CHUNG HO CO LTD v. NET POWER HOLDINGS LTD

DCDT 1283/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT CASE NO. 1283 OF 2012

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DECISION

Background

1. This is an interpleader summons taken out by the bailiffs pursuant to section 95 of the Landlord and Tenant (Consolidation) Ordinance, Cap.7 (“Ordinance”) after seizure of 56 items which are more particularly set out in the list of inventory (collectively the “Goods”) pursuant to a warrant of distress issued on 9 May 2012. 

2. At all material times, the Plaintiff is the landlord and the Defendant is the tenant of Shop 242, 2^nd Floor, World-Wide Plaza (World-Wide House), 19 Des Voeux Road Central, Hong Kong (“Premises”). It is the landlord’s allegation that the tenant owes $49,325, being arrears of rent for the period from 25 February 2012 to 24 April 2012 (2 months) at the rate of $24,000 per month and arrears of rates for the period from 1 January 2012 to 31 June 2012 in the total sum of $1,325.

3. According to the bailiff’s records, the warrant of distress was executed and the Goods seized on 15 May 2012. The Claimant, Mr Wong (“Wong”), now claims that he is the rightful and true owner of the Goods save and except items 7 (a fire extinguisher) and 10 (some photo albums) in the list of inventory.

4. The landlord does not agree to release the Goods or any part thereof to Wong. The bailiffs thus issued this interpleader summons which was heard before me.

5. The hearing of 30 May 2012 is the first hearing of the interpleader summons. The tenant did not show up. Both the landlord and Wong agreed to treat the hearing as the substantive trial of the claims on the affidavits filed. By consent, 2 bailiffs (Ms Kwok and Mr Chiu) who attended the execution of the warrant of distress on 15 May 2012 were called to give oral evidence. Wong himself also gave oral evidence. The landlord relied on its affidavit evidence only.

Wong’s Case

6. It is the evidence of Wong that it was his intention to run a photo shop subject to finding a suitable shop premises. Thus, he purchased the Goods in an auction on 22 November 2011 and loaned then temporarily to the tenant, as he was familiar with its director, Mr Chan.  He allowed the tenant to use the Goods free of charge but expected that the Goods would be taken back by him when he opened his photo shop in the future. He thus said that the Goods belonged to him (save and except items 7 and 10). 

7. Also attached to his statutory declaration is a list of inventory of 36 items and a letter issued to the bailiffs of the High Court requesting the bailiffs to release the said 36 items to one Wong King Leung (ie Wong himself). Both documents were said to be issued under HCA 1235/2011 (“the auction papers”).

Applicable Legal Principles

8. The applicable considerations are set out succinctly by HH Judge Marlene Ng in Wing Sau Industrial Company Limited v Tang Shing Fai [2009] 1 HKLRD 291:

“In considering the execution of the warrant, the initial question is whether the goods and chattels seized by the bailiff were in the apparent possession of the defendant. If the answer is no, the goods and chattels should be released to the rightful owner. If the answer is yes, the bailiff was entitled to seize the goods and chattels. But the court still has a discretion to return the goods and chattels to the rightful owner. Therefore a question also arises as to whether the claimant has shown himself to be the rightful owner.” (italics added)

9. As a matter of fact, section 87 of the Ordinance also provides that: 

“In pursuance of a warrant, a bailiff shall seize the movable 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 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 distress.” (italics added)

10. On the requirement of apparent possession, it is unnecessary for the bailiff to be apprised of all necessary evidence at the time of the seizure since the bailiff may enter the premises at any time (see Fort Crown Investments Ltd v Tam Virginia V trading as Star Light International Agency & Trading Services & Nepal International Group Limited, CACV 173 & 174/2005).  The bailiff is not required to go into detailed enquiry on the spot (See Lu Shang Chang v Kingroup Ltd [1995] 3 HKC 709).

11. In considering whether the seized goods should be returned to their rightful owner, all the attendant circumstances should be considered by the judge before coming to his decision and he can impose such terms as he thinks fit. The ownership of goods and chattels seized of itself would not cause the discretion to be exercised in favour of the claimant.  It is but a factor to be considered and must be weighed against the rights of the landlord:  Fuleekoo Co. Ltd. v Spiral Tubes International Ltd. [1986] HKC 269.

Apparent Possession

12. Wong does not dispute that the Goods seized were in the apparent possession of the tenant and the bailiff is hence entitled to seize the Goods.

13. However, if Wong was to dispute that, I would have to consider if the bailiff reasonably believed that the tenant was in apparent possession of the Goods in the circumstances of the case.

14. According to the evidence of the 2 bailiffs, Ms Kwok Man Wah and Mr Chiu Chi Wai (transliteration), they arrived at the Premises on 15 May 2012 together with a representative from the landlord. Upon arrival, they were greeted by a female staff of the tenant. It was noted by the bailiffs that the Premises were used as a photo shop for photo developing and related business.  The female staff showed them the business registration certificate which bore the name of the tenant.

15. At the same time, Mr Chiu was asked to take a telephone call made from a Mr Chan who claimed to the boss of the tenant. Mr Chan told him that all items thereat the Premises belonged to him but not the tenant (as a company limited). The said Mr Chan then faxed some auction documents dated 22 November 2011 for the perusal of Mr Chiu. The faxed documents showed that the goods and chattels at shop 102, 1^st Floor, World-Wide Plaza (World-Wide House), 19 Des Voeux Road Central, Hong Kong (not the Premises) were brought by one Wong King Leung (not Mr Chan) under auction in connection with HCA 1235/2011 (“HC Action”).  

16. Mr Chiu took the view that since the address and name in the auction paper did not match with what Mr Chan had said, the distraint was effected and the Goods were seized.

17. The inventory list compiled by the bailiffs shows (and Wong also agreed) that all the seized Goods were consistent with the business of a photo shop.  At the time of the seizure, the bailiff did not see Wong or his representative present at the Premises. 

18. Further, the Goods did not come within section 88 of the Ordinance which stipulates that a bailiff shall not seize:-

“(a) things in actual use, in the hands of a person at the time of seizure; or

(b) tools and implements not in use, where there is other movable property in or upon the house or premises sufficient to cover the amount of the rent and costs; or

(c) goods of a temporary guest at an inn; or

(d) goods of a lodger at a furnished lodging-house; or

(e) the debtor’s necessary wearing apparel; or

(f) goods in the custody of the law; or

(g) goods delivered to a person or firm exercising a public trade, to be carried, wrought, worked up, or managed in the way of the trade or employ of such person or firm.”

19. Under such circumstances, there was nothing according to the evidence of the bailiff’s eyes or from statements made to him that would and could possibly lead the bailiff to reasonably believe that the Goods at the Premises were not in the apparent possession of the tenant at the time of the seizure. I thus conclude that the Goods at the Premises were liable to seizure.

Rightful Owner

20. Having found that the Goods seized by the bailiff on 15 May 2012 were in the apparent possession of the tenant, I now turn to consider if Wong was the rightful owner and if so, whether this court should exercise the discretion to return the Goods to him.

21. The burden of proof is on Wong to show that he was the rightful owner.  And I am not persuaded that he has successfully discharged this burden of proof.

22. I should begin by saying that although Wong’s name is mentioned in the auction papers issued under the HC Action, this can at most show that Wong owned the items therein as at the date of the auction papers (ie 22 November 2011). It is not conclusive evidence that Wong was the rightful owner of the same as at the time of the execution of the warrant of distress.

23. Secondly, I note that the list of inventory under the HC Action does not totally tally with the list of inventory prepared by the bailiffs (admitted by Wong) in this action. There are altogether 36 items in the former, but a total of 56 items in the latter. Items such as (11) and (12) in the latter cannot be found in the former.

24. Thirdly, it is just a bare assertion of Wong that he loaned the Goods to the tenant. There was nothing in writing such as a simple agreement with an inventory list, an email or even an acknowledgement of receipt of the Goods.

25. Lastly, if Wong was the true owner of the Goods and he did really loan the Goods to the tenant for use, it remains strange and unexplainable that Mr Chan of the tenant told Mr Chiu, the bailiff, over the phone on 15 May 2012 that the Goods belonged to Mr Chan himself, instead of saying straight away that the Goods were Wong’s property.

26. As such, I conclude that it is more unlikely than that Wong is the true and rightful owner of the Goods.

27. I say further that even if I was wrong and Wong was the genuine owner of the Goods, it is clear that this is not a sufficient answer to the seizure of the goods under the warrant of distress. Ownership of the goods and chattels seized of itself would not cause the discretion of the court under section 96(2) of the Ordinance to be exercised in favor of the claimant.  It is only one of the factors to be considered by the court and to be weighed against the rights of the landlord under the distraint:  Fuleekoo Company Ltd (supra).

28. It cannot be disputed that the tenant of this case did owe the rent and rates as alleged by the landlord. The landlord acted promptly and took out the distraint proceedings without any undue delay. The Goods were in the apparent possession of the tenant at the time of the execution of the warrant of distress and were thus lawfully detained by the landlord. 

29. Further, the question of ownership is irrelevant to a landlord’s right of distress. In Xipho Development Co Ltd v CHM Holdings Co Ltd [1997] HKLRD 36, Litton VP (as he then was) said:

“In its origin, the common law rule heavily favoured the landlord. A landlord was entitled to seize and distrain for arrears of rent all goods and chattels found on the tenant’s premises. The question of ownership was, generally speaking, irrelevant to the right of distress. As Buckley LJ said in re Button, ex p Haviside [1907] 2 KB 180 at 189-90:

‘Where the goods of a stranger on the premises of a lessee are distrained for rent, and the stranger is obliged to pay the rent to redeem them, he may maintain assumpsit against the lessee: Exall v. Partidge (1799) 8TR 308.’ ”

30. After considering all the circumstances, I come to the conclusion that the evidence is in favour of the landlord’s right of distress. I thus decline to exercise my discretion in favour of Wong.  I would add that if (just assuming) Wong was the true and rightful of the Goods, his redress was to seek reimbursement of the value from the person from whom the rent was due, ie the tenant (see Xipho Development Co. Ltd. (supra)).

Conclusion

31. In the circumstances, Wong’s claim is dismissed.

32. Costs should follow event. I thus make a costs order nisi that Wong should pay the landlord’s costs of the application, to be taxed if not agreed, and the security guard fees incurred from 23 May 2012 to the date of this decision (31 May 2012) at the rate of $860 per day in the total sum of $7,740.

33. If no application is made to vary the costs order nisi within 14 days from the date of handing down of this decision, the said costs order nisi will be made absolute. The following directions will then apply for the purpose of my summary assessment of costs by paper:

(1)  The Plaintiff do within 7 days from the date of the costs order absolute lodge and serve statement of costs;

(2)  Wong do within 7 days thereafter lodge and serve summary of objections;