Happy Dragon Restaurant Ltd v. The Director of Lands

FAMV No.18 of 2010

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 18 OF 2010 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACV NO. 201 OF 2009)

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Between:

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Appeal Committee: Chief Justice Ma, Mr Justice Bokhary PJ and Mr Justice Chan PJ

Hearing and Decision: 4 November 2010

Handing Down of Reasons: 15 November 2010

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D E T E R M I N A T I O N

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Chief Justice Ma:

1.The background to the present case was a claim for compensation made by the applicant under the provisions of the Lands Resumption Ordinance Cap. 124 (“the LRO”).  Before this Committee was an application by the respondent, the Director of Lands, for leave to appeal to the Court of Final Appeal from the decision of the Court of Appeal dated 30 March 2010, in which the appeal of the applicant, Happy Dragon Restaurant Limited, from the decision of the Lands Tribunal was allowed, with the consequence that compensation was ordered to be paid to the applicant ($5,337,969 payable immediately and compensation in relation to another aspect to be assessed). Following submissions from Mr Edward Chan SC (for the respondent), we dismissed the application with costs.

2.The facts are contained in the judgments of the Lands Tribunal handed down on the 28 April 2009 and of the Court of Appeal handed down on 30 March 2010.  Essentially, the applicant operated a restaurant, occupying (as tenant) 3 properties on Shau Kei Wan Road.  A Notice of Resumption was affixed to the properties on 25 February 2005 (the properties were part of land that was to be resumed for the purposes of a development by the Hong Kong Housing Society).

3.In the Lands Tribunal, the applicant claimed compensation under the LRO on the basis that the resumption had the effect of totally extinguishing its restaurant business.  Compensation was therefore claimed under two heads: the permanent loss of the business (this was referred to below as the Extinguishment Claim) and various losses incurred as a result of the restaurant ceasing business (referred to as the Disturbance Claim).  By the time the matter was dealt with in the Court of Appeal, the Disturbance Claim consisted only of a claim for the following items:- the value of the fixtures and fittings of the restaurant, and also losses from the early termination (through cessation of the restaurant business at the end of February 2005) of the restaurant’s general and liquor licences.

4.The Lands Tribunal dismissed both heads of claim.  The Tribunal’s reasoning proceeded mainly along the lines that the applicant had acted unreasonably in not relocating the restaurant business; specifically that it had not relocated to certain premises in Kwun Tong (this was referred to in the Lands Tribunal and the Court of Appeal as the Wah Do location).  The Tribunal’s reasons for concluding that the applicant had not acted reasonably, as indicated in its judgment dated 28.4.2009, can be summarized as follows:-

(1)     The cost of relocation was in the region of $7.25m.  With assets of about $5.58m (this including a sum of $2,649,600 received as provisional compensation from the government), the shortfall was only about $1.67m. 

(2)     The Tribunal found that this shortfall could have been made up by applying to banks for a loan.  It was of the view that by not even attempting to apply for a loan, the applicant had acted unreasonably.

(3)     Another possible means of finance was to seek provisional compensation from the government for a relocation.  The Lands Tribunal surmised it was more probable than not that the government would have paid this provisional compensation and this would have exceeded the provisional compensation that the government had actually paid (amounting to $2,649,600.00).

(4)     In summary, the applicant had acted unreasonably because the Wah Do location was suitable and the applicant could, if it had sought financing in the ways just outlined, have had the financial resources to relocate.

5.Accordingly, the Tribunal dismissed the Extinguishment Claim.  For the same reason, it also dismissed the Disturbance Claim: since the applicant had acted unreasonably in not relocating, it could not justify those items claimed under this head of claim.

6.Following this decision, the applicant applied for a review under s.11A of the Lands Tribunal Ordinance Cap 17.  The application was refused on 27.5.2009 (the reasons for decision were handed down on 26.6.2009).  No review was embarked on: the application was simply not entertained in the first place.

7.The Court of Appeal unanimously allowed the applicant’s appeal.  All 3 judges (Le Pichon JA, Stone and Lam JJ) wrote separate judgments but there is consistency in their reasoning in allowing the appeal:-

(1)     On the Extinguishment Claim, the Court of Appeal was of the view that the Tribunal had erred in its consideration of the question of the applicant’s financial resources to relocate to the Wah Do location:- first, the Tribunal gave insufficient weight to the evidence from one of the witnesses called by the applicant to the effect that it was simply not practicable or possible to obtain financing; secondly, there was no evidence to suggest that the government would in fact have given provisional compensation (in excess of the $2,649,600 actually given) in the event of a relocation; thirdly, that the shortfall was actually more in the region of $5m, rather than the $1.67m calculated by the Tribunal.

(2)     On the Disturbance Claim, the Court of Appeal was of the view in relation to the only items before it that even if the applicant had acted unreasonably in not relocating, this did not, as Le Pichon JA put it, “necessarily” mean that the Disturbance Claim would fail.  It was in this respect that the Lands Tribunal had erred. 

(3)     The Court of Appeal was of the view that the items claimed under the Disturbance Claim represented actual losses that the applicant had suffered as a result of the resumption.  It did not follow even if the applicant had been unreasonable (a view with which the Court of Appeal disagreed) that its Disturbance Claim would “necessarily” fail, and in the circumstances of the present case, these losses could be claimed (presumably on the basis that they would have been suffered in any event even if there had been a relocation).  The decision of the Court of Appeal goes no further than this and it is not to be taken that the Court of Appeal had gone so far as the other extreme, namely, that where an applicant has acted unreasonably in relocating, a claim of the type of losses claimed under the Disturbance Claim would always succeed, regardless of any unreasonable conduct.  One of the guiding principles of resumption is that compensation for losses may only be claimed where a claim has acted reasonably: see Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2AC 111, at 126F-H.

8.We now come to the application before us for leave to appeal to the Court of Final Appeal.  It was put on 2 bases:-

(1)    An appeal as of right under s.22(1)(a) of the Hong Kong Court of Final Appeal Ordinance Cap. 484 (the HKCFAO).

(2)    Alternatively, discretionary leave is sought under s.22(1)(b) on basis of what were said to be 5 points said to be of great, general or public importance.

9.Section 22(1)(a) of the HKCFAO states:-

“(1) An appeal shall lie to the Court –

(a)    as of right, from any final judgment of the Court of Appeal in any civil cause or matter, where the matter in dispute on the appeal amounts to or is of the value of $1,000,000 or more, or where the appeal involves, directly or indirectly, some claim or question to or respecting property or some civil right amounting to or of the value of $1,000,000 or more.”

10.The respondent relies on the second limb of this provision. Mr Chan submitted that the applicant’s claim for compensation under the LRO was a claim to or question respecting a “civil right”.  The civil right was identified to be the right (presumably as a tenant of premises) to carry on business on those premises.  Reference was made to the opinion of Lord Nicholls of Birkenhead in Shun Fung in which reference was made to the value of land as encompassing the ability to conduct business on it without disturbance: at 125F.  Mr Chan further submitted that the value of this claim or question amounted to over $1m, as shown by the order for compensation made by the Court of Appeal.

11.In our view, the respondent is not entitled to appeal as of right:-

(1)    Although ultimately, it is unnecessary (for the reasons articulated below) to decide which limb of s.22(1)(a) of the HKCFAO the applicant’s claim for compensation comes under,  it is likely, in our view, to come within the first limb only.  Mr Chan submitted that the claim for compensation is a claim to or question respecting a civil right.  It is to be noted that a civil right, for the purposes of s.22(1)(a), is a proprietary right: see WLK v TMC [2010] 1 HKLRD 495, at 500 (para 12).  However, the nature of the applicant’s claim is in substance and in reality for monetary compensation.  It is more apt to place the matter under the first limb of s.22(1)(a) than the second.  And if this be the case, it just cannot be said that a claim for compensation is in the nature of a liquidated claim.  Given the range of considerations that are relevant to an assessment of compensation, it is more in the nature of an unliquidated claim (although we accept that it is not, strictly speaking, technically accurate to refer to a claim for compensation as being either a liquidated or unliquidated claim).  As a number of decisions have held, the first limb of s.22(1)(a) only covers liquidated claims.

(2) However, even assuming that the second limb of s.22(1)(a) is engaged, the difficulty for the respondent to overcome is the requirement to value the relevant claim or question at the requisite monetary level.  In China Field Ltd v Appeal Tribunal (Buildings) (No. 1) (2009) 12 HKCFAR 68, this Committee held that even where a putative appeal involved a claim to or question respecting property or some civil right, it was necessary to ascribe a value to that claim or question.  At para 24, Ribeiro PJ said this :-

“Consistently with the strict approach adopted in relation to the first limb of s.22(1)(a), it is only proper to ascribe a value which qualifies for leave as of right to the candidate claim or question if (i) on the evidence, such value is clearly quantifiable as a value of $1 million or more; and (ii) the court is satisfied that the Court’s order made upon disposing of the proposed appeal would take effect by immediately conferring or imposing on the relevant parties a financial benefit or detriment in the quantified amount. It is not enough that one is able plausibly to say that such a financial impact is likely eventual result of the appeal.”

(3)    Applying this test, we are unpersuaded that the applicant’s claim for compensation was “clearly quantifiable” at $1 million or over.  As noted above, the exercise in the quantification of compensation under the LRO is in many ways similar to the assessment of unliquidated damages.  For this reason alone, this is likely to be a bar in many cases where compensation is claimed for a resumption.  This is all the more so in the present case where the quantification of the applicant’s claim was at one stage nil (as the Lands Tribunal found) or substantial (as the Court of Appeal found).  The respondent clearly fails to satisfy the requisite test.

12.Under s.22(1)(b) of the HKCFAO, 5 questions are identified by Mr Chan said to constitute points of great general or public importance (these are taken from counsel’s skeleton submissions) :-

(1)       “… whether or not in an appeal against the Tribunal’s original decision, an appellate court should disregard the Tribunal’s reasons for refusing to review its original decision?”

(2)       “… whether or not an applicant making a disturbance claim under section 10(2)(d) of the LRO is under a duty to mitigate his loss and whether in discharging his burden of showing actual loss and damage having been caused by the removal of the business from the land resumed a claimant for compensation for land resumption has a burden of discharging the burden that the loss and damage is not caused by any failure in mitigating the loss and damage?”

(3)       “… whether the Court of Appeal is entitled to substitute its own view in contrary to that of the Tribunal on matter of the licensing practices where there is no evidence adduced to support of either the view of the Tribunal or that of the Court of Appeal.”

(4)       “… how should the Court of Appeal approach a “perversity”ground of appeal?”

(5)       “… whether the Lands Tribunal is entitled to use its own knowledge and experience when reaching its decision on the question of whether the Government would or would not make an provisional compensation and also how the Government would have.”

13.On the first question, the respondent sought to argue that the reasons handed down by the Lands Tribunal on 26 June 2009 for dismissing the application for a review ought to have formed part of the reasoned judgment for dismissing the applicant’s claim for compensation, and that accordingly, the Court of Appeal ought to have looked at not only the Tribunal’s judgment dated 28 April 2009, but also the reasons for dismissing the application for review.  Contrary to what appeared to be the respondent’s position in counsel’s skeleton submissions, Mr Chan frankly acknowledged that the reasons of 26 June 2009 did supplement or qualify the reasons contained in the original judgment dated 28 April 2009.  There would otherwise have been little point in the exercise.

14.The Court of Appeal refused to look at the reasons for refusing to enter into a review.  In para 20 of her judgment, Le Pichon JA said this: “Where the Tribunal declines to review its decision, the reasons it gives cannot supplement, alter or qualify the findings of fact made in the judgment sought to be reviewed”.

15.We agree.  If the Tribunal had actually embarked on a review and made findings, an appellate court would be bound to look at the reasons in order to decide whether the decision was correct.  Where, as in the present case, the Tribunal did not even enter into a review, the reasons given in support of the decision not to conduct a review cannot alter, supplement or qualify findings made in the original judgment or decision.

16.Mr Chan placed great reliance on the Tribunal not being as a matter of jurisdiction functus officio when it handed down the reasons for refusing the review.  We accept that the Lands Tribunal was not functus officio and obviously had the jurisdiction to grant (or refuse) a review.  However, this was not the issue at all and does not take the matter much further.  For the true question in the present case is whether the Court of Appeal was, in an appeal against the original decision, correct to disregard the additional reasoning of the Lands Tribunal in dismissing the application for a review.  As is clear from our earlier observation, this is unarguable.  No question of great, general or public importance therefore arises.

17.On the second question, no point of great, general or public importance arises either.  It is already well settled that compensation for a resumption of land is payable under the LRO where the claim for losses caused by the resumption are not too remote and where the applicant has acted reasonably: see Shun Fung at 126A-H.  Mr Chan made no submissions on the reference in this formulated question to the burden of proof, but we would observe that, like questions of mitigation that arise in other legal contexts, the burden is on the party who alleges unreasonableness.

18.The remaining questions can be quickly disposed of.  They are simply not questions of great, general or public importance: they reflect merely a dissatisfaction on the part of the respondent with the result reached by the Court of Appeal.

Mr Edward Chan SC and Mr Anthony Ismail (instructed by the Department of Justice) for the respondent (applicant)

Mr Johnny Mok SC and Mr Richard Leung (instructed by Messrs Lo & Lo) for the applicant (respondent)