SUNEASY LTD t/a TAIPAN MANAGEMENT CO v. HIROHITO HAYASHI

DCDT4162/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT CASE NO. 4162 OF 2011

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BETWEEN

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D E C I S I O N

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1.  The plaintiff obtained a distress warrant against the defendant for alleged arrears of rent in relation to the subject domestic premises rented by the defendant.

2.  There is a serious dispute between the parties as to whether there has been outstanding rent and the amount of outstanding rent, if any.

3.  This is an unfortunate case.  I should say in substance there was no fault on either party.  The tenancy was entered into through a property agency.  The employee of the agency, one Catherine Tan, had turned out absconded with rent paid by the defendant supposedly to the landlord.

4.  According to the plaintiff’s representative, Mr Young, the original agreed rent was $70,000 per month, with a special discount of $12,000 which can be withdrawn on the part of the landlord upon default or late payment of rent by the tenant, in accordance with a written tenancy agreement purportedly signed by the landlord and the defendant, witnessed by Catherine Tan.

5.  The defendant affirmed that he had never signed the written tenancy agreement.  It means that the signature of the tenant on the written tenancy was forged, and, therefore, he is not bound by the terms of the tenancy agreement and the only rent that he had to pay, in any event, was $58,000.

6.  The plaintiff asked for payment of outstanding rent, including the $12,000 discount calculated from October 2010, when the rent was allegedly paid late, presumably by Catherine Tan.

7.  Therefore, whether the written tenancy agreement had been signed by the defendant is material.

8.  I have compared the signature on the written tenancy agreement with the other signature of the defendant.  Even without the aid of an expert, I can tell the difference between the two.

9.  Coupled with the evidence by the defendant himself and the fact that Catherine Tan had perpetrated fraudulent acts, I have no difficulty to form the view at this stage that the defendant had not signed the written agreement.

10.  Mr Young suggested that as Catherine Tan was the agent of the defendant, the defendant shall be bound by her act.  However, it is obvious in the evidence that Catherine Tan had no actual authority to forge the defendant’s signature or to sign documents for him.

11.  The plaintiff has to establish apparent or ostensible authority of Catherine Tan in order to bind the defendant.  There is no evidence whatsoever in relation to what representation, if any, Catherine Tan had made to the plaintiff in relation to her capacity as an agent of the defendant.  There is simply insufficient evidence to establish apparent or ostensible authority.

12.  The fact that the company which the defendant was working had possession of a copy of the unsigned agreement is neither here nor there.  We have no idea as to the circumstances under which the company had in its possession of the copy and as to when it had come into the company’s possession.  It is simply insufficient for imputing any knowledge of those terms to the mind of the defendant or his wife.

13.  In looking at all the correspondences, including e-mails and text messages between the defendant’s wife and Catherine Tan, there is no hint of such term as the discount mentioned during the negotiation.

14.  At this stage, I take the view that the terms of the written tenancy do not bind the defendant.

15.  As such, there was no unpaid difference of rent by the defendant, and accordingly, taking into account the fact that the defendant had actually tendered payment of the three months’ rent in the amount of $174,000 to the plaintiff, the application for the distress warrant should not have been made.

16.  Moreover, I agree with Miss Poon, counsel for the defendant, that there has been material non-disclosure in the plaintiff’s ex parte application for the distress warrant as to the serious dispute amongst parties in relation to the existence and accuracy of the alleged outstanding rent.  Ignorance of law cannot be an excuse.

17.  In the circumstances, I order that the warrant of distress be discharged.

(Submissions re costs)

18.  It is all along the live issue between parties as to the serious dispute in relation to the alleged outstanding rent.  Even if you look at the very letter that Mr Young has referred to by the solicitors, dated 24 October 2011, it has set out in the letter their dispute as to the amount of $70,000 and $58,000, and it is all along the position of the defendant that the monthly rental was intended by the parties to be $58,000 rather than $70,000.

19.  So the dispute as to the subject rent had been there all along, and the purpose of distress proceedings was for a situation where there is little dispute as to outstanding rent.

20.  If there is serious dispute, the proper course is to issue a writ for the issue to be resolved at trial and not summarily in the proceedings of distress, and in my view, the application for distress should never have been taken out and there is no reason why upon failure, the plaintiff should not account for the costs of the other side, and therefore, I order that the costs of the defendant in these proceedings be borne by the plaintiff.

(Discussion re plaintiff’s request for substitute order on payment)

21.  This is my order for today’s hearing:

Upon the following undertakings of the parties, the warrant of distress is discharged with costs of the application of the defendant to be borne by the plaintiff, to be taxed if not agreed:

(1)  without admission of liability, the defendant undertakes to pay to the plaintiff the amount of HK$174,000 being settlement of this dispute between the plaintiff as agent of the landlord and the defendant as the tenant of the premises, subject to the defendant’s right to set off the defendant’s costs in this action and the previous destraint proceedings in relation to the premises;

(2)  The plaintiff undertakes to accept the amount of HK$174,000 in settlement of this dispute and not to pursue the alleged rental discount of HK$12,000 per month as against the defendant (subject to set-off by the defendant in relation to costs as set out in (1)).