Yip Kui t/a Tai Wo Trading Co. v. The Secretary for Transport

LDMR 52 of 2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Miscellaneous Reference No. LDMR 52 of 2000

_________________

_________________

J U D G M E N T

___________________

The Claim:

1. The Applicant Mr. YIP Kui was the sole proprietor of his company, Tai Wo Trading Company (hereinafter refers as "Tai Wo"), since 1988. In 1991, the Applicant moved his company into Unit 8, Block A, 23rd Floor, Wah Kai Industrial Centre, 221, Texaco Road, Tsuen Wan, New Territories ("the Premises"). The Applicant occupied the Premises in his capacity as a tenant under a tenancy agreement. The business operated by the Applicant was in providing disposable cutlery to various restaurants and fast food shops located at different areas in Hong Kong. On 2 October 1999, the Government of Hong Kong Special Administrative Region resumed the Premises notionally by means of a resumption notice (GN 3673) published on 30 June 1999 under the Railways Ordinance, Cap. 519. However, after the date of reversion, the Applicant was still in possession of the Premises until the Government assumed physical possession of the same on 3 April 2000. As a measure to allow the Applicant to mitigate his loss by selling his stock-in-trade, he was given the key to the Premises on 5 April 2000. The Applicant returned the key to the Government on 10 April 2000. It was the Applicant's case that he had terminated Tai Wo's business as a direct result of the forced resumption and that such decision was a reasonable one in the circumstances. Hence, the Applicant claimed under section 10(2)(d) of the Land Resumption Ordinance disturbance losses in the amount of HK$ 1,812,438, together with professional fees and interest. This amount of disturbance losses consisted of loss of profit rent at HK$167,000; loss of goodwill at HK$ 988,669; loss of profits in the shadow period of resumption at HK$212,564; loss of stock, fixtures, fixtures and fittings at HK$ 267,563 and severance payments to employees at HK$176,642.

The Issues:

2. The Respondent disputed the claim by maintaining that it was unreasonable for the Applicant to go for total extinguishment of his business. What the Applicant should do, contended the Respondent, was to relocate his business to another industrial building and continued with his operation there. Hence, the Respondent said that the Applicant should only be entitled to compensation payment in the sum of HK$81,000 for removal cost, plus professional fees and interest thereon. Alternatively, the Respondent also disputed the method of calculation of the Applicant even if we hold that the latter could make his claim on the basis of total extinguishment. The figure arrived at by the Respondent in such an eventuality was only HK$269,617 consisting of HK$58,158 for loss of goodwill; HK$81,000 for removal cost and HK$130,459 for severance payment.

3. The most important issue for us to resolve in this case is of course whether it was reasonable for the Applicant to terminate his business as he did in 1999. In other words, would a reasonable businessman in the Applicant's position go for total extinguishment of his business given the circumstances which he was in at the time when such a decision was made? After resolving this critical issue, we should then be concerned with the actual quantum of award by considering whether or not the Applicant could claim the individual items in full under the basis of claim approved by us.

The Agreed Facts

4. Before the hearing commenced, both parties before us had reached agreement on certain facts, which could be seen on pages 10 and 11 of the hearing bundle (Exhibit A2): on the saleable area of the Premises, the open market rent of the same; the amount of loss of profit rent, the amount of loss of fixtures and fittings, the amount of loss of equipment and the amount of loss of stock if we ultimately decide that the Applicant could claim those items in full.

The Applicant's case

5. The Applicant called 4 witnesses to testify in his case and they were Mr. YIP Kui (AW1), the Applicant himself; Mr. NG Tin-ming, Frank (AW2), the Applicant's accountant who prepared the accountant's report for the claim; Mr. SHAM Ting-kun, Simon (AW3), the plant & machinery valuer who prepared the valuer's report on equipment, fixtures, fittings and stock and Mr. NAM Chi-kwong (AW4), the Applicant's surveyor.

6. Amongst all the witnesses, the Applicant's evidence was most lengthy and important. It is because all the factual bases supporting the Applicant's claim came from the Applicant himself. On the other hand, all the other 3 expert witnesses simply based their opinion and findings on the factual bases so presented by the Applicant. Another observation we have made was that it had taken us 15 days out of the overall 21 hearing working days to receive the Applicant's evidence. The cross-examination of the Applicant alone took 13 days. From these figures, it could be seen how hotly contested was the Applicant's evidence.

7. The Applicant adopted his 2 witness statements appearing from page 13 to page 25 of the hearing bundle as his evidence. The first statement gave an account of how the Applicant started off the business of Tai Wo; how he got the lease from his landlord Techwant Investment Ltd; how he did business with his customers; how the resumption affected him and how he terminated his business in the end. The second statement was about his two forced sales, made after his business had closed down and the details of the concerned forced sale items. In his evidence given in the hearing, he further elaborated these areas. It could be seen that the Applicant's personal background, his working history, the way in which he used to manage his staff and the mode of operation of his business were not much in dispute. Rather, it was the reliability of his past trading accounts, the impact of the resumption on his business and his ability to relocate the same that were seriously contested.

The Applicant's background and his business

8. The Applicant was 65 years old when the hearing was held. This means that he was 63 years old when the Premises was resumed by the Government, and was 55 when he moved Tai Wo to the Premises from elsewhere. He had received education up to post-secondary level in Hong Kong and his last employment with H.S. Chan & Co. had lasted some 14 years, from 1974 to 1988. It was in that job that he had learned the way in running his disposable cutlery business. When he left that job in 1988, he was earning an average monthly income of $9,400. After leaving H.S. Chan & Co., the Applicant set up Tai Wo with a capital of $500,000 selling various disposable cutlery items to restaurants, fast food shops, canteens as well as other suppliers of such products to Mainland China (like the Union Score Development Ltd).

9. In the business of Tai Wo, the Applicant was the sole proprietor and he made all the decisions crucial to the business. LEE Chi-kong ("LEE") was his sales representative responsible for liaising with old customers and seeking out new ones. LEE was the only employee in Tai Wo who was not related to the Applicant when the business came to an end by October 1999. The Applicant was also maintaining contacts with the customers because the Applicant wanted to ensure that LEE was discharging his job properly but not doing anything else that might harm the Applicant's interests. The rest of the Applicant's relative employees were his younger brother YIP Kei (the delivery hand to customers' addresses); WONG Sze-foon (wife of YIP Kei, doing odd jobs like silk screen printings on lunch boxes); CHAN Hoon (the Applicant's mother-in-law, the cleaner of the Premises who was 76 or 77 years old in 1999); YIP Wai-hon (the younger son of YIP Kei, an all round worker in Tai Wo responsible for receiving, sorting out and dispatching the goods to the customers) and YIP Wai-sun (the Applicant's son about 28 years old, responsible for book-keeping, computer operation and various other jobs).

10. As for the immediate family of the Applicant, he was married with two sons. The family used to occupy a public housing unit. His wife was a civil servant but had already retired in 1996. The elder son, YIP Wai-sun was born in 1973 and was 5 years older than his brother YIP Wai-sin. But for YIP Wai-sun, the whole family was granted immigration visa in 1995 by the Government of the United State of America. The Applicant's wife got a sister in the US and the younger son of the Applicant was also pursuing studies there. By then, the wife and the younger son had already gained full US citizenship while the Applicant was holding a Permanent Resident's Re-entry Permit to the US. The wife normally lived in the US looking after the younger son. The elder son was still working in Hong Kong and had no plan immigrating to the US. The Applicant enjoyed very good relationship with his wife who had been present in the hearing most of the time. The Applicant had gone to the US many times since 1995 and stayed there for months. The Applicant only held one credit card, which was issued by the American Express Corporation before 1988 in Hong Kong. By the time of hearing, the credit card had already been changed to one denominated in US currency. While the Applicant was in Hong Kong, he lived with his son in the public housing estate unit. The Applicant said that he had no plan to immigrate to the US himself for he knew little English and did not like to live in a foreign country.

Tai Wo's Accounts

11. According to the Applicant, he himself or his son YIP Wai-sun made entries into the books of Tai Wo in the past years. The Applicant would issue invoices to customers on delivery of goods ordered. The total sum of the amounts shown on those invoices in a certain financial year would become the turnover of that year for accounting purposes. The expenses under various heads would also be recorded in the books, with the supporting documents kept for record purposes. By the end of each financial year, the Applicant would send all the books together with the supporting documents to his accounting firm, Fung's Consultant Company, for the firm to prepare the balance sheet and the profit and loss accounts of that year. The annual balance sheets and the annual profit and loss accounts for the period between 1 April 1994 up to 31 August 1999 were shown in the appendices of the Applicant's accountant's report appearing from pages 52 to 97 of the hearing bundle. It is noted that none of the working account books was produced and that nobody from Fung's Consultant Company was called to testify. This was so even though the Respondent disputed the accuracy and authenticity of those accounts. The Applicant said that since he was making a loss for the financial year 1995/96, he was not required to submit tax returns for the subsequent financial years. Hence, the balance sheets and the profit and loss accounts for the financial years 1996/97 and 1997/98 were not submitted to the Inland Revenue Department until 15 October 1999. A summary of those accounts shown in the accountant's report of the Applicant could also be seen in page 341 of the hearing bundle.

12. On the Applicant's own evidence, the accounts of Tai Wo did not show any bad debts. In fact, such bad debts existed at different stages in Tai Wo's business. However, by the time he terminated Tai Wo in 1999, the only outstanding debt was several thousand dollars only.

13. Another item the account did not show is far more substantial. Initially, the Applicant said that all the money he had drawn from Tai Wo's accounts were used for the business purpose of Tai Wo. Later on, he conceded that there were drawings made for his own personal spending and occasional purchases of home appliances for his family or purchases of gifts to his wife. However, the Applicant said that as his family was supported by the income of his wife all along, his regular drawings from Tai Wo was only used to buy his own lunch, his own personal clothing and for having his hair cut. His estimate of such personal spending was about two thirds of what he used to spend for the same purposes when he was working for W.S. Chan & Co. The final figure put forward by him was $2,400 per month. This means that an average annual personal drawing of $28,800 had been made from the funds of Tai Wo without any record being shown on the accounts of the same.

The Cash Flow Situation In Tai Wo

14. According to the Applicant, he had certified that all the balance sheets and the profit and loss accounts prepared by Fung's Consultant Company for the 5 years preceding the resumption were correct. From those accounting documents, the Respondent had compiled Exhibit R5. It could be seen that the undistributed profits of the last 3 years prior to the resumption, i.e. from 1 April 1996 to 31 March 1999, added up to $708,402. We also note that the capital of Tai Wo as at 31 August 1999 was $210,559. While we notice that the cash left in Tai Wo's only account with the Hang Seng Bank was just $13,496, the Applicant had offered no explanation as to what had happened to those accumulated undistributed profits except that he had made some regular drawings as described in the preceding paragraph.

The Tenancy Agreement and the Rental for the Premises

15. The Applicant's first tenancy with the landlord commenced on 1 August 1991 at a monthly rent of HK$10,400, inclusive of rates. Then on 31 July 1997, the rent was drastically cut down to HK$6,800 per month with the effective date dated back to 1 July 1996. Despite this renewed tenancy, in December of that same year, the Applicant was able to get the landlord to further reduce the monthly rent to $5,000 with effect from 1 September 1997. A formal tenancy agreement was signed on 5 January 1998 to cover the period from 1 January 1998 to 31 December 2001. The Applicant's surveyor in page 130 of the hearing bundle confirmed the details of the rental reduction process. According to the Applicant, the strategy he employed to secure the reduction was that he had told the landlord that he had been doing his business badly and that he would be moving his business elsewhere if the landlord refused to give him a reduction. The Applicant denied that the cut was secured as a result of the threat of resumption of the Wah Kai Industrial Centre. Under cross-examination, the Applicant admitted that in some instances, he had been late in paying his rent by 3 to 4 months.

The Resumption Process and its Impact on Tai Wo

16. It was not in dispute that the Government's Transport Branch had published the Railway Development Strategy in December 1994. In December 1996, the Government announced the West Rail alignment linking the Northwest New Territories with Kowloon. The Applicant agreed that he had knowledge of the resumption of Wah Kai as early as September or October 1997. He knew that the Chief Executive in Council had overruled the objection to the resumption lodged by the owners and occupiers of Wah Kai on 22 September 1998. The West Rail (Phase I) Scheme was gazetted on 3 October 1998. By that time, he knew that the resumption would proceed as planned by the Government. Despite all these, the Applicant still focused himself mainly in running Tai Wo's business as if nothing had happened. He did not take part in the meeting held in the Tsuen Wan Town Hall on the briefing of the resumption scheme conducted by the officials nor had he joined the meeting of the Owners' Incorporation held on the same subject. He said that those were the concerns of a large number of people and that it would be of little use even if he were present in those meetings. All along, it was business as usual for him until June or July 1999. At that point of time, his creditors tightened his credit. As a result, he could only buy goods with cash but still had to supply to his customers on credit terms. He learned that the driver whose vehicle he hired to obtain and deliver goods told his creditors and customers that the Premises of Tai Wo was going to be resumed. His suppliers who happened to call on him at the Premises also saw the staff of the KCRC taking measurements there and had their confidence on the Applicant shaken. As a result, the Applicant found that it was getting more and more difficult for him to continue with his business and that he could not find another industrial premises to relocate the same. At the same time, he could not afford to pay the necessary expenses, which according to his estimate was around $300,000 to $400,000, involved in relocating his business. He therefore made a firm decision in July, 1999 to lay off all his staff and terminate his business.

Applicant's effort in seeking out alternative premises

17. The Applicant said that he only started looking for alternative premises after he had received a letter from the Lands Department dated 12 May 1999 (page 220 of hearing bundle). He had not engaged any property agent for that purpose but had only gone to view premises in two industrial buildings i.e. one located in Yeung Uk Road and the other in Wang Lung Street. However, he found that the asking rental of the available premises there were too high, or that the premises were not suitable in terms of size. He made no other attempt apart from those two. One interesting point we observe is that while the Applicant said that he wished to cut down his cost by not engaging a property agent, he knew that he would have to pay the caretaker or the watchman commissions if he could successfully rent a premises through their help. We also note that the Applicant had in 1991 secured the leasing of Tai Wo's premises in Wah Kai through a property agent.

Stock-in-trade left on the Premises on resumption

18. Although it was common ground that the Government had on 2 October 1999 sent staff to Tai Wo for the purpose of stock taking in the presence of the Applicant, the actual quantity of stocks present in the Premises on that day were disputed between the parties. The Applicant produced a two-page stock list (Exhibit A5) and claimed that its contents represented the stock situation of Tai Wo as at 2 October 1999. Exhibit A5 was completed on a standard form provided by the KCRC for the purpose of stocktaking. The Applicant stated that on 2 October 1999, he was given the blank forms and was told to complete the same so that the officials would come back to collect them. However, the officials had never come back for the forms. Instead, the official only took away from his hand a hand-written, rough stocktaking list (Exhibit R1) and use the same as the final stock list. The Applicant accounted for the great discrepancies between Exhibits A5 and R1 by saying that Exhibit R1 was only a record of rough stock counting for his own use while Exhibit A5 was a product of careful checking of all his stocks in the Premises at the time. The Applicant also gave evidence to the effect that when he returned the key of the Premises to the watchman for the Government, somebody came along and asked him if he still wanted the goods on the Premises. The Applicant said that as he was leaving the Premises, he did not care what those somebody would do with his goods.

Evidence of the 3 remaining professional witnesses for the Applicant

19. The 3 remaining witnesses for the Applicant were all professional witnesses. Mr. Frank NG Ting-ming (AW2) was the accountant asked by the Applicant to work out an assessment on the loss of Tai Wo as affected by the resumption. He submitted two reports respectively shown in pages 36 to 119 (the first report) and in pages 263 to 266 of the hearing bundle (the supplementary report). He submitted the supplementary report at a later stage because he had received more information from the Applicant after submitting the first report. Such additional information suggested that the Applicant had changed his strategy in operating his business by introducing more cost-effective measures to his operation in 1996. Such measures had successfully reversed the losing business into a profitable one. Hence, AW2 had amended in the supplementary report his assessment basis from 5 years to 3 years so as to reflect this change of strategy employed by the Applicant. AW2 confirmed that he had based his findings on the information provided by the Applicant and he had never queried the authenticity of such information.

20. Mr. SHAM Ting-kun, Simon (AW3) was a plant and machinery valuer. He was the expert commissioned by the Applicant to furnish a report on the assessment of the market value of the equipment, the fixtures and fittings, and the stock in the Premises at the time when the Applicant terminated his business of Tai Wo. The amounts he gave in his report shown in pages 26 to 35 of the hearing bundle for the said items were HK$20,350, HK$25,000 and HK$240,000 respectively. In pages 32 to 35 of his report, there was also a set of photographs taken on 17 March 2000. AW3 said that he was provided with these photographs by the surveyor firm instructed by the Applicant. In fact, he had not gone to the Premises to carry out any site inspection to confirm the presence of the stock, fixtures and fittings, and equipment. He had only based his valuation on the documents and information provided to him.

21. Mr. NAM Chi-kwong (AW4) was a surveyor of the Dudley Surveyors Limited engaged by the Applicant to prepare the present claim. This witness had altogether furnished two reports, which could be seen respectively from pages 120 to 166 and 167 to 299 of the hearing bundle. He too rested the factual basis of his reports on the information and materials provided by the Applicant. In his reports, he worked out the amounts of claim under various heads as shown in paragraph 1 above. The claim was made on the basis of total extinguishment.

The Respondent's Case

22. It was the Respondent's case that no reasonable businessman in the position of the Applicant would terminate his business as he did in the circumstances. Instead, a reasonable businessman should and would relocate his business elsewhere and continue with his operation of the business. It was also the Respondent's case that after the Applicant had returned his key to the Government on 10 April 2000, most if not all of the stock and equipment were gone. Hence, it was the Respondent's case that the Applicant was only entitled to claim the removal cost at $81,000.

23. The first witness called by the Respondent was Mr. POON Yee-lap (RW1). He was the valuer engaged by the Respondent to provide estimates of the market value for the equipment, fixtures and fittings, and stock of Tai Wo when the Premises was resumed by the Government. He had furnished two reports, shown respectively in pages 180 to 189 and pages 308 to 311 of the hearing bundle. In the first report, he said that during a site survey carried out on 11 April 2000 (i.e. one day after the Applicant returned his key to the Government) on the Premises, he found that "all stocks and most furniture and machinery and equipment were not found in the subject property". It was also his assessment that the removal cost for Tai Wo would be around $81,000. Under cross-examination, RW1 confirmed that Exhibit R1 was an accurate stock list taken on 2 October 1999 when the Premises was notionally reverted to the Government.

24. Mr. KAN Wing-sang, Kevin (RW2) was the second witness for the Respondent. He was the accountant tasked by the Respondent to work out two reports (as shown in pages 167 to 179 and 300 to 307 of the hearing bundle respectively) in evaluating the claim made by the Applicant on the basis of total extinguishment. He had also used the data provided in the Applicant's accountant's report to work out a table (Exhibit R5) showing the cash flow situation during the last 5 years or so in Tai Wo's life span.

25. The third witness for the Respondent Mr. CHAN Kin-kwong, Benny (RW3) was a field staff of Chesterton Petty, the consultant firm engaged by the Government. On 2 October 1999 (the notional reversion date), he was part of a team, which went to the Tai Wo Premises for a stock taking exercise on the site. He produced a checklist as Exhibit R4, which detailed the steps he took in the process of compiling the stock list. RW3 said it was the Applicant who had produced to his team on 2 October 1999 the stock list at Exhibit R1. It was also the Applicant who had completed the first column (the description of various items) and the second column (the quantity of various items) of that stock list. The third column (the encircled numbers) were entered by RW3 himself, showing the reference numbers of the individual photographs (Exhibit R3) taken by RW3's assistant during the stock taking process, against the items described by the Applicant. However, RW3 admitted that he had not counted the precise quantity of each individual item on the list, but that he had only done a rough count of various items and had found the quantities alleged on the list to be acceptable.

26. The fourth witness for the Respondent was Mr. PANG Ho Chuen, Lawrence (RW4). He was a surveyor working for Chesterton Petty and had prepared two reports shown in pages 190 to 262 and 314 to 345 of the hearing bundle. Apart from giving opinion evidence on how the various amounts in the Applicant's claim should be calculated, this witness also gave oral evidence on the fact that he had talked to a representative of the landlord of the Applicant and learned that the Applicant had used the resumption as an excuse to obtain reduction of rent from his landlord.

Our Determination on the issues

27. Having outlined the cases of the parties and the evidence tendered, we now seek to analyze such evidence and give our decisions in the case. We shall first determine on what basis the claim should be assessed and then, whether an individual claim should be allowed in full or in part, or be disallowed completely.

Whether or not it was reasonable for the Applicant to extinguish his business

28. In the case of Director of Buildings v. Shun Fung Ltd. [1995] 2 A.C. 111, Lord Nicholls in delivering the judgement of the Privy Council pointed out that a successful claimant must be able to meet 3 conditions before his claim could be allowed. In brief, these three conditions are (1) the causation could be established between the loss claimed and the resumption; (2) the loss claimed must not be too remote from the cause and (3) the claimant has discharged his duty to mitigate his loss. Hence, if a reasonable man in the position of the Applicant would have relocated his business elsewhere and would not have opted for total extinguishment of the same, the Applicant would only be allowed to claim compensation in relation of the cost of removing his business to a new location.

29. In Callwin International Electric Co Ltd v Director of Engineering Development [1983-1985] CPR 448, Judge Cruden also said at page 457 the following:

"The law of compensation obliges a resumed owner who has suffered loss by resumption to take reasonable steps to mitigate that loss. The resumed owner's duty to mitigate is basically the same as the duty in tort placed on a person who suffers damage as a consequence, the resumed owner's duty to mitigate may include the obligation to relocate and carry on all or part of the resumed business elsewhere."

30. First of all, we have to consider the question of whether the Applicant's business was geographically bounded. In our judgment, the answer must be negative. We note that the Applicant's customers were located all over the territories in Hong Kong as he had to plan his routes of delivery evenly in each week in order to cover all the areas. As for the incoming stock, either that they would be delivered to the Premises by the suppliers or the staff of Tai Wo would have to go to collect the same by means of a hired van. The seeking out of new customers or maintenance of the old ones were done by LEE Chi-kwong and/or the Applicant himself, both calling on those customers at their shops. Under such circumstances, it must be rare and exceptional that a customer would have to go to the Premises in order to do business with the Applicant. The evidence was also clear that the operation of the Applicant's business mainly involved in the ordering of the stock, getting hold of them, re-packing them, sometimes slightly processing some of the stock like doing silk screen printing and then sending them off to customers. Neither the stock nor the machinery used by the Applicant was heavy. Therefore, there should be no specific floor-loading requirement, nor should there be any height clearance specification, which an alternative premises has to meet. A premises that is suitable for Tai Wo's operation did not, for the reasons given above, even have to be situated within the Tsuen Wan district. As such, there should be plenty of choices of premises for the Applicant to relocate his business.

Age of the Applicant

31. In the Applicant's statement shown in page 17 of the hearing bundle, he mentioned that because of his age, he could not deal with the problems caused by the resumption. Those problems he referred to were that he could not find suitable alternative premises to continue with his business; that others spread rumours about the unsteadiness of his supply to his customers; that his customers began to delay their payments; that his suppliers were reluctant to sell him goods on credit terms; that his landlord asked him for early payment of rent and that LI Chi-kong sued him in the Labour Tribunal for severance payment. To those problems raised, we have two observations to make. Firstly, we find that all those problems, apart from the first one, were problems caused by the resumption but not problems caused by relocating the Applicant's business. In fact, all those problems could be avoided or could at least be alleviated to a very large extent if the Applicant were to seek for and did find an alternative premises to relocate his business. Secondly, we note that in the Applicant's oral evidence given in the hearing, age had not been relied upon as his reason for not relocating his business. Rather, the reason given by the Applicant was clearly that he could not relocate his business because he could not afford to do so financially. Bearing in mind that all the Applicant's employees, except LI Chi-kong, were close relatives of the Applicant and that LI Chi-kong's relationship with the Applicant had been a long standing and harmonious one before LI was laid off, the Applicant should be able to enlist helps from his staff when planning for the logistics of relocating his business. Furthermore, we note that the Applicant did have experience in relocating his business, from QPL Industrial Building to Wah Kai Industrial Centre in 1991.

32. We are of course aware of the Lands Tribunal's earlier decision in the case of Director of Public Works v Dr. Renald Ching and Dr. Marie Feng [1978] HKLTLR 320, that the age of the Applicant must be taken into account when the Lands Tribunal was to assess whether or not that Applicant was reasonable in terminating instead of relocating his business. In that case, both doctors running an eye clinic decided to terminate their business instead of relocating the same. In fact, prior to resumption, both doctors, in their 70's, had already decided to retire and had taken steps to run down their practice to meet this goal. Their plan was frustrated by the resumption in that case and had to terminate their business earlier than they had planned for. The evidence was that they could relocate if they wanted to but it would not be prudent to do so for they would have to re-start their business elsewhere by incurring further cost and effort and yet the business would only last for the residue period up to their planned date of retirement. It was under those circumstances that the then Lands Tribunal found the two doctors' decision to terminate their business on resumption to be reasonable. In the case before us, the Applicant had before the resumption no plan to retire. Also it was his intention that he would be continuing with his business until either his son or his brother would take over. Hence, we find the two doctors' case to be clearly distinguishable from the facts in the present case. We also find that the remarks made by the Applicant's surveyor in paragraph 9.2 of page 136 of the hearing bundle to be unjustified since he confirmed that the Applicant had never told him specifically that age was a problem. On the evidence before us in the instant case, we are of the view that the Applicant should not have been seriously affected by his age of 62 if he wished to relocate his business.

Availability of alternative premises

33. From the statistical figures for private flatted factories as shown in the Property Review 2000 published by the Rating and Valuation Department (at page 236 to 239 of the hearing bundle), we note that the number of vacant units of size similar to the Premises in Tsuen Wan area was 373. The rentals were also at an all time low figure (i.e. the rental index figure for the 2nd quarter of 1999 was only about 89% of the corresponding index in 1989), while the overall vacancy rate in Tsuen Wan was at about 9.1% at the end of 1999. These figures clearly show that there were available alternative premises. The Applicant's assertion that available units were either too big or too expensive was clearly contradicted by the said statistics of the time.

Reasonableness of the Applicant's effort in locating alternatives

34. The Applicant's evidence was that he had made two attempts to locate alternative premises. He found that the available units at the two industrial buildings he had visited, namely, Fu Lai Industrial Building and Wung Lung Industrial Building, were either too big or too expensive.

35. We notice that both attempts of the Applicant were made after 12 May 1999. He said that since he could not locate suitable alternative premises, he had made a decision to terminate the business of Tai Wo and to lay off all his staff in mid or late July 1999. This means that the Applicant had decided to wind up his 11-year-old business because he could not locate suitable alternative premises in a matter of 2 months, from May to July 1999. Yet, in those two odd months, only 2 attempts to view possible alternative premises were made.

36. On the other hand, the Applicant had learnt about the impending resumption well before hand. He had knowledge of the scheme way back in 1997 when the West Rail project's authority had sent staff to the Premises to take measurements. He also agreed with the suggestions made by Mr. YIM, counsel for the Respondent, that when the Chief Executive in Council had overruled the objections of the owners in Wah Kai and approved the West Rail scheme in September 1998, he already knew by then that the resumption was an inevitability. In fact, by 22 March 1999, he had already engaged Dudley Surveyors Limited to represent him in the matter of claiming compensation.

37. Given the early notice of resumption the Applicant received, given the then vacancy rate and rental level of industrial premises of similar size in Tsuen Wan area, given that only 2 attempts were made by the Applicant in a matter of 2 months and given that he had not even engaged any property agent for the relocation exercise, we find that the effort made by the Applicant in his attempt to locate alternative premises was way below the standard of what a reasonable businessman in his position would have done.

Financial resources

38 In the Applicant's claim (page 350 of the hearing bundle), the Applicant stated that "the costs of a relocation including site search and removal is formidable and out of reach of the claimant." Similarly, the Applicant stated in his witness statement (pages 17 and 18 of the hearing bundle), "As a result of the resumption, I did not have standby financial resources to pay for a relocation, and I had to close down TW on 2nd October 1999."

39. In the final submission made by the counsel for the Applicant, it was submitted that the Applicant "simply did not have the money necessary for the move". That left him with "no option but to cease business." In particular, it was pointed out that the Applicant had only one bank account with the Hang Seng Bank. Thus, he concluded, "any cash available for use by Tai Wo or the Applicant is revealed by the Hang Seng Bank account. The account shows that as at 31st March 1999, cash amount stood at $57,326.00 and at 31st August 1999 at $13,496."

40. Also, the Applicant submitted that "the money and financial resources as alleged by the respondent, available to Tai Wo in the form of net asset as at 31st March 1999 and at 31st August 1999 or as undistributed profits accumulated for the 3 years prior to resumption simply did not exist in reality and only appears in the company's balance sheet."

41. On the other hand, the Respondent submitted that firstly, according to the balance sheets produced by the Applicant (pages 83 and 94 of the hearing bundle), the Applicant had, as at 31 March 1999 and 31 August 1999, capital in the sums of $237,059 and $210,559 respectively; secondly, the Applicant had made profits for three consecutive years prior to the resumption, in the total sum of $709,402. The Respondent submitted that since it was the Applicant's evidence that he did not draw any distributed profits from Tai Wo but only drew personal drawings in the sum of about $2,400 per month, the Applicant failed to offer any reason as to where the money have gone when he certified in the balance sheet as at 31 August 1999 that Tai Wo had only cash in bank of $13,496.

42. We will go through the Applicants' submitted balance sheets and profit and loss accounts to find if the Respondent's allegation was properly made. We reproduce below a summary of Exhibit R5, which was prepared by the Respondent's witness RW2 using the figures of the accounts certified by the Applicant:

Table 1

Ref.	Item	94/95	95/96	96/97	97/98	98/99	99/00
(A)	Reported net assets (i.e. difference of assets & liabilities)	261,970 ======	202,372 ======	252,539 ======	249,506 ======	237,059 ======	210,559 ======
(B)	Increase / (decrease) in capital not reported by the Applicant in the accounts	--	58,955	(195,104)	(239,738)	(238,873)	61,921
(C)	Capital that should have been brought forward from last year	289,940	261,970	202,372	252,539	249,506	237,059
(D) = (B) + (C)	"Capital" amount as reported by the Applicant in the accounts	289,940	320,925	7,268	12,801	10,633	298,980
(E)	Current year's profit / (loss) as reported	(27,870)	(118,553)	245,271	236,705	226,426	(88,421)
(F) = (D) + (E)	Capital that should have been carried forward to next year	261,970 ======	202,372 ======	252,539 ======	249,506 ======	237,059 ======	210,559 ======

Notes:

1. The figures in the rows referenced (A), (D) and (E) were the actual figures reported in the Applicant's self certified accounts.

2. The sum of the figures in the row referenced (B) is a net decrease in capital of $552,839 but unreported in the submitted balance sheets. Without taking into account the figures arrived at this row, the amounts shown in the balance sheets and the profit & loss accounts could not reconcile with each other.

.

43. We agree with the analysis of the accounts of Tai Wo by the Respondent's witness RW2, as summarized in Exhibit R5. We find from Table 1 above that unless there are the stated increase or decrease of capital of Tai Wo (i.e. the figures in the row referenced (B) in Table 1 above, which correspond to either an injection of new capital or a withdrawal of capital / distribution of profit), the accounts of Tai Wo for the years from 1994/1995 to 1999/2000 do not balance when read together. This is more apparent when the capital amount shown in the balance sheet of a certain year (for example 1997/1998) is compared with the reported profit for the same year and the capital amount shown in the balance sheet of a subsequent year (1998/1999), as follows:

		Capital reported in the balance sheet of 1997/1998	= $12,801
Add		Net profit reported in the profit & loss account and balance sheet of 1997/1998	= $236,705
		Accumulated capital that should have been carried forward to next year, 1998/1999	= $249,506
Contrast -		Actual capital amount reported in the balance sheet of 1998/1999	= $10,633

44. Therefore, from the above year-to-year comparison, we note that the actual capital reported in the accounts of 1998/1999 was short of $238,873 just when the two years' figures (1997/1998 and 1998/1999) are compared together. Therefore, for the above reason, we find that either the Applicant has omitted to report some figures on the distribution of Tai Wo's profits to the Applicant himself or, there were other personal withdrawals from the accounts of Tai Wo by the Applicant, apart from the monthly withdrawals in the sum of about $2,400 per month for personal consumption, or Tai Wo had some accounts other than the Hang Seng Bank Account reported by the Applicant, or there were cash in hand not reported in the accounts. Also, we are at a loss to understand the logic of the written submission by the Applicant's counsel that "the undistributed profits accumulated for the 3 years prior to resumption simply did not exist in reality and only appears in the company's balance sheet". Bearing in mind that the analysis of Exhibit R5 was prepared using entirely the Applicant's figures in his certified accounts and that the Applicant failed to provide other accounting data despite being requested to do so by the Respondent, the onus of explaining the above said very apparent discrepancies must rest with the Applicant. Since the Applicant failed to account for the whereabouts of such large sums of profits or changes in the capital of Tai Wo, we can only conclude that the Applicant is not a credible witness in so far as the accounts of Tai Wo is concerned.

45. Apart from the above finding, we have also considered the removal costs that might be involved in the event of relocation and the factors affecting the Applicant's capacity to bear those costs. Since it was the opinion of the Applicant's witness, Mr. NAM Chi-Kwong (AW4) that compensation should be awarded on the basis of total extinguishment, he did not provide any estimate of relocation costs. During the hearing, AW4 was asked to give an estimate of the total costs of relocation, item by item. He agreed with RW1 that the removal cost would be about $81,000. Apart from that, he estimated the other costs of relocation, which added up to about $113,120. Thus, he estimated the total costs of relocation to be about $194,120. Since the individual items of the costs of relocation will be considered in a later section, we shall for the time being assume that the costs of relocation would be, according to the experts called by the parties, in the region of roughly between $80,000 and $200,000.

46. The Respondent submitted that the financial resources of the Applicant for relocation was further strengthened by the rent deposit in the sum of $20,800 held by his landlord, Techwant Investment Ltd. We agree with this submission since by the Applicant's own admission, the Applicant did actually recoup this sum of money from the landlord indirectly by not paying the rent for the last four months prior to reversion of the Premises. Therefore, after deducting $20,800 from the estimated costs of relocation, we find that the Applicant only required about $60,000 to $180,000 for relocation. Has the Applicant got this sum of money? And, is there any other source of finance available to the Applicant that as a reasonable businessman should not simply ignore?

47. In this connection, the Respondent submitted that "a without prejudice ex-gratia compensation offer was made to the Applicant on 25 July 1999, which, if accepted, could have eased the financial difficulties of the Applicant and hence facilitated his relocation effort." The Applicant said that he did not respond to this offer because it came too late. By then, he already decided to terminate his business. Based on the Applicant's evidence that he had made a decision to terminate the business of Tai Wo and to lay off all his staff in mid or late July 1999, the offer may well be too late to be of any assistance.

48. In summary, we find from the analysis at Exhibit R5 that the Applicant failed to state a net reduction in capital of about $552,839 (see paragraph 42 above) for the years from 1994/95 to 1999/2000. This net reduction in capital is equivalent to an unreported net withdrawal of capital or an unreported distribution of profit from the business of Tai Wo by the Applicant. Hence, we find that based on his accounts as submitted, he should have more than sufficient fund to finance the costs of relocation, which, according to the estimates made by the expert witnesses, amounted to no more than between $60,000 and $180,000. Since the money that should have been withdrawn by the Applicant should be capital or undistributed profits belonging to Tai Wo but not his money from other sources (for example from his wife), we find that we must take that into account when deciding whether it would be reasonable for Tai Wo to relocate itself upon resumption.

49. Furthermore, if we look at the accounts of Tai Wo and the purported personal drawings of the Applicant from another angle, we find that our earlier conclusion that the Applicant should have withdrawn the above said sum of money to be a reasonable conclusion. If the Applicant's evidence was to be believed in full, he claimed that "Tai Wo is him and he is Tai Wo". He also claimed that he had only taken unreported drawings in the sum of about $2,400 a month for personal consumption. We find that his personal drawing was even less than half of the salary of his 76 or 77 years old mother in law, Madam CHAN Hoon, who worked as a cleaner in the Premises before the resumption. He said that he had not taken any other distributed profits for the few years prior to resumption and was thinking of, in the absence of resumption, continuing the business and turning it over either to his son or to his brother upon his retirement in the future. However, was he seriously thinking of continuing the business and passing it to his family member when what this business could give him in returns for some 5 years at least (from 1994/1995 to 1998/1999) was only the modest sum of $2,400 a month? This defies common sense, and we therefore cannot believe in what the Applicant said regarding the financial situation of Tai Wo.

50. We hence conclude that the Applicant should have sufficient finance resources to undertake a relocation, which in the circumstances is a reasonable step to be taken by any reasonable businessman who was in control of Tai Wo at the time of resumption, taking into account the nature of business, its track record in the past, availability of alternative premises and financial resources available to the Applicant. As such, compensation for the Applicant should only be awarded on the basis of relocation

Award made on the basis of relocation

51. We have considered the appropriate award to be made under this head even though the Applicant's application did not provide for this eventuality. The different items of award will be examined in the following paragraphs.

Whether profit rent should be awarded?

52. There is no dispute between the parties that under the Pointe Gourde principle, the Applicant could claim profit rent only if he could prove that the reduction of rent he managed to secure was not the result of the impending threat of resumption. The crucial issue before us is therefore whether the two reductions allowed by the landlord were the results of the Government's plan to resume the Premises. The Applicant's evidence was that he had secured the reductions by telling the landlord each time that he had been having poor business and that he would move elsewhere if no reduction was to be allowed. On the other hand, the evidence given by RW4 was that RW4 learned from the agent of the Applicant's landlord that the Applicant was using the threat of resumption to secure the reductions. We find the Applicant's evidence implausible because the two reductions (i.e. to the extent of 34.6% and 51.9% of the original rent) were formally secured respectively on 31 July 1997 (retrospectively back dated to 1 July 1996) and 5 January 1998 (again retrospectively back dated to 1 September 1997). At those points of time, the Applicant's trading record showed no down turn of business at all. In fact, during the last 5 months before terminating Tai Wo, it was business as usual in the Applicant's own evidence. Given the fact that the Applicant could secure two drastic cuts in a time span of less than 6 months and given the fact that very early publication of the West Rail project had been made, we find that it is more likely than not that the Applicant had secured the two reductions as a result of the threat of the impending resumption. As such, we decline to make any award to the Applicant under the head of profit rent.

Whether there was loss of profit during shadow of resumption

53. Ever since the decision of Director of Buildings v Shun Fung Ltd 2 AC 110, the law's position has been made clear in that an applicant may claim business loss suffered before the resumption if he could prove that such loss was suffered by his business as a result of the threat of the impending resumption. Such loss, now generally known as loss under the shadow of resumption, is also claimable in the case of an applicant making his claim on the basis of relocation. Amongst other elements that a successful applicant has to prove, the burden of proving the loss and proving that the applicant as a result of the threat of resumption has sustained such loss is on the applicant.

54. In the previous paragraphs, we have already gone into details Tai Wo's annual profit and loss accounts in the years prior to the resumption. A summary and analysis of those accounts were produced in page 341 of the hearing bundle. It could be seen from those accounts that Tai Wo had successfully improved its profitability significantly in the financial year 1996/97. Instead of making a loss in the preceding two years, Tai Wo was able to make a handsome profit in the three consecutive years. The actual figures recorded in the relevant accounts are $245,271.10 in 1996/97, $236,704.90 in 1997/98 and $226,425.60 in 1998/99. Assuming that such figures are correct and accurate, we must then conclude that on the face of these trading records, there was no sign at all that, up to 31 March 1999, the shadow of resumption was affecting the business of Tai Wo. We have of course noticed the significant drop in business recorded in the accounts for the 5 months period ending 31 August 1999. However, according to the Applicant's own evidence, he had been focusing in doing his business and did not care much about the impending resumption. It had been business as usual until June or July 1999. It thus follows that if Tai Wo was suffering from loss of business due to the shadow of resumption, that only took place in the last 3 months or so. We shall deal with this crucial 3 months in the paragraphs below.

55. According to the Applicant, by June or July 1999, his creditor tightened his credits. As a result, he could only buy goods with cash but still had to supply to his customers on credit sales terms. His customers and suppliers learned from Tai Wo's driver or, through visiting him on the Premises learned that the Government was going to resume the same. On the other hand, we also heard evidence from RW4 saying that in July 1999, he learned from the staff in Tai Wo that the Applicant had gone to USA, carrying out a field survey there. It was RW4's view that the Applicant could have deliberately scaled down his business to meet the resumption as the Applicant was planning to immigrate to the United States. In order to determine why Tai Wo's turnover declined drastically in those last few months, we find the issue of whether the Applicant was a creditable witness to be most important. However, after going through in details the evidence of the Applicant when he talked about his accounts and stock in Tai Wo, we find the Applicant to be an unreliable witness. We shall set out below our reasons for this finding.

56. We have in an earlier section found that the balance sheets for the years ending 31 March 1997, 31 March 1998 and 31 March 1999 were grossly incorrect because they failed to account for the whereabouts of the net profits generated, or to account for the net changes in the capital of Tai Wo. In addition, we can also infer from those balance sheets that either the accounts of Tai Wo for the said years had been badly prepared, thus generating the gross mistakes of omitting the whereabouts of those net profits or net changes in the capital of Tai Wo, or the Applicant was an unreliable witness in stating that firstly, the Hang Seng Bank Account was the only bank account held by Tai Wo and himself and secondly, he did not draw any sum from Tai Wo other than the relatively modest sums for personal consumption which averaged, according to his evidence, to be something about $2,400 per month.

57. We have also heard evidence from the Applicant about the quantity of stock of the Applicant prior to the resumption and how he had disposed of the said stock by forced sales. We will summarize and analyze below the evidence from the Applicant and other witnesses regarding the stock after which we shall also draw up our conclusion.

58. The Applicant produced a 2-page stock list (Exhibit A5) and insisted that its contents represented the stock situation of Tai Wo as at 2 October 1999. We find that there were, without counting 120,000 plastic bags that were not packed in cartons but in rolls, a total of 1,120 cartons and 85 cartons in page 1 and page 2 of Exhibit A5 respectively, thus giving a total of 1,205 cartons. We have also heard evidence from Mr. SHAM Ting-kun, Simon (AW3) that based solely on the information and documents provided by the Applicant, AW3 gave an estimate of the market value of the stock in the Premises. The valuation of AW3 was produced in page 31 of the hearing bundle. The surveyor firm instructed by the Applicant provided him with the photographs, appearing in pages 32 to 35 of the hearing bundle, which show the stock of the Applicant. The Applicant also produced a sketch plan showing the layout of the Premises and the positions where the photographs at pages 32 to 35 of the hearing bundle were taken. During the hearing on 22 November 2001, the Respondent supplemented and produced a set of 12 photographs (Exhibit R3) showing the stock in the Premises as at 2 October 1999.

59. After comparing the photographs dated 17 March 2000 appearing in pages 32 to 35 of the hearing bundle, the sketch plan in Exhibit A6 and the photographs in Exhibit R3, we find that there is no evidence that the Premises contained a total of 1,205 cartons of stock as at 2 October 1999. The Applicant said his stock was reduced by a forced sale of the stock (the sale invoice appearing in page 23 of the hearing bundle) that took place on 20 December 1999. The said invoice show that that forced sale involved a total of about 216 cartons. Therefore, after deducting 216 cartons from the original total stock of 1,205 cartons, about 989 cartons should remain in the Premises after 20 December 1999. However, by our rough estimates, the photographs that were taken on 17 March 2000 and produced at pages 32 to 35 of the hearing bundle could at most show the existence of a total of some 350 cartons. Hence, our estimate suggests that the stock in the Premises, as indicated by the photographs that were taken on 17 March 2000, represent only about one third of the Applicant's claimed quantity of stock as at 2 October 1999 per Exhibit A5 (as amended by the forced sale that took place on 20 December 1999).

60. Moreover, we have heard conflicting evidence from Mr. CHAN Kin-kwong, Benny (RW3) that the Applicant had not produced to him the stock list at Exhibit A5. Instead, RW3 said that the Applicant had actually prepared and produced to his stocktaking team another stock list as shown in Exhibit R1. In the latter list, there were 3 columns: the left column being a description of the stock made by the Applicant; the middle column being the quantity of the stock reported by the Applicant; and the right column being encircled numbers, written by RW3, that corresponded to the number of individual photographs (at Exhibit R3), which were taken by RW3's assistant. RW3 further admitted that he had not counted the precise quantity of each item on the list at Exhibit R1 but had only carried out a rough counting of various items and had found the stated quantity on the list to be acceptable. Although we are of the view that RW3, as the Respondent's representative on site, should have conducted a more careful counting of all the stock reported by the Applicant as it will be the subject matter of compensation in the future, on balance, we prefer to accept the evidence of RW3, rather than that of the Applicant. Firstly, we find that the list at Exhibit R1 was dated 2 October 1999 and signed at the end by the Applicant whereas although Exhibit A5 was written on a pro-forma stock list form, it was neither signed by the Applicant, nor confirmed by the Respondent's representative. Secondly, we find that the total number of stock shown in Exhibit R1 was 581 cartons and rolls, excluding the some 100,000 plastic bags. Therefore, the quantity described in Exhibit R1 resembled more closely with the quantity shown in the photographs presented by the parties.

61. For the foregoing reasons, we find that the Applicant was not a reliable witness in so far as the evidence on the stock of Tai Wo was concerned.

62. To summarize, based on the Applicant's evidence on the accounts and stock of Tai Wo, we find that the Applicant was not a reliable and credible witness. Hence, we therefore do not believe in what the Applicant told us as to be the true reason for the drastic reduction in the turnover of Tai Wo in the last few months of business. There is, therefore, no reliable evidence to support the Applicant's claim for loss of profit in the shadow period.

Estimate for the amount of loss of fixtures and fittings

63. In the valuation report prepared by AW3, a sum of $25,000 was estimated as to be the market value of the Applicant's fixtures and fittings before the resumption. AW3 did not at any stage inspect the Premises to determine the presence or otherwise of the Applicant's fixtures and fittings (as detailed in his report, at page 30 of the hearing bundle). However, the Respondent did not dispute in principle this item of compensation. We were also advised at the beginning of the hearing that the parties had agreed the amount of loss of fixtures and fittings to be $23,500. We therefore decide that this amount of compensation be awarded for the loss of fixtures and fittings of the Applicant.

Estimate for the amount of loss of equipment

64. Also, AW3 carried out his valuation of the market value of the equipment without inspecting the Premises and the said equipment. He had merely based his valuation on the documents (including photographs) and information furnished to him. In the valuation report, AW3 estimated the market value of the Applicant's equipment (as set out in page 30 of the hearing bundle) to be $20,350. The Applicant gave evidence that he did not dispose of any of the equipment from the Premises. When he returned the key of the Premises to the watchman for the Government, somebody came along and asked him if he still wanted the goods on the Premises. The Applicant said that since he was leaving the Premises, he did not care what those somebody would do with his goods.

65. Before the hearing commenced, both parties informed us that they had agreed the amount of loss of equipment to be $20,350 if we ultimately were to decide that the Applicant could claim those items of equipment in full.

66. RW3 gave evidence that the Applicant borrowed the keys to the Premises on 5 April 2000 and returned the keys to the Respondent on 10 April 2000. However, when RW3 carried out a site survey on 11 April 2000, all the stock and most of the equipment, furniture and machinery were gone.

67. We find the Applicant's evidence and his theory that somebody else might have taken the equipment and the stock from the Premises to be too absurd to be acceptable. The Applicant was a businessman with years of experience. He notified the Lands Department in March 1999 that his agent, Dudley Surveyors Limited, would represent him in this resumption claim. Therefore, regardless of his own personal attitude towards the resumption and the forced cessation of his business, we do not believe that the Applicant, being an businessman of such a long standing, would on the one hand borrow the keys from the Government's caretaker in order to get access to the Premises yet on the other hand, did not lock the Premises but chose to allow somebody that he did not even know to take whatever stock and equipment that the latter wished to take. Even if he had actually conducted himself in such a manner as he claimed, we still hold that this is not the standard of behaviour of a reasonable businessman, in that he, apart from not mitigating against the loss due to the resumption, acted purposely to increase the loss to himself. He simply could not give away at his will valuable stock and equipment to somebody else and later claim the compensation for the same from the Respondent.

68. As we have decided earlier that the compensation to the Applicant for the resumption of the Premises should be calculated on the basis of relocation, we have looked into the feasibility of removing and relocating the equipment as set out in AW3's schedule. We do not find the removal of the said equipment to pose any peculiar problem, as they were the usual type of office equipment. Finally, we find that the Applicant had failed to prove that he had lost what were set out in AW3's schedule of equipment. As a result, no award should be made for this item of claim.

Estimate for the amount of loss of stock

69. Similarly, we decide that the Applicant's theory that somebody else could have removed the stock must be rejected for being too absurd. Since we believe in RW3's evidence that all the stock in the Premises had been removed when the Respondent re-entered the Premises on 11 April 2002, we decide that no award should be made in respect of this head of claim.

The Relocation Costs which may be compensated

70. As we have mentioned previously, the Applicant's claim did not contain any calculation as to how compensation should be awarded if this Tribunal finds that the proper basis for such award is one of relocation. It was only when the Applicant's expert Mr. NAM Chi-kwong (AW4) was subject to cross-examination, did he give an itemized calculation as to how the concerned cost figures should be in the case of relocation. The figures given by AW4 are listed out below:

(a)	Agency Fee	$	5,850
(b)	Rental Deposit	$	23,400
(c)	Stamp Duty	$	707
(d)	Solicitor's Fee and Disbursement	$	3,000
(e)	First month's rental	$	11,700
(f)	Installation Charges and Deposits for utilities	$	10,000
(g)	Publicity cost	$	3,000
(h)	Cost of Renovation, Adaptation of Fixtures & Fittings	$	55,000
(i)	Double Overheads	$	463
(j)	Removal Cost	$	81,000
	Total	$	194,120

71. The parties had no dispute on the figure of $81,000 for the last item, removal cost. The Respondent contended that all the other items should not be awarded because they were either not covered by the provision under Section 10(2)e(i) of the Lands Resumption Ordinance (Cap. 124) or that the items could be avoided or capable of being set-off altogether. Mr. YIM, counsel for the Respondent submitted that item (h) fell into the former category and he cited a decision of this Tribunal in Leung Kee Investment Co. Limited v Secretary for Transport (unreported case, referenced LDMR 26 of 1999) to support his contention. The applicant in that case cited an English Court of Appeal decision, Harvey v Crawley Development Corporation [1975] 1 QB 485 to support his claim for, inter alias, the costs of purchasing new furniture, decoration costs, costs involved in purchasing electrical appliances and green plants and installation costs of electrical appliances and antenna. As the said English decision decided that the costs reasonably incurred by an applicant in moving to a new set of premises should be compensated, the applicant in the Leung Kee case contended that his claims under those items should be allowed. The then Lands Tribunal did not agree with this contention. After going into the English Statue under which the Harvey case was based and Section 10(2)e(i) of the Hong Kong Lands Resumption Ordinance under which the Leung Kee case was based, that tribunal was of the view that the Hong Kong provision was different from the English provision. It was held that the ratio of the English case was decided by interpreting Rule 6 of Section 2 of the Acquisition of Land (Assessment of Compensation) Act, 1919 and such provision forms no part in the Hong Kong Legislation. Therefore, the Harvey case was held to be not applicable to the case before that tribunal. Those claims were disallowed accordingly.

72. We find the reasoning of the Tribunal expressed in the Leung Kee case to be fair and accurate. Hence, we also find that the Applicant before us cannot claim any amount under item (h) as stated above. Besides, we wish to add that as the Applicant will be compensated for the loss of his existing fixtures and fittings in the Premises (under item 4 of the Agreed Facts), he should be made to bear the cost of improvement brought about by having new renovation and fittings installed in his new premises if he has chosen to relocate.

73. We now turn to the individual items claimed by the Applicant in alphabetical order. We allow for compensation for item (a) (agency fee) since we are of the view that it is quite common nowadays for prospective tenants to seek out prospective premises by employing a property agent. In fact, when we are examining if the Applicant had spent reasonable efforts in locating alternative premises, we also find that it was unreasonable for him not to engage a property agent in doing the job. In the circumstance, we find that it would only be fair for the Applicant to get his agency fee if we are to assess his compensation on the basis of relocation.

74. For item (b) (rental deposit) and the second limb of item (f) (deposit for utilities), we disallow those items for we are of the view that any amount required under those heads could be set off with the original corresponding amounts required for the Premises resumed.

75. For item (c) (stamp duty), we allow that claim for it is an expense, which the Applicant must incur in order to secure a new premises.

76. For item (d) (solicitor's fee), we do not allow that head. According to our experience sitting in the Lands Tribunal, it would only be in the most rare case for a tenant to secure the service of a solicitor in drawing up a tenancy agreement for premises with a monthly rental just above $10,000. Hence, such cost should not usually be incurred in connection with the leasing of an alternative premises required by the Applicant.

77. For item (e) (first month's rent) and item (i) (double overheads), we disallow those two items. Given the very lengthy notice in the present resumption exercise, should the applicant had opted for relocation, he could have ample time to plan his moves so that double overheads in terms of rents, rates, utility charges for both the new and the old premises could be avoided.

78. For the first limb of item (f) (installation charges), we adopt the same reasoning as we have expressed when dealing with item (h); and we therefore disallow that item as well.

79. Finally, for item (g) (publicity cost), we also disallow that item. Given the way how the Applicant operated his business --- namely by calling upon his customers at their shops, there should have been little worry on his part that his customers would lost contact with him. We have also had in mind that redirection of telephone lines and post will only be subject to minimal, if any, charges.

80. Summing up, we allow for a total compensation of $87,557 for the costs incidental to a relocation of Tai Wo's business by the Applicant from the Premises to an alternative new premises. This comprises the following:

Agency Fee (as estimated by AW4)-	$5,850
Stamp Duty (as estimated by AW4)-	$707
Removal Cost (agreed by the parties)-	$81,000
Total-	$87,557

Orders

81. Accordingly, we order that the Respondent pays the Applicant compensation in the sum of $111,057 (Hong Kong Dollars One Hundred And Eleven Thousand And Fifty Seven), comprising the following: -

	Item of Claim	Compensation
(i)	Profit Rent		Nil
(ii)	Temporary Loss of Profit		Nil
(iii)	Loss of Goodwill		Nil
(iv)	Agency Fee, Stamp Duty & Removal Cost		$87,557
(v)	Severance Payment		Nil
(vi)	Loss of Equipment		Nil
(vii)	Loss of Fixtures and Fittings		$23,500
(viii)	Loss of Stock		Nil

82. We further order that the matters of professional fees, interest and costs be adjourned to a date to be fixed by the Assistant Registrar, with liberty to apply for any other ancillary and consequential matters.

83. Finally, we also order that the Applicant's application for compensation made on the basis of total extinguishment of his business be dismissed.

Remarks: