1. 1 Public Liability in Building Management K.Y.Kwok Messrs. Li, Kwok & Law May 2010 All Copyright Reserved

2. 2 Meaning of Public Liability The liability of the incorporated owners or building managers. In respect of injuries or property loss caused to the members of the public. As a result of unsafe or defective conditions of common parts of a building.

3. 3 Meaning of Public Liability (contd) Examples: Common parts or illegal structures attached to common parts fell off and hit passers-by below. Slip-and-fall accidents occurring on wet surfaces of common areas.

4. 4 Legal Causes of Action 1.Negligence 2.Occupiers Liability 3.Public Nuisance

5. 5 Negligence The Defendant fails to meet the objective standard of a reasonable incorporated owners or management company under the same circumstances. Liability is assessed on a relative instead of an absolute basis.

6. 6 Occupiers liability In law, the incorporated owners and the management company are the occupiers who have control of the common parts of a building. Occupiers have to take reasonable precautions to ensure the safety of lawful visitors of the building owe them a Common Duty of Care. The standard of care expected is again the objective one of reasonableness.

7. 7 The Excelsior Hotels Case (CACV 38/2000) (Date of Judgment : 22 nd November 2000) On a rainy day, the plaintiff walked up the marble steps leading to an entrance of the hotel. She met with a slip-and-fall accident and was injured. Cleaners and security guards regularly patrol through the area to see if any need for cleaning arose, coconut mats were placed at the entrance to absorb moisture. The Court of Appeal (by a 2:1 majority) held that a reasonable patrol and cleaning system was in force, and the hotel was not liable.

8. 8 The Albert Houses case (HCPI 828/1997) (Date of Judgment : 23 rd December 1999) A cement canopy on the 1 st floor of the building fell off killing one passer-by and injuring some others. There were illegal structures (signboard and fish tank) erected on the canopy by the restaurant (i.e. the tenant) on the 1 st Floor of the building. The accident occurred when the restaurant engaged contractor to demolish the fish tank. The victims succeeded in their claims against each of the owner and tenant of the 1 st Floor, the incorporated owners, the management company and the demolition contractor. Their liability stemmed from their failure to act up to the expected standard of care.

9. 9 Public Nuisance Public Nuisance primarily means causing hazards to users of public highway; e.g. allowing objects to be dropped into a public road injuring passers-by.

10. 10 The Kwok Wing Houses Case(FACV No. 4 of 2007) (Date of Judgment : 26 th October 2007 A piece of concrete broke off from an illegal structure erected on the top floor of the building in Tung Choi Street. It hit a female hawker in the street and killed her. The illegal structure was constructed some 35 years ago.

11. 11 Kwok Wing Houses case (contd) The incorporated owners knew or ought to have known that the illegal structure might be a potential hazard to the users of the busy road but took no action to inspect or remove it. The Court of Final Appeal found the incorporated owners liable for causing public nuisance, even though the structure was illegal and was constructed by the owner/occupier of the top floor without the consent or approval of the incorporated owners. The inaction by the Building Department is no defence to the claim.

12. 12 Examples of potential dangers Presence of wet or slippery substances on the floor Failure to place mats on the floor on rainy days, or that the mats used were not appropriate or not duly affixed. Failure to separate areas where cleaning or washing is in progress Failure to place warning signs Uneven ground or inconspicuous steps Injuries caused by accidents or attacks by other visitors

13. 13 Examples of potential dangers Tiles or plasters peeling off the wall Steep stairs or narrow footings on stairs Allowing owners or occupiers to install facilities or store items without properly overseeing the safety thereof Failure to take proper reinforcement measures in poor weathers or conditions Using improper materials (e.g. materials of the floor surface is slippery)

14. 14 Contributory Negligence This means the victim himself was also negligent and this contributed partly or wholly to the accident The compensation awarded will be reduced according to the percentage of the victims responsibility Practical example: The victims should have been aware of the risk involved as a warning sign has been placed on the site.

15. 15 Reference articles

16. 16 Professional Negligence

17. 17 Meaning of professionals People engaged in an occupation which requires either purely intellectual skill, or manual skill controlled by the intellectual skill of the operator, as in painting, sculpture or surgery, as distinguished from an occupation which is substantially the production or sale or arrangement for sale of commodities. People who undertakes a specific task and professes some special skill in carrying out that task.

18. 18 Professional Negligence Professional must exercise reasonable care and skill in carrying out his task, and must NOT act in a way which no such professional of ordinary skill would be guilty of, if acting with ordinary care

19. 19 The Bolam Principle Where there are different schools of opinion in the professions as to the correct practice, a Defendant will not be negligent if he follows one such school of opinion. However, the court may consider a school of opinion to be unreasonable if there is no logical basis.

20. 20 Following Standard Professional Practice Acting in accordance with practice currently adopted by the profession is strong evidence of acting to the standard of a reasonably competent practitioner unless the practice contains reasonably foreseeable risks.

21. 21 Edward Wong Finance Co Ltd v Johnson, Stokes & Master (a firm) [1984] 1 AC 296 In a property transaction, the vendors solicitors fled Hong Kong with the purchasers money without passing the title deeds of the property to the purchasers solicitors. At that time, it was the prevalent practice in Hong Kong for solicitors to pay the purchase money to the vendors solicitors against the vendors solicitors undertaking to send back the title deeds The traditional English practice was to exchange title deeds with the purchase money simultaneously. The Privy Council found that the Hong Kong practice, though generally accepted by local practitioners at that time, was foreseeably risky. Ultimately, the purchasers solicitors

22. 22 Physical damage and Pure Economic Loss Physical damage are bodily injuries and physical damage to property Physical damage may result in economic loss like loss of income suffered by an injured person during his sick leave – economic loss consequent upon physical damage Pure economic loss are loss of profits, depreciation in value etc. not consequent upon any physical damage

23. 23 It is generally much more difficult to recover damages for pure economic loss than physical damage and economic loss consequent upon physical damage There are decided cases to the effect that pure economic loss is not recoverable by persons not having direct contractual or special relationship with the wrongdoers.

24. 24 Example: –An owner of a flat discovers some defects in the design / construction works by the architects / contractors engaged by the developer –There is no contractual relationship between the owner and the architect / contractors –No injury to person or damage to other property has been caused by the defect –Loss limited to the repair costs / depreciation of the value of the flat due to the defect – pure economic loss

25. 25 Sunface International Limited v Meco Engineering Limited (HCA 5958, 5965 and 5968 of 1988) (Date of Judgment : 10 th April 1990) Owners and occupiers of newly constructed houses in Discovery Bay sue various persons including the sub- contractor for the installation of defective electrical circuits. They sued for the costs involved for the replacement works. No injury or damage was caused to any persons or other properties before the replacement works. The claim against the sub-contractor was struck out without a full trial, as there was no contractual relationship between the owners and occupiers and the sub-contractors. Costs of replacement works were pure economic loss and were not recoverable.

26. 26 Policy reason behind If I buy a secondhand car to which there has been fitted a pneumatic tyre which, as a result of carelessness in manufacture, is dangerously defective ……. But if the tyre bursts without causing any injury other than to itself or if I discover the defect before the burst occurs, I know of no principle upon which I can claim to recover from the manufacturer in tort the cost of making good the defect which, in practice, could only be the cost of supplying and fitting a new tyre. That would be, in effect, to attach to goods a non- contractual warranty of fitness which would follow the goods into whosoevers hands they came. per Lord Oliver in D&F Estates Ltd v Church Commissioners for England [1989] A.C. 177

27. 27 Exception: The Hedley Byrne Principle Negligent act/statement causing pure economic loss The Defendant voluntary assumes duties and professes to exercise special skill or knowledge which the Plaintiff reasonably relies upon, then pure economic loss is recoverable. The special relationship is very often created by retainer entered into between lay clients and professionals

28. 28 Limitation Period According to the Limitation Ordinance (Cap 347) Generally, the limitation period is 6 years whether claim brought in contract or tort. For contract claim, the period will expire 6 years from the breach of contract.

29. 29 For tort claim, the period will expire 6 years from when the damage was caused. When was damage caused? –when the physical damage occurred –not when the damage was discovered or should, with reasonable diligence, have been discoverable

30. 30 The Pirelli Case [1983] 2 AC 1 Factory owners engaged consulting engineers to design a chimney for their factory. The specification regarding the material for the inner lining of the chimney was defective. The lining cracked under the impact of hot flue gases but this went undetected. By the time the outer casing had also cracked for the same reason and the damage was discovered, over 7 years had elapsed. The House of Lords held that the cause of action had accrued long before the crack in the outer casing was discovered and the action was time-barred.

31. 31 1991 amendment to the Limitation Ordinance For damage not reasonably discoverable, the limitation period will only expire after 3 years from the time when the damage ought to be discovered. However, if the limitation period is expired before the amendment, the amendment will not revive the time- barred action. e.g. defective works performed before 1985 There is nevertheless a long-stop 15 years provision which bars any negligence claims whenever discovered.

32. 32 The Bank of East Asia Case (FACV 21 of 1998) (Date of Judgment : 10 th December 1999) Defective design of the cladding system of the main office building of the Bank The building was completed in 1983. The defects were discovered in about June 1993. The cost of the rectification works amounted to $38 million odd.

33. 33 The Bank of East Asia Case (contd) The Bank sued the project architect, the structural engineer and the cladding sub-contractor in 1994 and 1995 to recover the costs of the rectification works Held: (by a 3:2 majority) the claim was already time- barred when the 1991 amendments came into operation, and was therefore dismissed. Following Pirellis principle, time began to run and damage was done when defect first appeared, whether it was detectable at all.

34. 34 Gratuitous Professional Same duty will be owed to person whom the professional knows (or ought reasonably to know) will rely on his professional services & advice, even though he acts gratuitously

35. 35 Inexperienced Professionals Lack of experience or skill of the surveyor in question is not a defence; the test concerning the standard of care required is an objective one Undertaking something which one is not up to without referring the task to appropriate professional may itself be negligence

36. 36 Limited Instruction Whether the instruction is to conduct a detailed survey or report on the general conditions visual inspection or structural survey Example: have not inspected structures which are covered, unexposed or inaccessible – not liable for defects which cannot be discovered without inspecting those structures

37. 37 Limited Instruction The standard for comparison is what a reasonably competent & experienced surveyor instructed to carry out that type of survey would have reported/identified/advised; Should advise the need of any follow-up survey if there are suspicious circumstances; Professionals may also limit the circulation and reliance on their expert report.

38. 38 The Vigers Case (HCA1589/2003) (Date of Judgment: 19 August 2009) Purchaser of a large basement of a building in North Point instructed Vigers to value the basement Vigers valued the basement at HK$470 million. Vigers valuation was relied on and the sale and purchase was completed at HK$470 million Vigers was accused of fixing the price in favour of the vendor or negligent in over-valuing the property.

39. 39 The court accepted the expert evidence of the Purchaser and found that the true market value of the basement at the time of purchase was only HK$108 million, i.e. one-fourth of the assessment made by Vigers.

40. 40 The Court commented that On any objective criteria, there is no need to consider whether it was outside the permissible bracket. It clearly was. The valuation was so bizarre, so glaringly sub- standard and so disproportionate that negligence can be readily inferred.

41. 41 Particulars of Vigers negligence –Not including comparables and analysis in the valuation report (when the subject was of substantial value) –Not stating the saleable area in the valuation report –Relying on information from the developers brochure without actual inspection –The comparables alleged to have been adopted (though not stated in the original report) were small street level shops with good visibility and accessibility and should not have been used as comparables to value the large basement.

42. 42 Assessment of Damages Damages is assessed at the difference between the purchase price of the property and the true market value of the property at that time.