WANG ON CONSTRUCTION ENGINEERING LTD. v. LO CHOK YIN AND OTHERS

HCA 18868/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18868 OF 1998

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J U D G M E N T

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1. In these proceedings the plaintiff has sued four defendants in contract and tort for damages arising out of alleged breaches of duty by them. Two of the defendants have admitted full liability including taxed costs. What remains to be resolved is the extent to which they can look to the other defendants for a contribution to that.

The Background

2. The third defendant is a wholly owned subsidiary of the fourth defendant. In February 1997 the fourth defendant purchased all the units on the 21st floor of Seapower Tower, Concordia Plaza, 1, Science Museum Road, Kowloon. The purpose was to provide premises to be occupied by the third defendant. But first the units had to be altered and redecorated. The first step in that process was to demolish all the internal partitioning. To that end the third defendant invited the second defendant to quote to carry out the demolition work, including the cost of third party insurance. The quote was accepted. I reproduce the English translation of that as follows:-

"Evertech Company Limited

Marco Polo Mansion, 10, Cleveland Street, Causeway Bay,

Hong Kong. Tel/fax: 8951465

To : China Aerospace International Holding Ltd.

Senior Manager

Demolition of 21st floor of Concordia Plaza, Tsimshatsui East, Kowloon

Quotation No. : Q04204-97-R1

Date : 11-4-1997

Quotation

Description		Quantity	Amount (HK$)
1.	Demolish all brick-walls separating the units according the the plan given	988 sq. ft.	185,000.00
2.	Purchase third party accident insurance (insured amount $5,000,000) and insurance against loss caused by the demolition (insured amount $1,000,000)	full policy	2,000.00
------------------------------------------------------------------------
		Total Cost	187,000.00

Remarks:

1. The demolition period will commence four days after this quotation has been signed, 50% deposit has been received and temporary electricity has been connected.

2. The cost for temporary electricity, cable installation by specified contractors and connection is payable by the customer.

3. Temporary lighting and electrical appliance shall be provided by us.

4. The price shown on this quotation is valid within two weeks.

5. Please make the cheque for payment payable to "Evertech Company Limited"

Advised by :	Approved by :
For and on behalf of Evertech Company Limited
____________________(sg.)	____________________(sg.)
Authorised Signature(s)	China Aerospace International Holdings Limited

12 April 97"

3. Work began immediately in circumstances I shall return to.

4. On 20 April 1997 a workman whilst engaged in the demolition work damaged a chiller pipe which burst and flooded the premises. The water permeated through the floors below entering the premises occupied by the plaintiff on the 18th floor of the building, there causing damage to computers and other office machinery, wall coverings and carpets. The plaintiff claims the cost of making good came to a total of $284,119.00.

5. Uncertain as to who or what entity was responsible the plaintiff issued proceedings against the four defendants, by writ dated 5 November 1998.

The Proceedings

6. The plaintiff joined the fourth defendant because as owner of the premises on the 21st floor it was a party to a document known as the Deed of Mutual Covent (DMC), in common with all other owners. It claimed the fourth defendant was in breach of clauses 6 and 7 of the DMC, which I reproduce below:-

"6. To be responsible for and indemnify the Registered Owner, the Manager and all other Owners and occupiers against all actions, proceedings, claims and demands whatsoever arising out of or in respect of any loss or damage to any person or property caused by or as the result of the act or negligence of any occupier of any part of any floor, Unit, Shop, Office or Garage of which he is the Owner or any person using such premises (excluding passengers and users of the Public Transport Terminus) with his consent express or implied or by, or through, or in any way owing to the overflow of water therefrom.

7. To be responsible to the Registered Owner and other Owners for the time being for the acts and omissions of all persons occupying any part of any floor, Unit, Shop, Office or Garage which he has the exclusive use with his consent, express or implied and to pay all costs, charges and expenses incurred in repairing or making good any loss or damage caused by the act, neglect or default of all such persons. In the case of loss or damage which the Manager is responsible to make good or repair, such costs, charges and expenses shall be recoverable by the Manager as hereinbefore provided and in the case of loss or damage suffered by other Owners or occupiers of the Building for which the Manager is not responsible to repair or make good, such costs, charges and expenses together with all other damages recoverable by law shall be recoverable by the person or persons sustaining the loss or damage."

7. It sued the third defendant because it was the party in occupation and responsible for engaging the contractors to carry out the demolition work thereby making it vicariously liable for the negligence of the contractor.

8. The second defendant was joined as the contractors engaged by the third defendant to carry out the demolition work.

9. The first defendant was made a party because the second defendant claimed to have sub-contracted the work to him.

10. The first defendant took no steps, and judgment by default was entered against him on 10 December 1998. As I understand, no formal steps have been taken to enforce that judgment.

11. The third and fourth defendants, acting in concert, have admitted full liability to the plaintiff. The third defendant concedes that it contracted with the second defendant to carry out the demolition work and that the pipe was damaged and burst during the negligent performance of that work. And the fourth defendant accepts that it is caught by the strict liability imposed by clauses 6 and 7 of the DMC. As a result the third and fourth defendants have paid into court a total of $390,133.52 which represents the amount sued for and interest from the date of the incident. In addition they accept liability for all the plaintiff's taxed costs. The plaintiff has accepted such payment in full settlement of its claim.

12. Having filed contribution notices against the first and second defendants, the third and fourth defendants now seek to recover the whole or part of that outlay from them.

13. This, then, is the issue I am now required to resolve.

14. What is not challenged is that the damage to the pipe and consequent loss caused by its bursting was the result of an act of negligence on the part of the workman responsible. What is not challenged is the quantum of the plaintiff's loss. What I have to decide is who or what entity was responsible for the acts of that workman and thus is liable in whole or in part for that loss.

15. For the answer to that I look to the evidence.

The Evidence

16. By all accounts the second defendant purported to arrange public liability insurance in terms of its contract with the third defendant. But the insurer engaged has refused liability and the second defendant has issued proceedings against the insurer and the broker which arranged the cover. I have not been told the current status of those proceedings. But it is pertinent to reproduce clauses 10 and 11 of the statement of claim, in which the second defendant herein is referred to as the plaintiff:-

"10. On or about 20 April 1997, an accident occurred at the premises whereby a worker carrying out the demolition work negligently caused a water pipe to burst ("the accident"), substantial damage was caused to the neighbourhood premises.

11. Being the main contractor of the demolition work, and according to the contract for the demolition work, the Plaintiff is legally liable for the damages done."

17. I should at this point mention that the second defendant filed in these proceedings a statement of defence denying liability; it pleaded that the demolition work was carried out by the first defendant and that it was he, or one of his employees, who was negligent and caused the damage. But before the trial got underway Mr Chan for the second defendant told me that his client did not wish to participate in the trial and would abide by any order that I made. He then asked for and was granted leave to withdraw. Accordingly I have had no evidence from the second defendant to substantiate its pleaded case.

18. I turn now to the first defendant. He was unrepresented. Although he had not taken any prior steps and in particular had not filed a defence or a witness statement I gave him leave to give evidence from the witness box. It was to be a revealing account.

19. He said that for the last ten years or so he has been a casual construction site worker, engaged by telephone call to undertake labouring work as and when it becomes available. One of those who hired him from time to time was a Miss Lam of a contractor he knew as Yuen Ying Company Limited, the Chinese name for the second defendant. When she telephoned it would be to tell him that work was available at a designated site and he would attend on a daily basis until the work was complete, and for which he would be paid, in common with all other casual workers, $800 per day. So it was that in April 1997 he was telephoned by Miss Lam and told to meet her the next day at the 21st floor of Seapower Tower. There, along with other casual workers, he was hired in the usual way, on this occasion to carry out demolition work and the removal of waste material, under Miss Lam's instruction and supervision. The work proceeded uneventfully for about ten days. During that time he was paid every two or three days, at the going daily rate. Then another workman, not being him but similarly employed, carelessly damaged the pipe and caused the flooding. He said he was not then and has never been a sub-contractor. At all times and in particular on this occasion he was working for wages as a casual construction site labourer. He owns no equipment, hires no work force, receives no contract sum.

20. When asked why he had taken no steps in the proceedings he said that he had not been served with or known about the plaintiff's writ and that was why he had not filed a defence or a witness statement. He did not know that judgment had been entered against him. He pointed out that his address is different from that recorded in the writ. The first indication he had that there was a suit was a solicitor's letter telling him about the judgment. He took it to the offices of Legal Aid, but was told they could not assist.

Findings of Fact

21. Crucial to the issue of liability is as to whether the second defendant sub-contracted the demolition work to the first defendant the burden being on it to establish that. In that respect I have no hesitation in finding that it did not. The first defendant satisfied me that he was a witness of the truth and was no more or less than a worker casually employed to carry out the necessary work in concert with others similarly engaged. And it was telling that having pleaded a contrary position the second defendant took no steps to support that in evidence.

22. Beyond question, I am satisfied that it was the second defendant which as contractor was solely responsible for the demolition work, and that it was its employee who, in the performance of his work, negligently damaged and caused to burst the water pipe which flooded the premises of the plaintiff below.

The Outcome

23. The second defendant is vicariously liable for the negligent acts of its employee and solely to blame for the damage he caused. Accordingly I find the second defendant liable to contribute 100% of the payment, including taxed costs, the third and fourth defendants have agreed to pay the plaintiff in settlement of its claim. The costs of the third and fourth defendants taxed if not agreed shall also be met by the second defendant. This order as to costs shall be nisi at first instance.

Footnote

24. I having found the first defendant to be blameless he would be well advised to protect his position by making application to have the judgment of 10 December 1998 against him set aside.