SECURITY PACIFIC CREDIT (HONG KONG) LTD v. WONG KWONG SHING AND ANOTHER

HCA005868/1982

1982 No. 5868

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

BETWEEN

	SECURITY PACIFIC CREDIT (HONG KONG) LIMITED	Plaintiff
	AND
	WONG KWONG SHING	1st Defendant
	TAI WO MOTOR CARS STORAGE BATTERY COMPANY (SUED AS A FIRM)	2nd Defendant

Coram: Master Betts in Chambers

Dates of Hearing: 30 November 1983, 20 January 1984 and 27 March 1984

Date handed down: 6 June 1984

_________________________

ASSESSMENT OF DAMAGES

__________________________

1. This is an assessment of damages pursuant to the judgment of Mantell J. delivered on 12 October 1983. For ease of reference I will set out in full the first two paragraphs:-

"The plaintiff is a finance company. The 2nd defendant is a firm carried on by a Mr Ng which deals in the sale of taxis and taxi licences. The 1st defendant, against whom the plaintiff has obtained judgment by default at some date earlier to his hearing, entered into a Hire Purchase Agreement with the plaintiff for the hire purchase of a taxi and the taxi licence. The total hire purchase cost was considerable, being just short of $500,000. Originally, the taxi and taxi licence had been the property of the 2nd defendant and the Hire Purchase Agreement came about through the familiar tripartite arrangement involving the finance company, the dealer and the hirer. In the course of that arrangement, the 2nd defendant had sold the taxi and licence to the plaintiff who, in turn, had let it on hire purchase terms to the 1st defendant. That agreement was entered into on 23rd July 1981. In due course, the hirer defaulted under the terms of his agreement with the plaintiff. The plaintiff, in due course, repossessed the vehicle and subsequently, as I have already mentioned, obtained judgment against the hirer which up to now remains unsatisfied.

In the present action against the 2nd defendant, the plaintiff claims under the terms of what is alleged to be a Master or Recourse Agreement with the 2nd defendant. it is that Master Agreement with which this action is chiefly concerned."

The relevant part of the Judgment subsequently entered reads:-

"It is adjudged that the Plaintiff recover against the 2nd Defendant such amount as shall be found due by a Master of the Supreme Court for damages for breach and repudiation of the agreement mentioned in the Statement of Claim."

2. This is ambiguous as the Statement of Claim mentions two agreements; the Hire Purchase Agreement and the Master Agreement. It does not allege repudiation of either. However, it is clear from the judgment itself that what has been in issue so far as the 2nd defendant is concerned is the Master Agreement, and it is under the provisions of that document damages are to be assessed.

3. The view of the plaintiff is simple and consistent as set out in the Statement, of Claim which says the agreement provides that:-

"2..........the 2nd Defendant indemnifys the plaintiff against all loss or damages which the Plaintiff may sustain under or as a result of entering into the Hire Purchase Agreement whether or not such loss or damages results from the commission of any breach by the 1st Defendant."

4. In other words the document is pleaded as a complete indemnity and leads on to the Particulars under paragraph 8 where calculations are shown giving a liquidated claim of $403,839.20 under the Hire Purchase Agreement against the 1st defendant.

5. The next paragraph recites default in payment of that sum by the 1st defendant and the last paragraph recites notice of such default to, and non-payment by, the 2nd defendant. The ensuing prayer simply claims that sum from both defendants. It is on that basis the plaintiff's evidence has been presented.

6. For the 2nd defendant Mr Ip argues that the Master Agreement is not, simply, an indemnity but goes on to provide in detail how the dealer's liability is to be computed in the event of default by the hirer. That computation, he says, may not and in this case does not, result in the dealer's liability equating with that of the hirer.

7. The Master Agreement has been produced. It is dated 31st July 1975 and signed by the 2nd defendant and an illegible signatory "For and on behalf of........." the plaintiff. I mention this last matter only because on the first page the agreement is expressed to be between Security Universe (Hong Kong) Ltd and the 2nd defendant.

8. The first half dozen clauses in the agreement are not relevant to this assessment.

9. Clause 7 (1) provides a full indemnity and it is clear that paragraph 2 of the Statement of Claim is based on it. Mr Ip does not seek to put any different interpretation upon it but moves on to clause 7(2) of which it is necessary to set out the main part.

"(2) For the purpose of this agreement the company's loss shall be deemed to have occurred as provided by Clause 6 hereof "........ which is not here relevant ......." or upon termination of the hire purchase agreement or of the hiring of the motor vehicle comprised in the agreement or upon the hirer making default for fourteen days in payment of any sum due under the agreement whichever of the above events shall first occur. Such loss shall be computed as

 

(a)

the unpaid balance of the hire purchase price payable under the said hire purchase agreement including interest on overdue instalments payments pursuant to powers contained in the agreement all legal and other expenses incurred by the company in relation to the agreement and all other sums for which the hirer is liable under the agreement (or would be liable if the agreement were binding on him) and has not paid; less

(b)

such discount for the acceleration of payment as the Company would have been obliged to allow the hirer under the terms of the hire purchase agreement if the hirer had completed his payments on the date of the deemed loss.

Provided that where the Company has repossessed and sold the motor vehicle credit shall be given for the net proceeds of sale (after deducting the costs of repossession, storage, insurance and sale) in computing the said loss."

10. Mr Pang seeks to distinguish clause 7(1) from 7(2) on the basis that 7(1) provides an indemnity for "loss or damage" suffered by the Company whereas 7(2) provides for the computation of it's "loss" without using the words "or damage". Looking at the agreement I cannot find that its draftsman was so meticulous as to distinguish between loss and damage.

11. Clause 7 must also be read in the context of clause 2(1). That deals with matters to be done by the dealer before submitting a proposal form. In part, clause 2(1) reads:-

"(1) procure the hirer's signature to the company's current form of hire purchase agreement ......." (my emphasis).

12. Thus it was envisaged, as is quite likely to happen, that the form of hire purchase agreement would be changed from time to time but that the Master Agreement would enure. It would continue whatever formula or provisions the hire purchase agreement might contain to ascertain the liability of a defaulting hirer and the formula in clause 7(2) for ascertaining the dealer's liability would likewise continue.

13. Thus, in spite of the clarity of clause 7(1) the quantum of the dealer's liability is found by reference to clause 7(2) and not simply by equating it with the hirer's liability under the hire purchase agreement.

14. The second main area of disagreement between the parties in the course of this assessment relates to the amount to be credited to the 2nd defendant from the sale of the vehicle after repossession by the plaintiff. In brief the 2nd defendant says the plaintiff delayed selling; the vehicle depreciated, and thus there was a failure properly to mitigate the plaintiff's loss. In turn the plaintiff, whilst not denying a duty to mitigate, denies any such failure.

15. In approaching this matter I reluctantly feel obliged to ignore a number of matters not argued between me and which appear to have been ignored throughout these proceedings. The reality of the transaction was that the greater part of the value was attached not to the chattel specified in the hire purchase agreement but to the taxi licence. Indeed at some stage the licence was transferred to a different vehicle and  agreement varying the hire purchase agreement correspondingly was made.

16. I shall treat it in the same way and (as both parties here) treat the licence as though it were an integral part of the substituted vehicle.

17. The chronology leading up to the repossession and sale of the vehicle is not in dispute.

18. The Hire Purchase Agreement was dated 23rd July 1981 and provided for the hirer to make 84 monthly payments of $4,854.00 with the first payment on 23rd August 1981.

19. He made that payment and the one due in September; but defaulted in November. The Hire Purchase Agreement provides for termination if (clause VI A (ii)) "the Hirer makes default in punctually paying .......any monthly Rent Instalment ......." "Punctually" is not defined but it will be recalled that clause 7(2) of the Master Agreement provides that the company's loss shall be deemed to have arisen, inter alia, upon the hirer defaulting in payment for fourteen days. Where payments are to be made monthly, "punctually" could to my mind well be considered in terms of days rather than weeks, but for present purposes I will take termination of the Hire Purchase Agreement to have taken place two weeks after 23 November 1981.

20. The plaintiff repossessed the vehicle on 17th March 1982. Mr Ip makes no complaint of delay up to that point. Indeed, both before and after repossession some payments were made by the 2nd defendant and I am satisfied efforts were being made to find a solution satisfactory to all parties.

21. The vehicle was not then sold.

22. The Writ in this action was issued in July.

23. The vehicle was sold in November by private tender, the purchaser being the 2nd defendant.

24. The 2nd defendant argues that the plaintiff should have sold the vehicle within a month or so of repossession. He called evidence from other finance companies as to the usual practice in the trade. He claimed that by November the vehicle itself had deteriorated in storage to such an extent that although his tender of $205,000 had been accepted the plaintiff accepted $190,000 which was little or nothing more than the then value of the licence. I accept his evidence that in March the vehicle itself was probably worth $15,000 and scrap value only by the following November. Indeed his evidence is supported by the acceptance of the lower figure by the Plaintiff; such acceptance not being otherwise explained.

25. The 2nd defendant gave evidence that from the moment it was repossessed he was urging the plaintiff to re-sell the vehicle. The plaintiff denies this and I heard evidence, which I found wholly unconvincing, purporting to explain away the delay both on the ground of a special business relationship between the plaintiff and the 2nd defendant and also on the ground that in March the market for taxi licences was low. As the Statement of Claim served in July, four months before the sale, the former is quite untenable and, on hearing the evidence the latter was clearly a case of what I believe in some circles is known as "backward broking". I do not believe, and there is no evidence to support, that in March 1982 the plaintiff made an appraisement of the taxi licence "market" and concluded that prices would significantly go up by the following November. If it did it was, as the evidence showed, wrong.

26. I find that there was unreasonable delay in re-selling and that the vehicle should have been put on the market either in April or, at the latest, in early May. As a result of that delay the vehicle itself depreciated by the following November to the extent of $15,000.

27. That, however, is not the end of the matter. I must take into account any difference in the value of the taxi licence between April/May and November 1982.

28. There is a market in such licences and assistance may be obtained from the tenders for new licences published in the Government Gazette. I had the advantage of hearing evidence from Mr Lo Chung Tim called by the 2nd defendant. Mr Lo is Marketing Manager of FNCB Finance Ltd where he has worked since 1969. He is experienced in this type of financing and keeps extensive records. He impressed me as a witness upon whose expertise I could rely. He told me that during 1981 the market price of taxi licences declined from a range in the first quarter of $250,000 to $270,000 down to a range in the last quarter of $190,000 to $195,000. In the first quarter of 1982 the range was from $185,000 to $190,000. In cross examination he was more specific giving a range in March, April and May 1982 from $190,000 to $195,000. For the purposes of this assessment I take a figure in the middle of the range for March to May, which is just $2,500 more than the Plaintiff obtained in November.

29. The plaintiff's delay in mitigating, therefor, resulted in $15,000 depreciation to the vehicle and $2,500 to the licence. That figure will be added to the re-sale price of the car in giving credit to the 2nd defendant under the proviso to clause 7(2) of the Master Agreement; so that figure becomes $190,000 + $15,000 + $2,500 = $207,500.

30. The next matter concerns the amount of discount or rebate to be allowed. There is no real dispute between the parties that such discount is allowable either under what is known as the "Rule of 78" or under clause 7(2) of the Master Agreement. There is dispute, however, as to the time at which that discount is to be computed. For the defendant Mr Ip takes the time to be in December 1981 when the dealer's liability arose under the Master Agreement. Mr Poon for the plaintiff puts the time either at the time the vehicle was resold or, by concession, two months earlier.

31. In view of my finding on the plaintiff's failure to mitigate I find myself in agreement with Mr Ip and assess the discount on the interest element of the outstanding hire purchase price at 95.32%.

32. Storage fees are also claimed at the rate of $35 per day. I allow them from the 17 March 1982, the date of repossession, to 17 May 1982 by which time I have held the vehilce should have been resold. The sum is $35 x 61 days = $2,135.

33. I allow in full the repossession charge of $400.

34. In Summary my assessment is as follows:-

	Balance of Capital element of H.P. Price	$235,000
	Less assessed resale	207,500	$27,500.00
		______
	Balance of interest element of H.P. price	$172,736
	Less discount of 95.32%	164,652	8,084.00
		_______
	Repossession charge		400.00
	Storage fees		2,135.00
			________
			$38,119.00

35. There will be judgment for that sum but the plaintiff will give credit for deposits held to the total of $10,000.00

36. I make the usual provisional order that there be costs to the plaintiff with a certificate for counsel on the second and third days of the hearing.

(J.Betts) Master

Representation:

Miss Chan of Messrs Fairbairn & Kwok on first day for Plaintiff

Mr Pang instructed by Messrs Fairbairn & Kwok on second and third days for Plaintif

Mr Ip of Messrs John Ip & Co for 2nd Defendant

HCA005868A/1982

Action No. 5868 of 1982

Contract - Non Est Factum.

A motor dealer signed an agreement with a finance company which was intended to govern future hire purchase transactions involving the parties with customers of the dealer as hirers. By one of its terns the dealer agreed to hold the company free from loss should a hirer default. In an action by the company to enforce the indemnity clause the dealer claimed that being in English he had not been able to read the agreement and had not known that it contained the term relied upon.

Held:

It is for the party raising a plea of non est factum to make it good by clear and positive evidence and as in this case there had been no misapprehension as to the general nature of the agreement the plea failed.

Saunders v. Anglia Building Society[1971] Appeal Cases followed.

Action No. 5868 of 1982

IN THE HIGH COURT OF JUSTICE

BETWEEN

	SECURITY PACIFIC CREDIT (HONG KONG) LTD.	Plaintiff
	and
	WONG KWONG SHING	1st Defendant
	TAI WO MOTOR CARS STORAGE BATTERY CO.	2nd Defendant
	(sued as a firm)

 

_______

 

Coram: Hon. Mantell J.

Date: 12th October, 1983.

__________

JUDGMENT

__________

 

1. The plaintiff is a finance company. The 2nd defendant is a firm carried on by a Mr. Ng which deals in the sale of taxis and taxi licences. The 1st defendant, against whom the plaintiff has obtained judgment by default at some date earlier to this hearing, entered into a Hire Purchase Agreement with the plaintiff for the hire purchase of a taxi and the taxi licence. The total hire purchase cost was considerable, being just short of HK$500,000. Originally, the taxi and taxi licence had been the property of the 2nd defendant and the Hire Purchase Agreement came about through the familiar tripartite arrangement involving the finance company, the dealer and the hirer. In.the course of that arrangement, the 2nd defendant had sold the taxi and licence to the plaintiff who, in turn, had let it on hire purchase terms to the 1st defendant. That agreement was entered into on 23rd July 1981. In due course, the hirer defaulted under the terms of his agreement with the plaintiff. The plaintiff, in due course,repossessed the vehicle and subsequently, as I have already mentioned, obtained judgment against the hirer which up to now remains unsatisfied.

2. In the present action against the 2nd defendant, the plaintiff claims under the terms of what is alleged to be a Master or Recourse Agreement with the 2nd defendant. It is that Master Agreement with which this action is chiefly concerned.

3. In July 1975, on the evidence of Mr. Ng which I accept, he had been carrying on his business as a dealer in taxis and taxi licences for something like five or six years. He had had previous arrangements and continued to have arrangements so far as I know with other finance houses. He never told me and there is no evidence as to the terms under which he did business with those other finance houses. The plaintiff's case is that the agreement was entered into on 31st July 1975. The plaintiff does not dispute Mr. Ng's evidence that the approach which gave rise to the making of this agreement was made for the plaintiff by a Mr. Wong, no doubt, seeking fresh avenues for business. On 31st July 1975, Mr. Wong presented Mr. Ng with a number of documents, one of them being, as I find on the evidence, the Master Agreement. The other documents to which Mr. Ng appended his signature are contained in the Agreed Bundle. They all had to do with the projected arrangement between the plaintiff and Mr. Ng's firm, but the Master Agreement sets out comprehensively the contractual basis proposed between' the parties. It is to be found at page 23 of the Agreed Bundle.

4. Clause 1 reads:

"The company will consider and if it thinks fit accept proposal forms (approved by the Company) submitted from time to time by the Dealer to purchase motor vehicles now or used and let the same to hirers named in hire purchase agreements submitted by the Dealer".

5. Clauses 2 to o inclusive further particularise the basis upon which such proposals would be accepted and imposed upon the 2nd defendant as dealer certain obligations. The material clauses to this action are clauses 7 to 10, by which, in effect, the dealer agrees to hold free from loss the plaintiff in so far as such loss might arise from the plaintiff entering into the Hire Purchase Agreement contemplated by they so called, Master Agreement.

6. After the Hire Purchase Agreement with the 1st defendant had been entered into on 23rd July 1981, there was a variation in that another vehicle was substituted for that originally referred to in the agreement and that was a matter raised by the 2nd defendant in his defence. As a point of defence, however, it was abandoned early in the hearing by Pin. Van Buuren who appears on behalf of the 2nd defendant. What remains for decision, however, is the effect of that Master Agreement and the question for me is whether or not the 2nd defendant is bound to indemnify the plaintiff as a result of the 1st defendant's admitted default.

7. The Master Agreement was signed by the 2nd defendant, as I find on the evidence, on 31st July 1975: It was not at that time signed for or on behalf of the plaintiff. Mr. Ng's signature was placed on the document at a point which had been designated the place for the plaintiff's signature. The whole of the Master Agreement was in English. Mr. Ng can neither speak nor read English. All he was told about this document when, as I find, he asked what it was about,was that it was a document necessary to open an account with the plaintiff. That he understood that it, together with the other documents he signed, were the legal documents necessary to bring into effect an agreement between himself and the plaintiff in order for them to be able to carry on business together, I also find. Some time after the relevant Hire Purchase Agreement had been entered into in July 1981, the plaintiff discovered that the Master Agreement had never been signed on their behalf. Quite properly, they did not attempt to add their signature at that stage but followings telephone conversation, the present General Manager of the plaintiff, Mr. Leung took the final sheet on which Mr. Ng's signature appears to Mr. Ng, having first ensured that a photo-copy of the sheet had been made. He produced another sheet which he invited Mr. Ng to sign in the correct position which Mr. Ng did and that sheet was signed also on behalf of the plaintiff.

8. The plaintiff and the 2nd defendant did not start to do business together immediately following the making of the Master Agreement in July 1981. Business did not begin between them until some day, as I find, towards the end of 1976. But thereafter, the volume of business was considerable. Mr. Ng says,and I accept, that it amounted to several million dollars worth of business.

9. The first matter I have to decide before the plaintiff can succeed is whether or not, to all outward appearances, there was a binding agreement between the parties in the terms of the Master Agreement. Returning to first principles, it seems to me that as at 31st July 1975 at the moment when only Mr. Ng's signature appeared on the document, it could not be said that both parties had signified their willingness to be bound by the terms of that agreement. Mr. Ng had, to all outward appearances but the plaintiff had not. It maybe, of course, that something had been said by Mr. Wong at the time which did signify the willingness of the plaintiff to be bound but there has been no evidence as to that, and the burden at this stage to show the existence of a concluded agreement between the parties must rest upon the plaintiff. But whether or not the plaintiff at any material time signified its intention to be bound by the terms of the agreement by appending its signature, it certainly did so, when it first entered into business arrangements with the 2nd defendant under the terms of the agreement and gave effect to clause 1 of the agreement, the terms of which I have reproduced earlier in this judgment. And if there had been no earlier business as I find that there had, it would have signified its willingness to be bound at the very latest on 23rd July 1981 when it entered into the Hire Purchase Agreement with the 1st defendant.

10. I have been assured from the Bar that there is no statutory provision in Hong Kong which might vitiate the effect of this Master Agreement on the ground of lack of form. In other words, the failure by the plaintiff to sign the document at any particular time does not of itself vitiate the legal effect of the document provided always there did come a time, as I have found, when both parties indicated their willingness to be bound by its terms.

11. So, I find on the evidence before me that there was to all outward appearances from the beginning of 1977 between the plaintiff and the 2nd defendant a binding agreement in the terms of the Master Agreement. I have used the expression "to all outward appearances" because it is a defence raised by the 2nd defendant in this action and the only outstanding defence which I have to consider that in signing the agreement as he did on 31st July 1975, Mr. Ng's mind did not go with his act. In other words, the defence is one of non est factum.

12. Mr. Van Buuren questioned whether or not such a defence being raised, the burden of proof resides with the party raising it. On authority, as I find, the burden does rest on the party alleging non est factum and, as I find also on authority, it is a defence which may be established in unusual cases but only by clear and positive evidence.I do not accept that the standard of proof required is that appropriate to criminal cases as was, at one time, suggested in argument by Mr. Ho. Has the 2nd defendant succeeded in establishing a defence of non est factum? I accept his uncontradicted evidence with regard to the meeting on about 31st July 1975, that he does not know English, and that he did ask Mr. Wong who presented him with the document to explain it to him. I also accept his evidence that Mr. Wong did not, in any way, attempt to go through the terms of the Master Agreement but simply said that it was a necessary document if Mr. Ng wished to open an account with the plaintiff, and by opening an account, I have understood, as I find Mr. Ng also understood, Mr. Wong to be meaning the entering into an agreement with the plaintiff. Mr. Ng's recollection of that meeting, not surprisingly, is at this distance of time somewhat hazy. He cannot, for example, remember how many pages there were in the document he signed or very little else about it, but I do find that the document he actually signed was the Master Agreement which has been put before me. Is that sufficient?

13. There is no evidence before me as to the nature of the various agreements Mr. Ng had entered into previously with other finance houses and I have indicated that I decline to take judicial notice of the standard form of such a Master or Recourse Agreement. I have been referred to authorities where on the facts non est factum has been established, one being a decision in Hong Kong as recently as July this year in the case of Wong Kwok Wing v. Wong Sau Hing,⁽¹⁾ and another, the only report of which Mr. Van Burren has been able to place before me being in Current Law for 1976 at paragraph 340. This last is an Australian case where it was held to be a material factor that the plaintiff in that case who was raising the issue of non est factum rather than the defendant was unable to read and understand the document which he signed. Both of those cases are, in my judgment, readily distinguishable on their facts from the present one and I am left in a position where I have to apply, as I find, the now well established principles with regard to non est factum as laid down by the House of Lords in Saunders v. Anglia Building Society, ⁽²⁾ or as it sometimes referred to as the decision in Gallie v. Lee  I remind myself of the words in the speech of Lord Reid appearing at page 1016:

"The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any inquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different. He could not have such a belief unless he had taken steps or been given information which gave him some grounds for his belief. The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case."

and the words of Lord Hodson at page 1019:

"The plea of non est factum requires clear and positive evidence before it can be established."

and then the citing of Lord Justice Donovan, as he then was, in Muskham Finance v. Howard(3)

"The plea of non est factum is a plea which must necessarily be kept within narrow limits."

and continuing from the speech of Lord Hodson:

"To take an example, the man who in the course of his business signs a pile of documents without checking them takes the responsibility for them by appending his signature. It would be surprising if he was allowed to repudiate one of those documents on the ground of non est factum."

14. Applying that approach and bearing in. mind that in this case, there were two parties contracting on equal terms, that Mr. Ng was a man who had been carrying on business in a similar field for a number of years, that there was no pressure upon him to sign without taking steps to have the document translated and to have, if necessary, advice upon it, Shave come to the conclusion that the defence of non est factum has not been established and, consequently, the plaintiff must succeed in its claim against the 2nd defendant. Counsel have agreed that the question of liability should be determined first leaving aside the issue as to damages which as yet has not been resolved and I indicated that I was prepared to follow that course, making it known that following my decision on liability I would entertain an application as to whether or not I should refer the matter of damages to a Master for assessment or whether I should deal with them myself.

15. By consent, damages to be assessed by a Master.

16. Costs of the action to the plaintiff.

	(C.B.K. Mantell)
	Judge of the High Court

(1)    Civil Appeal No. 23 of 1983

(2)    [1971] Appeal Cases

(3)    [1963] 1 Q3 904 at p.912

Representation:

B.K. Ho (Fairbairn & Kwok) for Plaintiff.

B. Van Buuren (John Ip & Co.) for 2nd Defendant.