KINGDOM POWER DEVELOPMENT LTD v. THE INCORPORATED OWNERS OF CHEONG WAH BUILDING, TSUEN WAN

HCA 2671/2017

[2025] HKCFI 1305

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2671 OF 2017

_____________

_____________

_______________

D E C I S I O N

_______________

Introduction

1.  The present action has been docketed to me. This is the first case management hearing before me.

2.  This water leakage case involves 10 Third Parties.

3.  The Plaintiff, the Defendant and the Third Parties have engaged 12 experts altogether on issues relating to liability, quantum on reparation expenses and rental valuation. The parties have filed 14 sets of expert reports with leave of the court.

4.  In light of the amount of expert evidence involved and the complexity of the technical issues, these proceedings require robust and active case management.

Material Background

5.  For present purposes, it suffices to set out the following matters succinctly.

6.  Cheong Wah Building (the “Building”) is located in Tsuen Wan.

7.  The Defendant is the incorporated owners of the Building.

8.  The Plaintiff is the owner of shop nos. 12 and 13 on the ground floor and the 1^st floor of the Building (the “Plaintiff’s Property”). On top of the first floor is the upper surface of a podium forming a flat roof.

9.  The Third Parties are the owners of the individual units on the 2^nd floor of the Building.

10.  The Plaintiff says that there has been water seepage at the ceiling of the 1^st floor and parts of the internal walls in the Plaintiff’s Property since July 2009.

11.  It is the Plaintiff’s pleaded case that:-

(1)  The waterproofing layer on the top of the concrete slab above the 1^st floor (the “Waterproofing Layer”) is a common part of the Building.

(2)  In breach of section 18(1)(a) of the Building Management Ordinance (Cap. 344), the duties under the deed of mutual covenants (“DMC”) and the obligations at common law, the Defendant unreasonably and/or negligently failed to maintain the Waterproofing Layer.

(3)  As a result, there has been water seepage in the Plaintiff’s Property.

12.  The Defendant denies liability. The Defendant’s pleaded case can be summarized as follows:-

(1)  The Waterproofing Layer is not a common part of the Building.

(2)  In any event, there were unauthorized building works (“UBW”) on the 2^nd floor of the Building, and the same damaged the Waterproofing Layer.

(3)  The Defendant had adequately discharged its duties by carrying out an investigation and arranging a renovation project in 2012.

(4)  The water leakage in the Plaintiff’s Property was ascribed to the alterations to the windows and wall structures therein.

(5)  The Plaintiff failed to mitigate loss.

13.  The Defendant contends that if it is liable to the Plaintiff, it is entitled to seek contribution and/or indemnity from the Third Parties. The basis is that the Third Parties (or their predecessors-in-title) were responsible for the UBW which damaged the Waterproofing Layer thereby causing the water leakage in the Plaintiff’s Property.

14.  In the premises, the Defendant took out a third party notice against the Third Parties on 10 January 2020.

15.  The Third Parties strenuously deny liability. In short, the Third Parties contend that:-

(1)  The works in question were not unauthorized, and the same did not cause water seepage to the Plaintiff’s Property.

(2)  The Waterproofing Layer is a common part of the Property.

(3)  The Defendant had acquiesced the existence of the UWB.

Should the Trial of the Main Action and the Trial of the Third Party Proceedings be Split or Separated?

The Stance of the Parties

16.  Mr Justin Lam (for the Plaintiff) invited me to order that the trial of the main action be heard before the trial of the third party proceedings.

17.  Mr Lam submitted that:-

(1)  The issues in the main action and the third party proceedings do not overlap at all. The key issues in the main action concern (i) whether the Waterproofing Layer is a common part of the Building; and (ii) whether the Defendant unreasonably and/or negligently failed to maintain the Waterproofing Layer. However, the key issues in the third party proceedings concern (i) whether Third Parties breached the DMC and/or section 34 of the Building Management Ordinance by erecting and failing to remove the UWB; and (ii) whether the UWB damaged the Waterproofing Layer.

(2)  The issues in the main action are straightforward. In contrast, the issues in the third party proceedings, which touch upon legal and factual questions regarding the existence and status of numerous UWB, are complicated.

18.  Mr Matthew Cheung (for the Defendant) opposed Mr. Lam’s proposal. Whilst he accused the Plaintiff of failing to take out a summons seeking a split order, he also emphasized that the question whether the Waterproofing Layer is a common part of the Building is a common issue in both the main action and the third party proceedings. As such, there is a risk of inconsistent finding.

19.  Mr Matthew Ngai (for the 5^th, 6^th, 8^th, 9^th and 10^th Third Parties) supported Mr. Lam’s proposal. However, in light of risk of inconsistent finding, he indicated that his clients wished to reserve the rights of participating in the trial of the main action for the limited purpose of contesting the issue whether the Waterproofing Layer is a common part of the Building (in respect of which expert evidence has been filed).

20.  Other Third Parties (except the 2^nd Third Parties) confirmed with the court that they did not wish to participate in the trial of the main action.

21.  As regards the 2^nd Third Parties, they did not attend the present hearing in light of their mental condition[1].

Discussion

22.  Under Order 1B, rule1(2)(d), (h), (i) and (j), the court has case management powers to:-

“ (d) direct that part of any proceedings (such as a counterclaim) be dealt with as separate proceedings;

(h) direct a separate trial of any issue;

(i) decide the order in which issues are to be tried;

(j) exclude an issue from consideration.”

23.  I am of the view that this is the appropriate occasion to consider whether the main action should be tried before the third party proceedings.

24.  For the following reasons, I am convinced that this is the appropriate course to take.

25.  The starting point is that a plaintiff is entitled to confine himself to dealing with the defendant, and he should not be coerced to deal with the third parties joined by the defendant. In this connection, Mr Lam helpfully referred me to Cooperative Raborank UA T/A Rabobank Dublin v AM Alpha Lux Invest 130 SARL [2023] IEHC 612 at para 68. There, Carswell J, citing Gillespie v Anglo Irish Beef Processors Ltd [1994] NI 65, stated:-

“ [A] plaintiff ought to be able to confine himself to dealing with those whom he has chosen to join as defendants and decline to concern himself with third parties joined by the defendant…the plaintiff is entitled to stand aside from the third-party proceedings and confine his dealings to those which he has with the defendant…”

26.  In my view, Carswell J did not go so far as to suggest that a plaintiff is always entitled to ask that the trial of the third party proceedings be split from the trial of the main action. In this connection, the court must bear in mind the question of procedural economy and would wish to resolve as many issues as possible at one go. However, in light of the circumstances of the present case, I am of the view that it would be just and fair to order that the two sets of proceedings be split and separated.

27.  First, I am of the view that the third party proceedings do involve complicated technical issues as well as legal issues relating to the UWB. These issues do not concern the Plaintiff at all. In the circumstances, if the main action and the third party proceedings are tried together, the trial will be substantially lengthened, and this would not be fair to the Plaintiff (who has not chosen to deal with the Third Parties).

28.  Second, the progress of the main action is ahead of the progress of the third party proceedings. In this connection, I am aware that the pleadings in the third party proceedings are not yet in order, and further amendments are necessary. Further, there is evidence showing that the 2^nd Third Parties have been suffering from dementia, and their son is still in the course of considering whether to make an application for appointment of a guardian ad litem. In the circumstances, if the main action and the third party proceedings are tried together, very substantial delay will be caused to the proceedings under the main action. This would be unfair to the Plaintiff.

29.  Third, if it transpires that the Plaintiff’s claims against the Defendant in the main action fail, the substantive dispute under the third party proceedings may not arise at all, and it appears that the only outstanding matter is costs. There is a real possibility that judicial resources and legal costs could be saved.

30.  Fourth, I do not lose sight it is the Third Parties’ stance that the Waterproofing Layer is a common part of the Building. In my view, it is easy to address Mr Cheung’s concern about the risk of inconsistent findings.

(1)  There is no reason why the court may not allow the Third Parties to participate in the trial of the main action for the purpose of contesting the specific issue of whether the Waterproofing Layer is a common part of the Building.

(2)  In my view, this is a convenient course to take. By adopting this course, the Court’s findings at the trial of the main action will be binding on the Third Parties, and the risk of inconsistent findings will not arise.

31.  Fifth, Mr Lam reminded me that paragraph 13 of Master Hui’s order dated 24 July 2020 provides that the “[t]he question of the liability of the Third Parties for indemnity and/or contribution be tried at the trial of this action with the main action or subsequent thereto as the Trial Judge shall direct”. For the reasons elaborated above, I am of the view that it would be appropriate to rescind the said order pursuant to Order 16, rule 4(5), which provides that “[a]ny order made or direction given under this rule may be varied or rescinded by the Court at any time”. The said order was made at a very early stage of the proceedings. At the time, the Third Parties had not yet filed their defences and expert reports in the third party proceedings. As of July 2020, the court could not have envisaged the complexity that arose subsequently.

32.  For all the above reasons, I order that:-

(1)  The trial of the main action and the trial of the third party proceedings be split and separated.

(2)  The trial of the main action shall take place before the trial of the third party proceedings.

(3)  The 2^nd[2], 5^th, 6^th, 8^th, 9^th and 10^th Third Parties be at liberty to participate in the trial of the main action for the purpose of contesting the issue of whether the Waterproofing Layer is a common part of the Building.

33.  Since the trial of the main action and the trial of the third party proceedings are split and separated, I will provide different directions for the two sets of proceedings, and they should not be tied with each other anymore.

34.  It is envisaged that the trial of the main action will take place much earlier than the trial of the third party proceedings.

Directions for the Proceedings in the Main Action

35.  Having heard from Mr Lam (for the Plaintiff), Mr Cheung (for the Defendant) and Mr Ngai (for the 5^th, 6^th, 8^th, 9^th and 10^th Third Parties, who wished to participate in the trial of the main action for limited purposes), I provide the following directions in respect of the proceedings under the main action:-

(1)  The time for the Plaintiff and the Defendant to file and serve their respective expert reports on restoration expenses under paragraph 14(8) of the Order of Master Hui dated 24 October 2022 be extended to 22 April 2025.

(2)  The time for the Defendant to file and serve its expert report on mitigation under paragraph 15(7) of the Order of Master Hui dated 24 October 2022, be extended to 1 April 2025, and Mr Simon Cheung (ie the Defendant’s expert on restoration expenses) be directed to answer the following issues:-

(a)  the type(s) of modification work required for enabling the Ground Floor to be let out on its own and the modification costs; and

(b)  the type(s) of modification work required for enabling the Ground Floor and part of the 1^st Floor to be let out and the modification costs.

(3)  The time for the Plaintiff to file and serve its expert report on mitigation under paragraph 15(7) of the Order of Master Hui dated 24 October 2022 be extended to 15 April 2025.

(4)  Notwithstanding paragraphs 17 and 19 of the Order made by Master Hui on 24 October 2022 and paragraph 6 of the Order made by Registrar Hui on 27 September 2023,

(a)  the time for the liability experts of the Plaintiff, the Defendant and the 5^th, 6^th, 8^th, 9^th and 10^th Third Parties to meet on a without prejudice basis for the purpose of preparing joint statement pursuant to Order 38, rule 38 indicating those parts of the evidence on which they are and those in which they are not in agreement be extended to 35 days from the date hereof;

(b)  the time for the aforesaid parties to prepare and sign the joint statement on the issue of liability be extended to 35 days thereafter; and

(c)  the time for the Plaintiff’s solicitors to file and serve the signed joint statement on the issue of liability be extended to 7 days thereafter.

(5)  A further case management conference in respect of the main action be fixed to be heard before this court on a date to be fixed not before 25 June 2025 in consultation with counsel’s diary, with 30 minutes reserved.

(6)  The 2^nd, 5^th, 6^th, 8^th, 9^th and 10^th Third Parties be at liberty to attend the said case management conference.

(7)  The costs of the present case management conference as between the Plaintiff and the Defendant be in the course of the main action.

Directions for the Proceedings in the Third Party Proceedings

36.  I also provide the following directions in respect of the third party proceedings:-

(1)  Leave to the Defendant to file and serve its Amended Reply and Defence to Counterclaim in relation to the 7^th Third Party’s Amended Defence and Counterclaim within 35 days from the date of the order to be made.

(2)  Costs of the application in respect of paragraph (1) above be to the 7^th Third Party in any event.

(3)  Leave to the 1^st and 4^th Third Parties to file and serve their Amended Defence within 28 days from the date thereof.

(4)  Leave to the Defendant to file and serve its Amended Reply within 28 days thereafter.

(5)  Costs of the 1^st and 4^th Third Parties’ application in respect of paragraphs (3) and (4) above be to the Defendant in any event.

(6)  Leave to the 5^th, 6^th, 8^th, 9^th and 10^th Third Parties to file and serve their Amended Defence within 28 days from the date hereof.

(7)  Leave to the Defendant to file and serve its Amended Reply within 35 days thereof.

(8)  Costs of the application in respect of paragraphs (6) and (7) be paid by the 5^th, 6^th, 8^th, 9^th and 10^th Third Parties forthwith, summarily assessed at HK$1,040.

(9)  The Defendant and Third Parties shall file, serve and exchange supplemental witness statements (if any) within 42 days after the Defendant files and serves its Amended Reply (if any).

(10)  The Defendant and the Third Parties shall seek counsel’s advice within 28 days upon compliance with the aforesaid directions.

(11)  A further case management conference in respect of the main action be fixed to be heard before this court on a date to be fixed not before 25 August 2025 in consultation with counsel’s diary, with 2 hours reserved.

(12)  The costs of the present case management conference as between the Defendant and the Third Parties be reserved.

Other Matters

37.  I express my gratitude to Mr Lam, Mr Cheung and Mr Ngai for their helpful assistance.