SHUI ON CENTRE CO LTD v. BPB (HK) LTD

DCDT 638/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT CASE NO. 638 OF 2006

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Coram: Deputy District Judge S. T. Poon in Chambers

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DECISION

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1. This is an application for leave to appeal on my decision made on 27^th April 2006, inter alia, refusing to set aside a warrant of distress against the Defendant (“my decision”).

2. The Defendant is the tenant of a commercial premises owned by the Plaintiff.  There were some disputes between the parties relating to the management fees of the premises and the Defendant ceased to pay rent and took out an action against the Plaintiff seeking refund of management fees.  In that action the Plaintiff counterclaimed for arrears of rent and vacant possession by way of forfeiture.

3. The relief for forfeiture was later on abandoned after my decision.

4. Before the determination of the above dispute the Plaintiff applied ex-parte under the Landlord and Tenant (Consolidation) Ordinance Cap. 7 for a warrant of distress for arrears of rent in a period after the Plaintiff had claimed forfeiture.

5. The crux of the Defendant’s proposed grounds of appeal is that by claiming forfeiture against the Defendant, the Plaintiff has elected to determine the lease or the lease was determined.  It follows that the Plaintiff has no rights or locus standi (as put by Miss Ho, counsel for the Defendant) to apply for a warrant of distress.  

6. Unfortunately, this argument has not been raised by the solicitors representing the Defendant at the hearing before me resulting in my decision.

7. For the purpose of the present application I am not to determine whether the Defendant will succeed on appeal but whether it has a realistic prospect of succeeding before the Court of Appeal.  Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538

8. It is settled law that by service of a writ claiming forfeiture against the tenant the landlord has elected to determine the lease.  Wong Wan Leung & others v. Secretary for Transport [2001] 1 HKLRD 427.  However, the legal authorities did not go so far as to saying that the lease is terminated upon the Landlord’s issuance and service of the writ. See p.436 per Litton LPJ citing Ivory Gate Ltd v Spetale [1998] 2 EGLR 43

9. Therefore, it does not necessarily follow that the landlord has no locus standi to exercise his rights under the lease after service of a writ seeking forfeiture.

10. Mr. Sham, counsel for the Plaintiff, was right in submitting that there is no direct authority before me saying that the landlord has no right to apply for a warrant of distress after service of a writ claiming forfeiture. (Perhaps except in Cayman Company Ltd v Violet Books Company Ltd DCDT 5588/2005 where Deputy District Judge Lam said that “If the Warrant had been issued after the date of the Writ, the Warrant would be unlawful” without explaining the reasons behind very much in detail)

11. However, Miss Ho submitted that the state of the lease is at least uncertain before the court finally determines whether there is a valid ground for forfeiture and hence, the Plaintiff was unable to satisfy the court that he was entitled to apply for a warrant of distress at the time when the ex-parte application was made.

12. Miss Ho’s submission is not without force.  In considering whether to grant a warrant of distress, the court has to be satisfied that there are indeed arrears of rent and it is for the landlord to prove to the court that there are.  If the state of the lease after the claim for forfeiture were uncertain, it would be at least questionable whether the landlord can satisfactorily prove to the court that there are arrears of rent, given the fact that the landlord himself maintained a different position in the action where he elected to terminate the lease.

13. Mr. Sham argued that the abandonment of the relief for forfeiture related the parties’ position back and made it certain that the Plaintiff had the right to receive rent at the material times.

14. With respect, I am of the view that the abandonment of the forfeiture relief is irrelevant for the purpose of the present hearing.  The application before me was to set aside the warrant of distress made by Deputy District Judge Casewell.  What I should consider in making my decision was whether the warrant shall be set aside on the day of the hearing, and it is against that decision that the Defendant is now seeking leave to appeal.  What the Court of Appeal would consider is whether, based on the available materials and facts before me on the day of the hearing, the warrant should be set aside.  A subsequent act of the Plaintiff, albeit changed the factual situation from then, is not a consideration.

15. I am satisfied that the Defendant has a realistic prospect of success in the appeal and leave to appeal is granted.

16. Costs of this application be in the cause of the appeal, with certificate of counsel.

DCDT638/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT NO. 638 OF 2006

Coram: Deputy District Judge S T Poon in Chambers (Open to the public)

J U D G M E N T

1.  The plaintiff is the landlord and the defendant is the tenant.  The plaintiff applied ex parte under the Landlord and Tenant Ordinance for a distraint order.

2.  On the day of execution, the defendant paid into court a sum of money equals the amount of the alleged outstanding rent to prevent the bailiff from executing a distraint order.  The sum of money was accepted by the court, and as a result, the bailiff stopped executing the order.  No inventory of the property was made.

3.  The defendant now applies to discharge the distraint order, seeking an injunction to restrain the account department of the District Court from releasing the money to the plaintiff, an injunction to restrain the plaintiff from applying for another distraint order and consolidation of these distraint proceedings with another District Court action between the parties.

4.  One of the grounds relied on by the defendant is that the plaintiff has committed material non-disclosure when making the ex parte application for distraint order.  Mr Tam, who represented the defendant, drew my attention to an authority pertaining to the duty of full and frank disclosure by application of a Mareva injunction or Anton Piller order.

5.  One of the disclosures concerned is the existence of another District Court action in relation to the parties’ dispute on management fees and rent.  The outstanding fees concerned in that action were between the period of April 2005 to October 2005 whereas the outstanding rent concerned for the present application was between November 2005 and January 2006.

6.  It is not disputed by Mr Tam that even if the defendant were to succeed in the District Court action, the defendant still owes the plaintiff at least around $128,000 and the total alleged outstanding rent for the present distraint application is $132,575.

7.  I consider this ground lack of merit in that the present outstanding rent is unrelated to the money in dispute in the District Court action.  Although there is a relief sought in the District Court action to restrain the plaintiff from taking out distress application, there is no interim injunction sought by the defendant in this regard.  There is nothing barring the plaintiff from taking out the application.

8.  It would be better if the plaintiff informed the court the whole background when making the application, but the non-disclosure is not material enough to render it dischargeable.  The standard of disclosure to be applied for a distress application shall not be as high as that of an Anton Piller order or a Mareva injunction because there is a prescribed mode of application for discharge for a distress order under the Landlord and Tenant Ordinance, which is within 5 days of execution and before the property being sold.

9.  Another alleged non-disclosure is that there is a change of shareholding of the defendant; and Messrs Leung & Wan, the solicitors occupying the subject property, was merely a licensee without having ownership of the goods involved.  I consider this fact immaterial in that it is admitted that the goods subject to the present distress order were owned by the defendant. 

10.  Taking into account also the fact that there is no dispute as to the existence of the outstanding rent in an amount close to the alleged one, I consider that the distress order ought not to be discharged.

11.  The sum paid in by the defendant was allegedly on condition that it should not be paid out to the plaintiff.  I agree with Mr Sham, counsel for the plaintiff, that this does not change the nature of the payment-in.  The payment-in is for the purpose of preventing the bailiff from executing the distress order and the only way for such payment to serve this purpose is to have the money paid to satisfy the outstanding rent.  The defendant can only stop the court from paying out if the defendant can satisfy the court that the distress order ought to be discharged, which the defendant has now failed.

12.  Paragraph 3 of the summons is misconceived.  Mr Tam even cannot answer to this court what the defendant’s cause of action is and cannot explain why no interim injunction has been applied for in the main action.

13.  In the circumstances, the defendant’s summons be dismissed with costs to the plaintiff, to be taxed if not agreed, with certificate of counsel.

Mr Walker Sham, instructed by Vincent T K Cheung, Yap & Co., for the Plaintiff

Mr Tam Kam-tung, of Messrs Leung & Wan, for the Defendant

Appeal allowed: see CACV246/2006 dated 13 October 2006