Chum Hon Chi v. Director of Lands

Crown Lands Resumption Reference No. 22 of 1994

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HEADNOTE

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Property law - Crown Lands Resumption - Workshop Premises - Business Losses - Valuation of Plant and Machinery - Valuation of Goodwill - Crown Lands Resumption Ordinance, Cap. 124, s. 10(2)(d)

Owner-occupied premises for manufacture of roller shutters resumed by and reverted to the Crown on 3rd October 1992. The workshop was allowed to operate until April 1994 when, upon eviction from the premises, the stock, machinery and equipment of the business were auctioned off for $50,000. The applicant proprietor of the business claims, inter alia, losses of goodwill valued at $110 million and for forced sale of machinery and equipment (including a very small amount for raw material stock) valued at $2.38 million. The respondent's expert valued the machinery and equipment of the business at $0.58 million. The respondent also contends that the applicant should have relocated to minimize losses.

The applicant calculates his goodwill by taking his last reported annual profits, increased each year by a hypothetical inflation/growth rate, and adding them up year by year to 2047 when the Crown lease for the subject premises should expire if not resumed. The respondent calculates goodwill by the adjusted annual profits of the business, deduct for interest on capital etc. and multiply by a small factor to get $0.5 million.

Held: (1) In accordance with s. 10(2)(d) of the Crown Lands Resumption Ordinance, the applicant is entitled to compensation that would restore him to the business position where it would be had there been no resumption, i.e. an amount of compensation so as to enable the applicant to acquire the same quantity and quality of trading stock, machinery and equipment together with the goodwill of an equivalent business in April 1994. (2) The established method for calculating goodwill is first, endeavour to establish the normal profit trends of the business before resumption. Conceivably, the reported profits of the business, the rental value of the premises at which the business is conducted or the wages and salary costs of the business may be used as basis for this purpose because each of them may somewhat relate to the profitability of the business. Once the annual profit trend of the business has been arrived at, it must be related by multiplication to the anticipated future life of the business, had the business premises not been resumed. Then the product is discounted to take into account the fact that the business operator will have the sum representing capitalized profits immediately available for investment or other use. (3) Justification for relocation requires consideration of the viability of the business at a new environment and the cost of relocation. On the facts and circumstances of this case, the applicant cannot be reasonably expected to relocate. Compensation to the applicant on the basis of total extinguishment. (4) On the facts of the present case, take a $1 million as annual profit trend and 5 as the multiplier. After discounting for interest, determine goodwill at $3.9 million. (5) Going through and fixing the value of each disputed item of machinery and equipment, and taking into account the agreed value of other items, determine compensation for loss due to forced sale of machinery, etc. at $608, 850. (6) After adding the award for other items claimed, total compensation determined at $4.65 million.

IN THE LANDS TRIBUNAL OF HONG KONG

Crown Lands Resumption Reference No. 22 of 1994

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JUDGMENT

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The Applicant is the sole proprietor of a workshop known as Sam Hing Hong Roller Shutter Co. ("the business") at premises situated at No. 11, Ground Floor, Sui Lun Street, Ma Tau Kok ("the subject premises") which were owned and registered in the name of the Applicant. The subject premises were resumed by the Crown pursuant to section 3 of the Crown Lands Resumption Ordinance, Cap. 124 ("the Ordinance") under a Notice of Resumption dated 26th June 1992, published in Volume CXXXIV Hong Kong Government Gazette on 3rd July 1992 as G.N. No. 2264 of 1992 and reverted to the Crown on 3rd October, 1992. Nonetheless, the Applicant was allowed to carry on the business at the subject premises rent free until April 1994 when the Applicant was evicted. There upon, the Applicant claims, there was total extinguishment of the business.

2. Compensation for the Applicant's interest in land is dealt with elsewhere and does not concern us here. In the present case, it is common ground that the Applicant is entitled to compensation for business loss calculated under section 10(2)(d) of the Ordinance as -

"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 resumption."

In practical terms, the Applicant is entitled to reimbursement that would restore him to the business position where they would be had there been no resumption.

3. Despite advice given by several members of the Tribunal at various stages, the Applicant decided not to engage legal representatives or valuers of any speciality to help him to prepare his case. The Tribunal has also repeatedly emphasized in open court that the burden was on the Applicant to prove each and every element of his claim. During the trial, the Applicant was given ample opportunities to adduce more evidence, if any, and to canvass more effectively for his case. Whilst additional materials, more effective advocacy and expert assistance for the Applicant would be desirable, and the same can be said for all cases arising from the same resumption exercise that the Tribunal has heard so far, the Tribunal is satisfied that there are sufficient facts and materials for the Tribunal to determine the claim. At the beginning of the trial, the Applicant asserted his claim for the following business losses:-

In the end, the Applicant agreed with the Respondent that the value of his stock may be put at $82,190 and his auction expenses at 13,224.80.

4. The Respondent's assessment of the Applicant's loss was revised several times during the course of these proceedings. Eventually, in final submission, the Respondent contends that the compensation due to the Applicant should be as follows:-

(a) If on total extinguishment basis

(b) If on relocation of business basis

5. Before we proceed further, we should point out that the subject premises were part of a major resumption of more than one hundred properties for the Hong Kong Housing Society's Urban Improvement Scheme ("the Scheme"). In addition to Sui Lun Street, the Scheme site extended to Wang Cheung Street, Ma Tau Kok Road, Pak Tai Street, San Shan Road and Pau Chung Street in Ma Tau Kok. The present case is one of nearly thirty applications by business operators affected by the Scheme for compensation who felt unable to accept the Crown's offer for settlement. Whilst each case must be decided on its own facts, an understanding of the background circumstances helps us to appreciate the general picture and understand the differences between the parties on specific issues. Having considered and otherwise dealt with a number of these claims, examined photographs of the area in general and of the individual streets and heard quite a few estate surveyors and witnesses involved, we believe we now have a fairly good idea of the locality and the resumption process.

6. The area affected by the scheme was essentially an old residential area. Most buildings were constructed immediately after the Second World War. All the buildings we have had to consider were not higher than six storeys and did not have a lift. The upper floors were mainly tenement flats with perhaps the odd business or other trade. We have heard evidence that some of the buildings were issued with occupation permits for "domestic use" from the ground floor upwards. But nearly all ground floor units in the area were used as shops, restaurants or workshops. Many of these enterprises and over-grown small operations were run by families who, as can be expected, are poor managers; the takings of the day go straight to meeting family, personal and trading expenses. Few, if any, have an accounting system; single entry records at best. And because it was a run down area, landlords and local residents were more tolerant of environmental, building and land use abuse. Most, if not all, ground floor units in the area had some sort of legal or illegal cockloft and an open yard which might be covered and protected from the elements by legal or illegal structures. Retail and food businesses in the area would hardly be able to find somewhere else with comparatively cheap rent or purchase price and yet more storage or useful space. Moreover, the area is also partially industrial, with a significant number of factory buildings right outside the fringes of the plots affected by the Scheme. This means that the clientele for retailers and food businesses were not limited to local residents, but also factory workers who filled the streets in the area during lunch hour and for a period before and after work.

7. Of particular importance to note is Wang Cheung Street and Sui Lun Street. These two streets were cul-de-sacs parallel and immediately next to each other. Vehicular traffic could only enter and leave either street by Pau Chung Street. The two streets were effectively the parking lots and common compound for the shop premises on the ground level there. Vehicles holding scrap metal, raw materials and even cranes were stationed in these two streets as temporary storage or even make-shift workshop. Premises of a few hundred square feet area with restricted length and width on the ground level of these streets could spill their repair, production or manufacturing activities out into these streets from time to time and enjoyed use of much more space. The two streets, therefore, were of special attraction to some "nuisance" trades, e.g. scrap dealers, garages, laundries, craft workshops, etc.

8. The Scheme was actually in the winds well before the resumption notices were issued in July 1992. Earlier, the Housing Society had begun to buy out some of the landlords and tenants in the area. After the resumption was gazetted in July 1992, the intention clearly was all the owners, occupiers and business operators would clear out in October 1992. Some did. Apparently, the landlords and tenants on the upper floors were dealt with first. The business operators on the ground level were given several extensions of time for moving out. Eviction was postponed first to the end of 1992, then to the beginning of 1993, then to September 1993 and eventually to April 1994. During all this time, the tenants were allowed to occupy and business operators permitted to trade (if there was still business) without having to pay rent. At first, claims for compensation were handled by the staff of the Housing Society which had a field office in situ. Later, processing of these claims was taken over by the Lands Department. It was in September 1993 that the Housing Society and the Lands Department sent staff to the ground floor businesses to take stock and inventory with the view to clearing them out then. Many of the claimants say that they handed over original documents and papers substantiating their claims to the Housing Society or the Lands Department during this period, hence they no longer have all the proof for their claims now. There is no doubt that a number of representatives of those affected by the Scheme had several meetings with officials of the Lands Department. They also sought help or mediation from local politicians and OMELCO. There were definitely letters passing between the parties, including offers of ex-gratia compensation. Some of the disputes were settled. Some claimants allege that they were given the impression that if they wanted to preserve their right to full compensation they had to cease trading, auction off their stock and not continue business in another locality. Others say that the ex-gratia payments they received on account from the Government were not enough to cover the costs of setting up elsewhere and the Government refused to lend them money, so that they were unable to re-locate. In any event, even if they could move to elsewhere, with higher rent, more restricted land use, different clientele and perhaps difficulties with labour supply, business would not be the same. But we hear from counsel for the Respondent that the Housing Society and the Lands Department had not advised the claimants to close their businesses altogether. We think there may be some misunderstanding there. In many cases, counsel for the Respondent says, the Housing Society and the Lands Department do not have the documents which the claimants allege they have handed over. We cannot determine who is right or wrong in fact in this respect; but, during the change over from Housing Society operation to Lands Department processing, the possibility of a bureaucratic mix-up cannot be ruled out. In any event, it is pointless to argue and ponder over irretrievable papers now.

9. It was in April 1994 that the authorities managed to evict the remaining affected ones. There was a furore at the time, with angry words uttered, force displayed and the attention of the mass media attracted. The claims we have to deal with are mainly concerned with those who moved out in April 1994. Probably due to the confusion and urgency at the time to clear the remaining business operators, their stock and inventory were not checked again. Some operators were able to remove their stock as they planned, some were locked out first and then allowed to retrieve their possessions. Some claimants say that their business books and records were left and lost in the resumed premises as they left in a hurry or were forced out. Upon eviction, most of the business operators had their stock, plant and machinery transported to a place in the New Territories and auctioned off by one common auctioneer. It is now undisputed fact that there is no reliable inventory of the actual stock, plant and machinery sold by auction for each claimant. This is a problem we encounter in virtually every case before us.

10. We now consider each of the outstanding items of claim.

Goodwill

11. A classic definition of business goodwill can be found in the formidable work - Land Compensation and Valuation Law in Hong Kong by H.H. Judge Cruden at pp. 79-80 as follows:-

"Goodwill is the value of that element of profitability which arises from either one of two factors or a combination of both. Those factors are first, the specific business connections in respect of the resumed premises and secondly, those due to the personality of the owner. In some cases a resumption may only affect or extinguish the former species of goodwill. The personal goodwill of the owner may only be partially affected or not affected at all if the business can promptly be relocated to a new suitable site." (Page 16 of the judgment in Callwin International Electric Co. Ltd. v. Director of Engineering Development MTR 3 of 1984).

This definition must be properly understood. Whilst goodwill is often valued by reference to profits, it is profitability on account of shop location and personal connection that is the true measure of goodwill. In Director of Buildings and Lands v. Shun Fung Ironworks Ltd. [1995] 1 HKC 417, the Judicial Committee of the Privy Council at page 436 advised that:-

"... this must not lead the tribunal into the error of equating the amount of a claimant's loss with the price he could obtain if he sought to sell the future profit stream to an outside commercial investor. Even on the willing seller basis, a prudent landowner running his own business might be prepared to pay more to keep his land and business and the expected profits than would an outside investor to acquire them. He might be prepared to accept a lower rate of return than an outsider who has no personal links in the business. In appropriate circumstances a tribunal may properly recognize this and make a modest allowance accordingly."

12. The Crown questioned the Applicant why he did not re-locate to other premises so as to minimize his losses. A manager from Suzuki Shutter Company (H.K.) Ltd., called by the Crown, stated that the Applicant should have no difficulty in setting up his business elsewhere. The Applicant says, in effect, as outlined earlier, he was told to close his business altogether. Besides, having lost cheap premises and free use of the street space, he could not find other suitable premises to continue the same line of business competitively. In evidence, he explained how he started his business in Wong Chuk Street in Sham Shui Po as a pure contractor relying on supply of roller shutters from other manufacturers and later moved to the subject premises where he had facilities to manufacture roller shutters. We are satisfied that even if the Applicant could re-establish his firm elsewhere, it would be quite a different business with a whole new equation for operating costs, either much higher to maintain the same line and standard of service or lower if reduced to simple contracting; the compensation for such "re-location" would be even more complicated and speculative. Having considered all factors and circumstances, we think fairness dictates that the Applicant should be entitled to compensation on total extinguishment basis.

13. In Callwin International Electric Co. Ltd. v. Director of Engineering Development MTR 3 of 1984, at page 17, the Tribunal stated that:-

"There are several methods of valuing goodwill and each has its advantages and disadvantages. Some methods are more appropriate for certain cases than others. The selection of a particular method will often depend on the factual situation. At times it may be helpful to use more than one method so that each may be a check on the goodwill figure arrived at by the other. This is a complex area of valuation."

The Tribunal also observed that:-

"Any assessment of goodwill includes an element of arbitrariness for it involves projections into the future often on the basis of minimal information of even existing factors. The employment of scientific methods should tend to improve the soundness of the ultimate assessment. However, in most cases it will merely narrow the range within which a realistic assessment may be made. In making a final assessment within that range experience and at times even intuition will be of importance." (Page 16 of the judgment and quoted in Land Compensation and Valuation Law in Hong Kong by H.H. Judge Cruden at page 81.)

14. The method we adopt is the one explained in Land Compensation and Valuation Law in Hong Kong by H.H. Judge Cruden at pp. 80-81 and which we have applied in WONG Sau Hing, LEE Wing Tau, LI Sai Kuen and LEE Sai Ho trading as Shing Kee Metal Dealer v. Director of Lands, CLR No. 20 of 1994. First, we endeavour to establish the normal profit trends of the business before resumption. Conceivably, the reported profits of the business, the rental value of the premises at which the business is conducted or the wages and salary costs of the business may be used as basis for this purpose because each of them may somewhat relate to the profitability of the business. Once the annual profit trend of the business has been arrived at, it must be related by multiplication to the aniticipated future life of the business, had the business premises not been resumed. Then the product is discounted to take into account the fact that the business operator will have the sum representing capitalized profits immediately available for investment or other use.

15. The Applicant's business was a trade workshop which depended on work orders. It did not have to keep large stock of raw materials. Unfortunately, we only have incomplete records of the trading accounts of the business and the Crown regards them as unreliable. We, therefore, have to look for other measure. The Applicant claims loss of goodwill at $110 million. When he gave evidence, he explained that the $110 million is derived by using $1,542,295 annual profits as starting point, increase it by 18.5% per year for growth rate, then add up all the projected annual profits to the year 2047 when the Crown Lease for the subject premises expires. The detailed calculations are in Exhibit A4. No one can expect the building where the subject premises were situated would remain standing until 2047. When the building has to be demolished, the Applicant's remaining interest will be a number of shares in the plot in common with other small owners in the building. He will not be entitled to exclusive occupation of the ground floor premises of a new building on the plot. We, therefore, have no difficulty in rejecting the Applicant's own assessment.

16. Mr. James Ng, expert valuer for the Respondent, in his report Exhibit R2 puts forward two methods for assessing the goodwill of the business. Mr. Johnathan Lovell, a chartered accountant from KPMG Peat Marwick, was also called by the Crown to produce an expert report (Exhibit R10) on valuation of goodwill. We do not propose to set out the workings here, suffice to say that both experts recommend calculation of the goodwill of the business on or with adjustments for wages and salary costs. Since it is impossible to determine with reliability the wages and salary costs to the Applicant of a number of employees who did not qualify for severance payments and some other casual workers, we doubt if this approach would do justice to the parties.

17. In WONG Sau Hing, LEE Wing Tau, LI Sai Kuen and LEE Sai Ho trading as Shing Kee Metal Dealer v. Director of Lands, CLR No. 20 of 1994, the Tribunal used taxable profits to determine the goodwill of that business. For the business in this case, we have net profits of $147,000 from the profits and loss account for the year ended 31st March 1992, $1.135 million as taxable profits for the year ended 31st March 1993 and $2.035 million from the profits and loss account for the year ended 31st March 1994. We gather from the Applicant that shortly before 1992 he had a huge order from the Kowloon Motor Bus Company for which he bought machines to make the shutters. Thereafter, he purchased more machines to enhance manufacturing facilities for general business. The Applicant also explains that the income for annual profits and loss accounts is based on money received, not on receivables. We believe these factors account for the lower profits for 1992 when the business had not quite changed from simple contracting to manufacturing and there were more expenditure on machinery. After 1992, due to change over to manufacturing, the business turned in significantly larger profits. For the year ended 31st March 1994, income was exceptionally high probably because of vigorous efforts to collect outstanding contract sums in view of impending cessation of business. We think it would be fair to disregard the 1992 profits figure and take the average of the 1993 and 1994 figures as the annual profits of the business for the purpose of calculating goodwill. This gives a figure of $(1.135 + 2.035)/2 million = $1.585 million per annum. Mr. Lovell suggests that an allowance of $0.115 million per annum for depreciation on fixed assets, $0.105 million per annum for market rent and taxation at 15% per year should be made. These adjustments are justified and bring the annual profits figure to $1.160 million. From this may be deducted an element of wages for the Applicant himself. For reasons we have explained in WONG Sau Hing, LEE Wing Tau, LI Sai Kuen and LEE Sai Ho trading as Shing Kee Metal Dealer v. Director of Lands, CLR No. 20 of 1994, this is not a case where deduction for interest on capital is necessary. Using a broad approach, we take $1 million as the net annual profits for calculation of goodwill.

18. In Callwin International Electric Co. Ltd. v. Director of Engineering Development, MTR 3 of 1984, the Tribunal has pointed out that the preferred approach for calculating goodwill is to multiply the value of annual profitability by with a multiplier selected on personal injury basis which takes into account future business risks, any proven potential for increased profits as well as subject factors which in the experience of the assessor may be relevant. We do not take this to mean that where a business is operated from self owned premises the multiplier would be as large as the number of years remaining on the working life of the proprietor or perpetuity for a limited company. Many factors like the age of the building at which the business was based, the nature and organization of the business and property development trend in the neighbourhood may well have a limiting effect on the economic life of the business. For example, according to our knowledge, the area affected by the Scheme is an old quartier due for renewal. Sporadic re-development had been going on for some time in the immediate vicinity. It was to be expected that very soon either the government would resume or private developers would assemble sites in the area for major re-construction. The very implementation of the Scheme so aptly named an urban improvement project confirms our belief. Moreover, most of the buildings affected by the Scheme was nearly 40 years old and could hardly be expected to stand wear and tear much longer. The block of buildings opposite 97 Pau Chung Street, known as 99-105 Pau Chung Street, was demolished in 1991 because 101 Pau Chung Street was declared dangerous by the Building Authority. We would not give a business within the area affected by the Scheme more than 5 years before it is extinguished by natural causes. Moreover, conventional wisdom has it that the multiplier, i.e. number of years as the projected span of profits, for even the most generous cases rarely exceeds five. The limited accounts we see show that the business was growing, and since the subject premises were owned by the Applicant, we think a multiplier of 5 is appropriate. The product should then be discounted for interest on advance cash payment. We generally apply an interest rate of 9% to calculate deferred reversionary interest, so we adopt the same rate to discount advanced interest. The relevant discount factor for 5 years at 9% is 3.8897, say 3.9.

19. Accordingly, we calculate the goodwill of the business at $1 million x 3.9 = $3.9 million.

Machinery and equipment

20. The business had quite a number of machines, equipment, tools and raw materials stock. In September, 1993, officers of the Lands Department went to the subject premises and made a record of the machinery, equipment, tools and raw materials stock held by the business at that time. There are altogether 35 items of them in all; see the list in pp. 6-7 of Exhibit R1. The inventory is not disputed by the parties. The Applicant claims for losses suffered as a result of forced sale of these machinery, equipment, tools and raw materials stock by auction in April 1994 for a gross sum of $50,000. It is now well established law that since the machinery, equipment, tools and raw materials stock were disposed of in April 1994, the Applicant is entitled to compensation being the value of the machinery, equipment, tools and raw materials stock to him at the time of sale less the auction proceeds he has received. In our view, the value to the Applicant in April 1994 is the price paid by the Applicant at various times previously to obtain the machinery, equipment, tools and raw materials stock less depreciation for wear and tear. Alternatively, the value should be the cost to obtain from the open market the same quantity and quality the Applicant had in April 1994. In either case, it is the replacement value.

21. Mr. Shadbolt of Chesterton Petty for the Respondent assessed the value of the machinery, equipment, tools and raw materials stock for compensation at $580,510. The value of some of the small items as assessed by Mr. Shadbolt has been agreed by the Applicant. But the value of all the major items are in dispute. The Applicant himself puts the value of his machinery, equipment, tools and raw materials stock at $2,282,050, this is supported by a number of actual invoices for purchase and later quotations for comparable types. This does not take into account depreciation for wear and tear and, since the Applicant has agreed the assessment by Mr. Shadbolt relating to some small items, his claim figure must now be slightly lower. Six machines in the inventory cost more than $150,000 each and their total, as claimed, comes to $2,126,000. They account for the vast difference in valuation.

22. In Callwin International Electric Co. Ltd. v. Director of Engineering Development MTR 3 of 1984, the Tribunal, comprised of H.H. Judge Cruden and Mr. Phillips, held that auction price is an acceptable basis for determining loss for purposes akin to section 10(2)(d) of the Ordinance. There, the trading stock of the applicant company was sold by auction in large lots to a single purchaser for the total of $1,410,000 which was only 27.4% of the agreed gross value of the entire stock. The Tribunal held that that was a reasonable auction price. It is common experience, also supported by expert evidence in the cases we have heard, that goods on auction should fetch 20% to 80% of the ordinary market value. In WONG Sau Hing, LEE Wing Tau, LI Sai Kuen and LEE Sai Ho trading as Shing Kee Metal Dealer v. Director of Lands, CLR No. 20 of 1994, taking a broad approach, we believed the price paid by the successful bidder in the auction in April 1994 reflects the variety and quantity of the trading stock, machinery and equipment on auction and took the auction price as the equivalent of 28.5% of the market value of the trading stock, machinery and equipment in that case. However, in the present case, if Mr. Shadbolt's assessment is correct, the auction proceeds are even less than 10% of the assessed market value. The explanation must be that the six most expensive machines are trade specific and not general purpose machine tools; they are of no use other than for the production of roller shutters. Hong Kong is rapidly losing its industrial and trade-craft capacity to mainland China, the demand for second hand machines for making roller shutters must be negligible, if not non-existent. Hence the Applicant's machines on auction must be treated as merely scrap metal. In the circumstances, the auction price is not a reliable guide.

23. We are skeptical of the prices stated in the documents produced by the Applicant in support of his claim in relation to the most expensive machines. They come from a firm called An Tai Trading Co. which has on its letterhead nothing but a post office box number as mailing address. We think that a firm that deals in expensive machinery, even if it does not have a showroom, would have a proper office address. And, for a contract for the sale of machines costing so much a piece, the firm should have properly drawn up agreements setting out important terms for quality assurance and maintenance arrangements. Instead, we see only the barest in handwriting on single sheets of blank letterhead. We certainly would not say they represent bogus transactions, the machines did exist, but we believe the prices have been exaggerated. Perhaps the Applicant was cheated.

24. We are impressed by Mr. Shadbolt's careful and meticulous approach. He worked out the depreciated value, obtained the market value for used machines from trade suppliers, then recommended a value falls somewhere between the depreciated value and the trade reference value. As we have pointed out earlier, we do not think there is a real second hand market for the types of machines under consideration. We, therefore, attach little weight to the so-called market value for used machines from trade suppliers. In any event, if one method of assessment produces a higher value, it is only fair to adopt that better figure. Based on information from Exhibits R1 and R4, the value we fix for each item in the inventory is set out in the schedule attached hereto.

25. In the premises, we place the value of the machinery, equipment, tools and raw materials stock of the business at $658,850 and determine compensation payable to the Applicant for loss due to forced sale of the machinery, equipment and tools at $(658,850 - 50,000) = $608,850.

Fixtures and Fittings

26. The Applicant puts the valuation of his fixtures and fittings, including decoration and floor re-inforcement costs, at $200,000. It is only an estimate and not supported by any document. An agreed list of fixtures and fittings in the subject premises can be found in the report of Mr. James Ng, surveyor and expert for the Respondent, as Exhibit R2.

27. Having considered Mr. Ng's report and Applicant's evidence, we find the assessment by Mr. Ng acceptable and accordingly determine compensation under this head at $67,300.

Miscellaneous Items

28. The Applicant further claims transportation fees for auction at $118,000 auction exhibition ground and security charges at $28,000 and auctioneers' charges at $13,224.80. The claims for transportation fees and auction exhibition ground and security charges are not supported by receipts. The claim for auctioneers' charges is supported by receipts issued by the auctioneers as shown in Exhibit A1. There cannot be any serious dispute over the auctioneers' charges.

29. However, the Respondent does not accept the amounts claimed for transportation fees and auction exhibition ground and security charges. Mr. James Ng in his report Exhibit R2 at page 9 worked out the costs for transportation at $5,200 and those for exhibition ground and security at $11,000. These workings is based on certain assumptions and glossed over figures which we find difficult to accept. For example, Mr. Ng assumed that an open storage area of 3,000 sq.ft. plus two security guards would require only $11,000. We do not have a breakdown for the rent or wages for one guard. For all we know, three guards might be needed to cover the ground round the clock. Mr. Ng also assumed that one lorry and 4 coolies for two days would be needed to move all the machinery, equipment tools and raw materials stock of the business.

30. We gather from evidence in related cases we have heard and from the Applicant that the auction exhibition ground and security charges at $28,000 are in fact an apportionment of a much larger amount which all the business operators affected by the Scheme and had to auction their goods had to share. We have no reason to doubt this and would allow the amount as claimed. The Applicant further says in evidence that the transportation charges actually included the expenses for removing his large machines by pneumatic power tools when at the time of such removal electricity supply for the subject premises had been cut off. We believe indeed the Applicant's transportation (and removal) charges may be higher than that estimated by Mr. Ng. Nonetheless, without documentary support, there may be a mistake in the Applicant's recollection of the actual amount he paid. We would add an extra $20,000 for two day's hire of pneumatic power tools and an additional $5,200 to cover four more workers and a more costly craned lorry to move the heavy machines. Thus the total transportation (and removal) charges should be $30,400.

31. In summary, compensation for the following items is justified:-

The Order

32. Accordingly, we determine compensation for the Applicant at $4,650,000. Leave is reserved to apply for the rate of interest, if not agreed, to be determined under section 17(3A) of the Ordinance. There is an order nisi that the Respondent shall pay the Applicant's expenses incurred in prosecuting his claim which we assess at $15,000 to be made absolute unless application is made, within 21 days from the date of handing down of this judgment, to the contrary. Liberty to apply is also reserved for ancillary and consequential matters.