EAST ASIA FINANCE CO. LTD. AND ANOTHER v. LI CHOI HUNG AND OTHERS

HCCL 80/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 80 OF 1999

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REASONS FOR JUDGMENT

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1. In these proceedings the 1st plaintiff's claim is in respect of six hire purchase agreements entered into by the defendants with the 1st plaintiff by which they agreed to take on hire six taxis. These were part of a larger arrangement involving 22 taxis and there were 13 High Court actions concerning them and the alleged breach of the hire purchase agreements. On 11 January 1999, Madam Justice Yuen, on applications for summary judgment, gave judgment for the plaintiff in respect of all the taxis except those now the subject of this action before me. Leave to defend was given in respect of these taxis as she held that, in the absence of an agreement for sale to the 1st plaintiff, there was an arguable defence.

2. The claim of the 1st plaintiff is for sums owed under those hire purchase agreements, alternatively damages to be assessed, and delivery up of two of the taxis, in the name of the 1st defendant, the other four having already been given up and sold. There is also a claim by the 2nd plaintiff for personal loans made to the defendants, but I am informed by Mr Chain for the plaintiffs that this is no longer being pursued, as the guarantor of those loans has settled them. Similarly the plaintiffs are not presently proceeding against the 4th defendant, the guarantor of these agreements, as he has been declared bankrupt.

3. At the commencement of the hearing, Mr Chain also informed me that the 1st defendant had consented to judgment being entered against her for the sums claimed and possession of two of the taxis, and, having ascertained from her, being present in court and acting in person, that she agreed to the terms proposed, judgment was accordingly given in the terms agreed. The 2nd and 3rd defendants did not appear and were not represented, and, after hearing the evidence of the 1st plaintiff's witnesses, and submissions by Mr Chain I gave judgment also against them for the sums claimed, and a declaration that the 1st plaintiff is the sole beneficial and legal owner of the remaining four taxis. I now give my reasons for so doing.

4. On the face of it, the hire purchase agreements the subject of these proceedings are standard agreements, and it appears not to be denied by the defendants that they have ceased to pay the instalments due thereunder. However, by the defence filed the defendants claimed that the hire purchase agreements and the personal loans were part of an elaborate financing scheme for the taxis which were in fact owned by a company called Yet Cheung Motors Company Ltd, and the 1st, 2nd and 3rd defendants were nominees/agents for Yet Cheung. This was for the purpose of refinancing the taxis, then financed by hire purchase agreements from Dao Heng Finance Ltd. They further claimed that title to the taxis was never transferred to the 1st plaintiff, and the agreements, being solely security for the loans, constituted bills of sale within the meaning of the Bills of Sale Ordinance, Cap. 20, and, never having been registered in accordance with the requirements of that ordinance, were void.

5. The only evidence before me at the hearing was from Mr Wong Wai Chung of the 1st plaintiff, and a Ms Chan Hau Yee, who was a senior officer with the 1st plaintiff at the time, who confirmed the accuracy of the figures in the statement of claim. Mr Wong's evidence, which I accept, was that the defendants were introduced by a dealer, with whom they had had a master dealer agreement since 1997, Kwok Chung Motor Car Ltd, to the 1st plaintiff, to finance a scheme for the hiring of the taxis whereby the 1st plaintiff would purchase the taxis from the dealer for hire to the defendants. The taxis were already registered as owned by the defendants, and subject to hire purchase agreements with Dao Heng, and this was a refinancing arrangement. The dealer paid off the sums due to Dao Heng the same day as the defendants submitted their applications to the 1st plaintiff.

6. As is common practice, the hirers of the taxis were registered as owners, but to protect their interests, the finance company would retain the original vehicle registration documents, giving the hirers a photocopy, with a stamp to indicate that the vehicle was under hire purchase. The hirers would sign blank notices of transfer, and delivery receipts to acknowledge they had taken delivery. The 1st plaintiff's practice is to make payment only against delivery of the original vehicle registration documents. If the 1st plaintiff was to pay off the previous hire purchase company it would deal direct and receive the vehicle registration documents from that company. In this case the dealer was able to, and did, pay off the previous hire purchase company and deliver the original vehicle registration documents before receiving payment from the 1st plaintiff. As far as the 1st plaintiff was concerned, this was a straightforward refinancing exercise, the effect of which was to transfer ownership to them of the taxis, against payment to the dealer, and then to hire them to the defendants. There was no necessity for a sale agreement with the dealer, nor enquiry as to previous hire purchase agreements, as the effect of the above arrangements was to transfer actual ownership to the 1st plaintiff against payment.

7. On the basis of this evidence it is clear that, whatever the arrangements and dealing between Kwok Chung, the dealer, Yet Cheung, and the defendants, these were true hire purchase agreements entered into by the defendants, and by the terms of which they were bound. The absence of a formal agreement for sale does not alter the situation as it is an irresistible inference from the dealings between the 1st plaintiff, the defendants and Kwok Chung, that a sale took place, upon which the 1st plaintiff even paid commission to Kwok Chung under their master dealer agreement.

8. For these reasons I found that the 1st plaintiff were entitled to the reliefs claimed for breach of the hire purchase agreements and gave judgment accordingly.