TANG YIN KWONG & OTHERS v. THE SECRETARY FOR TRANSPORT

CACV 2873/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 2873 OF 2001

(ON APPEAL FROM LDMR NO. 34 OF 2000)

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J U D G M E N T

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Hon Le Pichon JA:

1. This is the fourth in a series of appeals from the Lands Tribunal ("the tribunal") concerning the assessment of compensation for the resumption of agricultural land in Yuen Long, New Territories. As is the case with the three appeals immediately preceding this appeal namely, View Point Development Limited v Secretary for Transport, CACV 439/2002 ("View Point"), Busy Firm Investment Limited v Secretary for Transport, CACV 64/2003 ("Busy Firm") and Dragon House Investment Limited v The Secretary for Transport, CACV 1284/2001, the effect of the Court of Final Appeal's judgment in Director of Lands v Yin Shuen Enterprises Limited and Nam Chun Investment Company Limited [2003] 2 HKC 490 ("Yin Shuen") is central to this appeal.

The tribunal's judgment

2. The facts may be summarized as follows. The applicants were the lessees under a Block Government Lease of agricultural land in Yuen Long, New Territories consisting of a total area of 1,246.28 sq m (the land) which had been resumed by Government for the West Rail Project. As the land was zoned "R(C)" in the Draft Kam Tin South Outline Zoning Plan dated 17 June 1994, it had the potential of being developed for residential purposes to a maximum of 0.8 plot ratio. The applicants' surveyor considered that the most direct comparable would be the sale of agricultural land within the same R(C) zone. As no such comparable could be found, he identified 9 agricultural land sale comparables with residential zoning of different intensity, making adjustments in respect of time, location, accessibility and quantum. Having regard to the zoning of the land as R(C), the applicants' valuer opined that the plot ratio of 0.8 was in between that of R(D) and R(B)2. Of the 9 comparables, two had R(D) zoning and another two had R(B)2 zoning. He then took the average of those four comparables and arrived at the unit rate of $5,500 per sq m, resulting in a claim of $6,850,000.

3. The Government's valuer challenged the comparables on the basis that they were inappropriate in that they contained an element of "hope value" which is not permissible under section 12(c):

"I consider all of the comparables adopted by the Surveyors are inappropriate because the transacted prices could be distorted by the element of 'hope value'. This 'hope value' is the additional value to the pure agricultural land value paid by the purchasers in expectancy of a future land exchange for the resident use permissible under the residential zones. This 'hope value' must be disregarded under section 12(c) of the Lands Resumption Ordinance."

4. What was in issue before the tribunal was therefore the meaning of section 12(c). The tribunal concluded (at paragraph 6.3) that:

"... the expectancy or probability of the grant of a permission or a permit is the expectancy or probability existing at the date of the resumption of the land in question."

The tribunal held that as there was no evidence of any application by the applicants to the Government for the grant of any permission or permit by the time of the resumption, the issue of expectancy or probability did not arise and hence section 12(c) was not engaged.

5. Further, the tribunal rejected the comment made by the respondent's valuer in respect of "hope value" on the basis that it was not supported by any evidence. In determining the value of the land resumed, the tribunal accepted the approach of the applicants' valuer who had adopted a "like-with-like" comparison approach which took into account the zoning element of the lots and made the award of $6,850,000 based on a unit rate of $5,500 per sq m.

This appeal

6. This appeal by the Secretary for Transport ("the Government") was made on the basis that the tribunal had misunderstood and misapplied section 12(c) of the Ordinance and that the award must be set aside for that reason. In addition, it was submitted that the comparables used plainly had embedded in them development potential which on a proper understanding of the Court of Final Appeal's judgment in Yin Shuen, cannot be taken into account.

7. The applicants appeared in person. Apart from a short written submission prepared by the applicants, Mr Patrick Chong who had represented them in the proceedings below submitted a Note for this court's assistance. The points made may be summarised as follows. Land use zoning is one of the attributes of the land in question which should be taken into account in the assessment for compensation. For comparables, one had to compare "like-with-like" and the tribunal should not be restricted to selecting agricultural land with no residential or commercial development potential. In any event, the Court of Final Appeal's judgment in Yin Shuen is distinguishable because in the present case there was a clear finding of fact by the tribunal that there was no evidence to support the view that the comparables used had 'hope value' embedded in them. There was no evidence that the owners of the comparables had bought the land for the purpose of development.

8. In my view, the tribunal's ruling as to the meaning and effect of section 12(c) is wrong. For section 12(c) to apply, there is no requirement that the applicant had to have applied to the Government for the grant of any permission or permit by the time of the resumption in question. As the holding that section 12(c) had no application was based on a misconception of the meaning and effect of section 12(c), it must vitiate the award.

9. Further, the zoning element of the lots had been taken into account in the comparables used by the applicants' valuer. Town plan zoning does have a significant effect on the price: the higher the permitted plot ratio, the higher the price. In other words, the use for which a piece of land is zoned significantly affects its value. As the applicants' valuer acknowledged, two pieces of land which have been differently zoned have different values even if they are similar in other aspects including the Government lease restrictions to which they are subject. Although the comparables used by the applicant's valuer for working out the unit rate adopted by the tribunal were of agricultural land with similar lease restrictions, they had been used because of their particular residential zoning. In other words, embedded in the comparables was the potential for residential development. In view of the Court of Final Appeal's judgment in Yin Shuen as explained in the View Point appeal, the approach of the applicants' valuer which the tribunal accepted is plainly unsustainable.

10. For these reasons, the appeal must be allowed. I would add that whilst I have every sympathy for the applicants who feel aggrieved that the land which was their heritage, having been in the family for many generations, has been resumed against their will, there is nothing that this court can do in that regard.

Order

11. I would allow the appeal and set aside the judgment below. This matter is to be remitted to the tribunal for reassessment in the light of this judgment and this court's judgment in View Point.

12. I would also make an order nisi that costs here and below be borne by the applicant.

Hon Yeung JA:

13. I agree.

Hon Reyes J:

14. I agree.

Hon Le Pichon JA:

15. The appeal will therefore be allowed. There will be an order as set out in paragraphs 11 and 12 above.