The One Property Ltd v. Xiao Nan Guo Management Company Ltd
Read the full judgment text of HCA 759/2021 on BabelCite. This High Court CFI judgment was delivered on 10 November 2025.
1. The Plaintiff commenced this action in respect of a commercial tenancy dispute over the premises known as Shop L501 on Level 5, The ONE, 100 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong (the “ Premises ”).
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HCA 759/2021 [2025] HKCFI 5244 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 759 OF 2021 ________________________ BETWEEN
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________________________ J U D G M E N T (ON ASSESSMENT OF DAMAGES) ________________________ A. Introduction 1.The Plaintiff commenced this action in respect of a commercial tenancy dispute over the premises known as Shop L501 on Level 5, The ONE, 100 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong (the “Premises”). 2.In short, the Plaintiff’s case is that the Defendant had failed and/or refused to pay the monthly basic rent, service charges, promotion levy and rates stipulated in the tenancy agreement (as extended by an extension letter (“Extension Letter”))in respect of the Premises (collectively, the “Tenancy Agreement”) since 1 April 2020. It is also said that the Defendant had been late to pay the licence fees under the various licences granted by the Plaintiff to the Defendant (collectively, the “Licenses”) for November 2019, and had failed to pay the various licence fees since 1 February 2020 and 1 May 2020 respectively. 3.By Notice of Re-Entry dated 28 July 2020, the Plaintiff terminated the Tenancy Agreement and exercised its right to re-enter the Premises on 5 August 2020, without prejudice to its right to claim for the outstanding arrears and loss and damage consequent upon forfeiture. 4.The Plaintiff therefore commenced the present action to recover the arrears of monthly rent, service charges, promotion levy and rates as at 5 August 2020 together with outstanding interest on such arrears as well as damages for breach of the Tenancy Agreement and Licences. 5.On 31 August 2021, the Plaintiff obtained Final and Interlocutory Judgment (the “Judgment”) against the Defendant. Pursuant to the Judgment, the Defendant was ordered to pay to the Plaintiff:-
6.The assessment of damages was fixed to be heard before me on 9 October 2025. 7.The Defendant was formerly legally represented and had filed the Reply to Statement of Damages as well as a witness statement ie 王財永的證人陳述書 (“Wong’s Witness Statement”). 8.The Defendant’s former solicitors on record had ceased to act but no application was made under Order 5 rule 6(3) of the Rules of High Court. The Defendant was also absent at the hearing before me. However, I was satisfied on the Affirmation of Cheung Oi Nung filed on behalf of the Plaintiff that sufficient notice had been given to the Defendant of the hearing. It was therefore appropriate to hear the Plaintiff’s evidence and submissions. 9.This is my judgment on the assessment of damages. B. Material Factual Background 10.The Plaintiff is and was at all material times the owner of the commercial building known as “The ONE”, a 23-storey retail complex with more than 130 shops and restaurants, including the Premises, located at 100 Nathan Road, Tsim Sha Tsui, Kowloon. 11.The Plaintiff and the Defendant entered into a tenancy agreement dated 3 October 2018, by which the Premises was let to the Defendant for business purpose for a fixed term of 3 years commencing from 3 May 2018 to 2 May 2021 (both days inclusive) at the monthly (1) basic rent of HK$370,000 (exclusive of service charges, promotion levy, rates and other charges) and (2) turnover rent equal to the amount by which 13% of the Defendant’s monthly gross receipts exceeds the monthly basic rent. 12.The said monthly rent together with monthly service charges of HK$72,070.80 and monthly promotion levy of HK$6,322 were all payable in advance on the first day of each and every calendar month. 13.In addition, under the tenancy agreement, the Defendant should also pay rates charged on the Premises as assessed by the Government quarterly in advance. 14.By the Extension Letter dated 10 December 2019, the tenancy agreement was extended from 3 May 2021 to 2 November 2021 (both days inclusive) with all terms and conditions in the tenancy agreement remaining in full force and unchanged. 15.The Plaintiff also granted the following licences in conjunction with the Tenancy Agreement to the Defendant:-
16.The Tenancy Agreement as well as each of the 1st to 5th Licences provided that the Defendant shall pay interest on unpaid rent and other monies due from the Defendant including the respective licence fees at the rate of 3% p a above the HSBC Prime Rate after the same fall due. 17.Further, each of the 1st to 5th Licences also provided that the relevant Licence shall be automatically terminated at the expiration or the sooner termination of the Tenancy Agreement. 18.In breach of the Tenancy Agreement, the Defendant had failed and/or refused to pay the monthly basic rent, service charges, promotion levy and rates since 1 April 2020. 19.In breach of the Licences, the Defendant was late to pay the licence fees under the 1st to 4th Licences for November 2019 and had not paid (1) the licence fees under the 1st to 4th Licences since 1 February 2020 and (2) the licence fees under the 5th Licence since 1 May 2020. 20.On 19 May 2020, the Plaintiff received the Defendant’s letter dated 16 May 2020 in which the Defendant attempted to surrender possession of the Premises and returned 1 set of keys to the Premises to the Plaintiff. The keys were subsequently returned to the Defendant on or about 9 June 2020. 21.The Plaintiff did not accept the purported early termination of the Tenancy Agreement and informed the Defendant accordingly by letter dated 29 May 2020. In order to recover the monthly rent in arrears, the Plaintiff commenced distraint action no DCDT 1351/2020 for seizure and auction of goods and chattels of the Defendant on the Premises on or about 29 May 2020 (the “Distraint Action”). 22.On 6 July 2020, the Plaintiff received the Defendant’s letter dated 2 July 2020 in which the Defendant surrendered possession of the Premises and again returned the set of keys to the Premises to the Plaintiff. 23.The Plaintiff accepted the Defendant’s repudiation of the Tenancy Agreement and terminated the same. On 5 August 2020, the Plaintiff also exercised its right to re-enter the Premises and recovered possession thereof. 24.In the circumstances, the Licences were also terminated on 5 August 2020. 25.The Plaintiff accordingly commenced this action on 17 May 2021. 26.As mentioned, on 31 August 2021, the Plaintiff obtained the Judgment. Pursuant to the Judgment, the Defendant was ordered to pay inter alia the sum of HK$1,836,395.84 (the “Judgment Debt”). C. The Evidence 27.For the purpose of this assessment, the Plaintiff filed the witness statement of Mr Chan Kam Yuen (“Mr Chan”), who is the Assistant Leasing Manager of the Plaintiff. 28.As mentioned, the Defendant also filed Wong’s Witness Statement. Mr Wong is the sole director of the Defendant. However, as Mr Wong did not attend the assessment hearing on 9 October 2025 to confirm his witness statement and testify, I have disregarded his witness statement in its entirety. 29.Mr Chan was the only witness who gave evidence at the assessment hearing. He adopted the contents of his witness statements and provided clarifications on the relevant matters to the Court. 30.Apart from the above background matters, Mr Chan’s evidence essentially focused on two areas: (1) first, the steps taken by the Plaintiff in mitigation of loss; and (2) second, the loss and damage suffered by the Plaintiff. A brief summary of his evidence is provided below. C1. Mitigation of Loss 31.After the Plaintiff had taken possession of the Premises, the Plaintiff had made efforts to secure new tenant(s) by (1) approaching and engaging in negotiations with a number of restaurant owners or operators; and (2) adding the Premises to a list of available or vacant premises in emails to up to 16 estate agents in Hong Kong during the period from 12 August 2020 to late November 2020. 32.In or about December 2020, the Plaintiff managed to reach an agreement with Gyuhachi (HK) Limited re-let the Premises for a fixed term of 3 years commencing from 7 April 2021 to 6 April 2024 with rent free period from 7 April 2021 to 20 June 2021. The principal terms of the said tenancy agreement are as follows:-
C2. Loss and Damage 33.On the above basis, and as set forth in Mr Chan’s witness statement and clarified in his oral evidence[1], the Plaintiff has quantified the loss and damage as follows. 34.First, loss of monthly basic rent, service charges, promotion levy and rates from 6 August 2020 (ie upon recovery of possession of the Premises) to 2 November 2021 (ie the expiration date of the Tenancy Agreement) in the sum of HK$5,351,135.16.
35.Second, licence fee in arrears by reason of the Defendant’s breach of the Licences in the total amount of HK$35,977.41.
36.Third, loss of interest on the licence fees at the contractual rate of 3% above the HSBC Prime Rate (ie a total of 8% p.a) from their respective due date to the date of the termination of the Licences in the amount of HK$782.27. 37.Fourth, costs of the Distraint Action in the total amount of HK$17,125.80. The breakdown of which is set out as follows.
38.Fifth, costs incurred in reinstatement of the Premises in the total amount of HK$1,288,144.93[4]. The breakdown of which is set out as follows.
39.In the circumstances, the Plaintiff has quantified the total loss and damage under Paragraph 3 of the Judgment to be HK$6,693,165.57. D. Assessment of Damages 40.Where a landlord accepts a tenant’s repudiation, the landlord is entitled to recover damages reflecting the rent of the unexpired term of the tenancy agreement, service charges, rates and reinstatement costs. This is subject to a duty on the landlord to mitigate, and the landlord is expected to act reasonably and to take such steps as are necessary to re-let the vacant premises at market rent. The duty to mitigate is not onerous, and the landlord is not required to do anything other than in the ordinary course of business. The burden rests on the tenant to show that damages has not been mitigated: Silvercord Limited v High Performance Sports Limited [2020] HKCFI 1800 at §9. 41.To discharge this onus, the tenant has to raise the issue of mitigation with sufficient evidence. If that is done, the Plaintiff will then bear the burden to provide evidence as to how it has mitigated its loss: McGregor on Damages (22nd Ed) at §10-020; §10-116. 42.In this respect, the Defendant suggested that (1) the Plaintiff should have accepted the early termination of the Tenancy Agreement and exercised the right of re-entry on 19 May 2020 such that the Premises could be re-let promptly thereafter; and (2) it could be reasonably anticipated that the replacement tenancy could be secured at least 6 months earlier had the Plaintiff duly discharged its duty to mitigate its loss. 43.I do not accept the Defendant’s bare assertions which are not supported by any evidence. 44.First, there is no basis for the suggestion that the Plaintiff should or must have accepted the early termination of the Tenancy Agreement simply because the Defendant had attempted to return the set of keys to the Premises on or about 19 May 2020. The Plaintiff plainly had a choice not to accept any repudiation on the part of the Defendant at the time. 45.Second, based on the evidence before this Court, the Defendant was in fact in possession of the Premises until 2 July 2020. There can be no dispute that the keys were returned to the Defendant on 9 June 2020. The Defendant’s letter dated 2 July 2020 also shows that the Defendant had (as so alleged) carried out certain repair works to rectify some seepage problems of the Premises before returning the keys to the Premises to the Plaintiff again. 46.Third, Mr Chan also clarified in his oral evidence that in July 2020, the Plaintiff was informed by the Court that the Plaintiff could proceed with seizure of the goods on the Premises by reason of the Distraint Action. 47.Fourth, having decided to accept the repudiation on the part of the Defendant, the Plaintiff duly served the notice of re-entry on 28 July 2020 and re-entered the Premises on 5 August 2020. 48.Fifth, based on the unchallenged evidence of Mr Chan as set out above, I am satisfied that the Plaintiff had taken reasonable step to mitigate its loss. In particular, the Plaintiff had attempted to re-let the Premises at the first available opportunity through the various steps taken including contacting potential tenants and estate agents as described above. 49.Whilst the time taken to re-let the Premises was quite long and the rent had also dropped rather substantially, I accept Mr Chan’s explanation that the general market sentiment was bad due to the on-going covid-19 pandemic quarantine measures and travel restrictions implemented at the time. This is in particularly so given the nature of the use of the Premises is and was to operate as a restaurant. I also note that the Defendant did not seriously take issue with the lower rent agreed under the replacement tenancy. D1. Loss of Monthly Basic Rent, Service Charges, Promotion Levy and Rates from 6 August 2020 to 2 November 2021 50.In the circumstances, I accept Mr Chan’s evidence as clarified at the hearing and agree that the Plaintiff has suffered loss of rent since recovering vacant possession of the Premises until 2 November 2021 ie the expiration of the term of the Tenancy Agreement, taking into account the difference in rent after the execution of the tenancy agreement with Gyuhachi (HK) Limited. 51.I therefore also accept the amount as calculated by the Plaintiff in full and assess the damages for the loss of rent, service charges, promotion levy and rates to be HK$5,351,135.16. D2. The Licence Fee in Arrears 52.As I have rejected the Defendant’s contention that the Plaintiff should have exercised its right of re-entry on 19 May 2020, there is no basis for the Defendant to suggest that the 1st to 5th Licences should have automatically terminated on 19 May 2020. 53.I therefore also accept the quantum calculated by the Plaintiff in respect of the licence fees in arrears in the total amount of HK$35,977.41. D3. The loss of interest on the Licence Fees 54.For the sake of completeness, I also accept the interest on the licence fees in arrears at the contractual rate of 3% p a above the HSBC Prime Rate of 5% (ie a total of 8% p a) as calculated by the Plaintiff in the amount of HK$782.27. D4. Costs of the Distraint Action 55.In respect of the costs of the Distraint Action, the Defendant contended that it was unnecessary for the Plaintiff to incur the costs for the locksmith for breaking into the Premises as the Plaintiff was in possession of the keys to the Premises as at 2 July 2020. 56.I accept the explanation of the Plaintiff’s counsel (ie Mr Lam), which is also indicated in the invoice of the locksmith dated 28 July 2020 that the locksmith was hired not just to open the front gate. Rather, it was also required to break open the other locked items within the Premises including the two cabinets and a safe. 57.As all items of costs relating to the Distraint Action are supported by contemporaneous documents adduced by the Plaintiff, I accept the quantum claimed in full to be HK$17,125.80. D5. Costs Incurred in Reinstatement of the Premises 58.In respect of the costs said to be incurred in the reinstatement of the Premises, there is no dispute that the Premises was handed over to the Defendant in a bare shell condition as shown by the photographs taken on the same date. 59.The Defendant had an obligation to reinstate and yield up the Premises in good clean substantial and proper repair and condition and in its original state and condition pursuant to Clause 5.6 of the Tenancy Agreement. The Defendant did not dispute that it had not done so as indicated in the photographs taken after possession of the Premises was recovered by the Plaintiff in August 2020. 60.Mr Chan also confirmed his evidence that the Plaintiff had to reinstate the Premises at its own costs because the replacement tenant would only take the Premises in a bare shell condition. 61.In this respect, the Defendant did not take issue with the scope of the reinstatement work done and/or whether the same was indeed necessary. The Defendant only raised a general complaint that the costs were on the high side with no evidence to support this assertion. 62.On the other hand, Mr Chan gave unchallenged evidence to address this Court’s queries in relation to the various items of the reinstatement work. In particular, Mr Chan explained that:-
63.Having considered all the supporting documents including relevant tender documents, quotations, invoices (all with description of works) and payment advice, I am satisfied that the Plaintiff is entitled to all the costs claimed for reinstating the Premises in the total amount of HK$1,288,144.93. E. The Security Deposit Retained By The Plaintiff 64.The Plaintiff accepts that the Defendant had paid a total amount of HK$1,464,842 as security deposits pursuant to the terms of the Tenancy Agreement as well as the 1st to 5th Licences. The breakdown of which is set out as follows:-
65.The Plaintiff accepts that the aforesaid security deposits should be taken into account and that it should be at liberty to use the same to set off against any damages to which the Plaintiff is entitled. F. Interest 66.Mr Lam appearing on behalf of the Plaintiff, seeks pre-judgment interest in respect of just the loss of monthly basic rent, service charges, promotion levy and rates at the contractual rate of 3% p a above the HSBC Prime Rate from 23 March 2021 up to the date of judgment and thereafter together with other items of damages so assessed at judgment rate. 67.I see no reason why I should not accede to the order proposed by Mr Lam which is consistent with Paragraph 2 of the Judgment. G. Conclusion 68.In the circumstances, I make an order that:-
69.I also make an order that costs of the action including this assessment of damages be paid by the Defendant to the Plaintiff with certificate for counsel. As provided under Paragraph 4 of the Judgment, such costs is to be taxed on an indemnity basis if not agreed.
Mr Benjamin Lam instructed by S Y Wong & Co, for the Plaintiff Defendant acting in person and being absent [1] At the assessment hearing, Mr. Chan confirmed in his viva voce evidence that the correct quantification of the loss and damages is set forth in his witness statement. The total amount claimed is less than that as set out in the Statement of Damages. [2] The government rates charged for the period from the 3rd quarter of 2020 to the 1st quarter of 2021 were HK$54,000 per quarter before concession and HK$49,000 per quarter after concession. [3] The government rates charged for the 2nd quarter of 2021 were HK$37,500 before concession and HK$32,500 per quarter after concession. [4] The Plaintiff is no longer claiming for the 15% administrative fees in respect of the reinstatement works as set out in the Statement of Damages. [5] The Plaintiff now accepts that this was the amount of the security deposit received from the Defendant under the 3rd Licence as opposed to HK$3,000 as stated in the Statement of Damages. |
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