Introduction

The question of whether a claimant can recover loss of earnings from illegal activity was considered in the Court of Appeal case Chung Man Yau and Another v Sihon Co Ltd CACV 199/1996.  In Hong Kong, hawking without a licence is illegal and the claimant in Chung Man Yau made a living from illegal hawking.  It was argued that by allowing the illegal hawkers to recover their loss of earnings from illegal hawking would in some way encourage chaos in the streets of Hong Kong and endorse breaches of the hawking regulations.  In Chung Man Yau, Mortimer VP laid down the principles that illegality is not a bar to recovery of loss of earnings.

Background

The plaintiff made a living from hawking but held no licence. He had an arrangement with his Chinese godmother, who held a hawker’s licence for a fixed pitch outside a street in Yaumatei. The plaintiff paid her and hawked at the pitch illegally.

The plaintiff was injured whilst walking along a pavement by the collapse of part of the defendant’s concrete balcony. As a result, the plaintiff suffered personal injuries. At issue was whether the plaintiff’s claim of loss of earnings from unlicenced hawker business be allowed.

At first instance, the judge held that the plaintiff was not entitled to any award in respect of the loss of earnings. The plaintiff appealed. Before the appeal was heard, the plaintiff was granted the hawker’s fixed pitch licence for the very place where he had been operating for many years before the accident.

Whether illegality is a bar to recovery

Mortimer VP noted that the scope and principles relating to illegality as a defence to liability is uncertain. Nevertheless, his Lordship found the Australian case Mills v Baitis [1968] VR 583 convincing. In this case, the plaintiff claimed damages for loss of earnings as a motor engineer. But motor repairing was not a permitted use of his premises under the planning legislation which provided penalties for such non-permitted activity. However, the court held that public policy did not prohibit the plaintiff from recovering.

Mortimer VP considered that in cases involving claims for loss of earnings from illegal activity, the court must examine all the circumstances, including but not limited to the nature of illegality complained of, the moral and criminal culpability and the plaintiff’s conduct. Regard must also be given to any relevant legislation. Having done that, the court must then decide whether in all those circumstances, it would affront the public conscience or offend the ordinary right-thinking citizen, if compensation for the loss concerned is awarded.

In the present case, Mortimer VP considered the following circumstances relevant:

• the plaintiff was the godson of a licensed hawker who was too old to hawk from the stall herself;
• the stall in question was itself the subject of a valid licence;
• the plaintiff had previously applied for the transfer of that licence;
• the plaintiff now held a licence for that stall;
• there was no causal connection between the defendant’s negligence and the illegality; and
• the legislation gave no indication that an illegal hawker should be disentitled from recovery. That legislation is merely regulatory in nature and selling itself is not an illegal activity.

In conclusion, Mortimer VP allowed the appeal. But he also made it clear that there may be circumstances where an illegal hawker may be disentitled to recover and that will be a matter for the judge to decide based on facts of each case.

The other members of the Court of Appeal concurred. Godfrey JA added that even if the victim’s occupation is not in itself quite lawful he should not be deprived of the compensation to which he would be otherwise entitled unless the occupation is in itself against the public good. For example, damages for loss of earnings to a professional burglar will certainly be denied because allowing him such damages would be contrary to public policy.

Chung Man Yau was subsequently followed and applied in Chiu Wing Sze Karby v Chan Ying Wai and Another [2001] 2 HKLRD 92, where the court awarded the plaintiff loss of earnings from illegally hawking newspapers.  At the end of the day, the question the court is to ask is whether it will be an affront to the public conscience, or offend such an ordinary, right-thinking citizen, if damages is awarded to the plaintiff for loss of earnings from illegal activity.

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.