MODERN BEAUTY SALOON LTD v. ESTH'EDES INSTITUTE LTD

DCCJ22653/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATION REGION

CIVIL ACTION CASE NO 22653 OF 2001

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JUDGMENT

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1. The plaintiff, managed and owned by a Ms. Joyce Tsang and her husband, is a company running a number of beauty saloons in Hong Kong. The defendant company, managed by a Mr. Edward Wong, is the supplier of spa equipment, beauty therapy equipment and related products.

2. Since late 1999 the plaintiff had been patronizing the defendant company for the purchase of various fitness equipment. Apart from the spa equipment, the plaintiff also purchased mud and seaweed envelopment therapy equipment known as "Thalatherm" ( commonly known as a "mud tank" to the plaintiff ) from the defendant.

3. In January 2000 the plaintiff acquired 1 set of Thalatherm from the defendant company for HK$120,000. In September 2000 the plaintiff again obtained another set of Thalatherm from the defendant for HK$110,000. On 30/5/01 the plaintiff obtained further quotation from the defendant company for the supply of a third mud tank. The defendant offered to sell to the plaintiff a more modern version of the mud tank called Thalatlantis. After negotiation, the parties agreed to reduce the purchase price of the Thalatlantis from HK$128,000 to that of HK$123,000.

4. Mr. Chan Wai of the plaintiff negotiated the purchase of the mud tank with Mr. Edward Wong of the defendant. According to Mr. Edward Wong the reduction in price was to account for the dispensation of the installation service. A deposit of HK$61,500 was paid by the plaintiff and received by the defendant on 8 June 2001. The product was scheduled for delivery 4 weeks after the purchase was confirmed. The mud tank arrived Hong Kong in July 2001.

5. It was the plaintiff's evidence that the reduction of the purchase price has nothing to do with the installation requirement. According to Ms Joyce Tsang of the plaintiff, dispensation of installation was never mentioned in the negotiation process and she believed installation was an item of implied service to be supplied by the defendant along with the sale of the product.

6. As the plaintiff was unable to take delivery of the mud tank upon its arrival in July 2001, the plaintiff requested the defendant to store the mud tank on its behalf. Plaintiff also agreed to pay the defendant a weekly storage charge of HK$800 from 1/8/01. Pursuant to the agreement, the defendant deposited the mud tank with Hang Cheong godown since its arrival from France.

7. Through subsequent communications made between the staff of both parties, the mud tank was arranged to be delivered to the new branch shop of the plaintiff at Admiralty Centre on 17 September 2001.

8. The Admiralty shop of the plaintiff was still under decoration on 17 September 2001. When the delivery agent of the defendant arrived with the mud tank by noon on 17th September the plaintiff's shop in Admiralty Centre was cluttered with building materials and debris. The corridor and the door leading to the Jacuzzi room in which the mud tank was instructed to be placed was too narrow for the mud tank to be brought in without risking damage to the equipment.

9. Mr. Edward Wong of the defendant was advised of the problem by the delivering agent, whereupon Mr. Edward Wong attended the plaintiff's Admiralty Centre shop round about 4pm. It was Mr. Wong's assessment that an internal partitioning wall of the shop had to be demolished to facilitate the moving in of the mud tank to the Jacuzzi room. Mr. Edward Wong spoke to Ms Joyce Tsang of the plaintiff over the phone. Ms Tsang did not agree to the demolition of the wall and suggested Mr. Wong to take the mud tank apart for the purpose of bringing the mud tank into the Jacuzzi room. Ms. Tang did not agree to exempt the defendant from liability for damage done to the mud tank in the process of dismantling or conveying the tank to the Jacuzzi room. Mr. Wong was of the opinion that the bringing of the mud tank into the Jacuzzi room, without demolishing some of the partition walls within the premises, was physically impossible in light of the dimension of the internal layout of the shop.

10. By 5 pm there was still no sign of the attendance of any responsible person of the plaintiff at the Admiralty shop to take delivery of the mud tank. Judging from the response of the plaintiff Mr. Edward Wong was of the opinion that the plaintiff intentionally refused to accept delivery of the mud tank. He gave instruction for the delivery agent to repack the mud tank and to transport the mud tank back to the warehouse for storage. The only person whom Mr. Wong was able to speak to at the plaintiff 's Admiralty shop throughout the incident was a decorator by the name of Eric Poon.

11. Subsequent letters were exchanged between the plaintiff and the defendant. None of the communication was successful in resolving the differences between the parties. The plaintiff insisted the mud tank must be delivered to the Jacuzzi room at Admiralty Centre while the Defendant, in light of its experience on 17th September, insisted to have full payment of the purchase price and the storage and delivery charges before another delivery would be made. Final demand was made by the plaintiff through its solicitors on 8/10/01 for waiver of the storage charges after 22/9/01 and for delivery of the mud tank to the Jacuzzi room of the plaintiff's Admiralty shop within 3 days. As the defendant was not prepared to attempt a second delivery without settlement of all outstanding charges, the dispute was never resolved.

12. On 28 Jan 2002 the plaintiff took out a writ of summons to sue the defendant for non-delivery and claims :-

(a) specific performance of the contract for the delivery of the goods; and alternatively

(b) return of the deposit of HK$61,500;

(c) loss and damages for breach; and

(d) interest.

13. The defendant denies the plaintiff's claim and counterclaims for damages in respect of the plaintiff's non-acceptance of the goods and seeks the following reliefs:-

(a) specific performance of the contract; and alternatively

(b) damages in respect of its counterclaim for the following:-

(i) godown charges at HK$800 per week from 1/8/01 until re-sale of the goods;

(ii) transportation charges of HK$2000 and repacking charge of HK$500 incurred on 17/9/01;

(iii) the loss of profit in respect of the difference of the sale price of HK$123,000 and the re-sale price of HK$60,000;

(iv) the costs of re-sale; and

(v) interest.

14. At the hearing neither the plaintiff nor the defendant wished to proceed with their claim for specific performance. It was the defendant's evidence that the mud tank had been sold to a Singaporean merchant on 23/11/02 for HK$60,000. It was the plaintiff's contention that she had bought a replacement mud tank from another supplier. The invoice produced by the plaintiff showed the purchase of a mud tank from another supplier on 8/9/00, about a year before the occurrence of these events.

Court Ruling

15. The questions this court needs to resolve are:-

(a) What were the terms of the sale contract?

(b) Which party was in breach?

(c) Quantum of damages of the innocent party?

Terms of the Sale Contract

16. The only written document to witness the terms of the sale was a letter of the defendant of 30/5/01 giving the plaintiff quotations for various equipment including the Thalatlantis. On this letter was the signature of the husband of Ms Joyce Tsang, the plaintiff's chop and the hand written amendment of the purchase price from that of HK$128,000 to HK$123,000. No further letter of confirmation was issued by the defendant. The only service promised in the 30/5/01 letter was " Our prices for the above equipments including delivery to your premises ".

17. In the written letter of 30/5/01 no installation term was included. Despite the lack of reference to an obligation to install, would it be probable that an implied obligation to install arose through the parties' usual course of dealings?

18. From the previous transactions between the plaintiff and the defendant, ancillary terms, such as installation, maintenance or training, were always clearly spelt out in writing on the quotations or the confirmation letters.

19. It could be seen from the former transactions between the plaintiff and the defendant that installation service, if intended, would always be specifically spelt out either at the stage of giving quotation or at confirmation of the purchase. It was commercial reality for the purchase price of the equipment to be given only after estimation has been made of the installation costs. According to Mr. Edward Wong of the defendant the installation charges for the equipment varies from that of HK$5000 to HK$10,000, dependant upon the work required in order to set up the equipment. As an example Mr. Wong quoted one of the defendant's transaction with the plaintiff for the supply of a set of spa equipment to be installed in the plaintiff's Miramar shop. The contract made no provision for installation, hence no reference was made to installation service and the confirmation letter was silent on the obligation to install. The installation costs was subsequently agreed at HK$10,000 in light of the need of the removal of a flight of stair for the purpose of bringing the spa into the Miramar shop.

20. The supply of installation service along with the sale of the equipment appeals to common sense. Yet day-to-day experience tells us that the installation costs of electrical appliances such as air-conditioners or washing machines is not inevitably inclusive in the purchase price of the electric equipment as the installation work often varies according to work required.

21. I am satisfied of the honesty and veracity of Mr. Edward Wong, and his account of the negotiations he had with Mr. Chan Wai on behalf of the plaintiff in respect of the dispensation of the installation service. What is more telling of the truth of the matter is a communication contained in one of the letters of the plaintiff, written through its solicitor on 8/10/01, which stated in clear term " It should be noted that our client has never requested your company to install the said equipment."

22. Also it was Ms Joyce Tsang's testimony in court that she did not supply the defendant with the layout plan of her Admiralty shop nor did she see the need of asking the defendant to advise her on the pumping arrangement for the installation of the mud tank. If installation were intended, the plaintiff would obviously be concerned and would wish to inform the defendant of the layout of the premises and consult the defendant about the installation of the pumping arrangement. I accept it was parties' agreement, at the formation of the contract, that no installation service was required of the defendant in respect of the present disputed purchase.

Party in breach?

23. In any event the missing installation service of the mud tank was not the reason which rendered delivery fertile on 17th September. Failure to install was never averred to in the statement of claim. Rather the plaintiff was adamant that delivery must be effected to the designated Jacuzzi room. The defendant argued that there was no implied warranty that delivery must be made to the designated room when the design of the premise did not permit the transportation of the goods to the designated room.

24. According to Ms Joyce Tsang the width of the corridor was roughly 1.2 meters wide. According to the sales invoice the weight of the mud tank was stated to be 270 kilogrammes. In the brochure of the Thalatherm, the older version of the mud tank, the dimension of a Thalatherm was 2.2 meters long, 1.6 meters high and 1.25 meters wide. With the given dimension one can fully appreciate the difficulty of bringing the 270 kg mud tank through a 1.2 meters corridor, let alone the impossibility of negotiating the corners of a corridor, laden with construction materials.

25. What rendered delivery impossible was the layout of the internal partition of the plaintiff's Admiralty office on 17th September 2001. Coupled with the presence of the construction debris, I accept Mr. Edward Wong's evidence that delivery of the equipment into the Jacuzzi room was not possible without risking damage to the equipment.

26. Documents produced confirmed the plaintiff had borne the costs of the demolition of the staircase of its Miramar delivery when a set of spa equipment was delivered to the designated location within the premises. A physical delivery of the mud tank cannot possibly mean the delivery to a designated room when demolition of the internal partitioning wall of the premises is required.

27. It was the plaintiff's understanding that the manufacturer's warranty in respect of the mud tank's proper functioning would be lost should purchasers seek to take the mud tank apart without the aid of an authorized technician of its manufacture. According to Mr. Edward Wong the top cover of the mud tank should not be taken apart as wiring, temperature sensor and showers were all installed thereat. It was unreasonable of the plaintiff to insist the defendant to dismantle the Thalantantis for the purpose of delivering it to the Jacuzzi room, bearing in mind that the manufacturer's guarantee would be destroyed if the body of the Thalantantis was dismantled without the use of authorized mechanics. Further there was no agreement to install between the parties in respect of the present sale.

28. What rendered delivery incomplete was the absence of a responsible person from the plaintiff to accept and acknowledge delivery of the mud tank. The mud tank was not a small item which could be left at the outside of the plaintiff's office. In light of its value it is reasonable for the defendant to expect a responsible person from the plaintiff to attend to acknowledge acceptance of it. The fact that the plaintiff had given no instruction for the attendance of a responsible staff member of the plaintiff between lunch hours and 5 pm to accept delivery of a rather expensive equipment such as the mud tank indicated the plaintiff's lack of interest in accepting delivery of the same on 17th September.

29. In light of what transpired, I accept the defendant had done what was reasonable to effect delivery of the mud tank to the plaintiff's premises. The breach of the agreement was caused by the plaintiff's refusal to accept. The plaintiff's election not to attend to the delivery on 17th September, maintained that the equipment could be taken apart to be brought into the Jacuzzi room and refusal to assign a place where physical delivery was feasible constituted constructive refusal to accept the equipment when delivery was attempted by the defendant on 17th September 2001.

30. The subsequent letters of exchange sent by the plaintiff were not serious attempts of the plaintiff to take delivery of the goods, as there was no discussion about the construction of the Admiralty shop to facilitate the delivery of the equipment.

31. The plaintiff doubted whether the defendant had ordered a Thalatlantis rather than a Thalatherm, as all the invoices and importing documents referred the mud tank as a Thalatherm as opposed to a Thalatlantis. Mr. Edward Wong explained that was the typing error of his staff and his staff were confused about the name of the latest model of the mud tank. Mr. Edward Wong produced a copy of the original invoice from his French supplier which confirmed that a "Thalatlantis" was ordered on 6/6/01. I find nothing sinister about the error of the staff in referring the mud tank by reference to its old name when the equipment ordered was in fact a Thalatlantis.

Quantum of Damages

32. The plaintiff exercised its right to accept the plaintiff's repudiatory breach of non acceptance on 17th September. Half-hearted negotiations went on between September and October. The last letter to demand delivery was made by the plaintiff through its solicitors on 8th October demanding delivery within 3 days and a partial waiver of storage charges. By its letter of 27 October 2001 the defendant indicated the equipment would be disposed of since acceptance was not intended. The plaintiff took out the present writ in January 2002 to sue for specific performance. I accept it was reasonable for the defendant to store the mud tank pending disposal of the present action.

33. I accept the late re-sale of the product by the defendant was sequential upon the plaintiff's claim for specific performance and there was no failure on the part of the defendant to mitigate its damages.

34. There is no evidence before me to suggest the re-sale of the equipment was done in an unconscionable manner or that the re-sale price was not a proper second hand re-sale value of the Thalatlantis in question. I accept the damages suffered by the defendant as a result of the plaintiff's breach in failing to accept delivery of the equipment for a reason of its own were as follows:-

(a) loss of profit in the sale of the present mud tank of HK$1,500 ($123,000 - $61,500 - $60,000) .

(b) the first trip of delivery from the godown to the plaintiff's Admiralty Centre was inclusive of the purchase price of the equipment. Hence the additional expenses incurred by the defendant on 17th September were:-

(i) repacking charge of HK$500; and

(ii) transportation charge of HK$1000 to return the mud tank to the warehouse for storage.

(c) contractual storage charge of HK$5,485.70 at HK$800 per week from 1/8/01 to 17/9/01 [1/7 days x $800 x (49-1) days ];

(d) extra storage charges of HK$26,485.70 incurred pending resolution of the legal suit at HK$450 per week from 18/9/01 to 3/11/02 as shown in the receipts of Lee Shun Transportation Company [ invoice total of HK$26,550 deducting 1 day storage charge of 1/7($450) in respect of the storage on 17/9/01 ].

Court Order

35. The plaintiff's claim is dismissed. Judgment is entered in favour of the defendant in respect of its counterclaims. Damages in the sum of HK$ 34,971.40 ($1,500 +$500+ $1,000 + $5,485.70 + $ 26,485.70) is awarded in favour of the defendant with interest at 1% above prime from the date of the writ to the date of this judgment and thereafter at judgment rate until payment.

Order for Costs

36. I do award costs order nisi in favour of the defendant in respect of the present action, with certificate for counsel for the trial.