Cautionary Tale to Injured Plaintiffs: The Danger of a “Private Settlement” After a Traffic Accident

In Hong Kong, over 10,000 road traffic accidents take place every year. For an injured driver, passenger or pedestrian who is not at fault, the usual practice is that the he or she would give a witness statement (Pol. 154) to the police, giving his or her account of the particulars of the accident. 

However, in recent years, there seems to be an increasing tendency where the parties to an accident, often without first obtaining legal advice, reach a “private settlement”, after which they would either sign witness statements with no particulars of the accident, in which they expressly state, in broad terms, that they have settled the matter and that they do not intend to pursue the matter any further, or give no statement at all. 

Such settlements often involve the negligent driver paying the injured person a small amount of money as compensation, with little to no consideration for the usual heads of compensation in common law claims such as PSLA. Little do these injured persons know that the acceptance of such a small amount of money may debar them from making a proper personal injuries claim in Court. 

In Lo Wing Kwong v Wong Ka Wai Ruby [2007] HKDC 400; DCPI 1617/2006, a private car collided with a motorcycle, and the private car driver paid the motorcyclist HK$8,500 as compensation, after which signed homemade documents in Chinese, in effect a release, which stated that after the payment, they would not hold each other liable for the accident (ie “不再追討任何責任“). 

The motorcyclist subsequently commenced proceedings against the private car driver, and the private car driver, whilst admitting negligence, raised an argument that the HK$8,500 paid comprised compensation for personal injuries as well as for vehicle damage, was a full and final settlement of such, and hence debarred the motorcyclist from reviving the claim against the private car driver. The motorcyclist claimed that the compensation received was for vehicle damage only and did not cover compensation for personal injuries sustained by him.

The Court considered the leading case of Bank of Credit and Commerce International SA v Ali & others [2002] 1 AC 251 and found that a release should be construed in the same way as any other contract and that the key question was the intention of the parties ascertained objectively in the context of the circumstances in which the release had been entered into. 

The Court, having considered, among other things, the fact that the motorcyclist was educated to the tertiary level, that he wrote the release himself, the course of negotiation between the drivers, the wording of the release, and in particular, the wording that the parties would not hold each other liable for any liability (不再追討任何責任), and that nowhere in the release contained any wording to limit the settlement to compensation for vehicle damage only, ruled that the parties’ wish was to “wipe the slate clean” by preventing further disputes in future over the accident, which comprised both vehicle damage and personal injuries. 

The Court went on to consider important facts such as the fact that the motorcyclist in his Pol. 154 witness statement stated that he had settled the case with the private car driver and that he did not intend to pursue the matter any further (“…私下和解咗,所以晤想多講,亦唔會追究對方及出庭作供”), and that medical expenses (colloquially known as “湯藥費”) had been discussed before the parties reached an agreement on the settlement sum and signed the release, before coming to the conclusion that the plaintiff was debarred from reviving the claim by reason of the settlement agreement having been made and the settlement sum of HK$8,500 having been paid, and dismissed the motorcyclist’s claim. 

Conclusion

While it is understandable for a layman to want to avoid litigation, one should always bear in mind that his or her rights to claim may be lost by making a hasty settlement. As such, after a traffic accident, an injured person should always seek legal advice as soon as possible to protect his or her own interest.

When faced with the difficult question raised by their clients as to whether they should reach a “private settlement” with the other driver to reduce the risk of unwanted prosecution, for example, for careless driving or other traffic related offences, practitioners should advise their clients that not only such a private settlement, if carelessly worded, could potentially amount to perverting the course of justice (which is a separate and an important topic in its own right), but also of the full civil law implications of entering into such a settlement. 

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