HO'S FASHION LTD AND ANOTHER v. THE INCORPORATED OWNERS OF GOLDEN CROWN COURT AND OTHERS

HCA1386/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1386 OF 2006

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Dates of Hearing : 8–9, 12–13 and 16 January 2009

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REASONS  FOR  JUDGMENT

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BACKGROUND

1. On 5 December 2005 at about 15:00 hours, a fire broke out in the common lift lobby area on the 6^th floor of Golden Crown Court in Nathan Road.  The firemen arrived and broke into Unit B1 thereof in order to ensure that no one was inside the property.  This property was jointly owned by the 2^nd plaintiffs, Mr and Mrs Ho, who operated Ho’s Fashion Limited, i.e. the 1^st plaintiff.  The 1^st plaintiff also owned the neighbouring Unit A.

2. The fire was caused by the 3^rd defendant who had wrongfully and negligently cut off a gas pipe instead of a water pipe just opposite to and outside the entrance of Unit B1.  He was employed by the 4^th defendant who in turn was the sub-contractor of the 2^nd defendant in carrying out the renovation works of the building.

3. Judgment has already been entered against the 2^nd, 3^rd and 4^th defendants, and this trial is only concerned with the liability of the 1^st defendant, i.e. the Incorporated Owners of Golden Crown Court (“the IO”).

4. After the trial I have decided that there was no liability of the IO vis-à-vis the plaintiffs. 

5. There were three causes for action pleaded against the IO, namely :

(1) common law liability in negligence;

(2) occupiers’ liability; and

(3) liability under Rylands v. Fletcher.

Common law liability

6. The case pleaded against the IO was that “it failed to have discharged its duties or at all the material times by having engaged an incompetent contractor (i.e. the 2^nd defendant) to carry out the renovation work at the common area of the aforesaid Golden Crown Court”. 

7. Mr Lam who was the chairman of the IO at the material times gave evidence.  He described in detail how the IO openly tendered its renovation work after orders were served by the Building Authority requiring the IO to mend certain parts of the building.  At first one Akin Property was appointed as the project consultant and later on Global Generation was appointed. 

8. Further the 2^nd defendant Hip Lee Company Limited (“Hip Lee”) was appointed as the main contractor of the renovation work.  After public tender, members of the IO Committee had inspected two properties renovated by Hip Lee in the past, one in Kowloon and one in Causeway Bay.  The evidence supported the IO’s contention that they had done everything they could in appointing the contractors and therefore there was no evidence of negligence at all in engaging an incompetent contractor.  After all, they were only laymen, assuming their duties entirely on honorary basis.

9. After Mr Lam’s evidence which is the only evidence in fact given by the 1^st defendant, the plaintiffs applied to further re-amend their pleadings by alleging that the IO had not ensured the main contractor would not sub-contract the renovation works to sub-contractors.  It all arose from Mr Lam’s evidence that, although there was no provision of sub-contracting in the contract between the IO and the 2^nd defendant, he had orally indicated or requested the 2^nd defendant not to sub-contract the works to anyone.  This casual statement was to my mind made only casually and was not supported by the documents.  This did not form part of the contract between them.  Sub-contracting has always been a fact known to the plaintiffs and there was no discovery of the contract documents until the 1^st defendant voluntarily gave an incomplete copy of this contract to the plaintiffs.

10. The negligent act of a worker of the sub-contractor was not due to the fact of sub-contracting.  It might well be a case of lack of supervision of the 2^nd defendant, being the main contractor and/or the project consultant.  But strangely enough, there was no action taken against the project consultant Global and the plaintiffs instead sued the IO.

11. I have disallowed the application to further re-amend the Statement of Claim on the grounds that it was late, immaterial since the negligent act was not due to the fact of sub-contracting, and it would prejudice the 1^st defendant since they had never prepared their case on the allegation of the sub-contracting which had caused the damage to the plaintiffs.

12. In the end I am actually satisfied that the IO had been very responsible in appointing the project consultant and the main contractor and there was no negligence at all on their part in engaging them to carry out the renovation work.

Occupier’s liability

13. This is a misconceived cause of action against the IO.  No doubt the IO is the occupier of the common area on the 6^th floor.  However, the plaintiffs were not visitors of that common area and the damage suffered by them was not because of their visit to the common area.  I agree with Mr Jin Pao, counsel for the 1^st defendant, that the plaintiffs have been labouring under a serious misapprehension of the purpose and application of the Occupiers Liability Ordinance, Cap. 314.  

Rylands v. Fletcher

14. The IO was not liable under the principle in Rylands v. Fletcher at all.  This principle is only application when there was a non-natural user of the common area which caused the exit of fire to its neighbouring place, i.e. Unit B1 and consequently caused damage to the plaintiffs.  However, there was nothing unusual in the usage of the common area when the IO was renovating the same.  Thus Rylands v. Fletcher is not applicable in the instant case.  Lord Bingham in Transco plc. v. Stockport Metropolitan Borough Council [2004] 2 AC 1 said at 11G-H :

“I think it is clear that ordinary user is a preferable test to natural user, making it clear that the rule in Rylands v. Fletcher is engaged only where the defendant’s use is shown to be extraordinary and unusual.” 

and at 12A :

“… the question is whether the defendant has done something which he recognizes, or ought to recognize, as being quite out of the ordinary in the place and at the time when he does it.”

Conclusion on liability

15. In the end I do not find any liability on the IO to the plaintiffs at all. 

Quantum of damages

16. The plaintiffs had adduced evidence of amount of damages suffered by them.  The garments damaged by the smoke and water in the fire was divided into three categories, namely :

(1) water damage;

(2) smoke and soot damage; and

(3) smoke damage to garments covered with bags.

17. The total amount was about $6.89 million.

18. The 1^st defendant submitted that in respect of categories (2) and (3), they can be re-conditioned or properly laundried and sold at scrap value by removing the label of Ho’s Fashion.

19. Mrs Ho gave evidence and said that this could not be done because each and every garment was made to measure to a particular customer.  The plaintiffs had satisfied me that many of their customers were celebrities and politician in Hong Kong and in the Mainland.  After the damage, each and every garment would have to be re-made for a particular customer, albeit there was a delay with a number of complaints from their customers.  If the garments were re-conditioned and sold at scrap value, this would seriously affect the reputation of the plaintiffs.  Although there was evidence that famous brands of fashion like Esprit and Burberry have scrap sale with their label removed, yet clothings made by them were off-the-peg sale of garments.  Each and everyone is not a unique garment. 

20. However, for Ho’s Fashion, each and every one was made to measure to a particular customer.  If some of them were re-conditioned and sold at scrap value, there would be two similar garments in the market, one worn by their customer and the other one worn by another person who bought the garment at scrap value.  The later one of course would not completely fit that person. 

21. In the end I do accept Mrs Ho’s evidence that garments in categories (2) and (3) could not be re-conditioned and sold as they would have to safe-guard their own customer.  Thus I would have allowed the total amount damage of $6.89 million as claimed by the plaintiffs if the 1^st defendant were liable.  

22. However I do not consider the plaintiffs are entitled to expenses in renting a godown for two years from 16 May 2006 onwards.  The garments were presumably at Unit B1 until they were removed to a godown in Fo Tan until May 2006.  The surveyors for the plaintiffs had made an immediate survey of the damage after the fire.  The plaintiffs, if they were properly advised by their legal advisors, should have written to all the defendants to inspect the garments within certain period before they were destroyed.  Five months would be more than enough for such inspection to take place.  Unfortunately no written notice was given to the defendants and the garments were stored at the godown and were not inspected until November 2008, shortly before the trial.  I would have disallowed the eventual charges for the storage of the damaged goods. 

23. Further the insurance premium of the goods stored at Fo Tan for the total value of $6.89 million is entirely uncalled for.  To the minds of the plaintiffs, they were valueless except they were evidence for their claim in damages.  They did not intend to sell the garments at all and therefore there is no point in insuring them to the full value of $6.89 million.  If they are properly advised, no insurance policy should be taken out for the goods at all.  By May 2006 all these garments should have been inspected by the defendants if proper notice were given to them and if they choose not to inspect the garments, they could be destroyed after they were photographed.  These two items, i.e. the rental and insurance premium would be disallowed from the quantum of damages. 

Conclusion

24. The plaintiffs’ action herein against the 1^st defendant is dismissed with costs to the 1^st defendant, to be taxed if not agreed.