Mailex Ltd v. Grefo Ltd

CACV000108/1983

[Assessment of mesne profits. Principles applicable.]

IN THE COURT OF APPEAL

BETWEEN:

Coram: Roberts, C.J., Li, J.A. & Mayo, J.

Date: 25th August, 1983.

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JUDGMENT

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Roberts, C.J.

1. The consolidated actions, out of which this appeal arises, have a long and protracted history, which began with the issue of a writ in Action No.57 of 1980 on the 4th January, 1980.

2. It is unnecessary for us to repeat in detail the full history of this action, or of the later action No.9062 of 1981, which was consolidated with it. In both actions the plaintiff sought possession of three floors of premises at 339 Jaffe Road, with prayers for mesne profits and other relief relating to those premises.

3. On 16th April, 1980, Master Blackwell made an interim payment order for the payment by the defendant to the plaintiff of rent at the rate of $7,000 per month for the first floor of the premises, $5,500 for the second floor and $4,000 for the third floor a total of $16,500 per month. In addition, he ordered that there should be payable watchmen's fees of $1,200 per month, management charges of $600 per month and rates of $1,897.50 (11.5% of the rent) per month.

4. On 16th February, 1982, Master Wilson made a consent order for an increase in these payments, to be effective from 20th June, 1981. The total monthly rental for the three floors was to be $21,450, and with similar increases in management charges to $780 in watchmen's fees to $2287.50 and in rates to $2,466.75.

5. On 12th April, 1983 Jackson-Lipkin J. gave judgment for the plaintiff in the consolidated actions, with an order for possession. He remitted to a Master the assessment of the amount of means profits payable by the defendant to the plaintiff from 20th December, 1979 to the date of delivery of possession of the premises by the defendant.

6. Master Hansen, on 9th June, made the order, which is the subject of this appeal, for the payment, from 20th December, 1979 to date of delivery of possession, of mesne profits at the rate of $25,000 per month, plus management fees of $780 per month, watchmen's fees of $2,287.50 per month and rates of $2,467.75 per month. It is to be noted that, with the exception of the mesne profits, the other amounts ordered by Master Hansen were the same as those included in the consent order made by Master Wilson on 16th February, 1982.

7. In dealing this appeal, we have been somewhat handicapped by the absence of the judgment of the trial judge, which, although his order was dated 12th April, has not yet been delivered. Similarly, Master Hansen, against whose order this appeal has been brought, has not apparently recorded in writing his reasons for his assessment. We must observe that appellate courts and, indeed, parties and their legal advisers are left in considerable difficulty if Judges and masters leave Hong Kong for substantial periods without delivering judgments before they do so.

8. The general principles of law applicable to an award of mesne profits were set out in Swordheath Properties v. Tabet.⁽¹⁾ The following passage is taken from the judgment of Megaw, L.J. -

"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; 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."

9. The plaintiff sought to place before Master Hansen evidence as to the letting value of this property. It is to be noted that the original licence, if that is the proper description of the document under which the defendant has been in occupation of these premises for some years, provided for the licence to last for 36 months, from 20th June, 1978 to 19th June, 1981, at a total rent for the three floors of $16,500 per month. The licence was to be terminable by 6 months' notice by the licensor or licensee. There was provision for an extension of the licence for a further period of three years, from 1981 to 1984, at a rent which would be increased by 30%.

10. The device of a licence seems to have been adopted by the plaintiff, in an apparent attempt to circumvent the terms of its head-lease, which forbade him to assign or sublet.

11. At the hearing before the Master, the plaintiff called a valuer, in an attempt to adduce evidence of the letting value of the property. The valuer assessed the market rent of the premises concerned at a figure of $810,000 per annum as from 1st January, 1980. This valuation, however, was subject to qualifications. The valuer admitted that the presence in the licence of provision for a 6 months' termination by the grantor, would reduce the market rent of the property by about 30%.

12. He was then asked what effect, on the market rent of the property, the restrictive covenant in the head-lease would have, bearing in mind that its presence put the defendant, as well as the plaintiff, at the risk of eviction at any time for the plaintiff's breach of the covenant in the head-lease. He answered that he was unable to comment on the effect of such a covenant.

13. It therefore seems to us that the Master had no acceptable evidence as to the letting value of this property, subject to the conditions contained in the head-lease and the licence. In the absence of any evidence of this kind, it being accepted that the onus is on the plaintiff to establish that he has suffered damage, the usual method of assessment is to apply the rent which had previously been agreed between the parties. In this case, this would mean the rent and other charges agreed in the original licence of 1978, which would still have been in force but for the breaches of which the plaintiff complained and which were the grounds upon which it obtained an order for possession of the property.

14. In the absence of any other evidence before him as to the appropriate letting value of this property, the Master should have adopted, as his assessment of mesne profits, the amount of rent which had been agreed between the parties.

15. Therefore, the appeal must succeed. For the Master's assessment of the mesne profits, we substitute an order that the mesne profits, management charges, watchmen's fees and rates should be those specified by Master Blackwell in his order of 16th April, 1980, from 20th December, 1979 until 19th June, 1981, and those specified by Master Wilson, in his order of 16th February, 1982, from 20th June, 1981 to the date of delivery of possession.

16. The defendant has paid monies due to the plaintiff at the rates contained in those two orders up to July of this year. Thus the question of interest on any outstanding amounts does not arise and the Master's order relating to interest must be quashed.

(1) (1979) 1 A.E.R. 240.

Representation:

Mr. M. Bharurmey, instructed by Alexander K.H. Poa & Co. for Plaintiff/Respondent.

Mr. Benjamin Yu, instructed by Louis Kong & Co. for Defendant/Appellant.