Fook Lee Holdings Ltd v. The Secretary for Transport and Housing
Read the full judgment text of LDMR 2/2016 on BabelCite. This LDMR judgment was delivered on 21 May 2021.
1. This is an application for determination of the amount of compensation payable for temporary occupation of land under the Roads (Works, Use and Compensation) Ordinance, Cap 370 (“the Ordinance”). By a gazette notice dated 21 November 2013 (GN 6953) to facilitate implementation of “PWP Item No 6579TH – Central-Wan Chai Bypass and Island Eastern Corridor Link, a right of temporary occupation was created for some 1,480m 2 of Section A of Inland Lot No 7106 and Extension thereto below the level
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LDMR 2/2016 [2021] HKLdT 36 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MISCELLANEOUS REFERENCE APPLICATION NO 2 OF 2016 ________________ BETWEEN
________________ Before: Mr Lawrence Pang, Member of the Lands Tribunal Dates of Hearing: 1-3 February 2021 Date of Closing Submissions: 15 April 2021 Date of Judgment: 21 May 2021 ________________ J U D G M E N T ________________ Background 1.This is an application for determination of the amount of compensation payable for temporary occupation of land under the Roads (Works, Use and Compensation) Ordinance, Cap 370 (“the Ordinance”). By a gazette notice dated 21 November 2013 (GN 6953) to facilitate implementation of “PWP Item No 6579TH – Central-Wan Chai Bypass and Island Eastern Corridor Link, a right of temporary occupation was created for some 1,480m2 of Section A of Inland Lot No 7106 and Extension thereto below the level of 12 metres above the Hong Kong Principal Datum (the Temporary Occupation Area is hereinafter referred to as “the TOA” whilst the said lot (together with its extensions thereto) are collectively referred to as “the Lot”) as shown coloured purple stippled black on the Plan No HKM8529a[1]. 2.Initially, the TOA was created for a period from 26 February 2014 to 31 May 2017 in favour of the Government. Pursuant to GN 396 dated 26 January 2017, the period of creation of TOA was subsequently amended to a period from 26 February 2014 to 26 April 2017 (ie approximately 38 months) with the subject land of the TOA remaining unchanged. The Lot 3.The applicant is the registered owner of the Lot. The latter is situated on the southwestern side of Oil Street at its end towards the harbourfront. It is erected thereon a hotel known as the Harbour Grand Hong Kong (“the Hotel”) which the applicant terms it as a luxury 5-star hotel. The area in the vicinity comprises a mixture of commercial and residential/commercial composite buildings of various ages. 4.Use and development of the Lot is governed by Conditions of Exchange No 5036 dated 26 May 1954, as varied and modified by Conditions of Extension No 11717 dated 2 December 1983 and Letters of Modification dated 7 November 1986 and 14 June 2005 respectively (which are collectively referred to as “the Government Lease”). 5.Special Condition 3 of the Government Lease provides that the Lot is restricted for hotel purposes within the “Pink Area”, and non-industrial (excluding private residential, office, hotel, petrol filling station, and godown) purposes in relation to cultural, leisure and tourist-related activities within the “Pink Hatched Green Area”, the “Pink Cross-hatched Green Area”, the “Pink Stippled Black Cross-hatched Green Areas” and the “Pink Hatched Black Area” as defined in the Letter of Modification dated 14 June 2005. More particularly, pursuant to Special Condition 3(b), the Director of Lands shall have sole discretion in determining what comprises non-industrial (excluding private residential, office, hotel, petrol filling station, and godown) purposes in relation to cultural, leisure and tourist-related activities. The TOA 6.The TOA having an area about 1,480m2, has about 1,195 m2 sheltered under the Island Eastern Corridor and about 285m2 unsheltered in open area. In fact, it falls partly within the “Pink Cross-hatched Green Area” and partly within the “Pink Stippled Black Cross-hatched Green Area” of the Lot. 7.It is not in dispute that the majority portion of the TOA was the ancillary car park for the Hotel accommodating the parking and loading/unloading spaces as required under Special Conditions 54, 55, 56 and 57 of the Government Lease:
8.It is not disputed that 20 carparking spaces had been designated immediately prior to the creation of TOA and a small portion of the TOA was part of the landscaped terrace of the Hotel’s café. 9.During the Relevant Period, the said car parking facilities of the Hotel was relocated to the seaward side of the Lot temporarily (“Temporary Carpark”)[2] in order to reduce the disturbance to the daily operation of the Hotel and to comply with Special Conditions 54, 55, 56 and 57 of the Government Lease. 10.This Temporary Carpark was physically separated from the Hotel by the TOA; the hoarding erected by Government around the TOA had also completely screened the sight of the Temporary Carpark from the Hotel. This rendered the staff of the Hotel no longer possible to overlook the parking area directly from the ground floor of the Hotel building[3]. Compensation Claim 11.On 16 February 2015, Messrs Woo Kwan Lee & Lo, on behalf of the applicant, submitted its claim for compensation in respect of the TOA to the respondent for a total sum of HK$19,274,470 (excluding professional fees and interest), together with the particulars of claim prepared by James Ng Surveyors Ltd. 12.As the Government had already undertaken the reinstatement works arising out of or in connection with the creation of the TOA, in the present proceedings, the only head of compensation which remains under dispute is the total open market rent of the TOA for the Relevant Period under section 2(a) of Part II of the Schedule to the Ordinance: “the amount of an open market rent for claimant’s interest in the land occupied during the period of the easement.” 13.Item 12 of Part I of the Schedule to the Ordinance stipulates that:
14.On the applicant’s case, the total market rent was initially HK$18,904,799 (starting at HK$5,467,278 per annum with annual upward adjustments over the Relevant Period) whereas on the respondent’s case, the total market rent was HK$3,933,000 (at a flat rate of HK$1,332,000 per annum over the Relevant Period). Undisputed Legal Principles 15.Both parties refer to Ease Gold Development Ltd v Secretary for Transport, LDMR 13/1999 (unreported, dated 7 January 2003) which concerned also the assessment of open market rent for the claimant’s interest as a result of creation of a temporary occupation area under the Ordinance. Then HH Judge Chow of the Tribunal stated at §4 as follows:
16.Also both parties refer to Discreet Ltd v Secretary for the Environment, Transport and Works, LDMR 4/2005 (unreported, dated 15 March 2006) where the Tribunal was again concerned with the assessment of open market rent for the claimant’s interest as a result of creation of a temporary occupation area under the Ordinance. Then the Tribunal ruled at §§34 & 35 as follows:
17.Whereas “open market rent” is not defined in the Ordinance, “market rent” is defined in HKIS Valuation Standards 2017 as follows:
The parties have no dispute on adopting this definition. Expert Evidence 18.For the purpose of assisting the Tribunal in its determination of the open market rent, the applicant and the respondent have produced the following expert reports:
19.Ms Li was then an Estate Surveyor of the Government’s Lands Department but left its employ in or around late 2020. In the circumstances, Mr Poon Kai Man Simon (“Mr Poon”), also an Estate Surveyor of the Lands Department, has replaced Ms Li as the respondent’s expert. Ms Bonnie Y K Cheng (“Ms Cheng”), counsel for the respondent, submitted that upon considering Ms Li’s expert reports and the joint expert statement afore-mentioned, Mr Poon agreed with the opinions of Ms Li stated therein. Mr Poon had confirmed that he would adopt the same as his own opinions for the purpose of this trial. Mr Poon’s computation of the open market rent of the TOA during the Relevant Period is as follows:[4]
20.Initially, Mr Ng’s computation of the open market rent of the TOA during the Relevant Period is as follows[5]:
21.In Mr Christopher Chain (leading with Mr Brian Fan but hereafter referred to collectively as “Mr Chain”)’s closing submission, he informed that Mr Ng had revised his valuation because of the following concessions:
22.Mr Ng’s revised valuation is as follows:
Mr Poon’s Evidence 23.In his opening as well as his closing submission, Mr Chain contended that no weight should be given to Mr Poon’s evidence on the basis his being employed by the Director of Lands, which had conducted this case on behalf of the respondent. 24.Although I had referred Mr Chain to Tang Ping Choi v Secretary for Transport [2004] 3 HKC 178 during trial, Mr Chain persisted in his concern by referring to what Rogers VP stated (as he then was) in that case:
25.Mr Chain submitted that Mr Poon, in defending Ms Li’s opinion, had clearly demonstrated partisanship, lack of objectivity, bias and lack of independence:
26.Mr Chain submitted that the justification Mr Poon gave for his actions clearly showed that he not only prioritized but actively participated in protecting his employer’s interest. Mr Poon conceded that he made a conscious decision not to set out any his disagreements or uneasiness with Ms Li’s opinions, because doing so would require putting in a further supplemental expert report at a late stage (after Ms Li left its employ in or by the Lands Department around late 2020), which could lead to objection by the applicant and derailing of this trial with cost consequences to the respondent. 27.Mr Chain also referred to an instance during cross-examination when Mr Poon suddenly alleged that there was another relevant open-air car park comparable near Carson Mansion, near King’s Road whereby I questioned Mr Poon why he did not mention this car park earlier or during the site inspection when he had every opportunity to do so. 28.Mr Chain then referred to Best Origin Limited v Commissioner of Rating and Valuation, LDGA 14/1998 (unreported, dated 29 June 2006) where Lam J (as he then was) emphasized that:
29.With respect to Mr Chain, I must repeat the Tribunal or other courts’ agreement that valuation is not an exact science. In particular, when it comes to the choice of comparables and the ensuing adjustments on location, there exists no formula or mechanistic reference but highly depends on the subjective assessment of the valuation expert on the basis of his experience and familiarity of the area. On the one hand, valuation experts of both parties in litigation may accept compromise in working out their joint expert statements on agreement and disagreements. On other occasions, a valuation expert may as well change his opinion on location adjustment after a joint site inspection when he found something he did not observe earlier or overlooked. In Success Active Limited v Harbourview International Holdings Limited & Others, LDCS 31000/2018 (unreported, dated 19 April 2021), the Tribunal even remarked that the valuation expert tried to switch his opinion on location adjustments during trial[9]. While this may affect the reliability of the expert’s evidence, it does not necessarily mean that his evidence is biased or inadmissible. I have sympathy with Mr Poon in having to adopt or otherwise the evidence of Ms Li so soon after her departure. In fact, Rogers VP continued further in Tang Ping Choi as follows:
30.Mr Poon disclaimed Ms Li’s location adjustments at trial made to the comparables previously fully adopted by himself, and instead suggested that no adjustments were necessary except for a -5% to Comparable 3. Mr Poon put forward this change voluntarily in the examination-in-chief in favour of the applicant without compulsion from the applicant or any one. I only deplored that Mr Poon did not carry out a physical inspection of the comparables before adopting Ms Li’s evidence. But this did not have any material difference from Mr Ng making concessions also on not adopting certain comparable he had previously adopted or even on the methodology of assessment. See §21 above. 31.More importantly, as the Tribunal pointed out in Supergoal Investment Limited v Five F Ming House Limited & Others [2014] 1 HKLRD 286 and Cheer Capital Limited v Unibase Investment Limited & Others, LDCS 5000 & 6000/2013 (unreported, dated 12 June 2015), it is not bound to accept the submission of any party and may rely upon its own experience in determining the dispute on valuation, relying on Myers v. South Lakeland District Council [2005] EWCA Civ 498; [2005] RVR 301 and Checkpoint Limited v. Strathclyde Pension Fund [2003] 14 EG 124, [2003] EWCA Civ 84. And this is often the case particularly on the issue on the valuation adjustments. In Lingrade Development Limited v Secretary for Environment, Transport and Works (2011) 14 HKCFAR 439, the Court of Final Appeal remarked as follows:
32.I am content to give due consideration to the expert evidence of Mr Poon and put appropriate weight on it. See also section 10(6) of the Lands Tribunal Ordinance. Comparables 33.Both valuation experts, Mr Ng and Mr Poon, agreed to adopt the following 3 contemporaneous Government-tendered short term tenancies (“STT”) for open-air car parks as their comparables for arriving at the open market rent of the TOA:[10]
34.Notwithstanding the above, save for the size adjustments for Comparable 2 and Comparable 3 at 0% and 5% respectively, the two experts have the following disagreements. Adjustments for Location 35.Ms Li, as adoptd by Mr Poon, described the comparables in her expert report dated 28 November 2019 as follows:[11]
36.In contrast, Mr Ng was of the view that an upward location adjustment of 58% to all the 3 comparables should be made. He formed his opinion on the basis of hourly rates of indoor car parks in different districts. Mr Ng remarked at §5.2.5 of the joint statement that: “Be it open or indoor, the use of a car park is for car parking. So long as the car park comparables adopted are either all indoors or open, it makes no difference even if indoor car parks are used as comparables given the difference in hourly rates serves as good as that of open car park comparables in reflecting the appropriate adjustment due to location difference. Moreover, the difference between indoor and open car parks due to restrictions and characteristics such as users under lease and floor levels … will become irrelevant when all the comparables are of the same type, ie either all open or all indoor.”[12] 37.Mr Ng relied on the following hourly rates of indoor car parks obtained in August 2017 for the purpose of comparison:[13]
38.Mr Ng tried to support his analysis by asserting that location is a predominant factor which would affect the hourly rate of a fee-paying public car park. 39.At trial, I had pointed out that the 2 indoor car park comparables in Shau Kei Wan might not be so relevant because they are built by the Housing Authority who has been notoriously known to have high carparking ratios though I appreciate that car drivers may be attracted to the Oi Tung Estate Oi Tung Shopping Complex for regional shopping purposes. Tung Tao Court in particular would not be a suitable comparable because the carparking spaces there are offered for general public use which is prima facie in breach of the relevant condition. Mr Ng fairly made concession and revised his assessment of market rent downwards as stated in Mr Chain’s closing submission. 40.On the other hand, AIA Tower in North Point is a high-class commercial/office building which attract many day-to-day visitors. Indeed, both AIA Tower and Olympia Plaza occupy a convenient and busy location in proximity to the hustling and bustling King’s Road and the MTR Fortress Hill Station. 41.In such regard, I consider an adjustment of 42.Ms Li instead put forward other STT comparables for outdoor fee-paying public car parks in her supplemental report dated 31 January 2020 for direct adjustment to account for the locational difference:[14] STTs in Sai Wan Ho and Shau Kei Wan:
STTs in North Point:
43.In rebuttal, Mr Ng remarked that the two sets of comparables were different in nature and (there were factors other than location difference (eg user, size time, layout and configuration) that would have material impacts on the rentals…)[15] Mr Ng referred to the comparables in North Point were rent review cases as distinguished from fresh leases as a result of open tenders. Mr Ng commented that the rental agreed may not necessarily reflected the open market rent and may be affected by other factors or private consideration of the parties, eg saving in Government’s man-power and costs involved in re-tendering, consideration of committed programme for the implementation of planned uses/development of the STT sites that will pose uncertainties on the period of continuous occupation under the monthly tenancy. In that regard, I must agree with Mr Ng. For instance, the land for EHX-395 (ie B1) was tendered for sale as part of Inland Lot 8920 in mid-2011, which was only some a year and half after the rent review and the land for EHX-430 (ie B2) was tendered for sale as part of Inland Lot 9020 in early 2013, which was less than a year and half after the rent review. Judicial notice is also taken of Kwong Fat Loong Shipyard v Commissioner of Rating and Valuation, LDRA 5/1988 (unreported, dated 9 January 1990) in which the Tribunal was of the opinion that the new rent negotiated for a short term tenancy upon rent review might not represent open market rent. Further, the user clause of B1 was more restrictive in that the parking of lorries and coaches were specifically excluded. As well, the unit rental for B2 would require upward adjustments for
44.Mr Ng also managed to find out the hourly rates charged for private cars in 2011 for these new comparables put forward by Ms Li in her supplemental report:[16]
45.Having made such comparison, Mr Ng remarked that B1, being situated just opposite the TOA fetched an even higher hourly rate than the other two North Point car park comparables B2 and B3 which were situated within primarily residential neighbourhoods. I agree with Mr Ng that the TOA was situated in a much better location than all other car park comparables in these new sets of comparables. 46.In addition, Mr Ng drew the Tribunal’s attention to there being abundant supply of open car parks in North Point in 2011 with the presence of the 3 open car parks B1, B2 and B3 providing about 772 to 888 parking spaces in total (assuming the average site area occupied by each car park is 20 m2 and 23 m2 respectively). These open car parks had however been lost in 2014 when B1, B2 and B3 were then devoted to new developments[17]. I agree with Mr Ng that the location adjustment for the three comparables adopted for direct comparison should be upwards instead of downwards. 47.In such regard, I agree with Mr Ng that comparison of the hourly rates charged by carpark operators in different areas will provide good guidance on the difference that may be caused by locational difference. I also agree with Mr Ng that so long as there is no material change in the condition of the immediate neighbourhood that would materially affect the demand and/or supply of carparking, eg large scale redevelopment in the area causing loss or increase in supply and/or demand, etc, the location difference analysed from the indoor car park comparables in 2017 should be very similar, if not exactly the same, for 2014. 48.That said, I agree with Mr Poon that indoor car parks are not the same as the open fee-paying public car parks due to restrictions and characteristics such as users under the Government leases and floor levels. That 35.29% might be applicable to the retail parking but not necessarily applicable to the open market rent payable by a car park operator as in the STTs. In Top Sail International Limited v Wong Lai Wei, LDCS 19000/2010 (unreported, dated 26 October 2011), the expert on behalf of the respondent was criticized by the Tribunal to have based on the daily room rate of $800, the average unit rate for the “domestic GDV” of the proposed hotel on the lots in question instead of calculating the net rental income of the hotel, or the net sale price of the hotel accommodation.[18] 49.Thus, if I just take EHX-527 (which has a similar area as the TOA) as example, assuming it could derive receipt of R for running the carpark, the cost of running it and the profit the operator expected are taken as C, then R – C = $1,591/m2 (being open market rent of the carpark that the operator afforded to pay) which can be rearranged to become C = R - $1,591/m2. Then if R is subject to an addition of 36% for location, and assuming C is relatively constant, then the open market rent of such location would be 1.36%R – C[19] or 1.36%R – (R - $1,591/m2) ie $1,591/m2 + 36%R 50.Thus, assuming that R is some 20% higher than $1,591/m2, this is not too far away from Mr Ng’s assertion of 58%. 51.As regards Mr Poon’s sudden disclaiming Ms Li’s location adjustments and replacing instead new adjustments at 0%, 0% and -5%, I am not persuaded, especially having conducted the inspection of the comparables. Adjustment for Time 52.Initially, in attempting to arrive at the time adjustments, Mr Ng relied on four pairs of STT transactions, the tenancies of which were offered for tender by Government again upon expiry of the original ones. His analysis is as follows:[20]
53.In his Supplemental Report of 31 January 2020, however, Mr Ng considered Ms Li’s proposed time adjustment on the basis of the Private Retail Index compiled by the Rating and Valuation Department being in line with his adjustments. “As such, (Mr Ng) would have no objection to adopt the Respondent Expert’s time adjustments”.[21] 54.Yet, in the joint expert statement dated 28 May 2020, Mr Ng asserted that the time adjustments he had initially proposed “should be preferred to that derived from the Private Retail Index … since retail properties are wholly different from open car parks both in nature and market performance.”[22] To this I agree and in any event, the differences between the two experts are less than 4%. Adjustments for Size 55.As said, the two experts have agreed the size adjustments for Comparable 2 and Comparable 3 at 0% and 5% respectively. However, when compared with the TOA of 1,480m2, Comparable 1, having the size of as much as 3,520m2, is more than doubling the size of the TOA. I consider the adjustment of 10% as proposed by Mr Ng appropriate. Adjustments for Layout & Configuration 56.Mr Ng proposed no adjustment for layout in respect of Comparable 2 and Comparable 3; on the other hand, Mr Ng considered the configuration of Comparable 1 awkward, being long, narrow and of irregular shape. He recommended +15%. 57.Mr Poon, adopting the reports prepared by Ms Li, proposed an adjustment of -15% for each comparable because the TOA was subject to a right of passage of motor vehicles to the adjoining lot to and from Oil Street under Special Condition 23 which provides as follows:
58.Ms Li suggested that in this connection, this part of the TOA could not be fully and freely used for car parking purposes. Also apart from reserving a right of way to IL 7106 RP & Extension, the presence of four supporting columns of the Island Eastern Corridor within the TOA would reduce its utility, giving rise to constraints to the overall design and layout for car parking purposes.[24] 59.In contrast, Mr Ng managed to designate 74 carparking spaces on the TOA (“the Hypothetical Car Park”)[25]. Mr Ng tried to support his adjustments by making reference to the number of carparking spaces that may be accommodated in each of the STT comparables. Mr Ng assumed that the average site area to be occupied by a carparking space (including the circulation space) for Comparable 2 and Comparable 3 is 20m2 whereas that for Comparable 1 is 23m2:
That is 60.From the above, it appears that Mr Ng’s adjustments for layout or configuration has double counted that for size. Assuming Mr Ng’s estimations of the number of carparking spaces for the respective comparables are correct, I consider more appropriate to carry out the analysis on the basis of number of carparking spaces instead of on site area, following Hongda Containers Limited v Secretary for Transport, LDMR 7/2000 (unreported, dated 4 June 2002) and more recently Golf Café Bars Limited v West Yorkshire Combined Authority & Another [2021] UKUT 0016 (LC). This approach has the further advantage of having obliterated the adjustments for size, layout and configuration which are mostly subjective. 61.Therefore, whereas Mr Ng’s adjustments for location and time are preferred, the analysis should have been conducted on the basis of number of car parking spaces available:
Shelter Effect 62.In addition to the above, both Mr Ng and Mr Poon agreed that
63.In particular, Mr Ng explained the significance of the “shelter effect” as follows:
64.For the purpose of determining the extent of the “shelter effect”, Mr Ng made reference to a pair of different STT comparables in Tsuen Wan as follows:
65.While the above analysis gives a difference of 66.On the other hand, Mr Poon, adopting Ms Li’s evidence, only allowed an adjustment of 5% because the Island Eastern Corridor would provide minimal cover from storms and rain as it was at a height as much as 8 metres[30]. 67.As regards the two comparables in Tsuen Wan above, Ms Li commented in §3.1.3 of her Supplemental Report dated 31 January 2020 that the flyover at Tsuen Wan Road above STT 1521 is as high as 20 metres, “serving nearly no waterproof function for the cars parked under the flyover”[31]. She suggested there were many factors that may affect the rentals of two car parks with different attributes and characteristics; it was not accurate to allege that the difference of the unit rentals between STT 1524 and STT 1521 were all brought by the “shelter effect”. 68.Ms Li stated that these two STTs were indeed awarded to the same company ie Forerun Management Limited. She suggested that operating two car parks located so close to each other may generate some special interests that other operators in the market could not enjoy. Therefore, the tenderer might be willing to offer a higher rental than the market level for the benefits of such economics of scale. But with respect, this suggestion by Ms Li cannot explain why Forerun Management Limited offered two significantly different unit rentals for the two carparks which appear to be the same in locality. 69.On the other hand, as pointed out by Mr Poon, the hourly charges between the open car park at Sai Wan Ho, being EHX515, ie Comparable 3 at $14 and the Grand Promenade Public Car Park at $17 close to it provide the best indication of the consumers’ preference between covered and sheltered car parks. This difference is only 70.In the absence of further evidence, however, I cannot but adopt the average of 78.9% and 21.4%, which is equal to 50%. 71.It is important to note that at the time of the site inspection, the Sheltered Part had already been halved because of the demolition of one-line traffic of the Island Eastern Corridor. But by reference to the Plan No HKM8529a which was prepared for the purpose of creating the TOA vis-à-vis the layout plan of the car parking spaces, I note all the carparking spaces were supposed to be sheltered by the Island Eastern Corridor. 72.Whereas there were only 20 carparking spaces prior to the creation of the TOA, it appears that the open market rent of the TOA assuming that it could have been used as a fee-paying public carpark as the comparables would be: $4,130 per month x 20 x 1.5 = $123,900 per month as at 26 February 2014. User Restriction 73.In spite of the above, applying the similar site area occupied by each car park at 20m2, Mr Ng managed to designate 74 carparking spaces on the TOA instead of 20. Mr Ng conceded that this 20m2 per carparking space paid no heed to Special Conditions 54, 55, 56 and 57 of the Government Lease pertaining to the TOA (as stated in §7 above). Mr Chain advocated in support that the ancillary car park for the Hotel as required under Special Conditions 54 to 57 had been temporarily relocated to the northern portion of the Lot so that those lease conditions were at all times compiled with during the TOA period. 74.This cannot be right as, for instance, Special Conditions 54(b) and 55(a) requires carparking spaces to be provided within the Pink Hatched Green Area, the Pink Cross-hatched Green Area, the Pink Stippled Black Cross-hatched Green Areas and the Pink Hatched Black Area of the Lot. It is trite that “any increase (or decrease) in value which is entirely due to the scheme underlying the acquisition” should be disregarded, the well-known Pointe Gourde principle following the Privy Council decision in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565. Thus, any action carried out by the Government as a result of the scheme underlying the creation of the TOA should not have the effect of removing any restriction on user on the Pink Hatched Green Area, the Pink Cross-hatched Green Area, the Pink Stippled Black Cross-hatched Green Areas and the Pink Hatched Black Area of the Lot.[32] 75.Under Special Condition 54(c), each of those spaces so provided shall occupy an area of 2.5 metres in width and 5.0 metres in length instead of the smaller dimensions of 2.1-2.3 metres x 4.2-4.6 metres suggested by Mr Ng. That is, the proposed area for each parking space is at least 20% smaller than that required under Special Condition 54(c). Mr Ng would have exaggerated the number of car parking spaces that can be accommodated on the TOA by more than this percentage if the maneuvering spaces are also taken into consideration. This should not be a simplistic exercise of arithmetic division but requires substantial re-alignment and reconfiguration of the 4 parades of parking spaces proposed by Mr Ng. That Mr Chain’s claim that Special Condition 54(c) is not applicable to the car parking spaces to be provided in the Lot is totally out of question. 76.In that regard, I agree with the respondent that Special Conditions 23 and 55(a) limits the flexibility in layout of the carparking spaces within the TOA. Special Condition 23 is repeated as follows:
Mr Chain, in his opening submission at §19(a)(ii), admitted that the TOA did cover the access between the points X and Y through Z. 77.Mr Chain suggests that “Such spaces” as referred to in Special Condition 54(c)[33] are not confined to be provided only in the TOA but can be provided anywhere on the Lot. He submits that “(t)he purpose of Special Condition 54 is to ensure that adequate parking spaces would be provided for the exclusive use of Hotel guest. It does not purport to stipulate that extra car-parking spaces provided on top of the “parking requirements” must also be confined to for the use of “occupiers of the building or buildings erected or to be erected on the New Lot (ie the Lot) and the bona fide guests, visitors or invitees.”” 78.With respect, Mr Chain did not observe Special Condition 57 which limits the extra car-parking spaces that can be provided by not more than 5% or 50 in number (whichever is the less). That his interpretation of Special Condition 54(a) towards the counting the floor area to be used for parking spaces is totally misplaced. 79.In addition, in designating the 74 carparking spaces, Mr Ng failed to observe the following Special Condition:
80.Mr Ng did give the honest answer that this was not within his contemplation when he first drew up the plan for the Hypothetical Car Park on the TOA. But in defending his failure to allow for these 2 metres clearance in calculating the number of carparking spaces, Mr Ng suggested that the 2 metres clearance would have minimal impact on the layout of the Hypothetical Car Park. While Mr Chain tried to persuade me to disregard the discount of 15% put forward by Mr Poon in this regard as off the cuff, Mr Ng’s defence is unbelievable by looking at the congested layout proposed by him[34]. Indeed, the fact that the Temporary Carpark could accommodate 29 car parking space instead of 20 demonstrates that the right of way under Special Condition 23 and the 2 metres clearance requirement did have the adverse impact on limiting the number of car parking spaces that could be provided in the TOA. 81.By Special Condition 57 however, giving the benefit of doubt in favour of the applicant, I take that the 20 numbers of carparking spaces within the TOA can be increased by 5% to 21. Thus, the open market rent of the TOA assuming that it could have been used as a fee-paying public carpark as the comparables would be: $4,130 per month x 21 x 1.5 = $130,095 per month, say $130,000 per month as at 26 February 2014. 82.In this connection, I consider the methodology of capitalization adopted by Mr Poon on behalf of the respondent is correct and should be followed because the payment of compensation should be assessed on the first day of the creation of the TOA (ie 26 February 2014) and be paid in one go. Indeed, the Tribunal in Ease Gold Development Ltd, supra, stated at §23 of the judgment that: “If the rent for three years is to be paid in one lump sum, the Present Value of the rent above for the second and third year at the appropriate respective prime bank rates for time deposit at similar amount and duration should be ascertained.” 83.And in in Discreet Limited, supra, the capitalization rate of 1.5% was adopted when the date of creation of the rights of temporary occupation was 27 October 2001. At that time, the time deposit rate was reduced from 1.33% or higher to 0.58% in October 2001:
84.Similarly, in Tang Moon Kau v Secretary for Environment, Transport and Works [2008] 1 HKLRD 10 at §40, the valuation expert then opined that his estimated annual open market rent of $2,000 was capitalized for a rounding up period of 5 years at a rate of 5% the latter of which was based on “the prevailing interest rate for time deposits for capital of less than $100,000 for a fixed period of 12 months, as at May 1999” i.e. 5.59%, according to the Hong Kong Monthly Digest of Statistics. 85.Taking into account the above and the time deposit rate was just 0.01% in 2014, I assess the total loss of rent from 26 February 2014 to 26 April 2017 on the basis on fee-paying car park as follows:
86.On the other hand, I must comment that the methodology initially adopted by Mr Ng was wrong because the rental payable for the STT comparables from which he derived the open market rent would prevail for at least 3 years according to Government policy and this information should be well-known by the carpark operators. It was wrong for Mr Ng to assume the rental payable for the STT comparables would be re-assessed or re-determined after 1 year of the tenancies when he was comparing like-with-like. In Discreet Limited, supra, the Tribunal made the following remark at §30 of the judgment:
87.Mr Ng has corrected his methodology when Mr Chain submitted his closing submission on 8 April 2021. Hotel or Cultural, Leisure and Tourist-Related Activities 88.Mr Poon opined that the car parks on the TOA must be ancillary to the Hotel for use only by its owners, occupiers and bona fide visitors under the Government Lease, but not for the public through fee payment like the STT Comparables. 89.Mr Chain submitted otherwise, referring to Special Condition 3(b) which permits the TOA to be used for purposes in relation to cultural, leisure and tourist-related activities. In that regard, Mr Chain is referring to the Oil Street Art Space run by the Leisure, Cultural Services Department at the junction of Oil Street and Electric Road opposite AIA Tower, Ngo Wong Temple (岳王古廟), and even the North Point Alliance Church at 238 King’s Road near its junction with Oil Street. He submits therefore the TOA could be used in relation to such cultural, leisure and tourist-related activities, as a result of which the TOA can be comparable to a public fee-paying carpark. 90.To this I cannot agree. If Mr Chain’s argument is correct, anyone going elsewhere could park his/her car at the TOA. In Fully Profit (Asia) Limited v Secretary for Justice (2013) 16 HKCFAR 351, the Court of Final Appeal ruled at §15 of the judgment that when construing contractual terms, it was not particularly helpful in most cases to refer to the “ordinary and natural meaning” of words because there could often be much debate over exactly what was the ordinary or natural meaning of words. The surer guide to interpretation is context which is a key and starting point (together with purpose). 91.The purpose of Special Condition 3 as a whole was to restrict user of the Lot. Reading in context, the clause “not be used for any purpose other than for non-industrial (excluding private residential, office, hotel, petrol filling station and godown) purposed in relation to cultural, leisure and tourist-related activities” must mean the non-industrial purposes conducted within the Lot but not elsewhere. 92.Referring to Moody’s Investors Service Hong Kong Ltd v Securities and Futures Commission [2018] HKCFA 42 at §35, Mr Chain submitted that “relating to” or in the present case “in relation to” should have “the widest possible meaning of any expression intended to convey some connection … between the two subject matters to which the words refer”. But with respect, Mr Chain had not noted that Lord Neuberger continued his judgment at §37 as follows:
This principle is no different from that pronounced in Fully Profit. 93.In his closing submission, Mr Chain also referred to Sam Woo Marine Works Ltd v The Incorporated Owners of Po Hang Building [2020] HKLdt 56 (24 December 2020) where Deputy District Judge Michelle Soong listed out the general rule as stated in Lewison on Interpretation of Contracts, para 5.03, for the consideration of implying a term as follows:
94.Mr Chain submitted that at least (b), (c) and (e) above had not been satisfied by interpreting Special Condition 3(b) as requiring the non-industrial purposes to be conducted within the Lot. I hold otherwise. 95.That notwithstanding, I consider the provision of carparking next to a hotel especially a luxury 5-star hotel as claimed by the applicant is important. In Inland Revenue Commissioners v Clay [1914] 3 KB 466 at §475, Swinfen Eday LJ stated as follows:
96.Indeed, Scrutton J said in the lower court:
97.I consider likewise, the applicant as the hotel operator would bid for the TOA at least equal to the open market rent payable for a public fee-paying carpark. Indeed, in her closing submission, at §30, Ms Cheng stated as follows:
Item 13 of Part I of the Schedule to the Ordinance 98.As stated at §9 above, the car parking spaces were relocated elsewhere within the same Lot during the Relevant Period. More importantly, according to the layout as shown on the drawing no CWBIECL/027-009, this Temporary Carpark could accommodate 29 car parking spaces (including 9 lorry car parking spaces that were not provided in the TOA) instead of the original 20[35]. 99.Item 13 of Part I of the Schedule to the Ordinance provides as follows:
100.Mr Chain submitted that in the present proceedings there are two heads of compensation under item 2 of Part II of the Schedule to the Ordinance:
101.Mr Chain submitted that the amount of compensation for disturbance under item 2(b) was agreed but the loss suffered by the applicant which was still pending to be determined was the loss of use of the TOA during the Relevant Period. However, when the car parking spaces were relocated sideway with even more number of carparking spaces (including 9 lorry car parking spaces that were not provided in the TOA), was there any loss of use of the car parking spaces? 102.Mr Chain submitted that Item 13 of Part I of the Schedule to the Ordinance would only bar the applicant from recovering, as a hypothetical example, purported rent of “alternative accommodation” of ancillary car parking spaces under the guise of disturbance claims. Mr Chain put forward the following arguments:
103.With respect, notwithstanding Mr Chain’s skillful arguments, I am not persuaded. Item 2(a)(ii) of Part II of the Schedule to the Ordinance only specifies the basis on which compensation is to be assessed, which in the case of creation of a right of temporary occupation under section 15 is the open market rent. It does not say that open market rent must be paid as a matter of compensation. For the purpose of illustration, I gave an example on 15 April 2021 that in case the Government compulsorily expropriates a land from somebody but provides him with a similar piece of land next to it, does this somebody suffer any loss apart from disturbance? 104.Coming back to the present case, there had been no evidence before me that prior to the creation of a right of temporary occupation and then the relocation of the car parking spaces to the Temporary Carpark, that land which had become the Temporary Carpark during the Relevant Period had any beneficial use to the applicant. I consider the applicant having suffered no loss by having the car parking spaces relocated to land from which it could derive no beneficial use. 105.But if I am wrong, and for any reason Item 13 of Part I of the Schedule to the Ordinance is not applicable, I would have ordered the respondent be pay the applicant in the sum of $4,935,840 for the temporary occupation of TOA during the Relevant period. Orders 106.Accordingly, I order that nil compensation be paid to the applicant by the respondent for the temporary occupation of TOA during the Relevant period because of Item 13 of Part I of the Schedule to the Ordinance which is provided to avoid double compensation. 107.The matters of professional fees, interest and costs are adjourned to a date to be fixed.
Mr Christopher Chain and Mr Brian Fan, instructed by Messrs Woo Kwan Lee & Lo, for the Applicant Ms Bonnie Y.K. Cheng, instructed by the Department of Justice, for the Respondent [1] See Bundle A1/14. [2] See the drawing no CWBIECL/027-009 at Bundle B/493. [3] See Bundle A1/18 &19. [4] See Bundle A2/257. [5] See Bundle A2/321. [6] Mr Ng assumed an 8.4% increase in rental each year during the Relevant Period. [7] Ditto. [8] Ditto. [9] See §§37 & 38 of the judgment. [10] See Bundle A2/251 & 321. [11] See Bundle A2/220. [12] See Bundle A2/310. [13] See Bundle A1/205 & 206. [14] See Bundle A2/300. [15] See Bundle A2/311. [16] See Bundle A2/313. [17] I do not agree with Mr Poon that the TOA being opposite to B1 which was the construction site for a residential development, Harbour Glory, during the Relevant Period would be adversely affected while I am given to understand that the Hotel was in operation [18] See §§76 & 77 of the judgment. [19] The cost of running an open carpark should be independent of location. [20] See Mr Ng’s analysis at Bundle A1/204 or Bundle A2/321. [21] See Bundle A2/264. [22] See Bundle A2/317. [23] The Lot is known as Section A of Inland Lot No 7106 and Extension thereto. [24] See Bundle A2/219. [25] See Bundle A2/268. [26] See Mr Ng’s hypothetical layout of carparks at Bundle A2/278 & 279. [27] See Mr Ng’s hypothetical layout of carparks at Bundle A2/280 & 281. [28] See Mr Ng’s hypothetical layout of carparks at Bundle A2/282 & 283. [29] See Bundle A1/206 and the revision at the Annex of Mr Chain’s closing submission. [30] See Bundle A2/219. [31] See Bundle A2/296. [32] In Golf Café Bars Limited v West Yorkshire Combined Authority & Another [2021] UKUT 0016 (LC) at §23, “The acquiring authority disputed the validity of this as a head of claim (for Compensation for temporary possession) on the grounds that the use did not have planning permission, it was in breach of the user covenants of the long lease, and that such breach had not been regularised by landlord’s consent. Ms Noble submitted that if a claimant in a permanent acquisition situation is prevented by section 5 of the 1961 Act from recovering compensation generated by illegal or unlawful uses, equally it cannot do so in a claim for temporary possession. The authority’s principal position was therefore that this element of the claim should be assessed at zero.” [33] See para 7 above. [34] See Bundle A2/268. [35] See Bundle B/493. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
more appropriate.
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, Mr Ng made further reference to the hourly rates of open and covered car parks in Shau Kei Wan and Sai Wan Ho in §§33 & 37 above and noted the difference of hourly rates between open and covered carpark would be 
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. While Mr Ng explained that open-air sheltered car parking spaces on the ground floor would be generally more convenient than indoor multi-storey car-parking spaces like the Grand Promenade Public Car Park, the latter may provide better management.Cases cited in this judgment
Further hearings and rulings under LDMR 2/2016