LEE MING YUEH v. BROADWAY-NASSAU INVESTMENTS LTD AND ANOTHER

CACV 265/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 265 OF 2008

(ON APPEAL FROM LDBM 452 of 2007)

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J U D G M E N T

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Hon Cheung JA:

1.  This is the applicant’s appeal against the judgment of H H Judge Michael Wong, Presiding Officer of the Lands Tribunal in which he dismissed her claim against the respondents for damages.

Facts

2.  The Applicant is the owner of Flat A, 19^th Floor, No. 9 Mount Sterling Mall, Mei Foo Sun Chuen, Kowloon, Hong Kong (‘the flat’) which is on the top floor of the building.  The 1^st Respondent is the management company responsible for the management of Stage VII of Mei Foo Sun Chuen (‘the estate’), where the flat is situated.  The 2^nd respondent is the owners’ corporation of Stage VII of the estate.

3.  According to the witness statement of Ho Yin Wah of 1^st respondent, in October 2003 the 1^st respondent replaced the water proofing system on the roof of each of the buildings in Stage VII including that of the applicant.  The work was undertaken by an independent contractor, Kin Ching Construction Products Limited (‘Kin Ching’).  The work on the roof of the applicant’s building was completed on 22 March 2004. 

4.  In late July 2005 the applicant discovered that water leaked from the external wall of the living room of her flat.  She complained to the 1^st respondent. According to Ms Ho, the Management Office received the complaint on 29 July 2005.  At that time the 1^st respondent had engaged New Progress Construction Company Limited (‘New Progress’) to carry out maintenance and repair work on the external wall of the buildings in Stage VII.  It appeared that the repair work to the external wall of the applicant’s building had not yet commenced at the time when the leakage was discovered.  Upon receiving the complaint the 1^st respondent asked New Progress to conduct an inspection.  As the damage to the flat was found near the window and flowerbed of the flat, it was suspected by New Progress that the water seepage might be related to the external wall.  Luen Sing Construction Company (‘Luen Sing’) was then engaged by the 1^st respondent to carry out repair work on the external wall and the flowerbed near the area where water damage was found.  The repair work by Luen Sing commenced on 22 August 2005 and was completed on 30 August 2005.

5.  Shortly after the repair by Luen Sing the applicant found that the water seepage problem persisted.  The problem was deteriorating as water was seen seeping into the master bedroom and the study area of the flat through the external wall.  At the same time the applicant received a complaint from the owner of the flat immediately below hers about water seepage coming to that flat. 

6.  The 1^st respondent asked Kin Ching to conduct water test at the parapet wall of the roof of the applicant’s building.  The test showed that there was water seepage to the flat.

7.  Kin Ching was instructed to repair the water proofing system on the roof above the area of the applicant’s flat where water damage was found.  After completing the repair work at the end of 2005 water test was carried out, but it did not appear that the water seepage problem had been cured.  Kin Ching was asked to carry out further repair work to the water proofing system.  This time the repair work extended to a larger area than the previous occasion. 

8.  After this repair work, the respondents received no further complaint from the applicant until 30 June 2006, where at the general meeting of the 2^nd respondent, the applicant complained that the water seepage in her flat had persisted.

9.  The 1^st respondent immediately asked Kin Ching to carry out further repair work to the water proofing system.  Further water test was carried out. After this round of further repair work it was found that the water seepage problem had improved but not cured.

10.  Another round of repair work to the water proofing system was carried out by Kin Ching and this was completed in early August 2006.  Water test was also carried out after this further repair work.

11.  Ever since this round of repair work there was no more water seepage in the flat and no further complaint was received.

12.  However, according to the applicant the water seepage problem continued until 2007. 

The applicant’s expert

13.  The applicant had instructed a water leakage expert, Mr Stewart Wong (‘Mr. Wong’), to carry out an inspection of the applicant’s flat and the roof on 27 July 2006.  He found that water was leaking from the ceiling of the living room and also from the ceiling near the side of the external wall.  Water flowed down from the ceiling slab along the walls damaging the wall finish and wall paper.  Water also flowed down to the floor damaging the floor.  There was also damage in the master bedroom, small bedroom and study room by water leakage from the ceiling along the walls to the floor.  In the corridor of the flat the ceiling slab was dampened.  Sections of the wall in the corridor were dampened and the timber flooring was slightly water affected.  In the balcony the water leakage caused the plaster to blister and peeling of the paint finish.

14.  The expert was of the view that the cause of the leakage was the roof.  An inspection of the roof showed that the roof had been opened up and water was left on the floor of the roof.  As a result of a water leakage test, water was found seeping through the dilapidated floor slab of the roof to the flat.  Mr. Wong was of the view that the damp proof membrane in the roof slab was not properly reinstated.

15.  Mr Wong assessed the cost of repair to the damaged parts to be $33,900.  By another report dated 12 November 2007 Mr Wong revised the cost of the repair work including other items to be HK$93,276.  Mr Wong also assessed the cost of alternative accommodation and storage of goods during the course of repair.

Breach based on the DMC and BMO

16.  At the hearing below, the applicant (represented by her daughter Ms Tzeng Li Wen) confirmed that the applicant’s claim was based on the respondents’ breach of the Deed of Mutual Covenant of the estate (‘the DMC’) and the Building Management Ordinance, Cap. 344 (‘BMO’). 

The DMC

17.  Clauses 2(1) and 2(9) of the Second Schedule of the DMC state that:

‘ The Manager shall have the following obligations:-

(1)     To be responsible for the management of the Building the Common Parts and the Access Area.”

…

(9)     To keep in a clean and tidy condition free from all refuse or obstructions and maintain in good order and repair the Access Area and Common Parts and all facilities and amenities comprised therein and to provide all artificial lighting ventilation and other services necessary for the reasonable use safety and enjoyment of the same.’

It is not disputed that the roof is a common part of the building.

18.  Clause 4(10) of the Second Schedule of the DMC states that:

‘ The Manager shall be under no liability to any Owner for the breach by the Manager of any of the Terms herein unless such breach is caused by the wilful neglect or default of the Manager.’ (emphasis added)

BMO

19.  Section 18(1)(a) and (c) of the BMO states as follows:-

‘The corporation shall-

(a) maintain the common parts and the property of the corporation in a state of good and serviceable repair and clean condition;

…

(c) do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any) for the control, management and administration of the building.’

Finding by the Presiding Officer

20.

1) The Presiding Officer held that the terms of the DMC and BMO were not intended to impose an absolute duty on the respondent to ensure that no common facilities would ever break down.  The overall duty was one of ‘proper management’, which meant doing all that was reasonably required of a manager in the circumstances.  As long as the respondents have acted reasonably in the circumstances of the case to manage the estate properly they would not be in breach of the DMC or BMO.

2.  Having considered the evidence, the Presiding Officer held that he was unable to conclude the respondents had acted unreasonably or were in wilful neglect or default.  As to the repair by Luen Sing, the Presiding Officer held that it was not a case that the 1^st respondent did not take any action at all.  It had done what it could in the circumstances to resolve the problem for the applicant.  It was reasonable that the 1^st Respondent needed some time to go through the process of engaging a contractor to do the work.  There was no delay on its part.  As to the subsequent repair by Kin Ching, the Presiding Officer held that the respondents did follow up with the applicant’s complaint by asking the contractor to carry out the repair work.  The respondents might have been wrong in identifying the wrong source of leakage in the beginning, but as soon as they found out the real source of leakage on the roof, they also instructed the contractor to carry out repair work.  The wrong judgment of the respondents in the beginning did not mean that they had failed in their duties.  They were still trying to maintain the common parts and to resolve the problem.  They had done what was reasonable already even though they had made an honest mistake. 

3.  In any event the respondents had tried to remedy the leakage on the roof by engaging Kin Ching to do the repair work.  It was not the fault of the respondents when Kin Ching could not do the job properly on the first two occasions and further works were needed.  It was not wilful neglect or default on the part of the respondents.

Appeal on point of law

21.  An appeal from the Lands Tribunal must be based on a point of law.  The Court of Appeal will only interfere with the decision and allow an appeal if the Presiding Officer had committed an error of law.  An error of law would arise if, for example, the Presiding Officer misconstrued the law or made findings of fact which were not supported by evidence. 

22.  In this appeal the applicant (represented again by her daughter Ms Tzeng) attacked the judgment on the basis that the Presiding Officer had misconstrued the terms of the DMC and BMO and also made erroneous findings of fact.  The respondents did not object to Ms Tzeng representing the applicant in this appeal, so long as the applicant was present throughout the hearing. Ms Tzeng had raised many issues but I will focus on matters that are pertinent to this appeal.

Nature of obligation 

23.  In Lo Yuk Chu v Hang Yick Properties Management Ltd [1996] 4 HKC 278, the Court of Appeal considered the following provisions in a Deed of Mutual Covenant

‘ 1. During the said term…the Manager will manage the Building and the Land in a proper manner and in accordance with the provisions of this Deed and the Manager shall be responsible for and shall have full and unrestricted authority to do all such acts and things as may be necessary or requisite for the proper management of the Building and the Land. Without in any way limiting the generality of the foregoing the Manager shall perform the following duties:

…

(10)  To keep all the common sewers, drains, watercourses and pipes free and clear from obstructions.

(12)  To keep all Common Facilities in good condition and working order.’

24.  The Court of Appeal held that

‘ The overall duty imposed on the respondent by the Deed of Mutual Covenant is one of “proper” management. Such management entails doing all that is reasonably required of a manager in the circumstances. Things like keeping drains clear are specific aspects of a building manager’s overall duty. But the mere fact that such a thing is listed without being qualified by expressions such as “take reasonable steps to” does not turn a manager into an insurer against the consequences of a drain becoming obstructed through no failure on its part to act reasonably as a manager should.’ (at 282 D to E)

25.  In Lau Chun Wing Rod v. The Incorporated Owners of Po On Building CACV 20/2007,the Court of Appeal considered the provisions of section 18(1) of the BMO.  It held that :

‘ 12. This sub-section does not provide an insurance to the extent that if some part of the building becomes in disrepair the Incorporated Owners automatically and necessarily become liable.  Nevertheless, liability may arise if there is fault.  It also arises if, having been made aware of a defect which requires remedy, the Incorporated Owners fail to take appropriate steps.  On the judge’s finding the defendant did so fail to take appropriate steps.  Likewise it would seem that the case in negligence and nuisance is, on the facts, clear.

13. In view of the way in which the appeal was presented, it was pointed out that the judge had not held that the defendant was liable simply because there was some defect that became apparent in the premises.  He held the defendant was liable because it failed to act effectively when it should have taken action.  What is required to be done in carrying out the duty will differ according to the circumstances but in this case the judge clearly held that the defendant failed to take proper and necessary steps at a time when it had been alerted that it was necessary to do so and that it continued to fail in that regard for a very lengthy period.’

26.  In that case there was water leakage from the roof of the building into the plaintiff’s flat on the top floor.  The incorporated owners had employed a contractor to lay a water proofing layer on the rooftop and the canopy over the enclosed balcony of the plaintiff’s flat.  The trial judge found that after the plaintiff had complained, inadequate steps were taken to investigate the matter and remedy the leakage.  The defendant relied on the fact that it had a four-year guarantee from the contractor.  It simply called in the contractor. The contractor then attributed the leakage, wrongly, as the trial judge held, to the black tar that the plaintiff had had laid in order to remedy the water leakage problem and also some work which had been done inside the plaintiff’s flat.

Wilful default

27.  In Re Young & Harston’s Contract (1886) 31 Ch D 168 at 174-175, Bowen LJ stated that,

‘ The term “wilful default” … is not a term of art … Default is a purely relative term, just like negligence. It means nothing more, nothing less, than not doing what is reasonable under the circumstances—not doing something which you ought to do, having regard to the relations which you occupy towards the other persons interested in the transaction. The other word which it is sought to define is “wilful”. That is a word of familiar use in every branch of law, and although in some branches of the law it may have a special meaning, it generally, as used in courts of law, implies nothing blameable, but merely that the person of whose action or default the expression is used, is a free agent, and that what has been done arises from the spontaneous action of his will. It amounts to nothing more than this, that he knows what he is doing, and intends to do what he is doing, and is a free agent.’

Non-delegable duty

28.  Mr. Kent Yee, counsel for the respondents, accepted that the duties of the respondents under the DMC and the BMO were non-delegable in the sense that they owed the applicant a personal duty to carry out the obligations imposed on them. The respondents might of course engage independent contractors to carry out such obligations on their behalf but nonetheless the obligations remained theirs primarily.

29.  Mr. Yee accepted that the respondents could not simply delegate the obligations to independent contractors and thereby altogether avoid their liabilities under the DMC and the BMO.  However, he submitted that it does not follow that any default of the independent contractors in carrying out such duties must necessarily mean that the respondents were also in default of their personal duties.

30.  Mr. Yee had referred to a number of authorities, namely Clerk & Lindsell on Torts, 20^th Ed para 6-57, Leung Tsang Hung & Anor v. Incorporated Owners of Kwok Wing House (2007) 10 HKCFAR 480, Matania v. The National Provincial Bank Ltd v. The Elevenist Synicate Ltd [1936] 2 All ER 633 at 648, John Murphy, “Juridical Foundations of Common Law Non-Delegable Duties” in Neyers (et al), Emerging Issues in Tort Law (2007), Lau Chun Wing Rod v The Incorporated Owners of Po On Building, unreported, DCCJ 762/2004 (District Court) Decision, 14.8.2006 at paras. 111-114.

31.  In view of Mr. Yee’s concession I will refrain from discussing these authorities but will merely set them out to recognize the efforts of his research.

My View

32.  I agree with the Presiding Officer that the respondents could not be faulted when they referred the matter to New Progress and Luen Sing when the complaint of water leakage was first raised.  After all the complaint then was about water leaking from the external wall into the living room.  There was no indication then that the source of the problem was from the roof.

33.  There was no evidence that Kin Ching was improperly appointed as the contractor to repair the water proofing system on the roof tops.  As Kin Ching had provided a 10-year guarantee for its work, the respondents could not be criticised for asking Kin Ching to look into the water leakage problem that persisted despite the repair work carried out by Luen Sing on the external wall of the applicant’s flat. While it took two attempts by Kin Ching before it succeeded in resolving the leakage problem in 2005, I agree with the Presiding Officer that the respondents could not be said to be at fault in relying on Kin Ching to remedy the problem leakage.  This is a finding that the Presiding Officer was entitled to reach.

34.  The Court raised the point with the parties at the hearing whether the respondents’ duty was discharged when the applicant experienced further water leakage problems in June 2006 despite the earlier repair in 2005.  The concern of this Court was whether the respondents should continue to engage Kin Ching when there was a further complaint of water leakage problem.

35.  Despite this earlier concern, I am satisfied that the Presiding Officer was correct when he held that the respondents could not be faulted.  The applicant submitted that the respondents had failed to supervise Kin Ching, particularly when they had their own works department which could undertake this supervisory work, and that the failure amounted to breach of duty under the DMC and BMO. However, the point is that there was no fresh complaint about water leakage until June 2006.  There was really no basis for the respondents to doubt the competence of Kin Ching when it was alerted again of the leakage problem and instructed Kin Ching to address the problem.  After all Kin Ching had provided a 10-year guarantee for its work and the practical difficulties of engaging a new contractor when faced with a complaint and an immediate need to repair were real.  Had there been complaints between 2005 and 2006, the respondents might have grounds to suspect the competence of Kin Ching and a stronger case may be advanced that they should not have engaged it again.  As it was, the respondents could not be said to have failed in their duty. 

36.  In any event the difficulty faced by the applicant is that it is not clear whether this issue had been specifically put to the respondents or argued below.  Had this matter been raised, the respondents might well have called evidence to address this issue.

37.  Furthermore, the work carried out by Kin Ching upon receiving the June 2006 complaint could not be said to have fallen short of a level expected of a competent contractor.  In answer to the Presiding Officer’s query, Mr. Wong, in his evidence in chief, raised the allegation for the first time that the water test on 27 July 2006 was badly executed.  Mr. Yee drew to our attention that he had said nothing about the propriety of the water test in his two expert reports dated 29 November 2006 and 12 November 2007.  He also did not raise this in his advisory letter to the applicant dated 1 August 2006.  The applicant’s former solicitors Messrs Eddie Lee & Company also did not raise any issue about the water test in their letters.

38.  Although the Presiding Officer did not expressly address this issue, he must have impliedly rejected it when he found for the respondents.  The gist of Mr. Wong’s view is that when the roof slab was open and the work involved removal of the waterproof membrane, there should be protective measure such as covering the floor surface with canvass.  Further, when a water test was administered, the flooring should be completely covered.

39.  The respondent’s evidence was that water on the floor of the roof was essential to a water test on 27 July 2006 and a tent or any other protective cover would serve no meaningful purpose at all.  Further this allegation was not even put to the expert witness of the respondents.  The Presiding Officer must have rejected Mr. Wong’s complaint.

40.  Despite the applicant’s claim that the water seepage persisted until November 2007, it is apparent that the Presiding Officer had found that there was no water seepage after the repair in the summer of 2006, ‘although there was some residual dampness in the flat found in October 2006.’  This is clearly a finding of fact that the Presiding Officer was entitled to make.  This would further refute the allegation of incompetence against Kin Ching or the failure of duty on the part of the respondents.

41.  While I have sympathy for the applicant for the inconvenience she had suffered from the water leakage, she cannot identify an error in law which allows this Court to intervene.

42.  The only matter that I will disturb is the costs order made by the Presiding Officer. He ordered the applicant to pay the respondents’ costs on the High Court scale.  While the applicant should bear costs because she failed in her claim, the matter before the Presiding Officer was not of such complexity as to justify High Court scale taxation.  The amount of the applicant’s claim cannot be the basis for such an award.  I will order District Court scale taxation.

Conclusion

43.  Accordingly the appeal is allowed to the extent as indicated in the last paragraph.

44.  As the respondents have substantially succeeded in this appeal, I will order the applicant to pay 90% of the respondents’ costs of the appeal.

Hon Yuen JA:

45.  I agree.

Hon Kwan JA:

46.  I have had the benefit of reading in draft the judgment of Cheung JA.  For the reasons given by him, I agree that there is no basis to interfere with the decision of the Presiding Officer, save as to the scale of taxation.  I agree also that the respondents should have 90% of the costs of this appeal.