REGAL MOTORS LTD v. SHENZHEN NEW FUKONG TRANSPORT DEVELOPMENT CO LTD AND ANOTHER

HCMP 1458/2023

[2025] HKCFI 4967

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1458 OF 2023

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BETWEEN

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JUDGMENT

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1.  By originating summons issued on 5 September 2023 and refiled on 4 February 2025 (“OS”), Regal Motors Limited (the “Plaintiff”) seeks:

(1) a declaration that New Hong Kong Bus Company Limited (“D2”) holds 5 buses (the “Buses”) on trust for the Plaintiff; and

(2) an Order for transfer of the Buses to the Plaintiff or its nominee and/or ancillary directions for the same.

Factual background

2.  Shenzhen New Fukong Transport Development Co Ltd (“D1”) is a company incorporated in the PRC and the counterparty of the sale of the Buses by the Plaintiff. D1 did not file any acknowledgement of service despite the order the Plaintiff obtained on 21 March 2025 for substituted service by personal service on D1’s legal representative resident in Hong Kong.

3.  D2, a Hong Kong company, is D1’s nominee and adopts a neutral stance in this application.

4.  The Plaintiff is a Hong Kong company. It entered into 5 contracts with D1 in 2019 for the sale of the Buses to D1 for $9,766,860 (the “Contracts”).

5.  By a series of letters of authorisation, D1 authorised the Plaintiff to register and license the Buses under D2’s name, with D2 acting as D1’s nominee.

6.  As a result of this arrangement, in 2019, D2 became registered as owner in the Vehicle Registration Documents (“VRDs”) of the Buses.

7.  D1 made various payments for the Buses between 2019 and 2021 totalling HK$2,281,100. The balance of HK$7,485,760 (the “Balance”) remains outstanding.

8.  During the Covid-19 pandemic, D1 requested and the Plaintiff agreed that delivery of the Buses be postponed until the border between PRC and Hong Kong reopened. However, from 2021 onwards, D1 failed to respond to the Plaintiff’s demands for payment.

The Contracts

9.  Each of the Contracts contained the following provisions:

“5. It is understood that the title to Goods sold under this Contract remains with the Seller until the full amount of the purchase price and all related charges including, but not limited to those referred to in Clause 3 hereof are paid.

…

21. If after having been notified by the Seller of its readiness to deliver the Goods the Buyer fails to pay the balance of purchase price for the Goods or other monies payable by him hereunder within seven (7) days of such notification, the Seller shall be entitled to charge interest thereon at such rate as the Sellers shall think fit unit actual payment in full or to forfeit without notice any deposit paid to it by the Buyer, without prejudice to any other remedy provided to the Seller in this Contract, and in this respect time is of the essence of this Contract. In such event the Seller shall be at liberty on its own account to sell or otherwise deal with and dispose of the Goods in such manner as it may deem fit and the Buyer shall be liable for all losses and expenses that the Seller may incur thereby. Any time or date named by the Seller for delivery is intended as an estimate only and the Seller shall not be liable to make goods any damage or loss whatsoever whether arising directly or indirectly out of delay in delivery.”

10.  Under those terms, because of D1’s failure to pay the Balance, title to the Buses remains with the Plaintiff, notwithstanding the VRDs issued in D2’s name.

11.  In the circumstances, the Plaintiff seeks the declaration set out in §1 of the OS and consequential relief.

Disposition

12.  Ms So, counsel for the Plaintiff, invited attention to the fact that this is the substantive hearing of the OS and declaratory relief sought is not based on D1’s default as such under RHC Order 19, rule 7. Even in the latter situation, where a proprietary claim is asserted, the court has granted declaratory relief where the plaintiff cannot obtain the fullest justice without such relief, for example, because the plaintiff may be exposed to the risk that other creditors of the defendant claim against the defendant’s assets: see IQ Solutions Inc v WKJ Ltd [2024] HKCFI 559 at §§ 11-12.

13.  On the present facts, the Plaintiff is plainly entitled to the declaration sought in §1 of the OS.

14.  The Plaintiff also seeks orders for transfer of the Buses to the Plaintiff or its nominee and an order compelling D2 to take all necessary steps to procure the transfer of the Buses to the Plaintiff’s nominee including the registration of the Buses under the name of the Plaintiff or its nominee with the Transport Department.

15.  Mr Charlie Liu, counsel for D2, has no objection to the relief sought against D2 but requested that the word “reasonably” be added to § 3 of the OS such that the operative part reads:

“the 2^nd Defendant do take all reasonably necessary steps to cause or otherwise procure the transfer of the Buses to the Plaintiff or its nominee …”.

It would provide D2 with the necessary protection against being held in contempt in circumstances genuinely beyond its control because the transfer of the Buses back to the Plaintiff or its nominee is subject to regulatory compliance and licensing restrictions.

16.  The Plaintiff has no objection to the requested addition of the word “reasonably” to §3 of the OS.

17.  On 8 September 2021, the Plaintiff sent a letter to D1 making it clear that the Buses were ready for delivery and requested payment of the Balance. There was no response to that letter and D1 is absent at this hearing.

18.  The Plaintiff requested the addition of §4 to the OS:

“4. If the 1^st Defendant neglects or refuses to comply with the Order herein or cannot be found after reasonable inquiry has been made, the Registrar of the High Court (or a person appointed by him) shall, upon the request of the Plaintiff, execute all necessary documents required to effect the transfer of the Buses to the Plaintiff (or its nominee), pursuant to section 25A of the High Court Ordinance (Cap. 4A)”.

19.  Section 25A (1) of the High Court Ordinance, Cap 4A is a procedural mechanism for cases where a defendant transferor cannot be found to execute the relevant documents, that the same be carried out by the Registrar or a person appointed by him. Given D1’s failure to respond since 2021, the provision would facilitate the execution and completion of the necessary transfers.

20.  In view of the provisions of clause 21 of the Contracts, I agree that the Plaintiff is entitled to forfeit any deposit paid by D1 and at liberty on its own account to deal with the Buses as it sees fit.

Order

21.  I make an order in terms of the OS save that (i) the word “reasonably” be inserted in §3 of the OS as shown in §15 above; and (ii) the addition of §4 to the OS as shown in §18 above.

22.  There be an order of costs of this application against D1, such costs to be taxed if not agreed.

23.  There be no order as to costs between the Plaintiff and D2.