Star Play Development Ltd v. Glory Gold Ltd t/a Kam Ho Seafood Restaurant and Another
|
HCA 1186/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1186 OF 2006 ----------------------
---------------------- Before : Hon Sakhrani J in Court Date of Hearing : 1 and 2 June 2009 Date of Judgment : 2 June 2009 Date of Handing Down Reasons for Judgment : 11 June 2009 -------------------------------------------- REASONS FOR JUDGMENT --------------------------------------------- 1.On 2 June 2009 I gave judgment for the plaintiff against the 1st defendant in the sum of HK$5,983,786.05 with interest thereon at the rate of 1% above the best lending rate of HSBC from 3 June 2006 to the date of judgment and at the judgment rate after that until payment. 2.I also gave judgment for the plaintiff against the 2nd defendant in the sum of HK$1,195,064.52 with interest thereon at the rate of 1% above the best lending rate of HSBC from 3 June 2006 to the date of judgment and at the judgment rate after that until payment. 3.I also ordered that:
4.I indicated at the time that reasons in writing would be provided. These are my reasons. 5.At the trial the plaintiff was represented by counsel and solicitors. The 1st defendant did not appear at the trial. The 2nd defendant appeared in person and made submissions at the outset. He was prepared to consent to judgment on the plaintiff’s claim against him as guarantor in the total sum of HK$1,195,064.52. The 2nd defendant, however, was concerned with the plaintiff’s claim for interest and costs. The 2nd defendant chose to absent himself from the trial after the first morning. 6.The 1st defendant filed and served a defence and counterclaim. As the 1st defendant did not appear at the trial to prosecute its counterclaim, I dismissed the counterclaim and gave judgment to the plaintiff on the counterclaim with costs to the plaintiff against the 1st defendant. 7.At all material times the plaintiff was and is the registered owner of Hollywood Plaza at 610 Nathan Road, Kowloon. Hollywood Plaza is a multi-storey commercial building in Mongkok with a 3-storey shopping centre with restaurants. 8.The plaintiff was the landlord of the premises on the 2nd floor of the Hollywood Plaza (“the premises”) which was let to the 1st defendant for the running of a Chinese restaurant there. 9.By a tenancy agreement dated 19 November 2003 (“the tenancy agreement”) the premises were let by the plaintiff to the 1st defendant for a term of six years from 1 July 2003 to 30 June 2009 at the basic monthly rent of HK$550,000 from 1 July 2003 to 30 June 2006 and HK$600,000 from 1 July 2006 to 30 June 2009 on the terms and conditions set out therein. Apart from the basic monthly rent the 1st defendant was also liable to pay the plaintiff the turnover rent which shall be a sum equivalent to 10% of the monthly gross receipts in excess of and over HK$4,500,000. 10.The parties to the tenancy agreement were the plaintiff as landlord, the 1st defendant as tenant and the 2nd defendant as guarantor. 11.By clause 5(b) the 2nd defendant unconditionally and irrevocably guaranteed, as principal obligor, the payment by the 1st defendant of the rent, rates, government rent, management expenses, utility and other charges and outgoings and payments payable under the tenancy agreement and the due performance and observance by the 1st defendant of the terms and conditions of the tenancy agreement in the sum up to HK$1,000,000. Under the tenancy agreement the maximum sum that the 2nd defendant was liable to indemnify the plaintiff was HK$1,000,000. 12.Apart from the tenancy agreement a number of licence agreements were also entered into whereby licences were granted to the 1st defendant as follows:
13.The 2nd defendant was also a party to the licence agreements exhibits P3 and P5 as guarantor. By clause 15 of those licence agreements the 2nd defendant irrevocably undertook to indemnify the plaintiff up to HK$200,000 for damages and losses sustained and suffered by the plaintiff arising from or caused by any breach or non-performance or non-observance of any of the agreements, covenants, terms and conditions contained therein to be performed or observed by the 1st defendant. 14.I heard evidence from Yan Kam Fai (“Yan”), senior manager of the leasing and management department of Hang Lung Real Estate Agency Ltd. which was responsible for the leasing of Hollywood Plaza including the premises. I found him to be an honest, credible and reliable witness who told me the truth. I have no hesitation in accepting his evidence. 15.On the evidence I am satisfied and find that as from 1 April 2005 the 1st defendant failed to pay to the plaintiff a total sum of HK$2,465,355 which it was required to pay by clauses 4(a) to (d) of the tenancy agreement. 16.By paragraph 4 of its defence the 1st defendant pleaded that the failure to pay rent was solely caused by the plaintiff “having invited direct and closed business competition, the facts of which are averred in paragraphs 5 to 9 herein below”. 17.Essentially the 1st defendant relies on a representation made on 28 May 2003 before the plaintiff and the 1st defendant entered into the tenancy agreement that the plaintiff “would not rent out the upper floor of the [premises], that is, the 3rd floor of Hollywood Plaza…….. to those who would run the same business of Cantonese restaurant as that of the 1st defendant” (“the representation”). 18.By the particulars (a) under paragraph 8 of the defence of the 1st defendant, it is pleaded that wrongfully and in breach of the representation in or about March 2004 the plaintiff decided to let the 3rd floor of Hollywood Plaza to another operator known as Hoi Tin (Asia) Harbour Restaurant to run the same business of the 1st defendant despite the 1st defendant’s complaints. 19.It is also pleaded by paragraph 8 of the defence that in breach of the covenant to permit the 1st defendant to have quiet possession and enjoyment of the premises during the term without any interruption by the plaintiff under clause 6(a) of the tenancy agreement the plaintiff wrongly evicted the 1st defendant from the possession, use and occupation of the premises as particularized therein. These include allegations that on 29 and 30 June 2005 the plaintiff wrongfully sent 6 notices of termination to terminate the 6 licence agreements and the disconnection of the fuel supply of the restaurant and the wrongful regaining of possession of the premises by the plaintiff from the 1st defendant on 11 July 2005. 20.The 1st defendant alleges that it has suffered loss and damage in the total sum of HK$9,576,100 as pleaded and particularized at paragraph 9 of the defence. The 1st defendant counterclaimed this sum alternatively, damages to be assessed. By paragraph 18 of the defence the 1st defendant denied that it is liable to the plaintiff by reason of its counterclaim. By paragraph 19 it relied on its counterclaim to set-off the plaintiff’s claim. 21.As I have said, the 1st defendant’s counterclaim was dismissed with costs to the plaintiff as the 1st defendant did not appear at the trial to prosecute the same. 22.The 1st defendant’s allegations have been denied by the plaintiff. 23.It is for the 1st defendant to adduce evidence of the pleaded factual allegations which are in issue. The 1st defendant has failed to adduce any evidence in support of its pleaded case. 24.By clause 7(a)(i) of the tenancy agreement it was agreed that if the rent or any other sum payable by the 1st defendant under the tenancy agreement be in arrears for 15 days it shall be lawful for the plaintiff at any time thereafter to re-enter upon the premises and the tenancy agreement shall absolutely determine. 25.There is no doubt that the 1st defendant did not pay rent and the other sums payable by it under the tenancy agreement as from 1 April 2005. 26.By the letter from the 1st defendant’s then solicitors Messrs C. P. Cheung & Co. dated 9 July 2005 to the plaintiff’s solicitors it was admitted that the 1st defendant did not tender rent to the plaintiff “for the past few months” although it was asserted that licence fees were tendered. It was also stated that the 1st defendant “has encountered cash flow difficulty to pay the rent of [the premises] which was solely caused by your client to invite direct and closed business competition”. Thus there is a clear admission that the 1st defendant has failed to pay rent for the premises. 27.I would also observe that a claim for damages for misrepresentation would not afford the 1st defendant any reason not to pay rent and the other sums payable to the plaintiff under the tenancy agreement. 28.By clause 2 of the tenancy agreement the monthly rental was payable on the first day of each and every calendar month “without deduction and without set-off whatsoever”. By Part IV of the First Schedule it was also provided that the rent was payable “without any deduction and without any set-off whatsoever”. 29.By clause 4(b) all rates were payable quarterly in advance “without any deduction or set-off” within the months of January, April, July and October. By clause 4(c) a monthly sum towards the costs, charges and expenses for the maintenance and management of the building was payable in advance “without any deduction or set-off”. By clause 4(d) a monthly sum towards the costs, charges and expenses for the maintenance and supply of air-conditioning chargeable in respect of the premises was payable in advance “without any deduction or set-off”. 30.Although the 1st defendant alleged that it suffered loss and damage in the sum of HK$9,576,100 and counterclaimed the said sum in its counterclaim, it seems to me to be plain, and I so find, that in view of the clear express terms of the tenancy agreement the 1st defendant was obliged to pay the rent and the other sums payable by it under the tenancy agreement without any deduction or set-off. 31.As the 1st defendant failed to pay the rent and the other sums that the plaintiff was entitled to the plaintiff accepted the repudiation of the tenancy agreement on the part of the 1st defendant. I so find. In my judgment the plaintiff lawfully exercised its right of re-entry under clause 7(a)(i) of the tenancy agreement. On the evidence, which I accept, the plaintiff regained possession of the premises on 11 July 2005. I so find. 32.The plaintiff’s case is that all 6 licence agreements were also lawfully terminated pursuant to the notices of termination dated 29 and 30 June 2005 (exhibits P10 and P10A). The 4 licence agreements being Exhibits P2, P4, P6 and P8 each contain a provision providing for the termination of the licence or the delivery of vacant possession by the service of one month’s notice in writing. I am satisfied and find that by the service of the notices of termination the said licences were terminated on 1 August 2005. As regards the other 2 licence agreements namely exhibits P3 and P5, by clause 11(a) it was expressly agreed that the licence agreement “shall immediately and automatically be terminated if [the 1st defendant] ceases to be the tenant of [the premises] for whatever reason or if [the tenancy agreement] is terminated or forfeited for whatever reason…..”. The tenancy agreement was terminated on 11 July 2005 as I have found. That being so, I find that these 2 licence agreements were automatically terminated. 33.I find that the plaintiff lawfully terminated the tenancy agreement and the 6 licence agreements and that the plaintiff is entitled to damages against the 1st defendant for breach of the same. Quantum of damages 34.The plaintiff claims arrears of rent and other charges for the period from 1 April 2005 to 10 July 2005 up to the termination of the tenancy in the total sum of HK$2,465,355. 35.Yan gave evidence, which I accept, that as at 10 July 2005 the 1st defendant failed to pay the total sum of HK$2,465,355 to the plaintiff under the tenancy agreement made up as follows:
36.The plaintiff also claims loss of rental income and rates. On the evidence, in order to mitigate its damages the plaintiff let the premises to another tenant on 12 August 2005 for 3 years from 1 September 2005 to 31 August 2008 at the basic rent of HK$470,000 per month. The plaintiff claims full loss of rental income and rates from 11 July 2005 to 31 August 2005 and partial loss of rental income from 1 September 2005 to 30 June 2006. The total claim under this head is HK$5,156,258 made up as follows:
37.I am satisfied that the plaintiff has reasonably mitigated its damages by letting the premises to the new tenant Skyford Enterprises Ltd on the terms and conditions in the agreement exhibit P12 in a relatively short period of time after termination of the tenancy agreement. Although the offer that it accepted was not the highest offer, it seems to me on the evidence of Yan, which I accept, that in accepting the new tenant for the premises the plaintiff considered the background of the new tenant and its proposed business plan in arriving at a decision to accept that tenant’s offer. I am satisfied that the plaintiff has reasonably mitigated its damages by letting the premises to Skyford Enterprises Ltd. 38.The plaintiff also claims reinstatement and removal costs. By clause 4(x) of the tenancy agreement the 1st defendant was liable at its own cost to reinstate the premises upon termination of the tenancy. As the 1st defendant failed to reinstate the premises it seems to me, and I so find, that the plaintiff is entitled to claim the reinstatement and removal costs that it has incurred. On the evidence the plaintiff incurred such costs in the total sum of HK$554,000. 39.By clause 7(a) (ii) of the tenancy agreement the 1st defendant was obliged to pay interest on overdue payments at the rate of 5% per annum above the best lending rate of HSBC. The sum claimed for interest is the total sum of HK$43,629.39 for the period from 1 February 2005 to 31 May 2005. On the evidence of Yan and exhibit P16, I am satisfied that the plaintiff is also entitled to claim the said sum for interest on overdue payments for the period from 1 February 2005 to 31 May 2005. 40.The plaintiff also gives credit in respect of the rental deposit it has received in the sum of HK$2,276,100 and the sum of HK$184,614.40 being the net proceeds of sale received by the plaintiff in respect of a distraint action against the 1st defendant. I am satisfied that credit should be given to the 1st defendant for the said sums which amount to HK$2,460,714.40. 41.I am satisfied that the plaintiff is entitled to damages against the 1st defendant for breach of the tenancy agreement in the total sum of HK$5,758,527.99 made up as follows:
42.In addition to damages for breach of the tenancy agreement the plaintiff also claims damages for breach of 2 licence agreements namely, exhibit P3 and P8. 43.Under exhibit P3 the plaintiff claims arrears of licence fees from 1 April 2005 to 2 July 2005 in the sum of HK$3,064.52, and reinstatement costs in the sum of HK$192,000 amounting to HK$195,064.52. I am satisfied on the evidence that the plaintiff is entitled to claim this sum. 44.Under exhibit P8 the plaintiff claims arrears of licence fees from 1 July 2005 to 2 July 2005 in the sum of HK$193.54 and reinstatement costs in the sum of HK$30,000 amounting to HK$30,193.54. I am also satisfied on the evidence that the plaintiff is entitled to claim this sum. Conclusion 45.I am satisfied that the plaintiff is entitled to judgment against the 1st defendant in the total sum of HK$5,983,786.05 made up as follows:
46.The plaintiff is also entitled to interest on the said sum. In his submissions, Mr Lam, for the plaintiff, submitted that the plaintiff was now only claiming interest on the said sum from the date of the writ 3 June 2006 until judgment at 1% above the best lending rate of HSCB. I am satisfied that the plaintiff is also entitled to judgment for interest as claimed. 47.The 2nd defendant as guarantor under the tenancy agreement is liable to the plaintiff to the maximum amount of HK$1,000,000. Under the licence agreement exhibit P3 he is also liable as guarantor to the maximum amount of HK$200,000. The total amount claimed against the 2nd defendant is HK$1,195,064.52 under the tenancy agreement and exhibit P3. The 2nd defendant indicated at the first day of trial that he was prepared to consent to judgment for this sum. I am satisfied that the plaintiff is entitled to judgment against the 2nd defendant for the said sum. 48.Mr Lam also submitted that the plaintiff was now claiming interest on the said sum at 1% above the best lending rate of HSBC from the date of the writ 3 June 2006 to judgment and thereafter at judgment rate until payment. I am satisfied that the plaintiff is also entitled to judgment against the 2nd defendant for interest as claimed. 49.As costs should follow the event, I am also satisfied that the plaintiff is entitled to costs against the 1st and 2nd defendants. 50.For the above reasons, I gave judgment to the plaintiff and made the orders as set out above at paragraphs 1 to 3.
Mr Paul Lam, instructed by Messrs Tang & So, for the Plaintiff The 1st Defendant, absent The 2nd Defendant, in person, absent save in the morning of 1 June 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||