Woo Sih-tseng t/a Luen Tseng Trading Co (A Firm) v. Leung Kwok-yin t/a Kwok Kee Jewellery Co (A Firm)

HCA000651/1976

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 651 OF 1976

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Coram: Morley-John, J.

Date of Judgment: 30th November, 1976

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JUDGMENT

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1. It is agreed in the jewellery trade in Hong Kong that if a prospective customer comes into a jeweller's shop proposing to buy a certain type of precious stone and the proprietor of that shop does not have a suitable stone in stock he will contact a dealer in precious stones, explain his needs, and the dealer will then deliver to the jeweller certain stones on approval for the jeweller to show to his prospective customer. The dealer will, when delivering the stones to the jeweller, place upon each stone a price which he would charge the jeweller if the jeweller is successful in selling any of the stones. Any sum above this price for which the jeweller sells any stone goes to the jeweller as profit. If no sale is effected then the stones are returned to the dealer and no money passes.

2. It was a transaction such as this which arose in this case but the plaintiff, the dealer, alleges that between the time that he delivered a certain cut emerald to the jeweller, the defendant, on approval and the time that the defendant sought to return the emerald to him after no sale had been effected, that is, the time in which the stone was in the defendant's custody, that the emerald was damaged. From the evidence both parties agree that the stone is damaged but the defendant alleges that the stone was in its damaged condition when he received it on approval. In the alternative, if the stone was damaged while in his care, the defendant alleges that he is not liable for the damage as he took all reasonable care of the stone in the circumstances.

3. Mr. Hsuan Chia-chan gave evidence (in the Punti dialect the surname is pronounced Suen, and such surname was used throughout the trial). He said he was the husband of the plaintiff, that he in fact was the expert in gems, and his wife, although the proprietor of the firm, only dealt with accounts, stores and the general administration of the firm. Mr. Suen stated that he was contacted by the defendant firm who were making enquiries about emeralds as they had a prospective customer. He described how he took certain emeralds to the defendant firm. That he first saw a Mrs. Rosemarie Mak with whom he had had previous dealings. That she inspected the stones and then took him to the office of a Mr. Raymond Leung, the son of the defendant. Mr. Suen then said that Mr. Leung and Miss Mak chose three emeralds that they would retain on approval and he then completed a receipt for these stones which was signed by Mr. Leung. The receipt was produced as Exhibit P1. It is a printed receipt in the name of the plaintiff firm and it was signed by Mr. Leung and stamped with the stamp of the defendant firm to the effect that the goods referred to therein had been received on the terms and conditions set out in the said receipt. One of the printed conditions set out on the reverse side of the receipt provided.

"Such merchandise until return to them (the plaintiff firm) and actually received are at your risk from all hazards."

The value of the stone in question, one cut emerald, weighing 4.98 carats, was quoted on the receipt at $22,000 per carat, making a total price of $109,560. Mr. Suen confirmed that this was the price that the defendant would pay the plaintiff if the defendant was successful in selling this stone to the prospective customer. Mr. Suen also stated that he examined the three stones before he handed them over to Mr. Leung and all of them were in an undamaged condition. Mr. Suen described how subsequently after several telephone calls Mrs. Mak informed him that the three stones could not be sold and would he please take them back. He said that he went to the defendant's shop and received the three stones from Mrs. Mak, that he examined the stones in her presence and found the emerald in question had been damaged, that the edge had been cracked. He said that you did not have to be an expert to notice this crack. He pointed this out to Mrs. Mak and although he took back the two undamaged emeralds he refused to take back this damaged emerald.

4. Mrs. Mak, who has since gone to the United States of America, in evidence taken de bene esse before the Registrar, corroborated Mr. Suen's evidence that she had originally examined the emeralds, that three were chosen, and she agreed that she examined the emerald in question and it was not damaged when received by Mr. Raymond Leung. That none of the stones were cracked. She further stated that if the stone in question had been cracked then it would not have been worth $22,000 per carat. Mr. Suen had previously said that he would not expect any jeweller to accept a stone cracked as is the emerald in question at a value of $22,000 per carat.

5. Mrs. Mak explained how the three stones were not sold, and that Mr. Raymond Leung handed her back the three stones and told her to return them to Mr. Suen. Mrs. Mak said that she unwrapped the stones to examine them and found that one had a crack in it which it did not have when she examined it previously. She said it was a very obvious crack clearly visible to the naked eye. That she pointed out this crack to Mr. Leung who merely told her to return the stone to Mr. Suen. She explained how Mr. Suen refused to take back this emerald because it was cracked.

6. Mr. Raymond Leung, the Manager and son of the proprietor of the defendant company, gave evidence for the defendant and he explained how as several buyers were coming from Japan with the intention of buying high grade emeralds he asked Mrs. Mak, who was in charge of the jewellery section of his father's firm, to ask her contacts to bring emeralds to him for his inspection, with the ultimate aim of his firm to sell any such emeralds he chose to the prospective customers at a profit. In evidence Mr. Leung said that he examined the stones produced by Mr. Suen including the emerald in question. He was asked if he saw a crack on the stone, and his reply was:

"I did not pay particular attention to the stone I did not notice."

Again he was asked when he first noticed the crack in the stone and Mr. Leung said that it was when Mr. Suen told him about it, although Mrs. Mak said that she had called his attention to the crack before she tried to return the stone to Mr. Suen. Mr. Leung then said that he did look at the stone carefully before he accepted it on approval from Mr. Suen, and when asked then why could he not say if there was or was not a crack in the stone when he received it he said that the possibility of overlooking the crack could exist. Therefore, at its face value Mr. Raymond Leung's evidence amounts to the fact that he could not say definitely whether such crack existed in the stone when he received it. Unless Mr. Leung has behaved in a very careless and irresponsible manner I find it very hard to believe that he did not carefully examine the stone in question before he accepted it on approval. He signed the receipt for the stone on which the price of the stone was set at $22,000 a carat ($109,560) agreeing to the condition in the receipt that whilst the stone was in his custody he was responsible for any loss or injury occurring to the same. Another jeweller, a Mr. Wong Hon-chong, called by the defendant, stated that if he took a stone under the conditions contained in the receipt, Exhibit P1, he would examine such stone very carefully indeed before he signed such a receipt.

7. Mr. Leung was hoping to sell this stone at a profit. If it had been cracked when he examined it surely he would have noticed it and realised that such a stone so cracked was not worth $109,560. I am satisfied from the evidence of Mr. Suen and Mrs. Mak that the emerald in question was not cracked when it passed into Mr. Leung's custody and I am satisfied that such stone subsequently became damaged whilst in Mr. Leung's custody. I am satisfied that Mr. Leung is an employee of the defendant and as such the defendant is liable to the plaintiff for the damage caused to the emerald.

8. The plaintiff claims the sum of $109,560, being the price of the said emerald, that is, 4.98 carats at 22,000 per carat, or alternatively damages. As to the question of damages, certain evidence was adduced as to how the emerald could be "repaired", that is, by repolishing, and if such repolishing was successful by how much would the original value of the stone be reduced. However, evidence was also adduced that an emerald being a very brittle stone may well break when being repolished. The plaintiff stated that he wanted the defendant to retain the emerald and pay him the price contained in the receipt and thereafter either try to sell the emerald in its damaged state or to have the stone repolished thereby taking the risk himself of it breaking in the process. I am satisfied that this is the fairest solution to the problem, therefore, I give judgment for the plaintiff in the sum of $109,560 and that the defendant retain the emerald in question as his property. The plaintiff also claims damages at the rate of 8% and I allow this claim for interest at 8% on the sum of $109,560 from 10th November 1975 until payment of the judgment debt.

9. Although the defendant filed a defence and counterclaim, no reference was made to this counterclaim at the trial, and such counterclaim is dismissed.

10. I therefore give judgment for the plaintiff in the sum of $109,560 together with interest and costs.

Representation:

Mr. A.M. Niamatullah, instructed by (Sousae & Hoosen) for the plaintiff.

Mr. R. Kotewall, instructed by (Woo, Kwan, Lee & Lo) for the defendant.