C.E.C. CATERING EQUIPMENT CO.LTD. AND ANOTHER v. SUCCESS 2000 LTD. t/a BIG MAMA'S JUKE JOINT

DCCJ 12668/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 12668 OF 2001

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REASONS FOR DECISION

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1. This is an interpleader summons where both the 1st plaintiff and the claimant were making claims to the proceeds of goods seized and sold by auction by a bailiff; the gross proceeds of sale amounted to HK$ 139,350.00. Right from the outset, the claimant conceded that the expenses incurred by the 1st plaintiff in the sum of HK$ 47,430.00 in execution of writ of fi fa should be paid out of the proceeds of sale, and would only challenge the balance of it.

THE 1st PLAINTIFF'S CASE

2. On 18th September 2001, the 1st Plaintiff obtained judgment against the Defendant for the sum of HK$ 182,307.00 and then issued a writ of fi fa to levy execution against the Defendant. On 2nd November 2001, bailiff pursuant to the writ of fi fa seized the goods and chattels at the premises situated at 1st Floor, Kam Chung Building, No.52-58 Jaffe Road, Wan Chai (" the Premises") and proceeded to auction the same on 3rd December 2001 and realized a sum of HK$ 151,000.00. After deducting the auctioneer's expenses, the net proceeds of sale was HK$ 139,350.00. In levying execution against the Defendant, the 1st Plaintiff incurred expenses in the sum of HK$ 47,430.00.

THE CLAIMANT'S CASE

3. The Claimant was the landlord of the Defendant and by a tenancy agreement dated 18th April 2000, the claimant let "the Premises" to the Defendant at a monthly rental of HK$ 160,000.00. The Defendant failed to pay rent since 15th February 2001, and the Claimant obtained judgment against the Defendant on 20th July 2001 for possession and for mesne profit etc.. With the leave of the court, writ of possession and fi fa combined was obtained against the Defendant on 7th December 2001. The Defendant delivered up possession of "the Premises" on 4th January 2002.

WHETHER THE CLAIMANT COULD RELY ON S. 103 OF LANDLORD AND TENANT CONSOLIDATION ORDINANCE TO CLAIM PRIORITY OVER 1ST PALINTIFF IN RESPECT OF THE PROCEEDS OF SALE

4. S.103 of the Ordinance provides that no personal property shall be removed from any premises under any writ from any court, other than writs in Government suits, until the claim for rent due to the landlord or lessor or person entitled to receive rent is satisfied: provided that such claim shall not in any case exceed the amount due for 6 months' rent last due.

5. Also in S.102 of the same Ordinance, it is stated that arrears of rent may be distrained for after the end or determination of any term or lease at will, in the same manner as if such term or lease had not been ended or determined: provided that such distress is made during the continuance of the possession of the tenant from whom such arrears became due.

6. The most important word, in my view, which runs through these sections is rent. It seems to me that in order to rely on these sections to claim priority, the landlord must have had a claim for arrears of rent. However, the judgment obtained by the Claimant was for mesne profit, management fees, rates etc., there was nothing about arrears of rent.

7. The Claimant's counsel argued that so long as the Defendant remained in occupation of "the Premises" at time of seizure of the goods by bailiff, the landlord right of priority existed, and it would not come to an end upon determination of the tenancy. However, I think this argument is only true insofar as there is a judgment for arrears of rent. The Claimant's judgment, in my view, is only judgment for damages and not for arrears of rent. That being the case, the claimant's judgment is just an ordinary judgment and is no different from that of the 1st Plaintiff's. So the usual rule applies: "Priority amongst competing judgment creditors is determined by reference to the dates on which their respective writs of execution are delivered to the bailiff, with earlier writs taking priority over those subsequently delivered."( Cheung Tung Leung v. Paulsan Fat Watch Products Co. Ltd. (1985) 2 H.K.C. 140) In the present case, the 1st Plaintiff was the first in time to deliver the writ of execution to the bailiff; accordingly the 1st Plaintiff should have priority over the Claimant in their claims to the proceeds of sale.

8. For the reasons given, I conclude that the Claimant could not rely on S.103 to claim priority over the 1st Plaintiff in respect of the proceeds of sale. And therefore, I shall direct that the proceeds of sale, i.e. HK$ 139,350.00 together with interest accrued thereon (if any) be paid to the 1st Plaintiff in partial satisfaction of its judgment against the Defendant.

9. Costs of this summons be to the 1st Plaintiff with certificate of counsel and be borne by the Claimant, to be taxed if not agreed. I shall make it an order nisi, it shall become absolute on the expiration of 14 days after the date of handing down this decision.