NG YAT YING v. LAM MING KWAN AND OTHERS

BETWEEN

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AND

1977, No. 2496

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: His Honour Judge Downey, sitting as a Deputy Judge of the High Court.

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JUDGMENT

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1. At about 11.30 p.m. on the 6th November 1974, a private car, registration number AW5401, collided with a group of people in Queensway, Hong Kong, NG Yat-ying, who was then aged 10 months and her father Mr. NG Wing-fai were injured, and his wife, CHONG Suet-wah ("the deceased") was killed. The first defendant was the driver of the car.

2. On the 12th September 1977, writs were issued claiming damages against the first defendant and the second defendant, CHEUNG Wai-shing, as the owner of the car in question. On the 5th January 1978, solicitors acting for the second defendant filed Defences, in which it was alleged that the car had been bought by the first defendant from the second defendant "in or about the 5th November 1974", The first defendant failed to enter an appearance, and judgment in default was entered against him in the above actions, on the 25th February 1978, for damages to be assessed.

3. By orders dated the 25th November 1982, Mutual Underwriters Ltd. ("the insurer") was ordered to be joined as third defendant in both actions, and the following preliminary issues were ordered to be tried :-

In consequence of these orders, the Statement of Claim in each action was amended, and amended defences were filed on behalf of the second and third defendants by the same firm of solicitors who have acted for the second defendant throughout the course of these protracted proceedings.

4. Although the first defendant was, on the 14th May 1975, convicted of causing the death of the deceased by dangerous driving, both he and the second defendant have long since disappeared, apparently without trace. Neither of them gave evidence before me at the trial of the preliminary points. The trial was conducted on the basis of agreed bundles of pleadings and documents, which included certain correspondence relating to the accident and four statements in writing, made by the first and second defendants in 1974 and 1977. The absence of the makers of these statements is, perhaps, understandable, but, it is unfortunate that neither the persons who took those statements (or, at any rate, those made by the second defendant) nor any person employed by the insurers, has been called to give evidence relating to the issues now before me. I am, accordingly, faced with the task of ascertaining, in 1983, the intentions of certain persons in 1974, solely on the basis of documents of dubious value, and without the advantage of any oral testimony from these persons, or any other person which might have clarified some of the ambiguities therein or removed doubts concerning the weight to be given to the same. Furthermore, some documents which one would reasonably expect to be available, have not been placed before me.

5. On the 25th of February 1974, the insurer issued a policy of insurance to the second defendant, which covered him in respect of liabilities to third parties arising out of the use of the car. It is common ground that this policy extended to any other person driving on the insured's order or with his permission. The insurer contends, however that its. liability thereunder ceased shortly before the accident by reason of a sale of the car by the second defendant to the first defendant, which operated immediately to transfer property in the car to the first defendant, notwithstanding that payment of the balance of the purchase price was deferred until a few days after the accident. In short, they contend that the second defendant had no insurable interest in the subject-matter of the insurance at the time of the accident. On behalf of the plaintiffs, Mr. Neoh contended that the alleged contract of sale was conditional and that the passing of the property was in all the circumstances, suspended until the purchase price was paid in full.

6. I am indebted to Mr. Neoh and Mr. Ozorio for their submissions on the law and the facts, and the possible permutations of inferences to be drawn therefrom. Insofar as I consider, some of the latter to be somewhat speculative, I am doing no more than acknowledging the obvious difficulties, facing them and me, of coming to any firm findings of fact on the basis of the scanty and dubious quality of the evidence made available.

7. Counsel concentrated their submissions on the nature of the alleged contract for the sale of the car and the probable intention of the parties regarding the transfer of property therein, on the basis that the facts contained or asserted in the written statements of the first and second defendants were assumed to be the true facts. However, Mr. Ozorio did remind me of the provisions of section 51(3)(a) of the Evidence ordinance (Cap.8), and suggested that greater weight should be given to the statements of the first defendant because they were against his interest and more contemporaneous than those of the second defendant. These are fair points, but I consider that I should also bear in mind that the first and second defendants may have had an incentive to conceal the existence, the terms, and date of their alleged contract for the sale of the car, in order to avoid exposing themselves to a risk of prosecution for other offences, and that the second defendant had an incentive to misrepresent the facts in order to avoid being adjudged liable in these proceedings. his statements were made after the present proceedings were commenced. In the absence of any evidence as to the circumstances surrounding the making of his statements, or the manner in which they were obtained, the possibility that he was also motivated by a desire to assist the third defendant to avoid its prima facie obligation to satisfy any judgment against the first and/or second defendants cannot, in the overall circumstances of this case, be wholly ignored.

8. In addition to these general observations, there are other features in the evidence before me which in my view cast very serious doubts on the reliability of many of the assertions of fact to be found in the statements of the first and second defendants. Some of these doubts might have been eliminated if I had been accorded the benefit of access to information or documents which is reasonable to believe are in the possession of the insurer. For example, the second defendant's assertion that the accident, was reported by the first defendant could have been verified (or contradicted) by production of the vehicle accident report, adverted to in his first statement dated the 19th September 1977. It is obvious that the insurer was aware of the accident, and alerted to the possibility that it was "on risk", as early as the 8th November 1974. This is borne out by a letter and enclosure sent to the Traffic Accident Enquiry office on that date. (See pp. 25 and 26 of the bundle of documents.) Yet, I have not seen the vehicle accident report. Nor have I had the benefit of any evidence from the insurer regarding the author or source of the information which induced this prompt action on its part.

9. Furthermore, it would appear that the first defendant never became the registered owner of the car, in accordance with the requirements of Regulation 13 of the Road Traffic (Registration and Licensing of Vehicles) Regulations. Indexed it seems to be the case that as late as the 31st January 1975 the second defendant was still the registered owner of the car. I accept, of course, that due compliance with these statutory provisions is not essential to completion of the transfer of property under a contract for the sale of a car. The Regulation itself contemplates that the process of registering the transfer of ownership will frequently take place after property has been transferred under the contract. The parties are given a "grace period" of 72 hours within which to comply with Regulation 13(2), and the Commissioner has a discretion to register the vehicle in the name of the "new owner", notwithstanding either party's failure to comply with some of the statutory requirements. (of Regulation 13(4) and (5).) Nevertheless, I consider that the extent to which the parties to a contract for the sale of a car have complied with, or intended to comply with these statutory obligations, may have some bearing on the questions whether property has passed in accordance with the terms of their contract, and when that transfer took place, or was intended to take place.

10. The degree of assistance to be derived from any consideration of these matters must, I conceive, depend upon the extent of the parties' knowledge of their statutory obligations. In all the circumstances of the present case, I consider that I am entitled to draw the inference, which I do, that the first defendant, being a serving police officer, was fully cognizant of the requirements of Regulation 13, and the consequences of failure to comply with the same. Although the second defendant was a printer, aged about 23 at the date of the accident by reason of his ownership of the car, and the acts which he admits or claims to have done in connexion with the alleged sale of the car, I infer that he was equally aware of his obligations, although he may not have fully appreciated the consequences of failing to observe them.

11. For these and other reasons, I must confess that I entertain a grave suspicion that there ever was any concluded agreement between the first and second defendants for the sale of the car. It would seem that the defendants' solicitors were not sure about this, even after they had obtained a written statement from the second defendant, because, on the 23rd November 1977, they wrote to the plaintiffs' solicitors, saying :-

"our investigations revealed that the vehicle AW5401 might have been sold before the accident." (Emphasis supplied; of p.32 of the bundle of documents.)

I am not aware of any further investigations carried out by them. However, counsel's submissions were presented on the basis that a contract for the sale of the car had been reached prior to the accident. I conceive that I should endeavour to deal with the preliminary issues on that basis, although it, perhaps, comes perilously close to answering purely hypothetical questions.

12. Bearing in mind these reservations and other considerations, I am certainly not prepared to accept the bald assertions of the parties that the first defendant became the owner of the car on the afternoon of the accident, or on some earlier date as reliable indications of their probable intention as to when property was to pass under the contract for sale. I prefer to approach this question by considering what they apparently did at the material time, instead of attempting the almost impossible task of assessing the credibility of declarations of their intention made several weeks or years after the events in question.

13. I accept that the first and second defendants had been friends for about 5 years, and that the second defendant had frequently lent the car to the first defendant in the past. At some time prior to the accident the first defendant agreed to purchase the car at a price of $2,500, of which $1,000 was to be paid as a deposit or initial payment, and the balance a few days later, when the parties intended to go together to the Transport Department to complete the formalities required to register the transfer of ownership. The balance of the purchase price was not paid until one or two days after the accident, if it was ever paid at all. The second defendant retained the registration book at all material times, and intended to hand it to the first defendant on receipt of the balance of the purchase price.

14. Whether these events occurred on the 5th November 1974, as is alleged in the Defences and Amended Defences, and the first defendant's second statement made on the 13th December 1974, or at 5 p.m. on the 6th November 1974, as the second defendant contends in his two statements made in September and November of 1977, is a question which I find difficult to answer. But, although one may wonder how the first defendant, who was supposedly on duty, as a member of the uniformed branch of the Royal Hong Kong police Force, at Police Headquarters in Arsenal Street between 1500 and 2300 hours on the day of the accident, managed to slip away to meet the second defendant at a restaurant in North Point at 5 P.m. on that day, I consider that it is unnecessary to determine the precise day or time when these events allegedly occurred. Having regard to the manner in which counsel presented their arguments, I must assume that they occurred before the accident, and that by pleading that they occurred "in or about the 5th November 1974" the defendants have adequately dealt with the issue from a procedural standpoint.

15. I am not, however, persuaded, even on the balance of probabilities, that the second defendant also gave the first defendant a document of transfer signed in blank, or the policy of insurance in relation to the car. If, as the second defendant contends in his statement, made on the 19th September 1977 to Young Fair Company, who were presumably assessors appointed by the insurer, he intended to go to the Transport Department on the 7th November 1974 with the first defendant to deal with the change of ownership, there would have been little or no point in his giving the first defendant the prescribed form of notice of transfer of ownership, signed in blank. Giving the first defendant such document, whether signed in blank or completed in the manner required by Regulation 13(1)(b) of the Regulations already referred to, whilst retaining the registration book, would not constitute performance of the second defendant's statutory duty, nor facilitate the registration of the first defendant as the new owner of the car. However, although I consider that I should assume that the parties intended to comply with their respective obligations under the relevant legislation, I do not overlook the possibility that they may have intended to take advantage of the 72 hours "period of grace", permitted by regulation 13(2), in order to conceal the obvious breach of regulation 13(1). Even if the first defendant was given a notice of transfer, it does not really assist me in determining when the parties intended property in the car to pass.

16. The suggestion that the first defendant was also given the policy of insurance at 5 p.m. on the 6th November 1974 is, in my view, no more than another distraction by the second defendant. Possession of this document by the first defendant would not have conferred upon him any real benefit or advantage if he had acquired property in the car. Insofar as he may have thought that it afforded him the practical advantage of at least being able to produce the same to another police officer, in the event of some infringement of the road traffic laws, as prima facie evidence that he was not driving the car without insurance against liabilities to third parties, one would expect him to disclose the same shortly after the accident. However, it would appear from correspondence between the police and the insurers that the number of the policy of insurance was not known to the police until some time after the date of the accident. (See P.37 of the bundle of documents.) The fact that he was never prosecuted for driving the car without third party insurance may have been due to a variety of considerations, unconnected with the issues now before me. But, I think that it was more probably due to the fact that, on the night of the accident, they had been told by the second defendant that he had lent (N.B. not "sold") the car to the first defendant. (See his first statement at p.12 of the bundle of documents), and, were led to believe that such was the case by the insurers' letter of the 8th November 1974. If, as is suggested, the first defendant signed the accident report, it is, perhaps, significant that the insurers appear to have abstained from making any inquiry into the circumstances whereby the first defendant came to be driving the car at the time of the accident until some 3 years later. Their prompt written inquiry to the authorities is, in my view, more consistent with their realisation that they were potentially under a liability to indemnify the first defendant, under the extension clause in the policy, and were principally concerned to know whether the police intended to take any action against the first defendant which might, for all practical purposes, establish their liability.

17. I realise that there may be an element of speculation in my remarks on the alleged handing-over of the blank instrument of transfer and the policy of insurance. But even if they were handed to the first defendant, I do not think that such conduct provides a clear guide as to their intention as to the passing of property in the car. To the extent that these acts might suggest that the second defendant ceased to have any real interest in the car, that impression or picture is incomplete, by reason of his retention of the registration book, and his failure to sign a duplicate of the notice of transfer.

18. At this point, it may be helpful to summarize the arguments of counsel. Mr. Neoh contended that retention of the registration book until the balance of the price had been paid made the contract for sale a conditional contract and accordingly, section 20 rule 1 of the Sale of Goods ordinance (Cap.26) does not apply, and the question is to be answered by reference to section 19 of Cap. 26, of which it has been said:

"It is impossible to imagine a clause more vague than this, ...... " (per Channell, J in Varley v. Whipp [1900] 1 QB 513 at 517).

Alternatively, Mr. Neoh contends that if section 20 rule 1 does prima facie apply, retention of the registration book and/or postponement of payment of the balance of the purchase price demonstrates a different intention. thus forcing one back to the broad, if somewhat vague, criteria contained in section 19(2) of Cap.26. In support of his contentions he relies on Lambert v. G & C Finance Corporation Ltd. (1963) 107 So1.J.666 and other authorities which suggest that the registration book, though not a document of title, is the best evidence of title to a motor vehicle.(Cf Pearson v. Rose & Young [1951] 1 KB 275; Stadium Finance Ltd. v. Robbins [1962] 2 QB 664; J. Sargent (Garages) Ltd. v. Motor Auctions (West Bromwich) Ltd. [1977] RTR 121.)

19. On the other hand, Mr. Ozorio contended that Lambert v. G & C Finance Corporation Ltd., supra, was distinguishable as it dealt with arms'-length transactions between strangers, and that the registration book was not even the best evidence of title, because judicial opinions to that effect were not unanimous and were expressed in the context of cases where two or more innocent parties found themselves in conflict, as a result of the intervention of dishonest rogues. But his main submission was to the effect that the handing-over of the car, the keys, the policy of insurance and the form of transfer signed in blank were indications of a completed sale of the car, and not a conditional contract. Accordingly, he placed heavy reliance on the provisions of section 20 rule 1, and contended that postponement of payment of the balance of the purchase price was not a sufficient indication of a different intention, and retention of the registration book was no more than a purely symbolic act, or quid pro quo, between friends, based upon a desire to give ''face" to one or both of the parties.

20. In the absence of any further evidence from the first or second defendants, I do not think that the last submission can be accepted. Even if one accepts their written statements at face value, there is absolutely nothing therein to suggest that this was the reason or motive for retention of the registration book. In my view, the registration book was retained by the second defendant either as a practical means of ensuring receipt of the balance of the purchase price in due course or because the parties contemplated that the first defendant should not become the owner of the car until the balance of the purchase price had been paid, and they had gone together to the Transport Department to comply with the respective obligations imposed on them by the legislation to which I have already referred.

21. Insofar as the second defendant retained the registration book simply or solely because he had not received full payment of the agreed price, I do not think that this would be an indication of a different intention sufficient to oust the statutory rule, or presumption, contained in section 20 rule 1 of Cap.26, that property in the car passed on the making of the contract. It may be the case that this eminently practical rule in contrast with the vague general statement to be found in section 19 of Cap.26, was originally enacted mainly or essentially to cover the customary practices between merchants of giving credit for the price of goods, or allowing for delay in delivery of the same. It may not have been aimed at contracts between individuals who are not merchants or persons regularly engaged in trading in goods. However I do not think that I can ignore the words of the section, stating that postponement of the time of payment is immaterial. It may be that

"Very little is needed to give rise to the inference that the property in specific goods is to pass only on delivery or payment." (Cf. Ward Ltd. v. Bignall [1967] 1 QB 534 at 545.)

But, it seems to me that the Ordinance treats the passing of property as a matter separate and distinct from the right of the seller to receive payment of the price. Unless there is clear evidence that property is not intended to pass until payment is made, I do not think that mere postponement of the payment of the price is sufficient to displace the statutory presumption or inference that property passes on the making of the contract. There must be something more before a different intention can be inferred.

22. I do not think that the solution is to be found by attempting to classify the contract as conditional or unconditional That is merely restating the problem in a different form. Nor do I think that much assistance can be derived from the line of authorities containing dicta on the evidential value of the registration book (i.e., Pearson v. Rose & Young, supra etc.) They deal with the question of what amounts to a sale "in the ordinary course of business" so as to enable a person in possession of a car whether as a buyer or otherwise and who is not already the owner, to confer a good title on a bonafide ultimate purchaser. They do not decide that retention of the registration book by the original owner suspends the passing of property under the contract of sale between, him and the immediate buyer. If the original owner is aware of these finer points of the law, it can, perhaps, be readily inferred that retention of the registration book is a clear indication of an intention that property is not to pass on the making of the contract. But, on the facts before me, I cannot assume or infer that the first and second defendants possessed such knowledge.

23. It seems to me that more direct support for Mr. Neoh's contention may be found in the decision of Havers, J in Lambert v. G & C Finance CorporationLtd. supra, which decided that retention of the registration book, coupled with an agreement to defer payment of the price, was sufficient to amount to a different intention ousting the rule in section 20 of Cap.26. I accept Mr. Ozorio's point that this part of the case does not establish any proposition of law, but merely indicates the proper inference to be drawn from the facts of that case. Mr. Ozorio submitted that the same inference should not be drawn in this case because the parties were friends, and there is nothing to suggest that the second defendant was apprehensive about receiving the balance of the price, or not being able to trace the first defendant in the event of default. Although it does not seem that the fact that the parties in the case cited were strangers was regarded by the learned judge as a material circumstance, I think that there is much to be said in favour of this aspect of Mr. Ozorio's argument.

24. However, if the second defendant no longer regarded himself as having any proprietary interest in the car, I feel bound to ask why he did not forth-with deliver the registration book to the first defendant, as required by Regulation 13(1)(a), and why he did not also sign a duplicate of the notice of transfer, as required by Regulation 13(2)(a). On the material before me and bearing in mind my observations on the alleged signing of a notice of transfer in blank I think that the answers to these questions or the explanations for these omissions are to be gathered from the following facts which, I find, were agreed between the parties, namely, that they intended to go together to the Transport Department a few days after making the contract for sale, in order to comply with their respective obligations under Regulation 13, and until that time, and payment of the balance of the price by the first defendant, the second defendant was to retain possession of the registration book. Viewed in their entirety these facts are in my view sufficient to constitute a different intention, so as to oust the presumption contained in section 20 of Cap.26. The proper inference to be drawn from these facts, as distinct from the mere retention of the registration book and postponement of payment of the balance of the price, is that the parties did not intend the property in the car to pass until the balance had been paid and they had both attended the Transport Department to complete the statutory requirements. If it had been intended or contemplated that the first defendant should go alone to the Transport Department to complete the necessary formalities, one would expect that the second defendant would have also delivered a duplicate notice of transfer to the Commissioner, or placed the same in the hands of the first defendant with authority to fill in the necessary particulars. This was never done.

25. I do not think that the fact that the first defendant obtained possession of the ear, and the keys thereto prior to the accident, has any material bearing on the proper inference to be drawn in this case. Indeed but for the apparent intention of the first defendant to get it resprayed, I think that it is more probable that the second defendant would have also retained possession of the car until their intended visit to the Transport Department. There is absolutely nothing to indicate that the question of re-spraying the car figured prominently, or at all, in the negotiations leading up to the conclusion of the contract for the sale of the car. According to the second defendant's first statement it was not raised until after the contract had been concluded. In the first defendant's second statement it was mentioned merely as an explanation for the failure to get himself registered as the new owner. If it was the intention of the parties that the first defendant should become the owner of the car upon the conclusion of their contract there would have been no reason for mentioning the first defendant's intention to have the car resprayed, or for his obtaining the second defendant's consent to the immediate transfer of possession of the car. I am satisfied that this was no more than a subsequent informal arrangement reached between friends, solely designed to meet the personal convenience of the first defendant, in anticipation of his later becoming the owner of the car. It was not, in my view, a term of their contract, or a feature indicating an intention that property was to pass on the making of the contract.

26. For the various reasons L have given, I am satisfied that, at the time of the accident, property in the car was still vested in the second defendant ,and, accordingly he had had an insurable interest in the subject matter of the insurance effected with the insurers. Although I am not satisfied that the first defendant was driving the car, at the material time, as the servant or agent of the second defendant (a contention which Mr. Neoh properly declined to argue), I am satisfied that the first defendant was, at the material time and during the subsistence of the policy of insurance, driving the car with the second defendant's permission. Accordingly, the insurers are in my judgment, liable to satisfy the judgments already obtained by the plaintiffs against the first defendant, because he is a person covered by the "extension clause" in the policy of insurance.

27. No judgment has been obtained against the second defendant. Searing in mind these qualifications I decide the preliminary issues in favour of the plaintiffs. Strictly speaking, I cannot enter judgment against the third defendant in favour of the plaintiffs, although that is the practical effect of my decision. Nevertheless, I consider that I am empowered to order that the third defendant should also pay the plaintiffs' costs of the trial of these preliminary issues on the usual basis, which I do. Counsel having indicated their consent to my delivering my reserved judgment in this case, in accordance with the procedure authorised by Order 42 Rule 5A of the Rules of the Supreme Court, I make the appropriate nisi order as to costs and confirm that either party shall have liberty to apply for any further declarations or directions which may be necessary.