SHAN HE ELECTRONICS COMPONENTS CO. LTD. v. SKYBO INTERNATIONAL FOOD CO. LTD. AND ANOTHER

HCA 4568/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4568 OF 2000

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J U D G M E N T

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1. This is the plaintiff's claim for damages to recover loss occasioned by the negligence of the 2nd defendant during the course of work undertaken for the 1st defendant. The defendants both deny liability.

Background

2. The plaintiff trades in electronic components from its premises situated at room 1904, Fook Yip Building, 53-57 Kwai Fung Crescent, Kwai Fong. This is an office, with sufficient space to store merchandise packed and ready for shipment overseas.

3. The 1st defendant came to be incorporated in September 1998 for the purpose of engaging in trading of foodstuffs. For that purpose it took a lease of room 1903, Fook Yip Building, being premises next door to the plaintiff's separated from it by a common partitioning wall, taking possession on or about 1 May 1999.

4. Prior to moving in it engaged the 2nd defendant to carry out certain decoration work. The work was scheduled to take about a week. For the purpose the 2nd defendant was given possession of room 1903 on or about 1 May 1999.

5. Leung Hon Sun (Mr Leung) at all material times was employed as an assistant building supervisor by the company engaged to manage Fook Yip Building. He was on duty and in charge on the morning of 8 May 1999, which was a Saturday, when the decoration work was still in progress. At 9:50 a.m. a worker informed him that in the course of their work they had broken into a salt water pipe. He took immediate steps to have the main water supply closed off. That was done at 10:05 a.m. In the meantime he went to room 1903 to find that the pipe supplying salt water to the premises' lavatory had indeed been ruptured causing significant flooding to the premises. That ceased when the supply was turned off 15 minutes after the accident, but by then there was a lot of water accumulation. He took a photograph of the scene.

6. The plaintiff's office was generally closed over the weekend. That of 8 and 9 May 1999 was no exception. Poon Wai Ho (Mr Poon) was in those days employed as a clerk. He was last out on Friday 7 May and first in on Monday 10 May. When he left on Friday the company's two computers were located in their rightful positions on desk tops. So was a fax machine. In the area adjacent to the wall common to rooms 1903 and 1904 were stacked fifty or more cardboard cartons containing electronic equipment packed and waiting to be shipped. These stacks were up to five cartons high.

7. When he returned to work on Monday morning he found the place in disarray. There was an accumulation of water on the floor. Many of the stacks of cartons had collapsed, leaving the cartons themselves scattered all over. The two computers and the fax machine had been knocked to the floor. Those cartons stored at floor level and those that had collapsed to the floor were wet through. The immediate impression was that there had been a flood; that the water had softened the cardboard of the cartons at floor level to the extent that they were no longer able to support those stacked above. The stacks had collapsed, bringing down with them the computers and fax machine.

8. He checked the plumbing of the premises to find all taps turned off and no sign of leakage from that source. He noticed seepage and discoloration on the wall dividing the premises from room 1903.

9. Later that day Mr Leung inspected the premises and he, too, found no indication of leakage within the premises of 1904.

10. Mr Poon took a series of photographs. Then he and other employees of the plaintiff carried out an inspection of the merchandise and office equipment affected by water damage. He prepared an inventory and that established that stock to the value of US$95,194.20 ($742,514.76) was beyond repair and had to be written off. Similarly the fax machine and two computers worth $29,553.00 were irreparably damaged. The plaintiff spent a further $10,000.00 cleaning the premises.

11. Blaming the 2nd defendant and, vicariously, the 1st defendant for that loss, the plaintiff sought redress. When that was not forthcoming, it issued this writ in May 2000. The defendants filed defences denying liability and otherwise putting the plaintiff to strict proof.

12. The pleadings gave rise to several issues.

The Issues

(1) What caused the flooding and subsequent damage to the plaintiff's merchandise and equipment?

(2) If it was the rupture of the pipe caused by the 2nd defendant, was it in breach of a duty of care owed the plaintiff, and was it thereby liable?

(3) If so, was the 1st defendant vicariously liable?

(4) What was the extent of the plaintiff's loss?

The Conduct of the Trial

13. At the outset and during the course of interlocutory hearings both defendants were legally represented. Prior to trial both gave notice of discharge of their respective solicitors. Neither sought leave to be represented by a director and neither attended trial or played any part. The result was that only Messrs Poon and Leung were called to give evidence, each confirming the contents of his witness statement with some elaboration from the witness box. In fact a Ma Hang Shun (Mr Ma) describing himself as a director of the 1st defendant had also filed a witness statement. Although he did not appear to affirm its truth or be cross-examined on it, Miss Ma representing the plaintiff in her closing address relied on it as evidence in the cause.

14. I come now to consider the evidence.

The Evidence

15. Messrs Poon and Leung gave their respective accounts which, unchallenged as they were, I have recorded already, in summary form. Both produced the photographs of the two premises each had taken after the accident. Mr Ma stated in his statement that the 2nd defendant contracted to carry out certain decoration work which included installing and fixing electricity sockets, electricity wiring and air conditioning, painting and flooring. He went on to state that the 2nd defendant was given possession and full control without intrusion or interruption by the 1st defendant or any member of it.

16. Included in the bundle of documents was an invoice from the 2nd defendant to the 1st defendant itemising work carried out for which it was charging; work generally defined by Mr Ma in his statement. There was no reference to plumbing or the sanitation system. Also included was a letter from a company with which the 2nd defendant had sub-contracted to carry out the electrical work, in response to an allegation that it was or might be liable. Therein it stated that the damage to the water pipe was inadvertent, caused not by it or its employees but by an employee of the 2nd defendant when drilling holes in the wall.

Findings of fact

17. In reliance on the evidence, much of it uncontested, I come to the following findings:

(1) the plaintiff suffered loss when its premises became flooded causing stacks of merchandise to collapse such that much of that merchandise and some office equipment was damaged beyond repair;

(2) the total loss was $782,067.76 being the amount sued for;

(3) the source of the flooding was the rupture of the salt water pipe leading into room 1903 caused by a worker of the 2nd defendant accidentally drilling through the wall into the pipe;

(4) the decoration work the 2nd defendant had contracted to carry out included no work of untoward difficulty or that requiring a high degree of skill or special care; in particular, there was no plumbing or work going to the sanitation system required to be undertaken.

18. Based on these findings, I now come to the consequences, at law.

The Consequences

19. Is the 2nd defendant liable to make good the plaintiff's loss?

20. For the tort of negligence to be established there are four requirements:

(a) there must be a duty of care owed by the defendant to the claimant;

(b) there must be a breach of that duty of care;

(c) there must be a connection between the careless conduct and the damage;

(d) that damage must not be so unforeseeable as to be too remote, in the circumstances.

21. As to (a); I am satisfied that the 2nd defendant owed a duty of care to all persons engaged in lawful activity within the precincts of the work it had contracted to carry out. The plaintiff, whose premises were immediately adjacent, clearly fell within that category; there was nothing put before me to suggest otherwise. As to (b), (c) and (d); there was quite apparently a breach of that duty when the workman drilled through the wall into a pipe providing a continuous flow of water the escape of which caused damage to the plaintiff's property; and this was a foreseeable consequence.

22. The answer of the question posed is thus 'Yes'.

23. Is the 1st Defendant liable?

24. The answer lies in whether the 1st defendant is vicariously liable for the negligent act of the 2nd defendant as its independent contractor.

25. Generally the rule is that the employer of an independent contractor is not responsible for a tort committed by the contractor or his employees during the course of his work. But that may be displaced in the circumstances of a given case. An example is where the negligent act may be attributable to the employer; where, for instance, he has negligently engaged an incompetent contractor, or employed too few men, or has interfered with the way the work had to be carried out or has authorized or ratified the negligent act.

26. Does the 1st defendant fall into this category? Miss Ma submitted that it does; that there is nothing in Mr Ma's statement or elsewhere in the evidence to show that it exercised due care and diligence in the selection of the 2nd defendant as an appropriate contractor. Thus it follows, on her argument, that the 1st defendant has failed to establish it was not negligent.

27. But one only has to state the above to recognize that this argument reverses the burden of proof. I have already found that the work to be undertaken was of a relatively standard and straightforward nature, that in particular there was to be no alteration to the plumbing or sanitation systems requiring specialist skills. There is nothing before me to suggest the 2nd defendant was inherently not suitable to carry out the work. And there is no evidence and nor is it suggested that the 1st defendant interfered in the work or ratified the negligent act or otherwise could be held responsible. Indeed, Mr Ma in his statement said it stayed away, vesting full control in the 2nd defendant.

28. The answer to this question is thus 'No'.

The Result

29. Returning to the issues; I find the 2nd defendant owed a duty of care to the plaintiff and was in breach of that when its workman ruptured the water pipe. The damage to the plaintiff's property was a foreseeable consequence resulting in a loss to it of $782,067.76 for which it must be accountable. The 1st defendant is however not liable.

30. There will be judgment for the plaintiff against the 2nd defendant for the amount claimed together with interest at prime from the date of the writ to this date; thereafter at the judgment rate until payment. The claim against the 1st defendant is dismissed.

31. Costs of the plaintiff shall be borne by the 2nd defendant taxed if not agreed. (For the benefit of the Taxing Master this shall be all the costs of trial preparation and the trial itself.) Otherwise there shall be no order as to costs. (The orders as to costs are nisi at first instance.)