Szeto Chop and Others v. Chute Investment Co Ltd

LDBG000004/1981

IN THE LANDS TRIBUNAL OF HONG KONG

Application Nos. H.B. 2-4/81

TRIBUNAL: M.W. Phillips, Esq. Member.

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JUDGMENT

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1. These are applications for compensation to be determined pursuant to sections 18 and 18A of the Building Ordinance Cap. 123. They were lodged subsequent to shoring being placed in a prewar building at 207 Des Voeux Road West by the respondent company in connection with its demolition of the adjoining premises in June 1980. The hearing of this case has been deferred by consent since mid 1982 in the expectation of the shores being removed within a reasonable period and a complete account of costs and consequential losses becoming available.

2. At the date of hearing the shores still remained. As observed in the earlier case before this Tribunal of Chan Mui v. Cute Investment Company Limited HB 2/80 also concerning an application by a tenant in the subject building, there does not appear to be any immediate intention by the respondent company, Cute Investment Company Ltd., to undertake the development of the adjoining vacant site. Chan Mui, a second floor tenant, also applied to have his case heard in advance of the shores being removed. Also, there has been no indication that the owners of the subject property intend to redevelop, and therefore the shores are likely to remain indefinitely.

3. HB 4/81

4. At the commencement of this hearing it was stated that a settlement had been reached in respect of HB 4/81, with the third applicant Lau Ming Po, trading as Kam Chee Hong, in the sum of $2,000. An order by consent was sought and I so order that settlement in this sum be made accordingly. There is no order as to costs.

5. Compensation then remains to be determined in the case of HB 2/81, Szeto Chop, the first applicant, trading as Hau Seng Cheung Kee Wine Shop in respect of the whole of the ground floor of the premises, and in the case of HB 3/81, Madam Wong Kam Sau, the second applicant, in respect of the 1st floor. Both these applicants are tenants, as was Chan Mui in the previous case.

6. HB 2/81

7. Mr. Szeto Chop trading as the Hau Seng Cheung Kee Wine Shop has for some 40 years conducted a wine and spirits retail and wholesale business on the ground floor premises. Some cigarettes, beer and soft drinks are also sold. He has lodged a claim for the sum of $36,314.80 for losses suffered from 14th June 1980 when the shores were installed up to the 13th October 1981, which is the date of his application.

8. This amount does not include any loss in rental value beyond October 1981 which is left open because the shoring had not yet been removed. Amounts for the restoration of the damaged cocklofts and stairs were also included. The shoring has still to be removed and it is therefore necessary to estimate how long the shoring may reasonably be expected to remain.

9. In the case of Chan Mui it was considered that the building was ripe for redevelopment and at the most it would probably be demolished for such redevelopment in another 2 or 3 years' time. In June 1983, for Chan Mui's case I allowed a further 3 years, and for the sake of consistency, I propose to make a similar allowance in this case. That is that the shoring may be expected to remain until June 1986 when it will either be removed or more than likely the building will be demolished to make way for a new development.

10. The space taken up by the shoring affects some 5.95 m² of actual business space, about 2.45 m² of the kitchen and 1 m² of cockloft space. The total area of the premises is about 75 m² including cocklofts, but excluding the covered and open yards which add about another 11 m² of space. Therefore about 12½% of the area within the building is lost due to the shoring. Athough under the legislation the permitted rent is greater than that being paid, it is most doubtful that these premises could reasonably let at the rent so permitted. From April 1983 the rent has been $2,430 per month which on the evidence adduced ignores the existence of the shoring. Therefore, if it is taken that 12½% of the rental value is lost, in broad terms this should be a loss in the region of $300 per month. But in general the different parts of a shop have different values and the space lost from the cockloft, kitchen or the rear part of the store would not be as valuable as that in the front or main business area. The nature of the business conducted on these premises is mainly wholesale. This, together with the age of the building suggests that any breakdown of value might be somewhat unrealistic. However as the largest area affected by the shoring is in the shop itself, an allowance of some 10% in rental value appears, to be reasonable. That is at present some $243 per month rental value is lost.

11. When the shoring was erected in 1980 the rent was only $367.50 per month. It was increased in April 1981 to $1,260 per month, in April 1982 to $1,620 per month until again in April 1983 it reached its present level of $2,430 per month. Therefore the rental value lost was about $37 per month in 1980, $126 per month in 1981, $162 per month in 1982 and $243 per month in 1983.

12. As stated previously even without the shoring it is doubtfu, that these premises could command a rental as high as that permitted under the present legislation and therefore, in the light of the present market it would be mere speculation to suppose further increases up to June 1986. The loss in rental value due to the shoring from April 1983 to June 1986 will be assessed on the basis of the current loss of $243 per month.

13. The rental value lost up to the date of hearing in late November 1983 plus interest at 12% is assessed at $6,700. Again adopting 12% the present value of the anticipated rental value which will be lost up to June 1986 is assessed at $6,100.

14. The total loss in rental value is therefore assessed at $12,800.

15. Evidence was given concerning loss of profits due to the reduction in business created by the presence of the shores. This evidence was far from conclusive and was not supported by any documentary evidence. Mr. Szeto, who is 80 years old, admitted that his business had been running down over the years and in fact has been insufficient to warrant any tax returns being made for the past 7 years. The business is in the main wholesale with the retail takings being under $100 per day.

16. Profitability is directly related to the outlay of which rent, particularly in this case, would be a major part. It would be incorrect to regard profits lost and rental value lost separately, as one has a direct relationship with the other. Having been allowed a reduction in rent the profit must increase. Thereby, profitability is indirectly compensated. In view of the lack of any substantiated evidence of business profits, I consider that, in the circumstances of this case, an award for loss of rental value will offset any loss in profits created by the existence of the shoring.

17. Other unrelated items have been claimed. Two workers were engaged unproductively for the day the shoring was installed. On the evidence I award a $100 for this item. A signboard was damaged, and has never been repaired. A cupboard and a sideboard were also damaged and have been restored to some extent by the applicant. I award $4,000 in respect of these items which, in my opinion, should have been rectified from the onset under the provisions of Section 18(4).

18. Also some structural damage has been sustained. In particular the stairs to the cockloft have been reduced in width making access difficult. Section 18(4) of Cap. 123 provides for any damage caused by shoring being erected, maintained or dismantled to be made good as soon as practicable. Obviously these are items which will have to be rectified if and when the shoring is removed. The respondent has indicated that any damage will be so rectified. It is therefore further ordered that other than those items included in this award, the premises be made good in accordance with Section 18(4). Compensation is awarded in the case of HB 2/81 as follows:

19. The respondent is to pay the applicant's costs on the District Court scale plus disbursements to be approved by the Registrar (Lands Tribunal) if not agreed.

20. HB 3/81

21. Madam Wong Kam Sau, who is the tenant on the first floor of the subject premises, claimed a sum of $5,454 up to the date of application allowing for further compensation to be paid for losses after this date. The claim includes amounts for repairs and restoration as well as loss of rental value. She gave evidence of having to move out when the shoring was placed in the building in June 1980. She has continued to pay the rent and thereby retained the tenancy in expectation of the shores eventually being removed and the premises restored to its previous condition. Two shores were placed on the stair landing outside the front door and also the kitchen door which is opposite. The positioning of a shore outside, together with another just inside the front door of the flat has made access to the main part of the flat extremely difficult. The other shore on the landing has made it impossible to close the kitchen door. I have viewed the premises and noted that, as well as the access problem, the presence of the shores in the flat has reduced the useable space and also completely cut off the access to one of the cocklofts.

22. In the circumstances of this case I can only agree that it was reasonable for Madam Wong to move out. She has left furniture in the flat and I accept that should the place be restored she has every intention of returning to reside there. That she is sharing a flat in Robinson Road with her unmarried son is not particularly relevant as any rent she contributes is in respect of that flat alone. However, she has lost value in respect of the rent she has continued to pay to retain her tenancy at 207 Des Voeux Road and she is entitled to be compensated for this loss as well as the future loss in rental value which may be expected up to June 1986. June 1986 is the date determined as that at which the shoring may reasonably be expected to be removed or the building demolished to make way for redevelopment.

23. However the question is whether the premises should be considered to be completely uninhabitable or not. It should be possible to rectify the problem concerning the kitchen door and it is possible to gain entry to the main part of the flat, although with some degree of difficulty. Although I believe Madam Wong was completely justified in moving, to alternative premises, I cannot accept that the flat is uninhabitable and has not retained some rental value. In fact, Madam Wong's claim at a loss of rental value of $106.50 per month is not for the total rent.

24. Disregarding the cocklofts the flat has an area of about 54 m². The shores have reduced the useable area by about 15%. However, in addition, the inconvenience created by the positioning of shores just outside and inside the front door would cause a further loss in value. I consider the rental value to be reduced at least by a total of 25%.

25. When the shores were erected in June 1980 Madam Wong paid a rent of $213 per month. From April 1981 the rent was increased to $240 per month. From April 1982 it was further increased to $320 per month and finally to $480 per month in April 1983.

26. Although the permitted monthly rent under the Landlord and Tenant (Consolidation) Ordinance Cap. 7 is greater than $480, the legislation does not allow any rent in excess of that prevailing on the market. I do not consider, given the age and condition of these premises, that the market could be much in excess of the $480 presently paid even if the shoring were removed. I therefore propose to make any assessment of future loss in rental value on the basis of the $480 per month presently paid.

27. Loss in rental value from June 1980 to April 1981 is therefore $53 per month; from April 1981 to April 1982 it is $60 per month; April 1982 to April 1983 it is $80 per month and for April 1983 to June 1986 it is $120 per month. Allowing interest at 12%, the loss in rental value up to the date of hearing is assessed at $3,575. Again adopting 12%, the present value of the expected loss in rental value up to June 1986 is assessed at $3,025. The total loss in rental value is therefore assessed at $6,600. This assessment is made on the basis that the kitchen door and two broken windows have been repaired in order that the premises are made habitable. Therefore I allow the sum of $750 as claimed for these items which should have been rectified as soon as practicable under Section 18(4).

28. The respondent has undertaken to make good any further repairs if and when the shores are removed and this award is made on the basis that such repairs and restoration are carried out in accordance with Section 18(4). Compensation is therefore awarded in the case of HB 3/81 as follows:

29. The respondent is to pay the applicant's costs at the District Court scale plus disbursements to be approved by the Registrar (Lands Tribunal) if not agreed.

Dated this 15th day of February, 1984.

Representation:

Mr. Parrish Kwan of Chung, Kwan, Chan & Evans for the Applicants.

Miss F. Ma of S.P. Ma & Co. for the Respondent.