SPOKESMEN ENTERPRISES LTD v. CHEUNG YUK SHING t/a KAM SHING MOTOR TRADING CO

HCA 3764/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3764 OF 2003

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D E C I S I O N

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Applications

1. There are 3 applications before me:

(a)	The Plaintiff’s Charging Order: Notice to Show Cause (“Charging Order Nisi”) filed on 7 June 2004,
(b)	The Defendant’s summons asking to stay the Writ of Possession filed on 23 July 2004, and
(c)	The Defendant’s summons applying to stay the Charging Order Nisi.

At the outset of the hearing before me on 3 August 2003, Mr. Chan, solicitor for the Defendant, indicated that he did not intend to pursue his 2 summonses.  Ms. Chan, solicitor for the Plaintiff, did not oppose to it.  I therefore allowed Mr. Chan to withdraw the Defendant’s 2 summonses, leaving the question of costs thereof and the Charging Order Nisi to be argued.

Background

2. On 9 October 2003, the Plaintiff commenced the present proceedings against the Defendant for vacant possession of some pieces of land in Yuen Long (“the Premises”), outstanding rent, mesne profits, interest and costs.  Later, Plaintiff took out an application for summary judgment against Defendant.  On 1 April 2004, the matter was heard by Master Au-Yeung who gave judgment for the Plaintiff on possession of the Premises and mesne profits at the rate of $150,000 per month from December 2003 until vacant possession of the Premises would have be recovered by the Plaintiff.  On the other hand, the learned Master granted unconditional leave to the Defendant to defend for the remaining claims of the Plaintiff.

3. The Defendant was not happy and took up the matter to appeal.  It was dismissed by Deputy Judge To on 30 November 2004.  The matter went further before the Court of Appeal and the decisions below were upheld.

4. In the meantime, during the pendency of the above appeals, the Plaintiff took steps to protect its interest, including applying for the Charging Order Nisi and Writ of Possession.  The Defendant then applied for stay of them by the aforesaid summonses.  On 13 August 2003, the 3 applications went before me and I adjourned them to a date to be fixed for argument and to be heard together.

5. After the Defendant lost his case in the Court of Appeal, the parties restored the 3 applications.  Certainly, it is no longer possible for the Defendant to pursue any stay.  Mr. Chan rightly asked to withdraw his 2 applications.  Nonetheless, the question whether the Plaintiff’s Charging Order Nisi should be made absolute is disputed.

6. One day before the scheduled hearing before me, on 2 August 2005, both parties filed and served their respective affirmations.  The Plaintiff informed the Court of the latest position:

“	3.	I am instructed by the Plaintiff and verily believe that after handing down of the Judgment, the Plaintiff demanded the Defendant’s sub-tenants in occupation of the Premises to pay rent to the Plaintiff direct and the Plaintiff has been receiving rent from the sub-tenants since 1st April 2004.  In the circumstances, the Plaintiff in effect recovered possession of the Premises on 1st April 2004.  Accordingly the amount due and payable under the Judgment is as follows:-
		Mesne profits for the Defendant’s occupation
		of the Premises from 01/12/2003 to 31/03/2004
		(HK$150,000 x 4 months)	HK$600,000
		50% of the Plaintiff’s costs for the Summons
		for summary judgment	95,000
			HK$695,000
		together with interest on HK$695,000 at judgment rate from 1st April 2004 until payment.
	4.	I am instructed by the Plaintiff and verily believe that the above sum of HK$695,000 and interest thereon remain wholly unsatisfied.  I therefore pay for a Charging Order Absolute charging the Defendant’s beneficial interest in the assets specified in the Schedule to the Charging Order: Notice to Show Cause dated 2nd June 2004 with payment of the said sum of HK$695,000 together with interest thereon at judgment rate from 1st April 2004 until payment and the costs of the application.”

On the other hand, the Defendant complained on a number of matters:

“	8.	A Notice to Appeal to Judge in Chambers was filed on 8th April 2004.  Shortly after the filing of the said Notice, I was informed by my sub-tenants that a group of males claiming to be members of triad members requested them to pay the rent to the Plaintiff instead of me.  I instructed my former Solicitors to issue a notice to them explaining the situation and advising them to ignore their requests and to report the matters to police.
	9.	However, my sub-tenants were continued to be harassed and were prevented to use the Premises unless they conceded the Plaintiff’s requests.  Since June 2004, they paid their rent, which were supposed to be received by me, to the Plaintiff/the Plaintiff’s Solicitors for the period from April 2004 until now ……
	10.	The Plaintiff also requested one of my sub-tenants to enter into a new tenancy agreement with them on 3rd December 2004 ……
	11.	In this premises, the Plaintiff have received a total sum around f HK$3,704,000 from 1st April 2004 to 1st July 2005 (total of 16 months) of which the Plaintiff is not entitled to receive ……
	12.	Under the said Order, I am liable to pay mesne profit at the rate of HK$150,000.00 per month.  From 1st December 2003 to 1st July 2005, the total mesne profit I have to pay to the Plaintiff is HK$3,000,000.00 (total of 20 months).
	13.	I did not and have not delivered vacant possession of the Premises to the Plaintiff nor the Plaintiff have taken any step to recover the possession of the Premises up to present.  I submit that in order for the Plaintiff to recover possession, a surveyor shall be engaged to ascertain the boundaries of the Premises which to be surrender to the Plaintiff as some pieces of my lands are immediately adjacent to the Premises.  Part of the Premises and my lands were also let to some of my sub-tenants and part of Premises and my land were constructed as access road.  It is impossible to ascertain the boundaries of the Premises to be surrendered to the Plaintiff without the help from surveyor.”

Ruling

7. Upon consideration of evidence, authorities and submissions from the parties, I have come to the conclusion that the Charging Order Nisi is to be made absolute.  My reasons appear as follows.

The Law

8. The relevant legislation and principles in deciding whether a charging order nisi should or should not be made absolute are found in:

(a)	Section 20(3) of the High Court Ordinance:
	“in deciding whether to make a charging order the Court of First Instance shall consider all the circumstances of the case, and, in particular any evidence before it as to—
	(a)	the personal circumstances of the debtor; and
	(b)	whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.”
(b)	Paragraph 50/9A/23 at page 732 of the Hong Kong Civil Procedure 2004
	“The general principles governing the exercise of the discretion to make a charging order may be summarised as follows:
	1.	The question whether a charging order nisi should be made absolute is one for the discretion of the court.
	2.	The burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor.
	3.	For the purpose of the exercise of the court’s discretion there is, in general, no material difference between the making absolute of a charging order nisi on the one hand and a garnishee order nisi on the other.
	4.	In exercising its discretion the court has both the right and the duty to take into account all the circumstances of a particular case, whether such circumstances arose before or after the making of the order nisi.
	5.	The court should so exercise its discretion as to do equity, so far as possible, to all the various parties involved, that is to say, the judgment creditor, the judgment debtor and all other unsecured creditors.
	6.	……”

Reasons

9. Applying the above law in our case, the Defendant has failed to discharge its burden to persuade me that the Charging Order Nisi should not be made absolute.

(a)	On balance of probabilities, I accept that, as a matter of fact finding, the Plaintiff did recover possession of the Premises on 1 April 2004.
(b)	It is agreed that the Plaintiff’s stand towards the exact date on which possession was recovered has not been consistent.
(c)	However, the case of the Defendant is even worse.  It is noted that, despite the agreement by the Defendant to give up vacant possession of the Premises to the Plaintiff as early as at the hearing before Master Au-Yeung on 1 April 2004, the Defendant still pursued his appeal up to the Court of Appeal.  Paragraph 4 of the judgment of the Court of Appeal handed down on 1 June 2005 states clearly that:
	“It is not disputed by Mr Chong that before the master the defendant indicated that it had no objection to giving up vacant possession of the land in question.  In those circumstances I would query whether it is now open, or even before the judge below was open, to the defendant to resile from that concession which no doubt confirmed to the master the appropriateness of making the order for vacant possession.”
(d)	It is common ground that the Plaintiff has been receiving rent from the sub-tenants of the Premises since 1 April 2004.  “Forceful retry” is not a necessary ingredient for recovery of possession.  It may be done by peaceful re-entry or otherwise.  As pointed out by Ms. Chan, paragraph 17.089 of Woodfall sets out that:
	“Physical re-entry
	At common law
	17.089  …… A constructive physical re-entry takes place where the landlord lets into occupation some third party and maintains him there as tenant or, it seems, accepts an already occupying sub-tenant as tenant (i.e. by accepting such sub-tenant as a tenant under a new tenancy between the forfeiting landlord and the sub-tenant) ……”
(e)	As a result of the finding that possession of the Premises was constructively recovered on 1 April 2005, it follows that the Plaintiff would not claim any mesne profits from the Defendant after that date.
(f)	It also follows that the Defendant is not entitled to recover the “rent” from his sub-tenants in the Premises after 1 April 2005.  I should perhaps go further to suggest that the Defendant is estoppled from arguing otherwise.
	(i)	He represented to this Court on 1 April 2004 that he was agreeable to deliver possession of the Premises to the Plaintiff.
	(ii)	The Plaintiff then took steps to recover the Premises.  He successfully did so.  Though the Defendant is now complaining that the Plaintiff adopted improper means, I have no evidence from any of the sub-tenants on the matter.  Further, while the matter was said to have been reported to the police at the material times, there is no evidence before me that the Plaintiff has been investigated, prosecuted and/or convicted.
	(iii)	The Defendant has been legally represented throughout the proceedings.  Other than the present allegation that the Plaintiff has been wrongfully recovering rent from the sub-tenants, the Defendant apparently has not done anything to “address” the problem since 1 April 2004.

Costs

9. It appears to me that there is no reason why costs should not follow the events.  I will make an order nisi, which will be made absolute within 14 days from today, that costs of all 3 applications before me be borne by the Defendant to the Plaintiff, including all the costs reserved and the hearing before me on 3 August 2005, on party-and-party basis, to be taxed if not agreed.