CHIU HUNG SHUN, PAUL AND ANOTHER v. SO KA TAI AND ANOTHER

CACV136/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 136 OF 2005

(ON APPEAL FROM DCCJ NO. 5242 OF 2004)

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REASONS FOR JUDGMENT

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Hon Ma CJHC :

1. The present appeal was concerned with a dispute between neighbours over the leakage of water from the Defendants’ premises into the Plaintiffs’.  Liability was basically admitted but it was the consequential orders made by Judge Wesley Wong in the District Court that formed the subject matter of the appeal.  After hearing submissions from counsel (Mr K M Chong and Mr William Leung (Mr Shuni Yoneya) for the Plaintiffs, and Mr Joeson Wong for the Defendants), we allowed the appeal in part (on which I shall elaborate further below), stating that the Reasons for Judgment would be handed down in due course.

The facts

2. As mentioned above, the Plaintiffs and the Defendants are neighbours in a building in Shatin, the Plaintiffs owning and occupying a flat on the 9th floor, the Defendants owning and occupying the flat immediately above.  It would appear that since about February 2004, there had been seepage of water from the Defendants’ flat into the Plaintiffs’ flat.  Whatever repair work that had been carried out by the Defendants obviously did not satisfy the Plaintiffs.  Following a letter dated 7 May 2004 from the Plaintiffs complaining about the leakage and offering to settle on various terms, a letter in reply dated 10 July 2004 which denied any responsibility and various other correspondence between the parties’ respective solicitors, a writ was issued on 6 October 2004 in the District Court.

3. Reliance was placed in the Statement of Claim (which was endorsed on the writ) on the following terms of the Deed of Mutual Covenant that governed the relations between the Plaintiffs, the Defendants and other owners of the building in which they lived : -

“	(a)	That each owner would indemnify other owners and occupiers against any actions, proceedings, claims and demands whatsoever in respect of any loss or damage to any person or property caused by or as a result of negligence of such owner or his occupier through or in any way owing to the overflow of water (Section V, Part A, Clause 6).
	(b)	That each owner would maintain his own unit in good repair and condition and in such manner so as to avoid any loss, damage, nuisance of annoyance to other owners (Section V, Part A, Clause 11).
	(c)	That no owner would suffer or permit to be done anything whereby the flushing or drainage of any part of the building to be clogged or the efficient working thereof may be impaired (Section V, Part A, Clause 12).
	(d)	That no owner would cause or permit or suffer to be done any act or thing which may be or become a nuisance or annoyance to or cause damage to other owners and occupiers for the time being (Section V, Part A, Clause 15).”

4. The following relief was claimed in the Statement of Claim : -

“	(1)	A Permanent Injunction to restrain the 1st and 2nd Defendants or any of them from doing the following acts or any of them that is to say, causing, permitting, allowing or suffering water to be leaked, seeped and discharged from the Defendants’ premises into the Plaintiffs’ premises.
	(2)	Damages for breach of covenant and/or negligence and/or nuisance.
	(3)	Interest.
	(4)	Costs.
	(5)	Further or other relief as is just.”

5. The Defendants denied liability in their Defence dated 5 November 2004.  However, in an open letter dated 24 February 2005 from the Defendants’ solicitors to the Plaintiffs’ solicitors, the Defendants’ erstwhile position changed : -

(1)	The Defendants now admitted liability in the action but wanted the question of damages to be assessed.
(2)	An offer of $40,000 was made in full and final settlement of all claims.
(3)	For the purpose of the assessment of damages and the carrying out of rectification works, the Defendants proposed the joint appointment of a firm of surveyors whose findings, opinion and certification would be final and conclusive.

A draft consent order was enclosed with this letter.

6. By a letter in reply dated 14 March 2005, the Plaintiffs’ solicitors made effectively a counter-offer which stipulated the terms of any judgment to include both a mandatory injunction to remedy the water leakage as well as a permanent injunction in the terms sought in the Prayer to the Statement of Claim.  As to costs, the offer was that the Defendants pay the Plaintiffs’ costs on a party and party basis, such costs to be taxed if not agreed.

The hearing below

7. No agreement being reached, both parties took out summonses before the Court.  First in time was the Plaintiffs’ summons dated 23 March 2005 seeking the following orders : -

“	1.	Judgment be entered for the 1st and 2nd Plaintiffs against the 1st and 2nd Defendants for damages to be assessed upon admission of liability by the 1st and 2nd Defendants for breach of Deed of Mutual Covenant and/or negligence and/or nuisance;
	2.	a Permanent Injunction be granted to the 1st and 2nd Plaintiffs to restrain the 1st and 2nd Defendants or any of them, their servants, agents or otherwise from causing, permitting, allowing or suffering water to be leaked, seeped and discharged from the Defendants’ premises into the Plaintiffs’ premises which shall not be taken effect until 28 days from the date of the order to be made;
	3.	Interest;
	4.	The 1st and 2nd Defendants do pay the 1st and 2nd Plaintiffs the costs of this action; and
	5.	Liberty to apply.”

8. The Defendants’ summons dated 29 March 2005 sought the following relief : -

“	1.	Judgment on liability be entered for the 1st and 2nd Plaintiffs against the 1st and 2nd Defendants.
	2.	Assessment of damages be adjourned sine die with liberty to restore.
	3.	The costs of judgment on liability against the 1st and 2nd Defendants be to the 1st and 2nd Plaintiffs, such costs to be taxed if not agreed.
	4.	The parties hereto do forthwith at the Defendants’ costs jointly appoint Samson Wong & Associates Property Consultancy Limited (“the Jointly Appointed Surveyor”) : -
		i)	to carry out inspection on the 1st & 2nd Defendants’ premises situated at Flat G, 10th Floor, Tower 3, Bayshore Towers, No.608 Sai Sha Road, Shatin, New Territories (“the Defendants’ Premises”) to make findings on the possible source(s) of water leakage (if any) and advise on the precaution/rectification works to be done at the Defendants’ Premises and in this regard the findings and advice of the Jointly Appointed Surveyor shall be final and conclusive among all the parties to these proceedings; and
		ii)	to carry out inspection on the 1st & 2nd Plaintiffs’ premises situated at Flat G, 9th Floor, Tower 3, Bayshore Towers, No.608 Sai Sha Road, Shatin, New Territories (“the Plaintiffs’ Premises”), including taking photographs, audio and video recordings and written notes, and to make findings as to the parts of the Plaintiffs’ Premises and the fixture and fitting at the Plaintiffs’ Premises which are damaged by the water leakage from the Defendants’ Premises and in this regard the findings of the Jointly Appointed Surveyor shall be final and conclusive among all the parties to these proceedings.
	5.	The 1st & 2nd Defendants do, within 42 days (or thereafter any further period of time as agreed by the parties or, upon application to the Jointly Appointed Surveyor by any party to these proceedings, approved by the Jointly Appointed Surveyor) from the day when they receive the findings and advice given by the Jointly Appointed Surveyor under sub-paragraph 4 i) above, carry out at their own costs and expenses such precaution/rectification works at the Defendants’ Premises pursuant to the advice given by the Jointly Appointed Surveyor under sub-paragraph 4 i) above.
	6.	Upon compliance with paragraph 5 above by the 1st & 2nd Defendants, the parties shall forthwith instruct the Jointly Appointed Surveyor at the Defendants’ costs to carry out further tests (if necessary) to certify and/or approve that the 1st & 2nd Defendants have duly completed the precaution/rectification works pursuant to the advice given by the Jointly Appointed Surveyor under sub-paragraph 4 i) above and in this regard, the certification and approval by the Jointly Appointed Surveyor shall be final and conclusive among all the parties to these proceedings.  For avoidance of doubt, if any party to these proceedings refuses to instruct the Jointly Appointed Surveyor as aforesaid, the other parties to these proceedings, either individually or collectively, may instruct the Jointly Appointed Surveyor in the same manner and in such circumstances, the certification and approval by the Jointly Appointed Surveyor shall be final and conclusive among all the parties to these proceedings.
	7.	The costs of and incidental to this application be to the 1st and 2nd Defendants, such costs to be taxed if not agreed.
	8.	Liberty to apply in respect of paragraphs 2, 4, 5 and 6 above.
	9.	The Inter Partes Summons dated 23rd March 2005 taken out by the 1st and 2nd Plaintiffs be dismissed with costs to the 1st and 2nd Defendants.”

9. Both summonses were heard by Judge Wong on 1 April 2005.  The following orders were made by him : -

“	IT IS BY CONSENT ORDERED that judgment on liability be entered for the 1st and 2nd Plaintiffs against the 1st and 2nd Defendants for damages to be assessed.
	AND IT IS ORDERED that : -
	1.	The costs of judgment on liability against the 1st and 2nd Defendants be to the 1st and 2nd Plaintiffs, such costs to be taxed if not agreed;
	2.	The 1st and 2nd Plaintiffs’ Inter Partes Summons dated the 23rd day of March 2005 be dismissed with costs to the 1st and 2nd Defendants with Certificate for Counsel;
	3.	The 1st and 2nd Defendants do within 42 days from the date hereof rectify the water leakage of the 1st & 2nd Defendants’ premises situated at Flat G, 10th Floor, Tower 3, Bayshore Towers, No.608 Sai Sha Road, Shatin, New Territories;
	4.	The 1st and 2nd Plaintiffs do undertake to give access to the 1st and 2nd Defendants’ Surveyor to the Plaintiffs’ Premises situated at Flat G, 9th Floor, Tower 3, Bayshore Towers, No.608 Sai Sha Road, Shatin, New Territories to inspect the water leakage;
	5.	The costs of and incidental to this application be to the 1st and 2nd Defendants with Certificate for Counsel, such costs to be taxed if not agreed; and
	6.	Leave be granted to the 1st and 2nd Plaintiffs to appeal against this Order.”

The appeal

10. It is from this order that the Plaintiffs appealed.  In the Notice of Appeal dated 15 April 2005, the Plaintiffs sought that the following orders be substituted for the orders made by the Judge : -

“	FOR AN ORDER THAT the order of the learned District Judge be set aside AND for the following Orders that : -
	(1)	In respect of the 1st and 2nd Appellants’ inter partes Summons of 23.3.05 : -
		(a)	that interlocutory judgment be entered against the 1st and 2nd Respondents under Order 27 rule 3 of the Rules of the District Court for damages to be assessed by a Registrar of the District Court in Chambers;
		(b)	that the 1st and 2nd Respondents whether by their servants or agents, or otherwise howsoever, be restrained from causing, permitting, allowing or suffering water to be leaked, seeped or discharged from the 1st and 2nd Respondents’ premises into the 1st and 2nd Appellants’ premises which shall take effect after the lapse of 28 days from the date of the order to be made; and/or
		(c)	that the 1st and 2nd Respondents doth, within 42 days hereof, carry out all necessary remedial work and to purge all leakage, seepage and discharge of water from the 1st and 2nd Respondents’ premises into the 1st and 2nd Appellants’ premises;
		(d)	that the 1st and 2nd Respondents do pay the 1st and 2nd Appellants’ costs of the action inclusive of the costs of their inter partes Summons of 23.3.05 such costs to be taxed if not agreed with Certificate for Counsel.
	(2)	In respect of the 1st and 2nd Respondents’ inter partes Summons of 29.3.05 :-
		(a)	Paragraphs 1 - 3 of their inter partes Summons taken out pursuant to Order 27 rule 3 of the Rules of the District Court be dismissed.
		(b)	Paragraphs 4 – 6 of their inter partes Summons taken out pursuant to Order 29 rules 2 and 3 of the District Court Rules be dismissed.
		(c)	Paragraphs 7 – 9 of their inter partes Summons be dismissed.
	(3)	In respect of the order imposing an undertaking upon the 1st and 2nd Appellants to permit and allow the 1st and 2nd Respondents to enter into their premises, the same be set aside.
	And that the 1st and 2nd Respondents pay to the 1st and 2nd Appellants their costs below and of this appeal to be taxed.”

11. Before us, Mr Chong focused on four points in appealing the order below : -

(1)	Judgment should have been granted on the Plaintiffs’ summons instead of on the Defendants’ summons.  The Judge was wrong to have dismissed the Plaintiffs’ summons.
(2)	The Plaintiffs were entitled to a permanent injunction on the terms as contained in the Notice of Appeal.  This, it was said, would merely be an enforcement of the negative covenant contained in the Deed of Mutual Covenant (see paragraph 3 above) and the Defendants’ conduct hitherto justified this order as well.
(3)	The Judge below should not have imposed an undertaking on the Plaintiffs which would, it was said, give unrestricted and uncontrolled access to their premises for an indefinite period.
(4)	The Judge should have awarded costs against the Defendants on an indemnity basis, this reflecting the contract between the parties contained in Section V Part A Clause 6 of the Deed of Mutual Covenant (see paragraph 3 above).

12. I now deal with these points in turn.

Should the Plaintiffs’ summons have been dismissed?

13. In my judgment, the Plaintiffs’ summons should not have been dismissed by the Judge.  The Plaintiffs had sought judgment on liability based on the admission contained in the said letter dated 24 February 2005.  Their application for judgment was made under RDC O.27 r.3 and this was clearly justified.  On the other hand, the application for judgment contained in the Defendants’ summons (see paragraph 8 above), also made under RDC O.27 r.3, was misconceived.

14. RDC O.27 r.3 (which mirrors RHC O.27 r.3) states as follows : -

“	Judgment on admissions (O. 27, r. 3)
	(1)	Where admissions of fact or of part of a case are made by a party to a cause or matter either by his pleadings or otherwise, any other party to the cause or matter may apply to the Court for such judgment or order as upon those admissions he may be entitled to, without waiting for the determination of any other question between the parties, and the Court may give such judgment, or make such order, on the application as it thinks just.
	(2)	An application for an order under this rule may be made by summons.”  (Emphasis added)

It is clear from the italicized words “any other party” that only parties other than the party against whom judgment is sought, can apply for judgment on admissions.  The Judge was therefore in error in allowing the Defendants to apply for judgment under RDC O.27 r.3.

Permanent Injunction

15. Here, Mr Chong relied on the well-known obiter dicta of Lord Cairns LC in Richard Wheeler Doherty v James Clagston Allman and W.C. Dowden (1878) 3 App Cas 709 HL, at 719-720 where it was said : -

“

My Lords, if there had been a negative covenant, I apprehend, according to well-settled practice, a Court of Equity would have had no discretion to exercise.  If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties.  It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury – it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves.  But, my Lords, if there be not a negative covenant but only an affirmative covenant, it appears to me that the case admits of a very different construction.”

16. Some of the relevant covenants being negative ones (see paragraph 3 above), it is then submitted that a permanent injunction should therefore have been granted by the Judge.  In my view, the Judge was right to have refused to grant the Plaintiffs such an injunction : -

(1)	Injunctions are an equitable remedy and as such therefore subject to equitable principles.  They are to be granted only where necessary, appropriate and just.  For example, where damages provide an adequate remedy, an injunction will not generally be granted.  Where one is to be granted, the same principles also dictate that an injunction should not be made any wider than necessary; otherwise, for example, the party subject to the injunction may find himself in contempt of court (for this is in many ways the prime remedy for a breach) of an order that goes beyond what the party benefiting from the injunction could realistically have expected or have been entitled in the first place.
(2)	In the present case, the Plaintiffs’ complaint was that of a leakage from the Defendants’ premises.  The obvious remedy, in the absence of any special circumstances, was simply a mandatory injunction to effect due repairs, no more.  This was precisely what the Judge ordered.
(3)	I have already mentioned the aspect of a contempt of court.  If a permanent injunction were to be granted as the Plaintiffs wish, the Defendants might find themselves facing contempt proceedings even when they had repaired the leakage, should another leakage occur in the future.  Mr Chong submitted that if another leak did occur in the future, the Plaintiffs could only succeed on a motion for contempt if they proved a contempt beyond reasonable doubt.  This was the protection, he submitted, to prevent an innocent breach from being treated as a contempt.  I regret I cannot agree with this submission.  The relative ease or difficulty of securing a finding of contempt is not really to the point : a party should not be subjected unnecessarily to an order with penal consequences.
(4)	Mr Chong then submitted that the Defendants’ conduct justified the imposition of a permanent injunction.  He referred to the persistence of leakage.  He also submitted that even though the leakage in the present case had been rectified (and for this purpose we allowed new evidence to be adduced on appeal to show this), this was not a bar to a permanent injunction.  In making this submission, he relied on The Attorney-General v Birmingham, Tame, and Rea District Drainage Board [1912] AC 788 where, in relation to the discharge of effluent into a river, a permanent injunction was granted even though repairs had been effected.  I do not doubt that a permanent injunction can be granted in such circumstances but in my view, such an injunction is only justified where (as in the Birmingham, Tame, and Rea District Drainage Board case) the risk of a breach remained even despite the repairs or the party in breach has somehow shown by his conduct that unless restrained, he would continue with the breach.  A continuous breach, for example, would merit a permanent injunction being granted : - see for example The Attorney General v The Council of the Borough of Birmingham (1858) 4 K & J 528.  No such risk exists in the present case and there was no evidence before us to justify any finding that the Defendants intended to continue to breach the covenants in the Deed of Mutual Covenant.
(5)	Lastly, in relation to the Doherty v Allman point, apart from that part of Lord Cairns LC’s speech being obiter dicta, I doubt whether the rigidity of what appears to have been said in the relevant passage quite represents the modern law.  In Incorporated Owners of South Seas Centre, Mody Road v Great Treasure Development Ltd [1994] 1 HKC 197, Godfrey JA said this at 202, albeit in relation to interlocutory injunctions : -
	“	The dictum of Lord Cairns in Doherty v Allman has frequently been quoted and cited with approval.  But never, so far as we are aware, so as to exclude altogether the general discretionary considerations which always fall to be considered when the question for the court to decide is whether or not to grant an interlocutory injunction in the circumstances of the particular case.”
	It is, however, unnecessary to resolve this point finally in this appeal or to state the limits because in my view, when properly analyzed, the nature of the relevant covenants in the present case was positive rather than negative.  Although, as can be seen, some of the covenants are framed in negative terms, yet in the context of water leakage or seepage, the obligations on the Defendants is surely a positive one to keep his premises and pipes in sufficient repair so as not to allow water to leak.

The undertaking

17. This point can be shortly disposed of.  Such an undertaking or order was obviously necessary so as to ensure that the mandatory injunction regarding the repair of the leakage by the Defendants could be effectively carried out by an inspection of the Plaintiffs’ premises.  The submission that somehow access would be unrestricted, uncontrolled or for an indefinite period, was far fetched : such a right to access could only be for the purposes of effecting the repairs to stop the leakage and insofar as any conditions were necessary to ensure that the Plaintiffs were not unduly disturbed or inconvenienced, suitable conditions could have been suggested to the Judge or use made of the liberty to apply implicit in the Judge’s order.

Costs

18. Mr Chong referred us to Gomba Holdings (UK) Ltd and Others v Minories Finance Ltd and Others (No.2) [1993] Ch 171 where at 194, Scott LJ (now Lord Scott of Foscote) said : -

“Where there is a contractual rights to the costs, the discretion should ordinarily be exercised so as to reflect that contractual right.”

This reflects the law and practice in Hong Kong but it is important to remember that a residual discretion nevertheless rests with the Court regarding costs.

19. In the present case, there were (as will presently be seen) good grounds not to give the whole of the costs of the action to the Plaintiffs in the first place.  Coupled with the fact that an order for costs on the indemnity basis was not sought in correspondence (see paragraph 6 above), the pleadings or even in the Notice of Appeal, the belated attempt by the Plaintiffs to claim costs on this basis could not be permitted and accordingly leave to amend the Notice of Appeal was refused.

The order in this appeal

20. Mr Wong submitted that the appeal was somehow academic since repairs had already been effected.  In my view, the appeal was clearly not academic since there were other matters (principally the issue regarding the dismissal of the Plaintiffs’ summons and the question of costs) that still had to be resolved on appeal.

21. Even though many of the Plaintiffs’ arguments on appeal have had to be rejected, they nevertheless had to come to the Court of Appeal to seek a reversal of the order below dismissing their summons with costs.  In my judgment, the Judge was wrong to have made this order.  I have already earlier dealt with why the Defendants’ summons, in seeking judgment against themselves by admission, was misconceived.  So was the seeking of an order that a surveyor be appointed whose findings, opinion and certification would be final and conclusive.  This was not an order to which the Defendants were entitled.  Apart from anything else, the Court would be extremely hesitant to allow a third party to determine, instead of the Court, whether an order of the Court had been complied with.  Indeed, I cannot conceive of any situation in which such an order would be made unless the parties agreed by consent to do so (in the form usually of a Tomlin order).

22. As for the costs of the action and of the hearing before the Judge, the Plaintiffs again had to go to Court in order to get an order ensuring not only that judgment was entered in their favour but also that repairs would be duly carried out.  Although this had been suggested by the Defendants in correspondence, the suggested imposition of a condition that a surveyor be appointed whose findings, opinion and certification would be final and conclusive, was not for the reasons stated above, acceptable.  In my view, the Plaintiffs were entitled to an order of costs in their favour, although in view of the failure on the part of the Plaintiffs of many of their arguments, there should only have been a partial order in their favour which we decided at 75%.

23. As for the costs of the appeal, again in view of the partial failure on the part of the Plaintiffs, this should be reflected in the final order.  We thought that the Plaintiffs should be entitled to 25% of their costs.

24. Accordingly, the order made at the conclusion of the appeal was as follows, namely that : -

(1)	the Appeal be allowed in part ;
(2)	the Order of His Honour Judge Wong dated 1 April 2005 (“the said Order”) be set aside to the extent as follows : -
	(i)	paragraph 1 of the said Order be amended to ‘the costs of the action on liability be to the 1st and 2nd Plaintiffs, such costs to be taxed on a party and party basis if not agreed, with a certificate for counsel’;
	(ii)	paragraphs 2 and 5 of the said Order be set aside;
(3)	the 1st and 2nd Defendants’ Summons dated 29 March 2005 be dismissed;
(4)	75% of the costs of the 1st and 2nd Plaintiffs’ Summons dated 23 March 2005 and of the hearing before His Honour Judge Wong on 1 April 2005 be to the 1st and 2nd Plaintiffs, such costs to be taxed on a party and party basis if not agreed, with a Certificate for Counsel;
(5)	the costs of the 1st and 2nd Defendants’ Summons dated 29 March 2005 other than the hearing on 1 April 2005 be to the 1st and 2nd Plaintiffs, such costs to be taxed on a party and party basis if not agreed;
(6)	25% of the costs of the Appeal be to the 1st and 2nd Plaintiffs, such costs to be taxed on a party and party basis if not agreed; and
(7)	the 1st and 2nd Defendants do have leave to adduce additional evidence.

Hon Suffiad J :

25. I agree.

Hon Barma J :

26. I agree.