Yield-the-best Ltd v. The Secretary for Transport and Housing
Read the full judgment text of LDMR 1/2021 on BabelCite. This LDMR judgment was delivered on 21 December 2023.
1. On 2 August 2023, we handed down a judgment (“the Judgment”) [1] which, inter alia , ordered that the respondent do pay the applicant compensation for the resumption of certain lots in Fanling, New Territories (“Subject Lots”) in the sum of $21,005,000. At the material times, the Subject Lots were used as brownfield sites. Our order was made on the principal ground, contrary to the submissions and evidence of the applicant, that the value of the temporary structures erected on the Subject Lot
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LDMR 1/2021 [2023] HKLdT 75 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MISCELLANEOUS REFERENCE APPLICATION NO 1 OF 2021 ___________________ BETWEEN
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__________________ D E C I S I O N __________________ 1.On 2 August 2023, we handed down a judgment (“the Judgment”)[1] which, inter alia, ordered that the respondent do pay the applicant compensation for the resumption of certain lots in Fanling, New Territories (“Subject Lots”) in the sum of $21,005,000. At the material times, the Subject Lots were used as brownfield sites. Our order was made on the principal ground, contrary to the submissions and evidence of the applicant, that the value of the temporary structures erected on the Subject Lots was to be disregarded: see §10 to 14, 56, 57, 64, 65 & 120 of the Judgment. 2.This is applicant’s application for leave to appeal against the Judgment on the grounds more particularly elaborated in the Affirmation of Lui Yue Yun Gary (“Mr Lui”) dated 30 August 2023 and the draft Notice of Appeal exhibited thereto. Legal Principles for Appeal 3.Under s.11(1)(a) of the Lands Tribunal Ordinance (“LTO”), a decision of the Tribunal in determining the amount of compensation payable by the Government (acting on whose behalf, the Secretary for Transport and Housing) shall be the final determination thereof. However, under s.11(2) of the LTO, any party to the proceedings before the Tribunal may appeal to the Court of Appeal against a judgment of the Tribunal on the ground that such judgment is erroneous in point of law, subject to s.11AA. 4.S.11AA(1) of the LTO requires leave to be granted by the Tribunal or the Court of Appeal before an appeal under s.11(2) can be made. S.11AA(5)(a) of LTO provides that leave to appeal may be granted in respect of a particular issue arising out of the judgment. S.11AA(6) of LTO further provides that leave to appeal shall not be granted unless the Tribunal is satisfied that:
5.Such criterion of “reasonable prospect of success” was described in SMSE v KL [2009] 4 HKLRD 125 at para 17 by Le Pichon JA (as she then was) as involving the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful” without having to be “probable”. 6.Even if it is not demonstrated that the appeal has any reasonable prospect of success, there may be many reasons why leave should still be granted in the interests of justice. For example, the issue may be one which the court considers should in the public interest be examined by appellate court or the court may take the view that the case raises an issue where the law requires clarifying: Ma Bik Yung v Ko Chuen [2009] 3 HKC 359, 361B-C. Merits of Grounds of Appeal 7.There are altogether 4 Grounds in the draft Notice of Appeal. We shall first consider Grounds 1 and 2 as a group, Ground 3 thereafter and, finally, Ground 4 on their respective merits. Grounds 1 & 2 - Non-Application of Paragraph 5 and Misapplication of Section 12(b) of LRO 8.To understand theses 2 Grounds, we repeat below the key legislative provisions set out in the Judgment. 9.In the present case, the portions of the Subject Lots resumed, i.e. the Resumed Land particularised at §20 of the Judgment were resumed on 27 December 2019 pursuant to s.13 of Roads (Works, Use and Compensation) Ordinance[2] (“the Ordinance”). 10.S.38(a) of the Ordinance reads: “Except to the extent that provision is otherwise made in this Ordinance – (a) the Lands Resumption Ordinance (Cap.124) (“LRO”) shall not apply to the resumption of any land ordered under section 13 nor to any claim for or determination, award or payment of compensation for such resumption”. 11.Also, s.27(1) of the Ordinance reads: “The compensation referred to in section 26 is the right to recover from the Government for the matters set out in the first column of Part II of the Schedule a sum assessed on the basis specified opposite thereto in the second column thereof and with regard to the provisions of Part I of the Schedule, subject to – (a) … ; and (b) the other provisions of this Ordinance.” 12.Part I of the Schedule to the Ordinance (“the Schedule”) starts with paragraph 1 (“Paragraph 1”) which states as follows:
13.Part II of the Schedule sets out 9 items for which compensation may be claimed under the Ordinance. For present purpose, item 1 is our concern and is set out below (with bold supplied):
The basis on which compensation is to be assessed on other items of Part II of the Schedule (e.g. items 6 and 7) is different from that of item 1 i.e. not by reference to LRO. 14.For this application, the applicant has taken issue on paragraph 5 in Part I of the Schedule (“Paragraph 5”) which reads:
15.To put Paragraph 5 in its proper context, we also set out Paragraph 6 in Part I of the Schedule (“Paragraph 6”) which reads:
16.As the applicant submitted, this application involves the interface between the Ordinance and LRO. Hence, it is also necessary for us to set out ss.12(b), (c) & (d) of LRO below.
17.For this application, the applicant principally relied (and its contention is based) on §20.50 of Land Compensation & Valuation Law in Hong Kong by Gordon N Cruden and Liza Jane Cruden, 4th (2017) Edition, where the learned authors commented on Paragraph 5 as follows:
18.On the above 2 Grounds, the applicant first complained that the Judgment was per incuriam, in that the Tribunal had explicitly failed to apply Paragraph 5, failed to make findings of what was “just and equitable” in deciding what (a) compensation may be reduced in the first place, and (b) if so, to what extent such compensation should be reduced in respect of any building built in contravention of the Government Lease pertaining to the Subject Lots. Even if compensation ought to be reduced under Paragraph 5, the applicant complained, the Tribunal was wrong to entirely disregard the existence of all the temporary structures, reject the rental income approach, and perform an assessment purely on the basis of “Melhado” use. 19.The Tribunal, it was further complained, erred in ruling that it was obliged under s.12(b) to disregard enhancement in value attributable to temporary structures erected on the Subject Lots in contravention of the Government Lease. In particular, it failed to properly construe or apply Paragraph 1(b) and, as a result, wrongly determined that, as a starting point, Item 1 in Part II of Schedule allows all LRO provisions, including s.12(b), to be applied in assessing compensation for land resumed under s.13 of the Ordinance. 20.The Tribunal, it was said, also erred in concluding that Paragraph 5 was merely “additional” to the LRO and would “never prevail” over s.12(b) when both provisions are triggered on the facts. In ruling that they were not inconsistent or in conflict with each other, the Tribunal took into account, it was said, erroneous or irrelevant considerations by postulating that there could be “hypothetical scenarios where a building constructed “in contravention of a Government Lease” under Paragraph 5 might not also fall afoul of s.12(b). However, whether the 2 provisions are inconsistent or in conflict with each other must logically be determined when the facts fall within the ambit of both provisions, and the only relevant factual circumstances must be those before the Tribunal. 21.Finally, the applicant complained that the Tribunal had impermissibly construed Paragraph 5 well beyond what its natural words were capable of bearing to avoid contradicting s.12(b). It ignored the fact that s.12(b) is drafted imperatively whilst Paragraph 5 is drafted in permissive terms and operates on a purely discretionary basis. It accordingly failed to determine how Paragraph 5 ought to be read as a matter of construction. It failed to consider or give sufficient weight to the clear and unequivocal wordings in s.38 of the Ordinance, which disapply LRO by default unless provisions is otherwise made in the Ordinance. It erred in law by relying on non-contemporaneous legislative materials for other statues as a primary (if not sole) aid for interpreting Paragraph 5 without complying with the Pepper v Hart rule and other prohibitions against the use of extrinsic materials. For the same reasons, the Tribunal had insufficient basis to hold that s.12(b) and Paragraph 5 were enacted to deal with “different subject matters”. 22.By advancing the aforesaid, the applicant is, we think, regurgitating the same submissions it had previously made before we handed down the Judgment. 23.While we are not going to repeat all the discussions we made in the Judgment to lead us to agree with Ms Ling for the respondent that Paragraph 5 and s.12(b), dealing with different subject matters, is not inconsistent nor in conflict with one another and thus Paragraph 5 is an “additional” provisions under Paragraph 1(a) that never prevails over s.12(b), we would like to repeat and stress the following points.
24.Regarding the views of the learned authors of Land Compensation & Valuation Law in Hong Kong, we cannot but state that their observations on Paragraph 5 cannot stand against its purpose, text and context, the general law of resumption and other similar resumption ordinances, general principles of statutory interpretation, and the case of Hon Mei Hing trading as Wing Tat Iron and Steel Engineering v The Secretary for Transport, unreported, LDMR 19/2000, 30 November 2001 (cited at §83 of the Judgment), not referred to therein. At §6.2 of this review decision, the Tribunal has seen fit to give similar paragraph 5 of the Schedule to Railways Ordinance a short shrift by stating that it “cannot see how this paragraph can be of any assistance to the Applicant”. 25.For the above reasons we have stated in the Judgment, we do not find applicant’s interpretation of Paragraph 5 sustainable at all. Ground 1 and Ground 2 do not, we think, have any reasonable prospect of success. Ground 3 – Abandonment by Acquiescence / Waiver 26.We have dismissed in the Judgment this 2nd argument also raised by the applicant in order to require value of temporary structures erected on the Subject Lots to be taken into account. 27.For the present application, the applicant complained that, in dismissing its case of abandonment regarding restrictive covenants in the Government Lease, the Tribunal erred in failing to recognize that:
28.By way of background to Ground 3, the Subject Lots are held on Government Lease subject to restrictions by way of user covenant and building covenant: see §36 of the Judgment. At various parts of the judgment, we have made factual findings as to applicant’s use of the Subject Lots, and its dealings with the Government over the aforesaid restrictions, over the years: see §21 to 29, 42 to 55 of the Judgment. On parties’ agreement, witness statements of Mr Lui and others have been admitted into evidence without cross-examination: see §15 of the Judgment. 29.In reply to applicant’s submissions on this ground of appeal, we find it best to repeat our observation on the evidence at §118 of the Judgment (with our emphasis in bold).
30.At §119 of the Judgment, we have also stated our views which are repeated below (with our emphasis in bold).
31.Looking at, inter alia, §102, §103, §104(1) to (3) & (7), §118(4) to (7) and §119(1), (2) & (8) of the Judgment, we think that there cannot be any doubt that we have recognized that a presumption of abandonment arises where a covenant affecting real property has been openly and uninterruptedly broken for more than 20 years but that the facts of this case fall short of that such that the said presumption did not arise, unlike the different and stronger factual circumstances in Cheermark Investment Limited & Another v Director of Lands [2018] 1 HKLRD 79 and in Attorney General of Hong Kong v Fairfax Ltd [1997] HKLRD 243 that allowed the plea to succeed: see §114 & 117 of the Judgment. 32.We have in the above process applied the well-established principles applied in Attorney General of Hong Kong v Fairfax Ltd [1997] HKLRD 243 to the evidence of this case, albeit in the circumstances and conditions prevailing in Hong Kong in 1990’s to 2010’s and not those of 19th century England: see §116 of the Judgment. For avoidance of doubt, we have never “departed” from the above principles as complained by the applicant. 33.In the above process, we are also well aware that the essential ingredient of abandonment is “assent or lying by” on the part of the Government in relation to the applicant’s breaches. On that, Ms Ling has already cited to us The Incorporated Owners of Freder Centre v Gringo Ltd [2016] 2 HKLRD 190 (see §111 & 112 of the Judgment) and we have applied the said principles in that case at, inter alia, §118(3), (8) to (13) and §119(4) to (7) of the Judgment. 34.While acquiescence does not require the applicant to show that there has been unequivocal representation by the respondent that it would forego its right, such communications shed light, we think, on the belief of Mr Lui on behalf of the applicant: see, inter alia, §118(8), (11) & (12) and §119(2), (4) to (7) & (9) of the Judgment. 35.With due respect, the mere fact that Mr Lui was not subject to cross-examination by no means shut down the analytic faculties, or ties the hands, of the Tribunal as a fact-finding tribunal. We do not think that we are obliged at law to take at face value whatever Mr Lui has said in his witness statements: see Chan Chi Ling Elwyn v Richfield Realty Ltd, unreported, HCLA 9/2013, 11 July 2014, §108. 36.In giving no weight to Mr Lui’s bare assertions in his witness statements as we did at §104(9), §119(7) (and §26) of the Judgment, our reasons for the same are apparent in the Judgment for Mr Lui to read. With respects, Mr Lui’s own words, conducts and documents referred by us at §26, 118(11), (12) and (13) of the Judgment, and at §119(6) & (7) of the Judgment have betrayed Mr Lui himself. 37.Moreover, the rule of Browne v Dunn is not inflexible. It is not broken even though a material matter is not put to a witness if the witness can fairly and objectively be said to be on notice of it: Chan Chi Ling Elwyn v Richfield Realty Ltd, supra, §54 & 107. 38.As a matter of procedural history, the documents evidencing the 2000 Waiver Application, the 2001 Amended Waiver Application and the 2017 Waiver Application (produced as exhibits to Affirmation of Fung King Wat (“Mr Fung”)[4] dated 9 February 2023 (“Fung’s Affirmation”) were disclosed by way of respondent’s list of documents filed on 20 February 2023, after leave was given by the Tribunal at pre-trial review held on 17 February 2023. 39.Mr Fung has made it clear in Fung’s Affirmation that the aforesaid exhibits to Fung’s Affirmation are relevant to the issue whether the Government had abandoned the restrictive covenants in the Government Lease and they tend to show that applicant’s allegation that the Government had taken no action to enforce them for more than 25 years is incorrect (see e.g. §21(1), (2) & (4) of Fung’s Affirmation). 40.It was pursuant to leave of the Tribunal given at pre-trial review that Mr Lui made his supplemental witness statement dated 3 March 2023 in reply to Fung’s Affirmation and the exhibits thereto (see §2 thereof) and claimed, for the first time, that circumstances referred by him therein “led me to believe that the Government would not enforce the restrictive covenant” (see §13 thereof). 41.Against the above background, the applicant (and Mr Lui) can, we believe, fairly and objectively be said to be on notice that applicant’s claim of alleged abandonment of restrictive covenants on the part of the Government (and Mr Lui’s corresponding belief to the same effect) is not accepted by the respondent, notwithstanding that Mr Lui was not required to be cross-examined. In the circumstances, we do not believe that the rule of Browne v Dunn was broken in this case. 42.For the above reasons, we also find Ground 3 without merit. It is no more than a dressed-up attack on our factual findings which are not allowed under LTO. Ground 4 – Reliability of Income Method 43.On this ground, it is complained that, in discrediting the tenancy records[5] supporting the income method of valuation, the Tribunal remarked that even earlier tenancies made after 31 December 2015 were unreliable as the Government had announced the Resumed Land “shall be resumed” and reverted to the Government on 31 December 2015, pursuant to s.13 of the Ordinance. The Tribunal erred, it was said, in so holding, as:
44.In order to deal with this ground, we need to start with the valuation difficulties faced by the applicant. 45.In the present case, applicant’s valuation expert (“Ms Lau”) dropped the usual direct comparison approach but relied on the income approach in assessing the market value of the Resumed Land. At §136 of the Judgment, we recorded that Ms Lau had fallen into the impasse that she was left with no comparable for the income approach. At §138 of the Judgment, Ms Lau, we recorded, tried to make use of prevailing tenancy information for Portion A and Portion B of the Subject Lots to overcome the impasse. Unfortunately, we found at §140 of the Judgment that Ms Lau had made wrong assumptions in forming two simultaneous linear equations in order to solve the problems. And at §143 of the Judgment when we tried to rewrite the simultaneous linear equations, no solution could be found as the equations are illogical. 46.Then we remind ourselves at §144 to 146 of the Judgment that we should not rely on transactions (or rental) of the Subject Lots when the resumption itself was forthcoming, citing several authorities that were derived from Pointe Gourde Quarrying and Transport Co. v Sub-Intendent of Crown Lands [1947] AC 565 – commonly known as the Pointe Gourde principle. 47.Eventually, at §147 of the Judgment, we refer to §2 of the Judgment where we note that the Government announced on 31 December 2015 that the Resumed land shall be resumed from the Subject Lots to facilitate the Bypass Construction. 48.In so far the applicant complained that there is no evidence to support §147 of the Judgment, this is, we think, incorrect. Respondent’s valuation expert (“Ms Ng”) had stated clearly at §1.6 of her Expert Report dated 8 February 2022 as follows:[6]
Ms Ng then at §1.7 of the same report referred to GN5965 published on 26 September 2019 (GN5965 was cited at §4 of the Judgment). 49.It was against the aforesaid background that we approached at §147 of the Judgment the latest tenancy agreement dated 29 November 2019 for Portion A (i.e. soon after publication of GN5965 on 26 September 2019). Of particular interest is its clause 14 which stated that, even though resumption was imminent, the tenant company was prepared to continue paying the increased rental of $250,000 per month stated in the said agreement. It reads in Chinese as follows.
50.The contents of the aforesaid Chinese clause are, we think, contradictory to the contents of witness statement of one Mr Chan Hoi Yuen Peter (“Mr Chan”), the majority shareholder and director of the said tenant company of Portion A. As recorded at §32 of the Judgment, Mr Chan claimed on the other hand that that, owing to the resumption, Portion A would be substantially reduced and could not meet his operational needs. His company therefore moved out from Portion A to Sha Tau Kok, New Territories in or about the end of October 2020 i.e. soon after the date of Reversion. Such inconsistency, we think, casts doubt on reliability of the said increased monthly rental of $250,000 for Portion A. 51.Hence, we took the view that §148 of the Judgment that this latest tenancy over Portion A in December 2019, and latest tenancy for Portion B in February 2020, should be disregarded for assessment purpose under Pointe Gourde principle. 52.While we added at §148 of the Judgment the words “even the earlier tenancies entered after 31 December 2015 were questionable for that purpose”, such market information, if any, is questionable not because of its unreliability per se as was the case with latest tenancy in December 2019 for Portion A. They are questionable by reason of the application of Pointe Gourde principle only. 53.As the several authorities we quoted at §144 to 146 of the Judgment show, “the affect of a resumption scheme on market value is at least liable to occur from the date of formal public notification. In many cases, it may occur even earlier, particularly where the likelihood of a future resumption is well-known”. 54.We fully agree with the respondent that, so long the aforesaid tenancies entered after 31 December 2015 may have been affected by the resumption scheme in question, they are questionable by reason of Pointe Gourde principle. The precise timing at which the applicant or its tenants knew that portions of the Subject Lots were to be resumed in irrelevant to the issue of compensation. 55.Hence, though Mr Lui and Mr Chan were not called to the stand to be cross-examined on the precise timing the applicant or its tenants knew that portions of the Subject Lots were to be resumed, those tenancies entered after 31 December 2015 remain questionable by reason of Pointe Gourde principle as we have determined in the Judgment. 56.In any event, as the latest monthly rental of $250,000 paid for Portion A, or that $190,000 paid for Portion B, included the benefits and enjoyment of temporary structures erected on the Subject Lots that have to be disregarded, they should not be considered in determining market value of the Subject Lots under LRO in the first place: see §149 of the Judgment. 57.In the premises, like Grounds 1 to 3, Ground 4 enjoys on appeal no reasonable prospect of success either. Other reason in the interests of justice 58.On top of its submissions on the merits of its 4 Grounds, the applicant submitted that the interrelationship between Paragraph 5 and s.12(b) (i.e. Grounds 1 and 2) warrant appellate clarification and guidance in all the circumstances and that leave to appeal on these 2 grounds should also be granted under s.11AA(6)(b) of LTO. 59.Prior to this case, there is indeed, as the applicant submitted, no previous authority discussing, or analysing, the relationship between s.12(b) and Paragraph 5. 60.The only authority that the respondent cited on this issue i.e. Hon Mei Hing trading as Wing Tat Iron and Steel Engineering v The Secretary for Transport, supra, concerns similar paragraph to Paragraph 5 in the Schedule of Railway Ordinance[7]. This is a 2001 review decision. Unfortunately, the Tribunal had not discussed the matter in any details on that earlier occasion. 61.As we recorded at footnote 38 of the Judgment, the commentary of Paragraph 5 in Land Compensation & Valuation Law in Hong Kong that the applicant relied upon first appeared in its 2nd (1999) edition. It has remained until today in its current 4th (2017) Edition for practitioners’ guidance. 62.As we recorded at §93 of the Judgment , similar paragraphs to Paragraph 5 appear in 4 other resumption-related ordinances on top of the Ordinance[8] i.e. Mass Transit Railway (Land Resumption and Related Provisions) Ordinance[9], Railway Ordinance, Land Drainage Ordinance[10], and Water Pollution Control (Sewerage) Regulation[11]. The first of these 5 paragraphs appeared in 1974 (or 1982), and 4 of these paragraphs remain in our statute book today. 63.While we hope we have clarified the relationship between Paragraph 5 and s.12(b) by the Judgment, it is, we believe, not binding on our other colleagues at Lands Tribunal. 64.Though we are told by the respondent at the hearing on 25 September 2023 that there is no outstanding case touching the relationship between Paragraph 5 and s.12(b), we cannot rule out future cases touching the same issue in view of continued commentary in Land Compensation & Valuation Law in Hong Kong about a change in the law and presence of similar paragraphs to Paragraph 5 in, at least, 3 other resumption-related ordinances in our statute book. 65.This is all the more so as disputes involving whether or not value of temporary structures erected in brownfield sites in breach of restrictive covenants in Government Lease should be considered may likely increase in future in view of the development of Northern Metropolis and other planned and potential developments in the New Territories by the administration. 66.For the above reasons, we come to conclude that it would be in the interests of justice that leave to appeal on Grounds 1 and 2 be granted to the applicant. Disposition 67.Accordingly, pursuant to s.11AA(6)(b) of LTO, we grant the applicant leave to appeal against the Judgment on Ground 1 and Ground 2 of the draft Notice of Appeal exhibited in Affirmation of Mr Lui dated 30 August 2023. Save except for such leave, the rest of applicant’s Form 1 application filed on 30 August 2023 be dismissed. And we make a costs order nisi that 60% of the costs of this application be in the cause of the appeal.
Mr Victor Dawes SC, leading Mr Adrian Kwan, instructed by Jal N Karbhari & Co, Solicitors & Notaries, for the Applicant Ms Ebony Ling, instructed by the Department of Justice, for the Respondent [2] Cap.370 [3] Cap.123 [4] Mr Fung is an acting Senior Estate Surveyor/3 (New Development Area Section) of the Lands Department [5] They are summarized at §30 of the Judgment [6] See Bundle B(I)/2/134 [7] Cap.519, enacted in 1997 [8] Enacted in 1982 [9] Cap.276, enacted in 1974 [10] Cap.446, enacted in 1994 [11] Cap.358AL, enacted in 1994 |
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