POTENTIAL OPTICAL MEDIA LTD v. UPPLAN HOLDINGS LTD AND ANOTHER

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J U D G M E N T

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Background

1. On 11 July 2004, in the course of making a U-turn on a street, the 1^st defendant’s private car, driven by the 2^nd defendant (the appellant) had a slight collision with the claimant’s private car (hereinafter “the Car”). The collision resulted in scratch marks on the left side of the front bumper of the Car and a slight displacement of that bumper. The 2^nd defendant was willing to compensate the claimant for the cost incurred in repairing the Car, but they were unable to agree on the amount of compensation. Four years later, the claimant filed a claim with the Small Claims Tribunal, seeking compensation from the two defendants. On 7 April 2008, the Adjudicator of the Tribunal found for the claimant and ordered the 2^nd defendant to pay to the claimant $13,209.50 being the cost of repairing the Car and interest, and costs of $1,500. The 2^nd defendant now appeals against the order.

The claimant’s case at trial and the 2^nd defendant’s grounds of appeal

2. The claimant’s case at trial and the chronology of events are set out as follows:

Date	Event(s)	Witness(es)/Exhibit
11.7.2004	The 2nd defendant’s car collided with the Car.	Claimant, not in dispute
12.7.2004	The claimant sent the Car to Wing Li Motor Co. (永利汽車公司) (hereinafter “Wing Li”) for it to prepare a quotation.	Claimant, Mr. Tsang
13.7.2004	Wing Li gave the claimant a quotation.	Claimant, quotation
About 20.7.2004	Wing Li finished repairing the Car.	Claimant
About 23.7.2004	Claimant paid Wing Li.	Claimant, receipt
01.9.2004	Mr. Ho, a representative of the loss adjusters, carried out pre-repair examination of the car.	Claimant, Mr. Ho
05.9.2004	The loss adjusters issued an examination report and verified the cost of repair.	Claimant, Mr. Ho, examination report

3. The 2^nd defendant’s grounds of appeal are: (1) the Adjudicator erred in accepting the evidence of the claimant’s witnesses, namely Mr. Ho, the representative of the loss adjusters and Mr. Tsang, the proprietor of Wing Li, on the repair cost; and (2) the Adjudicator erred in failing to take into consideration the fact that the repair cost claimed by the claimant was not incurred as a result of the collision.

Review prior to the appeal hearing

4. Both parties were unrepresented at trial before the Small Claims Tribunal. As the claimant is a registered company, I arranged for the parties to attend a review hearing prior to the appeal hearing. I explained to the parties the procedures and the issues involved in the appeal. I also informed the claimant’s representative that the claimant was required to instruct a lawyer to act for it in the appeal or to apply to the Registrar for leave to allow the company’s representative to appear at the appeal hearing. In view of the small sum of money under dispute, I advised the parties to attempt to reach a reasonable settlement so as to avoid an unnecessary appeal and the substantial legal costs that the appeal would possibly entail. However, both parties were adamant in refusing to settle the matter, and therefore I gave directions on the appeal hearing. The appeal was fixed for hearing on 20 August 2008.

Claimant’s application for filing an affirmation

5. The claimant filed an affirmation on 9 August 2008 as its evidence in the appeal, but the affirmation was not served on the 2^nd defendant until one day before the hearing.

6. Mr. Ng, the claimant’s representative, is a director of the claimant company and was the driver of the Car at the time of the accident. He explained in the affirmation that at trial he had an unquiet mind and hence made a mistake when he recalled the date on which he sent the car to Wing Li for repair. He said that on 27 July 2004 he went to Hunghom Police Station to give a statement and a police officer took photographs of the Car to record the extent of damage of the Car, and therefore it was impossible for Wing Li to finish repairing the Car by end of July 2004. In light of the evidence of the police officer and the photographs he took, I do not harbour doubts about what Mr. Ng said. However, in the affirmation Mr. Ng did not provide any evidence to prove that the Car was not sent to Wing Li for repair until after 5 September 2004.

7. Mr. Lam, Counsel for the 2^nd defendant, objected to the claimant’s reliance on the evidence stated in the affirmation. Mr. Lam contended that the claimant’s affirmation was filed back on 9 August 2008 but was not served on the 2^nd defendant until the day before the hearing and this was unfair to the 2^nd defendant. Mr. Lam further submitted that the claimant had never explained the delay in serving the affirmation on the 2^nd defendant. Mr. Ng’s reply was that on the day when the affirmation was filed, he had instructed a colleague of his to serve the affirmation on the 2^nd defendant. His took the view that the claimant had discharged its duty, that the negligence of his colleague had nothing to do with the claimant, and that it would be unfair to the claimant if the claimant was not allowed to file the affirmation.

8. It is not necessary for me to adjudicate on the above dispute. What the affirmation contains is all new evidence, which is at variance with Mr. Ng’s evidence at trial. The Adjudicator had never had the opportunity to consider and assess such new evidence before he made his findings of fact. The power of the Court of First Instance to hear appeals from the Small Claims Tribunal is limited. Under section 28 of the Small Claims Tribunal Ordinance, the Court of First Instance can only hear an appeal on a point of law. Under section 29(1), on an appeal, the Court of First Instance may allow the appeal, dismiss the appeal or remit the matter to the Small Claims Tribunal for a new hearing. Under section 29(2), the Court of First Instance may draw any inference of fact but may not reverse or vary any determination made by the Adjudicator on questions of fact or receive further evidence. The Court of First Instance can only deal with an appeal on a point of law on the basis of the evidence adduced at trial and the Adjudicator’s reasons for decision. I have no power to receive the new evidence contained in the affirmation or determine when the claimant sent the Car to Wing Li for repair. I therefore refuse to admit the new evidence in the affirmation. That said, I can still refer to the new evidence in the affirmation when I exercise the powers under section 29(2).

Legal principles governing appeals on points of law against the Tribunal’s findings of fact

9. By way of an appeal on a point of law, the appellant herein seeks to challenge the Adjudicator’s findings of fact. As I pointed out above, the appellant can only appeal against the Tribunal’s decision on a point of law. But it does not follow that the Adjudicator’s findings of fact are immune from challenge. In the House of Lords case of Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430 at 462, paragraph 99, Lord Millett endorsed the legal principle laid down by the House of Lords in Edwards (Inspector of Taxes) v Bairstow [1956] AC 36 that, notwithstanding an appeal being one on a point of law, under special circumstances the appellate court still has the power to interfere with decisions of fact made by the fact-finding tribunal. These special circumstances are:

(1)     The decision was based on a finding of fact or inference from the facts which was perverse or irrational;

(2)     The decision was not supported by any evidence; or

(3)     The decision was made because the tribunal had considered irrelevant factors or failed to consider relevant factors.

10. This principle was also adopted by the Hong Kong Court of Final Appeal in Kwong Mile Services Ltd v Commissioner of Inland Revenue [2004] 3 HKLRD 168. In paragraphs 31 to 33 of the judgment, Bokhary PJ pointed out that the power of the appellate court in an appeal on law to interfere with the decision of the first instance court is not confined to cases where there are apparent and specifically identifiable errors of law. He said the fact that no appeal on facts is allowed at law does not mean that the appellate court is precluded from detecting and correcting errors of law buried beneath conclusions ostensibly of fact. He said under such circumstances, the appellate court can assume that the findings of fact made by the lower court resulted from an error of law and can intervene on that basis.

11. Bokhary PJ specified three points which the appellate court must bear in mind when dealing with this kind of appeal. First, the appellate court must bear in mind what scope the circumstances of the case provide for reasonable minds to differ as to the conclusion to be drawn from the primary facts. If the lower court’s conclusion is reasonable, i.e. within the scope for reasonable minds to differ, then even if the appellate court does not agree with that conclusion, it cannot substitute its own conclusion for that of the lower court. However, if the appellate court regards the contrary conclusion as the true and only reasonable one, in other words, the lower court’s conclusion is not within the scope for reasonable minds to differ, the appellate court is obliged to substitute the contrary conclusion for the lower court’s conclusion. In my view, the said legal principles are also applicable to appeals from the Small Claims Tribunal.

Ground of appeal (1): Claimant failed to discharge its burden of proof

12. The first ground of appeal put forward by the 2^nd defendant is straightforward. Put briefly, on the evidence before the Adjudicator, on the day following the accident, i.e. 12 July 2004, the claimant sent the Car to Wing Li for it to prepare a quotation and repair the Car. After one week or so, Wing Li finished repairing the car and the claimant paid $13,209.50 being repair cost. The whole process was completed within the month of July 2004, but the claimant relied on the loss adjusters’  report on the extent of damage of the Car, which was prepared one-odd month later, to prove that the repair cost was reasonable. On the chronology of events set out above, Wing Li had already finished repairing the Car by the time Mr. Ho examined it. It was impossible for Mr. Ho to examine the damage that resulted from the collision between the Car and the 2^nd defendant’s car. For this reason, Mr. Ho’s evidence and the examination report of the loss adjusters are incredible and likewise, Mr. Tsang’s evidence is open to question.

13. In making his closing submission at trial, the 2^nd defendant laid emphasis on the contradiction between the claimant’s case and the chronology of events. He said:

…, these photographs, these photographs which Mr. Ng produced in Court … cannot serve as evidence, because they were taken only on 1 September. When Mr. Ho of the loss adjusters was in Court, the condition [of the Car] which he photographed at that time [was a result of events which] happened in July. After [the Car] was repaired, he went to take the photographs in September, … The Car had already been repaired. Hence I categorically deny liability for this claim because the loss adjusters played a very important role.  It was only a minor collision which only resulted in minor scratches on the Car. That means the damage which appeared on Mr. Ng’s Car when the loss adjusters examined the Car on 1 September was not caused by me.

14 Although the 2^nd defendant’s submission was slightly incoherent and he did not allege that Wing Li and the report of the loss adjusters fabricated the extent of damage of the Car and the repair cost, he did clearly point out the contradiction between the claimant’s case and the chronology of events, and emphasize that it showed, crucially, that by the time Mr. Ho of the loss adjusters examined the extent of damage of the Car, Wing Li had already finished repairing the Car. This patent contradiction shows that the evidence of Mr. Ho and Mr. Tsang is not safe or credible.  The contradiction arose possibly because:

(1)     Mr. Ng wrongly recalled the date on which he sent the Car to Wing Li for repair;

(2)     Mr. Tsang and Mr. Ho fabricated evidence on the extent of damage of the Car and the repair cost; and/or

(3)     Some time after Wing Li finished repairing the Car and before Mr. Ho examined it, it met with another collision of the same nature.

15 The Adjudicator did not deal with the contradiction in the facts and chronology of events. In the Reasons for Decision, he referred to Wing Li’s quotation dated 13 July 2004, the examination report issued by the loss adjusters on 5 September 2004 and the undated receipt issued by Wing Li, and proceeded to make the following findings:

7.         The claimant and its witness, the proprietor of Wing Li Motor Company testified that all the damage described in the repair work quotation and the adjuster’s report was the result of the collision with the defendant’s car on 11 July 2004. Having carefully examined the claimant’s exhibits and assessed the evidence of the claimant and its witness, I hold that the claimant has discharged its burden of proof.

8.         The defendant’s first ground of defence: The alleged repair cost and damage are grossly disproportionate to the collision between the two cars on 11 July 2004, which was minor in nature. Some of the components listed in the adjuster’s report did not need replacement. The repair cost of HK$13,209.50 is excessive.

9.         Although the defendant claimed to be experienced in repairing the many vehicles he owned, he is not a professional bodywork repairer. And after the collision of the two cars, the defendant did not have an opportunity to carefully inspect the damage sustained by the claimant’s car. The defendant’s first ground of defence comprises purely the defendant’s personal opinion  and is not supported by any evidence.

10.       On the claimant’s side, there are the report prepared by a professional loss adjuster and the evidence of the proprietor of Wing Li Motor Company, a professional bodywork repairer. In my view, in comparison with the personal opinion of the defendant, who is not a professional, the evidence of the claimant is more credible. I therefore find as a fact that, as stated in the adjuster’s report and the evidence of the witness for the claimant, all the components listed in the said report had to be replaced, and that the repair cost being claimed is not excessive.

11.       The defendant’s second ground of defence: He alleged that after the collision with his car on 11 July 2004, the claimant’s car met with another collision before 1 September 2004, the day on which the loss adjusters carried out the examination, and that the damage described in the adjuster’s report was caused by the second collision.

12.       The defendant bears the burden of proving the second collision did occur before the loss adjusters carried out the examination on 1 September 2004. In this respect, the defendant does not have any evidence. The only argument put forward by the defendant is that the date of provision by Wing Li Motor Company of a quotation for the repair work is 11 July 2004 whereas the date of the vehicle examination as shown in the loss adjuster’s report is 1 September 2004.

13.       Although it is true that the adjuster’s report was not completed until one-odd month after the collision between the two cars, Wing Li Motor Company’s quotation for the repair work was completed on 13 July 2004, two days after the collision. Apart from making some deductions in relation to components which could be re-used after repair and giving some discount in respect of the labour cost, the loss adjuster’s report confirmed each and every item of repair work set out in the quotation prepared by Wing Li Motor Company. Therefore, the repair work quotation of 13 July 2004 confirmed the damage described in the loss adjuster’s report of 1 September 2004.

14.       There is no evidence from the defendant to prove that the claimant’s car had another collision before the loss adjusters carried out the examination. Hence, having carefully examined the evidence adduced by the parties and assessed the oral evidence of the parties, I find as a fact that the claimant’s car did not have another collision before the loss adjusters carried out the examination.

16.  The Adjudicator claimed that he had carefully examined the evidence adduced by the parties and assessed the oral evidence of the parties before he made the findings of fact. Paragraphs 7 to 10 of the Reasons for Decision show that, on the basis of the professional knowledge of Mr. Ho of the loss adjusters, the Adjudicator accepted Mr. Ho’s evidence on the repair cost and rejected the 2^nd defendant’s personal opinion. This was an exercise of the power, which the Adjudicator exclusively possessed, of assessing the credibility of the witnesses and making findings of fact. The appellate court would normally not intervene with the exercise of such power. Furthermore, as a professional adjudicator, the Adjudicator was not obliged to deal with each and every conflicting piece of evidence in the case. However, in light of the chronology of events and the 2^nd defendant’s defence and submissions, the contradiction in question was extremely serious and also crucial to the case. Although the 2^nd defendant did not allege that Wing Li and the loss adjusters fabricated evidence on the extent of damage of the Car and the repair cost, the contradiction in the facts and chronology of events was such that it could influence the Adjudicator’s assessment of the credibility of the evidence of Mr. Ho and Mr. Tsang, in particular the assessment of whether the extent of damage alleged by Mr. Tsang and Mr. Ho was true. I appreciate that by the time of trial it had been more than 4 years since the collision occurred, and hence Mr. Ng, Mr. Tsang and Mr. Ho might have confused the date of repair of the Car. However, on the evidence before the Adjudicator, Mr. Ng said that he sent the Car to Wing Li for repair about one week after the collision. The Adjudicator did not express doubts about Mr. Ng’s evidence. Had the Adjudicator considered the contradiction in the facts and chronology of events but still accepted the evidence of Mr. Ho and Mr. Tsang, this would have been an exercise of the Adjudicator’s exclusive power of assessing the credibility of witnesses and making findings of fact, and with such an exercise the appellate court would not intervene. However, the Adjudicator did not point out that Mr. Ng might have been mistaken about the date on which he sent the Car to Wing Li for repair. He also discarded the possibility of the Car having met with another similar collision. This heightened the suspicion that Mr. Ho might not have personally examined the Car and that Mr. Tsang might have exaggerated the amount of the repair cost. In the face of this extremely important and crucial contradiction, it was in my view not enough for the Adjudicator to claim, as he did, that he had carefully considered the evidence, that he accepted Mr. Ho’s professional evidence and that he made findings of fact accordingly.

17. Apart from the contradiction in the facts and chronology of events, the evidence of Mr. Tsang and Mr. Ho is shrouded in suspicion.  The loss adjusters were not independent adjusters engaged by the claimant to verify the quotation prepared by Wing Li; rather, they were adjusters acquainted with and employed by Wing Li.  Their impartiality is open to question.  Mr. Tsang and Mr. Ho asserted that a number of expensive components of the Car, such as the left headlight, the lower cover of the left headlight and the plastic covering of the front bumper, were broken or cracked and had to be replaced.  Surprisingly, however, Mr. Ho did not take photographs of these damaged components as evidence ― this was a necessary step which virtually all loss adjusters would take.  Similarly, Mr. Tsang did not adduce as evidence any invoice or receipt issued by the suppliers of these original or after-market components in respect of replacement of the components.  In addition, before instructing Wing Li to repair the Car, Mr. Ng neither informed the 2^nd defendant of the relevant repair cost nor gave the 2^nd defendant an opportunity to ascertain the extent of damage and appoint independent loss adjusters to verify whether the repair cost was reasonable.  This step should, unless the 2^nd defendant waived his rights, also be taken in cases involving relatively sizeable claims.  The claimant’s approach to the matter not only rendered it impossible for the 2^nd defendant to challenge the reasonableness of the repair cost, but also led to the criticism by the Adjudicator that the 2^nd defendant had failed to adduce professional evidence from any loss adjuster to support his defence.  In fact, no purpose would be served where the 2^nd defendant engaged loss adjusters to examine the Car 4 years after the completion of the repair work.  The evidence on the repair cost, which came exclusively from Mr. Tsang and Mr. Ho for the claimant, was hardly sufficient.

18. It is clear that the Adjudicator did not consider or address the contradiction in the claimant’s case and chronology of events. Nor did he properly consider the doubts in the claimant’s case.  The circumstances leading to this appeal fall within the third category of special circumstances set out in Runa Begum, namely the Adjudicator failed to consider relevant factors. This being the case, the appellate court is entitled to interfere with the Adjudicator’s findings of fact. Taking into account such factors as the contradiction in the facts and chronology of events, the extent of damage on the surface of the Car, the repair cost claimed, the insufficiency of the evidence of Mr. Tsang and Mr. Ho on the repair cost, the improper conduct on the part of Wing Li of engaging loss adjusters to verify its own quotation, and the claimant’s failure to give the 2^nd defendant any opportunity to verify the repair cost, I am of the view that the Adjudicator’s decision to accept Mr. Tsang and Mr. Ho as credible witnesses was perverse and irrational.  Any reasonable man would have doubted the evidence of Mr. Tsang and Mr. Ho on the repair cost and reached the opposite conclusion as to the credibility of their evidence.  In my judgment, on the claimant’s case as presented at trial, the only real and reasonable conclusion is that the evidence of Mr. Tsang and Mr. Ho on the repair cost is not credible.

19. As far as the burden of proof is concerned, leaving aside the contradiction in the claimant’s case and chronology of events, it is for the claimant to prove that the repair cost is reasonable. Although the civil standard of proof applies, the exact standard depends on all the circumstances of the case. There is no dispute that the collision in question was a very minor one. Both the police officer who carried out investigation at the scene and the police officer who subsequently handled the claimant’s complaint said that Car sustained minor damage, with only a few scratches on and a slight displacement of the front bumper. The claimant’s claim is grossly disproportionate to the damage on the surface of the Car, and the claimant will inevitably be required to meet a higher standard in establishing its case. I also understand that the police officer only observed the damage on the surface and did not further investigate the damage ― the very work that independent loss adjusters were under a duty to perform. Mr. Tsang said that before he prepared the quotation, he disassembled the damaged parts and inspected the extent of the damage. In a case where only minor superficial damage was involved but replacement of expensive components was necessary, Mr. Ho should, as a responsible representative of the loss adjusters, have taken photographs of the broken or cracked parts as evidence of the damage in order to protect the interest of his ultimate client. Similarly, Mr. Tsang should have kept the invoices and receipts concerning the purchase of the components as evidence. The claimant had not given the 2^nd defendant any opportunity to verify the repair cost. As stated hereinabove, the evidence adduced by the claimant on the repair cost was insufficient.  The claimant failed to meet the standard of proof.

20.  On the evidence before the Adjudicator, I find that the Adjudicator did not properly consider the contradiction in the claimant’s case and the evidence as a whole, and that he wrongly held that the claimant had discharged its burden of proof. His findings on the repair cost must be set aside accordingly.  I understand that Mr. Ng stated in his affirmation that at trial he had an unquiet mind and hence made a mistake when he was recalling the date on which he sent the Car to Wing Li for repair. Nevertheless, in determining the present appeal, I am bound by the evidence adduced at trial. The claimant can only blame Mr. Ng for not preparing properly for trial and for being careless in giving evidence.

Ground of appeal (2): Second collision

21. The 2^nd defendant alleged that the damage on the Car which Mr. Ho saw was caused by a collision similar to and subsequent to the collision in question. This, which is in fact an alternative ground of appeal, is advanced on the basis of the contradiction in the claimant’s case and chronology of events. I accept the Adjudicator’s findings in this respect. In light of my judgment on ground of appeal (1), it is not necessary for me to deal with this ground.

Conclusion

22. Having set aside the Adjudicator’s findings, I have to consider how I should exercise my power under section 29(2). As stated hereinabove, in exercising the power under section 29(2), I can consider whether, in view of the new evidence contained in Mr. Ng’s affirmation, the case should be remitted to the Adjudicator for a re-trial on the facts.  In my view, a re-trial will serve no purpose. Mr. Ho was the representative of the loss adjusters engaged by Wing Li. Mr. Ng did not appoint Mr. Ho to verify Wing Li’s repair cost. He simply could not prove that he sent the Car to Wing Li for repair only after Mr. Ho verified the repair cost on 5 September 2004. Nor could he produce Wing Li’s receipt for the repair cost to prove the date of repair of the Car. The claimant is a registered company, and Mr. Ng was unable to produce any payment record of the claimant company to prove the date of repair of the Car or the repair cost paid by the claimant. Furthermore, even if the Adjudicator at the re-trial accepts the new evidence on the date on which Mr. Ng sent the Car to Wing Li for repair, there is nothing the claimant can do to remedy the defect in the evidence. The claimant can neither produce photographs of the damaged components nor produce the invoices and receipts concerning the purchase of the components. On the evidence as a whole, even if there were a re-trial, the claimant would never be able to meet the standard of proof. I have with me the evidence before the Small Claims Tribunal. Pursuant to section 29(2), I am entitled to make inferences of fact. The claimant cannot prove that it is reasonable to replace the left headlight, the lower cover of the left headlight and the plastic covering of the front bumper. On the evidence in the present case, the claimant has failed to prove that the replacement of those items had any connection with the collision in question. I conclude that after taking out those three items, the rest of the repair cost is reasonable. In my assessment, the repair cost which the claimant has successfully established amounts to $6,379.50. Accordingly, I allow the 2^nd defendant’s appeal. I set aside the order made by the Adjudicator and reduce the amount of compensation to $6,379.50 plus interest. The 2^nd defendant has to file a claim with the Small Claims Tribunal in order to seek compensation. I affirm the orders made by the Adjudicator regarding interest and costs. The claimant shall pay the 2^nd defendant’s costs of the present appeal, to be taxed if not agreed.