Roxy Management Co Ltd v. Hoopeston Ltd

DCCJ 364/2019

[2022] HKDC 75

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 364 OF 2019

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Before:  His Honour Judge KC Chan in Court

Dates of Hearing:  11 & 12 January 2022

Date of Assessment of Damages:  20 January 2022

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ASSESSMENT OF DAMAGES

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1.This is otherwise a straightforward assessment of damages, except for a few matters to be sorted out.

2.I will first set out the following background and salient events, which unless otherwise stated, are either common ground or not seriously disputed.

3.The plaintiff, the building manager of the industrial building known as Roxy Industrial Centre situated at No 41-49 Kwai Cheong Road, No 58-66 Tai Lin Pai Road, Kwai Chung (“the Building”), discovered in early January 2019, that there were renovations being carried out in the 2 lobbies on the 14^th Floor of the Building (“the 2019 Renovations”).

4.All the 3 units on the 14^th Floor of the Building, namely, Units A, B and C were acquired by the defendant in 1994 and it has been their registered owners since.

5.There are 2 lobbies on each floor of the Building. For ease of reference, I will refer to the 2 lobbies on the 14^th Floor respectively as “the A/C Lobby” and “the A/B Lobby” and together “the 2 Lobbies”.

6.It is by now common ground that the 2 Lobbies were and are common areas and the 2019 Renovations involved unauthorized alterations which would breach Clause 11 of the Deed of Mutual Covenant in respect of the Building (“the DMC”).

7.On 11 January 2019, the plaintiff’s solicitors issued a cease-and-desist letter to the defendant (“the Cease-and-Desist Letter”). The defendant nevertheless continued with the 2019 Renovations.

8.I divert a bit to mention that according to the defendant, it had substantially renovated the A/C Lobby and to a lesser extent the A/B Lobby in around 2008 (“the 2008 Renovations”), which also involved “unauthorized alterations”. It is its case that the plaintiff had given consent to the 2008 Renovations. The defendant also produced photographs showing that the lobbies on many floors of the Building have likewise been substantially renovated. This alleged consent is disputed by the plaintiff, but the plaintiff accepts that prior to the 2019 Renovations, the 2 Lobbies had been renovated such that they were not in the same state as when the Building was first completed (“the Original State”).

9.Going back to the more recent events, on 22 January 2019, the plaintiff issued a generally endorsed Writ against the defendant to commence this action seeking a declaration that the defendant was not entitled to carry out the 2019 Renovations at the 2 Lobbies, an injunction and damages. On the same day, the plaintiff issued a summons applying for an interlocutory injunction to enjoin the defendant pending trial (“P’s Summons”).

10.On 24 January 2019, the defendant filed an Acknowledgement of Service stating therein that it would not contest the proceedings (“D’s AS”).

11.When P’s Summons was heard before the summons judge on Friday 25 January 2019, an order was made by consent granting the declaration sought, a permanent injunction, and an order for damages to be assessed (“the 2019 Order”).

12.Around May 2019, the plaintiff caused works to be performed at the 2 Lobbies restoring them essentially to the Original State (“the Works”).

13.The plaintiff in this assessment claims to recover from the defendant a sum of HK$315,000 being the costs they paid to the contractor performing the Works, namely文源建築工程有限公司 (“the Contractor”).

14.In a nutshell, the defendant raises 2 disputes.

15.Firstly, the defendant is only liable to the extent of restoring the 2 Lobbies to the state they were immediately prior to the breach complained of in this action (“the Pre-breach State”), and not liable to the extent of restoring them to the Original State. Therefore, it is liable for only some of the items of the Works and/or a much lesser sum than the amount of HK$315,000 claimed. In this regard, if necessary and as a fallback, the defendant says that the plaintiff had given consent for the 2008 Renovations.

16.Secondly, the defendant disputes that the costs paid by the plaintiff for the Works, or for such items found to be necessary to restore the 2 Lobbies to the Pre-breach State, were too high and the plaintiff has failed in its duty to mitigate in contracting these works to other contractors who quoted a lesser price.

17.For completeness, I should mention that in its written opening submissions, the defendant contended that there was also acquiescence and/or waiver. That contention was abandoned during its oral opening.

Is the defendant liable to restore the 2 Lobbies to the Original State or to the Pre-breach State?

18.As this dispute was a short one and its resolution would not depend on the oral evidence to be taken, but rather its resolution would affect the course of the evidence to be taken, I therefore proposed at trial to decide this dispute at the opening stage, which counsel for both parties agreed. Having heard Mr Liu’s submissions and without calling upon Mr Wong, I held that the defendant was liable only to restore the 2 Lobbies to their Pre-breach State and I said that reasons would be given in the written judgment. My reasons were as follows.

19.The indisputable starting point of course is that the defendant is only liable to restore, as far as reasonable, the 2 Lobbies to a state as if the breach of the DMC had not occurred. “The breach” would have to be the one complained of in this action and not other breaches that have not been brought into this action.

20.I am mindful that in resolving this dispute, I am effectively deciding what the plaintiff’s claim was that the defendant had indicated not to contest by D’s AS and had consented to pay damages to be assessed under the 2019 Order.

21.As no Statement of Claim was filed, I would begin by looking at the general endorsement of claim on the Writ. The endorsement, by O6 r2 of the Rules of the District Court, “must give sufficient information to enable the recipient to identify the occasion when the breach of contract or other wrong relied upon is alleged to have occurred” (§6/2/2 Hong Kong Civil Procedure; The Jangmi [1988] 2 Lloyd’s Rep 462 and [1989] 2 Lloyd’s Rep 1 (CA))(my emphasis).

22.The endorsement here reads:-

“The Plaintiff’s claim is for:

(1) a declaration that the Defendant is not entitled to carry out any works at the common areas as shown coloured yellow on the plan attached thereto [sic] (“the Common Areas”) and common facilities thereat (including but not limited to the ceiling, flooring, walls, electrical installations and fire surface installations) (“the Common Facilities”) on the 14^th floor of Roxy Industrial Centre, No. 41-49 Kwai Cheong Road, No. 58-66 Tai Lin Pai Road, Kwai Chung, New Territories (“the Subject Building”) without the prior consent obtained from the Plaintiff.

(2) an injunction restraining the Defendant whether by itself, its directors, officers, servants, workmen, agents or otherwise howsoever from :

(a) carrying out any unauthorized works or any other works at the Common Areas and Common Facilities on the 14th floor of the Subject Building.

(b) causing further damage to the Common Areas and Common Facilities on the 14th floor of the Subject Building.

(c) interfering the Plaintiff’s officers, servants, workmen and/or agents from carrying out reinstatement and rectification works at the Common Areas and Common Facilities.

(3) damages;

(4) interest;

(5) further or other relief;

(6) and costs.”

23.As can be seen, the endorsement only set out the reliefs claimed. It has not given any information of the breach alleged against the defendant. The DMC was not even mentioned, much less the occasion when the alleged breach of the DMC occurred. In my view, the endorsement has not complied with O6 r2.

24.That notwithstanding, Mr Liu relied on what Sheen J said in The Jangmi that “the rules do not require a general endorsement to be a precis of the statement of claim”, and boldly submitted that the endorsement was “wide” and “all encompassing” and covered “any” breach by the defendant regarding “the Common Areas” and “the Common Facilities” on the 14^th Floor, and therefore was “wide” enough to cover the breach occasioned by the 2008 Renovations. Such submission is wholly untenable, if not absurd, and must be rejected. It offends against the core tenet of justice that a plaintiff accusing a defendant of such wrong must give sufficient information of such wrong so that the defendant can fairly and properly contest and/or otherwise respond to it.

25.In any case, the breach, the subject matter of this action, was stated clearly in no uncertain terms in the affirmation of Tsui Kwok Kin Kelvin (“Tsui”), the Property Manager of the plaintiff, filed on same date of the Writ in support of P’s Summons (“the Affirmation”):-

“The Subject Dispute between the Plaintiff and the Defendant

9. On 9 January 2019, Mr. Cheung Wing Hung, (“Cheung”) a site staff of the Plaintiff saw renovation workers installing a suspended ceiling at the lift lobby of Units B and A on the 14^th floor of the Subject Building. …

10. On 11 January 2019, a letter before action was delivered to the Defendant’s premises at Units A, B and C on the 14^th floor of the Subject Building …

11. On 13 January 2019, Cheung was notified by Mr Lai Man Wai (“Lai”), the security staff of the Subject Building that renovation workers are chiselling the concrete hacking of the cargo lift lobby of Units B and D on the 14^th floor of the Subject Building and continued their work despite verbal warning …

12. On 14 January 2019, Cheung was notified by Lai that renovation workers are chiselling the floor platform of the cargo lift lobby of Units B and D on the 14th floor of the Subject Building…

The DMC

….”

26.Thus, in the Affirmation the only breach complained of was that which was occasioned by the 2019 Renovations, and nothing else. Mr Liu expressly accepted this to be the case.

27.Clearly, when the defendant filed D’s AS on 24 January 2019 stating that it would not contest the proceedings and on 25 January 2019 consented to the 2019 Order for damages to be assessed, it was acceding to the plaintiff’s claim as set out in the Affirmation.

28.Moreover, in the witness statement of Tsui filed for this assessment, he reiterated the position that “Details of the Defendant’s breach and the unauthorized erection and alteration caused by the Defendant’s renovation works at the common areas and common facilities on the 14^th Floor of the subject Building are set out in paragraphs 9-16 of my Affirmation filed on 22 January 2019 in support of the Injunction Summons” [1].

29.There is thus no doubt that it was the breach occasioned by the 2019 Renovations that the plaintiff was claiming against the defendant in this action, and over which the defendant decided not to contest. I therefore held that the defendant was only liable to restore the 2 Lobbies to the Pre-breach State.

30.For completeness, I would deal briefly with 2 other matters submitted by Mr Liu.

31.First, Mr Liu cited and relied on a number of cases dealing with applications to set aside the default judgment entered. Particularly, he relied on what the learned judges said there in relation to the applicants’ complaints about defects or inadequacies of the general endorsements in those cases. The setting aside of a default judgment clearly is a very different context and exercise requiring very different considerations. With respect to Mr Liu, these cases are wholly and simply irrelevant.

32.Second, Mr Liu relied on some of the said default judgment cases and The Jangmi, in which the question of the knowledge of the defendant over the subject matter of the claim was considered by the court and submitted that, here, the defendant “knew” the plaintiff was complaining about all the breaches. He said the knowledge was established by the Cease-and-Desist Letter, but not by the contents of the letter, not even by the Incident Reports enclosed with the letter, but by the photographs enclosed with the Incident Reports which captured not just the 2019 Renovations but also the then state of the 2 Lobbies which showed the results of previous renovations. With due respect, I would say no more than that it was absurdly far-fetched, that the subject matter of an action or its ambit should and would not be determined by the contents of a cease-and-desist letter, and that I wholly reject his submission.

Unauthorized alterations that the defendant is required to make good to return the 2 Lobbies to the Pre-breach State

33.Having resolved the above, there was not much dispute over what the unauthorized alterations made in the 2019 Renovations over the 2 Lobbies were as compared to the Pre-breach State. They could be gleaned from (a) the pictures enclosed with the 1^st Incident Report dated 9 January 2019 and the 2^nd and 3^rd Incident Reports both dated 14 January 2019[2], (b) the pictures comparing the 2 Lobbies before and after the Works[3] and (c) the photo produced by Tsui during his oral evidence[4].

34.Tsui in evidence accepted that there were no alterations made to the fire-proof doors at the 2 Lobbies; I so find. Law Ka To, the manager of the defendant, in evidence accepted that Exhibit P-1 accurately depicted the state of the false ceiling of the A/C Lobby immediately before the granting of the injunction by the 2019 Order and that the 9 rectangular shape openings thereat were opened during the 2019 Renovations. Whether it was true that some of the openings were newly cut and some were caused by the removal of service panels removed for the purpose of carrying out the 2019 Renovations is in my view immaterial.

35.After the conclusion of the evidence, I indicated to both parties my provisional findings and invited them to address me thereon if they would like to contend for different findings. Both parties were content with my provisional findings and did not seek to argue otherwise.

36.I find that the following alterations were made to the 2 Lobbies in the 2019 Renovations that the defendant is liable to restore:-

(a)  The A/C Lobby: (i) The false ceiling - as shown on Exhibit P-1, there were 9 rectangular shape openings on the false ceiling, the panels of the part of the false ceiling immediately outside one of the doors were also removed, and there were a number of blue lines made on the false ceiling. (ii) There was no alteration to the walls. (iii) Save the small area outside the passenger lift (referred to in the 3 Incident Reports as the “the passenger lift lobby”), the flooring was altered from the original cement sand flooring, and tiles were laid thereon instead.

(b)  The A/B Lobby: (i) The ceiling – there was erected over the ceiling a metal frame to support the intended false ceiling. (ii) As depicted by the photo marked “P-2019-26”[5], The finish of a section of wall was removed exposing the cement sand on the wall. (iii) Save the small area outside the passenger lift (referred to in the 3 Incident Reports as the “the passenger lift lobby”), the flooring was altered from the original cement sand flooring, and tiles were laid thereon instead.

Value of the restoration works

37.Before me there was no direct evidence, be it factual or expert, regarding the valuation of the works to restore the alterations I find above in respect of the ceilings of the 2 Lobbies and the section of wall in the A/B Lobby. However and as can be seen, they were just minor works. The parties, very sensibly, agreed to argue the matter nonetheless and let this court adjudicate, instead of seeking to introduce further evidence which would delay the matter and increase costs.

38.Now the 2 Lobbies were roughly of the same size, each of about 730 square feet in area. The work entailed would have been (a) for the ceiling of the A/C Lobby, reinstalling the panels to close the openings and at the area just outside the doorway and re-painting the entire false ceiling, (b) for the A/B Lobby ceiling, dismantling and disposing of the frame, making good the holes housing the attaching screws and patch-painting those holes, as the original ceiling was already quite old, and (c) for the section of the wall in the A/B Lobby, plastering and re-painting it. The figures put forth by the defendant were HK$4,000, HK$5,000 and HK$5,000 for the 3 respective items totalling to HK$14,000, while the figures put forth by the plaintiff were HK$10,000 for each item totalling to HK$30,000. While I accept the general evidence given by Tsui that it would be difficult to find contractors to perform small jobs such that usually a higher price would be charged for them, these 3 items, however and I think, could be performed by one contractor in one-go. I would assess a lump-sum of HK$20,000 as the reasonable costs for these 3 items.

39.To restore the floors of the 2 Lobbies, the plaintiff claims the costs charged and paid to the Contractor at HK$128,000 and HK$88,000 but netting therefrom HK$4,000 (which was agreed by the parties, the details of which I do not think need mentioning), totalling HK$212,000. The plaintiff says it is a reasonable cost that the plaintiff actually incurred, and awarding a lower sum would be unfair to the plaintiff.

40.The defendant says that the costs charged by the Contractor was too high. The costs quoted by the defendant’s contractor one Legend Construction Limited (“Legend”) were HK$39,500 for the floor of each lobby totalling to HK$79,000. In this regard however, I accept the evidence of Tsui that the plaintiff only engaged contractors it has approved to ensure quality and safety and Legend apparently was not in the list of approved contractors. I also find that this stance is reasonable and I therefore would not assess the value of this item according to the quote of Legend.

41.The defendant then contends, as a fallback, that under the quotation of 偉安油漆裝飾工程 (“Wai On”), which was a quotation obtained by the plaintiff at the same time it obtained a quotation from the Contractor, the price of HK$71,540 was quoted for the floor of each lobby, totalling HK$143,080 for the 2 Lobbies. Wai On was a contractor approved by the plaintiff.

42.I agree with the defendant that Wai On’s quoted price, and netting the said sum of HK$4,000, ie HK$139,080, should be assessed as the award for the restoration work of the floors of the 2 Lobbies, for the following reasons:-

(a)  There was a substantial difference in the prices quoted by the Contractor and Wai On, namely HK$72,920 (HK$212,000 – HK$139,080) such that I find that in its duty to mitigate loss, the plaintiff should have done what was reasonable to try to achieve this mitigation.

(b)  In cross examination, Tsui agreed that the work concerning the floor could have been sub-contracted out separately to a different contractor, like Wai On, to perform; and that the plaintiff had not made any attempt to sub-contract the work relating to the floor to Wai On.

(c)  The correspondence showed that on 8 March 2019, before the Contractor was engaged, the plaintiff’s solicitors sought confirmation from the defendant to engage the Contractor at the total costs of HK335,000. The defendant wrote the next day saying that its manager Mr Law was on a business trip and that it would reply by 19 March 2019. On 19 March 2019, the defendant wrote and said that they did not agree with some of the items and with some of the costs. It then sought 14 days to seek advice and also offered to use its contractor to perform the work. By their letter the next day on 20 March 2019, the plaintiff’s solicitors rejected the defendant’s offer to use the defendant’s contractor outright and only gave the defendant 7 days to confirm the engagement of the Contractor and to make payment of the demanded sum of HK$335,000, failing which the plaintiff would go ahead and engage the Contractor. In the same letter, the plaintiff also warned the defendant not to interfere and threatened the defendant with citing it for contempt.

(d)  At the time, the floor of the 2 Lobbies were already laid with new tiles. There was no issue of safety or other reason for the Works to be undertaken at such haste. In other words, I do not find any reason for urgency.

(e)  Under the general law, the plaintiff is entitled to have the 2 Lobbies restored, and if necessary, by means of a mandatory injunction ordering the defendant to do so. The plaintiff is not entitled to force the defendant to restore it by using a contractor chosen by the plaintiff and at such costs decided by the plaintiff. In my view therefore and in addition to the plaintiff’s general duty to mitigate loss, the plaintiff ought to have afforded the defendant a proper and reasonable opportunity to explore the possibility of the defendant engaging its contractor to perform the restoration work. Evidently, reasonable requirements over the standard and quality of the work and the reliability of the contractor and such the plaintiff was entitled to impose on the defendant’s contractor. Alternatively, the plaintiff ought to have afforded the defendant a proper and reasonable opportunity to respond to the quotation of the Contractor. I therefore find the time given and the stance taken by the plaintiff in the letter of 20 March 2019 less than reasonable.

(f)  I also find that in fulfilling its duty to mitigate reasonably, the plaintiff ought to have attempted to sub-contract the work relating to the floor to Wai On at much lower costs, which as said, it did not. In my view, the plaintiff has not fulfilled its duty to mitigate loss reasonably.

43.I therefore assess the value of the restoration work for the floors of the 2 Lobbies at the total costs of HK$139,080.

Total amount assessed

44.In the premises, I assess the total compensation to be paid by the defendant to the plaintiff at HK$159,080 (HK$20,000 + HK$139,080).

Disposal

45.I enter judgment in favour of the plaintiff in the sum of HK$159,080, with interest at the Best Lending Rate per annum of 5% from 15 July 2019 (the date of the plaintiff’s solicitors’ letter demanding payment) to the date of this assessment, and thereafter at judgment rate until full payment.

46.I will order costs, on nisi basis, that the defendant do pay the plaintiff the costs of this assessment with certificate for counsel, to be taxed if not agreed. This costs order nisi will become absolute unless any party applies to vary within the next 14 days.

47.I thank counsel for their assistance.

Mr Kelvin Liu, instructed by Marie Tsang, Dustin Chan & Co, for the plaintiff

Mr Wong Hok Yan, instructed by Patrick Mak & Tse, for the defendant