LEUNG YUK CHUN AND ANOTHER v. PARON GLOVES INTERNATIONAL LTD

DCCJ 5890 of 2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5890 OF 2006

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J U D G M E N T

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INTRODUCTION

1.  The Plaintiffs (“Madam Leung” and “Madam Wu”), claim against the Defendant for possession of the property situated at Unit N3, 3^rd Floor, Block 3, Nos. 448-458 Kwun Tong Road, Kwun Tong Industrial Centre, Kowloon (“the Property”) and arrears of rent and mesne profits between May 2006 and October 2009.  The Defendant claimed that all rent and mesne profits had been settled and counterclaims for the conversion of a company car by Madam Wu. 

2.  Vacant possession of the Property had been delivered up to the Plaintiffs on 30^th October 2009.  Upon admission by Madam Wu at the first day of trial, judgment had been entered for the counterclaim and for Madam Wu to return the car to the Defendant.  So the only issue remained to be determined is the claim for arrears of rent and mesne profits in the sum of HK$340,000 for May 2006 to February 2009.

UNDISPUTED FACTS

3.  Madam Wu is the daughter of Madam Leung.  The Property was being purchased in their joint names in December 1986.  Ever since the purchase, the Property was being used as the office of the Defendant.  Rent was being paid to Madam Leung and by May 2006, it was at the rate of HK$10,000 per month.  

4.  The Defendant was incorporated in 1986.  Madam Leung and Madam Wu had been the director and shareholder of the company till 16 December 2006 when they resigned.  Madam Leung’s son, Mr. Wu Kwok Kwong (“Mr. Wu”) was and still is the director and shareholder of the Defendant.

5.  No payment of rent had been made to Madam Leung by the Defendant since October 2005.  Mr. Wu paid the rent for October 2005 to April 2006 in the sum of HK$70,000 by way of a personal cheque in March 2006.  Ever since then, Mr. Wu had been paying Madam Leung HK$15,000 per month by way of a personal cheque till December 2006.  Since January 2007 to February 2009, Mr. Wu paid the said sum of HK$15,000 by way of 2 personal cheques of HK$10,000 and HK$5,000 respectively.  The Defendant had paid Madam Leung a sum of HK$80,000 covering rent between March 2009 and October 2009 by a company cheque in October 2010.

6.  The issue at this trial is whether the payment of HK$15,000 made by Mr. Wu to Madam Leung between March 2006 and February 2009 consisted of the payment of rent as well as living expenses for Madam Leung or it was just the latter.

THE PLAINTIFF’S CASE

7.  Madam Wu testified that Madam Leung had all along been receiving $15,000 as salary or living expenses from the Defendant on top of the rental payment received.  In fact every family members including Mr. Wu did draw a salary from the Defendant all these years.  Madam Wu was the one responsible for the accounting matter of the Defendant and had been drawing cheques to pay Madam Leung her salary each month whilst the rent was being paid at irregular intervals.  Rental receipts were issued upon payment of rent.   Madam Wu had not issued any cheque since October 2005 because there was insufficient fund in the bank account of the Defendant. Upon payment by Mr. Wu of the rent in March 2006, no rental receipt had been issued since there was no request from the Defendant for the same.  Madam Leung had told her that the $70,000 paid by Mr. Wu was for rent whilst the $15,000 was for her living expenses.

8.  Madam Leung testified that it was her decision for a salary to be drawn from the Defendant for each family member ever since 1996 or 1997 and she had been receiving $15,000 in cash till February 2006.  Since March 2006, Mr. Wu gave her his personal cheques instead.  The cheque of $70,000 was left home by Mr. Wu who told her that it was for the payment of rent.  As for the cheques of $15,000 from March 2006 to February 2009, it was brought home by Madam Leung’s husband. Madam Leung agreed that Mr. Wu had never told her what was it for but she assumed it was for her living expenses.  She had never noticed if there was anything written at the back of the cheques. 

THE DEFENDANT’S CASE

9.  Mr. Wu testified for the Defendant.  He confirmed that the cheque of $70,000 was for the payment of rent since his father told him Madam Leung was asking about the arrears of rent by the Defendant.  Since all the company cheque books had been taken away by Madam Wu when she resigned, Mr. Wu had to use his personal cheques for such purpose.  As for the cheque of $15,000 given to Madam Leung in late March 2006, since his father told him that Madam Leung was in need of money, he issued the cheque thinking that $10,000 was for the settlement of rent and the balance of $5,000 was for living expenses of Madam Leung.  It was Mr. Wu’s own thought to pay $5,000 as living expenses.  And ever since then, he paid Madam Leung $15,000 on a monthly basis.  From 31 January 2007, he issued 2 cheques instead in order to put things straight in view of this proceedings being instituted on 30 November 2006 and since July 2007, he had also written at the back of the cheque in the sum of $10,000 words representing payment of rent for the Property.  The payment ceased in February 2009 since he had been declared bankrupt.

10.  Mr. Wu also agreed that he as well as the Plaintiffs were drawing $15,000 per month from the Defendant as salary in cash.  He had never financially supported Madam Leung and the salary was decided by Madam Leung.  And such an arrangement had ceased for all family members ever since March 2006.

DISCUSSION

11.  The sole issue is whether the payment made by Mr. Wu between May 2006 and December 2006 as well as between January 2007 and February 2009 is for rental payment or for living expenses of Madam Leung. 

Payment for May 2006 to December 2006

12.  Having heard the evidence and on a balance of probability, I accept the evidence of the Plaintiffs as far as the payment for May 2006 to December 2006 is concerned.

13.  I found the evidence of Mr. Wu concerning the purpose of payment during this period inconsistent and unbelievable.  As rightly pointed out by counsel for the Plaintiffs, Mr. Wu had given 3 different versions in connection with this payment.  Mr. Wu had stated in his affirmation dated 7^th June 2007 that the money was “partly being the rental payment and partly being maintenance for the rented premises” (paragraph 11 of page 444 of Bundle).  In his witness statement dated 10^th November 2009, it was stated that the money was for rent as well as “something extra” (paragraph 40 of page 43 of Bundle).  His testimony in court was $10,000 for rent and the remaining $5,000 for Madam Leung’s living expenses.

14.  The 3 versions are inconsistent with one another and this gives one the impression that Mr. Wu is not an honest and truthful witness and his evidence is incredible.  The purpose of the payment of $15,000 goes to the root of his case and Mr. Wu failed to demonstrate that his evidence should be preferred on a balance of probability.

15.  Furthermore, Mr. Wu’s contention that the $15,000 paid to Madam Leung in March 2006 consisted of rental payment is also inconsistent with the fact that he had already paid her by another cheque of $70,000 covering rental payment for October 2005 to April 2006.  There is no explanation as to why he had to draw out another cheque and paid the rent for March 2006 again.  The fact that he paid $15,000 after settling the rent for the same month points to the reasonable conclusion that it was for Madam Leung’s living expenses instead of rental payment.

16.  I accept the evidence of the Plaintiffs and found as a fact that the payment of $15,000 by Mr. Wu between May 2006 and December 2006 is solely for the living expenses of Madam Leung and not for the payment of rent.  Hence, the rent for the said period had been in arrears.

Payment for January 2007 to February 2009

17.  However, I accept the evidence of Mr. Wu that the nature of payment since January 2007 had been changed since he had clearly stated his intention of payment by splitting the payment into two cheques and furthermore clearly marked at the back of the cheque that the payment was to settle the monthly rent.

18.  Mr. Leung for the Plaintiffs submitted that it lacks a meeting of minds as to the nature of cheque payment since Madam Leung did not notice the wordings at the back of the cheque and still regarded it as payment for her living expenses.  It is further submitted that without a meeting of mind, there is no binding contract and Mr. Wu had to prove that the cheques are for rental payment and Madam Leung knew and accepted those payments as such.  And the doctrine of appropriation is only applicable where more than 1 debt is involved and living expenses for one’s mother cannot be considered a debt.

19.  Mr. Hung for the Defendant submitted that what Mr. Wu had done after January 2007 was just exercising a debtor’s right of appropriation, relying on the case of Florence Deeley v Lloyds Bank Ltd [1912] AC 756 where Lord Shaw said at page 783 that “the person paying the money has the primary right to say to what account it shall be appropriated; the creditor, if the debtor makes no appropriation, has the right to appropriate; and if neither of them exercises the right, then one can look on the matter as a matter of account and see how the creditor has dealt with the payment, in order to ascertain how he did in fact appropriate it.”

20.  I do not see how Mr. Leung’s argument as to a meeting of mind is relevant as far as the nature of payment is concerned since once the debtor had made the appropriation, the right of appropriation of the creditor cannot arise.  I accept that it is for the debtor to decide what the payment is for and if the creditor upon receiving the sum did not agree with the debtor’s appropriation, he or she should refuse the payment or returned it within a reasonable time.  If the creditor accepts the payment so appropriated, he/she must apply it in the manner directed by the debtor.

21.  As for the argument that there must be 2 debts involved, I found the right of appropriation should arise when there are 2 payments to be accounted for and need not be debts in the strict legal sense. 

22.  The debtor’s communication of appropriation may be express or implied.  The intention of the debtor may be collected from the circumstances of the payment.  Given the fact that Mr. Wu had since after the institution of this proceedings by the Plaintiffs, split the sum of $15,000 into 2 sums of $10,000 and $5,000 each, inference can be drawn that he intended the payment to be appropriated for 2 accounts, with the $10,000 cheque specifically for the payment of rent.

23.  It is clear from the evidence that Mr. Wu had expressly made his position crystal clear since July 2007 by marking the purpose of payment at the back of the cheques. By so doing, he had exercised his right in deciding what the payment should be accounted for.  Madam Leung decided to turn a blind eye to this fact cannot deny the election made by Mr. Wu and cannot impose upon him her own assumption of fact.

24.  I found as a fact that the mesne profits from January 2007 to February 2009 had already been settled by Mr. Wu with his personal cheque hence there is no arrears.

The Order

25.  It is ordered that :-

a.  Judgment be given for the Plaintiffs and the Defendant do pay to the Plaintiffs the sum of HK$80,000, being arrears of rent for May 2006 to December 2006;

b.  Interest on the said sum at half of the judgment rate from the date of writ to the date of judgment, thereafter at full judgment rate until full payment ;

c.  Costs order nisi that there be no order as to costs.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.