NEW ERA GROUP (CHINA) LTD v. STUDIO M INTERIORS HK LTD

HCA 2963/2018

[2021] HKCFI 3711

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2963 OF 2018

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ASSESSMENT OF DAMAGES

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1.  By this action, the Plaintiff claims against the Defendant for loss and damages suffered as a result of the Defendant’s breach of an agreement made between the Plaintiff as owner and the Defendant as contractor in respect of the renovation works for a duplex unit known as Flat No 7, 46^th Floor, Convention Plaza Apartments, No 1 Harbour Road, Wanchai, Hong Kong (“the Property”). 

2.  Upon the Defendant’s default of production of documents pursuant to the Unless Order of Mr Registrar S Kwang dated 12 June 2020, Interlocutory Judgment was entered on 25 August 2020 against the Defendant with damages to be assessed, with costs. 

3.  This is the hearing for assessment of damages.  The Plaintiff has proved service of all relevant documents on the Defendant.  The Defendant was duly notified of this hearing but did not appear.  

4.  The Plaintiff now seeks to recover the following damages together with interest thereon:

(1)	refund of overpayment	HK$733,216.70
(2)	loss of use and enjoyment of the Property	HK$1,719,000.00
	Total :	HK$2,452,216.70

Evidence

5.  The Plaintiff has adduced two expert reports, namely

(i)  the report of Stephen C M Lam dated 15 April 2019 on the value of the works done by the Defendant for the Property (“Lam’s Expert Report”); and  

(ii)  the report of Liu King Tong dated 8 December 2020 on the market rent of the Property (“Liu’s Expert Report”). 

6.  The Defendant did not give any written notice to the Plaintiff’s solicitors requiring cross-examination of the two experts.  As such, pursuant to the Order of Master S H Lee dated 6 August 2021, both expert reports shall be admissible at the assessment of damages without calling the makers thereof.  

7.  One factual witness 李萬成, personal assistant to the director of the Plaintiff (“Lee”) gave oral testimony for the Plaintiff. 

Refund of overpayment

8.  With supporting documents, Lee testified that out of the contract sum of HK$3,000,000, the Plaintiff has made two partial payments to the Defendant respectively on 24 July 2018 and 5 September 2018 in the total sum of HK$1,200,000. 

9.  The Defendant wrongfully abandoned the renovation works on 7 December 2018.  By a letter dated 19 December 2018 of Messrs Tong Kan & Co, solicitors for the Plaintiff, the Plaintiff accepted the Defendant’s repudiation of the contract. 

10.  The Plaintiff relies on Lam’s Expert Report that the value of works done by the Defendant for the Property was HK$466,783.30.  Therefore, it claims for refund of overpayment in the sum of HK$ 733,216.70 (ie HK$1,200,000 – HK$466,783.30).

11.  I do not think the Plaintiff’s claim should be approached on the basis of a refund.  The normal measure of damages for breach of contract is the cost to the Plaintiff of completing the original contract in a reasonable manner less the contract price.  On the pleadings, the Plaintiff’s claim is for general damages for breach of contract, not for restitution of monies had and received.  

Cost of completing the original contract

12.  On 27 March 2019, the Plaintiff has engaged another contractor Forever Art Interior Design & Engineering Limited (“Forever Art”) to complete some of the works under the original contract.  The contract sum is HK$2,000,000. 

13.  Simply by comparing the description of works in the original contract with those in the contract with Forever Art, the following items of work under the original contract were not covered in the contract with Forever Art.  

Items	Amount (HK$)
B5, 6, 9	78,250
C11	free
D1, 2, 8	69,250
E3, 4, 7, 9	56,055
F8 – 10, 12, 14 – 17	392,225
G1	20,000
H1, 5	168,000
I5, 7, 8, 10	71,400
F3	9,800
H2	12,600
K1	11,600
Purchase items 13, 16 – 20	51,900
Total :	941,080

14.  On the other hand, the contract with Forever Art included some additional items which did not form part of the original contract with the Defendant.  Simply by comparing the description of work in the two contracts, the following items are additional.  

Items	Amount (HK$)
Part 1 : items 1.1 – 1.9	49,700
Part 2 : items 2.2 & 2.5	25,000
Part 4 : items 4.7 & 4.12	36,400
Part 5 : items 5.8 – 5.10; 5.14 – 5.17; 5.28	82,800
Part 6 : items 6.9, 6.17	28,000
	221,900

15.  There is no evidence that the Plaintiff has any intention to get the works listed under paragraph 13 above completed.  In fact, Lee did not know much about the content or scope of the two contracts to be able to identify the works which still remain outstanding.  

16.  In light of the aforesaid, damages are difficult to assess.  However, this does not disentitle the Plaintiff to compensation for loss resulting from the Defendant’s breach of contract.  The Court will assess damages as best it can on the available evidence.  Chitty on Contracts 28^th edn, Vol 1, 27-006

17.  Since the circumstances are not appropriate for assessing damages for the cost of completion, the best the Court can do on the available evidence is to assess damages on the difference in value. 

18.  According to Lam’s Expert Report, the value of works done by the Defendant for the Property is HK$466,783.30.  I accept that there is a difference of HK$733,216.70 from the value of works the Plaintiff is entitled to and has in fact paid for. 

Loss of use and enjoyment of the Property

19.  Lee testified that the Property has always been used as residence for the Plaintiff’s directors and/or for rental.  The Plaintiff claims loss of use and enjoyment of the Property for a period of 7.5 months from mid-January 2019 to end of August 2019. 

20.  According to the original contract, renovation works including all remedial works should be completed by mid-January 2019.  According to the contract with Forever Art, the date of completion should be end of August 2019, ie within 120 working days from 1 April 2019. 

21.  For the following reasons, I do not think the said period of 7.5 months is justified.  

22.  Firstly, Lee failed to provide reasonable explanation of the delay in engaging Forever Art.  The Plaintiff has accepted the Defendant’s repudiation on 19 December 2018, but Forever Art was only engaged on 27 March 2019.  I think the reasonable time to have a replacement contractor engaged should be mid-January 2019, ie within one month from the acceptance of the Defendant repudiation. 

23.  Secondly, the Plaintiff has conceded at the hearing that the contract with Forever Art contained those additional items of work as set out in paragraph 14 above.  For this reason, there should be some reduction in the time for completion.  Taking into account the proportion of additional works to the entire contract, I find that the reasonable time for Forever Art to complete outstanding works under the original contract should be 100 working days from mid-January 2019, ie by mid-May 2019.  

24.  Therefore, the reasonable period of claim for loss of use and enjoyment is 4 months, ie from mid-January 2019 to mid-May 2019.  According to Liu’s Expert Report, the market rent of Property for the relevant period was HK$229,200 per month.  I assess loss of use and enjoyment at HK$916,800 (ie HK$229,200 x 4 months). 

Damages and Interest

25.  Damages are therefore assessed at HK$1,650,016.70 representing (a) difference of value in the sum of HK$ 733,216.70; and (b) loss of use and enjoyment in the sum of HK$916,800. 

26.  The Plaintiff is entitled to interest thereon at 6% per annum from 21 December 2018 to date of the Interlocutory Judgment and thereafter at judgment rate until payment.  

Costs

27.  Costs to follow the event, the Plaintiff is entitled to costs of the assessment of damages including all costs reserved.  

28.  In light of the amount of award, a question arises as to what should be the appropriate scale of costs.  With effect from 3 December 2018, the civil jurisdictional limits of the District Court is increased to HK$3,000,000.  The Plaintiff issued the Writ on 21 December 2018. 

29.  Generally speaking, the Court will consider whether a plaintiff, when he or she issued the Writ has a reasonable prospect of recovering a sum in excess of the District Court scale.  In the present case, the answer is no.  Therefore, I find that costs should be on District Court scale.  

30.  The Plaintiff has submitted a statement of costs of the action including assessment of damages for summary assessment.  I agree that the matter is appropriate for summary assessment.  Costs on District Court scale is summarily assessed at HK$300,000. 

Order

31.  The Defendant do pay the Plaintiff the sum of HK$1,650,016.70 with interest thereon at 6% per annum from 21 December 2018 to date of the Interlocutory Judgment and thereafter at judgment rate until payment.  

32.  There be a costs order nisi that the Defendant do pay the Plaintiff’s costs of the action including assessment of damages, on District Court scale, summarily assessed at HK$300,000. 

33.  The order nisi shall become absolute unless an application to vary is made within 14 days from today.