DCCJ005066A_2007 by doocter

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B                                                              DCCJ5066/2007        B


C                    IN THE DISTRICT COURT OF THE                                   C

           HONG KONG SPECIAL ADMINISTRATIVE REGION
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                       CIVIL ACTION NO. 5066 OF 2007
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F   BETWEEN                                                                         F


G                                                                                   G
                                  LUI CHI YUEN                          Plaintiff
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                                         and
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                               KINGSWAY CARS
                              SERVICES LIMITED                        Defendant
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K                                                                                   K


L   Before:      H H Judge Lok in Court                                             L
    Date of Hearing: 1, 2 & 3 September 2008
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    Date of Judgment: 3 September 2008
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                                 JUDGMENT
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P                                                                                   P
    1.          This is a case about repair’s lien.
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    2.          I have dealt with this case earlier by giving a decision dated 23
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    April 2008 on the Plaintiff’s application for a determination by the court on
S   various questions of law pursuant to Order 14A of the Rules of the District     S

    Court, Cap 336 (“My Earlier Decision”). By that time, I took the view that
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    the issues in the present case are very much facts-sensitive issues and so it
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    is not appropriate for the court to dispose of this case by way of Order 14A
B   application. However, as the car in question had been retained by the            B

    Defendant for over a year, I made an order for a speedy trial. This is the
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    main trial of this action.
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    Facts of the case
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F
    3.            There is no dispute between the parties about the facts of the     F
    present case. The Plaintiff came to know one Mr David Lee (“Mr Lee”) in
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    or about March 2006, and they had a common interest in cars. By that time,

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    Mr Lee wanted to sell his Lotus Exige sports Car (“the Car”). As the             H
    Plaintiff liked the Car and the offer price was attractive, the Plaintiff
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    purchased the Car from Mr Lee’s father who was by then the registered

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    owner of the Car. The purchase was made in or about June 2006, and the           J
    purchase price was $475,000.
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L   4.            About one week after the purchase, the Plaintiff found that        L
    there was some problem with the central locking system of the Car. After
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    informing Mr Lee of the problem, Mr Lee took the Car to the Defendant’s

N   workshop for repair, and Mr Lee also paid for the service fees charged by        N
    the Defendant. There is a dispute between the parties as to whether the
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    Plaintiff had accompanied Mr Lee to take the Car to the Defendant’s

P   workshop for such repair work.                                                   P


Q                                                                                    Q
    5.            On 23 July 2006, Mr Lee and the Defendant had a ride in the
R   Car. While Mr Lee was driving, he lost control of the Car, and as a result       R
    the Car was damaged in a collision. After the accident, Mr Lee called the
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    Defendant and asked it to send a towage truck to tow the Car to the
T   Defendant’s workshop for repair. The Defendant is and was the authorized         T


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    dealer of Lotus Cars in Hong Kong. Mr Lee also told the Plaintiff that he
B   would arrange for the repair of the Car.                                          B


C                                                                                     C
    6.            As the damage to the Car was extensive and time would be
D   needed to ship the spare parts from Europe for this unique kind of sports         D

    Car, the Plaintiff knew that the repair work would take quite some time.
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    Further, he was busy with the preparation of his own wedding in January
F   2007, and so he did not actively press Mr Lee for the return of the Car.          F


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    7.            In January 2007, he wanted to get back the Car for the taking
H   of his wedding photos. Through the arrangement of Mr Lee, the Plaintiff           H

    took delivery of the Car from the Defendant’s workshop on 15 January
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    2007 and returned it to the Defendant on the same day. During that time,
J   the Plaintiff parked his own car, which was a Lexus private car, in the           J


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    Defendant’s workshop.      There is a dispute between the parties as to           K
    whether the Plaintiff just parked his car there for his own convenience or as
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    a security for the unpaid repair charges of the Car.

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    8.            Later in or about March and April 2007, the Plaintiff was
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    eager to take back the Car after such a long period of time. He approached

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    the Defendant’s workshop and enquired about the progress of the repair            O
    work. The Plaintiff says that he had told the Defendant’s staffs that he was
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    the owner of the Car, a fact which is disputed by the Defendant who claims

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    that its staffs were only aware of such fact much later in May or June 2006.      Q


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    9.            Upon Mr Lee’s request, the Defendant’s foreman, Mr Ng

S   Chin-wah (“Mr Ng”), delivered the Car to Mr Lee on 3 May 2007 at                  S
    Thompson Road, Wanchai. At the time of delivery, Mr Lee handed a
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    cheque to Mr Ng in purported settlement of the Defendant’s repair charges

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    of the Car in the amount of $122,138 (“the Cheque”). Upon seeing the
B   Cheque, Mr Ng found that the amount in words in the Cheque did not               B

    correspond with the amount in figures. Further, the comma used in the
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    description of the amount in figures was not correctly placed. Mr Ng
D   therefore called his supervisor, Mr Kung Kam-fai (“Mr Kung”), to inform          D

    him of the problem. After that, Mr Kung spoke with Mr Lee over the
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    phone. Mr Lee told him that he would place the comma in the correct
F   place in the Cheque and he would put his initial there to verify the             F

    correction. In respect of the discrepancy in the descriptions of the amount,
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    Mr Lee assured him that he had issued many cheques with such
H   discrepancy in the past, and the Defendant would have no problem in              H

    presenting the Cheque for payment. Mr Kung trusted his words and the
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    Car was then delivered to Mr Lee.
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    10.           Upon seeing the Cheque later, the Defendant realized that          K
    there would be a problem in presenting the Cheque for payment. The
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    Defendant’s manager, Mr Johnson Lau, then contacted Mr Lee on the same

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    day and requested him to send another cheque to the Defendant, to which          M
    Mr Lee agreed. Mr Kung then tried to call Mr Lee on numerous occasions
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    for the payment of the repair charges but without any success.            The

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    Defendant later also found out that the Cheque had in fact been drawn on         O
    the bank account of Mr Lee’s father, but no attempt has ever been made by
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    the Defendant to present the Cheque for payment.

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    11.           After obtaining the Car, Mr Lee handed the Car back to the
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    Plaintiff. As there was some problem with the air-conditioning system of

S   the Car, the Plaintiff took the Car to the Defendant’s workshop on or about      S
    17 May 2007 for repair. Later, the Plaintiff demanded the Defendant to
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    return the Car to him. However, as the Plaintiff did not agree to pay for the

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    earlier unpaid repair costs of the Car, the Defendant refused to deliver the
B   Car to the Plaintiff, which then resulted in the commencement of the               B

    present action for conversion.
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D   12.           The Defendant accepts that it was not the policy of the              D

    Defendant to find out the identity of the registered owner of a car when
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    someone brought such car to the Defendant’s workshop for repair. In this
F   particular case and before May 2007, the Defendant’s staffs had only dealt         F

    with Mr Lee in respect of the repair work of the Car. In their eyes, Mr Lee
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    was the owner of the Car at all material times.
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    13.           As I see it, the only factual disputes between the parties are
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    confined to those listed in paragraphs 4, 7 and 8 above.            As I will
J   demonstrate below, the resolution of these factual disputes is not relevant        J


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    in determining the main issue in the present case. In fact, the result of the      K
    case does not turn on the credibility of the witnesses and the court can
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    simply resolve this case by reference to the undisputed facts mentioned

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    above.                                                                             M


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    14.           However, if I have to make a ruling on the factual issues, I

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    would find that the Plaintiff’s version of events does carry more weight.          O
    Firstly, Mr Lee was a regular customer of the Defendant’s workshop. As
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    demonstrated by the incident on 3 May 2007, the Defendant put a lot of

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    trust in Mr Lee’s words, and so it was unlikely that the Defendant would           Q
    have asked for some kind of security when the Plaintiff just took away the
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    Car for one day on 15 January 2007. Secondly, the Plaintiff could not get

S   back the Car for a long period of time after the accident in July 2006. In         S
    such case, it would only have been sensible and reasonable for the Plaintiff
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    to reveal his identity as the owner of the Car and to press for the re-delivery

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                                          -6-

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    when he made enquiry with the Defendant about the progress of the repair
B   work in March and April 2007. Hence, I accept the Plaintiff’s version of           B

    events on the balance of probabilities, but as I have mentioned above, such
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    finding is not relevant in determining the main issue in the present case.
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    The main issue and the legal principle involved
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F   15.            The Defendant parted possession with the Car in May 2007            F

    but it later regained possession of the same. The central issue in the present
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    case is therefore whether the Defendant could, under such circumstances,
H   exercise the right of lien over the Car in respect of the earlier unpaid repair    H

    work requested by Mr Lee.
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J   16.           In My Earlier Decision, I have already ruled on the following        J


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    issues. Firstly, the repair’s lien enjoyed by the Defendant over the earlier       K
    unpaid repair charges is one of particular lien as opposed to general lien
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    (see: paragraph 6 of My Earlier Decision). Secondly, as possession is an

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    essential ingredient for the exercise of the lien, re-delivery of the goods to     M
    the owner or its agent destroys the lien, and when once made cannot be
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    recalled, even if made by mistake. However, if the delivery is induced by

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    fraud or is otherwise wrongly obtained, the lien revives if possession is          O
    recovered, even though the recovery is effected by stratagem (see:
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    paragraph 8 of My Earlier Decision). As to the basis for such rulings,

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    reference can be made to the contents of My Earlier Decision. I will               Q
    therefore proceed to determine this case in the light of these rulings.
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S   Application of the legal principles                                                S


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    17.           As the Defendant voluntarily surrendered possession of the
B   Car to Mr Lee, the Defendant would have lost the right of lien unless he         B

    can prove that the re-delivery had been induced by fraud on the part of Mr
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    Lee. I would refer it as the fraud issue. Further, the Defendant contends
D   that Mr Lee was at all material times acting as an agent of the Plaintiff and    D

    so the Plaintiff was bound by the fraud of Mr Lee. I would refer this
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    second contention as the agency issue.
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    18.           In paragraph 11 of the Amended Defence and Counterclaim,
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    the Defendant claims that the Plaintiff had unlawfully obtained the
H   possession of the Car which was induced by the fraud on the part of the          H

    Plaintiff and/or his agent, Mr Lee. By reason of such averment, Mr Yuen,
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    counsel for the Defendant, agrees that the Defendant would only be able to
J   succeed if the court rules the fraud issue and the agency issue both in          J


K
    favour of the Defendant. In other words, the Defendant would have lost the       K
    right of lien if it fails in any of these issues.
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    Fraud issue                                                                      M


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    19.           In my judgment, there is simply insufficient evidence to

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    substantiate the allegation of fraud on the part of Mr Lee. If Mr Lee            O
    wanted to obtain the Car by presenting a worthless cheque, why did he
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    have to present the Cheque in which the amount described in words did not

Q
    correspond with that in figures? This was an obvious defect, and it was          Q
    always open to the Defendant, after noting such defect, to defer the actual
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    handing over of the Car until the clearance of the Cheque by the bank. If

S   fraud were involved, it simply did not make sense to present such Cheque         S
    to the Defendant’s staff in purported payment of the repair charges.
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    20.           At this stage, I do not know why Mr Lee did not make the
B   payment subsequently. I also do not know why Mr Lee put his initial on             B

    the Cheque drawn on his father’s account. However, as fraud is a serious
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    allegation, there is simply not enough evidence for the court to find fraud
D   on the part of Mr Lee. It might be the case that Mr Lee or his father had          D

    made a genuine mistake in writing the amount in the Cheque, and the
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    handing over of such a defective Cheque might not have involved any
F   fraudulent element.                                                                F


G                                                                                      G
    21.           Further, if Mr Lee were to have the intention to obtain the Car
H   fraudulently, it is clear that the delivery of the Car to Mr Lee on 3 May          H

    2007 had not been induced by such fraud. The evidence of this case shows
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    that Mr Ng had read the descriptions of the amount in words in the Cheque
J   to Mr Kung over the phone, and so Mr Kung was then aware of the defect             J


K
    in the Cheque. The Defendant would certainly have difficulty in presenting         K
    the Cheque for payment, and yet he allowed Mr Lee to take delivery of the
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    Car.    In my judgment, the Defendant simply relied on Mr Lee’s

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    representation that payment would be taken care of rather than the giving          M
    of the Cheque itself, and hence the re-delivery of the Car had nothing to do
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    with the fraud on the part of Mr Lee, which I do not find it to be the case, in

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    presenting the defective Cheque for payment.                                       O


P                                                                                      P
    Agency issue

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    22.           The Defendant also fails miserably on the agency issue. It is
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    clear from the evidence that the Defendant had all along been treating Mr

S   Lee as the contracting party for the contract for repair. It was not the           S
    policy of the Defendant to find out the identity of the registered owner of a
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    car when accepting an order for repair, and the Defendant had all along

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    been treating Mr Lee as the owner of the Car and the party responsible for
B   the payment of the repair charges. Neither did the Plaintiff do any act           B

    which held out Mr Lee as his agent. In such circumstances, it is simply
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    impossible for the Defendant to succeed on the agency issue.
D                                                                                     D

    23.           Mr Yuen also seeks to rely on the principle of undisclosed
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    principal and argues that the Plaintiff, being the undisclosed principal, is
F   bound by the fraud of his agent, Mr Lee. However, for such principle to           F

    apply, the Defendant must show that it was the intention of both Mr Lee
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    and the Plaintiff that the former was to enter into the contract for repair on
H   behalf of the undisclosed principal, i.e. the Plaintiff. But the evidence in      H

    the present case shows otherwise. The Plaintiff had no intention to be a
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    party to the repair contract. Mr Lee was responsible for damaging the Car
J   and so he should be the one liable to pay for the repair charges involved.        J


K
    Further, the Defendant had all along been treating Mr Lee as the owner of         K
    the Car and the party responsible for the payment of the repair costs. In
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    such case, there is simply no room for the Defendant to argue that Mr Lee

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    was at any time the agent of the Plaintiff.                                       M


N                                                                                     N
    24.           As the Defendant fails on both the fraud and agency issues, the

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    Defendant had lost the right of lien when it voluntarily surrendered the Car      O
    to Mr Lee. By refusing to return the Car to the Plaintiff in June 2007, the
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    Defendant has since then converted the Car to its own use. I therefore

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    grant judgment in favour of the Plaintiff for the delivery of the Car or the      Q
    payment of its value.
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S   25.           As I see it, the Defendant has only itself to blame for losing      S
    this action. As a repairer, the Defendant had a powerful security over the
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    unpaid repair costs by exercising the right of lien over the Car. The right

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    was exercisable against the owner of the Car even if the owner was not a
B   party to the contract for repair. Further, the Defendant had not been misled     B

    in any way, and it always looked upon Mr Lee as the party to the contract
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    and responsible for the payment of the repair charges. If Mr Lee was not
D   the owner, it did not matter as the right of lien was good against the owner.    D

    However, the Defendant, after knowing the defect in the Cheque, did not
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    withhold the delivery of the Car pending the clearance of the Cheque. The
F   Defendant simply trusted Mr Lee’s words and pledged the payment on Mr            F

    Lee’s creditworthiness. If Mr Lee subsequently did not make the payment,
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    it did not alter the fact that the Defendant had voluntarily surrendered
H   possession of the Car to Mr Lee, and by so doing, he had lost the right of       H

    lien which was a powerful security.
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J   Loss of enjoyment for the use of the Car                                         J


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    26.           Mr Yuen agrees that if the Defendant is liable for conversion,
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    the Plaintiff is entitled to claim for damages for loss of enjoyment for the

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    use of the Car. For the quantum of such loss, Miss Wong, counsel for the         M
    Plaintiff, refers me to the English County Court decision of Thompson v
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    Boulter [2001] CLY 551. In that case, the defendant unlawfully retained a

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    BMW M3 motorcar for a period of time. During such period, the plaintiff          O
    had had the use of other vehicles of lower status. In the County Court,
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    District Judge Exton awarded £1,733 to the plaintiff for the loss of the use

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    and inconvenience over a period of 8 months, which was determined by             Q
    measuring the disappointment of driving other vehicles of lower status
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    against the pleasure of driving the BMW.

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    27.           In the present case, it seems that the Plaintiff was not very
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    much concerned about the use of the Car.         He had allowed Mr Lee

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    considerable time for the repair of the Car before pressing for its return,
B   and this shows that Mr Lee seldom used the Car himself. As the parties             B

    agree that the value of the Car was $430,000 at the time when the
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    Defendant refused to return the Car to the Plaintiff in June 2007, I award a
D   modest sum of $30,000 as loss of enjoyment for the use of the Car during           D

    the period from June 2007 to the date of this trial. In reaching this figure, I
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    have certainly taken into account the limited use of the Plaintiff even if the
F   Defendant had not wrongfully converted the Car to its own use.                     F


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    28.           I now listen to the parties’ submissions on the appropriate
H   order to be made in the light of my judgment and on the issues of interests        H

    and costs.
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J                                                                                      J


K                                                                                      K
                                                  (David Lok)
L                                                 District Judge                       L


M                                                                                      M
    Miss Abigail Wong, instructed by Messrs Tung, Ng, Tse & Heung, for the
N   Plaintiff                                                                          N
    Mr Carl Yuen, instructed by Messrs Lily Fenn & Partners, for the
O   Defendant                                                                          O


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