ORIENT BRIGHT INTERNATIONAL LTD v. HIANG KIE HONG KONG LTD

HCA10411/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.10411 OF 2000

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J U D G M E N T

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1. The plaintiff's claim is for breach of tenancy agreement.

2. The main defence (as contained in the Re-Amended Defence and Counterclaim) is that after the Writ in this matter has been issued, the parties, through their then respective solicitors, have on 23 January 2001, arrived at a binding agreement to settle this matter.

3. It was conceded by counsel for the defendant at the start of the trial that if the court finds against the defendant on that issue, it would follow that the defendant was in breach of tenancy agreement as claimed by the plaintiff since no other substantive defence has been put forward on the issue of liability.

Background

4. The plaintiff is the landlord of the Ground Floor and Mezzanine Floor of 28 Wellington Street, Central, Hong Kong ("the Premises").

5. The plaintiff let the Premises to the defendant to carry on a restaurant under a written tenancy agreement dated 12 November 1997 for a term of four years commencing from 1 November 1997 ("the Tenancy Agreement") whereby it was agreed that the monthly rent, exclusive of rates and management fees were to be $280,000.00 for the first two years (from 1 November 1997 to 31 October 1999) and at $322,000.00 for the second two years (from 1 November 1999 to 31 October 2001).

6. By a supplemental agreement in writing dated 8 February 1999 ("the Supplemental Agreement"), the parties agreed to vary the monthly rent (exclusive of rates and management fees) under the Tenancy Agreement as follows :

(a) at $280,000.00 from 1 November 1997 to 31 January 1999;

(b) at $196,000.00 from 1 February 1999 to 31 October 2000; and

(c) at $322,000.00 from 1 November 2000 to 31 October 2001.

7. Under the Tenancy Agreement and the Supplemental Agreement, needless to say, the defendant was under the obligation to pay the monthly rent as varied by the Supplemental Agreement. The defendant was also bound to discharge inter alia the rates and the all the charges for the building management in respect of the Premises.

8. Upon the signing of the Tenancy Agreement, the defendant was required to pay a rental deposit of $840,000.00 (being three months' rent at $280,000.00) and a management fee deposit of $7,500.00. It was agreed that such deposit would be adjusted accordingly when the increased rent for the second two years came into effect on 1 November 1999.

9. When the Supplemental Agreement was entered into, the plaintiff had refunded $252,000.00 of the rental deposit to the defendant to take account of the decreased rent provided for by the Supplemental Agreement.

10. It is the plaintiff's case that the defendant failed to pay rent since 1 November 2000 (when the monthly rent became $322,000.00 as provided for by the Supplemental Agreement) and also failed to pay the balance of rental deposit due to the increase in rent.

11. A letter of demand dated 2 December 2000 was ignored by the defendant. The Writ in this matter (with Statement of Claim) was then issued on 11 December 2000 essentially claiming only for two months' rental and balance of deposit from the defendant. The Statement of Claim was amended on 14 December 2000 to include a claim for possession of the Premises on the basis that the plaintiff, by issuing the Writ, accepts the repudiation of the defendant by its breach of the Tenancy Agreement (as varied by the Supplemental Agreement).

12. A Defence was filed by the defendant on 11 January 2001 essentially denying that it was in breach as alleged by the plaintiff.

13. As already stated above, the main defence now relied on by the defendant is that this matter had been settled by the solicitors acting for the parties and a binding settlement agreement reached between them on 23 January 2001. This defence is pleaded in the defendant's Re-Amended Defence and Counterclaim dated 25 April 2003.

14. As can be seen, what is now relied on by way of a defence to this claim occurred after the Writ was issued and indeed after the filing of the Defence in this matter.

15. I shall therefore deal first with this issue as to whether a binding settlement agreement had been reached between the then respective solicitors for the parties.

Whether or not binding settlement agreement reached

16. Negotiations between Messrs Angela Wang & Co. ("AW"), the solicitors acting for the defendant and Messrs Siao, Wen & Leung ("SWL"), the then solicitors acting for the plaintiff started on or about 6 January 2001. Such negotiations from 6 January up till 22 January 2001 were carried out in the form of 'without prejudice' letters passing between AW and SWL. These letters have been produced in evidence and there is no dispute as to their contents.

17. Without going into any great detail, it is sufficient for present purposes to note the following matters which can be seen from such correspondence passing between AW and SWL :

(a) By its letter of 6 January, AW indicated that they are instructed that the defendant is willing to deliver up vacant possession of the Premises to the plaintiff on 31 January 2001 and pay all outstanding rent due up to that date (after setting off the rental deposit paid) in full and final settlement. The plaintiff is to reply by 1.00 p.m. on 9 January. The letter further stressed that nothing therein shall be binding until a Consent Order in form to be agreed is signed by the defendant.

(b) By letter of 11 January, SWL replied saying that the proposal by AW is unacceptable to the plaintiff. The plaintiff further reserved its rights to claim for loss and damage suffered by it arising from the breach of the Tenancy Agreement by the defendant even if vacant possession is delivered on 31 January.

(c) By a further letter dated also 11 January, AW indicated that the defendant is prepared to accede to the plaintiff's request for an early termination of the Tenancy Agreement by delivering up possession on 31 January 2001 but that should not be construed as an admission of liability to the claims made by the plaintiff in the proceedings.

(d) SWL replied by letter dated 18 January denying that the plaintiff has ever proposed an early termination of the Tenancy Agreement reiterating that the earlier proposal of the defendant was unacceptable to the plaintiff.

(e) By letter of 19 January, AW offer the following terms in full and final settlement of the plaintiff's claim, namely,

1. the defendant to remain in possession of the Premises until 31 October 2001 at the monthly rent of $200,000.00;

2. the defendant to pay the arrears of rent from 1 November 2000 at the rate of $200,000.00 per month within 14 days of filing a consent order discontinuing the action;

3. on 31 October 2001 the security deposit held by the plaintiff be returned to the defendant;

4. upon acceptance by the plaintiff of these terms, the plaintiff to prepare a consent order to discontinue the action with no order as to costs; and

5. on a non-committal basis the parties each undertake to consider entering into a new tenancy agreement from 1 November 2001 if terms can be agreed.

The terms offered to lapse if not accepted by 1.00 p.m. on 22 January;

(f) By letter of 22 January, SWL replied that the terms offered by AW in its letter of 19 January were unacceptable to the plaintiff. The plaintiff counter-offered as follows :

1. Consent Judgment incorporating the prayer in the Statement of Claim be executed by the parties with a stay of execution of the Judgment upon the following terms :

i. $644,000.00 being rental/mesne profit for the period 1 November to 31 December 2000 be paid forthwith;

ii. mesne profits of $240,000.00 (exclusive of rates and management fee) for January 2001 be paid forthwith;

iii. $240,000.00 per month (exclusive of rates and management fee) for the period from 1 February to 31 October 2001 be paid on 1st day of each month; and

iv. $28,000.00 costs be paid forthwith.

Upon default of any of the above terms or payment of rates or management fees the whole judgment debt or balance thereof to become immediately due and payable. Such offer to be open up till 3.30 p.m. on 23 January 2001.

(g) By letter of 23 January, AW replied that the offer contained in SWL's letter of 22 January was not acceptable and counter-offered the following terms :

1. the defendant to remain in possession of the Premises until 31 October 2001 at the monthly rent of $220,000.00 (exclusive of management fee and rates) with effect from 1 November 2001 (sic);

2. the defendant will pay the rent for the period 1 November 2000 to 31 January 2001 at $220,000.00 (exclusive of management fee and rates) within 14 days of filing a consent order discontinuing HCA No.10411 of 2000; and

3. the letter further stated that the offer was open for acceptance up to 2.00 p.m. the same day, and if not accepted by then it will lapse. It also stressed that this was the final offer.

18. The negotiations between the respective solicitors then acting for the parties up to and including AW's letter of 23 January which I have summarized above were all contained in correspondence between them, and there are no factual dispute in relation thereto as to what transpired between them in their negotiations.

19. The factual dispute only arise from the evidence given by Eliza Kung ("Ms Kung") and that of Adrian John Taylor ("Mr Taylor"), respectively the handling solicitors for the plaintiff and the defendant, as to what took place in telephone conversations between them on 23 January 2001.

20. It is common grounds that there were three telephone conversations between Ms Kung and Mr Taylor. There is a slight difference in timing as to these phone conversations but that difference in timing is not of any great significance. The first was at about 2.38 p.m. or 2.49 p.m., the second was at about 4.26 p.m. or 4.31 p.m. and the third at about 5.21 p.m. or 5.23 p.m.

21. Each of them had made a note recording the contents of each of the three phone conversations between them. However their notes recording the contents of these phone conversation differ as much as their evidence did.

First phone conversation

22. It is the evidence of Mr Taylor that the first call came from Ms Kung who indicated that the counter-offer by AW as contained in their letter of 23 January, sent or faxed to SWL earlier that day was rejected by the plaintiff. Ms Kung then further indicated that the plaintiff will settle for rent at $240,000.00 per month from 1 November 2000 to 31 October 2001 and that the defendant is to pay for the plaintiff's legal costs to be taxed if not agreed.

23. The evidence of Ms Kung on the other hand is that in that phone conversation, she indicated that her client rejected the earlier offer of the defendant (as contained in AW's letter of 23 January) but made the counter-offer that rent be at $240,000.00 per month from 1 November 2000, legal costs to be borne by the defendant and that judgment be entered. She also told Mr Taylor to reply as soon as possible.

Second phone conversation

24. Mr Taylor's evidence on the second phone conversation was that he told Ms Kung their latest counter-offer was rejected by his client and that his client will offer monthly rent of $220,000.00 from 1 November 2000 to 31 October 2001 in full and final settlement. If this offer was not accepted by the plaintiff, the defendant will move out of the Premises on 31 January 2001 as previously agreed. He also left his mobile phone number for Ms Kung to reach him later as he was leaving the office.

25. However, Ms Kung's evidence as to the second phone conversation is that Mr Taylor rejected the plaintiff's latest counter-offer and insisted on the rent being $220,000.00 per month and that the defendant would not be responsible for the legal costs. She agreed that Mr Taylor left his mobile phone number with her as he was about to leave the office (being Chinese New Year's eve) but that he was eager to know the reply from the plaintiff. She told Mr Taylor that it may be difficult for her to obtain instructions as it was Chinese New Year's eve but she would try her best.

Third phone conversation

26. Mr Taylor's evidence is that in the third phone conversation, Ms Kung indicated that his last offer was rejected by the plaintiff but that she was instructed to make the following offer in full and final settlement of the plaintiff's claim :

(a) the defendant to remain in possession of the Premises paying rent at $220,000.00 from 1 November until 31 October 2001; and

(b) the defendant to pay the cost of the action, to be taxed if not agreed.

If these terms are acceptable, there can be a settlement and that settlement can be recorded when they are back at the office next week.

27. On the other hand, Ms Kung's evidence is that she did reply to Mr Taylor that the plaintiff was willing to reduce the rent to $220,000.00 per month but that the legal costs would be borne by the defendant. When she said that she meant cost in the sum of $28,000.00 since on no previous occasion did the parties ever mention costs paid by the defendant would be taxed if not agreed.

28. She also said to Mr Taylor that the plaintiff insisted on incorporating the terms of settlement in a consent judgment. Both of them then agreed that if the defendant agreed to bear the legal costs then they would further discuss the contents of the document for settlement.

29. Ms Kung was adamant that there was no mention between them that if the proposal was accepted by the defendant, this was to be a binding agreement since the amount of the rent and the payment of costs were only two of the issues that needed to be addressed for settlement. It was for that reason that she mentioned to Mr Taylor that they would further discuss the contents of the document for settlement.

E-mail on 23 January

30. At 9.10 p.m. on 23 January, Mr Taylor sent an e-mail to SWL's email address marked for Ms Kung. That email was forwarded to Ms Kung's internal email at 11.01 a.m. on 27 January 2001. The email reads :

"Dear Ms Kung,

Further to your telephone conversation with Adrian Taylor this afternoon, and the subsequent message he left on your voicemail, we have now had an opportunity to take instructions on your latest offer and we write to confirm that your offer has been accepted by our client namely:

1.	That our client will remain in possession of the premises paying rent from the 1st November 2000 to the end of the term on 31st October 2001 of HK$220,000 per calendar month.
2.	Our client will pay your client's costs to be taxed if not agreed.

These agreed terms are in full and final settlement of all your claims in the proceedings.

As discussed, we will discuss the preparations of the documents necessary to record the settlement and discontinue the proceedings when we are back in the office next week.

Yours sincerely,

Angela Wang/Adrian Taylor"

It is upon this e-mail that the defendant says a binding settlement had been reached between the parties in this case.

Events after 23 January 2001

31. The public holidays for Chinese New Year fell on 24 to 26 January inclusive. On 27 January (being a Saturday) Ms Kung came to know of the e-mail from Mr Taylor sent on 23 January stating that a settlement had been reached between them.

32. She proceeded to draft a reply and a Consent Order but that took several days as it needed to be approved by the staff of the plaintiff who were still on holiday.

33. On 30 January (the following Tuesday) AW sent a letter to SWL enclosing a Draft Consent Order and a Notice of Withdrawal (of the proceedings) for their approval. The Consent Order was on the basis of the plaintiff withdrawing the proceedings against the defendant.

34. By letter of 31 January, SWL replied saying that they had never agreed to discontinue the action and the contents of the draft Consent Order enclosed in AW's letter of 30 January was not acceptable. At the same time, SWL enclosed their draft Consent Judgment for AW's approval in which the legal costs to be paid by the defendant was stated to be $28,000.00.

35. This drew a reply from AW by its letter of 1 February stating that they presume that the $28,000.00 legal costs stated in the Consent Judgment to be an error in drafting since it was agreed that the costs is to be taxed if not agreed.

36. SWL replied by letter of 2 February stating that to save costs and time, they propose the amount of their estimated legal costs to be $28,000.00 asking AW to take instructions as to whether that amount is agreeable, and if not to let SWL know of their estimate and that they do not propose to revise the draft Consent Judgment at that stage.

37. AW replied by letter also of 2 February asking for a revised draft Consent Judgment so that they can take instructions on the proposed method of documenting the settlement and stating further that they will try to agree the costs but after the action has been formally settled, and in the absence of any agreement, costs will have to be taxed.

38. By a further reply by letter also dated 2 February, SWL stated that they do not agree that the matter has been settled since the issue of costs has not been settled and the Consent Judgment has not been signed. They further wanted the amount of costs to be agreed and contained in the Consent Judgment to save time and costs. SWL again asked AW to take instructions on the amount of costs and that they are not prepared to revise the draft Consent Judgment at that stage.

39. The correspondence continued and the rift between them increased leading to the present dispute.

Assessment of the evidence

40. The factual dispute arising from the evidence given by Ms Kung and Mr Taylor takes on but a very narrow compass.

41. Indeed in cross-examination, Ms Kung conceded that much more was said between them than was recorded by her in her attendance notes of the phone conversation because it was impossible to record down everything that was said between them. As a result she only recorded down those matters she considered to be more important and even then the record was only the gist of those matters.

42. I readily accept that evidence. Indeed the same would probably be true of the attendance notes prepared by Mr Taylor.

43. Having heard their evidence and cross-examination, I am of the view that neither of them were being untruthful or dishonest in the evidence related by them to the court. The differences in their evidence arose more from miscommunication between them because matters were taken for granted without specifically being spelt out.

44. One instance of this would be that when Ms Kung mentioned that the legal costs would have to be borne by the defendant, she had in mind legal costs in the sum of $28,000.00 previously mentioned by SWL in earlier negotiations, whereas Mr Taylor took it to mean 'costs to be taxed if not agreed'.

45. This is a conclusion which I am able to reach from the evidence, especially the cross-examination of Ms Kung when she agreed that in all the three phone conversations, she did not mention $28,000.00 as being the amount of legal costs. The $28,000.00 was merely what she had in mind when she said that legal costs had to be borne by the defendant in the phone conversation. She further agreed in cross-examination that where only that is said, the implication would be that the costs are to be taxed if not agreed.

46. From all the evidence given, I am able to make the finding that the only matters agreed between Ms Kung and Mr Taylor was that the defendant would pay rent from 1 November 2000 to 31 October 2001 at $220,000.00 per calendar month and that the legal costs were to be borne by the defendant when the e-mail of 23 January was sent by Mr Taylor at about 9.10 p.m. that day.

47. I further make the finding that there was no specific agreement between them as to the method by which the proceedings are to be settled, whether by way of a consent judgment or by the withdrawal of the proceedings. The only agreement made between them in this respect was to further discuss the documentation for the settlement when they returned to their offices the following Monday (29 January 2001). This was the evidence of Ms Kung and also reflected in the last paragraph of the e-mail from Mr Taylor.

Decision

48. It is the defendant's submission that the form in which the settlement is to take, whether it is to be by way of a consent judgment or a withdrawal of the proceedings, is merely the means whereby the settlement is to be achieved and is immaterial to the substance of the settlement itself.

49. On the other hand, it is the plaintiff's contention that the form in which the settlement is to take is a material term of the settlement which has not be agreed upon by the parties as at 23 January and therefore there is, at that date, no binding settlement agreement between them.

50. It is a question of construction whether the form in which the settlement takes is to be a condition or term of the agreement itself or whether it is "a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through" (see Von Hatzfeldt-Wildenburg v. Alexander [1912] 1 Ch 284).

51. In the present case, given that the parties' negotiations for settlement and the settlement itself, if it was achieved, involved the defendant remaining in possession of the Premises and paying rent until 31 October 2001, the manner in which the settlement is to be enforced should it become necessary, must, in my view be a material term of the settlement agreement.

52. There is no dispute that if the settlement was achieved by a consent judgment, it can be enforced pursuant to the consent judgment, whereas if the proceedings were withdrawn on the terms agreed in settlement, those terms will need to be enforced by a separate action.

53. Undoubtedly, that was the reason why SWL, the then solicitors for the plaintiff, had all along insisted on a consent judgment as the mode of any settlement between the parties.

54. On that basis, I have no doubt that the method via which the settlement is to be recorded must be a term and condition of any settlement reached between the parties. In coming to this conclusion, I note what is stated in Atkin's Encyclopaedia of Court Forms in Civil Proceedings, Second Edition, Volume 12(1) 1996 Issue, at page 9 where it states :

"Too often the negotiations for a settlement break down, not because terms cannot be agreed in principle, but simply because the parties have been unable to find or adapt a suitable form in which those terms could be appropriately and effectively embodied. In negotiations for a settlement the means employed for its conclusion often play a crucial part, for in the field of compromise and settlement the form of the agreement is as important as its substance."

55. In the present case, as at 23 January 2001, there was as yet no agreement between Ms Kung and Mr Taylor as to whether the Consent Order is to be by way of consent judgment in the proceedings or by way of a withdrawal or discontinuation of the proceedings.

56. As such a material term of the settlement agreement has not yet, at that date, been agreed between them. It was left to further discussion. As such an agreement to agree is not per se a contract.

57. Indeed this is highlighted when I asked counsel for the defendant in submission the obvious question, namely what happens the purported settlement alleged by the defendant to have been achieved fully and finally by Mr Taylor's e-mail of 23 January, if on the following Monday, the parties are unable to agree as to whether there should be a consent judgment entered or whether the proceedings should be withdrawn.

58. The answer given by counsel for the defendant to that question was in that event an application will have to be made to the court to determine the mode the settlement is to take. This answer shows up the fallacy of the defendant's contention that there was a binding settlement achieved on 23 January 2001 since an application to the court is only possible in circumstances where the court is prepared to imply a term or terms as may be necessary to render an agreement effective or complete in the manner in which the parties are presumed to have intended. It is trite law that it can never be for the court to re-write the parties' agreement or to impose a term or condition where such term or condition has never been agreed upon by the parties (see The Law and Practice of Compromise by David Foskett Q.C., Fifth Edition, para.5-42).

59. For these reasons, and upon the evidence and the findings made by me, I have come to the conclusion that no binding agreement had been reached between the parties to settle the proceedings as at 23 January 2001.

Damages

60. It is not in dispute that the defendant has vacated and delivered up vacant possession of the Premises back to the plaintiff on 16 October 2001. As a result, the claim of the plaintiff as contained in its Re-Re-Amended Statement of Claim is only limited to claiming for forfeiture of rental and management fees deposit, damages for the breach of the Tenancy Agreement and interests.

61. It is also not in dispute that the defendant has during the currency of these proceedings paid totally $2,200,000.00 to the plaintiff in relation to this dispute between them. That figure is made up of $660,000.00 paid by AW to SWL as being the monthly rent from 1 November 2000 to 31 January 2001 in purported settlement of these proceedings between them. Further sums totalling $1,540,000.00 were paid by the defendant between June 2001 and September 2001 pursuant to interlocutory orders made by Masters in these proceedings.

62. The claim for forfeiture of the rental and management fees deposit is in the amount of $602,500.00 which sum is being held by the plaintiff.

63. The claim for damages is quantified by the plaintiff at the net amount of $1,767,310.42 after giving credit for the sum referred to above of $2,200,000.00 already paid by the defendant and received by the plaintiff.

64. By its counterclaim the defendant claims for the refund of the deposits (totally $595,500.00) still held by the plaintiff relating to the tenancy of the Premises and the refund of the unsued rental for the latter half of October 2001 in the sum of $106,451.61 (after delivery up of possession on 16 October 2001).

65. It can therefore be seen that two issues in dispute between the parties relate to the forfeiture of deposits and the refund of the half month's rent for the latter part of October 2001. Indeed these were the only two issues upon which the parties addressed the court on in their final submission in relation to the damages claimed in this case.

Half month's rent

66. This is clearly the easier of the two issues in dispute and I shall deal with it first.

67. Looking at paragraph 22 of the Re-Re-Amended Statement of Claim, it can immediately be seen that item b of that paragraph claims mesne profits/damages up to 16 October 2001. Nowhere else in that paragraph or any other part of the plaintiff's claim is there a claim for either arrears of rent or mesne profit for the latter half of October 2001 after vacant possession has been delivered up.

68. There is also no evidence or any indication that the rent for the latter part of October 2001 had been paid by the defendant. Even if that had been part of the interlocutory orders made by Masters in these proceedings, full credit has already been given by the plaintiff for the total amount of $2,200,000.00 received by them to reduce its claim for damages under paragraph 22 of the Re-Re-Amended Statement of Claim.

69. In the circumstances, I can find no basis to entertain this part of the counterclaim for refund of a half month's rent.

Deposits

70. The defendant's counterclaim for refund of the deposits paid in the total amount of $595,500.00 is that the Tenancy was determined by the plaintiff when the Writ herein was issued in December 2000. At the time when the Tenancy was determined, there was no claim by the plaintiff for forfeiture of deposits held by it. The claim for forfeiture of deposits was only made on 19 July 2002 by amendment, some one and a half years after the Writ was served on the defendant.

71. It is also submitted that Clause 5(a) of the Tenancy Agreement does not make provision for any power to forfeit the deposit after termination of the Tenancy. In these circumstances, the defendant seek reliance on what is stated in page 176 of Malcolm Merry on Hong Kong Tenancy Law where it says :

"The power [to forfeit a deposit] may not, however, be exercisable after the end of the tenancy, unless the agreement so states....and will have instead to rely on his rights, if any to set his damages off against the deposit money."

72. On the other hand, the plaintiff submits that forfeiture of the deposit must follow termination of the Tenancy where it has been breached by the defendant.

73. In deciding this issue, the starting point must be the agreement of the party in respect of the deposit. This is provided for in Clause 5(a) of the Tenancy Agreement. In that clause, the purpose of the deposit is stated to be as follows :

"to secure the due observance and performance by the Tenant of the agreements, stipulations and conditions herein contained and on the Tenant's part to be observed and performed."

74. The power to forfeit the deposit is stated in the same clause as follows :

"The said deposit shall be retained by the Landlord throughout the said term free of any interest to the Tenant and in the event of any breach or non-observance or non-performance by the Tenant of any of the said agreements, stipulations or conditions aforesaid, the Landlord shall be entitled to terminate this Agreement and to forfeit the said deposit absolutely but without prejudice to the Landlord's right to claim from the Tenant damages or monetary loss which the Landlord may incur as a result of such non-observance or non-performance by the Tenant. Notwithstanding the foregoing, the Landlord may in any such event at its option elect not to terminate this Agreement and forfeit the deposit but to deduct therefrom the amount of any monetary loss incurred by the Landlord in consequence of the breach, non-observance or non-performance by the Tenant in which event the Tenant shall as a condition precedent to the continuation of the tenancy deposit with the Landlord the amount so deducted and if the Tenant shall fail so to do, the Landlord shall forthwith be entitled to re-enter on the said premises and to determine this Agreement, forfeit the deposit and claim further loss and damages as hereinbefore provided."

75. It is clear from the above provision in Clause 5(a) of the Tenancy Agreement, that the deposit is to be held by the plaintiff as a security for the due performance by the defendant of his obligations under that Tenancy Agreement.

76. It is also clear under that provision, that where the defendant is in breach of the Tenancy Agreement, the plaintiff is entitled to terminate the Tenancy and forfeit the deposit.

77. The Tenancy was terminated by the plaintiff when the Writ herein was issued in December 2000 on the basis that the defendant was in breach of the Tenancy. The claim for forfeiture of the deposit was not made until re-amendment of the Statement of Claim in July 2002. However, it is a cardinal principal of the rules of pleadings that the amendment duly made in a pleading takes effect not from the date when the amendment is made, but from the date of the original document which it amends. Therefore the amendment in July 2002 claiming forfeiture of the deposit must be taken to have the effect of having claimed such forfeiture of deposit when the Writ and Statement of Claim was issued back in December 2000 alleging breach by the defendant and terminating the Tenancy by that Writ.

78. Accordingly, I can see no reason why the plaintiff cannot claim forfeiture of the deposit even though that amendment was made in July 2002.

79. I next turn to the question whether the plaintiff, under the provision of Clause 5(a) of the Tenancy Agreement is entitled to claim forfeiture of the deposit as well as loss and damages but without taking into account the deposit forfeited. That is effectively what the plaintiff seeks to claim in this case.

80. It is true that the wording of Clause 5(a) allows the plaintiff to forfeit the deposit absolutely upon termination of the Tenancy Agreement. It is further stated that forfeiture of the deposit is without prejudice to the plaintiff's right to claim damages or loss resulting from the defendant's breach.

81. However, nowhere in Clause 5(a) do I find anything to suggest that the plaintiff is entitled to both forfeit the deposit and claim for damages or loss as well without having to give credit for the deposit forfeited.

82. In the absence of any such agreement that the plaintiff is entitled to do so, it must be unconscionable for the plaintiff to be permitted so to do as it would tantamount to double recovery.

83. If it should be necessary in this case, I am prepared to hold that there is an implied term in Clause 5(a) of the Tenancy Agreement that the plaintiff has to give credit for the amount of the deposit forfeited where he also sees fit to claim for damages or loss arising out of the defendant's breach of such Tenancy Agreement.

84. Lastly, turning to the amount of the total deposit still held by the plaintiff, there seems to be a small discrepancy between the figure put forward by the plaintiff and that of the defendant. According to the plaintiff, the amount of the total deposit held by the plaintiff is $602,500.00 whereas according to the defendant the amount of the total deposit held by the plaintiff is $595,500.00.

85. Having checked the Tenancy Agreement as well as the Supplemental Agreement, I have reached the conclusion that the figure given by the defendant namely, $595,500.00, is the correct figure. This is worked out from the original amount of rental deposit in the sum of $840,000.00 less the refunded amount of $252,000.00 but adding on the management fee deposit of $7,500.00.

Decision

86. For the reasons given above, the plaintiff succeeds in its claim as follows :

(a) forfeiture of the total deposit in the sum of $595,500.00 held by the plaintiff; and

(b) damages in the amount of $1,767,310.42 as claimed by the plaintiff.

87. Upon the defendant's counterclaim, the defendant is entitled have the amount of the total deposits set off against the plaintiff's claim for damages.

88. The net result therefore is that the plaintiff will have judgment in the sum of $1,171,801.42 with interests thereon at judgment rate as from 16 October 2001 until payment.

Costs

89. There will be a cost order nisi that :

(a) the costs of this action be to the plaintiff, to be taxed if not agreed; and

(b) the costs of the counterclaim be to the defendant, to be taxed if not agreed.