WING SAU INDUSTRIAL CO LTD v. TANG SHING FAI

DCDT 4064/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT NO. 4064 OF 2008

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R U L I N G

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1.  The plaintiff was and is the tenant of premises known as All Those Lot No. 1996 of DD 124, Lot No. 1997 in DD 124, Remaining Portion of Lot No. 1998 in DD 124, Remaining Portion of Lot No. 1999 in DD 124 and Remaining Portion of Lot No. 2220 in DD 124, Yuen Long, New Territories, Hong Kong (hereinafter called “the premises”).  The defendant was and is the tenant of the plaintiff in respect of the premises.

2.   The plaintiff claimed that the defendant owed them $367,200 being arrears of rent for five months (a) for the period from 1 to 31 December 2007 at the rate of $68,000 per month; and (b) for the period from 1 January to 28 February 2008 and from 1 July to 31 August 2008 at the rate of $74,800 per month payable in advance on the first day of each and every calendar month.

3.  A warrant of distress was issued on 20 October 2008 (hereinafter called “the warrant”).  On 23 October 2008 the plaintiff made an ex-parte application for priority to distrain by way of an affirmation of Leung Ka-mun, Carman (hereinafter called “Miss Leung”), the plaintiff’s account manager, dated 23 October 2008.  According to such affirmation, the defendant used the premises as a tire recycling factory with certain machines and equipment.  Miss Leung received news from her business friend working close to the premises that the defendant recently moved some machines and equipment from the premises.  Miss Leung personally attended the premises in the afternoon of 22 October 2008 and found some machines and equipment had been moved out of the premises.

4.  Upon enquiry, a Mr Tang of the defendant, i.e. the claimant, informed Miss Leung that “they would move out the remaining machines and equipment from the premises next week and then deliver vacant possession of the premises to the plaintiff.”   Miss Leung verily believed that the defendant was then in the course of moving out of the premises and would have moved out of the premises within a week.  So the plaintiff urged the court to grant priority to distrain.  On 24 October 2008 HH Judge Browne granted priority to distrain.

5.  The bailiff Au-yeung Lun confirmed in evidence that the warrant issued on 20 October 2008 was executed on 27 October 2008.  At that time the bailiff was accompanied by inter alia a clerk of the plaintiff’s solicitors and Miss Leung.  On that day the bailiff attended the premises where a workshop/warehouse building bore a signage “環力廢輪胎處理科技有限公司” at the entrance.  The bailiff also confirmed that inside the office there was a valid business registration of the defendant.  When the bailiff identified himself to the persons at the premises and explained the purpose of his visit, one of the men, a Mr Chow, identified himself as a caretaker employed by the defendant, and another man, Mr Chan, claimed to be a subtenant of the defendant in respect of one warehouse, two bedrooms and one kitchen at the premises.  The bailiff then started to seize the goods and chattels found on the premises.

6.  Upon seizure of the goods and chattels on the premises, the plaintiff prepared an inventory and appraisement comprising five pages and 189 items (hereinafter called “the inventory”).  Further, pursuant to identification of claim and instructions from the plaintiff’s representatives, certain goods and chattels were not seized at the premises.  On the same day, the bailiff notified the parties by a separate written notice or letter of the execution of the warrant and the auction of the seized goods and chattels to be held on 3 November 2008.  In particular, the defendant was notified that the notice of sale would be advertised in newspaper(s) on 2 November 2008 and that any person alleging himself to be the owner of any property seized under the warrant should lodge his or her claim to the bailiffs’ office within five working days.

7.  Also on the same day the bailiff issued a notice under section 89 of the Landlord and Tenant (Consolidation) Ordinance, Cap.7 (hereinafter called “the ordinance”) to notify the defendant that goods and chattels in the inventory were seized for the outstanding rent as specified in the warrant and unless the defendant paid the outstanding rent with the costs of the distress within  five days, or obtained an order from the court to the contrary, the same would be sold on 3 November 2008.

8.  On 29 October 2008 the plaintiff’s solicitors wrote to the bailiffs’ office to confirm that the place where the warrant was executed was let by the plaintiff to the defendant under a tenancy agreement dated 13 October 2004 and all the seized goods and chattels were located at premises leased under such tenancy agreement.

9.  On the same day the claimant made a declaration stating (a) he presently lived at “元朗媽廟路20號永發一期大廈10/F 6室 ” (hereinafter called “the claimant’s address”); and (b) all goods and chattels seized by the bailiff in execution of the warrant belonged to him (hereinafter called “the declaration”).

10.  Several matters are of note in respect of the declaration.  The claimant gave the claimant’s address as his residential address under declaration made five days before the summons referred to below.  I accept that the claimant’s address was a proper address for service in respect of the claimant irrespective whether he might (as he claimed) travel between mainland China and Hong Kong. 

11.  According to the bailiff’s records, the bailiff on 29 October 2008 telephoned the claimant to make an appointment for him to identify the goods and chattels he claimed belonged to him on the following day.  But the claimant said he was then in mainland China and would only be available on 31 October 2008.  On the same day the plaintiff’s solicitors wrote to the bailiffs’ office to confirm that the plaintiff would dispute the claim lodged by the claimant pursuant to the declaration.

12.  On 30 October 2008 the bailiff telephoned the claimant and confirmed that the appointment with him on 31 October 2008 to identify his claim to the goods and chattels seized upon execution of the warrant.   On 31 October 2008 the plaintiff’s solicitors wrote to the bailiffs’ office to abandon any right to levy execution against the goods and chattels listed as items 182 to 189 inclusive of the inventory.  They invited the bailiff to release such items accordingly.

13.  According to the bailiff’s records, the bailiff attended the premises on 31 October 2008, but the claimant did not turn up.  On 3 November 2008 the bailiff issued an interpleader summons pursuant to section 95 of the ordinance calling on the plaintiff and the claimant to appear and state the nature and particulars of their respective claims to the goods and chattels seized upon execution of the warrant (hereinafter called “the summons”).

14.  According to the affirmation of Chim Fung-ling (hereinafter called “Madam Chim”), senior bailiff, dated 12 November 2008, Madam Chim on 3 November 2008 telephoned and spoke with the claimant.  She notified the claimant of the date and court venue of the hearing of the summons and tried to make arrangements with him for service of the summons on him.  However, the claimant said he was then in mainland China and would contact the bailiffs’ office if he returned to Hong Kong. 

15.  On 4 November 2008 the bailiffs’ office wrote to the plaintiff’s solicitors requiring payment of additional security guard fees of $8,330 for the period from 4 to 17 November 2008 to be paid within seven days. 

16.  On 4, 5 and 7 November 2008 the process server of the bailiffs’ office attended the claimant’s address but the door was locked and nobody answered his call.  The process server dialled the claimant’s mobile telephone number, “but the mobile phone was disconnected, a message was left”.

17.  According to the aforesaid affirmation of Madam Chim, she telephoned and spoke with the claimant on 6 and 11 November 2008.  She repeatedly told the claimant the date and court venue of the hearing of the summons and asked him to make arrangements to receive the summons personally.  The claimant said he was then in mainland China and could not be sure when he would return to Hong Kong.  He further said that he would contact the bailiffs’ office when he returned to Hong Kong.

18.  On 7 November 2008 the plaintiff filed a further affirmation of Miss Leung of the same date to oppose the claimant’s claim.  According to the affirmation of service of the process server of the plaintiff’s solicitors filed on 10 November 2008, such affirmation was served by ordinary post to the claimant’s address. 

19.  According to Miss Leung’s affirmation, the plaintiff let the premises to the defendant since 2004.  Thereafter the defendant purchased and installed various equipment and machines at the premises for the purpose of operating a tire recycling business.  Miss Leung met the claimant in July 2008 when Mr Law, the defendant’s boss, introduced the claimant to Miss Leung and her boss and told them he had appointed the claimant to deal with the tenancy of the premises including renewal thereof.  Since then the claimant handled all matters relating to the premises including payment of rent and negotiations over the terms for renewal of the tenancy on behalf of the defendant.

20.  Miss Leung exhibited a name card of the claimant in the name of the defendant giving inter alia his mobile telephone number and the address of the premises.  Miss Leung went on to say that when she accompanied the bailiff to execute the warrant, she immediately recognized the equipment and machines at the premises were those purchased and installed by the defendant at the commencement of the tenancy. 

21.  It was discovered during execution of the warrant that the defendant had sublet part of the premises to a Mr Wong, pursuant to a sub-tenancy agreement dated 17 May 2008, signed by the claimant on behalf of the landlord of such sub-tenancy.  In the sub-tenancy agreement the landlord was described as “環力廢輪胎處理科技有限公司”, i.e. the defendant, and the plan annexed thereto bore the round company chop of the defendant.  However, the claimant signed under the company chop of AET Tire Environmental Technology Limited.  I pause here to note that AET Tire Environmental Technology Limited did not make any claim to the goods and chattels seized upon execution of the warrant. 

22.  By reason of the above matters, Miss Leung believed that the goods and chattels seized by the bailiff belonged to the defendant and not to the claimant. 

23.  On 10 November 2008 the process server of the bailiffs’ office left a copy of the summons to the claimant at the claimant’s address being his usual or last known address.

24.  To date the defendant has not appeared to challenge the distraint proceedings by denial of either (a) the landlord and tenant relationship asserted by the plaintiff; (b) the liability to pay arrears of rent claimed by the plaintiff; or (c) the lawfulness of the distraint.  Further, the defendant has not paid all or any part of the arrears of rent claimed by the plaintiff since the execution of the warrant.

25.  The issuance and execution of the warrant were pursuant to Part III of the ordinance.  Section 87 of the ordinance provides inter alia that: 

“In pursuance of a warrant, a bailiff shall seize the movable 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 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 distress.”

26.  The summons was issued pursuant to section 95 of the ordinance which provides inter alia as follows:

“If any claim is made to or in respect of any property seized under a warrant, or in respect of the proceeds or value thereof, by any person not being the debtor, the Registrar, on the application of the bailiff who seized the property, may issue a summons calling before the court the claimant and the person who obtained the warrant, and thereupon any action which may have been brought in respect of such claim shall be stayed, and the court, on proof of the service of such summons and that the property was so distrained, may order that the plaintiff to pay the costs of all proceedings in such action after the service of such summons.”

27.  Section 96 of the ordinance provides that:

“Every claim under section 95 shall be verified by affidavit setting out the facts on which it is founded.”

In this respect the claimant has filed the declaration and the plaintiff has filed the further affirmation of Miss Leung.

28.  Then section 95(2) of the ordinance goes on to provide that when the claims are so verified, the court shall adjudicate thereon, and make such order between the parties in respect thereof, and of the costs of the proceedings, as it thinks fit.

29.  The claimant is well aware of the summons not only from the notification and service by the bailiff, but such awareness is confirmed by his own letter addressed to the bailiffs’ office dated 10 November 2008 which refers to the hearing of the summons and which states as follows: “本人鄧成輝身分證號碼XXX現關於本案件DCDT4064/2008事項，由於本人因事未能回港，未能出席於2008年11月13日(sic)之法庭審理，希貴處能延期安排”.  Although this letter was on its face addressed to the Tsuen Wan office of the bailiffs’ office, it was in fact delivered by a person unknown to the District Court Registry. 

30.  Mr Ting, solicitor for the plaintiff, opposes any adjournment of the hearing today.  He submitted that the above chronology showed that the claimant was adopting a delaying tactic.

31.  In considering the paper application by the claimant who was absent at the hearing today, several matters are of note.  First, the claimant’s letter of 10 November 2008 and his telephone conversations with Madam Chim do not give any information as to what important or urgent matters he was engaged in that prevented him from attending the hearing today apart from a vague assertion of “因事”.

32.  Secondly, the summons was served on an address for service within the jurisdiction provided by the claimant on 29 October 2008, i.e. just two weeks ago.  There was no intimation from the claimant then of any potential unavailability in the near future.  Thirdly, the claimant did not in his letter dated 10 November 2008 or in his telephone conversations with Miss Chim say when he would be available to attend any court hearing in the near future.

33.  Fourthly, as apparent from the above chronology of events, since the claimant has lodged the declaration with the bailiffs’ office, he had shown singular disinterest in identifying and pursuing his claim despite the many opportunities afforded to him by the bailiff.  I find such unexplained conduct on the part of the claimant who, according to him, allegedly had many items of his own goods and chattels seized by the bailiff and about to be auctioned off difficult to understand.

34.  Fifthly, although the claimant asked for an adjournment of the hearing, there is no offer to put up security for any additional security guard fees that would necessarily be incurred as a result of the adjournment. Sixthly, bearing in mind that every claim under section 95 of the ordinance shall be verified by affidavit setting out the facts on which it is founded, even without taking into account Miss Leung’s further affirmation, the claimant’s declaration of itself (as seen below) fails to disclose arguable merits.

35.  Taking all of the above matters into account, I refuse the claimant’s paper application for adjournment of the hearing today.

36.  In considering the execution of the warrant, the initial question is whether the goods and chattels seized by the bailiff were in the apparent possession of the defendant.  If the answer is no, the goods and chattels should be released to the rightful owner.  If the answer is yes, the bailiff was entitled to seize the goods and chattels.  But the court still has a discretion to return the goods and chattels to the rightful owner.  Therefore a question also arises as to whether the claimant has shown himself to be the rightful owner.

37.  As explained above, the first question is whether the bailiff reasonably believed the distrainee, i.e. the defendant, was in apparent possession of the goods and chattels according to the evidence of the bailiff’s eyes and from statements made to him.  What were the overt indications to the bailiff’s eyes?  When he arrived at the premises, the workshop/warehouse building thereat had a signage named “環力廢輪胎處理科技有限公司”, i.e. the defendant.  There was also a valid business registration in the name of the defendant inside the premises.  The caretaker present at the time of the execution of the warrant admitted to the bailiff that he was employed by the defendant.  Apart from a sub-tenant who made no claim in the present proceedings, the goods and chattels seized at the premises were goods and chattels (including equipment and machines) consistent with a tire recycling business.

38.  The claimant claimed he was the owner of the goods and chattels seized upon the execution of the warrant.  However, this is a bare assertion.  No particulars were given as to when, how and under what circumstances the goods and chattels were acquired and no documentation was produced in support of the same.  More importantly, there was no suggestion that the fact of this alleged ownership was in any way brought to the attention of the bailiff at the time of the execution of the warrant.

39.  It is unnecessary for the bailiff to be apprised of all necessary evidence at the time of the seizure since the bailiff may enter the premises at any time  (see Fort Crown Investments Ltd v Tam Virginia V trading as Star Light International Agency & Trading Services (defendant) and Nepal International Group Limited (claimant) CACV173 and 174/2005, unreported, 5 January 2006).  The bailiff is not required to go into detailed enquiry on the spot  (See Lu Shang Chang v Kingroup Ltd  [1995] 3 HKC 709).

40.  It is a question of fact whether the defendant was in apparent possession of the goods and chattels of the premises.  In the circumstances I find there is nothing to rebut the evidence of the bailiff’s eyes to put him on notice that a third party would claim all of the goods and chattels at the premises at the time of the execution of the warrant, thus the goods and chattels at the premises were liable to seizure.

41.  As regards the ownership of the goods and chattels as explained above, the claimant has made only a bare assertion of ownership.  I am not persuaded by the claimant’s claim of ownership of all the goods and chattels seized by the bailiff.

42.  Apart from the matters referred to above, I further note the following objective evidence: (a) the name card of the claimant was under the defendant’s name; and (b) he signed the sub-tenancy in favour of Mr Wong not in his personal capacity but on behalf of the landlord described as the defendant.  Such objective evidence sat well with Miss Leung’s affirmation evidence that the claimant dealt with the plaintiff as landlord not in his own capacity but on behalf of the defendant. 

43.  But even if I am wrong and the claimant is in fact the true owner of the goods and chattels seized by the bailiff, i.e. accepting all the assertions in the declaration, I still find it an insufficient answer to the seizure of the goods and chattels under the warrant.  In Fuleekoo Co. Ltd. v Spiral Tubes International Ltd. [1986] HKC 269, it was held that the ownership of goods and chattels seized of itself would not cause the discretion to be exercised in favour of the claimant.  It is but a factor to be considered and must be weighed against the rights of the landlord.  All the attendant circumstances should be considered by the judge before coming to his decision and he can impose such terms as he thinks fit.

44.  Here, although some of the arrears of rent went back to January and February 2008, there were some months, for example, March to June 2008, when the rent was paid.  There was no suggestion that the plaintiff has allowed the arrears to accrue to such point when it would be unfair to exercise a discretion in his favour.  The plaintiff knew the defendant rented the premises to operate a tire recycling business, which was precisely the user at the time of the execution of the warrant.  As I found, the goods and chattels seized by the bailiff were in the apparent possession of the defendant.  There is also no suggestion that the persons present at the time of the execution of the warrant intimated to the bailiff that such goods and chattels belonged to the claimant.

45.  Upon considering all the circumstances and the relevant factors, I decline to exercise my discretion in favour of the claimant.  In Xipho Development Company Ltd v CHM Holdings Company Limited CACV112/1996, unreported, 13 November 1996, the Court of Appeal said that if the goods of a stranger were on the premises and lawfully distrained by the landlord for arrears of rent, then the redress of the owner of the goods was to seek reimbursement of the value from whom the rent was due.  In the circumstances, the claimant’s claim is dismissed.

(Discussion re costs)

46.   Since the claimant’s claim is dismissed, costs should follow event.  I am informed by the bailiff that the goods and chattels are anticipated to be sold this Saturday 15 November 2008.  In the circumstances, I order that the claimant do pay the plaintiff’s costs of the summons, to be taxed if not agreed, and extra security guard fees in the sum of $7,380 for the period from 4 to 15 November 2008.