WONG PEI CHUN AND OTHERS

1996, Nos.MP965, 1927 & 1972

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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Coram : Hon Sears, J. in Court

Dates of hearing : 9, 10, 11, 12, 13 and 16 March 1998

Date of judgment : 19 March 1998

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J U D G M E N T

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1. This is a claim for compensation arising from a judgment I gave in June of 1996. It must be understood that the amount of damages can only involve two matters; one, the loss of the structure and, two, the loss of the opportunity to live in Rennie's Mill indefinitely.

2. Despite my natural sympathy for people who were living in Rennie's Mill and have now been displaced, I can only award a figure according to well recognised legal principles. Those who lived there were not land owners. They only had a licence to occupy a portion of the land and the occupation was governed by the terms and conditions of the occupation permit. An assessment of damages for such a person is therefore unusual and, as people are of different age and the numbers vary from cottage to cottage, such an assessment could involve a variety of factors.

3. As far as the loss of structure is concerned, the Housing Authority have offered $7,000 per square metre and a figure for the ancillary area. The vast majority of residents have accepted that. As far as the second matter is concerned, I have already ruled, which is therefore binding on all persons, that the promise which was made in 1961 only gives rise to damages if a person can prove two things. I stress the word 'prove' because it is for the applicant to satisfy the court that he is entitled to damages.

4. The applicant must prove that (a) he was resident in Rennie's Mill at the time of the promise in June 1961. This means that he was ordinarily resident there at that time. For example, if he was away at school or ill and not physically living there he could still be resident if that absence was temporary. And (b) that he continued to reside there until at least April the 4th, 1995, the announcement of clearance. Again, it does not matter if he was absent for certain periods as long as these were temporary, as long as he was still ordinarily resident there. Put in a simple way, he had to be living in Rennie's Mill as his home. These two conditions, if proved, would entitle a person to compensation. The lawyers call this a person's eligibility.

5. A chart has been made of the 82 applicants, including two now deceased and 15 who have discontinued. Mr Grossman appears for some 62, 48 are admitted to be eligible and four persons have given evidence. I should add that a household member who satisfied the two conditions may also be eligible even if the applicant is not and two such persons have given evidence.

6. My conclusions on those who gave evidence are as follows and I set them out briefly.

Madam CHENG KUK FA, No.11 of MP 965

7. She was born in 1953 and first lived in Rennie's Mill in 1959, Cottage 126. The Housing Authority says she left in January 1976 and did not return until 1981. The Housing Authority records appear to indicate that she and six others moved out of the cottage and a 'turn-up' notice was posted on the cottage. This notice indicated that unless she 'turns up' at the Housing Authority office, her name would be deleted. She says she moved out of Cottage 126 to 128 and remained there. Her eldest daughter's birth certificate in December 1979 shows an address in North Point which was that of the father of her husband. She says she put it down to avoid the political stigma of being born in Rennie's Mill. A medical card of her daughter shows treatment in 1980 at Rennie's Mill. Also the respondent's records show that when she purchased the cottage in 1981 she was then living at Cottage 157.

8. The probabilities are that she would not have had a child in Tsuen Wan if she was living in North Point and that she may not have seen the turn-up notice which could have been defaced or removed. I found her evidence credible. I thought she was an honest witness. In my judgment, she has proved eligibility.

Mr SUEN WAI WING, No.2

9. He is the household member and the husband of Madam Cheng. He came to Rennie's Mill in 1956 when he was 6. It is accepted by the Housing Authority that he was there in June 1961, but they say he left in October 1967 when his name was deleted from the occupation permit for Cottage 20, Section 3. His mother signed a deletion form for himself and his brothers and sister and left behind his father. He was clearly receiving education in Rennie's Mill and produced a graduation certificate from the school. He said he did not know his name had been removed and he stayed with his father and continued his education at Rennie's Mill.

10. Having seen and heard him give evidence, and despite the December 1983 birth certificate of the second daughter showing Rennie's Mill, I believe him. He is also eligible.

Madam LAU SAU MEI, No.3

11. It is said by the Housing Authority that she was absent from December 1980 until November 1981. She came to Rennie's Mill in 1957 when she was 5. She was married in September 1976 and she lived in Cottage 12A. She said that when she informed the Housing Authority of her marriage she was told that her name should be deleted from 12A. Her husband applied for public housing in 1980 and the address given in Kowloon was the same as her daughter's birth certificate in September 1979. She used this address when moving into Cottage 92.

12. I do not accept that the Housing Authority's documents lead me to believe that she and the family moved out for 11 months. The probabilities are that if the husband was applying for public housing they would have continued to live at Rennie's Mill until it was allocated. Further, the children were aged only 1 and 3. It was, in my judgment, highly improbable for the family to move out for such a short space of time. I believe her evidence. She was a good witness. She is eligible.

Mr HO HUNG KEUNG, otherwise known as HO PO KWOK, No.4

13. He is the household member of Cheung Ka Wai who is not eligible. It is said he left Rennie's Mill before May 1979. He was born there in 1955 and in 1969 his parents were divorced and his mother left. He said he stayed behind with his father.

14. The housing records clearly indicate that he had moved out and, although he was back in November 1983 after he was married, in October 1983, I believe he had moved out with his mother. His marriage certificate gives the mother's address at Sau Ming Estate. I do not accept his evidence. In my judgment, he is not eligible.

Madam CHAO MEI WAH, No.5

15. She admits she had left Rennie's Mill in 1962 after marriage. She had five children and returned in 1994. She says she always intended to return. Her home, however, was elsewhere and she was not ordinarily resident in Rennie's Mill. She is not eligible.

Madam KO WAI SUM and Mr TSIU KWONG HING, No.6

16. I take these two together. She is 73 and she said she had been living in Rennie's Mill from 1950. The Housing Authority carried out a screening survey between 1961 and 1963 when Rennie's Mill became a cottage resettlement area. She and her son were not on the screening forms. However, her evidence seems to me to be truthful.

17. Further, the son, who has a senior position now with the Airports Authority and is obviously highly intelligent, said he was educated at Rennie's Mill. He produced his graduation certificate in 1967 for the Lutheran Primary School. The first occupation permit record is 1976, but they must have been living in Rennie's Mill at least ten years earlier. He was an impressive witness and the only challenge to his evidence was the lateness of his claim. This does not affect his credibility and I accept both their evidence. They are both eligible.

18. As far as all the other claims for eligibility are concerned which I have not dealt with, I dismiss them.

19. I turn now to the issue of the amount of damages. Both parties called experts who have agreed that the principle of compensation for the loss of opportunity can be based upon a theoretical rent for the particular cottage area the residents occupied multiplied by a capitalisation factor. To determine this figure, it is necessary to put a capital value on the applicants' right of occupation which is being lost.

20. The formula can be expressed as cottage area multiplied by notional monthly rental multiplied by capitalisation factor and the capitalisation factor is a combination of the market investment yield and life expectancy. Each of these three factors is in dispute and I must decide what each is.

The Experts

21. The applicants called a Miss Cheung. I found her a poor witness. Her conclusion on the monthly rental was $64 per square metre. She used comparables which she later abandoned. Her methodology was suspect. She failed to make a number of points which might have helped her clients. I totally reject her evidence.

22. The Housing Authority used Mr Cross. Although an ex-government employee and somewhat conservative in his opinions, he was a very experienced and a very good witness. I accept his approach as to the calculation of the ingredients of the formula, although I disagree with his conclusions.

The Cottage Area

23. Should this be the area of the structure or the permit area? In my judgment, the structure area is more appropriate for three main reasons.

(1) This was the area used by the Housing Authority in its computation of the compensation for the loss of the structure.

(2) When the comparables are examined and adjustments made to reflect the Rennie's Mill properties, the permit area would then not be comparing like with like.

(3) The Housing Authority asserts that additions or extensions were unauthorised.

24. Although it is right that the occupation permit requires consent, there was present in Rennie's Mill a housing office with staff and, apart from one incident in 1972, no action was ever taken against cottage occupiers. I have considerable doubt whether these extensions and alterations were unauthorised.

Yield

25. Mr Cross says 8% because the greater the risk, the higher the yield. I accept his approach, but the only reservation I have is his answers in cross-examination to Mr Grossman. He said one factor was the risk of renewing a tenancy. The evidence for Rennie's Mill appears that this could not be a relevant factor. There was a high demand for cottages. I think Mr Cross pitched his figure a little too high. In my judgment, based on the Mau Wu Tsai properties where a yield of 6% was expected, a figure of 71/2% would be more appropriate. I stress that although Miss Cheung gave a figure of 7%, I have disregarded her evidence.

Monthly Rental

26. Annex 3(a) of Mr Cross's reports set out the comparable capital transactions at Mau Wu Tsai. These figures are not challenged. His conclusion based on these figures and deductions give him a final figure of $55 per square metre. As far as the deductions are concerned, I accept them apart from the density and environment. Mr Cross said this could be in the range of 15 to 17.5%.

27. I do not think he had sufficient regard to the quieter and different style of life in Rennie's Mill and I would therefore take the lower end of the range. The total deduction should therefore be 60%.

28. The final figure is the unit rent. By looking at the comparable capital transactions and decapitalising them by 6%, there is a range of figures from $136 to $290. Mr Cross says these should not be averaged, but to arrive at his figure of $55 with a discount of 62.5% he must have adopted a figure of $148 per square metre. Even if comparable 6 is omitted as being out of line, this figure seems too low. In my judgment, a fair figure would be $152.

29. With an adjusted discount of 60%, the unit rent should be $61 per square metre. I have not disregarded Mr Cross' alternative to an investment valuation method by analysing comparable rents. This method also relies on a subjective discount approach. Even examining this, I feel justified in taking a figure of $61 per square metre.

30. The conclusion I therefore reach is as follows. I take applicant No.1, who is Mr Wong Pei-chun. His actual covered area is 50.2 square metres. The arithmetic is as follows. His damages are 50.2 multiplied by 61 multiplied by 155.432715. This is the capitalisation factor based on the yield and his life expectancy. His compensation then is $475,966 and for his ancillary area it is 123.31 multiplied by 6.1 multiplied by the same capitalisation factor, which comes to $116,915. The total damages, therefore, for his loss of opportunity to live in Rennie's Mill is $592,881.

31. Now I deal with the other loss. A large number of applicants now live in public housing. I have inspected several of these flats. It has been suggested they are primitive. I do not think that is the right word, but I think they are clearly basic. The floors are rough and unfinished. The decoration is of a most simple type. There are no partitions, no gas appliances, and I am in no doubt that any normal occupier would expend a large sum of money on making the flat livable, in particular, on floors, decoration and gas appliances. Although furniture and televisions, refrigerators, washing machines, etc. have to be bought, these cannot be a head of damage.

32. In my judgment, a fair figure would be $65,000 for each cottage. If there were different occupiers who have moved into different public housing flats then the figure is still $65,000 per cottage.

33. The only other matters I need determine are -

(1) An applicant with more than one cottage. The damages after the right of occupation are not the right of ownership. An applicant can therefore only receive damages for one cottage.

(2) The figure awarded is per cottage. Where there is more than one occupier, the figure should be split equally between them. This may produce some difference of opinion, but it seems to me the only fair way.

The Housing Authority must also pay interest on the damages. This should be from the date of departure. I am prepared to listen to submissions as to the rate, but it seems to me a fair figure should be to take 10%. This is less than the best lending rate and also judgment rate.

34. The figures I have given are, in my judgment, fair and reasonable. Although I am sure some people have suffered distress and anxiety and now live in a concrete tower rather than a cottage village which had a thriving community and I am sure provided a good living close to the sea, away from traffic, I am not permitted to give extra damages for this type of loss.

35. So, to take the example I have given above of Mr Wong Pei-chun, he will receive a total of $657,881. It must be remembered that he has already received a figure for his loss of structure. I am not sure of the exact figure, but it is about $400,000, so his compensation will be about $1 million.

36. I said at the close of the case that I was grateful to counsel and solicitors for the help they have given the court. The papers were prepared very well and both sides gave the court great assistance. I would also like to thank members of the public for keeping quiet during the case and taking the time and trouble to come to court. I have another case starting now in September where a different method of valuation apparently is going to be used by the applicants and I will listen to that evidence. The only matters which are determined and bind everybody are the conditions I have laid down for eligibility.

Representation:

Mr Grossman, SC & Mr Anthony Chan, inst'd by M/s Liu Chan & Lam, for all Applicants except the 12th, 20th & 22nd Applicants in MP965/96 and the 4th, 27th, 41st & 43rd Applicants in MP1927/96

Miss Gladys Li, SC & Mr Peter Ng, inst'd by M/s Simmons & Simmons, for the Respondents

Madam Tong Tim Nui, the 43rd Applicant represented by Mr Leung Chuen On, in person