ARNOLD ROBERT LTD v. GLORIOUS MOTORS LTD

HCA 950/2014

[2018] HKCFI 2467

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 950 OF 2014

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J U D G M E N T

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A. THE BACKGROUND FACTS

1.  In this action, the plaintiff sues the defendant for damages or alternatively contractual compensation for the alleged breach of a contract between them (“the Agreement”). 

2.  Under the Agreement, the details of which I shall say more below, the defendant, a dealer in used luxury automobiles, was to sell to the plaintiff a used motor vehicle of the McLaren brand (model number MP4-12C) with registration number “SA1280” (“the McLaren”), to be paid for partly by cash and partly by the plaintiff trading-in a used Ferrari (model number 599-F1) with registration “00LALA” (“the Ferrari”).

3.  Mr Adrian Petter (“Petter”) was and is a consultant of the plaintiff.  He acted on behalf of the plaintiff in all the dealings with the defendant and no issue arises in this regard.

4.  The Ferrari was manufactured, and first registered in Hong Kong, in 2007.

5.  The plaintiff purchased the Ferrari on 24 May 2013 (this beingthe date of the plaintiff becoming the registered owner thereof).  After thepurchase, the plaintiff arranged for it to be serviced by Auto Italia Limited(“Auto Italia”), which was at the time the authorised Ferrari dealer in Hong Kong.  The contact at Auto Italia was Mr Cliff Louie (“Louie”).

6.  On 29 May 2013, Louie sent an email to Petter making a number of recommendations for work to be done on the Ferrari, including an item being “Install 599 HGTE handling package” at a cost of HK$179,094.[1]  The plaintiff apparently agreed to this.

7.  On 30 May 2013, Louie sent another email to Petter stating:

“ A ferrari 599 with the HGTE exhaust system arrived at our facility today, so I took a picture to see if you would be interested.

The exhaust system claims adds horse power and the sound is also different.  If you have time you can stop by and listen to the difference.”

A photograph of the Ferrari with the HGTE exhaust system was attached to the email.  As it turned out, the plaintiff was not interested in the HGTE exhaust system. 

8.  It is agreed between the parties before me, by reference to two invoices issued by Auto Italia to the plaintiff dated 23 July 2013 and 30 September 2013, as follows:

“ The following items, components, alterations and/or enhancementsin the Invoices relate to HGTE and are relevant to the current case:

1. Labour: Replace all four tires and tire pressure sensors (HGTE WHEELS);

2. Labour: Install ‘HGTE’ handling package;

3. Install HGTE Handling kit, HGTE wheels and alignment $190150.50

4. F70001622 HGTE handling kit re;

5. F70001818 599 HGTE RIMS SET; and

6. Supply and Install driver side HGTE fnt lower mud guard $693.00.”

9.  It is therefore not in dispute that the Ferrari was in fact only fitted with the HGTE handling package, including the HGTE wheels.  It was not fixed with a HGTE exhaust system or with the HGTE aesthetic features.  It is not very clear whether a “HGTE handling package” and a “HGTE handling kit” are the same thing.  From the way Louie wrote up the various documents, it would appear that a HGTE handling package includes a handling kit (which itself includes the suspension, software and alignment) and the wheels.  On the other hand, counsel for both sides appear to accept that “HGTE handling package” and “HGTE handling kit”are the same thing.  It is not important to decide which is correct because there is no dispute that the Ferrari did have installed the HGTE handling “package”, and the HGTE handling “kit”, in the sense that I have described (if and in so far that they are different), but not the HGTE exhaust and aesthetic features.  As will be seen, an important issue in this case is what is meant by “HGTE package”.  The defendant, understandably, at the trial refers to the handling features as the handling “kit”.  However, since the official dealer, Auto Italia, itself at times referred to “HGTE handling package”, the term “package” when used in relation to HGTE, can be, and has been, used to describe the handling features only, and not necessarily the overall item which includes everything HGTE (including the exhaust and aesthetic features). 

10.  In about December 2013, Petter decided to sell the Ferrari and looked for another car.  He placed an advertisement on a website (“the Advertisement”), with the following “seller’s comment”:

“ Full Factory Warranty. Excellent Condition Like New. HGTE Package with upgraded suspension. New Tires. Ceramic Brakes.”

11.  Around that time, in December 2013 and January 2014, Petter visited the defendant’s Wanchai showroom. He was served by a sales consultant of the defendant, Ms Chen Jiaxuan (also known as Cherry Chen) (“Chen”).

12.  Petter expressed interest in the McLaren which the defendant had for sale, and he and Chen discussed inter alia the trading-in by the plaintiff of the Ferrari as part payment for the McLaren.  During one of these visits, Petter wrote on a piece of paper what were fitted to the Ferrari as options, which included “Sport Exhaust”.  After further discussions, and a viewing on 23 January 2014 [2] of the Ferrari by Chen at the car park of Petter’s apartment building (as to which more will be said below), on 28 January 2014 the plaintiff and the defendant entered into the Agreementfor the sale of the McLaren (described as “the Vehicle” therein) by the latter to the former at HK$3,480,000.  The price of the Ferrari (described as the “trade-in vehicle” therein) as a trade-in for part payment was stated to be HK$1,490,000.  A deposit of HK$25,000 was paid by the plaintiff.

13.  The Agreement was on the defendant’s standard printed formand, after giving details of the Ferrari as the trade-in vehicle, with the makeand model being given as “Ferrari” and “599 F1” respectively, it was stated:

“ 8.1 The Purchaser warrants that the particulars of the trade-in vehicle stated above are true and accurate. If not, the Seller is entitled to reduce the price of the trade-in vehicle or cancel the trade-in. If the price of the trade-in vehicle is reduced, the Purchaser must make good the difference. If the Seller cancels the trade-in, the Purchaser must continue to perform this Agreement and complete the purchase of the Vehicle.

8.2 The Purchaser warrants that the trade-in vehicle has no structural and mechanical defects, that the trade-in vehicle has not been involved in serious collision or serious traffic accident resulting in the welding of the engine compartment to the body of the Vehicle, the welding of the luggage compartment to the body of the Vehicle, the welding of the axles and driveshafts, and that the trade-in vehicle has not been flooded. The Seller shall accept the trade-in vehicle if it has reasonable depreciation and reasonable wear and tear. The Seller can demand the trade-in vehicle be inspected by the dealer. If the inspection report shows that the condition of the trade-in vehicle is different from the Purchaser’s above warranties, the cost of inspection shall be borne by the Purchaser and the Seller is entitled to reduce the price of the trade-in vehicle or cancel the trade-in. If the price of the trade-in vehicle is reduced, the Purchaser shall make good the difference. If the Seller cancels the trade-in, the Purchaser must continue to perform this Agreement and complete the purchase of the Vehicle. If the inspection report confirms the warranties of the Purchaser, the costs of inspection shall be borne by the Seller.

…

10.2 If the Seller fails to complete this transaction in accordancewith this Agreement after receiving the deposit from the Purchaser, the Seller shall refund the deposit to the Purchaser and compensatethe Purchaser in the amount of 20% of the Vehicle Price as stated in clause 7.1.  The Purchaser shall have no other claims against the Seller including but not limited to damages or specific performance.”

14.  Under clause 11.11 titled “Remarks”, the following words were inserted by hand:

“ The trade-in vehicle 599F1 with HGTE package”.

Clause 11.11 was initialled by Chen but not by Petter.

15.  The following additional clause was also inserted into the Agreement by hand by Chen (“the Handwritten Clause”), written in a space between clause 8.5 and clause 9.1 [3] :

“ If either party find that after inspection by the offical car dealersnamely Auto Italia LTD and McLaren HK LTD for the respective vehicles described within, that the dealers inspection discovers any damage to either vehicle in terms of the exterior of the vehicles body work, the interior, or the mechanincal parts or structura of the vehicle then both partys have the right to cancel the deal and the deposit shall imeadietly be returned” [sic][4].

The Handwritten Clause was not initialled by either Chen or Petter.

16.  Pursuant to the Agreement, the McLaren was inspected by McLaren Service (Hong Kong) (“MSHK”).  Petter paid the inspection fee of HK$12,363 on 10 February 2014.  MSHK also issued a report dated 14 February 2014 stating the further work that was required to be done on the McLaren, at an estimated sum of HK$39,338.

17.  On 13 February 2014, Chen sent an email to Petter as follows:

“ Referring to the purchase of our Mclaren MP-4 (SA1280), we have been informed that the inspection has been completed by Mclaren HK Ltd. Please kindly send us the service quotation, so that we can proceed the repair and settle the payment. Furthermore, please arrange 20% deposit ($696,000 - $25,000 = $671,000) of the above purchased vehicle. Once we receivedthe deposit we will complete the transfer and delivery the vehicle as soon as possible.”

18.  In the meantime, Petter sent the Ferrari to Auto Italia.  On 12 February 2014, Louie sent an email to Petter as follows:

“ The annual service on the F599 is complete, and I have enclosed the annual service report for your reference.”

19.  What was enclosed was a pro-forma invoice dated 12 February 2014 for $10,682.10 with details of the work done (supplemented by an email dated 14 February 2014 in relation to an item of work not included in the invoice).  This was the “annual service report” Louie referred to. 

20.  By an email dated 13 February 2014, Louie informed Petter that the Ferrari was ready for collection, and that the defendant had settled the invoice for the annual service.  It appears that Auto Italia issued a formal “Cash Sales Invoice” dated 13 February 2014 in identical terms to the pro-forma invoice of 12 February 2014, with a chop stating that the same had been settled by cheque on 12 February 2014.

21.  On 14 February 2014, in reply to Chen’s email the previous day (§17 above), Petter sent an email stating:

“ Thank you for confirming that you are satisfied with the checkingof the trade-in vehicle and your company’s agreement to pay for all the said repairs for the Mclaren as stated and discussed at Mclaren”.

22.  On 14 February 2014, at the request of the defendant, Louie prepared a quotation (“the Quotation”) setting out the pricing for various works to be done on the Ferrari, including the installation of a HGTE exhaust system, and the repair or replacement of the seat belt lock, the front underfloor fender, and the upholstery.  The Quotation stated a total price of $213,907.

23.  The defendant showed the Quotation to Petter on 15 February2014 when he visited its showroom, having sent him the Quotation by email around that time.  In the email, Chen said:

“ Thank you for confirming that you are satisfied with the checking of our Mclaren MP-4 and you are agreed to pay for all the said repairs for the Ferrari 599 as stated from Auto Italian Ltd (Quotation attached).

Once we received the repair completion and payment receipt of the trade in vehicle, please also send us original of the VRD ….”

24.  Petter however refused to pay for the matters stated in the Quotation.

25.  By letter dated 19 February 2014 to the plaintiff, solicitors acting for the defendant, Lau, Chan & Ko (“LCK”), referred to the sale of the McLaren with the Ferrari as the trade-in, and said:

“ The abovesaid arrangement was subject to the conditions as highlighted in Clauses 8.1 and 8.5 together with the handwritten supplemental clause in the Agreement. In particular, we wish to draw your attention to the following clauses:-

[After citing clauses 8.1 and 8.2, the letter continued:]

It was an implied term that owner of the two vehicles shall take their own vehicle to the official care dealers to conduct the inspection and repair …

We are instructed that our client has duly conducted inspection and repair of the McLaren on or about 14^thFebruary 2014 for youas requested. Copy of the corresponding reports, quotations and invoices have been delivered to you promptly. At about the same time, we received from you or your agent an inspection report and a quotation from Auto Italia Ltd, regarding the Ferrari. Nonetheless, we are told that you have not proceeded with the required repairing work as per the Agreement.

In addition, we notice from the quotation from Auto Italia Limited that HGTE Exhaust Kit needs to be installed in the Ferrari. As such, we put on record that the Ferrari does not come with full HGTE package as claimed and stated in the Agreement.

We are now instructed, which we hereby do, to urge you taking appropriate steps to complete this matter.  You could either complete the deal in accordance to the terms and conditions of the Agreement and to settle all outstanding sum due to Auto Italia Limited; or you confirm to cancel the deal and have the deposits refunded in the appropriate manner.”

26.  The plaintiff however demanded the transaction be completed with the Ferrari used as the trade-in vehicle, without paying for the works mentioned in the Quotation.  The balance of sum payable by the plaintiff (HK$1,976,694), taking into account the agreed trade-in value of the Ferrari, was tendered through its solicitors, Dundons, on 21 February 2014.  By a letter dated 22 February 2014, LCK said:

“ We stress that the particulars of your client’s Ferrari does not match with the description as stated clause 11.11 in the Agreement entered by our respective clients on 28^thJanuary 2014. Further, the condition of your client’s Ferrari is beyond reasonable wear and tear, as was shown by the inspection report made by the official dealer.

As such, whilst our client is willing to complete the deal, our client must exercise his rights pursuant to clauses 8.1 and 8.2 of the said Agreement. We put on record that our client will not accept your client’s Ferrari as ‘trade-in vehicle’ in this deal.

In this regard, your client can either complete the deal in accordance with the terms and conditions of the Agreement and to settle the outstanding sum due to our client in the sum of HK$1,478,306 (being the difference between the sale price of HK$3,480,000 and the deposit of HK$25,000 and the further payment of HK$1,976,694); Alternatively, your client may choose to cancel the deal and our client is very happy to return the said deposit and further payment in an appropriate manner.”

The cheque of HK$1,976,694 was returned.

27.  By letter dated 27 February 2014, Dundons replied as follows:

“ Your client has breached clause 8.2 of the Agreement in refusing to accept the Ferrari as the trade-in vehicle despite the Inspection Report dated 12/2/2014 showing merely ‘reasonable depreciations and reasonable wear and tear’, and in further breachof the Agreement has refused to accept our client’s above cheque and complete the sale of the McLaren.

Quiet clearly your client has evinced an intention not to be bound by the terms of the Agreement, and has repudiated the same, which repudiation our client hereby accepts and shall treat the Agreement as terminated and itself as released from any obligations thereunder.”

28.  By letter dated 28 February 2014, LCK said:

“ We put on record that the Agreement was terminated due to our client’s legitimate exercise of clause 8.1 and 8.2 of the Agreement. In any event, your confirmation that your client accepts and treats the Agreement as terminated is noted.

As such, both parties shall be released from any obligations under the Agreement, and our client would have absolute discretion to deal with the McLaren MP4-12C, without any need to notify your client.”

The deposit of HK$25,000 was returned.

29.  The matters referred to in §§1 – 28 above are not in dispute and/or are supported by contemporaneous documents, and I find them as facts.

B.   THE PARTIES’ CONTENTIONS

30.  In summary, the defendant says that because of the various defects as identified in the Quotation including the damage to the seat belt lock, the front underfloor fender, and the upholstery, which constituted more than reasonable wear and tear or reasonable depreciation, it was entitled not to accept the Ferrari as a trade-in vehicle.  Even if the defects were no more than reasonable wear and tear and reasonable depreciation, they constituted damage to exterior body work or the interior of the Ferrari and the defendant was entitled not to accept the Ferrari as the trade-in vehicle under the Handwritten Clause. 

31.  Further, the defendant says that the effect of clause 11.11 is that the Ferrari was one installed with all the options covered by “the HGTE Package which could possibly be installed to that vehicle”.  The sale by the plaintiff to the defendant was a sale by description of such a Ferrari and the plaintiff had breached the implied condition of the Agreement that the Ferrari would reasonably comply with the description, ie a Ferrari with the“HGTE Package”.  The Ferrari did not have various HGTE features, being the exhaust system, various aesthetic features, and various performance features.  The defendant says that the “HGTE Package” specification of a Ferrari 599 means the handling kit, the performance kit, the exhaust kit and the aesthetic kit.  The HGTE performance kit, however, is, the defendant accepts, only available for post-2008 cars, and cannot be installed on cars with manual gearboxes.  I therefore understand from the foregoing that it is the defendant’s case that as a matter of contract the Ferrari should, but in fact did not, have the HGTE exhaust and aesthetic features installed.

32.  In reply, the plaintiff denies that the various items in the Quotation were anything more than reasonable depreciation or reasonable wear and tear, or falling within the Handwritten Clause which, when read with clause 8.2, was intended to cover major or substantial latent defects to the vehicles, and there were no such defects in the Ferrari when it was inspected by Auto Italia.  The payment by the defendant of the invoice of the inspection is consistent with the defendant being satisfied with the Ferrari conforming with the warranties and terms of the Agreement.

33.  As for clause 11.11 and the “HGTE package”, the plaintiff avers that:

(1)   The plaintiff did not agree to the said term, but was added by Chen for the defendant without the plaintiff’s agreement or consent.

(2)   Clause 11.11 was merely a “remarks” clause and cannot be construed as containing an express condition or warranty that the Ferrari had the “HGTE package”, and the clause was not drafted with sufficient clarity or certainty as it did not specify which grade of the HGTE package was required to be fitted.

(3)   In any event, clause 11.11 was satisfied as the Ferrari did have the HGTE suspension package, wheels, handling kit, rim set and front lower mud guard.

(4)   The sale of the Ferrari was a sale of specific goods and not a sale by description.  Chen inspected and took photographs ofthe Ferrari and it was apparent that it did not have HGTE seats, grill or exhaust.  In any event, the Ferrari was described as having been fitted only with the HGTE suspicion package upgrade, which it did have.

34.  Although various heads of loss and damage are claimed in the Statement of Claim, at trial the plaintiff confines its claim to that stated in clause 10.2 of the Agreement, ie HK$696,000 (HK$3,480,000 × 20%). 

C.   THE EVIDENCE

35.  Petter is the only witness for the plaintiff.

36.  Chen and her immediate supervisor, Fan Chun Hung (also known as Arthur Fan) (“Fan”), give evidence for the defendant.  The defendant also adduces a witness statement of Tong Lok Man Raymond (“Tong”), a sales consultant employed by the defendant at the time of the Agreement and who apparently witnessed the signing of the Agreement by Chen and Petter, but does not call him at the trial.  I therefore disregard Tong’s statement.

37.  I shall set out the main points of the evidence of each witnessin this Section.  I shall make the findings necessary for the disposal of the issues in this case in the next Section.

C1.   Petter’s evidence

38.  Petter’s evidence is as follows.

39.  Since the plaintiff purchased the Ferrari in May 2013, it had arranged various repairs and additional works to be carried out on it by Auto Italia, including the installation of the HGTE handling package.  The reason was that Petter wanted the Ferrari to be installed with some new wheels which he had seen.  Those wheels turned out to be HGTE wheels, and Louie recommended to Petter the HGTE handling package, which included the HGTE wheels.  Petter had not heard of the term HGTE before.  The total cost of the repairs and works was HK$400,999.  The plaintiff also purchased a warranty at a cost of HK$39,000.  Petter was, however, not interested in the HGTE exhaust system as that would only make a loud car louder.

40.  According to Petter, as a result, since the plaintiff purchased the Ferrari, he had:

“ kept the vehicle in pristine condition and personally ensured that it was properly maintained”.

41.  Petter says he specifically stated in the Advertisement that theFerrari had the HGTE package with the upgraded suspension because it didnot want others to think that it had the other HGTE features which it did nothave, and also because the HGTE suspension was something which one could not see from the photographs but was something that he was proud of.

42.  According to Petter, when he visited the defendant’s showroom and discussed with Fan and Chen the possibility of buying the McLaren, with the Ferrari used as part payment, he showed Fan and Chen his mobilephone with images of the Ferrari’s vehicle registration document (“VRD”), so that the defendant could inter alia confirm with Auto Italia details of theFerrari and all the work that had been carried out on it, and the Advertisement.  He also said that they could inspect the Ferrari at his apartment building.

43.  Chen, at the instruction of Fan, went with Petter to his apartment building to view the Ferrari.  During the viewing, he pointed out various features of the car, including the fact that the wheels were HGTE wheels, it had HGTE suspension, and the HGTE software which were purchased as a package from Auto Italia.  Petter mentioned the HGTE suspension because it was expensive and she would not be able to see it externally.  Chen took photographs of the Ferrari, both externally and internally.  His impression was that Chen had adequate understanding andknowledge about supercars, and in particular the Ferrari 599 as the defendant had recently sold one with a HGTE exhaust fitted.  Whether or not the Ferrari had the HGTE exhaust system installed would be clearly visible from an external examination of the car by someone from the defendant, which sold a Ferrari with a HGTE exhaust not long before.Petter and Chen did not discuss whether the Ferrari had the HGTE exhaust or not.

44.  Regarding the Handwritten Clause, Petter says he was concernedthat the McLaren might have damage underneath which he could not see, orextensive hidden damage which might be costly to repair but did not affect vehicle safety, so that the plaintiff might still be obliged to purchase. Instead of the defendant agreeing to pay for the rectification of any such damage, which it did not so agree, the Handwritten Clause was inserted to allow the plaintiff to cancel in such circumstances.  It was not intended to override the “wear and tear clause”, ie clause 8.2.  However, Chen did, after consulting her manager, promise that if there were “scratches and damage underneath” the McLaren which were wear and tear, the defendant would pay for the repair.  Petter suggests that the defendant was trying to get outof paying for such repair (estimated by MSHK to be about HK$39,388) bysuddenly insisting that the plaintiff had to pay for the items in the Quotation. 

45.  As for clause 11.11, this is what Petter says in his witness statement:

“ As for the handwritten term in Clause 11.11 of the [Agreement],I recall that this was unilaterally inserted by Ms Chen and was not at my request, nor was it discussed with me prior to its insertion. I had assumed, because it was entitled ‘Remarks’, that it was a remark for internal use only. I did not understand it to be a term of the contract, nor was I informed that this might be the case.”

46.  Petter also says he did not pay particular attention to the words “HGTE package” in clause 11.11, as he assumed that it meant that the Ferrari had HGTE wheels and other items, to which the attention of Chen was drawn.  He cannot recall whether clause 11.11 was filled out when he signed the Agreement.  He was certain that he never represented to Chen that the car was fitted with the HGTE exhaust package, and the defendant could easily confirm that with Auto Italia.  He had only pointed put to Chen the HGTE features the Ferrari had, and did not understand how he could have given Chen any impression that the Ferrari had “everything” HGTE.  There was no fixed or certain meaning of a full HGTE package.

47.  Further, Petter says that Chen’s viewing, and the photographsshe took, of the Ferrari would have revealed what HGTE features the car did or did not have (apart from the suspension and the software).  Referring to the photographs taken by Chen of the Ferrari, Petter says that the exhaust of the Ferrari was clearly seen to be not HGTE.  Fan and her superiors would also have a reasonable understanding of the term HGTE, that it comprised several components which vary with the year of manufacture.

48.  Petter says that in a telephone conversation he had with Chen on 14 February 2014, she confirmed that the defendant agreed to the contents of the “Annual Service Report” for the Ferrari.  He then sent the email to Chen which I set out at §21 above.

49.  On being shown the Quotation on 15 February 2014, Petter refused to pay as he never agreed to it, and the Quotation was sought and obtained without his consent.  The defendant insisted that the plaintiff had to pay the sum, otherwise it would repay the deposit and cancel the transaction.  Petter refused, because the inspection was completed by Auto Italia as required and the additional items had not been recommended.

50.  Regarding the defects stated in the Quotation which the defendant now refers to, namely in relation to the seat belt lock, the front underfloor fender, and the upholstery, Petter says that they were all normal wear and tear of a 7-year-old car that had been driven in Hong Kong.  He says that the work to be done to the Ferrari as suggested in the Quotation would be to transform the car into a concourse or show model.  According to Petter, after the annual service report was issued, Louie also told him orally that everything was fine with the Ferrari.

51.  In mitigation, the plaintiff sold the Ferrari to another party in March 2014 for HK$1,200,000.

C2.   Chen’s evidence

52.  Chen was employed by the defendant as a sales consultant from around January 2011 to February 2012, and from around November 2013 to March 2014.

53.  In her witness statement, she says that although she had sold “Ferrari cars” in the past, she had not dealt with ones which had the HGTE package installed.  During cross-examination, however, she says she had only sold one Ferrari before, with the assistance of her superior.

54.  During his various visits to the defendant’s showroom in December 2013 and January 2014 regarding the possible purchase of the McLaren and the trading in of the Ferrari, Petter informed the defendant several times that the Ferrari had been fully installed with “HGTE package”[5],that it had “everything”.  She says that she asked Petter whether the HGTE package of the Ferrari comprised many things, and he said words to the effect of “Yes, very expensive”.  She says Petter told her that the HGTE package installed at the Ferrari cost over HK$400,000.  She does not recall seeing the Advertisement at the time and says that Petter gave no details about the HGTE package in the sense that it was only the handling package.

55.  Even though she went with Petter to view the Ferrari at his apartment building, and took some photographs, all she did was to see the car existed, its colour, and the year of manufacture.  She would leave the inspection of the vehicle to others.  Petter did not tell her anything about HGTE during the viewing.  She would not be able to tell if the Ferrari had a HGTE exhaust because she had never seen one before.

56.  It was Petter who wrote the Handwritten Clause down on a piece of paper first and said that it had to be added to the Agreement,otherwise he would not sign it.  Chen sought instructions from Fan, who said that the clause could be included, but since the defendant had not actually inspected the Ferrari or seen the logbook, the exact brand and model of the Ferrari had to be confirmed with the plaintiff and clearly set out in the Agreement.  In her supplemental witness statement and testimony, however, Chen accepts that she did see the Ferrari once before, when she saw the car at Petter’s apartment building, during which she took photographs thereof and sent them to Fan from her mobile phone.

57.  Chen then copied the Handwritten Clause onto the Agreement, and asked Petter to confirm the exact model, to which he replied “It is a Ferrari 599F1 that has been fully installed with a HGTE package”.[6]  Chenthen, with Petter by her side, wrote “The trade-in vehicle 599F1 with HGTE package” in the Agreement under clause 11.11, which she understood to mean everything in the HGTE package had been put in.  She says that any add-ons to a trade-in vehicle would be put there, and not under clause 8.

58.  Petter was then given the Agreement (with the Handwritten Clause) to read, which he did, and then he signed on behalf of the plaintiff.  Chen also did so.  Chen said that when he asked Petter to initial clause 11.11 he said he did not have to as he was signing the Agreement at the bottom, just underneath clause 11.11.  She gave Petter a copy of the Agreement immediately after it was signed by them.

59.  During cross-examination, Chen said that there “probably” was an agreement that the defendant would pay for the work to be done on the McLaren.

C3.   Fan’s evidence

60.  Fan was employed by the defendant as a sales consultant in 2007, and was promoted to the position of branch manager in 2011, and became a director in 2014.  He had worked as a mechanic before.  By January 2014, Fan had sold about 10 Ferraris, some with HGTE features.

61.  Fan agrees that a HGTE exhaust is different from a non-HGTE exhaust: the “mouth” is different in that the former has extra holes.  He says, however, that he was not familiar with what HGTE means when he was dealing with Petter (even though his team sold one with a HGTE exhaust not long before).

62.  In his witness statement, Fan says that during his various visits to the defendant’s showroom in December 2013 and January 2014 regarding the possible purchase of the McLaren and the trading in of the Ferrari, Petter informed the defendant that the Ferrari had been fully installed with “a HGTE package”, meaning that everything that could be added on had been added on. However, during testimony Fan clarifies that he did not have any conversation with Petter before the Agreement was signed, even though he saw him at the defendant’s showroom before,and he was not shown the Advertisement by Petter.  He was only told by Chen about what Petter said, including the fact that the Ferrari had the full HGTE package or add-on.  Chen did not tell Fan that Petter told her that the Ferrari only had the HGTE handling package.

63.  On being shown the photographs taken by Chen of the Ferrari on 23 January 2014, Fan says that he would not know at the time whether it had a HGTE exhaust system.

64.  On 28 January 2014, while he was not at the showroom, Chen called him and said Petter insisted on inserting the Handwritten Clause, to which Fan agreed after consulting his boss, a Mr Chan Tung (“Chan”).  As the defendant had not had the benefit of actually inspecting the Ferrari or seen its logbook, Fan told Chen that the exact brand and model of the Ferrari had to be confirmed with the plaintiff and then clearly set out in the Agreement.  In his supplemental witness statement, Fan accepts that Chen did view the Ferrari at Petter’s apartment building before.  (It would appear that neither Chen nor Fan considers the viewing of the Ferrari by the former on 23 January 2014 to be an “inspection”, which presumably was to be done by mechanics.)

65.  Chen then informed Fan that Petter had just confirmed that it was a “Ferrari 599F1 that has been fully installed with a HGTE package”. He then told Chen to include the clause “The trade-in vehicle 599F1 with HGTE package” in the Agreement and to ensure that Petter had the opportunity to read and verify the contents before signing.

66.  Since the defendant had not by then inspected the Ferrari, whenPetter informed the defendant that he had taken the Ferrari to Auto Italia for inspection in or around the beginning of February 2014, Fan immediately went to Auto Italia’s garage to request it to check that the Ferrari was the model specified in the Agreement and that it had been fully installed with a HGTE package.  He also asked Auto Italia to check the general condition of the Ferrari.

67.  Fan was told by Louie that the Ferrari had not been fully installed with a HGTE package:

“ Mr. Cliff Louie informed me that although the Ferrari has been fitted with HGTE alloy wheels, HGTE steering wheel and HGTEsuspension, it has not been fully installed with a HGTE package because it is missing, amongst other items, HGTE seats, HGTE gearbox and HGTE exhaust system. Mr. Cliff Louie further explained that it may be possible to install a HGTE exhaust system to the Ferrari for HK$60,872, but it is not possible to upgrade the Ferrari’s gearbox and seats to HGTE versions.”

68.  Fan then sought instructions from Chan, who said that the plaintiff had to pay for the installation of the missing HGTE exhaust system and any other defects.  Fan therefore told Auto Italia to complete the inspection and to provide a report and a quotation as soon as possible. He says he asked Auto Italia to put in the Quotation whatever that was in the Ferrari that required to be repaired.

69.  Fan also agrees that the defendant told the plaintiff on about 14 February 2014 that the defendant was willing to pay for the further workon the McLaren.  He says that Petter threatened to cancel the transaction ifthe defendant would not pay for the work, and in the email dated 15 February 2014 from Chen to Petter, which stated that Petter agreed to pay for the work stated in the Quotation, the defendant was copying the wording from Petter’s own email stating that the defendant agreed to pay for the work for the McLaren.

70.  In his supplemental witness statement, Fan says Louie told him that Petter would only let the defendant have the inspection report after paying the costs of the inspection.  Therefore Fan paid the costs at the service centre of Auto Italia, which he said was on 11 February 2014.

D.   DISCUSSION

71.  In my judgment, the crucial issues in this case are whether the defendant was entitled not to accept the Ferrari as the trade-in vehicle because (i) the Ferrari did not have the “full” HGTE package, and/or (ii) ithad defects which were more than reasonable wear and tear or depreciation, or otherwise entitling the defendant to cancel the transaction under the Handwritten Clause. 

D1.   The HGTE package

D1a.   The effect of clause 11.11

72.  Regarding HGTE, in my judgment, the issue is what is the effect of clause 11.11, being a clause in the Agreement itself, ie did the plaintiff give any promise or warranty thereunder that the Ferrari was “with HGTE package” (whatever that means)?  

73.  This is a matter of interpretation of clause 11.11.  As stated in Lewison, The Interpretation of Contracts [7] :

“ The interpretation of a written contract involves the ascertainment of the words used by the parties and the determination, subject to any rule of law, of the legal effect of those words.”

74.  It is to be noted that the defendant does not rely on anything Petter was supposed to have said about HGTE before the signing of the Agreement giving rise to a right to rescind the Agreement on the ground of mistake or misrepresentation or, as I understand it, as a pre-contractual statement which somehow, under the approach as summarised by Lightman J in Inntrepreneur Pub Co (GL) v East Crown Ltd [8], has effect as a collateral warranty.  The defendant is relying on clause 11.11 as a clause of a document which is undoubtedly a legally binding contract.

75.  Further, in considering the effect of clause 11.11 as a matter of interpretation, I have to exclude from my consideration previous negotiations of the parties and their declarations of subjective intent.[9] I shall therefore not consider the evidence from both sides as to what Petter and Chen might have said or discussed about the HGTE features of the Ferrari, or their evidence as to how the words in clause 11.11 came to be written.

76.  Subject to that, in interpreting clause 11.11, the question for me is:

“ … what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean.” [10]

77.  It is not what a pedantic lawyer would understand the parties to mean, but a reasonable person.[11]

78.  Further, in construing a contract, if possible, all parts of it should be given effect, and no part of it should be treated as inoperative or surplus.[12]

79.  In my judgment, the context and purpose of the Agreement is that it was a contract under which inter alia the plaintiff was selling a particular car to the defendant.  The car would have to be identified and described with all essential and material features in the Agreement, being one of the two subject matters thereof (the other being the McLaren being sold by the defendant to the plaintiff).  What was “reasonably…available to the parties in the situation in which they were at the time of the contract”[13],with one party being an owner of a Ferrari and the other an experienced dealer in “supercars” (including at least one Ferrari with HGTE features),was the fact that a 2007 Ferrari might or might not have HGTE features installed at not inconsiderable costs.  To me, whether such a Ferrari has HGTE features would be a very material matter in its description for the purpose of a sale.  While Mr Thomson, counsel for the plaintiff, correctly points out that the defendant has not explained how that would affect the trade-in price (with Fan not including this as a matter to be taken into account in fixing the price), what is also indisputable from the evidence, andwhich I find, is that the HGTE features were quite expensive: the handling package cost more than HK$190,000, and the exhaust, according to the Quotation, would cost $60,872 plus labour.  Petter himself clearly considered the HGTE suspension to be a selling point, as he put that in theAdvertisement.  All these are part of the factual matrix under which I should construe the effect of clause 11.11.  (As I said, I do not take into account the negotiations between the parties regarding the HGTE features or how clause 11.11 was filled in.)

80.  In the light of the above, a reasonable person would read clause 11.11 as part of the description of the essential and material featuresof the Ferrari, essential and material enough to be expressly recorded in the Agreement.  It is to be read together with the other essential details of the Ferrari recorded at clause 8.  That is, the subject matter of the sale by the defendant to the plaintiff was described as a Ferrari, with the details as stated at clause 8, and “with HGTE package”.

81.  Even though, as Mr Thomson submits, there is nothing to “link up” the warranty given by the plaintiff under clause 8.1 with clause 11.11, in my view this is not necessary, as one would then be looking at the Agreement as a pedantic lawyer rather than a reasonable person from a commercial and practical point of view.  As I said, the reasonable person would read the two clauses together to find out the description of what was being sold.  Even in a contract where there is no express warranty by the seller regarding the subject matter, if it is described therein with particulars which are materially different from the actual item, legal consequences would follow.

82.  On the other hand, the plaintiff’s submission on the effect of clause 11.11, namely it was just an internal note, does not make sense because if so there would have been no reason for it to be written in the Agreement at all.  The clause would have no operative effect, which objectively cannot have been intended, and is an interpretation which I should avoid if possible (and it is possible to so avoid).

83.  I note also the plaintiff’s point that clause 11.11 was only initialed by Chen and not by Petter.  However, I find as a fact that the clause was already filled in when Petter signed, because:

(1)   Chen’s evidence in this regard (§58 above) is not seriously challenged and I accept it.

(2)   In contrast, Petter could not recall if clause 11.11 had been filled in when he signed the Agreement.  However, the whole tenor of his evidence (§§45 – 46 above) was that he did consider the effect of clause 11.11 when he signed.

(3)   Chen’s evidence, which I accept, is that immediately after signing Petter was given the “customer’s copy” of the Agreement.  This is the most natural thing for her to do.  Thatcopy, which is produced before me, which is a carbon copy ofthe original at the top filled in by Chen, does contain the words.

In the premises, the fact that Petter did not initial clause 11.11 is, in my judgment, neither here nor there.  Even the Handwritten Clause, which no one disputes was a term of the contract binding on the parties, was not initialed by Chen or Petter, thus showing that the lack of initials do not necessarily mean that no contractual effect was intended.  By signing the Agreement with clause 11.11 filled in, Petter, on behalf of the plaintiff, accepted that as part of the bargain between the parties.

D1b.   The meaning of “with HGTE package”

84.  The next question is the meaning of the words in clause 11.11. Does that mean that the Ferrari had, as the defendant says, all HGTE features which could have been installed on a pre-2009 Ferrari, or, as the plaintiff says, it needed to have some HGTE package, which the Ferrari did have?

85.  In construing the meaning of the words inserted in clause 11.11, the same principles I refer to above apply. 

86.  Further, one matter which I find formed the factual matrix is the fact that there were four separate HGTE kits or packages available, three of which (handling, exhaust and aesthetic) could have been installed on a pre-2009 Ferrari.  Thus, what was reasonably available to the parties as at January 2014 was the knowledge that the Ferrari (being a 2007 model) could have been installed with one, or two, or three, HGTE package(s) or kit(s) (or, of course, none). 

87.  The words in clause 11.11 could of course have been more clearly drafted, by identifying the specific package or packages (handling, exhaust or aesthetic), or by saying that the Ferrari was with “a HGTE package” or “the HGTE package” or “all HGTE packages”.  However, I must construe the actual words used in the light of the factual matrix.

88.  In my judgment, the reasonable man would, with the aforesaid knowledge in mind when he reads clause 11.11, not have thought that the words meant that the car would necessarily have all the HGTE packages or features which could have been installed.  That would be reading too much into the words.  A more realistic reading is that they describe a car with some HGTE package.  Most probably, knowing that there were a number of different HGTE packages available, the reasonable man would, on reading this clause, find out more, namely exactly what package or packages the car had? Viewed in this light, I tend to agree with Mr Thomson’s submission that clause 11.11 is uncertain. However, it is not necessary for me to express a concluded view as to whether the clause is too uncertain and is therefore of no effect.  In my judgment, one simply cannot construe clause 11.11 in the manner suggested by the defendant, which is the only manner in which the plaintiff could have breached the same.  If clause 11.11 is too uncertain, in my judgment that would not render the Agreement unenforceable, but only that I shall proceed as if clause 11.11 is not there.

89.  Given that the Ferrari did have a HGTE package, namely the HGTE handling package (see §9 above), which is an agreed fact (§8 above), I find that the defendant was not entitled to terminate the Agreement, or require the plaintiff to pay for the installation of other HGTE features, or to reject the Ferrari as the trade-in vehicle, because of clause 11.11.  It is either too uncertain to have legal effect, or it has not been breached by the plaintiff.

90.  It is not necessary for me to resolve the factual disputes between the parties as to what was said or not said by Petter about HGTE during the course of the negotiations.  I would simply state that I find it most unlikely that Petter would have said, or conveyed the message, that the Ferrari had “everything” HGTE.  He knew as a fact that the Ferrari did not have everything HGTE (as he was offered the HGTE exhaust system by Louie but he declined), and he for whatever reason saw it necessary or desirable to specify the upgraded suspension in the Advertisement.  The suggestion that he then, not once, but several times told Chen that the Ferrari had everything can only mean that Petter was deliberately (rather than innocently or negligently) misleading the defendant knowing the same to be untrue.  Given that this would have been a blatant lie which could very easily, and almost certainly would subsequently, if not at the viewing by Chen (whose level of familiarity with HGTE features including HGTE exhaust would not have been known to Petter), be found to be untrue, I find it extremely unlikely that Petter would have done so.  In so far as it is necessary, I accept the evidence of Petter, and reject the evidence of Chen and Fan, in this regard.

D2.   Reasonable wear and tear and damage to the Ferrari

91.  The defendant also argues that the Ferrari had various defects so that it was entitled to reject the Ferrari as the trade-in vehicle.  Its case is summarised at §30 above.

92.  First, it is necessary for me to resolve the relationship between clause 8.2 and the Handwritten Clause. Without the Handwritten Clause, the defendant had to accept the trade-in vehicle even though it had “reasonable depreciation or reasonable wear and tear” (which I shall for short call “wear and tear”).[14] It could reject a trade-in vehicle only if the vehicle has the more serious defects identified, such as structural or mechanical defects.  Unless the vehicle has one of those defects stated at the first sentence of clause 8.2, that clause does not entitle the defendant to reject the trade-in or to reduce the price thereof.

93.  The Handwritten Clause was put in to deal with:

“ damage to either vehicle in terms of the exterior of the vehicles body work, the interior, or the mechanincal parts or structura of the vehicle”.

94.  So, what if the defect was the result of wear and tear but nevertheless fell within the words of the Handwritten Clause?

95.  I should, of course, interpret the Agreement as a whole, not to consider each clause in isolation, and to give effect to each clause thereof if possible.[15]  In particular, a clause should be interpreted so as to bring it in harmony with other provisions.[16] This is the approach I take in considering the effect of clause 8.2 and the Handwritten Clause, but I also note that in case of a conflict between them which cannot be resolved, I should give preference to the Handwritten Clause.[17]

96.  In my judgment, the Handwritten Clause was not intended to cover wear and tear.  Given that the Ferrari was a seven-year old used car, which therefore must have some wear and tear, no matter how minor, I do not find that the reasonable person reading the Agreement would consider itto be the intention of the parties, by inserting the Handwritten Clause whileleaving the entire clause 8.2 (including the part on wear and tear) intact, toallow the defendant to reject the trade-in vehicle, or to cancel the transaction, merely because the Ferrari had wear and tear and nothing more.  That would also rob that part of clause 8.2, which was preserved, dealing with wear and tear of any meaning or effect.

97.  I therefore find that the Handwritten Clause covered only defects as stated therein which went beyond wear and tear.  That is, the defect must be some physical harm or injury to the vehicle not caused by theprocess of ordinary use.  To so construe would not deprive the HandwrittenClause or effect, because one can easily imagine damage which falls withinit which is not wear and tear, for example, a severe dent on one of the doors.  In so holding I do not have regard to the evidence of the parties as to why the Handwritten Clause was inserted and what purpose it was intended to serve.

98.  In the premises, if the Ferrari only had defects which were no more than wear and tear as at about 14 February 2014, then the defendant would have no right to demand the plaintiff to pay for the repairs, or reject it as a trade-in, or to cancel or terminate the Agreement.  If, on the other hand, there were defects which went beyond wear and tear, which constituted“damage” as described in the Handwritten Clause, then it would have been entitled to terminate under that clause.  I note that there is no suggestion that the Ferrari had the more serious defects referred to in the first sentence of clause 8.2.

99.  Thus, in my judgment, the question is whether the Ferrari did have damage which was more than wear and tear and which fell within the Handwritten Clause.  If it did, then subject to the issue I refer to at §107 et seq below, the defendant could terminate the Agreement under the Handwritten Clause.  If it did not, then the defendant had no right to terminate the Agreement, or to reject the Ferrari as the trade-in, or to require the plaintiff to pay for the repair of the defects. 

100.  In the course of his testimony, Fan is shown the photographs he purportedly[18]took at Auto Italia when he went to see the Ferrari there. He identifies three defects from the photographs which he says are more than wear and tear, namely:

(1)   a missing screw at the radiator;

(2)   crack or damage to the underfloor fender; and

(3)   damaged seat belt.

101.  Fan accepts the other defects as wear and tear.  This of course is also the case of the plaintiff.  I see no reason to disagree with Fan on these other defects, and I so find.

102.  In addition to the photographs, according to the defendant, the defects not visible would be the damage to the clutch and the safety belt buckle.  I shall deal with the safety belt buckle as part of the damaged seat belt below.  As for the clutch, at the trial, there is considerable discussion about it, which was suggested to be replaced in the Quotation, and stated to be “42% worn” in the annual service report. There is no evidence or suggestion that the clutch needed to be replaced other than it having been worn out to the extent of 42%.  This is clearly a case of wear and tear (which means the waste of substance by ordinary use[19]) and I so find.

103.  The only other defect, in addition to the three stated at §100 above, specifically mentioned by the defendant in the pleadings is the damage to the roof upholstery.  I shall therefore deal with these four defects only.  The plaintiff of course disputes that they were more than wear and tear. The question for me is, were these four defects more than wear and tear,and were “damage” within the Handwritten Clause?

104.  In his supplemental witness statement, Petter gives his comments on these defects.  I do not think his opinion is admissible and I shall not take it into account.

105.  Regarding the missing screw at the radiator, while it may wellnot be wear and tear, in my view it cannot constitute “damage”, as described in the Handwritten Clause either, as that term is ordinarily understood to mean some form of actual physical harm or injury to the item in question, but not with something merely missing.

106.  As for the other three defects, I am hampered by the fact that there is no expert evidence adduced by either side.  On the basis that for example, the seat belt of the Ferrari was indeed damaged, there is no evidence before me as to how and why it was damaged.  Was it because of ordinary, everyday use?  Or because someone broke it negligently?  The same applies to the other two defects.  Unlike the clutch and the missing screw, which I am able to decide that they did not fall within the Handwritten Clause because they were either “wear and tear”, or not “damage”, according to the meaning of those words, for these other three defects, I cannot resolve the matter without evidence.

107.  But even assuming that they were all “damage” falling within the Handwritten Clause and not merely the result of wear and tear,in my judgment that does not assist the defendant.  This is because, as Mr Thomson points out, when purporting to reject the Ferrari as the trade-in, and later purporting to confirm that the Agreement was terminated, the defendant only relied on clauses 8.1 and 8.2, but not the Handwritten Clause (albeit it being mentioned in passing: see the letters from LCK which I set out above).  In my judgment, the defendant is not entitled to rely on that clause to justify its conduct in 2014 because even though the general principle is that:

“ if a party refuses to perform a contract, giving a wrong or inadequate reason or no reason at all, he may yet justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal” [20],

this principle does not apply where:

“ if the point which was not taken could have been put right”.[21]

108.  In Glencore Grain Rotterdam BV v Lebanese Organisation for International Commerce [22], Evans LJ (with whom Nourse LJ and Sir Ralph Gibson agreed) said:

“ Basic rule

‘It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal,does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not.’ (See Taylor v Oakes Roncoroni & Co (1922) 127 LT 267 at 269 per Greer J.)

First qualification …

‘This rule is, however, subject to a proviso. If the point not taken is one which if taken could have been put right, the principle will not apply.’ (See [1954] 2 All ER 770 at 773, [1954] 1 WLR 1273 at 1278 per Somervell LJ.)” [23]

109.  Had the defendant given the “good reason” at the time, namelythat there were three defects falling within the Handwritten Clause entitlingit to terminate (I am assuming here (without making a finding) in favour ofthe defendant that the three defects referred to above were more than wearand tear and fell within the Handwritten Clause), it is something which couldhave been put right by the plaintiff.  According to the Quotation, material and labour costs for these would be HK$55,053 [24].  Thus, these defects could have been put right by the plaintiff by paying those sums.  Of course there is no evidence whether Petter would have agreed to pay this sum (instead of the full HK$213,907 in the Quotation demanded by the defendant), as he was not offered that option.  But the test is not whether the defects would have been put right if the plaintiff was told the true reason by the defendant, but whether it could have been put right.  It would not be right that the test is the former, because since the fact is always that the party has not been told of the real, good, reason, whether if told the party would put it right is always a matter of ex post facto speculation (sometimes perhaps with a firm basis to come to a view, but perhaps most of the time not), and the point is that by not giving the real, good, reason, that party has been unfairly deprived of the opportunity to put it right.

110.  In the premises, even if the defendant could have invoked theHandwritten Clause as at January 2014, which it did not, it cannot do so now.

111.  I should state here that I do not place weight on the fact that the three defects in question were only referred to in the Quotation, and Auto Italia had apparently “cleared” the Ferrari to be driven away without any of the works mentioned in the Quotation to be done, or the fact that the defendant had paid for the invoice from Auto Italia on about 11 or 12 February 2014.  Without evidence that Auto Italia had been asked to address specifically the matter raised in the Handwritten Clause by anyone when the Ferrari was first delivered to it, and before it issued the annual service report, I do not think that one should take the annual service report as the “all clear” as far as the Handwritten Clause is concerned.

E.   DISPOSITION

112.  I hold that the defendant was in breach of the Agreement by refusing to proceed with the sale of the McLaren with the Ferrari used as the trade-in, and demanded the plaintiff either to pay for the full Quotation or cancel the transaction.

113.  In the course of this trial, a fair number of factual disputes and arguments have been raised, as recorded above.  It is not necessary to lengthen this judgment by considering all of them, in particular disputes as to pre-contractual discussions and negotiations which are inadmissible as aids to construction of the Agreement, and I have considered all the issues that I have to resolve to dispose of this matter.

114.  As for quantum, the plaintiff relies on clause 10.2, and claims HK$696,000. 

115.  The defendant does not challenge this as a penalty clause.  It is, after all, a clause in its own standard form and operates to limit its own liability in case of breach.  It is, or is analogous to, a liquidated damages clause, as it provides for the sum to be payable as damages in the event of a breach.[25] There is no reason to question the validity or enforceability of this clause as against the defendant.

116.  However, the defendant says that since the plaintiff should have accepted the defendant’s proposal that it paid for the Quotation, the damages should be limited to the sum of HK$213,907.  It is suggested that the plaintiff, by not taking up this option, had failed to mitigate its loss.

117.  I do not accept this argument.  By invoking clause 10.2, the plaintiff is simply seeking to recover what it is entitled to as a matter of contractual right.  The actual loss it has suffered is irrelevant[26], and so does the question of mitigation, because, as stated in McGregor on Damages[27]:  

“ the concept of a duty to mitigate is entirely foreign to a claim for liquidated damages”.

118.  I make the following orders:

(1)   The defendant is to pay the plaintiff the sum of HK$696,000, together with interest on the said sum at the rate of 1% above the prime rate as quoted by Hongkong and Shanghai BankingCorporation Limited from time to time from 19 February 2014to the date of this Judgment, and at the judgment rate thereafter until payment.

(2)   There be an order nisi that costs of this action be to the plaintiff, to be paid by the defendant, to be taxed on the District Court scale if not agreed.

119.  I thank counsel and their respective teams for assistance.