LUI CHI YUEN v. KINGSWAY CARS SERVICES LTD

DCCJ 5066/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5066 OF 2007

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J U D G M E N T

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1.  This is a case about repair’s lien.

2.  I have dealt with this case earlier by giving a decision dated 23 April 2008 on the Plaintiff’s application for a determination by the court on various questions of law pursuant to Order 14A of the Rules of the District Court, Cap 336 (“My Earlier Decision”).  By that time, I took the view that the issues in the present case are very much facts-sensitive issues and so it is not appropriate for the court to dispose of this case by way of Order 14A application.  However, as the car in question had been retained by the Defendant for over a year, I made an order for a speedy trial.  This is the main trial of this action.

Facts of the case

3.  There is no dispute between the parties about the facts of the present case.  The Plaintiff came to know one Mr David Lee (“Mr Lee”) in or about March 2006, and they had a common interest in cars.  By that time, Mr Lee wanted to sell his Lotus Exige sports Car (“the Car”).  As the Plaintiff liked the Car and the offer price was attractive, the Plaintiff purchased the Car from Mr Lee’s father who was by then the registered owner of the Car.  The purchase was made in or about June 2006, and the purchase price was $475,000. 

4.  About one week after the purchase, the Plaintiff found that there was some problem with the central locking system of the Car.  After informing Mr Lee of the problem, Mr Lee took the Car to the Defendant’s workshop for repair, and Mr Lee also paid for the service fees charged by the Defendant.  There is a dispute between the parties as to whether the Plaintiff had accompanied Mr Lee to take the Car to the Defendant’s workshop for such repair work. 

5.  On 23 July 2006, Mr Lee and the Defendant had a ride in the Car.  While Mr Lee was driving, he lost control of the Car, and as a result the Car was damaged in a collision.  After the accident, Mr Lee called the Defendant and asked it to send a towage truck to tow the Car to the Defendant’s workshop for repair.  The Defendant is and was the authorized dealer of Lotus Cars in Hong Kong.  Mr Lee also told the Plaintiff that he would arrange for the repair of the Car. 

6.  As the damage to the Car was extensive and time would be needed to ship the spare parts from Europe for this unique kind of sports Car, the Plaintiff knew that the repair work would take quite some time.  Further, he was busy with the preparation of his own wedding in January 2007, and so he did not actively press Mr Lee for the return of the Car.

7.  In January 2007, he wanted to get back the Car for the taking of his wedding photos.  Through the arrangement of Mr Lee, the Plaintiff took delivery of the Car from the Defendant’s workshop on 15 January 2007 and returned it to the Defendant on the same day.  During that time, the Plaintiff parked his own car, which was a Lexus private car, in the Defendant’s workshop.  There is a dispute between the parties as to whether the Plaintiff just parked his car there for his own convenience or as a security for the unpaid repair charges of the Car. 

8.  Later in or about March and April 2007, the Plaintiff was eager to take back the Car after such a long period of time.  He approached the Defendant’s workshop and enquired about the progress of the repair work.  The Plaintiff says that he had told the Defendant’s staffs that he was the owner of the Car, a fact which is disputed by the Defendant who claims that its staffs were only aware of such fact much later in May or June 2006.

9.  Upon Mr Lee’s request, the Defendant’s foreman, Mr Ng Chin-wah (“Mr Ng”), delivered the Car to Mr Lee on 3 May 2007 at Thompson Road, Wanchai.  At the time of delivery, Mr Lee handed a cheque to Mr Ng in purported settlement of the Defendant’s repair charges of the Car in the amount of $122,138 (“the Cheque”).  Upon seeing the Cheque, Mr Ng found that the amount in words in the Cheque did not correspond with the amount in figures.  Further, the comma used in the description of the amount in figures was not correctly placed.  Mr Ng therefore called his supervisor, Mr Kung Kam-fai (“Mr Kung”), to inform him of the problem.  After that, Mr Kung spoke with Mr Lee over the phone.  Mr Lee told him that he would place the comma in the correct place in the Cheque and he would put his initial there to verify the correction.  In respect of the discrepancy in the descriptions of the amount, Mr Lee assured him that he had issued many cheques with such discrepancy in the past, and the Defendant would have no problem in presenting the Cheque for payment.  Mr Kung trusted his words and the Car was then delivered to Mr Lee.  

10.  Upon seeing the Cheque later, the Defendant realized that there would be a problem in presenting the Cheque for payment.  The Defendant’s manager, Mr Johnson Lau, then contacted Mr Lee on the same day and requested him to send another cheque to the Defendant, to which Mr Lee agreed.  Mr Kung then tried to call Mr Lee on numerous occasions for the payment of the repair charges but without any success.  The Defendant later also found out that the Cheque had in fact been drawn on the bank account of Mr Lee’s father, but no attempt has ever been made by the Defendant to present the Cheque for payment.

11.  After obtaining the Car, Mr Lee handed the Car back to the Plaintiff.  As there was some problem with the air-conditioning system of the Car, the Plaintiff took the Car to the Defendant’s workshop on or about 17 May 2007 for repair.  Later, the Plaintiff demanded the Defendant to return the Car to him.  However, as the Plaintiff did not agree to pay for the earlier unpaid repair costs of the Car, the Defendant refused to deliver the Car to the Plaintiff, which then resulted in the commencement of the present action for conversion.

12.  The Defendant accepts that it was not the policy of the Defendant to find out the identity of the registered owner of a car when someone brought such car to the Defendant’s workshop for repair.  In this particular case and before May 2007, the Defendant’s staffs had only dealt with Mr Lee in respect of the repair work of the Car.  In their eyes, Mr Lee was the owner of the Car at all material times.

13.  As I see it, the only factual disputes between the parties are confined to those listed in paragraphs 4, 7 and 8 above.  As I will demonstrate below, the resolution of these factual disputes is not relevant in determining the main issue in the present case.  In fact, the result of the case does not turn on the credibility of the witnesses and the court can simply resolve this case by reference to the undisputed facts mentioned above. 

14.  However, if I have to make a ruling on the factual issues, I would find that the Plaintiff’s version of events does carry more weight. Firstly, Mr Lee was a regular customer of the Defendant’s workshop.  As demonstrated by the incident on 3 May 2007, the Defendant put a lot of trust in Mr Lee’s words, and so it was unlikely that the Defendant would have asked for some kind of security when the Plaintiff just took away the Car for one day on 15 January 2007.  Secondly, the Plaintiff could not get back the Car for a long period of time after the accident in July 2006.  In such case, it would only have been sensible and reasonable for the Plaintiff to reveal his identity as the owner of the Car and to press for the re-delivery when he made enquiry with the Defendant about the progress of the repair work in March and April 2007.  Hence,  I accept the Plaintiff’s version of events on the balance of probabilities, but as I have mentioned above, such finding is not relevant in determining the main issue in the present case.

The main issue and the legal principle involved

15.   The Defendant parted possession with the Car in May 2007 but it later regained possession of the same.  The central issue in the present case is therefore whether the Defendant could, under such circumstances, exercise the right of lien over the Car in respect of the earlier unpaid repair work requested by Mr Lee. 

16.  In My Earlier Decision, I have already ruled on the following issues.  Firstly, the repair’s lien enjoyed by the Defendant over the earlier unpaid repair charges is one of particular lien as opposed to general lien (see: paragraph 6 of My Earlier Decision).  Secondly, as possession is an essential ingredient for the exercise of the lien, re-delivery of the goods to the owner or its agent destroys the lien, and when once made cannot be recalled, even if made by mistake.  However, if the delivery is induced by fraud or is otherwise wrongly obtained, the lien revives if possession is recovered, even though the recovery is effected by stratagem (see: paragraph 8 of My Earlier Decision).  As to the basis for such rulings, reference can be made to the contents of My Earlier Decision.  I will therefore proceed to determine this case in the light of these rulings.

Application of the legal principles

17.  As the Defendant voluntarily surrendered possession of the Car to Mr Lee, the Defendant would have lost the right of lien unless he can prove that the re-delivery had been induced by fraud on the part of Mr Lee.  I would refer it as the fraud issue.  Further, the Defendant contends that Mr Lee was at all material times acting as an agent of the Plaintiff and so the Plaintiff was bound by the fraud of Mr Lee.  I would refer this second contention as the agency issue.

18.  In paragraph 11 of the Amended Defence and Counterclaim, the Defendant claims that the Plaintiff had unlawfully obtained the possession of the Car which was induced by the fraud on the part of the Plaintiff and/or his agent, Mr Lee.  By reason of such averment, Mr Yuen, counsel for the Defendant, agrees that the Defendant would only be able to succeed if the court rules the fraud issue and the agency issue both in favour of the Defendant.  In other words, the Defendant would have lost the right of lien if it fails in any of these issues.

Fraud issue

19.  In my judgment, there is simply insufficient evidence to substantiate the allegation of fraud on the part of Mr Lee.  If Mr Lee wanted to obtain the Car by presenting a worthless cheque, why did he have to present the Cheque in which the amount described in words did not correspond with that in figures?  This was an obvious defect, and it was always open to the Defendant, after noting such defect, to defer the actual handing over of the Car until the clearance of the Cheque by the bank.  If fraud were involved, it simply did not make sense to present such Cheque to the Defendant’s staff in purported payment of the repair charges. 

20.  At this stage,  I do not know why Mr Lee did not make the payment subsequently.  I also do not know why Mr Lee put his initial on the Cheque drawn on his father’s account.  However, as fraud is a serious allegation, there is simply not enough evidence for the court to find fraud on the part of Mr Lee.  It might be the case that Mr Lee or his father had made a genuine mistake in writing the amount in the Cheque, and the handing over of such a defective Cheque might not have involved any fraudulent element.

21.  Further, if Mr Lee were to have the intention to obtain the Car fraudulently, it is clear that the delivery of the Car to Mr Lee on 3 May 2007 had not been induced by such fraud.  The evidence of this case shows that Mr Ng had read the descriptions of the amount in words in the Cheque to Mr Kung over the phone, and so Mr Kung was then aware of the defect in the Cheque.  The Defendant would certainly have difficulty in presenting the Cheque for payment, and yet he allowed Mr Lee to take delivery of the Car.  In my judgment, the Defendant simply relied on Mr Lee’s representation that payment would be taken care of rather than the giving of the Cheque itself, and hence the re-delivery of the Car had nothing to do with the fraud on the part of Mr Lee, which I do not find it to be the case, in presenting the defective Cheque for payment.

Agency issue

22.  The Defendant also fails miserably on the agency issue.  It is clear from the evidence that the Defendant had all along been treating Mr Lee as the contracting party for the contract for repair.  It was not the policy of the Defendant to find out the identity of the registered owner of a car when accepting an order for repair, and the Defendant had all along been treating Mr Lee as the owner of the Car and the party responsible for the payment of the repair charges.  Neither did the Plaintiff do any act which held out Mr Lee as his agent.  In such circumstances, it is simply impossible for the Defendant to succeed on the agency issue.

23.  Mr Yuen also seeks to rely on the principle of undisclosed principal and argues that the Plaintiff, being the undisclosed principal, is bound by the fraud of his agent, Mr Lee.  However, for such principle to apply, the Defendant must show that it was the intention of both Mr Lee and the Plaintiff that the former was to enter into the contract for repair on behalf of the undisclosed principal, i.e. the Plaintiff.  But the evidence in the present case shows otherwise.  The Plaintiff had no intention to be a party to the repair contract.  Mr Lee was responsible for damaging the Car and so he should be the one liable to pay for the repair charges involved.  Further, the Defendant had all along been treating Mr Lee as the owner of the Car and the  party responsible for the payment of the repair costs.  In such case, there is simply no room for the Defendant to argue that Mr Lee was at any time the agent of the Plaintiff. 

24.  As the Defendant fails on both the fraud and agency issues, the Defendant had lost the right of lien when it voluntarily surrendered the Car to Mr Lee.  By refusing to return the Car to the Plaintiff in June 2007, the Defendant has since then converted the Car to its own use.  I therefore grant judgment in favour of the Plaintiff for the delivery of the Car or the payment of its value. 

25.  As I see it, the Defendant has only itself to blame for losing this action.  As a repairer, the Defendant had a powerful security over the unpaid repair costs by exercising the right of lien over the Car.  The right was exercisable against the owner of the Car even if the owner was not a party to the contract for repair.  Further, the Defendant had not been misled in any way, and it always looked upon Mr Lee as the party to the contract and responsible for the payment of the repair charges.  If Mr Lee was not the owner, it did not matter as the right of lien was good against the owner.  However, the Defendant, after knowing the defect in the Cheque, did not withhold the delivery of the Car pending the clearance of the Cheque. The Defendant simply trusted Mr Lee’s words and pledged the payment on Mr Lee’s creditworthiness.  If Mr Lee subsequently did not make the payment, it did not alter the fact that the Defendant had voluntarily surrendered possession of the Car to Mr Lee, and by so doing, he had lost the right of lien which was a powerful security.

Loss of enjoyment for the use of the Car

26.  Mr Yuen agrees that if the Defendant is liable for conversion, the Plaintiff is entitled to claim for damages for loss of enjoyment for the use of the Car.  For the quantum of such loss, Miss Wong, counsel for the Plaintiff, refers me to the English County Court decision of Thompson v Boulter [2001] CLY 551.  In that case, the defendant unlawfully retained a BMW M3 motorcar for a period of time.  During such period, the plaintiff had had the use of other vehicles of lower status.  In the County Court, District Judge Exton awarded £1,733 to the plaintiff for the loss of the use and inconvenience over a period of 8 months, which was determined by measuring the disappointment of driving other vehicles of lower status against the pleasure of driving the BMW. 

27.  In the present case, it seems that the Plaintiff was not very much concerned about the use of the Car.  He had allowed Mr Lee considerable time for the repair of the Car before pressing for its return, and this shows that Mr Lee seldom used the Car himself.  As the parties agree that the value of the Car was $430,000 at the time when the Defendant refused to return the Car to the Plaintiff in June 2007, I award a modest sum of $30,000 as loss of enjoyment for the use of the Car during the period from June 2007 to the date of this trial.  In reaching this figure, I have certainly taken into account the limited use of the Plaintiff even if the Defendant had not wrongfully converted the Car to its own use.

28.  I now listen to the parties’ submissions on the appropriate order to be made in the light of my judgment and on the issues of interests and costs.