High Yield Ltd v. Home Essentials (HK) Ltd
Read the full judgment text of LDPD 1638/2016 on BabelCite. This Lands Tribunal judgment was delivered on 23 November 2016.
1. This case originated from an application for recovery of possession of the premises at Flat A, 25 th Floor & Roof thereof, Imperial Terrace, No. 356 Queen’s Road West, Hong Kong (“the Premises”) by the applicant as landlord on the ground that the respondent had failed to pay rent since 1January2016.
Cited by 2 cases · Cites 4 cases
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LDPD 1638/2016 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION APPLICATION NO. LDPD 1638 OF 2016 _________________
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_________________ J U D G M E N T _________________ Background 1.This case originated from an application for recovery of possession of the premises at Flat A, 25th Floor & Roof thereof, Imperial Terrace, No. 356 Queen’s Road West, Hong Kong (“the Premises”) by the applicant as landlord on the ground that the respondent had failed to pay rent since 1January2016. 2.By a tenancy agreement dated 5 January 2015 (“the Tenancy Agreement”), the Premises was leased to the respondent for the period from 1 January 2015 to 31 December 2017 at a rental of $40,000 per month inclusive of management fee, Government rates and rent. 3.In the Notice of Application dated 8 August 2016, the applicant explained that the respondent owed a sum of $121,185.95 which included half month rental from December 2014 and outstanding revised security deposit and half of tenancy agreement stamping fee. In addition, the applicant was claiming cost/damages of $10,000 to re-paint the premises and $20,000 for agency leasing fee, both of which the applicant had to incur as a result of the early termination of the Tenancy Agreement. The applicant also claimed cost incurred for making this application. 4.The respondent in response filed its Notice of Opposition on 16 August 2016 in which it disputed the amount claimed by the applicant by reference to the following:
5.In gist, the respondent alleged that all those deductions were “proffered” by the applicant in the latter’s letter dated 4 August 2016. Since the respondent’s business is home furniture retail and renting, the respondent suggested, its qualifications to assess the value are unrivalled. In addition, all the pricing given in the quotation are listed on websites and on display in the retail store of the respondent. 6.In the Notice of Opposition, the respondent continued:
7.Attached to this Notice of Opposition is a schedule entitled “Proposal for Derek Hinden” (“the Schedule”) which contained the table below. Derek Hinden (“Mr Hinden”) is the director of the applicant:
8.The applicant’s letter dated 4 August 2016 as referred to in §5 above was also attached to the Notice of Opposition. The contents of the letter are recited below:
9.It is not disputed that Mr Christopher Exline (“Mr Exline”), Director of the respondent, did respond to the letter dated 4 August 2016. Instead of providing the cost price of the items to the applicant, Mr Exline referred to a similar proposal like the one as contained in his Notice of Opposition save that the discount near the bottom of the page was 10%, ie $7,889. 10.Mr Hinden was dissatisfied. He sent the following e-mail to Mr Exline at 15.15 on 5 August 2016:
11.Another e-mail from Mr Hinden to Mr Exline at 4.45 pm on 5 August 2016 is as follows:
12.An e-mail was further exchanged from Mr Exline who however refrained from providing cost price of the items to the applicant. It has been Mr Exline’s position that he should be better placed at assessing the value of the furniture since it was his stock and trade. He was referring to the prices as market value of the items stated in the schedule above which, he said, could be verified from the respondent’s website. 13.Then the applicant filed its Notice of Application on 8 August as stated in his e-mail and so informed Mr Exline via WhatsApp on 11 August 2016 which also intimated that the applicant “will also act upon our final warning letter and notice of re-possession on August 18 (next Thursday) should this not get resolved beforehand”. Mr Hinden also requested for viewing the Premises and WhatsApp messages were exchanged between the parties in the following days arranging the inspection on 15 August 2016. On 12 August 2016, nevertheless, Mr Exline suspected that the request for viewing was just an excuse for regaining access to the Premises. 14.Then in the afternoon on 15 August 2016, Mr Hinden met Mr Exline at the lobby of the Premises as scheduled for showing the Premises to a prospective tenant. Mr Exline just handed Mr Hinden a folder with the keys to the Premises therein, telling the latter that the respondent had moved out and that the furniture having been discussed was left there. According to Mr Hinden, Mr Exline promptly left. Appointment of Joint Expert & Disposal of Furniture 15.Thus there was a dispute between the parties that whether there was an agreement that the respondent could leave those furniture items at the Premises to set off the rental in arrears. Another major issue was the value of the furniture items. There was a hearing before Deputy Judge Tracy Chan on 2 September 2016 when she ordered, inter alia, the parties to adduce expert evidence on valuation of the furniture in the Schedule by appointing a single joint expert, failing which the parties have to explain in writing as to the reason why such would not be practicable. 16.On 13 September 2016, the applicant wrote to the Tribunal explaining the difficulty in finding an expert on valuation of furniture. The letter disclosed that Mr Exline would be willing to nominate the respondent to do it but it was obviously not desirable because of potential bias. The letter also stated:
17.On 22September 2016, the applicant informed the Tribunal that they had “received, and accepted, an offer to lease (the Premises) and require(d) that the Respondents furniture/decorative items (except for two bar stools which he agreed to leave at the start of the tenancy) be removed from the premises” because the lease would commence on 1 October 2016. 18.The letter also referred to the respondent’s submission on 2 September 2016 that it had its own moving trucks and storage facility and therefore there should be no reason why the respondent could not accommodate such a request. 19.This then became an Interlocutory Application filed by the applicant and the hearing took place before me on 30 September 2016. Mr Exline who appeared on behalf of the respondent maintained that the respondent had no objection to the applicant leasing out the Premises. Mr Exline further maintained the respondent’s position that the furniture items have now become owned by the applicant by reason of their agreement though the applicant denied. As the respondent no longer owned the furniture, the applicant would be at liberty to dispose of all the furniture left at the Premises. So I made my order accordingly. Forfeiture of the Tenancy Agreement 20.Clause 14 of the Tenancy Agreement provides that:
21.Whereas it is theoretically possible for the applicant for the applicant to re-enter the Premises based on the above provision, the re-entry must be peaceful; otherwise, the applicant will be liable for prosecution under section 23 of the Public Order Ordinance. In addition, under section 119V(1) of the Landlord and Tenant (Consolidation) Ordinance, Cap 7, if the respondent does not leave the Premises and the entry is not justified, the applicant would be liable for unlawful eviction. Therefore, the fear of Mr Exline that the applicant would force into the Premises on viewing might be overemphasized. Indeed, Mr Exline himself reminded Mr Hinden via WhatsApp on 12 August 2016 that: “You cannot forcibly enter and reclaim the premises.” 22.On the other hand, the forfeiture took notional effect on the applicant filing the Notice of Application on 8 August 2016 subject to the relief against forfeiture that may be granted by the Lands Tribunal under section 21F of the High Court Ordinance or otherwise. The relevant provisions of section 21F are:
23.But in the present case, the order for possession has not been granted and the forfeiture was in effect suspended pending payment by the respondent. Surrender by Operation of Law 24.On the other hand, returning the keys to the Premises by Mr Exline to Mr Hinden on 15 August 2016 did not amount to delivering vacant possession of the Premises when the furniture items in the Schedule were left inside the Premises against the wish of the applicant. The conduct of the parties must unequivocally amount to an acceptance that the tenancy has ended. 25.By reviewing the correspondence and WhatsApp exchanges between the parties since 4 August 2016, there was never an agreement as alleged by Mr Exline. It is right that Mr Hinden, on behalf of the applicant, had made an offer for the respondent to leave behind the furniture items as per the applicant’s letter of 4 August 2016, but it requires the items to be at cost value on which the respondent had never agreed. Instead, Mr Exline counter-offered the value of furniture in the Schedule at retail value subject to a discount of 10% on 5 August 2016 (which was later revised to 20% in the respondent’s Notice of Opposition dated 10 August 2016 and upon trial). In law, the counter-offer was equivalent to rejection of the offer by the applicant. 26.On 12 August 2016, Mr Hinden also reminded Mr Exline by WhatsApp that: “I hope you are taking the necessary measures to move your stuff out by Thursday (ie 18 August 2016)”. 27.Thus whether the returning of the keys to the applicant took effect as a surrender of the Tenancy Agreement by operation of law? Such an issue was considered in Oastler v Henderson (1877) 2 QBD 575, Artworld Financial Corp v Safaryan [2009] EWCA Civ 303 and more recently in Padwick Properties Limited v Punj Lloyd Limited [2016] EWHC 502 (Ch) and Levett-Dunn & Others v NHS Property Services Limited [2016] EWHC 943 (Ch) where a number of propositions were enunciated:
28.Thus, as regards the latter, the respondent’s suggestion that the applicant immediately posted the Premises as available for lease to the general public through a variety of internet websites as a furnished option using the furniture left behind is neither here or there. I accept the Mr Hinden’s submission that he was only trying to mitigate its loss and this effort appears to be fruitful because, as stated in §17 above, a replacement tenant has been found at the same rent of $40,000 per month inclusive of management fee, Government rates and rent. A new tenancy agreement dated 28 September 2016 for a term of two years commencing from 1 October 2016 has been produced as evidence. 29.The purported surrender of the Tenancy Agreement by the respondent by mere returning the keys on 15 August 2016 with the furniture remaining at the Premises was without consent of Mr Hinden or the applicant. I do not consider the respondent had delivered vacant possession of the Premises to the applicant on 15 August 2016. See, for example, Winsor Air Cargo Centre Limited v E-Commerce Logistics Limited, HCA 1465/2003 (unreported, dated 10 June 2004). I do not accept the argument by Mr Exline on behalf of the respondent that the applicant had accepted his repudiation by conduct as early as on 15 August 2016. See also [235.459] of Halsbury’s Law of Hong Kong, Vol 36, LexisNexis, 2014. The argument by the respondent that the applicant had not raised any issue or inquiry with the respondent after 15 August 2016 is neither here or there. In my view, the acceptance of the repudiation of the Tenancy Agreement by the applicant only occurred on 22 September 2016 when the applicant found the replacement tenant. 30.In spite of the above, I note the applicant is content to claim the rental in arrears since 1 January 2016 to 15 August 2016 which is in the sum of $101,185.95. Value of Furniture as Set-off 31.Notwithstanding the lacking in agreement, Mr Hinden accepted that the furniture left behind by the respondent comprises valuable items. Mr Hinden further accepted that he had the furniture removed to storage pending sale instead of disposing them as rubbish although as at the date of trial, the purported sale was not yet successful. 32.In this regard, I consider it is equitable to allow credit for the value of the furniture to set off part of the rentals in arrears by the respondent. While it is regretful that the parties cannot find an expert for valuing the furniture, the Tribunal had been experienced in valuing similar items particularly when dealing with compensation for losses under the Lands Resumption Ordinance, the latest being Yip Kui t/a Tai Wo Trading Co. v. The Secretary for Transport, LDMR 52 of 2000 (unreported, dated 18 September 2002). 33.I have no evidence to dispute the value of the various furniture items in the Schedule as new and therefore the retail values suggested by the respondent are accepted in full. On the other hand, I agree with the Mr Hinden that second-hand furniture cannot be traded at as much as 80% or 90% as suggested by the respondent. I further agree with Mr Hinden that second-hand furniture can only be sold about 40—60% less than their original retail price. See §15 above. This is consistent with the view of Lloyd R Manning, who, in his book Valuing the Small Business, Todd Publishing, Inc, 1993, stated at p50 that:
34.Furthermore, I am not persuaded those furniture items in the Master Bedroom in the Schedule can be regarded as brand new when rental had fallen in arrears since January 2016 and the applicant had threatened to proceed with court proceedings. In any event, the respondent had not tried to mitigate his loss, if any, by agreeing to remove the valuable items on seeing the letter from the applicant dated 22 September 2016 knowing by then that the applicant did not want the furniture. 35.Thus, in the absence of evidence to the contrary, I consider the 50% rule applies and determine the value of the furniture in the Schedule at $78,890 ÷ 2 = $39,445 say $40,000. Other losses 36.In addition, the applicant claims all costs, expenses and other outgoings so incurred because of the default of the respondent. The applicant relies on Clause 3 of the Tenancy Agreement which states:
37.For the purpose of this claim, the applicant produced at Invoice issue by J’s Design House dated 2 October 2016 as follows:
38.At trial, Mr Hinden conceded that item (11) should be disregarded because it was caused by the typhoon as reported by the respondent. As a result of that, the applicant is claiming $29,250 instead but the respondent contends that items (4), (6), (9) and (10) are also related to the effect of the typhoon. In spite of this difference of opinion between the parties, I do not need to resolve it for the reasons below. 39.Apart from this, the applicant also claims $20,000 for agency fee, $1,512 for storage of the furniture, $2,500 for the movers, $600 of cleaning etc. 40.It is the applicant’s contention that the applicant would not have incurred any of these expenses if the respondent had not defaulted on rental payments, forcing it then to look for a replacement tenant before the Tenancy Agreement expires on 31 December 2017, ie some 16 months to go. The applicant submits these costs are items that were required, or requested by the new tenant. 41.This is an obvious case resulted from a breach of contract by the respondent. Chapter 26 of Chittyon Contracts, 32nd Edition, 2015 (“Chitty”), provides a comprehensive view of the law on damages for breach of contract. On the question of what damages are generally recoverable for breach of contract, para 26-110 of Chitty refers to the time-honoured rule in Hadley v Baxendale (1854) 9 Ex 341, at 354-355, where Alderson B said:
42.Chitty at para 26-111 states that the principles laid down in Hadley v Baxendale have been interpreted and restated by the Court of Appeal in 1949 in Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 2 KB 528 and by the House of Lords in 1967 in Koufos v C. Czarnikow Ltd (The Heron II) [1969] 1 AC 350 and continues:
43.Also, by reference to Chitty para 26-032, the applicant is entitled to claim incidental losses, namely, reasonable costs incurred in mitigating the loss caused by the respondent’s breach or in otherwise dealing with the consequences of the respondent’s breach. Illustration of examples includes the recovery of the cost of substitute performance by a third party, the recovery of storage charges after the respondent refused to accept goods etc. 44.However, by Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2009] 1 AC 61 (HL), a claimant will not recover even losses that were not unlikely to occur in the usual course of things if a defendant cannot reasonably be regarded as assuming responsibility for losses of the particular kind suffered, and in particular, if such losses, viewed at the time when the contract was made, could be extensive, unpredictable, or beyond the parties’ control. In The Achilleas, Lords Hoffmann and Hope (with whom Lord Walker agreed) emphasised the underlying basis of remoteness, in that a defendant is only held liable for loss which it was the parties’ intention (objectively ascertained) that he should bear, as loss for which he has “assumed responsibility”, or which falls within the scope of his duty. 45.The above principles were recently considered by the Hong Kong Court of Final Appeal in Richly Bright International Limited v De Monsa Investments Limited (2015) 18 HKCFAR 232. At §34, Mr Justice Ribeiro PJ and Mr Justice Fok PJ cited with approval Lord Walker’s following statement in The Achilleas at §69.
46.Again, in the absence of evidence to the contrary, I accept the amounts being claimed by the applicant at §§34-36. However, by reference to Clause 12 of the Tenancy Agreement, the respondent was supposed to:
47.Mr Hinden conceded that most of the items in §34 were caught by “fair, wear and tear excepted” and in such regard, I consider that they are not compensable to the applicant because these are expenses which the respondent has never “assumed responsibility”, or which falls within the scope of his duty. To borrow the words fromLord Reid in Heron II at p 385 :
48.More particularly, this kind of expenses would become necessarily incurred by the applicant after the respondent had occupied the Premises for some 2 years and 7.5 months. 49.On the other hand, I would allow the claim for the agency fee in the sum of $20,000 as well as the $600 for cleaning. I consider these two items fall under Chitty para 26-032 and, for instance, accord with the fees incurred in obtaining new premises in the case of compulsory acquisition as explained in Harvey v Crawley Development Corporation [1957] 1 All ER 882; [1957] 1 QB 485. Here, I note in particular that the applicant could only be able to secure a replacement tenant at the same rent of $40,000 per month payable by the respondent before. 50.I would also allow $1,512 for storage of the furniture and $2,500 for the movers resulting from the breach. It would be unreasonable for the applicant to secure prospective purchasers of the furniture items within a short time when it only got my order for disposal on 30 September 2016. The respondent’s challenge that the description in “Standard Self Storage Agreement” submitted by the applicant does not accord with the full list of furniture in the Schedule is neither here or there if certain items had to be removed and the amount incurred is reasonable. Conclusion 51.In view of the above, the amount of rental in arrears together with damages resulting from the early repudiation of the Tenancy Agreement should be calculated as follows:
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52.On this monetary claim, therefore, I order the respondent to pay the applicant the sum of $47,197.95.
Costs
53.In addition, I determine the costs to the applicant in the sum of $800.
| Lawrence PANG | |
| Member | |
| Lands Tribunal |
The applicant, unrepresented, appeared in person
The respondent, unrepresented, appeared in person
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