VEMBER LORD LTD v. THE SWATCH GROUP (HONG KONG) LTD

HCA 1113/2020
& HCA 1114/2020
(Heard Together)

[2023] HKCFI 1779

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 1113 & 1114 OF 2020

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JUDGMENT

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INTRODUCTION

1.  This is the assessment of damages in respect of summary judgment entered in favour of the Plaintiff on 23 June 2021 in HCA 1113/2020 (“HCA 1113”) and HCA 1114/2020 (“HCA 1114”) respectively. In both actions, it was ordered that the Defendant is to, inter alia, pay the Plaintiff damages to be assessed.

2.  The Plaintiff seeks to recover the sum of HK$11,802,765.54 in HCA 1113 and the sum of HK$24,034,983.74[1] in HCA 1114 for damages arising out of the Defendant’s breach of two tenancy agreements.

FACTUAL BACKGROUND

3.  The following are the undisputed/indisputable facts.

4.  The Plaintiff belongs to the CK Asset group of companies. At all material times, the Plaintiff was the landlord of Shop G1 (“Shop G1”) and Shops G3 to G5 (“Shops G3-G5”) of China Building, 29 Queen’s Road Central (collectively, “Shops”).

5.  The Defendant carried on business as a retailer of watches under, inter alia, the “Swatch” and “Blancpain” brand names. The Defendant was the tenant of the Shops.

6.  The tenancy agreement for Shop G1 is dated 22 August 2018, and provides that the premises are let for a term of 3 years from 16 June 2018 to 15 June 2021. The shop was to be used exclusively for the sale of watches under the “Swatch” brand. The monthly rent (exclusive of government rent, rates, extra air-conditioning charges, management fees, utility, and other outgoings) was HK$1,350,000, plus a turnover rent based on 15% of the amount that gross turnover exceeded the basic rent for that calendar month. The Defendant paid a deposit of HK$4,086,069.

7.  The tenancy agreement for Shops G3-G5 is dated 12 March 2019, and provides that the premises are let for 3 years, from 4 January 2019 to 3 January 2022. The shops were to be used exclusively for the sale of “Blancpain” brand watches. The monthly rent (exclusive of government rent, rates, service charges and other outgoings) was HK$1,800,000. The Defendant paid a deposit of HK$5,454,582.

8.  Both tenancy agreements provided for a rent-free period subject to the Defendant’s due performance and observance of the terms and conditions of the agreements:-

(1)  For Shop G1, the rent-free period was for two months, from 16 June 2018 to 14 August 2018.

(2)  For Shops G3-G5, the rent-free period was divided into three separate periods: (i) 4 January 2019 to 3 February 2019; (ii) 4 January 2020 to 3 February 2020; and (iii) 4 January 2021 to 15 January 2021.

9.  From December 2019 onwards, without the Plaintiff’s consent, the Defendant ceased to pay full rent and instead paid sums equivalent to 70% of the monthly rents under the respective tenancy agreement.

10.  On 7 May 2020, the Plaintiff cut off the air-conditioning supply to the Shops. On 17 June 2020, the Plaintiff obtained warrants of distress against the Defendant. Upon the execution of the warrants of distress on 18 June 2020, the Defendant ceased to conduct business at the Shops and commenced demolition works.

11.  On 3 July 2020, the Writs in HCA 1113 and HCA 1114 were issued and were served on the Defendant on 6 July 2020.

12.  The Defendant completed the demolition works and returned the keys of the reinstated Shops to the Plaintiff on 31 July 2020 and 3 August 2020 for Shop G1 and Shops G3-G5 respectively.

13.  On 23 June 2021, pursuant to the Plaintiff’s applications, Master Rebecca Lee gave summary judgment in both actions for payment of arrears of rent and other charges (as particularized in the respective Statement of Claims in both actions) and ordered damages to be assessed.

14.  The Defendant appealed against the summary judgments. In the appeal, the Defendant relied on the “extraordinary circumstances” caused by social unrest and the Covid-19 pandemic and argued that it was entitled to an abatement of rent, or that the tenancy agreements were frustrated. The Defendant’s appeal was dismissed by DHCJ Le Pichon on 20 January 2022[2] and also by the Court of Appeal (Chu VP, Yuen and Chow JJA)[3] on 15 March 2023.

15.  Subsequent to the Defendant’s delivery of vacant possession of the Shops, the Plaintiff entered into replacement tenancies or licenses.

16.  In respect of Shop G1:-

(1)  The Plaintiff entered into a 6-month license agreement with 3i Corporation Limited (“3i”) from 1 December 2020 to 31 May 2021 at a monthly license fee of HK$194,500 (exclusive of government rent, rates, service charges and other outgoings). There was a 14-day license fee-free period (from 1 December 2020 to 14 December 2020).

(2)  There was a renewal for a further term of 6 months from 1 June 2021 to 30 November 2021 at the same monthly fee.

17.  In respect of Shops G3-G5:-

(1)  In around July 2020, after receiving an enquiry about a potential replacement tenant for Shop G5 specifically, the Plaintiff sub-divided Shop G5 from Shops G3-G4.

(2)  For Shop G5, the Plaintiff entered into a 3-year tenancy agreement dated 1 September 2020 with Watch Gallery Limited (“Watch Gallery”) from 1 September 2020 to 31 August 2023 at a monthly rent of HK$190,000 (exclusive of government rent, rates, service charges and other outgoings). There was a 45-day rent-free period (from 1 September 2020 to 15 October 2020).

(3)  For Shops G3-G4, the Plaintiff entered into a 6-month license agreement with MF Living (“MF Living”) from 16 February 2021 to 15 August 2021 at a monthly license fee of HK$290,000 (exclusive of government rent, rates, service charges and other outgoings). There was a 21-day rent-free period from 16 February 2021 to 8 March 2021. In around late July 2021, the license was extended for one month on the same terms governing the immediately prior license.

(4)  The Plaintiff entered into a 3-year tenancy agreement with Chung Yuen Electrical Company Limited (“Chung Yuen Electrical”) for Shops G3-G4 from 16 September 2021 to 15 September 2024. The monthly rent (exclusive of government rent, rates, service charges and other outgoings) was HK$550,000 for the first year, HK$650,000 for the second year and HK$750,000 for the third year.

WITNESSES

18.  The Plaintiff called one factual witness, Miss Sin Ka Yan (“Ms Sin”), who is a Senior Marketing Manager of Hutchison Property Group Limited (an associated company of the Plaintiff), to give oral testimony. Ms Sin has filed one witness statement in each action.

19.  In her evidence, Ms Sin explained the damages suffered by the Plaintiff and the steps that the Plaintiff had taken to mitigate its loss caused by the Defendant’s repudiation of the tenancy agreements:-

(1)  Mr Jin Pao SC, on behalf of the Plaintiff summarized Ms Sin’s evidence as demonstrating that the overall objective was to re-let the Shops “as soon as possible at the best achievable rent in order to mitigate the Plaintiff’s loss”. Dialing back to the material time, Ms Sin’s evidence was that the market conditions were poor due to the onset of the third wave of the Covid-19 pandemic. There were many vacant shops along Queen’s Road Central, where the Shops are situated.

(2)  In around mid-June 2020, once Ms Sin knew that Swatch was going to terminate its business, she made calls to a few real estate agents and the existing tenant of Shop G2, Chow Tai Fook, to inform them of the forthcoming vacancies. In around early July 2020, a potential tenant, ie Watch Gallery, approached the Plaintiff through Savills regarding Shop G5. After some negotiations, in around late July 2020, Watch Gallery confirmed that it would enter into a tenancy agreement with the Plaintiff in respect of Shop G5, subject to the delivery of vacant possession of Shop G5. The Plaintiff and Watch Gallery eventually signed a tenancy agreement dated 1 September 2020 for a term of 3 years (1 September 2020 to 31 August 2023) at the monthly rent of HK$190,000.

(3)  After the Plaintiff recovered vacant possession of the Shops, Shops G1 and G3-G4 were placed on the vacancy lists (updated on 3 August 2020) which were sent to a selection of reputable real estate agents. The lists contained basic information of the properties without specifying the asking rent or the term of the lease, which were both listed as “negotiable” as the Plaintiff wished to give potential tenants greater flexibility for negotiation and to avoid deterring potential tenants. The list was updated and sent out to the panel of real estate agents on a monthly basis.

(4)  According to Ms Sin, in her experience, for prime area shops, walk-in enquiries from potential tenants are rare and most deals are struck through referrals from estate agents. Even so, apart from marketing the Shops through estate agents, the Plaintiff had put up shopfront stickers/signages at the Shops for advertisement purposes.

(5)  For Shop G1, there had been no response until 28 October 2020 when the Plaintiff received an offer from The One and Associates Valuers (West Kowloon) Limited, an agent acting for 3i. After negotiations, the Plaintiff and 3i agreed on a license for a term of 6 months from 1 December 2020 to 31 May 2021 at a monthly license fee of HK$194,500.

(6)  Although Shop G1 was leased out to 3i as from 1 December 2020, the Plaintiff left Shop G1 on the vacancy lists in light of the fact that the license term was short and the Plaintiff was looking for better offers. However, the Plaintiff did not receive any offers for a license/tenancy agreement commencing on or before 15 June 2021. In around April 2021, 3i indicated its intention to renew the license in respect of Shop G1. After negotiations, 3i agreed on a renewal license for a term of 6 months (1 June 2021 to 30 November 2021) at the same monthly license fee of HK$194,500.

(7)  For Shops G3-G4, there had been no response until January 2021 when the Plaintiff received an offer from Centaline Property Agency Limited, for MF Living. After negotiations, the Plaintiff and MF Living agreed on a license for a term of 6 months (16 February 2021 to 15 August 2021) at the monthly license fee of HK$290,000. In around July 2021, MF Living requested an extension of the license in respect of Shops G3-G4 for one month from 16 August 2021 to 15 September 2021. By letter dated 5 August 2021, the Plaintiff indicated it had no objection to the extension.

(8)  On 26 April 2021, the Plaintiff was approached by a potential tenant through REPS Property Service Limited with an offer for a tenancy in respect of Shops G3-G4. The potential tenant offered to lease Shops G3-G4 for a term of 3 years at the monthly rent of HK$270,000 (first year), HK$300,000 (second year), and HK$330,000 (third year). The Plaintiff considered that the rent offered by the potential tenant was unreasonably low and verbally asked the potential tenant to improve their offer. The potential tenant did not respond.

(9)  In around late June 2021, another potential tenant approached the Plaintiff with an offer for a tenancy in respect of Shops G3-G4 for a term of 2 years at the rent of HK$350,000 per month. After negotiations, the potential tenant improved their offer for a term of 2 years at the monthly rent of HK$450,000 for the first year and HK$500,000 for the second year. The Plaintiff was agreeable to the rent offered and sent an offer letter to the potential tenant for its endorsement on 20 July 2021. The potential tenant did not sign the offer letter.

(10)  In around late July 2021, Chung Yuen Electrical approached the Plaintiff through Savills regarding Shops G3-G4. After negotiations, the Plaintiff and Chung Yuen Electrical agreed on a tenancy for a term of 3 years from 16 September 2021 to 15 September 2024 at the monthly rent of HK$550,000 for the first year, HK$650,000 for the second year, and HK$750,000 for the third year.

(11)  Save as aforesaid, up to 29 December 2021 (the date of Ms Sin’s witness statements), the Plaintiff did not receive any further offers for Shops G3-G5.

20.  Ms Sin’s evidence is disputed by the Defendant for reasons explained at §§34-35 below. In particular, the Defendant has challenged Ms Sin’s credibility as well as the following factual assertions:-

(1)  Ms Sin had made phone calls to individual estate agents and Chow Tai Fook in around mid-June 2020 to inform them of the impending vacancies.

(2)  The Plaintiff had attempted to negotiate an increase in license fee before the renewal of the license for Shop G1 for a further term of 6 months (1 June 2021 to 30 November 2021).

(3)  The term for the license for Shops G3-G4 from 16 February 2021 to 15 September 2021 was shortened at the request of the Plaintiff made during negotiations with Centaline.

(4)  The Plaintiff had attempted to renegotiate the license fee with MF Living before the license in respect of Shops G3-G4 was extended from August 2021 to September 2021.

(5)  The Plaintiff had negotiations with Savills/Chung Yuen Electrical before entering into the lease in respect of Shops G3-G4 from 16 September 2021 to 15 September 2024.

21.  Both parties called a valuation expert to give oral testimony on the market rent of the Shops at various dates, being the dates on which the Shops were returned by the Defendant to the Plaintiff and each of the dates on which the replacement licenses/tenancies were entered into. The Plaintiff’s expert is Mr Keith LH Siu (“Mr Siu”) of RHL Appraisal Limited and the Defendant’s expert is Mr Denys Lok Ping Kwan (“Mr Kwan”) of CS Surveyors Limited.

22.  The market rent assessed by the two experts is as follows:-

Property	Valuation date	Mr Kwan	Mr Siu[4]
G1	31.7.2020	HK$617,000	HK$429,000
	26.11.2020	HK$615,000	HK$428,000
	4.5.2021	HK$1,141,000	HK$435,000
G3-G5	3.8.2020	HK$670,000	HK$575,000
G3-G4	5.2.2021	HK$808,000	HK$410,000
	5.8.2021	HK$824,000	HK$419,000
	14.9.2021	HK$827,000	HK$420,000
G5	1.9.2020	HK$227,000	HK$240,000

THE PLAINTIFF’S CASE

23.  The Plaintiff’s case may be summarized as follows.

24.  Mr Pao SC, for the Plaintiff, submitted that the Defendant has failed to plead its allegation that the Plaintiff failed to mitigate its loss with sufficient particulars. The Defendant does not positively aver in its Answers to the Statement of Damages what the Plaintiff ought to have done, but did not do, in the discharge of its duty to mitigate. This is fatal to any case that the Defendant intends to run on mitigation.

25.  Without prejudice to this position, the Plaintiff submitted that it took reasonable steps to market and re-let the Shops after their return:-

(1)  The matter was handled professionally by competent staff of the Plaintiff’s associated company acting as its agents, and with the assistance of a broad panel of reputable estate agents who was promptly informed about the vacancies.

(2)  The offers eventually received resulted from the reasonable steps taken by the Plaintiff to market the properties, and the overall approach taken in accepting the offers that it did was reasonable in the circumstances, especially given the poor market conditions due to Covid-19.

(3)  Ultimately, the duty on the part of the Plaintiff to mitigate its loss is not an onerous one, and it is not required to do anything outside its ordinary course of business.

26.  The Plaintiff’s case is that expert evidence is of little relevance because on the facts of this case the Plaintiff has acted reasonably in discharging its duty to mitigate its loss arising from the Defendant’s breach. The best evidence of the market rent of the Shops at the time when the Plaintiff entered into the replacement leases is the actual rent that it managed to secure. There is no need to resort to comparable analysis, when the direct evidence is available and clear.

27.  Insofar as expert evidence is relevant, the Plaintiff submitted that Mr Kwan’s evidence is flawed in the following respects:-

(1)  Mr Kwan was not provided with details of the actual transactions the Plaintiff entered into. This is direct evidence on market value which he ought to have considered in forming his opinion. Mr Kwan’s valuation, based on the direct comparison method, is divorced from the actual facts.

(2)  Mr Kwan’s approach in only taking Comparables 1[5] and 2[6] for valuation dates in 2020, and Comparables 3[7] and 4[8] for valuation dates in 2021 is entirely arbitrary. The reality is that Comparable 1 is the “best comparable” to the Shops, being located a few shops away, also facing onto Queen’s Road Central, and leased to a luxury watch retailer. Mr Kwan arbitrarily excluded Comparable 1 from 2021 valuation dates on the basis that it was a transaction in 2020. However, there is no reason why a transaction entered on 1 September 2020 should be excluded from a valuation, for example, on 5 February 2021, just 5 months later.

(3)  Mr Kwan’s approach to Comparable 1 is inconsistent with his inclusion of Comparable 2 for the 2020 valuation dates. The rental commencement date for Comparable 2 was 24 April 2019. On Mr Kwan’s logic, Comparable 2 should be excluded because it was in a different year. Mr Kwan obviously wanted to include Comparable 2 (even though it was in 2019) to dilute the effect that Comparable 1 would have on the market rent for the 2020 valuation dates, given that Comparable 1 had the lowest adjusted unit rate.

(4)  Mr Kwan took Comparable 3 as a transaction entered into in 2021 on the basis that the tenancy date was 15 June 2021. However, the rental commencement date was on 18 January 2020. Comparable 3 was actually a 2020 transaction.

(5)  Mr Kwan’s location and return frontage adjustments are subjective. Further, his adoption of 1% per 100 square feet adjustment for size is plainly insufficient and insensitive, particularly for ground floor shops in the Central district which could take advantage of the prime location, good shop exposure and heavy pedestrian flow with a small shop.

28.  If necessary, the Plaintiff invited the Court to accept the evidence of Mr Siu in preference to that of Mr Kwan.

29.  In relation to its claim for claw-back for the rent-free period due to the Defendant’s breach of the agreements, the Plaintiff’s submissions were that:-

(1)  The Defendant’s liability to pay for the rent-free period is triggered by, and follows from, its breach of the agreements. It is wholly artificial to suggest that this cannot be recovered on an assessment of damages arising from breach.

(2)  The Plaintiff’s claim is analogous to one for liquidated damages. It is not unusual for courts to order liquidated damages on a hearing for assessment of damages.

30.  The Plaintiff seeks an order that interest should be paid on the amount of damages awarded at 1% above the HSBC prime rate from 3 July 2020 until judgment, and thereafter at judgment rate until full payment. The Plaintiff does not accept that there should be any reduction to the period in which interest is ordered due to the delay caused by the Plaintiff’s application for leave to adduce expert evidence on 5 May 2022:-

(1)  Any delay in the assessment process was caused by the Defendant putting forward wholly unjustified valuation evidence, which merited a response.

(2)  Alternatively, any reduction should only be for a period of 2 months, not 6 months as suggested by the Defendant. The time taken for the Court’s determination of the Plaintiff’s application should not be counted against the Plaintiff since the Defendant opposed the application and failed.

31.  As for costs, the Plaintiff seeks costs on a solicitor and own client basis.

THE DEFENDANT’S CASE

32.  The Defendant’s case may be summarized as follows.

33.  Mr Keith Chan, for the Defendant, submitted that the Plaintiff’s contention that the Defendant has not adequately pleaded its case of mitigation is unfounded. The Defendant has no quarrel with the proposition that a defence of mitigation must be pleaded and particularized, but the Defendant has done this.

34.  The Defendant submitted that in assessing whether the Plaintiff had taken all reasonable steps to mitigate its loss, the evidence of Ms Sin should be given little weight. Her oral evidence departed significantly from her witness statements and she had a clear tendency to come up with new material in Court which was never mentioned in her witness statements. In particular:-

(1)  During Re-Examination, Ms Sin alleged for the first time that she had made phone calls to 3 individual estate agents when the Defendant stopped operating the Shops (ie in mid-June 2020) to notify them that the Shops had become vacant. The fact that phone calls were made and the names of the estate agents that Ms Sin claimed to have called were never mentioned in her witness statements.

(2)  When asked whether she contacted existing tenants in Hutchison’s portfolio to see if they were interested in Shop G1, Ms Sin claimed for the first time that when the Defendant stopped operating the Shops, she called Chow Tai Fook (tenant of Shop G2) to see if it would be interested to expand.

(3)  Ms Sin’s oral evidence contradicted her written evidence. In both her witness statements, she claimed that the Plaintiff launched its marketing of the Shops on 3 August 2020. In cross-examination, Ms Sin accepted that her written evidence was not correct if “marketing” included calling agents.

(4)  Ms Sin would sometimes exaggerate matters to cast the Plaintiff in a more favourable light. For example, she asserted that there were “no tourists” who dared to travel to Hong Kong between August and November 2020.

35.  On Ms Sin’s credibility, the Defendant further submitted that the Court should take into account the fact that Ms Sin is an employee of Hutchison, occupying a senior managerial position, and has been working for them for the past 18 years.

36.  The Defendant submitted that Ms Sin’s evidence and the documentary evidence demonstrate that the Plaintiff has fallen short of its duty to take all reasonable steps to mitigate its loss:-

(1)  Before the Defendant returned the keys of the Shops, the Plaintiff failed to include any of the Shops on the vacancy lists between mid-June 2020 (when the Defendant ceased operating the Shops) and late-July/early-August 2020 (when the Plaintiff recovered vacant possession). Ms Sin claimed that this was because she was “not sure” when the Premises would be returned and was “not clear” as to how long the reinstatement works would last. However, it is fanciful to suggest that the Plaintiff, an experienced landlord, did not have any idea how long the reinstatement works would take. In any event, the Plaintiff could have indicated in the vacancy lists that the Shops would soon become available.

(2)  Ms Sin, in her witness statements, only mentioned two methods of marketing: (i) updating the vacancy lists and sending them by generic mass emails to a group of estate agents, and (ii) putting up shopfront stickers/signages advertising the vacant Shops. Whilst the Defendant agreed that the above steps could form part of the reasonable steps to be taken, the Defendant submitted that those steps by themselves were insufficient. In any event, the manner in which those steps were carried out was also inadequate.

(3)  As far as the vacancy lists are concerned, they contained scant information. In particular, there was no indication of asking rent, which would guide prospective tenants to propose something higher than the “low-ball offers” that they would make if there were no guidance at all. Moreover, Ms Sin herself said in cross-examination that agents could call the Plaintiff and enquire about the asking rent.

(4)  The Plaintiff only disclosed redacted versions of the vacancy lists which do not show whether any of the other premises had specified “asking rents”. There is a sound basis for the Court to draw an adverse inference that some of the premises in the vacancy lists had specified “asking rents”.

(5)  The emails sending out the vacancy lists were even more generic. There was no information in the email to promote or market the Shops and there were no photos of the Shops either.

(6)  The shopfront stickers and signage similarly contained no details about the Shops, such as size, headroom and layout. Such information could have been reasonably included on the signage to better market the Shops.

(7)  Even if Ms Sin’s evidence that she had called agents to inform them about the impending vacancy of the Shops from mid-June 2022 onwards is accepted, Ms Sin was only able to recall 3 of the agents that she called. Clearly, her department could have reasonably taken steps to contact more agents in a more systematic way. Further, if it was possible for the Plaintiff to contact agents by phone to market the Shops before vacant possession was recovered, the Plaintiff could equally have included the Shops in the vacancy lists at that time.

(8)  Ms Sin claimed that she had contacted an existing tenant, Chow Tai Fook, to ask whether they would be interested in the Shops. She confirmed personally that she did not contact any of Hutchinson’s other existing tenants. This is obviously insufficient given that Hutchison would have a vast number of tenants with whom enquires could have been made.

(9)  On Ms Sin’s own admission, the Plaintiff did not take other steps to re-let the Shops, such as advertising the Shops in newspapers, on websites or other platforms. Ms Sin acknowledged that the Plaintiff had previously advertised in newspapers, and that the costs were not high. Although Ms Sin attempted to explain that such advertisements would be “not very effective”, she could not definitively say that such advertising would not have had any effect. Mr Kwan, in re-examination, explained that proper marketing would include advertising on websites or newspapers.

(10)  It is no answer to say that most of the deals are struck through the referral of estate agents. There are instances where potential tenants would directly approach the Plaintiff, an example being the second potential tenant who approached the Plaintiff regarding Shops G3-G4.

37.  The Defendant made specific points of attack on the steps taken by the Plaintiff to re-let each of the Shops. In essence, it submitted that the Plaintiff failed to take sufficient steps to negotiate higher rents for the leases/licenses that had been entered into. Ms Sin’s evidence at trial that there had been oral negotiations on the rent payable was not mentioned in her witness statements and are not believable.

38.  As for the relevance of expert evidence on market rent, the Defendant submitted that the market rent is the best yardstick to establish a reasonable rent, and the duty to take reasonable steps to mitigate presupposes that the premises could and should have been rented out at such rent. The market rent is indicative of whether the Plaintiff had compiled with its obligation to take all reasonable steps to market and re-let the Shops. In the expert reports, “market rent” is defined as the estimated amount for which a property would be leased after proper marketing has been undertaken. It is no answer to say that the market condition was particularly dire due to Covid-19 and therefore the market rent is not probative. As explained by Mr Kwan, prevailing market conditions, including effects of the Covid-19 pandemic on the rental market, had already been taken into account through the use of market comparables to assess the market rent.

39.  Mr Chan made the following criticisms of Mr Siu’s evidence:-

(1)  During cross-examination, when asked about “nearby business type”, Mr Siu mentioned that the “instructions of the landlord” were to “get it as close as possible”, and that “luckily [he] found it”. He then referred to Comparable 1 which was leased out as a Frank Muller watch shop. Mr Siu may have been suggesting that the Plaintiff had instructed him on the type of comparables to look for. If this were the case, serious questions are raised about his credibility.

(2)  Some of Mr Siu’s calculations are unreliable. In Appendix 1a to the Joint Expert Statement for Shop G1, his percentage adjustments for headroom are not correct.

40.  Mr Chan submitted that Mr Kwan’s evidence was cogent and credible and should be preferred to that of Mr Siu:-

(1)  The Plaintiff’s attack on the credibility of Mr Kwan’s report on the basis that he had not seen the actual replacement leases/licenses should be rejected. As explained by Mr Kwan, the valuation was performed using the Direct Comparative Method, which involves looking at market evidence from market comparables, rather than the subject property itself. The same method was used by Mr Siu and there is nothing which suggests that Mr Siu had seen or considered the actual replacement leases/licenses either.

(2)  Mr Kwan’s approach of using Comparables 1 and 2 for the 2020 valuation dates and Comparables 3 and 4 for the 2021 valuation dates is preferable to Mr Siu’s approach of using all 4 comparables for all 4 valuation dates. The closer in time the market comparables to the valuation date, the more accurate it should be. Mr Siu’s response was that one can make objective adjustment for time by using the RVD rental index. However, both experts agreed that the RVD index is a territory wide index and not specific to Central district. Thus, if there are better comparables which are closer in time to the valuation date, it would be preferable to look to the direct comparables rather than relying on the RVD index.

(3)  For the date of the comparables, it is correct and reasonable for Mr Kwan to have used the date of tenancy rather than the date of tenancy commencement. Mr Kwan explained that the date of tenancy is when the landlord and tenant decided on the terms, including the amount of rent. Accordingly, it is the market situation at the date of tenancy which would affect the terms on which the parties entered into the agreement.

(4)  Mr Kwan’s approach was to take all the comparables, make the requisite adjustments, and average out the adjusted unit rents to obtain the figure for Shop G1 (the reference shop) as at 31 July 2020. He would then use the RVD index to extrapolate/project the averaged out figure to the other valuation dates. Mr Siu’s approach had the effect of diluting Comparables 3 and 4, which caused the significant difference in the valuations of market rent for the 2021 valuation dates. By contrast, Mr Kwan’s approach of performing the adjustments with reference to the relevant comparables at each of the valuation dates is more reliable.

(5)  There was cogent reason for Mr Kwan to adopt a less sensitive ratio for size and a more sensitive ratio for frontage. As explained by Mr Kwan at trial, tenants in Central usually want to have presence and image. Therefore, what is more important is frontage and location.

(6)  Mr Siu’s approach to location is problematic. The “nearby business type” adjustment factor is wholly subjective and vague. When valuation is performed, it is usually assumed that the shop would be available for all types of business. Thus, the “nearby business” type should not affect valuation. Further, splitting the “location” factor into 3 separate adjustment factors has the effect of magnifying and duplicating the relevant adjustments. Mr Kwan’s method of making a global adjustment for location is more appropriate.

41.  As for the Plaintiff’s claim in relation to the rent-free period, the Defendant submitted:-

(1)  The Defendant’s obligation to pay rent during the rent-free period is a primary obligation to pay rent, and not a secondary obligation to pay liquidated damages for loss of rent. This analysis is supported by the decision of DHCJ To (as he then was) in The Center (76) Ltd v Victory Serviced Office (HK) Ltd [2020] HKCFI 2881 at §§15-19.

(2)  Even if the analysis in The Center (76) Ltd is not accepted, it is impossible for the Plaintiff to characterise the rent-free period as a “liquidated damages” clause. If this were the case, the rent for the rent-free period would be the total sum of agreed damages for any and all breaches of the tenancy agreements. This would undermine and destroy the Plaintiff’s entire case on quantum.

(3)  As the rent-free period clause imposes a primary obligation to pay rent, the only way for the Plaintiff to recover such rent is to enforce the primary obligation by a claim in debt: Law Ting Pong Secondary School v Chen Wai Wah [2021] 3 HKLRD 185 at §74 (Chu JA, as she then was). The Plaintiff could not recover such sum through a claim for unliquidated damages, because the Plaintiff has suffered no loss. It is impermissible for the Plaintiff to make a debt claim in a hearing for assessment of damages. The scope of this hearing as directed by Master Rebecca Lee is only limited to the assessment of damages for breach of the agreements.

(4)  Alternatively, even if a debt claim could be made in an assessment of damages, it is a Henderson v Henderson abuse for the Plaintiff to make a claim for rent in the rent-free period now (or later by a new action), after final judgment has already been entered for the other debt claims.

42.  As for interest, the Defendant submitted:-

(1)  The Plaintiff now seeks interest from 3 July 2020 until the date of judgment. This is different from the date pleaded in the Statement of Damages, ie from 23 June 2021. The Defendant did not have any notice of the claim for an extra year’s worth of interest until the Plaintiff’s closing submissions and the Plaintiff should not be entitled to it now.

(2)  Interest should not run during the 6-month delay occasioned by the Plaintiff’s failure to adduce expert evidence from the start.

43.  As for costs, the Defendant invited the Court to direct written submissions to be made, or to make a costs order on a nisi basis.

DISCUSSION

Whether the Defendant has properly pleaded its case on mitigation?

44.  Having considered the parties’ submissions, I do not accept the Plaintiff’s argument that the Defendant has failed to properly plead its case on mitigation.

45.  It is common ground that a tenant who wishes to set up a positive case that the landlord has failed to mitigate its loss must plead the allegation with particulars specifically in its defence (or, in its Answer to the Statement of Damages). The Plaintiff went further and argued that the Defendant ought to have pleaded (i) when exactly the Plaintiff ought to have re-let the Shops and (ii) for what exact rent or license fee.

46.  I agree with the Defendant that none of the cases cited by the Plaintiff supports the proposition that a tenant’s case on the landlord’s failure to mitigate must be pleaded with such specific particulars. In particular, in Foxhill Investments Ltd v Sino Golden International Group Holdings Ltd [2021] HKCFI 3662 at §§14-15, whilst Master Sabrina Ho referred to the well-established principle that an allegation of a failure to mitigate must be pleaded with particulars, she did not make any observations on the extent of particulars required. In any event, the facts of Foxhill Investments are clearly distinguishable, as the defendant there did not file a defence or adduce evidence to show that the landlord had failed to mitigate its loss.

47.  I am satisfied that the Defendant’s case on mitigation has been pleaded with sufficient particulars. The Defendant has expressly denied that the Plaintiff has taken reasonable steps to mitigate its loss and relied on the fact that: (i) Shop G1 was not re-let until 4 months later; (ii) Shops G3-G4 were not re-let until 6 months later; and (iii) the terms of the replacement leases, in particular the rent and the duration of the leases, are significantly less favourable to the Plaintiff than under the original tenancy agreements.[9] In my view, the Defendant has made it sufficiently clear that its case on mitigation is that the Plaintiff should have caused the Shops to be re-let at an earlier time, at a higher rent, and for a longer term than under the actual replacement tenancies.

48.  In any event, as the Defendant pointed out, I cannot see any potential prejudice or unfairness to the Plaintiff arising from the Defendant’s alleged failure to sufficiently plead its case on mitigation. Indeed, none has been suggested by the Plaintiff. The Plaintiff understands the defence raised and has been able to meet that case.

Whether the Plaintiff has mitigated its losses?

49.  The applicable principles are not in dispute.

50.  The Plaintiff has a duty to take all reasonable steps to mitigate its loss in the sense that it cannot claim any part of the damage it has suffered which is due to its neglect to take such steps. Whether the Plaintiff acted reasonably is a question of fact: McGregor on Damages (21^st Ed) at §§9-014, 9-016.

51.  The legal onus is on the Defendant to establish the Plaintiff’s failure to mitigate. Once the Defendant raises the issue of mitigation with sufficient evidence, the Plaintiff will bear a “heavy evidential burden” to provide evidence as to how it has mitigated its loss: McGregor on Damages at §§9-020, 9-115, citing Sainsbury’s Supermarkets Ltd v Visa Europe Services LLC [2020] 4 All ER 807 at §216.

52.  Where a landlord accepts a tenant’s repudiation, the landlord is expected to act reasonably and to take such necessary steps to re-let the vacant premises at market rent. The duty to mitigate is not onerous, and the landlord is not required to do anything other than in the ordinary course of business. The burden rests on the tenant to show that damage has not been mitigated: Wing Siu Co Ltd v Goldquest International Ltd (HCA 3183 & 4145/2001, 18 August 2006) at §§7-8 (Master de Souza); Silvercord Ltd v High Performance Sports Ltd [2020] HKCFI 1800 at §9 (Master Anthony HK Chan).

53.  In the Defendant’s Reply Submissions,[10] Mr Chan confirmed it is not the Defendant’s case that the Court should infer from the experts’ views on the market rent on the valuation dates that “something must have gone wrong” and that the Plaintiff has not taken all reasonable steps to mitigate. The Defendant’s primary contention is that it is clear from the primary facts that the Plaintiff has not taken all reasonable steps to mitigate. It is only when the Court considers the primary facts to be equivocal on whether all reasonable steps have been taken, or once the Court concludes that the Plaintiff has not taken all reasonable steps, would expert evidence on market rent become relevant in guiding the Court’s assessment of the rent that would have been achieved had all reasonable steps been taken. I agree that this is the proper approach for the Court to take.

54.  Ms Sin had explained the steps taken by the Plaintiff to mitigate its loss. Having seen and heard her evidence, and considering that together with contemporaneous documents, I accept that Ms Sin was an honest, credible, and reliable witness. I do not think that the matters raised by the Defendant (summarised in §§34-35 above) have casted doubt on the quality of Ms Sin’s evidence:-

(1)  I accept Ms Sin’s explanation that she did not mention the phone calls that were made to individual estate agents and Chow Tai Fook before 3 August 2020 in her witness statements because there are no written records of such calls. Although the same could be said of the undocumented oral negotiations that took place after 3 August 2020, which were mentioned in Ms Sin’s witness statements, those oral negotiations took place against the backdrop of written correspondence between the Plaintiff and potential tenants and/or estate agents representing them.

(2)  Ms Sin’s evidence that she had made phone calls to estate agents before 3 August 2020 is corroborated by the fact that Mr Barrie Chan of Savills, one of the agents who Ms Sin called, approached the Plaintiff with an offer for Shop G5 before the vacancy lists were sent out on 3 August 2020.

(3)  I agree with Mr Pao that the Defendant’s point about Ms Sin’s “exaggeration” of her evidence about “no tourists” is without substance. The Defendant’s criticism of Ms Sin’s evidence in this respect does not sit well with the position it has taken in these proceedings that continuing to do business in the Shops were not viable due to the lack of tourists.

(4)  In assessing Ms Sin’s evidence, I am mindful that she is a current employee of Hutchison and has been under its employment for the past 18 years. However, I do not accept that this, in and of itself, affects the reliability of Ms Sin’s evidence given under oath.

55.  In my view, bearing in mind that the duty to mitigate is not onerous, and that the Plaintiff was not required to do anything other than in the ordinary course of business, the Defendant’s criticisms of the steps taken, or not taken, by the Plaintiff to re-let the Shops fall short of showing that the Plaintiff has failed to discharge its duty to mitigate.

56.  I also accept that it was reasonable for the Plaintiff to have waited until completion of the reinstatement works before including the Shops on the vacancy lists. Although the Plaintiff might have some idea as to the approximate length of the reinstatement works, the Plaintiff could not reasonably be expected to know exactly when the works would be completed. The Defendant and its contractors carried out the works, and the Plaintiff had no control over them. In the circumstances, instead of including the Shops on the vacancy lists when the Shops were not actually vacant, I find it reasonable for the Plaintiff to have instead approached individual estate agents and the existing tenant of Shop G2 (namely, Chow Tai Fook) on a more informal basis through phone calls, when the exact situation concerning the availability of the Shops could be more easily explained. In the end, the steps taken by the Plaintiff proved to be effective as it led to the Shop G5 lease.

57.  I do not agree with the Defendant that the vacancy lists ought to have included “asking rents” for the Shops. In my view, the inclusion of “asking rents” or simply to state that the term or amount is “negotiable” is very much a matter of commercial judgment for the Plaintiff. Both options are within the ordinary course of business. In any event, I accept Ms Sin’s explanation as reasonable that “asking rents” were not included because of the concern that setting a too high asking rent would deter potential offers from being made and lead to prolonged vacancy of the premises. This is particularly so in light of the impact that the Covid-19 pandemic undoubtedly had on the property leasing market.

58.  On a related note, I am unable to accept the Defendant’s submission that an adverse inference should be drawn from the redacting of other entries in the vacancy lists. The contention that redaction was done because there were other “asking rents” in the list was not suggested to Ms Sin in cross-examination and it ought to have been if such submission were to be made. I accept the Plaintiff’s submissions, in any event, which accord with common sense that the redactions were made because they contain confidential information relating to other properties in the Plaintiff’s portfolio and are irrelevant to the present proceedings. Further, as Mr Pao pointed out, the Defendant has never made any requests for unredacted versions of the lists or challenged the basis upon which the vacancy lists are redacted.

59.  As for the Defendant’s submission that the Plaintiff should have included specific information about the Shops in the body of the e-mails attaching the vacancy lists, I do not think the Plaintiff could realistically be expected to include such information for all the shops listed on the vacancy lists. The same applies to the shopfront stickers and signages that were put up by the Plaintiff at the Shops. Potential tenants, especially those interested in renting a prime shop in the Central district, could well be expected to make inquiries with the Plaintiff if they were interested in further information (e.g. size, headroom and layout).

60.  I do not accept the Defendant’s submission that the Plaintiff reasonably ought to have taken other steps to re-let the premises. I accept Ms Sin’s evidence that, in her experience, most deals are struck through agents, who would be adequately informed of vacancies through the vacancy lists. I agree with Mr Pao that to require the Plaintiff to indiscriminately call every agent and every existing tenant would be to place an excessive burden on it. As for other forms of advertisements (newspapers or websites), I do not think there is any basis to challenge Ms Sin’s evidence that these forms of advertisements would not be effective since prospective tenants for a prime shop in Central would tend to rely on the referral of estate agents rather than such forms of advertisements. Contrary to the Defendant’s submission,[11] the taking of reasonable steps in the ordinary course of business does not require a landlord to take steps which are likely or have been proven to be ineffective.

61.  For the reasons explained in §54 above, despite the Defendant’s submissions, I accept Ms Sin’s evidence that oral negotiations had taken place between the Plaintiff with prospective tenants and/or estate agents acting on their behalf in relation to potential leases of the Shops.

62.  As for Shop G1, whilst I accept that Ms Sin appears to have misunderstood the effect of the revised offer made on 18 November 2020 by 3i through its agent (being an improved offer, rather than a lower offer as suggested by Ms Sin in cross-examination), I do not think this has undermined the credibility of her evidence, bearing in mind the lapse of time and the fact that negotiations were not conducted by Ms Sin personally but by her colleague, Ms Gloria Chan, who reported to Ms Sin. The fact that the Plaintiff had received an improved offer is consistent with Ms Sin’s evidence that there had been negotiation of terms of the replacement leases, and that the Plaintiff had attempted to secure better commercial terms through negotiations. As for the Defendant’s complaint that the license fee did not change when the license was renewed 6 months later, given that the first license agreement was already based on an improved offer made by 3i, it is unsurprising that 3i was unwilling to agree to a further increase for the renewed license agreement.

63.  As for Shop G5, I agree with the Plaintiff that it would be setting the bar too high and thus would be unrealistic to expect the Plaintiff to have continued to market the Shop to other potential tenants or agents when negotiations with Watch Gallery through Savills were on foot. This was especially so when the continuing negotiations eventually led to an increase in rent from HK$150,000 to HK$190,000 as agreed.

64.  As for Shops G3-G4, I do not see any substance in the Defendant’s criticism of Ms Sin’s shift in her evidence from saying that negotiations with Centaline were done “mainly orally” to “completely orally”. Given the passage of time, it is unrealistic to expect the witness to give a definitive answer on whether there had ever been any non-oral negotiations. Further, there is no basis for the Defendant to suggest that little effort was put into the negotiations by the Plaintiff with Centaline (for the lease with MF Living) and/or Savills (for the lease with Chung Yuen Electrical). There is no guarantee that negotiations would necessarily lead to improved terms, especially against the poor market sentiment caused by Covid-19. In any event, negotiations with Centaline did lead to an improved offer as the Plaintiff was able to secure a significantly shortening of the term of the first license with MF Living.

65.  Overall, I find from the primary facts that the steps taken by the Plaintiff (as summarised in §19 above) were sufficient to discharge the Plaintiff’s duty to mitigate its loss. On principle, subject to what is said below, the Plaintiff is entitled to recover its loss of rent and other income caused by the Defendant’s repudiatory breach in full.

66.  It is common ground between the parties that expert evidence of market rent is not relevant if I find on the facts that the Plaintiff has discharged its duty to mitigate its loss. This I have done. Nevertheless, out of deference to the parties’ respective experts and the extensive submissions made by Counsel, I shall briefly express my views on the expert evidence in the following section of this Judgment.

Expert Evidence

67.  I accept that both Mr Siu and Mr Kwan have conducted their valuation of the Shops in a professional manner and have done their best to assist the Court. Both experts fairly accepted that their counterpart’s valuation is not outside the scope of a reasonable valuer and not unprofessional.

68.  As for the basis for the valuation, I do not accept the Plaintiff’s criticism of Mr Kwan’s report on the ground that he had not seen the actual replacement leases when preparing his report. I accept Mr Kwan’s explanation that the Direct Comparative Method, which he adopted, involves looking at market evidence from market comparables, rather than the subject property itself. It is noteworthy that the Direct Comparative Method was also adopted by Mr Siu, who was also not provided with the actual replacement leases for the preparation of his report. Relatedly, I accept that the Direct Comparative Method is an appropriate basis for conducting valuation of market rent.

69.  Even if (contrary to my finding) the Plaintiff failed to take all reasonable steps to mitigate its loss, in my view, it does not follow that damages must then be assessed on the basis that the Plaintiff should have achieved the market rent on the respective valuation dates. On the Defendant’s own case, evidence of market rent is “relevant”[12] or the “best yardstick”[13] for the Court to assess the rent that would have been achieved had all reasonable steps been taken, but not determinative of the same.

70.  If evidence of market rent were relevant, having considered the experts’ opinions and heard their live testimony under cross-examination, I would have preferred the evidence of Mr Siu. In my view, there are some problems with Mr Kwan’s approach and choice of comparables, which have a major impact on the overall valuation result.

71.  First, I see no basis for Mr Kwan’s approach of excluding Comparable 1 for the 2021 valuation dates simply because it was a transaction in 2020. When asked about this, Mr Kwan explained in cross-examination that he selected comparables based on the year in which the transaction occurred. As submitted by the Plaintiff and which I accept, such approach means that comparables are selected based not on proximity in time, but rather arbitrarily, the calendar year in which they happened to be transacted in. This resulted in Comparable 4 (15 June 2021) being used for the valuation date of 5 February 2021, whereas Comparable 1 (1 September 2020) was not, even though both comparables were broadly within the same time range from the valuation date. Besides, Mr Kwan’s explanation is inconsistent with his inclusion of Comparable 2 for the 2020 valuation dates, since Comparable 2 was a transaction dated 24 April 2019.

72.  Second, I also see force in the Plaintiff’s submission that Mr Kwan’s exclusion of Comparables 1 and 2 for the 2021 valuation dates have led to the surprising result that for Shop G1, Mr Kwan’s opinion of market rent was HK$615,000 on 26 November 2020, and HK$1,141,000 on 4 May 2021, amounting to an increase of about 85%. By contrast, during the same period, the RVD Indices were at 168.5 and 171.2 in November 2020 and May 2021 respectively, representing a relatively modest increase of about 1.6%. Even though the RVD Indices are territory-wide, this does not explain the significant discrepancy between the RVD Indices and Mr Kwan’s opinion. In cross-examination, Mr Kwan was unable to explain how he could justify such discrepancy.

73.  It seems that Mr Siu has adopted the more appropriate approach of using all four comparables for all valuation dates and adjusted for time through the adoption of the RVD Indices. Both experts accepted that the use of the RVD Indices is standard practice. I note that Mr Kwan himself had used the RVD Indices to make time adjustments for the comparables that he adopted.

74.  Further, I agree with the Plaintiff that it would have been appropriate for Mr Kwan to have used the rental commencement date (18 January 2020) rather than the date of tenancy (15 June 2021) for determining the year in which Comparable 3 occurred. The rent would have been paid since the commencement of the term (January 2020), and the actual tenancy agreement serves to record the rent which the tenant had been paying all along. Thus, the level of rent payable under the tenancy agreement would reflect the market situation as at the date of rental commencement, not as at the date of tenancy. Comparable 3 should have been regarded as a 2020 rather than a 2021 transaction.

75.  As for the specific categories of adjustments, the differences between the two experts are relatively insignificant. I accept that both approaches are within the scope of a professional valuer. For completeness, I would have preferred the adjustment factors adopted by Mr Siu:-

(1)  I accept that Mr Siu’s separate categories for location, namely (i) pedestrian flow; (ii) shop exposure and (iii) nearby business type provide clarity as to the underlying reasons for location adjustment. Whilst I accept that, in principle, it was open for Mr Kwan to adopt a global location adjustment, I find it difficult to understand why a -20% adjustment in location has been adopted for Comparable 1, when it was only a few shops away from the Shops on Queen’s Road Central.

(2)  I agree with Mr Siu that it is preferable to adopt a linear formula of +/- 1% for every 5 feet for return frontage, rather than to adopt a subjective return frontage adjustment of 30%, as Mr Kwan has done.

(3)  In relation to size, it seems to me that Mr Siu’s more sensitive ratio of +/- 3% for every -/+ 100 square feet is more appropriate. I accept that for ground floor shops in Central district, tenants could take particular advantage of the prime location and heavy pedestrian flow even with a small shop. As Mr Kwan explained in cross-examination, tenants in Central usually want to have presence and the image of having a shop there. They would not be particularly concerned about seeking a larger shop. Thus, it seems preferable to adopt a more sensitive adjustment for size in favour of smaller shops.

76.  For the reasons I have given, had it been necessary, I would have accepted Mr Siu’s evidence of the market rent on the valuation dates.

Rent-free period

77.  I respectfully agree with and adopt the analysis of DHCJ To in The Center (76) Ltd (supra) at §§15-19 in relation to the nature of rent-free period clauses. The effect of a rent-free period clause is to suspend the primary obligation to pay rent under the tenancy agreement, which would be “re-activated” upon the tenant’s breach. Thus, in my view, a claim for rent which has become payable upon a tenant’s breach under a rent-free period clause is a claim for an agreed sum or debt, not damages.

78.  For the following reasons, I am unable to agree with the Plaintiff that its claim for rent under the rent-free period is analogous to one for liquidated damages:-

(1)  Whilst an obligation to pay liquidated damages is a secondary obligation arising from the breach of a primary obligation, the Plaintiff’s claim for rent is a claim for performance of a primary obligation: The Center (76) Ltd at §19.

(2)  If the rent-free period clauses are (or analogous to) liquidated damages clauses, in the absence of clear words, they would have the effect of liquidating all the damages arising from the Defendant’s breach: K Line Pte Ltd v Priminds Shipping (HK) Co Ltd [2022] Bus LR 67 at §53 (Males LJ). As Mr Chan pointed out, this would be a surprising result and undermine the Plaintiff’s entire case on quantum.

79.  I also agree with the Defendant that a debt claim is not within the scope of the present hearing. Master Rebecca Lee, who entered summary judgment in favour of the Plaintiff, only directed that “damages” for breach of the tenancy agreements be assessed.[14] The Plaintiff has not referred me to any authorities where the scope of an assessment of “damages” was held to include debt claims, which by definition are not claims for “damages”. On the other hand, the cases cited by the Defendant, namely The Center (76) Ltd at §52 and Cheong Ming Investment Co Ltd v IBCL Property Investment Ltd [2022] HKDC 683 at §§1-2 (Master Maurice Lam), although not conclusive, support the Defendant’s position that a claim for rent during the rent-free period ought to have been sought at the summary judgment stage.[15]

80.  For those reasons, I would not allow the Plaintiff’s claims for rent during the rent-free period.

Pre-Judgment interest

81.  In the Plaintiff’s closing submissions, for the first time in these proceedings, pre-judgment interest is sought from 3 July 2020 until judgment. This is different from the position in its Statement of Damages and opening submissions,[16] where pre-judgment interest was only sought from 23 June 2021. In closing submissions, the Plaintiff contended that pre-judgment interest should accrue from 3 July 2020, when the writs in the present proceedings were issued, because that was when the Plaintiff started to be wrongly kept out of the pocket. Understandably, the Defendant complains about this belated change in stance.

82.  In the absence of an application to amend the Statement of Damages, I do not see any basis for the Plaintiff’s claim for pre-judgment interest from 3 July 2020. In any event, even if such application were made in the Plaintiff’s closing submissions, I would have refused to accede to it in the absence of: (i) an application made by way of summons, (ii) any prior notice to the Defendant and (iii) any valid reason for the late application.

83.  Thus, I would not allow the Plaintiff’s belated claim for pre-judgment interest for the period between 3 July 2020 and 22 June 2021.

84.  As for the period between 10 March 2022 and 29 August 2022, I agree with the Defendant that interest should not run during the period of delay caused by the Plaintiff’s application for leave to file expert evidence.

85.  I reject the Plaintiff’s suggestion that Mr Kwan’s evidence was, inter alia, “wholly unjustified”[17] which called for a response. For the reasons I have explained, although I would have preferred the evidence of Mr Siu, I do not think that Mr Kwan’s valuation was outside the scope of a reasonable valuer or was unprofessional. The Plaintiff’s criticism of Mr Kwan’s evidence in such terms does not sit well with the fact that even Mr Siu’s figures are, for the most part, noticeably higher than the actual rents achieved by the Plaintiff. In any event, I accept that, as submitted by the Defendant, the Plaintiff’s stated reason for not adducing expert evidence at the outset was because of its position that such expert evidence is irrelevant in principle. On the Plaintiff’s case, there should not have been any need to adduce its own expert evidence even if (contrary to my finding) the Defendant’s expert evidence could be said to be unreasonable.

86.  I also do not agree with the Plaintiff’s fallback position that, alternatively, any reduction should only be for a period of 2 months, ie between the date of the order granting leave to the Defendant to adduce expert evidence on 10 March 2022 up to the Plaintiff’s application on 5 May 2022. Although the Court eventually acceded to the Plaintiff’s application, the Plaintiff was seeking an indulgence from the Court and it was reasonable for the Defendant to oppose the application, as reflected by Master Phoebe Man’s order that costs of the application be paid to the Defendant. Thus, the time taken for Master Phoebe Man to determine the Plaintiff’s application should also be attributed to the Plaintiff’s delay in seeking expert directions.

87.  For those reasons, I would grant pre-judgment interest at 1% above the HSBC prime rate[18] from 23 June 2021 until the date of judgment, save as to the period between 10 March 2022 and 29 August 2022.

Damages

88.  I would assess the Plaintiff’s damages in HCA 1113 to be HK$9,168,088.12, the breakdown of which are as follows:-

Description	Amount (HK$)
Loss of rent and other income from 1.8.2020 to 15.6.2021	14,902,675.35
Agency fee for re-letting Shop G1	44,884.62
Cost of the shop front sticker for leasing Shop G1	9,558.00
Less:
Rent and other receivable from the replacement licensee from 1.12.2020 to 15.6.2021	(1,702,960.85)
Deposit paid by the Defendant	(4,086,069.00)
Total:	9,168,088.12

89.  I would assess the Plaintiff’s damages in HCA 1114 to be HK$20,404,306.80, the details of which are as follows:-

Description	Amount (HK$)
Loss of rent and other income from 4.8.2020 to 3.1.2022	32,120,492.33
Agency fee for re-letting Shops G3-G4 to the replacement licensee from 16.2.2021 to 15.9.2021	63,145.16
Agency fee for re-letting Shops G3-G4 to the replacement tenant from 16.9.2021 to 15.9.2024	62,128.92
Agency fee for re-letting Shop G5 to the replacement tenant from 1.9.2020 to 31.8.2023	81,480.06
Costs for the sub-division works of Shop G5 from Shops G3-G4	42,150.00
Costs for the installation of electrical cables at Shops G3-G4 consequent upon the sub-division works	99,800.00
Costs of the shop front sticker for leasing Shops G3-G5	12,960.00
Less:
Income receivable from the replacement licensee of Shops G3-G4 from 16.2.2021 to 15.9.2021	(2,234,502.47)
Income receivable from the replacement licensee of Shops G3-G4 from 16.9.2021 to 3.1.2022	(1,087,135.71)
Income receivable from the replacement tenant of Shop G5 from 1.9.2020 to 3.1.2022	(3,301,629.49)
Deposit paid by the Defendant	(5,454,582.00)
Total:	20,404,306.80

Costs

90.  Overall, I consider that the Plaintiff is the successful party. There is no reason why costs should not follow the event and the Plaintiff should be entitled to the costs of the assessment. Having considered parties’ submissions, I would make a costs order nisi that the Defendant pay the costs of this assessment of damages, with certificate for counsel, to be taxed if not agreed, on a solicitor and own client basis.

DISPOSITION

91.  For the reasons above, I make the following orders.

92.  In HCA 1113/2020:-

(1)  Judgment for HK$9,168,088.12.

(2)  Interest on the sum of HK$9,168,088.12 at 1% above the prevailing HSBC prime rate from 23 June 2021 until the date of judgment, save for the period between 10 March 2022 and 29 August 2022, and thereafter at judgment rate until full payment.

(3)  A costs order nisi that the Defendant pay the costs of this assessment of damages, with certificate for counsel, to be taxed if not agreed, on a solicitor and own client basis.

93.  In HCA 1114/2020:-

(1)  Judgment for HK$20,404,306.80.

(2)  Interest on the sum of HK$20,404,306.80 at 1% above the prevailing HSBC prime rate from 23 June 2021 until the date of judgment, save for the period between 10 March 2022 and 29 August 2022, and thereafter at judgment rate until full payment.

(3)  A costs order nisi that the Defendant pay the costs of this assessment of damages, with certificate for counsel, to be taxed if not agreed, on a solicitor and own client basis.

94.  The above costs order nisi shall become absolute unless an application to vary the same is made within 14 days of the date of this Judgment.