YIP KUI t/a TAI WO TRADING CO v. THE SECRETARY FOR TRANSPORT

CACV 379/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 379 OF 2002

(ON APPEAL FROM LDMR NO. 52 OF 2000)

____________________

____________________

____________________

J U D G M E N T

____________________

Hon Rogers VP:

1. This is an appeal from a judgment of the Lands Tribunal ("the tribunal") given on 18 September 2002 whereby the tribunal assessed the compensation payable to the applicant at $111,057 and adjourned the question of professional fees, interest and costs to be considered later. The tribunal dismissed the applicant's claim for compensation which had been put forward on the basis of total extinguishment of his business. The assessment was upon what the tribunal termed was a relocation basis. At the conclusion of the hearing of this appeal, this court reserved its judgment which we now give.

Background

2. The background to this case is that the applicant had carried on business under the name Tai Wo Trading Company ("Tai Wo") at premises in Wah Kai Industrial Centre. His business consisted of selling disposable cutlery and other disposable items, such as cups and containers, to fast food shops, canteens and other business entities. He had commenced business on his own account after leaving his previous employment in 1988. His first tenancy with the landlord at Wah Kai Industrial Centre was in August 1991. That tenancy was renewed from time to time and the final formal tenancy agreement was entered on 5 January 1998. The lease was to extend to 31 December 2001.

3. In the intervening time, however, the Government had announced the proposed construction of the West Rail System. The tribunal found that the defendant was aware that Wah Kai Industrial Centre would be resumed as early as about September or October 1997. Objections to the construction of West Rail, which had been made to the Chief Executive in Council, had been overruled in September 1998. The tribunal found that by October 1998 the applicant was aware that the resumption would be proceeding but that the applicant nevertheless "focused himself mainly on running Tai Wo's business as if nothing had happened." In June 1999, the applicant received written notice of the resumption of Wah Kai Industrial Centre and on 2 October 1999 the Government resumed the premises in accordance with the resumption notice which had been published on 30 June 1999 under the Railways Ordinance, Cap. 519. Nevertheless, the applicant still remained in possession of the premises in Wah Kai Industrial Centre until he was required to give up physical possession on 3 April 2000. On 5 April 2000 he obtained the key to the premises in order to enable him to mitigate any loss by selling his stock in trade. He returned the key to the Government on 10 April 2000.

4. The applicant's claim before the tribunal was for a total sum of $1,812,438. It was based on the claim that as a result of the resumption the applicant had been forced to terminate Tai Wo's business.

5. The tribunal rejected the applicant's claim that he had been forced to close the business. It found that there were many other similar premises available which it would have been reasonable for the applicant to have used in his business. Consideration was given to the applicant's age and the tribunal came to the conclusion that that was not a matter in the present case which should have seriously affected the applicant, had he wished to relocate the business. After giving detailed consideration to the applicant's accounts, the tribunal came to the conclusion that the applicant must have had available, from his own resources, sufficient funds to have been able to finance such a move. On the basis that the reasonable course to have taken would have been for the applicant to relocate his business, the tribunal rejected the claim based upon forced termination of the business. It went on, however, to award compensation on the basis of relocation, despite the fact that there was no relocation of the business. This, in part, seems to have been caused by the fact that, as recorded at paragraph 2 of the judgment, the respondent's stance had been that the applicant should only be entitled to compensation payment in the sum of HK$81,000 for removal costs plus professional fees and interest thereon.

6. Before this court the applicant's appeal was put on the basis that the tribunal should have awarded compensation on the basis of forced termination of the business as a result of the resumption. In the alternative it was said that, if that part of the appeal failed, the award based upon relocation should be increased on the basis that there had been no calculation in relation to a number of heads of claim. There was no cross appeal by the respondent.

Proceedings in the Lands Tribunal

7. Before proceeding to consider the basis of this appeal it is important to refer to two matters. The first is in relation to the basis of assessment of compensation and the second is as to the nature of any appeal to this court.

8. Under section 32 of the Railways Ordinance, Cap. 519 compensation can be claimed if a person falls within one of the categories listed in Part II of the Schedule. Under section 32(2):

"A person described in column 3 of Part II of the Schedule has the right to recover compensation for the matters set out in column 1 to the extent suffered or incurred by him as assessed under this Ordinance." (emphasis added)

The Railways Ordinance provides that the tribunal shall have jurisdiction. In Part II of the Schedule to that Ordinance, the first heading in respect of matters for which compensation may be claimed is the resumption of land under the Railways Ordinance. The basis of compensation is "As if the claim were made under the Lands Resumption Ordinance (Cap. 124) for land resumed under that Ordinance."

9. It might be mentioned in passing that Mr Lee, on behalf of the applicant, drew this court's attention to the provisions in Part I of the Schedule relating to disturbance payments. The facts of this case do not relate to any matter where disturbance payments would become relevant under Part II of the Schedule. Hence reference to those provisions was irrelevant.

10. Section 10 of the Lands Resumption Ordinance, Cap. 124 sets out the way in which the tribunal should determine compensation.

"10. Determination by Tribunal of compensation payable by Government

(1) The Tribunal shall determine the amount of compensation (if any) payable in respect of a claim submitted to it under section 6(3) or 8(2) on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim.

(2) The Tribunal shall determine the compensation (if any) payable under subsection (1) on the basis of-

(a) the value of the land resumed and any buildings erected thereon at the date of resumption;

(b) the value of any easement or other right in the land resumed, owned, held or enjoyed by a claimant at the date of resumption;

(c) the amount of loss or damage suffered by any claimant due to the severance of the land resumed or any building erected thereon from any other land of the claimant, or building erected thereon, contiguous or adjacent thereto;

(d) the amount of loss or damage to a business conducted by a claimant at the date of resumption on the land resumed or in any building erected thereon, due to the removal of the business from that land or building as a result of the resumption;

(e) in the case of land resumed under an order made under section 3 on or after the commencement of the Crown Lands Resumption (Amendment) Ordinance 1984 (5 of 1984)-

(i) the amount of any expenses reasonably incurred by him in moving from any premises owned or occupied by him on the land resumed to, or in connection with the acquisition of, alternative land or land and buildings, but excluding any amount to which paragraph (d) applies;

(ii) the amount of any costs or remuneration mentioned in sections 6(2A) and 8(4). (Added 5 of 1984 s. 5)"

11. From that it is abundantly clear that the claim which can be made is a claim in respect of loss or damage which has been suffered or expenses incurred. It may be that quantification of that loss would depend upon an assessment of future loss or expenses which would be incurred but any claim for compensation must be founded upon actual loss and not upon some hypothetical basis of expenses that might be incurred if the applicant were to do something which he has not done and has no intention of doing. As was said by Lord Nicholls in giving the advice of the Privy Council in the case of Director of Buildings and Lands v Shun Fung Ironworks Limited [1995] 2 AC 111 at 125C-D:

"The purpose of these provisions, in Hong Kong and England, is to provide fair compensation for a claimant whose land has been compulsorily taken from him. This is sometimes described as the principle of equivalence. No allowance is to be made because the resumption or acquisition was compulsory; and land is to be valued at the price it might be expected to realise if sold by a willing seller, not an unwilling seller. But subject to these qualifications, a claimant is entitled to be compensated fairly and fully for his loss. Conversely, and built into the concept of fair compensation, is the corollary that a claimant is not entitled to receive more than fair compensation: a person is entitled to compensation for losses fairly attributable to the taking of his land, but not to any greater amount. It is ultimately by this touchstone, with its two facets, that all claims for compensation succeed or fail."

12. The other aspect of claims for compensation that are submitted to the tribunal is that the decision of the tribunal on a question of fact is final. Section 11 of the Lands Tribunal Ordinance reads:

"11. Decisions of Tribunal final

(1) Subject to subsection (2) and section 11A, the decision of the Tribunal in determining- (Amended 49 of 1982 s. 11)

(a) the amount of compensation payable by the Government in the case of any claim submitted to it under section 8(1) or (2); or

(b) any appeal submitted to it under section 8(4),

shall be the final determination thereof.

(2) Subject to the provisions of any Ordinance relating to appeals from the Tribunal, any party to proceedings before the Tribunal may appeal to the Court of Appeal against a determination or order of the Tribunal on the ground that such determination or order is erroneous in point of law."

This appeal

13. It has been necessary to emphasise the two previous points because in the first place, the arguments put on behalf of the applicant have, in effect, amounted to a challenge as to the findings of the fact. In the second place, it appears that the tribunal may itself have awarded more compensation than would otherwise be payable because it quantified the claim for compensation on the basis not of expenses incurred but on the basis of expenses that might have been incurred had the applicant chosen to do something which he has not done and has no intention of doing. In this respect, the tribunal may have been led into error by a concession made on behalf of the respondent. That, in turn, appears to have generated a renewal of claims put on a similar hypothetical basis, which are the subject to the second part of this appeal.

14. In dismissing the claim for compensation on the basis of the forced total extinguishment of the business, the tribunal reached the conclusion that the applicant did not have to close his business because of the land resumption. The tribunal found that there would have been plenty of other premises to which the business could have been moved and that although the applicant was in his early 60's at the time of the resumption of the land, he was well able to continue his business and, indeed, that that had been his intention had the premises not been resumed. The tribunal came to the conclusion that the applicant had not made any reasonable attempts to locate alternative premises and that he would have had the financial resources to move the business had he wished to do so.

15. Before us, Mr Lee, on behalf of the applicant, sought to challenge the decision on three points. First, he said that the tribunal's approach in relation to alternative premises was in error. Secondly, he said that the tribunal did not have sufficient regard for the applicant's age. Finally, he said that the tribunal should have found that the applicant did not have the financial resources to move the business.

16. It must be said at the outset that the finding of fact by the tribunal was that the extinguishment of the applicant's business was not caused by the land resumption. In my view that finding of fact is unimpeachable in this court unless it was a finding which was so much in error that it amounted to an error in law. That, in my view, cannot be said.

17. Dealing with the individual points, Mr Lee's argument was that although the tribunal had found that there were 373 vacant units of similar size to the applicant's premises in Wah Kai Industrial Centre, that did not show that these premises were available at an appropriate rent. His submission went to the extent of saying that once the applicant asserts that there were no suitable premises, as a matter of law the resuming authority had to identify and prove that at least one suitable premises had been available for the applicant's occupation. Lindon Print Ltd v West Midlands County Council (1987) 283 E.G. 70 cited by Mr Lee is not an authority for such a rigid proposition. In my view, as a proposition of law, it is clearly erroneous.

18. It must always be remembered that it is for the applicant to demonstrate the validity of the claim to compensation. If the claim is put, as it was in this case, on the basis that a business had been extinguished, the applicant must show that the extinction of the business was due to the resumption of the land. Depending upon the circumstances of each case, it may be a short step for the tribunal to find that it was inevitable that the business would be extinguished with the land resumption. In most cases, however, businesses are able to relocate. Indeed, they often do relocate for other reasons. It is a question of fact as to whether or not it would have been reasonable for the business to have been relocated. In determining that, the tribunal is entitled to judge the matter, as a specialized tribunal, against its own experience. In this case there was ample evidence for the tribunal to conclude that the applicant would have had no difficulty in locating suitable similar premises at a reasonable rent in the vicinity of the resumed premises, let alone in other areas.

19. As regards age, the tribunal considered the evidence which had been given, in particular, by the applicant himself as well as the surrounding circumstances. It came to the conclusion, on the evidence, that the applicant should not have been seriously affected by his age if he had wished to relocate his business. This is an example of a tribunal taking into account the evidence and all the factors and reaching a conclusion on a matter of fact. In this case it was whether age had prevented the applicant from relocating. Even if this had been a situation where an appeal lay as to fact, I do not consider that this court could interfere with the tribunal's conclusion in this respect, but as I have already pointed out, this court is not empowered to interfere with a finding of fact by the tribunal unless that finding of fact is so clearly erroneous as to amount to an error of law.

20. Finally, there is the question of financial resources. Again, this was a question of fact as to whether the applicant would have had sufficient funds to finance a relocation. The applicant sought to give evidence based upon accounts which were produced on his behalf. It can be noted that the applicant was cross-examined for some 13 days. The tribunal analysed the accounts and came to the conclusion that it could not rely upon the applicant's evidence which it found untrustworthy in material respects. Specifically in relation to this, the tribunal came to the conclusion that there was an unexplained disappearance of substantial amounts of capital. Although Mr Lee sought to suggest that this had been simple personal expenditure by the applicant over the years, this is not what the applicant had apparently said in his evidence and, again, there can be no question of disturbing the tribunal's conclusion as to fact.

The alternative claim based on relocation

21. Having concluded that the applicant should have had sufficient financial resources to undertake a relocation which would have been a reasonable step to have taken in the circumstances the tribunal then said:

"As such, compensation for the Applicant should only be awarded on the basis of relocation."

This appears to have been as a result of a concession by the respondent which is recorded in paragraph 2 of the judgment. I have already emphasised the point that compensation can only be awarded in respect of loss or damage which has been suffered or expenses which have been incurred. It is not possible for compensation to be awarded, whether under the Lands Resumption Ordinance or under the Railways Ordinance, on the basis of a hypothetical loss or expense which might be incurred if the applicant had taken a course which he or she would have been entitled to take but had not taken, and never intends to take. On this basis any claim for the cost of renovation and adaptation of fixtures and fittings for use in new premises, installation charges for installing equipment in new premises, solicitors' fees in respect of acquiring a lease for new premises, rent in respect of new premises, whether it be double rent or the first month's rent, and publicity costs in connection with a move to new premises simply have no basis. There never were any new premises, there are not any new premises and there never will be any new premises. These claims are wholly spurious. In my view the applicant can only be grateful for the fact that he was awarded $81,000 in respect of removal costs, supposedly for removal of items to a new premises, and $5,850 in respect of an agency fee for finding new premises. None of this, as far as I can see, was ever incurred or ever will be incurred. The respondent has chosen not to cross appeal. Therein lies the applicant's good fortune.

Profit rent

22. Mr Lee attempted to argue that compensation for what is called "profit rent" should have been awarded. The tribunal dismissed the applicant's claim in this regard because it accepted the evidence from the respondent's surveyor that he had spoken to the agent for the landlord of the resumed premises and had discovered that the reduction of rent which the applicant had enjoyed had been secured by the applicant using the threat of resumption to secure the reductions. The tribunal considered the surrounding circumstances and also the applicant's evidence that he had secured the reduction on other bases. It found against the applicant on this point. This was a question of fact. Since profit rent could be categorised as the difference between the rent which a party actually pays and the rent which would be the normal rent for the premises, on the basis of the tribunal's finding of fact no award for compensation could possibly be given. The reduction in rent was enjoyed because of the impending resumption and on the basis that it would last until the resumption and no longer.

Loss of profit during shadow resumption

23. The applicant had claimed that there had been a loss of business caused by the threat of resumption. Again, the tribunal considered the evidence. It disbelieved the applicant in material respects in relation to the evidence, in particular as to the amount of stock which was on the premises at the date of resumption on 2 October 1999. The tribunal took into account the defects in the respondent's evidence. Having done so, it came to the conclusion that the applicant was not a reliable witness insofar as the evidence regarding the stock at Tai Wo was concerned. Since the tribunal did not believe the applicant as to the true reason for the reduction in the turnover at Tai Wo in the last few months of the business, the tribunal considered that there was no reliable evidence to support the applicant's claim for loss of profit in what is termed "the shadow period". Again, this is a conclusion of fact. Even if it had been possible for there to be an appeal as to fact, I would not have considered it possible for this court to have disturbed this finding.

Loss in relation to stock

24. As already noted, the applicant's evidence in relation to the stock which existed on 2 October 1999 was not accepted by the tribunal. The tribunal came to the conclusion that the applicant had continued to trade and that, by 17 March 2000, there could have only been about one third of the quantity of goods which had been claimed to have been present on 2 October 1999. Hence, the claim for loss of stock based on the amount said to have been held as of 2 October 1999 failed. The tribunal came to the conclusion that whatever stock remained by April 2000 was removed by the applicant.

25. On this aspect the argument slightly shifted in this court: it was suggested that the applicant had disposed of his stock on the basis of a forced sale at distress prices. In support of this reliance was placed on two invoices, one dated 20 December 1999 and the other dated 3 April 2000. On this basis Mr Lee argued that the applicant should have been entitled to at least the difference between the amounts realised for the equivalent products which were shown in the two invoices, and the prices shown in the list of stock as of 2 October 1999. The first difficulty with that is that there appears to be items which were sold in December 1999 which had not been in stock in October. This at once throws this new argument into confusion because a reasonable deduction would, therefore, be that the applicant had carried on trading and acquiring new stock after October 1999. In my view the difficulty in the applicant's way is that the basis of the claim which he put forward in the tribunal was rejected. That was a question of fact. His new arguments were not considered by the tribunal and, in any event, in respect of the first invoice, that of 20 December 1999, would have to be rejected outright in any event.

Conclusion

26. I have no hesitation in reaching the conclusion that this appeal must be dismissed. It is without merit. The appellant's arguments were not only fallacious but at the times Mr Lee sought to rely on propositions of law which he said came from either decisions or textbooks which, when examined, gave no support for what he was saying. His approach to the appeal amounted to challenges as to findings of fact by the tribunal which would have been unmeritorious even if an appeal as to the fact could have been entertained. I would therefore make an order dismissing this appeal with an order of nisi for costs in favour of the respondent.

Hon Le Pichon JA:

27. I agree.

Hon Stone J:

28. I agree.