Ho Po How v. Tse Kai Chow
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IN THE SUPREME COURT OF HONG KONG (ORIGINAL JURISDICTION) ACTION NO. 1007 OF 1970 ----------------- BETWEEN
----------------- Coram : Huggins, J. Date: 2 February 1972 ------------------------ J U D G M E N T ------------------------ 1. This is an action for damages for detinue or conversion of a motor-van and for consequential reliefs. The Defendant counter-claims for damages for breach of contract. 2. It is necessary to go back in time in order to understand how the Plaintiff claims to have been entitled to possession of the motor-van in question. He has for some time been operating and driving taxis in the New Territories and in December, 1968 he approached the Defendant’s wife with a view, as he says, to purchasing an old taxi from the Defendant, the Defendant himself being at that time out of the Colony and his wife having a power of attorney to act for him in relation to his taxi business. It may not be without significance that the Defendant’s wife herself says that during her husband’s absence “business almost came to a stop”. The Defendant does not dispute that an agreement was reached concerning this old taxi but he contends that the transaction was one of bailment and he says that the new taxi which the Plaintiff subsequently contracted to buy on hire purchase was bought on his behalf and remains subject to the agreement of bailment to which the old taxi had been subject. 3. According to the Plaintiff it was never intended that the old taxi should be put into operation by him and that what he was in fact acquiring from the Defendant was, substantially, the licence. That such a transaction could even be contemplated arises from the policy of the licensing authority to limit the number of licences to be issued for taxis in the New Territories and, at the same time, to allow the owner of any licensed New Territories taxi to transfer a licence from an old vehicle to a new one without having to take his place among the applicants for new licences. Before any licence could be renewed the vehicle had to be submitted for inspection and the inference appearsto bethat ifa vehicle failed to pass the inspection its licence wouldnot be renewed. The significance of that is that the agreement relating tothe Defendant’s old taxi was reached shortly before the vehicle’s licence expired and if the vehicle failedto pass theinspection the Plaintiff might have found himself, whetherasowneror as bailee, with a van which could not belicensedasaNew Territories taxi.Thereis no doubt that itwas a condition of the agreement that the vehicle must pass the inspection.The Defendant, of course, says that this was because this old vehicie was itself to be put into service. The Plaintiff says the intention was that the old vehicleshould be scrapped as soon as the new taxi which he had in mind to purchase was ready for delivery and that the sole object of the inspection was the preservation of the licence so that it could be transferred to the new vehicle. The vehicle did pass the inspection. Whether the old taxi was then used by the Plaintiff or not (and I am inclined to believe that it was), I am satisfied that on 30th December 1968 the Plaintiff placed an order with the Hong Kong Garage Ltd. for a new vehicle. I do not believe the Defendant’s wife when she says that some ten days after delivery of the old vehicle to the Plaintiff he asked her to replace it with a new one at the Defendant’s expense. On lst February, 1969 a hire purchase agreement was signed between the Hong KongGarage Ltd. and the Defendant. Although this agreement was completed in the name of the Defendant both the Plaintiff and the Managing Director of the garage say that in truth the hire purchaser was the Plaintiff and that the only reason for putting the Agreement in the name of the Defendant was that the Defendant had not yet arranged for the transferof the old taxi to the Plaintiff to be noted in the register of motor vehicles: until the transfer was registered the licensing authority would not recognise the Plaintiff as owner of the new vehicle to which the licence was being transferred. The Plaintiff says that he was entitled to a transfer of the licence of the old taxi, that he asked the wife of the Defendant to arrange a transfer and that she refused except on condition that he pay a sum of money over and above that which had been agreed for the transfer of the vehicle, while the Defendant denies that the Plaintiff was entitled to a transfer of the licence or that he ever asked for such a transfer. It has never been suggested by either side that the true agreement between the parties was that a sum of $2,400 should be paid for the vehicle and that a further sum should be paid in respect of the licence, although if the Plaintiff’s assessment of the value of the new van with the licence in December, 1969 is anywhere nearcorrect a price of $2,400 for the old van and the licence was undoubtedly very low. 4. It was admitted by the Defendant’s wife in evidence that she wrote the incomplete and unsigned document which has been marked Exh. L. It reads: “ (I) hereby received from Mr. Ho Po How the sum of Hong Kong Currency Dollars Seven Hundred Only for the purchase of vehicle body of AB4597 belonging to Asia Taxi Company, the whole purchase price being $2,500.00. The balance of the purchase price to be paid in full within two days after the said vehicle shall have passed inspection. In the event of failure in making payment the deposit shall be forfeited. Mr. Ho Po How shall be solely responsible for all costs relating to the repairs and insurance premium and registration fee in respect of the said vehicle. The passing of inspection of the vehicle shall be undertaken by me in the course of the next 14 days. The said AB 4597 at present”. Her explanation is that it was originally contemplated that the old taxi should be bailed to the Plaintiff in return for a lump sum payment of $2,500 and that they would go to a solicitor to have an agreement drawn up, but that the Plaintiff failed to pay in one lump sum and therefore they never went to see a solicitor. One would have thought that if she knew the Plaintiff was from the start defaulting in this way she would have been the more anxious to ensure that an agreement was drawn up in proper legal form. Be that as it may, this document written by her shows that at one stage she was clearly contemplating a sale and purchase of the old vehicle. She does not remember why the document was never completed 5. After the old van had been inspected and handed over to the Plaintiff the Defendant’s wife and the Plaintiff executed the Agreement which was marked Exh. J. This is a most unsatisfactory document. The opening recital does not even make it clear whether what it had been agreed to transfer was the taxi or the licence. Clause (1), however, would seem to indicate that the Plaintiff is appointed the Defendant’s attorney to operate the taxi, since one does not normally “operate” a licence. Clause (4) refers tothe taxi’s being “in the name of Asia Taxi ,Company” and I interpret that as meaning registered in the name of that company. The clause therefore provides that the Plaintiff shall not change the name in which the vehicle is registered but then goes on to prescribe a “fee” to be paid in the event of “any transfer of the ... taxi by [the Plaintiff]”. If the document was intended merelyto confer a licence on the Plaintiff to operate the vehicle there could be no quest of a transfer, for the licence would be personal to the Plaintiff and not transferable. Clause (8) provides that if the Defendant has any dispute “such will be no concern of [the Plaintiff] andthe vehicle”. This is some indication that the Defendant had disposed of his proprietary rights in the vehicle. Clause (9) provides that at the expiration of the Agreement the Defendant is to “take over the licence” while the Plaintiff is to take over the vehicle. How the parties thought that result could be achieved is not indicated, but this clause does point to at least an eventual transfer of the vehicle. At the same time it shows that the licence was an important factor in the transaction and it is inconsistent with an intention to transfer the licence. The Defendant relies upon this Agreement as representing the true nature of the transaction, while the Plaintiff says it is a document he was forced to sign by reason of the refusal of the Defendant’s wife to notify a change of ownership to the Registrar. In general it purports to allow the Plaintiff to use the old taxi for a period of ten years in return for a monthly “supervising fee” of $50 and an annual fee of $100 “for filing the returns to the Inland Revenue Department”. If the Plaintiff’s version of the agreement is true he was clearly entitled not only to the vehicle but also to have the licence transferred into his name in the register. Equally clearly the proper course if his vendor refused to take the necessary steps was to sue the vendor in respect of his breach of the implied term in the contract of sale and purchase or in some other way to establish to the satisfaction of the Registrar his title to the vehicle.However, obviously that would result in the Plaintiff’s being unable to use the vehicle until the proceedings were brought to a successful conclusion - and it is notorious that businessmen, particularly in Hong Kong, are prone to regard practical convenience as a weightier factor than morality. That being so the Plaintiff’s professed willingness to execute a wholly misleading document which would give him immediate possession of the vehicle, at the risk of jeopardizing his proprietary rights, becomes understandable even if not commendable. If the Plaintiff had to rely on this document to establish his case he might be in considerable difficulty, because the Defendant has pleaded that the agreement contained therein was illegal. However, as counsel for the Plaintiff has emphasised, he does not have to rely upon that document: he relies upon the true agreement for sale and purchase which thisdocument was designed tohide. That there was in truth an agreement for sale and purchase is supported by two receipts issued by the Defendant’s wife for payments made by the Plaintiff: Exh. M1 and Exh. P.The first of these was not signed by the Defendant’s wife but she admitted that she issued it as a receipt. Both receipts are clearly referableto a sale and purchase. 6. I certainly do not overlook the fact that on the face of it the Agreement which was signed contains little which is consistent with the Plaintiff’s allegation and much which is inconsistent with it. It is, however, also inherently suspect. However poor the New Territories taxi business may have been in December 1968 it is difficult to believe that use of a vehicle which was capable of passing a licensing examination would be given in return for a lump sum payment of “$2,000 odd” and a monthly payment of $50 for ten years. The $100 fee payable annually for filing the tax return would be reasonable enough if the Plaintiff were intended to operate the vehicle on behalf of the Defendant and toaccount to the Defendant for the profits. It is common ground that no such intention existed. Indeed it was admitted by the Defendant’s wife that in return for the annual fee of $100 the Defendant would include in his tax return a false return of the profits made with this taxi, such return being based on a wholly fictitious estimate made by the Defendant and not upon any figures provided by the Plaintiff. The sum of $2,400 paid in the instalments acknowledged by Exh. M1 and M2 and Exh. P is not mentioned inthe Agreement, although the Defendant’s wife says that this is “the remuneration for giving him the right to manage or use the car”. 7. It is not without significance that the old taxi had already been in service for eight years at the date of the Agreement Exh. J and that according to the Defendant,a man experienced in the trade, it had a further life expectancy of two to three years. Subsequently he said that, if properly maintained, the vehicle “could be run for ten years”. If by that he meant for ten years from the date of the Agreement, I just do not believe him. Even allowing for a one hundred per cent error in his estimate oftwo to three years it is difficult to believe that if the transactionwas genuine the parties would have contracted for a period of a further ten years. 8. I believe that the Plaintiff has told me the truth about this contract and that there was an agreement for the sale and purchase of the old taxi. He gave his evidence, for the most part, ina far more convincing manner than the Defendant and his wife. It may be that the Plaintiff took advantage of the Defendant’s wife in obtainingthe original agreement for sale and purchase at a price of $2,400 and that she attempted to redress the balance by asking for an additional payment before she would agree to the transfer of the licence. However, by seizing the vehicle and claiming to be the owner of it I am satisfied that the Defendant was guilty of conversion and became liable to pay damages to the Plaintiff. 9. The question then arises, whatdamages must he pay? and it must be borne in wind that the action lies in tort and not in contract. The Plaintiff claims to be entitled to $30,000 for a vehicle which, a year before, he had contracted to purchase for less than $20,000 and which, as a chattel, had no scarcity value. The enormous value put upon it depends solely upon (1) the existence of the licence and (2) the policy of restricting the number of such licences: although the Plaintiff could readily replace the vehicle with another, he could not use that other vehicle as a New Territories taxi. The added value attaches by virtue of the licensing policy, which is extraneous to the chattel itself. Nevertheless it is clear that if the Plaintiff were awarded the cost of replacing the vehicle without this added value he would not be restored to the position in which he was at the time of the conversion, while, on the other hand, the Defendant would be unjustly enriched by reason of his having the Plaintiff’s vehicle, which could still be used as a New Territories taxi. If, of course, the Commissioner of Transport were to cancel the licence of the vehicle which was wrongly taken and to issue a licence for any substitute vehicle acquired by the Plaintiff, no difficulty would arise, and the assessment of damages would be straight forward. Unfortunately this Court has no power to compel him to do this. No case has been cited to me where a scarcity value arising from a limited licensing scheme has been taken into account , but it seems to me that the licence here was of such a nature that unless it is taken into account the Plaintiff will suffer an injustice. It was clearly damage which it could reasonably be foreseen would result from the Defendant’s tort. 10. The evidence as to the market value, including “the added value”, is very sparse but I see no reason to reject the evidence of the Plaintiff that “$30,000 odd” could have been obtained at the time of the conversion, which is the material time. I think, however, that it would be wrong not to take into account the fact that the Defendant paid $9,994 in respect of instalments due on the van (see Exh. R): these were instalments due under the hire purchase agreement and should have been paid by the Plaintiff regardless of the fact that the Defendant had wrongfully deprived him of the use of the vehicle. 11. The counter-claim is based upon the Plaintiff’s failure to pay moneys due to the Hong Kong Garage Ltd. under the hire purchase agreement, it being a term of the alleged agreement for the replacement of the old taxi that the Plaintiff would make such payments and that if he did not the Defendant should be entitled to pay them and to repossess the van. It follows from what I have already said that I do not accept that there was such an agreement for the replacement of the old taxi as that alleged by the Defendant: I find that the old taxi was sold to the Plaintiff, as evidenced by the documents to which I have previously referred (Exh. M1 and Exh. P). 12. In the result there will be judgment for the Plaintiff on the claim in the sum of $20,006, with interest thereon at the rate of 8% per aunum from 24th December, 1969 and the Defendant’s counter-claim will be dismissed. The Plaintiff must have his costs on claim and counter-claim. Dennis Chang (Russ & Co.) assigned for Plaintiff. H. Y. Leung (K.Y.Woo & Co.) for Defendant. |