CHAN KOON HUNG TONY t/a INDIGO DéCOR CO v. NALZ & CO LTD t/a LITTLE MISSES & MINI MASTERS

DCCJ 2513/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2513 OF 2005

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JUDGMENT

1.  During July and August 2004, Nalz (the Defendant) was planning to open a shop selling children’s fashion, accessory and furniture at Horizon Plaza in Ap Lei Chau, Hong Kong.  Nalz eventually engaged Indigo (the Plaintiff) to provide the fitting out and decoration service to the shop premises.  Indigo now claims for the balance of the cost of work done and materials supplied.  For alleged delayed completion of work and poor workmanship, Nalz disputes liability.  Alternatively, Nalz claims damages to set off the claim.

2.  Nalz used to be legally represented until January 2007.

BACKGROUND

3.  The action was commenced by Indigo as a firm.  However, according to the pleadings, it is common ground that Chan Koon Hung Tony was and is the sole proprietor of Indigo.  I therefore gave leave to correct the title of the action as now appearing.

4.  Chan came to be engaged in this project through the introduction of Axel Cordemans, a qualified architect and interior designer.  Cordemans was also the designer in charge of this project for Nalz.  Most of the instructions and communication regarding this project were between Cordemans and Chan.

5.  Eventually Indigo submitted several quotations which were signed and accepted by Nils Neckel of Nalz.  The first agreed quotation was dated 24 August 2004 and the contract price was HK$150,000 (1^st contract).  However a number of the items of work listed in the quotation were yet to be confirmed.  Indeed another quotation was submitted for cabinetry works for the shop and its toilet.  On 14 September 2004, the parties agreed on the quotation for cabinetry and other works for the shop.  The contract price was HK$105,000 (2^nd contract).  On 17 September 2004, the parties agreed on the quotation for the remaining cabinetry works for the toilet.  The contract price was HK$20,000 (3^rd contract).

6.  During the renovation period, additional works and materials were ordered and supplied.  For them, Indigo issued 2 invoices in November 2004 for HK$13,850 and HK$4,941 respectively.

7.  Nalz has paid HK$90,000 under the 1^st contract and refused to settle the balance in the sum of HK$203,791.  Hence the present action.

8.  The above background is not in dispute.

THE ISSUES

9.  The issues are therefore:

(1)	the alleged delay;
(2)	the alleged defects;
(3)	Indigo’s entitlement to the claim; and
(4)	the counterclaim.

THE ALLEGED DELAY

10.  According to Neckel, Nalz obtained possession of the shop premises in July.  Keys to the shop premises were made available to Chan on or about 10 August.  Neckel made clear that the target was to have the shop ready for opening in mid-September.  Chan disputed that.

11.  The quotations expressly provided for the time required by Indigo for completing the works:

(1)	1st contract (24 August) – 21 workings days
(2)	2nd contract (14 September) – 15 working days for off site manufacture and 2 working days for on-site installation
(3)	3rd contract (17 September) – 7 working days

12.  Neckel signed and accepted the quotations on behalf of Nalz.  Therefore, whatever discussion parties had about the target date for the opening of the shop prior to contract, Nalz did agree to give to Indigo such working time as set out in the quotations.  It became that for the works under the contracts to be completed, Indigo was given time up to early October, at the latest.

13.  Neckel argued that had the works under the 1^st contract been completed within the time set out there, the shop could have been open much earlier.  Chan said, and Cordemans confirmed, that he commenced work on 26 August 2004, i.e., 2 days after the 1^st contract was concluded.  However, many items of works for the shop were agreed only after the commencement of work.  Neckel argued that such other works could still have continued after the opening of the shop.  He even suggested that such works might be carried out in the early morning and after the shop was close.  In view of the nature and the amount of the works under the 2^nd and the 3^rd contracts as well as the additional works evidenced by the November invoices, I find Neckel’s such suggestion to be unrealistic in the circumstances.

14.  Under the 1^st contract, Indigo was required to paint the floor of the shop premises.  This work was deferred to the conclusion of the project.  Chan explained that the project should conclude with final cleaning and painting of the floor.  Otherwise, the other works under the subsequent contracts and the moving of furniture items on the site could have scratched the newly painted floor.  He had discussed with Cordemans who confirmed this in court.  Neckel argued that it was not necessary to defer the painting of the floor as the painted floor could have been protected by cover.  But according to Cordemans, Chan also explained that if the floor was painted first, the other work on site would be interrupted as the paint took days to dry.  This would have caused delay instead.  In my view, both explanations of Chan for having to defer the flooring work sound reasonable.  Cordemans did not say he disagreed with Chan on this either.

15.  In any event, Chan could not have proceeded to paint the floor even if he had wanted to.  According to his e-mail to Chan on 20 and 21 September, Cordemans was still giving instruction to Chan to prepare sampling of the colour of the floor.  A final decision on the colour of the floor was simply yet to be made even after the expiry of the working time allowed under the 1^st contract.

16.  For all these factors, Chan eventually confirmed by e-mail dated 24 September that the works would be completed by 8 October.  According to Chan, except for the flooring work, Indigo completed most of the works within the time allowed under the contracts respectively.  I accept that.  Chan said it was his practice to state in the invoices the time when the project was completed.  In this case, it was 4 October.  Cordemans was informed of the completion so that he could conduct site inspection.  Cordemans did so and took photographs.  On 5 October, Cordemans sent to Chan copies of these photographs together with illustration of the follow-up work required from Indigo.

17.  The follow-up work required from Indigo became another basis for Nalz’s complaint that Indigo had failed to really complete the work on 4 October as alleged.  At various stages of the renovation, Cordemans would inspect the site.  The follow-up work required would be made known to Chan by way of what were labelled as punch-lists.  There was suggestion that other follow-up works not on the lists might also be mentioned verbally to Chan but the evidence in that regard was vague.

18.  Cordemans confirmed that there were all together 3 punch-lists dated 21 September, 26 September and 5 October respectively.  As mentioned above, the last one was in the form of the photographs of the site with illustrations of the follow-up work required.  They were apparently prepared soon after the time set for the completion of the works under the 3 contracts respectively.  Chan said, and I accept, that he finished some of these follow-up works within a few days.  It is common ground that the site was handed over on 11 October.  Chan had to make an appointment to fix the remaining items in the punch-lists and other painting and carpentry works on 14 October.  He confirmed this appointment with Cordemans by his e-mail dated 12 October.  Cordemans confirmed that these follow-up works were completed as appointed.

19.  As a matter of contract and post-contractual eventuality, Indigo was not and could not be reasonably expected to complete the works until the first week of October 2004.  I find that Indigo substantially did that as a matter of fact, though follow-up works were required which Indigo also completed within a reasonable time.  I do not find delay in completion as alleged.

THE ALLEGED DEFECTS

20.  Nalz has actually not particularised the alleged defective works in the pleading.  Neckel listed them in his statement.  Cordemans said that the problems discovered during the various site inspections were those identified in his punch-lists.  As mentioned above, Indigo had those problems fixed.  Neckel still complained about various problems.

21.  There were alleged cracks on the floor of the shop.  Nalz produced a number of prints of photographs depicting the floor.  Their quality was too poor to be reliable reference for identifying the floor condition.  According to Chan and the photographs taken by him and Cordemans on 5 October, there were no cracks on the floor then.  Cordemans also said that had there been such cracks, their existence would have been recorded in his punch-list on 5 October.

22.  Even accepting that cracks appeared on the floor of the shop some time after October, I still have to decide whether this was the result of Indigo’s workmanship.  Neckel argued that Indigo had not treated the screed properly before painting.  I do not attach much weight to such opinion of Neckel in the absence of supporting expert evidence.  Cordemans agreed that there could be an inherent problem with the screed, in view of the how Horizon Plaza was built and used as warehouses.  While he said that normally contractor would be expected to check the screed of the floor before applying the paint, the fact was that the 1^st contract only required Indigo to paint the existing screed of the floor of the shop.  Work involving removal of the existing floor tiles and laying of a small area of new screed was required only under the 3^rd contract for the toilet.  I do not find that cracks on the floor, if any, were the result of poor workmanship in the painting the floor by Indigo as alleged.

23.  Neckel complained about unfinished fittings.  One example was the electric wiring and light fittings.  However Cordemans confirmed that the light fittings were yet to be chosen and the exact location of them were yet to be finalised on 5 October.  They were therefore left the way they appeared in the photographs taken on that day.

24.  There was complaint about water dripping from the air-conditioner.  However, the 1^st contract only required Indigo to clean the filter and the outdoor compressor of the existing machine.  Indigo was not engaged to do anything about the mechanical functioning of the air-conditioner.

25.  The other complaints by Neckel relate to the dimensions of a few furniture items as well as the workmanship in the painting of the walls and the cabinets.  Cordemans said there was issue as to the size or dimensions of a couple of furniture items.  He had to somehow adjust his design as a result.  Chan disputed this.  But in any event, Cordemans agreed that as the designer in charge of the project, he accepted those items.  The complaint about how the cabinets were painted did not form part of Cordemans’ punch-lists but that about the quality of the painting of the walls did.  Some paint on the walls peeled off.  Neckel suggested that Indigo had not removed the old paint before applying the new paint.  Chan denied that.  There is no proper and objective evidence in support of Neckel’s suggestion.  In any event, such complaint was addressed by Chan when he made the appointment on 12 October to do the final touch-up on 14 October.  As mentioned above, Cordemans confirmed that that was done as scheduled.   If Neckel was referring to what happened afterwards, I would have expected proper documentary evidence to identify the existence and extent of such problem.  Such evidence is lacking.

26.  Considering all the evidence, I am not satisfied that the alleged defects are proved.

THE CLAIM

27.  It follows that the basis for disputing liability to the claim is not established.  I do not find there were works which could be done but left undone by Indigo, not to mention that none of them was proved to the extent required to render the contracts uncompleted.  Imperfection in the works, which have been substantially completed, is not be a ground for an employer to repudiate liability to pay the contractual sum to the contractor: see Hoenig v Isaacs [2952] 2 All ER 176.

28.  There is no dispute in respect of the agreed sums under the 3 contracts.  Cordemans confirmed in court that he instructed Chan to carry out the additional works and to purchase the materials now recorded in Indigo’s invoices in November 2004.  Therefore the amount claimed is also proved.

29.  Neckel argued that even if Nalz is liable, Nalz should only be liable for HK$163,000 instead of the amount claimed.  This lesser amount was the so-called special price stated in Indigo’s last invoice issued in April 2005.  Chan explained that he was financially tight then and wanted to settle the matter without resorting to litigation.  That invoice was issued as a result of such negotiation between him and Neckel.  This is evidenced by the e-mail correspondence between the parties in April 2005.  Chan offered a 20% discount from the amount claimed which came to this so-called special price.  Neckel rejected that offer.  The fact was that parties never reached any settlement.  It is therefore not up to Nalz to seek to bind Indigo to this lesser amount now.

THE ALLEGED LOSS AND DAMAGE

30.  For completeness, I proceed to consider the loss and damage alleged by Nalz as a result of the alleged delayed completion of works and defective works.

31.  For the delayed opening of the shop, the claim was put in 2 ways.  First, there was claim for compensation in the amount of HK$140,000 for the period of delay at what was said to be a reasonable daily rate of HK$3,500.  Secondly, there was the claim for loss of profits from sales, which allegedly would have been achieved during that period, and loss due to damaged reputation.  The amount claimed is in excess of HK$1.1 million.  In view of this court’s jurisdiction, Neckel opted for the claim in the first way and asked me to consider the second way of quantification as justification for his claim.  It suffices for me to say that Nalz’s claim, in either of the 2 ways, is not substantiated by proper evidence.

32.  For the alleged defects, Nalz claims the cost of rectification and the incidental loss during a 21-day period of rectification.  The amount claimed is in excess of HK$500,000.  Again, none of them are substantiated by proper evidence.  There is no claim for any abatement in price as a result of Indigo’s alleged deviation from the design.  There is also no claim for any consequential loss caused as a result of Nalz’s accepting the deviation.  Neckel said the cost of rectification was yet to be incurred because he could not afford actually closing the shop for the rectification.  During submission, Neckel disclosed that he had already closed down the shop and returned possession of the premises to the landlord.  Strictly this could not be taken as evidence.  In any event, I could conclude that the counterclaim must fail without taking this untimely statement into account.

ORDER

33.  Indigo shall have judgment in the sum of HK$203,791.  Nalz shall pay this amount together with interest thereon at 1% above HSBC prime rate from the date of writ to today and thereafter at the judgment rate until full payment.  I make a nisi order that Nalz shall pay Indigo costs of this action, including any costs reserved.  Such costs shall be taxed if not agreed.  For clarity, I certify the engagement of counsel.  This costs order shall become absolute in the absence of any appointment to argue costs in 14 days.