THE SECRETARY FOR TRANSPORT v. DELIGHT WORLD LTD

FACV No. 19 of 2005

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

 FINAL APPEAL NO. 19 OF 2005 (CIVIL)

(ON APPEAL FROM CACV NO. 167 OF 2004)

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J U D G M E N T

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Mr Justice Bokhary PJ:

Introduction

1.  Where land could not have been put to Melhado use without section 16 permission, is the need for such permission to be taken into account when compensation for the resumption of the land is assessed on the basis of such use?  By “Melhado use” I mean the sort of use left open by the decision of the Court of Appeal in Attorney General v. Melhado Investment Ltd [1983] HKLR 327.  And by “section 16 permission” I mean permission of the Town Planning Board (“the Board”) granted under s.16 of the Town Planning Ordinance, Cap. 131 (“the TPO”).  The Secretary for Transport (“the Secretary”), for whose road works the land concerned was resumed, contends that the need for section 16 permission and more particularly the risk or likelihood of its refusal is to be taken into account.  Delight World Ltd (“Delight”), which owned the resumed land, contends that no account is to be taken of such need.

2.  That encapsulates the first set of rival contentions before us.  The second set has to do with the use of comparables.  A little more has to be said by way of introduction before this second set can be intelligibly stated.  Before continuing with this introduction, I pause to acknowledge the assistance which I have derived in this by no means easy case from the arguments ably prepared and presented by Mr Edward Chan SC and Mr Nelson Miu for the Secretary and Mr Benjamin Yu SC and Mr Anthony Ismail for Delight. 

3.  The resumed land was part of a substantial tract of land in Kam Tin North out in the New Territories.  Delight owned that tract of land, holding it under a Block Crown Lease containing a restriction against building.  This lease describes Delight’s land as “padi”, a Malay word commonly used in Hong Kong to mean rice-field.  It was held in the Melhado case that descriptions of this nature are not restrictive as to land use.  So such a description in a lease containing a restriction against building does not preclude using the land concerned for non-agricultural purposes that do not involve building.  Such land use has come to be known as “Melhado use”.  A typical if not the classic Melhado use is the open storage of containers.

4.  Prior to the Melhado decision open storage on non-building New Territories land was controlled in that it took place only under short-term licences granted by the Government.  That decision removed such control.  And in the wake of its removal came the despoliation of the New Territories through the widespread storage of containers, building materials, machinery and even worse eyesores such as wrecked and rusty vehicles.  Eventually a measure of control was reintroduced by legislation in 1991.  But there are other matters to be noted before coming to that.

5.  At all material times Delight’s land lay unused. It is common ground that Delight’s land could not have been put to Melhado use without section 16 permission and that no such permission had ever been granted.  On 23 September 2000, upon the expiration of the period specified in a notice of resumption dated 22 June that year, part of Delight’s land was resumed under s.13 of the Roads (Works, Use and Compensation) Ordinance, Cap.370 (“the RWUCO”) for the purposes of major road works, namely the construction of the Kam Tin Bypass.  The severance of the resumed land from the remainder of Delight’s land contiguous thereto left the remaining land split into three parcels.  Delight’s claim for resumption compensation was not settled by agreement with the Secretary.  So the claim proceeded to the Lands Tribunal (“the Tribunal”) for assessment and award.  This brings one to s.27(1) of and Part II of the Schedule to the RWUCO.  They provide that claims for compensation for resumption under s.13 of the RWUCO are to be assessed as if they were made under the Lands Resumption Ordinance, Cap.124 (“the LRO”) for land resumed under the LRO. 

6.  Insofar as is material to the present case, s.10(2) of the LRO provides that in assessing the compensation payable for the resumption of land the Tribunal shall do so on the basis of –

“(a) the value of the land resumed and any buildings erected thereon at the date of resumption;

…

(c) the amount of loss or damage suffered by any claimant due to the severance of the land resumed or any building erected thereon from any other land of the claimant, or building erected thereon, contiguous or adjacent thereto;

… ”

Assessment and review by the Lands Tribunal

7.  By its judgment dated 27 June 2003 the Tribunal (HH Judge Chow and Mr WK Lo) awarded Delight compensation in the sum of $15,900,000.  This award was made up of $15,812,383 for the value of the resumed land and $81,705 for loss due to severance.  $15,812,383 plus $81,705 equals $15,894,088.  This total was rounded up by the Tribunal to $15,900,000.  Although the Tribunal was prepared to accept that Melhado use could form the basis of assessment, it disregarded such use on the ground that there was no evidence to support an assessment so based.

8.  Delight applied to the Tribunal for a review adducing such evidence.  On 21 May 2004 the Tribunal gave a judgment on review by which it set aside its earlier award and made a fresh award to Delight of compensation in the sum of $52,518,000.  This fresh award was made up of $26,044,892 for the value of the resumed land and $26,472,724 for loss due to severance.  $26,044,892 plus $26,472,724 equals $52,517,616.  This total was rounded up by the Tribunal to $52,518,000.  The assessment was made on the basis of a Melhado use, namely the open storage of containers, without taking the need for section 16 permission into account.

Appeal and cross-appeal to the Court of Appeal

9.  The case then proceeded to the Court of Appeal in the shape of an appeal by the Secretary and a cross-appeal by Delight.  Neither that appeal nor that cross-appeal concerned loss due to severance.  Both concerned the value of the resumed land.  By the judgment which it handed down on 12 May 2005 the Court of Appeal (Rogers VP, Le Pichon JA and A Cheung J) dismissed both the Secretary’s appeal and Delight’s cross-appeal.  Delight’s cross-appeal was brought in order to keep open the argument which was then on its way to us and which we have since rejected in Dragon House Investment Ltd v. Secretary for Transport (2005) 8 HKCFAR 668.  So nothing further need be said in regard to that cross-appeal.  And I turn to the contest which arose in the Secretary’s appeal to the Court of Appeal and is now before us for adjudication.

Plans

10.  Section 3(1) of the TPO provides that with a view to the promotion of the health, safety, convenience and general welfare of the community, the Board shall undertake the systematic preparation of –

“(a) draft plans for the lay-out of such areas of Hong Kong as the Chief Executive may direct, as well as for the types of building suitable for erection therein; and

(b) draft development permission area plans of such areas of Hong Kong as the Chief Executive may direct.”

11.  From those provisions of the TPO, one turns to s.20 of the same Ordinance.  Section 20(1) provides that “[i]n any draft plan prepared under section 3(1)(b), the Board shall designate any area of Hong Kong, as directed by the Chief Executive, as a development permission area”.  And then s.20(7) provides as follows :

“Where land that is within a plan referred to in subsection (1) is included in a plan prepared under section 3(1)(a), no person shall undertake or continue development on that land unless –

(a) the development was an existing use in relation to the plan prepared under this section;

(b) the development is permitted under the plan prepared under section 3(1)(a); or

(c) permission to do so has been granted under section 16 either before or after the land was included in the plan prepared under section 3(1)(a).”

In order to follow those provisions of the TPO, it is necessary to be aware, first of all, that s.1A of the same Ordinance provides that unless the context otherwise requires “‘development’ means carrying out building, engineering, mining or other operations in, on, over or under land, or making a material change in the use of land or buildings”.

12.  As to what the expression “permitted under the plan” in item (b) of s.20(7) of the TPO means, it is necessary to be aware that, as will be seen when I quote s.4(1) of the same Ordinance, the notes to a plan are part of the plan.  And it is also necessary to be aware that such notes typically set out two columns under each zoned use.  Column 1 lists “Uses always permitted”, and Column 2 lists “Uses that may be permitted with or without conditions on application to the Town Planning Board”.  The uses listed under Column 1 are those permitted under the plan.  And the uses listed under Column 2 are those for which section 16 permission may be granted.

13.  At the time when it was resumed Delight’s land was zoned for agricultural purposes.  For it was within an area so zoned by Kam Tin North Outline Zoning Plan No. S/YL–KTN/3 (“the KTNOZP”).  The land so zoned had previously been included initially in Kam Tin North Interim Development Permission Area Plan No. IDPA/YL-KTN/1 and later in Kam Tin North Development Permission Area Plan No. DPA/YL-KTN/1.  So s.20(7) of the TPO came into play.  In regard to items (a) and (b) thereof, it is to be noted that the open storage of containers was neither an existing use of Delight’s land nor a use thereof permitted under the KTNOZP.  That leaves item (c) concerning section 16 permission.  Section 16(1) of the TPO provides that where a zoning plan “provides for the grant of permission for any purpose, an application for the grant of such permission shall be made to the Board”.  Subsection (3) provides that “subject to subsection (4)” the Board “may grant or refuse to grant the permission applied for”.  And subsection (4) provides that the Board may grant such permission “only to the extent shown or provided for or specified in the plan”.  Any such permission may, as subsection (5) provides, “be subject to such conditions as the Board thinks fit”.

14.  Under the KTNOZP, where land is zoned as agricultural, the uses under Column 1 ie the “Uses always permitted” are :

“Agricultural Use

Ancestral Hall

On-farm Domestic Structure

Plant Nursery

Police Post/Police Reporting Centre

Rural Committee Building/Village Office

Shrine

Tree Plantation”

And the uses under Column 2 ie the “Uses that may be permitted with or without conditions on application to the Town Planning Board” are :

“Aviary

Burial Ground

Filed Study Centre/Education Centre/Visitor Centre

Government Refuse Collection Point

Government Use (not elsewhere specified)

Horse Riding School/Stable

New Territories Exempted House

Public Convenience

Public Utility Installation (excluding public utility pipeline, electricity mast, lamp pole and telephone booth)

Religious Institution (not elsewhere specified)

Utility Installation for Private Project”

It will be observed that open storage is not included in either column.

Need for section 16 permission left out of account below

15.  In leaving the need for section 16 permission out of account, the Tribunal and the Court of Appeal were proceeding on their understanding of the effect of s.12(aa) of the LRO which provides that when assessing compensation for land resumption

 “no account shall be taken of the fact that the land lies within or is affected by any area, zone or district reserved or set apart for the purposes specified in section 4(1)(a), (c), (d), (e), (f), (g), (h) or (i) of the Town Planning Ordinance (Cap.131)”.

16.  Section 4(1) of the TPO reads :

“The Board’s draft plans prepared under section 3(1)(a) for the lay-out of any such area may show or make provision for –

(a) streets, railways and other main communications;

(b) zones or districts set apart for use for residential, commercial, industrial or other specified uses;

(c) reserves for Government, institution or community purposes;

(d) parks, recreation grounds and similar open spaces;

(e) zones or districts set apart for undetermined uses;

(f) comprehensive development areas;

(g) country parks, coastal protection areas, sites of special scientific interest, green belts or other specified uses that promote conservation or protection of the environment;

(h) zones or districts set apart for use for village type development, agriculture or other specified rural uses;

(i) zones or districts set apart for use for open storage,

and any matter whatsoever may be shown or provided for or specified in or in respect of the plans by means of such diagrams, illustrations, notes or descriptive matter as the Board thinks appropriate; and any such diagrams, illustrations, notes and descriptive matter shall be part of the plans.”

It is to be observed that the only purposes specified in s.4(1) of the TPO which s.12(aa) of the LRO does not exclude from being taken into account are the lucrative ones specified in item (b).

Rival contentions here

17.  By leave of the Appeal Committee, the Secretary now appeals to us.  First, the Secretary contends that the need for section 16 permission before land could have been put to Melhado use is to be taken into account when compensation for the resumption of the land is assessed on the basis of such use.  Delight contends to the contrary.  Secondly, the Secretary complains that the assessment made by the Tribunal and affirmed by the Court of Appeal is bad in that comparables relating to the open storage of containers were applied without taking into account any physical attributes of the resumed land that were adverse to its suitability for such storage.  Delight contends that this complaint is not open to the Secretary in this appeal.

Remitter sought

18.  The Secretary seeks, while Delight resists, a reversal of the Court of Appeal’s judgment and a remitter to the Tribunal for re-assessment with a direction that the Tribunal should, to quote from the Secretary’s printed case, “consider whether any proposed Melhado use would have been approved by [the Board] in a section 16 application, while ignoring the zoning of the land”.  Mr Chan for the Secretary concedes that if the Secretary’s section 16 point were to fail, then it would not be appropriate to order a remitter merely on his point regarding physical attributes.  But if the Secretary were to succeed on his section 16 point, then the resultant re-assessment should, Mr Chan submits, also involve taking into account any physical attributes of the resumed land that were adverse to its suitability for the open storage of containers.

Approach to construction

19.  It has been clear at least since our decision in Medical Council of Hong Kong v. Chow (2000) 3 HKCFAR 144 that statutory interpretation is holistic and purposive.  In some situations – of which the present case is an example – the legal position is the product of the interaction between a number of statutory provisions.  Sometimes all the relevant provisions are to be found in the same statute.  At other times the relevant provisions are – as in the present case – spread out over more than one statute.  Whether in one or more than one statute, all the relevant provision must be construed together, in context and purposively.

20.  With that in mind, I turn to when and why the provisions here in question were enacted.  In 1973 the LRO was amended by the addition to it of s.12(aa).  The Explanatory Memorandum attached to the Bill by which this amendment was introduced reads :

“The Bill amends s.12 of the principal Ordinance so as to require a Compensation Board, when determining the compensation to be paid for land resumed under the Ordinance, not to take into consideration any change in value of the resumed land by reason of it being within, or affected by, any zone or area reserved for public purposes by the Town Planning Board.”

When s.12(aa) of the LRO was first introduced in 1973, s.4(1) of the TPO only included items (a) to (e).  And items (a) and (c) to (e) were the only ones referred to in s.12(aa) of the LRO as first introduced.  In 1988 item (f) was added to s.4(1) of the TPO, and a reference to that item was added to s.12(aa) of the LRO.  Then in 1991 items (g), (h) and (i) were added to s.4(1) of the TPO, and a reference to those items was added to s.12 (aa) of the LRO.

21.  It has been clearly recognised in Hong Kong since the decision of the Court of Appeal in Elson-Vernon Knitters Ltd v. Sino-Indo-American Spinners Ltd [1972] HKLR 468 that an Explanatory Memorandum attached to a Bill is admissible as evidence of the mischief which it was the object of the proposed legislation to remedy.  Such evidence is admissible, as Lord Millett NPJ explained in Director of Lands v. Yin Shuen Enterprises (2003) 6 HKCFAR 1 at p.15 F-G, to enable the court “to understand the factual context in which the statute was enacted and the mischief at which it was aimed”.

Section 12(aa)’s operation

22.  It is said in Gordon N Cruden : Land Compensation and Valuation Law in Hong Kong, 2nd ed. (1999) at p.80 that s.12(aa) of the LRO “prevents [the TPO] being used to rezone land or otherwise blight land so as to reduce the compensation payable on a later resumption”.  I agree, but the mischief aimed against by s.12(aa) of the LRO is not limited to the mischief of blighting land with the motive of reducing resumption compensation.

23.  Nor is s.12(aa) of the LRO simply to be equated with the common law principle of which Lord Russell of Killowen spoke in Melwood Units Pty Ltd v. Commissioner of Main Roads [1979] AC 426.  Delivering the advice of the Privy Council in that case, Lord Russell said at p.435 D – E that

 “it is a part of the common law deriving as a matter of principle from the nature of compensation for resumption or compulsory acquisition, that neither relevantly attributable appreciation nor depreciation in value is to be regarded in the assessment of land compensation.”

Lord Russell explained at p.434 C-D that appreciation or depreciation is “relevantly attributable” if it results from a zoning scheme of which the resumption forms an integral part.  But in saying that resumption compensation is to be assessed without taking zoning into account, s.12(aa) of the LRO does not qualify that statement by any proviso to the effect that the resumption has to form an integral (or indeed any) part of the zoning scheme.

24.  I have examined s.12(aa) of the LRO and its legislative history in context.  This history includes the fact that right from the start s.12(aa) of the LRO has covered every purpose specified in s.4(1) of the TPO save for the lucrative ones specified in item (b).  All things considered, the purpose which I feel driven to attribute to s.12(aa) of the LRO is that of preventing resumption compensation from being reduced by zoning.

25.  Regrettably the legislation to be interpreted in the present case is somewhat complex and by no means as clearly worded as one would have liked.  Sometimes – and the present case is such an instance – knowing what is the law requires knowing why it is the law.  In regard to the interaction between s.12(aa) of the LRO and section 16 permission, one of the things which the relevant legislative history shows is this.  Although s.12(aa) of the LRO was introduced before the Melhado decision, it was extended in tandem with s.4(1) of the TPO after that decision.

Permission scheme’s operation

26.  The relevant legislative history also shows as follows.  In 1991, belatedly it might be thought, legislation was introduced with a view to putting a halt to the despoliation of the New Territories flowing from the removal by the Melhado decision of the control which had been exercised under the short-term licensing system.  Under the statutory scheme introduced in 1991 the whole of the New Territories came to be covered by Development Permission Area Plans which evolved into Outline Zoning Plans.  And, as we have seen, no development as defined by s.1A of the TPO may be undertaken or continued on any land covered by an Outline Zoning Plan save as provided by s.20 of the TPO. 

Reconcilable purposes

27.  I recognise that there is this to be said in favour of what Mr Chan contends on the Secretary’s behalf.  Where section 16 permission is needed before land can be put to Melhado use, the market value of the land would naturally tend to be reduced by such need.  And assessing resumption compensation on the basis of such use without taking such need into account would therefore result in compensation above market value.  All of that is true.  But then so is this.  When it is provided that something is to be done without taking a certain element into account, the natural indication is that such element would otherwise be relevant but is nevertheless to be ignored.

28.  When the TPO permission scheme and s.12(aa) of the LRO are examined together and in context, their respective purposes can be seen to be reconcilable.  The purpose of the TPO permission scheme is to impose a measure of control designed to halt the despoliation of the New Territories.  Such control consists of zoning that curbs what landowners would otherwise be free to do with their land.  That is unavoidable if the despoliation aimed against is to be halted.  But halting such despoliation does not require that landowners receive less resumption compensation than they would have received if their freedom of land use had not been curbed by the introduction of the TPO permission scheme.  I have already said – and explained why I say – that the purpose of s.12(aa) of the LRO is to prevent resumption compensation from being reduced by zoning.  And in my view s.12(aa) of the LRO operates to prevent landowners’ right to resumption compensation being diminished by zoning under the TPO permission scheme.  This does not involve any clash between s.12(aa) of the LRO and that scheme.  After all, the purpose of the scheme is to halt despoliation, not to reduce resumption compensation.

29.  Article 105 of the Basic Law was mentioned in the course of the argument.  In this connection, let it be remembered that when art.105 provides that compensation for the lawful deprivation of property “shall correspond to the real value of the property at the time”, it does so immediately after guaranteeing property rights.  And this guarantee reads :

“The Hong Kong Special Administrative Region shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property.”  (Emphasis supplied)

Difficulties which the Secretary faces

30.  As we have seen, the Secretary’s key contention is that the need for section 16 permission before land could have been put to Melhado use is to be taken into account when compensation for the resumption of the land is assessed on the basis of such use.  Can the Tribunal leave zoning out of account as s.12(aa) of the LRO demands while at the same time taking the need for section 16 permission into account as the Secretary contends that the Tribunal should?  On this question, the initial difficulty which the Secretary faces is that you would not even be aware of any need for section 16 permission unless you had first taken zoning into account.  This is because the TPO permission scheme only applies where a zoning plan provides for the grant of permission.  And this requires one to know how the land in question has been zoned, for only then can one ascertain whether the proposed use comes within Column 1 (so that there is no need to seek permission) or comes within Column 2 (so that permission has to be sought) or falls outside both columns (so that permission is never to be granted).

31.  If the Secretary managed somehow to get out of that initial difficulty, he would then immediately be faced with another difficulty.  As we have seen, s.16(4) of the TPO provides that permission can only be granted “to the extent shown or provided for or specified in the plan”. Assessing the chances that section 16 permission would have been granted in any case therefore inevitably requires that cognisance to be taken of the zoning category applicable.  How then can the Tribunal coherently leave zoning out of account as s.12(aa) of the LRO demands while at the same time assessing the chances that section 16 permission would have been granted?  Mr Chan’s proposed solution was for the Tribunal to leave out of account the zoning which the Board had actually made and take into account instead the zoning that the Tribunal thinks that the Board would probably have made if it approached the zoning decision entirely afresh.

32.  Despite the customary skill with which Mr Chan put forward his argument, I am unable to view such an exercise as a coherent one.  For the Tribunal to step into shoes that the Board has taken off would be incongruous enough.  But the proposed exercise amounts to the even more incongruous one of the Tribunal trying to step into shoes that Board is wearing at the time.  I do not see how any valuer can give helpful evidence as to how such an exercise might be conducted or how any tribunal can make a realistic assessment of compensation in such circumstances.

Conclusion

33.  At the beginning of this judgment, I identified the crucial question in this case, which is this.  Where land could not have been put to Melhado use without section 16 permission, is the need for such permission to be taken into account when compensation for the resumption of the land is assessed on the basis of such use?  For the foregoing reasons, I answer this question “No”.  Accordingly I would dismiss this appeal, and do so with costs (the parties having accepted at the hearing that costs must follow the event).

Mr Justice Chan PJ :

34.  I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Ribeiro PJ :

35.  I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Nazareth NPJ :

36.  I agree with the judgment of Mr Justice Bokhary PJ.

Lord Millett NPJ :

37.  I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Bokhary PJ :

38.  The appeal is unanimously dismissed with costs.