TIN FOO INVESTMENT CO LTD v. PREVIGOR DEVELOPMENT LTD AND ANOTHER

HCA 1675/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1675 OF 2014

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D E C I S I O N

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1.  Before the court is the defendants’ appeal against Master Chow’s Order dated 26 January 2017:

(1) allowing the plaintiff’s summons dated 19 July 2016 (“Interrogatories Summons”) for the withdrawal of interrogatory numbered 3 (“Interrogatory 3”) and variation of interrogatory numbered 4 (“Interrogatory 4”) served by the defendants on the plaintiff without leave; and

(2) dismissing the defendants’ summons dated 27 July 2016 (“Discovery Summons”) for specific discovery of 1 class of documents.

Relevant background

2.  The facts and circumstances underlying this action and the applications giving rise to this appeal can be summarised shortly as follows.

3.  The plaintiff and the 1^st defendant are and were at all material times the respective owners of Flat C2 on the 3^rd & 4^th Floors (“Flat C2”) and Flat C3 on the 5^th and 6^th Floors (“Flat C3”) of Altadena House, 27 Barker Road.  The 2^nd defendant is a director of the 1^st defendant and has been in occupation of Flat C3.

4.  Each of Flats C2 and C3 is a duplex apartment with the upper level of Flat C2 (the plaintiff’s flat) immediately below the lower level of Flat C3 (the 1^st defendant’s flat).  The saleable area of each of these flats is about 378.4 square metres.

5.  Beginning from about early March 2013, signs of water seepage started to show in one of the rooms on the upper level of Flat C2 in that an area of about 2 m x 1.2 m in a corner of the ceiling near the windows appeared to be soaked and a smaller site of about 0.9 m x 0.9 m within that area was further affected by moss and peeled ceiling paint.

6.  It is common ground that the water seepage was caused by leakage of the concealed kitchen sink drainage pipe at Flat C3.  However, the plaintiff further maintains, but the defendants deny, that the water seepage also resulted from the failure of waterproofing work at the balcony floor area and the triangular drainage area of the balcony right outside the kitchen of Flat C3.

7.  Despite the disagreement on the cause(s) of the water seepage, after the issue of the writ of summons herein and following a mediation in December 2014, on a without admission of liability basis, the concealed kitchen sink drainage pipe at Flat C3 was replaced and the waterproofing work at the balcony floor area and the triangular drainage area of the balcony right outside the kitchen of Flat C3 was re-done at the defendants’ costs (altogether $24,000 which the defendants have duly paid). Such works were completed in about late January 2015, after which the water seepage has not recurred.

8.  For present purposes, we are concerned only with the plaintiff’s case on damages. 

9.  When the water seepage was first discovered, Flat C2 was being occupied by a tenant who, according to paragraph 4 of the first witness statement dated 4 March 2016 of the plaintiff’s property manageress Tam Suk Wai Kenny (“Ms Tam”), first entered into occupation on 1 April 2011.  Such tenant apparently renewed the tenancy agreement on 8 March 2013 for a further term of 6 months from 1 April to 30 September 2013 at $238,000 per month inclusive of government rent and rates and management charges, which term was then twice extended until 28 February 2014 when the tenant moved out. 

10.  It is the plaintiff’s case on damages that had the water seepage and damage to Flat C2 not occurred, it should and would have secured a new tenant in about one month’s time after the old tenant moved out (which period was also required for the flat to be touched up), i.e. by 1 April 2014.  However, the water seepage and damage had rendered the room affected “uninhabitable” or “unusable” which had in turn made it impossible for the plaintiff to attract a new tenant after the departure of the old tenant so that Flat C2 was left vacant from March 2014 until July 2016.[1] The plaintiff claims damages for loss of rental from the 10-month period from April 2014 to January 2015 (after the water seepage stopped) at the monthly rate of $231,000.[2]

11.  The loss of rental claim is hotly contested by the defendants who dispute that the relatively small area affected by water seepage (2.4 square metres) had rendered either Flat C2 or the room in question uninhabitable or unusable or affected or materially affected the plaintiff’s prospect of renting out Flat C2 after 28 February 2014. 

12.  The defendants also deny that the plaintiff had taken any or any reasonable or proper steps to have Flat C2 let out after the old tenant had moved out.

13.  Although the defendants have not pleaded any positive case as to what prevented the plaintiff from re-letting Flat C2, in support of Interrogatory 3 and the Discovery Summons, the defendants consider the plaintiff’s allegation that it was unable to secure a tenant for Flat C2 solely because of the relatively minor water seepage identified in the statement of claim to be defying logic and common sense.  The defendants point to the minimal area affected by the water seepage; the fact that the plaintiff’s old tenant chose to stay on for nearly a year after discovery of the water seepage in early March 2013 and after the expiry of the original tenancy on 31 March 2013; and the further fact that the plaintiff only managed to let out Flat C2 again in July 2016 after the water seepage had long stopped following the rectification works in January 2015 and further after having undertaken substantial “upgrading” works to Flat C2 lasting at least from November 2015 to February 2016 (paragraph 23(3) and (4) below).  The defendants hence surmise that there were reason(s), other than the water seepage, that caused Flat C2 to remain vacant after the old tenant had moved out in late February 2014.

The interrogatories objected to

14.  Against this background, on 5 July 2016, the defendants served on the plaintiff interrogatories which included the following:

(1) Interrogatory 3:

“Other than the renovation of the C2 Flat mentioned in paragraph 8 of Ms Tam’s Statement, was there any renovation, decoration, repair, maintenance and fitting out works carried out at the C2 Flat during the period from 1 March 2014 to the time when the C2 Flat was rented out/sold or to date (whichever is earlier)? If the answer is in the affirmative, please give full particulars thereof, including full description of the works done, the time and duration when the works were carried out and the costs of such works.”

(2) Interrogatory 4:

“Provide a table showing the state of occupation of the C2 Flat from 1 March 2014 to date, including:

(1) the name of the person or entity in occupation;

(2) the relationship of such entity with the plaintiff;

(3) the duration of occupation by such person or entity;

(4) the amount of rent or fees payable, and paid, by such person or entity to the Plaintiff for such occupation.”

15.  To put these interrogatories in context, paragraph 8 of Ms Tam’s first witness statement reads as follows:

“Once the last tenant moved out in around late February 2014, I immediately organised the renovation of the Premises in anticipation of receiving new tenant on or before 1^st April 2014. The walls were painted and generally cleaning up the place. However, the dampness and water stains described in the pleadings relating to the 4^th Floor of the Premises recurred shortly. It follows that the same cannot be rectified within the Premises except with the cooperation of Mr. Wong,[3] the owner of the premises, as the seepage from upstairs, and not elsewhere.”

16.  By Ms Tam’s affirmation dated 19 July 2016, the plaintiff declined to answer Interrogatory 3 and answered Interrogatory 4 only to the extent of saying that no person or entity was in occupation of Flat C2 between March 2014 and January 2015.

17.  The plaintiff takes the view that, save as answered as aforesaid, Interrogatories 3 and 4 are “irrelevant and fishing” and “not necessary for disposing fairly of the matter or saving costs”.  More particularly:

(1) With regard to Interrogatory 3, Ms Tam made this point in paragraph 4 of her 2^nd affirmation also dated 19 July 2016: “The other renovation, decoration, repair etc works have no bearing [on] the sources of the water seepage problem being complained of in this legal action, and also form no part of the loss and damages claimed by the Plaintiff.” 

(2) With regard to Interrogatory 4, the plaintiff reiterates that it is claiming damages for loss of rental up to January 2015 only.  The state of occupation of Flat C2 after January 2015 is therefore irrelevant.

18.  By the Interrogatory Summons issued on the same date, supported by Ms Tam’s said 2^nd affirmation, the plaintiff applied for an order that Interrogatory 3 be withdrawn and Interrogatory 4 be amended in 2 respects: the revision of the period covered to that from March 2014 to January 2015 and the deletion of the question in sub-paragraph (b).

The documents sought

19.  In the meantime, closely related to Interrogatory 3, the defendants demanded specific discovery by the plaintiff of the following documents (“Subject Documents”):[4]

“all quotations, agreements, contracts, works programmes/schedules, drawings, plans, photographs, debit notes, demand notes, payment vouchers, cheques/deposit slips/remittance records for payment, receipts for payment for all renovation, decoration, repair, maintenance and fitting out works carried out in the C2 Flat from 1 March 2014 until the C2 Flat was let out/sold or to date (whichever is earlier)”.

In short, the defendants want to see all documents relating to all renovation works done to Flat C2 after the departure of the plaintiff’s old tenant on 28 February 2014 and before the entry of the new tenant on 1 August 2016.

20.  In support of the Discovery Summons, the 2^nd defendant in his affirmation dated 27 July 2016:

 (1) deduced from paragraph 4 of Ms Tam’s said 2^nd affirmation (paragraph 17(1) above) that apart from the renovation work mentioned in paragraph 8 of Ms Tam’s first witness statement, Flat C2 had undergone other renovation, decoration, repair, maintenance and fitting out works at some time during the period from 1 March 2014 until it was let out again and that the plaintiff would have in its possession custody or power the Subject Documents;

 (2) suggested that the Subject Documents are relevant to:

 (a) whether there was any water seepage or defect at Flat C2 (other than those mentioned in the statement of claim) which prevented Flat C2 from being rented out;

 (b) whether the carrying out of renovation, decoration, repair, maintenance or fitting out works at Flat C2 prevented Flat C2 from being rented out; and

 (c) whether the plaintiff intended to rent out Flat C2.

21.  In opposing the Discovery Summons, Ms Tam said in her 3^rd affirmation dated 15 August 2016 the following:

“4. … The Plaintiff never claimed that there was other seepage or any defect elsewhere which prevented the renting of the C3 (sic) Flat. …

5. … Whilst it is true that I did mention certain “renovation” was carried out in around March 2014 in anticipation of receiving a new tenant in paragraph 8 of my first witness statement, such “renovation” is of “touch up” nature and very minimal works which are done almost every time whenever a tenant left the C2 Flat upon termination or expiry of the relevant tenancies. Of course, such renovation was wasted owing to the fact that the water seepage persisted at that time. …

6. … If the Discovery Summons is entertained, the Plaintiff will incur substantial times and costs in retrieving essentially all “touching up” works in different periods (while the Plaintiff was waiting for potential tenant) but all these works are not concerned with rectifying any water seepage problem in other area at all. The Plaintiff cannot accept that unnecessary time and costs should be incurred for entertaining the Discovery Summons.”

Discovery Summons

22.  It is trite that the court does not order specific discovery unless

(1) First, the document or class of documents sought is in existence.

(2) Second, the party against whom the document or class of documents is sought has or had the same in his possession, custody or power.

(3) Third, the document or class of documents sought relates to a matter in which in the action, in the sense that it is reasonable to suppose that it contains information which may either (1) directly or indirectly enable the applicant either to advance his own case or to damage that of his adversary, or (2) fairly lead to a train of inquiry which may have the consequences of either advancing the applicant’s case or damaging that of his adversary (per Brett LJin Campagnie Financiere Commercial Du Pacifique v The Peruvian Guano Co (1882) 11 QB 55 at 63).

(4) Fourth, discovery of the document or class of documents is necessary for either disposing fairly of the cause or saving costs (Order 24, rule 8).

See, for instance, Lee Nui Foon v Ocean Park Corp (No 1) [1995] 2 HKC 390, per Cheung J (as he then was) at 391H-392G.

23.  I am prepared to find a prima facie case that the Subject Documents are in existence and that the plaintiff has or has had the same in its possession, custody or power.  I so find having regard to the following evidence: -

(1) paragraph 8 of Ms Tam’s first witness statement (paragraph 15 above);

(2) paragraph 6 of Ms Tam’s third affirmation (paragraph 21 above) which may be read as suggesting that renovation works, other those mentioned in paragraph 8 of her first witness statement, might been done to Flat C2;

(3) paragraph 36 of the 2^nd defendant’s witness statement dated 2 March 2016 that they heard a lot of noise, which was like noise of renovation, coming from Flat C2 between November and December 2015 which suggests that substantial renovation of Flat C2 was carried out by the plaintiff in that period; and

(4) what appears to be a 5 page document appended to the Tenancy Agreement dated 15 July 2016 entered into by the plaintiff in respect of Flat C2 and comprising an “Equipment List”, a “Sanitary Fitment List”, a “Light List” and a “Material Schedule”.  Though the full address of Flat C2 is not shown, each such list/schedule shows the name “AVT CONTRACTING”, the plaintiff’s name and the projection description “upgrading of a duplex residence” and the address “27 Barker Road”.  The “Sanitary Fitment List” bears the date of 13 February 2016.

24.  I now turn to the relevance and necessity of the Subject Documents, on which Mr Lee Ting Ming, counsel for the defendants, advances the same arguments on the basis that the Subject Documents are necessary for disposing of this action fairly because they are relevant.  I propose also to address these 2 requirements together.  An application for specific discovery can be refused under the ‘necessity’ limb if the probative value of the documents sought would be so slight as not to justify the inconvenience of giving discovery: Hong Kong Civil Procedure 2017, Volume 1, paragraph 24/7/1.  In this case, it will be seen that, with one exception (paragraph 27 below), I think so little of the evidential contribution of the Subject Documents on the issues to which they are said to be relevant that I doubt if they can, even in the generous Peruvian Guano sense, be properly described as relevant.

25.  According to Mr Lee, the Subject Documents are expected to show the nature, details and timing of, and the time taken by, the renovation works required by, and undertaken by the plaintiff at, Flat C2 from March 2014 to July 2016 and are, thus, “highly” relevant to (and, therefore, necessary for the disposal of) the plaintiff’s claim for loss of rental income from 1 March 2014 to 31 January 2015.

26.  Paragraph 24 of Mr Lee’s Skeleton Submissions, by which counsel elaborates on how the “relevance” requirement is fulfilled, runs to 4½ pages.  The many sub-paragraphs and sub-sub-paragraphs thereof are somewhat repetitive.  I believe they can, on closer analysis, be distilled into the following points:

(1) First, the Subject Documents would contain details of the nature and contents of the works done to Flat C2 after the old tenant moved out on 28 February 2014 and before the new tenant moved in on 1 August 2016 which would reveal:

(a) the condition of the part of Flat C2 that was affected by the water seepage mentioned in the statement of claim which would, in turn, be relevant to the question whether such damage would render Flat C2 not capable of being re-let;

(b) whether there were other defects in Flat C2 which rendered the plaintiff unable to find a new tenant for Flat C2 or whether Flat C2 would have required substantial renovation anyway before the plaintiff could have found a new tenant therefor which go to the question whether the water seepage was, as the plaintiff claims, the sole cause for the plaintiff not being able to find a new tenant from March 2014 to January 2015.

(2) Second, they would reveal when the plaintiff began and finished the allegedly “minimal” “touch up” renovation works undertaken “in anticipation of receiving new tenant” in March / April 2014 and the other “touching up” works undertaken by the plaintiff at times other than in March / April 2014.  Such timing would go to the following questions:

(a) whether the plaintiff really wanted to have Flat C2 let out as soon as the old tenant moved out on 28 February 2014 bearing in mind the plaintiff’s evidence that it would carry out “touch up” renovation almost every time whenever a tenant left Flat C2 after the termination or expiry of a tenancy agreement in preparation for receiving a new tenant;

(b) whether Flat C2 could really be ready for receiving a new tenant by 1 April 2014;

(c) whether the 1 month period allowed by the plaintiff for finding a replacement tenant was sufficient or reasonable.

27.  I can see the relevance and necessity of the date of completion of the “minimal” “touch up” renovation works said to have been done by the plaintiff to Flat C2 in March / April 2014 in preparation for the entry of a new tenant to the question of whether Flat C2 was actually tenant ready by 1 April 2014, as claimed by the plaintiff.

28.  However, other than this, I am not with Mr Lee. 

(1) First, I doubt if one can gauge the condition of the spot affected by the water seepage or whether Flat C2 had been rendered not lettable by such condition just from checking what works (if any) the plaintiff had done to the same.  In any event, there is no need to resort to such indirect evidence.  There are 3 photographs of the spot in question taken in late April 2014 and appended to the Supplemental Joint Statement of Building Survey Experts dated 30 August 2016, from which one can see clearly the condition of the water damaged area.

(2) Second, whether a property is lettable or tenant ready is not a matter of absolute standard.  Rather, one would expect the matter to be relative varying from tenant to tenant and multifactorial depending on a number of factors of which the standard to which the property is renovated may just be one.  To my mind, for instance, it does not follow from the fact that Flat C2 had undergone a somewhat substantial upgrading renovation in late 2015 and early 2016 before it was eventually let out in July 2016 that Flat C2 was not lettable or tenant ready before such renovation.

(3) Third, I fail to see how one can draw any or any reliable inference as to whether the plaintiff intended to let out Flat C2 at any stage just from verifying what (if any) renovation works it had caused to be done to Flat C2.

29.  To conclude, I am prepared to allow the defendants’ appeal in respect of the Discovery Summons only to the limited extent of requiring the plaintiff to disclose the work programme/schedule and contractor’s debit note(s) relating to the renovation works mentioned in paragraph 8 of Ms Tam’s first witness statement.  As far as I can see, of all the documents identified by the defendants, these are the only ones that are likely to show the completion date of the works.

Interrogatories Summons

30.  It is well settled that the party seeking to interrogate has to demonstrate that the interrogatories are both relevant (in a sense similar to that under the Peruvian Guano test) and necessary (either for the fair disposal of the cause or matter or for saving costs).  See, for example, Kao Lee & Yip v Koo Hoi Yan, HCA 8847/1993, unreported, 23 April 2001, per Ma J (as he then was) at [7].

31.  Given the overlapping requirements of ‘relevance’ and ‘necessity’ and the close relation between the Subject Documents and Interrogatory 3, Mr Lee’s submissions on, and my reasons for allowing to a minor extent, the appeal in respect of the Discovery Summons apply equally to Interrogatory 3.

32.  As for Interrogatory 4, Mr Lee contends that if Flat C2 had been used by the plaintiff or someone related to or associated with the plaintiff from February 2015 to July 2016, it would throw light on whether the plaintiff had really intended all along to have Flat C2 rented out after the old tenant had moved out.  With respect:

(1) The plaintiff makes no claim for loss of rental income after January 2015.

(2) The defendants have not shown any evidential basis for even suspecting that Flat C2 was not vacant for any time after January 2015.

(3) Indeed, in paragraph 34 of his witness statement (made in March 2016), the 2^nd defendant relays his observation (which he is well able to make) that Flat C2 had remained vacant for over a year since the completion of the rectification works in January 2015.

(4) There is ample evidence in the form of visitors logs kept by the management office of Altadena House, recording visits by various estate agents to Flat C2 with potential tenants for the purposes of viewing the premises throughout the material period of time.

33.  To conclude, as in the case of the appeal in respect of the Discovery Summons, I allow the appeal in respect of the Interrogatory Summons only to the limited extent that the plaintiff should answer on what date the renovation works mentioned in paragraph 8 of Ms Tam’s first witness statement were completed under Interrogatory 3.

34.  Given the defendants’ limited success, I expect arguments to arise as to the incidence and/or apportionment of costs.  Instead of making an order nisi, I direct the parties to file and serve written submissions on costs as follows: the defendants within 14 days from today; the plaintiff within 14 days thereafter and the defendants to reply within 14 days thereafter.