Tung Wah Hospital v. The Deputy Registrar, Kowloon District Court and Another
Read the full judgment text of HCA 337/1961 on BabelCite. This High Court CFI judgment was delivered on 24 June 1968.
1. In these proceedings the plaintiff corporation, as the former landlord of a judgment debtor, claim to be paid arrears of rent out of proceeds, lodged in Court, of an execution levied by certain judgment creditors against the judgment debtor. The judgment debtor, having been apprised of these proceedings, has admitted the judgment debt and also the arrears of rent claimed, and has expressly declined to be added as a party to the proceedings. The plaintiff's claim gives rise to a consideration
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IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 337 OF 1961 -----------------
----------------- Coram: Mills-Owens J. in Court Date of Judgment: 24 June 1968 Sheratte. C.C. appeared for both defendants. ----------------- JUDGMENT ----------------- 1. In these proceedings the plaintiff corporation, as the former landlord of a judgment debtor, claim to be paid arrears of rent out of proceeds, lodged in Court, of an execution levied by certain judgment creditors against the judgment debtor. The judgment debtor, having been apprised of these proceedings, has admitted the judgment debt and also the arrears of rent claimed, and has expressly declined to be added as a party to the proceedings. The plaintiff's claim gives rise to a consideration of sections 31 and 32 of the Distress for Rent Ordinance (Cap.7), which provide as follows - "31. No personal property shall be removed from any premises under any writ from any court, other than writs in Crown suits, until the claim for rent due to the landlord or lessor or person entitled to receive the rent is satisfied: The arrears of rent, so limited to six months arrears, exceed the judgment debts and exceed also the proceeds of the execution. Obviously, the result of these proceedings is of no interest to the judgment debtor. Efforts to trace the judgment creditors, the persons primarily concerned apart from the plaintiff, have proved abortive. Accordingly the trial has proceeded between the plaintiff and the 1st defendant (the Deputy Registrar of the Kowloon District Court, in which court the judgments were recovered, the execution was levied, and the proceeds remain lodged) and the 2nd defendant (the Attorney General, who was added as a defendant no doubt ex abundanti cautela). 2. The following facts are agreed. The goods levied upon were seized by the execution bailiff on the 17th January 1961, and they were auctioned in pursuance of the levy two months later, namely on the 17th March 1961; seven days later, i.e. on the 24th March 1961, on the application of the plaintiff under the provisions of the Distress for Rent Ordinance, a distress warrant (No.119 of 1961) was issued out of the same Court; as I have said, the proceeds of the execution were paid into Court and there remain lodged; the goods seized and sold in execution were not removed from the premises even up to the date of the filing of the amended statement of defence in June 1962. 3. Section 32 of the Ordinance contemplates two cases - (1) where, at the time of the issue of the distress warrant goods liable to seizure in distress are already under seizure on behalf of an execution creditor; (2) where, after the issue of the distress warrant, but before seizure thereunder, goods liable to distress become seized on behalf of an execution creditor. In either of those two cases the distress warrant is not to be executed. Instead, the distress bailiff must return the distress warrant to the Court and deliver copies thereof to the execution creditor and the judgment debtor. The execution creditor or the debtor may then apply to the Court to discharge or suspend the distress warrant. This gives an opportunity to the debtor to urge, for example, that no rent is due; it gives an opportunity to the execution creditor to urge, for example, that the distress is levied by collusion between the landlord and the debtor with intent to defeat him (the execution creditor). If such an application is made the matter abides the order of the Court thereon. If no application is made the execution levied by the judgment creditor proceeds but the landlord is given priority for payment of 6 months arrears out of the proceeds of the levy and his costs. It is to be observed that the section refers to goods "otherwise liable to distress". That must relate back to section 16 of the Ordinance, which, inter alia, provides that the distress bailiff shall not seize goods in the custody of the law; that imports a recognition of the common law rule that goods seized in execution are in custodia legis and thus, generally, not liable to be distrained upon. Section 31 of the Ordinance corresponds in effect to section 1 of the statute of 8 Anne c.18, the Landlord and Tenant Act, 1709, concerning which, in England, a considerable body of law had evolved. In the case of In re Neil Mackenzie Ex parte the Sheriff of Hertfordshire(1), in the Court of Appeal, the proceedings were complicated by reason of a receiving order in bankruptcy having been made; nevertheless the case is invaluable as containing an authoritative statement by the Court, delivered by Lord Lindley, H.R., of the law and practice in relation to the landlord's rights upon an execution being levied as it had evolved under the statute of Anne. It had been argued in that case that, as the goods had been sold in execution before receipt by the sheriff of notice of the landlord's claim, previous authorities in favour of the landlord (such as Arnitt v. Garnett(2)) had no application; there was, as it was contended on behalf of the trustee in bankruptcy, nothing giving to the landlord a charge on the proceeds of sale placing him in the position of a secured or preferential creditor in respect of the proceeds. I would refer to the following passages from the judgment, at pp.573-6 - "(2) Next, as to executions. A tenant's goods, seized by a sheriff under a writ of execution, could not be distrained for rent. They were said to be in custodia legis and protected from seizure by the landlord: Gilbert on Distress, 3rd ed. p.40; Wharton v. Naylor (12 Q.B. 673). Nor could he, before the statute of Anne, by giving the sheriff notice or otherwise, obtain payment by the sheriff out of the moneys realised by him by the sale of the goods seized. The law in this respect was, however, altered by 8 Anne, c.14 (c.18 in the Revised Edition of the Statutes), s.1. This statute did not give the landlord a right to distrain, but it prohibited the removal of the goods seized by the sheriff until the landlord's rent in arrear (not exceeding one year's rent) had been paid by the execution creditor. The Act was so worded as to raise the question whether it imposed upon the sheriff the duty of ascertaining whether any rent was in arrear or not before allowing the goods seized to be removed; but it was early decided that it was not the sheriff's duty to inquire, and that he was under no liability to the landlord for not keeping the goods unless informed that rent was due: Gilbert on Distress; Waring v. Dewberry (1731 1 Str. 97); Palgrave v. Windham (1733 1 Str. 212) Arnitt v. Garnett (3 B. & A. 440). But if the sheriff had notice before the goods were removed that rent was due to the landlord, and the sheriff, nevertheless, did not keep the goods on the premises, but sold them without paying the landlord, the sheriff was liable to an action by the landlord for the wrongful removal: Riseley v. Ryle (1843 11 N. & W. 16); Andrews v. Dixon (3 B. & A. 645); Colyer v. Speer (2 B. & B. 67). The Act in effect impounded the goods for the landlord's benefit; they could not be removed until he was paid. To this extent the Act in terms gave him a right to have them preserved as a security for one year's arrears due to him. He could not, however, require them to be sold for his benefit; and if they were sold he could not maintain an action against the sheriff for money had and received: Green v. Austin (1812 3 Camp. 260). His remedy was by an action on the statute for wrongful removal without paying him: see a form of declaration, 2 Chitty's Pleadings, 629. If the execution creditor chose to pay the landlord, the goods were sold by the sheriff, and he applied the proceeds in paying his own expense and the judgment debt and the amount paid by the execution creditor to the landlord for the rent in arrear. The Act itself authorized this. 4. The judgment went on to hold, approving and following the decision in In re M'Carthy(3) that the landlord's rights were not affected by the bankruptcy; that there was nothing to displace the right of the landlord to have the goods kept unremoved, his right, sanctioned by long practice to be paid out of the proceeds of sale if they had been removed and sold contrary to the statute of Anne. The passages which are cited above from the case of In re Mackenzie(1) provide the necessary background to the arguments presented by counsel in the case now before me. 5. The plaintiff's case is that notice of its claim was received by the 1st defendant through his bailiff prior to the proceeds of the execution being paid over to the execution creditors - in fact, as I have said, the proceeds still remain lodged in Court. As I understood Mr. Martin Lee, for the plaintiff, he was not relying on the point that notice was received, by the 1st defendant through his bailiff, before the removal of the goods from the premises; in such a case the landlord's remedy would be to bring an action for damages against the sheriff; the present action was not so framed but in effect the plaintiff was applying to the Court for an order for payment out of the proceeds of sale - the mode of procedure referred to in In re Mackenzie(1) as the common practice. No technical objection is raised on behalf of the defendants in this respect. It is agreed that the plaintiff's claim may be regarded as procedurally the equivalent of a motion for a rule or order for payment of the rent out of the proceeds. Mr. Lee referred to various paragraphs of Woodfall (26th Ed.) and in particular to para.llll where it is stated, inter alia, -
The paragraph cites the cases of Arnitt v. Garnett(2) and Yates v. Ratledge(4) in support. In Arnitt v. Garnitt(2) the sheriff had removed the goods from the premises before receiving notice of the landlord's claim; after receiving the notice the sheriff proceeded to sell the goods, but he still retained the proceeds. The Court (Abbott C.J., Bayley, Holroyd and Best JJ.) was unanimous in holding that the sheriff must be ordered to pay the landlord's claim out of the proceeds, although the notice was not received until after the removal of the goods. In Yates v. Ratledge(4) the landlord's notice was given before removal of the goods but after the sale. It was argued that the execution creditor had acquired a vested right to the proceeds and that the landlord's quasi-lien (arising from his right to distrain) had gone, but it was held that so long as money remained in the hands of the sheriff the landlord's right was not gone; the Courts had, it was said, for a series of years been in the habit of affording equitable redress against a sheriff in such cases (per Pollock C.B., Martin B. and Channell B. ). Mr. Lee relied also upon the case of Wharton v. Naylor(5) where reference was made to the position of the sheriff as an officer of the Court; an extract from the judgment is reproduced below. Mr. Lee referred to the decision of Judge Springall in the District Court in Distraint No.599 C.J. No.4782 of 1965 which, however, does not appear to affect the point at issue. Mr. Lee further submitted that for a great many years the English Courts have given a liberal interpretation to the statute of Anne, that is to say in favour of the landlord, and that Sec.31 of the Distress for Rent Ordinance must be presumed to have been enacted, in 1883, in the light of such decisions, the section being, in substance, a reproduction of the provisions of the statute of Anne. I entirely agree with these submissions; the early case of Henchett v. Kimpson(6))bears out that the statute is to have a liberal construction (see also Calvert v. Joliffe(7)). It is evident also, in my view, that Sec.31 of the Ordinance is intended to reproduce the substance of the statute, consistently with the framework of the Ordinance generally. 6. Mr. Sheratte, for the defendants, submitted that where, before the sheriff or bailiff receives notice of the landlord's claim, the goods have been sold, the landlord's claim fails. He referred to Re Benn-Davis, Ex parte The Pollen Trustees(8). In that case, as it appears to me, the facts were unusual and the decision does not support Mr. Sheratte's wide proposition. The landlord had claimed two quarters' rent but as the second quarter was not due at the time of the seizure in execution, it was held, by Cave J. following earlier authority, that the landlord's claim as to that quarter could not succeed. With respect to the first quarter, Cave J. found that the goods sold had been left by the vendee on the premises from the date of sale (the 17th March) until the 10th April. The learned judge allowed further argument and found it to be inferred that the sheriff was not in possession during that period; accordingly, it was held the landlord could have distrained upon the goods during that period and was not prevented from so doing by any action of the sheriff; therefore, applying his maxim "Vigilantibus non dormientibus jura subveniunt", the landlord's claim failed. 7. Mr. Sheratte further submitted that section 32 of the Ordinance has no application in a case where the application for a distress warrant is made after the sale of the goods. I would agree that section 32 has no application in such a case; I have endeavoured earlier to deal with the effect of the section. The section is intended to eliminate conflicting seizures - the distress bailiff is prohibited from seizure under the distress warrant when the goods are already seized by the execution bailiff. Clearly, that does not overcome the landlord's right under section 31 as developed in the cases, particularly Arnitt v. Garnett(2) and Yates v. Ratledge(4). Mr. Sheratte endeavoured to meet these decisions by contending that they are of no application in Hong Kong, being decisions affording equitable redress to the landlord which form no part of the law here. Under the Application of English Law Ordinance (Cap.88), he argued, the rules of equity take effect subject to local Ordinance; with that I agree. Then he referred to section 46(2) of the Bankruptcy Ordinance (Cap.6) under which the execution bailiff is under the obligation to pay the proceeds of the execution into Court, a provision which comes from the Bankruptcy Act, 1890 which was later in point of time than the cases referred to; thus, he argued, the proceeds were no longer in the bailiff's hands when the landlord's application for a distress warrant (the equivalent of notice of the landlord's claim) was received, but were in the hands of the Court for, as he said, 'the general benefit of the creditors'. Mr. Sheratte went further, as I understood him, by saying that the former equitable redress afforded to the landlord by the Courts was abrogated, in England, as well as in Hong Kong, by the provisions of the Bankruptcy Act, 1890. These points are, in my view, clearly met and disposed of by passages in the judgment of the Court of Appeal in In re Mackenzie(1) where, at pp.576-8, it is said - "(3). Do the Bankruptcy Acts deprive the landlord of the right acquired in the manner above described? In one case we think they do, but only in one - namely, where the execution is itself overridden and rendered void by the bankruptcy and the landlord has not distrained: see Lee v. Lopes (15 East, 230); Gethin v. Wilks (2 Dowl. 189). In the present case the execution is not overridden so as to make it and the sale under it invalid. Sect.1 of the Bankruptcy Act, 1890, is qualified by s.46, clause 3, of the Bankruptcy Act, 1883, and the landlord was prevented by the execution from distraining. There is no provision in the Bankruptcy Acts which can deprive the sheriff of his right or the landlord of his, unless it be s.11 of the Bankruptcy Act, 1890. Clause 1 of that section does not apply, for the sale preceded the notice of the receiving order. But we are by no means satisfied that s.11, clause 1, which is a general enactment, repeals the statute of Anne, which is a special enactment applicable to a particular case. 8. The second reason advanced by Mr. Sheratte for his contention that in Hong Kong the landlord is not entitled to payment out of the proceeds rested upon the provisions of 0.17 r. 59 of the Code of Civil Procedure (since replaced by the Rules of the Supreme Court 1967 but in force at the relevant time); under that rule the purchaser of goods sold in execution acquires a good title and no person shall have an action against the bailiff. I have no doubt that this provision, derived from section 15 of the Bankruptcy and Deeds of Arrangement Act, 1913, was intended to meet the case where the bailiff or sheriff seizes and sells goods belonging to someone other than the judgment debtor; it was intended to provide an exception to the rule 'nemo dat quod non habet' and to protect the bailiff or sheriff from an action in conversion - see Curtis v. Maloney(9). But, as I see it, the provisions in question are of a general nature and not intended to meet special provisions such as those enacted by the statute of Anne or section 31 of the Distress for Rent Ordinance; the observations of the Court of Appeal in In re Mackenzie(1) in the very similar sort of situation where it was argued, but held otherwise, that the Bankruptcy Act, 1890 overrode the provisions of the statute of Anne, appear to me to apply equally in respect of the argument that 0.17 r. 59 of the former Code overrides the provisions of section 31 of the Distress for Rent Ordinance. 9. Then Mr. Sheratte argued that section 31 was intended to prevent collusion between judgment creditors and judgment debtors; whether that is so or not, primarily the purpose was to overcome the position that the landlord could not levy distress upon goods in custodia legis. In Henchett v. Kimpson(6) Pratt C.J. said: "It was thought hard that landlords should not have something like a specific lien so the Parliament give them this remedy ...". In Wharton v. Naylor(5) the Court said:-
Mr. Sheratte relied upon the case of Re Benn-Davis, Ex parte Pollen(8)for the proposition that even in England the trend was no longer to afford equitable redress to the landlord - he relied upon the following passage in the judgment of Cave J. "The statute (of Anne) only applied in the case of a removal by the sheriff, or of a removal by the vendee under a delivery by the sheriff. Goods seized under a fi. fa. are only protected from distress while they are in custodia legis; and if the sheriff relinquished possession, the possession of the goods reverts back to the original owner, and they may be distrained - Blades v. Arindale(10). If the sheriff sells under the execution the purchaser should remove the goods at once." Likewise, in White v. Bainstead(11) where Jervis C.J., in the course of the argument, said: "If the sheriff removes the goods, in prejudice of the landlord's claim, then he ought to pay the rent: if the goods are not removed, the landlord is not injured." The reason for these remarks is contained in the judgment delivered by Jervis C.J. in the latter case where he said, at p.309: "The goods not having been removed, the statute does not apply: it only attaches where the landlord is by the act of the sheriff deprived of the power of distraining for the rent due." I think that there are several answers to the proposition thus put forward. Distress is limited by section 15 of the Ordinance to goods in the apparent possession of the tenant; it is agreed in the present case that the goods remained on the premises until at least Jun 1962 but there is no evidence that they remained in the apparent possession of the tenant from whom the rent claimed was due. That tenant may well have been succeeded by another tenant. Secondly, and more importantly, it is not in the power of a landlord in Hong Kong himself to levy distress; landlords must act through the Court; if therefore there was any default it was on the part of the officers of the Court and the plaintiff ought not to be prejudiced thereby. Thirdly, it is evident that the tenancy has long since expired and it is to be inferred that the goods have long since been removed; the plaintiff gave proper notice of its claim at the relevant time and could have done no more to pursue its remedy; the proceeds remain in the hands of an officer of the Court and ought to be applied to the payment of the plaintiff's claim as landlord. In the circumstances of the present case the plaintiff has been "deprived of the power of distraining for the rent due." In the case of In re Benn-Davis, Ex parte Pollen(8) the sheriff had paid the proceeds of sale to the trustee in bankruptcy of the tenant. In Wharton v. Naylor(5) the distinction is drawn between the case where the goods are removed without payment of the rent in which case "such removal renders the whole proceeding unlawful in regards the landlord, and subjects the sheriff to an action on the case", and the case where the goods are sold and the sheriff receives the proceeds of sale where "he, being an officer of the court, will be compelled, on motion, to pay over (a year's rent) to the landlord". Mr. Sheratte developed an argument based on the proposition that section 32 requires that the goods shall be "otherwise liable to distress". But no such provision appears in section 31. He submitted that as the Ordinance codifies the law the English cases have no application. That, in my view, is not so; it is evident throughout the Ordinance that it is intended to reproduce English law substantially, in readily accessible form. Its provisions should therefore, in my view, receive the interpretation, including the liberal interpretation of section 31, which English case law has evolved. Mr. Sheratte contended further that O.17 r.59 of the Code of Civil Procedure protects the bailiff from any action in respect of goods sold in execution; I think I have said enough to point out that such a general provision cannot be taken to override the provisions of section 31 of the Distress for Rent Ordinance which deals with the special case of the landlord's claim for rent and confers on him a quasi-lien and express priority; Order 17 r.59 is concerned to protect the bailiff from claims in conversion. He made the point also that as the goods had been sold, and the purchaser had acquired a good title thereto before the application for a distress warrant was made, the goods ceased to be liable to distress. In reply Mr. Martin Lee referred to the case of Lam Wai Fong v. Ho Yin Sheung(12); in my view, that case has no direct application to the circumstances of this case where the proceeds of sale remains in the hands of an officer of the Court and where before the sale the goods were, admittedly, the goods of the tenant. 10. Above all, the fact is that goods of the tenant which the plaintiff might have distrained upon have been sold, and the proceeds are in the hands of an officer of the Court. The court will always direct its officers to do what is proper to be done; even, if necessary, not to stand upon strict rights. I consider that the English authorities which I have referred to are entirely applicable, particularly Arnitt v. Garnett(2), Yates v. Ratledge(4), and Wharton v. Naylor(5), and lead to the conclusion that the plaintiff corporation is entitled to be paid out the whole sum in Court (which, as I have indicated, is loss than 6 months arrears). Ordered accordingly. 24th June 1968.
Representation: Martin Lee instructed by Lo & Lo appeared for plaintiff. Sheratte C.C. appeared for both defendants. (1) (1899) 2 Q.B. 566. (2) 3 B. & A. 440. (3) 7 L.R. Ir. 473 (4) 5 H. & N. 249 (5) (1848) 12 Q.B.673; 116 E.R.1023 (6) (1762) 2 2 Wils. K.B.141 (7) (1831) 2 B. & Ad.417 (8) (1886) 55 L.J.Q.B. 217 (6) (1762) 2 Wils. K.B.141 (9) (1951) 1 K.B. 736 C.A. (10) 1 Mee. & S.711 (11) (1853) 13 C.B. 304 (12) (1958) D.C.L.R. 247. |