FALCON INSURANCE COMPANY (HONG KONG) LTD v. CHAN CHUN KIT

DCCJ 540/2023

[2025] HKDC 195

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 540 OF 2023

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BETWEEN

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ASSESSMENT OF DAMAGES

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INTRODUCTION

1.  This is the assessment of damages arising from an interlocutory judgment entered in favour of the Plaintiff on 27 April 2023, whereby the Defendant was ordered to pay the Plaintiff damages to be assessed with costs.

2.  According to the 3^rd Affirmation of Siew Yat Hung dated 2 August 2024, notice of this assessment of damages had been given to the Defendant. However, the Defendant did not appear at the hearing.

3.  The Plaintiff seeks to recover the following sums:

(1) A sum of HK$500,000 paid by the Plaintiff in settlement of Mr. Chung Siu Wing’s (“Mr Chung”) claim in DCPI 3017/2021 (“PI Action”) against the Defendant;

(2) A sum of HK$180,620 being Mr Chung’s costs and disbursements in the PI Action; and

(3) Legal costs and expenses in the total sum of HK$177,780 incurred by the Plaintiff in relation to the PI Action.

BACKGROUND

4.  The Defendant was the owner of a commercial vehicle bearing registration number EF 237 (“Vehicle”).

5.  The Plaintiff was at all material times the motor insurer of the Vehicle under a commercial vehicle policy no. 8NB-P5038549-MCV18-NS (“Policy”).

6.  On 31 October 2018, Mr Chung was to load some construction materials with a cart onto the Vehicle. The Defendant, as the operator of the Vehicle’s tailgate, was supposed to lift the tailgate after the cart was loaded on it. However, the Defendant lifted the tailgate before the cart was fully loaded. As a result, the cart lost its balance and the construction materials toppled on Mr Chung, causing injuries to his forearm, left hand, and right thigh (“Accident”).

7.  On 24 May 2021, Mr Chung through his solicitors issued a pre-action letter to the Defendant. On the same day, Mr Chung’s solicitors gave notice of the intended claim to the Plaintiff as the motor insurer of the Vehicle.

8.  On 6 October 2021, Mr Chung brought the PI Action against the Defendant claiming damages for losses arising out of the Accident.

9.  On 8 October 2021, the Plaintiff issued a letter to the Defendant indicating that it would not provide indemnity and/or insurance cover to the Defendant in relation to the Accident due to the Defendant’s failure to notify the Plaintiff of the occurrence of the Accident in breach of the Policy.

10.  Upon the application of the Plaintiff, leave was granted for the Plaintiff to be joined as the 2^nd Defendant in the PI Action.

11.  By order of the Court dated 5 October 2022 (as amended on 15 November 2022), the Plaintiff and Mr Chung agreed to settle the PI Action for a sum of HK$500,000 (inclusive of interest) with costs to be taxed if not agreed. The Defendant was present at the hearing and signed on the aforesaid order.

12.  After several rounds of negotiations, the Plaintiff agreed to pay HK$180,620 in settlement of Mr Chung’s costs and disbursements in the PI Action.

13.  On 13 February 2023, the Plaintiff issued these proceedings against the Defendant for the recovery of damages (including costs and disbursements) paid out to Mr Chung in the PI Action, as well as the Plaintiff’s own costs and disbursements, pursuant to section 10 of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap 272) and/or clause 15 of the Policy.

14.  Clause 15 of the Policy provides:

“If the Company [i.e. the Plaintiff] is obliged by the laws of any country within the Geographical Area or by virtue of any agreement between the Company [i.e. the Plaintiff] and The Motor Insurers' Bureau of Hong Kong to pay an amount for which the Company [i.e. the Plaintiff] would not otherwise be liable under this Policy the Insured and any other person [i.e. the Defendant] on whose account the payment is made shall forthwith repay such amount to the Company [i.e. the Plaintiff]."

15.  On 27 April 2023, since the Defendant did not give notice of intention to defend, the Plaintiff obtained interlocutory judgment on liability against the Defendant for damages to be assessed and costs.

THE PLAINTIFF’S WITNESS

16.  The Plaintiff called one witness to give oral testimony, namely Mr 冼文瀚 (“Mr Sin”). Mr Sin was employed by the Plaintiff as its 賠償部副總裁. In his witness statement, Mr Sin explained the damages suffered by the Plaintiff and produced documents evidencing the payments made by the Plaintiff in relation to the PI Action.

17.  Mr Sin’s evidence is consistent with the contemporaneous documents and was not challenged by the Defendant (who did not appear). I accept Mr Sin’s evidence.

APPLICABLE PRINCIPLES

18.  Sections 10(1) and (4) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap 272) provide that:

“(1) If, after a certificate of insurance has been issued under section 6(3) in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under section 6(1)(b) (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any law relating to interest on judgments.”

“(4) If the amount which an insurer becomes liable under this section to pay in respect of a liability of a person insured by a policy exceeds the amount for which he would, apart from the provisions of this section, be liable under the policy in respect of that liability, he shall be entitled to recover the excess from that person.”

19.  As submitted by Mr Pak on behalf of the Plaintiff, in an assessment of damages in the present context, the Court should consider the reasonableness of the settlement amount reached between the insurer and the victim of the accident, and the reasonableness of the costs incurred by the insurer in reaching such settlement: see, for example, Liberty International Insurance Limited v Yeung Kai Chung, Stanley (unrep, DCCJ 2775/2015, 21 August 2017); Liberty International Insurance Ltd v Yeung Chi Kong (unrep, DCCJ 3385/2008, 14 August 2009).

DISCUSSION

Agreed settlement sum of HK$500,000

20.  In the Statement of Damages filed by Mr Chung in the PI Action, Mr Chung claimed damages in the amount of HK$2,403,325 (exclusive of interest). After negotiations between the Plaintiff’s and Mr Chung’s solicitors, the parties eventually agreed to settle the PI Action for HK$500,000 (inclusive of interest). I have considered the relevant correspondence exchanged between the parties. I note that the eventual settlement sum is only about one-fifth of Mr Chung’s pleaded case on quantum. All in all, I am satisfied that the Plaintiff has made reasonable efforts to negotiate with Mr Chung before reaching settlement.

21.  According to the single joint expert report by Dr Lau Hoi Kuen (“Dr Lau”) dated 11 May 2022:

(1) Mr Chung was diagnosed to have suffered from a deep laceration wound over the dorsum of his left hand with intact extensor tendons, and abrasion wounds over his left forearm and left thigh;

(2) Sick leave granted from 1 November 2018 up to 7 June 2020 was considered appropriate;

(3) On the expiry of sick leave, as far as the upper limb condition was concerned, Mr Chung should be able to return to his pre-injury work as a delivery worker handling heavy items, though with mild reduction in work efficiency. However, Mr Chung’s ability to return to his pre-injury work was limited by his low back pain and leg numbness (which were unlikely to be related to the Accident);

(4) Mr Chung was assessed to have suffered 3% permanent impairment of the whole person and 3% loss of earning capacity as a result of his upper limb injuries.

22.  In view of the extent of injuries suffered by Mr Chung and the authorities which Mr Pak has referred me to, I accept that the settlement sum of HK$500,000 (inclusive of interest) is reasonable.

23.  In any event, since the Defendant was present at the hearing in the PI Action which led to the order dated 5 October 2022 and signed on that order to acknowledge his understanding and agreement of the settlement terms, it would not be open to him to dispute the reasonableness of the amount of agreed damages: Liberty International Insurance Limited v Yeung Kai Chung, Stanley (supra) at §31.

24.  For the reasons above, I am satisfied that the settlement sum of HK$500,000 for the PI Action is reasonable and I allow it in full.

Mr Chung’s costs and disbursements in the PI Action

25.  Having considered the relevant solicitors’ correspondence and the fact that the eventual agreed sum is lower than the figure initially proposed by Mr Chung in the first round of negotiations, I am satisfied that the Plaintiff has made reasonable efforts in negotiating with Mr Chung on the quantum of his costs and disbursements in the PI Action.

26.  As submitted by Mr Pak, the PI Action was settled around one year after it was commenced and considerable work had been incurred by then. There is no reason for me to question the reasonableness of the relatively modest agreed sum of HK$180,620 (consisting of profit costs of HK$165,000 and disbursements of HK$15,620) and I allow it in full.

The Plaintiff’s costs and disbursements in the PI Action

27.  Mr Pak has fairly pointed out that there is no express clause in the Policy for the recovery of the Plaintiff’s own costs and disbursements in the PI Action. In particular, such expenses are not amounts which the Plaintiff was “obliged” by law (i.e. the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap 272) or by virtue of an agreement with the Motor Insurers’ Bureau of Hong Kong “to pay... for which the Company [ie the Plaintiff] would not otherwise be liable under this Policy the Insured and any other person...” within clause 15 of the Policy.

28.  Nevertheless, I agree with Mr Pak that this claim is recoverable by the Plaintiff under general principles of damages for breach of contract, in that such expenses represent reasonable costs incurred by the Plaintiff in mitigating its loss caused by the Defendant’s breaches of the policy or in otherwise dealing with the consequences of such breaches: Liberty International Insurance Limited v Yeung Kai Chung, Stanley (supra) at §38; Chitty on Contracts, Vol 1, 35^th ed, at §§30-040 and 30-123.

29.  The Plaintiff seeks to recover a total of HK$177,780 under this claim, as particularised as follows:

(1) Legal costs and disbursements in DCPI 3017/2021: HK$132,600 (consisting of profits costs of HK$131,696 and disbursements of HK$904);

(2) Counsel’s fees in DCPI 3017/2021: HK$25,000;

(3) Law costs draftsman fees in DCPI 3017/2021: HK$7,200;

(4) Medical expert fees (Dr Lau): HK$12,900;

(5) Bankruptcy search fees: HK$80.

30.  The Plaintiff’s claim is supported by, among other things, the bill of costs of its solicitors, Messrs. John Lam, Law & Co, as well as contemporaneous documents showing the payments made.

31.  I am satisfied that these were reasonable costs incurred by the Plaintiff in mitigating its loss caused by the Defendant’s breach of the Policy. The profit costs claimed by the Plaintiff’s solicitors are lower than the agreed profit costs of Mr Chung’s solicitors, while the disbursements (including, for example, counsel’s fees) are relatively modest and cannot be said to be excessive or unreasonable.

32.  As such, I allow the Plaintiff’s claim for HK$177,780.

DAMAGES AND INTEREST

33.  In conclusion, damages are assessed at HK$858,400 (HK$500,000 + HK$180,620 + HK$177,780).

34.  I award pre-judgment interest at 1% above the prevailing HSBC prime rate from the date of the Writ (13 February 2023) to the date of this judgment, and thereafter at judgment rate until payment in full.

COSTS

35.  Costs should follow the event. I order that the costs of the assessment of damages (including costs reserved) be paid by the Defendant to the Plaintiff.

36.  Having considered the Statement of Costs dated 12 August 2024 prepared by the Plaintiff’s solicitors, I summarily assess the Plaintiff’s costs of the assessment at HK$115,000.

DISPOSITION

37.  For the reasons above, I make the following orders:

(1) The Defendant do pay to the Plaintiff the sum of HK$858,400.

(2) Interest on the sum of HK$858,400 at 1% above the prevailing HSBC prime rate from 13 February 2023 to the date of this judgment, and thereafter at judgment rate until full payment.

(3) Costs of the assessment of damages (including any costs reserved) be paid by the Defendant to the Plaintiff, summarily assessed at HK$115,000.