CHICKEEDUCK DISTRIBUTION LTD v. BPS INTERNATIONAL (GROUP) CO LTD t/a BEST & PRESTIGE CO

DCCJ10114/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 10114 OF 2001

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JUDGMENT

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Background

1. The Plaintiff is a trader in children's garment. On the 20 December 2000, it entered into a tenancy agreement with Chiaphua Components Ltd. and took out a tenancy of premises located at First Floor, 6 On Lok Mun Street, On Lok Tsuen, Fanling, New Territories (hereinafter called "the said warehouse"). The Defendant is a company specialises in the provision of storage system and reprovisions of warehouses.

2. In or about October 2000, the Plaintiff intended to relocate its warehouse for the storage of stock from its warehouse at Park Sun Building in Kwai Chung, New Territories and in November 2000, it decided on the said warehouse in Fanling.

3. In order to prepare for the relocation to the said warehouse, the Plaintiff required the following renovation work to be done: (1) demolishing of internal walls, (2) rewiring and installation of lighting; (3) plastering and painting of walls and ceiling; (4) floor preparation and repainting work; (5) dismantling and replacement of the racking system.

4. The Plaintiff entered into an agreement with the Defendant to prepare the floor and install a racking system for the Plaintiff and a second contractor (DMC) was engaged for the installation of the wiring, lighting, demolition of internal walls and painting of the walls and ceiling at the said warehouse.

5. On inspection of the said warehouse at completion, the Plaintiff was not satisfied with the work performed by the Defendant, it requested the Defendant to make improvements on the work done. The Defendant did no further work at the said warehouse. Eventually, the Plaintiff obtained the services of another contractor to redo the flooring completely by covering the floor with a 'seamless flooring'.

6. In the present action, the Plaintiff claims against the Defendant for the return of the deposit of $80,000 and damages suffered, i.e. the difference between the Defendant's contract price for the flooring work, and the payment to the new flooring contractor, in the sum of $208,000.

7. The Defendant on the other hand, denies it is at fault and maintains that it had performed the work under the contract and counterclaims for the outstanding balance of payment of $11,402.

The Plaintiff's case on facts

8. The Plaintiff called five witnesses. The Plaintiff's Chief Executive Officer (PW1) Mr. Herbert Chow, the Financial Controller of the Plaintiff Mr. Johnson Lam (PW5), a loss adjuster from Miller International Loss Adjusters (H.K.) Ltd. Mr. Chan Sun Wah who prepared a report on the work done by the Defendant at the said warehouse (PW2); Dr. Eric Lim of Safety, Accident and Failure Experts Ltd. who prepared six reports on floor painting (PW3); and the proprietor of Kan's Decoration Co. Ltd. the contractor who subsequently redid the said warehouse flooring (PW4).

9. It is both Mr. Chow's (PW1) and Mr. Lam's (PW5) evidence that Mr. Lam was entrusted with the job of obtaining quotations for the reprovisions of the said warehouse in Fanling between late October to mid-November 2000. As the deadline for the Plaintiff to move out of their Tsuen Wan warehouse was at the end of December 2000, the Plaintiff was concerned that the move should be no late than early January 2001.

10. Quotations from DMC Interior Design and Contracting Limited ("DMC") was obtained to perform the reprovision work of the said warehouse as an office cum warehouse. PW4 Mr. Kan whose company Kan's Decoration Co. Ltd. was also consulted on the suitable methods of floor preparation. Mr. Kan quoted a price of $218,265 for a seamless flooring job of 9,000 sq. ft. of the warehouse space.

11. PW5 obtained a quotation from the Defendant who had been the Plaintiff's racking system supplier at its Tsuen Wan warehouse. The Defendant was requested to give a quotation for floor painting and the provision of a racking system. The Defendant supplied a quotation for the racking system installation and floor preparation work and a second quotation for the reprovision of the said warehouse as an office cum warehouse. The former quotation included the flooring work using Flying Fish paint of 5,000 sq. ft. and 1 mm epoxy paint for 2,100 sq. ft. of space at the said warehouse. These were subsequently amended due to the Plaintiff's change of mind to use the said warehouse as a warehouse only.

12. On a date after 20 November 2000, PW1 and PW5 were taken by Vincent Cheung (DW2) and another staff of the Defendant to look at a warehouse in Kwai Chung (hereinafter called "the model warehouse") at which the Defendant had performed renovation work in the past. DW2 Mr. Cheung informed PW1 and PW5 that the Flying Fish paint was a cheaper but acceptable substitute for the warehouse floor.

13. It is PW1's evidence that PW5 had reiterated to the Defendant's staff at the model warehouse inspection that the floor of the said warehouse needed to have a proper finish, durable enough to withstand constant abuse of a normal commercial warehouse and they were assured that the Defendant's work would be able to meet such a requirement.

14. After negotiation and submissions of a number of quotations, the Plaintiff reached an agreement with the Defendant to carry out racking and flooring work at the said warehouse at a discounted price of $208,000 on 12 December 2000. The price attributable to the flooring work including floor preparation and grinding, work primer and floor painting with Flying Fish coating of 13,200 sq. ft. was $118,800 reduced to $91,402 after a special discount.

15. The Defendant was expected to commence work at the said warehouse on 16 December 2000 upon DMC's completion of its part of the warehouse renovation work. However, the Defendant did not commence work until 20 December 2000 over the matter of the Plaintiff's delay in the payment of deposit. On 26 December 2000 upon inspection conducted by PW5, the Defendant was found to have failed to remove the existing green coloured paint before the new paint was applied, he was told work was still under way. PW5 contacted DW1 immediately and informed him of his concerns. On 27 December 2000, PW1 and PW5 both inspected the said warehouse and found that only 65% of the floor had received any grinding and the remaining 35% had only been lightly scraped. They further found the floor to be uneven with nails on the floor surface. They found no primer had been applied. The painting work was found to have been poorly executed with uneven surface and the painting was of different hues. They claimed the flooring was worse off than before.

16. The Plaintiff gave the Defendant two days to remedy the defects for the Plaintiff had to move out from their Tsuen Wan warehouse soon. On 29 December 2000, the Plaintiff found that except for the removal of the nails on the floor and plastering over of a few of the holes, there were no further improvements to the floor.

17. At the insistence of the Plaintiff to remedy the defects, the Defendant faxed a certificate of acceptance with a defects list to be returned and signed by the Plaintiff. Furthermore, the Defendant agreed only to perform touching up work within two days of the return of the list of defects by the Plaintiff. On the other hand, the Plaintiff insisted that the whole floor should be scraped off the old paint, made smooth, levelled and flattened, followed by a primer to be applied before painting the top coatings.

18. After a discussion between PW5 and DW1 of the Defendant company on the list of work to be performed, the Defendant company faxed to the Plaintiff a new quotation for further preparation of the said warehouse floor amounting to over $600,000.

19. Due to the expiry of the lease of the Tsuen Wan warehouse, the Plaintiff moved its goods into the said warehouse and retained the services of the PW4's company to put in a seamless flooring as a result.

The Defendant's case on facts

20. It was the Defendant's Mr. Stephen Lee's evidence that he had a number of discussions with Mr. Johnson Lam over the renovation and reprovision of the said warehouse. On 13 November 2000, the Plaintiff's representatives had seen the 'model warehouse' the warehouse of Jardine Schindler group at ATL Building at the 5th Floor in Kwai Chung which was a job done by the Defendant a few years before. The Defendant was also requested to give a different quotation for 'a seamless flooring' and a Flying Fish epoxy enamel paint job. On 12 December 2000, the Plaintiff accepted the cheaper floor treatment quotation involving the removal of loose old paint, polishing of the floor and the application of primer and top coatings of Flying Fish paint.

21. On 14 December 2000, Mr. Lee visited the said warehouse with Mr. Lam for the first time and found the floor to be uneven with areas of loose surfaces. He realised the Flying Fish paint treatment may not be able to achieve a desirable result and suggested to Mr. Lam other means to improve the floor surface. Mr. Lee claimed that his suggestion was rejected by Mr. Lam because of the extra charges involved. Mr. Lam insisted that the Plaintiff required only the removal of the loose paint and a clean and tidy surface of the warehouse floor, he did not ask for a flat and even surface.

22. Mr. Lee claimed that on 26 December 2000, the day when Mr. Lam inspected the said warehouse, he had explained to Mr. Lam that though some of the loose old paint had yet to be removed, the Defendant should be able to finish the work on time. However, when Mr. Chow inspected the said warehouse the next day, he was highly dissatisfied with the work and insisted removal of all pieces of plastic sheet covering, old paint and nails on the floor, and the repainting of the whole of the warehouse floor. He also insisted on a smooth and flat surface with a 'seamless flooring' effect. Mr. Lee said he had agreed to remove all the nails from the floor and apply an extra coating of Flying Fish paint, but informed Mr. Lam and Mr. Chow that due to the existing condition of the floor and the nature of Flying Fish paint, a 'seamless flooring' effect could not be achieved. The Defendant was given until 29 December 2000 to finish the work. However, on 29 December 2000, the work done still did not meet the Plaintiff's approval. The Plaintiff further requested the Defendant subsequent to 29 December 2000 not to charge for the metal strip covering of the gap on the floor left by the removal of the internal office wall, to further touch up the floor to create a uniform floor colouring, to fill up all crevices and holes large and small and render the floor flat, even and smooth. The Defendant sent a defects list to the Plaintiff, Mr. Lee claimed the defects list was never returned.

The Plaintiff's expert evidence

23. The Plaintiff's expert evidence came from PW2 Chan Sun Wah, Billy, a loss adjuster from Miller International Loss Adjuster (H.K.) Limited and Dr. Eric C.H. Lim (PW3) of S.A.F.E. (Safety, Accident and Failure Experts Ltd.). Mr. Chan's (PW2) report can be found on p. 217 - 274 of bundle C. It was prepared on 8 February 2001. In Mr. Chan's report, the said warehouse was divided into different sections and photographs of these sections were attached. Mr. Chan found the said warehouse flooring to be rough in general, he concluded the flooring had not been prepared in accordance with the requirement of the Plaintiff, as there were differences in the appearance of the colour on the floor, he concluded that it was due to the lack of proper grinding work of the warehouse floor.

24. Dr. Eric Lim's (PW3) evidence is more in depth, technical and academic. Dr. Lim visited the said warehouse on 12 January 2001. He found the flooring on the right side of the entrance to be rough, uneven and lumpy; the middle of the warehouse was comparatively flat and smooth, samples from this area showed the old greenish paint between the new orange paint coating and the concrete base; the left side of the warehouse was found to be rough and uneven, the paint coating appeared to be smoother than the right side of the warehouse.

25. From samples collected by Dr. Lim, he found the right side of the warehouse entrance had only one single layer of orange paint coating and no primer had been applied. On the middle section of the warehouse, samples taken showed four layers of greenish paint and two layers of orange paint. On the left side of the entrance, two profiles were found, the first profile was two layers of orange paint on top of a thin layer of green paint and a yellow primer layer underneath. The second profile was two orange paint layers, no primer or green paint was found. Photographs of different areas of the warehouse flooring and samples taken from different areas of the warehouse magnified under the microscope have been annexed to his report.

26. He concluded that on the right side of the warehouse, the absence of green paint indicated surface preparation work of some kind had been performed with grinding done to remove the green paint exposing the concrete base. No sealant or primer had been applied to smoothen the surface before a simple layer of orange paint was applied. In the middle section, the orange paint was directly applied onto the existing green coating, resulting in the darker appearance and flat surface.

27. In the left section, part of the area had the green paint removed and two coats of orange paint applied, while in the remaining area the green paint had been partially removed before two coats of orange paint were applied.

28. Dr. Lim found no primer layer had been applied in any part of the warehouse prior to the application of the orange paint coating. He concluded the flooring had not been prepared to an acceptable standard by the complete removal of the old green paint and the application of a floor sealant to flatten and smoothen the surface before top coatings were applied.

The Defence's expert evidence

29. The Defendant adduced evidence from Mr. Stewart Wong of Proficiency Surveyors & Co. (DW3) and Mr. Ricky Au Yeung of Ray Engineering Company (DW4).

30. DW3 Mr. Wong inspected the said warehouse on 2 February 2001 and found the Plaintiff had appointed a new contractor to redo the warehouse floor, as a result, he was only able to inspect about 1,000 square feet of the said warehouse of which he took some photographs. It was his conclusion that the Defendant had generally performed the floor preparation work. He found no loose paint on the area of the warehouse inspected. He further found that the Defendant had diluted the Flying Fish epoxy enamel paint with thinner and used it as a primer on the warehouse floor before applying two coats of Flying Fish epoxy enamel paint. In his opinion, the Defendant had generally finished the floor preparation and grinding job, applied work primer and painted the warehouse with Flying Fish paint coating as agreed. In his evidence in Court, he agreed that the primer could be the same paint as the top coating, that the difference is in the proportion of the thinner used in the paint. Further, it is possible that the proportion of thinner used in the top coating can be more than the primer layer.

31. There was evidence from the paint supplier Y. Lee Chemicals Ltd. on the proportion of thinner used on the Flying Fish paint as a primer and different proportion when used in a top coating. Mr. Au Yeung (DW4) performed a paint test using Flying Fish epoxy enamel paint with thinner in accordance with the recommendation of the paint supplier Y. Lee Chemicals Ltd. for the primer layer and the top coating. These tests were performed to show that it is impossible to determine whether a primer layer had been applied on rough concrete surface and that it is impossible to distinguish the primer layer on the concrete surface and the top coating nor is it possible to distinguish the number of layers of paint applied.

32. Mr. Au Yeung's method of examination and testing had been challenged by Dr. Lim as not complying with the established method of preparation of samples surface to distinguish the exact number of layers of paint.

Findings

33. On the evidence of witnesses called by both parties, it is apparent that the Plaintiff had chosen the Defendant because of the Defendant's expertise in the racking installation. The Plaintiff further accepted the Defendant's quotation on flooring work after reviewing and consulting other flooring contractors and their quotations. Consequently, it cannot be said that the Plaintiff's Mr. Johnson Lam (PW5) was not knowledgeable on the type of flooring the Defendant would deliver after detailed alternatives had been studied by him and explained to him by persons he consulted and whom he obtained quotations from. Mr. Lam well knew what to expect from the Flying Fish epoxy enamel paint job the Defendant had contracted to do. I find Mr. Lam also knew well the type of work to be performed because similar steps and procedure were clearly stated in the 22 November 2000 quotation of Hopeful Company (see p. 126 of bundle C) and these were comparable to work to be performed by the Defendant. They were:-

"(a) Prepare surface with special cleaning

(i) strip off existing old floor by heavy duty machine;

(ii) remove and clean the dirt dust for whole area;

(iii) high jet water cleaning for the floor.

(b) Apply 'Camel' epoxy enamel EP9000 Line

(i) supply and apply one coat of Camel EP91 primer;

(ii) supply and apply two coats of Camel EP9090 Gloss."

There was no mention of filling in holes on the floor or levelling of the uneven surface. The price after discount was approximately $9 per sq. ft. This knowledge may not have been shared by the Plaintiff's chief executive officer Mr. Herbert Chow (PW1) but is certainly well known to Mr. Lam. Thus, even though Mr. Lam requested the Defendant to perform certain remedial work on 26 December 2000, Mr. Chow found further dissatisfaction with the work on 27 December 2000.

34. From the evidence of the Hopeful quotation of 22 November 2000 (p. 126 bundle C) and the evidence of the DMC quotation on the warehouse floor of 13 November 2000 (p. 116 of bundle C) giving a quotation of $200,000, I find the agreement between Mr. Lam and Mr. Stephen Lee was for a floor preparation comprising of the removal of and polishing of old paint that had become loose, apply primer and finishing with a paint top coating. As this agreement was made before Mr. Lee had a chance to inspect the said warehouse and he had quoted a price which could not guarantee an acceptable standard due to the existing condition of the floor of the said warehouse. Consequently, Mr. Lee, on inspection of the said warehouse together with its flooring contractor, found the poor condition of the said warehouse floor to be undesirable had suggested extra work to be performed on the floor in addition to the work contracted for and would result in an increase of the price quoted. This was rejected by Mr. Lam because Mr. Lam considered an agreement had been reached at a price accepted by the Plaintiff.

35. The evidence of the Plaintiff's experts, particularly the evidence of Dr. Lim, clearly indicated that the Defendant's work was unsatisfactory in that there was only partial removal of the old green paint and there were areas with rough and uneven surfaces. This shows inconsistency in the quality in various areas of the said warehouse. I accept the evidence of Dr. Lim that there were areas where evidence of a single layer of top coating of orange paint was found, while other areas had two layers. On the other hand, I find it is possible as recommended by the paint supplier that 'the primer' layer can be of the same paint as the top coat when mixing different proportion of thinner with the Flying Fish paint.

36. I find that it is not unreasonable for the Plaintiff to expect the Defendant to remove the nails on the floor remove the plastic sheet coverings, to fill up the holes on the floor, to make sure the flooring should be of uniform colour and meet the standards expected and contracted for. If the Defendant had failed to inspect and ascertain the condition of the warehouse floor before giving a quotation to the Plaintiff, and found subsequently at the inspection that more work would be needed than it had bargained for, it has itself to blame. It is not an excuse to produce low quality work.

37. On the other hand, it is unreasonable for the Plaintiff to expect the Defendant to produce a result that only a 'seamless flooring' method can produce. It was apparent to Mr. Lam that a seamless flooring would cost over $15 per square foot, while the price quoted for the work to be performed by the Defendant after discount costed approximately $7 per square foot. The quotation of Hopeful Company (see p. 126 of bundle C) was $94,000 for the warehouse floor of 10,000 sq. ft. of doing similar work ($26,000 for floor preparation and $68,000 for painting of primer and two coats of Camel paint) which had been amended subsequently to $116,000 for 13,000 sq. ft. of the warehouse floor after a 5% discount (i.e. about $8.92 per square foot). The quotation of DMC was $200,000 for the flooring work, this quotation did not specify whether it was for a 'seamless flooring' (see p. 116 of bundle C) or a conventional floor painting job. For a seamless flooring, the quotation of PW4 Mr. Kan's company was $218,000 in November 2001 and the quotations of two other contractors on 3 January 2001 were both $195,000 (see p. 145 and p. 146 of bundle C). Comparing these quotations, clearly, the Defendant's quotation was the lowest. After inspection of the 'model warehouse', the Plaintiff contracted with the Defendant.

38. On a balance of probability, the evidence before me shows that the Plaintiff knew what kind of work to expect when he chose a price just under $7 per square foot. It is unreasonable to expect the Defendant to produce the effect that only a seamless flooring can achieve, for which the Plaintiff would be expected to pay $15 - $16 per square foot. On the other hand, I find the Defendant should have performed the remedial work for the Plaintiff if the Plaintiff had given it an opportunity to do so. I also find that the Defendant had failed to perform a satisfactory job in that some areas of the floor had more than one coat of orange paint, while other areas had only one coat, further, certain areas of the floor was ground while other areas remained unscraped. There were also areas with fresh cement fillings which could not be concealed by a thin layer of paint. The Defendant could have applied a few more coats of paint so as to achieve a more polished and uniform colour appearance. Under the circumstances, the Defendant should compensate the Plaintiff for its failure to remedy those defects that can be remedied so far as possible.

39. In assessing the damages suffered by the Plaintiff, I take into account the cost for a similar type of work rather than the cost for a far superior 'seamless flooring' work. I have therefore applied the unit price found in the quotation of Hopeful produced in the evidence of Mr. Lam. The price quoted for one coat of primer and two coats of top paint was $68,000 for 10,000 sq. ft. The Plaintiff could have found another contractor (such as Hopeful) to remedy most of the defects by the application of a couple of layers of paint. Replacing the floor with a 'seamless flooring' was surely Plaintiff's own choice for a far superior floor covering. The cost for the application of two coats of paint is:-

$	(68,000 ÷ 3 x 2) x 13,000 x 0.95 = $55,986.67
	10,000

This is the sum the Plaintiff is entitled to recover.

40. The Defendant counterclaims for $11,402 (the difference between $91,402 and the deposit of $80,000), the Defendant succeeds on its counterclaim. This sum is set off against the Plaintiff's award and is deducted from the damages of $55,986.67.

$(55,986.67 - 11,402) = $44,584.67

I award the sum of $44,584.67 to the Plaintiff under the Plaintiff's claim.

41. Interest on the sum of $44,584.67 at half judgment rate from the date of writ to date of judgment, thereafter at full judgment rate until full payment.

42. Costs nisi - costs follow the event. The Plaintiff is entitled to its costs on the claim and the Defendant on its counterclaim, to be taxed if not agreed with certificate for Counsel. I further order that only the cost of one report from each of the two expert witnesses called will be awarded to the Plaintiff, there is no need to inundate the court with numerous reports from the same or a number of expert witnesses. Parties should take care that unless it is absolutely necessary not to produce more than one expert report from each side in a dispute such as this one.