FUNG JUN YUEN AND ANOTHER v. FONG WING HAY t/a ARTLAND CARPETS AND ANOTHER

1987 No. A4571

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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ASSESSMENT OF DAMAGES

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1. By a tenancy agreement in writing dated 14th June 1985 the Plaintiffs let the premises known as Shop "D" (inclvding the yard) on ground floor (including its cockloft) of Po Wah Building of No. 300-306. Temple Street, Kowloon to the 1st Defendant at the monthly rental of $8,500.00 from 20th July 1985 to 19th July 1987 exclusive of rates for business purposes. The Statement of Claim alleged arrears of rent and unlawful sub-letting by the lst Defendant to the 2nd Defendant. Enclosed in a letter dated 15th July 1987 the 1st Defendant through his solicitors returned 3 keys to the said premises purporting to deliver up vacant possession of the same to the Plaintiffs. The said keys were returned by the Plaintiffs' solicitors by letter dated 17th July 1987 on the ground that vacant possession of the cockloft has not been delivered. On 30th July 1987 the present proceedings were commenced. Final judgment for possession and arrears of rent with interest and costs were entered on 19th August 1988 in default of notice of intention to defend. At the same time interlocutory judgment for mesne profits from 20th July 1988 until delivery of vacant possession and damages to be assessed were also obtained. At the assessment the Plaintiff proceeded only against the 1st Defendant.

2. It is common ground that the sub-sub-tenants of the cockloft had remained in occupation of the premises up to 28th October 1987 when the bailiff recovered possession of the premises. The Plaintiffs' claim as per para. 9 of their joint affirmation for:-

(a) Mesne profits at rate of $12,000.00 from 20.7.1988 to 7.11.1987	$43,600.00
(b) Bailiff expense	$728.00
(c) Charges for locksmith to break the locks	$460.00
(d) Fees for security guard and removal expenses	$4,480.00
(e) Charges for decorator to seal window opening after removal of air-conditioner	$830.00
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	$50,098,00
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Mesne Profits

3. Pursuant to the valuation of the market rental of the premises as of 20th July 1987 by Messrs. Levett and Bailey as per their valuation report dated 15th June 1988 which was produced by consent (P.13), the Plaintiffs conceded to reduce their claim to the rate of $11,600.00 per month instead of $12,000,00 as originally claimed in their joint affirmation.

4. The original claim of $12,000.00 per month represents the rental payable by the new tenant of the premises. San Diego Hotel Ltd., pursuant to a Tenancy Agreement dated 16th November 1987 for a 5 year tenancy. The plaintiffs were prepared to let the premises at $11,000.00 per month for a 3 year tenancy in July 1987 to the said new tenant. The hotel operated by the new tenant has its backdoor facing the premises. P.W.2 Fung Jun Yuen (one of the Plaintiffs) disagreed that such circumstances had enhanced the rental offered by the new tenant. He further disagreed in cross-examination that the market rental at the material time should be around $7,000.00 to $8,000.00. The 1st Defendant suggested that as matters turned out the Plaintiffs were able to let the premise in November 1987 at a higher rental than it would have been prepared and able to in July 1987 as a result of the inability to obtain vacant possession earlier. The 1st Defendant thus said the Plaintiffs suffered no damage as a result thereof. Attractive as this argument may first appeared to be, interlocutory judgment for mesne profits for a defined period in addition to general damages to be assessed was entered. Though the Plaintiffs suffered no monetary loss in the long run because of the increased rental they managed to secure as a result of the delay they are entitled to mesne profits for the period pursuant to the interlocutory judgment. It is clear from the authorities that the existence or non-existence of actual pecuniary loss to the Plaintiffs has no bearing on a claim for mesne profits for use and occupation for trespass. In Penarth Dock Engineering Co. v. Pounds [1963] 1 Lloyd's Report 359, the Plaintiffs brought an action for trespass and/or breach of contract. Lord Denning M.R. awarded damages on the basis of the benefit obtained by the Defendant in failing to remove a pontoon from the Plaintiffs' dock premises after purchasing it from the Plaintiffs.  The Plaintiffs suffered no pecuniary loss as the dock premises were of no use to them and they were not required by their lessor to pay extra rent for it. The court applied the principle in Whitwham v. Westminster Brymbo Coal Co. [1896] 2 Ch. 538 (C.A.) where the principle in wayleave cases (a reasonable rent for the use of passages in the mine) was applied to trespass. In the not unsimilar case of Swordheath Properties v. Tabet [1979] 1 WLR 285 (C.A.) Megaw L.J. citing the Whitwham case said at page 288:-

"The Master of the Role had no hesitation in saying that the Plaintiffs, even though they would not themselves have made use, bringing in financial return of the dock in respect of which the trespass was committed were nevertheless entitled to damages from that trespass calculated by reference to the proper value to the trespasser of the use of the property on which they had trespassed for the period during which they had trespassed."

In that case the Defendant tenant had vacated the premises but left behind some licensees who continued in occupation.

5. In dealing with the Plaintiffs' claim against the licensees for trespass the learned Judge said at the same page:-

"It appears to me to be clear, both as a matter of principle and of authority, that in a case of this sort the Plaintiff, when he has established that the Defendant has remained on as a trespasser in residential property is entitled without bringing evidence that he could or would have let the property to someone else in the absence of the trespassing Defendant to have as damages for the trespass the value of the property as it would fairly be calculated; and in the absence of anything special in the particular case it would be the ordinary letting value of the property that would determine the amount of the damages."

A tenant is liable to the landlord for the wrongful occupation of the premises by sub-tenants after determination of the tenancy (see: Harding  v. Grothorn (1793) 1 Esp. 57). In the premises. I see no merits in the Defendant's contention.

6. No comparables were quoted by the valuers in their report (P.13) though they stated in para. 6 that they have researched and analyzed the relevant market data of similar lettings at around the date of valuation i.e. 20th July 1987. They have also expressly stated they have considered the agreed rental of $12,000.00 as at 16th November 1987 and the stock market crash on 26th October 1987 to arrive at the valuation of $11,600.00. Nowhere in their report did they indicate that they were instructed on the offer of $11,000.00 made in July 1987 and the Plaintiff's intention to accept such an offer or of the fact that the tenant who agreed to $12,000.00 has a special interest in acquiring the letting i.e. to use the premises as staff quarters for the hotel it operated opposite to it. The valuers were not called to explain their report. In the premises. I do not accept the said valuation as a fair valuation by a valuers who was in possession of all necessary and relevant information to enable him to make an informed valuation. I find the market rental of the premises as at 20th July 1987 to be $11,000.00 - the rental which was in fact offered and found to be acceptable by the Plaintiffs at that time. P.W.2 said they asked for $1,000.00 more for the rental after July 1987 because they later came to the view that $11,000.00 was too low.

7. Possession of the premises was obtained via the bailiff on 28.10.1987. As the cockloft was still occupied by sub-tenant on that day, many items of furniture, personal belongings and various articles were found there. The Plaintiffs' solicitors posted a notice at the premises allowing 2 days to the sub-tenants to remove the articles left on the premises. P.W.1. a clerk of the Plaintiffs' solicitors said they were not able to find a godown to store the articles as the godowns refused to accept furnitures. On 2nd and 3rd November 1987 two sub-tenants came and collected their belongings. He went to the promises on 6th November 1987 to remove the remaining unclaimed items. No reason was given as to why there was a delay between 3rd and 6th November 1987 before the unclaimed articles were removed. I accept that despite physical possession of the premises was recovered on 28th October 1987, the articles left behind by the sub-tenant prevented the possession obtained to be "vacant possession" and I allowed mesne profits up to the end of October 1987 to give the Plaintiffs some time to remove the articles. In the premises an amount of $37,258.06 is awarded for mesne profits ($11,000.00 x 3 + $11,000,00 x 12/31).

Bailiff expenses and security guard fees

8. The expenses of the bailiff security guards and removal fees incurred in respect of the recovery of possession are disbursement items in the costs of the execution under the final judgment for possession in these proceedings. Master O'Donnell has by order dated 8th September 1987 given leave to issue the execution in question and awarded costs to the Plaintiff. These items cannot in the premises also form heads of damages in the saw proceedings.

Costs of changing new locks

9. There is no evidence that the locks were damaged at all. There is also no explanation offered by the Plaintiffs' witnesses as to why it was necessary to change the locks. As there is no apparent causal link with the causes of action pleaded in the Statement of Claim for which default judgment was given this claim must fail.

Costs of sealing the window opening

10. There is no claim made by the Plaintiff in the Statement of Claim for a breach of the covenant to keep the premises in good repair or to deliver up possession of the same in its original and tenantable state etc. There is no evidence that the damage was done by the Defendant rather than by the sub-tenant or sub-sub-tenants. The Defendant said he had sublet the premises to the 2nd Defendant and had no actual knowledge of the condition of the premises. There is no evidence that the Defendant ever knew or permitted such removal. If the removal of the air-conditioner leaving an opening in the window was done by the sub-tenant or sub-sub-tenants, can it be said that it has arisen naturally out of the breach of a covenant against subletting? I think not. The volition of the sub-tenant to cause the injury is an actus intervenes to prevent the damage from being damage arising naturally out of the breach of a covenant against sub-letting. Further, the Defendant is under a absolute primary duty under covenants to keep the premses in good repair and to deliver it up in good and tenantable condition at the experation of the tenancy. Thus it is unreasonable to hold that it is within the comtemplation of the parties that there should further be a secondary vicarious responsibility for physical damage to the premises by sub-tenants under a covenant against sub-letting. Physical damage to the premises by the sub-tenants cannot be said to be reasonably within the contemplation of the parties to be a probable result of a breach of a covenant against sub-letting. I am not satified that the costs for the repair is an item of damage arising either naturally out of the breach or was within the contemplation of the parties to be the probable result of a breach of a covenant against sub-letting. This claim, for reasons aforesaid, also fails. It is therefore not necessary to deal with the dispute over the  reasonableness of the quantum of repair costs.

11. In the premises the Plaintiff is entitled only to $37,258.06 being mesne profits for the premises for the period from 20th July 1987 to 31st October 1987. I will hear the parties on costs.

12. Dated the 4th day of October, 1988.