INCHCAPE NRG H.K. LTD. t/a GILMAN OFFICE AUTOMATION v. HOTEL AMENITIES INTERNATIONAL LTD.

CACV 81/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 81 OF 2000

(ON APPEAL FROM DCCJ 22136/1997)

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J U D G M E N T

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Hon Godfrey VP :

Introduction

1. This is an appeal from Her Honour Judge Chan, who on 22 December 1999 gave judgment in the District Court in favour of the defendant on the defendant's counterclaim in the action before her. The plaintiff in the action is a company called Inchcape NRG H.K. Limited, which trades as Gilman Office Automation. The defendant is a company called Hotel Amenities International Limited.

The claim

2. The plaintiff's claim against the defendant was a claim for $24,300, being the price of a Ricoh photocopier sold and delivered to the defendant on 30 April 1997. There is no longer any dispute about the plaintiff's claim and the defendant accepts liability to pay for the photocopier, although, says the defendant, it proved unsatisfactory.

The counterclaim

3. The substantive issue which the judge had to decide and which we now have to revisit arose out of an allegation made by the defendant against the plaintiff that, before the defendant entered into the contract for the purchase of the photocopier, a representative of the plaintiff, one Lai, had misrepresented to the defendant the terms on which the plaintiff would be prepared to enter into a Service Agreement with the defendant for the service of the photocopier. The plaintiff's standard form of Service Agreement recites that the party who is to take the photocopier (called "the consumer") has requested to be supplied with such a machine by the plaintiff. It further recites that the machine has a meter which records the number of copies made by the consumer and that the Agreement should remain in force until whichever of the following events shall first occur :-

"(1) Five years shall have elapsed from the date of the guarantee issued by GOA [the plaintiff] in respect of this machine.

(2) 1,000,000 units shall have been recorded on the said meter."

4. Clause 1 of the standard form provides that the plaintiff agrees to keep the machine in good and serviceable condition and to supply all supplies (excluding paper) and parts to be used on the machine. Clause 2, which is the clause which has given rise to the dispute between the parties, reads as follows :-

"2. In consideration of GOA [the plaintiff] supplying such service and supplies and parts, the Consumer hereby agrees to pay to GOA a monthly charge of $___ per unit for the first and subsequent months of installation as recorded on the said meter. GOA shall have the option to vary the unit charge by giving thirty days notice and if rejected in writing within seven days of notification, such rejection will suspend GOA's obligations under this agreement."

5. During the course of the pre-contract negotiations between Mr Lai, for the plaintiff and Miss Kwan, for the defendant, there were some discussions about the unit charge. During those discussions, Mr Lai told Miss Kwan that the monthly charge would be $0.11 per unit. It is said by the defendant, and this was accepted by the judge, that Lai did not mention the option to which I have referred, namely the plaintiff's option to vary the charge (no doubt, by increasing it) on notice to the defendant.

6. In those circumstances, the defendant, on 29 April 1997, entered into the agreement for purchase of the photocopier. But it never entered into any service agreement, because it was not prepared to give the plaintiff the option to increase the unit charge. When the photocopier broke down, the defendant had to replace it. It claims the cost of replacement as damages for misrepresentation.

The case for the defendant

7. It is said for the defendant that the omission of Mr Lai to mention to Miss Kwan the option to vary the monthly unit charge falsified his representation (which was otherwise correct) that the monthly unit charge would be a monthly charge of $0.11 per unit; and that this alleged misrepresentation by omission is actionable under the provisions of the Misrepresentation Ordinance, Cap. 284, section 3(1).

The first question

8. As it seems to me, the first question which has to be addressed is whether or not there was any misrepresentation by omission made by Mr Lai to Miss Kwan at all. The judge seems to have been of the opinion, as I read her judgment, that there was such a misrepresentation, although this is an opinion which contradicts an interlocutory observation of the judge which reflected the provisional view of the judge that there was no representation at all : see p.171 of the bundle, p.69 of the transcript. For my part, I do not think there was any such misrepresentation, and that the judge's earlier view was right. What happened here was that there were some pre-contract discussions about the unit charge before the contract for the purchase of the photocopier was concluded but that nothing in those discussions constituted any clear and unequivocal representation to the effect that the plaintiff would have no option to raise the monthly unit charge. It seems to me impossible to spell out of the circumstances which I have related any representation of the clear and unequivocal character which would be required in order to give rise to the defendant's alleged cause of action against the plaintiff. It is only when a representation is made but some essential qualification is omitted from it, without the inclusion of which the original representation becomes untrue, that there is a misrepresentation by omission. That is simply not this case.

The second question

9. Secondly, even if there had been a representation that there would never be any increase in the unit charge, any problem which might have been caused by that was resolved when the defendant sent back the contract for the purchase of the photocopying machine at a time when the plaintiff had already supplied to the defendant the form which actually contained Clause 2, setting out the terms of the option.

10. It was said by Mr Tracy, on behalf of the defendant, in his helpful argument, that that is not good enough, because Miss Kwan's mind continued to be affected by the alleged misrepresentation even when the defendant sent back the purchase contract duly signed.

11. I cannot accept this argument. It may be that, as she said in evidence, Miss Kwan did not read the form containing Clause 2 before the defendant entered into the agreement for the purchase of the photocopier, and did not look beyond the numbers stated in the form. It is not surprising that she did not read what was contained in the form but on the principles enunciated in cases such as L'Estrange v. Graucob [1934] 2 KB 394, I am quite satisfied that this does not afford any good reason for treating the alleged misrepresentation as continuing beyond the time when the defendant was supplied with the form containing Clause 2. As it seems to me, there is no justification for the suggestion that the alleged misrepresentation continued to affect the mind of the defendant until a time after the defendant signed and accepted the terms of the purchase contract.

12. For these reasons, I would, for my part, allow this appeal; dismiss the counterclaim; and order that the plaintiff's costs of the action and counterclaim be taxed if not agreed and paid by the defendant to the plaintiff.

Hon Rogers JA :

13. I agree and I have nothing to add.

Hon Ribeiro JA :

14. I also agree.