Deluxe Ascent Ltd v. Director of Lands
Read the full judgment text of LDLR 9/2018 on BabelCite. This Lands Tribunal judgment was delivered on 9 August 2022.
1. In the judgment handed down on 28 February 2022 (“the Judgment”), the tribunal ordered the respondent to pay to the applicant compensation for the resumption of the following Resumed Lots (“the Resumption”) in the sum of $145,300,000 pursuant to section 10(2)(a) of the Lands Resumption Ordinance (“the LRO”):
Cited by 6 cases · Cites 10 cases
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LDLR 9/2018 [2022] HKLdT 33 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND RESUMPTION APPLICATION NO 9 OF 2018 ___________________ BETWEEN
_____________________________ Before: Deputy District Judge Michelle Soong, Presiding Officer of the Lands Tribunal, and Mr Lawrence Pang, Member of the Lands Tribunal Date of Applicant’s Submission and Reply: 5 May 2022 and 27 May 2022 Date of Respondent’s Submission and Reply: 6 May 2022 and 27 May 2022 Date of Decision: 9 August 2022 __________________ D E C I S I O N (Leave to Appeal) _________________ INTRODUCTION AND BACKGROUND 1.In the judgment handed down on 28 February 2022 (“the Judgment”), the tribunal ordered the respondent to pay to the applicant compensation for the resumption of the following Resumed Lots (“the Resumption”) in the sum of $145,300,000 pursuant to section 10(2)(a) of the Lands Resumption Ordinance (“the LRO”):
2.To recapitulate the background, at the time of the Resumption, the applicant owned a half share in Lot 1941A (of which only a portion was resumed) and a 144/200 share in Lot 391B, with the joint executors of Fok Ying Tung Henry, deceased (“the Other Owner”) as tenants-in-common. The applicant acquired its interests in Lot 1941A and Lot 391B and in other lots (to be discussed below) from the late Mr Stanley Ho on 11 November 2011. 3.As a result, the applicant and the Other Owner became co-owners of the following lots in DD 95 which are collectively referred to as “the Other Lots”, either in half-share or 144/200 shares as tenants-in-common:
4.At trial, it was undisputed that prior to the Resumption, the Resumed Lots and the Other Lots formed a contiguous parcel of land (“the Original Lots”). After the Resumption, the Other Lots are split by the Resumed Lots to form two separate parcels of land. The Resumed Lots and the Other Lots can be identified on the Lot Index Plan dated 10 April 2012. 5.By a summons dated 24 March 2022, the applicant applied for leave to appeal against the Judgment. The respondent also took out a Summons dated 25 March 2022 seeking leave to appeal against the Judgment. 6.Having considered the respective draft Notice of Appeal submitted by the parties, the tribunal directed that the parties’ leave applications be determined on paper based on written submissions without an oral hearing. 7.The applicant is represented by Mr Benjamin Yu, SC, leading Mr Mok Yeuk Chi and Ms Julia Au. They filed their submission on 5 May 2022. Mr Simon K C Lam representing the respondent filed his submission on 6 May 2022. The parties respectively filed their reply submissions on 27 May 2022. RELEVANT LAWS CONCERNING LEAVE TO APPEAL 8.Section 11AA(6) of the Land Tribunal Ordinance (“LTO”) provides that :
9.The intended appellants must “show more than just an arguable case, but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed” (Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515 at §19). APPLICANT’S GROUNDS OF APPEAL 10.The applicant raises the following intended grounds of appeal in their draft Notice of Appeal:
11.We will set out below the applicant’s elaborations on the above intended grounds of appeal and our analyses thereon Grounds (1) 12.In relation to Ground (1)(i) and (ii), the applicant submits that the courts in the afore-cited authorities had been interpreting the word “abut” on the basis of the ordinary meaning of the word in the absence of a statutory definition, and on the basis of adopting a “practical and commonsense” way bearing in mind that it is for the authority seeking to restrict the owner’s use of the land to satisfy the court that his contention cannot be right. The fact that the Building (Planning) Regulations changed “street” to “specified street” would not affect the reasoning for adopting the practical and commonsense meaning of the word “abut” in these cases. Nor does the adoption of the concept of “specified street” affect the reasoning that it is for the authority seeking to restrict the owner’s use of the land to satisfy the court that his contention cannot be right. 13.Secondly, according to a principle of construction of statutes and statutory instruments, they must be read “in the context of the general body of law into which it is assimilated”, citing Bennion on Statutory Interpretation, 7th ed, §25.1. When the Building (Planning) Regulations was amended in 2005 to provide for “specified street” in substitution for the word “street”, the concept of “abut” has already been established by the line of cases since the early 1980s. One must assume that when the regulations were amended, the maker of the regulations would be aware of the line of authorities on the meaning of the word “abut”. The maker must also be aware that the common law and existing legislation form part of the context against which a new statute or statutory instrument must be interpreted and applied. Had it been considered that the meaning of the word “abut” under the existing line of authorities should be changed, one would expect to see not merely the use of the phrase “specified street”, but some other manifestations in the amended regulations to alter the common law meaning of the word “abut”. 14.Thirdly, even after the introduction of “specified street” in the Building (Planning) Regulations, the court still applied the same meaning of the word “abut” in Building Authority v Appeal Tribunal (Buildings) (re: Methodist Church) [2015] 5 HKLRD 108 where Au J (as he then was) adopted the “fact and degree” test on whether a site abuts a street and followed Mightystream and Estoree in holding that “abut” does not always import actual contiguity or adjoining and touching. 15.In relation to Ground (1)(iii), the applicant submits that even if “abut” does require contiguity as a matter of law, the tribunal should still have found that as at the date of Resumption, the Resumed Lots (which at that time would have been the Original Lots as per §5 of the Judgment) did abut a specified street of more than 4.5m. This is because at §65 of the Judgment, the tribunal held that New Grant No 9594 of Lot 2054 dated 22 October 1965 can be regarded as an express grant, or alternatively an implied grant of access to Castle Peak Road. 16.It is submitted that having made the above-mentioned finding, the tribunal ought to have found that the southern boundary of the “tongue” of Lot 1941A abutted Castle Peak Road, which is a specified street of not less than 4.5m in width. This is irrespective of whether there existed a Government strip between the southern boundary of the “tongue” and Castle Peak Road, as the express grant or implied grant of access would render any such strip to be part of the specified street, by reason of regulation 18A(3)(iv) of the Building (Planning) Regulations. Ground (2) 17.In relation to Ground (2), the applicant submits that the tribunal made the following observations and findings in the Judgment regarding the Government Strip:
18.It is further submitted that the undisputed video recordings of the locus in quo produced in evidence by the applicant showed that:
19.The applicant submits that, in view of the findings of the tribunal and the uncontradicted evidence referred to in the preceding two paragraphs, no reasonable tribunal properly directing itself on the law would have failed to find that the Resumed Lots and the Other Lots did (on the date of resumption) abut Castle Peak Road, which is a specified street of not less than 4.5m wide and hence the Original Lots was a Class A Site. The tribunal erred in law to have reached the contrary decision. 20.We will deal with Grounds (1) and (2) together. 21.Both at trial and under Ground (1) of the intended appeal, the applicant cited Attorney General of Hong Kong v Mightystream Ltd [1983] 1 WLR 980, Multi-Strategic Investments Ltd v Attorney General [1984] HKC 178, Building Authority v Appeal Tribunal (Buildings) & Estoree Ltd, HCAL 147/2002 (unreported, 25 July 2003) in support of their argument that the Resumed Lots and Other Lots “abut” the Castle Peak Road. 22.As stated at §49 of the Judgment, “(w)e have reservation whether the authorities above are still applicable to the question of whether the Resumed Lots and the Other Lots were abutting a street for the purpose of site classification under Regulation 18A of the Building (Planning) Regulations, Cap 123F because the definition for the classification of sites has been changed in 2005.” (underline added). As to classification of the site in terms of the Regulations, a Class C site permits the highest percentage site coverage (and plot ratio) which is followed by a Class B site and then a Class A site. 23.Under section 2(1) of the Buildings Ordinance, Cap 123, the term “street” is defined to include the whole or any part of any square, court or alley, highway, lane, road, road-bridge, footpath, or passage whether a thoroughfare or not. Under regulation 2(1) of the Building (Planning) Regulations, the term is defined to include any footpath and private and public street. 24.In Attorney General of Hong Kong v Mightystream Ltd [1983] 1 WLR 980, one side of the site was bounded by a “nullah” over which a bridge leading from Borrett Road crossed on its way to the site. The trial judge found there was a very substantial natural feature in the form of “nullah” which lay between Borrett Road and the site throughout its length; the “nullah” was far from something in the nature of a mere gulley which could be disregarded, if precise contiguity was not required. The trial judge held that by that observation, the site did not abut a street which was in fact a “nullah”. This finding was approved by the Court of Appeal and undisturbed by the Privy Council. On the other hand, the Lordships in the Privy Council, agreeing with the Court of Appeal, held that the bridge connecting the site with Borrett Road was a “road-bridge” that the site abutted on it for the purpose of classification as a Class A site. 25.In Multi-Strategic Investments Ltd v Attorney General [1984] HKC 178, the road in question was bounded by embankment cut out of the hill which transferred to the site. Mantell J said he was bounded by the construction of the words “abut on” by the Privy Council in Aik San Realty Ltd v Attorney General (PCA 48/81, unreported) which distinguished between “abuts” and “front” in this way:
26.Notwithstanding the above, Mantell J said he paid regard to section 2(1) of the Buildings Ordinance, and having employed the test of fact and degree, considered that the boundary of the road and the site coincided because the embankment was part of the road for the reasons that it was formed at the time of the road being built and for planting a screen or decorative border. 27.In Building Authority v Appeal Tribunal (Buildings) & Estoree Ltd, HCAL 147/2002 (unreported, 25 July 2003), the site in question was adjacent to the Lai Chi Kok Park to the south, an area set aside as a public pleasure ground in terms of section 106 of the Public health and Municipal Services Ordinance, Cap 132. As to the physical lay-out of the southern boundary, the appeal tribunal described it as follows:
28.One of the main disputes in this case was whether the EVA was a “street” within the definition of the Building (Planning) Regulations. The appeal tribunal came to the following determination:
29.At §52 of the judgment of this Estoree Ltd case, Hartmann J (as he then was) agreed with the submission of counsel that, under section 2 of the Building (Planning) Regulations, a “street” is to be determined solely by physical manifestation and use. While Hartmann J determined that the EVA was a “street” and abutted the southern boundary of the site, he declined to determine the legal meaning of “abut” so long as he found no good ground for setting aside the factual finding of the appeal tribunal that the drainage channel did form part of the “street”, see §§57-58 of the judgment. 30.It is also of interest to note that in this Estoree Ltd case, counsel for the Building Authority submitted that the appeal tribunal had been inconsistent in its interpretation of the word “street” in the same set of regulations. Hartmann J ruled that different considerations may be applied in different contexts within the same regulations. A “street” for the purposes of regulation 2(1) may lay outside of a site while a “street” for the purposes of regulation 23(2)(a) fell within a site. 31.Regulation 18A is the provision that deals with site classification. In this provision, “class A site” is defined to mean “a site, not being a class B site or class C site, that abuts on one specified street not less than 4.5 m wide or on more than one such street”. 32.The Building (Planning) (Amendment) Regulation 2005 introduced the new term “specified street” to replace “street” in regulation 18A and introduced some additional circumstances (set out below) any of which must exist with respect to a street if a site is to be regarded as “abutting on a specified street” for site classification purpose –[1]
33.As a result of the change, the “road-bridge”, the embankment or the EVA in Mightystream, Multi-Strategic Investments and Estoree respectively would not be qualified as a “specified street” if they are not maintained by the Highways Department.[2] 34.The applicant relies on the case Building Authority v Appeal Tribunal (Buildings) (re: Methodist Church) [2015] 5 HKLRD 108 which was not referred to by them or by the respondent at trial despite this is a case after the Building (Planning) (Amendment) Regulation 2005 came into operation on 31 December 2005. In that case, the south-eastern corner of the site was separated from the existing Kennedy Road by a triangular shaped area (“the Triangular Area”) which was created over the years by the step-by-step straightening and widening of Kennedy Road. Historically, before the creation of the Triangular Area, Kennedy Road wound around and along the south-east side of the Site. The Triangular Area was allocated to the Department of Health for the Wan Chai Polyclinic as part of the open car park. It almost touched the existing Kennedy Road at its northern tip and was more than 4.5m wide at the southern portion. 35.The appeal tribunal had on its motion divided the Triangular Area into four sections:[3]
36.After setting out these four sections, the appeal tribunal then went on to decide section by section as to whether each of these sections can be regarded as a “specified street” under the various criteria provided at Regulation 18A(3)(a) of the Building (Planning) Regulations. For example:
37.Without reciting further details of that case, we note that Au J (as he then was) quashed the decision of the appeal tribunal on the ground that there was no rational basis for the appeal tribunal to conclude that these relevant sections of the Triangular Area could continue to be regarded as part of Kennedy Road. The appeal tribunal’s classification of site was held unlawful. We do not see how this case may assist the applicant in this appeal. At §§30, 38 & 39 of that judgment as quoted by the applicant, Au J (as he then was) simply repeated the “fact and degree” test that had been applied in Mightystream, Multi-Strategic Investments and Estoree etc on whether a site abuts a street, nothing is said to the effect that the required circumstance(s) laid down in regulation 18A as discussed in §§ 31 and 32 above should be ignored. 38.On the other hand, at §66, Au J (as he then was) remarked that the word “instrument” in Regulation 18A(3)(a)(iv) should be given a narrow meaning given the legislative history of this provision and the context that this provision deals with important matters relating to site classification and thus plot ratio by reference to an interest in land exercisable at all time. This in fact contradicted the applicant’s suggestion that the amended regulation did not seek to restrict the owner’s use of the land. 39.Thus, bearing in mind the above authorities or interpretation of by different judges in the cases, while a “street” is to be determined solely by physical manifestation and use under section 2 of the Building (Planning) Regulations, the additional criterion such as “and is maintained by the Highways Department” in regulation 18A(3)(a)(i) should be given due consideration. In the present case, it is undisputed that the Resumed Lots abutted a strip of Government land not maintained by the Highways Department. This Government Strip, by our observation on site and by reference to the photos taken[4] and to the maintenance record plan dated 31 December 2015[5], is far from something in the nature of a mere gulley or roadside kerb which could be disregarded, even if precise contiguity was not required. The applicant must have been confused by the different government land allocation arrangements between the urban area and the rural area in which the Resumed Lots were situated – there was a significant distance beyond, for instance, the Gate (which marked the southern boundary of the Resumed Lots[6]) before reaching the part of Castle Peak Road – Chau Tau Section maintained by the Highways Department. We opine that no one with reasonable mind would consider the Resumed Lots abutting the portion maintained by the Highways Department instead of mere fronting it. 40.In our view, Ground (1) and Ground (2) of the intended appeal by the applicant must fail. The further argument by the applicant that New Grant No 9594 of Lot 2054 dated 22 October 1965 could be regarded as an express or implied grant of an access to Castle Peak Road (ie Ground (1)(iii)) is misplaced as we have held that under section 13(3) of the Roads (Works, Use and Compensation) Ordinance, Cap 370, all land resumed in the 1984 Resumption or 2016 resumption was “free of all … easements, rights or interests of any kind in favour of any person.”. 41.In this regard, actually Mr Mok at §67 of his closing submission dated 7 October 2021 acknowledged that in the 1984 Resumption additional land was resumed (which was south of the section between the Tongue of Lot 1941A and Lot 394D) to provide road facilities like surface channels, utility poles, pedestrian walkway etc. Therefore, the applicant accepted that there was some distance between the Tongue of Lot 1941A and Castle Peak Road after the 1984 Resumption. Mr Mok also argued that “no part of Lots 1941A or 394D to the north of [Castle Peak Road] was resumed in the 1984 Resumption”. 42.In relation to this argument, we said at §72 of the Judgment that “We are not persuaded on this as Item 3 of Part II of the Schedule to the Roads Ordinance is the distinct provision whereby compensation may be claimed if there be extinction, by the operation of section 13(3), of any easement in favour of land not resumed when adjacent or contiguous land is resumed.” (underline added). 43.Notably, resumption plan NDR 37D[7] showed the resumption limit immediately south of the section between the Tongue of Lot 1941A and Lot 394D, and as well, portion of Lot 392C which was adjacent or contiguous to Lot 1941A was resumed in the 1984 Resumption. Even though Lots 1941A or 394D to the north of Castle Peak Road was not resumed, any easement in favouar of land these land would also extinguish by the operation of section 13(3). We went on to discuss at §80 of the Judgment that any common law rights of the owners of the adjoining lots should have been overridden by statute. Ground (3), (4)& (5) 44.Under Grounds (3) & (4), the applicant submits that the tribunal should have found the following, but erred in law in failing to do so:
45.Under Ground (5), the applicant submits that the tribunal made the determination in §102 of the Judgment that, in all probability, the site coverage of any proposed development of Lot 1941A would be around 20% in order to make it competitive and marketable. It is said that the tribunal made this determination by placing reliance solely on the fact that the European-style house comparables adopted by both valuation experts all have a site coverage below 20%. 46.The applicant contends that neither of the two valuers gave evidence concerning the effect of site coverage on marketability or competitiveness. There was no evidence on this issue in the valuation reports or in the oral evidence of the two valuers. The respondent’s valuation expert had not made any suggestion nor provided any evidence that, in the event of a house development in the Resumed Lots and the Other Lots, the market would only support a development of no more than 20% site coverage. It is suggested that insofar as the tribunal considered this issue to be relevant to valuation, the tribunal should, but failed to, invite the witnesses to address the same 47.In this regard, the applicant says that in the Agreed List of Issues between the parties, the only issues that related to site coverage of 20% were:
48.It is submitted that the issue (insofar as concerning the 20% site coverage) was joined on the sole factual basis of (1) whether there is a lease restriction in the form of the Modification Letter on the maximum site coverage of 20% of the area of the lot, and whether the applicant is estopped from denying such a lease restriction; and (2) what is the site classification of the Resumed Lots and the Other Lots which in turn affects the site coverage. There was no issue on whether, apart from the alleged lease restriction of 20% site coverage and the issue on site classification, the market would support a development intensity of no more than 20% site coverage, which site coverage, together with the lease restriction on height of 25 feet (2-storeys), would yield the plot ratio of 0.4. 49.The applicant further submits that the tribunal supported its determination that the market would probably support a 20% site coverage housing development by placing reliance solely on the basis that the European-style house comparables from the two valuation experts all have a site coverage below 20% and yielding a plot ratio of 0.4. It is reasonably arguable that in so doing, the tribunal erred in law to make a finding that was irrational and taking into account irrelevant consideration:
50.We shall deal with Grounds (3), (4) and (5) together. 51.As we have found that the Resumed Lots did not abut a street maintained by the Highways Department, the Resumed Lots did not comprise a Class A site under the Building (Planning) Regulations. Under regulation 19(3), therefore, the height of a building or buildings on the Resumed Lots, and the maximum site coverage and maximum plot ratio permitted in respect of such a building or buildings, shall be determined by the Building Authority. 52.At §90 of the Judgment, we made it clear that the tribunal could not determine the market value of the Resumed Lots in a vacuum. At §91 it was stated that we had to resort to the planning documents previously published and the previous planning decisions made. In doing so, the tribunal was conscious that those materials and decisions that might be affected by the scheme underlying the resumption should be ignored. At §101, we stated that after reviewing the historical development of the Resumed Lots and Other Lots, in particular the circumstance that they did not abut a specified street, we took the view that a maximum site coverage of 20% and, as restricted by the Modification Letter to a building height of 2 storeys, a maximum plot ratio of 2 x 20% = 0.4 would most likely be permitted in respect of a building or buildings to be erected on Lot 1941A as shall be determined by the Building Authority pursuant to regulation 19(3) of the Building (Planning) Regulations, Cap 123F with vehicular access in and out of Castle Peak Road – Chau Tau. 53.Having found the above, we had to proceed to the valuation of the market value of the Resumed Lots. Contemporary with this finding, in Mr Charles Chan’s calculation, the European-styled house comparables, whether those adopted by himself or by Mr Lee, all have a site coverage below 20%. We did not require additional evidence or comparables for the purpose of direct comparison valuation when the market at that moment in time had support of sales of European-styled houses with a site coverage around 20%. Thus at §102 of the Judgment, we said:
54.That paved way for our discussion on the prospect of the applicant’s joint development together with the Other Owner. At §119 of the Judgment, we made reference to the case Transport for London v Spirerose Limited [2009] 4 All ER 810, [2009] UKHL 44, [2009] RVR 225, [2009] WLR 1797 where the House of Lords of the United Kingdom remarked at §7 of its judgment that “(t)he open market can be expected to attribute a premium to certainty or, conversely, to apply a discount to reflect a lack of certainty”. Indeed, in that English case, the discount was from £608,000 to £400,000, ie some 34%. 55.As acknowledged by the applicant, the European-style house comparables from the two valuation experts all have a site coverage below 20% and yielding a plot ratio of 0.4. As said in the paragraphs above, the tribunal came to the view that a maximum site coverage of 20% and a maximum plot ratio of 0.4 would most likely be permitted in respect of a building or buildings to be erected on Lot 1941A as shall be determined by the Building Authority pursuant to regulation 19(3) of the Building (Planning) Regulations, Cap 123F with vehicular access in and out of Castle Peak Road – Chau Tau. This justified our application of a nominal discount. 56.In fact, the tribunal did have “comparables” from Eden Villa in Mai Po. Upon our request, the respondent’s expert calculated it to have a higher coverage of 27.57% (and 3 storeys in height)[8]. We were content to adopt $156,100 psm as the GDV for the Typical House of the hypothetical development at §138 and arrived at an average unit rate of $60,638 psm based on the analysis of the Eden Villa comparables. Whilst appreciating that Eden Villa comprises a NTEH developments, we pointed out at §173 that it is situated at a better location where there are a number of well-established residential estates. One should not lose sight of the fact that the Eden Villa comparables were actually proposed by the applicant’s own expert and it was observed during the joint site inspection that the houses were nicely built[9]. We were even content to adopt these comparables to check our residual valuation at §178. These provided support to our view that in all probabilities, the site coverage of any proposed development of Lot 1941A would be around 20% in order to make it competitive and marketable or the discount for uncertainty would have been significant (the applicant referred to the two government land sales as recorded at §158 of the Judgment which also comprised a site coverage of 20% but with a higher plot ratio of 0.48. In our view such government land sales comparable is neither here or there as those sites had also a site coverage of 20% and were situated in another locality. More particularly, the development of Lot 1941A was still subject to a height restriction of 2 storeys (25 ft) under the Modification Letter dated 27 September 1965). 57.Then, at §179 we arrived at a discount of 5%. 58.As could be seen, this was a step-by-step valuation exercise which should not be subject to challenge. In Lingrade Development Limited v Secretary for the Environment, Transport and Works (2011) 14 HKCFAR 439, Lord Hoffmann NPJ on behalf of the Court of Final Appeal had this to say:
59.In any event, the courts have consistently recognised and deferred to the particular expertise and experience of the tribunal in the determination of issues relating to valuation which come before it [10]. The tribunal is entitled to set out the main thrust of its decision in a judgment, without having to set out, discuss and then reject, each and every contention raised[11]. 60.In our view, Grounds (3), (4) and (5) of the intended appeal should fail. Ground (6) 61.In §185 of the Judgment, the tribunal adopted a 10% “allowance” or discount for the fact that the applicant held the Resumed Lots in co-ownership with the Other Owner. 62.The applicant submits that the tribunal adopted the 10% discount based solely on its single factual finding that the applicant and the Other Owner had no agreement of any joint development of the Original Lots. This determination was made based on the common footing between the parties at trial that whether the compensation could be assessed on a joint development basis by the two co-owners (namely the applicant and the Other Owner) shall be determined by the two tests formulated in §34 of Siu Sau Kuen v Director of Lands [2013] 6 HKC 557 CA. 63.It is submitted that in examining the evidence and reaching the determination that the co-owners had no agreement of any joint development of the Original Lots, the tribunal was employing the first test of the CA judgment, namely whether there was evidence of actual proposals to jointly redevelop by the two co-owners. The tribunal, however, failed to examine the situation by the second test, namely whether there was evidence of redevelopment in the vicinity showing that a joint redevelopment of the resumed property with other property giving rise to a viable redevelopment scheme was likely within a reasonable foreseeable time scale. 64.It is submitted that the tribunal ought to have applied the second test of Siu Sau Kuen and concluded, on the evidence of the many comparable developments in the vicinity adopted by the valuation experts and the tribunal, that the second test laid down by the Court of Appeal was fulfilled: the comparable developments showed that redevelopment of the joint interests of the co-owners (the applicant and the Other Owner) giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale. Accordingly, the tribunal should not have applied the 10% discount or any discount for the co-ownership interest of the applicant. 65.The applicant further submits that the tribunal erred in law by placing reliance on the UK taxation cases at §106 of the Judgment because:
66.On this Ground (6), the applicant bases their argument on there being a common ground between the parties at trial that whether the compensation could be assessed on a joint development basis by the two co-owners (namely the applicant and the Other Owner) was to be determined by the two tests formulated in §34 of Siu Sau Kuen v Director of Lands, supra. With respect, the applicant’s argument is misplaced. 67.Without any intention to undermine the referential value of Siu Sau Kuen case, to say objectively one should observe that the context and background of Siu Sau Kuen are quite different from the present case. In that case, the property resumed was the ground floor bearing 1/6 of the equal undivided shares of the lot resumed. The tribunal in that case applied the test of whether it was satisfied on the evidence that, at the date of resumption, there were people ready to buy up properties in the subject lot with a view to collecting a site worth redeveloping. “That being so, it is not the case that the Tribunal applied a test that required it not to take account of any future redevelopment potential existing as at the date of the resumption.”[12]. “In order to avoid any confusion that might arise by formulating the relevant test in the way the Tribunal appeared to do …”, the Court of Appeal restated the test which, to a large extent, is now relied on by the applicant. 68.In the present case, the Resumed Lots comprised, in a significant part, a building land by itself pending redevelopment. Both the applicant and this tribunal believe that any prospective purchaser of the Resumed Lots, would have bought the Resumed Lots “with their eyes open, very much with the expectation that there would be some prospect of development in the future”, a phrase which we borrow from §27 of the judgment in Taylor & Taylor v The Metropolitan Borough Council of Stockport [2022] UKUT 00142 (LC). All along at trial and in making the Judgment, we had assumed the possibility of the granting of an approval by the Building Authority pursuant to regulation 19(3) of the Building (Planning) Regulations, Cap 123F. We actually proceeded to determine the market value of the Resumed Lots on joint development basis by the applicant and the Other Owner as explained in §121 to §183 of the Judgment. Therefore, the second test of Siu Sau Kuen had already been applied in the applicant’s favour. 69.In their reply submission dated 27 May 2022 at §21, the applicant contends that:
70.In light of what we said in paragraph 68 above, this further argument of the applicant should require no further discussion. 71.At this juncture, we shall emphasis that bearing in mind discount for partial interest is another matter, it is trite if not common sense that a partial interest cannot be expected to realize as much as a whole or entire interest in the open market. This basic concept is not restricted to the valuation for taxation purposes as suggested by the applicant but should be equally true for sale of land from the perspective of a willing seller in an open market. 72.By reference to the prevailing HKIS Valuation Standards 2020 at para 5.3.2, “a willing seller” is neither an over eager nor a forced seller prepared to sell at any price, nor one prepared to hold out for a price not considered reasonable in the current market. The willing seller is motivated to sell the asset at market terms for the best price attainable in the open market after proper marketing, whatever that price may be. The factual circumstances of the actual owner are not a part of this consideration because the willing seller is a hypothetical owner. 73.For instance, in Kwai Tak Ming v K S Capital One Limited & Others, HCA 679/2012 (unreported, 5 May 2016) where the value of one-third share in a shop premise in Shek Wu Hui, Sheung Shui was in dispute, valuation experts from both sides applied a discount of 15% and 35% respectively though the court ended up adopting a midway discount of 25%. 74.In the present case, the discount for the partial interest, or more particularly for the lack of control, and in the United States sometimes referred to as the costs of partitioning, is fully justified and explained in the Judgment：
75.In this regard, the applicant refers to Joy Take Development Ltd & Others v Director of Lands [2009] 4 HKC 160 where there were five applicants owning one site together on which ten 4-storey buildings were erected. Three of the five applicants only owned 4 units out of the total of 40 units. They would have been tenants-in-common but the tribunal held (and its finding was affirmed by the Court of Appeal):
76.In our view, Joy Take Development should be distinguished on facts and the conclusion there should not be inflexibly applied here in the present case because:
77.Cust v IRC (1917) 91 EG 11 laid down the normal rule for valuing one of the joint interest at a discount of 10%. We considered 10% appropriate in the present case (as opposed to the 25% in Kwai Tak Ming, supra). Ground (6) of the intended appeal should fail. Grounds (7) & (8) 78.The applicant refers to §191 of the Judgment, saying that the tribunal rejected the applicant’s severance claim on the basis of its findings that in respect of Lot 2030RP (a building lot) after the resumption, though it can no longer gain access to the Castle Peak Road – Chau Tau via the Tongue after the resumption, “we find no reason why an alternative vehicular access cannot be proposed across Lot 394D”. 79.The applicant says that the tribunal rejected the applicant’s submission for a common law right of access in §78 of the Judgment and made this further finding in §79: “No common law right of access by vehicles should be inferred” because Lot 394DRP was an old schedule agricultural lot. The applicant consider the tribunal erred in not realizing that “agricultural” nature of Lot 392cRP and 394DRP was mere descriptive, and not prescriptive, as held by the Court of Appeal in Attorney General v Melhado Investment Ltd [1983] 2 HKLR 327. 80.It is submitted that on these findings, since Lot 2030RP is separated from Castle Peak Road by Lot 394DRP and (if Lot 394DRP is not contiguous to Castle Peak Road and there is a Government strip in between) the Government Strip. There could be vehicular access through Lot 394DRP only if the owner of Lot 394DRP has a common law right of access under common law and that such right includes vehicular access right. In the absence of such common law right to create vehicular access through Lot 394DRP, after the resumption of the Resumed Lots, Lot 2030RP would be ‘landlocked’ without any chance of creating any vehicular access. Thus, assuming that the tribunal was correct in §§78-79 in rejecting a common law right of access by vehicles, the tribunal erred in law in dismissing the applicant’s severance claim in respect of Lot 2030RP. 81.We do not find the applicant’s arguments convincing for the reasons below. 82.On the argument about “agricultural” nature, with respect, those lots having “agricultural” nature do not have vehicular access is an objective fact of life, an objective observation of the real-life situation. The applicant appears to have fallen into the same trap as the applicants in Chan Kin Ming & Chan Kwai Hong v Director of Lands, LDLR 1/1985 (unreported, 25th June 1986) where the tribunal in that case had the following observation:
83.The tribunal found in that case that:
84.The applicant in that case tried to argue that agricultural land could be given higher value as they could be put to some other commercial uses such as commercial market gardens (so-called Melhado value). Comparables with vehicular access were provided by the applicant but were rejected by the tribunal which observed that the agricultural land did not have vehicular access. In the end, the tribunal adopted as comparable the sale of 3 parcels of land “which we visited by means of a concrete track or footpath passing to within 20 or 30 metres of the plots which were used, for the same type of cultivation as the subject lot”. The so-called Melhado value was not applicable in that case. 85.In our view, Ground (7) of the intended appeal should fail. 86.On Ground (8) about severance claim, the applicant says that the tribunal was wrong in finding that Lot 2030RP would enjoy a vehicular access across Lot 394DRP (and thus rejected the applicant’s severance claim) which was inconsistent with the tribunal’s ruling that no common law right of access by vehicles should be inferred. 87.With respect, the tribunal, in determining there was no loss due to the severance, actually followed the applicant’s valuation expert, Mr Charles Chan’s methodology (though adopting the tribunal’s determination of unit rates) as stated in the Judgment:
88.§191 of the Judgment further explained that:
89.That explanation was obviously based on a scheme prepared by the applicant proposing as alternative access across Lot 394D[13]. The Government did not acknowledge that there existed an access from the Resumed Lots through the “Tongue” to Castle Peak Road – Chau Tau[14]. The applicant’s planning consultant was trying hard to improve the traffic arrangement in its planning application via its letters dated 10 September 2012[15] and 8 January 2013[16], some of which is incorporated in the table in §98 of the Judgment. We have earlier determined that having reviewed the historical development of the Resumed Lots and Other Lots, in particular the circumstance that they did not abut a specified street, a maximum site coverage of 20% and a maximum plot ratio of 0.4 would most likely be permitted in respect of a building or buildings to be erected on Lot 1941A as shall be determined by the Building Authority pursuant to regulation 19(3) of the Building (Planning) Regulations, Cap 123F with vehicular access in and out of Castle Peak Road – Chau Tau. 90.The Building Authority would, after the Resumption, likely permit the planning application with vehicular access granted is one thing, the contention that the applicant enjoyed a common law right of vehicular access before the Resumption is quite another. We do not see any inconsistency between the tribunal’s ruling against common law right of vehicular access before the Resumption and the tribunal’s assessment that the Building Authority will likely approve vehicle access after the Resumption. 91.Ground (8) of the intended appeal should fail. RESPONDENT’S GROUNDS OF APPEAL 92.In their application for leave to appeal dated 25 March 2022, the respondent states five intended grounds of appeal which are elaborated in Mr Simon K C Lam’s written submission dated 6 May 2022. R’s Ground (1) 93.Mr Lam submits that the tribunal’s approach of valuing the Resumed Lots on the basis that, but for the resumption in question, the best use for these lots would be the development of European-styled luxurious houses, is inconsistent with its finding that any common law right of way of the owners of the owners of the Resumed Lots should have been overridden (ie extinguished) by statute in the year 1984 when the neighbouring land was resumed for the construction/widening of Castle Peak Road – Chau Tau. 94.It is submitted that it was the common consensus of the parties, as revealed in the numerous hypothetical development models put forward by their respective valuation experts, that should the tribunal hold that the pieces of land in question were land-locked, the best use that should be adopted for valuation purposes would be the development of New Territories Exempted Houses, not European-styled luxurious houses. 95.The tribunal has not been informed and was unaware of the existence of such a common consensus as claimed by the respondent now. In any event, in reply to the respondent’s suggestion that should the tribunal hold that the pieces of land in question were land-locked, the best use would be the development of New Territories Exempted Houses for valuation purposes, we shall emphasize once again that the valuation was not conducted based on a land-locked situation but on the assumption that the Building Authority would likely permit development with vehicular access in and out of Castle Peak Road – Chau Tau, as explained both in the Judgment and in dealing with the applicant’s leave application above which shall not be repeated. 96.In the Agreed List of Issues dated 18 February 2021[17], the issue that may be related to this suggestion of the respondent under this ground was Issue 6 which is as follows:
97.At trial, the parties had their respective primary case and their fall-back positions or development propositions. In Mr Mok’s opening submission (for the trial) dated 23 July 2021, the tribunal was invited to assess (1) compensation for the resumption of the Resumed Lots; and (2) compensation for severance for the Other Lots. The valuation experts on both sides set out their agreements and disagreements in the valuation joint statement in Bundle C2 and the tribunal was invited to resolve their differences after the site inspection and the oral evidence. In the opening submission by Mr Lam dated 30 July 2021, the tribunal was invited to resolve the differences of the valuation experts in respect of (1) The choice of comparables; (2) The adjustments to be made to the comparables; and (3) The parameters pertaining to residual valuation. It was in the course of resolving all these that a step-by-step valuation process based on the evidence available came about. It is hard to appreciate the complaint underneath this Ground (1). R’s Ground (2) 98.The respondent submits that this second ground of appeal is associated with the first ground. 99.It is submitted that neither in our valuation on the basis of European-styled luxurious development (at §166 of the Judgment), or on the alternative basis of New Territories Exempted Houses development (at §178 of the Judgment), was adjustment made to take into account the finding that the Resumed Lots did not have vehicular access, and were therefore landlocked at least as far as vehicles were concerned. 100.In §64 of the Judgment, we said “ever since the aerial photo taken in November 1945, an access running from north to south in Lot 1941A connecting to Castle Peak Road had been found”. Then at §65 of the Judgment, we agreed with Mr Mok that New Grant No 9594 of Lot 2054 dated 22 October 1965 had supported that there was an express grant, or alternatively an implied grant of access to Castle Peak Road. Therefore, the tribunal did not find that the Resumed Lots had never had vehicular access prior to the 1984 Resumption. The tribunal only found that by section 13(3) of the Roads (Works, Use and Compensation) Ordinance, the 1984 Resumption (and the 2016 resumption) had extinguished “all mortgages, charges, claims, estates, easements, rights or interests of any kind in favour of any person” which should include the former grant of access to Castle Peak Road as, opposed to the reply submission by the applicant dated 25 May 2022 at §11, the Government Strip to the south of the Tongue fell within the resumption limit[18]. It does not make sense to suggest that when the government has resumed the lands for the construction of a trunk road, an expressway or a railway, owners of the lots adjacent to it can still claim a right of way after the resumption and the construction. 101.The applicant argued that there was no order to resume any part of Lot 1941A in the 1984 Resumption. But as stated above, portion of Lot 392C which was adjacent or contiguous to Lot 1941A was resumed in the 1984 Resumption. Item 3 of Part II of the Schedule to the Roads Ordinance is the distinct provision whereby compensation may be claimed if there be extinction, by the operation of section 13(3), of any easement in favour of land not resumed when adjacent or contiguous is resumed. 102.Despite the previous extinction of easement, the tribunal took the view that the Resumed Lots would not be necessarily landlocked. It is because after reviewing “the planning documents previously published and the previous planning decisions made”, we came to the view at §101 of the Judgment that “a maximum site coverage of 20% and a maximum plot ratio of 0.4 would most likely be permitted in respect of a building or buildings to be erected on Lot 1941A as shall be determined by the Building Authority pursuant to Regulation 19(3) of the Building (Planning) Regulations, Cap 123F with vehicular access in and out of Castle Peak Road – Chau Tau.”. 103.The respondent’s intended Ground 2 is unmeritorious in our opinion. R’s Ground (3) 104.The respondent raises that ground 3 concerns the proper legal test to be applied in deciding whether the two pieces of land resumed, viz Lot 1941A (portion) and Lot 391B, ought to be valued individually (on the basis that they would be separately developed), or jointly (on the basis that they would be developed as a single site). On this question, Mr Lam contends that the tribunal was wrong in law in failing to adopt and apply the test expounded by the Court of Appeal in Siu Sau Kuen, supra. In his opinion, the tribunal was wrong in the approach of considering whether, but for the resumption, the applicant would sell “its interest expectant on the prospect of … joint development” at §104 of the Judgment, which is not the test established by the Court of Appeal. 105.Regarding this point, as discussed under the applicant’s Ground (6) above, the applicant considers that the tribunal employed the first test of Siu Sau Kuen, namely whether there was evidence of actual proposals to jointly redevelop by the two co-owners but did not examine the situation by the second test, namely whether there was evidence of redevelopment in the vicinity showing that a joint development of the Resumed Lots with other property giving rise to a viable redevelopment scheme was likely within a reasonable foreseeable time scale. 106.As we have discussed above, unlike the situation in Siu Sau Kuen, the Resumed Lots comprised, in a significant part, a building land by itself pending redevelopment. The tribunal shared the applicant’s view that any prospective purchaser of the Resumed Lots would have bought the Resumed Lots “with their eyes open, very much with the expectation that there would be some prospect of development in the future”. Indeed, the applicant or its predecessor had been pursuing this actively since its acquisition:
107.We were of the view that a willing seller would not sell its interest in the Resumed Lots for a price that did not reflect the substantial development value inherent in its interest[19]. In fact, the two tests in Siu Sau Kuen were considered and applied. The tribunal actually proceeded to determine the market value of the Resumed Lots on joint development basis, just that a discount of 10% was applied to reflect the fact that applicant did not hold the entire or the controlling interest in the Resumed Lots. We believe this intended ground of appeal is misconceived. R’s Ground (4) 108.The respondent submits that the tribunal was wrong in principle in rejecting all the comparables for the agricultural land (ie Lot 391B) proposed by the respondent’s expert, in circumstances where, despite their deficiencies, they were the only comparables before the tribunal. 109.Mr Lam relied particularly on Zabihi v Janzemini [2009] EWCA Civ 851 which was an appeal from the High Court, Chancery Division. In that case, the valuation of certain missing converted jewellery was in issue. Blackburne J made reference to paragraph 280 in McGregor on Damages 17th Ed:
110.The English Court of Appeal remarked at §29 that:
111.Mr Lam also relied on Lehman & Co Management Ltd v Effiscient Ltd, HCCW 377/2010 (unreported, 28 November 2012) where Harris J, after quoting with approval English authorities including Biggin v Permanite [1951] 1 KB 422, and McGregor on Damages, said at §41:
112.With respect, unlike the High Court, Chancery Division in the United Kingdom or the Court of First Instance in winding-up proceedings of companies, the Lands Tribunal is a specialist tribunal and the Presiding Officer sits with a member who possesses the relevant professional qualification in surveying and valuation. Section 10(6) of the Lands Tribunal Ordinance, Cap 17 provides as follows:
113.The Lands Tribunal is not bound to accept the submission of any party and may rely upon its own experience in determining the dispute under LRO. We agreed with Mr Mok who appeared for the applicant at trial that all the comparables for the agricultural land proposed by the respondent’s valuation expert suffered from a lot of deficiencies[20]. We therefore decided to follow the approach of the applicant’s expert[21]. 114.We consider this proposed ground of appeal unmeritorious. R’s Ground (5) 115.The respondent submits that Ground 5 is an amalgamation of Ground (3) and Ground (4). 116.Mr Lam submitted that it is wrong in principle to “follow [the applicant’s expert]’s approach in valuing the Resumed Lots on a single site basis”, apparently as a consequence of rejecting the comparables submitted by the respondent’s expert. Mr Lam further submitted that the consequence of total absence of valuation evidence is to award nominal compensation instead of amalgamating the lot with another piece of land to conduct valuation on a joint basis. 117.With respect, we are of the view that the comparables submitted by the respondent’s expert were no comparables at all. The tribunal had the evidence of the applicant’s valuation expert and was entitled to follow the applicant’s expert’s approach in valuing the Resumed Lots on a single site basis. 118.In Cardtronics UK Ltd v Sykes (VO) [2020] UKSC 21, [2020] 1 WLR 2184 at §4:
119.Further the remark of the Irish Court of Appeal in Stanberry Investments Ltd. v Commissioner of Valuation [2020] IECA 33 at §51 is pertinent:
120.In our view, this proposed ground of appeal is unmeritorious. CONCLUSION 121.By reason of the above analyses, we are of the view that both the applicant’s intended appeal and the respondent’s intended appeal have no reasonable prospect of success nor is there any other reason in the interests of justice why the appeal should be heard. Parties’ respective application for leave to appeal are refused. 122.Consequential to such outcome, we make an order nisi that there be no order as to costs between the parties which order shall become absolute absent any application for variation within 14 days from the date hereof.
Mr Benjamin Yu, SC, leading Mr Mok Yeuk Chi and Ms Julia Au, instructed by Messrs Mayer Brown, for the applicant Mr Simon K C Lam, instructed by Department of Justice, for the respondent [1] The same provision can be found at §50 of the Judgment. [2] Indeed, the Legislative Council Brief dated 30 June 2005 on the new regulation specifically gave an example that “Open space allocated to government departments would not meet this criterion” : https://www.legco.gov.hk/yr04-05/english/subleg/brief/110_brf.pdf [3] See the plan attached to that judgment which is now reproduced as Appendix to this judgment. [4] See Bundles C2/3/430 & 431 E4/65/1036, E4/66/1037, F/18/034 & 035 and F/19/050-058. [5] See Bundle F/16/028. [6] See §§38 & 42 of the Judgment. [7] Bundle D/055. [8] See Exhibit R7. [9] See Inspection Bundle pp106-116. [10] See Myers v. South Lakeland District Council [2005] EWCA Civ 498, [2005] RVR 301, Checkpoint Limited v Strathclyde Pension Fund [2003] 14 EG 124, [2003] EWCA Civ 84 and Commissioner of Rating and Valuation v Agrila Ltd & others (2001) HKCFAR 83. [11] See Chan Shiu Hong & Another v Director of Lands, CAMP 54, 55 & 56/2019 (unreported, 11 July 2019). [12] See §31 of the Court of Appeal judgment. [13] Bundle C1/1/103. [14] See §75 of the Judgment. [15] Bundle E2/33/296. [16] See Bundle E3/40/613-614. [17] See Bundle A/12/49-50. [18] See the magnified part print of the 1984 resumption plan No NDR 37D at Bundle D/1/055. [19] See Cravecrest Ltd v Duke of Westminster & Others [2012] UKUT 68 (AAC) at §74. [20] See §146 of the Judgment. [21] See §147 of the Judgment. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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