Chan King Wan and Another v. Honest Scaffold General Contractor Co. Ltd. and Another

CACV000290/2000

CACV 290/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. CACV 290 OF 2000

(ON APPEAL FROM HCPI 1267 & 1269 OF 1996 (CONSOLIDATED))

Coram: Hon Rogers VP, Wong JA and Le Pichon JA in Court

Date of Hearing: 7 February 2001

Date of Judgment: 20 February 2001

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J U D G M E N T

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Hon Rogers VP :

1. This is an appeal from the Master on an assessment of damages in respect of two deceased persons.

2. The facts of the case are somewhat unusual. The two deceased were bamboo scaffolding workers. However, they were more than just workers. In 1986, they joined with Madam Yip Siu Yin to form the Honest Scaffold General Contractor Company Limited, the 1st defendant. Not only were they scaffolding workers but they were shareholders. In addition to their dividends as shareholders they received wages as scaffolders. As well as doing scaffolding work they were also responsible for getting in business and, it seems, generally for the business of the company.

3. Madam Yip gave evidence at the assessment. The Master formed a very favourable impression of her. Not only was she considered to be a most impressive and truthful witness, but the Master went on :

"Madam Yip possessed all the qualities of the pioneers who came to Hong Kong in the last century and built this place from the 'barren rock' to the thriving modern metropolis it is today. She was only a clerk in 1986 when she formed the idea of starting a scaffolding company. She recruited the 2 deceased. With application, hard work and co-operation, the old company was slowly built up. In the year after its inception, the financial picture was already starting to look healthy."

4. The Master went on to observe that it seemed it was Madam Yip who masterminded and steered the old company (that is the 1st defendant) into a successful enterprise which amassed enough assets to enable the three shareholders to invest in landed properties. Indeed, it would seem that the shareholders collectively, and at least in relation to the 1st deceased, individually, invested intelligently and prudently in real estate. The 1st deceased was apparently in the process of attempting to purchase a property in the Mainland, that is to be concluded from the fact that the deposit for such purchase was listed as one of his assets on his death. The shareholders also invested in foreign currencies in what would appear to have been a sensible and rational way.

5. After the fatal accident in December 1993, the 1st defendant company's business was, of course, thrown into some disarray. Madam Yip found two further scaffolders and formed a new company with a very similar name to that of the 1st defendant. Things were not easy for the new company. It would seem it looked for scaffolding business primarily in the public sector rather than the private sector to which the 1st defendant had looked. There was an additional difficulty in building up confidence amongst potential clients because of the fatal accident in 1993. As a result, the new company was forced to quote very competitively. This in itself appears to have provided some measure of success in that the turnover of the new company increased quite remarkably. However, the years for which audited reports were available showed that the new company was trading at a loss. The evidence was that by the time of the hearing of the assessment of damages that position had been remedied.

6. The 1st defendant acted not only as a sub-contractor but also sub-contracted work to others. In this way, the 1st defendant's profits were generated not solely by the physical labours of the two deceased but through the ability to sub-contract.

7. On this appeal, issues arise in three areas. The first is in relation to the award in respect of pre-trial and post-trial dependency; the second is in respect of the amount awarded in respect of the loss of accumulation of wealth; and the third is in relation to a potential claim for loss of service due to the death of the deceased. Since all the questions which arise on this appeal arise in relation to the 1st deceased, the facts in relation to that claim will be examined first, because those in relation to the 2nd deceased will follow.

The approach of an appellate court to assessments of damages

8. An appellate's court approach in respect of appeals as to damages was encapsulated by Greer LJ in Flint v Lovell [1935] 1 KB 354 at 359. The appellate court should only reverse the trial judge as to the amount of damages if it considers that either the judge acted upon a wrong principle of law or that the amount awarded was so high or so small as to make it, in the judgment of the appellate court, an entirely erroneous estimate. Simply because the appellate court might have awarded a different sum, it is not justified in altering the award.

Claim in respect of dependency

9. In respect of the 1st deceased, the Master awarded the sum of $3,191,526 in respect of pre-trial dependency and $627,684 in respect of post-trial dependency. The first figure was calculated in the conventional way by taking an average of the deceased's income at the date of death and at trial and by calculating the amount of lost income until trial; thereafter 76% of that figure was taken to allow for the amount which the deceased would have spent on himself. In respect of the post-trial dependency, the figure taken by the Master was based on the Master's estimate of what the deceased would have been earning at the date of trial. There was a simple arithmetical error in that although the Master intended to give a total multiplier of 10 years in respect of the 1st deceased, which would have entailed 42 months being accorded in respect of post-trial dependency, the figure, in fact, represented 12 times the monthly dependency. There is no dispute between the parties that if 10 years was the correct multiplier, then the post-trial dependency should be adjusted accordingly to comply with the Master's intention.

10. As referred to above, the deceased's income comprised two parts. In the first place, the deceased was paid a wage which was in line with the level of bamboo scaffolders' wages. In the second place, the deceased received a dividend from his shareholding in the 1st defendant.

11. There was no dispute as to the appropriate figure in respect of wages. However, for completeness, it should be mentioned that at first Mr Sarony challenged the inclusion in the Master's assessment of the figure of $1,500 per month which had been paid to the deceased in respect of meals and travel expenses. After discussion that line was not pursued.

12. The dispute in relation to dependency turned upon the correct figure to be taken in respect of dividends at the date of death and at the date of trial.

13. The dividends in the 6 years from the commencement of operations of the 1st defendant until the fatal accident in December 1993 had fluctuated. In particular, over the final 3 years the dividends had dropped considerably. In relation to the period until trial, Madam Yip had estimated that the dividends would have increased substantially from $180,000 to $500,000. This, it might be said, was in stark contrast to the dividends, or perhaps more accurately the absence thereof, that would have been payable by the new company since, of course, the new company was making a loss in that period.

14. As I have already indicated, the Master was impressed by Madam Yip's evidence. She was satisfied that Madam Yip was correct that the circumstances of the new company were not a proper guide as to what would have happened had there been no accident and the 1st defendant had carried on with the assistance of the two deceased.

15. Faced with this difficulty of assessing the likely dividends, the Master took the dividends at death to be an average of the dividends over the period in which the 1st defendant had been active until the death of the deceased and working on the figure of the income of the deceased which was derived from that calculation, she then took a notional 10% increase per year in the income of the deceased from the date of death until the date of the hearing of the assessment.

16. Mr Sarony, SC, appearing on behalf of the 2nd defendant challenged the Master's approach in two respects. In the first place, he pointed to the falling dividend in the three-year period up to the death of the deceased. He said that the figure which should be taken for dividends should be the figure for the final year i.e. $180,000. In the second place, he pointed to the lack of profits made by the new company in the relevant period and said that the Master's acceptance of Madam Yip's evidence of the likely profits to be made by the 1st defendant should be upset.

17. For his part, Mr Wong, SC, who like Mr Sarony had not appeared before the Master, and thus might have felt himself untrammeled by the submissions which had been made on behalf of the plaintiffs below, sought to increase the figure of dividends used to calculate hypothetical post-death earnings to those figures which had been given by Madam Yip. He said that once the Master had accepted Madam Yip as a truthful witness who had given an accurate estimation of the likely dividends, those figures which she had given for dividends should have been taken as the basis for calculating the deceased's potential income.

18. In my view, the Master's approach to the question should not be disturbed. She took a realistic and practical approach to the question of dividends at the date of death. By taking an average over the first 6 years of the operation of the 1st defendant she did no more than estimate in a reasonable way what the dividend would have been had there been no accident in the year of the death of the deceased.

19. In relation to the post-accident dividends, again I consider that the Master took a reasonable approach. Whilst she was clearly justified, on her findings of fact and in relation to Madam Yip's evidence, in rejecting any calculation based upon the profits of the new company, she took a reasonable view as to the likely increase in the deceased's income. Madam Yip's assessment of the 1st defendant's likely dividends had both deceased continued to work in the period up to trial was, clearly, an estimate based upon both deceased working. Some allowance would have to be made for the fact that, even if the fatal accident had not occurred, some other event may have occurred which would have prevented the old company continuing to prosper in the way anticipated.

20. It might be observed that in relation to the figures that should be taken into account as to income at the date of death and at trial, the figures taken by the Master corresponded to the figures which had been put forward by the plaintiffs at trial. If on appeal, the plaintiffs wish to demonstrate that the Master was wrong in taking those figures, it might be expected that there would be some explanation as to why those figures were put forward in the first place, as to why they were wrong and as to why the Master's approach to the question was wrong and had to be upset. No such explanation has been forthcoming.

21. Taken in the round the Master's approach to the income at the date of death and the likely income at the date of trial seems to me to have been even handed and realistic.

The Multiplier

22. As indicated above, the Master chose a multiplier of 10. At trial the 1st plaintiffs had argued that the multiplier should be 15. On this appeal the 1st plaintiffs contended that a further three years should be added to the 10 taken by the Master to account for a period between the time when the 1st deceased would have been 65 and when he would have been 70. The evidence indicated that in that period the deceased might well have continued to conduct the 1st defendant's business as a contractor even though he might not have been physically engaged in the erection of scaffolding.

23. The manner of selection of an appropriate multiplier was considered in the case of Chan Pui-ki v Leung On and Another [1996] 2 HKLR at 401. It was made clear that the appropriate multiplier for use in connection with awards of damages of this nature should be the conventional multipliers which had been used over the last - then 12 years or so (now some 17 years). In my view, the multiplier chosen by the Master was an appropriate multiplier for use in this case. Our attention was drawn by Mr Wong in support of his proposition to the case In re Lau Chuen-fat, deceased [1994] 2 HKLR at 173. However, in that case a multiplier of 10 was used in respect of a man of 45; clearly even given a possibility of the 1st deceased working until the age of 70, the choice of the multiplier of 10 for a man aged 50 would be appropriate.

24. Mr Sarony drew the court's attention to the "Ogden" tables which are to be found in Kemp and Kemp. Apart from suggesting that some discount on those figures would be appropriate, his submission as to an appropriate multiplier was somewhat fluid. For my part, I consider that it is of more assistance to follow the conventional figures as recommended in the Chan Pui-ki case.

Loss of accumulation of wealth

25. This claim arises under a provision in the Law Amendment and Reform (Consolidation) Ordinance, Cap. 23 which was introduced in 1986. Section 20(2)(b)(iii) reads as follows

"(2) Where a cause of action survives as aforesaid for the benefit of the estate of the deceased person, the damages recoverable for the benefit of the estate of that person-

(b) shall, where the death of that person has been caused by the act or omission which gives rise to the cause of action-

(iii) not include any damages for loss of property, whether income or otherwise, in respect of any period after his death, except in so far as the court is satisfied that, but for the act of the act or omission that gave rise to the cause of action, the deceased would have achieved an accumulation of wealth by the time that he would otherwise have died, in which case damages may be awarded in respect of the loss of that wealth."

26. There appears to be no corresponding provision in any legislation in Common Law jurisdictions, certainly none has been drawn to our attention.

27. The Master's approach in respect of the claim for loss of accumulation of wealth was to take the figure of the deceased's assets at the date of death which had been given for estate duty purposes as a starting point. That figure was then divided by 6 as an estimate, in rough terms, of the average annual accumulation of wealth which the deceased had made whilst the 1st defendant was in business.

28. Mr Sarony attacked the starting premise that the sum of $2.5 million, given for estate duty purposes, was appropriate. However, his challenge to that seems to me to fail. It is almost certain that the bank balances and properties, which are listed for the most part as one third interests, were all acquired as a result of the 1st defendant's business.

29. Mr Sarony's next argument was that an award under this head was only appropriate if there were demonstrated to have been regular savings on the part of the deceased, presumably out of his salary or other income.

30. I have come to the clear conclusion on the wording of the Ordinance that there is no doubt that the words 'accumulation of wealth' include not merely savings from income received, which the deceased might have made, but also the accumulation of wealth generally.

31. In those circumstances it is unnecessary to consider the matter further or the legislative history. However, following the decision in Reg v. Secretary for Transport, Ex parte Factortame (1990) A.C. 85 it is perhaps permissible to consider the provisions of the Bill which preceded the Ordinance. The relevant provisions corresponding to what is now sub-section (iii) were :

"... any damages for loss of income in respect of any period after his death, except where before the date on which the cause of action accrued he had established a pattern of making savings from income, in which case the damages shall include an amount calculated on the basis of that pattern, subject to such deduction as the court thinks fit on account of the accelerated payment of any such lost income for which damages are awarded;"

32. On the face of a comparison of the wording of the Bill and the Ordinance, it is clear that there was a material change in the wording of the Ordinance from that in the Bill. This in itself would indicate that the words 'accumulation of wealth' were indeed intended to be given their full meaning.

33. Were it legitimate to do so, further confirmation of that would also be drawn from the statement made by Mr Peter C. Wong on the 9th July 1986 on the resumption of the second Reading of the Bill. The second Reading had taken place on the 29th January 1986. In respect of this provision Mr Wong said :

"Clause 2 LARCO. The group queried how the 'pattern of savings' concept and clause 2 would be applied in practice, for example in relation to non-contributory pensions. After discussion with the Administration it was agreed that instead of imposing the 'pattern of savings' formula clause 2 should direct the court's mind to the accumulated wealth which would have been in the deceased's estate in the normal course of events. This approach avoids the need to define 'savings' and greater flexibility to the court to consider the individual circumstances of each case."

34. I will therefore content myself with simply stating that the statement made by Mr Peter C. Wong would tend to confirm the conclusion which I have already reached.

35. In the vast majority of cases the court, in considering claims for loss of accumulation of wealth, will, no doubt, be concerned to identify what savings the deceased was likely to have made out of his income. In the present case, given the structure of the 1st defendant and the manner in which the three shareholders operated it and dealt with its profits, it is clear that the 1st deceased was indeed accumulating considerable wealth as a result of his shareholding in and the operation of the 1st defendant. As a practical matter, there can be little doubt that valuations of property for estate duty purposes are unlikely to be inflated. Thus, as a starting point, the estate duty figures for the 1st deceased's estate seem to me to have been appropriate. By taking a figure of one sixth the Master was doing no more than trying to arrive in a practical manner at the amount of wealth which the deceased could be expected to have accumulated in the course of a year.

36. In respect of the 1st deceased, the Master then applied the same figure as had been applied as a multiplier in respect of the dependency claim. Again, this approach would appear to commend itself as a practical approach. It should be borne in mind that the deceased was 50 and would have been expected to work, albeit in the later years as a contractor rather than as a scaffolder, for the next 20 years. The resultant figure of $4,166,666 is no doubt substantial, but as Mr Wong pointed out, a cross check can be taken as to the reasonableness of that figure if one adds to that the value of the property which the 1st deceased had already accumulated and considers the result in the terms of the current value of property which the deceased might be expected to have acquired and retained at his death.

37. In this respect, Mr Sarony pointed out that there had been no deduction in respect of expenditure after the deceased's retirement and prior to his death. Although in some circumstances, it would be appropriate to reduce whatever the deceased might be expected to have accumulated during his working life to take account of expenditure in retirement, in other circumstances, it would not. Particularly, this would be so if, for example, it might be expected that the deceased would have put the majority of his money into property whereby he might be expected to live in one property and to enjoy the income from other properties. In my view, this is just such a case.

38. Although it is indicated the amount of the award is substantial, in each case the size of the award must be the result of a matter of impression and depend upon the judge's assessment of the evidence relating to the deceased and the impressions received as a result of seeing and hearing the evidence.

Damages for loss of services

39. Although section 20C of the Law Amendment and Reform (Consolidation) Ordinance, Cap. 23 provides that damages may be awarded for loss of society, the plaintiffs' claim on this appeal, that such an award should have been made, appears to me to fail, as pointed out by Mr Sarony, because of the provisions of section 20C(3). Damages for bereavement have been awarded of $70,000. In accordance with the sub-section that award would appear to bar any claim in respect of loss of society.

The 2nd deceased

40. Nothing further arises in respect of the 2nd deceased. In my view the 2nd defendant's appeal in respect of the 2nd deceased falls to be dismissed.

The appeal bundles

41. In this case, there were five bundles of documents prepared for the appeal totalling more than 1,600 pages. There was no core bundle produced. When the court raised this matter with the solicitors for the appellant prior to the hearing they replied by letter as follows :

"We confirm that we have not filed a Core Appeal Bundle of Documents. The grounds of the appeal as set out in the Revised Notice of Appeal touch on almost every aspects of the Judgement under appeal. The documents adduced in the trial are essential to the appeal and cross-appeal, and we believe that most of them are likely to be referred to in the hearing."

42. At the commencement of the hearing, Mr Sarony raised the matter with the court. He informed the court that his instructions from Mr Lau, the writer of the letter, were that the Practice Directions did not refer to a core bundle. Mr Sarony referred to a document which had been passed to him by the solicitor. However, it immediately transpired that that document was a copy of the Practice Directions for Civil Appeals in the Court of Appeal. A quick perusal was sufficient to disabuse the solicitors and leading counsel of their misconception. The only conclusion can be that neither solicitor nor counsel had troubled to read the Practice Directions, even before such absurd submissions were made. As it transpired in the course of the hearing, other than reference to the judgment, the court was asked to consider no more than 3 pages in all the bundles. Reference was made to no more than a dozen other pages to which the court could have reference should it wish to verify facts which had been stated.

43. It is difficult to avoid the conclusion that the preparation of the court bundles must have been done without reference to the Practice Directions and without any consideration of what documents were necessary on the appeal. Moreover, although a transcript of the evidence had been requested and obtained, it was clear that that, too, was unnecessary. In my view, the costs of preparing the court bundles in this fashion and of obtaining the transcript should fall solely upon those who ordered it. I am of the view that unless within 14 days of the handing down of this judgment, the solicitors for the appellant defendant show cause as to why such an order should not be made, there should be an order that the costs of the preparation of the bundles and of the transcript should be disallowed as between the appellant's solicitors and their client.

44. In addition to the order proposed, in my view, this appeal should be dismissed and the award in respect of the post-trial dependency in respect of the 1st deceased should be increased to $2,196,894 being the appropriate figure in relation to 42 months as intended by the Master. There should be an order nisi of costs in favour of the plaintiffs.

Hon Wong JA :

45. I agree with the judgment of Rogers VP and the order he proposes.

Hon Le Pichon JA :

46. I agree.

Hon Rogers VP :

47. The appeal will therefore be dismissed. The award in respect of post-trial dependency will be increased as indicated above and there will be the other orders in accordance with the judgments.

Representation:

Mr Ronny F H Wong, SC, and Mr Ng Man Sang Alan, instructed by Messrs Peter W K Lo & Co., for the 1st and 2nd Plaintiffs/Respondents

Mr Neville Sarony, SC, instructed by Messrs Clyde & Co., for the 2nd Defendant/Appellant