HO SAI CHEONG AND ANOTHER v. HONEST GATE COMPANY LTD

DCCJ 5283/2023

[2025] HKDC 832

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5283 OF 2023

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BETWEEN

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DECISION

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Introduction

1.  The plaintiffs and the defendant are both registered owners in Tower 6 of the South Horizons. The plaintiffs’ flat is one floor immediately below the defendant’s flat (part of which is a roof terrace). The plaintiffs sued the defendant in negligence, nuisance, breaches of section 34H of the Building Management Ordinance (Cap 344) (“BMO”) and the deed of mutual covenant (“DMC”), non-natural user of land, and trespass for water seepage to the plaintiffs’ flat since May 2022 from the defendant’s flat.

2.  By summons dated 24 July 2024 (“Summons”), the defendant applies for an order to set aside the default judgment (“Judgment”) granted by Deputy District Judge Kay Seto after the hearing on 18 April 2024 (“Default Judgment Hearing”). The learned judge handed down a decision explaining her reasons for entering the Judgment on the same day (“Decision”).

3.  The Judgment was entered in default of notice of intention to defend and in default of defence pursuant to Order 19, rule 7 of the Rules of the District Court (Cap 336H) (“RDC”).

4.  The Judge held that the seepage constituted nuisance, negligence and breaches of the BMO and the DMC,[1] and granted (1) an injunction to restrain the defendant from allowing, causing or permitting any water seepage from the defendant’s flat to the plaintiffs’ flat, (2) an injunction that the defendant do forthwith carry out all necessary works and repairs to stop water from leaking from the defendant’s flat to the plaintiffs’ flat by 18 July 2024 (collectively, the “Injunctions”), and (3) damages to be assessed.[2]

5.  In the submissions of Mr Dan Leung, counsel for the defendant, it was contended that the Judgment should be set aside on four grounds, namely (1) irregular judgment, (2) meritorious defence, (3) legal error of the Judge resulting from the plaintiffs’ non-disclosure, and (4) other considerations.

6.  In response, the plaintiffs submitted that the Default Judgment was regular, and should not be set aside given the lack of a meritorious defence, the conduct of the defendant, and the prejudice to the plaintiffs.

Applicable principles

7.  The principles governing an application to set aside a default judgment are trite and not seriously disputed by counsel appearing before me.

8.  A distinction is to be drawn between a default judgment entered regularly and one obtained irregularly: Cheung Sai Lon v Cheung Sai Ha & Anor [2021] HKCFI 904 at §13.

9.  A default judgment entered irregularly is liable to be set aside as a matter of right, and the Court does not have to consider the merits of the proposed defence: Cheung Sai Lon (supra) at §14.

(1) The test for regularity or irregularity is concerned with process. That is, whether the default judgment was obtained with good and effective service of the writ: Cheung Sai Lon (supra) at §14; Ma Mui Chi Omei v Ho Ka Fai [2024] HKCFI 1332 at §20.

(2) A material non-disclosure relating to the merits of the case but not the service process does not render the default judgment irregular: Ma Mui Chi Omei (supra) at §§19-24.

(3) As the learned Recorder noted in Bluesun Capital Ltd v Tewoo Group Finance No 3 Limited & Ors [2021] HKCFI 2040 at §53, for the purpose of setting aside a default judgment on the ground of material non-disclosure:-

(a) Generally speaking, the plaintiff would not have to make disclosure of possible defences to the underlying action because defences are generally not relevant to a default judgment;

(b) However, the plaintiff may be guilty of non-disclosure of matters which go beyond simply being a defence to the action, such as matters relating to the plaintiff’s standing to bring the action or to the validity of the service that the plaintiff relied upon.

10.  For a default judgment that was entered regularly:-

(1) The Court may set aside the judgment if a meritorious defence can be shown by the defendant. The defendant must show a real prospect of success, meaning a defence that could well be established at trial. Clear and objective evidence casting doubt on the claim is required;

(2) The power to set aside a regular default judgment is discretionary and unconditional. The Court should have regard not just to the merits of the defence case put forward but to all relevant circumstances; and

(3) Typically, the circumstances taken into account in the discretionary exercise include: (i) why the default occurred; (ii) the defendant’s conduct after he had notice of the proceedings; (iii) the explanation for the time taken where there had been delay in making the application; and (iv) any prejudice that would be caused to the plaintiff or third parties if the default judgment were to be set aside.

(see Cheung Sai Lon (supra) at §15)

Discussion

Ground 1: Irregular Judgment

11.  Mr Leung submitted that the Judgment was irregular because the Decision was ambiguous as it only stated that a judgment was to be entered in favour of the plaintiffs, but it had failed to state explicitly that a judgment was entered against the defendant.

12.  This criticism is thoroughly bad. It is in fact surprising that such argument was made at all.

13.  Also, it has no relevance whatsoever. The alleged irregularity had nothing to do with the process by which the Judgment was obtained. It did not go to the validity of the service of the writ.

14.  In fact, there was no dispute as to the validity of the service of the writ. In the affirmation of Ms Chan Sau Lin, the sole director of the defendant, she explained that the reason behind the defendant’s failure in taking any steps before the hearing on 18 April 2024 was that she was away from Hong Kong between the date of the writ, viz. 28 November 2023, and 16 April 2024. Sometime in January 2024, her son discovered the plaintiffs’ summons dated 24 January 2024 for default judgment. Ms Chan did not appreciate the effect of such document and assumed that all she had to do at that time was to turn up at the Default Judgment Hearing on 18 April 2024, and she actually did attend as recorded in the Decision. Ms Chan, however, had not prepared a board resolution of the defendant authorising her to represent the defendant in these proceedings.[3]

15.  The irregularity argument is completely misconceived and must be rejected.

Ground 2: Meritorious Defence

16.  The gist of the defence, as developed by Mr Leung in his submissions, was that the defendant’s flat was not the source of the seepage.

17.  In support of the defence, the defendant relied upon:-

(1) Three letters dated 19 September 2022, 27 September 2022 and 16 February 2023 issued by the Joint Office of the Buildings Department and the Food & Environmental Hygiene Department (“JO Letters”), which stated that the Joint Office and its contractor were unable to confirm the source of the Seepage; and

(2) Repair works allegedly carried out at the roof terrace of the defendant’s flat on or about 26-27 June 2024 (“Alleged Repair”).

18.  In opposition to the Summons, the plaintiffs relied on the followings:-

(1) An expert report prepared by Silver Consultants Engineering Limited dated 21 August 2023 (“Expert Report”), which concluded that defective waterproofing on the defendant’s roof terrace led to water leaking from the defendant’s flat to the ceiling of the master bedroom of the plaintiffs’ flat; and

(2) The decision of the Appeal Tribunal dated 1 March 2024 (“Appeal Tribunal Decision”),[4] which found that the fish pond illegally constructed on the defendant’s roof terrace weighed at least 1 tonne and had affected the roof terrace’s structure.[5]

19.  In considering the merits of the defence, I bear in mind:-

(1) There is no presumption in law that water found at the ceiling of the lower floor flat must originate from the upper floor flat. The burden is on the plaintiffs to prove the source of the seepage: Ngai Sin Fat v Keung Fuk Yau & Anor [2019] HKDC 711 at §§16-17;

(2) While the defendant is entitled to put the plaintiff to strict proof at trial on the source of the seepage, that does not detract from the requirement for the defendant to show a real prospect of success of the defence in its application to set aside a regular judgment: cf. Ngai Sin Fat (supra) at §§69-70.

20.  Having considered the evidence, I find that the defendant has failed to establish any real prospect of success. In general, the major fallacy of Mr Leung’s argument is that he is simply requiring the plaintiffs to strictly prove its case on this occasion as if (i) the burden is on them to do so and (ii) the evidence adduced by the plaintiff in opposition to the Summons would be the only evidence at trial if there were to be one. Such reversal of burden is not a valid approach for the purpose of the present application.

21.  The glaring feature of the defendant’s case is the paucity of any evidence, eg an expert report, etc, that can positively challenge the plaintiffs’ case that the seepage originated from the defendant’s flat.

22.  The only positive evidence that Ms Chan deposed in her affirmation was a short paragraph alleging that she had commissioned the Alleged Repair at the rooftop terrace of the defendant’s flat on 26 to 27 June 2024, and yet the plaintiffs still complained afterwards that seepage persisted, and therefore the defendant’s flat was ruled out as the source of the seepage. No particulars or details of the Alleged Repair were given. It was a bare assertion in the simplest of forms which can hardly demonstrate any defence, let alone one with real prospect of success.

23.  Nor any other evidence adduced for the present application could establish a defence of real prospect of success.

24.  First, the JO Letters are inconclusive as to the source of the seepage:

(1) The letter dated 19 September 2022 stated that the Joint Office could not confirm the source of the seepage at the plaintiff’s flat after conducting colour water test at the relevant drainage in the defendant’s flat.

(2) The letter dated 27 September 2022 stated that the Joint Office would engage a contractor to make more detailed investigation.

(3) The letter dated 16 February 2023 reported that the contractor conducted a water ponding test at the defendant’s flat, but it was unable to confirm the source of the seepage.

(4) It is well-recognised that colour water test or ponding test are not always successful. As such, negative results of those tests are inconclusive and pose no bar to the plaintiffs’ claim: Good Century Investment Ltd v Yim Kin Duo [2015] HKDC 1371 at §18; Yeung Yik Chun v Wong Lai Ming & Anor [2023] HKDC 1160 at §§75-78 (leave to appeal refused, [2024] HKCA 662).

(5) Also, as accepted by Mr Leung in his oral submissions, there is no evidence from the persons who actually conducted the tests.

(6) Therefore, the JO Letters, by themselves, are not evidence that could establish a real prospect of success for the defendant at the trial.

25.  The defendant also attempted to attack the Expert Report as “questionable” for two reasons:-

(1) It was commissioned without the defendant’s knowledge or consent; and

(2) Its methodology was flawed. The expert only conducted tests and inspections in the plaintiffs’ flat and hence the results at best indicated the presence of the seepage but not its source.

26.  Those criticisms, again, miss the point:

(a) As already held above, the burden is on the defendant to demonstrate a real prospect of success at the trial, and such burden cannot be discharged by simply casting doubt on the force of the evidence adduced by the plaintiff at this stage, while the defendant has adduced nothing of evidential value to dispute the analysis as set out in the Expert Report (eg an expert report setting out a contrary opinion).

(b) In any event, I agree with the submissions of Mr Peter Chung, Counsel for the plaintiffs, that the necessary level of detail for the expert’s analysis depends on the circumstances. Only the rooftop terrace of the defendant’s flat was above the area where the seepage was found was. The defendant has not identified any area above or around the seepage area that did not belong to the defendant but other owner(s) or common area. The defendant had not adduced any expert evidence (or indeed any evidence at all) to point to any other possible source(s) of seepage that the Expert Report had failed to examine and exclude.

(c) For completeness, nothing in the JO Letters contradicted the Expert Report. In this regard, I would respectfully adopt the observations of Chow JA in Yeung Yik Chun (supra) at §§24-26 that where the conclusion of the Joint Office was that the source of the water seepage could not be identified despite their investigation, the conclusion logically means that they did not rule out the defendant’s flat as a possible source of water seepage to the plaintiffs’ flat.

(d) Finally, I simply do not see the relevance of the complaint that the Expert Report was commissioned without the defendant’s knowledge. The fact remains that the defendant never considered it necessary to adduce its own expert evidence to challenge the soundness of the Expert Report based on admissible opinion evidence.

27.  For avoidance of doubt, I have not taken into account the finding of the Appeal Tribunal Decision as further support of the plaintiffs’ case. The correlation between the fish pond and the seepage would require further expert evidence to establish.

Ground 3: Legal error resulting from the plaintiffs’ non-disclosure

28.  Ground 3 consists of two arguments, which I shall deal with in turn:-

(1) The learned Judge erred in granting the Injunctions in a scope unnecessarily wide to cover the whole of the plaintiffs’ flat;

(2) The plaintiffs misled the Court or failed to make full disclosures of the facts or the applicable legal principles in obtaining the Injunctions.

29.  Insofar as the second argument is concerned, Mr Leung expressly withdrew the same during the hearing. It was surprising that such argument was made in his written submissions in the first place, when it was obviously baseless.

30.  For its first argument, the defendant referred me to Kan Lai Ling v Wong Man Kit [2024] HKDC 459 and argued that the Judge erred in not confining the scope of the Injunctions to the master bedroom of the plaintiffs’ flat.

31.  As a general principle, an injunction should not be wider than necessary. What is the necessary scope of an injunction depends on the facts of the case.

32.  In Kan Lai Ling v Wong Man Kit (supra), the learned Judge’s comment on the width of the injunction sought by the plaintiff therein was an obiter as the claim by the plaintiff was dismissed for failing to establish the defendant’s liability. Also, there was no clear evidence that the water seepage problem persisted at the time of the trial.

33.  On the other hand, it has been made clear by the 1^st plaintiff in his affirmation in opposition (dated 25 September 2024) that the water seepage problem persisted as of the date of his affirmation. The relevant plans in the Expert Report also showed that the terrace of the defendant’s flat, where the expert regarded to be the source of the seepage, covered not only the master bedroom but also other bedrooms of the plaintiffs’ flat. Given the prolonged neglect of the defendant in curing the seepage, the seepage might develop to other areas of the plaintiffs’ flat. Therefore, the injunction as granted by the Judge does not seem to be unduly wide.

34.  In any event, the defendant can apply for the variation of the injunction if there are any substantive reasons which render the injunction inappropriate or incapable of being observed or performed.

35.  Finally, Mr Chung argues that an error concerning the scope of injunctive reliefs can only be dealt with through an application for modification and cannot be a ground for setting aside the default judgment, with which Mr Leung seemed to agree during the hearing. I however note that in both Order 13 rule 9 and Order 19 rule 9 of RDC, the Court has a discretion to vary the judgment entered, ie both rules allow the Court certain latitude in the options for disposing of the application for setting aside. In the end, Mr Chung’s argument appears to be more about form than substance, which may not seem to be compatible with the apparent flexibility of the rules. Given my conclusion above, I do not need to conclusively rule on this matter one way or another.

36.  For reasons above, Ground 3 is rejected.

Ground 4: Other considerations

37.  Mr Leung highlighted three considerations which he contended I should take into account. For reasons explained below, I am not satisfied that those considerations could justify setting aside the Judgment.

38.  First, Mr Leung drew my attention to the difficulties faced by Ms Chan in keeping up with the proceedings. To summarise Mr Leung’s submissions, those difficulties arose from: (1) the passing of Ms Chan’s husband; (2) the advanced age of Ms Chan; (3) Ms Chan’s absence from Hong Kong at the time of the service of the writ; (4) Ms Chan’s incapability in understanding English; (5) Ms Chan’s lack of familiarity with legal procedures resulting in her failure to the represent the defendant before the Judge.

39.  Whilst Mr Leung was trying to appeal to the Court’s sympathy, it did not appear to me that Ms Chan had been handling the present proceedings in the most responsible manner:

(1) Ms Chan admitted having knowledge of the proceedings in January 2024 but she did not seek legal advice before she came to the view that all that was required of the defendant was to participate the hearing on 18 April 2024.

(2) The writ served on the defendant was printed partly in Chinese, which should be sufficient for Ms Chan to understand its nature as a legal document and realise the need to engage lawyers.

(3) Ms Chan applied to set aside the Judgment on 24 July 2024, i.e. merely 2 days after she received the letter from the plaintiffs’ solicitors on 22 July 2024 complaining about the persistence of the seepage. It appears from her own account of the events that the Summons was taken out in great haste without much careful considerations.

(4) Up to the hearing before me, given all the time and opportunities, Ms Chan still had not engaged any experts to investigate the seepage or produce any positive evidence to dispute the plaintiffs’ claim.

(5) In these circumstances, the factors mentioned by counsel can hardly lead to any exercise of discretion to the defendant’s favour.

40.  In the end, even if one were to be the most sympathetic to Ms Chan’s situation, I do not see how those matters could lead to the conclusion that the defendant should therefore be allowed to run the defence afresh. All those factors point to the contrary conclusion, ie the defendant should swiftly join hands with the plaintiffs to resolve the actual seepage problem and to compensate the latter, rather than asking for a chance to prolong the fight and to incur much more substantial legal costs to run through the whole course of litigation.

41.  Second, Mr Leung submitted that the plaintiffs’ conduct in withholding their Expert Report suggested that they had not conducted these proceedings or their communications with Ms Chan in good faith. Ms Chan in her reply affirmation argued that there was no evidence from the plaintiffs’ solicitors that they had delivered the demand letter dated 26 September 2023 enclosing the Expert Report. The defendant effectively insinuated that the plaintiffs’ solicitors were dishonest, which is a serious allegation. Other than a mere denial, the defendant could not point to any plausible reason why the plaintiffs’ solicitors would withhold the said letter when they were instructed by the plaintiffs to make a demand to the defendant. In any event, the plaintiffs had substantively pleaded the detail of the Expert Report including its findings in the Statement of Claim, of which the defendant was duly served. Further, I note that Ms Chan had not contacted the plaintiffs’ solicitors or requested to see the Expert Report even after she noticed the proceedings in January 2024. The alleged withholding of the Expert Report is simply without any basis or substance.

42.  Third, Mr Leung submitted that the plaintiffs would not be prejudiced by setting aside of the Judgment. To deprive the plaintiffs of the fruit of the Judgment without the defendant showing any bona fide defence is by itself a serious prejudice. Moreover, the plaintiffs’ evidence is that the seepage persisted and aggravated after the Judgment was granted. After all, one of the causes of action is continuing nuisance, and the basis for the granting the Injunctions was “a real risk of physical danger for the plaintiffs”.[6] To make a bare assertion that the plaintiffs would not suffer prejudice even if the Judgment were to be set aside is the most irresponsible.

43.  None of the other factors suggested by Mr Leung could trigger any exercise of discretion in favour of the defendant to set aside the Judgment.

Plaintiffs’ application to strike out parts of Ms Chan’s affirmation

44.  Lastly, I shall note that the plaintiffs requested trough Mr Chung’s written submissions to strike out certain paragraphs in Ms Chan’s affirmation on the basis that they contain mere opinions, scandalous materials, speculations and arguments. No summons was filed to apply for such order, and therefore the said request is procedurally improper.

45.  In any event, in view of my conclusions above, it is unnecessary to deal with the said request.

Conclusion and disposition

46.  For the above reasons, I dismiss the Summons.

47.  I make a costs order nisi that the defendant shall bear the costs of the Summons, with certificate for one counsel, to be taxed if not agreed.