Prosperity Clothing Co Ltd v. Corona Fashions Ltd and Others

DCDT000657/1976

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

DISTRAINT NOS. 613 & 657 OF 1976

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Coram: N.P. Power, District Judge

Date of Judgment: 15th July, 1976.

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RULING

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1. In this matter there have been two distraints by the same Plaintiff Company against the same Defendant Company. In the first a warrant was issued on 30th June 1975 distraining for $50,000.00 being the rent from 1st February 1975 to 30th June 1975 and in the second a warrant was issued on 17th June 1976 for $60,000.00 being the rent from August 1975 to January 1976. It would appear that the first warrant sought only five months' rent as the Plaintiff Company was then unaware of the full value of the goods on the premises.

2. The two claimants in each of the distraints are Victor POON and Corona Wig Factory Limited. Each claims the release of their goods which were on the premises at the time of seizure by the bailiffs.

3. Mr. CHANG has taken a preliminary point contending that even if the claimants establish the fact they set out in their affidavits they must nonetheless fail in their claims. It is agreed that in determining this preliminary point I must proceed upon the basis that the facts set out in the affidavits of Mr. POON are correct. The claimants, Mr. POON and the Corona Wig Factory Ltd. allege that one of the joint owners and directors of the Plaintiff/Landlord Company, Mrs. LAU, was a director in the Defendant/Tenant Company with Mr. POON and knew that part of the goods on the premises belonged either, in the case of the type-writer and Danish furniture, to Mr. POON or, in the case of the other office equipment and furniture, to Corona Wig Factory Ltd.

4. Mr. CHANG contends that even if Mrs. LAU is proved to have had this knowledge and even if this knowledge is, by reason of her position in the Plaintiff Company taken to be the knowledge of the Plaintiff Company, it is irrelevant in distraint proceeding such as this. He contends that under the distraint provisions of the Landlord & Tenant (Consolidation) Ordinance the knowledge of the landlord does not come into the matter, that once the rent has come into arrears and the landlord has applied to Court for a distraint then all that matters thereafter is the 'apparent possession' of the goods. It is not alleged that the Plaintiff Company or its directors have acted fraudulently by, for example, encouraging the claimants to bring their goods onto the premises for the purpose of distraining upon them but simply that the directors of the Plaintiff Company Mr. and Mrs. LAU had knowledge that the ownership of the disputed chattels lay in the claimants.

5. The question I must decide is whether knowledge on the part of a landlord that goods upon premises which he has let do not belong to his tenant in some way vitiates distraint proceedings brought by him under which those goods have been seized by the bailiff? In my view such knowledge alone does not vitiate the proceedings. Goods upon which distraint may be levied are all goods in the 'apparent possession' of the tenant. The ownership of the goods is immaterial as is the knowledge of the landlord as to that ownership. All of the Hong Kong cases which were cited to me and which I have considered suggest that this is the correct view although none deals specifically with the question of landlord's knowledge. Halsbury 4th Ed. Vol. 13 para. 130 suggests that an estoppel will arise at common law against a landlord in relation to the goods of a 3rd person brought onto the demised premises with consent of the landlord. It is clear from the case cited to support this proposition, Fowkes v. Joyce (1689) 2 Vernon 129, that 'consent' in the context of that case involved more than a mere standing by. In that case the landlord consented to the presence of the goods by personally giving his permission for them to remain upon the land and then impounded them. The Court considered the actions of the landlord went beyond mere consent and, in fact, amounted to fraud. I fully appreciate that, under the common law, it may well be that the estoppel arises in such circumstances, against a landlord as the seizure will have been made by the landlord or his agent; just it may well be in Hong Kong that no such estoppel will arise as the seizure is effected not by the landlord or his agent but by the bailiff acting under a statutory power and is lawful as long as the goods were in the apparent possession of the tenant. I have, nonetheless, no doubt that is the case of proved fraud on the part of the landlord, such as arose in Fowkes v. Joyce, the Court in interpleader proceedings has an inherent power to order the return of the distrained goods to the claimant/third party.

6. I cannot agree with the submissions of Mr. CHANG that, once it has been shown that the actions of the bailiff were lawful, the Court should in all cases, allow the sale to proceed and should merely indicate to the claimant that he may have a remedy directly against the landlord and, perhaps, the tenant also. In the case of fraud I have no doubt that the Court has an inherent power to act so as to prevent the furtherance of the fraud.

7. It might also be suggested that in the case where there is an express consent by the landlord allowing the claimant to place his goods on the land that the Court should also act. I cannot see that this should be so for in the ordinary case when the landlord rents out the land he consents to the tenant placing his own goods and the goods of others on the land and his express consent, in a particular case, is no more than a gratuitous affirmation of the general consent which he has already given and would, in my view, in no way vitiate distraint proceedings.

8. The more difficult case would be one where the landlord has himself placed the goods of another on the land or has given the third party an express assurance that the goods will be safe while on the land. The type of situation which could arise is endless and each would depend on its own facts. It may well be that where the conduct of the landlord could be characterized as fraudulent the Court would act to order the return of the goods and that where it could not be so characterized the Court would allow the distraint to proceed. Happily in the present case there has been no allegation of fraud. What is alleged is that the Plaintiff Company through its Director had knowledge of the position. The position here seems to me to be no different from that which occurs in most business tenancies where the landlord must know and tacitly consent to goods of others moving in and out of the premises.

9. As to the office equipment and furniture the property of the Claimant Company, it appears that about July 1974 the Defendant Company rented the premises and took over the use of the chattels of the Claimant Company, Corona Wig Factory Ltd., which were on the premises. In July 1975 the Claimant Company assigned the premises to the Plaintiff Company. At the time the chattels were brought onto the premises the Plaintiff Company was not the landlord - it was then a matter between the Defendant Company and the Claimant Company. At the time of the assignment the Plaintiff Company simply accepted the sitting tenant. No express consent to the Claimant Company to place its goods on the premises or assurance that the goods would be safe can possibly be spelt out from this - they were already there and simply remained there.

10. As to the typewriter and Danish furniture, the property of Mr. Victor POON, the position is even more strongly in favour of Plaintiff Company for all the claimant there suggests is that he brought them onto the premises and that Mrs. LAU knew of this. There was no suggestion of any express consent on her part or on the part of the Plaintiff Company.

11. For the above reasons then the Plaintiff Company must succeed in this preliminary point and I dismiss both claims.

12. Costs of application to be paid by Claimant for yesterday and for appearance to receive ruling to be taxed on upper scale. I certify for Counsel.

Certified true copy:-

Representation:

Mr. R.E. Low of Alexander Tsang & Co. for both Claimants

Mr. Denis Chang instructed by D.W. Ling & Co. for Plaintiff