WONG KIT MING AND OTHERS v. THE INCORPORATED OWNERS OF WAH HOI MANSION

DCCJ 213/2017

[2019] HKDC 1652

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 213 OF 2017

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BETWEEN

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JUDGMENT

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A. INTRODUCTION

1.  This is a water seepage case.

2.  The 1^st, 2^nd and 3^rd plaintiffs (“Ps”) are the joint registered owners of Shop No. J (“the Shop”) situated on the ground floor of Wah Hoi Mansion, 254-289 Electric Road, North Point, Hong Kong (“the Building”).

3.  The defendant (“D”) is the Incorporated Owners (“IO”) of the Building.  It is the body corporate of the owners of the Building incorporated under section 8 of the Building Management Ordinance, Cap 344) (“BMO”). It is in control of and/or manages the Building at all material times within the meaning of the BMO.

4.  The parties’ rights and obligations in relation to the Building can be found in the Deed of Mutual Covenant dated 3 March 1975, registered in the Land Registry by Memorial No. UB1155986 (“the DMC”).

B. BACKGROUND

5.  The 2^nd plaintiff and her late husband had first acquired the Shop in March 1987.  The ownership of the Shop went through several changes and has since 1999 been owned by Ps.  Since around December 1989, the Shop had been leased out to different tenants for commercial use.  From 18 December 2013 onwards, Ps let the Shop to a tenant (“the Tenant”) who operated a restaurant by the name of 「魚米」on the premises.  It was later changed to the name of 「心粥館」.  The monthly rent was at HK$105,000 under that tenancy (“1^st Tenancy Agreement”).

6.  The Shop is located on the ground floor of the Building facing a busy road in a popular residential area.  There are 3 common pipes which run vertically through the Building into the Shop before they reached 2 manholes under the concrete floor surface in the middle of the Shop.  Those pipes are respectively: Pipe A which is a soil pipe (糞渠); Pipe B which is a waste pipe (污水渠); and Pipe C which is a rain/storm water pipe (雨水渠).  Pipe A and Pipe B (collectively “Pipes A & B”) can be found on the left hand side of the wall, running parallel to each other in about the middle of the Shop.

7.  Ps were first informed of the water seepage problem from the common pipes at the ceiling level (“the Water Seepage”) by the Tenant in or around May/June 2015.  Ps immediately followed up with the Tenant’s complaints by reporting the same to the management company appointed by D at the Building.

8.  However, the Water Seepage did not stop.  Instead, the situation continued to deteriorate.  

9.  On 11 August 2015, Ps lodged a complaint with the Buildings Department (“BD”) regarding the Water Seepage.  On 22 August 2015, BD sent its staff to conduct a site inspection at the Shop.  As a result of their investigations, BD found the Water Seepage had come from the drainage pipes above the Shop.  It is not disputed that those pipes were common parts of the Building.  

10.  On 29 August 2016, a Building Authority order (Order no. DR00121/HK/16 dated 8 August 2016) which substituted a previous order dated 7 March 2016 was registered in the Land Registry (“the August 2016 Order”).  By the August 2016 Order, D was ordered to investigate, repair and/or renew as necessary the common waste pipes and soil pipes, ie Pipes A & B in the Shop by 7 October 2016.  

11.  The evidence reveals that D had failed to comply with the August 2016 Order.

12.  Despite the repeated complaints of Ps, including 3 demand letters issued by Ps’ previous solicitors to D respectively on 17 March 2016, 17 November 2016 and 10 December 2016, no action was taken by D to remedy the situation.

13.  On 8 February 2017, Ps and the Tenant entered into a new tenancy agreement (“2^nd Tenancy Agreement”). Due to the Water Seepage, Ps allegedly were only able to increase the rent by a nominal sum of HK$1,000 only, to a monthly rental of HK$106,000.  This is instead of the monthly sum of HK$126,000 which Ps could have received from the Tenant according to the option clause stipulated under the 1^st Tenancy Agreement.

14.  On 18 April 2017, due to the dangers posed by the increasing severity of the Water Seepage, the Tenant gave notice to Ps to terminate the 2^nd Tenancy Agreement.  Vacant possession was delivered by the Tenant on 30 June 2017.  The Shop has since been left vacant up to the date of trial.

C. DISCUSSION

C.1 The Plaintiffs’ case

15.  Ps’ case is rather straight-forward.  They say the Water Seepage was caused by the leakage of the drainage pipes.  Those pipes run through, inter alia, the Shop, the 1^st and 2^nd floors of the Building.  Ps say that D, as the IO of the Building, has a duty to properly maintain those pipes to avoid and/or remedy the Water Seepage. They claim D has failed to do so. 

16.  There is no dispute that the Water Seepage was found in the ceiling area of the Shop in the vicinity of Pipes A & B.  It is Ps’ case that the source of water of the Water Seepage had originated from Pipe B.  Both Pipes A & B run from the upstairs commercial unit which was rented out to the Hong Kong Jockey Club as an off-course betting centre.  It is common ground that both Pipes A & B are common parts of the Building within the meaning of Clause 4(r)(ii) of the DMC.

17.  D does not dispute that it owes Ps a duty of care to maintain the common parts and/or repair and/or carry out such works and/or do all things reasonably necessary to keep the common parts (including Pipes A & B), in a state of good and serviceable repair, whether pursuant to Clause 4(k)(v) of the DMC and/or section 18(1) of the BMO.

18.  Therefore, the main dispute in this case focuses upon whether D has failed to discharge its duties and has thereby breached the DMC and/or its duty of care owed to Ps.

19.  In the amended statement of claim, Ps seek:

(1) a mandatory injunction against D to carry out or take out immediate and effective remedial works to rectify or repair the Water Seepage;

(2) damages for loss of rental income as a result of the Tenant’s early termination and costs of repairing the damage done to the Shop by reason of the Water Seepage.

C.2 The defendant’s case

20.  As said, D does not dispute its liability to maintain and/or service the common parts, and/or that Pipes A and/or B are relevant to the Water Seepage.

21.  Under the amended defence, D denies liability on 2 main grounds:

(1) D has been diligent in performing its duties; and

(2) Ps had caused or permitted certain unauthorised acts to the common parts[1] (“the Alleged Unauthorised Acts”) which have caused or materially contributed to the blockage of the manholes inside the Shop; they have further caused or materially contributed to the backflow of waste water or storm water in the drainage pipes (ie Pipes A & B) which has led to or materially contributed to the Water Seepage.

22.  More specifically, the Ps’ Alleged Unauthorised Acts according to D are:

(1) Unauthorised relocation and alteration to the solid drain pipe, ie Pipe A from its as-built location;

(2) Unauthorised covering up of the waste water drain pipe, ie Pipe B and by stainless steel cover and decoration on Pipe A, thereby denying D’s access to Pipes A & B to carry out inspection and/or maintenance and exacerbating their deterioration through pressure exerted on both pipes by the stainless steel cover, and causing damage to both pipes during installation and/or dismantling of the stainless steel cover; and

(3) Unauthorised covering up and/or sealing of the storm water and foul water manholes inside the Shop, thereby denying D’s access to the manholes to carry out inspection and/or maintenance[2].

23.  Further, D says that it has taken reasonable measures to address the Water Seepage[3].

24.  In D’s counterclaim, D further alleges that Ps have caused or permitted P’s Other Unauthorised Acts[4], which, together with the Alleged Unauthorised Acts, have caused D to incur extra expense at approximately HK$335,000 to maintain, repair and/or rectify the common parts in the Shop.

25.  D further alleges that Ps have failed to mitigate its losses which in reality ignores the fact that the Water Seepage has been so serious that it could not possibly have been profit generating and was not reasonably safe for lawful visitors of the Shop, including but not limited to the Tenant and/or its employees and customers there.

C.3 Evaluation of the Evidence

26.  In deciding the issues raised by the parties in this case, I have taken into account of the following evidence which have been presented by the parties at the trial.

C.3.1 The undisputed evidence

27.  It is not disputed that the owners of all units of the Building, whether they are owners of the residential or commercial units, all have to pay management fees to D to meet the costs of running the Building.  They include the costs of repairing, renewing, maintaining and cleansing all water pipes, sewers, drains and the like[5]. Such costs were to be borne by the owners “in proportion” to their own respective assigned undivided shares in the Building according to the DMC.

28.  According to the DMC, the “proportion” of the management fees to be borne by the owners of the G/F and 1/F commercial units are substantially less than the 188 residential units situated on 2/ F to 23/F of the Building.  For example, for the period between March 2015 and June 2016, the management fees for the residential units was at HK$900 per month while the G/F commercial units paid a sum of HK$609 per month only. 

29.  At the annual general meeting of the owners held on 3 July 2016 (“the 2016 AGM”), D passed a resolution to increase the management fees for all units of the Building.  However, due to the “proportion” prescribed by the DMC, the commercial units still pay substantially less management fees than the residential units.

30.  It is also not in dispute that, pursuant to a resolution of the IO, D had, in or around 1996/97, arranged for Pipes A & B running from 2^nd to 23^rd Floors to be changed from cast iron to uPVC pipes as part of a scheme to overhaul and upgrade the common parts of the Building (“the Major Renovation”).

31.  The following matters have been recorded in the minutes of the 2016 AGM:

(a) In or around 2000, D passed a resolution to refrain from unclogging or maintaining any of the manholes or pipes in the G/F shops of the Building (“2000 Resolution”).  (「法團自2000年起不會再為地舖通沙井或通渠」) ;

(b) Appendix 1 of the 2016 AGM Minutes – 「附件1: 華凱大廈業主立案法團財務收支表」shows that D had not spent any of D’s budget or management fees on the maintenance and/or repair of drains, pipes and/or manholes for G/F shops, including the Shop.  This was admitted by the present chairlady of IO, namely, DW1[6], who says that since 2000, as per the former chairlady Madam Yuen, for all G/F shops and restaurants, if the manholes were covered, D would not unclog the manholes and pipes for them.

32.  It is also not in dispute that, at an extra-ordinary general meeting of D on 23 April 2017 (“the 2017 EGM”), the owners passed a resolution that D would not “unconditionally and continuously use the owners’ management fees/funds to maintain/repair the vertical pipes/manholes and related drainage systems sealed by owners/occupiers of G/F shops” (“the 2017 Resolution”).

33.  Resulting from the above resolutions passed by the owners and the subsequent actions taken by D, the vertical parts of Pipes A & B running between 1/F into G/F of the Shop and the horizontal parts of the pipes running across the Shop below the concrete floor slabs to the manholes (which are situated in the middle of the Shop) had never been benefited from the Major Renovation.  In other words, no repair or maintenance work had ever been carried out by D at Ps’ Premises since at least from 2000 onwards.  Thus, up to date of their removal in November 2018, Pipes A & B still consisted of the old cast iron pipes which were installed when the Building was first built over 40 years ago.  This is despite the fact that Ps, like owners of all the other commercial units, have been paying their share of the management fees according to the “proportion” stipulated in the DMC over the years.

34.  Lastly, it is not in dispute that the Water Seepage took place at the portion of Pipe B (ie the waste pipe) near the ceiling of the Shop.  As mentioned above, D does not dispute that Pipe B is a common part of the Building and that it is under a duty to maintain it under the DMC.

C.3.2 The factual witnesses’ evidence

C.3.2.1 PW1: Wong Moon Chau

35.  Ps have called Mr Wong Moon Chau (“P3”), who is one of the owners of the Shop, to give evidence on their behalf.  I find him to be an honest and straightforward witness.  Not only his evidence is consistent with the undisputed facts, but also they are in accordance with the inherent probabilities and the contemporaneous documents found in the case.  I accept his evidence.

C.3.2.2 DW1:  Madam Wong Yuk Lin

36.  D has called Madam Wong Yuk Lin (“Madam Wong”), the chairlady of the IO, to give evidence.  While I think Madam Wong meant well and was trying to be helpful, I do not find her evidence particularly convincing.  What stands out most about her evidence is that, despite having been D’s chairlady since 2007, it is clear that she does not fully understand the duties and responsibilities of D.  In particular, I do not think she fully appreciates the liabilities imposed on D under the DMC and the BMO.

37.  I also do not think she has been completely fair and impartial in the way she and the IO treated the owners of the commercial units in the Building.   As an owner of one of the residential units of the Building, she must have felt it was unfair for her and other residential unit owners to bear a much larger proportion of the monthly management fees when compared with the owners of the commercial units who, while receiving substantial rental income from their tenants, are paying much less contributions towards the maintenance of the Building.                   

38.  The fact that she had voted in favour of the 2017 Resolution shows that she could not have been neutral when it comes to the issue of whether D should spend any money on the repairs and maintenance of any public pipes at the Shop.

39.  In particular, there are several areas in Madam Wong’s evidence which I find she has either exaggerated her evidence or provided answers which are unsubstantiated by any documents:

(a) When asked by the court whether D had taken any legal advice prior to passing the 2017 Resolution, her answer was no as she says she was merely following what her predecessor had done; she says Madam Yuen her predecessor had always done things in such a way and for many years;

(b) When further pressed by the court whether she had checked the contents of the DMC on the rights and duties of D, she said she had not because she did not know how to read it;

(c) While in her witness statement she boldly claims that “The (D’s) Expert has advised in his report that the water leakage nuisance should be stopped immediately to safeguard the health and hygiene of the persons living at (the Building) because the foul water has caused a bad smell, spread of gems (sic) and is a serious risk to health” [emphasis added], under cross- examination, she was not able to find such a passage anywhere in D’s expert reports at all;

(d) She then tried to blame this on a misunderstanding between her and her solicitor which she says might have been caused by her accent;

(e) She later retracted this and admitted that it was her own opinion rather than something which can be found in D’s expert reports;

(f) In an important part of her witness statement which has been highlighted in bold, Madam Wong asserted that “The conclusion from the Expert is that ….  pipes and drainage of the Shop have not been properly maintained, causing defects in the Shop’s drainage and waterproofing system, which eventually has caused water to leak from the Shop onto common or public area of (the Building)”; yet under cross-examination, she admitted that D’s expert 1^st Report has not referred to any waterproofing system at all and the above passage cannot be found anywhere in D’s expert report.

40.  In my judgment, the above matters render her evidence either not credible or reliable.

41.  I further find Madam Wong as a very guarded and self-protecting witness.  During the course of her evidence, she has repeatedly emphasized how much she has done for the owners as D’s chairlady over the years.  It is clear that she is more concern of protecting her own reputation and justifying her actions vis-à-vis Ps than explaining the basis of D’s policy and actions towards the commercial units’ owners.  For example, instead of answering the questions put to her by Ps’ counsel, Madam Wong embarked on a lengthy answer of how she had worked diligently for D as its chairlady for over 10 years.  She thought all those who had repeatedly elected her as the chairlady of the IO must have shared the same view also.        

42.  Further, certain important parts of her evidence is unsupported by any contemporaneous documents.  For example, in her supplemental witness statement  Madam Wong mentioned the fact that D had “negotiated with (Ps), inter alia, in July, November and December 2016 urging (Ps) to uncover the manholes inside the Shop forthwith, so that remedial works could be proceeded”[7]. This is not only unsupported by any documents, but inconsistent with the reply to the letter before action sent by Ps’ solicitors.  Moreover, such important feature of the case was never mentioned in the reply[8]. In the minute of the AGM of the owners meeting on 3 July 2016 (which was attached to the reply letter), it has been highlighted that “due to some owners’ unilateral acts of covering the manholes or altering the drain pipes, (D) had decided since 2000 of not to unblock any manholes or drainage pipes for any shops on the street level.[9]” There was no resolution passed to authorize the officers from D to enter into negotiations with Ps to uncover the manholes so as to allow remedial work to be carried out as alleged by Madam Wong.

43.  Based on the above, I have no hesitation to reject the evidence given by Madam Wong.   

C.4 The experts’ evidence

C.4.1 Ps’ Expert Report

44.  Ms Lau Shan La (“Ms Lau / Ps’ Expert”) was appointed by Ps to look into the cause of the Water Seepage in September 2016. 

45.  Ms Lau and her assistant had attended the Shop on 3 separate occasions, namely, 29 July 2016, 6 September 2016 and 20 September 2016, to conduct inspections and carry out investigations.

46.  Following the inspections, Ms Lau prepared an expert report dated 9 November 2016 (“Ps’ Expert Report”). This report was sanctioned by the court.

47.  In Ps’ Expert Report, Ms Lau formed the opinion that the Water Seepage in the ceiling of the Shop was caused by the damaged public pipes in the Building, in particular at the space between the ceiling of the Shop and the base of the public pipe duct basin (「公共喉槽」) in the first floor unit (1/F) situated immediately above the Shop.

48.  Based on her opinion, Ps claim that D had failed to discharge its duty to properly maintain the public pipes, being common parts within the meaning of the both the DMC and BMO.

C.4.2 D’s Expert Report

49.  D’s expert, Mr. Simon WS Cheung (“Mr Cheung / D’s Expert”) of ‘Surveying and Construction Consulting Company’, has prepared an expert report dated 3 November 2017 on behalf of D (“D’s 1^st Report”).  This report was obtained with leave of the court.

50.  It was transpired during the trial that Mr Cheung had also been engaged by D in 2018 to prepare another expert report. This report was dated 17 May 2018.  In this report, he was specifically asked by the legal advisers of D to investigate into the alleged unauthorised building works which existed in the Shop (“D’s 2^nd Report”). I note that no leave had been granted by the court for this report.  In other words, D has unilaterally obtained D’s 2^nd Report without first seeking the authorization of the court or consent of Ps.  I shall return to this matter in the latter part of this judgment when I discuss the role and duties of an expert.

C.4.3 Joint Expert Report / Statement

51.  On 14 June 2018, the court gave leave for Ps’ and D’s experts to prepare a ‘Joint Statement’ of opinions or what is commonly known as a joint expert report.  On 24 July 2018, the parties’ experts conducted a joint inspection and without prejudice meeting at the Shop.

52.  As a result, the parties’ experts prepared a Joint Statement / Expert Report dated 23 August 2018 (“the Joint Report”).  Pursuant to an order of the court, the Joint Report has been directed to stand as evidence- in-chief of the parties’ respective experts’ evidence at the trial.

53.  Ps’ Expert Report, D’s 1^st Report and D’s 2^nd Report were all appended to the Joint Report.

54.  It is evident from the Joint Report that both the parties’ experts are unable to agree on whether the Water Seepage was as a result of the lack of repairs and maintenance of Pipe A and/or Pipe B (as per Ps’ case) as against the Alleged Unauthorised Acts and/or Other Unauthorised Acts committed by Ps (as per D’s case).

D. Issues to be decided

55.  Given the undisputed matters mentioned above, the issues which need to be decided by the court by the time of the trial have become much more narrow than those initially defined by the parties at the case management stage.

56.  In my view, they can be boiled down to the following questions:

(a) What is the cause of the Water Seepage and who should be held responsible for it?

(b) What are the loss and damage suffered by the wronged party?

(c) What are the proper reliefs to be granted to the successful party?

D.1 The Role & Duties of an Expert

57.  Before discussing the above issues and making my findings on them, I would like to comment on the proper role an expert should play in a case like this and why I had excluded D’s 2^nd Expert Report during the trial.

58.  Appendix E of Rules of the District Court, Cap 336H on the “Code of conduct for expert witness (Order 38 Rules 35, 37B and 37C)” (“the Code of Conduct”) provides as follows:

“General duty to Court

……….

2. An expert witness has an overriding duty to help the Court impartially and independently on matters relevant to the expert’s area of expertise.

3. An expert witness’s paramount duty is to the Court and not to the person from whom the expert has received instructions or by whom he is paid.

4. An expert witness is not an advocate for a party.”

……….

59.  In Daimler AG (formerly known as Mercedes-Benz AG) v Leiduck, Herbert Heinz Horst & Anor, unreported, 12 March 2013, HCA 4089/1994, at §38, the role of an expert has been explained succinctly by the court by citing Cresswell J in National Justice Compania Naviera SA v Prudential Assurance Co Ltd [1993] 2 Lloyds’ Rep 68 at 81-82:

“The duties and responsibilities of expert witness in civil cases include the following:

1. Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of the litigation…

2. An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise…An expert witness in the High Court should never assume the role of an advocate.

3. An expert witness should state the facts or assumptions upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion…

4. An expert witness should make it clear when a particular question or issues fall outside his expertise…

5. If an expert’s opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one…In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report…

6. If after exchange of reports, an expert witness changes his view on a material matter having read the other side’s expert’s report or for any other reason, such change of view should be communicated (through legal representatives) to the other side without delay and when appropriate to the Court. [emphasis added]

…”

60.  In Maysun Engineering Company Limited v International Education and Academic Exchanges Foundation Company Limited, unreported, DCCJ 27/2006; 22 September 2010 at §36, HH Judge Mimmie Chan (as she then was) has stated the following:

“(1) admissibility and weight are two different questions to be considered at different stages;

(2) in the context of expert evidence, it is a relevant consideration in determining permission to admit such evidence (as well as weight) whether he is fully aware of his duty as an expert;

(3) the fact that a witness is an employee of a litigant would not automatically bar him from giving expert evidence for that litigant;

(4) however, once the issue of admissibility is brought up, whether in respect of an employee or otherwise, the court could examine the extent to which such a witness is aware of his duty as an expert witness;

(5) an important aspect of the duty of an expert witness is to inform the court or tribunal all relevant matters whether such matters are favorable to his conclusion or otherwise.”

61.  In Tang Ping-Choi v The Secretary for Transport [2004] 2 HKLRD 284 at §14, Rogers VP stated the following:

“…Looking at it from the other way, they could not give advice to anybody who was considering engaging their services in litigation. Even more seriously, once engaged as an expert for litigation they could not give the engaging party any advice.”

62.  The principles relevant to the issue of conflict of interest of an expert have also been helpfully summarised in the case of Armchair Passenger Transport Ltd v Helical Barr plc [2003] EWHC 367 (QB) at §29, cited with approval by the Hon Bharwaney J in Novo Steel (HK) Limited v Peako Engineering Co Limited, HCCL 14/2012, unrep. 7 Nov 2014, at §37:

“The following principles emerge from [the] authorities:

(i) It is always desirable that an expert should have no actual or apparent interest in the outcome of the proceedings.

(ii) The existence of such an interest, whether as an employee of one of the parties or otherwise, does not automatically render the evidence of the proposed expert inadmissible.  It is the nature and extent of the interest or connection that matters, not the mere fact of the interest or connection.

(iii) Where the expert has an interest of one kind or another in the outcome of the case[10], the question of whether he should be permitted to give evidence should be determined as soon as possible in the course of case management[11].

(iv) The decision as to whether an expert should be permitted to give evidence in such circumstances is a matter of fact and degree.  The test of apparent bias is not relevant to the question of whether or not an expert witness should be permitted to give evidence[12].

(v) The questions which have to be determined are whether (i) the person has relevant expertise; and (ii) he or she is aware of their primary duty to the court if they give expert evidence and willing and able despite the interest or connection with the litigation or party thereto, to carry out that duty.

(vi) The judge will have to weigh the alternative choices openly if the expert’s evidence is excluded, having regard to the overriding objectives of the CPR[13].”

63.  It is clear that the mere existence of conflict of interest will not necessarily render the evidence of an expert inadmissible: see Nova Steel, supra.    Nevertheless, as an expert owes an overriding duty to the court, the existence and nature of role conflict in this case is something which the court is entitled to take into consideration in determining the admissibility of D’s expert evidence, or place whatever weight on it as the court deems fit. 

D.2 Whether D’s expert opinion should become inadmissible or merely carry less weight?

64.  Regrettably, the following events which occurred during the preparation of his expert evidence/reports have led me come to the conclusion that Mr Cheung is not an impartial or independent expert witness and his evidence should not be accepted by the court.

65.  First, in preparing D’s 1^st Report, I find Mr Cheung has assumed the role of an advocate on behalf of D.  In writing the D’s 1^st Report, Mr Cheung had been provided with minutes of the 2017 EGM of the IO.  The 2017 Resolution which was contained in the minutes of the 2017 EGM have become the central theme of D’s defence and counterclaim which was filed on 23 April 2018 in the present proceedings[14].  In my view, the mere fact that such minutes and resolution were given to the expert as background information for him to prepare his expert report is not objectionable. However, when they are being used as a basis to formulate the expert opinion when it is not directly relevant to the cause of the Water Seepage and not supported by any objective evidence are clearly not acceptable.

66.  This central theme of D’s defence can be found repeatedly in the D’s 1^st Report and Mr Cheung’s comments on the Joint Report.  Mr Cheung had essentially built his expert opinion on this central theme provided by D to him.  Under intense cross-examination by Ps’ counsel, Mr Cheung eventually admitted that many of the conclusions reached by him in §4.1 of D’s 1^st Report are not related to the cause of the Water Seepage.  Much of what has been stated by him in §§4.1.2 to 4.1.6 of that report had not been verified by him before it was put down in the report and were his own “speculations” only[15].

67.  What is rather astonishing in my opinion is that while Mr Cheung was fully aware that the wooden panel at the “Public Pipes Basin Area (「公共喉槽」)” (ie where it connected to Pipes A & B to the Shop below) situated at the floor level at the shop above was “seriously moldy and rotten”, yet he has not even mentioned once in D’s 1^st Report the possibility that the damage of Pipe B could be a cause of the Water Seepage.  To the contrary, he argued against such possibility in the Joint Report[16]. Again, under cross-examination, Mr Cheung’s opinion on this collapsed.  He reluctantly accepted that the Water Seepage could have been caused by the damage of Pipe B at the Public Pipes Basin Area. 

68.  In addition, what is more shocking to find in this case is that Mr Cheung, without any direction from the court or instructions from D, decided to write a “supplemental report” to compensate what he considered as the “inadequacy” found in D’s 1^st Report. This was D’s 2^nd Report referred to in §50 above.  This report raised a completely new line of defence based on the alleged “unauthorized works” or “unauthorized building works” which had never been suggested even once by Mr Cheung in D’s 1^st Report. 

69.  The circumstances which gave rise to D’s 2^nd Report are equally astounding.  Madam Wong in her evidence testified that she had not suggested Mr Cheung to write this “supplemental” report.  Rather it was through D’s solicitor who had informed her that “Mr Cheung suggested that another report was needed” as D’s 1^st Report “was not detailed enough”.  In particular, it was mentioned to her that the canopy had not been checked.  Madam Wong being a layman herself perhaps unsurprisingly had acceded to Mr Cheung’s request.  I have no reason to doubt Madam Wong’s evidence on this matter.  However, her evidence on this is very different from that of Mr Cheung’s.

70.  According to Mr Cheung, he was instructed by D’s handling solicitor to provide the 2^nd Report through an email dated 7 February 2018.  This short email which had never been disclosed but was produced as Exhibit D-1 on the fourth day of the trial confirmed that this whole idea of preparing a second report came from D’s solicitor and counsel without appearing to have consulted their lay clients first.  In it, Mr Cheung was asked to prepare this report according to a certain direction discussed amongst them[17]. At the end of the day, it matters very little whether the idea came from Mr Cheung or D’s lawyers. What is clear from the evidence is that no leave from the court had been obtained to adduce such a report.    

71.  The circumstances of how D’s 2^nd Report has found its way to be included as part of the documents in the trial bundles are more disturbing.  It is not as if D or its legal advisers were not alive to the fact that leave of the court will have to be obtained before D’s 2^nd Report can be introduced and relied on at the trial.  To that end, D’s solicitors had, on 10 August 2018, issued a summons seeking leave to file and serve D’s 2^nd Report[18].  However, the application to adduce D’s 2^nd Report was withdrawn by D and leave was given by a master on 21 August 2018 to give effect to that application[19].

72.  What is even more astonishing is that, instead of seeking leave to adduce D’s 2^nd Report, Mr Cheung saw fit to simply insert this an appendix to his part of the “Statement” in the Joint Report.  In other words, while D and his lawyers on one hand withdrew their application before the master to adduce this report in court, on the other hand they introduced this through the “backdoor” by simply added it as part of the Joint Report.  This matter was pointed out to the court by Ms Fong, counsel for the plaintiffs, during her opening.

73.  After hearing submissions from both sides, I made a ruling towards the end of the first day of trial that D’s 2^nd Report, which was prepared and introduced without leave of the court or consent of Ps, be expunged from the trial bundles and any reference to it in the Joint Report be deleted.  I further gave the direction that Mr Cheung be cross-examined on a de bene esse basis and the court will decide on the suitability of Mr Cheung as an expert and the admissibility of his expert evidence at the end of the trial.

74.  Sadly, this was not the end of the fiasco in relation to Mr Cheung’s evidence.  It transpired during the trial that he has failed to disclose to the court the dual roles he plays in this case. 

75.  Apparently, besides acting as D’s expert, it was discovered during the trial that he has also acted as its consultant and project manager.  The documents discovered during the trial reveal that, his company, ‘Surveying & Construction Consulting Company’, of which he was the principal and/or main director/shareholder, has been engaged by D to “co-ordinate and manage” the replacement of Pipes A & B at the Shop, which were the very pipes in question, the leakage of which he was supposed to give his expert opinion on.  Madam Wong confirmed the engagement of Mr Cheung’s service in her evidence.  A sum of HK$8,000 was paid by D to Mr Cheung’s company for his service in such capacity.  In the 2 invoices issued by Mr Cheung’s company to D, the fees have been clearly stated as “consultancy service fees” (「顧問服務費用」) and for the “management service” (「管理服務」) in relation to the replacement of the waste pipes at the Shop.

76.  Under cross-examination, Mr Cheung tried very hard to distance himself from his consultant/case manager role by claiming that the fees were merely for providing “liaison service” (「聯絡服務」) rather than “management service” to D.  I have no hesitation to reject such ridiculous claim as all the contemporaneous documents show exactly the opposite.    

77.  Instead of informing the court of the dual roles he played in this case, Mr Cheung apparently did not think there was any problem with it.  In particular, he did not consider there was any issue of conflict of interest.  He has expressly stated so in his evidence. 

78.  I find it rather alarming for an expert who supposed to have read and understood the Code of Conduct to say this under oath.  I find Mr Cheung was either fully aware of his potential conflict of interest or simply had ignored this matter when he provided his consultancy/project management service to D.  Either way, I find he was in breach of the Code of Conduct by wearing two hats at the same time. 

79.  In summary, based on the matters discussed above, I find Mr Cheung:

(a) was not an impartial or independent expert;

(b) was acting as an advocate on behalf of D;

(c) had prepared D’s 2^nd Report without leave of the court or consent from Ps;

(d) introduced D’s 2^nd Report by attaching the same to the Joint Report without authorization;

(e) referred to matters which were based on his own assumptions or speculations rather than on the evidence; and

(f) did not disclose to the court his dual roles as an expert and consultant/project manager for D.          

80.  While one or more of the above matters may only affect the weight of the evidence given by an expert, in my judgment, the combination of all the above factors could only lead to the inevitable conclusion that the opinions Mr Cheung gave was so bias and lack of objectivity that I do not think it will be safe for the court to rely on any of them.   I therefore find the expert opinion of Mr Cheung inadmissible in this case.

81.  This will leave Ps’ expert opinion as the only expert evidence/opinion for the court to consider and base its findings on in this case. 

D.3 Findings on Facts  

82.  The following are my findings on the disputed issues in this case.

D.3.1 Cause of the Water Seepage and the Responsible Party

83.  Based on the above discussed evidence and Ms Lau’s expert opinion, I find the Water Seepage, which occurred at the ceiling in the Shop near to Pipes A & B, was a direct result of the serious wear and tear of Pipe B.  I further find that this common pipe which had been in use for over 40 years since the Building was first completed in 1975, had never been properly repaired or maintained by D. 

84.  The above is supported by the undisputed fact that during the Major Renovation of the Building in 1996/97, only the cast iron pipes inside the residential units had been replaced by uPVC pipes, leaving those inside the commercial units, including those on the first and ground floors, unchanged.  It is further supported by the 2000 Resolution and 2017 Resolution where there was a conscious decision on the part of the IO of not to carry out any maintenance or repair to the common pipes found inside any of the commercial units.

85.  It is further supported by the fact that in November 2018, when Pipes A & B were being removed as a result of a Building Order issued in August 2016 against D for the repair of Pipes A & B, the photographs taken showed the pipes removed were extremely rusty and in a very poor condition.

86.  I further find D had ignored the repeated complaints of Ps over the years and had refused to carry out any repairs to the common pipes found inside the Shop due to a mistaken belief that the Water Seepage was caused by the unauthorized alternation on the common pipes embedded underneath the concrete floor and cover of the manholes.      

87.  Based on the above, I find D as IO of the Building has failed in its duty to properly maintain and/or repair the common pipes and/or remedy the Water Seepage in the Shop.  I find it was in breach of section 18 of the BMO and Clauses 3(d) and 4 (k)(b) of the DMC.

D.3.2 Was the Manager liable instead of D?

88.  A short technical matter which needs to be dealt with briefly here.  During the trial, while D does not dispute its statutory duties under the BMO, in its Opening, it suggested that, pursuant to the DMC, the manager, rather than D, should be responsible for carrying out the maintenance of the Building.  I note that this matter has not been pleaded in D’s defence and counterclaim and was raised in D’s Opening for the first time in this case. 

89.  Like most multi-storey buildings in Hong Kong, D as the IO of the Building, has hired a manager (in this case Wing Kai Property Management Company), to assist D in the day to day management of the Building.  The manager was solely appointed and employed by D and reports to D alone.  It was merely as D’s agent when carrying out the duties and obligations of the IO under the DMC and BMO. 

90.  D as IO of the Building and the employer and principal of the manager, are still bound by the provisions of the DMC and the BMO.  It cannot hide behind its manager to try to evade liability.

91.  Thus, I find there is no substance in this argument.    

92.  I note that D’s counsel had very belatedly withdrew this submission at the oral stage of the closing submission on the last day of the trial.

D.3.3 Ps’ Alleged Unauthorised Acts

93.  In my judgment, there is no credible evidence to support Ds’ allegations that the Water Seepage was caused by the unauthorised alteration of Pipe A, unauthorised covering of Pipes A & B by a stainless steel cover and unauthorised covering or sealing of the manholes.  It is clear from the evidence that they had nothing to do with the true cause of the Water Seepage.

94.  It was admitted by Mr Cheung under cross-examination that the alleged unauthorised cover up of Pipe A and the manholes had nothing to do with the Water Seepage.  Further, both Ms Lau and Mr Cheung have confirmed in their evidence that the stainless steel plate covering of Pipe B was merely screwed on and could have been removed easily. It was not the cause of the Water Seepage.

95.  More importantly, D has not provided any evidence to show that Ps had “not only covered but sealed” the pipes and manholes prior to the occurrence of the Water Seepage so as to prevent D from accessing the relevant pipes and manholes for maintenance and repair.  To the contrary, the evidence so overwhelmingly indicates that D had neglected its duties as an IO over the years to carry out any repair or maintenance to those common pipes inside the Shop.

96.  In the aforesaid premises, I find D’s defence which is based on the Alleged Unauthorised Acts is without any foundation and is hereby dismissed.

D.3.4 D’s counterclaim based on the Alleged Unauthorised Acts

97.  The D’s counterclaim which pleads that the Alleged Unauthorised Acts have caused D to incur extra expense at HK$335,000 to maintain, repair and/or rectify the common parts in the Shop must be dismissed also.

98.  In my judgment, not only because the Alleged Unauthorised Acts are unsubstantiated by evidence and have been rejected by the court, there is simply no evidence in relation to the alleged sum of HK$335,000 to support D’s counterclaim.

99.  D’s counterclaim is therefore dismissed.

E. Damages

E.1 What are the loss and damage suffered by the Ps?

100.  Following my findings that D should be held liable for the Water Seepage found at Ps’ Premises, I now turn to consider the loss and damage allegedly suffered by Ps and the issue of damages in this case.

101.  In the amended statement of claim, Ps seek damages in the sum of HK$1,135,741.94, being actual loss of rental income from 19 December 2016 to 28 February 2018 and a sum of HK$30,289.84 being the estimated cost for repairing the damage caused to the Shop.  Ps further claim the loss of rental income at HK$126,000 per month from 1 March 2018 to the actual date of the due rectification of the Water Seepage by D, which was continuing at the time of filing the amended statement of claim.

102.  As mentioned above, the 1^st Tenancy Agreement provided an option for the Tenant to renew the tenancy for 2 years from 19 December 2016 at HK$126,000 per month.  Due to the Water Seepage, Ps and the Tenant entered into the 2^nd Tenancy Agreement at a reduced rent of HK$106,000 per month only.  I find the reduced rent was as a direct result of the continuous water seepage as acknowledged by the parties in the 2^nd Tenancy Agreement.  Clause 6 of the 2^nd Tenancy Agreement provides that “The Landlord and the Tenant acknowledged that owing to the continuous existing water seepage problem from the ceiling, the Landlord has to reduce the originally agreed tenancy fees from HK$126,000 to HK$106,000.” I find D liable for the reduced rent.                   

103.  Unfortunately, even with the reduced rent, the Tenant found it was impossible to carry on the restaurant business in the Shop due to the continuous seepage of waste water from the ceiling. As the seepage occurred in the middle of the dining area, which would cause serious hygiene issues, it is perhaps not surprising that the Tenant would choose to terminate the 2^nd Tenancy Agreement instead of carrying on the business.  It was on 18 April 2017 that the Tenant had informed Ps that the Shop became “too dangerous” for them to carry on the restaurant business and therefore they gave notice to Ps to quit.  Originally the Tenant wished to move out the Shop on 18 May 2017.  It was only after negotiations between the parties that the Tenant agreed to deliver vacant possession and moved out of the Shop on 30 June 2017. 

104.  Based on the above evidence, I find the reduced rent under the 2^nd Tenancy Agreement was directly resulted from the Water Seepage found in the Shop.  Further, I find that the total loss of rental income after the Tenant had vacated the Shop was attributable to the breach on the part of D.    

E.2 Ps’ duty to mitigate their loss

105.  It is not in dispute that Ps are under a duty to mitigate their loss.  The question in this case is whether Ps have done so.

106.  As I have found above, the cause of the Water Seepage was due to years of neglect and lack of repairs and maintenance to the common pipes located inside the shop.  It has nothing to do with the Alleged Unauthorised Acts done to the pipes or covering of Pipe A by the stainless steel plate as claimed by D. 

107.  Despite the Order issued by the BD in August 2016, D had done nothing to repair or clear the blocked pipes or the manholes where the waste water had been seeping from.  In order to mitigate their loss, the Tenant together with other owners/tenants of nearby shop premises, gathered together to permanently cover the manholes and connect the pipes running on the ground level to a government manhole outside the Building.  This obviously had nothing to do with the cause of the Water Seepage as there is no evidence to suggest that the water on the ground level was able to “backflow” to the ceiling level.  Further, given the fact that the waste water had been diverted to the government’s public manhole outside the Building by the new pipes, there was simply no water to be able to “backflow” from the two manholes.

108.  In any event, once Ps were informed about this matter by the staff from the BD in March 2017, they immediately asked their Tenant to re-open the manholes.  Further, the Tenant, as was required under the 2^nd Tenancy Agreement, had to reinstate the premises to its original state.  Thus, before they delivered vacant possession of the Shop to Ps on 30 June 2017, the two manholes inside the Shop had been re-opened and the D was duly informed by letter through Ps’ solicitors on 21 June 2017 in regard to this matter. 

109.  It was not until March 2018, some 9 months later that D, through its solicitors, acknowledged that they were aware that the manholes had been re-opened and requested Ps to allow their appointed contractor to enter the Shop to carry out the repair works.  However, instead of arranging contractors/workers to carry out the repair works, Ds arranged its expert Mr Cheung to visit the Shop on 23 April 2018 with a view to prepare D’s 2^nd Report.  It was not until end of September 2018 that Ps received a letter from the D’s solicitors that it’s appointed consultant, ie Mr Cheung, would arrange a meeting between the various affected parties (including the contractor appointed by D), to discuss about the replacement of Pipes A & B inside the Shop.

110.  Between 12 and 19 November 2018, while D’s contractor was replacing Pipes A & B at the Shop, it was discovered that 2 ground beams (namely G17A and G12) were damaged by the workers.  Ps’ solicitors immediately made a report to BD on 19 November 2018. 

111.  Instead of acknowledging that its workers had damaged the ground beams, D through its solicitors wrote to Ps’ solicitors, alleging that Ps had carried out unauthorized alterations to the ground beams and asked Ps to rectify them.  D’s works at the Shop had to be suspended in the meantime as a result.

112.  After their investigations, BD issued a warning letter to D on 25 January 2019 in relation to the damage done to the ground beams.  In particular, BD pointed out that (i) the common underground drainage works have been carried out without following the ‘Minor Works Control System’; and (ii) non-provision of an efficient trap at the inlet to drain for common waste pipe.

113.  On 28 January 2019, another Building Order (C/TB/00308/19/HK) was issued to D.

114.  Instead of complying with the Order, D filed an appeal to the Appeal Tribunal (Buildings) in February and March 2019.  On 15 & 23 April 2019, D applied for time extension from the Appeal Tribunal. The submission of the appeal documents has been extended to 24 July 2019.

115.  In my view, while it is perfectly within the rights of D to file the appeal and sought an extension from the Appeal Tribunal to file the appeal documents, it does mean that all works within the Shop has to be put on hold and Ps cannot rent out the Shop in the meantime.  This would effectively prevent Ps from mitigating its loss by renting out the Shop to a new tenant.

116.  Given the above events, I am of the view that Ps have done everything within their power to mitigate their loss.  In my judgment, the latest events regarding the replacement of the new common pipes within the Shop was caused by the delays and inactions on the part of D for which D should be held responsible also. 

E.3 Calculations on damages

117.  Based on the aforesaid, I have worked out the appropriate damages in this case as follows:

Period	Actual Loss of rental income	Amount
19 December 2016 to 30 June 2017	HK$126,000-HK$106,000= HK$20,000 per month x 6 months (from January to June 2017)=HK$120,000 Plus 12 days in December 2016 (from 19 to 31 December 2016) at HK$645 per day (HK$20000/31 days)	HK$120,000+HK$7,741.91 =HK$127,741.94
1 July 2017 to 28 February 2018 (the ASoC was filed on 27 March 2017)	HK$126,000 x 8 months= HK$1,008,000	HK$1,008,000.00
	Sub-total	HK$1,135,741.94
Estimated cost for repairing the damage	HK$30,289.84 per Ps’ Expert Report (this will not be included in the present calculation as D has finally agreed to replace the offending pipes in 2018)	nil
1 March 2018 to 30 November 2019 (and continuing)	HK$126,000 x 21 months = HK$2,016,000	HK$2,646,000.00
	Total	HK$3,781,741.94

118.  At the Pre-trial Review hearing in this case, Ps through their counsel have agreed to limit their claim to HK$3 million in this case and agreed to waive any exceeding amount in order to submit this case to the jurisdiction of this court.           

119.  In the circumstances, I would enter judgment in favour of Ps in the sum of HK$3 million.

F. Interest

120.  There will be interest for the HK$3 million at half of the judgment rate from the date of the writ until date of judgment and thereafter at judgment rate until full payment. 

G. Injunctive reliefs

121.  On top of the damages awarded, I further make an order that D to carry out immediate or effective remedial works to rectify and/or repair of the Water Seepage within 28 days from the date of this judgment. 

H. Costs

122.  Costs will follow the event.  I make an order nisi that D do pay the costs of the action on a party and party basis, such costs to be taxed if not agreed, with certificate for counsel.  The order will become absolute in the absence of any application from the parties within 14 days.