Introduction

Complaints against the pricing strategies in decoration and renovation services have been increasing in recent years. On 4 July 2017, the Shatin Magistrates’ Courts (the “Court”) handed down the first criminal conviction on unfair commercial practices by renovators in Hong Kong since the Trade Descriptions Ordinance (Cap.362) (“TDO”) was amended in July 2013 to include further consumer protection measures (see our previous newsletter “Changes to the Trade Descriptions Ordinance”).

A renovation company was held to be in breach of misleading omissions under section 13E of the TDO by using hidden costs to inflate the initial quotation for a flat renovation project by over 4 times.

Facts

In late 2014, the plaintiff reached an initial agreement with Lam Pui-Chen (“Lam”) and his firm named Senior Design Associates (“SDA”) to renovate his flat. However, following the completion of the renovation project, the plaintiff was shocked to find out that the cost of renovation had elevated to a total sum of HK$790,000, being more than 4 times the initial quotation. The Court heard that, whilst the plaintiff was told that the price of each light switch would cost HK$690, he was not informed in the initial quotation that a total of 108 light switches would be required. Similarly, the cost of knocking down a bedroom wall was priced at HK$280 per foot, but additional costs relating to completing such work were not disclosed.

Law

According to section 13E of the TDO, a trader commits an offence if he/she engages in relation to a consumer in a commercial practice that is a misleading omission, i.e. a commercial practice which, in its factual context,

• omits material information;
• hides material information;
• provides material information in a manner that is unclear, unintelligible, ambiguous or untimely; or
• fails to identify its commercial intent, unless this is already apparent from the context,

and as a result it causes, or is likely to cause, the average consumer to make a transactional decision that the consumer would not have made otherwise.

Decision

The Court held that the defendants had failed to comply with the TDO as they misled the plaintiff into making informed decisions with material information provided in an “unclear, unintelligible, ambiguous and untimely” manner, resulting in difficulties in calculating the total cost of the whole renovation project based solely on unit prices. In light of the complexities involved in a renovation project in which an average consumer would be unlikely to understand, the Court upheld the conviction even though the defendant’s renovation work was not substandard, nor had the figures on the bill been tampered with.

As a result, both SDA and Lam were found guilty under section 13E of the TDO and the Court imposed a HK$30,000 fine on SDA and a 240-hour community service order on Lam.

Implication

While some argued that the amendments to the TDO may cause possible damages on the businesses of established industries and/or unaware traders, some consider the introduction of the amendments in the TDO as a positive step forward towards enhancing consumer rights and enforcement powers. Following the first conviction on commercial malpractices in the decoration and renovation industry, we can foresee that more cases of a similar nature will go to court in near future.

For enquiries, please contact our Litigation & Dispute Resolution Department:

E: criminal@onc.hk                                                             

W: www.onc.hk                                                                   

T: (852) 2810 1212

F: (852) 2804 6311

19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.