LIK KAI ENGINEERING CO. LTD. v. NEW CITY (H.K.) MANAGEMENT LTD. AND ANOTHER

DCCJ 207/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 207 OF 2004

(Formerly HCA No. 3940 OF 2003)

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DECISION

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1.  Three related summonses were heard together in this hearing.  They are:-

(a)  An application made on 20 March 2006 by D2 under O.18 r.19 to strike out the portion of the plaintiff’s statement of claims relating to D2 and to dismiss the plaintiff’s action against D2.

(b)  An application made on 25 April 2006 by the plaintiff to re-amend the plaintiff’s statement of claim to change some factual averments to introduce a new head of relief against D2; and

(c)  An application made on 30 June 2006 by D2 to file and serve the affirmation of Wong Huk Kam for the hearing of D2’s summons of 20 March 2006 to strike out.

Summons of 30/6/06

2. The plaintiff does not oppose the filing of Wong Huk Kam’s affirmation for the O.18 r.19 application.  I grant leave for Wong’s affirmation to be filed with costs of the summons of 30/6/06 to be costs in the cause of the application of this striking out application.

The Action & Background Facts

3. This is an action brought by the plaintiff originally against D1 for payment of services rendered in respect of the maintenance works done at Charmview Shopping Arcade (hereinafter referred to as the “Shopping Arcade” for short) situated at the ground floor of Yue Yee Mansion, 18-20A Belchers Street, Western, Hong Kong.

4. D1 is the management company in charge of the management of the Shopping Arcade.  There was no dispute that D1 had given instruction to the plaintiff for maintenance works to be carried out at the Shopping Arcade.

5. D2 is the Incorporated Owner of Yue Yee Mansion where the Shopping Arcade situates.

6. Summary judgment had formerly been obtained by the plaintiff against D1 on 8 July 2004.  D1 successfully set aside this O.14 judgment on the triable issue whether D1 contracted for the works for a disclosed principal, namely the owners of the Shopping Arcade, or whether D1 contracted in a personal capacity.  

7. After the setting aside of the O.14 judgment, the plaintiff amended its statement of claim on 20 September 2005 and brought D2 in to shoulder responsibility with D1 for the costs of the maintenance works.  The plaintiff averred D1 acted as an agent on behalf of D2 to contract for the said works.

8.  There is no information in any of the affirmations to show the identity of the “Owners of the Shopping Arcade”.  Nor does the plaintiff see fit to seek further and better particulars from D1 regarding the identity of the Owners of the Shopping Arcade whom D1 acted for.

The Plaintiff’s application for re-amendment

9. After D2 has initiated its application to strike out and filed its affirmation to deny the existence of any contractual agency between D1 and D2, the plaintiff applied to re-amend its statement of claims to enlarge the claim to unjust enrichment in addition to agency.

10. It was the plaintiff’s case in its proposed re-amended statement of claim that D2 is the Owners Incorporate of Yue Yee Mansion in which the Shopping Arcade situates.  As the works performed by the plaintiff benefited D2 in alleviating D2 from its statutory obligation of maintaining the common parts of the Yue Yee Mansion, D2 ought to be held liable to the plaintiff for the costs of the maintenance work carried out in the Shopping Arcade.

11. In the intended re-amendment lodged with its summons of 25 April 2006 the plaintiff adds in the following:-

(i)  The Shopping Arcade forms most of the ground floor of Yue Yee Mansion;

(ii)  D2 has a statutory duty to maintain the common parts of Yue Yee Mansion.

(iii) D2 received valuable benefit from the works carried out by the plaintiff in that the works ensured the air conditioning apparatus and fire fighting equipments and installations for the Building were:-

(a) maintained in accordance with the Second Defendant’s statutory obligations, given the air conditioning apparatus and fire-fighting equipment and installations covered by the works formed the common parts of the building to which the 2^nd defendant has a statutory obligation under the Building Management Ordinance Cap 344 to maintain and repair (the text in italics are what have been read out by counsel on behalf of the plaintiff in court on the plaintiff’s verbal application to further amend the intended re-amended version of the plaintiff’s statement of claim);

(b) renovated and updated; and

(c) complied with the statutory requirements.

Application for dismissal and striking out by D2

12.  In seeking to strike out the plaintiff’s intended claim against D2, the Chairman of D2 deposed to the following facts:-

(i) Yue Yee Mansion is an 8-storeys building built in the 1950s.

(ii) A Deed of Mutual Covenant was signed by the owners of the building on 23/2/1963 (the “DMC”).  The deed was registered in the Land Registry by Memorial No. 393195. Clause 1 of the DMC reads:-

“Each of the parties hereto for himself and his executors administrators and assigns hereby grants unto each of the other parties hereto their or his respective executors administrators and assigns full right and privilege to hold and enjoy to the exclusion of the grantors the part of the said building set out in the Second Column of the First Schedule hereto opposite to the respective names of the grantees as set out in the First Column of the said First Schedule TO THE INTENT that each of the parties heretoshall be entitled to the exclusive use occupation and enjoyment of the part of the said building as set out opposite to his name as aforesaid.” (emphasis in italics is added for clarity purpose in this judgment)

(iii) At the time when the DMC was signed, the entire ground floor of the building was a single unit and was allocated 3/61 undivided shares of the building.

(iv) Clause 1 of the DMC read together with the first schedule confers exclusive use, occupation and enjoyment to the owner or owners of the Shopping Arcade of the ground floor to the exclusion of owners of other units of the Yue Yee Mansion.

(v) The owner of the ground floor unit sub-divided the ground floor into 45 undivided shares in 1991.  On 3 December 1991 a Sub-DMC was executed by the owners of the Shopping Arcade.  The Sub-DMC governs the respective rights of the owners of the Shopping Arcade and the management of the Shopping Arcade.  This Sub-DMC was registered with the Land Registry on 10/1/92 by Memorial 5142407.

(vi) Pursuant to this Sub-DMC of the Shopping Arcade, the owners of the Shopping Arcade appointed their own management company. In December 1991 Inter-Association Estate Management Limited was the management company appointed by the owners of the Shopping Arcade to take care of the management and maintenance of the Shopping Arcade.

(vii) D2 was incorporated on 17/12/1992 under the old Multi-Storey Building (Owners Incorporation) Ordinance, an Ordinance which has now been replaced by the current Building Management Ordinance, Cap 344.

(viii) D2 appointed Senmax Property Management Limited since May 1998 for the management of Yue Yee Mansion.  Senmax Property Management Limited remained the management company of the residential floors of Yue Yee Mansion during the time when the plaintiff carried out the maintenance work in question.

(ix) D2 never appointed D1 to manage Yue Yee Mansion.  D2 did not instruct the plaintiff to engage in works for the Shopping Arcade.

(x) D2 also exhibited a copy of the letter from the solicitors acting on behalf of D1 which confirmed D1 only acted on behalf of the owners of the Shopping Arcade in instructing the plaintiff to carry out the works in the Shopping Arcade.  Solicitors of D1 also confirmed they had nothing in their possession which suggested D2 to have instructed D1 to deal with the fire services work for which the plaintiff was engaged to do in the Shopping Arcade.

13. It is not in dispute that D2 has an obligation to manage and maintain the common parts of the Yue Yee Mansion.

14. Section 2 of the Building Management Ordinance Cap 344 excludes parts of a building that have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner.  The DMC showed the Shopping Arcade is within the exclusive use, possession and occupation of the Shopping Arcade owners.  Thus the areas within the exclusive possession of the Shopping Arcade owners are not common parts of the Yue Yee Building, of which D2 has no obligation to maintain. (see Yeung J.A. judgment given in the Court of Appeal in Po Lok Buidling v Leung Koon  CACV-194/2005)

Scope of the plaintiff’s Works 

15. Paragraph 2 of the amended statement of claim deals with the nature of the works.  The general description of the works prayed in this paragraph was “maintenance and upgrading works, including but not limited to supplying and installing scaffolding, working platform, automatic sprinkler system and any protection work for the implementing of the fire service installation works, air conditioning works and other building works of the Arcade pursuant to the Fire Safety (Commercial Premises) Ordinance”.

16. The only other paragraph in this pleading which seeks to throw light on the scope of work done was the newly re-amended paragraph 12.1 which reads:- “…… the air conditioning apparatus and fire-fighting equipment and installations covered by the works formed the common parts of the building to which the 2^nd defendant has a statutory obligation under the Building Management Ordinance Cap 344 to maintain and repair.”

17. What was averred to in paragraph 2 of the statement of claim suggested the maintenance work carried out by the plaintiff were works of the Shopping Arcade.

18. There was no factual averment in the proposed re-amendment to suggest the “air-conditioning apparatus and the fire-fighting equipment and installations” maintained the plaintiff on behalf of D1 serviced the common parts of the building (emphasis added).

19. All that the plaintiff has pleaded is since the “air-conditioning apparatus and the fire-fighting equipment and installations” of the Shopping Arcade formed the common parts of the building, D2 should be held liable for the costs of such work (emphasis added).

20. As to how and why those apparatus, equipment and installations formed the common parts of the building, the plaintiff did not particularize in its pleadings.

21. Counsel on behalf of the plaintiff argues that at the preliminary stage of the proceedings, there is no obligation upon the plaintiff to plead to the particulars to justify their pleaded cause of action.  In other words, the plaintiff is suggesting a simple averment that the “air-conditioning apparatus, fire-fighting equipment and installation” formed the common parts of the building would be sufficient averment to justify their cause of action against D2 for unjust enrichment.

22. According to the plaintiff, to compel it to further provide particulars to justify its contention that the air-condition system and the fire-fighting installations formed the common parts of the building is tantamount to a demand for the supply of evidence, for which D2 has no legal entitlement until the exchange of evidence before trial.

23. This I do not agree.  The general theme that runs through the code of civil practice and procedural is to encourage parties to save costs by giving early disclosure of material facts and material particulars which helps party to crystallize the issues instead of encouraging parties to hide behind the curtain of evidence, in building up unnecessary costs.

24. In any event parties do have an obligation to provide particulars of the essential facts.  When particulars are required to be furnished by law, parties do have an obligation to plead to the same.

25. The need to particularize on the facts to support the plaintiff’s contention that “air-conditioning apparatus, fire-fighting equipment and installation” formed the common parts of the Yee Yue Mansion is just a matter of common sense.  The works had been carried out by the plaintiff at the instruction of D1.  D2 has never been a party to the contract for the maintenance work nor has D2 participated in authorizing or supervising the work.  It is just fairness that D2 ought to be informed in what way the apparatus, equipment and installations formed the common parts of the building, for D2 to form an assessment whether to accept or to defend the plaintiff’s intended cause of action against it.  In the words of Bramwell, L.J. in Philipps v Philipps (1878) 4 QBD 127 at 139 “ What particulars are to be stated must depend on the facts of each case.  But in my opinion it is absolutely essential that the pleading, not to be embarrassing to the defendants, should state those facts which will put  the defendants on their guard and tell them what they have to meet when the case comes on for trial.”  

26. The plaintiff cites Barnes v I.O. of Kwan Yick [2001] 3 HKLRD 855 as an example to show that the columns of a car park which formed the integral parts of the structural framework of a building is considered to be the common parts of the building.  Similarly, so says the plaintiff, the “air-conditioning apparatus and fire-fighting equipment and installations” are also capable of forming the common parts of a building.  The plaintiff’s argument runs on, as this court has not been equipped with the facts concerning the layout of the apparatus, equipment and installation, nor has there been a proper delineation of the common parts of the Yue Yee Mansion, this court is not in a position to come to the view that the plaintiff has no cause of action against D2.

D2’s Liability?

27.  The plaintiff seeks to attribute liability to D2 on the following grounds:-

(a) D1 contracted the plaintiff’s maintenance work as an agent or sub-agent on behalf of D2. D2, being the principal, should bear responsibility for the maintenance costs.

(b) The works that had been carried out at the Shopping Arcade involved the maintenance and upgrading of the air-conditioning apparatus and fire-fighting equipment. The air-conditioning apparatus and the fire-fighting equipment formed the common parts of the building. The plaintiff’s work inevitably conferred a valuable benefit upon the common parts of the Yue Yee Mansion on account of the plaintiff’s works done to the air-conditioning system and the fire-fighting installations of the Shopping Arcade.

(c) D2 having received valuable benefits from the works carried out by the plaintiff ought to shoulder legal responsibility for the costs on account of unjust enrichment.

Agency Averment?

28. The plaintiff’s statement of claims, as it stands, contains only a bare averment of the subsistence of agency between D1 and D2.

29. The plaintiff pleads on a legal conclusion that agency existed between D1 and D2 without particularizing the factual basis which give rise to the agency relationship between D1 and D2. Such cursory pleading would be acceptable if the relationship between D1 and D2 are clear to the parties involved.  However, the same would not be sufficient if the matter has been put in issue where the parties deny the existence of a principal and agency relationship.  From the exchange of correspondence, it was clearly the stance of D1 that D1 did not receive instruction from D2 to contract for the plaintiff’s works.

30. In light of D1’s confirmation through its solicitors that D1 did not receive instruction from D2 to contract the plaintiff’s work, should the plaintiff wish to rely on contractual agency between D1 and D2, the plaintiff’s averment should particularize on the factual circumstances which give rise to a contractual agency. 

31. There is no argument before me by the plaintiff that agency between D1 and D2 arose out of necessity.  However one could not ignore such a proposition should the facts support such a probable conclusion.

32. Should the plaintiff wish to rely on agency by necessity, one would expect some averment of facts to deal with the basis for implying the existence of agency by necessity.  There was no suggestion that notice has been served upon D2 by the authorities to demand repair or upgrading work to be done to the common parts of the building.  There has been no suggestion in the plaintiff’s pleading that the fire safety standard of the common parts of Yue Yee Mansion had fallen below the statutory standard whereby the need to repair arose out of necessity. 

33. The only possible head of agency by necessity that could arise is that the defendant has an obligation to maintain the “air-conditioning apparatus and the fight-fighting equipment and installation” which the plaintiff contends factually formed part of the common area of the Yue Yee Mansion.

34. The single issue which the plaintiff and D2 are in dispute is whether “the air-conditionings apparatus and the fire-fighting equipment and installations” formed the common parts of Yue Yee Mansion to which D2 has an obligation to maintain.  To contend the air-conditioning system and the fire-fighting installation, which served solely the Shopping Arcade, to form the common parts of the whole of the Yue Yee Mansion seems slightly beyond one’s reasonable understanding.  Yet, without more detailed information on the function of the two systems, the location of the actual works carried out by the plaintiff and as to how and why those apparatus, equipment and installations formed the common part of the building, a decision to strike out is pre-mature.

Valuable Benefits & unjust Enrichment to D2?

35. It is the plaintiff’s case that the plaintiff has carried out works maintaining and upgrading the “air-conditioning apparatus and the fire-fighting equipment and installations” of the Shopping Arcade.  As the air-conditioning apparatus and fire-fighting equipment and installation covered by the works formed the common parts of the building, D2 inevitably received valuable benefits from the plaintiff’s work.  Hence D2 has been unjustly enriched and is under an obligation to shoulder the costs of such work.

36. One does bear in mind the fact that there has been no averment that the air-conditioning system or the fire-fighting equipments served the common parts of the building.

37. The argument of unjust enrichment might have been fallacious at the end of the day.  As a simple illustration, if my next-door neighbour engaged a painter for painting work, without my instruction or consent, the painter painted my wall whilst carrying out the painting work for my neighbour.  Should I be held liable for the labour and costs of such painting work?  The answer is plain and obvious.  The remedy one sees proper is the painter’s obligation to re-instate my wall to its original condition.  One cannot possibly engage himself in unsolicited work on the property of another without the instruction of the property owner and proceed to claim for the costs of such work.  If this is allowed, anyone could have gone around doing unsolicited work and claimed for payments for his work on account of  “unjust enrichment”.

38. One doubts whether there can be a possible claim of unjust enrichment here unless a special relationship existed between the plaintiff and D2, such as active encouragement of the works by D2.

39. However on unjust enrichment alone, this court would need to examine more intricate and detailed argument with reference to the special facts of this case to arrive at a final conclusion.  Though this court takes a dim view of the plaintiff’s argument as the pleading now stands, however to proceed to strike out the plaintiff’s intended cause of action solely on account of the weakest of its unjust enrichment argument is not the appropriate yardstick to apply in a striking out application (see Brilliant Star Investment Limited [1989] 1 HKC 375).  

Conclusion and Court Orders

40. The court should always act with caution in granting a draconian order in striking out the plaintiff’s claim unless it was plain and obvious that the plaintiff’s intended claim is unarguable on the facts pleaded in its statement of claim (see the comments of the Chief Judge in Eugene Chuang [2002] 4 HKC 245).  On the other hand, it is the court’s duty to see to it that costs are not unnecessarily thrown away for a plainly unsustainable cause of action.

41. I must say, on the facts averred to by the plaintiff, the sole triable issue against D2 at the moment hinges upon whether the plaintiff is able to demonstrate on the facts of this case that the air-conditioning system and the fire-fighting installation the plaintiff had worked on formed the common parts of the entire building.

42. The fact that the 2 systems did not service the common parts of the building does not seem to favour such an argument.

43. There is nothing on the face of the current pleading to justify a finding of contractual agency between D1 and D2.  Had the plaintiff not sought to amend para. 12.1 to contend that the air-conditioning and fire-fighting system formed the common parts of the building, the plaintiff’s claim for liability on account of agency would have been struck out of its pleading and its cause of action against D2 dismissed.

44. I do grant leave for the plaintiff to re-amend its pleading in accordance with its summons of 25/4/06.

45. Costs order nisi is made in the following manner:-

(i) Costs is awarded in favour of D2 in respect of its striking out application up to the time of the plaintiff’s verbal application made in court for the amendment to paragraph 12.1 of the amended statement of claims.

(ii) The rest of the costs of today in respect of this application to strike out be costs in the cause of the action between the plaintiff and D2.

(iii) Costs of and incidental to the plaintiff’s summons to re-amend its statement of claim be to D2 in any event.

46. I thank counsel on behalf of the plaintiff for his detailed submission. Certificate for counsel is granted in respect of the costs for the striking out application.