THE KOWLOON MOTOR BUS CO (1933) LTD v. K. K. CARGO SYSTEMS (HK) LTD AND ANOTHER

DCCJ 7794/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 7794 OF 2001

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JUDGMENT

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Background

1. The Plaintiff was at the material time the owner of a public omnibus registration number GJ 4963 ("the Bus"). On 27 May 1999 an accident occurred in which the Bus was damaged by a medium goods vehicle registration number FF 3851 owned by the First Defendant and driven by the Second Defendant. Liability is admitted by the Defendants and only the assessment of damages is in issue.

Claims of the Plaintiff

2. The Plaintiff claims:-

(a) cost of repair to the bus - $296,595.68

(b) loss of use of the bus for 153 days - $208,845

(c) survey charges - $700

(d) interests

3. The special damages of cost of repair are agreed by the parties at $265,773.4. The survey charges of $700 is also agreed. The only dispute between the parties is the general damages for loss of use of the Bus.

Damages for Loss of Use

4. During the time the Bus was under repair it was replaced by a bus drawn from a standby fleet of buses maintained by the Plaintiff. Consequently, the Plaintiff suffered no loss of income through the loss of use of the Bus. The damages the Plaintiff claiming for the loss of use of the Bus is based on the average daily costs of maintaining this fleet of buses multiplied by the number of days the use of the Bus was lost to the Plaintiff.

5. Claiming damages in such a manner was recognised by the English House of Lords as early as in 1897 in the case of The Greta Holme [1897] AC 596 where it was held that a wrongdoer who damaged a dredger of the plaintiff was required to contribute to the loss of interest on the capital sum tied up in the dredger during the time the dredger was out of commission but replaced by another one from the standby facility.

Hong Kong Situation

6. The case was cited with approval in the local case of The Kowloon Motor Bus Co. (1933) Ltd. v A.G. [1984] HKLR 404 in which Hunter J., as he then was, said:-

Now in those circumstances if this bus had simply been damaged and had in fact been repaired, and replaced on the road by a standby bus during the period of time those repairs took place, there would be no doubt on the authorities; first that the plaintiffs would be entitled to a sum by way of general damages, measured by the cost of the facility and secondly that that cost would be measured over the period actually taken by the repairs. That principle was laid down by the House of Lords in two cases at the turn of the century. The first is The Greta Holme [1897] AC 596 and the second, The Mediana [1900] AC 113.

7. Although cases like The Greta Holme and The Mediana concerned sea carriers, Hunter J. was of the view that the same principle should apply to land carriers. This follows that Plaintiff in the present case is entitled to debit the wrongdoer with the cost of the standby facility

Method of Assessment

8. After reviewing the cases Hunter J. concluded that there are 3 methods by which the amount of damages can be calculated. The first one is the total amount of interest on capital sum employed to maintain the standby facility plus depreciation.

9. The second method is the one used in the case of The Marpessa [1907] AC 241 and is by way of a working costs computation which is the daily costs of maintaining and working the replacement bus plus depreciation while the bus is in operation.

10. The third method is that enunciated by Lord Lane in Birmingham Corporation v Sowsberry [1970] RTR 84. It rests on a standing charge cost basis which in the word of Lord Lane "includes no running charge but does include a sum for expenses on capital".

11. Hunter J. preferred the third method to the second one but in the case of The Kowloon Motor Bus Co. (1933) Ltd. v A.G. he chose to award damages in accordance with the first method which is based on interest on capital and depreciation. I share the view of Deputy Judge Bhawaney in the case of Kowloon Motor Bus Co. (1933) Ltd. v Yick Kwok Keung [1991] 2 HKC632 that this was largely because there was no clear evidence what the standing cost charges were in that case and Hunter J. had chosen the first method in light of the evidence available. Hunter J. in fact made it abundantly clear that he would have chosen the third method if he had had more accurate figure for the standing cost charge calculation. He found justification for his decision by saying that due to the rise in the interest rate the result produced by the two methods would not produce very different figures.

Standing Charge Cost

12. The Plaintiff in the present case is asking the court to adopt the standing charge cost basis for the calculation of the damages for the loss of use of the Bus. This approach basically consists of a multiplicand which is the average daily standing charge cost in the provision of the replacement bus and a multiplier which is the number of days the damaged bus is put off the road for repair. Taking into consideration the reasoning of Hunter J. and keeping in line with the authorities I am of the view that this method is to be preferred and will be adopted for the present case.

Multiplicand

13. 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.

14. 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.

15. 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 Witnesses

16. 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 testified that such figures were derived from the books and accounts of the Plaintiff and were true to the best of her knowledge.

17. Mr LAU gave an account of the repair work carried out to the Bus after the accident. According to him the length of time the Bus was off-road for the purpose of repair was 153 days which he opined to be reasonable. Mr LAU also stated that the evidence he gave were within his personal knowledge or gleaned by him from the records of the company.

Admissibility of Evidence

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

19. 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 while Mr LAU stated that his evidence was either within his personal knowledge or gleaned from the records of the company.

20. 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.

21. 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.

22. As such I do not consider that there is 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.

23. 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 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.

Multiplier

24. According to Mr LAU the Bus was off-road for 153 days for the purpose of repair. Mr LAU also testified that basing on his experience as senior manager of maintenance the time taken for the repair were no more than necessary. Although he was not cross-examined by the defence at all when he was in the witness box this piece of evidence represents his personal opinion which the court has much reservation about.

25. The Plaintiff is certainly under an obligation to mitigate its loss. It must carry out the repair within a reasonable time after the accident and must not take a longer period than necessary to complete the work.

26. According to a letter of the vehicle surveyor included in page 130 of the bundle of documents the final labour cost for the repair of Bus was assessed at $150,195 which was 589 hours of labour at an hourly rate of $255. In the vehicle repair report submitted by the Plaintiff to the vehicle surveyor for assessment the same hourly rate was also used. The amount of labour cost in that report was adjusted by the vehicle surveyor to become $150,000 which is basically the same as the assessment in the letter. In order not to prolong the time required for the repair it is fair and reasonable to provide 2 workers for the job. 589 hours of labour come to approximately 42 working days for 2 workers to work 7 hours a day. The court chooses 7 hours of work a day in order to give allowance of one hour meal break for the workers.

27. The court accepts the assessment of the vehicle surveyor to be a reasonable one. Even if we allow the workers to work 5 days a week, keeping the Bus off-road for 153 days is totally unreasonable and unacceptable. Giving allowance of 20 days for the time required to survey the damages to the Bus and to deploy manpower for the repair work and giving allowance of 2 rest days a week for the workers the court considers that the reasonable length of off-road period for the Bus to undergo repair is 74 days. The multiplier allowed by the court is thus 74 days.

28. The damages for the loss of use of the Bus are $1,365 multiplied by 74 which is $101,010 to which the two Defendants are jointly and severally liable. Judgment is entered for the Plaintiff in the sum of $101,010 with interest at half of the judgment rate from the date of the accident to today.

Costs

29. There will be an order nisi of costs in favour of the Plaintiff in this action, such costs to be taxed if not agreed. Unless any party applies to vary this order nisi within 14 days from the date of this judgment, the same will become absolute on the expiry thereof.