LEUNG TSANG HUNG AND LEE WAI YU v. THE INCORPORATED OWNERS OF KWOK WING HOUSE FACV 4/2007

S’s words:-

Kwok Wing House is a building in Mongkok with a famous bookshop in its Ground Floor. There was a loss of life in the accident. Not only the owner/occupier and tenant of the illegal structure, the Incorporated Owners of the Building was held liable. Once the Incorporated Owners was liable, it thus meant that every owner of the Building was liable. The Policy Consideration was rejected by the Final Court of Appeal. That should be the end of the appeal and the Incorporated Owners should have no way to avoid being responsible to pay for damages.

Personally, I partly agree with the view of Stock JA in Court of Appeal. It would be too harsh for the Incorporated Owners to be liable for the accident. The decision of the Final Court of Appeal was too harsh to the owners, but when we spend just a few minutes to consider the principle mentioned by Mr. Justice Bokhary, the decision was correct.

There is not yet any strict requirement for a building to have third party insurance to cover such kind of accident. We will have such statutory requirement soon. However, in the past, it was really difficult for a building to obtain any such insurance coverage. Now, every building whether old or not should obtain its own insurance.

But, if there was not yet any Incorporated Owners for the Building, it would be difficult for the Plaintiff to sue all owners. There are still lots of buildings in Hong Kong that are without any incorporated owners. The decision of the Final Court of Appeal may again discourage old buildings to have their Incorporated Owners.

That was definitely not in line with the existing policy of the Government to encourage owners to have their own incorporated owners.

---

Date of Judgment: 26 October 2007

Mr Justice Bokhary PJ:

Without attempting an exhaustive statement of the legal position, I think that at least this much can be said. Where any part of, or anything annexed to, the common parts of a building falls off as a result of its hazardous state and causes death, injury or damage in the street below, the incorporated owners are liable in nuisance for the consequences if they knew or ought to have known of the hazard in time to remove it but had unreasonably failed to do so. I regard such a rule as consistent with principle. And, as Lord Reid famously said in Dorset Yacht Co. Ltd v. Home Office [1970] AC 1004 at pp 1026H - 1027A, “when a new point emerges, one should ask not whether it is covered by authority but whether recognised principles apply to it”. That was said in regard to negligence. It holds good in regard to nuisance. On the basis of what these incorporated owners ought to have known in the circumstances of the present case as disclosed by the evidence, I am of the view that the estate of this deceased woman is entitled to succeed against them. For the foregoing reasons and those more fully stated in Mr Justice Ribeiro PJ’s judgment with which I agree, I would allow this appeal in the terms which he proposes.

Mr Justice Ribeiro PJ:

On 10 August 1999 at about 3.00 pm, Madam Liu Ngan Fong Sukey was plying her trade as a hawker at a fixed pitch in Tung Choi Street when she was struck by a piece of concrete which had fallen from the adjacent building. She died in consequence.

The building is known as Kwok Wing House (“the building”) and the object which had caused Madam Liu’s death was a triangular-shaped piece of concrete weighing some 15 lbs which had fallen from the 11th floor. It had formed the corner of a concrete canopy projecting out from over the enclosed balcony of Flat A on that floor (“the flat”), before it had become detached and fallen down into the street.

The plaintiffs are the administrators of the estate of Madam Liu. They sued Tse Yiu Pui and Ho Lai Bing who jointly owned the flat (“the owners”) as the 1st defendants. Chan Kwok Chi was their tenant (“the tenant”) and he was made the 2nd defendant. The 3rd defendants are the incorporated owners of the building, being a corporation which had come into existence on 12 April 1999 upon the owners being registered under the Building Management Ordinance[4] (“the BMO”).

The owners consented to judgment so that at the trial, the Judge was concerned only with the liability of the tenant and the corporation. They were each sued in negligence and public nuisance. His Lordship found the tenant liable along with the owners but dismissed the action against the incorporated owners with costs, holding that they did not owe any actionable duty to the deceased. Damages were assessed in the sum of $1,554,742.00 and judgment in that amount, together with various sums of interest and costs, was entered against the owners and the tenant. The plaintiffs’ appeal to the Court of Appeal in relation to the liability of the incorporated owners was dismissed,[5] again on the basis that the corporation owed the deceased no operative duty. An appeal on quantum is pending in the Court of Appeal. Leave to appeal to this Court was granted by the Court of Appeal[6] under section 22(1)(b) of the Court’s statute.

D.4 Control over the common parts

Given such attributes, can it be said that the incorporated owners in the present case exercised sufficient control over the building’s common parts to justify placing them in a category of actionability in respect of omissions?

In my view, the answer is affirmative. The Ordinance places the incorporated owners under a duty to “maintain the common parts and the property of the corporation in a state of good and serviceable repair ...; and to do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant ... for the control, management and administration of the building.”[100] The common parts include the external walls.[101] Obligations deemed by the BMO to form part of the DMC which the corporation is duty-bound to enforce include a prohibition against any person converting any common part to his own use without the approval of the owners’ committee.[102]

The DMC in the present case requires each owner to share in the cost of keeping the external parts of the building in good and tenantable repair and condition.[103] It also provides that the parties should not “make any structural alteration to the said building”.[104] Each owner covenants “not to place anything in or to occupy ... any part of the ... said building intended for common use.”[105] The parties also covenant to employ an agent to “generally take care of the said building for the common benefit of the parties hereto and to repair ... the structure and exterior of the said building or any part or parts thereof which are used by the parties hereto in common ...”[106]

To give these powers and duties teeth, the BMO authorizes entry on behalf of the incorporated owners into any flat for the purpose of inspecting, repairing, maintaining or renewing any common parts or other property in the flat causing concern; or for the purpose of “abating any hazard or nuisance which does or may adversely affect the common parts or other owners”.[107] If entry is refused, the BMO empowers a magistrate to issue a warrant authorizing a person to break into the flat in the presence of a police officer.[108] Members of the management committee exercising such powers in good faith and in a reasonable manner are given personal immunity.[109] Costs incurred in the exercise of these powers are recoverable from the owner in question,[110] as are the costs of remedial works which the corporation may undertake itself where the owner fails to do what is necessary, such costs being a charge upon the defaulting party’s share of the property.[111]

D.5 Incorporated owners’ actionable omissions

In the light of the foregoing, it is my view that the legal attributes, duties and powers of the incorporated owners place them in a category closely analogous with that occupied by the owners and occupiers discussed above.[112] They exercise a sufficient degree of control over the common parts of the building to justify making them subject to a duty which is actionable on the basis of omission in respect of nuisance hazards arising on or emanating from those common parts, subject to proof of the other necessary elements of liability.

D.8 Conclusion as to liability

It follows, in my view, that all the elements of liability on the incorporated owners’ part have properly been made out. They are accordingly liable for damages for public nuisance along with the flat’s owners and tenant.

F. Policy considerations

In reaching his decision, Stock JA referred to policy considerations which led him to the view that fixing incorporated owners with liability in a case like the present might have “harsh and unreasonable pragmatic consequences”.

This passage suggests that Stock JA was proceeding on the basis that liability is strict, so that the incorporated owners would be liable even where there is no reasonable basis for considering the structure a hazard. However, if, as has been held above, it is recognized that the law has evolved to the point where liability is premised on the defendant knowing or properly being taken to know of the existence of the hazard, this policy objection falls away. There is nothing harsh or unreasonable about making the body responsible, on behalf of the owners collectively, for keeping the common parts in good repair liable for failing to do so where they know or ought to know of the existence of a nuisance hazard endangering members of the public. The powers of enforcement given to the corporation by the BMO have been mentioned above.[143] The available measures are not confined to action in the courts.

There are moreover, in my view, sound reasons for making the incorporated owners, and not merely the individual owners implicated, responsible. Where the hazard involves the external common parts of a high-rise building, effective inspection and maintenance works can really only be carried out if those parts (and any illegal accretions thereto) are dealt with as a whole, with the erection of scaffolding and the like and with all the owners’ contributing to the cost, subject to possible adjustment regarding the individual owners implicated. And where the nuisance hazard consists of some unauthorized structure encroaching upon or being attached to the common parts, the individual owners who may have erected or adopted the structure and benefit from its existence, may well be unwilling to take any steps to remove it. Compulsion from, or direct action by, the incorporated owners may well be required if the hazard is to be nullified.