TIN LAI (TONG KEE) PIECE GOODS v. SUNG FOO KEE LTD.

1993, No.A46

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. On 26 June 1991, a fire broke out in 30 Wing on Street. It virtually gutted the building. The next day No.30 was declared a dangerous building and was closed. On 18 September 1991, Government served Demolition Orders on the owners of 20 to 30 Wing On Street. There were meetings and evaluations. Nos.20 to 28 Wing On Street were closed on 21 October 1991. No.28 was said to be dangerous and Nos.20-26 liable to become dangerous.

2. On 30 October 1991, the owners of 28 and 30, through their architects,requested. Government to demolish those two buildings at the owners' cost. On 7 February 1992, Mr Lee, the occupier of the shops at Nos.32 and 34 Wing On Street was notified by Government to recede from the party wall between 32 and 30 making vacant a space of some three feet for shoring. No shoring had ever been erected inside No.32 Wing On Street although the space of three feet had been accordingly provided by Mr Lee. On 4 June 1992, the Building Ordinance office gave the first Works Order to the defendant. The defendant as the term contractor of Government was to commence as soon as possible, inter alia, erection of lateral support to the party wall between 30 and 32 and such lateral support was to be "provided during and after the demolition" of No.30 Wing On Street. That must mean that shoring had had to be put in place or in situ before demolition commenced. On 24 July 1992, another Works Order was given by Government to the defendant as its term contractor and this time by the Property Management Section, whereby the defendant was instructed to erect hoarding and protective measures for the pedestrians.

3. In between the first Works Order and the date of a warning letter issued to the defendant as its term contractor by Government on 19 August 1992, no works apparently had been done on the site of Nos.22 to 30 Wing On Street.

4. Mr Kwok, the Chief Building Surveyor of the Building Ordinance Office, told the court that dilatoriness was such that by 19 August Government found it necessary to issue a warning letter to the defendant. The defendant as term contractor was not to wholly sublet the works, i.e. the demolition to any sub-contractor, but the defendant's officer disclosed that it had been a common mal-practice for a term contractor such as the defendant, to sublet the whole of its projects from Government to such-contractors. In this case, there had been no less than three tiers of sub-contractors. In each case the sub-contracting was entire and the whole work was sub-contracted. The defendant, as term contractor of the Government, sublet to Top Trend which in turn sublet entirely to Luen Fat which again in turn sublet wholly to Yip Kee. It is agreed on all hands that Yip Kee took prossession of the site on 23 August 1992. It is conceded by Mr Boey, counsel for the defendant, that the defendant through its sub-sub-sub-contractor Yip Kee owed a duty of care to the plaintiff as occupier of Nos.32 and 34 Wing On Street.

5. I then turn to consider what had been done by Yip Kee. In Yip Kee's documentary communication with Government no entries of works were reported between 24 August to 3 September. Mr Chan Kwan, the site foreman of Yip Kee, explained that there had been some work done on the site but that since Yip Kee had not been specifically asked by the Public Works Department what work the defendant through Yip Kee had so far executed on the site, no particulars were furnished. I find it difficult to accept that explanation. If any work had been done, unless it was insignificant, entries would have been expected to be made, requested or not, in the contractor's return to the Public Works Department. That is only common sense. Nevertheless, that is neither here nor there. Mr Kwok, the Chief Building Surveyor, testified that after the service of the warning letter on 19 August 1992 progress was satisfactory. Mr Kowk, however, told the court that there had been two months' delay between the first Works Order dated 4 June 1992 and the date of the warning letter 19 August 1992. According to Mr Kwok, as term contractor it was no excuse for the defendant to delay commencement of works ordered in the Works Order dated 4 June 1992 under the pretext that time was needed to contact and engage sub-contractors. According to Mr Kwok, the defendant was accepted by Government as a sound contractor who should have ample sub-contractors in hand to undertake a government works order. The monthly works orders issued by Government to its term contractor, the defendant, were in the region of 30 to 35. According to Mr Kwok, the delay was indeed inexcusable. Mr Kwok also complained of the absence of any progress schedule presented for discussion with the authority. The fire broke out in June 1991 and this was then June 1992.

6. Mr Kwok was of the view that there was time enough to safely demolish the perilous structures with little fear of collapse if the first Works Order had been obeyed or if the work had not been delayed. The condition of No.30 which had been declared a dangerous building since 27 June 1991, the next day after the fire, must have become more critical and I so infer. Mr Lee, the adjoining occupier, was clearly disturbed by the situation and understandably he became increasingly more concerned. He kept constant surveillance of the deteriorating condition of the premises adjacent to his No.32. On 15 October 1992, Mr Lee observed a crack of over two inches in between Nos.28 and 30 along the party wall running from the first floor level all the way to the roof. That was alarming and Mr Lee pointed out the over two-inch crack to the govemment staff on visit. There was no report of such a two-inch crack on the site visit of 15 October. According to Mr Kwok, government staff were then sent to the site for, inter alia, disconnecting the water supply. According to Mr Lee of the defendant, he had earlier detected the same crack in the same area about a month before. At that time the crack was a mere half an inch wide.

7. The sub-sub-sub-contractor of the defendant, Yip Kee commenced preliminary works on the site from 4 September to sometime in the afternoon on 14 October. Mr Chan Kwan of Yip Kee was adamant that no structural support was interfered with as his own safety would otherwise be jeopardised. I accept that Yip Kee was confined to these preliminary works and that there was no deliberate withdrawal of support. After all, Mr Kwok testified that the I-shaped steel bars provide/no support. There was evidently no shoring erected as per the first Works Order dated 4 June 1992 or at all. Yip Kee left the site because materials for hoarding and protective measures for the pedestrians had yet to arrive. They were expected to come, according to Mr Chan Kwan of Yip Kee, sometime around-20 October. So they pulled out. The site in question was left unattended. There was no watchmen staying behind. The defendant having wholly sublet the works from Government was not exercising any supervision over the site. Subletting was from the defendant to Top Trend, from Top Trend to Luen Fat and from Luen Fat to Yip Kee. Thus the site was left unattended and without supervision. It was an extraordinary affair in view of the condition of the buildings concerned, particularly that of No.30. The initial delay after the Work Order issued only a year after the fire and the unattended site made it all the more desirable for precautionary steps to be taken. Was it not negligence if no measure was taken to prevent or avoid a collapse?

8. Mr Chan Kwan of Yip Kee maintained that at the time of his departure on 14 October, the gap or the crack along the party wall between 28/30 was no more than 1/8th of an inch wide. It was a hair split and only plaster-rendering deep. One would wonder why Mr Lee should bother to take note of such a hair split. I have had an opportunity of observing the demeanour of Mr Chan and that of Mr Lee,/and I have no hesitation in accepting the version of Mr Lee as against that given by Mr Chan.

9. On 18 October 1992, with the site unattended and without any supervision by the defendant through any of its sub-contractor, the remnants of No.30 collapsed leaving its rear portion behind. The collapse caused damage to No.32 Wing On Street, less so to 34 Win On Street. It was very fortunate that no one was injured in the incident. The Fire Brigade was summoned and they worked late into the evening, fearing that some pedestrians might have been buried by the debris. After the withdrawal of the Fire Brigade, the collapsed site was guarded by the police. Mr Lee was not allowed to retrieve his properties until 10/11 November. Mr Lee was himself in some predicament. It was difficult for him to procure help for removing his properties from the collapsed site and he had also grave difficulty in arranging warehouse for storage. A second opportunity was afforded to Mr Lee by Government which notified that he could enter the collapsed premises at the end of November and the following day, 1 December. Mr Lee called for secret tenders on the explicit term that the successful tenderer was to take the risk of removing himself from the collapsed site the damaged and other cloths in the shops which formally occupied Nos.32 and 34 Wing On Street. Tenders came and the best was $145,000. Piece goods were thereupon removed from the collapsed site on 30 November 1992 and the next day 1 December. An extension was sought and granted and a further day was allowed to the successful tenderer to remove the piece goods in the collapsed site on 2 December 1992.

10. The defendant's surveyor only came on the 1 December 1992 and he made a cursory estimate of the value of the goods in Nos.32 and 34. It would not be right to place any reliance on the evidence of the surveyor engaged by the defendant, who came a day later and made no more than a visual estimate. At the time of the inspection, part of No.32 was buried and No.34 was also water damaged. The full extent of damage could not be known. At the time of the collapse, the water tower erected on top of No.32 serving the air-conditioners of the plaintiff was demolished and the shops of the plaintiff were severely flooded. Mud must have been carried from the collapsed portion of No.30 all the way over to No.32 and across No.32 to No.34. The opinion and estimate given by the surveyor of the defendant were in relation to the inspection on 1 December, at least after a day's removal by the successful tenderer of the plaintiff. I cannot accept that No.34 was in an orderly and undamaged condition as sought to be substantiated by the evidence of the surveyor called on behalf of the defendant. I prefer the evidence of Mr Lee that not only the piece goods in No.32 but also those in No.34 were damaged by water and soiled.

11. Mr Lee approached legislators they were willing to lend a helping hand. With some legislators behind Mr Lee, Government was not unco-operative. A post mortem was held and investigation conducted. A report was duly complied and presented. In a report bearing the date January 1993 on the collapse of Nos.28/30 Wing On Street, the possible causes of collapse are set out in para.8 of its p.4. There are nine possible causes of collapse : (1) Poor standard of design and construction; (2) Aging and deterioration of the elements of construction; (3) The demolition of No.32 Wing On Street; (4) The fire on 26 June 1991; (5) Disturbance caused by closure of the buildings; (6) Disturbance caused by preparatory work for the demolition; (7) Movement of floor and roof joints; (8) Vibration from a construction site in the area and (9) Removal of some floor joints by demolition workmen.

12. Mr Kwok Provides yet a further possible cause of a collapse. From his further consideration, Mr Kwok now states that another possible cause of collapse was the movement of the four racking shores erected against the party wall of Nos.30 and 32. Anyone or any combination of these possible causes could cause the incident on 18 October 1992. In para. at p.9 of the report, it is stated :

"Opinion As To Cause of Collapse : From available evidence, no definitive cause of the collapse can be established. The Building Ordinance office is, however, of the opinion that it is unlikely that one factor alone could have caused the collapse of the buildings at Nos.28-30 Wing On Street and that some of the identified factors did have the effect of weakening the buildings in varying degrees. The Building Ordinance office is also of the opinion that the building failure, which took place at about 2:30 p.m. on Sunday, 18 October 1992 when weather was fine, vehicular traffic less heavy than normal and piling works prohibited, may be equated to a very old person suffering from a multitude of diseases passing away."

Despite that colourful description, the conclusion was : "cause of the collapse is unknown".

13. Mr Kwok, the Chief Building Surveyor, complained of delay of some two months from the first Works Order, 4 June 1992, to the warning letter, 19 August 1992. He also complained of the absence of any programme schedule presented for discussion. The first Works Order was expected to be carried out and completed some three months thereafter. According to Mr Kwok, the term contractor was expected to commence work within a month and thereafter to complete it in two. The buildings, particularly No.30 Wing On Street, had or must have become further deteriorated as indeed Mr Au Kin Wah the former employee of the plaintiff told the court that some pieces, two to four inches in diameter, had from time to time fallen down to the roof of No.32 and onto Wing On Street. Mr. Lee of the plaintiff explained to the court that work in the collapsed site had stopped for about ten days from 6/7 October 1992 before the collapse on 18 October 1992. Mr Chan Kwan of Yip Kee told the court that Yip Kee left the site at about 4 p.m. on 14 October 1992. Both, I accept, are telling the truth. Whilst observing from outside the collapsed structure, work could have appeared to Mr Lee as having stopped for a longer period before 14 October. Work, in fact, so I find, completely ceased in the afternoon of 14 October when Yip Kee left the site.

14. The buildings, 28/30 Wing On Street, were left together with others unattended and without any supervision of the defendant or any of its sub-contractors. Only preliminary works were being done. No.28 and particularly No.30 were in a further weakened condition. That may also be inferred from para.10 at p.9 of the Building Ordinance Office report which concluded, inter alia,

"That some of the identified factors (possible causes of collapse) did have the effect of weakening the buildings in varying degrees."

15. The history of and after the fire called for instant prccautionarymeasures. The defendant, I find, failed to take any or any sufficient measure or protection to prevent or avoid the collapse or a collapse damaging the shops of Mr Lee. Nothing had been done by or on behalf of the defendant to prevent or avoid such a collapse or damage when it faced an increasingly weakened structure of No.28, more so for No.30. No step was taken to prevent or avoid such a collapse or damage when the site, particularly No.30, was left uniattended and without direct or any supervision. Mr Chan Kwan was adamant that if he had been at the site even shortly before the collapse, the collapse could have been prevented or avoided. In this aspect, the defendant was clearly negligent.

16. If I were wrong in seeking to support the alleged negligence pleaded in the plaintiff's Particulars by reference to the matters that I have endeavoured to analyse, then the incident must have been a totally unexplained occurrence. The defendant, through its sub-sub-sub-contractor Yip Kee had the control and management of the site. By the very concession of its counsel, the defendant owed a duty of care to Mr Lee of the plaintiff. Such an unexplained occurrence, if indeed it was one, was one which would not have had happened in the ordinary course of things without the negligence on the part of somebody other than the plaintiff. And the circumstances, as I have analysed, point to the negligence in question being that of the defendant rather than that of any one else.

17. The defendant has shown and can show no way in which the collapse might have occurred without negligence or that the collapse were just as consistent with the defendant having exercised due diligence as with it having been negligent. The need to take some precautionary measure or protection was, so to speak, written on the wall. Worse still, properties in that state were left unattended and without supervision, particularly with the crack as described by Mr Lee. It all points at least to negligence on the part of the defendant. If I were wrong that there is evidence to attribute the causation to the negligence of the defendant, and if the collapse had been a totally unexplained occurrence, I would invoke the doctrine of res ipsa loquitur in favour of the plaintiff and rely on the effect of the doctrine, in the circumstances, as sufficient evidence to establish negligence on the part of the defendant who must therefore shoulder the responsibility for the damage caused by the collapse to the shops of Mr Lee.

18. Lastly, I turn to the damages claimed. I accept Mr Lee's evidence that he had $2½ million stock in Nos.32 and 34. He was able to obtain the best tender possible, in the circumstances, to the extent of $145,000. Mr Lee stands to be compensated in sum of $2,355,000. But that is only the value of the goods. Mr Lee lost also the profits in the sale of his stock. Mr Lee explains that he would make $30 odd in a hundred dollars. Mr An Kwan, the Vice Chairman of the Association of Piece Goods Proprietors or Owner Association corroborates the evidence of Mr Lee that owners would make a profit of 30 to 40%. I take the estimate and the percentage so given to have taken account of the usual unsold stock. Mr Lee further explains that for the old stock or stock at the end of the sale, he would only be able to fetch 10-20%. I propose to and do take the mean between 10 to 30% and I would accept 20% as the estimated profit loss, taking into consideration also the usual portion of unsold stock. Therefore for $2½ million at 20%, that would give Mr Lee $½ million by way of loss of profits arising from his lost $2½ million stock. Mr Lee claims to have lost three tables worth $10,000. No claim is being made on his behalf by counsel for the six chairs said to be about $200 odd. The decoration and the fittings and fixtures were not initially made part of the plaintiff's claim. Mr Lee himself seemed quite unprepared to be in the position to set up and substainate any claim for those items.

19. Counsel for the plaintiff, Miss Cheung proposes to take as the value of the other properties of the plaintiff $400,000 to be divided by the years of purchase and to be divided by two representing the extra six months' occupation for his ship until May 1993. The defendant could not have foreseen that the plaintiff could have another six month at the location for his business. The reference to the possible duration of operation until May 1993 cannot be brought within the foreseeability of the defendant for calculating damages. For the same parity of reasoning, use of another six months by the plaintiff cannot be, in principle, so relied upon. Moreover, the mathematical apportionment by years of purchase proposed by Miss Cheung, counsel for the plaintiff, is, in my view, too remote to have been anticipated by the defendant. For the reasons given, I am only prepared to and do award $10,000 for the three tables and no more. The plaintiff therefore succeeds in the sum total of $2,865,000 and I would also award Mr Lee $2,865,000 with interest thereon at 8% per annum from the day of the writ to today, the day of judgment. Particulars of claim for loss of profits are not appropriate or wide enough to cover the $½ million awarded. Miss Cheung was prepared to make an application so to amend, Mr Boey, counsel for the defendant, was well briefed of the manner in which such calculation was proposed to be made. In the circumstances, I would treat the Particulars of Claim of the plaintiff as if they had been amended to enable this court to award the $½ million damages for loss of profits.

20. Judgment therefore is given in the sum of $2,865,000 plus interest thereon at the rate I have indicated. Costs, subject to what counsel have to say, are to follow the event i.e. the plaintiff do have costs of the action against the defendant.

(Submission on costs)

21. This is not a case in which counsel originally retained had the opportunity to oversee. There has been a display of laxity in the conduct of the proceedings by both counsel, perhaps as a consequence of their late instructions. I have, time and again, given counsel in these proceedings gentle reminders as to how cross-examination or examination-in-chief was best to be conducted.

However, the matters in this case including conduct of the proccedings on the part of counsel do not impell me to deprive costs of the successful litigant. Nothing said or done in the proceedings are sufficient for depriving the plaintiff of the costs of this litigation as I am invited by counsel for the defendant to do. Therefore I order : (1) judgment in the sum of $2,865,000 against the defendant with interest thereon at 8% per annum from the date after writ to today and (2) costs be costs of the plaintiff against the defendant.