Hing Man Group Co Ltd and Another v. The Incorporated Owners of on Ho Industrial Building

DCCJ1628/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1628 OF 2006

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Coram : H.H. Judge Chow

Dates of hearing : 12^th to 15^th April, 3^rd June 2010

Date of handing down judgment : 23^rd June 2010

Judgment

1.In this action, the 1^st Plaintiff claims against the Defendant for loss of rental income whilst the 2^nd Plaintiff claims against the Defendant for additional warehouse charges and transportation costs, whilst Defendant counterclaims against the 1^st Plaintiff for payment of its share of repair costs in the sum of $155,933.60. 

2.On Ho Industrial Building (“the Building”), a 9-storey building building constructed in 1981, is situated at Nos. 17-19 Shing Wan Road, Shatin, New Territories.  On the 1^st floor, there are car-parking spaces for cars and for lorries, and a container parking space.  Since June 2004 the 1^st Plaintiff has been the owner of Unit C on the Ground Floor of the Building.  Unit C has an area slightly less than 2,400 sq. ft., and part of it is right under parking spaces L4-L6 on the 1^st floor.  The 2^nd Plaintiff is an associated company of the 1^st Plaintiff.  It is the 1^st Plaintiff’s case that the 1^st Plaintiff has let Unit C to the 2^nd Plaintiff for the storage of raw materials since July 2004 at a monthly rate of $15,000.

The Incident

3.On 19.8.2005, the 1^st Plaintiff made a report to the Defendant that concrete fragments had fallen off from a portion of the ceiling of Unit C under parking spaces L4-L6 (“the Incident”).  The affected area was about 5 feet by 10 feet.  A representative of the Defendant immediately inspected the scene.  The Defendant held an urgent meeting on 22.8.2005, and as a result, the parking spaces L4-L6 were closed.  On 26.8.2005, the Defendant engaged an expert Mr. Chan Yuk Kit James (“James Chan”), a director of Charterwealth Professional Limited (“Charterwealth”), to inspect the deteriorated ceiling.  In October 2005, the Defendant appointed James Chan as the consultant for the repair works.  The repair works commenced in July 2006 and were completed in November, 2006.

Condition of the floor slab of the loading bay of parking spaces L4-L6

4.At the time of the Incident, the carpark on 1/F was already in a damaged state.  It the minutes of meeting of the management committee of the Defendant (“the management committee”) held on 26.8.2005, it was stated that it was the Defendant’s intention to avoid the damaged state of the carpark to continue to deteriorate.  It also stated that after James Chan had inspected the loading bay on the 1/F and Unit C on the G/F, he suggested that all the main thoroughfare and the public loading bay (i.e. L4-L6) must be closed because of immediate danger there.

5.On 30.8.2005, the management committee made a decision, banning people and vehicles from entering parking spaces L4-L6.  Photos taken of the parking spaces L4-L6 floor show broken and seriously corroded reinforcement steel bars.

6.The loading bay for parking spaces L4-L6 was designed for vehicles up to 12-tonne loading only.  But for a long time vehicles as heavy as 24 tonnes were permitted to enter the 1/F carpark and vehicles used the L4-L6 loading bay to load and unload goods.  Thus the L4-L6 loading bay had to bear loads substantially more than the designed capacity for many years.  The photo at p. 397 (Bundle 1) shows a statement in Chinese put up by the management at the vehicle entrance of the Building.  It states that container trucks and vehicles over 24 tonnes are not permitted to enter because the car parking area cannot withstand high loading.  Displayed underneath this sign is the notice dated 22.8.2005 put up by the management of the Building.  So the management committee must have knowledge of the existence of this sign in Chinese before the Incident.

7.Miss Candy Lee, a director and shareholder of the Plaintiffs, testified that she saw vehicles over 12 tonnes frequently using the L4-L6 loading bay before the Incident.  She was in Hong Kong 2 to 3 days each week.  Invariably she saw such trucks using the loading bay.  I do not have doubt on her integrity.  I accept all her evidence.

8.In March 2005, there occurred a water leakge which affected parking spaces L4-L6 and Unit C. The leakage required the use of grouting materials to be injected at various locations on the ceiling of Unit C.  This shows that the condition of the floor slab above Unit C was in a damaged state before the Accident.

Source of moisture

9.Candy Lee said that she often saw cleaners washing down the floor above Unit C, using the fire hose after the rubbish truck had departed.  She saw this happen several times each month.  In her 2^nd supplemental witness statement, she said:

“4. Prior the incident in August 2005, I often drove to work and parked my car on the 1^st Floor of On Ho Industrial Building nearly everyday.  Garbage trucks would be parked at the incident car parking space (“Parking Space”) above the 1^st Plaintiff’s property to pick up garbage on a daily basis.  Nearby space of the Parking Space would smell of garbage even long after the garbage truck had left and there would be liquids or drips coming from the garbage left on the Parking Space floor.  The cleaners therefore would use the fire hose to wash down the Parking Space.  I used to see this 4 to 5 times each month.  This situation persisted for years leading up to the collapse of the ceiling concrete in the 1^st Plaintiff’s property.  As there is no water drain in the vicinity, water would therefore accumulate in or near the Parking Space, and underneath the metal sheets covering the floor, and, in time, seep through the concrete floor slab and damage it.

5. Even after the incident, I understand that some people still use the fire house to clean their vehicles and also for cleaning the floor of the Parking Space.  Water-ponding was often seen in the Parking Space and the areas around it.”

Photos show that the fire hose was not in its proper glass casing under lock and key. 

10.On 30.9.2008, the Plaintiff’s expert, Mr. Albert Chan carried out an inspection of the floor slab.  He carried out a close inspection of the fire hose and the flooring condition in the vicinity of parking spaces L4 – L6.  He noted that the glass cover of the fire hose was not there.  There was uneven floor surface and water pending at the nearby area.  At some of the uneven floor surface, corroded steel reinforcement bars were exposed.  His evidence corroborates that of Candy Lee.  There is no floor drain in the vicinity of parking spaces L4-L6.  Water could not be drained away.  It would just remain on the surface of the floor above Unit C and go down the pores in the concrete.  It would wet the steal bars in the concrete, causing corrosion and concrete spalling.  When the concrete spalled to such an extent that it could not support itself, it just gave away and fell.  This must be what happened to the ceiling of Unit C on 19.8.2005.

Lack of maintenance

11.According to Ng Chung Hung (“Ng”), the chairman of the Owners’ Incorporation, the metal sheets on the L4-L6 parking spaces were placed there as early as 1992 or 1993.    They had at least for 5 years prior to the Incident not been removed.  Water was trapped underneath the metal sheets.  Thus no checking and no maintenance been done to the concrete surface prior to the Incident.  Hence the floor slab of the carpark on the 1/F was not kept in good repair.  Some time after the Incident there is no longer any metal sheets covering L4-L6.

12.In the minutes of meeting held on 16.8.2006, it was said that prior to the meeting, it had been found by the Charterwealth that in the vicinity of the repair works of L4-L6 parking spaces, some concrete floor slab sections had already been damaged and that the floor surface had already begun to become loose.  In photos taken shortly after the Incident, broken and corroded reinforcement steel bars can be seen after the metal sheets in L4-L6 loading bay had been uncovered.

13.Pursuant to section 18(1) of the Building Management Ordinance (“the Ordinance”) it is the duty of an owners incorporation to maintain the common parts of a building in a state of good and serviceable repair and clean condition.  According to section 2 of the Ordinance, “common parts” means “(a) the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner, and (b) unless so specified or designated, those parts specified in the First Schedule”.  The floor slab between an upper unit and a lower unit is for the common use for both floors.   It cannot be assigned exclusively to any owner.  Hence the floor slab of Unit C is a common part of the Building.  Furthermore, the floor slab above Unit C serves as the floor of the loading/unloading zone for the 1/F carpark.  It is an area used to serve all the building’s users.  Accordingly, it is a common part of the building.  Pursuant to section 18 (1) (a) of the Ordinance, the Defendant is under a duty to maintain the floor slab.  But it has failed to do so, resulting in part of the floor slab falling down.  Hence it is liable to pay for the loss and damages suffered by the Plaintiffs due to such collapse.

14.Albert Chan opines that “the water ponding resulted in earlier deterioration of the concrete floor which had not been waterproofed……… .The water accelerated rusting of the steel reinforcing bars in concrete, induced cracking, concrete spalling and water seepage……… the installation of ……… metal sheets further facilitated water trapped underneath and made regular inspection and maintenance very difficult ……… The early deterioration of concrete structure through serious corroded steel reinforcement bars and cracking had rendered the load bearing capacity of the original design greatly reduced.  I accept his opinion.

The size of the damaged area

15.In its letter dated 25.8.2005, Messrs. K.Y. Lo & Co., Solicitors for the Plaintiff, mentioned the size of the damaged ceiling being 5 ft. x 10 ft.  But the Defendant did not refute it until trial.  Even in his 1^st witness statement, the 2^nd witness for the Defendant, Mr. Chow Siu Wah (“Mr. Chow”) stated that “the area affected by the Concrete Fallen Incident on 19^th August 2005 …… is about 150-200 sq. ft. ……”.  Ng told this Court that he had visited Unit C and seen the collapsed concrete ceiling on 19.8.2005.  He described the affected area as merely 1 ft. wide by 1 odd ft. in length.  But a document signed by him states that on 19.8.2005 he was in fact out of town.  He was unable to explain this inconsistency.  I do not accept his evidence in this regard.

16.The Defendant argues that the Plaintiff failed to keep the surface of the ceiling in proper maintenance.  According to Candy Lee, she saw chunks of concrete as thick as 3 inches having collapsed from above.  It is not just the ceiling surface falling down, but part of the slab having fallen down.  So a portion of the common part fell down.  The Defendant’s argument cannot stand.

17.The Defendant submits that it had taken all reasonable care to prevent the occurrence of the Incident.  It sent out invitation to tenders to carry out maintenance works for the entire building prior to the Accident.  In 2002, an analysis was done for the building by 4 consultancy companies in respect of the building’s maintenance needs.  In October 2004, the owners in a general meeting resolved to invite tenders to carry out maintenance for the entire building “as soon as possible”.  In August 2005, no maintenance work had been carried out when the Accident happened.  The most important thing is that it should not have allowed vehicles over 12 tonnes to use parking spaces L4-L6, and it should have prohibited the use of water to wash the floor around that area.  By failing to do so, it had not taken reasonable care to prevent the occurrence of the Incident.

18.Mr. James Chan told the Court that the difference between constructing a 12 tonne-loading and a 16-tonne loading floor slab was just a few extra steel bars.  His evidence revealed that the new design for L4-L6 floor slab used 20 mm diameter steel bars instead of 16 mm ones.  He admitted that thicker bars were used to strengthen the slab to withstand 16 tonne loading.  Thicker bars were used to replace the original bars.  Hence it is not just adding a few extra bars.

19.He said that the fixation of anchor bolts to the ceiling in question was a fatal cause of the accident.  In his report, he opined that the more likely cause of the falling of the ceiling was the natural process of carbonation in the substandard concrete caused by airborne dioxide and moisture.  In his report, he stated that “if improper fixing bolts were used and the fixing bolts began to rust, the build up of internal stress would further cause cracks at the slabs.  This may not be the major cause of the slab deterioration ……” This is inconsistent with what he stated in his report.  His evidence is not objective.  I attach no weight to his evidence and to the contents of his report.

20.The Defendant carried out repair works on parking spaces L4-L6 on 1/F and the ceiling of L4 at a cost of about $311,867: -

Ng argues that since the repair costs of $311,867.20 concerned parking spaces L4-L6 on the 1/F and the corresponding ceiling below it, it is fair and reasonable that ½ of the repair costs be borne by the Defendant and ½ of the repair costs be borne by the 1^st Plaintiff.  Accordingly, the 1^st Plaintiff shall pay $155,933.6 to the Defendant for the repair.  This is wrong.  The Defendant failed to maintain the floor slab, causing part of it to fall down.  The Defendant is wholly liable for the repair costs.  On the other hand the portion of the ceiling which fell down formed a portion of the common part.  On this ground alone, the Defendant, and not the 1^st Plaintiff, is wholly liable for the payment of the repair costs.

Reconstruction of floor slab

21.In the Letter of Intent issued by Charterwealth on 18.1.2006, on behalf of the Defendant to Yuen Hing, the “re-casting of floor slab at G/F and 1/F carpark” was added at a price of $128,000, and then a discount of $128,000 was given in respect of the “re-casting of floor slab at G/F and 1/F carpark”.  Hence Yuen Hing was to undertake the re-casting of the floor slab without charge.

22.The dimensions of the re-cast are 11,200 mm + 8,625 mm (about 1,040 sq. ft.).  According to Ng, the fallen ceiling only measured 1 ft. x 1 odd ft.  The reconstructed area is therefore at least 500 times the size of the fallen area.  The Defendant claims that the 1^st Plaintiff is liable for the cost of such reconstruction.  This is simply sensical.

23.The 1^st Plaintiff was asked to pay $75,849.45 towards the repair works of Unit C, which included the reconstruction of L4-L6 parking spaces.  That sum was paid in January 2006 by the 1^st Plaintiff, as evidenced by a receipt at p. 430 of Bundle 2.

Temporary protective work

24.The Defendant claims that it is entitled to $89,120 (under items 15.3 and 15.4) from the 1^st Plaintiff for “temporary protective work”.  Ng testified that the Defendant had to pay the contractor $35,000 and $54,120 for “temporary protective work”, which covered the work relating to L4-L6.  NS2 was the concrete slab for which work was needed to be done by the contractor, with a quoted cost of $54,120, for “Chip off loose concrete slab NS2 and carry out repair works ……”  But no witness from the Defendant could explain what NS2 was, and how NS2 was related to the floor slab L4-L6.  Furthermore there is no evidence to show that the Defendant had paid Yuen Hing the claimed sum under this head.

25.Ng asserts that items 15.3 and 15.4 were related to “Temporary Protective Work”.  But there is no evidence to show why the 1^st Plaintiff should be responsible for such payments.

Rental fee for Hing Man

26.The Defendant claims that the 1^st Plaintiff is liable for the rental fee of $29,016 in respect of Unit 7L, which was arranged by the Defendant for the use of the 1^st Plaintiff during the construction period commencing from July 2006.  The Plaintiffs did not ask for the use of Unit 7L.  There was no agreement for such use.  There was no agreement as to who should pay for such rent.  The most important thing is that it is the execution of the repair work which triggered the arrangement of the use of Unit 7L.  The necessity to do so is due to the Defendant’s failure to properly maintain parking spaces L4-L6 of the 1/F car parking area, a common part of the Building.  So it is the Defendant which is liable to pay for the use of Unit 7L.

27.Charterwealth was retained by the Defendant to redesign and oversee the construction of the L4-L6 floor slab, which is a common part of the Builidng.  There is no basis for the Defendant just to pinpoint the 1^st Plaintiff for the Charterwealth’s consultancy fees and payment of submission plans to the Buildings Department.  Such expenses ought to be borne by all the owners in accordance with the DMC.

Plaintiff’s losses

28.The Defendant’s contractor only commenced works in July 2006.  During the period from August 2005 to late 2006, goods were removed from Unit C4 to the Man Sun warehouse.  The Defence Counsel submits that it is not within the reasonable contemplation of the Defendant that a localized concrete spalling could lead to a complete halt to the use of Unit C, bearing in mind that the alleged affected area only contributes about 2% of the net area of the warehouse and then was cockloft structures covering most of the area.  It is imprudent and reasonable for the 1^st Plaintiff not to use Unit C4, because it is obviously unsafe to do so.  Any part of the ceiling may fall down at any time, killing or injuring anyone working in Unit C4. 

29.I accept the evidence relating to the loss of rental income of the 1^st Plaintiff, and the extra warehousing and transportation costs of the 2^nd Plaintiff.

30.In the trial bundles, there are debt notes issued by the 1^st Plaintiff to the 2^nd Plaintiff, covering the rent of $15,000 per month from August 2004 to July 2005 in respect of Unit C4.  Candy Lee’s evidence that such a relationship exists was not challenged.  I accept her evidence in this regard.

31.The 2^nd Plaintiff had to incur additional storage expenses because of the collapse of the ceiling underneath L4-L6 parking spaces.  If not for the Incident, the goods stored in the Man Sun Godwon Ltd. would have been stored in Unit C.  The 2^nd Plaintiff is claiming against the Defendant for the additional storage charges it paid by virtue of the Incident.

32.I dismiss all the counterclaims.  I enter judgment in favour of the 1^st Plaintiff in the sum of $195,000 with interest thereon, at judgment rate, commencing from 30.3.2006 until payment.  I also enter judgment in favour of the 2^nd Plaintiff in the sum of $113,261.9, with interest thereon, at judgment rate, commencing from 30.3.2006 until payment. 

Costs

33.I make an order nisi, to be made absolute in 14 days' time, that the Defendant do pay costs to the Plaintiff, to be taxed, if not agreed, with certificate for Counsel.

The Plaintiffs:        represented by Mr. Paul H.M. Leung, instructed by M/S Chan & Tsu, Solicitors

The Defendants:    represented by Mr. Kenneth Chung, instructed by M/S Rowdget W. Young & Co., Solicitors