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Princess Yachts International Plc And Another v Master Yachts Co Ltd And Another

Judgment Cited authorities 3 Cited in Precedent Map Related
Vincent
Judgment Date17 December 2009
Year2009
Citation[2010] 1 HKLRD 394
Judgement NumberHCA2277/2009
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA002277/2009 PRINCESS YACHTS INTERNATIONAL PLC AND ANOTHER v. MASTER YACHTS CO LTD AND ANOTHER

HCA2277/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2277 OF 2009

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BETWEEN

Princess Yachts International PLC 1st Plaintiff
Long Asia (HK) Limited 2nd Plaintiff
and
Master Yachts Company Limited 1st Defendant
Lam Ching Wah 2nd Defendant

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Before : Hon Yam J in Chambers

Date of Hearing : 9 December 2009

Date of Handing Down Judgment : 17 December 2009

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JUDGMENT

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1. The 1st plaintiff is a maker of luxury yachts and the 1st defendant is in the business of selling luxury yachts to Hong Kong customers. This hearing is mainly concerned with the yacht, Princess Yacht V65, Hull Number V65571 (“the V65”). From the affidavit of Mr Douglas Culverwell, Senior Sales Manager of the 1st plaintiff, the history regarding the V65 is this : In November 2008 the 1st plaintiff sold the V65 to the 1st defendant, who then sold on to a customer. The V65 was rejected by the customer for quality issue, and the 1st defendant agreed to take the V65 back.

2. Around the same period, the 1st plaintiff knew that the 1st defendant was in some financial difficulty. The 1st defendant ordered some vessels from the 1st plaintiff but the down payments as required under the terms of the distributorship Agreement were not paid by the 1st defendant. To aid the cash flow of the 1st defendant, the 1st plaintiff proposed that they would raise a credit note for £800,000 in consideration of the 1st defendant passing the legal title of the V65 to the 1st plaintiff.

3. The proposal concerning the transfer of the V65 is said to be discussed in the London Boat Show. The exact mechanism of the transfer was agreed via letter sent from the 1st plaintiff to the 1st defendant on 15 January 2009. The letter reads :

“This letter is to confirm our agreement to the following :

…

5. [The V65] will be used (under the [1st defendant’s] control and management) for occasional periods throughout 2009 but no more than a total of 30 days by your customer who will be purchasing a new Princess V85 for completion and delivery in December 2009. The order for this V85 will be placed with us together with a 20% initial stage payment and full specification before end of January 2009. …”

It is useful to note here that the customer of a V85 mentioned above turned out to be the 2nd defendant, Mr Lam.

4. The letter on 15 January 2009 was later codified into a contract entitled “Credit Back Transfer Agreement” (“CBTA”) signed on 17 February 2009. Clause 1.3 reads :

“[The V65], whilst under the ownership of [the 1st plaintiff], will remain under the control and management of [the 1st defendant] until the end of 2009 by which time, or earlier, [the 1st defendant] is obliged to repay to [the 1st plaintiff] the £800,000.00 credit and re-transfer ownership of [the V65] from [the 1st plaintiff] to [the 1st defendant]. [The 1st defendant] will remain responsible for the security and upkeep of [the V65] throughout.”

5. Pausing at this stage, it is pertinent to ask why the 1st plaintiff would allow the 1st defendant to remain in control of a luxury boat when the ownership has already passed to the 1st plaintiff, through the shelf company, the 2nd plaintiff. Mr Culverwell explained that there were two reasons behind such an arrangement. The first reason is that the 1st plaintiff wants the 1st defendant to market the ship and sell it to obtain enough money to repay the £800,000 loan. The second reason is that the 1st plaintiff wanted to let the prospective buyer of the Princess Yacht V85 (“the V85”) to use the V65 while the V85 is being made. Mr Gilbert Collins, solicitor for the plaintiffs, termed such an arrangement as a “sweetener”, which I think it means that the sale of the V85 became more attractive because of this arrangement.

6. At or around the same time, the 1st defendant contracted with the 2nd defendant for the sale of the V85. Although the contract does not have any title, for the purpose of this hearing it has been termed as “Sales and Charter Agreement” (“SCA”). Clause 4 of the contract stipulates that :

“4) Seller should provide a Princess V65 (year 2008) for free rental to buyer immediately upon receiving 30% down payment from buyer. This V65 will be returned to seller only after reasonable quality acceptance of the new boat V85. Should the new boat V85 has quality defects and couldn’t be fixed by seller within 3 months after buyer’s official notification, seller should immediately and unconditionally return any down payment received from buyer. Buyer shall maintain reasonable care of the said V65 and carry out maintenance schedule as prescribed on owner’s handbook.”

7. There were some disputes as to the exact date of when the CBTA and SCA were entered. There was also a dispute as to whether the 1st plaintiff knew of the SCA arrangement and the identity of the “customer” under the CBTA. These disputes are immaterial to this hearing.

8. The 1st plaintiff alleges that the 1st defendant was in breach of the CBTA by allowing the 2nd defendant to not just use the V65 (as stipulated in the CBTA), but also to remain in control and management of the V65 over several months instead of no more than 30 days.

9. On 11 November 2009, the plaintiffs made an ex parte application before Deputy High Court Judge Louis Chan for an injunction to restrain the 1st defendant from removing the V65 mooring at A38, Gold Coast Marina, Tuen Mun. Mr Lam (now the 2nd defendant), who was in possession of the V65 at that time, was also ordered to be restrained from removing the V65. That application was granted.

10. On 20 November 2009, the plaintiffs applied for an interlocutory injunction before me to restrain the 1st defendant and Mr Lam from disposing of the V65 or diminishing the value of the V65 or removing the V65 from mooring at A38, Gold Coast Marina, Tuen Mun and to order them to deliver up forthwith to the care and control of the plaintiffs until 9 December 2009 or until further order. I granted that application.

11. On 9 December 2009, the plaintiffs, by their Amended Inter Partes summons applied for a continuation of the Order made on 20 November 2009. Mr Lam appeared in this hearing as an applicant and opposed to the plaintiffs’ application. At the outset of this hearing I have asked Mr Wilfred Tsui, counsel for the applicant whether the applicant should be joined as the 2nd defendant. All parties before me agreed that this should be the case. I therefore made the order accordingly.

12. Mr Payne appeared for the 1st defendant for the first time in this action. He submitted on behalf of the 1st defendant that it would not object to the Amended Inter Partes Summons on the condition that the plaintiffs should give the 1st defendant seven days notice before moving the V65 out of Hong Kong.

13. Mr Tsui, counsel for the 2nd defendant, however opposed the plaintiffs’ application on three grounds of opposition. The first ground is that the 1st plaintiff was guilty of material non-disclosure in the ex parte hearing for interlocutory injunction. The second ground is that the SCA made the 2nd defendant a pledgee of the V65 so that the 2nd defendant has a right to possession. The third ground is that the balance of convenience is in favour of the 2nd defendant. I shall deal with the allegation of pledge first.

Pledge

14. Can clause 4 of the SCA, quoted above, give rise to a pledge? Mr Collins, for the plaintiffs submitted that it cannot. His submitted that no power of sale had been conferred to the 2nd defendant under the SCA. Thus it is inconsistent with an intention of a pledge. Mr Tsui rejected this submission and relied on The Odessa [1916] 1 AC 145 for the proposition that a power of sale needs not be written into the contract.

15. I do not think The Odessa can assist the 2nd defendant in any way. The background of the case was set in a period when Great Britain was at war with Germany. The Crown was entitled to seize the property of the enemies as prize. The issue was whether the property of the cargo had been affected by the pledge of the cargo. It was held that the pledge did not affect the property of the cargo and that the property belonged to a German subject and thus was liable to confiscation by the Crown.

16. The Odessa was instrumental to the development of the law regarding pledges, but it does not assist the 2nd...

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