WING CHEUNG ROASTING FOODS LTD v. AU WAI MING

HCA 1484/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1484 of 2015

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ASSESSMENT OF DAMAGES

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1.  On 28 March 2014, a private car bearing registration number RR8363 (“Vehicle”) crashed into the barbeque pork and roasting shop operated by the Plaintiff at G/F, 2 King Kwong Street, Happy Valley, Hong Kong (“Shop”).  The Plaintiff commenced this action for damages caused by the Defendant arising from this crash of the Vehicle into the Shop (“Incident”).

2.  No Acknowledgement of Service has ever been filed by the Defendant and by an interlocutory judgment entered in favour of the Plaintiff on 4 September 2015, it was adjudged that the Defendant do pay the Plaintiff damages to be assessed and costs.  The hearing on assessment of damages took place before me on 21 June 2016.  Mr G Chan of Messrs. S.K. Lam, Alfred Chan & Co appeared on behalf of the Plaintiff. The Defendant did not put in an appearance at all. 

3.  Evidence adduced by the Plaintiff took the form of a witness statement and the oral testimony of Ho Man Fai Roland (“Ho”), a director of the Plaintiff, and an affirmation of Ho filed by the Plaintiff one day before the hearing.  This late affirmation deals with two matters: (1) the introduction of images of the Shop before the Incident and after completion of works for the restoration of the Shop which have been obtained from the internet (“Shop Photographs”), and (2) the revision of three items of expenses, namely water, gas and electricity.  I will come to each of the two matters shortly.  In terms of the oral testimony of Ho, in general he answered questions in a straightforward fashion and without hesitation.  I find him to be a credible witness. 

4.  The background of the case set out below is largely extracted from Ho’s witness statement.

5.  As shown by the copy Certificate of Particulars of Vehicle supplied under Regulation 4(2) of the Road Traffic (Registration and Licensing of Vehicles) Regulations, Cap 374 sub. leg., the Defendant was the registered owner of the Vehicle at the material time.  At about 2130 hours on 28 March 2014, the Defendant drove the Vehicle along Sing Woo Road from the north junction of Kwai Sing Lane till the junction of Yik Yam Street, Happy Valley, Hong Kong and crashed into the Shop.  Photographs of the scene showing the damage to the Shop (“Incident Photographs”) have been adduced by the Plaintiff.

6.  According to Ho’s witness statement, as a result of the Incident, the Defendant was charged and convicted upon a guilty plea of dangerous driving, contrary to section 37 of the Road Traffic Ordinance, Cap 374 on 26 September 2014.  The Defendant was fined HK$5,000 and prohibited from driving for 30 months.

THE LAW

7.  The Plaintiff points to the general rule that damages are to put the party who has suffered in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation, see §2-002, McGregor on Damages[1]. There is also reliance on §37-011, McGregor on Damages which states that in the case of damage to land, the normal measure of damages was either the amount of the diminution of the value of the land or the cost of reinstatement or repair, the test being the reasonableness of the claimant’s desire to reinstate the property.  Further, according to §37-025, McGregor on Damages, loss of user profits as a form of consequential loss may also be recoverable.  I agree that these principles apply in the present case.

8.  There are two heads of claims made by the Plaintiff against the Defendant for the damage to the Shop: costs for the restoration of the Shop and loss of business.

RESTORATION COSTS

9.  Although no tenancy agreement of the Shop has been produced, Mr Ho testified to the fact that the tenancy for the Shop was due to expire on 31 May 2014 and the Plaintiff had, before the occurrence of the Incident, agreed with the landlord for the renewal of the tenancy of the Shop for a term of two years commencing from 1 June 2014.  Having committed itself to the payment of rent for such period, it would naturally be in the interest of the Plaintiff to have its business continue operating at the Shop after the Incident.

10.  It is clear from the Incident Photographs that works for the repair and/or restoration of the Shop had to be conducted before it could be opened for business again.  That being the case, it is reasonable for the Plaintiff to reinstate the Shop and the cost for so doing is the appropriate measure of damages to the Shop.

11.  A contractor, David Decoration Limited, was instructed by the Plaintiff to carry out the restoration works. Ho testified to the contractor being the business of a街坊who had checked on the safety of people in the Shop almost immediately after the Incident.  He referred to the discussions he had with this 街坊in trying to get more reductions from the quotation from the contractor.  Ho also confirmed that the works conducted was for the purpose of reinstating the Shop to the state and condition it was in before the Incident. 

12.  The Shop Photographs were sought to be introduced for the purpose of showing that the state and condition of the Shop after completion of the Shop is no better than what it was before the Incident.  There has been no explanation as to why the Shop Photographs were not adduced earlier.  There is also no reason not to accept Ho’s words on this matter.  The production of the Shop Photographs is thus not necessary and I refuse leave for them to be adduced.

13.  The invoice dated 5 May 2014 that was issued by David Decoration Limited for such works and the cheque in settlement of such invoice have been exhibited by Ho in his witness statement.  The total cost for the restoration works is HK$648,000.  A discount of HK$27,529 is shown on the invoice which, according to Ho’s testimony, was offered by the contractor upon completion of the works.  The breakdown for separate items of the works, as set out in paragraph 9 of Ho’s witness statement, is reproduced below:‑

Item	Description	Amount
(i)	Basic, preparation and miscellaneous fees for repairs (including administration, insurance and cleaning fees)	HK$48,400.00
(ii)	Demolition costs	HK$35,450.00
(iii)	Bricklayer/plaster repairs and replacement costs	HK$66,500.00
(iv)	Wall surface repair and replacement costs	HK$41,250.00
(v)	Furniture replacement costs	HK$182,500.00
(vi)	Ceiling repair and replacement and painting costs	HK$45,900.00
(vii)	Electric gate replacement costs	HK$29,500.00
(viii)	Signboard repair costs	HK$8,500.00
(ix)	Air conditioner replacement costs	HK$116,722.00
(x)	Electric works replacement costs	HK$64,807.00
(xi)	Work pipes replacement costs	HK$21,700.00
(xii)	Altar replacement costs	HK$3,500.00
(xiii)	Overhang replacement costs	HK$3,200.00
(xiv)	Freezer room overhanging shelves and steel table tops	HK$5,500.00
(xv)	Aluminum hangers	HK$2,100.00
(xvi)	(LESS) Discount on Invoice no. 1404-012-14 from contractor decoration company	(HK$27,529.00)
	Total	HK$648,000.00

14.  On the basis of the evidence before me, I see no reason to challenge the extent of the works carried out and the amount claimed.  I award the sum of HK$648,000 as the costs for the works carried out to restore the Shop for resumption of operation.

LOSS OF BUSINESS

15.  As noted in paragraph 7 above, §37-025 of McGregor on Damages supports the Plaintiff’s claim for loss of user profits as a form of consequential loss.  Given that shops in Hong Kong are in general rented out for business, loss of business is an item of loss that is reasonably foreseeable in a traffic accident of a nature like that of the Incident.

16.  I agree with the Plaintiff’s submission that loss of revenue should be calculated by reference to the loss of total revenue less the expenses which would have been required to produce the revenue.  It is the uncontroverted evidence of the Plaintiff that it resumed its business on 1 May 2014.  This means that the loss of business recoverable from the Defendant is for 33 days, for the period from 29 March to 30 April 2014 (“ Restoration Period”).

17.  The Plaintiff claims HK$821,164.85 as the loss of revenue for the Restoration Period.  This figure was computed on the basis of the income of the Plaintiff for the month of April in 2011, 2012 and 2013; namely HK$752,418, HK$720,282 and HK$766,840.50 respectively according to the profit and loss sheets for the years ending March 2011, 2012, 2013 and 2014 produced by the Plaintiff.  It was Ho’s testimony that April is an especially busy month for the Plaintiff, since people would eat out with their families during the Easter Holidays and the Ching Ming Festival and there are more Mainland visitors in anticipation of the Labour Day holidays.  At the hearing, Ho remarked that although Ching Ming Festival falls on one day only, people would be sweeping the graves of the departed throughout the month.

18.  According to Ho, for convenience sake, the Plaintiff has instructed Joyce Yuen & Co, CPA, its accountants, to prepare an Income Statement of the Plaintiff for April 2011, April 2012 and April 2013 for the purpose of calculation of such loss of revenue.  The figures are actually readily available from the profit and loss sheets exhibited to Ho’s witness statements and there is no real need for the separate Income Statement to be prepared.

19.  The gross income for April 2011, April 2012 and April 2013 is HK$752,418, HK$720,282 and HK$766,840.50 respectively.  The average of the three figures is then divided by 30 to come up with the average April daily revenue.  Multiplying this daily average by 33, the claimed amount of HK$821,164.85 is arrived at.

20.  It can be seen from the profit and loss sheets of the Plaintiff that there were some fluctuations in the income of the Plaintiff’s business for different times of the year.  I accept that the average of the revenue of the Plaintiff’s business for April in the previous three years would be more or less representative of the income that would have been made by the Plaintiff for the Restoration Period had the Incident not occurred.  The figure of HK$821,164.85 is thus accepted as the gross revenue of the Plaintiff for the Restoration Period.

21.  In his witness statement, Ho has listed six items of expenses to be deducted from the gross revenue for the Restoration Period.  They are salaries, rental, water, gas, electricity and food stock and operation expenses.  The way that each expense item was calculated can be found in Exhibit “HMR‑9” to Ho’s witness statement (“Expenses Exhibit”).

Food stock and Operation expenses

22.  The major expense item is food stock and operation expenses.  The Plaintiff has adopted a similar approach as in the calculation of the gross revenue income by taking the average of this item of expenses for April 2010, April 2011, April 2012 and April 2013, which are HK$371,835.50, HK$425,029.50, HK$392,957.00 and HK$367,748.20 respectively. The average of the four years is HK$389,392.55.  Instead of using this average figure of HK$389,392.55 to calculate the daily average for April 2014, the Plaintiff has made a mistake in Ho’s witness statement in dividing the figure by four one further time.  Ho admitted to this mistake when asked about it at the hearing.

23.  With the figure of HK$389,392.55 divided by 30, the daily average for such expenses is HK$12,979.75.  The food stock and operation expenses for the Restoration Period can then be calculated by multiplying HK$12,979.75 by 33.  The figure so worked out is HK$428,331.80.  Mr Chan agreed that the amount of HK$428,331.80 should be adopted as the food stock and operation expenses for the Restoration Period.

Rental

24.  Next to consider is the rental for the Restoration Period.  Rental receipts for February, March and April of 2014 have been produced and the Plaintiff had paid HK$90,000 for each month. The Plaintiff then worked out the daily average rental of these three months by dividing the total rental paid in the sum of HK$270,000 by 88.  Given that there are actually 89 days from 1 February to 30 April 2014, there is a flaw in this formula although it works to the disadvantage of the Plaintiff.

25.  Further, there is no reason for the rental for the month of February 2014 to be dragged in at all, when the rental paid for the months of March and April 2014 are known.  The average daily rental for the month of March 2014 is HK$2,903.23 (HK90,000 ÷ 31).  The rental expenses for the Restoration Period should therefore be HK$2,903.23 x 3 + HK$90,000; that is HK$98,709.68.  In his closing submissions, Mr Chan also agreed that this amount of HK$98,709.68 should be adopted as the rental expenses for the Restoration Period.

Salaries

26.  The way the salaries expenses for the Restoration Period was computed by the Plaintiff can be found in the Expenses Exhibit.  In the Expenses Exhibit, the salaries paid by the Plaintiff for four periods have been set out – (1) 1 February to 28 February 2014; (2) 1 March to 31 March 2014; (3) 1 April to 22 April 2014 and (4) 23 April to 31 May 2014, being HK$109,770, HK$108,120, HK$92,400.00 and HK$48,000.00 respectively.  In calculating the average daily salaries expenses for April 2014, the Plaintiff has taken into account the above items (3) and (4).

27.  At the hearing, Ho clarified that only item (3) relates to the salaries paid by the Plaintiff to its staff in April 2014 whereas item (4) actually represents the salaries paid to its staff for May 2014.  In respect of the reduction of about HK$10,000 odd from the salaries expenditure from March to April 2014, Ho attributed this to the resignation of a staff member who left employment of the Plaintiff at the end of March 2014. 

28.  In light of the clarification made by Ho, Mr Chan accepted that the salaries expenses for the Restoration Period should be calculated this way: HK$92,400 + HK$108,120 ÷ 31 x 3 = HK$102,863.23.

Water

29.  As mentioned in paragraph 3 above, the Plaintiff seeks to revise the amount of water, gas and electricity expenses to be deducted from the figure of gross revenue referred to in paragraph 20 above, increasing the amount from about 85% to 150%.  Given that any increase in the expenses would mean the recovery of less damages by the Plaintiff, the revisions work to the detriment of the Plaintiff and to the advantage of the Defendant.  I therefore grant leave to the Plaintiff for the adducing of the further evidence in Ho’s affirmation that relates to the revision of the amount of water, gas and electricity expenses.

30.  The former position of the Plaintiff in respect of water charges, as set out in Ho’s witness statement, was to work out the daily average on the basis of an invoice of the Water Supplies Department adduced which covers the period from 24 March 2014 to 25 July 2014 (“WSD Invoice”).  The daily average was then multiplied by 33 to arrive at the water expenses for the Restoration Period.

31.  There is a bar chart in the WSD Invoice which shows the average water consumption for each four months’ period from July 2011 to July 2014.  The water consumption for each four months’ period has almost been the same save for the last period from April to July 2014.  This is to be expected since the Plaintiff had not been able to operate its business for the Restoration Period.  The WSD Invoice also records the amount paid by the Plaintiff for the preceding invoice which was HK$17,366.50, more than double the amount billed under the WSD Invoice.

32.  The new position of the Plaintiff illustrated in Ho’s Affirmation is to work out the daily average on the basis of the water charges for eight months (January to August) in 2011, 2012 and 2013 and then multiply the daily average by 33 to work out the water expense for the Restoration Period.  At the hearing, Ho explained that he picked those eight months because water consumption is generally higher in those months.

33.  The figures given in Exhibit “HMF‑14” (“Revised Expenses Exhibit”) of those eight months in 2011, 2012 and 2013 are HK$39,130, HK$36,392 and HK$35,629 respectively.  The water expenses for the Restoration Period are therefore (HK$39,130+ HK$36,392 + HK$35,629) ÷ 8 ÷ 3 ÷ 30 x 33 = HK$5,094.42.

34.  Unlike the case with Ho’s witness statement, the Plaintiff has not produced the relevant invoices of the Water Supplies Department for this revised calculation mode.  However, the amount shown in the WSD Invoice as the charges paid for the immediately four months’ period (the amount of HK$17,366.50 referred to in paragraph 31 above) is representative of each typical four months’ period from July 2011 to March 2014 according to the bar chart included in the WSD Invoice.  The figures given in the Revised Expenses Exhibit for each eight months’ period are more or less double of that figure.  I therefore do not see any reason to doubt the accuracy of the figures given in the Revised Expenses Exhibit or the representativeness of the level of water consumption of the eight months selected by Ho.

35.  Given that the revenue that the Plaintiff would have made had the Incident not occurred is to be taken in calculating the net income of the Plaintiff for the Restoration Period, the expenses to be deducted from such projected revenue should also be the expenses that would have been incurred by the Plaintiff had the Incident not occurred. That being the case, the figure computed by way of this revised method of calculation would be closer to what would have been the expenditure for water consumption at the Shop during the Restoration Period had the Incident not occurred.  I accept the figure of HK$5,094.42 as the water expenses for the Restoration Period.

Gas

36.  With gas charges, two bills for the periods from 5 March 2014 to 5 April 2014 and from 5 April 2014 to 5 May 2014 have been produced by Ho’s witness statements.  As in the case of the water charges, the former position of the Plaintiff was to work out the daily average for the Restoration Period by adding the amounts of the two gas bills (HK$15,949 and HK$3,124 respectively) and then dividing the sum by the total number of days during the two months’ period covered by the two bills.

37.  The amount payable under the later bill is less than 20% of the earlier bill.  There is also a bar chart showing the gas consumption for the previous two years’ period in each of the bill.  The drop in gas consumption for the month of April 2014 is clearly noticeable and significant.  In the gas bill for the period from 5 March 2014 to 5 April 2014, the amount paid for the preceding billed period, a period not affected by the Incident, is noted as HK$18,897.

38.  The new position of the Plaintiff is to calculate the daily average based on gas charges for April 2011, 2012 and 2013 and then multiply the daily average by 33.  Since the figures for the gas charges for April 2011, 2012 and 2013 are HK$17,843, HK$17,562 and HK$18,739 respectively, the gas charges for the Restoration Period is calculated by (HK$17,843 + HK$17,562 +  HK$18,739) ÷ 3 ÷ 30 x 33 = HK$19,852.80.

39.  Again the gas bills for the Shop for April 2011, 2012 and 2013 have not been produced by the Plaintiff. Using gas charges shown as paid for the month before 5 March 2014 in the bill produced as benchmark, I am prepared to accept the accuracy of the figures set out in Ho’s Affirmation as the gas charges for April 2011, 2012 and 2013. 

40.  Noting the significant drop in gas consumption covered by the periods covered by the two gas bills produced, I agree that relying on the gas charges for the month of April in 2011, 2012 and 2013 will give a more realistic figure as to what the gas consumption for the Restoration Period would have been had the Incident not occurred.  The revised amount of HK$19,852.80 should therefore be accepted as the gas expenses for the Restoration Period.

Electricity

41.  The last expense item is the electricity charges for the Restoration Period.  The Plaintiff holds two accounts with The Hongkong Electric Co., Ltd ‑ 0153093604 and 0153093800.  The monthly bills for the periods from 15 March to 15 April 2014 and from 15 April to 15 May 2014 for both accounts have been produced.  For account no. 0153093604, the billed amounts are HK$1,601 and HK$2,311 respectively; and for account no. 0153093800, the billed amounts are HK$3,750 and HK$4,732 respectively.

42.  In Ho’s witness statement, the Plaintiff worked out the daily average electricity expenses based on the billed amounts of the four bills (HK$1,601 + HK$2,311 + HK$3,750 + HK$4,732) ÷ 61 (number of days from 15 March‑15 May 2014), ie HK$203.18; and then multiplied this daily average by 33.  The product, ie HK$6,704.95, was then adopted as the electricity expenses for the Restoration Period.

43.  All these bills have information about the amount billed under their respectively immediately preceding bill.  It can therefore be discerned that in respect of account no. 0153093800, the amount billed for the month ending 15 March 2014 is HK$1,535; while the amount billed for such period in respect of account no. 0153093604 is HK$6,045.  There is a substantial difference between the billed amount for the month ending 15 March 2014 in respect of account no. 0153093604 and that for the period covered by the bill produced.

44.  With the revised version, the Plaintiff has adopted the same approach as in the case of the gas charges. Calculation of the daily average is based on electricity charges for April 2011, 2012 and 2013 which are, according to the Revised Expenses Exhibit, HK$9,991, HK$11,586 and HK$12,182 respectively.  The electricity charges for the Restoration Period is arrived at by multiplying this daily average by 33 (HK$9,991 + HK11,586 + HK$12,182) ÷ 3 ÷ 30 x 33 = HK$12,378.30.

45.  The electricity bills for April 2011, 2012 and 2013 have not been produced.  The amounts stated in the Revised Expenses Exhibit as the billed amounts for April 2011, 2012 and 2013 are not comparable to the figures in the electricity bills produced by way of Ho’s witness statement, or the sum of the amounts billed for the month ending 15 March 2014, which is a period not affected by the occurrence of the Incident.  Nonetheless, I accept the revised figure of HK$12,378.30 on the ground that it is more advantageous to the Defendant.

46.  A summary of the six items of expenses to be deducted from the gross revenue for the Restoration Period is set out in the table below:-

Description of Expenses	Amount
Food stock & Operation	HK$428,331.80
Rental	HK$98,709.68
Salaries	HK$102,863.23
Water	HK$5,094.42
Gas	HK$19,852.80
Electricity	HK$12,378.30
Total	HK$667,230.23

47.  The net loss of profits during the Restoration Period is thus HK$821,164.85 – HK$667,230.23 = HK$153,934.62.

CONCLUSION

48.  Adding the two heads of damages claimed (HK$648,000.00 + HK$153,934.62), the damages assessed as being payable by the Defendant to the Plaintiff is therefore the sum of HK$801,934.62.

49.  I award interest on the sum of HK$801,934.62 at 3% per annum from date of Writto date of judgment and thereafter at judgment rate until full payment.

50.  Costs of the assessment, including all costs reserved, shall be paid by the Defendant to the Plaintiff at District Court scale, to be taxed if not agreed.