Memoran Co Ltd v. The Incorporated Owners of Mei Hing Mansion

CACV 48/2021

[2021] HKCA 1146

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 48 OF 2021

(ON APPEAL FROM HCCT NO 18 OF 2020)

BETWEEN

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Before:  Hon Au and Chow JJA in Court

Dates of Written Submissions:  28 May 2021, 11 June 2021 and 18 June 2021

Date of Decision:  10 August 2021

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DECISION

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Hon Chow JA (giving the decision of the Court):

INTRODUCTION

1.By summons dated 25 March 2021 (“the Summons”), the Defendant applies for:

(1)  leave to adduce fresh evidence in the form of an Affirmation of Chau Kam Sang affirmed on 25 March 2021 (“Chau’s Affirmation”)  for the purpose of its appeal against an order made by Mr Recorder Houghton, SC dated 8 January 2021 (“the Order”); and

(2)  leave to amend the Defence dated 1 August 2020 in the form of a draft Amended Defence and Counterclaim annexed to the Summons.

2.Having read the evidence and submissions filed by the parties, we consider it appropriate to determine the Summons on paper without an oral hearing pursuant to Order 59 r 14A(1)  of the Rules of the High Court, Cap 4A.

BACKGROUND

3.The Defendant is the incorporated owners of a building known as Mei Hing Mansion, Nos 1 – 17 Yan Hing Street, Tai Po, New Territories (“the Building”).  The Plaintiff is the registered owner of the 3^rd floor of the Building (“the Premises”).

4.Above the Premises is a residential unit on the 4^th floor of the Building with a flat roof (“Flat 4D”). Separating the Premises and Flat 4D is a structural concrete slab (“the Slab”), the underside of which forms the ceiling of the Premises.

5.The Plaintiff’s tenant operates an elderly nursing home at the Premises, and has been experiencing water seepage problems at the ceiling of the Premises since about 2016.  Inspection revealed damage to the Slab, in particular, (i)  concrete spalling around the reinforced concrete steel bars (“RC steel bars”)  and (ii)  serious oxidation and rusting of the exposed RC steel bars.

6.By a writ issued on 7 May 2020, the Plaintiff commenced an action against the Defendant seeking (i)  a mandatory injunction to compel the Defendant to carry out all necessary and proper repair, maintenance, remedial measures and improvements to the Slab, and rectify the water seepage at the ceiling of the Premises, and (ii)  damages for breach of the deed of mutual covenant of the Building dated 23 March 1985 (“the DMC”).  It is the Plaintiff’s case that the Slab is a common part of the Building for the purpose of the DMC and the Building Management Ordinance, Cap 344 (“the BMO”), and the Defendant is under a duty to effect the necessary and proper repair and maintenance of the Slab.

7.By its Defence dated 14 August 2020, the Defendant denies that the Slab is a common part of the Building, and contends that it is not obliged to carry out the repair and maintenance works as claimed by the Plaintiff.  The Defendant also alleges that the cause or source of the water seepage at the ceiling of the Premises cannot be identified despite inspection and other investigative steps taken, and thus it is not in a position to determine the requisite repair or maintenance works to be carried out.

THE ORDER

8.On 30 November 2020, the Plaintiff issued a summons under Order 14 and Order 14A (“the O14/14A Summons”)  of the Rules of the High Court seeking summary determination of the following question (“the Question”), namely -

“Whether, on a true construction of the Deed of Mutual Covenant and/or the Building Management Ordinance (Cap. 344), the RC steel bars and the surrounding concrete in the floor slab between the 3^rd and 4^th Floors of Mei Hing Mansion (the ‘Structural Concrete Slab’)  constitute a common part of the building”,

and judgment against the Defendant consequent upon the determination of the Question, viz -

“(1)  An order that the Defendant do forthwith repair, replace, improve and otherwise remedy the spalled concrete in the Structural Concrete Slab;

(2)  An order that the Defendant do forthwith repair, replace, improve and otherwise remedy the steel reinforcement in the Structural Concrete Slab which has been exposed, seriously oxidized and/or damaged by rusting.”

9.The O14/14A Summons came before the Recorder for hearing on 8 January 2021.  That hearing, according to the Defendant, was “merely a direction hearing fixed for 15 minutes”.  At the hearing, the Defendant’s solicitor (Mr Andrew Wong)  submitted that the matter was not suitable for summary determination under Order 14/Order 14A because even if the Slab was a common part of the Building, there was an issue as to the Defendant’s responsibility for the water seepage and to repair or make good the damage to the Slab, and the resolution of that issue required the court to consider factual and expert evidence.  The Recorder considered, however, that the application before him did not “actually involve the water seepage aspects of this dispute” but “only to the definition in the DMC”, and he was being asked to determine summarily “whether the concrete slab [was] common parts within the terms of the DMC”[1].

10.At the conclusion of the hearing, the Recorder answered the Question in the affirmative, and further ordered that:

“3. Judgment be entered for the Plaintiff against the Defendant for the following relief:

(1)  A declaration that the Defendant is responsible under the DMC and the BMO to repair, replace, improve and otherwise remedy the spalled concrete in the Structural Concrete Slab;

(2)  A declaration that the Defendant is responsible under the DMC and the BMO to repair, replace, improve and otherwise remedy the steel reinforcement in the Structural Concrete Slab which has been exposed, seriously oxidized and/or damaged by rusting.

4.  Costs of and occasioned by this application together with the costs of this action be to the Plaintiff, to be taxed if not agreed.”

THE APPEAL

11.By a Notice of Appeal dated 5 February 2021, the Defendant appeals the Order to the Court of Appeal.  The Notice of Appeal contains 4 grounds, numbered 1, 2, 5 and 6 (omitting 3 and 4).  Grounds 1 and 2 are relevant for the present purpose.

(1)  Ground 1 contends that the Recorder erred in failing to consider that even if the Slab is a common part of the Building, there is still a factual issue to be decided, namely, who caused the damage to the spalled concrete and the steel reinforcement of the Slab which has been exposed, seriously oxidized and damaged by rusting, and thus is responsible for repairing the consequential damage to the Slab.

(2)  Ground 2 contends that the Recorder erred in failing to consider various relevant provisions of the DMC, including (i)  §8(a)  - not to make structural alterations which may cause damage to other parts of the Building, or inconvenience to other occupiers, (ii)  §8(c)  - not to cause nuisance or annoyance or damage or inconvenience to other occupiers, and (iii)  §8(f)  - an owner being responsible for the acts and omissions of persons occupying any part of the Building of which he is the owner.  The Defendant contends that the following factual issues, namely -

“(i)  whether the Plaintiff and/or its tenant … damaged the ceiling of the Plaintiff’s unit and hence caused water leakages; and/or (ii)  whether owners of residential units on the 4^th Floor … damaged the waterproof membrane of the floor slab and hence caused water leakages”,

should be decided at trial and judgment on liability should not be entered against the Defendant in an Order 14A application.

THE APPLICATION TO ADDUCE FRESH EVIDENCE

12.By the Summons, the Defendant seeks (inter alia)  leave to adduce Chau’s Affirmation as fresh evidence for the purpose of the Appeal.

13.It is well established that the three conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 must be satisfied before fresh evidence may be admitted in the Court of Appeal:

(1)  It must be shown that the evidence could not have been obtained with reasonable diligence for use in the court below.

(2)  The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive.

(3)  The evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.

14.In this case, Chau’s Affirmation consists of 31 paragraphs:

(1)  §1 - preliminary;

(2)  §§2-5 - “Defendant not yet given the chance to file Affirmation in Opposition”;

(3)  §§6-10 - “The water tank float valve incident”, which occurred in 2016;

(4)  §11 - “Plaintiff’s complaint of water seepage in 2018”;

(5)  §§12-14 - “Defendant not allowed by the Plaintiff to inspect the Premises”;

(6)  §§16-19 - “Defendant should be allowed to produce Expert Evidence”;

(7)  §§20-25 - “Damage to the Floor Slab by the Plaintiff’s installation of suspended false ceiling (Evidence obtained after the hearing on 8 January 2021)”;

(8)  §§26-30 - “Damage to the Floor Slab by the owner of Flat D”, and

(9)  §31 - “Conclusion”.

15.With the exception of §§20-25 of Chau’s Affirmation, the other paragraphs of his affirmation relate either to matters of submissions, or matters which it is not suggested could not have been obtained with reasonable diligence for use in the court below.  Accordingly, those other paragraphs, together with the exhibits referred to therein, plainly do not qualify for admission as fresh evidence in the Appeal.

16.In relation to §§20-25 of Chau’s Affirmation, the nature and effect of the evidence contained in those paragraphs, and the intended deployment of such evidence in the Appeal, are summarized in §§11 and 12 of the Defendant’s Written Submissions dated 28 May 2021, as follows:

“[11] D’s case is that the damage was caused by P itself. In the present case, despite repeated attempts, P denied D’s access to its premises for inspection until 25.1.2021 in order to carry out routine checking of the fire service system of the Building. It was found that one fire safety device installed at the ceiling of its premises was out of order and it was replaced with a new one. In a photograph showing the new fire safety device … it is discovered that P had drilled holes in the ceiling of its premises, i.e. the Structural Concrete Slab at the top of its premises in breach of §§8(a)  and (f)  of the DMC as P cannot damage the cement concrete flooring of the Building.

[12]  Accordingly, P caused damage to the Structural Concrete Slab and hence the waterproof membrane embedded therein.  As a result, P caused the said water seepage and consequential damage to the reinforcement steel and surrounding concrete thereof, and thus should be held responsible for the repair of the damage to the Structural Concrete Slab.”

17.Mr Tim Wong (for the Defendant)  argues that the three conditions in Ladd v Marshall are satisfied:

(1)  As regards the first condition, the Defendant had previously been denied access to the Premises, and the damage to the ceiling of the Premises done by the Plaintiff was only discovered on 25 January 2021 (after the hearing on 8 January 2021)  when the Defendant gained access to the Premises for carrying out a routine inspection of the fire service system of the Building.  Accordingly, the evidence could not have been obtained with reasonable diligence for use prior to the hearing before the Recorder.

(2)  As regards the second condition, if the damage to the Slab was in fact inflicted by the Plaintiff, this fact is likely to have a determining influence on the issue of responsibility for rectifying or making good the damage.

(3)  As regards the third condition, the Plaintiff has not made any relevant submission.  Anyhow, the evidence that the Plaintiff had drilled holes into the ceiling of the Premises as deposed to by Mr Chau is apparently credible and should presumably be believed by the court.

18.The Order consists of two main parts.  The first part concerns the question of whether the Slab is a common part of the Building for the purpose of the DMC/BMO.  This raises an issue of construction of the DMC/BMO.  The proposed fresh evidence contained in §§20-25 of Chau’s Affirmation has no bearing on this issue.

19.The second part of the Order concerns the responsibility of the Defendant to repair or made good the damage to the Slab. If the damage was in fact caused by the Plaintiff (or some other person for whose acts or omission the Plaintiff is responsible), we are provisionally of the view that it is reasonably arguable that the Defendant is not responsible to the Plaintiff to repair or made good the damage.  In his Reasons for Decision dated 25 January 2021, the Recorder made no finding on the source of the water seepage or the cause of the damage to the Slab.  The Recorder was aware of the fact that there were factual issues as to the cause of the damage[2], and that the Defendant’s position was that “the true issue was the cause of the damage to the slab”[3].  At §19 of the Reasons for Decision, the Recorder said:

“Paragraph 3 of the summons sought orders that the defendant should act on its responsibility to make good defective and damaged concrete in the relevant slabs. This was a more problematic request since the extent of such damage was indeterminate, as was its cause (albeit that some expert evidence has been provided by the plaintiff). This was not a question of interpretation or construction, and was factually sensitive, so the paragraph sought a judgment under O.14 in effect.”

20.Notwithstanding the perceived problem of giving a judgment in the Plaintiff’s favour on the Defendant’s responsibility to make good the damage in the Slab, the Recorder considered that the problem could be overcome by granting declarations in the terms as recited in §10 above, instead of directly ordering the Defendant carry out the repair or remedial works as sought by the Plaintiff in the Order 14/14A Summons.

21.Whether it is correct for the Recorder to grant the declarations in the aforesaid circumstances is an issue which will have to be further considered in the substantive Appeal.  However, for the purpose of the Appeal, we do not see why it is necessary for the Defendant to adduce evidence to show that it was the Plaintiff who caused the damage to the Slab. It seems to us that the Defendant can effectively argue, even without the proposed fresh evidence, that the declarations granted by the Recorder are not justifiable when the cause of the damage to the Slab remains a live issue between the parties.  As we see it, the proposed fresh evidence may well be relevant at the trial of this action if the Defendant can successfully set aside the declarations granted by the Recorder in the Appeal.  However, that is something which falls to be considered in future.

22.It follows from the above discussion that we do not consider the proposed fresh evidence contained in §§20-25 of Chau’s Affirmation would probably have an important influence on the result of the Appeal.  The second condition in Ladd v Marshall is not satisfied. Accordingly, the Defendant’s application to adduce fresh evidence in the Appeal is dismissed.

THE APPLICATION TO AMEND THE DEFENCE

23.The proposed amendments of the Defence seek to raise the defence that the damage to the Slab was caused by (i)  the Plaintiff, or (ii)  the owner of Flat 4D.  For the same reasons that we give for dismissing the application to adduce fresh evidence, it does not seem to us that the proposed amendments are necessary for the Defendant to effectively pursue the Appeal.  Again, the proposed amendments may well be relevant and necessary should the Defendant succeed in setting aside the declarations granted by the Recorder and the action proceed to trial.  In such a situation, the application to amend can be made in the court below.  We do not consider it justifiable for the amendment application to be made directly to the Court of Appeal. Accordingly, the application to amend the Defence is refused, without prejudice to any application which may be made by the Defendant to amend the Defence (if so advised)  in the court below in future.

DISPOSITION

24.The Summons is dismissed with costs to the Plaintiff.  We have considered the Plaintiff’s statement of costs dated 21 June 2021, which we understand has been served on the Defendant.  The Defendant’s application is a straight forward one.  We consider the involvement of 3 fee earners by the Plaintiff’s solicitors to be unnecessary and would likely involve duplication of work.  The time spent on perusal of documents and preparation of documents also seem to us to be on the high side.  We summarily assess the Plaintiff’s costs at HK$80,000.

Mr Jason Lee, instructed by Jones Day, for the Plaintiff

Mr Tim Wong, instructed by Huen & Partners, for the Defendant