NG SHIU CHUN AND ANOTHER v. LAI TAK MING AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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ASSESSMENT OF DAMAGES

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1. The deceased was killed in a freak accident on 12 July, 1981, when a vehicle, driven by the 1st Defendant and owned by the 2nd Defendant, rammed a traffic sign outside the deceased's shop in Causeway Bay, causing the sign to fall inside the shop and strike the deceased, causing him head injuries from which he died a few days later.

2. The writ was issued on 5 July, 1984. By a Consent Summons filed on 30 August that year, it was agreed that Interlocutory Judgement be entered against both defendants with damages to be assessed, but that Judgement was not entered until 29 December, 1988. Notice of Appointment of Assessment of Damages was filed on 20 December, 1989.

3. The Plaintiff sued under Chapter 23, (LARCO) on behalf of the estate of the deceased, she being his widow and entitled to the whole estate, and on behalf of the dependants of the deceased under Chapter 22 (FAO). In the Statement of Claim the dependants were stated to be the Plaintiff and Chau Kwong Yu, "step son" of the deceased. During the assessment hearings an Amended Statement of Claim was permitted to be filed amending the description of Chau Kwong Yu to "nephew", in accordance with the evidence I had heard from the Plaintiff, but at the end of his examination-in-chief of Chau Kwong Yu, the last of the Plaintiff's witnesses, Mr. Chik informed me that he was abandoning the claim on behalf of Chau Kwong Yu because he had no evidence to prove the claimed relationship.

LARCO Claim

4. The LARGO claim has 3 aspects - special damges, loss of expectation of life, and in respect of the loss of earnings of the deceased.

The special damages consisted of :-

(a)	Funeral expenses	$14,000
(b)	Hospital fee	25
(c)	Travelling expenses to and from hospital	260
(d)	Damage to a mahjong set	150 $14,435 ======

5. Those special damages (2 other minor sums mentioned in the Statement of Claim were not pursued by Mr. Chik) are agreed by Ms. Sze and I award them.

6. Mr. Chik asked for the now conventional sum for loss of expectation of life of $30,000, which Ms Sze apparently concedes, since she did not mention it in her closing address, and I also award that sum.

7. The question of the loss to the estate due to loss of future earnings of the deceased has caused me the most anxious consideration, as has the question of the claimed "dependency" of the widow.

8. I will set out first the history of the deceased's business prior to his death, and then deal with events subsequent to his death.

9. At the time of his death the deceased was aged 53, and his widow about the same age. Since 1955, the deceased had operated a business selling, repairing, and hiring out sets of mahjong tiles, and selling other types of the games and sundry articles connected with games. Until 1976, the deceased employed an assistant full-time, who carried on with part-time duties until 1980. Thereafter, I am satisfied that the deceased and the Plaintiff operated the business as a team until his death. In 1979, the above-mentioned nephew came to live with the couple and also began to work in the business.

10. As the Plaintiff explained, it was the original intention of the deceased and herself when the nephew came to Hong Kong that he be set up in the business, so that they could retire in due course.

11. On the death of the deceased, the Plaintiff carried on the business under the same firm name, with the assistance of the nephew. By this time, the widow was able to deal with all aspects of the business but one. The exception was that she was unable to go around the clubs and restaurants, as her husband had done, soliciting new business. This caused a drop in total turnover. Otherwise, the business carried on as before.

12. At the time of the death of the deceased, the rent being paid for the premises where the business was operated, and the family lived, was only $2,400. This was for only half of the premises, the other divided half being occupied by another tenant. On l March, 1982, a new 3-year tenancy began, with the Plaintiff taking over the whole premises at an increased rent of $10,000.

13. The Plaintiff ceased to operate the business at the end of February, 1985, transferring the stock to the nephew, who opened a new, similar business in North Point. The Plaintiff advanced 20% of the purchase price of the new premises, and paid the mortgage for the first 2 years. This move to new premises had been planned well in advance. The new business was operated by the nephew and his wife, with occasional assistance from the Plaintiff, for which she received $2,600 per month pocket money.

14. The fact that the deceased's business was carried on, without any significant changes, by the Plaintiff for 3½ years, before she turned it over to the nephew, is the key problem in this case. The attitudes adopted by Plaintiff and Defendants on this issue could not be further apart. On the one hand, Mr. Chik says that the continuation of the business by the Plaintiff is completely irrelevant, and that I should simply carry out the normal exercise of calculating an appropriate multiplicand, adopting an appropriate multiplier and producing a figure for compensating the deceased's estate for the "lost years" of the deceased's earnings. Ms. Sze, on the other hand, says the con-tinuation of the business, which formed part of the deceased's estate, is all-important and seeks to persuade me that there is no loss to the estate whatever. Ms. Sze has, however, anticipated that I may reach a decision somewhere between the 2 extremes and has produced alternative calculations of damages based upon possible ways of approaching the problem. Mr. Chik, has not sought to suggest any such compromise approach.

15. I have a fundamental difficulty about accepting Mr. Chik's argument. that I should ignore the continuation of the business by the widow, and calculate damages in exactly the same way as I would if the business had ceased on the death of the deceased. If I do as he asks, I shall be awarding to the Plaintiff damages for the loss of the notional earnings of the deceased from the business, when the Plaintiff enjoyed the actual earnings of the business for 3½ years until she voluntarily gave up the business. I do not see how that could be regarded as compensation for loss which is surely the whole basis of the exercise in these assessments of damages.

16. It is my conclusion that I cannot ignore the fact that the business, which formed part of the deceased's estate, was continued to the benefit of the Plaintiff, who is the sole beneficiary of the estate. In my view, the proper way to assess damages in this case is to discover what financial loss was actually occasioned to the business, and thus to the estate, of the deceased by his ceasing to work in the business.

17. The Plaintiff referred to the drop in takings suffered by the business after her husband's death on a couple of occasions during her evidence. In her evidence in chief she said "After husband died - upto 1985 - difference in business not large - sales of mahjong sets were less than before .... Level of business was $5-6,000 lower than when husband alive". She explained that the $5-6,000 loss was in sales of mahjong sets. She further explained that the decline was due to the fact she did not know how to go out looking for business. In cross-examination, she said that as regards items of stock other than the regular type of mahjong set there was not much difference in volume after her husband's death. When it was suggested to the Plaintiff by Ms. Sze that the business had suffered no loss after her husband's death, the Plaintiff replied "We suffered a little loss." The next day, as the Plaintiff was finishing her evidence, I gave her a further opportunity to quantify the amount by which the business deteriorated, but she was unable to do so.

18. The Plaintiff's general problem about. quanti-fying damages in this case is that prior to the death of the deceased, the business had kept no records whatever - no accounts, no receipts, no bank account. No income tax returns were ever filed. As part of her bundle of documents, the Plaintiff produced a chart purporting to set out figures of sales of particular items and costs and profits, but this was not a contem-poraneous document, having been produced in 1985 when the Plaintiff's solicitors requested her to provide financial, information, about the business. Ms. Sze demonstrated convincingly that the Plaintiff's figures about sales of mahjong sets were very suspect in the light of other evidence in the Plaintiff's case - so convincingly that in his closing submission, Mr. Chik accepted that a monthly profit figure in respect of sales of mahjong sets should be used which was 60% of his client's original figure.

19. In general, I did not regard the Plaintiff as a deliberately dishonest witness, even though her reconstructed turnover figures cannot be relied upon. I shall accept her estimate that the drop in turnover was of the order of $5-6,000 per month, being accounted for by the fall in sales or mahjong sets, caused by the loss to the business of the deceased's expertise in soliciting new sales. I shall adopt a median figure of $5,500. In one of her alternative calculations, lettered C, Ms. Sze had dealt with this possible approach to the assessment. As she points out, if one takes an average sale price for mahjong sets, based on the Plaintiff's evidence, of $165 per set, the figure of $5,500 trans-lates into a sales figure of 33 sets. At an average profit, again based on the Plaintiff's evidence, of $50, this amounts to a monthly loss of $1,650, and this is the figure I shall use as the multiplicand.

20. As to the appropriate multiplier, Mr. Chik asked that a multiplier of 7 years be used, but Ms. Sze argued that I must confine the multiplier to 3 years 7 months, being the period from which we knowthe business actually continued. I think, given the deceased's age of 53, that Mr. Chik's figure would normally be about right, and I do not accept Ms. Sze's argument on this point. What I have to try to do, however, is assess how long the deceased would have continued to run the business, which is not necessarily the period for which his widow actually ran it. As I Have described earlier, it was always the couple's intention that at an appropriate time the business would go to the nephew and they would retire. I think it is probable that the deceased would have carried on running the business for a little longer than his wife did before stepping down in favour of the nephew, and I adopt a multiplier of 5 years. I therefore award as damages for the "lost years" the sum of ($1,650 x 60) $99,000.

21. Before leaving the LARCO claim, I wish to indicate what my assessment would have resulted in had I adopted Mr. Chik's submission that I ignore the continuation of the business, and I will do so by using the calculation handed in to me by Mr. Chik.

22. The gross monthly profit upon which Mr. Chik's calculation is based, as corrected in the light of Ms. Sze's criticisms, is $19,920. I accept as reasonable the $7,000 of that figure attributed to the sale of "conventional" mahjong sets, the backbone of the business. However, I cannot accept that it is appropriate to simply adopt unquestioningly the Plaintiff's estimate of turnover in respect of other items, since Mr. Chik himself found it necessary, in putting forward the $7,000 for sale of "conventional" mahjong sets, to discount his client's original figure by 40%. I would discount the other gross profit figures totalling $12,920 by 25%, leaving $9,690. The monthly gross profit figure is now ($9,690 + $7,000) $16,690.

23. I accept Mr. Chik's deductions for rent $2,400, water charge $30, electricity $150 and phone $50 - a total of $2,630. This leaves a net profit figure of $14,060.

24. Mr. Chik's calculation then accepted that after the rent increase in March 1982, the profit figure had to be adjusted to take account of the extra $7,600 in rent, but claimed that a median figure should be used as the multiplicand to cover the whole period covered by the multiplier. In my view, Ms. Sze must be right that this approach is not logical. I agree with her that the period up to March 1982, must be based on the net profit after rent of $2,400, and the subsequent period upon the net profit after deducting the additional $7,600 rent.

25. As indicated earlier, I consider the proper multiplier is 5 years. My calculation for the lost years would thus be:-

26. This figure must be reduced to allow for taxation at 15% and becomes $374,680.

27. I consider Mr. Chik's suggestion that a free balance of 40% should be adopted is reasonable.

28. My calculation of the LARGO claim would thus produce a figure of $149,872.

The FAO Claim

29. The Plaintiff's case is that she was dependant on her husband and is entitled to damages for loss of dependency. Ms. Sze submits that the Plaintiff was not dependant on her husband and that this is demonstrated by events subsequent to his death. Ms. Sze contends that the evidence shows that the Plaintiff was well able to carry on running the business in exactly the same way as before her husband's death, apart from the modest drop in profit caused by him ceasing going out to look for new business. Ms. Sze contends that no award should be made under the FAO claim.

30. The business registration was in the deceased's name and I accept the Plaintiff's evidence that he made all business decisions and handled all money matters, and that there was no sharing of profit. Plaintiff was given money for housekeeping and $2,000 per month pocket money. She had savings of her own amounting to $100,000 odd, as compared to her husband's estate of over $500,000. I accept there was no formal partnership.

31. However, the Plaintiff's evidence made it clear that, after the assistant ceased work in 1976, having done nothing in connection with the business before, she became more and more closely involved in the business, and in learning to carry out the different duties involved. She learnt to paint and re-carve old mahjong sets, and she was in charge of running the shop in the absence of her husband. By the time of his death, the only aspect of the business she could not take over was the search for new business. At various points in her evidence she described how the business was run:- "(after 1976) ......we two ran the business"; "since 1976 when all staff members had gone we ran business, ourselves as husband and wife"; "in doing mahjong business it is usual that family members work together." When running the business together after 1976, the Plaintiff and her husband worked every day, public holidays included, from 9 a.m. to 9 p.m. I am in no doubt that the business was a husband. and wife, or "mom and pop", team operation.

32. Once her husband died the Plaintiff was able to continue running, the business as it was before his death, apart from the net drop in profits of $1,650 per month due to his absence. In preparing her chart showing the business profits and outgoings, one of the items of expenditure was $3,000 to cover the deceased's personal expenditure. The blunt fact is that, far from being financially worse off after her husband's death, the Plaintiff was better off in having all the profits to herself. When the Plaintiff ceased running the business, she did so voluntarily due to her wish to hand it over to the nephew, continuing to receive $2,600 per month from the nephew for only occasional assistance, this amounting, in effect, to a pension from the new business, and a well-deserved one in view of the financial assistance she had provided towards setting it up.

33. Neither counsel was able to refer me to any direct authority on the situation when a jointly run business carries on after the death of a spouse, but Mr. Chik had referred me to the case of HELSBY v. FISHER & L.F. BRIGGS (1932) LTD., 1966 CA No. 319A, for the sole purpose of its support for a multiplier of 7. Ms. Sze now relies upon that case in support of her argument that the continuation of the business is an important factor to be considered. In the HELSBY case, the Plaintiff and her husband had been "running a greengrocery business in partnership" - per Willmer, L.J. Whether this was a "partnership" in the legal sense is not revealed. However, the vital distinction between the HELSBY case and the present case is that in the HELSBY case "the business was continued for a short time by the widow, but she found herself in the event unable to cope with it" - per Willmer, L.J. Willmer, L.J. went on to quote from DANIELS v. JONES [1961] 3 E.R. 24, where Holroyd Pearce, L.J. said "Since the question is one of actual material loss ...."- my emphasis.

34. In HELSBY, Harman L.J. said "One has to remember that the wife depended on her husband's efforts and that it was impossible to carry on the business after he died ....." Diplock, L.J. said "when the husband was alive the wife received moneys for her keep and personal expenses from the family business, which it was possible to run only when the husband was alive."

35. I am left in no doubt whatever by those repeated references to the fact that the wife of the deceased was unable to continue to run the business, that if the wife had continued to run the business - this would be a factor which the Court of Appeal would have considered relevant.

36. I am satisfied that the Plaintiff has failed to prove that any financial loss was occasioned to her by her husband's death, and I consequently make no order under the FAO claim.

A summary of the LARCO award is as follows:-

(1)	Loss of expectation of life		$30,000
(2)	Agreed Special Damages
	(a)	Funeral expenses	14,000
	(b)	Hospital fee	25
	(c)	Travelling expenses to and from hospital	260
	(d)	Damage to mahjong set	150
(3)	Loss to the estate in respect of "lost years"		99,000 $143,435 =======

37. As I indicated at the end of counsels' submissions, I will now hear counsel on the matters of costs and interest.