Fung Tin Sang t/a Dragon Trading Co. v. The Secretary For Transport

LDMR 30 OF 2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 30 OF 2000

_______________

_______________

_______________

D E C I S I O N

_______________

1. The Applicant was the former tenant and occupier of the piece of land known as Lot No. 493B (Portion) in Demarcation District No. 103, Kam Tin Road, New Territories ("the Land"). On 16.1.1999, the Land was resumed by the Government of the Hong Kong Special Administrative Region under the Railways Ordinance ("the Ordinance") pursuant to a resumption notice (GN 4958) dated 15.10.1998.

2. By this application, the Applicant seeks the determination by the Lands Tribunal ("the Tribunal") on its claim for compensation to be assessed on a total extinguishment basis; the basis for assessing the loss of the Applicant is to be disposed of as a preliminary issue.

3. The company operated by the Applicant on the Land was known as the Dragon Trading Company ("DTC") which was a trading company engaging in the sale of parts of motor vehicles. On 12.1.1999, the Applicant was informed that the Land must be cleared on or before 31.3.1999. The business of DTC actually ceased on or about 31.3.1999. It formally ceased business on 28.4.1999, when its business registration was not renewed.

4. The Applicant said that he would carry on the business of DTC if he could find an alternative site to carry on the business. The expenses involved in moving to another site was within his financial capability. So the only issue is whether a suitable alternative site was available. Both the Applicant and his younger brother (Mr. Fung Tin Yeung), the manager in charge of the business of DTC, gave evidence in this respect.

5. The evidence of the Applicant

When the Applicant heard about the Gazette of the resumption of the Land from his fellow traders, he started to look for an alternative site. Initially he did this together with Fung Tin Yeung, by looking around in the New Territories and also through agents. The method he employed is by driving to look around in Yuen Long, Kam Tin and the vicinity of the Shek Kong Airport. He looked at over 10 sites, but all these sites were not suitable sites. Then he decided to cease the business of DTC.

6. The only site for which a deposit was paid by him is the one found by him and Fung Tin Yeung at Lot No. 665, 666 and 669, Pat Heung, but this is inconsistent with the statement he made on 6.11.2000, which is as follows: -

"In or about April 1998, Tin Yeung told me that the Government proposed to resume the Site for the West Rail Project. I then instructed him to find another suitable site to relocate the operation of DTC. Later, I was informed that he found a site in Pat Heung, Yuen Long and made a deposit payment to secure the tenancy of the same. However, I gave up the idea of relocating DTC to the said site since Tin Yeung found that the small size of and the poor access to the said site were highly unsuitable for the operation of DTC."

(Underline provided)

7. The statement reveals that it was only Fung Tin Yeung who found the site. The Applicant explained the difference by saying that before paying the deposit, he himself had visited the site at least twice. But the more important thing is that the tenancy agreement of this site was entered into in the personal name of Fung Tin Yeung, and not in the name of DTC. Since Fung Tin Yeung was trying to secure a tenancy for the DTC, there is absolutely no reason that the agreement was entered in his personal name. No explanation whatsoever was offered in this regard.

8. The evidence of Fung Tin Yeung

He looked at at least 20 to 30 spots, at Kam Tin, San Tin and Tuen Mun. He went to these places with the Applicant, the employees of DTC and estate agents. He found a site at Pat Heung but finally found it unsuitable. Eventually he could not find a suitable site, and he informed the Applicant about this. The Applicant said if it was really impossible to find a site, there was no alternative but to cease business of DTC.

9. Since there would be no more business for DTC because its business could not be relocated, he and Leung Tit Kwan set up a partnership (known as the Dragon Motor Company ("the DMC")) in March 1999, before DTC vacated. The business registration certificate for DMC was obtained on 1.4.1999, but Leung Tit Kwan only joined on 15.4.1999. According to him, it was Leung Tit Kwan, the other partner of the DMC, who found the site in D. D. 103, Lot Nos. 460, 461 and 462B, Kam Tin ("the DMC site"), for DMC.

10. The negotiation for the lease of the DMC site was conducted by Leung Tit Kwan, who settled the terms with the landlord. But the tenancy agreement was signed by him at a meeting. The following piece of evidence is relevant in this respect: -

"Q At that meeting, was there any discussion on what you purported to do?

A When I met the Landlord (gentleman), the contract for the lease was already made. When I saw him in the restaurant, I signed. Then I left. It's as simple as that.

Q Was Mr. Leung there?

A Yes.

Q Did you not say to him I really meant repairing of vehicles, instead of placing of vehicles?

A Yes.

Q What did he say?

A He said no problem, it is also vehicles.

Q Now, .................., you signed and left. You had talked to the landlord.

A Once I saw it, I signed. It won't be the case that not even a single sentence not said.

Q Did he say there was no problem?

A He said the same. In both cases, just the same .............. The landlord said that if you are going to carry out repair and maintenance, since all these are about vehicles. There won't be any problem."

11. Apparently Fung Tin Yeung was not prepared to tell the truth. He said twice under cross-examination that once he signed the tenancy agreement he went away. But ultimately it transpires that there was a discussion between him and the landlord in relation to the use of the DMC site. It is his evidence that it was Leung Tit Kwan who found the site and who had negotiated the terms of the tenancy with the landlord. He was just to go there to sign the lease. Apparently all the terms of the tenancy had been settled between Leung Tit Kwan and the landlord. The purpose of the tenancy must have been discussed. At the initial part of tenancy agreement of the purpose of leasing the DMC site was clearly written. It was for the purpose of "擺放汽車", which means the "placing of vehicles". According to Fung Tin Yeung, the business of the DMC was car repairing. "The placing of vehicles" and "car repairing" are two different matters. If Leung Tit Kwan had really negotiated and settled the terms of the tenancy with the landlord, he must have informed the latter the purpose they wanted the DMC site for. Since the landlord regarded the placing of vehicles and car repairing as the same matters, then he should have put down on the tenancy document that the purpose of leasing the DMC site was for car repairing instead of the placing of vehicles. The Tribunal has doubt as to whether it was Leung Tit Kwan who found the DMC site.

12. Fung Tin Yeung asserted that the business of the DMC was car repairing. But the evidence unfolded reveals that this is not the case. The first piece of evidence is that the particulars concerning its business in its business registration certificate are stated to be "import and export". This business registration certificate was taken out by Fung Tin Yeung. Had he intended to do car repairing business, he should have put down in the record of the business registration certificate that it was engaged in car-repairing business.

13. The goods imported by DMC from Japan are no different from those previously imported by DTC from Japan, in terms of assortment or mix. DMC even used the same Japanese exporter, Kiyomoto Shoten Co. Ltd., as used by DTC.

14. According to the business registration certificates, the business of DMC was identical to that of DTC. Both companies were involved in the import and export of auto parts. Exhibit "R5" (extracts from DTC's accounts) shows that for the year 1999/2000, DMC's purchase was 49.7% of its total sales, and the gross profit was 55.9% of its sales. Both these figures fall within the range achieved by DTC within the last 6 years. Extracts from the accounts of both companies show the following figures: -

These figures of DMC as shown above fall within the range of the figures of the sales and purchases of DTC, and an inference can be drawn that in 2000 DMC was running a business similar in nature to that of DTC.

15. DMC purchased from DTC for $200,000 the stock which had a value of $2,000,000. Since DTC was a trading company, all these taken-over stock were goods for sale. It is difficult to conceive why a car repairing company should need such a very substantial amount of goods, since its business was purported to be car repairing.

16. All the employees of DTC were taken over by DMC and no extra staff was recruited by DMC. It may be that some of them had some knowledge in car repairs. But taking into account all the circumstances, it must be that the transfer of the whole team provides an experienced work force in sales business, which was what DMC required. They were previously engaged in sales of automobile parts for 3 to 10 years in DTC.

17. Fung Tin Yeung claimed that there were only 2 partners in DMC. He contributed $150,000 whereas Leung Tit Kwan contributed $100,000. But the total contribution of the 2 partners as shown in the Balance Sheet of DMC for the year ending 31 March, 2000 was $596,602.72. Thus someone else must have contributed about a sum of $350,000 towards the partnership. Fung Tin Yeung's evidence that DMC only has 2 partners is very doubtful.

18. It is incredible that Leung Tit Kwan did not want the Applicant to be a partner because he wanted himself to be a boss. If this is so then why is it that he wanted Fung Tin Yeung to be a partner?

19. All these factors prove that DMC was running a trading business, the nature of which is no different from that run by DTC. Fung Tin Yeung's claim that the DMC site could not be used by DTC because of the different nature of business run by these two companies cannot be truthful.

20. According to the evidence of the Applicant, it is only at the initial stage of a half-a-year period during which he and Fung Tin Yeung looked for an alternative site. At the subsequent stage of this period, he did not do so because he was busily engaged in the business of Rickfung Trading Company (H.K.), of which he was the sole proprietor. When Fung Tin Yeung told him that he could not find an alternative site he could only make a decision that the business of DTC had to cease. Fung Tin Yeung could not specifically point out the time when he told the Applicant that he could not find a suitable site. But it was shortly after the Applicant made the decision to cease the business of DTC that he began to clear the site, and the site was cleared on 31.3.1999. The clearance lasted for about 1 month. So it was around the 1st of March 1999 that the Applicant made the decision to cease the business of DTC.

21. The business of Rickfung Trading Company completely ceased towards the end of December 1998. From this time onwards to the beginning of March 1999, there is no evidence that the Applicant looked for an alternative site for DTC. He relied on the effort of Fung Tin Yeung in this respect. In any event his evidence reveals that his effort to look for an alternative site only covers the initial period of the aforesaid half-a-year period. No doubt if his evidence stands alone, his claim to have the compensation to be made on a total extinguishment basis must fail, because for a considerable length of time before he decided to cease the business of DTC he made no effort to find an alternative site.

22. So far as the evidence of Fung Tin Yeung is concerned, the signing of the tenancy agreement of the Pat Heung site reveals that he signed the contract for himself. The Tribunal is not satisfied that he is a truthful witness. The Tribunal has no doubt that he intended to do and did start a business on the DMC site which was the same in nature as the business of DTC. It is extremely doubtful that he and Leung Tit Kwan are the only 2 partners of DMC. The Tribunal finds that the evidence of Fung Tin Yeung that he tried his effort to find an alternative site for the Applicant is not to be believed.

23. The Law

The relevant principles governing the award of compensation have been propounded by the Privy Council in The Director of Buildings & Land v. Shun Fung Ironworks Ltd. [1995] 1 HKC 417. At page 427 Lord Nicholls said: -

"Fairness requires that claims for compensation should satisfy a further, third condition in all cases. The law expects those who claim recompense to behave reasonably. If a reasonable person in the position of the claimant would have taken steps to eliminate or reduce the loss, and the Claimant failed to do so, he cannot fairly expect to be compensated for the loss or the unreasonable part of it."

24. Conclusion

For a period of about 2 months prior to making the decision to cease the business of DTC, there is no evidence that the Applicant made any effort to find an alternative site, and prior to this period he made no effort at all to do the same thing because he was busily engaged in the business of Rickfung Trading Company (H.K.). He only made some effort time at the initial stage. In fact he relied heavily on the effort of Fung Tin Yeung to find an alternative site. But the Tribunal finds that Fung Tin Yeung is not an honest witness, and does not accept that he made genuine effort to look for an alternative site for DTC. Therefore the Applicant fails to discharge the onus of proof that he has taken reasonable steps to find an alternative site. His claim for disturbance loss to be assessed on a total extinguishment basis therefore fails. The Tribunal orders that the compensation payable (if any) is to be assessed on the basis of the relocation of the business of DTC.

25. The Tribunal orders that the costs of these proceedings be reserved.

Remarks: