Read the full judgment text of HCPI 235/2011, HCPI 671/2007, HCPI 228/2010 on BabelCite. This Court of First Instance judgment was delivered on 7 February 2013 before Bharwaney J.
Personal injury damages – assessment of future losses – discount rate – whether Cookson v Knowles assumption of 4.5% net rate of return remains valid in Hong Kong given economic developments from 1995 to the present time – two infant plaintiffs (Li Ka Wai in HCPI 671/2007 and Yuen Hiu Tung in HCPI 228/2010) suffering from severe spastic quadriplegia and cerebral palsy following medical negligence – plaintiff in HCPI 235/2011 (Chan Pak Ting) settled before trial of preliminary issue – expert actuarial and economic evidence jointly prepared by Professor Chan Wai Sum of the Chinese University of Hong Kong and Ms Yvonne Sin of Towers Watson – review of historical investment data of various investment vehicles including 12-month time deposits, Exchange Fund Notes, MPF funds, MFR funds, and MIP survey data – analysis of price inflation versus wage (payroll) inflation in Hong Kong from 1983 to 2012 – differential of only 0.43% per annum from 2001-2012 insufficient to set two different discount rates for earnings-related and non-earnings-related losses (cf Simon v Helmot where 2% differential justified two rates) – management fees must be deducted from gross returns in calculating net rate of return – appropriate portfolio mix for prudent plaintiff driven by duration of future needs – 20% in 12-month time deposits and 80% in EFNs for needs not exceeding 5 years – 15% in time deposits and 85% in EFNs/bonds for needs not exceeding 10 years – 10% in time deposits, 70% in bonds, and 20% in equities for needs exceeding 10 years – discount rate of -0.5% for plaintiffs with needs not exceeding 5 years, 1% for plaintiffs with needs not exceeding 10 years, and 2.5% for plaintiffs with needs exceeding 10 years – liberty to parties to apply to adduce further expert evidence within 21 days – costs order nisi in favor of plaintiffs with certificate for three counsel – plaintiffs' own costs to be taxed pursuant to Legal Aid Regulations – periodical reviews of the discount rate recommended given current economic volatility – consideration of a Working Party chaired by the Chief Justice to review the discount rate periodically – negative discount rate permissible in principle where evidence shows it is needed to ensure full compensation.
Legal issues: Validity of Cookson v Knowles 4.5% net rate of return assumption in Hong Kong · Deduction of management fees in calculating net rate of return · Two different discount rates for earnings-related and non-earnings-related losses · Setting different discount rates for plaintiffs with different future needs
Outcome: The court held that the Cookson v Knowles assumption of a 4.5% net rate of return is no longer valid in Hong Kong. The court set new discount rates of -0.5% for plaintiffs with needs not exceeding 5 years, 1% for plaintiffs with needs not exceeding 10 years, and 2.5% for plaintiffs with needs exceeding 10 years. Liberty was granted to the parties to apply within 21 days to adduce further expert evidence on the assumptions made.
Cites 3 cases