陳炳華 v. 家利物業管理有限公司

HCSA 20/2019

[2019] HKCFI 2267

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO 20 OF 2019

(ON APPEAL FROM SMALL CLAIMS TRIBUNAL

CLAIM NO 6733 OF 2018)

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D E C I S I O N

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Introduction

1.  The two claimants herein, respectively the registered owner (“C1”) and the tenant (“C2”) of a shop space in a private housing development, lodged a claim in the Small Claims Tribunal on 12 February 2018, namely SCTC 6733/2018 against the defendant (“D”), for loss and damages suffered as a result of water leakage in the ceiling of C1’s shop space.

2.  On 22 February 2019, the Deputy Adjudicator Mr Ngai Lung-kit (“Adjudicator”) dismissed the claim of the claimants and made no order as to costs, and on 17 May 2019, the Adjudicator dismissed the claimants’ application for review with no order as to costs.  C1 then took out his present application for leave to appeal against the decision made by Adjudicator.

3.  On 2 July 2019, the Adjudicator handed down written reasons for his decision on 22 February 2019 (“1^st Reasons”) and also reasons for his decision on 17 May 2019 (“2^nd Reasons”).

4.  C1’s application for leave to appeal was subsequently amended on 10 July 2019 (“Amended Application”).  Counsel Mr Chu Tak appeared for C1 for this leave application. 

Background 

5.  The private housing development is known as “City Garden” and comprises 14 blocks of domestic towers (“Domestic Towers”) with commercial podiums therebelow (“Commercial Podiums”), a commercial building (“Commercial Building”) and a garage building (“Garage Building”) with an open space on the roof-top thereof  (collectively called the Estate”)[1].

6.  C1 was at all material times and still is the registered owner of two shop spaces known as Units 17 and Unit No 22, on the Portion of the 1^st floor of the Commercial Podium of Blocks 1, 2 and 3 of the Estate (respectively “Shop 17” and “Shop 22”).   

7.  On 12 October 2016, C1 entered into a tenancy agreement with C2 in respect of Shop 22 for a term of 2 years[2].

8.  D was at material times the “Manager” as defined in the Deed of Mutual Covenant and Management Agreement of the Estate  dated 4 February 1983 (“DMC”)[3].  The “Manager” was a party to the DMC and was appointed pursuant to Section V of the DMC.  There was further a Sub-Deed of Mutual Covenant and Management Agreement dated 13 December 1993 in respect of all those portions on the Basement, Ground Floor and First Floor of the Commercial Podiums of Blocks 1, 2 and 3 of the Estate (“Sub-Deed”) and pursuant thereto Hsin Chong Real Estate Management Limited (“Hsin Chong”) was appointed as the “Manager” and Hsin Chong was a party to the Sub-Deed[4].

9.  C1’s claim arose out of an incident on 17 November 2016 which according to C1, a drainage pipe “burst” and water leaked out (or flowed out) which caused flooding to Shop 22 (“Incident”). C1 first wrote to D on 5 December 2016 setting out his claims[5] and it appeared to be only on 16 May 2017, that P received a reply from a company Toplis and Harding (Hong Kong) Ltd (“Toplis”), who are the Loss Adjusters appointed by D’s insurers, claiming that the Incident was unforeseen and the leakage was caused by blockage of the drainage pipe, and was not due to any negligence on the part of D[6].  This was followed by another letter dated 26 May 2017 sent by C1 to D denying that it was only a water leakage as that there was large quantity of dirty water flowing out[7]. Subsequently, Toplis replied on 28 June 2017 reiterating that the leakage was due to the improper use of the drainage by the occupiers of the units in the Domestic Towers which caused the blockage and that after the Incident, appropriate measures had been taken by D to reduce the loss and that D had also arranged for regular cleaning of the drainage pipes and therefore D was not negligent[8].

10.  On 28 July 2017, C1 instructed solicitors to send a letter before action to, stating that as a result of a “burst” in the common drainage pipe on 17 November 2016, Shop 22 was flooded with toilet water and the ceiling was seriously damaged and that to clear up the mess, C2 had to cease business for 3 days[9] (“28.07.17 Letter”).

11.  It was alleged in the 28.07.17 Letter that it was “pursuant to Condition 1(l) of Part B under Section IV of the [Sub-Deed]” that D had the duty “to keep the common sewers drains water course and pipes free and clear from obstructions”, and that it was stated therein that the Incident was understood to be caused by blockages in the common drains of which D was liable.  C1’s claim was stated to be a total of HK$8,300 consisting of (i) cleaning fee of HK$600, (ii) ceiling restructuring (sic) of HK$6,000[10] and (iii) three-day rental compensation to C1’s tenant C2 of HK$1,700.

12.  On 29 August 2017, Toplis wrote again to state that their investigation revealed that the Incident was due to blockage of a drainage pipe by some foreign substances, and that after being notified of the matter, D had immediately shut off the flush water supply and cleared the affected areas and that they had arranged their sub-contractor to conduct a high-jet clearance to unclog the drainage pipe after the Incident.  It was further stated that D had conducted regular clearance for the main drainage pipe as well as high-jet clearance works and also issued a notice to remind (“Reminder Notice”) all residents of the block for the proper use of the drainage system after the incident.  It was again stated in Toplis’ letter that the Incident was unforeseeable and uncontrollable on the part of D and D had fulfilled their duty as a property manager to maintain the communal facilities in sound condition.

13.  The claimants issued their claim in the Small Claims Tribunal on 12 February 2018 claiming from D a sum of HK$8,300 as stated earlier above, plus C1’s various expenses incurred in the matter including his legal costs, of HK$10,000.  Thus the total amount of his claim was HK$18,300 and costs.

14.  D’s defence was essentially that there had been regular cleaning of the drain pipe and the drainage system by D’s sub-contractor and that according to D’s record, there was cleaning of the drain pipes of Block 2 on 8 November 2016.  Further, after the Incident, D had arranged for its sub-contractor to unblock and clear the drainage pipes and thereafter there had been no further leakage. It was D’s case that it had properly complied with its obligations as the “Manager” under the DMC in carrying out the maintenance and repairs.  D also relied on Clause B6 of Section V of the DMC (“Clause B6”). 

15.  In paragraph 5 of his 1^st Reasons, the Adjudicator summarized the disputed issues to be :

  (i)  whether the leakage of water from ceiling of Shop 22 on 17 November 2016 was caused by the “bursting” of the drainage pipe or “blockage” of the drainage pipe;

  (ii)  Depending on the cause of the Incident, whether D was in breach of its obligations as the Manager under the DMC;

  (iii)  If there had been a breach, could D rely on Clause B6.

16.  The findings of the Adjudicator were :

  (i)  The leakage to Shop 22 was caused by the blockage of the drainage pipe;

  (ii)  D was in breach of its duties under the DMC in not reminding occupants of the building, by way of notices or letters, the risk of drainage pipes being blocked due to foreign objects: See Lo Yuk Chu v Hang Yick Properties Management Ltd, CACV 169/1996, unrep, 5 November 1996 in that there was no evidence from D that it had issued similar notices or letters to occupants before the Incident, and D only issued the Reminder Notice after the Incident;

  (iii)  Clause B6 exempts D from any liabilities unless such was caused by any criminal liability or dishonesty or wilful negligence and since failing to remind occupants as aforesaid did not fall into any of those categories, D was exempted from liability.

17.  During the hearing of the claimants’ application for review, the claimants had alleged that the Adjudicator should have called for an expert witness.  The Adjudicator had pointed out in paragraph 5 of his 2^nd Reasons that at the Pre Trial Review on 17 April 2019, he had explained to C1 that he had right to apply for a witness summons/subpoena to call C2, or the tenant of another shop space Shop No 16 in the same Estate which had the same problems, and also the management company of the shopping mall of the Estate.

18.  As for expert evidence, the Adjudicator had pointed out to C1 that the burden of proof fell on the party who made the allegation, and that if C1 was of the view that the leakage was caused by bursting of the drainage pipe and not blockage, this was a matter for C1 to call an expert witness, and the Tribunal could not call any expert to give evidence on its own. 

Intended grounds of appeal 

19.  There are 13 grounds of appeal (“Grounds”) and that the Adjudicator has erred in:

(1)  failing to consider the applicability of the provisions of the Control of Exemption Clauses Ordinance, Cap 71 to the exemption clauses in the DNC;

(2)  failing to consider that the burden of proof is on D to satisfy the Court that the exemption clause in the DMC in the DMC satisfies the requirement of reasonableness;

(3)  failing to consider or adequately consider that as a matter of true and proper construction of the exemption clause in the DMC, the same is to be construed contra proferentum;

(4)  failing to consider or adequately consider that on a true and proper construction of the exemption clause in the DMC, the same does not cover negligence on the part of D;

(5)  failing to consider or adequately consider that even if the words used in the exemption clause are prima facie wide enough to cover negligence on the part of D, the existence of a possible head of damage other than negligence is fatal to the proferens;

(6)  failing to consider or adequately consider the meaning of “wilful default” or “wilful negligence” in the exemption clause;

(7)  failing to consider the exemption clause is inconsistent with Section 18(1)(a) and Section 18(1)(c) of the Building Management Ordinance, Cap 344;

(8)  having misdirected himself in law when considering the meaning of “willful” in the said exemption clause;

(9)  failing to enquire, investigate into and/or direct his mind to the issue as to whether D had been made aware of a defect which required remedies and had failed to take appropriate or reasonably appropriate steps thereafter;

(10)  failing to consider the issue of nuisance or at all;

(11)  failing to consider D’s duty as Manager in relation to nuisance hazards;

(12)  failing to consider whether D as Manager knew or ought to have known of the relevant nuisance hazard;

(13)  in holding that the duties imposed upon D as Manager are delegable to contractors.

Discussion

20.  Section 28(1) of the Small Claims Tribunal Ordinance, Cap 338 provides:

“(1) Any party who is aggrieved by a decision of the tribunal—

(a) on any ground involving a question of law alone; or

(b) on the ground that the claim was outside the jurisdiction of the tribunal,

may apply to the Court of First Instance for leave to appeal and the Court of First Instance may grant such leave if it thinks fit.

21.  It would appear from C1’s Claim Form that he had relied on both the provisions of the DMC and also the Building Management Ordinance, Cap 344 for his claim as set out in his Claim Form[11].

22.  First of all, in relation to the DMC, as the definition of the “Estate” in the DMC includes the Commercial Podiums, and the definition of “Owner” means any person who may become the registered owner of any undivided shares in the Land and the Estate, it would appear that the definition “Owner” would include the registered owner of “Commercial Units” as defined in the DMC, namely shops, offices and other non-domestic unit in the Commercial Podiums and Commercial Building.

23.  Although it would appear that on the face of the DMC that C1 was an “Owner” referred to therein, one should also need to check the provisions of the actual assignment pursuant to which C1 acquired Shop 22. No such assignment had been placed before either the Adjudicator or this Court.

24.  The definition of “Common Facilities” in the DMC includes all “service facilities” including sewers, drains, water courses, pipes, gutters, wells through which fresh or salt waters sewage and any other services are supplied to the Estate or any part or parts thereof.

25.  Section V of the DMC concerns the “Management of the Estate” and Part B thereunder sets out the “Powers and Duties of Manager”.  In particular, Clause B1(11) imposes a duty on the “Manager” to keep all the common sewers, drains, watercourses and pipes from and clear from obstructions and Clause B1(12) imposes a duty on the Manager to keep all the Common Facilities in good and working order[12]

26.  As seen in the 1^st Reasons, it was the finding of the Adjudicator that (i) D’s duty as “Manager” under the DMC was not absolute and that D only need to carry out suitable, reasonable or adequate management work; (ii) D was only in breach of its duty in failing to send out Reminder Notices prior to the date of the Incident to remind the occupiers of their proper use of the drainage pipes and to warn them of risks of blockage in case of their failure to do so; (iii) D did not fail in its duty in regular cleaning of the drainage pipes or the drainage system.

27.  The Adjudicator then found that D was not liable for its breach of duties by reason of Clause B6 in that there was no act or omission involving criminal liability or dishonesty or wilful negligence on the part of D.

28.  It would appear that the Adjudicator’s above findings were made in relation to D’s duties under the DMC only. 

29.  Most of the Grounds were in relation to Clause 6B in particular that the Adjudicator had failed to consider the provisions of the Control of Exemption Clauses Ordinance, Cap 71 (“CECO”) and that D had failed to satisfy the Adjudicator that Clause B6 satisfies the requirement of reasonableness.  

30.  I accept there was no mention by the Adjudicator of the CECO or whether the provisions of the CECO would be applicable. 

31.  Mr Chu had further submitted that it is doubtful whether the wording of Clause B6 was wide enough to cover negligence on the part of D.

32.  Clause B6 is in respect of any act, deed, matter or thing done or omitted in pursuance or in purported pursuance to the provisions of the [DMC], and it is arguable that the exemption only applies to breach of contractual duties only. 

33.  As for C1’s claim under the Building Management Ordinance, Cap 344 (“BMO”), Section 34l of BMO states as follows:

“(1) No person may—

(a) convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);

(b) use or permit to be used the common parts of a building in such a manner as—

  (i)  unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

  (ii)  to cause a nuisance or hazard to any person lawfully in the building.

(2)  Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.”

34.  Mr Chu had complained that the Adjudicator had failed to consider the issue of nuisance or hazard at all.

35.  Having considered the Grounds, I am of the view that the Grounds involve a question of law, and I am unable to say at this stage that there is no reasonable prospect of success.

Conclusion

36.  In light of the above, I am prepared to grant leave to appeal to C1.  Costs will be in the cause of the appeal.