YUEN HIU TUNG v. HOSPITAL AUTHORITY

YUEN HIU TUNG v. HOSPITAL AUTHORITY

The Cookson v Knowles 4.5% assumption is no longer valid in Hong Kong. The court sets pragmatic, horizon-based real net discount rates after deducting price inflation and reasonable management fees, using asset mixes and review periods matched to claimant needs: -0.5% for needs up to 5 years, 1% for needs up to 10 years, and 2.5% for needs exceeding 10 years. These rates follow from (a) adopting price inflation (not payroll) for non-earnings losses, (b) deducting reasonable management fees where mixed portfolios (equities/bonds) are used, (c) using a 5–7 year review for fixed income/EFNs and a 12-year review for equities held as long-term inflation hedge, and (d) recognising the limited...

Citation
YUEN HIU TUNG v. HOSPITAL AUTHORITY
Parties
Plaintiff (hcpi 235/2011): Chan Pak Ting; Defendant (1st): Chan Chi Kuen; Defendant (2nd): Chan Yiu Fai Joe; Plaintiff (hcpi 671/2007): Li Ka Wai (minor) by his mother So Yuet Wa; Defendant (hcpi 671/2007; HCPI 228/2010): Hospital Authority; Plaintiff (hcpi 228/2010): Yuen Hiu Tung (minor) by grandmother Yip Hei Siu
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
7 February 2013
Case Number
HCPI228/2010
Procedural Posture
Personal Injuries / Judgment on Preliminary Issue (discount Rate/multiplier)
Outcome
Preliminary issue determined: Cookson 4.5% discarded for Hong Kong; discount rates established by horizon; costs ordered
Legal Topics
Discount Rate, Multiplier, Cookson V Knowles, Wells V Wells, Simon V Helmot, Inflation, Investment Returns, Management Fees, Wage Vs Price Inflation, Exchange Fund Notes, Mpf/orso Funds
Source Language
EN
Tort Personal Injury Damages Evidence Actuarial Law Economic Policy Discount Rate Multiplier +9 more

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Parties

Chan Pak Ting

Plaintiff (hcpi 235/2011)

Chan Chi Kuen

Defendant (1st)

Chan Yiu Fai Joe

Defendant (2nd)

Li Ka Wai (minor) by his mother So Yuet Wa

Plaintiff (hcpi 671/2007)

Hospital Authority

Defendant (hcpi 671/2007; HCPI 228/2010)

Yuen Hiu Tung (minor) by grandmother Yip Hei Siu

Plaintiff (hcpi 228/2010)

Procedural Posture

Personal Injuries / Judgment on Preliminary Issue (discount Rate/multiplier)

Legal Issues

  1. 1 Whether the Cookson v Knowles assumption of a 4.5% net rate of return remains valid in Hong Kong
  2. 2 Appropriate method to calculate the net discount rate (price inflation vs payroll inflation)
  3. 3 Whether management fees must be deducted when setting the net rate

Ratio Decidendi

The Cookson v Knowles 4.5% assumption is no longer valid in Hong Kong. The court sets pragmatic, horizon-based real net discount rates after deducting price inflation and reasonable management fees, using asset mixes and review periods matched to claimant needs: -0.5% for needs up to 5 years, 1% for needs up to 10 years, and 2.5% for needs exceeding 10 years. These rates follow from (a) adopting price inflation (not payroll) for non-earnings losses, (b) deducting reasonable management fees where mixed portfolios (equities/bonds) are used, (c) using a 5–7 year review for fixed income/EFNs and a 12-year review for equities held as long-term inflation hedge, and (d) recognising the limited...

Court Disposition

Preliminary issue determined: Cookson 4.5% discarded for Hong Kong; discount rates established by horizon; costs ordered

Orders

  • Cookson v Knowles 4.5% assumption declared no longer valid in Hong Kong for present purposes
  • Discount rates fixed: -0.5% real net for plaintiffs with needs up to 5 years; 1% real net for plaintiffs with needs up to 10 years; 2.5% real net for plaintiffs with needs exceeding 10 years