FINEDALE INDUSTRIES LTD v. BUTT, WAHEED

DCCJ 3589/2017

[2018] HKDC 896

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3589 OF 2017

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ASSESSMENT OF DAMAGES

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1.  This is an assessment of damages in connection with a tenancy dispute. The plaintiff was represented by Ms Pang Mei Ngan of Messrs Ford, Kwan & Co at the assessment hearing. The defendant, who failed to appear in any of the prior court hearings or file any documents in the action, was not represented and was absent at the hearing.

2.  A notice of trial dated 14 June 2018 had been issued to the defendant by this court to inform him of the hearing.  Affirmation of service had also been filed by Messrs Ford, Kwan & Co to confirm that the order dated 13 June 2018 setting out the date and time of the hearing, the hearing bundle, and the plaintiff’s opening submissions and list of authorities, had all been served on the defendant.  I am satisfied that the defendant had been properly notified of the hearing.  Upon the plaintiff’s application pursuant to O 35 r 1(2) of the Rules of the District Court, I proceed with the hearing in the absence of the defendant.

Background

3.  The premises concerned is situated at Factory Unit 23, 12^th Floor, “No 1 Hung To Road”, 1 Hung To Road, Kwun Tong, Kowloon (“Premises”).  The plaintiff as landlord and the defendant as tenant entered into a tenancy agreement dated 7 April 2017, for a term of 2 years from 1 April 2017 to 31 March 2019 (“Tenancy Agreement”)

4.  Under the Tenancy Agreement, the user of the Premises was as a workshop and ancillary accommodation for non-domestic use.  The defendant agreed to pay (a) rent at HK$11,400 per month, (b) management fee at HK$913 per month, (c) rates on a quarterly basis; and to (d) deliver up the Premises with vacant possession in good clean and tenantable repair and condition and to reinstate the Premises in accordance with the latest approved building plan(s) and to “bare shell” condition to the satisfaction of the landlord.  In the event of default in payment of any sum of money not received by the plaintiff within 14 days from the due day, the defendant should pay to the plaintiff interest on the arrears at a monthly rate of 3.5%. See clauses 5.2(d), 5.3, 5.8, 5.19 and Parts III, IV, V, VIII of the Schedule.

5.  In addition, under the Tenancy Agreement, the plaintiff held a security deposit of $42,639 as security for the performance of the defendant’s obligations. See Part VII of the Schedule.

6.  The defendant has failed to pay rent and management fee since 1 May 2017.  He has also failed to pay rates since 1 April 2017.  In light of the breaches of the defendant, the plaintiff commenced the present proceedings against the defendant on 9 August 2017.  By the service of the writ of summons, the plaintiff sought to forfeit and terminate the Tenancy Agreement.  After applying the security deposit to offset the sums owed by the defendant, the plaintiff holds the surplus balance of HK$2,809.76 to which credit will be given in assessing the plaintiff’s loss and damages.

7.  The defendant had failed to give notice of intention to defend.  Final and interlocutory judgment was entered against the defendant on 18 October 2017.  The defendant was adjudged to give the plaintiff possession of the Premises and ordered to pay to the plaintiff:-

(a) mesne profit at the rate of HK$11,400 per month from 1 August 2017 to the date when vacant possession of the Premises is delivered up to the plaintiff by the defendant;

(b) management fees at the rate of HK$913 per month from 1 August 2017 to the date when vacant possession of the Premises is delivered up to the plaintiff by the defendant;

(c) rates at the rate as may be assessed by the relevant authority from 1 October 2017 to the date when vacant possession of the Premises is delivered up to the plaintiff by the defendant;

(d) loss and damages for the defendant’s breach of the Tenancy Agreement to be assessed (pursuant to paragraphs 8 and 9 of the statement of claim, the plaintiff will give credit to the surplus balance of the security deposit in the sum of HK$2,809.76 in assessing its loss and damages); and

(e) costs.

8.  The plaintiff was granted leave to issue a writ of possession and fieri facias combined against the defendant for the recovery of possession of the Premises on 10 November 2017.  The plaintiff recovered vacant possession of the Premises via the court bailiff on 2 February 2018.  However, the plaintiff did not proceed with the writ of fieri facias because the goods and chattels left by the defendant at the Premises are of nominal value and the sale of the same would be insufficient to cover the bailiff expenses in the execution of the writ of possession, let alone the costs in the execution of the writ of fieri facias.

9.  On 5 March 2018, the plaintiff issued a notice of appointment of assessment of damages.  Pursuant to the order made by Registrar Ho on 20 March 2018, if the defendant fails to file and serve any witness statement by 23 May 2018, he shall be deemed to have elected not to adduce evidence on quantum from factual witnesses.  The defendant has filed no witness statement and therefore has led no evidence in this assessment hearing.

The plaintiff’s case

10.  Ms Au Wing Yee (“Ms Au”), the Assistant Sales and Leasing Manager of the Chinachem Group, was called to give evidence for the plaintiff. 

11.  The plaintiff is a joint venture between Chinachem Group, Sino Group and Chinese Estates Group, and is the landlord of about 70% of the whole factory building where the Premises is situated.  Chinachem Agencies Limited (“CCA”), a company within the Chinachem Group, has been authorized by the plaintiff to handle the leasing matters for the Premises.  Ms Au’s duties include leasing of the plaintiff’s properties to tenants and matters incidental thereto.

12.  Ms Au referred this court to a hand-over form countersigned by the defendant dated 1 April 2017.  She explained that when the Premises was first handed over to the defendant, the defendant countersigned the aforesaid rent out record in which it is expressly stated that the defendant took over the Premises in a good condition without defects.  However, after recovery of the Premises via the court bailiff, it was found that the Premises was not kept in good repair and condition.  The defendant had failed to remove all fittings, partitions, ceiling and decorations; and failed to restore and reinstate the Premises into a good, clean and tenantable “bare shell” condition in breach of clause 5.8(a) and (b) of the Tenancy Agreement.

13.  Ms Au referred this court to the photographs showing the state and condition of the Premises when it was first handed over to the defendant.  It can be seen that the Premises was leased out on a bare shell basis.  Ms Au then referred this court to the photographs taken on 22 March 2018 showing the condition of the Premises left by the defendant.  It can be seen that there were electrical wiring, light conduits and carpets at the Premises.  There was glue on the floorboard.  Desks and cupboards, along with rubbish and sundry items, were also left at the Premises.

14.  In relation to the costs of the remedial works claimed, Ms Au noted that her team had asked for 2 quotations and had chosen the lower one.  The quotation and invoice issued by Tai Ming Engineering Company at a contract price of HK$14,800 were provided.

15.  As to the claims for loss of rent, management fees and rates, Ms Au explained that the plaintiff had tried to re-let the Premises at the same rent as under the Tenancy Agreement, ie HK$11,400 per month, by including the Premises in the vacancy list of the building and forwarding the list to various estate agents.  In addition, the plaintiff had placed various advertisement notices in newspapers. Despite the efforts made, the Premises has not been re-let or leased out up to the hearing date.

16.  Further, Ms Au noted that the rental amount of the Premises was already slightly lower than the market rent of other comparable units in the building.  The plaintiff, as the landlord of about 70% of the building, is not willing to set a lower asking rent because any lower rent would adversely impact on the other units in the building.

17.  The plaintiff makes claim as follows:-

(a) loss of rent from 3 February 2018 to 31 March 2019 in the sum of HK$158,785.71 (ie HK$11,400 x [26/28 + 13] months);

(b) loss of management fees from 3 February 2018 to 31 March 2018 in the sum of HK1,760.80 (ie HK$913 x [26/28 + 1] months); and from 1 April 2018 to 31 March 2019 in the sum of HK$11,340 (ie HK$945 x 12 months);

(c) loss of rates from 3 February 2018 to 31 March 2018 in the sum of HK$88.67 (ie HK$1,140 per quarter – HK$1,000 (rates concession) x 57/90 quarter); and from 1 April 2018 to 31 March 2019 in the sum of HK$0.00 (ie HK$1,200 per quarter – HK$1,200 (rates concession) x 4 quarters);

(d) reinstatement costs in the sum of HK$14,800.

18.  The above items amount to HK$186,775.18.  After credit is given to the surplus balance of security deposit, the plaintiff claims the sum of HK$183,965.42.

Legal principles

19.  An aggrieved landlord’s entitlement to damages for wrongful repudiation of a tenancy agreement following general contractual principles is well established.  Generally speaking, damages will include loss of rental, rates and fees stipulated in the tenancy agreement for the remainder of the term because had there been no breach, the tenancy would have run its full term.  The duty of the landlord to mitigate its loss is not an onerous one but one that is reasonable in the ordinary course of its business.  See Chan Annie v Lau Wai Kwong [1984] HKC 231 at 235G-H, Sano Screen Manufacturers v J & R Bossini [2000] 3 HKC 216, Wing Siu Co Ltd v Goldquest International Ltd HCA 4145/2001, 18 August 2006 at §7 and Silvercord Ltd v Ho Ching Yee t/a Crystal Plus DCCJ 4428/2007, 10 March 2009 at §§6 and 10.

Decision

20.  I accept the evidence of Ms Au in its entirety.  The items claimed by the plaintiff are in accordance with the terms of the Tenancy Agreement, and the costs of reinstatement are necessary and supported by relevant documents.  I am also satisfied that the plaintiff has acted reasonably in mitigating its loss.

21.  For the above reasons, I assess the damages in the sum of HK$183,965.42 and award this sum to the plaintiff.  As to interest, the plaintiff is entitled to interest on damages at the rate of prime rate plus 1% from the date of writ to today and thereafter at judgment rate until payment in full.

22.  I make a costs order that the plaintiff do have costs of the assessment. The costs of the action and the costs of assessment payable by the defendant to the plaintiff is summarily assessed at HK$102,000.