LEE LAI KUEN, SYRIA v. VENDOME BOUTIQUE CO. LTD.

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8820 OF 1999

_______________________

__________________

J U D G M E N T

__________________

Assessment of Damages

Introduction

1. On 20 July 1999, the plaintiff, Madam Syria Lee ("Madam Lee") obtained final and interlocutory judgment against Vendome Boutique Company Limited, her defaulting tenant ("the defendant") for the sum of $77,959 and $50,000 together with interest thereon at the rate of 11.94 per cent per annum from 28 May 1999 to the date of judgment and thereafter at judgment rate until payment, and damages to be assessed and fixed costs of $1,550. As judgment has been obtained in respect of the sums due from the defendant for arrears of rates, management fees and electricity bills, I am therefore not concerned with those items in today's assessment of damages.

Facts

2. Madam Lee is the registered owner of Flat 8 on the Upper Ground Floor and Car Parking Space No. L6 in the basement of Newport Centre, Phase II at No. 116 Ma Tau Kok Road, Kowloon ("the premises" and "the car park"). The defendant is a limited company incorporated and registered in Hong Kong.

3. By tenancy agreement dated 16 December 1997, Madam Lee, as landlord, let the car park and the premises to the defendant as tenant for a term of 3 years commencing 15 January 1998. The monthly rental reserved in the tenancy agreement (Exhibit P1) was $50,000, exclusive of rates, management fees, electricity charges and all other outgoings in relation to the premises. Rental was payable in advance.

4. The obligation of the tenant to pay and discharge all rents, Government rates and utility charges in respect of the premises and management fees are dealt with in clause 2(a) of the lease. Clause 2(g) specifically prohibits the defendant from making any structural alterations to the premises and provide that no partition thereto could be carried out without the prior written consent of the plaintiff. Clause 4(a) contains a typical clause for re-entry upon failure to pay rent in respect of the premises or if any of the terms, covenants and conditions of the agreement have not been observed or breached by the defendant.

5. Madam Lee gave evidence effectively adopting her witness statement as her testimony. She also produced various exhibits which have been appropriately marked. There was no cross-examination of her evidence and, in fact, all that the defendant wished to do in these proceedings is to require strict proof of the damage and loss suffered by Madam Lee.

6. The defendant, in breach of the tenancy agreement, failed to pay rates from 1 July 1998 to 31 January 1999, the management fees from 1 October 1998 to 31 January 1999 and all outgoings and other expenses and charges, including electricity bill, in relation to the premises. It is not in dispute that the plaintiff has had to meet these expenses which totalled $77,959. That has been suitably dealt with in the interlocutory and final judgment entered as aforesaid. In today's proceedings she has gone through the documentation to prove that claim but as I have indicated, judgment has been entered for that sum. It is unnecessary that any order I make should encompass that aspect of her claim. Suffice it to say that it has nonetheless been amply proved and established, as are the arrears of rent amounting to $50,000 also the subject matter of the same interlocutory judgment and final order.

7. In breach of the agreement, the defendant left the premises on 14 October 1998. The plaintiff accepted the defendant's repudiation of the agreement and, as she was entitled to, terminated the tenancy and forfeited the deposits paid by the defendant totalling $100,000. She will, of course, give credit for that sum of money in these proceedings.

8. I am satisfied that Madam Lee has made every effort, and successful ultimately, to mitigate her loss by re-letting the premises to an engineering company. That tenancy agreement was exhibited as P2.

9. She claims legal costs, expenses and stamp duty in respect of that new tenancy. I shall deal with that in due course.

10. After the removal of the defendant, Madam Lee discovered that metal structures had been erected on the premises without her prior approval and consent. These have had to be removed at a cost of $2,200 (Exhibit P3 refers). She claims loss of mesne profit of $166,000. Additionally, there is a claim for the rental difference between the rental reserved in the repudiated agreement and the new tenancy agreement. That sum has been calculated at $363,554. Those therefore are the heads of damages remaining to be assessed.

11. Turning first of all to the loss of mesne profit, at page 41 of the bundle of pleadings which forms part of Madam Lee's witness statement that she adopted in evidence, a breakdown of this claim has been afforded. Loss of mesne profit from 14 October 1998 to 31 January 1999 is assessed at $175,000. From that, the rental income from the car park of $9,000 was deducted, producing a figure of $166,000. That appears to me to be an appropriate calculation which I accept to represent her loss of mesne profit for the period.

12. As for the loss based on the rental difference, following the default of the defendant, for the period 1 February 1999 to 14 January 2001 at $15,470 per month totalling $363,545, the calculation appears also at page 41 of the same bundle. I also accept that calculation as properly reflecting her loss under this head.

13. The last item falling to be assessed is whether or not Madam Lee should be entitled by way of damages to the legal expenditure incurred in respect of the re-letting of the premises and the car park. I have heard Mr Li on this point. By normal effluxion of time, the original lease would have come to an end had the defendant not breached the agreement. Were Madam Lee to continue to let, and one suspects that she would as she is under a mortgage obligation herself in respect of the premises and the car park, she would have to bear legal expenses in any subsequent re-letting. That being so, it would not be right and proper that those expenses should be met by the defendant. I therefore disallow the claim for legal costs, expenses and stamp duty for the new tenancy of $6,552.30.

14. In conclusion, I assess Madam Lee's damages as follows:-

1)	Loss of mesne profit -	$166,000
2)	Loss of rental difference -	363,545
3)	The costs of removing the illegal structures -	2,200
		$531,745
Less: Forfeited deposit of $100,000		100,000
	NET DAMAGES:	$431,745

15. Madam Lee is therefore entitled to the sum of $431,745 consequent upon this assessment.

16. Additionally, it is ordered that there shall be interest at 11.94 per cent per annum on the sum of $431,745 from the date of the writ, namely 28 May 1999, until full payment thereof, with costs of assessment, taxed if not agreed.