CHIU AH TUNG v. TANG CHUNG CHUEN AND OTHERS

HCPI 233/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 233 OF 2000

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ASSESSMENT OF DAMAGES

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1. The plaintiff who was born on the 16 July 1949 was travelling as a passenger on a taxi registration number FC3843 which was owned and driven by the 1st defendant when the taxi was violently struck by another taxi registration number GJ8611 which was being driven by the 2nd defendant. The 3rd defendant was the owner of the defendant's taxi.

2. On the 28th May 2001, Judgment was entered for the plaintiff on liability with apportionment of liability as to 60% on the 1st defendant and 40% on the 2nd defendant with damages to be assessed. It was also ordered that the 1st and 2nd defendants do pay the plaintiff the costs of this action in accordance with the said apportionment.

Pain Suffering and Loss of Amenities

3. The plaintiff suffered from a posterior dislocation of the left hip associated with fracture of the posterior lip of the acetabulum and the antero-inferior part of the femoral head. There was also an undisplaced crack fracture at the neck of the right humerus.

4. The plaintiff had 2 operations. The first one on 26 November 1998 for closed reduction of the hip dislocation and insertion of Steinmenn pin into the left proximal tibia to facilitate skeletal traction. The second one on 1 December 1998 for open reduction and internal fixation of the acetabular hip fracture and excision of the femoral head fragment.

5. The plaintiff was discharged from hospital on 2 January 1999 because there was no bed space in the hospital ward. The plaintiff opted to go home for convalescence. The plaintiff was given sick leave from 26 November 1998 to 2 August 1999.

6. The Parties agreed the award under this head at $600,000.

Special Damages

Agreed Items

Medical expenses for in-patient, out-patient, acupuncture, bonesetter and herbal medicine	$8,746
Travelling expenses	$16,620
Wages of domestic helper	$20,000
Damaged personal items	$2,735
Tonic food	$5,000
Future Medical expenses	$20,000

Disputed Items

7. The defendant disputed items of expenses for MRI scan, X-ray, Medical Reports, and fees of Dr. Lau Hoi Kuen. The defendant states that these are costs of the litigation as they are expenses incurred to prove and establish the medical condition of the plaintiff for the purpose of litigation. These are costs of the litigation and should be recovered on taxation of costs and not as an item of special damages.

8. The plaintiff relies on the decision of Master P. Cheung, as he then was, in Chu Wang Fu v. Hang On Motors HCA No. A6746 of 1988 in which the Court relied on the decisions of Mr. Registrar Barnett in Yip Hoi Kwai v.Yau For Choi [1979] HKLR 169 and Green v. Tong Kwan Wah [1979] HKLR 207. In the last two cases the learned Registrar noted the defence submission that the cost of medical reports should be included in the bill of costs. However, he stated that in his experience it could be dealt with either way and allowed the claim as special damages. I am of the view that as these are items of the costs of litigation these should be recovered on taxation.

Claim for Accrued Loss of Earnings, Loss of Profit from the Business, Loss of Business Assets and Future Loss of Earnings

9. Before the accident, the plaintiff was managing a joint venture business named Shenzhen Natural Cosmetic Beauty Co. Ltd. (hereinafter referred to as the "Shenzhen Co.") in the Mainland. His family company Proma Enterprise (HK) Limited (hereinafter referred to as "Proma") owned 90% of the shareholding and was entitled to 90% share of the profits. The Shenzhen Co. commenced business on 2 June 1993 with an investment of RMB4,368,000 wholly provided by Proma. The business required his constant personal attention.

10. The plaintiff produced audited accounts of the Shenzhen Co. prepared by Shenzhen Zhongfa Certified Public Accountants for the years from commencement of business of the Shenzhen Co. from 2 June 1993 to 31 December 1998. This is at pages 431 to 477 of the 2nd Trial Bundle. The audited accounts show that after incurring loss during the first 2.5 years of operation until the end of 1995, the Shenzhen Co. began to make a profit. For the year ending 31 Dec. 1996, its net profit was RMB463,260. This increased to RMB1,174,591 for the year ending 31 Dec. 1997. However, the business of the Shenzhen Co. was hit by the Asia economic crisis and profit dropped to RMB769,458 for the year ending 31 December 1998. All the profits were ploughed back into the business. As at the end of 31 December 1998, the total assets of the business was RMB6,244,750.

11. The plaintiff stated that he was the person who held the company's purse string. He approved all expenditures of the company, and he monitored all the business turnover travelling to all the company's branch offices in the Mainland to supervise the running of business. The business needed his close attention. As a result of the traffic accident, he was hospitalized and incapacitated for a long time. During this period he was unable to travel to the Mainland to oversee the company. The crucial aspect of this was that he carried on his person his personal seal which was vital for the withdrawing money from the bank for payment of salaries, commission, rent, service charges, raw materials and for the completion of applications for VAT. Application for VAT was necessary in respect of goods sold to customers. It was only with the paid VAT invoice that the price of goods could be collected from the retail outlets such as department stores. The seal was required to apply for renewal of working permits or temporary resident permits to the Public Security Bureau on behalf of his employees. Without these, his employees could not return to Shenzhen to work after their year end holidays when they go home to the provinces. He also required the seal to apply to the Customs Department for clearing customs at the end of December each year. If he does not do so, the computer for custom clearance is locked. Then, he could not import nor export goods. He required the raw materials for manufacture of cosmetics to be imported. Also, in January and July each year he had to apply to the Technical Inspection Bureau for Quality Control. His personal seal is required because he is the Legal Representative of the Shenzhen Co.

12. He stated that during the period of his hospitalization, he was initially so absorbed with his physical condition, worrying whether he would survive the accident that he placed his business on a low priority. As he said, if he did not have health or life itself, what was the good of business or making money. So he just focussed his attention on recovery.

13. Secondly, he did not have anyone that he could trust to take personal seal to the Shenzhen Co. He explained why he could not ask Mr. Shum Pak Sheung, the Manager of the Shenzhen Co. to carry the seal to Shenshen though he is a Hong Kong resident with a Hong Kong I.D. Card. He stated that Mr. Shum had done a lot of things that had brought loss to his company. He could not trust him even though he allowed Mr. Shum to retain the post as Manager, he stripped him of his power. He continued to pay him his monthly salary of RMB20,000 because, Mr. Shum was the one who introduced him to his Shenzhen partner in the joint venture. Mr. Shum was the go-between, between himself and the Shenzhen joint-venture partner and continued to be so.

14. He stated that by the time he was able to go back to Shenzhen in about May 1999, he found the Shenzhen Co. premises in a mess. The machinery and plant was gone. That was because no rent was paid and the landlord distrained for rent. All the staff had gone. Only Ms. Tso and his cousin stayed. His cousin Mr. Chiu Hiu Ming, a PRC citizen in Shenzhen, who worked for him, told him this.

15. All the documents of the company were gone because of the distraint action by the landlord. However, his cousin Mr. Chiu told him that before Ms. Tso left the company, she handed to him some documents for him to hand over to himself.

16. The stock of the company had been sold. He had asked his sister, who visited him from England whilst he was in hospital, to telephone Ms. Tso to tell her to sell the stock to use the proceeds to pay salary to the staff before they returned to their home for the year end holidays.

17. The plaintiff is claiming pre-trial and future loss of salary at RMB50,000 per month, pre-trial and future loss of 90% share of profits from the business, loss of 90% share of the assets of the business.

18. The defendant's Counsel raised these questions:-

1. Was the business of the Shenzhen Co. at the time of the accident a profitable and expanding business or a failed business?

2. Was the absence of the seal the reason for the collapse of a successful business or is it merely an excuse to blame the accident and hospitalization for the collapse of the business?

19. The basis for the defendant's contention that the Shenzhen Co. is a failed business at the time of the accident is that Proma owed the Union Bank the sum of $5.18 million at the end of October 1998. It was through Proma that the Shenzhen Co. obtained loan facilities for the purchase of raw materials. The audited account of Proma showed that the Shenzhen Co. owed $1.69 million to Proma as at 31.12.97. There is no evidence that this had been repaid up to the time when the limit of the overdraft facility of Proma in the sum of $3.5 million with the Union had been exceeded. Its Trust Receipts were also overdue and unpaid with interest accruing. This became serious as Proma could no longer operate its account with the Union Bank and had to use its account with the Standard Chartered Bank which did not have loan facilities. Further Proma's account with the Union Bank was secured by a mortgage on the property of the plaintiff and his wife. The plaintiff ran the risk of the Union Bank applying for possession of his property as property prices in 1998 had fallen and the Union Bank refused to extend Proma's loan facilities. Despite that the Shenzhen Co. had not repaid Proma the $1.69 million.

20. The plaintiff's explanation was that he had ploughed back the profits of the Shenzhen Co. into expansion of the company. He had all the time been applying to the Union Bank for enlargement of his overdraft facilities. Obviously, the bank that had offered to do so in 1997 when the value of his property was worth $7 million resisted his request in 1998 when the value of the property dropped.

21. Defence Counsel referred to the remittance of a sum of $135,650 on 24.12.98 by the plaintiff in Hong Kong to the bank account of the Shenzhen Co. to argue that this must show that the Shenzhen Co. is facing serious cash flow problems. As Proma could not use its bank account with Union Bank because of having exceeded its overdraft facilities, surely, Proma required this sum in order to repay the interest on the overdraft and on Trust Receipts at the account with Union Bank. This remittance was made when the plaintiff was still at Queen Elizabeth Hospital.

22. The plaintiff stated that he received this sum from a customer whilst he was in hospital. He stated that this sum was in respect of the price of goods sold to Proma by the Shenzhen Co. He stated that Proma had to pay this to the Shenzhen Co. for customs purposes. He stated that even though he could not prepare the customs clearance form, the fact that he sent it would be sufficient to show the Customs authorities that this had been paid.

23. Further the Shenzhen Co.'s cash in hand as at 31.12.98 was RMB19,585.61 and RMB134,905.41 in the bank. The cash in hand was very low compared to the large accounts receivable of RMB4,308,269.84 and stock of RMB2,349,399.61 as at 31.12.98. This showed that the Shenzhen Co. was not a financially healthy company. Defence Counsel sought to persuade me that this must mean that the accounts receivable consist of long overdue and bad debts and the stock consisted of 'dead' stock. I do not believe there to be sufficient basis to draw such inference even though the plaintiff did say that for a small percentage of the goods sold he had extended credit period beyond the 60 to 90 days to 180 days and even up to 365 days.

24. In relation to the second question he posed, Defence Counsel submitted that there was no reason for the plaintiff not to have his personal seal delivered to Ms.Tso his personal assistant in the Shenzhen Co. whom he trusted or to his cousin Mr. Chiu who worked for him in the Shenzhen Co. Defence Counsel also questioned the plaintiff's evidence about Mr. Shum being untrustworthy and said this was just made up to explain why he did not ask Mr. Shum to deliver the seal to Shenzhen. Further, he cast doubt on the plaintiff's evidence that the plaintiff was so absorbed with his physical condition that he did not consider or think of the Shenzhen Co. during the period of his convalescence. He stated that if that were the case, he would not have asked his sister to remit money to the bank account of the Shenzhen Co. on 24.12.98 in the sum of $135,650.

25. However, I agree with the plaintiff's Counsel that the personal seal is in the nature of a 'PIN' with which one could have access to one's bank account. In the case of the personal seal its usage was beyond that of a 'PIN' as it was the seal of the Legal Representative of the Shenzhen Co. and could be used for various applications to government departments related to VAT, employee's residency permits, customs clearance. It was extremely important. I would think it would not be easy to part with it to anyone but the most trusted companion. I therefore do not find it unbelievable that the plaintiff did not want to part with it to send it by courier. Nor do I find any basis for the assertions that the evidence of the plaintiff about Mr. Shum Pak Sheung is untrue.

26. Defence Counsel also questioned the evidence of the plaintiff that he was paid RMB50,000 per month as salary. He stated that the highest denomination of RMB is a note of RMB100. RMB50,000 would be 500 of RMB100 notes. Further, he stated that it did not make sense for the plaintiff to draw his salary in RMB as it had to be converted into HK$ and from HK$ exchanged into Taiwan currency. Surely there would be a loss through the exchange.

27. Having considered I accept the evidence of the plaintiff that he kept his personal seal on his person always. I accept that his personal seal is vital to the running of his business as stated by him as he is the Legal Representative of the Shenzhen Co. I accept the submission of plaintiff's Counsel that it is in the nature of a 'PIN' or "personal identification number" that we use in telephone banking or for ATM machines. As such it has to be carefully kept. I accept his evidence that he could not entrust Mr. Shum to take it to Shenzhen nor could he trust any courier service to deliver it to Shenzhen. I also accept his evidence that he had no one that he could entrust to take it to the Shenzhen Co. I accept that during the period of his hospitalization, he was totally absorbed with his health and his survival and was in no state of mind to be concerned about the running of the Shenzhen Co. I accept his evidence that the failure to personally oversee his business and to deliver the seal to the Shenzhen Co. had the consequences that he described. This led to the collapse of the Shenzhen Co. I also accept the evidence of the plaintiff that he drew a salary of RMB50,000 per month from the Shenzhen Co. This is evidenced by the audited reports of the Shenzhen Co.

28. Having so found, I have to consider whether the Shenzhen Co. was in a healthy and profitable state or whether it was financially unhealthy. There is not a lot of evidence of the financial health of the Shenzhen Co., the only evidence is the audited accounts. However the audited accounts did not have sufficient information related to the state of the accounts receivables or the state of the stock in hand.

29. From perusal of the audited accounts of the Shenzhen Co. and consideration of the evidence aforesaid, I agree that the Shenzhen Co. was not in a financially healthy condition as there was a large amount of accounts receivables and large volume of stock with little cash in hand or cash at bank as at 31.12.98. It would seem that there was some difficulty in collecting the accounts receivables from some customers as some customers required a credit period of up to 365 days. According to the plaintiff, stock was sold to retailers on consignment. Surely, when a retailer requires such a long period to pay its accounts, there must be difficulty in selling the stock which had been delivered on consignment. There is no detailed information as to the accounts receivable, what they consist of. It would seem that the Shenzhen Co. had not repaid the amount of $1.69 million owed to Proma when Proma required the cash to repay its Trust Receipts overdue and the overdraft which exceeded the overdraft limit. The consequences of the long overdue Trust Receipt payments and failure to pay overdue interest on this and on the overdraft of Proma could lead to repossession of the mortgaged property of the plaintiff, by the Bank. There is therefore evidence to come to the inference that the Shenzhen Co. has serious cash flow problems. Even though on paper, the Shenzhen Co. had made a profit at year end 1998 in the sum of RMB769,458.00 this had been ploughed back into the business. Further there is stock to the value of RMB2,349,399.61 which is a large quantity of stock with finished product to the value of RMB$1,191,782.83. This may suggest that the stock is moving slowly when taking into account the large amount of unpaid goods in the retail outlets. I bear the aforesaid in coming to my assessment hereunder. However, although the Shenzhen Co. may not have been in financial health yet, there is insufficient evidence for me to come to the finding that it may not come around under sound management or that it is in the verge of collapse.

Loss of Assets of Business

30. This consists of fixed assets of RMB583,060.97, stock of RMB2,349.399.61 and accounts receivable of RMB4,308,269.84 (referred to in the audited report of the year ended 31.12.98). The fixed assets were said by the plaintiff to have been sold by the landlord for arrears of rent. The stock was sold by the staff of the Shenzhen Co. and the accounts receivable were not able to be followed up after the long delay when the plaintiff was unable to go to Shenzhen. In any event, the documentation related to these accounts receivable had been lost when the Shenzhen Co. had been taken over by the landlord. I find that the loss of fixed assets is established and I award its value pursuant to the valuation placed on it in the audited account for the year ending 1998 in the sum of RMB583,060.97.

31. In relation to the stock, I assess a sum equivalent to 75% of the value placed in the audited report for the year ending 1998 to take into account the fact that in view of the large volume of stock and the large amount of accounts receivable, the stock may not be moving in the then economic climate. The stock may have to be sold at a discount to move it. This comes to RMB1,762,049.70.

32. In relation to the accounts receivable, I take into account that a proportion of these may not be recoverable even if the plaintiff were able to take care of his business and had not met up with the accident. I assess the loss to the plaintiff at 2/3rds of the value placed on this in the audited report for the year ending 1998. This comes to RMB2,872,179.90. The three items total RMB5,217,290.57. As the plaintiff own 90% of the shares of the Shenzhen Co. I grant 90% of this sum under this head which equals RMB4,695,561.50.

Pre-trial Loss of Salary

33. The plaintiff stated that he took a salary of RMB50,000 per month. As the Shenzhen Co. had a real cash flow problem, it is not clear how the business of the Shenzhen Co. would fare. I am only able to award the plaintiff 4 months salary in the light of the uncertain situation. It is not clear as to the future prospects of the company as regards its profitability that it could continue to pay the plaintiff $50,000 per month. I award RMB200,000 under this head.

Post-trial Loss of Salary

34. Even if the accident had not happened, I am not sure if the Shenzhen Co. would be profitable so that the plaintiff could continue to draw a salary of RMB50,000. Because of that, causation for future loss of salary arising from the accident may not be that clear. However, were he not affected by the accident, he would not have the physical handicap which he obviously has. Arising from the accident the defendant is not able to travel in and out of Hong Kong to the Mainland and to various parts of the Mainland with the same agility as before. As the plaintiff had managed a manufacturing and retailing business in the Mainland, it would be likely that he would look for similar work. The defendant's Counsel has stated that the defendant is prepared to offer $100,000 for handicap in the labour market even though this had not been claimed. As the plaintiff had not claimed for this, and this is a legitimate item of claim I include the sum offered by the defendant's Counsel in the sum of $100,000.

Pre-trial Loss of Profits and Post-trial Loss of Profits

35. I am not able to award any damages under this head in view of the uncertain future prospects of the Shenzhen Company.

36. I assess damages as follows:-

PSLA	$600,000.00
Special Damages	$53,101.00
Pre-trial Loss of Salary	RMB200,000.00
	(or its HK$ equivalent)
Handicap in the Employment Market	$100,000.00
Loss of Assets of Business	RMB4,695,561.50
	(or its HK$ equivalent)
Future Medical Expenses	$20,000.00

37. There will be final judgment for the plaintiff against the 1st and 2nd defendants in the total sum assessed together with interest thereon on the general damages at 2% from the date of service of the writ to date of judgment, and interest run on the special damages at half judgment rate from the date of the accident to the date of judgment. I make an order nisi that the defendants pay the plaintiffs' costs to be apportioned as to 60% to the 1st defendant and 40% to the 2nd defendant.