K & B HOUSEHOLD CO LTD v. THE INCORPORATED OWNERS OF NOS. 151 - 153 SAI YEE STREET AND ANOTHER

DCCJ 348/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 348 OF 2008

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BETWEEN

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Judgment

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Introduction

1.  No. 151-153 Sai Yee Street is a nine-storey 50 year-old building in Mong Kok. The Plaintiff rented the Ground Floor of No. 153 Sai Yee Street (“the Premises”) for a period of 2 years from 1 May 2006, and operated a household goods store there.

2.  In the morning of Sunday, 11 March 2007, when the Plaintiff’s staff returned to the Premises, they discovered that the floor of the Premises was flooded with foul water and foul water was coming down from the false ceiling which had partially collapsed. Foul water was also coming out from pipes and also from manhole covers on the Premises.

3.  As a result, the Plaintiff’s shop had to close down for at least 5 days, and the Plaintiff’s stock was damaged.

4.  This is the Plaintiff’s claim for damages arising out of such flooding. The Plaintiff says that the Defendant should be held responsible, on the basis that the Defendant had failed to maintain and to keep the communal drainage pipes in good repair. Various causes of action are pleaded, including negligence, breach of the provisions of the DMC, nuisance, non-natural user (Rylands v Fletcher), and breach of statutory duty.

5.  The Defendant says that there was no failure to maintain, and that the flooding was caused by a towel that had apparently been flushed down the communal pipe and was caught at an unauthorised alteration of the communal pipe carrying foul water.

6.  The issues I have to decide would be what was the proximate cause of the flooding, whether that was in turn caused by any negligence, nuisance, breach of DMC or statutory duty. Quantum of damage is also in dispute.

The Plaintiff’s Evidence

7.  The Plaintiff called one witness, Mr. Cheuk Chor Wing. He is a shareholder and director of the Plaintiff.

8.  The Plaintiff rented the Premises for a period of 2 years from 1 May 2006. During the time that they were in occupation of the Premises, the Plaintiff did no major renovations except to change the false ceiling, and had never altered the pipes running through the Premises.

9.  He referred to a drainage plan (“the Plan”) apparently prepared by HKH Project Services Ltd., (“HKH”) surveyors, who produced an expert report for trial. The Plan was based on the original drainage plans submitted to the Buildings Department, and showed 2 shops, of which the one on the right was the Premises.

10.  The Premises originally had 3 manholes, and the first manhole which was referred to in the evidence as “Manhole A” is in the middle of the Premises, in front of a structural column. It is not in dispute that the communal sewage pipe (together with the communal waste water pipe) originally flowed into Manhole A. Manhole A connects to another manhole (referred to in the evidence as “Manhole B”) via a cast iron pipe of 4 inches in diameter (as marked on the plan) which is located just outside what was originally designated as the kitchen. This was an area known as the back yard of the Premises, although it has been covered up. Manhole B was also connected via another 4 inch diameter pipe to another manhole, (referred to in the evidence as “Manhole C”). Manhole C was then connected via another 4 inch diameter connection to the Government Sewer.

11.  From this plan, it is clear that the original design was for sewage water to flow first from the communal sewage pipe down to Manhole A, from which it would go to Manhole B, then Manhole C, and finally to the Government sewers. As to why there was this design with multiple manholes, there was no evidence as the expert of HKH was not called to give oral evidence, there being a prior order that the report was to be adduced without calling the maker.

12.  This original design was altered. There was no evidence from either side as to who made the alteration or when the alteration was made. The alteration was to connect both the waste water pipe and the sewage pipe into one UPVC pipe, which then ran under the floor of the Premises to connect directly to Manhole B, bypassing Manhole A altogether. Manhole A was completely blocked up.

13.  Cheuk’s evidence was that since about September 2006, there had been foul water seeping out from some manholes at the backyard (presumably Manhole B and Manhole C). Even worse, towards November of 2006, it was found that foul water was dripping down from the false ceiling of the Premises, soiling the Plaintiff’s goods.

14.  Despite numerous complaints to the chairman of the Defendants, all that was done was for the Defendants to arrange for a plumber to clear the drains. However, this did not result in any permanent solution, and Cheuk had to keep complaining every 2 weeks. However, as time went by, these complaints were ignored, with the chairman of the Defendants saying that he was only doing the job voluntarily, and there was nothing he could do about it.

15.  Things came to a head on 11 March 2007 when Cheuk received a call from the manager of the shop at the Premises that the shop was flooded, and the ceiling tiles had collapsed. Cheuk immediately went to the Premises.

16.  At the Premises, Cheuk found that part of the false ceiling had collapsed and water was coming down from the false ceiling. Water was also coming out from the seams of the communal pipe which was above Manhole A, and foul water came out of the manholes in the back yard.

17.  Cheuk contacted Yeung, who told him that he was aware of the problem, but nothing could be done that day. The Plaintiff’s employees could only clear up the flooding as best they could, using bin liners and pipes to divert the water away from the ceiling.

18.  By about the 3^rd day of the flooding, the situation had improved somewhat because the Plaintiff’s staff had been diverting the water away from the ceiling for the past few days. However, water continued to flow from the pipe and manholes whenever someone used the pipes upstairs. It was around this time that Cheuk discovered that communal pipes above Manhole A were connected together and diverted away from Manhole A which had been filled in.

19.  On the 10^th day of the flooding, the Plaintiff’s landlord employed a plumbing contractor to deal with the problem from Manhole B and C. After working for the afternoon, they told Cheuk that the problem had been solved, that they had cleared a lot of debris and rubbish from Manholes B and C.

20.  The Plaintiff’s shop was closed from 11 March to 16 March when it partially reopened, with the shutters being opened halfway and customers being served by the Plaintiff’s employees bringing out the goods to the entrance. It only fully reopened at the end of March. However, throughout April, the Plaintiff’s shop was on a clearance sale, selling off old, and water damaged stock at a loss or at best a little over cost.

21.  Even after April, business at the shop did not pick up. The shop had been seriously damaged because of the flooding, and it was uneconomical to do a complete remodelling halfway into the lease. In any event, the flooding was well known in the neighbourhood. The Plaintiff’s shop did not continue operating after the end of the lease.

22.  According to Cheuk, the loss caused by the flooding was as follows :

Cost of repair of damaged ceiling,	$ 28,620.00
Loss of damaged computer	23,000.00
Cost of repair to damaged security system	5,480.00
Damage to stock	33,548.00
Loss of profit in March and April 2007	158,402.10
Loss of goodwill and profits	239,486.23
Total	$488,536.33

which was less than the sum claimed in the Statement of Claim.

23.  Apart from Cheuk, the Plaintiff also relied on an expert report prepared by HKH, who inspected the Premises on 27 September 2007, more than half a year after the flooding. HKH’s opinion was that the flooding took place when the vertical waste water and/or soil water pipes overflowed from the lowest part outlets of the pipe system. As to the reason why there was this overflow, HKH does not offer a concrete opinion, simply pointing out deficiencies in the altered drainage system such as possible corrosion within cast iron pipes, without giving any opinion as to the more likely cause.

The Defence Evidence

24.  The Defendants called 2 witnesses. The first was the Defendant’s chairman at the material time, Mr. Ieong Chi Wai.

25.  He described the rear yard at the Premises as actually being part of the common area of the building, although access to the rear yard had to be through the Premises. There was one communal sewage pipe which was to flow into Manhole A.

26.  On Ieong’s evidence, he expressed the view that even though the manholes were common parts, the Defendant could not simply go to inspect or view them in the absence of complaint from owners or tenants, or having been required to do so by the Government, the Defendants could not simply go and inspect or view the Manholes.

27.  The complaints received by the Defendant in respect of the sewage pipes or manholes were mostly of blockage. Upon receipt of a complaint, Ieong would, on behalf of the Defendant, instruct Tong Kee Hardware & Sanitary Fittngs (“棠記五金潔具”) (“Tong Kee”) to inspect and deal with the complaints.

28.  According to Ieong, after the Plaintiff rented the Premises, the Defendants had received 2 complaints in August and November of 2006. After receiving the complaint in August, Tong Kee had been instructed to deal with the problem and had cleared debris from Manhole C.

29.  After the complaint in November, Tong Kee had again cleared debris from Manhole C, but had also suggested that another pipe be laid to connect Manhole C to the Government sewers, which was done in February 2007.

30.  On 11 March 2007, when he was on his way to work, Ieong noticed that there was a large amount of water flowing out from the unit at the 1^st floor of 153 Sai Yee Steet. He notified the owner, Mr. Ng and left for work. Around 8-9am, he was told by Mr. Ng that there was sewage flowing back out of the toilet. Ieong then instructed Tong Kee to deal with the matter.

31.  Later in the afternoon, he was told by Wong Yiu Man (“Wong”) of Tong Kee that they had found there was a blockage at the sewage pipe, but they were unable to clear it on the same day. They had gone to the Premises to check Manhole C, but had not discovered any problem there. They then discovered that Manhole A had been blocked, and that the 2 pipes which were to flow into Manhole A had been diverted by means of a “V” connecter through another pipe and then directly to Manhole C.

32.  He was further informed the next day that Tong Kee had cut open the communal sewage pipe at the first floor, and had cleared the blockage from that hole, and that Wong had recovered a towel at Manhole C which was believed to be the cause of the blockage.

33.  There was no system of regular maintenance for the pipes in the building, but action was taken when incidents happened.

34.  In cross-examination, he said that the pipes in the building had been changed twice, first in around 1995-1996 at the request of a government authority because the property was old. The second time was around 2004-2005, again at the request of a government authority because there appeared to be vegetation growing out from certain exposed pipes.

35.  In the course of the works in 2005-2006, All the visible pipes were replaced. However, all the pipes which were not visible, which (included the sewage pipe) the Defendant could not deal with them. Various reasons were given, including that they were in private premises, that there were too many unauthorized building works, that they were all blocked up in brick walls etc.

36.  The replacement of pipes in 2004-2005 was undertaken by Tong Kee. He had been informed by Wong after the work that they had examined the underground pipes, but was not told how this examination was carried out.

37.  When asked why he did not get an authorized person to deal with the maintenance works, he said that the Defendant did not really know the procedure, that they just got a plumber to do it, and the invitations to tender were given to those known to owners of the units in the building.

38.  The Defendants’ 2^nd witness was Wong. His witness statement, which he adopted as evidence-in-chief, was generally in line with that of Ieong. His witness statement described further how he and another colleague went to the 1^st floor of No. 153 Sai Yee Street upon receiving instructions from Ieong, and tried to clear the blockage from that unit but was unsuccessful. He then went to the premises, where he inspected Manhole C, but did not find any problem. He then discovered that Manhole A had been blocked up, and that the pipes which should have led to Manhole A were connected directly to Manhole C.

39.  The next day, he and a colleague cut a hole at the sewage pipe in the unit on 1^st Floor of 153 Sai Yee Street and were able to clear the drain from that hole. He subsequently discovered a towel at Manhole C, which he believed to be the cause of the blockage and subsequent flooding.

40.  In his oral testimony, he clarified that he did not see the V-shaped connector on the first day of the flooding but only some days afterwards when it was opened up.

41.  He came to the conclusion that the v-shaped connecter led to a pipe directly connected to Manhole C (instead of going to Manhole B) because that was where he found a towel. In fact, he had not inspected Manhole B, nor had he ascertained as a matter of fact where the pipes from the v-shaped connecter led.

42.  In cross-examination, he disclosed that he had not studied plumbing, but learnt the trade from his father. He was not a licensed plumber. He had difficulty understanding the drainage plan.

43.  He agreed that over time, the internal bore of cast-iron pipes would be narrowed because of corrosion, which was the reason why he suggested to put in a new pipe from Manhole C out to the Government Sewers.

44.  In the end, it seemed that the pipe that he connected was at a much shallower depth than the original pipe which led from Manhole C to the Government sewers. No application had been made to the Drainage Services Department for such connection. I have doubts whether such pipe is properly connected or not. That is not a question that I have to decide, but I mention this so that the Defendant may, if it sees fit, conduct proper investigation and remedial works, if necessary.

Assessment of the Evidence

45.  There are certain areas where the evidence on behalf of the Plaintiff and that of the Defendant differs : whether there were constant complaints from the Plaintiff to the Defendant about blockage of pipes; whether the pipe from the v-shaped joint was directly connected to Manhole B or Manhole C; whether water was spurting from the pipes at the Premises on the first day of the flooding; whether there in fact was a towel at Manhole C and whether the blockage had been cleared on the 2^nd day of flooding after drain clearing by Wong.

46.  The burden of proof on all issues is on the Plaintiff, to the ordinary civil standard. Having considered the evidence and witnesses, I would generally prefer the evidence of Cheuk where it conflicts with that of Ieong or Wong. There was an unexplained amendment of both witness statements in relation to whether the towel was found at Manhole B or Manhole C. Whilst this was not objected to, no explanation was proffered. Presumably, the plans would have been available, and no reason was given as to why such an error was made. Further, the evidence in the witness statement that Wong on 11 March 2007 discovered Manhole A had been blocked up is simply not consistent with his evidence that the floor tiles around Manhole A were not removed until some 3 days later.

47.  Cheuk was obviously very frustrated at the continued leakage of water into the Premises and I find his evidence that he had continually complained about blockage only to be met with the response from Ieong that he wasn’t paid to manage the building to be convincing and having the ring of truth. That he did not take the matter of water leakage further (prior to 11 March 2007) is understandable when considering that he was merely the tenant of the Premises on a 2-year lease. It is in no way incredible that long as the water leakage onto the Premises was tolerable,

48.  As to whether the v-joint was connected to Manhole B or Manhole C, the HKH report is unchallenged in that there is no contradictory expert report from the Defence. Wong’s view that the pipes were directly connected to Manhole C was based on the alleged fact that the towel was found at Manhole C. I find that the v-shaped connector pipe was not directly connected to Manhole C but to Manhole B.

49.  As to whether water was spurting from the upright communal pipes on the first day of flooding, I do not accept Cheuk’s version. This version first appeared in the oral testimony of Cheuk. This undoubtedly detracts somewhat from his general credibility, but bearing in mind that the standard of proof is on the balance of probabilities, I would still generally prefer Cheuk’s version on other matters in dispute over Ieong’s or Wong’s.

50.  As to whether there was a towel found at Manhole C by Wong on the 2^nd day of the flooding, I find that this has not been proved on the balance of probability. Quite apart from the unexplained amendment to the witness statement as set out above, a waterlogged towel would sink to the bottom of the manhole, instead of floating around at the top as alleged by Wong. Further, if the blockage had been cleared by pushing through the towel, there would really have been no reason why the Plaintiff or its landlord employed contractors to resolve the situation, obtaining the original drainage plans and finally on the 10^th day of flooding clearing debris at Manhole B and C.

Liability

51.  Although non-natural user of land (Rylands v Fletcher liability) was pleaded, it was not pursued at trial and accordingly falls away.

52.  As to nuisance, this is generally defined[1] as “an act or omission which is an interference with, disturbance of or annoyance to, a person in the exercise or enjoyment of (a) a right belonging to him as a member of the public, when it is a public nuisance, or (b) his ownership or occupation of land or of some easement, profit, or other right used or enjoyed in connection with land, when it is a private nuisance”

53.  Although the case of Leung Tsang Hung & Anor. v. The Incorporated Owners of Kwok Wing House [2] was cited, this was a case of public nuisance, and the principles enunciated therein are not particularly helpful to the present case which is one of private nuisance.

54.  Nevertheless, the law as it applies to the present case is not in serious dispute, whether the cause of action under negligence, nuisance or breach of the DMC/Building Management Ordinance is relied on. Without going into a detailed analysis of the elements of each cause of action, the Plaintiff would succeed if it shows that the Defendant had failed to properly maintain the communal pipes, and that such failure of maintenance caused the flooding on 11 March 2007, and such flooding caused loss and damage to the Plaintiff.

55.  On the question of loss and damage, there is little need at the stage of liability for any analysis. Damage has obviously accrued to the Plaintiff.

56.  The main questions would be what caused the flooding and whether this could have been prevented by proper maintenance.

57.  As to the proximate cause of the flooding, I am hampered by the lack of expert evidence. I am also hampered by the lack of any direct evidence from the contractors which were employed by the Plaintiff and its landlord. The report from HKH is, unfortunately, not very helpful on this issue.

58.  However, I am satisfied on the balance of probabilities that the flooding was caused by the accumulation of debris in Manhole B and C, which was sufficiently cleared up by the contractors on the 10^th day following the flooding. This effectively cleared the blockage and enabled the Plaintiff’s shop to reopen, whereas whatever action taken by Tong Kee had failed to do so.

59.  That leaves the question whether such accumulation of debris was the result of a failure of proper maintenance by the Defendants. Ms. Queenie Ng for the Defendants stresses that s. 18(1)(a) of the BMO does not provide insurance for the building, that there are no ‘absolute or strict duties’, citing Lau Chun Wing Rod v. The Incorporated Owners of Po On Building CACV 20 of 2007; Lo Yuk Chu v. Hang Yik Properties Management Ltd [1996] 4 HKC 278; Man Chung Lam v. Citybase Property Management Ltd. CACV 248 of 2005, 李明月訴秀企業有限公司及美孚新邨第七期業主立案法團LDMB 452/2007. I accept this summary of the principle, and indeed, this is not challenged by Mr. Wu for the Plaintiff.

60.  However, I find that the Defendants have failed to properly maintain the communal pipes. Indeed, there has simply been no system of maintenance at all, but a history of dealing with problems as and when they arise, instead of proactively instituting a system of maintenance to prevent problems occurring. This was clear from Ieong’s evidence.

61.  What is worse, when the pipes needed to be replaced, whether in 1995-1996 or 2005-2006, the sewage and waste water pipes were not replaced. The building is an admittedly old one, and if pipes had needed replacing as long ago as 1995, it was a dereliction of the Defendants’ duty to not replace all the common pipes in the building.

62.  The appointment of Tong Kee to replace the pipes in 2005-2006 is also failure of proper management. On Wong’s own admission, neither he nor anyone in Tong Kee was a licensed plumber, yet they undertook substantial works to replace the building’s pipes. Although Wong may be very experienced, I am afraid that his experience was insufficient to handle large scale works. This is demonstrated by his response to counsel’s question whether he had attached the new pipe from Manhole C to the wrong Government pipe ‘if there’s a problem, there would be a blockage. If there’s a problem with drains, it would be blocked, otherwise, there’s no problem.’ (“如果有問題啲渠就會塞。坑渠有問題就塞，其他就冇問題格啦。” ). Further, when asked why he did not recommend that under floor pipes should be replaced, his answer was that he was not asked to do so. This shows that Wong, whilst probably very competent for everyday household tasks, simply did not have the knowledge to properly advise the Defendants on maintenance of the building’s drains.

63.  Had the pipes and the manholes been properly maintained, the debris accumulated in Manholes B and C would have been discovered and cleared before any problem arose. The cast iron pipes should also have been changed to UPVC pipes, which would have reduced the likelihood of corrosion and reduction of the internal diameter.

64.  While I have considerable sympathy for the Defendants and particularly Ieong who was simply doing the best he could for no fee, this case highlights the importance of professional management, particularly for older buildings in Hong Kong.

65.  In the circumstances, I find that the Plaintiff succeeds on liability.

Quantum

66.  Of the quantum of damage, the Defendant agrees the cost of repair to the ceiling, cost of repair to the security system, damage to stock, loss of profit from March and April 2007, as well as part of the loss due to a damaged computer. What is in contention is the cost of a 1 year software maintenance fee, in the sum of $2,000, and the claim for loss of goodwill/gross profit from May 2007 to April 2008 when the lease ended.

67.  The software maintenance fee was something new which the Plaintiff had not subscribed to before. Cheuk explained that he subscribed to this plan because of worries that further flooding might occur, causing further damage to the Plaintiff’s computer system.

68.  Given that the Plaintiff had still more than one year to run on the lease and the history of clogged drains, it is understandable for the Plaintiff to incur this sum, which he would not have incurred had there not been the flooding on 11 March 2007.

69.  However, the question is whether or not the damage was foreseeable or whether it was too remote. The software maintenance fee was not a direct consequence of the flooding. It is not a type of damage which would normally be associated with, or foreseen to be a consequence of flooding. I find that the software maintenance fee was too remote.

70.  As to the loss of profit/goodwill from May 2007 to April 2008, issue is taken because of a response by Cheuk in cross-examination when he partly agreed that the decrease in gross profit from May 2007 onwards could be caused by a natural loss of customers, and when he also agreed that the loss of business from May 2007 onwards was not because of the water leakage.

71.  However, in re-examination, Cheuk had clarified that by May 2007, the water leakage had ceased, and that was the reason why he agreed with Ms. Ng that the loss of business from May 2007 onwards was not caused by the water leakage. Further, his agreement to the suggestion that the decrease in business since May 2007 could be because of a natural loss of customers, must be taken in the context of the whole of his testimony, particularly that in his answer to the question immediately following, he had pointed out that during that time, other shops which the Plaintiff operated showed growth.

72.  Ms. Ng also points out in her final submissions that there was a general increase in the costs of goods sold from May 2007 onwards, which may have caused the decrease in gross profits. However, I accept Mr. Cheuk when he says that ‘VIP’ customers had often told the Plaintiff’s staff that they preferred to go to the Plaintiff’s other shops because of the condition of the shop in the Premises.

73.  The standard of proof is on the balance of probabilities. Having considered the income statement produced by the Plaintiff and particularly comparing the figures before and after the flooding, I am satisfied that the Plaintiff has discharged its burden of proof on this issue to the required standard.

74.  In the circumstances, I am of the opinion that the loss caused to the Plaintiff is in the sum of $486,536.33 (the sum of $488,536.33 claimed in Cheuk’s witness statement less $2,000 software maintenance fee).

Conclusion

75.  The Plaintiff is successful in its claim against the Defendant. I order that judgment be entered in favour of the Plaintiff against the Defendant for the sum of $486,536.33 with interest at the rate of 1 % above the best lending rate as from time to time quoted by the Hongkong and Shanghai Bank from the date of the writ to the date hereof, and thereafter at judgment rate until payment;

76.  I also make an order nisi that the Plaintiff’s costs of this action to be paid by the Defendant, to be taxed if not agreed, with certificate for counsel.