TIN FOO INVESTMENT CO LTD v. PREVIGOR DEVELOPMENT LTD AND ANOTHER

HCA 1675/2014

[2018] HKCFI 1106

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1675 OF 2014

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DECISION ON COSTS

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Introduction

1.  The plaintiff in this case sought various relief against the defendants arising out of water seepage into the plaintiff’s property.

2.  After trial, I gave judgment dated 11 January 2019, to the effect that the 1st defendant had acted in breach of the DMC from 1 August 2013 to January 2015; and both defendants had committed nuisance and were negligent from 1 August 2013 to January 2015. However, I was not satisfied that substantial pecuniary damage had been proved, and hence I awarded nominal damages of $10 to the plaintiff against both defendants.

3.  1 August 2013 was the date on which an expert instructed by the defendants inspected the two relevant properties.  January 2015 was the date when rectification works were completed, and the water seepage problem was solved.

4.  I further gave directions for parties to file written submissions on costs. This has been done, and I now give my decision on costs.

5.  I am informed through the written submissions that the defendants had made a sanctioned payment of $1000 in settlement of the whole claim on 22 April 2016. Under the rules, that sanctioned payment was open for acceptance without leave of the court until 20 May 2016.  It was never accepted.

6.  The defendants accept that (i) the plaintiff could not be blamed for initiating the present proceedings against the defendants back in August 2014 (the writ was issued on 26 August 2014); and (ii) had the rectification works not been carried out, it would be likely that the court would have granted the injunctions sought by the plaintiff.

7.  As I understand it, the defendants' position is also that the plaintiff likewise could not be blamed for prosecuting the present proceedings up to January 2015.

8.  Accordingly, the defendants accept that they should be liable for costs to the plaintiff on a party and party basis from the date of the writ, i.e. 26 August 2014 to “January 2015”. From the orders suggested in paragraph 26 of the defendants’ first written submissions, I understand that they accept liability to pay such party and party costs up to 31 January 2015.

9.  I think it would be useful for me to first explain my views on the proper principles governing the following two questions:

   (1)   The cost consequences where nominal damages are awarded.

   (2)   The impact, if any, of the sanctioned payment mentioned above.

10.  On the first question:

   (1)   As explained in Hong Kong Civil Procedure 2019 §62/3/4, “where a plaintiff is successful on the issue of liability but recovers nominal damages only, the normal order for costs is in the defendant's favour”.

   (2)   It is further stated in Hong Kong Civil Procedure 2019 §62/2/6 that “where plaintiffs in an action for breach of contract recover only minimal damages and do not [establish] anything which is of the least value to them, they are not to be regarded as successful plaintiffs, and the court will normally treat the defendants as having succeeded and award the defendants the costs of the action, whether or not the defendants have at any stage made a payment into court of nominal damages.”

   (3)   Obviously these statements only set out the general position, and each case has to be decided on its own facts.  But I am satisfied that these statements correctly set out the general position, and hence the starting point is that the defendants in this case are the successful party. 

11.  On the second matter:

   (1)   Where a plaintiff fails to obtain a judgment better than a sanctioned payment, Order 22 rule 23 empowers the court to order costs (i) on an indemnity basis, and (ii) at an enhanced rate of interest of not more than 10% above judgment rate, in respect of a period after the date on which the plaintiff could have accepted the sanctioned payment without leave.

   (2)   Order 22 rule 23(5) further provides that “the court shall make the above orders [including the ones mentioned in paragraph 11(1) above] unless he considers it unjust to do so”.  Rule 23(6) then lists a number of factors which the court shall take into account in considering whether it is unjust to make the orders.

   (3)   On the rate of enhanced interests on costs, the defendants have referred me to Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 (Lam J, as he then was), and CLP Power Hong Kong Limited v Kong Chung Sang [2012] 5 HKC 299.  The plaintiff has made no submission on the rate of enhanced interests on costs. 

   (4)   The defendants say that on the strength of the aforesaid cases, they are entitled to an enhanced interest rate of 9%.  My reading of these cases is that the court adopted a rate of 4.5% from 28 days after the making of the sanctioned offer, with interest running on all items of costs from that date. 

   (5)   The idea is that the enhanced interest rate on costs is not to be penal, but to account for the fact that the party recovering costs on an indemnity basis should be compensated for the time value of his money. 4% above prime rate, or 9%, would be a generous reflection for costs of money. In a situation (like in the present case) where the court has no information about the precise date when each item of costs was incurred, a fair thing to do is to adopt half of that rate (i.e. 4.5%) on all costs incurred after 28 days after the making of the sanctioned offer or payment (in this case 20 May 2016), with interest running from that date (i.e. 20 May 2016) on all items.

   (6)   Given that the plaintiff has made no submission on the rate of interest on costs, I am content to adopt that approach in the present case.

12.  Applying the principles outlined above, and for the reasons I will endeavour to state in more detail below, I will order that:

   (1)   The defendants do pay the plaintiff's costs on a party and party basis at District Court scale from 26 August 2014 to 31 January 2015.

   (2)   The plaintiff do pay 50% of the defendants' costs on a party and party basis at High Court scale from 1 February 2015 to 20 May 2016.

   (3)   The plaintiffs do pay 50% of the defendants' costs on an indemnity basis at High Court scale from 21 May 2016 to 11 January 2019 (i.e. date of judgment).

   (4)   The plaintiffs do pay interest at 4.5% per annum on all items of costs mentioned in paragraph 12(3) above, and such interest shall run from 21 May 2016 to the date of this decision on all such items.

   (5)   Interest shall run at judgment rate on the costs mentioned in paragraph 12(3) above from the date of this decision until the date of payment. This is simply to follow the usual rule that judgment rate should apply to monies ordered to be paid by a court order from the date of the relevant judgment until the date of payment.

   (6)   There be no order as to costs in respect of the submissions as to costs.  This is to reflect that both parties to have succeeded only to a limited extent on their submissions on costs.

   (7)   There be no certificate for two counsel.  The defendants (the party with two counsel) have reasonably not sought such certificate.

13.  The plaintiff argued that the defendants should have been liable on a High Court scale, because of the high rental value of the property, and the plaintiff had a reasonable and genuine belief that the rental loss could exceed $1 million. I am unable to accept that argument, given that ultimately the plaintiff has not been able to show any substantial damage for any period.

14.  Nor do I think there is any merit in the argument that the defendants had never suggested a transfer to a District Court. The defendants have always taken issue on damages and I do not think it right that a defendant who is ultimately successful in reducing the damages claimed to below the jurisdictional limit of the District Court has a further duty to take active steps to transfer the proceedings to the District Court.

15.  The plaintiff has invited me to reflect in the costs order the degree to which they have been successful, in particular on the question of liability.

16.  I agree that it is right to do so:

   (1)   I have been referred to On Your Mart Co Ltd v Cosway (HK) Limited (HCA 1060/2012, 11 November 2015).  In that case, Recorder Linda Chan SC referred to the decision of the Court of Appeal in Hung Fung Enterprises Holdings Ltd v Agricultural Bank of China [2012] 3 HKLRD 679 §§100-102 (Kwan JA), where it was said that (i) although the principles of Re Elgindata Ltd (No 2) [1992] 1 WLR 1207, 1214A-C continue to apply after the Civil Justice Reform, the approach these days is to regard the proposition that costs should follow the event not as a general rule but only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts on a particular case; and (ii) the rationale of this shift in approach is that the mechanistic adoption of costs follow the event principle may result in parties incurring unnecessary costs in civil litigation.

   (2)   Indeed, even in the passage in Elgindata referred to above, Nourse LJ has said that although the general rule of costs follow the event does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs.  And where the successful party raises issues or makes allegations improperly or unreasonably, the court may deprive him of his costs, or even order him to pay the whole or a party of the unsuccessful party’s costs.

   (3)   It is also said in Hung Fung §104 and On Your Mart §6 that the credibility of the witnesses and the conduct of the parties in regard to the case they allege and seek to prove is a relevant matter for a judge to take into account in dealing with costs, as he has seen and heard the witnesses and attended to the whole course of proceedings, and, therefore, is in the best position to decide one has behaved so badly in the matter as to justify that party to be deprived of costs.

   (4)   For the reasons explained in §62 of my Judgment, I regard that the defendants had acted unreasonably after 1 August 2013.  I also regard the defendants’ evidence on why there was no follow up on the defendants’ expert’s inspection highly unsatisfactory (see §17 of my Judgment). Likewise I think the defendants did not act reasonably upon the plaintiff’s repeated attempts to follow up on the issue. 

   (5)   I am of the view that the defendants have acted improperly and unreasonably in their contest of liability.  Significant time and effort have been expended (even at trial) to determine the question of liability and it is right that that be reflected in the costs order.

   (6)   Accordingly, on a rough and ready basis, I will only award 50% of their costs to the defendants in respect of periods where they should get costs.

17.  For the avoidance of doubt, I regard the defendants as the successful party in this litigation, and I reject the submission that the plaintiff has achieved something of value in the award of nominal damages.  The rectification works (which successful fixed the water leakage) had long been completed by the time of the sanctioned payment and the trial.  This judgment will also only have very limited value in future water leakage cases involving the plaintiff and the defendants given that the cause of the next water seepage may be totally different. 

18.  The unpursued claim for repairing costs also adds nothing, for the simple reason that it is unpursued. 

19.  As regards the relevance of the sanctioned payment, the plaintiff has taken a highly technical point that the sanctioned payment should be regarded as a species of sanctioned offer.  It follows (as the argument goes) that Order 22 rule 5(7) applies, such that there should be some other letter stating the matters listed in rule 5(7).  I reject this argument for the simple reason that a sanctioned payment is not a sanctioned offer, and they are plainly governed by different rules.  The sanctioned payment in the present case was accompanied by a notice in accordance with Form No 23.  I see nothing wrong with that.

20.  There is also an argument that the plaintiff has done better than the sanctioned payment because there is a judgment on liability in its favour.  I am unable to accept this argument.  I believe that in a claim for monetary damages, if the plaintiff has not been able to obtain a monetary judgment more than the sanctioned payment, and has not been able to obtain any order of real value (as I have concluded above), the plaintiff fails to obtain judgment better than the sanctioned payment.

21.  Accordingly, for the above reasons, I will make an order in terms of paragraph 12 above.

HCA 1675/2014

[2018] HKCFI [2873]

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1675 OF 2014

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J U D G M E N T

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Introduction

1.  The plaintiff is the owner of a duplex apartment known as Flat C2 in Altadena House, a well-known high-end development on Barker Road, the Peak.

2.  The 1^st defendant is the owner of another duplex apartment immediately above Flat C2, known as Flat C3.

3.  The 2^nd defendant was at all material times and still is one of the directors of the 1^st defendant, who at all material times resided at Flat C3 with his family.

4.  Both of these apartments are roughly of the same size, ie around 4600 square feet.

5.  One of the rooms (“Subject Room”) in Flat C2 is immediately below the kitchen and balcony of Flat C3.

6.  Since March 2013, there were water stains appearing at various locations at the ceiling of the Subject Room.  The affected ceiling area was around 2.00 m × 1.2 m.

7.  As will be discussed in further detail below, there is now no dispute that these water stains were caused by water leakage in Flat C3.

8.  When the water stains first appeared in March 2013, Flat C2 was let to a tenant, one Mr Kavvathas.

9.  It is convenient at this juncture to set out the relevant history of Mr Kavvathas’s occupation of Flat C2:

(1)  He had been a tenant since April 2011, and, on 8 March 2013, renewed the tenancy for a term of six months from 1 April 2013 to 30 September 2013.

(2)  On 15 October 2013, Mr Kavvathas further renewed the tenancy to 28 January 2014.

(3)  On 28 February 2014, Mr Kavvathas moved out of Flat C2.

10.  There is no dispute that after the water stains were discoveredin March 2013, the plaintiff made a report to the manager of Altadena House.  It could be seen from an event log of the manager that on 25 March 2013, a complaint was made on behalf of the plaintiff by one Miss Tam.

11.  Things progressed rather expeditiously at the beginning.  According to this event log, on 26 March 2013, the manager replied to Miss Tam and indicated that they would follow up on the matter.

12.  The next day, on 27 March 2013, according to this event log, the manager notified Mr Tam that the owner of Flat C3 had agreed to the conduct of certain tests.  It appears that originally those tests were to be conducted on 31 March 2013, but ultimately that did not happen.

13.  On 2 April 2013, upon being told that the originally scheduledtests did not happen, Miss Tam suggested that the matter be handed over to“FEHD”.  This refers to the special task force established by the Buildings Department and the Food and Environmental Hygiene Department for investigating and handling water seepage problems (“the Joint Office”).

14.  It appears that the Joint Office conducted investigations in April and May 2013.  There is no dispute that the defendants cooperated with the Joint Office in this round of investigations.

15.  Unfortunately, the Joint Office never came to a definite conclusion on the cause of the seepage.

16.  The parties’ solicitors engaged in various correspondence.  Ina letter dated 29 July 2013, the defendants’ solicitors, Messrs Lo & Lo (“LL”), stated that the defendants intended to “engage an independent professionalsurveyor to carry out a full inspection/test to find out the source/cause of the water leakage and to prepare a report with recommended solution.”  The plaintiff’s cooperation was requested.

17.  In cross-examination, the 2^nd defendant (who gave evidence for the defendants) said that:

(1)  An inspection of both Flat C2 and Flat C3 by an “expert” instructed by the defendant did take place on 1 August 2013.

(2)  However, this “expert” only took some photographs without conducting any tests; stayed only for a short time; and left without seeing much.

(3)  Also, this “expert” never produced report.

(4)  Further, somewhat bizarrely, the defendants never followed upwith this “expert”, and the 2^nd defendant cannot even remember the name of this “expert”.

18.  The plaintiff’s solicitors, Messrs Hon & Co (“HC”) followed upby letter dated 21 August 2013, and asked about the result of the defendants’ surveyor’s conclusions.  There was no reply.

19.  HC next followed up some seven months later by another letter dated 19 March 2014.  In that letter, HC observed that since the earlier letter of 21 August 2013, the matter went to sleep, yet the seepage situation had not been remedied.  It further observed that the defendants had yet to revert to the plaintiff on the result of the inspection of the defendants’ expert.  It again demanded a copy of the report of this inspection.

20.  It appears that HC followed up in March 2014 because Mr Kavvathas moved out in February 2014.  Further, as stated in HC’s letter of 19 March 2014, the plaintiff engaged contractors to undertake decoration works to Flat C2 in anticipation of a new tenant.

21.  The timing of these renovations is not entirely clear:

(1)  I have been shown a number of invoices and bills in respect of the renovation undertaken by the plaintiff, which contain various dates in 2014.

(2)  But it was said on behalf of the plaintiff that those dates might not accurately indicate the date of the renovation works, because the invoices might have been issued much later than the completion of the works.

(3)  There was also a suggestion in the witness statement of the plaintiff’s witness, Dr Cheung Lik Ching David (who was and is one of the directors of the plaintiff), that the renovation started shortly after February 2014.

22.  Ultimately, I regard the oral evidence given by Dr Cheung under cross examination as to the dates of the plaintiff’s renovation to be most reliable.  It appears that in closing submissions, both parties’ counsel were content to proceed on that basis.

23.  Dr Cheung said in cross examination that the plaintiff’s own renovation works of Flat C2 commenced in around May 2014, and such works took between 3 to 6 months.  In other words, such works would have been completed between August to November 2014.

24.  It is also important to note that Dr Cheung accepted in cross examination, and as is apparent from the breakdown in one of the invoices issued by one of the plaintiff’s contractors (one Sip Bow Kee Painting & Decoration Ltd) dated 30 October 2014, that one of the things the plaintiff caused to do in its renovation works to Flat C2 was to repaint the bedrooms. 

25.  Dr Cheung accepted in cross examination that after the renovation works undertaken by the plaintiff, the water stains in the Subject Room were no longer visible.  Further, Dr Cheung’s evidence is that after the water seepage problem was solved in January 2015, the plaintiff did not do any further painting works to the Subject Room before Flat C2 was successfully rented out.

26.  As will be discussed in further detail below, these are important facts to my determination of whether the claimed loss of rental income can be made out.

27.  As mentioned above, HC sought a copy of the report of the defendants’ “expert” by letter of 19 March 2014.  There was no reply to this letter.  By letter dated 15 April 2014, HC stated that the plaintiff had instructed its own expert (Mr Edmund Chiu) to ascertain the cause of the seepage.  An inspection by Mr Chiu of Flat C3 was requested.

28.  The defendants cooperated.  An inspection of both Flat C2 and Flat C3 took place on 28 April 2014.

29.  At the request of the defendants, the Joint Office issued a letter to the 2^nd defendant dated 23 May 2014 (“the Joint Office Letter”).  In that letter, it was said that the Joint Office had not been able to find out the exact cause of the water seepage.

30.  I must point out, however, that the 2^nd defendant’s own evidence is that the Joint Office had in early 2014 requested another round of testing to be done in Flat C3, but the defendants had refused to consent to such tests.

31.  On 9 June 2014, HC sent the report of Mr Chiu to LL.  That report stated the view that the seepage had two causes, namely (i) defectivedraining pipe in Flat C3; and (ii) failure of waterproofing work at the balcony of Flat C3.

32.  By letter dated 23 June 2014, LL indicated the defendants’ refusal to accept the conclusions of Mr Chiu.  The main reason cited was that those conclusions were contrary to Joint Office Letter.

33.  I do not regard this as a sound reason.  My reading of the Joint Office Letter is that the Joint Office was reporting that they were unable to determine the cause of the seepage.  They were not saying that they had reached a positive conclusion that the cause of the seepage could never be determined by anybody.  Hence I would not regard Mr Chiu’s conclusions as being “contrary” to the Joint Office Letter.

34.  On 26 August 2014, the plaintiff commenced the present proceedings.

35.  Meanwhile, it can be seen from visitor records of Altadena House that from September 2014 onwards, there were visits from estate agents to Flat C2.  It is therefore clear that during this time, the plaintiff had sought tenants for Flat C2.

36.  It was only in November 2014 that the defendants instructed their own expert Mr Lee Hoi Tat Nathan, who concluded in his report of 12 December 2014 that the cause of the seepage was the defective draining pipe in the kitchen of Flat C3.

37.  In the course of the trial, counsel agreed that there was no need to call either of the experts to give evidence of the precise cause of the seepage, because it is common ground that the cause was from Flat C3, ie premises owned by the 1^stdefendant and occupied by the 2^nd defendant.

38.  After Mr Lee had rendered his report, in January 2015, after a failed mediation in these proceedings, on a “without admission of liability” basis, the defendants engaged contractors nominated by the plaintiff to carry out remedial works.

39.  It is common ground that after these works, the problem was solved and there was no further seepage into the Subject Room.

40.  However, Flat C2 remained vacant for a considerable amount of time after the seepage problem was solved.  It was only let out by the plaintiff in July 2016, ie some 18 months after the remedial works.

41.  In the Statement of Claim, it is said that but for the seepage issue, the plaintiff could have earned rental income in the sum of $238,000 per month since March 2013.

42.  In the light of the evidence, it is plain that this claim cannot be sustained, because Mr Kavvathas actually remained a tenant of Flat C2 until February 2014, and that there were renovation works conducted by the plaintiff between May 2014 lasting 3 to 6 months.

43.  In the opening submissions, Mr Paul Wong (appearing for theplaintiff) sought damages for a shorter period, namely between April 2014 to January 2015.  This claim likewise suffers from the problem that it seeks damages for loss of rental income within the period of the plaintiff’s own renovation works, and for a period where there is no visitor record showing that the plaintiff had earnestly sought a tenant.

44.  In his oral opening, and also his written closing submissions, Mr Wong suggested that he would focus on the period between September 2014 and January 2015.

45.  I should mention here that I think it is reasonably plain that Mr Wong is not claiming for loss of rental income arising out of Mr Kavvathas’s departure.  He is not putting his case on the basis that butfor the water seepage, Mr Kavvathas would have remained in Flat C2 all the way up to January 2015, and beyond.  I do not think there is sufficient evidence supporting such a contention anyway. 

46.  Rather, Mr Wong’s case is that but for the water seepage, Flat C2 would have been let out to another tenant in the period between September 2014 and January 2015.

47.  The plaintiff’s valuation expert opined that the monthly rent forFlat C2 in that period was $231,000.  The parties have agreed that there isno need for the valuation expert to be called to give evidence.  Accordingly, I proceed on the basis that this figure it is not challenged.

The issues

48.  In my view, there are two issues in this case:

(1)  First, I will have to determine whether the defendants are liable for breaching the Deed of Mutual Covenants (“DMC”) of Altadena House and/or has committed nuisance or negligence in respect of the water seepage.

(2)  If so, whether the plaintiff has proved the damages claimed.

Liability of the defendants

49.  Mr Wong relies on three causes of action, ie the breach of the DMC, common law nuisance and negligence.

50.  I would first make clear that only the 1^st defendant (but not the 2^nd defendant), being the registered owner of Flat C3, is a party to the DMC.  In other words, whilst the 1^stdefendant can be liable for breach of the DMC, I do not think the 2^nd defendant can be so liable.

51.  However, the 2^nd defendant is an occupier of Flat C3, and hence can be liable for nuisance or negligence.

52.  It is also to be noted that the 2^nd defendant is a director of the 1^stdefendant.  But there is no plea or submission that he should not be independently liable because he only committed the torts alleged against him in his capacity as an officer of the 1^stdefendant company.

53.  In respect of the DMC, the Second Schedule contains the following provisions:

(1)  Clause 3(a) requires 1^stdefendant “to keep the interior … ingood repair and condition and to maintain the same in a manner consistent with the preservation of the said premises [meaning the land on which Altadena House stands] and building as a high class residential estate ….”

(2)  Clause 6(a) requires the 1^st defendant “not to … cause or permit or suffer to be done any act or thing in [FlatC3] … which may be or become a nuisance or annoyance to or cause damage to other owners and occupiers of the said premises and building.”

54.  In respect of common law nuisance, Mr Wong relies on 張秀玲 v 鄭禮莊 (CACV 268/1998, 9 April 1999) for the propositions that: 

(1)  An owner of premises from which water seepage occurred is liable in nuisance if he has notice that the seepage came from his premises and has failed to take reasonable steps to rectify the seepage within reasonable time.

(2)  For these purposes, the owner has notice if he has actual knowledge, or if he would acquire actual knowledge if he had applied usual and reasonable diligence.

55.  Regarding negligence, Mr Wong drew my attention to Clerk & Lindsell on Torts (22^ndedn, 2018) §22-40, where it is said that:

“ If the defendant knew or ought to have known that in consequenceof his conduct harm to his neighbour was reasonably foreseeable, he is under a duty of care to prevent such consequences as are reasonably foreseeable. In such case the defendant is liable because he is considered negligent in relation to his neighbour, and here nuisance and negligence coincide. Whether his liability is described as falling under one legal rubric or the other would seem to be only a difference of words.”

56.  In respect of occupiers, in §22-42, it is said that:

“ If the occupier knows or ought to know of such a nuisance, and the possibility of damage occurring in consequence is a real risk, he must take such positive action as a reasonable person, in his position and circumstances, would consider necessary to eliminate the nuisance.”

57.  I do not understand these principles to be disputed by Mr Philip Chan (who appeared for the defendants alongside Mr Andy Mak).

58.  Mr Wong also made clear that his case is that the defendants had notice that the water seepage originated from Flat C3 because they failed to apply reasonable diligence after March 2013.  It is not part of his case that allowing Flat C3 to fall into disrepair was in itself wrongful.

59.  The question, therefore, is whether the defendants had notice of the fact that the water seepage came from Flat C3 before January 2015.

60.  The pleaded case of the plaintiff is that the defendants had committed nuisance and negligence since March 2013.

61.  I, however, do not think that the defendants had acted unreasonably since as early as March 2013:

(1)  As mentioned above, when the seepage issue was first drawn to their attention in March 2013, the defendants cooperated in arranging inspections by the Joint Office.

(2)  But the Joint Office never came to a definitive view as to the source of the seepage.

(3)  Indeed, as mentioned above, in July 2013, the defendants took the initiative to suggest that an expert be instructed to inspect both Flat C2 and Flat C3, and that inspection took place on 1 August 2013.

62.  I am of the view that the defendants acted unreasonably since the inspection on 1 August 2013:

(1)  By that date, the defendants had (in my view rightly) formed the view that an expert ought to be instructed to see whether the seepage came from Flat C3.

(2)  The defendants went so far as instructing an “expert” and organising an inspection of both properties.

(3)  However, according to the 2^nd defendant’s evidence, the “expert” he found undertook the most perfunctory inspection, and produced no report whatsoever.

(4)  Yet, inexplicably, the defendants did not follow up with the “expert”, despite repeated requests for a report by HC.  The 2^nd defendant even said in cross examination that he had forgotten the name of the “expert”.

(5)  In sum, although the defendants had by 1 August 2013 realisedand appreciated the real possibility that the seepage came fromFlat C3, and hence an expert should be instructed to ascertainwhether that was so, they failed to act reasonably in following up on the matter.

(6)  Indeed, as mentioned above, after it became apparent that the defendants were not going to produce any report from this “expert”, the plaintiff arranged for their own expert to inspect the two properties.

(7)  Yet, although the defendants cooperated in the inspection, andalthough they were sent the plaintiff’s expert report in June 2014,they did not accept those conclusions, and only instructed their own expert in November 2014.

(8)  Further, the defendants did not undertake, or cooperate in the undertaking of, remedial works until January 2015.

(9)  As discussed above, I am not persuaded that this inaction was justified by the Joint Office Letter.

63.  For these reasons, I am of the view that:

(1)  The 1^st defendant had acted in breach of the DMC from 1 August 2013 to January 2015.

(2)  Both defendants had committed nuisance and were negligent from 1 August 2013 to January 2015.

64.  As will be discussed in further detail in the next section, I am however of the view that the plaintiff has not been able to show substantial pecuniary damage arising out of the above.

65.  There is no dispute that a breach of DMC (being a breach of contract) can be made out despite the absence of proof of substantial damage. In such a case, nominal damages will be awarded for breach of contract.

66.  Mr Wong submitted that this is the same for the torts of nuisance and negligence.  He referred me to Born Chief Co v George Tsai [1996] 2 HKLRD 188, where the Court of Appeal awarded nominal damages for nuisance and negligence (overturning the trial judge's order for damages to be assessed by a master).

67.  Mr Wong submitted, and I agree, that where it is obvious that some damage has been caused, but the plaintiff has failed to prove the actual figure to be attributed to this damage, then the correct conclusion is that liability is established, but only nominal damages should be awarded.

68.  Mr Wong submitted, and again I agree, that in the present case, the water seepage has caused damage to the plaintiff at least to the extent of damaging the ceiling of the Subject Room in Flat C2.  The plaintiff has not attempted to put a monetary figure on this damage, but this does not mean that no damage is caused.

69.  For these reasons, I award nominal damages of $10 to the plaintiff against both defendants.

Loss of rental income

70.  Both parties agree, I think rightly, that the plaintiff bears the burden of proof that the wrongs complained of caused the loss claimed.  In other words, the plaintiff has to show that but for the water seepage, it would have been able to earn the rental income claimed between September 2014 to January 2015.

71.  In my judgment, the plaintiff has failed to do that.

72.  As noted above, Dr Cheung’s evidence is that the plaintiff had undertaken renovation works to Flat C2 from May 2014 to sometime between August and November 2014.

73.  I am of the view that during this period of renovation works, undertaken at the plaintiff’s own initiative to improve the quality of its property, it cannot be said that on the balance of probabilities, if there was no water seepage, the plaintiff would have been able to secure a tenant.

74.  After these renovation works, as noted above, Dr Cheung’s evidence is that the water stains had been painted over, and hence the signs of water seepage would not have been visible to any prospective tenant coming to inspect Flat C2.

75.  So how could the water stains or the water seepage affect the plaintiff’s ability to rent out Flat C2?

76.  Dr Cheung said that he believed that prospective tenants would have been able to find out about the water seepage problem despite the fact that it was not visible.  He speculated that the prospective tenants would have asked the caretakers of Altadena House whether there were previous problems about Flat C2.

77.  But there is absolutely no evidence to this effect.  Indeed Dr Cheung accepted that he had not even enquired with the caretakers of Altadena House to see whether any such enquiries had been made by prospective tenants.

78.  In closing submissions, Mr Wong invited me to take judicial notice of the fact that prospective tenants would normally ask estate agents about previous problems of a property.  I refuse to do so:

(1)  First, although it is possible for the court to take judicial noticeof commonly known matters without evidence, I do not think the fact that prospective tenants would ask estate agents about potential problems with a property is something that is so commonly known that I can simply assume without evidence.

(2)  Secondly, there is not even evidence that any estate agent had enquired with the plaintiff as to whether there were previous problems with Flat C2.  Indeed, there is no evidence coming from any estate agent.  If enquiries had been made by prospective tenants with an estate agent, one would have thought that the estate agent would have asked the owner (rather than just the management office) whether there were previous problems with Flat C2 worth mentioning.

(3)  Thirdly, Dr Cheung’s evidence was that before the water seepage problem was remedied in January 2015, there was oneperson who was interested in renting Flat C2.  But there is no evidence that the water seepage problem was known to this person, or that it featured in any discussion between him/her and the plaintiff in any way.

79.  Another powerful factor against the plaintiff is that even after the problem was remedied in January 2015, it took another 18 months before Flat C2 was let out.

80.  When this point was put to Dr Cheung, he said that rental was not a simple matter, he was not expert in leasing properties, and he could only set a target but one does not find a tenant every day.  That, to me, would mean that it cannot be said with any degree of confidence that Flat C2 could have been let out between September 2014 and January 2015 if the water seepage problem did not exist.

81.  In these circumstances, I am not satisfied that the plaintiff hasdemonstrated on the balance of probabilities that without the water seepage, it would have been able to secure a tenant for Flat C2 between April 2014 or September 2014 and January 2015.

Conclusion

82.  For the above reasons, I would order that the defendants do pay nominal damages of $10 to be plaintiff.

83.  I would give the following directions for parties to submit on the proper costs order:

(1)  The defendants do file written submissions on costs within the next 14 days.

(2)  The plaintiff do file written submissions on costs within 14 days thereafter.

(3)  The defendants do file reply submissions on costs within 7 days thereafter.

(4)  Unless the court otherwise directs, the costs order will be settled by the court on paper.

84.  It remains for me to thank counsel for their assistance.

HCA 1675/2014

[2018] HKCFI 2870

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1675 OF 2014

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____________

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DECISION ON COSTS

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1.  By a decision handed down on 16 May 2017 (“Decision”), I allowed, to a limited extent, the defendants’ appeal against Master Chow’s order dated 26 January 2017, which (1) allowed the Interrogatories Summons (using the abbreviations adopted in the Decision); (2) dismissed the Discovery Summons; and (3) ordered the defendant to pay the plaintiff’s costs summarily assessed at HK$95,000.

2.  In summary:

(1)  In respect of the Discovery Summons, I ordered the plaintiff to disclose the work programme/schedule and contractor’s debit note(s) relating to the renovation works mentioned in paragraph 8 of Ms Tam’s first witness statement, which would show the date of completion of such works.  I dismissed the defendants’ appeal concerning the other Subject Documents[1].

(2)  In respect of the Interrogatories Summons,I held that the plaintiff should answer on what date the said renovation works were completed under Interrogatory 3.  I dismissed the defendant’s appeal concerning the whole of Interrogatory 4[2] and the rest of Interrogatory 3.[3]

3.  In anticipation of arguments as to the incidence and/or apportionment of costs following the defendants’ very limited success, I directed the parties to file and serve written submissions on costs.

The parties’ respective costs position

4.  The defendants propose that the parties should bear their own costs in relation to both summonses both below and on appeal.  The defendants essentially regard themselves as the successful party in relation to both summonses but also acknowledge that the plaintiff did manage to resist certain aspects of the appeal.  It is suggested on behalf of the defendants that the time and efforts spent by the parties on the arguments in which they had respectively succeeded or failed were more or less the same.

5.  On the other hand, the plaintiff seeks affirmation of the costs order made by the master and asks for 90% of its costs of the appeal.  The plaintiff takes issue with the defendants’ claim to be the successful party.  Much of the appeal hearing was spent on the relevance and necessity of the documents and information sought by the defendants.  The defendants had lost in all their arguments save in the said limited aspect.  Speaking in the overall sense, the defendants had failed to establish their case.

Principles

6.  Costs is in the court’s discretion, to be exercised judicially: see s 52A(1) of the High Court Ordinance (Cap 4) and Order 62 rule 2(4) of the Rules of the High Court (Cap 4A).

7.  Following the Civil Justice Reform, the general rule of costs following the events no longer applies in interlocutory proceedings.  In this regard, Order 62 rule 3(2A) provides:

“(2A) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.”

8.  As summarised by To J in Melvin Waxman v Li Fei Yu, HCA 1972/2012 (unreported), 11 September 2013 at [19] (which I cited in agreement in Daimler AG vHelge Herbert Leiduck, appointed by Order to represent the estate of Herbert Heinz Horst Leiduck, deceased [2018] 1 HKLRD 1188 at [7]):

“Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.”

9.  Order 62 rule 5(1) sets out the matters that the court shall take into account in exercising the discretion as to costs including the following:

(1)  the underlying objectives set out in Order 1A, rule 1;

(2)  any offers made (unless they were made in circumstances when sanctioned payment or sanctioned offer could have been but was not made);

(3)  conduct of the parties; and

(4)  whether a party has succeeded on part of his case, even if he has not been wholly successful.

10.  With regard to “conduct of the parties”, according to Order 62 rule 5(2)(a), it includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue.

Discussion

11.  The defendants may, on one view, be regarded as the successful party in the appeal because it was allowed, albeit to a limited extent. 

12.  However, the plaintiff is right that the appeal hearing was almost entirely concerned with Interrogatory 4 and those aspects of Interrogatory 3 and the Discovery Summons on which I had ruled against the defendants.

13.  In this connection, first, insofar as the period in dispute (i.e. February 2015 to July 2016) is concerned, Interrogatory 4 had no merit whatsoever.  It ignored the fact that the plaintiff has made no claim for loss of rental income after January 2015.  Further, the premises underlying it also went against the evidence that had already surfaced, including the 2^nd defendant’s own witness statement.  See paragraph 32 of the Decision.  The plaintiff acted properly in refusing to answer Interrogatory 4 save to the extent mentioned in paragraph 16 of the Decision, which answer should have been accepted by the defendants as disposing of the interrogatory.  By persisting in the rest of such interrogatory, the defendants rendered it necessary for the plaintiff to come to court by taking out the Interrogatory Summons.

14.  Second, the Discovery Summons and Interrogatory 3, which were couched in unnecessarily wide terms, were essentially aimed at obtaining the same information.  It was a misconceived effort.  They likewise covered a period of time in respect of which the plaintiff makes no claim for any loss of rental income.  In any event, the reasons for which such information was said to be relevant and necessary did not stand up to scrutiny.  See paragraphs 25, 26 and 28 of the Decision.  As in the case of Interrogatory 4, the plaintiff could not be blamed for opposing Interrogatory 4 or the Discovery Summons, as they were drafted.

15.  In the circumstances, a fair costs order should reflect the defendants’ defeat for almost all their requests under the interrogatories and the Discovery Summons.

16.  For these reasons, I order the defendants to pay 90% of the plaintiff’s costs both below and on appeal.  I fail to see any reason to distinguish between the proceedings below and before me.  As Master Chow had already summarily assessed the plaintiff’s costs below at HK$95,000, I will vary the costs order she made by ordering the defendants to pay HK$85,500 (i.e. HK$95,000 x 90%) to the plaintiff for its costs of the Interrogatories Summons and the Discovery Summons before the master.  To facilitate the summary assessment of 90% of the plaintiff’s costs of the appeal, I direct the plaintiff to file and serve a statement of its costs within 14 days from today and the defendants to file and serve their statement of objections (if any) within 14 days thereafter.

HCA 1675/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1675 OF 2014

____________

____________

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D E C I S I O N

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1.  Before the court is the defendants’ appeal against Master Chow’s Order dated 26 January 2017:

(1) allowing the plaintiff’s summons dated 19 July 2016 (“Interrogatories Summons”) for the withdrawal of interrogatory numbered 3 (“Interrogatory 3”) and variation of interrogatory numbered 4 (“Interrogatory 4”) served by the defendants on the plaintiff without leave; and

(2) dismissing the defendants’ summons dated 27 July 2016 (“Discovery Summons”) for specific discovery of 1 class of documents.

Relevant background

2.  The facts and circumstances underlying this action and the applications giving rise to this appeal can be summarised shortly as follows.

3.  The plaintiff and the 1^st defendant are and were at all material times the respective owners of Flat C2 on the 3^rd & 4^th Floors (“Flat C2”) and Flat C3 on the 5^th and 6^th Floors (“Flat C3”) of Altadena House, 27 Barker Road.  The 2^nd defendant is a director of the 1^st defendant and has been in occupation of Flat C3.

4.  Each of Flats C2 and C3 is a duplex apartment with the upper level of Flat C2 (the plaintiff’s flat) immediately below the lower level of Flat C3 (the 1^st defendant’s flat).  The saleable area of each of these flats is about 378.4 square metres.

5.  Beginning from about early March 2013, signs of water seepage started to show in one of the rooms on the upper level of Flat C2 in that an area of about 2 m x 1.2 m in a corner of the ceiling near the windows appeared to be soaked and a smaller site of about 0.9 m x 0.9 m within that area was further affected by moss and peeled ceiling paint.

6.  It is common ground that the water seepage was caused by leakage of the concealed kitchen sink drainage pipe at Flat C3.  However, the plaintiff further maintains, but the defendants deny, that the water seepage also resulted from the failure of waterproofing work at the balcony floor area and the triangular drainage area of the balcony right outside the kitchen of Flat C3.

7.  Despite the disagreement on the cause(s) of the water seepage, after the issue of the writ of summons herein and following a mediation in December 2014, on a without admission of liability basis, the concealed kitchen sink drainage pipe at Flat C3 was replaced and the waterproofing work at the balcony floor area and the triangular drainage area of the balcony right outside the kitchen of Flat C3 was re-done at the defendants’ costs (altogether $24,000 which the defendants have duly paid). Such works were completed in about late January 2015, after which the water seepage has not recurred.

8.  For present purposes, we are concerned only with the plaintiff’s case on damages. 

9.  When the water seepage was first discovered, Flat C2 was being occupied by a tenant who, according to paragraph 4 of the first witness statement dated 4 March 2016 of the plaintiff’s property manageress Tam Suk Wai Kenny (“Ms Tam”), first entered into occupation on 1 April 2011.  Such tenant apparently renewed the tenancy agreement on 8 March 2013 for a further term of 6 months from 1 April to 30 September 2013 at $238,000 per month inclusive of government rent and rates and management charges, which term was then twice extended until 28 February 2014 when the tenant moved out. 

10.  It is the plaintiff’s case on damages that had the water seepage and damage to Flat C2 not occurred, it should and would have secured a new tenant in about one month’s time after the old tenant moved out (which period was also required for the flat to be touched up), i.e. by 1 April 2014.  However, the water seepage and damage had rendered the room affected “uninhabitable” or “unusable” which had in turn made it impossible for the plaintiff to attract a new tenant after the departure of the old tenant so that Flat C2 was left vacant from March 2014 until July 2016.[1] The plaintiff claims damages for loss of rental from the 10-month period from April 2014 to January 2015 (after the water seepage stopped) at the monthly rate of $231,000.[2]

11.  The loss of rental claim is hotly contested by the defendants who dispute that the relatively small area affected by water seepage (2.4 square metres) had rendered either Flat C2 or the room in question uninhabitable or unusable or affected or materially affected the plaintiff’s prospect of renting out Flat C2 after 28 February 2014. 

12.  The defendants also deny that the plaintiff had taken any or any reasonable or proper steps to have Flat C2 let out after the old tenant had moved out.

13.  Although the defendants have not pleaded any positive case as to what prevented the plaintiff from re-letting Flat C2, in support of Interrogatory 3 and the Discovery Summons, the defendants consider the plaintiff’s allegation that it was unable to secure a tenant for Flat C2 solely because of the relatively minor water seepage identified in the statement of claim to be defying logic and common sense.  The defendants point to the minimal area affected by the water seepage; the fact that the plaintiff’s old tenant chose to stay on for nearly a year after discovery of the water seepage in early March 2013 and after the expiry of the original tenancy on 31 March 2013; and the further fact that the plaintiff only managed to let out Flat C2 again in July 2016 after the water seepage had long stopped following the rectification works in January 2015 and further after having undertaken substantial “upgrading” works to Flat C2 lasting at least from November 2015 to February 2016 (paragraph 23(3) and (4) below).  The defendants hence surmise that there were reason(s), other than the water seepage, that caused Flat C2 to remain vacant after the old tenant had moved out in late February 2014.

The interrogatories objected to

14.  Against this background, on 5 July 2016, the defendants served on the plaintiff interrogatories which included the following:

(1) Interrogatory 3:

“Other than the renovation of the C2 Flat mentioned in paragraph 8 of Ms Tam’s Statement, was there any renovation, decoration, repair, maintenance and fitting out works carried out at the C2 Flat during the period from 1 March 2014 to the time when the C2 Flat was rented out/sold or to date (whichever is earlier)? If the answer is in the affirmative, please give full particulars thereof, including full description of the works done, the time and duration when the works were carried out and the costs of such works.”

(2) Interrogatory 4:

“Provide a table showing the state of occupation of the C2 Flat from 1 March 2014 to date, including:

(1) the name of the person or entity in occupation;

(2) the relationship of such entity with the plaintiff;

(3) the duration of occupation by such person or entity;

(4) the amount of rent or fees payable, and paid, by such person or entity to the Plaintiff for such occupation.”

15.  To put these interrogatories in context, paragraph 8 of Ms Tam’s first witness statement reads as follows:

“Once the last tenant moved out in around late February 2014, I immediately organised the renovation of the Premises in anticipation of receiving new tenant on or before 1^st April 2014. The walls were painted and generally cleaning up the place. However, the dampness and water stains described in the pleadings relating to the 4^th Floor of the Premises recurred shortly. It follows that the same cannot be rectified within the Premises except with the cooperation of Mr. Wong,[3] the owner of the premises, as the seepage from upstairs, and not elsewhere.”

16.  By Ms Tam’s affirmation dated 19 July 2016, the plaintiff declined to answer Interrogatory 3 and answered Interrogatory 4 only to the extent of saying that no person or entity was in occupation of Flat C2 between March 2014 and January 2015.

17.  The plaintiff takes the view that, save as answered as aforesaid, Interrogatories 3 and 4 are “irrelevant and fishing” and “not necessary for disposing fairly of the matter or saving costs”.  More particularly:

(1) With regard to Interrogatory 3, Ms Tam made this point in paragraph 4 of her 2^nd affirmation also dated 19 July 2016: “The other renovation, decoration, repair etc works have no bearing [on] the sources of the water seepage problem being complained of in this legal action, and also form no part of the loss and damages claimed by the Plaintiff.” 

(2) With regard to Interrogatory 4, the plaintiff reiterates that it is claiming damages for loss of rental up to January 2015 only.  The state of occupation of Flat C2 after January 2015 is therefore irrelevant.

18.  By the Interrogatory Summons issued on the same date, supported by Ms Tam’s said 2^nd affirmation, the plaintiff applied for an order that Interrogatory 3 be withdrawn and Interrogatory 4 be amended in 2 respects: the revision of the period covered to that from March 2014 to January 2015 and the deletion of the question in sub-paragraph (b).

The documents sought

19.  In the meantime, closely related to Interrogatory 3, the defendants demanded specific discovery by the plaintiff of the following documents (“Subject Documents”):[4]

“all quotations, agreements, contracts, works programmes/schedules, drawings, plans, photographs, debit notes, demand notes, payment vouchers, cheques/deposit slips/remittance records for payment, receipts for payment for all renovation, decoration, repair, maintenance and fitting out works carried out in the C2 Flat from 1 March 2014 until the C2 Flat was let out/sold or to date (whichever is earlier)”.

In short, the defendants want to see all documents relating to all renovation works done to Flat C2 after the departure of the plaintiff’s old tenant on 28 February 2014 and before the entry of the new tenant on 1 August 2016.

20.  In support of the Discovery Summons, the 2^nd defendant in his affirmation dated 27 July 2016:

 (1) deduced from paragraph 4 of Ms Tam’s said 2^nd affirmation (paragraph 17(1) above) that apart from the renovation work mentioned in paragraph 8 of Ms Tam’s first witness statement, Flat C2 had undergone other renovation, decoration, repair, maintenance and fitting out works at some time during the period from 1 March 2014 until it was let out again and that the plaintiff would have in its possession custody or power the Subject Documents;

 (2) suggested that the Subject Documents are relevant to:

 (a) whether there was any water seepage or defect at Flat C2 (other than those mentioned in the statement of claim) which prevented Flat C2 from being rented out;

 (b) whether the carrying out of renovation, decoration, repair, maintenance or fitting out works at Flat C2 prevented Flat C2 from being rented out; and

 (c) whether the plaintiff intended to rent out Flat C2.

21.  In opposing the Discovery Summons, Ms Tam said in her 3^rd affirmation dated 15 August 2016 the following:

“4. … The Plaintiff never claimed that there was other seepage or any defect elsewhere which prevented the renting of the C3 (sic) Flat. …

5. … Whilst it is true that I did mention certain “renovation” was carried out in around March 2014 in anticipation of receiving a new tenant in paragraph 8 of my first witness statement, such “renovation” is of “touch up” nature and very minimal works which are done almost every time whenever a tenant left the C2 Flat upon termination or expiry of the relevant tenancies. Of course, such renovation was wasted owing to the fact that the water seepage persisted at that time. …

6. … If the Discovery Summons is entertained, the Plaintiff will incur substantial times and costs in retrieving essentially all “touching up” works in different periods (while the Plaintiff was waiting for potential tenant) but all these works are not concerned with rectifying any water seepage problem in other area at all. The Plaintiff cannot accept that unnecessary time and costs should be incurred for entertaining the Discovery Summons.”

Discovery Summons

22.  It is trite that the court does not order specific discovery unless

(1) First, the document or class of documents sought is in existence.

(2) Second, the party against whom the document or class of documents is sought has or had the same in his possession, custody or power.

(3) Third, the document or class of documents sought relates to a matter in which in the action, in the sense that it is reasonable to suppose that it contains information which may either (1) directly or indirectly enable the applicant either to advance his own case or to damage that of his adversary, or (2) fairly lead to a train of inquiry which may have the consequences of either advancing the applicant’s case or damaging that of his adversary (per Brett LJin Campagnie Financiere Commercial Du Pacifique v The Peruvian Guano Co (1882) 11 QB 55 at 63).

(4) Fourth, discovery of the document or class of documents is necessary for either disposing fairly of the cause or saving costs (Order 24, rule 8).

See, for instance, Lee Nui Foon v Ocean Park Corp (No 1) [1995] 2 HKC 390, per Cheung J (as he then was) at 391H-392G.

23.  I am prepared to find a prima facie case that the Subject Documents are in existence and that the plaintiff has or has had the same in its possession, custody or power.  I so find having regard to the following evidence: -

(1) paragraph 8 of Ms Tam’s first witness statement (paragraph 15 above);

(2) paragraph 6 of Ms Tam’s third affirmation (paragraph 21 above) which may be read as suggesting that renovation works, other those mentioned in paragraph 8 of her first witness statement, might been done to Flat C2;

(3) paragraph 36 of the 2^nd defendant’s witness statement dated 2 March 2016 that they heard a lot of noise, which was like noise of renovation, coming from Flat C2 between November and December 2015 which suggests that substantial renovation of Flat C2 was carried out by the plaintiff in that period; and

(4) what appears to be a 5 page document appended to the Tenancy Agreement dated 15 July 2016 entered into by the plaintiff in respect of Flat C2 and comprising an “Equipment List”, a “Sanitary Fitment List”, a “Light List” and a “Material Schedule”.  Though the full address of Flat C2 is not shown, each such list/schedule shows the name “AVT CONTRACTING”, the plaintiff’s name and the projection description “upgrading of a duplex residence” and the address “27 Barker Road”.  The “Sanitary Fitment List” bears the date of 13 February 2016.

24.  I now turn to the relevance and necessity of the Subject Documents, on which Mr Lee Ting Ming, counsel for the defendants, advances the same arguments on the basis that the Subject Documents are necessary for disposing of this action fairly because they are relevant.  I propose also to address these 2 requirements together.  An application for specific discovery can be refused under the ‘necessity’ limb if the probative value of the documents sought would be so slight as not to justify the inconvenience of giving discovery: Hong Kong Civil Procedure 2017, Volume 1, paragraph 24/7/1.  In this case, it will be seen that, with one exception (paragraph 27 below), I think so little of the evidential contribution of the Subject Documents on the issues to which they are said to be relevant that I doubt if they can, even in the generous Peruvian Guano sense, be properly described as relevant.

25.  According to Mr Lee, the Subject Documents are expected to show the nature, details and timing of, and the time taken by, the renovation works required by, and undertaken by the plaintiff at, Flat C2 from March 2014 to July 2016 and are, thus, “highly” relevant to (and, therefore, necessary for the disposal of) the plaintiff’s claim for loss of rental income from 1 March 2014 to 31 January 2015.

26.  Paragraph 24 of Mr Lee’s Skeleton Submissions, by which counsel elaborates on how the “relevance” requirement is fulfilled, runs to 4½ pages.  The many sub-paragraphs and sub-sub-paragraphs thereof are somewhat repetitive.  I believe they can, on closer analysis, be distilled into the following points:

(1) First, the Subject Documents would contain details of the nature and contents of the works done to Flat C2 after the old tenant moved out on 28 February 2014 and before the new tenant moved in on 1 August 2016 which would reveal:

(a) the condition of the part of Flat C2 that was affected by the water seepage mentioned in the statement of claim which would, in turn, be relevant to the question whether such damage would render Flat C2 not capable of being re-let;

(b) whether there were other defects in Flat C2 which rendered the plaintiff unable to find a new tenant for Flat C2 or whether Flat C2 would have required substantial renovation anyway before the plaintiff could have found a new tenant therefor which go to the question whether the water seepage was, as the plaintiff claims, the sole cause for the plaintiff not being able to find a new tenant from March 2014 to January 2015.

(2) Second, they would reveal when the plaintiff began and finished the allegedly “minimal” “touch up” renovation works undertaken “in anticipation of receiving new tenant” in March / April 2014 and the other “touching up” works undertaken by the plaintiff at times other than in March / April 2014.  Such timing would go to the following questions:

(a) whether the plaintiff really wanted to have Flat C2 let out as soon as the old tenant moved out on 28 February 2014 bearing in mind the plaintiff’s evidence that it would carry out “touch up” renovation almost every time whenever a tenant left Flat C2 after the termination or expiry of a tenancy agreement in preparation for receiving a new tenant;

(b) whether Flat C2 could really be ready for receiving a new tenant by 1 April 2014;

(c) whether the 1 month period allowed by the plaintiff for finding a replacement tenant was sufficient or reasonable.

27.  I can see the relevance and necessity of the date of completion of the “minimal” “touch up” renovation works said to have been done by the plaintiff to Flat C2 in March / April 2014 in preparation for the entry of a new tenant to the question of whether Flat C2 was actually tenant ready by 1 April 2014, as claimed by the plaintiff.

28.  However, other than this, I am not with Mr Lee. 

(1) First, I doubt if one can gauge the condition of the spot affected by the water seepage or whether Flat C2 had been rendered not lettable by such condition just from checking what works (if any) the plaintiff had done to the same.  In any event, there is no need to resort to such indirect evidence.  There are 3 photographs of the spot in question taken in late April 2014 and appended to the Supplemental Joint Statement of Building Survey Experts dated 30 August 2016, from which one can see clearly the condition of the water damaged area.

(2) Second, whether a property is lettable or tenant ready is not a matter of absolute standard.  Rather, one would expect the matter to be relative varying from tenant to tenant and multifactorial depending on a number of factors of which the standard to which the property is renovated may just be one.  To my mind, for instance, it does not follow from the fact that Flat C2 had undergone a somewhat substantial upgrading renovation in late 2015 and early 2016 before it was eventually let out in July 2016 that Flat C2 was not lettable or tenant ready before such renovation.

(3) Third, I fail to see how one can draw any or any reliable inference as to whether the plaintiff intended to let out Flat C2 at any stage just from verifying what (if any) renovation works it had caused to be done to Flat C2.

29.  To conclude, I am prepared to allow the defendants’ appeal in respect of the Discovery Summons only to the limited extent of requiring the plaintiff to disclose the work programme/schedule and contractor’s debit note(s) relating to the renovation works mentioned in paragraph 8 of Ms Tam’s first witness statement.  As far as I can see, of all the documents identified by the defendants, these are the only ones that are likely to show the completion date of the works.

Interrogatories Summons

30.  It is well settled that the party seeking to interrogate has to demonstrate that the interrogatories are both relevant (in a sense similar to that under the Peruvian Guano test) and necessary (either for the fair disposal of the cause or matter or for saving costs).  See, for example, Kao Lee & Yip v Koo Hoi Yan, HCA 8847/1993, unreported, 23 April 2001, per Ma J (as he then was) at [7].

31.  Given the overlapping requirements of ‘relevance’ and ‘necessity’ and the close relation between the Subject Documents and Interrogatory 3, Mr Lee’s submissions on, and my reasons for allowing to a minor extent, the appeal in respect of the Discovery Summons apply equally to Interrogatory 3.

32.  As for Interrogatory 4, Mr Lee contends that if Flat C2 had been used by the plaintiff or someone related to or associated with the plaintiff from February 2015 to July 2016, it would throw light on whether the plaintiff had really intended all along to have Flat C2 rented out after the old tenant had moved out.  With respect:

(1) The plaintiff makes no claim for loss of rental income after January 2015.

(2) The defendants have not shown any evidential basis for even suspecting that Flat C2 was not vacant for any time after January 2015.

(3) Indeed, in paragraph 34 of his witness statement (made in March 2016), the 2^nd defendant relays his observation (which he is well able to make) that Flat C2 had remained vacant for over a year since the completion of the rectification works in January 2015.

(4) There is ample evidence in the form of visitors logs kept by the management office of Altadena House, recording visits by various estate agents to Flat C2 with potential tenants for the purposes of viewing the premises throughout the material period of time.

33.  To conclude, as in the case of the appeal in respect of the Discovery Summons, I allow the appeal in respect of the Interrogatory Summons only to the limited extent that the plaintiff should answer on what date the renovation works mentioned in paragraph 8 of Ms Tam’s first witness statement were completed under Interrogatory 3.

34.  Given the defendants’ limited success, I expect arguments to arise as to the incidence and/or apportionment of costs.  Instead of making an order nisi, I direct the parties to file and serve written submissions on costs as follows: the defendants within 14 days from today; the plaintiff within 14 days thereafter and the defendants to reply within 14 days thereafter.