GREIG MACPHERSON v. LI CHI KIN t/a KIN SHING MOTORS CO AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

___________

_____________

JUDGMENT

_____________

1. The Plaintiff is a young man with a passion for motor cars in general, and Porsche motor cars in particular. In early 1983 he already owned one, a 911S, which is expensive and fast by any standards but he ached to possess the even faster and most expensive 911 Turbo. It would be difficult to imagine a more unsuitable choice of motor car for the roads of Hong Kong. As Mr. Macpherson is quick to recognise, it is impossible to extract even a small fraction of the car's potential. Still that is not the point, which is pride of ownership, a kind of love sickness through which many young men have passed, some unscathed and some only after the sort of cathartic experience which has been the Plaintiff's in this case. A dealer in Porsche motor cars in Hong Kong is Kin Shing Motors, the 1st Defendant.

2. In April 1983 they had a Porsche Turbo which caught Mr. Macpherson's eye. Mr. Macpherson gave the car a cursory test drive, noticed some blemishes and subject to conditions agreed to by Kin Shing agreed to take the car, trading in his own 911S. The two conditions were that Kin Shing Motors would give him a six-month warranty and should he wish to change the car within one year they would allow him 90% of the purchase price of the Porsche Turbo against another car of equal or greater value. There is really no dispute as to those conditions except with regard to what was meant by the six month warranty. The salesman with whom Mr. Macpherson dealt was a Patrick Botelho.

3. This was not, as is wrongly pleaded in the Statement of Claim, a contract of sale between Kin Shing Motors and Mr. Macpherson: it was the familiar tripartite arrangement whereby the. dealer having interested a purchaser sells the motor car to a finance house who in turn let it out on hire purchase terms to what is loosely termed the customer. Quite independently of the hire purchase agreement, in the arrangements for which very often the dealer acts as the finance house's agent, there is, as was the case here, an agreement between the dealer and the customer whereby the dealer takes the customer's previous motor car in part exchange. These arrangements are so familiar nowadays and have continued for so long one would think that the elements would be well understood. The hire purchase company or finance house is not a party to the agreement by which a car is taken in part exchange. That is a quite separate matter between the dealer and the customer, and although, as frequently happens, the dealer is the finance house's agent for some purposes, he is perfectly entitled and does frequently enter into separate contractual arrangements with the customer. The contractual position as between the customer and the finance house is governed by the Hire Purchase Agreement. In this case the terms of the Hire Purchase Agreement are in common form. They purport to exclude any warranty which may have been given by the dealer as to the condition of the car, and ownership of the vehicle is retained by the finance house until the conditions specified in the agreement have bean fulfilled. The finance house did not agree to take back the vehicle in part exchange the vehicle being the subject matter of the Hire Purchase Agreement and of which they remain the owner. But that is what is alleged in the Statement of Claim. However, fortunately for Mr. Macpherson, the Statement of Claim puts it in two ways. In the first place it is alleged that the warranty and the agreement to re-purchase was an agreement between Mr. Macpherson and the 2nd Defendant entered into for the 2nd Defendant through the 1st Defendant as its agent. If that were right it would mean that Mr. Macpherson's only remedy would be against the finance house because it was a disclosed principal. Fortunately for Mr. Macpherson as I say, it is pleaded in the alternative that there was a separate agreement in which he and the dealer were the contracting parties.

4. I think, I have mentioned that Mr. Macpherson had noticed certain blemishes. They were put right; but there were more serious defects centering around the performance of the turbo charger unit which caused Mr. Macpherson to take the vehicle back to the garage more than once. Certain repairs were carried out which included, I hope the expression is not too loose, the re-conditioning of the turbo charger unit. When that work was done, Kin Shing presented Mr. Macpherson with a bill for over $10,732 even though the work had been done within the six-month warranty period. Mr. Macpherson thought that he should not be required to pay. Mr. Macpherson maintained that the warranty covered parts and labour. Kin Shing protested that the warranty only covered labour. The purchase order which is the only document evidencing the terms of the warranty simply says "six-month warranty" in Mr. Botelho's writing. Mr. Botelho has told me that the terms of the warranty were actually discussed between him and Mr. Macpherson and although Mr. Macpherson wanted a parts and labour warranty he, Mr. Botelho, was only prepared to offer a warranty covering labour and that was eventually agreed. If that is the case it is strange that when he came to write down on the purchase order what had been agreed he only put the words "six-month warranty". One would have thought that if there had been some question or dispute between the parties as to the nature of the warranty he would have been more specific. Well there are three possibilities, I suppose; that the matter was discussed and it was agreed that there should be a warranty for parts and labour; that it was discussed and agreed that it should be labour only; or that it was not discussed in terms at all. Both Mr. Macpherson and Mr. Botelho have told me that it was discussed so I am prepared to accept that it was. So I have to decide between the two witnesses and in view of what is written on the purchase order I would prefer the evidence of Mr. Macpherson even if questions of demeanour did not enter into it. But I found Mr. Macpherson to be an entirely frank witness. He acknowledged in some respects his own foolishness and lack of experience and I see no reason to reject his version of events and subject to the limits of recollection, which always play a part in the giving of evidence, I accept him as a truthful and accurate witness and where other evidence departs from that given by Mr. Macpherson, I prefer that of Mr. Macpherson which will also be important when I came to look at the evidence of Mr. Li. But although as I have found this was a warranty which included parts and labour and although Mr. Macpherson would have been entitled to insist on having his car back and not to pay a penny of the bill that is not what happened. There was this discussion as to what the terms of the warranty should be and the matter was in effect compromised. I accept that there were pressures on Mr. Macpherson because he felt he would not be able to get his car back unless he paid something or came to some agreement and in the end he did come to an agreement and paid $4,566. He did not say that the payment was without prejudice to his right to claim the sum back or that it was only made under protest. So Mr. Macpherson cannot recover the $4,566.

5. There were other occasions when the car was taken back to the lst Defendant and other occasions when more work was done and payment made This Statement of Claim makes no claim for repayment. I indicated at a time when it was possible for amendments to be made that the Statement of Claim as I read it relates to the invoice for $10,732 and nothing else. And although Mr. Ramanathan had argued at the time that by virtue of the claim on the invoice being overstated, it was possible to say that there was some surplus into which he could fit a claim for these other items of work, I rejected that argument at the time and I indicated to Mr. Ramanathan that if he wished to pursue claims for other repairs it had to come by way of amendment to his Statement of Claim. No application to amend has bean made and, I think quite sensibly, because other claims could be met in the same fashion as the first.

6. Even after these quite expensive repairs, the car was not working satisfactorily, or so Mr. Macpherson considered, and as he had not been given satisfaction by the 1st Defendant, he thought it is right to seek the advice of Mr. Turner of German Motors and he put the car into the hands of German Motors at the beginning at 1984 for what is called a full service to be carried out at a cost of $20,000 or more. That as I said was the beginning of 1984. There is no claim for any alleged breach of any condition or warranty under the Hire Purchase Agreement either express or implied as to fitness.  The claim is simply based on the alleged express oral agreement which was reached between Mr. Macpherson and Mr. Botelho as to the six-month warranty and the agreement to re-purchase, nothing else. The work which was done by German Motors was outside the warranty period and is irrecoverable.

7. During the time that the car was with German Motors the Plaintiff did instruct solicitors to write to Kin Shin and a letter was sent pointing out that the Plaintiff was going to seek legal redress and incidentally giving Kin Shing an opportunity to inspect the motor car which was then with German Motors. The letter itself did not say in terms that Mr. Macpherson was exercising his option to trade the car in, which is perhaps unfortunate, though it did refer to the fact that that had been part of the agreement between the parties. But it matters not, because as I find Mr. Macpherson on his own initiative did seek to exercise his option because in February 1984 he went along to Kin Shing's showrooms and spoke to Mr. Botelho saying that he wished to trade his car in and asked to be shewn suitable models which he might purchase under the terms of their agreement. At that time as I accept, Mr. Botelho simply opened the door of one motor car which in the event was not a car which Mr. Macpherson would have chosen. But from that moment onwards, as I find, the 1st Defendant was on notice that Mr. Macpherson was seeking to exercise his option to trade in his car at 90% of the original purchase price against some motor car of the 1st Defendant's of equal or greater value. If the 1st Defendant had been prepared to honour that agreement and had offered a reasonable choice of motor car to Mr. Macpherson and Mr. Macpherson had declined to accept anyone of them then it could not have been said that the lst Defendant was in breach of agreement. But what happened was that correspondence between solicitors ostensibly took Mr. Macpherson outside the 12-month period, though I do not say was done with that object. Yesterday Mr. Mackay who appears for the 1st Defendant told me that he was not taking the point that Mr. Macpherson was out of time even if the first attempt to exercise the option was found to have been as late as May, and that amendments which he envisaged applying for did not include any such allegation or averment. Today, having thought more about it overnight Mr. Mackie did seek to amend this defence to include the averment that if there were an option that it was not exercised it time. I did not give leave for the amendment to be made having regard to the lateness of the application and having regard to what Mr, Mackie had told me yesterday. So even if Mr. Macpherson had not sought to exercise his option, as I have found that he did in February, it would not matter because on any view he did attempt to exercise it in May, at a meeting which took place on Mr. Macpherson's balcony between Mr. Macpherson and Mr. Li. Although in an earlier telephone conversation Mr. Li had agreed in principle that he would allow 90% of the original purchase price against the Porsche Turbo when he came to see the motor car of the Plaintiff's he changed his mind. What he then proposed to Mr. Macpherson was that against a vastly more expensive motor car he was only prepared to allow $155,000.  That was what Mr. Macpherson told me and is not entirely inconsistent with the way in which the defence was originally pleaded. In the original defence it was denied that there was any agreement to take back the car of 90% but it was averred that an offer of $155,000 was made for Mr. Macpherson's motor car or I should say the finance company motor car as it still was at that time. When Mr. Li came to give evidence he insisted that not only had he been prepared to honour the 90% condition when he had spoken to Mr. Macpherson but that he was still prepared to honour it after the discussion on Mr. Macpherson's balcony. Well, that is not supported in the correspondence. It is contradicted by the original defence and it is contradicted by the evidence of Mr. Macpherson. And Mr. Macpherson, may I say, wrote two very important, letters, one following the telephone conversation which took place on 23rd May 1984 dated 25th May recording what he has told me were the terms of the conversation. Although in a sense it could be said to be self-serving nevertheless it is a fairly contemporaneous record of what was said. The same thing goes for the conversation which he had on the 25th of May which he followed up with a letter on the 28th recording the fact that all that Mr. Li was prepared to offer was $155,000. In those circumstances I have not the slightest hesitation in preferring the evidence of Mr. Macpherson to that of Mr. Li and in so doing I express the hope that the divergence of evidence arises out of a failure of recollection and nothing else.

8. So I find that Mr. Macpherson having attempted to exercise his option was never shown up to Mr. Li's clear repudiation of the agreement, as I find, a reasonable selection of motorcars from which to make his choice. So in my judgment the Plaintiff is entitled to recover that sum of money by which he failed on selling his motor car to reach the equivalent of 90% of the original purchase price, provided always that he has done all that was reasonable is mitigate his loss. Now he tells me that he advertised the car. He tried to sell it in Australia which was at one time a good market for second-hand motor cars from Hong Kong. He made enquiries of his friends. He advertised in local newspapers. In the end he managed to sell at $130,000. It is said that he did not do all that he might have done to mitigate his loss but I have not heard a word of evidence as to $130,000 not being a reasonable price as at that date for such a motor car in that condition. Indeed the evidence I have heard is all to the contrary because Mr. Li was not prepared to offer more than $155,000 in part exchange, which leads me to think that $130,000 obtained by a private individual selling in the open market is eminently reasonable.

9. Consequently, I find that Mr. Macpherson is entitled to judgment for the difference between $130,000 and 90% of the original purchase price which means he will recover $72,500. I ought to say in passing that at one time it was the 1st Defendant's case that they were not obliged in any event to take this car back because through some mismanagement by Mr. Macpherson it had so deteriorated in condition that they were relieved of their obligation. Had it been the case that through some neglect on Mr. Macpherson's part or through some accidental damage other than by fair wear and tear the motor car had deteriorated then it may be the Defendant would have been relieved of its obligation but the case has not proceeded on that basis. In the event the lst Defendant has maintained that the car was in such good condition after all the work had been carried out by Kin Shing Motors and by German Motors that the car ought to have, realised a greater price than $130,000. So it was not open to them to argue that they were relieved of their obligation to take the car back on that basis.

10. There will be judgment for the Plaintiff against the lst Defendant in the sum of $72,500 and the claim of the Plaintiff against the 2nd Defendant will be dismissed.

11. Mr. Merry applies for the costs of the 2nd Defendant - the 2nd Defendant having been dismissed from the suit and a question arises rather surprisingly as to who should pay them. Mr. Ramanathan, I think, optimistically and ingeniously, if I may say so, argues that they should be paid by the lst Defendant because although he acknowledges the claim against 2nd Defendant was misconceived he thinks the lst Defendant should have put him right at some stage in the course of pleadings. Although it is true that in the amendment which I allowed today after all costs had been incurred Mr. Mackay did admit an agency which had it been done earlier might have lent force to Mr. Ramanathan's application, there was no reason at all to bring in the 2nd Defendant and having bought it in there was no reason for keeping it in. That is why I mentioned the matter yesterday so that at least one day's cost might have been saved. In my judgment the costs of the 2nd Defendant have to be borne by the Plaintiff. In view of what I have said I dare say it is a matter that the Plaintiff's legal advisers will wish to consider and in particular whether or not Mr. Macpherson himself should be made to bear the 2nd Defendant's costs.