CHAN KAM PUI AND YANG WEI, THE ADMINISTRATORS OF THE ESTATE OF YANG FENG, DECEASED v. DR LAM MAN HO AND OTHERS

HCPI 128/2013

[2021] HKCFI 2027

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 128 OF 2013

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DECISION

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My decision

1.  I refuse to grant leave in respect of the proposed amendments contained in paras 53A to 53F, 74(4A) and (4B) of the draft amended re‑re‑revised statement of damages.

2.  In these paragraphs, the plaintiff introduces two new claims under the headings “Pre-Trial Entrepreneurial Skilled Services” and “Post-Trial Entrepreneurial Skilled Services”.  Together, the new claims make up a total sum of $4,297,874.45.

3.  They are claims for loss of service dependency made on behalf of the three daughters of the deceased as dependants pursuant to section 6(1) of the Fatal Accidents Ordinance, Cap 22.

4.  The youngest daughter is a minor.  The deceased passed away shortly after giving birth to her in March 2010.

5.  The present action is brought for medical negligence against the doctors, the hospital and the healthcare company involved in the delivery of the baby.  Based on the draft amendments, the total claim amount is over $35 million.

6.  The proposed amendments read:

“ Pre-Trial Entrepreneurial Skilled Services

53A. Without prejudice to the claim for loss of dependency arising from the uninherited rental income as pleaded in paragraph 38A above, it is averred that the 3 Daughters suffered further loss as a result of the Deceased’s death by reason of the following:

(1) The Deceased’s flair, experience and entrepreneurial skills in managing and/or developing the portfolio of the 5 properties pleaded in paragraph 35 above and the financial benefits that she would have brought to the family;

(2) There was considerable development potential in the properties which the Deceased had acquired. The skills which the Deceased could/would have applied to the property portfolio included, but not limited to, asset management skills and/or property management skills;

(3) All the skills which the Deceased would have brought to bear on her properties and the time, effort and energy which she would have devoted to maintaining and augmenting that property portfolio would have been an economic or pecuniary benefit to her dependents, which however have now been permanently lost to them by reason of her death.

53B. As a result of the loss of the Deceased’s entrepreneurial and/or management skilled services, the 3 Daughters claim the loss of full rental income in respect of Deceased’s matrimonial ownership in each property as follows:

Properties	Value of entrepreneurial skilled services
(1)    Clifford Estates Flat	HK$6,000 x 50% = HK$3,000 per month
(2)    Science City Shop	HK$13,800 x 25% = HK$3,450 per month
(3)    Vanke City Flat	HK$10,173.21 x 50% = HK$5,086.61 per month
(4)    Tian He N Rd Shop 614	HK$5,892,86 x 50% = HK$2,946.43 per month
(5)    Tian He Flat 2202	HK$15,000 x 50% = HK$7,500 per month
Total:	HK$21,983.04 per month

53C.    In so far as may be necessary for the purpose of assessing this head of damage, the value of the Deceased’s entrepreneurial skilled services is discounted by the uninherited rental income as pleaded in paragraph 38A above:

HK$21,983.04 [Services] – HK$12,308.37 [Uninherited rental] = HK$9,674.67 per month

53D.    For the 12 years from the date of death on 7^th March 2010 to the notional date of trial on 7^th March 2022, the Plaintiff claims in respect of the pre-trial value of entrepreneurial and/or management skilled services of the Deceased which would have enured to the benefit of the 3 Daughters as computed below:

HK$9,674.67 per month x 12 months x 12 years =

HK$1,393,152.17

     Post-Trial Entrepreneurial Skilled Services

53E.     Irrespective of whether the 3 Daughters will ultimately inherit the 5 properties, the Plaintiff avers that the Deceased would have continued to render her entrepreneurial skilled services in the management of the properties until her natural death.  The Deceased was born on 22^nd February 1971 and would have been 51 years old at the notional date of trial on 7^th March 2022.

53F.     According to Chan’s Table 2, the multiplier for pecuniary loss for life (females) at the discount rate of 2.5% is 25.02.  In the premises, the Plaintiff claims post-trial value of entrepreneurial skilled services as follows:

HK$9,674.67 per month x 12 months x 25.02 [Life multiplier] = HK$2,904,722.28”

7.  The primary issue in dispute at the hearing is whether the new claims, as pleaded, are bound to fail as they are unsustainable at law.  The defendants say that they are and for that reason leave to amend should not be granted for the plaintiff to pursue the claims at trial.

8.  I share that view.  In coming to that view, similar to a striking out application, I have assumed that the facts as pleaded to have given rise to the alleged loss to be true.

9.  More specifically, I have assumed the facts pleaded in para 53A to be true.  That is to say, by reason of the deceased’s flair, experience and entrepreneurial skills in managing and/or developing the property portfolio, she would have brought to the family financial benefits. She would have exercised her skills and devoted time and effort to maintaining and augmenting the property portfolio and that would have brought an economic or pecuniary benefit to her daughters.  However, by reason of her death, the benefit is now permanently lost to them.

10.  However, in my view, the above factual basis is not capable of giving rise to the loss as pleaded in paras 53B and 53C as a matter of law.

Legal principles

11.  Section 6(1) of the Fatal Accidents Ordinance provides:

“In the action, such damages, other than damages for bereavement, may be awarded to dependants in such proportions as reflect their respective injuries as a result of the death.”

12.  The foundation of a claim under this section is the dependant’s loss of expectation of a future pecuniary benefit from the deceased: Wood v Bentall Simplex Ltd [1992] PIQR P332 at P342.  It has long been recognised that a claim can be made in respect of services rendered by the deceased.  It is not necessary for the dependants to show that they were in receipt of a pecuniary advantage at the time of death.  If a dependant has a reasonable expectation of pecuniary benefit in the future, that will be sufficient to found a claim: Cape Distribution Ltd v O’Loughlin (2001) PIQR Q73 at para 12.

13.  In Cape Distribution, illustrations of lost services were given to explain the basis of such a claim (at para 13):

“This principle has been applied time and time again by the court in cases where the claimant has lost the services of a wife or mother. It has also been applied to the loss of a husband’s services as handiman, gardener, or any other such service activity as has been lost and has a money value in the sense that it will cost money to replace. I can see no difference in principle between the loss of services of that domestic nature, and the loss of services which have a positive financial value to the family. For example, a husband may be so skilled and successful in dealing with the family’s investments that he has no need of a stockbroker or other financial adviser. His death, whatever other loss may result, will mean that the family will have to replace that expertise and advice at the appropriate market cost. That cost is as much a loss to the family as could be the cost of a gardener. And, clearly, the position cannot be different, indeed it is a fortiori, if the family’s sole source of support is the investment portfolio managed by such a husband.”

14.  The assessment of whether there is any loss of pecuniary benefit under the statutory provision depends on the particular facts of each case: Wood at P342.  In a claim for lost services, it is a question of fact as to whether the dependants have lost the alleged services of the deceased.  The dependants must also show that the loss is capable of being valued in money terms.  It is a jury type of question.  The loss which the court has to assess is a loss which will be sustained in the future.  The assessment thus involves making estimates: Malyon v Plummer [1964] 1 QB 330 at 348-349.  Precise calculations are often not possible or practicable. Where that is the case, the court is entitled to use the material before it to come to what overall appears to be a fair conclusion as to the loss which is sustained: Cape Distribution at paras 11, 19 and 29.

15.  In Cape Distribution, the English Court of Appeal set out what the court’s task is (at para 14):

“It follows, it seems to me, that the court’s task in any case is to examine the particular facts of the case to determine whether or not any loss in money or in monies worth has been occasioned to the dependants and if it determines that it has, it must then use whatever material appears best to fit the facts of the particular case in order to determine the extent of that loss.”

16.  It is important to bear in mind that there is no prescriptive or “right” method by which the loss is to be identified or calculated apart from the principle that it requires that some damage capable of being quantified in money terms must be established: Cape Distribution at para 11.

17.  The question whether there has been a loss of dependency and, if so, how much, is a question of fact.  When answering the question, the court takes a realistic and common sense approach.  There is no hard and fast or prescriptive approach to the determination or quantification of loss of dependency.  The question of whether the dependant has suffered a loss of dependency is to be determined by reference to the time of death: Rix v Paramount Shopfitting Co Ltd [2020] 4 WLR 123 at para 60.

18.  It has been established in Cape Distribution that a viable claim may be made under the statutory provision in the following scenario.  The deceased had considerable flair and energy in the management of his business as a property developer.  He had brought to bear his skills on his business.  He had devoted time, effort and energy to maintaining and building up a property portfolio.  These had brought about increases in both the capital and the income value of the property portfolio.  These were held to be of economic or pecuniary benefit to his dependants, which have now been lost to them by reason of his death.  Such loss is capable of being measured in money terms: see paras 7 and 15.

19.  In the context of section 6(1) of the Fatal Accidents Ordinance, a question arises as to whether damages can be recovered under that section for lost support or income if the source of that support or income is inherited by the dependants. 

20.  The general answer to that question is no.  In Wood, Staughton LJ stated (at P349) that if the dependants have inherited the source of the income upon which they were dependants, they have not lost the income. They have suffered no loss under the statutory provision.

21.  The principle was affirmed, more recently, by the English Court of Appeal in Welsh Ambulance Services NHS Trust v Williams (2008) EWCA Civ 81 at para 36:

“Judge Hickinbottom drew from this case the general principle, which is plainly correct, that where the widow inherits the assets which have produced the income from which the dependency derived, she cannot have both the inherited assets and damages for loss of the income.”

22.  Hence, in a claim for lost income, a distinction needs to be drawn between an income-producing asset, such as a rental property or an investment, and a business which was benefiting from the labour, work and skill of the deceased.  In the former case, if the dependants have inherited the asset, ie the source of the income, there is no loss of income suffered by the dependants as such.  No loss of financial dependency can thus be claimed. In the latter case, the dependants will have lost the value of the hard work of the deceased as a result of the death.  Hence, they will have a financial dependency claim.  See Wood at P349; Rix at para 60.

23.  The rationale is that where a dependant inherits the assets which have produced the income from which the dependency derived, he cannot have both the inherited assets and damages for loss of the income.  On the other hand, where income had been earned but would come to an end at the death, that income would give rise to a claim of dependency: Wood at P349; Welsh Ambulance at paras 36 to 37.

24.  There are cases where the income is in part derived from capital and in part derived from the labour of the deceased.  In those cases, the court’s task is as stated by Staughton LJ in Wood (at P349):

“The court has to ascertain how much loss has arisen because the deceased is no longer alive and able to work, and how much of the deceased’s income was derived solely from capital which the dependants have inherited.”

25.  Lastly, in the Cape Distribution scenario, when quantifying the loss in money terms, it has been held that it would be appropriate to do so by ascertaining the monetary cost of replacing the services provided by the deceased.  The basis of this is that the dependant has lost the services provided by the deceased as a result of the death: Tsang Mei Ying v Lam Pak Chiu [2000] 1 HKLRD 883 at 888F-I.  The approach was adopted in Cape Distribution at para 16:

“ But one thing is certain, namely that the respondent would have to have professional advice in order to manage the family assets properly and effectively. The cost of such advice therefore represents the most secure basis from which to attempt to place a pecuniary value on the loss to the dependants arising from Mr O’Loughlin’s death. Whether she chooses to have such an adviser or not is another matter. But the fact will always remain that she and the dependants will have lost the services of Mr O’Loughlin as the manager of the family assets, and that loss is capable of being valued in money terms. I have no doubt, in these circumstances, that the judge was entitled to take the course that he did.” (underline added)

26.  Also in Welsh Ambulance, the trial judge held at para 67 of his judgment (cited in para 40 of the Court of Appeal judgment at para 40):

“67. By Mr Williams’ death, his dependants have lost his very considerable skills and services in relation to the builders’ merchant business, and wealth creating property and steam engine activities. They can be valued in moneys worth: and, in the circumstances of this case, I consider their dependency can most appropriately be measured by asking how much it would cost to replace those skills with another person capable of bringing those skills to bear upon the various activities engaged upon by Mr Williams. That is the approach I propose to adopt.” (underline added)

27.  The ruling was upheld by the Court of Appeal, at para 51:

“Once it has been established that the surviving members of the family were indeed dependants of Mr Williams, the judge’s task was to assess the value of the dependency. He was asked to do that on a global basis. It was apparent to the judge that the method of assessment which had been adopted in Wood and O’Loughlin was much the most convenient way of doing this. That was because, by focussing on the value of the deceased’s services, it was possible to exclude any benefit which had come to the family by inheritance under the deceased’s will. Any other method of assessment would have been difficult and complicated because of the need to separate out income which was derived from capital from that which was derived from labour. The method adopted by the judge went straight to the value of the deceased’s labour. The judge was right to choose this method of assessment.” (underline added)

28.  However, the authorities would appear to suggest that the replacement cost method is not necessarily the only method to quantify the loss of dependency in any given case.  There is no one “right” method of quantification.  It must depend on the facts of each case.  See, eg, the general guidance given in Rix. 

29.  Another possible method was mentioned in Cape Distribution (at para 15), namely the extent to which the portfolio or asset managed by the deceased would have been more valuable than the asset managed by or on behalf of the dependant.  This would involve a comparison of on the one hand, the likely increase in income and capital to be expected from the dependant, and on the other hand a projection of the increase in income and capital values of the portfolio based upon the deceased’s track record.  In that case, the Court of Appeal however noted that while such exercise was “theoretically possible”, it would be “so riddled with uncertainty and speculation as to make it difficult for a judge to find a secure basis for any conclusions that he might seek to reach”.

Discussion

30.  The pleaded facts in para 53A are prima facie capable of giving rise to a loss of dependency: see Cape Distribution.  Assuming that the pleaded facts in para 53A are true, there is an arguable case that the daughters have suffered loss of dependency by reason of the loss of the entrepreneurial services provided by the deceased.

31.  As pleaded in paras 53B and 53C, the plaintiff has quantified such loss to be equal to the loss of full rental income of the deceased’s share in the property portfolio, and if necessary the loss is to be discounted by the uninherited rental income. 

32.  It is not immediately apparent why the loss of the deceased’s services is quantified in this way.  There is no explanation in the relevant paragraphs why the full (or discounted) rental income would fairly represent the value of the deceased’s entrepreneurial services.

33.  The monthly rental figures set out in para 53B represent the average monthly rentals received for the respective properties when they were let out after the deceased passed away.  For instance, the Science City Shop has been rented out since December 2013 continuously with an increase in the monthly rental every year.  The sum of $13,800 is the average figure of the monthly rents received (or to be received) for that property from December 2013 to November 2023.  (Vanke City Flat has not been let out.  The monthly rent stated in para 53B is the arithmetic average of the monthly rents received in respect of the other four properties after the death of the deceased.)

34.  This total monthly rent has been (or, in the case of Vanke City Flat, would have been) received without any input from the deceased.  However, the dependants are now claiming this very sum as representing the value of the entrepreneurial services which the deceased would have rendered on the property portfolio had she lived.  On the face of it, it is illogical.

35.  If the plaintiff is saying that owing to the deceased’s astute business sense or well-established business connections, she would have been able to do better than the market and rent out the property at a premium over the prevailing market price, arguably the plaintiff may quantify the value of the deceased’s services as being equal to the premium which would have been received had she lived.  This exercise involves a comparison between what the daughters would likely achieve (ie fetching the market rent) and what the deceased would have achieved with her skills had she lived.  That may in theory be a legitimate way of quantification, even though in Cape Distribution doubt was expressed due to its uncertain and speculative nature.  However, that is not what the plaintiff is pleading here.

36.  There is simply no apparent logic why the loss of the deceased’s services should be equated with the full (or discounted) rental income that was in fact received after the deceased passed away.

37.  Worse still, as submitted by Mr Christopher Chain, appearing with Ms Sakinah Sat for the defendants, on the face of it, when quantified this way, the daughters are now effectively claiming the deceased’s share of the rental income of the properties.  Some share of the properties has been inherited by the daughters from the deceased.

38.  Such a claim would therefore offend the principle established in Wood, Welsh Ambulance and Rix. 

39.  There being no apparent logic or no express explanation for the quantification of the claim as pleaded, the plaintiff is to be taken to be in effect claiming the loss of rental income of the properties, even though the plaintiff’s premise for the claim is the loss of the deceased’s entrepreneurial skills.

40.  Mr Kumar Ramanathan, SC, appearing with Mr Edward Fan for the plaintiff, submitted that the full rental income is used by the plaintiff as a reference point on which the claim for loss of service dependency can be postulated.  The quantification of such loss is a factual issue.  In fatal cases, the plaintiff (and the court) when trying to quantify such loss is leaping into the unknown.

41.  The plaintiff does not know for sure what the deceased would or would not have done in managing the properties.  The plaintiff will have to look for a reference point to advance their claim.  And they should look for the best way to articulate the claim.

42.  Mr Ramanathan submitted that on the facts of the case, to quantify the loss of services by reference to the cost of replacing the deceased’s services (as in Cape Distribution) does not seem real as the dependants cannot presume that they will be able to find someone to replicate the role of the deceased.  It would therefore be stretching the credibility of their case on service dependency if the loss was quantified that way.  In the circumstances, the best reference point is the full rental income.  It may be that the amount will be adjusted or reduced depending on the evidence that is available at trial.  However, the plaintiff should not be shut out from making a claim under this head, especially when the interest of a minor is involved.

43.  In his written submissions, the following point was made:

“In the context of the present case, the fact that the pleaded values of the entrepreneurial skilled services are identical to the uninherited rent of the properties are merely factors for assessing the ultimate value of the skilled services, which may or likely be subject to appropriate discounts.”

44.  Mr Ramanathan’s submissions on the difficulties inherent in the quantification process echo the authorities in this area and underpin why the court must adopt a realistic and common sense approach in determining whether a claim for service dependency is made out and if so how much loss the dependants have suffered. 

45.  For the purpose of the present amendment application, it is only for the plaintiff to make out an arguable case of such loss.  There is bound to be a lot of room at trial for parties to place different monetary values on such loss.  It would be wrong for me to disallow the claim outright simply because the amount claimed is liable to be adjusted or reduced at trial. 

46.  In the present case, the plaintiff has chosen to formulate the loss by a direct linkage to the full (or discounted) rental income.  As explained above, there is no apparent logic or no express explanation in the draft pleading as to why the rental income can arguably or possibly represent the loss of the deceased’s services.  At the hearing, Mr Ramanathan was not able to suggest any potential factual basis to support such quantification.  Worse still, the claim quantified this way would violate the well-established principle that rental income is not capable of forming part of a dependency claim if the properties are inherited by the dependant. 

47.  I remind myself that there is no prescriptive or hard and fast method to quantify the alleged loss of entrepreneurial services.  One must apply a common sense approach and arrive at a fair figure which reflects the practical realities of the case.  An exercise of this nature, generally speaking, can only be conducted properly at the trial.  The plaintiff should not be shut out from their claim summarily just because there are question marks over the exact figures they are now putting forward.  The claim should only be disallowed if one can say definitively at this stage that it is untenable at all. 

48.  Here, my view is that the plaintiff has failed to outline or articulate how the “reference point” which they have chosen is capable of forming a viable basis in support of their quantification of the alleged loss, both as a matter of logic and as a matter of law.  The loss, as pleaded, is thus unarguable.

Orders

49.  For these reasons, the new claims should not be allowed to proceed to trial as they have no prospect of success.

50.  The defendants have no objection to the other proposed amendments to the re-re-revised statement of damages.

51.  I therefore make an order in terms of paras 1 and 2 of the plaintiff’s amendment summons save that the proposed paras 53A to 53F, 74(4A) to (4B) should be excluded.

Costs order nisi

52.  On costs, Mr Ramanathan accepted that costs of and occasioned by the amendments (if allowed) should be to the defendants as the plaintiff is seeking an indulgence from the court.  He further agreed that the costs thrown away in preparing the answer to the re-re-revised statement of damages should also be paid by the plaintiff to the defendants.

53.  I have ruled against the new claims for loss of service dependency, which was the subject-matter of the dispute of the hearing.  Costs should follow the event.  The defendants should have costs of the hearing.

54.  Mr Chain asked for costs to be paid and taxed forthwith if not agreed.  He submitted that it is clear from the procedural history in relation to the statement of damages that there has been serious and inexcusable delay on the part of the plaintiff in taking out the present application. 

55.  I consider that Mr Chain’s submission is validly made.  I wish to make a note of the following unusual features as revealed from the procedural history insofar as the statement of damages is concerned:

(a)  The plaintiff filed the re-revised statement of damages in October 2018.  That pleading was considered to be not satisfactory by Bharwaney J.

(b)  The judge then directed the plaintiff to provide a draft re-re-revised statement of damages for the court’s approval.

(c)  A draft was produced in January 2019.  That draft was not approved.

(d)  In May 2019, the plaintiff lodged a second draft.  It was settled by senior counsel.

(e)  In August 2019, Bharwaney J granted conditional leave for the plaintiff to file the re-re-revised statement of damages in the form of that draft.  The condition was that the plaintiff should file a further supplemental list of documents in support of the claims.

(f)  A number of checklist review hearings then followed in which the plaintiff’s disclosure condition was being dealt with.

(g)  The plaintiff eventually satisfied the condition in July 2020.

(h)  Just when the judge was about to grant further directions, including the filing of an answer, at the hearing on 3 September 2020, the plaintiff attempted to seek leave to amend the re-re-revised statement of damages without at the same time producing a draft for the court’s consideration.   The judge refused to entertain the application.

(i)  The present amendment summons, accompanied by the proposed amendments, was eventually taken out on 29 October 2020.

56.  The above chronology really speaks for itself.  There is clearly dilatoriness on the part of the plaintiff in coming up with and sorting out the disclosure issues surrounding the re-re-revised statement of damages.

57.  When the plaintiff produced the second draft of the re-re-revised statement of damages to Bharwaney J for approval in May 2019, they ought to have made sure that they were in a position to formulate their claims fully and properly, including gathering all the relevant documents in support of their claims.  If they had been prosecuting the action diligently, it would seem to me that many of the present amendments could have been incorporated into that draft.  But it was only in October 2020 that the amendments were finalised and ready. 

58.  In the affirmations filed in support of the amendment summons, the plaintiff’s solicitors sought to explain that the amendments could not be finalised earlier when the disclosure process was not yet completed and they had had difficulties in getting documents from the plaintiff.  But that only goes to explain why the solicitors were (perhaps) not to be blamed for the delay.  There is a marked silence in the affirmations as to why the plaintiff themselves were not able to locate the documents in the first place save for a bland assertion that the deceased’s husband resided in the USA whereas the documents were in the PRC at the time when senior counsel was instructed to settle the draft.

59.  The re-re-revised statement of damages was the plaintiff’s third attempt to revise the statement of damages.  (The action was commenced in 2013.)  It was incumbent on them to act diligently to formulate their claims fully and properly.  If there was a good reason why they could not do so in May 2019, they have not said so.  There is in any event no proper explanation why it had taken them many more months and only finally in October 2020 to come up with the draft amendments.  Dragging on the proceedings like this is not fair to the defendants.

60.  In view of such dilatoriness, I accept that it is an appropriate case to order immediate taxation of the defendants’ costs.

61.  I therefore make the following costs order nisi.  The defendants do have costs of and occasioned by the amendment summons, including all costs reserved and costs of the hearing, and the costs thrown away in preparing an answer to the re-re-revised statement of damages.  The costs are to be taxed forthwith if not agreed.