Judgment no. 54/2018/DS-ST dated 16/11/2018 on dispute over a service contract

THE PEOPLE'S COURT OF NHA TRANG CITY, KHANH HOA PROVINCE

JUDGMENT NO. 54/2018/DS-ST DATED NOVEMBER 16, 2018 ON DISPUTE OVER A SERVICE CONTRACT

Petitioner: Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S

Respondent: V Tourist Resort Co., Ltd.

FACTUAL AND PROCEDURAL BACKGROUND

According to the petition dated December 8, 2017, the voluntary statement, the minutes of conciliation and at the court hearing, the authorized representative of the petitioner, Mr. Tran Duc P, presented:

On February 26, 2017, Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S signed a timeshare contract No. PBRC-S-064621 with V Tourist Resort Co., Ltd.

Accordingly, the value of the timeshare contract is VND 388.110,000; the fixed week:  Week 16; Type of holiday apartment: Type A.

Until March 15, 2017, Ms. Nguyen Thi Long T, Mr. Nguyen Hoang S have deposited VND 300,488,000.

At the time of entering into the contract, due to limited time, Ms. T and Mr. S did not read carefully the timeshare contract.  On April 26, 2017, after receiving an email from V Tourist Resort Co., Ltd., Ms. Nguyen Thi Long T, Mr. Nguyen Hoang S carefully reviewed the signed contract and found unreasonable terms of the contract, so they actively proposed to terminate the contract, but it was not accepted by V Resort Co., Ltd.

Therefore, to protect their rights, Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S filed a lawsuit at the Court with the content:  Request the Court to declare the timeshare contract No. PBRC-S-064621 days 26/02/2017 invalidated and require a refund of VND 300,488,000 to Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S.

For the following reasons:

- V Tourist Resort Co., Ltd deceived customers like opening a seminar on tourism but failing to perform the promise the seminar program; told lies about the project investor who is an Israeli billionaire, Mr. I; defrauded on investment capital to gain confidence from those who want to buy a timeshare to sign a contract and make a deposit.

- V Tourist Resort Co., Ltd advertised that the product is designed according to the model that has won the Asia - Pacific Award, but when built, it does not follow the advertised model; the advertising model and the actual model is not the same; the tourist apartment is designed for two people only, but the advertised apartment is for 5 people; the project is located in Nha Trang.

- V Tourist Resort Co., Ltd violates the prohibition of law that a foreign-invested enterprise is not allowed to send Vietnamese people abroad; disposal of the deposit when it is not in their possession.

- The progress of construction and putting the project into official operation is slow compared to the commitment, causing damage to those who have bought the timeshare.

According to the voluntary statement, the minutes of conciliation and at the court hearing, the authorized representative of the respondent, Ms. Pham Thi Kieu H, presented:

On February 26, 2017, V Tourist Resort Co., Ltd. signed a timeshare contract No. PBRC-S-064621 Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S. The form and content of the contract are completely legal.  The person entering into the contract is competent and authorized, has not been coerced, and has voluntarily signed this contract.

V Tourist Resort Co., Ltd does not agree with the reasons given by the petitioner as a basis to claim that the timeshare contract No. PBRC-S-064621 is invalid.

Because:

Firstly, the petitioner’s claim that the Company deceived consumers is a false statement based on subjective opinions.  The company insisted that it did not make up or provide false information to consumers.  Company V has 2 capital contributors including Mr. Duong Tuan A and Company E; in which Company E is in the enterprise controlled and owned by Mr. I and his businesses.  As such, Mr. I is an investor of the Company, making investments through the Companies under his control.

The initial registered charter capital was 105 billion VND and is now 486 billion VND.  This is the contributed capital according to the investor's commitment to the project company, in accordance with the provisions of Vietnamese law.  The investment capital of the project is 300 million USD or higher that is the estimated investment capital of the whole project including but not limited to:  land rents, costs of investment, construction, management, project operation, administration costs, etc.

Secondly, at the introduction meeting, the Company clearly explained that this is a timeshare, not a real estate purchase, so there is no confusion about the contract; when working with customers, the company explains and clearly states in the contract which fixed week in the timeshare is bought, and what type of hotel.

Thirdly, our Company does not take customers abroad, here is, if resort customers do not like to stay in the country, they can exchange timeshares with other customers to go vacation abroad. This is just a customer's activity, our company does not send Vietnamese people abroad for tourism, but only supporting customers.

Fourthly, regarding the deposit, the law does not limit the agreement on the use of the deposit.  The Company's purpose of using the deposit is not prohibited by law.

Fifthly, the construction progress and the official opening date are clearly stated in Article 8 of the Contract, which is 36 months from the date of issuance of the final construction permit of the project with an extension of another 6 months. Currently, the last permit was issued in October 2018.

If the petitioner continues to perform the signed timeshare contract, the respondent may consider reducing the price or supporting some other benefits.

Speaking at the trial, the representative of the People's Procuracy of Nha Trang city concluded:  The People's Court of Nha Trang city has complied with the civil procedure law in the process of settling the case, at the trial; involved parties have fully exercised their rights and fulfilled their obligations during the proceedings; and the Court has duly served legal documents.  However, in order to clarify whether V Tourist Resort Limited Liability Company is allowed to trade and transfer vacation ownership, it proposed Trial Panel to adjourn the trial to collect further documents.

JUDGEMENT OF THE COURT

[1] After studying the documents contained in the case files which have been verified at the trial and based on the results of the oral argument at the trial, the Trial Panel determined:

[2] At the trial, the representative of the People's Procuracy of Nha Trang city proposed to adjourn the trial to collect further documents to determine whether V Tourist Resort Co., Ltd. is allowed to transfer apartments or transfer timeshares when the project is not completed or not.  This proposal of the Procuracy representative was unnecessary, because this is not a transfer contract related to real estate, but a service contract in the field of tourism, and is essentially a deposit contract to own vacation.  At the time of the trial, there was no document from the competent authority restricting deposit of a timeshare of V Tourist Resort Co., Ltd. Therefore, the Trial Panel continued to hear the case according to general regulations.

[3] On December 17, 2017, Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T filed a lawsuit against V Tourist Company Limited at the People's Court of Nha Trang city, asking to declare the timeshare contract No. PBRC-S-064621 dated 26/02/2017 invalidated and force V Resort Co., Ltd to refund the deposit and payment amount of VND 300,488,000.  This is the amount that Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T have deposited a timeshare from V Tourist Resort Co., Ltd.

[4] At the trial, the petitioner maintained their claim to initiate a lawsuit, requesting the Court to declare the timeshare contract No. PBRC-S-064621 dated February 26, 2017 invalid and force V Tourist Resort Co., Ltd. refund the deposit and payment amount of 300,488,000 VND.

[5] Thus, the disputed legal relationship is defined as a "service contract" as defined in Article 513 of the Civil Code 2015, Article 14 of the Law on Protection of Consumer Rights.

[6] In Article 12.3 of the timeshare contract No. PBRC-S-064621 dated February 26, 2017, the parties have agreed to choose the agency and method of dispute settlement which is the Singapore International Arbitration Center (SIAC) in accordance with the SIAC arbitration rules in effect at the time of dispute resolution.

[7] However, Article 17 of the Law on Commercial Arbitration and the guidance in Clause 5, Article 4 of Resolution No. 01/2014/NQ-HDTP dated March 20, 2014 of the Council of Judges of the Supreme People's Court provide for unenforceable arbitration agreement as follows:

[8] “The supplier of goods and services and the consumer has an arbitration agreement that is recognized in the general conditions for the supply of goods and services prepared by the supplier specified in Article 17 of the Law on Commercial Arbitration, but when a dispute arises, the consumer does not agree to choose arbitration to settle the dispute”.

 [9] The timeshare contract No. PBRC-S-064621 is a type of prepared contract offered by a service provider, a ready-made contract stipulating an arbitration agreement, now the consumer petitioner does not agree to choose an arbitrator and requests the People's Court of Nha Trang city to settle the dispute in accordance with Article 38 of the Law on Protection of Consumer Rights, Article 17 of the Law on Commercial Arbitration and the guidance in Clause 5, Article 4 of Resolution No. 01 /2014/NQ-HDTP dated 20/3/2014 of the Council of Judges of the Supreme People's Court.  Therefore, the People's Court of Nha Trang city accepts and settles the dispute in accordance with Clause 3, Article 26, Clause 1, Article 35 of the Civil Procedure Code and is still within the prescriptive period for initiating lawsuits specified in Article 429 of the Civil Code 2015, Article 184 of the Civil Procedure Code.

[10] Considering the timeshare contract No. PBRC-S-064621 dated February 26, 2017 signed between V Tourist Resort Co., Ltd and Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T, it is found that:  The contract was signed by the representative of V Tourist Resort Co., Ltd. was Mr. Le Huu B, Head of Finance Department, Representative Office of V Tourist Resort Co., Ltd in Ho Chi Minh City and Mr. Nguyen Hoang S. Ms. Nguyen Thi Long T. Mr. Le Huu B was not the legal representative of V Resort Co., Ltd. but at the time of signing, the legal representative of V Tourist Co., Ltd. had written authorization dated February 1, 2017 for Mr. Le Huu B to sign the contract on behalf of the legal representative in accordance with the procedures and contents prescribed by law.  Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T had full active legal capacity.

[11] According to the content of the timeshare contract No. PBRC-S-064621 dated February 26, 2017, the petitioner registered to buy a timeshare week 16, the type of resort apartment was A; the period starts from the year with the official opening date to the end of the Project's term.  Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T can sell or transfer the timeshare to others or exchange the timeshare in some parts of the world (transferrable timeshare).  Buyers have to pay in installments according to the project construction progress.  Specifically, Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S have paid 3 deposits with the amount of 310,488,000 VND (with a discount of 10,000,000 VND).

[12] The official opening date is determined according to Article 8 of the Contract.  That is, within 36 months from the date of issuance of the final construction permit and extended for another 6 months, the Company will send a notice of completion to the client.

[13] In addition, every year from the date of official opening, the customer must pay the maintenance fee or management fee according to Article 3 of Appendix C enclosed with the contract specifying the rights and obligations of the parties, the terms and conditions pertaining to payment, deposit, transfers and obligations arising out of the contract.

[14] The parties have entered into a timeshare contract with voluntary commitment and agreement, the content of which does not violate the prohibition of the law, is not contrary to social ethics, is bound by the parties and serves as a basis for dispute settlement.

[15] The Trial Panel found that:

[16] Tourist Resort V Company Limited was granted the Certificate of Business Registration by the People's Committee of Khanh Hoa Province on February 5, 2013, registered for the 4th amendment on April 8, 2016 and the 5th amendment on October 15, 2018; Investment Certificate No. 371022000419 dated February 5, 2013 and registered for the 3rd amendment on January 27, 2015 to invest and execute the ALMA luxury resort project at land lots D7a2, TT4, X6, belonging to the North R peninsula Tourist Resort, district C, Khanh Hoa.

[17] During the process of project investment and execution, V Tourist Resort Co., Ltd. has held introduction sessions on resort models in several localities, including Ho Chi Minh City.

[18] The petitioner is one of many customers invited by V Tourism Company Limited to attend the event on February 26, 2017.

[19] At the event, the petitioner directly entered into a timeshare contract No. PBRC-S-064621 on February 26, 2017 with V Resort Co., Ltd. And as of March 15, 2017, the petitioner paid a deposit of VND 310,488,000, of which he was entitled to an incentive policy of VND 10,000,000, the actual amount paid was VND 300,488,000.

[20] While waiting for the official opening date, the petitioner argued that the timeshare contract No. PBRC-S-064621 dated February 26, 2017 contained many inappropriate terms, causing damage to their interests, they had many meetups with V Tourist Resort Co., Ltd to negotiate to terminate the contract, but V Tourist Company Limited failed to do so.  Therefore, the petitioner sued and asked the Court to consider declaring the timeshare contract No. PBRC-S-064621 dated February 26, 2017 invalid for the reasons that they have been deceived, confused, the Company has violated prohibitions of law and delays in putting the works into use.

[21] Speaking to defend the rights of the respondent, the lawyer said that the reasons given by the petitioner as a basis for the Court to request the Court to declare the timeshare contract No. PBRC-S-064621 dated February 26, 2017 invalid as the petitioner has been deceived and confused and the Company has violated prohibitions of law is unacceptable for the reasons mentioned above by the respondent, and the argument sent to the Council judge.

[22] Considering that:

[23] Firstly, it should be recognized that this is a new concept of ownership in Vietnam, in which the owner is entitled to exercise his/her rights for a certain period of time (7 days) at the place where the timeshare was purchased.  It is not synonymous with real estate ownership.  Ownership of real estate remains under the investor, which is V Tourist Resort Co., Ltd during the period of being granted a valid license.

[24] Thus, the timeshare that Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T have deposited is considered a type of off-the-plan (right of) property.  But after the time of entering into the contract, it is not owned by Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T until the resort is officially put into use. The transaction of the parties to deposit and make a reservation to own the timeshare (contract performance) is deemed accordant with the provisions of Clause 2, Article 108, Article 328 of the Civil Code 2015.

[25] The petitioner said that V Tourist Resort Co., Ltd cheated about the project investor who is an Israeli billionaire, Mr. I and about the investment capital.  But the documents provided by the respondent and have been publicly examined show that: Company V has 2 capital contributors including Mr. Duong Tuan A and Company E; in which Company E is in the enterprise controlled and owned by Mr. I and his businesses.  As such, Mr. I is an investor (not owner) of the Company, the investment through the Companies under his control is real. The petitioner did not provide evidence to prove that V Tourist Resort Co., Ltd had deceived by asserting that Mr. I was the project owner.

[26] The initial registered charter is 105 billion VND, the investment capital to execute the project according to the 5th revised business registration certificate dated October 15, 2018 is 426 billion VND.  This is the capital contributed as committed by the investor to the project company, in accordance with the provisions of Vietnamese law, excluding but not limited to:  land rents, costs of investment, construction, management, project operation, and other costs.

[27] Thus, the project's expected investment capital of 300 million USD is the estimated value of the total investment capital of the whole project, not the charter capital.

[28] The petitioner stated the reason:  The respondent advertised a product designed according to the award-winning model, but when it was built it was not like the award-winning model; the advertising model and the actual model are not the same.  Publications issued to promote the product are dishonest.

[29] However, the model design issue has been approved by the People's Committee of Khanh Hoa province in Official Dispatch No. 3590/UBND-XDND dated May 27, 2016 and has been notified to timeshare owners.

[30] Advertising on publications has legal publishing licenses, and up to the date of the first instance hearing, the competent authorities have not issued any document to cancel or withdraw these publications.

[31] When participating in an event and officially entering into a contract, participants must know what event they attend, what contract they sign, where their investment is located.  The location where the Tourist Resort is built is publicized by the Tourist Resort Co., Ltd; on documents, transaction papers also show the location of ALMA Nha Trang.  It cannot be said that V Tourist Resort Co., Ltd. using the name ALMA Nha Trang or the invitation to the conference to switch to introducing models and products is a deception to customers.

[32] Accordingly, there is no evidence that one of the parties to the contract was deceived as specified in Article 127 of the Civil Code 2015. Therefore, the timeshare contract No. PBRC-S- 064621 dated 26/02/2017 and the appendices attached to the contract come into effect.

[33] As stated in Clause 4.4, Article 4 of the Contract of transferrable timeshare, Section 2 of Appendix B, the terms and conditions of the timeshares are essentially the exchange of timeshares at other resorts around the world, operating in the same way as at the Resort, joining the exchange network.

[34] In fact, if a resort guest does not stay at the Resort that he/she has purchased a timeshare, he or she can exchange the timeshare with other resort guests, including resorts abroad.  This is the activity that the resort guests may choose an alternative resort opportunity from a range of resort opportunities that the Exchange Company can provide.  V Tourist Resort Co., Ltd does not send Vietnamese people abroad for tourism, but only supports resort guests in connecting tourist destinations.  Among resort guests; many people have made timeshare exchange through the transferrable timeshares and they directly contact the alternative resort and complete paperwork for overseas travel arranged by the Company with the relevant parties in order for the Resort guests are provided with resort services by other resort providers at the resort's chosen location.

[35] The Company's support and assistance for resort guests to choose a place to exchange timeshare and procedures for other resort service providers to provide resort services for resort guests cannot be considered a link or stage in bringing resort guests abroad as the petitioner argued.  The petitioner also did not provide evidence to prove that V Tourist Resort Co., Ltd. had illegally sent people abroad.

[36] Thus, there are no documents or evidences to prove that V Tourist Resort CO., LTD personally brought timeshare owners to travel abroad.

[37] According to the provisions of Clause 5.2, Article 5 of the timeshare contract No. PBRC-S-064621 dated February 26, 2017, Clause 2.2 Article 2 Appendix C attached to the timeshare contract No. PBRC-S- 064621 dated 26/02/2017 stipulating the deposit and payment schedule, the amount that Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T have paid was the deposit.  Only after the official opening date comes, can the paid amount become a part of the payment.

[38] Thus, the deposit of Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T is for the performance of the contract as prescribed in Article 328 of the Civil Code 2015.

[39] The deposit amount received by Resort V Limited Company from Resort guests (not precious metals, gems or valuables) is determined by the Company in the form of investment in the project and reasonable expenses that are not prohibited by law, without limiting the parties' agreement on the use of the deposit. In the event that a refund or compensation is required for any reason, the value of the money to be refunded or compensated will be calculated, no one asked to pay the correct amount of deposit as stated by the petitioner's representative.

[40] Right on the cover page of the Contract, it is stated that “Timeshare”, Article 3 of the timeshare contract No. PBRC-S-064621 dated February 26, 2017 states “Resort guest, under this contract, agrees to rent a room from the Company... ”  and in Appendix A part III, IV the petitioner also confirms the reservation of the resort type, the timeshare week and the payment of the room rent, not the ownership of the property, or the payment of the property. Such clear provisions in the contract cannot be confused with real estate ownership. The reason the petitioner raised was mistakenly owning real estate is unacceptable.

[41] The petitioner argued that, when entering into the contract, the marketing staff of the V Tourist Resort Co., Ltd. did not give the petitioner reasonable time to read carefully the contract's contents, which was a violation of Article 17 of the Law on consumers’ right protection. However, it is the consumer's right to spend time researching the contract, and the petitioner's failure to use this right is considered a waiver of his or her right.  The Law on Protection of Consumer Rights as well as the Civil Code does not stipulate that if an organization or individual trading in goods and services does not spend a reasonable time for consumers to study the contract, the contract will not be valid.  Therefore, the fact that the petitioner voluntarily entered into the contract was real and at the trial, the petitioner's representative still affirmed that the conclusion of the contract was completely voluntary. Therefore, the contract comes into force.

[42] Regarding the project performance progress:  The official opening date determined according to Article 8 of the Contract is that within 36 months from the date of issuance of the final construction permit and extended for another 6 months, the Company will send a notice of completion to the client. Currently, the dossier shows 2 construction permits:

- Construction permit number 67/GPXD-SXD dated April 28, 2017.

- Construction permit number 133/GPXD-SXD dated October 24, 2018.

[43] Thus, up to the trial date, if based on the Construction Permit dated April 28, 2017, it is still less than 36 months from the date of issuance of the construction permit. Meanwhile, until October 24, 2018, V Tourist Resort Co., Ltd continued to be granted a construction permit.  Therefore, there is no basis to believe that V Tourist Resort Co., Ltd has violated the construction schedule, delayed putting the project into operation, violated the deadline for handing over the timeshares to the owners.

[44] From the above arguments and analysis, it can be seen that the timeshare contract No. PBRC-S-064621 dated February 26, 2017 and the attached Appendixes do not fall into the cases of invalid civil transactions as regulated from Article 122 to Article 129 of the Civil Code 2015. Therefore, Article 131 of the Civil Code 2015 is not applied to settle the case as requested by the petitioner.

[45] For the request to return the deposit amount.

[46] Deeming that: The nature of the booking confirmation is a deposit contract.  According to the agreement, the above deposit will be converted into the first payment amount upon the official opening date.  Thus, at the time of establishment of the Booking Confirmation, the above amount is a deposit for the reservation to secure the performance of the service contract.  This deposit contract is not illegal and not against social ethics.  On the other hand, Section 4.1 of the Contract also stipulates: “The resort guest, under this Contract, irrevocably commits and agrees to make a reservation to enjoy the Timeshare under the terms and conditions of this Contract.  In order to make a reservation, the resort guest will pay a deposit to the Company in accordance with Article 5.2 of Appendix C”.  The respondent did not violate the contract, the petitioner also did not have evidence to prove that the respondent breached the deposit contract; and the parties have agreed that the Contract is not revocable; The "timeshare contract" is not invalidated as requested by the petitioner, therefore, the petitioner's request for refund of the deposit of VND 300,488,000 is groundless.

[47] Regarding court fee:  Since the request of Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S was not accepted, they had to pay a court fee of 300,000 VND for the request to declare the contract invalid and 15,024,400 VND for the first instance civil court fee for requesting a refund of VND 300,488,000.  Thus, Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T must pay the first-instance civil court fee of VND 15,324,400.

For the foregoing reasons,

DISPOSITION

Pursuant to Articles 122, 123, 124, 125, 126, 127, 128, 129, 328, 401, 513 of the Civil Code 2015; Article 14, Article 42, Article 43 of the Law on Protection of Consumer Rights; Article 74 of the Commercial Law; Article 17 of the Law on Commercial Arbitration; Section 4 Chapter IV of the Law on Tourism; Articles 147 and 273 of the Civil Procedure Code;

Pursuant to Clause 1, Article 26, Clause 3, Article 27 of Resolution No. 326/2016/UBTVQH14 dated December 30, 2016 of the National Assembly Standing Committee on the amounts, exemption, reduction, collection, remittance, management and use of court fees and charges.

Declare: Do not accept the request of the petitioner, Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S, about the statement that the timeshare contract No. PBRC-S-064621 dated February 26, 2017 signed between Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S with V Resort Co., Ltd. invalidated and refund of the paid deposit of VND 300,488,000 because there were no grounds for that.

With reference to court fees: Mr. Nguyen Hoang S and Ms. Nguyen Thi Long T must pay the first-instance civil court fee of VND 15,324,400.

Refund to Ms. Nguyen Thi Long T and Mr. Nguyen Hoang S VND 7,512,000 of the court fee advance according to the collection receipt No. AA/2016/0008400 dated February 1, 2018 of the Sub-Department of Civil Judgment Enforcement of Nha Trang city.

The petitiaoner and respondent have the right to appeal against the first-instance judgment within 15 days from the date of judgment to request the People's Court of Khanh Hoa province to retry the case according to the appellate procedures.