Kelland Co Ltd v. Pacific Ace International Holdings Ltd

DCDT 4160/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DISTRAINT CASE NO. 4160 OF 2010

____________

Coram: H.H. Judge Chow

Hearing dates: 24^th and 25^th February, 2011

Date of handing down Judgment: 23^rd March, 2011

Judgment

1.This is the Bailiff’s application for an order that this court is to adjudicate the claims between the Plaintiff and the Claimants on the goods and chattels (“the goods and chattels”) seized by the Bailiff on 23.11.2010 on the premises known as Shop A, Ground Floor, CNT Tower, 338 Hennessy Road, Wanchai, Hong Kong (“the Premises”) for the sum of $540,000 being rents for 3 months from 1.9.2010 to 30.11.2010 under a warrant of distress issued by the District Court on 8.11.2010. The Premises were let by the Plaintiff to the Defendant under a tenancy agreement dated 5.7.2010 for the purpose of carrying on the business of an optical shop at a monthly rental of $180,000.

2.The inventory list compiled by the Bailiff shows that all the goods and chattels were consistent with the business of an optical shop.  At the time of the seizure, the Bailiff, Mr. Chow Kwok Yau, did not see any representative of the Claimants present at the Premises. Hence, the goods and chattels seized by him at the Premises were in the apparent possession of the Defendant at the time of the seizure.

3.Section 88 of the Landlord and Tenant (Consolidation) Ordinance (“the Ordinance”) 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.”

The goods and chattels did not come within this section.

4.The Plaintiff has a statutory right to sell the goods seized and the amount of sale shall be applied in satisfaction of the debt.  This is provided for under section 99 of the Ordinance, which reads:-

“(1) In default of any order to the contrary, the distrained property shall be sold on the day mentioned in the notice given under section 89 and the sale shall be conducted at such place and time and by such auctioneer or bailiff as the Registrar may direct.

(2) The auctioneer or bailiff shall, on realizing the proceeds, pay over the amount thereof to the court, and such amount shall be applied first in payment of the costs of the distress, and then in satisfaction of the debt; and the surplus, if any, shall be returned to the debtor.”

(Underlines added)

The Claim of the 1^st Claimant

5.In September 2010, the 1^st Claimant sold to the Defendant some batches of spectacles, and the Defendant issued to the 1^st Claimant a cheque in the sum of $110,911.2 for these goods.  The 1^st Claimant accepted the cheque.  By so doing, the 1^st Claimant intended that the property was to pass to the Defendant, so that the Defendant could dispose of the goods as the owner thereof.  Hence the property passed to the Defendant.  The cheque was subsequently dishonoured, but this would not revert the property of the goods to the Claimant.  The only remedy in law is to sue on the dishonoured cheque.

6.In Xipho Development Co Ltd v CHM Holdings Co Ltd [1997] HKLRD 36, Litton VP said:-

“In its origin, the common law rule heavily favoured the landlord. A landlord was entitled to seize and distrain for arreas 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.”

The claim of the 2^nd Claimant

7.The 2^nd Claimant’s claim is in respect of the goods listed in the delivery note No. DN-066/10 dated 28.10.2010.  In October, 2010 the 2^nd Claimant and the Defendant entered into a sales agreement in respect of the goods.  On 28.10.2010, the 2^nd Claimant delivered the goods to the Defendant. The Defendant issued a cheque to the 2^nd Claimant in the sum of $87,028 as deposit money.  But it was subsequently dishonoured.  The 2^nd Claimant argues that because the money for the goods has not been paid, it still holds the property in the goods.  Once the goods were delivered to the Defendant, it could make use of them.  This shows that the parties intended that the property of the goods passed to the Defendant when the machines were delivered to the Defendant.  Hence when the goods were seized, the property of the goods had already passed to the Defendant.  The only remedy of the 2^nd Claimant is to sue on the dishonoured cheque.

The claim of the 3^rd Claimant

8.The 3^rd Claimant submits that after the Defendant had purchased the goods, it did not make any payment.  When the Defendant purchased the goods, the property of the goods passed to the Defendant and became its property.  The remedy of the 3^rd Claimant is to sue for the outstanding payment of the goods.

The claim of the 4^th Claimant

9.The 4^th Claimant delivered their goods to the Defendant on consignment basis.  I accept that the Claimant remained the owner of the goods, when they were seized by the Bailiff.

The claim of the 5^th Claimant

10.The goods of the Claimant were sold to the Defendant.  Payment was made by way of a cheque, but it was subsequently dishonoured.  Because the transaction was a sale, when the goods were delivered to the Defendant, the property of the goods passed to the Defendant.  The remedy of the 5^th Claimant is to sue on the dishonoured cheque.

The claim of the 6^th Claimant

11.The 6^th Claimant accepts that ownership itself is not the only factor to be considered by the Court.  The rights of the Plaintiff are to be balanced against the rights of the owner in determining whether the Court should exercise its discretion to return the goods.  Where there is a lawful seizure of the goods and chattels, the Plaintiff has a statutory right under section 99 of the Ordinance to sell the goods in distraint, and to apply the proceeds, to the arrears of rents.  The Court may exercise its discretion, and order the goods to be returned to the claimants.  Under section 99, the 6^th Claimant has no statutory right to demand the return of the goods.  Ownership of the goods itself is only one of the factors to be considered, and to be weighed against the statutory right of the landlord (the Plaintiff) by this Court, in the exercise of its discretion on the question of whether to return the goods to the 6^th Claimant.  I have considered the 4 factors contained under paragraph 5 of the submission (dated 24.2.2011) of the 6^th Claimant.  They are not factors in the 6^th Claimant’s favour for the return of the goods.

12.I accept that the display samples loaned to the Defendant remained the property of the Claimants.  The rest of the goods (not display samples) were sold to the Defendant.  It did not receive any payment for these goods, which had been delivered to the Defendant.  At the time of making the delivery of these goods, the parties must have intended that the property in the goods was to pass to the Defendant, so that the Defendant could dispose of them.  Hence, the Defendant became the owner of the goods. 

13.The 6^th Claimant argues that the Plaintiff faces a commercial risk being a landlord.  Its losses are reduced by the retention of rental deposits, whereas the 6^th Claimant faces a potential 100% loss in this case.  The loss faced by the Plaintiff is an actual loss, whilst what the Claimant faces is only a potential loss.  It will only become an actual loss if the Court makes an order not in its favour.  It is not a comparison of like with like.  The correct approach adopted by the Court to exercise its discretion is to consider whether there is any factor which would make the court take away the statutory rights enjoyed by the landlord and return the goods to the owner.

14.The 6^th Claimant complains that the Plaintiff has allowed the Defendant to remain in the premises for a further 3 months after the termination of the lease agreement.  In doing so, it allowed the Defendant to fall further behind in rental fees.  This is not a valid argument.  The Plaintiff had the right to extend the tenancy.  It is lawful to do so; so no complaint can be launched against it.

The Claim of the 7^th Claimant

15.The Claimant sold several batches of goods to the Defendant.  The 7^th Claimant delivered the goods to the Defendant in September 2010, and it received a deposit of $28,230.5.  The balance is $44,390.5.  But it did not receive the balance payment.  Very clearly, as shown before, the property in the goods to the Defendant passed to the Defendant upon the delivery of goods.  The remedy for the 7^th Claimant is to sue on the dishonoured cheque.

The claim of the 8^th Claimant

16.Under a hire purchase agreement dated 15.9.2010 and made between the Defendant and the 8^th Claimant, a number of machines were delivered to the Defendant.  The 8^th Claimant paid the relevant payment to the supplier under the hire purchase agreement.  The Defendant paid several instalment payments to the 8^th Claimant, but it failed to pay the monthly hire rent for the machines in November 2010.  By two letters dated 16^th November 2010 sent to the Defendant, the 8^th Claimant accepted the wrongful repudiation of the Defendant and terminated the hire purchase agreement.  According to the two letters, the 8^th Claimant would or might repossess the Machines, but it did not take steps to get back the Machines, and they were seized by the Bailiff on 23.11.2010.  I accept that the machines in question remained, at the material time, the properties of the 8^th Claimant.

17.The Bailiff is entitled to seize the goods, the property of which has already passed to the Defendant, at the time of their seizure by him.  Where the goods did not belong to the Defendant, but they were in the apparent possession of the Defendant at the time of the seizure, the Bailiff is still entitled to seize them.  I have not been able to find any factor which would make this Court exercise its discretion in favour of the Claimants in respect of the return of these goods, the property which had not passed to the Defendant.  For the reasons above-said, I dismiss all the Claimants’ claims.

Costs

18.I make an order nisi for costs, to be made absolute within 14 days’ time, that the Claimants do bear costs of the action in equal shares, to be taxed, if not agreed.

The Plaintiff : represented by Mr. CHAU Chan-piu of M/s. W.K. To & Co.

The 1^st Claimant : represented by CHAN SHUI HIN(陳瑞衍)

The 2^nd Claimant : represented by TSE PO CHEONG(謝普昌)

The 3^rd Claimant : represented by DIU WANG KEI(刁宏基)

The 4^th Claimant : represented by CHOW KWOK WAI DANIEL(周國偉)

The 5^th Claimant : represented by CHAN PO CHUN(陳寶珍)

The 6^th Claimant : represented by Mr. Derek HO instructed by M/s. K.B. Chau & Co.

The 7^th Claimant : represented by LO CHUN YU KENNETH(盧震宇)

The 8^th Claimant : represented by Miss A. NG of M/s. Keith lam, Lau & Chan