Discreet Ltd v. The Secretary for The Environment, Transport and Works

LDMR 4/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 4 OF 2005

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BETWEEN

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Coram: Deputy Judge WONG, Presiding Officer of the Lands Tribunal and Mr. W.K. LO, Member of the Lands Tribunal

Dates of Hearing: 24, 25, 28 & 29 November 2005 and 9 & 13 February 2006

Date of Handing Down of Judgment: 15 March 2006

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J U D G M E N T

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Background

1.This is an application for determination of the amount of compensation payable for temporary occupation of land under the Roads (Works, Use and Compensation) Ordinance, Cap 370 (“the Ordinance”).  By a gazette notice dated 26 July 2001 (G.N. 4520), a right of temporary occupation was created for 1,066.2 m² of Lot 414 in DD 399 and 1,163.4 m² of Lot 415 in DD 399 (the temporary occupation area is hereinafter referred to as “the TOA” whilst the said two lots are referred to as “the Lots”), together with other pieces or parcels of land for carrying out any operations or installing, maintaining or removing any structures or apparatus in relation to Castle Peak Road Improvement between Area 2 and Sham Tseng of Tsuen Wan (detailed in the PWP Item 6365TH) (“the Road Project”) under section 15(1) of the Ordinance.  The said right of temporary occupation was created in favour of the Respondent upon expiry of 3 months from the date upon which the said gazette notice was affixed on or near the TOA , i.e. commencing from 27 October 2001.

2.In the said gazette notice, it was stated that the said right of temporary occupation “shall be created in favour of the Government of the Hong Kong Special Administrative Region for the purposes of or incidental to the works or use described” in the Scheme, which was defined to include the various schemes of works referred to in G.N. Nos. 3309, 2874, 3565 and 4746.  In particular, it was stated in the G.N. 4520 that the first publication date of the first G.N. 3309 giving notice to the general public (including the Applicant and the owners of other affected land) describing the general nature of the proposed scheme of road works was 10 July 1998.

3.It was not disputed by the parties that the commencement date of the temporary occupation of the TOA was 27 October 2001.  Also, they agreed that upon completion of the works and use under the Road Project, the TOA was handed over to the Applicant by the Respondent on 6 July 2004.  Therefore, although the said G.N. 4520 allowed the Respondent to temporarily occupy the TOA for 48 months, the actual occupation period was only for about 2.7 years.

4.The Lots were under the same ownership of the Applicant.  The Respondent by a letter dated 16 October 2001 invited the Applicant to submit a claim under the Ordinance for the TOA.  A few months earlier, on 27 July 2001, a small portion of the Lots (Section A of Lot 414 in DD399) having an area of 162.7 m² fronting Castle Peak Road was resumed for the same Road Project under the Resumption Notice of G.N. 2612 dated 26 April 2001 as amended by Corrigendum G.N. 4300 dated 13 July 2001.  The compensation for that portion of the Lots was determined by the Lands Tribunal in Discreet Limited v Secretary for Transport (unreported, judgment dated 25 July 2003, reference LDMR 14 of 2002).  The Tribunal awarded compensation to the Applicant in the sum of $1,530,000, equivalent to $9,404 per m² of land resumed.  The assessment was computed by the Tribunal on the basis of the difference of value of the Lots before and after the resumption (which methodology was also adopted by the experts representing both sides), as follows: -

Before Resumption                             $26,037,503
After Resumption                               $24,507,010
Compensation                                      $1,530,493

There was no appeal from either side on the said determination by the Tribunal.

5.The Applicant, represented by Mr. Charles C P Lai of Surpass Property Strategy Consultant and the Respondent, represented by the Lands Department, failed to reach agreement on the compensation payable to the Applicant for the creation of the rights of temporary occupation over the TOA.  The Applicant consequently made an application to the Lands Tribunal against the Respondent for the determination of the amount of compensation payable to the Applicant.  This Judgment sets down the background, the Law, the issues, the disputes between the parties and the Tribunal’s findings and determination.

Particulars of the Lots, the TOA and the house formerly standing on the TOA

6.Prior to the temporary occupation by the Respondent, the Lots comprised a piece of flat land at the middle with sloping land towards the northern and southern boundaries.  This was indicated in the site plan produced by the parties, the Plan No. TWM2933c prepared by District Survey Office for the said G.N. 4520. 

7.The Lots are held under New Grant No. 3413 for “building and garden” purposes.  Any developments erected or to be erected thereon are governed by G.N. 364 of 1934 as amended by G.N. 50 of 1940.  Therefore, any development of the Lots is restricted to a maximum height of 2 storeys and 25 feet with a maximum site coverage of 2/3, i.e. with a maximum plot ratio of about 1.33.

8.The parties agreed on the following land areas: -

(1)  areas of the Lots (excluding the resumed area of Lot 414 s.A of 162.7m²) = 2,624.36 m²

(2)  area of TOA = 2,229.6 m²

9.Other than the above agreed figures, the parties failed to have agreements on other areas to be used in their valuations.  Therefore, we will first determine these disputes.

10.The house formerly standing on the TOA was demolished well before the 2 experts preparing the valuation reports and giving evidence in this case were instructed.  The 2 experts failed to reach agreement on the area of the house.  Mr. Lau Tak Francis, the expert surveyor called by the Applicant (“AW”) proposed to use an average of the following 3 figures in arriving at the area of the demolished single storey villa house: -

(1)  area of the house as reported by Mr. Charles CP Lai, the previous consultant surveyor employed by the Applicant in his valuation report, i.e. 186 m²;

(2)  area of the house from survey sheet measurement as quoted by Ms. Leung Miu-yin Karen (“RW”), the expert surveyor called by the Respondent in her valuation reports, i.e. 167.7 m²; and

(3)  another area of the house, the roof-over area as measured by Land Surveyor / Tsuen Wan from a survey sheet and reported by RW in her report, i.e. 231.7 m².

11.Hence, AW arrived at a figure of 195.13 m² and used this in his estimation of the Open Market Rent (“OMR”) for the house portion of the TOA.

12.On the other hand, RW opined that in the absence of any accurate record, the area of the demolished house should be based on the area as measured from the survey sheet.  RW contended that although Mr. Charles C P Lai reported an area of 186 m² and produced a sketch plan in his valuation report, she noted that the sketch plan was not to scale and there were only a few dimensions in the plan.  On the other hand, the area as scaled off from the Respondent’s survey sheet should be relied upon in the absence of better evidence.  Therefore, in assessing the OMR of the TOA in her primary valuation on the basis of house use for the structure and garden use for the land, she opined that the area of the house obtained from scaling off the survey sheet, i.e. 167.7 m² should be adopted.  Notwithstanding this, RW accepted to use the area of 195.13 m² as quoted by AW when assessing the OMR of the house in her alternative valuation, which was made on the basis of covered storage and workshop use for the house structure and open storage use for the land.

13.Since the Applicant failed to substantiate the figure of 186 m² as quoted by Mr. Charles C P Lai, which was challenged by the Respondent who sought to rely on scaled measurements of the survey sheet, we agree with RW to use the latter figure of 167.7 m².  As to the difference between the roof-over area of 231.7 m² and the much smaller area of 167.7 m², this is not unusual bearing in mind that the villa house had large canopies and flower beds and the like.  But as a general rule and even in the standard method of measurement of properties adopted by the surveying and the real estate profession, in calculating the area of a house, the areas representing large canopies etc. would not be treated as the house area per se.

14.Also, in the alternative valuation assuming that the house structure was used for covered storage and workshop purpose, RW’s concession to adopt AW’s suggested area of 195.13 m² is reasonable.  As said before, portion of the house structure extending to about 64 m² (difference between 231.7 m² and 167.7 m²) roofed over as canopy, etc., would attract a higher rental value than open land if the said portion was used for storage.  So, by accepting a higher area of 195.13 m² (a difference of 27.43 m² from the RW’s estimated house area of 167.7 m²), this could compensate for the extra value of the roofed over but not enclosed area of 64 m².

15.There were also disputes between AW and RW on the extent of flat land or sloping land.  So, in AW’s various valuation reports, the areas quoted differed from those adopted by RW.  However, in the Written Final Submission of counsel for the Respondent, revised computation sheets show that AW agreed to change his earlier figures after he decided to adopt RW’s estimated area of the Lots of 2,642.36 m².  Therefore, for the purpose of calculating the OMR of the Lots, AW used 195.13 m² as the house structure area and 2,429.23 m² (i.e. 2,624.36 m² less 195.13 m²) as the land area.  AW further opined that in both his primary and alternative valuations (i.e. for open storage & workshop use, and garden use respectively), the Applicant should be compensated for the loss of rent over this entire land area of 2,429.23 m².

16.On the other hand, RW gave evidence that based on the advice given to her by Land Surveyor/Tsuen Wan of The District Survey Office/Tsuen Wan and Kwai Tsing of Lands Department, as at the date of creation of rights of temporary occupation, the various areas are as  follows: -

Total of Lot 414 RP and Lot 415
Sloping Land	852.9 m2
Flat Land	1,209 m2
House	167.7 m2
Temporary Occupation Area (TOA)	2,229.6 m2
Non-TOA Area	394.76 m2
Total area of the Lots	2,624.36 m2
(excluding resumed area of Lot 414 s.A)

17.RW confirmed that the various areas were obtained by the said Land Surveyor by means of survey sheet measurements.  In the absence of other better evidence, we agree to adopt these areas in this Judgment.  Also, based on the Plan TWM2933c referred to in the G.N. 4520, we find that the non-TOA Area is the entire natural back slope at the northern end of the Lots.

18.However, we will deal with the other disputes over areas later in separate sections when deciding on the issues submitted by AW, i.e. (a) whether the loss of rent should cover the entire Lots but not restricting to the TOA, and (b) whether the loss of rent for the assumed use of covered storage and workshop or open storage should cover the sloping land of the entire Lots, both inside and outside the TOA.

The Law behind the Applicant’s claim

19.The Applicant’s claim is based on Items 2(a), 2(b), 6(a) and 6(b) of Part II of the Schedule to the Ordinance: -

2. 6.

(a) The creation of an easement or other permanent right or a right of temporary occupation under section 15. (b) Disturbance resulting from the creation of an easement or other permanent right or a right of temporary occupation under section 15. (a) Physical or structural damage to any land or building resulting from the works. (b) Disturbance resulting from the structural damage mentioned in item 6(a)

(a) (i) … (ii) in the case of the creation of a right temporary occupation, the amount of an open market rent for claimant’s interest in the land occupied during the period of the easement. (b) A disturbance payment. (a) The expense which is fairly and reasonably incurred in repairing the damage and any expense fairly and reasonably incurred in preventing or mitigating the damage. (b) A disturbance payment

20.The rights of the Applicant to receive compensation have to be construed against the provisions of Part I of the Schedule to the Ordinance, and in particular:

-	ss. 2 & 4, defining a disturbance payment as expenditure arising from (in this case) the Temporary Occupation, to be assessed as if the Temporary Occupation were a tort;
-	s. 12, prescribing the relevant date of valuation as being “the date of the happening of the relevant event”, (The Respondent submitted that this is the date on which the Temporary Occupation commenced); and
-	s. 13, prescribing the compensatory nature of claims under the Ordinance (i.e. there shall be no double compensation).”

21.Although there were substantial differences between the two expert surveyors called by the 2 parties in the opinion of compensation payable to the Applicant, most of these involve issues of factual disputes or valuation issues. We will sum up these issues in the next section. 

The Issues

22.Counsel for the Applicant helpfully summarized in his Opening and Final Submissions the issues concerning the compensation payable to the Applicant in respect of the Temporary Occupation of the TOA.  They are re-stated below: -

(1)   The determination of the loss of rent of the TOA from the date of the creation of the rights of temporary occupation (i.e. 27 October 2001) to the date of handover of the TOA back to the Applicant (i.e. 6 July 2004).  This includes the following sub-issues:

(a)   the assessment of the loss of rent for the different portions of the TOA (i.e. the house and the land); and

(b)   whether the loss of rent to the Applicant should also cover the non-TOA area of the lots;

(2)   Whether the Applicant is entitled to claim for the loss of rent of the TOA and the non-TOA area of the lots for the following 2 additional periods:

(a)   from the date of the first publications of G.N. 3309 affecting the lots (i.e. 10 July 1998) to the date before the creation of the rights of temporary occupation of the TOA (i.e. 26 October 2001); and

(b)   from the date after the handover of the TOA back to the Applicant (i.e. 7 July 2004) to the date when the house together with the land of the lots were assumed to be reinstated and ready to let (estimated by AW to be 2 years from the date of handover, i.e. 7 July 2006)

(3)   Whether the Applicant is entitled to claim disturbance payments for the physical or structural damage to the Lots including the following:

(a)   the reinstatement cost of the house and its assessment;

(b)   the additional costs for piling for building development to avoid loading on the bored pile retaining wall no. BPRW 37 built by the Highway Department’s contractor and its assessment;

(c)   the additional cost of constructing the outstanding section of 16 metres of Road R3 and its assessment;

23.During the hearing, the parties agreed on the assessments for the last 2 items of works set out in the last paragraph, so they dispensed with calling their experts to give evidence on these estimations.  However, the parties still disagreed on the issue of entitlement for these 2 items.  We will deal with these in a separate section below.

24.Also, there were originally 3 more issues, namely the disturbance payment for the extra expenditures to be incurred by the Applicant for “elevated deck and piling for reinstating the over-excavated portions of the platform and Slope No. 22” in the agreed sum of $5,013,000 as well for “construction of widened section of road R3” in the agreed sum of $574,275, and the issue raised by the Respondent as to whether a set off in disturbance payment for the “cost saving for bulk excavation into Slope 22 carried out by Highways Department” in the agreed sum of $712,500 should be credited.  However, since during the hearing the Respondent abandoned these 2 claims and the Applicant also abandoned the said set off, there was no need to discuss these 3 issues any further. 

The Applicant’s claims and the Respondent’s assessments

25.The Applicant instructed an expert surveyor, Mr. Charles C P Lai to file claims to the Lands Department on 24 July 2002 and 18 November 2002.  Since January 2005, the Applicant has instructed another expert surveyor, AW to prepare valuation reports and revise the claims.  AW has altogether filed 3 valuation reports.  He also gave evidence at the hearing.  Similarly, the Respondent instructed an expert surveyor, RW who has filed a total of 4 valuation reports and gave evidence at the hearing.  Although their methods of valuation were basically the same, and their comparables for the assessment of house rentals were also the same, they failed to have consensus opinion on most issues.  Also, as already stated above, they did not have agreement on certain factual information such as the area of the house, and differed a lot in their valuation opinion.

26.A summary of the Applicant’s claims and the Respondent’s assessments is set out in the Table 1 below.  All the revisions made by the 2 experts and the concessions given by both parties have already been reflected in the said table.  These include some last minute changes made by AW and reported in the Final Written Submission given by counsel for the Applicant.  These changes were needed to reflect the change in the valuation date by AW.  Based on the higher of the 2 different valuations on the rental value of the Lots, the total claim of the Applicant was $22,576,673 whilst the total assessment made by the Respondent was $2,530,000.  The difference in valuations between AW and RW is about 9 times.

27.In summary, if we look at the broad picture of the higher of AW’s estimated claims under the 2 different scenarios, we find that his total claim for loss of rent, in his primary valuation, is about $12.6 million.  Since he claimed for a total period of about 8 years (actually 8 years less 4 days, from 10 July 1998 to 6 July 2006), including about 3.3 years before the actual period of occupation, about 2.7 years of actual period of occupation and 2 years post-actual occupation, the annual loss of rent he estimated is about $1.6 million.  On the other hand, RW estimated the loss of rent in the sum of about $0.2 million per year and applied that for the actual period of temporary occupation of about 2.7 years.  So, as far as the assessment of the OMR is concerned, the 2 experts’ opinion is about 8 times in difference.  We find this to be very unusual.

Table 1- Summary of the Applicant’s Claim and the Respondent’s assessment

Relevant Valuation date for assessing Loss of Rent

28.Another unusual feature in this case is that even the valuation date previously adopted by AW in his reports and his oral testimony differed from that adopted by RW.  And during the hearing when AW was cross-examined by counsel for the Respondent, AW still stood by his opinion that the relevant valuation date for the assessment of “loss of rent” compensation payable to the Applicant should be 10 July 1998, instead of 27 October 2001 as contended by RW.

29.However, AW advised counsel for the Applicant that he had reconsidered the matter and agreed to use the date of 27 October 2001, which was all along adopted by RW.  As a result, AW had to make changes for all his adjustments to the comparables.  In short, he abandoned all his time adjustments and agreed to use all the time adjustments suggested by RW.  Also, he made consequential changes to his assessments of the OMR for the TOA and the Lots and the compensation payable to the Applicant.

30.We do think that expert surveyors should pay more attention to this issue of the correct valuation date from the beginning to avoid the need to make amendments both before and during a hearing for compensation claims.  As pointed out by counsel for the Respondent, the date of valuation is clearly set down under s.12 (Date of valuation and interest) of Part 1 of the Schedule to the Ordinance. If an expert surveyor has any problem in confirming the relevant date of valuation, he should be prepared, subject to taking instruction from his client, to consult his client’s lawyer.  This would obviously simplify the differences in computations between the parties and alleviate the tasks of the Tribunal in understanding their different figures in their series of valuation reports produced.

Assessment of OMR for the TOA or the Lots by AW and RW

31.We have summarized the various OMR valuations prepared by AW and RW in Table 2 below.  In AW’s Scenario I, he assumed the use of the house structure for house use whilst the entire land portion was put for open storage and workshop use.  We note that there was no provision at all for any space for the parking of the tenant’s car.  Also, there was no allowance for the fact that a tenant of the subject house would be prepared to occupy the house at a rent comparable to other houses in a residential neighbourhood but the house itself was entirely surrounded by open storage and workshop uses.  We are doubtful if in the market, any tenant would be prepared to pay a market rent (assessed by AW at the sum of $13,415 per month) under the circumstances.  We also note that in AW’s calculations, he did not comment about his estimated open market rent per month for the different portions of the Lots, i.e. the house and the land portions.  Instead, he just show his mathematics of arriving at his estimated loss of rent for different periods of time.  He was too bogged down with his mathematical calculations in his valuation reports but seemed to have lost sight of, as commented by counsel for the Respondent, any “big picture” assessment of the case.  We have done the analysis and breakdowns ourselves in Table 2 below.

Table 2 - Assessment of OMR by AW and RW

Assumed uses for the TOA or the Lots for the purpose of assessing the loss of rent

32.It was AW’s case that since the Respondent’s road works contractor used the TOA for the purpose of resident site staff’s office, workshop for repair and maintenance of construction plant, and storage of construction materials, it must be the case that in undertaking the valuation of the TOA for the temporary occupation period as well as for the periods prior to and subsequent to the temporary occupation, the Applicant could assume, as of right, that the TOA (including the structure and the land) could be put to such “actual” uses.  Hence, AW considered that comparables of open storage and workshop instead of garden comparables should be chosen.

33.AW justified his above argument by giving evidence that during his site visit to the Lots, prior to their return to the Applicant, the Lots had actually been used by the road works contractor as its resident site staff office, workshop for repair and maintenance construction plant, and storage of construction materials.  We do not agree with AW on this point.  The TOA was required specifically for the purpose in connection with the Road Project.  So, it must be the case that the TOA was actually put for such uses.  However, we do not agree that just because there was evidence that the TOA was actually used for the said purposes, the highest and best use of the TOA or the Lots for rent must be for the same purposes. 

34.It is trite law that in assessing compensation, we cannot simply assume that the land could be used for the specific purpose for which the land was compulsorily resumed.  Although the present case involves temporary occupation of land, the same general principle should also apply.

35.In addition AW argued that since the Lots were held for the purpose of building and garden, subject to what was usually known as the “G.N. 364 conditions”, the Lots should be valued on the basis that it could put to car repairing uses and fee paying car park uses, and that we should assume that the Lots could be let out, not only with the benefit of the house structure then standing on the Lots but with the benefit of a much larger notional structure with the gross floor area extending to 1.33 times the area of the Lots.  It seems to us that AW lost sight of the need to ascertain the market situation surrounding the Lots.  In valuation of a property, we should not assume that since there is no restriction under the lease, we should value the property for all the uses that are permitted.  Certainly we have to consider the location of the property, the demand for the proposed uses, particularly if it was not the actual use or a former use, as well as the market reality before deciding whether the property should be put to the proposed uses.

36.The Lots are located between Area 2 and Sham Tseng of Tsuen Wan, on the hill ward side of Castle Peak Road with the neighbourhood zoned for residential and green belt.  On basis of evidence adduced by the parties, we find on balance of probabilities that the Lots were, at the relevant date of valuation, not suitable for use as a fee-paying car park or for car repairing use.

37.Also, when valuing the TOA or the Lots for the purpose of open storage and workshop use, AW applied the same rate to all the sloping land as well as the flat land because the Respondent’s contractor was using the sloping land as well as the flat land.  For the same reason as stated before, we should not assume that just because the Respondent requires or actually uses the resumed land for a certain use or in a certain manner, we should assess compensation on the basis of the same use or manner of use.

38.Besides, as rightly pointed out by the Respondent, the Respondent required the temporary occupation of the TOA so that the level of portion of the TOA could be lowered.  The Respondent definitely would need to enter into all portions of the TOA including using part of it for storage.  However, it does not follow that the Respondent could use the sloping land, including the natural slope at the back for storage use. 

Assessment of OMR of structure for house use

39.Having considered all the evidenced adduce by the parties, we adjusted the commonly adopted house rental comparables for various factors of adjustments identified by the 2 expert surveyors.  As for any valuation, we held the same view for some factors and had our own view for some other factors.  At the end, we arrived at an average adjusted unit rate of $49.13/m² p.m. or $589.44/m² p.a.  A summary of our adopted adjustments is set out in Table 3 below.

Table 3 - Adjustments of House Rental Comparables

Comparable	H1	H2	H3	H4	H5
Unit Rate	$92	$136	$66	$86	$51
Adjustments
Time	- 2%	5%	6%	- 2%	- 2%
Building Condition	- 47.5%	- 60%	- 47.5%	- 55%	- 40%
Sea view	0%	2%	0%	5%	0%
Location	3%	0%	5%	1%	10%
Traffic Noise	5%	2%	- 10%	- 10%	- 10%
Size	0%	0%	- 1%	3%	- 5%
Privacy	5%	2%	8%	5%	0%
Parking	5%	0	5%	0	5%
Total Adjustments	-31.5%	-49%	-34.5%	-53%	-42%
Adjusted Unit Rate (/m2)	$63.02	$69.36	$43.23	$40.42	$29.58
Average (/m2)	$49.12

We discuss in more details below our adopted adjustments: -

Time

Both AW and RW used the same rental index as the basis for adjustments.  Following the last minute amendment of AW in the relevant date for the assessment of loss of rent to 27 October 2001, counsel for the Applicant confirmed in his Final Submission that there was no longer any difference between Aw and RW on this factor of adjustment.  We accept the agreed adjustments of AW and RW for time.

Building Condition

Both AW and RW attributed substantial adjustments for this factor.  AW allowed for adjustments ranging from –30% to –70% whilst RW allowed for adjustments of between –50% and –70%.  This suggests that to both expert surveyors, the comparables were far much better in condition than the house on the Lots, which had been demolished.  We appreciate the difficulties for the expert surveyors of adopting a reasoned adjustment for this factor of adjustment, bearing in mind that neither of them had even the opportunity of viewing the external of the house close to the relevant valuation date prior to its demolition.  For the same reason, we find it difficult to attribute an adjustment percentage for this factor.  However, we do not agree with the contention of AW that as an alternative basis, we should take into account the estimated cost of renovation given to the Applicant.  Firstly, we do not think that the contractor has sufficient information to carry out his estimate.  Secondly and more importantly, in assessing the OMR of a house, it is more likely than not that a prospective willing tenant in the market will not take all the trouble of seriously consider the estimated cost of renovation (which amounts to about $0.75 million, based on AW’s evidence of the contractor’s estimate), the return or annual equivalent of such cost before deciding on the rent that the tenant is prepared to pay.  At the end, we decide to adopt the average of the adjustments proposed by AW and RW. 

Sea view

Both AW and RW agreed that no adjustment was warranted for Comparables H1, H3 and H5, and the same minor adjustment applied to Comparable H2.  We adopted their opinion for these 4 comparables.  They both agreed that an upward adjustment was warranted for Comparable H4 but they did not agree on the degree of adjustment.  Having regard to the evidence of AW and RW, including the location plan and the photographs showing the comparables, we are of the view that AW’s opinion was more likely to be correct than RW.  Therefore, we adopt AW’s adjustment of 5% for Comparable H4.

Location and accessibility

AW and RW first differed in opinion as to whether a separate item of adjustment was warranted for the factor of accessibility.  They also differed in their adjustments for the factor of location.  In particular, RW attributed a total adjustment of 30% of both factors combined for Comparable H5.  We agreed with the Applicant that this is far too much.  After detailed consideration of the evidence, we gave our opinion in the above table our adopted adjustments for these 2 factors combined.

Traffic Noise

AW and RW again differed much in their opinion on this factor of adjustment.  We basically agree with RW on most of the adjustments for the comparables on this factor.  We agree that this site, with its location next to Castle Peak Road and not far away from many major highways suffered from traffic noise.  Therefore, we follow closer to AW in our choice of adjustment percentages for this factor of adjustment.

Size

Both AW and RW applied only minor adjustments to the comparables.  We agree to adopt RW’s adjustments or nil adjustment (where appropriate) to all the comparables with the exception of Comparable H5.  For Comparable 5, AW opined that an adjustment of –5% was appropriate whilst RW suggested a smaller adjustment of –3%.  Having regard to the large size difference between the subject structure on the Lots and Comparable H5, we prefer to adopt AW’s figure of –5%.

Privacy

AW attributed a factor of 2% for Comparable H2 only.  For the other comparables, AW opined that no adjustment was required.  On the other hand, RW only agreed that no adjustment was warranted for Comparable H5 but suggested adjustments of 5%, 8 % and 5% for Comparables H1, H3 and H4 respectively.  We have considered their evidence and decide to adopt RW’s adjustments for all the comparables for this factor of adjustment.

Parking facility

AW did not find this adjustment to be necessary.  AW opined that no separate adjustment for this factor was warranted whilst RW suggested 5% each for Comparables H1, H3 and H5.  We accept RW’s opinion in this regard.  However, as we assess the OMR of the Lots in a later section, we will take into account the fact that it was the RW’s case that there was car-parking provision on the Lots for the tenant of the house standing thereon.  So, in assessing the OMR of the land portion of the Lots for open storage and workshop use, we find that we have to make allowance for certain area of land that has to be reserved for parking and access.  Otherwise, it will amount to double counting. 

Assessment of OMR of structure for covered storage and workshop use

40.AW produced no comparable for the covered storage and workshop use.  That is also why in his primary valuation, he only adopted house rent for the structure portion and open storage and workshop rent for the land portion.   We have already commented the incompatibility of these assumptions before.

41.On the other hand, RW opined that of the 3 comparables quoted by AW for the assessment of open storage rental value, it would be appropriate to adopt the rent of Comparable W3 (i.e. STT 3462) as the rental value for covered storage and workshop use.  This is because the tenancy is permitted for use as workshop subject to 100% site coverage with gross floor area of not exceeding 270 m².  The tenancy was tendered at a rent of $108,000 p.a.  After using an adjustment factor of 0.6 to the upper floor workshop or storage area, RW estimated the effective area of the tenancy to be 216 m².  The rent equated to $500/ m².  RW allowed a total adjustment of -37% giving an adjusted unit rate of $315/m².  We have considered the adjustments made by RW and decided to adopt the following adjustments: -

Structure	-10%
Time	1%
Location	-5%
Security of tenure	-3%
Total adjustment	-17%
Adjusted unit rate	$415/m2

42.Therefore, relying on this comparable, we estimate the unit rate for the house structure of the TOA for covered storage and workshop use to be $415/m² p.a..

Assessment of OMR of land for garden use

43.AW suggested in his alternative valuation that the best evidence for land in the TOA or the Lots for garden use are (1) the Standard Rates adopted by the Respondent for the existing and new short term tenancies (for conversion and regularization cases) of Government land in the New Territories.  He quoted a schedule of “standard rates” that he said was applicable from 1 April 2002.  There was a range of rates, in this quoted list of standard rates, ranging from $214/m² for the “High Rate Zone” and $121/m² for the “Low Rate Zone” in Tsuen Wan and Kwai Chung Area.

44.In addition, he quoted a comparable of Short Term Tenancy (No. KX2033 located at Kai Tak, Kowloon) which was used for Recreational Purpose (i.e. Golf Center and such ancillary facilities as may be approved in writing by the District Lands Officer).  The tenancy of land of 148,600 m², awarded by way of tender on 23 November 1999, was let at a yearly rent of $19,200,000 (or a monthly rent of $1,600,000), or at a unit rate of $129/m² p.a.  Based on these comparables, AW adopted a unit rate of $130/m² p.a. for valuing the land for garden use.

45.On the other hand, RW produced in her valuation reports a schedule of comparable rents.  After making adjustments, she opined that an appropriate unit rate was $100 /m² p.a.

46.AW failed to produce other rental evidence in support of his conclusion of value.  He reiterated that his evidence is the best evidence.  In addition, he attacked the relevance of RW’s comparables and the adjustments made by RW.

47.On the contrary, we find that the comparables quoted by AW were irrelevant.  Firstly, the standard rates adopted by the Respondent for the conversion and regularization of short-term tenancies were not comparables.  AW contended that most of the comparables used by RW were rent review cases all with the Respondent as the landlord.  However, the tenants in those cases could have the choice of whether agreeing or not agreeing the rents offered at reviews.  For the only tender comparable quoted by AW, it was obviously a very different piece of land from that of the TOA or the Lots.  Therefore, after discarding Rental Comparable G1 and G4 that had sloping land, we find that the remaining comparables of RW range from $77 to $100.  In particular, we find that the comparable at Wah King Hill Road, Kwai Chung was only let at a rate of $77/m² p.a.  Having regard to all the evidence, we therefore agree with RW that it would be very reasonable to value the garden land at the rate of $100 /m² p.a.

Assessment of OMR of land for open storage use

48.Based on 3 comparables (referenced W1, W2 and W3) all of which were located in Kwai Tsing, an industrial area, AW estimated the unit rate for the land for open storage use in the unit rate of $586 /m² p.a.  However, as pointed out by RW, the actual uses of these 3 comparables were as a fee paying public car park, a vehicular repairing centre and a workshop respectively.  Therefore, we agree with RW that the comparables W1 (i.e. STT 3458) and W2 (i.e. STT 3467) are clearly irrelevant for assessment of the land of the TOA or the Lots.

49.We further agree with RW that Comparable W3 (i.e. STT 3462) is also not suitable as a comparable for open storage use because the tenancy is permitted for 100% site coverage with gross floor area of not exceeding 270 m².  For this reason, we agree to adopt the 4^th comparable. W4 (STT3520) identified by RW.  We note that the tendered rent for the tenancy at Tsing Yi Road, Area 20, Tsing Yi, is $277,296.  With a site area of 2,180 m² (comprising flat area of 1,770 m² and sloping area of 410 m² ), the rent breaks down to a unit rate of $156.66/ m² (based on the flat area alone).  RW made adjustments to this comparable bringing down the adjusted unit rate to $114 m².  We have reviewed RW’s adjustments and considered to adopt the following adjustments instead: -

Size	0%
Time	8%
Location	-20%
Security of tenure	10%
Total adjustment	-2%
Adjusted unit rate	$153.53 rounded to $153/m2

50.Therefore, relying on this comparable, we estimate the unit rate for the land of the TOA or the Lots for open storage use to be $153/ m².

Tribunal’s Determination of the OMR for the Lots for the period of temporary occupation by the Respondent

51.We have valued the Omr of the TOA and the non-TOA (where appropriate) of the Lots in Table 4 below.  Since AW’s Scenario I is the same as RW’s Scenario II, there are altogether 3 different scenarios put forward by AW and RW.  As we have explained before, we do not find AW’s Scenario I, i.e. with structure portion or house use and open storage and workshop use to be a feasible scenario in the real world as no one would like to pay for such rent for a house which is surrounded by some flat and sloping land that are being used, as suggested by AW, for open storage and workshop use.  Therefore, we only need to consider in details the 2 feasible scenarios of uses of the Lots.  That is, since we are of the view that the Lots could either be used for (1) a mix of house use for the structure portion plus garden use for the land portion or (2) a mix of covered storage and workshop for the house portion plus open storage for the land portion, the higher of the two estimated values in Table 4 represents the OMR of the toa or the Lots.  We estimate this to be $261,759, which is rounded to $262,000 p.a.

Table 4 – Tribunal’s Assessment of OMR of the TOA or the Lots

Whether the loss of rent to the Applicant should also cover the non-TOA of the Lots

52.AW contended that the basis of the Applicant’s claim for the loss of rent over the non-TOA of the Lots was Item 2(b) of column two under Part II of the Schedule to the Ordinance.

53.As discussed before in the section on the area of the TOA and the Lots, we find that the TOA covers all the area of the Lots with the exception of the back slope.  Therefore, as set out in Table 2 above, we find that AW has included the entire non-TOA (i.e. back slope) in both his Scenarios 1 and 2.  AW opined that even though the Respondent chose to omit the non-TOA of the Lots (i.e. the back slope) in G.N. 4520 for the temporary occupation period, it would not be possible for the Applicant to make use of the non-TOA slope as the Applicant was denied access during the said period of occupation.  On the other hand, RW contended that the Applicant was only entitled to what was stated in the G.N. 4520, as stipulated by the provisions of the Ordinance.

54.RW opined that under AW’s Scenario I (in which the land portion was assumed to be put to open storage and workshop use), the sloping land, whether within the TOA (i.e. the front slope) or within the non-TOA (i.e. the back slope), could not be put to such uses.

55.In AW’s Scenario II (which is the same as RW’s Scenario I) under which it was assumed that the structure was put to house use and the land was put to garden use, AW assessed the entire slope (both within and outside TOA) at the same unit rate as for garden use on flat land whilst RW only assessed the TOA portion at 1/4 of the unit rate for garden use on flat land.

56.Having regard to all these evidence and arguments, we find that the Applicant should be compensated for the non-TOA as damages if the basis was for garden use.  However, we decide that we agree with RW that there is no market for open storage and workshop use for all the sloping land in his Scenario I.  But we agree with RW that the non-TOA, by virtue of the topography could only at best fetch 1/4 of the value as for flat land, even if the use is for garden use.

Whether the Applicant is entitled to claim the loss of rent for the period prior to the relevant G.N. 4520 for the temporary occupation of the TOA

57.The Applicant contended that the basis of the Applicant’s claim for the loss of rent prior to the creation of the right of temporary occupation of the TOA was Item 2(b) of column two under Part II of the Schedule to the Ordinance.  G.N. 4520 stated that the Respondent would be allowed to temporarily occupy the TOA for the purposes of or incidental to the works or use described in the Scheme of Road Project described thereof, which included the various schemes of works referred to in G.N. Nos. 3309, 2874, 3565 and 4746. 

58.However, it does not follow that the Applicant is entitled to claim for the loss of rent from the date of the first such G.N. (i.e. G.N. 3309).  Firstly, the provisions of the Ordinance and G.N. 4520, which authorized the temporary occupation, did not explicitly allowed for such entitlement of claim.  Secondly, according to the evidence of Mr. Daniel Kwan, a director of the Applicant, the property had been let out at one stage for 2 or 3 years but this use had been abandoned not because of the Temporary Occupation of the TOA.  Thirdly, there was evidence, again from Mr. Kwan, that the Applicant had all along intended either to sell or to redevelop the property.  Finally, although Mr. Kwan gave evidence claiming that after he knew of the Scheme dating back to the first notice of G.N. 3309, it was not possible to rent out the property because the Respondent said that the original access linking the property with Castle Peak Road would be blocked.  However, we do not accept this piece of evidence since as an experienced architect Mr. Kwan should have known that any road scheme published by the Respondent might take a long time to materialize or that any road scheme might not be approved at all.  It does not make sense to us at all that Mr. Kwan felt compelled to stop renting out the property as soon as he first noticed G.N. 3309, which first notified the general public, the Scheme, or variations of the Scheme before the final Scheme as that shown in G.N. 4520.  For this reason, we decide not to accept AW’s contention to extend the period of claim for loss of rent to the date of first gazetting of G.N. 3309 (i.e. 10 July 1998), about 3.3 years before the date of creation of the rights of temporary occupation (i.e. 27 October 2001).   

59.The Applicant failed to discharge the onus of proof that the element of causation existed between the first date of notice of the first G.N.; G. N. 3309 and the cessations of use of the Lots for storage or other permitted uses.  Therefore, the Applicant did not satisfy the test for the award of damage under Item 2(b) of Part II of the Schedule to the Ordinance.

Whether the Applicant is entitled to claim for the loss of rent for the period that is needed for the reinstatement of the house on the lots

60.There was no dispute from the Applicant that the Applicant knew that the house would be demolished by the Highway Department’s contractors who temporarily occupied the TOA under the scheme permitted by G.N. 4520 dated 26 July 2001.  This was needed since the site level of the TOA had to be lowered to 2 levels (i.e. +43.5m P.D. and +34.5 m P.D.). 

61.However, the Applicant contended that since the Respondent confirmed that there was no issue of any legal waiver of entitlement on the part of the Applicant, the Applicant was entitled to compensation for (1) the cost of reinstatement of the house and (2) the rent that could not be received by the Applicant during the construction period of reinstating the house on the Lots.  The basis of the Applicant’s claims for these 2 items of claims were respectively based on Item 6(a) and 2(b) of column two under Part II of the Schedule to the Ordinance.

62.Also, the Applicant contended that they were entitled to compensation assessed under the general compensation principle of “no better and no worse”, akin to the compensation for the resumption of land by the Respondent.  Counsel for the Applicant cited the well-established principle enunciated by the Judgment of Shun Fung case in support of his contention.

63.We agree with the Respondent that it would be wrong to award compensation for loss of rent for this “notional” period of time.  Firstly, it was not in accordance with the provisions of the Ordinance, in particular the items listed out in Schedule II to the Ordinance.  Secondly, if it was the Applicant’s case that compensation for loss of rent for this “notional” period was needed because this formed part of the disturbance payment due to the Applicant, it should better be taken care of by the “fall-back” approach of RW.  This will be discussed in the section below. 

Tribunal’s assessment of the total compensation for the loss of rent

64.As set out in the computations in Table 4 above, we have estimated the OMR of the Lots at $262,000 p.a.  Also, after detailed consideration, we have also decided that the only relevant period for the assessment of compensation payable to the Applicant, for the loss of rent due to the temporary occupation by the Respondent of the TOA considered, is the period between (1) the date of creation of the rights of temporary occupation (i.e. 27 October 2001) and (2) the date of handover of the site to the Applicant (i.e. 6 July 2004).  Therefore, we estimate the total loss of rent to be as follows: -

Estimated OMR p.a.	$262,000
YP 2.6913 years @ 1.5 %	2.6185
Compensation for loss of rent	$686,047
Rounded to	$686,100

Disturbance payment to the Applicant

65.During the hearing, the Applicant consented to abandon the claim for the additional costs of constructing the elevated deck and piling for the over-excavated portion of the platform and Slope No. 22 as well as the claim for the additional costs of widening R3 from 4.5 metres to 6 metres.  Also, apart from the disputes on whether the Applicant is legally entitled to the compensation for the additional costs for piling for building development to avoid loading on the bored pile retaining wall No. BPRW 37 and the additional costs of constructing the outstanding section of Road R3, the parties consented on the quantum of these costs, at $5,536,046 and $199,680 respectively.

66.We agree with RW that her ‘fall back” approach, if properly done, should have taken care of all the disturbance to the Applicant’s TOA as well as all the disturbance to the Applicant’s non-TOA of the Lots.  We agree with RW that, what the Respondent has suffered, as a result of the Respondent being allowed (by virtue of the G.N. 4520 giving the Respondent rights of temporary occupation of the TOA) to occupy the TOA for the period from 27 October 2001 to 6 July 2004, should best be calculated by reference to the difference in the Open Market Value (“OMV”) of the Lots as at the date of handing over of the TOA to the Applicant on 2 bases, assuming (a) no rights of temporary occupation has been given to the Respondent and (i.e. “Before” Value) (b) rights of temporary occupation has been given and actually enjoyed by the Respondent (i.e. “After” Value). 

67.Both parties agreed that in the absence of suitable direct sale site comparables, the only method of valuing the OMV of the Lots in the “Before” and “After” situation is the Residual Method which, as we understand, has also been commonly employed by the valuation profession.  In the Residual Method of Valuation, the estimated OMV of the Lots, being a site ripe for development, at a certain point of time should have already reflected the delay in development, if any, that might have been caused by the temporary occupation of the TOA by the Respondent. 

68.AW argued that, regardless of the intention of the Applicant, the Applicant was still entitled to claim for the damage done to the Applicant’s property in the form of (a) reinstatement cost of the house structure, and (b) delay to the development envisaged by the Applicant.  We do not agree with this contention and AW’s reasoning.

69.Mr. Kwan gave evidence that since purchase in 1994, the Applicant never actually renovated the house for renting out as a house and garden.  In 1998, the Applicant applied to redevelop the Lots into 2 blocks of 6 to 7 storey service apartments but was rejected.  Notwithstanding this rejection, the Applicant was still contemplating redevelopment, including exploring the possibility of having a land exchange with the Respondent.  The Applicant confirmed its continuing intention of redevelopment during the years when the Respondent consulted the general public and the owners of affected land (including the Applicant) on the Scheme, which were revised a number of times.  From the agreed minutes of meetings held during this period and the evidence of Mr. Kwan, the Applicant indicated very clearly that one of the main reasons for agreeing the temporary occupation of the TOA was that they would not like a different scheme which might trigger resumption of a much larger area of the Lots and which would also delay their development proposal.

70.During these years, the Town Planning Board was in the course of amending the zoning for the Lots and some other land in the vicinity, by relaxing the maximum permissible plot ratio from 0.4 (at the time of 27 October 2001 when G.N. 4520 was published) to 1.2.  There were much consultation and amendments relating to this relaxation of density control.  Eventually, the Town Planning Board agreed on 14 March 2003 that the proposed amendment of plot ratio should form part of the draft OZP No. S/TWW/13.

71.Therefore, based on the facts of this case including the evidence of Mr. Kwan, a director of the Applicant who was involved with the planning for the redevelopment of the Lots from the beginning of their purchase by the Applicant in 1994 to the present day, as well as the valuations prepared by AW and RW, we have no doubt to conclude that the highest and best use of the Lots, both before and after the temporary occupation, was as a development site.

72.So, in short, using the valuation profession’s jargon, a “Before” and “After” valuation of the Applicant’s property, including the TOA and adjoining non-TOA of the Lots at the relevant date, if properly done using the correct assumptions and parameters, would sum up all the disturbance that should be payable to the Applicant.  This disturbance payment would already reflect all the expenditure in the nature of extra engineering and building costs due to the change in the physical level, soil and ground condition of the TOA and the non-TOA of the Lots.   

73.Using compensation for resumption of a portion of land as an analogy, it does not make sense that a claimant whose land was compulsorily resumed by the Respondent should be compensated for both (a) the diminution in development value of his land due to resumption (i.e. valuation made on development site value basis) and (b) the diminution in existing use value of his land and existing structure thereon. (i.e. valuation made on existing use value basis).  Normally, the aggrieved claimant would be compensated for the higher of the two valuations.  Hence, we do not agree with the approach of RW to compute the disturbance to the Applicant’s property by adding up all the items (e), (f), (g) and (h) as set out in his valuation report and summarized in Table 1 above.

74.Finally, since the purpose of assessment of the OMV of the Lots was to ascertain the disturbance effects, if any, that were due to the temporary occupation of the TOA by the Respondent, it would be reasonable if we take the date of handing over of the TOA to the Applicant as the relevant valuation date. 

Assessments of the effects on the OMV of the Lots by AW and RW

75.As discussed in the previous section, we do not agree with the approach of AW to claim for the disturbance payment in the nature of “loss due to the delay in development” caused by the requirement to carry out additional engineering works in the actual (or “After” situation) when the Respondent handed back the TOA to the Applicant.  AW set out his estimate and conclusion in his Second Further Supplementary Valuation Report dated 23 November 2005.  He revised 2 residual valuations previously prepared by his predecessor consultant, Mr. Charles C P Lai who used to estimate the claim on behalf of the Applicant.  On this approach, AW estimated the “Before” and the “After” Values of the Lots, as at 27 October 2001, in the sums of $41,217,373 and $39,391,369 respectively.  These show a difference of $1,826,004.  AW claimed this sum as the Applicant’s loss due to the delay in development of the Lots.

76.In both the “Before” and “After” valuations, AW assumed the optimum development of 25 NTEHs with a total GFA of 3,123 m².  All the inputs in both valuations were the same, the only difference being the additional period of 2.5 years in the “After” situation, as against the shorter period of 2.0 years in the “Before” situation.  Also, we note that contrary to what Mr. Lai did in the “After” situation (at which time Mr. Lai estimated an extra site formation cost due to slope cutting of $1,000,000) AW did not see fit to add the additional cost (i.e. extra foundation and site formation costs) even though AW already had the benefit of the agreed extra cost of $5,536,046.

77.We understand AW’s rationale.  He thought that it would be more reasonable to claim the additional extra foundation and site formation cost as one of the separate items of claim under the general heading of “disturbance” as a consequence of temporary occupation of the TOA by the Respondent.  Therefore, he did not include this additional cost in his “After” valuation to avoid double counting. However, in RW’s computations, this item of delay in development of the Lots should have been taken into account by reference to the difference between the OMV of the Lots assessed under the “Before” and “After” situation.  After considering both approaches, we have no doubt that AW’s approach was wrong because RW’s valuation approach was correct in principle.

78.RW’s latest assessment of the “Before” and “After” Values are set out in her Further Supplementary Report dated 24 November 2005.  She estimated the “Before” Values to be $40,109,748 and $38,099,846 respectively, giving a difference of $2,009,902.  She rounded off this figure to $2,010,000, which was accepted by her as the compensation payable to the Applicant for all the disturbance caused to the Applicant, other than the compensation for the loss of rent in respect of the actual period of occupation of the TOA.

79.There is much in common in the basic approach in both AW’s and RW’s valuations, with the following main exceptions: -

Tribunal’s assessment of the effects on OMV of the Lots

80.We set out in the table below our valuations of the Lots in “Before” and “After” situation. 

“Before” Value

Date of valuation: 6 July 2004
Site area of the Lots: 2,624.36 m²

Permitted Plot Ratio = 1.2 (Note: -the Lots zoned for R (c) 2 on 8 July 2003)
Permitted GFA: 3,149.23 m²

Assumption:  vacant site with site level and condition same as before the creation of TOA

Proposed Development

Type:  13 nos. of detached house (based on the Applicant’s proposal)

Permissible GFA: 3,149.23 m²
Size of each house: 242 m² (about)

Redevelopment Value Assessment

Less costs

“After” Value

Date of valuation: 6 July 2004
Site area of the Lots: 2,624.36 m²

Permitted Plot Ratio = 1.2
Permitted GFA: 3,149.23 m²
Assumption:  vacant with site level and condition same as at the date of handover from the Respondent to the Applicant

Proposed Development

Type:  13 nos. of detached house (based on the Applicant’s proposal)
Permissible GFA : 3,149.23 m²
Size of each house : 242 m² (about)

Redevelopment Value Assessment

Less costs

Compensation Assessment

81.We agree to adopt the assumptions and all the valuation inputs of RW with the exception of the following: -

(1) We find that we should assume a development to a plot ratio of 1.2 since the Lots had already been re-zoned to R(C)2 on 8 July 2003 before the valuation date of 6 July 2004.  It is noted that for this revised zoning, the Lots could be developed to a maximum plot ratio of 1.2.  Since we adopt RW’s date of valuation as well as the type of development, we obviously should use the assessed unit gross development value and unit cost of TW.  On the other hand, AW’s valuations assume BTEH (New Territories Exempted House).  This assumption is not applicable in AW’s latest proposal.

(2) For the development periods in both situations, we must take into account the larger scale of development than what RW assumed.  Also, we find and agree with the Applicant that it would take more time to undergo the development in the “After” situation when the Applicant has to carry out additional foundation and site formation works in the tune of over $5.5 million, or about an additional 14% of construction costs in the “Before” situation (based on our estimate).  In the circumstances, we consider it reasonable to assume a period of 2 years in the “Before” situation and an additional period of 3 months in the “After” situation.

(3) In calculating the present values of the costs of development in the valuations, we have taken into account the figures used by AW as well as what the Tribunal adopted in the resumption case of LDMR14 of 2002.  We agree to take, on average, more than half of the overall period of development in arriving at the present value of the costs of development.  We decide to adopt figures of 1.25 years and 1.5 years in the respective “Before” and “After” situations.

(4) For the site formation cost in the “Before” situation, we agree to adopt RW’s estimate, which is based on 10% of RW’s estimated building cost.  However, in the “After” situation, whilst we agree in principle with RW to add the agreed additional piling and site formation cost for building development on the lower platform, we do not agree with her that this agreed additional cost already covers the site formation cost which is therefore deleted in RW’s valuation.  However, we have checked the cost estimate produced by the Applicant’s consultant (at p.393 of Exhibit AR-2), we find that the agreed additional cost is the extra cost for the piling and foundation works.  No expert on construction or engineering was called to support of either party’s contention.  Also, we agree with the Applicant that by the time of our adopted date of valuation (6 July 2004, the date of hand over of the site to the Applicant), the site had been rezoned to R(C), which permits a maximum plot ratio of 1.2.  Therefore, the agreed additional cost, based on the Applicant’s latest development proposal obviously also assumes a plot ratio of 1.2.  Hence, we find that the full amount of the agreed additional cost of piling and site formation works in the sum of $5,536,046, in addition to the RW’s adopted site formation cost (representing 10% of RW’s estimated building cost) should be adopted in the “After” situation.

(5) For the developer’s profit, we decide to adopt the 20% figure both used by the Tribunal in the Judgment of LDMR 14 of 2002 and the AW’s valuations.

82.Based on the difference of our two residual valuations for the “Before” and “After” situations, we estimate the difference in the OMV of the Lots as at 6 July, 2004 (i.e. at the date of its hand over to the Applicant by the Respondent) in the sum of $6,305,310.  As explained before, we are of the opinion that this represents the total amount of disturbance due to the temporary occupation of the TOA of the Lots, other than the loss of rent to the Applicant due to the said temporary occupation.  Hence, this also represents the total amount of compensation payable by the Respondent to the Applicant in respect of the disturbance.

83.Therefore, we also dismiss all the claims by the Applicant for the various items of disturbance as set out in an earlier section of this Judgment, with the exception for the construction of outstanding section of road R3, which we will discuss below.

Construction of outstanding section of road R3

84.The Applicant submitted that before the temporary occupation of the Lots by the Respondent, there was an existing access road linking the Lots with Castle Peak Road and the Respondent had also agreed to re-provide Road 3 after the completion of improvement works of Castle Peak Road.  However, the contractors of the Highways Department terminated the construction of the re-provisioned access road about 16 metres away from the site boundary of the Lots.  The additional costs of this stretch of road was estimated by the Applicant’s consultant Mr. Koo at $199,680 the quantum of which was also accepted by the Respondent subject to the Tribunal’s determination on the issue of entitlement.

85.The Respondent submitted that this item of roadwork was unconnected with the temporary occupation.  As such, there should be no basis for the claim.

86.However, we find that it is not disputed that before the temporary occupation of the TOA, there was the said access road linking the Lots with Castle Peak Road.  The re-provisioning of the access road was definitely part of the Road Project Scheme covered by G.N. 4520, which provided the Respondent the basis for the temporary occupation of the TOA.  In the last section, we have considered the damage done to the Lots, apart from the issue of loss of rent by reference to the difference in the OMV of the Lots in the “Before” and “After” situations.  However, since the assessment of the OMV of the Lots in both situations must assume the existence of an access road leading to the Lots.  In the “Before” situation, there was no dispute that an access road existed whilst in the “After” situation, there was also no dispute that the re-provisioned access road was some 15 m away from the boundary of the Lots.  Since we have not made allowance for the absence of 15 m of re-provisioned road in our “After” situation, we think it is appropriate that the Applicant should be compensated for this item on the basis of the agreed estimated cost of $199,680.

Summary of compensation for the Applicant

87.In summary, the compensation payable to the Applicant are estimated to be the sum of the following:

Loss of rent

Orders

88.Accordingly, we order that the Respondent do pay the Applicant compensation for the temporary occupation of TOA over the Lots, including compensation for the loss of rent and disturbance payment, in the sum of $7,191,100.  The matters of professional fees, interest and costs are adjourned to a date to be fixed.

Mr. Yeung Ming Tai, instructed by Messrs. Huen & Partners, for the Applicant

Mr. Anthony Houghton, instructed by the Department of Justice, for the Respondent