THE APPRAISAL CORNER

Judge orders refund in sale of treated beryls

A verdict has been reached in one of the world's first court cases regarding the sale of treated gemstones.

The case involved a Singapore jeweler and gem stone dealer, House of Hung, who, in 1988, sold 39 Maxixe-type blue beryls to a dealer from Abu Dhabi, Darwish M.F.K. Al Gobaishi, without informing him that the beryls were irradiated and the color would fade. Dr Gobaishi tried to return the beryls after laboratory fade tests showed that the color was not stable but House of Hung refused to refund the money paid for the 39 beryls, claiming that the invoice described the beryls as "Maxixe," that the invoice said that goods sold are not returnable, and that the beryls did not fade as fast as claimed, producing expert Kurt Nassau, who testified that sometimes Maxixe-type beryls retained their color for long periods of time.

The Singapore judge in the case, Judge G. P. Selvam, ordered House of Hung to refund the purchase price of the 39 stones in exchange for the return of the stones in his ruling on the case, dated March 31,1995.

The case does not address the issue of whether or not jewelers or dealers have an obligation to inform customers about routine gemstone enhancements. The gemstones in the case,

Maxixe beryls, are not con sidered a normal industry product: the consensus of the trade has always been that they are unstable artifi cially colored treated stones and must be clearly labeled as such, if sold at all. In light of this fact, it is surpris ing that the seller refused to refund the money.

However, the ruling in the case does take several interesting positions with regard to gemstone treat ments and the obligations of the gemstone supplier.

Because the buyer bought the stones for the purpose of reselling them, the ruling in the case turned upon whether or not the stones were suitable for that purpose.

The judge concluded they were not: "Maxixe-type stones attract very little, if any demand in the gem trade as they are rarely used. ...Maxixe-type stones histori cally have had an adverse market perception in the gem trade which perception either destroyed or dimin ished their merchantable quality."

The judge said: "A gem stone to be called so must withstand the wear and tear of constant use and expo sure to heat and light. In the case of a colored gemstone, it must possess the ability to retain its color even when subjected to heat and light." The judge also said that gemstones, even if natural, were "imitation" if artificial means had been used to enhance their qualities and if these qualities, such as color, were unstable.

The judge's ruling said that the case was decided on the basis that a breach of contract had occurred. The buyer, he said, relies on the fact that the shopkeeper is a professional who knows his merchandise: "... the buyer goes to the shop in confi dence that the tradesman has selected his stock with skill and judgement:...the main inducement to deal with a good retail shop is the expectation that the tradesman will have bought the right goods of a good make...."

The judge concludes that the buyer could not be expected to recognize the "defect" in the stones because it would require the skills of "a scientist not a layman."

The burden is on the supplier to ensure that the goods sold are of appropriate quality. The supplier should have known, the judge said, even if the evi dence in the case showed that in all probability the seller did not know.

Whether or not the seller knows the goods are sub standard is not an excuse: "Ignorance of unfitness, however, would not excuse the seller of liability."

The judge said he was not convinced by the testi mony of Dr Nassau because it contradicted his book.

Gemologists G. Brown of Australia and Don Palmieri of the United States testified for the plaintiff.

The evidence submitted in the case included a table from the United States Gemstone Enhancement Manual which indicates that irradiated color in beryl is rarely seen, has poor stabili ty, and requires special care.

"This judgement will hopefully put everything in perspective that avoiding the actual facts will certainly spell disaster when a cus tomer finds no satisfactory answer from the jeweler," said ICA member Tay Thye Sun of Singapore.

The newspaper story on the verdict in The Sunday Times of Singapore described that the Maxixe beryls were "artificially enhanced to deepen their color" and that they "faded in color after prolonged exposure to light" but did not mention the fact that the beryls were irradiated.

"The publicity from this case has affected retail sales in Singapore," Mr Tay said. Generally, there are worries about treated gemstones, for example, some of my cus tomers say they are worried about buying blue stones like blue zircon."

Mr Tay said that although both wholesalers and customers in Singapore were very concerned about treatment, most still did not talk about it with customers for fear of losing sales.

Source: ICA Gazette, June 1995

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