GWONG LEUNG PROPERTY HOLDINGS LTD v. WONG KWOK TSOI

DCCJ 5473/2016

[2022] HKDC 946

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5473 OF 2016

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ASSESSMENT OF DAMAGES

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INTRODUCTION

1.  This is an assessment of damages in a water leakage case.  By the Order made by Deputy District Judge Lawrence Yip dated 21 September 2017, the plaintiff obtained an interlocutory judgment[1] against the defendant with damages to be assessed, as well as an injunction[2] restraining the defendant, whether by its servants, agents or otherwise, from causing, suffering or permitting to suffer any water leakage from the defendant’s property to the plaintiff’s property.

2.  The present assessment of damages is held in pursuance of the said interlocutory judgment.

3.  The plaintiff commenced the present proceedings against the defendant on 11 November 2016.  The action is based on (1)  negligence, (2)  trespass and/or nuisance, (3)  the rule under Rylands v Fletcher.  According to the Statement of Claim[3], the plaintiff claimed damages under the heads of (1)  the costs of (and the increased costs of)  renovation and reinstallation works, (2)  surveying and professional fees, (3)  loss of rental income, and (4)  general damages for discomfort and inconvenience. That being so, the plaintiff only pursues the last two heads in this assessment of damages.

4.  At the assessment hearing, the plaintiff was represented by Ms Katrina Lee of counsel.  The defendant, who was not legally represented, did not attend the hearing.  Upon perusing the 6^th Affirmation of Service of Kung Chi Wah filed herein on 11 August 2022[4], I was satisfied that the defendant had been duly notified of the present assessment of damages, as well as this assessment hearing.  Accordingly, I decided to proceed with the hearing in the defendant’s absence.

5.  At the conclusion of the hearing, I have indicated that a written decision will be handed down on 6 September 2022. This is my decision.

ANALYSIS OF EVIDENCE

6.  At the assessment hearing, Ms Lee called Ms Yiu Pui Man (hereinafter “Ms Yiu”)  as a factual witness.  Ms Yiu is one of the current directors of the plaintiff.  She adopted her witness statement filed on 18 June 2021 as examination in chief.  She also answered questions raised by me. Ms Lee did not seek to re-examine Ms Yiu after my questions.

7.  According to Ms Yiu, the present litigation was mainly handled by her late father Mr Yiu Kwan Poon, who was also a director of the plaintiff.  Unfortunately, Mr Yiu passed away on 1 November 2017.  Her knowledge about this case is mainly gleaned from the records and documents available to her, although she also testified that she had occasionally assisted her father in handling the rental matter, and thereby gained some personal knowledge about these matters.  That being the case, I find that Ms Yiu’s personal knowledge about the present case is rather limited.  If her evidence is inconsistent with the contemporaneous documents, I would prefer documentary evidence over her testimony. 

8.  It was stated in Ms Yiu’s witness statement that the selling price was below the market value of the Plaintiff’s Property.  It was also stated there that there was a reduction in the selling price to take account of the purported costs of renovation[5]. As it was confirmed by Ms Lee during the hearing, the plaintiff would pursue neither the claim for the difference between the selling price and the market value of the Plaintiff’s Property, nor for the claim for the concession of selling price due to the purported renovation costs.  I think this is a correct approach. These heads of damages had never been pleaded in the Statement of Claim. Nor is expert evidence available for the purpose of assisting the Court to determine the market value of the Plaintiff’s Property. Accordingly, I will not deal with these aspects of evidence in details here.

9.  In this assessment of damages, the plaintiff relies on an expert report[6] prepared by Mr Jacob Tsang of Smart Joy Surveying Consultants Ltd dated 29 August 2016.  In pursuance of the Order made by Master B Mak dated 13 April 2022[7], the said expert report was allowed to be adduced as evidence without calling the marker thereof. 

10.  I find that the plaintiff has proved its case as set out below.

THE PLAINTIFF’S CASE

11.  The plaintiff is the registered owner of the flat located at Flat 1 on 1^st Floor, Nam Cheong Building, Nos 153-155 Nam Cheong Street, Kowloon, Hong Kong (“the Plaintiff’s Property”). The plaintiff purchased the property for the purpose of investment.

12.  The defendant is the registered owner of the flat situated on the 2^nd floor of the same building (“the Defendant’s Property”). The Plaintiff’s Property was divided into six rooms, and the present litigation concerned one of them, which was identified as Room F.  Room F was not located exactly under the Defendant’s Property.  Immediately above the bedroom of Room F was the flat roof, which was covered by an unauthorized structure.

13.  By a tenancy agreement entered on 15 December 2015[8], Room F was let to a tenant for a term of 2 years commencing on 19 December 2015 at the monthly rent of $8,000. 

14.  In or about early February 2016, the tenant complained to Mr Yiu about the water seepage problem.  Mr Yiu then contacted the Joint Office of the Buildings Department/Food and Environment Hygiene Department and tried to contact the occupant of the Defendant’s Property.

15.  Due to the persistence of the water seepage problem, the tenant of Room F terminated the tenancy prematurely, and moved out of Room F at the end of February 2016.  While another tenancy agreement was entered, the new tenant refused to pay rents and deposit. The new tenancy was also terminated prematurely.  The plaintiff was not able to rent out the room again.

16.  Mr Yiu tried to contact the defendant through an estate agent, but to no avail.

17.  Mr Yiu also engaged a surveyor to investigate the cause of the water seepage in Room F.  The expert report mentioned in paragraph 6 above was prepared as a result.

18.  Due to the persistent water seepage problem, the plaintiff sold the Plaintiff’s Property to a third party in October 2017 (and the transaction was completed in November 2017). 

DISCUSSION

19.  As indicated at the beginning of this decision, the plaintiff claims only the following heads of damages in this assessment hearing:

(a)  Loss of rental income; and

(b)  Damages for distress, discomfort and inconvenience.

20.  I now deal with the said heads of damages in the same order.

(1)   Loss of Rental Income

21.  It was submitted that loss of rents is recoverable as damages consequent upon the injury to the property by the nuisance[9]. I have no query about this submission.

22.  According to the evidence given by Ms Yiu, the 1^st tenant terminated the tenancy at the end of February.  A letter dated 17 March 2016[10] was produced to the Court, indicating that the plaintiff agreed to the early termination of the tenancy due to the water seepage problem, and the security deposit would be refunded to the tenant in full.  Ms Yiu testified during the hearing that the letter was signed after the 1^st tenant had moved out from Room F.

23.  According to the 2^nd tenancy agreement produced by the plaintiff (which was entered on 25 February 2016), the 2^nd tenancy commenced on 3 March 2016 at a monthly rent of $6,300.  In light of this contemporaneous document, I hold as a matter of fact that the 1^st tenant terminated the tenancy on 2 March 2016. 

24.  Ms Yiu further testified that the 2^nd tenant moved out on 18 March 2016.  I have some reservation about this testimony. As I pointed out during the hearing, a handwritten note was marked in top left corner of the 2^nd tenancy agreement that “[there were] water seepages from the upper floor and the damages to the bed, moved out on 20 May”[11].  Ms Yiu explained that the date (20 May)  should be the date of removing the bed damaged by the water seepage.  She said that it was not consistent with Mr Yiu’s character that the 2^nd tenant would be allowed to stay in the property for more than 2 months without paying any rents. 

25.  I am not able to accept Ms Yiu’s testimony in this respect.  First of all, there is no concrete evidence before me showing that the 2^nd tenant did move out on 16 March 2016.  According to Ms Yiu, this date of moving out was gathered from various notes and records of Mr Yiu. But no such notes and records were made available to the Court for consideration. Secondly, I do not find it inherently improbable that the 2^nd tenant was allowed to stay in Room F without paying any rent, given the room was being suffered from severe water seepage problem at the time. Finally, nor can I find it make any sense to put down the date of removing the bed in the tenancy agreement which, according to Ms Yiu, had already been terminated 2 months earlier.  On balance of evidence available before the Court, I find it more probable that the 2^nd tenant did move out on 20 May 2016, instead of 16 March 2016.  I therefore hold as a matter of fact that the 2^nd tenancy was commenced on 3 March 2016 and ended on 20 May 2016. 

26.  In the circumstances, I do not accept that the plaintiff is entitled to claim loss of rental income since 18 March 2016.  I do not see any reason why the defendant should be responsible for the 2^nd tenant’s failure to pay rent during the currency of the 2^nd tenancy, notwithstanding the fact that the defendant was held to be responsible for the water seepage problem.  I am however prepared to accept that there was a rental concession of $1,700 (ie, $8,000 - $6,300)  due to the water seepage problem, and that the plaintiff is entitled to claim for the difference.  Accordingly, I would award a sum of $4,387.10 (ie ($1,700 per month x 2 months)  + ($1,700 per month ÷ 31 days per month x 18 days))  during the 2^nd tenancy.

27.  Ms Yiu testified that the plaintiff was not able to rent out Room F since the termination of the 2^nd tenancy.  The expert report adduced by the plaintiff indicated that, due to the water seepage problem, there were spots of debonded plastering in Room F, and that the condition of the bedroom was particularly severe.  It was also stated that the persistent water seepage caused damages to the carpentry and joinery in the room, and also led to electrical fault of the circuits, switches and outlets[12]. Ms Yiu testified during the hearing that the real situations in Room F were even worse.

28.  I have also carefully considered the photographs[13] taken by the expert upon the inspection on 26 August 2016.  The photographs clearly show that Room F was in devastated conditions at the material times.  Given the situations shown in the said photographs and Ms Yiu’s testimony, I accept that such an adverse state would make the room unfit for occupation, and find that it was indeed uninhabitable.  I find as a matter of fact that the plaintiff would not be able to lease the room out unless some remedial works were to be carried out by the defendant in his property. 

29.  According to the land search record[14], the Plaintiff’s Property was sold on 21 November 2017.

30.  In the circumstances, I would award the loss of rental income between 21 May 2016 and 20 November 2017 in the sum of $144,000 (ie, $8,000 per month x 18 months).

31.  My award under the head of loss of rental income therefore amount to a total sum of $148,387.10 (ie, $4,387.10 + $144,000). 

(2)   Damages for Distress, Discomfort and Inconvenience

32.  The plaintiff also claims the sum of $20,000 being general damages for discomfort and inconvenience suffered by the plaintiff as a result of the water seepage problem[15]. Ms Lee submitted that the damages for inconvenience could be claimed even though the plaintiff rent out the flat and did not suffer any direct distress or discomfort as a result of the water seepage problem[16]. She also referred to me authorities[17] showing that a corporate claimant is still entitled to claim general damages in nuisance.

33.  I accept as a matter of principle that the plaintiff, even if it is a corporate claimant, is entitled to recover general damages for distress, discomfort, and inconvenience in the circumstances of this case.

34.  To support this head of damage, Ms Lee referred me to the evidence given by Ms Yiu that the late Mr Yiu had spent a substantial amount of time and effort in trying to contact the defendant in order to resolve water seepage problem and to handle the tenant’s complaints.  As I have held above, the water seepage problem suffered by the plaintiff was severe and had rendered Room F uninhabitable. 

35.  Accordingly, I am satisfied that the claimed sum of $20,000 is reasonable and would award the same amount under this head of damage.

(3)   Summary

36.  Accordingly, I would assess the plaintiff’s damages in the present action at the sum of $168,387.10 (being $148,387.10 for the loss of rental income and $20,000 for the damages for discomfort, distress, and inconvenience).

INTERESTS

37.  Ms Lee did not make any submissions in the opening submissions in respect of interests.  She submitted at the hearing that the plaintiff would like to seek interests of the awarded sum from the date of the Writ of Summons (ie 11 November 2016)  to the date of this assessment at 1% above HSBC’s best lending rate, and at judgement rate thereafter until payment.

38.  For my part, I have some concern regarding the plaintiff’s delay in bringing up this assessment of damages.  As I have noted above, the interlocutory judgment was entered on 21 September 2017.  The plaintiff only took out the Notice of Appointment of Assessment of Damages 3 years and 4 months later, on 5 February 2021.  Ms Yiu was not able to offer any explanation of the delay. At the hearing, Ms Lee submitted that the delay was due to the confusion of those instructing her as to who was going to give instructions on behalf of the plaintiff after the demise of Mr Yiu.

39.  With all due respect, even taking into account the said explanation given by Ms Lee, the delay is still substantial and inordinate.  I do not find it fair for the defendant to bear the consequence of the delay which he was at no fault.  Accordingly, on a broad-brush approach, I would disallow the plaintiff’s interests for a period of 2 ½ years, between 11 November 2016 and 10 May 2019.  I would not make any discount in respect of the interest rate. 

40.  Accordingly, the plaintiff is entitled to claim interest of the awarded amount from 11 May 2019 to the date of this assessment, at the rate of 1% above the best lending rate.  There would also be post-judgment interests after the date of this assessment.

COSTS

41.  Costs should follow the event.  I order that the defendant should pay the plaintiff’s costs of these assessment proceedings.

42.  In the plaintiff’s statement of costs, the plaintiff claims a total sum of $121,846.  I find the sum on the high side.  In my view, the present case is a simple and uncontested water seepage case.  It appears to be excessive where the solicitor is said to have spent a total of 6 hours and 45 minutes in communication.  The fees charged for professional works also appear to be somewhat inflated, as I cannot see any justification for the solicitor to spend 18 hours and 45 minutes in preparation of documents, where the only substantial documents in this case are the Statement of Claim and the Witness Statement of Ms Yiu.  Given the hearing bundle was only little more than 200 pages, it does appear to be a bit on the high side to charge a total of 3 hours and 30 minutes in perusal of documents.  On a broad-brush approach, I fix the plaintiff’s profit costs at $46,800 (ie, 18 hours x nominal rate of $2,600 per hour).

43.  I would award other parts of the statement of costs in full.

44.  Accordingly, I fix the plaintiff’s costs and disbursement of these assessment proceedings at $79,456 (ie $4,300 for manual work, $46,800 for profit costs, $12,000 for counsel fee, and $16,356 for disbursements).

DISPOSITION

45.  For the reasons as aforesaid, I enter final judgment in favour of the plaintiff against the defendant in the sum of $168,387.10 together with interests thereon at 1% above HSBC best lending rates from 11 May 2019 to the date hereof, and at judgment rate thereafter until full payment.

46.  I also order the defendant to pay the plaintiff’s costs of the assessment of damage, summarily assessed at $79,456, payable forthwith.

47.  Lastly, I would like to thank Ms Lee for her assistance rendered to this Court.