KO PHILIP ZHI YAO v. THE INCORPORATED OWNERS OF HAMBURG VILLA

DCCJ 5363/2020

[2024] HKDC 1388

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5363 OF 2020

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BETWEEN

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DECISION

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Introduction

1.  This is the decision in respect of the plaintiff’s application dated 16 February 2024 for varying the cost order nisi in the judgment dated 5 February 2024 (“Judgment”)[1], whereby it was ordered that:

(a) There be a monetary judgment in the sum of $173,648.00 (“Judgment Sum”);

(b) Interest on the judgment sum shall accrue from the date of the writ to the date of payment at the judgment rate; and

(c) There be an order nisi that half of the costs of the plaintiff shall be paid by the IO, with certificate for Counsel, to be taxed if not agreed.

2.  On 16 February 2024, the plaintiff filed a summons (“Summons”) seeking to vary the cost order nisi to the effect that:

(a) The defendant do pay the plaintiff all (as opposed to half) costs of this action (a) on a party and party basis up to 20 May 2022, and (b) from 21 May 2022 on an indemnity basis, including all costs reserved with certificate for counsel, to be taxed if not agreed;

(b) The defendant do pay the plaintiff enhanced interest on the Judgment Sum at 10% above judgment rate from 21 May 2022 until the date of the judgment;

(c) The defendant do pay the plaintiff interest on the Judgment Sum at prime rate plus 10% per annum from the date of the service of the Writ on 6 October 2020 until 20 May 2022, and at judgment rate from date of the Judgment until payment; and

(d) The defendant do pay the plaintiff interest on costs incurred in this action from 21 May 2022 at half of the enhanced interest rate provided for in paragraph 1(2) above, such interest to accrue from 21 May 2022 until the date of judgment.

3.  The plaintiff also seeks costs of the Summons with certificate for one counsel on an indemnity basis, to be taxed if not agreed.

Parties’ negotiations

4.  The plaintiff’s main basis in support of the Summons is the second sanctioned offer made in compliance with Order 22 of the Rules of the District Court, Cap 336H (“RDC”), on 22 April 2022 (“2^nd SO”), whereby the plaintiff offered to settle the action by a payment of $5,000 from the IO. The last date of accepting the 2^nd SO was 20 May 2024, hence the temporal dividing line for the various reliefs set out in the Summons.

5.  Both parties have extensively referred to various events in relation to the negotiations. To put the 2^nd SO in context, such events are summarized as follows:

(a) The present proceedings were commenced on 6 October 2020.

(b) On 28 December 2020, upon reviewing the Defence filed by the IO, the plaintiff made a Calderbank offer to the IO, proposing terms of settlement to the effect that the IO should arrange for the walls of the Lightwell as well as the B5 Stairwell to be repaired and re-waterproofed, and the plaintiff should arrange (at the IO’s costs) an expert to examine the work afterwards (“1^st CO”). The plaintiff also left the question of legal fees, costs, and other expenses open and stated that he was “willing to consider a reasonable proposal from [the IO]”.

(c) Between January and August 2021, parties were in discussion of the arrangement for an expert inspection of the relevant areas. The discussion turned confrontational after the water-spraying test was aborted on 13 April 2021, whereby parties were arguing whether the water-spraying test was aborted by consent or unilaterally by Dr Patrick Lau, the expert engaged by the plaintiff at that stage. I refer to paragraph 25 of the Judgment for my views on the unsatisfactory handling of such disagreement by both parties.

(d) Meanwhile, in February 2021, parties were in brief discussion about arranging for mediation, but it became apparent that the IO only intended to mediate after the expert reports were available.

(e) On 5 August 2021, the plaintiff made another Calderbank offer to the IO. The plaintiff proposed to settle the whole action by a sum of $160,000 payable by the IO plus costs to be taxed if not agreed (“2^nd CO”).

(f) On 11 August 2021, the IO replied and pointed out that payment of any settlement sum would require a resolution. Documents, e.g. an expert report, in support of the reasonableness of the sum would be necessary. Since the expert inspection was yet to take place, the IO could not accept the 2^nd CO. The IO also urged the plaintiff to arrange for the expert tests to be conducted as soon as possible, such that any mediation or further negotiation for settlement could be conducted on an informed basis.

(g) On 6 October 2021, expert directions were granted by the Court.

(h) On 30 December 2021, a joint site inspection of the Property, the Lightwell and B5 Stairwell took place. I again refer to paragraph 25 of the Judgment for the unfortunate dispute during the joint inspection.

(i) On 28 January 2022, the expert witnesses filed their respective reports.

(j) On 18 February 2022, the expert witnesses met for the preparation of the Expert’s Joint Statement on Liability and Quantum Matters (“Joint Statement”).

(k) On 15 March 2022, the plaintiff made the first sanctioned offer under Order 22, whereby the plaintiff offered to settle the action by a payment of $30,000 by the IO (“1^st SO”).

(l) On 16 March 2022, the expert witnesses issued the Joint Statement.

(m) On 13 April 2022, the IO replied to the 1^st SO and counter-proposed a settlement sum of $12,000 payable by the IO, with no order as to costs. (“IO Counteroffer”)

(n) On 14 April 2022, the plaintiff further counter-proposed a settlement sum of $12,000 plus costs of the action on a party and party basis payable by the IO. (“P Counteroffer”)

(o) On 20 April 2022, the IO replied and asked for the breakdown of the costs of the Action (including all disbursements) for the IO’s consideration, as a decision to accept the offer would require a resolution with supporting documents at the general meeting.

(p) On 21 April 2022, the plaintiff responded the solicitors would begin preparing a bill of costs upon “receipt of a positive response” from the IO.

(q) On 22 April 2022, the plaintiff revised the 1^st SO to reduce the proposed settlement sum to $5,000, hence the 2^nd SO. The last day for acceptance of the said offer, without leave, was 20 May 2022.

(r) On 23 May 2022, the management committee of the IO held a meeting. The IO’s legal representative as well as Mr Simon Cheung were present. It was stated in the minutes, inter alia, that the IO had reasons to doubt the authenticity of the allegation of water seepage, and the IO would instruct the legal team to mediate with the plaintiff.

(s) On 9 June 2022, the Court ordered the parties to attend the Case Settlement Conference (“CSC”) to be held on 9 August 2022. The legal representatives of the parties were directed to, inter alia, prepare their respective statements of costs as in Appendix A to Practice Direction – 14.3 to give information as to their costs incurred up to the CSC and their estimates of costs up to and including the trial. The statement of costs should be lodged and exchanged at least 7 days before the CSC.

(t) On 9 August 2022, the CSC took place which apparently did not result in any settlement. On the same day after the CSC, the plaintiff made the third Calderbank offer and proposed a global settlement sum (inclusive of legal costs) of $500,000 payable by the IO (“3^rd CO”).

(u) On 10 August 2022, the IO replied to ask for invoice(s) of the plaintiff’s expert(s) for the IO to disclose the same at the general meeting.

(v) On 27 August 2022, the IO held a general meeting. Three options were considered, namely (i) the 2^nd SO, (ii) the 3^rd CO, and (iii) continuation of defending the action. The attending owners unanimously voted for continuation of defending the action.

(w) On 10 June 2023, the IO held another general meeting. The attending owners voted unanimously to continue with the present proceedings.

Applicable rules

6.  Order 22 rule 24 paragraphs (1) and (4) of the RDC provide that where a defendant fails to achieve a better result than a sanctioned offer, the Court shall, unless it considers unjust to do so, make the orders referred to in rule 24 paragraphs (2) and (3), namely (i) enhanced interest on the judgment sum for some or all of the period after the latest date on which the defendant could have accepted the sanctioned offer without requiring leave of the Court or agreement with the plaintiff on costs (“Latest Date”), (ii) costs on indemnity basis after the Latest Date, and (iii) interest on costs.

7.  Order 22 rule 24(5) requires the Court, in considering whether it would be unjust to make the orders in paragraphs (2) and (3), to take into account all circumstances of the case including:

(a) the terms of any sanctioned offer;

(b) the stage in the proceedings at which any sanctioned offer was made;

(c) the information available to the parties at the time when the sanctioned offer was made; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.

8.  Order 62 rule 5(1) provides for a list of factors that the Court shall take into account in exercising its discretion as to costs, including:

(a) under rule 5(1)(d), any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22; and

(b) under rule 5(1)(e), the conduct of all the parties.

9.  Order 62 rule 5(2) further elaborates rule 5(1)(e):

“For the purpose of paragraph (1)(e), the conduct of the parties includes—

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings."

Half or full costs?

11.  In paragraph 63 of the Judgment, I allowed (on a nisi basis) only 50% of the plaintiff’s costs because much of the evidence as well as arguments of the plaintiff were devoted to the issues of (i) the Alleged Secret Repair and (ii) the failure of conducting the water spraying test on 13 April 2021 (“Rejected Case”), but both of which did not end up in the plaintiff’s favour. I have rejected the plaintiff’s allegation of the Alleged Secret Repair. Also, I have found that the dispute in relation to the reason why the water spraying test on 13 April 2021 was aborted was irrelevant, as it could not shift the parties’ respective burdens of proof and parties could always have resorted to the Court’s assistance under Order 29 rule 3 of the RDC.

12.  The plaintiff seeks to vary this part of the cost order from 50% to 100% of his costs. Whilst the plaintiff has made expansive submissions, the upshot of his contention is that the IO was behaving unreasonably in refusing to accept various offers made by the plaintiff as well as refusing to mediate.

13.  Noticeably, the plaintiff has not directly addressed the effect of my findings against the Rejected Case. Nor does the plaintiff argue for a different proportion of costs that was attributable to the Rejected Case.

14.  I do not find that the plaintiff’s arguments could merit a change of the proportion of the costs that the plaintiff is entitled to.

15.  First, the plaintiff’s arguments focused on analyzing the various factors under Order 62 rule 5 governing the Court’s exercise of discretion on the awarding costs. Therefore, the plaintiff is apparently not arguing, and rightly so, that the Court is mandated by Order 22 rule 24 to award full costs. Such argument would be wrong in principle as illustrated in the respective rulings of the Court of First Instance and the Court of Appeal in CEP Ltd v Wuxi Jiacheng Solar Energy Technology Co Ltd [2014] 4 HKLRD 44 and [2016] 1 HKLRD 960.

16.  As I have found in the Judgment, very significant portion of the evidence and time of the trial were devoted to the Rejected Case. The fact that the IO could and should have approached the negotiations for settlement a lot more proactively could not be a justification for the plaintiff to run unmeritorious/irrelevant arguments, let alone substantially basing his case on them. None of the underlying objectives of the RDC as set out in Order 1A rule 1, to which the Court is under a duty to give effect under rule 2, would lead to a different conclusion.

17.  One of the most unfortunate features of the present case is the plaintiff seemed to be labouring under heavy cynicism towards the acts of the IO. For example, the plaintiff should have instructed the expert witness Mr Honby Chan to conduct his own assessment of the condition of the Property. Instead, the plaintiff was entrenched in his pre-conception that the water seepage had stopped, and focused on establishing the case of the Alleged Secret Repair.

18.  Also, Mr Honby Chan as well as those advising the plaintiff should have noticed the most significant flaw in the evidence of Mr Simon Cheung, namely the apparently inconsistent interpretations of the infrared images in respect of the Upper Corner and the Lower Corner as set out in the Infrared Report (see paragraph 15(g) of the Judgment). The Infrared Report was apparently made available to Mr Honby Chan, who referred to it in his own expert report filed on 28 January 2022.

19.  During cross-examination, Mr Simon Cheung u-turned on his interpretation of the infrared images about the Upper Corner when I requested him to clarity. Such request for clarification should have been made by Mr Honby Chan as early as 18 February 2022 when he met Mr Simon Cheung for preparing the Joint Statement, if not before.

20.  Instead, Mr Honby Chan focused his evidence on attacking the reliability of the Infrared Report based on the limit of the relevant equipment’s function, and he maintained the argument that the Infrared Report could not demonstrate any remaining moisture at the Lower Corner. Rather than objectively assess the infrared images that Mr Simon Cheung had collected, Mr Honby Chan sticked to the premise that the water seepage had ended, which was not a considered view based on his expertise, as he never independently verified the plaintiff’s view about the cessation of seepage.

21.  Similarly, the plaintiff never noticed the fact that the Jan 2019 BD Letter was suggesting there were defects on the 2/F section of the Lightwell Wall, whilst Tin Hung only repaired the 1/F section of it. Again, such discrepancy was only noticed by the Court during the cross-examination of Madam Poon.

22.  Having missed the most significant features of the evidence of facts, the plaintiff devoted a substantial portion of his case to the Alleged Secret Repair. Also, instead of making an application under Order 29 rule 3 of the RDC to seek a proper opportunity to conduct the appropriate tests, the plaintiff spent significant effort to argue with the IO as to whether Mr Simon Cheung also consented to the abortion of the intended water spraying test on 13 April 2021.

23.  I therefore do not find the additional materials in respect of the parties’ negotiations sufficient for varying the plaintiff’s entitlement to costs from 50% to 100%. I maintain my ruling that only 50% of the cost of the action be awarded to the plaintiff.

24.  That said, parties’ conduct during the negotiations for settlement will be relevant to whether I should impose upon the IO the consequences of failing to better a sanctioned offer under Order 22 rule 24, and if so, in what manner.

Should the orders under Order 22 rule 24(2) and (3) be made?

25.  There is no suggestion that the 2^nd SO was not made in compliance with Order 22 rule 5 of the RDC, or that the plaintiff had failed to better the 2^nd SO.

26.  Given the express terms of Order 22 rule 24(4), and the rationale behind the sanctioned offer regime, there must be some positive reasons making it unjust for the orders Order 22 rule 24(2) and (3) to be made: Qvist Henrik v Clatronic Far East Ltd [2020] 1 HKLRD 703, at §18.

27.  The IO argues that the following facts collectively (not individually) render it unjust to impose the orders under Order 22 rule 24(2) and (3):

(a) The 1^st and 2^nd SOs were merely nominal, whilst the major consideration was on the plaintiff’s entitlement to costs;

(b) The plaintiff has failed to provide the breakdown of costs and disbursement as requested by the IO for the purpose of deliberation at the general meetings;

(c) The IO was correct in respect of the Rejected Case; and

(d) At the time when the 1^st and 2^nd SOs were reviewed and considered by the IO, the IO was not insisting on a weak or hopeless case in terms of evidence, but a case that was at least level with or even more promising than the plaintiff’s case.

28.  I have considered those grounds, and I do not consider any of them to be valid, whether individually or collectively.

29.  First, the IO’s repeated emphasis that “costs was [sic] the ‘meat’, offer on the substantive claim was only the ‘sauce’” is neither here nor there. The costs consequence upon the acceptance of a sanctioned offer is the design of Order 22 rule 24. Without more, it could not be an unjust factor. Also, the 2^nd SO was made 6 months before parties filed their respective witness statements in October 2022, i.e. it was a time when the costs in relation to the preparation of factual evidence were yet to be substantially incurred (if at all). The IO would also be protected by the taxation mechanism against any unreasonable claim of costs to be made by the plaintiff.

30.  Insofar as the failure to provide the breakdown of costs and disbursements is concerned, such failure lasted until 7 days before the CSC on 9 August 2022 (as ordered by the Court in fixing the CSC), which was about slightly over 3 months after the 2^nd SO was made. In the minutes of the IO’s management committee meeting dated 23 May 2022, there was no record of any inability to deliberate on the 2^nd SOS arising from the lack of necessary information about the plaintiff’s incurred costs. Instead, it showed that the IO was suspicious about the genuineness of the plaintiff’s claim. In the minutes of the general meeting of the IO dated 27 September 2022, the IO with full information of the costs incurred (albeit the actual invoices issued by the experts might still be at large) resolved unanimously to reject both the 2^nd SO and the 3^rd CO.

31.  Further, I reject the IO’s contention that given the Court’s ruling against the Rejected Case, it was right for the IO to refuse the 2^nd SO (or any other offers), otherwise the IO would have to bear the 50% costs arising from the Rejected Case which was rejected by the Court. Such convoluted argument is missing the key for the failure of the IO’s case, namely the fundamental error in Mr Simon Cheung’s original analysis about the infrared images, which caused the IO to continue to defend the action unnecessarily. The action should have come to an end before the costs of factual evidence and the trial were incurred. It is highly unlikely that, had the IO accepted the 2^nd SO, it would be liable for a larger amount of costs than the amount under the order nisi in the Judgment.

32.  Finally, for reasons stated above, the argument that the IO was not insisting on a weak or hopeless case in terms of the evidence but a case which was equally meritorious as, if not more promising than, that of the plaintiff’s is, with respect, totally misconceived. Mr Simon Cheung’s opinion was based on a fundamental (and obvious) flaw in the Infrared Report, and such error should have been noticed by those advising the IO before the 2^nd SO was made. For the purpose of assessing whether it is unjust to impose the orders under Order 22 rule 24, the IO cannot simply disclaim the responsibility arising from the error of Mr Simon Cheung’s opinion.

33.  I therefore find that it is not unjust to impose the orders under Order 22 rule 4(2) and (3) in the circumstances of the present action. For avoidance of doubt, I have also considered the IO Counteroffer of $12,000 inclusive of legal costs. Such offer was far below the Judgment Sum, and it would be even more inadequate when the legal costs are taken into account. I do not consider that IO Counteroffer would tilt the balance in favour of the IO, whether individually or collectively with all other matters relied on by the IO as analyzed above.

34.  The orders under Order 22 rule 4(2) and (3) should therefore be made.

Costs on the indemnity basis

35.  Pursuant to Order 22 rule 4(2), the plaintiff’s costs should be taxed on a party and party basis between the date of the Writ of Summons and 20 May 2022, i.e. the Latest Date, and on an indemnity basis from 21 May 2022 until the date of the Judgment. 

Enhanced interest rateon the Judgment Sum and costs

36.  The maximum uplift of 10% above judgment rate is only saved for the worst cases: Qvist Henrik v Clatronic Far East Ltd (supra), at §29.

37.  There is no lack of criticisms against the IO’s conduct of the action, e.g. the unexplained change of expert witness in the beginning of 2021 and a relative lack of proactiveness in arranging for expert inspections after the originally intended test was aborted on 13 April 2021. However, the IO’s conduct is not of the most egregious type, e.g conducting the proceedings with dishonest ulterior motive or dishonest behaviour.

38.  Having considered the relatively small amount of the Judgment Sum, and the difference between it and the 2^nd SO as well as the IO Counteroffer, I consider an enhanced interests of 5% above the judgment rate to be appropriate for the Judgment Sum. The enhanced interest rate should start to apply from 21 May 2022, i.e. the day after the Latest Date.

39.  One matter should be specifically addressed. At paragraph 1(3) of the Summons, the plaintiff seeks an order that:

“The defendant do pay the plaintiff interest on the Judgment Sum at prime rate plus 10% per annum from the date of the service of the Writ on 6 October 2020 until 20 May 2022, and at Judgment rate from date of judgment until payment.”

40.  Nevertheless, in paragraph 43 of the submissions in support of the Summons, Mr Adrian Leung, counsel for the plaintiff, apparently no longer pursue paragraph 1(3) of the Summons. Instead, he referred to paragraph 1 of the sealed judgment and proposed an order that:

“…the IO do pay P interest on the judgment sum at judgment rate from the date of the service of the Writ on 6/10/2020 until 20 May 2022 (the latest date for acceptance of P’s 2^nd SO), and from date of judgment until payment.”

41.  Apparently, the order as proposed under paragraph 1(3) of the Summons was misconceived. I consider Mr Leung’s submissions as an appropriate proposal.

42.  As to enhanced interest on costs, the IO relied on this Court’s ruling in Leung Tak Kwan t/a Wallpaper Warehouse (HK) Co. v Gao Meng Fa Limited[2022] HKDC 260, the material ruling in which was based on Shih Pik Nog v G2000 (Apparel) Ltd [2011] 4 HKLRD 121, §18, and argued that the party seeking such relief should adduce evidence showing that he or she has already made the payment of costs and disbursements to solicitors.

43.  In reply, the plaintiff referred me to Antwerp Diamond Bank NV v Brink’s Incorporated (No 2) [2015] 4 HKLRD 628, whereby the Court of Appeal clarified the ruling in Shih Pik Nog v G2000 (Apparel) Ltd (supra):

“26 …with respect, Shih Pik Nog appears to have been a case in which insurers were involved for defendants, and in those circumstances the learned judge might well have been concerned to see that costs had actually been expended before making an order for interest to be paid on them. Most ordinary litigants (including companies and banks) can be expected to have to fund the litigation in which they are involved as it proceeds, and we do not think that such evidence should necessarily be required in every case. However, given that enhanced interest on costs is meant to be compensatory rather than punitive, if a paying party has reason to think that the receiving party has not actually paid its own costs in the usual manner (viz by different instalments over a period of time during the course of the litigation), the paying party can raise his query with the court and, depending on the circumstances, the court may require a statement from the receiving party’s solicitors certifying the dates and amounts of costs that have in fact been paid.”

44.  Antwerp Diamond Bank NV v Brink’s Incorporated (No. 2) (supra) is binding on this Court and it was not cited in Leung Tak Kwan t/a Wallpaper Warehouse (HK) Co. v Gao Meng Fa Limited (supra).

45.  I therefore follow the Court of Appeal’s ruling in Antwerp Diamond Bank NV v Brink’s Incorporated (No. 2) (supra) and reject the IO’s argument that the plaintiff should not be entitled to the enhanced interest on costs solely for failing to adduce evidence that he has been out of pocket. Nor has the IO put forward any suggestion (let alone reasons) that the plaintiff had not actually paid its own costs in the usual manner. The plaintiff should therefore be awarded interest on costs.

46.  Also based on paragraphs 27 and 28 Antwerp Diamond Bank NV v Brink’s Incorporated (No. 2) (supra), and upon taking the circumstances of the present proceedings into account, I order that interest on the entirety of the plaintiff’s taxed costs be paid at half of 4% above prime rate, accruing from 21 May 2022, i.e. the day after the Latest Date, which also happens to be about the half-way point in time between the issuance of the Writ of Summons and the handing down of the Judgment.

Disposition

47.  For reasons set out above, paragraphs 62(b) and 63 of the Judgment should be replaced by the following:

(a) The defendant do pay the plaintiff 50% of the costs of this action (a) on a party to party basis up to 20 May 2022, and (b) from 21 May 2022 on an indemnity basis, including all costs reserved with certificate for counsel, to be taxed if not agreed;

(b) The defendant do pay the plaintiff enhanced interest on the Judgment Sum at 5% above judgment rate from 21 May 2022 until the date of the Judgment;

(c) The defendant do pay the plaintiff interest on the Judgment Sum at judgment rate from the date of the service of the Writ on 6 October 2020 until 20 May 2022, and at judgment rate from date of the Judgment until payment; and

(d) The defendant do pay the plaintiff interest on costs incurred in this action from 21 May 2022 at half of 4% above prime rate from 21 May 2022 until the date of the Judgment.

48.  As for the costs of the Summons, the plaintiff has succeeded in obtaining the orders under Order 22 rule 24(2) and (3), but failed his application for varying his entitlement to costs from 50% to 100%. Considering (i) the fact that the evidence filed by parties was relevant to all aspects of the Summons, and (ii) the proportion of arguments for all issues under the Summons, the plaintiff should be awarded 75% of the costs of the Summons. There is no reason that the cost consequences under Order 22 rule 24(3) should not be applied to the costs of the Summons.

49.  As such, I make an order nisi that 75% of the costs of the Summons be to the plaintiff. To save costs of the parties, based on the Statement of Costs filed on behalf of the Plaintiff on 25 April 2024, I summarily assess the plaintiff’s full costs of the Summons as $100,000, which has already reflected the sanction under Order 22 rule 24(3) and a certificate for one counsel. Therefore, the plaintiff is entitled to $75,000 as costs. Such costs should carry the same interest as the costs of the action, namely half of 4% above prime rate, from the date of the Summons until payment.

Mr Adrian Leung, instructed by Humphrey & Associates, for the Plaintiff

Mr Jevons Chan, instructed by Lau, Kwong & Hung, for the Defendant

DCCJ 5363/2020

[2024] HKDC 178

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5363 OF 2020

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JUDGMENT

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Introduction

1.  This is a bitterly contested dispute arising from the problem of water seepage within a residential property.

2.  On 6 October 2020, the plaintiff, as the owner of Flat 4A, 1^st Floor, Hamburg Villa, Nos 8-10 Eastbourne Road, Kowloon Tong, Hong Kong (“Property”), commenced the present action against the defendant, the incorporated owners of Hamburg Villa (“IO”), in respect of the water seepage found in one of the two bedrooms of the Property which was discovered in or around early September 2018.

3.  The defendant has at all material times engaged a company named MVO as the management company of Hamburg Villa.

4.  It is not disputed that water seepage had been found in one of the two bedrooms of the Property (“Bedroom”).

5.  The water seepage was found on two walls of the Bedroom, namely the wall abutting the common stairwell of Block 5 of Hamburg Villa (“B5 Stairwell”, “Stairwell Wall”) and the wall abutting the guest bathroom (“Guest Bathroom”, “Bathroom Wall”). One of the other walls of the Guest Bathroom contains a window facing the lightwell between Block 4 and Block 5 of Hamburg Villa (“Lightwell”, “Guest Bathroom/Lightwell Wall”). The Lightwell Wall is the linear extension of the Stairwell Wall. The more detailed depiction of the Bedroom, the Stairwell Wall, the Bathroom Wall and the Lightwell Wall is set out in the plan in Annex 1.

6.  It is not disputed that the side of the Stairwell Wall that is facing the B5 Stairwell and the external walls inside the Lightwell are common areas under Hamburg Villa’s Deed of Mutual Covenant dated 15 August 1970 (“DMC”).

7.  Parties have agreed that the following are the material issues in the present dispute:

(a)  Did the Property suffer from water seepage between September 2018 and mid-2021?

(b)  Did the source of water seepage originate from the common areas of Hamburg Villa?

(c)  If the water seepage did originate from the common area, was the IO in breach of any duties under the Building Management Ordinance, Cap 344 (“BMO”), the DMC and/or common law? Has the IO exercised reasonable care in maintaining and repairing the common parts of Hamburg Villa in the given circumstances of the case?

(d)  If the plaintiff succeeds in his claim, what should be the reliefs and quantum of damages to be awarded?

Issue 1: Whether there was any water seepage within the Property?

8.  The respective expert witnesses for the plaintiff and the IO, namely surveyors Mr Honby Chan and Mr Simon Cheung, agreed that there had been water seepage inside the Bedroom. All photos that were taken between 14 March 2020 and 30 December 2021 clearly demonstrated substantial marks of water seepage on both the Stairwell Wall and the Bathroom Wall.

9.  However, there is an apparent dispute with respect to the timeframe, the actual location of the water seepage within the Bedroom, and most importantly the source of the water.

10.  The question of the exact location of the water seepage is interwind with the issue of the source of the water, and I will deal with the two questions in the later part of this Judgment.

11.  The timing of the water seepage problem has an unusual significance in the present dispute. Normally, the duration of the water seepage is relevant to the issue of damages. However, in the present dispute, the plaintiff’s expert evidence was dictated by his stance as to when the water seepage began to subside (if ever).

12.  In respect of the beginning of the water seepage problem:

(a)  The plaintiff’s case is that the water seepage started in September 2018. Upon his discovery of the problem within the Bedroom, he made a written report to the Buildings Department and orally informed the representatives of the IO as well as MOV within the same month.

(b)  The IO denied having received any notice from the plaintiff as early as in September 2018. On 28 January 2019, the IO received a letter from the Buildings Department (“Jan 2019 BD Letter”). The Jan 2019 BD Letter stated that the officers had inspected the Property, and they had discovered certain damage on the external wall of the lightwell on the 2/F which was above the Guest Bathroom (“Damaged Portion”). The IO was urged to carry out necessary repair, but it was not mentioned that there was any seepage within the Property. The IO asserted that it was only informed of the water seepage problem on 23 February 2019 through a letter from the plaintiff.

(c)  It was stated in an email from one KL Cheng of the Buildings Department to the plaintiff dated 2 November 2018 that the plaintiff made a report of water seepage on 10 September 2018. I accept the truth of this statement.

(d)  Given there is no dispute that there had been water seepage within the Bedroom, the reasonable inference is that the problem started in early September 2018 when the plaintiff made the report to the Buildings Department.

13.  The more peculiar dispute in the present proceedings is about when the water seepage subsided.

14.  The plaintiff suggested that the water seepage had subsided sometime in mid-2021 after the IO had carried out certain maintenance work at the Lightwell between January and April 2021. The plaintiff asserted that the IO had secretly repaired the defects on the Lightwell Wall and cured the water seepage problem (“Alleged Secret Repair”):

(a)  The plaintiff has adduced (i) certain photos taken between December 2020 and January 2021 showing building/repair materials at G/F, Block 4 of Hamburg Villa and scaffolding within the Lightwell and around the Lightwell; and (ii) videos (recorded in January 2021) of the conversations between the plaintiff and his mother on one hand, and the workers hired by the IO to carry out the maintenance work at the Lightwell on the other (“Inquiry Videos”).

(b)  In the Inquiry Videos, the plaintiff and his mother (both of whom spoke in English and not very fluent Cantonese) inquired with the workers as to whether they were hired to repair the Lightwell Wall and other parts of the external wall of the Lightwell. One of the workers gave some very brief responses in broken English. He seemed agreeable to the plaintiff’s suggestions. The workers eventually told the plaintiff and his mother in Cantonese to inquire with the management office.

(c)  It was a common ground that scaffolding was erected from the bottom to the top of the entire Lightwell between January and (at least) April 2021.

(d)  On 13 April 2021, Dr Patrick Lau (the then expert witness for the plaintiff) and Mr Simon Cheung attended the Property for a joint-inspection. The original plan was to conduct a water-spraying test. However, Dr Patrick Lau questioned the suitability of the intended water-spraying test, suggesting that the presence of the scaffolding would distort the results. Eventually, no such water-spraying test was conducted. Parties disagreed on whether Mr Simon Cheung did agree to the cancellation of the test. For reasons I will explain in the later part of this Judgment, I do not consider such dispute material at all.

(e)  Then in or around mid-2021, based on the plaintiff’s own observation, the water seepage within the Bedroom had subsided.

(f)  On 30 October 2021, Mr Honby Chan conducted an inspection of the Property. However, he did not perform any test or inspection to verify the plaintiff’s suggestion that the water seepage had subsided. He merely took photos and left the Property.

(g)  On 30 December 2021, Mr Honby Chan and Mr Simon Cheung conducted a joint-inspection of the Property. Mr Simon Cheung and his team inspected the property with infrared equipment and they also conducted a water-spraying test. On the other hand, Mr Honby Chan did not conduct any kinds of inspection of the Property. He merely observed the water-spraying test and refused to have further participation into it. This was because Mr Honby Chan questioned the utility of the test, as he proceeded on the basis that the water seepage inside the Bedroom had already subsided since mid-2021 as a result of the Alleged Secret Repair, even though he apparently had never verified the said suggestion.

(h)  Therefore, the allegation that the water seepage had subsided since mid-2021 remains a personal observation of the plaintiff.

15.  On the other hand, the IO denied having performed the Alleged Secret Repair:

(a)  Madam Poon, the chairperson of the IO, testified and categorically denied having carried out the Alleged Secret Repair. She explained that the building/repair materials were used for part of a large-scale repair work for all the common areas of Hamburg Villa which had started before November 2020 pursuant to an order issued by the Buildings Department.

(b)  Insofar as the scaffolding inside the Lightwell is concerned, Madam Poon testified that the IO had requested the contractor of the said repair work to help conduct an inspection of the entire Lightwell all the way up to the top floor, not just confined to the portion of the Lightwell outside the Property. There had only been one inspection (“IO Inspection”) and no defects had been found.   

(c)  It was suggested to Madam Chan that her relevant testimony was not supported by documents. Madam Chan’s response was: “if there were no documents, then there were no documents”. On the other hand, there is no evidence that the plaintiff had attempted to seek discovery of the relevant documents before trial.

(d)  During the joint-inspection on 30 December 2021, Mr Simon Cheung’s team performed an infrared inspection of the Stairwell Wall and the Bathroom Wall.

(e)  On 6 January 2021, Mr Simon Cheung produced a report setting out the findings and his observations of the infrared inspection (“Infrared Report”).

(f)  In the Infrared Report, Mr Simon Cheung opined that water-seepage was still active within the Bedroom because the temperature at the corner where the Stairwell Wall, the Bathroom Wall and the floor slap joined (“Lower Corner”) was significantly lower than the ambient temperature, which indicated the on-going water seepage within the relevant walls.

(g)  Even though the infrared images of the corner where the Stairwell Wall, the Bathroom Wall and the ceiling slap joined (“Upper Corner”) were similar to those images of the Lower Corner, Mr Simon Cheung opined in the Infrared Report that no moisture was detected at the Upper Corner. During his cross-examination, Mr Simon Cheung, however, u-turned on his opinion in the Infrared Report and accepted that the infrared images demonstrated that water seepage was also alive at the Upper Corner.

(h)  The Infrared Report was apparently circulated to Mr Honby Chan, who referred to the same in his expert report (“P/HC Expert Report”). Mr Honby Chan challenged the reliability of the Infrared Report, as the infrared equipment only measured temperature, not the moisture contents of the inspected areas. He however did accept Mr Simon Cheung’s classification of the situation of the Lower Corner as “III Serious Seepage” based on the infrared images as set out in the Infrared Report.

(i)  In fact, the infrared images showing lower temperature of the Lower Corner and the Upper Corner were consistent with the physical conditions of both positions as shown in the photos.

(j)  Mr Honby Chan has provided no alternative explanation as to why the respective temperatures of both the Upper Corner and the Lower Corner would be significantly lower than the surrounding areas had it not been caused by the presence of moisture.  

16.  For the reasons above, I find that water seepage was still present within the Bedroom at both the Lower Corner and the Upper Corner as of 30 December 2021.

17.  I accordingly reject the plaintiff’s unverified personal observation that the water seepage had subsided by mid-2021. As a corollary, I reject the allegation that the IO had carried out the Alleged Secret Repair.

18.  For the avoidance of doubt, I have considered Madam Poon’s testimony in respect of the Alleged Secret Repair. The plaintiff’s allegation is, to a certain extent, unusual in nature, and should require cogent proof. The plaintiff sought to rely on the Inquiry Videos as evidence to prove that the workers had admitted to such repair work. However, the contents of the Inquiry Videos are too inconclusive as to what exactly the worker who responded to the plaintiff was referring to. Also, those workers in the video were apparently scaffolders, which are specialists. There was no evidence to suggest that they were involved in the any work other than building and dismantling the scaffolding. Also, the photos of the building/repair materials are also peripheral and inconclusive. I therefore accept Madam Poon’s evidence as truthful.   

19.  In any event, it was the Infrared Report coupled with Mr Simon Cheung’s live evidence in respect of the Upper Corner that have anchored my finding against the Alleged Secret Repair.

Issue 2: What was the source of the water?

20.  Mr Honby Chan and Mr Simon Cheung, having carried out their respective inspections of the Property, have narrowed down the possible source(s) of the water seepage to 3 possibilities, namely (i) the Guest Bathroom, (ii) the Lightwell, and (iii) the B5 Stairwell. The expertise of Mr Honby Chan and Mr Simon Cheung was not subject to any challenge.

21.  Mr Honby Chan took the view that the source of the water was either the Lightwell or the B5 Stairwell.

22.  Mr Simon Cheung took the view that the source of the water was the Guest Bathroom.

23.  There are three preliminary matters which are significant to the analysis of the evidence.

24.  First, both parties in their closing submissions expressly accepted that the Court could make a finding of the source or cause of the water seepage by the method of elimination even in the absence of direct proof. This methodology is of course subject to the cogency of evidence overall.

25.  Second, there were actual disagreements between parties during the both joint-inspections that took place on 13 April 2021 and 30 December 2021 respectively. Those disagreements concern allegations of the same nature, that is, given the alleged conduct of the other sides, both parties were unable to carry out necessary tests or inspections, or at least not in a reliable way. The complaint by the plaintiff was that the scaffolding inside the Lightwell in early 2021 would affect the reliability of the water-spraying test. The complaint by the IO was that the plaintiff allegedly refused to allow Mr Simon Cheung to inspect the Guest Bathroom on 30 December 2021. Substantial volume of factual evidence was devoted to address these complaints. One must firmly bear in mind the following matters in order to fairly assess the relevance of those complaints:

(a)  Save in exceptional circumstances, the parties’ respective burdens of proof would not be shifted as a result of the conduct of the other side during the intended investigations. This is particularly so when the Court has power to facilitate investigations.

(b)  Order 29 rule 3 of the Rules of District Court, Cap. 336H, provides the Court with power to facilitate sample taking, observation and/or experiment to be performed against a property, with the ancillary power to authorize any person to enter upon any land or building in the possession of any party to the cause of the matter.

(c)  None of the parties have made any application for the Court’s assistance to facilitate the intended water-spraying test in April 2021 or the intended inspection of the Guest Bathroom.

(d)  Instead, parties have devoted a majority of the factual evidence to trying and proving their respective complaints against the other over the purported obstructions of such intended test or inspection.

(e)  It is therefore unfortunate that parties in the present proceedings have completely failed to focus on obtaining actual primary evidence in respect of the probable source(s) of the water. Disproportionate amount of time, effort and costs were spent on blaming the other side in respect of the alleged obstructions which do not assist them in discharging the relevant burden of proof at all.

26.  In this light, I will not give any weight to the evidence that was adduced to substantiate the allegations of obstructions by both parties. I will only focus on the experts’ respective opinions in relation to the results and findings of the tests, inspections and investigations that were actually performed.

27.  Third, in the closing submissions, the IO contended that Mr Honby Chan had essentially adopted the expert opinion of Dr Patrick Lau (“P/Lau Report”) and pointed out that Dr Patrick Lau had identified five possible sources of water. In addition to the Guest Bathroom, the Lightwell, the B5 Stairwell, Dr Patrick Lau had pointed out two more possibilities for the cause(s) of the water seepage, namely (i) leakage from the water supply or drainage pipe inside the Property (“Pipes”), and (ii) leakage from the unit above the Property (“Upper Flat”). The IO then contended that the Court should also consider the possibilities of the Pipes and the Upper Flat as the source(s) of the water seepage, as Dr Lau had not satisfactorily excluded them as the possible source(s) of the water. I reject the IO’s contention on the following bases:

(a)  The ultimate burden was on the plaintiff to prove that the water seepage originated from the common area of Hamburg Villa. However, the IO did not simply put the plaintiff to strict proof. Instead, it produced the expert evidence of Mr Simon Cheung (“IO Expert Report”), who had also produced a joint report with Mr Honby Chan (“Joint Report”).

(b)  When both Mr Honby Chan and Mr Simon Cheung prepared for their respective expert opinions, they applied their own expertise in identifying what was/were the probable source(s) of the water and set out their findings in their respective reports as well as the Joint Report. Both of them have put forward their respective opinions on the probable cause(s) of the water seepage in positive terms.

(c)  In particular, in paragraph 1.4 of the IO Expert Report, Mr Simon Cheung stipulated that: “The purposes of this report are to identify and determine the possible cause(s) and source(s) of the alleged water leakage problem…”. His opinion was not confined to merely rebutting the source(s) of water seepage as identified by the plaintiff’s experts.

(d)  Further, Mr Simon Chan positively stated paragraph 6.1.g. of the IO Expert Report that: “I am of the opinion that delaminated plaster on internal walls of guest bedroom should be caused and sourced from the adjacent guest bathroom of the Plaintiff’s Premises.” There was no mention of other possible/probable source(s) of water in his opinion at all.

(e)  In the Joint Report, Mr Simon Cheung re-expressed his opinion, again, in positive terms at his answer to question 2 that: “……Internal walls of the Guest Bathroom are closely adjacent to the Guest Bathroom of the Plaintiff’s Premises. By excluding the possible source of the water leakage from the escape staircase of the Block 5…and common external walls of the lightwell of Block 4, it has only and solely (sic) cause and source of the water leakage (sic) and should (sic) be came from the Guest Bathroom of the Plaintiff’s Premises.”  His answer to question 3 in the Joint Report contained almost identical terms.

(f)  There was no ambiguity in Mr Simon Cheung’s opinion. On the contrary, his opinion was clear and assertive. Nor has he expressed any reservation or limitation as to his own opinion in the “Caveat” section of the IO Report.

(g)  In such situation, the evidence set out in the various expert reports should form the basis and scope of the Court’s assessment of the probable cause of the water seepage. 

(h)  On the other hand, any new and substantive matters that had not been set out in any of the expert reports, unless with cogent reasons, shall be given minimal or no weight at all.

(i)  Insofar as the contention that the Pipes were the potential causes of the water seepage is concerned, Mr Simon Cheung referred to it as part of the justification of his opinion that the water seepage originated from the Guest Bathroom. I will deal with his opinion in the later part of this judgment. However, insofar as the IO seeks to make the same contention beyond the Guest Bathroom and to include all other drainage or water supply of the Property in general, such general contention is completely unsupported by evidence and must be rejected.    

(j)  The same should apply to the Upper Flat. Whether in the IO Expert Report or the Joint Report, Mr Simon Cheung had never considered the Upper Flat as the cause of the water seepage. Nor was there any challenge of the methodology and results of the tests conducted by the BD/FEHD Joint Office (whether through its own officers or its contractor) between May 2019 and early 2020 as set out in various letters of the BD/FEHD Joint Office dated between 27 August 2019 and 6 March 2020.

(k)  The BD/FEHD Joint Office had conducted a colour water test at the Upper Flat and no colour dye was detected at the sample taken from the seepage location within the Bedroom. Further, a ponding test to the floor slab of guest bathroom, ponding test to the floor slab of shower area of guest bathroom and spray test to enclosing walls of shower area of guest bathroom of the Upper Flat were conducted. The BD/FEHD Joint Office took the view that the cause of water seepage could not be identified, i.e. the tests conducted did not show that the Upper Flat was the source. 

(l)  In the complete absence of any evidential basis, Mr Jevons Chan, counsel for the IO, attempted to cross-examine Mr Honby Chan in respect of the limitations of the tests conducted by the BD/FEHD Joint Office based on certain professional guidelines that were nowhere to be found in the evidence. I overruled the relevant cross-examination as Mr Jevons Chan has failed to establish the evidential basis of his cross-examination, whether in the opinions of Mr Simon Cheung or otherwise. During the examination in chief of Mr Simon Cheung, Mr Jevons Chan sensibly refrained from introducing any matters as such through Mr Simon Cheung.

(m)  As such, the evidence of Mr Simon Cheung before he was cross-examined was that, he raised no challenge to the results or methodology of the tests performed by BD/FEHD Joint Office, nor did he identify the Upper Flat as the probable source of water seepage.  

(n)  It was not until the very end of Mr Simon Cheung’s live evidence in Court that he raised a host of reasons to challenge the sufficiency of the tests performed by the BD/FEHD Joint Office.

(o)  Albeit expressed in negative terms that the tests performed by BD/FEDH Joint Office were insufficient for excluding the Upper Flat as a possible source of water seepage, Mr Simon Cheung’s new evidence still represented a substantial change of his stance that the probable cause of water seepage was leakage from the Guest Bathroom.

(p)  No proper explanation was given as to why he did not set out his observations in relation to the tests performed by the BD/FEDH Joint Office in any of his written reports. No fair chance had ever been given to the plaintiff to properly address all those observations.

(q)  In the closing submissions, the IO argued to the effect that Mr Simon Cheung’s opinion all along was only focusing on excluding the common parts as the sources of water seepage, and his opinion that the Guest Bathroom was the source of water seepage should be understood in such context. This argument should simply be rejected. I have set out the evolution of Mr Simon Cheung’s evidence above. The fair understanding of the effect of his evidence was that there was a change of stance. His opinions in the IO Expert Report and the Joint Report were clear and unequivocal, and they were incongruent with his sudden addition of the Upper Flat as a possible source of the water seepage.  

(r)  Having considered the evidence as a whole, I do not accept Mr Simon Cheung’s evidence in respect of the possibility of the Upper Flat being the source of the water seepage through a last-minute change of stance to dispute the tests performed by the BD/FEHD Joint Office. The reliability of evidence advanced in such manner is seriously doubtful. It is also fundamentally unfair to the plaintiff for the want of a proper opportunity to address such evidence, which ultimately would deprive the Court of a proper chance to evaluate the evidence on an informed basis.

(s)  For completeness, I have also considered the IO’s argument based on the case authorities, namely (i) Good Century Investment Ltd v. Yim Kin Kuo and Anor, unreported, DCCJ 4980/2013 (23 November 2015), and (ii) Chan Pat Hung Eva (suing by her attorney Pun Sau Yuk) v. Wong Hau Ki[2023] HKDC 230.

(t)  I have no difficulty in accepting the proposition that the BD/FEDH Joint Office’s view that the “source of water seepage could not be identified” after performing certain tests at a subject property does not necessarily equate the subject property having been conclusively eliminated as a possible source of water seepage.

(u)  However, as the IO also accepted in the closing submissions, it all depends on the evidence in individual cases. I have already set out my reasons for rejecting the relevant evidence of Mr Simon Cheung and the IO’s arguments seeking to revive the possibility of the Upper Flat being the source of the water seepage.

The evidence in relation to the Lightwell, the B5 Stairwell and the Guest Bathroom

28.  The plaintiff’s case that the sources of the water seepage was/were the Lightwell and the B5 Stairwell is mainly based on the opinion of Dr Patrick Lau as set out in the P/Lau Report, which was adopted by Mr Honby Chan (and the IO has no objection to such methodology of Mr Honby Chan).  It is apparent that other than visual inspection, Mr Honby Chan did not perform any tests whether at the Property, the Lightwell or B5 Stairwell at all, primarily because he was instructed to be the plaintiff’s expert witness in place of Dr Patrick Lau after the point in time when the water seepage had purported subsided in accordance with the plaintiff’s unverified observation.  

29.  On 27 August 2020, Dr Patrick Lau conducted a site inspection at the Property, the Lightwell and the B5 Stairwell. He performed the following steps:

(a)  Inspection of the Bedroom: Dr Patrick Lau conducted infrared scanning as well as took the protimeter readings of various sections of the Stairwell Wall and the Bathroom Wall. He observed that damp patches with blistering of paint and loosening of plaster were present at the Upper Corner and the Lower Corner. He further concluded that significant portions of the two walls were wet.  

(b)  Inspection of the Guest Bathroom: Dr Patrick Lau inspected the Guest Bathroom and found no apparent defect on the exposed area of the finishes, sanitary fitments and associated pipes.

(c)  Inspection of the Lightwell: Dr Patrick Lau inspected the Lightwell both through the window of the Guest Bathroom and at the ground level inside the Lightwell. He observed that the wall of the Lightwell was rough with cracks and stain marks. He further observed that there were certain signs of previous repair on the external wall where there was reported water seepage area. However, no further particulars were given and no specific markings were made to the photos taken by Dr Patrick Lau. Infrared scanning was also performed on the walls of Lightwell. Dr Patrick Lau “suspected” that those portions in lower temperature (mostly on the Lightwell Wall and some on the wall adjacent to the Lightwell Wall which was the linear extension of the Bathroom Wall, “2^nd Lightwell Wall”) were in wet condition. However, he did not perform any further test to verify his suspicion.

(d)  Inspection of the walls in the B5 Stairwell: Dr Patrick Lau inspected the walls in the B5 Stairwell. He found no sign of defects on the floor surface and the wall surface up to the dado level. Above the dado level, certain paint was peeled off. He also inspected the walls by infrared scanning and found that certain areas were of comparatively lower temperature. Based on the infrared images, he concluded that those areas with lower temperature were wet.

(e)  Flow meter test of the potable water supply pipe(s): Dr Patrick Lau turned off all water taps of the Property for 30 minutes. Upon a comparison between the respective photos of the meter at the beginning and the end of the said 30-minute period, he observed no change in the reading of the flow meter, which was located outside the Property on the ground level.

30.  To substantiate his case in relation to the B5 Stairwell, the plaintiff also testified that he had seen cleaners of Hamburg Villa wetting the floor of the stairwell when they were cleaning that area. Certain WhatsApp messages between the plaintiff and the representative of the contractor of the BD/FEHD Joint Office as early as in January 2020, where the plaintiff set out his observation about how the cleaners cleaned the stairwell, were produced. However, the plaintiff accepted in his cross-examination that his observation as such was to the cleaning of the stairwell of Block 4, i.e. the stairwell accessing the Property, which was far away from the B5 Stairwell. He never noticed the actual intervals of cleaning at Block 4 or 5, and he could not tell whether the stairwells of Block 4 and Block 5 would be cleaned at the same time.

31.  For the evidence adduced by the IO, Mr Simon Cheung attempted twice to inspect the Property and to carry out a water spraying test. As summarized above, the joint-inspection and the intended water-spraying test on 13 April 2021 were aborted as a result of Dr Patrick Lau’s protest in relation to the presence of scaffolding within the Lightwell. On 30 December 2021, whilst he failed to inspect the Guest Bathroom (and the actual reason for such failure is not material in my assessment), Mr Simon Cheung managed to perform the following steps:

(a)  Infrared inspection of the Upper Corner and the Lower Corner: as summarized under Issue 1 above, Mr Simon Cheung’s assistants conducted an infrared inspection of both the Upper Corner and the Lower Corner. The infrared images showed that they were both damp at that time.

(b)  A water-spraying test at the Lightwell: the water-spraying test was filmed. As shown in the video, the assistants of Mr Simon Cheung consistently sprayed water at mainly the 1/F section of the Guest Bathroom/Lightwell Wall as well as the 2^nd Lightwell Wall. The video also showed that the spray water occasionally landed on the lower end of the 2/F section of the 2^nd Lightwell Wall. The infrared images of the Upper Corner and Lower Corner taken both before and after the water spraying test did not demonstrate any change of moisture in those locations as a result of the test.

32.  I also consider that the following factual evidence is material to the assessment of the source of the water seepage:

(a)  In the Jan 2019 BD Letter issued by the Buildings Department to the IO dated 18 January 2019, the IO was informed that, upon a recent inspection by the staff of the Buildings Department, it was found that “there were minor defects on the external wall above the guest bathroom of the [Property] at the light well of 2/F”. (emphasis added).

(b)  On 20 February 2019, the Buildings Department issued a letter to the plaintiff (“Feb 2019 BD Letter”). In addition to repeating the finding as set out in the Jan 2019 BD Letter, the Buildings Department further stated that “We have carried out an inspection to the external wall adjacent to the location of the water seepage at your premises and neither apparent drainage defect nor any sign of drainage pipe leakage was noted.”

(c)  On 10 September 2019, the IO engaged one Tin Hung Engineering Company to repair the concrete of the 1/F of the Lightwell.     

Analysis

33.  Under his cross-examination, Mr Simon Cheung had admitted on two significant matters:

(a)  As summarized under Issue 1, Mr Simon Cheung u-turned form his opinion set out in the Infrared Report and admitted that the infrared images of the Upper Corner showed that there was moisture, i.e. seepage was present at that location; and

(b)  Mr Simon Cheung was asked about the protimeter readings measured by Dr Patrick Lau on 27 August 2020. He agreed that a reading of 39.7 for a location which was around the Upper Corner was a high reading and it was caused by a seepage problem. Counsel for the plaintiff, Mr Adrian Leung, further suggested to him that the likelihood of such seepage being caused by any leakage from the Guest Bathroom was rather low. Instead of merely agreeing that the likelihood was low, Mr Simon Cheung stated in definite terms that the said leakage would not be caused by the leakage from the Guest Bathroom.

(c)  In the closing submissions, the IO sought to water down the effect of Mr Simon Cheung’s evidence in sub-paragraph (b) above by suggesting that he only meant it would not be caused by the “spilt during usage of Guest Bathroom”. I do not accept this submission.

(d)  First, the live evidence of Mr Simon Cheung did not have such qualification.

(e)  Second, presumably, the IO wanted to preserve the possibility that the seepage detected at the Upper Corner was caused by leakage from the Pipes within the Guest Bathroom. However, as Mr Simon Chan had admitted during his cross-examination, he never inspected the piping plan(s) of the Property, which was kept by the Water Supply Department. The highest of his evidence was that it remained a possibility, a hypothesis. He had also never elaborated, whether in his written reports or in his live evidence, how such possibility would be supported by any available evidence.

(f)  On the other hand, there was no challenge to the flow meter test for the potable water pipe(s) performed by Dr Patrick Lau.

(g)  Also, photos of the toilet within the Guest Bathroom (contained in the P/Lau Report) showed that (i) the flush water supply and the drainage of the toilet were connected to very bottom of the Lightwell Wall, and (ii) the fresh water supply within the Guest Bathroom was on away from, instead of attached to, the Bathroom Wall. Such objective evidence militates against any possibility that the Upper Corner seepage was caused by any leakage within the Guest Bathroom.

(h)  In light of the above, I find against the suggestion that the seepage at the Upper Corner could be caused by the leakage from the Guest Bathroom, whether by spilt during usage or any possible leakage of the Pipes.

34.  As such, the only remaining possible sources of the water seepage at the Upper Corner as identified by Mr Honby Chan and Mr Simon Cheung were the Lightwell and the floor slab of the B5 Stairwell.

35.  For completeness, I also find against the suggestion that the seepage at the Lower Corner could be caused by any leakage from the Guest Bathroom:

(a)  First, there is no basis to dispute the plaintiff’s evidence that the Guest Bathroom was not used for years prior to the material period. The photos of the Guest Bathroom as contained in the P/Lau Report do demonstrate that the condition of the Guest Bathroom was consistent with the plaintiff’s evidence.

(b)  Second, as I have held above, even if (and I make no finding one way or the other as it is unnecessary) the request by Mr Simon Cheung to inspect the Guest Bathroom was denied, it would not elevate a mere hypothesis to a realistic probability. It was upon the IO to make the necessary application for an order of the Court to facilitate such inspection.

(c)  Finally, as I have held above, the suggestion that the seepage at the Lower Corner was caused by the leakage of the Pipes remained a mere hypothesis as Mr Simon Cheung never inspected the piping plan(s) of the Property or actually inspected the Pipes. Such hypothesis was therefore unsubstantiated by any evidence. On the other hand, both Dr Patrick Lau (as stated in the P/Lau Report) and the Buildings Department (as set out in the Feb 2019 BD Letter) had inspected the Pipes (or at least part of them) and did not found any leakage.

36.  Insofar as the suggestion of the B5 Stairwell is concerned, I accept the arguments of the IO that such suggestion is unsubstantiated by evidence:

(a)  The most substantial basis of the plaintiff’s case in relation to the B5 Stairwell was the plaintiff’s own observation of the habit of the cleaner for the stairwell of Block 4. He gave no evidence in respect of the cleaning of the B5 Stairwell.

(b)  No tests were performed on the floor slab of the B5 Stairwell, whether by imitating the manner of wetting the floor of Block 4’s stairwell as observed by the plaintiff or otherwise, whatsoever. Again, it was owing to the plaintiff’s misconceived instruction to the experts that the water seepage had already subsided when they were instructed.

(c)  As such, I do not find that the suggestion that the floor slab of the B5 Stairwell was the source of the water seepage was supported by any evidence.

37.  Finally, after weighing all evidence, on balance, I find that the cause of the seepage was the leakage from the external walls of the Lightwell:

(a)  Parties’ respective experts have identified only 3 possible sources of the water seepage, and I have already found against the Guest Bathroom and the B5 Stairwell.

(b)  Furthermore, the Jan 2019 BD Letter evidenced the existence of damage on the external wall of the Lightwell at 2/F, even though the Buildings Department did not positively suggest that such damage was the cause of the water seepage.

(c)  The damage on the external wall of the Lightwell on 2/F was never addressed by the IO. Even though the IO had engaged Tin Hung to deal with the request of the Buildings Department to repair the external wall of the Lightwell, the invoice issued by Tin Hung only suggested that they had fixed 1/F instead of 2/F.

(d)  Madam Poon in her cross-examination suggested (and it was no more than a suggestion) that Tin Hung might have mistaken in the invoice as they should have read the Jan 2019 BD Letter. However, she further testified that workers of Tin Hung only worked on a ladder from the G/F level and they had not erected any scaffolding during the repairment work. Whether judging from the photos of the Lightwell or the video of the water spraying test performed by the assistance of Mr Simon Cheung, it was unlikely that any person standing on a ladder placed on the G/F of the Lightwell could reach the 2/F level of the external wall. The inference is therefore that Tin Hung’s invoice was accurate in stating the scope of their work, namely repairment of the concrete on the external wall of the Lightwell at the 1/F level.

(e)  Insofar as the scaffolding erected in the Lightwell in early 2021 is concerned, Madam Poon’s evidence was that the contractor (which was not Tin Hung at that time) was only requested to inspect if there were any defects on the external wall of the entirety of the Lightwell. No defects were detected and therefore no repairment was carried out. However, no further evidence was ever produced as to (i) the qualification of such contractor, and (ii) what  steps they had taken to inspect the external walls of the Lightwell. In any event, this part of the evidence does not support any suggestion that Tin Hung did repair the 2/F external wall as pointed out by the Buildings Department.

(f)  The water spraying test performed by Mr Simon Cheung’s team suffered a similar problem as that of Tin Hung. From the video evidence, the water was sprayed mainly on the 1/F portion of 2^nd Lightwell Wall, as well as the corner between the Guest Bathroom/Lightwell Wall and the 2^nd Lightwell Wall (also on the 1/F level). The water was only occasionally sprayed on the lower portion of the 2/F level of the said walls. Given the high position of the Upper Corner, one would expect the water spraying test to also cover the entirety of the 2/F level in order to prove or disprove any correlation.

(g)  I therefore do not consider the result of the water spraying test to have the effect of disproving the external wall of the Lightwell to be the source of water seepage.

(h)  Finally, I have also considered the point made by Mr Simon Cheung in the IO Report that, according to the weather reports of the Hong Kong Observatory, there was no raining in most of the days in December 2021. The reports showed that no raining was detected between 1 and 13 December 2021. From 14 to 28 December 2021, there were 3 days with no raining detected, 4 days with traces of raining detected, and rainfall between 0.2mm and 9.4mm were detected. No raining was detected on both 29 and 30 December 2021.

(i)  Nevertheless, I note that Mr Simon Cheung did not go so far to suggest that that rainfall record was conclusively against the possibility of the external walls of the Lightwell being the source of water seepage. After all, there was no evidence as to the exact level of dampness at both the Upper Corner and the Lower Corner, and how long it would normally take for the moisture stalled inside the walls to totally evaporate or dissipate.

38.  For completeness and the avoidance of doubt, in coming to my findings above, I have considered all other evidence and arguments  even though I have not set them out in their entirety. None of them have any substantial impact on my analysis above.

Issue 3: Has the IO breached its duties?

39.  Pursuant to section 18 of the BMO, the IO shall maintain the common parts of Hamburg Villa in a state of good and serviceable repair and clean condition. The same duty is owed by the IO to all owners of Hamburg Villa under clauses 4(c), 4(f)(iv) and 4(f)(v) of the DMC. The IO does not dispute that it owes such duties.

40.  On the other hand, the plaintiff accepts that the IO’s liability would not be an absolute one. Rather, the IO’s liability may arise if there is fault, or if having been made aware of a defect which requires remedy, the IO failed to take reasonable and appropriate steps.

41.  The IO accepts that it had notice of the water seepage as early as 23 February 2019 when it received a letter from the plaintiff making such complaint. Coupled with the Jan 2019 BD Letter, it took the IO until 10 September 2019, i.e. almost 8 months, to engage Tin Hung to carry out the repair of the concrete of the external walls of the Lightwell at 1/F level, the problem of which I have already summarized above.

42.  Madam Poon however claimed that after the repair by Tin Hung in September 2019, the IO had never received any complaint from the plaintiff about the continuation of the water seepage until it received the pre-action letter form the plaintiff on 17 September 2020. Nor was it aware of the fact that the contractor engaged by the BD/FEHD Joint Officer had conducted the tests at the Upper Flat at the time.

43.  It is however undeniable that the IO was copied of two letters from the BD/FEHD Joint Office dated 10 October 2019 and 6 March 2019, which dealt with the tests to be conducted at the Upper Flat and the results of the same. Madam Poon suggested that those letters were kept by the security staff engaged by MVO at the drawer of the management office. Those letters were only drawn to her attention until after the receipt of the writ of the present action. Even if such assertion was true, it provided no excuse to the IO: 

(a)  MVO was engaged as the agent of the IO to discharge its duty under the BMO and the DMC.

(b)  The breakdown in communication between the IO and the staff of MVO did not negate the fact that knowledge of the staff of the MVO was imputable to the IO given the agency relationship.

(c)  Furthermore, the fact that the staff of MVO did not even have the awareness of the need to draw the letters received from the BD/FEHD Joint Office, which should be well known to all property management companies to be a government department specialized in handling water seepage complaints, to the IO immediately, but simply kept the same in the drawer of the management office only reflects badly on the IO’s lack of effort to discharge its duties in respect of water seepage.

44.  I have also considered Madam Poon’s evidence that, after the completion of the Tin Hung’s repair work, neither she nor anyone from the IO had approached the plaintiff to follow up on the water seepage situation. Rather, she adopted the attitude to sit back and expected the plaintiff to come forward if the water seepage problem persisted but the plaintiff had never done so until the issuance of the pre-action letter a year later in September 2020: 

(a)  I note the dispute as to whether the plaintiff had, as he claimed, made various oral complaints to the staff of MVO in respect of the continuation of the water seepage problem.

(b)  I accept the plaintiff’s evidence that he had made the oral complaints to the management staff of MVO from time to time between 2018 and 2020.

(c)  It would not make sense that the plaintiff would suddenly stop making complaints to the staff of MVO while the water seepage problem (as parties agreed) had persisted well after the repair work of Tin Hung in September 2019 and the plaintiff were taking various steps to try to identify the source of water seepage (including engaging Dr Patrick Lau in mid-2020) throughout.

(d)  Even if I were simply to consider the evidence of Madam Poon alone, I do not find it an acceptable attitude not to inform or engage the plaintiff in respect of Tin Hung’s repair work whether beforehand or afterwards. Madam Poon was at least tacitly avoiding any contact with the plaintiff, which falls short of a reasonable way to discharge of the duties of the IO.

45.  The only other effort that the IO had spent to address the problem of water seepage in the Property was the inspection by the contractor which was in charge of the maintenance of other common areas of Hamburg Villa in early 2021. The only indisputable fact was that scaffolding was erected within the Lightwell. No other details of such inspection whatsoever were found in the evidence at all. Nor was there any actual repairment work after the said inspection. Again, the plaintiff was completely unengaged in respect of the said inspection. In any event, such inspection only took place after the commencement of the present action, and therefore could not be a defence to the plaintiff’s claim against the IO for its breach of duties under the BMO and DMC.

46.  Having considered all the relevant facts and evidence, I find that the IO has breached its duties under the BMO and the DMC. Such breach was illustrated by the problems of the repair work performed by Tin Hung, the neglect of the letters from BD/FEHD Joint Officer which clearly demonstrated the persistence of the water seepage problem after the repair work by Tin Hung and the avoidance of engaging the plaintiff in respect of the repair work by Tin Hung.  

Issue 4: Reliefs

47.  The plaintiff in his Amended Statement of Claim has pleaded for an injunction against the IO for (i) restraining the latter from continuing the water seepage (which should be inapplicable to the facts of the present case as there is no allegation that the water seepage was caused by any positive acts of the IO), and (ii) mandating the IO to carry out all necessary repair and remedial works to stop the water seepage. However, the claim for an injunction was no longer maintained in his closing submissions.

48.  What therefore remains is the assessment of damages.

49.  The plaintiff claims:

(a)  HK$150,000 for general damages; and

(b)  HK92,648 as special damages, consisting of:

i.  Repair costs of HK$79,000 in total; and

ii.  The cost of 14 days of alternative accommodation during the repair work in the amount of HK$13,648, with reference to the monthly rent of a one-bedroom serviced apartment in Kowloon at around HK$29,000.

50.  The IO argues that:

(a)  The general damages should be between HK$60,000 and HK$80,000;

(b)  The special damages should only be between HK$6,553 and HK$12,000.

General damages

51.  The plaintiff primarily relies on Fong Bo Yee v The Incorporated Owners of Hamburg Villa & Anor.[2023] HKLdT 39, in which general damages of HK$180,000 were awarded.

52.  The IO primarily relies on Chan Albert Koon Keung & Ors v Yee Yung Tung[2020] HKDC 1201, in which general damages of HK$80,000 were awarded.

53.  I have compared the facts of the present case to those in Fong Bo Yee and Chan Albert Koon Keung. The IO’s avoidance of engaging with the plaintiff, whether for the repair work of Tin Hung or the subsequent inspection of the Lightwell in early 2021, and its failure to instruct MVO to pay heed to the correspondence of the BD/FEHD Joint Office, have prolonged the seepage problem and the resolution of the present dispute. On the other hand, the extent of physical damage caused to the Property was relatively minor compared to the one in Fong Bo Yee.  

54.  I assess the general damages at HK$100,000.

Special damages

55.  In light of the proximity between the Upper Corner and the long horizontal crack on the beam at the top of the Bathroom Wall, I find it highly unlikely that such crack on the beam was caused solely by the aging of the building and was completely unrelated to the water seepage. The repairment work that the IO would be liable to pay for is more extensive than merely repainting the surface of the Upper Corner and the Lower Corner as Mr Simon Cheung proposed. I therefore allow the repairment costs of the same to be included in the special damages.

56.  I have considered the 3 quotations obtained by the plaintiff, and Mr Simon Cheung’s criticisms of those quotations, especially the one from Marvel Harvest Ltd which was the plaintiff’s preferred quotation.

57.  On the other hand, I will give no weight to (i) the estimate proposed by Dr Patrick Lau which was not based on any quotations, and (ii) Mr Simon Cheung’s proposed costs for repair as the repairment work for the beam was not contemplated.

58.  Given the age of Hamburg Villa and the beam is obviously a structural feature, I accept that it would be prudent to engage a reputable and experienced contractor to handle the repairment work. On the other hand, as Mr Honby Chan accepted in his evidence, a structural engineer is only optional in such repair work. I only allow half of such cost. Also, there are some apparent duplications of work in the breakdown of the quotation from Marvel Harvest Ltd.  

59.  In light of the above, I assess the repairment cost at HK$60,000.

60.  I also allow the plaintiff’s claim for the costs of alternative accommodation in the amount of HK$13,648.

61.  Accordingly, the total damages are assessed at HK$173,648 (HK$100,000 + HK$60,000 + HK$13,648).

Disposition

62.  Judgment shall be entered in favour of the plaintiff on the following terms:

(a)  There be a monetary judgment in the sum of HK$173,648.00.

(b)  Interest on the judgment sum shall accrue from the date of the writ to the date of payment at the judgment rate.

63.  Insofar as the costs are concerned:

(a)  Much of the evidence (both factual and expert) as well as arguments of the plaintiff were devoted to the issues of (i) the Alleged Secret Repair and (ii) the failure of conducting the water spraying test on 13 April 2021. I have already found against the plaintiff on both issues.

(b)  Having considered all matters in the whole, I make an order nisi that half of the costs of the plaintiff shall be paid by the IO, with certificate for Counsel, to be taxed if not agreed.

Mr Adrian Leung, instructed by Humphrey & Associates, for the Plaintiff

Mr Jevons Chan, instructed by Lau, Kwong & Hung, for the Defendant

Annex 1

DCCJ 5363/2020

[2024] HKDC 228

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5363 OF 2020

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DECISION

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1.  On 9 June 2023, ie about 2 weeks before the commencement of the trial on 26 June 2023, the plaintiff filed a summons to make further discovery of evidence and to seek leave to adduce the same into the evidence for the trial (“Discovery Summons”). Given discovery is a continuing duty, the more significant aspect of the application is for the leave to adduce such newly discovered materials into the evidence for the trial. The materials that sought to be adduced are:

(a)  An approximately 20-minute video recording the joint-inspection on 30 December 2021 (“Joint-inspection Video”); and

(b)  A letter from a surveyor, Dr Patrick Lau of Trusty Surveyors (HK) Ltd, to the plaintiff dated 13 April 2021. (“Lau Letter”)  Dr Lau was the former expert appointed by the plaintiff. The Lau Letter set out Dr Lau’s account of what happened during the joint inspection of the Property with the defendant’s expert, surveyor Mr Simon Cheung, on 13 April 2021 which was aborted.

2.  I heard arguments in respect of the Discovery Summons on 26 June 2023, and ordered that:

(a)  Leave be granted to the plaintiff to adduce the Joint-inspection Video into the evidence for the trial;

(b)  Application for leave to adduce the Lau Letter as evidence be refused; and

(c)  The costs of the Discovery Summons be to the defendant, to be taxed if not agreed.

3.  The reasons for my decision were reserved and are as follows.

4.  Insofar as the Joint-inspection Video is concerned:

(a)  It is direct evidence in respect of what took place during the joint-inspection on 30 December 2021.

(b)  There is a dispute on whether the plaintiff had obstructed the defendant’s expert, surveyor Mr Simon Cheung, from accessing and inspecting the guest bathroom on 30 December 2021. Mr Simon Cheung suggested that such obstruction occurred, whilst the plaintiff denied that there was any request to access or inspect the guest bathroom in the first place.

(c)  For reasons I will detail below, I consider that such dispute as to the reason behind the lack of inspection of the guest bathroom is only of marginal significance. However, given the Joint-inspection Video is directly related to matters arising from the contents of witnesses on both sides, I regard it as relevant to such extent.

(d)  The IO argued that the lack of satisfactory explanations for the delay in disclosing such video by itself was a prejudice which warranted the refusal to grant leave for adducing the same as evidence.

(e)  I accept the IO’s arguments that there was no satisfactory explanation in respect of the delay. The plaintiff did not suggest that he could not discover the Joint-inspection Video at the earlier stage of the proceedings. The only explanation given was that the materiality of the said video was only realized upon Counsel’s advice in the preparation of the trial.

(f)  However, on balance, I find that the evidential value of the Joint-inspection Video outweighs the prejudice arising from the lack of explanation of the delay. I therefore grant leave to the plaintiff to adduce such video as evidence in this trial.

5.  Insofar as the Lau Letter is concerned:

(a)  Again, the plaintiff’s only explanation for the lateness of discovering the same was that it was his Counsel who pointed out the relevance of the Lau Letter in the preparation of this trial. There was no suggestion as to any inability to produce the said letter at any earlier stage.

(b)  More importantly, Dr Lau is no longer the expert witness for the plaintiff. Counsel for the plaintiff, Mr Adrian Leung, explained during the hearing that Dr Lau resigned as the expert witness on his own volition. There was no suggestion that he could not testify in Court for any reasons (eg physical incapacities).

(c)  The IO complained that since Dr Lau was not called by the plaintiff to testify in this trial, the IO would be deprived of an opportunity to cross-examine Dr Lau on the allegations in the Lau Letter that the IO disagreed.

(d)  I accepted the IO’s arguments that there would be substantial prejudice arising out of its inability to cross-examine Dr Lau.

(e)  I therefore refused leave to adduce the Lau Letter as evidence of the trial.

Mr Adrian Leung, instructed by Humphrey & Associates, for the Plaintiff

Mr Jevons Chan, instructed by Lau, Kwong & Hung, for the Defendant