Unlawful holding over: meaning of possession and calculating mesne profits

In Fordtime Industrial Ltd v Yip Shing Lam ([2016] HKEC 812, LT) the tenant of a cockloft unlawfully held over at the end of the tenancy. After a dispute lasting several years, it wrote to its former landlord on 2 December 2014 notifying the landlord that it could re-take possession. The tenant had, however, built a wall that blocked off access to the cockloft. The landlord was finally able to demolish the wall on 7 March 2015. Had possession been given to the landlord on 2 December 2014 or 7 March 2015? Since the wall erected by the former tenant prevented the landlord from enjoying possession, possession was given on 7 March 2015 when the wall was demolished.

The tenant had removed the floor slab from the cockloft to adapt it to its purposes. The market value of the cockloft was much higher if it was let with a floor slab in place. Should mesne profits be calculated on the basis of the value with the slab or without it? The Tribunal held that the restitutionary basis should be adopted in this case: the aim was to prevent the tenant from being unjustly enriched. Actual losses suffered by the landlord would only come into the calculation if they were higher than the value of the benefit received by the tenant. This was not the case here. Mesne profits were to be calculated by reference to the use contemplated by the parties (without the floor slab).

Michael Lower

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