ML CONCEPT LTD. v. DESIGN BEYOND LTD.

DCCJ 9733/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 9733 OF 2001

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JUDGMENT

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NATURE OF THE PLAINTIFF'S CLAIM

1. Both the Plaintiff and the Defendant were at all times material to this action carrying on business as interior designers. The Plaintiff claims that by an oral agreement made between the Plaintiff and the Defendant in March 2000, the Plaintiff agreed to provide certain design services ("the Design Services") for the Defendant at an agreed fee of $200,000.

2. The Design Services were to be provided in respect of the fitting out of a branch office of the United Overseas Bank Limited, located at Rooms 2504-06, Gloucester Tower, Pedder Street, Central, Hong Kong ("the Office"). The Defendant was appointed by the bank as the designer as well as the main contractor for the fitting out works. The "design" part of the project was sub-contracted by the Defendant to the Plaintiff.

3. According to the Plaintiff, it has duly performed and completed the Design Services. On or about 24th May 2000, the Defendant made a partial payment of $35,000 to the Plaintiff. On 29th August 2000, the Plaintiff and the Defendant orally agreed that a "special" discount of $50,000 should be given to the Defendant. After deducting the part payment and the discount from the agreed fee, the Plaintiff claims against the Defendant the balance in the sum of $115,000, together with interest thereon at such rate and for such period as the Court thinks fit.

THE DEFENDANT'S CASE

4. According to the Defendant, the agreed fee for the Design Services was $120,000, not $200,000 as alleged by the Plaintiff. Further, in breach of the oral agreement between the Plaintiff and the Defendant, the Plaintiff has failed and omitted to perform the following works: -

(i) design of the colour scheme;

(ii) selection of the furniture;

(iii) conducting "sufficient" site supervision during the period from 1st May 2000 to 16th June 2000; and

(iv) attending meetings with the client and contractors on 30th May 2000, 7th June 2000 and 13th June 2000.

5. Miss Chow, acting for the Defendant, submitted in her Closing Submissions that for a lump sum contract, a contractor (the Plaintiff in the present case) can recover nothing before the work is completed. The employer (the Defendant in this case) would be able to avoid payment of the fixed price by reference to omissions. In other words, the agreement between the Plaintiff and the Defendant was an entire contract, complete performance by the Plaintiff of all its obligations thereunder was a condition precedent to the liability of the Defendant to pay the agreed fee.

AGREED FEE: $120,000 OR $200,000

6. The fitting out of the Office was completed by mid-June 2000 and the Office was handed over to the bank. It is not in dispute that the first invoice was issued by the Plaintiff to the Defendant on 14th July 2000 (page 44 of the Agreed Bundle). By this invoice, the Defendant was demanded to pay $165,000 to the Plaintiff, being the agreed fee less the part payment.

7. No payment was made by the Defendant. According to Mr. Lee Chur Nin ("Mr. Lee"), a director of the Plaintiff, what happened thereafter was this. On 29th August 2000, Miss Tang Fung Yin ("Miss Tang"), the Managing Director of the Defendant, went to the Plaintiff's office. She told Mr. Lee that the Defendant was not able to settle the invoice and requested for a "special" discount of $50,000. This request was accepted by Mr. Lee. He appreciated her coming over to the Plaintiff's office to try to solve the problem.

8. It is not in dispute that the Plaintiff thereafter on 30th August 2000 issued a revised invoice to the Defendant, demanding payment of the reduced balance in the sum of $115,000 (page 47 of the Agreed Bundle). Upon failure by the Defendant to settle the revised invoice, the Plaintiff has issued no less than 7 written reminders to the Defendant on respectively 16th September 2000, 10th November 2000, 24th November 2000, 13th December 2000, 29th December 2000, 6th March 2001 and 10th May 2001. These were followed by a demand letter from the former solicitors of the Plaintiff, Messrs. Ellen Au & Co., issued to the Defendant on 23rd May 2001.

9. It is noteworthy that all these written demands and reminders prompted no written response from the Defendant. The allegation by the Defendant appeared for the first time in its Defence filed in this action on 16th August 2001.

10. According to Miss Tang, what in fact happened was this. After receiving the first invoice in July 2000, she was (in her own words) "freaked out". She was shocked and could not believe that the Plaintiff would be so cunning. She was so emotional and unhappy that she was unable to respond to the invoice for 7 days. Thereafter, she telephoned Mr. Lee to point out that the figure was wrong. There was an argument over the telephone. She pointed out that the Plaintiff had not performed its duties regarding the colour scheme, furniture selection, site supervision, and attendance of meetings. She slammed the phone down.

11. According to Miss Tang, she went to the Plaintiff's office on 29th August 2000 to "clarify the matter". She reiterated that the figure charged by the Plaintiff was wrong and she repeated the complaint regarding the Plaintiff's failure to perform its duties. She then left the Plaintiff's office. She did not request for a $50,000 discount. She did not tell Mr. Lee that the Defendant was in financial difficulty.

12. Miss Tang went on to testify that Mr. Lee telephoned her at about 9:00 a.m. on 30th August 2000. Mr. Lee said that he did not want to hurt their feelings and suggested giving a $50,000 discount to the Defendant. She reluctantly agreed. She was again "shocked" when she later received the revised invoice demanding payment of $115,000. She had thought that the discount was from the sum of $120,000. She chose to ignore the revised invoice.

13. Having observed Mr. Lee and Miss Tang giving evidence in the witness box, I accept Mr. Lee as a truthful witness. He gave his evidence in a credible and straightforward manner. I do not believe the account of the events given by Miss Tang. I reject her evidence insofar as it is inconsistent with the evidence of Mr. Lee. Miss Tang is an educated and experienced business woman. She has received college education in Canada and she founded the Defendant company in 1987. I find it particularly incredible that, had the fee for the Design Services been agreed at $120,000, Miss Tang would choose simply to ignore the revised invoice. It is also incredible that Miss Tang would choose not to respond in writing to the numerous demands and reminders thereafter issued by the Plaintiff.

14. Accordingly, on the evidence before me, I find as a fact that the fee for the Design Services was agreed at $200,000.

DID THE PLAINTIFF FAIL TO PERFORM ITS DUTIES AS AGREED

15. Briefly stated, the Plaintiff's answer to the Defendant's allegations, given by Mr. Lee in the witness box, is as follows: -

(i) The design of the colour scheme and the selection of furniture was not within the scope of works which the Plaintiff had undertaken to perform;

(ii) The Plaintiff has duly performed sufficient site supervision during the whole of the construction period; and

(iii) The Plaintiff's representatives were absent from the last 3 meetings on 30th May 2000, 7th June 2000 and 13th June 2000 with the prior consent of Miss Tang.

16. Again, I accept Mr. Lee's evidence as being truthful. The Plaintiff's case on the colour scheme and furniture selection is supported by a document entitled "Meeting Minutes No. 1" dated 29th March 2000 issued by the Defendant (page 1 of the Agreed Bundle). Miss Tang accepted when giving evidence that in this document, she had tried to set out the scope of works to be performed by the Plaintiff as clearly as possible. There is simply nothing in this document to suggest that the Plaintiff was to be responsible for the design of the colour scheme or the selection of furniture.

17. Further, the Plaintiff's case on the non-attendance of meetings is supported by the Minutes prepared by the Defendant, in particular, those of the last 2 meetings held on respectively 7th June 2000 and 13th June 2000 (pages 39-41 and 42-43 of the Agreed Bundle). In the Minutes of the last 2 meetings, the Plaintiff's representatives were not recorded as being absentees. This, in my view, clearly suggests that they were absent from the meetings with the consent of the Defendant.

18. Under cross-examination, Miss Tang explained that the omission to record the absentees was deliberate, but it was not due to the fact that she had consented to their absence. She simply did not want the bank to know that there were so many absentees.

19. I agree with Mr. Chua, who appeared at this trial on behalf of the Plaintiff, that the explanation given by Miss Tang is nonsensical. According to the Minutes, the bank's representative (a Mr. K. K. Cheung) was present at both meetings. He would, of course, be aware of those who had failed to turn up at the meetings, whether or not it was recorded in the Minutes.

20. If the Plaintiff had really been in serious dereliction of its duties as alleged by the Defendant, one would have expected the Defendant to make some formal written complaint to the Plaintiff, demanding the Plaintiff to fulfil its side of the bargain. However, no such complaint was ever made by the Defendant. In short, there is no documentary evidence whatsoever in support of the Defendant's allegations. The Defendant has adduced no independent evidence (for example, from the various contractors involved in the project who would be able to testify as to the amount of site supervision conducted by the Plaintiff) to substantiate its case.

21. For the reasons set out above, I reject the allegation by the Defendant that the Plaintiff has failed or omitted to perform its obligation under the oral agreement with the Defendant.

CONCLUSION

22. I hold that the Defendant is liable to the Plaintiff as claimed in the Amended Statement of Claim. Mr. Chua submitted that the Plaintiff should be awarded interest on the judgment sum at the Judgment Rate (as varied from time to time) from 16th June 2001, that being the date when the Writ of Summons in this action was issued. Miss Chow raised no objection to the rate of interest that should be applied.

23. Accordingly, I order that there be judgment against the Defendant in favour of the Plaintiff for the sum of HK$115,000, together with interest thereon at the Judgment Rate (as varied from time to time) from 16th June 2001 to the date of this Judgment.

24. Further, I make an order nisi that the costs of this action be paid by the Defendant to the Plaintiff, to be taxed if not agreed.