Leverson Ltd v. Secretary for Transport
Read the full judgment text of LDMR 32/2000 on BabelCite. This LDMR judgment was delivered on 19 September 2003.
1. This is an application for determination of the amount of compensation under the Roads (Works, Use and Compensation) Ordinance, Cap.370 ("the Ordinance"). The Applicant is the owner of Tsuen Wan Inland Lot No. 5 in DD399 ("the Lot"). The Lot has a registered area of 5,780.3 sq.m. It used to have a bungalow situated thereon and known as Ormes Bungalow, Ting Kau, Tsuen Wan, New Territories, Hong Kong.
Cited by 3 cases · Cites 3 cases
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LDMR 32/2000 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION Miscellaneous Reference Application No. 32 of 2000
Coram: Deputy Judge WONG, Presiding Officer of the Lands Tribunal and Mr. W.K. LO, Member of the Lands Tribunal Dates of Hearing: 20, 21, 22, 23, & 24 January 2003 and 18, 19, 20, 23, 24, 25, 26, 27 & 30 June 2003 Date of Judgment: 19 September 2003 _________________________ J U D G M E N T _________________________ Background 1.This is an application for determination of the amount of compensation under the Roads (Works, Use and Compensation) Ordinance, Cap.370 ("the Ordinance"). The Applicant is the owner of Tsuen Wan Inland Lot No. 5 in DD399 ("the Lot"). The Lot has a registered area of 5,780.3 sq.m. It used to have a bungalow situated thereon and known as Ormes Bungalow, Ting Kau, Tsuen Wan, New Territories, Hong Kong. 2.By a Notice under Section 16 of the Ordinance, i.e. Government Notice No.1723 dated 12 May 1994, the Government created the following easements:-
3.The second easement as aforesaid was of temporary nature and does not concern the present application. The first and third easements (collectively referred to as "the Easements") are both permanent and form the subject matters of the dispute in this application. The effective date for the creation of the Easements was on 12 August 1994, three months after the date of the Notice. The Easements were created to facilitate the construction of the Tin Kau Bridge and its Approach Road. The Applicant contends that there is a diminution in value of the Lot as a result of the creation of the Easements and hence claims for compensation under Item 2(a) of Part II of the Schedule to the Ordinance. Basis of compensation 4.Section 27(2) of the Ordinance provides that every person who is described in the third column of Part II of the Schedule shall have the right to recover compensation for the matters set out opposite thereto in the first column to the extent suffered or incurred by him as assessed under the Ordinance. There is no dispute that the Applicant is such a person qualified under Section 27(2) and the third column of Part II of the Schedule to the Ordinance to claim compensation in respect of the Easements. 5.According to Item 2(a) of Part II of the Schedule to the Ordinance, the basis on which compensation is to be assessed in the case of an easement or other permanent right is "the amount by which the open market value of the claimant's interest in the land is diminished." There is dispute in relation to the interpretation of this provision. The issues 6.According to the Respondent, there are four main issues in dispute and they are:-
Whole or portion of the Lot to be compensated 7.The first issue raises an important question of law. It concerns the proper construction of the Ordinance, in particular, Sections 2, 5, 15, 16, 27 and Part II of the Schedule. Section 15(1) of the Ordinance stipulates that:-
8.The question is: when the Government exercises its power under Section 15(1) to create an easement in, under or over a piece of land, is it the intention of the Ordinance that compensation should be assessed by reference only to the effect of creation of easement on that portion of land which is subject to the creation of the easement, ignoring the effect on the rest of the land, or is it the intention of the Ordinance that the owner of the plot of land be compensated for the diminution in value of the whole of his land as a result of the creation of the easement? General principles of statutory interpretation 9.The object of all interpretation of a statute is to ascertain the intention of the legislature as expressed in the statute, considering it as a whole and in its context, and acting on behalf of the people. The meaning of an enactment that corresponds to this intention is known as the "legal meaning". The legal meaning may or may not correspond to the grammatical or literal meaning: Halsbury's Laws of England, 4th ed. reissue, vol. 44(1), para. 1372. It is the meaning arrived at by applying to the enactment, taken with any other relevant and admissible material, the rules, principles, presumptions and canons which govern statutory interpretation. These may be referred to as the interpretative criteria, or guides to legislative intention: Halsbury's Laws of England, ibid, para. 1373, and Bennion: Statutory Interpretation, 4th ed. (2002), p.14. This approach was endorsed and applied by the Court of Final Appeal in Medical Council of Hong Kong v. Chow Siu Shek (2000) 3 HKCFAR 144, and followed in Jade City International Ltd. v. Director of Lands, Civil Appeal No. 2631 of 2001. 10.There is however a plain meaning rule. It is a rule of the common law that where the enactment under inquiry is grammatically capable of one meaning only and, on an informed interpretation of that enactment, the interpretative criteria raise no real doubt as to whether that meaning is the one intended by the legislator, then the legal meaning of the enactment is taken to correspond to that grammatical meaning: Halsbury's Laws of England, ibid, para. 1391. There is also a presumption favouring literal meaning, i.e. prima facie, the legal meaning of an enactment as it applies to particular facts is presumed to be that which corresponds to the literal meaning of the enactment in relation to those facts: Halsbury's Laws of England, ibid, para. 1470. 11.On the other hand, it is presumed to be the legislator's intention that the court, when considering which of the opposing constructions of the enactment corresponds to its legal meaning, should assess the likely consequences of adopting each construction, both to the parties in the case and (if and when similar facts arise in future cases) for the law generally. If on balance the consequences of a particular construction are more likely to be adverse than beneficent, this is a factor telling against that construction: Halsbury's Laws of England, ibid, para. 1471. The court should find against a construction that creates an anomaly or otherwise produces an irrational or illogical result: Halsbury's Laws of England, ibid, para. 1480. 12.The entire statute should be read and construed as a whole. Construction as a whole requires that, unless the contrary appears, every word in the statute should be given a meaning, the same word should be given the same meaning, and different words should be given different meanings: Halsbury's Laws of England, ibid, para. 1484. In Medical Council of Hong Kong v. Chow Siu Shek, ibid, at 154B, Bokhary PJ said this :-
13.Both parties adopted the aforesaid principles in construing the Ordinance, but in doing so they came to different conclusions. The parties' contentions 14.The Applicant contends that upon a literal construction of the relevant provisions of the Ordinance, the Government is authorized by Section 15(1) to create an easement or other permanent rights over the land of a person, and Section 27(2) confers on that person the right to recover compensation to the extent suffered or incurred by him, whilst Item 2(a) of Part II of the Schedule makes it plain that he is to be compensated for the amount by which the open market value of his interest in the land is diminished. There is no room for any suggestion that the person should be compensated on the supposition that the loss to him is confined to the portion of land over which the easement or permanent right is created. Furthermore, this construction is confirmed by other provisions in the Ordinance, such as Section 15(8) and Section 16(1), as the reference to "the land" in those sections must be a reference to the whole of the land of the owner. 15.The Respondent however contends that upon the proper construction of the Ordinance, compensation can only be claimed in respect of the portion within the Lot falling within the easement area, not the whole of the Lot. The Respondent also contends that compensation is for diminution in value caused by the creation of the Easements, not exercise of the Easements, and the Applicant has failed to prove any loss. It is further contended that compensation is for the taking of the Applicant's interest in part of the Lot, not for injurious affection to the Lot. The literal meaning 16.Under Section 15(1) of the Ordinance, the Chief Executive may by order direct that easements or other permanent rights in, under or over land and rights of temporary occupation of land in the works area which easements and rights were proposed in the scheme mentioned in Section 5 should be created in favour of the Government for the purposes of or incidental to the works or the use. The Applicant's claim for compensation is under Item 2(a) of Part II of the Schedule to the Ordinance, which reads as follows:-
17.The Respondent submitted that upon the literal and proper construction of Section 15 and Item 2(a) of Part II of the Schedule, compensation for diminution is value under Item 2(a) can only be claimed:
18.The first contention of the Respondent is that "the land" must fall within the "works area". If the land is outside the "works area", the Secretary for the Environment, Transport and Works ("the Secretary") has no power to create an easement over it at all. Section 2 of the Ordinance defines "works area" to mean "the land delineated in the plan prepared under section 5". Section 5 of the Ordinance stipulates that:-
19.The second contention is that "the land" in question is the land in, under or over which an easement or permanent right is created or occupied pursuant to rights of temporary occupation created (see Section 5(b)(iii) of the Ordinance). Section 15(4) of the Ordinance stipulates that:-
20.The Respondent contends that "the benefits and obligations thereof" means "the benefits and obligations of the easement created in, under or above the land within the works area under Section 15(1)". Such benefits and obligations can only be enforced against the persons having an estate, right, share or interest in the same land, i.e. the land within the works area in, under or above which the easement is created under Section 15(1). Compensation under Item 2(a) is therefore for the loss of such an estate, right, share or interest in the land within the works area in, under or above which the easement is created, as a result of creation of the easement. 21.The Applicant, however, referred to Section 15(8) of the Ordinance which provides that:-
The Applicant contends that by reason of this provision, "the land" referred to in Item 2(a) must mean the land registered in the Land Registry, which is the entire Lot TWIL No. 5, i.e. the whole of the Lot. 22.The Respondent disagreed with this interpretation and submitted that since the affected land is part of the Lot, the registration of the Easements in the register of the affected land will inevitably appear in the register of the Lot. However, it will be clear from the registration itself that only a small part and not the entirety of the Lot was affected by the Easements. Under Item 2(a) of Part II of the Schedule to the Ordinance, the right to compensation is triggered by the creation of the easement or right, not the registration of the relevant order in the Land Registry as in Section 10 of the Electricity Network (Statutory Easements) Ordinance Cap. 357. Further, Section 15(8) must be read in the context of the rest of Section 15 and also other related sections of the Ordinance. 23.In Section 16 of the Ordinance, it is provided that notices are to be given to person who may have any interest in the land mentioned in the order. Section 16 reads as follows:-
24.Also, compensation under Item 2(a)(ii) of Part II of the Schedule to the Ordinance for the creation of a right of temporary occupation, the compensation is the amount of an open market rent for claimant's interest in the land occupied during the period of the easement. The Respondent contends that the diminution of value (in terms of open market rent) is limited to that of the occupied land. The compensation under Item 2(a)(i) must be construed consistently with those under Item 2(a)(ii). In other words, the compensation under 2(a)(i) for the creation of an easement or a permanent right is the amount of an open market value for claimant's interest in the land, in, under or over which a permanent right is created. 25.The Respondent further contends that, if one looks at the 3rd column of Part II of the Schedule, "persons who may claim compensation for their respective losses" is "any person owning a compensatable interest in the land". This is applicable to both Item 2(a)(i) and Item 2(a)(ii). This shows that the land under Item 2 of the Schedule in respect of which diminution of value is considered is not any land at large but must mean the land "in the works area" and "in, under or over which easements and rights were proposed in the scheme mentioned in Section 5". Once the relevant order, Gazette Notice, Plan and Scheme are reviewed in the light of the above analysis, any compensation under Item 2(a) must be confined to the portion of the Lot which is within the works area and in, under or over which an easement or permanent right is created or occupied pursuant to rights of temporary occupation created. 26.We do not, however, accept the Respondent's arguments as aforesaid. The Respondent's arguments are in fact based on the assumption that "the land" in the Ordinance can mean "part of the land". This is against the plain meaning of the word. As submitted by the Applicant, "the land" must mean the Applicant's land, i.e. the whole of the Lot, and does not mean part of its land. Creation of easement or other permanent rights over land does not involve severance. Severance only comes about if there is a resumption of part of the land. Before the creation of the Easements, the land which the Applicant had was TWIL No. 5, i.e. the whole of the Lot. After the creation of Easements, the land which the Applicant has is still TWIL No. 5, not part of the Lot. The expression "the amount by which the open market value of the claimant's interest in the land is diminished" can only be a reference to the Applicant's interest in TWIL No. 5. The Respondent argues that the Applicant's claim must be based on the Ordinance, but the Ordinance says the Applicant is entitled to be compensated for the diminution in value of its land. Its land is TWIL No. 5, not part of it. The Respondent's interpretation is against the "plain meaning rule". 27.Under Section 5(b)(iii) of the Ordinance, the Secretary has to "describe the land in, under or over which he proposes there may be created an easement or other permanent or temporary right under section 15". The land "over which" easement is sought to be created is TWIL No. 5. Under Section 15(1), the Chief Executive may by order direct that easement or other permanent rights "in, under or over land". Again, "the land" here is the unpartitioned TWIL No. 5. The Respondent stresses that the rights and obligations created cannot go outside the works area. That is so, but it does not assist in the construction of the meaning of "the land" in Item 2(a). "The land" is not the same as "the easement". As stipulated in Section 16(2) of the Ordinance, a notice of creation of an easement or right shall "describe the land and the easement or right". It is clear to us that "the land" and "the easement" are not the same. The land over which the easement is created is the whole of the unpartitioned and unsevered land, even though the easement itself covers part of the land only. 28.The scheme in question refers to the "Lot No" as "Portion of TWIL No. 5", but there is no such lot. There has been no severance or partitioning. The land over which easement and permanent rights were created can only be the whole of TWIL No. 5. The language used in the scheme cannot alter the construction of the Ordinance. The Applicant's interest in "the land" must refer to the same land as stipulated in Section 15(8). 29.The Respondent's argument is not helped by Item 2(a)(ii) either. We do not accept that "claimant's interest in the land occupied" means only that part of the land which has been occupied. We are of the view that in a case where the occupation effectively results in the landowner being unable to use the other portion of the land, compensation should be payable to the landowner on the basis of an open market rent for his interest in the whole of the land. Again, as there is no severance or partition involved, "the land occupied" refers to the whole of the land. Even if one assumes that "the land occupied" means only that part of the land which has been occupied, Item 2(a)(i) does not have the same limitation. The absence of the word "occupied" in Item 2(a)(i) makes it different from Item 2(a)(ii). Item 2(a)(i) does not limit compensation by reference to diminution in value of that part of land which was subject to the creation of the permanent rights or easement. Likewise, in the absence of the word "occupied", the reference to "any person owning a compensatable interest in the land" in the 3rd column does not impute the restriction as suggested by the Respondent. Presumptions in statutory construction 30.The Ordinance does not say that compensation is limited to diminution in that portion (or strip) of land in respect of which easement or permanents rights are created. Rather, it says "the claimant's interest in the land". If the legislature intended to restrict the right to compensation to diminution in value of part of the land, it would have to say so. There is a principle of statutory construction that required "the most explicit words before an acquisition could be held to be sanctioned by a statute without full compensation being provided": per Lord Radcliffe in Belfast Corporation v. O.D. Cars Ltd. [1959] AC 490, at 523. 31.There is also the presumption against anomalous or illogical result as aforesaid. If the Respondent's argument is correct, it means that in a case where the easement is just a narrow path cutting right across the middle of a piece of land, the landowner will receive very little compensation, even though the easement has tremendously affected the development potential of the land as a whole. The Respondent's argument can be described as a "head I win, tail you lose" argument. The Respondent is saying that one can only obtain compensation by proving loss in development potential, but in assessing development potential, the rest of the site is ignored and only that strip of land where the easement is physically located can be counted. The result is that the affected owner can only claim loss of development potential in that part of the land marked on the plan as occupied by the easement, ignoring the fact that his land covers a larger area. It is absurd to suggest that in assessing diminution in value by reason of loss of development potential, the law requires the Tribunal to disregard the whole extent of the claimant's land. Creating an easement across a piece of land is not an unrealistic scenario. This depends on the alignment of the road. An owner cannot compel the Government to resume the land if the Government insists on taking an easement or permanent right. So such an absurdity will result if the Respondent's argument is accepted. The authorities 32.The Respondent in fact cites no authority for the argument. The authorities cited are all against the Respondent. In Yicon Ltd. v. China Light & Power Co. Ltd. [1995] 3 HKC 547, Judge Cruden referred to Chow Chi Keung v. China Light and Power, L.T. Misc. Ref. No. 1 of 1982 (unreported) and observed:
33.In Chow Chi Keung's case, at p. 23, the tribunal stated:
34.This shows that as a matter of law, the owner can seek compensation for the diminution in value of the whole of his property. Whether he can do so in a given case depends on the facts, in particular, whether the creation of rights detrimentally affected the value of the whole of the property. The Respondent submitted that Chow Chi Keung's case was an exception. We do not agree. What the case shows is that when assessing compensation for easements created over part of the land, the Tribunal treated the claimant's land as an unpartitioned land. 35.In Kater v. Electricity transmission Authority of N.S.W. (9 February 1996, Lexis copy), the plaintiff claimed compensation described as "diminution in value" of his land by reason of creation of easement for construction and maintenance of an electricity transmission line. The land comprised 1027.35 ha. There were two areas subject to easement for the transmission line. One covered an area of 19.67 ha. The other was 1.71 ha. The Court considered two approaches: the "before and after" method and the "piecemeal method". It referred to various cases in New South Wales concerning the creation of other types of easements, such as sewage. What is clear from these cases is that when assessing compensation for the diminution in value of the owner's land as a result of the creation of easement, the court does not use a curtailed approach or put on blinkers. Rather, it looks at the loss and damage to the owner's land, meaning the whole of his land which became subject to the easement. 36.On the interpretation of the literal meaning of "the land" in the Ordinance, i.e. whether the Applicant's interest in the land means TWIL No. 5 or only that part of TWIL No. 5 subject to easement, we find in favour of the Applicant's contention. Compensation is any diminution of value caused by the creation of easements, as opposed to any subsequent exercise thereof 37.The Respondent contends that the right to claim compensation under the Ordinance is strictly conferred and confined by the Ordinance. Item 2(a) refers to a claim triggered by the creation of easement, not the exercise of the easement, i.e. not the activities undertaken by the Government after the easement is created. Creation of the easement should be contrasted with provisions such as Section 12(1) of the Sewage Tunnels (Statutory Easement) Ordinance, Cap. 438, where the liability to pay compensation is extended to loss or damage to land (including any diminution in the value of land) "as a result of the creation of rights, or the exercise of rights created". 38.Here, the Easements were created in August 1994, which is the agreed valuation date for assessing compensation. Paragraph 12 of Part I of the Schedule to the Ordinance provides that compensation shall be assessed as at the date of the happening of the relevant event mentioned in the first column of Part II of the Schedule. The "relevant event" mentioned in the first column is expressly stated to be "the creation of the easement". Thus, the valuation date of the diminution of the open market value of the land is the date when the easement is created, i.e. August 1994. That is at a time long before the Ting Kau Bridge was actually built. Also in the 4th Column of Item 2(a) of Part II of the Schedule, the period within which the claim must be served on the Respondent is before the expiration of one year from the date on which the easement is created. That still was before the Ting Kau Bridge was constructed. 39.The Respondent therefore argues that the choice of valuation date and the prescribed period of claim submission show that the legislative intention is to enable the claim to be made and resolved immediately after the creation of easement. What was certain as to the effect of the creation of the easement at the time when it was created in August 1994 is that the Applicant could no longer erect a building on a portion of the subject Lot reaching the airspace 70 m above HKPD, where the easement is created and a structure was to be put thereat. As a result, the otherwise full right of the Applicant as owner to develop that part of the land had been hampered or curtailed to that extent. This is the extent to which the Applicant's interest in land has been diminished by the creation of the easement. 40.We do not accept this line of argument at all. When the Easements were created, they were clearly created for the purpose of building the Ting Kau Bridge. It is reasonable to assume that any interested party would be aware of the fact that there would be a bridge hanging over the Lot in the near future. Potential buyers would definitely take that into consideration when they made any offer to purchase the Lot. The market value of the Lot is therefore affected not only by the creation of the Easements, but by the contemplation of the exercise of the Easements. It is wholly unrealistic and artificial to assume that the future presence of the Ting Kau Bridge had no effect on the market value of the Lot in August 1994. The diminution in value of the Lot caused by the creation of the Easements must reflect the factor that there would be a bridge hanging over the Lot. The purpose of the Ordinance - the principle of equivalence 41.Furthermore, when we look at the purpose of the Ordinance, the creation of an easement or permanent right is in principle no different from compulsory acquisition of land. The purpose of legislation affording compensation to claimants whose land is the subject of compulsory acquisition is fair compensation, which has sometimes been described as "the principle of equivalence", i.e. the principle that the owner is to be compensated for his loss, neither more nor less. This principle of equivalence is said to be at the root of statutory compensation: per Scott LJ in Horn v Sunderland Corporation [1941] 2 KB 26, at 48-9:
42.In Director of Buildings and Lands v. Shun Fung Ironworks Ltd. [1995] 2 AC 111 at 125, it was also said that:
43.We agree with the Applicant that when an easement or permanent right is created over the land of a claimant, it is fair to compensate him for the diminution in value to his interest in the land. That is his loss and he should be compensated for that loss. If the Government were to negotiate with the claimant for a consensual granting of the easement or permanent right, the claimant, as the hypothetical willing seller and the Government, as the hypothetical willing purchaser, would have agreed that the price for the easement or permanent right should, in principle, be equivalent to the diminution in value of the claimant's interest in his land, and not merely diminution in value of the part of his land subject to the creation of the permanent right or easement. Conversely, it would not be fair to compensate the owner of the land on the basis of the curtailed approach as contended for by the Respondent. In other words, the contention advanced by the Applicant is consistent with the purpose behind the compensation provisions in the Ordinance. Injurious affection 44.The Respondent, on the other hand, contends that the doctrine of "equivalence" is basically "faireness" in terms of "give and take". It is readily applicable in compensation for "taking of land". The cases of Horn v. Sunderland Corporation [1941] 2 KB 26 and Director of Buildings and Land v. Shun Fung Ironworks Ltd. [1995] 2 AC 111 cited by the Applicant in support of the doctrine of equivalence are all cases involving compulsory resumption of land. Likewise, in the European case of Lithgow v. UK (1986) 8 EHRR 329, the discussion on compensation and the doctrine of equivalence was also in the context of "taking of property" (nationalization of certain business undertakings), not in the context of "injurious affection": see P. 371, para. 120. 45.The Respondent argues that the doctrine of equivalence is difficult to apply in compensation claims based upon "injurious affection", as the touchstone of "injurious affection" is not "taking of land" but rather "injury to land", the redress for which is subject to proof, limited by remoteness of damage and other policy considerations (thus in land compensation law, injurious affection must be expressly mandated by statute). Even if the doctrine of "equivalence" is applicable in compensation for injurious affection, a wider or different consideration of "give and take" must apply. As was recently held by Lord Hoffmann in Grape Bay Ltd. v. AG of Bermuda [2000] 1 WLR 574, at 583:
46.The Respondent further contends that in jurisdictions where "injurious affection" is expressly provided for under statutes as a head of compensation, no compensation for such injury can be claimed where the public works in question were not constructed on land not owned by the applicant notwithstanding that his land is in fact adversely affected. In Sisters of Charity of Rockingham v. The King [1922] 2 AC 315, at 324, it is stated:
47.Thus, taking the scenario where the Ting Kau Bridge were erected just a few metres away outside the Lot, so that there was no need to create any easement at all but the Bridge was immediately adjoining the Lot, the Lot would still be subject to similar noise and view impacts. Yet there would have been no recourse by the owner under the Ordinance or in common law. The fact that an easement was created over a very small part of the Lot cannot possibly change the position by creating in favour of the Applicant some additional "interest in the land" vis-à-vis noise or visual impact, which it has never had. 48.Furthermore, if instead of creating easements or rights pursuant to Section 15, the Government actually resumed the land in the easement area pursuant to Section 13, the Applicant would still have no claim for compensation based upon any adverse noise or visual effect on the Lot. This is because the Applicant is never entitled, as a matter of proprietary right, to freedom from adverse noise or visual effect arising from the Government works. Thus, the Respondent contends that there is plainly contravention of the doctrine of equivalence and to allow compensation to the Applicant as asked and beyond the easement area will confer on them a windfall that the Ordinance was not intended to do. Compensation is for "taking" not for "injurious affection" 49.The Respondent submitted that the alleged diminution of value to the subject Lot as claimed by the Applicant is caused by the adverse impact of noise and visual obstruction caused, not just by the section of the Ting Kau Bridge overhanging part of the subject Lot, but by the entire Ting Kau Bridge itself (generating the noise and blocking the seaview). The alleged extent of noise and visual impact was over the entire subject Lot. The Applicant's claim is therefore in substance one for "injurious affection" caused by the presence and use of the entire fully constructed Ting Kau Bridge. Any claim that one's land has suffered diminution in value by reason of adverse effect of noise or visual obstruction germane from a structure, part of which hands over one's land, is in essence a claim based upon "injurious affection". As held in Sisters of Charity of Rockingham v. The King [1922] 2 AC 315, at 320:-
50.The Applicant also used the word "nuisance" in the Applicant's reports and Opening Submissions when the noise and adverse visual impact were referred to. "Injurious affection" was said to bear similarities to the common law tort of "nuisance. The Respondent contends that unless the statute specifically so provides, there is no claim for compensation based on "injurious affection": See Cruden, Land Compensation and Valuation Law in Hong Kong (2nd edition), p. 118-119, and Sisters of Charity of rockingham v. The King, ibid, at 322:
51.In Yicon Ltd. v. China Light & Power Co. Ltd., ibid, at 551D-F, HH Judge Cruden said this:-
52.The Respondent submitted that, as a matter of fact, those affected by the presence and use of the entire fully constructed Ting Kau Bridge are not confined to the owner of the Lot. The owners of the lots adjacent to the Lot (including those at the headland) are also affected by the noise and visual obstruction. There is no issue that under the Ordinance they are not entitled to claim any compensation for the alleged "nuisance". There is the reluctance of the Courts to attribute to the legislature an intention to make a radical change by way of a side-wind: see Medical Council of Hong Kong v. Chow Shiu Shek, ibid, at 158C-D. The Tribunal should be very slow in attributing to the legislature the intention to make a radical change from this long-established rule by permitted a claim for injurious affection without the statute having express provision therefor. 53.The Respondent further argues that under the scheme of the Ordinance, there is no room to claim "injurious affection" under Item 2(a). The creation of easement over a servient tenement is a form of "taking" of the proprietary interests of the owner of the servient tenement. There is a fundamental difference between a case in which proprietary interests in land are taken in whole or in part by the Government and a case where land is injuriously affected by a proposed Government scheme without any property being taken. The Respondent relied on the following passage in Re Trustees of the Estate of Tsang Hung Tin. Deceased [1971] HKLR 68, at 74:-
54.The Respondent submitted that there is no statutory right under the Lands Resumption Ordinance or the Ordinance to claim compensation for injurious affection. Under the Ordinance, the only permissible head of loss related to the creation of easement which bears some resemblance to "injurious affection" is the claim for "disturbance payments". The legislature did not consider it right to confer any compensation based upon "injurious affection" generally: see Cruden, Land Compensation and Valuation Law in Hong Kong, ibid, p.118-119. On the other hand, Item 2(b) of Part II of the Schedule permits a separate claim for "disturbance" resulting from the creation of the easements and rights under, but it was not pursued by the Applicant. 55.The Respondent further submitted that "diminution of value of interest in land" is to compensate for the loss from taking of proprietary interests in land, not for injurious affection, and it is confirmed by para. 8 of Part I of the Schedule, which prevails over Part II. Para. 8 stipulates that:-
Thus, if compensation under Item 2 is to compensate for "injurious affection" to parts of land outside the strip of land over which easements were created, this statutory set-off will be quite unworkable. 56.Further still, to allow compensation for the loss of "quite environment" or "panoramic seaview" is to pay the Applicant for something it never has by way of "proprietary interests" in Lot. Compensation claimed under Item 2(a) is "the amount by which the open market value of the claimant's interest in the land is diminished". It is the value of the claimant's interest in the land that matters, not the value of the physical land itself. In Director of Lands v. Yin Shuen, FACV Nos. 2 and 3 of 2002, CFA, unreported, para. 17, point 2, it is said that:-
57.The Respondent therefore contends that the Applicant has never had any "negative easements" or "negative covenants" to view or prospect or to a noise-free environment. These were never part of the Applicant's estate and interest in the land. Under the common law, there is no entitlement as of right to enjoy one's property free from noise or adverse visual impact: see Philipps v. Pears [1965] 1 QB 76 at 83A-C. The Applicant cannot say that any of its "estate or interest in the land" has been "taken" by the Government because of the noise and visual effect. To allow the Applicant to claim compensation due to adverse noise and visual impact is tantamount to compensating for the loss of an easement in its favour which it did not and could not have. 58.We do not accept the Respondent's above arguments. "Injurious affection" is a concept which is normally used where some one who does not have his land taken seeks to claim compensation. In Sisters of Charity of Rockingham v The King, ibid, the appellants owned two discrete parcels of land; one was on the west side of a public road, the other consisted of two small promontories (headland) of land. The question of injurious affection arose not because the authority carved up part of their land, but in the context of the authority resuming the two promontories. The land on the west side was untouched. We accept that the Ordinance entitles the Applicant to claim compensation for diminution in value of his unpartitioned land, i.e. TWIL No. 5. The question of "injurious affection", in the sense used in cases where no land was taken from the claimant, does not arise. 59.We accept the Applicant's contention that in cases where part of the land of an owner has been compulsorily taken from him, "diminution in value" is a concept which covers any loss due to what is called injurious affection to the remainder part of the owner's land. In Duke of Buccleuch v Metropolitan Board of Works (1872) LR 5 HL 418, the plaintiff was a lessee of land with house and garden, and access to the river Thames. The acquiring authority expropriated the causeway, pier or jetty for the purpose of constructing the Thames Embankment. At p. 460, Lord Chelmsford observed:-
60.It is no answer to say that the wording of the statue is different from our Lands Resumption Ordinance or the Ordinance. It is clear to us that diminution in value in the context of resumption of part of the land of an owner must embrace any "injurious affection" to the remaining land. Cowper Essex v. Acton Local Board (1889) 14 App Cas 153 is another case involving resumption of part of the land of an owner. About five acres of land was expropriated from the appellant for the purpose of sewerage works. The appellant claimed compensation for injurious affection in respect of the 30 acres remaining. At p. 166, Lord Watson stated:-
Lord Macnaghten at p. 178 also said this:-
61.A good illustration of how the above principle has been applied in Hong Kong is the Yicon's case, ibid, at p. 552-3, where Judge Cruden said this:-
62.In Chow Chi Keung's case, ibid, at p.11, it is said:-
63.Also in Kater v Electricity Transmission Authority of NSW, ibid, the Court, when considering the appropriate method for assessing compensation in the context of legislation which expressly referred to injurious affection, stated:
64.Although the present case is not a "resumption" case, we do accept that "injurious affection" is claimable in resumption cases where part of the land of an owner is resumed, but a person whose property is not the subject of any resumption cannot claim injurious affection. Section 10(1) of the Lands Resumption Ordinance provides that the Tribunal shall determine the amount of compensation payable in respect of a claim "on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim". The provisions of Section 10(2) cannot be read to limit the generality of sub-section 10(1). The point is made clear by the House of Lords in Hughes v Doncaster Council [1991] AC 382, at 390:-
65.The case of Trustees of the estate of Tsang Hung-tim, ibid, assists the Applicant rather than the Respondent's argument. At p. 74-75, the Court quoted from the Uthwatt Committee on Compensation and Betterment. The passage makes it clear that in cases where there is no taking, the owner is entitled to compensation only if he establishes a tort, and in the case of taking, the "range of compensation is much wider", with the clear implication that injurious affection is included: "all consequential damage may be claimed whether it results from construction or user". Judge Cruden, at p. 118-119 of his book, was dealing with resumption. He did not say for sure that injurious affection cannot be recovered in resumption. What he stated was that there was no express provision for injurious affection. He did not consider the effect of Hughes v Doncaster Council, ibid. 66.We do not find the provision with regard to set-off, if creation of permanent right is followed by resumption, assist the Respondent's argument. As said, an owner of land which is partly resumed can claim for what has been called "injurious affection". In any event, it is wrong to read into the provision anything to water down the clear provision in Item 2(a) that the owner is entitled to be compensated for diminution in value of his interest in the land. 67.The Ordinance provides that an owner should be compensated for diminution in open market value of the land. It is indisputable that the view derived from location of land is highly relevant to open market value of the land. Phipps v Pears, ibid, does not assist the Respondent. Here, the Respondent is taking away the Applicant's property rights, and is required by law to pay compensation. This is miles away from someone who wishes to complain a neighbour building a house to obstruct one's view. The law has always recognized a clear distinction between the following two cases: where land is taken by an authority and where land is not taken. Whilst the general law does afford protection to the view that a person enjoys, this cannot affect the landowner's right to be compensated when the Ordinance affords him the right to be compensated for diminution in open market value of his land. In Duke of Buccleuch v Metropolitan Board of Works, [1872] LR 5 HL 418 at p.444-5, Hannen J said this:-
Baron Martin, at p. 453, said that:-
Also Lord Chelmsford, at p. 458, said this:-
68.Similarly in the case of Jade City International Limited v Director of Lands [2002] 3 HKC 36 CA, the Court of Appeal held that only those whose land is the subject of creation of easement can claim; but other landowners can equally be affected by the nuisance, and in the case of Yicon, ibid, the applicant failed in his claim because his land was not the subject of creation of easement. We therefore reject the Respondent's submissions in this aspect. We find that there is a "taking" of the Applicant's interest in the Lot, and the law requires the Government to pay compensation. There is no question of changing the law by a side-wind, nor is there any anomaly as suggested by the Respondent. The distinction between the two classes of cases is well established. It is not right to describe the Applicant's entitlement to compensation for its loss as a "windfall". The fact that the Government has to pay compensation to those whose land is the subject of a "taking" does not "hamper" the Government in undertaking road works as suggested by the Respondent. The fact that the works would take some time before completion and that the time for lodging a claim for compensation may expire before completion of the work do not affect the principle: see Yicon, ibid, at p. 552B-E. 69.We totally reject the "curtailed approach" as suggested by the Respondent. It simply cannot be right that the compensation, in the extreme scenario mentioned by the Respondent, is "nil". We do not accept that the intention of the Ordinance could be that the Government can take away the rights of a landowner without paying any compensation to reflect the owner's loss. We also reject the Respondent's contention that as a consequence of the curtailed approach, the compensation should be between $136,000 and $9,107,000 by considering the effect of creation of easement only on that part of the land over which easement is created, as we do not think that this was the intention of the legislature. 70.In Medical Council of HK v Chow Siu Shek, ibid, at p. 156B-H, Bokhary PJ stated:
71.We find it of assistance to consider the positions of other statutes dealing with creation of easements or permanents rights. Section 12 of the Sewage Tunnels (Statutory Easement) Ordinance, Cap. 438 provides:-
There can be no suggestion that "the land" in this section refers only to that part of the land subject to the creation of rights. Surely, the claimant is entitled under this section to recover loss or damage to his land, meaning the entirety of his land. 72.Also, Section 10(1) of the Electricity Networks (Statutory Easements) Ordinance, Cap. 357 provides:-
As held in Yicon's case, a claimant is entitled in law to claim compensation for diminution in value to the whole of his land. The Tribunal was assessing compensation to the owner in respect of the diminution in value caused as a result of the nuisance created by the transmission lines, and accepted the submission of the claimant in reliance on the dictum of Lord Watson in R v Sisters of Charity of Rockingham, ibid, as follows:-
The tribunal added:
73.We are of the view that the position with regard to creation of permanent rights and easement under the two other pieces of legislation to enable power lines or sewage tunnels to be built have the same effect as contended here by the Applicant, notwithstanding the fact that the wording may not be identical. 74.The allegation that the Applicant's construction is problematic and would also lead to a host of anomalies is unfounded. The Respondent alleges that if the Applicant's construction is to prevail, one would be entitled to compensation in respect of the entirety of a large lot if just a tiny part of it falls within the easement area, whereas someone with a similar large piece of land adjacent and contiguous to the easement area would receive no compensation at all. This would be so notwithstanding the fact that the impact of the noise and visual effect on his land would be no less significant. However, the entitlement to compensation is created by statute, if the statute does not cover certain category of people, it does not mean that those who are covered are wrongly compensated. 75.The second allegation of the Respondent is that the Applicant will be able to claim amount of compensation which it would not be able to claim had the Government taken the more drastic step to resume the easement areas outright pursuant to Section 13 of the Ordinance. In case of resumption of the fee simple of the easement area (as opposed to creation of an easement over the same), the Applicant would have been entitled to compensation representing the open market value of the land resumed only, but not for any land beyond the easement area. We are however of the view that in such cases, the claim under Section 10(2)(c) of the Lands Resumption Ordinance for severance does provide adequate compensation for the owner and it is on top of the claim for compensation in respect of the resumed part of the land. There is no unfairness to the owner. Presumption of compliance with international obligations 76.Moreover, it is a principle of legal policy that the municipal law should conform to public international law. The court, when considering, in relation to the facts of the instant case, which of the opposing constructions of the enactment would give effect to the legislative intention, should presume that the legislators intend to observe this principle: Bennion, ibid, p. 698. Section VI of Annex I to the Joint Declaration provides that the rights concerning the ownership of property and compensation for lawful deprivation (corresponding to the real value of the property concerned) shall continue to be protected by law. This suggests that the existing law on compensation for lawful deprivation of property was regarded as providing for fair compensation, consistent with the principle of equivalence. 77.Article 105 of the Basic Law further provides that compensation for lawful deprivation of property "shall correspond to the real value of the property concerned at time". Although the Basic Law came into effect only after the enactment of the Ordinance, we are still entitled and indeed bound to have regard to the fact that the Basic Law is our Constitution and that after July 1997, all our laws must be constructed consistently with our Basic Law: Section 2A of the Hong Kong Reunification Ordinance. 78.Thus, even if there is any doubt on the construction of the provisions of the Ordinance, which we do not find so, such doubt should be resolved in favour of construing the Ordinance as providing for compensation giving to the owner the real value of the property taken from him. That can only be assessed by reference to his true loss, not an artificial figure arrived at on the basis of ignoring the fact that the creation of easement had a negative impact on the whole of his property. 79.The Respondent, however, submitted that a claim for injurious affection as contended by the Applicant is not one involving the taking of an interest in land. There is no deprivation of property as such. Any protection of an individual's use of property (e.g. freedom from noise) is a matter falling into the wider administrative and regulatory consideration of the Government: see The Chinese text of Article 105 where the equivalent of "deprivation" is "徵用", and Grape Bay Ltd. V. AG of Bermuda [2001] 1 WLR 574. So the Respondent argues that there is no question of the compensation provisions under the Ordinance, as construed by the Respondent, being inconsistent with the Joint Declaration or Basic Law: see also the Court of Final Appeal's views in Director of Lands v. Yin Shuen Enterprises Ltd. & another, FACV Nos. 2 and 3 of 2002, 17 January 2003, at p. 25 80.We are of the view that creation of easement or other permanent rights does involve deprivation or "taking". The Respondent in fact also accepts that creation of easement or permanent right is a partial taking. The Respondent submitted that "creation of easement over a servient tenement is a form of 'taking' of the proprietary interests of the owner of the servient tenement" and "taking of proprietary interest in land". In Sporrong and Lonnroth v Sweden (1983) 5 EHRR 35, para. 63, the European Court of Human Rights declared:-
81.The case of Grape Bay Ltd. V AG of Bermuda, ibid, is clearly distinguishable. That was not a case of compulsory acquisition at all. It only concerned prohibition of franchised restaurant i.e. restricting the use of property, not a "taking' by the public authority. Once there is a "taking" or "deprivation", compensation should correspond to the "real value" of property concerned. This must be construed in the light of the authorities governing compulsory acquisition and understood as referring to the value of the property to the owner, not its value to the acquiring authority; and as including all the loss which the owner suffered in consequence of the taking: per Lord Bridge of Harwick in Hughes v Doncaster Council [1991] AC 382 at p. 390G - H. Thus, Section 10(1) of the Lands Resumption Ordinance measures value of the property taken by reference to the loss and damage suffered by the owner. Having regard to the equivalent principle, real value must (in the absence of countervailing public interest) cover the full loss to the owner. 82.The Respondent also argues that the Basic Law only seeks to preserve the pre-existing laws. Such argument on "continuity" must be read in the light of Bokhary PJ's judgment in Yin Shuen's case. It is wrong to assume that any pre-handover law is not open to constitutional review under Art. 105. In any event, there is no reason to assume that the pre-handover law is different from what the Applicant submits. After 1997, all laws are required to be construed in such a way as not to contravene the Basic Law: Section 2A of the Hong Kong Reunification Ordinance. Answer to the first issue 83.In the circumstances, we find that the whole of the Lot is to be assessed rather than just the portion of the Lot subject to the Easements is to be compensated. The Respondent's curtailed approach is not adopted at all. Existing Use Value Basis ("EUV") or Redevelopment Value Basis ("RV") 84.On the second issue, the Respondent contends that it should be EUV. The Respondent relies on Section 12(c) of the Lands Resumption Ordinance and the Court of Final Appeal's decision in Director of Lands v. Yin Shuen Enterprises Ltd. & another, FACV Nos.2 and 3 of 2002, 17 January 2003, to contend that no compensation shall be given in respect of any probability of (a) the grant by the Town Planning Board ("TPB") of any planning permission, permitting the Applicant to redevelop the Lot against the Green Belt Zoning or in excess of the R(C) Zoning with a plot ratio of 0.4; or (b) the grant by the Lands Department of the Certificate of Exemption ("COE") without any condition to obtain planning approval. 85.Alternatively, the Respondent argues that even if Section 12(c) of Lands Resumption Ordinance and Yin Shuen are not applicable, the burden is fairly on the Applicant to establish the likelihood of redevelopment in accordance with proposed best use, and that compensation should be on the basis of potentialities and not "realized" potentialities. In respect of the proposed best uses (51 and 36 NTEH), the Respondent contends that the Applicant would have to apply for planning approval and the Applicant has failed to prove that it would obtain such planning approval. In this connection, the relevant zoning at the material time was Green Belt. But even if Green Belt is to be ignored, which is denied by the Respondent, the most probable zoning would be R(C). The proposed redevelopment still exceeded the plot ratio restriction on R(C), and the Applicant has failed to prove that it would obtain planning approval to exceed the plot ratio. 86.The Respondent contends that the COE under Cap. 121 does not exempt the Applicant's proposed use of the Lot from planning control. The Director of Lands could impose a condition to obtain planning approval when issuing COE: R. v. District Lands Officer, Tai Po. Exp. Rita Enterprises Co. Ltd. [1996] 4 HKC 410. Further, in relation to the COE, the Applicant has not proved that other conditions, which the Director can impose, can be satisfied. For example, the requirement by the Fire Services Department relating to the accessibility to the headland. Section 12(c) and the case of Yin Shuen 87.Section 12(c) of the Lands Resumption Ordinance provides that:-
88.In Yin Shuen, the Court of Final Appeal held that Section 12(c), notwithstanding Article 105 of the Basic Law and the doctrine of equivalence, still has the effect of excluding the speculative element arising from the probability of obtaining a change of user under the Government Lease, when it comes to computation of compensation. Thus, the subject lands in Yin Sheung should still be valued as agricultural land, the existing user, as opposed to the potential user that they could be put to upon obtaining modification of the relevant government leases. 89.The Respondent contends that words "licence, permission, lease or permit whatsoever" in Section 12(c) are very wide and the word "whatsoever" precludes the application of the ejusdem generis rule. These words went beyond renewal of Government lease or modification/permission of restricted users under the lease. The only limitation on "licence, permission, lease, or permit whatsoever' is that the grant or refusal of the same will affect the intrinsic value of the land or the interest in the land taken, and is not dependent on the personal qualifications of the particular applicant. The essential connection is an economic one. Section 12(c) is "concerned with the probability or expectancy of the grant of a licence, permit or permission for the claimant to do something on the subject land". 90.The Respondent further contends that whether or not TPB Planning approval or COE without stipulating the requirement of planning approval could be obtained directly affects the Applicant's interest in the land and its intrinsic value, as whether the Applicant can redevelop the Lot at all or beyond certain prescribed Plot Ratio directly affects its value. As stated in Yin Shuen, para. 46:-
91.Applying Section 12(c), the Respondent says no compensation shall be given in respect of any expectancy or probability of the grant by the TPB of planning approval, or the grant by the Director of Lands of a COE without condition to obtain planning approval. Thus, the Lot should be valued on the EUV, not as the 51-house or 36-house scenario being put forward. 92.We do not accept that Section 12(c) applies in the present case. There is nothing in the Ordinance which gives the effect that in assessing the open market value of the Lot in respect of the Easements created, the provisions of the Lands Resumption Ordinance apply. So the case of Yin Shuen is not applicable either. 93.The Applicant however contends that the Green Belt Zoning should be ignored by virtue of Section 12(aa) of the Lands Resumption Ordinance, or para. 3 of Part I of the Schedule to the Ordinance, or equivalent common law principles, and that it could obtain a COE from the Director of Lands as of right without any condition attached that planning approval must be obtained. 94.By the same token, we do not accept that Section 12(aa) applies in our case either, as there is simply no reference in the Ordinance to give that effect. However, we agree with the Applicant that the "Green Belt" zoning should be disregarded by virtue of para. 3 of Part I of the Schedule to the Ordinance, or the equivalent common law principles. Para. 3 of Part I of the Schedule provides that:-
95.At common law, the effect of zoning or land use restriction which was part of the resumption scheme should be disregarded: see Cruden, Land Compensation and Valuation Law in Hong Kong, ibid, pp. 86-87, Melwood Units Pty Ltd. v. Commissioner of Road [1979] AC 426, 434 and Housing Commissioner of NSW v. San.Sebestian Pty Ltd. (1978) 140 CLR 196. This is also in line with the presumption that the owner must be compensated for the "real value" of his property: see Re South Eastern Railway v London County Council [1915] 2 Ch 252 at 258, per Eve J explaining the difference between "real value" and "market value". 96.We further find that on the facts of this case, the Green Belt zoning was clearly retained to afford protection to the Route 3 project (i.e. the project which led to the creation of the Easements). The TPB Paper No. 1069 for TPB consideration on 22 September 1989 stated that "One of the main intentions of the 'GB' zoning of the four objection sites and other existing building lots in Ting Kau is to protect the possible alignment of Route 3 which is a proposed major highway of territory-wide significance". The evidence shows that The Town Planning Department ("TPD") proposed that consideration of the objections be deferred. TPB agreed with TPD's proposal and deferred consideration of the objections pending Government's final decision on the alignment of Route 3. 97.We agree with the Applicant that the Respondent's argument to the contrary should be rejected both as a matter of fact and as a matter of law. If preservation was an important consideration, the consideration of the objection need not have been deferred. The evidence shows that "The Project Manager/Tsuen Wan, the District Lands Officer/Tsuen Wan and the District Officer/Tseun Wan also consider that, should any of the objection sites not be affected by Route 3, rezoning of these sites to Residential (Group C) ('R(C)') would be appropriate." If preservation was an important consideration, the area would not have been re-zoned CDA after the alignment was fixed. Reference was made by the Respondent to OZP at B1/31 and B1/60-1. Those zoned as "Green Belt" are hillside, slopes or beach areas. Reference to B1/79 only concerns comment of an objector, who was actually proposing the rezoning to R(C) with plot ratio of 0.7. The authorities relied on by the Respondent show that the only requirement is that there is a "nexus" or direct relationship between the restriction on land use and the proposed public works: see Kiley v The Minister of Water Resources (SA) (1981) 27 SASR 2174, at p.281-282. We have no doubt that such nexus is clearly demonstrated on the evidence. Effect of ignoring the "Green Belt" zone 98.However, after ignoring the "Green Belt" zone, it does not mean that there will be a "no zone" world or there will be no planning control at all. In Busy Firm Investment Limited v. Secretary for Transport, LDRW No.6 of 2001, 21.11.02, we have held that although all zoning connected to the scheme (West Rail in that case) was to be ignored for the purpose of assessment, the Tribunal still had to consider what was the most probable alternative zoning in the "no zone" world. The Applicant does not contest that there is a "no zone" world and in fact accepts that it is sufficient for its case to be R(C) zoning. 99.From the evidence before us, we have no doubt that R(C) would have been the most probable alternative zoning. It is supported by the evidence in the Preliminary Consideration of Objections, the OZP of Tsuen Wan West and the latest OZP in 1998. Most of the surrounding lots unaffected by the scheme were zoned R(C). Best uses contended for by the Applicant 100.In the present case, the Applicant's proposed best uses are 51 NTEH, with a plot ratio of 1.7 and 36 NTEH, with a plot ratio of 1.2. However, if the zoning was R(C) with a plot ratio of 0.4, the proposed best uses of 51 and 36 NTEH would not comply with this requirement. The Applicant however contends that the development of NTEH was pursuant to Buildings Ordinance (Application to the New Territories Ordinance), Cap. 121 and does not require planning permission, and that the Applicant is entitled to the COE as of right. On the other hand, the Applicant has not contended that if planning approval is required, it would have succeeded in obtaining it. 101.In this regard, we accept the Respondent's submission that development of NTEH is not exempted from planning control. Even if these proposals were NTEH redevelopment within the prescribed dimensions whereby the Applicant will apply for COE from Director of Lands under Cap. 121, as opposed to obtaining approval from the Building Authority under the Building Ordinance, the certificate still does not exempt these developments from planning control, and the Director Lands has power to impose condition to obtain planning approval. The Director of Lands in issuing COE under Cap. 121 has power to impose a condition that the Applicant should obtain planning approval. The Applicant is not entitled to a certificate of exemption free from such condition as of right. Since the redevelopment of the Lot is still subject to planning control, the Applicant has failed to discharge the burden that such approval would be obtained (whether the relevant zoning is GBZ or R(C) with plot ratio of 0.4). 102.In arguing that the Applicant's proposed NTEH developments are not subject to requirement of planning permission, the Applicant seeks to rely on the following:
103.The Applicant's present contention is contrary to what its expert's stance in the 1st report where he said:-
104.However, the fact that the Planning Department took steps to prepare the "Planning Guidelines for the Village Layouts in the New Territories" which are to be complied with, shows that NTEH are not exempted from planning considerations. Even if the Guidelines were not "mandatory" in nature, it does not mean that the TPD or the TPB would not refer to it in considering relevant Section 16 application. After all, the Guidelines set out the "minimum requirements" in relation to air and space, and made recommendation on desirable layouts. This is no reason why such minimum requirements would cease to be relevant just because the NTEH developments were pursued by private developers, instead of by the Government (as re-site village or otherwise). 105.The Applicant's experts tried to distance themselves from the reference to compliance with the Guidelines in the 1st submission, by in effect putting the blame on the other person for including the reference. However, even if the Applicant now says the 1st submission was superseded, the fact that the Applicant in the 1st submission saw fit to refer to compliance with these Guidelines shows that they believed it was important to persuade the Director of Lands that the Planning Department's concern about such development had been addressed. There was no separate Guidelines issued by the TPD for NTEH developments by private developers. Further, Cap. 121 did not draw any distinction between developments by indigenous villagers and those by private developers. The Lands Department has just one single policy and set of instructions for application of COE. There is no reason why the guildelines on "minimum requirements" relating to air, space and layout should differ because the person building it happens to be a private developer as opposed to an indigenous villager. In fact, planning control is directed as all land users, irrespective of their identity. Requirement to apply for planning approval not exempted under Cap. 121 106.Under Section 16 of the Town Planning Ordinance Cap. 131, where a draft plan or approved plan provides for the grant of permission for any purpose, an application for the grant of such permission shall be made to the Town Planning Board. Section 14 of the Buildings Ordinance stipulates the need for written approval by the Building Authority of the building plans submitted and written consent to the commencement of works shown on the approved building plans. Section 16 of the Buildings Ordinance lays down the ground upon which approval or consent required under Section 14 may be refused by the Building Authority. Section 16(1)(d) provides that:-
107.Provisions of the Buildings Ordinance are applicable to building works in the New Territories by virtue of the Buildings Ordinance (Application to the New Territories) Ordinance Cap. 121. The preamble of Cap.121 states:
108.Section 4 of Cap. 121 empowers the Director of Lands to issue a certificate of exemption in respect of any building works in the New Territories. The effect of such certificate is provided in Section 7:-
109.The exempted sections of the Building Ordinance listed in Section 7(1) of Cap. 121 do not include Section 16(1)(d) or the preamble of the Building Ordinance. Thus, buildings exempted under Cap.121 are still subject to planning controls: See R. v. District Lands Officer, Tai Po, ex p. Rita Enterprise Co. Ltd. [1996] 4 HKC 410, p.414E - 415A. We accept that any requirement to obtain planning approval from the TPB is not absolved by the issue of the COE. The requirement of planning approval is not provided under the Buildings Ordinance but under the Town Planning Ordinance, although the Building Authority may no longer enforce the "planning" requirement under Section 14 of the Building Ordinance. The Applicant unlikely to obtain an unconditional COE, not to mention obtaining it as of right 110.The Applicant contends that by reason of Section 5 of Cap.121, there is a mandatory requirement to issue the COE. The Applicant further contends that under Section 9, by reference to the Internal Memorandum (Bundle A, p.99), any conditions which the Director of Land can impose "must only relate to the occupation of the building to be erected" and must not "have the effect of nullifying the issue of the COE". 111.We however accept the Respondent's submission that upon the proper construction of the various provisions under Cap.121, the Director of Lands plainly has the power to impose as a condition on the issue of such COE that the Applicant should apply for planning permission. This has been confirmed by Seagroatt J. in R.v. District Lands Officer, Tai Po. Ex p. Rita Enterprise Co. Ltd. [1996] 4 HKC 410, at 415B-I. In that case, the applicant sought to build houses on the lots in Tai Po which were subject to GB Zoning. The District Lands Officer granted certain certificate of exemption containing the following condition: "no building work shall commence until Planning Permission for village type development has been obtained." The Applicant challenged that the District Lands Officer had no power to impose such a condition. Seagroatt J. rejected this argument and held that Section 9 of Cap.121 empowered the Director of Lands to impose such a condition to the certificate. Internal Memorandum 112.There is nothing in the Internal Memorandum which is inconsistent with the ruling in Rita Enterprise. In Rita Enterprise, as in the Memorandum, it has been emphasized that the issue of a COE under s.5 is mandatory (p.413A). The power of the Director of Lands to impose conditions under Section 9 is also reiterated. If the condition of planning permission had the effect of nullifying the issue of the COE, it would not have survived the judicial review. The condition of obtaining planning approval from the TPB is not a re-introduction of exempted provisions through the back door, for the planning requirement originates from the Town Planning Ordinance and not from the Building Ordinance. Further, planning permission (including issues of Plot ratio) cannot be said to be unrelated to the "occupation of the building to be erected". 113.Furthermore, as can be seen in the Internal Land Instruction LIJ-5, the position has been put beyond doubt:-
114.The above instruction was of course issued after the decision in Rita Enterprise. Ms. Lee has further produced the Internal Land Instruction in 1994 prior to the issue of this instruction (see "R11"). It may be the case that the conditions spelt out in that set of instruction which the Director may impose does not include "planning permission". However, that cannot be relied on to say that the Director has no such power. Para. 5E did not say the conditions referred to are "exhaustive'. In fact, it cannot be because Section 9 of Cap.121 is drafted widely and the only limitation on the conditions which can be imposed is "reasonableness":-
115.One obvious reason why it was only after Rita Enterprise that there was a specific instruction regarding the imposition of condition for obtaining planning permission is because prior to Rita Enterprise, the Lands Department had not encountered any significant number of cases whereby the NTEH applied for under the COE in fact infringed the relevant planning restrictions. There are only 2 cases regarding COE which the Applicant can locate, which prima facie suggest that no condition to obtain planning permission was imposed although the relevant planning restrictions were infringed. They are Bayside Villa, a case where the zoning is R(C) with plot ratio of 0.4, but the NTEH had a ratio of 1 (subsequent became 0.7 as built), and a case involving a petrol filling station. 116.We accept that this is consistent with Ms. Lee's evidence that the only case she knew where COE was granted without imposing condition on planning approval notwithstanding infringement was Bayside Villa. These 2 cases adduced are however insufficient for the Applicant to discharge the burden of proof that the Applicant is entitled as of right to a COE without any condition for obtaining planning permission, i.e. the Director of Lands could not lawfully impose such a condition even if he had wanted to, and that it is more probable than not that the Director would not impose such a condition although the proposed best use 51-house and 36-house scenarios with plot ratio of 1.7 and 1.2 respectively infringed the planning restrictions (GBZ or R(C) with plot ratio of 0.4. Bayside Villa 117.It was contended by the Applicant that the example of Bayside Villa supports their stance that no planning permission is required for NTEH development although the zoning restrictions are contravened. We however accept that even if the Director of Lands did not impose a condition for obtaining planning approval in one case, it does not mean the Applicant can insist on an unconditional COE as of right. We also accept the Respondent's analysis of the history of the planning approval application in Bayside villa which confirms the point that NTEH developments are not exempted from planning restrictions. 2,131 Certificates of Exemption issued by the Director of Lands 118.The Applicant sought to place reliance on the fact in the 2,131 Certificates of Exemption issued by the Director of Lands, none had attached a condition to obtain planning approval. But as Ms. Lee pointed out, in these 2,131 cases, there was no case involving contravention of planning restrictions. For some, there was no infringement because the relevant zoning did not prohibit the development in question (e.g. in "V" zones) and thus no Section 16 application was required. For others, where there could have been infringement, planning permission had already been applied for and obtained, before application for the land grant was made. Thus there was simply no occasion whereby the Director would need to impose a condition for planning approval in these cases. We accept her evidence. Ms. Lee has considerable experience over applications for approval for NTEH developments. For 4 months in 1994 and 1995, she was a member of the District Lands Office Conference who approved NTEH applications. Although she had only acted up and attended the District Lands Conference two times in 1994 and 1995, she familiarized herself with what a District Land Officer should know in approving and not approving such applications. 119.The burden is on the Applicant to show not only 2,131 COE had been issued without condition for planning approval, but also that no such condition was imposed notwithstanding that the redevelopment proposed would infringe planning restrictions. OZPs could have been inspected in order to ascertain if the redevelopment would infringe any planning restrictions. This the Applicant has failed to do. They cannot shift the burden to the Respondent and argue that it was for the Respondent to show in none of these COE there was infringement of planning permission. Attempt to distinguish COE applications by indigenous villagers and by private developers cannot possibly succeed. Lands Department's policy on granting application for COE (as reflected in the Lands Instructions) applies whether the applicant is an indigenous villagers or a private developer. It is true that in cases involving application for land grant, the applicant had applied for planning approval prior to the grant. But it matters not. The important point is that because Section 16 application had been made and approval obtained, when it comes to issue of COE there was no issue of any infringement with planning restrictions. Further, these applicants must have accepted that planning approval was needed for NTEH application under Cap.121. Otherwise, they would not have made the application. They could have just applied for the grant as agricultural land and then apply under Cap.121 and insisting that they were exempted from planning control. 120.However, and perhaps more importantly, the fact the Director might in a previous comparable occasion not insist on planning approval does not mean the Applicant can insist on an unconditional COE as of right, or that the Director could or would not impose such a condition: See Rita Enterprises, p416E-417G. Other requirements 121.Further, it is also clear to us that the proposals failed to comply with The HK Planning Standards and Guidelines: See the comments of the Traffic Engineering Division dated 27.12.01 and the HK Planning Standards and Guidelines applicable to both 51 and 36 house projects (even though NTEH). This will also be a valid reason for the Lands Department not to grant COE, unless it is resolved. 122.Apart from planning approval, there is first the requirement imposed by the Fire Services Department ("FSD") that accessibility of the headland lots should be secured. The revised layout plans, whereby the Applicant's architect proposed to use the EVA within the estate as the access road for the headland lots, had been submitted to FSD for consideration. The FSD was still not satisfied that the Applicant had secured the accessibility of the headland lots. The Applicant has filed no further evidence to deal with this outstanding matter. Nor did Mr. Peter Yam dealt with this outstanding concern on the part of the FSD in giving evidence. Nothing said by Mr. Lau could have dealt with this outstanding problem. The right of way was simply brushed aside. It was said that "in the absence of written binding records the existing access road serving the few residents behind the headland could be re-provisioned outside the lot on government land." It was further said that "In any event the no. of houses involved are small, and any inconvenience or nuisance caused by the grant of a passage right to them would be minimal that it does not warrant any adjustment at all." However, Mr. Lau also accepted in cross-examination that the access road had been in existence for a very long time and that it provided the only access to the headland lots. There is simply no basis to say that it only serves "few residents behind the headland". From the relevant plan it can be seen that there are 3 developments in the headland, which required the access road. The number of flats/households in the headland at the valuation date is unclear. But Ms. Lee had given evidence that there were 10 to 12 households. They are not small developments. 123.The Applicant's experts have not shown in any report where the alternative route can be re-provisioned. It seems that the only land possibly available for the alternative road is the Government slope to the west of the existing road. If so, the Applicant would have to apply for Government approval to grant a right of way over Government land. A lease modification will be needed subject to premium payment. Further, the Applicant will have to revise the site formation proposal, now adopted for the RDV assessment, as there would be substantial slope cutting or filling work, and consequently substantial additional site formation cost, if the road is constructed on the road. 124.The Proposed carpark use on Lot 429 in DD 399 is in breach of Government Lease. The Applicant has assumed 24 car parks on Lot 429 in DD399 and 11 carparks on the Lot. The Applicant is also the owner of Lot 429. However, under the Government Lease of Lot 429, it is stated to be for garden use only. The proposed carpark use is breach of the Government Lease. Answer to the second issue 125.The Applicant submitted that as a minimum, compensation should be based on the basis of 12 non-NTEH Houses Scenario, with the assumption of a R(C) zoning and a plot ratio of 0.4 for the Lot. On the other hand, the Respondent's primary position was that the "Green Belt" zoning of the Lot could not be ignored. However, the Respondent accepted that if the "Green Belt" zoning were to be ignored, the most probable zoning would have been R(C), with a plot ratio of 0.4. In this respect, we find earlier in this judgment the following:-
Summing up, we do not accept that the proposed 36 or 51 NTEH developments as submitted by the Applicant would be viable. Therefore, the only remaining redevelopment basis that would be viable is the proposed 12 non-NTEH Houses scenario as suggested by the Respondent's expert and agreed by the Applicant's expert. Summary of the parties estimated compensation under different approaches 126.The two experts called by the parties filed several valuation reports, which set out their valuations under different bases. Since we have decided that the compensation payable to the Applicant should not be based on the "Curtailed Approach", we summarize below their estimated compensation figures under the "Whole Lot Approach":
Diminution in value of the Lot on the basis of existing use 127.Mr. Lau put forward 3 different valuations based on the existing use value of the house or the existing bulk of the house then standing on the Lot at the relevant date. Firstly, Mr. Lau estimated the value of the house then standing on the Lot to be $57,183,750. He analyzed the 7 house comparables (Comparables R1 to R7) identified by Ms. Lee and found that all were relevant comparables with the exception of Comparable R2 as it did not enjoy any view at all, and Comparable R4, which had the benefit of a short term waiver as well as a short term tenancy of Government land as garden land. He adjusted the remaining 5 comparables (Comparables R1, R3, R5, R6 and R7) and adopted the average of the unit rates of these comparables at $65,000 per sq. m. for the valuation of the main accommodation, a unit rate of $16,250 for the out-houses and a unit rate of $3,250 for the garden area. The unit rates adopted for the out-houses and the garden were equivalent to 25% and 5% respectively of that for the main accommodation. However, because of the sheer large size of the garden (about 5,000 sq. m.), the value attributable to the garden already amounted to $16,250,000. Mr. Lau assumed and allowed a diminution in value of the house at 40% due to the easements created and hence, he arrived at a loss in value, on existing use value basis, of about $22,873,5000. This he rounded to $22,900,000. 128.On the other hand, Ms. Lee opined that Comparable R5 was the most relevant comparable as it was one house in a small-scale development of 4 terrace houses with sea view, but did not form part of a large estate of houses and flats. She adopted the adjusted unit rate of $44,000 per sq. m. of this comparable for the valuation of the main house and a unit rate of $11,000 per sq. m. for the out-houses. As to the value of the garden area, Ms. Lee opined that if it were to be assessed on the basis of 5% of the unit rate for the main house, the value so allowed would be excessive. Instead, she suggested that the value of the garden area should at most be equivalent to about an additional 20% of the values of the main house and the out-houses. On this basis, she estimated the value of the garden area to be about $5,453,800, which was equivalent to about $1,082 per sq. m., based on her estimated garden area of 5,040 sq. m. Overall, she valued the house on the Lot, with its out-houses and garden, at $32,722,800. Applying an estimated percentage reduction in value of about 30% to reflect the effects of the easements, she estimated the diminution in value of the Lot to be in the sum of $9,817,000. 129.We find that the differences between Comparable R5 and the other comparables are not that great. We agree with Mr. Lau that apart from Comparables R2 and R4, there is no reason that the other comparables cannot be used for the purpose of valuing the subject house. We further find that it will not be that reliable if a valuation by comparison method uses only one comparable. Moreover, we disagree with the finding of Ms. Lee that because the Rating & Valuation Department reported that property market activities slowed down in the second quarter of 1994 following an active period in the first quarter, we should refrain from using any comparables in the first quarter of 1994. In fact, from the extracts of the "Private Domestic - Price Indices" published by the Rating & Valuation Department (Bundle B2/ page 439), we do not find that the contraction of the market in the first quarter of 1994 was extraordinary. We set out below the said Prices Indices for the quarters in question:
130.Therefore, we have used all the comparables adopted by Mr. Lau and analyzed them for the purpose of determining an appropriate unit rate for the valuation of the subject house. We set out in the table below our adjustments, which are the same as those adopted by Mr. Lau, with the only exception that we agree with Ms. Lee that an adjustment for size to reflect the substantial differences in size between the house in the Lot and the comparables are obviously necessary. Adjustments of House Sale Comparable (for valuation on Existing Use Basis)
131.Thus, we estimate that the comparables have an average adjusted unit rate of $51,000 per sq. m. We adopt this for the purpose of valuing the house on the Lot, on existing use basis. In our valuation, we follow Ms. Lee's assumptions as to the values for the out-houses and the garden area. We concur with her that because of the exceptionally large size of the garden her subjective estimate is more reasonable than the indiscriminate application of a pro-rata rate for the garden area, as suggested by Mr. Lau. We also decide on balance that Ms. Lee's estimate of a total impact of 30% be preferred to Mr. Lau's estimate of 40%. Hence, our valuation of the impacts of the easements on the Lot and the diminution in value of the Lot is as follows:
Diminution in value of the Lot on the basis of refurbishment of the existing house 132.Mr. Lau also estimated the value of the old house standing on the Lot on the assumption that refurbishment were to be undertaken. He assumed that after spending a renovation sum of about $7 Million on the existing house, the refurbished house would have, before discounting, a value of about $72 Million. He opined that after refurbishment, the house would fetch a unit rate of about $82,000 per sq. m., with the out-houses fetching a rate of about $20,500 per sq. m. and the garden area a rate of $4,100 per sq. m. Thus, the value of the garden land would by itself exceed $20,000,000! 133.After deducting the discounted refurbishment cost from the discounted value of the refurbished house, he estimated the value of the land and building to be about $59 million. Since he estimated that the impacts due to the easements to be about 40% he estimated the diminution in value of the Lot under this basis to be about $23.6 million. He sought to compare the subject house with the detached houses in Island South, Hong Kong and said that his comparison was reasonable. The Respondent criticized this approach as to be unrealistic. We hold the same view as the Respondent and find that on balance, the Respondent failed to prove its case on this basis. Redevelopment to Existing Bulk 134.Mr. Lau said that the Applicant was entitled to redeveloping the Lot to the "existing bulk" of the house then standing on the Lot. Therefore, he carried out a valuation of the house to be erected, on unit rates similar to those adopted for valuing the existing house on refurbishment basis. Since he used the same assumed unit rates as for the assessment of the refurbished house, he estimated the value of the proposed house to be the same, at about $72 Million. He allowed a similar 40% to the value of the house in the "After" situation. He deducted the land value in the "After" situation from that in the "Before" situation in arriving at the diminution in value of the Lot. This he calculated to be $21,000,000. 135.The Respondent criticized Mr. Lau's valuation of the house under this basis as to be unrealistic and not supported by the market evidence. We share the same view and we find on balance that the Respondent failed to prove its case on this basis as well. 136.Since the estimated compensation figures of both parties were greater on redevelopment basis than on existing use basis, we shall consider in more details below the diminution in value of the Lot on redevelopment basis, under the following different scenarios:
The common valuation model for redevelopment approaches 137.In assessing the diminution in value of the Lot under different redevelopment scenarios, both experts used the same residual valuation approach and the same model whereby the values of the Lot before and after the creation of the easements were assessed. Firstly, the gross development values of the proposed developments were assessed by multiplying the gross floors area of each category of houses with the number of houses under each category, and further multiplied by the average unit rate adopted for each house under each respective category. Different average unit rates were adopted for houses with sea view and/or fronting Ting Kau Bridge and those with limited or without sea view. The total sale price so estimated was then multiplied by a present value factor to discount for the period of development. The rate of discounting was agreed by the experts at 9.5%. Next, the total costs of development were estimated. These include the costs of construction, the professional fees and the contractor's profits (assumed by both experts to be the same, respectively at 6% and 20% of the costs of construction). Then, the total costs of development were reduced by another present value factor (again, with the rate of discounting agreed at 9.5%) representing the discount for the period of construction. The difference between the discounted sale prices and the discounted costs of development was the sum of the land value of the Lot and the developer's profit. After deducting from this the developer's profit, assumed by both experts to be the same 20%, the residual value of the land was determined. Thus, by comparing the residual value of the land under the "Before" and "After" situations, the diminution in value of the Lot under different redevelopment scenarios were estimated by the parties. 138.However, we find that since our task was only to assess the diminution in value of the Lot under different redevelopment scenarios and, as the discounted costs of development were invariably the same under the "Before" and "After" situations, the computations could be much simplified, as illustrated by the workings in the following table:
That is, the estimated diminution in value of the Lot
139.In the various residual valuations produced by the two experts under different scenarios, apart from the differences in their estimates of the sale prices of the houses or flats in the respective scenarios, there were also differences in (1) the choice of the development period, which affects the present value factor for discounting the gross development value, (2) the use of the unit construction costs and (3) the differences in their estimates of the discounts to be applied to the valuation in the "After" situation to reflect the effects of the visual and noise impacts of the easements. We will deal with these issues below. Choice of the development period 140.For the 12 Non-NTEH Type Houses scenario, both parties agreed that the development period should be 2 years, including 6 months for submitting plans and obtaining approval from the Building Authority, 6 months for the site formation works and 1 year for the construction. We find these assumptions to be reasonable and hence we agree to use them in the valuation model for the 12 Non-NTEH Type Houses scenario. 141.For both the 36 NTEH and the 51 NTEH scenarios, both parties also agreed that apart from the period required for planning approval, the development period would be two and a half years. Mr. Lau asserted that no planning approval would be required; hence, there would be no need to make allowance for the period required for planning approval. On the contrary, Ms. Lee opined that planning approval, which would take one year prior to the other development processes, would be required. For reasons stated earlier, we decide that based on the evidence available to us, the Applicant would be required to obtain planning approval. As such, we shall be using three and a half years as the total period of development in the residual valuations under the 36 NTEH and the 51 NTEH scenarios. Choice of the unit construction costs 142.For the 12 Non-NTEH Type Houses scenario, both Mr. Lau and Ms. Lee adopted the same unit construction cost of $8,200 per sq. m. However, for the 36 NTEH scenario, Mr. Lau used the unit cost of $7,500 per sq.m., based on the "Building cost for Low End Houses" of the Levett & Bartey's costs statistics for the 3rd Quarter 1994. On the other hand, Ms. Lee adopted the same unit cost of $8,200 per sq.m. as for 12 Non-NTEH Houses scenario, based on the same statistics for higher quality houses. Based on the differences in the experts' estimated sale prices for houses in these 2 different scenarios, we agree that Mr. Lau was right in differentiating for the costs of construction. 143.In the 51 NTEH scenario, Mr. Lau in giving evidence said that one could envisage using the most luxury type of construction and decoration, like full-length curtain window, marble façade, best decoration materials, instead of using those construction material commonly used for village houses. In support of this assertion, he quoted the example of the development of Bayside Villa. However, as rightly pointed out by the Respondent, the type of houses to be erected under the 51 NTEH scenario and the environment under that scenario would be quite different from that of Bayside Villa. We agree that it would be unrealistic to expect the quality of flats in the 51 NTEH scenario to be of the same quality as that for Bayside Villa. This is because for the type of flats developed under the 51 NTEH scenario, the purchasers who would be attracted could not likely be the types that would be willing to pay a high price. As a result, it would be unrealistic to increase the construction costs so as to give an impression of building luxury type NTEH developments. 144.However, as pointed out by the Respondent in the Closing Submission, the same construction costs would have to be applied in the "Before" and "After" situations. Thus, it does not really matter what construction costs are used in the residential valuation model as it would be set off in any-event. Other common grounds in the residual valuation model 145.Originally, there were other differences between the parties. These include the estimation of the site formation costs. However, during the hearing, the parties managed to agree on the proposed site formation works plan and the estimated site formation costs. For the 12 Non-NTEH Type Houses scenario, both parties agreed to adopt the site formation costs of $5,600,000 as estimated by the Quantity Surveyor consultant of the Respondent. Similarly, for the 36 NTEH and 51 NTEH scenarios, both agreed to adopt the estimated site formation costs of $8,620,000 as put forward by the Quantity Surveyor consultant of the Respondent. The parties also agreed on the levels of the Lot upon completion of the proposed site formation works. As a result of these agreements, the parties further agreed on the number and the location of the houses and flats in the layout plans under different redevelopment scenarios including the number and location of houses and flats having sea view and fronting onto Ting Kau Bridge and those having no or limited sea view. Finally, the parties also managed to agree that the EVA (emergency vehicular access) as stated in the latest layout plans produced by the Applicant could satisfy the requirements of the Director of Fire Services. 146.Before considering the valuations presented by the two experts, we shall consider the issue of the effects of the visual and noise impacts due to the easements. The effects of the visual and noise impacts due to the easements 147.Mr. Lau contended that in the 12 Non-NTEH Type Houses scenario, all 12 houses would have sea view, with 5 houses facing towards Ting Kau Bridge and the other 7 houses facing Ting Kau Bridge. In the "After" situation, the 5 houses facing Ting Kau Bridge would diminish in value by 40% due to the adverse noise and visual impacts, whilst the other 7 houses would only diminish in value by 10% due entirely to the adverse noise impacts. On the other hand, Ms. Lee opined that for the 5 houses (House No. 1-5) facing Ting Kau Bridge, they would diminish in value by 30% representing 15% for the noise impacts and 15% for the visual impacts. As for the other 7 house (Houses 10-12) facing the beach, they would only diminish in value by 15%, entirely due to the noise impacts. 148.In both the 36 NTEH and 51 NTEH scenarios, Mr. Lau contended that the effects of the visual and noise impacts due to the easements on the estimated sale prices of the houses to be erected on the Lot were the same. Therefore, he allowed the same range of adjustments, in the order of a maximum of 20% adjustment each for both the visual and noise impacts in both scenarios. Originally, he also allowed a 10 % discount for the visual impacts for the middle row(s) of houses. After the adjournment, when the layout had been revised, Mr. Lau agreed that for all non-sea view houses, there was no need to give any additional discount for the visual impacts. As for the noise impacts, Mr. Lau in both scenarios allowed a 20% discount for all houses with the exception of the row of houses fronting onto Ting Kau Beach for which he allowed a 10% discount. 149.There was no evidence from Mr. Lau regarding the percentage discount for the visual impacts. In support of his estimated discounts for noise impacts, Mr. Lau relied on (1) the comparison between (a) the noise difference near the Lot with and without the impacts of the Bridge and (b) and the noise difference between selected flats in Mei Foo Sun Tsuen for which analysis of sale prices had been made; (2) the noise measurements at two points near the Lot in 2001 between 18:00 - 19:00 hours and 4:00 - 5:00 hours as to represent the noise impacts of the Ting Kau Bridge on the Lot; and (3) the comparison between the noise difference at two points near the Lot and the estimated noise difference between Blk 18E and Blk. 19C at the development, known as Dynasty View in Tai Po for which noise differential of about 9dB(A) and an average price difference of about 25% were recorded. 150.On the other hand, Ms. Lee opined that in the 51 NTEH scenario, as the houses were so much cheaper, they would be of inferior quality. As such, intending purchasers of this type of flats would primarily be attracted by the competitive prices but would be less sensitive to noise and visual impacts. Therefore, for the 51 NTEH scenario, the noise impact would be 10% whilst for the 12 Non-NTEH Type Houses or the 36 NTEH scenarios, the noise impact would be 15%. Similarly, for the visual impacts, Ms. Lee allowed for similar percentage adjustments of 15% or 10% for houses affected under the different scenarios. 151.Similarly, Ms. Lee did not adduce any evidence on the visual impacts. In response to Mr. Lau's noise impact study of flat sales in Mei Foo Sun Tsuen, Ms. Lee produced in her supplementary report an analysis showing the unreliability of Mr. Lau's analysis. She pointed out how the prices of flats in the study undertaken by Mr. Lau could have been affected by many factors other than the noise factor. Therefore, the Respondent submitted that the comparison of flats in Mei Foo Sun Tsuen was not reliable and should be ignored. 152.Regarding the Applicant's assumption of noise impacts from Ting Kau Bridge based upon the readings taken at points R1 and R2 near the Lot, the Respondent contended that they were erroneous and excessive. The Respondent submitted that, "by comparing R1 with the 1993 measurements of TK1, a site next door to the subject Site, one can see the level of noise affecting TK1 and the subject Site in 1993 (without TK Bridge) could not have been that much lower than level of noise affecting the subject Site in 2001 (with TK Bridge)." 153.Moreover, the Respondent submitted that the Applicant had no proper basis to say that the noise differential with or without Ting Kau Bridge was higher than the 9 dB(A) noise difference between Blk 18E and Blk 19C of Dynasty View. Hence, the Respondent said that the Applicant, could not infer that as there was a 25% reduction in sale prices between the said Blk 18E and Blk 19C, there should be a 20% reduction in sale price for the houses proposed to be erected on the Lot, with or without the effects of the easements. This was especially so since for Dynasty View, the 25% differential in price between the flats could not possibly be attributable entirely to the noise differential but could be due to a host of other factors as well. 154.On balance, we find that the evidence on the noise differential on the Lot with and without the Ting Kau Bridge was not so clear. Because of the doubts that had been raised on the readings at points R1 and R2, we agree that there was no conclusive evidence on the additional noise effects due to the Ting Kau Bridge, which was permitted by virtue of the easements created on the Lot. Insofar as to the overall effects of the visual and noise impacts on the Lot due to the easements created, we prefer to adopt the assumed percentages of adjustments put forward by Ms. Lee for the different scenarios considered by the parties. Choice of comparables under the R(C) or 12 Non-NTEH Type Houses scenario 155.Ms. Lee opined that even if the Applicant could show that the "Green Belt" zoning were to be ignored, the most probable zoning would have been Residential (Group C) zoning, with a plot ratio of 0.4. On this basis, Ms. Lee said that the best scenario would be 12 houses. She explained the reasons for her choice in the valuation report produced at pages 81-83 of Bundle A. The Applicant did not produce any alternative proposal but contended that as a minimum, the Applicant should be entitled to be compensation on this basis. There was no issue at all over the viability of this option. There were also very minor differences between the parties on their valuations under this 12 Non-NTEH Type Houses scenario. Under this scenario, the Applicant estimated the diminution in value of the Lot in the sum of about $30 Million whilst the Respondent estimated the diminution in value in the sum of about $25.23 Million. The difference was accounted for by (a) the different estimates of unit sale price as adopted by Mr. Lau and Ms. Lee, at $82,000 and $80,000 per sq. m. respectively and (b) the differences in the assumed effects of the noise and visual impacts on the Lot. 156.The two experts based their valuations on the same set of comparables (described as Comparables R1 to R7) identified and produced by Ms. Lee as Appendix XIX of her report dated 31 January 2002 (Bundle B2/page 389). The different analysis of the comparables by the two experts have been summarized in the table marked as Table (viii)-a of Bundle B2. 157.Mr. Lau in his valuation considered that all the houses to be erected on the Lot would have sea view. As a result, he only considered that those comparables with sea view were relevant. Therefore, he discarded Comparable R2 which view was completely blocked by the high-rise block in front of it. Also, he did not adopt Comparable R4, which was subject to a short term waiver and was having a garden on Government land held under a short term tenancy. He analyzed the remaining 5 comparables and adjusted them for the factors of adjustments of location, access, aspect, age/condition and time. He calculated the average of the adjusted unit rates of these 5 comparables to be $82,000. However, the Respondent in the Closing Submission reminded us that Mr. Lau in cross examination had conceded that the adjustment on view for Comparable R6 should be -5% (as contended by Ms. Lee). With this change in adjustment, Mr. Lau's adjusted unit rate for Comparable R6 should be $100,042, and his average adjusted unit rate should become $80,662, which is very close to Ms. Lee's adjusted unit rate of $80,000. 158.Mr. Lau considered that all the 5 comparable he used (i.e. Comparables R1, R3, R5, R6 and R7) had sea view. Sine all the 12 houses proposed on the Lot would have sea view, he used the average adjusted rate from these 5 comparables to value the 12 houses proposed for the Lot. On the other hand, Ms. Lee considered Comparables R5 and R6 to be the relevant comparables for houses with sea view on the Lot, and Comparable R7 to be the relevant comparable for houses with limited sea view. 159.We agree with Ms. Lee that Comparable R7 be adopted as the relevant comparable for houses with limited sea view on the Lot. As for the comparables with sea view, we however agree with Mr. Lau that Comparable R1 and R3 should be used as well. We do agree with both experts that Comparable R2 should not be used as it is totally blocked by other blocks, whilst Comparable R4 should not be used as it was subject to a short term waiver and with the benefit of a short term tenancy. 160.We set out below the adjustments we adopt for Comparables R1, R3, R5, R6 and R7. Adjustment of House Sale Comparables (for redevelopment into 12 Non-NTEH houses)
Location 161.Both experts agreed that upward adjustments should be given to all the comparables to reflect their greater distances away from the urban areas. We adopt the 10% suggested by Mr. Lau. Access 162.We agree with both that nil adjustment is needed for the factor of access. Aspect 163.We adopt Ms. Lee's adjustments for this factor. Age/Condition 164.We agree with Mr. Lau that nil adjustment is required for this factor. Communal Facilities 165.It is very obvious that the comparables, with the exception of Comparable R5 provide communal facilities which were entirely not provided for in the 12 Non-NTEH Houses redevelopment proposed for the Lot. Hence, the -10% adjustment suggested by Ms. Lee is accepted. Time 166.Mr. Lau's adjustments for time for Comparables R1 and R3 are adopted. Facing Retaining Wall 167.Based on the site formation plans prepared by the Respondent's quantity surveyor consultants Ms. Lee contended that a high retaining wall would have to be created on the Lot as a result of which 4 houses (House 6-9) would be blocked by the retaining wall. Therefore, in adjusting for Comparable 7, which was adopted by Ms. Lee as the Comparable for houses to be erected on the Lot with limited sea view, Ms. Lee suggested that a substantial reduction of 25% was warranted to reflect the disadvantages of facing a retaining wall. We agree with the analysis of Ms. Lee and accept her adjustment of -25% for this factor. 168.In summary, the average of the adjusted unit rates of Comparables R1, R3, R5 and R6 is calculated as $73,578, which is rounded to $74,000. This will be used for the valuation of houses with sea view, i.e. House 1-5 and 10-12 under the 12 Non-NTEH scenario. Also, the adjusted unit rate of Comparable R7, at $47,464, which is rounded to $47,500, will be used for the valuation of houses with limited sea view and affected by the retaining wall, i.e. Houses 6-9 under the 12 Non-NTEH scenario. 169.As to the impacts due to the easements, we adopt, as we have explained earlier in this judgment, the discounts proposed by Ms. Lee. That is, for Houses 1-5, a discount of 30% will be allowed for both the visual and noise impacts whilst for the other houses, only 15% discount will be given to reflect the noise impacts. Estimation of Sale Price of the houses under the 12 Non-NTEH Type Houses Scenario 170.Based on the average unit rates of the adopted comparables, detailed in the table above, we estimate the sale price of the houses under this scenario, in the "Before" and "After" situations, as follows:- Estimation of Sale Price for 12 Non-NTEH Type Development "Before" Situation
Estimation of Sale Price for 12 Non-NTEH Type Development "After" Situation
Estimated diminution in value of the Lot assuming 12 Non-NTEH Type Houses development 171.Based on the equation derived above and the estimation of the total sale prices of the Lots in the "Before" and "After" situations, we calculate below the estimated diminution in the value of the Lot under the 12 Non-NTEH Type Houses scenario, i.e. Diminution in the residual estimated land value of the Lot
Choice of Comparables under the 36 NTEH scenario 172.Under this alternative scenario, the experts based on the same sets of comparables (R1 to R7) as for the valuation under the 12 Non-NTEH Houses scenario. As we said before, we do not agree with Ms. Lee's opinion of discounting Comparables 1, 2 and 3 because they were transacted in the first quarter of 1994. However, we agree with both experts in not using Comparable R4. Therefore, we analyze Comparables R1, R3, R5 and R6 and use them as the relevant comparables for houses with sea view under this 36 NTEH scenario. In addition, we decide that Comparables R2 and R7 are relevant comparables for houses without or with limited sea view under this scenario. As to the adjustments, we agree with Mr. Lam regarding the adjustments for location, access, size and time whilst for the factors of view, privacy, communal facilities and age, we follow the adjustments of Ms. Lee. For the factors of "Design of NTEH" and "Design Flexibility" or "Design of Development/Development Layout", we consider that they should be grouped as one factor, for which an allowance of -20% is considered to be reasonable. We set out in the following table our adopted adjustments for these comparables. Adjustment of House Sale Comparable (for 36-NTEH development)
173.In summary, we calculate the average adjusted unit rate of Comparables R1, R3, R5 and R6 at $54,414, which is rounded to $54,500. This will be used for the valuation of the houses with sea view under the 36 NTEH scenario. In addition we calculate the average adjusted unit rate of Comparables R2 and R7 at $46,855, which is rounded to $47,000. This will be used for the valuation of the houses without or with limited sea view under the 36 NTEH scenario. 174.Based on these estimated unit rates and the layout plan produced by the Applicant, we estimate the sale prices for the 36 NTEH scenario in both the "Before" and "After" situations, as follows:- Estimation of Sale Price for 36 NTEH Development "Before" Situation
Estimation of Sale Price for 36-NTEH Development "After" Situation
Estimated diminution in value of the Lot assuming 36 NTEH Development 175.Based on the equation derived above and the estimation of the total sale prices of the Lots in the "Before" and "After" situations, we calculate below the estimated diminution in the value of the Lot assuming 36 NTEH Development, i.e. Diminution in the residual land value of the Lot
Choice of comparables under the 51 NTEH scenario 176.Under another alternative 51 NTEH scenario, the properties to be valued are in fact 153 flats but not 51 houses. Mr. Lau considered that both sales of flats in Ting Kau Village (Comparables N1 to N6) and the nearby Tsing Lung Tau (Comparable N7) as well as sales of flats in the developments known as "Pearl Island Garden and Pearl Island" were relevant. However, Ms. Lee opined that the comparables in the latter developments at Pearl Island were not relevant for the valuation under the 51 NTEH scenario. The Respondent submitted that the 51-NTEH development envisaged would be a much denser development with a site coverage of over 57%, with a narrow estate road of only 4.5 m wide having no separation of vehicles and pedestrians. There would also be absolutely no facilities, open space and amenities, and grossly inadequate parking facilities in the development. Therefore, it would not be appropriate to adopt the sales of flats in "Pearl Island Garden" and "Pearl Island" as comparables for the flats in the proposed 51 NTEH redevelopment scenario for the Lot. We agree with this submission. 177.We disagree with Ms. Lee that those comparables that were transacted in the first quarter of 1994 could not be used. 178.Instead, we only discard comparables (i.e. Comparables N5 and N6 respectively) that were 9 months and 15 months away from the relevant valuation date but decide to include Comparables N4, which, with a transaction data of March 1994 is only 5 months away from the valuation date of 12 August 1994. We summarized in the table below our adopted percentages of adjustments for the most relevant chosen Comparables N1, N2, N3, N4 and N7. Adjustments of Flat Sale Comparables (for valuation of the Lot under 51 NTEH scenario)
Adjustments of Flat Sale Comparables 179.We have considered the adjustments adopted by both Mr. Lau and Ms. Lee. Their major differences were in the factors of locality and age/condition. We set out below our adopted adjustment for each factor. Locality & location 180.Whilst both experts agreed that adjustment was not required for the factor of location since the Lot and Comparables N1 to N7 were close to each other, Mr. Lau opined that "a 10% discount is considered appropriate to reflect the variance between the quality housing proposed for the Lot and those piecemeal village house development(s)". We agree with Ms. Lee that this adjustment is not justified. Access 181.Both experts agreed that upward adjustments should be given to reflect the better advantage of the Lot as it is accessible by vehicles. They differed slightly in the quantum of adjustments. We prefer to adopt Ms. Lee's estimates. 182.Although Comparable N1 is smaller in size, equivalent to about 70% of the normal NTEH Type flat, we do not agree that its size has an adverse effect on design/layout/efficiency, as contended by Mr. Lau. Therefore, we decide that nil adjustment is required for this and other comparables. Layout 183.We agree with Mr. Lau that a -5% adjustment is warranted for Comparables N1 whilst no adjustment is required for the other comparables. View 184.We agree with Ms. Lee regarding her adjustment of -5% for Comparable N1 to reflect its enjoying better view. Side Windows 185.Similarly, we agree with Ms. Lee in respect of her adjustments of -5% for Comparable N1, N3 and N7 for this advantage. Privacy 186.Although we also share the same opinion with Ms. Lee that an upward adjustment is required for Comparable N7, we think a more modest -5% adjustment is more reasonable. Management 187.We do not accept Mr. Lau's opinion of adjustment for this factor. Age/Condition and time 188.We adopt the same adjustments for these two factors as used by Mr. Lau. Summary 189.In summary, our total adjustments for Comparables N1, N4 and N7 are 8%, 12% and 2% respectively. The resulting adjusted unit rates for these 3 comparables are $32,557, $34,596 and $31,734 per sq. m. respectively, giving an average of $32,962, which is rounded to $33,000 per sq. m. Since these are comparables with sea view, we consider that the flats in the 51 NTEH Type Hoses development with sea view should be valued at $33,000 per sq. m. in the "Before" situation. Similarly, we calculate that Comparables N2 and N3, after adjustments of 8% and 7% respectively, fetch unit rates of $22,416 and $27,145 per sq. m. respectively. We adopt the average of the adjusted unit rates of these 2 comparables for valuing non-sea view houses in the "Before" situation. We calculate this at $24,781 per sq. m., which is rounded to $25,000 per sq. m. We set out in the 2 tables below our estimates of the sale price of the 153 flats for the 51 NTEH Development in the "Before" and "After" situation. 190.In both situations, we agree with Ms. Lee that special discount of 90% should be applied to the 21 houses which borders onto the EVA leading to the other Lots in the headland. Likewise, these groups of "houses" could be sold as the first phase of the development. However, we disagree with Ms. Lee that another discount of 0.95 be applied as we consider this to be excessive. 191.As to the discounts due to the visual and noise impacts caused by the easements, we adopt Ms. Lee's adjustments for reasons set out before. Estimation of Sale Price for 51 NTEH Development "Before" Situation
Estimation of Sale Price for 51 NTEH Development "After" Situation
Estimated diminution in value of the Lot assuming 51 NTEH Development 192.Based on the equation derived above, we calculate below the estimated diminution in value of the Lot assuming 51 NTEH Development, i.e. Diminution in the residual land value of the Lot
Summary of estimated diminution in value of the Lot under different scenarios 193.To summarize, we have considered the diminution of value in the Lot under different scenarios and our estimates of the diminution in value (i.e. our estimated compensation figures) are as follows:
194.The highest diminution in value of the Lot was estimated to be $45,656,751, on the basis of redevelopment to 36 NTEH Type Houses. However, as we have decided earlier, the only options that would be permitted are (i) the existing use approach and (ii) the approach of redevelopment of the Lot on the assumption of R(C) zoning with a maximum plot ratio of 0.4, i.e. redevelopment to 12 Non-NTEH Type Houses. We estimate the values on these two bases to be $11,379,000 and $23,140,000 respectively. Since the Applicant is only entitled to the highest of the diminution in value on the bases that could be permitted, the compensation payable to the Applicant should therefore be $23,140,000. Conclusion 195.We therefore assess the amount of compensation to be in the sum of $23,140,000. Orders 196.Accordingly, we order that the Respondent do pay the Applicant compensation in the sum of $23,140,000. 197.We further order that the matters of professional charges, interest and costs to be adjourned to a date to be fixed by the parties.
Representation: Mr. Benjamin YU, SC and Mr. Patrick CHONG, instructed by M/S Woo, Kwan, Lee & Lo, for the Applicant. Mr. WONG Yan-lung, SC and Mr. LAW Man-chung, instructed by the Department of Justice, for the Respondent. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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