HILLSBOROUGH HOLDINGS LTD v. LEE LAI BING

DCCJ 5728/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5728 OF 2007

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JUDGMENT

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Background

1.  The hearing is for assessment of damages. The Plaintiff is the owner of a property situated at Shop no 181 on the 1^st Floor of Causeway Place, Hong Kong Mansion, Nos 1-1L Yee Wo Street, Nos 1-7 Paterson Street and Nos. 2-10 Breat George Street, Hong Kong (“the Premises”). The claim is for damages caused by the Defendant’s repudiation of a tenancy agreement (“the Tenancy Agreement”) and the terms therein.

2.  Final and Interlocutory Judgment on liability was entered on 1 August 2008 with an award of $85,170.56 with interest of 3% per annum above the HSBC Prime Lending Rate on part of the sum for periods of time as specified in the order. The Court ordered further damages for loss of rent, service charge and rates to be assessed. The Defendant did not attend any of the directions hearings since Notice of Appointment for Assessment of Damages was issued on 17 January 2012. The assessment of damages was scheduled to be heard on 22 June 2012. On the date of hearing, the Defendant appeared by Counsel asked for leave to file and serve List of Documents and witness statements.  The application was granted with directions on filing of joint expert report. Assessment of damages was adjourned to 1 November 2012. During the adjournment there was application made on behalf of the Plaintiff asking for leave to file their own expert report as the Defendant had made no response to their invitation to make joint expert report as stated in my order. There was then another application by the Plaintiff asking for extension of time to file an expert report and such application was granted. 

3.  The Defendant’s legal representative made an application for cease to act on 24 October 2012 and such application was granted on 29 October 2012, 2 days prior to the scheduled hearing date.  At the date of hearing, the Defendant was absent again. After viewing affirmation on services, I am satisfied that the relevant documents and orders had been duly served on the legal representative of the Defendant when they were still representing the Defendant on record. After viewing correspondences from her lawyer to her, I am satisfied that the Defendant was given due notice of the hearing date. I directed that the hearing to proceed in the absence of the Defendant.

The Plaintiff’s case

4.  Mr Chin of the Plaintiff said that pursuant to the parties had entered into a tenancy agreement on 25 November 2002 (“the Tenancy Agreement). Under the Tenancy Agreement the Defendant was allowed to use the property for a term of 2 years commencing from 1 May 2002 until 30 April 2004 at the rent of $29,000 per month (exclusive of rates and other charges) and a further sum of $2,422 as service charge payable in advance on the first day of each and every month.

5.  Clause 7 (a)(i) of the Tenancy Agreement provides that if the rent, service charge or any other charges payable under the Tenancy Agreement shall be in arrears for 8 days after the same shall have become payable, it shall be lawful for the Plaintiff at any time thereafter to re-enter the Premises and thereupon the Tenancy Agreement shall absolutely determine and the deposits paid shall be absolutely forfeited to the Plaintiff as and for liquidated damages.

6.  Mr Chin  said that in breach of the Tenancy Agreement on the part of the Defendant, the Defendant had failed to pay rent, service charges and other charges since 1^st December 2002 and further without the consent of the Plaintiff had unilaterally surrendered the possession of the Premises on or about 11 February 2003. The Plaintiff eventually re-entered on 22 February 2003 and reinstated the Premises.

7.  Although the Plaintiff’s claim for arrears was awarded in the Final and Interlocutory Judgment, there was still loss suffered by the Plaintiff such as rental income and expenses in the form of management fees and government rates and rent according to Mr Chin. As to whether the Plaintiff had endeavoured to mitigate its loss, Mr Chin said the Premises were put on the market for lease since March 2003. The rental asked for was $33,600 per month initially and since there was no positive response and the market got worse due to the downturn of Hong Kong’s economy, the rental asked for was reduced from $33,600 to $30,300. A new tenant was secured to commence only on 15 October 2009 at the rent of $22,000 per month. He therefore said that the Defendant should compensate the Plaintiff for its loss and damage as particularized below:

Particulars of Claim

Loss of rental income ($29,000/month)	23/2/2003 - 28/2/2003 (HK$29,000 / 28 x 6)	$ 6,214.29
	1/3/2003 – 31/3/2003	$ 29,000.00
	1/4/2003 – 30/4/2003	$ 29,000.00
	1/5/2003 – 31/5/2003	$ 29,000.00
	1/6/2003 – 30/6/2003	$ 29,000.00
	1/7/2003 – 31/7/2003	$ 29,000.00
	1/8/2003 – 31/8/2003	$ 29,000.00
	1/9/2003 – 30/9/2003	$ 29,000.00
Leased to a new tenant at HK$22,000 per month for 15/10/03 – 14/10/05	1/10/03 – 31/10/03 (including part of rent free period (15/10/03 – 3/11/03) given to new tenant)	$ 29,000.00
	1/11/03-30/11/03 (Part of rent free (15/10/03 – 3/11/03) given to new tenant) i.e. [HK$29,000 – (HK$22,000 /30 x 27]	$ 9,200.00
	1/12/2003 – 31/12/2003	$ 7,000.00
	1/1/2004 – 31/1/2004	$ 7,000.00
	1/2/2004 – 28/2/2004	$ 7,000.00
	1/3/2004 – 31/3/2004	$ 7,000.00
	1/4/2004 – 30/4/2004	$ 7,000.00
Loss of service charges (HK$2,422.50 per month)
	23/2/2003 – 28/2/2003	$ 519.11
	1/3/2003 – 31/3/2003	$ 2,422.50
	1/4/2003 – 30/4/2003	$ 2,422.50
	1/5/2003 – 31/5/2003	$ 2,422.50
	1/6/2003 – 30/6/2003	$ 2,422.50
	1/7/2003 – 31/7/2003	$ 2,422.50
	1/8/2003 – 31/8/2003	$ 2,422.50
	1/9/2003 – 30/9/2003	$ 2,422.50
Leased to a new tenant also at the service charge of HK$2,422.50 per month for 15/10/03 – 14/10/05	1/10/2003 – 14/10/2003 i.e. HK$2,422.50 /31 x 14	$ 1,094.03
Loss of government rates	23/2/2003 – 31/3/2003 (HK$4,575 /90 x 37)	$ 1,880.83
	1/4/2003 – 30/6/2003	$ 3,675.00
	1/7/2003 – 30/9/2003 (Rates concession)	$ 0.00
	1/10/2003 – 14/10/2003 (HK$3,675 /92 x 14)	$ 559.24
Total:		$ 307,100.00

Surveyor Report

8.  The Plaintiff has filed an expert report on the market rent in the relevant period. Miss Wong the maker of the report was called as a witness. She was of the view that the market rental of the Premises should have been within the range of $26,800 to $28,600 for the months when the Premises was left vacant without a tenant and at the time a new tenant was secured. She supplemented by saying that at the material time it was a tenants’ market and it was not easy to get a tenant.

Discussion

9.  After hearing the evidence, I accept Mr Chin as a truthful witness. I accept that the Plaintiff had tried their best endeavour to let the Premises after the Defendant had abandoned the lease. I am of the view that although the Premises were leased out to a new tenant at a rate lower than that as assessed by the surveyor, I accept that the new tenant was the one who made the first offer to the Plaintiff since the Plaintiff had re-entered into the Premises. I am satisfied that there was no delay in putting the Premises on the market, I also accept that the drastic economic atmosphere at the material time when there was outbreak of SARS had seriously attacked the retail market and hence the rental of shops. Lastly, I would take into account a sum of $94,267.50 as the deposit was still kept by the Plaintiff.

Interest

10.   The Plaintiff asked for interests at the rate as provided under the Habendum Term in clause 1 of the Tenancy Agreement. The rate provided for is 3% per annum above the HSBC Prime Lending Rate. I have considered the clause, I am not satisfied that the prescribed interest rate applies to the awarded sum on loss of rental income and other expense as those claimed by the Plaintiff in this hearing.   I would award judgment rate since date of loss until full payment.

Conclusion

11.  The Plaintiff’s claim is for compensation for loss and damage caused by breach of the Tenancy Agreement on the part of the Defendant. The Plaintiff has been awarded a sum of $85,170.56 for arrears of rent and other payments including government rates and rent and management fees. Purpose of this hearing is to assess the damages suffered by the Plaintiff due to the breach of the Defendant. For reasons set out above I am satisfied that the Plaintiff has proved that it had suffered loss since 23 February 2003 until 30 April 2004 for a total amount of $212,832.50 ($307,100-$94,267.50). 

12.  I also order that there be interest at judgment rate on such sum as it became due and accruing until date of writ and thereafter on the sum of $212,832.50 also at judgment rate until full payment. 

Costs

13.  The Plaintiff asked for costs on indemnity basis. It is submitted that the Defendant had deployed delaying tactics by making an application for adjournment to allow her to file documents and witness statements on the trial date scheduled on 22 June 2012 but failed to comply with the order granted by the Court and failed to attend the trial on the adjourned trial date. I have considered the submission, I accept that the trial was delayed by the Defendant, I am also of the view that the expert report was made necessary by the application of the Defendant, after viewing the Statement of Costs prepared by the Plaintiff’s solicitors, I award costs under items D3, D4, E and F in full. On the whole, I award a total amount of $142,000. This is an order nisi which shall become absolute 21 days herefrom should there be no application to vary the same.