Lee Ying Lin and Chan Chui Wan Di Di, The Co-administratrices of the Estate of Chan Chui Ping Kimmy, Deceased v. Lo Pik Lee

HCPI 93/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 93 OF 2013

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HCPI 94/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 94 OF 2013

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(Consolidated pursuant to the Order of Master Leong dated 5^th December 2013)

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R U L I N G

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1.This is an application by the plaintiffs to adduce expert evidence on quantum by one certified chartered accountant.

2.As the background, Chan Chui Ping Kimmy deceased (“1^st deceased”) and Lo Kwan Lung deceased (“2^nd deceased”) are husband and wife.  At the material time, the 2^nd deceased was driving a motorbike and the 1^st deceased is the pillion passenger.  The defendant was driving a light goods vehicle and collided with the motorbike.  As a result, both deceased died.

3.2 actions were taken out by the plaintiffs who are the co-administratrices of the estates of the 2 deceased.  The actions were subsequently consolidated. Later, liability had been admitted with damages to be assessed. Understandably, the income of the 2 deceased before the accident is a material factor for assessment of damages.

4.Before I consider the submission of counsel, I would first set out the case of the plaintiffs on the income of the 2deceased as stated in the Statement of Damages.  According to the pleading, the plaintiffs claimed that the 2^nd deceased was the sole proprietor of “Sun Cheong Motor-Cycle Services” (“Sun Cheong”), and the 1^st deceased assisted the 2^nd deceased in running Sun Cheong.  Paragraph 19 of the Statement of Damages read:

“…The business of Sun Cheong included, inter alia, making repair and maintenance of motorcycles as well as purchase and sale of second hand motorcycles.  Sun Cheong was also one of the contractors of Mitsubishi Elevator Hong Kong Company Limited (“Mitsubishi”) for the repair work of motorcycles of this company.  His wife, i.e. the 1st Deceased was the only person who assisted the 2nd Deceased in the running of the business of Sun Cheong.  Both the 1st Deceased and the 2nd Deceased worked very hard and Sun Cheong was proved to be a profitable enterprise.  Most of the income from sales by Sun Cheong were received in cash, cheques or by autopay arrangements.  The 1st Deceased was responsible for all the financial management of Sun Cheong.  Whenever the cash income from sales by Sun Cheong had been accumulated up to a certain amount, the 1st Deceased would deposit the same into her personal bank accounts. The business expenses of Sun Cheong included, inter alia, rental of the business premises, business registration fees, electricity, water, telephone, and internet bills, purchase price of second hand motorcycles, engine parts and spare parts for motorcycles, lubricant, license fees and insurance premium for motorcycles.  Most of business expenses were paid by EPS, cheques and by autopay arrangements from the 1st Deceased’s personal bank account and also cheques from Sun Cheong’s current bank account.”

5.The plaintiffs ask for leave to adduce expert evidence by a certified public accountant “on quantum issue”. The scope of expert evidence is refined by Mr Wong, counsel for the plaintiffs, for “reconstruction of the profit and loss account of Sun Cheong which was run solely by the two deceased.”  Mr Wong submits that to give a proper assessment of damages, it would require determination of the net profit of Sun Cheong.  The question I have to decide is whether the expert evidence could assist the court.

6.The law on when to admit expert evidence is well settled.  The guiding criteria is whether the expert evidence sought is necessary, relevant and of probative value.  In considering the issue of relevance, the expert evidence must be show to be relevant in the sense that it is helpful to the court in arriving its decision on one or more issues to be resolved.  If the court can make an informed decision on any issue in the case justly without the aid of such expert evidence, then the court may regard such expert evidence as not useful and should not be adduced ( per Master Marlene Ng (as she then was) in Wan Ying Sheung v Wan Yiu Kan HCPI 288/2009).

7.Mr. Sadhwani, counsel for the defendant, also refers to the judgment of Bharwaney J given in Fung Chun Man v Hospital Authority & Anr HCPI1113 of 2006.  Bharwaney J said

“The expert evidence can only be adduced with leave of the court and, in deciding whether or not to grant leave, the court must ensure that such evidence is admitted only if it is likely to be of real assistance to the determination of the issues, and that it is adduced in the most effective and economic way consistent with the objectives of the CJR.”

8.I believe there is no dispute on the legal principle.

9.In support of the application, an affirmation has been filed by Mr Chan Kin Wo (“Mr Chan”), the plaintiff’s solicitors.  He said in his affirmation that it is necessary to instruct a certified public accountant to prepare an un-audited profit and loss account of Sun Cheong for at least 2 years before the accident. 

10.Mr Chan in his affirmation further said that Sun Cheong was proven to be a profitable enterprise.  He submits that the schedule of property attached to the letters of administration for the respective estate of the 1^st and 2^nd deceased shows that they have valuable assets.  He further submits that they were acquired at the material times from profit which the 2^nd deceased earned or derived from the business of Sun Cheong.

11.He submits that as all the income of the 1^st deceased and 2^nd deceased was derived from the business of Sun Cheong, the proper assessment of damages would require a determination of the net profit of Sun Cheong.  Mr Chan also submits that the accountant is to prepare an un-audited profit and loss accounts of Sun Cheong based on the bank statements and cheque copies of the 1^st deceased and 2^nd deceased and the bank statements/bank passbook of Sun Cheong. 

12.But it is the case of the plaintiffs that they do not have personal knowledge of the profit earned by Sun Cheong.  The letter from the plaintiff’s solicitors to the defendant’s solicitors dated 20 May 2014, “CKW-3”, stated that

“Almost all business records of Sun Cheong were kept in its shop at [address]. After the death of the 1^st Deceased and 2^nd Deceased, all these business records were lost. Our clients were only able to retrieve very few business records of Sun Cheong and they do not have personal knowledge of the profits earned by Sun Cheong.”

13.The few business records of Sun Cheong maybe referring to the accounts and tax returns that I should come to later.  One must question, when there is little documents, how can the accountant reconstruct the profit and loss account? 

14.I believe Mr Chan made his affirmation from instructions of the plaintiffs. While he repeated his instruction, he has not explained with particulars or examples on how the bank statements, in particular those of the 1^st and 2^nd deceased’s personal account could reflect on the income of Sun Cheong.  And to be fair to the plaintiffs, I also refer to the witness statement of one of the plaintiffs Chan Chui Wan (“Ms Chan”) which has been adduced as part of the hearing bundle.

15.At paragraph 7 of Ms Chan’s witness statement, she explains that before the accident, she had a close relationship with the 1^st deceased who is her elder sister.  The 1^st deceased used to be an account clerk.  By around 2004, the 2^nd deceased established Sun Cheong.  The 1^st deceased resigned her job to assist the 2^nd deceased in his business.

16.Ms Chan said the main business of Sun Cheong included maintenance and repair of motorbike, buying and selling of motorbike parts, to trade in 2^nd hand motorbikes, and to arrange third party insurance for customers.  Most of the customers were individuals and they paid by cash.  The main corporate client of Sun Cheong is Mitsubishi Elevator Hong Kong Company Limited.  After the accident, she could find some business documents of Sun Cheong.  She therefore instructed the solicitors to obtain the account statements and record of the accounts of the 1^st and 2^nd deceased and Sun Cheong from the banks.  She also received some further payment and record from Mitsubishi Elevator Hong Kong Company Limited.

17.Ms Chan said at paragraph 10 of her witness statement that she could understand the operation of Sun Cheong after obtaining the monthly statement and copy cheques from the banks.  She said that the usual expenses of Sun Cheong would include items like rental, electricity and water charges, licence fees, and others.  The income of Sun Cheong was mainly in cash.  For the cheque payment received after paying the business expenses, the balance would be transfer to the accounts of 1^st or 2^nd deceased.

18.Before I move on, I note that Ms Chan has not explained how she comes to understand the arrangement for paying the expenses of Sun Cheong as above mentioned.  Again, without stating the detail reason, Ms Chan said in her witness statement that the expenses of Sun Cheong were paid mainly from the account of Sun Cheong, or paid by the 1^st deceased from her account by cheque or EPS. 

19.And according to her own evidence, Ms Chan recalled that the 1^st deceased had told her that for trading of 2^nd hand motorbike, it was usually done in cash.  And when the 1^st deceased received cash up to a certain amount, such as $20,000, she would deposit the money into her account.  But there is no other information on how to identify these transfers to the personal account of the 1^st deceased from the personal account of the 1^st deceased.

20.It is also acknowledged by Ms Chan that the payment out from the account of the 1^st deceased and Sun Cheong for expenses of Sun Cheong had been mixed up with payment out for family expenses.  Some examples are given in paragraph 12 of her witness statement which I do not repeat.

21.With the above analysis, I am not trying to rule on the creditability or reliability of the evidence of Ms Chan.  But by analyzing her witness statement, and by taking her case to the highest, this would be a factor that I should bear in mind in considering whether expert evidence by an accountant is necessary or will be of real assistance to the determination of an issue or issues in the case.

22.The plaintiffs’ application is opposed by the defendant.  Mr Sadhwani submits that the issue on quantum could be decided without expert opinion.  And hence it is not necessary to have the accountant report.  He refers to a number of documents disclosed by the plaintiffs and submits that they were sufficient for the court to make a finding on quantum.  He refers in particular to the following documents disclosed by the plaintiffs –

(a) Letter from the MPF of the personal accounts of the 1^st deceased

(b) Cost of tax returns of the 1^st deceased for 2007-9

(c) Profit and loss accounts of Sun Cheong for 2009

(d) Notice of assessment of profit tax to 2^nd deceased for 2007-8

(e) Notice of assessment of profit tax to 2^nd deceased trading as Sun Cheong for 2008-9

(f) Notice of assessment of profit tax to 2^nd deceased trading as Sun Cheong for 2009-10

(g) Tax return of the 2^nd deceased for 2007-2009

23.To be fair to the plaintiffs, I should also refer to the list of document filed by the plaintiffs and enclosed in the hearing bundle.  It appears that the business documents would be the above items, and some additional agreement on trading of motorbikes, and the banking records.

24.Mr Sadhwani also comments that in the summons issued by the plaintiffs, they applied to introduce expert evidence to comment on quantum issue.  It is not specific on the issue to be commented by expert and how the evidence could assist this court.  I believe it is now clarified by Mr Wong that the plaintiffs are seeking to have a reconstructed profit and loss account of Sun Cheong. 

25.Mr Sadhwani comments that the plaintiffs now ask for a reconstruction of the profit and loss of Sun Cheong, but it is not clear how that is going to reflect on the income of the 1^st and/or 2^nd deceased at the material time.

26.And at some stage, Mr Wong submits that the plaintiffs may be asking for a forensic accountant for reconstructing the profit and loss account of Sun Cheong.  Strictly speaking, there is no application for forensic accountant before me today.  But be that a certified public accountant or forensic accountant, whether leave should be granted would depend on –

a. identifying the issues to be addressed by the accountant,

b. a determination if the issues may be commented by the expert, and

c. whether the expert opinion is necessary. 

I would approach the question first from the importance of identifying the issues to be addressed by the experts. 

27.I need not repeat the said judgment of Bharwaney J and Master

Ng (as she then was) on the importance of considering the issues to be addressed by expert before leave is granted.

28.I accept that when leave is granted for medical evidence on quantum is adduced in PI cases, it is not usual for this court to identify the issue.  Experience tells that the issue can be agreed and set out in the joint instruction letter. But when a supplemental report is to be obtained from the medical expert, it is not unusual for this court to define the questions/issues to be put to the experts before direction for supplemental expert report is given. 

29.And for experts on liability, it is quite often for this court to require the parties to identify the issues by setting out the questions or matters to be address by the expert, before leave would be granted.  The identification of issues is both relevant for assessing if the expert evidence is of probative value and necessary, and to limit the scope of the evidence to be obtained, which is in line with the underline principle of Order 1A.

30.For the present application, I see no reason why the issues to be addressed and commented by the accountant expert should not be set out in the summons.  The wording of the summons is unclear.  Mr Wong now asks for reconstruction of the profit and loss account of Sun Cheong from the bank account of the 1^st and 2^nd deceased and Sun Cheong.  However, he has not identified with precision the matters that are to be referred to the expert for comments and to re-construct the account. 

31.Mr Wong has not explained how the reconstructed account would assist in the resolution of any issue in this case.  I can accept that since the 2^nd deceased is the sole proprietor of Sun Cheong, it is at least arguable that its earnings could have a bearing on the income of the 2^nd deceased before the accident.  As submitted by Mr Sadhwani, there are accounts and tax return of Sun Cheong disclosed.  For this application, I assume that the plaintiffs wish to submit that these accounts do not reflect correctly the profit of Sun Cheong.

32.In order to justify the reconstruction of the account, there must be evidence adduced, subject to proof at the trial, upon which this court could find that the accounts of Sun Cheong is not correct and re-construct the account. The burden rests on the plaintiffs to identify these evidence with particulars (without the need to satisfy me that they must be accepted to be correct at the trial).  And when these evidence, particularly documentary evidence can be identified, then this court is in a position to assess whether expert accountant evidence is required to prepare calculation to assist the reconstruction of the profit of Sun Cheong.

33.I must bear in mind that it is the case of the plaintiffs that most of the business record of Sun Cheong have been lost.  And according to the witness statement of Ms Chan, most of the transactions of Sun Cheong were conducted in cash and she has not referred to any record, such as invoice or monthly statement of Sun Cheong which recorded such transactions.  From the evidence before me, such additional information for reconstruction appears to be mainly oral evidence from Ms Chan, and her reading or interpretation of the bank statements and record of the 1^st and 2^nd deceased, and Sun Cheong. Yet she has not gone into any details or particulars of items that she claims should be included in the account for reconstructing the profit and loss account of Sun Cheong.

34.Apart from the oral evidence of Ms Chan, Mr Wong only refers me to the bank statement and cheque copies of Sun Cheong and the 2 deceased. 

35.Assuming for a moment that we have an accountant to look at all the bank statements, and cheque copies.  When there is a cheque payment by Sun Cheong, I can image that he can read from the copy cheque the name of the payee.  But whether that payee is a customer of Sun Cheong or whether the payment is related to the business of Sun Cheong would not be apparent. 

36.As said, it is admitted that the business records are lost.  Very few business or accounting documents have been disclosed.  For the accountant to cross check and analyse any cheque payment, he has to rely on the instruction/evidence of the plaintiffs, which may include communication with the payee on the purpose of the cheque, or oral evidence of Ms Chan.  There is again no evidence of any investigation with the payees.  As I have found, and the witness statement of Ms Chan is lacking of details.  The plaintiffs have not shown the evidence to be provided to the expert to carry out any construction investigation/opinion.

37.And for payment into the 1^st deceased’s bank account which the plaintiffs claim to be income of Sun Cheong, it must again depend on the evidence of Ms Chan.  But it has not been set out in her witness statement how she could identify such item as income or payment from the accounts, and what these items are.

38.When the evidence or information to be presented to the expert cannot be identified, the issue cannot be defined with precision, it is impossible for this court to be satisfied that expert evidence would be helpful.  I cannot approve the engagement of accountant to reconstruct the accounts without knowing the alleged missing items to be included for preparing the profit and loss account of Sun Cheong. 

39.Further, those instructing Mr Wong had in fact provided me with a number of schedules.  These are meant to be summary of the accounts of the 1^st deceased and 2^nd deceased and Sun Cheong.  They are put under different categories of income and expenses.  Nevertheless, those schedules are not part of the affirmation nor are they part of the witness statement of Ms Chan.  I was not told how the classification of item was made.  Little probative value could be attached to such schedule.

40.Mr Sadhwani initially objects to the production of those schedules but later he withdraws his objection.  Mr Sadhwani submits if that is the plaintiffs’ case, it would all be a matter for the trial judge to decide whether such a classification or the classification of any particular items to a certain column on the schedules is correct.  With such finding, and by mathematical calculation, the reconstruction could be done without expert evidence.  Hence no expert evidence is required.  Mr Sadhwani also suggests if the accounts could be reconstructed by those instructing Mr Wong, it is not a complicated task.

41.If it is on the reconstruction of the account with figures as set out in the schedules, the plaintiffs have to adduce evidence to explain why they could begin to classify the figures in such a manner.  And Mr Sadhwani is correct that whether such classification is correct would be a matter of finding of facts at the trial.  The court can come to an informed decision with some mathematic calculation.  No expert evidence is necessary. 

42.Mr Wong also relies on the judgment of Bharwaney J given in Fung Suen Sim v Liu Chun Pong HCPI 896/2007.  In that case, unaudited profit and loss accounts have been produced.  And it is not dispute that even when the deceased may have understated their profit in their tax return, in assessing the damages, the court may find that the business had higher earnings and use the higher earning to assess the loss. 

43.Mr Sadhwani submits that the case can be distinguished.  I note his detailed analysis of the different factors.  

44.I am not ruling out that in appropriate cases, expert evidence by accountants would be helpful to the trial judge.  It all turns on the facts of the case.  Indeed, the said judgment of Bharwaney J is a judgment after trial, and the unaudited profit and loss accounts are part of the evidence before the court.  And I do not have the earlier ruling when leave was granted to obtain the unaudited profit and loss account.

45.I also note that the plaintiff in Fung Suen Sim’s case does not have personal knowledge of the profit earn by the business in issue.  But there are a lot of documents of the business being disclosed.  Those documents include bank statements, bank passbooks, cheque book stubs, monthly turnover reports, invoices issued by the business, invoices issued by suppliers, and personal savings account passbook of the deceased.  And it is based on these documents when the unaudited profit and loss account were prepared.

46.In contrast, the plaintiffs here admit that they have very few additional documents of Sun Cheong.  Accordingly, a lot must depend on the oral evidence to be adduced by the plaintiffs.  I agree with the analysis of Mr Sadhwani that Fung Suen Sim’s case is distinguishable.

47.With the above analysis, I can safely conclude that for the reconstruction of profit of Sun Cheong, the plaintiffs have not shown a case that expert evidence is necessary.

48.Mr Wong also relies on paragraph 66 of PD 18.1 and submits that in respect of any pre-accident earnings, a self-employed person must serve copies of his or her profit and loss accounts together with tax returns lodged with the Inland Revenue Department.  He also relies on paragraph 65(2)(d) of PD 18.1 that requires the plaintiff to give an estimate of the claim for loss of dependency.  He submits that this could only be given after the papers had been perused and categorized by the accountant.

49.Reading paragraph 66 as a whole, it is clearly stated that the purpose of the requirement is to avoid unnecessary delay.  It is a matter of practice for the plaintiff to provide the documents in so far as it is practicable.  I therefore do not agree with Mr Wong that this is a mandatory requirement. 

50.I come to the conclusion that the plaintiffs have not satisfied me that from the evidence and submission, the introduction of expert evidence is necessary. Further, since they have not identified the issues or areas of dispute to be addressed by the expert, it cannot be shown how the expert evidence could assist this court.  Accordingly, I dismiss the application with an order nisi that the plaintiffs do pay the costs of the defendant of this application to be taxed if not agreed, with certificate to counsel.

51.Lastly, I wish to thank both counsel for their assistance.

Mr Wong, instructed by Tsang, Chan & Woo, for the plaintiffs

Mr Kamlesh Sadhwani, instructed by Krishnan & Tsang, for the defendant