SO KEE TRANSPORTATION CO LTD v. THE SECRETARY FOR THE ENVIRONMENT, TRANSPORT AND WORKS

LDRW 36/2003

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

RAILWAYS ORDINANCE APPLICATION NO. 36 of 2003

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DECISION ON REVIEW

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Background

1. After handing down of the Judgment dated 18 September 2007, the Department of Justice, acting for Respondent, wrote a letter dated 20 September 2007 to the Tribunal informing the Tribunal that the Applicant and the Respondent had in fact agreed that the amount of severance payments payable to the Applicant (should the Tribunal come to the view that the Applicant is eligible for compensation of severance payments) should be in the sum of $1,645,350.00 (including the 8 drivers) or a sum of $1,180,832.00 (excluding the 8 drivers).  However, Messrs. Chan & Tsu, for the Applicant, wrote another letter dated 20 September 2007 to the Tribunal contending that the letter of the Department of Justice was written without reference to them and their consent had not been obtained.

2. In view of the contention, we decided to review the Judgment on our own motion to clarify the positions of the parties.  At the review hearing, however, the Applicant no longer raised objection to the aforesaid agreement.  Instead, the Applicant raised another issue concerning the gain on disposal of plants and machinery for our consideration.  We shall deal with these issues below.

Severance Payments

3. There was an error in paragraph 78 of the Judgment.  Instead of 7, there should be 8 drivers in the Applicant’s Container Yard operation.

4. In the Judgment, we have already found that the severance payments to the drivers are compensatable.  Since the parties have agreed that in such case the amount of severance payments payable to the Applicant should be in the sum of $1,645,350 (including the 8 drivers), this figure should supersede the figures shown in Exh. AR-4/p.1029 and Exh. AR-2/p.316.  Accordingly, the award made by us in paragraph 85 of the Judgment in the sum of $2,258,883 shall be replaced by the agreed figure of $1,645,350.

Gain on Disposal of Fixed Assets of $1,511,322

5. The Applicant submits that the Tribunal had not dealt with the issue of the gain on disposal of plant and machinery.  The Applicant contends that if the gain on disposal of plant and machinery in 2003 of $1,511,322 (averaging $377,830 per year) is to be taken into account as an over provision in arriving at the estimated yearly adjusted profit, the adjusted yearly profit would become $1,779,178, the estimated yearly profit after deducting the interest on the Applicant’s capital would then become $1,604,091 and the loss on total extinguishment of goodwill of the Container Yard business would become $1,336,742 ($1,604,091 x 10/12) instead of $1,021,884.  On the other hand, if this item is not to be taken into account, the estimated sum of $1,226,261 remains unchanged. 

6. Nevertheless, we agree with the Respondent that no sufficient evidence had been adduced to suggest that it would be appropriate for the gain on disposal of fixed assets be clawed back to the years in question, i.e. 1999 to 2002, instead of to the earlier years.  The Applicant had started the Container Yard operation back in 1993/1994 at another site.  When the Applicant moved to the subject site in 1999, he brought along many equipment, most of which had already been substantially or over depreciated.  As can be seen from the detailed computation sheet submitted by the Respondent, which was based on the figures extracted from the Applicant’s audited accounts for year 1999 (pages 1182 – 1183 of Exh. AR-4), it is more likely than not that there had been an undercharge in the depreciation provision for the years 1999 to 2002. 

7. Thus, we do not find it necessary to include the gain on disposal of plant and machinery in our computation.

Conclusion

8. In the circumstances, we hereby order that the orders in paragraphs 86 and 87 of the Judgment dated 18 September 2007 be varied and substituted by the following orders: -

(1)	The Respondent do pay the Applicant compensation for the resumed Lot in the sum of $7,929,399, the breakdown of which is as follows: -
	(i)	for loss on total extinguishment of goodwill of the Container Yard business in the sum of $1,021,884;
	(ii)	for loss on forced sale of vehicles, containers, plant and machinery, stock, fixtures and fittings, reinstatement costs, etc. in the sum of $5,262,165; and
	(iii)	for severance payments for the employees of the Applicant in the sum of $1,645,350.
(2)	The matters of professional fees, interest and costs shall be adjourned to a date to be fixed by the Listing Officer, with liberty to apply for any other ancillary and consequential matters.

9. We also order that the costs of this review application be reserved and to be argued together with the costs of the main application, unless otherwise agreed by the parties.