POLO COURT DEVELOPMENT LTD v. TENY LTD

DCCJ 2134/2020

[2021] HKDC 508

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2134 OF 2020

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D E C I S I O N

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1.  This is an application by the defendant by summons dated 15 April 2021 to set aside the default summary judgment entered against the defendant on 7 April 2021, pursuant to Order 14, rule 11 of the Rules of the District Court (Cap 336H) (“RDC”).

Background

2.  The plaintiff is the registered owner of Unit 16, 12/F, Wah Sang Industrial Building, 14-18 Wong Chuk Yeung Street, Shatin, New Territories (“Unit 1216”).  The defendant is the registered owner of Unit 16, 13/F of the same building (“Unit 1316”), which is situated directly above Unit 1216.  The defendant, which carries on the business of food manufacturing, has been using Unit 1316 to manufacture a Chinese dim sum known as steamed rolls.

3.  According to the plaintiff’s case, it discovered water seepage on the ceiling of Unit 1216 in around late August 2019.  The plaintiff engaged a company called Hong Kong Building Inspection and Structural Diagnostic Limited (“HKBI”) to investigate the source of water seepage.  HKBI carried out water seepage tests at Unit 1216 and Unit 1316 on 8 October 2019.  In its report dated 28 November 2019 (“HKBI Report”), HKBI opined that the waterproofing work in the floor slab of Unit 1316 was defective, causing the waste water generated from the defendant’s production of steamed rolls to seep through the ceiling of Unit 1216.  Further, HKBI noted that the defendant had constructed an unauthorised underground drainage system at Unit 1316 which accumulated waste water, some of which seeped through the floor slab of Unit 1316 into Unit 1216.

4.  On 20 May 2020, the plaintiff commenced these proceedings against the defendant by a specially endorsed writ.  The principal reliefs sought are as follows: (i) an order requiring the defendant to remove the unauthorised drainage system at Unit 1316; (ii) an order requiring the defendant to cause a proper waterproof membrane to be laid beneath its food production machines so as to prevent any further water seepage into Unit 1216; and (iii) damages to be assessed.

5.  The defendant, which has been legally represented throughout, filed a defence on 14 August 2020 and an amended defence on 17 August 2020.  It denies that the floor of Unit 1316 was non-waterproof or defective, and avers that any water generated in the course of producing steamed rolls would be discharged into the communal sewage pipe of the building.

6.  After the close of pleadings, on 26 January 2021, the plaintiff issued a summons returnable on 7 April 2021 for summary judgment under RDC Order 14, rule 1 (“Order 14 summons”).  There is no dispute between the parties that the Order 14 summons was duly served on the defendant’s solicitors on 29 January 2021.

7.  The defendant’s solicitors did not attend the hearing on 7 April 2021, which resulted in default summary judgment being entered against the defendant at the hearing.

8.  On 15 April 2021, the defendant issued the present application to set aside the default summary judgment.  In a supporting affirmation for the defendant’s application, the defendant’s solicitor in charge deposed that, as a result of an inadvertent mistake of the administrative staff of his firm, the Order 14 summons and the cover letter of the plaintiff’s solicitors were never passed to him and he was therefore unaware of the Order 14 summons and the hearing returnable on 7 April 2021.  He only became aware of the Order 14 summons on 8 April 2021 when Mr Lam Kwing Fu, a director of the defendant, informed him that a security guard of the building had told Mr Lam about the default summary judgment entered against the defendant.

9.  The defendant accepts that the default summary judgment has been obtained regularly by the plaintiff.

Approach to setting aside default summary judgment under RDC Order 14, rule 11

10.  The relevant legal principles applicable to the defendant’s setting aside application are not in dispute.

11.  Where default summary judgment has been obtained regularly, as in the present case, the primary consideration for the court is to look at the merits of the defence.  The defendant has to show a defence which has a real prospect of success.  The court is therefore required to form a provisional view of the merits of the case: see Chekiang First Bank Limited v Ng Chun Hing Benjamin, HCA 3473 of 2000 (12 December 2001), §12, per Ma J (as he then was).

12.  There are other considerations which a court must consider in deciding whether or not to set aside default judgment, such as the reason why default judgment was allowed to occur in the first place, any delay in setting aside and any consequent prejudice caused to the plaintiff.  The court’s approach is to conduct a balancing exercise of all relevant factors: see Morigood Development Ltd v Sunny Trading Co (a firm) [1999] 2 HKC 710, 717E-F, per Keith J (as he then was); Chekiang First Bank, supra, §13.

13.  I shall therefore deal first with the merits and whether I am satisfied that the defendant is able to demonstrate a defence which has a real prospect of success.

Merits of the defence

14.  Mr Wong, appearing for the defendant, submits that the findings in the HKBI Report, which are relied upon by the plaintiff as part of its pleaded case, are contradicted by the findings in an expert report commissioned by the Joint Office for Investigation of Water Seepage Cases set up by the Buildings Department and the Food and Environmental Hygiene Department (“Joint Office Report”).

15.  The Joint Office Report, which was prepared upon 4 investigations conducted at Unit 1216 and Unit 1316 between 30 December 2019 and 27 February 2020, stated, among other things, the following relevant findings:

(1)  During the inspection of the suspected areas of water leakage at Unit 1316 on 4 January 2020:

(a)  no water leakage or wet floor was noted (Section C, §2);

(b)  no sign of poor workmanship or dilapidation was noted at the floor surface, the wall surface enclosing the bathing area, and the water tight sealant between the bath tub and the enclosure wall (ibid); and

(c)  no concealed water borne services pipe, drainpipe or pipe duct was noted (Section C, §3).

(2)  The source of water seepage into Unit 1216 was “uncertain” and “could not be ascertained” (Section E, §§1-2) on grounds including the following:

(a)  the colour water tests conducted on 4 January 2020 showed that leakage of the drainage pipe of Unit 1316 was unlikely (Section D, §1A);

(b)  the ponding tests conducted on 4 January 2020 showed that leakage from the floor slab of Unit 1316 was unlikely (Section D, §1B);

(c)  the moisture meter monitoring and visual inspections conducted on 30 December 2019, 14 January 2020 and 27 February 2020 showed that water supply pipe leakage was uncertain (Section D, §1D); and

(d)  the moisture content checks conducted on 30 December 2019, 14 January 2020 and 27 February 2020 showed that rainwater leakage from the building envelope was unlikely (Section D, §1E).

16.  In response, Mr Lau, appearing for the plaintiff, submits that the Joint Office Report is not satisfactory because it does not identify the source of water seepage into Unit 1216.  He also invites the court to ask the rhetorical question: if the water does not come from Unit 1316, where does it come from?

17.  For the purpose of the present application, it is not necessary for the court to come to any final conclusion on this issue.  In any event, it is for the plaintiff to prove the source of water seepage or leakage.

18.  It is well established that identifying the source of water is essential for attaching liability to a defendant for nuisance in water leakage cases. The onus is on the plaintiff to establish that the leakage originated from the defendant’s flat.  There is no presumption that water leakage was necessarily caused by the flat above, and the doctrine of res ipsa loquitur does not apply.  A defendant does not bear any burden of proving where the water came from: see Leung Yung Chun v Chan Wing Sang [2000] 1 HKLRD 456, 461I-J, per Cheung J (as Cheung JA then was); Hui Ling Ling v Sky Field Development Limited, CACV 122 of 2012 (22 March 2013), §42, per Kwan JA (as Kwan VP then was); Mohan Selvaraj v Grace Ka Man O’Brien [2020] HKCA 698, §17, per Lam VP.

19.  In the present case, I am of the provisional view that the findings in the Joint Office Report tend to support the defendant’s case that the water leakage into Unit 1216 did not come from Unit 1316, and that there is no defect in the floor slab and drainage system of Unit 1316 as alleged.  It seems to me that these findings, made by an independent third party, constitute cogent evidence which gives rise to a defence with a real prospect of success.

Other relevant considerations

20.  On the undisputed evidence before me, I am of the view that the defendant is not personally responsible for the reason why default judgment was allowed to occur in the first place.  There is no undue delay in the defendant’s application to set aside the default summary judgment.  It also appears to me that, if the default summary judgment is to be set aside, no real prejudice would be caused to the plaintiff.

Disposition

21.  For all these reasons, I am satisfied that it is an appropriate case in which to exercise my discretion under RDC Order 14, rule 11 to set aside the default summary judgment entered on 7 April 2021 against the defendant.  I would emphasise that the provisional view I have formed on the defence is based only on the existing affidavit evidence before the court.  In the light of the evidence to be received in due course, the court may reach a different decision as to the merits of the parties’ respective cases.

22.  Upon the parties’ consent, I give the following directions in relation to the conduct of the Order 14 summons:

(1)  unless the defendant files and serves its affirmation in opposition by 4:00 pm on 21 May 2021, judgment be entered for the plaintiff with costs;

(2)  leave to the plaintiff to file and serve its affirmation in reply, if any, within 21 days thereafter;

(3)  no further affirmations shall be filed or served without leave of the court; and

(4)  the Order 14 summons be adjourned to a date to be fixed for substantive argument, with 3 hours reserved.

(Submissions on costs)

23.  The parties agree that the defendant’s solicitors shall personally pay (i) the wasted costs of the hearing of the Order 14 summons on 7 April 2021, and (ii) the costs of the present setting aside application, to the plaintiff. Upon considering the plaintiff’s statement of costs and hearing the parties’ submissions thereon, those costs are summarily assessed at $64,945, to be paid by the defendant’s solicitors personally within 14 days of the date hereof: see RDC Order 62, rule 9B(1)(a).

24.  The costs of the Order 14 summons, save for those of the hearing on 7 April 2021, be reserved.