HARVON LIMITED AND ANOTHER v. DAYS PROPERTIES LTD

DCCJ 4720/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4720 OF 2011

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DECISION

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The defendant’s summons to extend time

1.  This Decision arises out of a not uncommon “neighbour dispute” in Hong Kong: water leaks.  Before attending to that, the first business before this court was the defendant’s summons to extend the time for filing and service of the affirmation on its behalf, opposing the plaintiffs’ application for summary judgment.  The time sought to be extended (by Mr Toby Brown, of Messrs Kennedys, appearing for the defendant) was for a further two hours.  Pursuant to the order of Master KK Pang dated 19 July 2012 and the “unless order” of Registrar Lui, the affirmation on the defendant’s behalf was due to be filed and served by 4:00 pm on Friday 31August 2012; it was actually filed at 4:45 pm and served on the plaintiffs’ solicitors a little under two hours late. The defendant’s summons for time was (not unfairly) opposed by the plaintiffs’ solicitor (Mr Ian Childs, of Messrs Stephenson Harwood).  The defendant’s summons was rather late but the extension of time sought minimal in the circumstances.

2.  After hearing both Mr Brown’s and Mr Childs’ brief submissions, the defendant was granted an extension of time for the service of the affirmation on its behalf.  This court did so applying: its wide case management powers under RDC O.1A, r.4[1], its wide powers to grant relief from sanctions under O.2, r.5 and its wide discretion as to time generally under O.3, r.5.

3.  In brief, on balance, and in the context of the main business of the plaintiffs’ summons, it was not a proportionate sanction to actually debar the defendant from relying on its affirmation evidence, particularly given the administration of justice; both parties were represented and ready for the main business of the day (the plaintiffs’ summons for summary judgment) and the hearing was listed for full argument.  That stated, the costs of the defendant’s summons to extend time were ordered to be paid by the defendant to the plaintiffs forthwith and summarily assessed in the sum of HK$800.00.  Mr Brown (for the defendant) did not object to that costs order.

4.  If the plaintiffs are disappointed that their challenge to the defendant’s affirmation evidence was rejected, they might usefully reflect on what their position would have been had the roles been reversed; an issue of “reciprocity” also alluded to in the final paragraph of this Decision.

The plaintiffs’ summons

5.  Now to the main business before this court.  The plaintiffs’ summons dated 29 June 2012 (“the plaintiffs’ summons”) seeks final judgment against the defendant for (in brief):

(i)  HK$19,200.00;

(ii)  a mandatory injunction that the defendant do within two weeks repair the cause of water leakage alleged to originate from its apartment;

(iii)  an indemnity for the alleged costs of repairs and decoration to the first plaintiff’s apartment; and

(iv)  damages to be assessed for the second plaintiff’s alleged “loss of enjoyment” with respect to the first plaintiff’s apartment.

6.  The plaintiffs’ summons also seeks interest on the HK$19,200.00 and the costs of the action.

Summary of Decision

7.  After careful deliberation, and having read the respective parties’ skeleton submissions, the hearing bundle (“the hearing bundle” - pages 1-222) before the hearing of the plaintiffs’ summons and having taken the time (over the course of a week or so) carefully to reflect on the parties’ submissions during an almost three hour hearing on Monday, 24 September 2012 (“the hearing”), the defendant is granted unconditional leave to defend.  This outcome is arrived at with some reservation but, applying the test for summary judgment, is respectfully the correct outcome.  That test is briefly stated at paragraphs 48-49 (of this Decision) and is not controversial; its application is more difficult and, importantly, fact sensitive.

8.  As mandated by O 14, r 6, detailed directions for the progress of this case also follow.  These directions follow careful deliberation, exercising a principled based case management discretion.  Reasons for these directions are explained (at paragraphs 73-78 of this Decision).  The parties are now required to go away, with their respective legal representatives, and observe these directions and case manage this action in accordance with their duties to assist the District Court (O 1A, r 3).

9.  It is also worth stating that the defendant’s invitation (at the end of the affirmation filed on its behalf) to dismiss the plaintiffs’ summons was declined; in the whole scheme of things, the plaintiffs’ summons was not unjustified.  Furthermore, careful consideration was given to granting an order for conditional leave to defend or giving judgment for part of the plaintiffs’ claim; these options were rejected for reasons that will be explained (at paragraphs 62-63 of this Decision).  The reasons given for granting unconditional leave to defend, in effect, explain the reasons for not granting summary judgment.  These are the main options considered on the plaintiffs’ summons.

The parties and some definitions (where appropriate)

10.  Harvon Limited (“the 1^st plaintiff’) is a Hong Kong company and Mr Stephen Shih Hing Wong (“the 2^nd plaintiff”) is a director.  The 1^st plaintiff owns a rather luxurious apartment at Flat 1, 6^th floor, Block A, Villa Monte Rosa and has done so since October 2003 (referred to as “the 6^th floor apartment”, for the purposes of this Decision, although there is another apartment on the 6^th floor).  The 2^nd plaintiff and his family (his wife and children) have occupied the 6^th floor apartment during the material times of this dispute. 

11.  The defendant is apparently a company incorporated in the Turks & Caicos Islands and it owns the apartment above the 6^th floor apartment (referred to as “the 7^th floor apartment”, for the purposes of this Decision).  The defendant has owned the 7^th floor apartment since about June 2006 and a Mr Mahesh Nanik Dayaram (“Mr Mahesh”) and his family (his wife and children) live there and have done so during the material times of this dispute.  Villa Monte Rosa is what might be called a luxury high rise apartment complex at 41A Stubbs Road.  Both the apartments are, by most Hong Kong standards, rather “large”. 

12.  Mr Mahesh is instructed on the part of the defendant to assist in its alleged defence of the plaintiffs’ summons.  The plaintiffs claim that Mr Mahesh is also the legal and beneficial owner of the defendant.  Mr Mahesh certainly appears to be authorised to act on the defendant’s behalf and assists with the instruction of the defendant’s solicitors in this matter. 

13.  The 1^st plaintiff and the defendant are bound by a Deed of Mutual Covenant for Villa Monte Rosa, dated 12 October 1965 (“the DMC”).  In brief, clauses 10 (a) and (d) of the DMC contain (among others) the “usual” covenants not to “alter” or cause a “nuisance”. 

The plaintiffs’ claims – summary

14.  The plaintiffs’ claims are set out in the statement of claim served on 5 June 2012 and the reliefs claimed by the 1^st plaintiff and the 2^nd plaintiff are set out in the generally indorsed concurrent writ and the prayers for relief in the statement of claim.

15.  In short, the plaintiffs’ claims are rooted in alleged breaches by the defendant of the DMC, negligence and/or common law nuisance.  

16.  In short, the reliefs claimed by the plaintiffs against the defendant include: declarations as to the cause of the water leaks to the 6^th floor apartment (and declarations arising from such a finding), loss and damage in negligence and/or nuisance and/or arising out of alleged breaches of the DMC.  The plaintiffs also seek a mandatory injunction requiring the defendant to permanently fix or repair the cause of the water leaks and an indemnity with respect to repair and redecoration costs to the 6^th floor apartment.

17.  The 2^nd plaintiff also claims damages against the defendant for “loss of enjoyment” of the 6^th floor apartment.

The dispute

18.  The plaintiffs claim that since about March 2010 water has leaked from the master bathroom (“the defendant’s Master Bathroom”) and/or the renovated bathroom (“the defendant’s Renovated Bathroom”) of the 7^th floor apartment and into the 6^th floor apartment’s second Bedroom (“the plaintiffs’ 2^nd Bedroom”), thereby causing damage to the ceiling.  The plaintiffs also claim that since the first quarter of 2011 water has leaked from the defendant’s Master Bathroom and/or Renovated Bathroom and begun to penetrate the first bathroom of the 6^th floor apartment (“the plaintiffs’ 1^st Bathroom”), thereby causing (among other things) further damage and/or dampness and/or mould.  The plaintiffs claim that since about February 2011 the plaintiffs’ 2^nd Bedroom has been unusable.  It should be noted that the defendant’s Master Bathroom and the defendant’s Renovated Bathroom are immediately above the plaintiffs’ 2^nd Bedroom and 1^st Bathroom.  Appendix 1 of the plaintiffs’ statement of claim is a floor plan of the 6^th floor apartment.  That appendix shows the “bedrooms” and “bathrooms” of the 6^th floor apartment.   This Decision attempts not to confuse the two and if there is any interchange between the two in this Decision it is an inadvertent “slip”; not a misunderstanding of the difference.

19.  The plaintiffs’ position regarding the water leaks is set out in detail in the first and second affidavits of the 2^nd plaintiff sworn on the plaintiffs’ behalf (“the 2^nd plaintiff’s first affidavit” and “the 2^nd plaintiff’s second affidavit”).  That water has leaked into the 6^th floor apartment does not appear to be in doubt or disputed.  The defendant’s position (thus far) is set out in Mr Mahesh’s first affirmation (“Mr Mahesh’s affirmation”).

20.  Although there was no agreed chronology between the parties, it is not proposed to recite in complete detail the parties’ respective accounts of events regarding the water leaks in the 6^th floor apartment.  Suffice to say that the plaintiffs claim that since about March 2010 they have regularly informed the defendant and Mr Mahesh about the water leaks and that the defendant and Mr Mahesh have failed to act.

21.  In particular, the plaintiffs claim that from about June 2010, after their contractor had concluded that the water leaks originated from the 7^th floor apartment, the defendant has failed to act.  The plaintiffs refer to various letters from the Buildings Department to the defendant (or copied to the defendant) dated 22 September 2010, 1 February 2011 and 29 March 2011, among other things,  putting the defendant on notice of the water leaks and requesting that it investigate the matter (pages 64-66 of the hearing bundle).

22.  The plaintiffs describe the water leaks in their 2^nd Bedroom as a “flow” by February 2011.  They also claim that that by about April 2011 parts of the ceiling of the plaintiffs’ 1^st Bathroom had begun to crack and break-off.

23.  By July 2011 the plaintiffs engaged consultants to conduct a rapid infrared thermographic survey of the ceiling of the plaintiffs’ 2^nd Bedroom and 1^st Bathroom. That survey was on or about 7 July 2011 (“the plaintiffs’ 1^st survey”).  Based on some of the scanned images, the plaintiffs’ 1^st survey report (dated 11 July 2011) states that:-

“…Signs of water seepage were detected on the ceiling of bathroom and bedroom before the water test. These signs of water seepage were enlarged after water test. It is believed that those signs of water seepage on the ceiling were induced by water penetration through the bathroom of unit A1-7/F after water test”.

24.  At the same time as the plaintiffs’ 1^st survey, the “Joint Office of the Buildings Department and the Food and Environmental Hygiene Department” (“the FEHD”) conducted coloured water tests of the drainage outlets of the defendant’s Master Bathroom and Renovated Bathroom (“the FEHD July 2011 coloured water tests”).

25.  The FEHD July 2011 coloured water tests were inconclusive as to the source of the water leaks.  Their letter to Mr Mahesh dated 23 August 2011 confirms as much.  The same inconclusive conclusion had been reached by the FEHD in their letter to Mr Mahesh dated 7 April 2011 (concerning coloured water “ponding” and “spray” tests to parts of the defendant’s Master Bathroom).  In their letter dated 31 March 2011 to the defendant (concerning the coloured water tests of the drainage outlets of the defendant’s Master Bathroom) the FEHD suggested that the source of the water seepage was “unlikely” to be the drainage system of defendant’s Master Bathroom (pages 205-207 of the hearing bundle). 

26.  One of the conclusions of the plaintiffs’ 1^st survey report states that, immediately after the FEHD July 2011 coloured water tests, a visual inspection of the ceiling to the plaintiff’s 1^st Bathroom found “a drop” of water.

27.  The plaintiffs claim that the defendant and Mr Mahesh have continued to fail to act to remedy what the plaintiffs consider are water leaks from the defendant’s Master Bathroom and/or Renovated Bathroom and (it is claimed) having been provided with a copy of the plaintiffs’ 1^st survey.  

28.  In September 2011 the plaintiffs’ solicitors (Messrs Stephenson Harwood) were asked to contact Mr Mahesh to agree to the protocol for the engagement of a joint expert to report on the origin of the water leaks.  The expert was to be the same consultants who conducted the plaintiffs’ 1^st survey.  The word “expert” here is used without commenting on the qualifications of the expertise; a point to be borne in mind at paragraphs 60-61 of this Decision.

29.  Concerned about the defendant’s alleged lack of engagement with the plaintiffs’ solicitors, the plaintiffs issued the writ in this action on 9 December 2011 and a copy of a concurrent writ was eventually served on the defendant at its overseas registered office.  The defendant’s solicitors (Messrs Kennedys) acknowledged service of the concurrent writ, confirming the defendant’s notice of intention to defend. 

30.  There is a dispute between the parties as to exactly when, but eventually Mr Mahesh for the defendant agreed to a joint protocol (“the joint protocol”) for the engagement of a joint expert (“the joint expert”) to conduct another rapid infrared thermographic survey of the plaintiffs’ 2^nd Bedroom and 1^st Bathroom.  It should be noted the plaintiffs’ 1^st survey was for their own benefit. Again, the phrase “joint expert” is used in this Decision without commenting on the qualifications of the expertise; a point to be borne in mind at paragraphs 60-61 of this Decision.

31.  The joint protocol essentially confirms the parties’ agreement to jointly engage an expert to report on the origin of the water leaks at the 6^th floor apartment (page 116-117 of the hearing bundle).  The parties agreed (among other things): to share equally the joint expert’s fee; depending on the findings of the joint expert, to reimburse the other party half of the joint expert’s fee; “to be bound by the contents of the Expert’s report”; and, in the event the joint expert identified that the source of the water leaks was from the defendant’s 7^th floor apartment, Mr Mahesh would as soon as practicable arrange for full repairs to the source  of the water leaks and repair damage to “Mr Shih’s apartment” (the 6^th floor apartment) or pay for reasonable repairs thereto.

32.  It is not disputed that eventually the defendant did get around to agreeing to the appointment of the joint expert, including to be bound by the contents of the joint expert’s report, and did pay half of the joint expert’s fee.  In this regard, it is worth noting that agreement at page 118 of the hearing bundle.

33.  On 2 February 2012 the joint expert conducted another rapid infrared thermographic survey of the ceiling of the plaintiff’s 2^nd Bedroom and 1^st Bathroom.

34.  It is also worth noting that the joint expert report was based on three different tests.  In Test 1 scanned images were taken before and after water was flushed through the fresh and flush water supplies of the 7^th floor apartment (“Test 1”).  In Test 2 scanned images were taken after water was sprayed through the drains, basins, toilets and baths of the defendant’s Master Bathroom and Renovated Bathroom (“Test 2”).  In Test 3 scanned images were taken after water was sprayed on the floor of the defendant’s Master Bedroom (“Test 3”).

35.  Again, the Buildings Department and the FEHD carried out coloured water tests on the same day (2 February 2012).  The parties agree that the Buildings Department’s coloured water tests were inconclusive; it is worth noting here paragraph 38 of the 2^nd plaintiff’s first affidavit and paragraph 13 of Mr Mahesh’s affirmation.  However, following the 2 February 2012 rapid infrared thermographic survey, the joint expert issued a report dated 13 February 2012 (“the joint expert’s report”) and addressed to both the plaintiffs and the defendant.  The joint expert’s report states (page 124 of the hearing bundle) :

“It is believed that existing water mark on the ceiling of the bedroom and guest bathroom of Unit A1, 6/F should have been caused by the fresh water supply pipe, the floor of shower tray of guest bathroom and the floor of shower tray of master bathroom of Unit A1, 7/F.

Results of other test methods should be analyzed in conjunction with the findings of this report…..”.

36.  The joint expert report’s conclusions are also supported by some of the scanned images in its report.  A “summary” of the scanned images’ findings (following Test 1, Test 2 and Test 3) is at page 127 of the hearing bundle.  In short, Test 1 and Test 3 were “positive” in pointing to water leaks from the defendant’s Master Bathroom and the defendant’s Renovated Bathroom; Test 2 was negative.

37.  The plaintiffs place much reliance on the joint expert’s report, and understandably so, particularly as it was obtained pursuant to the joint protocol.  The plaintiffs believe that the joint expert’s report once and for all confirms that the source of the water leaks to their 2^nd Bedroom and 1^st Bathroom is from the 7^th floor apartment.  The plaintiffs’ solicitors’ letter to the defendant dated 16 February 2012 confirms as much.

38.  Mr Mahesh also agreed to reimburse the plaintiffs’ share of the joint expert’s fee in an email to the plaintiffs’ solicitor (Mr Childs) on 29February 2012; approximately two weeks after the joint expert’s report (page 187 of the hearing bundle). 

39.  Unfortunately, that was not the end of the matter.  It is not clear exactly when, but by June 2012 the defendant was querying the findings of the joint expert’s report.  Mr Mahesh’s affirmation gives little detail as to this delay.  At paragraph 6 of his affirmation (page 58 of the hearing bundle) Mr Mahesh suggests that the joint expert report “only arrives at a possible conclusion”.  The plaintiffs appear to be concerned that the defendant, at times, may be being economical with the actualité.  

40.  Mr Mahesh appears to have arranged a meeting with one of the authors of the joint expert’s report on 12 June 2012 (a Mr Kevin Ng) and claims that Mr Kevin Ng considered that the joint expert report (to which Mr Ng is a co-signatory) was “not conclusive”.  Mr Mahesh goes onto to state that (paragraph 7 of Mr Mahesh’s affirmation):

“…he (Mr Ng) would not rule out the possibility of other causes of the leak”.

41.  Mr Kevin Ng’s letter dated 10^th September 2012 and addressed to 2^nd plaintiff reaffirms the contents of the plaintiffs’ 1^st survey and the joint expert’s report (page 222 of the hearing bundle).  Mr Kevin Ng accepts that the joint expert report cannot confirm “what the cause of the leak is with 100% accuracy”.  Mr Kevin Ng’s letter also refers back to the plaintiffs’ 1^st survey (not surprising, given that he was the common co-signatory to both reports).

42.  About the same time, 6August 2012, the Buildings Authority wrote a letter to the 2^nd plaintiff confirming that it had requested the defendant to contact the 2^nd plaintiff and “carry out any necessary repair work to cease the water seepage” (page 221 of the hearing bundle).  For the sake of completeness, it is also worth noting that the management company of Villa Monte Rosa wrote to the 1^st plaintiff on 18 July 2012 (page 203 of the hearing bundle), confirming that that (among other things):

“…no sign of water leakage from the common external water pipes has been found. Therefore, it is highly likely that the source of water leakage comes from the private water pipes.

We…wish the owner would try to fix the problem as soon as possible”. (italics added)

43.  As things presently stand, the plaintiffs claim their 2^nd Bedroom is unusable and, because of the water leaks, damage to the ceiling of the plaintiff’s 1st Bathroom and what comes with that (damp, smells, and mould), that about 20% of the 6^th floor apartment is not usable.

44.  The 2^nd plaintiff’s first affidavit and Mr Childs’ affidavit (in support) exhibit photos of damage to the plaintiffs’ 2^nd Bedroom and 1^st Bathroom.  In the event that the plaintiffs’ succeed at trial, the damage would appear to be significant, as might any loss of enjoyment claimed.  Some of the photos and scanned images exhibited also appear to point to the effect of leaks or damp in the vicinity of light fittings and electric cables at the 6^th floor apartment.

45.  The above is not intended to be a comprehensive account of all the events surrounding this dispute.  A significant amount of detail is included in the affidavits in support of the plaintiffs’ summons and the exhibits thereto.   If some factual detail is not accounted for in this Decision it is because this court did not consider it to be material to its decision to grant the defendant unconditional leave to defend. 

Procedural events so far - summary

46.  The concurrent writ was served on the defendant overseas on 22 March 2012.  The defendant (through its solicitors) has given notice of its intention to defend this action; received by the District Court Registry on 19 April 2012.  The plaintiffs’ statement of claim was served on the defendant’s solicitors on 5 June 2012.  The plaintiffs’ affidavits in support of the plaintiffs’ summons depose to their belief that the defendant has no defence.  Therefore, an evidential burden is put on the defendant to resist the plaintiffs’ summons.

Parties’ submissions at the hearing of the plaintiffs’ summons

47.  The parties’ respective submissions at the hearing the plaintiffs’ summons are set out in Mr Childs’ “Written Submissions”, filed on 19 September 2012 (for the plaintiffs’), and Mr Brown’s “Skeleton Submissions”, filed on 20 September 2012 (for the defendant); it is not proposed to recite those submissions in detail here.  Suffice to note, Mr Childs’ submissions (for the plaintiffs) focus on the state of the evidence in support of the plaintiffs’ summons, concentrating (understandably) on the conclusions and scanned images of the plaintiffs’ 1^st survey and the joint expert’s report. Mr Brown’s submissions (for the defendant) understandably concentrate on the coloured water tests.  Mr Brown asserted that coloured water tests are an acceptable testing method in “water leak disputes”.  Mr Brown went on to suggest that given water travelled “the path of least resistance” the water entering the 6^th floor apartment could be coming from any of the apartments above the 7^th floor apartment; a submission that, perhaps, tested an “advocate’s licence”.  However, in the context of a summary judgment application, both Mr Childs and Mr Brown were given a fair degree of room “to advocate”.  This focus on the different water leak tests is not to ignore the parties’ other submissions on the law and the nature of the reliefs claimed by the plaintiffs. 

Test for summary judgment (in brief)

48.  The test for summary judgment in Hong Kong has been set out in much case law and it serves little purpose in reciting it in much detail here.  The test is not difficult to set out.  Once a plaintiff comes within the procedural requirements for summary judgment under O.14, r.2 an evidential burden shifts to a defendant to show a “credible” proposed defence. The court does not have to believe a defendant’s case and the summary judgment procedure is not a trial on the interlocutory evidence.  If a defendant can raise a triable issue or question of fact and/or law, or some other reason for trial, then a defendant is entitled to unconditional leave to defend (Hong Kong Civil Procedure 2012, O.14/4/8-9, commentary and authorities referred to therein).  [Mr Brown also made the point that the case law supports the proposition that there is no presumption that water leaking in the floor below must come from the floor above: Leung Wai Kee & Anor v Tam Yuet Sheung [2012] HKCU 1423. For what it is worth, Mr Childs was not understood to question that proposition].  

49.  The test for summary judgment in respect of equitable reliefs is set out in the Hong Kong Civil Procedure 2012, O.14/4/8-9, commentary. 

50.  As for the court’s discretion to grant a mandatory injunction on a summary judgment application, see the Hong Kong Civil Procedure 2012, O.14/4/8 (commentary at page 247) and O.14/4/9 (commentary at page 249).  The grant of any injunction also requires an exercise of the court’s discretion and a balancing exercise:

“The Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in any action or proceedings in the Court and within its jurisdiction in which the Court considers it just or convenient so to do”. (District Court Ordinance (Cap 336), section 52B(1))

51.  In this case, the exercise of discretion is (in short) between the harm being done to the 6^th floor apartment and the rights of defendant as regards the 7^th floor apartment.  There is also the consideration of the harm done to the defendant if ordered to effect repairs to its Master Bathroom and Renovated Bathroom at this stage, but it is then found that those areas are not the source of the water leaks.  This balance is important, but does not detract from the main issue before this court.

Main issue to be determined on the plaintiffs’ summons

52.  In short, has the defendant raised a “credible” proposed defence that the water leaks in the 6^th floor apartment do not originate from the defendant’s Master Bathroom and/or Renovated Bathroom or, indeed, the 7^th floor apartment?

Decision on the plaintiffs’ summons

53.  After a careful consideration of the parties’ respective affidavits and affirmation (and the substantial amount of documents exhibited by the plaintiffs), this court considers that the correct application of the test for summary judgment on the evidence (to date) justifies the grant of unconditional leave to defend.  The sometimes complexity of parts of the evidence, the inconclusive nature of the coloured water tests (thus far) and the amount of deliberation required support such a conclusion. 

54.  On the totality of the evidence before it, this court did not consider dismissal of the plaintiffs’ summons justified.  Enough is said about that option. 

55.  This court gave consideration to the possibility of summary judgment on one or more of the plaintiffs’ claims, but discounted that option after careful thought.  The reasons for doing so follow on from the reasons for granting the defendant unconditional leave to defend the whole of the plaintiffs’ action (also see paragraphs 62-63 of this Decision). In the same vein, the reasons for granting the defendant unconditional leave to defend explain the reasons for not imposing conditions to the grant of leave to defend.

Court’s Reasons

56.  The plaintiffs base their evidence (to date) principally on the conclusions of the plaintiffs’ 1^st survey (July 2011) and the joint expert’s report (February 2012).  Those reports are supported by numerous scanned images, some of which point to water leaks coming from the 7^th floor apartment.  That evidence is not conclusive and neither does it need to be for the plaintiffs to obtain summary judgment (or to succeed at trial).  The plaintiffs’ 1^st survey and the joint expert’s report suggest that some water leaks are coming from the 7^th floor apartment and, in particular, specific areas of the defendant’s Master Bathroom and/or Renovated Bathroom. 

57.  However, the defendant points to various different coloured water tests, carried out at different times at the 7^th floor apartment, that are inconclusive.  Indeed, the main thrust of Mr Brown’s submissions (for the defendant) was exactly that. 

58.  The key point, in this court’s decision, is that on the arguments put forward (so far) it cannot be concluded that the defendant’s arguments are not “credible”.  In short, and on balance, the inconclusive nature of the different FEHD coloured water tests justifies the grant of unconditional leave to defend (and “gets” the defendant to trial, should it wish). 

59.  It should also not be forgotten that, in its conclusion, the joint expert’s report states (paragraph 5):

“Results of other test methods should be analyzed in conjunction with the findings of this report”. (page 124 of the hearing bundle)

60.  There is also the alternative point that, should this action proceed to trial, the court may well benefit from further expert evidence as to the reliability of coloured water tests (or “dye” tests) compared to rapid infrared thermographic surveys (see: “Some other reason for trial”: Hong Kong Civil Procedure 2012, O.14/4/10, commentary). That is more a matter for the environment of a trial, with the possibility of expert report(s) verified by a statement of truth and with one or more experts subject to the court’s “Code of Conduct for Expert Witnesses”.  The plaintiffs clearly prefer rapid infrared thermographic surveys over coloured water tests.  Indeed, the plaintiffs’ 1^st survey and the joint expert’s report (conducted by the same company) do suggest that water leaks are coming from the 7^th floor apartment.  But, in fairness, aspects of the 2^nd plaintiff’s affidavits smack at times of encroaching on the divide between a factual account and the role of more technical evidence.  This is not a criticism but a note of caution when considering parts of the 2^nd plaintiff’s affidavits.

61.  It should also be noted that whatever the merits of rapid infrared thermographic surveys over water coloured tests, the court will also benefit from knowing more about exactly how these different types of tests are and were carried out and the expertise of those involved. 

“All or nothing”

62.  Some of the plaintiffs’ claim to loss and damage is for the costs of repairs already incurred, and the cost of the plaintiffs’ 1^st survey and the half share of the joint expert’s fee.  On a careful perusal of the statement of claim these three items are all pleaded as loss and damage arising out of the matters “pleaded above”; namely, the alleged breach of the DMC, negligence and nuisance.  If the defendant has raised a credible position with respect to the plaintiffs' claim in the main, it is difficult to see how this court can justify granting summary judgment on one or more of these three individual items, as presently pleaded. Further, in light of paragraphs 56-61 of this Decision, this court declined to make any of these amounts the subject of a conditional leave order.

63.  In particular, summary judgment for half the amount of the joint expert’s fee, based on Mr Mahesh’s 29February 2012 email to Mr Childs (page 187 of the hearing bundle), does not arise, because that item is not pleaded by reference to an admission.  See (among others): Hong Kong Civil Procedure 2012, O.27/3/3 commentary and Chitty & Jacob’s “Queen’s Bench Forms” (Chapter on “Admissions”).  

The joint protocol

64.  The defendant’s position regarding the joint protocol has not been ignored.  It is not an attractive position to agree a joint protocol for the instruction of an expert, agree to be bound by that expert’s report, agree to reimburse the plaintiffs’ share of the joint expert’s fee and then, some significant time later, seek to query the joint expert report’s conclusions; conclusions that are reaffirmed in the joint expert’s letter dated 10 September 2012 (page 222 of the hearing bundle and pretty much the last word on the matter, until Mr Mahesh’s account of events in his affirmation).  Mr Mahesh’s account of events between 29 February 2012 (and his email to Mr Childs) and June 2012 when he met Mr Kevin Ng (one of the co-signatories of the joint expert’s report) is, at times, short on detail and may invite scrutiny.  However, this is a matter for evidence on oath at trial (if it comes to that). 

65.  The points made in the above paragraph are not made to cast doubt on anyone’s credibility at trial (if it comes to that); the plaintiffs’ summons is, after all, heard by way of a summary process.  However, the points made in the above paragraph are mentioned to reassure the parties that the events from the time of the joint expert’s report to Mr. Mahesh’s meeting with Mr. Kevin Ng were considered in this court's deliberations.

Other Matters

66.  Argument was put at the hearing of the plaintiffs’ summons, both in the 2^nd plaintiff’s first and second affidavits, as to possible reasons for the defendant’s alleged delay and/or evasiveness in responding to the plaintiffs’ concerns; for example, see paragraphs 46-47 of the 2^nd plaintiff’s first affidavit.  As to the financial affairs of one of Mr Mahesh’s family relative(s) and the alleged financial constraints that those behind the defendant may be experiencing, these are not matters that were material to the outcome of the plaintiffs’ summons given that they were, in large measure, speculative; for example, see the last sentence of paragraph 47 of the 2^nd plaintiff’s first affidavit (“I don’t know…”).  This point might assist the plaintiffs’ “case theory” at trial, but not its summons for summary judgment. 

67.  As for the general tenor of the 2^nd plaintiff’s comments in his affidavits that the defendant has been evasive or indifferent or “turned a blind eye”, these were not central to the main reasons for granting the defendant unconditional leave to defend.  However, a neutral bystander may well understand the plaintiffs’ frustration.

68.  Mr Mahesh states at paragraph 5(c) of his affirmation that he has been “very co-operative with the Plaintiffs and participated on behalf of the Defendant in all the tests instigated by the Plaintiffs….”.  That statement needs to be read in the context of events since he received the joint expert’s report in February 2012.  Certainly, at times, the defendant gives the impression of having to be pushed to co-operate with the plaintiffs.  As just one example, the issue of the plaintiffs’ writ of summons seems to have momentarily spurred Mr Mahesh into some action.  

69.  The 2^nd plaintiff’s second affidavit (at paragraph 41) also suggests that coloured water tests are not effective because of (among other things) the size of the concrete between the two apartments.  The 2^nd plaintiff suggests that the colour might be “filtered out”.  That is something that may require more evidence in the context of this dispute.

70.  The plaintiffs also strongly suspect (without knowing) that the renovations to the defendant’s Master Bathroom and the defendant’s Renovated Bathroom finished sometime shortly before the first water leaks were discovered in March 2010. The defendant states that those renovations had been completed by the time the defendant purchased the 7^th floor apartment in June 2006.  The 2^nd plaintiff has (apparently) only once been allowed into the defendant’s Master Bathroom and can only suspect as to when the renovations were done.  This point did not factor large in this Decision. 

71.  The outcome of the plaintiffs’ summons is that the defendant is granted unconditional leave to defend. 

Case management directions that follow

72.  Pursuant to O.14, r.6, and allowing for proportionality, reasonable expedition, procedural economy, fairness and costs control (in a District Court case), a set of directions is ordered to get this case on case management track.  The directions are set out in the court’s sealed order and rooted in the underlying objectives of the court rules (O.1A, r.1). 

Reasons for case management directions

73.  The defendant has been aware of the fact of water leaks at the 6^th floor apartment since about March 2010.  Since about 5 June 2012 it has known of the details of the plaintiffs’ pleaded case and it received a copy of the concurrent writ as long ago as 22 March 2012.   The defendant has had four months or so to prepare a defence; it has chosen not to do so.  Rather, the defendant has relied (for now) on Mr Mahesh’s affirmation.  Those dates are significant.  In the whole scheme of things, the plaintiffs are entitled to expect these proceedings to proceed expeditiously.  

74.  At the hearing of the plaintiffs’ summons (and admittedly in the context of a hearing for summary judgment) Mr Brown based some of his submissions firmly on the right of the defendant to require the plaintiffs to prove their case.  To date, the defendant’s position principally appears to be that it does not know the cause of the water leaks at the 6^th floor apartment.  In that context, such a defence is not a difficult one to plead and after four months it is now time that the defendant put its case in its pleading.  The defendant has also had the benefit of legal representation since about April, 2012.  After careful deliberation, and having heard the nature of defendant’s arguments, 14 days is long enough to plead its case.  

75.  The deadlines are also demanding of the plaintiffs. 

76.  This court has considered the option of directing that the 2^nd plaintiff’s first and second affidavits and Mr Mahesh’s affirmation be ordered to be used as witness statements and as evidence in chief at trial.  However, on closer examination, there is unlikely to be much costs saving and efficiency in ordering so.  Some aspects of that evidence will give rise to admissibility issues at trial (for the trial judge) and will also have to be updated in light of on-going events such that, had affidavits/affirmations been ordered to be used as witness statements, supplemental witness statements almost certainly will have been necessary.  That said, the time period for the exchange of witness statements is deliberate.  The parties are aware of each other’s case and have been for some time.  The defendant has known about the fact of the water leaks in the 6^th floor apartment since about March 2010; two and a half years ago.  The plaintiffs have not delayed since then; they have proactively tried to resolve the dispute.

77.  Further directions concerning the nature and form of the expert evidence can be dealt with at the first case management conference (“CMC”); in particular, for example, the exact location on the 6^th floor apartment and the 7^th floor apartment in which to conduct expert tests.  For example, the defendant has the expectation to limit the interference with its enjoyment of the 7^th floor apartment but that needs to be balanced with the plaintiffs’ similar rights. It is possible that a single joint expert may be appointed, but that is a matter for the CMC.

78.  If the plaintiffs’ wish to put forward further evidence on the assessment of their alleged losses (and going forwards) that is a matter they can raise at the CMC. 

Order

79.  It is again worth stressing that this Decision, the order and directions granted have been arrived at after careful consideration of the parties’ affidavit and affirmation evidence and submissions.  At the end of the hearing, it was explained that this court’s decision would be reserved and written reasons handed down as soon as practicable and possibly not until after the long weekend (29 September to 2 October 2012, inclusive).  In these circumstances, this court undertook “carriage” of its order.  That order has been sealed and handed down with this Decision. The time for compliance with the court directions starts now.  For the avoidance of doubt, it is the sealed order that confirms the case management directions; for ease of reference, these are set out below in paragraph 80.

80.  The order on the plaintiffs’ summons is that:

(1)  The defendant be granted unconditional leave to defend this action.

(2)  These proceedings proceed towards trial (or other resolution) in accordance with the case management directions set out herein.

(3)  The defendant do file and serve its defence within 14 days of the date of this order.

(4)  The plaintiffs do file and serve their reply (if any) within 14 days after service of the defence.

(5)  The plaintiffs and the defendant do within 14 days after service of the plaintiffs’ reply (if any), or within 28 days after service of the defence if there is no such reply, file at court and serve on each other their list of the documents which are or have been in their possession, custody or power relating to the matters in question in this action and at the same time give a notice of inspection in conformity with RDC O.24, r.9.

(6)  There be mutual inspection of the parties’ non-privileged documents within 7 days after service of the parties’ lists of documents.

(7)  The parties be at liberty to file and serve witness statements of fact within 35 days of the inspection in this action (referred to in paragraph (6) above) and such witness statements (unless otherwise ordered) do stand as their evidence in chief at trial.

(8)  The parties attend before the Listing Officer by no later than 30 November 2012 to fix a date for a thirty minute case management conference to be heard by no later than 14 December 2012 and at which further court directions be sought for:-

(i) the instruction of a single joint expert, or (if the court permits) one expert witness for the plaintiffs (together) and one expert witness for the defendant, to investigate and make a written report (or, in the case of the plaintiffs (together) and the defendant instructing one expert witness each, one written report for each expert) with respect to the following issue: the cause of water leakage to the 1^st plaintiff’s property situated at Flat 1, 6^th Floor, Block A, Villa Monte Rosa, 41A Stubbs Road, Hong Kong (the 1^st plaintiff’s property), such investigation and expert report (or reports, as the case may be) to include, if the plaintiffs or the defendant so require, but not be limited to, a rapid infrared thermographic survey of the 1^st plaintiff’s property and/or coloured water tests conducted at the defendant’s property situated at Flat 1, 7^th Floor, Block A, Villa Monte Rosa, 41A Stubbs Road, Hong Kong; and

(ii) the trial or other resolution of this action.

(9) The parties be at liberty to apply.

(10) Save for costs orders already on the court file, the costs of and occasioned by the plaintiffs’ application for summary judgment be the costs in the cause.

Costs

81.  On 20-21 September 2012 the court clerk requested the parties to file statements of costs on the morning of the hearing and this they did.  This was requested in the event that an order for costs was made against a party on the plaintiffs’ summons.  Those statements of costs were requested pursuant to Practice Direction 14.3 (Appendix A), and, as a matter of practice over three years or so, are not unusual.  The parties were given the opportunity, during a short recess before the end of the hearing, to consider each other’s statement of costs.  No significant objections were made, save that the parties’ legal representatives agreed that (further to Mr Childs’ submissions) the hourly rates in the defendant’s statement of costs should reflect the District Court rate.

82.  Save for that last point, both statements of costs appeared reasonable taking a “holistic” and fair view (and bearing in mind the substance to the plaintiffs’ summons).  Mr Brown (for the defendant), with commendable fairness, acknowledged that the plaintiffs’ costs were understandably higher given that they were the applicant party.  However, on further deliberation and in light of this Decision, an order for a summary assessment of costs on the plaintiffs’ summons is not made.  That said, should the need arise, the statements of costs and the parties’ legal representatives’ submissions at the end of the hearing are on the court record.  The order for costs on the plaintiffs’ summons is as specified in the sealed order; namely, that save for costs orders already on the court file, the costs of and occasioned by the plaintiffs’ summons for summary judgment be the costs in the cause. 

Dispute resolution and “reciprocity” between “neighbours”

83.  No stakeholder case managing this case could arguably move on without commenting on the context of the underlying dispute.  In his oral submissions and in his skeleton argument, Mr Brown (for the defendant) referred to the case of Leung Wai Kee v Lou Sau Lin & Anor, [2012] HKCU 1423.  That case appears to be unreported and neither party’s legal representative made anything of that.  Given the differences in the nature of the apartments (among other things), the claim in Leung Wai Kee involved losses for much less than that which the plaintiffs may seek to recover by way of an indemnity and damages should they succeed at trial. Despite that context, the learned deputy judge’s comments at the end of her judgment in Leung Wai Kee are apt, even in this dispute:

“[97] Had the parties then exercised their good sense and been more forbearing and co-operative…, I am sure that it was very likely that the source of the leakage could have been identified…

[98] If so, enormous costs and fees could have been saved…

[99] As such, I regret to say that no one turns out to be the de facto winner…

[100] I therefore would give a soft reminder to any party (and their solicitors) in a water leakage case that they should act with good sense and goodwill and, above all, be more pragmatic and proactive in terms of settling their dispute before the cost element gets out of control”.

84.  The plaintiffs have acted with commendable patience, becoming of neighbours.  By the end of 2011, this litigation can have come as no surprise to the defendant.

85.  The defendant’s “success” in defending the plaintiffs’ summons should not be taken to suggest that the defendant’s position (to date) is built on solid foundations.  However, the hearing of the plaintiffs’ summons is not a trial of the merits and it is right (for the reasons given in this Decision and, more particularly, at paragraphs 56-61) that the defendant be granted an opportunity to put its defence at trial, should it so choose.  The defendant must now prepare to state its defence to the plaintiffs’ statement of claim; served about four months ago.

86.  It only remains to thank Mr Childs and Mr Brown for their assistance during the morning of the hearing of the plaintiffs’ summons.  Both lawyers represented their respective parties with fairness and decorum.  In particular, Mr Childs commendably resisted the temptation (if there be any temptation) to “play to the gallery”, irrespective of the photographs of the plaintiffs’ 2^nd Bedroom and 1^st Bathroom (and exhibited to the affidavits in support of the plaintiffs’ summons).   

87.  It is to be hoped that the “above and below neighbours” in dispute in this action can reciprocate their legal representatives’ engagement at the hearing.