WONG YUK KIN v. YIP HING KEUNG AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. On 6th September 1982 the plaintiff Wong Yuk Kin, was the front seat passenger in a goods van driven by Tam Kiu Chu and travelling in Tuen Mun Road towards Tuen Mun. In circumstances which gave Mr Tam no chance of avoiding it, another goods van driven by the 1st defendant and owned by the 2nd defendant performed a U-turn directly in front of the plaintiff's vehicle. The collision which resulted was clearly caused by the 1st defendant's negligence, I think it unfortunate that this was not admitted, much earlier, as it might have concentrated attention upon the real issue in this case which is quantum.

Pain suffering and loss of amenity

2. The front near side quarter of the plaintiff's van took the full force of and was driven back by the impact. This caused the crushing and major injuries to both the plaintiff's legs: a compound fracture dislocation of the right ankle and a compound comminuted fracture of the left tibia and fibula. In addition he was probably rendered unconscious: lost three incisor teeth: and suffered severe lacerations especially to his legs.

3. The leg injuries have needed extensive treatment. The repair of the right ankle was comparatively straight forward. The fracture was reduced and fixed with a plate and screws and the ankle plastered. The fracture particularly of the left tibia and of the fibula produced "considerable non-viable bone and soft tissue (which) had to be removed" and required the fixing of an external frame support. The missing bone was later replaced by a vascularised ilia bone graft, the donor site being the right pelvis. The restoration of the skin surface took no less than three skin grafting operations, the donor site being the right thigh. These grafting operations left their inevitable scars and scar tissue. On 20th December the plaintiff was discharged from Princess Margaret Hospital after some 3½ months on two crutches with the external frame still in place. The following month he was readmitted for about ten days for procedures to check the viability of the bone graft.

4. He then had two further operations and periods of impatient treatment in Caritas Medical Centre. The first lasted some three weeks and was for the removal of the external support which was replaced by plaster. The second for about five days was for the removal of screws. Outpatient treatment followed for several months. He was first able to start walking with two sticks some twelve months after the accident and graduated to one by the end of 1983. As recently as December 1986 he was readmitted to Prince of Wales Hospital for treatment for what is described as "chronic ostelmyelitis" in the injured left leg.

5. The presentation of the medical evidence left something to be desired. I had a typically clear report from Dr. Wedderburn dated 23rd March 1984, and a nearly contemporaneous report of Dr. York Chow of 16th February 1984. There was no up-to-date report, and Dr. Chow, who gave evidence, had the opportunity only of a cursory examination of the plaintiff literally at the door of the Court. He had an equally brief opportunity of considering Dr. Wedderburn's report which was then shown to him for the first time, and of considering and reconciling their apparent different view points in percentage terms. But these differences were, I think, more apparent than real. The doctors did not really differ in their description of the effects of these injuries upon the plaintiff and the prognosis.

6. Elaborate treatment has saved the plaintiff from a below the knee amputation with which he was threatened. But the present limb is only marginally better, functionally, than a prosthesis. There is 1¼ inches shortening: bowing and the disfiguration: permanent weakness indicated by material muscle wastage: pain: limitation of movement and signs of early atrophic changes in the ankle. By comparison the right, and now the preferred leg is much stronger. But there is restricted movement in the ankle where osteoarthritic degenerative changes have already started and can only get worse.

7. The overall effect is that the plaintiffs mobility and agility is markedly reduced. He walks slowly with the aid of a stick and with an obvious limb. His effective range is of the order of half a mile None of his former athletic pursuits are open and his capacity for play with his children is much reduced. He could only contemplate sedentary employment.

8. In their intiial submissions counsel spoke substantially with the same voice. I was invited to conclude that the injuries fell within the "serious" description in Lee Ting Lam ⁽¹⁾, and at the upper end of the $60,000/$80,000 bracket: that the figure of $80,000 should be uplifted by just over 60% to allow for inflation i.e. to about $130,000: and that some $5,000 should be added in respect of the teeth.

9. I expressed serious misgivings about this type of approach in a decision last April in Chan Yin-pang⁽²⁾. Coincidentally l then awarded $135,000 under this head for injuries more grievous than those suffered by this plaintiff, and invited the Court of Appeal to review and reconsider the whole position. Subsequent events have confirmed these reservations and exposed my timidity and the inadequacy of my then award. An appeal against my decision was "bought off" by a further payment in excess of $100,000. Reconsideration of this whole question is now very necessary. As the Court of Appeal can readily be denied the opportunity, it has been pointed out to me that the impetus may have to come from a trial judge.

10. In this case counsel for the plaintiff invited me to do no more than adjust the Lee Ting Lam scale by some percentage for wage increases since 1982. I cannot accept this. Any wages adjustment must, I think, reflect increases at least since 1979. Counsel for the defendant invited me not to rock the boat or to disturb the simplistic "convenience" of the current practice. For the reasons I expressed in Chan Yin-pang I find that submission equally unattractive. But in the light of counsel's submissions it is not right for me to make more than a modest adjustment to reflect those factors, so my award under this head is $150,000.

Loss of earnings

11. Most of the evidence at the trial was directed to enquiring into the plaintiff's pre-accident income. He was then running a business which he had started in 1979 and then registered under the name Tung Tak Knitting Factory. This business consisted basically of performing sub-contract work for other Hong Kong manufacturers of knitted garments. The main work consisted of knitting woollen panels for such manufacturers. Two manufacturers in particular gave him work: Golden Fountain knitters Ltd. or Go Fai whose managing director, William Ma Yu Lun, gave evidence; and a company called Pak Lok which ceased business in about 1984.

12. The plaintiff carried out this knitting work at two locations. First he had factory premises in the Kam Wah Building, Yuen Long, where he had some 20 knitting machines. In the period 1979/1982 the volume of work done there sharply declined as it became cheaper to have the work done at the other manufacturing outlet in Mainland China. In consequence Yuen Long became What he called a "co-ordination point". By 1982 only about 14 of the machines were in use and the work was confined to the knitting of samples and small orders.

13. The Chinese outlet was developed by the plaintiff in 1979 by arrangement with the Ping Wu Commune in Po On Province. The Commune provided the factory premises and the necessary labour force to carry out panel knitting as sub-contractor to the plaintiff; while he initially at least supplied the knitting machinery. He said that in 1979 he supplied 120 machines in all and that they were in regular use up to his injury. In the material years 1979/1982 the plaintiff's profit came principally from Ping Wu. From this period only two contemporary documents have apparently survived and were produced in evidence because the plaintiff had them in his pocket at the time of the accident. The first was his latest and last contract with the Ping Wu Commune dated 21st August 1982. This provided for the performance by the Commune of knitting work to the value of $126,866 between 27th August and 31st October 1982 at unit prices ranging from $17 to $26 a dozen and one small batch at $50 a dozen. The plaintiff for his part had to supply the Commune with knitting yarn to the value of over $1.5 m., a process which scarcely seems to have started before the accident intervened.

14. The second document was a contract entered into between another Mainland Chinese entity in Shek Kei and the plaintiff and Mr Tam jointly for the manufacture in China of woollen gloves out of materials to be supplied, and (wholly or in part) on machines to be supplied by the plaintiff and Mr Tam. The contract which is dated 19th July 1982 provided for shipment in batches each way between July 1982 and August 1983. No shipments were in fact made pre-accident because the plaintiff and Mr Tam were still looking for the necessary machines. This contract was a joint venture between the plaintiff who had experience of manufacturing in China, and Mr Tam who had experience in gloves. The expectation was that two or more Hong Kong glove manufacturers would supply them with the necessary yarn, and later buy the finished gloves at a profit over the sum payable to the Chinese manufacturers.

15. Every administrative and managerial task in the plaintiff's business was performed by him. He solicited orders: made the contracts: supervised manufacture: arranged for collection and delivery of goods: and kept such rudimentary records as were made out. When he was confined to hospital the business could not and did not continue. Mr Tam could not start to carry out the gloves contract on his own. When supplies to Ping Wu ceased, the Commune took over the plaintiffs interest in the machines there, it would seem, in satisfaction of their claims against him. The plaintiff was anxious to limit his rental liability to his landlord at Yuen Long. At short notice his wife had to find another smaller home. For want of space, and because she thought they were of little value. Having regard to the plaintiff's then physical condition, she left all the papers and documents behind for the rubbish collector.

16. It is as easy to conclude that the effect of this accident and the plaintiff's injuries was to destroy his existing business; as it is difficult to determine its value in the absence of any contemporary evidence of turnover or profit. Such records as were kept were abandoned. No proper accounts were ever prepared or tax returns rendered. The first tax documents are estimates for the years ending 1980, 1981 and 1982 dated 11th October 1983. They follow a simple mathematical progression of $20,000: $40,000: and $80,000. I have no reason to believe that the Inland Revenue had any real information upon which to base such estimates. If they were expecting to do no more than provoke a return, they failed. The plaintiff made some use of a bank account but I have seen no pass sheets. No timely attempts were made to see what records Go Fai and Pak Lok may have kept, and Mr Ma's enquiries over the mid-day adjournment whilst he was giving evidence proved fruitless.

17. The evidence fell into two categories. First, the plaintiff put forward his own estimates of net profits in the years 1979/1982. He has made two. The first was made earlier in 1985 for the purposes of his Statement of Claim. This estimated the net profits at "approximately $120,000 p.a.". This figure was repeated for past and future loss in particulars dated 24th December 1986. Beyond confirming that this was his then best estimate of net profit the plaintiff gave no further evidence about it by way of explanation or quantification.

18. In evidence the plaintiff's estimate was very much greater. In chief he gave figures which produced a net profit for his operations at Ping Wu in excess of $350,000 p.a. and of $60,000 a month at Yuen Long. Consequent upon a probing of the main deductions in cross-examination the figure for Ping Wu was reduced to about $173,000 p.a. and for Yuen Long to allow for some decline in activity to $60,000 p.a. The Ping Wu net profit figure of $173,000 was based upon a turnover of $907,200 and therefore constituted some 19% of total turnover. This new profit before tax figure of $233,000 p.a. constituted a massive unexplained increase on the pleaded figure; was based upon recollection going back seven years; and supported by no material figures in any contemporary document.

19. The Ping Wu estimated turnover figure is based upon two assumptions. The first is that the total annual production at Ping Wu would consist of simple panels, for which the plaintiff would receive $30 a dozen from his Hong Kong manufacturers/supplier, and for which he would pay Ping Wu no more than $15 a dozen, producing a gross return of 50% i.e. $15 a dozen. The second was that since the panels were simple, Ping Wu would achieve its calculated annual maximum capacity and produce nearly 60,500 dozen in the year. There is no support for this in the surviving Ping Wu contract. The price ranges there showed either that those panels were not simple and would therefore have taken longer to complete, or if and insofar as any were simple that the basic price was at least $17 a dosen. Nor having regard to the delivery dates, can I accept the plaintiffs assertion that this contract represented one and not two months work. I accept that the plaintiff was running a profitable business, but I am not able to accept his present estimates without very considerable qualification.

20. The other category of evidence which I had no difficulty in accepting came from Mr William Ma, and from a Mr Wong Shu-lun who contemporaneously with the plaintiff established a manufacturing outlet for knitted garments and initially for panels in Mainland China. Mr Ma confirmed that his company had given work to the plaintiff at the material period: that the usual price for simple panels was $30 a dozen: that he had seen some 110/120 machines in use at Ping Wu: and that for manufacture in China he would have expected the plaintiff to show a gross profit of about 40%. In the absence of any of his company's contemporary records he described the monthly payments to the plaintiff as small and the annual total quantity as "on average several hundred to 1,000 dozen a month ..... ..multiplied by 10 for the full year to allow for the off season". He declined further to define "several". These figures put a maximum of 10,000 dozen p.a. on work given to the plaintiff: and if "several" equals 500, a more realistic figure may be 7,500 dozen p.a.

21. Mr Wong gave a most helpful account of this type of business. He showed that in 1979 it had a great potential, especially, as he had done most successfully, if the manufacturer could break away from the role of sub-contractor to the Hong Kong manufacturer and manufacture on his own account. When he started in the Mainland in 1979 with 40/50 machines his annual production of panels was 10,000/20,000 dozen a year. Now with 500/600 machines his panel production is only 10,000 dozen a year because of his diversification into other work. Whilst emphasising that the cost of production of panels varies widely with degrees of difficulty, his working gross profit figure was 40% and his net, allowing for overheads, some 30%. These figures contrast with the plaintiff's calculated net profit of under 20% on a gross of 50%.

22. In these circumstances it would be a pretence to attempt any calculations for the past or the future. I can only seek to assess an all purpose multiplicand which seems to me just to both parties. I accept that the accident destroyed the plaintiff's business, and that he has since been living on charity or notional loans from his friends. I accept Mr Ma's view that the plaintiff is now virtually unemployable, and that his only real hope of future income is from some new small business which he may start hereafter. I have carefully considered both the plaintiff's submission that I should allow for some expansion of the plaintiff's business on the lines of Mr Wong's success; and the defendant's submission to the contrary. I reject both as too speculative. The glove contract shows that the plaintiff was attempting to diversify. But this never left the ground by the time of the accident. It was then too conjectural for any confident profit forecast to be made. Conversely in what was a lively and expanding market I see no reason to attribute failure to the plaintiff. I have also considered whether I should bring into account for the future any return the plaintiff may receive from any new business he may start with the aid of this award. In addition to doubting whether this is right in principle, I reject it also as being too speculative. I accept the defendant's submission that for a man of 49 at the time of the accident and in the plaintiff's position, a multiplier of 10 is appropriate. As a multiplicand I have, I think, to derive from all the evidence a basic figure which can reasonably be said to represent actual earnings in the past and lost earnings past and future.

23. On quantum of work I have two guides. The first is Mr Ma's average of 7,500 dozen p.a. and a maximum of 10,000 dozen. His company was providing approximately half the plaintiff's work which suggests a firm annual figure of 15,000 dozen and a possible maximum of 20,000. The other figure is the quantity of just over 4,600 dozen in the surviving contract. If it represents two out of nine productive months work, it gives an annual figure similar to Mr Ma's maximum, assuming full production. Production depended upon overall supply, and Mr Ma gave the best evidence of this. I am sure that by 1981 Ping du was the main source of manufacture with Yuen Long relegated to little more than a head office role. Therefore, I think it reasonable for a basic figure to take 15,000 dozen a year and to apply to that the basic average price of $30 a dozen. This gives an annual turnover figure of $450,000.

24. There is nothing to support the plaintiffs estimate of 50% for gross profit, and I prefer the figure of 40% given by both Mr Ma and Mr Wong. Mr Wong allowed 10% for what he called overheads, whilst the plaintiffs calculated expenses come to nearly 20% of turnover. That calculation included a substantial allowance for machine replacement, but nothing for the expenses of Yuen Long. Overall I think it reasonable to take 20% of turnover as the plaintiffs net profit i.e. $90,000 p.a. If the decision in Sinolink v. Commissioner of Inland Revenue⁽³⁾ is correct the whole of this profit is taxable, so I deduct 15%. This produces a net profit after tax figure of $76,500 p.a. which is my multiplicand.

25. The application of my ten year multiplier to this produces the following calculations:-

26. The remaining items of special damage had been agreed or proved as follows:-

27. In addition there was a claim for nourishing food at the rate of $1,000 a month for the first two years of the plaintiff's incapacity. In the absence of supporting medical evidence the limitations on this type of claim are shown by Chin Kit Lam ⁽⁴⁾. I can only allow this for the initial period of 3½ months in hospital and at a rate of $500 a month i.e. $1,750.

Summary

28. Special damages

29. There must be judgment for the plaintiff for that sum.

(1)    [1980] H.K.L.R. 657

(2)    [1982] No. 7922

(3)    [1985] H.K.L.R. 431

(4)    [1981] H.K.L.R. 419