WING SIU CO. LTD. v. GOLDQUEST INTERNATIONAL LTD.

HCA3183/2001 and
HCA4145/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.3183 AND 4145 OF 2001

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(Actions consolidated by Order dated 26 April 2002)

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J U D G M E N T

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The application before the court

1) I have already dealt with these consolidated proceedings on two previous occasions in : first, an appeal from Master Hout .C. Wong in relation to an application by the Defendant to strike HCAApril 3183/2001 (Decision made on 15 April 2002, Reasons for Decision handed down on 23 2002pending ); and secondly, in an application by the Defendant for a stay of the proceedings the hearing of the appeal from my 2002, 15 April 2002 Decision (Decision made on 16 August Reasons for Decision handed down on 29 August 2002).

2) The background to these proceedings (which were consolidated by Order of Master Mary Yuen on 26 April 2002) is described in the Reasons for Decision in both my previous Decisions. In order to put the present application in context, I set out paragraphs 1 to 7 of the Reasons for Decision handed down on 29 August 2002 in relation to the stay application :

"1. The background to the present summonses before the court is as described in the Reasons for Decision handed down on 23 April 2002 in relation to an application by the defendant to strike out HCA 3183/2001 ('the Second Action'). There, Master H.C. Wong had made an order striking out the action but on appeal, I allowed the plaintiff's appeal after a hearing on 15 April 2002 and dismissed the defendant's strike out application.

2. The defendant has appealed my decision by a notice of appeal dated 3 May 2002 ('the Appeal'). The hearing before the Court of Appeal is to take place on 17 January 2003.

3. It will be recalled that the plaintiff is the owner of premises situate at Suites 2101-05A, 21/F, Dah Sing Financial Centre, 108 Gloucester Road, Wanchai, Hong Kong ('the Premises'). Under a lease dated 11 October 1999 ('the Lease'), the Premises were let to the defendant for a period of three years from 11 October 1999 to 10 October 2002. Following defaults by the defendant in the payment of rent and other charges, the plaintiff commenced proceedings in the District Court on 19 January 2001. These proceedings were transferred to the High Court on 4 September 2001 (in HCA 4145/2001). I will refer to the District Court proceedings and the transferred proceedings simply as 'the First Action'.

4. On 22 January 2001, three days after the Writ had been issued in the District Court in the First Action, the defendant purported to determine the lease and returned the keys of the Premises to the plaintiff. The plaintiff treated this as a repudiation of the lease and by a letter dated 6 February 2001 from its solicitors, accepted the repudiation.

5. On 6 April 2001, the plaintiff applied for summary judgment on its claim for the outstanding rent and other charges. On 17 May 2001, Master Kwang granted summary judgment to the plaintiff in the sum of $354,252 and interest, but stayed execution pending the determination of the defendant's counterclaim for the return of rental deposit. That counterclaim to this day remains unresolved and the defendant has not made much progress in this regard.

6. Subsequent to Master Kwang's order, by a summons dated 20 June 2001, the plaintiff applied for leave to amend the Statement of Claim in the First Action to plead the cause of action based on the acceptance of the defendant's repudiation of the Lease. On 29 June 2001, Master Au-Yeung refused leave. Following this refusal, the plaintiff instituted the Second Action on 16 July 2001, making a claim based on the said repudiation. It is this claim the defendant sought to strike out. Whether this action should be struck out will of course be a matter for the Court of Appeal to resolve in the Appeal. As stated earlier, I had dismissed the defendant's application to strike out.

7. By a summons dated 3 August 2001, just before the defendant's application to strike out, the plaintiff applied for summary judgment against the defendant in the Second Action. Following the plaintiff's appeal from Master H.C. Wong being allowed on 15 April 2002, the plaintiff amended the Statement of Claim in the Second Action on 5 July 2002. On 9 July 2002, the plaintiff issued a summons seeking leave to amend the 3 August 2001 Summons to refer to the Amended Statement of Claim and also to claim interim payment under RHC Order 29, rule 10. In addition, the plaintiff sought directions for the hearing of the amended Summons. On 26 July 2002, leave to amend was given by Master Ho, leaving the directions part of the 9 July 2002 Summons outstanding."

3) I shall use the same abbreviations as I have done in the previous Reasons for Decision.

4) The present application before the court is the hearing of the Plaintiff's amended Summons for summary judgment and interim payment. There is also an application by the Plaintiff for the lifting of a stay, although there is no summons for this.

The parties' respective positions

5) The Plaintiff's claim is simply put. On 22 January 2001, the Defendant sought to terminate the Lease by returning the keys to the Premises. The covering letter of that date made reference to a letter dated 16 November 2000 which had been sent by the Defendant's Director of Legal Affairs to the Plaintiff. I shall be referring to these letters in greater detail presently.

6) The Plaintiff treated the return of the keys as a repudiation of the Lease and by a letter dated 6 February 2001 from its solicitors, accepted it. The Plaintiff, therefore, claims damages for repudiation.

7) Damages are claimed in the present application under the following heads :

(1) The rental loss that the Plaintiff has suffered from 1 February 2001 to 25 September 2002 (the date of the hearing of the present summons) at the rate of $123,048 a month. Strictly speaking, this claim should be for the loss of rental from 1 February 2001 to 6 February 2001 when the Lease was terminated and mesne profits from that date to 25 September 2002. This claim amounts to $2,440,452.

(2) Service charges from 1 February 2001 to 25 September 2002 in the sum of $610,113.

(3) Office rates from 1 April 2001 to 25 September 2002 in the sum of $90,700.

(4) Legal costs from 15 January 2001 to 19 September 2002 in the sum of $1,690,405.50.

8) The Plaintiff accordingly seeks judgment in these amounts; alternatively, that interim payment be made in such sums. In addition, the Plaintiff applies to lift the stay of execution on Master Kwang's Order for summary judgment made on 17 May 2001.

9) The Defendant disputes both liability and quantum :

(1) As to liability, the Defendant raises the alleged existence of an oral collateral contract made between the parties in or about September 1999 whereby the Plaintiff promised the Defendant that should larger premises be available in the building where the Premises were located (Dah Sing Financial Centre ("the Building")), the Defendant would be permitted to terminate the Lease and a new lease would be entered into in relation to the larger premises. The Plaintiff is alleged to have breached this collateral contract by refusing to let to the Defendant some larger premises that became available. This breach, so it is alleged, therefore justified the abandonment by the Defendant of the Lease.

(2) As to damages, the Defendant contends that the Plaintiff has not mitigated its loss. The Premises were left unoccupied subsequent to the termination of the Lease and remains unoccupied today. Affidavit evidence has been adduced by the Defendant to the effect that as at the date of termination, the market rent for the Premises was in the region of $100,000 a month and, as at September 2002, about $85,000 a month.

(3) The Defendant also disputes the liability to pay legal costs. This part of the Plaintiff's claim was based on a provision contained in the Lease. The Defendant argued that even if this could be sustained, the relevant legal costs had as yet not even been taxed (for these costs related to the Plaintiff's costs in the consolidated actions) and therefore it was not right that the Plaintiff should have an order either for judgment or for interim payment in respect of the same.

10) I have, of course, not forgotten the fact that the Defendant has appealed my Decision dated 15 April 2002 refusing to strike out the Plaintiff's claim in the Second Action. This appeal is due to be heard by the Court of Appeal on 17 January 2003. If the Defendant were to succeed in this appeal, the consequence would be that the second action would be struck out. In this event, if I were to grant judgment or order interim payment in the present application, any such orders would have to be set aside. Mr William Wong (who appeared for the Defendant) made it clear that his principal position was of course that the Plaintiff's claim should be struck out but accepted that I had already decided this against him in my Decision made on 15 April 2002.

11) Mr Wong's submissions, in the present case, were therefore made subject to the appeal due to be heard by the Court of Appeal in January next year.

Liability

12) Ms Roxanne Ismail appeared for the Plaintiff in the summons before me. It was her submission that quite simply, the Defendant had repudiated the Lease and the Plaintiff had accepted this repudiation.

13) It is clear that by the act of returning the keys to the Premises, the Defendant sought, unilaterally, to terminate the Lease and vacate the Premises. It said as much in its letter to the Plaintiff dated 22 January 2001 enclosing the keys. There can be no doubt that, but for the collateral contract defence to which I shall come presently, the Defendant repudiated the Lease. This repudiation was accepted by the Plaintiff's solicitors by their letter dated 6 February 2001. The contractual concepts of repudiation and acceptance of repudiation apply equally to leases as they do to any other contracts : see National Carriers Ltd v. Panalpina (Northern) Ltd [1981] AC 675, at 703 per Lord Simon of Glaisdale.

14) What then of the Defendant's collateral contract defence?

15) In the affirmation of its Director of Finance, Mr Richard Zinkiewicz, it is said that in about early September 1999, he visited the Premises together with a Mr Samson Law and his assistant, Ms Asther Lau (both of whom he says were acting on behalf of the Plaintiff (which I shall assume for present purposes)). Upon Mr Zinkiewicz expressing some concern over the adequacy of the floor space of the Premises, Mr Law and Ms Lau "reassured me unequivocally on the Plaintiff's behalf that should there be a larger floor area in the same building become available in future, the Plaintiff would offer that to the Defendant and a new lease would then be entered into. They also told me that for the first year, the Plaintiff was willing to offer around HK$50,000 per month, though for the rest of the term the contractual rent would be higher".

16) This, Mr Wong argued, was a collateral contract for the entering into of a new lease should larger premises become available. It was as a result of this collateral contract that the Defendant agreed to lease the Premises from the Plaintiff. The Lease was dated 11 October 1999.

17) Mr Zinkiewicz then further deposes to the fact that in about August 2000, there appeared the possibility that some larger premises in the Building (the 38th floor) were available. Negotiations then ensued between the Defendant's representative (one Mr Nelson Lam of Chesterton Petty Ltd ("Chesterton Petty")) and the then tenant of the 38/F premises, Dah Sing Bank. These negotiations were conducted on the basis that Dah Sing Bank would sublet these premises to the Defendant. The Defendant's impression was that agreement with Dah Sing Bank was close, but later that month, the negotiations were suddenly called off. It was said that the tenant had changed its mind and wanted to reserve the 38/F premises for itself. Mr Zinkiewicz alleges that the reason why the negotiations were called off was that the Plaintiff had disapproved of the possibility of the Defendant becoming the subtenant of the 38/F premises. It is alleged by him that this was because the Plaintiff did not like the Defendant's clientele (the Defendant sold gold and jewellery).

18) The Defendant's reaction was the said letter dated 16 November 2000 to the Plaintiff from its Director of Legal Affairs, in which extreme disappointment was expressed at the Defendant not being able to secure the tenancy of the 38/F premises. Reference was made to a "bad taste left in their mouth". The upshot was that by the letter, the Defendant sought the Plaintiff's consent to "assign ... [the Premises] or locate a takeover tenant". No response having been received from the Plaintiff, the Defendant then sought to terminate the Lease by the said letter dated 22 January 2001.

19) In my view, these allegations by the Defendant do not amount to an arguable defence that should go to trial :

(1) First, the precise terms of the alleged collateral contract are so vague that even on the Defendant's version of events, there is insufficient certainty to found the existence of a contract. Generally, in the case of a lease, the material terms must be those relating to the location of the premises to be let, the duration of the tenancy and rent. Even on the assumption that the alleged agreement meant that if larger premises in the Building were available (wherever they may be located), the Defendant would be bound to take them, there was nothing that was agreed (even according to Mr Zinkiewicz) as to the duration of such a tenancy. As to rent, all that is said is that the Defendant would be willing to offer "around $50,000 per month, though for the rest of the term the contractual rent would be higher".

(2) This is much too vague to found a contract. When this is coupled with there having been no agreement (even on the Defendant's case) as to what was to happen to the Lease of the Premises in the event of a new tenancy being entered into, this uncertainty becomes increased. For example, when exactly would the Lease terminate and the new lease begin? Or who would be responsible for the removal costs in the event of a new tenancy being made?

(3) I am of course mindful that the modern approach of the courts is to strive to find the existence of a contract where the parties have clearly intended this : see Chitty on Contracts, (28th Edition), Volume 1, at paragraph 2-129. However, on the Defendant's case, it cannot surmount the difficulty that the terms of the alleged collateral agreement are much too vague and uncertain. I have derived much assistance in this area of the law from the judgment of Rix LJ in Mamidoil-Jetoil Greek Petroleum Company SA v. Okta Crude Oil Refinery AD [2001] 2 Lloyd's Rep. 76, at paragraphs 50-69. While in some situations, I accept that the court can fix even the price of goods by reference to the yardstick of reasonableness when this has not been agreed (see Chitty at paragraph 2-104) and also in the case of rent where this has not been expressly agreed (Chitty at paragraphs 2-120 and 2-122), this is not possible in the present case. The willingness of the Plaintiff to offer "around" $50,000 for the first year and a "higher rent" for the rest of the term (whatever that may be) is at the same time vague but also makes it impossible for the court to fix a sum as rent by reference to the yardstick of reasonableness. The market rent (which is probably the best yardstick to establish a reasonable rent) may not necessarily accord at all with either $50,000 (for the first year) or "higher" (for the subsequent term). It is to be observed that this $50,000 figure would apply whatever the size of the premises, as long as they were larger than the Premises. There is also the question of what would be the duration of the new lease. Would it simply be the balance of the unexpired term of the Lease of the Premises or would it be a new term (and if so, what would this be)?

(4) Secondly, when one looks at the documentary evidence and the conduct of the Defendant in the present case, there is really no question that an agreement along the lines of the collateral contract now advanced by the Defendant, was ever in the minds of the parties. I have already referred to the Defendant's letter dated 16 November 2000. There is not a hint of the collateral contract. The same can be said of the 22 January 2001 letter from the Defendant (again, from its Legal Affairs Department). The stated reason for the termination of the Lease by the Defendant was the non-response to the request for the assignment or subletting of the Premises that had been made in the 16 November 2000 letter. It seems to me inconceivable that if an agreement existed, that this would not have been mentioned by the Legal Affairs Department of the Defendant.

(5) There is also no reference to any collateral contract in the Counterclaim that the Defendant still maintains in the First Action. The Counterclaim neither in its original nor amended forms remotely hints as the existence of the collateral contract.

(6) Thirdly, even if it can be assumed that the alleged collateral contract existed, on the facts as alleged by the Defendant, it has no application. The collateral contract is predicated on the fact that if larger premises became available, it would be the Plaintiff who would let them to the Defendant (viz., a direct tenancy). Yet the Defendant's version in relation to the 38/F premises of the Building relates instead to a proposed sub-tenancy as between the Defendant and Dah Sing Bank. Nothing in the alleged collateral contract deals with this situation and Mr Wong did not deal with this aspect at all. It is also perhaps noteworthy that the Defendant and Dah Sing Bank were negotiating on the basis of a rent of about $347,622 proposed by the Defendant : see the letter dated 23 August 2000 from Chesterton Petty to Dah Sing Bank. This is entirely inconsistent with the collateral contract in which, it will be recalled, the starting rent for the first year would be in the region of $50,000 a month.

20) Finally, I come to Ms Ismail's reliance on clause 5(8) of the Lease : the entire agreement clause. The clause states as follows :

"This Lease sets out the full agreement reached between the parties and no other warranties or representations express or implied have been made or given by the Landlord or by anybody on its behalf relating to the Building or the Premises and if any such representation or warranty has been given or implied the same is hereby withdrawn and is deemed to have been withdrawn immediately before the execution of this Lease."

21) The Lease was made subsequent to the alleged collateral contract. Quite apart from its terms being completely inconsistent with the existence of the alleged collateral contract, in my view, Ms Ismail is right when she says that clause 5(8) operates to prevent the Defendant from relying on this defence. Although the clause does not in terms exclude the applicability of any previous agreements or promises, I am of the view that it is sufficiently wide to cover any reliance on the alleged collateral contract. In Inntrepreneur Pub Company (GL) v. East Crown Ltd [2000] 2 Lloyd's Rep. 611, Lightman J had to deal with a clause that was more or less only stated that the written agreement in that case constituted the "entire Agreement" between the parties : see 613(1). Like clause 5(8) of the Lease, there was no express exclusion of previous agreements or promises. The learned judge held, however, that the words in that case were sufficient to exclude the application of any alleged collateral contract : see 614(1)-615(1). With respect, the reasoning of Lightman J in Inntrepreneur is compelling and I follow it. The nature of a collateral contract (or collateral warranty as it is sometimes called) is that it involves an assurance or warranty : see Chitty at paragraph 12-101. The words "representation or warranty" contained in clause 5(8) are apt in my view to cover collateral contracts.

22) For the above reasons, the defence advanced by the Defendant in the present case is bad in law, even if the assertions are believable (which in my view they are not, applying the well-known Ng Shou Chun test).

23) Accordingly, there will be judgment for the Plaintiff on liability. But should there also be summary judgment for any particular amount or interim payment ordered?

Damages and interim payment

24) The test for giving summary judgment in relation to damages is the same as for liability : only if there is compelling evidence in support and no arguable defence shown, would it be appropriate to grant summary judgment in any particular sum or sums. It is of course possible to grant summary judgment for a part of a claim : Order 14, rule 3(1). While this is often appropriate where liquidated claims or an ascertainable portion of a number of claims are involved, it is also possible to make such an order in relation to identifiable or indisputable parts of unliquidated claims (i.e. there is no doubt that some damages are payable but there is an argument fit for trial as to the balance) : see Associated Bulk Carriers Ltd v. Koch Shipping Inc. [1978] 2 All ER 254.

25) Running in parallel with the court's power to give judgment in relation to a part of a claim is the court's power to order interim payment. It is appropriate to make an order for interim payment where the court is satisfied that the Plaintiff will obtain judgment for a substantial sum : see Hong Kong Civil Procedure 2002, Volume 1, at paragraph 29/11/1. There will often be an overlap between applications for summary judgment and applications for interim payment and, like the present case, they are often made together. The conceptual differences between the two are discussed in Hong Kong Civil Procedure, Volume 1, at paragraph 29/11/3. The practical differences may be few but where the court entertains some doubt for whatever reason as to the appropriateness of granting summary judgment, even though it is of the view that the Plaintiff will eventually obtain judgment for a substantial sum at trial, an order for interim payment would be appropriate.

26) I have earlier identified the Plaintiff's monetary claims. I now deal with them in turn. The claims can essentially be placed in two groups :

(1) The claims for loss of rent, service charges and office rates.

(2) Legal costs.

27) The first group of claims focuses on the question whether the Premises could or should have been let following the termination of the Lease on 6 February 2001. It is not in dispute that they were not let and indeed remained so up to and including 25 September 2002. It would also appear that this is the position today. The Defendant's case is that the Plaintiff has not mitigated its loss. The law is clear. In claiming damages following the termination of a contract, the innocent party must act reasonably to minimize its losses : see Chitty at paragraphs 27-087 and 27-088. The burden of proof is, however, on the party in breach.

28) The Plaintiff has served affidavit evidence in support of its contention that it has acted at all times reasonably in its attempts to let the Premises following the termination of the Lease. There is evidence before me of the efforts made by the Plaintiff. A number of estate agents were engaged (about 10) and when the asking rents were not accepted, the Plaintiff offered lower rents. Reference was also made to the fact that demand for office space in the Building dropped since the termination of the Lease.

29) It is unnecessary for me to deal with every minute aspect of the Plaintiff's case here. In my judgment, they are all matters which should properly be resolved at the assessment of damages. At this stage, I am of the view that the Defendant has demonstrated an arguable case on the question of damages under this group of claims (but only to a limited extent, however) :

(1) The stark fact remains that from February 2001 to September 2002, the Premises have remained unoccupied. The Plaintiff's contention was not that there was no demand whatsoever for premises in the Building, only that occupancy was dropping and that the Premises could not be let. This instantly gives rise to the argument that perhaps the asking rents were too high. One reason of the lack of demand may have been the fact that the Premises did not face the lifts or had unattractive decorations (these facts appear from the Plaintiff's own evidence).

(2) Whether or not in the circumstances the Plaintiff had acted reasonably is not something that is easily decided on a summary basis. Reasonableness is a matter of degree and in the absence of cross-examination or full discovery, this is not often capable of determination at the Order 14 stage. In other words, the very concept of reasonableness invariably gives rise to arguments that should only be resolved at trial (or in the present case, at the assessment exercise).

(3) The Defendant has adduced evidence in the form of a surveyor's report to the effect that as at February 2001, the market rental for the Premises was $100,000 a month, which was below the Plaintiff's asking rent for the Premises. In that respect, it was also stated that the market rent for the Premises as at September 2002 was in the region of $85,000 a month. This presupposes that the Premises could and should have been rented out at these rates. Ms Ismail analyzed the report and made many criticisms of the surveyor's approach. There may be some force in what she says but not enough for me to discount it altogether. Mr Wong informed me that the surveyor's valuations were based on comparables (and this is what the survey itself says) although details are not provided anywhere in the report. I should add here that the Plaintiff has also produced a survey report which states that in the opinion of its surveyor, the rent in January 2001 was $31 per square foot and $17 per square foot as at September 2002. Apart from demonstrating the existence of a triable issue, this report would also suggest that the Plaintiff could (and therefore should) have been able to let the Premises instead of leaving them empty.

30) In the end, I have come to the conclusion that the damages suffered by the Plaintiff as regards rent, must be determined at an assessment. As there exists therefore the argument that the Plaintiff may not have acted reasonably in not letting the Premises during the relevant period, it follows also that the other claims for service charges and office rents, must also be left for the assessment exercise. In other words, if it transpires that the Plaintiff ought reasonably have let out the Premises for the period in question (or any part of it), the liability for service charges and office rates should then have fallen on the hypothetical tenant and not the Defendant.

31) That said, given the Defendant's case that the market rental for the Premises as at February 2001 was $100,000 a month, it is right that judgment should be given to reflect the difference between that and the Plaintiff's claim. Of course, for the six days from 1 February 2001 to 6 February 2001, the Plaintiff is entitled to a pro rata proportion of the rent under the Lease. Accordingly, the Plaintiff is entitled to partial judgment in the sums of :

(1) $24,272.50 (being the rent due for the period from 1 February 2001 to 6 February 2001, prorated on a 365-day basis).

(2) $452,309 (being the difference between $123,048 and $100,000 for the period from 6 February 2001 to 25 September 2002 also prorated on a 365-day basis for the incomplete month in September 2002).

(3) The total is therefore $476,581.50.

32) As for legal costs, the Plaintiff relies on clause 3(29) of the Lease which enables it to claim solicitors' costs on indemnity basis for any proceedings in relation to breaches of the Lease. It is of course well-established that as far as costs are concerned, the court will normally give effect to the contractual bargain between the parties : see Chekiang First Bank v. Fong Siu Kin [1997] 2 HKC 302, at 309 (Court of Appeal).

33) Mr Wong does not dispute the applicability of these principles. His contention, rather, is that the sums claimed as representing the Plaintiff's costs in the consolidated actions have not yet been taxed and even includes a sum ($221,689) as yet unbilled.

34) I have been shown bills in relation to the solicitors' costs incurred by the Plaintiff in the consolidated actions. They amount to $1,690,405.50. In my view, although taxation has not taken place, it is extremely likely that the Plaintiff will obtain an order for a substantial amount to be paid to it by way of costs, particularly if taxed on an indemnity basis. As I have remarked above, the Defendant does not really submit that the Plaintiff will not be entitled to a taxation on this basis.

35) I am in agreement with Ms Ismail that an order for interim payment should be made. As taxation has not yet taken place, I am of the view that it would not be right for summary judgment to be ordered, even on a partial basis. However, an order for interim payment would be appropriate and I would so order. Ms Ismail advanced the basis for any order for interim payment as being Order 62, rule 9A and I am content to do so on that basis. Whether or not there is any difference between an order made under this rule and an order under Order 29, rule 12, it is unnecessary for me to decide. It seems to me in either case that the court will be able to make any necessary adjustments once a final order as to damages has been made or taxation has taken place : see Order 29, rule 17 and Order 62, rule 9A(2).

36) As to the amount of such interim payment, I would adopt a rough approach. It is often said that on a party-and-party basis of taxation, the court will usually award two-thirds of a party's actual costs. This percentage would increase if taxation is on an indemnity basis. Taking a conservative line, I would order that interim payment in the sum of $1,000,000 be made by the Defendant to the Plaintiff.

Lifting of stay of execution on Master Kwang's Order dated 17 May 2001

37) There is no reason why the stay of execution ordered by Master Kwang should remain in place any longer. Master Kwang made the order on the basis of the then existing Counterclaim made by the Defendant in the First Action. In the original Counterclaim, there were allegations of breach of the Lease on the part of the Plaintiff. The Counterclaim was amended on 17 January 2002 to delete the whole of the original Counterclaim, substituting in its place a claim for $107,178, being the difference between the judgment sum ordered by Master Kwang ($354,252) and the rental deposit of $461,430 paid by the Defendant when it entered into the Lease.

38) In the Amended Counterclaim, the Defendant accepts that it is liable under the judgment ordered by Master Kwang. For its part, the Plaintiff accepts that the rental deposit must be taken into account to the Defendant's credit.

39) However, I leave open for the parties' agreement or further determination by the court all questions regarding interest arising from Master Kwang's order and the Amended Counterclaim.

Order

40) Accordingly, for the reasons given above, I would order as follows :

(1) Subject to paragraph (2), there be interlocutory judgment on liability in favour of the Plaintiff with damages to be assessed.

(2) There be partial judgment in the sum of $476,581.50 to the Plaintiff with a balance of any damages due to be assessed by a Master.

(3) The Defendant is to make interim payment of the sum of $1,000,000 to the Plaintiff.

(4) The stay of execution ordered by Master Kwang on his judgment dated 17 May 2001, be lifted.

(5) The Plaintiff is to give credit to the Defendant in the sum of $461,430 in relation to any payments to be made by the Defendant herein.

41) If necessary, I shall hear the parties on the exact terms of the order. This would include any questions as to interest arising from the above.

42) As to costs, I make an order nisi that the costs of and occasioned by this application be to the Plaintiff in any event, such costs to be taxed if not agreed.