HO PANG LIN AND ANOTHER v. HO SHUI ON AND ANOTHER

1993 No. A4450

HEADNOTE

Fatal accident - award for loss of accumulation of wealth where no identifiable savings pattern - Chan Yuk Ying v. Chan Cheung Wan 1988 No. A7911 and Chan Sim Lan v. Shun Shing Engineering Co. 1992 No. A749 considered - global award appropriate if accumulation probable but impossible to quantify on the evidence.

Dependency award - English practice adopted of a conventional percentage of income as representing an overall family dependency.

1993 No. A4450

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an action by the administrators of the deceased for the benefit of his dependants under the Fatal Accidents Ordinance (Cap. 22) and for the benefit of his estate under the Law Amendment and Reform (Consolidation) Ordinance (Cap. 23). The deceased died as a result of an accident, which occurred on 9th March 1992 and which involved a motor vehicle driven by the first defendant and owned by the 2nd defendant. Liability was conceded at the commencement of the hearing, which continued for the purpose of assessing quantum.

2. The deceased was a man of 40 at the date of death and was a bus driver employed by Leung Kee Transportation Co. Ltd., of which he was also a 20% shareholder. Exhibit P.1, the annual return of the company for 1992, shows in his name 20,000 paid up shares of $1.00 each out of a nominal capital of $100,000.

3. The wife of the deceased Madam Ho Pang Lin, gave evidence that she had four children and that her husband was the sole breadwinner during the marriage. Her mother-in-law also lives with her in a household now totalling six. These are all particularised as dependants and their personal details at the date of judgment are:

The widow - aged 38.
Wong Ka Po, son - aged 21.
Wong Ka Ming, son - aged 18.
Wong Ka Ki, son - aged 15.
Wong Ka Ying, daughter - aged 10.
Hui Yuk Yip, deceased's mother - aged 66.

4. Madam Ho said that her eldest son was still a student and was returning to school to do his 'A' levels in September. Her second and third sons will also be returning to school in September, as will her daughter, who is still in Primary School. She said that her husband used to give her housekeeping of $6,500 per month, which was all used. She listed the monthly expenditure of the family.

5. A radically amended schedule of special damages was tendered at the start of the hearing. This was allowed with a half-day adjournment for defence counsel's consideration. The schedule was further revised during the hearing to reflect an amendment to funeral expenses, partly in respect of a miscalculation and partly in respect of an account for $13,000 not previously included.

6. Miss Pinto for the Defendants was initially prepared to agree funeral expenses, but understandably declined to extend her agreement to the revised figures. I am however satisfied that the revised figures reflect funeral expenditure as recalculated, including the sum of $13,000 represented in the receipt produced as Exhibit P.2. The sum of $71,120 is therefore awarded under this head.

7. Miss Pinto has also agreed hospital expenses and the standard bereavement award, and these sums of $306 and $70,000 respectively are awarded.

8. The deceased's monthly earnings at the date of the accident are agreed at $8,183.33, as are his earnings notionally upgraded to the date of trial at $10,127, and the median pre-trial earnings calculated therefrom at $9,155.17. Miss Lau for the Plaintiffs uses these figures as her starting point in arguing for an award under LARCO for loss of accumulation of wealth, however Miss Pinto disputes that such an award should be made.

9. Judges have recently disagreed on when an award for loss of accumulation of wealth should be made. Nazareth J. in Chan Yuk Ying etc, v. Chan Cheung Wan, 1988 No. 7911 applied the admittedly arbitrary factor of 10% of net earnings in making an award under that head. He relied on the deceased's "sober and frugal habits", and coupled this with "the natural thrift of the inhabitants of Hong Kong" in concluding that an award should be made even when the evidence failed to disclose a pattern of savings. He reasoned that the deceased would have begun to save as soon as he was able, which would not have been long as his particular occupation was receiving increased remuneration.

10. Kaplan J. in Chan Sim Lan v. Shun Shing Engineering Co. and others 1992 No. A747, disagreed with this approach in finding no basis in S.20(2)(b)(iii) of LARCO for the award of a conventional or notional sum. The learned judge also argued that there is anyway a difference between the accumulation of savings during a working life and the continued existence of those savings at the notional date of natural death. Accumulated savings, he reasoned, are often spent in the years between retirement and death, leaving little for the estate.

11. In addressing these two arguments, Miss Pinto also drew my attention to a decision of my own in Wai Kang Kwan v. Wong Wing Hon and Link Charm Trading Co. Ltd. 1989 No. A1803. In that case I declined to make an award under this head on the death of a 17 year old unmarried girl who had relatively recently left school. I found that any assumption of accumulated wealth would be speculative and would bear no relation to the proven realities of her situation.

12. The first and most obvious point is that each case is decided on its own facts. Secondly, I respectfully agree with Kaplan J. that a notional or conventional award should not be made. There is no basis in LARCO for doing so.

13. The provisions of the relevant subsection stipulate that damages for loss of property shall not be awarded -

"Except insofar as the court is satisfied that, but for the act or omission that gave rise to the cause of action, the deceased would have achieved an accumulation of wealth by the time he would otherwise have died, in which case damages may be awarded in respect of the loss of that wealth."

So the court must be "satisfied" that the deceased would have accumulated wealth by the time of his natural death. The court's conclusion to this effect must be based on something in the facts which persuade it to that conclusion. The court must find a balance of probabilities that there would have been an accumulation of wealth; it cannot draw the foundation for this finding from a total absence of anything in the evidence to point to it.

14. It has been usual in reaching this finding to rely on an established savings pattern and Kaplan J. in Chan Sim Lan found that the complete lack of any pattern of savings prevented him from making an award. Nazareth J. in Chan Yuk Ying was evidently enlarging the basis for finding a probable accumulation by including factors beyond the savings pattern. Addressing this point he says:

"While I accept that it is upon a pattern of savings that a loss of wealth award might ordinarily be made, in my view it cannot be right to deny an award in the absence of such a pattern where the evidence establishes a probability that savings would have been made, if such savings can be assessed on some other, possibly even minimal basis."

15. Nazareth J. is therefore considering the situation where the court will find from the lifestyle of the Plaintiff that he is likely to have made savings by the time of his natural death. The uncertainty relates not to the likelihood of savings being made, but to the quantum of those savings. It is this situation which led the learned judge to the 10% approach now urged by Miss Lau.

16. I find that I am in sympathy with the approach of Nazareth J. when he infers his probability of accumulation from other factors before him in the absence of a savings pattern. I have less sympathy with the 10% approach. The statute imposes no duty on the court to find from the evidence a savings pattern before it makes an award. The usefulness of a savings pattern lies not only in proving accumulation, but also in establishing the quantum of an award once a probability of accumulation has been found. It will assist in establishing the probability itself, but I suggest that it is not essential to it. Other factors may show that, on the balance of probabilities, wealth would have been accumulated by the date of natural death.

17. Those other factors were addressed by Nazareth J. in the passage I have just quoted. They are the deceased's lifestyle, his thrift, his age at death as older people have more settled lifestyles, his family circumstances and how he is coping with them financially, and his employment situation and prospects. If such factors point to a probability of accumulation, even without an established savings pattern, then I consider that an award should be made. The standard of proof is the balance of probabilities and at that level it is not speculation to conclude that a particular person is, or is not, likely to accumulate wealth. There is of course the situation when the court will be unable to find a likelihood one way or the other, and this I shall address shortly.

18. I suggest that there are three situations a court will have to consider on the issue of accumulation of wealth. Firstly and most simply, there is the deceased with the obvious savings pattern. This should be applied in quantifying the accumulation and perhaps upgraded for a likely increase, for example when the future departure of children from the household would increase the disposable income.

19. The second category is where there is no savings pattern and no indication whatsoever from the lifestyle of the deceased whether or not accumulation was likely. This situation would usually be found when the deceased was a young person whose lifestyle had not yet crystallized into a recognizable pattern. This was precisely the position I addressed in Wai Kang Kwan in declining to make an accumulation award to the estate of a young girl who died at 17. Not only did the evidence fail to disclose a savings pattern, but there was no indication that the deceased either was or was not likely to have accumulated wealth. In those circumstances an award could only have been speculative.

20. The third category of situation is that of the deceased without any identifiable savings pattern, but whose habits and lifestyle indicate a probability that he would accumulate wealth. As always, the court must avoid speculation. However, if thrift, frugality, responsibility and perhaps good employment prospects clearly emerge from the evidence then an award should be made even if the contemporary income is fully utilised, for example on maintaining a young family.

21. The difficulty in such a situation lies not in deciding that wealth would have been accumulated, but in quantifying the damages for the loss of that wealth. It was this dilemma which Nazareth J. addressed in assuming that a notional 10% of net income would be devoted to savings. I confess I find this approach unattractive, as it confers on the award a spurious mathematical validity by assuming a savings percentage calculated at a time when the evidence shows that no savings were made. It is of course a device and I think unnecessary.

22. Compensation for personal injuries and death is an area of the law replete with artificiality. This is necessarily so when assumptions are extrapolated from the present and projected into an unknown and often distant future. However the artificiality should be minimised, particularly when it conflicts with the evidence.

23. In this third situation, when the court is satisfied that accumulation would have occurred but can find no evidential basis to quantify it, I suggest that a global award is appropriate. Compensation in this form is frequently awarded in personal injuries cases for loss of earning capacity. Loss of future earnings can usually be calculated mathematically, however loss of earning capacity reflects a Plaintiff's diminished value in the labour market and is not therefore susceptible to calculation. Nonetheless, it is recognised for compensation and will attract a global award.

24. Similarly, I suggest, should the court treat an award for loss of accumulation of wealth when it is satisfied that there would have been accumulation, but cannot quantify it mathematically. This approach would also comprehend Kaplan J.'s point that savings at retirement would often have been spent, and hence be unavailable to the estate, by the notional date of natural death. This would be one factor to consider in regard to the lifestyle and age of the deceased in reducing the global award or in declining to make one at all.

25. Relating this discussion to the circumstances of the present deceased, he was a man with four children, a wife and an elderly mother to support. With those responsibilities, understandably he had no savings pattern. He was however a man whose lifestyle was settled, who exhibited patterns of thrift and responsibility and who appeared to have good prospects in his business. He was a part-owner of the bus company for whom he worked and the company was making a small profit on top of heavy outgoings in wages; see page 26 of the bundle where a profit is disclosed although set off against earlier losses carried forward.

26. In all these circumstances I find it more probable than not that this man would have accumulated wealth by his retirement. As a part-owner of his employer he could have worked to a later age than a person with a fixed retirement date. This would further enhance his accumulation and at the same time reduce his expenditure between retirement and death. I therefore find it also probable that the deceased would have retained an accumulation of wealth by the date of his death from natural causes.

27. To compensate for the loss of this probable accumulation I shall make a global award. This will necessarily have an arbitrary element, but no more so than the 10% factor adopted in other cases. The figure should be on the conservative side and related so far as possible to the factors of the deceased's lifestyle already discussed. Bearing all this in mind I award $100,000 for loss of accumulation of wealth.

28. I turn to the dependency claim under the Fatal Accidents Ordinance. Miss Lau for the Plaintiffs has urged an approach appearing in the English authorities, but not so far in Hong Kong, whereunder conventional percentages of income are applied in assessing overall dependency. The apportionment of the resulting award is made after this calculation and does not form part of it.

29. The reasoning behind this approach is that a family is a dependent unit and its dependency should therefore be assessed as a whole. The rationale for this is lucidly expressed by O'Connor L.J. at page 565 in Harris v. Empress Motors Ltd. [1983] 3 All E.R. in these words:

"In the course of time the courts have worked out a simple solution to the similar problem of calculating the net dependency under the Fatal Accidents Acts in cases where the dependents are wife and children. In times past the calculation called for a tedious inquiry into how much housekeeping money was paid to the wife, who paid how much for the children's shoes etc. This has all been swept away and the modern practice is to deduct a percentage from the net income figure to represent what the deceased would have spent exclusively on himself. The percentages have become conventional in the sense that they are used unless there is striking evidence to make the conventional figure inappropriate because there is no departure from the principle that each case must be decided on its own facts. Where the family unit was husband and wife the conventional figure is 33% and the rationale of this is that broadly speaking the net income was spent as to one-third for the benefit of each and one- third for their joint benefit. Clothing is an example of several benefit, rent an example of joint benefit. No deduction is made in respect of the joint portion because one cannot buy or drive half a motor car. Part of the net income may be spent for the benefit of neither husband nor wife. If the facts be, for example, that out of a net income of ?8,000 per annum the deceased was paying ?2,000 to a charity the percentage would be applied to ?6,000 and not o 8,000. Where there are children the deduction falls to 25%, as was the agreed figure in the Harris case."

30. McGregor on damages also illustrates the principle in the following passage at paragraph 1559 of the fifteenth edition:-

"(a) Amount of annual dependency: the basic factor for the multiplicand. The starting point in the calculation has for long been the amount earned by the deceased before his death; from this has been deducted that portion of his earnings which was not used for the support of his dependants but was spent exclusively on himself. Today it has become more common to express the annual dependency as a percentage of the deceased's annual earnings or as a fraction of them. This has become, as a conventional figure, 66 2/3 per cent. of earnings for the dependency of a widow alone, 75 per cent. of earnings for a widow and children, but there is room for variation if the particular circumstances justify."

31. This approach, apart from its attractive simplicity, also serves to eliminate a common inequity. This occurs when a deceased husband has given the wife a monthly sum for the whole family and the wife, through maternal affection and frugality, has minimised the expenditure on herself to the benefit of the children. It is patently unjust that the wife's dependency should be fixed to her disadvantage by her own conscientious housekeeping in favour of her children. A wife of lesser calibre, who was self-indulgent of the monthly allowance at the expense of her children, would receive the greater compensation.

32. In the present case the wife was given a monthly lump sum and spent very little on herself. It is entirely inappropriate that this thrift should receive the ill reward of a small dependency. This is the more so when the probabilities are that the wife would have spent proportionately more on herself as the children progressively left the household.

33. However this approach should not be allowed to work an injustice against the Defendants. The danger lies in the application of an overall multiplier where there are, as here, several dependants at different stages of their dependency. The widow and the daughter, aged 7 at the accident, would attract relatively large multipliers, whereas the elderly mother and the eldest son comparatively small ones. The award would be excessive and unjust to the Defendants if the widow's multiplier were applied to the whole dependency. To some extent this may be counterbalanced by the reduced percentage of notional earnings (67% as opposed to 75%) conventionally applied when the widow is the only remaining dependant. This may still work unfairly however when the household is a large one with several dependents of widely ranging ages who would, on an individual basis, attract varying multipliers.

34. Bearing in mind that we are considering an overall dependency I find that the only fair approach is to apply an average multiplier. This will also dispense with the need to reduce the multiplicand to 67% of income after the children would notionally have left home. The averaging of the multiplier will itself cover this factor.

35. I accept Miss Lau's submission that the basic multiplier should be 12. In the circumstances of this case however, this only applies to the widow. Bearing in mind the circumstances and ages of all the dependants I find an average multiplier of nine to be appropriate.

36. Applying this formula to the conventional 75% of notional median earnings, the pre-trial dependency loss would therefore be -

$9,155.17 × 28.5 months × 75% = $195,691.76.

For the post-trial period, and considering the notional income at trial, the loss would be -

$10,127 × (108 - 28.5 months) × 75% = $603,822.37

The total of these figures is $799,514.13, which is awarded for loss of dependency under the Fatal Accidents Ordinance.

37. From this sum the Employees Compensation award of $484,600 falls to be deducted and the apportionment will relate to the balance of $314,914.13. I bear in mind that the widow is responsible for her children and already has the Employees Compensation award to provide for some of their needs. She also has the award for loss of accumulation of wealth. In the circumstances I make the following apportionment -

Wong Ka Po Wong Ka Ming Wong Ka Ki Wong Ka Ying The deceased's mother The widow, the balance of The total award is therefore -

- $ 20,000 - $ 35,000 - $ 55,000 - $100,000 - $ 50,000 - $ 54,914.13

LARCO

Funeral Expenses Hospital Expenses Loss of accumulation of wealth

$71,120 306 100,000

FAO

Bereavement Loss of dependency (after deduction of$484,600 EC award)

70,000.00 314,914.13

38. There will be interest on the special damages at the rate of 4.75% from the date of the accident to the date of judgment. In view of the need for an adjournment at the start of this hearing, I will hear counsel as to costs.