CLASSICS INTERNATIONAL LTD v. CLARET HOUSE CO LTD

HCA 1337/2018

[2019] HKCFI 163

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1337 OF 2018

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D E C I S I O N

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Introduction

1.  This is D’s urgent appeal against Master J Wong’s decision on 8 January 2019 refusing a stay of execution of his order for specific performance of a contract for the sale and purchase of a 1994 Porsche 964 Turbo S, (“Vehicle”) which is currently physically in Germany.

2.  P, the purchaser, issued the writ herein on 8 June 2018 and sought specific performance of the sale and purchase contact executed by P on 13 December 2017 and by D on 18 December 2017 (“Contract”) and an injunction restraining D from selling, assigning, transferring, charging or in any way dealing with the Vehicle.

3.  P also issued a summons to seek an interim injunction and obtained an undertaking from D in terms of P’s summons on 12 June 2018, which was subsequently continued by consent on 28 June 2018.

4.  On 7 September 2018, P issued a summons under Order 86 Rules 1 & 2 of the Rules of the High Court for specific performance of the Contract, and for an order that D to deliver to P within 7 days (i) the full set of handbooks along with the service handbook with the data page included (“Handbooks”) and the leather wallet of the Vehicle (“Leather Wallet”) and (ii) the Vehicle (“Order 86 Summons”).

5.  On 8 January 2019, Master J Wong granted the order in terms sought by P and gave judgment for P for specific performance of the Contract and ordered that the Vehicle be delivered in Germany within 7 days together with the Handbooks and the Leather Wallet (“SP Order”).  D had immediately applied for a stay of the execution of the SP Order from Master J Wong but such application was refused by Master J Wong (“Refusal of Stay Order”).

6.  On 11 January 2019, D lodged two Notices of Appeal, one against the SP Order (“1^st Notice”) and one against the Refusal of Stay Order (“2^nd Notice”).  What happened thereafter on 11 and 14 January 2019 will be set out later.  In short, D’s solicitors issued an ex-parte summons, stated to be “on notice”, for an interim stay pending the determination of the 2^nd Notice (“Ex-Parte Summons”), which was heard by this Court at 7:30 pm on Monday 14 January 2019.

7.  Ms Anita Yip SC and Ms Lily Yu appeared for D. No one turned up from P’s solicitors.  The Court declined to hear the summons on ex-parte basis.  However, as it was impressed upon this Court that there was urgency in that 15 January 2019 was the deadline for the compliance with SP Order, I ordered an interim stay until 4:30 pm on 15 January 2019 for D to issue an inter-partes summons.  On 15 January 2019, D issued an inter-partes summons seeking an expedited hearing of the 2^nd Notice with time of service abridged and to be heard at 4:30 pm on 15 January 2019 (“Inter-Partes Summons”).

8.  Mr Luxton appeared for P at the hearing of the Inter-Partes Summons.

9.  The parties agreed that the inter-partes hearing was to be the expedited hearing for the 2^nd Notice.  The Court had invited the parties to consider whether the 1^st Notice, which would be a de novo re-hearing of the Order 86 Summons, could also be heard on an expedited basis, but this was not agreed by D.

10.  At the end of the hearing, this Court reserved its decision and extended the interim stay until determination of the 2^nd Notice.

Events leading to the issue of the Ex-Parte Summons

11.  Mr Luxton complained that P’s solicitors only became aware of the Ex-Parte Summons just before 12 pm on Tuesday 15 January 2019 and that D’s conduct in relation to this matter was entirely inappropriate and that on this ground alone, D should not be rewarded for its conduct by having the interim stay extended.

12.  What transpired was that on 11 January 2019, after lodging the two Notices of Appeal, D’s solicitors had sent an urgent letter on the same day to the Registrar seeking a 30 minute short hearing before the Duty Judge on and/or before 14 January 2019.

13.  The letter was received shortly before 4 pm by the Masters’ Clerks’ Office on Friday 11 January 2019.  It was not clear what then happened.  According to Ms Yip’s Note for the inter-partes hearing, no constructive response was received, and that D’s solicitors had then tried to reach out to the Duty Judge[1] but was asked to go back to the Registry.

14.  It further appeared from Ms Yip’s Note that on Monday 14 January 2019, D’s solicitors attempted to lodge an ex parte (on notice) summons for an interim stay pending the hearing of the 2^nd Notice, and had requested the Registry for a hearing before the Duty Judge but was refused by the Registry and instead D’s solicitors were told to fix it before the Practice Master.  Eventually, the summons was heard by Master Chow at 4 pm on 14 January 2019.  Notice of D’s summons was given to P’s solicitors.  The application was dismissed by Master Chow.  According to Ms Yip, Master Chow took the view that the summons was “a res judicata of Master J Wong’s Decision in Refusing Stay, since Master J Wong has already refused the stay pending appeal”[2].  However, according to P, Master Chow’s decision was based on Brand Farrar Buxbaum LLP v Samuel-Rozenbaum Diamond Ltd and anor HCA 5191/1998, 08.05.2002. In any event, Master Chow had ordered D to pay P’s costs on an indemnity basis.

15.  After dismissal, D immediately issued a further ex-parte summons before the Duty Judge for an interim stay of execution of the SP Order pending the determination of the 2^nd Notice (“Ex-Parte Summons”).

16.  Pausing here, I wish to point out that I am the Duty Judge for the week commencing 14 January 2019.  The only call I received from D’s solicitors was around 6:55pm on 14 January 2019 during which I told D’s solicitors to be at Court 46, at 7:30 pm.  I understand that my clerk had earlier received a call from D’s solicitors at 6:10 pm, but at the time I was attending the Ceremonial Opening of the Legal Year.

17.  No one had informed this Court at the ex-parte hearing that there had been an earlier hearing before Master Chow or the above events, nor did the bundles lodged by D’s solicitors contained any correspondence between the parties after 28 December 2018.

18.  Mr Luxton complained that P’s solicitors were not given notice of the Ex-Parte Summons, notwithstanding a letter they sent to D’s solicitors on 14 January 2019 that it would be wrong to apply to the court ex-parte.  D’s solicitors said they had attempted to telephone P’s solicitors, and although there had been earlier correspondence indicating that D was going to seek an interim stay and that P’s solicitors were indeed given notice of D’s application before Master Chow, it was admitted by D’s solicitors that no letter/email/message was sent to P’s solicitors giving them notice that they were going to make an application to the Duty Judge and/or that a hearing was fixed at 7:30 pm before this Court on 14 January 2019 .

19.  Mr Luxton had also referred this Court to Order 3 rule 2(5) of RHC and paragraph 3/2/9 of the Hong Kong Civil Procedure 2019, Vol 1, and submitted that as the “specified days” are to be excluded, namely Saturday and Sunday, the deadline for complying with the SP Order would only expire on Thursday 17 January 2019, and there was no urgency and no justification for D to issue the Ex-Parte Summons without notice.

20.  The SP Order states that the delivery has to be “within 7 days”. Having considered paragraph 3/2/9, I accept Mr Luxton’s calculation of time and that the deadline should in fact be 17 January 2019. There was no urgency in the Ex-Parte Summons being heard on 14 January 2109. 

21.  As said by Ma J, as he then was, in the Brand Farrar Buxbaum case, such abuses of the ex parte procedure are to be deplored, and even if there is genuine urgency, the proper course is for an inter partes application, if necessary with time abridged, or if that is somehow not possible, to make an ex parte application on notice[3].  Further, following the observation of the then Ma J, the better course is for D to ask for an expedited hearing date for the appeal and in the present case, what D should have done was to seek an expedited hearing for the 2^nd Notice, if necessary before the Duty Judge, instead of issuing the Ex-Parte Summons.

22.  The Court’s attention was not drawn to the Brand Farrar Buxbaum case at the ex-parte hearing.  I must say I find that D’s conduct in seeking an urgent hearing in the way it did was inappropriate and had resulted in wasting this Court’s time on 14 January 2019. 

23.  Having said this, as D’s solicitors did in the end issue the Inter-Partes Summons, which they should have done in the first place, and had agreed the inter-partes hearing to be the expedited hearing of the 2^nd Notice, further waste of the Court’s time was avoided.

The Merits of the appeal  

24.  The appeal from the matter to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal and the judge treats the matter as though it came before him for the first time[4]. In the present case, the matter is whether the Court should grant a stay pending the hearing of the 1^st Notice.

25.  Essentially, Ms Yip argued that:

(i)  If stay is not granted, D would lose the Vehicle and the appeal against the SP Order would be rendered nugatory;

(ii)  D has a good prospect for its appeal against the SP Order and that Master J Wong’s decision in granting the SP Order was plainly wrong.

26.  The legal principles for a stay have been set out in the well known case of Star Paly Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.  In particular, the existence of an arguable appeal (ie an appeal with reasonable prospects of success) is the minimum requirement before a court would even consider granting a stay, and where there exists only an arguable appeal, the appellant will need to provide the court with additional reasons as to why a stay is justified, for example, that an appeal would be rendered nugatory[5].

27.  As Mr Luxton has submitted, which I accept, and as seen in the judgment of Cheung JA in Lee Theatre Realty Limited and Tong Wah Jor & Others, CACV 279/2009, unrep, 02.03.10, this Court should first consider the merits of D’s proposed appeal before considering whether D’s appeal will be rendered nugatory if a stay is not granted[6]. 

28.  Ms Yip submitted that there are clearly two areas of serious factual disputes which need to be resolved by hearing evidence:

(i)  where the delivery of the Vehicle shall take place;

(ii)  whether the payment method shall relate to the delivery of the Vehicle.

29.  Ms Yip also submitted that Master J Wong (“Master”) failed to realise that there was a dispute as to when the Vehicle was ready to be delivered.

30.  On the issue as to when the Vehicle was ready to be delivered, it was P’s understanding that the Vehicle was a ‘finished vehicle’ at least by 7 May 2018, based on a whatsapp message sent by Mr Kelvin Wong of D on 20 March 2018 (05:09)[7] and subsequent email message dated 7 May 2018 with Matthias Riske of Porsche Classic Centre[8].  D’s case is that he was only informed by Porsche Classic Centre on 25 October 2018 that the maintenance work was completed and that it was thereafter that the Vehicle was ready for delivery

31.  Mr Luxton submitted that even if D were right in that the Vehicle was only ready to be delivered on 25 October 2018 and was thus not ready for delivery when the writ and/or Order 86 application was made (which is strongly disputed by P), this would not provide grounds for refusing an order for specific performance.  Mr Luxton had referred to the Court of Appeal’s decision in Kou Lau Ru Ling v Tse Sui Luen [2002] 2 HKC 644.  As seen in that decision, and as said by Godfrey VP, a claim for specific performance is not defeated merely by the fact that the claimant has misconstrued the contract and so mistakenly insisted on an incorrect date for completion, and that the court will simply ignore the mistake and will make such an order as is appropriate to carry the contract into execution[9].  I therefore accept Mr Luxton’s submission that even if the Order 86 Summons were premature, this would not provide grounds for refusing the SP Order.

32.  As for where the delivery is to take place, Ms Yip’s submission is that the Contract  contemplated an overseas delivery all along since there was an express term in Clause 3 under Section III of the Contract[10]. Clause 3 reads as follows:

“The Buyer shall be solely responsible for not only all the export customs and declarations but also the import customs clearances and duties in England.”

33.  Even though Clause 3 expressly refers to import customs clearances and duties in England, it is clearly not an express provision that England is where the delivery of the Vehicle is to take place. There is simply no such express term. 

34.  Ms Yip had also tried to argue that there is an implied term in the Contract that the “Vehicle shall be delivered from Germany to England”[11] and that the Master’s decision to invoke s 31(1) of Sales of Good Ordinance (“SOGO”) which has no operation is clearly wrong.

35.  The relevant principles as to implied terms have been outlined by the Court of Final Appeal in Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381.  It is not necessary to give business efficacy to the Contract to imply a term that the Vehicle is to be delivered in England as there is no provision in the Contract regarding who is responsible for arranging for such delivery or the costs incurred.

36.  Further, as seen in the following letters between the parties’ respective solicitors, it was never D’s case in those letters that the place of delivery is to be in England or that this was an implied term of the Contract:

(i)  In a letter dated 2 November 2018, P’s solicitors proposed that delivery was to take place in Hong Kong as the Vehicle’s Hong Kong registration had to be transferred to P and at the same time D could handle the claim for refund of VAT when the Vehicle is shipped out of Germany[12].

(ii)  In P’s solicitors’ reply letter dated 9 November 2018[13], they referred to Clauses 1 and 3 under Section III of the Contract that the parties had clearly anticipated that delivery would take place in Germany and that P would thereafter take the Vehicle to England where P is registered, and that delivery must take place in Germany.

(iii)  In the letter dated 12 November 2018[14], D’s solicitors stated that the Contract was silent on the place of delivery and as the Vehicle was registered in Hong Kong and not Germany, D did not agree that the delivery must take place in Germany and that D was willing to consider options of delivery other than in Hong Kong.

(iv)  In response to the above, and after P’s inspection of the Vehicle at the Porsche Classic Centre on 3 December 2018, P’s solicitors had written on 5 December 2018[15] to state that P remained ready to take delivery in Germany.  The letter goes on to say that as P’s director resides in the United States, P is prepared to air freight the Vehicle from Germany to the States at its own costs, and that this arrangement may work to the advantage of D if D wishes to recover any European VAT that he may be liable to pay in respect of the Vehicle.

(v)  It would appear in a letter dated 5 December 2018 from D’s solicitors[16] that D was amenable to P’s proposal to transport the Vehicle by air to the States which may facilitate D to recover the VAT and to which D was grateful but then D proposed P’s payment be by way of irrevocable letter of credit and that D would be the person handling the transport.

(vi)  P was not prepared to accept the terms imposed by D and reiterated that P would pay as per the Contract and would pay in cash the purchase price within 7 days upon delivery[17].

(vii)  D’s solicitors then wrote on 11 December 2018 and stated amongst other things, that it was beyond dispute that the place of delivery and mode of payment were not expressly provided for in the Contract and that to perform the Contract, the parties were obliged to co-operate and hold discussion as to these missing puzzles and logistics that followed.

37.  It is clear from the above letters that the now alleged implied term is not so obvious that it goes without saying.  There was also no mention by D of any implied term as to delivery in England.

38.  It is also clear from the above letters that the parties were discussing various options as to the place of delivery.  At the hearing before the Master, there was no agreement between the parties.  In the absence of an express or implied term specifying the place of delivery, the Master ordered the delivery to be in Germany pursuant to section 31(1) of SOGO.  Having considered the evidence, in my view, there are no reasonable prospects of D succeeding in arguing for an implied term requiring delivery of the Vehicle in England.

39.  As for D’s argument that there is an implied term that P is required to pay the purchase price for the Vehicle by letter of credit, this is contrary to the express terms in Clause 4 of the Contract. 

40.  In light of what I have said above, I have come to a preliminary view that there is no arguable appeal and/or there are no reasonable prospects of success for the appeal against the SP Order. 

Whether the appeal would be rendered nugatory 

41.  D argues that there is no possible retention of title when the Vehicle is delivered to P’s possession in Germany, and Ms Yip submitted that delivery in Germany will render the retention of title clause (paragraph 3 under Section IV) totally meaningless, and also that if the Vehicle were delivered to P in Germany, P would obtain physical possession of the Vehicle and drive away the Vehicle, resulting in D losing the Vehicle and leaving D with no security as P is a one dollar company.

42.  It is expressly stated under paragraph 3 of Section IV of the Contract that the ownership will only pass onto P once the bank honours the bank transfer or the other legal instrument of payment.  The Contract only provides for the delivery of the Handbooks, the Leather Wallet and the Vehicle.  There is no provision for the delivery of the original title documents/registration documents of the Vehicle and/or transfer of title until the payment is honoured.  As pointed out by Mr Luxton[18], delivery of the Vehicle is separate from transfer of title.  I do not find there was sufficient evidence that the levying of execution would result in financial ruin or serious financial consequences to D or that failure to grant a stay would have a serious deleterious effect.

43.  Having considered the above, I am not satisfied that the appeal would be rendered nugatory if there is no stay.

44.  Ms Yip also argued that time is not of the essence, since it is clearly provided by Clause 1 under Section III that the date of the completion of the maintenance of the Vehicle cannot be ascertained and that in any event, D shall not be held liable for late delivery of the Vehicle.

45.  The SP Order simply provides for D to perform its part of the contractual obligations and P to perform its part of the contractual obligations.

46.  It appeared that it was D’s lawyer who prepared the Contract[19]. Prior to coming up with the draft, D had also asked for the business registration documents of P[20], and had also asked for a deposit[21]but was informed that P would not pay a deposit.  Notwithstanding this, D decided to proceed with signing the Contract.  In fact, it is clear that D had had legal advice from his lawyer before signing the Contract[22].

47.  There is no unfairness to D, as D is simply required to perform its contractual obligations.  Even on D’s case, it has been ready to deliver the Vehicle pursuant to the Contract since 25 October 2018 and more than two months have gone by, and in my view, D has had reasonable time to perform its contractual obligations.

Conclusion 

48.  Having considered the above, I am not prepared to grant any continuation of the interim stay of execution.  The 2^nd Notice is dismissed.  D shall pay P’s costs of the Inter-Partes Summons and of the 2^nd Notice to be taxed if not agreed, with certificate for Counsel.