SUM MUN KID FREDERICK v. AUTO ITALIA LTD

HCA 60/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 60 OF 2017

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J U D G M E N T

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1.  On 12 January, I heard an ex parte application made on behalf of the plaintiff, Frederick Sum, for an order restraining the defendant, Auto Italia Ltd (“the company”), from selling two valuable Ferrari motor cars.  Mr Sum claims that he ordered them from the company, an authorised Ferrari dealer, and complied with all his obligations as the purchaser of the cars.  However, the cars were not delivered to him.  The company claims that Mr Sum did not comply with his obligations under the agreements for the purchase of the cars, and it therefore treated Mr Sum as having repudiated the agreements.  Mr Sum was concerned that the company would sell the cars elsewhere, and he sought an injunction to stop them doing that.

2.  An important feature of his case was that damages would be an inadequate remedy.  The cars were said to be unique and to have been manufactured to Mr Sum’s individual requirements.  That admittedly made them more difficult to sell to anyone else.  However, one of them, by far the more expensive of the two, was the last model of its kind to be manufactured, and Mr Sum would not be able to get that car anywhere else. The same thing applied, albeit with lesser force, to the other car.  That was the basis on which I accepted that there was at least a triable issue as to whether damages would be an adequate remedy for Mr Sum, and I made an order restraining the company until the return date, which is today, from disposing of the two cars.

3.  The other order I made was one requiring the company to disclose to Mr Sum where the vehicles were located and where they were being stored.  Pursuant to that order, the company’s solicitors informed Mr Sum’s solicitors that both of the cars had been sold at the same price as Mr Sum had paid for them.  One of the cars, the more expensive of the two, had already been delivered to the purchaser, but the other had not, and the injunction had therefore prevented its delivery from taking place.  But in the light of that, it looked as if the company might argue that the injunction would have to be discharged.  The sale of the cars meant, to use a colloquialism, that the horse had bolted before the stable door had been closed. 

4.  The twist in the story is that Mr Sum does not accept that the cars have been sold.  He suspects that the company’s assertions that they have been sold are untrue — alternatively, that they have been sold to stooges to enable them to be resold at a higher price. His suspicions are based on a number of things.  First, why would someone want to purchase cars which had been customised for Mr Sum?  Secondly, the more expensive of the two cars was allegedly delivered within a period much shorter than is typical for a Ferrari, and the delivery of the other car was allegedly due to take place on the day after it had allegedly been sold, and at a time when the company knew that the legality of their refusal to deliver the cars to Mr Sum was being challenged.  Thirdly, the sums which the company claims to have sold the cars for were far less than what Mr Sum claims they could have been sold for as their value had increased significantly since he had agreed to purchase them.  And fourthly, the fact that the cars had been personally customised for Mr Sum would have been apparent, or at any rate should have been, to any purchaser of the cars on an examination of them.  Mr Sum doubts that the alleged purchasers would have been prepared to purchase the cars in those circumstances.  Indeed, if the cars had really been sold, that would have meant that the purchasers were not bona fide purchasers without notice of Mr Sum’s interest in them.

5.  Although I know, from the skeleton submissions of Ms Cindy Kong for the company, what the company’s case is likely to be, no evidence has yet been filed on the question whether Mr Sum had failed to comply with the terms of the agreement.  There is no question of any criticism of the company in that respect.  But in the absence of any evidence from the company, there continues to be a serious question to be tried on that issue.  Indeed, no evidence has yet been filed by the company dealing with the grounds for Mr Sum’s suspicion that the cars have not been sold at all.  In my opinion, there is, in the light of such evidence as is before me today, a serious question to be tried on that issue.  Damages remain an inadequate remedy, and I therefore propose to continue the injunctions I granted on 12 January for however long is necessary to enable the company to file evidence to show that there is not a serious question to be tried on those issues.  To be fair, the company does not seek to argue otherwise.  Indeed, that was what it suggested to Mr Sum’s solicitors prior to today’s hearing.

6.  I should add that the two agreements with Mr Sum are said to have incorporated the company’s conditions for sale, and that those conditions include an arbitration clause in which both Mr Sum and the company irrevocably agreed that any dispute over any alleged breach of the terms of the agreements would be settled by arbitration in Hong Kong in accordance with the UNCITRAL Arbitration Rules. I was not informed of those clauses at the hearing on 12 January. According to the company, it will in due course be seeking a stay of the proceedings in favour of arbitration.  Having said that, the company does not suggest that that affects the order I should make today.  Given the urgency of the matter, it may not have been practical for Mr Sum to attempt to constitute an arbitral tribunal and then apply for interim relief. In any event, the principles relating to the granting of interim measures in aid of an arbitration proceeding in Hong Kong are the same as those for granting interlocutory injunctions pending the resolution of court proceedings.

7.  So I come to the only issue which is contentious today, and that relates to Mr Sum’s application for further disclosure.  He seeks an order requiring the company to disclose unredacted copies of the two agreements made with the new purchasers, their names and addresses if they are not apparent from the agreements, the place and time of delivery of the more expensive of the two vehicles, and such documents as evidence what the purchasers paid for the vehicles and how they were paid.  That is opposed by the company on the basis that the new purchasers have instructed the company not to give any information which would reveal their identity.

8.  Mr Sum’s application is made on the basis of Ord 24 r 10 of the Rules of the High Court.  As I said to Mr Westbrook just before I started giving this judgment, that is intended to enable a party to inspect a document referred to in an affidavit filed on behalf of another party. However, Ord 24 r 10 merely entitles a party to serve a notice on another party requiring that party to make the document available for inspection and to inform the requesting party where it can be inspected, or if it objects to the document being inspected, the grounds for that objection.  Ord 24 r 10 gives the court no powers in the matter. The court’s powers are only engaged in Ord 24 r 11, which gives the court power, but not a duty — in other words, a discretion — to order production of the documents.  So the current application is misconceived.  The court’s powers are only engaged once the procedure required by Ord 24 r 10 has been concluded.  Then, and only then, can the court’s powers be engaged, and only under Ord 24 r 11, unless, of course, other powers of the court are being invoked, whether in aid of an injunction or on the basis of the Norwich Pharmacal principles.

9.  In any event, however the application is framed, the real issue of substance is whether the information sought by Mr Sum needs to be given now, or whether a decision on what information should be disclosed can await the hearing of the summons.  I know that the information which is sought goes to the heart of the case, its materiality being beyond question because it is highly relevant to whether the company has indeed sold the cars, and if it has, whether it has sold them to bona fide purchasers for value without notice of Mr Sum’s rights.  I appreciate that the information would enable Mr Sum’s solicitors to begin inquiries now about the genuineness of the sales.  But Mr Sum is protected from any disposal of the cars in the future if the sales which are alleged already to have taken place are found not to have been genuine sales at all by the continuation of the injunctions.  I have not discerned any downside for Mr Sum if the question of disclosure of the purchasers’ identities is deferred until the hearing of the summons.

10.  I therefore propose to make an order along the lines of paras 1, 2, 4, 5 and 6 of the order sought by Mr Sum in para 18 of Mr Westbrook’s speaking note for today, but not along the lines of para 3.  This matches in its entirety the consent order which the company’s solicitors proposed last week, but which Mr Sum’s solicitors did not agree to because they wanted the court to make the further order for disclosure.

(Submissions on costs)

11.  I think the appropriate order to make today is that all the costs arising out of the summons be reserved to the judge who is to hear the summons, save that the company’s costs of today be paid by Mr Sum, to be taxed if not agreed, but not paid until the conclusion of the trial of the action.