HONLINK DEVELOPMENT LTD v. KAM DAO CITY UNITED CLUB LTD

DCCJ1371/2016

[2018] HKDC 135

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.1371 OF 2016

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ASSESSMENT OF DAMAGES

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1.  By writ of summons issued on 23 Mar 2016, the plaintiff owner of Golden Era Plaza, 39-55 Sai Yee Street, Kowloon (the plaza) sued the defendant tenant to indemnify the plaintiff for loss and damage the plaintiff had suffered as a result of a fire that occurred on 8 Sept 2011 and originated from 8/F of the plaza (the fire) then let by the plaintiff as landlord to the defendant.

2.  Absent notice of intention to defend, interlocutory judgment was entered in plaintiff’s favour against the defendant for damages to be assessed on 16 May 2016.

3.  The assessment of damages came before me.

4.  On the hearing before me, the plaintiff was represented by counsel Ms Wendy W.Y. Yeung (Ms Yeung).

5.  The defendant has all along been unrepresented and none appeared on its behalf before me. I am, however, satisfied on the affirmations of service filed on behalf of the plaintiff that the defendant has been properly notified of the date of this hearing for assessment of damages and properly served with the papers concerned. Accordingly, I acceded to request of Ms Yeung to proceed with this assessment in the absence of the defendant.

Evidence

6.  On 25 May 2017, the plaintiff filed its list of documents and hearsay notice of the documents so disclosed.

7.  On 27 July 2017, the plaintiff filed witness statement as to quantum dated 17 May 2017 by its general manager i.e. Mr Chong Yan Tak Jeff (Jeff).

8.  By order of Registrar Ho dated 1 Aug 2017, the defendant was ordered to file list of documents and witness statement as to quantum by 29 Aug 2017, failing which it was deemed to have elected not to adduce documentary evidence at the assessment of damages and elected not to adduce from factual witness evidence on quantum. By expiry of the said deadline, the defendant had not filed any list of documents or witness statement as to quantum.

9.  By the same order, unless otherwise directed by court, all witness statements shall stand as evidence-in-chief of the witnesses concerned.

10.  And, by the same order, the plaintiff was given leave to adduce in evidence 1) the preliminary report dated 31 Oct 2011 (the preliminary report); and 2) the final report dated 19 Apr 2012 (the final report) both prepared by Cunningham Lindsey (HK) Limited (the loss adjuster). Unless otherwise directed by court, the preliminary and final reports shall be adduced in evidence at the assessment of damages without calling the makers thereof.

11.  At the hearing before me, I did not require the maker(s) of the preliminary and final reports to give oral evidence. In any event, they are, I note, also included in the aforesaid hearsay notice filed on behalf of the plaintiff and the defendant has not required the maker(s) to be cross-examined before me.

12.  At the hearing before me, the plaintiff called Jeff as its sole factual witness as to quantum. He was allowed by me to adopt his witness statement as his evidence-in-chief. Afterwards, he answered a few questions of this court to clarify certain matters and there was no re-examination by Ms Yeung.

Plaintiff’s claim

13.  Plaintiff’s claim set out in paragraph 5 of its statement of claim endorsed on its writ is in the total sum of $560,994. It comprises 2 heads: a) loss and damages to fixtures and fitting of the plaza and 4 passenger lifts thereof in sum of $517,479; and b) loss adjusters’ fees in sum of $43,515.

Analysis

14.  I have fully and carefully considered all evidence, submissions and authorities put before me in this hearing.

15.  Jeff impressed me as a frank and honest witness. But he was an old gentleman; he was born in 1941. And, as plaintiff’s general manager, he delegated a lot of detailed works to others, such as his junior accounting staff on, say, payment of repair costs. Also, he left detailed negotiations of repair costs with divers contractors to the loss adjuster instructed by plaintiff’s insurer i.e. Asia Insurance Company Limited (the insurer).

16.  It is therefore not surprising to me that Jeff could no longer recall, in the box, certain events or details and got some wrong, and he does not have personal knowledge of some matters before me.

17.  Save for the above shortcomings of Jeff, which are, I note, mostly remedied by documentary evidence produced in the assessment bundle, I accept Jeff’s evidence as the truth.

18.  All things considered, I accept, and give full weight to, such contents of the documentary evidence produced before me and referred below. In so far there is any conflict between their contents and Jeff’s oral evidence, I prefer the former for reasons stated above.

19.  In so accepting these documents, I have reminded myself that some of them contain multiple hearsay and that their makers e.g. the loss adjuster, firemen of Fire Services Department and repairing contractor could have been called but none had been called nor tested by cross-examination.

20.  Nevertheless, I do not see any motive or interest for the firemen concerned to distort the truth in the incident report of the fire. They were, after all, performing a public duty.

21.  While acting for its private insurer client, I also trust the loss adjuster would act, and had acted, in the best interest of its client in arriving also at a reasonable total repair costs of the alleged damage caused to plaintiff by the fire and would not allow its client to pay excessive amounts for the same.

22.  As good proof of their discharging their aforesaid private duty to client, I note, and I agree, that the loss adjuster had given valid reasons for making downwards adjustment of certain excessive amounts of repair costs claimed by plaintiff’s contractors. It also sought quotations from other sources to verify the amount quoted by plaintiff’s contractor. It further demanded the plaintiff to give credit for salvage left behind by arranging tender sale of the same. All in all, these brought plaintiff’s total claim of repair costs down by as much as $100,000.

23.  And I have, of course, watched out to check for consistency or inconsistency of the alleged repaired items among these documents, including verifying the figures stated in the reports of the loss adjuster against those stated in the quotations, invoices and receipts of the contractors before me, which documents themselves, of course, also support the existence of the alleged damage, execution of the alleged repair works and their alleged payments.

24.  Not the least, the alleged extent of damage and alleged repairs is also corroborated by the photographic record the loss adjuster had taken the day after the fire referred below.

25.  Finally, the defendant did not see fit to attend this hearing to challenge these documents or adduce contrary evidence to rebut their alleged contents.

26.  I therefore decide at the end of the day to accept such alleged contents of these documents, albeit hearsay, referred below and give them full weight.

27.  On the basis of the sum total of the above evidence I accept, I find as follows.

My findings

28.  On the day of the fire, the plaza was owned by the plaintiff which let out various floors to various tenants thereof. It was a block of 28-storey reinforced concrete glass curtain commercial building constructed in 1998. Basement to 3/F were carparks while 5/F to 26/F were for commercial occupancy. Each floor had a gross floor area of 5,890 square feet, or an area of about 50m x 25m. Access to the various floors were via, inter alia, 4 passenger lifts.

29.  By way of fire protection, the plaza was equipped with a sprinkler system and fire services hose reels and hydrants were installed at strategic positions.

30.  On the day of the fire, entire 8/F of the plaza (the 8^th floor) was let by the plaintiff to the defendant with terms partly set out in a written tenancy agreement dated 11 Apr 2016 (the tenancy). The defendant occupied the 8^th floor as a mahjong club and subdivided it into many rooms.

31.  Clause 2.23 of the tenancy requires the defendant to fully indemnify the plaintiff for any of its loss or damage, and all costs and expenses incidental thereto, caused directly or indirectly by fire or by overflow of water from the 8^th floor.

32.  At about 1736 hours, the fire was reported to have occurred at the 8^th floor. Firemen arrived at about 1739 hours. The fire was stopped at about 1757 hours.

33.  It was believed that spark/heat generated by electric fault of the electric wiring connecting to an advertising signboard on the 8^th floor ignited its insulating material and in turn set fire to the same and nearby combustibles, leading to the fire.

34.  Prior to arrival of firemen, the sprinkler system installed on the false ceiling of the 8^th floor was activated by intense heat generated by the fire. Extinguishment water showered down and put out the flames before arrival of fire brigades.

35.  The plaintiff held a property all risks insurance policy with the insurer covering the plaza on the day of the fire (the policy). It reported the fire and its damage to the insurer after the event and made a claim on the policy.

36.  The loss adjuster, on the instructions of the insurer, visited the plaza for site survey on at least 9 Sept 2011. On such survey, it had kept photographic record of the damaged areas now annexed to the preliminary report.

37.  The total area of the 8^th floor affected by the fire was of about 40m x 15m. It was mainly confined in the mahjong room where the advertising signboard was situated. It ignited the wooden decorations and part of the false ceiling of the room.

38.  The windows and glass at the said mahjong room were damaged. Two curtain-wall glass panels (6ft x 3 ft) and their frames were also damaged by fire. It was necessary to replace the same.

39.  As a large amount of extinguishment water was discharged flooding the 8^th floor before seeping into the lift shafts via the lift doors on 8/F, the passenger lifts i.e. L1 to L4 were affected too. On its survey, the hoisting ropes, call buttons, governor ropes, switches, alarms, sensors, sockets, emergency lights, door bridge/rollers, security lights, emergency lights, door bridge/rollers, security locks, CCTV and its signaling cables were all affected, as observed by the loss adjuster and shown by the photos taken by the loss adjuster.

40.  Detailed particulars of the damaged items are set out at p.3 of the preliminary report and plaintiff’s contractors originally made a total claim in sum of $617,280.

41.  With another $500 for debris removal, the plaintiff made a total claim of $617,780 on the insurer under the policy.

42.  At the end, the loss adjuster managed to adjust the total claim downwards to $517,479 by its investigations and negotiations with plaintiff’s contractors, by calling on the plaintiff to ask for alternative quotations, and by demanding the plaintiff to give credit for salvage sold by way of tender.

43.  Detailed particulars of these adjustments and grounds thereof are set out at pp.2-4 of the final report.

44.  The plaintiff had paid out on the adjusted sums stated in the final reports to its contractors to get the damage caused by the fire repaired and got reimbursement from the insurer the total adjusted sum of $517,479 stated in the final report, inclusive of $500 for debris removal and after making allowance of $1,700 for salvage sold.

45.  In making its survey and preparing the preliminary and final reports, the loss adjuster charged the insurer fee and expenses in a total sum of $43,515 which the insurer had paid.

46.  On 12 Oct 2015, plaintiff’s solicitors had sent out a letter before action to the defendant demanding payment of the total sum of $560,994 ($517,479 for loss and damage to the plaza and 4 lifts and another $43,515 for loss adjuster’s fees) but the defendant had not replied nor make payment to the plaintiff.

47.  Subrogated to plaintiff’s claim for indemnity against the defendant on clause 2.23 of the tenancy, the insurer later brought this action in the name of the plaintiff against the defendant.

Repair costs

48.  For reasons in the analysis section above, I agree with the adjustments made by the loss adjuster in the final report and the adjusted figures are, I think, reasonable amounts of repair costs to be paid out by the plaintiff to its contractors, save and except for $500 for debris removal which is not supported by any document before me and abandoned by Ms Yeung in her closing.

49.  Except for this sum of $500 which I disallow, I allow all the remaining adjusted repair costs in the total of $516,979 by way of loss and damage the plaintiff is entitled to indemnity from the defendant as per clause 2.23 of the tenancy.

Loss adjuster’s fees

50.  I also allow the sum of $43,515 as reasonable incidental expenses recoverable by the plaintiff from the defendant as per clause 2.23 of the tenancy.

Disposition

51.  Accordingly, I enter final judgment in the plaintiff’s favour against the defendant in the total sum of $560,494 i.e. $516,979 + $43,515.

52.  Ms Yeung also sought pre-assessment interest against the defendant as from 23 Mar 2016 (the date of the writ) at judgment rate. I agree with the starting date proposed but I think a commercial rate of interest would suffice to compensate the plaintiff.

53.  I accordingly further order the defendant to pay the plaintiff interest on the said judgment sum of $560,494 at HSBC best lending rate(s) from time to time as from 23 Mar 2016 until the date of this assessment.

54.  The aforesaid judgment debt would, of course, carry further interest at judgment rate until full payment by the defendant after the date of this assessment.

Costs

55.  Costs normally follow the event. I see nothing to depart from this general principles, all the more so the plaintiff has recovered in this assessment substantial damages from the defendant which, I agree, justify the engagement of counsel at this hearing.

56.  By way of order nisi, I therefore order the defendant to pay the plaintiff the costs of the assessment of damages, inclusive of all reserved costs and the costs of this hearing before me, together with certificate for counsel, and such costs payable by the defendant to the plaintiff are to be taxed, if agreement cannot be reached between the parties.

57.  This above costs order will become absolute if none applies by summons within 14 days of the date of this assessment to vary the same.

58.  Finally, I thank Ms Yeung for her assistance.