Kingearn Co Ltd v. Lee Woo-bun and Others

Case No.DCCJ 7175/1981

Court

District Court

Date29 Jul 1982

Judge—

Case Document

100%Judiciary

DCCJ007175/1981

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NOS. 7169-72, 7174-77 & 7179-82 OF 1981

________________________

BETWEEN
	KINGEARN COMPANY LIMITED	Plaintiff
	AND
	LEE Woo-bun & others.	Defendant

_____________________________

Coram: Deputy Judge Edmund Cheung in Court.

Date: 29 July 1982

------------------------

JUDGMENT

------------------------

1. In these consolidated actions, the plaintiff claims possession of the suit premises known as Nos. 22A. 24 and 26 Aberdeen Street, Hong Kong on the ground that the plaintiff intends to rebuild under Section 53(2)(c) of the Landlord and Tenant (Consolidation) Ordinance.

2. The plaintiff is a limited company. At the date of hearing, its authorized capital was $10,000 and its paid-up capital $2. The premises were purchased by plaintiff for a total consideration of $9.7 million between January and July 1981 with funds borrowed from 2 shareholders who are the only share-holders of the plaintiff company. By 2 Mortgages dated 17th February 1981 and 3rd March 1981, part of the suit premises, namely Nos. 24 and 26 Aberdeen Street, were mortgaged to Hong Nin Bank Ltd. to secure banking facilities to the total extent of $3 million. By a Building Mortgage and Building Further Charge, the whole of the suit premises were mortgaged and charged to the same bank to secure building loans totalling $5 million for the purpose of the development scheme.

3. As at the date of hearing, the plaintiff had a credit balance of a little over $42,000 in its bank.

4. On 13th July, I indicated to Mr. Wong, solicitor for the plaintiff, that I did not think the plaintiff company, as it then stood, was financially sound and financially capable of carrying out the rebuilding scheme for the following reasons:-

	(1)	The plaintiff's only assets consist of a paid-up capital of $2 in its own right. Although the suit premises are registered in the plaintiff's name, they were purchased with money wholly borrowed from the shareholders and it is still indebted to them to the extent of the cost of the suit premises. Consequently, the plaintiff cannot be said to have a substantial stake in the premises.
	(2)	If the creditors of the plaintiff, i.e. the shareholders and the mortgagees call is their loans, the plaintiff would immediately find itself insolvent.

5. At my suggestion, plaintiff has now increased its nominal capital to $10 million and allotted 10 million sharer of $1 each (less 2 shares already subscribed by the existing sharecholders) to its shareholders.

6. I would interpose here and say that had the plaintiff not done so nor taken any other measures to improve its financial situation, I would have no alternative but to dismiss the plaintiff's claim.

7. Now that the plaintiff company has a paid-up capital of $10 million, I am satisfied with its intention to rebuild and its financial capability to do so. I am also satisfied that the rebuilding will result in an increase in the number of dwelling or in accommodation for domestic use or in accommodation for other than domestic use.

8. It is common ground that all the tenancies have subsisted for more than 5 years - indeed since 1963, 1964 and the latest 1970. Under Section 53A(4)(a)(iii) of the Ordinance, the minimum amount of compensation to be awarded to the tenants shall be equal to twice the ratable value of the suit premises. The question for me to decide is what "is reasonable in all the circumstances"? The rates payable on the suit premises, like most other premises in Hong Kong, were last ascertained by the Rating & Valuation Department in 1976. Since then, the cost of living, and in particular, rental of domestic premises, has soared by leaps and bounds. Taking an annual increase of 12%, one would have an overall increase of a little over 97% over the last 6 years.

9. I have tried, in vain, to obtain guidance on the quantum of compensation from previous similar cases that came up before the Court. Unfortunately, such cases were either settled or withdrawn so that the quantum of compensation was based on agreement between the parties and not determined by the Court. I am, however, informed that such agreed compensation amounted to between 4 and 6 times the rateable value.

10. Having regard to what I have said above, the level of cost of living to-day and the location of the suit premises, I have come to the conclusion that in all the circumstances it is reasonable to award compensation to the defendants on the basis of an amount equal to four times the rateable value of the suit premises. On this basis, the amount of compensation payable to each defendant is as set out in the List of Defendants marked Ex. P20. (Amounts of compensation read out in Court)

Order

11. I would accordingly make the following order:

1. Order for possession of the suit premises on the following conditions:-\

(a)	That compensation be paid by the plaintiff to the defendants as shown on the List of Defendants (Ex. P20), payment to be made in the following manner:-
	(i)	50% to be paid within 2 months from the date of this order; and
	(ii)	50% balance thereof to be paid within 7 days of vacant possession being delivered up to the plaintiff by the defendants or any of them.
(b)	That the plans of the new building showing the number and size of any dwellings to be erected be lodged with this Court and that the new building be erected to provide that number of dwellings.
(c)	That the new building be commenced on or before and completed on or before.

2. By consent there will be a stay of execution on the order for possession until 28th January 1983.

3. Each of the defendants do pay the plaintiff arrears of rent as claimed up to 29th July 1982 and thereafter mesne profits at the rate as claimed from 30th July 1982 until vacant possession is delivered up by each defendant in manner aforesaid.

4. In accordance with Section 68B of the Ordinance, I make no order as to costs.

Dated the 29th day of July 1982.

(Edmund Cheung)
Deputy District Judge