CHIU CHI WO and Others t/a Hang Hing v. Director of Lands

1995, No. LR 3

IN THE LANDS TRIBUNAL OF HONG KONG

Crown Lands Resumption No. 3 of 1995

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HEADNOTE

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Property law - Crown Lands Resumption - Valuation of Fixtures and Fittings - Expenses for Looking for Premises to Relocate - Crown Lands Resumption Ordinance, Cap. 124, s. 10(2)(d) - Application for Review - Lands Tribunal Ordinance, Cap. 17, s. 11A - Lands Tribunal

Ground floor premises rented for electroplating workshop resumed by and reverted to the Crown on 3rd October 1992. The Tribunal awarded total compensation at $3.85 million. The partners of the workshop apply for review contending that the Tribunal should have allowed at least part of the claims for fixtures and fittings and expenses for looking for premises to relocate to. They also sought leave to produce additional evidence to substantiate those claims on the ground that at the trial they had not been asked to produce sufficient evidence.

Held: (1) In principle, tenants of resumed premises are not entitled to compensation for loss of fixtures and fittings because those have become part of the property of the registered owner. Moreover, the Applicants failed for lack of sufficient credible evidence to support this item of the claim. (2) The Applicants also failed on the claim for expenses for looking for premises for lack of sufficient credible evidence. (3) In principle, neither the opposing party nor the Tribunal has any duty to question the sufficiency of evidence. A party once given full opportunities to adduce evidence is not entitled to call further evidence in support of a rejected claim after judgment has been delivered.

IN THE LANDS TRIBUNAL OF HONG KONG

Crown Lands Resumption No. 3 of 1995

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DECISION

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By a judgment delivered on 7th October, 1996, we awarded compensation at $3,850,000 to the Applicants pursuant to section 10(2)(d) of the Crown Lands Resumption Ordinance, Cap. 124. On 6th November, 1996, the Applicants applied for review under section 11A of the Lands Tribunal Ordinance, Cap. 17 ("the Ordinance"). The only ground for review was that, and we quote:-

"the calculation approach can not fulfill the fundamental principle of compensation which is to put the party who has suffered in the same position he would have been if he had not sustained the damage due to resumption."

2. We heard the parties on 10th January, 1997 when Mr. Chiu, representative of the Applicants, indicated that in fact the Applicants were not satisfied with our rejection of the claims for (1) fixtures and fittings and (2) expenses for looking for premises. Mr. Chiu contended that both claims were justified and reasonable and that, in any event, an award of some amount on each of the two items is due.

3. In respect of the claim for fixtures and fittings, the Applicants at the trial put it on the basis of and limited to expenditure stated in an invoice produced at discovery and at the trial. Mr. Chiu argued that even if some items of work stated in the invoice were not believed, the remaining items should still be accepted. Mr. Chiu maintained that there must be some fixtures and fittings in the subject premises, like drains, pipes, electrical wiring and lighting, otherwise the business could not run. We thought and still think the Applicants have to get over two hurdles in order to succeed on this item of claim. First, there must be sufficient proof of the existence and the value of fixtures and fittings as claimed. Taking into account the report of staff of the Respondent who inspected the premises, the records of the Environmental Protection Department and the testimony of Mr. Chiu, we did not believe the bulk and major items of work stated in the invoice were in fact carried out. We did, of course, study photographs of the subject premises but were not able to identify in any of them any item of work referred to in the invoice, much less to verify the value of such work. Once the bulk and major items of work stated in the invoice are disbelieved, the invoice becomes highly suspect as evidence in regard to the other minor items in the invoice as well.

4. The second hurdle, which we did not go into in our original judgment because the Applicant failed to get past the first hurdle, is the issue of liability. Strictly speaking, fixtures and fittings installed by a tenant become part of the rented premises and no longer the property of the tenant. Had the Applicants relocated their business, they would be entitled to compensation for the cost of setting up in new premises which may include expenses for installing new fixtures and fittings. In a case of total extinguishment as the present one, claim for the value of fixtures and fittings by the Applicants as tenants is unjustified. In some previous related cases, we have awarded compensation under the heading of "Fixtures and Fittings" to businesses run on rented premises, but that is partly because the parties tended to mix tools of trade, e.g. movable storage racks, with real fixtures and fittings bolted to the walls, ceiling, etc. like the structure called a rack by the Applicants but in fact a cockloft, and partly because the Respondent agreed or took no issue on such items. We accept that there were fluorescent tubes, wires, pipes and drains in the subject premises; but the Applicants as tenant operators are not entitled to compensation for them.

5. In respect of the claim for expenses for looking for premises to relocate, at the review hearing, Mr. Chiu referred us to Weco Textiles Manufacturers Ltd. v. The Secretary for Transport, [1991] HKLTLR 77 where expenses for looking for premises to relocate at $136,685 was allowed by H.H. Judge Cruden. However, the question in this case at the trial and now is, not one of liability, but of proof and reasonableness. The Applicants relied on a bland assertion by Mr. Chiu in the witness box to claim $150,000. There was no independent evidence at all to support the claim for such a six figure sum. Mr. Chiu said in evidence at the trial that all three Applicants took part in looking for premises day and night over a period of one year. Yet, looking at the reported taxable profits for the last two years before the Applicants were evicted, and we used those figures to award a handsome amount of $3 million for loss of goodwill, one must have serious doubts about the Applicants' claim for - (1) unlike most other business operators in related cases who either have no or negligible reported taxable profits to show, the Applicants assessed on high profits must have kept proper detailed books and accounts, why are there no adequate records or documents showing expenses incurred for looking for premises? (2) why were expenses incurred for looking for premises not charged against the profits and loss accounts and those accounts not produced at the trial? (3) how could the Applicants reap comparatively large profits in the closing years when they had to look for premises day and night over a one year period?

6. In the Weco case, the business involved was a large scale one. This is evident by the fact that compensation for loss of goodwill in that case amounted to over $20 million. The claimant in that case had an administration manager and support staff to look for premises. Obviously, detailed particulars and evidential support for related expenses were submitted to the Tribunal otherwise the claim could not be put at a precise figure of $136,685. If a business with loss of goodwill at $20 million would need only $136,685 as expenses for looking for premises, we cannot see $150,000 as like expenses for a business with loss of goodwill at $3 million being reasonable. We hasten to add that by the nature of these things one cannot apply a straightforward sliding scale based on the amount claimed in one case to determine a reasonable amount for another case. And we do not think an arbitrary assessment, on an assumption that there must have been some effort to look for premises, should be undertaken after we have found the amount claimed is incredible. The Tribunal cannot operate like peddlers in a flea market where prices are set high only to be bargained to a substantial low, that would encourage all sorts of mischief. In the absence of satisfactory evidence or rational basis for assessment, the Tribunal must reject the claim.

7. Mr. Chiu at the review hearing complained that when giving evidence he was not asked by counsel for the Respondent to provide details or proof of the expenses incurred. To this we simply say that the burden of proof is on the Applicants and they had been repeatedly urged to engage professional assistance to prosecute their claim. Counsel for the Respondent had no duty to assist the Applicants. Nor did the Tribunal which, despite its name, is a conventional court bound to conduct trials in the adversarial mode. In this respect, we should not lose sight of what Lord Denning has said in Jones v. National Coal Board [1957] 2 Q.B. 55 at pp. 63-64,

"In the system of trial which we have evolved in this country, the judge sits to hear and determine the issues raised by the parties, not to conduct an investigation or examination on behalf of society at large, as happens, we believe, in some foreign countries.....

"The judge's part in all this is to hearken to the evidence, only himself asking questions of witnesses when it is necessary to clear up any point that has been overlooked or left obscure; to see that the advocates behave themselves seemly and keep to the rules laid down by the law; to exclude irrelevancies and discourage repetition; to make sure by wise intervention that he follows the points that the advocates are making and can assess their worth; and at the end to make up his mind where the truth lies. If he goes beyond this, he drops the mantle of a judge and assumes the robe of an advocate; and the change does not become him well..."

8. At the review hearing, Mr. Chiu also sought leave to call more evidence to prove their claims. As we understand it, one fundamental principle of litigation is the finality of trial. Having been given ample opportunities to prepare and present its case, a party is not allowed to introduce supplemental evidence after reading the judgment of the court pointing out defects in its case. To allow such "cure" may lead to admission of manufactured evidence tailored to cover an inherent defect. We could not see why the Applicants should have a second bite at the cherry.

9. The Applicants were unable to convince the Tribunal that the original determination was wrong. There being no merit in this application for review at all, we dismissed it with costs to the Respondent to be taxed if not agreed.

10. This judgment is delivered in both Chinese and English languages. Either language version may be used in aid of interpretation of the other. In the case of irreconcilable difference in meaning, that conveyed in the Chinese version shall prevail.

Dated 10th March 1997