MODERN BEAUTY SALON (HK) LTD v. KING ALLIANCE INTERNATIONAL LTD

DCCJ 2216/2019

[2026] HKDC 115

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2216 OF 2019

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JUDGMENT

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1.  This is the 4-day trial of the present action commenced by the Plaintiff (“P”), a commercial tenant of the premises known as 4^th Floor of Albion Plaza, Nos 2-6 Granville Road, Tsimshatsui, Kowloon, Hong Kong (the “Premises”), on 6 May 2019 against the 1^st Defendant (“D1”), the landlord of the Premises, for the return of the entire amount of the rental deposit in the sum of HK$1,180,575.

2.  Initially, P also mounted a claim against the 2^nd Defendant (“D2”), the manager engaged and retained by D1 as the building manager of Albion Plaza, Nos 2-6 Granville Road, Tsimshatsui, Kowloon, Hong Kong (the “Building”), in the present action for the return of the entire amount of the air-conditioning and management deposits in the sum of HK$258,000. P’s action against D2 was settled by P filing and serving a Notice of Discontinuance on 15 December 2023[1] pursuant to the Consent Order made on 27 October 2023[2].

3.  D1 defended the present action by contending that P was in breach of the terms of the Tenancy Agreement entered into between P and D1 on 4 November 2016 (the “T/A”), in particular clauses 5.03, 5.23 and 5.25, and that, by virtue of clause 12.01(1), D1 was entitled to set off against the rental deposit the repair costs, loss and damage suffered by D1 as a result of the P’s breaches of the T/A.

4.  At trial, P was represented by Mr Victor Lau (“Mr Lau”) of Counsel and, on factual matters, called Mr 李守義 (“Mr Lee”) and Mr 梁松喜 (“Mr Leung”) viva voce. D1 was represented by Mr Tommy Cheung (“Mr Cheung”) of Counsel and called 2 factual witnesses, namely Mr 葉志傑 (“Mr Yip”) and Ms 蕭碧賢 (“Ms Siu”) viva voce.

5.  Pursuant to the Order of Master Isaac Yung dated 18 September 2023 (the “18/9/23 Order”), P and D1 were granted leave each to call one expert in relation to the following 2 issues and other consequential expert directions:-

(a)  The condition of the Premises at the time of P’s delivery of vacant possession of the Premises to D1 on 15 February 2019; and

(b)  The repair costs for restoration of the Premises to tenantable condition.

6.  At trial, P called Mr Leung Yu Cheung (“Mr YC Leung”)[3] whilst D1 called Mr Wong Wing Cheung, Dennis (“Mr Dennis Wong”)[4] to give their expert testimony. The Joint Expert Report compiled by Mr YC Leung and Mr Dennis Wong on 4 January 2024 pursuant to the 18/9/23 Order can be found at pp 244-256 of Trial Bundle A.

7.  After hearing the oral closing of Mr Cheung and Mr Lau on 21 July 2025, I adjourned the trial for my written judgment to be handed down.

8.  This I now do.

BACKGROUND

9.  P started renting the Premises from D1 in 2008. The 1^st tenancy agreement in respect of the Premises was entered by P and D1 on 11 February 2008.[5]  The term of the 1^st tenancy agreement was from 17 February 2008 to 16 February 2011. On 17 February 2008, D1 handed over the Premises to P in the “as is” condition with D1’s structure, fixtures and fittings stipulated in a written handover list[6] (the “17/2/08 Handover List”). On the same day, photos of the condition of the Premises (the “17/2/08 Photos”) were also taken.[7]  The 17/2/08 Handover List recorded, inter alia, the following:-

(a)  All windows are finished with tinted and tempered solar reflective glass set in anodized aluminum frames; and

(b)  Standard air-conditioning with ceiling mounted fan coil 32 units and primary air ducting.

10.  The T/A is the 4^th tenancy agreement entered by P and D1 in respect of the Premises.

11.  The T/A was the product of discussions between P and D1 and was signed by P after P’s inhouse lawyer gave green light to its signing. The T/A provided the following:-

(a)  Under clause 1, D1 let the Premises to P at a monthly rental (exclusive of rates and charges) of HK$393,525 for a term of 2 years, commencing on 17 February 2017 and expiring on 16 February 2019.

(b)  Under clause 12.01(1), (2) and Part III of the 2^nd Schedule, P should pay D1 a rental deposit of HK$1,180,575, an air-conditioning deposit of HK$138,000 and a management deposit of HK$120,000 on the signing of the T/A.

(c)  Under clause 2.03, P should engage and retain D2 throughout the term of the T/A for the provision of air-conditioning and management services and pay to D2 the monthly air-conditioning charges (HK$46,000), management charges (HK$40,000).

(d)  Under clause 5.13, P should keep all windows of the Premises closed at all times.

(e)  Under clause 5.03(1), P should keep and maintain at the expense of P all the interior parts of the Premises including D1’s fixtures and fittings therein and all additions (whether of P or D1) thereto including all doors, windows, electrical installations and wiring, air-conditioning ducting and air-conditioning equipment etc in good, clean, tenantable, substantial and proper repair and condition and as may be appropriate from time to time properly painted and decorated.

(f)  Under clause 5.25, P should pay to or reimburse D1 the cost of replacing all broken, damaged, scratched or marked windows or glass panels whether or not such breakage, damage, scratching or marking was caused by the act, default, negligence or omission of P or its contractors, employees, agents, invitees, licensees or permitted sub-tenants.

(g)  Under clause 5.03(2), P should, at the expiration or sooner determination of the term of the T/A, deliver up the Premises and all fittings, fixtures and additions therein and thereto, other than P’s fixtures and fittings, to D1 in good, clean and tenantable condition and repair in accordance with its covenant to repair contained in the T/A (fair wear and tear excepted).

(h)  Under clause 5.23, P should yield up the Premises with all fixtures, fittings and additions therein and thereto at the expiration or sooner determination of the T/A in good, clean and tenantable repair and condition in accordance with the stipulations thereinbefore contained together with all keys giving access to all parts of the Premises having removed all P’s trade furniture and fittings and making good any damage to the Premises caused as a result.

(i)  Under the 4^th Schedule, a special condition that at the expiry or upon sooner determination of the T/A, P should deliver vacant possession of the Premises to D1 in a “bare shell” condition with the said concrete ceiling, concrete floor and concrete walls together with D1’s provisions (fair wear and tear excepted).

(j)  Under clause 11.01, if there should be any breach or non-performance of any of the stipulations, conditions or agreements herein contained and on the part of P to be observed or performed, D1 might in any such event at its option elect not to terminate the T/A but to deduct from the rental deposit the amount of any costs, expenses, loss or damage sustained or incurred by D1 as the result of the breach, non-observance or non-performance by P in the manner as stipulated therein.

(k)  Under clause 12.01(1), P should, on the signing of the T/A, deposit with D1 the rental deposit to secure the due observance and performance by P of the agreements, stipulations, terms and conditions contained in the T/A and on the part of P to be observed and performed which rental deposit should be held by D1 throughout the currency of the T/A free of any interest to P and in the event of any breach or non-observance or non-performance of any of the agreement, stipulations, terms or conditions covenanted with D1, D1 might at its option elect not to terminate the T/A but to deduct from the rental deposits the amount of any rent, rates and other charges payable thereunder and any costs, expenses, loss or damage incurred or sustained by D1 as a result of any breach, non-observance or non-performance by P thereof.

(l)  Under clause 12.03(1), subject as aforesaid, the rental deposits should be refunded to P by D1 without interest within 30 days after the expiration or sooner determination of the T/A and delivery of vacant possession to D1 or within 30 days after the settlement of the last outstanding claim by D1 and/or D2 against P for any arrears of rent, etc and for any breach, non-observance or non-performance of any of the agreement, stipulations, terms and conditions contained in the T/A and on the part of P to be observed or performed whichever should be the later.

12.  Throughout the terms of the 4 tenancy agreements, P had not done any repair work to the Premises and neither had P complained to D1 about the structure and interior of the Premises. All along prior to the expiry of the T/A, P had been on good terms with D1.

13.  For commercial reason, P decided not to rent the Premises after the term of the T/A. P therefore engaged a contractor to reinstate the Premises for the purpose of yielding up of the Premises to D1 upon expiration of the T/A. On 20 December 2018, a Contractors’ All Risks Insurance (Liability to Third Parties) policy was taken out covering interior decoration works to be carried out from 21 December 2018 to 20 February 2019 (the “All Risks Policy”).[8]  The insured thereunder was Tai Chun Engineering & Metal Recycle Co (“Tai Chun”) as contractor and/or all its sub-contractors of every tier.

14.  About the same time, P also engaged Carrier Hong Kong Limited (“Carrier”), the air-conditioning contractor nominated by D1, to carry out work regarding the air-conditioning system installed at the Premises. According to P, its contract with Carrier was evidenced by the Quotation to MIR Limited[9] dated 3 January 2019[10] (the “3/1/19 Quotation”) and the cheque issued by Beauty Expert (Logistics) Limited to Carrier on 10 January 2019[11].[12]

15.  On 30 January 2019, Carrier sent a quotation of repair work of fan coil units at the Premises to D2[13] (the “30/1/19 Quotation”) regarding “1. [s]upply and replace 6 nos. of fan coil motors at 4/F[,] 2. [s]upply and replace 5 nos. of fan coil actuator at 4/F [and] 3. [s]upply, install & reconnect 35 sets of fuse spur, conduit with cable wiring for fan coil units at 4/F”.

16.  On 31 January 2019,

(a)  Ms Siu emailed Mr Andrew Mak, suggesting the handover of the Premises to be carried out on 15 February 2019 and that if there was any delay in replacing the fire door, cost would be deducted from the rental deposits[14]; and

(b)  Carrier faxed to Ms Siu, quoting the price for the installation works of individual FCU Group Control[15] for the Premises[16] (the “31/1/19 Faxed Quotation”).

17.  On 1 February 2019,

(a)  Mr Yip of the Building management office emailed Mr Andrew Mak, recording the telephone conversation with the latter on 22 January 2019 about details of the outstanding defects, ie (a) some cements particles and stains found on the window frames and (b) a Town Gas supply pipe installed inside the female toilet, after inspection with Ms Pong of the latter’s contractor, and asking the latter for rectification as soon as possible[17] (the “1/2/19 Email (1)”); and

(b)  Mr Yip of the Building management office emailed Mr Andrew Mak with photos, requesting rectification of the male toilet and columns inside the Premises[18] (the “1/2/19 Email (2)”).

18.  On 13 February 2019, Mr Andrew Mak emailed Ms Siu with copy to Mr Wind Suen, confirming the handover date and that the fire door would be replaced on or before 10 March 2019.[19]

19.  On 15 February 2019,

(a)  P handed over the Premises to D1. Ms Siu (representing D1), Mr Yip (representing D2), Mr Andrew Mak and Mr Wind Suen (both representing P) attended the handover of the Premises on 15 February 2019; and

(b)  Cheung Hung Aluminum Decoration Engineering Co. Ltd. (“Cheung Hung”) sent a quotation to Mr Yip for replacing 6 windows at the Premises[20] (the “Cheung Hung Quotation”).

20.  On 16 February 2019,

(a)  Mr Yip of the Building management office emailed Mr Andrew Mak with copy to Ms Siu, stating that the latter’s contractor came to the Premises for the reinstatement works in the morning and asking for a working schedule before processing the reinstatement works[21]; and

(b)  Mr Yip of the Building management office emailed Ms Siu a draft email (to Mr Andrew Mak regarding reinstatement works at the Premises) (the “16/2/19 Draft Email”) for the latter’s comment before dispatch[22].

21.  On 18 February 2019,

(a)  Ms Siu emailed Mr Yip, approving the 16/2/19 Draft Email[23];

(b)  Mr Yip of the Building management office emailed to Mr Andrew Mak with copy to, inter alios, Ms Siu, referring to the handover meeting on 15 February 2019, stating that due to the bad condition of all the aluminum windows and no power supply to test all fan coil units, the takeover process of the Premises was not successful and asking for the reinstatement works to be completed by D1’s nominated contractor as soon as possible[24] (the “18/2/19 Email (1)”);

(c)  Mr Yip of the Building management office emailed to Mr Andrew Mak with copy to, inter alios, Ms Siu, enclosing a copy quotation for reinstatement of the aluminum windows, stating that the T&C and the power supply for all the fan coil units were still outstanding and advising to complete the reinstatement of the fan coil units and to confirm the quotation on or before 20 February 2019 at 18:00[25] (the “18/2/19 Email (2)”);

(d)  Mr Wind Suen emailed Ms Siu, informing the latter that P had not altered any part of the aluminum windows of the Premises, that the aluminum windows had been glued shut from outside, that it was impossible for P to glue shut the aluminum windows from outside, that when the Premises was handed over to P in 2008, the condition of the aluminum windows was already in such a condition and asking for return of the deposits under the T/A as soon as possible[26] (the “18/2/19 Reply Email”); and

(e)  Li & Associates (“Li”) representing P sent a letter before action to D1 and D2, asking for the repayment of the rental deposit and the air-conditioning and management deposits in the total sum of HK$1,438,575 within 30 days from 15 February 2019[27] (the “18/2/19 Letter”).

22.  On 20 February 2019, D2 issued a debit note to P charging for rental, management fee and air-conditioning fee for the period from 17 February to 16 March 2019 (the “20/2/19 Debit Note”).[28]

23.  On 22 February 2019, Lo & Lo solicitors (“L&L”) acting for D1 and D2 replied to the 18/2/19 Letter and, inter alia, particularized the defects[29] found at the time of the joint inspection on 15 February 2019 (the “22/2/19 Letter”).[30] The 22/2/19 Letter also enclosed a copy of the 20/2/19 Debit Note, the 30/1/19 Quotation, the 31/1/19 Faxed Quotation and the Cheung Hung Quotation.

24.  On 4 March 2019, L&L issued a letter before action to Li, informing the latter that D1 and D2 would appoint a building surveyor to assess the condition of the Premises and prepare a report before D1 and D2 instructed contractors to carry out all the necessary repairs without further notice to P, and thereafter would mount a claim against P.[31]

25.  Between 5 and 8 March 2019, various quotations for the replacement of windows at the Premises were obtained from various contractors, ie Success Unity Engineering Services Limited (“Success Unity”)[32], A & G Aluminum Windows Engineering Company[33] and Since Foon Aluminum Decoration Engineering Co, Limited[34].

26.  On 8 March 2019,

(a)  D2 signed the 30/1/19 Quotation[35]; and

(b)  D2 signed the 31/1/19 Faxed Quotation[36].

27.  On 9 and 11 March 2019, Mr Raymond Cheng of R Cheng Property Consultants Limited inspected the Premises for the preparation of a report to ascertain the defects on vacating the Premises by the outgoing tenant with findings (including drawings and photos).[37]

28.  Between 14 and 21 March 2019, Carrier carried out the repair works to the air-conditioning system in accordance with the 30/1/19 Quotation.

29.  On 18 March 2019, D2 issued a debit note to P charging for rental, management fee and air-conditioning fee for the period from 17 March to 16 April 2019.[38]

30.  On 22 March 2019, Mr Andrew Mak emailed Ms Siu with copy to Mr Wind Suen, stating that the replacement of the fire door was completed on 9 March 2019 and that the original certificate was delivered to the management office on 11 March 2019.[39]

31.  Between 28 March and 10 April 2019, Cheung Hung replaced 6 windows at the Premises.

32.  Between 3 and 12 April 2019, Carrier carried out the repair works to the air-conditioning system in accordance with the 31/1/19 Faxed Quotation.

33.  On 8 April 2019, Mr Raymond Cheng compiled the report ascertaining the defects on vacating the Premises by the outgoing tenant with 94 photos taken (“Cheng’s Report”).[40]

34.  On 3 May 2019, L&L sent a letter to Li, enclosing a cheque of HK$403,051.77 issued by D2 to P on 2 May 2019 representing the balance of the rental deposits after deducting the repair and reinstatement costs, mesne profits and government rates (the “2/5/19 Cheque”) with table of calculation.[41]

35.  On 19 April 2023, L&L sent a similar letter to Liu & Co representing P, enclosing another cheque of HK$403,051.77 issued by D2 to P on 17 April 2023 since P had not presented the 2/5/19 Cheque.[42]

THE PARTIES’ RESPECTIVE CASES

P’s Case

36.  P’s case is simple and straightforward.

37.  On 15 February 2019, P delivered vacant possession of the Premises to D1 in a “bare shell” condition. P did so pursuant to Part IV of the 4^th Schedule to the T/A.

38.  In breach of the T/A, D1 has failed to refund the rental deposit of HK$1,180,575.00 to P which D1 should have done so within 30 days after the expiration of the T/A and delivery of vacant possession to D1 pursuant to clause 12.03(1) in Section XII of the T/A.

39.  As a result, P has suffered loss and damage and therefore claims against D1 for the refund of the sum of HK$1,180,575.00 with interest.

D1’s Case

40.  D2 is acting as the agent and/or building manager of the Building on behalf of D1.

41.  D1 pleaded to rely on clauses 5.03, 5.23 and 5.25 to aver that P was in breach of the T/A by: -

(a)  failing to deliver the Premises in good, clean and tenantable conditions and repair in accordance with its covenant to repair contained in the T/A; and

(b)  failing to make good any damage to the Premises caused by P

(i)  during the term of the T/A; or

(ii)  while removing its trade furniture and fittings and/or during the reinstatement works carried out by P prior to its delivery of vacant possession of the Premises on 15 February 2019.

42.  The defects found upon delivery of vacant possession of the Premises to D1 on 15 February 2019 were particularized as follows:-

(a)  8 BMS controls for the fan coil units were removed from the fan coil systems affecting the proper operation and functioning of the air-conditioning system of the Premises;

(b)  a number of window glass panels were seriously damaged and those damaged glass panels had to be replaced;

(c)  the electricity wirings and connections of the fan coil units to the electricity supply were removed and such electricity wirings had to be reinstated; and

(d)  the fire door near the service lift was seriously damaged[43].

43.  By the 18/2/19 Email (1) and the 18/2/19 Email (2), Ms Siu of D2, acting as agent of D1, put on record the bad condition of the aluminum windows and no power supply to test all fan coil units and enclosed a copy of the Cheung Hung Quotation and photos showing the condition of the aluminum windows.

44.  By the 22/2/19 Letter, D1 put P on notice of the defects found on the inspection of the Premises on 15 February 2019 and demanded P to be responsible for the repair costs of such defects as well as the loss and damage including the rental of the Premises until such defects had been repaired or fixed.

45.  The replacement of the damaged fire door aside, P had not dealt with the other defects particularized and D1 instructed its contractors to fix them.

46.  In order to mitigate its loss, D1 had instructed its contractors to fix the defects with remedial works completed on 6 April 2019. D1 claimed a total of HK$1,065,963.33 for the necessary and/or reasonable repair costs incurred by D1[44] and loss and damage suffered by D1 up to the completion of the repair works[45].

47.  Hence, D1 was entitled, by virtue of clause 12.01 of the T/A, to set off the aforesaid total sum of HK$1,065,963.33 against the rental deposit of HK$1,180,575.00. After adding the electricity deposit repayment [HK$9,800] and the balance of the management and air conditioning deposits repayment [HK$20,640 (278,640 – 258,000[46])], D1 should refund HK$145,051.77 to P.

THE ISSUES

48.  I understand that the parties have filed their Agreed Statement of Issues In Dispute on 22 May 2025 (the “Agreed Statement”). Instead of adopting the Agreed Statement verbatim, the following are the issues culled from the pleadings and reached after discussion with Mr Lau and Mr Cheung at the oral Opening:-

(a)  What was the condition of the Premises upon delivery of vacant possession of the Premises to D1 on the expiry of the T/A? (the “1^st Issue”)

(b)  Did P cause loss and damage and/or allow loss and damage to be caused to the Premises during the term of the T/A? (the “2^nd Issue”)

(c)  Was P in breach of the T/A by:-

(i)  failing to make good the loss and damage to the Premises caused by P during the term of the T/A or while removing its trade furniture and fittings and/or during the reinstatement works carried out by P prior to its delivery of vacant possession of the Premises on 15 February 2019; and/or

(ii)  failing to deliver the Premises in good, clean and tenantable conditions and repair in accordance with its covenant to repair contained in the T/A? (the “3^rd Issue”)

(d)  Has P delivered vacant possession of the Premises to D1 as required[47] on the expiry of the T/A? (the “4^th Issue”)

(e)  Was D1 entitled to deduct from the rental deposit the costs, expenses, loss or damage incurred or suffered by D1 as a result of P’s breaches of the T/A? (the “5^th Issue”)

(f)  Has D1 breached the T/A by failing to return the rental deposit to P within 30 days under the T/A after P’s delivery of vacant possession of the Premises to D1 as required on the expiry of the T/A? (the “6^th Issue”)

49.  Before I embark on my journey in resolving the aforesaid issues in the later section “Analysis of the Evidence” of this Judgment, I shall briefly state some legal principles applicable to this case.

THE APPLICABLE LEGAL PRINCIPLES

Burden of Proof

50.  Although P bears the legal burden, or persuasive burden, of proving the vacant possession of the Premises had been delivered, if D1 has raised the issue of whether P has failed to perform some of the terms of the T/A, D1 shall bear the evidential burden ie to adduce evidence sufficiently cogent and probative to raise the issue before the Court of whether there was an antecedent breach by P of the terms in question. Such evidence, when properly assessed, has to be capable of justifying a reasonable inference that, in this case, there is an issue to be tried as to whether the terms in question were breached. It is not enough merely to raise suspicious circumstances. If D1is able to discharge that evidential burden, then P would then have the legal burden of satisfying the Court that it had, in fact, duly performed its obligations under the terms in question.[48]

51.  As to the “fair wear and tear” exception, if any want to repair is alleged and proved in fact, it lies on P to show that it comes within the exception.[49]

In Good, Clean, Tenantable, Substantial and Proper Repair and Condition

52.  In Proudfoot v Hart (1890) 25 QBD 42, Lord Esher MR at pp 52-53 held the following:-

“…‘Good tenantable repair’ is such repair as, having regard to the age, character, and locality of the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it … The house need not be put into the same condition as when the tenant took it; it need not be put into perfect repair, it need only be put into such a state of repair as renders it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it.

… If when the tenancy ends, the paper on the walls is merely in a worse condition than when the tenant went in, I think the mere fact of its being in a worse condition does not impose upon the tenant any obligation to repaper under the covenant, if it is in such a condition that a reasonably-minded tenant of the class … would not think the house unfit for his occupation. But suppose that the damp has caused the paper to peel off the walls, and it is lying upon the floor, so that such a tenant would think it is a disgrace, … the tenant is bound … to put up new paper. He need not put up paper of … equal value to the paper which was on the walls when his tenancy began. He need not put up a paper of richer character than would satisfy a reasonable man within the definition.”

53.  In considering whether the tenant was entitled to the return of the whole rental deposit and arising therefrom whether the tenant had discharged his obligation under the covenant to repair, HH Judge Lok (as he then was) in Lee Ho Seok v Kanvest Limited, DCCJ 5074/2002 (Unreported), 1 December 2004 at [13], adopted the summary of the law in Hong Tenancy Law by Malcolm Merry, 4^th ed, at p 116:-

“The standard will vary with the length of the lease, the obligations to repair undertaken by tenant and landlord in other covenants, and the age, character and location of the premises at the time the lease was entered into. In one old case it was said that:

‘good tenantable repair’ is such repair as, having regard to the age, character and locality of the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it.

This means that a higher standard of repair would be expected, for instance, in a modern flat in a middle-class district than in a flat in an old tenement block in a crowded area. The character of the district and the character of the premises may change over time, so it is important to consider the nature of the location and the premises at the beginning of the lease. Where, as is common in Hong Kong, the lease is for three or fewer years these considerations are, however, unlikely to make a difference.”

54.  In Lee Ho Seok (supra), HH Judge Lok (as he then was) went on to say at [14] and [17]:-

“14. If the leased premises are in a very bad condition in need of repair, obviously the outgoing tenant, before he vacates the premises, has a duty to carry out reasonable repair work, the standard of which is to be judged according to factors such as the neighbourhood of the premises. However, that does not necessary mean that the outgoing tenant has a duty of redecorating the leased premises to the satisfaction of the new tenant. This was exactly what the Defendant had asked the Plaintiff to do, which simply cannot be right.

…

17. Even if the Plaintiff was in breach of the covenants under the Agreement, there are other obstacles barring the Defendant from claiming any damages in the present case. Firstly, leaving aside the larger and the more noticeable dirt marks, some of the minor dirt marks in the walls were undoubtedly “fair wear and tear”. According to the Defendant’s case, it was not possible to repaint part of a wall because of the shading problem. Hence, even with some minor marks, the Defendant would have had to repaint the walls in any event in order to place the Premises for lease again in the market. That was exactly what the Defendant did before it leased the Premises to the Plaintiff. As the Defendant was expected to incur such costs in removing the “fair wear and tear” defects to the satisfaction of the new tenants, the presence of the larger marks did not make a difference as far as the Defendant’s costs are concerned. In other words, the Defendant has suffered no real loss in this regard.”

55.  As regards the duty on the tenant to repair and maintain the “interior” of the premises, without qualification, such obligation “may extend to all parts of the interior (whether or not these parts are included within the “structure” of the premises)”. Irrespective of any repairing covenant on the part of the tenant, in the absence of express contractual obligation, a landlord’s obligation in relation to the fabric of premises demised are very limited.[50]

Fair Wear and Tear Exception

56.  By fair wear and tear, the definition in Haskell v Marlow (supra) at p 57 per Salter J is informative: To bring the dilapidations/defects within the fair wear and tear exception, the plaintiff must show the following: -

(a)  The dilapidations for which exemption is claimed were caused by normal human use or by the normal action of the elements; and

(b)  They are reasonable in amount, having regard to the terms of the contract to repair the premises and the other circumstances of the case.

57.  The exception of want of repair due to wear and tear must be construed as limited to what is directly due to wear and tear. It does not mean that if there is a defect originally proceeding from reasonable wear and tear, the tenant is released from his obligation to keep in good repair and condition as to everything which it may be possible to trace ultimately to that defect. He is bound to do such repairs as may be required to prevent the consequences flowing originally from wear and tear from producing others which wear and tear would not directly produce.[51]

Loss of Rental Claim

58.  The Court would allow the landlord’s claim against the defaulting tenant for loss of the property rental covering the period of time for the landlord to liaise with various parties including the contractor in preparing for the repair works to commence and the repair works carried out.[52]

General Approach to Evaluating Evidence

59.  In respect of evaluating the evidence given by witnesses, guidance can be found in Lee Fu Wing v Yau Po Ting Paul[53], in which DHCJ Au (as he then was) said:-

“53. In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations (sic) the following:

(a) Whether the party’s case is inherently plausible or implausible;

(b) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(c) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility; and

(d) The demeanour of the witnesses.”

60.  In Taishin International Bank Co Ltd v QFI Ltd [2020] HKCFI 2116, DHCJ Paul Lam SC set out the general principles that the court should apply in assessing the credibility of a witness; in particular, citing one English Chancery case and one English Court of Appeal case at [13] and [14] respectively:-

“13. The credibility of both Ko and Huang is in issue. There is no dispute on the general principles that the Court should apply in assessing the credibility of a witness (see e.g. Progetto Jewellery Co Ltd v Lau Chiu Ying [2020] HKCFI 209 at §§28-31, per DHCJ M K Liu, cited by the Plaintiff). I also found the following summary of principles set out in Northampton Borough Council v Cardoza and others [2019] EWHC 26 (Ch) instructive:

“36. As to the considerations applicable to evaluating evidence, a useful starting point is Goff J’s (as he then was) observation as to resolving conflicts of evidence in Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 LL Rep 1 at p.57

‘… Where there is a conflict of evidence … reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth’.

37. Factors relevant to the evaluation of a witness’s evidence were identified by Lewison J (as he then was) in Painter v Hutchinson [2007] EWHC 758 (Ch) at [3] when addressing the unsatisfactory nature of the defendant’s approach to giving evidence. These included: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure. This was not intended to be an exhaustive list, but it is important and very helpful.

38. A useful recent reminder or guidance on the approach to the evidence of factual witnesses, and expanding on the guidance given by Goff J in The Ocean Frost, was given by Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm). After noting that human memory is fallible and that the process of litigation and preparing for trial tends to interfere further with the reliability of human memory, particularly where a lawyer has had a hand in drafting a witness’s evidence and the witness’s memory has been refreshed by reading documents, Leggatt J concluded that the best approach for a judge to adopt at the trial of a commercial case is to base factual findings on documentary evidence and known or probable facts and the inferences to be drawn therefrom. Witness evidence, written and oral, is not without purpose; but, its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’s motivations, personality and working practices.

39. In similar vein, in the recent case of Freemont (Denbigh) Ltd v Knight Frank LLP [2014] EWHC 3347 (Ch) reference was made to an article written by Bingham J (as he then was) entitled “The Judge as Juror: The Judicial Determination of Factual Issues” published in Current Legal Problems 38 in 1985. Bingham J considered the approach to deciding upon the reliability of a witness’s evidence and regarded the following to be helpful indicators of where the truth lies: the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred; the internal consistency of a witness’s evidence; and, the consistency of a witness’s evidence with what (s)he has said or deposed on other occasions. Bingham J considered that the credit of a witness in matters not germane to the litigation was of less assistance, and that the demeanour of a witness was on the whole not a reliable pointer to a witness’s honesty.”

14. In Simetra Global Assets Ltd & Another v Ikon Finance Ltd [2019] EWCA Civ 1413, Males LJ of the English Court of Appeal stressed the importance of contemporaneous documents at §48:-

“In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party's internal documents including emails and instant messaging. Those tend to be the documents where a witness's guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence. The classic statement of Robert Goff LJ in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at p.57 is frequently, indeed routinely, cited:

‘Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth. I have been driven to the conclusion that the Judge did not pay sufficient regard to these matters in making his findings of fact in the present case.’”

61.  It was held by the Hong Kong Court of Appeal in Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at [7] (per Rogers V-P) and [134]-[135] (per Stock JA (as he then was)) that for the events in question that took place a long time ago, contemporaneous documentation is usually of the highest importance.[54] The reason is obvious: Due to unreliability and fallibility of human memory, it may be difficult for witnesses to recall clearly what happened in relation to events which took place a long time ago and this prompts judges to place little if any reliance at all on witnesses’ recollection of events.[55]

Approach in Assessing the Weight of Expert Evidence

62.  In Wong Yu Cho, Rolly and Anor v Art Statements Ltd and Others [2023] HKDC 462 at p 9, the Court summarised the duties of expert witness as follows:-

“3.5 The duties of an expert witness are summarized in The Ikarian Reefer (No 1) [1993] 2 Lloyds Rep 68 and include the following established principles: Maysun Engineering Co Ltd v International Education and Academic Exchanges Foundation Co Ltd t/a Hong Kong Institute of Technology, DCCJ 27 of 2006, 22 September 2010 §31.

(1) Expert evidence presented in court should be, and be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation.

(2) Independent assistance should be provided to the court by way of objective unbiased opinion regarding matters within the expertise of the expert. An expert witness should not assume the role of advocate.

(3) Facts or assumptions upon which the opinion was based should be stated together with material facts which could detract from the concluded opinion.

(4) An expert witness should make clear when a question or issue fell outside his expertise.

3.6 In particular, an expert must explain the basis of his or her evidence and mere assertion carries little weight. An expert’s bald statement of his opinion is not of any real assistance and proper evaluation of the opinion can only be undertaken if the process of reasoning which led to the conclusion, including the premises from which the reasoning proceeds, are disclosed by the expert: Kennedy v Cordia (Services) LLP [2016] 1 WLR 597 §48.”

63.  The approach for assessing the weight of expert evidence was explained in Wong Siu Wa v Win Sino Engineering Limited [2018] HKCFI 1663 by Deputy High Court Judge Raymond Leung SC at pp 35-36:-

“154. In assessing the expert evidence, I would respectfully adopt the approach of Stuart-Smith LJ in Loveday v Renton [1989] 1 Med LR 117 (at 125), wherein it was explained that:

(a) The mere expression of opinion or belief by a witness, however eminent, does not suffice.

(b) The court has to evaluate the witness and the soundness of his opinion.

(c) Most importantly this involves an examination of the reasons given for his opinions and the extent to which they are supported by evidence.

(d) The weight to be given to the opinion of an expert depends on:

(1) the internal consistency and logic of his evidence;

(2) the care with which he had considered the subject and presented his evidence;

(3) his precision and accuracy of thought as demonstrated by his answers;

(4) how he responds to searching and informed cross examination and in particular the extent to which a witness has conceived an opinion and is reluctant to re-examine it in light of later evidence, or demonstrates a flexibility of mind which may involving changing or modifying opinions previously held;

(5) whether or not a witness is biased or lacks independence.”

ANALYSIS OF THE EVIDENCE

64.  Before I start my analysis of the present case, I shall give a brief summary of the evidence given by the witnesses.

A Summary of the Factual Witnesses’ Evidence

Mr Lee

65.  Mr Lee started working for P in the year of 2001 and has had the title of CAO (Chief Administrative Officer) since 2006. P carried on the business of providing beauty salon services and he was responsible for the operation of a P’s branch at the Premises.

66.  P decided to rent the Premises in 2008 because the Premises was located in Tsim Sha Tsui and its interiors was suitable for running a beauty salon. From 2008 to 2018, the facilities (including air-conditioning system and power supply) at the Premises were in normal operating condition and did not require any repair. Throughout all the years, P had no problems with D1 and neither had P complained about the structure and interiors of the Premises.

67.  In 2019, the lease market in Hong Kong was booming. It was only for commercial reasons that P had decided not to continue renting the Premises and to reinstate the Premises to the “bare shell” condition. P engaged a contractor to carry out the reinstatement work and gave the contractor the 17/2/08 Handover List and the 17/2/08 Photos to facilitate it in carrying out the reinstatement work. The message to the contractor was to reinstate the Premises to a “bare shell” condition. Almost simultaneously with the reinstatement work, P also engaged an air-conditioning contractor to do the air-conditioning work as required by D1. Mr Lee did not know whether D1 had overseen the reinstatement work carried out by the contractor.

68.  Mr Lee personally did not know how the Premises was reinstated by the contractor. He had instructed his colleagues to check the reinstatement work undertaken by the contractor at the Premises from time to time and received reports from his colleagues.

69.  After completion of the reinstatement work, Mr Lee arranged for the Premises to be handed over to D1 on 15 February 2019. On 15 February 2019, P’s staff returned the keys[56] to D1’s representatives. Thereafter, D1 has taken complete control of the Premises.

70.  On 18 February 2019, P’s staff received the 18/2/19 Email (1) from the Building management office, indicating that all the aluminum windows of the Premises were in bad condition and that there was no power supply to test all fan coil units of the Premises. In order to maintain the good relationship with the Building management office, P gathered understanding of the accusation regarding the aluminum windows. After having understood the situation, P verified that it had not altered any part of the aforesaid aluminum windows. P’s staff discovered that the aluminum windows had been glued shut from outside and such work required working on the scaffoldings outside the Building. Without the approval by the Building management office, it was impossible for P to carry out such construction work. When the Premises was handed over to P in 2008, the condition of the aluminum windows was already in such a condition.

71.  On 18 February 2019, P sent the 18/2/19 Reply Email to the Building management office.

72.  In cross examination, Mr Lee said the following:-

(a)  Since he was not present at the Premises when the contractor reinstated the Premises, he was not able to answer the question whether he could rule out the possibility of the contractor disconnecting the wiring of the air-conditioning system whilst reinstating the Premises.

(b)  He did not feel the necessity of calling the contractor to give evidence because the contractor did not do the air-conditioning work.

(c)  He inspected the windows when D1 handed over the Premises to P in 2008. He noticed that the windows were obviously aging and wearing away, but he had not complained to D1 about such condition.

(d)  After P rented the Premises in 2008, all the windows had been blocked by hoarding and the beauty salon business carried on at the Premises did not require windows. The hoarding was made of gypsum with aluminum frame. The hoarding was erected at 10mm away from the windows. Before the handover in 2019, the hoarding had been removed by the contractor.

(e)  Throughout P’s tenancies over the Premises, P had not inspected or repaired the windows. Before the 2019 handover, P had not sought any contractor to check the windows.

(f)  After the contractor completed the reinstatement work, his colleagues (namely Mr Andrew Mak and Mr Wind Suen) who was also responsible for the 2008 handover reported to him that the condition of the Premises was the same as that when the Premises was handed over in 2008.

(g)  His colleagues had to report to him whatever problems D1 had during the 2019 handover.

(h)  His colleagues had not reported to him that the windows and the power supply of the Premises had problems and that without power supply, D1 could not check and test the air-conditioning system.

(i)  After the 2019 handover, D1 had not signed any document certifying that the handover was satisfactory. However, his colleagues (Mr Andrew Mak and Mr Wind Suen) told him that the Premises had been handed over to D1 and that the entire handover process had no problems. There was no documentation recording the report regarding the 2019 handover made by his colleagues to him.

(j)  The reason why he had not called Mr Andrew Mak and Mr Wind Suen to give evidence was that their employment with P had been terminated and he no longer had contacted them.

(k)  P engaged Carrier to carry out work relating to the air-conditioning system installed at the Premises. The contract with Carrier was evidenced by the 3/1/19 Quotation[57] and the cheque issued by Beauty Expert (Logistics) Limited to Carrier on 10 January 2019[58].

(l)  He agreed that he had not detailed the work carried out by Carrier to the air-conditioning system at the Premises and that he had not received documents from Carrier as relates to the completion of such work.

(m)  He disagreed with the suggestion that in fact, Carrier had not done the work relating to the air-conditioning system.

(n)  He was very concerned when he received the 18/2/19 Email (1) from D1. If the 2019 handover was unsuccessful, D1 could keep the deposits. He therefore sought legal assistance to reserve P’s rights and asked the contractor to check the problems.

(o)  P issued the 18/2/19 Letter[59]. In reply, D1 issued the 22/2/19 Letter[60], particularizing all the defects.

(p)  He disagreed that the defects particularized in the 22/2/19 Letter already existed during the 2019 handover. After P received the 22/2/19 Letter, master worker - Mr Leung and Mr Andrew Mak had inspected the Premises and told him that the condition of the Premises was the same as that in the 2008 handover. They had not told him the defects particularized in the 22/2/19 Letter except that the fire door near the service lift had problems. P therefore had installed a new fire door for D1.

Mr Leung

73.  Mr Leung is employed by P as repair technician, responsible for renovating the Premises.

74.  In or about 2008, Mr Leung represented P to obtain possession of the Premises from D1. When he inspected the Premises, he found the decoration of the Premises delipidated, including but not limited to the aging, wear and tear of the walls and all the windows. Some of the windows could not be opened because they were glued shut from outside. Such work required working on the scaffoldings outside the Building. Without approval by the Building management office, it was impossible to carry out such construction work.

75.  Since P would not use the windows during its business, Mr Leung was instructed to find a contractor to erect hoardings to block all the windows from inside. He therefore did not pay attention to the fact that some of the windows could not be opened.

76.  Mr Leung supervised the decoration work on the Premises and instructed the contractor to use hoardings to block all the windows. After the decoration work was completed, all the windows had been blocked by the hoardings and no one could contact the windows from inside.

77.  In or about 2018, P instructed Mr Leung to reinstate the Premises. Mr Leung supervised the reinstatement work and instructed a contractor to remove all the hoardings which blocked the windows. After all the hoardings had been removed, Mr Leung discovered that the condition of the windows was the same as that in the 2008 handover.

78.  On 15 February 2019, P handed over the Premises to D1. Thereafter, D1 had been in complete control of the Premises.

79.  In cross examination, Mr Leung testified the following:-

(a)  He started his employment with P in 2003. He only participated in the repair, maintenance and taking possession of the premises rented by P. His responsibility included planning the installation work.

(b)  At its peak, P had a total of 40 odd beauty salons. He was responsible for taking possession of and handing over all the beauty salons of P.

(c)  If there were problems at the site, he would give his opinions and formulate plans to deal with the problems. If the problems were related to external walls, common areas and advertising signages, he would give his proposals to P and P would document his proposals to the Building management office. If the problems were about interior decoration work, he would give oral instructions to the contractor directly.

(d)  At the 2008 handover, the Premises was delipidated and the windows were aging. The Premises had no lighting and no electricity supply. He reported the condition of the Premises to his boss. His boss told him that beauty salon did not require windows and P had not informed D1 of the condition of the Premises. Hoardings made of gypsum with aluminum frame were erected inside to block all the windows.

(e)  He was not present at the handover on 15 February 2019.

(f)  He did not attend the Premises daily to oversee the reinstatement work carried out by the contractor in 2018. He gave the contractor the 17/2/08 Handover List for the contractor to reinstate the Premises to the condition as shown in the 17/2/08 Handover List. The contractor removed all the power supply system, the air-conditioning system, the fire lighting system and the lighting system.

(g)  He agreed that the contractor had disconnected the power supply to the air-conditioning system for the reinstatement work. The reinstatement work included removing the false ceiling and the hoardings. He was present at the Premises when the hoardings were removed because the hoardings were close to the window glass panels. He had told the workers of the contractor to be careful.

(h)  When asked whether he saw pits on the windows during the 2008 handover, he said he did not know what “pits on the windows” meant. He said that he saw cellophane on the window glass blocking sunlight and the window glass had some marks (花).

(i)  He agreed that his memory of the events that happened over 10 years ago might not be accurate.

Ms Siu

80.  Ms Siu was employed by D2 as construction and operation manager.

81.  Ms Siu started her employment with D2 on 1 May 2015 and was posted to the Building to represent D1 to manage the Building. D2 was the Building management company.

82.  During P’s tenancies over the Premises, D1 and D2 had never received any complaints from P about the condition of the Premises nor any complaints about the structure or installations of the Premises. The Building management office had not received any notification or complaints from P that the fan coil units of the Premises were not operational.

83.  On 20 December 2018, Mr Andrew Mak emailed Ms Siu, informing her that P had instructed Tai Chun to reinstate the Premises.

84.  On 22 January 2019, Mr Yip and one Ms Pong of Tai Chun inspected the Premises and found some defects including some cement particles and stains on the window frames and Town Gas supply pipe in the female toilet. Mr Yip reported the aforesaid defects to Mr Andrew Mak by email on the same day.

85.  Before the 2019 handover, P, at the request of D1, engaged Carrier to cleanse the fan coil units of the Premises. Thereafter, Carrier informed Mr Yip that the fan coil units were not operational and could not be tested because the power supply to the air-conditioning system and the components of the fan coil units had been removed.

86.  On 15 February 2019, Ms Siu, Mr Yip and the representatives of P, namely Mr Andrew Mak and Mr Wind Suen took part in the handover of the Premises. During the handover, 4 problems were found:-

(a)  The aluminum windows were seriously damaged. All the windows facing Granville Road had been glued shut and 2 pieces of window glass had marks (花). After Tai Chun followed up on the problems, the problems of the windows facing Granville Road had been solved. 3 windows facing Cameron Road were oxidized and had irremovable hard objects-cement on the window frames. 1 piece of window glass facing Cameron Road had marks (花).

(b)  The fire door was damaged. A new fire door was installed on 10 March 2019.

(c)  All the power supply to and the BMS controls of the air-conditioning system had been removed. The air-conditioning system was not operational. This was discovered by Carrier when Carrier cleansed the air-conditioning system for P in January 2019

(d)  All the fan coil units (about 30 in number) could not be turned on. Some fan coil units were damaged and needed to be replaced.

87.  On 16 and 18 February 2019, Mr Yip emailed Mr Andrew Mak, recording the aforesaid defects/problems found during the 2019 handover and informing the latter that the aforesaid defects/problems should be repaired as soon as possible.

88.  On 18 February 2019, Ms Siu received the 18/2/19 Letter.

89.  Since P had not replied to D1’s demand for the repair of the aforesaid defects/problems, D1 approached suitable and reputable contractors for quotations to carry out the repair works.

90.  After Ms Siu informed D1’s leasing department of the aforesaid defects/problems on 20 February 2019, D1 instructed Mr Raymond Cheng of R Cheng Property Consultants Limited to inspect the Premises on 9 and 11 March 2019 to report on the items which required repair and the relevant repair costs. Hence Cheng’s Report.

91.  Between 14 and 21 March 2019, Carrier carried out the repair works to the air-conditioning system in accordance with the 30/1/19 Quotation.

92.  Between 28 March and 10 April 2019, Cheung Hung carried out the repair works to the aluminum windows in accordance with the Cheung Hung Quotation.

93.  Between 3 and 12 April 2019, Carrier carried out the repair works to the air-conditioning system in accordance with the 31/1/19 Faxed Quotation.

94.  All the repair works were regarded by D1 as completed on 6 April 2019 although the scaffoldings erected for the repair works were only removed after 6 April 2019. D1 therefore claimed for the sum of HK$826,888.50 as loss of rentals from 15 February 2019 to 6 April 2019.

95.  Ms Siu was cross examined and said the following:-

(a)  She did not have air-conditioning work qualification. Her knowledge of the BMS air-conditioning system came from the Carrier repair workers. She elaborated on the BMS system, and how the system was connected to the computer at the Building management office for the purpose of charging tenant the air-conditioning fees.

(b)  There were in total 8 BMS controls.

(c)  All the windows facing Granville Road which were glued shut had been cut open by the contractor after the 2019 handover.

(d)  The Cheung Hung Quotation only recited that 6 window glass panels had problems but did not identify which window glass panels on the Premises had problems.

(e)  The window panels which had problems were facing Cameron Road. She identified windows W8 to W19 in Cheng’s Report[61] as the windows having problems. The windows had marks (花), the aluminum window frames had white-grey protruded objects and two-coloured irons. The problems resulted in the windows becoming not eye appealing.

(f)  The 4 windows facing Cameron Road which she said had problems were contained in the 6 window glass panels mentioned in para. 95(d) hereinabove.

(g)  She first inspected the Premises on 15 February 2019. She had not prepared any handover checklist because 15 February 2019 was not the expiry date of the T/A[62] and she gave P one more day to solve the problems.

(h)  The 18/2/19 Email (1) recording that all the aluminum windows were in bad condition was not inaccurate because P knew which windows were bad and it had not replied. She disagreed with the suggestion that she had exaggerated the damaged condition of the windows in the 18/2/19 Email (1).

(i)  She agreed that Cheng’s Report only mentioned windows W3 and W7 facing Cameron Road had pits. She had not mentioned the windows had pits in her witness statement. She did not remember which window facing Cameron Road had marks (花).

(j)  She was not a professional and could not tell the difference between pits and marks (花).

(k)  According to her, at most only 1 window had pit. Her observation was at variance with the observations in Cheng’s Report. She disagreed with the suggestion that she had not inspected the windows carefully during the 2019 handover.

(l)  No colleagues had told her that the windows had more than 1 pit.

(m)  According to the quotation of Success Unity dated 5 March 2019[63], 7 window glass panels had problems. The quotation had not identified which 7 window glass panels had problems. She believed that Success Unity had attended the Premises and quoted 7 window glass panels needed to be replaced.

(n)  P wanted to hand over the Premises to D1 when the T/A expired. She therefore told P to cleanse the air-conditioning system of the Premises. She asked Mr Andrew Mak over a telephone conversation whether the 32 fan coil units of the Premises needed to be cleansed. P asked Carrier to give a quotation. Hence the 17/12/18 Quotation. She did not remember whether she saw the 17/12/18 Quotation or the 3/1/19 Quotation.

(o)  Carrier, whilst reinstating/cleansing the air-conditioning system, discovered that 8 BMS control boxes were missing and reported to D1. Thereafter, Carried faxed to her the 31/1/19 Faxed Quotation. At the time, she did not know whether the 8 BMS control boxes were removed.

(p)  She had not discussed the matter with Carrier and did not know whether Carrier had discussions with D1’s staff or Mr Yip before the issue of the 31/1/19 Faxed Quotation.

(q)  The 30/1/19 Quotation did not have installation of BMS control boxes within the scope of work quoted.

(r)  The 31/1/19 Faxed Quotation quoted the installation of 8 BMS control boxes because the air-conditioning system of the Premises had 8 sets of air-conditioning and each air-conditioning set had 1 BMS control box.

(s)  On 15 February 2019, only 4 people took part in the handover. Carrier did not have any staff attending the 2019 handover.

(t)  On 15 February 2019, the power supply to the air-conditioning system was disconnected and, without electricity, the function of the components of the air-conditioning system could not be tested.

Mr Yip

96.  Mr Yip started his employment with City Professional Management Limited (“City Professional”) as senior management supervisor and was posted to the Building on 14 January 2019.

97.  Mr Yip graduated from Hong Kong City University with a Continuing Education Diploma in Property Management in 2000. Since 2021, he had been a property manager (2^nd level) licence holder. He had more than 40 years of experience in property management.

98.  City Professional had signed with D2, being the management company of the Building, a service agreement for the former to manage the Building.

99.  Since Mr Yip was posted to the Building on 14 January 2019, he only had limited personal knowledge of the events that happened between P and D1.

100.  That said, his evidence is more or less the same as that fallen from the mouth of Ms Siu save the following.

101.  Ms Siu told Mr Yip that P started its reinstatement work in or about December 2018 since P was required to deliver vacant possession of the Premises to D1 on 15 February 2019. Whilst the Premises was being reinstated, Carrier discovered that the power supply to and all the components of the fan coil units had been removed when Carrier was cleansing the fan coil units for P. Carrier informed Mr Yip of the aforesaid problems and thereafter, Mr Yip notified Mr Andrew Mak, reminding him to follow up on the aforesaid problems. D1 also asked Carrier to give its quotation for rectifying the aforesaid problems. If P could not rectify the aforesaid problems on 15 February 2019, D1 would instruct Carrier to proceed with the repair work.

102.  D1 provided the 35 fan coil units of the Premises. When P occupied and used the Premises, D1 was responsible for repairing and replacing any damaged fan coil units at its expense.

103.  On 1 February 2019, Mr Yip emailed Mr Andrew Mak, pointing out that the window frames of the Premises had hard objects and glue, that the columns had plaster and the problems with the false ceiling, lighting and cleaning, and asking the latter and the contractor responsible to follow up on the aforesaid matters.[64]

104.  On 15 February 2019, P could not deliver up vacant possession of the Premises to D1 and D1 requested Mr Andrew Mak to rectify the defects discovered that day. Otherwise, D1 would arrange for the rectification of the defects and set off against the deposits the repair costs and the rentals for the period of rectification.

105.  In cross examination, Mr Yip said the following:-

(a)  When problems emerged, he was responsible for reporting the problems to Ms Siu.

(b)  Ms Siu was not his superior, but the representative of D1.

(c)  In the 1/2/19 Email (1) and the 1/2/19 Email (2), there was no mention of the window frames of the Premises having glue. But the stains mentioned in the 1/2/19 Email (1) were caused by the glue.

(d)  Although he mentioned all aluminum windows were in bad condition in the 18/2/19 Email (1), he did not pursue the problems of the window facing Granville Road. The problems were with the windows facing Cameron Road. All the windows facing Cameron Road were in bad condition.

(e)  He had not read Cheng’s Report, but he brought Mr Raymnd Cheng to inspect the Premises on 9 and 11 March 2019. Mr Raymond Cheng had not discussed the problems with him during the inspection.

(f)  The conclusion of Cheng’s Report showed that only 2 windows facing Cameron Road had pits and did not tally with his evidence that all aluminum windows facing Cameron Road were in bad condition.

(g)  He did not know whether the windows facing Cameron Road had more than 6 window glass panels mentioned in the Cheung Hung Quotation. After seeing the floor plan of the Premises contained in Cheng’s Report[65], he confirmed that the windows W1-W19 were windows facing Cameron Road and that there were 6 window glass panels, 4 big panels[66] and 2 small panels[67].

(h)  The window glass panels mentioned in the Cheung Hung Quotation were the windows W1-W17 mentioned in Cheng’s Report. He could not confirm the location of those window panels.

(i)  He attended the 2019 handover. He did not prepare the handover list for the 2019 handover because the handover list should not be prepared by the management company. He orally informed D1 of the defects that day. He reported the defects in writing to Ms Siu by email on 16 February 2019 and to P on 18 February 2019.

(j)  He agreed that when he mentioned in the 18/2/19 Email (2) that all windows were in bad condition, he had exaggerated the bad condition of the windows.

(k)  On 15 February 2019, he saw one 5 mm pit on a window glass. But he negligently failed to mention such defect in his witness statement. He agreed that this reflected his record of defects was not accurate. He later agreed that he did not find any pit on the glass of the windows. He nevertheless disagreed that his inspection was not careful.

(l)  When asked why he had to wait until 5 March 2019 to seek other quotations for the replacement of defective windows after the Cheung Hung Quotation on 15 February 2019, he said he had waited for P’s reply to the Cheung Hung Quotation. He sought 3 other quotations to find out the reasonable price for the replacement of the defective windows. This was done according to D1’s instructions. The quotations had been copied to D1, but not to P.

(m)  When asked why Cheung Hung waited until 28 March 2019 to start the windows replacement work after the last quotation was issued on 8 March 2019, he said that D1 needed time to examine all the quotations and approve the appropriate quotation.

(n)  Prior to 15 February 2019, he inspected the air-conditioning system of the Premises with Carrier’s staff and verified that that the power supply to (the wiring) and all the components of the fan coil units had been removed. He agreed that he had not mentioned his inspection prior to 15 February 2019 in his witness statement. But he had telephoned and emailed Mr Andrew Mak, reminding the latter of the aforesaid defects.

(o)  When asked why P had to pay for the replacement of 6 fan coil motors and 5 fan coil actuators as stipulated in the 30/1/19 Quotation, he said that Carrier was engaged by P to carry out the replacement work and P had added some fan coil units on the Premises.

106.  In re-examination, Mr Yip said that if the tenant had not altered the air-conditioning system, the landlord would have undertaken the repair obligation in relation to the air-conditioning system, that D1 had provided P with 32 fan coil units in 2008 but there were in total 35 fan coil units in the 2019 handover and that P had altered the air-conditioning system.

A Summary of the Expert Witnesses’ Evidence

107.  Mr YC Leung has not referred to his relevant qualifications and experience in Leung’s Report. He nevertheless was probingly cross-examined on this and has given an elaborate account of his qualifications and court experience. I do not think it is necessary for me to repeat this aspect of his evidence here save to mention that I accept that Mr YC Leung has the relevant expertise to assist this Court.

108.  Mr Dennis Wong having set out his relevant qualifications and experience in Wong’s Report, I have not doubted for a moment that Mr Dennis Wong has the relevant expertise to assist this Court.

109.  Mr YC Leung and Mr Dennis Wong did not have the opportunity to visit the Premises to inspect its condition after the 2019 handover. Mr Dennis Wong relied on Cheng’s Report in respect of which Mr Raymond Cheng had inspected the Premises on 9 and 11 March 2019. Mr YC Leung only treated Cheng’s Report as a reference and has not discussed the same in Leung’s Report. Mr YC Leung explained that Mr Raymond Cheng only inspected the Premises quite some time after the 2019 handover and that there was no information as to what happened to the Premises between the handover and the time when Mr Raymond Cheng inspected the Premises. However, Mr YC Leung accepted that there was no objective evidence showing that someone tampered the condition of the Premises between the handover and the inspection by Mr Raymond Cheng.

110.  I have read Leung’s Report and Wong’s Report which have respectively been adopted by Mr YC Leung and Mr Dennis Wong as their evidence in chief. They have also been cross-examined. On the whole, there are not many controversies over their evidence. In a nutshell, their evidence which I accept is as follows:-

(a)  The window glass of the Premises was not high above the floor.

(b)  The general marks (花) and stains on the windows or window frames should be regarded as fair wear and tear.

(c)  A window glass with pit(s) was different from a normal window glass. The pit(s) on the window glass was caused by the impact of an external force, eg the bumping of the broom stick whilst cleaning floor or the iron ruler whilst moving things. To remove cellophane from the window glass could not cause pit(s) to the window glass. Pits on a window glass were weak points and were more susceptible to breakage; the glass would possibly be broken by applying some external force to the weak points. If the window glass had pit(s), it would be prudent to replace the window glass.

(d)  Considering the age of the Building, it was not uncommon to have pits on the windows.

(e)  Since reinstatement work had been carried out on the Premises, it was possible that something bumped on the window glass causing the pits.

(f)  Windows W3 and W4 facing Cameron Road each had a pit on the glass surface.

(g)  Window W29 facing Graville Road had a pit on the glass surface.

(h)  Window W25 facing Graville Road had defective glass sealant and required to be replaced to ensure waterproof and safety.

(i)  The time required for ordering the window panels and window frames was around 2 to 3 weeks and for reinstating 6 window panels around 2 to 3 days (1 day for erecting scaffolding and 1 to 2 days for installing 6 window panels). In the spring and summer time, circa 1 month was a reasonable period for replacing 6 window panels.

(j)  When the electric wiring of the fan coil units was disconnected, it was impossible to test whether the fan coil units could be turned on or in working order. If the test could not be performed, it would be impossible to determine whether the parts including the pumps, thermostats, motors and actuators were defective. The testing and commissioning should be carried out after electricity supply to the fan coil units resumed.

(k)  The actuator was a part controlling cold water to the fan coil units and thereby controlling the temperature. The blower inside the fan coil units controlled the wind speed.

(l)  Item 3 of the 30/1/19 Quotation related to the problem of electric wiring disconnection.

(m)  If there was no electricity supply to the fan coil units, testing could be performed by way of temporary electricity supply. Connecting all fan coil units to a temporary electricity supply would be a time-consuming exercise. It would take around a day to connect 4 to 5 units.

(n)  In the 31/1/19 Faxed Quotation, integrator with Cable Wiring and Conduit for 1 set FCU was equivalent to BMS control boxes. BMS was a system from the Building management office to manage the air-conditioning provided to the Premises so that the Building management office could calculate the air-conditioning charges. BMS controlled the chill water provided to the Premises.

(o)  The repair work for reconnecting the electric wiring and replacing the motors, actuators and integrators/BMS could be carried out simultaneously. The testing and commissioning should be carried out afterwards. It would take a few days or a week to reconnect the electric wiring of the fan coil units at the Premises. The installation of the BMS control boxes at the Premises could be completed within a few days or a week excluding the procurement time for the devices.

(p)  The estimated repair costs of the 4 defective windows were HK$54,500.00

(q)  The estimated costs for the reconnection of all the disconnected electric wires of the fan coil units, testing and commissioning were HK$74,800.00.

Findings of Law

111.  The “fair wear and tear” exception was incorporated in clause 5.03(2) of and the 4^th Schedule to the T/A. Clause 5.03(2) and the 4^th Schedule are related to the obligation of the tenant (P) to deliver up possession of the Premises in the condition as required therein at the expiry or sooner determination of the T/A. The relevant point of time is the termination of the T/A.

112.  Clauses 5.03(1) and 5.25 of the T/A are related to the continuing obligations of the tenant (P) to keep and maintain at its expenses all the interior parts of the Premises, and to pay to or reimburse landlord (D1) the cost of replacing all broken, damaged, scratched or marked windows or glass panels respectively. The relevant time frame is the entire term of the T/A.

113.  I find that the “fair wear and tear” exception does not apply to clauses 5.03(1) and 5.25. This is particularly so since the T/A was a complex formal contract prepared by the parties with the assistance of their lawyers after rounds of discussion. If the draftsman had wanted “fair wear and tear” exception to apply to clauses 5.03(1) and 5.25, he would have said so clearly in those clauses.

114.  Of note is that even if dilapidations may be construed as “fair wear and tear” at a particular point during the currency of the T/A, the tenant (P) still needs to do such repairs as may be required to prevent the consequences flowing originally from wear and tear from producing others which wear and tear would not directly produce. Therefore, there was a reason why “fair wear and tear” should be viewed at the expiry or sooner determination of the T/A. Furthermore, clause 5.25 has differentiated windows and glass panels from other fixtures, fittings and additions and rendered the tenant’s (P’s) obligations vis-à-vis windows and glass panels more onerous. The tenant (P) was under an obligation to pay or reimburse the landlord (D1) the cost of replacing all broken, damaged, scratched or marked windows of glass panels whether such condition was caused by the tenant (P) or not.

115.  If the tenant (P) is found liable under clause 5.03(1) and/or clause 5.25, the tenant (P) cannot be said to have delivered up the Premises to the landlord (D1) in good, clean and tenantable condition and repair upon the expiry or sooner determination of the T/A unless the tenant (P) has remedied the breach(es).

Findings of Facts

116.  All the factual witnesses called for this trial are credible witnesses. There may be some aspects of the evidence of each factual witness which I have accorded no weight. But it was not because of his/her credibility that I have discounted his/her evidence. For instance, I have discounted Mr Lee’s evidence concerning the condition of the Premises after completion of the reinstatement work and the condition of the aluminum windows after P received from D1 the 18/2/19 Email (1) because his evidence on this material aspect was based on pure hearsay. P should have called the person(s) who did the checking and inspection to give evidence. Insofar as Mr Yip’s evidence is concerned, I have accorded no weight to his evidence concerning that he saw one 5 mm pit on a window on 15 February 2019 because such evidence was not mentioned in his witness statement and his evidence on this aspect was contradictory.

117.  Materially, I find as facts the following:-

(a)  P rented the Premises from D1 in 2008 to carry on the business of providing beauty salon services. On 17 February 2008, D1 handed over the Premises to P in the “as is” condition with D1’s structures, fixtures and fittings stipulated in the 17/2/08 Handover List. D1’s structures, fixtures and fittings handed over to P that day included 32 fan coil units mounted on the ceiling of the Premises.

(b)  Since the beauty salon business carried on in the Premises did not require windows, all the windows had been blocked from inside by hoardings until the end of the T/A when the Premises was reinstated to its original condition.

(c)  The T/A is the 4^th tenancy agreement entered by P and D1 over the Premises.

(d)  Throughout P’s tenancies over the Premises,

(i)  P had not complained to D1 or D2 about the condition, the structure or the installation of the Premises;

(ii)  P had not inspected or repaired the windows; and

(iii)  P had not sought any contractor to check the windows before the 2019 handover.

(e)  For commercial reasons, P decided not to continue renting the Premises after the T/A and to reinstate the Premises to the “bare shell” condition. The T/A would expire on 16 February 2019.

(f)  In or around December 2018, P engaged Tai Chun to carry out the reinstatement work and gave Tai Chun the 17/2/08 Handover List and the 17/2/08 Photos to facilitate it in carrying out the reinstatement work. Tai Chun removed all the power supply system, the air-conditioning system, the fire lighting system and the lighting system on the Premises. During the reinstatement work, the contractor had disconnected the power supply to the air-conditioning system.

(g)  In or around January 2019, P, at the request of D1, engaged Carrier to cleanse the fan coil units of the Premises. Thereafter, Carrier informed Mr Yip that the fan coil units were not operational and could not be tested when Carrier was cleansing the fan coil units for P because the power supply to the air-conditioning system and the components of the fan coil units had been removed. Mr Yip notified Mr Andrew Mak, reminding him to follow up on the aforesaid problems. D1 also asked Carrier to give its quotation for rectifying the aforesaid problems. Hence, the 30/1/19 Quotation. If P could not rectify the aforesaid problems on 15 February 2019, D1 would instruct Carrier to proceed with the repair work.

(h)  Carrier, whilst cleansing the air-conditioning system, discovered that 8 BMS control boxes were missing and reported to D1. Thereafter, Carried faxed to Ms Siu the 31/1/19 Faxed Quotation

(i)  P handed over the Premises to D1 on 15 February 2019. P attended the 2019 handover by Mr Andrew Mak and Mr Wind Suen whilst D1 was represented by Ms Siu and Mr Yip. On 15 February 2019, the power supply to the air-conditioning system was disconnected and, without electricity, the function of the components of the air-conditioning system could not be tested.

(j)  In the 18/2/19 Email (1), the Building management office wrote to P, indicating that all the aluminum windows of the Premises were in bad condition and that there was no power supply to test all fan coil units of the Premises.

(k)  On 18 February 2019, Ms Siu received the 18/2/19 Letter.

(l)  Since P had not replied to D1’s demand for the repair of the defects/problems, D1 approached suitable and reputable contractors for quotations to carry out the repair works.

(m)  After Ms Siu informed D1’s leasing department of the defects/problems on 20 February 2019, D1 instructed Mr Raymond Cheng of R Cheng Property Consultants Limited to inspect the Premises on 9 and 11 March 2019 to report on the items which required repair and the relevant repair costs. Hence Cheng’s Report.

(n)  Between 14 and 21 March 2019, Carrier carried out the repair works to the air-conditioning system in accordance with the 30/1/19 Quotation.

(o)  Between 28 March and 10 April 2019, Cheung Hung carried out the repair works to the aluminum windows in accordance with the Cheung Hung Quotation.

(p)  Between 3 and 12 April 2019, Carrier carried out the repair works to the air-conditioning system in accordance with the 31/1/19 Faxed Quotation.

The 1^st to 4^th Issues

118.  As to the condition of the windows on 15 February 2019, I find the evidence of Ms Siu and Mr Yip not reliable and satisfactory on the following grounds: -

(a)  Their evidence contradicts the 18/2/19 Email (1) and the findings in Cheng’s Report;

(b)  Their evidence also does not tally with the Cheung Hung Quotation and other quotations for the replacement of the windows which proposed 6 or 7 window glass panels to be replaced; and

(c)  Their evidence was contradicting between themselves and they exaggerated the condition of the windows in the 18/2/19 Email (1).

119.  As to the condition of the windows on 15 February 2019, I do not see any reason why I should not accord weight to the findings contained in Cheng’s Report. I give the findings in Cheng’s Report full weight. However, both Ms Siu and Mr Yip have conceded that only the windows facing Cameron Road had problems and that they would not pursue the problems of the windows facing Granville Road.[68]  In the light of the aforesaid concession, I find that windows W3 and W7 facing Cameron Road had pits as described in Cheng’s Report.

120.  As to the condition of the air-conditioning system on 15 February 2019, I find that all the power supply to the air-conditioning system had been disconnected and all BMS control boxes thereof removed and that the aforesaid defects cannot on any view be said to be “fair wear and tear”. In my view, the power supply to the air-conditioning system could not have been disconnected and all BMS control boxes could not have been removed when P was still carrying on its beauty salon business on the Premises. Accordingly, I further find that all the power supply to the air-conditioning system had been disconnected and all BMS control boxes thereof removed during the time when Tai Chun reinstated the Premises.

121.  By the aforesaid reasons,

(a)  P was in breach of clauses 5.25, 5.03(1), 5.03(2) and 5.23 of the T/A; and

(b)  P has not delivered vacant possession of the Premises to D1 as required on the expiry of the T/A.

The 5^th and 6^th Issues

122.  Obviously, D1 was entitled to deduct from the rental deposit of HK$1,180,575 the costs, expenses, loss or damage incurred or suffered as a result of P’s aforesaid breaches. The question here is how much is to be deducted from the rental deposit.

123.  D1 claimed it was entitled to deduct a total sum of HK$1,065,963,33 made up of the following:-

 

Item No	Description	Amount (HK$)
(a)	Costs for installing 8 lots of integrators with cable wiring and conduit for one fan coil unit	HK$80,000.00
(b)	Costs for replacement of 6 window glass panels and related installation works	HK$87,000.00
(c)	Costs for (i) supplying and replacing 6 fan coil motors and 5 fan coil actuators and (ii) supplying, installing and reconnecting 35 sets of fuse spur, conduit with cable wiring for fan coil units	HK$52,000.00
(d)	Mesne profits / loss of rental for the period:   (i)  17/2/2019 to 16/3/2019 – HK$486,405.00 (ii)  17/3/3019 to 6/4/2019 – HK$340,483.50	HK$826,888.50
(e)	Government rates from 1/4/2019 to 6/4/2019 on a pro rata basis at HK$61,800.00 per quarter	HK$4,074.73
(f)	Survey fees payable to Surveyor Mr Raymond Cheng for conducting a site inspection and preparing a survey report on the condition of the Premises (ie Cheng’s Report)	HK$16,000.00

124.  On this, I would allow item 123(a) above to be deducted from the rental deposit. This item concerns the removal of BMS control boxes and their replacement costs of HK$80,000. The replacement was done by Carrier, D1’s nominated contractor, between 3 and 12 April 2019. There is nothing to suggest that the sum exceeded a reasonable sum.

125.  I would allow the nature of claim under items 123(b) and 123(c)(ii) above.

(a)  The former item concerns replacement of problematic windows. However, the sum HK$87,000 claimed was excessive since it was related to the replacement of 6 window glass panels and their related installation works. The installation work was carried out by Cheung Hung from 28 March and 10 April 2019. The Cheung Hung Quotation did not identify which 6 window glass panels of the Premises needed to be replaced. It seems that the 2 windows in question, ie windows W3 and W4 facing Cameron Road involved 1 small and 1 big window glass panels. I do not think I can use HK$87,000 or any part thereof as the sum to be deducted from the rental deposit under item 123(b) above. Here, I would adopt the repair costs of HK$54,500 estimated by Mr Dennis Wong and adjust the estimated sum downward by taking note that only 2 instead of 3 windows needed to be replaced and there was no need to replace the sealant of window 25 facing Graville Road. Taking into account the aforesaid downward adjustment by discounting HK$12,000 and HK$1,000, I would allow a sum of HK$41,500 (54,500 - 12,000 - 1,000) under item 123(b) above to be deducted from the rental deposit.

(b)  The latter item concerns disconnection of the power supply to the air-conditioning system. However, the sum HK$52,000 included not only the reconnection costs, but also the costs for the supply and replacement of 6 fan coil motors and 5 fan coil actuators which fall outside the pleaded particulars of defects in D1’s Amended Defence. There is no evidence informing this Court that the 6 fan coil motors and 5 fan coil actuators were defective and how the sum HK$52,000 could be broken down into the aforesaid 3 components. I understand that Mr Dennis Wong estimated that the costs for the reconnection of all the disconnected electric wires of the fan coil units, testing and commissioning were HK$74,800. But I do not think it is fair to deduct Mr Dennis Wong’s estimated costs from the rental deposit since D1 has only incurred a lesser cost. Doing the best I can, I would allow a sum of HK$17,333.33 (52,000 ÷ 3) under item 123(c)(ii) above to be deducted from the rental deposit.

126.  I would not allow the costs incurred for the compilation of Cheng’s Report under item 123(f) above. Cheng’s Report was relied upon by Mr Dennis Wong in Wong’s Report and in his testimony at trial. Such costs should form part of D1’s litigation costs incurred for adducing expert evidence.

127.  Insofar as item 123(d) above is concerned, D1 claimed for a period from 17 February to 6 April 2019. This period claimed allowed for the time for P to reply to the 22/2/19 Letter, the time for D1 to obtain various quotations for the replacement of the problematic windows and the time for D1 to consider and opt for the appropriate contractor to undertake the work. I would consider 2 weeks reasonable for D1 to wait for P’s reply to the 22/2/19 Letter and to obtain quotations for the replacement of the 2 window glass panels. Assisted by the experts, there is no reason why the replacement work for the window glass panels and the repair work for the air-conditioning system could not be carried out at the same time. The reasonable time for completing both works would be about 1 month. Hence, I would allow mesne profits/loss of rental for the period from 17 February to 3 April 2019 to be deducted from the rental deposit, which is calculated as follows:-

HK$393,525.00 x (1 month and 18 days) = HK$622,023.39

128.  Insofar as item 123(e) above is concerned, D1 claimed for a period from 1 to 6 April 2019. In a similar vein, I would allow D1’s claim for government rates from 1 to 3 April 2019 on a pro rata basis. It is undisputed that the government rates for the 2^nd quarter of 2019 was HK$61,800.[69]  The pro rata sum of government rates to be deducted from the rental deposit is calculated as follows: -

HK$61,800.00 x 3 ÷ 91 = HK$2,037.36

129.  Accordingly,

(a)  the total sum to be deducted from the rental deposit shall be HK$762,894.08 (80,000.00 + 41,500.00 + 17,333.33 + 622,023.39 + 2,037.36); and

(b)  D1 has not breached the T/A by failing to return the full rental deposit to P within 30 days after 16 February 2019, ie the expiry date of the T/A whilst the handover took place on 15 February 2019.

CONCLUSION

130.  For the reasons given above, I shall order that the rental deposit of HK$417,680.92 (1,180,575.00 - 762,894.08) be refunded by D1 to P. Under clause 12.03(1) of the T/A, the refund of the HK$417,680.92 rental deposit shall carry no interest since the justifiable claims by D1 against P for breach of the T/A have not been settled and therefore D1’s obligation to refund the rental deposit has not yet arisen.

131.  Accordingly, judgment be entered for P against D1 for the sum of HK$417,680.92 with interest at the judgment rate from the date of judgment to the date of full payment of the same.

132.  As to costs, I shall make no order as to costs. Briefly, my reasons are as follows: -

(a)  Although P has obtained the judgment for the refund of HK$417,680.92, it nevertheless has lost its main plank of its claim against D1 for breach of the T/A on the ground that D1 failed to refund the full rental deposit of HK$1,180,575.00 to it within 30 days after the expiration of the T/A;

(b)  On the other hand, D1’s case was that it was entitled, by virtue of clause 12.01 of the T/A, to set off a total sum of HK$1,065,963.33 against the rental deposit of HK$1,180,575.00. After trial, the sum which I adjudged to set off against the rental deposit should be HK$762,894.08 which is HK$303,069.25 less than the “set off” sum claimed by D1; and

(c)  Taking into account the overall justice of this case, I am of the view that it is only fair for this Court to make a “no order as to costs” order nisi in this case.

133.  The costs order nisi shall be made absolute unless application for variation is made within 14 days from the date of this judgment.

134.  Lastly, it remains for me to thank counsel for their able assistance rendered to this Court.