Civil Action1999

TAK CHANCE FOOD PRODUCTS INDUSTRIAL CO LTD v. WIDA DYEING FACTORY LTD AND ANOTHER

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52027-EN-2006-03-27

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HCA 10723/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10723 OF 1999

____________

BETWEEN

	TAK CHANCE FOOD PRODUCTS INDUSTRIAL COMPANY LIMITED	Plaintiff
	and
	WIDA DYEING FACTORY LIMITED	1^st Defendant
	CAFIA COMPANY LIMITED	2^nd Defendant

____________

Before: Deputy High Court Judge Gill in Court

Dates of Hearing: 15-17 March 2006

Date of Judgment: 27 March 2006

______________

J U D G M E N T

______________

1. In November 2001 this action came before me as a claim in contract and tort for damages. During the trial the defendants in concert admitted liability as to 20%; the dispute centred on the remaining 80%. In a judgment handed down on 28 November I found in favour of the plaintiff. This is the restored hearing to establish the quantum.

2. The claim concerns two floors in an industrial building in Tsuen Wan separated by a concrete slab which was the floor of one and the ceiling of the other. The plaintiff purchased the lower floor, the 5^th, in 1982, and from then began operating a mushroom canning factory. In those days about half the area was used in the canning process and the balance for storage. Then in 1991 it transferred the canning operation to a factory on the Mainland and thereafter the entire 5^th floor, of about 26,000 square feet, was used for storage. It was so utilized when this cause of action arose.

3. At the material time the 2^nd defendant owned the 6^th floor, which was occupied by a related company, the 1^st defendant. The 1^st defendant carried on business as a dyeing factory.

4. In the course of the 1990’s the concrete slab between the 5^th and 6^th floors showed signs of deterioration. At first this was manifested in the appearance of damp spots, some coloured, on the ceiling of the 5^th floor. The concrete in certain areas started chipping and cracking. Then pieces of concrete broke away, exposing rusted reinforcing.

5. In 1999 the plaintiff alerted the Buildings Department (BD), and following an inspection a Building Order (BO) issued, dated March 1999, compelling restoration work to render the floor/ceiling safe. Then in June 2000 there was a major incident when large chunks of concrete broke away and fell into the 5^th floor, damaging some of the plaintiff’s stored stock.

6. Meanwhile, the plaintiff engaged senior academics of the Department of Civil and Structural Engineering of Hong Kong Polytechnic University to inspect the premises and report. Their findings were that the cause of deterioration was seepage through the floor of liquid from above which caused corrosion of the reinforcing and expansion and spalling of the concrete.

7. Based on those findings, the plaintiff looked to the defendants to make good the damage. When that did not happen the plaintiff issued its writ, which was in July 1999.

8. The pleaded defence was that it was the plaintiff’s canning operation in the 1980’s which caused the damage or at least contributed to it.

9. As at the date of trial the dyeing factory was in full production and the warehouse was still being utilized as such, albeit only as to about half of its floor area. In terms of the BO it was necessary for the damage to be repaired whatever the outcome on fault and who should bear the costs.

10. With this in mind, at the outset of the trial, by consensus, it was agreed that I should rule on liability and then adjourn to give the parties the opportunity to agree the costs and repair programme under supervision of the BD and to minimize disruption of both operations, with liberty to restore if that proved not to be possible.

11. The work has been carried out; there is no dispute as to workmanship. The plaintiff has sold the 5^th floor. What is challenged are some of the items the plaintiff is looking to be compensated for. So it is, more than four years on, that the matter is back before me for rulings on quantum.

12. It is apparent from the outset that the defendants were looking to have the damage repaired without delay and in a spirit of co-operation. Even before judgment had been handed down, by letter dated 26 November 2001, their solicitors wrote to the plaintiff’s inviting agreement on the appointment of one Lee Chun Fat to be the designated Authorized Person (AP) at his quoted fee of $100,000. The plaintiff’s response was that it was attempting to contact the responsible officer of the BD and would revert.

13. But it did not. The plaintiff engaged one Ng Chi Chai to be the AP without further discussion, notwithstanding that his charge of $123,000 was significantly more than that quoted by the defendants’ choice of AP. Then there was a site inspection in January 2002 attended by Mr Ng and a BD inspector. The inspector required temporary shoring works to be undertaken; Mr Ng got up a proposal and that was approved by late January. Mr Ng asked for and was quoted the cost of the shoring work from a contractor called Bright Construction Co. Limited (Bright Construction), and approved the quote of $230,000. It was not until a letter of late February that the defendants were notified of these developments.

14. Thereafter the plaintiff continued to operate unilaterally, asking for and receiving a quote from Bright Construction to complete the remedial work proper. This was for $1,643,850. The defendants’ grievance was not just that their proposal for AP had been ignored, not just that there was no consultation as had been agreed was the way forward in the trial, but that there was no indication that Mr Ng had sought tenders from any other contractor.

15. This of course smacked of the plaintiff ignoring its legal obligation to mitigate. But it was also contrary to Mr Ng’s contract of employment as AP.

16. Albert Wong, a director of the defendants having conduct of the matter, immediately got quotes from two other contractors, called Program Contractors Limited (Program Contractors) and Leader Engineering and Construction Limited (Leader Engineering) for undertaking both the temporary shoring work and the remedial work. These were significantly cheaper than those of Bright Construction.

17. Meanwhile, Bright Construction was given the job of completing the temporary shoring work and it did so, in or about May and June 2002. The plaintiff paid the quoted price of $230,000 plus $2,500 for an insurance premium.

18. With the defendants through Mr Wong by now fully involved, it came to be agreed with approval of the BD that the defendants could appoint their own AP and contractor to undertake the remedial work proper. But the plaintiff first required to be indemnified for the amount it had paid Bright Construction for the temporary shoring work it had completed, and such further charges that there might be for the dismantling of it. These indemnities were prepared and duly signed.

19. The plaintiff meanwhile had paid Mr Ng on account for his services to date $78,800 and he was then discharged. His approved proposals for the remedial work were asked for by the defendants. Having been paid for they were handed over.

20. Thereafter the defendants appointed Mr Lee, their original choice, to be the AP, and Leader Engineering, whose quote for the remedial work was the cheapest of the three, was engaged to carry out the remedial work.

21. The work was finally undertaken in the first half of 2003, and completed in July 2003.

22. The defendants paid Leader Engineering the quoted price plus an extra to meet the cost of waterproofing the floor. It also paid Mr Lee his full quoted price of $100,000.

23. By an arrangement between the parties the defendants, with spare warehousing space in the building, provided temporary accommodation to the plaintiff for its stock on the 13^th floor whilst the work was being carried out.

24. In February 2004 the plaintiff’s solicitors sent a schedule of outstanding damages and sought reimbursement. The defendants declined to pay and challenge the various items in whole or part. These are the matters I am now required to resolve. There are eight in all.

25. The first is the cost of an updated report asked for by the plaintiff from Hong Kong Polytechnic University amounting to $78,650. This was dated May 2001. For some reason that is not clear to me this was called for and was available well before the liability trial in November 2001 but was not produced, nor was its existence disclosed to the defendants or to me. It is stated that the update was “necessary for submitting to the BD at the material times in order to provide an updated status of the dilapidated conditions of the 5^th floor premises at the time to the BD and in order to postpone the execution of the BO”.

26. It is pertinent to note that in the exercise of taxation of the plaintiff’s costs following the success of their claim on liability this item was submitted but, hardly surprisingly, was taxed off.

27. The second is the amount paid Mr Ng, on account of the work he undertook, of $78,800.

28. The third is the cost of the temporary shoring work undertaken by Bright Construction of $232,500.

29. The fourth is the cost of transporting the plaintiff’s stored goods to and from the 13^th floor during the period the repairs were carried out. This came to $7,000.

30. The fifth is the cost of electricity used on the 5^th floor by Leader Engineering in carrying out the repairs. This came to $10,474.

31. The sixth is a more complicated calculation arising from a decision made by the plaintiff in 1999. It was, at the material time, the owner of two sub-units on the 17^th floor, of about 6,000 square feet. With the ceiling on the 5^th floor in a serious state of disrepair it decided in October 1999 to shift half of its stock to the 17^th floor premises. It did not disclose this to the defendants. It did not undertake an inventory.

32. The 17^th floor had been let, as a factory, up to the middle of 1999 at $17,369.60 per month, following which the tenant moved out.

33. The plaintiff now claims that because it was forced to use the space to store its own goods for the period from October 1999 to July 2003, a period of some 46 months, it was denied the opportunity to earn rent comparable to the rent it had been enjoying up to that time. It claims that rent at $17,369.60 multiplied by 46 months, discounted as to 50%. That comes to $399,500.80.

34. The seventh and eighth are a refund of the management fees and rates paid “for those parts of the 5^th floor rendered non-usable due to the damaged ceiling” for the period April 1999 to July 2003.

35. Prior to the trial I was informed that the defendants agreed to meet the fourth and fifth items but challenged the rest, in whole or in part.

36. I come now to deal with these in turn.

37. I begin with the general comment that it is quite apparent that the plaintiff behaved in a highhanded and arrogant manner once liability had been found in its favour. Quite absent was the spirit of co-operation and decision sharing that I had been assured would follow the trial on liability, whatever the outcome. This as I find materially added to the time it all took and the costs legal and otherwise that were incurred. The flavour of this is reflected in my findings on quantum I now come to.

38. The first item is denied intoto. It was sought in the taxation process and rejected; presumably because it was not used at trial. It was not called for by the BD and has no place as an item the charge for which should be reimbursed.

39. I have sympathy for the defendants in their challenge of the second item, Mr Ng’s charge. His appointment reflects the attitude of the plaintiff I have already alluded adversely to. But the defendants must accept some liability. It goes without saying that two APs are going to cost more than one. I was told Mr Lee started from scratch; that was why he charged for and was paid his original quote of $100,000. That being so, why was Mr Ng’s remedial proposal asked for, if not to be made use of? It seems to me that Mr Lee’s charge should have been reduced, and some of that paid to the plaintiff in settlement of a reasonable part of Mr Ng’s bill. I fix that at $45,000.

40. The defendants’ major challenge to the Bright Construction charge for the shoring works has already been reproduced (see paragraph 14). Again I am sympathetic. The total cost of $232,500 plus $50,000 more for dismantling was way above the quote of Program Contractors and Leader Engineering.

41. There is no indication that Mr Ng called for further quotes. If he did not, as seems likely, he should have. He was contractually bound, and his principal the plaintiff had a duty to mitigate. The defendants should have been justified in resisting at least a part of this item. It was thoroughly highhanded and irresponsible of Mr Ng to accept the quote without tendering for others.

42. But the difficulty the defendants have is that the immunity that they signed, presumably on legal advice, is quite unequivocal. It amounts to a settlement of this part of the claim to which they are bound. This figure stands at $232,500.

43. The fourth and fifth items having been conceded I come now to the sixth; that is, the charge the plaintiff has made for the use of the 17^th floor.

44. There is a legal challenge to this item and a factual one.

45. The legal challenge goes to the pleadings. In its statement of claim, dated July 1999, the plaintiff claimed, as an item of special damages, “loss in respect of and/or relating to vacation of the 5^th floor premises to be assessed”. Of course at that time there had been no charge incurred, which began in October 1999. But thereafter and to date there has been no amended statement of claim detailing this item. And it is an important rule of procedure that a plaintiff will not at trial be allowed to give evidence for any special damage which is not claimed specifically either in his pleading or particulars; see the WB at 18/12/41. The plaintiff made reference to this item at the outset. But as details became known it was incumbent on it to particularize those details or abandon the claim.

46. The factual challenge goes to the removal itself. The defendants were not advised of this, as being a necessary consequence of the deteriorating ceiling to keep safe the plaintiff’s stock. They had no opportunity to monitor the extent to which the 5^th floor was rendered hazardous or call for an inventory of stock to be moved. They were not told of the basis upon which the plaintiff would be seeking to recover the notional costs of storage of that stock. They were not invited to provide their own space.

47. The significance of this last concern is apposite, because Mr Wong, the director of both defendants, said that throughout they have been the owners and occupiers for their own use of at least 100,000 square feet of warehouse space in the building, and could have accommodated such percentage of the plaintiff’s stock without disruption of their own operations.

48. These challenges in my view both have much weight.

49. Certainly, the pleading is sparse. It is not particularized when it should have been. But it is not entirely devoid of detail. It relates to the need for alternative premises pending making the 5^th floor safe. The need for special damages to be claimed explicitly is to give a defendant the opportunity to know what he is up for. The defendants as owners and occupiers of the 6^th floor would have been well aware of the substandard condition of the concrete slab and that it was getting worse. They knew of the BO. And the collapse of whole chunks of the ceiling in the incident of 2000 would have been a dramatic indication apparent to all that the situation had become critical. They could have sought further particulars of this item but presumably chose not to. In the circumstances, I decline to refuse the plaintiff’s right to claim damages under this head on the pleadings point.

50. But on the factual point the plaintiff has a much harder row to hoe. It owed it to the defendants to give notice of what it was planning to do and what it regarded as a reasonable charge for that. And there was no evidence about that before me. There was nothing to suggest that all the available 17^th floor space was needed; nothing to suggest that the rent the previous tenant had paid for the space as a factory in 1997 could have been matched by a tenant looking for a warehouse two years later. With knowledge of a pending claim — after all the proceedings had been issued — all this could and should have been established, and disclosed.

51. It is apparent, as I find, that the defendants must be responsible for a reasonable charge. The plaintiff has discounted by 50%. In my view, doing the best I can with the limited information I have, a further discount is warranted. For this item I allow $200,000.

52. The seventh and eighth items can be shortly dealt with. They amount to a claim for double enrichment. They are refused.

53. There is judgment for the plaintiff in the sum of $494,974.

54. The costs order is nisi. The plaintiff has judgment but for well below its claim. By its conduct post trial on liability it materially and unnecessarily added to the costs of sorting out the damages. There is no order as to costs.

(D M B Gill)
Deputy High Court Judge

Mr S Chan, instructed by Messrs S Y Chu & Co., for the Plaintiff

Mr K Wong, instructed by Messrs Wong Hui & Co., for the 1^st and 2^nd Defendants

37640-EN-2001-11-28

TAK CHANCE FOOD PRODUCTS INDUSTRIAL CO. LTD v. WIDA DYEING FACTORY LTD & ANOTHER

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HCA010723/1999

HCA 10723/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10723 OF 1999

____________

BETWEEN
	TAK CHANCE FOOD PRODUCTS INDUSTRIAL COMPANY LIMITED	Plaintiff

	AND

	WIDA DYEING FACTORY LIMITED	1st Defendant
	CAFIA COMPANY LIMITED	2nd Defendant

____________

Coram: Deputy High Court Judge Gill in Court

Dates of Hearing: 19-22 November 2001

Date of Judgment: 28 November 2001

_______________

J U D G M E N T

_______________

Introduction

1. The plaintiff is the occupier and owner of premises in a multi-storey industrial building in Tsuen Wan. The 1st defendant is the occupier and the 2nd defendant the owner of the premises immediately above.

2. The plaintiff's ceiling has fallen into a state of disrepair and it blames the 1st and or 2nd defendant for allowing water or other liquid to seep into the ceiling from the floor above and thus cause the damage. It claims against both breach of the building's deed of mutual covenant (the DMC) and as against the 1st defendant negligence and nuisance. It seeks damages to made good the ceiling and related expenditure.

3. The claims are denied by both defendants, save as to a 20% contribution, a concession made during the course of the trial as I shall come to.

History

4. The building in question is the Kong Nam Industrial Building, 603 to 609, Castle Peak Road, Tsuen Wan. The plaintiff was incorporated in 1982 and that year began operating as a mushroom canning factory from the premises it acquired for the purpose on the 5th floor. Chen Khay Boen (Mr Chen) came to be employed by the plaintiff from the beginning and is still with the company as warehouse supervisor. He was called by the plaintiff to described the process. I shall come to his evidence in due course.

5. In those days the 5th floor was divided into two areas approximately equal in size. The seaward side comprised the office and the plant and machinery where the canning was carried out. The other side was the warehouse where stock was packaged and stored.

6. In 1992 the plaintiff transferred its operation to a factory on the Mainland. From then on and to date the 5th floor has been solely utilised as a warehouse. Mr Chen has remained on site and is in charge.

7. At all material times the 2nd defendant has been the owner of the 6th floor in the Kong Nam Building, and the 1st defendant is its tenant and occupier, carrying on business as a dyeing factory.

8. Problems in the ceiling of the 5th floor first became apparent when, some time in or before 1991, damp spots, some of them coloured, appeared on the underside of the ceiling. There were also indications of the concrete becoming chipped and cracked. Then one night in May 1991 a large amount of water and other liquid came right through the ceiling into the plaintiff's premises causing minor flooding and damage to its stock beneath. The plaintiff complained to the 1st defendant demanding that it make good. Whether there was response to this demand by the 1st defendant is disputed as I shall come to.

9. For a while there was no seepage but then it began again. Over the years it has got gradually worse. By 1999 much of the slab was clearly in a seriously damaged condition. By then chunks of concrete had broken away leaving exposed rusted reinforcing. With the situation becoming dangerous, in 1999 the plaintiff reported the damage to the Management Office of the Kong Nam Building, its insurers and the Buildings Department. The Buildings Department issued a Building Order declaring that the 5th floor premises would be liable to become dangerous if repairs to the ceiling were not carried out. In a report undertaken by the insurers the loss adjuster who had carried out an inspection opined that the damage was caused by the water and other liquid that had over the years seeped into the floor and ceiling from the premises above. The plaintiff engaged experts from Hong Kong Polytechnic and they came to the same conclusions.

10. Then in June 2000 there was a major incident when large chunks of concrete stained with coloured liquid became detached from the ceiling and fell to the floor, damaging sprinklers on the way down. Red coloured liquid dripped through onto goods stored there, damaging them.

11. The plaintiff has been quoted the cost of repair at $1.6m. It having sought an undertaking from the defendants that the leakage would desist and the damage made good without result, it issued its writ in July 1999.

The Proceedings

12. By the writ the plaintiff seeks an injunction restraining the defendants from allowing the ongoing seepage to continue and damages to compensate for the cost of repair of the concrete slab and related expenditure.

13. The defendants deny liability, save as I shall come to, stating that any seepage that might have occurred over the years caused by the dyeing operation was minor and inconsequential. Together they pleaded that the damage to the ceiling was caused by the plaintiff itself, during the course of its operation as a mushroom processing factory.

14. However at the hearing Mr Wong, representing both defendants, gave notice that there was a formal acknowledgement of liability to the extent of 20% of the total by both defendants in contract and by the 1st defendant in tort.

15. The defendants jointly engaged their own expert whose findings support the sharing of responsibility I have referred to.

The Issues

16. Before the hearing concluded I discussed with counsel the nature of the order or orders I should make. It was agreed by consensus that I should deal with the issue of liability and then adjourn to enable the parties to try to resolve the remedies which should follow after with liberty to restore. The reason for that has regard to the nature of the work to be carried out, namely, to repair a concrete slab which is the floor of a factory in full production on the one hand and the ceiling of a warehouse under use on the other. Furthermore, the deteriorated ceiling being the subject of a Building Order, the Buildings Department will require to be satisfied that the work, as and when it is carried out, satisfies the Department's requirements.

17. It was agreed that the proper way forward once liability had been established is for the parties in concert with the Buildings Department and prospective contractor to try to agree the cost and work out a programme which minimizes costs and inconvenience for all concerned, but with liberty to restore if that could not be agreed.

18. On that basis the issue before me is straightforward; namely, the defendants conceding liability as to 20% of the cost of making good the damage to the concrete slab between the premises of the plaintiff and 1st defendant in contract and in tort, to what extent, if at all, are they liable for the remaining 80%?

The Evidence

19. On issues of fact for the plaintiff I heard only from Mr Chen. He described the process of canning the mushrooms during the ten years or so the 5th floor premises operated as a factory.

20. Cooked mushrooms arrived in bulk from the supplier soaking in brine inside plastic barrels. These were poured into a large stainless steel container filled with cold fresh water to remove the brine. The mushrooms were next cut into pieces before being canned. During this process the mushrooms were carried by conveyor belt into a closed system. Within the system the cans were heated first to sterilize them and then to drive out the air before they were sealed. The hot air and steam released from this process was carried by sealed exhaust pipes to the exterior of the building. He described the premises as having been properly ventilated, and the temperature was normal depending on the season. It might have been marginally higher in the immediate vicinity of the boilers whilst they were operating but that was compensated by electric fans drawing off the heat. The workers engaged in the process wore white with no protective clothing necessary.

21. He said the work is seasonal because the mushrooms which come from the Guangdong Province do not grow and are not harvested in summer. So the factory produced between early December and early June. During the off season repairs and maintenance were carried out, and the warehouse was utilized to store other goods.

22. Following the flood of water and liquid that arrived via the ceiling in 1991 the plaintiff having complained to the 1st defendant there was no response. To save time and trouble the plaintiff undertook remedial work at its own expense.

23. In cross examination it was put to him that during the ten years or so that the plaintiff was processing mushrooms on site, there were numerous complaints from the Management Office and other occupiers of the building; that these were largely because of damage caused by brine spilling from the barrels as they were delivered through the building to the plaintiff's premises; that in particular the cargo lifts were sometimes flooded and frequently had to be stopped for repair; that the 4th floor occupiers had come to complain about seepage of brine through its ceiling; that there was salt water seepage into the lower ground floor as well. He conceded that there were complaints although in his position he was not directly involved in receiving them or dealing with them. He understood that all relevant issues were handled by management and fixed at the plaintiff's cost.

24. It was put to him that business was not in fact seasonal but carried out all year round. He denied that. He said there simply was no delivery of mushrooms during the summer which is the off-season.

25. Then he was taken to the mushroom processing. He was asked to confirm that in the sterilization process the cans had to be heated to a temperature of 128°c for up to 28 minutes. He confirmed that. It was put to him that steam escaping filled the factory, carrying with it vapourized liquids. His answer to that was an emphatic 'No!'. It was put to him that the boilers generated heat, making the temperature inside the factory much higher overall. He denied that. He said the boiler and the pipes leading from it were lagged to prevent heat loss. The excess steam was trapped and exhausted to the exterior. The temperature in the vicinity may have been a bit higher, but the boiler room was ventilated with electric fans to the exterior to compensate.

26. It was put to him that in the procedure where the brine was rinsed off the mushrooms the water had to be heated. He denied that. He said only cold water was used in the rinsing. He was asked whether the mushrooms had to be cooked. He said they did not. The mushrooms arrived already cooked. He was asked about the process where steam was used to create a vacuum in the canning procedure. He said that was extracted by an exhaust system. It was put to him that the exhaust systems he spoke of were not effective, leaving the factory full of steam, heat and humidity. He denied that.

27. I come now to review the evidence of the defence witnesses two, in all, on issues of fact.

28. The first was Wu Pik Ling (Miss Wu). She has been employed in the administrative section of the 1st defendant since 1982 when she was an accountant. Her office was originally on the 11th floor of Kong Nam Building. In 1993 she was promoted to manager and moved to the 6th floor.

29. By virtue of her being an occupant of the building she came to know of the mushroom processing factory operated by the plaintiff on the 5th floor, for the ten years or so from 1982. She also knew that complaints against the factory were frequent because of seepage from the barrels of the solution in which the mushrooms were soaked when they were being delivered to the plaintiff's premises. She knew that the 4th floor occupants complained of seepage and resultant damage, and that the cargo lifts were sometimes flooded by a brackish, smelly fluid which put them out of action from time to time.

30. She said there were two occasions, to her knowledge, when the plaintiff complained about damage to its premises emanating from her employer's on the 6th floor. The first was in 1989. She said there was a blockage and this did cause flooding and minor damage. Her employer had the drains cleaned and repaired the minor damage. The plaintiff did not seek compensation. Then in 1991 there were two more accidents. There was another flood when a drain blocked again, and an oil pipe burst discharging oil which seeped to the floor below. Again the 1st defendant quickly responded by unblocking the drain and repairing the oil pipe and other damage. Again no compensation was asked for.

31. Over the years of the plaintiff's use of the premises as a processing factory she did not at any stage go inside. But from time to time the lift she was occupying would stop at the 5th floor and she would have to emerge to reactivate it. On such occasions she could see inside the factory. The atmosphere appeared hazy more often than not as if the factory were full of steam. As far as she knew the factory operated all year round.

32. She said that in 1986 and again in 1997 her employer engaged contractors to waterproof that part of the floor of the 6th floor premises which might be susceptible to flooding caused by waste liquids being discharged from machines used in the dyeing process.

33. When she came to learn of this suit she asked for quotations to make good the damaged slab. One of these was from a company called Tung Fat (Chow Kee) Engineering Co. Ltd (Tung Fat) which company had apparently been engaged by the plaintiff to quote the cost of repair. This came to $1,150,000. The other was from a company called Grandtone Engineering Limited which came to $957,000. (A closer reading of these would indicate that they are estimates rather than quotations).

34. She said that during the year 2000 a part of the floor of the 6th floor premises collapsed leaving a gaping hole. When this happened the 1st defendant reported it to the Buildings Department. But they were unable to make more than superficial repairs because access to the premises below was denied then.

35. Then came her cross-examination.

36. She agreed that once the plaintiff had closed down its processing plant in 1992 the flooding of the brine and consequential complaints came to an end.

37. She was asked about the dyeing process but responded she did not know, beyond that there was a lot of water and various chemicals, of a type unknown to her, utilized.

38. She came to be aware over the years of complaints from the plaintiff of seepage and ultimately that there was a Building Order served going to the state of the floor/ceiling slab. She said she ordered the quotations for the cost of repair because she was told to do so in case it was found that her employer was to be held responsible. She did not know because she was not told whether the 1st defendant was assuming liability.

39. The second witness of fact for the defendant was Cheung Muk Shing (Mr Cheung). He has at all material times been in transportation, initially as an employee until in 1993 he established his own company. In both capacities he has served the 1st defendant since 1982 and this has persisted to the present day. The 1st defendant is his principal customer and he goes to Kong Nam Building nearly every day.

40. During the ten years that the plaintiff was operating a mushroom processing factory it made heavy demands on the cargo lifts which meant he often had to travel to the 5th floor and negotiate for the use of the lift. During those visits he came to note that the floor was invariably flooded, the factory was filled with steam and it was hot and humid. The workers wore rubber boots and were stripped to the waist. He knew that the mushrooms were delivered in buckets soaked in brine and that during the delivery sometimes this leaked causing damage especially to the cargo lifts. As a result they were often closed for repairs. When the factory was moved away these difficulties virtually disappeared.

41. There was one further witness called by the defence, a Miss Siu who is employed by the company that manages the Kong Nam Building. But as her evidence was hearsay about a matter not material to the issues I shall not review it.

42. Finally, the plaintiff produced the Kong Nam Building's DMC for the purpose of founding its claim in contract. But as the defendants have conceded contractual liability I find no need for me to reproduce those provisions which are relevant to the issue before me.

The Experts

43. The plaintiff engaged the Hong Kong Polytechnic University to inspect the concrete ceiling of its 5th floor premises, estimate the extent of the deterioration and, if possible, identify the cause.

44. Senior academics of the Department of Civil and Structural Engineering participated. These included Dr Tommy Chan (Dr Chan) whose expertise is in Civil Engineering, Dr S. P. Chi whose skills are in chemistry and Dr Eddie Lam who is a specialist in building structures.

45. They inspected the premises in May 1999. Samples were taken and tested. In the fullness of time they co-authored a report dated June 1999. Dr Chan came to court to produce it.

46. When they inspected the premises they were solely being used for storage. Generally the condition was dry, save for localised wet patches on the floor, caused by liquid dripping from the ceiling. It was visually apparent that in many areas concrete in the ceiling slab had broken away, exposing rusted reinforced steel. Some of these concrete chunks were found on the floor. Coloured stains were observed on some ceiling beams. The impression gained visually was that the reinforcing had become exposed to moisture coming from above, had rusted and expanded and this led to the break up of the surrounding concrete. They took photographs of those parts of the ceiling that were damaged and samples from the concrete that had broken away. The photographs form part of the report and explicitly illustrate the extent of deterioration. They took for analysis some of the liquid pooled on the floor. They also undertook what are described as "rebound hammer tests', but these proved inconclusive.

47. Once the testing of the samples had been carried out, they concluded that the general condition of the ceiling was poor; to a greater extent than one would expect in industrial buildings of similar age and thus not the result of natural ageing. Only the worst of the examples were specifically recorded and photographed. The damaged areas showed signs of infiltration by water, solution, and dyestuff or pigmentation. The test results of the concrete samples indicated that the rusting of the reinforcing and deterioration of the concrete was caused by the ingress of chemicals with a high chloride content.

48. Because the condition of the premises was generally dry, it was surmised that attack came from above, from liquids containing chloride utilized in the upstairs premises. This was substantiated by the sight of liquid dripping from the ceiling, the pools of liquid on the floor, the coloured water stains and the test results of the liquid found on the floor. Their final conclusion was that the concrete slab comprising the ceiling had become contaminated by liquid seeping through it from the floor above which led to corrosion of the reinforcing, resultant expansion and spalling of the concrete. No access was sought to the premises above and so the cause of the seepage could not be established.

49. The defendant engaged Lee Mark Building Surveyors. The inspection and report were undertaken by Lee Chun Fat (Mr Lee) who is a director. His many qualifications include that he is a Chartered Surveyor and Builder, Professional Surveyor and an Authorized Person registered under the Buildings Ordinance Cap. 123. His brief was similar to that of the team from Hong Kong Polytechnic, whose report of June 1999 he had access to. He inspected the premises in July 2001. His report was dated 10 November 2001, just a few days before the hearing. Mr Lee came to court to present his report and be questioned on it.

50. In describing the premises he inspected, namely, the 5th and 6th floors, it is pertinent to note how he came to describe the 5th floor:-

"6.2 The Subject Property
6.2.1 According to the information by the Client, the Subject Property has been used as a mushroom manufacturing factory for about 10 years. At present, the Subject Property is used as a warehouse.
6.2.2 The environment of the Subject Property was extremely humid during the manufacture of mushroom as informed by the Client. Patches of dense fog made the visibility very low. Workers need wearing special dress to protect them in this adverse environment. Furthermore, many plastic barrels stacked up at the floor as well as in the common areas." (emphasis added)

51. Included in a basic description of the 6th floor premises was the following:-

"6.3 The Above Property
6.3.1 As per the Client's information, their dyeing factory has been operating since 1982. Waterproofing system has been applied on the floor to prevent the seepage of water from the Above Property to the Subject Property.
6.3.2 There were eleven machines in operating during our inspection. The Client informed us that a vertical drying machine adjacent to the drying and sizing machine was not in operation since 2000 and had been removed a year ago.
6.3.3 Generally, wastewater is expelled from machines of M4, M5, M10, M11 and M12. This wastewater will be diverted to the surface channel and then to the sewage pipes at external walls.
6.3.4 As informed by the Client, two accidental water and oil leakage had been occurred in the past. Water leakage happened at late 80's and early 90's and oil leakage from the oil tank happened in 1989. The Client carried out immediate repair works to stop the liquid leakage in these two accidents.
6.3.5 the Client has provided additional application of waterproofing material to floors in 1986 and 1997."

52. The references to the machines depict where they are situated. M4 and M5 are more or less situated in the middle of the premises, above the worst of the damage to the 5th floor ceiling. M10 and M11 are located at the right hand side and left hand side above areas apparently not affected. The reference M12 would appear to be a typographical error as there are only 11 machines.

53. Mr Lee noted visually a dilapidated ceiling: "spalled concrete, loose plaster, cracks, peeling off paint and the like were found at the ceiling soffits and beams."

54. He proceeded to map the defects which appeared to be of any consequence. These tended to be concentrated in the middle of the premises, above that part of the plaintiff's premises which in the days of the factory were used solely as a warehouse.

55. He took samples for testing of the ceiling concrete from various areas where the deterioration was apparent as well as from where there was no visible sign of damage. The purpose was to establish the level, if any, of a chloride content. He found the results failed to establish a co-relationship between high chloride content and damage. He also extracted 9 cores from various parts of the slab running right through the slab. At or close to the top level of the core sample, that is at or close to the floor, the chloride content was high, indicating consistent spillage of waste water containing dyes and contaminates containing chloride. In only one area did he find damage to the floor as distinct from the ceiling below - this was in the core taken from that part of the floor where the whole thickness of the slab had fallen through to the premises below - forming the hole as described by Miss Wu - situated almost precisely in the middle of the premises, in fact where the worst of the defects were concentrated. Finding that in all other samples the chloride level gradually decreased through the thickness of the slab he found that the worst of the deterioration of the concrete and the rusting of the reinforcing at the lowest level (the ceiling) was not due to a chloride attack.

56. However leakage from above was not fully excluded from causing the dilapidation; he cited several examples where in his opinion the defects were as a direct result of seepage of liquid high in chloride content from the 6th floor.

57. During the course of his inspection, Mr Lee came across a data sheet which quoted the temperature and time period for the sterilization and gas eviction procedure that Mr Chen had explained. Mr Lee noted the temperature was required to be up to 128°c. He went on to say that apart from those defects caused by infiltration and seepage from above the remainder were caused by the frequent change in temperature and high moisture content causing expansion and contraction of the concrete and the steel reinforcing within.

58. By way of explanation he presented a chart to demonstrate that concrete subjected to a frequent temperature variation from 20°c to 120°c would expand and contract by up to 13.2mm per 12 metres (the distance between support beams), more than enough to expose the reinforcing to moisture and cause corrosion and spalling.

59. Mr Lee concluded that some only of the ceiling deterioration in the 5th floor premises was caused by leakage of water and chemicals from the 6th floor, arbitrarily fixing on 20%. But the major cause was the expansion and contraction process resulting from the dramatic variation in temperature of the 5th floor premises during what he described as the manufacturing process when the plaintiff operated a factory from there, coupled with high humidity. He also considered that the ceiling had deteriorated further as a result of not having been repaired when the defects first would have become apparent.

Findings of Fact

60. An important dispute of fact is the extent to which the plaintiff's premises came to be subjected to excessive heat and humidity during the mushroom canning process. The witnesses called for the defence painted a picture of high temperatures, flooded floors, rubber-booted, half-naked workers carrying on their activity in a fog of steam carrying moisture and damaging chemicals to the ceiling above.

61. I reject out of hand this scenario. The process itself was the straightforward one of canning mushrooms. The rinsing of the brine was done with cold water. Heat was needed not to cook the mushrooms, for they arrived pre-cooked, but to sterilize the cans and expel air. Steam was conveyed through lagged pipes, as one would expect, expelled through a closed system to the exterior of the building. Such increase in temperature caused by the boiler would have been confined to the immediate vicinity, dissipated by electric fans. Were it to have been as portrayed by Miss Wu and Mr Cheung, the working conditions would have been intolerable. Plant, materials and warehoused stock would have become permanently damaged. No worker would have tolerated such harsh conditions. No factory inspector would have permitted such operation.

62. It is apparent, as I accept, that during the time it operated as a factory the plaintiff was frequently guilty of delinquent behaviour and consequent disruption to fellow occupiers because it permitted brine to spill and to leak in significant amounts causing seepage into premises below and damage to the cargo lifts. But that does not render the plaintiff responsible for damage to its own ceiling.

63. Neither Miss Wu nor Mr Cheung were invitees to the 5th floor. Such evidence they gave was from glimpses into the premises from the lift they were occupying from time to time. I am satisfied their so-called eye witness accounts are inaccurate, exaggerated, self-serving and misleading.

The Reports

64. Mr Lee concluded that whilst 20% of the defects were caused by leakage from above the remainder were caused by the huge temperature variations and high humidity of the premises during the manufacturing process. He accepted as fact that the premises were subjected to heat and humidity - see para. 6.2.2 - because he was told of that by staff of the 1st defendant whom he described as his client. But he took no steps to seek corroboration, or the extent of the heat and humidity. And he seized on the data sheet as self-evident that there was a temperature variation of up to 100°c depending upon whether the plant was operating or not. This was a quite extraordinary conclusion, akin to the finding that because a chicken needs to be cooked at 250°c the temperature outside the oven would match that. Having so concluded he seemed not to put his mind to the fact that such extremes would cause damage and injury and could not be tolerated by the plaintiff or its workers or indeed the Inspector of Factories.

65. Having found that the processing operation was carried out in conditions neither oppressively hot nor humid, I reject out of hand Mr Lee's conclusions that these extremes played any part.

66. When Dr Chan and his team inspected the premises in 1999 they witnessed liquid dripping from the ceiling into pools below. There were water marks and coloured stains revealing the likely cause. The photographs exhibited are a telling illustration. The tests undertaken established the source. It is from the machines of the 1st defendant whose function is to discharge waste fluids, situated above where the worst of the damage has occurred. Attempts by the 1st defendant to waterproof that part of its floor and otherwise remedy the developing problem proved to be either ineffective or undertaken too late to avoid damage. The collapse of part of the entire slab in June 2000 was a graphic indication of how serious that damage has become. In my view, Mr Lee's approach which was to apportion the blame as to 20% was arbitrary and inappropriate, based on wrong assumptions and conclusions.

The Consequences

67. The damage to the plaintiff's ceiling is caused wholly by the 1st defendant wrongfully failing to prevent seepage of water, liquids and chemicals through the floor of its premises to the plaintiff's ceiling below. The defendants are together contractually liable to make good the damage.

68. On the issue of liability I find against both defendants in contract and against the 1st defendant in tort. The proceedings are adjourned to a date to be restored for the measure of damages and other remedies to be dealt with.

69. Costs (nisi at first instance) are to the plaintiff to be borne by both defendants taxed if not agreed.

	(D M B Gill)
	Deputy High Court Judge

Representation:

Mr S Chan, instructed by Messrs S Y Chu & Co., for the plaintiff

Mr K Wong, instructed by Messrs Wong, Hui & Co., for the defendants