ACTIN TRADING LTD v. THE INCORPORATED OWNERS OF CHIU TAT FACTORY BUILDING AND ANOTHER

DCCJ 1946/2017

[2022] HKDC 547

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1946 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. The plaintiff was and still is a tenant of (a) Factory Unit B on GROUND FLOOR including Yard & Store Room, Chiu Tat Factory Building (“Factory Unit”), Nos 708-710 Prince Edward Road East, No 108-110 King Fuk Street, Kowloon, Hong Kong (“the Building”) and (b) Carpark Spaces No 22 & 23 on GROUND FLOOR of the Building; and also licensee of Carpark Spaces No 20 & 21 on GROUND FLOOR, of the Building. (Carpark Spaces No 20, 21, 22 & 23 are collectively referred as “Carpark Spaces”)[1]. The plaintiff commenced these proceedings and claims damages caused by a leakage against the 1^st and 2^nd defendant.

2.  The 1^st defendant is the Incorporated Owners of the Building and the 2^nd defendant was the management company appointed by the 1^st defendant at the material time for the purpose of carrying out duties of managing the Building under the Deed of Mutual Covenant (“DMC”) and the Building Management Ordinance (“BMO”).

3.  It is the plaintiff’s pleaded case that:-

a. On 13 February 2016, water escaped from Flat D on First Floor (“Flat 1D”) into corridor of First Floor the Building (“Corridor”)[2]. Water then ran through holes made in the concrete floor slab of the Corridor. Holes were there to allow pipes and cable ducts to go from First Floor to GROUND FLOOR of the Building. Through the holes, water eventually dripped from the ceiling and damaged goods stocked up inside the Factory Unit on GROUND FLOOR[3].

b. The water seepage continued until the morning of 14 February 2016 causing damage to goods stored inside the Factory Unit[4].

4.  The plaintiff alleged that it had suffered damages as a result of :

a. negligence and/or breach of duty of care of 1^st and/or 2^nd defendant[5], and/or

b. for breach of statutory duties under Occupier’s Liability Ordinance, Cap 314 (“OLO”) [6] and Building Management Ordinance, Cap 344 (“BMO”)

c. The plaintiff also relies on the doctrine of res ipsa loquitur[7].

5.  The plaintiff claims that as a result of the water seepage, it suffered losses and damages as follows [8]:-

Goods damaged and could not be sold	RMB301,100 and HK$95,000
Surcharge for urgent orders for re-manufacturing of damaged goods that could not be delivered to customers	RMB180,660
Hiring of temporary workers for cleaning up the Factory Unit and Carpark Spaces	HK$3,000
Costs of engagement of Brooks Loss Adjusters Limited	HK$10,000

6.  The 1^st defendant’s case is that the Carpark Spaces are not for storage and the plaintiff was in breach of the Occupation Permit and/or DMC had it used the same not for parking vehicles but storage[9]. The 1^st defendant denies liability on damage caused to contents in the Factory Unit under OLO and as the 2^nd defendant was engaged to carry out duties or powers under the BMO for the 1^st defendant, the 2^nd defendant shall be responsible if liability is proved[10].

7.  The 1^st defendant pleaded that the caretakers of the 2^nd defendant had taken all reasonable steps to remedy the situation arising from the leakage at the material time including informing the supervisor and shutting off the Main[11]. It was further pleaded that there were no obvious or latent defects of the building materials as alleged by the plaintiff and it falls outside the scope of obligation of the 1^st defendant under BMO or DMC[12].

8.  There is no expert evidence in the present case to assist the court on how water had come to the ceiling of the Factory Unit. The only evidence was from Mr Lui of the plaintiff and the Damage Report. Mr Chong, counsel for the plaintiff agreed that Mr Lui was not called as an expert but a factual witness. Further the Damage Report focused on damage only and what it had said in about the source was hearsay evidence.

B. Issues in Disputes

9.  In a usual water seepage case, the burden is upon the plaintiff to establish and prove that a tortfeasor is the source of any alleged water seepage for breach of duty under tort of nuisance and/or negligence. (see: Lam Kit Yee v Lam Chum Lam, unrep, DCCJ 3115/2011, 10 March 2017 at §11 and 張秀玲及吳炳漢 對 鄭禮莊 (unrep, CACV 268/1998, 9 April 1999 at §§26-28).

10.  In the present case, it is not disputed that the flooding in the Corridor was caused by water flowing from Flat 1D (“the Flooding”). Neither the owner nor the occupier of Flat 1D was made a party to these proceedings by the plaintiff. The owner, Mr Yuen, was joined as a Third Party by the 2^nd defendant by way of a Third Party Notice dated 17 May 2018. The 2^nd defendant however abstained from the proceedings and failed to appear before Master B. Mak on 12 November 2020. At the same hearing its claim against the Third Party was provisionally struck out[13].

11.  It is common ground that the Flooding came from Flat 1D which is not immediately above the plaintiff’s. It is trite that in a water seepage case, the burden is on the plaintiff to prove the source of the water seepage and that the doctrine of Res ipsa loquitur does not apply.

12.  The 1^st defendant says since plaintiff’s assertion is that water flew from Flat 1D into the Corridor seeped through the holes on the concrete slab in the Corridor into the ceiling of the Factory Unit, it is therefore for the plaintiff to prove how the water flew from Flat 1D came into the Factory Unit, which was not immediately below Flat 1D, including but not limited to the mechanism and/or mannerism of the seepage.

13.  The plaintiff and the 1^st defendant filed a Joint Statement of Issues in Dispute on 26 June 2020. The plaintiff no longer pursued claims for loss and damage to the goods at the Carpark Spaces at trial. Further, the plaintiff would not pursue its claim regarding water seeping through concrete floor slab from First Floor. As the case developed, issues were narrowed down.

14.  Whilst the claim is premised on negligence and breach of statutory duty under OLO, BMO and DMC, causation remains to be one of the main issues to be determined. Causation include causation of the dripping inside Factory Unit (“Dripping”) and then of the losses and damage.

15.  Another area of argument is whether duty of the 1st defendant under Cap. 344 of the BMO delegable and whether the 2^nd defendant could rely on the Management Agreement to limit or diminish its duties mentioned above and is thus exempted from liability.

Evidence

16.  The plaintiff called two factual witnesses at trial. Mr Lui Wai Kuen, its Director who had filed two witness statements before trial[14]. A subpoena was issued by the plaintiff for Leung Ming Kin of the 2^nd defendant to give evidence. Mr Leung’s witness statement was filed by the plaintiff[15]. The 1^st defendant called factual witness: 鄧秀英, Chairlady of the Incorporated Owners of the Building (“Madam Tang”) and Mr Lam Ming Wah who was the supervisor of the management team. Madam Tang has filed two witness statements[16]. Mr Lam’s witness statement was filed by 2^nd defendant’s lawyer. Evidence shall be set out when relevant issues are discussed.

Issue 1: Causation of Dripping inside the Factory Unit

17.  The pleaded case of the plaintiff on causation is that water escaped and flew out from Flat 1D and caused the Flooding in the Corridor. Water then seeped through the concrete slab in the Corridor (“Concrete Slab”); and/or ran through the holes and eventually dripped down to the Factory Unit from the ceiling inside[17]. As mentioned earlier, the plaintiff no longer relied on water seeping through the Concrete Slab but only on water coming through the holes on Concrete Slab. This allegation was denied by the 1^st defendant[18] and the 2^nd defendant[19].

18.  At trial, Mr Lui told the court that there was a hole (“the Hole”) at the ceiling above Carpark no 9 which is outside but close to the Factory Unit[20]. There are walls partitioning the Factory Unit from the Car Park on GROUND FLOOR. He referred to videos and photographs for the court to see the positon of the Hole from Ground Floor[21] and First Floor[22].

19.  Mr Lui told the court that water escaped from Flat 1D to the Corridor and the lift lobby of First Floor. When the Corridor was flooded water ran into the Hole and flew down to Ground Floor. When water reached or went past the Hole some ran into the Concrete Slab and travelled along to reach the ceiling of the Factory Unit (the Concrete Slab served as the ceiling of the Ground Floor and the floor of First Floor). Finally water dripped into the Factory Unit. When being cross-examined, Mr Lui said that the Hole was not smooth and therefor it allowed water to go inside it into the Concrete Slab. He is adamant that since Flat 1D is not immediately above the Factory Unit, it had to be the Hole which permitted water to travel to the ceiling of the Factory Unit. When put to him that the Hole did not get water into the Factory Unit, he said the Hole was not smooth. He said after the Incident he found that the Hole looked like it “being bitten by a dog”.

20.  From the evidence of Mr Lui, the Hole was poorly finished and it permitted water to seep into the Concrete Slab and reached the ceiling of the Factory Unit. There is no expert evidence. On more than one occasion, Mr Lui admitted that the allegation on the path of water flow was made on his “own observation”, “own experience” and “own opinion”. There was no factual evidence to support Mr Lui’s saying that water travelled in the manner he suggested. The size of the Hole is relatively small. There is no evidence to say how and why it absorbed that amount of water to drip from the ceiling to the Factory Unit as shown in the videos produced by him. According to him the water flow down to Carpark no. 9 was like waterfall already. He did not explain how and why that amount of water would travel horizontally inside the Concrete Slab and started to drip at a spot not closest to the location of the Hole. These questions need an expert to explain.

21.  I agree with Miss Gwilt that the court could not accept opinion evidence from a factual witness to prove that the Hole had caused the Dripping inside the Factory Unit.

Issue 2: Negligence of the Defendants

22.  The plaintiff’s claim was on two categories of negligence: (i) negligent in failing to properly rectify the Hole and (ii) negligent in failing to take immediate remedial measures.

(i) Failure to rectify and maintain the Hole

a. Liability under Negligence

23.  Plaintiff’s allegations on negligence against the defendants include the following:-

a. Failure to detect / rectify the defects of the structure of the Building, including the Holes;

b. Failure to maintain proper repair of the common parts of the Building up to a reasonable standard.

24.  The sub-issues under negligence are:-

a. what ought to be done regularly for proper maintenance,

b. whether the Hole was noticeable by reasonable man with due care;

c. whether the Flooding was reasonably foreseeable;

d. whether the Dripping caused by the Hole reasonably foreseeable

25.  Mr Lui’s evidence about the Hole stated above in paragraphs 18 to 19 is adopted. The plaintiff’s position is that the defendants would have detected the existence of the Hole and repaired the same prior to the Incident had they managed the Building properly. Further, had they done so the Dripping would not have occurred.

26.  When being cross-examined, Mr Lui agreed he had never noticed the existence of the Hole prior to the Incident. He also agreed he heard of no complaint about the Hole.

27.  Madam Tang, chairperson of the 1^st defendant, said nothing about the Incident in her witness statement because she was not at the scene. When asked she said she did not see the Dripping and did not know about the Hole on the Concrete Slab. It was only a few weeks later she learned from Mr Lam that water came down from the Hole. She said the Hole was plugged afterwards. She said had the 1^st defendant known about the Hole earlier, it would be plugged early. She agreed that the Hole was plugged afterwards.

28.  Mr Lam of the 2^nd defendant was called by the 1^st defendant as a witness. He was supervisor of the management team. He said the Hole was there for many years. He did not know who dug the Concrete Slab to make the Hole. It was made to allow telecommunication duct and pipes to pass through. Only on those floors where owners needed such telecommunication facilities, there would be such a hole. He said the cables could not go through if the Hole was plugged. He said he did not know that it was subsequently plugged.

29.  In her closing submission, Miss Gwilt submitted that:-

a. There is no evidence from the plaintiff to suggest that before the Incident, the 1^st defendant was made aware of any defect in the Corridor, or in particular any defect in the Hole (if any) and that the 1^st defendant failed to take proper and necessary steps when it became aware of the need to do so.

b. There is no evidence from the plaintiff to suggest that the Incident, ie water overflowing into the Corridor leading to water seepage into Factory Unit is foreseeable.

30.  On foreseeability of the possible consequence that water flowing down the Hole would travel to the ceiling of the Factory Unit, Miss Gwilt submitted, without admitting causation as discussed above, that there was no evidence to suggest that a flood in the Corridor had happened before to alert the defendants to be aware of such possibility. Further, all toilets were housed inside of the 4 units on the First Floor. In the circumstance, ponding of water and in particular the Flooding in the Corridor is not foreseeable. In my judgment, flooding in the Corridor might be possible when there is water supply inside the 4 units, it cannot be said to be not reasonably foreseeable. The question is whether it is reasonably foreseeable that water would seep through the Hole and travel horizontally to the ceiling of the Factory Unit. In my view, it is not.

31.  I accept Mr Lam evidence that he was aware of the presence of the Hole. To him, it was there for a purpose. He said the Hole could not be plugged or the cables could not go through. I accept the evidence of Madam Tang that she was not aware of the Hole prior to the Incident. She also said that had she known about it she would have it plugged. Madam Tang was unaware of the existence of the Hole until weeks after the Incident.

32.  Mr Chong acting for the plaintiff in his closing submissions said Madam Tang has admitted that the Hole needed be plugged but the defendants had failed to do so. In my view, Mr Lam and Mr Tang’s evidence did not go that far. The fact that it has been plugged does not mean that there was a breach of duty not having done so earlier. According to Mr Lam, the Hole was there for a purpose and, rightly or wrongly, he said it could not be plugged. Neither Mr Lam nor Madam Tang admitted that the Hole was a defect which needed to be repaired. In any event there is no evidence before the court to prove that after plugging the Hole while permitting the conduit and pipe to go through, there would be no water flowing down the Hole or that such water would not cause another dripping in the like manner at the same location if that was the real cause of the Dripping.

33.  Further, in my judgment, it is not reasonably foreseeable to a reasonable man that water flowing down the Hole outside the Factory Unit would travel to inside of the Factory Unit, horizontally perhaps, along the Concrete Slab and cause the Dripping. I do not think the plaintiff could say that it is reasonably foreseeable and therefore action ought to have been taken about the Hole.

34.  After considering the evidence before me I accept Miss Gwilt’s submission that the plaintiff has failed to prove that the Hole was a defect which needed to be repaired and that the Incident and the Consequence was reasonably foreseeable. I find that the plaintiff has failed to prove negligence on the part of the defendants.

b. Breach of Common Duty of Care under OLO

35.  It is indisputable that the defendants are occupiers under OLO. Section 3(2) provides for the common duty of care:-

“s. 3(2)

The common duty of care is a duty to take such care as in all the circumstances of the case is reasonable to see that the visitor will be reasonably safe in using the premises for the purposes for which he is invited or permitted by the occupier to be there.”

36.  For same reason stated in paragraphs 32 to 34 above I am of the view that it is not reasonable to require the defendants, in all the circumstances of the present case, to take action regarding the Hole prior to the Incident. I find that the plaintiff has failed to prove that the defendants were in breach of the common duty of care under OLO.

Breach of Duty as Owner of Common Parts under BMO and DMC

37.  It is not disputed that the 1^st defendant has engaged the 2^nd defendant to carry out management of the factory building. It is common ground that the Corridor is a common part of the Building.

c. Obligation under BMO

38.  The plaintiff relies on section 18(1) of BMO[23] to say that the 1^st defendant has failed its duty thereunder:-

“18. Duties and powers of corporation

(1) The corporation shall—

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

(b) ---

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

39.  It is the submission of Miss Gwilt that the duty imposed under BMO is not a strict or an absolute one. Miss Gwilt drew the court’s attention to the following legal principles on management’s duty:-

a. In Lo Yuk Chu v Hang Yick Properties Management Ltd [1996] 4 HKC 278[24] at 282:

“The overall duty imposed on the respondent [Incorporated Owners] by the Deed of Mutual Covenant is one of ‘proper’ management. Such management entails doing all that is reasonably required of a manager in the circumstances.”

b. In Lau Chun Wing Rod v The Incorporated Owners of Po On Building, unrep, CACV 20/2007, 1 November 2007[25] per Hon Rogers VP, it was made clear that the Incorporated Owners do not assume absolute liability as if it were an insurer if any part of the building becomes in disrepair:

“12. This sub-section does not provide an insurance to the extent that if some part of the building becomes in disrepair the Incorporated Owners automatically and necessarily become liable. Nevertheless, liability may arise if there is fault. It also arises if, having been made aware of a defect which requires remedy, the Incorporated Owners fail to take appropriate steps. … .

13. …..What is required to be done in carrying out the duty will differ according to the circumstances but in this case the judge clearly held that the defendant failed to take proper and necessary steps at a time when it had been alerted that it was necessary to do so and that it continued to fail in that regard for a very lengthy period.”

[Underlining added by the court]

40.  I agree with the submissions of Miss Gwilt that the standard of care of incorporated owners depends on circumstances required. Even taking into consideration the obligation to repair under BMO, I agree with Miss Gwilt that in the present case, the Hole is not an apparent defect but has been there to cater for the needs of some owners. There is no evidence as to who had made the Hole. According to Mr Lam similar holes also exist on other floors to serve similar purpose. According to Ms Tang there has not been complaint about their existence or their being defective, nor has any of them ever caused any problem.

41.  Having considered the evidence before me, I find that the plaintiff has not proved the defendants were in breach of BMO as far as the Hole is concerned.

Failure to take Timely Remedial Action after the Flooding

a. Liability under Negligence

Mr Lui of the plaintiff

42.  Taking into consideration the pleading and the witness statements of Mr Lui, the plaintiff’s case in this regard is that the 1^st defendant and/or its employee(s), servant(s) or agent(s) and also the 2^nd defendant had in gist

(i) failed to detect, prevent or stop, find out the source of the Flooding and Dripping;

(ii) failed to take any measure to prevent or diminish the spreading of the Flooding which had continued overnight in a reasonable manner;

(iii) failed to take any remedial measure to prevent or stop the Dripping;

(iv) failed to notify the 2^nd defendant to take any of the remedial measures which has been happening overnight;

(v) failed to notify the owners and all the tenants and/or licensee(s) causing and or affected by the Flooding and/or the Dripping in a reasonable manner.

43.  The crux of complaint from Mr Lui was that the night shift caretaker did not detect the Flooding in good time. As a result nothing had been done to stop the Flooding and prevent the Dripping and no immediate remedial action was taken.

44.  Mr Lui’s evidence was that according to owner of Flat 1D, the origin of the Flooding was the water tap in Flat 1D which was not closed at about 10 pm the night before. Water flew therefrom should not be fast. It took a long time for the Flooding to overflow through the Hole to Ground Floor like waterfalls. When Mr Lui was cross-examined, he said the above statement was made on basis of induction or inference (推論) he drew from what he saw and what he heard at the scene. It was put to him that the Incident Report[26] recorded that the Main was closed at 7 am. He said “the Dripping was still serious at 9:30 am, I felt that they had not closed the Main”. He said he come to this conclusion on basis of his experience.

45.  Mr Lui was referred to read his witness statement in which he said “neither of the two defendants had immediately discovered the Flooding, the night shift caretaker did not deal with the Flooding and leakage timely (including making a report to the supervisor, closing the Main, and to contact the owners). He was asked what he meant by “timely”. He said to put a cloth to plug the Hole or to put a cloth outside Flat 1D. When asked again he said timely meant immediately.

46.  When suggested to him that he could not tell damages would definitely be reduced by plugging the Hole immediately. He disagreed and said it did not take an expert to say so. Mr Lui was further asked whether he agreed at the time the Flooding was first discovered by the night shift caretaker, the source was unknown. He said he was not at the scene. He agreed that in his witness statement he had said that water flew overnight. He agreed in cross-examination that he heard about that only. When asked he said the defendants should have used all means to stop water leaking into the Factory Unit.

Mr Leung called by the plaintiff

47.  Mr Leung was the day-time caretaker at the material time but had left the 2^nd defendant already. His statement was prepared by the plaintiff’s then solicitor[27] and he came to court under a subpoena issued by the plaintiff. In his witness statement he said on the day of the Incident he went to work and arrived at the Building at about 6:30 am. He was informed by the night-time caretaker, Mr Wong, that there was water flowing from ceiling of the Car Park on Ground Floor. He went to take a look and saw that water was coming down like rain. He saw that leaking was more serious near the loading and unloading area (according to the floor plan produced by the plaintiff, this area is next to Carpark no 9 above which the Hole was located and opposite to Carpark Spaces 18 and 19[28]). He immediately went upstairs to look for the source. He went to First Floor and found the Flooding in the lift lobby. He therefore telephoned to inform Mr Lam, the supervisor, and upon his direction he shut off the water main for the lower floors, that was from 1^st to 8^th floors[29].

48.  After that Mr Leung looked up in the telephone book to get contacts of owners. He could only speak to their helpers or representatives or leave messages behind. It was Luna New Year holiday. Eventually Mr Lui of the plaintiff arrived at about 9:00 am. Mr Leung went to the First Floor with him and found water come out of Flat 1D and flow to the Ground Floor through the Hole on the Concrete Slab[30].

49.  At about 9:30 am Mr Lam, supervisor of Mr Leung, arrived at the Building and at about the same time Messer Yuen, owner of all the 4 flats (A/B seems to share one entrance[31], C and D) on First Floor also came to the Building.

50.  Under cross-examination, Mr Leung said he turned off the Main at about 6:45 am to 7:00 am. He said he did not know what time the Flooding and Dripping happened. He saw it from the 2016 log book that it was discovered at that 5:30 am[32]. Only two pages of the 2016 log book (“2016 Log Sheets”) were produced by Messrs S.K. Lam, Alfred Chan & Co, the then solicitors of 2^nd defendant[33]. In one of the pages it was recorded that:-

“13/2 22:30 報更正常 (12320)

14/2 00:30 報更正常 (12320)

14/2 02:30 報更正常 (12320)

14/2 04:30 報更正常 (12320)

14/2 05:30 發現18, 19號車天花漏水，傢俬舖門前也滴水，請跟進 (12320)

14/2 07:00 報更正常 (2137)

14/2 07:15 1樓C單位?有大量X水滲出無辦法聯絡到有關人仕” (2137)

Mr Lam

51.  Mr Lam was the supervisor of caretakers at the material time. He left the 2^nd defendant in 2019. Mr Lam's witness statements were taken for and on behalf of the 2^nd defendant[34]. He was called by the 1^st defendant to attend court. In the 1^st witness statement he repeated what he had been told by Mr Leung after he was summoned to go back to the Building by Mr Leung. It was a rest day for him. When he arrived at the Building at about 9:00 am, Messrs Yuen and Mr Lui were there already. Upon listening to a report made to him by Mr Leung, he went into Flat 1D and Flat 1 AB for inspection because at that time, Messrs Yuen, owner and his son, came with the keys.

52.  In his 2^nd witness statement he gave more details on what he saw when he arrived at the First Floor. He said he saw water in the Corridor and in front of the entrance of all flats. Water was upto the bottom of his shoes. He could not see from which flat water come out[35]. He went inside the flats with Messrs Yuen and saw that the floor of Flat 1D was flooded but the toilet inside was dry. The water level just reached the bottom of his shoes. When he went into Flat 1AB he saw that the floor was also flooded. Water was about to reach the tip of his shoes.

53.  The condition inside the flats was also briefly recorded in the Incident Report [36] :

“ 9:00-9:30a.m. 本人由業主阮生帶領下視察進入室單位內視察,發現A-D單位有不同程度積水,而D單位積水最為嚴重”

54.  Under cross examination, he said due to time lapse, he could not remember the time he and other people arrived at the Building. He remembered it was about 10 am he went into Flat 1AB. He said he did not remember using sand bags to stop water from flowing down the Hole. He remembered a pump was borrowed from Flat 1C to clear the water. He agreed he had not mentioned using water pump to remove water in the Corridor in his witness statements.

55.  On the issue of whether caretakers had been adequately trained to face unexpected situations and whether they were competent to take the caretakers’ job, Mr Lam was referred to read the employment agreement executed in 2010 between Mr Leung and the 2^nd defendant (“Leung’s Employment Agreement”)[37]. He was asked whether Mr Wong, the night shift caretaker, would have an agreement with same terms about duty and responsibility (僱員職責) stated. He said they all have employment agreements and the terms were the same. He confirmed that Mr Wong had to observe the Manual for Security Personnel Providing Guarding Services in Building issued by Security and Guarding Services Industry Authority. He agreed that there had been saying from colleagues that Mr Wong was not mindful about his job, lazy and not giving good account of his duties. He disagreed that there was ever any complaint from colleague that Mr Wong slept during his night shift. He also disagreed that there was complaint that Mr Wong would refuse to take on responsibilities. He agreed that Mr Wong’s performance was not up to standard and that he was dismissed in mid-2018. He said Mr Wong was dismissed by the 2^nd defendant and the 1^st defendant was informed.

56.  Mr Lam said he had shown to Mr Wong the location of pipes and fire hose at the Building when the latter first reported to work. He told Mr Wong all relevant positons and how to close the Main. He had also told Mr Wong that they had to inform the owners in case of incidents as well. He said the caretakers were instructed and would know what to do in case of fire and water leakage.

57.  Mr Lam was asked whether a caretaker sitting at the guard station on Ground Floor could see Carpark Spaces 22 and 23. He said one could be able to see Carpark Spaces 18-19 but not very clear. He said if there was one caretaker on night shift, it was for the caretaker to decide whether to do patrolling on the Building. It was because they might have to watch over the entrance. He said caretakers had been informed that in case of fire, they should report to police and inform him. For water leakage, should close the Main and inform him. All caretakers had his telephone number and his phone was on 24 hours.

Madam Tang

58.  Madam Tang was the chairperson of the 1^st defendant between 2008 and 2019. She is still a member of the Management Committee. In her first witness statement she said after the incorporation of the 1^st defendant in 1970 they appointed a management company to manage the building on its behalf. It was because the committee members had no professional knowledge in building management. The 2^nd defendant was the management company at all material time. In her second witness statement, she produced the management agreement with the 2^nd defendant executed in 2008 (“Management Agreement”)^[38]. The Management Agreement was renewed on same terms. She explained that in the Management Agreement it was said that “the Building was to be patrolled at least once a week” and that was for supervisor’s level only. As far as the caretakers are concerned they would patrol the Building every day. She produced the log book of 2017. She said the 2016 log book was damaged in another flood caused by a unit on Second Floor in 2017. It was therefore not produced.

59.  In cross-examination, she agreed that she could terminate the Management Contract if the 2^nd defendant did not perform accordingly. When asked she said there were 2 caretakers on day shift and 2 on night shift. She was asked whether the caretakers were the employee of the 1^st defendant. She said no. She was referred by Mr Chong to read the Management Agreement^[39]

“1.02 大廈管理工作人員由委託人直接僱用，由經理人協助招聘、訓練、監管及解僱；如有任何不稱職之管理人員或有需要增減管理人員人數時，委託人有權提出更換之建議。”

60.  After reading the passage, she said the 1^st defendant could make suggestions about employment but the final decision was with the 2^nd defendant. When asked she said training was to be given by the 2^nd defendant. As to communication with supervisors, she said she would talk to them and not that they came to see her on regular intervals.

Discussion

61.  Miss Gwilt submitted that Mr Lui is relying on hearsay evidence and his own opinion to prove his claims. He has when giving evidence amplified and improvised matters that had not been pleaded in the pleadings nor stated in his witness statements. She further submitted that after the caretakers discovered the suspected water seepage, immediate remedy was done within reasonable time by switching off the Main.

62.  I read the Log Sheets[40] and the Incident Report[41] . In the Log Sheets it was said that at 0530 there was water leakage from ceiling at Carpark Space no 18 and 19[42]. When Mr Lam arrived at about 0900, he also saw dripping from above Carpark Spaces 21, 22 and 23. Carpark Spaces 22 and 23 were outside the entrance of the Factory Unit. There was also dripping in front of the entrance of the Factory Unit. The location of the Carpark Spaces 18 and 19 are not close to the Hole. Mr Wong in the Log Sheets did not mention any leakage or dripping above Carpark Space no 9. He said nothing to mention the Hole. Mr Lam mentioned nothing about the Hole in the Incident Report. There was no evidence that the Hole was an apparent cause to the dripping inside the carpark when the caretakers attended to the Incident.

63.  According to the Log Sheets, an entry made at 0700 said 報更正常. It is probable that Mr Leung made this entry on the Log Sheets after he took over duty from Mr Wong at 0700[43]. The next entry was made at 0715 reporting that water came out from Flat 1C but he put a question mark next to it. This indicated that Mr Leung was not certain about the source at 0715 even after checking on First Floor.

64.  This was echoed by the Incident Report prepared by Mr Lam. Mr Lam reported that “he received a telephone call from Mr Leung some time after 7 (大約七點多) and was told that Mr Wong discovered water dripping from ceiling above Carpark Spaces 18-19 at about 0530. Mr Wong went up to First Floor to check and saw Flooding in the Corridor, at that time the source of leakage was unidentified. Later on he found that water leakage continued, so he suspected the source came from the units due to tap not turned off or burst of pipe. Since the owner could not be contacted, Mr Leung closed the Main when he took over duties from Mr Wong.” In which he said at the time he received the call “當時未確定源頭”, “0900-0930 一樓業主告知管理處漏水源頭屬於一樓D室單位”. I accept that the source of water was identified after Messr Yuen arrived at the Building.

65.  I have considered all evidence before me. I do not find negligence regarding failing to detect the Flooding in good time is proved. There were entries in the Log Sheets including the caretaker reporting everything alright at 0230. There was however no evidence to prove that Mr Wong slept through the period and for that reason he did not notice the leakage at Carpark Spaces 18 and 19 which according to Mr Lui were just opposite the guard station.

66.  Mr Lui’s evidence that the Flooding had occurred overnight was not supported by evidence. He relied on what he was told by Mr Yuen, owner of the units on First Floor. The source of this evidence was also hearsay. Flat 1D was leased out to a tenant. There was no evidence to show as from what time water started to flow into the Corridor from Flat 1D. Even if the hearsay evidence on the time the tap water was left running is attached weight there is no evidence to show when the Flooding in the Corridor occurred. There is Mr Lam’s unchallenged evidence that Flat 1 AB which was immediately above the Factory Unit was also flooded. There is no evidence how water went into Flat 1AB . I do not know whether water spread within the flats or water in the Corridor went into Flat 1AB.

67.  There is no evidence to say that Mr Wong had a duty to patrol the floors of the Building during his duty on that night. According to Mr Lam, it is for the caretaker to decide. In any event, there was no complaint from Mr Lui that Mr Wong should have patrolled the floors but he failed to do so. The plaintiff’s case is that Mr Wong fell asleep and did not even notice the dripping above Carparks 18 and 19 which was opposite to the Guard Station. His evidence was based on his deduction as according to him, Mr Wong could not have missed the drippings in the Car Park on Ground Floor because they were like waterfalls when he returned.

68.  The court considers that according to the Log Sheets and Incident Report, which are contemporaneous records, Mr Wong discovered the Flooding at about 0530 and there is no evidence he was aware of water flowing down the Hole. He did not make any record of leakage above Carpark Space no 9, be it through the Hole or otherwise. There was no mention of the Hole in the Log Sheets. Madam Tang’s evidence was that she was informed of the Hole only days after the Incident.

69.  There is no evidence to suggest the time Dripping started inside of the Factory Unit. The Factory Unit was closed and no one could enter to see what was happening. The owner of the Factory Unit, a Mr Sung, was informed of the Incident because of what happened to Carpark Spaces 21-23. I do not find negligence is proved with evidence before me.

70.  As to measures to be taken to prevent spreading of water to the Factory Unit and to remedy the situation, the plaintiff’s case is that the defendants should have put something, a piece of cloth, to plug the Hole and switch off the Main immediately.

71.  I accept the evidence of Mr Leung and Mr Lam that the Main to the lower floors had been switched off when Mr Leung reported duty at around 7. Given the fact that the source could not be identified at the time of 0530 or even at 0715, the Main being switched off some time after 0700 could not have amounted to a failure of duty on the part of the defendants. There was no evidence to show that the caretakers were aware of the consequence that water passing through the Hole would cause the Dripping. They should not reasonably be expected to have plugged the same soonest possible.

72.  I agree with Miss Gwilt that the plaintiff is imposing a standard of duty that exceeds what is reasonably expected of the defendants. I also find that the suggestion to block water from flowing down the Hole immediately was made with hindsight. There is no evidence that the Hole itself was apparently related to water leaking above Carpark Spaces 18 and 19 when first discovered by the caretaker.

Conclusion on Causation and Liability

73.  After considering all evidence before me, I am not satisfied that the plaintiff has proved that the Dripping inside the Factory Unit came from water flowing down the Hole. Mr Lui said he was adamant that the Dripping was caused by water flowing down the Hole and not the Concrete Slab because Flat 1D was not immediately above the Factory Unit. There is however evidence that Flat 1AB was immediately above it and was also filled with water. I have no assistance from any expert to say anything further. It is however strange that the plaintiff abandoned the alleged source of the Dripping from Concrete Slab due to lack of expert evidence but insisted that the court should accept Mr Lui’s evidence on the probable source from the Hole.

74.  The plaintiff has also failed to prove negligence or breach of statutory duties on the part of the defendants for their having failed to repair the Hole. I do not accept that the Hole makes the Concrete Slab defective or the Hole was defective in itself. In fact the plaintiff case was not clear. In the pleadings, it said “holes” on the Concrete Slab which suggests Concrete Slab being defective with holes on it. During trial, it turned out to be one hole, the Hole, which by itself is not a defect but has a reason to be there. Mr Lui said the Hole was defective, there is however no expert evidence to explain how the condition of the Hole would lead to the Dripping. In my view, the plaintiff has failed to prove that the defendants were under an obligation to repair the same.

75.  As to the remedial action which the defendants ought to have taken as alleged, from evidence before me, the relevant period was between 0530 to 0700. I have to see whether the caretakers had been negligent for failing to take appropriate remedial measures including blocking the Hole and switching off the Main. As the Hole could not be easily seen during the Flooding and there was no report of water leakage above Carpark Space no. 9 through the Hole in the earliest possible report in the Log Sheet, the allegation that the Hole ought to be blocked immediately has not been proved.

76.  As to whether it had taken too long to switch the Main off, again, there is no evidence to say that the night-shift caretaker was aware of source of the Flooding in the Corridor at the time he said he discovered water leakage above Carpark Spaces 18 and 19. The Main was switched off at around 0700 after Mr Leung arrived. In my view, what had been done was within range of reasonable measures.

77.  Further, there is no evidence to prove the time Dripping inside the Factory Unit started and that it would stop had the Main been switched off at 0530. Mr Lui said that the Dripping did not stop or became less when he arrived at about 0930. According to Mr Lam and Mr Leung, by that time the Main had been switched off. The fact remained that Flat 1AB immediately above the Factory Unit was still filled with water at the time around 0900-0930 when Mr Lam entered with the owner who had the keys to open the door.

78.  In my judgement, the plaintiff has failed to prove negligence on both defendants.

Quantum

79.  In case I were found to be wrong on my determination on causation and liability, below is my finding on quantum.

80.  The plaintiff claims damages for the following:-

a. Damage to stocks;

b. 60% surcharge for manufacturing of goods on urgent basis to meet delivery deadline;

c. Temporary workers for cleaning up the Factory Unit, checking the stocks and dispose of wastages in sum of $1,800. The sum represented half the claimed amount after abandoning claim made under carparks;

d. Cost of the Damage Report

Damage to Stocks

81.  The plaintiff said that due to the Dripping the stocks kept inside the Factory Unit got wet and damaged. It is the submission of Mr Chong that such damage was reasonably foreseeable and not remote. Brooks was appointed by the plaintiff. They did site inspections on 15 February and 16 March 2016. Out of the 63 damaged items on the list, 43 were placed inside the Factory Unit and are therefore relevant to the claims herein (“Items”). It was stated that the quantum was assessed to be $456,320 including those items placed at the Carpark[44].

82.  In his opening, Mr Chong revised the quantum to RMB200,740 and HK$95,000 to reflect the latest positon of the plaintiff to abandon claims relating to those items stored at Carpark Space. Mr Chong admitted that the Damage Report is not an expert report. It assists the plaintiff to tabulate details of the damaged items including information on description, size, quantity and cost price.

83.  I agree that the Damage Report was compiled to reflect the facts gathered during their inspection. The value stated was by adopting the manufacture cost. There was no objective valuation made and no opinion evidence given in this regard. I am however of the view that whether the Items were merchantable is opinion. As Mr Chong has admitted that the Damage Report is not an expert report, no opinion evidence could be accepted. The court would consider evidence of Mr Lui in this regard.

84.  I shall now turn to the evidence. The plaintiff is claiming a total of RMB200,740 and HK$95,000 for 43 Items. It said it is claiming cost and not profit of the items. A list of stock is attached to the Amended Statement of Claim as Appendix 1[45]. In the list the Cost Price on each item was included.

85.  Appendix 1 is in fact a reproduction of the inventory lists set out in the Damage Report[46] Under the topic “Nature and Extent of Damages”, it is stated in the Damage Report that[47]:-

“Following our joint checking [the plaintiff] prepared a list of the damaged stock. Based on our physical checking result of 15 February and 16 March 2016, we confirmed that the quantum of the damage stock stated in the list was correctly stated. We also confirmed that the stock stated in the list was water damaged and photos were taken in order to verify the damage. The details of the damaged stock were summarized as follows”.

What follows is a list indicating the description of 63 items, the location they were stored (at the Carpark Spaces or inside the Factory Unit), the quantity, the reference to relevant photographs taken and the Catalogue Photographs (“Inventory List 1”)[48].

86.  Under “Assessment of loss” Brooks stated that[49] :

“The [plaintiff] provided us with a set of the invoices of the damaged stock and having checked these invoices against the damaged stock, we confirmed that the loss which was based on the cost prices stated in the invoices were in order.[50]”

What follows is another inventory list of same items in same order but the list included the cost of each item (“Inventory List 2”)[51].

87.  Since Brooks stated in the Damage Report that they were given to read a set of invoices to confirm the cost of the Items, the court looked for the invoices mentioned. At the end of the Damage Report, under “Endorsement”[52] 4 Appendixes were referred to:

(a) Appendix I: photographs taken on 15 February 2016 (Photos A1 to A15)[53].

(b) Appendix II: photographs taken on 16 March 2016 (Photos B1 to B76)[54]

(c) Appendix III: Catalogue photographs (Photos C1-C68)[55]

(d) Appendix IV: Invoices of the damaged stocks

88.  Appendix IV seems to be relevant, there is no Appendix IV attached to the Damage Report. For the first 3 Appendixes, there was a cover page naming each of the Appendixes[56] . There is not a page naming Appendix IV.

89.  After the last page of Appendix III[57], there is a stack of invoices issued by Essence (“Essence Invoice”)[58]. Unlike other documents produced under the first 3 Appendixes, the stack of invoices issued by Essence did not have the word “Brooks” printed at the top right corner. The content of the Essence Invoices appeared to be sale of fabric material to the plaintiff. They bear no relevance to manufacture cost charged by 金历洪家具(深圳)有限公司. There is no cross referencing to assist the court to relate the Essence Invoices to the Items set out in Inventory List 2. I do not rely on them as proof of what Brooks had checked to make up Inventory List 2 to prove the cost.

90.  There is a list issued by 金历洪家具(深圳)有限公司[59], it is not an invoice of the Items. It was issued on 15 April 2016, 2 months after the Incident. This could not be what Brooks had read when writing the Damage Report.

91.  Apart from the difficulties in proving the cost of the Items, or even if I accept that invoices had indeed been checked by Brooks, I agree with the observation of Ms Gwilt that there was no description of how the Items were damaged. Brooks stated very briefly that a large quantity of the stocks were affected/soaked by dripping of water to various extents[60]. It stated further that the stock was either made of timber or fabric and was susceptible to water damage. Such statements could not assist the court.

92.  Further most of the photographs produced could not show the damage not to say to verify the same. Most of the Items were still partially wrapped or wrapped and the damage was not apparent on the photographs. In this case even where the defendants produced no reports or evidence in any form to challenge the findings of Brooks that the Items were water damaged, the court could not rely on the Damage Report to find that the Items were damaged and to determine the extent of such damage.

93.  Mr Lui gave evidence, he relied on the Damage Report on the overall damage suffered in the Items. He did give some explanation on quite a few damaged Items under cross examination. His evidence however could not add value to the Damage Report.

94.  Finally, I agree that customers who ordered made-to-measure furniture would not accept items with water marks. Mr Lui gave some explanation as to why the Items could not be repaired or sold at a lesser price. I do not think this is a very crucial point for the 1st defendant because if Ms Gwilt wants to rely on mitigation of loss it has to be pleaded. However it was not.

95.  Having considered evidence and submissions before me, I am not satisfied that the plaintiff has proved the claimed damages of the Items. The claim under this head is dismissed.

The claim of 60% surcharge

96.  Miss Gwilt submits that the plaintiff has failed to prove the alleged re-manufactured goods were indeed the same item as the alleged damaged stocks in the Factory Unit. She points out to the court that:-

a. Brooks made reference to the catalogue photos provided by the plaintiff[61] to correspond to the Inventory Lists[62]. However, no description or dimension or measurement was stated in the catalogue. It is impossible to say they correspond to each other.

b. The description of the items on the invoice of 金历洪家具（深圳）有限公司[63] does not correspond to the item description on the Inventory Lists of the Damage Report[64].

c. The description of the Items and their measurement as recorded in the invoices of Luxhome and CAZ iNTERiORS[65] (“Retail Invoice”) cannot correspond to the description on the invoice of 金历洪家具（深圳）有限公司[66] and the item description on the Inventory Lists of the Damage Report[67] as well. Examples are:-

(i) The measurement of TOT Coffee table recorded in the Damage Report was “(100 x 55 x 35) cm”[68] but the measurement recorded in Luxhome Retail Invoice was “W 1000 x D 600 x H 360 mm”[69]. The size was different. Mr Lui explained during cross-examination that Luxhome measured the tray of the coffee table as well and hence there was a difference, and 5cm was less than 10% difference, it is therefore not significant. However, no evidence is available to support such assertion during trial[70].

(ii) The item in the Luxhome Retail Invoice was a set of Sofa set[71] whereas the item listed was an ottoman. The two do not match.Lui’s explanation during cross-examination is that the ottoman is part of the set of sofa. There is no evidence to support Lui’s assertion during trial.

(iii) The size of a bed stated in Damage Report[72] is different from that recorded on Luxhome Retail Invoice[73]. Lui’s explanation during cross-examination was that he believed Luxhome measured the bed frame as well and hence the width had a difference in 1 cm. There is also no evidence to support Lui’s belief.

97.  I have studied the two Inventory Lists[74] in the Damage Report, the Retail Invoices[75] and the photographs[76], I agree with Ms Gwilt that Books used different names for the Items as compared to those used in the Retail Invoices. I do not agree with Miss Gwilt that the names were so different that they were not describing the same Items. First, whilst the Damage Report was written in English, the invoices were in Chinese. For example Ottoman was called 沙化 in another document. The damaged ottoman is a foot rest according to Mr Lui. According to cambridge.org the meaning of “ottoman” is “a piece of furniture like a long box with a soft top, that you can use to store things in or to sit on”. I accept that ottoman could also mean a chair or a sofa. I do not find it offensive to use these two descriptions on a damaged foot-rest. I do not find that the complaint about the difference in measurement was so significant to destroy the evidence that they were referring to the same Items.

98.  I am however more concerned about there being no contemporaneous documentary evidence of (a) Luxhome and CAZ iNTERiORS placing order with the plaintiff, (b) plaintiff placing urgent order for re-manufacturing of the alleged damaged items with 金历洪家具（深圳）有限公司, or (c) request by 金历洪家具（深圳）有限公司 of the 60% surcharge. Mr Lui said during cross-examination that:-

a. He has some excel documents at the plaintiff’s office but no one suggested him to provide such documents.

b. The requests for surcharge and quotation were made orally between the retail company and the manufacturer.

c. He agreed that there was no evidence to show that some of the Items were in fact manufactured by 金历洪家具（深圳）有限公司 in the first place before the Incident.

d. He also agreed that the invoice of 金历洪家具（深圳）有限公司[77] and the delivery record of 金历洪家具（深圳）有限公司[78] had not stated the plaintiff’s name.

e. He also agreed that the plaintiff had no evidence to prove that these alleged re-manufactured items were actually delivered to plaintiff’s clients eventually.

99.  I am also concerned that there is no evidence that the plaintiff had discussed with its long standing clients, Luxhome and CAZiNTERiORS, as to late deliveries and how damages, if any, could be managed. According to the witness statement of Mr Lui, all he said therein was “to avoid damages for late claims made by clients, the plaintiff had to place urgent orders with the manufacturer in China.” This manufacturer in China, 金历洪家具（深圳）有限公司 is in fact a company held by the same family. On the other hand, Luxhome and CAZiNTERiORS on the retail front are also held by the same family. That may explain why the record of orders were scanty at the least. There is no evidence to link the possible claims from clients and the 60% surcharge. No justification has been given.

100.  I do not find the plaintiff has successfully made out a cross-the-board claim for 60% surcharge on all of the Items. I agree with Ms Gwilt that a cross-the-board 60% surcharge is the kind of damages not foreseeable by the defendants.

101.  As mentioned before, 金历洪家具（深圳）有限公司issued an invoice charging 60% on top on. This invoice however raised one question. It is noticed that the Statement of Claim was filed on 24 April 2017. The claim for the 60% surcharge was made only when the Statement of Claim was amended on 15 March 2019[79]. The 60% surcharge is of a significant amount which should not be lightly omitted. The claim under this head is dismissed.

Temporary workers for cleaning up the Factory Unit

102.  The plaintiff reduced the claim from $3,000 to $1,800 to represent the expenses incurred only in the Factory Unit. Miss Gwilt does not agree to this claim for the reason that it was not supported by any receipt and there was no evidence to show the apportionment as reasonable. I agree with Miss Gwilt that although it is a small amount, receipt could have been produced especially when Mr Lui said that the amount of $3,000 were supported by invoices[80]. The claim under this head is dismissed.

Cost of the Damage Report

103.  I agree with Miss Gwilt that this should be recoverable as one item of disbursement in the legal costs incurred by the plaintiff arising from these proceedings if he is awarded costs.

Conclusion

104.  As the plaintiff has failed to prove causation and liability its claims against both defendants are dismissed with costs. Even if I were wrong, the plaintiff has not proved the quantum as claimed.

105.  I order on nisi basis that the plaintiff shall bear the defendants’ costs with certificate for counsel. Such costs are to be taxed on party and party basis if not agreed. The costs order shall become absolute unless there is application to vary the same within 14 days.