Panhard Ltd v. Yeung Chun Leung and Others

LDPA000051/1983

Landlord and Tenant Part I - exclusion order from the provisions of Part I to allow redevelopment - review of tenants' compensation award for business disturbance - compensation is for costs and consequential losses incurred or expected in shifting a business to similar premises - costs incurred in setting up the business in the suit premises can only be used as evidence of those expected costs - Section 4 Landlord and Tenant (Consolidation) Ordinance, Cap.7.

IN THE LANDS TRIBUNAL OF HONG KONG

Application No. H.E. 51/83

IN THE MATTER of Part I of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7

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

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REVIEW DECISION

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1. On the 1st June 1984 this Tribunal ordered that, to allow for their redevelopment, pre-war premises at 483 to 497 King's Road, Hong Kong were to be excluded from the provisions of Part I of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. This exclusion order was made under Section 4(2) and was subject to conditions set out in the order which included the payment of compensation to the disposed tenants.

2. In respect of H.E. 51/83 the tenants Yeung Chun Leung and Yeung Kwok Leung, who are brothers trading as the Fan Shun Cheung Fashion Company and the Shanghai Fur Company, were treated, for the purposes of the award of compensation, as one entity. The Tribunal awarded them the sum of $70,000 as compensation. The business is a clothing store operating from a ground floor shop premises at No. 487, King's Road. The business includes the manufacturing and sale of furs in the winter season.

3. On the 19th and 21st of June 1984 the tenants applied separately for the award to be reviewed under Section 11A of the Lands Tribunal Ordinance, Cap. 17. These applications sought leave to present additional evidence concerning the costs incurred in setting up the premises for their business, apparently only some 2 months prior to the applicant company Panhard Limited purchasing the premises for redevelopment in June 1983. The review was heard on 6th July 1984 and once again the two applications ware amalgamated and treated as one claim. The additional evidence was admitted.

4. Counsel for the tenants referred the Tribunal to the case of Scaiffee Ltd. v. Chow Hei-chuen and Others (1983) H.K.L.T.L.R. 11 which sets out principles relating to tenants' compensation. Although this case dealt with compensation payable to tenants in respect of the provisions of Part II of Cap. 7, the same principles apply to Part I which, similarly to Part II at the time of that decision, sets out no guideline as to how such compensation is to be assessed. The principles to which he specifically referred, and, which were held in that case were:-

5. Section 53A(4) of Part II has since been amended so that the tenants' interest is now dealt with under the new subsection (i) by the provision for the payment of a sum equivalent to twice the rateable value of the premises and subsection, (ii) and (iii) set out how disturbance is to be assessed.

6. No similar provisions exist in Part I so that the tenants' interest as determined in the Scaiffee case can now apply only to Part I. While disturbance may be determined without reference to the Part II provisions, the guidelines set out therein may wall be reasonably applied as they constitute an approach which is in accordance with the statement on page 1053 in Brown's "Encyclopedia of Compulsory Purchase and Compensation, Part I" under the heading of "Disturbance":-

"Thus in general any loss sustained by a dispossessed owner which flows from a compulsory acquisition may properly be regarded as the subject of compensation, provided, first, it is not too remote and secondly, that it is the natural and reasonable consequence of the dispossession of the owner. "

7. It may be taken that, with respect to disturbance, the same principles apply to a tenant under an exclusion order as they do to an owner occupier under a compulsory acquisition order.

8. With respect to the submissions made in this case I am unable to accept the argument submitted on behalf of the tenants that they are entitled to the costs they incurred in setting up the clothing shop which they now must vacate. They are entitled to the cost of reinstating their business in similar premises and any consequential losses which are incurred in shifting the business to such premises as this is the damage that follows directly as a consequence of taking of the tenancy. Counsel for the applicant company explained that the suit premises were, on the evidence available, old and in such a condition so as to require expenditure greater than that which might reasonably be expected for setting up similar premises elsewhere to a similar standard.

9. The evidence of the cost of setting up the suit premises within the last twelve months is of course invaluable evidence of what might be expected to be the cost of doing it again for a shop of about the same size in a nearby building of similar age and design. It is more than likely that the shift will be to newer premises as few pre-war buildings will be available in the King's Road area. Therefore it is only remotely likely that any of the problems associated with old premises should occur again.

10. I have carefully regarded all the items listed in the bills presented by the tenants to verify the costs they incurred. These bills show that three different companies were employed to carry out work:

11. In evidence the tenant Yeung Chun Leung said that, although some of the work done by the firm of King Fai was similar to that done by Leung Lui Kee, each job was entirely separate. It seems from the evidence King Fai carried out some decoration work but was mainly engaged to carry out electrical installation work while the work done by Leung Lui Kee effectively widened the shop front and created an extended cockloft. Leung Lui was called to substantiate the evidence given by Mr. Yeung, that the structural work he carried out was in addition to that done by King Fai. I am satisfied that had one contractor been retained for this work the cost could have been reduced. However, this evidence is useful in that it helps to determine what costs might be expected in setting up in alternative similar premises. After considering all of the evidence I have concluded that such a cost should reasonably be in the region of $95,000.

12. The tenants have claimed an amount of $65,000 which is the sum which Yeung Chun Leung paid to take over the tenancy of a Mr. Fan Shun Cheung, the original proprietor of the Fan Shun Cheung Fashion Company. While it is usual to commence business in vacant premises, in this case it appears that the father of the tenants, Yeung Cho Tak, who gave evidence at the earlier hearing, was formerly a tailor employed by Fan Shun Cheung. When Mr. Fan due to age wished to retire from the business, he agreed to allow Mr. Yeung Senior to succeed him in the business. Although the business was subsequently transferred to Mr. Yeung Cho Tak's son, he said it was really a transfer to him and he and his son carried on the business together.

13. The tenants say the transaction formed part of the cost of establishing their present business and is included in this present claim; but this amount of $65,000 cannot really be regarded as a cost now likely to be incurred in relation to setting up in alternative premises.

14. No doubt the Yeung's believed that they were receiving value for this payment. What it actually relates to is unclear other than it is probably the value of the goodwill of the business together with the apparent right to continue the protected tenancy under the firms name of the Fan Shun Cheung Fashion Company. This protection for business premises under Part I of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 expired on 1st July 1984. In April 1983 it had only a little over a year to run. Valuation evidence was led in the oringinal hearing that, for the purposes of this application, the value of such an interest should reasonably be compensated in the sun of $11,000 in respect of this tenancy. This amount was not challenged, nor could I discern any apparent weakness in the argument based on a profit rent assessment which led to this conclusion. I therefore intend as I did in the previous hearing to allow the sum of $11,000 as compensation for the tenants' interest in the premises. Any additional value in the goodwill is transferable to alternative premises.

15. In the earlier hearing Mr. Yeung Chun Leung gave evidence concerning the business turnover and monthly not profits. He also advised the Tribunal as to the number of staff employed and their respective monthly wages. In respect of this evidence I included is the award, at that time, a sum of $34,000 to cover less of business during the period of the shift to new premises including abortive wages, as well as transportation and other sundry costs. No further argument has been produced in this review concerning these matters.

16. I therefore determine on this review that the sum of $140,000 should be paid by the applicant, Panhard Limited, in respect of tenants' compensation associated with the exclusion order made by this Tribunal on 1st June 1984.

The sum is made up as follows:

17. There is no order as to costs.

Dated the 31st day of July, 1984.

Representation:

Mr. Christopher Chan of Messrs. Woo, Kwan, Lee and Lo for the Applicant.

Mr. C.M. Li of Messrs. Poon, Yeung and Li for the Respondents.