FOXHILL INVESTMENTS LTD v. SINO GOLDEN INTERNATIONAL GROUP HOLDINGS LTD

HCA 2938/2018

[2021] HKCFI 3662

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2938 OF 2018

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DECISION

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A.   Introduction

1.  This is the assessment of damages suffered by the Plaintiff as a result of the Defendant’s breach of a tenancy agreement dated 1 March 2018 (“the Tenancy Agreement”). 

2.  The Plaintiff is represented by Ms Becky Wong.  The Defendant is absent at the hearing.  Having read the affirmations of service filed by the Plaintiff, I am satisfied that the Plaintiff has served all the necessary papers of this assessment of damages hearing on the Defendant such that the Defendant should have knowledge of the hearing. I will proceed with the hearing in the Defendant’s absence.  

B.   Background Facts

3.  The Plaintiff, Foxhill Investments Limited, is and was at all material times the registered owner of a property known as Unit Nos 2601- 02, on the twenty sixth floor of the Commercial Development of Infinitus Plaza, No 199 Des Voeux Road Central, Hong Kong (“the Premises”).

4.  By a tenancy agreement dated 1 March 2018 (“the Tenancy Agreement”), the Plaintiff as the landlord agreed to lease the Premises to the Defendant as tenant for a fixed term of 3 years commencing from 1 March 2018 and expiring on 28 February 2021 (both days inclusive).  The rent under the Tenancy Agreement was HK$264,485 per month (exclusive of rates, management fee and air-conditioning charge and other outgoings) payable in advance on the first day of each calendar month.  

5.  Since 1 September 2018, in repudiatory breach of the Tenancy Agreement, the Defendant has failed to pay rent, management expenses and government rates for the Premises.  

6.  By a Writ of Summons filed on 19 December 2018 and a Statement of Claim filed on 8 January 2019, the Plaintiff claims against the Defendant for, inter alia, vacant possession of the Premises and arrears of rent, management expenses and government rates.  

7.  By the issuance of the Writ of Summons, the Plaintiff has accepted the Defendant’s repudiation of the Tenancy Agreement.  

8.  As no intention to defend has been given by the Defendant within the prescribed time, on 28 January 2019, final and interlocutory judgment (“the Judgment”) was entered against the Defendant:

(1)  The Defendant was adjudged and ordered to give vacant possession of the Premises to the Plaintiff;

(2)  The Defendant was further adjudged and ordered to pay:

(a)  The sum of HK$903,601, comprising arrears of rent in the sum of HK$793,455.50; management fees in the sum of HK$79,345.50; and rates in the sum of HK$30,800 (§ (i) of the Judgment);

(b)  Arrears of rent and/or mesne profits at the rate of HK$264,485 per month from 1 January 2019 to the date when vacant possession of the Premises is delivered up by the Defendant to the Plaintiff (§ (ii) of the Judgment);

(c)  Management fees at the rate of HK$26,448.50 per month from 1 January 2019 to the date when vacant possession of the Premises is delivered up by the Defendant to the Plaintiff (§(iii) of the Judgment);

(d)  Rates per quarter at the rate to be assessed by the Commissioner of Rating and Valuation from 1 January 2019 to the date when vacant possession of the Premises is delivered up by the Defendant to the Plaintiff (§(iv) of the Judgment);

(e)  Interest in the sum of HK$34,552.06 (§(v) of the Judgment);

(f)   Damages to be assessed (§(vi) of the Judgment); and

(g)  Costs of the Action to be taxed (§(vii) of the Judgment). 

9.  On 7 March 2019, the Plaintiff obtained leave to issue a Writ of Possession of the Premises.  On 21 March 2019, the Writ of Possession was issued by the Court.  On 20 March 2019, before the Writ of Possession was issued, the Defendant delivered vacant possession of the Premises by a Notice of Surrender of the same date.  

10.  In this assessment of damages, I will deal with the quantum of the amount which the Defendant should pay to the Plaintiff under §(vi) of the Judgment (see §7 (2) (f) above).  I will also assess the amount of costs which the Defendant should pay to the Plaintiff under §(vii) of the Judgment (see §7 (2) (g) above).  

C.   The Plaintiff’s Summons to file and serve Supplemental List of Documents

11.  By a Summons dated 26 July 2021, the Plaintiff seeks to file and serve a Supplemental List of Documents and rely on the documents therein in the assessment of damages hearing (“the Summons”).  

12.  I allow the Summons as the documents in the Supplemental List of Documents are relevant to the Plaintiff’s effort in mitigating its loss.  Further, there is no indication from the Defendant that it would oppose the Summons.  

13.  As for the costs of the Summons, I will order it to be in the cause.  

D.   Assessment of Damages

The Plaintiff has taken reasonable steps to mitigate its loss

14.  It is well established that where a landlord accepts a tenant’s repudiation of the tenancy agreement, it is entitled to claim as damages against the tenant for rent of the unexpired term of the tenancy agreement, rates, service charges and reinstatement costs.  This is subject to a duty on the landlord to mitigate its loss by acting reasonably and take such steps as are necessary to re-let the vacant premises at market rent.  The duty to mitigate is not onerous, the landlord is not required to do anything other than in the ordinary course of business.  The burden is on the tenant to show that damages has not been mitigated: see Silvercord Limited v High Performance Sports Limited HCA 1774/2018 (unrep, 30 July 2020) at §9 per Master Anthony H K Chan, citing Chan Annie v Lau Wai Kwong [1984] HKC 231 at 235G-H per Mantell J and Wing Siu Co Ltd v Goldquest International Ltd HCA 3183 & 4145/2001 (unrep, 18 August 2006) at §§7-8 per Master de Souza.  

15.  If a defendant wishes to set up a positive case that the plaintiff has failed to mitigate his loss, he must plead the allegation with particulars specifically in its defence: see Hong Kong Civil Procedure 2021 §18/8/23.  Here, as the Defendant has not filed any defence and has not adduced any evidence, it is not open for the Defendant to say that the Plaintiff has not mitigated its loss.  

16.  In any event, the unchallenged evidence adduced by the Plaintiff does show that the Plaintiff has taken reasonable steps to mitigate its loss by actively advertising the Premises in the market for leasing after it has accepted the Defendant’s repudiation of the Tenancy Agreement. Eventually, the Plaintiff managed to enter into a new tenancy agreement with its current tenant Bausch & Lomb (“B&L”) at a rent higher than that under the Tenancy Agreement: 

(1)  In January 2019, the Plaintiff distributed flyers through Jones Lane LaSalle Limited (“JLL”) to market the Premises for leasing at an asking rent of HK$72 per square foot gross;

(2)  From March to June 2019, the Plaintiff increased the asking rent to HK$75 per square foot gross;

(3)  On 27 May 2019, Bausch & Lomb made an offer to the Plaintiff to rent the Premises at HK$70 per square foot gross;

(4)  After a few rounds of negotiation between JLL on behalf of the Plaintiff and B&L, on 6 September 2019, the Plaintiff and B&L entered into a tenancy agreement of the Premises in the following terms (“the New Tenancy Agreement”):

(a)  The tenancy shall be for a term of 3 years from 1 August 2019 to 31 July 2022 (both days inclusive);

(b)  The rent shall be HK$297,037 per month (exclusive of rates, management fee and air-conditioning charge and other outgoings) payable in advance on the first day of each calendar month.  This amount is higher than the rent under the Tenancy Agreement, which was only HK$264,485 per month;  

(c)  There shall be a rent-free period of 45 days from 1 August 2019 to 14 September 2019.  

Amount of Damages under §(vi) of the Judgment

17.  Having found that the Plaintiff has taken reasonable steps to mitigate its loss after the Defendant has delivered vacant possession of the Premises, I assess the damages under §(vi) of the Judgment to be HK$1,699,822.50, being:

(1)  The amount of rent from 21 March 2019 (the day after the Defendant delivered vacant possession) to 14 September 2019 (the last day of the rent-free period under the New Tenancy Agreement) in the sum of HK$1,539,700.84;  

(2)  Management fees and rates for the period from 21 March 2019 (the day after the Defendant delivered vacant possession) to 31 July 2019 (the day before the commencement of the New Tenancy Agreement) in the sum of HK$115,178.95; and

(3)  Rates for the period from 21 March 2019 (the day after the Defendant delivered vacant possession) to 31 July 2019 (the day before the commencement of the New Tenancy Agreement) in the sum of HK$44,942.71.  

E.   Interest

18.  Under §(v) of the Judgment, the Defendant was ordered to pay interest on the arrears of rent and management fees in the sum of HK$34,522.06 as at 31 December 2018: see also §(vi) of the Relief in the Statement of Claim.  

19.  In respect of the interest on the arrears of rent/mesne profits, management fees and government rates from 1 January 2019 to 20 March 2019 (the date when vacant possession was delivered) (ie §§(ii), (iii) and (iv) of the Judgment), I order that the Defendant do pay interest at 2% per month on the sum of HK$796,601.57^[1] from the date of the Writ to the date of this judgment at 2% per month pursuant to Clause 8.3 of the Tenancy Agreement and thereafter at judgment until payment in full: see §(vii) of the Relief in the Statement of Claim.  

20.  In respect of the damages assessed under §(vi) of the Judgment, I order that the Defendant do pay interest on the sum of HK$1,699,822.50 at the contractual rate pursuant to Clause 8.3 of the Tenancy Agreement and thereafter at judgment rate until full payment.  

F.    The Deposit and Clause 9.1 of the Tenancy Agreement

21.  In §§35-36 of the Plaintiff’s Opening Submissions, the Plaintiff stated that it has retained a deposit of HK$1,804,876.80.  Clause 9.1 of the Tenancy Agreement provides that the Plaintiff as the landlord shall have the right to deduct from such deposit “the amount of any rent rates and other contributions or charges payable hereunder and nay costs expenses loss or damage sustained by [the Plaintiff] as the result of any non-observance or non-performance by [the Defendant] of any of the said agreements stipulations obligations or conditions…”.  The Plaintiff is at liberty to exercise its right under Clause 9.1 of the Tenancy Agreement as it deems fit.  I do not need to, and will not give any order regarding the Plaintiff’s application of the deposit to satisfy any sum due by the Defendant to it pursuant to Clause 9.1 of the Tenancy Agreement.  

G.  Costs

22.  For the costs of the assessment of damages, I order that costs to be with the Plaintiff with Counsel’s Certificate, to be summarily assessed.  

23.  The Plaintiff has submitted a Statement of Costs dated 27 July 2021 for the purposes of summary assessment of the costs of the Action.  In §40 of the Plaintiff’s Skeleton, the Plaintiff suggests that all the costs of the Action have been included in above Statement of Costs. I will take it that the costs of the Summons have also been included in the Statement of Costs.   

24.  I consider the costs claimed by the Plaintiff to be reasonable overall.  After minor adjustment, I will summarily assess the costs of the Action to be HK$100,000.  

H.  Orders

25.  I am the following orders:

(1)  The Defendant do pay to the Plaintiff damages in the sum of HK$1,699,822.50 together with interest on such sum from the date of the Writ to the date of this Judgment at 2% per month and thereafter at judgment rate until full payment;

(2)  The Defendant do pay interest to the Plaintiff on the sum of HK$796,601.57 from the date of the Writ to the date of this judgment at 2% per month and thereafter at judgment rate until full payment;

(3)  Costs of this Action, including costs of this assessment of damages, be summarily assessed at HK$100,000 and be paid by the Defendant to the Plaintiff forthwith.