Ng Ah Kiu and Another v. Lau Wing Keung

Read the full judgment text of CACV 169/1983 on BabelCite. This Court of Appeal judgment.

1. This is an appeal against assessments of means profits by Master Hansen in two actions which have now been consolidated.

Case No.CACV 169/1983
Court
Court of Appeal
Date
Judge
Case Document
100%Judiciary

Civil Appeal No. 169 of 1983

Landlord and tenant - assessment of mesne profits. Where a landlord claims mesne profits he may recover the actual damages resulting from the defendant's trespass (here, the loss of rent he would have received under a tenancy agreement with a third party for the period of wrongful occupation) and is not limited to the market rental value.

Courts, practice and procedure

Where a landlord claims mesne profits by his original Statement of Claim, the Master has jurisdiction to grant leave to amend so that the landlord's actual loss is pleaded even after judgment (interlocutory in so far as it provided for the assessment of mesne profits) has been entered.

Assessment of Master Hansen affirmed.

Date of hearing: 5th and 6th April, 1984.

Date of delivery: 6th April, 1984.

Civil Appeal
No. 169 of 1983

IN THE COURT OF APPEAL

BETWEEN

NG AH KIU Plaintiff
(Respondent)

and

LAU WING KEUNG Defendant
(Appellant)

AND BETWEEN

CHAN KING CHOI

Plaintiff
(Respondent)

and

LAU WING KEUNG

Defendant
(Appellant)

_______

Coram: Cons and Fuad JJ.A., and Kempster J.

Dates of hearing: 5th and 6th April 1984

Date of delivery: 6th April 1984

___________

JUDGMENT

___________

Fuad, J.A.:

1. This is an appeal against assessments of means profits by Master Hansen in two actions which have now been consolidated.

2. The background of the appeal is as follows. Mr. Chan King Choi and his wife Ng Ah Kiu own adjoining shops on the ground floor of premises in Hing Fong Road, Kwa Chung. Under separate tenancy agreements husband and wife let out their shops to Mr. Lau Wing Keung for five years from the 5th December 1977. The husband's shop was leased at a rental of $2,500 a month and the wife's at $3,500 a month. They each caused notices to quit to be served on Mr. Lau on the 3rd March 1982 requiring vacant possession of their shops at the expiration of the leases, i.e. on the 4th December 1982. Mr. Lau did not move out and so Mr. Chan and his wife issued separate writs against Mr. Lau on the 14th December 1982 .

3. The Statements of Claim which accompanied the writs (No. 12151 of 1982 was the husband's action, and No. 12150 was the wife's) were in identical terms when account is taken of the different rents. The two Plaintiffs claimed possession of their shops, arrears of rent, mesne profits, "further and other reliefs" and costs. Mr. Lau, it is common ground, moved out of both the shops on the 10th June 1983.

4. In each of the actions, on the 22nd February 1983, final judgment was entered in favour of the landlord for possession and arrears of rent; and interlocutory judgment for mesne profits to be assessed.

5. Both the Plaintiffs filed Amended Statements of Claim on the 3rd October 1983. The Master granted leave for the amendments to be made on that day. However, it is to be noted that the summonses for leave to amend were taken out on the 12th July 1983, returnable on the 26th September. They had then been adjourned for argument to the 3rd October.

6. The effect of the amendments in each Statement of Claim were to include averments that the shops were leased to a Mr. Tai Ka Ming for three years from the 5th December 1982 at monthly rentals of $15,000 and $10,000 respectively and that  Mr. Lau had been informed of the lettings on the 3rd June 1982. In each case by the Amended . Statement of Claim the landlords claimed as special damages, and as an alternative to mesne profits, damages in respect of the lost rent that would have been received from Mr. Tai, $62,000 for the husband's shop and $93,000 for the wife's.

7. The hearing before the Master took place on the 3rd and 4th October 1983. He heard the evidence of the two Plaintiffs and that of a Surveyor called on their behalf. The Defendant in both actions, Mr. Lau, gave his evidence and his valuer, a Mr. Maguire, then testified. This is how his evidence was recorded -

"I'm estate surveyor with A.G. Wilkinson & Associates. B.Sc. in Urban Estate Surveying. I have valuation prepared by my firm. Firm asked to assess open market value at 5.12.82. I didn't see premises personally. (Mr. Sujanani objects to hearsay evidence.) Rental assessment is $8,500 p.m. This made by applications of comparables. That is similar properties to subject property. Comparables have been used in this case. A total of 6 shops 80 and 81, G/F, Kwai Shing Courts let $8,000 inclusive for 3 years from November 1982. Also shop C2 cockloft Kwo Fong Building 39A Kwo Fong Street. 3 years lease from 1.11.82. '850 p.m. for 1st 2 years and $7,000 p.m. for last year. It is 69.5 sq. meters and cockloft 61.5 meters. land requesting has been searched. There are copy searches on file. I would say $8,500 is a reasonable assessment based on comparables that has been used. I've read Mr. Lai's valuation report. I disagree with rental assessment but I agree with decrease from June to December. (Report and evidence ruled inadmissible). Mr. Sujanani - no XXD)."

8. The Master gave his decision on the 4th October. After reviewing the evidence, about Mr. Maguire he said this -

"Mr. Wong also attempted to adduce evidence on behalf of the defendant from a valuer, Mr. Maguire. However, it transpired that Mr. Maguire had not been to the premises and had no personal knowledge of this matter. Apparently, his evidence was to be based on some rough notes made by some former member of the staff of A.G. Wilkinson and Associates. On Mr. Sujanani's submission, I ruled this evidence to be inadmissible."

9. The Master accepted the Plaintiffs' evidence in preference to that of the Defendant where there was a conflict. He believed Mr. Chan when he said that he had told Mr. Lau about the new tenancy, agreements for the shops with Mr. Tai Ka Ming. He then stated- "I also accept the evidence of valuations given by Mr. Simon Tai..." . He had testified that the market rental value of the two shops would have been, respectively, $25,000 per month in June 1982 and $22,500 in December 1982, a drop of 10%.

10. The Master then went on to quote from the judgment of Megaw L.J. in Swordheath Properties v. Tabet [1979] l All E.R. 240 and when dealing with the rent for the shops that Mr. Tai had undertaken to pay said -

"There are the two "arms length" tenancy agreements which clearly establish the letting value of the property... unless there was evidence to show these two tenancy agreements were something other than "arms length" transactions it would be quite wrong to go behind these figures... The Plaintiffs are entitled to mesne profits from the 5th December 1982 until vacant possession (i.e. 10th June 1983 as pleaded)."

11. He assessed the mesne profits as follows -

(a) for the wife's shop $93,000 (at the rate of $15,000 per month);

(b) for the husband's shop $62,000 (at the rate of $10,000 per month).

12. For the Appellant it was contended that the Master should not have permitted the Statements of Claim to be amended after the interlocutory judgments had been entered on the 22nd February 1983, and while those judgments stood. These were, as we have seen, interlocutory judgments for mesne profits to be assessed and it is said that the Master had no jurisdiction to consider, in accordance with the alternative prayers in the amended Statements of Claim, "special" damages for the lost rent that Mr. Tai Ku Ming would have paid in respect of each shop.

13. In arriving at his figures, the Master said -

"In this particular case it is not necessary to attempt to calculate the "ordinary letting value of the property". There are the two "arms length" tenancy agreements which clearly establish the letting value of the property i.e. $15,000 per month for shop A4 (HCA 12150/82) and $10,000 per month for shop A5 (HCA 12151/82). Unless there was evidence to show these two tenancy agreements were something other than "arms lengths" transactions it would be quite wrong to go behind these figures. As I found earlier, both the agreement were "arms length" transactions. The plaintiffs are entitled to mesne profits from the 5th December 1982 until vacant possession (i.e. 10th June 1983 as pleaded)".

The phrase "ordinary letting value of the property" comes from the passage from the judgment of Megaw L.J. in Swordheath which the Master had earlier relied upon. When Megaw L.J. was discussing the measure of damages in cases such as this, he said "...and, in the absence of anything special in the particular case, it would be the ordinary letting value of the property that would determine the amount of damages."

14. It seems to me that the crucial issue in this appeal is what is meant by the expression "mesne profits". If it means only the market rental value there would be great force in Mr. Bernacchi's arguments to which I confess I was initially attracted. However, I was later satisfied, if I may say so with respect, that the law is correctly summarised in para. 255 of Vol. 27 of HALSBURY (Fourth Edition). The paragraph is in these terms (omitting the references to foot-notes) -

"255. Mesne profits. The landlord may recover in an action for mesne profits the damages which he has suffered through being out of possession of the land or, if he can prove no actual damage caused to him by the defendant's trespass, the landlord may recover as mesne profits the amount of the open market value of the premises for the period of the defendant's wrongful occupation. In most cases the rent paid under any expired tenancy will be strong evidence as to the open market value. Mesne profits, being a type of damages for trespass, can only be recovered in respect of the defendant's continued occupation after the expiry of his legal right to occupy the premises. The landlord is not limited to a claim for the profits which the defendant has received from the land, or those which he himself has lost."

15. Here the landlords were able to prove the actual loss they suffered through being out of possession of their shops and therefore it was hot necessary to fall back upon the open market value to assess mesne profits. In my judgment, therefore, the Master did not go outside the mandate given him under 0.13 and by the terms in which the interlocutory judgments were couched.

16. I accept that amendments to the Statement of Claim were in fact necessary so that the Plaintiffs pleaded the special facts and circumstances giving rise to their precise losses, to enable the Defendant to know what case he had to meet. But I entertain no doubt that the Master had power to grant leave to amend particulars relevant to the assessment even after the interlocutory judgments had been entered. If the Defendant felt that he had been prejudiced, he could have appealed against the Master's Order timeously, and he did not. I do not see how the Master could be blamed for proceeding immediately to assess the mesne profits if, as happened, he was not asked for an adjournment. This court cannot now entertain any enquiry into the propriety of these amendments. I agree with Mr. Chang's submission that the fact that the Plaintiffs chose to categorise their actual loss as "special damages" could not prevent the Master from assessing mesne profits by reference to their actual loss. When the Master's judgment is read, it is clear that this is what he did.

17. On the question whether the Master was right in his approach to Mr. Maguire's proferred evidence, in the light of my views on the matters central to this appeal, it is not necessary to form a concluded opinion. I would say, however, that in my view the Master was perhaps too hasty in ruling the totality of Mr. Maguire's evidence to be inadmissible. I have already read out the reasons the Master gave for this decision. Apart from the question of weight,I see no reason why an expert valuer should not be permitted to give his opinion about the market rental value of shop premises he has not himself visited when he knows the location of the shop and its dimensions, provided his general or special experience has given him knowledge of comparable rents. I will, if I may be permitted to do so, suggest that the judgment of Megarry J. in English Exporters (London) Ltd. v. Eldonwall [1973] W.L.R. 435 is most helpful on the point. Of course, cross-examination of Mr. Maguire might have shown, as the Master seems to have thought, that he was really giving someone else's evidence for him and not giving opinion evidence about matters within his field of competence, although I am bound to say this is not the impression I formed from the bare record of his abortive testimony.

18. It was also urged upon us that the damages claimed and awarded did not in fact arise because if the leases to Mr. Tai Ku Ming were valid, the rental for three years commenced directly he was able to have vacant possession of the premises. I only mention this ground to dismiss it. I entirely agree with what Master Hansen said about this issue.

19. This disposes of the main issues in this appeal. Complaint is, however, also made about part of the order for costs that the Master made at the conclusion of the hearing - this is what he said in his judgment -

"

Costs to the plaintiff excepting the costs of the adjournment on the 20th June 1983 which shall be to the defendant. Late on the afternoon of the 3rd of October I was told the valuation witness the defendant preppsed to call was not available and I was asked to adjourn the hearing till the next day. On the 4th of October it transpired
(a) the witness, Mr. Maguire, had been sitting outside chambers all the afternoon of the 3rd of October and the ease could have been concluded that afternoon; and
(b) his evidence was ruled inadmissible. Accordingly, I award the plaintiffs costs on a solicitor and own client basis for the hearing on the 4th October. Certificate for counsel."

20. All that it is now necessary to say on this point is that when Mr. Chang, who appeared for the Respondents in this appeal, heard a statement from the Bar from Junior Counsel who had represented the Defendant before the Master about what had transpired on the 3rd October, he very fairly conceded that the Master's Order should not be allowed to stand. Junior Counsel had told us that late in the afternoon of the 3rd October, perhaps as late as 5 p.m., he had informed the Master that his valuation expert was not available. This was true for he had intended to call the person (if he could be found, for he had left the firm of valuers in the meantime) who had prepared the valuation report on which the Defendant intended to rely. And so the hearing was adjourned. On the following day when he realised he could not call that person for he still could not be found, he decided to make the best of the situation by calling Mr. Maguire. It seems likely that the Master did not have the matter fully explained to him or that he misunderstood the position.

21. I would therefore dismiss the appeal on the merits, but vary the costs Order, and direct that the Defendant should pay the Plaintiffs' costs for the hearing on the 4th October, on the usual basis - as between party and party. To that extent, only, I would allow the appeal.

(K.T. Fuad)
Justice of Appeal

Cons, J.A. :

22. I am in full agreement with the judgment of my Lord Fuad J.A. and with the order that he proposes. I would only add one very small point in relation to the argument put forward by Mr. Bernacchi and based on the clause in the Plaintiffs' agreements with their new tenants which provided for the term of the new leases to start either from the fixed date or from such time as the present tenant should vacate the premises. There is a suggestion that because of that term the Plaintiffs had no contractual right to occupation of the premises until the present tenant should think fit to move out. I agree with Fuad J.A. that the Master dealt adequately with what during argument I called "the mitigation aspect" of that submission. As to "the technical aspect" I think the true import of that term has been missed. The term was not there for the benefit of the present tenant. It was there only for the protection of the landlord. Without it, the landlord might well have found himself subject to an action for damages at the suit of the new tenant, when the present tenant failed to vacate. It cannot detract from the landlord's rights against him.

(D. Cons)

Justice of Appeal

Kempster, J.:

23. The expression "mesne profits" means damages for trespass and includes all such damages. Normally they are assessed in terms of the market rental of the property in question during the period of unlawful occupation. When special, aggravated or exemplary damages are sought, however, leave to amend must be obtained if the relevant particulars do not appear in the original pleading. Further, no leave is new required to join a claim for mesne profits with one for the recovery of land.

24. Going no further into legal history than 1770 and to a case felicitously entitled Goodtitle v. Tombs(1). The Chief Justice, Wilmot, himself looked even further back, stating at page 120:-

"By the old law and practice in an action of ejectment you recovered nothing but damages the measure whereof was the mesne profits."

and at page 121 :-

"Damages are not confined to the mere rent of the premises but the jury may give more if they please."

This last observation would now require consideration in the light of more recent authority on the subject of aggravated and exemplary damages. In Swordheath Properties Ltd. v. Tabet(2), cited by my Lord Fuad J.A., Megaw L.J. observed at page 242 :-

"It appears to me to be clear both as a matter of principle and of authority that in a case of this sort the plaintiff, when he has established that the defendant has remained on as a trespasser in residential property, is entitled, without bringing evidence that he could or would have let the property to someone else in the absence of the trespassing defendant, to have as damages for the trespass the value of the property as it would fairly be calculated".

These words necessarily infer that it is open to the landlord to addace evidence that he could have let the premises to someone else if such evidence, as in the present case, is available. It is this plain that para. 255 of Halsbury's laws 4th edition Vol. 27 fairly and accurately states the relevant law.

25. Here the learned Master assessed mesne profits after he had validly given leave to amend the Statements of Claim which necessarily altered his approach to though not the nature of his remit. I say validly amended bearing in mind, among other considerations, that the defendant has not or has not been permitted to appeal against the orders giving leave to amend. The Master was acting within his jurisdiction in assessing what damages had been suffered by the plaintiffs during the period of the defendant's trespass.

26. The fact that the particular term granted to Mr. Tai will not be shortened is neither here nor there. None of us can gauge whether the level of rents will be greater or lesser on its expiry.

27. In the circumstances I agree with the order proposed by Fuad, J.A.

(M. Kempster)
Judge of the High Court

(1) 3 Wilson 118

(2) [1979] 1 All E.R. 240

Representation:

Mr. B. Bernacchi Q.C. with Mr. R. Sujanani (Ip, Ku and Stoppa) for the Appellant.

Mr. D. Chang Q.C., with Mr. H.Y. Wong (Lo, Wong and Tsui) for the Respondents.