A Pub (H.K.) Co Ltd v. Tang Yuk Lun Alan t/a A. Plus Design & Contracting
|
DCCJ 3129/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3129 OF 2005 ____________ BETWEEN
____________ Coram: His Hon Judge Leung in court Date of hearing: 6, 7, 8, 19 May 2008 Date of judgment: 13 November 2008 JUDGMENT 1.In 2004, Au planned to incorporate a company, eventually the Plaintiff (A Pub), to run a pub. Through introduction, Au came to know the Defendant (Tang), who runs a design and contracting business. Tang was contracted to provide (1) consultancy service for the purpose of obtaining the necessary operating licences; and (2) the design of the pub and most of the decoration work. A Pub now claims against Tang for damages for alleged misrepresentation and breach of agreement. Tang denies liability and counterclaims for the balance of the consultancy fee and the cost of decoration work done. BACKGROUND 2.Au and Tang started discussion of Au’s plan in early March 2004. After viewing various premises, Au decided to rent a ground floor premises at Sai Yeung Choi Street North, Mongkok, Kowloon. A Pub was incorporated and Au became practically the sole shareholder and director. Tang was contracted for the services mentioned above. 3.In late March 2004, Tang arranged the submission of A Pub’s application to the Food and Environmental Hygiene Department (FEHD) for the licences (the 1st Submission). The layout design was that the front of the pub would consist of the enclosed seating area and a service bar while the back of the pub, that is an open yard, would accommodate the food preparation room. A covered corridor in the open yard would link the two areas. A Pub itself would be responsible for erecting the cover that was supposed to be a retractable one. 4.After preliminary screening, the FEHD considered the 1st Submission unacceptable because of unclear delineation of the exact boundaries of premises in the plans. On 2 April 2004, Tang arranged and submitted a second letter of application with the revised plans (the 2nd Submission). 5.After a site inspection of the premises in mid-April, the FEHD considered the layout design of the pub to be basically unacceptable because food and clean utensils would apparently be conveyed through open yard from the food preparation room to the seating area and the service bar. 6.As a result, Tang had to submit a third letter of application with further revised plans (the 3rd Submission). The idea of a retractable cover was dropped and replaced by a stainless steel cover over the corridor at the open yard. After consideration, the FEHD had no objection in principle to A Pub’s application but subject to certain requirements and conditions. This led to a joint department Application Vetting Panel for Restaurant Licensing meeting on 30 April 2004. Au and Tang attended the meeting. 7.The requirements subject to which the provisional licence would be issued were contained in the letters of requirement. Among others, non-standard requirements were imposed in respect of the construction of the stainless steel cover, namely, (1) a copy of application for the BD’s approval of the construction should be submitted to the FEHD prior to the issuance of the provisional licence; and (2) the stainless steel cover should be properly constructed. Authorised Person (AP)/Registered Structural Engineer would be required to certify compliance. 8.It took another 3 weeks before Tang arranged submissions to the BD for the approval of the addition of the covered corridor. These included the notices of appointment of Lee, the AP (Lee), and the RSE as well as the application for the approval of the Alteration & Addition (A&A) plan for the intended works. Meanwhile, a request for fast track processing of the approval of the A&A plan by the BD was submitted. In June 2004, Lee also applied for the BD’s consent to commence the intended works. For this purpose, further revised plans were submitted. 9.The application to the BD was again a failure. The BD considered the application and the A&A plan to be fundamentally unacceptable due to, among other things, incorrect gross floor area (GFA) and plot ratio calculations. The BD accordingly refused the application for consent to commence the intended works as well. 10.Parties ended up in another joint meeting with the FEHD in July 2004. The conclusion was that the whole idea of the covered corridor had to be scrapped. The food preparation room had to be relocated to the enclosed front of the pub. The consequential application with further revised plans was submitted (the 4th Submission). 11.By then, nearly 4 months have elapsed since Tang was engaged in this project. The rent-free period allowed under the tenancy agreement has also elapsed by then. Yet A Pub was still in lack of the provisional licences to commence business. Au was obviously not pleased by such progress. 12.Meanwhile Tang presented his final account to A Pub and requested payment for the balance of the consultancy fee and cost of the decoration work so far completed. A Pub disputed various items of the final account and held Tang to be liable for the financial consequence of having to relocate the food preparation room and the delay. This ended up in a deadlock between the parties. 13.A Pub eventually engaged another contractor and, through them, another consultant to take over the project and to carry out the relocation of the food preparation room. The 2 provisional licences were eventually issued in August and September 2004 respectively. 14.Tang first instructed solicitors to demand A Pub for payment. But it was A Pub that commenced the present action in July 2005 and Tang counterclaims. Both parties put forward the defence of set off in respect of the other’s claim. 15.The above background is largely evidenced by the contemporaneous documents. I find the same to be the facts. THE ISSUES 16.A Pub alleged misrepresentation and breach of implied contractual duty of care on the part of Tang. The complaint is mainly about (1) the layout design of the pub (namely, the concept of the covered corridor in the open yard connecting the food preparation room); and (2) the alleged agreement or assurance that the pub would be ready for business by 3 May 2004. 17.According to the pleading, there are basically the following issues to be determined:
A PUB’S RIGHT TO SUE 18.There is no dispute that the agreement for the decoration works was concluded between Tang and A Pub. The challenge against A Pub’s right to sue relates to the agreement for the consultancy service only. The basis for such challenge is essentially that when the consultancy agreement was concluded, A Pub was yet to be incorporated and Au is said to have no authority to act for and on behalf of A Pub that did not exist. On similar basis, it is contended that A Pub has no right to sue for any alleged misrepresentation made to Au prior to A Pub’s incorporation. 19.Tang indeed sent his fee proposal regarding the consultancy services to Au. Au also accepted the same by signing it himself. But the following circumstances of the case show that Tang treated A Pub as his counterpart in this project without distinguishing the agreement for the consultancy services from that for the decoration work:
20.In my view, the contention that Tang somehow chose to contract with Au personally for the consultancy services, as opposed to the agreement for decoration works, is technical and artificial in the circumstances of this case. I say the same in respect of the contention that Au personally, but not A Pub, who might rely on the representation made by Tang in the course of rendering his advice and services. There can be no real argument about A Pub’s right to sue. THE IMPLIED DUTY OF CARE 21.According to his fee proposal dated 18 March 2004, the scope of Tang’s consultancy services included the preparation for submission of layout plans to the FEHD, interior design layout drawings and all the correspondence with the relevant government departments in relation to the licence applications. 22.Ms Ng for A Pub submitted that Tang was under the duty to serve A Pub with the care and skill that a reasonably competent professional in the field would do. She relied on Greaves and Co. (Contractors) Ltd v Baynham Meikle and Partners [1975] 1 WLR 1095, 1100A-F; Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384, 434E-H; and Jackson & Powell on Professional Negligence (6th ed) at 2-002–2-003; 2-007–2-012. 23.Tang held himself out as having 10 years of experience in the industry. A Pub relied on Tang for obtaining the licences without which the pub simply could not operate. There could be no doubt that he was under the implied contractual duty to exercise reasonable care and skill. Section 5 of the Supply of Services (Implied Terms) Ordinance, Cap.457 also implies a similar duty on Tang. Though denying by pleading, Tang effectively accepted in court that he owed such duty to A Pub. BREACH 24.The hindrance to A Pub’s application for the licences was the layout design. Much was also said about the suitability of the premises chosen for the pub. However the premises was not chosen to suit a particular layout design in mind. By suitability, it could only be referring to the contemplation of the parties that if this particular premises was to be chosen for the pub, the idea would have to be to locate the food preparation room in the open yard. If the layout design was infeasible, A Pub might have second thought about the suitability of the premises. In my view, the suitability of the premises for the pub was not per se a distinct issue from the feasibility of the layout design. 25.According to Tang, his original design was actually to put the food preparation room in the front of the pub while the back was supposed to be a VIP room. He showed Au his proposed design. But Au allegedly rejected it and requested him to revise the layout so as to move the food preparation room to the open yard at the back. 26.First, according to his pleading and statement, the alleged original design mentioned above was contained in a plan shown to Au when Tang submitted his consultancy fee proposal on or about 18 or 19 March 2004 and the revised design was contained in the plan attached to Tang’s quotation for the decoration works submitted on 24 March 2004. This differs from his case in court that the alleged original design plan was allegedly shown to Au during the meeting on 12 March 2004 whereas the plan supplied to Au on 19 March 2004 already showed the food preparation room in the open yard. Secondly, Tang could not really explain how his alleged original design plan managed to contain a print of the approved layout plan of the premises which was not available until much later. 27.I do not accept Tang’s evidence in this respect. I need say no more on this because it matters not whether it was Au or Tang who initiated the layout design. It should not be surprising for Au as the proprietor of the pub to make suggestions on its design. Even if Au had done so, it would still have been Tang’s duty to advise on the feasibility of the suggestion and its ramification on the application for the licences. 28.Tang agreed that he told Au that it might be difficult to obtain the licences with the food preparation room in open yard but he did not say this was not feasible. In fact, it probably did not occur to Tang that the covered corridor concept was infeasible. I say this because even according to his alleged original design mentioned above, he would still have expected the food and utensils to be conveyed from the food preparation room to the VIP room through the open yard. The FEHD would have raised precisely the same objection. Tang suggested that if indeed objected to, the VIP room could just be given up to become a storeroom. Had that really been the idea, I doubt whether Au would have accepted such contingency at the expense of the number of seats in the pub. 29.In any event, the objection by the FEHD in respect of the conveyance of food and utensils in the open yard was addressed by replacing the retractable cover by a stainless steel hard cover over the corridor. However this gave rise to another concern, namely, whether the addition of the structure was feasible. This depended on, among other departments, the BD. 30.Tang must be aware of the need to consult the BD about this. In the letter of application contained in the 3rd Submission to the FEHD on 21 April for the proposed stainless steel cover, Tang made reference to his telephone communication with, among others, the BD. For the first time, Tang also copied the documents in the 3rd Submission to the BD. 31.There is dispute as to when Au came to realise the need to obtain the BD’s approval for the addition of the structure. Tang referred to the submission signed by Au and the documents from the department addressed to A Pub and argued that Au must know by the end of April 2004. Au explained that all the documents and correspondence with the departments were prepared by Tang and he simply signed them. The letters from the departments addressed to A Pub were mostly diverted to Tang for handling as he was the consultant in charge. He came to realise the requirements set by the FEHD only when he telephoned the FEHD on or about 12 May 2004, after noticing no development since the panel meeting at the end of April 2004. 32.While one may say Au ought to have known about these documents, his explanation of how things happened in reality was credible in the circumstances. But whether and, if yes, when Au came to realise the requirements of the FEHD was not crucial. The real issue is more fundamental, namely, whether the addition of the stainless steel cover was feasible and whether Tang should have considered this and advised Au before submitting the application for the proposed work. 33.Although Lee, the AP, had once made submission to the BD that the addition of the cover should not entail any GFA/plot ratio calculation or addition, the fact was that Tang had to concede that the problem with the GFA and plot ratio could not be rectified. But Tang sought to explain that he could not have known the FEHD’s requirements beforehand. I find this difficult to accept. Tang held himself out as a professional consultant with over a decade of relevant experience. Further he had enlisted the help of Lee and named Lee as the appointed AP and one of the contact persons in this project in as early as the 1st Submission to the FEHD (although Lee was not officially engaged until later). Tang also accepted in court that the information for the GFA/plot ratio calculation could have been obtained from the BD. 34.Mr Chong for Tang referred to the duties of a prudent consultant set out by Chan (of the consultant that took over the project from Tang subsequently) in his evidence. Mr Chong submitted that Tang had already carried out these duties with extra care and diligence. However, it was also Chan’s evidence that he was surprised when he first came to see the design of the open corridor. When he came to see the later plan where the additional stainless steel cover was proposed, he was equally surprised at the way the construction and planning were done. He stated that the A&A plan should be submitted first to the BD for approval. In other words, feasibility of the intended works could and should have been considered. 35.The reality was that had Tang considered and advised Au that the covered corridor design was not going to be feasible, Au would have had no reason at all to insist on such design at his expense. Au did say that in court. This was particularly so after A Pub had already committed itself to renting the premises. Tang had failed to do so. In all the circumstances, I find the alleged breach on the part of Tang proved. THE COMPLETION DATE 36.According to Au, the pub was supposed to be ready for business by 3 May 2004. According to the pleading, this was the deadline agreed or alternatively assured by Tang prior to and after their contracts. There was admittedly no documentary record of such completion date. Au said that at the beginning, Tang estimated a period of about 45 days for the pub to be ready for business. The target date of 3 May 2004 was projected before A Pub entered into the tenancy agreement and was maintained when Tang submitted his quotation for the decoration works. 37.According to Chan of the subsequent consultant in this project, it normally takes 4 weeks to a month to obtain the provisional licence and another 6 months to obtain the full licence. This indeed happened when he later obtained the licences for the adjacent premises also on behalf of A Pub. 38.According to Tang, it was understood between the parties that the decoration would take 2 months from the issuance of the letters of requirements. Again there was no documentary record of such understanding. 39.Tang said in court that it should have taken about 28 days for the letters of requirements to be issued. But since Au rejected his alleged original design, Tang became unable to advise Au when the letters of requirements or the provisional licences would be issued. Earlier on, I rejected Tang’s allegation about his original design. Further, I have difficulty in believing that the parties, particular A Pub, would simply leave the estimated completion time at that as alleged by Tang. 40.Tang further explained that he suggested the 2-month decoration period to provide more time for his own protection. However, I wonder how this could have possibly met Au’s approval. Tang agreed that it was the major concern of Au to have the pub ready to take advantage of the business volume generated by the European Football Championship matches beginning just before mid-June 2004. Tang should know that the earliest time when he could submit A Pub’s application for the licences would be late March. The 1st Submission was indeed submitted on 24 March. Had Tang projected a timetable of nearly 3 months before the pub would be ready for business, even in accordance with his alleged original design, Tang would hardly have addressed Au’s major concern behind when to commence business. 41.Notwithstanding his alleged 2-month decoration period after the letters of requirements, Tang agreed in court that the decoration works would actually commence without waiting for the letters of requirements. This was also what happened in this case. According to Au, with the landlord’s consent and through the estate agent, he managed to gain access to the premises for doing some preparation work before he took possession of the premises. 42.Mr Chong for Tang suggested that Au was still ordering equipment for the food preparation room on 29 April 2004. First the document of that date referred to was an invoice for the equipment. Even assuming that order was placed only on that day, this might only mean that the target date could not be adhered to strictly. This does not mean that such a target date did not exist in the first place. 43.I do not think Au made up the date of 3 May 2004. I do not find the understanding alleged by Tang to be convincing. On balance, I find that 3 May 2004 had been suggested and understood by the parties as the target date. Clearly, Au had to accept that this target date eventually could not be adhered to. Au indeed said that he would have been prepared to allow time to Tang anyway. But a substantial delay by months would have been unacceptable. A Pub could still claim for any loss as a result of the delay. LOSS AND DAMAGE 44.A Pub claims for the following loss and damage:
45.A Pub was not able to commence business until it secured the last of the 2 licences in late September 2004. This was over 4 months from the target commencement date. Except for the covered corridor, Au said that about 90% of the decoration works had been completed by early May 2004. Tang agreed that during the period between May and July 2004, there was not much decoration work in the pub. I accept Au’s evidence. I find that but for the lack of the licences, the pub would have been ready for business at least in late May 2004. 46.At the beginning of the trial, A Pub abandoned the claim for loss of business profits obtainable during this period, which would have been difficult to prove in the circumstances of this case. A Pub now claims for the loss of 4 months’ rent at HK$22,000 per month (after averaging out the benefit of the 3-month rent-free period over the term of the lease). I find this to be a reasonable alternative measure. The amount was HK$88,000. 47.In court, Au explained the relevant quotations and invoices in relation to the cost of and occasioned by relocating the food preparation room. This included the consultancy fee paid by the contractor to the consultant that took over the project and application for the provisional licences. I accept such evidence. A Pub should be entitled to the amount of HK$143,357 claimed. 48.A Pub claims the cost of constructing the stainless steel cover that was wasted as a result of the BD’s refusal to authorise. A Pub also claims the cost of demolishing the same. The total amount was HK$15,200 and was evidenced by documents. According to Au, when Tang advised him that it would take 2 months for the BD to process the A&A plan, it was already past the target commencement date. Yet Tang represented that he could apply for fast track processing that should take a month. As mentioned above, Tang through Lee did make such an application. Au was given to understand that if he really had to commence the construction of the cover prior to the BD’s approval, he should not do so until after the BD had inspected the premises. Au said that the BD did carry out the inspection and only after that did he commence the construction. I accept his evidence. 49.In these circumstances, the fact that the BD decided subsequently in early June 2004 that Tang’s plan did not qualify for fast track processing and eventually not even for approval at all did not render it unreasonable for A Pub to have commenced constructing the cover at the material time. I allow this part of the claim. 50.I allow the additional application fee of HK$11,200 paid to the BD. 51.I find that Tang is liable to A Pub for damages in the total amount of HK$(88,000 + 143,357 + 15,200 + 11,200) = HK$257,757. This amount will have to be set off by what A Pub should pay to Tang for the work done. THE COUNTERCLAIM 52.Tang is prima facie entitled to the cost of the work done up to the termination of his engagement. According to his final account dated 17 July 2004, the amount of HK$188,951.50 that Tang claims is made up of the following:
Cost of decoration work done 53.The starting point was Tang’s preliminary quotation (02) dated 31 March 2004. I find that Au did accept this quotation on behalf of A Pub. On the basis of this quotation, subject to subsequent variations, Tang set out his claim in his final account dated 15 July 2004. 54.A Pub disputes numerous items of claim for the balance of cost of decoration work done. They fall into 3 categories: (1) unfinished work; (2) wasted materials and work; and (3) extra work done in the absence of variation order. Au marked on the final account and explained in his statement these items of dispute as well as his own view as to the reasonable cost of particular items. While submitting at the end that Au’s comment on the final account was arbitrary, Mr Chong for Tang did not seem to have substantially challenged Au’s evidence in this respect. I bear in mind all these when assessing the evidence. 55.I also note that Au somehow marked lower figures next to items that do not fall into any of the categories mentioned above (e.g., B2, B4, B7). Presumably, these represent his view as to the reasonable cost of them. However, since these items were those already agreed and charged in accordance with the preliminary quotation in March 2004, and in the absence of suggestion of actual shortage, I see no sufficient justification for reducing the agreed cost of these items. Unfinished work 56.Item A1 was general cleaning after completion. I accept Tang’s evidence that the work had been done. If A Pub was not satisfied with the quality, this would have amounted to a counterclaim for extra cleaning cost instead of a deduction from the cost of work done. Since cleaning work was service in nature, the complaint about part of it being related to the food preparation room before its relocation does not change the fact that this work had been done. 57.Item B1 suggests missing part of the equipment installed. While A Pub may be entitled to claim any cost of replacement or repair, the deduction proposed by Au is arbitrary and I do not accept that. 58.Item E3 relates to supply and installation of fire extinguishers. I do not know what sort of installation should have been carried out or how the alleged lack of installation, without details, should amount to as much as the 40% deduction proposed. It is too arbitrary and I am prepared to allow the cost of this item. 59.Tang accepted in court that items B9, C9 and E6 of the Final Account should not be counted. Wasted materials and work 60.These are the items relating to food preparation room constructed in the open yard. Due to the relocation of the food preparation room, it is reasonable to expect wastage of the materials supplied and installed there, either in their entirety or in part. On balance, I am prepared to accept most, if not all, the deductions of quantity or at the percentages proposed by Au. 61.Tang had supplied 8 items of materials at his expense for which he was supposed to be reimbursed by A Pub (Items (R01)I to VIII). Tang agreed in court that 4 of these items (Items (R01)I to IV) related to the food preparation room. For the same reason mentioned above, I accept that they were probably wasted as a result of the relocation of food preparation room. I allow the amount of the remaining 4 items (Items (R01)V to VIII). Extra work 62.As mentioned above, the preliminary quotation has undergone subsequent variations including cancellation and addition. Regarding the additional items of work, A Pub’s major complaint is that they were carried out in the absence of variation orders or agreement. 63.Tang agreed that there was no variation order issued in respect of the extra work. However, he explained that for items not exceeding HK$10,000, he would proceed with the work upon instruction without issuing any variation order during the interim. 64.There were also items of work not contained in the preliminary quotation but in the final account that Au seems to accept without comment, though they were also not supported by any variation order. Regarding the variation between the quotation and the final account, Au also seems to have taken no issue regarding the cancelled items, though the same were also not documented. On balance I do not believe that they were carried out in the absence of instruction or knowledge on the part of Au during the relevant period of time. There is no serious dispute, if at all, that these extra works were done and enjoyed by A Pub. I am prepared to allow these items. Summary 65.In summary the items of the final account from Tang that are allowed are as follows:
66.Deducting the previous instalments in the total sum of HK$140,000 already paid by A Pub, the balance of the cost of decoration work done will be HK$(189,349 – 140,000) = HK$49,349. Others 67.The other 3 items of Tang’s final account above were supported by evidence. A Pub has not really disputed these items and I allow them. 68.The total amount of Tang’s claim allowed is as follows:
69.After set off, Tang is liable to A Pub for the net sum of HK$(257,757 – 77,005) = HK$180,752. ORDER 70.I give judgment in favour of A Pub in the sum of HK$180,752 together with interest thereon at the judgment rate from the date of writ until full payment. I make a nisi order that Tang shall pay A Pub’s costs of this action. Costs shall be taxed, if not agreed. For the avoidance of doubt, I certify the engagement of counsel. This costs order shall become absolute in the absence of any appointment to argue costs in 14 days.
Representation: Ms Queenie W S NG instructed by Messrs Knight & Ho for the Plaintiff Mr CHONG Fu Chuen of Messrs Wong, Fung & Co for the Defendant |
Other judgments that cite this case
Further hearings and rulings under DCCJ 3129/2005