TACTIC ALLY LTD v. LI FAI WAI

HCA 1165/2020

[2023] HKCFI 1469

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1165 OF 2020

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J U D G M E N T

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INTRODUCTION

1.  This is a trial of an action for the breach of a provisional tenancy agreement dated 28 March 2020 (“the Agreement”).

2.  The Agreement was entered into between Tactic Ally Limited (“the Plaintiff”)  as landlord with Mr Li Fai Wai (“the Defendant”)  as tenant for the lease of the commercial premises known as Unit 01, 21/F Office Tower, Convention Plaza, No. 1 Harbour Road, Hong Kong (“the Unit”).

3.  On the question of liability, the issue in dispute is whether the Defendant assumed personal liability under the Agreement, or whether he merely signed as agent for Mr. Ng Shung Ying Jie (“Mr Ng”).  There is no dispute that Agreement was breached but the Defendant contends that he was not personally responsible for this since he merely signed as agent on behalf of Mr Ng.  In other words, despite being the named tenant under the Agreement, the Defendant’s case is that he did not assume personal liability for its breach.  The Defendant claims that the Plaintiff knew of the true position when the Agreement was signed.

4.  In the event that liability is established, there is an issue as to whether the Plaintiff took reasonable steps to mitigate its loss, and a separate issue as to whether the damages to which the Plaintiff is entitled should be reduced by HK$426,500 on account of a payment received by the Plaintiff from a third party, Miss Hung Hung Ming (“Ms Hung”).

THE AGREEMENT

5.  As I have mentioned above, the Agreement was entered into on 28 March 2020.  The term of the lease was for 3 years commencing from 1 April 2020 at a monthly rent of HK$400,000, with a rent-free period from 1 to 30 April 2020.  The tenant was responsible for paying the government rates, management and air-conditioning fees.

6.  A security deposit of HK$1,200,000 was payable to the Plaintiff under the Agreement.  This consisted of an initial deposit of HK$400,000 payable upon the signing of the Agreement and a further deposit of HK$800,000 payable on or before 31 March 2020.  The rent of HK$400,000 for the first month was also payable on 31 March 2020.

7.  Under Clause 21D, the parties were required to sign the formal tenancy agreement on or before 8 April 2020.  Clause 14 provided that if the tenant failed to execute the formal tenancy agreement, the initial deposit shall be forfeited to the landlord.

8.  Clause 21C provides:

“業主知悉及同意租客將於簽署正式租約時或之後時間，會更改用回 WISHING GROUP LIMITED 唯鮮控股集團有限公司 或 LI FAI WAI 李煇偉 P****** (*)  之董事註冊有限公司作為租客繼續承租該物業”

“The Landlord acknowledges and agrees that upon or after the signing of the formal tenancy agreement, the tenant will be changed to either WISHING GROUP LIMITED or a company to be registered by [the Defendant] in which he is a director to continue to rent the said premises as tenant” (English translation).

9.  There is also a provision contained at the bottom of the Agreement which stated that “under any circumstances, the one who signed This Agreement will be legally liable to [sic] the content of it”.

10.  The Defendant was named as the tenant under the Agreement with his HKID details and address stated, and he signed it in his personal capacity.  The Agreement originally stated that the tenant was “New Aspects Investments Limited” and the Defendant signed for on and behalf of it.  However, the references to that company in the Agreement were later crossed out and countersigned, with the final agreed version signed by the Defendant in his personal capacity.

EVENTS AFTER THE AGREEMENT

11.  On 8 April 2020, the Defendant paid the initial deposit of HK$400,000.[1]  On 21 April 2020, the Plaintiff presented the Defendant’s personal cheque dated 9 March 2020 for HK$1,200,000 for payment. This was meant to be for the HK$800,000 outstanding for the security deposit, together with HK$400,000 as rental for the first month.  However, on 22 April 2020, the cheque was dishonoured.

12.  On 24 April 2020, the Plaintiff received a further HK$100,000 paid by the Defendant.[2]  The Plaintiff has confirmed that it is willing to give credit for this sum paid by the Defendant.

13.  There is no dispute that the Defendant has not executed the formal tenancy agreement, and that the initial deposit and first month’s rent had not been fully paid by the Defendant.

14.  On 30 April 2020, the Plaintiff received a cheque issued by a Miss Hung Hung Ming (“Ms Hung”)  for HK$1,000,000.  The Plaintiff says that it did not request payment from Ms Hung, and that it did not know the purpose of this cheque at the time.  However, the Plaintiff proceeded to present the cheque for payment and it was later dishonoured.

15.  The Defendant’s case is that Ms Hung was introduced to the Defendant in early 2020, and that Ms Hung issued the HK$1,000,000 cheque to the Plaintiff on Mr Ng’s instructions.

16.  By a letter dated 28 May 2020 from the Plaintiff’s solicitors, the Plaintiff stated that the Defendant was in repudiation of the Agreement because the Defendant had failed to pay the balance of the deposit and the first month’s rent, as well as failing to execute the formal tenancy agreement.  The letter notified the Defendant that the Plaintiff accepted the repudiation and forfeited the HK$400,000 paid by the Defendant as part of the deposit.

17.  On 9 June 2020, the Plaintiff issued a Statutory Demand for the sum of HK$1,000,000 against Miss Hung.  This led to a settlement agreement being reached with Miss Hung on 24 June 2020, with her husband, Mr So, as guarantor.  This provided for an immediate payment of HK$300,000 by way of cashier’s order, and the balance of the sum, with interest, to be paid by way of 28 consecutive monthly installments. There was a repayment schedule attached listing out the details of the 28 payments to be made, with the first payment due on 31 July 2020.

18.  On the same day, the Plaintiff confirmed receipt of HK$300,000 in cash, together with 10 post-dated cheques signed by Miss Hung which corresponded to the first 10 payments to be made by her under the settlement agreement.  At trial, it was confirmed that the Plaintiff was able to clear the first four post-dated cheques for the total amount of HK$126,500.[3]  Taking this together with the HK$300,000 in cash, the Plaintiff was able to receive HK$426,500 from Miss Hung.

19.  In the meantime, after the Plaintiff accepted repudiation, it began to market the Unit with estate agents.  I will discuss these efforts in further detail later in this judgment.  Despite these efforts, the Plaintiff was unable to find a replacement tenant.

20.  Eventually, the entire 21/F on which the Unit was situated was assigned by the Plaintiff on 29 April 2022 as part of a group restructuring.  No issue was taken as to this at trial by the Defendant.  Accordingly, the Plaintiff seeks to recover its losses as a result of loss rental income and other expenses up to 29 April 2022, even though the lease was due to last for 3 years up to 31 March 2023.

21.  In these proceedings, the Plaintiff also sought to set aside the sale of a property by the Defendant was a disposition of a residential property at Kingsgate, No. 178 Pau Chung Street, Kowloon made with the intent to defraud creditors.  However, this was no longer a live issue at trial.  Accordingly, I do not propose to say anything more about it.

THE DEFENDANT’S CASE

22.  In summary, the Defendant says that he only entered into the Agreement as agent for Mr Ng, and is therefore not personally liable for any breach of the Agreement.  The Defendant explains that he became acquainted with Mr Ng in January 2020, and that Mr Ng said that he would like to establish a supermarket business in Hong Kong and intended to assign the Defendant as the general manager of his business.

23.  The Defendant says that he acted under Mr Ng’s instructions to assist him in establishing his supermarket business.  The Defendant was asked to incorporate a company to operate the business, and to look for potential commercial premises at the Office Tower of Convention Plaza and to follow-up on tenancy matters.  The company that was to be incorporated by Mr Ng was named Wishing Group Limited (“WGL”).

24.  The Defendant’s case is that he was instructed by Mr Ng to enter into the Agreement with the Plaintiff as an agent.  As I will explain below, and as Ms Cheung submitted, the Defendant’s pleaded case as to who the principal actually was unclear and far from satisfactory.  However, at trial, Mr Chu counsel for the Defendant, confirmed that his case was that the Defendant signed the Agreement on behalf of Mr Ng. The Defendant then explained that Clause 21C was inserted into the Agreement because WGL had yet to be incorporated, and that it was contemplated that WGL would enter into the formal tenancy agreement.

25.  In legal terms, the primary case advanced by the Defendant was that this was a situation where the Agreement was entered into on behalf of a disclosed and identified principal, Mr Ng, and therefore the Defendant should not assume personal liability for breach.  The Defendant has also made a counterclaim against the Plaintiff for set-off of HK$200,000[4] and HK$400,000, and various declaratory relief.

RELEVANT LEGAL PRINCIPLES

26.  The question of whether an agent is deemed to have contracted personally in the case of a contract in writing (other than a deed, bill of exchange, promissory note or cheque)  depends upon the intention of the parties, as appearing from the terms of the written agreement as a whole, the construction of which is a matter of law.  The starting point is that if a written contract is signed by an agent in his own name without qualification, he is deemed to have contracted personally unless a contrary intention plainly appears from other portions of the document: Bowstead & Reynolds on Agency (22^nd ed)  at §§9-036-9-037.

27.  In Honet Industries Ltd. v Inkan Ltd. (CACV 59/1996, 30 May 1996), the Court of Appeal dismissed an appeal by a seller of cloth who did not perform its contract.  The seller contended that it did not assume liability because it was not in fact the seller, but only the seller’s agent, despite the fact that the appellant was named as the seller in the contract.  On the approach to be taken in such cases, Godfrey JA, with whom Litton VP and Liu JA agreed, stated at pp. 3-4:

“… I would suggest that in cases of this sort, in which parties seek to adduce evidence as to what they said to each other as an aid to construing the written contract between them, judges should discourage them from doing so.  Adducing such evidence takes up much time and leads to the reception of much inadmissible material which serves to obscure rather than to illuminate the issue.  Where a contract of this sort is in writing, and the court has to decide whether it was the intention of the parties that the agent should assume personal liability, the determination of such intention (which must be ascertained objectively)  involves nothing more nor less than the true construction of the written contract.  Parol evidence is not admissible to add to, contradict or vary the terms of a written contract … But where agents sign contracts without any qualification, they will always be held to be personally liable, in the absence of intrinsic evidence, i.e., within the contract itself, clearly denoting otherwise: see, e.g., Parker v Winslow (1857)  7 E & B 942.  The usual way in which an agent qualifies his signing so as to negative his personal liability is by signing “for and on behalf of” the principal.  That of course was not done in this case” (emphasis added).

28.  Where the issue is whether a party signed a document as principal or agent for someone else, there is no automatic relaxation of the parol evidence rule.  The person who signed is the contracting party unless (a)  the document makes it clear that he signed for a sufficiently identified principal or as the officer of a sufficiently identified principal; or (b)  extrinsic evidence establishes that both parties knew that he was signing as agent or company officer: Hamid v Francis Bradshaw Partnership [2013] EWCA Civ 470 at §57(iv)  per Jackson LJ.

29.  As to mitigation of loss in the landlord and tenant context, where a landlord accepts a tenant’s repudiation, the landlord is entitled to recover damages reflecting the rent of the unexpired term of the tenancy agreement, service charges, rates and reinstatement costs.  This is subject to a duty on the landlord to mitigate its loss, and the landlord is expected to act reasonably and to take such steps as are necessary to re-let the vacant premises at market rent.  However, the duty to mitigate is not onerous, and the landlord is not required to do anything other than in the ordinary course of business: Wing Siu Co Ltd v Goldquest International Limited, HCA 4145 & 3183/2001, 18 August 2006 at §§7-9; Silvercord Ltd v High Performance Sports Ltd [2020] HKCFI 1800 at §9.

30.  In cases involving a breach of contract, the plaintiff is only required to act reasonably.  Reasonableness is to be judged by the state of affairs at the time of breach, and the Court will guard against the use of hindsight.  Often criticisms will “not come well from those who have themselves created the emergency” and the plaintiff will not be disentitled to damages merely because the party in breach “can suggest that other measures less burdensome to him might have been taken”: Banco de Portugal v Waterlow and Sons [1932] AC 452, 506 per Lord MacMillan.

31.  The burden is on the defendant to raise and properly plead a case of failure to mitigate.  If a defendant wishes to set up a positive case to show that the plaintiff failed to mitigate his loss or damage, these allegations must be specifically pleaded with supporting particulars: White Book 2023 at §18/8/28.

EVALUATION OF THE WITNESS TESTIMONY

32.  Mr Christopher Pan testified on behalf of the Plaintiff.  He gave evidence in a straightforward manner, and his evidence was supported by the documentary evidence.  To his credit, he readily accepted that the Plaintiff did receive HK$426,500 from Miss Hung and that the purpose of this payment was to settle what was outstanding under the Agreement.  I found him to be a credible witness, and I have no hesitation in accepting the entirety of his evidence as honest.

33.  The Defendant gave evidence on his own behalf.  As I will explain below, I was unable to accept his evidence on the main issues in dispute as to whether the Plaintiff actually knew that the Defendant was contracting on behalf of Mr Ng.  Moreover, during the course of his testimony, the Defendant referred to new documents which were never disclosed or mentioned before in his witness statements.  I do accept that he appears to have had a botched business venture with Mr Ng.  Overall, although I do have some sympathy for the Defendant, I was unable to accept his evidence on the main issues in dispute.

DISCUSSION

34.  I will first deal with the main issue in dispute, namely, the capacity in which the Defendant executed the Agreement.

35.  First, as a matter of construction, the Agreement was clearly executed by the Defendant in his personal capacity and as tenant of the Unit.  His personal name, address and identity card number appears in the description of the tenant, and he signed the Agreement in his personal capacity.  There is nothing in the Agreement to suggest that the Defendant was executing it for and on behalf of a third party, let alone mentioning who that might be.  In fact, there is no mention of Mr Ng anywhere in the Agreement.  Moreover, the Agreement contains an express provision stating that the person who signed it assumed legal liability for its contents under any circumstance.  This would have made it clear to the parties that the Defendant assumed liability for the Agreement.  If the true contractual intention was that the Defendant executed the Agreement on behalf of Mr Ng, it is difficult to see why this was not expressly spelt out in the Agreement.

36.  Second, Clause 21C of the Agreement does not assist the Defendant.  It simply provides that upon, or after, the signing of the formal tenancy agreement that the tenant will be changed to either Wishing Group Limited or a company to be registered by the Defendant in which he is a director.  Clause 21C does not even mention Mr Ng. I agree with Ms Cheung that the meaning of this provision is unequivocal and does not assist the Defendant’s argument.

37.  Third, the Defendant’s pleaded case[5] as to who the alleged principal is unclear and confusing.  It was alleged by the Defendant that he signed the Agreement for and on behalf of “Mr Ng and/or his company and/or WGL”.  However, in the same paragraph, it is then pleaded that “the Defendant is was an agent of Mr Ng”.[6]  Then, after referring to Clause 21C, it was alleged that the Plaintiff acknowledged that the Defendant signed “for and on behalf of Wishing Group Limited or a director company limited registered [by the Defendant]”.[7]  The pleading is hopelessly impossible to understand on such a fundamental issue. In my mind, the lack of clarity in the Defendant’s pleaded case undermines any suggestion that he was the agent of Mr Ng.

38.  Fourth, in my view it is incredible and contrary to commercial common sense for a landlord to have agreed to contract with Mr Ng as principal without having his details set out in the Agreement or without knowledge as to who he was.  I agree with Ms Cheung that there is scant information regarding Mr Ng, or that the Plaintiff knew precisely who this person was.  The true contractual position was that the Plaintiff as landlord was dealing with the Defendant as tenant, and it was the Defendant who assumed liability under the Agreement.  It may have been contemplated that there was a possibility that the tenant would later be changed to WGL or a company to be incorporated by Mr Ng in which he was to be a director.  However, in my judgment, it is plain that there was never any intention that Mr Ng would be a contracting party.

39.  Fifth, insofar as may be necessary, I also reject the Defendant’s factual case that the Plaintiff knew that the Defendant signed the Agreement on behalf of Mr Ng.  The strongest possible evidence comes from the terms of the Agreement itself which records in writing that the Defendant assumed liability as the tenant.  Both parties confirmed having read its contents before signing it.

40.  Having seen and heard the witnesses, and despite the cross-examination by Mr Chu, I find that as a matter of fact the Plaintiff did not know that the Defendant was entering into the Agreement on behalf of Mr Ng.  While I agree that the Plaintiff might have known that the Defendant had a “partner” in his business venture to be operated at the Unit, this is a far cry from knowledge that the Defendant was entering into the Agreement as agent for Mr Ng.

41.  The communications between the Plaintiff and the Defendant before the Agreement was signed were done through the estate agent, Mr Sam Lau who was not called as a witness.

42.  I accept Mr Pan’s evidence that Mr Lau informed the Plaintiff that the Defendant would be the tenant but for convenience the Defendant wanted to change the tenant later to either WGL or a company in which the Defendant was in charge.  I also accept his evidence that he did not take issue with this request because it was not uncommon that tenants would sometimes request the tenant to be later changed to a company. Lastly, I also accept Mr Pan’s evidence that at the time of the signing of the Agreement, that he had never heard of Mr Ng and did not know of his existence.

43.  I have not lost sight of the cross-examination by Mr Chu of Mr Pan in relation to the alleged lack of background checks and due diligence performed with respect to the Defendant. The case that was put to Mr Pan was that these were not performed by the Plaintiff because it knew that the true contracting party was Mr Ng.  Having seen and heard the witnesses, I am unable to accept this submission.  I accept Mr Pan’s evidence that he trusted the information received from the estate agent regarding the information on the Defendant.  In any event, even if it might have been more prudent for more inquiries to have been made by the Plaintiff, I do not accept that the reason it did not do so was because it knew that the Defendant was contracting on behalf of Mr Ng.

44.  The Defendant testified orally that a “business proposal” of about 30-odd pages allegedly prepared by Mr Ng was provided to the Plaintiff by Mr Sam Lau.  This was mentioned with a view to showing the Plaintiff must have known about Mr Ng.  However, this “business proposal” was never placed in evidence before the Court, and its existence was never put to Mr Pan in cross-examination, which suggests that Mr Chu was not even aware of its existence.  I am unable to place any weight on the Defendant’s testimony in this regard.

45.  Overall, I find that the Agreement makes it clear that the Defendant was contracting in his personal capacity, and there is no contrary intention shown to suggest that the Defendant was contracting on behalf of Mr Ng.  Moreover, to the extent necessary, I also reject the Defendant’s case that the Plaintiff had knowledge that the Defendant was contracting on behalf of Mr Ng.  Since breach was not in dispute, I also find that the Plaintiff validly accepted the repudiation of the Agreement by the Defendant on 28 May 2020, and it is entitled to seek damages.

MITIGATION OF LOSS

46.  As I have mentioned above, if a defendant wishes to advance a positive case that the plaintiff has failed to mitigate his loss or damage, this must be pleaded with supporting particulars.  In the present case, there is no pleading in the Defence and Counterclaim in relation to the issue of mitigation of loss by the Plaintiff.  There is not even a general averment that the Plaintiff had failed to mitigate its loss.

47.  In these circumstances, I agree with Miss Cheung’s submission that it is not open to the Defendant to advance a positive case at trial that the Plaintiff ought to have taken different steps than it actually did to mitigate its loss arising from breach of the Agreement.

48.  This is not a technical pleading point; the requirement is underpinned by the notion of fairness and providing advance notice to the other side that issue will be taken at trial as to the steps taken by the innocent party to mitigate its loss.  The pleadings will dictate whether certain steps are taken by the parties before trial, including the filing of witness statements to address the issue, or seeking leave to adduce expert evidence, where appropriate.  Where a party does not plead a positive case regarding an alleged failure to mitigate loss, it would usually be unfair to the innocent party if it is raised for the first time at trial.

49.  Further, and in any event, I accept that the Plaintiff acted reasonably in marketing the Unit and seeking to re-let the premises with the assistance of professional real estate agents. However, likely due to the poor market sentiment at the time, these efforts were to no avail.

50.  The Plaintiff accepted repudiation on 28 May 2020 and put the Unit on the market in less than one month.  This is supported by a vacancy list dated 12 June 2020, which included the Unit together with other units located on 22/F of Office Tower, Convention Plaza. The Unit was listed with an “immediate” availability in “fitted” condition with an asking rent of HK$57 per square foot.  The Plaintiff also produced further vacancy lists in later months which showed that the Unit remained immediately available for leasing.

51.  The Plaintiff has produced documentary evidence to show that the vacancy lists were sent to a large number of leading estate agencies in Hong Kong by way of e-mail and WhatsApp messages from late June 2020 onwards.  I find that the Plaintiff acted reasonably in marketing the Unit for leasing within a reasonable time after the repudiation of the Agreement.  I do not accept the Defendant’s criticism that the Plaintiff did not act with reasonable expedition.

52.  Mr Chu submitted that the earliest communications with estate agents were sent only in late June 2020.  In my mind, this was a fairly minor point because these messages were still sent within one month following the Defendant’s repudiation, and not after an unreasonably long period.  This point must also be seen in the context where there was no pleading that the Plaintiff failed to mitigate by taking an unreasonably long period of time to market the Unit.

53.  In addition, I accept Mr Pan’s evidence that the Plaintiff made telephone calls to various estate agents to update them of the status of the Unit as further efforts to market the Unit.  I am unable to place any weight on the Defendant’s argument that the Plaintiff did not produce written records of these telephone calls, or that Mr Pan did not precisely recall the dates when the calls took place.  I find that it is inherently probable that these phone calls did take place, and I believe that Mr Pan was telling the truth when he mentioned them in his testimony.

54.  Moreover, I accept Mr Pan’s evidence that the Plaintiff made it clear to the estate agents that the asking rental was open to negotiation and that the Plaintiff was willing to accept any reasonable offer below asking rent.  In addition, the Plaintiff had adjusted the asking rental downwards three times between 2020 to early 2022 in view of the lukewarm responses.  I also accept Mr Pan’s evidence that the likely reason for the lack of positive response was due to the poor market sentiment in the light of the ongoing Covid-19 pandemic and also because of the border closures with Mainland China which meant that fewer businesses were willing to take up new leases in Convention Plaza.

55.  I am unable to accept Mr Chu’s submission that the asking rent for the Unit was significantly above market rent.  Mr Chu referred to two transactions dated 29 April 2020 and 22 May 2020 where units on different floors in Office Tower, Convention Plaza were leased out at HK$43 and HK$48 per square foot respectively.  Mr Chu submitted that the rental rate for these units were lower than that for the Unit where the asking price was set at HK$57 per square foot, and that they were transacted proximate in time to the Defendant’s repudiation.

56.  I am unable to conclude merely from these two comparable transactions that the asking rent for the Unit was set unreasonably high.  Most importantly, there was no expert evidence adduced on this issue because the point was never raised in the pleadings.  Even for units in the same building, the proper market rent can be affected by a large number of variables, including size, view, layout, floor number, and whether the premises were furnished.  In the absence of expert evidence, and the full details of the comparable transactions, I am unable to form a view as to whether the Plaintiff’s asking price was set unreasonably high or not.

57.  I am also unable to conclude that the asking price was set unreasonably high merely because it was approximately 33% higher than the rent agreed under the Agreement.  As Ms Cheung submitted, the Plaintiff did make it clear to the estate agents that the asking rental price was negotiable.  It was a starting point for negotiations, and I accept that the Plaintiff did not intend for the asking price to be fixed in stone.  It was open for potential tenants to make lower offers for the Plaintiff to consider.  The fact that the Agreement was set at a lower rate than the asking price indicates that the Plaintiff would genuinely consider lower rents.

58.  For all the above reasons, I accept that the Plaintiff acted reasonably and discharged its duty to mitigate its losses.

DOUBLE RECOVERY

59.  Mr Pan accepted in evidence that the Plaintiff received a total of HK$426,500 from Miss Hung.  This comprised the HK$300,000 initial payment and first four installments by way of post-dated cheques which eventually cleared.  He also accepted that the purpose of the settlement was to settle the outstanding sum of HK$1,200,000 under the Agreement; his evidence in this regard was distinctly forthright and crisp.

60.  I am unable to accept Ms Cheung’s submission that these sums were paid in settlement of Ms Hung’s liability for the dishonoured cheques which were the subject matter of the statutory demand, and therefore dealt with a different subject-matter which should not be taken into account insofar as damages in these proceedings are concerned.  In my view, that submission is artificial since it loses sight of the undisputed evidence regarding the purpose of these payments as being partial payment of what was outstanding under the Agreement.

61.  At trial, I expressed concern as to whether the Defendant is entitled to take the point regarding potential double recovery since it was not a point pleaded in the Defence and Counterclaim.  I have given the matter careful consideration.  Given that there is no dispute that HK$426,500 was received by the Plaintiff and that the payment was intended to cover what was outstanding under the Agreement, and that Ms Cheung did have the opportunity to address the matter in closing submissions, I consider that it would be manifestly unfair to enter judgment for an amount which does not reflect the HK$426,500 payment.  I take the view that the award of damages that the Plaintiff should be entitled to should be reduced by HK$426,500.  To do otherwise would be to occasion an injustice upon the Defendant.

QUANTUM

62.  The Plaintiff claims a total of HK$9,573,333.33 in relation to rental income.  This claim is with respect to the rental arrears for the period between 1 May 2020 to 28 May 2020,[8] and for the loss of rental income from 29 May 2020 to 28 April 2022.  The Plaintiff also claims for government rates of HK$566,769.23 for the period between 1 April 2020 to 28 April 2022,[9] together with management and air-conditioning fees for the same period at HK$1,217,736.52.

63.  The net amount of these claims is HK$11,357,839.08, and there was no objection taken as to the calculation of these figures at trial. The Plaintiff has indicated that it will give credit to the HK$400,000 initial deposit paid by the Defendant and the HK$100,000 which was paid by the Defendant on 24 April 2020.  Moreover, as I have decided above, the amount claimed should be further reduced by HK$426,500.

64.  After these items are deducted, the total amount of the Plaintiff’s claim is HK$10,431,339.08, and I enter judgment in favour of the Plaintiff for this amount against the Defendant.  I also grant a declaration that the HK$400,000 initial deposit has been duly forfeited by the Plaintiff in view of the breach of the Agreement.  I also dismiss the Defendant’s counterclaim.

65.  I make an order nisi that (i)  interest on HK$10,431,339.08 shall be payable by the Defendant at 1% above the prevailing HSBC Best Lending Rate for the period between 28 May 2020 to the date of judgment, and thereafter at judgment rate until full payment; and (ii)  the Defendant do pay the Plaintiff the costs of these proceedings, including all costs reserved, to be taxed if not agreed.

66.  I should also mention that my firmly held provisional view is that there should be no reduction on the amount of costs which the Plaintiff is entitled to by reason of the HK$426,500 reduction in damages.