PARLICO LTD v. NEW ACCORD HOLDINGS LTD AND ANOTHER

HCA 1665/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1665 OF 2010

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J U D G M E N T
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INTRODUCTION

1. This case concerns water leakage into a flat owned by the plaintiff in the Tregunter development, comprising Flat B at the 33^rd floor (“33B”, or “the plaintiff’s premises”).  The 1^st defendant owns the 34^th, 35^th floors and part of the roof (“the Penthouse”).  In particular because the plaintiff’s flat is on the 33^rd floor and below the 1^st defendant’s, the core question which arises is as to whether the source or sources of the water leakage concerns either or both of the defendants, and if so, whether one or both is to be held responsible for the damage caused by the water leakage.

2. Altogether, complaint is made about four incidents of water leakage which took place between March and September 2009; specifically on 24 March 2009; 25 May 2009; 4 September 2009; and 15 September 2009.  These will be referred to respectively as the “1^st, 2^nd, 3^rd and 4^th Incidents”, and collectively as “the Incidents”.

3. The plaintiff’s premises are immediately below the 1^st defendant’s premises which, in turn, are immediately below the roof.  The 1^st defendant is the owner of part of the flat roof of the development.  The Incorporated Owners are the 2^nd defendant.

4. Not a party to the legal proceedings, but a key player in the events and in the trial was Protech Property Management Ltd (“Protech”) who was and is the property management company for Tregunter.  As may be expected, Protech were the 2^nd defendant’s representatives in all relevant meetings and discussions.

THE BACKGROUND

5. The plaintiff owns two properties in Tregunter.  These, it appears, have been used for investment and are, in the ordinary run of things, rented out to tenants.  The commencement of the water leakage issues appears to have coincided with the expiry of the tenancy agreement for 33B.  There is an issue between the parties as to the date on which the 33B premises became vacant, but it is undisputed that the premises were vacant at the time the leaks are said to have started.

6. At about the same time the 1^st defendant became the owner of the Penthouse, this having been assigned on or about 12 February 2009.  The 1^st defendant intended to (and did) renovate the Penthouse before going into occupation.  This unit was to form a family home for Mr Kevin Khong Siew Kin (“Mr Khong”) and his wife, Ms Mary Chan Lai Mei (“Mrs Khong”) once renovated, as it still does. 

7. The 2^nd defendant was not in existence at the time the 1^st defendant purchased the Penthouse and was only incorporated on 21 April 2009, after the 1^st Incident had occurred.  The plaintiff does not seek to hold the 2^nd defendant liable in respect of that 1^st Incident accordingly.

8. The renovation of the Penthouse commenced in either February or early March 2009.  There is an issue as to precisely when.  What is not in issue is that one of the first pieces of work carried out for the 1^st defendant by its contractor Krishom Holdings Ltd (“Krishom”) was the demolition of some of the existing structures, including one on the roof, referred to in the trial as “the doghouse”.

9. The 1^st Incident occurred on 24 March 2009.  Water leakage was observed and Protech were notified, and on the following day, the leakage was reported to the 1^st defendant.

10. Because of the 1^st Incident, Mr and Mrs Khong, the individuals behind the 1^st defendant, say that they kept pushing Protech to arrange for repairs to be carried out at the roof.  No remedial work to the roof was undertaken until October 2009 however.  The 1^st defendant complains that the 2^nd defendant was slow in taking up its responsibility in this regard.  The part of the roof in question here is also referred to as the upper roof and is in common ownership.  The roof immediately above the Penthouse is part of the Penthouse and will be referred to as “the Private Roof”.

11. Water testing of this work at the upper roof was carried out on 23 October 2009.  The contractor confirmed that there was no water leakage following the remedial work.  Repair work was also undertaken to the private roof area, specifically the area where the doghouse structure had been demolished, in or about November 2009 by a contractor engaged by the 1^st defendant.  There was no subsequent complaint of water ingress by the plaintiff. 

12. As far as the 1^st defendant is concerned its position was made worse because the 2^nd and 3^rd Incidents on 25 May 2009, and 4 September 2009 were not reported to the 1^st defendant. The 2^nd defendant does not accept that to be correct.

13. Although the finger was initially pointed (by Protech among others) at the demolished doghouse structure on the roof as a source of water leakage, the contractor engaged by the 1^st defendant (“Camling”) discovered the presence of two small holes through the floor of a balcony at the 34^th floor level.  These, in effect, opened into the ceiling space of the master bedroom in the plaintiff’s premises.  Prior to the floor tiling being stripped off by Camling these holes had been covered from above by floor tiles and from below by a suspended ceiling in the bedroom. It is suggested that these holes could well have been a source of water ingress to that part of the plaintiff’s premises.

THE PLAINTIFF’S CASE AGAINST THE 1^ST DEFENDANT

14. The plaintiff places some emphasis on, the chronology.  It is contended that the plaintiff’s premises were unaffected by water leakage until 24 March 2009.  During the two years preceding this date the plaintiff’s premises were tenanted during which time, it is said, there was no complaint from the tenant about water leakage.

15. Water leakage commenced only after the 1^st defendant commenced the renovation works to the Penthouse, on or about 9 March 2009.  The 1^st incident of water leakage came approximately two weeks later.

16. The plaintiff complains of negligence on the part of the 1^st defendant who is said to have been under various duties, including a duty to maintain the private roof and other parts of the Penthouse, so as to ensure that water would not escape, leak or seep into the plaintiff’s premises.  In addition the plaintiff says the 1^st defendant was under an obligation to ensure that its contractor carried out work in such a way as not to damage the waterproofing works and/or to protect unfinished waterproofing work during the currency of the renovation.

17. Similar obligations, but arising under the DMC, are also alleged to have been breached by the 1^st defendant, including alleged breaches of clause the Seventh Schedule of the DMC by permitting renovation work to be Penthouse premises in such a negligent manner as to cause nuisance, or cause damage to the plaintiff and the plaintiff’s premises.

18. Through its pleading the plaintiff claims approximately $2.5 million in damages the bulk of which ($2.28 million) is an alleged loss of rental income for the period between 24 March 2009 and October 2010.  The claim was limited by the claimant in its oral opening so as to comprise a claim for $1,615,000 in respect of loss of rental income (for the period between 1 April 2009 and 31 October 2010, calculated at a rate of $85,000 per month); a claim for repair costs in the sum of $223,318.72; and a claim in respect of a liability owed to Maddox amounting to $37,720.59.  The last of these was dropped at the stage of closing submissions.  In addition the plaintiff claims interest and costs.

THE PLAINTIFF’S CASE AGAINST THE 2^ND DEFENDANT

19. The plaintiff’s claim against the 2^nd defendant also lies in negligence and in respect of alleged breaches of its duties as manager of the building under section 18 of the BMO.  The 2^nd defendant is said to have been under a duty to maintain and repair the waterproof membrane on the roof. 

20. The damages which are claimed are, as referred to above, confined to those said to have followed from the 2^nd, 3^rd, and 4^th Incidents as far as the 2^nd defendant is concerned.

THE 1^ST DEFENDANT’S DEFENCE

21. The 1^st defendant contends that the plaintiff is mistaken to attribute responsibility for any of the Incidents to the 1^st defendant and, self‑evidently therefore, the primary issue in the case concerns the source or sources of the water leaks which are said to have given rise to the damage in the plaintiff’s premises.  The 1^st defendant not only puts the plaintiff to proof, but rather, relying upon the evidence of its expert witness, contends that there are other explanations for the water ingress to the plaintiff’s premises which are more likely to comprise the true explanation.  The possible sources of water ingress are somewhat different in regard to each incident and, therefore, the 1^st defendant submits that each incident must be looked at and considered separately.

22. In summary, so far as the 1^st Incident is concerned this is said to have been a result of water penetration through the core walls of the building.  The water is said to have penetrated the core walls at the upper roof level, or perhaps through a defective waterproofing membrane at the common roof area.  In either situation these were areas or parts of the building which were the responsibility of the 2^nd defendant. In addition, given the large quantity of water which appears to have penetrated the plaintiff’s premises on this occasion, the likelihood, according to the 1^st defendant, is that windows were left open in the plaintiff’s premises allowing rainwater to penetrate.

23. In addition, it is suggested, water likely penetrated through the two (then concealed) holes in the so‑called “upper balcony” (hereafter “the Penthouse Balcony”) forming part of the 1^st defendant’s premises, and located above the plaintiff’s master bedroom.

24. So far as the 2^nd Incident is concerned the 1^st defendant suggests that, because water staining only appeared at the ceiling of the master bedroom it is likely that the two holes in the Penthouse Balcony were, again, the probable source.

25. The 3^rd and 4^th Incidents are said to have probably been caused by rain water penetrating down the core walls as described above, with contribution made by the two holes (as far as damage within the master bedroom in the 3^rd Incident is concerned) and by leakage through the external walls (the 4^th Incident).

26. Irrespective of the source of the damage in any of the incidents, the 1^st defendant says that there was no, or no significant loss suffered by the plaintiff because the plaintiff intended to carry out a comprehensive renovation of its premises, and was in course of doing so when the water leakage incidents commenced.  In other words there was no loss of rental income because the premises would have been vacant in any event, and there was no, or no significant, additional work because the renovation was in progress.

27. Moreover, according to the 1^st defendant, the plaintiff either had no real intention of letting the premises during the period claimed for loss of rental income, or had no real prospect of obtaining a tenant during that period.  The rent being sought ($135,000 per month) was far in excess of the reasonable market rental at the time of approximately $71,000 per month.

28. It is submitted further that the plaintiff failed to mitigate in that, although the water leakage problems ended in mid‑September 2009 the premises were not in fact still not rented out over one year later, in November 2010.

29. The 1^st defendant also takes a legal point in submitting that any default by Krishom (its 1^st contractor) in carrying out the demolition work on the roof to the doghouse and not properly protecting that area was the act or default of an independent contractor for which the 1^st defendant is not responsible.

30. Moreover, after the 1^st Incident Krishom offered to carry out the repair work needed in the plaintiff’s premises, but the plaintiff declined to accept that offer.  In doing so the plaintiff failed to mitigate its loss and, since it could have had that work carried out at no cost, is not entitled to recover the monetary damage relating to that water leakage incident. 

THE 2^ND DEFENDANT’S DEFENCE

31. The 2^nd defendant contends that the evidence clearly points to the Penthouse being the source of the water leaks.  Thus, it is said, the question is not whether the 2^nd defendant was under some duty to maintain the waterproof membrane on the buildings. Rather the question is one of the causation, “what caused the water seepage into 33B?”

32. At a factual level the 2^nd defendant points out (correctly) that the area of the roof where repairs were undertaken by it in 2009 was quite remote from the parts of 33B affected by water damage. The repair work undertaken there was broadly contemporaneous with repair work to the Private Roof performed by Camling for the 1^st defendant. Therefore, the fact that water leaks ceased after the repairs at the common roof does not point to the common roof as the source of the problem.

33. The 2^nd defendant  says (as does the plaintiff) that the DMC imposed obligations on the 1^st defendant, as an owner, which included an obligation to be responsible for loss or damage arising out of any act or negligence of the owner or occupier.  The responsibility for maintaining the Penthouse, including the Private Roof, lay with the 1^st defendant.

34. So far as the plaintiff’s damages claim is concerned, the 2^nd defendant adopts points made by the 1^st defendant and, in addition, says that the quantum of loss, if any, must take account of the Lehman Brothers collapse and the negative impact the surrounding events had on the market for high end property.

THE ISSUES ARISING

35. The primary issue to be decided is whether or not the water ingress to the plaintiff’s premises emanated from the premises of 1^st defendant or elsewhere in regard to each of the four incidents of water leakage.

36. Once the source of water leakage has been identified, the question as to whether either of the defendants bears any responsibility has to be addressed, as does the amount and value of the damage caused.  In assessing those damages the plaintiff is challenged as to whether the alleged expenditure has been caused by the water leakages; is challenged to demonstrate that it acted reasonably and did not fail to mitigate any element of its loss; and is otherwise put to proof of expenditure.

The 2^nd defendant’s Contribution Notice against the 1^st defendant

37. The 2^nd defendant has issued a contribution notice against the 1^st defendant which, by the Order of Master Hui dated 28 November 2012 was heard together with the issues in the main action. 

38. The basis upon which contribution is sought by the 2^nd defendant is that the water leakage was caused by the 1^st defendant, or the 1^st defendant’s contractor, negligently damaging the waterproofing membrane as part of the renovation work and, in addition, negligently failing to act on the advice of Protech (acting on behalf of the 2^nd defendant) to carry out rectification work at an earlier stage.

39. The 2^nd defendant seeks a full indemnity against any liability it may incur to the plaintiff.  The basis for this lies in the Civil Liability (Contribution) Ordinance (Cap 377) which provides:

“In any proceedings for contribution under section 3 the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question.”

40. The 2^nd defendant contends that a full indemnity would be “just and equitable” since the water leakage was caused by the 1^st defendant’s negligence in damaging the waterproofing membrane and the 2^nd defendant, acting through Protech, was responsible and diligent in attempting to follow up the reports of water leakage at the material times.

41. The 1^st defendant has counterclaimed against the 2^nd defendant in the contribution proceedings alleging, among other matters, that the 2^nd defendant ought to have known that the doghouse was a source of water ingress and ought to have voluntarily taken up repair work to the waterproof membrane of the roof at that location.  The 1^st defendant alleges that it is entitled to an indemnity from the 2^nd defendant in respect of any liability owed to the plaintiff because of the 2^nd defendant’s ‘mis‑statements’ in the Incident Reports, and the failure to maintain the ‘common parts’, pleaded at paragraph 9 as being the “external Walls and the Upper Roof”.

The factual evidence

42. The plaintiff called factual evidence from two witnesses; Ms Mandy Wong Wai Man (“Ms Wong”), and Ms Kathy Luk Sau Han (“Ms Luk”).  Ms Wong had prepared two witness statements in accordance with directions which had been given and leave was sought at the commencement of the hearing for a further corrective supplemental statement to be adduced in evidence.  Leave was granted after hearing from the parties.  Ms Luk had prepared one witness statement.

43. Ms Wong is an employee of the plaintiff and was responsible at the relevant times for the management of the relevant premises.  Ms Luk was an employee of a property agency and her employers were commissioned by the plaintiff to attempt to re‑let the premises in approximately March 2009.

44. The 1^st defendantcalled evidence from three factual witnesses.  Two of those witnesses were the husband and wife owners of the 1^st defendant; Mr and Mrs Khong.  In addition, evidence from Mr Choi Fui Kuen (“Mr Choi”) of Camling (a contractor) was also adduced.

45. Since the relevant events took place several years ago it is worth mentioning that the bulk of the witness statements were prepared in 2012.  Mrs Khong in particular gave a very lengthy witness statement running to 145 paragraphs in September 2012 at which stage, it appears, her recollection of events would have been comparatively fresh.

46. For its part the 2^nd defendant relied on evidence from Mr Cheng Ka Yeung (“Mr Cheng”), Mr Law Tat Fai, and Mr Gary Hui Chiu Yin (“Mr Hui”).  These gentlemen were, at the relevant time, employees of Protech, involved in the investigations related to the plaintiff’s complaints as to water leakage.

CHRONOLOGY LEADING UP TO THE 1^ST INCIDENT

47. The relevant chronology begins a few months prior to the 1^st Incident when, in January 2009 the 1^st defendant decided to purchase the Penthouse.  In the course of taking the decision to make this purchase Mr and Mrs Khong visited the premises and also visited the roof, part of which was included as part of the premises.  It appears that the roof areas were not in particularly good condition and photographic evidence was adduced showing cracks in the walls at the upper roof and water bubbles contained beneath the paint surface of those walls.  This area was part of the common area, not the private roof belonging to the 1^st defendant. The 1^st defendant nevertheless proceeded with the purchase, and took possession of the Penthouse on or about 12 February 2009.

48. During this period the plaintiff’s premises were leased out at a monthly rental of $90,000 exclusive of management fees of $5,700 per month.  The lease ran until end March 2009, but the tenant indicated prior to the expiry of the lease that it did not intend to renew. Accordingly, the plaintiff was aware that the premises would fall vacant (unless let to another tenant) in or about the end of March 2009.  Ms Wong’s evidence, which I accept, was that there were no complaints from the tenant about water leakage.

49. The 1^st defendant wanted to carry out renovation work to the Penthouse and signed a contract with Krishom on 15 February 2009.  Mrs Khong related in her witness statement how she had been advised by Mr Nison Chan of Krishom (“Mr Chan”) that the Penthouse should be stripped out and demolition work carried out as a first step before design work.  She stated (at paragraph 16 of her statement) that the demolition work started on or about 9 March 2009.

50. As was pointed out in the statement, this date was of some significance because the other parties, the plaintiff in particular, have suggested that it was demolition work within the private roof area that may have given rise to the water leaks into the building and the plaintiff’s premises, the 1^st Incident having arisen on 24 March 2009.

51. Mr Khong sought to change the date of demolition in his 2^nd Supplemental Statement dated 30 August 2013.  By reference to documents in his possession, which included a work permit issued by Protech dated 18 February 2009, and a receipt for keys he had handed over to Krishom on 18 February 2009, Mr Khong was belatedly prompted to recall that Krishom had requested to be provided with the keys on 18 February 2009 so that they could proceed with the demolition work straight away.  In other words the demolition work on the roof should have been carried out at about that date.  Mrs Khong corrected her witness statement by way of supplemental evidence in chief to the same effect.

52. I am sceptical about this late change of evidence, but I do not think that too much turns on the question as to whether Krishom started demolition work in mid‑February or only on 9 March 2009. It is a process that would have taken a period of time when it is remembered that the Penthouse is over 6000 sq ft in area and remembering also that work on the private roof was also carried out.  It has been suggested that there is some advantage to the 1^st defendant in advancing the date of demolition so as to separate in time the fact of demolition from the 1^st Incident of water leakage.  I do not think however that further separating these dates by a maximum of about three weeks (on the assumption that the work on the roof was the first activity undertaken) is of any great significance in determining the causes of the leakages that in fact took place.

53. What is clear is that the demolition work undertaken by Krishom included removal of the doghouse on the private roof. This structure served, in part at least, to provide a route for drainage for rainwater from the private roof.  The design shown on the drawings appears to have been intended to allow rainwater falling on the roof to drain towards the location of the doghouse, at which point there were inlets into vertical rainwater pipes ducting the rain down through the centre of the building.  The doghouse was therefore at the lowest part of this section of the roof but was itself slightly raised above the general roof level.

54. Photographs included in the evidence show that the vertical walls of the doghouse had been demolished and, inevitably therefore, it appears, the top slab covering the doghouse had also been removed.  In its place, as a temporary measure, concrete or cement and sand had been deposited in something resembling a small mound, and this had been covered with a tarpaulin.  It bears repetition that this was the lowest point of this part of the roof and therefore the place where rainwater would accumulate. Self‑evidently this created at least a risk of water leakage.

55. The 1^st defendant was, as matters transpired, unable to reach agreement with Krishom as to the renovation works and, at the end of the day, the Penthouse was renovated by a different contractor, Camling.  That contractor was not however appointed until November 2009 and it seems therefore that the temporary protection to the doghouse area at the roof was in place for considerably longer than may originally have been expected.

56. The plaintiff’s premises were vacated, at the latest, by about mid‑March 2009 although it may have been earlier.  The evidence does not appear to provide a clear date and Ms Wong was unable to recall when those premises were vacated.  In any event the 1^st Incident was reported to Protech on 24 March 2009 by Ms Wong.  The complaint was handled by Mr Cheng of Protech who appeared as a witness (under a subpoena, having left the employment of the 2^nd defendant, and changed his profession, in 2009).  It was not possible for an inspection to take place until the evening of 24 March however and Mr Cheng did not take part in that inspection.  Mr Cheng was informed that there was indeed water leakage into the living room and master bedroom at the plaintiff’s premises, and it was reported to him that the suspected source was the Penthouse. Mr Cheng accordingly contacted representatives of the 1^st defendant and, on 25 March 2009 personally inspected both the plaintiff’s flat and the Penthouse.  As far as the plaintiff’s flat was concerned he observed water marks on the ceiling of the living room and the master bedroom and he noted that the master bedroom floor was still wet.  In his statement he noted that there was an obvious camber to the floor in the living room, meaning that the water had drained down to the lowest point.

57. At the Penthouse he found that the floor was flooded, to the extent that the standing water “caused very clear reflection of light and formation of image”.  He observed that the flooded area in the Penthouse was above the living room of the plaintiff’s premises.  Mr Cheng also reported in his statement observing certain PVC pipes within the Penthouse area which he thought to be damaged and which had surrounding watermarks.  I understand these to be vertical pipes running down from the roof.

58. Mr Cheng also observed that there was flooding on the balcony area of the Penthouse, this area being above the master bedroom of the plaintiff’s premises.

59. Mr Cheng ventured up to the roof and observed the demolished (“dug up”) doghouse structure which he observed was not covered with waterproof material due to the ongoing, incomplete, building work.  His observation, as recorded in the course of his cross‑examination, was that the waterproof membrane must have been removed by this work.  He said that he had reported this to his senior.  Mr Hui could not recall whether any repair work had been instructed by Protech.  It seems doubtful since, at this stage, there seems to have been a common understanding that responsibility for the waterproof membrane in the private roof area lay with the owner, namely the 1^st defendant.  By the trial the parties’ understanding was different.

Consequences of the 1^st Incident

60. On 30 March 2009 the plaintiff arranged for surveyors/loss adjusters (Toplis and Harding) to inspect the damage.  On 1 April 2009 the plaintiff’s contractor, Maddox, provided a quotation purportedly representing the cost of the repair works required because of the flooding incident.  This amounted to $123,304.

61. As was discussed with Ms Wong during her cross‑examination however, that quotation was, in effect, an extract from larger value quotation given by Maddox for renovation generally within the plaintiff’s premises.  Selected parts of the general renovation were allocated to the quotation as representing the damage caused by the 1^st Incident.

62. Ms Wong’s evidence was that the decision to renovate the whole flat was sparked by the water damage arising in the 1^st Incident. This seems improbable.  The numbering format for the quotations given by Maddox suggest that the quote for the overall renovation work of about $1.5 million was first given on 25 March 2009, and must have been asked for some days (at least) before that.  Clearly (and admittedly) the quotation for the repair caused by the 1^st Incident was extracted from an existing larger value quotation for overall renovation, and it seems unlikely that two quotations could or would have been obtained in just a few days.  I believe the plaintiff was planning an overall renovation of 33B before the 1^st Incident occurred.

63. Following the inspection by Toplis and Harding, the plaintiff’s solicitors sent a demand letter to the 1^st defendant on 24 April 2009.  It seems that the plaintiff did not wait to hear from the 1^st defendant in response however, perhaps because the scope of renovation being undertaken was wider than simply repairing the water damage, and Maddox were instructed to commence work sometime in April 2009.  The plaintiff’s demand letter to the 1^st defendant was not however received by the 1^st defendant until 5 May 2009 because it was delivered to the Penthouse letterbox and because the Penthouse was awaiting renovation Mr and Mrs Khong were not in residence and the letterbox was not checked on a daily basis.

64. The demand letter of 24 April 2009 was responded to by a solicitors firm (Li & Partners) who stated that they acted for the 1^st defendant on 13 May 2009.  Subsequently the 1^st defendant has denied having engaged the solicitors, contending that they were acting in fact for Krishom.  The 1^st defendant’s case is that when the demand letter of 24 April 2009 came to the attention of Mr and Mrs Khong, it was passed on to Mr Chan of Krishom.

65. Mrs Khong’s evidence is that Mr Chan took up responsibility, and said that he would “take care of the matter”.  Mrs Khong reports that he said that he would pass the matter to “his solicitor”; but the problem was very minor and Krishom would arrange to handle it.  The 1^st defendant, through Mrs Khong, contend that Krishom offered to carry out repair work in the plaintiff’s premises at no charge.  This was denied by Ms Wong in her witness statement, although she was less positive in her cross examination stating that she had “no recollection”.  While, overall, this is a less than convincing rebuttal, the evidence of any offer having been made is no stronger than a report of what Mr Chan may have said on some unspecified occasion. Given that the Li & Partners’ letter of 13 May 2009 constituted a flat denial of any responsibility for the water leakage it seems to me improbable that any offer to carry out repair work was made by Mr Chan or Krishom, at least in this period of time.

66. Maddox invoiced the plaintiff $123,304 for carrying out the repair work on 20 May 2009.  Only a few days later however, on 25 May 2009 the 2^nd Incident occurred. 

THE 2^ND INCIDENT

67. This incident was reported to Protech by the plaintiff’s contractor, and Mr Cheng went to inspect the plaintiff’s premises. He found evidence of water leakage near the window of the master bedroom.

68. As was standard practice a record (a “Teleconversation Record”) was made by Mr Cheng of the report.  It was recorded that, on 27 May 2009, “the contractor” (Krishom) had been informed of the water leak, but also that “The management office phoned the owner of flat 34B, Mr Khong, discussing the subject incident.  He replied that his contractors would follow up with the issue”.

69. This is flatly denied by Mr Khong who says that neither he nor his wife was notified by Protech of either this incident or the subsequent incident until approximately September 2009.

Consequences of the 2^nd Incident

70. The solicitors acting the plaintiff wrote to Li & Partners on 26 May 2009 referring to the further water leakage which had taken place.  It appears no reply was received, and further letters were sent on behalf of the plaintiff on 15 June 2009 and (following the 3^rd Incident) on 7 September 2009 (all asking whether Li & Partners had instructions to accept service of proceedings).  However the only response came on 10 September 2009 and this was simply to the effect that Li & Partners had “…no further instructions to act for New Accord Holdings Limited”.  Li & Partners gave the names of two individuals as representatives of the 1^st defendant who could be contacted instead.

71. It was standard practice for Protech to prepare an “Incident Report” where there had been reports of water leakage, and one was prepared on 6 June 2009 in regard to the 2^nd Incident. As prepared, against the date of 27 May 2009 this stated that:

“Management Office conducted an inspection with the contractor of flat 34B in the balcony. After inspection, management office found that the waterproofing work to the floor of balcony at flat 34B was not finished. It was suspected that rainwater penetrated through the non-finished balcony flooring during raining and caused the water leakage problem at flat 33B. Management office asked the owners of flat 34B to carry out repair works as soon as possible.”

72. The accuracy of the Incident Reports was challenged by the 1^st defendant, and this was taken up by Mrs Khong in mid November 2009.  At her insistence this report was amended and reissued (dated 2 December 2009) so as to remove any reference to the waterproof work at the balcony not being finished, and removing the reference to the management office having asked the 1^st defendant to carry out repairs on 27 May 2009.

73. For my own part, while I find the contemporaneous record inherently more likely to be accurate, set against that is the evidence of Mr Choi.  Mr Choi’s company, Camling was employed by the 1^st defendant after Krishom, to carry out the renovations of the Penthouse, and he stated that when he was engaged, in about mid‑November 2009, the balcony flooring was intact.  Mr Choi engaged workers to remove the flooring and it was only in about mid‑December 2009 that one of his workers, while carrying out this work, discovered the “two holes” through the floor of the balcony above the plaintiff’s master bedroom.  

74. Accepting that evidence involves drawing the conclusion that the contemporaneous Incident Report was simply (and inexplicably) wrong, when it stated that the balcony flooring had been disturbed and was incomplete.  Not accepting that evidence involves concluding that Mr Choi was, at the least, mistaken in his evidence.  Whichever of those alternatives is adopted, the fact remains that the relevant balcony area was only then suspected to be the source of water ingress to the master bedroom of the plaintiff’s premises but, it appears, there were “holes” in the concrete which could have facilitated water ingress to the plaintiff’s premises via the balcony.  If the tiles had been removed, water ingress in that way would, self‑evidently, have been more likely.  Whether any water damage is related to the balcony is discussed in the context of the expert evidence.

75. It seems clear that the damage caused in this incident was very minor.  Maddox were instructed by the plaintiff to provide a quote for the repair work, and this amounted to only $12,000.  The plaintiff instructed Maddox to proceed with the work.

THE 3^RD INCIDENT

76. This occurred on 4 September 2009.  Water leakage was again noticed by Maddox who were still carrying out work at the plaintiff’s premises, with the living room and the master bedroom of the plaintiff’s premises affected.  Serious damage was said to have been caused to newly installed timber flooring.

Consequences of the 3^rd Incident

77. Protech inspected the plaintiff’s premises on 4 September 2009 after receiving the complaint about water leakage.  The Penthouse was suspected to be the immediate source of the water leak.  Protech and the 1^st defendant together inspected the Penthouse and the private roof on 5 September 2009.  They found that the doghouse structure at the private roof area was still in the same state as in March 2009, namely that demolition had been carried out, but not permanent reinstatement.  It appears that this may have been a result of continuing discussions between the 1^st defendant and Krishom as to what was to be done by way of renovation to the Penthouse.

78. Before “correction” at the request of Mrs Khong the Protech Incident Report stated:

“… After inspection, management office found that the waterproofing work to the floor of the rooftop at 34B had not yet been finished. It was suspected that rainwater penetrated through the non-finished rooftop flooring during raining and caused the water leakage problem at flat 33B.”.

79. After protest by Mrs Khong this was changed to a record suggesting that the joint inspection was carried out at the request of the 1^st defendant “in order to ascertain the responsibility for carrying out waterproofing work at a part of rooftop at Tower 1 as the area was found defective”.

80. Despite this change in both emphasis and location, it is clear that the doghouse area had not, at this stage, been the subject of any further work.  Camling were not engaged to carry out renovation and repair works until November 2009.

81. Not surprisingly this water leakage incident gave rise to the further letter addressed to Li & Partners (the letter of 7 September 2009) in which a claim for repair costs, incidental expenses, and loss of rental was set out, amounting to $382,804.

82. As with the other incidents of water leakage (except the 2^nd) Toplis and Harding were appointed to inspect the plaintiff’s premises.

THE 4^TH INCIDENT

83. This took place on 15 September 2009 or thereabouts during the passage of typhoon Koppu.  Protech carried out an inspection of the plaintiff’s premises and discovered water damage at the ceilings of the dining room and the master bedroom.  In the original Incident Report it was recorded the Protech suspected the Penthouse as being the immediate source of the water leakage but, again, this was removed in the revised version, at the insistence of Mrs Khong.

Consequences of the 4^th Incident

84. In any event on 16 and 17 September 2009 Protech attempted further inspection of the plaintiff’s premises.  There were however no workers in attendance at the premises and Protech were unable to gain access.  Protech informed the 1^st defendant of the water leakage incidents.  Either the 1^st defendant responded by asking Protech to assist in arranging access to the plaintiff’s premises for the water damage to be inspected, or (as originally recorded in the Incident Report) the 1^st defendant stated that its contractor would follow up with the renovation contractor working at the plaintiff’s premises.

85. On 10 October 2009 Protech wrote to the 1^st defendant referring to a telephone conversation between Mrs Khong and Mr Hui of Protech on 28 September 2009 and stating:

“Please kindly be informed that we have received numerous complaints from the owners of flat 33B … regarding water leakage problem … originated from your premises since March 2009… In order to upkeep a harmonious neighbourhood relationship… you are kindly requested to arrange your contractor to carry out inspection/repair works to the water leakage problem as soon as possible”.

It is difficult to understand why this letter was not sent much earlier, and in more forceful terms.

86. The solicitors acting for the plaintiff wrote to the 1^st defendant on 22 October 2009 complaining about the water leakage and demanding $763,024 in damages.  The 1^st defendant’s evidence was that this letter was not received until 16 November 2009.  On 17 November the 1^st defendant replied and stated that, while denying liability, the claim letter had been passed to insurers to handle.

87. On 12 February 2010 WK To & Co, acting for the 1^st defendant, wrote to the plaintiff’s solicitor’s denying any liability for the water leakage.

88. Taking stock, at this point in time there had been four incidents of water leakage, one minor, all of which had been notified to Protech, and according to Protech, all notified to the 1^st defendant. Protech’s contemporaneous records reflected the notification to Mr and Mrs Khong but they accept only being told about the 1^st and 4^th Incidents.

89. Solicitors’ letters had been written seeking compensation.  Mr and Mrs Khong acknowledge having received the first of these, but no others until 17 November 2009.  The position advanced by Mr and Mrs Khong is that when Protech staff recorded that they had notified the 1^st defendant of the 2^nd and 3^rd Incidents they were simply wrong.  What happened, it is said, is that Krishom instructed (and presumably paid) solicitors to act in the 1^st defendant’s name.  Krishom not only accepted responsibility for the water damage issue but, when those solicitors received letters demanding compensation, including loss of rental income alleged to amount to $120,000 per month, they carried on taking up that responsibility and said nothing to Mr and Mrs Khong.

90. This is more than implausible, and I do not accept that Mr and Mrs Khong were kept in the dark in the way they suggest.

91. However, even if they were ignorant of the 2^nd and 3^rd Incidents, they were fully aware of the fact that damage had been caused in the 1^st Incident and that their contractor had not only not rejected any responsibility, Krishom had accepted that they, or their work, was implicated.  That seems to have been enough for Mr and Mrs Khong who seem to have taken no further follow‑up action to ensure that there would be no repetition, and only expressed concern about leaks at the common roof top in September 2009.  Mrs Khong says that she visited the Penthouse on every rainy day to see that there was no further leak, but nothing seems to have been done to have permanent waterproofing put in place on the Private Roof for example.

THE REMEDIAL WORK BY THE PLAINTIFF

92. The 1^st defendant says that the plaintiff has alleged (wrongly) that it was reasonable and appropriate for it to defer making good work within the 33B premises from March 2009 until October 2010 even though there is no allegation that there was further water ingress after October 2009.  This is significant in the context of the monetary claim which is made because the bulk of that claim relates to loss of rental income.  The plaintiff’s property remained empty and was not let to a tenant until the repair and renovation work had been carried out.  It was not in fact rented out until September 2013.

93. The 1^st defendant suggests that this was a deliberate choice on the part of the plaintiff at least so far as the period for which a claim is made, because the plaintiff was considering selling the property at the material time and would find it easier to sell if not let to tenants.  For its part the plaintiff says that it was awaiting clear confirmation that the water leakage problem had been solved since it had previously carried out repair work only to have further damage caused by further leakage.

94. Ms Wong accepted in cross examination that 33B was listed with property agents both for sale and for lease in 2009. Ms Luk, the property agent who acted for the plaintiff at the time, agreed in cross‑examination that the asking rental between 2010 and 2012 was too high.  She also thought that the fact that the Tregunter building was undergoing a substantial overall renovation was a factor from late 2010.

95. It remains the plaintiff’s case that, for the period between April 2009 and November 2010, but for the water leakage incidents, the plaintiff’s premises would have been rented out.

SUMMARY OF WATER DAMAGE ARISING FROM THE INCIDENTS

96. The 1^st Incident gave rise to water damage to the living room and master bedroom of 33B.  The 2^nd Incident; minor water damage, evident only at the ceiling of the master bedroom of 33B. The 3^rd Incident resulted in water damage to the living room of 33B.  The 4^th Incident caused water damage to the living room and master bedroom of 33B.

THE POSSIBLE CAUSES

97. There were, in effect, four candidates as potential sources of water ingress into the building and into 33B; the private roof area forming part of the Penthouse, and, in particular, the doghouse; the upper roof structure forming part of the common area of the building; the Penthouse Balcony in which the two holes were found; and the external walls and windows of the building, specifically at 33B.  An earlier possibility of leakage from some pipes within the premises was unsupported by any evidence, was rejected by all of the experts, and is therefore disregarded.  Nor (as the 1^st defendant accepts) is there any evidence of open windows representing a possible source of water ingress.

98. Water ingress through the walls of 33B was not an issue raised until very late in the day; specifically by Mrs Khong during the course of her oral evidence when she recounted having been told in 2009 by a conveyancing solicitor that there had been complaints made about such leakage into 33B.  This was categorised by counsel for the plaintiff as a recent fabrication, no such matter having been raised or contained in the witness statements filed by Mrs Khong.  Counsel for the plaintiff invites me to reject this evidence or, at the least, given that it is multiple hearsay, attach no weight whatsoever to it.  Absent any support I do not think that this belated evidence by Mrs Khong can be taken to impeach the evidence given on behalf of the plaintiff that there was no complaint of water leakage into 33B during the tenancy, immediately prior to the Water Leakage Incidents in 2009.

99. The plaintiff and the 1^st defendant adduced expert evidence intended to assist in identifying which of the potential sources was more likely to have been responsible for each of the Incidents.

The expert evidence

100. Unfortunately the expert evidence regarding the causes of the water leaks was somewhat unhelpful.  The plaintiff deployed two experts one of whom, Mr Peter Wong (“Mr Wong”) had, through his employment with Toplis and Harding, inspected one or both sets of premises contemporaneously with the various Incidents.  The plaintiff’s other expert was Mr John Ho (“Mr Ho”) and he had been appointed to form an independent view in July 2010.

101. As is pointed out on behalf of the plaintiff, the expert witness called on behalf of the 1^st defendant, Dr Eddie Lam (“Dr Lam”), was not instructed until 2012 and, consequently, any inspections that he carried out were, perforce, somewhat belated.  Dr Lam could only rely upon what he had been told (or was able to read) about the water leakage incidents and the condition of the building in 2009.  However he did not make contact with Mr Chan or any other representative of Krishom to obtain evidence as to the condition of the building or the damage arising in regard to the Incidents.

102. Counsel for the plaintiff is critical of Dr Lam for acting “like a hired gun”, and it is true to say that he was, in my view, far too firmly wedded to his own theory as to the sources of water ingress, and unhelpfully defensive of that theory in his responses to cross examination.  He was unwilling to countenance the possibility that the alternative sources of water ingress referred to by the plaintiff’s experts provided a possible explanation for some or all of the Incidents.  While firmness of opinion is not in itself to be criticised, the court is not much assisted by an offhand dismissal of any alternative explanation.

103. The plaintiff’s experts are not free from criticism either.  Neither had seriously investigated the upper roof as a possible source of water ingress, and more importantly, neither had investigated the ‘route’ of water from the supposed point of entry at the doghouse to 33B.  There was little explanation as to how water from the doghouse might have caused damage at the master bedroom of 33B.

The joint report

104. In accordance with directions which had been given by the court the experts met on a without prejudice basis on 26 June 2013 and produced a joint report the purpose of which was intended to be the narrowing down of issues.  The experts were accompanied in that meeting by representatives of the solicitors and, in addition, representatives of the 1^st defendant and 2^nd defendant.  This, in my view was an inappropriate way in which to conduct such a meeting.  In Chinachem Charitable Foundation v Chan Chun Chuen, HCAP 8/2007, [2010] HKCU 273, Lam J (as he then was) said at paragraph 490:

“The joint meeting is an opportunity for the experts to narrow their differences. It takes two to tango. It requires both experts to focus on the objective of the meeting and act responsibly and frankly with each other. At such meeting, an expert should bear in mind his overriding duty to the court to act independently without any fear of compromising his client’s position. Thus if his professional judgment dictates that a concession should be made in the light of the arguments advanced by the other side, he should not feel inhibited from doing so due to conflicting opinion previously expressed by him in favour of his client. On matters within his expertise, an expert need not seek instructions from his client before reaching an agreement with the other side’s expert. A self-respecting expert should not accept instructions that placed limitations on his professional judgment in the performance of his duty as an expert witness. And it is not proper for lawyers to give such instructions on behalf of his clients. In line with his duty to act independently, an expert should not be dictated by his client in respect of the substance of his expert evidence and the agreement to be reached in joint meeting.”

105. The requirement for the experts to seek to agree matters within their sphere of expertise, and the importance of the independence of the experts is emphasised in the Code of Conduct for Expert Witnesses at paragraphs 12 and 13:

“12. An expert witness shall abide by any direction of the Court to-

(a) confer with any other expert witness;

(b) endeavour to reach agreement on material matters for expert opinion; and

(c) provide the Court with a joint report specifying matters agreed and matters not agreed and the reasons for any non-agreement.

13.  An expert witness shall exercise his independent, professional judgment in relation to such a conference and joint report, and shall not act on any instruction or request to withhold or avoid agreement.”

106. The Code of Conduct does not preclude attendance by the parties or their lawyers at the meeting of experts.  However, ordinarily the conduct of such meetings will be facilitated if neither the parties nor their legal representatives attend such discussions.  If the legal representatives do attend they should normally act only as observers, save where asked by the experts to advise on any legal point.

107. For whatever reason, the experts’ joint report here was far from helpful in summarising agreements (there was only one) or in explaining succinctly the disagreements.  Instead the experts set out, at considerable length, arguments for and against positions taken by them in their respective reports, using the joint report as an opportunity to expand upon those views.  Remarkably, the joint report did not contain any discussion of what Dr Lam suggested was a major cause of the water leaks, namely water penetration into the core walls at the upper roof level.

108. The position was somewhat ameliorated by a schedule agreed by the experts during the course of the trial, which summarised their areas of disagreements somewhat more pithily.

Mr Peter Wong and Mr John Ho

109. Mr Wong was involved contemporaneously with the Incidents, having been the representative of Toplis and Harding who attended to review the damage caused in those incidents.  Those reports provide useful factual evidence as to the nature and extent of damage which had been caused.  Generally however Mr Wong was unable to gain access to the Penthouse and his views as to the ultimate source of water ingress were, perforce, somewhat more speculative.  Mr Wong expressed no doubt however but that the water entering 33B had come via the Penthouse.  Given that water damage at the ceiling of 33B was observed in each of the three Incidents that he observed, that is hardly surprising.

110. Mr Wong produced a ‘wrap‑up’ of his findings in February 2012 the conclusion of which was that rainwater ingress from the private roof was the source of the water that had ultimately found its way into 33B.  Mr John Ho was brought in by the plaintiff to provide an independent view and to consider specifically the source of the leakage.  Although he was instructed in or about July 2010 his initial report was not available until November 2010.  Mr Ho inspected the premises twice but was also unable to gain access to the Penthouse.  After considering various possibilities he reached the same conclusion as Mr Wong, that the water came from the roof.

111. I should mention, as an aside perhaps, that the plaintiff adduced two expert witnesses on the same area of expertise only by reason of an order, made by consent, dated 30 December 2011.  Self‑evidently perhaps such a course would not normally be followed.

Dr Eddie Lam

112. Dr Lam carried out his initial inspections in March and April 2012.  In short he ruled out water from the roof as a source on the basis that serious damage in 33B could only have arisen had there been flooding in the Penthouse.  He had been given to understand that the Penthouse was not flooded.  That understanding could only have come from what Mrs Khong was told by Mr Chan of Krishom, but, so far as the 1^st Incident is concerned, this was clearly incorrect, as could be seen from the witness evidence of Mr Cheng (of Protech) and the photographs he took at the Penthouse in March 2009.

113. Dr Lam tacitly acknowledged as much in his Supplementary Report dated 24 May 2013.  Nevertheless, he remained of the view that the true cause of water ingress to 33B was not the ponding of water on the floor of 34B, but rather the seepage of water into the parapet walls at the upper roof and the transfer of that water via the core walls of the building to the plaintiff’s premises.

114. Dr Lam noted that some of the water damage in 33B was located in the master bedroom and he suspected that the two holes in the balcony floor at the Penthouse may have been connected to this.  He also noted that Mrs Khong’s evidence was that the Penthouse was not flooded when the 2^nd, 3^rd and 4^th Incidents occurred.

115. That evidence raises some questions in itself, not the least being why flooding in the Penthouse occurred in the 1^st Incident but not subsequently.  That remains an open question.  It must be remembered that Mr and Mrs Khong were not resident in the Penthouse at the time, and did not observe flooding on any occasion.

116. There can be no serious question however as to whether Dr Lam’s opinion, that the bulk of the water ingress emanated from the upper roof and penetrated via the core walls, is a more probable explanation than is leakage via the demolished doghouse.  It is not.  Indeed in my judgment having considered the expert evidence, the proposal is not at all likely.  Dr Lam had no explanation as to why the leaks started only when they did, and had no explanation as to the route this water is said to have taken from the upper roof to 33B, a journey, vertically, of about 4 floors. Dr Lam’s contention, in effect, was that the water travelled vertically down over a considerable distance but only moved horizontally at 33B.  Dr Lam informed the court that there were elementary engineering calculations that could determine the water pressure within the concrete.  But he had not carried out any such calculations.

117. The plaintiff bears the burden of proof of course, and water ingress via the doghouse also lacks a clear explanation as to the route taken if, as Mrs Khong said, the Penthouse suffered no further flooding.  Nevertheless, in my view it offers by far the more probable explanation.

118. Dr Lam did point out in his report the fact that the water damage at the master bedroom of 33B could well be related to the defective concrete (the two holes) in the Penthouse Balcony.  This, as Mr Ho agreed, is a not unreasonable proposition although, again, there is an open question as to why the water gained entry before the tiles were stripped off that balcony.  On balance however this appears to be a likely explanation for the damage to the master bedroom at 33B.

119. Before leaving the expert evidence, I record that valuation evidence was given by Mr Keith LH Siu of RHL Appraisal, who was instructed jointly by the plaintiff and 1^st defendant. His (revised) valuation of the rental value of the property at the relevant time was $71,000 per month exclusive of rates and management.

Conclusions on causes of damage

120. In my judgment it is overwhelmingly likely that the damage to 33B in the living room area was a result of water ingress via the demolished doghouse in the Private Roof.  The damage at the master bedroom of 33B was, in all probability, a result of water leaking through the Penthouse Balcony.

LIABILITY OF THE 1^ST AND 2^ND DEFENDANTS

121. In light of the findings above I conclude that the demolition work carried out by Krishom on behalf of the 1^st defendant was the predominant cause of the water leakage and the subsequent damage to 33B in the 1^st, 3^rd and 4^th Incidents in the living room area of 33B.  The damage at the master bedroom, it seems to me, was probably caused by water ingress via the Penthouse Balcony.  So far as the former cause of water damage at 33B in concerned it seems to me that the 1^st defendant bears responsibility for this, firstly by permitting the demolition to be performed by Krishom in such a manner as to result in a nuisance, annoyance or damage to the plaintiff and secondly by failing to cause Krishom (or a competent contractor) to carry out proper waterproofing work to the Private Roof after demolition of the doghouse.  I do not accept that the 1^st defendant is relieved from these responsibilities by having employed Krishom to perform the work of demolition.

122. So far as the latter cause of damage is concerned, since I accept the evidence that the Penthouse Balcony tiling was undisturbed until December 2009, it follows that the two holes which provide the likely route of water into 33B master bedroom remained concealed until that time.  In those circumstances, and with both relevant flats in the course of renovation, I do not see that the 2^nd defendant has breached any relevant obligation owed to the plaintiff. 

123. In those circumstances I find and hold the 1^st defendant liable for the damage caused by water leakage through the roof to the living room areas of 33B.  I have addressed below the apportionment in respect of damage arising from water ingress via the Penthouse Balcony.

124. Correspondingly, I do not agree that the 2^nd defendant is liable to the plaintiff in respect of any of the water leakage.

CONTRIBUTION PROCEEDINGS

125. The 1^st defendant’s counterclaim for contribution from the 2^nd defendant lies in a failure to maintain either the external walls or the common (upper) roof.  I do not find any basis for either alleged failure.  Since I have not made any finding of liability on the part of the 2^nd defendant to the plaintiff there is no finding to be made as to contribution by the 1^st defendant to the 2^nd defendant.

QUANTUM

126. Regrettably, the resources devoted to fighting over these four Incidents are not proportionate to the true damage caused. There is no doubt that some physical damage was caused to the plaintiff’s premises by each of the four Incidents.  There is also no doubt in my mind that the plaintiff had intended to carry out renovation works in any event.  The question is whether the physical damage has had any monetary consequence and if so, how such.  As regards the cost of redecoration, had there been but one incident then I do not think there would have been a monetary loss.  The redecoration would have taken place in any event.  This therefore excludes, in my view, the damage said to have arisen from the 1^st Incident.

127. For subsequent Incidents, the question is whether the evidence shows that work had to be re‑done.  The plaintiff had a contractor (Maddox) in‑situ, but no doubt, if redecoration had to be re‑done because of water damage, then this would attract an extra charge. 

128. I accept that the repair needed in the 2^nd Incident stemmed from leakage via the Penthouse Balcony and, therefore, this also falls to be excluded.  Excluding the master bedroom from the Maddox quotation of 7 September 2009, relating to the master bedroom reduces that quotation to $89,020.  There was an arithmetical error in that quotation, and it was only paid to the extent of HK$88,014.72.  I assess that sum as representing the relevant liability of the 1^st defendant.

129. So far as loss of rental is concerned the evidence strongly suggests that the four Incidents were not causative of any such loss and I so find.  The plaintiff was seeking what can be seen to be an extremely high rent at a time when the market for luxury property seems to have been poor. Renovation work to the whole of the flat was ongoing throughout the period of the 2^nd to 4^th Incidents and, it seems, for a long time afterwards.  Renovation to the whole building was also carried out at a later date.  The property was also listed for sale.  I do not think the plaintiff had any reasonable prospect of renting the premises at the asking rent, nor any firm intention to let the premises at a market rate during 2009 or 2010.

130. The suggestion that it was reasonable to wait until November 2010 to rent the premises in circumstances in which no further damage occurred after September 2009 is simply fanciful.  If the plaintiff truly wished to rent out its premises, and was losing at least $70,000 per month in not doing so, then quick action would or should have been taken to have the independent survey carried out to see if it was reasonable to proceed with renting the premises.  Instead, the plaintiff waited until November 2010.  This head of claim fails.

131. The sum recovered by the plaintiff is to carry interest from the date of issue of the writ at 1% above the HSBC best lending rate.

CONCLUSIONS

132. The plaintiff’s claim against the 1^st defendant succeeds in the sum of HK$88,014.72 only.  The claim against the 2^nd defendant fails.  The 1^st defendant’s counterclaim in the contribution proceedings fails and is also dismissed.

COSTS

133. The parties invited me to deal with costs on an order nisi basis, which I now do.  The plaintiff has enjoyed limited success against the 1^st defendant and has failed against the 2^nd defendant. The 2^nd defendant is to have its costs of the main action against the plaintiff, to be taxed if not agreed on a party and party basis.

134. The level of recovery by the plaintiff calls in my view for the order for costs to be made in favour of the plaintiff to be made on the District Court costs scale, rather than at High Court taxation rates.  Accordingly I order that the plaintiff is to have its cost against the 1^st defendant, to be taxed if not agreed on the District Court scale.

135. Both claim and counterclaim effectively failed in the Contribution proceedings.  I make no order as to those costs.