Jetwise Investment Ltd. v. Net Power Ltd. and Another

DCDT7570/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT NO. 7570 OF 2001

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J U D G M E N T

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1. This is a bailiff's interpleader summons which comes about in this way: In October 1999, the plaintiff leased the whole of the 38th floor, MLC Tower ("the premises"), to the defendant for a term of 3 years commencing on 22 January 2000 at a monthly rental of $163,022. In October 2001, the defendant defaulted in the payment of rent.

2. On 1 November 2001, the defendant asked the plaintiff whether it might surrender a portion of the premises but this request was refused. On 23 November, the plaintiff applied for a warrant of distress in the sum of $326,044 being the amount of rent in arrears. On 24 December, the bailiff attended the premises and levied execution by seizing the furniture and office equipment there.

3. The claimant then came to court on 27 December contending that it was the owner of the seized property and not the defendant for the reasons which I will need to consider in a little detail in a moment. On that occasion, the plaintiff and the claimant entered into an agreement embodied in a consent order whereby the claimant paid into court the amount set out in the distress warrant together with costs and thereby obtained the release of the items seized by the bailiff.

4. I have heard evidence with a view to determining whether the bailiff was entitled to levy execution on the items seized by him. If I find that he was so entitled, then the amount in court must go to the plaintiff. If I hold otherwise, the monies paid in must be returned to the claimant.

5. Before I attend to the evidence, it is helpful to first consider the law relating to the bailiff's powers of seizure in such circumstances. The position is covered by section 87 of the Landlord and Tenant (Consolidation) Ordinance Cap. 7 which is in these terms:

"In pursuance of a warrant, a bailiff shall seize the moveable 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, hereinafter called the "the debtor", or such part thereof as may in the bailiff's judgment be sufficient to cover the amount of rent together with the costs of the distress."

The material words therefore are; "in the apparent possession of the person from whom the rent is claimed".

6. These words were considered by Lindsell J in Hong Kong Land Investment & Agency Company Limited v Athena Studio & Another [1932-33] 26 HKLR 39, where at page 41 he said:

"Nor do I find any great difficulty in the words 'apparent possession'. In my view, their effect is this: to make liable to distraint all goods on a tenant's premises which at the moment of executing the warrant the bailiff supposes on the evidence of his eyes to be in possession of the tenant. The only test in such a case as this is on entry did the bailiff believe the disputed goods to be in the tenant's possession and, if so, had he reasonable grounds for that belief?"

7. This is the test that has been approved and continues to be applied in our courts. It, of course, gives rise to a question of fact to be determined on the evidence called in the particular case before the court. In Lu Shang-chang v Kin Group Limited [1995] 3 HKC 709 the Court of Appeal (Ching JA) observed that in deciding whether goods are in the apparent possession of the tenant, he cannot be expected to go into a detailed enquiry on the spot although "in apparent possession" must mean more than that the goods are physically on the premises.

8. In Xipho Development Company Limited v CHM Holdings Company Limited [1997] HKLR D36, Litton JA delivering the judgment of the Court of Appeal held that whether goods were in the apparent possession of the tenant could be judged by the evidence of the bailiff's eyes but that other cogent evidence could also come into play to displace the prima facie view that the goods seized were in the tenant's apparent possession.

9. In this matter there are some important factual disputes which require a decision by me. In view of the fact that I could not decide them on the basis of contested affidavits, I have directed that there should be oral evidence from Mr Manson Chan, the claimant's executive director, and from the bailiff, but limited only to those matters. I will come to these issues presently.

10. In short, the claimant's case is that it purchased the defendant's business on 23 April 2001 under the terms of a written agreement and assignment which documents have been exhibited as "MC3" to the affirmation of Mr Manson Chan dated 27 December 2001. Thereafter the claimant occupied the premises and under the terms of the assignment also purchased the defendant's furniture and office equipment at the premises.

11. Under the terms of the agreement, the claimant paid the defendant rent in respect of the premises expecting that this rental payment would be passed on to the defendant (as tenant) to the plaintiff, the landlord. As I have already observed, this did not take place after October 2001 which caused the plaintiff to take out these distraint proceedings.

12. The bailiff's evidence is contained in his affirmation starting at page 149 of the trial bundle, as well as the evidence given from the witness-box. In essence it amounts to this: upon arriving at the ground floor lobby of the building, he saw that the tenants directory for the 38th floor had the name of the defendants. When he went up to the office reception area on the 38th floor, he saw the claimant's logo writ large and prominently displayed behind the reception counter. (See the top left photograph at page 91A of the bundle.)

13. He approached the receptionist, explained to her the purpose of his visit and he asked her whether the defendants were in occupation of the premises and she said that they were. Another lady colleague of the receptionist then came to see him. He also explained to her the purpose of his visit and he asked her whether the defendants were in occupation of the premises to which she also said that they were. He then asked to speak to the person in charge. A few moments later Mr Manson Chan came to see him.

14. It is here that there is a marked divergence in recollection as to what took place. The bailiff says that Mr Chan told him that the claimant allowed the defendants to use the office furniture and equipment so that they might carry out work on behalf of the claimant. Mr Chan's visiting card, shown to the plaintiff, showed that he was an executive director of the claimant. The effect of what was being said to the bailiff was that the claimant had taken over ownership of the defendant's business and furniture and equipment and that in those circumstances the bailiff should not levy execution.

15. Also present at the time was a Mr Lam who is a legal executive employed by the plaintiff's solicitors. He and Mr Chan then entered into discussions about this and so the bailiff decided to leave them to continue talking whilst he attended to a distraint matter elsewhere. He left behind a security guard that he had brought with him. Although not having levied execution at that stage, the security guard would not have been able to prevent removal of the contents of the offices.

16. When he returned later that morning, he said that Mr Chan showed him two pieces of paper. Firstly, a photocopied extract from the Government Gazette showing the transfer of the defendant's business to the claimant (page 11 of the bundle) and the claimant's business registration certificate giving the address of the premises as its business address (page 8). The bailiff then spoke on the telephone to Mr Cheung, the plaintiff's solicitor, and Mr Ching, the claimant's solicitor, also arrived at the premises. Mr Cheung asked him to proceed to levy execution and Mr Ching sought to persuade him to desist.

17. The bailiff says that he decided to proceed and levy execution. Other than the two documents referred to, he saw no proof that the claimant's were the owners of the furniture and equipment. He says that no contracts or agreements were shown to him, the defendants continued as the tenant of the premises and their name was in the downstairs entrance lobby directory of occupants. He had been told by more than one of the staff on the 38th floor that the defendants continued to occupy the premises and Mr Manson Chan had allegedly told him that the defendants were using the office to do work there on behalf of the claimants.

18. In all the circumstances he concluded that the furniture and office equipment was in the apparent possession of the defendants and so he seized it pursuant to the warrant. That is his explanation.

19. Mr Manson Chan gives a materially different account. He says that quite apart from showing the bailiff the two documents which I have already referred to, he also showed him two further documents. Firstly, the agreement and assignment of the defendant's business to the claimant. These are part of Exhibit MC3 of Mr Chan's affirmation of 27 December 2001 starting at page 12 of the bundle and running to some 78 pages. He says that this document was not immediately available to him and he had to ask the bailiff to wait until this was sent over from the claimant's other office at North Point, a ten minute taxi ride away. He says that he also showed the bailiff a computer printout showing the furniture and equipment belonged to the claimant on the premises which also indicated when that furniture was acquired.

20. He also made two telephone calls to lawyers to explain to them what the bailiff wished to do and to ask them to explain to the bailiff that the furniture now belonged to the claimant and not to the defendant following the sale of the business. The bailiff accepts that he was present when these calls were made but he is adamant that the agreement and assignment were never shown to him, neither was the computer printout. He does accept that because there were discussions between the solicitor's clerk (Mr Lam) and Mr Manson Chan about this apparent change of ownership and he was willing to give more time for these discussions to continue which, in any event, suited his schedule that morning because he had another urgent distraint to attend to and he trusted Mr Chan not to do anything precipitous and attempt to move the furniture whilst he was away which, on a practical basis, would have been difficult in the extreme in a short period of time.

21. I found both Mr Lee (the bailiff) and Mr Manson Chan impressive individuals but I am bound to say that on the question of whether the bulky agreement (Exhibit MC3) and the computer generated inventory of office furniture were shown to the bailiff, I have no doubt that the bailiff's evidence is correct. Whilst a bailiff would not wish to be shown to be in error in seizing goods, and in such circumstances this might provide a motive for not being frank and not telling the complete truth about every document that was shown to him, I am entirely confident that this bailiff, Mr Patrick Lee, is a perfectly honest and straightforward individual who has given his evidence accurately and dispassionately.

22. Whilst Mr Chan has provided the court with cogent evidence of a sale of the defendant's business to the claimant, I am satisfied that the agreement/assignment "MC3" was not available to him on that day and that he could not and therefore did not produce it to the bailiff as he says he did. Neither did he show an inventory. If he had, I am confident that the bailiff would have told me so.

23. I therefore propose to proceed on the evidence of the bailiff which I accept.

24. Was he correct on the evidence to conclude that the furniture and equipment that he seized was in the apparent possession of the defendant tenant? There was, of course, documentary material, pages 8 and 11, which he did see, recording the transfer of the defendant's business to the claimant, as well as the sustained protests of Mr Manson Chan and the persons on the telephone, that Mr Chan put on a telephone conference speaker confirming this. Was this sufficient to displace the prima facie situation that presented itself to him on arrival? That is to say, that the defendant was the tenant of the entire floor, two of the staff had told him that the defendant continued to occupy the 38th floor and indeed Mr Chan had said that the defendant continued to use the furniture and equipment to do work there on behalf of the claimant.

25. The defendant's name continued to be shown on the ground floor directory, although it is right to say that the claimant's was prominent and the defendant's absent at the 38th floor reception. There certainly were indications going both ways so factually this was not a clear-cut situation for the bailiff. I daresay he hoped that perhaps the parties might have sorted the matter out between themselves and perhaps he was glad to leave them to it whilst he dealt with another distraint. Eventually he was put to it to decide. Proceed or withdraw?

26. On the evidence before him, there was ample material for him to conclude that the tenant (the defendant) continued in possession of the items which he seized. He then asked himself the right questions which I daresay he does daily in his work. Were the goods in the apparent possession of the defendant? He decided that they were.

27. In coming to that conclusion, I am certain, having heard him, that he had taken into account everything that Mr Chan had said to him and shown to him. I am satisfied that he came to the right conclusion in acting as he did and in levying distress.

28. Accordingly I dismiss the claimant's application to set aside the warrant of distress and the seizure thereunder. Pursuant to the consent order of 27 December 2001 the monies paid into court and any interest accrued thereon must therefore be paid out to the plaintiff.

29. The costs will clearly have to follow the event. So costs of and occasioned by the interpleader summons are to be paid by the claimant to the plaintiff. As to the application for certificate of counsel, I take the view this really was a straightforward matter. There was an issue of fact but clearly it is something that any competent solicitor would have been able to deal with. So far as the law, the law is the law! The authorities are there. They are, if I may so, straightforward and of course helpful, so I really do not think this is an occasion for certificate of counsel.