Otb International Credit Card Ltd v. Au Sai Chak, Michael

Case No.DCCJ 2400/1979

Court

District Court

Date—

Judge—

Case Document

100%Judiciary

DCCJ002400/1979

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION No.2400 OF 1979

-----------------

BETWEEN
	OTB INTERNATIONAL CREDIT CARD LIMITED	Plaintiff
	AND
	AU SAI CHAK, MICHAEL	Defendant

-----------------

Coram: Judge Jones in Court

Date of Judgment 22 August 1979

-----------------

JUDGMENT

-----------------

1. On the 28th April 1976 the defendant signed an application form with the plaintiffs for the issue of a credit card. Pursuant to the application a credit card was issued to the defendant on the 16th September 1976 valid for one year.

2. In September 1977 the credit card was renewed by the plaintiffs and replaced by a new card valid for 1978. On the 22nd October 1978 the credit card was stolen from the defendant's motor car.

3. Upon discovering the loss the defendant made an immediate report by telephone to the plaintiffs. However, as the 22nd October was a Sunday he was only able to speak to a junior member of the plaintiffs staff Mr. Lau. Details of the loss were recorded by Mr. Lau who informed the defendant to confirm them to the plaintiffs as soon as possible in writing. On the following day the 23rd October the defendant wrote a letter to the plaintiffs to this effect. The letter was delivered to the plaintiffs by a messenger employed by the defendant.

4. Although the plaintiffs' claim that the letter was received on the 24th October at 10.00 a.m. and was initialled by Miss Choi an employee of the plaintiffs on the letter, the defendant maintained it was delivered on the 23rd October. The letter was in fact addressed to a Mr. Philip Tsang who handed it to Miss Choi. Miss Choi did not know when the letter was actually received by the plaintiffs. Mr. Tsang did not give evidence. I have no hesitation in accepting the evidence of the defendant and his witness that the letter was delivered on the 23rd October.

5. The plaintiffs subsequently issued a replacement card to the defendant. The defendant was surprised to receive with his monthly statement for December 1978 five sales slips which had not been signed by him. It is not in dispute that the slips were not signed by the defendant. All these slips are dated the 22nd October 1978 the date when the credit card was stolen. The defendant queried his liability for the sales slips with Miss Choi. I accept that Miss Choi informed the defendant that he should pay the amounts that he admitted whilst those in dispute would be investigated by the plaintiffs. However, the plaintiffs allege that the defendant is liable for the amounts incurred under the sales slips totalling $3216.09 which includes interest, by virtue of clause 2 of the Rules of Membership endorsed upon the back of the application form. I accept that the defendant had express notice of the clause which is clear and unambiguous.

6. The relevant part of the clause is as follows: -

'In the event of loss of theft of the card, the cardholder must immediately notify the company by registered mail or telegram and until such notification is received by the company the cardholder will remain responsible for all purchases charged through the use of such card'.

7. It is clear that the defendant did everything that he was required to do in reporting the loss immediately to the plaintiffs by telephone, and by his letter written the following day. He could not have done more. Nevertheless as the card was used on the same day that it was stolen it might have been difficult for the plaintiffs, even if the loss had been on a working day, to take effective preventive measures for their own protection. Although the plaintiffs contend that Mr. Lau had no authority to make decisions this is purely an internal matter.

8. In this case we have two innocent parties for the losses can be attributed to the establishments who supplied the goods or services in not exercising proper care to ensure that the person who used the card was the defendant. I find validity in the defendant's defence that the signature on the slips did not resemble the signature on the card. There would appear to be no reason why a member establishment should not be obliged to require a cardholder to produce his identity card or other means of identification when using his credit card and to ensure that the sales slip is legible and signed by the cardholder.

9. Is this clause fair and reasonable to the defendant having regard to the facts of this case? Had the defendant not written the letter after making the telephone call the position might well be different.

10. In Schroder Music Publishing Co. Ltd. v. Macaulay (1974) 3 All E.R. 616 Lord Diplock said at page 624:

	'If fairness or reasonableness were relevant to their enforceability the fact that they are widely used by parties whose bargaining power is fairly matched would raise a strong presumption that their terms are fair and reasonable.
	The same presumption, however, does not apply to the other kind of standard form of contract. This is of comparatively modern origin. It is the result of the concentration of particular kinds of business in relatively few hands. The ticket cases in the 19th century provide what are probably the first examples. The terms of this kind of standard form of contract have not been the subject of negotiation between the parties to it, or approved by any organisation representing the interests of the weaker party. They have been dictated by that party whose bargaining power, either exercised alone or in conjunction with others providing similar goods or services, enables him to say : " If you want these goods or services at all, these are the only terms on which they are available. Take it or leave it." /In Gillespie Bros v. Roy Bowles Ltd. (1973) Q.B. 400 Lord Denning at page 415 said 'The time may come when this process of "construing" the contract can be pursued no further. The words are too clear to permit of it. Are the courts then powerless? Are they to permit of it. Are the courts then powerless? Are they to permit the party to enforce his unreasonable clause, even when it is so unreasonable, or applied so unreasonably, as to be unconscionable? When it gets to this point, I would say, as I said many years ago: " there is the vigilance of the common law which, while allowing freedom of contract, watches to see that it is not abused". John Lee & Son (Grantham) Ltd. v. Railway Executive (1949) 2 All E. R . 581, 584. It will not allow a party to exempt himself from his liability at common law when it would be quite unconscionable for him to do so'.

11. An American authority Union Oil Co. v. Lull 349 P. 2d 243 (Ore 1960) held that a member establishment's negligence would bar the issuer of the card from relying upon such a clause, and that the issuer of the card from relying upon such a clause, and that the issuer must prove that the member establishment is not careless. The court in that case also relied upon the analogy that a provision in bank pass books purporting to exempt the bank from liability for making payments to an imposter does not protect the bank from its own negligence or bad faith.

12. Applying the principles of these cases to the facts of the present case I am of the opinion that it would be unconscionable for the plaintiffs to rely upon the terms of clause 2 of the agreement to recover the amounts of the unauthorised purchases. As a result the plaintiffs action will be dismissed.

	B. L. Jones
	Judge of District Court
	21st August 1979

22nd August, 1979

Representation:

Mr. Suen (Tsang & Chau) for Plaintiff.

Defendant in person.