Lui Choy v. Ho Siu Han

HCA006727/1983

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Coram: Hon. Liu J.

Dates of Hearing: 10 - 14, 18 - 21 and 25 June 1985

Date of Delivery of Judgment: 4 July 1985

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JUDGMENT

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1. By a Property Leasing Agreement in the Chinese language apparently signed on the 9th June 1981, the suit premises described therein as the Front Portion of the 7th floor of the Wah Mow Factory Building were let to Mr. CHAN Chun-ming (hereinafter referred to as "Defendant Chan") for a term of three years at the rental of $21,500 per month, exclusive of rates and management fees. A sum of $30,000 was paid as rental deposit and a further sum of $20,000 was paid for the taking over of the office partition. This Chinese Property Leasing Agreement was thereafter superseded by a formal Tenancy Agreement dated the 10th August 1981, whereby the Plaintiff let to Defendant Chan the same Front Portion i.e. Flats C and D of Wah Mow Factory Building called "the said premises" which were "more particularly delineated on the plan annexed (thereto) and thereon hatched red TOGETHER with the right in common with the Landlord and the tenants of the other shops and flats in the said building and all others having the like right to use for the purposes only of access to and egress from the said premises the entrance hall staircases landings and lifts in the said building and such passages (therein) as (were) not included in any of the other flats". The essential terms of letting remained the same except for the rental deposit which was increased to a three months' deposit of $64,500. There was no plan attached to this formal Tenancy Agreement. It would appear from the above cited operative clause that the lifts did not form part of the premises let.

2. The Plaintiff was and has throughout been the owner of these two flats and another six in the same factory building. As for these premises let to Defendant Chan, the Plaintiff had himself been using them for his branch factory until two/three months before the same were let to Defendant Chan.

3. Another personality in these proceedings is Defendant Chan's sister-in-law by the name of HO Siu-han (hereinafter called "Defendant Ho"). Defendant Chan operated a factory in the suit premises himself under the name of "Hung Yee Fat Garment Factory".

4. By a Transfer Note dated the 30th April 1982, Defendant Chan transferred "the tenancy of (his) sole proprietorship business Hung Yee Fat Garment Factory, situate at (the suit premises) together with the production tools, raw materials in stock, products and all the decoration facilities upon the factory" to Defendant Ho for $470,000. The factory name on the signboards was changed in May 1982. The insurance company for the factory was duly notified of the transfer and change of name. Defendant Ho had herself registered as sole proprietress of the factory business as from the 1st May 1982. An issue in these proceedings was whether the Plaintiff had consented to or acquiesced in such transfer.

5. Rental was paid almost invariably by postdated cheques, and at the time of such transfer, the rental had fallen into arrear. At the end of the day, no rent had been paid since the 10th November 1982, and management fees at $1,200 per month were outstanding since January 1983.

6. On the 6th February 1983, a fire broke out in the factory. Defendant Chan was then in China, delivering materials for finishing works. In the evening just before the fire, the factory had been in full swing under the supervision of Defendant Ho, who locked up for the day. After the fire, Defendant Chan returned to the factory at about 6 p.m. On the 6th and managed to contact Defendant Ho an hour later around 7 p.m. In the police enquiry as to the cause of the fire, arson was suspected, but no one has ever been charged.

7. Claims were filed with the insurance company on the 31st of March 1983. The insurance company assessed the value of articles affected by the fire to be $799,286 but allowed fire loss only to the extend of $705,371.40. From these calculations of the insurance company, there would appear to be left in the damaged articles a salvage value of $93,914.60. On the 7th of July 1983, by Exhibit "D4" Defendant Ho, in the name of her factory, "Prosperity Garment Factory" accepted the assessment of the insurance company.

8. The Plaintiff sent in his decorator on the 17th February 1983, and the quotation, Exhibit "P4(1)", was submitted by the decorator on the 27th February 1983. The removal of the damaged articles in the factory did not commence until the end of July or early August, and the suit premises were reinstated in more than a month thereafter.

9. There are two separate actions, one against Defendant Chan, another against Defendant Ho. These two actions were heard together and evidence was given once for both. The Court was not given any explanation, but that would appear to be the consensus.

10. As against Defendant Chan, the Plaintiff claims arrears of rent and management fees, electricity charges and mesne profits. In addition, the Plaintiff sues Defendant Chan under the clause for repair, for his reinstatement expenses. In the other action, Defendant Ho is sued for mesne profits as a trespasser for a period from the Plaintiff's alleged re-entry on the 17th of February 1983 up to commencement of repair and reinstatement works at the end of July 1983. Alternatively, the Plaintiff seeks to hold Defendant Ho also responsible for the same damages claimed from Defendant Chan if Defendant Ho could set up a lawful sub-tenancy or transfer. In both actions, the Plaintiff would allow credit for the rental deposit in the sum of $64,500. There is no Counterclaim by Defendant Chan in the action against him. Defendant Ho counterclaims for the salvage value of the damaged articles in the factory in the sum of $93,914.60 as assessed by the insurance company and loss of profit in six of her pending contracts.

11. In the course of these proceedings and Counsel's final submissions, concessions were made and points were abandoned, such as Defendant Ho' s claim of loss of profits in these six pending contracts, the possible frustration of the Tenancy Agreement, the entitlement to claim management fee as part of mesne profits, the relevance of insurance compensation etc. I do not propose to list out all the concessions and abandoned points. They are well recorded in the note of proceedings.

12. The defence, as succinctly stated by Mr. Cheung, Counsel for Defendant Chan and Defendant Ho, is as follows : As regards Defendant Chan, he claims to have lawfully transferred the tenancy of the factory to Defendant Ho prior to the fire and therefore he should not have been sued. As for Defendant Ho, in her alleged capacity of transferee or sub-tenant of the factory, she must pay all arrears subject to deduction of the rental deposit. It was conceded that she would be liable for one month's mesne profits after the fire. No defence was advanced for her tenant's obligation to repair. She is apparently liable also for the electricity charges. Defendant Ho claims, by way of set off and Counterclaim, the salvage value as assessed by the insurance company.

13. The stance taken by Defendant Chan would allow him no Counterclaim, but Mr. Cheung invited me to adopt the Counterclaim of Defendant Ho as Defendant Chan's counterclaim if the Court should find the transfer unlawful without the plaintiffs consent or acquiescence.

14. The writ against Defendant Chan was issued on the 29th March 1983 and that against Defendant Ho on the 31st May 1983. The latter was served in June 1983 on Defendant Ho, and the former was served subsequently in July 1983 on Defendant Chan.

15. I pass then to the events which led to the transfer in April 1981. According to Defendant Chan, he made false entries or declarations in his export licence application. At the instigation of his customer, Defendant Chan shipped unfinished goods instead of finished products under his export licence so applied for. His misdeed was subsequently unearthed by DC & I, and his quota entitlement as well as quotas in hand were forfeited. Defendant Chan had been in the export manufacturing business for some twenty years. Without quotas and quota entitlement, it was exceedingly difficult to continue with his factory in the suit premises. He allegedly turned his attention to factory finishing work in Mainland China. As for his factory "Hung Yee Fat" in the suit premises, he had it formally transferred to Defendant Ho by the said Transfer Note dated the 30th April 1982 for $470,000. It was said by Defendant Ho that the transfer was a half sale and half gift. Subsequent to the transfer, the insurance policy of the factory was endorsed to cover Defendant Ho who accordingly applied for business registration, Exhibit "D1", some time in May 1982 for a business under the name of "Prosperity Garment Factory" as from the 1st of May 1982. The Chinese name of the factory was changed from "Hung Yee Fat" to "Hung Yu Fat" by the alteration of the middle Chinese character from "Yee" to "Yu". New signboards were also put up.

16. Defendant Ho's sister married Defendant Chan in 1975. Defendant Ho herself started working for Defendant Chan in 1973 for $850 a month. Defendant Ho had then an evening job in a wan-tun shop for $480 a month. In 1976, Defendant Ho was asked by Defendant Chan to and did thereafter assist him in running his factory, and Defendant Ho had since that year worked full time in the factory. In 1976 her monthly salary was $100/$200 over $1,500, and in April 1982 her salary was $2,000 a month. Defendant Ho was provided with meals in the factory and worked practically daily throughout the year.

17. Defendant Ho accounted for her savings and its sources: she shared frugal living accommodation, and she would incur allegedly no more than $300/$400 a month for travelling expenses. She contributed to three chit funds netting $1,000 odd each a year. She had once acquired 2,000 "Mei Hon" shares then going public and made a profit of $8,000. She contributed 1/3 of the investment capital in the speculative purchase of two flats, one in Wai Shing Commercial Building, and another in Kwan Yick Building, Phase 2. From the first investiment, she took a clean profit of $60,000. From the second speculation, she withdrew $30,000 prematurely, and when the property was sold at the end of 1983, presumably she had the remainder of her share which she did not specify. Since 1976 she had chosen to leave the main bulk of her wages with Defendant Chan. Up to the time of the transfer in April 1982, she claimed to have accumulated some $80,000 wages with Defendant Chan, which together with interest thereon at $20,000 amounted to $100,000. She also claimed to have lent money to Defendant Chan to pay wages and other expenses, such loans running up to another $100,000 by the time of the transfer in April 1982. She had little difficulty in borrowing $50,000 from her brother and another $50,000 from her uncle, all in cash. She maintained therefore that of this $470,000 half sale half gift transfer in 1982, she paid at the time $300,000, i.e. $100,000 with Defendant Chan, $100,000 unpaid loans and $100,000 borrowed fund. She explained that she worked out the allegedly uncomplicated accounts in April 1982 from her memory, but no sooner had she made this allegation than she admitted that she had a poor memory and could not even remember when she drew the last month's rent cheque.

18. For the transfer, she had not even checked in detail the stock of raw materials, finished and unfinished products and pending orders. She had not examined the factory accounts. She had not sought information of Defendant Chan's tax returns. She readily accepted the oral assurance from Defendant Chan that he would only receive orders for her Prosperity Garment Factory and not for his own factory or the benefit of his other connections in Mainland China. She had not enquired of Defendant Chan about arrears. She made no demand for all arrears to be cleared and outstanding debts paid. She was adamant that Defendant Chan was himself to be responsible for all, the existing liabilities. There was no discussion as to whether the Tenancy Agreement permitted a transfer. In addition to this half sale half gift transfer, there was no arrangement made for the substantial rental deposit. The $470,000 price did not take into account the rental deposit as Defendant Ho paid 30,000 odd dollars towards that forfeited rental deposit only last month. In this direction, it seems strange that of the $470,000, a balance of $170,000 was allegedly paid only some 3 years later in the last month by way of her payment to the Wah Mow Construction Company for the purchase of premises on behalf of Defendant Chan in the sum of $200,300 odd. It was claimed that out of this late $200,300 odd, $170,000 was for payment of the outstanding balance and the remaining $30,000 odd was to compensate Defendant Chan in part for his loss of the rental deposit in the sum of $64,500. There was no mention of interest.

19. The deposit of most of her wages since 1976, the huge loans to Defendant Chan for payment of wages and other expenses and the cash loans from her relatives, for the transfer in April 1982 all sounded unreal. Defendant Ho was incredibly generous as was Defendant Chan in this half sale and half gift transfer. The unsettled questions of the $170,000 balance, the enormous rental deposit and whatever were Defendant Chan's liabilities made the evidence from these defendants all the more suspect.

20. Furthermore, Defendant Ho was admittedly unknown in the trade at the time of transfer. I am not satisfied that the alleged consideration did pass. No doubt, some formalities had been gone through with a view to keeping quota facilities. There was no evidence of legal advice or assistance having been sought in the intended transfer of a 6,000 sq. ft. factory. No or no proper notices of the transfer were given or published under the Transfer of Business (Protection of Creditors) Ordinance, 1980. No copy of the Transfer Note dated the 30th April 1982 was ever sent to the Plaintiff.

21. On the surface, there was a transfer. The formalities adopted were designed to give an appearance of a transfer which was necessary for acquiring quota entitlement in the name of a new management. But it would appear that effective control of the factory never left Defendant Chan. He was said to be down-graded to a working staff under a little known former employee loyally pledging to serve exclusively the new establishment. Whilst Defendant Chan claimed to have been paid a bonus of $4,500 with $500 travelling expenses in 1983, Defendant Ho described this payment as his annual wages. If the employer/employee relationship had been genuine, it would have been unlikely that a different description would be assigned by each to that payment. Defendant Chan continued to pay rent with his own cheques after the transfer. Defendant Chan constantly referred to the factory as his business. He was visibly upset in recapitulating its damage by the fire. The transfer bore all the indicia of a mere front for securing quota entitlement. However, what is at issue here is whether such transfer was known to and accepted or tolerated by the plaintiff. As for that, both Defendants relied heavily on the new signboards and the change of name as well as alleged meetings and conversations with the Plaintiff and his secretary, Miss Chan. As I have said earlier, the simplest precaution for avoiding controversy was to give the Plaintiff notice or sent him a copy of the Transfer Note or, publish a newspapers notification. None of these was done, and the Tenancy Agreement prohibited a transfer or subletting.

22. I will deal with the new signboards first. There was no suggestion that the new signboards were differently hung. It was also not suggested that the new signboards had a different appearance in shape or construction or was differently designed or arranged in its writing or Chinese calligraphy. The size of the new signboards was more or less the same. The previous dimensions were given as approximately 18 inches x 72 inches and the new signboards were about 20 inches x 70 inches. Defendant Ho was driven to concede that the two names for the factory "Hung Yee Fat" and "Hung Yu Fat" sounded "a little similar" although she was adamant that the new name "Hung Yu Fat" would not cause confusion, would not give the appearance of the same company and was selected merely as a matter of a "near coincidence". The English name was totally different. The new name "Hung Yu Fat" has reinenforced my view that the change of front, though somewhat formal, was a device attempted in the hope of having the best of both worlds, on the one hand securing quota entitlement and on the other avoiding detection of the nominal but unlawful transfer.

23. Even in his narration of a conversation with the Plaintiff, which, according to the Plaintiff, was never had, Defendant Chan could not sever himself from the factory business. After the change of signboard, the Plaintiff was said to have telephoned Defendant Chan. I shall have to return to this telephone conversation later, but according to Defendant Chan, the Plaintiff said to him :

"Ah Chan, your factory had the signboard changed and tenancy transferred, which is without my consent, which is contrary to our tenancy agreement. Do you know?"

Defendant Chan gave the Court his reply as follows :

"Mr. Lui, my tenancy agreement has not yet expired."

The Plaintiff allegedly further said :

"Even if it is not expired, the tenancy should not be transferred."

Defendant Chan allegedly continued pleading with the Plaintiff :

"I am still the same - doing business there."

The Plaintiff allegedly concluded :

"Alright, forget about it, but in future you must be punctual in paying rent. If you are not punctual in future, I would do what should be done."

24. Coming back to the new signboards which I accept as put up, their presence and contents would not, by themselves, be of assistance to the Defendants.

25. I turn next to the alleged meetings and conversations with the Plaintiff. According to Defendant Chan, soon after the appearance of the new signboards, the Plaintiff's rent collecting staff urged him to discuss it with the Plaintiff. It was alleged that soon after, Miss Chan, the Plaintiff's secretary telephoned Defendant Chan and enquired whether he had reported the transfer to the Plaintiff. In reply, Defendant Chan allegedly said that he had intended to so inform the Plaintiff but he simply could not find time. He requested Miss Chan to pass the message to the Plaintiff; to which Miss Chan allegedly said that she would but would not take the responsibility as to whether or not the Plaintiff would accept the transfer. The Plaintiff and his secretary denied all this. There would appear to be no particularly sound reason why those new signboards would alarm the plaintiff's staff who were not necessarily the same man each time for collecting rent. Then came the allegation from Defendant Ho who told the Court that Miss Chan telephoned her two odd months after the transfer, pressing for payment of rent and that she thereupon informed her that she could talk to herself about rental matters because she was the transferee. Another allegation also came from Defendant Ho : She recalled how after the transfer in about October/November 1982, the Plaintiff was seen coming out of the sewing-machine room to the Receipt and Despatch Counter and that upon seeing her and being asked by her if he came for any business, the Plaintiff remarked :

"Nothing, merely to visit the factory. Now it is transferred to you, quite nice, quite a lot of work."

Although the Plaintiff was asked whether or not between October 81 to February 1983 he had visited the suit premises, to which question the Plaintiff answered in the negative, the Plaintiff was never confronted specifically with this implicating conversation. Then we have the allegation from Defendant Chan that in October 82, the Plaintiff rang him up for rent and had the conversation which I have earlier quoted. Defendant Ho also claimed that after the fire, when Miss Chan was seeking to find out what she, Defendant Ho "contemplated to do", she assured her that she, Defendant Ho would pay rent and redecorate as soon as the police investigation had finished. Lastly, Defendant Chan told the Court that about ten odd days after the fire but before the insurance Loss Adjusters entered the suit premises, he met the Plaintiff by an appointment made through Miss Chan. Defendant Chan developed more details in cross-examination. Both in examination in chief and in cross-examination, although in his narrative Defendant Chan gave the impression that he himself alone was at this meeting, saying that "he arrived" there and "he left or returned home" after the meeting, he told the Court how the Plaintiff asked Defendant Ho as to her intention about the factory. It is inconceivable that having so committed herself in a substantial purchase Defendant Ho could have been content to have Defendant Chan seeing the Plaintiff without her. After all, she claimed to have earlier impressed upon Miss Chan that she was the one to speak to. Defendant Chan was also at pains to stress the point that matters including the increase of insurance premium were in the hands of Defendant Ho as the person in charge. Therefore, either Defendant Chan lied about the question asked personally of Defendant Ho at this meeting or he made a mistake in testifying that the Plaintiff spoke to Defendant Ho whilst what he really meant was that the plaintiff was speaking to he himself about the intention of Defendant Ho. Defendant Ho maintained that she was not present at such a meeting after the fire, but when she was confronted with this version of Defendant Chan and asked which version was correct, her first reaction was startling :

"What do you mean I was not there?"

She soon recovered her composure and reasserted her absence. As a witness, Defendant Ho left me with an impression that she was ready to improvise. Wherever the truth lies, for the meeting and the presence or absence of Defendant Ho, Defendant Chan was certainly very keen in holding Defendant Ho out as being the person in control.

26. I should say a further word about this alleged telephone call from the Plaintiff in October 1982. According to the Defendants, the Plaintiff had already known or should have known about the alleged transfer, hence it was put to the Plaintiff in cross-examination that in October 1982 he telephoned Defendant Chan saying that he, the Plaintiff, had already done him a favour by not objecting to the transfer of tenancy and that he, Defendant Chan should pay rent punctually. However, when Defendant Chan came to give his evidence of that conversation, as can be seen from the evidence I have quoted, the Plaintiff was allegedly still raising an objection to the transfer and only became lenient and "very straightforward" at the close of the conversation.

27. In addition, it was suggested to the Plaintiff that as he was Chairman of the Incorporated Owners of the factory building, he must have frequented the building and the suit premises from time to time. The Plaintiff testified that he left everything to his secretary, Miss Chan and his solicitors. Mr. Lui struck me as not making enough effort to offer reasonable assistance as a witness in his answers to Counsel. However, having observed him in the witness stand, I find that not to be evasiveness but a mixture of arrogance and scorn for the allegations. I accept that in these matters before the Court, there was a high degree of delegation.

28. Coming back to the plaintiff's personal visits : Defendant Ho told the Court that the Plaintiff visited the suit premises about a month after the factory's initial operation. The Plaintiff himself had no recollection of it, but he categorically denied that he ever visited the suit premises between October 81 to February 83. Miss Chan explained that when the plaintiff had a branch factory in the suit premises, meetings of the owners invariably took place in the office of the Plaintiff or the office of the vice-Chairman. The office of the Plaintiff was then in Tai Yau Street, somewhere near the suit premises. Miss Chan further told the Court that after the Plaintiff's branch factory was moved, owners' meetings took place in the new office of the Plaintiff in Yau Tong Bay.

29. Both the Plaintiff and his secretary, Miss Chan disclaimed any knowledge of the transfer. Miss Chan denied that information of the transfer was ever transmitted to her by the rent collecting staff and that she telephoned Defendant Chan making enquiry about the transfer and accepting his request to convey the message to the Plaintiff. Miss Chan told the Court that the factory had invariably been late in the payment of rent and that whenever she contacted Defendant Chan enquiring as to when the Plaintiff's staff could come to fetch the rent cheque, Defendant Chan would ask for indulgences under the pretext that the consignment had not been shipped. Rent cheques, when ready, were collected by whichever of the Plaintiff's staff passing through the neighbourhood. At times, Defendant Chan was not available, and Defendant Ho would tell Miss Chan that Defendant Chan was in China.

30. After the fire, the Defendant sent a Chinese letter dated the 7th February to Defendant Chan, Exhibit "P2", and later the Plaintiff's solicitors sent a letter to Defendant Chan dated the 17th February (page 45 of Agreed Bundle B). Both letters were returned undelivered. These letters were sent to the address of Defendant Chan as given in the Tenancy Agreement of the suit premises. Defendant Chan explained that as his address in Chi Lok Gardens was on the 13th floor and not the 12th as given in the Tenancy Agreement, hence both letters did not reach him. From the letter dated the 17th February 1983, it can be seen that by that date the Plaintiff had decided to re-enter. Rental of the suit premises having been in arrear for over three months since the 10th of November 1982, the Plaintiff did re-enter by resuming possession of and locking up the suit premises on that very day. According to Miss Chan, one Mr. Man of the decoration firm, Hop Hing Ho, was sent to survey the premises for giving a quotation for repairs and reinstatement. Mr. Man attended the suit premises on the 17th of February. At this trial, he confirmed the condition of the suit premises as that depicted in the photographs produced. After his survey Mr. Man caused to be boarded up the door to the suit premises, and he gave the Plaintiff a quotation on the 27th of February 1983, Exhibit "P4(1)".

31. According to Miss Chan, on the 16th or the 17th of February, with a telephone number from the Management Office, she succeeded in contacting Defendant Ho. Miss Chan told the Court that Defendant Ho gave her the residential telephone number of Defendant Chan and that upon being asked whether the suit premises would be surrendered, Defendant Ho left it in no doubt that she could not make any decision. Defendant Ho claimed to be unsure of Defendant Chan's position, and she urged Miss Chan to discuss the matter directly with Defendant Chan who was then said to be still in China. Miss Chan told the Court that she never requested Defendant Ho to meet the Plaintiff. Miss Chan further categorically denied that Defendant Ho ever suggested that she would try to reinstate the factory after police investigation; nor did she claim to be a tenant or have any proprietary interest. According to Miss Chan, she was still unable to get in touch with Defendant Chan with his residential number.

32. As I have said, the Plaintiff denied having met Defendant Chan after the fire or having any conversation with him over the telephone. The Plaintiff further denied having been to the suit premises between October 81 to February 83, and he had no opportunity to comment on the alleged chance meeting and conversation near the Receipt and Despatch Counter with Defendant Ho as that was not put to him.

33. As a matter of fact, Miss Chan maintained that she was unaware of even the existence of "Prosperity Garment Factory" until the 17th February 1983 when she sent someone to go with Mr. Man to the suit premises after the fire to take photographs and check the mail box. It was reported back to her that there was two letters in the factory letter-box, one addressed to the Prosperity Garment Factory and the other one from Messrs. Deacons. It was only upon a search of the business registration of Prosperity Garment Factory that the Plaintiff's solicitors carne to discover that it was recorded as having been operating in the suit premises. Miss Chan explained that upon being asked by the Police if she had known sore proprietor by the name of Miss Ho, she had the Police immediately corrected that the proprietor was Defendant Chan.

34. The defendants' case was built on much strained assertions, and the alleged consent or acquiescence does not go hand-in-glove with the background as known. Defendant Chan was at odds with D.C. and I., the factory was in arrear and the Tenancy Agreement prohibited any transfer. Defendant Chan could not have been very keen in arousing his landlord who seemed to be a difficult person to be trifled with. The Plaintiff claimed that he would have made various demands for a transfer. I have little misgivings that he is a shrew businessman of that disposition I prefer the evidence of the Plaintiff and Miss Chan to that of both defendants in these matters. I find that the nominal transfer by Defendant Chan to Defendant Ho was never known to the Plaintiff or his secretary. In fact, much effort was made to conceal it as reflected in the new name "Hung Yu Fat" and the absence of any written communication with the Plaintiff. I further find that the Plaintiff has never agreed to or acquiesced in such transfer.

35. After the fire on the 6th of February 1983, the Police returned the premises to Defendant Ho on the 3rd day. On the 11th February 1983, i.e. one day before the Chinese New Year Eve, Defendant Ho was paying off the factory workers who subsequently fed her the information that the suit premises were found locked up on the same evening. Evidence of visits made to the fire damaged premises from the defendants, particularly Defendant Ho was quite confusing. Defendant Ho further told the Court that about ten odd days after the fire, she and Defendant Chan inspected the damage and that subsequent to the filing of an insurance claim Defendant Chan, Defendant Ho, their then solicitor and the factory clerk, Mr. Hung attempted to enter the factory from the rear to meet the insurance Loss Adjusters waiting in front. On this occasion, entry was not successfully gained, and the Loss Adjusters left. On a second occasion soon thereafter, so testified Defendant Ho, the defendants, Mr. Hung and the insurance Loss Adjusters went into the premises for a survey. Mr. Hung was instructed to lock up the suit premises thereafter. In brief, the defendants and their workers may be taken as having paid four visits to the fire-damaged premises : one visit on the day before Chinese New Year eve, another visit some 10 odd days after the fire and two visits with a view to verifying the insurance claim after its submission on the 31st March 1983, Exhibit "D2".

36. The defendants maintained that several days later the premises were again found to be locked and from inside. No evidence was given as to why the defendants did not thereupon consult their then solicitors who had previously advised them to enter by whatever means at their disposal since possession had been returned by the Police to Defendant Ho. No explanation was given as to why the Plaintiff was not approached for removal of the looks. According to Miss Chan, up to August 1983, there was no complaint from the Defendants or their solicitors on any question of access to the factory premises.

37. Although Defendant Ho claimed that the 30 tons air-conditioner and the cooling tower as well as the window-type air-conditioners were undamaged and that some fabrics in the cutting section and on the hanging shelf as well as some clothes in the iron room were undamaged, the submitted claim of Defendant Ho to the insurance company described most of these items as damaged and put a loss value under the heading of "Amount of Damage Sustained". Defendant Ho explained at one time that she was under the impression that everything should be included for the insurance company to judge. Subsequently, she claimed to have put a loss value of articles under this head on the erroneous understanding that once compensation was paid, all damaged articles would go to the insurance company. Defendant Ho also offered the explanation that she was not really giving the matter much thought at the time and that besides the figures were not so entered on the claim form by herself but were calculated by the account clerk, Mr. Hui. The part-time account clerk, Mr. Hui himself never visited the damaged factory, and he could offer no better excuse than that he felt that every article should be included for the decision of the insurance company. That must be a very irresponsible attitude.

38. Defendant also called Mr. TSUI Chung-chau, a man who was in the habit of buying from small factories. He came to the damaged suit premises together with the Loss Adjusters. According to him, much was left with a high salvage value, and he offered Defendant Ho $80,000 for raw materials and $90,000 for finished and semi-finished products.

39. The bare fact remains that for whatever reason, she, Defendant Ho did make a claim on cost items on the basis that they were virtually all damaged by fire. The insurance company whose offer Defendant Ho accepted described the "air-conditioning system" as being good for "iron scrap". See Pages 7 & 8, Exhibit "D5". As for salvage value, Mr. Tsui must be exaggerating. Even Mr. Cheung, Counsel for the Defendants, was driven to allow himself to be guided by the salvage value given by the insurers in the sum of $93,914.60.

40. Moreover, no evidence was led as to whether water damage was caused by sea water or fresh water. That was conceded by Mr. Tsui to be a matter of importance. The inspection by Mr. Tsui and the Loss Adjusters was after March 1983, say in early April. There was some faint suggestion that the condition of damage was similar to that in the earlier inspection made 10 odd days after the fire. The Plaintiff had in fact not attempted to remove the damaged articles until the commencement of the repair works at the end of July i.e. 3?months after the defendants' last inspection and almost 6 months after the fire.

41. Defendant Ho told the Court that at the time she accepted the insurance company's offer on the 7th July 1983, the Plaintiff had already served her with a writ. She also claimed that by then the Plaintiff had removed the damaged articles. This, according to Mr. Man, cannot be accurate. Mr. Man's firm started clearance only at the end of July. Counsel for the defendants conceded that the writ was served on Defendant Ho in June 1983 and that it was Defendant Chan who was served in July. The defendants had, I find, ample time to remove the goods even after service of the writs.

42. It may very well be the case that by the time Defendant Ho finally learned from the insurance company on her acceptance of its offer that the damaged articles were hers, she herself also realized that the same would no longer have any value. This is speculation, but for whatever reasons the defendants did not remove or cause to be removed these articles in the factory, although they had almost six months to do so from the date of the fire, I find that the same had no salvage value at the end of July. Mr. Man of Hop Hing Ho, the man who inspected the premises on the 17th of February 1983, told the Court that the articles and machinery were then observed to have suffered from fire damage. He was not quite explicit and was not asked to elaborate. However, he gave a reasonably clear description of their condition as at the end of July. He said that the damaged articles on the floor had formed a hard crust on top but still damp underneath and that the machines were rusted. That was only to be expected in the climate of Hong Kong. Mr. Man described all as "rubbish and garbage", and he testified that they were removed to a dumping centre in Sai Kung. I accept his evidence.

43. Mr. Cheung, Counsel for the Defendants complained that it was unreasonable, despite the inaction of the defendants, for the Plaintiff to delay removal of the damaged articles in the burnt out factory after almost 6 months. Counsel contended that one month's wait would have been the maximum allowable. If the Plaintiff had given proper notice of his intention to remove the articles within a month, the Defendants might have taken some precautionary measures, such as drying and cleaning the articles, airing the factory, separating the undamaged items or storing the articles elsewhere. In hindsight, probably the defendants would not have taken any action. Various reasons were advanced, but it was a fact that none of these defendants ever approached the Plaintiff for the removal or preservation of any articles Defendant Chan claimed that there was no other storage space, and Defendant Ho painted a picture of tight cash flow. The defendants had had in fact ample time to remove these articles, and their deterioration after a long delay could not be the responsibility of the Plaintiff. However, I agree with Mr. Cheung that the Plaintiff should have effected the removal after a month and that the period of almost six months after the fire would, in my opinion, be unreasonably protracted; hence the defendants should not be held liable for mesne profits for that extra period. In the action against Defendant Chan, only one month's mesne profits was claimed, though Counsel for the Plaintiff had proceeded as if damages had been sought up to the end of July 1983. Furthermore, the claim for mesne profits against Defendant Chan was referable to the period of repair. However, both counsel conducted these proceedings on the basis that the Plaintiff would at least be entitled to a month's delay. But for the concession to mesne profits for one month made by Mr. Cheung, I would have treated the Plaintiff's claim for one month's mesne profit as appropriately amended.

44. In the circumstances, Defendant Chan must be liable for arrears from the 10th November 82 to the 5th of February 1983 i.e. a day before the fire. There was also managements fees for one month and 5 days i.e. from 1st January to the 5th February.  Time for repairs took over a month according to Mr. Man. Defendant Chan should not be liable for this period as he would be entitled to abatement of rent for the suit premises which had been rendered uninhabitable by fire under the Tenancy Agreement. The time gap between the date of the fire and date of re-entry was part of the one month's waiting period allowed; alternatively, as it took the Plaintiff that long to arrange for the decorator to visit the fire damaged premises, this period would likewise enjoy abatement of rent. Defendant Chan must also pay a month mesne profits after the fire for delaying repair works. I have found that it was reasonable for the Plaintiff to wait for the defendants for a month. Defendant Chan must also pay for electricity which, although charged up to the 10th of February 1983, was obviously unused after the fire. As for the repairs to the lifts, bearing in mind the operative clause in the Tenancy Agreement, I would not accept that the lifts are part of the let suit premises or any fixture or fittings therein. Mr. Wong, Counsel for the Plaintiff, informed me that there was no other provision in the Tenancy Agreement governing the lifts and their repairs. It was also not suggested that the repair expenses for the lifts were or could be part of the management fees. Consequently the Plaintiff's claim for a portion of repair expenses for the lifts cannot succeed.

45. As for the specific repairs, I agree with Mr. Cheung, Counsel for the Defendants that the price in the quotation, Exhibit "P4 (1)" or pages 51 and 52 of the Agreed Bundle 3, will have to be somewhat reduced : In item 7, false ceiling and partition in the sum of $8,500 must be deleted as Defendant Chan had paid $20,000 for the office partitions. There was no evidence that the wall paper was not included in the office partitions which would appear to be quite comprehensive. I am not satisfied that any in this item was proved.   From the Chinese quotation it can be seen that items 8 and 9 were lumped up for $14,100. Counsel confirmed that to be so. There was some lighting in the corridor at the Inception, and there were also the main switch-box and meter. I accept that Defendant Chan put in new wiring. On probabilities, he must have done so for the lighting and arrangements of his needs. Doing the best I could, I would allow $3,000 for these then existing items and labour cost for removing burnt wires and articles thus leaving the quoted price for items 8 and 9 to be $3,000 instead of the full $14,100. The cisterns were installed by the factory, and again to do the best I could, I would only allow half of the repair cost for item 2 i.e. $1,450 instead of the full $2,900 claimed. Mr. Wong conceded that tenant's fixtures would not be for the benefit of the plaintiff/landlord. All in all, the repair cost of $76,600 should be deducted by a sum of $21,050 ($8,500 + $11,100 + $1,450). Therefore, the repair cost to be paid by Defendant Chan should be $55,550.

46. I summerize the items allowed as against Defendant Chan as follows :

47. This is the judgment sum that I would grant in favour of the Plaintiff against Defendant Chan, i.e. $89,276.32 with interest thereon at 10% per annum from date of service of the writ to date of judgment.

48. As for Defendant Ho, her counterclaim for salvage value must fail. Consequently, if Defendant Chan were to be allowed to raise the same counterclaim, he would likewise fail. Whilst the tenant i.e.  Defendant Chan must surrender vacant possession to the Plaintiff as landlord after termination of the Tenancy Agreement, Defendant Ho was herself also a trespasser and as such is responsible for one month's mesne profits. Therefore, I enter judgment against Defendant lie in the sum of $22,700 with interest at 10% per annum also from service of the writ to date of judgment. I would award to the Plaintiff costs in each of these actions against Defendant Chan and Defendant Ho respectively. Defendant He's counterclaim is also dismissed with costs.

Representation:

Mr. Alexander Wong, instructed by M/S Deacons for the Plaintiff

Mr. Peter Cheung, instructed by M/S Victor Ng & Co. for the Defendant in H.C.A. 3660/83

Mr. Peter Cheung, instructed by M/S Oscar Lai & Ho for the Defendant in H.C.A. 6727/83