Case Detail

LDLR 3 OF 2006

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO. 3 OF 2006

----------------------

BETWEEN
	馮慶及秦好愛 (以萬安膠輪公司的名營業)	Applicants
	and
	地政總署署長	Respondent

----------------------

Coram: Mr. W. K. LO, Member of the Lands Tribunal

Date of Hearing: 9 September 2008

Date of Handing Down of Decision: 21 October 2008

----------------------

D E C I S I O N

----------------------

Background

1. On 24 April 2006, the Applicants applied to the Lands Tribunal for determination of compensation pursuant to the provisions of the Lands Resumption Ordinance, Cap. 124 (“the Ordinance”). The Applicants claimed for the following items: -

(1) $997,472 plus interest for land taken under section 10(2)(b) of the Ordinance;

(2) $1,562,500 plus interest for loss of goodwill under section 10(2)(d) of the Ordinance;

(3) $801,600 plus interest for several payment under section 10(2)(e)(i) of the Ordinance;

(4) surveyor’s fee to be calculated in accordance with the HKIS Fee Scale 10 under section 10(2)(e)(ii) of the Ordinance.

2. On 12 May 2006, the Respondent filed the Notice of Opposition to deny that the Applicants had any right to claim compensation or alternatively that the amount claimed was assessed in accordance with the Ordinance. The Respondent also contended that the amount claimed was excessive.

3. The parties reached partial settlement and filed a consent summons on 31 December 2007 to settle the first item of claim, i.e. the Respondent agreed to pay the Applicants $700,000 as compensation for the value of land resumed. The remaining items were not settled and hence the trial of the remaining items proceeded on divers dates in January 2008.

4. After trial, I gave my judgment on 6 February 2008 and ordered that: -

“(1) The Respondent do pay the Applicants the sum of $885,014 as the total compensation for the total extinguishment of the business on the Property including the loss of goodwill of $704,100 and the severance payments of $180,914;

(2) The matters of professional fees, interest and costs be adjourned to a date to be fixed, with liberty to apply for consequential and ancillary matters.”

5. The parties could not agree on the liabilities for professional fees and costs and hence these two matters same back before me for determination.

The Respondent’s position

6. At the hearing on 9 September 2008, the Respondent submitted that section 12 of the Lands Tribunal Ordinance, Cap. 127 had provisions on costs, as follows: -

“(1) Subject to the provisions of the Ordinance giving the Tribunal jurisdiction in any matter, the Tribunal may award costs to and against any party to any proceedings and may order that those costs be taxed on the basis of any one of the Scales of Costs set out in the Schedules to Order 62 of: -
(a) the Rules of the High Court (Cap. 4 sub. leg. A); or
(b) the Rules of the District Court (Cap. 336 sub. leg. H).
(2) Subject to any rules made by the Chief Justice under section 10(3), Order 62 of the Rules of the High Court (Cap. 4 sub. leg. A) shall apply to the award, taxation and recovery of costs in the Tribunal.”

7. The Respondent submitted that “under Order 62, rule 5 of the Rules of the High Court, Cap. 4A, the court in exercising its discretion to costs shall take into account any written offer made under Order 22, rule 14 provided that the court shall not take such an offer into account if at the time it is made the party making it could have protected his position as to costs by means of a payment into court under Order 22”. In addition, the Respondent submitted that “Order 22, rule 1 provides for a defendant making a payment into court in any action for a debt or damages” and “it is by now clear that a claim for compensation made to the Lands Tribunal is not such an action: Director of Buildings & Lands v. Shun Fung Ironworks Ltd [1995] 1 HKC 417, per Lord Nicholls, at p.443B-D.”

8. Accordingly, the Respondent submitted that the Tribunal, in exercising its discretion on costs, should take into account the Respondent’s last written offer of $895,739 (the Calderbank offer) made on 2 January 2008.

9. The Respondent contended that the important question to be asked by the Tribunal was whether the Applicants had “acted unreasonably in refusing to accept such offer from the Respondent”: the oft-quoted passage in Butcher v. Wolfe [1999] 1 FLR 334, per Mummery LJ, at p. 340B-C, followed by Wong Wai Chun v. Lewin [2000] 2 HKC 271, per Master Poon, at p. 277 refers (paragraph 62/5/3, Hong Kong Civil Procedure 2008 (Vol. 1)): -

“The proper approach of a Calderbank offer, when it is taken into account on a later argument on costs, is to ask whether the party to whom the offer was made ‘ought reasonably to have accepted the proposal in the letter?’ Or, to put it another way, account must be taken of the reasonableness or otherwise of the refusal to accept the offer: see Cutts v. Head, supra, per Oliver J at 302 and Chrulew & Ors v. Borm-Reid & Co [1992] 1 WLR 176 at 182A. This approach is to be compared with payment into court where, in the absence of a special reason for depriving the offering party of his post-offer costs, the simple question is whether the payment in is equal to or is beaten by the defendants at trial.”

10. The Respondent submitted that the Applicants were unreasonable in refusing to accept the Respondent’s last written offer for the following reasons: -

(1) Compared to the compensation sum of $885,014 awarded by the Tribunal on 6 February 2008, the Applicants’ last proposed figure of $980,000 (on the basis of exclusive of severance payments) made on 31 December 2007 was proved to be excessive whilst the Respondent’s final offer of $895,739 (on the basis of inclusive of severance payments but with separate provisions to cover interest and costs, same as that of the compensation award) was proved to be reasonable.

(2) The accusation of brevity of the period for acceptance of the final offer from the Respondent could not be accepted because (i) the Applicants’ expert had been involved throughout their claim; (ii) their solicitors, Messrs. Charles Ho & Co. were not new to the Applicants’ case either; (iii) it took the Applicants no difficulty to promptly respond to the Respondent’s earlier counter-offer made on 28 December 2007 and, (iv) if the Applicants’ contention were right that they required more time to consider their position, the Applicants failed to explain why they had never cared to ask the Respondent for an extension of time when the last offer dated 2 January 2008 made by the Respondent was received by the Applicants.

11. In summary, the Respondent submitted that it should be entitled to professional fees and costs with certificate for counsel starting from 3 January 2008, to be taxed on the High Court scale if not agreed. In other words, the Respondent did not disagree that the Applicants should be entitled to professional fees and costs up to and including 2 January 2008, the date of last written offer from the Respondent before the trial took place from 7 January 2008.

The Applicants’ position

12. The Applicants sought professional fees and costs against the Respondent for the whole case, including the hearing on 9 September 2008.

13. The Applicants submitted that even though the elderly Applicants could not beat the last offer of the Respondent, the Tribunal should nevertheless grant costs to the Applicants since the Respondent had failed to allow the Applicants sufficient time for consideration of the Respondent’s offer. Therefore, the decision of the Land’s Tribunal in Wong Yik Po & Ors v. Director of Lands [1996] 1 HKC 586 should be followed. In that particular case, it was held that,

“the applicants were entitled to their costs as the Calderbank letter gave insufficient time to consider the offer. The brevity of the offer was exacerbated by the amount of expert witness involved in the case. The respondent had ample time to make a Calderbank letter offer, well before 17 March 1995. There were no special circumstances in the present case to support the very short period the letter allowed. Hence, the costs order nisi was made absolute. The Salavery [1968] 1 Lloyd’s Rep 53 applied (at 595G-H 596A-C).”

14. The Applicants submitted that in the present case, the Tribunal should take into consideration the following factors: -

(1) At the date of the trial, the 1^st Applicant was aged about 81;

(2) According to the last offer made by the Respondent dated 2January 2008, the Respondent only allowed 1 working day for the Applicants to consider;

(3) The last offer made by the Respondent was $895,739, which was only $10,725 more than the compensation of $885,014 awarded by the Tribunal; and

(4) On 27 December 2007, the Respondent had made another offer of $815,739, for which the Applicants were able to beat.

The chronology of events

15. Before determining the important issue of whether the Applicants had acted unreasonably in refusing to accept the “Calderbank offer” made by the Respondent on 2 January 2008, I set out below the offers and counter-offers made between the parties during the period of between two and three weeks prior to the first date of trial hearing on 7 January 2008: -

Applicants (“A”) Respondent (“R”)
20/12/2007
(Thursday) A proposed $1,265,468.70
(excl. severance payment)
28/12/2007
(Friday) R counter offered $815,739 (by fax & post)
31/12/2007
(Monday) A refused to accept $815,739 but proposed $980,000 (excl. severance payment). Offer lapsed on 4/1/2008. Offer received by R on 29/12/2007 (Saturday) at 17:51
31/12/2007
(Monday) Settlement by A and R on the value of land (at $700,000)
2/1/2008
(Wednesday) R made final offer of $895,739, requiring acceptance by 4/1/2008 (Friday)
7/1/2008
(Monday) Trial began

The Tribunal’s determination

16. Having considered the submissions of both parties, I accept the Respondent’s submission that it was unreasonable for the Applicants not to accept the Calderbank offer made by the Respondent on 2 January 2008. For the reasons stated by the Respondent and set out in paragraph 10 above, I agree that it was not unreasonable in the circumstances for the Respondent to require the Applicants to accept the Calderbank offer by 4 January 2008, that being the Friday before 7 January 2008 (Monday), the date fixed for the trial of the Applicants’ application. In reaching that conclusion, I find that I must also take into consideration the following two facts: (i) that the parties were negotiating in final details after the Applicants first put up the proposed compensation sum of $1,265,468.70 in the letter dated 20 December 2007 from the Applicants’ solicitor to the Respondent; and (ii) the parties were able to reach a settlement on 31 December 2008 on the compensation for land taken.

17. I find that one must distinguish the present case from Wong Yik Po case (supra) in which it was held that,

“the tribunal, as a matter of law, is obliged to exercise its costs discretion judicially, on the basis of the present facts. To the extent that binding cases set down guidelines, they must of course, be followed. Where other cases exercise a similar discretion they are at least of interest. When the facts are similar, they will invariably be helpful.”

18. The distinguishment is appropriate because there are many obvious differences between the present case and Wong Yik Po case, as follows: -

(1) In Wong Yik Po case, there was no evidence of any prior offer to the applicants from the respondent. On the other hand, there were exchanges of serious offers between the parties in the present case since 20 December 2007.

(2) In Wong Yik Po case, it was held that “the proper consideration of any offer, proof if the dispute went to trial and the tribunal’s ultimate determination, all principally depend on expert valuation evidence”. The dependence on expert valuation evidence is similar in the present case. However, unlike Wong Yik Po case, when the Tribunal held that “an applicant should in the absence of special circumstances, reasonably be allowed more than four days immediately before trial (reduced to two and a half working days) to consider an offer of $34 m”, the Applicants in the present case had been considering offers from the Respondent since 28 December 2007. Indeed, the Applicants were able to respond, rejecting that offer by a letter dated 31 December 2007. Besides, the Applicants did reach a settlement with the Respondent on the compensation for the value of land taken. So, one can infer from these that the Applicants had been considering, at least since 28 December 2007, the issues of all compensation items with the benefit of expert and legal advice from their appointed valuation expert and their solicitor respectively.

(3) In Wong Yik Po case, it was held that “the chronology established by the pleadings and other document filed, also demonstrates that the respondent had ample time to make a Calderbank letter offer. There are no special circumstances … to support the very short period the letter allowed”. On the contrary, in the present case, the Respondent required the response from the Applicants by 4 January 2008 because that was the last working day before the trial began on 7 January 2008, should there be no agreement between the parties. Obviously, this is because the Respondent wished to make use of the very limited time, between the date of the Respondent’s last offer and the first day of the listed trial date, to see if there could be a settlement.

19. On the whole, therefore, I find that there are special circumstances in the present case to support the short period of time allowed for in the Respondent’s Calderbank letter dated 2 January 2008.

20. As to the costs for the hearing on 9 September 2008, I am of the view that the Applicants do pay the Respondent costs, as the Respondent has succeeded in her arguments.

21. Both parties have agreed that the costs should be on High Court Scale because, among other reasons, the total sum of claims of $1,332,000 lodged by the Applicants exceeded the jurisdiction of the District Court. I also agree that High Court Scale is appropriate for this case.

Conclusion

22. I therefore order as follows: -

(1) The Respondent do pay the Applicants professional fees and costs for the proceedings incurred up to and including 2 January 2008;

(2) The Applicants do pay the Respondent professional fees and costs starting from 3 January 2008;

(3) The amounts of the professional fees are to be assessed by the Tribunal if not agreed; and

(4) The costs are to be taxed on High Court Scale with certificate for counsel if not agreed.

(Mr. W. K. LO)
Member
Lands Tribunal

Mr. Daniel TANG, instructed by Messrs Charles Ho & Co., for the Applicants.

Ms. Teresa WU, instructed by the Department of Justice, for the Respondent.

LDLR 3 OF 2006

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Lands Resumption Application No. 3 of 2006

_______________

BETWEEN

	馮慶及秦好愛(以萬安膠輪公司的名營業)	Applicants
	And
	地政總署署長	Respondent

_______________

Coram : Mr. W. K. LO, Member of the Lands Tribunal

Dates of Hearing : 7 to 10 January 2008

Date of Judgment : 6 February 2008

___________________

J U D G M E N T

___________________

Background

1. This is an application for compensation under the Lands Resumption Ordinance, Cap. 124 (“the Ordinance”). There was no dispute on the Applicants’ entitlement to compensation. Prior to the hearing, the Applicants have settled with the Respondent their claims on the value of the land taken. The outstanding claims relate to (i) the loss of goodwill (under section 10(2)(d) of the Ordinance) and (ii) severance payments (under section 10(2)(e)(ii) of the Ordinance) to Mr. Fung Kin Wah and Mr. Fung Kin Ming, the two sons/employees of the Applicants’ business on the resumed property. The parties agreed that these were all disputes of facts.

2. According to the copy of business registration document produced, one of the Applicants, Mr. Fung Hing began his business since 1964. The business name was amended in 1980’s to Man On Rubber Tyre Co. (“Man On”) (the other Applicant being Madam Chun Ho Oi, wife of Mr. Fung Hing). In 2004, the business of Man On was totally extinguished, which was in turn caused by the resumption of the Applicants’ property known as Shop 7, Ground Floor, On Yip Building, No. 185 Fuk Wing Street, Sham Shui Po, Kowloon, Hong Kong including cockloft thereon (the Property).

The issues in dispute

3. It was not in dispute that the loss of goodwill of the business of Man On should be assessed on the basis of total extinguishment. In calculating the loss of goodwill, the experts agreed on the methodology, being the product of the adjusted historic yearly profit of the business and a Years’ Purchase (“YP”) multiplier, which in turn is dependent on the discounting rate and the number of years Man On could be expected to remain on the Property if there were no resumption. The experts also agreed to use the discounting rate of 20% but they differed on the number of years Man On could carry on its business on the Property. They also differed on the estimation of the normal historic yearly profit of Man On.

4. The experts disputed on whether the Applicants’ two sons Mr. Fung Kin Wah and Mr. Fung Kin Ming, had been, during their respective periods of their employment with Man On, dwelled in the small dwelling as Mr. Fung Hing. Also, there were disputes as to the quantum of the last month’s salary of Mr. Fung Kin Wah and Mr. Fung Kin Ming.

Differences between the parties

5. The parties have managed to narrow down their differences during the hearing. At the closing submissions, the Applicants sought a compensation for loss of goodwill and severance payments of $1,332,000 whilst the Respondent’s correspondent figure was $630,000.

The assessment of the net yearly profits of Man On

6. The Applicants, based on the opinion of their valuation expert Mr. Tony T.N. Chan, suggested that in calculating the loss of goodwill, the multiplicand should be the last year’s profit of Man On whilst the Respondent, based on the opinion of Mr. Patrick W.C. Lai adopted the average profit of the last 3 years’ accounts of Man On.

7. In the accounts presented to the Inland Revenue by the Applicants, the expenses included the staff messing. Mr. Lai contended that it should not be allowed as an item of expenses. In addition, Mr. Lai pointed out that the MPF contribution at 5% of the staff salaries as well as depreciation at $3,500 a year should be added back as items of expenses in arriving at the adjusted historic net profits for the purpose of computing the loss of goodwill. At the final submissions, there was no longer any disagreement as to the treatment of these 3 items of expenses.

8. I therefore adopt the agreed adjustments of the parties, which are also fair and reasonable, in arriving at the net yearly profits of Man On, which are as follows:

Year Adjusted net profit Percentage increase over previous year
1999/00 $167,130 N/A
2000/01 $178,229 +6.64%
2001/02 $215,797 +21.08%
2002/03 $234,700 +8.76%

The normal annual profit of Man On

9. What loss an applicant could be compensated was described by the Lands Tribunal in U.K. as “the loss of ability to derive a future profit out of the particular premises from which he has been dispossessed” in Reynolds v. Manchester City Council [1981] 257 EG 939 at 941. In that case, the Tribunal went on to set out that, “because of the lack of any external check on the figure finally agreed at under this head of claim, the assessment of loss is inherently a difficult task.” The Tribunal adopted an approach adopted by valuers that was similar to the one sometimes employed when assessing the value of a business changing hands in the open market. The calculations of that approach, consisted of 3 stages, namely, firstly, the ascertainment of a figure of historic profit; secondly, the adjustment of this historic profit by making certain deductions such as the profit rent and an allowance for interest on the capital employed in the business and thirdly, the capitalization of the adjusted annual profit by applying a multiplier in terms of years’ purchase. This approach was applied in the Court of Appeal’s decision in Ng Yuen Kang trading as Wing Lee Metal Company v. Secretary for Transport, CACV 4095/2001 (unreported, judgment dated 16 April 2003, on appeal from LDMR 27/2000). In the present case, I agree with the parties that the same 3-stage approach should be used.

10. Mr. Chan giving evidence for the Applicant opined that it would be appropriate to use the last year’s actual profit as to represent the historic profit of Man On. In support of this, he cited the case of Chan Chaw-man, Ching Suk-ming and Chan Suet-fu trading as Kam Yuen Sea Food Hot Pots v. Director of Lands, LDLR 1/1995 (unreported, Land’s Tribunal judgment dated 20 January 1996) in which it was held at paragraph that, “ in view of the steady growing annual profit trend, we do not think it is fair to take an average figure. The latest 1993/94 figure of $908,882 is a good starting point…”

11. On the other hand, Mr. Lai said that “it is essential that the annual net profits adopted should be representative of the normal operation of the business” and that the Tribunal should not depart from the usual approach of adopting the average of the three previous years’ trading profits. He also added that the increase in the adjusted net profits in the present case was nowhere comparable to the magnitude of growth in the Kam Yuen case cited by the Applicants. In addition, Mr. Lai said that it was not reasonable in the actual accounts of the Applicants that the ratio of staff salaries to net sales decrease whilst the net sales of the business increased during the last 3 years of operation. After applying a uniform ratio of staff salaries to net sales (at about 12.8%) to the profits figures of Man On in the last 3 years, Mr. Lai calculated that if his alleged proportional increase in staff salaries were factored into the profits, the yearly profit increase in the last year of trading would be reduced considerably, from 8.76% to only about 3.7%. This supported his opinion that the average of the last 3 years’ profits should be preferred.

12. I disagree with Mr. Lai’s opinion. Firstly, although the magnitude of the growth in profits in the present case was not the same as in the case of Kam Yuen, I find that it was also correct to say that for Man On, there was a “steady growing profit trend” that warrants the use of the last year’s profit instead of averaging the last 3 years’ profits. Secondly, I do not agree with Mr. Lai that the ratio of staff salaries to net profit must be a rigid figure. Although the ratio differs from year to year, I find that they fall within a very narrow range (between 12.8% and 12.3 %). Otherwise, it would be supporting another argument, already rejected by the Lands Tribunal and upheld by the Court of Appeal in Ng Yuen Kang case that the Tribunal should resort to what was known as “salary and wages” approach” in assessing the loss of goodwill.

13. In the present case, I therefore decide in favour of the Applicant and adopt the last year’s adjusted net profit of $234,700 (i.e. year 2002/2003) as the basis for assessing the loss of goodwill

The number of years that Man On could continue its business without the resumption

14. Mr. Fung Hing was 76 years old at the date of reversion of 7 June 2003. The parties agreed that for the purpose of computing the goodwill, the relevant date should be taken as the date of cessation of the business of Man On. The date was 16 March 2004, when Mr. Fung Hing was evicted by force from the Property by the Bailiff. Mr. Tony T.N. Chan opined that Mr. Fung Hing could operate the business of Man On for 9 more years (i.e. to the age of about 86 years old) if not for the resumption. He asked this Tribunal to have regard to the physical appearance and behaviour of Mr. Fung Hing when giving evidence in the Tribunal when deliberating on this matter.

15. On the other hand, the Respondent’s valuation expert Mr. Patrick W.C. Lai gave opinion that it would already be generous on the part of the Respondent to assume that Mr. Fung Hing could work for another 5 years (i.e. to the age of 82 years old) without the resumption. Mr. Lai opined that this already stretched the limit of the working life of an elderly proprietor such as Mr. Fung Hing as the business of Man On by its nature still required considerable physical stamina. Mr. Lai added that when undertaking the valuation at the relevant date of 9 March 2004 (for the purpose of assessing the goodwill), one should disregard the benefit of hindsight as suggested by Mr. Chan.

16. Having regard to all the circumstances of this case including the different opinion of the two experts, I am of the view that it is reasonable and indeed generous on the part of the Respondent to accept that Mr. Fung Hing could be expected to work for 5 more years until he is about 82 years old if there were no resumption. I therefore adopt the Respondent’s estimated number of years instead of the Applicants’ figure. Using the agreed discounting rate of 20%, the YP of 5 years will give a figure of about 3, which will be used below in the computation of the goodwill.

17. Hence, I compute that the loss of goodwill shall be the product of the last year’s net profit after adjustments of MPF and depreciation, i.e. $234,700 and the YP multiplier of 3, giving a sum of $704,100.

Severance payments

18. The Respondent opposed to award the severance payments to Mr. Fung Kin Wah and Mr. Fung King Ming, the 2 sons and employees of Mr. Fung Hing because the Applicants, through their surveyor Mr. Chan replied to the Lands Department on 19 May 2005 that they, together with his daughter, the third employee Miss Pang Wai Chu “are living together” with Mr. Fung Hing at the address of Flat E, 11/F., Capital Building, No. 89 Un Chau Street, Sham Shui Po, Kowloon (“Flat E on 11/F”). Mr. Chan gave evidence that before his writing to the Lands Department in response to the latter’s queries, he had explained the matter to Mr. Fung Hing and had asked him for residential proof but was instructed to give such a reply.

19. The Respondent submits that it is trite law that any claimant such as the Applicants should be compensated with the severance payments lawfully payable to his employees under section 31G of the Employment Ordinance, but not with any excess amount whether that has actually been paid out or not: Director of Public Works v. Dr. Renald Ching and Dr. Marie Feng [1978] HKLTLR 320 at 339.

20. The Respondent submits that although the Applicants were allowed to produce various additional documents during the hearing, they still failed to address the Respondent’s objection in proving, as alleged by the Applicants, that (1) the Applicants moved out from Flat E on 11/F to Flat C on 10/F in 1993; and (2) Mr. Fung Kin Ming moved out from Flat E on 11/F (of the same building) in 1990. Instead, the Applicants only relied on the oral evidence of Mr. Fung Hing in support of their case.

21. According to section 4(2)(b) of the Employment Ordinance, the provisions of the Ordinance including those relating to severance payment does not apply “to a person who is a member of the family of the proprietor of the business in which he is employed and who dwells in the same dwelling as the proprietor”. Hence, the Respondent submits that the said clear wordings of the Ordinance apply to exclude application of the severance payments for Mr. Fung Kin Wah and Mr. Fung Kin Ming.

22. The Applicants submit that this Tribunal should accept the evidence of Mr. Fung Hing, who is a reliable witness. Mr. Fung Hing also produced various documents to support of the Applicants’ case, including copies of land searches of various properties dwelled by Mr. Fung Hing and his two sons, as well as other documents relating to these properties.

23. I agree with the Respondent that the documents relating to these properties with the exception of one, a copy of tax return of Mr. Fung Kin Wah, do not lend support to the Applicants’ case directly. However, having considered all the evidence, I accept Mr. Fung Hing’s evidence because (1) having regard to the size of Flat E on 11/F (the address of Mr. Fung and his 2 sons as reported to the Lands Department by Mr. Chan), which is only about 500 sq. ft. in gross floor area, and that of another property, Flat C on 10/F in the same building, and (2) the family’s ownership of the various properties at various dates, it is more probable than not that Mr. Fung and his 2 sons were not living together (and with their respective families) at Flat E on 11/F since the purchase of another flat at Flat C on 10/F in 1993. Also, the actual occupation and living condition of members of the three Fungs’ families (with Mr. Fung Hing as head of the extended family) at various properties at various dates were consistent with the dates of the purchases (and sales, if applicable) of these properties.

24. I also accept the suggested explanation by counsel for the Applicants that Mr. Fung Hing, when asked the question of the location of dwelling by Mr. Tony T.N. Chan, might have misunderstood the meaning of the question.

25. Similarly, I do not find that the possession of the keys by Mr. Fung Hing of Mr. Fung King Wah’s flat at Flat E on 11/F or that the 2 families living on Flat E on 11/F and Flat C on 10/F had a very close relationship of eating and doing laundry together would suggest that they dwelled in the same dwelling. The important criterion of a dwelling place is the place where one sleeps regularly over-night.

26. In conclusion, I find, on balance of probabilities, that at the relevant date of cessation of the business of Man On and before that, (i) while Mr. Fung Kin Wah has continued to dwell at Flat E on 11/F, (ii) Mr. Fung Hing together with his wife and their daughter have moved one floor downwards to Flat C on 10/F since its purchase in 1993, and (iii) Mr. Fung Kin Ming lived at a separate dwelling at various locations since moving out from the building.

The last month’s salaries of Mr. Fung Kin Wah and Mr. Fung Kin Ming

27. Mr. Fung Hing gave evidence that the last month’s salary of either Mr. Fung Kin Wah or Mr. Fung Kin Ming was the same, at $21,000. However, there was no documentary proof of such payments. Therefore, the Respondent did not accept this figure as the last month’s salary of these two employees. They would only accept the average monthly sum of the two employees’ “Salary & Allowance” as shown in the copy of profit & loss account for the year 2002/2003 produced by the Applicants to the Inland Revenue Department.

28. In the absence of any other proof of payment, I do not accept the evidence of Mr. Fung Hing in his statement of the last month’s salaries of his two sons/employees, as they are much higher than the average of “Salary & Allowance” as shown in their accounts submitted to the Inland Revenue Department for the year 2002/2003 and are also inconsistent with the previous trend of “Salary & Allowance” shown in the previous years’ accounts.

29. In the circumstances, based on figures shown in the accounts, I calculate the compensation for the item of severance payment made by Mr. Fung Hing to the two eligible employees in the total sum of $180,914, a break-down of which is as follows: -

Mr. Fung Kin Wah: $14,625 x 11 x 2/3 = $107,250

Mr. Fung Kin Ming: $9,208 x 12 x 2/3 = $73,664

Conclusion

30. In light of the above findings, I make the following orders: -

(1) The Respondent do pay the Applicants the sum of $885,014 as the total compensation for the total extinguishment of the business on the Property including the loss of goodwill of $704,100 and the severance payments of $180,914;

(2) The matters of professional fees, interest and costs be adjourned to a date to be fixed, with liberty to apply for consequential and ancillary matters.

(Mr. W. K. LO)
Member,
Lands Tribunal

Mr. Daniel TANG, instructed by M/S Charles Ho & Co. for the Applicants.

Mdm. Teresa WU, instructed by the Department of Justice, for the Respondent.

馮慶及另一人(以萬安膠輪公司的名營業) v. 地政總署署長

Related cases with same parties

Files (2)

	Applicants (“A”)	Respondent (“R”)
20/12/2007 (Thursday)	A proposed $1,265,468.70 (excl. severance payment)
28/12/2007 (Friday)		R counter offered $815,739 (by fax & post)
31/12/2007 (Monday)	A refused to accept $815,739 but proposed $980,000 (excl. severance payment). Offer lapsed on 4/1/2008. Offer received by R on 29/12/2007 (Saturday) at 17:51
31/12/2007 (Monday)	Settlement by A and R on the value of land (at $700,000)
2/1/2008 (Wednesday)		R made final offer of $895,739, requiring acceptance by 4/1/2008 (Friday)
7/1/2008 (Monday)	Trial began

Year	Adjusted net profit	Percentage increase over previous year
1999/00	$167,130	N/A
2000/01	$178,229	+6.64%
2001/02	$215,797	+21.08%
2002/03	$234,700	+8.76%