NONFERROUS METALS PROCESSING (HONG KONG) CO LTD v. WAH KEUNG METAL ENGINEERING LTD

DCCJ 6123/2020

[2022] HKDC 123

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6123 OF 2020

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BETWEEN

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JUDGMENT

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INTRODUCTION

1.  The parties were landlord and tenant in respect of an oral tenancy agreement (“the Tenancy Agreement”) concerning a piece of land situated at Lot No 780 in DD 110, Yuen Long, New Territories (“the Premises”). The terms of the Tenancy Agreement are disputed. By these proceedings the tenant plaintiff (“Plaintiff”) claimed for an order for deliver-up of a number of machines and equipment as set out in paragraph 4 of the Re-amended Statement of Claim (the “Machines and Equipment”). There were 12 items of them. It was alleged that the landlord defendant (“Defendant”) had on 2 August 2018 wrongfully refused to allow the Plaintiff to remove the same from the Premises upon an agreement on early termination. There was a claim for damages for wrongful conversion as well.

2.  The Defendant said that the Plaintiff had failed to pay rent from the day the Tenancy Agreement commenced on 1 May 2018. The allegation of conversion was denied and the Defendant averred that it had the rights to exercise a lien over the Machines and Equipment accrued to it due to the said default of rent. The Defendant also counterclaimed against the Plaintiff for vacant possession, arrears of rent, and mesne profit. It also asked for a declaration for the deposit paid (“Deposit”) to be forfeited.

RESPECTIVE CASE OF THE PARTIES

3.  In gist, the Plaintiff’s case was that in around April 2018 the Tenancy Agreement was reached between the parties. Before the terms were finalized, the Defendant allowed the Plaintiff to move the Machines and Equipment and other items at the worth of over HK$10 million onto the Premises. It was verbally agreed that the monthly rent was $40,000 but it was subsequently increased to HK$120,000.00.

4.  There was further negotiation on the commencement date for rent on 17 May 2018 by WeChat messages (“WeChat Discussion”)[1]. At the conclusion, Mr Liang agreed not to charge any rent for May but would start to charge rent from mid-June 2018[2]. There would be payment for two months’ rent in advance but subject to endorsement of the Plaintiff. At the 1^st Board Meeting of the Plaintiff held on 19 May, the payment terms was endorsed by Mr Lo and Mr Wong, shareholders of the Plaintiff (“the 1^st Board Meeting”). A message was sent to the WeChat Group confirming terms raised at the WeChat Discussion being endorsed on 20 May 2018 (“Confirmation Message”)[3]. The Plaintiff said Tenancy Agreement was finalized. Pursuant to the Tenancy Agreement[4] the Plaintiff sent two cheques at the amount of HK$120,000.00 each to the Defendant representing payment of rent for two months in advance from mid-June to mid-August 2018[5].

5.  In about July 2018, relationship between Mr Lo and Mr Liang, representatives of the parties herein, turned sour. It was resolved at the 8^th Board Meeting of the Plaintiff (“the 8^th Board Meeting”) that the Tenancy Agreement should not continue and that Mr Wong, the other shareholder of the Plaintiff, should leave the Plaintiff. When Mr Lo of the Plaintiff tried to retrieve the Machines and Equipment from the Premises on 2 August 2018, access was denied by Mr Liang of the Defendant. The Plaintiff took out an inter parte application against the Defendant for an urgent order for deliver-up of the Machines and Equipment. Application was granted on 17 August 2018 upon the Plaintiff’s undertaking to pay into court a sum of $120,000[6] (the “Deliver-up Order”). The costs of the application be in the cause of the action.

6.  The Plaintiff only succeeded to remove the Machines and Equipment on 27 August 2018 pursuant to the Deliver-up Order with intervention of police. The counterclaim is denied by the Plaintiff.

7.  The Plaintiff, through its counsel Ms Yang, confirmed at the trial that since the claim for loss of profits had been abandoned by the Re-amended Statement of Claim[7], award for damages for unlawful conversion and detinue could be nominal at the rate of $100. The Plaintiff would still need a final judgment on the claim for deliver-up because the Deliver-up Order was a compromise pending full hearing of the action. There is costs consequence.

8.  The Defendant’s case was that the Plaintiff placed machines on the Premises since March 2018. Verbal tenancy agreement was reached in April for a monthly rent of $120,000 and the lease was to start on 1 May 2018. The amount of HK$240,000.00 paid to the Defendant in late May 2018 was merely the rental deposit under the Tenancy Agreement (“the Deposit”) but not for rent[8]. Further, the Defendant had never waived the rent for May 2018[9]. It was therefore the Defendant’s case that the Plaintiff had breached the Tenancy Agreement by failing to settle the rent for the months as from May to July 2018 and thereby entitling the Defendant to forfeit the Deposit paid and claimed arrears of rent[10]. Further, by reason of the Plaintiff’s breach, the Defendant was entitled to exercise its right of lien on the material date[11]. Plaintiff’s claim for damages for conversion was denied.

9.  A further complaint of the Defendant was that although the Defendant had already caused to deliver-up the Machines and Equipment to the Plaintiff, the Plaintiff still failed to move away all items they had caused to be put there on the Premises (the “Remaining Items”). On this premise, the Defendant averred that the Plaintiff had never delivered vacant possession of the Premises to the Defendant. It also claimed mesne profits for unlawful trespass against the Plaintiff until the date of delivery of vacant possession[12].

ISSUES

10.  The following issues are in dispute:-

(i) What was the date agreed for the Tenancy Agreement to commence, 1 May or mid-June 2018;

(ii) Whether the HK$240,000 paid was for the Deposit or two months’ rent from mid-June to mid-August paid in advance;

(iii) Whether there was default of rent on 2 August 2018;

(iv) Whether the Defendant was entitled to exercise its right of lien;

(v) Whether the Plaintiff is entitled to damages for conversion assessed at $100;

(vi) Whether the Plaintiff had failed or refused to remove the Remaining Items from the Premises since 27 August 2018;

(a) If so, whether this constituted unlawful trespass on the part of the Plaintiff;

(b) If so, whether the Defendant is entitled to any mesne profits as a result of this unlawful trespass;

(c) Assessment of mesne profit as appropriate.

EVIDENCE

Witnesses

11.  At trial, Mr Lo, shareholder and director of the Plaintiff and Mr Liang of the Defendant gave evidence. The Defendant also called Mr Wong Wang Wai (“Mr Wong”) the shareholder and former director of the Plaintiff to testify in Court.

Mr Lo of the Plaintiff

12.  In his witness statement, Mr Lo said he had been running recycling business in Hong Kong for the past 40 years. In fact he was and still is the chairperson of the Hong Kong General Business Association of Re-Cycling Business. He said that he had a plan to enlarge his recycling business in about 2017. He talked to Mr Liang about his plan when they played mahjong. Mr Liang had once shown interest but could not come up with the necessary fund at the end. In fact a cheque for an amount of $1,400,000 had been handed over to Mr Lo representing Mr Liang’s investment but it was subsequently returned to Mr Liang at the request of the latter. Mr Liang later introduced Mr Wong to Mr Lo to see whether the three could form a joint-venture. A company, the Plaintiff, was formed for the purpose of materialising the business plan (the “Business”). Mr Lo and Mr Wong were shareholders and Mr Lo was the sole director at the inception of the Plaintiff. Mr Lo holds 60% of shares of the Plaintiff while Mr Wong holds the remaining 40%. Mr Lo said Mr Liang and one Wong Chi Keung (to be referred to as “Little Wong”) were de facto associates of Mr Wong and were beneficial owners of the shares held by Mr Wong (“Associates”). He said that Mr Liang and Little Wong were active in the Business.

13.  On 5 March 2018, an induction meeting was held between shareholders of the Plaintiff to review and approve budget for the Business (the “Induction Meeting”). Relevant documents were signed by the two shareholders at an accounting firm on 13 March 2018 for the formalities of the inception. At about the same time, a WeChat group was created to facilitate communication amongst people concerned (the “WeChat Group”).

14.  In or around April 2018, Mr Liang suggested that the Plaintiff should move the machines already available onto the Premises[13]. Upon site inspection, Mr Liang suggested to let the uncovered part of the Premises for the size about of 10,000 sq ft to the Plaintiff for HK$40,000 per month. Mr Liang suggested that the Defendant would also build a roof to cover the area. Later, the rent was increased to HK$120,000 a month. Both parties agreed to the arrangement.

15.  On 17 May 2018, Mr Lo, Mr Liang, Mr Wong and Terry (also known as “龍”) took part in a discussion in the WeChat Group (“WeChat Discussion”). The Plaintiff produced a copy of transcript of the WeChat Discussion (“WeChat Transcript”) in support of its evidence. The core subject of the WeChat Discussion was about the date the Tenancy Agreement should commence ie the date rent should start to be charged. Finally it was agreed that the rental should be charged from 15 June 2018[14], but there should be payment for rent for two months in advance[15].

16.  The terms raised in the WeChat Discussion were reported at the first board meeting of the Plaintiff (the “1^st Board Meeting”) on 19 May 2021, 2 days after the WeChat Discussion. A resolution was passed to endorse the payment terms including the commencement date of the Tenancy Agreement, the monthly rental and two months’ payment in advance (the minutes of the 1^st Baord Meeting shall be set out below)[16]. Arrangement for payment of the said $240,000 as rent in advance was also endorsed. Two cheques were issued on 19 and 26 May 2018 in total sum of $240,000 for period from 15 June to 14 August 2018. The payee on the two cheques was left blank at the request of the Defendant. It was not disputed that two cheques were in fact issued on 19 May 2018 but it was the Defendant who requested the Plaintiff to issue another one on 26 May as there was a mistake they made on the payee in one of the two cheques. Mr Lo believed that the Tenancy Agreement was finalised in May 2018.

17.  Two months later, Mr Lo lost trust in Mr Liang and Mr Wong. One of the reasons was that Mr Liang had proposed to raise the rent again from $120,000 to $200,000[17] and that the costs for building the covers as promised by Mr Liang increased from HK$300,000 to HK$1,300,000[18]. Mr Lo, Mr Wong and Mr Liang attended the 8^th Board Meeting held on 26 July 2018 and they discussed about the way forward for the Plaintiff. Amongst other things, it was agreed that Mr Wong should leave and the Plaintiff should be left to Mr Lo for operation and that the Tenancy Agreement should be terminated.

18.  Mr Lo said there was an oral agreement reached on division of Plaintiff’s assets also (“Division Agreement”). Basically the agreement was that the machines now referred to as the Machines and Equipment would leave the Premises with Mr Lo and all those related or attached to the land should remain on the Premises and go to Mr Wong and Mr Liang or the Associates). Pursuant to the Division Agreement, Mr Lo caused the Machines and Equipment to be removed from the Premises on 2 August but his access was denied. After the Plaintiff was granted the Deliver-up Order on 17 August 2018[19], a second attempt was made to remove the Machines and Equipment on 27 August. He only managed to retrieve the Machines and Equipment after intervention of police. He said that pursuant to the agreement made at the 8^th Board Meeting, the Plaintiff was not entitled to remove the Remaining Items as they belonged to the Associates.

Mr Liang of the Defendant

19.  Mr Liang said he knew Mr Lo and Mr Wong for a long time and had been a good friend of Mr Lo[20]. In about March 2018 Mr Wong approached him indicating that the Plaintiff would like to use the Premises for storage of their machines. Negotiations started between Mr Wong and himself. It was indicated to him by Mr Wong that the machines were for recycling business. There were no consensus reached by them from mid-March to April. Out of kindness he however allowed the Plaintiff’s machines to be placed on the Premises pending the creation of a formal tenancy agreement. It was in about April 2018 there was an oral agreement reached between himself and Mr Wong. It was agreed that starting from 1 May 2018 the Plaintiff could place its machines in the Premises by way of subletting and the rent would be HK$120,000 per month. The Plaintiff would also have to pay HK$240,000 as rental deposits[21].

20.  The Defendant’s case was that the Plaintiff had failed to pay the Deposit and any rent due from 1 May as agreed. On 17 May 2018 Mr Liang sent messages to the WeChat Group[22]. Mr Lo and Terry were queried why no rental payment had been made for June. Mr Liang said that by allowing the Plaintiff to delay payment for May rental it did not mean it had been waived[23]. He received on 19 May 2018 two cheques in total amount of HK$240,000 signed by Mr Lo and Mr Wong[24]. They were to pay the Deposit. Mr Liang said the Plaintiff had never paid any rent since its use and occupation of the Premises. Believing that the Defendant had the right to exercise a lien over the Plaintiff’s machines due to its default, he closed all exits of the Premises on 2 August 2018 to prevent the Plaintiff from taking away any of the items including the Machines and Equipment.

21.  Mr Liang agreed that he had attended the 8^th Board Meeting but he did not take part in the resolution as he had no part to play in the Business. He admitted that he had locked up the Premises and did not allow the Plaintiff or its agent to remove any thing from the Premises. He said it was because the Plaintiff had failed to pay any rent due as from May. He believed he had the right to exercise a lean on Plaintiff’s items on the Premises.

22.  He said the Deliver-up Order was made as parties agreed to compromise. The merit had yet been decided. He further said that pursuant to the Deliver-up Order, the Defendant allowed Plaintiff’s access to the Premise. As requested by the Plaintiff’s legal representative, the Defendant through his lawyer confirmed to the Plaintiff that there would be no blockage to the access. If there was any one who refused to allow Mr Lo to remove the Machines and Equipment on 27 August, it was done by Mr Wong because of shareholders’ dispute between them. That had nothing to do with the Defendant. As far as the Defendant was concerned, it did not cause any blockage and had through its lawyer demanded the Plaintiff to remove the Remaining Items. The Plaintiff however refused to remove the Remaining Items on 27 August 2018 and they continued to occupy the Premises without paying any rent.

23.  At trial, Mr Liang said he had only known Mr Lo for a few months before Mr Wong joined Mr Lo to form the Plaintiff. Although he heard about bad reputation of Mr Lo being dishonest he did not tell Mr Wong. When asked why he visited the Premises after it was leased out to the Plaintiff, he said he went there to demand for rent. He agreed there was no record of such demands until the WhatsApp Discussion. When asked if he did not agree with the arrangement suggested by Mr Lo and Terry at the WeChat Discussion why he did not say so but agreed to make appointment to play mahjong with them which would seemed to others as an indication he had agreed to the proposed terms. He said they were talking non-sense and he was angry.

24.  He denied being part in the Business. He denied the Associates amongst himself, Mr Wong and Siu Wong. He said he did not know Little Wong but learned later that he was relative of Mr Wong. He said he joined the 8^th Board Meeting of the Plaintiff because he was asked to and he wanted to be a mediator between Mr Lo and Mr Wong[25]. He knew there was shareholders’ dispute between them. He said if their dispute could be settled that would help resolve the problem of the arrears also[26]. He said he questioned Mr Lo about the purchase price of machine because he found overstatement and could not bear the dishonesty. He said he might have said too much at the meeting but he had no interest in the Plaintiff as alleged by Mr Lo. He also said that he said “we”, “us” and “ours” as pet phrases. He did not mean he had interest in the Plaintiff through the Associates or otherwise.

25.  When being cross-examined on what happened to the Premises since September 2018, he said, for the first time, that he had already leased out part of the Premises to a new tenant in February 2019 for $45,000 a month. He said he could not lease out the part where the Weight-bridge was installed because that would affect the scaling function if things were put on it constantly. As to how he had dealt with the Remaining Items he said that the metal grill, metal paraphernalia, plastic buckets had been moved to other places for storage. The Cargo Containers and the Weight-Bridge were still on the Premises.

Mr Wong for the Defendant

26.  Mr Wong was called by the Defendant to support its case. He is the shareholder and former director of the Plaintiff. He signed off a witness statement on 5 February 2020. His statement echoed that of Mr Liang’s in many aspects but in opposition to that of Mr Lo’s. He said he approached Mr Liang in March 2018 in the capacity of Plaintiff’s director to negotiate a lease with Mr Liang of the Defendant. Starting from March and April 2018 the Plaintiff had already started to move machines into the premises. It was in April 2018 he himself and Mr Liang reached an oral agreement to lease the Premises to the Plaintiff at the rate of HK$120,000 per month for storage of machines. It was also agreed that the Tenancy Agreement would take effect on 1 May 2018 and that the Plaintiff would need to pay HK$240,000 as deposit.

27.  The Tenancy Agreement was then endorsed by Mr Lo and Mr Wong, the shareholders and the sole director[27] of the Plaintiff in its 1^st Board Meeting. In the minutes of meeting, the $240,000 paid was mistakenly referred to as payment for two months’ rental in advance. He said in actual fact the resolution was to pay two months’ rental as deposit not 2 months’ rental payment in advance.

DOCUMENTS

28.  There were put before the Court documentary evidence relied on by the Plaintiff, they included the WeChat Transcript, Minutes of the 1^st Board Meeting, Transcript of the audio recording of the 8^th Board Meeting of the Plaintiff (“Audio Transcript”), the Written Demand and photographs. For easy reference I shall indicate my observations and analysis after each documents.

WeChat Transcript

29.  The WeChat Transcript show there were 11 WeChat account holders in the chat group (“WeChat Group”) which was named有色金屬場地跟進聊天室[28]. The key persons were:-

(1) Terry, employee of Mr Lo, who negotiated the terms of the Tenancy Agreement between the Plaintiff with Mr Liang;

(2) Mr Lo, holding 2 accounts in the WeChat Group in the name of “安記-羅” and “okboss”;

(3) Mr Liang (梁強);

(4) Mr Wong (黃宏惠), one of the shareholders and later a director of the Plaintiff but subsequently removed from directorship;

(5) Little Wong, relative of Mr Wong and the technician responsible for installation of Machine, de facto partner of Mr Wong’s shares in the plaintiff; shareholder of Plaintiff as introduced by Mr Liang;

(6) Angel, daughter of Mr Lo;

(7) Wai Wai (慧), employee of Mr Lo;

(8) Ken Wong, employee of Mr Liang.

30.  The material messages were sent into the WeChat Group by Mr Lo, Mr Liang and Terry who represented Mr Lo at that time. Relevant messages are as follows:-

17 May 2018 at 12:10

(i) 慧：“二）尚有一張華強強哥租金需要簽票共280,000，需等黃總星期六回來簽票予羅先生，特此情報及紀錄

(二) 尚有一張華強強哥租金需要簽票支付，共120,000，亦需黃總簽署並付予強哥作7月份租金，我已擬定好租約，待付支票比強哥時一同處理 …[29]” (Underline added by Court)

17 May 2018 at 14:12

(ii) 梁強：“龍，6月份租金，變成7月份，6月份租金阿龍你比我嗎！(表情符號)”[30] (Underline added by Court)

(iii) Terry (5”)：唔係wor強哥，我老闆話你免租一個月，7月先計數架wor[31] (Underline added by Court)

(iv) Terry (8”)：你記唔記得你果日， 我老闆問你，免租返一個月，7月先比得唔得，跟住你好似話得wor[32] (Underline added by Court)

17 May 2018 14:29

(v) Terry (25”)：唔係，強哥，咁我果日聽住你同我老闆傾果陣時，我老闆話叫你減租，你話唔好。跟住我老闆問你，遲一個月交租得唔得，你又話得。咁我哋6月先整好個場，咁我問…我地嘅說話同我老闆嘅溝通係7月交租吖呀嘛[33] (Underline added by Court)

(vi) Okboss (28”)：強哥強哥咁梗係都ok啦，抵租我都話抵租，咁果日你應承我話7月先交租嘛。咁我話減你唔肯，咁都係抵租，咁你宜家叫我哋交租，都可以嘅。不過，你比比我，你幾時你幾時會整好比我吖 [34] (Underline added by Court)

17 May 2018 14:37

(vii) 梁強 (33’)：荃哥荃哥，呢個月底一定黎畀到你，我今日黎咗兩個貨櫃嗰啲，都費事用一啲舊瓦，用啲新互，隔熱瓦，dum多廿萬落去畀你哋，... 咁咪靚啲呀，等啲工人唔使咁熱呀做嘢，…[35]

17 May 2018 14:41

(viii) Okboss (27”)：強哥強哥，你知我呀冇乜所謂㗎啦，一人一步啦，開月中啦，比十零日免租期啦當，好唔好，咁叫佢開埋一個月畀你呀，如果你要啊開夠兩個月比你呀，咁我要同阿股東阿黃總講講呀，黃總你出出聲，有無問題呀？咁樣好好啊，好唔好啊強哥？一人一步[36] (Underline added by Court)

(ix) Okboss (11”)：你當日真係應承咗我㗎喇，不過咁我哋唔執著呢啲，我知道實得㗎喇，不過我要問阿黃總，黃總有冇問題啊？[37]

(x) Terry (14”)：係啦係啦，強哥如果你ok既話，我問埋阿王總睇下o唔ok如果ok就答覆你，咁我叫我哋會計嗰邊準備定支票，等埋阿黃總返嚟簽跟住拎畀你呀[38]

(xi) Okboss (18”)：你同啊強哥簽還簽呀，每個禮拜兩餐飯，兩場麻雀，X呢d你唔好走雞呀，唔好到時話冇講過呀，依家係群組度講啊，黃總（Mr Wong）都係度[39]

(xii) Terry (18”)：強哥咁我睇下禮拜六，睇下等啊黃總轉頭覆埋，如果ok嘅話，等我禮拜六黃總簽完張支票咁我拎過嚟，你幫我簽埋個租約啦附帶條件每星期兩餐飯，加兩場麻雀娛樂下不論輸贏ok唔ok呀

(xiii) 梁强 (16”)：三場都得呀，三場都得呀，下，放馬過嚟啊全哥，係咪呀，打到你舉手啊，打，啊，ok？問下黃總呀[40]

31.  From the WeChat Transcript, I find that Mr Lo and Terry on one side were negotiating with Mr Liang on the date the Plaintiff should start paying rent under the Tenancy Agreement. Mr Liang had asked for rent for June 2018. Terry mentioned that the Premises was still not ready in May at (v) above[41] and Mr Liang had undertaken to make the Premises ready by end of May[42]. At (viii) above Mr Lo suggested that there be rent-free period for 10 odd days and the Plaintiff would pay two months rental in advance by two cheques to be sent to Mr Liang. Terry reiterated the salient terms and also said that there would be mahjong games to please Mr Liang. Mr Liang agreed to the mahjong game at (xiii) above[43].

32.  In the Confirmation Message sent out by Terry 3 days later on 20 May 2018 it also stated that 2 cheques without named payee were issued for a total amount of $240,000 to pay two months’ rent and that the cheques would be handed over to Mr Liang by Mr Wong[44] .

33.  As could be seen from the WeChat Transcript, Deposit was never mentioned. On the other hand rental had been mentioned a few times. Further there was no evidence from the Defendant saying that they had opposed to the Confirmation Message.

Minutes of 1^st Board Meeting of the Plaintiff

34.  Mr Lo relied on the resolution made at the 1^st Board Meeting in support of the Plaintiff’s contention that the $240,000 paid as rent was also supported by Mr Wong who signed on the Minutes of 1^st Board Meeting. Relevant passage is as follows:-

“4.1 由於當初華強鐵器量強先生表示每月租金$40,000，但後來基於個人考慮後，再表示需要每月$120,000，經與會人士商討後，再經公司董事及股東同意後，通過有關租金水平，華強鐵器梁強先生要求預支兩個月租金，經公司董事及股東同意後，決定支付15/6/2018至15/7/2018及16/7/2018至15/8/2018合共兩個月之租金$240,000給予華強鐵器量強先生”

Audio Transcript of the 8^th Board Meeting of the Plaintiff

35.  Mr Lo also referred to the transcript of audio recording the 8^th Board Meeting (“Audio Transcript”) to support the Plaintiff’s case on the nature of the $240,000 paid and whether there was agreement on how Plaintiff’s assets were to be divided by the shareholders.

36.  The 8^th Board Meeting was attended not only by its directors Mr Lo and Mr Wong[45], but also Mr Liang and Siu Wong. That means all directors of the Plaintiff and all three in the Associates, according to Mr Lo, also attended. Ms Yang submitted that the following dialogues (“Dialogues”) supported the Plaintiff’s case that the $240,000 paid was rental and not Deposit:-

(1) P13, Ln 7 of Transcript at page 116;

(2) P28, Ln 23-27 of Transcript at page 131;

(3) P30, Ln 2-20 of Transcript at page 133;

(4) P32, Ln 9-24 of Transcript at page 135;

(5) P32, Ln 31-35 of Transcript at page 135;

(6) P34, Ln 3-16 of Transcript at page 137;

(7) P34, Ln25-29 of Transcript at page 137;

(8) P36, Ln 3-10 of Transcript at page139;

(9) P37, Ln 7-12 of Transcript at page 140;

(10) P48, Ln 18-23 of Transcript at page 151;

(11) P50, Ln 25-32 of Transcript at page 153;

(12) P52, Ln 9-10 of Transcript at page155;

(13) P53, Ln 37 of Transcript at page156;

(14) P54, Ln 2-9 of Transcript at page157;

(15) P55, Ln 27-29 of Transcript at page 158;

(16) P68, Ln 16-23 of Transcript at page171;

(17) P83, Ln 2 of Transcript at page186;

(18) P85, Ln8-9 of Transcript at page 188.

37.  Relevant sections of the audio recording of the 8^th Board Meeting had been played in Court. Upon listening and reading the Audio Transcript on the Dialogues cited above, the Court finds that not all of the above Dialogues suggested by Ms Yang were related to the $240,000 paid. 9 Dialogue nos 6, 7, 9, 11, 12, 15, 16, 17 and 18 however were relevant.

38.  Out of the 9 Dialogues, 2 were uttered by Mr Liang. At Dialogue 11 he said “租當我呀, 即係入咗我哋, 當係畀咗兩個月你哋去玩啦”[46]. By Dialogue 15 Mr Liang said 地租都計埋落去啊[47]. At the two junctures the topic of discussion was on division of assets of the Plaintiff. The said two Dialogues showed that Mr Liang had admitted that the $240,000 received were for two months’ rent.

39.  It is also noted that Mr Lo had said at Dialogue 16 that “果兩個月按金有無呀”[48]. So, as mentioned above, Mr Lo had referred to the money paid as “Deposit”. In Court he said when he meant to say 2 months of rent he said “按金” by mistake. According to the Audio Transcript, Terry immediately corrected him by saying “兩個月租金24萬”[49]. Neither Mr Liang nor Mr Wong corrected Terry for his referring to the $240,000 paid as rent. It is also noted that all along prior to this Dialogue Mr Lo had referred to the $240,000 as rent paid by the Plaintiff in Dialogues 6, 7 and 9.

Dialogue 6：	羅：	“比所有建設設施地租全部你們攞番曬”
Dialogue 7：	羅：	“所有啲地啲租金全部歸你們是嗎”
Dialogue 9：	羅：	“有兩個場地租12萬，24萬啦場地租金”
	龍：	“嗰度有24萬，百幾萬”
	強：	“咁就百二萬”

40.  I accept that Mr Lo had made a mistake when he uttered “Deposit” when he meant to say “rental” as he had all along been saying. I also accept that when he said in Dialogue 11 about not paying rent, it was a reply to Mr Liang’s saying that he had let the Plaintiff “play” on the Premises for two months. That was an emotional reply dismissing the statement made by Mr Liang.

41.  Ms Yang said that if there were arrears of rent since May, there would have been demands made after May and thereafter as arrears accumulated. It was her submission that there was no acceptable evidence on any demand for rent made by Mr Liang. There was only oral evidence from Mr Liang saying that there were oral demands made. It was suggested by Ms Yang that such oral evidence of Mr Liang should not be accepted. In my judgment, had there been demands made, it would be convenient to do so through the WeChat Group like what parties had done on 17 May 2018.

Written Demand in August 2018

42.  There was a demand letter issued by the Defendant on 1 August 2018 (“Written Demand”). That was issued 4 days after the 8^th Board Meeting was held and the day before the date Mr Lo made an unsuccessful attempt to retrieve the Machines and Equipment. In the Demand Letter it was stated that the $240,000 received was for Deposit and there was arrear of rent as from May to July.

43.  I find the Written Demand self-serving. There was no evidence as to why this Demand Letter had to be issued all of a sudden. There was no evidence from the Defendant to explain why on 1 August Mr Liang saw the need to send the Written Demand to the Plaintiff after he had said something quite inconsistent at the 8^th Board Meeting.

44.  In my view, the content of the Written Demand contradicted Dialogue 11 where Mr Liang said “租當我呀，即係入咗我哋，當係畀咗兩個月你哋去玩啦”. First, by Dialogue 11, Mr Liang admitted that rent had been received, and he further said that it was to the benefit of the Mr Lo in the division of Plaintiff’s assets, the sum of $240,000 would be accounted for as theirs. In the course, Mr Liang said he would just treat it as having let them use the land for free for two months (畀咗兩個月你哋去玩啦). In any event there was no demand for arrears of rent at the 8^th Board Meeting. There was no reason why Mr Liang did not do so as parties were talking about termination of the Tenancy Agreement.

ASSESSMENT OF CREDIBILITY

Mr Lo

45.  After hearing all witnesses and viewing documentary evidence I prefer the evidence of Mr Lo. His oral evidence is consistent with the pleading and his witness statement. His account of the material facts is probable and is supported by documents. My analysis on the documentary evidence has been set out above. I find Mr Lo straight forward and his evidence reliable.

Mr Liang

46.  I find Mr Liang not a truthful witness. There was inconsistency in his evidence in court and in his witness statement.

47.  A crucial point in his evidence is how Mr Lo came to start up the Plaintiff with Mr Wong and the relationship between the three. Although in his witness statement he had said it two times that he had befriended Mr Lo for long time, at trial he told the Court that he only knew him for months. He gave no explanation as to why a cheque issued by the Defendant at the amount of 1,400,000 was returned to him by Mr Lo. I accept Mr Lo’s evidence that he had once indicated interest in the Business before he introduced Mr Wong to join. I accept Mr Lo’s evidence that Mr Liang had told him about the Mr Wong’s taking part and his interest in Mr Wong’s share in the Plaintiff.

48.  He gave different reasons for cheques without payee given to him for total sum of $240,000 which were eventually deposited into Mr and Mrs Wong’s joint account. One was because he owed Mr Wong a loan[50] and the other was that it would be more convenient for Mrs Wong to cash the cheques and give him the money through Mr Wong. The inconsistency is blatant and not explained. The reason based on convenience is absurd and odd.

49.  The evidence on the purpose of his attending the 8^th Board Meeting was contradicted by the Audio Transcript. His participation in the discussion over many issues contradicted his evidence that he went there as a mediator and to chase rent. The Audio Transcript did not show that he had asked the Plaintiff to pay rent but to the contrary he talked about rent received and that the sum would be accounted for in the division of assets in favour of the Plaintiff as he would treat that they were allowed to “play” there for two months. At the 8^th Board Meeting, Mr Liang took strong views on how the Business should run and when consensus reached that it should cease, he took full participation on division of assets. When talking about the 40% shares of Mr Wong and what assets Mr Wong should take, on many occasions, it was Mr Liang who said what was to be done. Many times, he used the expressions such as “we”, “us” and “ours” when he referred to the interest of Mr Wong.

50.  As to why he blocked Mr Lo from taking away the Machines and Equipment on 2 August, he said he did not know he could go to court. In the Written Demand signed off by him, it was however said that legal action would be taken[51] . I do not find Mr Liang is a truthful witness.

Mr Wong

51.  After hearing Mr Wong, I do not find him a truthful witness. I would analyse 3 areas to show his evidence not being credible.

52.  First, Mr Wong stated in his statement he was authorised fully by the Plaintiff to negotiate the Tenancy Agreement with Mr Liang on behalf of the Plaintiff[52]. It was also stated that an oral agreement had been reached between him and Mr Liang about leasing the Premises[53]. This was not pleaded in the Defence. Paragraph 13 thereat however admitted “the fact that Mr Lo and Mr Liang made the Actual Agreement orally in April 2018 pursuant to which the Defendant leased the Premises to the Plaintiff …..” [54].

53.  Mr Wong said that the oral agreement reached with Mr Liang was $120,000 a month in April and there was never any offer of $40,000 per month. This is inconsistent with the Minutes of the 1^st Board Meeting in which it was recorded that there was initial agreement for the Premises to be rented at $40,000 a month but it was later raised to $120,000[55]. His evidence on the date to charge rent and the nature the $240,000 was paid is also contradicted by the Minutes of 1^st Board Meeting. Whilst he said that the agreed date to commence charging rent was 1 May and the $240,000 paid was for the Deposit, the Minutes of 1^st Board Meeting stated clearly that “15/6/2018 至15/7/2018 及16/7/2018 to 15/8/2018合共2個月租金$240,000”[56].

54.  I do not accept his explanation to the inconsistencies. He said he did raise the date for charging rent on 1 May 2018 at the meeting. Further he said the Deposit was mistakenly stated as rent. Although he did not explain why he made no correction to the Minutes of 1^st Board Meeting in his witness statement, he told the Court that he had asked the correction to be done but in any event he signed. They however did nothing to correct the mistake and he did not know why. In my view, there could have been two options to correct the mistakes. First by asking the mistakes to be corrected before putting down his signature or asking for an amendment at the following meeting. None of these was done.

55.  Mr Wong is not a truthful witness.

DISCUSSION ON ISSUES

(i) What was the date agreed for rent to be charged under the tenancy Agreement

56.  Having considered all the evidence before me, I accept that Mr Liang of the Defendant had agreed on 17 May 2018 that rent should be charged as from mid-June 2018 and there should be two months’ payment in advance. This was endorsed subsequently by the Plaintiff. Confirmation Message was sent out without receiving any opposition from the Defendant. The cheques were received by the Defendant and deposited into an account at Mr Liang’s choice before end of May. Further there was no acceptable evidence on demands having been made for arrears as from May or June after 17 May 2018 until Written Demand sent out on 1 August 2018.

No Reason for Rent-Free Period

57.  Mr Li who appeared for the Defendant said that there was no reason for any rent-free period to be granted[57]. I do not think a reason is needed for rent free period. It all depended on what had been agreed by parties. Further Mr Li’s submission was not consistent with the evidence of witnesses of the Defendant. Both Mr Liang and Mr Wong said that Plaintiff’s machines were placed on the Premises in March and April. Oral agreement was reached in April but the lease only take effect on 1 May 2018. The Plaintiff had been allowed to use the land before rent was charged. I accept Mr Lo’s evidence that rent-free period was agreed. I saw nothing unreasonable or in violation of commercial sense.

58.  In my judgment, the agreed date for rent to be charged was 15 June 2018.

(ii) Whether the $240,000 paid were for rental or for Deposit

59.  I accept Mr Lo’s evidence that the two cheques sent to the Defendant before end of May were advance payment for 2 months’ rent from mid-June 2018 and nothing else. His evidence is consistent with the WeChat Transcript, Minutes of 1^st Board Meeting and the Audio Transcript.

Judicial Notice for Rental Deposit to be paid

60.  Mr Li asks the Court to take judicial notice that it is extremely common for tenancy agreement to include a term regarding deposit. It is also common that a tenant would be asked to pay 2 months deposit and one month’s rent in advance. In the view of the Court, such proposition could not stand in the light of the evidence cited above. There was clear evidence that the $240,000 paid was for rental payment in advance.

CONCLUSION ON PLAINTIFF’S CLAIM

61.  For the above reasons, I accept Mr Lo’s evidence on the terms of the Tenancy Agreement that the rent should start in 15 June 2018. Further the $240,000 paid was rent in advance for two months therefrom. There was therefore no breach on the part of the Plaintiff for failing to pay rent as from 1 May and in particular on 2 August 2018 when Mr Lo made an attempt to remove the Machines and Equipment from the Premises. The claim for conversion therefor succeeds As there was no lawful reason for the Defendant to detain the Machines and Equipment and the defence of lien cannot stand. In fact Ms Yang has made detailed submissions on how and when lien could be exercised, I do not think those legal principles need to be engaged in dismissing the Defendant’s defence.

COUNTERCLAIM

62.  The Defendant claimed for arrears of rent, vacant possession, and mesne profit. The claim for a declaration for forfeiture of deposit is incidental to the claim for arrears of rent.

Arrears of Rent

63.  The Defendant’s pleaded case was that the Plaintiff was in arrears of rent from May to July for a total sum of $360,000 ($120,000 x 3 months from May to July). I have already made a finding that there was no arrears of rent, this claim must fail.

Vacant Possession

64.  It is the Defendant’s case that the Tenancy Agreement had been terminated as the Plaintiff had refused to pay rent as from May 2018. Further, upon the said repudiatory breach, the Plaintiff refused to remove all of the items and they continued to occupy the Premises unlawfully. For this reason it was alleged that vacant possession had not been delivered. The Defendant claims mesne profit at the rate of the monthly rent of $120,000.

65.  Ms Yang submitted that on 2 August Mr Liang had re-entered onto the Premises and foreclose the same. By such conduct, vacant possession had been obtained especially when the Plaintiff was not allowed to retrieve the Machines and Equipment. The Plaintiff was denied access to the Premises since that day. Ms Yang said the Plaintiff had to take out an application to the Court for the Deliver-up Order. The Plaintiff could not get access on 27 August 2018 when armed with the Deliver-up Order until police was requested to intervene. All these suggested that the Defendant had resumed the Premises for its own use since 2 August. Further the claim for vacant possession has become academic because the Premises had been returned to the owner of the Premises (the “Land Owner”) not long before the trial. I agree with Ms Yang that the claim for vacant possession is academic. This was not in particular further pursued by Mr Li.

Forfeiture of Deposit in Default of Payment for Rent

66.  Even if the $240,000 was paid as Deposit, the Defendant did not make out his case as to why the alleged Deposit paid should be forfeited instead of being applied to set off the alleged arrears of rent when parties decided to terminate the Tenancy Agreement. In Court Mr Liang agreed that the $240,000 paid as “Deposit” could be used to offset the rent in arrears. He admitted that there was no discussion on forfeiture in default. In the circumstances, there was no basis for the Defendant to claim for a declaration that the HK$240,000 be forfeited. For avoidance of doubt, it is the Court’s finding that the $240,000 paid was for rent not Deposit.

Mesne Profit

67.  In the Counterclaim the Defendant also claimed mesne profit at the rate of $120,000 per month as from 1 August 2018 until the date of vacant possession[58]. In his witness statement filed in February 2020, Mr Liang said mesne profit started to accrue on 1 September 2018 until all Remaining Items were removed[59]. The allegation of the Defendant was that there were the Remaining Items occupying the Premise and the Plaintiff must pay mesne profit.

68.  At trial, Mr Liang said that the Defendant had in fact leased the Premises to a new tenant from February 2019 for $45,000 per month (the “New Tenancy Agreement”). He said by the New Tenancy Agreement he leased out half of the Premises. He then changed to say one quarter was leased out. He said that the New Tenancy Agreement was extended orally to 31 August 2021.

69.  The Court notices that the quantum of mesne profit as claimed was not revised or amended to reflect the income arising from the New Tenancy Agreement[60]. More importantly Mr Liang did not disclose the New Tenancy Agreement and the incidental rental income in his witness statement which was filed in February 2010, 1 year after the New Tenancy Agreement had commenced. The New Tenancy Agreement plainly contradicted his saying in paragraph 27 thereof that:-

“由於原告人…..持續的無理佔用行為，被告人一直未能將該處所重新租出與其他潛在租客，被告人因此由2018年8月28日起蒙受利潤損失，為方便起計，本人認為被告人所蒙受的利潤損失，應以該租約每月月租$120,000為基礎，由2018年9月1日開始計算，直至原告人取回全部仍然存放於該處所內的機器及物品為止。” (emphasis added by the Court)

70.  With full knowledge of the New Tenancy Agreement and the incidental rental income, Mr Liang in his witness statement chose to claim HK$120,000 per month as mesne profit. In Court he only disclosed the New Tenancy Agreement when being cross-examined by Ms Yang. I am of the view that Mr Liang was in breach of his undertaking to state the truth in his witness statement[61].

71.  According to Mr Liang, the Remaining Items included the weight bridge (“Weight-bridge”), some cargo containers (“Cargo containers”), the metal grille (“Metal Grille”) to safe guard the Premises or part thereof, some metal matters, plastic buckets and sound proof planks[62].

72.  It is not disputed that some of the Remaining Items were not easy to be removed such as the Cargo Containers and Weight-bridge. The Court was referred to see the photographs[63] showing their condition and position inside the Premises. The Court does not agree that the Weight-bridge would affect the Premises to be leased out as it was almost at the same level with the ground and would not cause any obstruction to movement. It would not diminish the area to be leased out. Mr Liang’s evidence that no items could be placed on the Weight-bridge could not be given weight. First, he did not tell the Court the basis of his saying so. Secondly, there was no reason he should keep the condition or function of the Weight-bridge to the prejudice of the Defendant if it was wrongfully left on the Premises by the Plaintiff against the wish of the Defendant.

73.  The Cargo Containers had been used and could still be used as office and storage. There was no evidence how they had affected the marketability of the Premises.

74.  Moreover there was no evidence that action had been taken against the Defendant by the Land Owner for the Weight-bridge and the Cargo Containers being left on the Premises when the Premises was returned to the latter according to clause 3 of the principle lease[64] or otherwise.

75.  Much time had been spent at trial and at closing submissions hearing to argue who owned the Remaining Items and to bear the responsibility until they were removed. It was the Plaintiff’s case that there was the Division Agreement. The Machine and Equipment went to Mr Lo who would leave the Premises and continue to operate the Plaintiff. Mr Wong would take the Remaining Items and leave the Plaintiff. The Defendant’s case was that there was no such agreement reached at the 8^th Board Meeting or at all. Even if there was agreement reached, the agreement was not valid for the shareholders’ had failed to comply with the requirements under the Company Ordinance and there had been no transfer of shares. the Division Agreement could not be enforced.

76.  The Court is of the view that whether there was a valid agreement concluded on the division of assets between Mr Lo and Mr Wong is immaterial in determining the issue of mesne profit. The Court takes the view that, for reasons set out above, the Defendant has failed to prove its claim because Mr Liang is not a credible witness. There is therefore no acceptable evidence to prove damages caused by the Remaining Items as alleged or at all. Further there was no acceptable evidence to support the rate at $120,000 per month. The time mesne profit started to run was September 2018, some 4 years before the case was heard. There was simply no evidence to show that the rate suggested was fair and just in these 4 years.

DECISION

77.  For reasons set out above, the Court has found that:-

(i) the $240,000 paid were for advance payment for two months’ rent from mid-June until mid-August 2018; and

(ii) there were no arrears of rent as on 2 August 2018.

78.  From the above findings, there was thus no basis for the Defendant to claim the right of lien of the Machines and Equipment and there was thus wrongful conversion for the same until they were removed on 27 August 2018.

79.  There were no arears of rent owed to the Defendant and the counterclaim under this head is therefore dismissed. The Defendant’s claim for vacant possession is dismissed because the Defendant is no longer in possession of the same. There was no basis in law or on facts to support the Defendant’s counterclaim for a declaration that the Deposit paid be forfeited. Last, as the Defendant has failed to prove its case that it had suffered loss and damages for the Premises being unlawfully occupied by the Remaining items and there was no evidence for the rate to be assessed at $120,000 a month in any event. The claim for mesne profit fails also.

80.  Judgment is therefore entered for the Plaintiff for the claim for deliver-up and damages for conversion of the Machines and Equipment. Damages of conversion assessed at $100. The counterclaim is hereby dismissed.

81.  There be order nisi that the Defendant do pay the Plaintiff’s costs of this action and the counterclaim with counsel certificate. The Defendant do bear costs of the Application for the Deliver-up Order before Deputy High Court Judge Leung. Such costs are to be taxed if not agreed. This order nisi shall become absolute unless application to vary the same is made within 14 days hereinafter.