LET'S GO INVESTMENTS LTD v. YEUNG SAU HING

CACV 16/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 16 OF 2006

(ON APPEAL FROM DCCJ 4585 OF 2004)

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J U D G M E N T

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Hon Cheung JA :

Facts

The Building

1. Chau Hop Shing Building (‘the Building’) is a multi-storey building situated at No. 6 Chung On Street, Tsuen Wan, New Territories, Hong Kong.  The Building consists of commercial units from the ground to the third floor and domestic units from the fourth floor to twenty-second floor.  On the fourth floor there are four units namely, Flat A, Flat B and Flat Roof, Flat C and Flat Roof and Flat D. 

2. This case is concerned with the dispute between the owners of the third and fourth floor of the Building.  The plaintiff is the registered owner of the third floor.  According to the land record the plaintiff acquired its property in 2002.  The defendant is the registered owner of Flat B and Flat Roof on the fourth floor.  The defendant’s property is situated immediately above the plaintiff’s unit.  The Flat Roof is an open space.  The defendant’s husband also owned Flat A on the fourth floor.  The defendant and her husband acquired their properties in 1993.

3. Located on the fourth floor is a Lift Motor Room which houses the machinery for the lifts that serve the first, second and third floors of the Building.  Until 1998 access to the Lift Motor Room could only be gained through the defendant’s property on the fourth floor.  For a short period between 1996 and 1997 access to the Lift Motor Room could be made through a ladder installed on the external wall of the Building from the ground to the fourth floor.  The Building Authority in 1997 ordered the ladder to be dismantled. 

4. In 1998 an opening (‘the opening’) was cut in the ceiling of the third floor and as a result access could be gained to the Lift Motor Room from the third floor by a ladder without going through the defendant’s property.  Although the evidence was not clear the opening was probably made by or with the approval of the owner of the third floor.

5. In June 2000 the Buildings Department ordered the owner of the third floor to remove the unauthorised work, namely, the opening ^{but suspended the operation of this order when it discovered that access could not be gained from the defendant’s property (which was then unoccupied) to the Lift Motor Room.}  Eventually the order was complied with and the opening was filled up.  Then the owner of the third floor applied to the Buildings Department for permission to make an opening at the same area and by adding a fireproof door at the opening.  The Building Authority approved the application and the owner had since made a fresh opening at the same location and constructed a fireproof door at the opening.  It is not clear from the evidence when the opening was filled up.  According to a letter dated 22 July 2003 from the Buildings Department, at an inspection on 10 April 2003 the opening was observed to have been filled up.  By then the plaintiff had become the owner of the third floor. 

The claim

6. The plaintiff acquired the third floor subject to a tenancy.  The tenant operated a restaurant there and suffered serious water leakage problems on its ceiling.  The plaintiff claimed that the problem originated from the defendant’s property, specifically from the Flat Roof and commenced action against the defendant for damages and an injunction requiring her to carry out repair work on the Flat Roof to make it waterproof.  The defendant, on the other hand, contended that the leakage was caused by the opening on the ceiling. 

7. The case was heard by H H Judge Barbara Chan in the District Court.  She found that the water leakage problem originated from the defendant’s property in that the waterproofing membrane on the Flat Roof no longer served its purpose and she granted relief to the plaintiff.  This appeal is not concerned with this aspect of the case.  This Court (Tang VP and Yuen JA) had refused the defendant’s application for leave to appeal against this part of the judgment. 

The counterclaim

8. This appeal is concerned with the counterclaim brought by the defendant against the plaintiff.  The judge awarded the defendant $50,000 for her counterclaim.  The defendant filed two separate documents entitled the defence and counterclaim respectively.  In the defence the defendant pleaded that the plaintiff had in breach of the Deed of Mutual Covenant (‘DMC’) of the Building made the opening on the ceiling of the third floor.  Negligence and nuisance were also relied upon.  She alleged that the opening posed a security risk to her property.  In the counterclaim the defendant pleaded that ‘the door of the Lift Motor Room led to the Flat Roof on Flat B’ and this caused her property and her husband’s property to be left vacant and could not be sold.

9. The defendant pleaded that the Building Authority had legitimised the unauthorised work, namely, the opening and that damage was caused to the Building by the opening.

10. The defendant asked for four items of damages :

(i) the mortgage instalment payments, rates and management fees that she had to pay since 1998;

(ii) costs of the action;

(iii) repair work by the plaintiff of the Flat Roof; and

(iv) mental distress. 

The judge’s reasoning

11. Since acquiring the units in 1993 the defendant and her husband could not dispose of their units.  The judge referred to the evidence of the husband that they could not sell their properties because of the opening.  The husband stated that he had told those who had viewed the defendant’s property about the opening.  These potential buyers had noticed the door of the Lift Motor Room and asked him what was behind that door.  The judge found that there must be a security risk for any occupant of the defendant’s property caused by the opening leading from the third floor to the Lift Motor Room.  She also found that by making the opening the plaintiff was in breach of the terms of the DMC.  The judge awarded a sum of $50,000 to the defendant on her counterclaim.  Her reasons for so doing are as follows :

‘ 69. It is not possible to assess the extent to which the hole in the Lift Motor Room contributed to the difficulty to sell the Defendant’s Premises.  There is no expert guidance.  I find that it causes a security risk that would be an additional feature to cause deterrence any potential purchaser from the purchase of the Defendant’s Premises but is a factor that could not be ignored.  However as the security risk posed by the hole in the Lift Motor Room could not be the main reason for the failure to sell the Defendant’s Premises I find that the Counterclaim in respect of all the Defendant’s mortgage repayments and rates and management fees in respect of the Defendant’s Premises since 1998 could not be established.  On the other hand, the Defendant has suffered loss through the hole in the Lift Motor Room in that it has brought to the Defendant’s Premises a security risk that adds a serious adverse feature to the Defendant’s Premises.  I have to balance a number of factors when considering the Defendant’s Counterclaim.  These include the Plaintiff’s breach of the DMC infringing the rights of other owners principally that of the Defendant in making the hole on the floor slab of the Lift Motor Room (referred to aforesaid) as against that of the Defendant’s breach of the DMC (referred to aforesaid) that caused the Plaintiff take this drastic measure.  There is also the fact of the unfortunate design of the 4^th floor plan, which encumbered the Defendant’s Premises with the right of access through it to enter the Lift Lobby Room.

70. On that basis I am of the view it would be just to award the Defendant a nominal sum to compensate her for the security risk posed by the hole on the floor slab of the Lift Motor Room and to enable her if she wished to pay for a security gate and window bars or any other measure to render her said premises secure.  I have no guidance of any expert of an appropriate sum hence I award a nominal sum which in all the circumstances, I feel would be appropriate having regard to the type of property and its condition and age.  I am of the view that this sum should be in the sum of $50,000.00.’

12. The defendant had also applied for leave to appeal against the award of $50,000 which she claimed was too low.  This Court refused to grant her leave. 

The appeal

13. The plaintiff appeals against the award of the $50,000 by the judge.  The grounds of the appeal can be summarised as follows :

(1) The judge was wrong to award this sum because it had not been asked for in the counterclaim;

(2) The judge was wrong to find that the opening posed a security risk to the defendant’s property because there was no sufficient evidence to support such a finding;

(3) There was insufficient evidence to support the judge’s finding that the defendant had suffered a loss by reason of the opening; and

(4) Although the judge described the sum of $50,000 as a nominal sum this was in fact not nominal at all and there was no basis to support this sum. 

14. The fifth ground of appeal has been abandoned by the plaintiff. 

Was the claim pleaded?

15. In respect of the first ground of appeal Mr. Paul Leung, counsel for the plaintiff, argued that the defendant did not plead that the opening had diminished the value of her property.  Further, it was not the defendant’s case that she needed to make her property more secure by installation of security measures because the property had all along been left unoccupied at least since 1996 when the occupant at that unit moved out. 

16. The defendant was not legally represented at the trial.  She was represented by her husband.  Her pleading was not drafted by lawyers.  It is true that the defendant had not specifically pleaded that measures are required to safeguard the security risk caused by the opening.  But the central theme of her case was that the opening caused a security risk to her property.  Properly understood her case is that this risk caused her loss and damage because she was unable to dispose of her property since 1988.  Hence in my view the defendant had properly identified in her pleading that she suffered loss and damage as a result of the opening.  Whether she could establish her loss and damage is of course a different issue.  This goes to evidence and not the state of pleadings.

17. I also have to disagree with Mr. Leung’s submission that the defendant’s case was that her inability to sell her flat was by reason of the existence of the door of the Lift Motor Room, as opposed to the opening.  In this connection the defence and counterclaim which were filed as separate documents have to be considered together. 

Was the opening a security risk?

18. The judge awarded the defendant damages because she was of the view that the opening had brought to the defendant’s property a security risk that posed a serious adverse feature to her property. 

19. It is important for this case to identify the period of time relevant to the defendant’s counterclaim.  In my view the relevant time to be considered is the period between 1998 when the opening was made and 2003 when the opening was filled up.  The facts show that by 1996 the defendant’s unit had been left vacant and unoccupied.  The plaintiff’s justification in making the opening was that the machines in the Lift Motor Room needed to be serviced and as it was not able to gain access through the defendant’s property it took upon itself to make the opening for it to enter the Lift Motor Room.

20. Although the plaintiff did not make the opening in the first place, after it acquired the third floor, it did not fill up the opening.  The stark facts are the opening was made without the approval of the owners of the Building and the Buildings Department.  More importantly I agree with the judge that this unauthorised act resulted in a security risk to the defendant’s property because whereas previously access to her Flat Roof could only be gained through Flat B, the opening would enable persons to enter the Flat Roof from the third floor.  This must have an adverse effect on the defendant’s property.  The risk was continued by the plaintiff after it acquired the property.

21. The security risk continues after 2003 when the opening was made again.  However, this risk is no longer of relevance for the purpose of the defendant’s counterclaim because by then the Buildings Department had authorised the plaintiff to make a fresh opening.  After that, the defendant really has no cause of complaint because a feature of the Building is that access may be gained from the third floor to the Flat Roof outside Flat B on the fourth floor.  This access has been approved by a government department.  The approval might well be an act of necessity but nonetheless the physical layout of the Building has been altered and the defendant just cannot say that she would suffer loss and damage as a result of this change. 

Loss and damage 

22. The narrow issue in this case is whether between 1998 and 2003 the opening had caused the defendant any actual loss and damage. 

23. The evidence shows that even prior to 1998 the defendant had difficulties in selling her property.  During the time when there was an external ladder the potential buyers were put off by the external ladder.  After the external ladder was removed there were still no takers of her property.  According to the husband’s evidence the buyers were concerned with the door of the Lift Motor Room.  In this context it must mean that the buyers were concerned that they have to allow workmen to go through Flat B in order to gain access to the Lift Motor Room.  Understandably not too many buyers would be happy to have their property being used by strangers.

24. Between 1998 and 2003 the defendant’s property continued to be unoccupied.  There was no evidence that despite this security risk, it had caused any actual loss or damage to the defendant.  As pointed out earlier the reopening of the ceiling after 2003 cannot be a cause for complaint.

Nominal damages

25. It is clear from a reading of the judgment that the judge was not satisfied that the defendant had proved that she was unable to dispose of the property because of the security risk arising from the opening.  It was the physical condition of the Flat Roof rather than the opening which deterred the buyers. 

26. The situation is that the defendant had established liability against the plaintiff in that it had caused a security risk to her but she was unable to prove that she had suffered any actual loss.  This is the classic situation of awarding nominal damages to her so as to recognize her legal rights have been infringed.  As Lord Halsbury L.C. observed in The Mediana [1900] A C 113 at 116

‘ ‘Nominal damages’ is a technical phrase which means that you have negatived anything like real damage, but that you are affirming by your nominal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all, yet gives you a right to the verdict or judgment because your legal right has been infringed.’  

27. It is wrong in principle to award the defendant $50,000 for her to install security measures because this could only be justified on the basis of a continuing unauthorised opening.  This is no longer the case when the Buildings Department approved the making of the opening.  The appropriate amount of damages in this case should be $100.  

Conclusion

28. Accordingly the appeal by the plaintiff is allowed.  The judgment against the plaintiff whereby it was ordered that the plaintiff do pay a sum of $50,000 to the defendant is set aside, and in its place, we make an order that the plaintiff is ordered to pay nominal damages of $100 to the defendant.  In the circumstances the provisional costs order is no order for costs of the appeal.

Hon Yuen JA :

29. I agree.

Hon Chu J :

30. I agree with the judgment of and the order proposed by Cheung JA.