TERRY CHENG v. HO HO INVESTMENT LTD

HCSA 34/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO 34 OF 2015

(ON APPEAL FROM SMALL CLAIMS TRIBUNAL
CLAIM NO 27899 OF 2014)

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J U D G M E N T

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Introduction

1.  The claimant herein lodged a claim in the Small Claims Tribunal (“Tribunal”) against the defendant for a sum of HK$8,500, being loss of (1) a Head Porter black down jacket with leather trimmings of purchase price of HK$5,500 and (2) a Paul Smith London white striped shirt of purchase price of HK$3,000, which he took to the defendant’s laundry shop (“Laundry Shop”) for cleaning and which were later given away/disposed of by the defendant/Laundry Shop without his consent.

2.  On 2 June 2015, the Learned Adjudicator Ms Soong Wing Sum (“Adjudicator”) awarded a sum of HK$4,273.40 to the claimant and costs of HK$993.20, plus interests at judgment rate from date of award until payment.

3.  The Adjudicator handed down her reasons for decision on 4 August 2015 (“Reasons”).

4.  The defendant made an application for leave to appeal on 26 June 2015, and this court granted leave on 8 September 2015.

The facts

5.  The parties’ respective case and arguments had been set out in detail by the Adjudicator in the Reasons.

6.  Briefly, the claimant delivered the down jacket and the shirt to the defendant respectively on 15 April 2012 and 15 August 2012, and the cleaning costs were deducted from a pre-paid card the claimant had purchased from the defendant previously.

7.  It was the claimant’s allegations that when he went to collect the down jacket, he found that the down feather inside the jacket became much less and also the buttons were discoloured.  He was not satisfied with the condition of the jacket and refused to collect the same indicating he would follow up on the matter.  Later when he went to collect the shirt, he noticed there was a tainted spot on the shirt and further discovered that the shirt was wet washed and not dry cleaned as specified by him and for which he had paid the necessary charges.  Again he was not satisfied with the condition and the service and refused to collect the shirt indicating he would follow up on the matter.

8.  Thereafter, in October 2012, the claimant made a complaint to the Consumer Council, but notwithstanding the mediation of the Council, the defendant was only willing to return the cleaning costs to the claimant but refused to pay any compensation.  This was rejected by the claimant.  Then for a period of some 22 months, the claimant did not follow up on the matter.  The claimant had explained that this was because his elder brother was suffering from cancer, and it was only after the death of his brother, in about July 2014, that the claimant went to the Laundry Shop to follow up on the matter, but was at first told that the clothes were stored in the warehouse.  After a few weeks, he went to the Laundry Shop again to make enquiries about his clothes but to no avail.

9.  The defendant denied that the claimant’s clothes were damaged in the course of cleaning.  Further, the defendant’s case was that it only learnt of the claimant’s dissatisfaction with its service through the Consumer Council, and it had offered to repay the cleaning costs, but this was rejected by the claimant.  Since there was no further follow up by the claimant, and there was a long period during which the claimant failed to retrieve his clothes, the clothes were probably disposed of.

10.  According to the defendant, the Laundry Shop would store customer’s clothes up to 6 months, but subject to prior request and advance payment.  If the customer failed to collect his clothes within 6 months, the defendant would regard the clothes as being abandoned by the customer, and would dispose of the same in an appropriate manner, including giving them to charity or to throw them away.  This, according to the defendant, was its Laundry Shop’s standard condition and that it was also the trade practice for clothes not retrieved by customers for a long period of time.

11.  In short, the defendant’s grounds for opposing the claim were (1) it denied having damaged the claimant’s clothes; (2) the claimant did not collect the clothes after a long period of time and the defendant had the right to dispose of the clothes; (3) it was unreasonable for the claimant to lodge the claim only after two years.

12.  The Adjudicator in the Reasons had distinguished the present case from the ordinary situation when a customer failed to collect his/her clothes after cleaning within a reasonable period, in that in the present case, the customer had returned to the shop with the intention to collect his clothes, but he was dissatisfied with the condition and with the service/the way the shop had handled the matter.  As after the mediation of the Consumer Council, the Laundry Shop still refused to pay reasonable compensation, he therefore made a decision not to collect the clothes before the dispute was resolved.  The Adjudicator said the decision not to collect the clothes was understandable as (1) to avoid any perception that he had accepted the defendant’s service ; and (2) to avoid any argument that the condition of the clothes was caused by him[1].

13.  The Adjudicator then came to the view that any provision in relation to storage of clothes, whether it was one month (as stated on the front of the receipt) or 6 months (on the back of the receipt), would only be applicable in ordinary circumstances and not applicable in the present case[2].

14.  The Adjudicator further went on to say that in the present case the claimant had delivered his clothes to the defendant for cleaning and the claimant had paid for the cleaning costs, and the defendant had accepted the cleaning costs and accepted the clothes into its custody, and   there was a close relationship between the two parties, and the defendant’s action would directly affect the claimant.  Thus, when the defendant was deciding whether to take or not to take a particular course of action, the defendant should have considered the effect on the claimant of its action or non action.  In the circumstances, the defendant should have realised that in giving away or throwing away the claimant’s clothes, it was not only disposing of the latter’s property, but also disposing of a very important piece of evidence in any claim for damages by the claimant.  It was the Adjudicator’s view that there existed a duty of care from the defendant towards the claimant[3].  The Adjudicator further pointed out that the limitation period for the claimant’s claim had not yet expired[4].

15.  The Adjudicator also accepted the claimant’s evidence and found that that the defendant did not try to contact the claimant before disposing of the clothes and that she found this was unreasonable and that the defendant was in breach of its duty of care towards the claimant.

16.  Although the Adjudicator accepted the claimant’s evidence in relation to the purchase price, she was of the view that there would be a good second hand market for designer clothes, and in the end awarded the claimant, together with costs and interests, a sum of HK$4,250 being 50% of his claim, plus the return of the dry cleaning costs of HK423.40, as the defendant failed to provide the dry cleaning service.

Grounds of Appeal

17.  There were 3 grounds of appeal:

(i) The Adjudicator erred in law when she held that the defendant owed the claimant a common law duty of care to keep a physical object for 6 years (the general limitation period in civil claims) just because the physical object could be adduced as evidence in a potential civil claim which had not yet been, and might never be commenced, when there was no court injunction to that effect;

(ii) The Adjudicator failed to discharge her duty to investigate when she considered the back of a receipt to be highly relevant but did not direct that the back of the receipt be produced by the parties;

(iii) The Adjudicator further erred in law when she failed to appreciate that the contractual terms between the parties, on their proper interpretation, excluded the defendant’s liability for the disposal of clothing items left unclaimed for 6 months or more.

18.  At the ex parte leave application, Counsel for the defendant Mr Lam had pointed out to the court that the Adjudicator was aware that there were standard contractual terms governing the relationship between the parties on the back of the receipt, and yet although the Adjudicator referred to there having been 3 hearings when there was a general direction that all relevant documents must be submitted to the court, there was no specific direction that the back of the receipt should have been produced.

19.  Mr Lam had submitted then and now that as the law prohibited legal representation at the Tribunal, simply giving a general direction to produce all relevant documents would not be good enough and that under the section 16(3) of the Small Claims Tribunal ordinance, Cap 338 (“Ordinance”), the Tribunal had a duty to inquire into any matter which it might consider relevant to a claim, whether or not it had been raised by a party.  Mr Lam had also referred to the case of Chan Suk Bing Angie v Harbour Phoenix [1992] 2 HKC 459 where on appeal from the Labour Tribunal, and in construing an almost identical provision in the Labour Tribunal Ordinance, the then Deputy Judge Jerome Chan had allowed the appeal and had said that as hearings in the Labour Tribunal were inquisitorial in nature and in view of the lack of legal representation and the informal nature hearings, the requirements of justice in such a tribunal were that the presiding officers should assume an active inquisitive role in the proceedings.

20.  This court eventually granted leave to the defendant, on all the three grounds of appeal put forward by the defendant.  At this hearing, the main thrust of Mr Lam’s submissions was in relation to Ground (ii).

21.  Counsel Mr Tang for the claimant had submitted that the Adjudicator had reminded both parties to submit all their relevant documentary exhibits for the hearing on three occasions at three different hearings, but the defendant had failed to provide the evidence to prove his case and adopted a passive attitude, not even bringing a similar receipt to the hearing.

22.  Mr Tang also submitted that despite the defendant’s failure, the Adjudicator had taken the content and the existence of the exemption clause on the back of the receipt into consideration even though there was no actual production of the receipt.  He further submitted that the clause printed on the back of the receipt was basically an exemption clause that the defendant had attempted to rely on to evade his liability by raising the argument that the claimant had failed to collect the two items after the expiry of the 6 month period.  Further, as ruled by the Adjudicator, the exemption clause was irrelevant.

23.  The Adjudicator had stated in paragraph 25 of the Reasons that although the defendant did not produce the back of the receipt as evidence, she had considered that normally receipts of laundry shops would contain a provision that the customer had to collect the cleaned clothes within a specified time, otherwise the shop could dispose of the clothes, and she accepted the defendant’s evidence that there was such a provision on the back of the receipt.  She then said such an exemption clause would not be applicable in the circumstances in the present case.

24.  Mr Tang had tried to submit that the Adjudicator must have been applying the law of bailment in distinguishing the present case from the normal cases when a customer simply did not turn up to collect his clothes after a reasonable period of time in coming to the view that there was no need for the Adjudicator to specifically call and read the back of the receipt. 

25.  Mr Tang also relied on section 7 (2) of the Control of Exemption Clauses Ordinance, Cap 71 and submitted that defendant could not rely on an exemption clause to exclude or restrict his liability for negligence as bailee, except in so far as the term or notice satisfied the requirement of reasonableness.

26.  Mr Tang further argued that in the present case, the defendant had already returned the clothes to the claimant after cleaning and that the contract had thus been completed, and the original exemption clause would not be applicable.

27.  However, as submitted by Mr Lam, without reading all the written terms on the back of the receipt, one simply would not know whether there were contractual provisions which would apply after return of goods.

28.  Even though the Adjudicator had accepted the defendant’s evidence that there was an exemption clause, I do not understand how, without reading the actual terms and considering the exemption clause, she could have come to the view that it was only applicable in a situation where a customer had simply failed to collect the clothes within a reasonable period, and not to the present case.

29.  Even if this was what was stated by the defendant[5], I accept Mr Lam’s submission that the Adjudicator had an active inquisitorial role and that she had a duty to investigate and she should have made a specific direction for the defendant to produce the a copy of the back of the receipt so that the full effect of the contractual terms can be considered.

30.  Mr Tang had also referred section 2 of the Disposal of Uncollected Goods Ordinance, Cap 294.  Section 2 provides for the right of bailees to sell goods accepted for repair or other treatment but not redelivered. However, as pointed out by Mr Lam, this provision is expressly stated to be subject to the provisions of any agreement between him (bailee) and the bailor, and to the provisions following thereafter in the ordinance. 

31.  Having considered both sides’ submissions, I accept that the law of bailment is always subject to the law of contract, and that the Adjudicator could not apply the law of bailment in isolation, without calling for and/or reading the back of the receipt, where the parties’ contractual terms could be found, and that she had erred in law in this respect.

32.  Thus, for ground (ii) alone, I will allow the defendant’s appeal.  So far as ground (i) is concerned, I accept what was submitted by Mr Lam in that there was no basis in law for the Adjudicator to say the defendant owed the claimant a common law duty of care to keep a physical object for the duration of the limitation period for any possible future claim just because it might be adduced as evidence to support such a claim.  There was no evidence that I could see which would indicate that the claimant was contemplating such a claim, nor was there any injunction restraining the defendant from disposing of the items. As for ground (iii), this would follow in light of what I have said in respect of ground (ii).  I will thus also allow the appeal on Grounds (i) and (iii).

Conclusion

33.  In light of what I have said above, I order the matter be remitted to the Tribunal for a trial de novo before a different adjudicator.

34.  As set out in section 29(2)(b) of the Ordinance, costs are in the discretion of the court on an appeal.  Although I have allowed the appeal by the defendant, as there will be a new trial, I am of the view that the costs of the appeal should be costs in the cause of the new trial.