LUK SAU LAN AND ANOTHER v. YIN TAK INVESTMENT CO LTD

DCCJ 2576/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2576/2010

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ASSESSMENT OF DAMAGES

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1. This is a water leakage case involving 3 units one immediately above the other in Shek Pik Resettlement Block B, Nos 85-99 Yeung Uk Road, Tsuen Wan, New Territories (“the Building”). This is the hearing of the third party proceedings.

BACKGROUND

2. The Building is half a century old.  The plaintiffs are the registered owner of a unit on the 2^nd Floor of the Building.  On 27 July 2010, they commenced the present action against the defendant, owner of the unit on the 3^rd Floor immediately above, for damage caused by water seepage from the defendant.

3. The defendant resisted the claim; and contended that the water seepage originated from the third party on the 4^th Floor immediately above it that had overflowed into the defendant’s unit and eventually into the plaintiffs’ unit below.  On this basis, the defendant initiated the third party proceedings.

4. The plaintiffs and the defendant then settled the main action.  On 13 June 2012, it was ordered by consent that the defendant should pay HK$150,000 to the plaintiff in full and final settlement of the claim together with the plaintiffs’ costs of this action, to be taxed, if not agreed.

5. The third party has never entered appearance and has been absent from the previous court hearings.  Upon the defendant’s application, this court gave judgment in favour of the defendant against the third party on 15 June 2012 in, among others, the following terms:

(1)  the third party shall contribute to the defendant’s liability to the plaintiffs (including the costs that the defendant shall be liable to pay to the plaintiffs in respect of the claim and the defendant’s own costs of defending the claim, to be taxed if not agreed) now settled, save that the degree of contribution is to be assessed;

(2)  interlocutory judgment on liability be entered against the third party for damages to the defendant to be assessed;

(3)  the third party shall pay the defendant’s costs of the third party action up to the date of judgment on liability, to be taxed if not agreed.

6. This is the assessment of (1) the degree of the third party’s contribution towards the defendant’s liability to the plaintiffs; and (2) the damages that the third party is liable to pay for the damage caused to the defendant.

THE THIRD PARTY’S CONTRIBUTION TOWARDS THE DEFENDANT’S LIABILITY TO THE PLAINTIFFS

7. Section 3 of the Civil Liability (Contribution) Ordinance, Cap 377 (“the Ordinance”) provides the statutory basis for the defendant’s recovery of contribution from the third party who is liable in respect of the same damage.

8. Section 3(4) provides that a person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage shall be entitled to recover contribution without regard to whether or not he himself is or ever was liable in respect of the damage, provided that he would have been liable assuming that the factual basis of the claim against him could be established.

9. Section 3 provides that:

“(5) On assessing any contribution under this section, the court shall disregard any part of the payment in respect of which the contribution is sought which appears to the court to be excessive.”

10. Section 4 provides that

“(1) …… in any proceedings for contribution under section 3 the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question.

(2) …… the court shall have power in any such proceedings to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.

……”

11. The defendant seeks contribution from the third party towards the settlement sum of HK$150,000 and another sum of HK$198,000 being the cost of repair to the floor of the defendant’s unit to prevent further water seepage into the plaintiffs’ unit. The primary stance of the defendant is that it should be complete indemnity.

Indemnity or contribution

12. The plaintiffs claimed against the defendant for breach of duty as owner under the deed of mutual covenant and the Building Management Ordinance as well as in negligence and for nuisance.  The defendant denied liability and blamed the third party entirely for the damage to the plaintiffs’ unit.

13. The plaintiffs disagreed.  It was specifically pleaded (at §7(b) of the reply) that the seepage from the third party accumulated at the floor slab of the defendant’s unit; and but for its defective state and condition, the seepage would not have gone further down to the plaintiffs’ unit.  It was also pleaded (at §8A of the amended statement of claim) that since the defendant has acquired knowledge about the water seepage, it has failed properly or at all to take any step to stop or abate the nuisance.

14. The plaintiffs’ case is that they started to notice and to complain about the water seepage problem in 2008.  In her evidence on behalf of the defendant, Ms Chan, director and shareholder, suggested that she learned about the seepage problem in 2008-2009.  According to her, her brother used to reside at the defendant’s unit at one stage; and he moved out and started to use the unit for storage only since the end of 2008.

15. Ms Chan confirmed that her brother is the Mr Chan who previously made a statement dated 17 February 2012 in these proceedings.  His statement was included in the pre-trial review bundle and was supposed to be a witness at the hearing.  With subsequent leave of the court, Ms Chan was added as a witness, who eventually became the only witness for the defendant.  Mr Chan was not called during this hearing.

16. According to Mr Chan statement, the defendant’s unit used to be let; but has become vacant since 2003.  There was no mention that he had used the unit for residence or storage during the interim as Ms Chan asserted.  He stated that it was at the end of 2009 when he happened to learn that the plaintiffs had been trying to get in touch with the defendant.  It was then when the defendant first came to learn about the seepage problem.

17. Mr Chan made his statement in his capacity as the manager of the defendant and was authorised to do so on its behalf.  Its truth was verified by him.  When asked about this, Ms Chan did not, as she probably could not, contradict her brother’s statement.

18. The evidence shows that after complaint has been filed with the Joint Office of the Buildings Department and the Food Environmental and Hygiene Department (“the Joint Office”), contractor was engaged by the Joint Office to carry out dye-water test in the units of the defendant and the third party respectively.

19. It was found that the waterproof layer of the floor slab of the bathroom in the defendant’s unit was defective and thus causing seepage into the ceiling of the plaintiffs’ unit.  Notice was thus issued by the Joint Office to the defendant on 5 July 2010 for rectification.

20. It was also found that the third party’s unit had been sub-divided into various sub-units self-contained with bathrooms.  The floor slabs and wall fringes of 3 of those sub-units were defective in waterproof and thus causing seepage into the defendant’s unit below.  Notice was thus issued by the Joint Office to the third party on 8 July 2010 for rectification.

21. After the commencement of the action, the plaintiffs have engaged their expert to investigate the cause of the seepage.  A report dated 18 September 2010 was produced.  The conclusion was similar to that of the investigation conducted by the Joint Office mentioned above.

22. Pursuant to the direction of the court, the defendant also engaged its expert to investigate the cause of the seepage.  Inspection was conducted in the presence of the representative of the plaintiffs.  A report dated 12 December 2011 was produced.

23. According to the report, there were the following findings in the plaintiffs’ unit:

(1)  Water leakage areas were apparent towards the end of the unit along the corridor, within the kitchen, and to the bedrooms and storeroom on the sides of the corridor.  Extensive loose plastering, peeling off paintwork and brownish water staining were found.

(2)  In the bedrooms, serious detached plastering and water marks on the ceiling and walls were found.  In another bedroom and adjacent storeroom, extensive and scattered brownish water marks and bubbling paintwork were found.

(3)  Water drippings were recorded from the ceiling of the corridor, which was collected and diverted to drain into a plastic bucket on the floor.  There were generally peeling paintwork, detached plastering and minor hairline cracks.  Readings of the moisture content in the affected areas were medium to high.  By touching, the experts noted the affected areas of the ceiling to be cold and moist.

24. In the defendant’s unit, there were the following findings:

(1)  The flat was unoccupied.  Debris and dust were spread around within the flat.  The impression was that the flat had been vacant for some time.

(2)  Along the end of the corridor and near to the toilet, there was dripping water from the ceiling.  This had caused ponding on the floor and the surroundings had become wet.

(3)  Because the dripping water was clear and odourless, the source was believed to be the potable water pipe from the ceiling above.

(4)  The toilet was noted to be dilapidated with broken drain pipe and the surrounding was heavily soiled.

25. In the third party’s unit, there were the following findings:

(1)  The inspection confirmed the investigation of the Joint Office mentioned above that the unit had been sub-divided into 4 individual units self-contained with kitchen and toilet.  Major alteration of the internal plumbing and drainage was believed to have been carried out.

(2)  Inspection of the roof above the third party’s unit led the expert to rule out the causation between the condition of the roof and the water seepage problem.

26. The expert engaged by the defendant concluded that the source of the water seepage was likely the plumbing or drainage pipes rather than the external wall defects.  The leak from the defective pipes of the sub-divided units in the third party’s unit and the accumulation of water in the defendant’s unit, that had been left vacant, eventually caused the seepage into the plaintiff’s unit.

27. The defendant’s unit has been left largely unattended over the 6 years prior to 2009.  The photographs depicting the interior of the unit at the end of 2011 (annexed to the defendant’s expert report) somehow evidence that.  Assuming that there were indeed occasions on which Mr Chan (or anyone from the defendant) might have been at the unit for whatever purpose during the relevant years, the attention to the interior, if any, did not suffice to detect the water seepage during 2008-2009.

28. Mr Ng submitted that but for the water seepage from the third party’s unit, the failure of his client in maintaining its unit per se would not have given rise to any claim by the plaintiff against the defendant.  Therefore the sole operative cause that gave rise to his client’s liability to the plaintiff was the seepage from the third party, not the lack of maintenance and repair of his client’s unit.  On this basis, Mr Ng submitted that the defendant is nevertheless entitled to an indemnity from the third party.  I do not agree.

29. First, as mentioned, the plaintiff’s claim against the defendant was also based on the deed of mutual covenant, in particular, clauses 2 and 6.  The duty of the defendant as a co-owner to maintain the interior of his unit and to make good any loss or damage to other co-owners was therefore also contractual.  The plaintiff’s reliance on section 34H of the Building Management Ordinance reinforces the imposition of such contractual duty on the part of the defendant by operation of law.  Breach of the contractual obligation per se becomes actionable.  The question of the resultant damage only determines whether compensation to the innocent party is nominal or substantial.

30. Second, what Mr Ng submitted is correct insofar as the time when a tortuous act becomes actionable is concerned.  Even so, in the event that damage was indeed caused by the breach on the part of the defendant and thus becomes actionable in tort by the plaintiff, such damage caused by the defendant and that caused by the third party, even assuming both to be water seepage, would have been different damage to the plaintiff.  That would have taken the case out of the context of contribution for the same damage; and the plaintiff may have to pursue the defendant and the third party for the damage respectively caused by them.

31. Mr Ng also cited a number of cases as instances where the court is said to have awarded full indemnity.  Those might be appropriate cases for full indemnity; but none of them is in any material way close to the present one in terms of context.

32. Had the defendant properly maintained the interior of its unit, particularly the floor, and attended the unit, the seepage could have been discovered and further seepage to the plaintiffs’ flat could have been prevented or abated.  The evidence tends to support the plaintiffs’ view of the responsibility of both the defendant and the third party towards the same water seepage to their unit.

33. The defendant apparently carried out repair to its floor only in May 2012.  Whilst Ms Chan explained in court her understanding that the repair to its floor was impossible without the stoppage of the water seepage from above, the repair was nevertheless carried out when, according to her in court as well, the seepage was continuing.  Indeed there is no evidence that the third party has done anything about the situation at all.

34. The way that the third party sub-divided her unit is another instance of the notorious practice in multi-storey building.  The total disregard by the third party of the complaint by the plaintiffs and the defendant as well as the present action is inexcusable.  The third party is certainly substantially to blame.

35. After the hearing, Mr Ng submitted additional authorities in support of not more than 20% responsibility on the part of his client in the present case.  I am not particularly assisted by the cases, which again differ from the context of the present one. Having said that, and in the absence of contrary argument, I am prepared to find that the proposed apportionment of blame between the defendant and the third party is not unfair in the circumstances of the case.

The settlement sum

36. As pleaded, the plaintiffs claimed against the defendant for:

(1)  injunctive reliefs for the purpose of stopping and preventing further water seepage from the defendant’s unit;

(2)  cost of repair and reinstatement of the furniture and fittings in the sum of HK$150,000;

(3)  general damages for discomfort, inconvenience and disturbance to be assessed;

(4)  cost of electric re-wiring in the sum of HK$3,000;

(5)  alternatively damages to be assessed;

(6)  interest.

37. There is expert evidence in respect of the cause of the water seepage and the damage so caused to the plaintiffs; but there is none in respect of the reasonable repair and the cost thereof so entailed.  Nevertheless, considering the claim against the documentary evidence produced (in both pre-trial review hearing bundle and the assessment hearing bundle), I find that the settlement sum of HK$150,000 is not unreasonable.

38. The defendant is entitled to contribution by the third party to the extent of 80% and hence a sum of HK$120,000.

The repair of the floor of the defendant’s unit

39. As mentioned, evidence shows that the defendant repaired the floor of its unit in May 2012.  That cost the defendant a sum of HK$198,000.  The defendant claims that as part of the settlement with the plaintiffs.  Mr Ng for the defendant explained that it was mere neglect or mistake that his client’s undertaking to repair its floor was left out of the consent summons.  I have problem with such explanation.

40. The consent summons was filed on 13 June 2012; and the order made on 15 June 2012 when the pre-trial review was held.  No suggestion of mistake was hinted by counsel during the pre-trial review.  In fact the explanation came from counsel during this hearing.

41. In support, the defendant referred to the letter dated 3 April 2012 from its solicitors to the plaintiffs’ solicitors.  The defendant’s solicitors indeed recorded that as a package of the settlement, the defendant undertook to carry out repair to its floor to prevent further seepage from the defendant to the plaintiffs.  The parties would jointly confirm a list of necessary repair; and the plaintiffs would be entitled to carry out inspection upon completion of the repair.

42. For incorporating the above undertaking, the defendant’s solicitors pointed out, and I think rightly, that a Tomlin order instead of a consent order should be prepared.  Nonetheless, as mentioned, a consent summons was filed and for an order for the payment of the settlement sum only.  That both parties’ solicitors, particularly the plaintiffs’ solicitors whose clients were supposed to benefit from such undertaking, somehow committed such mistake would be quite extraordinary.

43. Mr Ng suggested that amendment of the order would be sought, if necessary.  But if the undertaking should not have been incorporated by way of a consent summons, I wonder how it should now be introduced by way of amendment to the order already made.  In any event, the order cannot be amended ex parte without hearing the plaintiffs or alternatively obtaining their consent.

44. The settlement sum was indeed paid (on 19 June 2012) pursuant to and after the order dated 15 June 2012.  On the contrary, the repair to the floor of the defendant had already been completed by the time of the consent summons.  An undertaking by the defendant and hence an order embodying that would have been unnecessary. The explanation that the undertaking to repair the floor of the defendant should have been included in but left out of the consent summons by mistake simply cannot hold.

45. Having said that, I think it is not crucial whether or not it was pursuant to any settlement with the plaintiffs that the repair was carried out.  The repair was and had to be carried out to curb the water seepage problem.  In any event, whether the defendant is entitled to attribute the burden of the cost of such repair to the third party depends firstly on whether the repair was caused by the third party’s breach; and secondly on whether the amount is reasonable.

46. The defendant was and still is under a contractual obligation (under the deed of mutual covenant and by operation of law) to maintain the interior condition of its unit irrespective of any breach on the part of other owners in the Building.

47. There is however allegation that the condition of the floor of the defendant’s unit was also the result of the water seepage from the third party.  However the allegation was not specifically made by way of pleading against the third party. Nor was this mentioned in the witness statements.  Ms Chan was led to give such evidence in court.  But there are problems with such assertions.

48. First, the defendant never sought direction from the court for adducing expert evidence in respect of the cause of the condition of the interior of its unit; and, if the water seepage from the third party had any bearing, the extent of damage attributable to that cause.

49. Second, Ms Chan in her statement (§12) indicated that the contractor responsible for carrying out the repair to the floor of the defendant’s unit would attend the hearing.  He might have been in a position to cast some light on the question. He did not attend the hearing as suggested.

50. Third, the contractor was supposed to explain its repair work and quotation.  In my view, it had better done so.  Contrary to the undertaking recorded in the solicitors’ letter in April 2012 mentioned above, there is no evidence that the repair work carried out to the floor of the defendant’s unit was the result of a jointly confirmed list of repair.  There is no evidence of such a list.

51. The written contract for such work consisted of the demolition of all the interior partitions and associated structures as well as repair and waterproof work to the entire floor of the defendant’s unit.  Ms Chan sought to explain that all the partition walls were soaked and the floor tiles damaged by the water seeped from the third party.  The waterproof work procedure also necessitated the removal of the partitions in any event.

52. However it is obvious from the reports of the experts that the test carried out by the plaintiff’s expert at the defendant’s unit in September 2010 and the water seepage found by the defendant’s expert in November 2011 were localised along the corridor towards the end of the units where the kitchen and toilet are.  Some photographs taken by the defendant’s expert in November 2011 depict that some partition walls and floor tiles apparently towards the other end of the defendant’s unit showed no signs of water damage as that alleged by Ms Chan.  When confronted with the above evidence, Ms Chan had to concede that about one quarter of the unit was unaffected by the water seepage from above.

53. I am not particularly impressed by the state of such evidence adduced on behalf of the defendant.  This becomes more apparent when the same contractor’s quotation for the other renovation work to the defendant’s unit is considered (below).  There are all the signs that the contractor was engaged to renovate the defendant’s unit without specific regard to which part of it was and was not damaged by the water seepage from the third party.

54. As to the leakage sites of the floor that were not the result of the water seepage from the third party, the defendant had the obligation to maintain and to repair them from the outset.  At the end, Mr Ng did not seek to argue otherwise.  Taking all factors into account, Mr Ng conceded that his client may have to accept that only 50% of this item of claim could be attributed to the third party.  In the absence of contrary argument, I am prepared to accept that.

55. The amount under this head attributable to the third party is therefore HK$99,000.

OTHER DAMAGES PAYABLE BY THE THIRD PARTY TO THE DEFENDANT

56. For any damage caused by the water seepage to the defendant’s premises, the third party should also be liable.  Cost of repair is claimed at the sum of HK$584,300.

57. The pleading of such damage is un-particularised.  Neither the statement of Mr Chan (who was not called at this hearing) nor that of Ms Chan particularised the damage.  A quotation from the contractor dated 20 June 2012 was relied on.  This is the same contractor responsible for carrying out repair to the floor of the defendant’s unit.

58. This quotation envisages effectively renovation of the entire unit of the defendant. It shows no regard to which part of the unit was and was not damaged by the water seepage.  Of course, there is the possibility that renovation of the part damaged entails that of the rest, though intact, for reasonable overall consistency in appearance.  But whether this is the explanation in the present case is a matter of fact to be established by evidence.  It is not for the court to take judicial notice or to make assumption of that.

59. Indeed, some items of work, on their faces, are hardly expected as repair or renovation work necessitated by the water seepage from the third party.  Examples include the replacement of all the potable and drainage pipes, repair of and waterproof work on the external wall of the unit and the replacement of all window frames of the unit.

60. Besides identifying the localities of seepage and areas affected, as he was then supposed to only do, the defendant’s expert did not say any other part of the unit was damaged by the seepage from above.  No direction has been sought for adducing expert evidence in respect of the reasonable renovation necessitated by such damage and the reasonable cost of it.  Contrary to the suggestion in Ms Chan’s statement, as mentioned, the contractor responsible for the quotation was not called to explain the items of work quoted.  Again Mr Ng led Ms Chan to do so only in court.

61. Ms Chan sought to justify the quotation by effectively asserting that all those partitions, installations and facilities were damaged by the water seepage.  As mentioned, she had to concede that at least one quarter of the unit was unaffected by the water seepage from above.

62. The reasonableness of the contractor responsible for the quotation also causes some concern.  On the same day when this quotation was prepared, the contractor also prepared another quotation for the repair work proposed to be carried out to the floor of the third party’s unit presumably for stopping the seepage to the defendant.  Surprisingly, that quotation was identical to the quotation (and contract) for the repair work to the floor of the defendant’s unit in May 2012 both in terms of the items of work and the cost.  I find that hard to believe, in view of the substantially altered interior of the third party’s unit (into various self-contained sub-units) as opposed to the interior of the defendant’s unit below.

63. Ms Chan’s attempt in court to link the water seepage from the third party to the condition of these parts and hence their repair, and particularly if the same was allegedly the understanding obtained from the contractor, is again not particularly impressive.  In her evidence, Ms Chan even revealed reason for concern about the reasonableness of the quoted cost of particular items.  For instance, the quoted cost of sanitary installations in the kitchen and toilet apparently provided for the replacement of the original type by more expensive alternative.

64. In view of the above, Mr Ng had to acknowledge the existence of room for questioning a number of items of work in the quotation; and is prepared to concede that only 70% of the quoted cost of repair should be allowed.  In the absence of contrary argument, I accept that not without reluctance.  The amount allowed is HK$409,010.

OTHER RELIEFS

65. The order given on 15 June 2012 consisted of an injunction restraining the third party from causing or allowing further nuisance to the defendant’s unit; and a mandatory injunction compelling the third party to repair its own unit.  As mentioned, the defendant has also obtained a quotation for the necessary repair to the third party’s unit so as to stop and to prevent further water leakage. Mr Ng made clear at the hearing that the claim in that respect would not be pursued for being premature.

66. The evidence suggests that the complaint by the plaintiffs and the defendant has been ignored; and that the water leakage from the third party continues as at today.  If substantiated, that will have to form the basis for the enforcement of the injunctive reliefs mentioned above pursuant to O.52 of the Rules of the District Court.  The liberty to apply requested by Mr Ng is thus unnecessary.

CONCLUSION

67. By way of contribution and damages, the third party is liable to pay to the defendant HK$(120,000 + 99,000 + 409,010) or a total sum of HK$628,010.

68. There should be interest on the sum of HK$120,000 from the date of its payment and on the sum of HK$508,010 from the date of the third party notice, both at the judgment rate until full payment by the third party.

69. The third party shall contribute 80% of the defendant’s liability for the plaintiffs’ costs (just agreed on 16 August 2012 at HK$165,000) and its own costs of defending the plaintiffs’ claim in the main action as already ordered.

70. The third party shall pay the defendant’s costs of these assessment proceedings. Statement of the defendant’s costs has been provided, which I summarily assess at HK$95,000.  The costs order is nisi; in the absence of application within 14 days to vary, the order shall become absolute and the assessed costs shall become payable by the third party thereafter.