A sound investment for safer homes
The recent decision by the Court of First Instance, ordering flat owners in a 30-year-old Aberdeen building to pay $25 million as their share of responsibility for death and injuries caused by a collapsed canopy and fish tank, came as a shock to many in Hong Kong.
The owners were only one of five parties found to be at fault for failing to properly maintain the building. They were found to be 15 per cent to blame, as were the developers. The remaining 70 per cent of the blame was placed mainly on the restaurant from which the fish tank fell, and on the building management company. Total damages were assessed at $34 million. The flat owners paid their $5.4 million share, yet they were later ordered to pay much more - about $25 million. Why did this occur?
There is an ancient common law rule that says where several parties cause damage through their collective wrongdoing, each is individually responsible for the full amount of the victim's loss. If one of the parties pays the full amount, he is entitled to claim the difference from the other wrongdoers, according to their apportioned blame. In this case, the developer did pay the entire sum, and sought contribution from the others. However, the restaurant, the contractor and the management company all became insolvent.
The court decided that the developer and flat owners, as the only solvent defendants, should each be required to pay 50 per cent of the victims' losses. In the court's view, it is better that the burden of the defendants' insolvency be borne by the solvent defendants rather than by the innocent victims of the accident. This means that the liability of a wrongdoer found minimally to blame can increase with the financial instability of co-defendants.
In recent years, in Britain and elsewhere, auditors and other professional bodies, have expressed dissatisfaction with the joint-liability rules, and have lobbied for a rule of 'proportionate recovery', in which each defendant's liability is restricted to the amount of damage for which he was found responsible. People complain that they can no longer purchase insurance to cover their risks because of the insurers' fears of large payouts.
For flat owners in Hong Kong, relief can only be found in the form of an appropriate third-party risks insurance policy. Insurers will not be overly burdened, because damages from poor building maintenance will not normally be a greater burden on insurers than ordinary motor vehicle accidents.
The government is apparently not oblivious to the plight of flat owners. In 2000, amendments to the Building Management Ordinance authorised the making of regulations requiring owners' corporations to insure against third-party liability.
However, the government has been slow to act, apparently awaiting consultation with the insurance industry, although it has indicated that it will amend the law in the coming year. The co-operation of the insurance industry will be needed, but one representative recently expressed the view that coverage would not be extended to old buildings.
This is an issue in need of immediate attention by the government. A law requiring mandatory third-party liability insurance will serve the interests of all flat owners in Hong Kong, and more importantly, those unfortunate victims injured as a result of poor building maintenance. It should also be extended to the repair of slopes. And, as is now apparent to the affected flat owners in Aberdeen, this reform is most urgent, in the absence of a rule restricting liability to the proportionate share of responsibility for the damage.
Rick Glofcheski is an associate professor in the Faculty of Law at the University of Hong Kong, and editor of the Hong Kong Law Journal, where an expanded text of this article will appear next month
