MARUYAMA (ASIA) CO., LTD. v. VAAFAS TRADING LTD. AND ANOTHER

HCA9963/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.9963 OF 1999

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J U D G M E N T

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The plaintiff's claim against the defendant

1. By a provisional agreement for tenancy made between the plaintiff as tenant and the defendant as landlord dated 6 May 1999, the plaintiff agreed to rent House 7, Windsor Park, Nos.2-88 Ma Ling Path, Kau To, Shatin for two years commencing on 1 June 1999 and ending on 31 May 2001 at the rent of $72,000 per month, inclusive of rates and management fee. The plaintiff paid the sum of $72,000 to the defendant as the initial deposit upon signing of the Provisional Agreement. A Tenancy Agreement was signed by the defendant on 21 May 1999 to confirm the terms of the Provisional Agreement. The Tenancy Agreement was signed by the plaintiff on 24 May 1999. On the same day, the plaintiff paid to the defendant the total sum of $146,165.50 which represented the balance of the rental deposit, first month's rent and half share of the stamp duty for the stamping of the Tenancy Agreement. The plaintiff's claim was that wrongfully and in breach of the terms of the Provisional Agreement and the Tenancy Agreement, the defendant did not repair the water leakage of and in the said premises on or before the agreed date of 26 May 1999. It was averred that the water leakage of and in the said premises rendered the said premises unfit for habitation. By reason of the matters aforesaid, it was averred that the term of the tenancy did not commence on 1 June 1999 or at all. The plaintiff, therefore, claimed against the defendant the sum of $218,162.50 which represented the total of the two payments made by the plaintiff to the defendant, and also damages for breach of contract.

2. On the first day of the trial, by consent, judgment was entered for the plaintiff for the sum of $218,162.50 and a declaration that the plaintiff was entitled to rescind the Tenancy Agreement. The counterclaim against the plaintiff was dismissed and the plaintiff was awarded costs of the action and interest on the sum of $218,162.50. A stay of execution of judgment was ordered until the conclusion of the 3rd party proceedings by the defendant against the 3rd party.

The defendant's claim against the 3rd party

3. The defendant sought an indemnity against the 3rd party and alternatively damages against the 3rd party for negligence and/or nuisance. The basis of the claim is that the 3rd party was the registered owner of the adjoining house, House 6 which shared a common party wall with House 7. It was averred by the defendant that in about June 1998, the 3rd party commenced demolition works on House 6 which continued intermittently until early April 1999, and resumed on 20 May 1999. It was averred that the said demolition works rendered House 6 in the following state :

(a) The damp proof course of a part of the roof of House 6 was removed;

(b) Another area on the roof, through which the down pipe of House 6 ran, was broken; and

(c) All the external protection elements of House 6, namely, the external walls and windows, were removed.

4. It was also averred that since about March 1999, House 7 had water seepage which affected the following parts :

(a) Column, beam, ceiling and wall of the ground floor;

(b) Beam, ceiling, wall and floor of the first floor; and

(c) Fixtures and fittings on the ground floor and the first floor.

The said water seepage was averred to have been caused by the penetration of water into House 7 from House 6.

5. Further, the demolition works at House 6 caused vibrations as a result of which cracks appeared in House 7. The defendant claims that by reason of the matters aforesaid the defendant suffered loss and damage. Particulars of damages claimed were :

(i)	Loss of rental for the period from 1 June 1999 to 12 September 1999 @$72,000 per month	$244,800
(ii)	Cost of works at House 7	$10,000
(iii)	Diminution in the value of House 7	To be assessed
(iv)	Damages claimed by the plaintiff and interest thereon	To be assessed
(v)	Costs which the defendant may be adjudged to pay to the plaintiff in this action
(vi)	Costs which the defendant has incurred and will incur in defending this action

6. It was claimed by the defendant that the water seepage at House 7 and the defendant's loss and damage were caused by the negligence of the 3rd party, its servants or agents.

7. Further or in the alternative, it was claimed that the 3rd party was liable to the defendant in nuisance for the water seepage at House 7 and the defendant's loss and damage.

8. The defendant therefore claimed against the 3rd party :

(a) indemnity against such sum as may be awarded to the plaintiff whether by way of damages or costs, together with the defendant's costs of defending their action;

(b) further or alternatively damages;

(c) interest;

(d) costs; and

(e) further or other relief.

The 3rd party's defence

9. In their defence, the 3rd party claimed that the portion of the common party wall between House 6 and House 7 was added and re-erected by the defendant during the structural alteration works of House 7 on a date unknown to the 3rd party. The 3rd party also claimed that on a date unknown to it, there had been extensive demolition works and construction works carried out by the defendant in House 7 comprising :

(1) an extension of the ground floor living room with skylight rooftop which abutted the party wall between House 6 and House 7;

(2) an extension of the master bedroom to form a new master bathroom at first floor level onto the external terrace which abutted the party wall between House 6 and House 7;

(3) installation and modification of the plumbing and drainage system and piping for the new master bathroom with "jacuzzi" bathtub in the aforesaid extension of the first floor master bedroom;

(4) extension of the first floor master bedroom encroaching onto the external terrace by about one metre;

(5) additional wall and column along the party wall between House 6 and House 7 extending from ground floor level to roof level.

The defendant's evidence

10. The defendant called as its first witness Mr Lee Ka Hung. He was the manager of the plaintiff company. He just deposed to the signing and subsequent termination of the lease of House 7 and his evidence did not really advance the defendant's case.

11. The next witness for the defendant was Mr Lok Wing Kay who was a shareholder and director of the defendant company. He said that since about June 1998, building works commend in House 6 and continued intermittently until about early April 1999, and then resumed on 20 May 1999. He said sometime after the commencement of the said building works, water seepage into his property was found. The water seepage left marks at various parts of House 7. He denied that the defendant made any alternations to House 7 which was bought on 30 April 1997. He moved to live in House 7 since around June 1997. At that time, House 6 was vacant and in June 1998, House 6 was purchased by the 3rd party. He said demolition works commenced in House 6 since about June 1998 and continued intermittently thereafter. Heavy machinery was used in the demolition works and a lot of pounding and vibration was caused. The demolition works reduced House 6 to a bare shell. The front external walls and the windows were removed and House 6 had no cover or protection. He said sometime afterwards various parts of the ground floor and first floor of House 7 in the vicinity of the party wall with House 6 began to experience wetness and dampness during rainy days. The problem intensified as the demolition works progressed. Parts of the wall, ceiling and floor were dampened and stained. Sometime in September or October 1998, the demolition works in House 6 stopped. Shortly thereafter building works started at House 6 and it was extended to the garden area for about twice of the original area. Since about March 1999, demolition works were carried out again to remove the parts of House 6 which had been rebuilt. Heavy machinery had again been used in the demolition and there was again a lot of pounding and vibration. The demolition works again left House 6 a bare shell, with no front external walls and no windows. House 7 again experienced the above mentioned problem during rainy days. He also noticed fine cracks at the kitchen door frame and the party wall at the ground floor of House 7. The demolition works stopped in early April 1999, but on 20 May 1999, the demolition works of House 6 resumed. In or about mid May 1999, the witness and his family moved out of House 7. He instructed estate agents to put the property up for lease in early 1999.

12. After termination of the Tenancy Agreement, Mr Lok tried to rent out House 7 and also offered it for sale through an agency. He did not succeed because it was very difficult for the house to be leased. He received no leasing offer. He succeeded in selling the property but the other party saw the damage caused by the seepage and requested a reduction of price from $20 million to $18.25 million. According to Mr Lok, the provisional Sale and Purchase Agreement was signed in September 1999.

13. The 3rd witness for the defendant was Mr Thomas Hui Kim Kong. He was a certified architect and after he was retained by the defendant, he carried out an inspection of House 7 on 19 June 1999. He found that there was no obvious sign of structural distress, no ground movement and structural cracks. Water seepage was observed at various places as follows :

G/F	wooden covering to column and beam and ceiling
1/F	bathroom (next to master bedroom) wall, beam and ceiling
1/F	wooden (full height floor to ceiling) cabinet alongside the wall adjoining to next house, that is, House No.6

14. He was of the opinion that the water seepage action was due to the penetration of rain water from the adjoining house, namely, House 6, and that was because the damp proof course ("DPC") of part of the roof of House 6 had been removed and damaged. It was also the result of a small broken area of roof for the purpose of placing or running a down-pipe of House No.6, and hence, rainwater could run through this broken area to the floor below. By seepage action the water would then run into the adjoining wall of House 7. It was also noted that all the external protection elements of House No.6, such as, the external walls and windows were removed, and consequently, water would run inside and into House No.6, and, then, through seepage action got into House No.7.

15. Mr Hui stated that he believed that the only way for water to be able to go from House 6 to House 7, in relation to the portion of wall between Houses 6 and 7, was by seepage action, and not by any other action. The water seepage marks found were the results or proof of the water penetration. He ruled out the possibility of water penetration by leakage which was the result of water passing from one point to another through cracks, because he found no cracks on the portion of wall between Houses 6 and 7. He also ruled out the possibility of water penetration by broken down pipes or down pipe holes, because there were no down pipes or down pipe holes on this portion of roof area of House 7. The broken down pipe and down pipe holes were on roof area of House 6 only. He ruled out the possibility of water penetration by roof slab cracks, because there were no cracks on the roof slab along the wall between Houses 6 and 7. He also ruled out the possibility of water penetration by broken roof finishes, because there were no broken roof finishes along the roof area between the wall of Houses 6 and 7.

16. In cross-examination, he reaffirmed that it was not leakage but seepage. He said he inspected the whole house and he had found some parts of the roof of House No. 6 were damaged and as a result water travelled from the roof to the wall with House 7 and then from the wall into House 7. He said there were small cracks in House 7, no cracks in the roof and no damaged area. He said the water accumulated in House 6 and the party wall and then seeped through to House 7. Water did not accumulate in House 7. He said that on his inspection on 19 June 1999, he found that the DPC (damp proof course) of House 6 had been removed and the down pipe from the roof of House 6 to the first floor then to the ground floor was not covered up and so water ran down this pipe.

17. PW2, Mr Lok Wing Kay was recalled and he said that the Sale and Purchase Agreement was signed on 15 September 1999 and therefore the loss of rental should be up to 15 September 1999. House 7 was sold with vacant possession. He confirmed that the 3rd party after buying House 6 had to apply to the Incorporated Owners, and the application was on 23 July 1998 and the actual date of commencement of works was 27 September 1998.

The 3rd party's evidence

18. The first witness for the 3rd party was Mr Ernie Lee who was a chartered insurance adjuster. He produced his report as Exhibit D1. In the report, it was stated that his company, the Adjusting Services (Hong Kong) Limited, on 10 June 1999 attended House 7 to survey the damage. Their company had been retained by the solicitors acting for the plaintiff who at that time was thinking of renting House 7. He found on the ground floor of the house hairline cracks at three places and water stains at another three places. On the first floor of the house, he found severe leakage of water at two places and water stains at three places. Their opinion was that in view of the severity of the water leakage sustained to the ceilings of all the bedrooms on the first floor, the problem originated from the tiled flooring (especially along the wall edges) of the open roof of the house where the water proofing might have worn out. Rain water was able to penetrate through the floor slabs of the open roof and resulted in the leakage of water from the ceilings on the floor below. He did not inspect House 6 on 10 June 1999, but noticed some works there. He did not have the feeling that the water damage in House 7 was caused by the works in House 6. He did not observe water seeping in via the common party wall because from the damage that he saw on the wall, he did not have the impression that the damage was caused by that wall. The flow of water came from different directions and not from one direction. In his opinion, the water had come not from the adjacent house but from the upper areas of House 7 and this was based on the position of the water mark and the area that it spread through. There was a big area on the first floor, in each room and also in the corridor.

19. The next witness for the 3rd party was Mr Fong Kwok Kee. He was the brother-in-law of Mr Alan Suen Kan Po, who was a shareholder and director of the 3rd party. As a result of complaints from the owner of House 7, on 29 July 1998, Mr Fong attended House 7 and found that the inside of House 7 had suffered serious water leakage for a long period of time which could be seen in the ceiling and wall. The decoration works had commenced in House 6 at about the end of July 1998. After the Buildings Department issued a warning on or about 3 February 1999, the works ceased and did not recommence until 24 February 1999 when it went on until the end of August 1999.

20. The final witness called for the 3rd party was Mr David Chan Wah Wai. He was a Director of Wellgo Archdecor Consultancy Limited which was his own firm and he was a professional building surveyor, qualified in 1979. He was also an authorised person listed under section 3 of the Buildings Ordinance since 1981. His firm was appointed in February 1999 by the 3rd party to act as the authorised person in respect of the removal of unauthorised building works erected in House 6. He was shown Mr Thomas Hui's report and statement and he expressed the view that Mr Hui had focused his attention solely on the original common wall between House 6 and House 7 and had ignored other possible causes and sources which might have induced the alleged leakage defects in House No.7. He also noted that Mr Hui did not mention the patch-repaired condition of the House No.7 lean-to roof which was right next to the original common wall between House No.7 and House No.6. This patch-repaired lean-to roof was immediately above several of the leakage affected areas in the first floor master bathroom of House No.7.

21. He inspected House 7 on 2 July 1999 and observed hairline cracks and leakage related defects. In his opinion the alleged defects in House No. 7 could be categorised into two types, (1) hairline cracks; and (2) leakage related defects. The hairline cracks could be classified as shrinkage cracks which might have existed but were subsequently widened or lengthened due to the vibration from the UBWs (unauthorized building works) removal operation in House No.6. In Mr Chan's opinion, such defects were very minor in nature and could be rectified without too much costs or disturbance.

22. For the leakage related defects, in his opinion, they could be a result of the following aspects :

(1) water seepage due to the absence of waterproofing on the main roof level of House No.6;

(2) water leakage via concealed pipings and/or water seepage via concealed conduits in House No.7;

(3) water seepage via junctions/joints between the original building structure and the subsequent unauthorized extension in House No.7;

(4) rising dampness from the ground substrate of House No.7.

23. The other remaining leakage related defects were either located at the perimeter of House No.7's unauthorised extension or were situated immediately below the junctions/joints between the original building structure and its subsequent unauthorized extension in House No.7. Vibration from the UBWs removal operation in House 6 might have worsened the already defective situation. However, it would be almost impossible to prove the exact quantum of such, or whether the effect from the vibration was negligible.

24. On his visit to House 7 on 2 July 1999, Mr Chan found two hairline cracks which might have been aggravated by the vibration arising from the demolition works in House No.6. With respect to the other water damaged defects on the ground floor and the first floor respectively, Mr Chan's opinion was that these defects might have been caused by any one or any combination of the following factors :

(1) defective roofing tiles on the main roof level of House No.7;

(2) possible defective waterproofing on top of House No.7 extensions on first floor level and ground floor level;

(3) possible defective waterproofing treatment bridging over the original structure and the extension structure of House No.7 on first floor level and ground floor level;

(4) possible seepage of rain water through the T.V antenna cable conduit serving House 7 which was fixed at the main roof level on the side of House No.7;

(5) possible water seepage from various glazed sliding doors and/or glazed windows of the extensions in House No.7;

(6) possible water seepage or condensation from the bath tub or water pipings installed on the first floor level of the House No.7 extensions;

(7) possible leakage of air-con condensate water from the ceiling mount fan coil unit on ground floor level in the conservatory style extension of House No.7;

(8) possible water seepage through the side walls of House No.7 extension which was alongside the common boundary of House No.6 and House No.7;

(9) possible rising damp through the floor slab joint between the original structure and the extension structure of the House No.7 extension;

(10) possible water leakage from pipings inside the pipe duct of House No.7;

(11) other possible causes and sources which could not be practically identified by the visual inspection.

25. In his opinion, there was a 50% chance that the seepage in House 7 had occurred internally but there was only a 10-20% chance that the seepage had started in House 6 and went into House 7. In summary he gave the following causes for the seepage :

(1) from House No.6;

(2) from the roof of House No.7;

(3) leakage from water pipes in House No.7;

(4) water seeping through conduits like T.V antenna.

26. He reaffirmed that the works in House No.6 were just one of a number of possibilities which caused the ingress of water and he put this at 20%.

Assessment of the evidence

27. The two opinions given by the two experts called by both sides, Mr Hui and Mr Chan were very different. I was not impressed with Mr Hui as a witness despite his long experience as an architect. I formed the view that his investigation of the causes of the seepage was not comprehensive enough and was only focused on the party wall between House 6 and House 7. I found Mr Chan a more forthright witness who was prepared to accept the possibility that some of the damage, albeit a small percentage, could have been caused by the works which took place in House No.6. However, his opinion was that there was a number of causes for the damage caused by water in House No.7, most of which were attributable to defects within House No.7 itself. On a balance of probabilities, I prefer the evidence of Mr Chan to that of Mr Hui.

28. In the circumstances, I find that the defendant is not entitled to the indemnity which he seeks from the 3rd party. In any case, the evidence adduced by the defendant was very vague as regards the alleged damage caused to the defendant. The damages that the defendant had to pay to the plaintiff were in fact not damages but just a reimbursement to the plaintiff of monies paid by the plaintiff to the defendant. The provisional Sale and Purchase agreement signed by the defendant with the intended purchaser was dated 10 August 1999, so I cannot see how the defendant can hope to claim for loss of rental from 1 June 1999 and 15 September 1999.

29 In all the circumstances, the defendant's claim against the 3rd party is dismissed. Mr Cheung for the 3rd party was content that only costs at the District Court level should be awarded with a Certificate for Counsel. I therefore award costs of the proceedings to the 3rd party at the District Court level with a Certificate for Counsel. The order for costs will be an order nisi.