CHAN TIN CHUNG v. WONG KA CHUN t/a PRO AUTO CO AND ANOTHER

DCCJ 4422/2017

[2019] HKDC 1677

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4422 OF 2017

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BETWEEN

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JUDGMENT

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1.  The 1^st defendant traded in second-hand vehicles, and the 2^nd defendant was his sales representative and agent. The 1^st defendant had a second-hand Ferrari F599 F1 (“the F599”) to sell.

2.  The plaintiff paid a sum of HK$82,800 as deposit for the purchase of the F599, which the defendants said they had forfeited because of a breach of contract by the plaintiff.  The plaintiff disputes that and now claims for its return.

Circumstances leading to the dispute and the Sales Agreement

3.  The below circumstances, unless otherwise stated, are common ground or not disputed.

4.  In late 2016 or early 2017, the plaintiff learned about the sale of the F599 from the internet.  He contacted the 2^nd defendant, with whom he never had any dealing before.  They had some discussions.  The plaintiff was shown the F599 twice.

5.  On 10 February 2017, the wife of the plaintiff Madam Jim signed in her name a provisional sales agreement (“the Provisional Agreement”) for the purchase of the F599 at the price of HK$828,000.

6.  The 2^nd defendant and the plaintiff then met at about noon on 20 February 2017 in a garage in Kwun Tong where the F599 was parked (“the 20 February Meeting”).  They had some discussions (“the 20 February Discussion”).  Some of the contents and effect of what was said or agreed are disputed, which will be alluded to later.  After that, they signed the Sales Agreement (“the Sales Agreement”); and contemporaneously the plaintiff paid the said deposit of HK$ 82,800 by issuing a cheque to the 1^st defendant.  The amount was received by the 1^st defendant.

7.  The Sales Agreement was a one-page document in English bearing the logo of the 1^st defendant.  It was prepared by the 2^nd defendant.  The provision under “Remarks” is the one now disputed by the parties.  I will set out the entire Sales Agreement:-

“ProAuto

44 Tin Hau Temple rd

Causeway bay, HK TEL: 27599066 FAX: 27599066

20/2/2017 Contract no: EEC3146

Salesman Code: Benny Chan (code 2315)  TEL: [ xxx ]

Sales Agreement
Vehicle Descriptions:	Make & Model: Ferrari F599 F1
Chassis No.:	[ xxx ]
Engine NO.:	[ xxx ]
Cylinder capacity:	5,999cc
Colour:	RED
Year of manufacture:	2008
Year of Registration:	2009
Registration Mark:	[ xxx ]
No. of previous owner:	2
Payment Terms		Buyer:	CHAN, Tin Chung
Selling price:	HK$828,000	HKID card no:	[ xxx ]
Transfer fee:	HK$1,000	TEL:	[ xxx ]
Government MOT	HK$585
Licence fee	HK$11,329
Insurance	HK$T. B. C.
Other:	HK$______
Total:	HK$840,914
Deposit: HK$82,800	Cash/Cheque No.018697
Remain balance:	HK$758,114
Remarks:	Finance HK$1,000,000 3% / Year 36 Months		Monthly Payment HK$30,278
Cheque payable to (Pro Auto Co.) or direct transfer to our HSBC Account: [ xxx ]
Seller		Buyer: CHAN, Tin Chung
Pro Auto Co.		HKID Card no: [ xxx ]
[signature] & [chop]		[signature]
Authorized Signature & Company Chop		Authorized Signature & Company Chop”

(words in italics were hand-written; certain information is denoted by [ xxx ] for privacy reasons)

8.  In the afternoon of 20 February 2017, the plaintiff set up a whatsapp group consisting of himself, Madam Jim and the 2^nd defendant to discuss matters relating to the sale of the F599.  There were ensuing queries from the plaintiff about the amount of monthly payment being too high, discussions and communications about obtaining a loan of the same amount at interest rate of 2.5% per annum, which was agreed to by the 2^nd defendant, and a loan in the larger amount of HK$1,200,000 at other interest rates.  Various documents and income proofs were also provided by the plaintiff and Madam Jim to the 2^nd defendant for the purpose of applying for the bank loan.

9.  The loan was actually applied for in the name of Madam Jim and to be guaranteed by the plaintiff.  While the F599 was to be purchased by the plaintiff, all along parties knew that the F599 was to be registered in the name of Madam Jim and the plaintiff was to act as her guarantor.  Nothing turns on this arrangement.

10.  The long and short was that by mid April 2017 Madam Jim and the plaintiff could not obtain the car loan from all the banks introduced by the defendants.

11.  The plaintiff then on 25 April 2017 again offered to pay the balance of the purchase price by cash[1], which the defendants refused.  The plaintiff demanded the return of the deposit which again was refused.  I say that the plaintiff offered to pay cash again because earlier on 12 March 2017, the plaintiff already mentioned to the 2^nd defendant that he could pay cash, but his suggestion was met with a strong response by the 2^nd defendant.  I will say more about this exchange later on.

12.  It is not disputed that the plaintiff was all along ready and willing to complete the purchase by paying the balance price by cash.  It is also not disputed that the plaintiff, as he said, was in fact desirous of buying the F599.

13.  The plaintiff therefore commenced this action on 6 October 2017.

Parties’ respective case

14.  The defendants’ case is that:-

(a) The plaintiff had agreed that it was an “essential term” of the sale that the plaintiff had to finance the purchase by a loan to be provided by bank(s) introduced by the defendants, the loan amount would be HK$1,000,000, interest rate at 3% per annum, to be repaid in 36 monthly instalments at HK$30,278 each; and that breach of this term would entitle them to forfeit the deposit;

(b) This “essential term” was so provided under the “Remarks” clause in the Sales Agreement; and

(c) At trial, the defendants further said that the said term was orally agreed to by the plaintiff a day before as well as at the 20 February Meeting.

15.  The defendants further said that under the above loan arrangement, the 1^st defendant would be entitled to a commission from the lending bank equaled to 31% of the total interest, while the 2^nd defendant would be paid by the 1^st defendant a fair portion of that.  The defendants accepted that they had never told the plaintiff about this, but said that the plaintiff knew that they would receive commission from the lending bank.

16.  The defendants confirmed in closing submission that it is their case that since they were not at fault regarding the plaintiff’s and Madam Jim’s failure in obtaining the loan from banks introduced by them, the plaintiff must be treated as being at fault and therefore breached the Sales Agreement, thereby entitling them to forfeit the deposit.

17.  The plaintiff’s case and evidence, essentially, is that financing had been suggested by the 2^nd defendant towards the end of the 20 February Discussion.  The plaintiff then asked the 2^nd defendant to indicate what the term of loan and monthly payment amount would be, for his consideration.  There upon the 2^nd defendant used HK$1,000,000 as the loan amount, 3% as interest rate and 36 monthly instalments to calculate out a monthly instalment payment of HK$30,278.  These figures were therefore provided by the 2^nd defendant as a reference for him.  The plaintiff also said that he had queried why such information need to be written in the Sales Agreement.  The 2^nd defendant answered that it did not matter, might as well wrote it down (“寫埋啦，吾緊要”)[2].  The plaintiff said he had never agreed to the term as now alleged by the defendants

The “Remarks” clause in the Sales Agreement does not have the meaning and effect now contended for by the defendants

18.  In paragraphs 2, 5, 6, 10 and 13 of their respective Defence, both defendants contend that the “Remarks” clause in the Sales Agreement has the meaning and effect as set out in paragraph 14(a) above and that the plaintiff had breached it.

19.  For ease of reference, I set out that very short provision again:-

20.  The principles to be applied to the interpretation of commercial agreements are trite:-

“The court’s task is to ascertain the objective meaning of the language which the parties have chosen in which to express their agreement. The court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. The court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to the objective meaning of the language used.”

(per Popplewell J in Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd [2018] EWHC 163)

21.  It is also trite that the courts are not concerned to identify the subjective understandings of the parties to the contract or the meaning which they subjectively ascribe to the term in dispute, and such evidence is therefore inadmissible (para 13-048 Chitty on Contracts Vol 1 33^rd ed).

22.  Applying the above principles, I must reject the 2^nd defendant’s evidence and repeated submission emphasized to this court, and adopted by the 1^st defendant, that the “Remarks” clause by the 2^nd defendant’s own reading carried the meaning and effect the defendants now contend.

23.  To ascertain the meaning, I turn to look at the language, if there is much language to speak of.  The “Remarks” clause consists only of one word and 4 sets of numbers with minimal description – Financing, HK$1,000,000, 3%/Year, 36 months and Monthly Payment HK$30,278. While one can surmise that they refer to the core terms of some form of loan, it is beyond clear that however one reads it, it would be impossible to ascertain, as its objective meaning, the meaning and effect - “essential term”, “must obtain financing from bank(s) introduced by the defendants” or “the 1^st defendant is entitled to forfeit the deposit if such financing is not so obtained”.  The defendants’ contention that the “Remarks” clause has such meaning need only to be stated to be rejected.

Any oral agreement to that effect?

24.  In evidence, the 2^nd defendant said that the alleged term was orally agreed between him and the plaintiff in a telephone conversation that took place a day before the 20 February Meeting as well as in that meeting.  He said quite emphatically that the words “必须” and “重要” were spoken by him in relation to the plaintiff’s obligation to obtain financing from bank(s) introduced by the defendants.

25.  The plaintiff denied having so agreed, and the gist of his evidence has already been set out in paragraph 17 above.

26.  Mr Kwan for the plaintiff pointed out, rightly, that in their Defence, the defendants alleged that the plaintiff had promised to such a term, but it was always by reference to the “Remark” clause and never to any oral agreement.

27.  I mentioned earlier that the 2^nd defendant responded quite strongly when the plaintiff first mentioned on 12 March 2017 about paying the balance price in cash.  The whatsapp messages exchanged between the plaintiff and the 2^nd defendant were thus[3] :-

“[The plaintiff:]   No worry, if in this case I may pay cash !

[The 2^nd defendant:]   陳生: 點解D terms 你不斷更改呢？其實我哋應該尊重合约精神，我們白纸黑字簽好合约。我都需要和很多人交代，我的拍檔要我跟合约上所有 terms 做。如果唔係就當撻訂 ….

…

[The plaintiff:]   Benny 你講乜，冷静D，傾下吧！ ”

                    (my emphasis)

Likewise, in this message exchange when the 2^nd defendant was complaining against the plaintiff for changing the contract terms, the 2^nd defendant never mentioned any oral agreement or orally agreed term.

28.  The existence of any oral agreement or orally agreed term also was not mentioned in any other whatsapp messages exchanged between the parties.

29.  When questioned as to why, if it had been agreed, such a term was not written out in language, the 2^nd defendant’s explanation, essentially, was that the “Remarks” clause, as it was, already carried that meaning.  This explanation, as I said above, I have no difficulty at all to reject.

30.  When also questioned, if such was agreed a day ago, why he did not type it out in the Sales Agreement, his explanation was that the Sales Agreement was the form the company has always used.  However, the following was typed out, in advance and prior to meeting Madam Jim, under “Remarks” in the Provisional Agreement[4], which was also prepared by him :

“Remarks:

1. The deposit cheque of HK$28,000 from the Buyer will not be deposited nor transferred nor processed at any time.

2. Only if the car owner accepts the above offer price at HK$828,000.00 together if the Buyer confirms final agreement for the purchase at HK$828,000.00, this will deal will be on (sic). The Buyer will arrange payment of the deposit with credit cards or other means. The deposit cheque will not be processed in anyway.

3.      If the car owner does not accept the above offer price at HK$828,000.00, the deposit cheque will be returned to the Buyer and this deal will be cancelled.”

31.  This clearly shows that his explanation is not true, and further that the 2^nd defendant, on a prior occasion in relation to the same deal, has set out in quite clear and elaborate language what the parties’ arrangement and agreement were.  In my view, if he and the plaintiff had reached such an oral agreement prior to the 20 February Meeting as the defendants now contend and if as they say it was an “essential” term of such importance, there was no reason why, for the benefit of the defendants, that the 2^nd defendant did not write or type out the same in the Sales Agreement, as he did in the Provisional Agreement.

32.  Regarding credibility of witnesses, I am of the view that the 2^nd defendant was very bend on advocating his own cause and his own subjective interpretation of events or words spoken.  I do not find him a reliable witness.  On the contrary, I find the plaintiff calm and straight forward while giving evidence and find him credible and reliable.  The 1^st defendant did not give evidence and rely on the evidence of the 2^nd defendant.

33.  Based on the matters set out above in paragraphs 26 to 31 and my assessment of the credibility between the plaintiff and the 2^nd defendant, I prefer the plaintiff’s evidence and reject the 2^nd defendant’s where they differ, and find for the plaintiff’s version and hold that the parties have not reached such oral agreement as alleged by the defendants.

Other matters

34.  The 2^nd defendant gave evidence that in a telephone conversation occurred around the time the plaintiff and him were discussing a “leasing” loan at 1.75% interest (presumably around 12 March 2017, see whatsapp message[5]), the plaintiff offered to pay the defendants an extra HK$10,000, which arrangement, as events showed, was not taken up.  The 2^nd defendant said that such offer supported the defendants’ case.  To that, the plaintiff said in evidence that he did not remember having said so.  Mr Kwan submitted that even if the plaintiff was minded, almost a month after the Sales Agreement was signed, to pay something extra to sweeten the deal, such move did not reflect, one way or another, whether such an alleged term was agreed to; and that rather, it was consistent with the fact that the plaintiff was eager to successfully purchase the F599.  I agree with the said submission without finding whether such was in fact said by the plaintiff.

35.  Mr Kwan also raised (but did not find it necessary to seriously pursue) the alternative arguments (a) that even if the plaintiff were contractual obligated to obtain financing from a bank introduced by the defendants and even if such were breached, the 1^st defendant was still bound to complete and would be entitled to damages equivalent to the lost commission only, and not refusal to complete and forfeiture of the deposit, and (b) that the failure to obtain such a loan from banks introduced by the defendants was without fault on the part of the plaintiff such that the deposit should have been refunded by way of restitution.  In view of my finding and holding above, I do not find it necessary to adjudicate on these 2 alternative arguments.

36.  As the defendants appear quite conversant in English and having obtained their understanding, I deliver this judgment in English.  However, if they think the need arises, they may contact the court to arrange for this judgment to be interpreted to them.

Conclusion and disposition

37.  In the premises, I hold that there was no such contractual term as contended for by the defendants, and the 1^st defendant therefore has no right to forfeit the deposit.

38.  The plaintiff claims no other relief but the return of the deposit. I therefore enter judgment against the 1^st defendant for the sum of HK$82,800.

39.  The plaintiff seeks interest from the date of the issuance of the writ to the date of this judgment at the rate of 5% per annum, which was the earlier lesser prime rate.  The 1^st defendant does not contend otherwise.  I so order.  Interest on the sum then after until full payment will be at judgment rate.

40.  As to costs, Mr Kwan mentioned that it is reasonable to commence this action also against the 2^nd defendant as it was not confirmed then that he was a mere agent and the 1^st defendant was the principal, that the 2^nd defendant was the protagonist, and that the 1^st defendant was mirroring and adopting the Defence and all matters proffered by the 2^nd defendant.

41.  Considering these matters provisionally without deciding, I make a costs order nisi, which presently seems fair to me in the circumstance, that the 1^st defendant do pay the plaintiff’s costs of this action to be taxed if not agreed and there is no order as to costs of this action between the plaintiff and the 2^nd defendant.  This costs order nisi will become absolute unless there is an application to vary the same within the next 14 days.