CHUNG KAM WING and Another v. NON NO FASHION GARMENT LTD.

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1998, No. 39
(Civil)

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J U D G M E N T

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Nazareth, V.-P.:

1. In January 1994 the plaintiff respondents commenced an action against the appellant seeking vacant possession of certain factory premises they had leased to the appellant. They also asked for arrears of rent, mesne profits and damages, and an injunction to restrain the use of those premises for purposes other than a factory. They obtained judgment by consent in October 1995 for vacant possession, arrears of rent and for damages and mesne profits to be assessed.

2. The following month, November 1996, the appellant took out a writ for a declaration that he was a tenant of the respondents on terms similar to those in fact averred by the respondents in their earlier action. In December 1996, the appellant obtained a stay of execution of the earlier consent judgment in the respondents' action.

3. It is not necessary for me to adumbrate all the steps these protracted proceedings went through. The next significant step was that upon the application of the respondents, on 3 December 1997, Master Chung ordered the appellant to make a further interim payment of HK$500,000, being the balance of mesne profits up to then.

The appellant appealed against that order. The appeal came before Sears J on 20 January 1998. He allowed it to a very minor extent by reducing the amount from $500,000 to $460,000. It is convenient to mention why he did so. He found a reference in the bank statements to a payment of $40,000 by the appellant to the respondents. It became clear that this was a payment that the appellant had made directly into the account of the respondents apparently without their knowledge. Sears J decided that that payment, which had been made as a rental deposit, could be appropriated by the respondents to the mesne profits and other outstanding amounts and he proceeded to set it off, reducing the total of $500,000 to $460,000.

4. The appellant was dissatisfied with that. He appeals to this Court asking for the entire order for interim payment to be set aside. He put in his grounds by means of an affidavit. He repeated those grounds before us today. He makes allegations of bias against the judge. He also complains that his language is Chinese and that his points may not have been appreciated by the judge and apparently also by his own counsel. It is not necessary to go into those and some similar matters which have nothing in them or did not operate against him. There is certainly nothing of bias in the way the judge approached the matter. In fact, he obviously devoted a great deal of time to examine the appellant's complaints and the evidence because he spotted that payment of $40,000 which he set off.

5. The first point that I find it necessary to address is the appellant's suggestion that the judge did not take into account a "fundamental principle", i.e. meaning that he should have required the respondents to prove that the appellant owed them some $4.9m in the first place, before he began to examine the question of what amount had been paid by the appellant. However, it is in fact clear from the early documentation that there was no dispute that a very large amount of money was owed by the plaintiff much of it arising from forbearance payments to the Government for the appellant's use of the premises for unauthorised purposes. In fact there was one Chinese document he signed as early as 1995 clearly acknowledging that he owed $2.142m. I can find nothing then in the point that the judge should have required the respondents to first establish the sum of $4.9m as due to them. It is clear that there was no dispute as to that, and that even the appellant approached the matter in the same way, accepting that the total amount was due, and attempting to show that he had paid all or most of it back.

6. The next point the appellant made was that he had paid everything from March to December 1996. What this omits is that the appellant was always in arrear. To say that he paid everything that accrued since March 1996 does not meet the point at all. The respondents were entitled to take the payments that they received and appropriate them to the earlier arrears, particularly those outstanding for the longest period.

7. A point that the appellant also makes is that the judge was at fault in not paying any attention to a most vital document. This document was in Chinese and it purports to have been signed by the landlord, the 1st plaintiff Chung Kam-wing. It says this:

"To KWAN SING KWONG of Non-No Fashion Garment Limited:

Due to the absence of my wife SHU MAN LEE in Hong Kong, I will fully on behalf of my wife SHU MAN LEE manage the tenancy matter and execution thereof, etc. in respect of B5, Ground Floor, Block B, Hong Kong Industrial Centre, 489-491 Castle Peak Road with Non-No Fashion Garment Limited and will also be responsible for all obligations.

I, CHUNG KAM WING declare that Non-No Fashion Garment Limited has paid all rental before March 1996. I will later without any condition return to KWAN SING KWONG all cheques issued by Non-No Fashion Garment Limited. I also agree to let the above property to Non-No Fashion Garment Limited from the 1st day of March 1996 to the 16th day of March 1998 with reduced monthly rental of $120,000.00. However, the rates, water, electricity, management fee be borne by Non-No Fashion Garment Limited."

The respondents, and Chung Kam-wing in particular, denied that he signed that document. It was in fact reported as a forgery to the police who arrested the appellant but later released him. He contends, therefore, that until the authenticity of this document is resolved, it somehow operates in his favour and that the interim payment ought not to be ordered. However, it can be seen from the document that even if it is genuine, all it does say is that that appellant paid the rental before March 1996. That is not disputed by the respondents. In the detailed account they produced, he is shown as having paid the amounts due before 1996. What he has to pay arose subsequently.

8. He complains also that the respondents did not issue him receipts. But at the same time he admits he made all the payments by cheque. Although he claims the banks have not been able to return his cheques, he has produced some of those from time to time. Besides he has all the bank statements. It is not clear, certainly to me, why between the cheques he received and the statements, he is not able to show that he has in fact made all the payments he claims. On the other hand, the accounts that the respondents have produced satisfied the master and the judge that there was a substantial deficiency; and certainly appear to be accurate accounts. If, as he says, he has paid all these amounts, he should be in a position to show that. I cannot say that anything he has said to us leads me to the conclusion that the judge was wrong in his decision.

9. Mr Horace Wong, for the respondents, has submitted that the bank statements that have been exhibited by the appellant do not support him. I have to accept that submission because having put it to the appellant and all he has been able to say is that he requires the receipts as even the couple of months he worked on the statements apparently did not lead to any conclusion or provide any evidence that he had made the payments he claims to have done.

10. In those circumstances, I see no reason for rejecting or interfering with the judge's conclusion.

11. Clearly the appeal fails, and I would dismiss this appeal.

Mortimer, V.-P.:

12. I agree and for the reasons given by the Vice President, I would also dismiss the appeal.

Rogers, J.A. :

13. I too agree.

14. I would only add this that I consider it rather unfortunate that this case has proceeded this far on what is essentially a very simple point as to whether payments have been made or not. I have to observe that it is surprising that arrears of rent and other payments relied have arisen without contemporaneous written complaints. To that extent, it seems to me that the Plaintiff has been the author of its own misfortune. Particularly, given the size of the rents which have been due and owing, one would have expected rather better contemporaneous accounts to have been kept.

Nazareth, V.-P.:

15. [After hearing the appellant and Mr Wong] The appeal is dismissed. The respondents are to have their costs of the appeal.