BULMER LTD. AND ANOTHER v. ACL ELECTRONICS (H.K.) LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The 1st plaintiff is and has, at all material times, been the owner of one of the blocks, Block A, on the 4th Floor of Alexandra Industrial Building in Shamshuipo. In 1974, the 2nd plaintiff became the tenant and occupier of Block A on that 4th Floor. I shall call it "the suit premises".

2. The defendant has, since 1985, been tenant and occupier of the entire 5th Floor, part of which is above the suit premises. The previous tenant of the 5th Floor was Kin Chuen PCB Company Limited. In 1983, Kin Chuen PCB Company Limited caused to be set up and thereafter maintained an air-conditioned room. The defendant became tenant in 1985, and in 1991, the defendant changed its name from Associated Circuits (H.K.) Ltd. to ACL Electronics (H.K.) Ltd. The previous tenant Kin Chuen PCB Company Ltd. maintained an average temperature of 20°C in the air-conditioned room, 24 hours a day, 7 days a week. It would seem that after its occupation the defendant continued with the same air-conditioned room until early 1989 when it installed a 10-horsepower machine with humidity control preset at 20°C and relative humidity 50%.

3. Mr Tsang, the General Manager of the defendant, who was also in the employ of Kin Chuen PCB Company Limited, was not wholly conversant with technical details and he preferred to refer the question of optimum operational temperature for the air-conditioned room on the 5th Floor to the defendant's process engineering. In the report of Vigers (Hong Kong), Mr Chan seemed to have been advised that the range of temperature of the defendant's air-conditioned room was 18°C - 20°C. The new machine installed in early 1989 by the defendant must be powerful. But on his visit, Mr Chan of Vigers (Hong Kong) recorded a temperature of 23°C. According to Mr Chan, the visit was in "a hot and relatively humid day". The room was more congested as he was accompanied by the parties and Mr Chik of Jones Lang Wootton. The evening or night temperature must be lower.

4. The defendant had 16 - 17 workers per shift in the air-conditioned room which is served by two exposers for its dry-beam process, one oven, one laminator with two heat rollers operating at a high temperature of about 110°C - 130°C and three auto-printers. It is not known how many shifts, the defendant worked the air-conditioned room. In 1989, the defendant also ran the its 10-horsepower air-conditioning unit without interruption, thus lowering the temperature of the floor slab inside the air-conditioned room between the 5th Floor and the 4th Floor.

5. Both Mr Chik of Jones Lang Wootton and Mr Chan of Vigers (Hong Kong )are, I accept, experts. Their views mostly converge. Both attributed water condensation to the lower temperature of the 4th Floor ceiling, brought about by the defendant's round-the-clock air-conditioned room above. Mr Chik of Jones Lang Wootton was more precise as to the ordinary or steady workable temperature for offices and factories. He described office use as being on full air-conditioning and the optimum factory condition as provided by means of economic air-conditioning. I prefer his evidence of 24°C for air-conditioned offices and 27°C for air-conditioned factories. For air-conditioned offices, Mr Chik agreed that it might be set to a lower 22°C.

6. About the time of the installation of the new 10-horsepower air-conditioning unit on the 5th Floor, in early 1989, Mr Fung, the Factory Manager of the 2nd plaintiff, noticed water condensation with an uneven ceiling surface on the 4th Floor. In June 1989, there were blisters and cracks with a few water drops. The condition deteriorated progressively, and in August 1989 spalling of concrete and exposed rusted steel were observed on the ceiling of the suit premises. Some 10 - 12 days before September 1989, the appearance of the ceiling was as depicted in photograph 1 at page 12 of the Agreed Bundle. The damaged ceiling of the suit premises remained visually in the same condition until the 4th September 1990 when photograph 1 was taken.

7. I find that condensation, particularly noticeable in the summer months, was caused by the lower than atmospheric temperature of the floor slab between the 5th and the 4th Floor. This conclusion has the support of both experts. For the reasons I am about to give, I take the view that such water condensation was the direct consequence of the defendant's unceasing use of its newly installed air-conditioning unit in the room above.

8. Mr Chan of Vigers, the defendant's expert, conceded that the low temperature of the ceiling slab of the suit premises was "a very likely cause of the condensation". Granted that he arrived at this opinion on his visit when the suit premises were unused by any workers and left in bad ventilation. In Viger's report, Mr Chan advised, inter alia, insulation to the flooring of the air-conditioned room on the 5th Floor. Mr Chan's visit was made after the 2nd plaintiff's repair to the ceiling and consequently he was unable to see the exposed rusty reinforcements and the nature of their protective coating, if any, or the thickness of the concrete covering. Poor quality concrete, thin concrete covering, inadequate protective coating for the steel rods and, for that matter, also arguably the specification of the steel used could all cause the spallings and damage. But for these speculative possibilities, Mr Chan was prepared to conclude that water condensation was the probable cause of the ceiling problem. Mr Ismail, counsel for the defendant, submitted further that on account of other possibilities I shall enumerate later the plaintiffs failed to establish that the condensation itself was, in effect, caused by the defendant's air-conditioned room.

9. At one time in his re-examination, Mr Chan expressed the view that with a running ceiling fan and open windows for better ventilation, the chance of "crying ceiling and dry walls" was "unlikely to happen". It can readily be appreciated that these somewhat loose surmises deserve no attention, particularly on Mr Chan's concession that exhaust fans would not improve the situation if there was no difference between the outside and inside temperature and humidity. On the evidence presented, I am not satisfied that there was a material disparity between the temperature and humidity outside and inside the suit premises at any time. It is difficult to imagine that any court would, on the evidence, allow itself to conjecture these wild postulations, such as presence of acid vapour, better use of fans and machines, in-adequate ventilation etc.

10. In July 1990, renovation including repainting and some patch repairs to spalled areas in the common parts was done by the Incorporated Owners. In October 1990, repairs to the damaged ceiling of the suit premises beneath the defendant's air-conditioned room for spalled concrete and exposed steel reinforcements were carried out at the expense of the 2nd plaintiff in the sum of $19,500. As the defendant will vacate the 5th Floor at the end of this year, proper insulation as a precautionary measure to the floor/ceiling slab is now quite unnecessary. The plaintiffs' claim is therefore confined to the repairs cost of $19,500.

11. In between August 1989 and March/April 1990, there were several meetings between Mr Ham of the 2nd plaintiff and Mr Mitch Gardiner of the defendant. In the course of one or the other of these personal meetings, Mr Gardiner suggested re-directing the defendant's air-conditioning flow as well as opening all the windows and turning on all the fans in the suit premises. Mr Ham canvassed the question of insulation with Mr Gardiner who was receptive to the idea. Subsequently, Mr Gardiner paid a visit to the 4th Floor with "an inspector". Later, Mr Gardiner suggested the use of an anti-moisture paint but no brand name was furnished to the 2nd plaintiff. However, Mr Gardiner supplied the name of a company for insulation works. Mr Ham arranged for a visit to the suit premises by a Mr Wong who advised that painting alone could provide no permanent solution. Hence, anti-moisture painting was not attempted.

12. Mr Gardiner further suggested the use of standing fans or the installation of air-conditioning by the 2nd plaintiff. Mr Ham found that any number of standing fans over and above 3/4 would be impractical and causing obstruction. He also regarded the installation of air-conditioning as not being commercially viable for an open space of 7,000 sq.ft. with no partitioning. The affected ceiling was merely under a 900 sq.ft. cold room.

13. The condensation problem of the ceiling was more acute in the summer months of June/July. Complaints were made to the Incorporated Owners, Urban Council Department, Fire Services Department and Lands Department by the 2nd plaintiff but it was all to no avail. It was only after a decision had been taken to repair, that the 2nd plaintiff consulted solicitors in September 1990. In October 1990, repairs were effected.

14. The arguments advanced by Mr Ismail, counsel for the defendant, may conveniently be put into three separate compartments :

15. As for (1)(a), the rule in Rylands v. Fletcher, the test would seem to be whether the agent causing damage is "naturally on the land from which it escapes." Rylands v. Fletcher, supra. at p.339. An analogy may be drawn from rain water collected in an artificially formed lake. Cold air converted from the atmosphere shares a common denominator with such rain water; both are not naturally on the land, but collected or converted from the air space above or around. Moreover, the cold air in the air-conditioned room of the defendant was channelled in by ducts connected to a condenser unit installed outside the air-conditioned room. The floor slab was thereby cooled down allegedly causing spallings and concrete damage. It was virtually common ground that at some stage cold air did permeate through to the ceiling of the 4th Floor, though initially the cold temperature would probably affect it by conduction. Hence, there must come a time when cold air "escaped". This point was not taken and in any case it was not debated before me whether cold temperature like radiation is capable of "escaping" without permeation.

16. On behalf of the defendant, Mr Ismail argued under (b) : Nuisance, inter alia, that the defendant's 900 sq.ft. air-conditioned room occupied a small fraction of 6-7% of the total 5th Floor of some 14,000 sq.ft. The use is incidental to and necessary for the defendant's trade. The low temperature, so counsel contended, is close to that universally enjoyed in air-conditioned premises. The same area had been put to similar use by the previous tenant. The condensation problem prevails over only a short period of 4 months in a year, naturally becoming more unpleasant in June/July. The building of which these premises form part is an industrial building situated in a heavily-industrial area. The irritating effects should be tolerated and in any event they could arguably have been easily overcome or alleviated. Counsel submitted that a reasonable or unreasonable user must be determined by reference to all the circumstances of a particular case and not to be decided by "an abstract consideration of the act itself". It is ultimately a question of fact. Counsel submitted that in all the circumstances the interference with the 2nd plaintiff's use and enjoyment of the suit premises was one within the "rule of give and take, of live and let live". See Kennaway v. Thompson [1980] 3 AER 329 at p.333, Letter g per Lawton L.J. Reasonableness of the defendant's conduct in using its air-conditioned room on the 5th Floor must therefore be considered on these guidelines, in a sense rather different from the approach adopted in the law of negligence. Is the cold temperature affecting a relatively small fraction of the 5th Floor floor slab, with its alleged consequential damage and annoyance, something that the 2nd plaintiff as an occupier is expected, in all the circumstances, to endure?

17. There is no evidence that the air-conditioning unit of Kin Chuen PCB Co. Ltd. had the same capacity or performance as the defendant's newly 10-horsepower unit installed in early 1989. Mr Tsang, the General Manager of the defendant and a former employee of Kin Chuen PCB Co. Ltd. recalled that the previous tenant Kin Chuen maintained its air-conditioned room at 20°C on an average. Both Jones Lang Wootton and Vigers, the experts from both parties, gave a starting low temperature of 18°C. There is no evidence whether Kin Chuen was then using similar equipment or heat-generating apparatus. I prefer Mr Chik's evidence that the optimum temperature for offices was 24°C - could be lower at 22°C and factories 27°C. Mr Chik did not elaborate as to whether these offices and factories in his estimates would be round-the-clock air-conditioned. Mr Chan of Vigers took temperature at 23°C on a hot humid day and at a time when a number of persons were visiting on an inspection. There can be little doubt that with a starting low temperature of 18°C or even a temperature set at 20°C from a unit run without interruption, the cooling down of the floor-slab must have caused condensation on the ceiling of the suit premises located in an overall warmer industrial area. It would be incredibly naive and against the weight of the evidence to find otherwise.

18. The defendant used two layers of vinyl floor tiles. Thus the defendant must have been conscious of the need to insulate the floor slab of its air-conditioned room. Evidence was led that the defendant was making enquiries from the authorities as to insulation of its air-conditioned room for the same special purpose in its new premises. The defendant must still feel that they have at least an unusual situation in hand. According to the experts, these vinyl tiles did not succeed in properly insulating the floor slab. The area affected was directly below the defendant's air-conditioned room. On the evidence, I am unable to say that there was any real disparity between the outside and inside temperature and humidity. The defendant did not conduct operations or keep equipment which could generate any appreciable heat or humidity. Condensation was noticed quite soon after the installation of the defendant's 10-horsepower new unit.

19. Both experts conducted primarily a visual inspection. It was not suggested that a more in-depth inspection was necessary. Mr Chan of Vigers inspected after repairs had been effected without the benefit of any exposed steel reinforcements and damaged concrete. In addition, at the time of Mr Chan's inspection, 30% of the suit premises was vacant and it was not used by any workers but wholly for storage. Mr Chik of Jones Lang Wootton inspected before the repairs. He must have enjoyed some advantage over Mr Chan.

20. None of the factors presented for my consideration is decisive, including some of those drawn to my attention in counsel's arguments that the plaintiffs failed to discharge their burden of proof or to mitigate by making earlier repairs or taking prompt remedial measures. It is largely a determination to be made with a degree of arbitrariness. The court must first examine these relevant factors but has ultimately to fall back on virtually the general feel of the case on an overall evaluation. This Court is deeply conscious of the inexactitude or elasticity with which it is to reach its conclusion. The matters have all been tested singly, one against the other and in an overall scenario. After concerned deliberation, the conclusion that I have arrived at is that it is a nuisance that the 2nd plaintiff as an occupier should not be expected to bear. The interference with the 2nd defendant's use and enjoyment of its premises is therefore actionable.

21. The defendant, through counsel, also submitted that the plaintiffs failed to eliminate equally probable causes; hence, they failed to prove their case. Between 1983 to 1985, no spallings were detected during the tenure of the previous tenant, Kin Chuen PCB Co. Ltd. After commencement of the defendant's occupation in 1985, no spalling or condensation was observed before June 1989. After the repairs by the Incorporated Owners as well as the repairs to the ceiling of the suit premises by the 2nd plaintiff in 1990, spallings did not reappear. The problem was thereafter confined to water condensation and droplets, more severe in the humid summer months.

22. The building is an over 15-year old structure and Mr Tsang of the defendant claimed to have discovered spallings also in its premises, but at one time, Mr Tsang made some reference to a false ceiling in the air-conditioned room, if not in parts or all of the 5th Floor premises. I am not satisfied that his view was wholly unobstructed and consequently I prefer not to accept his claim. The defendant relied also on the breathing of the 2nd plaintiff's workers, neon-lights or washing operations, effect of pane glass used, possible acid vapour from dyed materials in store, likely poor quality or ageing of concrete in the floor slab, possible insufficient anti-rust protection given to the steel reinforcements, possible inadequate concrete covering, etc.

23. There was no evidence that the building was erected in contravention of Buildings Regulations. These are highly speculative surmises unworthy of any serious consideration. No evidence was given of the effect of the pane glass used for or in the suit premises. Much was sought to be made also of ventilation, the size and the nature of the plant, the manufacturing operations and the resultant possible higher temperature and humidity, but there is no direct evidence that the "environment" on the 4th Floor was otherwise than normal. The proper inference is otherwise than as suggested by Mr Ismail. This Court also heard no evidence that any operation on the 4th Floor would involve washing of the heat-generation kind. The amount of acid vapour, if any, emitting from dyed materials would be depending on the dye used, the age and condition of the stored fabrics, the manner in which they were stored and the period of storage. These imponderables were left unexplored. It was not sufficiently demonstrated that any other equally probable causes ever existed. I cannot even begin to accept, letting alone to examine them as possibilities. Subject to my disposal of the remaining issues, I find that the plaintiffs have proved their case.

24. Lastly, I turn to the contention that the plaintiffs failed to mitigate by earlier repairs or were otherwise themselves partly to blame for the water condensation and the alleged consequential damage. Repairs were done in October 1990, about a year after damage was noticed by Mr Fung, the Factory Manager of the 2nd plaintiff. However, there were on-going discussions between the 2nd plaintiff and the defendant. The parties also met and they were in search of a remedy. Some proposals were put to test. Use of fans, including standing fans was unsuccessful. Other suggestions were considered and rejected. It was reasonable of the 2nd plaintiff to at least try to remove the cause before deciding on repairs. Moreover, the 2nd plaintiff had to allow time for the humid season to leave and the dry season to come. Execution of the repairs was wisely made to coincide with the 2nd plaintiff's regular renovation. Even in the course of the renovation, days had to be allowed to pass for a dry spell to set in before remedial works could be applied to the affected ceiling area. The 2nd plaintiff was not guilty of inaction or dilatoriness.

25. There was no or no credible evidence that the same steps of dressing the damaged area including the reinforcements would not have been taken in any earlier attempt. There was also no or no credible evidence that earlier repairs would have involved less work or cost. I attach little weight to Mr Chan's bare assertion that earlier repairs would prevent further deterioration. No evidence was given that the reinforcements had not already been affected at the early stages. In fact, it is not known whether and to what extent the steel reinforcements and the concrete had then been damaged. It is therefore quite impossible to conclude that earlier repairs would have prevented further deterioration or taken a different or less involved form.

26. It was suggested by counsel for the defendant that air or plastic curtains could have been installed. The area could have been partitioned off and wall-mounted oscillating fans provided for closer and more direct flow of air. The 2nd plaintiff did try the fans but did not succeed in removing the condensation problem. Fans, however raised and oscillated, would have served little purpose, so conceded Mr Chan of Vigers, if relative temperature and humidity had been the same outside and inside the suit premises.

27. Use of dehumidifiers was also suggested but with an open area of 7,000 sq.ft, it could hardly be expected to achieve any result.

28. From the photographs showing localized damage, Mr Chan of Vigers speculated that there might be a possibility of poor quality concrete, but he elaborated that due to the poor ventilation experienced on his visit, he took the view that water condensation was still "the most likely cause". In addition to the observations I have made, poor quality or ageing of concrete was not even ventilated in any of the experts' report. The expert for the plaintiffs, Mr Chik, was not cross-examined on it. Matters relating to an alleged poor quality or ageing of the concrete were not specifically put to the plaintiffs' witnesses. This was sought to be introduced in the re-examination of Mr Chan of Vigers as a possible cause on the basis that there was no Visible recurrence of concrete spallings after the repairs by Incorporated Owners in July 1990 and by the 2nd plaintiff in October 1990. For the reasons I gave, counsel's attempt was ruled out of order. Mr Ismail, counsel for the defendant, did not then warn the Court or his opponent that such proposed re-examination on equal probabilities or possibilities was designed as an attack at the plaintiffs' effort in establishing their case. The same endeavour was belatedly revived on its proper footing and resurrected only in the course of the evidence of Mr Tsang, the General Manager of the defendant.

29. It was further submitted on behalf of the defendant that nothing beyond water condensation, mildew or fungus on the 4th Floor ceiling could have been reasonably foreseeable. Hence, the defendant cannot be liable for such remote damage in the form of spalled steel reinforcements and falling concrete. As I have been at pains to emphasize, there is no evidence that the steel reinforcements were insufficiently rust-proof or cement-covered. Consequential damage such as concrete blisters and cracks, spalled and exposed reinforcements brought about by humidity from whatever source or cause is common knowledge to everyone in Hong Kong and has for years been widely debated in the press and electronic media. This is knowledge of common affairs of life which any Hong Kong citizen of ordinary intelligence possesses. They are matters of which I can take judicial notice. Insulation precaution was ineffectively taken by the defendant and the experts both acknowledged the need for proper insulation for a room earmarked for special manufacturing process such as that in the defendant's air-conditioned room. Apart from knowledge of these common affairs of life, on the evidence before me, no other causes have been plausibly identified or demonstrated for serious deliberation. The Court should not speculate. On probabilities, the damage was caused by water condensation. I formally so find.

30. Moreover, the question of remoteness of damage was not explicitly canvassed at the trial. None of the experts in their reports took any point that the actual damage was not reasonably foreseeable by a Shamshuipo manufacturer. If indeed, Mr Ismail's submission on unforeseeability by a reasonable factory operator had any hope of success, the experts would not have been silent or been left in silence. All seemed to have taken for granted that the damage was a common phenomenon flowing from water condensation. I find that the actual damage was not of an entirely different kind which no one, including the defendant, would anticipate or could have anticipated from inadequate insulation of the defendant's special-purpose air-conditioned room and the resultant water condensation.

31. On my findings, water condensation was not the culminative effect of a series of acts. The defendant was, in the circumstances, I find, solely responsible for the water condensation.

32. None of the further arguments advanced by Mr Ismail for the defendant succeeds and I find it guilty of nuisance as well as liable on the strict rule of Rylands v. Fletcher. The repairs cost of $19,500 was admitted. The other more substantial claim of the plaintiffs was not proceeded with by reason of the defendant's expected imminent vacation from the 5th Floor sometime at the end of this year. Judgment is therefore given against the defendant in favour of both plaintiffs in the sum of $19,500. I make an order nisi for costs against the defendant.