DCCJ 4309/2015
[2020] HKDC 354
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 4309 OF 2015
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BETWEEN
THE INCORPORATED OWNERS OF TUNG FAT BUILDING BLOCK A KAM PING STREET
Plaintiff
(錦屏街東發大廈A座業主立案法團)
and
NG KING FONG JUDY (伍琼芳)
1st Defendant
LIN FENG JING (林峰菁)
2nd Defendant
CHUNG WING LEUNG ALBERT (鍾永亮)
3rd Defendant
CHAN HON WING (陳漢榮)
4th Defendant
YEUNG SHING WAI (楊成偉)
5th Defendant
LUK LAI SHEUNG (陸麗嫦)
6th Defendant
CHEUNG KWAI KIT (張桂杰)
7th Defendant
LO CHO HING (盧佐卿)
8th Defendant
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Before:
Deputy Judge Rebecca Lee in Court
Dates of Hearing:
6-9, 12-15 & 23 August 2019
Date of Judgment:
5 June 2020
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JUDGMENT
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BACKGROUND
1. The plaintiff is the Incorporated Owners (“IO”) of Block A, Tung Fat Building (“the Building”). The 8 defendants were the Management Committee members of the plaintiff from 2011 until 12 November 2014.
2. The common parts of the Building was covered by third-party liability insurance policy (“the Policy”) provided by China Ping An Insurance (HK) Co Ltd (“China Ping An”) from 24 May 2012 to 24 May 2015.
3. Competent Property Services Company Limited, the Third Party (“TP”), was appointed the management company of Block A of the Building in 2004/2005. Its appointment was terminated on 30 November 2014.
4. The 4th defendant (“D4”), together with Madam Lee Chun (“Lee”), were and are the joint owners of Shop No 4 on Ground Floor of the Building.
5. On 24 June 2011, Fan, Wong & Tso, the then solicitors acting for D4 and Lee, sent a letter to the plaintiff claiming damages to their Shop due to water leakage from the outer wall of the Building.
6. On 21 September 2012, 5 September 2013, 29 November 2013 respectively, Lo & Co, solicitors acting for D4 and Lee, issued 3 letters to the plaintiff claiming for damages for the said water leakage.
7. On 21 February 2014, the writ of summons under DCCJ 664/2014 (“the Writ”) was issued against the plaintiff.
8. On 28 July 2014, Interlocutory Judgment was entered against the plaintiff as no notice of intention to defend was filed on behalf of the plaintiff.
9. On 26 August 2014, TP faxed the Notice of Appointment for Assessment of Damages to Cunningham Lindsay, the Loss Adjusters acting on behalf of China Ping An.
10. By a letter dated 29 August 2014, Cunningham Lindsay rejected the plaintiff’s claim under the Policy. The letter states, inter alia:-
“On 26 August 2014, we have received by fax from your property manager Competent Property Services Company Limited the Notice of Appointment for Assessment of Damages dated 19 August 2014 issued by the third party’s solicitors.
Our investigation found that you had not sent the Writ of Summons issued by the third party’s solicitors to your insurers before this Notice of Appointment for Assessment of Damages . As you have failed to forward the Writ of Summons to the insurers immediately upon receipt, you have manifestly breached the following Policy Condition.
Item 4 of the Policy Conditions states, “The Insured shall give notice in writing to the Company as soon as possible after the occurrence of any accident with full particulars thereof. Every letter, claim, writ, summons and/or process shall be notified or forwarded to the Company immediately on receipt. Notice shall also be given in writing to the Company immediately the Insured shall have knowledge of any impending prosecution or inquest in connection with any accident for which there may be liability under this Policy ……
Hence, the above Policy Condition is applicable in this case. Policy liability therefore does not arise in respect of the subject incident under the captioned Policy. Your Insurers are thus unable to give the matter any further consideration. You are advised to retain solicitors to deal with the claim on your behalf.”
(emphasis added)
11. At the material times, the 1st defendant was the chairman of the Management Committee, the 2nd defendant the treasurer and the 3rd defendant the secretary. The 4th to 8th defendants were members of the Management Committee.
12. On 12 November 2014, a new chairman, Mr Ng Tak Ki (“NTK”) and new members of Management Committee were elected by the owners’ resolution.
13. In March 2015, the plaintiff (with a new chairman and new management committee) settled DCCJ 664/2014 with D4 and Lee at the amount of HK$450,000.00 inclusive of interest and costs. The plaintiff also incurred own legal costs in the sum of HK$100,000.00 as a result.
14. The plaintiff now seeks to recover the total sum of HK$550,000.00 against all the defendants.
15. There are three actions before the court:-
(a) The plaintiff’s claim against all the defendants for recovery of the sum of HK$550,000.00 (“The Main Action”).
(b) The contribution and indemnity action of the 1st , 2nd , 3rd , 5th , 6th , 7th and 8th defendants (“D1-3 and D5-8”) against D4 (“The Contribution and Indemnity Action”).
(c) The third party proceedings by D1-3 and D5-8 against TP (“The Third Party Action”).
THE MAIN ACTION
The plaintiff’s Claim
16. In a nutshell, the plaintiff avers that the defendants, being members of the Management Committee, without any reasonable justification, failed to:-
(a) attend at or to follow up which the leakage matter when the same has to come to notice of the members of the Management Committee;
(b) deal with or conduct the Writ in a proper manner;
(c) notify the owners of any legal proceedings to which the IO is a party;
(d) mitigate the loss and damages suffered by the owners such as negotiating with D4 and Lee for their alleged damages;
(e) keep an insurance in force in relation to the common parts of the building and the property of the corporation by breaching the condition of the insurance policy;
(f) act in good faith and in a reasonable manner in the performance or purported performance of the duties imposed by the Building Management Ordinance (“BMO”) on the IO.
17. The plaintiff relies on the following provisions under the BMO:-
“Section 18(1): The Corporation shall--
(a) Maintain the common parts and the property of the corporation in a state of good and serviceable repair and clean condition;
(2A) …… the corporation in the performance of its duties and exercise of its powers under this section shall have regard to and be guided by Codes of Practice issued from time to time under section 44(1).
Section 26A: A management committee shall notify the owners of any legal proceedings to which the corporation is a party…
Section 28: A corporation shall procure and keep in force in relation to the common parts of the building and the property of the corporation, such policy of insurance with an insurance company in respect of third party risks…
Section 44(2): A failure on the part of any person to observe any Codes of Practice issued under subsection (1) shall not of itself render that person liable to criminal proceedings of any kind but any such failure may, in any proceedings whether civil or criminal including proceedings for an offence under this Ordinance, be relied upon as tending to establish or to negative any liability which is in question in those proceedings.”
18. The plaintiff also relies on clause 4.6.2 of the Codes of Practice which states, inter alia, “any water seepage shall be rectified”.
19. It is common ground that the IO had taken steps to remedy the leakage prior to the issue of the Writ.
20. It is specifically pleaded that by receiving the Writ, the defendants failed to inform the owners and failed to forward the Writ to the insurer immediately upon receipt. Miss Bu for the plaintiff agrees that in terms of causation, it is the basis of the plaintiff’s claim (rather than the failure to attend to the leakage problem).
21. The plaintiff relies on the same particulars and alleged that the defendants are grossly negligent as Committee members.
Defence of D1-3 and D5-8
22. D1-3 and D5-8 are jointly represented by Mr Chung (together with Mr Yip). The gist of their Defence is that they had never received (and thus had no knowledge of) the 29 November 2013 letter (“the Demand Letter”) nor the Writ.
23. They were therefore in no position to inform the Management Committee and the plaintiff, enabling them to handle the Writ, the proceedings and the Interlocutory Judgment and report the same to the insurer.
24. D1-3 and D5-8 alleged that the plaintiff and the Management Committee had at all material times entrusted their administration work and the daily management of the Building to the Management Company (ie TP).
25. TP did not and failed to discharge its duties by informing the Management Committee and the plaintiff of the Demand Letter, the Writ, the proceedings and the interlocutory judgment.
26. As pointed out by Miss Bu, delegation of duty was not pleaded by D1-3 and D5-8 (nor pleaded by D4).
27. It is averred that, the Management Committee was first informed of the Demand Letter on 2 May 2014 and upon which they directed TP to locate and pass the said letter to the insurer.
28. D1-3 and D5-8 averred that the plaintiff failed to mitigate the loss and damages by failing to:-
(a) hold TP liable for its breach of contract and/or negligence;
(b) claim the Incorporated Owners of Block B of Tung Fat Building for apportionment of liability and contribution as water seepage of the Building including the water seepage in the premises was caused by the common sewers, drains and/or watercourses owned / used by the plaintiff and the IO of Block B; and
(c) in the premises, the Statement of Claim is scandalous, frivolous or vexatious and is otherwise an abuse of the process of the court.
29. D1-3 and D5-8 aver that they had all along been “acting in good faith and in a reasonable manner” and had taken all reasonable steps in discharge of their duties as the members of the Management Committee. They seek to rely on the statutory defence under s 29A(1) of BMO, which states:-
“No member of a management committee, acting in good faith and in a reasonable manner, shall be personally liable for any act done or default made by or on behalf of the corporation
(a) in the exercise or purported exercise of the powers conferred by this Ordinance on the corporation; or
(b) in the performance or purported performance of the duties imposed by this Ordinance on the corporation.”
30. Further or in the alternative, it is averred that:-
(a) at all the material times before the proceedings, they and/or the Management Committee were told and honestly believed that D4 would claim the IO of Block B instead of the plaintiff relating to the water seepage in D4’s Shop; and
(b) on 8 July 2011, the Management Committed directed TP to contact and enquire the insurer of the Building on matters relating to the water seepage in D4’s Shop.
Defence of D4
31. As pointed out by his Counsel Mr Cheung, the gist of D4’s Defence is that, being one of the plaintiffs in DCCJ 664/2014, he was potentially in a conflict of interest position when acting in the capacity as a member of the Management Committee in relation to DCCJ 664/2014. It is D4’s case that he has refrained from discussion on the leakage to the Shop during Committee meetings.
32. Both the plaintiff in its Reply and D1-3 and D5-8 in the Contribution and Indemnity Action relied on D4’s “conflict of interest” as the basis of their respective claim against D4.
33. It is averred by D4 that he had all along been “acting in good faith and in a reasonable manner” when discharging his duties as a management committee member under the BMO. D4 relies on the statutory defence under s 29A(1).
The Contribution and Indemnity Action
34. By way of Notice of Contribution and Indemnity filed on 11 July 2017, D1-3 and D5-8 seek against D4 for contribution and/or indemnity.
D1-3 and D5-8’s case
35. D1-3 and D5-8 contend that D4 had breached of his duties as a member of the Management Committee by failing to:-
(a) alert, inform and/or notify the Management Committee, other members and/or the IO of his claim and/or intended claim against the IO for damages resulting from the leakage occurred at Shop No 4.
(b) alert, inform and/or notify the Management Committee, other members and/or the IO of his commencement of the DCCJ 664/2014.
(c) forward the Writ and/or inform and/or notify the Management Committee, other members and/or the IO to forward the Writ to China Ping An.
(d) lodge any notice of intention to defend of the Action and/or inform and/or notify the Management Committee, other members and/or the IO to lodge any notice of intention to defend.
(e) inform and/or notify the Management Committee, other members and/or the IO to attend to or to follow up with the leakage matter and/or to deal with or conduct the proceedings.
(f) avoid and/or stop allowing himself in a conflicting position when and/or after his interest had conflicted with the interest of the IO.
(g) act in good faith and a reasonable manner in the performance or purported performance of the duties imposed by the BMO on the IO.
36. The basis of their case being:-
(a) D4, as one of the plaintiffs in DCCJ 664/2014, had full knowledge and/or was well informed of the conduct of the action;
(b) D4, being a member of the Management Committee, owed the same duties as the other Committee members to the IO.
37. They claimed against D4 for a declaration that they are entitled to indemnity and/or contribution if they were found liable to the plaintiff under the Main Action.
D4’s case
38. Like his Defence in the Main Action, D4 pleaded that he was potentially in a conflict of interest position when acting in the capacity of the member of the Management Committee in relation to DCCJ 664/2014. D4 had therefore excused himself from any discussions of the Management Committee in relation to any matters concerning the same.
39. It is further averred that because of the peculiar position of D4, he would have been excused from executing any duties under the Building Management Ordinance and/or the Codes of Practice and/or the common law when such duties, if any, concerned the matters in relation to DCCJ 664/2014.
40. D4 avers that he did avoid and/or stop allowing himself in a conflicting position by not getting involved in the handling of the matter of DCCJ 664/2014 by the Management Committee and/or the IO. He is therefore not under any of those duties pleaded by D1-3 and D5-8.
41. Lastly, it is said that D4 had all along been acting in good faith and in a reasonable manner when discharging his duties as a management committee member under the BMO. D4 relies on Section 29A(1) of the BMO and said that he was “acting in good faith and in a reasonable manner” at the material times.
Third Party Action
42. By way of Third Party Notice dated 28 June 2017, D1-3 and D5-8 brought proceedings against TP.
43. It is contended that the Management Committee entrusted their administrative work and daily management of Block A to TP. TP was negligent in that it did not or failed to inform the plaintiff and D1-3 and D5-8 of the Demand Letter, the Writ and the interlocutory judgment of the DCCJ 664/2014.
44. D1-3 and D5-8’s case is that they had never received the Demand Letter and the Writ, and had no knowledge of the proceedings as well as the Interlocutory Judgment. All the defendants were not in the position to inform the plaintiff to handle the action.
45. TP’s defence is that all mails addressed to IO would be passed to one of the Management Committee members. The mail containing the Writ was found inside the cabinet of the rooftop office used by the Management Committee (“the Rooftop Office”) and only the defendants held the key(s) to the Rooftop Office.
46. TP had no knowledge of the Writ until 25 August 2014 when informed by D1.
47. After hearing all evidence, it is now clear that the TP was given the Notice of Assessment of Damages rather than the Writ on 25 August 2014.
48. D1-3 and D5-8 in their Reply alleged that TP would open and read all the mails addressed to IO and would inform the Committee members of the contents of the mails afterwards, and that TP has kept the keys to the Rooftop Office.
49. Mr Chung conceded in his Closing Submissions that the evidence at Trial did not support his clients’ claim against TP as pleaded. He did not seek to proceed further against TP.
50. The TP Action is therefore dismissed accordingly.
51. The only thing outstanding is the issue of costs. Mr Wong (together with Mr Lee) acting for TP has asked for costs against D1-3 and D5-8 on indemnity basis.
52. I shall deal with issue of costs at a later stage.
THE ISSUES
53. Parties have filed Agreed List of Issues before Trial.
54. During the course of Trial, the issues are further fine-tuned in the light of the evidence.
55. In the light of Mr Chung’s concession, it is not necessary for the court to determine the issues as between D1-3, D5-8 and TP.
56. The issues are boiled down as follows:-
(a) whether the defendants, in failing to forward the Writ to the insurer, were grossly negligent and/or in breach of the statutory duties under the BMO (and if so whether they could rely on the statutory defence under s 29A); and
(b) whether D1-3 and D5-8 are entitled to indemnity and/or contribution from D4 if they were found liable to the plaintiff.
57. In order to determine issue (a), the court has to first of all decide whether the defendants had in fact received the Writ.
58. It in turns depends on the how the mails to IO was handled and who was in possession of the keys to the Rooftop Office (and put the Writ inside the cabinet).
59. For issue (b) as well as issue (a), the position of D4 warrants a separate investigation.
60. These are essentially questions of fact.
EVIDENCE
Chronology
61. Before going into the evidence, it is helpful to list out the chronology of events:-
st Letter”)
st Letter) [B224]
nd Letter”)
rd Letter”)
th Letter”)
62. I shall highlight certain documentary evidence.
The Four “Legal Letters” / “律師信”
63. Prior to the issuance of the Writ, four “legal letters” / “律師信” were issued to the plaintiff by the legal representatives of D4:-
(a) letter dated 24 June 2011 from Fan Wong & Tso (“1st Letter”) [B/33-34];
(b) letter dated 21 September 2012 from Lo & Co (“2nd Letter”) [C1/159-160];
(c) letter dated 5 September 2013 from Lo & Co (“3rd Letter”) [C1/162-163];
(d) letter dated 29 November 2013 from Lo & Co (“4th Letter”) [C1/164-165].
64. On the face of it all 4 letters were posted to the IO and copied to Mr Mak Shek Ping (“Mak) of TP by fax.
Minutes of Management Committee Meetings
65. It is common ground that the minutes were prepared by TP. However, none of the minutes were signed (by D1 as chairman).
66. According to NTK, the minutes (and the Writ) were found inside the cabinet of the Rooftop Office of the Block A after he has taken over as chairman.
67. His version is not challenged by the defendants at Trial.
68. No issue is taken by the parties as to the authenticity of the minutes. The disagreement, if any, is over the interpretation of what was recorded in the minutes.
Meeting on 8 July 2011
69. The minutes of meeting held on 8 July 2011 was produced at [C2/487-8].
70. Members in attendance were: D1 (chairman), D2 (treasurer), D3, D4, D5, D6, Mr Chong Wing Ning and Mr Choi Lei Sheung (members).
71. Under AOB Clause 5.1, it is stated that:-
“Shop No.4 owner Mr. Chan (i.e. D4) complains that due to long term water seepage from outer wall, his tenant has asked him for compensation. He therefore issued “legal letter”/“律師信” asking for compensation in the sum of HK$120,000.00…On the other hand, IO requests TP to contact insurer to enquire about the above-mentioned compensation issue”
72. Mr Chong and Mr Choi are not parties to the present proceedings nor are they called as witnesses.
73. The “legal letter” mentioned, in terms of timing, coincides with the 1st Letter.
Meeting on 2 May 2014
74. Minutes of the meeting held on 2 May 2014 is produced at [C2/523-4].
75. Members in attendance were: D1, D2, D3, D4, D6 and D8. D7 and one other member Mr Ng Kin Chi were absent.
76. Luk also attended on behalf of TP.
77. Under AOB, Clause 9.1, it is stated that:-
“request TP to locate the “legal letter” ”/“律師信” from Mr. Chan (of Shop 27) and to forward to insurer”.
78. Mr Ng Kin Chi is not a party in the present proceedings nor called as a witness.
79. In terms of timing, the letter referred to in the Meeting is likely the 4th Letter, ie the Demand Letter.
Incident Report dated 29 October 2012
80. The Incident Report [C1/19] was prepared by Mr Chiu Hing Ping of TP, in response to a complaint made by D4. The “staff in charge” is said to be Mak.
81. In the Report, the entry dated 24 October 2012 refers to TP’s receipt of D4’s “legal letter”/“律師書” .
82. The timing apparently coincides with the 2nd Letter.
WITNESSES
Evidence on behalf of the plaintiff
83. The plaintiff called NTK, the present chairman, to give evidence.
84. NTK confirmed his Witness Statement as his evidence in chief.
85. According to him, it was only after he became the chairman on 12 November 2014 that he was informed by Huen & Partners (IO’s then legal representatives) that the plaintiff was a party to DCCJ 664/2014 and Interlocutory Judgment had been obtained against the plaintiff with damages to be assessed.
86. Further, it was only after he got the keys from the former Management Committee could he gain access to the Rooftop Office, where he found some documents inside the cabinets. Among the documents, he discovered a mail from Lo & Co to the IO. The envelope was obviously opened and the Writ issued on 21 February 2014 was inside.
87. NTK said that only the members of the Management Committee has possession of the keys to the Rooftop Office and to the mailbox designated for IO on the ground floor security guard office.
88. NTK also produced the letter by Lo & Co. dated 17 September 2014 [B50-51]. The letter states that the sealed copy of the Writ and all accompanying documents were sent to the Management Office of the IO by way of Registered Post with a covering letter on 24 February 2014.
89. According to Lo & Co, the Writ was successfully delivered to the Management Office on 25 February 2014.
90. NTK learnt from Cunningham Lindsey that it was only until 26 August 2014, some 6 months after the service of the Writ, that TP faxed the Notice of Appointment for Assessment of Damages (not the Writ) to Cunningham Lindsey.
91. In Luk’s witness statement, it is said that he has on 25 August 2014 faxed the “legal letter and Writ” to the insurance broker. A copy of the coverage page of the fax is produced at [B236]. The fax is said to have consisted of 5 pages (including the covering message page). It would mean that the letter and the Writ would make up the remaining 4 pages.
92. The Demand Letter (ie the 4th Letter) is produced at [C1/164-165] and the Writ is produced at [B36-46]. Given the number of pages of these documents, it is highly unlikely that the fax produced by Luk contained both the Demand Letter and the Writ.
93. It is most likely that what was faxed by Luk to the broker was the Notice of Appointment of Assessment of Damages. The broker then forwarded the same to Cunningham Lindsey.
94. NTK’s evidence is mostly unchallenged at Trial except who in fact was in possession of the key(s) to the Rooftop Office.
95. At Trial, NTK said D2 told him that only D2 and D3 held the keys (which D3 agreed in court). NTK got the keys from D3 and he had no idea whether TP had the keys to the Rooftop Office.
Evidence on behalf of D1-3 and D5-8
96. Mr Chung called D1-3 and D5-8 to give evidence.
97. However, D5 is unable to confirm his signature on his 2 witness statements nor the contents as he is visually challenged.
98. Despite the effort taken by Mr Chung, D5 could not even recall he has made the witness statements at all nor the events detailed therein. D5 is unable to give any valuable evidence at Trial.
99. With the exception of D5, all Mr Chung’s witnesses adopted their witness statements as their evidence in chief.
100. In a nutshell, evidence of D1-3 and D6-8 as contained in their witness statements can be summarized as follows:-
(a) they have never received the 4 “Legal Letters” nor the Writ;
(b) D4 never told them he would sue Block A for the water leakage to his Shop;
(c) all mails addressed to IO would be placed inside a mailbox designated for IO on ground floor security guard office, which was taken care of by TP;
(d) Mak or Luk of TP would collect and open the mails and they would follow up with whatever action that was required;
(e) and if matters needed to be followed up, they would present the same at Management Committee meetings; and if not presented at meetings, TP would contact D2;
(f) D2 specifically mentioned that he would not open any mails to IO and TP would notify him if they were utility bills since he was the treasurer and had to issue cheques on behalf of the IO;
(g) none of them was in possession of the keys to the Rooftop Office, the keys was kept at the security guards’ office on the ground floor. TP should be the one who received the Writ.
101. They blame TP and Huen & Partners for their negligence in failing to deal with the Writ.
102. Regarding D4, they all said that D4 never declared conflict of interest during the Management Committee meeting on 28 December 2012. They only learnt about the “Legal Letter” / “律師信” from D4’s solicitors at the 2 May 2014 Meeting, and D4 did not specify that it was in fact the Writ (as supposed to “legal letter” / “律師信”) and thus D4 was “hiding the truth”.
103. As for the “legal letter” / “律師信” mentioned in the 8 July 2011 Meeting, D1, D2, D3, D6 and D8 said that it means a letter from D4’s tenant to D4, and not a letter from D4 to IO.
104. D2 specifically denied that he had said to D4 that he has received the “legal letter” / “律師信” and passed on to TP.
105. I shall deal with their evidence in court in more details below.
Evidence of D1
106. In respect of the mail arrangement, D1’s evidence in court is that mails to the IO are usually collected and opened by TP, then passed to D2 if it is urgent and important.
107. D1 is able to read and understand English but she travels often.
108. D1 said that the Rooftop Office was “broken in” by NTK before he was elected new chairman. NTK has changed the lock to the Office. D1 clarified that she only had the old set of keys before the “break-in”.
109. The “break-in” was never mentioned in any of the witness statements of D1-D3 and D5-D8.
110. Regarding the knowledge of the Writ, her evidence is that someone mentioned at the 2 May 2014 Meeting a “legal letter” / “律師信” from D4. She has no recollection of any follow-up actions after the Meeting and she sometimes asked D2 and Mak about the progress of the follow-up. It was TP’s duty to follow up the insurance issue.
111. She also has no recollection of handing some documents to TP in August 2014 for TP to fax to insurer. She did not know that the insurer has rejected their claim in August.
112. D1 insisted that she only learnt about the Writ when she was asked to attend the office of Huen and Partners.
Evidence of D2
113. On the mail arrangement, D2 said that:-
- He would sometimes open the mailbox on the ground floor to check the mails but only open those relating to utility bills;
- He doesn’t read English but he would ask his son if the letters were in English;
- TP may contact him or D1 for urgent matters.
114. He admitted that he had the keys to the Rooftop Office, but it was the old set of keys prior to the “break-in” by NTK. He did not have the new set of keys after NTK changed the lock and thus his version in his witness statement is correct, ie he did not have the keys after the “break-in”.
115. Regarding the Writ, D2 said:-
- Prior to 2 May 2014 Meeting D4 might have mentioned about the Writ in their chat (「或者傾計提過都未定」);
- D4 mentioned at the Meeting that he issued “legal document” / 「法律文件」 to IO and instructions were given to TP to find the document and claim insurance;
- He doesn’t remember any meeting after 2 May 2014 and did not know what had been done between May and September;
- He disagreed that he did nothing to follow up the letter and the insurance but he doesn’t remember what he had done;
- He only knew of the existence of the Writ in August 2014.
116. D2 said that D1-3 would put IO documents inside the Rooftop Office cabinet.
117. I noticed that D2, in the witness box, said 「穿煲」 when it was mentioned that the Writ was subsequently found inside the cabinets of the Rooftop Office.
118. However, D2 was not asked to further elaborate on the matter.
Evidence of D3
119. D3 said he has kept both the old and the new sets of keys to the Rooftop Office. He also admitted that he had handed both sets of keys to NTK in person after NTK was elected chairman.
120. According to D3:-
- There was regular committee meeting every month;
- He knew it requires follow-up actions once legal letter is issued;
- He had experience in appearing in court on behalf of IO;
- He was in charge of construction related issues;
- TP would contact D2 first for IO matters, and if they cannot find D2, they would call him;
- TP would solve problems by themselves and they would not mention it to the members if the issues were resolved;
- After 2 May 2014 Meeting, he was waiting for TP to follow up but TP did not report and he did not make any inquiries;
- He did not know if any other members followed up the issue but he didn’t ask.
121. D3 said TP would receive, open and read all the mails addressed to IO, and they would carry out whatever actions deemed necessary. The mails would not be returned to IO but kept by TP.
122. D3, when cross examined by Miss Bu, said that TP had briefly talked about the “legal letter” during the period between February and May 2014 although D3 had not seen the letter himself.
123. D3 maintained he had no knowledge of the Writ.
Evidence of D6, D7 and D8
124. Regarding the mail arrangement and who had possession of the key(s) to the Rooftop Office, they have no personal knowledge. Their evidence in that respect was all information coming from D1/D2/D3.
125. They all claimed that they were “ordinary members” and all the management matters (and the “follow up” after the 2 May 2014 Meeting) were left to D1, D2, D3 and TP.
126. In D6’s case, she day-dreamed during meetings, and sometimes left shortly after signing in. She did not demand the minutes of meetings (nor was she given any) afterwards. She did not communicate with D1-3 for any issues to be followed up after the meetings.
127. D7 is owner of a ground floor shop in Block A and does not reside at the Building. Like D4, his shop also suffered water leakage problem.
128. D7 did not attend all Management Committee meetings but he would be given the minutes of those meetings that he did not attend. The minutes would be given to him by either D2 or D3 (but mostly D2). TP did not pass any minutes to him.
129. According to D7, it was D1 who prepared meeting agenda.
130. Regarding the mail arrangement, D7 said it is something only D1-D3 can tell. According to D7, D5-D8 did not have the keys to the mailbox on the ground floor nor the Rooftop Office.
131. D7 believes that D1, D2 should have the key(s) to Rooftop Office.
132. D8’s evidence is similar to that of D6.
133. D8 said that she overheard, sometime before the May 2014 Meeting, at Café de Coral, that D4 asked D2 if he had received the “legal letter”, although she was not sure how D2 replied.
Evidence on behalf of D4
134. D4 adopted his 2 witness statements as his evidence in chief.
135. D4’s case is straightforward: he was a Committee member and knew that his suing the plaintiff would put him into a position of conflict of interest. He thus refrained from participating discussions relating to any matters concerning the case DCCJ 664/2014, except the 2 May 2014 Meeting when he mentioned that he has issued “legal letter” / “legal proceedings” against the IO.
136. During the 2 May 2014 Meeting, D4 said that what he told the other members was that he issued “legal proceedings” (not a “legal letter”) against the plaintiff.
137. D4 said shortly after the issuance of the Writ, D2 did acknowledge to him that he was aware that a Writ was served upon the plaintiff as D2 said 「知㗎啦」.
138. D4 specifically said that D2 mentioned to him that the plaintiff had passed all his legal letters together with the Writ to Mak of TP to follow up.
139. D4 also said that Mak was also made known of the issuance of the Writ well before the 2 May 2014 Meeting and each time D4 asked Mak about the Writ, Mak replied him that the matter was being dealt with.
140. Mak is not a witness in the present proceedings.
141. According to D4, he mentioned he has started legal proceedings against the IO several times prior to the 2 May 2014 Meeting on different occasions. However, he could not remember whether all the defendants were present on those occasions but he did distinctly remember that D1 was present.
142. D4 admitted that he had no knowledge of the actual logistics of the mail arrangement. He believes that letters and/or legal documents to the plaintiff would be passed by TP to D1, D2 and D3.
Evidence on behalf of TP
143. Mr Wong for TP called Mr Luk King Leung (“Luk”).
Evidence of Luk
144. In his witness statement, which he has adopted as his evidence in chief, Luk said that either Mak or himself would attend Committee meetings and prepare the minutes of meetings afterwards.
145. At the office of the security guard on ground floor of Block A, there was a mail-box designated for the plaintiff, which was used to receive mails for the plaintiff and was locked. The key to the mail-box was kept by the Committee members and they would collect the mails from time to time. Neither himself nor Mak was provided with the keys.
146. The usual arrangements regarding mails were for the mails to the plaintiff left to the security guards, who would pass to any of the defendants whenever they passed by the ground floor. If mails were not collected, Luk would instruct the guards on duty to deliver to either D1 or D2.
147. Luk said that he would not open and had never opened any mails addressed to the plaintiff and he believed Mak would have done the same. He also believed that the guards would pass all the mails to the defendants.
148. As for the Rooftop Office, only D2 had the keys.
149. After the 1st Letter and the 8 July 2011 Meeting, Luk, as instructed by Mak, reported D4’s claim to Cunningham Lindsey on 12 August 2011.
150. He was, however, unable to locate the 2nd Letter from TP’s archive but reference was made in the Incident Report.
151. He was unable to locate copies of the 3rd and 4th Letters.
152. He personally had no knowledge of the Writ or DCCJ 664/2014 until 25 August 2014 when D1 passed the Letter and Writ to him. He then faxed the same to the insurance broker. However, Luk was only able to provide the fax cover at [B236].
153. As mentioned, I find it is more probable that it was the Notice of Appointment of Assessment of Damages rather than the Writ that was faxed to the insurance broker.
154. TP does not keep copies of the minutes and agenda of meetings.
155. When members instructed TP to take action, such as to locate the legal letter, when there was no positive result, TP would not take the initiative to take further actions.
Analysis of Evidence
156. It is undisputed that the Writ was properly served on the plaintiff at the correct address. It is also undisputed that the mail containing the Writ was opened and the envelope together with the Writ were eventually found inside one of the cabinets in the Rooftop Office.
157. Other than the Writ (and the envelope that contained it), the 4 Legal Letters from D4’s solicitors were found by NTK inside the Rooftop Office.
158. The questions for the court are:-
(a) what was arrangement of incoming mails addressed to IO?
(b) who held the keys to the Rooftop Office?
(c) who opened the mail containing the Writ?
(d) who put the Writ (and the envelope) inside one of the cabinets in the Rooftop Office?
The Mail Arrangement System
159. D3’s evidence is that no mails would ever pass to Management Committee members and that TP would file / keep the mails in TP’s own archive and never return to the Management Committee. D3 said there was no need for the Committee to keep the mails (「俾番我地做咩呀?」).
160. Given Mr Chung’s concession in his Closing Submissions, clearly D3’s evidence is not to be relied on as the basis of D1-3 and D5-8’s case, ie all incoming mails would be received, opened and read by TP before referring to the Management Committee.
161. D1 said in court that most of the time mails would in fact be passed to D2 while D2 said he would directly open and handle utility bills. There were instances where he did open mails and found them to be in English, he then sought help from his son.
162. D2 mentioned that security guards were told to call Mak / Luk if they received any urgent mails.
163. When asked by Mr Wong for TP as to how the security guards could tell if the mails were urgent without opening them, D2’s answer is that registered mails / law firm mails are considered urgent.
164. D1, D2 and D3 all said in court (contrary to their written evidence) that there were mails passed to D2, which did not limit to utility or insurance bills.
165. D2 himself said that not only would he take, open and handle utility bills, he would sometimes open other mails. If it was in English, he had to seek help from his son.
166. D2, when asked who would store documents into the cabinets in the Rooftop Office, he replied D1, D3 and himself.
167. D6 and D8 agreed what was contained in their witness statement is what D1-3 told them. D7 simply did not know what the arrangement actually was.
168. In court, D6-8 all said that they were never directly involved in handling mails addressed to the IO, they all said that mails were handled between D1-3 and TP and they did not know how mails were actually handled between D1-3 and TP.
169. D4’s evidence is similar, that he did not know how the mails to IO were actually handled, what he said in his witness statement was what D1-3 told him.
Keys to the Rooftop Office
170. D1, D2 and D3 admitted in court that they had the keys to the Rooftop Office, contrary to what they have stated in their respective witness statement.
171. D1 and D2 sought to explain what they meant by “not in possession of the keys to the Rooftop Office” was the keys after the “break-in” by NTK (who changed the lock). They had the old set of keys only.
172. D3 admitted that he had both the old and the new keys. He conceded that his denial of having the keys in his witness statement is incorrect. He agreed that he had handed over both set of keys to NTK.
173. I note that the alleged break-in (and changing of lock) was not put to NTK by Mr Chung as it was not originally D1-3 and D5-8’s case.
174. D6 said it was D1-3 who told her that there was another set of keys kept at the ground floor guard post.
175. D8 never went to the Rooftop Office on her own and never asked anyone to open the door for her. Her witness statement as to who had the key was based on what D2 told her.
176. D4 and D7 were not able to provide any useful information on the subject.
My Findings
177. I have observed the demeanor of all witnesses while they were giving evidence.
178. NTK was straightforward and his evidence is consistent with his witness statement. I am satisfied that he is an honest and truthful witness. I accept his evidence in full.
179. In any event, NTK’s evidence on how he came to discover the Writ and the envelope (and the other documents including the 4th Letter) was not disputed. It is common ground that the Writ was properly served [C2/556-7].
180. It is also not disputed that old files or record from the former IO was passed to NTK by the former IO, not TP.
181. NTK said he was handed over the keys to the Rooftop Office by D3 in person. This is not contradicted by Mr Chung’s witnesses.
182. On the other hand, D1, D2 and D3 all departed from their original version regarding the Mail Arrangement System and the Keys to the Rooftop Office.
183. Their explanation of why they were in possession of the keys to the Rooftop Office seems to be an improvisation in the witness box, when they found themselves unable to explain why NTK was given the keys to the Office by D3.
184. Their explanation of “old key” and “new keys”, I find, is something they have made up while giving evidence in court.
185. Regarding the knowledge of the Writ, they all insisted that they had no knowledge of it until the insurance policy was rejected by China Ping An and/or informed by Huen and Partners.
186. D1, who was the chairman, is able to read and understand English. She said that she travelled a lot so she relied on D2.
187. However, she admitted that Huen and Partners contacted her to attend their office when the Notice of Appointment of Assessment of Damages came to light.
188. D2 kept changing his stance when he was questioned about the knowledge of the Writ.
189. Under cross examination, he said that before the 2 May 2014 Meeting, D4 might have told him during a casual conversation that D4 had issued the Writ (有可能傾計同我講過出咗告票).
190. When he was asked to confirm the above evidence, D2 said he could not remember.
191. Then when further asked as to whether he said to D4 the Writ was received, he answered that he had no impression.
192. Under re-examination, D2 said he had not much impression after so many years.
193. D3 simply denied he has any knowledge at all as he was only responsible for the “construction side of things”.
194. D1, D2 and D3 were evasive under cross examination and most of the time said that they did not recall the details due to lapse of time.
195. I do not find them to be honest and truthful witnesses. They were trying very hard to disassociate themselves from the Writ.
196. I rejected their evidence when it comes to the explanation regarding possession of keys to the Rooftop Office. I also do not accept that the mails to IO would be read by TP and followed up by TP without first informing one or all of them.
197. Considering all the evidence before me, it is more probable than not that when mails to IO were delivered to Block A, the security guard would pass to either D1, D2 or D3 as they were the key players of the Committee while D4-D8 were not.
198. D1, as chairman, would be the most obvious recipient of any mail addressed to the IO.
199. Even if the mails were normally picked up or passed to D2, according to D2, if he found them to be in English, he would seek help from his son.
200. D3 himself admitted that if the security guard could not get hold of D2, he would be the one they contacted instead.
201. Further, D3, as he has admitted in the witness box, had experience in attending court for the IO.
202. In the premises, either one of them could have received the mail containing the Writ.
203. D4, D6-8 were all unable to give first-hand information regarding the Mail Arrangement System. They also did not have the Keys to the Rooftop Office.
204. I accept that the evidence of D4, D6-8 in so far as it represents their first-hand information. I accept that they have no actual knowledge of the Mail Arrangement System and that the mails to IO would not be passed to them.
205. I also accept their evidence in that they were not provided the Keys to the Rooftop Office.
206. Considering all the evidence before me, I am satisfied, on balance of probabilities, that D1, D2 and D3 held the keys to the Rooftop Office before NTK became chairman.
207. I do not accept that there existed “old keys” and “new keys”.
208. Even if the lock was indeed changed by NTK, it is not disputed that the Writ and other documents from former IO were found inside the Rooftop Office. It was never suggested that these documents were somehow planted by NTK. It does not matter whether the lock was changed or not.
209. As to whether the security guard (ie TP) kept one set of Keys to the Rooftop Office on the ground floor, I find it is more probable than not that TP was not in possession of the Keys.
210. If TP did have the Keys, when TP was expressly instructed to locate the “legal letter” at the 2 May 2014 Meeting, they would most certainly have looked for it in the Rooftop Office and would have found the Writ.
211. Luk’s evidence, which I accept, is that he was unable to locate the “legal letter” (and the Writ) after searching TP’s own archive.
212. In any event, neither the plaintiff nor any of the defendants alleged that TP has kept a copy of the Writ in their possession.
213. The undisputed evidence shows that TP did in fact contact the insurer after the 1st Letter and the insurer did arrange for an inspection.
214. I do not see any reason why TP would not contact Cunningham Lindsey and/or China Ping An if they had been provided a copy of the Writ.
215. There is a possibility that Mak might have been instructed by D1/D2/D3 to follow up with the Writ.
216. However, Mak is not a witness in the present proceedings. The court only has evidence of Luk in this respect.
217. Considering all the evidence before me, I find, on balance of probabilities, that:-
(a) The Writ was passed by the security guard to D1/D2/D3 when it was served by post.
(b) After the mail containing the Writ was passed to D1/D2/D3 by the security guards, D1/D2/D3 (who each kept a set of Keys) opened it and put it inside the cabinet of the Rooftop Office.
(c) It was somehow forgotten and only came to light when NTK unearthed it from the cabinets.
218. In the light of my Finding of Facts, the failure to inform the insurer of the Writ was a result of inaction or omission on the part of D1/D2/D3, and not D5 to D8, after the Writ was properly served on the IO.
D4’s Position
219. Both Miss Bu and Mr Chung submitted that D4 was in a position of conflict of interest as a member of the Management Committee and as a plaintiff under DCCJ 664 of 2014.
220. That precisely is the basis of D4’s defence in the both the Main Action and the Contribution and Indemnity Action.
221. Miss Bu submitted that D4, as a member of the Management Committee, should facilitate that task of the IO in providing a copy of the Writ to the insurer.
222. I have considered D4’s evidence carefully and his demeanor in giving evidence.
223. I am satisfied that D4 is an honest and truthful witness.
224. D4 has properly instructed solicitors to issue the 4 Legal Letters over the span of 3 years before the Writ was issued.
225. It is not disputed that the Writ was properly served.
226. As a plaintiff under DCCJ 664 of 2014, there is nothing more for him to do.
227. As a member of the Management Committee, he did notify the members of his “legal letter” / “legal proceedings” during the 2 May 2014 Meeting.
228. Luk agreed that D4 did mention his conflict of interest during the Meeting.
229. Mr Chung’s witnesses took issue that D4 only mentioned “legal letter” and not “legal proceedings” (as suggested by D4).
230. I agree with Mr Cheung that if D4 did intend to mislead the other members, there was no need for D4 to even mention the “legal letter” in the first place.
231. In my view, D4 should be the last person who wants to keep the Writ from the insurer. He should be most anxious in having the claim be dealt with as soon as possible.
232. As shown in the minutes of meeting, D4 did bring up at the 2 May 2014 Meeting that “legal letter” was issued. As a member who was in position of conflict of interests, there is nothing more for him to do.
233. Mr Chung’s witnesses all said that D4 has “misled” them that D4 would not sue Block A (and only Block B) for damages for the water leakage.
234. It is clear from the evidence of D1-3, D6-8 that D4 never said he would not sue Block A for damages.
235. I find that D4 has not “misled” any of the members into thinking that Block A would not be sued.
236. In the light of his conflict of interest, I do not agree with Miss Bu that D4 should personally send the Writ to IO and/or the insurer as he has instructed his legal representatives to serve the Writ.
Should all defendants be held liable?
237. Miss Bu argued that IO, like a company, acts as a whole and thus each and every defendant should be held liable and the court does not have to deal with each and every defendant’s liability separately, irrespective of their different roles within the Committee.
238. I accept that a management committee of an IO is akin to a board of directors of a company.
239. Miss Bu refers to The Incorporated Owners of Kwai Wan Industrial Building v Kwai Fung Industrial Limited , LDBM-208, 209, 210, 212, 222, 226 and 20/2002 (consolidated), where Hon Chu J (as she then was) held:-
“21. …… I am unable to agree that in law, a management committee of an incorporated owners is a legal entity distinct from the incorporated owners. The legal position of a management committee has been succinctly summarized by His Honour Judge L Chan in the recent decision of 恆麗園業主立案法團第四屆管理委員會訴恆麗園業主立案法團第二屆管理委員會及恆麗園業主立案法團第三屆管理委員會 (unreported) LDBM 73 of 2004 at para.6 as follows:
“A management committee of an incorporated owners of a multi-storey building or a housing estate is just like the board of directors of a limited company . The company is a legal person but the board of directors is not. The fact that section 45 of the Building Management Ordinance, Cap. 344 has included a management committee as one of the persons who is competent to commence proceedings in the Tribunal under that section is, without more, insufficient to make the management committee a legal person. When the interest of the company is in issue, it is the company that can sue or be sued in its own name, not the board of directors. The board of directors is not a legal person independent of the company. The same applies to an incorporated owners and its management committee.”
22. I will additionally point out that a management committee is in essence a body of natural persons who are the officer bearers of the incorporated owners. …… They are appointed for the purpose of carrying out the powers and duties of, and to make collective decisions for the incorporated owners, through and under the name of the management committee. Insofar as they are intra vires , decisions and acts taken by the members of a management committee are not only the decisions and acts of the management committee, but also those of the incorporated owners. It follows that the mere inclusion of a management committee as one of the persons competent to commence proceedings in the Lands Tribunal under section 45 of the Building Management Ordinance does not make a management committee a legal entity. It is therefore difficult to see the legal basis for a management committee being regarded as a legal entity independent from the incorporated owners.
23. …… it is clear from section 29 of the Building Management Ordinance, which delegates the powers and duties of the incorporated owners to the management committee, that a management committee is the agent of the owners incorporated . It follows that, irrespective of whether it is a legal entity, a management committee must act under the authority and mandate of the incorporated owners. It is thus untenable that a management committee does not require the authority of the incorporated owners to proceed with the enforcement of the rights and entitlements of the incorporated owners it enjoys directly or indirectly through the management committee.”
240. I fully adopt the above reasonings.
241. Miss Bu submitted that since it was resolved at the 2 May 2014 Meeting that “TP to locate that legal letter and pass to insurer”, all the members should be bound. The failure to send the Writ to the insurer means it is a failure of all the members.
242. I should point out that D5 did not attend the Meeting and there is no evidence before me showing that D5 was informed of the decision of the Meeting.
243. As noted earlier, Mr Ng Kin Chi who attended that Meeting was not joined as a party.
244. What was resolved at the 2 May 2014 Meeting was to “ask TP to locate the letter and pass to insurer”. The court finds no evidence to show that D5-D8 had any knowledge of the Writ at all.
245. As for D4, I am satisfied, on balance of probabilities, that D4 did not mislead or hide any information from the other members. He had instructed his solicitors to issue the 4 Legal Letters and the Writ, which was properly served.
246. While it is trite that the acts of an individual committee member are acts of the committee and the IO, it does not mean that the acts of an individual member can automatically bind the other members.
247. In any event, the “decision” of the Committee, as reflected in the minutes of the 2 May 2014 Meeting, is to “ask TP to locate the legal letter and pass to insurer”. There is no evidence before the court to show that every member present (and those absent) has knowledge of the Writ.
248. In the circumstances, I am bound to consider each and every defendants’ involvement in causing the plaintiff’s Loss and Damage as result of the failure to send the Writ to the insurer.
Causation of the plaintiff’s Loss and Damage
249. I have found that the failure to send the Writ to the insurer is a result of the inaction or omission by D1/D2/D3 after they have received the Writ.
250. In the light of the above Findings, I am satisfied that the plaintiff’s loss under the Main Action was caused by the failure to inform the insurer on the part of D1, D2 and D3.
251. Such inaction or omission constitutes breach of s 28 of BMO in that the IO was unable to keep in force an insurance policy in respect of third party risks.
252. It is also a breach of s 26A in that the owners of Block A was not notified of DCCJ 664/2014.
253. I also find that D1, D2 and D3 did not act in good faith and in a reasonable manner as stipulated under s 29A(1).
254. D1, D2 and D3 were key players of the Committee. They owed a duty of care to the IO (ie the plaintiff) to carry out the above duties.
255. In failing to send the Writ to the insurer and rendering the policy being revoked, they were grossly negligent.
256. The court is unable to apportion the liability amongst D1, D2 and D3 as the evidence shows that either one of them could have received the Writ and put the Writ inside the cabinets of the Rooftop Office.
257. I find that the D5, D6, D7 and D8 played no part in causing the loss and damage suffered by the plaintiff as they did not receive the Writ nor have knowledge of the Writ in the first place.
258. The plaintiff’s loss and damage was not caused by any act (or inaction) on the part of D4.
259. I have found that D4 to D8 did not cause the failure in sending the Writ to the insurer. They did not commit any breach under s 28 & s 26A and were not grossly negligent. They are therefore not liable for the plaintiff’s loss and damage.
CONCLUSION
260. Under the Main Action, in view of my Finding of Facts, I find that D1, D2 and D3 were in breach of BMO and/or grossly negligent in causing the loss and damage suffered by the plaintiff.
261. The plaintiff is therefore entitled to judgment in the sum of HK$550,000.00, with interest thereon in accordance with s 49 and s 50 of the District Court Ordinance, against D1, D2 and D3.
262. In view of my Finding of Facts, D4, D5, D6, D7 and D8 were not in breach of BMO and/or negligent in causing the loss and damage suffered by the plaintiff.
263. The plaintiff’s claim against D4, D5, D6, D7 and D8 is dismissed.
264. Under the Contribution and Indemnity Action, I find that D4 did note break his duties as a member of the management committee. He was not liable to contribute and indemnify D1, D2 and D3.
265. D1, D2 and D3’s claim against D4 under the Contribution and Indemnity Action is therefore dismissed.
266. As D5 to D8 are not liable to the plaintiff, their claim against D4 under the Contribution and Indemnity Action does not arise.
267. The Third Party Action is dismissed.
COSTS
268. As indicated earlier, Mr Wong for TP has asked for costs on indemnity basis from D1-3 and D5-8 in respect of the Third Party Action.
269. I reserve my decision on costs in respect of the Main Action, the Contribution and Indemnity Action as well as the Third Party Action pending written submissions from all parties.
270. I order that written submissions on costs be filed and exchanged within 28 days of handing down of this Judgment. Reply, if any, to be filed and exchanged within 14 days thereafter.
271. The court is grateful for the assistance rendered by all Counsel.
( Rebecca Lee )
Deputy District Judge
Ms Annie Yanan Bu, instructed by Yu Hung & Co, for the plaintiff
Mr Jerry Chung and Mr Micky Yip, instructed by Messrs CMK Lawyers, for the 1st to 3rd & 5th to 8th defendants
Mr Harrison Cheung, instructed by Messrs Lo & Co, for the 4th defendant
Mr Martin Wong and Mr Bryan Lee, instructed by Messrs Kenneth C C Man & Co, for the third party