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DCCJ 1808/2013
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 1808 OF 2013
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| BETWEEN |
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CARLE, GREGOR |
Plaintiff |
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and |
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MAK, CLARENCE trading as
CENTURY PRIDE MOTORS COMPANY |
1st Defendant |
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B.M.W. CONCESSIONAIRES (H.K.) LIMITED |
2nd Defendant |
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| Before: His Honour Judge Andrew Li in Court |
| Dates of Hearing: 22-24, 27-30 April, 4 May & 15-16 June 2015 |
| Date of Judgment: 30 May 2016 |
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JUDGMENT
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INTRODUCTION
1. This is a case concerns the sale of a second hand BMW X5 vehicle. It involves with allegations of breach of contract, misrepresentations and breach of an agent’s duty.
BACKGROUND
2. The plaintiff, Gregor Carle (“the plaintiff”), was the registered owner of a BMW X5 private motor vehicle bearing registration number RP147 (“the Vehicle”).
3. The 1st defendant, Clarence Mak (“the 1st defendant”), at all material times carried on the business of a motorcar trading company under the name of Century Pride Motors Company (「紀俊車行」) (“Century Pride”). It operated out of a booth at the Kowloon Bay Integrated Automall (“the Automall”).
4. The 2nd defendant (“2nd defendant”) was and is the importer and sole distributor of BMW motor vehicles in Hong Kong. Its business included providing inspection, repair and maintenance services for BMW vehicles at its various service centres.
5. By an agreement made between the 1st defendant and the plaintiff on 10 November 2012, the 1st defendant agreed to sell and the plaintiff agreed to buy the Vehicle in the sum of HK$499,366 (comprising the car price of HK$488,000 and fees and expenses totalling HK$11,336), of which the plaintiff would receive HK$188,000 as trade-in value for a BMW X3 which the plaintiff had traded in with the 1st defendant (“the Agreement”).
6. The plaintiff alleges that the Agreement was partly made orally and partly made in writing.
7. In so far as the Agreement was made orally, the plaintiff claims that it was made between one Mark Mak (“Mark”), the brother of the 1st defendant, over some telephone conversations on 10 November 2012.
8. In so far as the agreement was made in writing, the plaintiff alleges that it was contained in a written sales contract bearing no 1667 dated 10 November 2012 signed by the plaintiff and the 1st defendant immediately after those phone calls.
9. Pursuant to the Agreement, the plaintiff paid a sum of HK$25,000 as deposit at the request of the 1st defendant on 10 November 2012.
10. On 13 November 2012, Mark, on behalf of the 1st defendant, took the Vehicle to the 2nd defendant’s Tsuen Wan Service Centre (“the Service Centre”) for inspection.
11. The plaintiff was informed by Mark on 14 November 2012 that the cost of the inspection was at HK$1,140.
12. On 14 November 2012, the Service Centre issued an inspection report (in the form of a service invoice) stating, inter alia, that:-
(1) the Vehicle had undergone a “BMW Final Inspection”; and
(2) the mileage of the vehicle was at 39,235 km (“ Inspection Report”).
13. Upon receipt of the Inspection Report, the plaintiff telephoned the Service Centre on 15 November 2012 at around 11:00 am and spoke to one of the service supervisors employed by the 2nd defendant by the name of Wong Yiu Sing, Terence, (“Terence”). The plaintiff claims that various misrepresentations were made by Terence to him during his telephone conversation which later turned out to be incorrect and untrue.
14. Further, the plaintiff says that other than the contents of the Inspection Report, neither the 1st defendant nor Mark had communicated any further information relating to the status or condition of the Vehicle as conveyed to him by the Service Centre. On the contrary, on 14 November 2012, Mark acting on behalf of the 1st defendant informed the plaintiff that all that was mentioned by the 2nd defendant in connection with the inspection had already been stated in the Inspection Report.
15. Allegedly, in reliance of and induced by Mark and Terence’s
representations being “true, complete, correct and/or reasonably held in all materials respects”, the plaintiff was led to believe that the true mileage of the vehicle was approximately at 39,000 km at a time when those representations were made.
16. The plaintiff says that based on the above belief but not otherwise, he completed the purchase of the Vehicle by paying the balance to the 1st defendant in the afternoon of 15 November 2012 and took delivery of the Vehicle on 16 November 2012.
17. Subsequently, on or about 18 February 2013, from information supplied by the 2nd defendant’s Chai Wan Service Centre (“Chai Wan Service Centre”), the plaintiff found out the true mileage of the vehicle was at least at around 130,000 km as at the time when he purchased the Vehicle from the 1st defendant.
18. As a result, the plaintiff sues the 1st defendant for breach of the Agreement and for the negligent and/or fraudulent misrepresentations made by Mark. Further, the plaintiff sues the 1st defendant for breach of duty as an agent.
19. In addition, the plaintiff sues the 2nd defendant for the negligent misrepresentation made by Terence on the basis that Terence knew or should reasonably have known that there was a discrepancy between the mileage of the Vehicle as recorded on its odometer on 13 November 2012 (at 39,235 km) and the mileage as recorded during the vehicle’s workshop visit on or about 3 October 2011 (over 100,000 km). In particular, the plaintiff alleges that, during the brief but crucial telephone conversation between him and Terence on 15 November 2012, Terence had misrepresented to him the true mileage of the vehicle.
20. The plaintiff alleges that due to those breaches, he suffered damages as a result when he sold the Vehicle at a fairly low price of HK$110,000 to a third party in April 2013 in order to minimize his loss. He now claims damages in the sum of HK$389,336, being the difference between the purchase price and sale price of the Vehicle, or alternatively, the difference between the purchase price of the Vehicle under the Agreement and the market value of the Vehicle with its true mileage in November 2012 as assessed by the court. On top of that, the plaintiff also claims expenses incurred in respect of repairs carried out on the Vehicle in the period between 15 November 2012 and 12 April 2013 amounting to HK$21,812.80.
21. Both the 1st and 2nd defendants deny any wrongdoings on their part and in particular any misrepresentations made on their behalf.
22. In particular, the 1st defendant denies that there was any discussion between Mark and the plaintiff regarding the odometer and/or mileage of the Vehicle.
23. On the part of the 2nd defendant, it is averred on its behalf that the mileage stated in the Inspection Report was only “a record of the mileage revealed on the odometer” of the Vehicle as part of the description of the Vehicle being inspected for identification purpose and it was and still is the “common practice of garages and vehicle inspecting services centre in Hong Kong”. In particular, the 2nd defendant claims that confirmation or verification of the true mileage of the Vehicle was not part of the services provided under the Inspection Report.
24. One significant fact raised by the 2nd defendant is that, after receiving the order for inspection of the Vehicle, Terence incidentally noticed that the mileage recorded at the last service at one of the workshops of the 2nd defendant was over 100,000 km, which was much higher than that appeared on the odometer. This fact was related to Mark, who had held himself out as the representative of the owner of the Vehicle at the time and was the person who had brought the Vehicle to the Service Centre for inspection. On that occasion, Terence was allegedly told by Mark that he was aware of the mileage discrepancy but that was not what the 2nd defendant was required to inspect or verify.
DISCUSSION
Issues in Dispute
25. Although the parties have put down 11 separate issues under the “Agreed Statement of Issues in Dispute”, the actual disputes between the parties are much narrower. In my view, they can be answered by resolving the following 3 main factual issues in this case:-
(a) Did Mark represent to the plaintiff and/or undertake or warrant to the plaintiff the mileage of the Vehicle as alleged during his visit to the Automall?
(b) When the Vehicle was taken to the Service Centre, did Terence tell Mark that its mileage was different from the service record? If he did, did Mark respond by asking the 2nd defendant not to be concerned about the matter?
(c) After the Inspection Report was issued to Mark and passed to the plaintiff, what transpired during that brief but crucial telephone conversation between the plaintiff and Terence?
26. Of course, there will be the question of what would be the appropriate amount of quantum in the event that the court finds liability against any of the 2 defendants.
27. At the outset, I would like to put on record by stating this: what had been a very simple transaction involving with the sale of a motor car has been completely blown out of proportion and a 10 day trial resulted therefrom. A great deal of trivial and collateral matters which have no direct bearing to the central issues of the case have been introduced into the evidence by the parties, in the guise that they are somehow relevant to the dispute. They included some clearly inadmissible evidence like the newspaper cuttings purportedly showing value of the Vehicle; statement of submissions rather than statements of facts contained in the plaintiff’s witness statements; hearsay evidence of services given by garages to verify mileage reading on odometer of cars, etc. In my view, such practice must not be encouraged as they will only distract the parties from focusing on the real issues of the case, wasting time of the court and embarrass the enquiry of the tribunal in the fact finding exercise.
28. In this judgment, I shall first deal with the undisputed and/or uncontroversial facts between the parties. Second, I shall deal with the principles regarding assessing evidence and witness credibility. Third, I shall make findings of fact in the 3 main disputed areas in the light of the evidence given by the various witnesses during the trial. Fourth, in the light of those findings of fact, I shall answer the questions of whether the 1st and/or 2nd defendant should be liable to the plaintiff for the alleged breaches of the Agreement and/or misrepresentations made, including some of the arguments of law. Fifth, if so, what is the appropriate amount of damages to be awarded to the plaintiff.
I. Undisputed or uncontroversial facts
29. The following are what I would regard as the undisputed or uncontroversial fact between the parties in this case.
30. First, there is no dispute or it can hardly be disputed between the plaintiff and the 1st defendant that:-
(a) there were oral discussions between the plaintiff and Mark about the Vehicle over several telephone calls before signing of the Sales Contract;
(b) the plaintiff and Mark verbally agreed that the plaintiff shall be permitted to cancel the purchase and obtain a refund of the deposit, depending on the result of an inspection of the Vehicle to be done by the 2nd defendant[1]; and
(c) while the Sales Contract recorded the words “Other: BMW Inspection Fee …. $: Quote” under the column of “Other items”, it does not specify under what circumstances the plaintiff would be allowed to cancel the purchase and obtain a refund.
31. Based on the above, in my view, it can hardly be disputed that the Agreement was made partly orally and partly in writing, this is despite what has been pleaded by the 1st defendant in its amended defence saying that all the terms of the Agreement are contained in the Sales Contract[2] .
32. Another undisputed but very important fact is that, at the time when Mark took the Vehicle to the Service Centre for inspection on 13 November 2012, he did so in the capacity as the agent of the plaintiff. Hence, the plaintiff was his principal for this purpose.
33. Also not in dispute is the fact that the inspection fee charged by the 2nd defendant was in the modest sum of HK$1,140 only.
34. Not in dispute also is the fact that Mark was one of the many customers who had taken their vehicles to the Service Centre for inspection, service, repairs or maintenance on that day.
35. The parties also do not dispute the fact that the 2nd defendant was not a party to the Agreement and hence has no interest in the dealing between the plaintiff and the 1st defendant.
36. Another undisputed fact is that the 2nd defendant is the sole agent which owns the concessionaire of BMW vehicles in Hong Kong, which means that they literally deal with dozens if not hundreds of inspection, service, maintenance and repairs jobs of such vehicles in each of their service centres on a daily basis.
37. Further, no matter what the plaintiff would like to say about Terence’s proficiency of English, there is no dispute that he had failed miserably in the English subject in his Hong Kong Certificate of Education Examination (“HKCEE”). He only managed to obtain a Grade H in that subject, which was the lowest grade one could obtain in such an examination.
38. The following further uncontroversial facts have been highlighted by the 2nd defendant’s counsel in his final submission of which are not disputed by the plaintiff and the 1st defendant:-
(a) The 2nd defendant did not and does not provide the service of verification of mileage reading of a car sent to its workshops for inspection, repairs or service;
(b) No one from the 2nd defendant had ever represented to the plaintiff that there was such a service;
(c) The figure put under “Mileage” of the Inspection Report is what was recorded on the odometer of the car. Whenever the car key is inserted into to the car key reader, that figure would be shown automatically;
(d) The 1st defendant was running a business of trading second hand cars for profits. Hence, completion of a deal would likely to result in profit to him; and
(e) As a second hand car salesman, it would be in Mark’s own interest as well as the interest of his company or boss (who is his elder brother) to secure the sale of the Vehicle.
II. Principles governing assessing evidence & witnesses’ credibility
39. I am grateful to Mr Benny Lo, the plaintiff’s counsel, in reminding me of the well established principles laid down in the following 2 cases in relation to assessing credibility of witnesses.
40. In Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (unreported) HCA 1975/2005 etc; 28 July 2011, Poon J explained those principles in the following terms at §§21, 24-25:-
“21. … a good dose of common sense is required when the court evaluates the evidence in determining the probability or otherwise of the conflicting versions of events.
…….
24. In assessing credibility, the court takes into account, among other things, the inherent probabilities or improbabilities of one’s testimony, the contemporaneous documents or any evidence, which is undisputed or indisputable, tending to support or contradict one account or the other and the overall impression of the characters and motivations of the witnesses: see In re B (Children), supra, per Baroness Hale at para. 31 at p.24, applied by this court in Standard Chartered Bank v Li Wai Ping & others, HCA 10587/2000 & HCA 2575/2003, 17 February 2011, unreported, at para. 19. Where there exists a wealth of contemporaneous documents, credibility is to be tested by reference most particularly to them: see Esquire (Electronics) Ltd v Hong Kong & Shanghai Banking Corp Ltd [2007] 3 HKLRD 439, per Stock JA (as he then was) at para. 158 at p.494.
25. Further, some of the witnesses had given evidence for more than one action. The best example is Mr Lee, who is in fact a key witness for all the four actions. I must not take a blinkered approach when considering the testimony of such witnesses. I must assess their overall credibility on all the matters that they have testified to. If one’s evidence is found to be unreliable in one action, it will most likely affect his credibility in another.” [emphasis added)]
41. In Hui Cheung Fai v Daiwa Development Ltd (unreported) HCA 1734/2009; 8 April 2014, DHCJ Eugene Fung SC held:-
“76. In making my findings of act in this case, I am guided by a number of general principles which judges apply as to fact finding and the assessment of credibility.
77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in questions emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce). It is right to point out, however, that some of the documents in this case are alleged by the Son to be shams and those documents obviously cannot be used to assess the credibility of the parties.
78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J).
79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.
80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability sole or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).
81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarized by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:-
“Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.”
82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’ credibility features prominently in the court’s determination. They are particularly apposite in a case like the present where very serious allegations (akin to allegations of fraud) have been made by the Son against the defendants.” [emphasis added]
42. Mr Andy Hung, counsel for the 2nd defendant, has also very helpfully pointed me to the criminal case decided by the Court of Final Appeal (“CFA”) in HKSAR v Egan (2010) 13 HKCFAR 314, at §§ 304 (pp 410 – 411) where Litton NPJ stated the following:-
“304. Fact finding by a tribunal is a forward moving process. At the starter’s line are the primary facts relevant to the indictment (or to the pleadings in a civil suit). Most of these, generally speaking, would be non-controversial. From these, a picture of the inherent probabilities will often emerge. Take the present case concerning Mr Lam (D3): Is it likely that a solicitor would knowingly enter into a criminal conspiracy with a new client, within the first couple of hours of their first meeting? From this, and similar circumstances, the tribunal would then move on to evaluate the disputed evidence. “Evaluate” means just that: To measure, to weight. Not every piece of evidence has equal weight. Here the tribunal is not seeking to penetrate the personality of the witness, to uncover his soul. In everyday life, how well does one know one’s neighbour? Is he or she a truthful person? How well does one know oneself? When a tribunal in giving judgment recites the testimony of a witness and says “I accept him as a truthful witness”, this is not evaluation: It is a conclusion which might be reached at the end, after weighing the relevant evidence.
305. As mentioned earlier, fact-finding is a forward moving process. The tribunal does not start at the winning post and run backwards.
307. It is at the end of the track that the tribunal gathers together all the evidence. The inherent probabilities have always to be borne in mind.” [emphasis added]
43. Although HKSAR v Egan was a criminal case, in my view, the principles governing a judge’s task in fact finding as stated by Litton NPJ applies equally in a civil case.
44. I shall bear the above principles in mind when assessing the credibility as well as in making my findings of facts in this case.
III. Findings of fact in 3 main areas of dispute
45. First, I accept the approach suggested by Mr Hung that in this case one should focus on the key issues in dispute and not bogged down ourselves with unimportant, trivial and collateral matters: see comments of Godfrey JA in Amy So v Au Leslie [1995] 2 HKC 113, at 122 B-E.
46. With respect, I cannot agree with Mr Lo’s submission that the starting point is to look at the “detailed and in-depth account of the relevant events concerning the purchase of the [Car] and the subsequent dealings with representatives from D1 and D2.” Nor should it be a test of how “reasonable and extremely fair” the plaintiff might have been when he gave his evidence. To my mind, it is also not right to assess the witnesses’ credibility by merely looking at what they allege in their witness statements, which in civil litigation these days are often carefully drafted by solicitors and fine-tuned by counsel. They tend to argue the case for a particular party, instead of merely stating the facts pertaining to the material issues. After all, at least to me, assessing a witness’ evidence is not about who performs “better” in the witness box or who could draft a more detailed and in-depth witness statement. Rather, it is more to do with those matters mentioned by Deputy High Court Judge Fung SC in Hui Cheung Fai, supra, viz. whether the case is consistent with the contemporaneous documents, the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events and the consistency of the witness’ evidence with undisputed or indisputable evidence and the internal consistency of the witness’ evidence.
47. With those matters in mind, I agree with Mr Hung and find it is incredulous how the plaintiff has run his case:-
(a) while in his witness statements he accused the 1st defendant that the documents proving the original purchase of the Vehicle from another car dealer was highly questionable; yet at the trial no question had ever been asked about those documents;
(b) while the plaintiff, through his lawyers, runs a very bold case that the 2nd defendant had the alleged company policy of concealing the true mileage to its customers, yet no question was asked of a material witness, namely Mr Frank Cheung (DW3) about this alleged policy;
(c) some very serious allegations of fraud, dishonesty and criminal acts had been levelled against the 1st defendant and the 2nd defendant in his letter to the Police, yet at the trial this has been toned down significantly;
(d) the change of the case against the 2nd defendant from one of negligent misrepresentation to one of negligent by omission;
(e) then to “intentionally providing false information” and “knowingly withheld material information”.
48. Assessing evidence is, as Litton NPJ in Egan said, “a forward moving process” and not merely for a tribunal to decide who is more likely a “honest, truthful and reliable witness” at the outset and therefore “his evidence should be accepted” and then works its way backwards from the “winning post”. In my view, a witness may be honest and truthful in certain aspects of his case but may be less so in other areas for different reasons. Or his evidence may be masked by subjective beliefs, blinded spots, flawed memories, unconscious bias or honest but mistaken beliefs. All these may affect a witness’ credibility in different areas or issues in the case. The correct approach in my view is to adopt all those matters mentioned by DHCJ Fung SC in Hui Cheung Fai, supra when deciding the different key issues in the case. This is the approach I am going to take.
Issue 1: Did Mark represent to the plaintiff and/or undertake or warrant to the plaintiff the mileage of the Vehicle as alleged during his visit to the Automall?
49. The case of the plaintiff and the 1st defendant on this issue is diametrically opposite to each other and only one version could be true.
50. On this issue, I accept the plaintiff’s version of events and reject that of the 1st defendant’s, in particular that of Mark’s. I consider the 1st defendant’s version as inherently improbable and against common sense.
51. I accept the plaintiff’s case on this that when he first saw the Vehicle at Century Pride’s booth in Automall, there was nobody around. He therefore moved to another second hand car dealer by the name of Glorious Motors where he was warned by the staff there about the problem of “mileage rigging” with some of the less reputable dealers in the Automall. The plaintiff was assured by the staff at Glorious Motors that they would guarantee the mileage of any cars purchased from them would be correct and that their cars had not been driven in Mainland China. However, as the plaintiff and his wife preferred the silver colour of the X5 displayed at Century Pride to the white one offered by Glorious Motors, they therefore did not proceed further with their enquiries with the latter.
52. Thus, with such warning still fresh in his mind, I believe and accept the plaintiff’s evidence that when he first spoke to Mark on the phone, he did ask him 3 things about the Vehicle, namely, (i) its mileage, (ii) its accident history; and (iii) whether it had been driven in the Mainland. I also accept the plaintiff’s evidence that Mark had told him that the correct mileage was approximately 39,000 km as shown on its odometer; that it had not been driven in the Mainland; and that it had not been involved in an accident. After all, I consider that it is highly probable that an experienced purchaser in second hand vehicles, which the plaintiff was, would ask such questions. In fact, I would say that the mileage of a vehicle would be at the forefront of the mind of any purchaser of second hand vehicles as the mileage would usually be able to indicate the general condition of the engine and the overall wear and tear of the vehicle. Common sense would also tell us that the mileage of a second car would dictate its re-sale value. The general rule is that the higher the mileage, the lower the price it will fetch and vice versa.
53. Hence, I consider the plaintiff would pay particular attention to the mileage both presented by Mark and as shown on the Vehicle’s odometer when he was told by Mark that the previous owner had lost the record history. As this was the first second hand vehicle that the plaintiff bought in Hong Kong which did not come with a service record, all the more I consider that he would pay particular attention to the mileage presented by the 1st defendant.
54. I believe and accept the plaintiff’s evidence that in the second phone call the plaintiff had with Mark, he asked Mark those 3 things about the Vehicle again and Mark repeated the same answers. I accept the plaintiff’s evidence and find as a fact that it was at this juncture that the plaintiff requested and Mark agreed as a condition of sale that the Vehicle would be taken to the 2nd defendant for an inspection and if it reveals anything materially different from Mark’s representations concerning (i) the mileage; and (ii) the Vehicle had not been involved in an accident, the plaintiff would obtain a refund of deposits less the inspection fees. The plaintiff alleges and I accept that Mark was “nothing but accommodative” as no doubt Mark was keen to complete the sale on behalf of the 1st defendant.
55. I further accept the plaintiff’s evidence and find that in the third phone call between him and Mark, there was a discussion on the price of the Vehicle and eventually this was settled at a price which was later stated in writing in the Sales Contract. I accept that the trade-in price of his vehicle was lower than which he had expected although it was still within the bounds of his expectations.
56. On the other hand, I find the case of the 1st defendant on this issue totally improbable, devoid of merits and fly in the face of common sense.
57. I have no hesitation to completely reject the evidence of the 1st defendant ie Clarence (DW1) whom I find to be a dishonest, evasive and wholly incredible witness. His attempts to distance himself from the impact of mileage and past history on the condition and maintenance of a second hand car is simply unbelievable. His evidence that the Vehicle was sold on its “existing condition” and that the Vehicle’s odometer reading was “for reference only” equally beggars belief. All in all, I find him to be a thoroughly dishonest individual.
58. His brother Mark’s evidence is not much better. The central theme of Mark’s (DW2) evidence is that he knew very little about the Vehicle and there was definitely no discussion on the mileage of the Vehicle. In my judgment, this is simply not believable for the following reasons:-
(a) As a car salesman, whether he worked full-time or part-time or on a freelance basis (as alleges by him), it is incredible that he was not familiar with the Vehicle which Century Pride was displaying and selling at the Automall;
(b) The fact that his colleague Ben Kwok (“Ben”), who was manning the booth of Century Pride when the plaintiff was making enquiries, passed the telephone to him to speak to the plaintiff indicates that he knew as much about the Vehicle as Ben if not more;
(c) Even if he did not, there was no reason why he could not have found out from Ben on the phone about these matters before speaking to the plaintiff;
(d) Given mileage of a second hand car would be in the forefront of the mind of any serious buyers of such vehicles, it would be simply flying in the face of common sense that such would not be asked by any potential buyer or voluntarily offered by the second hand dealer;
(e) Given what the plaintiff had been told by the staff of Glorious Motors just a few moments before his enquiries with Ben at Century Pride, it would be totally incredible that he would not have asked such basic but important information about the Vehicle; and
(f) If the plaintiff had asked such basic but important information about the Vehicle (which I believe he did), there was simply no reason or excuse of why a car salesman would not have disclosed to and discussed this with his potential customer.
59. In my judgment, what Mark said in evidence in this regard is highly improbable, totally illogical and plainly against common sense. Based on the above, I have scant doubt that Mark did make a representation to the plaintiff that the true mileage of the Vehicle as of 10 November 2012 was as those shown on its odometer, ie at approximately 39,000 km. I so find that as a fact.
60. As I have found the Agreement was made partly orally and partly in writing, I also find that it was part of the terms of the Agreement – based on the oral representation made by Mark to the plaintiff on the telephone – that the true mileage was that as shown on the Vehicle’s odometer, namely at approximately 39,000 km.
61. I also reject the 1st defendant’s claim that the Vehicle was sold on its existing condition and status, ie on an “as-is” basis, based on the following reasons:-
(a) Given the plaintiff’s experience in purchasing second hand cars (he had bought 6 to 7 in the past prior to this one), it was most unlikely that he would agree to purchase the Vehicle on an “as-is” basis;
(b) Mark’s limited ability in communicating in English makes it doubtful whether he would even know how to express this concept to the plaintiff;
(c) Although the Sales Contract contains the words to the effect that “if the car sold is a second-hand car, then the car’s meter is only for the purpose of reference”, it will not diminish the effect of the representation made by Mark on behalf of the 1st defendant regarding the mileage. As what the plaintiff relied on was not the mileage shown on the odometer only but the specific warrant and representation made by Mark on behalf of the 1st defendant regarding the mileage;
(d) As Mark has accepted under cross-examination by the plaintiff’s counsel, if whatever he said to the plaintiff about the Vehicle which was not recorded in the Sales Contract subsequently turned out to be untrue, either he or the 1st defendant would be responsible. Under such circumstances, whatever is stated under the Sales Contract about the odometer being “for reference only” is in my view not here nor there; and
(e) In any event, the plaintiff, being an expatriate who originally has come from Scotland, can neither write nor read Chinese, it is meaningless to say that he had agreed to the terms of the Sales Contract (which was written in Chinese only).
62. Thus, on Issue 1, I find Mark had represented to the plaintiff and/or undertook or warranted to the plaintiff the mileage of the Vehicle as alleged during his visit to the Automall.
Issue 2: When the Vehicle was taken to the Service Centre, did Terence tell Mark that its mileage was different from the service record? If he did, did Mark respond by asking the 2nd defendant not to be concerned about the matter?
63. On this second issue, I find as a fact that at the Service Centre, Terence did inform Mark that the mileage of the Vehicle was different from the service record. I also find as a fact Mark has responded by asking the 2nd defendant not to be concerned about the matter.
64. I accept Terrence’s evidence that, on 13 November 2012 when Mark brought the Vehicle to the Service Centre for inspection, he had told him that the Vehicle’s mileage on the last visit to the workshop was over 100,000 km, which was markedly different from the odometer reading and the mileage stored in the key of the Vehicle as of that day. I also accept and believe Terence’s evidence that Mark had told him that he knew about the mileage discrepancy.
65. My finding is based on the following.
66. First, I find it inherently more probable than not that, a service supervisor like Terence, would inform his customers directly and honestly what he found in front of his computer – whether he discovered this incidentally or otherwise -- rather than hiding them from their customers. In this regard, as in other areas of evidence he gave to the court, I find Terence as a direct, honest and trustworthy witness. He has vividly told the court of how he inserted the car key into the car key reader, the file would open on the screen on his computer, how he rolled up and down the cursor and noticed the mileage recorded in the last service was over 100,000 km. He then told Mark of that fact. The response from Mark was that he knew and Terence was simply asked to go ahead with the inspection.
67. Second, in my judgment, what Terence has told the court is entirely consistent with the contemporaneous documents found at the time. For example, in the letter dated 6 March 2013[3] written by the 2nd defendant in reply to the plaintiff’s solicitors letter dated 27 February 2013[4], the following was recorded after the management made enquiry with Terence as to what took place on 13 November 2012:-
“Upon receipt of the Vehicle, we noted that the mileage recorded as of the previous workshop visit (dated 3rd Oct 2011) at over 100,000km, was higher than the mileage as then recorded in the Vehicle odometer (viz, 39,235km). We immediately informed Mr. Mak about the mileage discrepancy. He merely responded that he was aware of this matter.”
68. I agree with Mr Hung that this letter acts like a contemporaneous record of what took place. There was no time or little opportunity for Terence to concoct a story when he was asked by his superiors about what had taken place on the day. I accept that this is an important piece of evidence which support the viva voce evidence given by Terence in court.
69. Third, in my judgment, it is very important that one must put this matter in context. And the context is this: Mark took the Vehicle to the Service Centre for inspection and not for verification of its mileage, which is a service which the 2nd defendant did not and still does not provide. Further, neither Terence nor the 2nd defendant had any interest in the sale of the Vehicle. It is a transaction between the plaintiff and the 1st defendant only. In fact, Terence would not even know the inspection was related to the sale of the Vehicle, let alone the plaintiff had in mind that he was hoping that the inspection would able to confirm the true mileage of the Vehicle.
70. This is in stark contrast with what Mark was doing. He brought the Vehicle to the Service Centre with one thing in mind, ie to obtain a favouable inspection report so that he could complete the sale on the 1st defendant’s behalf. I have no hesitation in rejecting his evidence when he said that he had no personal interest at all in the transaction and would not personally benefited in any way by the sale. In my view, this is so much against common sense that it is not even worth considering further as a plausible explanation.
Imputed knowledge of the plaintiff?
71. My conclusion above that Mark took the Vehicle to the Service Centre for inspection and was told by Terence of the true mileage leads to the following arguments of law:-
(a) Did Mark act as the plaintiff’s agent when taking the car to the Service Centre for inspection?
(b) Whether the plaintiff, as principal of Mark, would have imputed knowledge of the mileage?
(a) Was Mark acting as the plaintiff’s agent?
72. There is no dispute that, at the time of the sale, Mark was employed by the 1st defendant as a salesman. Hence, the 1st defendant is vicariously liable for whatever acts Mark did within the course of his employment so long as they were relating to the business of Century Pride. The issue here is whether Mark was acting on the plaintiff’s behalf when taking the Vehicle to the 2nd defendant’s Service Centre for inspection and when collecting the same on his behalf on the next day. As such, whether Mark owed the plaintiff the duty to pass onto him all the information on the status and condition of the vehicle that he had received from the 2nd defendant in connection with the inspection.
73. On this issue, I agree with Mr Lo that when Mark took the Vehicle to the 2nd defendant’s Service Centre for inspection, Mark (and hence the 1st defendant) was acting as the plaintiff’s agent and owed to the plaintiff a duty to convey the information he has obtained from the 2nd defendant in relation to the Vehicle. The following reasons have led me to this conclusion.
74. First, the 1st defendant in his pleaded case has accepted that the delivery of the Vehicle to the 2nd defendant for inspection was as per the plaintiff’s instruction and was done on behalf of the plaintiff.[5] Further, he asserts that Mark had made clear to Terence when they first greeted each other at the Service Centre that he was delivering the Vehicle for a “pre-sale inspection” on behalf of his customer.[6]
75. Second, this matter has been expressly stated in Mark’s supplemental witness statement[7] as well as in his evidence. Thus, it is not disputed by the 1st defendant.
76. Third, this is also in accordance with the assertion of the plaintiff when he stated in his supplemental witness statement that the inspection was a condition of the purchase of the Vehicle, he was not in a position to personally take the Vehicle to the Service Centre for such purpose and that he had to rely on the 1st defendant to take the Vehicle on his behalf.[8]
77. Fourth, as a matter of law, in his capacity as the plaintiff’s agent, the 1st defendant, through Mark, owed the plaintiff a duty to act in the plaintiff’s best interest; a duty to act with all reasonable care, skill and diligence; and a duty to pass onto the plaintiff all material information with respect to the Inspection: see Spencer Bower Turner & Sutton on Actionable Non-Disclosure (2nd edition) §§17.38-17.39, Bowstead & Reynolds on Agency (20th edition) §§6-017 to 6-022.
78. In this regard, I reject the submissions made on behalf of the 1st defendant that he was not an agent of the plaintiff which was made based on the following grounds:-
(a) That there was no reposing of special trust and confidence in the 1st defendant by the plaintiff in asking the plaintiff to deliver the Vehicle to the 2nd defendant for inspection;
(b) That the relationship between the plaintiff and the 1st defendant was commercially adverse rather than commercially related (1st defendant’s counsel relied on §1-032 of Bowstead & Reynolds, supra).
(c) That there is no “sound logic” in the plaintiff expecting the 1st defendant to be its agent and that the 1st defendant consequentially owing the plaintiff a fiduciary duty;
(d) That is inconsistent with the plaintiff’s case against the 2nd defendant for negligence in tort as the plaintiff could not on one hand claim that the 1st defendant was his agent, yet at the same time deny that he had imputed knowledge of the mileage discrepancy, while on the other hand claims that the duty of care owed by the 2nd defendant only arose over the phone call with Terence on 15 November 2012;
(e) 1st defendant did not receive any remuneration from the plaintiff for delivery of the Vehicle to the 2nd defendant for inspection;
(f) The Vehicle was at all times owned by the 1st defendant as the legal title, beneficial interest and possession of the Vehicle had not been vested in the plaintiff at the time of the inspection yet; and
(g) The mere fact that one person undertakes work at the other’s request and for his benefit is insufficient to establish agency: §1-034 of Bowstead & Reynolds, supra.
79. I do not accept that the plaintiff had not placed any special trust and confidence when he asked the 1st defendant to take the Vehicle to the 2nd defendant for inspection. In fact, in my judgment, the contrary is true. As is apparent from the evidence, the plaintiff placed special emphasis on the 3 things which were still in the forefront of his mind and made the inspection as a condition of buying the Vehicle. Thus, it is not true to say that he did not place any special trust and confidence in the 1st defendant.
80. Further, I do not accept Ms Chau’s argument that the plaintiff and the 1st defendant was at a commercially adverse position when Mark took the Vehicle for inspection at the Service Centre on 13 November 2012. At that stage, the sale has not been completed yet. The parties had agreed that if the inspection would reveal anything untoward, the plaintiff would be entitled to cancel the Agreement and have his deposit of $25,000 returned to him. As the title of the Vehicle has not been transferred to the plaintiff at that stage yet, he has to place his trust and confidence in the 1st defendant by informing him whatever the 2nd defendant might have related to Mark which is material to the condition of the Vehicle. In my opinion, the true mileage must be amongst one of them. As the writers of Bowstead & Reynolds say in the same paragraph which Ms Chau has cited to the court, each transaction must be examined on its facts, “considering the extent to which an agent’s duties are appropriate”. I further agree with the learned writers that much turns on “the extent to which the principal can call for a account, for the duty to account is a typical feature of the agent’s position.”: see last paragraph at §1-032 on p [33] of Bowstead & Reynolds, op.cit.
81. In addition, contrary to Ms Chau’s submissions, I find it perfectly logical for the plaintiff to rely on the 1st defendant as his agent when Mark took the Vehicle for inspection. After all, he was the person who has agreed to pay for the inspection. Whether the 1st defendant received any remuneration in my view is not here nor there as his interest in taking the Vehicle for inspection is to fulfill one of the important conditions of the sale. It is obviously in his interest to try to complete the sale through Mark by any means.
82. However, I do agree with Ms Chau that there is some internal inconsistency in the plaintiff’s claim when he on one hand claims that the 1st defendant was his agent and yet denies he has imputed knowledge of the mileage when Mark had been told by Terence of such fact and on the other hand claims that the duty of care of the 2nd defendant only arose during the telephone call between him and Terence.
(b) Whether the plaintiff as principal of Mark would have imputed knowledge?
83. As I found Mark was told about the true mileage of the Vehicle by Terence, the only question left is whether the plaintiff, as the principal of Mark for the purpose of sending the Vehicle for inspection, would have imputed knowledge of the matter.
84. Mr Hung submits that once the court finds Terence had indeed told Mark the correct odometer reading was over 100,000 km, the plaintiff would have imputed knowledge of the same. Mr Hung contends that this principle of law is trite and can be found in the following authorities: Bowstead and Reynolds on Agency op.cit.§8-204; §8-205; Tanham v Nicholson (1872) LR 5 HL 561 and Norwegian American Cruises A/S (formerly Norwegian American Lines A/s) v Paul Mundy Ltd [1988] 2 Lloyd’s LR 343.
85. Mr Hung further submits that this would be fatal to the plaintiff’s case disregard the outcome on my finding on the subsequent conversation between the plaintiff and Terence on 15 November 2012.
86. I do not agree with Mr Hung on this.
87. On this issue, the plaintiff claims that the 2nd defendant has wholly misconceived the concept of “imputed knowledge” in this case for the following 3 reasons:-
(a) It has never been the 2nd defendant’s pleaded case that the plaintiff has “imputed knowledge”;
(b) This case falls within one of the exceptions and recognized defences not mentioned by the 2nd defendant; and
(c) The 2nd defendant’s argument based on the “imputed knowledge” principle as if it is “automatic” or “invariable” does not present a complete picture of the law.
88. The first complaint of the plaintiff is that “imputed knowledge” has not been pleaded in any of the pleadings of the defendants. The plaintiff relies on the following authorities to reiterate the trite principle that a party is not permitted to run a case that is not pleaded: RHC O.18 r 8(1); Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co Ltd [1994] 2 HKC 264(at 269E-270C); Bruce James Stinson v Gu Ming Gao (unreported) HCA 2352/2012; 17 April 2015 per Registrar Lung at §25; Sinoearn International Ltd v Hyundai-Ccecc Joint Venture (a firm) (2013) 16 HKCFAR 632 per Ribeiro PJ at §§27 & 30 and Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 per Ma CJ at §§21 & 23.
89. I reject the contention of the plaintiff that the legal concept of “imputed knowledge” needs to be specifically pleaded in this case. In my judgment, it is trite that a party needs only plead the material facts and not law in his pleadings: see for example the following passage in Atkin’s Court Forms in Civil Proceedings, Vol 32 1996 issue p 16 §15:-
“The court’s duty at trial is to determine the legal effect of the facts proved. It is usually neither necessary nor appropriate to plead law or legal argument or to assert the legal effect of the facts pleaded, for it is the duty of the court to take judicial notice of what the law is in determining whether the facts pleaded and proved establish the case of the plaintiff or defendant in law.”
90. Although a party may by his pleading raise any point of law, this is not always required: see §18/11/11 of Hong Kong Civil Procedure 2016 (“HKCP”). Further, under Order 18, rule 12(1)(b) of the Rules of the District Court (“RDC”), “knowledge” has been specifically stated as an exception to what needs to be pleaded “when a party pleading alleges any condition of the mind of any person….”: see §18/12 of HKCP at p 419-420.
91. In my judgment, throughout the trial, the plaintiff was well aware of the issue and has all along been running the case that Mark was the plaintiff’s agent when he took the Vehicle to the Service Centre for inspection. Further, the contention of “imputed knowledge” was well known to the plaintiff since the Pre-trial Review (“PTR”) in this case. At the opening stage of the case, the plaintiff’s counsel was specifically asked by the court what would be the answer to the legal effect of the “imputed knowledge” on the plaintiff once Mark was found to be his agent, no pleading point had been raised by the plaintiff’s counsel at that point. More importantly, the plaintiff’s counsel has conducted the trial and questioning the witnesses clearly with this contention in mind. In my judgment, it would be unfair to allow the plaintiff to raise this as a pleading point at the closing submission stage of the proceedings.
92. Having made that finding, I agree with Mr Lo that this case does fall within at least one of the exceptions to the general rule, ie the fraud exception.
93. The writers of Bowstead & Reynolds on Agency, op. cit. in Article 95 at §8-207 stated the following:-
“8-207
(1) The law may impute to a principal knowledge relating to the subject matter of the agency which the agent acquires while acting within the scope of his authority.
(4) Knowledge is not attributed to the principal where the principal is claiming in respect of a breach of duty of his own agent, and, perhaps, where the agent is defrauding the principal in the transaction at issue.”
94. I agree with the learned writers that it is always necessary to consider the context of the particular legal issue to which imputation of knowledge might be pertinent. There is also no over-arching principle that a principal is deemed to know at all times and for all purposes that which his agent knows: Bowstead & Reynolds, op. cit. at §8-208 and Moulin Global Eyecare Trading Ltd v CIR [2014] HKCFA 22 at [106].
95. In my judgment, this case would fall within the “fraud exception” or more recently known as “breach of duty exception” of the principle: see Bowstead & Reynolds, op. cit. at §8-208 (c) at [542] and the recent UK Supreme Court case of Jetivia SA v Bilta (UK) Ltd [2015] UKSC 23 per Lord Sumption at §§71-72. In essence, this exception applies where the principal complains that his agent has caused loss to him by breach of duty, and the principal’s claim may be against the agent, or even a third party which has assisted in, or benefited from, the agent’s breach. It is clear that such “exception” is not only confined to fraudulent breaches of duty but applies equally to honest breaches of duty. Further, as pointed out by the writers of Bowstead & Reynolds, op. cit. at §8-213, the putative defence that the exception is used to rebut is premised on the fallacy that a principal is prima facie deemed to know at all times and for all purposes that which his agents know. As Lord Hoffmann LJ (as he then was) in El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685, at 715 has stated:-
“English law has never taken the view that knowledge of a director [is] ipso facto imputed to the company – see Powles v Page (1846) 3 C.B, 16”.
96. Based on the above, I am of the view that this case comes within the “fraud” or “breach of duty” exception and there is no purpose for deeming the principal, ie the plaintiff, to know what the agent, ie Mark, knows in this case.
97. In this regard, I also agree with Mr Lo that the 2nd defendant’s argument that the application of the imputed knowledge principle as if it is automatic or invariable does not represent a complete picture of the law: see El Aju v Dollar Land Holdings Plc, supra, at 705; Moulin Global Eyecare Trading Ltd v CIR, supra, at §106 and Jetivia SA v Bilta (HK) Ltd, supra at §9.
98. For the aforestated reasons, although I found the 2nd defendant is entitled to run the legal contention of “imputed knowledge” of the plaintiff in this case (despite the same not having been pleaded in its defence), I agree with Mr Lo that there is simply no good justification in this case for imputing knowledge on the plaintiff of what Terence had told Mark regarding the mileage.
Issue 3: After the final inspection invoice was issued to Mark and passed it to the plaintiff, what transpired during that brief but crucial telephone conversation between the plaintiff and Terence?
99. In my judgment, this brief but very crucial telephone conversation between the plaintiff and Terence on 15 November 2012, which formed the bedrock of the plaintiff’s case against the 2nd defendant, needs to be placed in its proper context.
100. First and foremost, on the plaintiff’s own case, this telephone conversation lasted less than 1 minute. It was made out of the blue in a normal but busy working day of Terence at the Service Centre. No prior warning had been given to him about the nature of such phone call. Terence had never met the plaintiff nor talked to him on the phone before. The plaintiff allegedly asked a few short but leading questions to Terence in order to extract some important answers from him to form the basis in his own mind of whether he would proceed with the purchase of the Vehicle from the 1st defendant or not. He had never asked Terence to repeat or clarify any of the contents. He never tried to ascertain if Terence understood what he was talking about.
101. Second, the conversation was carefully “re-constructed” with hindsight after the event, clearly with attaching liability on the 2nd defendant in mind. It somehow happens to fit perfectly into the rather technical legal concept of “voluntary assumption of duty”.
102. It has often been said that “hindsight is 20/20” and the “re-play” of the short conversation between the plaintiff and Terence perhaps is a perfect example of this.
103. In his oral testimony, the plaintiff related the entire telephone conversation between him and Terence as follows:-
“Plaintiff: I introduce myself as the buyer of the vehicle with the license plate RP147 which he had inspected the previous day.
Terence: Yes. Hello.
Plaintiff: I trusted BMW more than a used car dealer to tell me the truth about the vehicle. Although I have seen the report, I wanted to speak to [him] directly to understand if there is anything else or unusual I needed to know about the car.
Terence: No, it’s all in the report.
Plaintiff: No accident? At this point, would you consider the car showed normal wear and tear for a car of this mileage?
Terence: No, only normal wear and tear. [He gave the example of the rubber mounts.]
Plaintiff: So is there any other reason why I should not consider going ahead with the purchase?
Terence: No. The car is OK.
Plaintiff: Thank you for your time. Good bye.”
104. Having had the benefit to hear the plaintiff giving evidence and reading the transcript of his evidence when writing this judgment, I do not believe that the conversation was as precise and as perfect as the plaintiff had presented to the court. There are several reasons which have led me to such conclusion.
105. First, given the limited ability in both of his written and spoken English[9], it is rather unlikely in my view that Terence would have been able to understand the very pointed questions asked by the plaintiff even if they were true. Besides his limited, if not rather poor English, it does not help by the fact that this conversation took place over the telephone, without the benefit of the parties able to read each others’ facial expressions and/or body language. It also does not help by the fact that the plaintiff speaks English with a slight tint of Scottish accent, albeit not a very strong one. This would no doubt exaggerate over the phone with someone whose mother tongue is not English like Terence on the receiving end. All the above in my judgment will render a meaningful conversation on the telephone between the plaintiff and Terence rather difficult, if not impossible.
106. Second, the plaintiff tried to recall a very brief conversation which took place almost 29 months prior to giving evidence in court. Yet, he was able to give an almost perfect account to the court which just happened to fit perfectly with his case against the 2nd defendant, ie “negligent misrepresentation by omission” or “voluntary assumption of duty”. The account he has related to the court in evidence appears to me more like the lines of cross-examination by a lawyer on a witness in court rather than the normal enquiry from a customer to a service supervisor in a main car agent’s service centre. To my mind, this is simply too good to be true and inherently improbable.
107. Third, there was material inconsistency between the account he gave in court and the contemporaneous documents. I bear in mind of the fact that by the time he gave evidence in court, the plaintiff had had plenty of time to go over the conversation in his own mind. He also had had plenty of opportunities to go over that particular conversation with his lawyers. Yet the account he gave in court was rather different from that he had given to his own solicitors much closer to the event. In the pre-action letter of his solicitors to the defendant dated 27 February 2013, which was written slightly over 3 months after the alleged telephone conversation, there was no mention of important sentences like: “I trusted BMW more than a used car dealer to tell me the truth about the vehicle”; “Would you consider the car showed normal wear and tear for a car of this mileage”; “So is there any reason why I should not consider going ahead with the purchase?”. His complaint letter to the Police dated 22 February 2013 alleging criminal acts on the part of Mark and Terence likewise was similarly worded as the solicitors’ pre-action letter which was written a few days later. Again, all these crucial parts of the conversation were found missing. In my view, these are material discrepancies which affect the credibility of the plaintiff on this crucial issue. While it is true that the account he gave in court is similar (if not identical) to the version he had given in his lengthy witness statement[10] and supplemental witness statement[11] filed for the purpose of the trial, by this time he already had had the benefit of knowing the defendants’ case and what the legal issues were involved. This probably explains why this account has been heavily embellished.
108. Fourth, I consider it is highly improbable that a person who sent in a car for inspection and paid a modest sum of HK$1,140 would ask the service supervisor questions like “is there is anything else or unusual I needed to know about the car?” or “is there any other reason why I should not consider going ahead with the purchase?”. After all, Terence was not his technical expert or advisor in the purchase of the Vehicle nor did the 2nd defendant provide such a service. The Service Centre was not an enquiry desk or telephone advice centre where a potential buyer of a vehicle could simply pick up the phone and demand for some definite “yes or no” answers on some highly technical and crucial questions. If the staff gives the wrong answer or might have omitted certain information (as the plaintiff alleges in this case), it would expose the company to liability of over several hundred thousand if not a couple of millions of dollars (as in this case if one takes into account of the legal costs involved). To me, this simply flies in the face of common sense.
109. Fifth, we all know how hindsight can play tricks in our mind. I am not saying that the plaintiff has deliberately tried to lie to the court when giving evidence. I do not think he did. However, in my judgment, he has certainly embellished or garnished his evidence in order to suit his case. To me, whether he did so consciously or unconsciously matters very little, my finding is that it is extremely unlikely the conversation took place in the way as he has described it in court.
Terence’s English ability
110. Much time and efforts have been spent by the plaintiff on this rather trivial issue. The plaintiff’s case is that given the number of training hours he has had on English-related subjects, and his relatively experienced position in the 2nd defendant’s Service Centre, his alleged limited English ability is not credible.
111. With respect, I do not agree.
112. I think the best “exhibit” of this is Terence himself. Throughout the solid 1½ days when he was being questioned by the parties’ counsel in the witness box[12], I have carefully observed him and find him to be a direct, honest and straight-forward witness. I do not find him to have exaggerated on any parts of the evidence he gave and, perhaps more importantly for the present purpose, I do not find him to be able to speak or understand English at the level as the plaintiff’s counsel alleges that he would. Unless Terence is an extremely good actor who could perform faultlessly in the witness box (of which I do not find him to be so), I do not consider he was able to understand English fully in the way as the plaintiff has described in his pleadings as well as evidence.
113. This of course is not only a matter of impression of the court but can be supported by many objective facts.
114. The starting point is the undisputed fact that this approximately 50 year old witness has no academic achievement to speak of. He left school after completing the HKCEE in 1984 when he failed in all the 7 subjects he sat in. In 3 subjects, he obtained Grade G and in the 4 other subjects (“English Language (Syllabus B)” amongst one of them), he obtained Grade H, which was the lowest grade one could get in such examinations. Thus, to say that he was able to fully understand what a native English speaker was saying over the telephone is something I find difficult to believe.
115. One thing that the plaintiff has heavily relied on is the large number of training courses which Terence had attended while in the 2nd defendant’s employment. A great deal of time has been spent by the plaintiff’s counsel in cross-examining Terence on this. Yet, the only useful thing which has come out of this is the fact that Terence had attended a “Customer Service English for Services Centre” course in 1992 when he first joined the 2nd defendant as a “service advisor” (at its lowest rank of grade C) and attended an “English Club” for a total of 20 hours in 2003. With respect, attending a couple of English courses offered by the employer (which incidentally was taught by a local Chinese) years ago does not necessary make one able to speak or hear English better. It all depends on the aptitude and language ability of a particular individual. Having seen Terence giving evidence in court, I certainly would not regard him as someone who possesses such natural flair. In fact, quite the opposite, I find him to be a rather unsophisticated and lack of confidence individual. Even when he spoke in his native dialect (which is Cantonese), he has had difficulty sometimes in understanding the questions and in expressing himself. And I do not consider this has come from just being simply nervous in court, I think it is more to do with his natural limited ability in languages.
116. Terence might have attended other courses offered by the 2nd defendant over the years; however, it is clear that they are more of a technical nature rather than for improving his language skill. While he could not remember the contents of most of them, including some recent ones he attended, this does not in my view mean that he is an unreliable witness. I think it is only natural that he would not be able to remember the contents of the 2 English courses which he had attended years ago.
117. Nor do I think his coming across of English speaking customers in his job from time to time would mean that Terence has had no difficulty in understanding what was being said to him on the phone by the plaintiff in quick sequence.
Terence’ account of the telephone call
118. I prefer Terence’s account of the telephone conversation than that related to by the plaintiff.
119. Basically this is what Terence has told the court: from whatever words the caller uttered at the beginning of the phone call, he was able to understand that the caller said “my car number RP 147”; he then understood and believed that the caller must be the owner of the Vehicle eventhough the word “owner” was never used by him; the caller wanted to ask about the condition of the Vehicle; he told him after reading from the computer that “BMW final inspection finished”; he then read out the “reminder” about the “battery and rubber mounts tension struts” mentioned in the report to the caller; thereafter the caller said something which he could not understand and he repeated the contents of the Final Inspection to the caller again.
120. Terence has frankly admitted in evidence that there were other things said by the English speaking gentleman during the phone call but he simply could not understand what he was saying. He was not able to follow and simply could not understand. For those parts he could understand, there was no difficulty in knowing what the caller was saying.
121. I accept what Terence has told the court was true.
122. While I accept that over the 23 years of employment working for the 2nd defendant, Terence must have developed working knowledge of English language which is relevant to the role of a service advisor or service supervisor (a matter readily accepted by him under cross-examination), equally I accept his qualification that “as far as they are relating to what is in the car, I would have known about that”. I further accept his evidence that he had only come across very few English speaking customers over the years in such a role. He was very honest when he said that he would deal with such customers as far as he could handle. If he found that he could not handle such customers (due to his limited ability in English), he would ask his senior/supervisor to help him.
123. I find as a fact that his inability to recall some of the contents of the telephone conversation between the plaintiff and him was genuine and true.
124. One very telling matter is that despite how much the plaintiff has emphasized throughout the trial of the importance of the true mileage of the Vehicle to him, he had never put that “six million dollar” question to Terence during that fatal phone call on 15 November 2012. As Terence related to the court, of whose evidence I accept, the plaintiff only asked about the condition of the Vehicle and never about the mileage itself. The plaintiff accepted that he did not. In my judgment, this begs the question of why the plaintiff would not ask Terence such an important matter when he was so concerned about mileage rigging and when one of the main purposes for him to send the Vehicle to the Service Centre was to verify its true mileage. The only logical conclusion seems to me is that this was not at the forefront of the plaintiff’s mind when he made that phone call and he was more concerned about the general condition of the Vehicle than the mileage itself.
125. I believe Terence when he said that if a customer has specifically asked him about the mileage of a vehicle, he would have told him or her. In the case of Mark, I believe Terence that he had only accidently come across the mileage from the last service when he issued the invoice to Mark, therefore he told him about the discrepancy. I further believe Terence did not know the case involved with the sale and purchase of the Vehicle, even at the stage when the plaintiff called him up. After all, why should he, as a service supervisor of the 2nd defendant, who has to deal with 8 to 10 vehicles on a daily basis, needed to be concerned about this.
126. Based on the above, I would reject the plaintiff’s account of the telephone conversation and would accept the more simple, direct and perhaps less than “perfect” account given by Terence.
Was there any misrepresentation by omission?
127. Given my findings above, I do not consider the plaintiff’s case against the 2nd defendant based on voluntary assumption of responsibility would even take off the ground. There is therefore strictly speaking no need for me to go into the law and the authorities referred to by Mr Lo to the court on this issue in his submissions.
128. However, for the sake of completeness, I wish to add here that even if I were to find in favour of the plaintiff based on the account of his telephone conversation, in my judgment, I still do not consider the plaintiff will able to establish his case against the 2nd defendant because :-
(a) I do not consider that Terence has been careless or has provided any misleading information or advice about the Vehicle to the plaintiff;
(b) I do not consider that Terence has acted negligently by not telling or advising or alerting to the plaintiff the mileage discrepancy as he had never been asked by the plaintiff about this and it was never part of the services provided by the 2nd defendant whether in a vehicle inspection or otherwise; and
(c) I do not consider that the plaintiff has relied on Terence’s “representations” in completing the transaction of the Vehicle with the 1st defendant at all.
129. Thus, the classic elements to meet the Hedley Bryne principles simply were not there: cf GP Trasnport (SA) P/L v Cavill Power Products P/L [2009] SADC 77.
130. Based on the aforementioned reasons, I find the plaintiff has failed to establish his case against the 2nd defendant.
A side issue: any established policy of the 2nd defendant in hiding the actual mileage from customers
131. Before I leave the issue of liability in this case, I should briefly mention one matter, which although not forming any core issues in this case, was something which the parties had spent much time on during the trial and which may have some marginal value. It is whether the 2nd defendant has an established policy of hiding actual or true mileage of vehicles from their customers.
132. The plaintiff runs the case that the 2nd defendant has a deliberate and established policy of concealing the actual mileage of any vehicles it serviced or inspected from its customers. This is based on what Billy Law, a staff from the 2nd defendant’s Chai Wan Service Centre, had allegedly told him on the telephone when it was trying to fix the problem of the battery of the Vehicle.
133. While it is unfortunate that the 2nd defendant has failed to file a witness statement or to call Billy Law to give evidence to refute this matter (a last minute attempt to do so during the trial was rejected by the court due to lateness and unfairness caused to the plaintiff), I have no problem in rejecting the plaintiff’s case that the 2nd defendant has such a company policy for the following reasons:-
(a) As a reputable main dealer and sole concessionaire of a leading European brand of vehicles in Hong Kong, it is highly improbable and almost inconceivable that the 2nd defendant would have such an established policy to “deceive” their customers;
(b) This was denied by Terence when he gave evidence;
(c) This was contrary to the act of Terence when he frankly and willingly volunteered the information to Mark once he discovered the mileage discrepancy after inserting the key to the reader on 13 November 2012;
(d) Despite express invitation from the 2nd defendant’s counsel, the plaintiff’s counsel has failed to put this matter to Mr Frank Cheung, the technical and training manager of the 2nd defendant, who would be in the best position to answer such question on behalf of the 2nd defendant;
(e) As Mr Cheung has stated in evidence (of which is not challenged by the plaintiff), there is no way for the 2nd defendant to know or to find out the “actual” mileage of a vehicle. The so-called “actual mileage” typed by Billy Law on an invoice dated 14 February 2013, as explained by Mr Cheung, was not the “actual” mileage of the Vehicle. It was only the mileage recorded in the computers at the time when a fault was recorded.
(f) The 2nd defendant did not and does not provide a service to verify the mileage reading of the odometer of a BMW vehicle. No one at the 2nd defendant had ever told the plaintiff or represented to the plaintiff so. This was a fact accepted by the plaintiff.
(g) It was only the wishful thinking of the plaintiff that by taking the Vehicle to the service centre, that the actual mileage would be verified. Mr Cheung told the court that this could not be done. There were only 2 ways where the 2nd defendant itself could ascertain the true mileage of a vehicle: one is to send the vehicle back to the manufacturer in Germany and the other way is to replace the whole panel (disregard of its condition) and replace it by a new one so as to trick the computer.
134. Rhetorically speaking, if the 2nd defendant does not know what the actual mileage of a vehicle is, how could it have an established policy of concealing the same from its customers? Thus, I find as a fact that the 2nd defendant did not and does not have such a policy to conceal the actual mileage from its customers.
IV Whether the 1st and / or 2nd defendant should be liable to the plaintiff
(a) Against the 1st defendant
135. Based on the factual findings I made above, I find section 3 of the Misrepresentation Ordinance, Cap.284 applies in this case and:-
(a) the 1st defendant is liable for Mark’s false representations made to the plaintiff, acting under the 1st defendant’s actual authority, that the correct mileage was around 39,000 km on 10 November 2012 rather than over 100,000 km;
(b) the plaintiff was induced by Mark’s representation to enter into the Agreement; and
(c) by reason of having entered into the Agreement, the plaintiff has suffered loss and damage as a result.
136. Alternatively, I find that the 1st defendant is liable in negligence under the Hedley Byrne principle: see Clerk & Lindsell on Torts, op. cit. at §8-119.
137. Further, I find that Mark’s representation on the correctness of the mileage of the Vehicle is capable of constituting a warranty as to the Vehicle’s correct mileage and therefore the 1st defendant is liable in contract: see Chitty on Contracts (32nd edition), Vol.1 §6-004 and Clerk & Lindsell, op. cit. at §8-120.
138. Lastly, I also find that the 1st defendant, in its capacity of the plaintiff’s agent in taking the Vehicle for inspection on 13 November 2012, owed the plaintiff the duty to convey information. Having been informed of the crucial information about the true mileage by Terrence, Mark / the 1st defendant was in breach of his duty as an agent for failing to inform the plaintiff of the same.
(b) Against the 2nd defendant
139. Based on my findings above, I do not regard that 2nd defendant through Terence had voluntarily assumed the responsibility of informing the plaintiff the true mileage of the Vehicle as claimed or at all.
140. As I did not find the conversation took place in the manner as related to the court by the plaintiff, it follows that the 2nd defendant is not liable in negligence for any losses allegedly suffered by the plaintiff resulting from purchasing the Vehicle.
141. I therefore would dismiss the claim of the plaintiff against the 2nd defendant.
V Appropriate amount of damages
142. The plaintiff case on loss and damage has been pleaded on the following alternative basis under §22 of the amended statement of claim:
(a) Difference between the purchase price of the Vehicle (plus the associated fees and expenses) under the Agreement and the sale price of the Vehicle by the plaintiff, ie $389,336 ($499,336 - $110,000); or
(b) Difference between the purchase price of the Vehicle under the Agreement and the market value of the Vehicle (with its true mileage) as of November 2012.
143. On top of that, the plaintiff also claims expenses in respect of repairs carried out on the Vehicle during the period from 15 November 2012 to 12 April 2013.
144. For the record, the plaintiff has given credit for the diminution in value of the Vehicle during the period when it was driven by him from 15 November 2012 to 12 April 2013, a total distance of about 1,888 km only. However, according to the joint statements of the experts, the relatively short distance driven by the plaintiff during that period makes no significant difference to the value at all. I am prepared to accept this joint piece of evidence.
145. The common grounds between the expert for the plaintiff and the expert for the 2nd defendant (the 1st defendant has not engaged any) is that:-
(a) the “cost approach method” (ie the method used by the plaintiff’s expert Paul Law) is an accepted method if there is no active second-hand market for the subject vehicle;
(b) the “market approach method” (ie the method used by the 2nd defendant’s expert Raymond Lee) is an accepted method if there is an active second-hand market for the subject vehicle.
146. I accept the 2nd defendant’s expert evidence that the market approach was and should be the more reliable approach when there is an active second hand market with a “sufficient number of sales of comparable vehicle that can be independently verified through reliable sources”.
147. I reject the plaintiff’s expert opinion that there was no active second market for such vehicles in Hong Kong. One does not have to drive far on the streets in Hong Kong to see there are plenty of BMW X5 around and no doubt there is an active second hand market for them. Yes, while it is true to say that there may not be the exact vehicles of the same age or same mileage, but to say that there was no sufficient sale of comparables to determinate the second hand prices is simply not correct.
148. In my view, the cost approach adopted by the plaintiff’s expert is artificial and unrealistic. I accept that such approach (which is based on the “depreciated replacement cost method, ie replacement cost new of car less the depreciated amount according to useful life of a vehicle and certain obsolescence) may be used in the valuation of car with no active second hand market, eg like a fire fighting vehicle. However, in my judgment, it has no application to a vehicle like the BMW X5 where it has an active second hand market.
149. I therefore reject the methods used by the plaintiff’s expert, ie the straight diminishing method and adjustment mileage method as they do not reflect the reality of the case at all.
150. I further reject the plaintiff expert’s evidence on the ground that he has unduly and inappropriately relied on the bulky newspaper cuttings, which are inadmissible evidence that had been expunged by the court at the early stage of the hearing. His hearsay and unsubstantiated oral evidence that on the market there are private garages which would check actual mileage of vehicles are simply not believable.
151. In the circumstances, I would adopt the value assessed by the 2nd defendant’s expert based on the market approach method. In other words, the market value of the Vehicle as of 10 November 2012: (i) with mileage of 39,235 km would be at HK$450,000; and (ii) with mileage of approximately 130,000 km would be at HK$360,000. Further, the market value of the Vehicle as of 12 April 2013 would be at HK$310,000 (whether with mileage of 130,000 km or 131,888 km).
152. Thus, regrettably, I find that the plaintiff not only had re-sold the Vehicle in haste but also at a substantially discounted price at HK$110,000 when he sold it to an unrelated third party. Its market value, even at its true mileage at or around 130,000 km, in my judgment, should have been at or around HK$310,000 as assessed by the 2nd defendant’s expert.
153. Based on the above, for the plaintiff’s claim against the 1st defendant for misrepresentation under section 3 of the Misrepresentation Ordinance, Cap 284, I agree with Mr Lo that the plaintiff is entitled to all actual losses flowing directly from Mark’s misrepresentation and that the plaintiff would be put in a position as if he had not entered into the Agreement. Under such scenario, Mr Lo claims that the plaintiff would be entitled to be awarded a sum of $411,148.80. However, that would be the case had I agreed with the re-sale value of the Vehicle. As I have found, the Vehicle was sold by the plaintiff to Mr Li Wai On for a substantially discounted sum under the market value (even after taking into account of the much higher mileage of over 130,000 km).
154. For the claim against the 1st defendant based on negligence, breach of duty as an agent and breach of contract, I agree with Mr Lo that the measure of damages is to put the plaintiff back in the position (in the case of negligent misrepresentation) as of the negligent representation has not been made, and (in the case of breach of agent’s duty) as if the agent’s duty has not been breached, plus any consequential damages. In either case, the effect is to put the plaintiff back into the position as if he had not entered into the Agreement or completed the purchase, ie the price the plaintiff paid less the market value of the Vehicle at its true mileage: see McGregor on Damages (19th edition)§§47-054 to 47-055.
155. For the breach of contract on the part of the 1st defendant, the measure of damages is to put the plaintiff back in the position as if the Agreement is fully performed plus any consequential losses. I agree that in this case, the basic loss is the difference in value between the Vehicle as represented (at 39,235 km) and its value at its true mileage: see McGregor on Damages, op. cit., at §§4-002 and 4-011.
156. In the aforesaid circumstances, in my judgment the damages which the plaintiff is entitled to is as follows:-
(HK$499,336 - HK$310,000) HK$189,336
157. The plaintiff also claims as consequential loss the sum of HK$21,812.80. This is said to be the cost of the repairs carried out on the Vehicle during the period from 15 November 2012 to 12 April 2013 when the plaintiff was the legal owner of the Vehicle. I find this amount reasonable and it is supported by documentary evidence. They flow from the loss caused by the 1st defendant’s various breaches above and the plaintiff is entitled to recover the same.
CONCLUSION
158. In the aforesaid premises, I would order judgment be entered against the 1st defendant in the sum of HK$211,148.80 (HK$189,336 + HK$21,812.80).
159. There will be interest for the above sum at 1% above prime rate from date of the breach, ie on 10 November 2012 to the date of judgment and thereafter at judgment rate.
160. I would dismiss the plaintiff’s case against the 2nd defendant.
Costs
161. Costs will follow the event.
162. I make an order nisi that the 1st defendant do pay the plaintiff’s costs of the action, such costs to be taxed if not agreed with certificate for counsel.
163. Insofar as the 2nd defendant’s costs is concerned, since the plaintiff has failed to establish his case against it, the plaintiff has to bear the costs of the 2nd defendant, such costs to be taxed if not agreed with certificate for counsel.
164. The order nisi will become absolute unless any party applies within 14 days to vary the same.
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( Andrew SY Li ) |
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District Judge |
Mr Benny Lo, instructed by Boase, Cohen & Collins, for the plaintiff
Ms Grace Chau, instructed by Huen & Partners, for the 1st defendant
Mr Andy Hung, instructed by Ng, Lie, Lai & Chan, for the 2nd defendant
[1] See Amended Defence of 1st Defendant (D1’s AmDef) §8(2)(c)(i)
[2] See D1’s AmDef §§7 & 8(1)
[3] See Trial Bundle [C/471]
[4] See Trial bundle [C/481]
[5] See §16(1) of D1’s AmDef
[6] See §16(3) of D1’s AmDef
[7] See Mark’s SWS §6
[8] See §7 of P’s SWS
[9] This matter will be discussed further under the heading of “Terence’s English ability” below
[10] 28 pages long with nearly 80 pages of exhibits dated 4 April 2014
[11] 13 pages long dated 20 June 2014
[12] From around 12:40 pm on Day 7 to 5:20 pm on Day 8
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