Area Solutions & Anor v Tasty Wok Ltd & Anor [2004] EWHC 2615 (TCC)

Case No 4BM 50006[2004] EWHC 2615 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of JusticeDate Thursday, 14 th October 2004
Strand
London WCA 2LL
B e f o r e:
HER HONOUR JUDGE KIRKHAM
Between
AREA SOLUTIONSClaimantORIGO SOLUTIONS LIMITEDClaimant-v-
Between
TASTY WOK LIMITEDDefendantMICHAEL CHAN LIMITEDDefendant
Tape transcription by Smith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTelephone 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
MR WHITTAKER appeared for SECOND CLAIMANT.MR DE WAAL appeared for DEFENDANTS.
J U D G M E N T

JUDGE KIRKHAM:

[1]This case concerns work undertaken in connection with a new buffet-style Chinese restaurant at the Solihull Ice Rink. The restaurant is called the Tasty Wok. The second claimant claims payment of unpaid invoices. The defendants claim in relation to floor tiles laid in the restaurant and the kitchen. These are now the only live issues between the parties, and the contractual issue that I shall come to.[2]The parties agree that, subject to the defendants’ claim for set off, there be judgment for the second claimant in the sum of just over £31,500 and that the counterclaim should be dismissed. The issues in relation to the set-off claim are as follows.[3]The parties agree that there were contracts for the refurbishment work. In issue is, firstly, whether the contracts were made between the first claimant and the first defendant or the first claimant and the second defendant, and, secondly, whether the tiles are reasonably fit for their purpose, within the meaning of s.14(3) of the Sale of Goods Act 1979 and, if not, what the consequences are.[4]I have heard evidence from a number of lay witnesses and from an expert for the defendants, and all approached their evidence carefully and properly.[5]Mr Chan, the second defendant, owned a restaurant called the Fortune Inn. In June 2001 he found premises at the Solihull Ice Rink and decided that these would be suitable for a buffet-style restaurant, and he subsequently took a lease of those premises. He engaged an architect to prepare designs. The name of that architect has not been available. In the event, Mr Chan did not proceed with that architect’s designs, but later instructed Mr Tommy Wong, an architect of Lane Lister & Associates.[6]In about July 2001 Mr Chan and Mr David McConnell, who is with the claimants, began discussions about work which Mr McConnell’s company might undertake in connection with the refurbishment. Those discussions continued on and off until about January 2002. Floor tiles had been used at the Fortune Inn. Mr Chan wished to have a tiled floor in the new premises in the restaurant area, the kitchen and in the lavatories. As Mr McConnell acknowledged, Mr Chan had no particular specification in mind as to the type of tile. Neither of the architects prepared a specification in relation to the work. In about May 2001 Mr Chan and Mr McConnell visited a number of restaurants around the country to gain ideas, and the two of them went to Central Tiling, an outlet for tiles in Hall Green, Birmingham, and together they looked at tiles. Mr Curley, the proprietor of Central Tiling, was involved in that process.[7]Mr McConnell and Mr Curley knew the proposed use for the floor tiles. Mr McConnell identified some tiles which he considered would be suitable for the restaurant floor and the kitchen floor. Six possible tiles were identified for the restaurant area. Mr McConnell took the samples of the possible restaurant tiles back to his office. They identified a tile for the kitchen, which was a Wooliscroft Multi-versatile BM2 tile. Eventually an Italian tile, a Milleto Verde, was chosen as suitable for the restaurant area. Shortly after that, Mr Chan went to Hong Kong on a visit, and Mr Wong chose the shade of the Milleto Verde tile suitable for the interior design of the restaurant. The refurbishment work began in about January 2002.[8]It is necessary to explain some matters concerning the claimants. Norwood Solutions UK Limited was incorporated on 1st November 2002 and dissolved on 24th February 2004. A company called Norwood Solutions Limited was registered in Northern Ireland. It appears to have been incorporated on 16th January 2003 and dissolved on 10th August 2004. Mr Ruff, a director of that company, gave evidence that that company had changed its name to Area Solutions Limited. However, the evidence on that is unclear. It appears that a company called Area Solutions Limited was incorporated in Northern Ireland as a separate entity from Norwood Solutions Limited. Mr Ruff was, I believe, genuinely surprised by that evidence as to the formal status of the various companies.[9]The second claimant relies on a deed dated 16th September 2003 by which it took an assignment of the benefit of the invoices, the subject of these proceedings. The defendants suggest that the claimant in effect is saying that there has been a novation of the contract from Norwood to Area Solutions. However one arrives at the end point, as I have indicated, it is not disputed that the second claimant is entitled to payment of the outstanding invoices it claims, subject to the defendants’ claim for set off.[10]Mr Alan Ho is a chartered accountant and has been engaged by Mr Chan for a number of years in connection with Mr Chan’s business affairs. Mr Chan was in partnership to run the Fortune Inn and Mr Ho prepared the partnership accounts. Mr Ho and Mr Chan met in about July 2001 and discussed the advantages and disadvantages of incorporating the Fortune Inn partnership as a limited company, and Mr Ho was subsequently instructed to effect that.[11]Shortly after that, Mr Chan instructed Mr Ho to set up a new limited company for the restaurant in Solihull. The first defendant company, Tasty Wok Limited, was incorporated on 30th July 2001. Mr Chan was appointed the sole director. The company, as I say, is called Tasty Wok Limited and trades as Wok’s Hall.[12]Mr Ho was responsible, amongst other matters, for procuring the VAT registration for the first defendant company. That registration was effected on 25th April 2002. Mr Ho arranged for pre-registration expenses to be related back for the six-month period prior to the VAT registration.[13]On 16th February 2002, Norwood sent a quotation for refurbishment work. That was marked “For the attention of Mr Michael Chan” and was addressed to the Fortune Inn. The following day, 17th February, a letter which concerned that quotation again was sent by Norwood to Mr Chan. There were further quotations from, first, Norwood and then Area Solutions for various aspects of the work, dating between February and April 2002. All are addressed to Mr Chan, initially at Future Inn and subsequently addressed to him at Wok’s Hall. None was addressed to the first defendant company.[14]The claimant raised a number of invoices. These date from January 2002. Those dated January and February 2002 are from Norwood to Mr Chan at Wok’s Hall and those dated March to June 2002 are from Area Solutions and addressed to Wok’s Hall Restaurant. An invoice dated 21st November 2002 was addressed to:
“Mr Chan, Tasty Wok Limited, t/a Wok’s Hall.”
The invoices dated 27th June and 21st November 2002 are those which have not been paid.[15]The claimant was paid money on account from February 2002 onwards. Four cheques for sums totalling £60,500 were paid to the claimant, dating between 1st February and 22nd March 2002. None of those four cheques has been produced and Mr Chan was unable to recall on whose account those cheques had been drawn. We do however have cheques which bear, on their face, dates between 22nd April and 30th September 2002. Some of those had been post-dated cheques. All ultimately were met. On six of the cheques dating between April and September the printed name of the account is “Tasty Wok t/a Wok’s Hall Restaurant”. On two of the cheques, those dated 16th and 30th September, the account name is “Tasty Wok Limited t/a Wok’s Hall Restaurant”. It appears from the information printed on the cheques and the cheque numbers that there were probably in existence at the same time two chequebooks in the name Tasty Wok trading as Wok’s Hall Restaurant, but Mr Chan was unable to recollect how that might have come about.[16]The restaurant opened with a charity evening on about 12th May 2002. A meeting was held at the restaurant on 23rd October 2002. That was attended by Mr Ruff and Mr McConnell, for the claimant, and by Mr Chan. A few days later a without prejudice meeting was held attended by parties and solicitors. On 4th November 2002 Garratt & Co, solicitors, wrote to the claimant. In that letter they said they were instructed by Tasty Wok Limited, the first defendant. In that letter they noted that the first defendant disputed the 27th June 2002 invoice and the letter went on to deal with some complaints regarding the work which had been undertaken.[17]Proceedings were issued on 27th November 2002. The initial claim was against the first defendant only. Until the claim was amended in October 2003, the claimant proceeded only against the first defendant. The statement of truth and Particulars of Claim were signed by Mr Ruff for the claimant. In their Reply and Defence to Counterclaim, in relation to contractual issues the claimant pleaded clearly that its contractual relationship was with the first defendant. Again that was supported by a statement of truth signed by Mr Ruff. The claimant answered a Part 18 request made by the defendants, and again the answer was attested to by Mr Ruff. That answer referred to Mr Chan and the first defendant company as different legal entities and persisted in the original approach, namely that the first defendant was the contracting party. The claimant acknowledges that their initial approach had been to sue the first defendant alone. Now, however, their primary case is that they contracted with the second defendant, Mr Chan. Their alternative case is that they contracted with the first defendant.[18]The defendants’ case is that the true position is a contract with the first defendant, as the claimants themselves had initially considered to be the case. They deny that Mr Chan was the contracting party and they contend that the claimants joined Mr Chan, the second defendant, only in order to put commercial pressure on to the defendants.[19]Mr Chan signed a witness statement on 14th September 2004 in connection with these proceedings. In that he stated as follows:
“It was during the various meetings with David McConnell and Christopher Ruff that I informed them that this project was not being carried out by Fortune Inn but rather by my new company, the first defendant. I cannot however state categorically where and when those specific instructions were conveyed other than that it was some time during February and before the work had commenced.”
[20]At trial, however, Mr Chan corrected that part of his statement. His evidence to the court was that it was during a meeting with Mr McConnell in February 2002 that he told Mr McConnell that it was his company, Tasty Wok Limited, which would be the contracting party. Mr Chan said that he now remembered this, because he recalled having agreed to make a payment on account for materials and so on of £18,000, a payment which was indeed made at that time.[21]Mr McConnell and Mr Ruff both deny that Mr Chan made any such statement about his company. They say that the first they knew of the existence of the limited company and Mr Chan’s contention that the contract was with a company was when they saw the November 2002 letter from Garratt & Co.[22]I found Mr Ruff, Mr McConnell and Mr Chan to be truthful witnesses. Mr Chan, for example, was quick to make it clear when there was a matter which he could not recollect. However, in relation to the evidence as regards the meeting between Mr Chan and Mr McConnell in February 2002, I am not persuaded that Mr Chan’s recollection is accurate. I cannot be confident that he remembers accurately when he says that he told Mr McConnell that the contract for work to the restaurant was to be with his company.[23]The documents do not support Mr Chan’s evidence. I have referred already in some detail to the quotations, the invoices and the cheques. The first document in time which makes mention of the name Tasty Wok Limited appears to be the cheque bearing the date 16th September 2002, and that date of course is well after the date on which the work had been finished and the restaurant opened. The evidence of Mr Ruff and Mr McConnell, that the first that they knew of the first defendant was Garratt & Co’s November letter, rings true and is not inconsistent with the documents.[24]I am reminded that the question whether or not a contract has been formed is one which must be determined objectively. In this context, the parties’ subjective belief as to the identity of the contracting party is of little, if any, assistance. The fact that Mr Ruff signed various pleadings alleging a contractual relationship with the first defendant is of no assistance in deciding whether the first or the second defendant was a contracting party.[25]The simple starting point is whether an offer capable of acceptance has been accepted. Here, Norwood/Area Solutions made various offers by their quotations. In circumstances where I am not persuaded that Mr Chan told Mr McConnell that his company would be the contracting party and where the documents do not make this clear, it must follow that acceptance by Mr Chan of Norwood/Area Solutions’ offers was made by Mr Chan on his own behalf and not on behalf of his company.[26]In all the circumstances, I conclude that there was a series of contracts made between about January and April or May 2002, in which Mr Chan and not the first defendant was the contracting party.[27]I next come to the question of the quality of the tiles. I heard evidence from Mr Wong, the architect who prepared some drawings for Mr Chan, from Mr Curley, as well as Mr Chan himself and Mr Ruff and Mr McConnell with respect to the manner in which the tiles were selected. There is no pleaded case that Mr Chan himself selected the tiles, with the consequence that the claimant cannot be held liable for that selection. What is clear is that the claimant and indeed Mr Curley knew that Mr Chan wanted tiles for the floors for the restaurant area and the kitchen. Mr McConnell and Mr Curley both accepted that they knew that Mr Chan needed non-slip tiles. Mr Wong’s involvement was limited to choosing the colour of the restaurant floor tiles from the range which had already been selected. I am satisfied that Mr McConnelll was involved in the selection of tiles for the restaurant and made a selection from which Mr Chan could choose the colour and type of tile he wanted. Similarly, Mr McConnell was involved in identifying a tile which would be suitable for the kitchen. This is not a case where the claimant could escape liability on the basis that it was Mr Chan and not the claimant who chose the tiles.[28]Norwood sent Mr Chan a written quotation for tiled floors as follows. It states:
“In main restaurant to be slip-resistant ceramic/porcelain Grade 5 floor tiles. To kitchen area will be with the Wooliscroft Universal non-slip Grade 5 tile or equivalent.”
It is clear that the claimant had a contractual obligation to supply and lay non-slip Grade 5 tiles, or equivalent, in both areas. It is common ground that both the kitchen tiles and the restaurant area tiles were of Grade 5, which is a hardness test. In issue is whether they were non-slip or slip-resistant. It is clear that the claimant had a contractual obligation to supply and lay non-slip Grade 5 tiles, or equivalent, in both areas. It is common ground that both the kitchen tiles and the restaurant area tiles were of Grade 5, which is a hardness test. In issue is whether they were non-slip or slip-resistant.[29]So far as the kitchen is concerned, the tile which was supplied was the Wooliscroft Multi-versatile BM2 tile. The manufacturer’s leaflet describes it as an “unglazed floor tile, which is slip resistant, making them ideal for use inside and out in long-life commercial installations or in the home”. One face of the tile is plain, the other is profiled. The tile can be laid either way up. In the manufacturer’s details the plain face is said “generally to offer sufficient slip-resistance for most applications where normal footwear is used”. The profiled face is said to be recommended for “ramps, slopes and bare foot traffic”. The leaflet suggests that the plain face is easier to clean than the profiled face, and as a matter of common sense one can see that that must be so. The Wooliscroft Multi-versatile tile has an R rating of 9 so far as the plain face is concerned, and the profiled face has an R rating of 11. The R rating is used by UK and Italian manufacturers as a measure of friction coefficient, which in turn is an approximate guide to slip-resistance.[30]The two tilers who laid the tiles both gave evidence. They said that Mr Chan had decided the way up which the kitchen tile should be laid. It was Mr Chan who had decided that he wanted the profiled face face down and the plain face uppermost, and that indeed is how they were laid. Mr Chan could not recall having made that choice. On balance, I accept that Mr Chan probably did make that decision. It is unlikely that he would have chosen to have the profiled face uppermost, as that would have made the kitchen floor more difficult to clean. However, as will become clear, it would not have mattered which way up the tile had been laid. Both the plain and the profiled face had a coefficient of friction lower than that recommended for the application.[31]So far as the restaurant floor tiles are concerned, as I have said, these are Milleto Verde tiles and have an R rating of 9. Mr Chan’s evidence, which I accept, is that some customers have complained that the restaurant floor is slippery. His staff have complained that the kitchen floor is slippery. No accidents have been recorded, and Mr Chan does not refer to any specific accident. No claim has been made in respect of any slipping on the tiles.[32]I have had the benefit of expert evidence from Mr Reed. For reasons which I gave at the time, the evidence of a Mr Graham, on whom the claimant wished to rely, was not admissible. Mr Reed is a consulting engineer who qualified as a civil engineer. He has experience in project management and expertise in procurement and estimating, with particular reference to design. His experience is in relation to domestic and commercial properties. He was instructed by the defendants and visited the restaurant. His evidence, which I accept, is that it was immediately apparent to him that the floors were potentially slippery. He describes having seen a shiny, polished appearance of both the kitchen and restaurant floor tiles. He found the floors to be slippery even when wearing rubber-soled shoes.[33]Mr Reed’s report describes how, in his opinion, a specifier should have approached the process of selecting tiles, and Mr Whittaker cross-examined him on those matters. But this is not a case where the process of selection as such is in issue. The defendants do not, for example, claim that the claimant was negligent in the way that it selected the tiles. The question is whether the tiles were or were not reasonably fit for their intended purpose within the meaning of s.14(3) of the Act.[34]Mr Reed approached that question by considering the R values of these tiles. It is common ground that there is no legally prescribed standard for the UK for the slip-resistance of tiles. There are various tests in use in different parts of the world. It appears that some efforts are being made to work towards a common standard, but agreement has not yet been reached.[35]Mr Reed’s opinion is that the tiles in the kitchen area should have had an R rating of 12. He arrives at that by reference, firstly, to a ramp test DIN measurement, and, secondly, to the recommendations of a 1998 report by the Tile Association on the subject of slip-resistance of hard flooring. So far as the restaurant tiles are concerned, Mr Reed’s opinion is that these should have had an R rating greater than 10 in accordance with the recommendations of the 1998 Tile Association report.[36]DIN standards are internationally recognised and accepted standards. The DIN 51130 standard describes classifications from R9 to R12, being a measure of average friction coefficient. R9 is the lowest of the classifications in that DIN standard. The suggested use for each of the four classifications is given. R11 is suggested for, amongst other matters, kitchens serving up to 100 meals a day, and R12, amongst other matters, for industrial kitchens, canteens and large-scale catering with over 100 meals a day. I accept that the DIN standard indicates that a rating of R12 was appropriate for the kitchen at the Tasty Wok. Tiles with a lower R rating were not suitable for that application. The kitchen tiles had an R rating of 9 or 11, depending on which face had been laid uppermost. Neither of those faces was fit for the intended purpose.[37]The 1998 Tile Association report noted that the report should be used in conjunction with current and forthcoming British, European and international standards on tiles. The report noted that there was little guidance or recommendation regarding minimum dynamic coefficient of friction or slip-resistance. The report described a wide range of hard flooring products and considered the various environments in which such products might be used. That report noted that R9 is considered the minimum level of the test, i.e. the most slippery, and is not appropriate on flat, uncontaminated surfaces.[38]Mr Reed’s opinion is that the kitchen and restaurant areas fall within the category described as areas with frequent contact with moisture, e.g. kitchens, food preparation areas, washrooms and so on. Such areas are described as ones where the likelihood of contact with moisture is high and likely to be combined with other contaminants such as, amongst other matters, kitchen fats, oils and foodstuffs. It seems to me that that describes the environment in both the kitchen and the restaurant area in this case. I include the restaurant area, because there is a likelihood of contaminant on the floor near the buffet area of the restaurant and where customers are carrying food from the buffet to tables. I reject the claimant’s suggestion that the Tile Association category of “internal dry conditions” is the relevant category here. The Tile Association report noted that for dry-shod conditions R9 was suitable, and for wet-shod conditions R10 was a minimum. I accept Mr Reed’s evidence that the appropriate category for the restaurant is wet-shod. Customers may come into the restaurant from wet conditions outside. The restaurant proprietor can have no control over the type of footwear that customers wear. There is the likelihood of spillage of food in the restaurant area.[39]It follows that the restaurant area tiles should have had an R rating of at least 10. As they had an R rating of only 9, they were not reasonably fit for their intended purpose.[40]In arriving at these conclusions, I have taken into account the research data published by Pilkington and on which the claimant cross-examined Mr Reed. The Pilkington material refers to the difficulty of measuring slip-resistance and warns that any figures suggesting slip-resistance should be treated with caution and could be interpreted only by experts. The Pilkington document goes on to say that experts currently consider that the only basis for selection is from previous practical knowledge of whether a floor treatment in an identical environment has in fact proved successful in accident avoidance.[41]Whilst there may be difficulties in measuring slip-resistance, I see no reason not to arrive at a conclusion in this case on the basis of the DIN standard, which is an internationally acknowledged standard. Further, I see no reason not to rely on the guidance contained in the Tile Association report. While Mr Reed is not an expert in tiling as such, his expertise was sufficient to enable him to identify and assist the court with interpretation of the relevant literature.[42]In my judgment, the defendant has proved breach of s.14(3) of the Sale of Goods Act. The claimant knew the purpose for which the tiles were intended. The claimant supplied these in the course of their business. The tiles were not reasonably fit for their intended purpose, in that they were not slip-resistant. The defendant is therefore entitled to damages for the claimant’s breach of contract.[43]Damages of £9,034 are claimed, being the estimated cost of buying replacement tiles and laying these over the existing kitchen and restaurant area tiles. This sum was the sum estimated by Mr Reed as the likely cost of that exercise. The claimant did not challenge those figures as such.[44]The claimant points to the lack of evidence of any accident. However, it is plainly not the case that it is necessary to wait for an accident to happen before concluding that damages are payable. There is plainly potential for an accident, and today an accident which results from a slip on tiles may well result in a claim against a restaurant proprietor for compensation. The claimant points to the fact that Mr Chan has not yet done anything at all about the tiles, even though, on his case, he has been concerned about these since the early summer of 2002, and even though he has had the benefit of Mr Reed’s opinion that the tiles were not suitable. However, it was not suggested to Mr Chan that it was not his intention to carry out the remedial work which Mr Reed identified in February of this year as being needed.[45]The claimant relies on the defendants’ failure to refer to the deficiencies in the tiles until very late in the day. I am not persuaded that Mr Chan mentioned to Mr McConnell in the summer of 2002 that there were problems with the tiles. It is clear from the correspondence and pleadings that it was not until service of the Amended Defence and Counterclaim in February of this year that this claim in relation to the tiles was first intimated. However, that does not detract from the conclusion I have reached as to breach of s.14(3), which is an objective question, and it does not affect the question of damages.[46]The appropriate measure of damages for the claimant’s breach is the estimated cost of supplying and overlaying tiles, a sum estimated at £9,034, and in my judgment Mr Chan is entitled to set off that sum against the sum he is liable to pay the claimant.[47]MR WHITTAKER: Can I just mention one point which is that the principal claim has advanced by two further days since Tuesday, so the figure has in fact slightly increased. The present figure is £31,617.36.[48]MR DE WAAL: I invite you to enter that. We can check it in a moment and come back to you if it is wrong.