FOTOSKY INVESTMENT LTD v. HEALTH & BEAUTY INT'L HOLDINGS LTD

DCDT3713/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT NO. 3713 OF 2005

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D E C I S I O N

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1.  In this matter the plaintiff and defendant signed a tenancy agreement whereby the defendant would commence to occupy the plaintiff’s shop premises, known as Shop B090, at a monthly rental of $16,000 for 12 months, commencing 10 March 2005.  The defendant had paid over a deposit of $48,000 but this was not to be counted as rental moneys.  On 31 March 2005, the defendant commenced trading in the shop but had not paid any rent.  On 16 June 2005 the plaintiff applied for, and this court granted, a warrant of distress against the defendant for $16,516.13 being for rent due on 1 June 2005.  The defendant has now paid the sum into court but seeks to set aside the warrant.

2.  By affidavit from Mr Wu of the plaintiff company, the plaintiff says the defendant had been trading without difficulty ever since occupation.  The defendant, in reply, says it was trading under fear because of inability to secure public liability insurance and for its staff’s safety, and this in turn was because the shop was an illegal structure which should be a carpark but which the plaintiff had illegally transformed into shops.  It is not disputed that the Government had required the plaintiff to reinstate the premises into a carpark and the plaintiff had paid over to the Government an amount of $442,216 as security in order to delay reinstatement to about 25 September 2005 pending final resolution.  This shows that the plaintiff at least acknowledged a possibility that his arrangement to let might be a breach of land user, which is not strictly illegal use: see Best v Glenville (1961) P & CR 48, AG v Melhado Investment Ltd. Civil App 79/1982 and similar cases.  Even if the user was illegal qua the Government, there was nothing illegal qua the defendant.  For example, the plaintiff had not knowingly rented the shop to the defendant for the purpose of manufacturing dangerous drugs.

3.  Subject to the defendant’s argument on illegal land user (which I have already dealt with), the defendant fairly admits liability for rent.  This of course was because the defendant had traded in the shop.  Lawfulness of the tenancy agreement aside, equity operates against the defendant regarding the payment of rent.  How equity can assist the defendant, however, is that the defendant will be permitted to quit before the tenancy period expires.  I am told that, indeed, the defendant and other tenants had quit as from 1 August 2005.  I find that the defendant is indebted to the plaintiff for rental moneys from 31 March 2005 to 1 August 2005, i.e. two more months of rent in addition to what the plaintiff had sought under the warrant, which was $16,516.13, due on 1 June 2005.  Put another way, the defendant is indebted to the plaintiff in the sum of $16,516.13 plus $32,000, equals $48,516.13.

4.  As to how the above debt should be settled, I note that the plaintiff has in its possession $48,000 by way of a deposit.  In the circumstances it is immaterial whether the deposit was or was not usable as rental moneys.  In addition, the defendant has paid into court a sum of $16,516.13.  As the defendant owes the plaintiff $48,516.13, the plaintiff is entitled to use the deposit moneys to satisfy the debt in addition to being paid $516.13 out of the moneys now in court so that the whole of the debt will be satisfied.  The remainder of the moneys in court, namely $16,000, should be returned to the defendant.

5.  I therefore order that:

(1)	The plaintiff be entitled to retain the deposit moneys of $48,000 for its use;
(2)	The plaintiff be paid $516.13 out of the moneys now in court for the plaintiff’s use;
(3)	the remainder of the moneys now in court, namely $16,000, be returned to the defendant, and;
(4)	the warrant of distress to stand because I have no legal basis to set it aside, although it is now meaningless because the defendant has cleared out all its possessions.

6.  There will be costs to the plaintiff for today’s application.