Sum Mun Kid Frederick v. Auto Italia Ltd

HCA 60/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 60 OF 2017

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JUDGMENT

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1.The application before the court is the plaintiff’s application by summons dated 13 January 2017 to continue until trial of the action or further order an injunction first granted by Deputy High Court Judge Keith on the plaintiff’s ex parte application which was heard on 12 January 2017 and then continued by the learned judge until the determination of the said summons or until varied or discharged by further order on the first hearing of the plaintiff’s inter partes summons on 23 January 2017. The hearing of the said inter partes summons on 23 January 2017 was adjourned (the injunction continuing in the meantime) with directions, including provision for the filing of further evidence by the parties.

Parties

2.The plaintiff is a Hong Kong businessman who it is said has over 35 years’ experience of purchasing Ferrari motorcars, of which he has a sizeable collection.  There is no dispute that due to his substantial past dealings with or in relation to Ferrari motorcars or the Ferrari brand he is classified by the Italian manufacturer of Ferraris as a Very Very Important Person (“VVIP”) and that he was well known to the defendant and several of its senior staff over many years.

3.The defendant was at all material times, but importantly is no longer, the sole distributor in Hong Kong of newly manufactured Ferrari motorcars.  Whether and to what extent the defendant had prior notice is not in evidence before the court however, there is no dispute that the defendant’s Hong Kong sole distributorship was terminated by Ferrari by a notice dated 28 November 2016 with effect from 27 May 2017.

4.The explanation for the events that give rise to these proceedings may well be closely connected with the termination of the defendant’s Ferrari sole distributorship.  Therefore, the date of 28 November 2016 has some significance.

Contracts

5.The plaintiff entered into contracts with the defendant to purchase two newly manufactured Ferrari motorcars as follows:

(a) On 23 July 2013, the defendant and the plaintiff signed and entered into a Sales Contract to sell and purchase a LaFerrari model Ferrari motorcar (“LaFerrari”).  There is a second unsigned contract document dated 18 February 2016 but save for completion of details such as the year of manufacture, chassis number, engine number and net price (which included the cost of the plaintiff’s specified additional and personalised optional items) the terms appear identical to the earlier signed contract.  Before me it was not suggested that anything turns on the fact that there are two versions of the contract and I observe that at the hearing counsel for the defendant throughout referred to the Conditions of Sale which at least in the court bundle were included with the second unsigned contract document.  The total price shown on the second unsigned contract document is US$1,448,550.00.

(b) On 23 December 2014, the defendant and the plaintiff signed and entered into a Provisional Sales Contract to sell and purchase a 458 Speciale A model Ferrari motorcar (“458”).  In the same manner as with the LaFerrari and apparently for the same reasons, there is a second (signed only by the plaintiff) contract document dated 23 December 2015 but, again, seemingly nothing turns on there being two versions of the contract.  The total price shown on the second (partially signed) contract document is HK$3,276,529.20.

Termination of contract

6.The dispute in the action results from the defendant’s actions, beginning from late November 2016, when it rescinded the contracts for the purchase of both the LaFerrari and 458 by the plaintiff.  The defendant claims that it was entitled to rescind the contracts on the grounds of the claimed non-performance by the plaintiff, namely his failure to pay the full purchase price and take delivery of the motorcars.

7.The commercial explanation for the defendant’s actions, which followed very shortly after the announcement of the ending of the Hong Kong Ferrari distributorship, may very well be that the defendant, having paid the Italian Ferrari manufacturer for both motorcars many months previously, wanted them off its books and to be reimbursed for the large amount of money it had already paid out, and also was less concerned than it might have been previously at the prospect of upsetting a Ferrari VVIP in the process.

Ex parte application

8.On the plaintiff becoming aware that the defendant considered the contracts in respect of both the LaFerrari and 458 terminated with the result that it was free to sell both motorcars to other purchasers as it wished, the plaintiff applied for ex parte injunctive relief to seek to prevent the defendant from selling and/or disposing of the two motorcars.  This application came before Deputy High Court Judge Keith on 12 January 2017.  While the transcript of the hearing later obtained by the defendant’s solicitors refers to notice of it having been given to the defendant’s then solicitors, any such notice was very short and, no one having appeared on behalf of the defendant, it proceeded on an ex parte basis.

9.After hearing senior counsel for the plaintiff, His Lordship granted an injunction in the following terms:

“ the defendant must not remove from Hong Kong, nor dispose of, sell, charge or in any other way deal with Ferrari Chassis Number ZFF76ZHB000216144, or Ferrari Chassis Number ZFF78VHC000215320 (herein ‘The Assets’)”

The first chassis number is that of the LaFerrari and the second that of the 458.

10.His Lordship also made various consequential orders, in particular a direction that the defendant disclose to the plaintiff the location and storage details of both the LaFerrari and 458.  It is the plaintiff’s case that it is entitled to specific performance of the contracts for purchase of both motorcars hence the wish to obtain information as to their whereabouts in order that it may enforce any judgment it might obtain.

11.Amongst the matters argued before the court was the defendant’s claim that the ex parte injunction granted by His Lordship and continued to the present hearing should be discharged by the court by reason of what was said to be deliberate material non-disclosure on the part of the plaintiff.  The defendant further sought to oppose the plaintiff’s application for continuation of the injunction until trial or further order or the grant of a new inter partes injunction should the injunction obtained ex parte be discharged.

Inter partes application

12.By the time of the first inter partes hearing on 23 January 2017, the defendant, by way of the first affirmation of Lam Chi Yan filed on 18 January 2017, had provided information as to the present status and location of the LaFerrari and the 458.  It was stated on behalf of the defendant that each motorcar had been sold to an “independent third party”. 

(a) In the case of the LaFerrari the sale was said to be pursuant to a provisional sales contract dated 18 December 2016 and at a net price of US$1,463,750.  It was further stated that payment having been made, the LaFerrari was delivered to the purchaser on 3 January 2017 since which date the defendant was unaware of its location.  I observe that the price paid closely approximates to the price agreed to be paid by the plaintiff to the defendant for the same motorcar more than three years previously though it appears common ground that in the second hand market today the price one might have to pay to acquire an equivalent motorcar could be several million US dollars.  Therefore, the new purchaser is guaranteed an immediate substantial profit should they in turn sell the motorcar;

(b) in the case of the 458 the sale was said to be pursuant to a sales contract dated 11 January 2017 and at a net price of HK$3,276,529.20. It was further stated that payment having been made, the 458 had been due to be delivered to the purchaser on 12 January 2017 but was not delivered as a result of the defendant having been served with the injunction order granted by His Lordship that day.  I observe that the price is identical to the price agreed to be paid by the plaintiff to the defendant for the same motorcar more than two years previously though the price in the second hand market today again is likely to have significantly increased.  Therefore, again the new purchaser is guaranteed an immediate and substantial profit should they in due course be able to receive and then sell the motorcar.

13.The defendant’s position regarding the price at which the LaFerrari and 458 were sold to the new purchasers is that it is bound by its agreement with the Ferrari manufacturer not to sell at a higher price.  However, the evidence in this regard appears to be far from complete and, in particular, it is not clear that any such agreement continues post the date of termination of the distributorship.  I need not make any finding on the issue on the present application and only observe that it is a matter which may fall to be considered in the action in due course.

14.Deputy High Court Judge Keith delivered a written judgment the same day, in which His Lordship finds:

(a) there is a serious question to be tried as to whether the plaintiff had failed to comply with the terms of the contracts thereby entitling the defendant to rescind.  His Lordship observed that this view was formed without the benefit of any evidence from the company hence His Lordship’s order that the hearing of the plaintiff’s application be adjourned (with the injunction continued in the meantime) to allow the company an opportunity to file evidence;

(b) there is a further triable issue as to whether, given the plaintiff’s claims that the two motorcars were sufficiently unique and had been manufactured according to his individual requirements, damages would be an adequate remedy were it later found that the defendant was in breach of contract.

15.However, His Lordship declined to determine an application by the plaintiff that the defendant give disclosure of the agreements made with the new purchasers for the purchase of the two motorcars, their names and addresses if not apparent from the agreements, the place and date and time of delivery of the LaFerrari motorcar, and documents evidencing how much the purchasers paid for the motorcars and how they paid.  The plaintiff sought this information as he did not accept that the motorcars had been sold or that if they had been sold that the purchasers, as claimed by the defendant, were each an “independent third party” and that they were bona fide purchasers for value without notice of the plaintiff’s interest.  Resolving this question could determine the ability of the plaintiff to seek specific performance and recovery of the motorcars themselves rather than damages.  The plaintiff’s application was opposed by the defendant on the basis that the new purchasers had instructed it not to give the plaintiff any information which would reveal their identity.

16.In the event, His Lordship adjourned the plaintiff’s application until the hearing of the plaintiff’s inter partes summons to continue the injunction but I observe that when doing so he commented:

“ I know that the information which is sought goes to the heart of the case, its materiality being beyond question because it is highly relevant to whether the company has indeed sold the cars, and if it has, whether it has sold them to bona fide purchasers for value without notice of [the plaintiff’s] rights.”

17.I dealt with the plaintiff’s application for disclosure at the commencement of the hearing before me on 10 July 2017.  Having reviewed the evidence of the parties filed subsequent to the hearing on 23 January 2017, I was of the same view as Deputy High Court Judge Keith regarding the potential significance of the information sought and therefore I asked counsel for the defendant to explain why the application was opposed.

18.Counsel identified two issues.  First, she argued that if damages were an adequate remedy, as the defendant maintained, there was no justification for the plaintiff seeking the information as he could be compensated in money rather than by way of recovering the two motorcars.  However, this analysis both ignores the potential availability of a proprietary remedy even absent an interim injunction and, in any event, presupposes that the purchasers are bona fide purchasers for value without notice, the very thing that the plaintiff potentially seeks to put in issue.  If they are not, then the plaintiff may well apply to have the sales to them set aside.

19.Secondly, counsel for the defendant relied on the purchasers’ request for confidentiality.  However, I do not consider that the mere desire for confidentiality of a third party is a basis on which a party to litigation can resist disclosure of that which otherwise would be discoverable. The identity of the purchasers and any dealings between them and the defendant which casts doubt on whether they were a bona fide purchaser for value without notice is the very thing that the plaintiff seeks to discover.  To, as the defendant has done to date, provide redacted copies of contracts which reveal no meaningful information beyond the fact that the motorcars have apparently been sold, serves no purpose at all.

20.In my view, the potential significance and therefore the justification for ordering disclosure of the information sought is clear.  It will be discoverable subsequently in the proceedings in accordance with the normal principles under Order 24 of the Rules of the High Court, whether following a request by the plaintiff under Order 24, rule 10 or pursuant to Order 24, rule 11(2), and it is within the jurisdiction of the court now to order disclosure ancillary to the interim injunction.  Accordingly, after hearing counsel for the parties, I made an order for the discovery by the defendant to the plaintiff of specified documents relating to the purchases of the motorcars within 14 days.  This disposed of the summons of the plaintiff filed on 20 January 2017 seeking disclosure.

Plaintiff’s evidence

21.By the time of the hearing before me the plaintiff had filed and served a total of four affidavits, the last of them, the plaintiff’s evidence in reply to that of the defendant, being filed on 27 March 2017.

Defendant’s evidence

22.Until shortly prior to the hearing before me commencing on 10 July 2017, the defendant had filed and served a total of seven affirmations in opposition to the plaintiff’s application, the last of them filed and served on 20 February 2017.  However, on 30 June 2017, without any attempt to first obtain the consent of the plaintiff’s solicitors, the defendant issued a summons seeking leave to serve and file an additional eighth affirmation, it was said, in response to the last of the four affidavits filed and served on behalf of the plaintiff.

Application of defendant to file additional evidence

23.At the commencement of the hearing before me, I asked the defendant’s counsel to justify the late application to file additional evidence.  I observed that as regards the matters that I considered the court should be concerned with when determining the applications before it, the affirmation appeared to contain nothing new that was directly relevant or that could not have been included as part of the defendant’s evidence filed as far back as February.

24.While the affirmation also included evidence and made complaint in relation to a letter from the solicitors for the plaintiff to Mr Lau William Kwok Ming (a previous employee of the defendant and the maker of an affirmation on behalf of the defendant in the proceedings) dated 8 June 2017, I observed that any issues as regards the circumstances and purpose of the letter did not appear to have any bearing on the matters the court was required to decide on the present applications.  It appeared that the letter to Mr Lau was largely being used as a pretext to belatedly file further evidence on the substantive issues, noting that it took 3 weeks from the date of the letter for the affirmation to be prepared and the application to file and serve it filed.

25.After hearing the defendant’s counsel, I observed that unless the plaintiff consented (and senior counsel for the plaintiff made clear his client’s strong opposition to the late admission of the affirmation), if the defendant’s application were granted there was a likelihood that the hearing would need to be further adjourned so as to allow the plaintiff an opportunity to file evidence in reply with all that this involved in wasted time and costs, costs which presumably the plaintiff would argue he should recover from the defendant.

26.In the event, after taking further instructions, counsel for the defendant indicated to the court that it wished to withdraw the application to file additional evidence and I gave leave accordingly. 

Application of defendant for stay of proceedings in favour of arbitration

27.The final, preliminary, matter dealt with at the commencement of the hearing was the disposal of a summons issued by the defendant filed on 20 January 2017 seeking the stay of the action in favour of arbitration.  While this was an issue relied upon by the defendant prior to the interpartes hearing before Deputy High Court Judge Keith on 23 January 2017, in the event, and in the face of submissions by the plaintiff’s senior counsel as to why the contractual provision for arbitration potentially was not enforceable, the defendant and the plaintiff agreed terms for the withdrawal of the defendant’s summons and again I gave leave accordingly. 

Application of plaintiff for continuation of injunction to trial

28.The plaintiff’s position before the court in relation to the basis and justification for continuation of the interim injunction was little changed from the position at the time of the ex parte application on 12 January 2017 and the first hearing of the inter partes application on 23 January 2017.  Senior counsel for the plaintiff submitted that there were plainly serious questions to be tried in relation to the defendant’s termination of the contracts between the plaintiff and the defendant and that there was more than adequate evidence that given the particular characteristics of the motorcars, including the personalised aspects, damages might not be an adequate remedy.

29.As regards the evidence filed by both parties subsequent to the hearing on 23 January 2017, senior counsel for the plaintiff submitted that the claim of the defendant that the plaintiff had been given, after many indulgences, formal notice and therefore a final opportunity to pay and take delivery of the motorcars, and having failed to do so, the defendant was free to forfeit the deposits previously paid and sell the motorcars to others, had been comprehensively addressed and answered by the plaintiff.  In particular, he submitted that the evidence now showed even more not less apparent confusion or contradiction on the part of the defendant as to when and by what manner the necessary formal notices under the terms of the contracts had been given by the defendant to the plaintiff.  I will address the factual disputes as regards these matters when I deal with the question of whether there is serious question to be tried later in this judgment.

30.Senior counsel for the plaintiff submitted that there are the following serious questions to be tried:

(a) Whether the defendant ever formally notified the plaintiff that the motorcars were ready for collection before 21 December 2016 so as to trigger the defendant’s right to forfeit under clause 6 of the Conditions of Sale.

(b) Whether the defendant ever made any proper and valid demand for payment of the balance of the purchase price for the motorcars pursuant to the Conditions of Sale.

(c) Whether the plaintiff breached any terms of the contracts entitling the defendant to forfeit the deposits paid and/or sell the motorcars to third parties.

(d) Whether the defendant breached the terms of the contracts by failing to accept payment and refusing to deliver the motorcars to the plaintiff.

(e) Whether the prior course of dealings between the parties raised an estoppel that prevented the defendant from insisting on strict adherence to the terms of the contracts.

(f) Whether the plaintiff is entitled to specific performance of the contracts.

(g) Whether the defendant entered into the subsequent contracts for the sale of the motorcars to an “independent third party” in good faith and the purchasers were bona fide purchasers for value without notice of the plaintiff’s interest in the motorcars.

31.Senior counsel for the plaintiff referred to the judgment of Deputy High Court Judge To (as he then was) in AXA China Region Insurance Co Ltd v Pacific Century Insurance Co Ltd [2003] 3 HKC 1, wherein at 12I – 13B, His Lordship observed:

“ 24. The plaintiff’s first hurdle is to satisfy the court that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried. It is no part of the court’s function at the interlocutory stage to try to resolve conflicts of evidence on affidavits as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at trial (American Cyanamid at 407). In this context, it is irrelevant whether the court thinks that the plaintiff’s chances of success in establishing liability are 90% or 20%: Alfred Dunhill Ltd v Sunoptic SA [1979] FSR 337 per Megaw LJ at 373.”

32.The plaintiff’s senior counsel referred to Behnke v Bebe Shipping Co [1927] 1 KB 649 at 661, in support of the principle that where goods sold are of a peculiar and practically unique value to the plaintiff damages would not be adequate compensation.

33.The plaintiff’s senior counsel further submitted that if the court found there was a serious issue to be tried, it should go on to consider where the balance of convenience lies, and referred to the judgment of Browne LJ in Fellowes & Son v Fisher [1976] 1 QB 122 at 137F – 138D and again, AXA China Region Insurance at 13C – 14D. 

34.It is the plaintiff’s case, which I observe is supported by what I view as credible evidence, albeit we are at the interlocutory stage and therefore it has not yet been tested through the rigor of oral testimony, that the two motorcars in question are unique or near to it. Both are rare (in each case only 499 models were made) and they have been customised to meet the plaintiff’s particular requirements, including body measurements which determine the position of the driver’s seat and the pedals, as well as by the addition of various cosmetic elements.  The plaintiff does not dispute that there is a second hand market in motorcars of the same model, albeit the prices are now very considerably higher (especially for the LaFerrari) than the contracted purchase price, but maintains that even a second hand replacement motorcar of the same model would never be equivalent to the brand new motorcar obtained by him direct from the manufacture and thereby only ever under his ownership, control and care.

35.The plaintiff’s senior counsel also contrasted the position of the plaintiff with that of the defendant and the “independent third party” purchasers of the two motorcars, who he suggested could not possibly have the same ‘personalised’ and close connection with the specific motorcars as he did, and, if the defendant is successful in the litigation, therefore could be readily compensated in money which would allow them to purchase a replacement motorcar if they wished.

36.As evidence of the relative positions of the plaintiff and the defendant (and the new purchasers), the plaintiff’s senior counsel referred to a bank guarantee in the sum of HK$2.5 million that the plaintiff had already provided to the defendant as a condition of the grant of the injunction and in fortification of his cross undertaking in damages.  I further observe that within seven days of 21 December 2016, when the plaintiff claims to have first been put on notice of the defendant’s intention to sell the two motorcars, in very short order (and over the Christmas holiday period) he paid the defendant a sum in excess of HK$6.7 million.

37.That the plaintiff is a man of substantial means appears clear.  I say this notwithstanding that the affirmation evidence of the defendant seeks to suggest otherwise (but unsupported by any direct evidence other than claimed statements by the plaintiff himself that he lacked the necessary funds to complete the purchases of the LaFerrari and 458, statements which he disputes ever having made).  The defendant claims that concerns in this regard caused it to doubt that the plaintiff could or would complete the purchase of the two motorcars.  However, as I have observed, once stung into action, the plaintiff was able to arrange (and in only 7 days) to pay HK$6.7 million into the defendant’s account.

38.The defendant’s claimed belief was put further in doubt during the course of the hearing, when it became apparent that, at the same time as purchasing the LaFerrari and the 458, the plaintiff was involved, either as an individual or via a company, in the purchase from the defendant of two further Ferrari motorcars.  I observe that there is no dispute that the plaintiff remitted HK$1 million to the defendant on 8 December 2016, money which was originally intended as a deposit for the third motorcar, a Ferrari F12 tdf motorcar. The only dispute is as regards the plaintiff’s claim that the defendant’s representative later agreed that the money could instead be applied towards the purchase of the LaFerrari and 458.  In addition, during the course of the hearing, a ‘fourth’ purchase, of a Ferrari 488 GTB motorcar (by a limited company with which the plaintiff had an apparent connection), was revealed to the court, which purchase was completed as recently as April 2017. 

39.While HK$1 million is only a small part of the HK$6.7 million required to complete the purchases of the LaFerrari and 458, that at the same time the plaintiff should be pursuing the purchase from the defendant of two further Ferrari motorcars must call into question whether there was a reasonable basis for the defendant’s claimed belief that the plaintiff did not have the funds to complete the purchase of the LaFerrari and 458.  Not least, the plaintiff risked losing the very substantial sums already paid by way of deposits (as he has now done).

40.Relying on the above matters, the plaintiff’s senior counsel submitted that the balance of convenience lies heavily in favour of continuing the injunction until trial.

Application of defendant to discharge for material non-disclosure

41.Counsel for the defendant very much relied on the terms of the contracts for the purchase of the motorcars, in particular the printed Conditions of Sale.  The conditions include provisions as follows:

(a) Condition 6.1:

“ Delivery shall have taken place when (i) the Vehicle arrives at the Premises and (ii) written or oral notification has been given by the Seller to the Buyer that the Vehicle is ready for collection ‌…” ‌

(b) Condition 6.2:

“ the Buyer will take delivery of the Vehicle within seven calendar (7) days from the date of notification by the Seller in accordance with Condition 6.1, after which time storage charges will be imposed by the Seller for the Vehicle which must be fully paid by the Buyer prior to the Buyer taking delivery of the Vehicle, but without prejudice to the Seller’s rights contained in Condition 6.4.”

(c) Condition 6.4:

“ If, after having been notified by the Seller of the delivery of the vehicle, the Buyer fails to pay all sums due in respect of the Vehicle within seven calendar (7) days of such notification (time being of the essence), the Seller shall be entitled to forfeit the Deposit, without prejudice to any other remedy of the Seller and the Seller shall be at liberty on its own account to sell or otherwise deal with and dispose of the Vehicle…. No concession or allowance by the Seller beyond the scheduled date and time for payment specified herein shall be deemed to be a waiver of the Seller’s rights in this condition.”

(d) Condition 18.1:

“ Notices shall be delivered pursuant to this Contract if sent to the address of a party shown on the Sales Contract or such other address as shall be notified in writing by such party to the other from time to time.”

(e) Condition 18.2:

“ Unless otherwise specifically provided for herein, time shall be of the essence with regard to any action to be taken by the Buyer. Any concession given by the Seller or failure by the Seller to immediately enforce its rights shall in no circumstances amount to a waiver of the Seller’s rights.”

42.The defendant’s counsel shortly submitted that the case involves straightforward breaches of contract on the part of the plaintiff for failing to pay on time when the terms of the contracts provided that time was of the essence.  She further submitted that the effect of Condition 18.2 is to completely preclude even the potential for an allegation on the part of the plaintiff of waiver or estoppel.  Therefore, she submitted that there is no serious question to be tried.

43.On the question of whether damages would be an adequate remedy for the plaintiff, counsel for the defendant, again shortly, referred to the availability in the second hand market of motorcars of the same model and sought to minimise the significance of any of the customised and personalised elements relied upon by the plaintiff.  However, in response to questions from the court, she appeared to accept that if the purchasers turn out not to be bona fide purchasers for value without notice the plaintiff may well be able to pursue a proprietary claim to recover the LaFerrari and 458 motorcars themselves.

44.The submissions of counsel for the defendant at the hearing before me were largely directed to the allegation of material non-disclosure on the part of the plaintiff at the ex parte hearing before Deputy High Court Judge Keith on 12 January 2017.  In what I view as unnecessarily strongly worded written submissions counsel identified three allegations said to have been made by the plaintiff in his evidence in respect of which it was said that the plaintiff had failed to disclose relevant materials to the court.

45.The evidence relied upon on behalf of the plaintiff at the ex parte hearing consisted of the affidavit of the plaintiff’s solicitor Alan Lam Man-Bun dated 10 January 2017.  At that point in time the plaintiff was out of Hong Kong but Mr Lam in his affidavit referred to the plaintiff having seen and approved a draft, and also having indicated that he would make an affidavit of his own to confirm the contents of Mr Lam’s affidavit as soon as he returned to Hong Kong.

46.The first allegation relied upon by the defendant’s counsel relates to what is described as the plaintiff’s claim that he was surprised to learn of the delivery of the motorcars to Hong Kong (reference being made to paragraphs 17 – 21 and 37 of Mr Lam’s affidavit).

47.The second allegation relates to the plaintiff’s claim that he had never been advised of the precise outstanding amount that he was required to pay (reference being made to paragraphs 35 – 36 of Mr Lam’s affidavit).

48.The third allegation relates to the plaintiff’s claim that he had paid a deposit HK$1 million for the two motorcars on 8 December 2016 (reference being made to paragraphs 8, 25 – 26 and 56 of Mr Lam’s affidavit).  This is the sum I referred to early in this judgment which apparently was originally intended for the purchase of a different Ferrari but which the plaintiff claims the defendant’s representative agreed could be allocated toward the balance payable for the LaFerrari and 458.

49.In respect of each allegation, counsel for the defendant’s written submissions refer to “… substantial, deliberate, and material non-disclosure.”.

50.Counsel for the defendant submitted that the principles as regards material non-disclosure are well settled.  She submitted that it is the duty of the applicant for an injunction to make full and frank disclosure of all the material facts failing which the ex parte injunction should be discharged.  She referred to Brink’s Mat Ltd v Elcombe (CA) [1988] 1 WLR 1350 at 1357C:

“ (5) if material non-disclosure is established the court will be ‘astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure … is deprived of any advantage he may have derived by that breach of duty:’ ….

(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application.  The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.”

51.Counsel for the defendant submitted that:

(a) On the court being satisfied that there was material non-disclosure at the ex parte stage, the ex parte order so obtained should, without more ado, be discharged.

(b) It is not necessary to demonstrate that had the alleged material facts been disclosed to the court, the court would necessarily or likely have arrived at a different decision.  The applicant has a duty to make all proper enquiries and to give careful consideration to the case being presented.

(c) Full disclosure means complete and encompasses all relevant aspects and fair disclosure requires a fair assessment of the materiality when disclosure is made.

(d) Even where a plaintiff disputes the defendant’s version, the plaintiff must put before the court the material facts which it is material for the judge to know in dealing with the application as made.  Materiality is to be decided by the court and not by the assessment of the applicants or their advisers.

(e) It is no answer for a plaintiff to say that the information was contained in the papers submitted to the court on the ex parte application if the judge cannot or does not read it.  It is the duty of legal advisers and counsel to call the judge’s attention everything that he must see even if there is a mass of material.

52.Counsel for the defendant further submitted that the evidence in this case points to the non-disclosure not being innocent.

Response of plaintiff to application to discharge

53.The plaintiff’s senior counsel strongly refuted the defendant’s claims that there had been material non-disclosure at the hearing before Deputy High Court Judge Keith on 12 January 2017.  In addition to senior counsel’s written submissions for the present hearing, the plaintiff put before the court:

(a) a set of the materials provided on behalf of the plaintiff to His Lordship for the ex parte hearing on 12 January 2017, including a Skeleton Argument and Speaking Note.  I observe that these materials were provided to the defendant solicitors in advance of the inter partes hearing on 23 January 2017 and therefore the defendant has long been aware of them; and

(b) a note described as an ‘Aide Memoire’ which item by item cross-referenced the defendant’s evidence and the defendant’s counsel’s submissions in respect of non-disclosure, identifying where the relevant matters were noted or drawn to His Lordship’s attention at the ex parte hearing on 12 January 2017 (or why they were not material and therefore irrelevant).

54.I observe that His Lordship also had the benefit of correspondence exchanged between the solicitors for the plaintiff, the defendant and the then solicitors for the defendant in advance of the hearing consisting of:

(a) the plaintiff’s solicitor’s letters to the defendant of 22 and 28 December 2016; and

(b) the letter from solicitors Mandy Wan & Co acting for the defendant to the plaintiff’s solicitors dated 5 January 2017.

Not surprisingly, senior counsel for the plaintiff placed considerable store by this exchange of correspondence, in particular the lengthy (7 pages) letter in reply written by the then defendant’s solicitors refuting, in considerable detail, the allegations contained in the plaintiff’s solicitor’s letters before action to the defendant.

55.Finally, for the present hearing the court and the parties also had the benefit of a full transcript of the hearing before His Lordship on 12 January 2017.  Therefore, there was no doubt as to the materials and matters referred to before His Lordship at the hearing.

56.The transcript shows that Deputy High Court Judge Keith, amongst other materials, read and had regard to:

(a) the affidavit of Mr Lam;

(b) those of the exhibits “… that I thought I needed to read in the light of what I knew the dispute was to be …”;

(c) the lengthy letter from solicitors Mandy Wan & Co acting for the defendant dated 5 January 2017; and

(d) the Skeleton Argument of senior counsel appearing for the plaintiff.

The transcript also records His Lordship reminding senior counsel for the plaintiff of his duty of candour on such an ex parte application, even one on notice, and enquiring as to whether there was anything further the court ought to be told.  In response, the transcript shows, senior counsel for the plaintiff referred the court to paragraph 26 of the Skeleton Argument which makes express reference to and invites the court to read the defendant’s solicitors’ letter of 5 January 2017 and also refers to paragraphs 45 to 59 of the affidavit of Mr Lam responding to and denying various of the allegations made in the solicitor’s letter.

57.During submissions the defendant’s counsel conceded that the allegation of claimed non-disclosure relating to the terms of the printed Conditions of Sale, in particular the allegation that the court was not informed that the contract provided that time was of the essence, could not be maintained.  This must be the case as the Skeleton Argument of senior counsel for the plaintiff for the hearing on 12 January 2017, in the section headed “Estoppel”, makes specific reference to the Conditions of Sale, including generally Condition 6, and expressly notes that Conditions 6.4 and 18.2 “purport to make time of the essence and seek to limit the circumstances in which the Buyer can rely on a waiver of the Seller’s rights.”

58.As regards the other allegations of claimed non-disclosure relied upon by the defendant that I have referred to previously, despite several invitations from the court, counsel for the defendant was not able to identify any potentially material matter that the plaintiff had failed to sufficiently draw to the court’s attention, a matter of which it could be said that had the plaintiff done so the court might have concluded that it was relevant.  Counsel referred several times to the plaintiff’s senior counsel having only ‘paraphrased’ matters, an apparent criticism that they were not explained fully, but, as I observed in court, while the plaintiff is required to make known and refer the court to the potential lines of defence it does not have to argue the defendant’s case as their own advocate would.  As I have already observed, even at the time of the ex parte application the court had the benefit of a detailed letter from the defendant’s then solicitors which set out clearly its case.

59.Counsel for the defendant maintained that it was for the court to decide whether any matter was relevant or not, and therefore the plaintiff was under an obligation to put all materials before the court so it could determine what was relevant.  However, when I asked whether a plaintiff is required to exhaustively take the court through the entire narrative leading up to the dispute, in effect to read every single document, or whether the plaintiff might instead form a view on the potentially material matters, obviously conscious that it would be prudent to err on the side of caution, counsel for the defendant largely repeated her previous general submission that it was for the court, not the applicant, to decide what was relevant and her criticism of the plaintiff’s counsel’s ‘paraphrasing’.

60.I would observe that the submissions of the defendant’s counsel before me do not appear to have changed significantly from those she made on the first hearing of the inter partes summons before Deputy High Court Judge Keith on 23 January 2017.  Counsel’s submissions for that hearing are in evidence, as an exhibit to the plaintiff’s fourth affidavit filed on 27 March 2017.

61.I further observe that none of the subsequent evidence, that filed by both sides, appears to have resulted in any further allegations of material non-disclosure on the part of the plaintiff.  In short, the factual background seemingly relevant to the key issues in the action appears to have been largely ‘set’ at the time of the ex parte hearing on 12 January 2017 and anything learnt by either side subsequently has only caused them to adjust not fundamentally change their position.  The exception being the significant issue regarding whether the new purchasers are bona fide purchasers for value without notice, disclosure as to which is still pending.

62.The judgment in Brink’s Mat Ltd v Elcombe relied upon by counsel for the defendant includes the following passage:

“ Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application.” [underlining added]

63.The defendant’s application to discharge for material non-disclosure the ex parte injunction obtained by the plaintiff, in my view, can largely be disposed of by reference to the materials which evidence the course of the hearing before Deputy High Court Judge Keith on 12 January 2017.  The defendant has not been able to direct the court to any item of potentially material non-disclosure on the part of the plaintiff.  As the Aide Memoire of senior counsel for the plaintiff clearly demonstrates, the matters relied upon by the defendant were either sufficiently drawn to His Lordship’s attention such that one can conclude that His Lordship had due regard to them when reaching his decision on the issues he had to decide or, if not, are minor matters which while they may be part of the narrative leading up to the dispute are not potentially material to the matters that the court was required to decide.  Therefore, the defendant’s application to discharge the ex parte injunction granted by Deputy High Court Judge Keith on 12 January 2017 and continued by His Lordship on 23 January 2017 for material non-disclosure is dismissed.

Continuation of injunction to trial

64.For the reasons already set out in this judgment I am further of the view that the interim injunction first granted by Deputy High Court Judge Keith on 12 January 2017 and continued by His Lordship on 23 January 2017 should be continued until trial or further order.

Serious issue to be tried

65.Unlike His Lordship, I have had the benefit of the parties’ filed evidence, evidence which I observed continued to be added to, by both sides, even during the course of the hearing before me.  I have previously set out a list of serious questions to be tried submitted by senior counsel for the plaintiff, which includes issues as follows:

(a) whether the defendant ever formally notified the plaintiff that the motorcars were ready for collection before 21 December 2016 so as to trigger the defendant’s right to forfeit under clause 6 of the Conditions of Sale;

(b) whether the defendant ever made any proper and valid demand for payment of the balance of the purchase price for the motorcars pursuant to the Conditions of Sale; and

(c) whether the plaintiff breached any terms of the contracts entitling the defendant to forfeit the deposits paid and/or sell the motorcars to third parties.

66.Before me the defendant’s position as regards these issues appeared to be somewhat uncertain and became even more so as the hearing progressed as further evidence was produced that potentially cast doubt on the position it had previously taken.  In an effort to obtain some clarity regarding the defendant’s case, I asked counsel for the defendant when she said that the defendant had given notice to the plaintiff in accordance with Condition 6.1.  Her response was:

(a) LaFerrari: 9 May 2016  
 and therefore the deadline for payment was 16 May 2016.

(b) 458: 16 February 2016   
 and therefore the deadline for payment was 23 February 2016.

However, I observe that in each case the purported notice relied upon by the defendant’s counsel was informal, being in the form of a personal and relatively casually written email, and that neither email made any reference to Condition 6.1, either expressly or implicitly, or any other Condition of Sale. In reply senior counsel for the plaintiff took the court through the wording of each email to demonstrate why the plaintiff maintained that neither could possibly amount to a notice in accordance with Condition 6.1, a notice which if given triggered the potentially very serious consequences provided for by Condition 6.4.

67.The position of the defendant’s counsel as set out above is also difficult to reconcile with the letters written by the defendant to the plaintiff dated 30 November 2016 and 15 December 2016 on which so much attention was focused during the hearing (and in the submissions and evidence prior to the hearing).

68.The letter dated 30 November 2016, written only two days after the termination of the defendant’s Ferrari sole distributorship, and which it is the plaintiff’s case he was unaware of until receipt of Mandy Wan & Co’s letter of 5 January 2017 and only finally saw after these proceedings were commenced, reads as follows:

“ Dear Mr SUM

We are writing to inform you that both the LaFerrari and 458Speciale A are in Hong Kong since earlier this year awaiting delivery. As we are now approaching our year end and as standard procedure, these two units urgently required your attention. We urge you to contact James Chow, your sales executive to make all the necessary arrangement for delivery.

As a reminder under the sales contracts, you are required to take possession of both vehicles within seven calendar days of this notice, by 7^th December 2016.

If you have any queries in the meantime, please do not hesitate to contact your Sales Executive Mr James Chow at 9485 9330 or our Assistant Sales Manager Mr Clement Li at 2627 8962 directly ….”

69.The letters (one in respect of each motorcar) dated 15 December 2016, which it is the plaintiff’s case he only read for the first time on 21 December 2016 after a copy was emailed to him by the defendant a second time on 21 December 2016, read (the operative words of the two letters are identical) as follows:

“ Dear Mr SUM, Mun Kid Frederick

We refer to our Sales Contract…by which you agree to purchase from us LaFerrari and a copy of the Sales Contract is enclosed. We also refer to our latest reminder to you dated 26^th October 2016.

You were formally notified of the Vehicle being delivered to our offices in Hong Kong on 26^th October 2016. Under the terms of the Sales Contract you were required to take possession of the Vehicle and pay the outstanding balance due to us within seven calendar days of that notice i.e. by 2^nd November 2016.

Despite our communications, you have still failed to both take possession of the Vehicle and pay the balance due to us. This letter, therefore, serves as a formal notice that we are now going to exercise our rights on your default in accordance with the Sales Contract, which includes our right to forfeit your deposit and our right to sell the Vehicle to another party.

No further reminders or warnings will be given of these steps which will now be taken.

We reserve all our rights against you in accordance with the Sales Contract ….”

70.The two letters are not consistent in that the letter of 30 November 2016, while it does not directly refer to Condition 6.1, seems to have been written with the condition in mind.  However, the letter of 15 December 2016 makes no reference to the earlier letter of 30 November 2016, but instead seemingly relies on “our latest reminder to you dated 26 October 2016.”

71.There is no dispute between the parties that what occurred on 26 October 2016 was in fact a lunch meeting between the plaintiff and Mr James Chow of the defendant.  It is the defendant’s claim, which the plaintiff denies, that during the lunch Mr Chow demanded that the plaintiff take delivery and pay for the two motorcars.  However, it does seem more than a little surprising that the defendant would rely on such an occasion to give formal notice in accordance with the Conditions of Sale (even if Condition 6.1 expressly allows that such a notice can be given orally).

72.But for the response of the defendant’s counsel to the court’s question that I referred to earlier, one might have been expected that the defendant would seek to rely on the letter of 30 November 2016 as the notice in accordance with Condition 6.1, and on the letter of 15 December 2016 as further confirmation that the defendant now considered itself free to dispose of the two motorcars as it wished.

73.That the defendant’s counsel did not do so may be because there also appears to be uncertainty regarding the addressing and delivery of the two sets of letters.

74.On the evidence before me there is a clear issue as to whether the letter of 30 November 2016 was correctly addressed and as a result delivered to the plaintiff (certainly he denies ever having seen it at the time).  The address it shows is the address on the face of the contract the terms of which, Condition 18.1, provide that it is to this address that any notice should be given unless the defendant has previously been notified in writing.

75.However, there is also evidence that the defendant was at least aware of and had previously communicated with the defendant at a different address, albeit in the same building, post the date on the contract. During the course of the hearing senior counsel for the plaintiff handed up an email from Mr Clement Li of the defendant (the Assistant Sales Manager referred to in the defendant’s letter of 30 November 2016), to the plaintiff dated 29 March 2016 in which Mr Li refers to the address for the plaintiff recorded on “[the defendant’s] system” as being the more recent address.  Further, counsel for the defendant, after taking further instructions, was able to inform the court that when Mr Chow, in his affirmation filed on 20 January 2017, refers to having visited and left papers on the desk of the plaintiff’s secretary on 4 July 2016, he also did so at the more recent address and not that shown on the contract.  Therefore, it appears at least arguable that the defendant was already on notice that the plaintiff’s address had changed.

76.That only 15 days later the defendant should address a second set of letters to a completely different address only serves to further demonstrate the apparent confusion on the part of the defendant as to how to give notice to the plaintiff.  The best that counsel for the defendant could offer by way of explanation is that this different address appears to have been taken from the paperwork relating to the purchase of the model 488 GTB Ferrari motorcar, a further motorcar purchase involving the plaintiff which was only revealed during the course of the hearing.  However, this motorcar was purchased in the name of a company and not the plaintiff’s own name.  Nevertheless, it appears that the defendant relied on the fact that the contract, though in the name of the company, had been signed by the plaintiff for and on behalf of the company and re-used the company’s address as if it were that of the plaintiff. None of this appears to accord with Condition 18.1 of the Conditions of Sale.

77.I have to observe that if the defendant had intended by the letters of 30 November 2016 and 15 December 2016 to give the plaintiff, a Ferrari VVIP with whom it had dealt for many years, a final opportunity to pay for and take delivery of the LaFerrari and 458 motorcars, one wonders why more apparent effort was not taken to communicate with him directly, including by telephone, email or text message, all methods of communication that the defendant and its staff had used to contact the plaintiff on numerous occasions in the past.

78.It is the plaintiff’s case that it was only on 21 December 2016 that he became aware that the plaintiff no longer considered itself bound by the contracts for the LaFerrari and 458.  The evidence, which is undisputed, shows that he then took immediate steps to arrange and tender payment to the defendant of the full unpaid balance of the purchase price of the two motorcars.  He further had his solicitors write the first of the two letters before action dated 22 December 2016.  However, in respect of the LaFerrari seemingly he was already too late as it is the defendant’s position that the contract for sale to the new purchaser had already been signed on 18 December 2016.  Hence the defendant took steps to return all of the further monies paid, including the HK$1 million paid on 8 December 2016, which originally was intended as a deposit for the Ferrari F12 tdf model motorcar (while retaining as forfeited the very substantial deposits previously paid by the plaintiff for the LaFerrari and 458).

79.For the reasons I have set out above, I am of the view that there are serious questions to be tried in this matter. 

Damages not an adequate remedy

80.I also share the view of Deputy High Court Judge Keith as set out in His Lordship’s judgment following the hearing on 23 January 2017 that there is a triable issue as to whether damages would be an adequate remedy for the plaintiff were he to succeed in the action.  There is evidence that both the LaFerrari and 458 motorcars are certainly rare, verging on unique, items.  Further, there is evidence that the specific two models have been customised and personalised in accordance with the plaintiff’s requirements to an extent that even another motorcar of the same model would not be a direct replacement.

81.The 458 motorcar remains in the possession of the defendant and therefore subject to the injunction.  It will be for the court in due course to resolve the competing claims of the plaintiff and the new purchaser, but it may well be that if the plaintiff is successful in the action he will be able to secure possession of the motorcar.  As regards the LaFerrari, subject to whether any further ‘on sale’ has already taken place, the issue may turn on whether the purchaser is a bona fide purchaser for value without notice.  If not, again, if the plaintiff is successful in the action he may well be able to secure possession of the motorcar.

Balance of convenience

82.I have also considered the balance of convenience and noted the submissions of senior counsel for the plaintiff regarding the relative positions of each of the plaintiff, the defendant and the new purchasers of the LaFerrari and 458.  I am satisfied that the balance of convenience lies in favour of preserving as far as possible the status quo pending the trial of this action or further order.  In due course, once the circumstances of the purchases of the LaFerrari and 458 from the defendant become clearer, the plaintiff will have to consider how he formulates his claim, in particular whether a claim of a proprietary or tracing nature is justified.  At that point, if need be, the continuation of the injunction may be revisited.

Costs

83.Order 62, rule 3(2A) of the Rules of the High Court provides:

“ If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.”

84.I observe that following the first hearing of the plaintiff’s inter partes summons to continue the injunction order dated 13 January 2017 before Deputy High Court Judge Keith on 23 January 2017, His Lordship ordered as follows:

“ all costs arising out of the parties summonses be reserved to the judge hearing their substantive applications save that the costs of the hearing on 23 January 2017 be to the defendant, to be taxed if not agreed, and paid after the conclusion of the trial.”

When making the above order, no doubt His Lordship had in mind whether the hearing had been necessary, he having observed that the defendant’s solicitors had previously invited the plaintiff to agree to an adjournment on substantially the same terms that he went on to order.

85.At the commencement of the hearing before me I dealt with and made orders for costs in respect of all other pending applications before the court.  Therefore, the only remaining matter I need to deal with are the costs of the plaintiff’s inter partes summons dated 13 January 2017, subject, as I have said, to His Lordship’s previous order that I have noted above.

86.The matter before me proceeded effectively in two parts.  The first, the defendant’s application to discharge the injunction obtained by the plaintiff ex parte for material non-disclosure.  The second, the plaintiff’s application to continue the injunction obtained ex parte until trial or further order.  For the reasons set out in this judgment, I find that there is no good basis for the defendant’s allegation of material non-disclosure by the plaintiff before the learned ex parte judge at the hearing on 12 January 2017, and therefore I decline to order the discharge of the ex parte injunction order.  Further, I find that there are serious questions to be tried, including whether the contracts between the plaintiff and the defendant were validly terminated by the defendant and whether damages would be an adequate remedy for the plaintiff, and further that the balance of convenience lies in favour of preserving the status quo pending trial or further order.  I therefore grant the plaintiff’s application and order that the ex parte injunction order continue until trial or further order.

87.In my view, the application of the defendant to discharge for material non-disclosure was not well-founded.  When formulating the application, in my view, insufficient regard was had to the available materials evidencing the course of the hearing before the learned ex parte judge, including the written submissions of senior counsel for the plaintiff for the ex parte hearing and, by the time of the hearing before me, the transcript of the ex parte hearing.  Further, in my view, the submissions of the defendant’s counsel did not sufficiently focus on identifying matters that were potentially material to those issues that the court had to decide, as opposed to matters that were merely part of the factual matrix or background.  Therefore, in the exercise of the court’s discretion, I consider that the costs in respect of the defendant’s application to discharge the ex parte injunction obtained by the plaintiff for material non-disclosure should be to the plaintiff in the cause.

88.Save as above and as previously ordered by Deputy High Court Judge Keith, I consider that the costs in respect of the plaintiff’s inter partes summons dated 13 January 2017 should be costs in the cause.

89.As regards the division of the costs of the plaintiff’s summons dated 13 January 2017, I propose to adopt a broad brush approach and apportion them 50:50 between the two parts identified above.  In this regard, I observe that the submissions of counsel for the defendant before me in relation to the questions of whether there was a serious issue to be tried or damages would not be an adequate remedy were comparable to the time devoted to the allegation of material non-disclosure.

90.I therefore make a costs order nisi as follows:

(a) The costs of the defendant’s application to discharge the injunction order obtained by the plaintiff on the ex parte application before Deputy High Court Judge Keith on 12 January 2017 be the plaintiff’s costs in the cause to be taxed if not agreed.

(b) The costs of the plaintiff’s application by summons dated 13 January 2017 to continue the injunction order obtained by the plaintiff on the ex parte application before Deputy High Court Judge Keith on 12 January 2017, save as already provided for by the order of Deputy High Court Judge Keith dated 23 January 2017, be costs in the cause to be taxed if not agreed.

(c) The costs of the plaintiff’s application by summons filed on 13 January 2017 to continue the injunction order obtained by the plaintiff on the ex parte application before Deputy High Court Judge Keith on 12 January 2017, save as already provided for by the order of Deputy High Court Judge Keith dated 23 January 2017, be apportioned 50:50 between the costs provided for by paragraphs (a) and (b) above.

(d) There be a certificate for two counsel.

91.The costs order nisi shall become absolute 14 days after the date of judgment if no application has been made to vary it.  I further direct that any party seeking to vary the costs order nisi shall file and serve their written reasons for seeking variation and proposed order within 14 days of the handing down of this judgment.

Mr Simon Westbrook SC, leading Mr Robin D’Souza, instructed by Alan Lam, Yam & Pe, for the plaintiff

Ms Cindy Kong, instructed by Howse Williams Bowers, for the defendant