SPRING TRIUMPH HOLDINGS LTD AND ANOTHER v. SAVE ENTERTAINMENT LTD AND ANOTHER

HCA 1550/2021

[2022] HKCFI 3686

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1550 OF 2021

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J U D G M E N T

(on assessment of damages)

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A.  Introduction

1.  The Plaintiffs commenced this action in respect of a commercial tenancy dispute over the premises known as 7^th Floor of MW Plaza, No 40 Kimberley Road, Kowloon, Hong Kong of ALL THAT piece or parcel of ground registered in the Land Registry as The Remaining Portion of Kowloon Inland Lot No 6836 and ALL THAT piece or parcel of ground registered in the Land Registry as Section A of Kowloon Inland Lot No 6836 (the “Premises”). 

2.  In short, the Plaintiffs’ case is that the 1^st Defendant had failed and/or refused to pay the rent, management fees and rates as stipulated in the tenancy agreement in respect of the Premises (the “Tenancy Agreement”) since 30 July 2021.  The Plaintiffs therefore commenced the present action to recover vacant possession of the Premises, the outstanding rent, management expenses and government rates in arrears as well as damages for breach of the tenancy agreement.  The Plaintiffs also sought to hold the 2^nd Defendant liable for such sums due and owing as well as damages together with interest and costs under an irrevocable guarantee executed in favour of the Plaintiffs in consideration for them to enter into the Tenancy Agreement. 

3.  On 31 December 2021, the Plaintiffs obtained Final and Interlocutory Judgment (the “Judgment”) against the Defendants.  Pursuant to the Judgment, the 1^st and 2^nd Defendants were ordered to pay to the Plaintiffs:-

(1)  The sum of HK$159,851.97 being arrears of rent, management fees and rates together with interest at judgment rate from the date of Judgment until payment; 

(2)  Arrears of rent and/or mesne profits at the rate of HK$55,000 per month from 12 October 2021 to the date when vacant possession of the Premises is delivered together with interest at judgment rate from the date of Judgment until payment; 

(3)  Management fee at the rate of HK$8,855 per month from 12 October 2021 to the date when vacant possession of the Premises is delivered together with interest at judgment rate from the date of Judgment until payment; 

(4)  Rates per quarter at the rate to be assessed by the Commissioner of Rating and Valuation from 12 October 2021 to the date when vacant possession of the Premises is delivered together with interest at judgment rate from the date of Judgment until payment; 

(5)  Damages to be assessed;

(6)  Costs of the action to be taxed; and

(7)  Vacant possession of the Premises at the expiration of 7 days from the date of service of the Judgment.  

4.  On 28 January 2022, the 1^st Defendant delivered vacant possession of the Premises to the Plaintiffs. 

5.  The assessment of damages was fixed to be heard before me on 6 December 2022. 

6.  Despite the Defendant’s absence at the hearing, I was satisfied on a Mr Cheung Sai Ho’s 6^th Affirmation of Service filed on behalf of the Plaintiff that sufficient notice had been given to the Defendants of the hearing.  It was therefore appropriate to hear the Plaintiffs’ evidence and submissions.  

7.  Further, at the hearing before me, the Plaintiffs sought leave to adduce a supplemental list of documents containing only 1 document, that is the government rates demand note for the period 1 October 2021 to 31 March 2022.  The summons seeking leave and the supplemental list of documents both dated 30 November 2022 was served on the Defendants at their respective last known address.  As the document is relevant, I granted leave for the same to be admitted into the Plaintiffs’ evidence. 

8.  This is my judgment on the assessment of damages.  

B.  Material Factual Background

9.  The Plaintiffs were at all material times the registered owner of the Premises. 

10.  The Plaintiffs and the 1^st Defendant entered into the Tenancy Agreement dated 1 August 2019, by which the Premises was let to the 1^st Defendant for commercial purpose for a fixed term of 3 years commencing from 30 July 2019 and expiring on 29 July 2022 (both dates inclusive) at the rent of HK$55,000 per month and management fee at HK$8,855 subject to review from time to time (exclusive of rates, air-conditioning charge(s) and other outgoings) payable in advance on the 1^st day of the term in each and every calendar month. 

11.  In consideration of the Plaintiffs entering into the Tenancy, the 2^nd Defendant, a director of the 1^st Defendant, executed a guarantee dated 21 August 2019 (the “Guarantee”) and irrevocably guaranteed to the Plaintiffs that he would on demand in writing of the Plaintiffs pay to them all moneys and liabilities where due and owing or incurred by the 1^st Defendant by reason of the Tenancy Agreement together with all costs and expenses incurred by the Plaintiffs for recovery thereof on a full indemnity basis. 

12.  Further, the Guarantee shall take effect from and inclusive of 30 July 2019 and shall remain in full force and effect subject to the renewal of the tenancy up to 29 July 2022.  Notwithstanding any early determination of the tenancy for whatever reasons, the 2^nd Defendant shall remain liable in accordance with the terms of the Guarantee during such effective period. 

13.  In breach of the Tenancy Agreement, the 1^st Defendant had failed and/or refused to pay rent, management fees and rates since 30 July 2021.  

14.  Notwithstanding the Plaintiffs had via their solicitors demanded the 2^nd Defendant to perform his obligations under the Guarantee to pay the outstanding rent, management fees and rates in arrears, the 2^nd Defendant had not made payment for the same or any part thereof. 

15.  The Plaintiffs accordingly commenced this action on 3 November 2021. 

C.  The Evidence

16.  For the purpose of this assessment, the Plaintiffs has filed a witness statement on quantum of Ms Angel Lau (“Ms Lau”) who was the manager of the Plaintiffs. 

17.  Ms Lau attended the assessment hearing on 6 December 2022, adopted the contents of her witness statement and provided clarifications on the relevant matters to the court. 

18.  Apart from the above background matters, Ms Lau’s evidence essentially focused on two areas:- (1) first, the steps taken by the Plaintiffs in mitigation of loss; and (2) second, the loss and damage suffered by the Plaintiffs.  A brief summary of her evidence is provided below. 

C1. Mitigation of Loss

19.  After the 1^st Defendant had delivered vacant possession of the Premises on 28 January 2022, the Plaintiffs made efforts to secure a new tenant by its estate agents including Cushman & Wakefield (HK) Ltd and Knight Frank Hong Kong.  

20.  Eventually, the Plaintiffs managed to re-let the Premises to a Yoou Beauty Limited at the monthly rental of HK$56,000 pursuant to a tenancy agreement dated 31 March 2022, with the new tenancy commencing from 1 April 2022. 

C2. Loss and Damage

21.  On the above basis, and as set forth in Ms Lau’s witness statement and clarified in her oral testimony, the Plaintiffs have quantified the loss and damage as follows. 

22.  First, under Paragraph (ii) of the Judgment, mesne profit in the sum of HK$195,161.29 from 12 October 2021 to 28 January 2022:-

Period	Amount
12 to 31 October 2021	HK$35,483.87 (HK$55,000/31 x 20 days)
1 to 30 November 2021	HK$55,000
1 to 31 December 2021	HK$55,000
1 to 28 January 2022	HK$49,677.42 (HK$55,000/31 x 28 days)

23.  Second, under Paragraph (iii) of the Judgment, management fees in the sum of HK$31,420.96 from 12 October 2021 to 28 January 2022:-

Period	Amount
12 to 31 October 2021	HK$5,712.90 (HK$8,855/31 x 20 days)
1 to 30 November 2021	HK$8,855
1 to 31 December 2021	HK$8,855
1 to 28 January 2022	HK$7,998.06 (HK$8,855/31 x 28 days)

24.  Third, under Paragraph (iv) of the Judgment, rates in the sum of HK$5,213.01 from 12 October 2021 to 28 January 2022:-

Period	Amount
12 October 2021 to 31 December 2021(HK$4,375 x 81/92 days)	HK$3,851.90
1 January 2022 to 28 January 2022 (HK$4,375 x 28/90 days)	HK$1,361.11

25.  Fourth, under Paragraph (v) of the Judgment, mesne profit, management fees, and rates from 29 January 2022 to 31 March 2022 in the total sum of HK$136,903.41:-

(1)  Mesne profit in the sum of HK$115,322.58:-

Period	Amount
29  to 31 January 2022	HK$5,322.58 (HK$55,000 – HK$49,677.42)
1 to 28 February 2022	HK$55,000
1 to 31 March 2022	HK$55,000

(2)  Management fees in the sum of HK$18,566.94:-

Period	Amount
29  to 31 January 2022	HK$856.94 (HK$8,855 – HK$7,998.06)
1 to 28 February 2022	HK$8,855
1 to 31 March 2022	HK$8,855

(3)  Rates in the sum of HK$3,013.89:-

Period	Amount
29 January to 31 March 2022	HK$4,375 – HK$1,361.11

26.  In the circumstances, the Plaintiffs have quantified the total loss and damage under Paragraphs (ii) to (v) of the Judgment to be HK$368,698.67. 

D.  Assessment of Damages

27.  Where a landlord accepts a tenant’s repudiation, the landlord is entitled to recover damages reflecting the rent of the unexpired term of the tenancy agreement, service charges, rates and reinstatement costs.  This is subject to a duty on the landlord to mitigate, and the landlord is expected to act reasonably and to take such steps as are necessary 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 damages has not been mitigated: Silvercord Limited v High Performance Sports Limited HCA 1774/2018 (Unrep) 30.7.2020 at §9. 

28.  If a defendant wishes to set up a positive case to show that the plaintiff failed to mitigate his loss or damage, such allegations must be specifically pleaded with supporting particulars: Hong Kong Civil Procedures 2023 Vol 1 at §18/8/23.  In the present case, the Defendants have not put forward any positive case to raise the issue of failure to mitigate. 

29.  In any event, based on the unchallenged evidence of Ms Lau as set out above, I am satisfied that the Plaintiffs have taken reasonable steps to mitigate their loss in that within only a period of around 2 months after the 1^st Defendant delivered vacant possession of the Premises, the Plaintiffs already managed to enter into a new tenancy agreement with Yoou Beauty Limited. 

D1. Loss of Rent, Management Fees, Rates From 29 January 2022 to 31 March 2022

30.  In the circumstances, I also accept Ms Lau’s evidence as clarified at the hearing and agree that the Plaintiffs have suffered loss of rent, management fees and rates since recovering vacant possession of the Premises until 31 March 2022 when a new tenancy agreement with Yoou Beauty Limited was executed.  The particulars of loss as per the Plaintiffs’ calculation, have been set out in Paragraphs 25 to 26 above. 

31.  I therefore accept the amount as calculated by the Plaintiff in full and assess the damages under Paragraph (v) of the Judgment to be HK$136,903.41 together with interest at judgment rate from the date of Judgment until payment. 

D2. Arrears of Rent, Management Fees, Rates from 12 October 2021 to 28 January 2022

32.  For the sake of completeness, I also accept the quantum calculated by the Plaintiffs as per Paragraphs (ii) to (iv) of the Judgment. 

33.  If and insofar as it is necessary, I accept that Plaintiffs are entitled to claim the following sums from the Defendants together with interest at judgment rate from the date of Judgment until payment:-

(1)  Pursuant to Paragraph (ii) of the Judgment: HK$195,161.29;

(2)  Pursuant to Paragraph (iii) of the Judgment: HK$31,420.96;

(3)  Pursuant to Paragraph (iv) of the Judgment: HK$5,213.01. 

E.  The Deposit Retained By The Plaintiffs

34.  The Plaintiffs have retained a deposit in the amount of HK$199,815 as required under the Tenancy Agreement.  At the hearing before me, the Plaintiffs’ counsel accepted that the said deposit should be taken into account and invited me to make an order that the Plaintiffs be at liberty to use the same to set off against any damages to which the Plaintiffs are entitled. 

F.  Conclusion

35.  In the circumstances, I make an order that:-

(1)  The 1^st and 2^nd Defendants do pay the 1^st and 2^nd Plaintiffs the total amount of loss and damage under Paragraphs (ii) to (v) of the Judgment being HK$368,698.67 (ie HK$136,903.41 + HK$195,161.29 +31,420.96 +5,213.01) together with interest on such sum at judgment rate from the date of Judgment (ie 31 December 2021) until payment; and

(2)  The Plaintiffs be allowed to use the deposit retained in the amount of HK$199,815 to set off against the aforesaid damages assessed by the court.  

36.  Insofar as costs is concerned, there is no reason why costs should not follow the event.  I make an order that costs of this action, including costs of this assessment of damages summarily assessed at HK$53,000, be paid by the Defendants to the Plaintiffs forthwith.  For the avoidance of doubt, I also grant a certificate for counsel for the attendance of the hearing of the assessment of damages. 

37.  It remains for me to thank the Plaintiffs’ counsel for her assistance.