WHARF PROPERTIES LTD. v. XS FASHION LTD. t/a "XS mix & match"

DCDT No. 4727/2002
DCDT No. 4888/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT CASES NOS. 4727 and 4888 OF 2002

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Judgment

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1. This is an interpleader proceeding arising from the applicant bailiff's execution of two warrants issued in two distraint cases no. DCDT 4727 and DCDT 4888 of 2002. Two warrants were applied for by the Plaintiff Wharf Properties Ltd to distrain for arrears of rent for two different periods owed by the Defendant company XS Fashion Ltd. The Defendant company did not trade in its own name but in the name as "XS mix & match" at the premises located at Shops 2301-2303, 2nd Floor, Gateway I, Harbour City, Canton Road, Tsimshatsui, Kowloon. The Defendant held the premises as a tenant to the Plaintiff.

2. The two warrants were executed on 11th June, 2002 by the applicant bailiff. It was not in dispute that Mr. KWOK Hung Joe showed the bailiff one Business Registration Certificate with the name of the business as Mexwise Limited trading as "XS mix & match". The 2 sign boards-one outside and one inside the shop-both bore the name "XS mix & match" It was the Claimant's case that the Claimant was a tenant and franchisee of the Defendant running the Defendant's previous business there.

3. The bailiff Mr. CHAN Wai-kei gave evidence to the effect that he was only shown the Business Registration Certificate but not the Franchise Agreement and the Tenancy Agreement between the Claimant and the Defendant as suggested in the affirmation of Mr. KWOK. The bailiff said as he find the trading name "XS mix & match" to be the same as the one used by the Defendant and that all the goods in the premises bore labels of the same description, he was satisfied in his naked eyes that all goods and chattels on the premises were in the apparent possession of the defendant. The name of the Claimant appearing on the Business Registration Certificate did not change his mind for he did not know how closely related was the Claimant with the Defendant. He did asked Mr. KWOK to show him supplier's invoices but the latter had shown him none. I have no difficulty in accepting the truthfulness of the bailiff's evidence. Mr. NG for the Claimant also conceded that as he had not called Mr. KWOK to give evidence, he was prepared to rest his case on the fact that a Business Registration Certificate with the Claimant's name sufficed to put the bailiff on notice that the goods and chattels on the premises was not in the apparent possession of the Defendant.

4. Mr. YU Ching-hoi Joseph was called by the Claimant to give evidence. I do not find the evidence of Mr. YU to be helpful in resolving the issue of apparent possession before me for two reasons. Firstly, he was not on the premises on 11th June, 2002 and hence he could not tell me what the bailiff had looked at and what he had not. Secondly, I find Mr. YU not to be a witness of truth and I put no weight on his evidence at all. The information he deposed in his affirmation dated 19th July, 2002 was proved to be untrue by company search and business registry records attached to the 3rd Affirmation of Mr. SHAM Wing-keung dated 2nd August, 2002. For example, Mr. YU said in paragraph 7 of his affirmation that "I also confirm that the Claimant has no association with the said Defendant (except as franchisee and franchiser above-mentioned)". The company search record showed that in fact he had only become the director of the Claimant on 29th April, 2002 and yet he was appointed a director of the Defendant only 1 day afterwards. The two companies also shared the same registered address in Lai Chi Kok. Mr. YU's explanation in the witness box saying that he took up the appointment of directorship in the Defendant's company to monitor its debt repayment process for money owed to the Claimant was clearly a recent fabrication and not capable of believing at all. Also together with his affirmation, he had produced 40 invoices issued by Ka Ka Fashion-the Claimant's alleged China manufacturer-as Exhibit "YCH-4". I noted that those invoices issued for different batch of goods delivered in February up to May, 2002 were all in sequential serial numbers. Furthermore, I also noticed that some issuing dates shown on the invoices was one and a half months behind other invoices which bear subsequent serial numbers. This witness was even trying to make me believe that the amounts shown on the invoices were not the selling price or processing fee that the Claimant have to pay Ka Ka but was the shelf price of those items of goods when it was displayed on the premises in question! This witness' evidence is simply not capable to be believed.

5. So far as the law is concerned, Section 87 of the Landlord and Tenant (Consolidation) Ordinance Cap. 7 gives the bailiff's power to seize goods under these circumstances:

"In pursuance of a warrant, a bailiff shall seize the moveable 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 "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 the distress."

6. Lindsell J in Hong Kong Land Investment & Agency Company Limited v Athena Studio & Another [1932-1933] 26 HKLR 39 interpret "apparent possession" in the following manner:

"Nor do I find any great difficulty in the words 'apparent possession'. In my view, their effect is this: to make liable to distraint all goods on a tenant's premises which at the moment of executing the warrant the bailiff supposes on the evidence of his eyes to be in possession of the tenant. The only test in such a case as this is on entry did the bailiff believe the disputed goods to be in the tenant's possession and, if so, had he reasonable grounds for that belief."

7. In Xipho Development Company Ltd v CHM Holdings Company Ltd [1997] HKLRD 36, Litton JA in the Hong Kong Court of Appeal held that whether goods were in the apparent possession of the tenant could be judged by the evidence of the bailiff's eyes but that other cogent evidence could also come into play to displace the prima facie view that the goods seized were in the tenant's apparent possession.

8. In Jetwise Investment Limited v Net Power Limited and another DCDT 7570 of 2001, His Honour Judge Carlson, after having gone through the above authorities, held that the production by the claimant to the bailiff in that case a copy of the Government Gazette showing the transfer of business of the defendant to the claimant and the Claimant's business registration certificate giving the address of the premises in question was not sufficient in over turning the bailiff's decision of the fact that the goods on the premises were in the apparent possession of the defendant in that case and thus liable to distress.

9. In the case before me, the sign board and the labels on the clothes all bore the trade name used by the defendant. There was also a non-alienation clause in the tenancy agreement between the Plaintiff and Defendant in this case. The Plaintiff had also received the monthly return of sales figures from the defendant regularly up to 12 June, 2002 (see second affirmation of SHAM Wing-keung). Like His Honour Judge Carlson, I also held that the mere production of the Business Registration Certificate was not cogent evidence that could displace the prima facie evidence under the naked eyes of the bailiff suggesting that the premises as well as the goods and chattels on the same were in the apparent possession of the Defendant.

10. In the end, I hold that the bailiff had come to the right conclusion in law. The distress warrants were executed rightfully. As a result, it is ordered that the Plaintiff may proceed with the execution process. The Claimant's application to set aside the warrants failed and is hereby dismissed. Finally, I see no good reason to depart from the usual principle in that cost should follow the events in this case, I order that the Claimant shall pay the Plaintiff the cost of and occasioned by the interpleader summons.