DISCOVERY BAY SERVICES MANAGEMENT LTD V. DAVID BUXHAUM

________________________

HEADNOTE

________________________

PROPERTY LAW – Deed of Mutual Covenant – burden of positive covenants – S.41 Conveyancing and Property Ordinance (Cap.219) – liability of occupier – whether successor in title liable for breaches committed by predecessor in title – owner’s refusal to pay management fees because of breach of duty by manager – Control of Exemption Clauses Ordinance (Cap.71).

IN THE DISTRICT COURT OF HONG KONG

CIVIL JURISDICTION

ACTION NO. 4782 OF 1991

______________________

JUDGMENT

______________________

1.  These proceedings concern premises known as Flat C, 3rd floor, No.1 Parkvale Drive, Parkvale Village, Discovery Bay (“the flat”), on Lantau Island. They began in the Small Claims Tribunal in March 1991, when the plaintiff sought to recover $9,155 from the defendant for management fees, water charges, and other charges arising out of his occupation of the flat. The plaintiff’s then claim covered the period from the 1st May 1989 to the 28th February 1991. In answer to that claim, the defendant pointed out that he did not become the registered owner of the flat until December 1990; and complained of numerous acts of omission and commission by the plaintiff which he claimed had caused him to suffer losses quantified at $40,000. The case was then transferred to the District Court. The amounts involved are relatively modest; but the rival contentions of the parties have given rise to issues of fact and law of some complexity.

2.  The case centres on the provisions of a Deed of Mutual Covenant, dated the 30th September 1982; and a Sub-Deed of Mutual Covenant, dated the 6th January 1988. These documents run to almost 100 pages. The contents are notoriously difficult to digest because of the prolixity of their language. This, perhaps, explains why, despite several amendments to the pleadings, Mr. Chan was unable to identify the provision on which the alleged liability for water charges arose until a late stage of the trial. Counsel for both parties experienced other problems or difficulties in presenting their cases. Some of these may be due to the fact that the more material events occurred some 5 or 6 years ago. This lapse of time and the incomplete or fragmented presentation of evidence have not helped me in my task of resolving the matters in controversy. I have to assess the creditworthiness of witnesses in relation to events which took place many years ago, in the absence of full supporting documents or other corroboration; but against an evidential background of two bundles of documents, consisting of more than 200 pages on some of which I have not received any assistance from Counsel. In some cases, their existence and significance only became apparent to me after I had reserved judgment, since neither counsel adverted to them in their opening addresses or final submissions.

3.  In the circumstances of the present case it is, in my view, convenient and useful to begin with the undisputed facts and the legal issues which arise therefrom. It is not disputed that the defendant is an American attorney, who has been engaged in practice as a foreign lawyer in Hong Kong for several years. His work requires him to make frequent trips to China. But, his base is in Hong Kong; and from 1987 until 1991 he occupied the flat as his home. From the 7th December 1990, he did so as the owner of the flat. But, prior to that date he did so as a result of some vague arrangement with a corporate body, which I will call May Lee International. The nature of the defendant’s relationship with May Lee International is not clear. But, prior to the 7th December 1990, I am satisfied that the registered owner of the flat was Hui Chor Yuk (“Madam Hui”), who leased the flat to May Lee International Consultants (HK) Ltd (“the tenant”) from the 20th December 1987. I assume that the tenant is a company registered in Hong Kong. It is stated to be a subsidiary of May Lee International, Inc on notepaper apparently belonging to that entity, which I assume is an American corporate body. (See p.116 of Bundle ‘A’ – A116). In 1990 May Lee International or the tenant purchased the flat from Madam Hui; and very soon afterwards sold it to the defendant. I do not know the precise details of the defendant’s dealings with May Lee International, but for the purposes of these proceedings I find that he was no more than an occupier of the flat as a result of a licence granted to him by May Lee International during the period when it was the tenant and later the owner of the flat. In these circumstances, the question is: how can the defendant be liable for management fees and water charges incurred before he became the owner of the flat?

4.  That question arises because the relevant provisions of the Deed of Mutual Covenant only impose obligations on the “owners” of residential or commercial units. Although the plaintiff appears to rely on the Sub-Deed dated the 6th January 1988, it has not been demonstrated how this document affects the defendant’s position. Even if one assumes that this document is relevant to the issues in this case, it is clear that it only imposes obligations upon “owners” of the flat. In my view, the real issue is whether the burden of a positive covenant falls upon the defendant in the circumstances of the present case. On behalf of the plaintiff, Mr. Chan contends that it does, because the defendant is now sued as an owner and the successor in title to the original owner of the flat. Furthermore he contends that section 41(3) of the Conveyancing and Property Ordinance (Cap.219) supports his contention that the defendant is not only liable to pay management fees since he became the owner of the flat, but also arrears thereof which accrued before he became the owner of the flat.

5.  In support of his submissions on the proper construction and effect of section 41of Cap.219, Mr. Chan relied heavily on dicta of Rhind DJ (as he then was) in International Property Management Ltd v. Lee Yung Sang [1975] DCLR 104 (at 110) to the effect that legislation designed to facilitate the admirable social purpose of seeking to ensure that multi-storey buildings are properly managed and maintained should be given the “Mischief Rule” of interpretation. I do not dissent from that proposition. But, the passage in question has been taken out of context. It was the learned judge’s response to a suggestion that the obligations of an owner in a multi-storey building could not be enforced by proceedings taken by the management company; but only by proceedings brought by all the other owners.

6.  Nevertheless, I would be prepared to apply that canon of interpretation to section 41 of Cap.219. It seems to me that this legislation was intended to deal with a “mischief” in the common law which the rules of equity have not yet eradicated in England. There, the burden of positive covenants does not run with the land, largely because Victorian judges were not inclined to encumber freehold estates in England with such obligations. As between lessors and lessees the burden of positive covenants could be passed onto other occupiers through the doctrine of privity of estate, which overcame the obvious absence of privity of contract. As a result of a recent decision of the Privy Council, the purity (or validity) of the latter doctrine may be in doubt. But, apart from casting doubt on the relevance of English cases to Hong Kong, where all land, except that vested in the Anglican Cathedral, is presently held on lease from the Crown, I am doubtful of the relevance of English cases in this field. Be that as it may, I consider that section 41 of Cap.219 merely extends the common law and rules of equity to positive covenants and makes such covenants run with the land. But, nothing in the section makes the persons against whom the covenant is enforceable liable for any breach thereof committed before they become bound by the covenant. Between August 1989 and 7th December 1990 the defendant was an occupier of the land. The liability imposed on him in that capacity by section 41(2) is expressed to be subject to sub-section (5), which provides:–

“A positive covenant shall not, by virtue only of this section, be enforceable against –

…..

…..

(c) any person merely because he is an occupier of land.”

7.  A lessee or occupier will not be liable to the covenantee or his successors in title for breach of a positive covenant merely because he is a lessee or occupier at the material time. There has to be something more than occupation to make him liable, such as a covenant contained in his lease or licence. It is not enough that there is a covenant in a Deed of Mutual Covenant binding on the lessor or licensor. See Nield : The Hong Kong Conveyancing and Property Ordinance (1988 Butterworths) at 122. Nor, in my view, is it sufficient to show that he is a successor in title at the time when the proceedings are commenced. It is the covenant that runs with the land; not the breach thereof.

8.  Mr. Chan argued that if the plaintiff is not entitled to recover arrears of management fees etc. from the defendant, as an alternative to claiming them from the previous owner, there would be an anomalous result that the other owners would have to make good the deficit in the budget. That may be so; but that consequence would result from the failure of the plaintiff to exercise its wide powers under the Deed of Mutual Covenant. Apart from taking the former owner to the Small Claims Tribunal once the fees are overdue, the plaintiff should seek to register a memorial of the charge on the defaulting owner’s undivided shares under clause E.4 of the Deed of Mutual Covenant (A33). I appreciate that there may be practical difficulties in implementing such provisions because of the requirement of s.5 of Cap.219 that equitable interests in land be created by written instruments signed by the creator. (See Nield : Multi-Storey Building Management (Hong Kong Law Journal : 1990) pp.10-11) If the defaulting owner is a party to the Deed of Mutual Covenant there should be no difficulty. But, if he or she is a successor in title, it may be that his or her signature on the assignment will satisfy the requirements of section 5 of Cap.219. For the purposes of these proceedings I do not have to reach any conclusion on that possibility. I merely mention it to show that Mr. Chan’s reduction ad absurdum may not be valid; or if it is, it stems from deficiencies in the Deed of Mutual Covenant. It is not the function of any court to fill those gaps by making successors in title to land liable for breaches committed by their predecessors in title. Accordingly, I reject the contentions that the defendant is liable for the arrears of management fees and water charges which may have accrued before he became the owner of the flat.

9.  In paragraph 2.7 of his written submissions Mr. Chan suggested that it would also be anomalous if the defendant did not have to bear the burden of paying management fees under the Deed of Mutual Covenant whilst he was entitled to take the benefit of the same. At first sight, I thought that this was a reference to what is often called the rule in Halsall v. Brizell [1957] Ch 169. When I asked what benefits under the Deed of Mutual Covenant the defendant took before 1990; and whether the plaintiff was relying on the observations on this so-called rule in Tito v. Waddell (No.2) [1977] Ch 106, Mr. Chan replied that he was not sure. In the circumstances, I do not think that I have to consider this aspect of the ways that covenants can be made to run with the land. (See : Hong Kong Conveyancing : Law and practice (Butterworths : 1993) Vol.1; IV [168]) As I have tried to emphasise, the issue is not the enforceability of the covenant against a successor in title; but whether such person is liable for the prior breaches of a predecessor in title. In any event, the rule in Halsall v. Brizell only applies where the benefit and obligation arise under the same deed or transaction. The benefits under the Deed of Mutual Covenant could only be enjoyed indirectly by the defendant during the period in question by virtue of his occupation under the licence from May Lee International or the tenant. See Law Debenture Trust Corporation v. Ural Caspian Oil Corporation Ltd [1993] 1 WLR 138.

10.  Clause E.2 of the Deed of Mutual Covenant provides that the defaulting owner shall pay interest at the rate of 1.5% per month on all sums payable but unpaid within 30 days of their becoming due. Mr. Chan has prepared a very helpful schedule setting out the sums which he claims were due from the defendant as management fees and interest thereon. I do not think that Miss Levy challenged Mr. Chan’s calculations and I respectfully adopt them for the purposes of my judgment.

11.  Management fees are due on the 1st of each month. Accordingly, the defendant only became liable to pay those due on and from the 1st January 1991, if my previous findings and conclusions are correct. However, if I am wrong in finding that the defendant is not liable for arrears of management fees which accrued before he became the owner of the flat, I find as a fact that the arrears amount to $5,575 and the interest thereon up to the 31st May 1994 amounts to $4,136, making a total of $9,711.

12.  Miss Levy submitted that, in any event, clause E.2 was unenforceable because it was a penalty, rather than a genuine estimate of the plaintiff’s loss. I do not rule out the possibility that a stipulated rate of interest to be added to a debt may be struck down as a penalty, even though it does not offend the levels prescribed by the Money Lenders Ordinance. But, I do not think that a rate of 18 per cent per annum can be regarded as so excessive as to be unconscionable. If it were, most financial institutions providing credit card services would be unable to enforce the terms of their agreements. The figure I have mentioned in the previous paragraph for interest is substantial; but only because the management fees have been outstanding for between 3½ and almost 5 years!

13.  The evidence regarding water charges is extremely confusing. But after an effort which is out of all proportion to the small amounts involved, I do not think that the plaintiff has proved that any amount is outstanding or due from the defendant. For the period before he became the owner of the flat, I do not think that he is liable for the same reasons I have given with regard to management fees. I can only trace 4 demands during this period, totaling $66. The sum of $61 was paid on the 29th August 1990. For the period after the defendant became the owner, there are only 3 demands for payment of water charges, covering the period 1st September 1990 to 31st August 1991, and totalling $41. I am satisfied that between June 1991 and October 1991 three sums totalling $61 were paid for water charges. Accordingly, the plaintiff has failed to prove that any sum in respect of water charges is owing by the defendant.

14.  Before I return to the question of management fees payable after the 7th December 1990, I must deal with the claim for a “collection charge” in the sum of $150. The only documents relating to this amount is a demand dated 1st February 1990, addressed to May Lee International (A157) and a solicitor’s demand dated 31st May 1990, addressed to Hui Chor Yuk. Quite apart from the fact that the claim for this sum relates to a period before the defendant became the owner, under clause E.2(2) such a charge is expressed to “cover the cost ….. of the extra work occasioned by the default.” The plaintiff has wholly failed to show that any extra work was so occasioned. This, too, is not recoverable in these proceedings.

15.  In my view, the defendant did not become liable to pay management fees until the 1st January 1991. But, from then until November 1991 he was prima facie liable for such sums because he was the owner of the flat during that period. I have said that the defendant was “prima facie” liable during this period, because no demand was ever addressed to him until the 1st December 1991 (p.32 Bundle B – B32) i.e., after he had ceased to be owner! But, the defendant does not complain of this formal defect; and probably could not do so because he may not have notified the plaintiff that he had become the owner, as section V.1 of the Sub-Deed of Mutual Covenant apparently required him to do (see A81). In any event, I am satisfied that he only paid the management fees for June, July and August 1991; and find that the fees in arrear amount to $2,998. Again, I adopt Mr. Chan’s calculations for interest on these outstanding fees and arrive at a total of $1,634.37 for the period up to 31st May 1994. I calculate the amount of interest for the period from the 1st June 1994 to 31st August 1994 to be $130.68, making a grand total of $4,763.05.

16.  Essentially, the defendant contends that he is not liable to pay any of these sums because of the complaints which form the subject-matter of his counterclaim, to which I now turn. For several reasons this has proved to be the most difficult and troublesome feature of these proceedings. The evidence of the witnesses was extremely disjointed and, in my judgment, very much influenced or coloured by attitudes which had become rigid due to the passage of time, ignorance, or misconceptions regarding their strict legal relations. To a large extent the latter stem from the fact that the Deed of Mutual Covenant contains two groups or types of obligations, namely those between the owners operating as covenants affecting land; and contractual powers and duties placed by the owners on the manager. This combination of different obligations in one instrument frequently leads to confusion over the role of the manager and its powers and duties. In my view, there has been much confusion of roles in this case on the part of both sides.

17.  The plaintiff has, at times, sought to disclaim all responsibility for dealing with many of the complaints made by the defendant during his occupation of the flat, taking the view that rectification was the responsibility of the contractor engaged by the developer; or that of neighbouring owners; or the defendant’s own responsibility. Occasionally, it has done so on the simple basis that the problem concerned the interior of the flat for which the plaintiff was not responsible. Yet, clause B.1(2) of the Deed of Mutual Covenant (A20) states that the plaintiff shall have a duty:–

“To put in hand and ensure the satisfactory completion of the work necessary to maintain any and every part of the City including (subject however to sub--clause (3) of this Clause) the interior of Residential and Commercial Units … so as to ensure that the same are maintained in a good, clean and safe condition at all times and for this purpose to employ reputable and competent contractors and workman.” (my emphasis).

18.  In my view, the scope of this duty is not really restricted by sub-clause (3), which merely enjoins the plaintiff to ensure that all owners and occupiers maintain their units; and if they fail to do so,

“to put in hand any necessary maintenance and to take all necessary steps to recover the cost therefor from the defaulting owner or occupier.”

19.  From time to time the plaintiff’s managerial employees have overlooked these duties when responding to many of the complaints about the flat. It may be that they were not fully aware of the plaintiff’s duties. But, that is no excuse, because it is reasonable to expect a manager to be fully cognizant of its powers and duties; and to have a management strategy which will enable it to carry them out to the reasonable satisfaction of the owners of units in the development. I think that was lacking in this case; and may have contributed to the attitude of apparent indifference or abdication of responsibility on the part of the plaintiff. Indications of this unhelpful attitude can be found in the evidence of Mr. Wong Fu Keung, the plaintiff’s estate manager, and numerous documents. (See, e.g., A117, A129, A135-6, A142 and A144; B16 and B26).

20.  Although I am satisfied that the defendant has had cause to complain about various matters affecting the flat during the period of his occupation, I have found it extremely difficult to assess the gravity of his complaints and to determine what, if any, legal redress he is entitled to on the evidence placed before me. This is, in my view, due to various factors. The passage of time has clearly affected the defendant’s recollection of the details or timing of certain events. That is understandable, bearing in mind that he ceased to have any interest in the flat at the end of 1991. I do not know what he paid May Lee International to purchase the flat in 1990. Nor do I know the price he obtained when he disposed of it a year later. Since he has not sought, in these proceedings, to recover damages based on any diminution in the flat’s value, I consider that I am entitled to infer that no such loss has ever been suffered by the defendant. His complaints date back to 1987. Yet, until the plaintiff began these proceedings in the Small Claims Tribunal he took no steps to seek compensation in the sums which are now mentioned in his counterclaim. He, or May Lee International, simply failed or refused to pay the monthly management fees. Mr. Chan has submitted that these and other aspects of the defendant’s conduct indicate that his complaints were not sufficiently serious to justify non-payment of management fees, as they fell due; and are not sufficient to sustain his counterclaim.

21.  Mr. Chan’s submissions cannot, in my view, be lightly dismissed. The defendant did not take any legal action. Although he, and May Lee International, made many complaints of mismanagement or non-management, they never went so far as to assert that the plaintiff’s conduct constituted repudiation of its obligations under the Deed of Mutual Covenant; at least until the Defence and Counterclaim was amended earlier this year. The probability that the defendant’s complaints have been inflated or exaggerated in the process of recalling events which happened several years ago has to be given serious consideration. The defendant was apparently willing to tolerate the state of the flat and its environment for some four years; and eventually purchased it despite the fact that numerous defects remained to be remedied. This all suggests that the underlying causes may not have been as serious as the defendant contends.

22.  The fact that the defendant has not attempted to support his very general complaints by more specific details, or concrete evidence of the same, or his precise losses therefrom, also suggests, perhaps, that he realised that he did not have a strong case for claiming damages in the amounts listed in his counterclaim. Even now, more than three years after the institution of these proceedings, the defendant has placed little or no evidence before me to substantiate his alleged losses resulting from the plaintiff’s alleged breaches of duty during the relevant period. Miss Audrey Ng, on behalf of the defendant, told me that photographs had been taken to demonstrate the plaintiff’s failure to keep the hallways clean and free from garbage. Regrettably, these photographs have not been produced. So, I cannot realistically assess the defendant’s loss from this alleged breach of duty by the plaintiff. A Chinese scroll allegedly damaged by flooding in August 1988 was thrown away 6 months later, although the defendant was thinking off suing the plaintiff at the time. The only damage to furniture – desk, credenza, book case -- was discoloration. Although he still uses these items I was not invited to inspect them or shown any photographs.

23.  I have taken all these and similar features of the defendant’s case into account along with Mr. Chan’s final written and oral submissions. Although I think there has been some degree of overstatement of certain aspects of the defendant’s case (e.g. his complaints about spilling cement and the front entrance lock), I am nevertheless satisfied that he has proved the essence of his principal complaints. Whether they constitute breaches of duty on the part of the plaintiff, which the defendant can legally enforce, is another question. Possibly due to the passage of time, I think that his recollection of the times when certain events occurred is faulty. For example, the defendant complains of flooding in 1990. According to his pleaded case and his evidence, this happened in April, June and July of that year. The defendant conceded that the flooding was similar to those in 1988 and 1989; but less serious. No mention of such flooding was made in the letter of the 17th June 1990 (A113). On the evidence before me, I think that the defendant’s complaint in 1990 (if any) was not related to flooding, as in the past. It was probably a leakage from other sources unconnected with seasonal rainfall.

24.  On behalf of the plaintiff it was put to the defendant that there was no incident of flooding in 1988. Mr. Wong testified that the plaintiff had no record of any flooding in that year. He clearly was ignorant of, or ignored, the letter from May Lee International dated the 28th August 1988 (A102). I have no hesitation in preferring the defendant’s evidence on this issue. But, apart from the obvious inconvenience and annoyance, I have no solid evidence on which the defendant’s true loss can be assessed. Indeed, assuming that in 1988 the plaintiff owed the defendant a duty of care, there is very little evidence that it was breached in 1988. There was flooding of the flat, but it has not been proved that it was directly caused by the plaintiff’s negligence, as alleged in paragraph 9(a) of the Re-Amended Defence and Counterclaim. It may have been aggravated by the gap between the main door and the threshold of the premises, but I find that the direct cause was heavy rainfall and blocked drains on the roof, causing the accumulated water to escape down the common staircase. The drains were under the immediate control of the owners of the top floor units; and the flooding occurred at or about a time of abnormally heavy rainfall in a year which, I seem to recall, was otherwise abnormally dry.

25.  The gap at the entrance had been reported to the plaintiff long before August 1988; and the plaintiff failed to remedy it. I find that the defendant (or May Lee International) did so by fixing a marble lip at a cost of $250. But, this was not done until 1989, after another flooding. Why this inexpensive remedy was not carried out earlier by the plaintiff or the defendant has not been explained. I doubt whether it would have been a complete obstacle to the entry of water at times of abnormally heavy rainfall. But, on the evidence before me it is impossible to assess the extent of the damage to property inside the flat in 1988 or 1989 or in subsequent years. I do not propose to examine the authorities touching upon the difficult question of the circumstances which give rise to a duty of care outside of a contractional relationship. I do not think that Mr. Chan challenged the contention of the defendant that his relationship with the plaintiff at all material times was more than sufficient to pass the tests of proximity and reasonable foresight. He was, I think, content to deny that there was any breach of that duty of care; or to rely on the exempting provisions of Section IV clause B.4 of the Deed of Mutual Covenant (A25). I am not persuaded that the consequences of the 1988 flooding were due to any breach of the defendant’s duty of care. But, I do think that its failure to respond to the flooding in 1988 until after the flooding in May/June 1989 is indicative of negligence on its part. Only then, did the plaintiff take measures to curb the flow of water from the roof by erecting a concrete kerb around the roof-door. The defendant contends that that measure was inadequate; but, with respect to him, I consider that he is being over-demanding in expecting complete protection from the weather in Hong Kong during the rainy or typhoon season.

26.  I have not overlooked the various complaints made by the defendant, or others on his behalf, during the four years or more of his occupation of the flat; but I do not propose to deal with them seriatim. I think that his complaints of water being swept into his premises from the hallway, and those relating to the door look have probably been overstated. His complaints of flooding in 1990 and 1991 appear to relate to atmospheric conditions normally encountered in Hong Kong; or to some external source which could have been simply controlled by closing a bathroom window! But, I do find that his complaints of flooding; garbage being left in the hallway for unreasonably long periods; and falling tiles are entirely justified. I also find that the plaintiff’s general and specific responses to these complaints were inadequate, long delayed; or never materialised at all. Although the defendant did not spend a lot of time in Discovery Bay, I consider that he is entitled to be compensated for the discomfort and loss of enjoyment of the flat during the period of his occupation of the flat, as a result of the plaintiff’s breaches of its duty of care prior to the 7th December 1990. After that date, I do not think that the defendant had much cause to complain about the plaintiff’s activities as manager. By then, the defendant’s complaints seem to be confined to leakage from the ceiling of the bathroom and water entering from an external pipe through the bathroom window. But, the fact that the defendant did pay management fees for part of 1991, because the plaintiff was improving its service to residents, is some indication that the remaining complaints were not regarded as serious by the defendant.

27.  Prior to December 1990, I think that the plaintiff was guilty of breaches of the duty of care it owed to the defendant, largely because of its numerous and long-standing acts of omission. After the defendant became the owner of the flat, it is more difficult to identify the subsequent complaints with specific breaches of the Deed of Mutual Covenant, although I think that sub-clauses (2), (3) and (9) of clause 1 of section IV.B may cover the situation. But, whether the defendant’s complaints constitute examples of common law negligence or breaches of contract, in the form of the plaintiff’s duties under the Deed of Mutual Covenant, I do not think that the defendant and his predecessors in title, were entitled to refuse to pay management fees, as and when they fell due. In this context, I respectfully adopt Mr. Chan’s arguments. The plaintiff is merely enforcing covenants between the owners. The amount of the management fees is fixed in advance and based on budgets or estimates of expenditure. The fact that the manager may have breached some of the provisions of the Deed of Mutual Covenant, but continues to provide other services, albeit unsatisfactorily, is not, in my view, sufficient to amount to a repudiatory breach by the manager.

28.  Mr. Chan submitted that insofar as the defendant relies on common law negligence to support his counterclaim, a complete answer is to be found in the exempting provisions of the Clause B.4 of Section IV of the Deed of Mutual Covenant (A25). He further submits that it is not subject to the test of reasonableness in the Control of Exemption Clauses Ordinance (Cap.71), because it is expressly excluded from that control by section 19 and Schedule 1 of Cap.71. Clause B.4 is in the following terms:–

“Neither the Manager nor any servant agent or other person employed by the Manager shall be liable to the Owner or any of them or to any person or persons whomsoever whether claiming through, under or in trust for any Owner or otherwise, for or in respect of any act, deed, matter or thing done or omitted in pursuance or purported pursuance of the provisions of this Deed … not being an act or omission involving criminal liability or dishonesty or wilful negligence …”

29.  The Deed of Mutual Covenant is dated the 30th September 1982, and is, in my judgment, excluded from Cap.71 for that reason, and also because it is a contract which “relates to the creation or transfer of an interest in land” within the meaning of paragraph 1(b) of Schedule 1. Despite Miss Levy’s valiant argument to the contrary, the recent enactment of the Building Management Ordinance (Cap.344), bringing in (by Part VIA) some control over the provisions of Deeds of Mutual Covenant, is an implicit recognition that most of such contracts were not subject to any form of statutory control. However, in the present case, the clause can only be relied on to protect the plaintiff from breaches committed after the defendant became the owner of the flat. Furthermore, I doubt whether it extends to protecting the plaintiff against tortious liability arising in negligence.

30.  Although the defendant originally claimed $40,000 for his losses, his remedy is not for a liquidated sum but for unliquidated damage. In January 1992, he particularised and quantified his losses when giving Further and Better Particulars of his Counterclaim. In support of his submission that the defendant had not proved his actual loss, Mr. Chan pointed to discrepancies between some of these amounts and the defendant’s evidence. For example, the damage to the Chinese scroll was claimed to be $4,000; but the defendant testified that it had cost $5,000 and was thrown away 6 months after the flooding in 1988. I have indicated that I do not think that negligence has been proved against the plaintiff on that occasion. But, if I am wrong; and the plaintiff was negligent, because it failed to deal with the complaints about the gap at the threshold, I would assess the damage to the scroll at $5,000. In the absence of documentary proof I think the defendant’s recollection in January 1992 is likely to be more reliable than his evidence in 1994. Similarly, his estimate of the cost of re-polishing damaged furniture has grown from $3,000 to $5,000. But, in this case I would make no award because both figures are pure guesses. No written quotation from a polisher or survey report has been produced.

31.  As the defendant was never a tenant of the flat, rental costs for periods when the flat was uninhabitable because of flooding are not, in my view, recoverable. The reasonable cost of alternative accommodation would be recoverable (see Calabar Properties Ltd. v. Stitcher [1984] 1 WLR 287). But, apart from a hotel bill for the night of 4/5 May 1990 (Ex.D1), such cost has not been proved. The defendant was very vague about the occasions when he stayed at a hotel. In evidence he said he did so on several occasions for not more than one, two or three days. He claims a total of 10 nights at $1094.80 per night. That was what he paid for staying at the Hilton hotel in May 1990. I don’t know where he stayed in other years. I do not consider that he is entitled to anything in respect of August 1988 for the reasons I have given; but, I will allow one night at the Hilton for the flooding in 1989 and 1990. Allowing for differences in room rates, I assess his recoverable loss under this head at $2,000. If I am wrong about the effect of the exemption clause, I would allow a further $2,500 for two nights in 1991. The marble lip was installed after the flooding in 1989. In my view, this should have been carried out by the plaintiff after the flooding in 1988. Accordingly, the cost thereof is recoverable, i.e. $250 (Ex.D2).

32.  Over and above these heads of damage, the defendant is, in my view, entitled to be compensated for the discomfort and loss of enjoyment of the flat during his occupation. Although I have found that the flooding in 1988 was not caused by the plaintiff’s negligence, I do consider that breaches of its duty of care, by omissions to do things which it ought reasonably to have done, began then and continued until early 1991. It is extremely difficult to arrive at a figure for such compensation. As I have tried to indicate earlier in my judgment, the seriousness of the frequent complaints is not easy to measure. There is no evidence that the defendant’s health has suffered. He did not use it for long periods because of his work and travel. Despite his experiences, he purchased the flat at the end of 1990, and lived there for a further year, during which time management services improved sufficiently to induce him to pay fees for certain months in 1991. In view of the lack of concrete evidence, I consider that my award under this head should be modest. I assess damages under this head at $5,000.

33.  Accordingly, I find for the plaintiff in the sum of $4,763.05, being the arrears of management fees since the defendant became the owner of the flat, and interest to the date of judgment. On the counterclaim I assess the total damages at $7,250. Having regard to the history of these proceedings, I will hear counsel on the form of order and on the question of costs.