陳炳華及另一人 v. 家利物業管理有限公司

HCSA 20/2019

[2020] HKCFI 3010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO 20 OF 2019

(ON APPEAL FROM SMALL CLAIMS TRIBUNAL

CLAIM NO 6733 OF 2018)

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J U D G M E N T

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Introduction

1.This is an appeal by the 1^st claimant (“C1”) from a decision of the Adjudicator in the Small Claim Tribunal, pursuant to leave being granted by this Court on 10 September 2019 (“Leave Decision”). C1 is the owner of a shop space in a development called City Garden and the 2^nd claimant was his tenant of the shop space.  The 2^nd claimant is not involved in this appeal. 

2.This Court will follow the definitions in the Leave Decision, unless otherwise indicated herein.

3.There were 14 grounds of appeal set out in the Notice of Appeal issued on 20 September 2019 (“Grounds”).  Ground 14 was not a ground originally relied on when C1 was seeking leave to appeal.  C1 is now seeking leave to rely and argue on Ground 14, to which there was no objection.

4.The background of the matter has been set out in the Leave Decision.  Briefly, C1 lodged a claim on 12 February 2018 in the Small Claims Tribunal for loss and damages suffered as a result of the Incident on 17 November 2016 which had caused water leakage in the ceiling of his shop space in City Garden, ie Shop 22.  The defendant or respondent in this appeal Cayley Property Management Limited (“D”) was at all material times the “Manager” as defined in the Deed of Mutual Covenant and Management Agreement of the Estate executed on 4 February 1983 (“DMC”)[1]. 

5.C1’s claim was stated to be a total of HKD 18,300 being (i) cleaning fee of HKD 600; (ii) ceiling restructuring of HKD 6,000; (iii) 3 day rental compensation to the 2^nd claimant of HKD 1,700; and (iv) various other expenses and legal costs of HKD 10,000.  The claimants’ claims were dismissed on 22 February 2019 by the Adjudicator, and C1’s application for review was also dismissed on 17 May 2019.

6.The Adjudicator found that the Incident was caused by the blockage of sewage pipes and that there was negligence on the part of D as the Manager in the DMC in failing to send regular reminders to residents to inform them of proper use of their toilets and to warn them of risks of sewage pipes being blocked in case of improper use.  However, the Adjudicator found that notwithstanding D’s negligence in this respect, Clause B6 in Section 5 of the DMC (“Clause B6”) had exempted D from liability as there was no wilful negligence on the part of D.

7.Counsel Ms Chantel Lin appeared for C1 in this appeal, and Counsel Mr Andrew Mak and Mr Francis Chung appeared for D.

The Grounds 

8.The Grounds can be grouped into 5 main issues. As set out by Ms Lin, they are :

(1)     Whether the Control of Exemption Clauses Ordinance, Cap 71 (“CECO”) applies to the DMC in question (Ground 1) (“Issue 1”);

(2)     Whether the Adjudicator had adequately directed his mind or considered the principles of (1) reasonableness test under CECO; and (b) contra proferentem (Grounds 2-3) (“Issue 2”);

(3)     On the true and proper construction, whether the exemption clauses (2) relied upon by D under the DMC could exclude D from the liability in this case (Grounds 4-9) (“Issue 3”);

(4)     Whether the Adjudicator had failed to consider the issue of nuisance or hazard at all (Grounds 10-12) (“Issue 4”);

(5)     Whether the Adjudicator erred in law holding that duties imposed on D as delegable to the contractor (Ground 13 and additional Ground 14) (“Issue 5”).

Issue 1 - The CECO Applicability Issue

The parties’ respective submissions

9.Ms Lin submits that the Adjudicator had totally failed in considering the applicability of CECO to Clause B6.

10.On the other hand, it is Mr Mak’s submission that the CECO does not apply to the DMC in the present case for reasons including in particular the following:

(1)     As the DMC was executed on 4 February 1983, it was thus a contract made before the date on which the CECO came into force and therefore the CECO has no application to the DMC under section 19 of CECO (“Section 19”);

(2)     Paragraph 1(b) of Schedule 1 to CECO (“Paragraph 1(b)”) expressly states that Sections 7 and 8 therein do not apply to any contract so far as it relates to the creation or transfer of an interest in land.

Paragraph 1(b)

11.Dealing with Paragraph 1(b) first, it is not disputed that a deed of mutual covenant, or the DMC, is a contract.  As this Court has said in Addfield Investment Ltd & Ors v Incorporated Owners of Mei Sun Building Tai Po (unrep) HCA 507/2011, 12.12.13, an executed deed of mutual covenant constitutes a contract between the original parties, binding on their successors in title, and thus, the general principles on the interpretation and construction of a contract would be similarly applicable in the case of construction of a deed of mutual covenant[2].

12.Paragraph 1 (b) states that sections 7 and 8 of the CECO do not apply to any contract so far as it relates to the creation or transfer of an interest in land, or to the termination of such an interest.

13.The question is thus, is a deed of mutual covenant a contract which falls into Paragraph 1(b).  In Discovery Bay Services Management Limited v David Buxhuam [1995] HKDCLR 7, District Judge Downey thought it was.

14.In the Discovery Bay case, it was held by Judge Downey that the deed of mutual covenant in that case was excluded from CECO for the reason that (i) it was dated the 30 September 1982, and before the coming into effect of CECO (“Section 19 Reason”); and (ii) it was a contract which “relates to the creation or transfer of an interest in land” within the meaning of paragraph 1 (b) of Schedule 1 of CECO (“Paragraph 1(b) Reason”).

15.However, as pointed out in paragraph [5.260] om Chapter 4 of Malcom Merry: Building Management in Hong Kong, 3^rd Ed:

“the DMC is intended to regulate the owners’ rights in the land by covenant and to provide for management of the development. It does not operate to create, transfer or extinguish property rights, namely the creation or transfer of shares in the Land. The DMC records, but does not effect, the creation and transfer of shares carried out by the developer’s assignments. The DMC might be said to affect property rights in that it restricts the co-owners’ right to possession but it does not extinguish that right. For this reason alone, it is arguable that the CECO ought to apply[3].”

16.In fact, as the learned author of Building Management in Hong Kong has pointed out in paragraph [5.261], if a deed of mutual covenants is treated as a “land contract” which falls into paragraph 1(b) of Schedule 1, paragraph 1(b) would rarely, if ever, apply[4].

17.The learned author Sarah Nield in Hong Kong Land Law 2^nd Ed has also stated that a deed of mutual covenant can only be said to create interests in land to the extent that it creates mutual covenants to regulate the co-owners’ rights and obligations, and the management function of a deed of mutual covenant and, in particular, the appointment of a manager, does not create interests in the land[5].

18.In Great Source Enterprise Ltd v Sino Estates Management Ltd [2004] 4 HKC 49, Cheung JA had referred to the Discovery Bay case and Judge Downey’s Paragraph 1(b) Reason, but Cheung JA had pointed out that there were contrary views expressed by textbook authors[6] that a deed of mutual covenant was only intended to regulate the owners’ rights in land and to provide for the management of the development[7] and that  the relevant part of the appellant’s notice of application should not be struck out by the presiding officer of the Lands Tribunal.  

19.Having considered all the above, I agree with the views expressed by the learned textbook authors, in particular paragraph [5.260] set out earlier, and I am of the view the DMC does not fall within Paragraph 1(b) and that CECO ought to apply, subject to the considerations on Section 19 below.

Section 19

20.The CECO came into effect on 1 December 1990 (“Effective Date”).

21.The DMC in the present case was executed on 4 February 1983 between the then Registered Owner and the 1^st and 2^nd Confirmors, the “First Purchaser”, and D (Manager).  P purchased Shop 22 on 8 November 2000.

22.As seen earlier in the Discovery Bay case, one of the two reasons given by Judge Downey was the Section 19 Reason, namely the deed of mutual covenant in that case was dated 30 September 1982, which was before the Effective Date, and thus excluded from application under section 19 of CECO.

23.As also seen earlier, in Great Source Enterprise Ltd v Sino Estates Management Ltd [2004] 4 HKC 49, Cheung JA had referred to the Discovery Bay case and although he pointed out that Judge Downey’s Paragraph 1 (b) Reason was against views in textbooks, there was no mention of the Section 19 Reason given by Judge Downey. 

24.Mr Mak has referred this Court to paragraph [5.251] of Malcom Merry: Building Management in Hong Kong, 3^rd Ed in which the learned author considers that the CECO does not apply to a deed of mutual covenant made, or to any loss or damage suffered, before 1 December 1990[8]. 

25.Ms Lin on the other hand argues that:

(i)     Whether the CECO applies to exemption clauses in a deed of mutual covenant before the Effective Date has not been conclusively and clearly decided by the courts and it remains an academic point.

(ii)     If the CECO only applies to a deed of mutual covenant executed before the Effective Date, this would achieve in an unfair result, in that it would mean that an owner who “unfortunately” purchases a property with a deed of mutual covenant executed before the Effective Date will forever be excluded from the CECO protection;

(iii)     Further, when one talks about how CECO applies to the deed of mutual covenant, one focuses on the issue between an owner (not the first purchaser) and the manager in the management agreement, the agreement of which always form an indispensable part of a deed of mutual covenant.

26.Ms Lin has referred to a paper by Ms Judith Sihombing on “Duties and Liabilities of Managers of DMCs” in the Lectures on Multi-Story Building Management published by the Hong Kong Law Journal Limited 1990 in which Ms Sinhombing had set out the relationship of the manager and the developer[9], citing from what was said by Cruden J in Pearl Island Hotel Ltd v Li Ka-yu & Ors [1988] 2 HKLR 87, namely that :

“The typical factual position has arisen where the developer, as the original owner, has appointed a manager of its choice for a very long period, in respect of a multi-owned residential building, of which it is no longer the owner. Further, only the developer and not any of the new flat owners, is given the contractual right to terminate the employment of the appellant as manager[10].”

27.Ms Sihombing went on to say that it was within the above “service contract” framework that the powers and liabilities of the manager were examined in her paper, and that whilst the relationship of owner and manager was treated as one of contract, the relationship might fit within other categories[11].

28.She then pointed out that a purchaser (other than the first purchaser) has no direct contractual relationship with the manager and that the obligations in the covenants in the deed of mutual covenant where they relate to the manager cannot be transferred as covenants which affect or run with the land, and that a better interpretation of those powers is that they create a contract of employment wherein the manager has an obligation of personal service[12].

29.Ms Sihombing further went on to express that the contract between a manager and owner as contained in a deed of mutual covenant to be perhaps a “hybrid”, namely although it is classified as one of service but the extensive powers of a manger in the DMC make the contract look like a contract for services[13].

30.Relying on the above views expressed by Ms Sihombing, Ms Lin seeks to place a distinction between what she describes as “basic contracts”, and “management contracts” contained in the deed of mutual covenant, and argues that Section 19 should not be applicable in the context of a deed of mutual covenant. 

31.As said by Chan PJ in Grande Properties Management Ltd v Sun Wah Ornament Manufactory Ltd (2006) 9 HKCFAR 462 at [2] :

“2. The rights and obligations of the owners and the manager of a multi-storey building are usually defined and governed by a deed of mutual covenant in respect of the Building. The deed is a contract which runs so as to bind all owners and their assignees and the manager. Some of these rights and obligations are modified by the Building Management Ordinance, Cap 344 (the Ordinance). The provisions of the deed and the Ordinance are usually aimed at facilitating the management of the building by reducing conflicts among co-owners on the one hand and preventing abuse by the manager and the majority owner on the other. It is fair to say that most disputes are resolved by a purposive construction and common sense application of the relevant provisions of the deed and the Ordinance.”

32.As further explained by the Court of Final Appeal in Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd and Anor (2008) 11 HKCFAR 403, the Hong Kong system of dealing with multi-storey buildings in multi-occupation has been described in textbooks as unique in the common law world and that the second principal feature of the Hong Kong system is that individual owners execute a deed of mutual covenant regulating by contract their rights inter se regarding the exclusive use and occupation of the units allotted to their respective parcels of undivided shares, their use of the common parts of the building, as well as their mutual obligations on such matters as managements charges, and the operation of such covenants is underpinned by statutory provisions (Sections 41(2) and (3) of the Conveyancing and Property Ordinance) which ensure, among other things, that the burden of positive covenants can run with the land and that such covenants may operate notwithstanding the absence of dominant and servient tenements[14]. Further, over the years, the form of the deed of mutual covenant has become increasingly standardised[15].

33.The DMC in the present case is called “Deed of Mutual Covenant and Management Agreement of the Estate” and it contains (i) covenants which regulate the co-owners’ rights and obligations, and also (ii) covenants which regulate the management functions and the appointment of a manager. Whether those covenants in (ii) are a “hybrid” of a contract of services or a contract for services, it does not deflect from the fact that those contractual obligations were made prior to the Effective Date.  There is no authority put before this Court as to why Section 19 should not apply to the “management contract” part of the DMC as submitted by Ms Lin.

34.In any event, I agree with the views put forward in Malcom Merry: Building Management in Hong Kong that the CECO does not apply to a deed of mutual covenant made, or to any loss or damage suffered before the Effective Date.

The Sub-Deed

35.Further to the DMC, there is the Sub-Deed, namely Sub-Deed of Mutual Covenant and Management Agreement dated 13 December 1993 in respect of all those portions on the Basement, Ground Floor and First Floor of the Commercial Podiums below the Domestic Towers of the Estate, and Hsin Chong is a party to the Sub-Deed.  Pursuant to the Sub-Deed, Hsin Chong was appointed as the “Manager” of the Commercial Podiums.

36.It is submitted by Ms Lin that even if this Court holds the view that the CECO only applies to a deed of mutual covenants made before the Effective Date, the CECO still applies in the present case because of the Sub-Deed. 

37.Ms Lin argues that the Sub-Deed and the DMC are inextricably connected and because the Sub-Deed was made in December 1993, it was made after the Effective Date, and this means if this Court follows the academic views and holds that the CECO does not apply to the DMC because it was made before the Effective Date and that the CECO applies to the Sub-Deed because it was made after 1 December 1990, this will create more practical problems and thus it is submitted by Ms Lin that the Court’s approach to interpret the provisions under the DMC should be subject to the CECO. 

38.However, the defendant in the present case is D and not Hsin Chong.  D is not a party to the Sub-Deed and it is only a party to the DMC, and the Sub-Deed contains its own Section IX on “Exclusions and Indemnities” for Hsin Cong, the “Manager” under the Sub-Deed and the provisions are different from Clause B6.  Whether the Sub-Deed was made after the Effective Date and that CECO will apply to the Sub-Deed is not relevant as to whether the CECO will apply to the DMC.

39.As said, the parties to the DMC and the parties to the Sub-Deed are different.  In any event, the Sub-Deed is expressed to be subject to the DMC, and further Clause 7 of the Sub-Deed states that, amongst other things, that no provision to the Sub-Deed shall prejudice or in any way be construed to prejudice or exclude the operation and/or effect of the provisions of the DMC.  I am of the view whether CECO will apply to the Sub-Deed will not assist C1, nor am I of the view that adopting a different approach to the DMC and the Sub-Deed on the applicability of CECO will create more practical problems as submitted by Ms Lin.

Conclusion on Issue 1 (the CECO Applicability Issue)

40.In light of all above said, I am of the view that that Paragraph 1(b) is not applicable to the present DMC, but Section 19 is, and thus the present DMC is excluded from the application of the CECO, as it was made prior to the Effective Date.  In the event I am wrong, I will continue to consider the other Issues.

Issue 2 - The “Reasonableness Test” Issue

41.Section 3 sets out the “reasonableness test” as follows:

“(1) In relation to a contract term, the requirement of reasonableness for the purposes of this Ordinance and section 4 of the Misrepresentation Ordinance (Cap. 284) is satisfied only if the court or arbitrator determines that the term was a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.

(2) In determining for the purposes of section 11 or 12 whether a contract term satisfies the requirement of reasonableness, the court or arbitrator shall have regard in particular to the matters specified in Schedule 2; but this subsection does not prevent the court or arbitrator from holding, in accordance with any rule of law, that a term which purports to exclude or restrict any relevant liability is not a term of the contract.

(3) In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Ordinance is satisfied only if the court or arbitrator determines that it would be fair and reasonable to allow reliance on it, having regard to all the circumstances obtaining when the liability arose or (but for the notice) would have arisen.

(4) In determining (under this Ordinance or the Misrepresentation Ordinance (Cap. 284)) whether a contract term or notice satisfies the requirement of reasonableness, the court or arbitrator shall have regard in particular (but without prejudice to subsection (2)) to whether (and, if so, to what extent) the language in which the term or notice is expressed is a language understood by the person as against whom another person seeks to rely upon the term or notice.

(5) Where by reference to a contract term or notice a person seeks to restrict liability to a specified sum of money, and the question arises (under this Ordinance or the Misrepresentation Ordinance (Cap. 284)) whether the term or notice satisfies the requirement of reasonableness, the court or arbitrator shall have regard in particular (but without prejudice to subsection (2) or (4)) to—

(a) the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and

(b) how far it was open to him to cover himself by insurance.

(6) It is for the person claiming that a contract term or notice satisfies the requirement of reasonableness to prove that it does.”(emphasis added)

42.It is submitted on behalf of C1 that pursuant to section 3(6) above, the burden was on D to satisfy the Adjudicator that Clause B6 met the requirement of reasonableness under section 3(1) of CECO (“Section 3(1)”).

43.As the Adjudicator did not consider the applicability of CECO, he did not direct his mind to considering whether the burden was on D to satisfy the requirement of reasonableness of Clause B6, or whether Clause B6 satisfies the requirement of reasonableness in Section 3(1).

44.However, Mr Mak has submitted that even if the Court were to take the view that CECO applies to the present DMC, Section 3(1) is still not applicable by reason that the alternative requirements under section 8(1) of CECO (“Section 8(1)”) have not been satisfied.

45.Section 8(1) provides that the section applies as between contracting parties where (i) one of them deals as consumer or (ii) on the other’s written standard terms of business.

46.“Dealing as consumer” is further set out in section 4 of the CECO as follows:

“‘4. Dealing as consumer’

(1) A party to a contract “deals as consumer” in relation to another party if—

(a) he neither makes the contract in the course of a business nor holds himself out as doing so;

(b) the other party does make the contract in the course of a business; and

(c) in the case of a contract governed by the law of sale of goods or by section 12, the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption.

(2) Notwithstanding subsection (1), on a sale by auction or by competitive tender the buyer is not in any circumstances to be regarded as dealing as consumer.

(3) It is for the person claiming that a party does not deal as consumer to prove that he does not.”

47.Mr Mak has submitted that :

(i) In the present case, C1 derives his title from Hong Kong Electric Company Limited and its successor-in-title and thus whatever rights or obligations C1 has in relation to Shops 17 and 22 are derived from the Hong Kong Electric Company Limited.

(ii) As regards “dealing as consumer”, the Court is referred to what was said by DHCJ Mimmie Chan, as she then was, in paragraph 45 of her judgment in Fung Hing Chiu Cyril v Henry Wai & Co (a firm) [2018] 1 HKLRD 808, that a consumer is typically an “unsophisticated and inexperienced” person “without any bargaining power” vis-à-vis its counterparty.  It is submitted by Mr Mak that Hong Kong Electric Company Limited being the developer could not have been described as a “consumer” vis-à-vis the other parties to the DMC, and further a shop owner such as C1 cannot be properly regarded as a party to the DMC who “deals as consumer”, and that a shop owner’s rights are subject to the DMC because the shop owner has acquired the shop space for business purpose.

(iii) As regards “on the other’s written standard terms of business”, the DMC could not have been the “written standard terms of business” of other parties, in particular the First Purchaser, and that the DMC covenants could not be considered as the terms which are habitually used as the DMC is specifically catered for the property in question: African Export-Import Bank and others v Shebah Exploration and Production Co Ltd and others [2018] 2 All ER 144 at [20] (per Longmore LJ).

48.In reply, Ms Lin tried to distinguish the Fung Hing Chiu Cyril case and the African Export-Import Bank case in that they were not in relation to any deeds of mutual covenant. However, there were no submissions from Ms Lin as to why any of the parties to the DMC could be said to be dealing as consumer or on the other’s written standard terms of business.

49.Having considered the above, I have come to the view that the Adjudicator did not have to consider the reasonableness requirement of Clause B6 as the requirements under Section 8(1) have not been satisfied. 

Issue 3 - The Construction Issue 

50.The main issue under this heading is essentially whether Clause B6 is wide enough to exempt D from liability arising out of mere negligence of D.

51.Clause B6 provides :

“Neither the Manager nor any servant agent or other person employed by the Manager shall be liable to the Owners or any of them or to any person or persons whomsoever whether claiming through, under or in trust for any Owner or otherwise, for or in respect of any act, deed, matter or thing done or omitted in pursuance or purported pursuance to the provisions of this Deed not being an act or omission involving or criminal liability or dishonesty or wilful negligence and the Owner shall fully and effectually indemnify the Manager from and against all actions, proceedings, claims and demands whatsoever arising directly or indirectly out of or in connection with the management of the Estate or any act, deed, matter or thing done or omitted as aforesaid and all costs and expenses in connection therewith and not involving criminal liability, dishonesty or wilful negligence on the part of the Manager[16].”

(emphasis added)

52.As accepted by Ms Lin, Clause B6 has specified 3 categories of the limitation of liability on D’s part in respect of an act or omission involving (i) criminal liability; (ii) dishonesty; and (3) wilful negligence.   There was no express reference to mere or ordinary “negligence” under Clause B6.

53.Both Ms Lin and Mr Mak have referred the Court to Canadian Steamship Lines Ltd v the King [1952] AC 192 (PC), an appeal to the Privy Council from the Supreme Court of Canada, in which the duty of a court in approaching the consideration of exemption clauses was summarised as follows at page 208:

“(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called “the proferens”) from the consequence of the negligence of his own servants, effect must be given to that provision. 

(2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens.  If a doubt arises at this point, it must be resolved against the proferens in accordance with article 1019 of the Civil Code of Lower Canada “In cases of doubt, the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation.

(3) If the words used are wide enough for the above purpose, the court must then consider whether “the head of damage may be based on some ground other than of negligence,” to quote again Lord Greene in the Alderslade case.  The “other ground must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, which is no doubt to be implied from Lord Greene’s words, the existence of a possible head of damage other than that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants.”

54.Clause B6 clearly does not contain any express reference to ordinary negligence.  Ms Lin argues as there is no express reference, there is doubt as to whether the wording of Clause B6 is wide enough to cover ordinary negligence and that once doubt existed, it must be resolved against the D, ie contra proferens, but instead the Adjudicator had erred in failing to follow the approach set out by the Privy Council, and instead his approach was by eliminating criminal liability, dishonesty, or wilful negligence.

55.Each exemption clause must be considered in the context of the case.  Clause B6 does not in fact exclude totally the liability of the Manager from his duties and only limits the liability of the Manager, and Mr Mak has thus described it as only a “limitation clause”.  Although there is no express reference to ordinary negligence or mere negligence, the wording of Clause B6 is quite clear in that the Manager’s liability is limited unless the Manager’s act or omission involves criminal liability or dishonesty or wilful negligence.  Further, the words “wilful negligence” would also in my view indicate that the clear intention of the drafter was that the Manager would only be liable in the event of wilful negligence, and not mere or ordinary negligence.

56.I do not find that on a fair and objective reading, there is any doubt as to the width of Clause B6, and I am of the view that Clause B6 is wide enough to cover mere or ordinary negligence.  I am of the view that the Adjudicator cannot be criticised for the approach he took.

Issue 4 - The Nuisance Issue

57.Clause 7 under Section X of the Sub-Deed provides that no provisions in the Sub-Deed shall prejudice or in any way be construed or prejudice or exclude the operation and/or effect of the provisions of the Building Management Ordinance, Cap 344 (“BMO”).

58.It was submitted by Ms Lin on behalf of C1 that D as the Manager would still be liable to C1 on the ground of nuisance or hazard which is not exempted under Clause B6 and that the Adjudicator had completely failed to consider the application of section 34I of the BMO.

59.First of all, as said earlier, under Clause B6, D is only liable to C1 on the basis of criminal liability, dishonesty and wilful negligence, and the words “any other act, deed, matter or thing done or omitted” in my view are wide enough to also cover any liability on nuisance.

60.Second, the only breach of duty found by the Adjudicator was the failure on part of D to remind occupants of the Domestic Towers the risk of sewage pipes being blocked due to foreign objects, and this did not constitute a fact of nuisance.

61.Third, only the actual wrongdoer is liable in tort to the victim.  On the facts found by the Adjudicator, there was an absence of evidence showing that D as the Manager had created the Incident and caused nuisance to C1. 

62.In any event, I accept Mr Mak’s submission that any nuisance claim by C1 should be directed towards the actual wrongdoers, ie the residential owners who were at fault, and not D.

63.In my view, C1 had no cause of action for nuisance against D and the Adjudicator cannot be criticised for not considering the same.

Issue 5 - Whether D’s duties were delegable

64.During the trial before the Adjudicator, D’s evidence was that they had engaged contractor (s) to clean up the sewage pipes and/or the man-hole(s) thereof on a regular basis and that the last time before the incident occurred when such cleaning took place on 8 November 2016. 

65.The Adjudicator accepted D’s evidence that D had regularly caused the sewage pipes or the sewage system to be cleaned and that after the Incident, D had immediately taken action and that D was not negligent in this respect[17]. As said earlier, the Adjudicator only found that D was negligent in not sending out regular reminders to occupants of their proper use of toilets.

66.Ms Lin has submitted that the Adjudicator had erred in law in holding that duties imposed on D were delegable to subcontractors.

67.However, there was in fact no clear finding by the Adjudicator on this point.

68.The Adjudicator clearly accepted D’s evidence and found that D was only negligent in not sending out regular reminders. The Adjudicator did not find D negligent in other aspects.  The Adjudicator’s findings were factual findings, and I see no reason why such findings should be disturbed.

Ground 14

69.Under this Ground, Ms Lin seeks to argue that as C1 is not a party to the DMC, Clause B6 would not bind him as he was a stranger to the same and there was no evidence that the clause had been drawn or sufficiently drawn to his attention or brought or sufficiently brought to his attention[18].

70.C1 being the registered owner of 2 shop spaces (including Shop 22) in the Commercial Podium  clearly falls within the definition of “Owner” in the DMC, which includes registered owners in the Commercial Podium[19]. Clause 4 of Section I of the DMC expressly provides that the “Owners” shall be bound by the DMC[20], and thus C1 is contractually bound by the covenants under the DMC.  Mr Mak has also referred to section 3 (1) of the Law of Property (Enforcement of Covenants) Ordinance 1956 which was later replaced by sections 39 and 41 of the Conveyancing and Property Ordinance, Cap 219.

71.Having considered the parties’ respective submissions, I see no merits in Ground 14.

Disposal of this appeal 

72.For all the reasons set out above, I find that the C1 has not made out the Grounds, and the appeal is hereby dismissed.

73.I order C1 to pay the costs of the appeal to D. I do not think the matter merits two counsel, and I only allow certificate for one counsel. Such costs to be summarily assessed on party and party basis. D to lodge its statement of costs within 14 days hereof, and C1 to lodge his list of objections within 14 days thereafter.  C1 shall pay the amount summarily assessed within 21 days of this Court’s assessment.

Ms Chantel Lin, instructed by Law & Co, for the 1^st claimant (Appellant)

Mr Andrew Mak and Mr Francis Chung, instructed by Clyde & Co, for the Defendant (Respondent)