PHILIP MA CHING YEUNG v. EMDIA LTD t/a SIBA CO

HCA 15596/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15596 OF 1998

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J U D G M E N T

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1.  At the material time, being 1994 and 1995, the plaintiff was in the market to purchase jewellery in recognition of his forthcoming wedding.  To this end he engaged the services of the defendant, a retailer of jewellery carrying on business at the Mezzanine Arcade of the Mandarin Hotel.  After several visits culminating on 14 October 1994, the plaintiff chose and purchased a platinum and diamond engagement ring and a loose diamond at the price of $805,300.00.  Edward Abram had conduct of the sale for the defendant and wrote out the invoice, numbered 2210.  The price was not then and has not since been paid.

2.  Thereafter, attention focused on additional items of jewellery which the plaintiff wanted to buy in time for his bride to wear at the wedding which was scheduled for late February.  They were shown a pendant comprising a natural ruby from Burma.  In due course, he came to agree with Mr Abram that the defendant would make up a set comprising the pendant and a bracelet, ring, necklace and earrings, all featuring rubies from Burma commensurate with the one in the pendant, for a purchase price of $4.5 million.  But when in mid-January Mr Abram pronounced the set to be ready, it was apparent that many of the rubies were inferior in colour, quality and finish and few matched the benchmark sample that the plaintiff had inspected and approved and been promised.  It is his case that with time running out it was agreed that they would take the jewellery in its then state so that it could be worn at the wedding, and that afterwards Mr Abram would have the inferior stones replaced with those of a standard that the parties had contracted for.  On this basis, the plaintiff was prepared to pay in full the purchase price and take delivery, whilst withholding that amount due under invoice 2210 until the replacement of the rubies had been completed.

3.  So it was that Mr Abram wrote out the invoice for $4.5 million and the plaintiff paid that sum.  It is pertinent that in the description of each of the five items he recorded the principal stones as ‘Burma ruby’ as an obvious indication that the source of the rubies was to be that country.  In respect of the single ruby in each of the pendant and ring, he attached a Gubelin certificate, certifying the country of origin as Burma.  That for the pendant had this commentary: ‘no indication of thermal enhancement’.

4.  It is the plaintiff’s case that although Mr Abram was approached many times to honour the obligation he had made for the defendant to change the stones that was never to happen.

5.  Then it was, come March 1998, that the defendant threatened a suit to recover the amount due under invoice 2210.  This prompted a response from the plaintiff rejecting the sub-standard jewellery and demanding a refund of $4.5 million.  Meanwhile, the plaintiff had the jewellery, specifically the rubies, examined by gemologists at the SSEF Swiss Gemological Institute (SSEF) to establish the nature of the stones.  The report came back to the effect that many of the stones were from Thailand, some had been subjected to the treatment known as thermal enhancement and of those many were tarnished with artificial glassy residues.

6.  With no settlement in prospect, the plaintiff issued these proceedings in September 1998.  Since then there have been various milestones, including a default judgment, reinstatement by consent, an application for summary judgment by the defendant on its counterclaim to recover the invoiced $805,300.00 (which failed) and amended pleadings in November 2002.  None of this, except for the amended pleadings, is now relevant, save that it does to an extent explain why the case has taken so long to come to trial.

7.  As now amended the statement of claim records the plaintiff’s claim to recover the purchase price of $4.5 million or in the alternative damages, based on the reduced worth of the sub-standard jewellery; in either case less the amount due under invoice 2210.  The defence as pleaded is that there was no agreement for the defendant to replace any of the rubies after the wedding or at any time; that the plaintiff had taken delivery of the jewellery and paid for it, to complete the contract.  The demand that the rubies be replaced or the price refunded emerged only for the first time in 1998, when the defendant put the heat on to recover the amount due to it under invoice 2210.  The defendant denied that some of the stones were from Thailand not Burma, and denied they were otherwise inferior in quality.  On the issue of thermal treatment: that is a normal and common process and accepted practice in the jewellery trade.  Denying thus any liability, it counterclaimed for the sum of $805,300.00.

8.  There was also pleaded the defence that the cause of action for breach of the agreement to sell and buy the jewellery having been pleaded in an amended statement of claim filed after 6 years had elapsed, the same is now time-barred.

9.  With directions for trial then pursued, the defendant’s solicitors lost touch with their client and were given leave to withdraw.  Thereafter the defendant has taken no steps.  Formal and appropriate notice was sent to its registered office, but there was no representation or otherwise attendance at the trial; thus no evidence to counter that which formed the plaintiff’s case.

10.  What were produced for the plaintiff were the reports from SSEF, handed in by their author, Professor Hänni.  He is an accredited and experienced expert in the study of gems, and I had no reason to doubt his expertise.  The stones were subjected to microscopic inspection and chemical testing, and yielded the results I have already referred to.  Professor Hänni said that the benchmark stone, the one in the pendant, was a high quality natural ruby from Burma.  Burmese rubies are of a higher quality than those from Thailand, and are thus more valuable.  He said that thermal enhancement has become an increasingly common treatment that stones having some inherent defect, such as an inferior colour or tint, might be subjected to, to improve the visual attributes of the stone.  But a stone that has been treated is less precious than its natural counterpart; furthermore, the treatment can result in the forming of artificial glassy residues, as was present in some of the stones in this jewellery.

11.  The plaintiff engaged another expert, Mr Eric Wong of Ideal Gemmological Laboratory Pte Limited of Singapore.  Mr Wong’s area of expertise, as I accept, is in the valuation of precious stones primarily for insurance purposes.  He assessed the worth of the jewellery contracted for, had it comprised Burmese natural stones, at the price paid, namely $4.5 million.  By now the value would have increased by 30%, to $5.85 million.  The set actually supplied, being sub-standard, was worth only $1,827,500.00, so that the plaintiff paid $2,672,500.00 more than he should, and has lost out on the appreciated worth.  He also said that in fact a heat-enhanced stone bought in 1995 would be actually worth less now, because so many inferior natural stones are given the treatment to meet an enhanced demand for rubies.

12.  The plaintiff and his wife also gave evidence.  Both said that when the set was offered to them just before the wedding, many of the stones were visibly imperfect; that they were scratched and of neither good cut nor finish and were clearly inferior to the benchmark stone, as was borne out in the report by SSEF.  But for the promise by Abram that he would make good by replacing the stones after the wedding, the plaintiff said he would not have taken the jewellery or paid the purchase price.

13.  And so now to my findings.  I have no evidence to counter that given by the plaintiff and his wife as to the circumstances surrounding the giving and taking of delivery of the jewellery.  It is, moreover, apparent that most at least of the rubies did not match the benchmark ruby in the pendant; in particular, many were not Burmese and that was contrary to their description in the invoice.  I also accept that whilst heat enhancement is a common enough treatment, it is the mark of an inferior stone. Professor Hanni said as much, and it was quite apparent from the flaws in those stones enhanced that this must be so.  Furthermore, the Gubelin certificate pronouncing the benchmark stone as having no indication of thermal treatment was tantamount to that.  Therefore, I accept that the plaintiff would not in the normal course have taken delivery of the jewellery as it was presented to him, but only did so because by agreement the defendant would, post the wedding, make good by replacing the sub-standard stones.  I accept also that the plaintiff has not been in breach of the contract to purchase the jewellery itemized in invoice 2210, because payment of that was to coincide with the replacement of the rubies.

14.  As to the pleaded defence that the plaintiff’s claim is time-barred; I find nothing to the point.  The proceedings issued in 1998 well within 6 years of the contract that was in breach.  No new cause of action emerged when the amendments to the pleadings came about in November 2002.

15.  The plaintiff shall be entitled to judgment.  By virtue of the defendant’s non-appearance, he asks for damages in lieu of restitution of the purchase price.  I accede to that.  I assess his loss at the overpayment of $2,672,500.00 plus the enhanced worth of $1,350,000.00 less the set-off of $805,300.00, making a total of $3,217,200.00.

16.  The counterclaim is dismissed.

17.  Costs, nisi at first instance, are to the plaintiff.