POLO COURT DEVELOPMENT LTD v. TENY LTD

DCCJ 2134/2020

[2022] HKDC 57

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2134 OF 2020

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BETWEEN

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REASONS FOR DECISION

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Introduction

1.  This is an Order 14 application for summary judgment.

2.  The background leading to the present application has been set out in detail by Deputy District Judge Kay Seto in her Decision given on 23 April 2021, whereby the learned Judge set aside the summary judgment obtained in default. She gave directions for the parties to file further affirmations with an adjournment for substantive arguments for the original Order 14 summons taken out on 26 January 2021. I gratefully adopt the detailed background as set out in there.

3.  The Order 14 summons resumed before me on 6 December 2021. At the conclusion of the hearing, I granted the defendant unconditional leave to defend with costs in the cause. I now give reasons for my decision.

Background

4.  In brief, this is a water leakage case. The plaintiff is the registered owner of Unit 16, 12^th Floor, Wah Sang Industrial Building, Wong Chuk Yeung Street, Fo Tan, New Territories. The plaintiff complains that there was water leakage from the defendant’s premises immediately above, ie Unit 16, 13^th Floor, from late August 2019 to early May 2021. The plaintiff claims damages.

5.  It is not disputed that the defendant's premises have been used as a factory for making “steamed rolls” (a traditional Chinese dim sum made with rice flour). Machinery and embedded drainage system were installed. However, the defendant denies that the wastewater generated, if any, from the manufacturing process had caused any water damage to the plaintiff’s premises.

6.  There are two pro-forma investigation reports provided by the plaintiff in its 1^st Affirmation in support of the Summons. The first one is the report compiled by the plaintiff’s surveyor Hong Kong Building Inspection and Structural Diagnostic Limited (“HKBI”) dated 28 November 2019 (“the HKBI Report”). After several professional tests being conducted at the ceiling of the plaintiff’s premises on 8 October 2019, HKBI concluded that there was water seepage penetrating from the floor slab of the defendant’s premises to one particular part of the ceiling of the plaintiff’s premises in front of the loft office (“the seepage area”). Further, HKBI stated in their report that they had eliminated all possible sources of water seepage other than that originated from the defendant’s premises.

7.  The second one is an undated report provided by Easy Living Consultant Limited (“Easy Living”), which was commissioned by the Joint Office of the Building Department and the Food and Environmental Hygiene Department (“the Joint Office”). We shall call it “the Joint Office Report”. After conducting several colour water tests and ponding tests on 4 January 2020, Easy Living found that, inter alia, leakage of the drainage pipes and from the floor slab of the defendant’s premises were unlikely. It was concluded in the Joint Office Report that the source of water seepage was “uncertain” and that it was a fail case.

8.  On the other hand, the defendant would, in turn, rely on the Joint Office Report to support its Defence. The defendant put the plaintiff to strict proof of the source of the alleged water seepage. Nonetheless, the water seepage continued.

Subsequent events

9.  There was a new development since the last hearing before Deputy District Judge Kay Seto on 23 April 2021. The defendant had carried out renovation works at the defendant’s premises from late April to early May 2021. Since then, according to the plaintiff, the water leakage has stopped.

10.  The plaintiff has filed an updated report, compiled by HKBI dated 7 June 2021 (“the Updated Report”), to confirm the cessation of water seepage after the renovation works carried out by the defendant in early May 2021 and to comment on the deficiency of the ponding tests conducted by Easy Living on behalf of the Joint Office.

Applicable principles

11.  The principles relevant to Order 14 for summary judgments are well established. The defendant must show that there are triable issues. He has to satisfy the court that he has a “real or bona fide defence” (see Hong Kong Civil Procedures 2022, para 14/4/9).

12.  However, it is important to bear in mind that before the court looks at the defence, one must look at the plaintiff’s case first (Li Mingren v Questex Development Inc and another, unreported, CACV 141/2014, 18 November 2015, per Yuen JA, citing Billion Silver Development Ltd v All Wide Investment Ltd [2000] 2 HKC 262).

13.  The Court of Appeal had explained the same requirement in an earlier decision in Ju Yan Di Emperory Genesisy v Yan Wai Han [2015] 1 HLKRD 822, per Cheung JA at 827,

“It is well-established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence.”

14.  Once the plaintiff has demonstrated a plausible prima facie case, the court will then consider whether the defendant’s assertions are believable, ie capable of belief, but not whether those are to be believed at the summary stage. Order 14 is for clear cases only, that is cases in which there is no serious material factual dispute and no serious dispute of legal questions involved. And the court must not embark on a mini-trial on affidavit evidence (Hong Kong Civil Procedure 2022, paras 14/4/9-9A).

15.  As to the legal principles relevant to water leakage cases, it is well established there is no presumption that water leakage was necessarily caused by the flat above, and the doctrine of res ipsa loquitur does not apply. It is not for the defendant to identify the source of leakage or to prove it did not come from the defendant’s flat. The onus is on the plaintiff to establish that the leakage originated from the defendant’s flat (Hui Ling Ling v Sky Field Development Limited, unreported, CACV 122/2012, 22 March 2013, per Kwan JA, at para 42).

16.  The above general principles are accepted by the parties and not in dispute.

The plaintiff’s prima facie case

17.  Mr Wong Cho Lik, counsel for the plaintiff, submitted that there was overwhelming evidence to show that the defendant’s premises had to be the source of the water seepage. In addition to the photos and video footage taken by the plaintiff about the water dripping, the plaintiff primarily relied on the following to identify the source of seepage:

(1) With the use of specialized equipment, HKBI had conducted a series of water seepage tests, such as electrical conductivity moisture meter test, rapid infrared thermographic scan, microwave tomography, etc., onto the ceiling of the plaintiff’s premises. Further, by way of visual inspection performed at the defendant’s premises, they found that the waterproofing material of the floor slab and surrounding walls was defective. It was concluded in the HKBI Report that the water was seeping through the defendant’s floor slab to the plaintiff’s ceiling;

(2) HKBI had eliminated all other possible sources of leakage by conducting further tests on the ceiling of the plaintiff’s premises. They concluded that there were no other signs of leakage surrounding the water seepage area; and

(3) There is new evidence that the water seepage ceased after the defendant had carried out the renovation works at the defendant’s premises in early May 2021.

18.  On the strength of the HKBI Report and the Updated Report, Madam Wong, the director of the plaintiff, has confirmed by way of affirmation that the plaintiff believes the defendant has no defence.

19.  However, I immediately discerned some problems in the plaintiff’s case as far as the present application is concerned. I do not think the plaintiff’s deposition is justified, and I am unable to accept that the defendant has no defence for the following reasons.

20.  First of all, there are two sets of expert reports, namely the HKBI Report (together with the Updated Report) and the Joint Office Report, being placed before this Court. Their conclusions are basically contradictory to each other. While the HKBI report was suggesting that the water was seeping through the floor slab of the defendant’s premises, the Joint Office Report just concluded otherwise. It can be seen from the Joint Office Report that after having conducted several rounds of colour water tests and ponding tests at the defendant’s premises, their surveyor could not show that the defendant’s premises were the source of the water leakage. More significantly, the ponding tests had flooded the entire defendant’s premises with water at about 20-47mm in height for about one hour. Still, no sign of water seepage was found on the ceiling of the plaintiff’s premises.

21.  In law, there is no presumption that water leakage was necessarily caused by the unit directly above. Therefore, the Joint Office Report remains as competing or inconsistent evidence before the court. Given the inconclusive nature of the reports, I do not think that the court can accept one expert report and reject the other at this stage without cross-examining the expert witnesses at trial.

22.  Second, there is self-deficiency in the HKBI Report itself. The surveyor said they had eliminated all other possible water seepage sources. However, I have some reservations as to the correctness of that statement. It is noted from the HKBI Report that they had done testing in all four directions from the seepage area to show there was no other seepage in the surroundings. At the time, they had recorded that there was another damp area (as shown by the moisture meter) on the ceiling near the party wall adjoining Unit 17 with peeling of the plastering and water stain (para 7.1.1.4, HKBI Report). Despite the fact that there was another damp area detected, the surveyor did not deal with it and went on to conclude (para 8.2) that there were no signs of leakage on the ceiling adjacent to both Unit 15 and Unit 17 on the 13th Floor. It is important to note that such another damp area immediately adjacent to Unit 17 was also confirmed by the Updated Report (para 6.1.1.2, Figs 16-20). This matter should also be addressed by the expert witnesses at trial.

23.  I do not find that the plaintiff has made out a plausible prima facie case, nor can the plaintiff say that the defendant has no defence. Where there are doubts as to the validity of the plaintiff’s case, such doubts would detract from the plaintiff’s right to summary judgment (Billion Silver Development Ltd v All Wide Investments Limited (Supra) at 268C-D).

24.  Counsel for the plaintiff then submitted that the Joint Office Report is of no assistance to the defendant. He said it is well-recognized, as provided in the Hong Kong Institute of Surveyors’ Guideline, that a negative result from a colour water test (or a ponding test) is not conclusive evidence that there was no water seepage and it poses no bar to the plaintiff in establishing liability on the defendant’s part, and that only a positive test result is firm proof of the source of leaking. He cited Good Century Investment Ltd v Yim Kin Kuo (unreported, DCCJ 4980/2013, 23 November 2015) and Yeung Chiu Wing & Chan Nga Sze v Ho Chi Ming (unreported, DCCJ 3244/2015, 17 November 2017).

25.  As said, the findings in the Joint Office Report are inconsistent with that of the HKBI Report. I am satisfied that the Joint Office Report made by an independent third party is cogent evidence that the defendant can rely on to show a triable issue or that it has a bona fide defence. Further, the two cases cited were cases after trial. It is of my view that they are examples to show why inconsistent test records should normally be examined at trial with experts' assistance. Since the court shall not embark on a mini-trial at the summary judgment application stage, the plaintiff is still facing two conflicting reports on the source of water seepage, to be resolved at trial.

26.  Counsel for the plaintiff then referred to the judgment of Deputy District Judge Winnie Tsui (as she then was) in Yui Tat Nam Darney & Another v Century Bridge Ltd (unreported, DCCJ 2399/2016, 28 October 2016). It was submitted that, in the case, albeit neither party had adduced any expert evidence on the source of the water leakage, the plaintiff had managed to put forward a positive and reasonable case that the origin of the water leakage was from the defendant’s unit.

27.  In my view, I do not see how Yui Tat Nam can advance the plaintiff’s case any further. I agree that Yui Tat Nam has laid down a proposition that expert evidence is not mandatory for the plaintiff to prove its case in a water leakage case. However, each case turns on its own facts. Suffice it to say that, in that case, there was no rebuttal evidence being provided by the defendant at all.

28.  One must bear in mind that it is for the plaintiff to establish that the source of water seepage was from the defendant’s premises, and identifying the source of water seepage is essential for attaching liability to a defendant (Hui Ling Ling v Sky Field Development Ltd (supra)). Can the fact that water seepage stopped after renovation works done in the defendant’s premises advance the plaintiff’s case further? At this stage, I am afraid it cannot. It is no answer to the challenges in the plaintiff’s case as the two events could have no correlation. The court would have to make a finding of facts in this respect at trial.

29.  I would add that this Court does acknowledge the defendant carrying out renovations to the premises, which as the defendant stated, that was done without admitting any liability on the part of the defendant, to have stopped the water seepage, if any. At least, as a result of such renovations, there was no more water damage or nuisance, if there was any, caused to the plaintiff. However, the other side of the coin is that the parties’ experts can no longer conduct any more testing (such as a four-hour ponding test as suggested by the plaintiff’s surveyor) to confirm the source of the water seepage. I agree with Mr Henry Wong, the solicitor appearing for the defendant, that if there is any adverse inference which ought to be drawn against the defendant for having done the renovation works, it would be a matter for the trial judge to decide after hearing all the evidence.

Res judicata

30.  Mr Henry Wong for the defendant submitted that since the learned Judge at the hearing for setting aside the summary judgement had already made a finding that the defendant has shown “a real prospect of success”, the defendant had successfully passed the test of a higher threshold before coming to this court. It was submitted that in this hearing the defendant was only required to show there is a triable issue to go on to trial, which is of a lower threshold, and hence, this court should grant the defendant leave to defend which otherwise would result in inconsistent finding being made by the court.

31.  I think the defendant has raised a legal question here. To put it properly in issue, the question is: Whether, if without any new evidence, it would be res judicata or, more particularly, issue estoppel for the plaintiff to resurrect its Order 14 summons for summary judgment after the regularly obtained summary judgment in default had been set aside?

32.  As this hearing was proceeded on the ground of new evidence, it would not be an issue and certainly not require for this court to consider whether this court would be bound by the earlier decision of my learned colleague based on the higher level of threshold of “real prospect of success”. As there was no full argument by the parties before me, I would reserve this question for future occasion.

33.  For what it is worth, in my view, I would simply say that there is no res judicata or issue estoppel as issue estoppel is a form of estoppel by record and depends on the final decision of the court and the merits having been fully considered. I have three comments to supplement on this point. First, once the default summary judgment has been set aside, the previously obtained judgment is no longer in existence, and if there is any issue of res judicata, it would have to be confined to the court’s ruling of setting aside (P & O Nedlloyd BV v Arab Metals Co and others (No 2) [2007] 1 WLR 2288). Secondly, in general, the court’s decision on an application to set aside a default judgment does not determine the issues between the parties, but is merely an exercise of a discretion whether, taking into account the merits of the potential defences and all relevant factors, to grant a procedural or interlocutory remedy (Mullen v Conoco Ltd [1998] QB 382; see also The Law of Estoppel (2020), Michael Barnes QC at para 9.52). Thirdly, the decision made by the learned Judge who set aside the default judgment was based on a “provisional view” of the merits formed at the hearing only. Such a provisional view as to the merits of the case is in no way binding on any subsequent judicial hearing.

Conclusion

34.  For the aforesaid reasons, I found that there are triable issues in the present case. I refused to give summary judgment. I gave the defendant unconditional leave to defend. Costs of and occasioned by this application be costs in the cause with certificate for counsel.