TEARAWAY LTD v. INSINGER BRUMBY LTD AND ANOTHER

DCCJ6714/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATION REGION

CIVIL ACTION CASE NO 6714 OF 2002

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Assessment of Damages

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1. The plaintiff was the registered owner of a residential flat situated on the 1st floor of 21 Bisney Road and the carpark on the lower ground floor of the building (hereinafter collectively called the "said premises").

2. The 1st defendant signed a tenancy agreement with the plaintiff on 21 January 2000 for a 3 years lease of the said premises for monthly rental of HK$46,000 from 1 March 2000 to 28 February 2003. A deposit of HK$92,000 was paid to the plaintiff pursuant to the agreement.

3. A written guarantee was signed by D2 on the day of the execution of the tenancy agreement by D1, i.e. on 21 January 2000 in which the D2 guarantee to the plaintiff the performance of D1's contractual obligations under the lease.

4. D1 defaulted payment of rental since 1 July 2002. The plaintiff has made various attempts to contact the D1 and D2 for the payment of rental but was unable to reach them either on the telephone or through the electronic messages. Clause 4.1 of the tenancy agreement made provision for the plaintiff to exercise contractual right to re-enter should the defendant default payment of rental for 10 days. Clause 4.1 also permitted the plaintiff to forfeit the deposit and to claim against the tenant in respect of his breach of the tenancy terms.

5. On 7 September 2002 the plaintiff exercised its contractual right to re-enter and forfeit the deposit of HK$92,000. On 30 October 2002 plaintiff took out the present writ to sue for the following damages:-

(a) Arrears of rental in the sum of HK$102,733.33 for the period from 1/7/02 to 7/9/02 at HK$46,000 per month;

(b) loss of rental income of HK$265,266.67 for the unexpired term of the tenancy from 8/9/02 to 28/2/03 at HK$46,000 per month; and

(c) interest.

6. In default of notice of intention to defend, interlocutory judgment was entered against both defendants on 20 December 2002 in the following terms:-

(a) a sum of HK$10,733.33 together with interest from 30 October 2002 to payment; and

(b) damages to be assessed.

7. It was the evidence of the director of the plaintiff that the plaintiff had since repossessing the premises approached about 10 real estate agents for the purpose of renting out the premises but was met with no success. Since the plaintiff was unable to rent out the said premises despite of its efforts made, the plaintiff mitigated its loss by selling the said premises on 28 January 2003.

8. The plaintiff now claims damages in the sum of HK$214,815.06 being the rental in respect of the remaining term of the tenancy before sale of the property by the plaintiff on 28 Jan 2002, a sum total of :-

(a) loss of rental of HK$35,266.67 at HK$46,000 per month from 8/9/02 to 30/9/02 (HK$46,000 x 23 days /30 days);

(b) loss of rental of HK$138,000 from 1/10/02 to 31/12/02 (HK$46,000 x 3 months); and

(c) loss of rental of HK$41,548.39 from 1/1/03 to 28/1/03 (HK$46,000 x 28 days/31 days).

9. The tenancy agreement between the plaintiff and the defendant contains no break clause during the contractual term of 3 years.

10. There was no evidence to suggest the plaintiff has failed to exercise due diligence in securing a replacement tenant. I accept the sum of HK$214,815 do represent the damages the plaintiff suffered as a result of the defendants' breach.

11. The provisional agreement for sale and purchase was signed on 9 December 2002. After the signing of the Plaintiff sale and purchase the plaintiff would not be entitled to rent out the property without the consent of the buyer. I accept the date for assessment of the plaintiff's damage ought to be pitched at the date of the completion of the agreement for the sale and purchase. In contractual damages the plaintiff ought to be compensated as though there was no breach. Should the plaintiff honour its contractual obligation, it would be liable to pay its rental to the plaintiff until the day of the conveyance on 28 January 2003.

12. Damages of the plaintiff are assessed at the sum of HK$214,815 with commercial interest, i.e. 1% above prime, from the date of the writ until judgment and thereafter at judgment rate until payment.

13. Costs order nisi for this assessment is also awarded to the Plaintiff.