CROWN RIVER INDUSTRIAL LTD v. WAN CHIU YUEN AND ANOTHER

HCMP 3011/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 3011 OF 2015

(ON AN INTENDED APPEAL FROM DCCJ 4448/2011)

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REASONS FOR DECISION

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Hon Barma JA (giving the Reasons for Decision of the court):

1. This was an application by the plaintiff for leave to appeal against the judgment of Deputy District Judge R Lai dated 20 April 2015. At the end of the hearing we dismissed the application with costs to the defendants. These are our reasons for doing so.

2. The claim concerned damage to the plaintiff’s property (Flat 1C, Tower 1, Greenheight Villa, Shatin Heights Road, Tai Wai, New Territories), which was situated directly beneath the defendants’ property (Flat 2C in the same building).  The plaintiff alleged that such damage was caused by the seepage of water from the defendants’ flat into the plaintiff’s flat during heavy rain on the night of 19 July 2009.  It was also alleged that there was further water leakage thereafter, causing additional damage.  The judge ordered the defendants to pay the plaintiff HK$48,000 in respect of the damage caused by the seepage on 19 July 2009, and a further HK$7,800 in respect of the additional damage caused by water leakage thereafter.  He also granted a mandatory injunction against the defendants requiring then to repair their property so as to prevent further leakage from occurring.

3. However, the judge rejected a further claim for just under HK$600,000 in respect of loss of rental allegedly caused by the subsequent leakages.  The plaintiff claimed that its tenant decided not to renew her lease and moved out because of such further leakages and that it was unable to secure a new tenant for some 33 months after that.

4. Both sides applied unsuccessfully to the judge for leave to appeal.  The defendants did not take matters further.  However, the plaintiff renewed its application for leave to appeal to this court in respect of the rejection of its claim for damages in respect of loss of rent.

5. The test for granting leave to appeal is well established.  It is necessary for the party seeking leave to show that his appeal has reasonable prospects of success, or that the appeal ought to be heard for some other reason in the interests of justice.  Only the first of these grounds is engaged here.

6. The plaintiff contends that it has reasonable prospects of success in its proposed appeal, relying on the following grounds:

(1)  Loss of rental was to be expected as the water leakage was likely to affect the rentability of the flat.  The judge erred in having regard to valuation evidence as to the rental value of the flat, which had been adduced for the purpose of assessing the quantum of the loss of rental, in order to conclude that the cause of the plaintiff’s inability to rent out the flat was the high rental at which the plaintiff had placed the flat on the market, rather than the damage caused by the leakage.

(2)  The judge erred in placing excessive weight on the evidence of the defendants’ valuation expert, having regard to what are said to be unsatisfactory aspects of the methodology adopted by him.

(3)  The judge erred in rejecting the plaintiff’s claim because of the plaintiff’s failure to adduce direct evidence from potential tenants or estate agents as to the reasons for the inability to rent out the flat for a prolonged period, particularly when it was impractical to expect the plaintiff to adduce such evidence.

(4)  The judge erred in requiring the valuation experts to be called at trial and cross-examined before permitting criticism to be made of the defendants’ expert, when he had refused an application made by the plaintiff at the pre-trial review seeking a direction that the experts be required to attend for cross-examination.

(5)  The judge was wrong to find that the tenant’s failure to renew was in part due to residual problems caused by the earlier (rather than the later) incident of water seepage.

7. It is important to bear in mind that the judge found against the plaintiff in respect of the claim for loss of rental because he considered that the plaintiff had not established that the tenant decided to move out as a result of the further leakage of which the plaintiff complained. He considered that the main reason for the plaintiff’s failure to rent the flat out for as long as 33 months was because the level of the rent at which the flat was marketed was too high. Initially, the flat was put on the market at HK$25,000 per month (inclusive of a car parking space, rates and management fees), nearly $10,000 per month more than the rent under the previous lease. This was subsequently reduced six months later to HK$20,000 a month, which the judge considered was still substantially above the rental value of the flat, as the flat remained unlet for a further 27 months, by which time rental values had eventually increased to a level approximately equivalent to the asking rent.

8. Against this basic background, it seems to us that the proposed grounds of appeal have no reasonable prospects of success.

9. The first ground of appeal is without merit. Although the valuation evidence may have been adduced for the purpose of assessing the rental value of the flat, once adduced, it was available to be used in connection with any issue to which it was relevant.  Evidence of the rental value of the flat was clearly relevant to the question of whether or not the asking rent sought by the plaintiff was realistic, or whether it was at a level which would make it difficult, if not impossible, to secure a tenant.  It was therefore clearly relevant to the issue of whether the real cause of the flat remaining empty was the alleged water damage as a result of the later leakages, or because the plaintiff was simply asking too high a rent.

10. At the oral hearing, Mr Leung (counsel for the plaintiff) submitted that the defendants had failed to adequately plead the respects in which the plaintiff had failed to mitigate its losses, and that had the defendants wished to put forward a case that the plaintiff had failed to act reasonably in mitigation of its losses by placing the flat on the market at an unreasonably high price, this should have been spelt out, failing which the valuation evidence should not have been taken into account for the purposes of such an argument.  With respect, it seems to us that the matter is more one of causation than mitigation, and that this was how the point was approached by the judge.  Essentially the judge took the view that the failure to rent the flat out was caused not so much by its condition as by the rather aggressive asking rental that was sought.  So regarded, we do not think that there is any substance in this argument of Mr Leung’s.

11. The second proposed ground of appeal is also unmeritorious.  Further, it seeks to attack the weight given by the judge to the evidence of the rival expert witnesses.  This court has repeatedly stated that general assertions of excessive weight being given to particular evidence will not amount to good grounds of appeal.  The particular errors which the judge is said to have been made, and the respects in which such errors can be said to be palpable, must be identified.  Although the plaintiff has sought in its submissions to suggest some respects in which criticisms might be made of the evidence of the defendants’ expert, it is apparent from the judgment that the judge preferred such evidence to that of the plaintiff’s evidence, for reasons (which appear to us to be sound ones) that he explained at length in paragraphs 192 to 210 of the judgment.

12. As to the third ground of appeal, given that the judge preferred the evidence of the defendants’ valuation expert over that of the plaintiff’s expert, and had formed the view that the asking rent was far in excess of what the market would bear, it does not seem to us that the judge can be criticized for declining to accept the plaintiff’s assertion as to what it was told by potential tenants as sufficient evidence that the inability to rent out the flat was caused by the alleged water damage rather than the high asking rent without there being placed before him cogent direct evidence to this effect from disinterested parties.

13. Ground four does not appear to us to be a fair criticism of the judge.  It is correct that the judge was disinclined to accept the criticisms of the defendants’ expert without the expert having been cross-examined so as to be afforded and opportunity to deal with such criticisms.  It is also correct that the judge declined an application for leave to cross‑examine made by the plaintiff.  However, that application was made very late in the day, just a few days before the trial, and in those circumstances, the judge was clearly entitled to refuse it as a matter of case management.  In those circumstances, this criticism too is without merit.

14. Finally, as to the fifth ground, it appears from paragraphs 275 to 276 of the judgment that the judge considered the overall effect of the plaintiff’s tenant’s evidence to be that the effective reason for her decision not to renew the lease was that she wanted a change of environment, and that the mould stains she mentioned in her oral evidence were not an effective cause for that decision, particularly since they related to the earlier incident rather than the later water leakages which were relied upon for the purposes of the claim for loss of rental. Although it was suggested at the hearing before us that the judge had misapprehended the evidence, no particulars were put forward in the written submissions of the evidence that was allegedly misunderstood.  It therefore seems to us that the judge was entitled to form the view he did, and that there is no basis on which this court should intervene.  Moreover, as the judge pointed out, the plaintiff’s pleaded case was that the tenant had decided not to renew because of the continuous water leakage (i.e. the later problems) rather than because of damage caused by the major seepage in 2009.

15. For the foregoing reasons, we were satisfied that the plaintiff’s proposed appeal has no reasonable prospects of success and we dismissed the application for leave to appeal, with costs to the defendants.  Having considered the statements of costs lodged and the parties submissions on them, we assessed such costs on a gross sum basis, in the amount of HK$115,000.