Re: HAN CHUNG CHEN, Debtor and Ex-parte: LAYPARK CO. LTD., Petitioning Creditor

HCB1100/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO.1100 OF 2000

-------------

------------------------

J U D G M E N T

------------------------

1. This petition for bankruptcy is founded on a judgment debt obtained against the debtor, Mr Han Chung Chen, on an application for summary judgment. The debtor used to be the tenant of the petitioning creditor, Laypark Company Limited, in respect of the letting of the premises at No.22 Leighton Road, 8/F, Hong Kong for domestic purposes.

2. On 2 September 1999, the petitioner issued a writ against the debtor in High Court Action No.14185 of 1999 to forfeit the tenancy on the ground that the debtor had failed to pay rent for 41 months from 1 March 1996 to 31 July 1999 at a total sum of HK$273,828.75. The petitioner claimed an order for possession of the premises, arrears of rent in the amount as stated, and mesne profits at the rate of HK$6,678.85 a month from 1 September 1999 until the delivery up of vacant possession. Summary judgment was given for the petitioner by Master Lung on 25 January 2000. It was ordered that the debtor was to deliver up vacant possession of the premises to the petitioner, and that he was to pay arrears of rent in the amount as claimed, and mesne profits at the rate as claimed from 1 September 1999 until the delivery up of vacant possession. It was further ordered by the court that the debtor would be granted relief against forfeiture and that he would hold the premises without a new lease being entered into on condition that he was to pay the arrears of rent of HK$273,828.75 by four monthly instalments of HK$68,457.20 each, with the first instalment payable on or before 25 February 2000 and thereafter on or before the 25th day of each succeeding month until full payment, and that the interests thereon and costs of the proceedings were to be paid together with the fourth instalment. It was also provided that if the debtor was in default of payment of any monthly instalment, the balance should be paid forthwith. Lastly, Master Lung ordered that the debtor would have liberty to proceed with his counterclaim and that he was to file and serve his counterclaim within 28 days of the order.

3. The debtor did not pay any part of the arrears of rent as ordered. On 17 March 2000, a statutory demand was served on him personally for the judgment debt of HK$273,828.75 with interests thereon calculated up to the date of the demand, making a total sum of HK$284,534.64. The petition herein was filed on 8 April 2000 and served on the debtor personally on 27 April 2000. It was amended on 4 May 2000 to correct the name of the petitioner. On 22 May 2000, the debtor delivered up vacant possession of the premises to the petitioner. He has not, however, paid any part of the judgment debt to date.

4. The order of Master Lung giving summary judgment for the petitioner has not been stayed, nor has the debtor lodged any appeal against this order. It was initially submitted by Ms Gekko Lan, who appeared on behalf of the petitioner, that I should make a preliminary ruling that the debtor should not be allowed to go behind the judgment in the petitioner's favour. I decided to give the debtor some latitude, in view of the fact that he had no legal representation. I allowed the debtor to lead evidence to substantiate his argument that he should not be liable for the judgment debt, notwithstanding that he might have raised this before the master in opposing the application for summary judgment.

5. The petitioner called its managing director, Mr David Kung Kwok Wai, to give evidence as well as the solicitor who had been handling the tenancy matters of the petitioner for a long time, Ms Lily Fenn Kar Bak. The debtor gave evidence and called his son Mr Han Li Ching as a witness.

6. The debtor is 94 years old. He has poor eyesight and is somewhat hard of hearing. However, he was apparently able to read the documents shown to him in court without the need of spectacles. He was eager for his son to take over the conduct of the case for him, and informed the court that his son should address the court for him and answer all questions on his behalf. I allowed his son to sit with him at the counsel table to provide assistance to him, but I was not prepared to allow his son to address the court without assessing for myself whether the debtor was really so handicapped in view of his age that he could not present his case properly to the court. In the end, I am satisfied that that was not the position.

7. The debtor appeared to be a well educated person, having attained a level of education in Shanghai equivalent to university first year. He gave his evidence in Shanghainese. I understand he also speaks Cantonese with a heavy accent, and when he spoke to Ms Fenn at a meeting in February 2000, Ms Fenn who does not speak Shanghainese could understand up to 80% of what he said. The debtor had also interspersed his evidence with English words and phrases. Before he retired in about the 60's, he had held managerial positions with big foreign companies in China. He has lived in Hong Kong for more than 40 years. I also note that the debtor went to see Ms Fenn alone in February 2000 to discuss settlement with her, and that he took three post-dated cheques to her himself after that meeting. I am satisfied that the debtor is physically and mentally capable of handling his own affairs and that he understood what was going on in the bankruptcy proceedings and in the High Court action.

8. I should also mention that in the High Court action as well as these proceedings, the debtor had, with the assistance of his son, prepared detailed pleadings and affirmations that were filed in court, setting out in a fairly orderly manner the grounds for opposing the claim in the High Court action and the grounds for opposing the bankruptcy proceedings. The defence and some of the affirmations are in English and they were written by the debtor's son in a clear and comprehensive manner.

9. The history of the dispute between the petitioner and the debtor went back for some time and may be set out as follows. The debtor moved into the premises more than 40 years ago when the building was just completed. He held the premises on a verbal tenancy from month to month. On 27 January 1996, the petitioner's solicitors served a notice to quit on the debtor to terminate his tenancy and requiring him to deliver up vacant possession on 29 February 1996 pursuant to s.53(2)(c) of Part II of the Landlord and Tenant (Consolidation) Ordinance, Cap.7, on the ground that the petitioner had the intention to rebuild No.22 Leighton Road, in a joint re-development with the owners of Nos.14, 16, 18, 20 and 24 Leighton Road for the construction of a hotel. On 12 February 1996, the petitioner's solicitors wrote a 'without prejudice' letter to the debtor offering compensation of HK$442,500.00 "if and only if [the debtor] (and all sub-tenants, if any) are able to vacate the said premises and deliver up vacant possession thereof to [the petitioner] on or before 29th February 1996." The debtor did not vacate the premises on or before 29 February 1996. Instead, he and another tenant of the petitioner, Mr Wong Yau Cheong of a neighbouring unit, made a verbal counter-offer to the petitioner's solicitors. I do not need to be concerned with the amount of that counter-offer, which was in dispute. Suffice it to say that the debtor's counter-offer was not accepted by the petitioner.

10. On 5 March 1996, the debtor wrote to the petitioner's solicitors enclosing a cheque for payment of rent for March 1996. The cheque was returned by the solicitors to the debtor under cover of a letter dated 7 March 1996 in which the solicitors stated as follows :

"Since your tenancy has already be (sic) determined on 29 February 1996, the landlord will not accept rent from you any more. We are instructed by the landlord to return you herewith your cheque No.065444 drawn on the Standard Chartered Bank for your disposal."

11. From March 1996 to February 1998, the debtor sent a cheque to the petitioner's solicitors every month for payment of rent. The cheques were all returned by the petitioner's solicitors.

12. On 31 December 1996, the petitioner filed an application in the Lands Tribunal for possession of the premises on the ground of its intention to rebuild with a claim for mesne profits from 1 March 1996 until the delivery up of vacant possession. The debtor lodged his opposition with the Lands Tribunal on 13 January 1997.

13. On 1 January 1998, the debtor's son recovered possession from his tenant of a flat in King's Road, North Point. This property was left vacant since January 1998 as it was intended to be used as the debtor's residence if and when he should vacate the premises let to him by the petitioner in Leighton Road, and the debtor did eventually move into the premises of his son in King's Road in May this year. The debtor said in his evidence that he did not move into the King's Road property earlier because he was waiting to see whether the petitioner would negotiate with him and pay him compensation if he was required to leave on the basis that the petitioner was to re-develop the land.

14. From March 1998 to September 1998, the debtor continued to send cheques to the petitioner's solicitors every month for payment of rent. These cheques were retained by the solicitors but they were not presented for payment. The practice of sending cheques to the petitioner's solicitors stopped in October 1998 when the debtor and another tenant of the petitioner, Madam Pham Lam Tuyet Phuong wrote to the petitioner's solicitors stating that as the cheques for rent were returned or not presented for payment, they would not send any cheque to the petitioner in future until they received information from the petitioner that the petitioner would accept rent.

15. On 16 July 1999, the petitioner's solicitors wrote to the debtor asking if he would give his consent to discontinuance of the proceedings in the Lands Tribunal and asking the debtor to pay outstanding mesne profits within 10 days, failing which legal proceedings would be instituted. On 12 August 1999, the debtor wrote to the petitioner's solicitors refusing consent to discontinuance. On 25 August 1999, the solicitors filed a notice of discontinuance of proceedings in the Lands Tribunal. The writ in the High Court action, as mentioned earlier, was issued on 2 September 1999.

16. In the defence filed by the debtor in the High Court action on 1 October 1999, he disputed liability on the ground that the petitioner had refused to accept rent because of the petitioner's alleged intention to re-develop. He made a counter-claim which was entitled "Statement of Claim" on the ground of various breaches by the landlord in respect of the petitioner's obligation of repair and to provide services in the building. His grounds of defence were rejected by the master who entered summary judgment against him.

17. After judgment was given, the debtor contacted Ms Fenn of the petitioner's solicitors requesting a meeting and one was arranged on 11 February 2000. According to the debtor, he made a proposal to Ms Fenn to settle the dispute with the petitioner. He was to give up his claim for compensation which would be HK$442,500.00 according to the letter of the petitioner's solicitors dated 12 February 1996 and he would vacate the premises. In return, the petitioner should forego the judgment debt for the arrears of rent of HK$273,828.75. The debtor asked Ms Fenn to seek instructions from the landlord regarding his proposal. Later, on the basis that there was an understanding or agreement with the petitioner on his proposal, he handed over three post-dated cheques to the petitioner for mesne profits in February, March and April 2000 and delivered up the keys to the premises in May 2000. Ms Fenn denied that there was any such agreement or understanding.

18. I will first consider the question whether the debtor has made out any sufficient ground for the court to go behind the summary judgment. Having considered the evidence and the submissions made to me on both sides, I am unable to see any valid basis for doing so. The master was entirely correct in holding that the landlord's intention to rebuild and the abandonment of that intention subsequently did not absolve the debtor from his liability to pay mesne profits of the premises, which he had occupied throughout. The debtor appeared to be labouring under a firm belief that he was entitled to compensation on the basis of the 'without prejudice' letter dated 12 February 1996 notwithstanding that he had not accepted the offer in that letter by delivering up vacant possession on or before 29 February 1996, as he was required to do by that letter. He would like to think that he was still entitled to claim compensation on the ground that the landlord had, at one time, the intention to re-develop the land notwithstanding that the petitioner's application for recovery of possession on that ground was discontinued in August 1999.

19. The debtor's son has filed a lot of evidence in an attempt to establish that the petitioner was untruthful in some respects about its intention to re-develop, all of which is wholly irrelevant, quite apart from the fact that the conversation the son had with the officer of the public company that owned the neighbouring land is not admissible as evidence of the matters stated in that conversation.

20. I can well understand the debtor's grievance at not being able to obtain compensation from the petitioner when an offer of over HK$400,000 was made to him at the beginning in February 1996, an offer which he had declined to accept. It was entirely his own choice to remain in the premises and keep the property of his son vacant since January 1998 in the hope that the petitioner would eventually make him a new offer of compensation. The debtor's plan of getting substantial compensation from the petitioner back-fired when the petitioner's plan to re-develop fell through because of the downturn in economy in the latter part of 1997 and the owners of the neighbouring land sold to the present owner instead of proceeding with the joint re-development. There was simply no legal basis for the debtor's alleged entitlement to compensation when the High Court action was brought against him in September 1999.

21. The debtor raised an argument that the petitioner had agreed he would not have to pay rent since March 1996 pointing to the letter dated 7 March 1996 in which the solicitors returned the cheque for payment of rent and stated that the cheque was "for your [i.e. the debtor's] disposal". I do not think these words could possibly have the meaning put upon them by the debtor, and certainly not an indication of the petitioner that it would waive any payment for the debtor's use and occupation of the premises. This would also dispose of an argument raised in the debtor's affirmation that his ability to pay rent was seriously damaged owing to the petitioner's refusal to accept rent for 41 months and the abandonment of the intention to re-develop. Whatever the debtor had chosen to do with the cheques he issued in payment of rent and returned by the petitioner's solicitors was a matter entirely for him. If he decided not to set aside the money in the event that he might have to meet the liability for rent or mesne profits one day, he could not blame this on the petitioner. Further, I find the debtor's assertion that he was led to believe by the letter dated 7 March 1996 that he would not have to pay rent wholly incredible. If the debtor really had that belief by virtue of the letter in March 1996, he would not have continued to tender a cheque to the petitioner's solicitors month after month in payment of rent from March 1996 to September 1998. The letter he wrote to the petitioner's solicitors dated 15 October 1998 showed clearly that he knew he was under an obligation to make payment for his use and occupation of the premises at all times.

22. I turn to consider the alleged agreement in February 2000 reached with the petitioner's solicitors after judgment was entered. I have considered the evidence of the debtor and his son very carefully. The debtor wanted to believe that he had reached a "compromise" (as he put it in English in his evidence) with the petitioner's solicitors, and he sought to provide a reason for his belief by asking why he should deliver three post-dated cheques and hand over the keys without a compromise. What the debtor would like to believe is one thing, what actually happened is another matter. Even in his evidence, the debtor stated that the solicitors had agreed with him that everything could be settled other than the question of "extra allowance" or "removal fees" payable as compensation for moving out of the premises. This showed clearly that the petitioner's solicitors had not acknowledged that the debtor was entitled to any compensation for moving out of the premises, whether on the ground of re-development or otherwise, when they had the discussion in February 2000. The debtor's son also admitted that when he was asked to issue three post-dated cheques by the debtor, the debtor did not tell him that the petitioner had agreed not to enforce the judgment debt for the arrears of rent. Ms Fenn denied that she had made any promise to the debtor that the judgment debt would be waived. She gave evidence that what was agreed at the meeting on 11 February 2000 was that the debtor would have a grace period of three months to vacate the premises on condition that he would make payment of mesne profits from February to April 2000. She said the debtor had told her he had no money to pay the arrears of HK$273,828.75 and she had also explained to the debtor the consequence if he should fail to pay the monthly instalments as ordered by the court. According to Ms Fenn, she told the debtor that the petitioner would file a petition for his bankruptcy in that event, as the petitioner had done in the case of another tenant, Mrs Pham, and she had shown the debtor a copy of the petition against Mrs Pham at that meeting. I have no hesitation in accepting Ms Fenn's evidence on this. I find that there was no agreement of a compromise between the debtor and the petitioner's solicitors in February 2000 to waive the judgment debt for arrears of rent.

23. For the sake of completeness, I should mention that the debtor has not filed any counterclaim in the High Court action within three weeks of the order dated 25 January 2000 or at all. I have considered the various heads of claim the debtor has put forward in his "Statement of Claim" filed with his defence, some of the heads of claim are time-barred, other items would appear to me to be dubious.

24. As the debtor has failed to make out any case for disputing his liability to pay the judgment debt, and there is no other reason why a bankruptcy order should not be made, I make a bankruptcy order against him with costs to the petitioner.