ABERDEEN WINNER INVESTMENT CO LTD v. THE INCORPORATED OWNERS OF ALBERT HOUSE AND ANOTHER

cacv 42/2004 & CACV 236/2004

CACV 42/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 42 of 2004

(on appeal from HCA NO. 3408 of 2003)

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CACV 236/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 236 of 2004

(on appeal from HCA NO. 3408 of 2003)

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BETWEEN

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J U D G M E N T

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Hon Rogers VP:

1.  I agree with the judgment of Le Pichon JA. 

Hon Le Pichon JA:

2.  These are appeals from Reyes J.  The same issues arise in both appeals.  The first (CACV 42/2004) is an appeal from (1) the order dated 21 January 2004 granting summary judgment in favour of the plaintiff (“Aberdeen”) against the 1^st defendant who were the Incorporated Owners of Albert House (“the Owners”) in the sum of $9,239,437.87 and against the 2^nd defendant (“Wong”) in the sum of $4,899,127.76 together with interest, adjourning the determination of paragraph 3 of Aberdeen’s summons and prayer 6 of the Re-Amended Statement of Claim sine die and dismissing the strikeout summons issued by the Owners on 1 November 2003 and (2) the order dated 13 February 2004 made at the adjourned hearing of prayer 6 which held that Aberdeen was not liable to contribute towards the Owners’ own costs and the Owners’ liability to pay the costs of the action.  The second (CACV 236) was an appeal from order granting a 2^nd final judgment against the owners for the sum of $2,449,563.88 with interest and holding that Aberdeen was not liable to contribute to the Owners’ own costs and the Owners’ liability to pay the costs of the action.  At the conclusion of the hearing, judgment was reserved.

Background

3.  In 1994, a concrete canopy which was a cantilevered structure projecting out from the external wall along one side of Albert House collapsed.  One person was killed and 7 injured.  The estate of the person killed and those who were injured (“the Action Plaintiffs”) sued the Owners, Housing Management Agency Ltd (“HMAL”), Ho Wing Hang (“Ho”), New Best Restaurant Ltd (in liquidation) (“New Best”), Aberdeen and Wong.  For convenience, I will refer to that action as “the main action”.  HMAL was the management company managing Albert House at the time of the accident.  New Best was the owner of the restaurant business that had been carried on on the 1^st, 2^nd and 3^rd floors of Albert House.  Ho was the director and decision maker of the 4^th defendant New Best.  Aberdeen was the original developer of Albert House and remained an owner of some of the units.  Wong was the contractor who carried out renovation works for New Best between October and December 1984 and was responsible for the construction of a fish tank which in part stood on the concrete canopy that collapsed.

4.  At the time of the trial of the main action, interlocutory judgment had already been entered against Wong.  Ho and New Best did not appear either by counsel or in person.  At that time, New Best was already in liquidation.  In his judgment dated 23 December 1999, Suffiad J (“the trial judge”) found each of the 1^st to 5^th defendants in the main action, namely, the Owners, HMAL, Ho, New Best and Aberdeen, liable in negligence and nuisance.  On the question of apportionment, the trial judge came to the following conclusion:

“Apportionment

…. the most culpable of the defendants in this case are without doubt [Ho] and [New Best].  For the purposes of apportioning liability as between the different defendants, I will treat both [Ho and New Best] as one.  There are two reasons for this.  [Ho] is the director and decision-maker of [New Best].  Furthermore, there is no contribution notice inter se between the two of them.

On the other end of the spectrum, [Wong] is probably the least culpable, judgment having been entered in default against him, he being the contractor engaged by [New Best] to demolish the fish tank on the day of the accident.

In between these two spectrum are [the Owners, HMAL] and [Aberdeen].  There is little, if any, to separate [the Owners, HMAL] and [Aberdeen] from each other in so far as apportionment of liability is concerned.  Each had a duty to maintain this canopy.  All of them were in complete breach of their own respective duty to maintain the canopy.  Without any clear indication as to which of these three is more to blame for the collapse of the canopy, I propose to apportion their liability equally.

In all the circumstances of this case, I shall apportion liability as between the defendants as follows.  [Ho and New Best] will together be 50% to blame.  Each of [the Owners, HMAL] and [Aberdeen] will be 15% to blame.  [Wong] will be 5% to blame.…”

5.  The judgment dated and entered on 23 December 1999 as amended pursuant to the order of the trial judge of the 25 July 2003 read as follows:

“IT IS ADJUDGED that [the Owners, HMAL, Ho, New Best and Aberdeen] do pay the Plaintiffs damages to be assessed.

IT IS FURTHER ADJUDGED that costs be paid by the Defendants on a joint and several liability basis to the Plaintiffs, …”

Damages were subsequently assessed by the trial judge after which each of the plaintiffs in the main action obtained an “amended final judgment after assessment of the damages”.  These were in identical terms save for the identity of the plaintiff and the amount of the award:

“The 1^st Plaintiff having on the 23^rd day of December 1999 obtained interlocutory judgment herein against all the Defendants for damages to be assessed.  The assessment having been heard before the Honourable Mr. Justice Suffiad at the High Court, Hong Kong, and the said Mr. Justice Suffiad ordered that judgment as hereinafter provided be entered for the 1^st Plaintiff.

IT IS ADJUDGED that the Defendants do pay the 1^st Plaintiff the sum of HK$16,784,345.25, …

IT IS FUTHER ADJUDGED that there be costs order nisi that costs of the assessment in relation to the 1^st Plaintiff will be borne by the Defendants on a joint and several liability basis, …”

The Defendants referred to were all the defendants to the main action, namely, the Owners, HMAL, Ho, New Best, Aberdeen and Wong.

6.  A total sum of $33,257,886.25 plus interest and costs was assessed to be payable.  The Action Plaintiffs mainly pursued Aberdeen who by 31 August 2002 had paid a total of $32,728,942.46 to the Action Plaintiffs computed as follows:

	$
Total damages paid	32,579,749.85
Interest	137,692.61
Charging order application	11,500.00
	_____________
Total:	32,728,942.46
	=============

This sum substantially exceeded Aberdeen’s 15% share of liability that the trial judge had found.

7.  By 10 September 2002, the Owners had made payments totalling $5,458,631.34 towards the judgment computed as follows:

	$
15% of judgment debt of $33,257,886.25	4,988,682.94
15% of $3,132,989.30 (interest on judgment debt up to 31 August 2002)	469,948.40
	_____________
Total:	5,458,631.34
	=============

Apart from the Owners, HMAL had also made an interim payment of $1,566,666.67.

8.  The writ in the present proceedings was issued in September 2003 by Aberdeen seeking contribution from the Owners and Wong.

9.  At the time of the trial, New Best was already in liquidation.  Ho was adjudicated bankrupt in August 2002.  In July 2003, HMAL went into involuntary liquidation.  Wong had not made any payment and at the time of the hearing below, it was thought that he was likely to be made a bankrupt which, indeed, did happen.  A bankruptcy order was made against Wong on 9 June 2004.

10.  The issue before the judge was the effect of a contributor’s insolvency on other contributors.  The judge concluded that Aberdeen’s claim fell within section 3(1) of the Civil Liability (Contribution) Ordinance (Cap. 377) (“the Ordinance”), such that it was entitled to claim reimbursement for the excess paid from the Owners, Wong and the other Action Defendants in accordance with the apportionment of liability determined by the trial judge.  As HMAL and Ho had become insolvent in the interim and New Best had been in liquidation at the date of the trial, Aberdeen was unable to recover any contribution from them.  However, the judge held that that did not mean that Aberdeen was left to shoulder the burden that ought to have been paid by them.  Rather, he held that the remaining Action Defendants (i.e. Wong and the Owners) must bear proportionately the share of damages payable by HMAL, Ho and New Best.  The outcome therefore was that the share of damages of those Action Defendants fell to be borne by Aberdeen, the Owners and Wong in the following proportions:

(1)    Aberdeen’s share: 15/35 or approximately 42 .857%.

(2)    The Owners’ share: 15/35 or approximately 42.857%.

(3)    Wong’s share: 5/35 or approximately 14.285%.

Payments received from HMAL were to be credited to the amounts payable by Aberdeen, the Owners and Wong respectively in the same fractions.

11.  Applying that formula, the judge held that Aberdeen was entitled to recover $9,239,437.87 from the Owners and the sum of $4,899,127.76 from Wong by way of contribution.

12.  At the adjourned hearing of prayer 6 on 13 February 2004, the judge held that Aberdeen was not liable to contribute to the Owners’ own costs.

13.  Following the judgment in CACV 42, Aberdeen sought to recover the judgment sum from Wong.  A bankruptcy order was obtained subsequent to which Aberdeen applied to recover one-half of that amount from the Owners by way of contribution.  On 15 July 2004, Reyes J entered a 2^nd final judgment against the Owners and made a costs order similar to the one made in CACV 42 absolving Aberdeen from having to contribute to the Owners’ own costs.

Effect of a co-tortfeasor’s insolvency

14.  The first issue which arises is whether the judge was right in holding that section 3(1) of the Ordinance applied to Aberdeen’s claims enabling it to recover contribution from the solvent co-tortfeasors.  As I understand it, the argument advanced by Mr Yuen SC, on behalf of the Owners, was that at common law and in equity, there was no right of contribution between co-tortfeasors.  It only became possible after the enactment of the Tortfeasors Ordinance in 1936.  It was submitted that the Ordinance which was enacted in 1985 merely widened the right to claim contribution from co-tortfeasors and it was not intended to introduce the equitable principle governing co-debtors to contribution claims between co-tortfeasors.  Mr Yuen argued that Aberdeen’s claim was not in respect of the “same damage” as that suffered by the Action Plaintiffs in that its present claim arose out of the other co-tortfeasors’ failure to pay their share of damages rather than the damage suffered by the Action Plaintiffs arising from the collapse of the canopy.  It was also submitted that Aberdeen’s present claim for further contribution amounted to a “second bite at the cherry” in that issues concerning co-tortfeasors’ insolvency should be raised at the time of apportionment of liability.

15.  Section 3(1) reads as follows:

“(1)Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).”

Prima facie, that provision would encompass Aberdeen’s claim against the Owners.  “Damage” as used in that section is to be interpreted in accordance with section 2(3) of the Ordinance:

“(3)A person is liable in respect of any damage for the purposes of this Ordinance if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise).”

The Owners and Aberdeen were plainly liable in respect of the “same damage” suffered by the Action Plaintiffs.  It must follow that Aberdeen’s claim is within section 3(1) of the Ordinance.  There is no ambiguity arising here such as would require resort to the legislature’s intention in interpretating the section.

16.  The effect of a contributor’s insolvency on other contributors was considered by the late Professor Glanville Williams in his book on Joint Torts and Contributory Negligence,1951 edition at § 48.  The judge referred to this in his judgment and noted that the upshot of Professor Williams’s analysis was that solvent defendants should bear the burden of an insolvent defendant’s contribution in proportion to the solvent defendants’ respective shares of liability.  Such an approach accords with the rationale behind section 19(2) of the Law Amendment and Reform (Consolidation) Ordinance which provides for contribution to be “just and equitable having regard to the extent of that person’s responsibility for the damage”.

17.  I am unable to discern any good reason for not adopting this approach.  Leaving only one of several solvent defendants to shoulder virtually the entire burden of damages arising from the insolvency of one or more of the defendants would be contrary to the rationale underlying the statutory provisions for contribution.  As Lord Hobhouse observed in Dubai Aluminium Co Ltd v. Salaam and Others [2003] 2AC 366 at para. 72,

“the right to contribution arises from the fact that one person has borne a disproportionate burden which it is just that another should share”. 

Lord Millet considered that where a defendant is insolvent, the whole of the liability of meeting the judgment falls to be apportioned between the other defendants, as otherwise the deficiency arising from the insolvency is borne by whichever defendant happens to satisfy the judgment.  In his view, the purpose of the statutory provisions regarding contributions between co-tortfeasors was to avoid that result.  See paragraph 167 of his judgment.

18.  Focusing on the orders made by the trial judge and his findings, the order drawn up on 28 December 1999 as amended did nothing more than enter interlocutory judgment against the Owners, HMAL, Ho, New Best and Aberdeen for damages to be assessed.  There was no order drawn up to reflect the trial judge’s findings as to apportionment.  The liability of those defendants in the main action was “on a joint and several liability basis” as reflected in the costs order contained in the order so drawn up and entered.  The final judgment obtained by each of the Action Plaintiffs made no mention of apportionment between the Action Defendants inter se.  Accordingly, all that the judge below did in the present proceedings was to carry into effect the findings and determination that had been made by the trial judge as to liability.  The submission that Aberdeen’s damage arises from the insolvency of some of its co-tortfeasors is misconceived and is based on a misreading of the Ordinance.

19.  In my view, the judge’s judgment on the contribution point was irreproachable.  I would dismiss the appeal on that issue.  I now turn to the second issue.

The costs order

20.  Aberdeen is one of the Owners and, as such, was liable to contribute to sums adjudged payable by the Owners by the order made on 21 January 2004.  The question whether Aberdeen should be liable to contribute to the Owners’ own costs was considered at the adjourned hearing held on 13 February 2004.  The judge made an order to the effect that Aberdeen was not liable to contribute towards the Owners’ own costs.  Mr Yuen submitted that that was wrong in principle in that as Aberdeen was liable to contribute its proportionate share to sums payable by the Owners, no distinction should be drawn between damages and costs.

21.  Since what is being challenged here is that the judge’s exercise of his discretion in relation to costs, it is incumbent on the Owners to demonstrate that the judge had gone seriously wrong in the exercise of his discretion.  It was said that in substance, the action was hostile litigation involving Aberdeen on the one hand and all the other owners of Albert House on the other.  Aberdeen had no option but to bring this action to recover contribution from the Owners.  The fact that Aberdeen is itself one of the Owners and therefore liable to contribute to the damages claim in that capacity does not detract from the fact that these proceedings would not have been necessary but for the fact that the other members of the Owners who carried the vote at owners’ meetings would not agree with Aberdeen’s claim which ultimately prevailed.

22.  Mr Chan SC who appeared for Aberdeen submitted that section 17 of the Buildings Management Ordinance, Cap. 344 allows the court to relieve a successful individual owner from contribution towards the costs of the incorporated owners.  That section provides as follows:

“(1)    If a judgment is given or an order is made against a corporation, execution to enforce the judgment or order may issue-

(a)    against any property of the corporation; or
(b)    with leave of the tribunal, against any owner.”

In an application under section 17, the plaintiff has the onus of establishing that it is a proper case for the granting of leave and must establish that justice requires the making of the order.  The court will have regard to all the circumstances.  The application would fail if the court considers that greater injustice will be done to an owner if leave is granted than will be done to a plaintiff if it is refused.  See the judgment of Power J in Golden Chance (Hang Cheong) Properties Ltd v. Incorporated Owners of Gold Mine Building HCA 6749 of 1983, unreported, at p. 9.  These principles were adopted and applied in Vic Green Co Ltd v. The Incorporated Owners of Henley House, MP 2863 of 1991, unreported, where leave was granted to execute judgment against three owners who had been actively involved in denying access to another owner to an electricity generator room she had a right to enter.  See Kent, Merry and Waters, Building Management in Hong Kong, 2002 edition at p. 258.  Section 17 therefore enables orders obtained to be enforced against selected individual owners.  Were it a question of the Owners seeking to obtain leave to enforce the payment by the plaintiff of his contribution towards the Owner’s own costs, the justice of the case would require a declaration to the effect that they may not do so but beyond that it is difficult to see how section 17 can found the legal basis of the costs order made below.

23.  It is to be noted that in Vic Green, the individual owners against whom the order was sought to be enforced were themselves defendants to the action in addition to the incorporated owners.  It was their conduct that culminated in the order made by Mayo J.  In the present case, the Owners who carried the vote were not made parties to the proceedings.  Had they been joined as defendants, based on Vic Green, it might have been possible, for example, to obtain costs orders against those individual defendant owners that they should bear the plaintiff’s share of the 1^st defendant’s own costs thereby effectively relieving the plaintiff from contributing his share of the costs as one of the Owners.  However, that did not happen.  Notwithstanding Mr Chan’s submissions, I regret that I am unable to read section 17 as enabling the court to make the order the judge below made.

24.  Apart from section 17, Mr Chan also relied on the court’s discretion.  Under section 52A of the High Court Ordinance, Cap. 4 and Order 62, rule 2(4) of the Rules of the High Court, the court has full power to determine by whom and to what extent the costs are to be paid.  Whilst there is no difficulty as such in ordering costs against the 1^st defendant, i.e. the Owners, it is quite another matter to order as the judge did that the plaintiff is not liable to contribute towards the 1^st defendant’s own costs.  This is because his liability to contribute is an internal matter affecting those who constitute the Owners whose duties and obligations inter se arise under and are governed by the deed of mutual covenant of Albert House.  I am therefore driven to conclude that the costs order made below lacked a legal basis.  Whilst I fully recognize that the order made by the judge accords with my own sense of the justice of the case, I am unable to uphold that order.  It is therefore with the utmost reluctance that I would allow the appeal so far as it relates to the costs order.

25.  As noted above, the same issues arise in CACV 236/2004.  Accordingly, I would dismiss the appeals so far as they relate to the final judgment and the 2^nd final judgment and allow the appeals so far as they relate to the costs orders made.  I would also make an order nisi that 90% of the costs of the appeals be to Aberdeen.

Hon Waung J:

26.  I agree.