HKCFI 2467
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 950 OF 2014
||ARNOLD ROBERT LIMITED
||GLORIOUS MOTORS LIMITED
||Mr Recorder Stewart Wong SC in Court
|Dates of Hearing:
||24, 27 – 30 November, 1 and 8 December 2017
|Date of Judgment:
||8 November 2018
J U D G M E N T
A. THE BACKGROUND FACTS
1. In this action, the plaintiff sues the defendant for damages or alternatively contractual compensation for the alleged breach of a contract between them (“the Agreement”).
2. Under the Agreement, the details of which I shall say more below, the defendant, a dealer in used luxury automobiles, was to sell to the plaintiff a used motor vehicle of the McLaren brand (model number MP4-12C) with registration number “SA1280” (“the McLaren”), to be paid for partly by cash and partly by the plaintiff trading-in a used Ferrari (model number 599-F1) with registration “00LALA” (“the Ferrari”).
3. Mr Adrian Petter (“Petter”) was and is a consultant of the plaintiff. He acted on behalf of the plaintiff in all the dealings with the defendant and no issue arises in this regard.
4. The Ferrari was manufactured, and first registered in Hong Kong, in 2007.
5. The plaintiff purchased the Ferrari on 24 May 2013 (this beingthe date of the plaintiff becoming the registered owner thereof). After thepurchase, the plaintiff arranged for it to be serviced by Auto Italia Limited(“Auto Italia”), which was at the time the authorised Ferrari dealer in Hong Kong. The contact at Auto Italia was Mr Cliff Louie (“Louie”).
6. On 29 May 2013, Louie sent an email to Petter making a number of recommendations for work to be done on the Ferrari, including an item being “Install 599 HGTE handling package” at a cost of HK$179,094. The plaintiff apparently agreed to this.
7. On 30 May 2013, Louie sent another email to Petter stating:
“ A ferrari 599 with the HGTE exhaust system arrived at our facility today, so I took a picture to see if you would be interested.
The exhaust system claims adds horse power and the sound is also different. If you have time you can stop by and listen to the difference.”
A photograph of the Ferrari with the HGTE exhaust system was attached to the email. As it turned out, the plaintiff was not interested in the HGTE exhaust system.
8. It is agreed between the parties before me, by reference to two invoices issued by Auto Italia to the plaintiff dated 23 July 2013 and 30 September 2013, as follows:
“ The following items, components, alterations and/or enhancementsin the Invoices relate to HGTE and are relevant to the current case:
1. Labour: Replace all four tires and tire pressure sensors (HGTE WHEELS);
2. Labour: Install ‘HGTE’ handling package;
3. Install HGTE Handling kit, HGTE wheels and alignment $190150.50
4. F70001622 HGTE handling kit re;
5. F70001818 599 HGTE RIMS SET; and
6. Supply and Install driver side HGTE fnt lower mud guard $693.00.”
9. It is therefore not in dispute that the Ferrari was in fact only fitted with the HGTE handling package, including the HGTE wheels. It was not fixed with a HGTE exhaust system or with the HGTE aesthetic features. It is not very clear whether a “HGTE handling package” and a “HGTE handling kit” are the same thing. From the way Louie wrote up the various documents, it would appear that a HGTE handling package includes a handling kit (which itself includes the suspension, software and alignment) and the wheels. On the other hand, counsel for both sides appear to accept that “HGTE handling package” and “HGTE handling kit”are the same thing. It is not important to decide which is correct because there is no dispute that the Ferrari did have installed the HGTE handling “package”, and the HGTE handling “kit”, in the sense that I have described (if and in so far that they are different), but not the HGTE exhaust and aesthetic features. As will be seen, an important issue in this case is what is meant by “HGTE package”. The defendant, understandably, at the trial refers to the handling features as the handling “kit”. However, since the official dealer, Auto Italia, itself at times referred to “HGTE handling package”, the term “package” when used in relation to HGTE, can be, and has been, used to describe the handling features only, and not necessarily the overall item which includes everything HGTE (including the exhaust and aesthetic features).
10. In about December 2013, Petter decided to sell the Ferrari and looked for another car. He placed an advertisement on a website (“the Advertisement”), with the following “seller’s comment”:
“ Full Factory Warranty. Excellent Condition Like New. HGTE Package with upgraded suspension. New Tires. Ceramic Brakes.”
11. Around that time, in December 2013 and January 2014, Petter visited the defendant’s Wanchai showroom. He was served by a sales consultant of the defendant, Ms Chen Jiaxuan (also known as Cherry Chen) (“Chen”).
12. Petter expressed interest in the McLaren which the defendant had for sale, and he and Chen discussed inter alia the trading-in by the plaintiff of the Ferrari as part payment for the McLaren. During one of these visits, Petter wrote on a piece of paper what were fitted to the Ferrari as options, which included “Sport Exhaust”. After further discussions, and a viewing on 23 January 2014  of the Ferrari by Chen at the car park of Petter’s apartment building (as to which more will be said below), on 28 January 2014 the plaintiff and the defendant entered into the Agreementfor the sale of the McLaren (described as “the Vehicle” therein) by the latter to the former at HK$3,480,000. The price of the Ferrari (described as the “trade-in vehicle” therein) as a trade-in for part payment was stated to be HK$1,490,000. A deposit of HK$25,000 was paid by the plaintiff.
13. The Agreement was on the defendant’s standard printed formand, after giving details of the Ferrari as the trade-in vehicle, with the makeand model being given as “Ferrari” and “599 F1” respectively, it was stated:
“ 8.1 The Purchaser warrants that the particulars of the trade-in vehicle stated above are true and accurate. If not, the Seller is entitled to reduce the price of the trade-in vehicle or cancel the trade-in. If the price of the trade-in vehicle is reduced, the Purchaser must make good the difference. If the Seller cancels the trade-in, the Purchaser must continue to perform this Agreement and complete the purchase of the Vehicle.
8.2 The Purchaser warrants that the trade-in vehicle has no structural and mechanical defects, that the trade-in vehicle has not been involved in serious collision or serious traffic accident resulting in the welding of the engine compartment to the body of the Vehicle, the welding of the luggage compartment to the body of the Vehicle, the welding of the axles and driveshafts, and that the trade-in vehicle has not been flooded. The Seller shall accept the trade-in vehicle if it has reasonable depreciation and reasonable wear and tear. The Seller can demand the trade-in vehicle be inspected by the dealer. If the inspection report shows that the condition of the trade-in vehicle is different from the Purchaser’s above warranties, the cost of inspection shall be borne by the Purchaser and the Seller is entitled to reduce the price of the trade-in vehicle or cancel the trade-in. If the price of the trade-in vehicle is reduced, the Purchaser shall make good the difference. If the Seller cancels the trade-in, the Purchaser must continue to perform this Agreement and complete the purchase of the Vehicle. If the inspection report confirms the warranties of the Purchaser, the costs of inspection shall be borne by the Seller.
10.2 If the Seller fails to complete this transaction in accordancewith this Agreement after receiving the deposit from the Purchaser, the Seller shall refund the deposit to the Purchaser and compensatethe Purchaser in the amount of 20% of the Vehicle Price as stated in clause 7.1. The Purchaser shall have no other claims against the Seller including but not limited to damages or specific performance.”
14. Under clause 11.11 titled “Remarks”, the following words were inserted by hand:
“ The trade-in vehicle 599F1 with HGTE package”.
Clause 11.11 was initialled by Chen but not by Petter.
15. The following additional clause was also inserted into the Agreement by hand by Chen (“the Handwritten Clause”), written in a space between clause 8.5 and clause 9.1  :
“ If either party find that after inspection by the offical car dealersnamely Auto Italia LTD and McLaren HK LTD for the respective vehicles described within, that the dealers inspection discovers any damage to either vehicle in terms of the exterior of the vehicles body work, the interior, or the mechanincal parts or structura of the vehicle then both partys have the right to cancel the deal and the deposit shall imeadietly be returned” [sic].
The Handwritten Clause was not initialled by either Chen or Petter.
16. Pursuant to the Agreement, the McLaren was inspected by McLaren Service (Hong Kong) (“MSHK”). Petter paid the inspection fee of HK$12,363 on 10 February 2014. MSHK also issued a report dated 14 February 2014 stating the further work that was required to be done on the McLaren, at an estimated sum of HK$39,338.
17. On 13 February 2014, Chen sent an email to Petter as follows:
“ Referring to the purchase of our Mclaren MP-4 (SA1280), we have been informed that the inspection has been completed by Mclaren HK Ltd. Please kindly send us the service quotation, so that we can proceed the repair and settle the payment...