LDLR 4/2006
IN THE LANDS TRIBUNAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
Lands Resumption Application No. 4 of 2006
______________________
| | 梁續有(以天祥參茸藥行的名營業) | Applicant |
| | 及 | |
| | 地政總署署長 | Respondent |
______________________
| Coram: | H.H. Judge WONG, Presiding Officer of the Lands Tribunal and Mr. W. K. LO, Member of the Lands Tribunal |
| Dates of Hearing: 10, 11, 14 to 18, 22 and 23 January 2008 |
| Date of Handing Down of Judgment: 22 February 2008 |
______________________
JUDGMENT
______________________
Background
1. This is an application made by the Applicant for determination of the amount of compensation pursuant to section 8(2) of the Lands Resumption Ordinance, Cap. 124 (“the Ordinance”). The Applicant was the registered owner and occupier of the property known as Shop 6 (inclusive of a cockloft), Ground Floor, On Yip Building, No. 185 Fuk Wing Street, Sham Shui Po, Kowloon, Hong Kong (“Shop 6”).
2. By a notice of resumption dated 26 February 2003 and published in G.N. 1484, the government informed the Applicant that Shop 6 would be resumed for implementation of development proposal K26 on the expiration of 3 months from the date of the affixing of the notice to Shop 6. The notice was affixed to Shop 6 on 7 March 2003. Thus, upon expiration of the 3-month notice period, reversion took place on 7 June 2003.
3. Prior to the resumption, the Applicant had been practicing as a Chinese medicine practitioner and running his business as Tin Cheung Ginseng Medicine Hong at Shop 6 for many years. The Applicant was 59 years old at the time of resumption in 2003. The Applicant refused to move out Shop 6 on the day of reversion and had sought for time extensions to move out. Despite the extensions given, the Applicant still failed to move out after the deadlines. The bailiff had to issue the last notice to occupiers to the Applicant on 9 March 2004 and evict him from Shop 6 on 16 March 2004. After the eviction, the Applicant did not continue his business elsewhere, but closed down the entire business. He was unemployed for a period of time, but since March 2005, he has worked as an employed Chinese medicine practitioner in another Chinese medicine shop earning $8,000.00 a month.
4. The Applicant, through Vigers Appraisal & Consulting Limited, submitted his claim for compensation to the Respondent on 24 December 2004. The total amount claimed was $3,187,431.40 plus interest and surveyor’s fee. The Respondent did not agree with the Applicant’s claim and hence the Applicant took out the present application on 24 April 2006. In the Notice of Opposition filed by the Respondent on 12 May 2006, the Respondent denied that the Applicant has any right to claim compensation or alternatively the amount claimed was assessed in accordance with the Ordinance. The Respondent also contended that the amount claimed was excessive.
5. Shortly before the trial, the parties reached partial settlement and filed a consent summons on 31 December 2007, which was approved by the Tribunal on 4 January 2008. By virtue of the consent summons, the Respondent agreed to pay the Applicant a sum of $800,000.00 in full and final settlement of the claim for compensation for the value of the land resumed under section 10(2)(a) of the Ordinance. The remaining claims that have not been settled are for loss of goodwill, forced sale of stock, transportation fee and rental of storeroom. The claim for loss of goodwill is made under section 10(2)(d) of the Ordinance, whereas the claims for forced sale of stock, transportation fee and rental of storeroom are all made under section 10(2)(e)(i) of the Ordinance.
6. At the trial, the Respondent no longer contends that the Applicant has no right to claim compensation. It is agreed by the parties that the main issue is whether the compensation should be assessed on the basis of total extinguishment or on the basis that the Applicant could relocate his business. The Applicant argues that he could not relocate his business and on the basis of total extinguishment, he is entitled to claim loss of goodwill, forced sale of stocks, transportation fee and rental of storeroom. However, if the Tribunal finds that the Applicant could relocate, the Applicant confirms that save for transportation fee and rental of storeroom, he will not claim for any other compensation on the basis of partial extinguishment.
7. The Respondent, on the other hand, argues that it was unreasonable for the Applicant not to relocate his business, and if he had relocated, there would be no loss of goodwill, no forced sale of stock and no need to incur rental of storeroom. Nevertheless, the Respondent agrees to pay the transportation fee of $4,000.00, as claimed by the Applicant, in the event that the Tribunal finds the case in favour of relocation.
8. Thus, what we need to determine in this case is in relation to the remaining claims for loss of goodwill, forced sale of stock and rental of storeroom, the amounts of which are $1,799,000.00, $100,031.40 and $20,000.00 respectively.
The law
9. Section 10 of the Ordinance provides that:-
| “ | (1) | The Tribunal shall determine the amount of compensation (if any) payable in respect of the claim submitted to it under section 6(3) or 8(2) on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim. |
| | (2) | The Tribunal shall determine the compensation (if any) payable under subsection (1) on the basis of:- |
| | | (d) | the amount of loss or damage to a business conducted by a claimant at the date of resumption on the land resumed or in any building erected thereon, due to the removal of the business from that land or building as a result of the resumption; |
| | | (e) | in the case of land resumed under an order made under section 3 on or after the commencement of the Crown Lands Resumption (Amendment) Ordinance 1984 (5 of 1984)- |
| | | | (i) | the amount of any expenses reasonably incurred by him in moving from any premises owned or occupied by him on the land resumed to, or in connection with the acquisition of, alternative land or land and buildings, but excluding any amount to which paragraph (d) applies;” |
10. As stipulated in section 10(2)(d) of the Ordinance, compensation is payable for loss or damage which is “due to the removal of the business”. Clearly, losses suffered because of relocation are compensable. However, it has been held in many cases that loss suffered on the total extinguishment of a business is equally a loss suffered due to the removal of the business (see Cruden: Land Compensation and Valuation Law in Hong Kong, 2nd edition, p. 126). Thus, loss or damage which is due to the total extinguishment of a business is also compensable under section 10(2)(d) of the Ordinance. Likewise, any reasonable expenses incurred due to the total extinguishment of the business is compensable under section 10(2)(e)(i) of the Ordinance.
11. Total extinguishment arises where the resumption causes the affected party to extinguish his undertaking on the land permanently because, for example, he may not be able to find a suitable alternative site for his operations to continue (see Fung Tin Sang trading as Dragon Trading Company v. The Secretary for Transport, CACV 2747/2001). The burden is on the Applicant to prove to the Tribunal that the extinguishment of his business was caused by the resumption. In Yip Kui trading as Tai Wo Trading Company v. The Secretary for Transport, CACV 379/2002, Rogers VP held that:-
| “ | It must always be remembered that it is for the applicant to demonstrate the validity of the claim to compensation. If the claim is put, as it was in this case, on the basis that a business had been extinguished, the applicant must show that the extinction of the business was due to the resumption of the land.” |
12. When an owner decides whether he should relocate and continue his business or whether he should close down the business because of the resumption, the law requires the owner to act reasonably in response to the resumption, and he should take steps to eliminate or reduce the loss. If he does not do so, he would not receive compensation for the loss (see Fung Tin Sang, supra).
13. The parties have no dispute on the principles of law stated above, but they hold different views on the reasonableness of the Applicant’s decision in closing downing the business instead of relocating.
14. The Applicant, however, refers to the case of Bede Distributors Ltd. v. Newcastle-upon-Tyne Corporation (1973) 26 P. & C.R. 298 and suggests that the Respondent bears the burden of proof to show that the Applicant is not entitled to the claims. The following judgment is cited by the Applicant:-
| “ | In law, where a business has in fact been extinguished following a compulsory purchase order, the onus of proving the amount of the loss lies in the first instance on the claimant. Once the amount of that loss has been established or agreed, that sum is prima facie the amount due as compensation unless the acquiring, [sic] authority can prove either the loss was too remote or that it was not a dispossession-loss (in the sense of being a loss that was “the natural and reasonable consequence of the dispossession”).” |
15. We do not accept that this judgment has altered any of the established principles. The judgment merely said that the claimant has to establish the amount of his loss first and then the acquiring authority can rebut the claim. As said in the judgment, “the onus of proving the amount of the loss lies in the first instance on the claimant”. It means that the Applicant bears the legal burden of proving his loss. However, once the Applicant has adduced evidence to establish his loss, the Respondent will then bear the evidential burden to rebut the Applicant’s claim. It seems to us that the Applicant is confused with the legal burden and the evidential burden of the parties. Thus, the Applicant still bears the legal burden to establish that it was reasonable for him to close down his business.
Reasonableness of total extinguishment
16. The Applicant’s case is that it was reasonable for him to close down the business. His evidence is that he had tried to locate alternative premises from 2003 to 2004, but failed. The properties introduced by the estate agents to him were too expensive for him to purchase. The offer for compensation made by the government at that time was only in the sum of $501,000.00, but a comparable shop would cost several millions of dollars to purchase. He did not consider renting a shop to continue his business because he had a bad experience of being asked by the landlord to raise his rent substantially in the past, and since then he had all along been using his own purchased property to run his business. His herbs could not be kept for too long as they would go bad and grow worms. He had to sell his herbs away at a loss on 28 July 2004. He was losing his customers and suffered financial hardship. His health also deteriorated. Thus, on 18 November 2004, he decided to extinguish his business.
17. Broadly speaking, the Applicant’s grounds for total extinguishment are threefold:-
| (1) | Inability to locate an alternative premises comparable with Shop 6 for continuation of his business; |
| (2) | Financial difficulty rendering him unable to afford an alternative premises; and |
| (3) | Inability to continue business because of his poor health. |
18. The Respondent, on the other hand, contends that the Applicant should have relocated his business by renting another shop. There were at least two alternative premises suitable for the relocation in the vicinity, i.e. Shop 2 on Ground Floor, Tung Bo Court, No. 50 Shun Ning Road, Kowloon (“Replacement Premises 1”) and Shop 6 on Ground Floor, Wo Fung Building, No. 25B Shun Ning Road, Kowloon (“Replacement Premises 2”). The Applicant did not produce sufficient evidence to show that he was financially unable to relocate. In fact, the Applicant could have accepted the provisional payment for compensation offered by the government pursuant to section 16A of the Ordinance, which was in the sum of $666,000.00, to finance his relocation. His health could not have prevented him from continuing the business as he was employed by another Chinese medicine shop doing similar duties. As the Applicant claims that he could continue to work for another 18 years if there were no resumption, he should have relocated.
19. Having considered all the evidence and submissions made by the parties, and for reasons stated below, we are of the view that it was unreasonable for the Applicant to extinguish instead of relocating his business.
Alternative premises
20. First of all, the Applicant has not established with sufficient evidence that there were no alternative premises available for him to relocate his business, and if the Applicant had exercised due diligence, we are of the view that he should be able to find an alternative premises. The Urban Renewal Authority issued a press release about the redevelopment on 11 January 2002. On the same day, it had begun the 4-day occupancy survey to ascertain the exact number of the households and the people that would be affected by the resumption. Starting from 15 January 2002, 50 briefing sessions on acquisition and re-housing arrangements were conducted to facilitate communication. The Applicant admits in cross-examination that even though he cannot recall whether he was aware of the press release, he had been invited to take part in the occupancy survey and the briefing sessions of the Urban Renewal Authority. Hence, the Applicant should be aware of the resumption in January 2002.
21. However, the Applicant did not make any search for alternative premises until November 2003. From the inspection records of the Applicant’s estate agents, it can be seen that the Applicant started to look for alternative premises only on 6 November 2003, and the last inspection was made on 5 April 2004. The Applicant explains that he did not search for alternative premises earlier because he did not know that the government was serious about the resumption, and he thought that the government would exchange Shop 6 with another shop for him. We do not find it reasonable for the Applicant to have such beliefs. The government had taken all the formal steps to resume Shop 6 and the Applicant was aware of the actions taken by the government. There is simply no basis for the Applicant to think that the government was not serious about the resumption. The government had never given any indication that there would be an exchange of Shop 6 with another shop for the Applicant, but just offered to compensate him monetarily. It is unreasonable for the Applicant to have such a unilateral expectation.
22. In Wan Wai Hong and Wai Wai Shing trading as Wai Kee Machinery Workshop v. The Director of Lands, LDLR 6/2002, the Lands Tribunal (of a different composition) held that 12 months before the date of resumption might be the appropriate time for those affected by resumption to plan for removal. We do not think that we should simply adopt 12 months as a strait-jacket in every case, but it should be reasonable for a person affected by resumption to plan for removal as soon as practicable, taking into consideration of all the circumstances of the case. In the present case, it is understandable that the Applicant might have difficulties to inspect properties during the period from January 2003 to June 2003 when there was an outbreak of SARS in Hong Kong. However, there was no reason why the Applicant could not have inspection of alternative premises before and after this period, but had to wait until November 2003. When being asked about this in cross-examination, the Applicant did not give any satisfactory explanation. His evidence shows that he was aggrieved by the compulsory resumption and was all along expecting the government to give him another shop in place of Shop 6. That was why he refused to move out from Shop 6 and had to be evicted by the bailiff. We find it unreasonable for the Applicant to simply continue his business at Shop 6 and seek for time extensions without making good use of the time given to plan for the removal. The Applicant might be disgruntled at the resumption forced upon him, but it does not give any excuse. In determining compensation under the Ordinance, no allowance shall be made on account of the resumption being compulsory (section 12(a) of the Ordinance).
23. Even when the Applicant was looking for alternative premises, he was not acting reasonably. Most of the premises he inspected were much larger and more expensive than Shop 6. They could not be treated as comparables or suitable alternatives in any real sense. Shop 6 had a ground floor area of 12.46 sq. m. and an authorized cockloft area of 5.63 sq. m., giving a total area of 18.09 sq. m., which is about 195 sq. ft. However, some of the premises the Applicant inspected were as large as 600 sq. ft., 900 sq. ft. and 1,000 sq. ft., and the asking price of most of the premises was a few millions of dollars. One even went up to $12,000,000.00. Although the Applicant explains that it was the estate agents’ idea to bring him to inspect these premises, he admits that he knew about the size and the price of these premises before attending the inspections. So it is not a case that the estate agent had misled him. It seems to us that the Applicant was not serious in looking for comparable premises to relocate his business. If he had been serious about it, he should have given specific instructions to the estate agents to introduce more comparable premises to him.
24. Although some other premises the Applicant inspected were similar in size to Shop 6, the Applicant did not give any evidence as to why they were not suitable save that they were too expensive for him to purchase. The Applicant simply gave evidence that all the premises required a few millions of dollars to purchase and he could not afford to pay the price. There is absolutely no evidence on the attributes of these premises and why they were not suitable. It is also not clear whether these premises were available around the time of reversion and how much their prices were at the time of reversion. As the inspection took place many months after the reversion and the SARS period, it is likely that the prices would be cheaper at the time of reversion than those offered to the Applicant. Since there was no other evidence on the value of comparable premises at the time of reversion, the parties have agreed at the trial that, for the purpose of argument, the value of Shop 6 at the time of reversion was $800,000.00. Thus, to purchase a comparable shop at or around the time of reversion, it should also cost about $800,000.00 and not several millions of dollars as the Applicant claims.
25. Thus, we do not accept that the prices of alternative premises around the time of reversion were as high as the Applicant claims. Without any evidence on the suitability of these alternative premises, apart from the prices, the Applicant has simply failed to establish that there were no suitable alternative premises to relocate his business. In fact, according to the evidence of the Respondent’s expert, there were many suitable alternative premises available at that time and he had simply chosen two premises, i.e. Replacement Premises 1 and 2, to show that there were such premises available for the Applicant to relocate his business. The Applicant’s except, however, criticizes the Respondent’s expert for not referring Replacement Premises 1 and 2 to the Applicant earlier, and by so doing, the Respondent has been acting unfairly to the Applicant. The Applicant and his expert also allege that Replacement Premises 1 and 2 were unsuitable for the Applicant’s business. From the way the Applicant presents his case, the Applicant seems to suggest that the Respondent owes a positive duty to the Applicant in locating alternative premises for him, and the Respondent should be blamed for failing to do that. Relying on the case of Lindon Print Ltd v. West Midlands County Council [1987] 2 EGLR 200, the Applicant even submits that the onus is on the acquiring authority to prove that the claimant has failed reasonably to mitigate his loss.
26. Nevertheless, we agree with the Respondent that the Applicant has mistaken about the law. The applicant in Yip Kui’s case, supra, advanced a similar argument like the Applicant’s here, but it was rejected by Rogers VP to be erroneous. Rogers VP said the following in his judgment:-
| “ | Dealing with the individual points, Mr. Lee’s argument was that although the tribunal had found that there were 373 vacant units of similar size to the applicant’s premises in Wah Kai Industrial Centre, that did not show that these premises were available at an appropriate rent. His submission went to the extent of saying that once the applicant asserts that there were no suitable premises, as a matter of law the resuming authority had to identify and prove that at least one suitable premises had been available for the applicant’s occupation. Lindon Print Ltd v West Midlands County Council (1987) 283 E.G. 70 cited by Mr Lee is not an authority for such a rigid proposition. In my view, as a proposition of law, it is clearly erroneous.” |
| | (underlines added) |
27. We follow Rogers VP’s judgment and are therefore of the view that the burden is on the Applicant to satisfy us that there were no suitable alternative premises for him to relocate his business, and it is not for the Respondent to show that there were such alternative premises.
28. In any event, we do not agree with the Applicant that Replacement Premises 1 and 2 were not suitable alternative premises, and will consider the attributes of these two premises below.
Location
29. Both Replacement Premises 1 and 2 are close to Shop 6. Even the Applicant agrees that it requires only 5 minutes’ walk from Shop 6 to these two premises. However, the Applicant’s expert still maintains that they are not comparable to Shop 6 in terms of location. He opines that both Replacement Premises 1 and 2 are located beyond the “catchment area”, which comes into being by the Applicant’s expert plotting on the location plan the addresses of 5 of the Applicant’s clients.
30. We, however, agree with the Respondent that it is highly artificial and unreliable to define a catchment area like this. The Applicant himself states that he had many more clients than these 5 clients. There is no evidence that all the other clients also came from the catchment area, and it would not be reasonable to make that assumption too. It is more probable than not that there were other clients coming from areas beyond the catchment area. Thus, we do not see any logic in assuming that the Applicant’s clients only came from the catchment area. A distance of 5 minutes’ walk is by no means a far distance. There is no reason to assume that the Applicant’s clients would not patronize him again if the Applicant’s shop were moved to Replacement Premises 1 or 2. From the Applicant’s own evidence, only 1 out of these 5 clients had walking difficulty. We do not agree that the Applicant’s business could not be relocated beyond this catchment area just because of 1 client. In fact, the Applicant gave evidence that he provided home visit medical service to clients. The Applicant could simply pay home visit to this particular client if he did not want to lose this client. Moreover, part of the Applicant’s business was related to sale of medicine, which should not be affected by a client’s inability to walk at all.
31. The Applicant also expresses his concern about the resumption near Replacement Premises 1 and 2, which may reduce the pedestrian flow. As agreed by the experts of both parties, the resumption in question concerned only one single block in the vicinity, which is not a large area when compared with a number of large residential complexes around Replacement Premises 1 and 2. We agree with the Respondent that these surrounding residential complexes should contribute positively to the pedestrian flow. Moreover, Replacement Premises 2 is also a corner shop with 2 frontages like Shop 6. Thus, we do not think that the pedestrian flow at Replacement Premises 1 and 2 would be significantly lower than that at Shop 6.
Competition
32. The Applicant raises the point about competition because another Chinese medicine clinic was found right next to Replacement Premises 1. However, from the photographs produced at the trial, it is clear that the shop next to Replacement Premises 1 is not a Chinese medicine shop but a Chinese bonesetter clinic. It seems to us that the Applicant had mistaken about the nature of the shop next door when the point on competition was raised. Despite that, the Applicant still insists that a bonesetter clinic would pose competition to his business because a bonesetter would also treat patients with ailments such as rheumatism. We do not accept the Applicant’s contention in this regard at all. In his witness statement, the Applicant specifies his expertise to be in the areas of “婦科” (gynaecology), “感冒” (influenza), “痔瘡” (hemorrhoids) and “身體調理” (holism). We do not accept that a bonesetter can pose any competition to a Chinese medicine practitioner whose expertise is in these areas. Hence, we do not find that competition is a factor that would make Replacement Premises 1 unsuitable for the Applicant to relocate his business.
Water supply and lavatory
33. The Applicant also raises the lack of water supply and lavatory as an objection to Replacement Premises 1 and 2. However, the Applicant’s expert admits that subject to obtaining the owners’ corporation’s consent, there should be no difficulty in getting water supply connected. In fact the bonesetter clinic next to Replacement Premises 1 and the salon next to Replacement Premises 2 would also need water supply to run their businesses. If they had no difficulty in obtaining owners’ corporation’s consent to have water supply, we do not see why the Applicant would have such difficulty. As long as there is water supply, we do not think that the lack of a lavatory would affect the Applicant’s business. Thus, there is no merit in raising these objections.
Size and layout
34. Replacement Premises 1 is rectangular in shape and has a floor area of 13 sq. m., which is very similar to Shop 6. However, the Applicant raises the objection that there might not be a cockloft in Replacement Premises 1. According to the record of the Rating and Valuation Department, Replacement Premises 1 has a cockloft of the size of 9.7 sq. m., which is in fact bigger than the size of the authorized cockloft at Shop 6 (disregarding the illegal part of the cockloft at Shop 6 in respect of which no compensation should be made). In any event, the headroom of Replacement Premises 1 is tall enough to build a cockloft. The Applicant’s expert accepts this provided that the loading and other building requirements are well taken care of. There is however no suggestion that proper arrangements cannot be made to build a cockloft there, save that there might be a pump room nearby making it infeasible to build a cockloft. Nevertheless, the Applicant’s expert cannot confirm that the pump room is situated within Replacement Premises 1. In the absence of such evidence, and from the record of the Rating and Valuation Department, we accept that a cockloft can be built there, if it is not already there. Thus, the size and layout of Replacement Premises 1, including the availability of a cockloft, are very similar to Shop 6.
35. Replacement Premises 2 is rectangular in shape but divided into Shop 6A and Shop 6B. Shop 6A has a floor area of 7.44 sq. m. and Shop 6B has a floor area of 7.19 sq. m. There is a staircase structure, as well as a partition wall, in between Shop 6A and Shop 6B, and the staircase structure also reduces the headroom of Shop 6B. It is not feasible to build a cockloft at Replacement Premises 2. The main objection to Replacement Premises 2 goes to the availability of Shop 6B. The Applicant’s expert was told by the operator at Shop 6B that Shop 6B was in business for about 6 years, which suggests that Shop 6B would not be available for the Applicant to relocate his business around the time of reversion.
36. The Respondent, however, argues that from the Rating and Valuation Department’s record, the tenancy at Shop 6B had expired on 31 October 2003 and hence Shop 6B was available during the period from 1 November 2003 to 28 February 2004 when a new lease was executed. Although the operator of Shop 6B was not called as a witness, we accept that the Applicant’s expert has no reason to mislead the Tribunal in this aspect. There is also no reason to assume that the operator was not telling the truth to the Applicant’s expert. The record of the Rating and Valuation Department may not reflect the situations where a tenant might have stayed on after the lease had expired and before a new lease was executed, or where a person had occupied the premises pursuant to an oral tenancy or a licence. The operator at Shop 6B may also be a subtenant. Thus, the record of the Rating and Valuation Department may not reflect the real situation.
37. On the other hand, we accept that the existence of a partition wall will not pose any problem at all. This wall was not marked in the plans produced and it does not appear to be a structural wall. It should be feasible to demolish the wall to reconnect Shop 6A and Shop 6B when necessary. The inability to install a cockloft there can be overcome by renting a separate place for storage. Apart from the question of extra cost involved, which could be claimed by the Applicant had he relocated, we do not see any real difficulty in renting a separate place for storage. The suggestion raised by the Applicant’s expert about securitydoes not make any sense, when the Applicant had in fact rented a separate cockloft for storage.
38. Thus, we are of the view that the size and layout of both Replacement Premises 1 and 2 are suitable to be alternative premises to Shop 6. However, as it is likely that Shop 6B may not be available at the time of reversion, which would reduce Replacement Premises 2 to about half its size, it may not be suitable for the Applicant to relocate there. Despite that, Replacement Premises 1 remains suitable for the Applicant to relocate. As aforesaid, the burden is not on the Respondent to show that there were alternative premises suitable for relocation, but on the Applicant to show that there was no alternative premises for him to relocate. The existence of Replacement Premises 1 as being suitable alternative premises in fact rebuts the Applicant’s contention that there were no suitable alternative premises to relocate.
Financial difficulty
39. On the contention that the Applicant had financial difficulty to relocate because he could not afford to purchase another property, the Applicant again fails to adduce sufficient evidence to satisfy us that it was really the case. As aforesaid, it should cost about $800,000.00 to purchase an alternative premises, not several millions of dollars as the Applicant claims. If the Applicant had agreed to accept the provisional offer of $666,000.00 from the government, he would only need to raise about $134,000.00 to pay the balance. The Applicant’s business was all along making profits. His evidence is that his business had a monthly turnover of about $50,000.00, 70% of which was the net profit. He also said that if the net profits were not more than 70%, he would have quitted his business already. In other words, he earned about $35,000.00 per month as the net profits on average. He owns his own residential property without any mortgage attached. He could afford to send his son to Australia to study. Although the Applicant suggests that it was a heavy financial burden on him to send his son to Australia, there are simply no bank statements or other documentary evidence produced to show his real financial situation. On the face of it, the Applicant had a steady income and cannot be regarded as poor at all. It is difficult to see why he could not raise $134,000.00 to pay the balance if he had the desire to purchase another property to continue his business. Even if he did not have the cash with him to pay the balance, it would not be difficult for him to raise the balance purchase price by borrowing from a bank, either by way of a mortgage or a bridging loan pending his claim against the government for the balance of compensation. With his track records in business and a self-owned residential property, we do not think that he would have any difficulty in borrowing the money from a bank.
40. Even if the Applicant could not have afforded to purchase another property or is unable to raise a loan, we agree with the Respondent that he should have considered renting a shop to continue his business. We find it unreasonable for the Applicant not to consider this option at all. As aforesaid, he earned about $35,000.00 per month, and his evidence is that he could afford to pay $8,000.00 to $10,000.00 to rent a shop for his business. If he had done that, he would still be able to earn about $25,000.00 to $27,000.00 per month from his business, which is substantially more than his earning of $8,000.00 by being an employee of another Chinese medicine clinic. He could also receive the provisional offer to pay for the renovation of the rented premises and the rental deposit. Thus, he could have eliminated or reduced his loss by renting a shop to continue his business. We find it odd and unreasonable that the Applicant had not taken this step. From the Applicant’s evidence, it is clear to us that he chose not to rent a shop to continue his business because of his past experience in renting or his dislike in operating his business by way of renting. It was the Applicant’s own independent business decision that caused the extinguishment rather than the resumption.
41. The Applicant, on the other hand, argues that in offering the provisional compensation under section 16A of the Ordinance, the government should have considered all the factors mentioned in section 10 of the Ordinance. When the Applicant had enjoyed the use of a shop that was free from any incumbrance before the resumption, the provisional compensation offered should allow him to restore to his original position, i.e. it should be sufficient enough for him to purchase a replacement premises in full. Hence, the offer made by the Respondent was unreasonable and the Applicant had acted reasonably in rejecting the offer. In making these submissions, the Applicant relies on the following judgment of the Lands Tribunal in Wong Sau Hing, Lee Wing Tau, Li Sai Kuen and Lee Sai Ho t/a Shing kee Metal Dealer v. Director of Lands, Crown Lands Resumption Reference No. 20 of 1994:-
| “ | It is common ground that the Applicants are entitled to compensation calculated under section 10(2)(d) of the Ordinance … |
| | In practical terms, the Applicants are entitled to reimbursement that would restore them to the business position where they would be had there been no resumption.” |
42. The Applicant submits that such suggestion is also in line with the general proposition laid down in Fung Kai-yin, Cheung Chin, Yau Chi-hung and Ling Po-sin t/a Hang Lam Tong Sun Yung Seafood and Medicine Co. v. Director of Lands,Crown Lands Resumption Reference No. 12 of 1995,that:
| “ | Resumption albeit for the public good is a tortious interference with the rights and interests of legitimate property owners and business operators.” |
43. The Applicant also submits that similar view was mentioned in Director of Buildings & Lands v. Shun Fung Ironworks Ltd. [1995] 1 HKC 417 as follows:-
| “ | Fair compensation requires that he should be paid for the value of the land to him, not its value generally or its value to the acquiring authority…. If he is using the land to carry on a business, the value of the land to him will include the value of its being able to conduct his business there without disturbance. Compensation should cover this disturbance loss as well as the market value of the land itself…. |
| | In Harvey v Crawley Development Corp [1957] 1 QB 485 at 493, Denning LJ gave the example of the acquisition of a house which is owner occupied. The owner could recover the cost of buying another house as his home, but not the cost of buying a replacement house as an investment. The latter would be too remote.” |
44. Thus, the Applicant contends that as he was the owner-occupier of Shop 6, which was free from any incumbrance since May 1990, the provisional offer should allow him to purchase another shop with similar condition as Shop 6, also free from any incumbrance, so as to restore him to his original position before resumption. The argument that the Applicant should have received the provisional offer to allow him to rent a replacement shop should therefore be rejected.
45. We do not accept the Applicant’s contention in this regard. The cases cited by the Applicant do not support the proposition that the Applicant had acted reasonably in not renting because he had a self-owned property. They just confirm the principle that all the loss and damage caused by the resumption to the Applicant have to be compensated. The loss of the value of the land, i.e. Shop 6, has already been compensated by the agreed settlement sum of $800,000.00. What is left to be determined is just the amount of the loss and damage caused to the Applicant’s business by the resumption, which is a separate item of claim from the value of the land resumed. There is no principle of law that a business must be conducted in a self-owned property even though it was the case before resumption. The Applicant can simply be compensated for any extra cost or loss and damage suffered if the business had to be conducted in a rented property after resumption. With that compensation, the Applicant is restored to his original position, as he would be able to conduct his business as before. Whether the business is now conducted in a rented property or a self-owned property is neither here nor there, as the Applicant would not suffer any loss or damage that has not been compensated.
46. Thus, the Applicant’s suggestion that since he could not afford to purchase another shop, he was not restored to his original position before resumption is clearly wrong. If he could relocate to a rented property to continue his business and yet refused to do that, he must have failed to act reasonably to eliminate or reduce his loss and damage. The Applicant has also failed to satisfy us that there is any causative link between the extinguishment of business and the resumption. In fact, Shop 6 had a rateable value of $72,000.00, i.e. $6,000.00 per month, whereas the rateable value of Replacement Premises 1 was $70,800.00, i.e. $5,900.00 per month. Although it is not the same as the market rent at any particular time, the rateable value of a property is an estimate of the annual rental value of the property at a designated valuation reference date (i.e. 1 October of each year), assuming that the property was then vacant and to let. In the absence of any evidence on market rent, the rateable value can be an indication of the level of rent a property can attract. In our present case, there is no evidence on the actual market rent of a similar shop that could be used for relocation of the Applicant’s business. However, as both Shop 6 and Replacement Premises 1, which is a suitable alternative premises, have a rateable value in the region of $6,000.00 per month, it should also cost about $6,000.00 per month or such a level of rental to rent a similar shop. Since the Applicant, according to his own evidence, was prepared to pay a monthly rent of $8,000.00 to $10,000.00 to rent a shop, there should be no problem at all for the Applicant to relocate his business to a rented shop. It is clear to us that the Applicant has acted unreasonably in refusing to relocate his business to a rented premises. The extinguishment of the Applicant’s business was due to his own unreasonable decision not to relocate, rather than the resumption.
Health Condition
47. The Applicant suggests that his health had deteriorated because of the resumption. However, when being asked in cross-examination whether he had consulted a doctor for his condition, he states that it was his mental condition that was in question and he had not consulted a psychiatrist or received any medical treatment. Instead of adducing medical evidence, the Applicant’s expert mentions about his impression of the Applicant’s physical condition obtained from their normal encounters. The Applicant’s expert even explains on behalf of the Applicant about the Applicant’s failure to consult a doctor. We do not accept the Applicant and his expert’s bare allegations in this regard. The Applicant’s expert simply cannot give any evidence of the Applicant’s health, as the expert is not a qualified medical professional. Hence, the Applicant fails to establish that his health had deteriorated because of resumption.
48. On the other hand, the Applicant has been able to continue to practice as an employed Chinese medicine practitioner in another shop, undertaking similar duties as in the past, except that he is now required to do petty jobs such as washing herbs. When the Applicant is able to continue to work as an employee, we fail to see why he could not continue with his own business. In fact, it is the Applicant’s contention that he could continue to work for 18 more years had there been no resumption. If it is the case, then he should simply relocate and continue to run his own business, instead of working for someone else. We do not therefore find that the Applicant’s health condition was a reasonable explanation for him to extinguish his business.
Loss of goodwill
49. For the loss of goodwill, the Applicant contends that it should be assessed on the basis of total extinguishment and claims the amount of $1,799,000.00 calculated as follows:-
| Adjusted profit of the final year of 2002/2003 |
| $395,800.00 + $36,000.00 (messing) - $72,000.00 (rental) = $359,800.00 |
| Total |
| $359,800.00 x 5 (y.p. for 18 years at 20%) = $1,799,000.00 |
50. However, for reasons aforesaid, we do not find it reasonable for the Applicant to extinguish instead of relocating his business. Thus, the loss of goodwill should not be assessed on the basis of total extinguishment. At one stage, the Applicant had thought of asking the loss to be assessed on the basis of partial extinguishment, but later on confirms that only transportation fee and rental of storeroom are claimed in the event that the Tribunal finds the case in favour of relocation. Thus, it is not necessary for us to consider other losses on the basis of partial extinguishment. In fact, as held in the case of Yip Kui, supra, the Tribunal cannot award any hypothetical loss or expense, such as loss or expense that the Applicant would otherwise have suffered had he relocated. In that case, Rogers VP made it clear that only claim for actual loss or damage would be allowed.
51. The Applicant is therefore not entitled to any claim for loss of goodwill.
Forced sale of stock
52. The Applicant claims for forced sale of stock in the sum of $100,031.40, being the difference in the value of his stock and equipment and the sale price to a Mr. Mok, as follows:-
| Value of stock and equipment |
| $140,031.40 (stock) + $10,000.00 (equipment) - $50,000 (sale price) = $100,031.40 |
53. Since it is our finding that the Applicant should have relocated his business, the stock and equipment could have been retained for his use after the relocation. The forced sale of the stock and equipment has therefore nothing to do with the resumption, and the loss associated with the forced sale is not recoverable.
Rental of storeroom
54. As to the rental of storeroom, the Applicant claims for $20,000.00, being the cost of renting a storeroom to keep his stock during the period from 1 April 2004 to 31 July 2004 (i.e. prior to its forced sale on 28 July 2004) at $5,000.00 per month.
55. As it is our finding that the Applicant should have relocated, the Applicant could have removed the stock to his new place of business. If the new place of business had a cockloft, the stock could be stored at the cockloft. If the new place had no cockloft and the Applicant had to rent another place to store the stock, then the rental cost could be recovered. However, the present claim for rental is not related to relocation at all, but is caused by the Applicant’s own unreasonable act in ceasing his business. Thus, it should not be allowed.
Transportation fee
56. For transportation fee, the Applicant claims for $4,000.00. Since the Respondent does not dispute this claim, it will be allowed as claimed.
Conclusion
57. By reasons aforesaid, it is our finding that the Applicant has acted unreasonably in extinguishing instead of relocating his business and the only loss he can recover is the transportation fee agreed by the Respondent.
58. We therefore order that:-
| (1) | The Respondent do pay the Applicant the agreed compensation for transportation fee in the sum of $4,000.00; |
| (2) | No compensation is payable in respect of the Applicant’s claims for loss of goodwill, forced sale of stock and rental of storeroom; and |
| (3) | All consequential and ancillary matters, including professional fees, interest and costs, be adjourned to a date to be fixed by the listing officer at the request of the parties. |
H.H. Judge WONG
Presiding Officer
Lands Tribunal | Mr. W.K. LO
Member
Lands Tribunal |
Mr. Daniel TANG, instructed by M/S Charles Ho & Co., for the Applicant.
Ms. Teresa WU, instructed by the Department of Justice, for the Respondent.