United Merchants Finance Ltd v. Tang Woon-wing
Read the full judgment text of DCCJ 62/1980 on BabelCite. This District Court judgment was delivered on 11 July 1980.
1. By writ issued on January 22, 1980 the plaintiff claimed: (1) $711.42 as arrears of rental due under a hire-purchase agreement dated September 12, 1978; (2) $4,119.99 allegedly due under clause 7 of the agreement; and (3) further or alternatively damages to be assessed.
|
DCCJ000062/1980 IN THE DISTRICT COURT OF HONG KONG HOLDEN AT TSUEN WAN CIVIL JURISDICTION T. W. ACTION NO. 62 OF 1980 -----------------
----------------- Coram: B.W.M. Downey, District Judge Date of Judgment: 11 July 1980 ----------------- JUDGMENT ----------------- 1. By writ issued on January 22, 1980 the plaintiff claimed: (1) $711.42 as arrears of rental due under a hire-purchase agreement dated September 12, 1978; (2) $4,119.99 allegedly due under clause 7 of the agreement; and (3) further or alternatively damages to be assessed. 2. On April 23, 1980, the defendant having failed to file a defence, the plaintiff applied for judgment to be entered in its favour for the sum of $711.42 together with interest at the rate of 2% per month from July 13, 1980 (sic), and an order "in terms" was made on May 20, 1980. 3. On June 10, 1980 the plaintiff sought an appointment for the hearing of the assessment of damages in this action, and I heard the matter on June 24, 1980, when I received evidence from Mr. Cheung Dig-chiu, a supervisor employed by the plaintiff, and the defendant. 4. At the conclusion of the hearing, I set aside the judgment dated April 23, 1980 (under rule 22(8) of the District Court Civil Procedure (General) Rules) and gave judgment for the plaintiff in the amount of $388.05 with interest from August 12, 1979 until payment at the rate of 2% per month, I also indicated that I would give my reasons in writing, which I now do. 5. On September 1978 the plaintiff entered into an agreement with the defendant which is described as a HIRE PURCHASE AGREEMENT in respect of a Daihatsu S60 v van. The cash price was $18,000 to which was added $550 for insurance and $300 for Registration giving a total Cash Price of $18,850. The defendant made an Initial Payment of $7,850 in the form of $2,000 cash and $5,850 as Trade-in for another vehicle. To the Balance of Cash Price of $11,000 Hire Charges of $2,969.80 were added, giving a figure of $13,969.80 as the Balance of Hire. The Hire Purchase Price was $21,819.80 (i.e. Total Cash Price plus Hire charges) The defendant agreed to pay the balance of the Hire Purchase Price by 36 monthly rentals of $388.05 commencing on October 12, 1978 and thereafter on the 12th day of each month. The Agreement was in standard form, printed in English and Chinese, but clause 16 thereof provides:
6. Although described as a hire-purchase agreement, it is not in the form which received the blessing of the House of Lords in the leading case of Helby v. Matthews [1895] A.C. 471, since it does not give the hirer an option to return the goods to the owner at any time. Clause 9 of the Agreement provides that on payment of the Hire Purchase Price and observance of all the terms and conditions, the Agreement and the hiring thereby constituted shall determine and the hirer shall become the obsolute owner of the goods. Until that time the goods remain the sole property of the owner and the hirer is a mere bailee. Nevertheless, for the purposes of this assessment, the law to be applied is, in my view, that which governs contracts of hire-purchase at common law (of Yeoman Credit Ltd. v. Waragowski [1961] 1W.L.R. 1124; Overstone Ltd. v. Shipway [1962] 1W.L.R. 131; Financings Ltd. v. Baldock [1963] 2 Q.B. 104) This view is reinforced by clause 10(1) of the Agreement, which provides that the terms and conditions therein contained in favour of the owner shall be in addition to and not in substitution for the terms and conditions implied in favour of the owner under a hire purchases agreement at common law, "except in so far as such implied terms and conditions are inconsistent with these terms and conditions". 7. In addition to the Initial Payment, the defendant paid 10 monthly rentals, but failed to pay the rental due on August 12, 1979. On September 6, 1979 the plaintiff repossessed the van. By a written notice dated September 7, 1979 (exhibit P2) the plaintiff notified the defendant that the hiring had been terminated and that the van would be sold unless all arrears and expenses were paid within 7 days. The defendant was unable to pay the arrears, and on October 12, 1979 the van was sold by the plaintiff for $5,000. The defendant says (and I so find) that sometime in August 1979 he telephoned and spoke to a Mr. Leung, an employee of the plaintiff and asked for postponement of the instalment, so that he could continue with the Agreement, but he was informed that the plaintiff insisted upon payment on the due dates. In the circumstances, and under the terms of the Agreement, the plaintiff was perfectly entitled to terminate the Agreement and repossess the van. 8. The present application for damages to be assessed is put forward on the basis that the defendant repudiated the agreement by failing to pay the instalment due on August 12, 1979. Ordinarily, a mere failure to pay one or two instalments, even after receiving a reminder or warning letter, would not amount to repudiation by the hirer. See Financings v. Baldock, supra; Brady v. St. Margaret's Trust Ltd. [1963] 2 Q. B. 494; Anglo-Auto Finance Co. Ltd. v. James [1963] 1 W.L.R. 1042. When considering whether there has been a repudiation by one party it is necessary to look at his conduct as a whole, to see whether it manifests an intention to abandon the contract and to refuse performance, and also to consider its impact on the innocent party: see Woodar Investment Development Ltd. v. Wimpey Construction U.K. Ltd. [1980] 1 W.L.R. 277 at 280, 298 and 299. As Lord Wilberforce said (at 283):
Having regard to the defendant's attempt to obtain further time to pay the August instalment and his desire to continue the Agreement, I do not consider that his conduct manifested an intention to abandon the agreement. 9. But the plaintiff contends that it is unnecessary to examine the actual facts of the defendant's conduct or his state of mind in this case because of the terms of clause 1(2) of the agreement, which reads:-
Whether this clause has the suggested effect of precluding a court from considering all the circumstances surrounding the breach must, in my view, depend upon its true and proper construction. 10. At first sight, the words "deemed to have repudiated" may be taken as sufficiently expressing an intention to make any breach of the obligation to punctually pay the monthly rentals (or any part thereof) a breach which goes to the root of the contract and thus entitling the plaintiff to terminate or rescind the whole contract, if it so desires. As Lord Reid said in L. Schuler A.G. v. Wickman Machine Tool Sales Ltd. [1974] A.C. 235 at 251:
Substituting the words "deemed to have repudiated" for the word "condition", I consider that these dicta, emanating from such eminent and authoritative source, provide significant assistance on the proper construction of the terms of the agreement now before me. 11. The apparent intention to make punctual payment of the essence of the contract is, in my view, to some extent contradicted by the provision in clause 2(2) that the hirer should pay interest on overdue instalments at the rate of 2% per month, a provision which Diplock L.J. has described as "an express remedy in damages, of which the measure is agreed." (see Financings Ltd. v. Baldock, supra at 118-9) If the plaintiff's contention is right, it would be entitled to terminate the agreement if the defendant through an oversight sent a cheque for $388, and did not tender the remaining 5 cents until 8 days after the monthly rental became due. This is so unreasonable that I cannot believe that it represents the intention of the parties, but if it is the only possible interpretation of the words they have used, effect must be given to it, however harshly it may operate on the hirer. In my view, however, the words in question are capable of a different meaning. Whenever a court is faced with a deeming provision it is, in my view, entitled to ascertain the purpose for which the parties have resorted to what is, or may be, a mere fiction. In the context of this agreement, clause 1(2) can reasonably be regarded as designed to relieve the plaintiff of its normal burden of proving a repudiatory breach by the hirer, and of overcoming the very real practical difficulty of satisfying a court, especially in uncontested cases, that an alleged repudiation has been established. of. Wayfoong Credit Ltd. v. Ho Fai [1975] D.C.L.R. 130 at 148. 12. Even if the words in question are not clearly and fairly susceptible of the somewhat intermediate meaning I have placed upon them, it is still necessary for the plaintiff to show that the alleged or deemed repudiation was in fact accepted, for even the clearest repudiatory breach does not automatically bring a contract to an end. In this case, the plaintiff did not immediately accept the repudiation when it occurred on or about August 20, 1979. Instead, it sent a reminder to the defendant. Only when it repossessed the van on September 6, 1979 can it be contended that the repudiation was accepted. But, on the evidence before me, I do not think that the plaintiff did accept the alleged or deemed repudiation. The notice (Ex.P2) which it sent to the defendant the following day indicated the plaintiff's intention to rely on clause 7 of the agreement. This is the usual "minimum payment" provision, and is expressed to come into operation upon the termination of the agreement "pursuant to the last preceding condition" viz, clause 6, which is the usual provision giving the owner the express right to terminate the agreement upon any default, as well as other events not amounting to a breach. In my view, the plaintiff was exercising its express sight to terminate under clause 6 of the agreement. It did not indicate that it was purporting to accept the repudiation by the defendant at that time, or indeed at any time until it served the writ in this action. The inclusion in the particulars of claim of a claim under clause 7 of the agreement does not, in my view, prevent the plaintiff from pursuing its alternative claim for damages for repudiation. I merely observe, that at no time between the date of the defendant's breach (i.e. August 12, 1979) and the plaintiff's termination of the agreement, on or before the date when it repossessed the van, did the plaintiff indicate that it was accepting the repudiatory breach by the defendant. 13. Having regard to the view I have formed on the facts of this case, the plaintiff is clearly entitled to damages for the defendant's failure to pay the instalment due on August 12, 1979. In accordance with the decision in Financings Ltd. v. Baldock and Brady v. St. Margaret's Turst Ltd. supra, the plaintiff is entitled to recover no more than the amount of the instalment which became due on August 12, 1979, and interest thereon. The plaintiff's claim in paragraph 7 of the Particulars of Claim for $711.42 as "overdue rental" from July 13 to September 6, 1979, has not been established, and is misconceived. The defendant paid the instalment due on July 12, 1979, and did not become liable to pay the instalment which would have been due on September 12, 1979, because the agreement had been determined by the plaintiff before that date. 14. In Anglo-Auto Finance Co. Ltd. v. James, supra, the cost of repossessing the goods was allowed as an item of damages for non-repudiatory breach by the hirer, apparently on the basis that the agreement expressly provided that the hirer should be liable for such expenses in the event of the agreement being terminated. The fact that the damages awarded in other cases of non-repudiatory breach (e.g., Financings v. Baldock; Brady v. St. Margaret's Trust) did not include the costs of repossession suggests that such loss does not arise naturally from the breach in question, or is not, in the absence of express provision in the contract, within the reasonable contemlation of the parties. It may be that these decisions were also influenced by the general rule of the common law that a debtor who defaults in his obligation to pay a specific sum of money is not liable for any additional loss incurred by his creditor. (cf. Chitty on Contracts (24th edition) paragraph 1589). Accordingly, it seems to me that I must direct my mind to the question whether the agreement in this case expressly imposes on the defendant a liability to meet the costs of repossession in the circumstances of this case. 15. Clause 7 of the agreement expressly provides for these expenses (as well as storage expenses) to be taken into account in calculating the "net proceeds of sale" of the van. But, I am not concerned with a claim based on clause 7 of the agreement. In any event, clause 7 only operates upon termination of the agreement, pursuant to clause 6. It does not deal with a right to repossess the goods in other circumstances. The only other provision which expressly makes the hirer liable for the expenses of repossession is clause 2(15), which provides:-
In my view, this clause only applies to a repossession during the hiring, to enable the plaintiff to have repairs carried out under clause 2(3). 16. In case this matter should be taken further, I assessed the damages to which the plaintiff would be entitled on the basis of an accepted repudiation by the defendant. From the amount of the upaid balance of the hire purchase price ($10,089.30) there must be deducted sums already due but unpaid (i.e. the one instalment of $388.05), the value of the van, and an allowance for accelerated payment. The van was sold on October 12, 1979 for $5,000. The defendant claimed that it should have fetched more. The only evidence as to its value was that given by the plaintiff. Although Mr. Cheung said that it was sold "by auction", what actually happened was that the plaintiff invited various dealers to make offers for the van. Most of the dealers were not interested, and the plaintiff accepted the highest offer it received. In the absence of any evidence as to the state or existence of a market in used vehicles of the kind in question, I consider that it is reasonable to accept the plaintiff's method of disposing of the van as an indication of its value. The cost of repossessing and storing the van prior to sale ($840) should be deducted to give the figure of $4,160 as the value of the van. I was also invited a deduct a further sum of $240, which the plaintiff paid in respect of fixed penalties tickets issued in respect of the van. The receipts (Ex. P7) to prove these payments do not indicate that they were incurred by the defendant. The only dates mentioned thereon are after the van had been sold by the plaintiff. There being no evidence that they were incurred at any time while the van was in the defendant's possession, I do not consider that he should be accountable for them in this action. Accordingly I did not deduct this sum from the re-sale price of the van. I accepted the plaintiff's figure of $1,337.89 as the discount for accelerated payment. This was calculated in accordance with the "Rule of 78" which in my view, provides a suitable formula for arriving at the allowance which should be made. See Chartered Finance (Hong Kong) Ltd. v. Helen Fashions Garment Co. Ltd. [1978] D.C.L.R. 20. The total of these sums is $5,885.94. Accordingly, the damages on the basis of a repudiatory breach would be $4,203.36.
Representation: Miss L. Tung of Gallant Y.T. Ho and Co. for plaintiff. Defendant in person. |