SUTTER LTD v.CHEERS FLORAL & GIFT SERVICES o/b MAXBO HOLDINGS LTD

DCDT 1529/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT CASE NO. 1529 OF 2011

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BETWEEN

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Decision

1.  By application made by summons on 17 June 2011 the Defendant applies to discharge the Warrant of Distress issued on 5 May 2011 (the “Warrant”) on the ground that the Warrant was “outdated and untrue” when execution pursuant to the Warrant was carried out on 16 June 2011.

2.  The Warrant had been issued on the application of the Plaintiff to distrain goods and chattels of the Defendant for the sum of HK$36,780.  That sum represented arrears of rent for 3 months, due from the Defendant as tenant to the Plaintiff as landlord, for the period from 1 March 2011 to 31 May 2011 at the rate of HK$12,260 per month, under a tenancy agreement dated 7 June 2001 (the “Tenancy Agremeent”).

3.  It is not in dispute that, at the time the Warrant was issued, the Defendant was in arrears of rent to the extent stated.

4.  Following the issue of the Warrant, the Defendant had made 2 payments to the Landlord, both in the sum of $16,313. The payments were made on or about 11 May 2011 and 26 May 2011.

5.  The main issue separating the Plaintiff and the Defendant is whether the sums paid by the Defendant on 11 and 26 May 2011 should have been applied exclusively to arrears of rent the subject of the Warrant – or whether (as was the case here) they were permissibly applied by the Plaintiff not just to rent which was outstanding but also to rates, management and legal fees, being other sums due contractually under the Tenancy Agreement.

6.  The further issue is whether, at the date of execution of the Warrant on 16 June 2011, the Defendant remained in arrears, irrespective of whether the sums paid by the Defendant should have been applied exclusively to arrears of rent.

7.  The execution of the Warrant was originally scheduled for 25 May 2011.  By letter dated 23 May 2011, the solicitors for the Plaintiff informed that the Chief Bailiff that the Defendant had paid rent for the month of March 2011 in the sum of HK$12,260.  They requested that the said sum of HK$12,260 be deducted from the outstanding indebtedness of the Defendant during the execution.  (This was a reference to the sum of HK$16,313 paid by the Defendant on or about 11 May 2011.)  No execution was carried by the Chief Bailiff on 25 May 2011 as no one answered the door at the tenanted premises. 

8.  The second attempted execution was scheduled for 31 May 2011.  By a letter dated 30 May 2011, the solicitors for the Plaintiff informed  the Chief Bailiff that the Defendant had paid the Plaintiff a further sum of money in partial settlement of the outstanding rent, and requested that the total sum of HK$18,544.80 be deducted from the outstanding indebtedness of the Defendant during the execution.  (This was a reference to the further sum of HK$16,313 paid by the Defendant on or about 26 May 2011.) No execution was carried out on 31 May 2011 as no one answered the door at the tenanted premises.

9.  On the calculations provided by the Plaintiff, the outstanding amount at that point was HK$18,235.20.  The third attempted execution for this amount was then successfully carried out on 16 June 2011.

10.  On 17 June 2011, the Defendant effected payment of all outstanding amounts by settling its account at the Accounts Office of the District Court.  Settlement at that date was in the sum of HK$22,375.40, which comprised the balance owing after partial payment of HK$18,235.20 plus additional amounts totaling HK$4,120.20 for fees and charges payable to the Chief Bailiff.

11.  As I said earlier, the objection advanced by the Defendant was that the entirety of the amount paid on behalf of it on 17 and 26 May 2011 (amounting to HK$32,626) should have been applied towards rent and rent alone.  I reject this.

12.  On the relevant dates the Defendant was in arrears in respect not just of rent but of other sums payable under the Tenancy Agreement including rates and management fees.  Further amounts in the nature of legal fees became payable upon the Defendant falling behind with its rent and proceedings for recovery having been commenced – see Clause 2.5 of the Tenancy Agreement.

13.  On behalf of the Defendant the case Ng Kwok Hing v Tiah Toh Ming (unreported, HH Judge Li, DCDT 970/1983, 27 October 1983) was cited to me.  The learned judge, following a review of the authorities, held that rent, and rent alone, could be the subject matter of distrain proceedings.  If it were the case here that repayment had been made by the Defendant to the Chief Bailiff in answer to the Warrant, I could see the force of an argument that such repayments were to be applied exclusively to rent (and perhaps fees of the Chief Bailiff).  But that was not the case here.  The payments were made to the Plaintiff.  The Plaintiff, in my view, was entitled as it did to apply the payments to any and all amounts owing contractually.

14.  Ms Twinky Chow, a director of the Defendant, informed me from the bar table that notations were made by her on the back of both relevant cheques, to the effect that such payment should be used for outstanding rent only.  I have taken this point into account.  Even if I were to accept this information as evidence, I cannot see that the Plaintiff’s contractual rights could be qualified unilaterally by a casual note made on the back of a cheque.

15.  Furthermore, even on the Defendant’s own reasoning (i.e. that payments made on 11 and 26 May 2011 should have been applied exclusively to rent), there was still a net amount owing from the Defendant to the Plaintiff as at the date of execution on 16 June 2011.  On the Defendant’s case, the HK$32,626 paid by it was exclusively for rent.  That left a balance owing of HK$4,154.  Added to that were fees and charges payable to the Chief Bailiff of HK$4,120.20.  At the date of execution therefore, even on the Defendant’s own calculation, a net amount remained owing of HK$8,274.20.  I am informed by Miss Kate Poon, appearing for the Plaintiff, that the Chief Bailiff estimated the value of goods seized on 16 June 2011 at HK$3,242.00.

16.  It was submitted by Miss Poon on behalf of the Plaintiff that distress proceedings can be wrongful in a number of circumstances, none of which is applicable in the present case.  These circumstances were summarized by H.H. Judge Huggins in Lam Wai Fong v Ho Yin Sheung [1958] DCLR 274.  Illegal distress occurs where there is no right of distress at all.  This is not applicable here.  Further, irregular distress occurs when a wrongful act is committed during the seizure.  This is also not applicable.  Then excessive distress occurs where more goods are impounded than are reasonably necessary to satisfy the debt.  In this case the amount of HK$8,235.20 was outstanding (on the Plaintiff’s calculation), plus the Chief Bailiff’s fees and charges, when execution took place on 16 June 2011.  As I have already pointed out, the amount of HK$4,154 was owing, plus the Chief Bailiff’s fees and charges, even on the Defendant’s case, when execution took place.

17.  For all of these reasons I dismiss the application of the Defendant to set aside the Warrant. 

[Discussion on costs]

18.  The Plaintiff should have its costs of and incidental to this application.  I have made a gross sum assessment of those costs of HK$2,500.