Chau Kei Man Rayman v. Chaters Auction Ltd Formerly Known As Chritrs Auction Ltd
Read the full judgment text of HCA 2310/2014 on BabelCite. This High Court CFI judgment was delivered on 23 March 2018.
1. This is an action by the plaintiff against the defendant in detinueand for damages arising out of a consignment of five valuable Chinese teapots by the plaintiff to the defendant with instructions for the latter to sell the same at a public auction. The teapots were not sold at the auction and four of them were subsequently found to have been damaged.
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HCA 2310/2014 [2018] HKCFI 662 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2310 OF 2014 ______________
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______________ JUDGMENT ______________ 1.This is an action by the plaintiff against the defendant in detinueand for damages arising out of a consignment of five valuable Chinese teapots by the plaintiff to the defendant with instructions for the latter to sell the same at a public auction. The teapots were not sold at the auction and four of them were subsequently found to have been damaged. The parties 2.The plaintiff was an amateur collector of Chinese teapots. Since about April 2016, the plaintiff has been running a shop in Shenzhen selling valuable Chinese teapots. 3.The defendant is a limited company carrying on business as an auctioneer in antiques and art objects. In that connection, it also provides a valuation service. It is part of a group which carries on business as auctioneers in a number of countries, including Mainland China, the United States and Japan. The relevant facts 4.The plaintiff was and is the owner of the five teapots in questionwhich he had acquired in the years 2003 – 2007. In the latter part of 2012, hewas minded to put up the same for sale by auction. He located the defendant as an auctioneer from the internet. 5.According to the plaintiff, on 5 December 2012, he took altogether seven Chinese teapots, including the five in question in this case, to the office of the defendant in Wanchai. 6.He was received by a Mr Brian Lee (“Lee”) of the defendant. After Lee had inspected and valued the teapots, it was agreed that the plaintiff would hand over the five teapots in question to the defendant to be sold by public auction. 7.Lee took photos of the teapots and prepared an Agent Contract to be signed by the plaintiff. The plaintiff was also asked to pay for the preparation of the catalogue for the auction at the rate of $4,500 per teapot, thus totalling $22,500 for the five teapots. 8.Lee also explained to the plaintiff the method of calculation of the commission to be charged by the defendant in the event of a sale. 9.Eventually on the same occasion, the plaintiff did sign the Agent Contract and paid the sum of $22,500 referred to above. A copy of the Agent Contract is annexed hereto as Annexure A. 10.As can be seen, the detailed description with the photo and estimated value of each of the five teapots are set out in the Agent Contract. I shall refer to each of the five teapots by their Lot numbers 1762, 1763, 1764, 1765 and 1766 respectively below. 11.The auction was held on 13 July 2013. The plaintiff attended the auction and his five teapots were not sold. 12.Subsequently, Lots 1762, 1763, 1765 and 1766 were found to have been broken or damaged. 13.The five teapots were kept by the defendant until they were produced by the defendant on the first day of the trial which were then marked as Exhibits D1 – D5. 14.The plaintiff also produced a collection of photos which became marked as Exhibit P1, showing the condition of each of the four broken teapots before he handed them over to the defendant and the condition of each of them after production by the defendant in court, as well as the condition of Lot 1764 (Exhibit D1) which has not been damaged. 15.The above facts are uncontroversial. 16.I shall examine below:
17.Before I do that, I should deal with a matter relating to the striking out of a part of the Defence and a part of the Witness Statement of Chan Kin Wah (陳健華) (“Chan”) adduced by the defendant. The striking out 18.By paragraphs 8(b), 9 and 10 of the Defence, the defendant pleaded a case to the effect that the five teapots were properly exhibited in a display cabinet, that when a potential customer by the name of You Hua wanted to inspect the teapots he was reminded to be careful and that it was asa result of his carelessness that the teapots fell to the ground and were broken. 19.After requests made which had not been acceded to, the plaintiffhad to apply to the court to seek further and better particulars of the pleading referred to in paragraph 18 above. 20.By an Order dated 7 June 2017, Mr Registrar K W Lung orderedthat, unless the defendant was to supply the said further and better particularsbefore 21 June 2017, the said paragraphs in the Defence would be struck out. 21.The defendant still failed to supply the said further and better particulars and therefore those paragraphs in the Defence should be deemed to be struck out. 22.Unfortunately, there was no Amended Defence filed accordingly. 23.At the beginning of the trial, Mr Law, Counsel for the plaintiff, asked me to ignore those paragraphs in the Defence and also paragraphs 12 – 13 of the Witness Statement of Chan which relate to the plea in the said paragraphs of the Defence and the copy documents pages 95 – 96 of the Agreed Trial Bundle. 24.I acceded to Mr Law’s application and ordered that the defendant should file an Amended Defence accordingly. 25.The end result is that there is completely no evidence adduced by the defendant as to how it was that the four teapots came to be damaged. The evidence 26.I now deal with the evidence adduced by the parties. 27.It will be noticed that the Agent Contract contained the provisions referred to below. 28.There is a provision giving an option to the seller whether to take out an insurance policy which is as follows:
I believe that the word「不」in the phrase「不受到的損失及損壞」in the last sentence must have been put in by mistake. I shall ignore it. 29.Furthermore, there is a term under the heading “Business Rules” (「業務規則」) which reads as follows:
30.According to the plaintiff, when he was made aware of the abovementioned provisions regarding insurance, he asked Lee what would happen if the teapots were broken. Lee replied and said that, with so manyof the defendant’s people watching, the teapots would or could not be broken. The plaintiff did not think that, if the teapots were broken, it would be his responsibility. He did not think that the chances of them being stolen or being damaged in a fire would be high. He therefore elected not to take out any insurance policy. 31.There has been no Witness Statement of Lee ever filed. He was not called as a witness for the defendant. The only witness called by the defendant was Chan. 32.When Chan was in the witness box, he was asked as to why Lee had not been called to give evidence. His only explanation was that Lee was very busy and had to be abroad quite a lot. I find that explanation to betotally unacceptable and incredible. It is trite law that in such circumstances the court is entitled to draw such adverse inference against the party failing to call an essential witness as it thinks fit. 33.In the Witness Statement of Chan, he alleges that he was presentwhen Lee was explaining about the Agent Contract to the plaintiff. He says that when Lee was dealing with the insurance matter, Lee explained to the plaintiff that the seller could elect to insure or not to insure. If the seller elected not to insure, then the risk would be borne by the seller as was already made plain in the Agent Contract. 34.In cross-examination by Mr Law, however, Chan said that he was in fact only responsible for the collection of items from customers. Heplainly admitted that he was not present during the meeting between Lee and the plaintiff and that in fact he could remember nothing. He did not give any evidence as to how the four teapots came to be broken. 35.Mr Co, Counsel for the defendant, re-examined Chan and tried to ask him to explain why his oral evidence was different from the contents of his Witness Statement. There was no satisfactory explanation. 36.In any event, in all the circumstances, I prefer the oral evidenceof the plaintiff about his discussions with Lee and do not accept the evidence of Chan about such discussions as alleged in his Witness Statement. He was stating the truth when he made the admissions under cross-examination by Mr Law, namely, that he was not present during the discussion between the plaintiff and Lee on 5 December 2012 and could remember nothing. 37.Having said the above, I note that neither party is alleging that the agreement between the plaintiff and the defendant was one which was partly oral and partly in writing. At the end of the day, I will basically have to construe the Agent Contract as an agreement within its four corners. 38.To continue with the evidence of the plaintiff, he said that immediately after the auction which took place on 13 July 2013 had finished, he inquired with some of the staff of the defendant as to whether he could take back the teapots. They replied and said that he would need to ring after two days to make an appointment to retrieve them. 39.On 16 July 2013, the plaintiff rang and spoke to Lee to ask for the return of the teapots. Lee told him there were a few customers from the Mainland who would like to see the teapots. Lee asked him whether he could retain them till 25 July 2013. The plaintiff agreed. 40.On 23 July 2013, Lee rang the plaintiff and asked whether he could retain the teapots until 29 July 2013 since there were a few customers from the Mainland who were thinking of buying them but the price could not be agreed yet. 41.On 25 July 2013, as the plaintiff was eager to take back the teapots, he went to the defendant’s office to ask for the return of the teapots. The member of staff who received him asked whether he was wanting to take back the “broken teapots”. The plaintiff was at a loss. Later, he was met by Lee and he said he wanted to see the teapots. Lee said that, as the staff member responsible for the storage of the teapots was not at work, he could not get them and advised him to return on 29 July 2013 to get back the teapots. 42.When the plaintiff returned to the defendant’s office on 29 July 2013, a staff member showed him the teapots which had been broken and told him that they had been broken by some customer or customers. Later, he saw Lee who said that he could take back the teapots and the $22,500 which he had paid and that would be the end of the matter. The plaintiff refused. 43.In oral evidence, the plaintiff also said that he had asked Lee for the return of the unbroken teapot, namely, Lot 1764 (Exhibit D1), but Lee said that he would either have to take back all the teapots or nothing. It is not clear as to when this conversation took place. 44.I accept the evidence of the plaintiff as being the truth, especially when there is no evidence adduced by the defendant to refute it. The duties on the part of the defendant 45.The plaintiff avers that the Agent Contract has a number of implied terms as follows:
46.The plaintiff further relies on section 5 of the Supply of Services (Implied Terms) Ordinance (Cap 457) to say that there is an implied term that the defendant would perform its service with reasonable care and skill. That section reads as follows:
47.The plaintiff further pleads a relationship of bailment between the plaintiff as bailor and the defendant as bailee and that the defendant owed the plaintiff a duty of care not to damage or impair the teapots whilst in its possession. 48.I do not think that there can be much doubt that the defendant did owe a duty to take reasonable care not to expose the teapots to any risk of damage in its possession or custody and to ensure that they would be returned intact to the plaintiff on all or any one of the bases set out in paragraphs 44 – 47 above. See:
49.The defendant seems to suggest that the plaintiff is arguing for the imposition of an absolute duty on the defendant. I do not agree that the plaintiff is arguing for that. Breach of duty by the defendant 50.On all the evidence, I have no difficulty in finding that the defendant had been at least negligent in not having taken reasonable care to avoid damage to four of the five teapots and to return the same to the plaintiff intact. 51.The plaintiff has pleaded that the evidential rule of res ipsa loquitur should apply in the present case. 52.I agree with that. The law is succinctly summarised by Bokhary PJ in the case of Sanfield Building Contractors Ltd v Li Kai Cheong(2003) 6 HKCFAR 207 at 211 as follows: “ 2. The expression res ipsa loquitur (the thing speaks for itself) features prominently in the judgments of the courts below in this case. It is an expression that some lawyers (prominent among them Hobhouse LJ (as he then was) in Ratcliffe v Plymouth and Torbay Health Authority [1998] PIQR P170) prefer to avoid. But some lawyers still find it convenient. For my own part, I think that using it is convenient sometimes. The important thing to remember—and make clear—is that the expression does not denote a doctrine but merely ‘a mode of inferential reasoning’. The words which I have put within quotation marks are those used by Gleeson CJ and McHugh J in their joint judgment in a recent decision of the High Court of Australia, Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 at p.141. 3. This mode of inferential reasoning applies only to accidentsof unknown cause. But it matters not that the immediate cause ofan accident (eg brake failure or a burst tyre) is known. As long as the cause on which the issue of liability actually turns (eg why the brakes failed or the tyre burst) is unknown, the accident is regardedas one of unknown cause. The res ipsa loquitur mode of inferential reasoning comes into play where an accident of unknown cause is one that would not normally happen without negligence on the partof the defendant in control of the object or activity which injured the plaintiff or damaged his property. In such a situation the court is able to infer negligence on the defendant’s part unless he offers anacceptable explanation consistent with his having taken reasonable care. The ‘essence’: of this was identified by Lord Radcliffe in Barkway v South Wales Transport Co Ltd [1950] 1 All ER 392 at p.403G. It is, his Lordship said, that ‘an event which in the ordinary course of things is more likely than not to have been caused by negligence is by itself evidence of negligence’. 4. None of this is to be analysed as putting an onus on the defendant to disprove negligence. In the famous case of the falling bags of sugar, Scott v London and St Katherine Docks Co (1865) 3 H&C 596 at p.601; 159 ER 665 at p.667, Erle CJ, giving the judgment of the majority in the Court of Exchequer Chamber, said that: … where the thing is shewn to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of explanation by the defendants, that the accident arose from want of care. (Emphasis added.)” As mentioned above, there has in effect been no evidence adduced by the defendant as to how the four broken teapots came to be broken. The teapots were under the exclusive control of the defendant. The plaintiff could not possibly have known how the teapots came to be broken. The burden was on the defendant to show how it happened and why it was not the defendant’s fault which caused the damage. Unless that burden has been discharged, which has not been by the defendant, res ipsa loquitur applies. The Exemption Clauses 53.The defendant seeks to rely on the provisions in the Agent Contract as set out in paragraphs 28 and 29 above (“the Exemption Clauses”) as exemption clauses in order to avoid liability towards the plaintiff in case the defendant should be found to be negligent and/or in breach of its duty or duties towards the plaintiff. 54.The relevant words are:
which can be translated into English as follows:
55.The defendant argues that the abovementioned words have the effect of exempting it from liability no matter how and why the damage to the teapots had been caused. 56.In law, exemption clauses must be clear and unambiguous. In Chitty on Contracts (32nd Edition) Volume 1, it is stated at §15-008 as follows:
57.In the case of Always Win Ltd (supra), Cheung J (as he then was) also dealt with the law on construction of exemption clauses. At pages 62G – 63C, he said the following:
58.In my judgment, the Exemption Clauses are not clear enough to exempt the defendant from liability for negligence. If that was intended, it should have been expressly so stated. 59.Indeed, in argument, Mr Co conceded that the Exemption Clauseswould not be wide enough to cover the case of damage to the teapots caused by a deliberate act on the part of the defendant. I asked Mr Co how about the case where the teapots were damaged by an act of gross carelessness or, alternatively, an act of minor carelessness, on the part of the defendant and where one should draw the line. There was no satisfactory answer from Mr Co. 60.Mr Law further relies on the rule of construction known as contra proferentem. In Chitty (supra), it is stated at §15-012 as follows:
Further, in §15-013, it is stated:
61.I agree that the contra proferentem rule of construction also works against the defendant. 62.In short, there are the following points to note:
63.I therefore find the following:
64.The above would be sufficient to dispose of the question of liability against the defendant. In case, however, I am wrong in my construction of the Exemption Clauses, I shall proceed to deal with the argument based on the Control of Exemption Clauses Ordinance (Cap 71). Control of Exemption Clauses Ordinance (Cap 71) (“CECO”) 65.Both parties are agreed that the CECO would apply in the event that the Exemption Clauses are held to have the effect of exempting the defendant from liability for the damage done to the four broken teapots. They are also agreed that, in that context, the only issue between the parties is whether the Exemption Clauses satisfy the “reasonableness test” for which guidelines are provided under Schedule 2 to the CECO (“Schedule 2”). 66.Despite the consensus between Counsel for the parties in their respective submissions that Schedule 2 is applicable in the present case, I have my doubts. I shall set out my reasons below. 67.Under Schedule 2, there is an express reference to sections 3(2) and 6 of the CECO and no other section. 68.Section 3(2) of the CECO reads as follows:
It can be seen that Schedule 2 is specified to have relevance for the purposes of section 11 or 12 only. 69.When one examines sections 11 and 12 of the CECO, one can see that they concern sale of goods cases only. The present case has nothing to do with sale of goods. 70.Section 6 of the CECO simply relates to the power of the Legislative Council to amend Schedules 1 and 2 to the CECO. 71.In the above circumstances, I have my doubts as to whether Schedule 2 actually has application to the present case which is not a sale of goods case. 72.Having said the above, I refer to section 3(1) and (6) of the CECO which read as follows:
73.Section 7(1) and (2) of the CECO read as follows:
74.The relevant part of section 8 of the CECO reads as follows:
75.Both sections 7 and 8 set out above would apply to the present case because we are concerned with an exemption clause which has become a term of the contract between the plaintiff and the defendant and, further, the plaintiff was “dealing as a consumer” within the meaning of section 4(1) and the Agent Contract was the defendant’s written standard terms of business. 76.All in all, in my judgment, the effect of the provisions in the CECO set out in paragraphs 72 – 74 above is that the validity of the Exemption Clauses would depend on whether they pass the reasonableness test as described in section 3(1) of the CECO and that the burden is on the defendant to prove that they do. 77.In my judgment, the defendant has failed to discharge the said burden. The Exemption Clauses are simply too wide. Despite the concession by Mr Co to the effect that they would not exempt the defendant from liability for damage to the teapots as a result of a deliberate act of destruction by the defendant, on the face of their wording, they are actually wide enough to cover even such an act. There is no justification for drawing the line somewhere in between. This is, of course, on the basis that I am wrong in my earlier construction that the Exemption Clauses do not cover a deliberate act of destruction or a negligent act on the part of the defendant. Furthermore, the defendant handed over the teapots which were rather delicate objects to the custody and total control of the defendant. They were at the complete mercy of the defendant. It would be unreasonable for the plaintiff not to be able to have any recourse against the defendant no matter how the defendant conducted itself in relation to the teapots. 78.Hence, if I am wrong on my construction of the Exemption Clauses, I would hold that the defendant cannot rely on them to avoid liability because it has not discharged the burden of showing that they are fair and reasonable in all the circumstances. The claim in detinue 79.The plaintiff also claims for the return of the five teapots whichhave now been produced as exhibits and are kept by the court. The plaintiff is particularly eager to get back the unbroken teapot, that is, Lot 1764 (Exhibit D1). 80.By a letter dated 18 December 2013, Messrs Cheung, Chan & Chung, the solicitors acting for the plaintiff, demanded from the defendant the return of all the five teapots, an admission of liability and an offer for settlement of loss and damage suffered by the plaintiff. 81.By a letter dated 9 January 2014 from Messrs Lim & Lok, the solicitors acting for the defendant, to the plaintiff’s solicitors, they denied liability. 82.There has never been any tender by the defendant to return the five teapots to the plaintiff. They had been kept by the defendant all the time until their production in court during the trial. 83.The defendant seeks to rely on one term in the Agent Contract toargue that the plaintiff should have collected the teapots from the defendant’s office. That term reads as follows:
84.In my judgment, that term does not avail the defendant in all the circumstances. If the defendant had been minded to return the teapots to the plaintiff but wanted him to pick them up from its office, it could easilyhave instructed its solicitors to reply to the demand by the plaintiff accordingly. 85.The five teapots are clearly the property of the plaintiff. I hold that the plaintiff has proved his case in detinue. 86.I therefore order that the five teapots be returned to the plaintiff. My findings on the question of liability 87.In summary, my findings on the question of liability are as follows:
Quantum of damages 88.Neither party has adduced any expert evidence on the value of the five teapots. The parties have included a Joint Statement in the Agreed Trial Bundle which sets out the agreed value of each of the five teapots in good condition. I annex hereto as Annexure B a copy of the Joint Statement. It can be seen that it is simply an extract of the relevant part from the Agent Contract. 89.The plaintiff was recalled to give evidence regarding the extent of damage to the teapots and to give his assessment as to whether they are reparable and, if so, how much they would be worth after repair. Mr Co objected to my hearing such evidence on the basis that the plaintiff was not an expert. I said that I would hear the evidence on a de bene esse basis and then rule on it. 90.In my judgment, I am entitled to take into consideration the evidence of the plaintiff in this regard, especially when he seems to be quite knowledgeable about Chinese teapots, to the extent that he has opened a shop in Shenzhen. After all, the parties have agreed on the value of each ofthe teapots in good condition. Thus, I do have a starting point for the value. Expert evidence is only for the assistance of the court. The court would not be bound by the evidence of experts in any given case. The court would also have to apply its own knowledge and experience and common sense in dealing with the issue of assessment of damages. When the defendant argues that the broken teapots are reparable, it is in effect arguing that the plaintiff should carry out its duty to mitigate damages. The burden is actually on the defendant to show that the plaintiff should repair the teapots and hence mitigate the damage he has suffered. It was open to the defendant to apply to adduce expert evidence on the point but it never did. The defendant would also have had to give notice (probably in its pleadings)that it was going to argue the point. See McGregor on Damages (23rd Edition) at §9-020 which states as follows:
91.I now deal with the condition of each of the five teapots. 92.As mentioned above Lot 1764 (Exhibit 1) has remained intact and will be returned to the plaintiff. 93.Lot 1762 (Exhibit D2) has been damaged in that there is a small chip at the lid and there is a hairline crack on the inside. According to the plaintiff, it cannot be used as a teapot anymore because the water will leak out. It can only be used as a display object. The plaintiff suggests that its reduced value should only be about $15,000. I take the view that it is probably worth a little more. 94.To calculate the loss suffered by the plaintiff, I start off with the agreed value in the Joint Statement at $250,000 – $300,000. I take the median figure of $275,000. I assess that, in its damaged condition, it is now worth 20% of its value when in good condition, that is, $55,000. Thus, I assess the loss suffered by the plaintiff in relation to Lot 1702 (Exhibit D2) to be in the sum $220,000 ($275,000−$55,000). 95.I deal with Lot 1766 (Exhibit D3). The lid is broken with a big crack in the middle right across the tip at the top. The mouth is broken into a few pieces. I do not think that it has any meaningful value even if reparable. I therefore assess the loss at full value which is the median of the agreed value of $300,000 – $320,000, that is, $310,000. 96.I deal with Lot 1765 (Exhibit D4). It has a long crack all over it and has sellotape pasted all over it. I do not think it is reparable. I therefore assess the loss at full value which is the median of the agreed value of $300,000 – $320,000, that it, $310,000. 97.Finally, I deal with Lot 1763 (Exhibit D5). The handle has been broken. It is probably reparable. I assess that, after repair, it is worth 20% of its full value. Its full value as agreed in the Joint Statement is $600,000 – $650,000. I take the median at $625,000. I therefore assess its value after repair to be $125,000 ($625,000×20%). Hence, I assess the loss to the plaintiff to be $500,000 ($625,000−$125,000). 98.In summary, I assess the total damages payable by the defendant to the plaintiff to be as follows:
99.I therefore order that the defendant do pay damages to the plaintiff in the sum of $1,340,000. 100.I also order the payment of interest on the said sum of $1,340,000 from the date of the Writ to the date of Judgment at the rate of 1% over prime rate. 101.There is no reason why the defendant should not pay the costs of the action to the plaintiff and I so order. Conclusion 102.I make the following orders:
103.Lastly, I thank Counsel on both sides for their assistance in this matter.
Mr Ryan T H Law, instructed by Cheung Chan & Chung, for the plaintiff Mr Dixon Co, instructed by Lim & Lok, for the defendant Annexure A
Annexure B
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Cases cited in this judgment