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England and Wales High Court (Queen's Bench Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Phoenix Interior Design Ltd v Henley Homes Plc & Anor [2021] EWHC 1573 (QB) (09 June 2021) URL: http://www.bailii.org/ew/cases/EWHC/QB/2021/1573.html Cite as: [2021] EWHC 1573 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| PHOENIX INTERIOR DESIGN LTD |
Claimant |
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- and – |
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| (1) HENLEY HOMES PLC (2) UNION STREET HOLDINGS LTD |
Defendant |
____________________
Nicholas Broomfield (instructed by Edwin Coe LLP) for the Defendant
Hearing dates: 9, 10, 11, 12, 15 & 18 February 2021, with further submissions on 22 February 2021
____________________
Crown Copyright ©
MR JUSTICE FREEDMAN:
I Contents
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SECTION NUMBER |
SUBJECT |
PARAGRAPH NUMBER |
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I |
Contents |
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II |
Introduction | |
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III |
The parties | |
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IV |
The contractual relationship between the parties | |
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V |
Evaluation of the witnesses | |
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VI |
Expert evidence | |
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VII |
The issues | |
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VIII |
The identity of the contracting parties | |
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IX |
The terms of the Phase 1 Contract A. The Initial Brief, the documents that form the Phase 1 Contract and the terms thereof B. Contractual terms - incorporation of the Claimant's standard terms
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X |
If the Claimant's standard terms and conditions were incorporated into the Phase 1 Contract, are they unreasonable for the purposes of the Unfair Contract Terms Act 1977? A. The statutory provision and the terms of Clause 8 B. The pleaded case C. Discussion |
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XI |
Did the Claimant owe the Defendants a tortious duty to act with reasonable skill and care? | |
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XII |
Did the Claimant "complete" the Phase 1 Contract causing the balance of the contractual monies to fall due and/or were the goods "accepted": the legal analysis | |
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XIII |
Did the Claimant act in breach of contract or its tortious duty of care?
(1) Any matters relating to the negotiation and terms of the contract relevant to the alleged breaches
(2) The history of the dealing as regards the signing off performance of the contract
(3) The effect of the continued use by the Defendants of the goods supplied
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XIV |
Conclusions before considering specific defects
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XV |
Furniture
(1) Introduction (2) The Defendants' case (3) The Claimant's case (4) Discussion |
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XVI |
Roman Blinds/Black-Out-Blinds
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XVII |
Curtains, Curtain rails and Curtain Rods |
179-189
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XVII |
Glass topped coffee tables | |
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XIX |
Marble coffee tables | |
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XX |
Headboards | |
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XXI |
Damages/quantum | |
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XXII |
Did the Claimant "complete" the Phase 1 Contract causing the balance of the contractual monies to fall due and/or were the goods "accepted"? | |
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XXIII |
If the Claimant's standard terms and conditions were incorporated into the Phase 1 Contract, is the Claimant in breach of clause 8 of its standard terms and conditions? | |
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XXIV |
Conclusion |
II Introduction
III The parties
IV The contractual relationship between the parties
""Please see attached a set of plans for the serviced apartment hotel I spoke to Justine about yesterday…
We are seeking from you a scheme just for the rooms and suites themselves and not the communal areas, as these have been done….
The building itself is Victorian but the look we are seeking is more stripped back than the original décor, which was all a bit 'scotch baronial tat'. We want sympathy for the original but modern in finish, maximising space and light. Definitely NOT tartan and stags heads, although modern use of traditional local colours, woods, metals, stone, etc is fine.
We definitely need hard-wearing and contract quality which is easy to clean, maintain and replace BUT with a luxurious 5-star feel. Easy, eh??
We would need to know from you furniture, softs, artwork, mirrors, lamps, wall and floor colour/coverings.
The bedrooms must have hotel-style wall hung headboards, which contain built-in power outlets, lighting and bedside tables…
The windows are likely to have a secondary glazing system with an integral sheer blind but there will need to be curtains within the room, probably with an acrylic pole/handle thing to pull them closed.
…
Ease of daily cleaning and maintenance is key and so, while we'd be fine with suggestions to vary décor colours and materials across different floors or wings (or perhaps for different room sizes or types), we would not want to unnecessarily complicate the daily management of the site. For example, if the housekeepers had to have a list to remind them what throws went in what specific rooms, this would become onerous.
We would need handover info from you at the end of the job, to assist with replacement, maintenance and so on.
Pricing: please cost for each room type so we know what each studio, 1 bed and 2 bed apartment will cost." [emphasis added]
"This Victorian building (1881) was purchased from administrators and is now being refurbished by Henley Homes into 32 contemporary serviced apartments, which will be finished in June 2015.
The target market is visitors interested in the local walking, fishing, golf, etc in the surrounding hills, but who are seeking the independence, privacy and comfort offered by high-end serviced apartments. They are used to the best that the City can offer, but who are seeking some peace and quiet in the country. …
Accommodation will be £80-£120 per night.
Interior design is luxurious, light and modern, with a focus on detail and stripped-back use of natural colours and local materials. This is a large step away from the previous décor of tartans, antlers, baronial Victoriana, etc." [emphasis added]
"Don't forget we also manufacture hotel beds and cased goods in our joinery department, products like bedside tables, wardrobes, credenzas etc for all the hotel industry … We've just fitted out the Ibis and Novotel hotels in Glasgow and Edinburgh so not a problem."
V Evaluation of the witnesses
VI Expert evidence
VII The issues
A. The identity of the contracting parties
B. The terms of the Phase 1 Contract
B1. The Initial Brief, the documents that form the Phase 1 Contract and the terms thereof
B2. Were the Claimant's standard terms and conditions incorporated by reference into the Phase 1 Contract?
B3. Were the Claimant's standard terms and conditions incorporated by course of dealing into the Phase 1 Contract?
C. Did the Claimant owe the Defendants a tortious duty to act with reasonable skill and care?
D. Did the Claimant act in breach of either the Phase 1 Contract or its tortious duty of care?
D1. Furniture
D2. Roman Blinds/Black-Out Blinds
D3. Curtains, curtain rails and curtain poles
D4. Glass topped coffee tables
D5. Marble coffee tables
E. Did the Claimant "complete" the Phase 1 Contract causing the balance of the contractual monies to fall due and/or were the goods "accepted"?
F. If the Claimant's standard terms and conditions were incorporated into the Phase 1 Contract, is the Claimant in breach of clause 8 of its standard terms and conditions?
G. If the Claimant's standard terms and conditions were incorporated into the Phase 1 Contract, are they unreasonable for the purposes of the Unfair Contract Terms Act 1977?
H. Damages/Quantum
VIII The identity of the contracting parties
IX The terms of the Phase I contract
A The Initial Brief, the documents that form the Phase 1 Contract and the terms thereof
"6. Following an initial telephone call, during which the Hotel refit was discussed with the Claimant, the Second Defendant emailed the initial brief to the Claimant on 22 December 2015 ("the Initial Brief"). The Initial Brief, upon which the Defendants will rely at trial for its full terms and effect, expressly required the Claimant to provide "hard-wearing and contract quality which is easy to clean, maintain and replace BUT with a luxurious 5-star feel".
7. The Initial Brief attached and incorporated a document which set out background to the Hotel. The document explained that the Hotel was to be, inter alia, "high end" and that the interior was to be "luxurious, light and modern".
…
12…. The parties entered into a contract on the terms of the Counter Offer. The terms of the Counter Offer, which were accepted by the Claimant and formed the basis of the Phase 1 Contract, were accordingly:
12.1 The Claimant would, in accordance with the Initial Brief and the terms of the Counter Offer, supply, deliver and install high quality furniture, soft furnishings and accessories for the purpose of fitting out fifteen studio apartments, 15 one bedroom apartments and 2 two bedroom apartments to five-star standard in exchange for payment of £309,787.57.
12.2. The furniture, soft furnishings and accessories provided and/or procured by the Claimant would be fit for the purpose set out in paragraphs 6 and 7 above, namely for inclusion in a five-star hotel.
…
12.4 Any furniture, furnishings and accessories provided by the Claimant would correspond with the description provided by the Claimant/third parties to the Second Defendant."
(1) a five-star feel is loose and unspecific;
(2) it is not the same as a five-star standard;
(3) the combination of hard-wearing and five-star feel is almost contradictory (the expression "easy eh!" bears this out);
(4) in fact, there is no evidence of a specific five-star quality standard for furniture and finishings;
(5) at the contractual stage, it was not intended that the Hotel would be a five-star hotel, but an apartment hotel, which is a very different concept.
(1) the email does not refer to a five-star product;
(2) the reference is to aiming for a "4 stars plus product" is loose and unspecific;
(3) there is no evidence of a "4 stars plus product" for furniture and finishings;
(4) the reference is to a boutique hotel which is looser than and not the same as a five-star hotel, and appears to be something which is smaller and stylish, but does not lend itself to a specific standard;
(5) it comes in an email from Mr Khalil who was not engaged by the Defendants at the time of the contractual negotiation.
B Contractual terms – incorporation of the Claimant's standard terms
"13-013. It is not necessary that the conditions contained in the standard form document should have been read by the person receiving it, or that he should have been made subjectively aware of their import or effect. The rules which have been laid down by the court regarding notice in such circumstances are three in number:
(1) if the person receiving the document did not know that there was writing or printing on it, he is not bound;
(2) if he knew that the writing or printing contained or referred to conditions, he is bound;
(3) if the party tendering the document did what was reasonably sufficient to give the other party notice of the conditions, and if the other party knew that there was writing or printing on the document, but did not know it contained conditions, then the conditions will become the terms of the contract between them.
13-014. It is the third of these rules which has most often to be considered by the courts. The question whether the party tendering the document has done all that was reasonably sufficient to give the other notice of the conditions is a question of fact in each case, in answering which the tribunal must look at all the circumstances and the situation of the parties. But it is for the court, as a matter of law, to decide whether there is evidence for holding that the notice is reasonably sufficient. Cases in which the notice has been held to be insufficient have been those where the conditions were printed on the back of the document, without any reference, on its face, such as "[f]or conditions, see back", where, on documents sent by fax, reference was made to conditions stated on the back, but those conditions were not in fact stated on the back or otherwise communicated, or where the conditions were obliterated by a printed stamp. It is not necessary that the conditions themselves should be set out in the document tendered: they may be incorporated by reference, provided that reasonable notice of them has been given. Reference to standard terms may be found on a website may be sufficient to incorporate the terms on the website into the contract."
(1) they do not accept the evidence about the original presentations and say in any event that this was not sufficient to incorporate the terms into the specific contract at the offer and acceptance stage;
(2) the offer of January 2016 which did attach terms and conditions (although they did not appear overleaf) was not accepted. It was not signed and was rejected by a counter-offer relating to the removal of the wallpaper and the amount to be left to be paid on completion, namely 50%;
(3) the revised proposal in February 2016 which was signed did not have terms and conditions either overleaf or attached. A subsequent proposal in June 2016 likewise did not have terms and conditions either overleaf or attached;
(4) in the absence of terms provided with relevant proposals, a reasonable person in the position of Mr Usmani/the Defendants would conclude that there were no applicable terms and conditions.
" MR LEGG: Mr Usmani, there would not be any terms and conditions overleaf because this is something that your office printed off for you to sign. It was an attachment that was attached to an email. What I would suggest to you that in that context it must have been obvious that "overleaf" is referring to something else and that something else was the standard terms and conditions that had ordinarily been incorporated into your dealings with the Claimant?
A. Yes, I agree. If I go back to the beginning, I did say terms and conditions were never a feature of our relationship either way. Did I consider them when Susan would have left her proposal? No. Did Susan point them out and say "please do consider"? No. Were they sent to me via email with terms and conditions because they are not going to be on the back, but will follow? They were not. The relationship was not based on terms and conditions, it was based upon mutual understanding, trust and that is maybe the reason we are where we are. [T3/68/20 – 31]"
(1) Similar factual circumstances to those in issue in these proceedings were considered and addressed in a series of cases beginning with the Court of Appeal's decision in Poseidon Freight Forwarding Co Ltd v Davies Turner Southern Ltd [1996] 2 Lloyd's Rep 388. Leggatt LJ, with whom Waite LJ and Peter Gibson LJ agreed, held that:
"This is not a case where a party declares that the terms are available for inspection, it is a case where, on documents sent by fax, reference is made to terms stated on the back, which are, however, not stated or otherwise communicated. Since what was being described as being on the back was not sent, it was a more cogent inference that the terms were not intended to apply."
(2) Mr Justice Coulson (as he then was) in J Murphy & Sons Limited v Johnston Precast Limited [2008] EWHC 3024 (TCC) considered a case of a fax of an order which stated "Your attention is directed to the conditions overleaf", but the conditions were neither "overleaf" nor sent with the purchase order. Coulson J rejected the argument that Murphy's terms and conditions were incorporated into the contract between the parties:
"99. I acknowledge at once that this means that I am effectively putting to one side the words at the bottom of the Murphy Order (paragraphs 62 and 63 above). However, I have concluded that it is appropriate to do so. There are a number of reasons for this. First, there is no evidence that anybody on either side paid any attention to whether or not the terms were actually attached to the Order when it was faxed on 21st April. Secondly, of course, no terms were in fact faxed, so the words were meaningless. Thirdly, I do not believe that these words amount to an effective incorporation of the Murphy terms in any event. They merely draw the reader's attention to the conditions; they do not say expressly that those conditions wholesale will be incorporated into any proposed contract. They do not say that the Order is 'subject to' those conditions, or even that the Order 'incorporates the conditions overleaf'. Fourthly, I am confirmed that this is the right approach by the decision in Sterling in which a similar (in fact, rather stronger) attempt to incorporate non-existent terms and conditions was rejected by the learned judge." (emphasis added)
(3) In an earlier case of Sterling Hydraulics Ltd v Dichtomatik Ltd [2007] 1 Lloyd's Rep 8 where the defendant's acknowledgment of order stated that delivery was "based on our general terms of sale" but no terms of sale were provided until after the goods had been delivered, and the Court held that there was no incorporation. Accordingly, HHJ Havelock-Allan QC held that the relevant terms were not incorporated because insufficient notice had been given, notwithstanding that wider words than "on the reverse" or "overleaf" had been used by the draftsman.
(4) Sterling was followed in Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC), which concerned a trial of a preliminary issue to determine the terms of the contract made between the parties for the purchase of nitrile gaskets. The claimants and defendants both claimed that their standard terms applied, but Edwards-Stuart J concluded that neither set of terms was incorporated, setting out his reasons at paragraphs 43 – 50.
C Conclusion on incorporation
(1) I am satisfied that Henley Homes had been handed a hard copy of the standard terms and conditions at the presentation on the reverse of the quote, as Ms White testified. Mr Usmani and Ms Jones did not say anything to gainsay that evidence: Mr Usmani said he didn't look for terms and conditions on the back, and Ms Jones said she could not remember. On the basis of this evidence, I am satisfied that the hard copy with terms and conditions attached were provided to the Defendant at the meeting on 11 February 2015.
(2) Henley Homes was sent by email a copy of the terms and conditions on the proposal summary on 6 January 2016.
(3) The signed version returned on 11 February 2016 contained amendments to payment terms and crossed out the wallpaper option. Although the terms and conditions were not overleaf or attached, the acceptance of the order subject to the terms and conditions obviously referred back to the standard terms to which notice had been given to Henley previously.
(4) The revised version signed on 13 June 2016 was to be interpreted and understood in the same way – the revisions did not affect the standard terms.
(5) Bearing in mind that the terms had previously been provided at the presentation and on 6 January 2016, it was clear to a reasonable person in the position of Mr Usmani that his signing the revised proposals in February 2016 and in June 2016 that it was subject to those terms despite the absence of the terms overleaf.
(1) The acceptance was specifically to the accepted contract being subject to terms and conditions. This was a more specific incorporation than simply having terms overleaf or than a reference to terms overleaf, but an acknowledgment that the terms were subject to the terms and conditions.
(2) There was no attempt on the part of the Defendants to contract on their own terms such that a counter-offer could be interpreted as being a rejection of the terms of the Claimant for the terms of the Defendants. The cases of Sterling and Transformers were battle of the form cases, which was relevant to the outcome of those cases.
(3) The evidence of Mr Usmani that he did not believe that terms applied was not because of any assurance on the part of the Claimant but appears to have resulted from his inattention.
(4) The above would have sufficed, but in fact the position is stronger still on incorporation by reference because of the previous dealings between the parties when terms and conditions were sent, even if Mr Usmani did not pay attention to them. This included in 2013. On 19 March 2013, Mr Usmani signed a proposal summary with the same terms and conditions accepted. There are other examples of signed unamended cover sheets. There was also the evidence of Ms White which the Court accepts that the terms and conditions were presented in the course of pitch or tender meetings.
X If the Claimant's standard terms and conditions were incorporated into the Phase 1 Contract, are they unreasonable for the purposes of the Unfair Contract Terms Act 1977?
A The statutory provision and the terms of Clause 8
"Section 3
(1) This section applies as between contracting parties where one of them deals ... on the other's written standard terms of business.
(2) As against that party, the other cannot by reference to any contract term—
(a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or
(b) claim to be entitled—
(i) to render a contractual performance substantially different from that which was reasonably expected of him, or
(ii) in respect of the whole or any part of his contractual obligation, to render no performance at all, except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness.
Section 6
(1A) Liability for breach of the obligations arising from—
(a) section 13, 14 or 15 of the 1979 Act (seller's implied undertakings as to conformity of goods with description or sample, or as to their quality or fitness for a particular purpose);
(b) section 9, 10 or 11 of the 1973 Act (the corresponding things in relation to hire purchase), cannot be excluded or restricted by reference to a contract term except in so far as the term satisfies the requirement of reasonableness.
Section 11
(2) ln determining for the purposes of section 6 or 7 above whether a contract term satisfies the requirement of reasonableness, regard shall be had in particular to the matters specified in Schedule 2 to this Act; but this subsection does not prevent the court or arbitrator from holding, in accordance with any rule of law, that a term which purports to exclude or restrict any relevant liability is not a term of the contract.
…
(5) lt is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does.
Schedule 2
The matters to which regard is to be had in particular for the purposes of section [6(1)(A)] are any of the following which appear to be relevant—
(a)the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the customer's requirements could have been met;
(b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having a similar term;
(c) whether the customer knew or ought reasonably to have known of the existence and the extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties);
(d) where the term excludes or restricts any relevant liability if some condition was not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable;
(e) whether the goods were manufactured, processed or adapted to the special order of the customer."
"8 Warranties and Liability
8.1 Subject to the conditions set out below the Seller warrants that the Goods will correspond with their specification at the time of delivery (subject to the Seller's right under clause 3.3 to alter and amend any specification) and will be free from defects in material and workmanship for a period of 3 months from delivery.
8.2 The above warranty is given by the Seller subject to the following conditions:
8.2.1 the Seller shall be under no liability in respect of any defect in the Goods arising from any drawing, design or specification supplied by the Buyer;
8.2.2 the Seller shall be under no liability in respect of any defect arising from fair wear and tear, wilful damage, negligence, abnormal working conditions, failure to follow the Seller's instructions (whether oral or in writing), misuse or alteration or repair of the Goods by the Buyer without the Seller's approval.
8.2.3 the Seller shall be under no liability under the above warranty (or any other warranty, condition or guarantee) if the total price of the Goods has not been paid by the due date for payment,
8.2.4 the above warranty does not extend to parts, materials, or equipment not manufactured by the Seller, in respect of which the Buyer shall only be entitled to the benefit of any such warranty or guarantee as is given by the manufacturer to the Seller
8.2.5 all lights, including fixed, floor, lamp bases and light bulbs are covered by a 1 month guarantee only
8.3 All warranties, conditions or other terms implied by statute or common law (save for the conditions implied by Section 12 of the Sale of Goods Act 1979) are excluded to the fullest extent permitted by law.
8.4 Where the Goods are sold under a consumer transaction (as defined by the Consumer Transaction (Restrictions on Statements) Order 1976, the statutory rights of the Buyer are not affected by these Conditions.
8.5 The Seller warrants to the Buyer that all upholstered furniture and furnishings sold to the Buyer comply with the requirements of the Furniture and Furnishings (Fire)(Safety)(Amendment) Regulations 1993.
8.6 Any Claim by the Buyer which is based on any defect in the quality or condition of the Goods or their failure to correspond with specifications shall be notified to the Seller within a reasonable time after discovery of the defect or failure. If the Buyer does not notify the Seller accordingly, the Buyer shall not be entitled to reject the Goods and the Seller shall have no liability for such defect or failure, and the Buyer shall be bound to pay for the price of the Goods. Where any valid claim is notified to the seller in accordance with these Conditions, the Seller shall be entitled to replace the Goods (or the part in question) free of charge or, at the Seller's sole discretion, refund the Buyer the price of the Goods (or a proportionate part of the price), but the Seller shall have no further liability to the Buyer.
8.7 Except in respect of death or personal injury caused by the Seller's negligence, the seller shall not be liable to the Buyer by reason of any representation (unless fraudulent), or any implied warranty, condition or other terms, or any duty at common law, or under the express terms of the Contract, or any indirect, special or consequential loss or damage (whether for loss of profit or otherwise), costs, expenses or other claim for compensation whatsoever (whether caused by the negligence of the Seller, its employees or otherwise) which arise out of any connection with the supply of the Goods, except as expressly provided in these Conditions.
8.8 The Seller shall not be liable to the Buyer or be deemed to be in breach of the Contract by reason of any delay in performing, or any failure to perform, any of the Seller's obligations in relation to the Goods, if the delay or failure was due to any cause beyond the Seller's reasonable control including, without limitation, acts of God, governmental actions, explosion, flood, tempest, fire, accident, war or national emergency, riot, civil disturbance, strikes, lock-outs or other industrial actions or trade disputes (whether involving employees of the Seller or of a third party) or restraints or delays affecting carriers or inability or delay in obtaining supplies of adequate or suitable materials.
8.9 A person who is not a party to this Contract has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any terms of the Contract, but this does not affect any right or remedy of a third party which exists or is available apart from that Act."
B The pleaded case
(1) there has not been pleaded the whole of Clause 8, but only 8.2.1 - 8.2.3. For example, it has not been pleaded that the Counterclaim is limited by reference to Clause 8.6 (which has been mentioned in a note about UCTA provided on 22 February 2021).
(2) there are denials about the allegations of the Defendants that Clause 8 was unreasonable, but save for minor elaboration of the denial, there has not been an attempt to prove the reasonableness of the Clause as required by section 11(5) of UCTA (burden on the party relying on the clause) and see also Sheffield v Pickfords Limited [1997] EWCA Civ 984.
(1) The context of Clause 8 is a warranty to replace any implied conditions and warranties under statute or at common law. In other words, the effect of being in breach of this condition is that the Defendants revert to the state of affairs without the warranty in Clause 8.1 and subject to the blanket exclusion in Clause 8.3.
(2) The argument of the Claimant was as if this was an anti-set off clause, and in the skeleton arguments, the focus was that anti-set off clauses have often been upheld: see F.G. Wilson (Engineering) Ltd v John Holt & Co [2012] EWHC 2477 (Comm); [2012] 2 Lloyd's Rep 479 at [93]-[109] ("Wilson"); RÖHLIG (UK) Ltd v Rock Unique Ltd [2011] EWCA Civ 18 at [8] and [16]; University of Wales v London College of Business Ltd [2015] EWHC 1280 (QB). These cases were distinguished from Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] QB 600, which was a case about a set off clause despite the credits being admitted, which the Court did not find reasonable.
(3) The limited nature of anti-set off clauses was highlighted in the following cases:
(a) In Wilson, Popplewell J (as he then was) at [99(3)] said: "I do not see anything essentially unfair or unreasonable in a seller in these circumstances requiring the buyer to pay in full, leaving any disputed cross-claim to be resolved by subsequent negotiation or determination rather than being used as a ground to withhold payment of the undisputed price of goods which the buyer has received many months previously."
(b) In ROHLIG, Moore-Bick LJ at [8] said: "The meaning of clause 21(A) is clear on its face: it does not prevent the customer from pursuing claims against the supplier, but it does prevent him from withholding payment in satisfaction of a claim or (if his claim is unjustified) from withholding payment until the merits have been determined."
(c) In University of Wales, HH Judge Keyser QC said: at [98.2] "Clause 5.1 was not ambiguous, unclear or complicated", and at [98.3] "no set-off" provisions are very common in business contracts. They do not affect the substance of the parties' obligations; they only affect the question of who has to take the initiative of bringing proceedings in the event of a dispute. (Cf. the dicta of Rix LJ in the Axa Sun Life Services case, at [108].) Put another way, they are about cash flow."
(4) As a result of the Court's concerns regarding the differences between an anti-set off provision and the instant Clause 8.2.3, the Court invited further argument regarding the provision. This led to a note of 22 February 2021 from the Claimant to the effect that no authority directly in point had been found. It pointed by way of analogy to cases where time bar provisions had been construed in favour of the bar. It also drew attention to the case of Goodlife Foods Limited v Hall Fire Production Limited [2018] EWCA Civ 1371, where the Court of Appeal considered and upheld the reasonableness of a standard term excluding all liability for a defective fire suppression system, save for the replacement of faulty components. It was said that just as in that case there was not a blanket exclusion clause (liability remained to replace faulty components) [45], [109] (ii), so cl 8.2.3 does not apply where the bill is paid.
C Discussion
(1) The researches of Counsel do not indicate that there is anything common about this clause. It is very different from an anti-set off clause, which is common, but whose rationale and effect are to be distinguished from the instant clause. There is no good explanation why an anti-set off clause would not have sufficed.
(2) This apparently unusual clause is tucked away in the undergrowth of the Standard Terms and Conditions without any particular highlighting of the consequences of even the slightest delay in payment. This has to be balanced against the opportunities in a course of dealing for consideration of the clause, but this factor is still a consideration in the context of the Schedule 2 consideration of whether the customer ought reasonably to have known of the existence and the extent of the term. Even if there was detailed consideration of the term, its consequences are not obvious, and the Court has to be careful not to confuse the kind of knowledge referred to in Schedule 2 with the knowledge which appears after hours of forensic examination in contested litigation.
(3) The clause is potentially exorbitant in that the consequence of the slightest delay or deduction might bar all rights of redress against the Claimant relating to the quality of the goods supplied.
(4) The clause creates real difficulty in its application. The payment has to be made on its due date. However, in this case, as regards the last 50%, there is not a due calendar date. It is the date of an event, namely completion. That gives rise to a problem because it is not like having to pay on the first day of a month, where there is certainty. As this case and many other cases demonstrate, it is very often not easy to say when completion has taken place. It may be possible after a court case to rule whether completion has taken place despite unresolved snagging items, but it is a question of degree and evaluation. This would mean that a customer would often not know whether there had been completion. In order to protect its position under this clause, it might have to consider paying the final amount under protest at a time when payment was not due because completion had not taken place.
(5) It is not an answer to say that there are limited rights under Clause 8.6 to the replacement of goods or to a refund, following payment in full. The danger for the customer is twofold. First, it would forgo the right to withhold payment until completion if it paid before the time of completion. Second, the seller or supplier might not perform under Clause 8.6 once paid (or might regard the work as not being required), and so the customer would not only pay early, but also lose the lever to encourage the seller or supplier to complete.
(6) It is necessary to consider these matters at the time of the contract, although theoretical concerns will be ignored: see Stewart Gill v Horatio Myer above. The question about what might amount to completion is not a theoretical concern or construct, as this case amply demonstrates. It does not mean that the term is too uncertain to be enforced or that the Court in this case with all the evidence before it cannot determine when completion has occurred in each case. However, it is very difficult for a customer without an independent certifier to say when there has or has not been completion, or in the instant case when the date of completion has arrived for payment to be made.
(7) Technically, the position is even worse because the payment is supposed to be on the date of completion as opposed to a number of days following completion.
(8) One of the criteria in Schedule 2 is either in point or analogous, namely "where the term excludes or restricts any relevant liability if some condition was not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable". The matters set out above or any of them (including the difficulty of identifying the precise moment of completion and the timing of the payment) might render it unreasonable at the time of the contract to expect that compliance of payment of the balance on the day of completion impracticable.
XI Did the Claimant owe the Defendants a tortious duty to act with reasonable skill and care?
XII Did the Claimant "complete" the Phase 1 Contract causing the balance of the contractual monies to fall due and/or were the goods "accepted": the legal analysis
(1) The contractual trigger of payment of the balance due under the contract had been satisfied in that the goods had been delivered and installed: alternatively, once initial (or even final) snagging was, objectively, complete.
(2) The Claimant considers that this took place by 21 January 2017, if not then by 20 February 2017 when the goods were delivered and installed as far as they could be given the state of unreadiness of the Hotel. At latest, the goods were installed and indeed all snagging was done by 20 June 2017 after the agreed snagging list was complete.
(3) Any remaining matters, if there were any (which is denied) were trifling only and/or not sufficiently substantial to withhold payment. All the goods were kept in the Hotel and have been in use at least until the closures for the current COVID pandemic.
(4) The Claimant points to Mr Usmani's email of 12 July 2017 referring to the works as completed in the second paragraph ("Notwithstanding the inordinate length of time it took to complete the works…"), with some issues outstanding which were then listed and which the Claimant characterises in context as trifling: payment should therefore have been released.
"(1) The buyer is deemed to have accepted the goods…
(b)when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller.
…
(4) The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them.
…
(6) The buyer is not by virtue of this section deemed to have accepted the goods merely because --
(a) he asks for, or agrees to, their repair by or under an arrangement with the seller."
"The judge also referred to the fact that the appellants had accepted the goods by using them. Had that been the only matter and no lapse of time, I am not persuaded that that would have been sufficient. But it is not necessary for me to consider that matter further because there was sufficient in the lapse of time that had occurred for the judge to have been entitled to find that a reasonable time had elapsed before the intimation of rejection was made."
"(1) If the buyer— (a) has the right to reject the goods by reason of a breach on the part of the seller that affects some or all of them, but (b) accepts some of the goods, including, where there are any goods unaffected by the breach, all such goods, he does not by accepting them lose his right to reject the rest."
"A helpful statement of the law is set out in the judgment of Mr Justice Evans in Graanhandel T. Vink v European Grain [1989] 2 Lloyd's Rep 531, in which he expressly considered acceptance and rejection for the purposes of section 35 of the Sale of Goods Act 1979. Following consideration of Morton v Chapman (1843) 11 M&W 534, Tradax Export SA v European Grain & Shipping Ltd [1983] 2 Lloyd's Rep 100 and Vargas Pena Apezteguia [1987] 1 Lloyd's Rep 394, Evans J explained at 533 that:
"In my judgment, these authorities show, first, than (sic) an unequivocal rejection prevents a subsequent acceptance of the goods whether that be called an affirmation of the contract or otherwise. Similarly, an affirmation of the contract prevents a later rejection of the goods. It follows, logically, as Mr Justice Saville said in the third of those cases, that a subsequent resale by the buyer is a wrongful conversion of the goods. I would observe in passing that if the seller has refused to accept the rejection, it would seem difficult for him to complain that a subsequent sale is a conversion. It may be – I do not need to decide this – that the effect of the seller's refusal of the rejection is to give a locus poenitentiae to the buyer, which would mean that the subsequent sale would not be wrongful but, of course, would be regarded as affirmation of the contract. Secondly, an unequivocal rejection does not necessarily depend upon the terms of one communication alone. It is necessary to consider the whole of the relevant communications and also the buyer's conduct generally. It is noteworthy that s.35 of the Sale of Goods Act, by reason of which subsequent inconsistent dealing with the goods is deemed to be an acceptance of them, does not depend upon communications of any fact to the seller. It of course remains true that once goods have been rejected there can be no subsequent acceptance of them…"" (emphasis added)
"A finding that the buyers clearly rejected the goods and claimed arbitration does not in my judgment conclude this question in their favour. It might emerge, as it did in Chapman v Morton (1843) 11 M&W 534, that the buyers were saying one thing and doing another, so as to invalidate their written statements or throw doubt on the bona fides or the unequivocal nature of their rejection. Or they might act in such a way as to create an estoppel against themselves. Or they might enter into a new agreement with the sellers involving an express or implied withdrawal of their rejection or a retransfer of title to them. It does, however, seem to me quite plain that once the buyers have proved what, on its face, amounted to a clear and unequivocal rejection of the goods and claim for arbitration, it is for the sellers to prove, if they can, that the apparent effect of the buyer's conduct was destroyed by other conduct having a different and inconsistent effect and not for the buyers to establish the negative case that they did nothing subsequently to disentitle themselves from asserting their rejection."
XIII Did the Claimant act in breach of contract or its tortious duty of care?
(1) any matters relating to the negotiation and terms of the contract relevant to the alleged breaches;
(2) the history of the dealings between the signing off performance of the contract;
(3) the effect of the continued use by the Defendants of the goods supplied.
(1) Any matters relating to the negotiation and terms of the contract relevant to the alleged breaches
(1) I found Ms White an impressive and truthful witness. If she had made such a representation, it would have been untrue, and she would have been untrue. I formed the view that Ms White was an honest witness and that therefore such a statement would have been unlikely.
(2) In any event, it made no sense for Ms White to lie in this regard, since such a statement would obviously have been contradicted by the absence of hotel experience on the Claimant's website, as Mr Khalil would notice. This would then leave Ms White without any explanation if taken up on such a statement and unable to provide details of the names of the hotels designed by the Claimant.
(3) The evidence of Mr Usmani that he did not ask for details about the Claimant's experience in respect of hotels also makes no sense. He said that it was because he trusted the Claimant. Far more likely than the explanation for not doing so is that his recollection is mistaken.
(4) When subsequently Mr Khalil became involved, he noticed that the Claimant did not have relevant hotel experience from the absence of reference to the same on the hotel website. This did not lead to Mr Usmani going back to Ms White to challenge her about apparently having been misled by her. The only probable explanation for that is that the representation was not made. Indeed, despite considerable contemporaneous written communications between the parties, there was no accusation of the Defendants before the dispute arose that Ms White had misled Mr Usmani about her experience.
(1) Until March 2016, that is after the making of the contract for Phase 1, the goods were required for hotel apartments and not for a hotel, which is a very different proposition from a five-star hotel. When the Defendants decided to open a hotel instead of apartments, there was no relevant change of specification on the part of the Defendants.
(2) There was no specificity of requiring five-star goods, but much more equivocal language as evidenced especially by the line "hard-wearing and contract quality which is easy to clean, maintain and replace but with a luxurious 5-star feel. Easy eh!" with all the attendant contradictions and lack of specificity to which attention has been drawn above.
(3) There is no such concept as five-star furniture or furnishings in any event.
(2) The history of the dealing as regards the signing off performance of the contract
(1) At 18.26 on 1 June 2017, Mr Khalil wrote "Hi Susan, Hope you got to the airport without any issues." He then said that he would provide an update on his audit to Mr Usmani and referred to the issue of the glass top of the coffee table. There was another email about the same at 18.50 on 2 June 2017 in which Mr Khalil said that his concern was about safety. This is not consistent with wide ranging defects and unhappiness or about Mr Maccallum acting very aggressively.
(2) Later on 2 June 2017 at 21.57, Ms White provided an updated snagging list, and referring to the coffee table issue. She finished with the words "thanks again for your kind words on Wednesday [31 May] & look forward to receiving all outstanding invoices." It was put to Mr Khalil that this was consistent with his overall satisfaction and with his passing on the matter to Mr Usmani in the expectation that the invoices would be paid. He said that he would not have discussed payment because it was between Ms White and Mr Usmani. He said that he was not prepared to put his name on approving the furniture because it would fall apart before too long. In my judgment, the tone of the correspondence at the time is to contrary effect. In particular, the reference to kind words and to the receipt of invoices (meaning in the context payment) bear out the account of Ms White and are inconsistent with that of Mr Khalil.
(3) On 5 June 2017, Ms White wrote to Mr Khalil to confirm that the French polishers were returning to the hotel on 6 June 2017. In the context of the snagging list which had been sent, this is not consistent with wholesale rejection of furniture or many items of furniture. Mr Khalil wrote on 6 June 2017 timed 12.30 which is set out in full because it is entirely consistent with the account of Ms White and inconsistent with the evidence of Mr Khalil. It was in the following terms
"Hi Susan
Your suggestion on the glass top is not acceptable to Henley. The glass top should be no thinner than what we have in the rooms at present and would have to be levelled, not above the sides of the table at all.
As I have already noted, once you confirm that the French Polisher has finished his job, I will organise for the rooms to be rechecked next week as I am not on site this week and then revert but the matter of the coffee table needs to be resolved quickly.
I would also strongly suggest that Phoenix please ensures all outstanding items are resolved before we do further checks as this would be the fifth time we are re-checking the rooms.
The next few days are pretty hectic for me hence hope the above sets the position of the next steps.
As I have already noted to Susan previously, I do not deal with the accounting side of things hence I would not be able to assist in that regard. All I am able to is confirm what has been done and what is outstanding once rechecked.
Best wishes,
Nassar"
"The page before, Mr Khalil, page 5, please. He then - he is asked to send the detail of the lovely words that you said about Phoenix to him and he writes saying, "Yes, of course, when discussing the feature in Dunalastair Hotel suites, it was Nassar Khalil that advised me that this feature may be of interest to Phoenix to lead with a position to advertise. Due to your major involvement and fantastic job you have done as lead designer, he thought you would be interested in leading". So are you suggesting that he is making that up, Mr Khalil?
A. I am suggesting that these are his words to get paid advertising. They are not my words.
Q. Well, let us have a look at the article itself. It is page 16 - if we could look at 16 to 18, just a couple of comments that you make and are quoted as saying. So it starts at 14 and over the page at 16 you are quoted as explaining your ambition for the project and, then, in the middle paragraph, "It is a great achievement to have opened the hotel after two meticulous years of dedicated attention to detail, drive and hard work. We didn't want to leave any aspect of the design out of sync with our luxury vision". This is what you said, Mr Khalil?
A. I do not recall but, yes, it would have been something that I would have contributed to, yes.
Q. And, therefore, in short, every corner of the hotel oozes attention to detail from colours to moulding to individually designed pieces of furniture, fixtures and fittings". Those these are your words?
A. Yes, yes.
Q. And, over the page, underneath the picture of the bathroom, you comment on Phoenix Interior Design and say, "We involved Phoenix Interior Design because we wanted the interior design to be unique. In line with our concept, I wanted a company that would transmit that into what I envisaged from the outset. We brought Phoenix Interior Design on board having previously worked with them on a number of separate projects. They were particularly helpful sourcing some of the bespoke furniture pieces". So this is twice in the same article, Mr Khalil, that you are singling out the bespoke furniture for comment?
A. Bespoke furniture is what we wanted in a five star hotel. This is an advertising pitch that can only help the standing of the hotel. It is not a piece where I was going to ascribe my hotel and its interior as not in line with what I would want my guests who have come to expect the highest standards to see.
Q. Well, what I would suggest, Mr Khalil, is that the furniture was something to be proud of and that is why you mentioned it twice?
A. Well, let me just explain that the furniture of the hotel does not just involve the rooms. The reception desk, the common path, the boutique consoles that we have bespokely sought one-off pieces that you would find in the hotel. So when you talk about presentation of the hotel, it was not just the bedrooms, Mr Legg, it was the entire hotel on its own and we had very many pieces there. I mean, we got chandeliers that cost in the region of £12,000 in the hotel, so you would understand why I am very proud of the hotel as a whole."
(1) there was a very detailed process of providing a detailed snagging list, of agreeing matters with Mr Khalil;
(2) the Claimant involving a number of people including Top Brass and a French polisher attended to the snagging and rectified almost everything;
(3) Mr Khalil was satisfied by the attendance of the Claimant and was complimentary to Ms White and expressed his expectation that the Claimant would be paid, albeit that the ultimate decision was a matter for Mr Usmani;
(4) Mr Khalil was fulsome in his praise about the Claimant to Premier Hospitality Magazine, evidencing his satisfaction with their work.
"Dear Susie,
I have now had the opportunity to properly consider the furniture and associated fittings, to include window dressings at the Dunalastair hotel.
Notwithstanding the inordinate length of time it took to complete the works and the unnecessary level of inconvenience and disruption experienced, I set out for you the issues that remain outstanding. When writing I want you to note that whatever I have been able to accept I have done so in order to avoid lengthy discussion however the following list is comprised of those items identified that are unacceptable:
1. Curtain tracks: as previously identified and discussed are of a poor quality and with the constant usage that would be experienced in a commercial property these will have a limited life span. lt is difficult to pull the curtains across, it requires such force that either the tracks will be irreparably damaged or guests will start handling the curtains themselves. Neither is acceptable. When I raised this previously I was told it was due to the dust and building grit, the hotel has been operating for some 10 weeks or so. You have reported that you have cleaned and oiled the tracks, there is no dust or building grit, yet the problem persists. The new metal wands used to pull the curtains in to an open or close position have started bending as a result. please advise.
2. Blackout blinds: These are not fit for purpose. They do not allow the guest to sleep in a room without light flooding through. There is a possible solution but that needs discussion as there is a cost associated.
3. Coffee tables: The solution provided isn't acceptable. The original concept of having a piece of glass which sat proud of the frame itself and also with nothing to stop the glass from sliding off was clearly a design fault, this you have accepted. The remedy now being provided doesn't do much to rectify the design fault, the glass still sits proud of the frame.
4. Damaged Coffee table glass: There is a chip to the glass in Room 202. This has been previously identified. As it is your operatives that have attempted to
5. There are headboards which have not been adjusted to their correct positions, as agreed. Namely Room nos.: 200,207. Reducing the volume of the curtains that we have paid for is not an acceptable solution. The headboards should be set in their correct position as clearly set out on the plan. Please advise.
6. Poor stitching to headboard panel Room 215: This panel needs to be replaced, as agreed. It appears on the final list but has been omitted. please advise
7.Curtains to Room 215,2nd bedroom. As agreed the blinds were to be replaced with curtains, this has been done in bedroom 1 but not in the 2nd bedroom. This appears on the list but has not been done. Please advise.
8. Window blinds Room 111: The chains used to control the blinds are all cut to different lengths. The windows are in close proximity to each other, this looks unsightly and shows disregard for detail
9. Wall lights in restaurant area and Lounge: These are of poor quality and are completely inadequate in terms of size relative to the area of wall. We have discussed this and l have replaced with more appropriate size and quality. These will need to be credited to our account
10. Marble top coffee tables in lounge: These are completely inappropriate for the location. These are now badly stained with coffee and tea stains. Please advise.
11. Side table, glass top: This has been invoiced but never delivered. There is no proof of delivery nor can we find it on site. please credit this invoice.
12. Expenses: lnvoice no. L36101 £1,219.80. This has never been agreed. Please credit.
There are some anomalies which I have asked our accounts department to clarify, I will let you know if these are not resolved in the next day or two.
I think it is fair to say that Phoenix haven't taken on a project of this size or type. lt would have been better for both parties if Phoenix had declared that position rather than us finding out through very hard experience.
As a specialist supplier you are there to advise and unfortunately this hasn't happened. There has been gross overcharging on a number of items however I agreed the price so difficult to argue that point but it leaves a bitter taste. The overall cost of the interior furnishing has been disproportionately expensive and we did not receive a complete solution. We had to source many items ourselves and adjust much of the furniture especially in the lounge as it simply didn't fit. lt has created a great deal of work in my office and numbers of unnecessary trip at short notice to and from Dunalastair. However, we are where we are. We need to find an amicable solution to the issues outlined above. I am happy to talk it through, provide further back up information should you require.
I look forward to receiving your response at your earliest convenience"
"1. Curtain tracks not of satisfactory quality: Contrary to what you assert, the curtain tracks are of contract quality. This is an item which was on the snagging list and was completed and subsequently approved by Mr Khalil and Mr Huntley at the "walk around" on 1 June 2017.
2. Blackout blinds not sufficiently opaque; During the compilation of the snagging list you (via Gregor Ritchie, Managing Director of Optimum Hotel and Leisure Management, who are responsible, we understand, for managing the hotel) raised the issue of blinds in relation only to one room (number 215). He suggested that the blinds be changed to curtains which our client did without charge. lf you want the blinds in other rooms to be changed as well then that work would fall outside the scope of the agreed contract and you would need to pay for all the work associated with that.
3. Coffee tables wrongly designed: Our client rejects entirely your allegation that there is a design fault in relation to these tables - there is nothing wrong with the tables.
4. Damaged coffee table glass: You have alleged that there is a chip to the glass in room 202, but your sentence is incomplete and so we do not know what the criticism is - our client believes that this problem was resolved as part of the snagging issues.
5. Headboards not adjusted to their correct positions: This problem was resolved as part of the snagging works and completed to the approval of Mr Khalil and Mr Huntley at the "walk around" on 1 June 2017.
6. Poor stitching to headboard panel in room 215: Again, this was on the snagging list and put right, to the satisfaction of Mr Khalil and Mr Huntley at the "walk around'' on 1 June 2017
7. Lack of curtains in the second bedroom of room 215: Contrary to what you state, this was done and approved by Mr Khalil and Mr Huntley on 1 June 2017.
8. Chains controlling window blinds in room 111 cut to different lengths and windows too close to each other: Again, these problems were resolved as part of tire snagging process and approved by Mr Khalil and Mr Huntley on 1 June 2017.
9. Wall lights in restaurant area and lounge of poor quality and too small: These lights were approved by you in September 2016. Our client delivered them on 29 March 2017 and, during compilation of the snagging list of 12 April, you raised the issue, but our client pointed out that these were the lights which you chose.
10. Marble top coffee tables in the lounge now stained with coffee and tea and inappropriate for the location: Our client wrote to you with a solution on 23 May 2017 (offering a change in the surface from marble to glass) but did not hear back.
11. Side table with glass top invoiced but never delivered: ln fact, there are four of these tables on site and we attach photographs which prove this. The only problem was that one side table was missed off our client's delivery listings, but you have the tables which you ordered and they have been installed on site.
12. lnvoice number 136101 for £1,219.80 was never agreed: This item was approved by your Suze Jones via email to our client's Justine Webber."
This was out of step with the communications of and with Mr Khalil referred to above. It was out of order for Mr Usmani to be so busy that he could not attend to matters personally, leaving it to Mr Khalil, and then for him to write in terms which depart from the process in the snagging lists.
(1) Mr Khalil was entrusted with dealing with the Claimant for months. He was the specialist in hotels, and not Mr Usmani, so any departure from Mr Khalil's satisfaction has to be treated with caution.
(2) Mr Khalil had been through a process of the creation of and working through snagging lists, so the subsequent email of 12 July 2017 has the appearance of a construct not based on reality.
(3) The criticisms of overcharging say more about the animus of Mr Usmani than they do about the contractual relationship. The prices had been agreed under the contract. If the prices had been too steep, Mr Usmani could have refused them at the time or negotiated. In fact, the evidence is that he required a reduction in the price by 30%, and it has never been explained how this came about. There was a suggestion that the practical effect may have been only a £8,000 reduction: if this is true, it has not been demonstrated how this was the case. In any event, the point here is that there is no rational basis for this complaint (it has not been run as an issue in the case). The allegation provides a context for considering the other complaints.
(4) There is no general complaint about the quality of the cased goods or the furniture and nor is there a complaint about the curtains or the drapery. There are two very specific complaints, but the email does not provide an evidential foundation to the counterclaim which is to the effect that every item of cased goods or the furniture should be replaced and every item of drapery, curtains and blinds should be replaced.
(5) The email does not contain a rejection of the goods supplied. It does not indicate that the balance of the moneys will not become due, if they are not by then due.
(6) The email has the language about completion of the works saying "Notwithstanding the inordinate length of time it took to complete the works and the unnecessary level of inconvenience and disruption experienced, I set out for you the issues that remain outstanding." In other words, it has in mind completion having taken place, and it has in mind work of rectification or compensation.
(7) As regards the specific complaints, they were answered by return in the response of the solicitors for the Claimant, but they will be considered in greater detail below.
(3) the effect of the continued use by the Defendants of the goods supplied
January 2017: delivery and installation of the goods.
March 2017 – June 2017: preparation of snagging list and rectification works carried out.
May 2017: opening of the hotel and continuous use of the goods until closure for COVID.
May 2017: numerous customer reviews such as "our suite was beautiful and yes it's just been refurbished and so was all new but the luxury and attention to detail is exceptional." And "our suite was the best we have stayed in" and "the rooms are remarkably well appointed."
27 March 2018: award of 5-star grading from VisitScotland. The literature accompanying the award states "All suites have been designed with sumptuous, five-star comfort and use the finest fabrics and furniture created by Phoenix Interior Design".
1 June 2018: Dunalastair Hotel Suites wins Boutique hotel of the Year at the Scottish Hospitality Awards 2018.
2018/19: Best Hotel Interior awarded by Best Loved Awards Bo-Ho winner for UK Country & Coastal 21-50 rooms "Everything in the building was renovated to five-star standard" Nassar Khalil.
28 June 2019: Amended Defence and Counterclaim based on Contessa quote: £298,544.23 plus VAT and costs incurred of £19,725 plus VAT.
March 2020: first closure of the hotel due to COVID (evidence is that the hotel was open for 2 months).
June 2020: quote from FYR projects to do the rooms again £212,372.00 plus VAT.
(1) the Defendants would have been bound as a matter of commercial necessity and plausibility to have replaced the furniture and furnishings years ago rather than use allegedly sub-standard goods in a five-star hotel;
(2) Mr Khalil would not have praised the quality of the work done and goods provided by the Claimant in the context of five star accreditation;
(3) reviewers would have been very critical whereas in fact they were fulsome in their praise.
XIV Conclusions before considering specific defects.
(1) The Defendants did not reject the furniture and fittings but retained the same and used them. If there was a possibility that they might have rejected the same, their subsequent conduct in continuing to use the same shows that there was no rejection. This is not a case where there was a rejection followed by acceptance: it is a case where there was no rejection, and where if there was any ambiguity or any possibility there might be a rejection, this came to an end because of the continued use of the furniture and furnishings over the years which ensued.
(2) There was a process for dealing with the defects through the snagging list. This was managed poorly by the Defendants in that there was no attendance by decision makers at site for several weeks after delivery and installation until March 2017. Mr Khalil became involved, and in the end, he was broadly satisfied. He denies vehemently that this was the case in his evidence, but the contemporaneous documents provide a consistent and strong picture to contrary effect. The more he says that he was expressing his dismay to the Claimant and that the Claimant was behaving in an aggressive way, the more the correspondence shows a very different picture. He was complimentary to and about the Claimant and he collaborated towards the ways of sorting out the snagging and facilitating payment.
(3) Payment was ultimately left for Mr Usmani. His position was generally distant for months, leaving the position to Mr Khalil. By May 2017, he appears to have become annoyed with Ms White, despite the talk about trust and high regard. Whatever it was, it has led to his believing that Ms White made a representation about hotel experience, whereas I have found that she did not make any such claim. It has led to his going out on a limb of his own in his email of 12 July 2017 making unsubstantiated claims about excessive charges and complaints which have ignored the whole sequence of the snagging lists and the steps taken by the Claimant to address the same.
(4) The evidence of the Defendants has been badly anchored. It has at its source an order of five-star furniture for a five-star hotel. In fact, the documents do not bear this out. First, the order was for a high-end apartment hotel at the time of contract, which is a different concept from a five-star hotel. Second, there is no evidence of a star rating system in respect of furniture. Third, as noted above, the language relating to specification is contradictory, inconsistent and imprecise.
(5) In my judgment, the evidence given for the Defendants about the quality of the goods is out of step with contemporaneous documents. I have made criticism especially of key witnesses for the Claimant, namely Mr Usmani and Mr Khalil. The evidence of Mr Deak has been unimpressive. The evidence of Mr Bassett was based on the assumption that the contract was specific and precise.
(6) The Defendants' retention of the goods in the hotel and use of the same for years is completely at odds with the extent of the complaints which are being made. If in fact the goods had been as defective as the Defendants relate, they would have been bound to have replaced them years ago. The fact that they did not do so is a telling feature against the Defendants' case.
(7) Further, it was vital for a hotel to have a system for maintenance of the damaged items in the hotel. The evidence is that apparently respectable customers can treat a hotel room in a way that they would never treat their own home. That is why the furniture had to be hard wearing, but also why the hotel would have to have in place a way for dealing with wear and tear and rough treatment by customers. The evidence of Mr Deak revealed that there was no adequate system for maintenance in place, and the Defendants have no ground for complaint to the extent that the problems arose out of their failure to maintain the furniture, furnishings and fittings. The fact that Mr Deak had not engaged the services of a French polisher or the like was also revealing.
(8) Before reaching any final conclusion, it is necessary to consider the individual complaints and it is to this that the attention of the judgment now turns.
XV Furniture
(1) Introduction
(1) the Defendants' case is based on an erroneous characterisation of the specification in the case;
(2) the furniture and cased goods were approved in advance by the Defendants, and the Claimant acted on their approval;
(3) the furniture and cased goods were of sufficient quality and were hard wearing and suitable for a high end establishment;
(4) the furniture and cased goods were approved by the Defendants in the inspections following delivery and culminating in an inspection by Mr Khalil on 1 June 2017 and later in the month;
(5) the same were not the subject of criticism even by Mr Usmani on 12 July 2017;
(6) the Defendants are responsible for the way the premises were not in a fit state to receive the same when the same were delivered and installed in January 2017;
(7) the Defendants failed to maintain the same adequately or at all and failed to maintain any system for such maintenance;
(8) if the furniture and cased goods had not been fit for purpose, they would not have been used for years following opening in May 2017 until lockdown in March 2020 and again during the times when the Hotel was open.
(2) The Defendants' case
" … the laminate has been inelegantly and poor quality application of that laminate to provide a protrusion of laminate at the same time, there that inelegance – when I talk about inelegance I am not talking about inelegance simply from a design perspective, but in terms of the manufacturing quality – the poor application of the laminate and the rather strange use of physical location of the laminate has meant that the laminate has become easier to break, so it is very rare. It is very common to see laminate used on a horizontal surface, a table top, a bedside table, coffee table, and it is very rare, in fact, I do not think that I have ever seen it before, other than in one piece of sculpture, where laminate has been used for vertical surfaces of table legs and I think this rather strange use of laminate has contributed to the poor wear of the product." [T/5/47/4 – 14]
"… I said I have never seen [laminate] used on legs before, ever, okay, and secondly, the protrusion of laminate is unusual, I believe is poor quality manufacturing and the third part is, what I cannot tell is how well the laminate was bonded on to the substrate, be that MDF or chipboard. I cannot tell you how well that has been bonded, but the damages that I am seeing are highly unusual." [T/5/47/24 - 28]
(1) On 10 February 2017, Mr Khalil emailed the Claimant saying "Veneer is coming off some of the furniture and there are quite a few chips in others…"
(2) In an email dated 3 May 2017, Mr Khalil stated that sharp edges remained on some of the furniture.
(3) The snagging list compiled by the Claimant in April 2017 expressly recorded that (i) various items of furniture needed to be repaired/replaced; and (ii) "All furniture" was recorded as needing sharp edges sanding and glue spots removing. This became the "agreed" list after the 15 May 2017 meeting (following additions from the Defendants).
(3) The Claimant's case
(1) the absence of a categorisation of five-star furniture and the fact that at the time of the order, the furniture was for an apartment hotel and not a five-star hotel. This has been set out in some detail above and does not require repetition;
(2) the approval by the Defendants of the furniture by inspections in particular (a) On 10 March 2016 in Hartlepool, (b) at Henley Homes' head office on 24 March 2016; and (c) the sample room at the Hotel on 18 September 2016;
(3) the way in which there was a snagging list which was worked through until satisfaction in June 2017 subject to the ultimate decision of Mr Usmani;
(4) Mr Usmani's document of 12 July 2017, which makes very limited and specific criticism of the furniture and cased goods;
(5) The use of the furniture and cased goods for years without replacing the same in the period between May 2017 on opening and March 2020, the first closure for the COVID pandemic and thereafter open for two months during the pandemic;
(6) The fact that the premises were not ready to accept the furniture and cased goods in January 2017 and for weeks thereafter, with no heating there and numerous contractors working there and living there prior to the official opening in May 2017;
(7) The absence of any system for maintenance of the furniture and cased goods, as evidenced by Mr Deak.
(4) Discussion
(1) the specification was imprecise and did not include that the furniture was five-star furniture;
(2) there is no categorisation of five-star furniture or indeed stars for furniture;
(3) the furniture was provided contractually for an apartment hotel and not for a five-star hotel, which is a different concept: it was not for the Claimant to start again when the Defendants decided belatedly to have the hotel ascribed as a five-star hotel;
(4) the furniture had to be hard-wearing and have a high-end feel. It has broadly fulfilled that requirement as evidenced by the reviews of customers which have been positive and by the ability of the Hotel to obtain five-star rating. The latter has not been due solely to the furniture, but this has not held it back, and on the contrary, the relevant furniture and the appearance of the rooms have been singled out for particular praise as set out above.
XVI Roman Blinds/Black-Out-Blinds
Discussion
"Well, the thing is, it is impossible. As I said before, you need an allowance for the roller mechanism to work. So, there is always going to be some form of light spillage. As I said, it never came up in the snagging and we did offer a solution. The solution was – because the solution for anything like this is you would put in a casement, like they were going to do in part of the brief. The original brief was the new windows were going to have the sheer inside for that purpose. These were not fitted, they asked us to add sheers in 2016, they had the list and the images of every single window treatment, so the client knew what they were getting and as I said, there is blackout lining in the curtains and the roman blinds. There is no way of getting around light spillage but as I said before, the photographs that are in there are from daylight hours you can see."
XVII Curtains, Curtain rails and Curtain Rods
"Q. Would you expect there to be a high quality maintenance team to ensure that these goods are kept in a state of repair that otherwise the deterioration that you are seeing could be a lack of maintenance, for example?
A. Correct. I would agree wholeheartedly with that, my Lord, and I would have expected to see the operating and maintenance instructions for each product, each fabric, each light, the carpet, the drapery tracks, the furniture, every single item to be in an operating and maintenance manual provided to the Hotel so that they knew, as you say, Mr Legg, how to maintain that property effectively."
Discussion
(1) Top Brass was using items which had satisfied the Accor Groups Hotels over a period of 12 years. It makes no difference for this purpose that those hotels were three or four star hotels and not five star hotels. It follows that the curtain tracks were of hotel quality and suitable.
(2) the wands were specified by the Defendants and if and to the extent that they might have needed replacement more often than more robust and less aesthetically pleasing ones, there was no reason for the Claimant to advise against the selection. If these were defects, they were due to the drawing, design or specification supplied by Henley Homes, and Clause 8.2.1 applied. It was a reasonable exclusion of liability insofar as there was any liability.
(3) the snagging process was over a period of time and these alleged defects did not feature and the Defendants particularly by Mr Khalil, expressed their satisfaction.
(4) the complaints made by Mr Usmani made in his email of 12 July 2017 about the curtain tracks were properly answered by the Claimant by reference to the snagging process. Further his oral evidence was unsatisfactory as set out above. If there really had been a problem with curtain tracks, and the Claimant had not addressed it, then there was no reason for the Defendants to replace the same over the years that have since elapsed.
(5) the failure of the Defendants to have any adequate system of maintenance is of particular concern in this regard. This was at two stages. First, on delivery and installation, there was poor use during installation and dust from workmen. This was all sorted during the snagging process. Thereafter, there was poor maintenance and in particular there was a failure to keep the curtain rails silicone sprayed on a regular basis. The observations above concerning Mr Deak's evidence are of a failure to have any or any adequate system of maintenance with poor records and failing to attend to matters in a way designed to keep the Hotel to a high standard. There were notes about providing customers with compensatory meals or drinks or the like, but this was not a substitute for attending to the maintenance issues in a professional manner by making such repairs and improvements as required with a skilful and designated staff ready to implement the same. The Defendants' case emphasises repeatedly the failure of the Claimant to supply a service fit for a five-star hotel. This judgment has addressed that above. However, it is noteworthy, that the approach to maintenance falls far short of what would have been expected for a five-star hotel or a less rated establishment.
XVIII Glass topped coffee tables
Discussion
XIX Marble coffee tables
Discussion
XX Headboards
XXI Damages/quantum
(1) If many of the goods have been so bad as to require replacement (particularly the allegation that they are not fit for a five-star hotel), this begs the question why the Defendants have been prepared to go on running the Hotel without replacing the same for years. There is evidently no issue of impecuniosity. None has been suggested: on the contrary, the financial strength of Henley Homes has been mentioned in the evidence. If the allegations were well founded, then the continued operation of the Hotel parading its five-star accreditation in its sales literature would appear to be irresponsible. Customers would be booking and attending when the Defendants on their case believed that much of the furniture was not fit for purpose, and especially not of the standard fit for a five-star hotel. Instead, the failure to replace the goods is evidence that the complaints are not made out.
(2) Not only has there been delay in replacing faulty goods, but there is a lack of clarity as regards the quotation from FYR. The Defendants' case is that they have accepted the quotation of FYR. The reason, it is said, that they have not proceeded with the works is due to the COVID pandemic which has delayed the commencement of the work. This requires some consideration.
(3) If the Court were to allow the Counterclaim based on the replacement of so many of the goods supplied, then the Defendants would receive a significant betterment. The goods only have a life on the evidence of very approximately eight years, and the replacement would be after the goods supplied had been used for over three years. It is not suggested that there should not be an allowance for use or a reduction on account of the betterment that flows from the combination of the use and the receiving of money for the replacement of goods. No figures are advanced to reflect this.
(4) There are some relatively modest figures said to have been spent on some items to which this judgment will return. However, there is no evidence to value the losses in the event that the Court does not accept the argument of damages of a scale of hundreds of thousands of pounds but is more in the territory of Mr Barrett's figures. In short, there is no financial response to Mr Barrett's evidence about the remedial work which he said would cost about £7,000 - £8,000. In short, the Defendants have concentrated their fire on the case of no completion and/or defective work giving rise to the requirement to replace much that has been supplied and installed giving rise to a claim in the hundreds of thousands of pounds.
"Yes. Yes, I see the point that you are making. The issue that we had is that if we, if we removed this furniture we have to put into storage. What it is actually doing for us is just increasing our costs. So, one, one element of it is costs and I felt at the time, and maybe wrongly so, that this whole – we would get a resolution to this problem, not, you know, not too far in the future, and of course what has transpired since is that it has been a long journey. But I think I would still be holding onto the furniture in some storage facility, and would I be able claim for that even if I was successful in anything else, then that is quite questionable.
So, what it was doing for me was just increasing costs and increasing costs. Ideally, what I would like to have done was just remove the furniture. If there was no other issue to discuss we would have just removed the furniture, but I felt morally that there is a responsibility in the way that the furniture has been supplied and that people are just not prepared to take that responsibility. I mean, it is unfair that, you know, we have ordered brand new furniture, bespoke furniture, and this is what I have ended up with [T/4/49/26 – T4/50/4]."
(1) The figures set out in the witness statement of Mr Khalil in respect of costs said actually to have been incurred; and
(2) The figures referred to by Mr Barrett, and whether that throws open some other sums of money.
(1) A sum of £4,410 plus VAT in respect of remedying various works set out in job sheets;
(2) A spreadsheet detailing electrical works carried out by MP Electrical accompanied by relevant invoices to rewire headboards (£2,635 plus VAT) and to move wall lights, freestanding lamp sockets and make good and redecorate walls (£12,680 plus VAT).
(1) There is not enough detail in order to identify with particularity the work in the job sheet with any fault on the part of the Claimant (as opposed to say normal maintenance). In any event, it appears to have been more than one year from the opening of the hotel, adding to the likely inference that it was either customer damage or a failure to carry out early maintenance on the part of the Hotel exacerbating any difficulty. If case, there was something which connected these costs with the job sheets in an intelligible way, the Defendant was given the opportunity to refer to any relevant documents before the judgment was finalised, but entirely realistically, it has been confirmed that there is no further evidence to be adduced.
(2) The commentary above in respect of the headboards shows that this head of claim has not been advanced. This then applies both to the costs of £2,635 plus VAT and of £12,680 plus VAT. It is noted that realistically it does not appear in the closing skeleton on behalf of the Defendants. It is also difficult to work out whether the sums were paid, and when it took place. There is reference in the documents of MP Electrical to April 2017 which would coincide with the time of the snagging works, making it the more difficult to correlate this with the time when remedial works were being carried out by the Claimant. If there had been a claim being pursued in respect of headboards, there is not sufficient information in any event from which to make out this alleged head of loss.
"MR BROOMFIELD: Mr Barrett, thank you. I have just got one final question. Right at the end of your report you put a price of £7,000 to £8,000 on the remedial works. You have not provided a breakdown of that figure, have you?
A. No. I was just thinking about the things that are chipped and basically that was it.
Q. Have you, have gone to or have you approached or enquired of somebody who fixes laminate surfaces for the purposes of that quote or is it a figure that you have plucked out of the air?
A. I do not pluck it out the air. I mean, I look at it and think well, this is what I would do with it and that is how I would do it. And it could be done I am sure.
Q. But you have not had the works priced?
A. No. But I mean, as far as that – as far as those legs are concerned, it would not be – I mean, I know that some people today have been saying it is all very difficult, impossible, cannot do it, that sort of thing, but it can be done. I mean, I, I do not like shouting my – blowing my own trumpet, yes, I do. No, but if I, if I am allowed to blow my own trumpet for five minutes or two minutes, if I had that, I could match that with paint and it would not look wrong, those legs, I could do that, I could fill it and match it with paint and it would not look wrong. No, but, you know, so, because I was explaining to Andrew Legg last week that ---
Q. Well, Mr Barrett, do not – if you are about to ---
A. No, no, no, this is nothing, nothing secret, about graining. It is something that I learnt to do when I was a small boy really, because my father taught me, but I learnt it as, as a decorator. It is making any surface look like wood by – with using paint. Do you know about it?
Q. No, I do not.
A. No. And do you know, my Lord? Do you know about it?
MR JUSTICE FREEDMAN: No, please go on.
A. It is basically use of paint or a particular type of paint called scumble which you use with stain to – over a particular undercoat to make any flat surface look like wood and you can imitate all wood grains and – if you know how to do it – and it is easy to do, well, easy once you know how, and it is – I could use that method to match that and it would not, would not show. Still, that is – but would need somebody who knows what to do and how to do it. And I am not volunteering to go to Scotland to do that.
Q. Well, Mr Barrett, those sorts of fixes simply are not suitable for a high end Hotel of this nature are they?
A. Whose – if you do not know what it is and you cannot see it, what is the problem? It, you know, just because it is, because it is done with paint and not with, and not putting another piece of laminate on, does it – is there any – is paint any worse than laminate? I do not think so.
Q. Well, it is less, less hard wearing, is it not?
A. Possibly. But then what wear is it going to get apart from getting chipped off? I mean, it is, it – I do not agree. It is – but anyway, that is – it can be done but you would have to find the right people. But it is ---
Q. Mr Barrett ---
A. --- it would be not be a polisher, it would not be a polisher, I mean, the only other person who could, who could it possibly would be a, I was thinking about it this morning, it was a cabinet maker. Somebody who does cabinet making who is used to using veneers. That would be a better, probably a better, better option.
Q. You just said that there that it would not be a French polisher?
A. No. No. Because they only deal with polish basically whereas if you, if you have a, if you had a cabinet maker they deal in French polish as well and they also deal with veneers.
Q. Because in fact a French manufacturer or a cabinet maker like Top Brass do not do the work on site, do they? They take it back to their, they take it back to the warehouse and fix it there.
A. Yes, yes, of course."
"[263] Those cases seem to me to lead to the following general principles when considering an award of damages for defective premises:
(1) There will generally be an award of the cost of reinstatement provided that reinstatement is reasonable: East Ham v Bernard Sunley at 434, 445; Ruxley at 358D, 360E, 367B.
(2) Reinstatement will be unreasonable if the cost of reinstatement would be out of all proportion to the benefit to be obtained: Ruxley at 367B.
(3) The question of reasonableness has to be answered in relation to the particular contract: Ruxley at 358D.
(4) It is not necessary for recovery of the cost of reinstatement to show that the claimant will reinstate the property but the intention to reinstate may be relevant to reasonableness: Ruxley at 359C to D and 372A to 373E.
(5) If reinstatement is unreasonable then the measure will generally be diminution in value: East Ham v Bernard Sunley at 434, 445; Ruxley at 360E, 367B.
(6) Where reinstatement is unreasonable and there is no diminution in value, then the court may award damages for loss of amenity: Ruxley at 354D, 360H, 374.
(7) There is a general rule, subject to exceptions, established in Addis v Gramophone, that a claimant cannot recover damages for injured feelings for breach of contract: Watts v Morrow at 1445; Ruxley 374 A to B; Farley v Skinner 747D.
(8) One of the exceptions, explained in Watts v Morrow and Farley v Skinner and applied or adapted in Ruxley and applied in Farley v Skinner is that where the object of the contract is to afford pleasure, relaxation, peace of mind or freedom from molestation such damages are recoverable: Ruxley 374B to D; Farley v Skinner 747D.
(9) In cases not falling within that exception, damages may be recovered for physical inconvenience and discomfort caused by the breach and mental suffering directly related to physical inconvenience and discomfort: Watts v Morrow at 1445F.
(10) That for physical inconvenience or discomfort, the cause of that inconvenience or discomfort must be a sensory (sight, touch, hearing, smell etc) experience: Farley v Skinner at 768D to E.
(11) That any damages under either of the heads are modest: Ruxley at 374C to D; Watts v Morrow at 1443, 1445; Farley v Skinner at 751.
[264] Whilst in those cases the courts have treated the various heads of damage as distinct and alternatives and whilst I accept that in many circumstances that will be so, there will be circumstances where, for instance, there may be remedial works which will still give rise to diminution in value and there might be some reasonable minor remedial works whilst the loss is properly compensated by diminution in value. In each of those cases both the costs of remedial works and diminution in value may be required properly to compensate a party. In addition whilst usually either the cost or remedial works or diminution in value will be sufficient, there might be a case where lesser remedial works still leave an element of loss of amenity. Whilst in Farley v Skinner at 109 Lord Scott indicated that diminution in value and damages for discomfort would not be recoverable that was on the basis that there would otherwise be double recovery. I consider that this forms the basis of the principle for not allowing recovery under one or more heads, not some principle that divides the heads of damages so that there is not proper recovery once."
XXII Did the Claimant "complete" the Phase 1 Contract causing the balance of the contractual monies to fall due and/or were the goods "accepted"?
XXIII If the Claimant's standard terms and conditions were incorporated into the Phase 1 Contract, is the Claimant in breach of clause 8 of its standard terms and conditions?
XXIV Conclusion
