Fung Suen Sim v. Liu Chun Pong and Another

HCPI 896/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 896 OF 2007

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BETWEEN

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Before : Hon Bharwaney J in Court

Dates of Hearing : 27 – 29 June 2011, 29 – 30 August 2011

Date of Written Submissions on Tax Liability : 19 September 2011

Date of Judgment : 23 December 2011

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J U D G M E N T

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1.This is an assessment of damages in a fatal accident claim brought by the plaintiff, the widow of Lung Kai Hon, deceased, who died unnecessarily in a tragic fatal traffic accident that occurred on 22 October 2004. His death was caused by the defendants, the drivers of two public light buses, who, whether for reasons of road rage or otherwise, decided to engage in road racing. Their dangerous driving resulted in a traffic accident that caused fatal injuries to the deceased who had the misfortune to be one of the passengers on board of one of the public light buses. The accident occurred because the public light buses had entered the junction of King’s Road and Health Street East when the traffic lights were showing red to them, resulting in multiple collisions with a taxi and the two public light buses. The defendants were rightly charged, convicted, and sentenced to imprisonment for 5 years for dangerous driving causing the death of the deceased. Their insurers, very sensibly, consented to interlocutory judgment to be entered in this action for the damages to be assessed.

2.The deceased was aged 58 at the time of his death.  He was a sole proprietor of a fruit and vegetable wholesale business, under the name of Tai Cheong, supplying fruits and vegetables to restaurants in Central, Admiralty, Lan Kwai Fong and SoHo.  He left as his dependant, his widow, Madam Fung Suen Sim, a housewife who was aged 61 at the date of the assessment.  There is a dispute as to whether his son, Mr. Lung Wai Kai, born on 5 June 1972 and aged 39 at the time of the assessment, and his daughter, Ms. Lung Mei Yi, born on 8 March 1982 and aged 29 at the time of the assessment, were dependent on the deceased at the time of his death.

3.It is common ground that the deceased operated his business, in the name of Tai Cheong, initially, out of a stall in Central Market and, later, out of a stall at the Western Wholesale Food Market.  Tai Cheong commenced business in September 1999.  Before then, the deceased had assisted his elder brother in a similar business for some 25 years, before he fell out with his brother and ventured out on his own.

4.The schedule of property attached to the Letters of Administration granted by the Probate Registry showed that the estate of the deceased held assets to the value of almost HK$4 million and had trading debts of the firm called Tai Cheong, of which the deceased had been the sole proprietor, of about HK$176,000.  Most of the assets were money deposits in various bank accounts as well as in the bank accounts of Tai Cheong.  His assets also comprised a ½ share in an apartment in Kwan Yick Building in Des Voeux Road West.  This was jointly owned by the deceased and his elder brother as tenants-in-common.  It was purchased on 18 January 1991 for the sum of HK$250,000.A mortgage was not taken against this property and the purchase price had been paid outright.  During his lifetime, he also owned a ½ share as a joint tenant, together with the plaintiff, in two other properties :

(1) an apartment in Sun Shing Mansion in Queen’s Road West had been purchased on 31 December 1985 for the price of just under HK$360,000 with the assistance of a mortgage loan in the sum of HK$200,000 which was subsequently repaid and discharged on 5 August 1988;

(2) an apartment in Kornhill purchased on 26 May 1998 for the price of HK$4,420,000 which had been purchased with the assistance of a mortgage loan in the sum of only HK$700,000 and which had also been repaid and discharged, some 14 months later, on 30 July 1999.

5.As these two properties were owned by the deceased as a joint tenant with the plaintiff, they did not form part of his estate but devolved to the surviving joint tenant, his widow, upon his death.  The Sun Shing flat had been the family home until the purchase of the Kornhill flat.  After its purchase, the family moved to live in Kornhill and the Sun Shing flat was rented out and produced a monthly rental which the deceased had allowed the plaintiff to keep.  It was common ground that, as the widow inherited this property upon the death of her husband, she could not claim as part of her loss of dependency, the loss of rental from this property.  If I may borrow the colourful metaphor adopted by Staughton LJ in Wood v Bentall Simplex Ltd. [1992] PIQR p.332 at p.348 :

“Can the dependants inherit the goose and still claim that they have been deprived of eggs?”

In that case, the dependant widow and sons enjoyed the income derived from the deceased’s farming business and Staughton LJ recognised (at p.349) that if they had inherited the source of the income upon which they were dependant, they had not lost it.  The same principle applies here.

6.It was the plaintiff’s evidence that the purchase of the three properties, in which the deceased had an interest, was funded from his earnings during the time when he was assisting his elder brother.  A substantial part of those earnings consisted of bonus entitlements which had been accumulated and which were only be paid when the deceased needed money to purchase the Kornhill flat in 1998 and when the plaintiff left the brother’s business.  A balance payment by his brother of his accrued bonus enabled him to discharge the outstanding mortgage on the Kornhill flat in July 1999.  It is therefore correct to say that the accumulation of the deceased’s wealth in the form of these three properties was not achieved from any profits that he made as the sole proprietor of Tai Cheong.  However, his ability to work hard and to accumulate bonuses in the course of his 25 years of work in his elder brother’s business certainly bodes well for his ability to carry on a profitable enterprise as the sole proprietor of Tai Cheong which, in turn, would enable him to continue to accumulate wealth in the future if he had not met with this accident.

7.It is also not disputed that, on average, the deceased used to give the plaintiff HK$30,000 per month for her personal and household expenses and that, but for the accident, the deceased would have continued, at least until the end of his working life, to support and maintain the plaintiff in the same manner as he had done before the accident.    

THE INCOME OF TAI CHEONG

8.The proper assessment of damages in the present case requires a determination of the profits generated by the business of Tai Cheong, from its commencement in September 1999 to the time of his death in October 2004.  The plaintiff gave evidence before me and I accept her as a truthful witness.  She said that when the deceased started his business he operated from a stall in Central Market before later moving to the Western Wholesale Food Market in Sai Ying Pun.  He ran the business by himself and only employed two delivery workers.  He kept his own accounts and filed tax returns.  He kept the business records in carton boxes in the stall and recorded his business transactions on his computer.  Although she herself was a housewife all along, on occasion, she would help the deceased in carrying on the business of Tai Cheong by spending some time in the stall and taking orders on the telephone from customers.

9.I accept the plaintiff’s evidence and find that the deceased was a very hardworking man, who spent most of his time running his business in the fruit and vegetable stall in the Western Wholesale Market.  He was an extremely frugal person and a caring father and husband.  The deceased took his breakfast and lunch outside and only had dinner at home.  He did not gamble and did not have any bad habits, according to the plaintiff.  He was very fond of his work.  He was very interested in making money.  He did not spend much on entertainment as he was always working.  The deceased was very hardworking and used to work from 4 a.m. in the morning every day, unless it was a Sunday or a holiday, until 6 or 7 p.m. in the evening.  He worked every day of the year except for 3 days during Chinese New Year holidays when his stall would be closed.

10.5 months after he commenced the business of Tai Cheong, he started, in February 2000, to pay to the plaintiff the monthly sum of HK$30,000 for the household expenses and for her own purposes.  He either paid her in cash or by transfer to the bank account of the plaintiff.  The plaintiff was a housewife and had no income of her own other than from some small investments in stocks and foreign exchange, and interest income from fixed deposits.  She handled the deceased’s finances.  Most of his accumulated bonus had been paid by his elder brother directly into the account of the plaintiff.  Indeed, the greater part of the purchase price of the Kornhill flat came from the plaintiff’s bank account.  The plaintiff gave evidence that, after she had made all the payments in respect of the Kornhill flat in July 1999, she still had about HK$1 million in her accounts consisting of cash deposits, foreign currency and shares.  Indeed, her own savings account showed a credit balance in excess of HK$1 million on 9 November 1999.  The deceased’s own savings account on 11 November 1999 had an opening balance just above HK$600,000.  This sum represented this accumulated savings from the past and could not have come from Tai Cheong’s profits as Tai Cheong had just commenced business in September of that year.

11.The money that the plaintiff invested in shares and foreign currencies and kept on fixed deposits came from the accumulated bonus payments of the deceased, which had been paid to her by his elder brother, and, after the brothers had separated, from the income of the deceased in the business of Tai Cheong.

12.The plaintiff does not have personal knowledge of the profits earned by Tai Cheong in the 5 years from September 1999, when the business commenced up, until October 2004, when the business came to an abrupt end because of the death of the deceased.  She collected the business records of Tai Cheong to try to establish his net income after expenses.  The plaintiff relied on 3 sets of unaudited profit and loss accounts prepared by a firm of accountants called South China CPA Ltd. which were dated 1 December 2008.  They related to the tax years ended 31 March 2003, 31 March 2004 and the 7-month period from 1 April to 30 October 2004.  These accounts were prepared by South China CPA Ltd. after the death of the deceased on the instructions of the plaintiff and were based on documents handed over to them by the plaintiff’s son.  These documents included the bank statements and bank passbooks of the business, cheque book stubs, monthly turnover reports, invoices issued by Tai Cheong to its customers, invoices issued by fruit and vegetable suppliers from whom Tai Cheong obtained the goods which they sold to their customers, the personal savings account passbook of the deceased, and the profit and loss accounts prepared by the deceased which were appended to his tax returns.

13.The monthly turnover reports provided reliable evidence of the monthly sales achieved by Tai Cheong. Ms. Selina Lau, who appeared for the defendants, was correct to submit that they provided only half the picture, on the revenue side, but told us nothing about the cost of sales and overhead expenses.  More compelling evidence than these monthly turnover reports were the bank statements from Tai Cheong’s savings account.  Annex I to the closing submissions of Mr. H.Y. Wong, who appeared for the plaintiff, showed the amounts deposited into this savings account from October 1999 up to October 2004, including further deposits by way of autopay and cheque deposits, in the total amount of HK$81,552.85, after October 2004 up to December 2004.  I accept and find as a fact that all income from sales by Tai Cheong was deposited into Tai Cheong’s savings account, either by the deposit of cheques issued by its customers in favour of Tai Cheong or by autopay arrangements whereby its customers directly paid into Tai Cheong’s savings account the price of goods purchased by them.  As can be seen from Annex I, Tai Cheong received a sum of just under HK$2 million as proceeds from sales from October 1999 up to March 2000, a sum slightly above HK$6.8 million as proceeds of sales from the financial year ended 31 March 2001, and a sum slightly above HK$6.58 million as proceeds of sales for the year ended 31 March 2002.  Sales were down in the year ended 31 March 2003, which coincided with the advent of SARS and its aftermath that kept most people at home and resulted in a territory-wide substantial downturn in restaurant business.  The downturn continued for a considerable period of time and was reflected in the sales figures of Tai Cheong for the year ended 31 March 2004, in a total sum that was slightly above HK$3.6 million.  The proceeds of sales paid into Tai Cheong’s savings account from April to December 2004 were just short of HK$2 million.  The fact that the payments were made even after the death of the deceased demonstrated that Tai Cheong afforded credit payment terms to its customers which is what one would expect in this business.

14.Annex III to the plaintiff’s closing submissions shows the deposits that were made into the plaintiff’s savings account from Tai Cheong’s savings account from August 2000 up to October 2004.  Although Tai Cheong’s savings account statements for this period were unavailable, the deposits, made into the plaintiff’s account between 1 December 1999 and 3 July 2000, were likely to have been deposits made from Tai Cheong’s savings account.  The cash withdrawn from Tai Cheong’s savings account is shown on p.2 of Annex III.  This aspect of the case is not controversial and it is accepted that the plaintiff received a monthly sum of HK$30,000 from the deceased prior to his death.

15.Given the compelling evidence of the substantial amounts received in Tai Cheong’s savings account from customers for the purchase of goods, I have little difficulty concluding that the deceased understated his income when he filed his tax returns and his profit and loss accounts for the years ending 31 March 2003 and 31 March 2004 with the Inland Revenue Department.  As recorded in the monthly turnover reports, the sales made by Tai Cheong for the year ended 31 March 2003 were HK$4,510,424. This is supported by the deposits in the Tai Cheong’s savings account in the sum of HK$4,625,953.84.  Given the credit terms of the business, some of those deposits into Tai Cheong’s bank account would have been for purchases made in the preceding financial year.  The tax return filed by the deceased for the year ended 31 March 2003 only showed sales of HK$3,475,962.  Likewise, the profit and loss account filed by the deceased with the Inland Revenue for the year ended 31 March 2004 showed sales of only HK$3,286,310, as opposed to the monthly turnover record which showed sales of HK$3,728,619 for that financial year and which was also supported by the receipts into Tai Cheong’s savings account for that period in the sum of HK$3,638,657.90.  Ms. Lau rightly submitted that the court is not necessarily bound by matters stated in a tax return and is required to investigate what the real facts are.  The contents of a tax return are admissible evidence and ought to be accepted as correct unless, on the totality of the evidence adduced, the court is satisfied that the true position is otherwise than that set out in those returns.  As Reyes J. said in his judgment in the decision of the Court of Appeal in Christopher Gordon Young v Lee Chu (CACV 131/2003, 19 May 2004), at §132 :

“In ascertaining damages consequential on a wrong, a Court has to investigate the actual facts. However tempting, the Court cannot prejudge its assessment of the facts on the basis that a plaintiff derived a significant tax advantage by presenting a certain picture of his affairs in his tax returns and should be held to that picture. The picture painted in the tax returns may or not have been accurate in its characterization of fact. The picture cannot bind a judge. The Court may thus find at the end of the day that the true state of affairs was something other than that depicted in a plaintiff’s returns. In appropriate circumstances, the Commissioner of Inland Revenue may consider whether or not a plaintiff has wrongly obtained a benefit for which he should be re-assessed to additional tax or penalized in some way. But that is a decision for the Commissioner. It does not affect the Court’s investigation of fact.”

16.If I accept the truth of the monthly turnover figures or of the annual sales figures set out in the profit and loss account prepared by South China CPA Ltd., should I not also accept the expenses, in the form of cost of sales and overhead and other business expenses, that were recorded in the profit and loss account prepared by them for the years ended 31 March 2003, 31 March 2004, and up to the date of cessation of business on 30 October 2004?  Ms. Lau submitted that I should not because the statement of expenses in those accounts was just a wholesale adoption of the expenses declared by the deceased in the profit and loss accounts he filed with the Inland Revenue for the years ended 31 March 2003 and 31 March 2004, the only difference being an additional sum of HK$3,000 recorded as the accountancy fee of South China CPA Ltd.

17.The analysis by Messrs. Wong C. Fung & Co., certified public accountants, engaged by the defendants’ solicitors, to examine the books, statements, bank accounts and other records of Tai Cheong does not cause me to conclude that the sale figures set out in the monthly turnover or in accounts of South China CPA Ltd. are incorrect.  Messrs. Wong C. Fung & Co. examined all the invoices that were issued for the periods in question, but did not have all the invoices for the year ending 31 March 2003 and only had invoices for the period from 1 November 2002 to 31 March 2003.  The invoices for those 5 months came up to about HK$1.57 million.  There has been no cross-check between these figures and the monthly turnover records for this period.  It must be noted, however, that the sales must have been reducing during this period of time because of the impact of SARS on restaurant business in Hong Kong.

18.A tally of invoices for the year ending 31 March 2004 conducted by Messrs. Wong C. Fung & Co. produced a total sum of HK$3,469,443.34, which, of course, is short of the sales figures of HK$3,728,619 appearing in the monthly turnover records for that year or the annual sales figure of HK$4,094,832 shown on the profit and loss account prepared by South China CPA Ltd. for this period.  However, the tally produced by Messrs. Wong C. Fung & Co. did not include the figures set out in 107 illegible invoices.  They also noted that some invoices were missing from the sequence numbers of 25961 to 33661 that were issued during this period of time. Finally, Messrs. Wong C. Fung & Co. tallied some 3,619 invoices issued during the period from 1 April 2004 to 30 October 2004 and arrived at a total sum of HK$1,637,348.52.  It is not clear how many invoices were ignored by them as being illegible and whether or not there were any missing invoices.

19.I produce in table form, for the three tax year periods ended 31 March 2003, 31 March 2004 and 30 October 2004, the annual sales figures produced by South China CPA Ltd., the tally of invoices by Messrs. Wong C. Fung & Co., the annual total of the figures appearing in the monthly turnover reports, the annual sales figures appearing in the profit and loss account prepared by the deceased and filed with his tax returns, and, finally, the amount of deposits in Tai Cheong’s savings account. 

20.In the light of this evidence, whilst I conclude that the deceased understated his income when he filed his tax returns and his profit and loss accounts for the years ending 31 March 2003 and 31 March 2004 with the Inland Revenue Department, the only finding I am prepared to make is that the business of Tai Cheong enjoyed gross receipts from sales in the sums deposited into Tai Cheong’s savings account, as set out in the above table, i.e. in the sums of HK$4,625,953.84, HK$3,638,657.90 and HK$1,955,672.62 for the period from 1 April 2002 to 30 October 2004, making a total of $10,220,284.36.  This produces monthly gross receipts of $329,686.60 or annual gross receipts of $3,956,239.10 over this period of time.

21.Having reached this conclusion, I turn to consider the other side of the equation, namely, the expenses of Tai Cheong for the same period.

22.I produce a similar table showing the cost of sales and administrative expenses shown in the accounts filed by the deceased with the Inland Revenue, almost identical figures were produced by South China CPA Ltd. (save that the administrative expenses were increased by $3,000 to reflect their own accounting fees), the cheque payments made from Tai Cheong’s current account to its suppliers and in respect of other business expenses, and the figures produced by Messrs. Wong C. Fung & Co. in respect of those cheque payments.

23.People evade taxes by failing to declare the true receipts of their businesses and by inflating the expenses of their businesses, thereby reducing the taxable profits of the business.  A person who wants to evade tax will not under-declare his expenditure.  To do so will increase his tax liability and not reduce it. I find that the accounts filed by the deceased with the Inland Revenue showed the true expenses of his business for the years ended 31 March 2003 and 31 March 2004, and I also find that the accounts prepared by South China CPA Ltd. showed the true expenses of the business of Tai Cheong from 1 April 2004 to 30 October 2004.

24.The payments made from Tai Cheong’s current account in the sum of HK$2,349,537.61 for the year ended 31 March 2004 is less than the business expenses for that year shown in the sum of HK$3,124,104 in the accounts filed by the deceased. Likewise, the cheque payments from Tai Cheong’s current account in the sum of HK$1,278,602.98 for the period up to the end of October 2004 is less than the business expenses of HK$1,619,337 (which is net of the sum of HK$3,000 for their accountancy fees) shown in the accounts prepared by South China CPA Ltd.  However, even ignoring the amount transferred to the current account from Tai Cheong’s savings account and the amount of HK$30,000, which was paid to the plaintiff from a cash withdrawal made on 26 November 2003, there were other cash withdrawals from the Tai Cheong’s savings account for the year ended 31 March 2004 in the sum of HK$355,000, and further cash withdrawals of HK$125,000 for the period from April 2004 to October 2004.  The Letters of Administration also showed that trading debts of Tai Cheong in the sum of HK$175,601.40 were unpaid.  Further, a review of the personal accounts of the deceased showed that funds from his personal savings account were likely to have been used by the deceased when he started the business of Tai Cheong in order to meet the liabilities of Tai Cheong.  Based on the above, I find that the liabilities of Tai Cheong, which were not met by payments from Tai Cheong’s current or savings accounts, were either paid by the deceased from his other assets or remained unpaid.  On the above basis, I find that the expenses of Tai Cheong for the year ended 31 March 2003 were HK$3,317,502, for the year ended 31 March 2004 were HK$3,124,104, and for the year ended 30 October 2004 were HK$1,619,338.  The total expenses for this period were HK$8,060,944 or HK$260,030 per month or HK$3,120,365 per annum.

25.I find that the net pre-tax income for this period of 31 months was HK$835,874.1 per annum (HK$3,956,239.10 less HK$3,120,365) or HK$69,656 per month.

26.I refer to the detailed analysis of Ms. Lau that was based on the growth of the assets of the deceased. She compared his assets at the time the business of Tai Cheong commenced and his assets at the time of his death, which produced a gross aggregate surplus from the business of between HK$1,311,794.09 to HK$1,381,024 over the 5 years that Tai Cheong was in operation.  These figures produced net annual profit figures of between HK$227,283 and HK$276,205 for the 5 years that Tai Cheong was in business.  To this sum must be added the annual sum of HK$360,000 which came from Tai Cheong’s profits and which was paid to the plaintiff. This produced total annual profits of between HK$587,238 and HK$636,205.  This analysis by Ms. Lau proves beyond peradventure that the profits and loss accounts filed by the deceased with the Inland Revenue, showing a net profit of HK$158,460 for the year ended 31 March 2003 and HK$173,206 for the year ended 31 March 2004, were clearly wrong.

27.I have considered the further written submissions and calculations from the parties on the incidence of tax on the net pre-tax income of the business.  Calculations based on assumed total annual profits of between HK$587,238 and HK$636,205 produced a tax liability of between HK$53,884 and HK$62,843 for the year ended 31 March 2004 and between HK$43,110 and HK$51,434.80 for the year ended 31 March 2009.  Taking a broad brush approach I conclude that tax liability was in the region of 9% of the net pre-tax income of the business and I find that the annual profits from the business, net of tax, was HK$760,645 (HK$835,874.1 less 9% on account of tax).

28.I take judicial notice of the fact that there has been about a 10% inflationary increase of prices from 2005 to the present (see the Consumer Price Indices published by the Census and Statistics Department from January 2005 to the present) and I find that the present notional net, after tax, income of Tai Cheong would have risen by at least 10%, after taking inflation into account and even ignoring the recovery and general increase of restaurant business in Hong Kong and in the areas supplied by Tai Cheong since 2005.  This translates to a post-trial notional net, after tax, income of HK$836,710 (HK$760,645 x 10%) and median pre-trial notional net, after tax, income of HK$798,678 (HK$836,710 + HK$760,645 ÷ 2).

The award for loss of dependency

Who were dependant on the deceased?

29.It is common ground that the plaintiff was dependant on the deceased.  She was born on 29 November 1950 and was aged almost 54 at the time of the accident.  She is now 61 years old.  The issue I have to determine is whether the son of the deceased, who was aged 32 at the time of his death, and the daughter of the deceased, who was aged 22 at that time, were also dependent on the deceased.  The evidence in support of the daughter’s dependency comes from the plaintiff who said, in §7 of her witness statement, that she had gone to study in Japan in 2002, some 3 years before the death of the deceased in October 2005, and that remittances as well as cash in Japanese currency were made and given to her, from the end of December 2001 up to 20 August 2004, in a total sum of almost HK$880,000, as can be seen from Annex VI attached to the closing submissions of Mr. Wong.  By reason of the untimely death of the deceased, she was forced to quit her studies in Japan and she came back to Hong Kong in early 2005.  She lived with the plaintiff and her brother in the Kornhill flat from that time until the end of 2007 when she married.  I accept this evidence, and also the evidence of the plaintiff that the remittances and the purchase of Japanese yen were made using the funds the deceased had given her.  It is clear from Annex VI that the source of these remittances and the monies used to purchase the Japanese Yen came either from the plaintiff’s savings account or from the plaintiff’s multiple currency savings account.  I also accept the submission of Ms. Lau that there is no evidence to suggest that the deceased made any transfer of funds from any of his personal accounts or from the accounts of Tai Cheong to the plaintiff to specifically cover the remittances and the purchase of Japanese yen.  On this evidence, I am satisfied that the deceased’s daughter was partially dependent on him prior to his death and that she would have remained partially dependent on him up to the time she married at the end of 2007, and that her financial needs were partially satisfied from the monthly payments of HK$30,000 which the deceased made to the plaintiff.   I am also satisfied that she was also partially dependent on her mother, the plaintiff, at the time of the death of the deceased.  The total value of the contributions of HK$880,000 averages out to over HK$20,000 a month over the period of some 3 years and 7 months, from 2002 up to the time of the death of the deceased in October 2004.  As can be seen from Annex IV attached to the closing submissions of Mr Wong, the monthly household expenditure came up to almost HK$15,800 per month.  I find that this household expenditure was entirely funded from the monthly contributions of HK$30,000 made to the plaintiff by the deceased.   Clearly, part of the funds expended on the remittances and purchase of Japanese currency made in favour of their daughter came from the personal savings and investment returns of the plaintiff.

30.I also accept the evidence of the plaintiff that her son had been residing, all along, with her and the deceased in the same household.  He was aged 32 at the time of the death of the deceased and was engaged full-time investing in shares and other financial instruments.  He earned sufficiently to cover his own personal expenses.  However, he did not make any contribution towards household expenses even though he resided with his parents in the Kornhill flat and took all his meals at home.  I also find that he was dependent on the deceased in the monthly sum of just under HK$6,000 shown on the revised monthly household and personal expenses calculations contained in Annex IV to the closing submissions of Mr. Wong.  The deceased did not make any additional payment towards the household expenses which were incurred for the benefit of his son.  The source of the money to pay for the monthly household expenses was the monthly sum of HK$30,000 that was paid into the plaintiff’s savings account.                      

31.After the death of the deceased, the daughter and son of the deceased enjoyed benefits that arose independently and by the voluntary act of another person, in this case, their mother, the plaintiff in these proceedings, who supported her daughter and her son from her own assets after the monthly contribution of HK$30,000 from the deceased ceased upon his death.

32.The claim for loss of dependency on behalf of the son of the deceased is only made for the pre-trial period from the date of death in October 2004 up to the date of this judgment in December 2011, a period of 7 years and 2 months or 86 months.  The award to be made in this regard depends on the assessment of the length of time the deceased would have continued to run the business of Tai Cheong, had this accident not occurred.

                   The value of the Kornhill apartment

33.I have already referred to the calculations of the monthly household and total expenses of the deceased and his family appearing in Annex IV to the closing submissions of Mr. Wong.  I note that there is no reference, in these calculations, to the value of the Kornhill premises in which they resided.  That is correct, so far as the widow’s enjoyment of the premises was concerned.  By reason of her joint ownership of these premises, she became the sole owner on the death of her husband.  No deduction is to be made of the benefit she obtained from inheriting the deceased’s share in the property upon his death.  Damages were originally awarded under the Fatal Accidents Act of 1846 for the net financial loss arising from the death of the deceased and this approach required that all financial benefits which arose on the death had to be set off against the damages to be awarded.  However, the principle that required a deduction to be made of financial benefits was gradually eroded by judicial decisions, such as Bishop v. Cunard White Star Co Ltd. [1950] P 240 and Heathley v. Steel Co of Wales Ltd. [1953] 1 WLR 405, which excluded the financial value of a house or a car already owned jointly with the deceased before his death.  Based on these authorities, the proper determination to make, in this type of case, is that the plaintiff did not enjoy any financial gain because her enjoyment of the property was the same before and after his death, although, after his death, she could, if she wished, sell the Kornhill flat and convert it into cash.  Indeed, if the capital value of the flat had to be deducted from the award for damages for loss of dependency, as a benefit accruing to the widow upon the death of the deceased, it would be necessary to add, to the value of the widow’s dependency, a sum representing the rental value of her free occupation of the Kornhill flat.  This would counter-balance the capital deduction. For this reason, the courts have long disregarded the rental value of the family home on the one hand and the capital value of the inheritance on the other. 

34.The continuing erosion of the deduction principle has occurred with various legislative changes to the Fatal Accidents Act and to our Fatal Accidents Ordinance. It was completed with the amendment, in 1982, of section 4 of the Fatal Accidents Act 1976.  Our current section 7 of Fatal Accidents Ordinance, Cap. 22, which was modelled on that amendment, provides:

“In assessing damages in respect of a person's death in an action under this Ordinance or under the Carriage by Air Ordinance (Cap 500), benefits which have accrued or will or may accrue to any person from his estate or otherwise as a result of his death shall be disregarded.

As illustrated by the decision in Wood v Bentall Simplex Ltd. [1992] PIQR p.332, referred to above, after the enactment of his provision, the question to ask in the assessment of damages under the Fatal Accidents Ordinance, is whether there is a continuing source of support, as distinct from a supervening “benefit” which had to be disregarded.  In the former case, there is no loss; in the latter case, the “new” benefit is to be disregarded.

35.However, in the case of dependent children who do not inherit the premises, jointly owned by their parents, in which they were living before the death of the deceased, it may be appropriate to assess the value of the accommodation they enjoyed in those premises prior to the death of the deceased.  If they were to be regarded as being jointly permitted by their parents to reside in the premises, then half the value of the accommodation they enjoyed in those premises could be assessed as part of the value of their dependency on the deceased.  Although they would continue to enjoy such accommodation after the death of their deceased father, such enjoyment would arise from the voluntary act of their mother who allowed them to continue to reside in the premises which she wholly owned after his demise.  In this case, however, there is no claim for the value of the accommodation enjoyed by the son of the deceased.  The value of the dependency of the daughter of the deceased did not include the value of rent-free occupation in the Kornhill flat: she had lived in Japan for some years prior to his death and only returned to Hong Kong in 2005, after his death.

Taylor v O’Connor [1971] AC 115: the loss of benefit from future savings

36.As originally pleaded, the loss of dependency claim was based on the financial contributions made to the plaintiff during the lifetime of the deceased.  However, it is clear that savings made by the deceased in the course of his working life that enure to the benefit of his dependants, either by way of financial contributions to be made to them after his retirement which he would make from his accumulated savings, or by way of inheritance after his natural death, should be included in the calculation of the value of the dependency.  In the decision of the House of Lords in Taylor v O’Connor [1971] AC 115, the deceased, a partner in a firm of architects, died in a traffic accident as a result of the fault of the appellant and left, as his dependants, his wife, and a daughter who was aged 18 at the time.  In his judgment at p.127, Lord Reid said :

“It had been assumed that the wife’s dependency ought to be calculated on the footing that it would have ceased when her husband ceased earning. I do not think that is right in this case. Before he reached 65 he would have been able to make ample provision for the future, whether or not he survived, and I think that, if one is to be realistic, dependency should be taken on the basis that she would be maintained at the same rate of expenditure throughout her life.”

The savings that the deceased would have been able to accumulate during his notional working life up to the date of his retirement would be the source of funds from which his wife would be maintained.  In his judgment in the same case, Viscount Dilhorne said at p.140:

“The position with regard to possible savings is more difficult. If he had saved £1,750 a year for 12 years, it would have amounted to £21,000 but some part of the savings might have been used to maintain the family’s standard of life after his retirement as a working partner. Some part might have been used in taking out insurance policies. Estate duty would be levied on his death. One can reasonably say that some sum should be added on account of possible future savings, but it is not possible to do more than select an arbitrary figure.”

In his judgment, Lord Pearson also commented on the savings element, at p.142 :

“The judge estimated that of the deceased’s net spendable income, estimated at £6,000 per annum, two-thirds, that is, £4,000 per annum, would have enured to the benefit of the respondent and the daughter. That must include both elements of the lost pecuniary benefit, namely, the maintenance element and the savings element. Presumably the deceased would in the later years of his working life have been both maintaining the family and saving for the benefit of the family. The savings would have provided some present financial security not only for the deceased but also for the respondent and the daughter, and probably the savings or the residue of them would ultimately have been inherited by the respondent and the daughter or one of them.”

37.I do not accept the submission of Ms. Lau that the decision of Taylor v O’Connor turned entirely on its own facts and did not establish any principle.  Ms. Lau also submitted that, at the time Taylor v O’Connor was decided, the decision of the Court of Appeal in Oliver v Ashman [1962] 2 QB 210, that loss of earnings, in the years lost to an injured plaintiff whose life expectancy had been shortened, were not recoverable, was still good law.  Oliver v Ashman was overruled by the House of Lords in Pickett v British Rail Engineering Ltd. [1980] AC 136, which allowed a “lost years” claim by a living plaintiff whose life expectancy had been shortened.  Subsequently, Pickett was applied by the House of Lords in Gammell v Wilson [1982] AC 27 to allow “lost years” claims by the estates of deceased persons.  Ms. Lau submitted that the continuing validity of Taylor v O’Connor had been affected by these decisions, and continues to be affected, notwithstanding that the lost years’ claims were subsequently abolished by statute.  I do not accept this submission.  A similar submission was made and rejected by the Privy Council in Singapore Bus Service (1978) Ltd v Lim Soon Yong [1985] 1 WLR 1075 where Sir Edward said at p.1080 :

“The fact that the deceased’s estate might have had a claim for the value of lost contributions to the fund in no way affects the right of the dependants to claim for their own loss. The fact that, in England, before the Administration of Justice Act 1982 damages could be claimed by the estate for loss of the ability to earn over the “lost years” (see Gammell v Wilson [1982] A.C 27) did not take away the right of dependants to claim for their loss of dependency. The claim by the estate might affect the valuation of the claim by the dependants to the extent that they benefited from the estate but the two claims are independently sustainable.”

38.In Gavin v Wilmot Breeden Ltd [1973] 1 WLR 1117, the Court of Appeal held that the element of savings is a proper element to be included in the assessment of the value of the dependency.  In that case, the deceased and his widow had only been married for 3 months at the date of his death.  He was earning £30 a week net, of which he paid £6 a week to his parents for their board and lodging, and saved £10 a week to create a capital sum for the future use.  The trial judge held that the dependency was £18 a week, apparently including the whole of the weekly savings of £10 as part of the dependency.  The Court of Appeal held that the whole £10 a week should not be regarded as spent for the widow’s benefit, since some part was likely to be used at some future date for the husband’s benefit.  Accordingly, the Court of Appeal reduced the weekly dependency from £18 to £15.

39.The notional savings that the deceased can accumulate between the time of his death and the time of his natural retirement continues to form an important element of the claim for loss of dependency by his dependants, as is recognised by McGregor on Damages, 18^th Edition (2009) at §36-037 :

“Moreover, the value of the dependency can include not only that part of the deceased’s earnings which he would have expended annually in maintaining his dependants but also that part of his earnings which he would have saved and which would have come to his dependants by inheritance on his death …”

In the same paragraph, the author goes on to state :

“Alternative methods of dealing with these savings have appeared: either they are regarded as comprised in the figure of annual dependency to be multiplied by the multiplier or they are excluded from the figure of annual dependency and a separate, and additional sum is calculated and awarded in respect of them.”

40.In the course of the hearing, the plaintiff amended her claim to include a claim for loss of dependency based on the loss of benefit from the further savings the deceased would have accumulated, had the accident not occurred.  I include, in my award of damages for loss of dependency in this case, the financial contributions that the deceased would have made to his dependants during his notional working life and, also, that part of his savings which he would have accumulated during his notional working life and which would have enured to the benefit of his dependants after his retirement, and after his natural death.  I turn now to consider how I may properly assess these claims for loss of dependency.

Assessing the award for loss of dependency

41.The traditional way would be to assess the financial value of the dependency by taking the sum of the monthly contribution of HK$30,000 to the plaintiff, which was utilized for her benefit and for the benefit of his son and daughter, and to take out from that sum the amount of HK3,733 which was expended on the deceased, being his share of household expenses as shown in the calculations in Annex IV attached to the closing submissions of Mr. Wong.  If this approach is taken, the savings element of the loss of dependency claim would have to be assessed separately, by assessing the notional savings that the deceased would have made and calculating the portion thereof which would enure to the benefit of the dependants, just as the trial judge had done in Taylor v O’Connor when he estimated that two-thirds of the net spendable income, including both the maintenance element, and the savings element, would have enured to the benefit of the widow and the daughter.

42.In cases such as the present where the most important factor in the calculation of the award is the earnings of the deceased, as opposed to income from other sources, a practice has developed of expressing the annual dependency as a percentage of the annual earnings of the deceased.  Percentages have become conventional in cases where the surviving widow had been wholly dependent on her husband and did not use her own income, if any, to support the common household expenditure.  This practice was explained and supported by O’Connor L.J. in Harris v Empress Motors [1984] 1 WLR 212 at p.216-217 :

“In the course of time, the courts have worked out a simple solution to the … problem of calculating the net dependency under the Fatal Accident Acts in cases where the dependants are wife and children. In times past, the calculation called for a tedious enquiry into how much housekeeping money was paid to the wife, who paid how much for the children’s shoes etc. This has all been struck away and the modern practice is to deduct the percentage from the net income figure to represent what the deceased would have spent exclusively on himself. The percentages have become conventional in the sense that they are used unless there is striking evidence to make the conventional figure inappropriate because there is no departure from the principle that each case must be decided on its own facts. Where the family unit was husband and wife, the conventional figure is 33% and the rationale of this is that broadly speaking, the net income was spent as to one-third for the benefit of each and one-third for the joint benefit … Where there are children, the deduction falls to 25%.”

The reason for the smaller deduction in the latter case is that earnings are presumed to be split four ways in the latter case, rather than three ways, namely, one-quarter for the deceased, one-quarter for the wife, one-quarter for the children, and one-quarter for joint use.  Thus, the conventional figures adopted 66.6% of earnings, to assess the dependency of a widow alone, and 75% of earnings, to assess the dependency of a widow and children.

43.It is appropriate to adopt these percentages in the present case to reflect, not only the financial contribution made by the deceased to his wife, but also the value of the dependency represented by the savings he would have accumulated for the benefit of his dependants.

44.I have looked closely at the calculations prepared by Mr. Wong and Ms. Lau employing the traditional method of assessing the separate elements of the loss of dependency claim.  I do not see anything striking in these calculations to make me conclude that the conventional figures are inappropriate in the present case and I am prepared to adopt these conventional percentages in the present case.

The multiplier

45.I turn to consider the appropriate multiplier to be adopted in the present case.  It is common ground that the multiplier should be adopted by having regard to the age and health of the deceased and, in particular, to the date when he would likely have retired if the accident had not occurred.  The age and health of the plaintiff is also relevant.  At the time of death, the deceased was 58 years old. The plaintiff is now 61 years old and there is no doubt that she would live much beyond the likely retirement date of the deceased.

46.It is also common ground that I should apportion that multiplier, if it exceeded the pre-trial period, between the pre-trial and post-trial period.  There is ample authority to support this approach : Pritchard v J. H. Cobden Ltd [1998] Fam. 22, Corbett v Barking, Havering and Brentwood Health Authority [1991] 2 QB 408 and White (Administratrix of White, deceased) v ESAB Group (UK) Ltd (11 January 2002, unreported, QBD). There has been much criticism of this practice.  It has been said that the discount for early receipt of the damages, implicit in the calculation of the multiplier, should only apply to future losses from the date of trial or date of assessment and that the effect of a choice of multiplier from the date of death is that the discount is applied to pre-trial losses, which ought not to be discounted for early receipt, there be no early receipt of such losses. However, the point was not taken and I say no more about it.

47.I have already found that the deceased used to spend almost every working day of his life in his store in Western.  He had been in this trade for some 25 years helping his elder brother before starting his own business which he carried out diligently for about 5 years up until his untimely death.  The plaintiff claims a multiplier of 10 on the footing that he would have continued to operate and run his business for as long as his health permitted him to do so, and that, prior to his death, he was in good health and did not engage in practices, such as smoking or drinking, which might impact on his future health.  Ms. Lau countered that the multiplier should not, in any event, exceed 6 years, being the uttermost limit of generosity for the deceased who was aged 58 years and 8 months at the time of his death.  At an assumed rate of return of 4.5% per annum, the multiplier of 6 would represent a working life of 7 years (see Personal Injuries Tables Hong Kong 2005 Edition at p.68).

48.I have considered the authorities cited to me by counsel on the issue of the proper multiplier, including Law Yuet Kwai v Secretary for Justice [2002] 3 HKLRD 727; Lee Sik Yee (Administratrix of the estate of Kwok Hing Cheung, deceased) v Lo Wing Hong, HCPI 21/2006; Wong Wai Hang v KMB, HCA 8273/1983.  In addition to the case of Wong Wai Hang v KMB cited by Mr. Wong, I also had regard to the case of Hung Oi Mui (intended personal representative of the estate of Hung Tin Kai, deceased) v Lam Kwok Leung (HCPI 205/1998, 16 August 1999) in which Deputy Judge Muttrie adopted a multiplier of 6 for the deceased who had been employed as a warehouse man at the time of his death at the age of 66.

49.I found particular assistance from the decision of O’Connor  J, as he then was, in Davies v Whiteways Cyder Co Ltd [1975] 1 Q.B. 262.  In that case, Mr. Davies was killed in a traffic accident in 1971 when he was 55 years old.  He was a successful businessman.  Until 1963, he owned and ran a family business.  In that year, the business was taken over.  He then started a partnership with a Mr. Phillips to build houses and to sell them.  In assessing the appropriate multiplier, O’Connor J had regard to age of health of Mr. Davies, the age of health of Mr. Phillips, and the age of the business.  Mr. Davies enjoyed excellent health prior to the time of his death.  He was an active man and highly enjoyed the business in which he was engaged, which was carried out from his home.  O’Connor J was of the view that it was highly improbable that he would have wanted to retire before he reached the age of 70.  Mr. Phillips was a younger man by a few years and, although he had a fairly serious illness in 1972, he had recovered from it.  The Judge found that he would have manned his half of the team until Mr. Davies was 70.  He also held that the probability was that the business would have remained profitable for a long time to come.  On that basis, he had no difficulty concluding the correct multiplier to use in that case was 10. 

50.In this case, I conclude that the probabilities are that the deceased would have continued his occupation as a sole proprietor of Tai Cheong and carried on his business until he reached the age of 70.  His pre-accident lifestyle was such that I cannot conceive of any reason why he would stop working, in order to pursue other activities, unless he had to stop by reason of ill health or business losses. I find that the outlook for his business was very positive and continues to remain positive.  I have not received any evidence that would lead me to conclude that he was unlikely to remain healthy up to the age of 70.  On the above basis, I adopt a multiplier of 9 in this case which I apportion between the pre-trial period of 7 years and 2 months, or 86 months, and a post-trial period of 22 months.

51.On the basis of my findings, I assess and award damages for pre-trial loss of dependency in the sum of HK$4,292,894.25 (HK$798,678 x 75% ÷ 12 x 86 months).  I direct the plaintiff to file a memorandum of apportionment of this award between the plaintiff, the son and the daughter of the deceased, within 21 days hereof. 

52.I also assess and award damages for post-trial loss of dependency in the sum of HK$1,021,623 (HK$836,710 x 66.6% ÷ 12 x 22 months).  As the dependency of the son and daughter of the deceased ceased and did not extend beyond the pre-trial period, the entire post-trial award for loss of dependency ought to be apportioned in favour of the plaintiff.

Loss of Accumulation of Wealth under LARCO

53.The award for damages for loss of earnings in the “lost years”, made in favour of the estate of the deceased under the authority of Gammell v Wilson, was abolished in Hong Kong by the enactment of section 20(2) of the Law Amendment and Reform (Consolidation) Ordinance, Cap.23 (“LARCO”) in these terms :

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

(a) shall not include any exemplary damages;

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

(i) be calculated without reference to any loss or gain to his estate consequent on his death, except that a sum in respect of funeral expenses may be included;

(ii) not include any damage in respect of loss of ability to render services after his death;

(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 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 :

Provided that damages awarded under this sub-paragraph shall be subject to such deduction as the court considers it just to make in the circumstances of any particular case on account of the accelerated receipt of that wealth and in order to avoid over-compensation.”

54.The Court of Final Appeal in Lam Pak Chiu & Ors v Tsang Mei Ying and So Sau Lin (Administratrices of the estate of To Shing Chiu, deceased) (2001) 4 HKCFAR 34, referred to and endorsed the approach of Kaplan J who said in Re Lau Chuen Fat [1994] 2 HKLR 173 :

“50. It is clear from this sub-section that an award of damages based on an accumulation of wealth which would have existed as at the date of the likely natural death of the deceased can be made provided that the court is satisfied that some would have existed. I can find nothing in this section that provides for the award of a conventional or notional sum which I note is frequently awarded in some of the reported cases.

51. It seems plain to me that what the court has to consider is whether, at the date of death by natural causes, there would have been an accumulation of wealth, the realization of which the tortuous death has prevented. The mere fact that some savings can be shown at the date of the tortuous death is not tantamount to saying that such savings would have been in existence at the date of the natural death. It seems clear to me that whereas a man in this sort of work can make some savings, these are inevitably earmarked for the period after which he has retired and during which there is no meaningful old age pension or other support. Further, savings that can be identified at the date of the tortuous death may well be spent on a variety of matters during the normal working life.

52. It also seems clear to me that the amendments introduced by section 20 of LARCO to counter the “lost years” claim were enacted to prevent a windfall accruing to estates which could not be justified on the evidence. In fact, section 20 itself exhorts the court to ensure that there is no over compensation to the estate.”

55.Consistent with those observations, Bokhary PJ said in §34 of his judgment in Lam Pak Chiu & Ors v Tsang Mei Ying and So Sau Lin (Administratrices of the estate of To Shing Chiu, deceased) :

“34. … Thus if the court were to find in any given case that an accumulation of wealth would have been achieved by the notional time of retirement, the realistic possibilities, factoring in probable inflation, would then be as follows :

(i) expenditure during retirement may exceed the income from the accumulation plus any pension and the like received during retirement so as to exhaust the accumulation some time before the notional time of death, thus leaving the deceased dependent upon state, family or other help during his notional final years; or

(ii) post-retirement expenditure may exceed post-retirement receipts but only so as to diminish the accumulation without exhausting it; or

(iii) such receipts may more or less match such expenditure so as to leave the deceased’s financial position at the notional time of death much the same as it had been at the notional time of retirement; or

(iv) it may even be that such receipts would exceed such expenditure so as to leave his financial position better at the notional time of death than it had been at the notional time of retirement.”

56.In many cases where the deceased falls into the low income earning bracket and the family leads a hand to mouth existence, there will not have been any savings made by the deceased prior to his death and the prospects of future savings, had the accident not occurred, will be nil or negligible.  However, the conventional percentages can still be applied to the earnings of the deceased to assess loss of dependency in such cases.  But they would operate to assess the loss of dependency from the loss of the financial contributions made to the dependants by the deceased from his earnings, rather than to assess the loss of benefit from any notional future savings of the deceased.

57.The present case is not such a case. The deceased accumulated substantial wealth during his working life and he would have continued to do so, had the accident not occurred.  However, in a case such as the present, where a substantial part of the savings that the plaintiff would have accumulated has already been earmarked and awarded to the dependants as part of the award for loss of dependency, it would be wrong in principle and tantamount to double compensation for that same portion of savings, earmarked for the dependants, to form part of any award for loss of accumulation of wealth which is made in favour of the estate.  The starting point, therefore, and which I have regard to, must be the remaining balance of 25% of his net pre-tax income over the pre-trial period of 86 months and the remaining balance of 33.3% of his post-trial net income over the post-trial period up to the likely date of his retirement.  Obviously, but for the accident, he would have expended some of these monies on his own personal expenses, for transport and meals and other personal expenses, during this period of time.  Having regard to his work-orientated and frugal lifestyle, I find that he is likely to have saved 10% of his notional income, as his personal savings over the pre-trial period, and 15% of his notional income, as his personal savings over the post-trial period.

58.Accordingly, in the 11.5 years (or 138 months) of his notional working life from the time of death to the likely notional date of retirement when he would have reached 70 years of age, he would have saved:

(a)  over the pre-trial period, the sum of HK$572,386 (HK$798,678 x 10% ÷ 12 x 86 months),

(b)  over the post-trial period, the sum of HK$543,861 (HK$836,710 x 15% ÷ 12 x 52 months),

(c)  thereby producing total personal savings of HK$1,116,247.

It is inappropriate to use a multiplier to assess his notional savings over this period of time.  The award under this head of claim is not a lump sum award to represent the loss of a future continuing stream of income, which has to be discounted on account of accelerated receipt by the use of a multiplier.  The above assessment has to be made in order to assess the total notional accumulation of wealth from the time of death to the time of notional retirement, including any likely growth of these accumulated savings from investment returns.  Once this amount has been assessed, the next stage is to determine whether this accumulated wealth would grow, or be depleted, by the time of natural death.  If there is a net balance at the time of natural death, this net balance, which is a future loss sustained by the estate of the deceased, must be discounted for accelerated receipt.  However, this discount is a discount for the accelerated receipt of a future lump sum loss rather than for the loss of a future continuing stream of income.

59.On the above basis, I conclude that he would have saved HK$1,116,247 at the time of his natural retirement at the age of about 70.  A greater part of this sum is likely to be invested by his wife for his benefit, if not by himself, and grow.  These invested savings would grow, during the period he was accumulating his savings, as well as during the period, after his retirement, when he would have stopped saving. 

60.The current practice is to assess multipliers, and discounts for accelerated receipt, on the assumption that prudent investments made of the damages awarded to victims of torts would yield an annual return of 4.5% per annum (see Cookson v. Knowles [1979] AC 556 and Chan Pui Ki (an infant) v. Leung On [1995] 3 HKC 732).  Where a court finds that the deceased would, but for the accident, have accumulated wealth from the date of his death to the date of his natural retirement and that he would have invested the wealth he accumulated, then, in order to be consistent with the current practice, it is only right that the court should assume that such investments would yield a similar rate of return of 4.5%.  Although I have not attempted to make detailed calculations in this regard, I am probably not much off the mark in assessing the assumed return on savings to have augmented the accumulated fund to about HK$1,300,000.

61.I now turn to consider what would happen to this fund during the years from the date of notional retirement at age 70 to the date of natural death, when the deceased ought to have reached 82 or 83 years of age.  I have no doubt that a substantial part of the accumulated wealth would have been depleted during this post-retirement period on account of his personal expenditure, which would exceed the assumed rate of return of 4.5% per annum on the accumulated fund.  I have assessed that he would be saving about 15% of his net after tax income at the time of retirement.  This would leave a balance of 18.3 %, from his remaining free balance of 33.3% assessed above, for his personal expenses. 18.3% of HK$836,710 amounts to HK$153,118 per annum or about HK$12,760 per month.  His expenses after retirement are likely to reduce to about HK$10,000 per month or about HK$120,000 per annum, as he would not need to travel daily to and from work.   This amounts to about 9% of his accumulated savings at the time of retirement of about HK$1,300,000.  Reducing this sum of HK$1,300,000 by 9% per annum and increasing the balance by the assumed rate of return of 4.5% per annum will result in a net reduction of the accumulated savings by 4.5% per annum.  The fund, therefore, will reduce to about HK$1,116,000 in 11.5 years’ time and reduce further to about HK$1,066,000 in 12.5 years’ time, being the period of time between the notional date of retirement and the date of natural death.  Again, without attempting to make detailed calculations in this regard, I am probably not much off the mark in assessing the remaining net balance on the notional date of death to be no more than HK$1,000,000.

62.The remaining net balance on the notional date of death would then have to discounted for accelerated receipt of almost 18 years from the date of natural death to the date of judgment.  A discount of about 55% would be appropriate for this length of time (see Personal Injuries Tables Hong Kong 2005 Edition at p.66).

63.Every court that has to assess this head of claim faces the difficult situation of having to gaze into a crystal ball to gauge what the future might bring to the financial fortunes or setbacks of the deceased if the accident had not occurred. The above method of assessment to assess damages under LARCO is the best I can devise that is consistent with the authorities and current practice.  There may be other cases where the pattern of accumulation of wealth was by way of investment in real estate, such as Carolyn Dall v. Choy Ying Wai [1999] 1 HKLRD 705, where another approach might be indicated.

64.On the basis of the above assessment, I award the sum of HK$450,000 as the loss of the net accumulation of wealth in favour of the estate under the provisions of LARCO.  This case demonstrates that this remnant of the abolished lost years’ claim is unlikely to yield a very high award, even in a case such as the present where the deceased was likely to accumulate substantial savings on account of the fact that he was a high income earner and lived frugally.

Set off of damages under LARCO and under FAO

65.Section 20(5) of LARCO provides:

“ (5) The rights conferred by this section and sections 21 and 22 for the benefit of the estates of deceased persons shall be in addition to and not in derogation of any rights conferred on the dependants of deceased persons by the Fatal Accidents Ordinance (Cap. 22) …”

Therefore, the award under the Fatal Accidents Ordinance is not to be deducted from the award made under LARCO.  On the other hand, the effect of section 7 of Fatal Accidents Ordinance, reversing the previous position, is that no deduction of a LARCO award, which would be inherited by a dependant, is to be made from the award made in favour of the dependant under the Fatal Accidents Ordinance.  The combined effect of these two provisions creates a risk of duplication of the 2 awards, one for loss of wealth under LARCO that would be inherited by the dependants, or by some of them, and the savings element of the other award for loss of dependency under the Fatal Accidents Ordinance.  However, I have eliminated that risk in this case, pursuant to the statutory injunction under section 20(2) of LARCO to avoid over-compensation, by assessing the LARCO award in the manner set out above.

Damages for Bereavement

66.This has been agreed in the sum of HK$150,000.

Funeral Expenses

67.Funeral expenses in the sum of HK$80,357 are also agreed.

Summary

68.A summary of my award is as follows :

(a)	Damages for pre-trial loss of dependency	HK$4,292,894.25
(b)	Damages for post-trial loss of dependency	HK$1,021,623
(c)	Damages for net accumulation of wealth in favour of the estate	HK$450,000
(d)	Bereavement	HK$150,000
(e)	Funeral expenses	HK$80,357

Interest

69.I award interest at 2% per annum on damages for bereavement from the date of death to the date of judgment and interest at 8% per annum on funeral expenses from the date of death to the date of judgment. I also award interest at 4% per annum on damages for pre-trial loss of dependency from the date of death to the date of judgment.

Costs

70.I make a costs order nisi that the 1^st and 2^nd defendants pay the costs of the action to the plaintiff, to be taxed if not agreed.

71.I cannot conclude this judgment without thanking counsel for their considerable assistance to me in this case.

Mr Wong Hay-Yiu, instructed by Messrs Johnny K.K. Leung & Co., for the Plaintiff

Ms Selina Lau instructed by Messrs Chong & Partners, for the 1^st and 2^nd Defendants