THE KOWLOON MOTOR BUS CO (1993) LTD v. K K CARGO SYSTEMS (HK) LTD AND ANOTHER

CACV 372/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 372 OF 2002

(ON APPEAL FROM DCCJ NO. 7794 OF 2001)

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J U D G M E N T

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Hon Woo JA:

Introduction

1. This is an appeal against the judgment of Deputy District Judge Yau given on 2 August 2002, leave to appeal having been granted by the Judge on 25 September 2002.

2. The plaintiff's claim against the Defendants arose out of a traffic accident on 27 May 1999 in which its public omnibus GJ4963 was damaged by a goods vehicle FF3851 owned by the 1st defendant and driven by the 2nd defendant. Liability having been admitted by the defendants and interlocutory judgment entered, the Judge only dealt with damages.

3. Before the Judge, the parties agreed to the costs of the repair to the bus and the survey charges. The only dispute between the parties was the general damages for the loss of use of the bus.

4. Regarding the loss of use of the bus, the Judge arrived at the multiplier of 74 days and a multiplicand of $1,365 per day. As a result, the Judge entered judgment for the plaintiff in the sum of $101,010 (ie, $1,365 x 74) with interest at half of the judgment rate from the date of the accident to the date of the judgment.

The issues on appeal

5. The appeal is very limited in scope, in that it only challenges the Judge's assessment of the multiplicand. The Notice of Appeal originally also challenged the Judge's award of interest at half of the judgment rate. The parties have now agreed that the proper interest rate should be two per cent instead of one half of the judgment rate as adopted by the Judge. The only thing left for this Court's decision relates to the multiplicand.

6. There is in substance only one ground of appeal against the Judge's decision on the multiplicand, which is that the Judge erred in holding that the evidence of the only witness called by the plaintiff on the multiplicand, Miss Sheila Hau Yat-yee, should be fully accepted. In particular, it is argued that the Judge, in his assessment of the weight that ought to be given to Miss Hau's evidence, which contained mainly hearsay, erred in failing to take into account relevant considerations, being the factors stipulated in sections 47A(4)(b) and 49(2) of the Evidence Ordinance, Cap 8 in the weighing of hearsay.

Challenge as to facts

7. It is, therefore, clear that the defendants challenge the Judge's decision on facts and how he weighed the evidence. It has been well established that the weighing of evidence is within the Judge's ambit and this Court is slow to interfere. The principles can be found in para 59/1/48 of Hong Kong Civil Procedure, 2002, Vol 1 and a large number of English and Hong Kong cases. The law on this subject which is most favourable to the defendants' appeal can be found in a passage in the judgement of Lindley MR in Coghlan v Cumberland [1898] 1 Ch. 704, which was substantially repeated by Godfrey JA in Tang Kwok Ming v Daxprofit Scaffolding Ltd [1999] 1 HKC 657, at 663E:

"Even where ... the appeal turns on a question of fact, the Court has to bear in mind that its duty is to rehear the case, and the Court must reconsider the materials before the Judge, with such other materials as it may have decided to admit. The Court must then make up its own mind, not disregarding the judgment appealed from but carefully weighing and considering it, and not shrinking from overruling it if on full consideration it comes to the conclusion that it is wrong."

The Evidence Ordinance

8. Since the challenge to the judgment relates to the Judge's decision on weighing hearsay, it is necessary to set out the relevant provisions of the Evidence Ordinance, which are all under Part IV of the Ordinance, as follows:-

"47. Admissibility of hearsay evidence

(1) In civil proceedings evidence shall not be excluded on the ground that it is hearsay unless--

(a) a party against whom the evidence is to be adduced objects to the admission of the evidence; and

(b) the court is satisfied, having regard to the circumstances of the case, that the exclusion of the evidence is not prejudicial to the interests of justice.

...

47A. Notice of proposal to adduce hearsay evidence

(1) Provision may be made by rules of court--

(a) specifying hearsay evidence in relation to which subsection (2) shall apply; and

(b) as to the manner in which (including the time within which) the duties imposed by that subsection shall be complied with in the cases where it does apply.

(2) A party proposing to adduce in civil proceedings hearsay evidence which falls within subsection (1)(a) shall, subject to subsections (3) and (4), give to the other party or parties to the proceedings--

(a) such notice, if any, of that fact; and

(b) on request, such particulars of or relating to the evidence,

as is reasonable and practicable in the circumstances for the purpose of enabling him or them to deal with any matters arising from its being hearsay.

(3) Subsection (2) may be excluded by agreement of the parties, and compliance with the duty to give notice may in any case be waived by the person to whom notice is required to be given.

(4) A failure to comply with subsection (2), or with rules under subsection (1)(b), shall not affect the admissibility of the evidence but may be taken into account by the court--

(a) in considering the exercise of its powers with respect to the course of proceedings and costs; and

(b) as a matter adversely affecting the weight to be given to the evidence in accordance with section 49.

48. Power to call witness for cross-examination on hearsay statement, etc.

Rules of court may provide that where a party to civil proceedings adduces hearsay evidence of a statement made by a person and does not call that person as a witness--

(a) any other party to the proceedings may, with the leave of the court, call that person as a witness and cross-examine him on the statement as if he had been called by the first-mentioned party and as if the hearsay statement were his evidence in chief;

(b) any party to the proceedings may call additional evidence to attack or support the reliability of the hearsay statement or to attack or support the reliability of that additional evidence.

49. Considerations relevant to weighing of hearsay evidence

(1) In estimating the weight, if any, to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.

(2) For the purposes of subsection (1), regard may be had, in particular, to the following--

(a) whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;

(b) whether the original statement was made contemporaneously with the occurrence or existence of the matters stated;

(c) whether the evidence involves multiple hearsay;

(d) whether any person involved had any motive to conceal or misrepresent matters;

(e) whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose;

(f) whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight;

(g) whether or not the evidence adduced by the party is consistent with any evidence previously adduced by the party."

9. Under s 46 of the Ordinance, which is the interpretation section for Part IV of the Ordinance, "hearsay"

"(a) means a statement made otherwise than by a person while giving oral evidence in the proceedings which is tendered as evidence of the matters stated;

(b) includes hearsay of whatever degree;"

10. Mr Paul Lam, for the defendants, emphasises that the Judge's decision failed to take into account relevant considerations as required by s 47A(4)(b) and paragraphs (a), (c), (d) and (f) of s 49(2) of the Ordinance. He complains that the plaintiff had not given any notice to adduce Miss Hau's evidence as hearsay evidence, contrary to s 47A(2) of the Ordinance. He also argues that the Judge wrongly took into account irrelevant considerations, namely, the accuracy of the audited accounts and records of the plaintiff and the fact that the defendants failed to cross-examine Miss Hau.

The judgment

11. In his judgment, the Judge set out the methods of assessment and concluded that the "standing charge cost basis" as enunciated by Lord Lane in Birmingham Corporation v Sowsberry [1970] RTR 84, and referred to by Hunter J in The Kowloon Motor Bus Co. (1933) Ltd v AG [1984] HKLR 404 should be adopted for assessing the damages for the loss of use of the bus. The defendants do not challenge this method of assessment, but only direct their attack on the Judge's accepting the evidence of Miss Hau on the multiplicand.

12. In this respect, the Judge said:

"Multiplicand

The items included by the Plaintiff as the multiplicand for the calculation are:

(a) depreciation - $347;

(b) insurance premium - $70

(c) overhaul charges - $948

The total amount of the multiplicand is thus$1,365.

According to the statement of Miss HAU Yat-yee, Costing Manager in the Financial Planning and Costing Department of the Plaintiff, depreciation is calculated by dividing the average original purchase price of the buses in the standby fleet by the estimated life span of the buses. This item together with the insurance premium are clearly within the ambit of the standing charge cost required for the provision of the standby fleet.

According to the statement of Miss HAU the overhaul charges are the average daily cost of compulsory overhaul for the replacement buses required for obtaining Certificate of Roadworthiness and Certificate of Fitness and costs of Minor Dock. In order that a replacement bus can be provided from the standby fleet as and when required the buses of the fleet must not only be kept in a good working conditions but must also possess all these certificates. Such charges are clearly also part of the standing charge cost.

Evidence of Witness

The Plaintiff relies on the evidence of Miss HAU and Mr LAU Tin-cheung, Senior Bus Maintenance Manager of Tuen Mun Depot of the Plaintiff, which are in form of statements under Order 38 r. 2A of the Rules of District Court. As pointed out above Miss HAU gave an account of the figures of the average daily costs of keeping a replacement bus which included the amounts of depreciation, insurance premium and costs of overhaul. Miss LAU (sic) testified that such figures were derived from the books and accounts of the Plaintiff and were true to the best of her knowledge.

...

Admissibility of Evidence

The Defendants objected to the admissibility of their evidence on the ground that they were hearsay.

Under section 47(1) of the Evidence Ordinance, Cap 8 evidence will not automatically be excluded merely because it is hearsay in nature and such evidence can only be excluded if having regard to the circumstances the court considers that there is no prejudice to interests of justice. It is not in dispute that the evidence of the two witnesses are hearsay. Miss HAU, however, stated very clearly that her evidence had been derived from the books and accounts of the company and were true to the best of her knowledge ....

The Plaintiff is the largest land carrier in Hong Kong and runs the largest fleet of buses in Hong Kong. Common sense tells us that the operation of such a large company will invariably involve a large number of personnel of different levels and a large amount of documentary records. It is not surprising that a large number of documents are required to prove the items being claimed by it.

The Plaintiff is a subsidiary of a publicly listed company. Its accounts and books are subject to auditing requirements under the law of Hong Kong. The Plaintiff is also required to make known to the public details of its operation, accounts and financial position in the annual report of its holding company. I accept on the balance of probability that its accounts, books and records are accurately kept and are truthful.

As such I do not consider that there s any justification to exclude the evidence of the two witnesses which are based on these documents. I am of the view that to do otherwise would clearly not be in the interests of justice. There is no dispute in the present case that the Bus had been damaged and it is natural that the Plaintiff must have suffered damages as a result. It is after all a question of weight to be given to such evidence by the court. The evidence of the two witnesses are therefore ruled admissible.

The defence did not cross-examine the two witnesses at all when they testified in court. It was never put to them that their evidence was inaccurate or untrue. Under such circumstances there is no reason for the court to doubt their assertion that their evidence are either within their personal knowledge or have been derived or gleaned from the books, accounts or records of the company. As pointed out above the court has accepted the accounts, books and records of the Plaintiff to be true and accurate. It must follow that there is no reason for the court to doubt the accuracy and truthfulness of the evidence of Miss HAU and Mr LAU. The evidence of Miss HAU is accepted in full by the court. The same applies to that of Mr LAU with the exception as to his opinion regarding the length of time required for the repair which I shall deal with below."

The defendants' contentions

13. The defendants' only challenge to the Judge's decision on Miss Hau's evidence is the weight that the Judge attached to the evidence. The defendants rely on s 47A(4)(b) of the Ordinance on the basis that the plaintiff had not given any notice to adduce Miss Hau's evidence as hearsay evidence and thus, the Judge should have placed no or little weight on her evidence. The defendants also argue that the plaintiff had persistently and deliberately refused to disclose the bases or documents ("the primary evidence") in support of Miss Hau's evidence and suggest that that was an attempt to prevent the court's proper evaluation of Miss Hau's evidence. The defendants also point out that there was no evidence that it would have been unreasonable or impracticable for the plaintiff to disclose the primary evidence and/or to call the makers of the primary evidence to give evidence in court, especially where Miss Hau's evidence is probably multiple hearsay.

14. Indeed, in the pre-trial stage of correspondence between the parties' solicitors, the defendants had, on a number of occasions, sought documents from the plaintiff regarding the assessment of damages. The plaintiff refused, not because the documents providing primary information on the calculation of the multiplicand were not known, but because they were voluminous and would take a long time to make available. In a letter dated 7 June 2002 from the plaintiff's solicitors to the defendants' solicitors, it is stated as follows:-

" We are instructed by our client that there are undisclosed documents which would support their claim on damages for daily loss of use. They include:-

1. Bus purchase agreements;

2. Bus assembly contractor agreements;

3. Insurance policies;

4. Computer reports of service labour cost of individual buses;

5. Records of spare parts and materials for consumption of individual buses; and

6. Costing analysis and workings for apportioning the overheads into overhaul job and bus groups.

We are instructed that 30 replacement buses were in service to replace the damaged bus no. GJ 4963 during the loss of use period from 27th May 1999 to 26th October 1999. That means, there are 30 sets of the aforesaid documents to prove the calculations of our client's daily loss of use. Each set of those documents would fill up a 3-inch box file.

Apart from that, details on workshop overheads such as rent, rates, electricity, water depreciation of depot building and depreciation of plant and machinery are shown in the general ledger of our client. We are told that the general ledger for the relevant period consists of about 8,500 pages.

We are further instructed that since the oldest replacement bus was purchased 13 years ago, it would take considerable time for them to retrieve those records. Moreover, part of the records under items (4) and (5) are in intangible form. It would also take time for our client to print out those records. According to our client's estimation, it would take not less than 1 month for them to supply all the aforesaid documents.

Further, we are instructed that the requested documents, in particular, the ledger of our client's bus company, are commercially sensitive.

In view of matters aforesaid, our client would resist any application for disclosure of these documents on ground of oppression.

We are further instructed to point out that in the past, in relation to our client's claim for loss of use, the Court has invariably accepted the oral evidence of our client's costs accountant in supplement of the loss of use statement."

15. At the interlocutory stage, the defendants had made three applications to the District Court respectively for further and better particulars of the damages claimed by the plaintiff, specific discovery of documents and interrogatories. They resulted in three orders made by that court respectively on 12 April 2002, 30 May 2002 and 14 June 2002, dismissing the defendants' applications. These attempts of the defendants were for the purpose of obtaining evidence to check or to attack the damages claimed by the plaintiff, but all of them failed. Although the defendants say that all of their applications failed purely on technical grounds, and that might well have been so, they did not appeal, and instead they chose not to cross-examine the plaintiff's witnesses when they were giving evidence before the Judge and have now chosen to appeal the Judge's assessment of the multiplicand. This appeal is substantially based on the lack of primary documents in support of the figures mentioned in the evidence of Miss Hau. The absence of the primary documents was well known to the defendants because of its failure to obtain them at the interlocutory stage. What they are asserting before us is that in the absence of such documentation, the Judge could never have accepted the evidence of Miss Hau because it is hearsay, albeit admissible.

16. Mr Lam refers us to the case of Aqua-Leisure Industries Inc & another v Aqua Splash Ltd [2003] 1 HKLRD 142, in support of his contention that the Judge was wrong to have admitted hearsay, including multiple hearsay, where the source of information was not identified. That case involved contempt of court, and this Court (differently constituted) held that the standard of proof involved was one beyond reasonable doubt. It went on to examine the evidence in support of the application for committal for contempt and concluded that the evidence was hearsay and multiple hearsay. At page 157G, it held that

"the apparent failure of the judge to take sections 48 and 49 [of the Ordinance] into account when evaluating the evidence would warrant the setting aside of the judgment below."

17. The present case is very different. First, it is not a case on contempt of court and the standard of proof is on the balance of probabilities and not beyond a reasonable doubt. Secondly, the Judge had apparently taken into account the various considerations under ss 47A and 49 of the Evidence Ordinance. The Judge was fully aware that the evidence before him was hearsay. Indeed in the defendants' final written submissions to him, the defendants had specifically directed his attention to the evidence of Miss Hau being hearsay without the business records of the plaintiff adduced in support. In those written submissions, the defendants referred to s 47A(4) of the Ordinance and asked the court to "take that into account in considering the exercise of its powers with respect of proceedings and costs and as a matter adversely affecting the weight to be given to the evidence in accordance with section 49 of the Evidence Ordinance." And that, in my view, was what the Judge did. The plaintiff's solicitors' letter dated 7 June 2002 was before the Judge, and that dealt with the reasonableness and practicability for the plaintiff not to produce the primary documents and its general ledger, and that must also relate to the reasonableness and practicability of the plaintiff not to call the makers of these primary documents: these are considerations under s 49(2)(a). In his judgment, the judge specifically mentioned that

"Miss HAU, however, stated very clearly that her evidence had been derived from the books and accounts of the company and were to the best of her knowledge";

"The Plaintiff is the largest land carrier in Hong Kong and runs the largest fleet of buses in Hong Kong. Common sense tells us that the operation of such a large company will invariably involve a large number of personnel of different levels and a large amount of documentary records. It is not surprising that a large number of documents are required to prove the items being claimed by it";

"The Plaintiff is a subsidiary of a publicly listed company. Its accounts and books are subject to auditing requirements under the law of Hong Kong. The Plaintiff is also required to make known to the public details of its operation, accounts and financial position in the annual report of its holding company. I accept on the balance of probability that its accounts, books and records are accurately kept and are truthful."

18. All the above passages in the judgment clearly demonstrate the Judge had taken into consideration the factors that he may have regard to under s 49(2)(c), (d), (e) and (f). The challenge that the Judge failed to comply with s 49 of the Ordinance has no merit.

19. Mr Lam also contends that the contents of the letter of 7 June 2002 show clearly that the plaintiff attempted to prevent the court from evaluating the weight of Miss Hau's evidence because the plaintiff had refused to produce the primary evidence. Apparently, the Judge did not think so. He referred to the plaintiff being the largest land carrier and with the largest fleet of public omnibuses in Hong Kong and also to the point that operation of such a large company will invariably involve a large number of personnel of different levels and a large amount of documentary records. He obviously appreciated the difficulty that the plaintiff would face if it be required to produce a large amount of documents to prove the multiplicand, and was satisfied that its failure to do so was not an attempt to prevent the proper evaluation of the weight of Miss Hau's evidence.

20. The defendants' argument that the Judge had erroneously taken into account irrelevant considerations also has no substance whatsoever. It is contended that in the absence of any evidence about the relationship between Miss Hau's evidence of the items added up together to form the multiplicand on the one hand and the primary documents in the form of the audited accounts and records (which were found by the Judge to be accurately kept and truthful) on the other hand, the Judge was not justified to find that Miss Hau's evidence of the items was equally accurate and reliable. This is tantamount to challenging that the documents enumerated in the letter dated 7 June 2002, namely, bus purchase agreements, bus assembly contractor agreements, insurance policies, computer reports of service labour cost of individual buses, records of spare parts and materials for consumption of individual buses, and costing analysis and workings for apportioning the overheads into overhaul job and bus groups, had any relationship with the audited accounts and records of the plaintiff. This argument cannot bear any examination, for such primary documents must be related to the audited accounts and records of the plaintiff, and without such primary documents being open to examination in the audit, the accounts of the plaintiff cannot be called audited accounts, and moreover, such documents must form part of the records of the plaintiff.

21. The defendants also contend that their failure to cross-examine Miss Hau does not connote any acceptance of the truth or accuracy of her evidence. They say that they were unable to conduct any meaningful cross-examination in the circumstances. Despite the fact that Miss Hau's evidence is derived from the accounts and records of the plaintiff, and most probably double hearsay in nature, it cannot be said that any cross-examination of Miss Hau would have been a meaningless or futile exercise. Miss Hau could have been asked based on what documents or information did she arrive at the figures forming the multiplicand. She could have been cross-examined on the reliability of such documents and records and whether there was any possibility of them being inaccurate or untruthful. Her evidence can be tested in many other ways. Mr Lam argues that the defendants were under no duty to give Miss Hau the chance to "expand her evidence in the witness box". That is so, but it is also true that if a witness is not asked any question at all in cross-examination, the court is fully entitled to accept his evidence as being unchallenged. If it was the defendants' case that the information based on which Miss Hau gave her evidence relating to the multiplicand was either untrue or inaccurate, it would have been incumbent upon them to make an express challenge to Miss Hau during cross-examination.

22. Mr Lam draws our attention to Phipson on Evidence, 15th Ed, para 11-26 which states:

"... If he [the cross-examining counsel] asks no questions he will generally be taken to accept the witness's account and will not be permitted to attack it in his final speech, nor will he be allowed in that speech to put forward explanations where he has failed to cross-examine relevant witnesses on the point. ...

Failure to cross-examine will not, however, always amount to acceptance of the witness's testimony, for example if the witness has had notice to the contrary beforehand, or the story itself is of an incredible or romancing character, or the abstention arises from motives of delicacy in the cross-examination of children, or to save time by not putting the same matters to several witnesses. ..."

23. Mr Lam claims that the defendants' situation was within the exception to the general rule because in the interlocutory stage, the defendants had made known to the plaintiff that they wanted the primary documentation in support of the figures forming the multiplicand and that the figures were merely hearsay.

24. In my judgment, the defendants were not within the claimed exception to the general rule. Their requests for the primary documentation at the interlocutory stage and their objection before the Judge to the figures being hearsay might have only amounted to their not being satisfied with the hearsay nature of the figures and they wanted the plaintiff to produce primary documents in support, but this is far from giving notice to the plaintiff, let alone Miss Hau, that her evidence is unreliable, inaccurate or untruthful. There is no substance in this argument.

Conclusion

25. For the reasons given above, I would dismiss the appeal with an order nisi that the defendants pay the costs of the appeal to the plaintiff.

Hon Yuen JA:

26. I agree.

Hon Stone J:

27. I agree with the judgment of Woo JA.

28. In my view the approach of the learned Deputy Judge below was entirely appropriate, and he was clearly justified in reaching the decision that he did upon the unchallenged evidence before him.

29. For my part I harbour considerable doubt that the situation such as arose in this case in terms of the evidence of Miss Hau is the type of situation for which section 49(2)(f) of the Evidence Ordinance, Cap. 8 was enacted to deal. In any event, I can discern no "circumstances" surrounding the evidence as given which, in the language of the sub-section, could be "such as to suggest an attempt to prevent proper evaluation" of the weight of the hearsay evidence adduced, as Mr Lam submitted. In fact, in the light of the background circumstances in this case - wherein the existence of discoverable documents was freely acknowledged in correspondence - I should have thought that the situation was precisely the opposite.

30. This appeal manifestly had no merit. In my view its dismissal should be attended by an award of costs against the appellant upon a common fund basis.

Hon Woo JA:

31. This Court dismisses the appeal and makes an order nisi that the defendants pay the costs of the appeal to the plaintiff.