GREAT BRIGHT LTD. v. TRIANGLE MOTORS LTD.

HCA 7781/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7781 OF 1995

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J U D G M E N T

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1. In September 1994, there was a change of policy in China with regard to importation of vehicles. Formerly, Hong Kong investors importing vehicles for use of business set up in China could do so without any custom duty being levied provided that the vehicles were listed in an approved inventory of imported equipment for a foreign business in China ("外商投资企业进囗机器设备、辨公用品清单") ["the Equipment Inventory"]. That policy ceased to apply from 1 October 1994. Hence, 30 September 1994 was the last day on which a foreign investor (including Hong Kong investors) could import vehicles free of custom duty for the use of their business in China.

2. Mr.Wong Kam Hung ["Wong"] was a Hong Kong businessman. He had a business called Continental Knitting Factory ["Continental"]. In 1992, in the name of the Plaintiff, a limited company called Great Bright Limited, Wong set up a knitting factory in Shenzhen, China called Yongxiang Knitting Garment (Shenzhen) Limited ("永祥针织制衣（深圳）有限公司") ["Yongxiang"]. Wong and his wife were the only shareholders of Great Bright Limited. For all intents and purposes, Yongxiang was as much a business of Wong as Continental. The Business Permit ("外资企业批准证书") for Yongxiang was issued in July 1992. The Equipment Inventory for Yongxiang included 4 vehicles: two 3 ton trucks and two 1.5 ton trucks.

3. After Wong learnt of the change of policy in September 1994, he hoped to import the 4 vehicles into Shenzhen before 30 September 1994. On 7 September 1994 he placed two orders with Lin Chun Ming ["Lin"], a sales representative of the Defendant for the 4 vehicles. The order bearing Contract No.CB945343-5344 was for two 3 ton Isuzu trucks. The total contract price was $324,800 made up as follows,

(a) price of vehicle:	$153,900 x 2
(b) air-conditioner and radio cassette:	$ 5,900 x 2
(c) inspection by China Inspection:	$ 1,800 x 2
(d) transportation:	$ 800 x 2

4. The other order bearing Contract No. CB945341-5342 was for two 1.25 ton Isuzu trucks. The total contract price was $312,200 made up as follows,

(a) price of vehicle:	$147,900 x 2
(b) air-conditioner and radio cassette:	$ 5,900 x 2
(c) inspection by China Inspection:	$ 1,800 x 2
(d) transportation:	$ 500 x 2

5. Both orders were placed on printed forms of the Defendant and they were expressly stated to be "Customer's Order for Export to China" [the "Customer's Order"]. It is not disputed that Lin and the Defendant was fully aware that Wong bought those vehicles for use in China. The name of purchaser as put down in the orders was Continental. A deposit of $10,000 for each vehicle was paid by Wong. It was also not disputed that Lin and the Defendant were aware of the change of policy in China mentioned in Paragraph 1 above. Wong paid the balance of the contract price by a cheque dated 24 September 1994.

6. By the close of business at the Chinese Custom at Man Kam To on 30 September 1994, only one out of the four vehicles ordered by Wong was delivered at China, namely a 1.25 ton truck. The other three vehicles could not be delivered in time and they could therefore be delivered with the benefit of custom exemption. As a result, they were driven back to the Defendant's carpark and were stored there up to now.

7. Wong pressed for delivery of the other three vehicles through solicitors and the Defendant took the position that delivery had taken place in Hong Kong and all their obligations under the contracts had been performed by the Defendant. In a letter dated 14 December 1994, the Defendant's solicitor also put forward a case that the Defendant had on the instruction of the purchaser tried their best to arrange a transportation company to deliver the 3 vehicles to Shenzhen without success due to congestion at the control point. The Defendant denied any breach of contract on their part. The Defendant also reserved the right to claim storage charges in respect of the 3 vehicles still parked at their car park.

8. On 3 August 1995, Wong issued the Writ in the present action claiming refund of $480,900 on the ground of total failure of consideration in respect of the 3 vehicles and also damages for breach of contract. The plaintiff named in the Writ when it was issued was "Wong Kan Hung trading as Continental Knitting Factory". By an order of Cheung J made on 19 March 1998, the plaintiff was changed to "Great Bright Limited". It is common ground that the name of Great Bright Limited was never mentioned by Wong to Lin at any time before or when the contract was made. Mr.Lau, counsel for the Plaintiff, advanced the Plaintiff's case on the basis of the law relating to undisclosed principal.

The proper plaintiff

9. The Defendant averred in the Defence that the contract was made with Continental. In Paragraph 3 of the Amended Statement of Claim, it was pleaded that Continental or alternatively Wong acting as agent for and on behalf of the Plaintiff (viz. Great Bright Limited) made the agreement for the purchase of the four vehicles. On the evidence, it is clear to me that the purchase was made by the Plaintiff with the intention to import the four vehicles under the Equipment Inventory. It was the Plaintiff, not Continental, who was the foreign investor named in the Business Permit for Yongxiang. Wong's evidence that the vehicles were bought by the Plaintiff for the use of Yongxiang was not challenged by Mr.Chiu, counsel for the Defendant, in his cross-examination.

10. The law as to undisclosed principal can be found in the judgment of the Privy Council in the case of Siu Yin-kwan v. Eastern Insurance Co. Ltd. [1994] 1 HKLR 77 at p.83,

"(1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority.

(2) In entering into the contract, the agent must intend to act on the principal's behalf.

(3) The agent of an undisclosed principal may also sue and be sued on the contract.

(4) Any defence which the third party may have against the agent is available against his principal.

(5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal."

11. It is also relevant to bear in mind the dicta of Diplock LJ in Teheran-Europe Co. Ltd. v. S.T. Belton (Tractors) Ltd. [1968] 2 QB 545 at 555 which was cited by Lord Lloyd in Siu Yin-kwan,

"where an agent has ... actual authority and enters into a contract with another party intending to do so on behalf of his principal, it matters not whether he discloses to the other party the identity of his principal, or even that he is contracting on behalf of a principal at all, if the other party is willing or leads the agent to believe that he is willing to treat as a party to the contract anyone on whose behalf the agent may have been authorised to contract. In the case of an ordinary commercial contract such willingness of the other party may be assumed by the agent unless either the other party manifests his unwillingness or there are other circumstances which should lead the agent to realise that the other party was not so willing."

12. In the present case, I am satisfied on the evidence before me that when the agreement for the purchase of the four vehicles was made by Wong in the name of Continental, he intended to act on behalf of the Plaintiff and that the vehicles were to form part of the equipment supplied by the Plaintiff for the use of Yongxiang. I am also satisfied, and indeed there is no evidence to the contrary, that the Defendant had not excluded an undisclosed principal's right to sue on the agreement by any terms thereunder. I therefore hold that the Plaintiff is the proper plaintiff in the present action.

The terms of the contract

13. In Paragraph 3 of the Amended Statement of Claim, it is pleaded that the contract was evidenced by the 2 Customer's Orders. On the other hand, the defence case as pleaded in Paragraph 1A of the Re-Amended Defence and Counterclaim was that there were two contracts in writing contained and/or evinced in the two Customer's Orders. There is therefore a dispute as to whether the customer's orders were the contracts or were just evidence of one contract. This is important because the Plaintiff pleaded an oral representation by Lin as an express condition of the contract (see Paragraphs 6 and 7 of the Amended Statement of Claim). If the two Customer's Orders were the contracts and they did not contain the alleged express condition, it would be more difficult for the Plaintiff to establish that there was an additional term not set out in the written contracts which should have contractual force.

14. The relevant principles of law are set out in Chitty on Contracts, 28th Edn. Vol. 1, Paras.12-094 to 12-098. If it is shown that the parties intended their contract to be partly oral and partly in writing, extrinsic evidence is admissible to prove the oral part of the agreement. The crucial question is whether the parties intended to record all the terms of their agreement in a particular document.

15. In the present case, the Customer's Orders were printed documents of the Defendant. Although they recorded some particulars regarding the transaction, I find that they did not contain all the essential terms, in particular those terms essential from the purchaser's point of view like place of delivery and deadline for delivery. These were essential based on the facts of the present case because, for the reasons given hereinbelow, it must have been obvious to both parties that the purchaser was most concerned with the date of delivery of the vehicles to the border of mainland China.

16. On the formation of the contract, Wong's evidence was that when he approached Lin on 7 September 1994, he was most concerned about the vehicles being delivered to mainland China before the deadline. He sought assurance from Lin that the vehicles could be delivered on time. Lin told him after checking that although there was no stock in Hong Kong at that moment, a shipment would arrive in the middle of September. Lin assured Wong that the deadline could be met. Wong said if Lin had told him that the Defendant could not warrant delivery before the deadline, he would not purchase from the Defendant. Wong thought that the place of delivery would be at the border of mainland China. That understanding was reinforced by the fact that the Defendant charged transportation charges of $500 and $800 respectively for each vehicles and those were explained by Lin to Wong as charges for taking the vehicles to the border. He said it had been not explained to him at the time when the Customers' Orders were signed that the Defendant would engage a transportation company to deliver the vehicles to the border. He agreed that there was no provision in the Customers' Orders as to the deadline for delivery but he said he trusted Lin and his oral promise.

17. Although Wong had signed four Chinese documents called "送車出口確認書(Confirmation of Export Delivery of Vehicle)" ["the Confirmations"], he said he signed those at the request of Lin on 8 September 1994 who explained that those documents were necessary to facilitate the work of the Defendant. He did not attach much significance to those documents. He said when he signed those documents, the blanks on the printed forms were not yet filled in. On the other hand, counsel for the Defendant Mr.Chiu attached great importance to these documents. Mr.Chiu summarized the effect of the same as follows,

(a) acknowledgment by the purchaser as to delivery of the vehicle;

(b) acknowledgment by the purchaser that the vehicle had been inspected and found to be in good condition with the specified accessories;

(c) the purchaser authorized the Defendant to engage a transportation company to deliver the vehicle to the border at Man Kam To.

18. Whilst I would need to come back to the Confirmations later, neither party contended that they were contractual documents. I have set out the Plaintiff's case in terms of the evidence of Wong. Lin's evidence was that the Confirmations were signed much later on 26 September 1994. He agreed that when the he asked Wong to sign the Confirmations, the name of the transportation company was left blank although he said other particulars had been filled in. Hence, the Confirmations could not be part of the contract. Lin said in his witness statement (which was adopted as evidence in chief) that he had explained to Wong on 7 September 1994 that the Defendant did not operate a delivery service outside Hong Kong but could consign the vehicles to a transport company to deliver them to Man Kam To and for that purpose the Confirmations would had to be signed. However, in cross-examination, Lin said what he told Wong was that the vehicles would be delivered by a transportation company engaged by the Defendant ("由我公司委托的运输公司送入去"). I regard that piece of evidence to be more reliable than the evidence set out in the witness statement. The latter was prepared by lawyer for the Defendant and was obviously not the ipsissimma verba of the witness. On the whole, taking all the evidence into account, in particular the testimony of Wong and those of Lin and the documents signed by the parties, I am satisfied on the balance of probabilities that the message conveyed by Lin to Wong on 7 September 1994 was that the Defendant would take care of the delivery of the vehicles although Lin had told Wong that such delivery would actually be handled by a transportation company engaged by the Defendant.

19. Lin accepted that on 7 September 1994 Wong had impressed on him that Wong needed to have the vehicles in China by 30 September 1994. Lin himself was aware of the change of policy at that time. Against such background, after checking about the shipment of the vehicles, Lin told Wong that there should be no problem in meeting the 30 September 1994 deadline. Hence it was not a casual statement by him. He gave the assurance after checking. He knew Wong would rely on it. In this connection, I again found that piece of evidence to be more reliable than his evidence in his witness statement that he had not promised Wong that the vehicles would be delivered by 30 September 1994. Mr.Chiu submitted that Lin gave that answer under cross-examination when he was asked about certain hypothetical situations and hence the answer could not be regarded as evidence of Lin actually saying that to Wong on 7 September 1994. I have listened to the recording of that part of the proceedings to check the context in which such evidence was given. I must say that Mr.Chiu was wrong on this point. After the aforementioned evidence had been given by Lin in response to a question by Mr.Lau, I specifically clarified with the witness (Lin) and Lin confirmed that he had actually said so to Wong¹.

20. Given Lin's knowledge as to Wong's concern about this deadline, it is clear to me that he knew that Wong would take his assurance seriously. If he told Wong that the Defendant could not guarantee that the vehicles would reach the border by 30 September 1994, I am sure that Wong would not enter into the contract with the Defendant. In the circumstances, I find on the balance of probabilities that the common intention of Wong and Lin was that the oral assurance by Lin would be a term of the contract. Further, by reason of the matters set out in paragraph 18 above, I also hold that the common intention of the parties was that the place of delivery would be at the border of mainland China. In other words, the Defendant would be responsible for delivering the vehicles there although it might engage another transportation company to undertake such a task. Hence, due to the omission of these essential terms in the Customers' Orders, they were not complete as contractual documents.

21. It follows from my aforesaid findings that the parties did not intend to have all the terms set out in the Customers' Orders and the contract was partly oral and partly in writing. Hence, the absence of written terms in the Customers' Orders as to the place of delivery and the deadline for delivery does not matter. This only showed that the Customers' Orders was not complete as evidence of the contract. The oral terms have as much contractual effect as the written terms.

22. I have come to the above conclusion on the basis of the evidence Wong and Lin. Although there were some discrepancies between their evidence, I do not think such discrepancies affect the said conclusion. Even on Lin's version of events (viz. his evidence under cross-examination as set out above), such conclusion is justified. Mr.Chiu submitted that it was unlikely that Lin would give such a promise because he was in no position to be sure that the vehicles would arrive on time and there were matters outside the control of the Defendant. This flies in the face of the evidence given by Lin as set out in Paragraph 19 above. Further, Lin explained that he gave such assurance to Wong because he had checked with his manager about the shipment and found that it was in order. Of course, one can say that there were still imponderables and matters outside the control of the Defendant. However, Lin also wanted to secure the business of Wong at that time. In a commercial transaction, there were always imponderables and matters beyond the control of one party or both. The function of a contract is to distribute the risk arising from such uncertainties between the parties. The fact remains such assurance had been given on behalf of the Defendant and I see no reason why the Defendant should not be bound by it when thing turned sour due to matters beyond its control.

The Confirmations and the status of Hing Yip

23. Although the discrepancies between the evidence of Wong and Lin did not have much practical importance, for the sake of completeness I would make findings on the date on which the Confirmations were signed and to what extent the blanks had been filled in at the time when Wong signed them. On the balance of probabilities, I find as a fact that the Confirmations were signed by Wong on 26 September 1994. I come to such finding on the basis of the evidence of Lin that there was a meeting between him and Wong on that date and Wong was asked to sign the same on such occasion. I reject Wong's evidence that there was no meeting on 26 September 1994 and that the Confirmations were signed on 8 September 1994. In my judgment, Wong's recollection was at fault on these points although I find him in general to be a truthful witness. Lin said that the Confirmations were produced to Wong for signature when he also gave Wong the Certificates of Inspection and four invoices. There is incontrovertible evidence that these documents only became available on 26 September 1994. Wong's denial as to any meeting with Lin after 24 September 1994 did not sit well with his evidence in the witness statement that he got those certificates from the Defendant. As Mr.Lau put it in his cross-examination of Lin, if there were any contacts between the Defendant and Wong, it would probably be done by Lin.

24. As to the particulars filled in on the Confirmations when they were presented to Wong for signature, Lin himself agreed that the name of the transportation company had not been filled in. Lin was also not sure about the date at the bottom of the Confirmations. The documents were prepared by another department in the Defendant. It seems that the date as filled in (28 September 1994) matched the date when the vehicles were delivered to the transportation company Hing Yip Trading Company ["Hing Yip"]. The delivery of the vehicles to Hing Yip was handled by a third department. Lin said in evidence that on 26 September 1994, he did not know which transportation company would be engaged by the Delivery Section of the Defendant for the delivery of these vehicles. He probably also did not know when exactly would the cars be delivered. On the evidence, I find on the balance of probabilities that the dates at the bottom of the Confirmations were not yet filled in at the time when Wong signed the same. I accept the evidence of Lin that the other particulars (viz. apart from the dates and name of transportation company) had already been filled in.

25. I have set out in Paragraph 17 above Mr. Chiu's case about the effect of the Confirmations. I agree with him that the words on the Confirmations are capable of bearing the meanings contended for by him. However, the legal effect of the Confirmations is a different issue. That issue has to be considered in the context that on 26 September 1994 (when the Confirmations were presented to Wong for signature), the Defendant had already undertaken contractual obligation to deliver the vehicles to the mainland border by 30 September 1994. Could the Confirmations absolve the Defendant from the performance of such obligations? In my judgment, unless the Confirmations could be taken as a waiver or variation of the contract, the Defendant was still obliged to perform its original contractual duties towards the Plaintiff.

26. On the evidence, I am not satisfied that Lin had clearly explained to Wong at the time when he asked the latter to sign the Confirmations that the Defendant were to be released from the original contractual obligation and the obligation as to delivery to Man Kam To would become the sole responsibility of a transportation company. Lin agreed that he was unable to inform Wong as to the name of that transportation company since Lin himself did not know which company would be used. I do not see why Wong would agree to the release of the Defendant (whom he trusted) from its contractual duties and in turn put his faith on a company whose name he had probably never heard of and the identity of which was unknown to him. Lin's evidence about what he said to Wong when he asked him to sign the Confirmations was as follows.

"On 26 September 1994, I told Wong that the vehicles had arrived and inspection had been done. I brought him the Inspection certificates and 4 invoices. I told him that he could inspect the cars. I told him if that was okay, he could sign." ²

He agreed that those were all he had said to Wong. That was clearly inadequate in bringing to the mind of Wong that the Defendant were to be released from its contractual obligation as to delivery to Man Kam To upon the signing of the Confirmations.

27. Mr.Chiu said that by the Confirmations Wong entrusted the Defendant to "further entrust" ("轉托") the vehicles to a third party for delivery to Man Kam To on behalf of Wong. I find that there is an ambiguity in this term "further entrust". It could either mean subcontract or re-engage. Without any evidence as to clear and cogent explanation by Lin as to the effect of this process of so called "further entrustment", I am not satisfied that it was the common intention of the parties that the Defendant would be released as to the obligation as to delivery. After all, the transportation charges were paid to the Defendant. As I have mentioned, Lin had told Wong that a company engaged by the Defendant would make the delivery. In my judgment, the mere act of asking Wong to sign the Confirmations were not sufficient to dispel the impression created by Lin in the mind of Wong that this transportation company would be acting as agent of the Defendant in the delivery.

28. I therefore hold that the Confirmations did not have the legal effect of absolving the Defendant from its contractual obligations towards the Plaintiff. Further, I hold that the Confirmations did not have the effect of making Hing Yip the agent for the Plaintiff in the performance of the task of delivery. On the evidence, I find as a fact that Hing Yip was the agent of the Defendant. This was illustrated by the fact that when the vehicles could not be delivered, Hing Yip took them back to the Defendant's car-park instead of contacting the Plaintiff. On the evidence, Wong and his staff never contacted Hing Yip and vice versa. The person whom Wong and his staff contacted to chase up for delivery was Lin. Hing Yip knew nothing about Wong or Continental.

29. Such conclusion is reinforced by the fact that the Defendant charged Wong $500 and $800 respectively for the delivery of the four vehicles. On the other hand, the evidence of Ting Kam Chuen ["Ting"] of Hing Yip was that there was no difference in Hing Yip's charges for both kinds of vehicles (viz. 3 ton and 1.25 ton). The Defendant did not place before me evidence as to the exact charges they paid to Hing Yip for the jobs. On the evidence available and on the testimony of Ting, I infer that the charges levied on Wong by the Defendant was not the same as the fees they paid to Hing Yip. The Defendant did not inform Wong about the charges levied by Hing Yip. This again suggested that Hing Yip's contract was with the Defendant rather than Wong and Hing Yip was acting as agent of the Defendant in conveying the vehicles to the border.

30. In Paragraph 8 of the Re-Amended Defence and Counterclaim, a plea was made under Section 34(1) of the Sale of Goods Ordinance Cap.26. That section provides,

"(1) Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer."

31. I think Mr.Lau is right in his submission that the section has no application on the facts of the present case. To start with, Hing Yip was not a carrier. The vehicles were driven by the staff of Hing Yip rather than being carried, whether by sea or by air or on land, by them. I think it is stretching the meaning of the word "carrier" to say it cover a driver who drove a vehicle to somewhere else. In normal parlance, a carrier does not use the goods or articles he carries for transporting the same. Further, in my judgment, that section only applies where the seller does not undertake a duty to deliver the goods at a particular place under the contract of sale. In the present case, my findings are that the Defendant agreed under the contract to deliver the vehicles at the Man Kam To border and Hing Yip was acting as their agent in the process of conveying the vehicles there. There is no material difference between the present case and a case where a driver employed by the Defendant undertook the delivery. I do not think Section 34(1) could be relied upon to reduce the liability of the Defendant in either case. (see Benjamin's Sale of Goods, Para.8-014; Badische Anilin und Soda Fabrik v. Basle Chemical Works[1898] AC 200 per Lord Herschell at p.206-207) Even if the section applies, it is only a prima facie rule which is clearly overridden by contrary intention of the parties in the present case in view of my findings. Delivery did not take place until the vehicles were parked at the Parking Area I described in Paragraph 33 below.

The events at the mainland border at Man Kam To

32. In view of my findings as to the terms of the contract between the Plaintiff and the Defendant and the legal effects of the Confirmations, the Defendant remained under a contractual obligation towards the Plaintiff to deliver the vehicles to Man Kam To border by the close of the border on 30 September 1994. It is not disputed that three of the vehicles were not delivered accordingly. Hence, the Defendant was prima facie in breach of the contract. The defence however argued that the non-delivery was due to certain failure on the part of Wong or the Plaintiff or alternatively due to events for which the Defendant should not be held responsible. Since the Defendant was under a contractual obligation to deliver the vehicles to the Parking Area by 30 September 1994, it could only escape liabilities if its performance was prevented by acts of the Plaintiff or events amounting to frustration. Otherwise, given the terms of the contract, the risk as to the non-delivery falls on the head of the Defendant even if such non-delivery was strictly speaking due to events outside its control.

33. Hing Yip collected the vehicles from the Defendant on 28 September 1994. The vehicles were then driven to a car-park of Hing Yip in Sheung Shui close to the border. The practice at the border was that in respect of vehicles imported into mainland China through Man Kam To, the transportation company would drive the vehicle across the Hong Kong Custom and park the same at an area outside the Hong Kong side of the border (which I shall call the "Parking Area"). That area, according to the evidence before me, was an area in between the Hong Kong side and the Chinese side of the border. Since the drivers of the Hong Kong transportation company were not allowed to drive the vehicle into mainland China, the job had to be done by drivers employed by one Hung Kee Transportation Company ("鴻基公司") ["Hung Kee"]. Hung Kee was a Chinese company and the only company authorized by the Chinese authorities to drive the vehicle from the Parking Area to cross the Chinese border checkpoint manned by the Chinese Border authority ("边防") and then to park the vehicle at Chinese Custom Area. To enable a car to be driven through that border checkpoint, a document issued by the Chinese Border authority was required. Hong Kong people called this document "Jiao Tou Zhu 橋头纸". The Chinese people called it "放行条" or "車辆放行条". I would call it Border Pass. Then Custom clearance would take place and it would be handled by the Chinese Custom authority. After clearance, the vehicle could be driven away by the importer or consignee. On 30 September 1994, Wong and the staff of the Plaintiff waited at the Chinese Custom but only one of the four vehicles was successfully delivered to them.

34. As to the other three vehicles, Ting agreed that they had not been driven to the Parking Area. All along, they remained in the car park of Hing Yip. Ting said it was because the Border Passes for those vehicles were not available. Ting's evidence was that usually they would wait for confirmation from the representative of Hung Kee that a Border Pass had been issued in respect a particular vehicle before the same would be driven by a driver of Hing Yip to the Parking Area. He agreed that even without the Border Pass, the vehicle could be driven to the Parking Area. This arrangement was for the convenience of Hing Yip because if it turned out that the Border Pass was not issued, Hing Yip had to drive the vehicle back to its own car-park at the close of the border in the evening. He agreed it was the representative of Hing Yip who approached Hung Kee for confirmation each day. He agreed that Hung Kee issued documents called Notification of Approved Vehicle Lists ("接车通知單交接清單") ["the List"] to the transportation company in Hong Kong and Hing Yip also had got the list dated 28 September 1994. That list included the four vehicles in question and a Collection Number ("接车編号") was assigned to each vehicle. Ting agreed that the Collection Number signified that the Custom documentation with regard to that vehicle had been completed. However, it was still necessary to have the Border Pass.

35. The Plaintiff agreed that it was necessary to have a Border Pass before a vehicle could be driven across the Chinese border checkpoint by driver of Hung Kee. The Plaintiff said that Border Passes had been obtained in respect of all four vehicles and given to staff of Hung Kee early in the morning of 30 September 1994 and the relevant receipts (which also served as the passes) were produced. In this connection, I accept the evidence of Cheung Chun Chi and Kwok Pui Hung. Mr.Chui attacked their evidence by reference to the description of the document as a receipt rather than the pass itself in the witness statement of Kwok Pui Hung. I do not regard that as significant. The main thrust of their evidence was that the passes had been purchased. Since the document was issued in a set of three, one retained by the issuing authority, one handed by the importer to Hung Kee and the third one kept by the importer as receipt, it is correct to describe the same document either as a receipt or the pass itself. Their evidence was corroborated by the production of Exhibits P-7 to P-10 and the evidence of Fung Yiu Hon ["Fung"], the person-in-charge of the Car Collection Unit of Hung Kee. In a way, exhibits P-7 to P-10 spoke for itself. An examination of P-7 to P-10 will show that they were called "車辆放行条", viz. the Border Pass, and they were issued by the Chinese Border authority. Whilst there were inaccuracies in Fung's evidence, notably with regard to the sequence as to the issue of the Border Pass and the List, I do not think those inaccuracies affect the reliability of his evidence as to what was a Border Pass and its nature. I accept Fung's evidence on these matters. I also accept the evidence of Fung that on 30 September 1994, Hung Kee had been able to drive all the vehicles in the Parking Area to the Chinese Custom before the close of the border that night.

36. Ting said P-7 to P-10 were not the Border Passes. He said they were mere receipts. Ting said the Pass was a document contained a chop of the Chinese Custom authority. He appeared to be not very sure as to which document he was talking about because he said the Border Pass was a document called "進口車辆放行条" or "進口車辆通知單" in Paragraph 3 of his Second Supplemental Witness Statement. That was a witness statement specifically prepared by the Defendant to give full particulars as to the defence case as to the Border Pass. Despite that Ting could not give a definite description of that document in the statement. When pressed about that in cross-examination, Ting said at one stage that the name printed on the document was "放行条" and yet at a later stage said the name printed thereon was "汽車進口通知單"³. He explained that people called that document by different names.

37. Based on such evidence, Mr.Chiu submitted that the document referred to by Ting was similar to the document called "海關入車通知單" described in Paragraph 5 of the Supplemental Statement of Fung. That was clearly another document. It is difficult to see why that document, viz. "海關入車通知單", would be called "放行条". According to Fung, the former was a document issued by the Chinese Custom authority. Hung Kee received that from the Chinese Custom authority and prepared the List after that document was issued. That document would be in the possession of the staff of Hung Kee when they went to collect the vehicles at the Parking Area. They would verify the particulars as to the vehicles (as set out on a paper placed at the windscreen of each vehicle) by reference to this document. After such verification, the vehicle would be driven to the Chinese Custom area⁴. When a vehicle was eventually delivered to the Chinese Custom by Hung Kee, that document would be handed back by Hung Kee to the Chinese Custom. These evidence were not challenged by Mr.Chiu. Hence, that document had nothing to do with the Chinese Border checkpoint and would not be the concern of the transportation company in Hong Kong. Further, since the List of 28 September 1994 included the four vehicles, it would also mean that the "海關入車通知單" had been issued in respect of them.

38. Mr.Chiu challenged the credibility of Fung by reference to his evidence about the verification of the Collection Number. He cross-examined Fung as to the absence of that Collection Number in the paper placed at the windscreen. That was somewhat misguided because the evidence of Fung was that the verification was by reference to the chassis number, engine number and name of importer, all these were information written on the paper at the windscreen. However, as to the Collection Number, Fung testified that there was a small piece of paper near the speedometer recording the Collection number. I have some doubt over that part of Fung's evidence and I have taken such doubt into account in assessing the credibility of Fung. Yet, on the whole, I am satisfied that Fung was a truthful witness with regard to P-7 to P-10 being the Border Passes.

39. Ting agreed that the Border Pass would not be given to the transportation company in Hong Kong since it was not necessary for them to produce the document to drive the vehicle to the Parking Area. All they did was to check with Hung Kee as to whether the Border Pass had been issued. Thus it was likely that Ting himself did not pay much attention in the past as to the exact nature and the words printed on the Border Pass. That explained the confusion in his evidence in this respect. I therefore do not find Ting to be a reliable witness as to what was and what was not a Border Pass. I have no hesitation in preferring the evidence of Fung, Kwok and Cheung to the evidence of Ting.

40. I therefore find as a fact that on 30 September 1994, the Plaintiff had procured the Border Passes for all four vehicles and given them to Hung Kee. The Plaintiff therefore did not fail to procure any documents which it was obliged to procure to facilitate the importation of the vehicles. It was due to the failure of Hing Yip to deliver the three vehicles to the Parking Area that rendered delivery before the deadline impossible. I also find as a fact that had those vehicles been delivered to the Parking Area, Hung Kee would have been able to deliver the same to the Chinese Custom authority for custom clearance before the close of the border on 30 September 1994.

41. As to the alleged lack of notification by Hung Kee that the Border Passes were ready, I do not consider that to be a valid excuse. Ting agreed that Hung Kee would not contact the representative of Hing Yip for such purpose. Rather, it was the staff of Hing Yip who approached Hung Kee for such information. Ting himself was not present at the Parking Area all through the day on 30 September 1994. I have insufficient evidence to show how diligent were the other staff of Hing Yip in making such enquiries on that crucial day. The fact that Hing Yip did not get the information does not necessarily mean that it was due to the fault of Hung Kee. It may due to the lack of care or diligence on the part of Hing Yip's staff. Bearing in mind that the arrangement was purely for the convenience of Hing Yip, Hung Kee simply had no obligation to give such information to Hing Yip. In any event, I see no reason why Hung Kee's act or omission should prejudice the position of the Plaintiff. The Plaintiff had a contractual right to have the vehicles to be delivered to the Parking Area before the deadline and there was nothing to stop that from happening. Ting agreed that even without the Border Pass, the vehicles could be driven to the Parking Area. On the other hand, Hung Kee being an independent company, I cannot see how the Plaintiff could be under any obligation to procure Hung Kee to undertake a matching exercise with Hing Yip.

The Exemption clause

42. The defence relied on a clause printed at the back of the Customers' Orders. The clause reads in English,

"Every effort is made to deliver vehicles to meet the customer's requirements but Triangle Motors will not be liable for any claim for compensation or damages in the event of their failure to deliver the vehicle within any stipulated time."

However, the Chinese version bears a different meaning. The Chinese version reads,

"本公司将盡法把車輛依期交给買方,但如有不能預計之意外延誤,則本公司毋須負任何損失賠償之責任。"

It means that the Defendant would only be exempted from liability in case of unforeseen accidental delay.

43. Although it cannot be disputed that the clause was printed at the back of the Customers' Orders, it does not follow that legal effect would be given to the same. I find the present case indistinguishable from the case of Mendelssohn v. Normand [1970] 1 QB 177. In that case, there were exemption clauses printed at the back of a garage ticket and a notice at the reception desk. The plaintiff parked his car at the garage. He was told by the attendant to left the car unlocked. The plaintiff said that there was a suitcase containing valuables in the car. The attendant insisted that the car be left unlocked but agreed to lock it up for the plaintiff after he moved it. The plaintiff then gave the keys to the attendant. The valuables were stolen and the garage was held to be liable notwithstanding the exemption clauses. The Court of Appeal was unanimous in their reasoning as to why the printed conditions at the back of ticket (which was accepted to be a contractual document, see p.182 G to 183A) could not be relied upon by the garage. Lord Denning MR said at p.183G to p.184C,

"He relies on the conversation which Mr. Mendelssohn had with the attendant. The man promised to lock up the car. In other words, he promised to see that the contents were safe. He did not do so. Instead he left the car unlocked. It was probably he who took the suitcase himself. What is the effect of such a promise? It was not within the actual authority of the attendant to give it but it was within his ostensible authority. He was there to receive cars on behalf of the garage company. He had apparent authority to make a statement relating to its custody. Such a statement is binding on the company. It takes priority over any printed condition. There are many cases in the books when a man has made, by word of mouth, a promise or a representation of fact, on which the other party acts by entering into the contract. In all such cases the man is not allowed to repudiate his representation by reference to a printed condition, see Couchman v. Hill [1947] K.B. 554; Curtis v. Chemical Cleaning and Dyeing Co. [1951] 1 K.B. 805; and Harling v. Eddy [1951] 2 K.B. 739; nor is he allowed to go back on his promise by reliance on a written clause, see City and Westminster Properties (1934) Ltd. v. Mudd [1959] Ch. 129, 145 by Harman J. The reason is because the oral promise or representation has a decisive influence on the transaction - it is the very thing which induces the other to contract - and it would be most unjust to allow the maker to go back on it. The printed condition is rejected because it is repugnant to the express oral promise or representation. As Devlin J. said in Firestone Tyre and Rubber Co. Ltd. v. Vokins & Co. Ltd. [1951] 1 Lloyd's Rep. 32, 39: "It is illusory to say: 'We promise to do a thing, but we are not liable if we do not do it'." To avoid this illusion, the law gives the oral promise priority over the printed clause."

Phillimore LJ said the same thing at p.185H to 186 E. In particular at p.186D,

"In my judgment the submissions which Mr. Yorke has made are correct and he is also entitled to say that if you have an express undertaking, as here, followed by printed clauses, the latter must fail in so far as they are repugnant to the express undertaking."

44. In the present case, I have found that the oral assurance of Lin amounted to an undertaking by the Defendant to deliver the vehicles to the border by the deadline and that was very important to the Plaintiff. Without such undertaking, Wong would not make the contract with the Defendant. To allow the Defendant to rely on the exemption clause printed at the back of the Customers' Orders would render the undertaking to be illusory. The exemption clause, at least in its English version, is repugnant to the undertaking given by Lin. I hold that the principle of Mendelssohn v. Normand applies here and the oral undertaking prevailed.

45. In respect of the Chinese version of the exemption clause, it does not help the Defendant. The delay in delivery was not due to any unforeseen accident. It was due to the deliberate decision of Hing Yip to withhold delivery to the Parking Area until it got confirmation from Hung Kee. No matter how one sees it, this could not be properly described as an unforeseen accident. I do not accept Mr.Chiu's submission that 'accidental' in this context means something not intentional. The contra proferentum rule applies against the Defendant on the construction of the clause.

46. If I were wrong about the construction of the Chinese version and the expression "unforeseen accidental delay" could encompass this kind of delay, I would hold that the Chinese clause is also repugnant to the oral undertaking given by Lin and as such could not be effective in law.

47. I am able to come to the above conclusion as to the effect of the exemption clause without the need of referring to the Control of Exemption Clauses Ordinance Cap.71. However, if necessary, I would also have no hesitation in holding that the exemption clause in question did not satisfy the requirement of reasonableness and therefore could not be relied upon to exclude the liability of the Defendant by virtue of Section 8(2)(a) or (b)(i) of that ordinance. That section applied because the Plaintiff dealt with the Defendant on the latter's written standard terms. Section 8(2) reads,

"As against that party [viz. the Plaintiff in the present context], the other [viz. the Defendant] cannot by reference to any contract term ---

(a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or

(b) claim to be entitled -

(c) to render a contractual performance substantially different from that which was reasonably expected of him; or

(d) in respect of the whole or any part of his contractual obligation, to render no performance at all,

except in so far as (in any cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness."

48. My conclusion as to the requirement of reasonableness is reached after consideration of Section 3 and the matters set out in Schedule 2 of that ordinance. I would not list out each and every factor. I also bear in mind what was said by Litton NPJ by way of obiter in the recent case of Green Park Properties v. Dorku Limited [2001] 3 HKLRD 760 at Paras.26 and 27. On the admission of Lin, it was known to the Defendant that Wong considered it to be very important that the vehicles could be delivered by the deadline. Lin however did not draw attention to Wong that by reason of the clause the Defendant would not guarantee that delivery could be made on time. Wong was clearly induced by Lin's assurance to enter into the contract and sign the Customers' Orders. Without such assurance, Wong might purchase the vehicles from another car dealers which did not impose such a clause in the contract. The purported effect of the exclusion clause was to negate Lin's assurance. On balance of probabilities, I find that Wong did not know of the existence of the clause, in particular the English version, a language which was not too familiar to him. Given the common knowledge in the trade as to the deadline, I see no reason why the Defendant could not give specific instructions to Hing Yip and take steps to ensure that Hing Yip would deliver the vehicles to the Parking Area by 30 September 1994. Mr.Chiu referred to the relative bargaining position of the parties and the fact that the Customers' Orders were signed at the office of Wong. Whilst it is correct that Wong purchased the vehicles in the course of business, that did not mean that he thereby lost the protection of the ordinance. After all, the document was a standard form of the Defendant. As to insurance, there is simply no evidence before me to show which party was in a better position to insure against the delay in delivery. Having regard to the circumstances known to the parties at the time of contract, I am not satisfied that the exclusion clause was a fair and reasonable one to be included.

Frustration

49. There appears to have been changes in the stance of the Defendant as to its case on frustration. In the pleading, reference was originally to made to traffic congestion in the route leading to Man Kam To. Hing Yip was able to deliver one vehicle successfully. On the evidence, I am not satisfied that the traffic was so congested on 30 September 1994 that the vehicles could not be delivered to the Parking Area by Hing Yip. The sole cause for the non-delivery was Hing Yip's omission to do so for its own convenience. On Ting's own evidence, Hing Yip had never driven the remaining three vehicles out of its car-park in Sheung Shui on 30 September 1994.

50. In his written closing submissions, Mr.Chiu relied on the omission by Hung Kee to bring the Border Passes to the Parking Area. In my judgment, there is insufficient evidence to support that assertion. I repeat what I said in Paragraph 41 above. In any event, that did not prevent Hing Yip from driving the vehicles to the Parking Area. It cannot be an event of frustration.

51. Therefore the defence of frustration fails.

Conclusion on liability

52. In summary, I find that the Defendant had failed to deliver the three vehicles in accordance with the contract and there was no valid ground to absolve the Defendant from liability for breach of contract. By the issue of the Writ in this action, the Plaintiff through its agent Wong accepted the repudiation of the contract. The Defendant is therefore liable to the Plaintiff.

Damages

53. The Plaintiff claims for the return of the sum of $480,900 as the purchase price of the three vehicles. Mr.Chiu has not advanced any reason why this should not be repaid if the Defendant was in breach of the contract. I will allow that claim.

54. In addition, the Plaintiff also asks for damages in the sum of RMB 1,448,312.00 in terms of costs of hire of substitute transport up to 30 June 1996. The particulars were set out in Paragraph 13 of the witness statement of Wong. They were partly supported by documents in the Court Bundles. Mr.Chiu did not challenge such evidence at the trial. I am satisfied that these charges were incurred by the Plaintiff as a natural and probable consequence of the breach of the contract. It must also be within the reasonable contemplation of the Defendant that if the vehicles were not delivered, the Plaintiff would have to hire substitute transport. I therefore allow this claim as well.

55. In October 1996, the Plaintiff purchased another vehicle in China at the price of RMB 157,000. However, since the purchase price of the three vehicles would be refunded to the Plaintiff, I do not think it could recover this sum as well. Otherwise, there would be double recovery. Mr.Lau accepted this in his final submissions.

56. I therefore give judgment to the Plaintiff on its claim in the sums of $480,900 and RMB1,448,312 with interest on $480,900 from 3 August 1995 at the agreed rate of 10% per annum and interest on RMB1,448,312 from 1 October 1994 to 30 June 1996 at the agreed rate of 5% per annum and from 1 July 1996 to date of judgment at the agreed rate of 10% per annum. The Counterclaim of the Defendant is dismissed. The Defendant will also bear the costs of the Plaintiff in this action.