EXXON LTD AND ANOTHER v. ZENG CHENG ENGINEERING COMPANY LTD

DCCJ 3140/2023

[2024] HKDC 869

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3140 OF 2023

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DECISION

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Introduction

1.  By Summons dated 22 March 2024 (“the Summons”), the 1^st Plaintiff (“P1”) and 2^nd Plaintiff (“P2”) (collectively, “Ps”), apply for default judgment against the Defendant (“D”) pursuant to O 19, r 7 of the Rules of the District Court, Cap 336H (“RDC”). As declaratory relief is sought by Ps, not being within O 13, rr 1-4, Ps have proceeded as if D has given notice of intention to defend under O 13, r 6(1), although D has never filed any acknowledgement of service or stated that it intends to contest the present action.

2.  In gist, Ps’ pleaded case is that:

(1)  Ps and D are all companies incorporated in Hong Kong;

(2)  P1 is the registered owner of an area on or within Tsing Yi Town Lot No.115 (“West Terminal”) and the tenant of a portion of the Remaining Portion of Tsing Yi Town Lot No 46 (“East Terminal”);

(3)  P2 has been assigned P1’s interest in East Terminal;

(4)  In 2018 and 2019, by procurement contracts, P1 and P2 engaged D to carry out repair and maintenance works at West Terminal and East Terminal respectively (“the Procurement Contracts”);

(5)  For the purposes of performing the Procurement Contracts, D was granted an implied licence to occupy and use parts of West Terminal and East Terminal (“the Premises”) as temporary workshops and for storage of, including but not limited to, containers, equipment, machines, materials, tools and other objects (“the Chattels”);

(6)  Upon the completion of the services provided under the Procurement Contracts and settlement of the invoices of D in August 2019, the implied licence to occupy and use the Premises also terminated and no further licence or permission were granted by Ps;

(7)  In breach of the terms of grant of the implied licence, D had left the Chattels on the Premises and failed to retrieve or remove the Chattels;

(8)  Since 2020, Ps have made repeated attempts to arrange with D, its directors, shareholders and company secretary, to remove or retrieve the Chattels but to not avail;

(9)  By letter dated 8 March 2023, Ps’ solicitors gave notice to D that:

(a)  D shall make immediate arrangements to retrieve or remove the Chattels which were and still are held at the Premises;

(b)  leaving the Chattels unattended at the Premises amounts to trespass and if D continues to fail to arrange collection or removal of the Chattels, Ps shall take such action as appropriate to sell or otherwise dispose of the Chattels after the stipulated deadline;

(c)  in the event that some or all of the Chattels can be sold, proceeds from the sale will be kept by Ps to cover all Ps’ reasonable charges and disposal costs. If proceeds from the sale do not cover the relevant costs, Ps shall hold D liable for all losses suffered by Ps as a result of D’s failure to retrieve or remove the Chattels and its continued wrongful occupation of the Premises. Further, excess proceeds of sale (if any) remaining after deduction of such charges and costs of Ps may be claimed from Ps; and

(d)  the licence that D may have relating to the occupation of any area of the Premises ceased to have effect and in case it has not ended, Ps terminate all licence that D may have relating to the occupation of the Premises and that termination of the licence shall take effect on 15 March 2023.

(10)  By another letter dated 15 March 2023 from Ps’ solicitors to D, Ps gave a final notice to D; and

(11)  Notwithstanding the above, D has failed and refused, and still fails and/or refuses, to retrieve or remove the Chattels from the Premises. All demands from Ps for the collection, removal or disposal of the Chattels have not been responded to by D.

3.  Accordingly, Ps claim against D:

(1)  A declaration that the Chattels on or within the Premises have been abandoned by D;

(2)  A declaration that Ps are entitled to demolish and dispose of at will the Chattels on or within the Premises;

(3)  Costs incurred by Ps for demolishing and disposing of the Chattels on or within the Premises with interest; and

(4)  Costs of this action.

Service of process and non-appearance of D

4.  I am satisfied from the affirmations of service filed on behalf of Ps that the Writ of Summons, Notice of Intention to Enter Judgment and the Summons were served on D by leaving the same at the registered office of D. I accept that the said service amounts to proper service on D.

5.  Notwithstanding the time limits for acknowledging service of the Writ and service of defence by D had expired, no Acknowledgement of Service or Defence has ever been filed.

6.  Furthermore, given that the Summons has been served on D, I am of the view that it is expedient to proceed with the hearing of the Summons under O 32, r 5 of RDC notwithstanding the absence of D at today’s hearing.

7.  Mr Suen, solicitors on behalf of Ps, appears at today’s hearing.

Applicable principles

8.  The applicable principles for default judgment under O 19, r 7 are well-settled. The power to grant judgment under O 19, r 7 is discretionary. The court is required to scrutinize whether the matters pleaded in the Statement of Claim entitle the plaintiff to the judgment sought. The court’s decision is made on the basis of pleaded facts, rather than on evidence. See Hong Kong Civil Procedure 2024, Vol.1, §§19/7/11 and 19/7/14.

9.  As for declaratory relief, the rule of the court that a declaration will not be granted when giving judgment by consent or in default without a trial is a rule of practice and not of law, and will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled. The Court will consider whether the declaratory relief is properly made out on the pleadings and whether it is appropriate in the overall exercise of discretion for such relief to be granted without trial. The declaratory reliefs to be granted should not be in terms wider than what the plaintiffs are entitled to and what is necessary to do justice to them. See ibid, §§19/7/14 and 19/7/20.

10.  In relation to the common law principles of involuntary bailment in Chan Cho Fai v Lam Kit Heung [2017] 4 HKLRD 794, His Honour Judge Andrew Li at §§13-18 has helpfully reviewed the relevant authorities which I gratefully adopt herein:

“13. The difficulties encountered by an involuntary bailee in such situation are succinctly pointed out by the learned authors of Palmer on Bailment at §13-050 as follows:-

There is at common law no general right to dispose of goods which a bailor has refused, or is unable to collect. In Sachs v Miklos, Lord Goddard C J suggested that the bailee might place the bailor in a position of having impliedly consented to a sale, by writing to him and warning him that this will take place unless the goods are collected within a specified time. But this raises difficulties, not least in that silence in response to an offer cannot generally be taken to connote consent. Nor will the principle of agency of necessity relieve the bailee, except in very limited circumstances, from the consequences of an unauthorized disposal. It should be borne in mind that, according to Lord Diplock in The Winson, the strict concept of agency of necessity is now to be limited to situations where the notional agent seeks to create contractual relations between his notional principal and a third party. As the decision of McCardie J in Pager v Blatspiel, Stamp and Heacock shows, there must be an actual commercial necessity dictating the disposal before the bailee can evade liability for conversion; in addition, the bailee must have acted prudently and bona fide in the interests of the owner and must have been, for practical purposes, unable to communicate with his bailor prior to the disposal. Although this doctrine may apply where goods are deteriorating or otherwise falling in value (provided the depreciation is sufficiently serious to constitute an emergency) there is little prospect of its acceptance in situations where the disposal or other treatment is for the benefit of the bailee alone.

… Clearly, this is one situation in which the common law is incapable of supplying a satisfactory solution.” (Palmer on Bailment 3^rd edition, para 13-050 at pages 742-743.)

14. The draconian liability seems to be have been modified by the court in the local case of Desir Anthony C v Knight Frank (Services) Ltd, (unrep, HCSA 36/2013, [2015] HKEC 44, 9 January 2015), (DHCJ Marlene Ng), which held that ‘… if an involuntary bailee performs in good faith an act which, taken in the abstract, would amount to a conversion, he is liable only if the performance of that act was accompanied by a lack of reasonable care. If an involuntary bailee conscientiously performs acts with the object of returning the goods to their owner, such acts would be regarded as reasonable acts.” However, the court went on to state that “what is reasonable will depend on all the circumstances, including the nature of the goods. The burden falls on the involuntary bailee to prove that he has exercised the required standard of care’: (per DHCJ Marlene Ng at §82).

15. Desir Anthony C v Knight Frank (Services) Limited & Others, supra concerned a resident who had left some bicycles in the common area of a building. The management company issued a series of circulars followed by two ‘Final Notices’ requiring the resident to remove the bicycles, and when no agreement could be reached with the resident, the management company removed and later disposed of the bicycles. DHCJ Marlene Ng held in that case that the IO/management company were liable to the resident in conversion having regard to the legal principles on involuntary bailment and the fact that the resident was in constant contact with the management company and persistently demanded the return of the bicycles.

16. However, in my view, the fact in that case is quite different from ours as the plaintiff in our present case had made multiple attempts to contact the defendant to ask her to remove and/or retrieve the Left Property and the defendant had simply ignored such requests, despite the same had clearly been received by her and her solicitors.

17. In seeking the declaratory relief to remove the Left Property, Mr Koo also relies on the English Court of Appeal’s decision in Jones v Gospel & White (1998) 76 Planning and Compensation Report, D43 (Beldman, Millett & Mummery LJJ; 25 June 1998). The case concerned a chalet left on a site by its former occupier. The English Court of Appeal held in that case that ‘to place or leave a chattel on the land of another, without consent, is a trespass and the owner of the land is entitled, taking reasonable care, to remove the offending chattel’.

18. I accept Mr Koo’s submissions that the dicta in Desir Anthony C and Jones v Gospel & White both highlighted the importance for an involuntary bailee to demonstrate that it has acted in good faith and exercised reasonable care (meaning having taken reasonable steps) in dealing with the offending articles.”

11.  In Chan Cho Fai, the plaintiff, like the present case, sought default judgment against the defendant, a trespasser, seeking:

(a)  a declaration that various household items left by the defendant (“the Left Property”) has been abandoned and the plaintiff is entitled to dispose of the Left Property at will;

(b)  costs incurred by the plaintiff for disposing of the Left Property be paid by the defendant with interest; and

(c)  costs of the action including the costs of the summons for default judgment.

12.  The declaratory relief sought was granted by the learned Judge. He was satisfied that the conscientious and repeated attempts by the plaintiff to invite the defendant to remove the Left Property are clear evidence that the plaintiff exercised the required standard of care and taken reasonable steps to return the Left Property to the defendant. On the other hand, the fact that the defendant had not pursued the Left Property since the plaintiff’s letter dated 11 February 2015 strongly suggested that the defendant had abandoned the Left Property. (See §§19-20.)

13.  The learned judge further held that the declaratory relief sought was genuinely needed by the plaintiff to retain his full rights to use and enjoy the premises he was licensed to use and enjoy while having the peace of mind that the removal/disposal of the Left Property is lawful. Moreover, the grant of declaratory order was the only way to do fullest justice to the plaintiff. (See §§23-24.)

14.  As for the costs of disposing of the Left Property, by reference to various passages in Palmer on Bailment (§§13-027 and 13-028), the learned judge noted the inconsistent authorities as to whether an involuntary bailee can recover expenses incidental to the removal or disposal of the goods from the party who placed them with him without consent. One school of authority took the view that such expenses were recoverable under the law of quasi-contract or restitution. But on the other hand, the modern English authorities held that an involuntary bailee may only recover expenses which were incurred in the course of discharging some duty of care towards the goods, and that he has no general right to recover the costs of storage unless such entitlement was derived from some antecedent contractual relationship. (See §25.)

15.  The learned judge held that as the plaintiff’s case was pleaded on the basis of the defendant’s trespass which had not been disputed, and it is trite that in cases of trespass to land the costs of removing the offending articles or illegal structures is recoverable as damages from the trespasser, a fortiori, the plaintiff is entitled to recover the costs of removing the Left Property. (See §26.)

Analysis and Disposition

16.  Chan Cho Fai concerned a case where the plaintiff’s initial reception of the Left Property was without his consent and he was an involuntary bailee from the start.

17.  In the present case, although Ps initially consented to storage of the Chattels on the Premises, it has been pleaded that upon the completion of the services provided under the Procurement Contracts and settlement of D’s invoices, the licence to occupy and use the Premises also terminated. Furthermore, by the letter dated 8 March 2023, Ps gave notice to D that any licence expires with effect from 15 March 2023. Accordingly, upon expiry of the licence, be it in August 2019 or March 2023, Ps ought properly be considered as involuntary bailees. See Palmer on Bailment, 3^rd Edn, §13-039:

“In certain circumstances, the period of the bailee’s consent to possession may be measured by reference to the agreed or the ascertainable span of the bailment itself. Once that term has expired, the original bailee may be classed as an involuntary possessor, owing whatever obligations are appropriate to such a person.”

18.  I am satisfied that from the repeated and conscientious attempts to invite D to retrieve or remove the Chattels, although to no avail, and the commencement of the present proceedings, Ps have acted in good faith and exercised reasonable standard of care, ie taken reasonable steps, in dealing with the Chattels in the circumstances of this case.

19.  I also take the view that there is a genuine need for a declaration that Ps are entitled to demolish and dispose of the Chattels in order for Ps to fully use and enjoy the Premises with the peace of mind that disposal of the Chattels by Ps is lawful. I would accordingly grant a declaration that Ps are entitled to demolish and dispose of at will the Chattels on or within the Premises.

20.  However, I am not prepared to grant a declaration that D has abandoned the Chattels.

21.  Firstly, as Mr Suen accepts from the authorities he had cited, in order to establish abandonment, there must be clear evidence both of intention to abandon and of some physical act of relinquishment. Mere reasonable belief that abandonment had taken place does not suffice. See Palmer on Bailment, 3^rd Edn, §§13-044, 13-045 and 26-030, cited with approval in Robot Arenas Limited and Mr Edward Hoppitt v Simon Waterfield and Newton Nottingham LLP [2010] EWHC 115 (QB), §14.

22.  In the present case, it has not even been pleaded that there was any intention to abandon (or facts from which such intention can be inferred) and physical act(s) of relinquishment by D. The word “abandoned” only appeared for the first and only time in the relief, seeking “a declaration that the Chattels on or within the Premises have been abandoned by the Defendant”. I am therefore not satisfied that Ps are entitled to the declaration sought on the basis of the pleadings alone.

23.  Secondly, given that that I have already granted a declaration which would enable Ps to demolish and dispose of the Chattels, I am of the view a further declaration that the Chattels have been abandoned is unnecessary. I would therefore not exercise my discretion to grant such declaration.

24.  As for the costs of disposal of the Chattels, unlike Chan Cho Fai, the parties had a prior contractual relationship. It has been pleaded that the Procurement Contracts were governed by the General Terms and Conditions for Goods and Services which were provided to and accepted by D. It contained the express term that, “for Work performed at any location of [Ps] other than a refinery or chemical plant, [D] will at its sole expense remove all inert debris and municipal trash resulting from [D]’s operations and keep and leave any Work Site in a condition satisfactory to [Ps]” (“the Term”).

25.  Even adopting the approach of the modern English authorities discussed in Palmer on Bailment, 3^rd Edn, at §13-028, given that D was required at its sole expense to remove all debris and municipal trash and keep and leave any work site in a condition satisfactory to Ps, the expenses incurred by Ps for demolishing and disposing of the Chattels, flowing from D’s breach of the Term, are accordingly recoverable.

26.  I would therefore order that the reasonable costs incurred by Ps in demolishing and disposing of the Chattels on or within the Premises be paid by D with interest.

Costs

27.  Costs should follow the event. I therefore make an order that D do pay to Ps the costs of this action, including the costs of and occasioned by the Summons, to be taxed if not agreed.