HONG KONG EXHAUST EMISSION LABORATORY LTD. v. CRIC MOTOR WORKS LTD.

DCCJ 2520/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2520 OF 2001

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JUDGMENT

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1. The plaintiff in this action claims against the defendant for the sum of HK$96,550.00, being the price of services (including costs of test $ 84,000 and towing fees $12,550) rendered to the defendant. The defendant counter-claims against the plaintiff for the return of a private car, a Mitsubishi Grandis (" the car"), seized by the plaintiff allegedly by way of lien and for damages for loss occasioned by such detention.

2. The plaintiff carries on business of testing vehicles in respect of exhaust fumes emission and noise level and compiling reports for customers. The defendant is an importer of vehicles, both new and used ones, for sale locally. In order to sell the vehicles, the defendant, first of all, needed to obtain a report to show that the vehicle has passed the emission and noise test as required by law, and then apply for registration of the vehicles in the Transport Department with an approval letter from the Environmental Protection Department.

3. The present dispute concerns 18 vehicles sent by the defendant to the plaintiff for such tests during the period from September 2000 to December 2000. The plaintiff charged HK$8,000.00 and HK$ 3,000.00 for test on 4-wheel and 2-wheel drive vehicles respectively. For the first 13 vehicles, there are no issues on test charges but parties are disputing on the towing fees. As for the last 5 vehicles, the plaintiff alleged that it had carried out test on them and compiled reports but it withheld the test reports and seized "the car" as lien.

4. The plaintiff alleged that there was an oral agreement between them in September 2000 that the plaintiff would provide towing services for the vehicles to be tested at certain prices but the defendant said that the plaintiff agreed in June 2000 to provide such services free of charge.

5. The issues in the case are as follows:

(a)- whether there was an oral agreement for the provision of towing services and if so, what were the terms?

(b)- whether the plaintiff was entitled to the contract prices for the last 5 vehicles?

(c)- whether it was right for the plaintiff to retain " the car" by way of lien?

ORAL AGREEMENT

6. It is common ground that both parties had business dealings back in 1999 for quite some time and stopped for almost a year before the defendant entrusted vehicles to the plaintiff for tests again in July 2000.

7. Mr. Paul Fan, general manager of the plaintiff, testified that sometime in September, he was called by Mr. Mercedes Wong, director and shareholder of the defendant, to have a meeting with him at the Windsor House in Causeway Bay. There Mr. Wong told him that his company was short of manpower and there was not any reliable towing company around, Mr. Fan suggested Cheung Kee Towing company to him and agreed, which was accepted by Mr. Wong, to arrange towing services by Cheung Kee for the defendant at the costs of HK$ 800, HK$ 650 & HK$ 300 dependent on the length of journey.

8. Mr. Wong vehemently denied this and alleged that the meeting was held in June 2000 and during the meeting, Mr. Fan in order to obtain business from the defendant, offered to provide towing services free of charges. Relying on this, Mr. Wong started to send vehicles to the plaintiff for tests in July onwards and there were no charges of towing until the invoice dated 20th September 2000 in which the plaintiff started to levy such charges.

9. Having heard the evidence of these two witnesses, insofar as the oral agreement is concerned, I find both Mr. Wong and Mr. Fan to be unreliable witness. In the Defence it is stated clearly that "Pursuant to the oral agreement made between Mr. Fan and Mr. Wong in or about September 2000 ------------------ The plaintiff expressly agreed that they would be responsible for the delivery of the vehicles from the defendant's showrooms or any place that the defendant designated from time to time and the service of delivery would not be charged thereon" The Defence was drafted by the defendant's solicitors on the instructions of Mr. Wong. This was contrary to what he told the court that the oral agreement was made in June 2000. His explanation was that he had not given much thought to it at time of giving instructions to his solicitors and since Mr. Fan said in the Statement of Claim that it was in September, he just thought so. Mr. Wong struck me as a very careful person, I do not believe that he would have made such a mistake. Moreover, in his letter to Mr. Fan in relation to the disputed transactions, he stated that " -------I only agree to pay the reasonable extra for the 3rd way towing from the testing center to Kin Wan for service of the cars-------" ( See P. 76), here the letter seems to suggest that the towing services were not free at all. This is again different from what he told the court that the towing services were provided by the plaintiff free of charge regardless the length and number of journey.

10. On the other hand, Mr. Fan's evidence is not very good either. He said he was not sure of the exact charges of Cheung Kee during the meeting at Windsor House, he had tried to get in touch with Cheung Kee through his staff but in vain. He then told Mr. Wong that he would charge the defendant at three different fixed prices i.e., $800, $650 & $300, dependent on the length of journey. A few days later, his staff told him of the charges of Cheung Kee; he did not inform Mr. Wong about it and would stick to the prices as he had told him before, simply because he thought that the difference between the charges of Cheung Kee and that which he charged the defendant was not much, he was quite prepared to bear the loss if that was the case turned out to be. I find it hard to believe that Mr. Fan could be so easily give the prices arbitrarily in a business negotiation when he was unsure of the exact charges of Cheung Kee, especially there was evidence to suggest that the plaintiff rarely provided such service to its customers before. It just does not make much business sense. Moreover, in his witness statement, Mr. Fan said concerning the oral agreement that "------ In the meeting, I told Mr. Wong clearly that the plaintiff would help to call up the towing services centre to arrange for the towing and that the charges should be borne and paid by the defendant to which Mr. Wong agreed." These were terms described by Mr. Fan, there was no mention of exact charges such as $800, $650 or $300 to which Mr. Wong had agreed. It is very hard to imagine that Mr. Fan could have missed out such important terms of the agreement when giving his statement.

11. I believe it is more likely that there had been much discussion about the towing service during the meeting but there was no agreement finalised as to the charges. And this is the reason, in my view, giving rise to the present dispute.

ENTITLEMENT TO PRICES FOR THE LAST FIVE CARS TESTED

12. The obligations of the plaintiff in these transactions were to carry out test on vehicles and compiled reports; once the reports were made, their obligations ended. In the present case, the plaintiff was able to adduce reports in respect of the 5 cars to show that they have done tests on them. The Defence did not really challenge this part of the evidence, I am satisfied that the plaintiff had carried out tests on these five vehicles and therefore completed its entire obligations in these 5 transactions with the defendant. The plaintiff is, in my judgment, entitled to the costs of test for these transactions.

LIEN

13. It is well established that at common law a lien, which may be particular or general, consists of one person to retain possession of goods of another until all his claims are satisfied.

Particular Lien ( in relation to obligations arising in connection with the particular goods for which the lien exists)

14. The requirement is that the person who claims the lien must show that he has expended his labour upon the chattel which came into his lawful possession.

15. It is also established that for a possessory lien to take effect the labour or skill of the artificer must improve the condition of the chattel. There is no lien for the mere maintenance of a chattel, however much care and skill may be expended.

16. In the present case, the vehicles were sent in not for repair but for tests to be carried out. As a result of the tests, the plaintiff would compile reports on these vehicles, there was no work done on the vehicles at all. It is not sufficient to say that these vehicles were being maintained by the plaintiff, let alone improvement.

General Lien( relating to all obligations owed by the property owner to the possessor)

17. In order for the plaintiff to justify the detention of the Mitsubishi Chariot lawfully on the basis that the defendant owed the plaintiff debts, being the cost of tests done on the first 13 vehicles, the plaintiff must be able to establish a general lien.

18. " The test for the existence of a general lien is that the usage in a particular trade in a particular locality must be certain and reasonable and so universally acquiesced in that everyone in the trade knew of, or on inquiry could have ascertained, its existence. This is a very high standard, and outside certain very well-defined instances general liens arise otherwise than by usage." P.247 of Personal Property Law by Simon Gleeson. There is no evidence whatsoever in the present case in relation to this aspect.

19. Applying the principles of law stated above to the present case, in my judgment, the plaintiff does not have lien, be particular or general, over "the car" which it seized and therefore, its retention of it is wrongful. As far as the retained reports are concerned, however, I find that the plaintiff does have a lien over them for it had expended labour and skill in compiling the reports.

20. Mr. Wong testified that "the car" was intended to sell to a Mr. Tang and had signed a sale and purchase agreement with him( See P.205), Mr. Tang had given a deposit of HK$ 10,000 for the transaction. As a result of Plaintiff's detention of "the car", the deal fell through, and the defendant had returned the deposit to Mr. Tang and on top of that paid compensation of HK$ 10,000 to him as evidenced by a receipt( See P.234 ). Mr. Wong said in his witness statement that "the car" was sold at the price of HK$ 230,000 and he estimated that the depreciation of "the car" was 20% of the selling price and the value of depreciation up to the date of filing the Defence and Counter-claim i.e. 4th April 2001, was therefore HK$ 46,000. The defendant thus claims as damages the sums of $ 10,000 and $46,000 and further depreciation of the car at 20% per annum until the return of the car. He said that the defendant had paid compensation of HK$ 10,000 to Mr. Tang for its failure to complete the transaction, the evidence he adduced was an acknowledgement receipt purportedly signed by Mr. Tang ( P.234). First of all, this Mr. Tang has not been called to give evidence, and secondly if there was payment made to Mr. Tang, I would expect he would be paid by the company cheque of the defendant, and the defendant should have kept the bank records and the copy of cheque to support its assertion, especially when the defendant knew there was a dispute going on about the car.

Strangely, however, there is no such evidence in the case. I do not believe that the defendant had paid Mr. Tang the compensation.

21. The plaintiff did not really challenge the estimates of Mr. Wong on the depreciation value of the vehicle i.e., 20% of the selling price per annum, however, I find Mr. Wong had miscalculated the amount of depreciation. In the sale agreement (P.205), it was stated that the selling price was HK$ 205,000, but in his statement he said HK$ 230,000. Mr. Wong also stated that the value of the car had depreciated by HK$ 46,000 up to 4th April 2001 when the Defence and Counter-claim was filed and further depreciated at the rate of 20% per annum. The car was detained by the plaintiff as from 29th December 2000, by 4th April 2001 the car would have been detained for slightly over 3 months, Mr. Wong adopted the figure of $ 230,000 as the selling price, even if using the rate of depreciation as suggested by him, the amount could never have come anywhere near HK$ 46,000, it should be approximately one quarter of the amount calculated.

22. Since there is no evidence from the plaintiff to challenge the calculation, I would, therefore, adopt the rate of depreciation of 20% per annum as suggested by Mr. Wong in assessing the damages for the wrongful detention of "the car". As for the selling price, I would use the one stated in the sale agreement, that is HK$ 205,000.

23. For the reasons given above, I conclude that the plaintiff is entitled to the costs of test carried out on the 18 vehicles but not the towing charges, and that the plaintiff wrongfully detained "the car" and is liable to pay to the defendant damages.

24. The orders that I make are as follows:

(a) judgment for the plaintiff for HK$ 84,000.00; the rest of the claim be dismissed;

(b) judgment for the defendant for wrongful detention of "the car" and is entitled to damages calculated at HK$ 205,000 x 20% per annum on a pro rata basis as from 29th December 2000 up to the date of delivering up "the car" to the defendant, and the rest of the counter-claim be dismissed; such sum is to be set off against the judgment sum of HK$ 84,000.00;

(c) judgment for the plaintiff for the balance after the set off ; interest on the balance at the rate of 12.5% per annum from the date of writ until the date of judgment and thereafter at judgment rate until payment.

(d) "the car" be delivered up to the defendant by the plaintiff forthwith;

(e) the five reports retained by the plaintiff be released to the defendant upon satisfaction of the judgment sum under paragraph (c) above.

25. I make an order nisi that no order as to cost and the order nisi is to be made absolute at the expiration of 14 days from the date of handing down judgment.