Tang Ping Choi and Another v. The Secretary for Transport

LDMR000038/2000

LDMR 38/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 38 OF 2000

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Date of Judgment: 27th September 2002

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J U D G M E N T

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1.The Applicants were the periodic tenants of the pieces of land known as Lot No. 157(P) in D. D. No. 106, and Lot Nos. 155, 158(P), 163, 169, 170, 172, 178 and 184 in D. D. 106, and Lot No. 158(P) in D. D. No. 113 in Pat Heung, Yuen Long ("the Land"), on which they grew barabdos lilies ("BL") on the Land. On 16th January 1999, the Land was resumed by the HKSAR Government. Stock-taking of the plants took place between 21st and 27th January 1999, and the Land was cleared on 14th April 1999.

2.The Applicants' claimed against the Respondent for the following items of claims: -

(1) Loss of their leasehold interest in the sum of $74,371;

(2) Loss of profits of their business in the sum of $10,728,077;

(3) Loss of stocks in the sum of $8,810,901;

(4) Costs; and

(5) Interests.

3.Background

It is the evidence of the 2nd Applicant ("Chan Chuen") that he lives in Tung Chung, Lantau Island. Prior to the resumption of the Land, he had been growing and selling flowers for many years. In 1992, he bought 1,500 bulbs of BL from a Mr. Yip Kong Ming because Mr. Yip's flowers looked very beautiful; he also bought 1,000 bulbs of BL from Sum Kee Yuen. The owner of Sum Kee Yuen told him that the bulbs were of foreign origin.

3.1The number of bulbs can be increased in the following way. A bulb can be cut into 4 or 8 pieces (sprouts). After 3 months, the sprouts can be separated and they in turn will produce more sprouts. If the original bulb was a large one, the offsprings may take 2 to 3 years to reach the same size as the original bulb. Sprouts take 2 to 3 years to blossom.

3.2From 1992 onwards, Chan Chuen had concentrated on the task of increasing the number of bulbs. By 1994, he had 25,000 bulbs. In 1996, he entered into an oral agreement with the 1st Applicant ("Tang Ping Choi") under which the latter was to provide labour and his land at Tin Sum near Yuen Long, and Chan Chuen would provide the bulbs. The 2 Applicants had a leased area of 10,566.80 square metres of which 5,013.22 square metres were used for growing BL bulbs. In early 1997, Chan Chuen transported from Tung Chung to Tin Sum "tens of thousands" of bulbs, at least 250,000 BL bulbs, to the Tang Ping Choi's place. In 1997/1998, he entered into various forms of agreements with 14 other farmers in Tin Sum area. The various pieces of land covered by these agreements were resumed by the Government for the purpose of constructing the West Rail.

3.3At the beginning of 1998, the Government resumed Chan Chuen's land in Tung Chung. In accordance with its practice of making ex-gratia payments on a per plant basis which had been followed since 1984, the Government made ex-gratia payments to Chan Chuen and his partners. He and his partners received $5 million for BL and $5 million for other plants. He received his share of $5 million in 1998 and he was allowed to remove some 800,000 BL bulbs which he sent to Tin Sum, for his joint ventures there.

3.4In about September 1998, it became known that the compensation basis payable for plants grown on the land resumed was to be changed. The evidence of Mr. So, the Applicants' surveyor, is that the amount of compensation payable in accordance with the new basis was one twelfth of that provided by the traditional basis.

4.Is Compensation to be paid on termination basis or on relocation basis?

The land was not cleared until 14th April 1999, and Chan Chuen confirmed that he had been notified in writing by a letter dated 13th January 1999 issued by the Lands Department, the relevant part of which reads: -

"I would like to reiterate to your clients that all private land to be resumed for the KCRC West Rail (Phase 1) project will revert to the Government on 16.1.1999 and the land will be cleared by Government in Phases starting from 4.2.1999. The cultivators of the crops grown on the land to be resumed should remove their crops before the clearance date."

4.1The Respondent's Counsel Mr. Miu submitted that, given this admitted fact, the Applicants could and should have harvested and removed or relocated the plants. But they had not taken action to harvest the crops. The Chinese New Year in 1999 fell on 16th February 1999. Had there been no resumption, the Applicants could and should have harvested the crops and sold them in February 1999. According to the computation of Mr. So, the Applicants should have reaped HK$1,618,482 from this harvest and this should provide ample fund for relocation. He further submitted that Chan Chuen said that he had no money to do the relocation, but the 1st Applicant was also under a duty to mitigate the Government's loss and there was no evidence that he did not have the means to do so.

4.2On the assumption that the Applicants did have the financial means to do so, would they have been able to do so? The field record sheet (page 91 of Exhibit No. 38A3) contained the following statement: -

"This is the preliminary record of sapling and stock record. The relevant information and condition of the sapling are now pending the examination from the Agriculture and Fisheries Department. For your own benefit, please do not remove the sapling at the captioned land before inspection."

(Underlines added)

This field record sheet was produced by Chan Chuen. On the top right hand corner of this sheet are the Applicants' names. No doubt this sheet was given to the Applicants. This sheet bears a hand-written statement: -

"The assessment was represented by Mr. Chan Wing Yiu & Mr. Jeffrey Tang (KCRC) on 27-1-1999."

The said statement describes what took place on 27.1.1999. Therefore it must have been given to Chan Chuen on or after 27.1.1999. This field record sheet of course supersedes the letter dated 13.1.1999, in so far as the removing of the crops is concerned. Stock-taking was completed on 27.1.1999. The Chinese New Year fell on 16.2.1999. If Mr. Miu's submission is correct, then the Applicants had to sell the crops prior to 21.1.1999, before they could have the means to remove the crops. But the period from 21st January to 27th January 1999 was stock-taking period, and on 27.1.1999 the Applicants were told not to remove the crops away. The Applicants were placed in a difficult position; they could not have harvested the crops even if they had intended to. In these circumstances the Tribunal held that the compensation is to be assessed on a termination basis.

5.Dutch hybrids or Chinese variety?

What prices the Applicants' BL flowers and BL bulbs could have fetched if sold in the market? In this respect we have to consider the evidence of the Applicants' witnesses and the documents they produced in court in order to decide whether the bulbs grown by the Applicants were of the Dutch hybrid or were of the Chinese variety. It is not disputed that BL bulbs and flowers of Chinese variety can be bought and sold at much lower prices than those of the Dutch hybrids in the market.

5.1The evidence of Chan Chuen

In his witness statement dated 5th January 2001, Chan Chuen said, "In early 1992 I decided to start up my flower farming business, I purchased about 2,500 Dutch Hybrid Barbados Lily bulbs from a local flower wholesaler at the price of $30.00 each", and by early 1998, he had a total of about 2,500,000 mature bulbs. All his bulbs were of Holland origin and they were reproduced by him at his nursery at Lantau Island. But his evidence revealed that he purchased the BL bulbs from a Mr. Yip Kong Ming and from Sum Kee Yuen. When he purchased the bulbs from Mr. Yip Kong Ming in 1992, he did not know if the bulbs were of Chinese origin, Dutch origin or where they originated from.

5.1.1Chan Chuen admitted that before 1996 he had never sold any BL flowers grown by him, whatever the origin. When he began to sell BL flowers in 1997, he was not aware that on the market there were 2 kinds of BL flowers, one imported from Holland and one from China.

5.1.2He has known Mr. Wu Wai Kuen since 1997 (the Applicant in LDMR 37/2000). On one occasion he took Mr. Wu to a shop in Fa Hui flower market to check the price of BL bulbs, but he did not know and he did not care whether the bulbs were of Dutch origin. He held the view that as long as they were beautiful, someone would come to buy them. He did not know, nor could he differentiate the prices of BL bulbs of Chinese origin in the market.

5.1.3In light of his evidence, his assertion in his witness statement that the BL bulbs he purchased in 1992 were of Dutch origin is not credible. If he had not known and had not cared about the distinction between BL bulbs of Dutch origin and BL bulbs of Chinese variety, he could not have known or cared about whether the BL bulbs he purchased in 1992 were of Dutch origin.

5.1.4It is his evidence that in 1999 he requested the owner of Sum Kee Yuen to issue to him an invoice retrospectively in respect of this transaction. But the owner did not accede to his request. Several days prior to 5th September 2001 he approached the owner again, but the owner still said the same thing as before, namely that it was too long ago, how could he make out an invoice retrospectively to him. It is only until the night on the 4th September 2001 that when Chan Chuen phoned him up again, that the owner acceded to his request. When Chan Chuen arrived at his shop, the owner had already gone, but he had written a statement on an undated invoice (Exhibit No. 38A8) that Chan Chuen had purchased a batch of BL of foreign origin from his company.

5.1.5The evidence of Mr. Ng Chuen

According to his witness statement dated 10th September 2001, Ng Chuen was the sole proprietor of Sum Kee Yuen. He had been selling BL flowers and bulbs of Dutch hybrids. He had never sold BL bulbs of Chinese origin. In his witness statement he said: -

"I remember that a Mr. Chan Chuen bought from me about a thousand of Dutch origin bulbs of Barbados Lily in the early 1990s."

5.1.5.1When Ng Chuen testified on 11.9.2001, he recalled that it was many years ago that Chan Chuen bought BL from him. The number of BL bulbs Chan Chuen purchased was very close to 1000. He did not bump into Chan Chuen afterwards. He had a clear idea that Chan Chuen bought from him because he bought up all his stock. But he also agreed that it was not unusual for someone to buy up his remaining stock. We had some doubt as to why Ng Chuen could be certain that it was Chan Chuen who had purchased the BL bulbs from him, because when Chan Chuen bought the bulbs, Ng Chuen did not know him, and did not know his name. Chan Chuen stated that he had not patronized Sum Kee Yuen before or after this purchase. According to Chan Chuen, that incident took place in 1992. During a period of 9 years, namely, from 1992 to 2001, Ng Chuen must have had come across many customers, why could he remember the purchase by a certain customer (Chan Chuen) 9 years ago? We find it difficult to attach any weight to his evidence.

6.The photo Exhibit No.38A 11

According to Chan Chuen, this photo was taken in Tin Sum, one year prior to the resumption of land. The purpose of taking this photo was "just for memory. Just as memorial item". In this photo the flowers show a variety of colours, ranging from red to pink to white. But no white or pink and white BL flowers can be seen from the numerous coloured photos taken during stock-taking of the BL plants. When pointed out to him that when the KCRC people went to do the stock-taking, they found that the BL flowers only had red colour, and certainly no white colour, Chan Chuen disagreed. He only agreed that they (the white BL flowers) had not bloomed yet.

6.1This photo showed that the BL flowers of different colours were blooming at the same time. Had these been the BL plants grown in Tin Sum, why is it that the numerous photos taken during stock-taking of the BL flowers in Tin Sum only show flowers of red colours? This Tribunal therefore attaches no weight to the evidence relating to the photo.

6.2The witness statement of Mr. Wong Chau Kwong

Mr. Wong Chau Kwong did not testify in court. We do not know why. In the circumstance we would not attach any weight to his witness statement which has been included in Exhibit No. 38A1.

6.3Mr. Lui Kwok Fai, a consultant of Albert So Surveyors Limited, took part in the stock-taking exercise at the end of January 1999. As soon as the exercise was over, he took home several BL bulbs from the field with the permission of Chan Chuen. Just before and after the Chinese New Year 2000, those bulbs were in full blossom and Mr. Lui took pictures of them. He produced 4 pictures (Exhibit No. 38A12, pictures A, B, C and D).

6.4Mr. Cheng, the Respondent's horticulture expert, listed out a table in his second witness statement (P. 523 - P. 546 of Exhibit No. 38A2) 6 of the observable differences between the flowers exhibited by Mr. Lui and those flowers (6 pictures at Exhibit No. R1) purchased by the Respondent from the Fa Hui Flower Market at the beginning of March 2001. We reproduce the said table, with numbers added to indicate the items of differences.

6.5We agree that differences (1), (3), (4) and (5) can be clearly seen by comparing the pictures showing Mr. Lui's flowers and the Respondent's flowers. Difference (2) involves subjective comparison and so it does not provide a very helpful guideline to differentiate the 2 kinds of flowers. Difference (6) does not serve any useful purpose for lack of measuring unit for Mr. Lui's flowers.

6.6On 2.4.2001, Mr. Cheng purchased 5 small plastic bags of BL plants (with leaves, bulbs in soil) from Chan Ho Farm at Kam Tin, at $4.5 for each bags. As it was blooming season for BL, some bulbs in the bag was bearing flowers. The operator of Chan Ho Farm advised him that the plants were from the Mainland. On the following day each of the 5 bags was cut and all the bulbs therein were separated and categorized into Small, Medium and Large. P. 540 to P. 542 of Exhibit No. 38A2 contain 6 pictures showing the results of the operation. The top picture on P. 540 shows the 5 bags of BL plants and 1 pot of Dutch BL plant (Dutch Hybrid Hippeastrum) for comparison. It can be seen quite clearly that the latter is markedly distinct from the former. The top picture on P.541 shows the appearance of the second bag of BL plants. It can be clearly seen that the shape of the flowers is trumpet-like with long tubular base; the flowers are pendent and the flower-stalks are curved to one side.

6.7The pictures on Exhibits No.38R5 and R6 show that Chan Chuen was holding 2 stems (with bulbs) of his BL flowers when stock-taking exercise was being conducted. The shape and colours of the flowers look similar to the flower shown on P. 741A of the Bundle of Documents (Exhibit No. 38A4). Both are pictures of BL flowers taken during the course of stock-taking. Without being able to look at the bases and stems of the flowers (only part of the base of a flower in Exhibit No. 38R6 is shown), we find it difficult to accept the Applicants' assertion that they are BL flowers of Dutch origin.

6.8The flowers shown on pictures 648A, 721A, 722A, 738A of Exhibit No. 38A4 and the pictures shown on P. 52A and 53A of the expert report of So Chun Him dated 21 November 2000 look alike. The top picture report on P. A5 of the supplementary report compiled by Mr. Cheng dated 21.2.2001, (P. 441 of Exhibit No. 38A2) shows a BL bulb lifted during the counting exercise on 27.1.1999. It clearly shows that the BL flower has a trumpet-like shape with long tubular base, and the flower is pendent. It is not known how long after the bulb had been lifted when the picture was taken, but the flower still looks fresh. All the flowers pictures clearly show that the BL flowers have trumpet-like shape with long tubular bases, and that the flowers are pendent.

6.9At paragraph 6 of his witness statement, Chan Chuen stated: -

"......... After one year of growing, one original bulb would produce an average of 10 offsets, I would then separate them and replanted them at my nursery to allow them to grow in size for one more year. Hence, by early 1994, I had a total of about 25,000 mature bulbs. In the beginning of 1994 and 1996, I had repeated the above process and by early 1998, I had a total of about 2,500,000 mature bulbs. All my bulbs were of Holland origin and they were reproduced by me at my nursery at Lantau Island ........"

(Underlines provided)

The above statement has to be considered against the results of the stock-taking recorded in Mr. Hong's report (Exhibit No. 38A1, P. 312 to P. 318) and summarized at P. 352A. The summary of the records shows that of the 2,177 BL bulbs sampled, only 16 (0.7%) were "extra large" category, having a diameter of over 2.5 (P. 317, Exhibit No. 38A1). 344 bulbs (15.7%) were of the "large" category, having a diameter of 1.5 to 2.5 inches. The rest of the bulbs (1,827, or 83.9%) fell into the "medium" or "small" categories, having diameters ranging from less than 1 inch to 1.5 inches for each bulb. But the Dutch BL bulbs have sizes ranging from 3.25 inches to over 5 inches (P. 193, Exhibit No. 38A1). It is correct for the Respondent to submit that "the profile of the sizes of bulbs sampled in Chan Chuen's fields resembled closely those purchased from Chan Ho Farm" (P. 526 of Exhibit No. 38A2). Chan Chuen had 2.5 million mature bulbs in early 1998, and his bulbs were transported to Tin Sum. It follows that there should be a very high percentage of "extra large" bulbs amongst the bulbs sampled, and yet from the said samples, only 0.7% of the samples were of the "extra large" category. What the above record shows is that the bulbs are not of Dutch origin.

6.10Having considered all the evidence shown above, this Tribunal has found that the BL flowers grown on the Land were BL of the Chinese variety, and of course, the bulbs, must also be of the Chinese variety.

6.11The Applicants' expert Mr. So assessed the loss to the Applicants on the basis of $16.50 per cut flower. The only documents which the Applicants produced to support such prices are the "agreement" in Chinese dated 1.1.1998 made between Chan Chuen and Wong Chau Kwong and the receipt in Chinese dated 5th October (P. 101 and 103 respectively of Exhibit No. 38A3). The translation of the said "agreement" reads: -

"Our company certified that there is an agreement with the cultivators of Pat Heung and Mr. Chan Chuen etc. promised to wholesale their cultivated Barbados Lily and Barbados Lily flowers. The price (of the Barbados Lily) would be calculated by reference to 60% of their market value. In relation to Barbados Lily flowers at an average price of HK$16.50 each. However, it will be settled with 10% discount."

6.12It is his evidence on 2.3.2001 that a piece of BL flower has been sold for least $20 to $30 for many years. From his past experience the price of a bulb in the Fa Hui flower market was at least $50 to $100.

6.13Under this agreement Wong Chau Kwong was to wholesale the BL bulbs and flowers for Chan Chuen. But according to Chan Chuen's evidence it turned out that Chan Chuen assisted on the sale of the flowers. Chan Chuen could even sell 300 to 400 pieces of BL flowers per day. On a good day, Chan Chuen could even sell up to 1,000 pieces of such flowers. When asked why he bothered to sell; why not let Wong Chau Kwong do the selling for him. He said that when some times he was not free, Wong Chau Kwong would sell the flowers for him. He further said that all along it was he himself who handled the selling of flowers. This is simply inconsistent with the promise by Wong Chau Kwong "to wholesale" the flowers for him and that he assisted on the sale of the BL flowers.

6.14He said that no BL bulbs were sold at Wong Chau Kwong's place. But in the early spring of 2,000 he sold at least 10,000 BL bulbs at $30 per piece to a Mrs. Yeung, and he collected cash in the sum of $300,000. There is no documentary evidence of this sale. He did not inform his surveyor or lawyer about this transaction. He did not mention about this transaction of the sale of BL bulbs in his witness statement dated 5.1.2001. He described in detail in his witness statement about the prices for the BL flowers. There is simply no reason for him not to have mentioned the sale prices of these BL bulbs to his surveyor or lawyer, so that the compensation for their loss of stock on the bulbs can be assessed by reference to such prices. The amount of stock of bulks is so huge in this claim that it is impossible for him to have left out this piece of evidence that can throw light on the amount of compensation to be computed on the loss of stock on the bulbs.

6.15The amount of BL bulbs involved in this transaction is at least 10,000, the sale involved $300,000, which is not an insignificant amount of money. Further this is the only sale of bulbs before the trial which commenced on 26th February 2001. There is absolutely no reason he could have forgotten it. If he had not forgotten this transaction, why had he not have told his surveyor or lawyer? This is inexplicable. This Tribunal finds that this piece of evidence about the sale of the 10,000 BL bulbs totally incredible.

6.16The receipt in Chinese dated 5th October is the only other documentary evidence showing that the selling price of a piece of BL flower was $16.5. The translation of the receipt reads: -

"Also sold the 300 Barbados Lily flowers by consignment for Mr. Chan Chuen. The average selling price of (Barbados Lily) is HK$16.50 each making a total sum of HK$4,950, settled with 10% discount at HK$4,455.0

(Sd.) Wong Chau Kwong

5th October "

6.17There is no documents evidencing the sale of 30,000 BL flowers in the sum of $480,000. Tang Ping Choi trusted him in such sale. When asked whether he could explain if Tang Ping Choi trusted him on the sale of 30,000 BL flowers to obtain $480,000, why he considered it necessary to show him the mere sale of 300 flowers in October 1998, his answer is that because on that occasion the flowers were not sold by himself. He just consigned to Wong Chau Kwong to be sold by him.

6.18Tang Ping Choi did not ask Chan Chuen to show him any invoice to prove any sale. He entrusted Chan Chuen in the sale of the BL flowers. There is no document evidencing the sale of the 30,000 BL flowers (32,000 BL flowers in Chan Chuen's witness statement) in the sum of $480,000, then it is inexplicable why Chan Chuen should obtain receipt from Wong Chau Kwong just to prove the mere sale of 300 BL flowers by the letter. The explanation advanced by Chan Chuen is incredible. The point is that it did not matter whether it was he or Wong Chau Kwong who sold the flowers. So long as the flowers were sold, they were to divide the money. That was the situation in early 1998. Tang Ping Choi did not ask him for an invoice on that occasion and he still had trust in him. Wong Chau Kwong had not issued any invoice to him before, despite the sale of 30,000 BL flowers in the amount of $480,000. There is absolutely no reason Chan Chuen should obtain this receipt for the sale of 300 BL flowers on another occasion.

6.19Tang Ping Choi did not file any tax return in respect of his share of $240,000 in respect of the sale of the 30,000 BL flowers. He had filed tax returns before. He had been in restaurant business for 20 years and in the real estate business for 10 year. During those years he filed his net tax return with the Inland Revenue Department. His explanation for not filing tax return in respect of the money he received from Chan Chuen is that the money was given in several lots, not in one go, for $240,000. He had filed tax returns before, for the money he received from his past businesses . When he was in the restaurant business, was he not receiving money from customers everyday? Yet he filed his tax returns. Then there is no reason that he did not file any tax return for the money he received in respect of the sale of BL flowers under the joint venture business with Chan Chuen. We did not believe that he was telling the truth in this respect.

6.20We did not find that the sale of the BL flowers at $16.50 credible. We attach no weight to this piece of evidence.

7.The issue on expert evidence

After the Applicants had closed their case, their Senior Counsel Mr. Mumford applied to this Tribunal to decide whether to allow the proposed expert witnesses, namely, Mr. Cheng and Mr. Hong to give expert evidence on behalf of the Respondent. Mr. Mumford relied on the case of Liverpool Roman Catholic Archdiocesan Trustees Inc. v Goldberg (No. 3) [2001] 1 WLR 2337 to support the application. After hearing the submissions advanced by both parties, we dismissed the application. In the course of doing so we said that we would give out our reasons when judgment of this case is delivered, and this we now do.

7.1Mr. Mumford submitted that the extent and nature of the relationship between the proposed expert witnesses and the party calling them is such that a reasonable observer might think that relationship was capable of affecting the views of the expert witnesses so as to make those views unduly favourable to the party calling him. He submitted that it is clear from the reports themselves that Messrs. Chesterton Petty are the consultants to the KCRC for the whole railway scheme and assessment of claims. The proposed experts engaged themselves in pursuing matters of fact and Mr. Cheng, with the approval of Mr. Hong, acted as a kind of private detective. Therefore they could not be accepted as expert witnesses. In his expert report dated 21st February 2001, Mr. Cheng made comments on the witness statements of Wong Chau Kwong, Chan Wong Man, and Chan Chuen. This is wholly inappropriate for an expert witness to do. He is not supposed to be engaged in disputes as to fact. What he was trying to do is to confute the statement by another witness which is not the function of an expert. Mr. Cheng and a Mr. Ko told untruths to Wong Chau Kwong and they offered him inducements, trying to get him to say things against Chan Chuen. This is wholly inconsistent with the position of an independent expert witness.

7.2Having perused the transcript of the taped conversation, the Tribunal found that neither Mr. Cheng nor Mr. Ko offered any inducement to Wong Chau Kwong.

7.3As for Mr. Hong, he made the following comment in his report: -

"Please refer to the transcript of the conversations between Mr. Wong Chau-kwong and Mr. Cheng Wing-yiu. The transcript is submitted separately by Cheng Wing-yiu, together with supplementary report."

Mr. Mumford submitted that the statement quoted above shows how unsuitable Mr. Hong is as an expert witness because he was simply relying on evidence given by other people; he was not relying on anything he had seen or done himself. In doing that as he though fit, he revealed a relationship or an attitude to the case which a reasonable observer might think was capable of making his views unlikely favourable to the Respondent.

7.4In Goldburg's case the court declared that the expert evidence due to be given by Michael Flesch Q C or on behalf of the defendant was inadmissible on the ground that (i) Michael Flesch lacked the necessary independence from the defendant to act as an expert witness;(ii) the report of Michael Flesch contained no expert evidence which was relevant to any issue in the case; and (iii) the report was not helpful to the resolution of any issue before the court.

7.5At P. 2339 of the Judgment Evans-Lombe J said: -

'10. Mr. Flesch's evidence qualified as that of an expert within section 3 of the 1972 Act but, in my judgment, the court should disregard it on the ground that Mr. Flesch was unable to fulfil the role of an expert witness because of his close relationship with the defendant.

11. In his report, having described that relationship, Mr. Flesch said:

"I do not believe that this [relationship] will affect my evidence certainly accept that it should not do so. But it is right that I should say that my ............."

12. It seems to me that this admission rendered Mr. Flesch's evidence unacceptable as the evidence of an expert on grounds of the public policy that justice must seen to be done as well as done. ................'

7.6In Goldberg's case Mr. Flesch and the Defendant had known each other for 28 years and were good friends. They were also in the same chambers. In the present case Mr. Cheng and Mr. Hong are the employees of Chesterton Petty, which has been engaged as a consultant for the West Rail. But there is nothing to suggest that the sort of close relationship between the Defendant and his expert in Goldberg's case is present in the present case.

7.7Mr. Cheng did do some private detective work, the product of which is a tape-recorded conversation engaged between Wong Chau Kwong and Mr. Cheng and Mr. Ko, and this piece of conversation was transcribed and attached to Mr. Cheng's supplemental report. This report was endorsed by Mr. Hong. But it would be pre-mature to draw any inference, before hearing any evidence from the Respondent's experts, that simply by reading the Respondent's expert reports, an inference can be drawn that what Mr. Cheng and Mr. Hong did was in pursuance of an unduly close relationship between the Respondent and its experts, which would render their expert evidence inadmissible.

7.8In any event, under section 10(6) of the Lands Tribunal Ordinance, we may admit in evidence any statement, document, information or matter, whether or not it would otherwise be admissible in evidence and attach such weight to it as may be appropriate in the circumstance. In these circumstances we were of the view that the Applicants' application was pre-maturely made, and therefore it was dismissed.

7.9After hearing all the Respondent's evidence we did not find that there was any unduly close relationship between the Respondent's two experts and the Respondent. However we did find that it is beyond the scope of expert duty for Mr. Cheng to do the private detective work and to make comments on the witness statements of Wong Chau Kwong, Chan Kwong Man and Chan Chuen. We therefore attached no weight whatsoever to such comments and to the contents of the taped conversation made on 7th September 2000. Although he told lies to Wong Chau Kwong during the conversation, we held the view that having regard to the contents of his supplementary report (dated 21st February 2001), such lies would have no effect on those parts of this supplementary report and his report dated 21st November 2000.

7.10Mr. Hong complied his report on 6th November 2000 and a supplementary report on 21st February 2001. At paragraph 2.3.2.1 of the letter report, he referred to the said taped conversation. This is outside the scope of duty of an expert witness. Therefore we attached no weight to this part of his report. However we were of the view that, after considering the nature of the information of the other part of this report, and the information contained in the report dated 6th November 2000, the reference to the taped conversation would not affect the weight to be given to the information contained in the reports.

8.Summary of the parties' assessment of compensation on the basis of total extinguishment

We have decided above that the compensation to the Applicants be assessed on the basis of total extinguishment.

8.1Mr. So for the Applicants estimated that the total compensation payable to the Applicants, on the basis of total extinguishment of business, amounted to $19,613,349 comprising the following: -

1. Leasehold Interest- $74,371

2. Loss of Profit- $10,728,077

3. Loss of Stock- $8,810,901

8.2On the other hand, Mr. Hong for the Respondent's assessment of the total compensation amount on the same, total extinguishment basis amounted to $27,417, which comprises: -

1. Leasehold Interest- $27,417

2. Loss of Profit- Nil

3. Loss of Stock- Nil

8.3Although the basis of valuation and methodology of the two expert surveyors were similar, we note that their estimates of the compensation amounts varied very substantially. In fact, Mr. Hong's estimate of the total compensation amount was a mere 1.40% of Mr. Ho's figure.

8.4The Applicants called for the evidence of two experts, Mr. So and Mr. Ho while the Respondent called for the evidence of two other experts, Mr. Hong and Mr. Cheng. Although the Applicants submitted that we should disregard the evidence of Mr. Hong and Mr. Cheng on the ground that both of them acted contrary to the conduct of an expert, we decide that whilst their evidence on the meeting between Mr. Wong Chau Kwong and Mr. Cheng should be disregarded entirely, both Mr. Hong and Mr. Cheng were accepted as experts in their own fields in this application. As for the factual witnesses, we decide to disregard the evidence of Mr. Wong Chau Kwong entirely. Other than that, we have heard the evidence of several factual witnesses, including the two Applicants.

8.5Whilst we accept that the two expert surveyors, i.e. Mr. So and Mr. Hong were giving evidence for this case, we understand that both of them had expertise in property valuation and valuation for compensation purposes, including compensation for business loss and loss of stock. Therefore, they respectively had to rely on the evidence and advice of their colleagues or associates, the two horticulture experts, Mr. Cheng and Mr. Ho. Indeed, both surveyors have either summarized their horticulture experts' opinion in their valuation reports or attached the latter's reports as appendices to their valuation reports. Similarly, whilst this Tribunal, being a specialized tribunal, has a member who has knowledge in property and compensation valuation, also has to rely on the evidence of the two horticulture experts. We shall also carefully analyze the evidence given by the witnesses, including the two horticulture experts to find out, for example, if there is any obvious inconsistency or irregularity. We shall, as far as possible, utilize the information and data commonly agreed by the parties or their experts as the bases of our analysis. We shall come to the details of these analyses later.

8.6According to Mr. So, the Applicants are entitled to have their compensation assessed under two separate heads: firstly, the value of the Applicants' leasehold interest for the remaining period of the tenancy extinguished by the resumption, payable under section 10(2)(a) of the Lands Resumption Ordinance ("Ordinance") and secondly, the loss due to disturbance and total extinguishment of business, payable under section 10(2)(d) of the Ordinance. Mr. Hong agreed these heads of claims if the compensation should be assessed on the basis of total extinguishment.

8.7Mr. So submitted two valuation reports, which were respectively found in pages 18 to 171 and pages 356 to 379 of Exhibit No. 38A1. His valuations covered this case LDMR No. 38 of 2000 as well as two other cases, LDMR No. 36 of 2000 and LDMR No. 37 of 2000. The latter two cases were heard together with this case. However, at the beginning of the hearing for the three consolidated cases, the parties informed us the other two cases were settled. Thus, we only have to deal with the compensation for this case.

8.8In Mr. So's supplementary report dated 22 January 2001, he helpfully summarized the various parameters adopted by him in the calculation of his first report dated 21 November 2000 and those adopted by Mr. Hong in the latter's valuation report dated 6 November 2000. Mr. So also agreed to revise his original primitive valuation by using some of the parameters adopted by Mr. Hong. These include the remaining term of the leases of the subject land, the planting densities adopted for various lots of the subject land, the unit costs of fertilizer and pesticides to be applied to the subject land, and the unit cost of harvest transportation. In addition, Mr. So agreed to revise his estimates by firstly, adopting various planting densities based on the actual densities of the sample plots; secondly, revising the wholesale discounts for various years and wastage allowances; and finally, accepting to deduct for the costs of harvest labour and harvest transportation, even though he did not actually use Mr. Hong's figures. Mr. So's revised valuation was set out in Appendix IV to his supplementary report (page 377 and 378 of Exhibit No. 38A1).

8.9Mr. Hong's first report dated 6 November 2000 was reproduced in pages 224 to pages 355 of Exhibit No. 38A1 while his supplementary report dated 21 February 2001 was in pages 465 to 516 of Exhibit No. 38A2. Similarly, his reports covered the subject case as well as the other two cases, LDMR 36 of 2000 and LDMR 37 of 2000. Mr. Hong also produced a witness statement, which was marked as pages 547 to 558 of Exhibit No. 38A2. In that witness statement, Mr. Hong said that since the remaining terms of the subject land were just sufficient for the Applicants to undertake a total of two harvests, he had to revise his valuation to take into account the loss of profits of two harvests, instead of three harvests in his earlier valuation. Mr. Hong's revised valuation was set out in pages 352A, 353A and 354A of the same bundle, Exhibit No. 38A2.

9.Assessment of the leasehold Interest

In assessing the Applicants' leasehold interest in the subject land, the method of valuation of Mr. So was identical to that of Mr. Hong. Both assessed the market rent of the land in question, calculated the difference between the rents reserved under the leases and the estimated market rent of the subject land and finally capitalized the estimated profit rent for the residue term.

9.1The two experts agreed on the sum of the rents reserved under the existing leases of the subject land to be $250.60, and the residual term of Lot No. 157(P) in D.D. 106 and that of various other lots to be 533 days and 502 days respectively. Both experts also agreed on the landlord's requirement to serve a not less than 6 months' notice to the tenant after the expiry of the periodic lease term thus increasing the residual term of each lease by 6 months. However, both differed in the assessment of the market rent for the subject land and the capitalization rate.

9.2In the supplementary report, Mr. So revised his valuation and estimated the value of the leasehold interest in the sum of $74,371 whilst Mr. Hong for the Respondent maintained his estimate of the value of the leasehold interest, in the sum of $27,417.

10.Analysis of the experts' rental comparables and valuation

In analyzing the comparables, both experts acknowledged that good comparables in the locality close to the relevant date were not available. Mr. So at the end considered it appropriate to rely on the tender results of two short-term tenancies for his valuation. The details of these two tenancies were as follows: -

Table 1: Rental comparables chosen by Mr. So

Address	KX 3390 - Wah King Shan Road, Kwai Chung	SHX 949 - Wong Chuk Hang Path, Hong Kong
Date of Instrument	29 Oct., 1998	8 Mar., 1999
Site Area	13,455 sq. ft.	$7,373.34
Rent per annum	$96,000	$12,312
Unit Rate (per sq. ft. p.a.)	$7.1349	$1.6698
User	Commercial garden and plant nursery purposes only	A garden or a plant nursery or any combination thereof

10.1Then, Mr. So sought to apply the following adjustments to the two comparables he adopted as to be the best comparables: -

Table 2: Analysis of rental comparables

Address	KX 3390 - Wah King Shan Road, Kwai Chung	SHX949 - Wong Chuk Hang Path, Hong Kong
Unadjusted Unit Rate (per sq. ft. p.a.)	$7.1349	$1.6698
Commercial factor	-25%	0
Accessibility	-25%	-20%
Location	-20%	-20%
Time	0%	0%
Site Layout and Condition	-25%	-20%
Total Adjustment	-95%	-60%
Adjusted Unit Rate (per sq. ft. p.a.)	$0.36	$0.67

10.2We find that Mr. So's adjustments to his comparables as set out above and his valuation at page 370 of Exhibit No. 38A2 are ludicrous. It is the first time that this Tribunal has heard evidence from any professional surveyor that if the analysis of two appropriate comparable of a piece of property indicates average unit rates of about $7.1 per sq. ft. and $1.7 per sq. ft., the surveyor could make adjustments to these comparables to the extent of -95% and -60% before arriving at his "adjusted" unit rates of about $0.36 and $0.67 per sq. ft. And, the surveyor in the final analysis opined that an average of these two adjusted unit rates, or $0.51 per sq. ft. should still be adopted for the purpose of valuing the property. One must ask: what is meant by the word "comparable"? If it takes an adjustment of -95% to convert a "comparable" so that it could be compared directly with the subject property, one must ask, is there any other property less comparable to the subject property than this "comparable"?

10.3We also find that the above valuation was not a mistake. Mr. So was certainly very serious that his analysis and valuation were correct because he was defending this valuation when being challenged by the counsel for the other side. He defended, we recall, on the ground that Mr. Hong's comparables were not good comparables, no other good comparables were available and the percentage adjustments he adopted, though subjective, were appropriate, and so on. Yet we failed to understand or accept these reasons as a proper defence for his adjustments and conclusion of value (i.e. appropriateness of the "adjusted rate") for the subject valuation. In a nutshell, if Mr. So found that he had to adjust by -95% and -60% to his two chosen comparables, he should have immediately came to a conclusion that his initial opinion that that comparable was a good comparable must be wrong in the first place. Hence, he should have no hesitation but to disregard these comparables entirely in the final reconciliation of value.

10.4Besides, we also fail to understand why all other agricultural comparables in the rural New Territories cited by Mr. Hong or otherwise were all less comparable than those two comparables located in Hong Kong Island or in urbanized Kwai Chung. Were they all more than 95% different from the subject land?

10.5In principle, we do accept that sometimes, an experienced valuation surveyor could value a piece of property without reference to any comparable, by the so-called "spot" method of valuation if the same surveyor is very familiar with the sub-market, sometimes a "niche" market. However, in so far as the direct comparison method of valuation is concerned, we regret to say that Mr. So's valuation as set out in page 370 was entirely wrong in principle and in practice. The valuation as such will not be accepted by any valuation court, and that certainly includes this Tribunal.

10.6We note from Mr. Hong's valuation report that he had researched a large number of comparables and decided to categorize them into 3 groups according to their characteristics. In the final analysis, Mr. Hong stated that he had relied principally on his Comparable B5 to assess the market value of the subject land (page 236 of Exhibit No. 38A1). He admitted that the reliance on one comparable was unsatisfactory but this was due to the absence of good rental comparables.

11.Tribunal's choice of the best comparables & valuation

Because we decide to disregard the illogical valuation of Mr. So, we accept Mr. Hong's estimate of the market rent for the subject land, at $2 per sq. m. p.a. Also, we accept Mr. Hong's valuation of the leasehold interest, in the sum of $27,417. The details of his valuation are shown in page 310 of Exhibit No. 38A1.

12.Basic of valuation of the loss of profits of the Applicants' business

The Applicants gave evidence that although they started their joint venture business of growing BL since sometime in 1996, there was no written evidence as to the details of their agreement. All the Applicants could say was that Mr. Chan Chuen provided the bulbs, the capital and the know-how whilst Mr. Tang Ping Choi provided the land (by arranging the leases with the landlord or head lessee) and the labour. The Applicants also gave evidence that they did not have any written record of their expenses of the business, or any written record of their incomes from selling the BL flowers. For these reasons, the Applicants could not produce any record of actual accounts, whether certified or not, to substantiate their claim for loss of profits due to the total extinguishment of business.

12.1Therefore, in principle, it would be necessary for the Tribunal to consider the projected yearly accounts of the Applicants' business of growing BL over the subject land, in the absence of the resumption.

12.2In his amended claim calculation sheet attached to his first expert report dated 21 November 2000 (page 33 of Exhibit No. 38A1), Mr. So estimated the disturbance compensation as to be the sum of firstly, the net revenue of three years' harvest and secondly, the loss of stock. Mr. So also confirmed in the said expert report that with the exception of cancellation of the "crop compensation report" and the change of labeling of the remaining Appendices, the said expert report adopted unchanged his earlier claim report that was dated 24 June 2000. In Mr. So's claim calculation sheet, he allowed for an overall planting density of 7.16 bulbs per sq. ft., an overall expense item of $5.08 per sq. ft., an after-revenue discount of 15% to allow for wastage. In the above said amended claim calculation sheet, Mr. So estimated the discounted value of the loss of revenue from selling flowers to be $15,580,136. Adding this to the estimated loss of stock of $10,779,240 it gave a total claim of $26,459,833, net of professional costs.

12.3On the other hand, Mr. Hong in his first expert report dated 6 November 2000 stated that since the Respondent had not submitted any profits and loss account for the assessment of loss of profits of the business, he, with the assistance of Mr. Cheng, worked out the potential profits and loss for the planting of BL in the subject land. Mr. Hong summarized his approach in paragraphs 6.3.1.2 and 6.3.1.3 of his report (pages 238 and 239 of Exhibit No. 38A1). This is reproduced below: -

"My approach is to calculate the potential profits / loss of the business is to deduct the total costs from the total revenue for each harvest. The total revenue is calculated by the no. of stems of cut flowers produced from the cultivated area less wastage multiplied by the selling price per cut flower, whereas the total costs are the sum of purchase costs of the bulbs and the operating costs. The assessments of the total revenue and the total costs for each harvest are subject to different determinants.... In a nutshell, my approach can be represented by the following equation:

Net profit / loss = Total Revenue x [1-Wastage(%)] - Total Costs"

12.4In his supplementary report dated 22 January 2001, Mr. So confirmed that he shared with Mr. Hong the same view of the approach of assessing the loss of profits of the Applicants' business. That is, Mr. So agreed to use the same equation as suggested by Mr. Hong and reproduced in the previous paragraph. Mr. So also revised his claim for loss of profit and loss of stock, on the basis of total extinguishment, to $10,728,077 and $8,810,901 respectively.

12.5In Mr. Hong's supplementary report dated 21 February 2001 (pages 465 to 516 of Exhibit No. 38A2), he did not change the basic approach he outlined in his first report. Therefore, both experts only sought to adduce further evidence and reasoning to support the refined calculations, which, we emphasized, were based on the same basic approach.

12.6However, we also note that during the hearing, Mr. So gave evidence a number of times that he had agreed to adopt certain figures used by Mr. Hong in order to have a speedier settlement. We remind any expert that, when giving advice to a client, his expert opinion would be relied upon by the Lands Tribunal in the determination of compensation amounts under the provisions of the Ordinance. We also fully understand that a particular client may wish to settle the matter with an opposing party and may wish to limit the areas of disputes. However, when an expert in a supplementary report informed the other party that the former agreed to concede to a number of points raised by the latter, it would be natural for the latter, and the Tribunal as well, to take it that the former no longer wished to dispute the points in question. If the former expert wished to defend his opinion on the points in question, he should not retract from his former position but should, if appropriate, adduce further evidence or reasoning in support of his former position. Otherwise, it will be very difficult for the Tribunal to find out the reasons for the expert to retract from his former position. It is simply useless to give a general statement later, after the filing of one's revised opinion and valuation that because the expert (or the expert's client) wished to have a speedier settlement, the expert retracted his former position over a certain issue.

12.7Hence, in the present case, when Mr. So stated in his supplementary report that he agreed to adopt Mr. Hong's approach or Mr. Hong's estimated figures, we should seek to understand these in the context of what Mr. So wrote at the time.

12.8In the final submissions of the Applicants, Mr. Mumford submitted that the calculation of compensation to be awarded to the Applicants could also be calculated on various other bases. For example, he estimated that the compensation could be based on the summation of the first year's estimated profit of $1.6 million, the second year's estimated profit of $3.4 million and 18 times the third year's estimated profit (or $102 million) giving a total value of $107 million. From this, he submitted, a one-time relocation cost of $2 million was deducted to give a figure of $105 million. It was further submitted that from this figure, even if a 75% discount was applied, the residual figure still amounted to $26 million. Alternatively, the counsel submitted that if a six years' purchase were to be applied, one got "a similar result" of $27 million (i.e. $1.6 million + $3.4 million + next 4 years' profits). After submitting the above alternative calculations, Mr. Mumford agreed that the Applicants were bound by their pleadings. Nevertheless, he also submitted that Mr. So's figures represented a reasonable compromise and therefore he resisted "the idea that one should start off with Mr. So's figures and then apply huge discounts to them for business risk and so on."

12.9We find that since both experts had agreed on the method of valuation of the business loss, we should stick to the same method as agreed by the two experts and shall not use other quasi and far less reliable method, some of which were suggested and summarized above by the counsel for the Applicants.

12.10More particularly, we find that in the present case, both experts chose the method of estimating the projected profit (or loss) in the first two years or three years' harvests and then discounting the assessed net profit, but not the method of estimating a normalized net profit for a certain year and multiplying the profit by an appropriate years' purchase. There are merits in the choice of the former approach since it does not require the determination of the appropriate years' purchase for the estimated normalized annual net profit and the need to estimate the normalized net profit over the duration of the business.

12.11Summing up, we shall in this case use the same method as adopted by the two expert surveyors, bearing in mind that we still have to decide whether two harvests or three harvests should be allowed in the calculation, in addition to other areas where we have to make a decision in light of the differences between the experts. We shall, first of all, summarize below, the common grounds and the differences between the two expert surveyors, which, as we have said earlier, also reflected the differences between the two horticulture experts.

13.Summary of the two expert surveyors' valuation on the loss of profits and the loss of stock

We set out below the variables adopted in the two expert surveyors' valuation on the loss of profits and the loss of stock.

Table 3: Summary of the experts' valuation

13.1Therefore, we see from the above summary that the experts for the two parties had agreement on the following matters: -

(1) the total leased area and the total cultivated area;

(2) the actual planting density at the date of reversion (based on the actual densities of the sample plots on various lots or, the density of two sample plots on the adjacent lots, when there is no sample plot for a particular lot);

(3) some of the unit cost items.

13.2On the other hand, from the above summary and upon reading the valuation sheets prepared by the experts (i.e. pages 353A to 355A and pages 377 and 378 of Exhibit No. 38A1), we find that they still had major differences over the following areas: -

(1) the productivity of the flowers from certain type of bulbs;

(2) whether it was feasible for the Applicants to have a 3rd harvest;

(3) wholesale discount and wastage allowance for flowers;

(4) some of the unit cost items;

(5) rate of discount for calculating the present value of the estimated net profits from the sale of flowers.

14.Areas under cultivation and the issue of potential for expansion

Mr. So in his supplementary report agreed to abandon his estimates of areas under cultivation and adopt Mr. Hong's figure of total cultivated area of 5,013.22 sq. m. Hence, we adopt this figure as the actual area used for the cultivation of BL, out of the agreed total leased area of 10,566.80 sq. m. Thus, the area used for the cultivation of BL represents about 47% of the total leased area.

14.1However, we note in paragraph (1) of the Notes to the "Assessment of Loss of Profits and Stock" produced by Mr. So as Appendix IV of his supplementary report (page 378 of Exhibit No. 38A1) the following remarks: -

"According to our Horticulture Expert, Mr. Ho Man Fan, Barbados Lily can grow in a healthy condition to a planting density of 100 bulbs per sq. m. The maximum number of bulbs to be produced per harvest within the subject lot would thus be calculated as the product of the relevant area and the maximum planting density, which is 100 bulbs / sq. m."

14.2According to the evidence of Mr. So, "there is a difference between the cultivated areas and the leased areas in all of the three cases. The Applicants still have room for expansion of business in case all the existing cultivated areas are cultivated under the maximum planting density. Therefore, in accounting the maximum number of bulbs to be cultivated, I adopt the product of the maximum planting density and the leased areas" (page 365 of Exhibit No. 38A1). Therefore, the said relevant area quoted in the previous paragraph was meant by Mr. Ho to be the total leased area, not the actual cultivated area.

14.3We will consider the matter of the planting density later. For the time being, we will consider whether it is correct to assume that the total leased area of all the lots in the subject case were to be planted with BL, for the purpose of estimating the loss of profits. First of all, we understand that the total leased area is the summation of all the registered areas of the lots that are the subject matter of the leases in this case. Secondly, we further understand that the total cultivated area is the summation of all the areas actually found upon survey on site and agreed by the parties as the areas cultivated for the growing of BL. In this respect, Mr. Cheng reported in his "Report on Physical Counting of Barbados Lily Bulbs" at page 195 of Exhibit No. 38A1 the following: "1.2 Stock-taking by area measurement method was conducted between 21/1/99 and 23/1/99 and the whole batch of reports was forwarded to Agriculture & Fisheries Department for further action. Calculation of Barbados Lily Ex-gratia Allowance would be based on the cultivated area measured." Thirdly, we have not heard any evidence from the Applicants as to why the remaining areas (representing about 53% of the total leased area) were not put for the cultivation of BL. On the contrary, we heard evidence from Mr. Hong that "the majority of the surplus land was occupied by third parties planted with crops, fishponds, tress, structures, footpath, river and concrete platform. These pieces of surplus land were simply not possible for business expansion at all or substantial costs had to be spent for the said business expansion. Therefore, there are material mistakes in the Surveyor's (i.e. Mr. So's) valuations" (page 470 of Exhibit No. 38A2). In support of this, Mr. Hong set out at Appendix IV of his supplementary report a summary of his colleague's survey of the occupation status of the remaining areas of the leased areas that were not found for the cultivation of BL.

14.4There was no factual evidence produced by the Applicants refuting the above said land status survey prepared by the Respondent's expert. The counsel for the Applicants submitted that it did not follow from the said survey that the remaining areas could not serve as expansion area for the cultivation of BL by the Applicants. For example, a concrete platform could be blown up and removed; a fishpond could be filled and other occupiers (especially if they were the occupiers of one of the Applicants, Mr. Tang) could be removed.

14.5In general, we think that it is reasonable to say that the actual area capable of cultivation for certain crop should usually be less than the total leased area since the latter could well include paths, culverts for irrigation and uncultivated land - embankment, concrete platform and so on.

14.6In the present case, we find that since the remaining some 53% of the leased area were, according to the evidence adduced by the Respondent, either occupied for some other purposes or incapable of being put for the cultivation of BL due to certain physical constraints, it would only be right to treat the actual cultivated areas surveyed and agreed by the parties as the areas cultivated for the growing of BL. Without sufficient evidence, we cannot firstly, simply assume that all the areas covered by the leases are capable of being used for the cultivation of BL and secondly, that all other actual users including occupation by other occupiers, could cease immediately and could be converted, by the Applicants, to the use of the cultivation of BL. If that was possible, one might ask, why did the Applicants not make use of all the leased areas after starting to grow BL on the subject land since over a year ago before the date of reversion?

15.Actual densities of the bulbs as revealed by the sample plots

The experts for both parties reported the details of the joint surveys on the sample plots in their reports. Mr. So reported that altogether 48 sample plots on the Applicants' land had been checked. He added that, "on the average, within the 48 sample plots, there are at least 5.9 bulbs of barbados lily planted together within a square foot of our client's cultivated land out of 1,853 square feet and a total of 10,952 bulbs." Similarly, Mr. Cheng reported the following "Field Situation" in his report (page 195 of Exhibit No. 38A1) that, "due to time constraint and the very extensive area of cultivation, sample plots of Barbados Lily for each of the outstanding case were selected on a consensus basis among representatives from KCRC and Albert So Surveyors Ltd. and Mr. Chan Chuen. Clumps of bulbs grown within each plot were dug up for physical counting.... The Small size bulbs were actually off-sets (bulblets). They were still being fed by their mother bulbs. If re-sited and grown separately, they would take 2 to 3 years to produce flowers." Mr. Cheng also summed up the results of the joint counting exercise, which "indicates the bulb density whatever the size is 5.74 nos. per sq. ft. and the clump density is 0.49 nos. per sq. ft. The small size bulbs occupy 46% of the total bulbs counted." He further produced a summary table, as follows: -

Table 4 : Distribution of bulbs in the sample plots

* This density is equivalent to about 62 bulbs per sq. m.

15.1The experts from both parties had the following consensus on the definition of the different size types of the BL bulbs, based on the diameter of the bulbs as follows: -

Table 5: Classification of bulbs

15.2Although there were some differences on the parties' reported dimensions and figures on the joint survey, we think that they were mainly due to the different basis for rounding off. Also, since the parties agreed to use Mr. Cheng's reported actual densities of the bulbs as indicated by the sample plots, we shall not waste time in repeating the statistics for all the sample plots here.

15.3Nonetheless, we note that the total area of sample plots was too small, bearing in mind that this would be used in this and the other similar BL claims. Therefore, we would like to comment that in the future, in order to be fair to the parties and to assist the Tribunal, it would be more preferable if the concerned parties would arrange that more sample plots, preferably determined at random but recorded positions were surveyed, with their results taken and analyzed.

15.4In the absence of other method to determine the density of the actual crops cultivated on the subject land that had been cleared after the date of reversion, we agree with the parties' experts that we should base on the result of the actual survey of sample plots on the subject lots. Where there was no sample plot for a particular lot, we agree with the experts that two sample plots on adjacent lots should be used and the average figure be adopted for the said lot. On this basis, we set out below the details of the direct application of the actual densities obtained from the sample plots in arriving at the estimated number of bulbs of different size types in the subject land, as follows: -

Table 6: Analysis of sample plots' data (extracted from Mr. So's assessment sheet at page 377 of Exhibit No. 38A1)

* Density = No. of bulbs / sq. m.

15.5Therefore, using the above densities of bulbs derived from the chosen sample plots, we find that the total numbers of bulbs of different size types are the same as estimated by Mr. So in page 375 of Exhibit No. 38A1. The same set of figures were also accepted by the Respondent's expert as to represent the situation of the subject land in late January 1999. These figures are set out in Table 7 below: -

Table 7: Projected distribution of bulbs in the subject land

15.6We note from the reports of Mr. Cheng that the stock-taking by bulb counting method was carried out on 21, 26 and 27 January 1999 whilst the stock taking by area measurement method was conducted between 21 and 23 January 1999. Therefore, it was natural that the average planting density of the bulbs on the subject land should be calculated by dividing the estimated total number of bulbs of 367,121 with the total cultivated area of the subject land, or 5,013.22 sq. m. On this basis, we calculate the average estimated planting density to be about 73 bulbs per sq. m. Since the dates of the stock taking at the selected sample plots were so close to the date of reversion of 16 January 1999, they could be taken to be the same as no or very minimal growth could take place in a few days' time.

15.7There are differences between the estimated average densities of the bulbs on the subject land (i.e. Table 6 and Table 7 above) and the average actual densities of all 48 sample plots (i.e. Table 4 above). This is because the average figure in Table 4 is based on some 48 sample plots whereas the figures in Table 6 and Table 7 are based on 9 samples. The overall average density of each size type of bulb in Table 4 and Table 7 is close to each other. For our analysis below, we shall use the figures from Table 6 and Table 7.

16.Estimates of the number of bulbs and flowers in the projected harvests

This is one of the most important issues to be considered and determined by us. This is also one of the areas where the parties' horticulture experts had major disagreement. Before analyzing their differences, it is necessary for us to summarize the adopted figures and assumptions used in their assessments. We shall therefore firstly summarize the estimates of the number of bulbs and flowers by the experts. Next, we shall identify their differences and analyze them in the light of all the evidence adduced in the case regarding the growing of BL flowers and bulbs.

16.1Based on the projected number of bulbs at the date of stocktaking (a summary of which is shown in Table 7), Mr. So adopted the opinion and assumptions of Mr. Ho in projecting the number of bulbs and flowers in the 3 harvests that could have been made by the Applicants, in the absence of resumption. His figures, shown in his revised assessment at page 375 of Exhibit No. 38A1 were extracted and reproduced in the following table: -

Table 8: Mr. So's projections of bulbs and flowers

16.2On the other hand, Mr. Hong estimated that only two harvests would be possible within the unexpired term of the existing leases, even taking into account the period of notice given. On that basis, and adopting the opinion and assumptions of Mr. Cheng, Mr. Hong estimated that for the 1st harvest, there would be a total of 62,901 flowers and for the 2nd harvest, a total of 164,766 flowers. Also, after the 2nd harvest, there would be a total of 164,766 bulbs of Extra-large, Large and Medium size type, or a total of 367,120 bulbs, if Small bulbs were included.

17.Reasons for the differences in the experts' estimates of the number of bulbs and flowers in the projected harvests

So, although Mr. So and Mr. Hong had agreed to use the figures in Table 7 as the basis of their assessments, their projections on the total number of flowers in the next 2 or 3 harvests and on the total number of marketable bulbs at the 3rd harvest are different. This is due to the use of different assumptions regarding, for example, the productivity of flower producing bulbs, the marketability of bulbs of different sizes and the number of harvests that could be undertaken within the unexpired term of the existing leases. The two expert surveyors of course relied principally on the opinion and advice of their colleagues or associates, Mr. Ho and Mr. Cheng, who, we understand, have different opinion of the appropriate assumptions that should be adopted. We shall set out below their differences, and where possible, our findings.

18.Whether medium sized bulb could produce flowers?

There was a difference of opinion between Mr. Ho and Mr. Cheng. According to Mr. Ho, 100% of the Extra Large and Large bulbs and about 50% of the Medium bulbs could produce one stem of cut flower per harvest. On the other hand, Mr. Cheng held the view that Medium bulbs were "still too young to give strong and good quality marketable flowers."

18.1Apart from the above, there was no other evidence in support of their opinion. For example, there was no evidence as to the minimum size of bulb that could produce flower. We note that both Mr. Ho and Mr. Cheng had similar background. Both previously worked in the Agricultural & Fisheries Department, and had experience of assessing crops including all sorts of flowers. However, neither of them had actually grown BL in the same open field environment as the Applicants did. So, on this issue alone, we cannot easily say which one's opinion should be preferred. We think that we will have to consider the evidence of these two horticulture experts in other areas before we can make up our mind on this issue.

19.Whether a smaller sized bulb will grow into the next size category after one year?

Both Mr. Ho and Mr. Cheng agreed that the BL bulbs in the subject land would grow larger, and in theory, would grow into the next size category in about a year's time. This also matches the other evidence we heard that the BL bulbs would in suitable condition generally grow until they reach maturity. We therefore accept this common assumption.

20.When should division take place and when will the cycle of births of new bulblets stop?

According to Mr. Ho, a medium sized bulb could give birth to a small bulb every year, whilst bulbs of large and extra large size could reproduce 2 or 3 bulbs every year respectively. All these additional growth of smaller bulbs by a bulb of medium size or larger took place alongside with the growth of the bulbs themselves. Mr. So, based on the above said assumption, estimated in his amended assessment that, with the exception of the first harvest, the number of small bulbs was calculated as to be the sum of (i) 3 times the number of Extra-Large bulbs in the previous year, (ii) 2 times the number of Large bulbs in the previous year and (iii) 1 times the number of Medium bulbs in the previous year. It was on this basis that Mr. So estimated that in the 2nd harvest and 3rd harvest, there would be 230,280 and 594,788 small bulbs respectively.

20.1In addition, Mr. So assumed that as at the 2nd harvest, the total number of bulbs would exceed the maximum number that could be allowed for in the existing cultivated area. Therefore, division would be needed. However, Mr. So's revised assessment did not spell out at the time of division at the 2nd harvest, how many bulbs (and of what sizes) were divided and taken away to make room for the bulbs remaining in the field. From the amended assessment in page 378 of Exhibit No. 38A1, there was no such indication at all. In fact, as we follow the assumptions spelled out at the footnotes and the assumed quantities and types of bulbs at the 2nd harvest and the 3rd harvest, all we can find is that the number of bulbs of different categories were the maximum number that could be obtained by applying the assumptions adopted by Mr. Ho in the previous paragraph. There was no deduction of bulbs (not even Small bulbs) at all on account of the fact that some bulbs were divided and taken away. So, we find that this is an obvious inconsistency between the "division" assumption made and the actual projected figures put forward in Mr. So's amended assessment.

20.2In Mr. So's amended assessment, it was also assumed (No. 12 of the footnotes) that "As the 3rd harvest is the last harvest, no division will be carried out despite the total number of bulbs exceed the maximum number allowed for the leased area." And, No. 11 of the footnotes stated that, "As at the 3rd harvest, the whole leased area has to be used for cultivation as the existing cultivated area has been saturated. The leased area, instead of the existing cultivated area, would thus be used for calculation of costs of fertilizer and pesticides." What we can infer from the former statement is that, even assuming that there would be a 3rd harvest, if the total number of bulbs during the year from the time of 2nd harvest to 3rd harvest exceeded the maximum density that could be allowed for on the land, no division would be carried out, as a result of which all the bulbs would not have an optimal environment for growth during the year. We think that one does not have to be an expert to know that all plants require minimum space, water and nutrient for survival, not to mention the growth of the plants and the blossoming of flowers from the plants. In this connection, we note that according to Mr. So, the total number of bulbs, small ones included, as at the 3rd harvest would be 1,192,189. This equates to a density of 238 bulbs per sq. m.

20.3Besides, we find it difficult to understand why, without sufficient justification, Mr. So chose to assume that all of a sudden, the Applicants could make use of all the leased area during this year, bearing in mind that it was commonly agreed that based on on-site survey, only roughly about half of the leased area were used for the cultivation of BL. Since this is also another important difference between the parties, we have considered this issue earlier in this Judgment. We repeat ourselves here that we do not agree with Mr. So and the Applicants' submission that this was feasible, given the evidence adduced in this case.

20.4Mr. Cheng agreed in principle that each of the Large bulbs and the Extra-large bulbs can reproduce 2 and 3 bulblets respectively; however, "the multiplication will stop at a point where planting is too overcrowded". He also added, "Then only the larger and stronger bulbs will keep on growing and the weaker ones will stay dormant waiting for division."

20.5Summing up, we have grave reservations on the mechanical application of Mr. Ho's stated reproduction abilities of the BL on the subject land with reference only to his suggested maximum density and the actual planting densities (as revealed by the sample plots) but without paying due regard to the optimal planting density. We remind ourselves that in the determination of compensation in this case, we are not concerned, solely with the single issue of the quantity of plants, bulbs and flowers. The law requires us to determine the compensation payable by the Respondent to the Applicants. That includes the loss of profits and the loss of stock. Also, there is no dispute that the compensation for these two items be assessed on the basis of the actual market values of the flowers and bulbs that could have been produced, marketed and sold in the market. Therefore, the quality of the plants, bulbs and flowers are all issues of significance.

20.6Unfortunately, we had opposing opinion from the two horticulture experts on the state of the BL plants in the subject land. On the one hand, we understand that it was Mr. Ho's opinion that the maximum density of 100 bulbs per sq. m. under which the BL could grow at a healthy environment had not been reached for the subject land. Even if that density was reached, the Applicants could carry out division work to relieve the density. Therefore, we decide that we should, at this juncture, address the issue of the maximum optimum planting density for the BL bulbs. We also decide that by implication, the maximum density for the BL bulbs must also be the same and the maximum and optimum density for the healthy growth of the BL bulbs, and eventually the plants including the flowers, or else the term, "maximum density", by itself is meaningless. Before that, we shall consider below whether there should be a third harvest in the assessment of the loss of profits due to the resumption as this affects the number of years of projection of the planting.

21.Whether the loss of profits from a 3rd harvest of flowers should be allowed?

We note that Mr. So agreed with Mr. Hong as to the remaining terms of the existing leases of the lots in the subject land. They were 533 days for Lot 157(P) in D.D. 106 and 502 days for other lots. It was also the Applicants' case that before the date of reversion in January 1999, Chan Chuen was able to sell some flowers in late 1998 since those flowers came out earlier than usual. So, around the time of reversion, the Applicants lost the prospect of receiving the net profits from the 1st harvest. One year later, it would be the 2nd harvest. The parties agreed that, if not relocated, the Applicants would suffer loss of the net profits from the 2nd harvest. However, Mr. So then did not exactly explain how the Applicants could be able to have a 3rd harvest in the remaining few months' time of the leases since BL plants, could at most only flower once a year.

21.1Although the Applicants submitted that Chan Chuen had the ability to control the blooming season of BL flowers, there was no evidence that he actually had the ability to change slightly the blooming period of BL flowers, not to say moving it forward by a number of months. On the other hand, we think that although one could schedule a holiday bloom of BL flowers; however, it would usually require special efforts in carefully controlling the temperature and humidity. However, it would be almost impossible for Chan Chuen or any other person to change either of these two factors in the open field. Therefore, we find that we should only allow two harvests for the purpose of assessing the loss of net profits to the Applicants.

22.What is the maximum planting density of BL plants?

Mr. Ho gave opinion that the maximum planting density of BL could be 100 bulbs per sq. m. However, he did not spell out the size of the bulbs when he gave this statement of opinion in his report. What he said was, "the maximum planting density should not exceed 100 bulbs / sq. m. Otherwise, division is necessary." He also said that, "Usually 4-5 bulbs are planted into well-prepared soil to form a clump. It takes a few months to mature and the season for full bloom is Spring. Each bulb will produce one piece of flower after first year of planting and another flower in each of the subsequent years." As to the growing condition of the BL on the field, including the subject land, he reported that, "their planting spacing / distance was proper and in good order."

22.1Mr. So added that he accepted Mr. Ho's suggestion of the maximum density of 100 bulbs per sq. m. after considering that "a planting density as high as 104.24 bulbs / sq. m. is recorded in the sample plot". This reasoning is by itself very questionable. The purpose of having a site survey involving a large number of sample plots was to find out, as far as practicable and fair to the parties, the overall actual planting density on site, not just to find out the highest density of a particular sample plot on site. We cannot understand at all the rationale that since a certain high density was achieved in one out of 48 sample plots, one must assume that that particular density should be taken as the maximum density for all the land. This is because when we consider this issue of maximum density, we are not considering simply whether someone could plant such and such quantity of bulbs into the land, we also have to take into account the viability of such density as well. There is no point in achieving a certain density if that density is not leading to a good environment for the plants in question. For this reason, Chan Chuen, being an experienced farmer, should have planted the BL bulbs to the maximum and optimum density on every part of the land, but not restricted to a certain portion of the land. Granted that the plants may grow differently under the same condition and that the degree of growth of bulbs themselves and the new bulblets are different, thus giving rise to different densities at location of various sample plots at the time of survey. However, it does not make sense to us that Chan Chuen did not make full use of all the cultivated land if he was a capable farmer and was making rational decision. Therefore, the use of the overall actual density for the all the sample plots is a much better indicator of the maximum optimum density for the land under cultivation. Mr. So's suggestion of using a certain density of a particular plot as the maximum optimal density, but not to use the average of all the sample plots cannot be right.

22.2On the other hand, Mr. Cheng reported that, "based on my field observation during the physical bulb counting exercise, many of the bulbs in a clump within the high density sample plots (as high as 104.24 bulbs / sq. m.) were either squeezed together or overlapped one another in soil. The abnormal planting in terms of yearly open field commercial cultivation would lower the land use efficiency and productivity. It could allow only the stronger bulbs in the clump to survive while the remainder would have to stay dormant." When commenting on Mr. Ho's suggested maximum planting density of 100 bulbs per sq. m., Mr. Cheng pointed the obvious damaging effect to the BL plants if cultivated at such a high planting density. We find try to find out if this is a reasonable proposition or not.

22.3Mr. Cheng also quoted from two books, one Chinese and one American, the planting density of BL bulbs. In the Chinese book, it was stated that the planting space for of a bulb of Chinese origin was 15 cm x 20 cm, i.e. about 6" x 8". (We estimate that this stated density is equivalent to about 26 bulbs per sq. m. of cultivated land assuming 80% efficiency, i.e., the same basis as that used for the computation of densities in Table 9 below.) For Dutch hybrid BL bulbs, the American book recommended a space per plant of 12" x 12". Mr. Cheng in his supplementary report (page 429 of Exhibit No. 38A2) set out the results of his survey conducted between November 2000 and January 2001 regarding the popularity of growing BL among local cut flower growers. He found that there was no large scale commercial planting of BL among local growers. We do not agree with the Respondent's submission that all these information gathered by Mr. Cheng are of no useful purpose at all on the ground that they were hearsay evidence. We will not rely simply on the reported density from a book quoted by one witness. But, likewise, we cannot just rely on any of the conflicting mere statements from experts like Mr. Ho and Mr. Cheng, particularly since both of them admitted that they did not have any real life experience of cultivating BL in open space on such a large scale. Neither had they closely observed open field planting of BL of similar scale before. We find that the experts were actually obliged to research the market to find out what was happening elsewhere in Hong Kong, apart from the situation in this case and in other similar cases, most of which also affect Mr. Chan Chuen, one of the Applicants in the present case.

22.4We find that we still lack sufficient evidence in other existing market gardening farms in Hong Kong to support a certain maximum optimum density for the growing of BL, when they were grown in open field as in the present case. We understand that this was because the open field growing of BL in large-scale commercial operation was not common in Hong Kong. Chan Chuen also admitted that he thought of the concept himself, hence setting up his joint venture businesses with a large number of partners in Tin Sum. Al these joint ventures, incidentally, including this case, were the subject matters of compensation claims. The evidence from all sample plots shows an overall average planting density of 62 bulbs per sq. m. By comparison, the average planting density on sample plots located within or adjacent to the subject land was found to be 73 bulbs per sq. m. (see Table 7 above). If these sample plots were owned by and operated by different independent parties, and there was evidence of the type and quantity of flowers produced in these plots, then there is obviously no problem in adopting these actual average densities as to be close to the maximum optimum density.

22.5However, since we know that Chan Chuen was a related party with vested interests, in most if not all the sample plots, it is prudent to say that the actual average planting density achieved in all these plots might not necessarily provide an objective guide to the maximum optimum density for the growing of BL bulbs. It might be the case that in all of the land related to Chan Chuen, they were planted with BL bulbs that exceeded the maximum optimum planting density. We find that we cannot rule out this possibility. This is particularly so for several reasons. Firstly, it is common ground that all these land or at least an overwhelming majority of these land fall within the boundary of resumption for West Rail. Bearing in mind that there were over 20 claims, and the land involved a large number of joint ventures and leases with so many landlords, we find that there is no doubt that Chan Chuen deliberately chose certain locations to grow his BL bulbs and plants. Of course, this by itself will not affect the rights of Chan Chuen and his partners to lodge claims. What these infer is that Chan Chuen may not be so concerned with the optimal planting density of the BL bulbs. Secondly, whether it was a sheer co-incidence or not, we understand that there were no harvest of flowers on any of these plots that had been evidenced by the party requiring the land, the KCRC although the latter had been keeping watchful eyes on the land within the resumption boundary since the gazetting of the resumption. Finally, it was also not denied by the Applicants that they were taken by surprise the change in the basis of assessing compensation of BL as a crop, from the ex-gratia basis, which was mainly computed on the basis of quantity grading, to the actual and projected loss basis. And it was only with the latter basis that the parties were really concerned with the actual optimal planting density.

22.6In summary, there is the absence of any objective evidence as to the optimum planting density of BL in open field in Hong Kong. The 2 horticulture experts had different views on the state and the density of the BL plants actually found in the subject land. Besides, we find that the acid test of whether an optimum planting density has been exceeded is whether the BL bulbs will give rise to good quality flowers. In this case, we do not have sufficient evidence to say that the BL bulbs were grown in such a healthy environment, that each and every one of the BL bulbs, beyond a certain size category, produced flowers. We cannot agree without further evidence that the average overall actual density achieved in the sample plots must necessarily be the maximum optimum density for the growing of BL as a plant with a view of producing flowers. Therefore, we decide that we should try to find out what sort of density Mr. Ho was talking about when he said that the maximum density was 100 bulbs per sq. m.

22.7We set out below in Table 9 the results of our analysis of the estimated density of the BL plants assuming certain sizes of bulbs and spacing between the bulbs:

Table 9

* D = [1 sq. m. x 10.764 sq. ft. / 1 sq. m. x 144 sq. in. / 1 sq. ft] x 80% efficiency / A2

22.8In the calculation of the variable D in Table 9 above, we have assumed an efficiency ratio in the cultivated area of 80%. In principle, we agree with Mr. Cheng that for growing BL or any other flowering plants, it is essential to have a working area. Mr. Cheng suggested that this represented about 25% of the gross cultivated area. The Applicants submitted that this would be unnecessary. We find this to be common sense, since growing BL is unlike the growing of cereal crops such as wheat or rice. It is very obvious that any prudent farmer must allow ample working space in between the BL plants. We ask ourselves, how far away can a farmer extend his arm in working on the plants, including harvesting? On that basis, we estimate that a minimum area of working space would extend to about 20 to 30%. We decide that a working space of 20%, which is very minimum for market gardening plants including BL. In fact, after looking at the site photographs produced, we do not find the existence of any regular rows of working space in the subject land.

22.9We agree that the analysis in Table 9 is our rough estimates only, in the absence of any similar calculation from the witnesses. We chose certain thresholds of space for each BL plant, which includes the average diameter of a BL bulb and the average spacing between the bulbs. The figures in Table 9 are chosen at random, and the computation of the column D is self-explanatory. We shall find out below if the analysis will throw any light on the maximum density for BL plants.

22.10We have also heard evidence from the experts that according to the survey of sample plots, they agree the average size of Extra-large bulbs, Large bulbs, Medium bulbs and Small bulbs to be in the order of over 2.5 in., 2 in., 1.25 in., and under 1 in. respectively. However, although Mr. Ho and Mr. Cheng differed in opinion as to whether a Medium bulb would have flower, both agreed that a Small bulb would not. So, when Mr. Cheng said that the maximum density of bulbs before sub-division was required was 100 bulbs per sq. m., he must have meant that the bulbs were flower-producing bulbs. It is therefore reasonable to assume that the average size of bulbs in such an eventuality was 2 in.

22.11From the above Table 9, we find that at a density of 101.22 bulbs per sq. m., the bulbs with an average diameter of 2 in. will only has an average space of 1.5 in.; alternatively, if one expects an average space of 2 in. among the bulbs, the average diameter of bulbs has to be 1.5 in. We decide that although we do not profess to be experts in horticulture before we can conclude, based on our common sense, that either of these alternatives will leave so little space that the growing environment for the BL bulbs and plants must be very unsatisfactory. No doubt, the very little space will affect the ability of the bulbs to give rise flowers too. Therefore, we conclude that Mr. Ho's opinion of the maximum density of BL bulbs is not reliable at all.

22.12In addition, we find from Table 4 and Table 7 above that the actually achieved average planting density of all sample plots and the sample plots located in or close to the subject land, at 62 and 73 bulbs per sq. m. respectively, were very high. However, according to Mr. Cheng, the area of cultivated land at the time of joint survey was measured on a gross basis, i.e., without any allowance for working space in between rows of plants, so Mr. Cheng suggested that in estimating the "compensation density" of the plants, such a working space, as a percentage of the total cultivated area, should be allowed in the computation to work out a net density of the bulbs on the subject land, excluding the working space. He suggested the percentage to be 25% (page 178 of Exhibit No. 38A1). We note that the sample plots were in sizes of between 4 ft. x 4 ft. and 13 ft. x 10 ft. although we do not know on what basis were they chosen. However, it appears to us that Mr. Cheng's reasoning is sound. Therefore, for comparison purposes, the density achieved by the sample plots should be adjusted to reflect the need to provide a minimum working space in the field for the growth of BL plants. We will use our adopted 20% instead of Mr. Cheng's suggestion of 25%. Hence, the actual densities attained by all the sample plots, on the same basis as that calculated in Table 9, is equivalent to 62/(1-20%), or 77.5 bulbs per sq. m. of net cultivated area. Similarly, the actual density attained by the sample plots located at or adjacent to the subject land, on the same as Table 9, is equivalent to 73/(1-20%), or 91.25 bulbs per sq. m.

22.13We find from Table 9 above that the densities arrived at in the last paragraph would suggest that the total dimension of the average diameter of a bulb and the spacing between the bulbs would be only about 4 in. or less. This figure suggests to us that we have no doubt that the subject land, as well as all the land covered by the sample plots were very densely planted. This, we note, also supports Mr. Cheng's statement that in his field survey, he found that "many of the bulb were either squeezed together or overlapped one another in soil". Also, this contrasts with Mr. Ho's statement in his report that, for the BL bulbs, "their planting spacing/distance was proper and in good order." Hence, all in all, we conclude that Mr. Ho is not a credible witness.

23.Tribunal's valuation of the loss of profits

Following the commonly agreed principle and method of valuation of the two expert surveyors, we assess the loss of profits to the Applicants, in the following table: -

Table 10: Valuation of Loss of Profits

24.Estimates of the variables in the valuation of the loss of profit

We follow the sequence of the valuation in Table 10 in discussing the reasons for the choice of various variables.

25.Estimates of quantity of flowers

We have said earlier that Mr. Ho and Mr. Cheng differed in opinion as to whether a Medium bulb would give rise to flowers. However, we find from our analysis of the planting density of BL bulbs that Mr. Ho is not a credible witness. Therefore, we adopt the opinion of Mr. Cheng that, on the whole, a Medium bulb will not give rise to flowers, not until it grows to the next category, a Large sized bulb. We also decide to adopt Mr. Hong's estimate of the number of new bulbs in the 2nd harvest, in addition to his estimates of the number of flowers in the 1st and 2nd harvests. We understand that Mr. Hong adopted Mr. Ho's opinion in computing his estimates

25.1Also, we have already decided earlier that only 2 projected harvests could be allowed in this case. Therefore, since there is no need to estimate the profits from the projected 3rd harvest, we do not have to decide when did the growth of new bulblets end and the thorny question of whether, when and how the division would be carried out.

26.Estimate of sale price

We have decided in the earlier part of this Judgment that the BL bulbs and flowers found in the subject land are of Chinese variety. We find that the market survey conducted by Mr. So's assistant only covered the retail prices of BL bulbs and flowers of Dutch origin. This was verified by a similar survey conducted in June 1999 by Mr. Hong's colleagues (page 328 of Exhibit No. 38A1). Since it was commonly agreed that the prices of these BL bulbs and flowers of Dutch origin were much more expensive than their those of Chinese variety, so the Applicants' market survey does not assist us in the estimate of unit sale price of either BL bulbs or flowers in the present case.

26.1Chan Chuen gave evidence that he had sold to Wong Chau Kwong the BL flowers grown from the subject land in early and late 1999. However, we have already considered his evidence in details but found that we cannot believe in what he said. There was therefore no acceptable evidence from either the Applicants or their experts regarding the retail sale prices of BL flowers and bulbs of Chinese variety.

26.2Mr. Hong said that because of the limited demand for cut flowers of BL of Chinese variety, they were not able to find their retail sale prices. Even Mr. Cheng in his market research was only able to find the sale prices of BL bulbs of Chinese variety. These bulbs, depending on size and packing, were sold from $1.2 to $3.0 per bulb (page 243 of Exhibit No. 38A1). In addition, Mr. Hong said that he had received a receipt from a Mr. Fung Chi Fai saying that the latter had purchased 80,000 bulbs at $1.5 each on 14 June 1998 (page 244 of Exhibit No. 38A1). Based on the ratio of unit price of BL bulbs and flowers of Dutch origin and the sales evidence of BL bulbs of Chinese variety, Mr. Hong concluded that he would adopt unit price of $0.80 per cut flower and $1.35 per bulb in the subject case.

26.3Mr. Cheng stated in his supplementary report (page 179 of Exhibit No. 38A1) that he got a quotation from a private nursery, Chan Ho Farm in Pat Heung, Yuen Long. Mr. Chan, the owner of the nursery quoted him a price of $3.00 per plant potted in plastic bag. Mr. Cheng also said in the same report that "In a bi-monthly flower magazine published on 1 September 2000 by the Canton Province Flower Association, I also found some advertisements listing out quite a number of local mail order flower prices. Barbados Lily is on the lists ranging from RMB 0.80 to 2.00 for a bulb or from 1.00 to 1.50 for a plant."

26.4The above summarizes all the evidence available to us regarding the retail sale price of BL flowers and bulbs of Chinese origin. We conclude that based on the scant available information adduced in this case, it would be reasonable for us to estimate the unit retail price of a BL flower in the present case to be about $2.5 per cut flower.

27.Estimate of wholesale discount

We adopt the wholesale discount used by Mr. Hong. We do not agree that the 40% allowed is high, bearing in mind that it reflects two elements, firstly, the normal wholesale discount to reflect the difference between retail price and wholesale price, from flower growers to wholesalers and secondly, the large supply of some 2.4 millions BL flowers from this case and other competitors.

28.Estimate of wastage

Mr. So used a wastage allowance of 5% for the flowers in each harvest. Mr. Hong adopted a 25% wastage factor to account for the following factors: harvest loss, loss in post harvest transportation and storage, loss due to the usual natural risks such as heavy downpour and typhoons that could all affect the growth and yield of the flowers. Also, Mr. Hong stated that according to Mr. Cheng, the high average planting density in the subject land would reduce the quality and yield of the flowers.

28.1We note that in Mr. Hong's assessment, he had assumed that each Extra-large and Large bulb would produce a flower. Hence, having regard to this proposition and the factors listed out by Mr. Hong, we find that Mr. Hong's allowance was in our opinion very generous to the Applicants. The Respondents' allowance of a modest 5% was ridiculously low. As such, we adopt Mr. Hong's figure.

29.Estimates of various costs

For the first harvest, we decide that since it was almost the harvest season, we should not allow for the full costs incurred. It was the Applicants' case that the best time for the sale of the flowers were the Chinese New Year, Valentine's Day and Ching Ming Festival. Also, these festivals matched with the flowering days. Therefore in the absence of other information, we estimate that the flowers should be harvested within the first few months of 1999. Hence, roughly only an average of 2 months' regular costs should be allowed.

29.1The costs that had been expended before the date of reversion should not be allowed. Since the Applicants did not seek for the compensation for the abortive costs already incurred in their farming operation, the 1st harvest of which had been thwarted by the resumption in January 1999, we find that these abortive costs should not be deducted from the gross revenue in the calculation of the profits payable to the Applicants. Otherwise, the Applicants would be penalized and would not have a fair compensation. For the other costs (i.e. harvest labour and transportation costs) relating to the 1st harvests, the full costs should be allowed.

29.2The situation is different for the second harvest. All the costs that had to be incurred before the Applicants were able to reap the net profits from the second harvest would have to be deducted.

29.3Rent- For reasons stated above, we decide that there is the need to deduct the rent for 2 months in the computation for the 1st harvest. However, as to the 2nd harvest, a full year's rent will be deducted. Since the Applicants will be compensated for the loss of his leasehold interest, the rent to be deducted has to be the market rent. Otherwise, the Applicants will receive double benefits.

29.4Cost of bulbs - Since the bulbs were placed into the subject land at least about a year from the date of resumption, its cost should not be deducted in the calculation of the net profit for the first harvest. Similarly, since the Applicants did not have to buy new bulbs for the growth leading to the 2nd harvest, the bulbs' costs should not be deducted in the computation for the 2nd harvest.

29.5Fertilizer- Both experts agreed the costs of fertilizer to be $1.46 per sq. m. We adopt this estimate.

29.6Pesticides- Similarly, both experts agreed the costs of pesticides at $1.29 per sq. m. We also adopt their estimate.

29.7Seasonal labour cost- According to Mr. Ho, this cost item was not needed as the work was normally done by the cultivator himself and his family members. On the other hand, Mr. Cheng suggested that this seasonal labour, at a rate of $21.43 per sq. m., should be allowed for in the costs estimates. We find that we agree with Mr. Cheng's opinion and hence, Mr. Hong's valuation. Even though the Applicants' family members might have provided the required seasonal labour in this flower growing business, the costs of such labour must be taken into account; otherwise, the net profits of the Applicants' business in this case will be grossly exaggerated. As an analogy, should we not include the costs of labour even though this is a business, for instance, a manufacturing or retail enterprise employing a large number of relatives as its employees? We find that it is obvious that we have to allow for the labour cost.

29.8Harvest labour cost- We find that Mr. Cheng is a more creditable witness. We decide to adopt Mr. Cheng's estimate of the harvest labour cost, at the rate of $900 per 2,000 flowers.

29.9Harvest transportation cost- Similarly, we decide to adopt Mr. Cheng's estimate, at the rate of $200 per 2,000 flowers.

29.10Division cost- No division cost has been allowed since the Applicants would dispose of the marketable bulbs after the 2nd harvest. If this item has to be used, we will also use Mr. Cheng's estimate as it appears to us that his figures were thought out in more details than the Applicants'.

30.Computation of net profits from 1st and 2nd harvests

Mr. So and Mr. Hong agreed on the formula of calculating the estimated net profits from the harvests of flowers, which was the difference between the estimated revenue and estimated costs. We accept the simple formula with the exception that we prefer to estimate each year's net profit separately.

30.1Therefore, the estimated loss of profits from the 1st and 2nd harvests are $7,725 and -$59,967 respectively. Hence, compensation in the sum of $7,725 for loss of profit from 1st harvest is payable to the Applicants.

31.Tribunal's valuation of loss of stock

The parties' experts could not agree on the quantity of marketable bulbs. We adopt Mr. Hong's estimated quantity..

31.1We set out below our valuation of the loss of stock to the Applicants:

Table 11: Valuation of Loss of Stock

32.Unit sale price of BL bulbs

We have previously covered the market price data for BL bulbs and flowers of Chinese variety. Mr. So adopted an unit rate of $40 per bulb whilst Mr. Hong adopted a rate of $1.35 per bulb. We adopt Mr. Hong's projected quantity of 164,766 bulbs for the purpose of assessment. We further decide, on the basis of scant evidence available, that the average retail sale price of a bulb in the present case is $3.00.

33.Other matters on the loss of bulbs

We also decide to adopt Mr. Hong's wholesale discount of 50% against Mr. So's adopted figure of 40%. In addition, we do not agree with Mr. Hong that the Applicants, because of his knowledge of resumption prior to commencement of their planting business, should not be entitled compensation for the loss of stock. On the issue of relocation and mitigation, we have already considered the matter in details and decided that the compensation to the Applicants in the case be assessed on the basis of total extinguishment.

33.1However, we decide that the compensation amount for the loss of stock has to be discounted from the date of 2nd harvest to the date of reversion. In the absence of information, we roughly adopt a discounting rate of 8%, for a period of 1 year and 3 months.

34.Orders

(1) Accordingly, we order that the Applicants' application for compensation made on the basis of total extinguishment of their business.

(2) We further order that the Respondent pays the Applicants compensation in the sum of $259,627 (Hong Kong Dollars Two Hundred And Fifty-nine Thousand Six Hundred And Twenty-seven), comprising the following: -

Item of Claim	Compensation
Loss of leasehold interest	$27,417
Loss of profits (from 1st harvest)	$7,725
Loss of stock	$224,485

(3) Finally, 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.

Representation:

The Applicants : represented by Messrs. Chan & Tsu, Solicitors.

The Respondent : represented by Secretary for Justice.

Remarks:
Appeal by the 1st and 2nd Applicant to Court of Appeal. Appeal dismissed. Please refer to the appeal judgment of CACV000081/2003.