Permanent Investment Co. Ltd. v. Lau Wai Po

HCA 15067/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15067 OF 1999

__________

_________________________

Assessment of Damages

_________________________

1. This is an assessment of damages for breach of guarantee.

2. The Plaintiff was the registered owner of the premises at the ground floor of Nos. 390-392 Hennessy Road, Hong Kong.

3. On 19 March 1998 Auto Rich Limited signed a lease with the Plaintiff for a period of 3 years from 3 February 1998 to 2 February 2001 at a monthly rental of HK$300,000, exclusive of rates, management fees and other outgoings.

4. Clause 4 (f) of the Tenancy agreement provided that the tenant should procure a Letter of Guarantee to be executed by the Defendant, a director of Auto Rich Limited, in favour of the Plaintiff upon the signing of the Tenancy Agreement. A Letter of Guarantee was executed by the Defendant in favour of the Plaintiff on 9 February 1998.

5. The Letter of Guarantee provided that the Defendant shall, upon default of payment of Auto Rich Limited and upon written request from the Plaintiff, pay to the Plaintiff all arrears of rent, rates, management fees or other charges payable by Auto Rich Limited under the Tenancy Agreement.

6. By clause 2 of the Letter of Guarantee the Defendant agreed and undertook the following :-

"If the tenant shall make default in the performance or observance of any of the provisions on its part contained in the Tenancy Agreement I will pay to you all losses damages expenses and costs which you shall be entitled to recover by reason of such default to the extent to which you shall be unable to recover them from the Tenant."

7. Auto Rich Limited had failed to pay rent since 1 April 1999. On 9 September 1999 the Plaintiff obtained a warrant of distress against Auto Rich Limited in DCDT 9050/99 and the warrant was executed on 22 September 1999. The goods of Auto Rich Limited were seized and auctioned for HK$50,842 on 30 September 1999.

8. Demand for payment of the outstanding rental, rates and management fees in the sum of HK$1,663,850 was sent to the Defendant in his capacity of a guarantor on 10 September 1999. The Defendant defaulted payment.

9. The Plaintiff took out the present writ on 20 September 1999 to enforce payment from the Defendant of the following sums owing by Auto Rich Limited to the Plaintiff:-

(i)	arrears of rental at the rate of HK$300,000 per month from 1/5/99 to 30/9/99	HK$1,500,000.00
(ii)	shortfall of rental from 1/4/99 to 30/4/99	66,000.00
(iii)	arrears of management fees at HK$3,400 per month from 1/2/99 to 30/9/99	27,200.00
(iv)	arrears of rates at HK$14,625 per month from 1/2/99 to 28/2/99 and at HK$12,450 per month from 1/4/99 to 30/6/99 and at HK$6,225 per month from 1/7/99 to 30/9/99	70,650.00
	Total:	HK$1,663,850.00
		=============

10. Judgment in default of notice of intention to defend was entered in favour of the Plaintiff against the Defendant on 26 October 1999 in the following terms:-

(i) HK$1,663,850;

(ii) Interest on the sum of HK$1,663,850 at the rate of 11.54% per annum from 20 September 1999 to the day of judgment on 26 October 1999 and thereafter at judgment interest rate until payment;

(iii) Damages for repudiation of the Tenancy Agreement of 19 March 1998 to be assessed; and

(iv) costs of the action to be taxed.

11. On the same day, 26 October 1999, the Defendant executed a Deed of Surrender on behalf of Auto Rich Limited. Pursuant to the Deed of Surrender Auto Rich Limited surrendered the premises to the Plaintiff on 7 October 1999. In the Deed of Surrender Auto Rich Limited convenanted to pay the expenses incurred by the Plaintiff in the distraint proceedings in DCDT-3713/99 and DCDT-9050/99 and all outstanding rental, rates, management fees and outgoings payable by Auto Rich Limited prior to the surrender of the lease.

12. Clause 2 of the Deed of Surrender read:-

"The tenant convenants that it shall on the 7th day of October 1999 surrender unto the Landlord the tenancy held by the Tenant under the Tenancy Agreement and deliver up vacant possession of the said premises to the Landlord to the intent that [upon] such surrender the said tenancy shall be extinguished and merge in the reversion expectant thereon and that the said tenancy shall absolutely ceases and determine."

13. Clause 8 read:-

"On the Date of Surrender and subject to the observance and compliance of the provisions herein and without prejudice to the Tenant's convenants contained herein, the Landlord releases the Tenant and the Tenant releases the Landlord from their respective obligations under the Tenancy Agreement but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of any of the covenants agreements stipulations or conditions contained in the Tenancy Agreement and the Tenancy Agreement shall be terminated on the Date of Surrender."

14. Auto Rich Limited was wound up on 15 December 1999 in Companies Winding Up No. 990 of 1999. Upon request of the Official Receiver, the proceeds of sale of HK$50,842 were remitted to the Official Receiver pursuant to S.265(5) of the Companies Ordinance Cap 32.

15. At the hearing the Defendant did not dispute the quantum of costs incurred in respect of the 2 distraint proceedings in DCDT-3713/99 and DCDT-9050/99. I accept the evidence of the witness on behalf of the Plaintiff and found the following represented a fair and reasonable quantification of the damages suffered by the Plaintiff as a result of the breach of Auto Rich Limited and the Defendant :-

(i)	rental in arrears from 1 Oct 99 to 7 Oct 99	HK$67,741.94
(ii)	Government rates from 1 Oct 99 to 7 Oct 99	1,405.65
(iii)	Management fees from 1 Oct 99 to 7 Oct 99	767.74
(iv)	Costs of reinstatement	52,200.00
(v)	water and effluent charges	119,195.32
(vi)	debris removal charges	4,800.00
(vii)	costs for removing gas supply pipes	560.00
(viii)	costs in the distraint proceeding of DCDT-3713/99	108,640.00
(ix)	costs in the distraint proceeding of DCDT-9050/99	17,801.10
	Total	HK$373,111.75
		===========

16. The Plaintiff also claimed a sum of HK$125,000 agency fees for the introduction of the new tenant 'Diary Farm Company' which subsequently signed a tenancy agreement with the Plaintiff for a term of 3 years from 16 November 1999 to 15 November 2002 at a monthly rental of HK$250,000.

17. The Deed of Surrender freed the parties from their obligations under the tenancy agreement save and except for the purpose of enforcing antecedent breaches of the agreement prior to the date of surrender. The agency fees, not being a head of damage arising from an antecedent breach of the agreement, is not recoverable as a head of damage under the Letter of Guarantee.

18. Judgment is awarded in favour of the Plaintiff against the Defendant in the sum of HK$373,111.75. Pre-judgment interest is granted at 1% above prime from the date of the writ to the date of judgment. Post-judgment interest accrues at judgment interest rate from the date of judgment until payment

19. Costs of this assessment hearing is awarded to the Plaintiff, to be taxed if not agreed .