HOME EXPO (HONG KONG) LTD v. MODERN FAR EAST LTD

DCDT 1499/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT NO 1499 OF 2014

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REASONS FOR DECISION

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1.  This is an application brought by the defendant for the purported discharge of a Warrant of Distress (“the Warrant”) in accordance withthe provisions under Part III of the Landlord and Tenant (Consolidation) Ordinance, Cap 7 (“The Ordinance”). At the end of the hearing on 13 June 2014, I dismissed the defendant’s application with costs and said that I would provide the reasons for my decision in due course. Here are the reasons.

Background

2.  This case first came to me as an urgent exparte application made by the defendant on 10 June 2014.  On that day, the defendant, having authorized one Miss Ho Pik Kei Karen (“Ms Ho”), who later was found to be not a director but a clerk of the company, to make an urgent application in front of me for the discharge of the Warrant which was issued by His Honour Judge WK Kwok on 19 May 2014. The Warrant is for the distraint of goods and chattels on the premises and in the apparent possession of the defendant situated at shops 651, 651A, 653 and 655 of 6/F of Kowloon Bay International Trade and Exhibition Centre, No 1 Trademart Drive, Kowloon Bay, Kowloon, Hong Kong (“The Premises”).  The distraint order was for the sum of HK$104,629.10 “being the amount of one month’s rent due to the Plaintiff …on the 1^st day of May 2014”.  The Warrant was said to have been issued in accordance with the provisions ofPart III of the Ordinance.

3.  The defendant purported application to discharge the Warrant was based on the allegation that the defendant had never owed the plaintiff any rent for the Premises.  The defendant’s case was that all the rent up to 1 May 2014 had been received by the plaintiff’s account department. In Chinese, the following is what the defendant says in the ex parte application:-

「撤銷財物扣押案件2014年1499號　因被告人未有欠原告人任何租金，所有租金有關位於香港九龍九龍灣展貿徑1號九龍灣國際展貿中心六樓651、651A、653及655號舖位　截至2014年5月1日為止已由原告人會計部收妥。」

4.  Since it was an urgent application, I was prepared to overlook the fact that the defendant was not represented by one of its directors, which was required under Order 5A of the Rules of the District Court, Cap 336 (“the RDC”).  I shall come back to this matter in the later part of this decision. 

5.  At the urgent ex parte application, Miss Ho, who represented the defendant, however, informed the court that the defendant had paid rent up to 13 April 2014 only but had not paid rent for the month starting on 1 May 2014 onwards.  She alleged that each month the plaintiff either sent itsrepresentative to collect rent from the defendant at the Premises or that the defendant would send or bring the rent to the office of the plaintiff.  According to her, the defendant operated a business at the Premises under the trade name of “Sofasogood” which, as itsname suggests, selling furniture like sofas, settees and couches.  Miss Ho alleged that the plaintiff would collect the rent on different dates during each month and there was no fixed date which they would do so.

6.  According to Miss Ho, the reason why the directors of the shareholder of the defendant would not attend the urgent application was due to the fact that they had an “important meeting” to attend to during that afternoon.  Miss Ho further alleged that the defendant had tried to locate the plaintiff but could not do so.

7.  During the hearing, I pointed out to Ms Ho that the Warrant was for the non-payment of rent from 1 May 2014 onwards and I asked if the defendant had paid for the rent for the month of May 2014.  She confirmed that the defendant had not done so.  The defendant allegedthatit was laboured under the misapprehension that the plaintiff had issued the Warrant based on the non-payment of rent for “up to” the month of May 2014. It claims that the misunderstanding stemmed from the Chinese translation of that document where the wordings may have suggested that it was the rent upto the month of May 2014 which had not been paid.  However, when one looks at the Warrant signed by His Honour Judge WK Kwok, which I have cited above, there is in my view no room for any misunderstanding.  In any event, as said, Miss Ho admitted during the hearing that the defendant had not paid the rent for the month of May 2014 which was supposed to pay on the first day of each month under the tenancy agreement between the plaintiff and the defendant.  Miss Ho also admitted that the defendant had not contacted the plaintiff’s solicitors which name appears on the Warrant itself. 

8.  Having heard Miss Ho submissions, I was not satisfied that the Warrant should be discharged on an ex parte basis.  Instead, I ordered the defendant to immediately take out aninter partesummons (within one day from the date of the hearing of the ex parte application), together with any supporting affidavit/affirmation and any documentary evidence exhibited thereto, to formally apply to this court to discharge the Warrant under section 93 of the Ordinance.  I further ordered that such summons, together with the supporting evidence, should be servedon the plaintiff or its solicitors immediately upon its issue.  An early date was given for the application to be heard before me on 12 June 2014 at 2:30 pm (with two hours reserved).  The costs of the ex parte application made by the defendant and the costs of attending to the issue of and execution of the Warrant was also reserved.

The inter parte summons

9.  Despite of my Order, the defendant did not issue the inter parte summons on the next day.  Instead, the defendant made another urgent ex parte application on 12 June 2014 before Deputy Judge Mak shortly after noon on that date.  The 12 June 2014 ex parte application was to ask the court to “safeguard” (「保管」) the amount of HK$119,151.10 on behalf of the defendant.  It is not clear under what provisions of the Ordinance or the RDC was this application made.  According to the court’s record, Deputy Judge Mak had apparently suggested to Miss Ho to consult the defendant’s solicitors of the legal issues arising out of this case. 

10.  On condition that the defendant would before 5:00 pm on 12 June 2014 to issue an inter parte summons as ordered by me on 10 June 2014, the court ordered that the sum of HK$119,510.10 should be temporary suspended from releasing to the plaintiff until further notice.  As for the summons taken out by the defendant on 12 June 2014, Deputy Judge Mak ordered it to be heard before me on 13 June 2014 at 2:30 pm.

The hearing on 13 June 2014

11.  At the hearing on 13 June 2014 before me, Miss Ho again wanted to represent the defendant.  However, on this occasion, I pointed out to Miss Ho that according to Order 5A, rule 2 of the RDC, a corporation may not begin or carry on any proceedings in the District Court otherwise than by a solicitor except as expressly provided by or under any enactment or by that particular rule itself.  Under Order 5A, rule 2(2), a corporation may begin or carry on proceedings by one of its directors where ─ :-

“(a) a solicitor does not act for the corporation in the proceedings;

(b) the director has been duly authorized by the board of directors of the corporation to act onits behalf in the proceedings; and

(c) the director has made and filed at the Registry an affidavit stating that he has been duly authorized by the board of directors of the corporation to act on its behalf in the proceedings and exhibiting:-

(1) the original of resolution authorizing the director to act on behalf of the corporation; or

(2) a copy of such resolution duly certified by another person who must either be a director or the secretary of the corporation.”

12.  Before the hearing itself, I have been informed that it was not Miss Ho who had made an affirmation to ask the court to “safeguard” (「保管」) the amount which the defendant had paid under distraint proceedings but it was a director of the defendant, one Mr Yau Ching Man (“Mr Yau”) who had done so.

13.  At the beginning of the hearing, Miss Ho insisted she wanted to represent the defendant again.  She confirmed that she was not a director of the defendant.  I told her that the court would not be able to hear her due to the rules said down in Order 5A of the RDC.  The matter was then stood down and adjourned to wait for the arrival of Mr Yau to court. After Mr Yau arrived, the hearing was further adjourned in order to allow him to produce the necessary authorization and affidavit as required by under Order 5A of the RDC.

14.  At about 3:30 pm, which was one hour after the case was originally scheduled to start, Mr Yau arrived at the court room and confirmed that he was a director of the defendant company.  He also confirmed that he had the necessary authorization and affirmation from the defendant as required under Order 5A.  In the affirmation which was affirmed before the Commission for Oath at the District Court earlier in that same afternoon, Mr Yau confirmed that he had the authority of the defendant to attend the hearing.  He also opposed the Warrant on the basis that the furniture seized by the bailiff actually was purchased by the company on his behalf.  From the minute of a directors’ meeting allegedly held at its registered office on 1 May 2014, it claims that not only Mr Yau owned the goods and furniture,healsohad placed them at the Premises.  It was his intention that he would move them to another premises in Tsuen Wan at a later date.  In theminute, it has been further alleged the “property”in the goods and furniture belonged to the Mr Yau even though it was being placed at the Premises.  It claims that the defendant had no ownership of all the goods and furniture found at the Premises.  Mr Yau also wanted to ask one Mr Yeung Hon Keung, Larry (“Mr Yeung”) who was the defendant company’s accountant/account clerk to represent the defendant at the hearing.  A minute of the company dated 11 June 2014 for such purpose was produced as an exhibit attached to Mr Yau’s affirmation.  I refused the application as Mr Yeung was not a director of the company.  Like, Miss Ho, he does not fall within the category of the persons which was authorized to represent a corporation under Order 5A of the RDC.  However, during the hearing, I have allowed both Miss Ho and Mr Yeung to sit behind Mr Yau in court in order to assist him.

Issues involved

15.  In my view, the issues involved in this case are very simple.  It is whether the defendant has raised any sufficient and/or valid grounds to discharge the Warrant issued by His Honour Judge W K Kwok on 19 May 2014. 

Finding of the court

16.  The defendant had raised several issues in Mr Yau’s affirmation purportedly as grounds for the discharge of the Warrant.  I agree with the plaintiff’s counsel Mr Tony Chow that none of the issues raised, even at this most generous interpretation, will amount to sufficient grounds for the discharge of the Warrant. 

Inability to tender rent

17.  First, the defendant seems to have suggested that it did attempt to pay the rent but was unable to do so as a result of itsinability to locate the plaintiff: see Mr Yau’s affirmation at §3.  It is not disputed that the plaintiff is the principal tenant of the head landlord of the Premises which was sub-let to the defendant under a tenancy agreement dated 15 March 2013 (“the Tenancy Agreement”).  It has been alleged that the staff of the plaintiff had repeatedly went to the registered office of the plaintifffor the purpose of paying rent before the due date.  It has further been alleged by the defendant that the plaintiff was in the process of being wound up and was insolvent.  The defendant further alleged that the plaintiff was trying to get as much money and rent out of the defendant as possible.  Hence, the defendant is seeking “for the protection from the court in this regard”. 

18.  In my opinion, this argument of the defendant is clearly unsustainable.  First, the defendant was under anobligation to pay rent at the beginning of each month under the Tenancy Agreement.  Such obligation is independent of whether the plaintiff might have been in the processof being wound up or insolvent at any time.  Secondly, no particulars were given as to the date and time of the defendant’s purported attempts to reach to the plaintiff’s as registered office for the purpose of paying rent.  Thirdly, the defendant’s allegation was contradicted by its own solicitors letter dated 8 May 2014 to the plaintiff’s solicitors where it expressed a clear intention of not to pay the last two months of rent ie from May and June 2014 under the Tenancy Agreement.  It is stated in the letter that the defendant “had no objection to (the plaintiff) to deduct two months’ rent (for the month of May and June2014) from the rental deposit”.  Thus, it is clear all along that the defendant had no intention to pay the rent for the month of May and June 2014.  The defendant has only selectively chosen to disclose this particular letter in the chain of correspondence between its solicitors and the plaintiff’s solicitors on the issue.  The chain of the correspondence was shown to me by the plaintiff’s counsel during the hearing.  It was apparent that the defendant had unilaterally wanted to make use of the rental deposits as payment of the last two months of rent under the Tenancy Agreement.  This rightly has not been accepted by either the plaintiff or its solicitors.  Fourthly, as the defendant has always been in touch with the plaintiff’s solicitors, I do not see why they could not have tendered its rent for the month of May to its solicitorsif it really was not able to locate the plaintiff as it registered office as alleged.  Of course, nothing was mentioned in the chain of correspondence that the defendant was not able to tender the rent due to the inability to locate the plaintiff.

Collateral agreement to use deposit as setoff

19.  The defendant also alleges that there was a “collateral agreement” at the time of execution of the Tenancy Agreement to the effect that the defendant may apply the deposit paid thereunder to be used as payment of rent as its discretion: see Mr Yau’s affirmation at §4.

20.  Under Section XI (11) of the Tenancy Agreement which specifically provides as follows:-

“This Agreement including the Schedules hereto constitutes the entire agreement between the parties hereto with respect to the sub-tenancy of the Premises and contains all the agreements, representations, warranties and conditions between the parties in connection therewith and supersedes al previous agreements, understandings, negotiations and discussions. This Agreement shall not be amended or modified in any respect except as expressly provided for herein or by mutual agreement of the parties hereto in writing.” [Emphasis added]

It is abundantly clear that the Tendency Agreement itself does not contain any terms which entitles the defendant to apply the deposit paid thereunder to be used as rent or as setoff.  It is merely wishful thinking on the part of defendant without any grounds or legal basis.

Ownership of the property seized

21.  The defendant also allegesthat the property seized under the execution of the Warrant belongs to Mr Yau and not the defendant.

22.  This is clearly self-serving and contradicts to the earlier allegation made in Mr Yau affirmation itself.  In the affirmation, it has been disposed to by Mr Yau that the movable property belongs to “Sofasogood”, a trade name used by the defendant at the Premises and not the defendant itself.  In the minute exhibited to Mr Yau’s affirmation, it has been alleged by the defendant that the property actually was purchased by Mr Yau from the defendant on the 1 May 2014 although the goods were being kept at the Premises. 

23.  I have no hesitation to find that such allegation is totally untrue and was made purely to avoid the goods being seized by the bailiff.  I would not be surprised that the minute was made only after the goods had been seized by the bailiff and as an afterthought after the defendant had decided to not to pay the rent to the plaintiff anymore. 

24.  Under section 87 of the Ordinance, “a bailiff shall seize the movable property found in or upon the house or premises mentioned in the warrant and in the apparent possession of the person from whom the rent is claimed”. [Emphasis added]

25.  I agree with the plaintiff’s counsel that there is no evidence to suggest in this case that:-

(i) the defendant was not in apparent possession of the property at the time of execution of the Warrant; or

(ii) that the defendant had notified the bailiff at that time that the property belongs to somebody else.

26.  In the aforesaid circumstances, I have no hesitation to dismiss the defendant allegations that the property belonged to “Sofasogood” or Mr Yau.

Conclusion

27.  In conclusion, I am of the view that the defendant’s application for the discharge of the Warrant has no basis at all and I so dismissed the application at the end of the hearing on 13 June 2014.

28.  At the end of the hearing, I also ordered the defendant to pay the costs of the plaintiff for the application with certificate for counsel which I had summarily assessed at HK$22,579.50 to be paid forthwith.

29.  I will order a Chinese translation of this Reasons for Decision be provided to the defendant since the hearing was conducted in Chinese and the defendant was not legally represented.