So Ji Ting t/a Kartier Skincare Centre v. Medipro Ltd
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DCCJ 3760/2010 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3760 OF 2010 _______________ BETWEEN
_______________ Coram: Before Master I. Wong in Court Date of Hearing: 25th and 26th April, 2012 Date of Handing Down Decision: 23rd May, 2012 __________________________ ASSESSMENT OF DAMAGES __________________________ 1.The Plaintiff is operating a beauty centre. This assessment concerns a defective laser skin care treatment system (“the Machine”) that she purchased from the Defendant. 2.The hearing was conducted in Punti but since all the pleadings and most of the documents are in English, with the consent of the parties, this judgment is given in English. 3.The Defendant is acting in person. Ms. Tsang attended the hearing before me on the strength of an authorization letter signed by her for and on behalf of the Defendant. She claimed that she was the sole director and shareholder of the Defendant. This was confirmed by the search records obtained by the Plaintiff. In light of this, despite the fact that the requirements under Order 5A, RDC had not been complied with, I allowed Ms. Tsang to appear for the Defendant. 4.Before I go into the assessment I need to turn to the two applications for adjournment first. I refused both applications. I have already given my extempore rulings. For the sake of completeness, I set them out below. The 1st Application for Adjournment 5.The first application was by the Plaintiff at the commencement of the trial. Ms. Chow, for the Plaintiff, sought an adjournment for 2 months so that the Plaintiff might file and serve her witness statement and seek leave to adduce expert evidence on the value of the Machine. Ms. Chow, however, was not able to explain why these matters had not been done prior to the hearing. 6.In order to put the application in proper perspective, I need to set out the brief history of these proceedings. 7.The Writ of Summons was issued on 2nd November 2010. Since the Defendant did not file any notice of intention to defend, interlocutory judgment was entered with damages to be assessed with costs on 29th December 2010. 8.By a letter dated 6th January 2011, the Plaintiff's solicitors notified the Defendant that directions regarding discovery and exchange of witness statements applied automatically under O. 37, r. 1, RDC. Despite that said, no witness statement was ever filed by the parties and the Plaintiff went straight to assess her damages on 20th April 2011. Pausing here, one could readily realise that that hearing took place more than a year ago. What I gathered from the records were that when the case was heard on that date, realising that the Plaintiff was ill-prepared, Ms. Cheng, the solicitor then appearing for the Plaintiff, applied for an adjournment so that she could file witness statements and adduce expert evidence. 9.The learned Master granted the application and adjourned the assessment sine die with liberty to restore with costs reserved. 10.Then one year went by, as far as I could see, except that an expert report on the value of the Machine was obtained on 17th June, 2011 (“the Report”), the Plaintiff had done nothing to cure the deficiencies. Even as regards the Report, for reasons only known to the Plaintiff’s solicitors, it was not until as late as 11th April 2012 that the same was served on the Defendant. In the absence of any explanation, the only inference I could draw is that the Plaintiff's solicitors had not been diligent enough in the preparation of the case. 11.Ms. Tsang did not really oppose the application. Indeed, she expressed that there was little time for her and the Defendant needed at least 6 months and probably more to consider the case. She complained that it was not until 20th April 2012 that the Report was served on her. However, faced with the Plaintiff's affirmation that the Report was in fact served on 11th April 2012, Ms. Tsang then changed to say that it was on 20th April 2012 that her staff put all the documents on her desk. She complained that she and her solicitor did not have sufficient time to study the Report. But upon inquiries, it became clear that what she meant was she knew a solicitor in the name of Ms. Tse who had talked with her about 6 months ago on another matter. 12.The Defendant was fully aware that judgment had already been obtained in favour of the Plaintiff. Ms. Tsang was also present in the adjourned hearing last year. It is crystal clear that the Defendant had equally done nothing whatsoever during this protracted period of time. Even when she was served with the Report on 11th April, 2012 (i.e. 2 weeks before the hearing) and then the rest of the documents, she virtually did nothing. In my view, what she said was absurd. Given that default judgment had been entered, I have no doubt that the Defendant had every intention to procrastinate. 13.A trial date is a milestone date and the court should not grant an application to vary it unless there are exceptional circumstances justifying the variation: O. 25, r. 3, RDC. 14.In my view, there was simply a dearth of reason to justify an adjournment. I refused the application. The 2nd Application for Adjournment 15.The second application was made in the afternoon when Ms. Tsang was in the middle of her cross-examination on Mr. Ng, the Plaintiff’s expert. 16.Initially, Ms. Tsang claimed that she had evidence to show how a proper inspection or testing could be carried out on the Machine but upon perusal of the documents that she intimated would like to discover, I noted these documents were merely the invoice, cargo delivery and correspondences between the parties, and perhaps except the blank Maintenance Application Form (客户保養申請書) they had either been filed or discovered. Ms. Tsang then indicated that the Defendant wanted to have the judgment set aside so thatboth liability and quantum could be challenged. She reiterated her grievances over having insufficient time to respond to the Report. 17.I have already drawn my observation on the Defendant’s attitude; I would not repeat the same here. Suffice it to say is that this was an 11th hour application. The Defendant has had ample time since November, 2010. I saw no merit in her application. I have no doubt that it was Ms. Tsang’s last-ditch attempt to avoid the outcome of the proceedings. 18.I have not lost sight of the fact that the Plaintiff’s two Supplemental List of Documents were filed 18th and 19th April, 2012 only, but I noted apart from the expert’s invoices for his services and the correspondences by the Plaintiff’s solicitors to the Defendant, all the others were the Defendant’s own documents. In any event, Ms. Tsang did not take issues on the Lists of Documents. 19.I did not find any valid reasons for the application, so I refused. 20.I should add that at the end of first day’s hearing, I adjourned the hearing to 4:00 p.m. the next day (i.e. 26th April, 2012) pending the preparation of the Plaintiff’s Statement of Costs but the Defendant did not grasp this opportunity to seek legal advice or to file an application to set aside, which could easily have been done at the Registry. Even up to the time of handing down this judgment, no application whatsoever has been taken out by the Defendant. The Plaintiff’s Case/Evidence: Was there a breach of implied condition of merchantable quality? 21.The Plaintiff would need to juggle along without any witness evidence. In this connection, I expressly reminded Ms. Chow that as an advocate, she should not overstep herself by giving evidence from the bar-table. 22.As the Report had been discovered, I did not see any prejudice caused to the Defendant in allowing the Report to be adduced as evidence and to allow its maker Mr. Ng to give evidence. 23.By making default in giving notice of intention to defend, the Defendant admitted all the allegations in the Amended Statement of Claim (“the Amended SOC”) indorsed on the Writ: see: para. 13/0/10 Hong Kong Civil Procedure 2012. 24.The question is whether the Amended SOC is sufficient. The relevant parts of the Amended SOC are as follows,
25.In my judgment, the facts pleaded together with the evidence that I shall deal with in due course support a case of breach of implied condition that the Machine was not of merchantable quality under Section 16 of the Sale of Goods Ordinance, Cap. 26. 26.Ms. Tsang of the Defendant admitted that the Plaintiff was the Defendant’s usual customer, the Machine was sold in the course of the Defendant’s business and at the time of the contract, she knew that the Plaintiff purchased the Machine for treating her customers. 27.Ms. Tsang also agreed that printed information and the User Manual of the Machine (p. 36 – p 68 of the Bundle) had been provided to the Plaintiff at the relevant time. 28.According to these undisputed evidence, the Machine should be capable of emitting laser-beam and should be capable of performing on 2 Wave-lengths (being 532 nm and 1064 nm)[1] and with energy levels varying from 45 mj to 850 mj. [2] Different types of treatment require different energy levels to be engaged. They range from the lowest for the treatment of freckle and lentigines (which require an energy level up to 110 mj at the wave-length of 532nm) to the highest for the treatment of removal of nevus, which requires an energy level of 850 mj at wave-length of 1064 nm. 29.Seven kinds of treatment utilizing energy levels ranging from 45 mj to 160 mj are suitable for the wave-length of 532 nm whilst six other kinds of treatment were suitable for wave-length at 1064 nm with energy levels from 200 mj to 850 mj. It seems to me clear that higher wave-length alongside with higher energy levels are apt for more stubborn cases. 30.According to the Amended SOC, it was more often the case that a lower energy level would be employed (para. 6) but the Machine was not able to work at an energy level below 600 mj at the beginning (para. 5) and later nothing lower than 700 mj (para. 8). The sequel was that the Machine was not able to perform most of the treatments that it claimed to be capable of performing. Clearly, the Machine was not fit for the Plaintiff’s purpose for which the Defendant was well aware of. I am of the view that the Machine was not of merchantable quality and this was a breach of the implied condition under s. 16 of the Sale of Goods Ordinance, Cap. 26 (“the Ordinance”). Such breach would entitle the Plaintiff to treat the contract as repudiated and to reject the Machine. The Plaintiff did purport to reject it by delivering it back on 27th August, 2010 but was refused by the Defendant. Was the Plaintiff entitled to Reject? 31.The question is whether the Plaintiff was entitled to reject. If the Plaintiff had accepted it, its right to reject would be lost. The Plaintiff’s damages would then have to be assessed on different principles pursuant to section 55 (Remedies for breach of warranty) of the Ordinance which I shall deal with in due course. 32.On acceptance, the relevant provisions are in section 37 of the Ordinance, which state as follows,
33.In the present case, there is no evidence that the Plaintiff had previously examined the Machine before delivery. I think probably she had not. Therefore, she should have a reasonable opportunity of examination for the purpose of ascertaining whether the Machine was in conformity with the contract: s. 37(2)(a). 34.The Amended SOC pleaded that the price was fully paid on 30th April, 2010 and according to the Cargo Delivery, the Machine was delivered to the Plaintiff on 21st April, 2010. However, it was not until 28th June, 2010, nearly 2 months later, that the Plaintiff started to use the Machine. Though there is no evidence indicating one way or the other, it is hard to believe that the Plaintiff had not had a reasonable opportunity of examining the Machine since delivery for the purpose of ascertaining whether it was in conformity with the contract. In this regard, I noticed that the “Remarks” of the Cargo Delivery stated, “Demonstration period of the above-mentioned laser machine on 21st to 27th April, 2010”, indicating that demonstration had been carried out. 35.The Plaintiff would also be deemed to have accepted when after the lapse of a reasonable time she retained the goods: s. 37(4). What is a “reasonable time” is a question of fact: s. 58 of the Ordinance. In general the buyer is entitled to a reasonable time during which he may assess the defects and decide what to do: but if his delay is necessarily prejudicial to the seller’s rights, it may be held unreasonable: see Chitty on Contracts Hong Kong Specific Contracts, 2nd Edition, at para. 11-255. 36.There was a lapse of some 4 months before the Plaintiff returned the Machine. Given that she might need some time to assess the defects, I do not think this could conclusively be construed against the Plaintiff. 37.However, what is most detrimental to the Plaintiff is that after the Machine had been delivered, what she did in relation to it was inconsistent with the ownership of the Defendant and it is that the Plaintiff had entered into a Hire-Purchase Agreement on 30th April, 2010 in respect of the Machine with a finance company, obviously for financing the purchase. I do accept that strictly legally speaking under the Agreement, the Plaintiff was merely a hirer and she was not the owner yet, but entering into such an agreement meant that the property in the Machine had passed and hence the same could not be returned to the Defendant. I have to make it clear that I am not referring to physical delivery but delivery on the legal sense. This situation is similar to one where the purchaser has mortgaged the goods and it has been held that the purchaser would have lost the right to reject: Metals Ltd. v. Diamond [1930] 3 D.L.R. 886. Further, in general, if the purchaser is unable to return the goods, for instance he has sub-sold them to a sub-purchaser, he loses his right to reject: see Benjamin’s Sale of Goods, 8th Edition, at para. 12-053. Even if I were wrong on this point, the Hire-Purchase Agreement was a clear intimation that the Plaintiff had accepted the Machine. The Measure of Damages 38.I therefore find that the Plaintiff lost her right to reject. The implication is that the Defendant’s breach is to be treated as a breach of a warranty. The appropriate measures of damages are prescribed under s. 55 of the Ordinance,
39.The prima facie measure of damage is the difference between the value of the Machine at the time of delivery and the value it would have had if it had answered to the warranty: s. 55(3). The Value of the Machine 40.The Plaintiff relied on the Report prepared by Mr. Ng who also gave evidence as an expert. 41.Ms. Tsang challenged Mr. Ng’s competency for the reason that Mr. Ng had not attended any course of study on medical laser equipment for engineer or obtained any relevant qualification. She contended that the reliability of Mr. Ng’s evidence is in doubt. 42.Mr. Ng is employed as an Engineering Surveyor by a loss adjusters company. Whilst he accepted that he did not have the qualification as mentioned by the Defendant, he maintained that he had the required qualification and experience. He is registered as an Incorporated Engineer with the Engineering Council and a member of the Operation Engineer Society of the United Kingdom. He is also registered as a Mechanical Engineer and a member of the Chinese Mechanical Engineer Society of the Mainland. 43.Mr. Ng explained that for the last 35 years he has been carrying out surveys for banks and financial institutions on the values of various types of machines for hire-purchase or mortgage purposes or when the lessees or mortgagors failed to honour payments, to value and test their functionality. He said that in recent 10 years or so, he has been frequently instructed to survey similar type of machines that utilise laser technology such as those used for beauty treatments and in eye-clinics. 44.Despite Ms Tsang’s challenges, I accept that Mr. Ng is a seasoned surveyor and has the experience and qualification to give evidence as an expert on the value of the Machine. 45.Mr. Ng inspected and tested the Machine twice on 9 June and 14 June, 2011, some one year after the incident. In evidence, he was essentially asked to elaborate on the Report. For the purpose of assessing the Plaintiff’s quantum, I do not think it is necessary for me to set out the details on how he tested the Machine because the Defendant is taken to have admitted the non-merchantable quality of the Machine. Suffice it for me to say is that the result of the testing by Mr. Ng a year later showed that, as far as functionality was concerned, there was no marked difference from what were pleaded on the Amended SOC. 46.The quality of the questions that Ms. Tsang put to Mr. Ng showed, contrary to what she claimed, she was well prepared for the trial. She mounted her challenges on every aspect she could think of. 47.Ms. Tsang challenged that the testing of this type of machine needed special apparatus but instead, Mr. Ng just used a piece of paper to test whether the laser was working, i.e. to see whether the laser beam could burn the piece of paper. She also suggested that as the Machine had been laid idle for a long time, some parts or perhaps important parts had gone missing, there would be dust or mould or presence of humidity or even mishandling so that the functionality of the Machine might have been adversely affected. Ms. Tsang even suggested that the Machine could be repaired or with suitable apparatus, the energy level could be tuned up. To all these, Mr. Ng fairly accepted that he could not rule out the possibilities. He replied that his duty was to test the functionality of the Machine but not to repair it. 48.Of course, it is a matter of commonsense that anything could have happened but Ms. Tsang’s fallacy is that she is merely speculating. She agreed that she is a layman and she is not able to specify what apparatus is there for the tuning up of the Machine. The Defendant did not even inspect the Machine, let alone producing a report of its own. There is simply no concrete evidence in support of her challenges. 49.When Mr. Ng did the testing, he used another machine of different brand and model but applying the same laser system for comparison. Ms. Tsang doubted whether the comparison is meaningful. She emphasised that Mr. Ng should have used the same brand and model for comparison. 50.I do not think I need to rehearse all her challenges here. All in all, Ms. Tsang contended that Mr. Ng’s evidence is unreliable. 51.As the Defendant is taken to have accepted the Machine was not of merchantable quality at the time of delivery, Mr. Ng’s testing, which was conducted more than one year later, obviously would not be of any relevancy to the issue of merchantable quality. 52.I accept that if the Machine could be repaired or tuned up, this would affect its value but as I said, these suggestions are mere speculations. 53.Mr. Ng explained, both in the Report and in evidence, that the price of a brand new model would include treatment manipulation course and subsidiary products such as consumables but it is not the case for used models. For these reasons, used models do not fetch a high resale price. Further, the rapid change in knowledge of skin enhancement equipment would further lower the price. On that basis, Mr. Ng assessed the market value of the Machine to be from $2,500 to $10,000. This would be the price from recycle traders. 54.I find this opinion reasonable. As a matter of fact, this opinion was not met with challenges from Ms. Tsang. However, the date on which he made the valuation was roughly one year after the delivery, the Machine then should be in better shape. I would take this into consideration but I would not give any weight to the possibility of repairs or tuning up. 55.I do not think there is anything which warrants a departure from the prima facie rule. Considering all the evidence before me, doing the best I can, I would assess the value of the Machine at $10,000. 56.The Plaintiff claims for the full refund of the purchase price. This cannot be right. The purchase price is $140,000. The value of the Machine that it would have had if it had answered the warranty is clearly this sum. The damages are therefore $130,000 ($140,000 - $10,000). Delivery Charges 57.As shown on the Defendant’s invoice, it appears that $800 is the charge for the delivery of the Machine to the Plaintiff. For the reason that the Plaintiff is not entitled to reject the Machine, I do not think she is entitled to the same. Likewise, there is no basis for the Plaintiff to claim for the charges incurred in the return of the Machine in the sum of $910. Rentals 58.The Plaintiff’s case is that since she was not able to use the Machine, she had to lease another similar machine from one E-Force Technology Limited from September, 2010 to April, 2011, thereby incurring $36,682. I do not think the Plaintiff is entitled to the same. With $130,000, the Plaintiff is being put into the position she would have been in had the warranty been satisfied. Even if she had not purchased the Machine from the Defendant, she would have either purchased or leased an alternative from someone else anyway. If she is further awarded this sum, it means that she would be provided with the use of the machine free of charge. This would be tantamount to allowing double recovery. Conclusion 59.To sum up, the Plaintiff’s damages are assessed at $130,000. 60.I order the Defendant do pay the Plaintiff $130,000, with interest at the rate of 8% per annum from the date of the Writ to the date of this judgment and thereafter at judgment rate until payment. Costs 61.The Plaintiff elects summary assessment. The Statement of Costs gives a total sum of $39,216, inclusive of expert’s fees. 62.The adjournment of the hearing of 20th April, 2011 was apparently due to the incompetency of the Plaintiff’s legal representatives. I think it is just that the Defendant be given the costs of that hearing. By way of summary assessment, I would award costs in the sum of $300 in favour of the Defendant for the hearing of 20th April, 2011. 63.Taking a broad-brush approach and considering that this is a straight forward case, I assess the costs of this action at $32,000. After deducting the $300 that the Plaintiff has to pay to the Defendant, the net amount is $31,700. 64.I order that the Defendant do pay the costs of this action by way of summary assessment in the sum of $31,700.
Representation Ms. Chow Suk Kum of K.Y. Lo & Co., Solicitors for the Plaintiff Ms. Tsang Pui Kee Viola, director of Medipro Limited, the Defendant (in person) present [1] nm stands for nano-meter, the numbers of nm (e.g. 532 nm) indicate how many nano-meters for a full wave-length of the laser light [2] mj stands for megajoule, an energy measurement unit |