WHARF PROPERTIES LTD v. FU ON TRADING CO LTD

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J U D G M E N T

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Power, J.A.:

1. Fu On Trading CO. Ltd. ("the respondent") leased Shop No.222 in the Ocean Centre, Kowloon, from Wharf Properties Ltd. ("the appellant") pursuant to a tenancy agreement dated 14th October 1985 under which the property was leased to the respondent for a term of three years commencing on 1st December 1985 and expiring on 30th November 1988. The rent for the first year was $31,680, for the second year $35,040 and for the third year $38,400. On 19th April 1988 the appellant served a Notice of Termination of Tenancy on the respondent which stated, inter alia,

"The term of the lease will expire on 30th November 1988 and accordingly as landlord of the above premises of which you are tenant we hereby give you notice to quit and deliver up vacant possession of the said premises to us on or before 30th November 1988".

2. It was expressly provided in Clause 24 of Section III of the agreement, dealing with "Tenant's Obligations" that the tenant agreed:

"to quietly yield up the said premises together with all fixtures, fittings and additions therein and thereto at the expiration or sooner determination of this tenancy in good clean and tenantable repair and condition notwithstanding any rule of law or equity to the contrary ....."

3. On 14th October 1988 the appellant wrote to the respondent reminding it of its obligation to deliver up vacant possession and stating:

"While writing, we wish to stress that should you be unable to reinstate and hand over the premises to us on or before 30th November 1988, you will be liable to payment of compensation and mesne profit equivalent to current market rent, air-conditioning, other charges and liquidated damages calculated upto and including the date by which you have properly reinstated and handed over the premises to us".

4. Meanwhile on 16th August 1988 D'Urban Distributions (H.K.) Ltd. had signed a document headed "Letter of Offer for Retail Premises'' addressed to the appellant in which D'Urban stated that they were offering "to lease from yourselves/the landlord the premises described below " The premises described were Units 220, 222 and 223 of the Ocean Centre. Shop 222, the subject premises, is situated between Shops 220 and 223 and the three units together form what appears to be a very desirable corner unit. This letter also bore the signature of one Doreen Y.F. Lee who signed on behalf of the appellant. Although at trial it had been argued that this letter did not constitute a binding offer to rent the premises, this approach was not pursued with any vigour on appeal perhaps because, if it was established by the evidence that the appellant intended to let the combined premises, conveyed that intention to the respondent and, in the outcome, did let the premises, the legal effect of the letter was of no real significance in these proceedings.

5. Messrs. Deacons, the solicitors for the appellant, wrote by letter dated 30th November to the respondent giving details of the combined letting transaction, the proposed commencement date of which was the 2nd December 1988. The letter went on to state:

"Should you not deliver up vacant possession of the above premises today, our client will be unable to let the new combined unit to the proposed new tenant and our client will suffer a loss as a result of your unlawful occupation of the said premises which loss our client will be entitled to claim from you by way of mesne profits. The quantum of the said mesne profits will be at the rate of the said sum of $170,200 per month together with air-conditioning and other related charges. Our clients will therefore seek to recover such sums from you should you not vacate the premises on or before the due dates, in addition to exercising their right to take proceedings for, possession."

6. When the respondent did not vacate, the appellant issued its Notice of Application dated the 9th December 1988. This pleaded in full in paras.8 and 9 the details of the offer to rent the combined premises, the proposed rental and that the offer had been accepted by the appellant. It was pleaded in para.10 of that Notice that

"By a letter dated the 30th November 1988, the Applicant, through its Solicitor Deacons, demanded the Respondent to vacate the said premises to the Applicant by the 1st December 1988 and put the Respondent on notice that it would be liable to pay the mesne profits at the rate of $170,200 per month should the respondent fail to do so".

7. The respondent in para.3 of its "Notice of Opposition to Application" dated 18th January 1989 said:

"Paragraph 10 is admitted but the Respondent says that the Applicant is not entitled to mesne profits at such rate."

8. The respondent in the outcome did not deliver up vacant possession to the landlord until 18th January 1989.

9. On 13th January 1989 the appellant served a Hearsay Notice on the respondent indicating that it desired to give in evidence the statements made in the following documents:

1. The Tenancy Agreement dated 14th October 1985;

2. the Notice of Termination of Tenancy dated 19th April 1988;

3. the letter from the applicant to the respondent dated 14th October 1988;

4. the letter of offer dated 16th August 1988 from D'urban Distributions (H.K.) Ltd. to the appellant;

5. the letter from the appellant's solicitors to the respondent dated 30th November 1988; and

6. the letter from D'urban Distributions (H.K.) Ltd. to the appellant dated 23rd December 1988.

10. The Couhter-Notice from the respondent required the appellant "to call as a witness at the trial of these proceedings the maker of the letter of offer dated 16th August 1988 from D'urban Distributions (H.K.) Ltd. to the applicant and the maker of the letter from D'Urban Distributions (H.K.) Ltd. to the Applicant dated 23rd December 1988". No issue was raised as regards the other documents in the Hearsay Notice.

11. At the trial before the Presiding Officer, Judge Cruden, on 13th February 1989 Mr. Mendoza, the Estate Manager of the appellant was called and he produced the letter of offer, which was marked Exh.1A. He also produced a document headed "Estimate of Costs" which was marked Exh.A2. The matters referred to in the latter document are not material to this appeal.

12. In his evidence Mr. Mendoza said that the market rent for Shop 222 from 30/11/88 to 19/1l/89 was "Around $76,000 to $91,000 per month". He made no reference to any of the other documents in the Hearsay Notice and they were not marked as exhibits. Mr. Cook, who appeared for the appellant, however, when addressing the Court, referred to the letter of 30th November 1988 which set out the details of the proposed combined rental. The Judge's Note in this regard is as follows:

"Letter 30/11/88 from landlord's solicitors. (see Hearsay Notice) so tenant had full knowledge of quantum. Applicant entitled to $170,200."

13. It appears from the record that an oral judgment was delivered and that the judge then held:

"I assess mesne profits on evidence at $80,000 pet month."

This oral judgment was never reduced to writing and neither party to the appeal saw fit to apply to the presiding officer requesting him so to do. The consequence of this was that the matter came before this court without the inclusion of any written judgment in the appeal papers. We feel it appropriate to indicate that it was the duty of the appellant to have made an application to the judge and to have ensured that the oral judgment reduced to writing formed part of the pacers placed before this Court. In this connection we suggest that consideration be given by the rule making authority to enlarging the scope of rule 26(2) of the Lands Tribunal Rules.

14. However, in the circumstances this matter, we felt that it was proper to proceed as it seemed clear from the record that the issue before the judge was whether the mesne profits should be assessed in accordance with the market rent of the single unit or the agreed rent of the combined units.

15. Mr Andy Hung, who appeared for the respondent, initially raised what he stated to be a point of jurisdiction. The letter of 30th November 1988, which for the first time put the respondent on notice as to the proposed combined letting at a monthly rental of $170,200 was never marked as an exhibit. Mr. Hung argued that it was, therefore, not evidence upon which either Judge Cruden or this Court was entitled to rely. No objection had been taken in the Counter-Notice to its being admitted, however Mr. Hung argued that to become evidence it must be tendered and marked as an exhibit. It seems perfectly clear that it was, in fact, before the court as Mr. Cook referred to it in his address and the trial judge made the notation to which reference has been made above. Mr. Hung had, of course, to accept the admission in the Notice of Opposition that a letter of 30th November had been received but contended that, as there was no admission acknowledging that the contents had come the notice of the respondent, it was not proper to place any reliance upon the letter as having given notice of an intention to let the combined premises.

16. We are satisfied that there is no merit in this contention By virtue of the Hearsay Notice. the letter was admissible without calling its maker. It is clear that it was, in fact, considered by the Presiding Officer as reference was made to it, without objection, by Mr. Cook, in address relying upon it to show that the "tenant had full knowledge of quantum". The material was admissible and was with the knowledge of both parties and without objection before the court. The only irregularity was that the Presiding Officer failed to mark it as an exhibit. This, in the circumstances is not an irregularity of any real moment.

17. It is Mr. Hung's further contention that even if the respondent received the letter there is no evidence to indicate that he understood the significance of its contents. We consider that there is no merit in this contention. The terms of the letter are perfectly plain and the respondent, having chosen to give no evidence, must be taken to have understood its contents.

18. We are satisfied that the real issue in this appeal, as contended by Mr. Fok who appeared for the appellant, was whether the Presiding Officer was correct in assessing the rent at the market rental of the single unit or whether he should have made his assessment having regard to the agreed rental of the combined units.

19. A claim for mesne profit is, as Halsbury makes plain (Vo1.27 para.255), "a type of damages for trespass". We had addressed to us a number of finely drawn contentions which canvassed whether damages for trespass fall to be calculated upon the basis of foreseeability, or whether the damages are measured, once trespass is proved, by the harsher yardstick of actual loss and foreseeability, therefore, becomes irrelevant. These contentions raise interesting, yet difficult questions of principle, which have not been fully argued before us. Moreover we do not think it profitable to enter into these, for we are satisfied that whichever test is used, the measure of damages in the present case would be the same.

20. It is true, as Mr. Hung points out, that the normal measure of damages for holding over, i.e. the mesne profits, is the market value of the property held over. This is, however, so not because damages are limited to such a claim but because this is the loss suffered. Denning, correctly stated the law as to the measure of damages in an action for mesne profits when he said in Clifton Securities, Ltd. v. Huntley & Others [1948] 2 All E.R. 283 at 284:

"When the rent represents the fair value of the premises, mesne profits are assessed at the amount of the rent, but, if the real value is higher than the rent, then the mesne profits must be assessed at the higher value."

21. Consistent with this approach - and in circumstances not dissimilar to the present - is the decision in Barclays Bank Ltd. (Trustees of G.F. Day, deceased) v. Jones (1955) J.P.L. 822 where Sir Reginald Clark, when dealing with a tenant who held over a room in a private dwelling house, said at p.822,

"Since the defendant's refusal to vacate the room had effectively prevented the landlords from letting the whole flat, damages must be assessed, not in terms of the rent of 16s. a week for the one room, but in terms of the rent for the whole flat which the landlords had lost through the defendant's trespass."

22. So too, is the decision of this Court in Lau, Wing Keung v.Ng Ah Kui & others [1984] H.K.L.R 241

23. Even if the correct criterion does involve the element of foreseeability, we find it impossible in the present case to escape the logic of the suggestion that what is known must be foreseeable. On the 30th November the respondent was informed of the consequences that would follow if it did not then vacate. How can it be said it did not then foresee those consequences? Moreover, by continuing possession in that knowledge its conduct must be taken to have been intended.

24. The learned editor of Windfield & Jolowicz on Tort, 12th Edition, page 137 suggests that "Intended consequences are never too remote" and refers to the comments of Lord Lindley in Quinn v. Leathem [1901] A.C. 495 at p.537:

"The defendants were violating their duty to the plaintiff and his customers and servants, which was to leave them in the undisturbed enjoyment of their liberty of action as already explained. What is the legal justification or excuse for such conduct? None is alleged, and none can be found. This violation of duty by the defendants resulted in damage to the plaintiff - not remote, but immediate and intended. The intention to injure the plaintiff negatives all excuses and disposes of any question of remoteness of damages."

25. Although it was made in a different context, we would respectfully agree with the principle underlying His Lordship's opinion. If the words "leave them in the undisturbed enjoyment of their liberty of action as already explained" were replaced by "give them the undisturbed enjoyment of their land", the quotation would seem appropriate to the present situation.

26. For these reasons we think the Presiding Officer was wrong to restrict the damages as he did. We therefore allow the appeal and vary the judgment below by substituting the figure of $170,200 for the figure of $80,000 therein. We make an order nisi giving the appellant its costs to be taxed to be made absolute in 14 days.