Modern Beauty Saloon Ltd v. Hing Yip Investment Co Ltd and Another

DCCJ 5634/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5634 OF 2003

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BETWEEN

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Coram :  H.H. Judge Chow

Dates of Hearing :  10^th to 12^th July 2006

Date of Handing Down Judgment :  29^th August 2006

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JUDGMENT

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1.This is the Plaintiff’s claim for return of the balance of deposit in the sum of $280,729.

2.By a lease in writing dated 23 August 2001, made between the Plaintiff as tenant, and the Defendants as landlord, the Plaintiff rented the Ground Floor and the basement of Full Win Commercial Centre, No. 573 Nathan Road (“the Premises”), for the period from 15 August 2000 to 14 August 2003, at a monthly rent of $130,000.

3.On 14 August 2003, the Plaintiff yielded up the Premises to the Defendant.  The Defendant deducted a sum of $280,729 from the deposit, and only returned to the Plaintiff on 11 September 2003 the balance of the deposit in the sum of $251,003.

4.When the Plaintiff surrendered the Premises to the Defendant, the following items of works had been done found:-

(1) Alterations and/or additions to fire service installations of Defendants in the Premises including 50 heat detectors, 50 remote controlled lights, 1 set of fire alarm, 108 fire sprinklers and 1 set of fire hose (“the Fire Services Work”);

(2) Demolition of 2 toilets, i.e. the toilet for the disabled (with water closet and wash basin) and the male toilet (with water closet, wash basin and male lavatory), removal of wash basins in the female toilet and installation of another water closet thereon;

(3) Raised flooring by concrete of 6 inches thick embedded with water and drainage pipes on the area coloured pink on Exhibit D1;

(4) Demolition of 2 walls (including 2 doors) next to the staircase leading from the Ground Floor portion to the Basement portion of the Premises.

5.The cost of repairing and reinstating the fire services installations is $27,000.  The cost of repairing and reinstating 3 toilets and 2 walls next to the staircase is $103,700.  The cost of reinstating the floor is $58,000.  The loss of use and occupation of the Premises required for the execution of the reinstatement works rental for 20 days at $92,029, based on estimated market rental of $110,000, and air-conditioning charges and management fees at $28,044 per month.  The total sum is $280,729.

6.Clause 5.22 of the Lease stipulates that “The Tenant shall quietly yield up the Premises to the Landlord in a bare shell condition and hand over the same together with the three toilets at the expiration or sooner determination of the Term in good clean and substantial repair and condition (fair wear and tear excepted).”  Under Clause 5.22, the Plaintiff was required to handover “the three toilets” upon the expiry of the lease.  “The three toilets” are not just any three toilets, but the three toilets depicted in Exhibit D1, the basement floor plan.  When the Plaintiff delivered the Premises on 14 August 2003, there were only 3 partitions, each of which had a water closet.  The Plaintiff had demolished the 2 smaller toilets and converted the wash basins area in the larger toilet into another partition with a water closet therein.  The toilets which the Plaintiff handed over cannot be “the three toilets” as depicted in Exhibit D1.  In this respect it was in breach of Clause 5.22. 

7.According to the Shorter Oxford English Dictionary, one of the meanings of “bare” is “unfurnished, undecorated”.  Therefore the Plaintiff was obliged to deliver up the Premises without furnishings or decorations, namely, in a bare shall condition.   The business run by the Plaintiff is a fitness centre.  Each of the four items of work set out under paragraph 4 of this Judgment must have been done for the purposes of furnishing and/or decorating the layout of the business.  If not for such purposes, it would not have been necessary to do these four items of work.  When surrendering the Premises  the Plaintiff did not observe Clause 5.22 of the Lease, because it did not deliver the Premises in a bare shell condition.

8.Clause 11.1 of the Lease empowers the Defendant to make deductions from the deposit.  It reads:-

“……

The Deposit shall remain deposited with the Landlord and shall not be withdrawn throughout the Term and shall only be released as hereinafter provided.  The Landlord shall be entitled to deduct from the Deposit the amount of all direct losses and damages sustained or incurred by the Landlord as a result of the breach, non-observance or non-performance by the Tenant of any of the covenants, terms or conditions herein contained …”

(Underlines provided)

The deductions that can be made by the Defendant under Clause 11.1 are confined to “the amount of all direct losses and damages sustained or incurred by the Landlord” as a result of the breach of the Lease by the tenant.  According to Mr. Wong Po Ke, the assistant manager of Hing Yip Investment Company Limited, other than the Fire Services Work, no other reinstatement works were carried out, after the delivery of the Premises by the Plaintiff to the Defendants.  Thereafter, the Premises have been rented out on an “as is” basis.  That is to say, the Premises have been rented out without any reinstatement work other than the Fire Services Work.

9.According to Mr. Lau Ying Kit, the Project Manager of Shun Yick & Co. Ltd., the fire service contractor for the Full Win Commercial Centre, the costs for the Fire Services Work was $27,000 and it took around 8 to 10 days to complete the works.  The average of 8 to 10 days is 9 days.  The cost of occupying the Premises for 9 days following the delivery of the Premises for the purposes of doing the Fire Services Work is $41,413.20 [($110,000 + $28,044) x 9/30].  The Defendant made the total deductions of $280,729 on the basis of the reinstatement works set out in its letter to the Plaintiff on 11.9.2003 (Exhibit D6), comprising the amounts of $27,000, $10,3700, $58,000, and $92,029.  Only the reinstatement works in respect of the Fire Service Work in the sum of $27,000 has been done.  Therefore apart from the losses and damages arising from the Fire Services Work in the sum of $68,413.20 ($27,000 + $41,413.20) no other direct losses and damages have been sustained or incurred by the Defendants as a result of the breach of the Lease by the Plaintiff.  Hence the Defendants are only entitled to deduct $68,413.20 from the deposit, and the Plaintiff is entitled to the return of the balance of $212,315.80 ($280,729.00 - $68,413.20).

10.I order that the Plaintiff do return, within 14 days from today, the balance of deposit in the sum of $212,315.80, together with interests thereon, commencing from 11 September 2003, until satisfaction, at judgment rate.

Costs

11.I make an order nisi, to be made absolute in 14 days’ time, that each party is to bear its own costs of this action.

The Plaintiff: represented by Mr. Daniel Tang, instructed by Messrs. Wong & Yip, Solicitors.

The Defendant: represented by Mr. Jenkin Suen, instructed by Messrs. Wong, Hui & Co., Solicitors.