Mitsui & Co Ltd v. United Overseas Motors Ltd and Others

HCA001245/1974

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1245 OF 1974

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Coram: Pickering, J. in Chambers

Date of Judgment: 5th June, 1974.

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JUDGMENT

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1. This is an application for an interim injunction.

2. The plaintiff is a limited company incorporated in Japan; the first defendant is a company incorporated in Hong Kong and is in receivership; the second defendant was, until a receiver was appointed, the managing director of this first defendant company and the third defendant is a bank incorporated in Hong Kong.

3. By certain contracts, the dates and details of which it is unnecessary to particularise, the plaintiff company sold to the first defendant company approximately 250 vehicles which were duly shipped from Japan and received by the first defendants. Payment was to be by warious bills of exchange accepted by the first defendants but not all those bills were honoured. As a result of certain of the bills being overdue, an arrangement was made between a representative of the plaintiff company and the second defendant whereby, on 20th February, 1974, the keys to some 145 vehicles remaining unsold by the first defendant company were handed, together with a key to the compound in which the vehicles were stored, to the plaintiffs' representative. A further reason for this arrangement was that an agreement that the first defendants would pay over to the plaintiff company, as and when received, 100% of the price obtained upon any sale of a vehicle by the first defendant company, had not been honoured in full.

4. After delivery of the keys to the plaintiffs' representative, whenever the first defendants effected a sale of any vehicle they would write to the plaintiffs' Hong Kong office asking for the keys of the vehicle so sold together with the key to the compound, whereupon a representative of the plaintiff company would go to the compound with the appropriate vehicle keys and the key to the entrance gate. The gate would be opened, the requisite vehicle keys handed over to the staff of the first defendant company and the representative of the plaintiff company would verify that only vehicles in respect of which keys had been so returned to the defendant company were then moved from the compound.

5. On 28th February 1974, the plaintiff company wrote to the first defendant company intimating that the plaintiffs would keep the balance of the stock in the compound in their hands and would not release any further vehicles to the first defendant company until that company had furnished further guarantees in respect of the sums owed to the plaintiff company.

6. It is now necessary to describe the role of the third defendant company, the bank, in these proceedings. In 1969, the first defendant company issued a debenture in favour of the bank conferring a floating charge upon all the assets of the first defendant company. On the 22nd April 1974, the defendant bank gave the requisite one month's notice necessary under the terms of the debenture and, on 22nd May 1974, that is two days after the issue of the writ and this summons in these proceedings, appointed a receiver of the first defendant company.

7. In the meantime, on 4th May 1974, a representative of the plaintiff company in Hong Kong was informed that a member of the third defendant bank wished to negotiate with the plaintiffs in relation to the affairs of the first defendant company. In order to prepare for such negotiation the plaintiffs' representative went to the compound to make a stock check of the vehicles there remaining. On arrival, he found that the old signboard bearing the name of the first defendant company was broken and lying on the ground, whereas three new signboard bearing the name of the third defendant bank had been erected. The padlock of the chain to the gate to the compound had also been changed and the key in the plaintiff company's possession would not fit the new padlock. Subsequently, it was alleged, the third defendant bank declined to allow the first defendants' representatives to enter the compound if they were accompanied by a representative of the plaintiffs.

8. It is fair to say that the bank denies responsibility for the erection of the three signboards bearing its name whilst the affidavit of the second defendant, the former managing director of the first defendant company, is silent upon the matter of the signboards. There can be no question however that the bank has adopted the attitude that it will not permit the plaintiffs to exercise the measure of control over the vehicles in the compound which they formerly enjoyed. Thus, claims Mr. Litton for the plaintiffs, the bank has resorted to self-help and either perpetrated or adopted an illegality.

9. The plaintiffs now seek an interim injunction to restrain the third defendant bank from interfering in any way whatever with the plaintiffs' possession, custody or control of the vehicles remaining in the compound, and seek also a mandatory order that the bank deliver to the plaintiffs all keys in their possession to the main gate of the compound.

10. Mr. Oswald Cheung, for the bank, met this application with the argument that the property in all the vehicles had passed to the first defendant company - a proposition which was conceded by Mr. Henry Litton for the plaintiffs. In the events which had occurred, Mr. Cheung argued, the plaintiffs' unpaid seller's lien had been terminated, if not by shipment from Japan, certainly by delivery of the vehicles to the first defendants in Hong Kong, and once that lien had been terminated it could not be revived. On the other hand the first defendant company was in default on its debenture which gave the bank a right to demand repayment by one month's notice and, in default, to appoint a receiver. On that appointment the charge fixed on all the property of the first defendant company and the vehicles, being such property, were new secured by a fixed charge in favour of the bank which was entitled to the proparty in the vehicles to the extent of the first defendant company's indebtedness to the bank, a sum in the region of $450,000.

11. For the proposition that once the statutory unpaid seller's lion given by the Sale of Goods Ordinance had been terminated it could not be revived by redelivery of possession Mr. Cheung relied upon the cases of Valpy v. Gibsen⁽¹⁾ and London Scottish Transport Ltd. v. Tyres (Scotland) Ltd.⁽²⁾. In both these cases the property in the goods had passed to the buyer but in each case possession became revested in the seller; despite this it was held in both cases that the unpaid seller's lien had not revived. In my view, however, the cases are not authority for so wide a proposition as that contended for by Mr. Cheung. In the first place in neither case was possession resumed by the seller with the approval of the buyer whereas in the present case the various keys were handed over to the plaintiffs (the sellers), by the first defendant company (the buyers). Moreover neither of these cases professes to be authority for the propesition that the unpaid seller's lien could not in any circumstances be revived. In the case of Valpy the report ends with the words that redelivery of the goods to the sellers "could not have the effect of creating a lien for the price, without an agreement to that effect". In the Scettish case it was said that

"Before it can be argued that a lost lien had revived it would be necessary ...... to show that the goods had been handed back to the sellers by the purchasers with the particular intention that the seller's lien should revive".

12. In each case there is a clear recognition of the fact that if there was an express agreement to that effect, the unpaid seller's lien could revive upon his re-assuming possession of the property even though the property in the goods had passed to the buyer. In our case the whole purpose of the arrangement regarding the keys was to put the plaintiffs in effective possession and control of the vehicles with a view to ensuring that they got their money therefor. A more express way of re-asserting the unpaid seller's lien is difficult to conceive. It is true that nobody uttered or wrote any magic words about re-assertion of a lien but both parties knew that this was precisely what was happening and what was intended to happen. By recovery of the keys to the vehicles and the taking, by agreement. of the key to the compound, the plaintiffs were putting themselves, so far as is possible with bulky objects such as vehicles, in physical possession thereof and ensuring that no sale could be made without the proceeds accruing to the plaintiffs. Both sides knew precisely what they were doing. That the first defendant company was under no illusion is evidenced by their letter of 20th February 1974 to the plaintiffs. This letter was in the following terms:

"On your request and as required we now deliver to you the 145 units of Isuzu vehicles of the undermentioned particulars.

1.. List of models

Please check the above referring the attached statements and acknowledge receipt. Thank you."

13. In my view there can be no question that the unpaid seller's lien revived by agreement between the buyer and the seller. But if that view be wrong, it still would not follow that the bank was entitled to interfere with the plaintiffs' possession of the vehicles. What the first defendants had, at the moment the floating charge crystallized, was not a property in the vehicles simpliciter but that property subject to the physical control of the plaintiff's over any sales made and subject also to the obligation to pay over to the plaintiffs the whole of the price obtained upon the sale of any vehicle. Even if it be the case that the lien did not revive - and I find strong evidence that it did - it was only this limited property in the vehicles which crystallized and the bank cannot claim more than that limited property. But that is precisely what the bank is doing in denying to the plaintiffs that measure of control over the disposition of the vehicles which they enjoyed at the moment of crystallization.

14. It was for these reasons that at the conclusion of the hearing I ordered that an interim injunction issue in the terms of the summons in that behalf. Mr. Cheung applied for a stay of the injunction pending appeal against my decision but, since he had informed me that he had not yet received instructions as to whether to appeal or not, I refused a stay. The plaintiffs, who of course had given the usual undertaking as to damages through their counsel, were entitled to costs and I granted a certificate for counsel.

Representation:

H. Litton, Q.C. & R. Mong (P.C. Woo & Co.) for plaintiff.

O. Cheung Q.C. & A. Li (F. Zimmern & Co.) for 3rd defendant.

Robert Wong of ...(illegible) pson. & Gist for 2nd Defendant (watching brief)

Peter Lee of Woo, H. an, Lee & Lo for 1st Defendant (watching brief).

(1) (1847) 4 C.B. Rep. 837

(2) 1957 Scets. L.T. 48