 November 2007.  Therefore Silvercord is claiming damages up to that date.  In respect of (2) above, the solicitors for Silvercord ask for such costs to be assessed summarily.

6.  Mr Wong for Silvercord referred to various authorities in support of his submission that the landlord’s entitlement to claim damages for early termination of tenancy agreement basically follows the general contractual principles: Hop Woo Cheung Enterprises Ltd v Intergroup Industries Ltd [1982] HKC 436; Well Century Holdings Ltd v Leung Kam Yu, CACV 370/2002; Contender Limited v Global Sonic Limited, HCA 2894/2003; Hoi Cheng Pan v Headstart Education Group Limited, DCCJ 4028/2006.  Essentially, the landlord’s loss, and thus damages, shall represent the rent and charges that the landlord would have received during the remainder of the term of terminated tenancy agreement, subject to mitigation.

7.  Strictly mitigation is an issue to be raised by the defence which did not exist in these cases.  Yet Silvercord assumes, and I think rightly, the duty to mitigate its loss by seeking to re-let the shop premises.

8.  Silvercord called its senior leasing officer, Mr Tong, to explain the efforts made by the company to re-let the shop premises after repossession.  These efforts included appointment of estate agents, promotional flyers to existing tenants and cold calls to prospective tenants.  Save for shop BM63 (in DCCJ 4430/2007), the other shop premises could not be re-let and remained vacant until 17 November 2007.

9.  A report dated 30 October 2008 on the valuation of the market monthly rental of the shop premises in question during the period between the repossession and 17 November 2007 was filed.  Miss Lau, director of the valuation company, attended court to give evidence.

10.  It was acknowledged that the asking rentals that Silvercord set for re-letting these shop premises were apparently higher than their respective market rentals as valued.  However Mr Wong submitted that Silvercord was entitled to do so in anticipation of the bargaining process during negotiation with the prospective tenant.  He also referred to the comment of the learned Master in Wing Siu Co Ltd v Goldquest International Ltd, HCAs 4145/2001 & 3183/2001:

“……As a whole-building landlord, such an approach would impact on rent reviews, renewals and new lettings of other premises.  The plaintiff was duty bound to do not more than was reasonably necessary to market the premises.  Taking any steps that may have an adverse consequence on the rental tone of the building is not to be expected of the plaintiff in my considered view.”

11.  In my view, the duty of the landlord to mitigate its loss is not an onerous one but one that is reasonable in the ordinary course of its business.  Mr Tong gave evidence that during the relevant period, Silvercord also successfully let other shop premises at vim on the Basement Floor similar to the shop premises in question in terms of size at the monthly rentals fairly close to these asking rentals.

12.  I accept the evidence of Mr Tong and valuation evidence of Miss Lau.  I also accept the calculation of damages representing Silvercord’s loss of rent, service charges and rates as submitted by Mr Wong.

13.  Mr Wong also submitted his calculation of interest on the basis of the contractual overdue interest rate for rent and charges in arrears.  I pointed out and Mr Wong conceded that the contractual overdue interest rate does not apply to damages though the same is to be assessed with reference to the rent and charges receivable under the tenancy agreements but for their premature termination.

14.  For gross sum assessment of costs, Mr Wong submitted the skeleton bill of costs.  Upon my query as to the rate charged and the substantial overlapping items of work in these cases, the skeleton bill was revised and the costs claimed adjusted.

DCCJ 4428/2007 (Shop BM55)

15.  The monthly rental was HK$15,000 and monthly service charges were HK$1,692.60.  Rates were payable quarterly.  But for the early termination, the contractual tenancy would have expired 24 November 2007.  Silvercord repossessed the shop premises on 17 October 2006.  The shop premises was never re-let.  Damages (from 18 October 2006 to 17 November 2007) are assessed as follows:

Loss of rent	HK$195,274.19
Loss of service charges	HK$ 22,034.74
Loss of rates	HK$   4,732.34
LESSsecurity deposit	HK$ 50,077.80
Total:	HK$171,963.47

DCCJ 4429/2007 (Shop BM59)

16.  The monthly rental was HK$15,000 and the monthly service charges were HK$1,692.60.  Rates were payable quarterly.  But for the early termination, the contractual tenancy would have expired on 4 December 2007.  Silvercord repossessed the shop premises on 20 October 2006.  The shop premises was never re-let.  Damages (from 21 October 2006 to 17 November 2007) are assessed as follows:

Loss of rent	HK$193,822.58
Loss of service charges	HK$ 21,870.94
Loss of rates	HK$   4,666.30
LESS security deposit	HK$ 50,077.80
Total:	HK$170,282.02

DCCJ 4430/2007 (BM63)

17.  The monthly rental was HK$26,600 and the service charges were HK$HK$1,692.60.  Rates were payable quarterly.  But for the early termination, the contractual tenancy would have expired on 24 November 2007.  Silvercord repossessed the shop premises on 19 August 2006.  The shop premises were re-let on 7 September 2006 at the monthly rental of HK$13,300 for a fixed term of 2 years.  Damages (from 20 August 2006 to 17 November 2007) are assessed as follows:

Loss of rent	HK$397,770.11
Loss of service charges	HK$ 25,310.74
Loss of rates	HK$   9,604.89
LESS rent received	HK$155,610.00
LESSservice charges received	HK$ 20,311.20
LESS rates received	HK$   6,450.00
LESS security deposit	HK$ 84,877.80
	HK$165,436.74

DCCJ 4432/2007 (BM78) 

18.  The monthly rental was HK$20,700 and the monthly service charges were HK$2,047.50.  But for the early termination, the contractual tenancy would have expired on 24 November 2007.  Silvercord repossessed the shop premises on 12 June 2006.  The shop premises was never re-let.  Damages (from 13 June 2006 to 17 November 2007) are assessed as follows:

Loss of rent	HK$355,350.00
Loss of service charges	HK$ 35,148.75
Loss of rates	HK$   9,484.83
LESS security deposit	HK$ 68,242.50
Total:	HK$331,741.08

Interest

19.  There shall be interest on the damages assessed in each case at the judgment rate from the date of writ to full payment.

Costs

20.  Pursuant to the tenancy agreements, Silvercord is entitled to claim costs on an indemnity basis.  Costs including these assessment proceedings are now summarily assessed at HK$31,730 in each action.