DELUXE ASCENT LTD v. DIRECTOR OF LANDS

LDLR 9/2018

[2022] HKLdT 11

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND RESUMPTION APPLICATION NO 9 OF 2018

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J U D G M E N T

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Background

1.  This is an application by the applicant for determination of compensation pursuant to section 10(2) of the Lands Resumption Ordinance, Cap 124 (“the LRO”) in respect of the resumption of a portion of Lot 1941 Section A (“Lot 1941A”) and Lot 391 Section B (“Lot 391B”) both in Demarcation District 95 (“DD 95”) which are collectively referred to as “the Resumed Lots”.

2.  By a notice of resumption dated 5 August 2016 and published in GN 4571, the Government informed the applicant that the Resumed Lots would be resumed for the construction of a purpose-built complex of residential care homes for the elderly after expiration of 3 months from the date of affixing of the notice (“the Resumption”).  The notice of the Resumption was affixed to the Resumed Lots on 12 August 2016 and therefore the Lots were reverted to the Government at midnight on 12 November 2016 (“the Resumption Date”) which is agreed by the parties as the date of valuation. The Resumed Lots were shown coloured orange stippled black and orange hatched black on the resumption plan no DNM5004a, an extract of which is reproduced at Appendix 1.

3.  At the time of the Resumption, the applicant owned a half share in Lot 1941A (of which only a portion was resumed) and a 144/200 share in Lot 391B, with the joint executors of Fok Ying Tung Henry, deceased (“the Other Owner”) as tenants-in-common. The applicant acquired its interests in Lot 1941A and Lot 391B as well as other lots below from the late Mr Stanley Ho (“Mr Ho.”) on 11 November 2011.

4.  As a result, the applicant and the Other Owner are also co-owners of the following lots in DD 95 which are collectively referred to as the Other Lots, either in half-share or 144/200 shares as tenants-in-common:

-     Lot 1941 Section A Remaining Portion (“Lot 1941ARP”) (which is what remains after the resumption),

-     Lot 394 Section D Remaining Portion (“Lot 394DRP”),

-     Lot 2030 Remaining Portion (“Lot 2030RP”),

-     Lot 2054, and

-     Lot 392 Section C Remaining Portion (“Lot 392CRP”) in DD 95.

5.  It is undisputed that prior to the Resumption, the Resumed Lots and the Other Lots formed a contiguous parcel of land (“the Original Lots”). The Other Lots are split by the Resumed Lots to form two separate parcels of land. The Resumed Lots and the Other Lots can be identified on the Lot Index Plan dated 10 April 2012[1].

6.  The areas of Lot 1941A and Lot 391B and their respective resumed area are:

Lot	Lot Area	Area Resumed
Lot 1941A	59,752 m2 (or 59,526 m2) [2]	12,858.8 m2
Lot 391B	2,183 m2	2,183 m2

Issues

7.  The applicant is claiming:

(1)     Compensation for the resumption of the Resumed Lots; and

(2)     Compensation for the severance damage to the Other Lots.

8.  The compensation for the resumption of the Resumed Lots is claimed under section 10(2)(a) of the LRO which provides that it should be made on the basis of “the value of the land resumed and any buildings erected thereon at the date of resumption”.

9.  Determination of the compensation under section 12 of the LRO is also subject to the following rules:

“(a) no allowance shall be made on account of the resumption being compulsory;

(aa) 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);

(b) no compensation shall be given in respect of any use of the land which is not in accordance with the terms of the Government lease under which the land is held;

(c) no compensation shall be given in respect of any expectancy or probability of the grant or renewal or continuance, by the Government or by any person, of any licence, permission, lease or permit whatsoever:

Provided that this paragraph shall not apply to any case in which the grant or renewal or continuance of any licence, permission, lease or permit could have been enforced as of right if the land in question had not been resumed; and

(d)     subject to the provisions of section 11 and to the provisions of paragraphs (aa), (b) and (c) of this section, the value of the land resumed shall be taken to be the amount which the land if sold by a willing seller in the open market might be expected to realize.”

10.  On the amount of compensation, the applicant relied on the valuation of his expert, Mr Charles C K Chan (“Mr Charles Chan”) of Savills Valuation and Professional Services Limited and the respondent relied on the valuation of Mr Lee Chi Ping (“Mr Lee”).

11.  Both experts were prepared to adopt the residual valuation method in the assessment of the amount of compensation herein which can be done by deducting development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development.

12.  The nub of the experts’ disagreement is mainly the adoption of different hypothetical models as well as the adoption of different valuation parameters. The appropriate hypothetical development model to be adopted will depend on the findings over the following major issues in dispute:

(a)     Whether the values of the pieces of land involved ought to be assessed on a joint/ amalgamated development basis, or whether they should be valued separately and individually;

(b)     The accessibility of the various pieces of land involved; and

(c)     The permissible/ appropriate site coverage of the hypothetical development.

13.  At trial, Mr Mok Yeuk Chi (“Mr Mok”) leading Ms Julia Au represented the applicant.  Mr Simon K C Lam (“Mr Lam”) acted for the respondent.

Particulars of the Resumed Lots

14.  The Resumed Lots were located on the north side of Castle Peak Road – Chau Tau Section/ Fanling Highway and in the area locally known as Kwu Tung North. Prior to the Resumption, the Resumed Lots were situated adjoining the existing private elderly home facilities at Dills Corner Garden[3] at its east. Apart from this facilities, the environment was largely undeveloped but scattered with temporary structures, village houses and vacant sites.

15.  On the opposite side of Castle Peak Road – Chau Tau Section/ Fanling Highway, there exists some low-rise private estate-type residential developments such as Europa Garden, Valais I and Valais II.

16.  In the aerial photos from 1924 to 2016 produced by the respondent’s land surveyor, Ms Hui Chai Fun (“Ms Hui”), in her expert report dated 12 November 2020[4], the Resumed Lots appeared to be vacant land. The photos taken immediately before the Resumption show that the Resumed Lots were overgrown with vegetation[5].

17.  The Resumed Lots and the Other Lots or their predecessors, if any, were originally granted under the Block Crown Lease dated 27 March 1905. Section 15 of the New Territories (Land Court) Ordinances (No. 18 of 1900), which came into force on 23 July 1900, stipulates that:

“All land in the New Territories is hereby declared to be the property of the Crown during the term specified in [the Second Peking Convention], and all persons in occupation of any such land, after such date as may be fixed by the Governor by notification in the Gazette, either generally or in respect of any specific place, village, or district, shall be deemed trespassers as against the Crown, unless such occupation is authorized by grant from the Crown or by other title allowed by the court under this ordinance, or by licence …” [6]

18.  Lot 391B, Lot 392CRP and 394DRP were originally held from the government under a Block Crown Lease of DD 95 for a term expiring in 1997 for “agricultural purpose”.

19.  For Lot 1941A, the original New Grant from the government cannot be traced but it is not disputed that various lots in DD 95 vide memorial N51935 and N51936 were surrendered in February 1922 in exchange for it. Then on 30 April 1923, Lot 1941A together with other lots were sold to the applicant and the Other Owner’s predecessor in title via a Conveyance on Sale vide memorial N56395 with a plan supposed to be prepared by the New Territories Administration[7]. By a Modification Letter dated 27 September 1965 registered vide memorial N156446 in the Land Registry (“the Modification Letter”), erection of buildings thereon subject to, inter alia, a building height not exceeding 2 storeys (25 ft) is permitted.

20.  Lot 2030 is held under New Grant 8907 dated 16 December 1959 which involved a surrender of Lot 1941 Section B Remaining Portion (“Lot 1941BRP”) [8], an agricultural lot and a re-grant of the same area but for building of residences of European type up to 2 storeys or 25 ft and a built-over area of 20%. This took place only one day after the applicant’s predecessors in title acquired the so-called “south portion” and “north portion” of Lot 1941 Remaining Portion (“Lot 1941RP”) altogether like a laterally inverted L-shape to the east of Lot 1941BRP or Lot 2030.

21.  On 20 July 1960, a significant portion of Lot 2030 known as Lot 2030 Section A (“Lot 2030A”) was sold[9], leaving behind Lot 2030RP with an area of 105,469 sq ft (ie 9,798.3 m²) which was subsequently sold to the applicant and the Other Owner’s predecessor in title on 24 November 1960 vide memorial N142860[10]. In August 1961, the so-called “south portion” and “north portion” of Lot 1941RP together with Lot 2016 and also a significant portion of Lot 2030RP were surrendered in exchange for Lot 2038 under New Grant 9002, leaving behind 19,869 or 20,091 sq ft (ie 1,866.5 m²) for Lot 2030RP [11].

22.  By a Memorandum of Agreement dated 20 February 1968, the grantee of Lot 2030A successfully obtained from the government the grant of a right of way of 34 feet wide both “with or without animals and vehicles” over and along a road known as Po Lau Road which leads all the way to Castle Peak Road – Chau Tau Section.

23.  Lot 2054 is held under New Grant 9594 dated 22 October 1965 which was also a surrender and re-grant of two small unconnected lots falling within or are contiguous to Lot 1941A. The one (formerly Lot 375 with an area of 647.4 sq m or thereabouts) falling within Lot 1941A shall be used for private residential purposes only subject to a maximum height of 25 ft and a built-over area of 30% whilst the other (formerly Lot 391 Section A with an area of 164.0 sq m or thereabouts) being contiguous to Lot 1941A is restricted to the use as an access road. This latter portion of Lot 2054 and a portion of Lot 1941A are contiguous to each other and are identified as the Private Strip or “the Tongue” in the present proceedings.

24.  By the New Territories Leases (Extension) Ordinance Cap 150, the Block Government Lease and the New Grants above-mentioned have been extended until 30 June 2047 subject to payment of an annual Government rent at 3% of the rateable value for the time being of the lots (together with the structures thereon).

25.  In fact, the Resumed Lots and the Other Lots were affected by some prior resumption or “sale” to the government:

(a)     In April 1910, a portion of Lot 392 and a portion of Lot 394 known as Lot 392 Section A (“Lot 392A”) and Lot 394 Section A (“Lot 394A”), were sold to the government vide memorial 12811 and 12674 respectively.

(b)     In July 1915, further portion of Lot 392 and further portion of Lot 394 known as Lot 392 Section B (“Lot 392B”) and Lot 394 Section B (“Lot 394B”) were surrendered to the government vide memorial N30851 and N30852 respectively.

(c)     In December 1915, further portion of Lot 394 known as Lot 394 Section C (“Lot 394C”) was surrendered to the government vide memorial N31740.

(d)     In May 1984, in an “Agreement as to Compensation” registered by memorial N212498, portion of Lot 392C (120.8 m²), Lot 394 Section D Subsection A (2,590.0 m²), 1,500.4 m² agricultural land and 40.5 m² building land of Lot 1941 Remaining Portion were resumed by the government for the New Territories Circular Road Improvements under resumption plan NDR 37^D (“the 1984 Resumption”). [12]

(e)     In year 2019 (ie after the Resumption), the remaining Lot 392CRP and Lot 394DRP were resumed by the government vide memorial 19111100650011 and 19112200810018 respectively.

26.  Ms Hui, in her expert report dated 12 November 2020, showed the aerial photos from 1924 to 2016 as follows[13]:

	Aerial Photo Number	Date of Aerial Photo
1	NH49-0023B	24 Nov 1924
2	681_4-3074	6 Nov 1945
3	V81A_550-0047R	17 Nov 1954
4	63_9972	22 Feb 1963
5	2661	29 Nov 1972
6	32288	5 Nov 1980
7	37321	17 May 1981
8	46463	21 Dec 1982
9	A04665	7 Mar 1986
10	A21865	27 Jul 1990
11	A30734	28 Apr 1992
12	CN19437	6 Nov 1997
13	CN19608	7 May 1998
14	CN27687	9 Aug 2000
15	CW42901	9 Sept 2002
16	CW77751	25 July 2007
17	CS61706	17 Dec 2015
18	E008843C	6 Dec 2016

27.  According to Ms Hui, the earliest available aerial photo no

NH49-0023B was taken on 24 November 1924. The Resumed Lots and the Other Lots were largely a cultivated area covered by vegetation. The Castle Peak Road was already constructed and could be seen in the photo. Ms Hui acknowledged that owing to the small scale of the aerial photo, she was not sure whether there was a strip of land between the Resumed Lots and the Other Lots at one end and the Castle Peak Road – Chau Tau at the other end. On a balance of probabilities based on the evidence available, we believe  that the government surely served a purpose in acquiring Lots 392A, 392B, 394A, 394B, 394C and the various lots (being the strip of land) in exchange for Lot 1941 in February 1922[14] and usually the Government would not have constructed  the Castle Peak Road immediately next to the lots resumed but would leave a strip of land as buffer (or shoulder otherwise) for say, use by the pedestrians.

28.  By reference to the aerial photo no 681_4-3074 dated 6 November 1945, Ms Hui found an access running from north to south in Lot 1941A connecting to Castle Peak Road.

29.  From aerial photo no V81A_550-0047R taken in 1954, the Resumed Lots and the Other Lots were still occupied as cultivated land but in 1963, the number of structures built thereon increased. The topographic features remained similar in 1972. Then in 1980, the structures and cultivated fields could no longer be seen which probably indicated the abandonment of cultivation, but the access from north to south to Castle Peak Road – Chau Tau was still visible.

30.  In the aerial photo no 37321 taken in 1981, the Resumed Lots and the Other Lots were cleared from vegetation and they were enclosed by fence for construction works. A gate was also erected at the southern side of Lot 1941A at the end of the Tongue (“the Gate”).

31.  The construction works appeared to have been completed in 1982 when the Resumed Lots and the Other Lots developed into different portions separated from each other by pavements.

32.  However, from the aerial photos taken during the period from 1982 to 2016, the Resumed Lots and the Other Lots gradually changed into a densely vegetated area. In 2016, almost all topographic features on the Resumed Lots and the Other Lots were obstructed by dense vegetation. This can be demonstrated from the photo records taken before the Resumption as contained in Mr Lee’s Rule 20 Document at Appendix V[15].

Whether the Resumed Lots abutted Castle Peak Road?

33.  When the parent lot of 1941 was subdivided into Section A which was sold together with other lots to the applicant and the Other Owner’s predecessors in title vide the document registered by memorial N56395 dated 30 April 1923, a plan was attached thereto. On such plan, there appeared to be a strip of land between Lot 1941A and Castle Peak Road. This strip of land was also coloured red like Lot 1941A and the other lots sold[16].

34.  When the parent lot of 1941 (to the east of Lot 1941A) was further subdivided into Section B which was sold vide the document registered by memorial N79138 dated 24 March 1931, the strip of land was still shown on the plan attached thereto[17].

35.  In Government Gazette No 1595 dated 2 August 1968, sections of Castle Peak Road in the Yuen Long District were gazetted. The section on the southern side of Lot 1941A, Lot 392C and Lot 394D was named as “Castle Peak Road – Chau Tau”. A Drawing No NTA/YL/R12 was prepared to delineate the extent of the road but it was untraceable.

36.  In October 1965, when Lot 375 and Lot 391 Section A were surrendered in exchange for Lot 2054, the strip of land was annotated “CL” meaning “Crown Land” on Plan I attached to New Grant No 9594.[18] When its adjoining lot to the east, ie portion of Lot 392C, was resumed in May 1984, the strip of land was again denoted as “CL” on the resumption plan No NDR 37^D[19]. The strip of government land which lies immediately south of Lot 1941A is hereinafter referred to as “the Government Strip”.

37.  Ms Hui noted that there was some discrepancy between Plan I in New Grant No 9594 and the resumption plan No NDR 37^D. In Plan I of New Grant No 9594, Lot 394D appeared to be partially abutting Castle Peak Road – Chau Tau, while in the resumption plan no NDR 37^D (near its northwest corner), there was a strip of land outside the southern boundary of Lot 394 Section D Subsection 1 and Lot 394DRP with the annotation of “CL” (which means “Crown Land”). Ms Hui considered the resumption plan to be more reliable because it was relatively recent in time. She elaborated that the Plan I of New Grant No 9594 was prepared for the purpose of re-granting Lot 2054 and did not concern Lot 394D. Ms Hui also referred to the position where after the 1984 Resumption, and after the construction of the New Territories Circular Road, Lot 394D was fenced off and became physically separated from Castle Peak Road – Chau Tau by nullah and pedestrian walkway. Ms Hui opined that Lot 394D did not abut upon Castle Peak Road – Chau Tau at least since 1984.

38.  Ms Hui also referred to the setting out plan of Lot 1941RP dated 25 March 1994 which showed that there was a strip of land between Lot 1941A and Castle Peak Road – Chau Tau that the Gate should mark the southern boundary of Lot 1941A[20]. From the topographical survey plan no HC-12715/07 dated 21 August 2012[21] prepared by Mr Chan Hon Kwan Henry (“Mr Henry Chan”), the Authorized Land Surveyor appointed by the applicant, a strip of land between the Resumed Lots and the Other Lots and the road margin of Castle Peak Road – Chau Tau, could also be seen.

39.  On 4 August 2016, ie one day prior to the notice of the Resumption, another land resumption order GN 4412 was published under section 13(1) of the Roads (Works, Use and Compensation) Ordinance, Cap 370 (“the Roads Ordinance”) for the construction of cycle tracks as shown on resumption plan no DNM2019b (“the 2016 resumption”). The land resumed under this resumption order reverted to the government on 5 November 2016, ie one week earlier than the Resumption.

40.  This resumption concerned among others a very small portion of Lot 394D (74.3 m²) at its southeast corner. Ms Hui observed that the resumption limit ran along or was very close to the lot boundaries of Lot 1941A, Lot 392CRP and Lot 391B. She further observed a strip of land between the Resumed Lots and the Other Lots and the Castle Peak Road – Chau Tau and opined that this strip of land needed not be resumed because it was in fact government land.

41.  Mr Henry Chan agreed that Lot 391B, Lot 2030RP and Lot 2054 did not abut Castle Peak Road – Chau Tau as there existed Lot 392CRP and a strip of government land separating them from Castle Peak Road – Chau Tau.[22]

42.  Mr Henry Chan agreed that the Government Strip existed between Lot 1941A and Castle Peak Road - Chau Tau from 1923 to 2016[23]. He however observed that the southern boundary of Lot 1941A as shown on the Resumption Plan Nos DNM2109b (dated 2016), DNM5014a (dated 2019) and DNM5115 (dated 2019) had been shifted southward to include the Gate after the partial resumption of Lot 1941RP in May 1984. Ms Hui agreed to this.

43.  Ms Hui acknowledged in her expert report dated 12 November 2020 at §3.2 that owing to the small scale of the aerial photo, she was not sure whether there was a strip of land between the Resumed Lots and the Other Lots and the Castle Peak Road – Chau Tau[24]. Mr Henry Chan was no better in identifying the situation. He  adopted the boundaries of Lot 392B, Lot 391CRP, Lot 394DRP, Lot 1941A, Lot 1941RP, Lot 2030RP, Lot 2054 and Lot 2106 etc established from 1960s onwards and tried to overlay them onto the aerial photos and survey sheets to form the basis of his opinion. Unfortunately, as admitted by him in his expert report dated 16 December 2020 at §3.2:

“The Aerial Photos … were originally in different scale when purchased from the Survey and Mapping Office. For ease of reference and comparison, they were enlarged to the same scale of 1:2,000…. Since the geometry of the Aerial Photos had not been rectified, the lot boundaries overlaid were for location identification only.”

44.  In Liu Ma Cheung & Others v Liau Yin Fu, HCA181/2004 (unreported, dated 26 October 2007), the Court of First Instance also observed at §57 that “(w)ith a scale of 1:1980 (for the DD Control Sheet), an error of 1 mm in the retracing exercise would result in an error of 1.98 metres on the ground.” The DD Control Sheet No 95 in the present case was at a scale of 1:3960 which is an even smaller scale.

45.  More importantly, the Government Strip was found to exist in an on-site survey carried out by the Crown Lands and Surveys Office in 1961 upon the request of the land owners concerned, see the Setting Out Tracing No NT75 at Bundle D/3/257a.

46.  Upon the applicant’s application, discovery was made in relation to the documents pertaining to the 1961 survey. A computation folder was produced by the respondent as Exhibit R5 as a result. The applicant did not suggest that the survey was defective or unreliable in any respect. Obviously, the survey was accepted by the landowners concerned who acted through solicitors and architects.

47.  In our opinion, this dispute between Ms Hui and Mr Henry Chan is academic if the experts agree that there was an access from Lot 1941A to Castle Peak Road in 1945[25]. As we observed in §27 above, the government surely served a purpose in acquiring Lots 392A, 392B, 394A, 394B, 394C and the various lots in exchange for Lot 1941. The strip of land should form the buffer pertaining to the construction of the Castle Peak Road. We agreed with Mr Henry Chan that the Government Strip was reserved as the access to and from Castle Peak Road for Lot 1941A. The picture became clearer by reference to the setting out plans nos NT 2215-S and  DN 2166-D for Lot 1941RP in April 1971 and March 1994 respectively[26] and subsequently the resumption plan nos DNM2109b and DNM5004a. These plans showed that those portions of government land not forming Castle Peak Road – Chau Tau itself had been occupied and used as an access point to Lots 1941RP and 1941A or the open channel or nullah.

48.  Mr Mok submitted that actual contiguity between a site and the paving of an adjacent street is not necessary for abuttal, citing Attorney General of Hong Kong v Mightystream Ltd [1983] 1 WLR 980 (PC), Multi-Strategic Investments Ltd v Attorney General [1984] HKC 178, Building Authority v Appeal Tribunal (Buildings) & Estoree Ltd (Interested Party), HCAL 147/2002 (unreported, dated 25 June 2003) etc.

49.  We have reservation whether the authorities above are still applicable to the question of whether the Resumed Lots and the Other Lots were abutting a street for the purpose of site classification under Regulation 18A of the Building (Planning) Regulations, Cap 123F because the definition for the classification of sites has been changed in 2005. While Mr Mok referred to Sky Ace Enterprises Ltd v Appeal Tribunal (Buildings) & Building Authority (Interested Party), CACV 126/2015 (unreported, dated 20 June 2017) where the Court of Appeal seemed to affirm the decision of Building Authority v Appeal Tribunal (Buildings) & Estoree Ltd (Interested Party) at § 4, that was only in relation to the definition of a “street” but not “specified street” for the purpose of calculating the site area.

50.  In our view, for the purpose of classification of sites pursuant to Regulation 18A of the Building (Planning) Regulations, Cap 123F and in consideration of “abuttal”, it is a “specified street” rather than any “street” that is under concern. Under regulation 18A(3), a street is to be regarded as a specified street—

“(a) if there exists, with respect to the street, any of the following circumstances—

(i) the street is vested in the Government and is maintained by the Highways Department;

(ii) the street is a private street on land held under the same Government lease as the site and under the terms of the lease the lessee has to surrender (when required to do so) the land on which the street is situated to the Government;

(iii) the street is a street required to be constructed on unleased Government land by the lessee of the Government lease under which the site is held pursuant to the terms of that lease; …

(iv) the street is on land over which the owner of the site is expressly granted, by or by virtue of an instrument, a right of way exercisable at all times;

(v) the street is on land held under a Government lease by the owner of the site; …” (underline added)

51.  Mr Mok submitted that when determining abuttal in cases where there is an intervening strip, the Practice Note for Authorized Persons and Registered Structural Engineers on Streets for Site Classification (PNAP APP-124) issued by the Building Authority in November 2005 is relevant, paragraph 2(c) of which states that:

“Where there is a physical separation of a site from a street by an intervening strip of land, whether the site can be considered as abutting on that street for the purpose of site classification will depend upon the function, status and ownership of the intervening land.”

52.  However, we note that the Practice Note does not end there. Paragraph 3 that ensues states that:

“Apart from constituting a street itself, a street has to meet certain criteria before it can be regarded as a street for the purpose of site classification. The Building (Planning) (Amendment) Regulation 2005 (the “Amendment Regulation”), which will come into operation on 31 December 2005, introduces a new regulation 18A setting out such criteria. A “class A site”, “class B site” or “class C site” is defined under B(P)R 18A(1) according to the number of “specified street” not less than 4.5m wide that the site abuts. A street is to be regarded as a “specified street” if any of the following circumstances exists with respect to the street:

(a) (which repeats basically regulation 18A(3)(a)(i)).

(b) (which repeats basically regulation 18A(3)(a)(ii).

(c) (which repeats basically regulation 18A(3)(a)(iii).

(d) (which repeats basically regulation 18A(3)(a)(iv)

(e) (which repeats basically regulation 18A(3)(a)(v))

(f) If one or more of the circumstances mentioned in (a) to (e) above exist with respect to different parts of the street, and these parts together constitute the street, such street will also be considered as specified street (regulation 18A(3)(b)). If these parts are separated by intervening strips of land that do not meet any of the above circumstances, each of these parts will be considered as a separate specified street.” (underline added)

53.  So clearly, the Practice Notes refer back to regulation 18A. According to the maintenance record plan for Castle Peak Road – Chau Tau from the Highways Department dated 31 December 2015, the Resumed Lots and the Other Lots did not abut any land maintained by the Highways Department[27], hence regulation 18A(3)(a)(i) is not satisfied. Since the 1984 Resumption until the Resumption Date, no right of way had been granted to the applicant or its predecessors in title by way of any instrument, therefore regulation 18A(3)(a)(iv) is not satisfied. The contents of regulation 18A(3)(a)(ii), (iii) and (v) are self-explanatory and they are clearly not applicable to the circumstances of the present case. As a result, the maximum site coverage and maximum plot ratio permitted in respect of a building or buildings to be erected thereon, shall be determined by the Building Authority by virtue of regulation 19(3) of the Building (Planning) Regulations, Cap 123F.

54.  We consider that Mr Mok’s reliance on Kong Sau Ching v Kong Pak Yan & others [2004] 1 HKC 119 is misplaced. In this case, a road ran from Castle Peak Road to the village of Hang Tau, west of Sheung Shui. The road became a way (“the Way”) covering various lots of land in private ownership at the other end of Hang Tau. The Way forked at Lot 364A. Part of the Way on Lot 364A was an L-shaped portion (“the Disputed Way”). One fork of the Way went through the Disputed Way towards Lots 362A, 362B, 362C, 362D and 362RP, on which a building development had begun since 1996. The Disputed Way at that time was a partly concrete and partly dirt road. Heavy vehicles went through the Disputed Way to the building development. In mid-1997 heavy rain caused damage to the Disputed Way and repair works were carried out by those responsible for the building development. Thereafter the Disputed Way consisted of an entirely concrete road. In November 1997, one of the defendants sought to stop vehicular traffic through the Disputed Way but failed. In December 1998, owners of the properties in Hang Tau village brought an action claiming that they had a right to drive vehicles through the Disputed Way because the Disputed Way had long been used for vehicle traffic without hindrance. It was argued that the Disputed Way had been dedicated to public use notwithstanding that the owners of Lot 364A only held the land as government lessees. Reyes J (as he then was) held that the public had a right to pedestrian and vehicular passage along the Disputed Way because, on evidence, the government as reversioner under the government lease had consented to a dedication of the privately owned land as a public highway.

55.  In our view, this case must be distinguished because first it was about the dedication of privately owned land as a public way as opposed to the dedication of government land to private use. Secondly, since the 1984 resumption, under section 13(3) of the Roads Ordinance, all land resumed shall vest in the Financial Secretary Incorporated or revert to the government “without any conveyance and free of all mortgages, charges, claims, estates, easements, rights or interests of any kind in favour of any person”.  Thirtly, pursuant to regulation 18A of the Building (Planning) Regulations, Cap 123F a street has to meet certain criteria before it can be regarded as a specified street for the purpose of site classification.

Whether a Vehicular Right of Way Existed from the Position of the Gate to Castle Peak Road – Chau Tau?

56.  Both Mr Hui and Mr Henry Chan agreed that Lots 391B, 2030RP and 2054 in DD 95 did not abut Castle Peak Road – Chau Tau.[28]

57.  After the sale of Lot 2030A to a third party on 20 July 1960, Lot 2030RP became landlocked unless access to Castle Peak Road – Chau Tau was through say, Lot 1941A via the Tongue which portion of Lot 2054 forms part.

58.  The respondent admitted the existence of a right of way but contended that it was for pedestrian access only.

59.  It is undisputed between the parties that no express grant of right of way over the Government Strip can be found. The original grant or lease of Lot 1941 cannot be found either. The modification letter dated 27 September 1965, by which permission was granted for the erection of buildings on Lot 1941A, did not mention any grant of  right of way over the Government Strip.

60.  Mr Henry Chan relied on a plan attached to the Conveyance on Sale of Lot 1941 dated 30 April 1923 which shows that the Tongue was part of the area coloured red and was connected directly to Castle Peak Road without the Government Strip in between (“the Mistake”). Mr Henry Chan measured the width of the Tongue at about 40 ft (12.2 metres) from the plan in a scale of 16 inches to 1 mile (ie 1:3960).

61.  In another joint statement of the parties’ land administration experts dated 12 August 2021, the applicant’s expert, Mr Wan Man Yee (“Mr Wan”) stated “in those days”, plans registered with memorials (such as conveyance documents) “would be prepared by either the New Territories Administration as part of the public service of the Land Office or architects and were based on then available DD Sheets and other Government land ownership record plans”. On the other hand, the respondent’s expert, Mr Tsin Hok Yin (“Mr Tsin”), stated that the plans attached to memorials were just prepared, traced or copied from some plan records readily available in the Land Office without proper survey and were for identification purpose only.

62.  In Tam Mo Yin & Another v Attorney General & Others, HCMP 1868/1994 (unreported, dated 30 October 1995), Hon Yam, J (as he then was) made the following observations at §§15-17 of the judgment:

“15. It should be pointed out here that there was a DD Survey commonly called the Indian survey in the years 1898 to 1904. Lot 1510 being a New Grant in 1931 would not have been included in the said earlier Indian survey. However, from the Indian survey, there was a DD Control Sheet and from the DD Control Sheet, someone had marked the boundary of 1510 in a pointed half fan‑shape pointing to the western side. It is not known who plotted the boundary of Lot 1510 onto the DD Control Sheet. The area as shown in the DD Control Sheet is in excess of the acreage shown in the auction particulars. …

(2) Is the area a certainty?

16. The 1st Defendant’s argument hinged on the certainty of the area of 126.24 acres. However, is this area a certainty. Nobody knows how this figure was arrived at. Mr Tarrant, a very experienced surveyor called by the Plaintiffs, (whose expert evidence I accept) suggested that someone plotted the Lot 1510 on the DD Control Sheet casually without actual measurement. There was no demarcation of reference to any land marks on the site such as rock, drain, lamppost, track or the like. The area was a calculation by square and circle of the roughly drafted boundary on the DD Control Sheet. The plotting was casually made and thus the calculation from it was subject to errors. In the end, Lot 1510 was only estimated to have an area of 126.24 acres and in other words, it is not a certainty.

17. The aforesaid contention is consistent with the directions and warnings issued by the aforesaid government Acting Land Surveyor Mr S.C. Leung, a Crown servant, on 18 September 1987. In respect of The New Grant Lots he said at pB123:

“The New Grant Lots

7.     Immediately following the DD Survey, all lands not claimed were declared as Crown Land and disposed of, in parcels known as New Grant (NG) Lots.  These NG Lots once granted were pointed out to the new owners and roughly sketched on separate plans by staff without any survey training.  These called grant plans were invariably at an extremely small scale with few, if any, details or reliable map references.  These lots were also recorded on the DD Sheets but in an equally fictitious manner.  ...”

Mr Leung concluded at pB126 as follows:

“ In short, to determine the DD lot areas, the highest reliability should be given to the original ground occupation. Following this, the graphical data on the DD Sheet should be accepted, subject to intelligent interpretation. The registered area is less certain and the converted area which may include manufactured components is the least reliable. This grading of reliability must be observed in dealing with DD lot boundaries, including usage in the correlation exercise.”

18.    The general principle, in the determination of a Lot boundary, is by the proper construction of the conveyance and unless the answer is plain from the conveyance itself extrinsic evidence of material facts existing at the time of the conveyance is admissible.  Extrinsic evidence may include what was to be found on the site at the time of the Crown.  According to Halsbury’s Laws of England, 4th ed. vol.4(1) para.904, it has been said:

“Boundaries may, and generally should, be fixed by the deed or deeds conveying one or both of the properties concerned. Nevertheless, conveyances of land commonly leave the exact line of the boundary undetermined ...

The construction of a deed is always a matter for the court, but in order to interpret its provisions extrinsic evidence is admissible of all material facts existing at the time of the execution of the deed, so that the court may have the same knowledge as the parties to the deed then had. ... Once it is admissible, there is no reason to limit the extrinsic evidence to what is found in earlier documents of title without regard to what is found on the site.”” (underline added)

63.  With this approach in mind, we agree with Mr Lam that the width of the Private Strip or the Tongue was not necessarily 12.2 m. We accept the measurement on the basis of the resumption plan no DNM5004a which shows a width of 10.5 m (or 34 ft). Although by reference to the same resumption plan, Mr Lam suggested that part of the Private Strip was encroached upon by Lot 1941RP, there is no evidence on when the encroachment started or any evidence of adverse possession claim by the owner of Lot 1941RP. The suggestion of encroachment would not be explored further in any event as it has not been pleaded nor raised prior to trial[29].

64.  The applicant’s case is based on firstly the vehicular right of way on the basis of prescription, following China Field Ltd v Appeal Tribunal (Buildings) [2009] 5 HKLRD 662, (2009) 12 HKCFAR 342 at §41. As discussed in § 28 above, ever since the aerial photo taken in November 1945, an access running from north to south in Lot 1941A connecting to Castle Peak Road had been found. The access was so visible based on a aerial photo scale of 1:2000 that we do not think it was merely a pedestrian footpath. We agree with Mr Mok that the survey sheets dated November 1971, October 1973 and October 1975 and the aerial photos read together show more likely than not that the temporary structures along the access were construction containers which by their size and weight must require vehicular transportation. Mr Mok relied on TLC Trade Land Co Ltd v Samuel N & Co Ltd [2005] 2 HKLRD 756 citing §§64-65 that “The true rule would appear to be that mere non-user [of a discontinuous easement, such as a right of way] without more, however long, cannot amount to abandonment”. We agree with the applicant on this. 

65.  Furthermore, New Grant No 9594 of Lot 2054 dated 22 October 1965 provides in Special Condition 3 and the grant plan states that the portion falling within the Tongue “shall be used solely as an access road”. By looking at the grant plan which was of a scale of 330 feet to 1 inch (ie 1:3960), the width of this portion occupied at least 2/3^rd of the width of the Tongue. That is more than 7.0 m (23 feet) which appears too wide if it is for pedestrian access only. We agree with Mr Mok that this can be regarded as an express grant, or alternatively an implied grant of access to Castle Peak Road. Otherwise, the restriction on use as an access road would make no sense.

66.  In this regard, Mr Lam submitted that even if the vehicular right of way did exist from Lot 1941A to Castle Peak Road, such vehicular access would have been extinguished by the resumption in 1984 when the land was resumed for the construction of the New Territories Circular Road. Mr Lam referred to the resumption plan NDR 37D dated 12 August 1983 on which the resumption line went past the southern tip of the Tongue. As acknowledged by Mr Mok in his closing submission:

(a)     This resumption covered some additional land on the north of Castle Peak Road, but significantly more on the south of Castle Peak Road – Chau Tau.

(b)     The actual construction of the circular road was to the south of Castle Peak Road – Chau Tau and is a highway now known as Fanling Highway.

(c)     Castle Peak Road – Chau Tau remains a local road at ground level.

(d)     The additional land resumed to its north for the section between the Tongue of Lot 1941A and Lot 394D was to provide road facilities like surface channels, utility poles, pedestrian walkway etc.

67.  Mr Lam submitted that all areas to the south of the Tongue (including the Government Strip) therefore fell within the resumption area. He then referred to section 5 of the Lands Resumption Ordinance, Cap 124 (enacted in 1987) (“LRO”) which states that:

“On the expiration of 1 month, or any longer period authorized under section 4(3), the land other than any land purchased by agreement under section 4Ashall—

(a) where it is an undivided share in land, vest in The Financial Secretary Incorporated together with such rights to the use and occupation of any building or part thereof as may be appurtenant to the ownership of that share; and

(b) in all other cases, revert to the Government,

and all the rights of the owner, his assigns or representatives and of any other person in or over the land or any part thereof shall absolutely cease.” (underline added)

68.  Mr Lam further referred to the earlier provision of the LRO prior to 1987 as follows:

“On the expiration of 1 month, or any longer period as aforesaid, the land shall revert to the Crown and all the rights of the owner, his assigns or representatives and of any other person in or over the land or any part thereof shall absolutely cease.”

69.  Mr Lam submitted that the extinguishment of whatever right that the applicant might have over the Government Strip made sense because the government would not want the New Territories Circular Road to be constructed to be subject to any rights or interest of any individual person. Even if any right of way of the owner of Lot 1941A was not extinguished by the 1984 resumption, such right would have been extinguished by another land resumption order GN 4412 dated 4 August 2016 (ie the 2016 Resumption) prior to the notice of the Resumption, when the land was resumed for the construction of cycle tracks[30].

70.  As pointed out by Mr Mok in his closing submission, Mr Lam had referred to the wrong ordinance which Mr Lam agreed. Both the 1984 Resumption and the resumption under GN 4412 (ie the 2016 Resumption) were ordered under section 13 of the Roads Ordinance instead of under the LRO.  

71.  First, section 38 of the Roads Ordinance stipulates that except to the extent that provision is otherwise made therein, the LRO shall not apply to the resumption of any land ordered under section 13 which seems to suggest that the Roads Ordinance and the LRO are providing different regimes for land resumption. More importantly, Mr Mok referred to section 17 of the Roads Ordinance which is the specific provision that permits the government, for the purposes of or incidental to the works or the use, in relation to any road, to direct by order that the road or part thereof shall be closed or to declare by order that any public or private right in, upon, under or over the road shall be extinguished, modified or restricted. Mr Mok submitted that no such order had been made by the government.

72.  Nevertheless, under section 13(3) of the Roads Ordinance, all land resumed shall vest in the Financial Secretary Incorporated or revert to the government “without any conveyance and free of all mortgages, charges, claims, estates, easements, rights or interests of any kind in favour of any person”.  Mr Mok submitted that the 1984 Resumption (and the 2016 resumption) extinguished by stealth/without compensation violated the common law right of access. We are not persuaded on this as Item 3 of Part II of the Schedule to the Roads Ordinance is the distinct provision whereby compensation may be claimed if there be extinction, by the operation of section 13(3), of any easement in favour of land not resumed when adjacent or contiguous is resumed.

73.  This extinction is affirmed by Ms Hui in her oral testimony. She was of the view that “this access might however have fallen into disuse after the apparent abandonment of the subject site since the early 1980s, and became non-existence since the resumption and construction of the New Territories Circular Road in 1984”[31]. As evidenced by the aerial photos, the site had a re-growth of vegetation after the site formation which shielded the access road. Counting from 1984 onwards, or at least by reference to the aerial photo taken on 9 August 2000[32], there had not been a continuous use of the access road for 20 years so as to establish a right by prescription. By reference to the photo attached to the Environment Assessment Report dated 7 December 2012 prepared by the consultant of the applicant and others in support of a planning application (which will be further discussed below) , the vehicular access, if any, could hardly be seen.[33] Also, as shown in the tree survey plan prepared relating to the said planning application, there were a number of “existing tree to be felled” at the southern end of the Tongue[34]. A photo taken on 1 April 2016 further showed that the Tongue  had been overgrown with trees and vegetation[35]. The applicant claimed that they had been paying management expenses for routine inspection and maintenance of the access. In our view, such argument is irrelevant to the question of whether they are entitled to a vehicular right of way[36].

74.  The applicant also referred to the planning application submitted by Kenneth To & Associates Ltd (“KTA”) on behalf of the applicant (exclusive of the Other Owner) to the Town Planning Board on 5 June 2012 together with owners of adjoining lots, including Lots 1941RP, 2030A, 1941B1 and 2106[37]. Such application concerned a total site area of 105,500 sq m[38] seeking development of the Resumed Lots and the Other Lots together with the adjoining lots to a total floor area of 39,102.12 sq m (ie a plot ratio about 0.4)[39] and a site coverage of not more than 20% (“the Planning Application”). In the Planning Application, in response to the question “Any vehicular access to the site?”, the answer was “Yes. There is an existing access.”[40]. Mr Mok submitted that the Town Planning Board and government departments did not counter such answer.

75.  In our opinion, this observation of Mr Mok would not advance the applicant’s case. It is noted that the Lands Department without having to respond to the alleged existence of access directly commented that “… a land exchange is necessary to implement the residential development”[41]. The Transport Department remarked that “Regarding the proposed vehicular access at Castle Peak Road, … right turn traffic from Castle Peak Road to the proposed development will significantly affect the traffic flow at Castle Peak Road.”[42]. The word “proposed” used by the department ordinarily mean that the existence of the access was a thing alleged by the applicant without acknowledgment on the part of the department.

76.  After receiving the comments from various government departments, KTA on 25 July 2012 requested the Town Planning Board to defer its decision on the Planning Application[43] which request was acceded to by the Town Planning Board on 24 August 2012. On 1 November 2012, KTA again requested the Town Planning Board to further defer its decision which was acceded to by the Town Planning Board on 9 November 2012. Eventually, the Town Planning Board rejected the application on 22 May 2015[44].

77.  As regards Lot 392CRP and Lot 394DRP, it is undisputed that at least after the 1984 Resumption, they no longer abutted the road margin of Castle Peak Road – Chau Tau, and the road facilities, such as nullah, culvert (and cycle track after the 2016 resumption)[45] existed in between the lots and the road margin of Castle Peak Road – Chau Tau.

78.  The applicant referred to the common law right of access enjoyed by the landowners whose property adjoins a highway. It is submitted that such owners are entitled to access the highway at any point of contact between their premises and the highway. In our view, this proposition is of significance because if it succeeds, it would mean that the owners of Lot 392CRP and Lot 394DRP be bestowed with the right to compel the Government to set aside or modify the road facilities (nullah, culvert, cycle track etc) so as to allow vehicles to pass and repass from the lots to Castle Peak Road – Chau Tau at any point along the south boundary of the lots. To put it in another way, the applicant is proposing that the construction of those road facilities (such as nullah, culvert, cycle track etc) which made it impossible for vehicles to pass and repass from the lots to Castle Peak Road – Chau Tau was in contravention of the landowners’ common law rights in the first place. Mr Lam submitted that such proposition was absurd and we agree.

79.  The common law right of access to highway shall be provided to the extent of what is necessary for the reasonable enjoyment of the property[46]. Given that both Lot 392CRP and Lot 394DRP were Old Schedule agricultural land, pedestrian access should be sufficient for the reasonable enjoyment of the properties. No common law right of access by vehicles should be inferred.

80.  For Lot 1941A, although it is a lot which is capable of building development, it does not necessarily mean that it should be given special treatment as there are numerous lots in the New Territories capable of building development which are not granted with vehicular access. Lot 2030RP by itself was also vehicularly landlocked[47]. In any event and as discussed above, all land resumed in the 1984 Resumption was “free of all … easements, rights or interests of any kind in favour of any person.”. Any common law rights of the owners of the adjoining lots should have been overridden by statute.

81.  During the joint site inspection, the Tribunal drew the parties’ attention to the resumption of land for the construction of the Sheung Shui to Lok Ma Chau Spur Line under the Railways Ordinance, Cap 519 pursuant to GN 4335 dated 18 July 2002. In this resumption, many lots of land were resumed for the construction of the road networks connecting to the Lok Ma Chau station. One application for compensation was made to the Lands Tribunal for determination in 2005 and the case was So Kee Transportation Company Limited v Secretary for the Environment, Transport and Works, LDRW 36/2003 (unreported, dated 17 October 2005). The Tribunal in that case ruled that under section 18(2) of the Railways Ordinance, Cap 519, all land resumed would be “free of all mortgages, charges, claims, estates, easements, rights or interests of any kind in favour of any person” which wording is exactly the same as that in section 13(3) of the Roads Ordinance. It is unsound to suggest that any person could come forward to interrupt the construction of a railway by claiming such a common law right. Section 18(2) of the Railways Ordinance, Cap 519 actually makes no differentiation between resumption for construction of railway line and resumption for construction of road networks connecting thereto.

Permitted Site Coverage for Development of Lot 1941A

82.  Among the Resumed Lots and Other Lots involved in the present case, three of them were building lots. It is not disputed that among these three building lots, Lot 2030RP was subject to a site coverage restriction of 20%, and Lot 2054 was subject to a similar restriction of 30%. The only dispute is whether Lot 1941A was subject to site coverage restriction, and if so, how much.

83.  As mentioned in §19 above, the original land grant for Lot 1941 cannot be traced. The Modification Letter dated 27 September 1965 did not mention any site coverage restriction applicable to Lot 1941A. Recently, the Resumed Lots were the subject of a judicial review in Deluxe Ascent Limited v Director of Lands [2021] 2 HKLRD 431 (hereinafter referred to as “the Earlier Decision”) which concerned only the offer of ex gratia compensation[48]. The following evidences were disclosed in the judicial review proceedings:[49]

“(1) In February 1961, the former owners of Lot 1941A and Lot 375 in DD 95 (“Lot 375”) applied to the District Office for the surrender of those lots in exchange for a piece of land of approximately 636,650 sq ft (“the 1961 Application”).

(2) On 11 March 1961, the 1961 Application was considered at a Lands Conference, which approved the application subject to, inter alia, “permitted BO area of 20%” (ie built over or roofed over area of 20%).

(3) By a letter dated 20 March 1961, the District Officer, Tai Po made an offer to the agent of the owners (Harriman Realty Co Ltd). One of the conditions of the proposed surrender and exchange was stated to be “Restriction on User: Residential purposes only, with flatted development permitted subject to a roofed over area of 20% of the site and a height restriction of 25 ft.”.

(4) By a letter dated 22 November 1962, Harriman on behalf of the owners accepted the District Officer’s offer contained in the said letter of 20 March 1961 and a further letter dated 10 October 1962.

(5) However, the 1961 Application was eventually not pursued.

(6) In around April 1965, the former owners of Lot 375 and Section A of Lot 391 in DD 95 (“Lot 391A”) made another, different, application (“the 1965 Application”) to the District Commissioner, NT to surrender and exchange those lots together with Lot 1941A for a new grant of land which the District Commissioner proposed would comprise Lot 1941A and an extension thereto (with a total area of 649,500 sq ft).

(7) In a draft, or unsigned, Memo from the District Commissioner, NT to the Colonial Secretary dated 23 April 1965, it was recommended that the proposed surrender and exchange be approved upon certain terms and conditions. There was no suggestion, however, that the land to be granted would be subject to any site coverage restriction.

(8) Some further correspondence ensued, but they have not been produced as evidence before the court. It is, however, clear that the 1965 Application was not proceeded with, as shown by the fact that:

(a) on 27 September 1965, the Modification Letter was issued which, as earlier mentioned, permitted buildings to be erected on Lot 1941A with no site coverage restriction but a height restriction of 2 storeys (25 ft)[50]; and

(b) on 22 October 1965, Lot 375 and Lot 391A were surrendered and exchanged for Lot 2054 in DD 95 (“Lot 2054”) under New Grant No 9594, which contained a built-over, or site coverage, restriction of up to 30% of the area of a portion of Lot 2054 (shown coloured red on Plan I annexed to the grant).[51]

(9) On 12 January 1978, Messrs Tsang, Chan & Tam, Architects and Engineers, wrote to the District Officer, Tai Po, stating that their clients were desirous of redeveloping Lot 1941A and Lot 2054 into a residential estate comprising detached, semi-detached and/or terraced houses of 7.62 m (25 ft) high with a maximum site coverage of 20%, and asked the District Officer to confirm whether the tentative proposals (“the 1978 Proposals”) were acceptable.

(10) By a letter dated 12 June 1978, the District Officer, Tai Po replied to Messrs Tsang, Chan & Tam that the 1978 Proposals did not infringe any lease conditions and were, subject to approval by other Government departments, acceptable to him.

(11)   Again, it would appear that the 1978 Proposals were not subsequently proceeded with.”

84.  Hon Chow J (as he then was) ruled at §23 of the Earlier Decision that “on the materials before the court, there is no evidence to support the view that Lot 1941A was subject to any site coverage restriction, whether of 20% or otherwise, or that the former owners of Lot 1941A had ever entered into any binding agreement with the Government for the imposition of a site coverage restriction, whether of 20% or otherwise, on Lot 1941A.”.

85.  Relying on issue estoppel, Mr Mok submitted that the compensation to be assessed should be on the basis that Lot 1941A was not subject to any site coverage restriction, whether of 20% or otherwise.

86.  Mr Lam agreed that the doctrine of res judicata applies but submitted that Lot 1941A was still subject to a site coverage restriction of 20% under the Pointe Gourde principle which obtains its modern nomenclature from the Privy Council decision in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565. According to this principle, “compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition”.

87.  Mr Lam’s line of arguments was as follows:

(a)     At the time of resumption, the Resumed Lots were zoned “Government, Institution or Community” (GIC) in the Approved Kwu Tung North Outline Zoning Plan No S/KTN/2 dated 16 June 2015 (“the 2015 OZP”) which had led to the resumption for the construction of a purpose-built complex of residential care homes for the elderly.

(b)     Prior to the publication of the 2015 OZP, the outline zoning plan in force was the Approved Kwu Tung North Outline Zoning Plan No S/NE-KTN/8 dated 31 October 2006 (“the 2006 OZP”).

(c)     Under the 2006 OZP, the Resumed Lots were zoned “Comprehensive Development Area” (CDA).

(d)     Thus, it was apparent that one of the purposes of the publication of the 2015 OZP was to enable the resumption of, inter alia, Lot 1941A for development into GIC use in 2016.

(e)     The 2015 OZP was therefore part and parcel of the scheme under which resumption of Lot 1941A took place.

(f)     But before that, under the 2006 OZP, Lot 1941A was subject to site coverage restriction of 20%.

(g)     Under the 2015 OZP, there was no such site coverage restriction, apparently since the Government did not wish GIC development in Lot 1941A to be subjected to such restrictions.

(h)     The removal of the site coverage restriction by the 2015 OZP increased the value of Lot 1941A.

(i)     The Pointe Gourde principle dictates that any increase in value wholly due to the purpose for which the land is being resumed should be disregarded.

(j)     The removal of the site coverage restriction by the 2015 OZP should therefore be disregarded in the assessment of compensation herein.

(k)     Compensation should therefore be assessed on the basis that Lot 1941A was subjected to site coverage restriction of 20%.

88.  We would approach the issue this way. Under section 12(aa) of the LRO, in the determination of the compensation to be paid thereunder, “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)”. A comprehensive development area falls exactly under section 4(f) and therefore should be disregarded. The 20% coverage restriction incorporated in the CDA zoning (as follows) should also be disregarded:[52]

“On land designated “Comprehensive Development Area” to the south-west of Shek Tsai Leng ..., no new development, or addition, alteration and/or modification to or redevelopment of an existing building shall result in a total development and/or redevelopment in excess of a maximum plot ratio of 0.4, a maximum site coverage of 20% and a maximum building height of 3 storeys (9m) including 1 storey car park.”

89.  At the Explanatory Statement attached to the OZP at §9.1.1:

“This zone is intended for comprehensive development/ redevelopment of the area for residential use with the provision of open space and other supporting facilities. The zoning is to facilitate appropriate planning control over the development mix, scale, design and layout of development, taking account of various environmental, traffic, infrastructure and other constraints.”

90.  However, we cannot determine the market value of the Resumed Lots in a vacuum.

91.  In Hong Kong, it is trite that development control is governed by the Government lease, Building (Planning) Regulations and town planning zoning[53]. Roger Nissim noted in Land Administration and Practice in Hong Kong, 2^nd Edn, p.87 that until 1973 planning restrictions under the Town Planning Ordinance, Cap 131 were confined to controlling land use whilst the density of development was controlled by lease conditions and the Building (Planning) Regulations, Cap 123F which was administered by the Building Authority.  Lease conditions, statutory powers under the Buildings Ordinance and the planning regime by way of OZP under the Town Planning Ordinance had historically been fulfilling their respective roles in planning control in Hong Kong[54].

92.  As the Earlier Decision had already ruled that “there is no evidence to support the view that Lot 1941A was subject to any site coverage restriction, whether of 20% or otherwise”, we can only assume that Lot 1941A was not subject to any site coverage restriction under the Government lease. We therefore have to resort to the planning documents previously published and the previous planning decisions made and, in doing so, we are conscious that those materials and decisions that might be affected by the scheme underlying the resumption should be ignored.

93.  As evinced from the evidences in the Earlier Decision,   long ago in the 1961 Application, the Government was prepared to grant development of the Resumed Lots subject to a site coverage of 20%[55].

94.  Then there was the 1978 Proposals to the then District Officer, Tai Po as follows:[56]

“Dear Sir,

Re: Lots Nos 1941 Sec A & 2054 in DD 95

     My clients are desirous of redeveloping the above property into a residential estate comprising detached, semi-detached and/ or terraced house of 7.62M (25 feet) high with a maximum site coverage of 20%.

     I shall be obliged if you will confirm that my clients’ above tentative proposals are acceptable to you as they do not infringe any lease conditions.

     Detailed proposals of course shall follow thereafter.

     Looking forward to your earliest reply,”

95.  In the Planning Application mentioned above, it sought to develop the Resumed Lots and the Other Lots together with the adjoining lots to a total floor area of 39,102.12 sq m (ie a plot ratio about 0.4[57]) and a site coverage of not more than 20%. The proposed development would, among other things, consist of 167 houses of average unit size of 230 sq m + 2 clubhouses.[58]

96.  On 25 July 2012, after KTA had received comments from various government departments, KTA requested the Town Planning Board to defer its decision on the Planning Application[59]. This request was acceded to by the Town Planning Board on 24 August 2012[60].

97.  Meanwhile, there appeared to be a Kwu Tung North (“KTN”) Recommended Outline Development Plan being produced by the Planning Department which earmarked the site under the Planning Application which included the Resumed Lots for “Government” (Hospital, Polyclinic and General Clinic/ Health Centre), “Institution and Community (Electricity Substation)”, “Education  (Primary and Secondary Schools)”, “Residential Zone 1 (with Commercial)”, “Public Rental Housing”, “Comprehensive Development Area”, “Open Space”, Amenity” and road uses[61]. The Stage 3 Public Engagement of such study (“the Study”) was due for completion by end of August 2012. As a result, on 1 November 2012, KTA requested the Town Planning Board for a 2-month deferral of its decision on the Planning Application[62]. This request was acceded to by the Town Planning Board on 23 November 2012[63].

98.  On 8 January 2013, KTA responded to the Town Planning Board incorporating its response to all government departmental comments received. Some of the comments and corresponding responses are as follows:

Government Departments	Comments	Responses
District Lands Office/North	3.     From the lease point of view, as some of the private lots are demised for agricultural use and government land is involved in the subject site, a land exchange is necessary to implement the residential development. However, it is also noted that the proposed residential development will be in direct conflict with the future planned land uses of the Kwu Tung North New Development Area…	The areas of the private lots are obtained by actual site survey. A copy of the boundary survey plan prepared by Henry Chan Surveyors Limited showing the boundaries and areas of the private lots is attached in Appendix 2… There is no government land within the boundary of the Development Site… In the event that houses are proposed to be built on any of the agricultural lots, application for lease modification or land exchange to allow residential use on that particular agricultural lot or lots will be made accordingly. We noted there is no guarantee that application for lease modification or land exchange will be approved[64].
Civil Engineering and Development Department	1.     It is noted that the CDA boundary still encroaches into the proposed site under the cycle track project 259RS as indicated in the attached plans nos NTN 2224A and NTN 2225A. 2.     Please so be advised that we had already included a major part of the application site as part of the NENT NDAs (North East New Territories New Development Areas Planning and Engineering Study) advance works project … According to the tentative development programme, the NDAs will be developed in phases and construction works are scheduled for commencement in 2017/18, …, subject to further review.	… the area encroaches into the proposed site under the cycle track project is government land and is outside the development boundary under this application[65].
Chief Town Planner/Studies & Research	2.     …, the site is earmarked for “Government” (Hospital, Polyclinic and General Clinic/ Health Centre), “Institution and Community (Electricity Substation)”, “Education (Primary and Secondary Schools)”, “Residential Zone 1 (with Commercial)”, “Public Rental Housing”, “Comprehensive Development Area”, “Open Space”, Amenity” uses and road under the Kwu Tung North (KTN) Recommended Outline Development Plan. We maintain our view of not supporting the subject application, which is not in line with the planning objectives and landuse proposals of the KTN New Development Area.	The Applicants would like to reiterate that the proposed development is located at a development site zoned “Comprehensive Development Area” in the prevailing statutory Outline Zoning Plan. The proposed use, development intensity and other development restrictions are completely in line with the prevailing OZP, and therefore the application should be considered acceptable. Notwithstanding, the Applicants had submitted an Alternate Solution to the NENT NDAs during the Stage 3 Public Engagement period to demonstrate that the proposed development can co-exist with the future Kwu Tung North Proposed Development and reshuffling of land use parcels proposed in the Recommended Outline Development Plan. While allowing the planned development at the Application Site, adoption of the Alternative Solution would not result in a decrease in the government, institution and community facilities planned for the KTN NDA. It will neither reduce the planned population nor delay the implementation of the RODP.
Commissioner for Transport	(d)     … three junctions are operating without space capacity. Two of them are linking with Fanling Highway. The other is Ho Sheung Heung Road which is the sole access serving Ho Sheung Heung Road. The impact of traffic jams at these junctions will be significant.	Junction improvement measures were proposed … With the proposed improvement scheme, J/O Flyover across Fanling Highway/ Slip Road from Fanling Highway W/B and J/O Flyover across Fanling Highway/ Kwu Tung Road will operate with spare capacity. It should be noted that DFCs ( design flow/capacity ratios) of these junctions are above 1.0 for reference scenario. With the proposed improvement scheme, the junctions will perform significantly better with DFC less than 1.0. For J/O Castle Peak Road – Chau Tau/ Ho Sheung Heung Road, there is no land space available to widen the junction. Also, by comparing Reference and Design scenarios, the DFC of the junctions would be virtually similar and the proposed development is not anticipated to induce significant traffic impact at the junction.

99.  Having received the responses from KTA, the Planning Department requested the Town Planning Board to defer its consideration of the Planning Application until the completion of the NENT NDA Study and the confirmation of the land use proposals for the KTN NDA. This request was acceded to by the Rural and New Town Planning Committee of the Town Planning Board on 1 March 2013[66].

100.  KTA applied for a review under section 17(1) of the Town Planning Ordinance, Cap 131 to no avail.

101.  Having considered the above and with reference to Waters & Others v Welsh Development Agency[2004] 1 WLR 1304, [2004] UKHL 19at §58 in particular, we are of the opinion that the Resumption flowed from the Kwu Tung North Recommended Outline Development Plan which should be the scheme underlying the Resumption that is to be disregarded. Having reviewed the historical development of the Resumed Lots and Other Lots, in particular the circumstance that they did not abut a specified street, a maximum site coverage of 20% and a maximum plot ratio of 0.4 would most likely be permitted in respect of a building or buildings to be erected on Lot 1941Aas shall be determined by the Building Authority pursuant to Regulation 19(3) of the Building (Planning) Regulations, Cap 123F with vehicular access in and out of Castle Peak Road – Chau Tau.

102.  It is also of relevance to note that in Mr Charles Chan’s calculation, the European-styled house comparables, whether those adopted by himself or by Mr Lee, all have a site coverage below 20%. In all probability, the site coverage of any proposed development of Lot 1941A would be around 20% in order to make it competitive and marketable.

Joint Development

103.  As mentioned in §9 above, section 12(d) of the LRO provides that the compensation would be determined on the basis of the amount which the land resumed if sold by a willing seller in the open market might be expected to realize. Implicit in this requirement is that notwithstanding the actual use of the land resumed at the relevant date, compensation is to be determined on the best use to which the land may reasonably be put. In Raja Vyricheria Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302, Lord Romer pointed out at 313 that the court has to consider:

“… what a willing selling vendor might reasonably expect to obtain from a willing purchaser, for the land in that particular position and with those particular potentialities. For it has been established by numerous authorities that the land is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined … but also by reference to the uses to which it is reasonably capable of being put in the future.”

104.  Since Lot 1941A and Lot 2054 were capable of being developed for residential purpose, a willing seller would likely sell his interest in the Original Lots as a joint development. Mr Lam for the respondent argued that according to the will of the Other Owner, the executors can only have the power to sell the estate’s interest in the Original Lots and have no power to redevelop the Original Lots. Without going into the interpretation of the will of the Other Owner, even assuming Mr Lam’s interpretation to be correct, this should not bar the applicant from selling its interest expectant on the prospect of the joint development. This was exactly what happened when Mr Ho sold and the applicant purchased the Original Lots in November 2011.

105.  According to the witness statement of Mr Lo Hing Hung (“Mr Lo”), the Managing Director of the Investment Team of Gaw Capital Partners (“Gaw Capital”) which is the 100% shareholder of the applicant, the Original Lots were introduced to them through an estate agent.  They did not even bother to discuss or notify the executors of the Other Owner (“the Executors”) prior to or at the time of the purchase[67] possibly under the impression that the Executors might be a potential competitive bidder[68].

106.  It is interesting to note that Mr Ho or his successor did not sell the Original Lots to the Other Owner who might be able to merge 100% interest in the Original Lots. We agree that this selling of a partial interest in land would usually be subject to a discount or allowance, examples could be found in HM Inspector of Taxes v Hatt [2011] EWLands TMA/207/2000 (dated 13 November 2001), Barrett v Commissioners for her Majesty’s Revenue and Customs [2005] EWLands DET/42/2005 (dated 24 November 2005) and Re the estate of Norman Peter Youlden deceased [2006] EWLands TMA/215/2005 (dated 22 June 2006) and more recently in Tse Chan Fai & Another v Director of Lands, LDLR 10/2018 (unreported, dated 5 November 2020).

107.  In Collector of Land Revenue v A K A C T V Alagappa Chettiar and Collector of Land Revenue v Ong Thye Eng (Malaysia) [1970] UKPC 35, each of the co-owners of land compulsorily acquired objected to the Collector’s award on the ground that the amount of compensation was too low. The first respondent there held one-half share for many years, the second respondent and the other eight co-owners had purchased the remaining half-share between them just on 5 November 1963 prior to the compulsory acquisition in June 1964. The government valuer based his valuation of $3.00 per square foot upon the price of $1.10 per square foot at which the half-share was sold to the second respondent and others. For the purpose of comparison with other sales, the price of the land was throughout expressed as if it were $2.20 per square foot (ie simply $1.10 per square foot x 2) for the whole interest in the land.[69] Gill J of the Malaysian High Court found that everyone concerned knew of the potentialities of the land as a building site and that the undivided half-share was sold and bought on that basis. The circumstances of that case were that half-share of a large area of land was sold to purchasers who wished to join the owner of the remaining half-share to develop the land as a building site. Gill J was of the opinion that:

“the price paid did provide as appropriate starting point from which a suitable allowance could be made for the sale being that of an undivided share. He considered that the best guide as to the amount of the allowance lay in the prices paid upon recent sales of similar land in the same neighbourhood. For this purpose he relied principally upon a sale in September 1962 of an area of 2.85 acres at $1.12 per square foot.”[70] (underline added)

108.  Gill J observed that $2.20 did represent the market value of the entirety of the acquired land at the date of the sale of the half-share at $1.10 per square foot. He concluded the following and upheld the Collector’s award of $3.00 per square foot:

“In valuing the land acquired in June 1964 the Collector has allowed an increase of approximately 38% over a period of seven months. The value of $3.00 per square foot reflects not only the general increase in the price of land annually but also a reasonable allowance for the fact that its previous sale was of an undivided half-share.”[71]

109.  Nevertheless, the Federal Court of Malaysia allowed the appeal by the two respondents. They summarized their conclusion as follows:

“(a) that $2.20 was not even prima facie the true market value of the undivided half interest on November 5, 1963;

(b) that there were ample grounds for the conclusion that Devarayan (the vendor) accepted an offer below the market value of his share; and

(c) that, in any event, the sale price of the undivided half interest provided no proper criteria for the subsequent valuation of the whole interest.”

110.  But on appeal to the Privy Council, the Collector raised a fresh argument that the compensation ought not be assessed upon the value of the land as an undivided whole and apportioned among the co-owners proportionately to their respective undivided shares in it, but should have been assessed upon the aggregate of the separate values of the undivided shares in which the land was held. The Privy Council refused to entertain this fresh argument as it did not have the advantage of the opinion of the court below on such argument.

111.  As regards conclusions (a) and (b) of the Federal Court of Malaysia, their Lordships were of the view that the Federal Court of Malaysia were not entitled to substitute their own view for that of the judge who had heard the evidence in extensor and observed the demeanour of the witnesses as they gave it. If conclusion (c) was based upon (a) and (b) it is open to the same criticism. If on the other hand it was intended as a general proposition that recent sales of undivided shares of land should always be ignored in valuing the entirely of the land, this proposition in their Lordships’ view was far too wide. The following judgment was given on page 6:

“As Gill J pointed out in his judgment, the relationship between the price obtained upon a recent sale of an undivided share of land to the market value of the land as a whole will obviously be one of the factors in determining the price at which the vendor is willing to sell and the purchaser willing to buy a share in it. What discount (or addition) should be made for the other factors is very much a matter for the judge who had the advantage of seeing and hearing the evidence of the purchasers of one half-share and the co-owner of the remaining half-share. Their Lordships are not satisfied that Gill J erred in principle in his approach to the question of the relationship between the sale price of Devarayan’s undivided share and the value of the land as a whole, checking it as he did by a comparison with what he considered to be the most comparable recent sale of land in the same neighbourhood.” (underline added)

112.  In his closing submission, Mr Mok submitted that in the above cited part of the judgment, the Privy Council upheld the decision of Gill J on, inter alia, the question of the relationship between the sale price of the undivided half-share and the value of the land as a whole. With respect, we do not agree that the Privy Council upheld the relationship between the two, a more accurate description is that the Privy Council did not find Gill J erred in principle in his approach to the question.

113.  It is worth noting that in fact, Gill J did recognize that “the price paid did provide as appropriate starting point from which a suitable allowance could be made for the sale being that of an undivided share”. The fact that Gill J did not disturb the finding of the Collector at $3.00 per square foot and the total sum was apportioned between the co-owners proportionately to their respective undivided shares in the land does not mean that he did not make “allowance”. Gill J said that “The onus lies upon the applicant to satisfy the court by evidence that the amount of compensation awarded is inadequate … but if at the conclusion of the evidence he is not satisfied that the amount awarded by the Collector is inadequate, the award must be upheld and the application dismissed”[72].

114.  As we understand it, there was no oversight on Gill J’s part on “allowance”. The price paid at $1.10 per square foot was adopted as the starting point. Gill J then “relied principally upon a sale in September 1962 of an area of 2.85 acres at $1.12 per square foot”, “allowing for the general rise in land prices between September 1962 and November 1963” and came to the view that $2.20 did represent the market value of the entirety of the acquired land at the date of the sale of Devarayan’s half-share in it at $1.10 per square foot. If the discount for the mere half-share is 10%, the $2.20 would have become $2.20 ÷ 0.9 = $2.44.

115.  Gill J observed that in valuing the land acquired in June 1964, the Collector had allowed an increase of approximately 38% over a period of seven months since November 1963: ie$2.20 x 1.38% = $3.04. If $2.20 is replaced by $2.44, $2.44 x 1.38% = $3.37. If a discount of 10% is applied to this figure, the result will revert back to $3.03. The learned judge said that “The value of $3.00 per square foot reflects not only the general increase in the price of land annually but also a reasonable allowance for the fact that its previous sale was of an undivided half-share.”. It could therefore be seen that all along Gill J had this “allowance” in mind for the fact that the previous sale was of an undivided half-share in the land.

116.  Like this Malaysia case, the applicant knew of the potentialities of the land as a building site and that the undivided half-share was sold and bought on that basis. The applicant in the present case did not even bother to discuss or notify the Executors prior to or at the time of the purchase of the partial interest in the Original Lots obviously for fear of the risk of being overbid by the Other Owner. This further supports the making of an “allowance” or discount.

117.  Mr Lo, when being cross-examined by Mr Lam, said that after Gaw Capital had acquired the half-interest, they should have common interest with the Executors and an agreement to jointly develop the Original Lots might be reached. If no agreement could be reached at the end, the pieces of land could be divided into two portions, and they would give the Executors the first right to choose between the two portions. Gaw Capital might then develop the other portion on its own after resolving their difference in holding title. Such evidence confirmed that the applicant and the Executors actually had no agreement of any sort till the resumption.

118.  In June 2012, the applicant and some owners of other neighbouring lots made the Planning Application. Although those representing the Executors did join meetings in which the application was discussed, they did not join the Planning Application. In his oral testimony when being cross-examined about the Executors’ involvement in the application, Mr Lo’s answers were evasive at the start[73]. Upon further questioning, Mr Lo finally conceded that the Executors’ representatives had never given any concrete response. In his words, 「有參與， 無反應」[74]. According to Mr Lo, the Executors’ representatives had not raised objection to the application but neither had they given any promise or commitment. They had not agreed or disagreed to anything[75]. It is noted that the Executors also had not joined this application for compensation.

119.  In our view, the making of an “allowance” or discount is also judicially justified by reference to Transport for London v Spirerose Limited [2009] 4 All ER 810, [2009] UKHL 44, [2009] RVR 225, [2009] WLR 1797 where the House of Lords of the United Kingdom remarked at §7 of its judgment that “(t)he open market can be expected to attribute a premium to certainty or, conversely, to apply a discount to reflect a lack of certainty”. In §33, Lord Nicholls made reference to Camrose v Basingstoke Corporation [1966] 1 WLR 1100 to explain further:

“If (to take an extreme and indeed absurd example) planning permission for residential development were assumed for 1,000 acres of high-altitude moorland in Cumbria, the open-market value of the land could be expected to reflect the market’s scepticism as to whether the development would ever be carried out and prove profitable. That is the point, in much less extreme circumstances, of the Camrose case. Disregarding (under section 6 and the First Schedule, case 4) what Lord Denning MR called the “artificial inflation” of Basingstoke under the Town Development Act 1952, and the extra infrastructure needed for that expansion, the 233 outlying acres (part of the total 550 acres acquired from the Berry family trustees) were unlikely to be developed for many years. Therefore, although there was an assumed planning permission, it was in the circumstances discounted to no more than “hope value”—hope not of planning permission (which was assumed), but of the permission being acted on (see [1966] 1 WLR 1100, 1106).”

120.  Lord Collins also added at §99, in the light of the finding of fact in that case, that:

“it seems to me to be plain on the basis of the statutory provisions and of authority going back more than 100 years, which is entirely in accordance with commercial common sense, that (a) the value of the land is the open market value; (b) any depression in the price which the land might be expected to fetch which is caused by the scheme is to be disregarded; (c) the valuation must take into account the potential of the land, including its potential for development; and (d) the development potential must be valued in the normal way, by discounting for future uncertainties…”

Valuation of the Resumed Lots

121.  Mr Charles Chan provided a fall back valuation with 20% site coverage and vehicular access. The proposed domestic GFA of 4,587.815 sq m was agreed in the experts’ Joint Statement[76]. Among that figure, Mr Charles Chan provided for GFA of 780.951 sq m for Special Houses. The main difference of his hypothetical house developments with and without 20% site coverage restriction lied in the provision of gardens or open areas. Mr Charles Chan was of the opinion that such gardens or open areas attracted significant values or put it in another way, the enhancement in value brought by lower site coverage had been fully reflected in the value of the houses with gardens or open spaces which additional value would not exist for house developments with high site coverage.

122.  Mr Charles Chan assessed the compensation for Lot 1941A (Portion) and Lot 391B on the basis of a single site with the adjusted unit rates for the Typical Houses ($175,000 psm) and the Special Houses that has a large garden ($204,000 psm) by making use of the area of Lot 391B which is an “agricultural lot”.[77]

123.  Mr Lee assessed the compensation for each of the two Resumed Lots separately:

(a)     Lot 1941(portion) with the unit rate for his houses at $64,500 psm;[78] and

(b)     Lot 391B with the unit rate of $2,362 psm.

124.  Irrespective of the approach to be taken, the two valuation experts resorted to the residual valuation in assessing the market value of Lot 1941 (portion) which was a building lot with an assumption of 20% site coverage. This was done by deducting the development cost (including construction costs, professional fees, finance costs etc) and the developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development.

125.  Regrettably, Mr Charles Chan and Mr Lee could not agree on the comparables to be adopted in assessing the GDV of the Typical House. Mr Charles Chan adopted transactions in Valais I (天巒 1期)  and Valais II (天巒 2期) as well as The Green (歌賦嶺). Mr Lee adopted transactions in Europa Garden (歐意花園) and Miami Crescent (邁爾豪園)[79].

126.  We note that Valais I and Valais II are residential developments with over 300 houses situated on the opposite side of Castle Peak Road – Chau Tau Section, each having its own vehicular access towards Kwu Tung Road. This is a tranquil residential locality as compared with the vicinity of the Resumed Lots which was occupied by workshops and open storage yards etc. We agree with Mr Charles Chan that as Mr Lee adopted transactions in Europa Garden, an older development than Valais I and Valais II, we see no reason why the transactions in Valais I and Valais II, which are in the same locality of Europa Garden, shall not be adopted as comparables.

127.  Mr Lee objected to taking the transactions in Valais I and Valais II as comparables because he considered the marketability of the deluxe/luxurious houses in the Kwu Tong area doubtful, especially when a large number of domestic luxurious units flushed into the market in one-go. It appears to us that Mr Lee failed to observe that the Planning Application actually envisaged that the development would proceed in phases[80].

128.  Mr Lee tried to support his view by referring to some newspaper articles dated 21 February 2014, 10 June 2016 and 18 January 2019 respectively which reported that both Valais and The Green were well-known for their extremely low occupancy rate[81].

129.  In the newspaper report dated 21 February 2014, it was said that at Valais I & II, there were a total of 11 sales at a loss in the past year and out of the total of 330 houses therein, some 130 houses were on sale. Since the valuation date was 12 November 2016, that notorious high vacancy of Valais I & II, if the news reporting was true, should have been well known in the market. When Mr Charles Chan was able to locate some 10 transactions reached between willing sellers and willing buyers close to the valuation date, we do not find any problem in adopting them as comparables.

130.  On the other hand, The Green is situated at a relatively far away locality in close proximity to the Hong Kong Golf Club, which is home to three 18-hole courses and practice facilities and is regarded as enclave for the elite class, a major marketing point for luxurious premises. We initially are hesitant to adopt sales of The Green as comparables but as Mr Lee chose to adopt transactions of Miami Crescent which is situated next to The Green, we would not disregard transactions of The Green.

131.  The comparables adopted by the two experts are as follows:[82]

Valais (Completed in 2009)

132.  In the above tables, we agree with Mr Charles Chan’s approach in not applying a unit rate to the ancillary areas apart from the garden on the ground that the hypothetical house should have the similar provisions. In any event, unlike that for the gardens, the unit rate of the ancillary areas should be minimal or negligible when compared with the unit rate of the houses themselves.

133.  Mr Charles Chan and Mr Lee agreed to adopt the Private Domestic Price Index (Class E) published by the Rating and Valuation Department (“RVD”) for the adjustment for time differences. They however could not agree on the adjustment for age: Mr Charles Chan adopted 1% per 1 year difference whereas Mr Lee adopted 0.5% per 1 year difference[83]. Considering that the hypothetical development and the comparables are classified as deluxe or luxurious houses, we agree with Mr Charles Chan that such house purchasers should be more concerned about the design and condition of the development. We also agree with him that the taste and preference of such house purchasers may change over time as evident by Mr Lee’s newspaper report. Mr Charles Chan’s 1% per 1 year difference is preferred[84].

134.  Mr Charles Chan provided no adjustments for location and environment but Mr Lee allowed -5% adjustment for comparables at Valais II, the Green and Miami Crescent to reflect noise and air pollution etc due to the close proximity between the hypothetical development and the Fanling Highway. We agree with Mr Lee on this.

135.  Mr Lee made a further -15% allowance for open car-parking in the hypothetical development which Mr Charles Chan disagreed. Mr Charles Chan opined that the inferiority of the open car-parking would be evened up by the fact that the car-parking spaces of these comparables are situated at the basement level and the occupiers are required to walk up a storey of staircase to get to the G/F. Mr Charles Chan opined that in many residential developments, difference between open and covered carparks may affect the value of a carpark normally in a range of 20% to 30% of the carpark’s value but not of the house’s value. He considered the adjustment of -15% proposed by Mr Lee excessive and not supported by evidence[85]. Mr Charles Chan conceded that some adjustments should be made. We would allow an adjustment of -5%.

136.  Our analysis of the comparables differs from that of Mr Charles Chan by some -10% and is set out as follows:

137.  We have arrived at two sets of values, one being from $151,798 psm to $165,996 psm and another set is from $77,727 psm to $83,851 psm. Since the second set comprises aged development i.e. more than 10 years before the valuation date and since the taste and preference of such house purchasers may have changed over time, this second set of comparables is of less referential value and should be disregarded.

138.  In our view, the RVD index is territory wide and is not specific to a particular location and a particular type of house, we therefore prefer placing more weight on the adjusted value of the comparable transacted closest to the valuation date of 12 November 2016, ie $156,100 psm for T1. This figure also happens to lie some midway between $151,798 psm and $165,996 psm. Mr Lee pointed out that both the seller and the purchaser of T1 bore the same surname “Zheng” but we find such observation neither here nor there because as explained by Mr Charles Chan, “Zheng” is a common surname for Mainland Chinese. There is no evidence to support that T1 is not an arm’s-length transaction. We are content to adopt $156,100 psm as the GDV for the Typical House of the hypothetical development.

139.  As regards the assessment of the GDV for the Special Houses, Mr Charles Chan relied on the following 5 transactions of the The Green:[86]

140.  Mr Lee disagreed to adopting these comparables for the reason that they were first-hand sales by the developer.

141.  In Million Add Development Ltd v Secretary for Transport, [1997] CPR 316, the Tribunal rejected the use of the pre-sale comparables despite those were actual market transactions because:

“proper analysis would have to take into account a variety of factors, several of which would not easily be quantified. Allowance would have to be made for loss of interest on pre-payments; uncertainties over quality and completion dates; and varying market conditions over the relevant period... We consider it extremely difficult to make reliable adjustments for the presale factors....”

142.  Then in Good Faith Properties Limited and Others v Cibean Development Company Limited, LDCS 42000/2011 (unreported, dated 31 May 2013), the Tribunal remarked that:

“185. .... It may sound peculiar to someone who is not familiar with the basic assumption of residual valuation that if pre-sales (even if they are close to the relevant valuation date) are used, difficult adjustments would have to be made because in the market, pre-sale transactions are usually completed with stage payment, i.e. without the need for the purchasers to pay up the full amount of purchase price (hence the gearing ratio of the investment is different from the purchase of a completed development). It is this factor that Mr. Chan sought to argue that presale prices could most likely be inflated by the vendor/developer as the purchaser does not need to pay the full price today.”

143.  We note that first, these 5 comparables adopted by Mr Charles Chan actually were not pre-sale as The Green was completed in 2013, ie some 3 years before the valuation date. Hence those factors mentioned in Million Add Development case such as loss of interest on pre-payment, uncertainties over quality and completion date, varying market condition etc should not exist. Mr Lee said during oral evidence that there might be benefits offered by the developers in the first-hand sales but he was unable to produce any evidence to substantiate the same. The second point to note is that Mr Lee actually did not provide any alternative comparables which left us with no choice but to rely on these comparables proposed by Mr Charles Chan:

144.  We are prepared to adopt $185,000 psm as the GDV for the Special Houses of the hypothetical development.

145.  In the residual valuation, we are going to adopt Mr Charles Chan’s approach in valuing the garden within Lot 1941A as 1/8 of the unit rate for Typical Houses, ie $19,500 per sq m, and the garden with Lot 391B as 1/10 of the unit rate for Special Houses, ie $18,500 per sq m.

146.  As mentioned above, Mr Lee valued the building land portion and the agricultural portion separately. However, we agree with Mr Mok that all the comparables for the agricultural land proposed by Mr Lee ie RAV1, RAV2 and RAV3 suffered from a lot of deficiencies:

(a)     RAV1 is totally surrounded by other private lots and Mr Lee failed to show how vehicular access can be obtained free of charge and as of right.

(b)     RAV2 is in the middle of a logistic centre and Mr Lee failed to show how this comparable could be used or accessed by a buyer who is not the operator of the logistic centre.

(c)     Whilst RAV1 and RAV2 are landlocked, Mr Lee’s attempt to use the Private Factories Flatted Index published by RVD for time adjustment is unreliable for agricultural lots.

(d)     RAV2 and RAV3 are both located far away from the highway whereas Lot 391B is right next to Castle Peak Road – Chau Tau section.

147.  In light of the above, we reject RAV1, RAV2 and RAV3 as comparables for the agricultural land and follow Mr Charles Chan’s approach in valuing the Resumed Lots on a single site basis.

148.  Mr Charles Chan and Mr Lee had further agreements/ disagreements on the other parameters in the residual valuation as follows[87]:

		Mr Charles Chan	Mr Lee
Date of Valuation		13 Nov 16
Site Area	Lot 1941A (Portion)	12,858.8 sq m
	Lot 391B	2,225 sq m	2,183.3 sq m
Number of Storeys		2
Site Coverage		20% on Lot 1941A (Portion)
Proposed Domestic Gross Floor Area/ Saleable Area		4,857.815 sq m
Marketing Cost		3%
Interest Rate		4.0%	5.0%
Professional Fee		6.0%
Construction Cost		$329,252,445 [88]on the basis of the Building Cost Data published by Ride Levett Bucknall, often known as RBL, assuming High Quality residential standard.	Not Provided
Breakdown on Construction Cost	Average Cost	$43,800/m2
	Development Scale Adjustment	0%*	+15%
	Site Formation	$470/m2
	External Works (including landscaping)	$8,700/m2
	Air-conditioning	$940/m2
	Appliances:	$1,430/m2	$2,170/m2
	Clubhouse	$45,300/m2
Construction Period		18 months	24 months
Developer’s Profit on cost		15%	40%

* Mr Charles Chan had revised this to 0% at trial from his original +15%.

Site Area of Lot 391B

149.  Whereas the difference in site area of Lot 391B is small (less than 2%), we are prepared to adopt just the average of the two, ie 2,204 sq m.

Cost of Appliances

150.  Mr Charles Chan considered that when the construction cost had been agreed on the basis of High Quality standard, the cost of appliances should be similarly assumed. However, Mr Lee opined that if the transactions of Valais and The Green are adopted as comparables, the cost of appliances should be assessed on the basics of very high quality standard with flat size of 150 sq m being fitted with European made appliances. Taking into account the visual inspection of the house of Valais and The Green from the outside and their analysed unit price being on the upper range, we share the view of Mr Lee though the difference should not be significant. By reference to the Building Cost Proforma  promulgated by the Hong Kong Institute of Surveyors to facilitate consideration of construction costs, we arrive at a total construction cost of $397,543,161 (which differs from Mr Charles Chan’s estimate of $393,948,378 by less than 1%).

Interest Rate

151.  We agree with Mr Charles Chan that an interest rate of 4% was invariably adopted by the Tribunal in residual valuation in compulsory sale cases around the period of the valuation date.  As this interest rate is in the nature of the finance rate that may be generally incurred by developers in a competitive market, it would not be significantly different on an individual basis. Thus, Mr Charles Chan’s 4% is adopted.

Construction Period

152.  Mr Charles Chan was of the opinion that as the hypothetical development was low-rise, the construction of foundation would be less demanding especially when no basement is to be constructed. Mr Lee agreed with Mr Charles Chan initially but then suggested that there would be uncertainty about site formation and drainage etc on raw land in the rural area. As stated on the first page of the Environmental Assessment Report dated 4 September 2012 (“the Environmental Assessment Report”), “(t)here is no public sewerage connection available to the Application Site. Like other similar developments south of the Fanling Highway, pumping of sewerage to the nearest public sewer is proposed”[89]. The Drainage Services Department’s comment was: “The proposed development is far away from the existing sewer along Castle Peak Road (Kwu Tung Section) and the length of the proposed sewer is about 1.5 km along Castle Peak Road”[90]. The Environmental Assessment Report acknowledged at  §4.1 that “… the subject site is at the upper upstream of an existing sewerage system located about 1.5 km away”[91]. At §6.1, the Environmental Assessment Report confirmed that “(t)he assessment has been carried out with plot ratio of 0.4 to check the capacity of the existing sewers along Castle Peak Road – Kwu Tung …”.

153.  On the other hand, Mr Charles Chan referred to a government sale of land at Lot 1909 in DD 100 on 15 April 2015. The site area is 6,409 sq m with a plot ratio of 0.48, ie a maximum gross floor area of 3,076 sq m. This has been developed into a luxurious estate known as Cadenza Phase 1 (華第第一期) comprising five 3-storey detached houses with size ranging from 539.67 sq m to 644.74 sq m. This development was only completed in the end of 2020.

154.  Another government land sale referred to by Mr Charles Chan was on 7 August 2015 at Lot 2115 in DD 105. The site area is 8,754 sq m with a plot ratio of 0.48, ie a maximum gross floor area of 4,201 sq m. It appears that this development has yet to be completed.

155.  With the above in mind, we agree with Mr Lee’s suggested construction period of 24 months.

Developer’s Profit

156.  A major difference between Mr Charles Chan and Mr Lee is on the quantum of the developer’s profit. Mr Charles Chan considered a profit margin of 15% adequate for the scale and the type of the adopted development. On the other hand, Mr Lee suggested a much higher profit margin of 40% on the ground that both Valais and The Green were well-known for their extremely low occupancy rate. As explained above, so long as there were numerous transactions between willing sellers and willing buyers as at the valuation date, the so-called low occupancy rate should not pose a serious hurdle for the developers. Taking into account the rising market trend by reference to the RVD index as follows, we are prepared to adopt a developer’s profit at 15% as suggested by Mr Charles Chan:

2016	Private Domestic Price Index (Class E)
January	265.5
February	(264.1)
March	264.0
April	266.3
May	269.1
June	269.9
July	271.0
August	275.2
September	283.2
October	288.7
November	290.9
December	293.2

() indicates fewer than 20 transactions in the period.

157.  Subject to what we have stated above, we shall follow Mr Charles Chan’s residual valuation as a template in the determination of the RDV[92]. We arrive at the land value of the Resumed Lots at $335,000,000 (ie accommodation value of about $68,961/sq m) as shown at Appendix 3 to this judgment.

158.  As said, Mr Charles Chan had provided two government land sales and a land exchange as cross-check to his valuation[93]:

	Land Sale Transaction 1	Land Sale Transaction 2	Land Exchange
Property	Lot 1909 in DD 100, Fan Kam Road, Sheung Shui	Lot 2115 in DD 105, San Tin Road, San Tin, Yuen Long	Lot 4823 in DD104, San Tam Road, San Tin, Yuen Long
Date of Transaction	15 April 2015	7 August 2015	9 December 2015
	$302,200,000	$548,000,000	$30,540,000
Site Area	6,409 sq m	8,745 sq m	736.3 sq m
User	Private Residential	Private Residential	Private Residential
Development Conditions	Max GFA: 3,078 sq m (Plot Ratio: 0.48) Max Site Coverage: 20% Max No of Storeys: 3 storeys including carparks or any floor below ground	Max GFA: 4,201 sq m (Plot Ratio: 0.48) Max Site Coverage: 20% Max No of Storeys: 3 storeys including carparks or any floor below ground	Max GFA: 294.5 sq m (Plot Ratio: 0.40)   Max No of Storeys: 3 storeys including carparks or any floor below ground
User Restriction (Before Land Exchange	-	-	Agricultural
Accommodation Value (“AV”)	$98,244 per sq m	$130,445 per sq m	Approx. $103,694 per sq m

159.  Mr Charles Chan considered these three land sales and land exchange provided a good reference to the accommodation value of the Resumed Lots because the development envisaged in these transactions were similar to the hypothetical development of the present case in terms of locality, type of development and scale of development.

160.  Mr Lee considered otherwise because, for instance, the development permitted in the three land sales and land exchange has 3 storeys including carparks or any floor below ground. In this regard, we have allowed -5% adjustment in assessing the GDV of the residual valuation.

161.  Mr Lee considered that the market condition was also different. In order to cool down the overheated property market, the government implemented on 4 November 2016, ie less than 2 weeks before the date of valuation a new round of demand-side management measures targeting the residential property market, under which an ad valorem stamp duty (“AVD”) at a flat rate of 15% chargeable on residential property transactions has been introduced. Whilst Mr Charles Chan opined that the effect of this additional AVD would be short-lived, we believe there might be a dampening effect as at the date of valuation which might not be wholly reflected in the RVD index when transactions were few.

162.  In addition, we agree that the locality of San Tin or Ngau Tam Mei where Lot 2115 in DD 105 or Lot 4823 in DD104 are situated is completely different from that of the Resumed Lots. There has been a number of well-established residential estates in San Tin or Ngau Tam Mei. As we shall see below, some 10% to 15% would be allowed for location difference

163.  Similarly, we consider that Lot 1909 in DD 100, Fan Kam Road, Sheung Shui is situated in a locality which is superior to the Resumed Lots. Lot 1909 in DD 100 is in fact situated opposite The Green across Fan Kam Road, being even closer to the Hong Kong Golf Club.

164.  Whereas Mr Charles Chan saw fit to provide no adjustment to these “comparables”, we can only say that, as demonstrated in Able Luck Development Limited & Others v Public Global Investments Limited & Others, LDCS 7000/2014 (unreported, dated 6 October 2017) at §§104-106, a minor change in the GDV would result in the residual land value being amplified.

165.  In this regard, we share the remark of the Tribunal in Hofei Estates Limited v Secretary for City and New Territories Administration, LDLR 1/1982 [1980-82] CPR 486 which is cited as follows:

“14. Unfortunately, the comparables were not only in different localities, but were also very much smaller than the subject property, have varying development costs and contained other differences. These major differences obliged both valuers to make substantial adjustments to the comparables to relate them, for valuation purposes, to the subject property. The adjustments actually made were mostly subjective and unsupported by any detailed analysis.

15. In these circumstances a better approach would have been to have used the residual method. The adoption of the residual method would have enabled the valuers to have tested the value of the subject property in terms of optimum development in relation to cost and reasonable profit margins.

16. We are satisfied that evidence was available from the comparables and elsewhere; for reasonably accurate assessments to have been made by the residual method. Furthermore this is the method more likely to be adopted by a reasonable prospective purchaser of this type of property.

17.    We appreciate that caution must be exercised before adopting the residual method. However, provided the variables used are supported by evidence in the market, it has many advantages. Certainly on the facts of this particular application, the residual method would have allowed for a better comparison between the subject property and the comparables. For each could have been compared in relation to its optimum development. In the absence of evidence adduced before us enabling the residual method to be applied, we are obliged to arrive at a valuation based largely on unsupported percentage adjustments to comparables which, quite apart from other differences, are too dissimilar in size and development potential, for direct comparision.”

166.  Having said that, we are prepared to round up our assessment of the market value of the Resumed Lots to $340,000,000 (ie about $70,000 per sq m).

167.  Both Mr Charles Chan and Mr Lee had prepared an alternative valuation on the assumption of there being no vehicular access but no site coverage restriction following the Earlier Decision. On the basis of this assumption, only New Territories Exempted Houses under the Buildings Ordinance (Application to the New Territories) Ordinance, Cap 121 could be developed on Lot 1941A. It is interesting to note that Mr Charles Chan, on this assumption, arrived at a residual land value of $387,441,000 which is some 14% higher than our assessment at $340,000,000 above.

168.  However, Mr Charles Chan and Mr Lee held different opinion on the comparables to be adopted as well as the adjustments thereto. For example, Mr Charles Chan relied on the transactions in Eden Villa in Mai Po San Tsuen while Mr Lee relied on the transactions in La

169.  Regent Park and Grand Garden Phase III:[94]

170.  Initially, Mr Charles Chan had also relied on the transactions at Lin Tong Mei and Hang Tau. The three comparables in Lin Tong Mei actually belong to the same single development that comprises a total of three houses and the comparable in Hang Tau is a single house development. These “comparables” are situated in traditional village environment with poor accessibility. On review, Mr Charles Chan revised the location adjustments to +50% and +35% respectively[95]. These “comparables” are disregarded.

171.  Unfortunately, the comparables relied on by Mr Lee are just in respect of one particular floor of a village type house which is not considered good comparables. The houses are aged (built in around 2000) and their construction was distant from the date of valuation. Our assessment just based on the adjustments for time, age and vehicular access and carparking as suggested by Mr Lee would have arrived at the following:

172.  We are therefore only left with the comparables by Mr Charles Chan, ie the transactions of Eden Villa which was newly built in 2015.

173.  Eden Villa is situated at Ngau Tam Mei which is completely different from that of the Resumed Lots. There are a number of well-established residential estates in San Tin or Ngau Tam Mei and they are to be contrasted with the subject location which is dominated by workshops and open storage sites etc. As a matter of fact, Lot 1941RP was used for open storage of heavy vehicles at the time of resumption. We agree with Mr Lee that there has to be an adjustment of -15% for location.

174.  In terms of scale and facilities, Mr Charles Chan on review also agreed with Mr Lee on the adjustments as some houses within Eden Villa are installed with internal lift.[96]

175.  Mr Charles Chan and Mr Lee also differed on the adjustments for the lack of vehicular access and therefore carparking spaces in the Resumed Lots. Mr Chan allowed -10% while Mr Lee allowed -15%. We prefer the opinion of Mr Lee.

176.  We set out below the resulting analysis based on the above discussion:

177.  We arrive at an average unit rate of $60,638 per sq m instead of that of Mr Charles Chan at around $74,000 per sq m.[97]

178.  We then apply this $60,638 per sq m to Mr Charles Chan’s original residual valuation[98]. We arrive at a residual land value of just $290,000,000 which is less than our assessment at $340,000,000 above.

Discount for Uncertainty

179.  The Lots not being abutting a specified street under the Building (Planning) Regulations, Cap 123F, the maximum site coverage and the maximum plot ratio permitted in respect of a building or buildings to be erected thereon shall be determined by the Building Authority. As there is still a minor uncertainty in securing the development with 20% site coverage with vehicular access as envisaged as at the valuation date, following the rationale in Transport for London v Spirerose Limited, supra, we would allow a nominal discount of 5% and determined the market value at $323,000,000.

180.  We are not going to explore the two main alternative scenarios assumed by the applicant, being (1) vehicular access is available through the Tongue of 1941A, 394DRP & 392CRP, and (2) vehicular access is available only through the Tongue, both on the basis of no 20% site coverage to Lots 1941A, 391B, 394DRP and 392CRP and the lease restriction on Lot 2054 being 30% site coverage and Lot 2030RP being 20%. In our opinion, given that Lot 1941A in particular did not abut a specified street, the uncertainty in securing the higher site coverage in these alternative cases would be high and may stand less than 50% chance of success.

181.  In Farlinger Developments Limited v East York (Borough) (1975) 9 OR (2d) 553, 61 DLR (3d) 193, 8 LCR 112, the issue in that case was whether the appellant could reasonably expect a change in the zoning which would permit the development as desired which formed the basis of determining compensation for the market value of the land being expropriated. Howland JA of the Court of Appeal of the Ontario Supreme Court of Canada held at §38 of the judgment that:

“From these authorities it would seem to be established that the highest and best use must be based on something more than a possibility of rezoning. There must be a probability or a reasonable expectation that such zoning will take place. It is not enough that the lands have the capability of rezoning. In my opinion probability connotes something higher than a 50% possibility ……..”

182.  The Canadian Court of Appeal found that there was no evidence upon which the Land Compensation Board could properly find that there existed a probability of favourable zoning instead of a mere possibility. In the present case, we come to the same conclusion that with the evidence currently available there exists low probability of securing such alternatives suggested by the applicant or Mr Charles Chan.

183.  Although the applicant owned 72% rather than 50% in Lot 391B, as Lot 391B is agricultural land, its contribution to the market value of the Resumed Lots is relatively insignificant, which is acknowledged by Mr Mok in his closing submission at §§138 & 140. Also, as determined by the Court of Final Appeal in Director of Lands v Yin Shuen Enterprises Limited & Another [2003] 2 HKLRD 399, (2003) 6 HKCFAR 1 and Dragon House Investment Limited & Another v Director of Lands [2005] 4 HKLRD 480, (2005) 8 HKCFAR 668, section 12(c) of the LRO applies in the case of resumption under the Roads Ordinance or the Railways Ordinance so that the prospect of land exchange of this agricultural land should be excluded. In Dragon House, the Court of Final Appeal summarized at §37 the syllogism as follows:

(a)     zoning for a use which is not permitted by the lease has no value capable of being realised unless the terms of the lease are modified;

(b)     in assessing the compensation to be paid on resumption no account may be taken of the prospect of obtaining such a modification (or land exchange in the present case as required by the Lands Department in response to the Planning Application); and

(c)      therefore no value may be attributed to zoning which can only be realised by obtaining a modification (or land exchange in the present case0.

Discount for Partial Interest

184.  We shall now proceed to apply the discount for the value of the partial interest owned by the applicant.

185.  On the presumption that the applicant would be entitled to half of the value of $323,000,000, ie $161,500,000 and subject to a discount of partial interest at 10%, we determine the market value of the interest in Lot 1941A and Lot 391B owned by the applicant as at the Date of Resumption at $145,300,000.

Severance Claim

186.  When some land is taken from an owner, the “before and after” method is normally taken to determine the amount of compensation suffered by the owner and the method is essentially by ascertaining the value of the subject property before and after the partial taking and then by deducting one sum from the other.

187.  Mr Charles Chan had carried out residual valuation for the “before value” of the Original Lots (under the assumption of 20% site coverage and vehicular access)[99], adopting the same unit rates and similar approach as in the residual valuation of the Resumed Lots.

188.  Mr Charles Chan had then carried out the “after value” valuation with the Resumed Lots being resumed[100].

189.  Despite Mr Charles Chan’s meticulous assumption and calculations, we do not find any of the lots included in the Planning Application would have suffered any loss in value after the Resumed Lots were resumed by reference to the available evidence including the master layout plan included in the Planning Application[101].

190.  In respect of the lots situated to the west of the Resumed Lots, they can still make use of the Tongue as the proposed vehicular access. The Tongue is not resumed anyway. As regards Lot 1941A, it had an original area of some 59,526 m^2[102] of which only 12,859 m² (ie less than 22%) was resumed. Even in Mr Charles Chan’s development model, Lot 1941A would be developed in phases. The resumption of portion of Lot 1941A would have no effect on the value of the remaining portion.

191.  In respect of Lot 2030RP, although it can no longer be accessible to the Castle Peak Road – Chau Tau through Lot 1941A via the Tongue after the Resumption, we find no reason why an alternative vehicular access cannot be proposed across Lot 394D[103] .

192.  We agree with Mr Lee’s comment in his report dated 12 November 2020 that: “in the prevailing circumstances at the time of resumption, … the negative effect of the resumption on the layout of the adjoining lots, should be insignificant”[104].

193.  As set out by Mr Charles Chan in his rebuttal report dated 16 December 2020 at section 12.3.2, the difference in the number of detached houses to be available before and after resumption was between 168 and 157[105], ie a reduction of mere 11 houses. It is true that the proposed layout had to be re-designed. But the so-called reduction in value is solely derived from Mr Charles Chan’s different parameters in applying the “before and after method”. A summary of Mr Charles Chan’s calculation is as follows:

194.  Here, Mr Charles Chan assumed the amount of loss or damage suffered by the applicant and the Other Owner due to the severance of the Resumed Lots to be $39,755,638 (being the difference of $2,303,615,000 and $1,833,982,000 minus the value of Resumed Lots which he assessed at $429,867,871)[106].

195.  If we perform the same analysis using our determination of $156,100 psm and $185,000 psm for the Typical Houses and Special Houses respectively and add the construction period by half year because of the larger scale of development, we would arrive at the following:

196.  Therefore, the difference before and after the Resumption would become $335,376,460. When $340,000,000 being the value of the Resumed Lots is deducted from $335,376,460, the result is negative.

Conclusion

197.  We determine that the compensation payable to the applicant is as follows:

 Market Value under section 10(2)(a) of the LRO: $145,300,000

 Severance Loss under section 10(2)(c) of the LRO: Nil

Orders

198.  Accordingly, we order that the respondent do pay the applicant compensation for the Resumed Lots in the sum of $145,300,000.

199.  The matters of professional fees, interest and costs shall be adjourned for arguments on a date to be fixed by parties in consultation with counsel’s diaries if necessary, with liberty to apply for any other ancillary and consequential matters.

Appendix 1

 

Appendix 2

 

[1] See Bundle D/1/32.

[2] The former figure is that asserted by the applicant and the latter figure is that of the respondent but the difference is minor and insignificant.

[3] This appears to be the purpose of the Resumption that the Government is going to construct a purpose-built complex of residential care homes for the elderly to rehouse the residents of Dills Corner Garden.

[4] See Bundle D/2/193-210.

[5] See Bundle C2/3/429-445.

[6] See Kwok Cheuk Kin & Another v Director of Lands & Others [2021] 1 HKLRD 737 at §§40-46.

[7] See Bundle D/1/080.

[8] Two portions, being Lot 1941 Section B Subsection 1 and Subsection 2, were sold previously on 21 February 1935 vide memorial 91927 and 91928, granting a right of way to Lot 1941BRP otherwise the latter would have become landlocked.

[9] See Bundle D/094.

[10] See Bundle D/1/098.

[11] See Bundle D/1/099-100.

[12] See Bundle E4/54/1019-1020.

[13] See Bundle D/2/175.

[14] See §19 above.

[15] See Bundle C2/2/429-445.

[16] See Bundle D/1/080.

[17] See Bundle D/1/088.

[18] See Bundle D/1/048-049.

[19] See Bundle D/1/055.

[20] See the Joint Statement of Ms Hui and Mr Chan Hon Kwan Henry (“Mr Henry Chan”), the Authorized Land Surveyor appointed by the applicant dated 16 February 2021 at §7: Bundle D/3/251.

[21] See Bundle E4/59/1025.

[22] See the Joint Expert Statement of Ms Hui and Mr Henry Chan dated 16 February 2021, §5 at Bundle D/3/251.

[23] See the Joint Statement of Mr Hui and Mr Henry Chan dated 16 February 2021 at §11: Bundle D/3/252.

[24] See Bundle D/2/175.

[25] See the table at §4 of the Joint Expert Statement of Ms Hui and Mr Henry Chan dated 16 February 2021: Bundle D/3/250.

[26] See Bundle D/1/105 & 109.

[27] See Bundle F/16/028.

[28] See the Joint Statement of Ms Hui and Mr Henry Chan dated 16 February 2021 at §21: Bundle D/3/255.

[29] See Grand Power International Limited v Chan Sing Hoi Enterprises Limited[2020] 2 HKLRD 142 at §41.

[30] See resumption plan no DNM2109b: Bundle D/067.

[31] See Bundle D/2/189 at §5.8.

[32] See Bundle D/1/147 & F/2/12.

[33] See Bundle E2/40/703.

[34] See lower right hand corner of Bundle E3/40/790.

[35] See Bundle E4/63/1032 & E4/66/1037.

[36] See Bundle B/1/13.

[37] See the ownership of the various lots at Bundle E1/29/269 which is reproduced as Appendix 2 of this judgment.

[38] The site included an existing development called Fairy Park at Lot 2106 with a site area of 1,388.2 sq m plus 6,336.7 sq m of Government land. See Bundle E1/29/269 and the Master Layout Plan at Bundle E2/33/299.

[39] See Bundle E1/27/195.

[40] See Bundle E1/27/197.

[41] See Bundle E3/40/603 & E4/49/992.

[42] See Bundle E2/33/296.

[43] See Bundle E1/31/274.

[44] See Bundle E4/50/1006.

[45] Mr Mok pointed out in his closing submission that cycle track is a portion of a road set aside for bicycles or tricycles under section 54 of the Road Traffic Ordinance, Cap 374.

[46] See The Modern Law of Highways by Hamilton at p17.

[47] The grantee of Lot 2030A successfully obtained from the Government the grant of a right of way of 34 feet wide by a Memorandum of Agreement dated 20 February 1968. See §22 above.

[48] See §8 of the Earlier Decision.

[49] See §21 of the Earlier Decision.

[50] It may be more correct to say that the Modification Letter did not mention any site coverage restriction applicable to Lot 1941A. See the end of §20 of the Earlier Decision.

[51] See also §23 above.

[52] See Bundle C2/3/479.

[53] See, for example, United Grand Limited v Town Planning Board, cacv 398/2006 (unreported, dated7 August 2007) at §20.

[54] This is what was cited in Gold Shine Investment Limited v Secretary for Justice, HCMP 1272/2008 (unreported, dated 29 December 2009) at §24 and Building Authority v Appeal Tribunal (Buildings)[2013] 1 HKLRD 101 at §42.

[55] See §71 above.

[56] See Bundle C2/3/466 or F/14/23 for the letter sent by Messrs Tsang, Chan & Tam, Architects & Engineers dated 12 January 1978.

[57] See Bundle E1/27/195.

[58] See Bundle E1/27/196.

[59] See Bundle E1/31/274.

[60] See Bundle E1/32/275.

[61] See Bundle E2/33/292.

[62] See Bundle E2/37/590.

[63] See Bundle E2/38/591.

[64] See Bundle E3/40/603.

[65] See Bundle E3/40/606.

[66] See Bundle E3/42/805.

[67] See Bundle B/1/05 at §17.

[68] Oral evidence of Mr Lo on 5 August 2021 at 12:37-12:39.

[69] See p4 of the judgment.

[70] See near the middle of p5 of the judgment.

[71] See near the middle at p5 of the judgment.

[72] See p3 of the judgment at the top.

[73] Mr Lo’s oral evidence on 5 August 2021 at 14:45-14:48.

[74] The wordings used by Mr Lo on 5 August 2021 at 14:55.

[75] Mr Lo’s oral evidence on 5 August 2021 at 15:.00-15:04.

[76] See Bundle C3/4/520.

[77] See Bundle C1/2/337B.

[78] See Bundle C2/3/497.

[79] See Bundle C3/4/539.

[80] See Bundle E1/29/269.

[81] See Bundle C2/3/491, 492 & 493.

[82] See Bundle C3/4/541A.

[83] See Bundle C3/4/544A.

[84] See Bundle C3/4/546A.

[85] See Bundle C3/4/548A.

[86] See Bundle C3/4/542A.

[87] See Bundle C3/4/520A

[88] See Bundle C1/2/338B.

[89] See Bundle E2/33/315.

[90] See Bundle E2/33/289.

[91] See Bundle E2/33/368.

[92] See Bundle C1/2/337B.

[93] See Bundle C1/1/30 & 31, C1/2/189 & C3/4/538.

[94] See Bundle C3/4/560A &561A.

[95] See Bundle C3/4/563A.

[96] See Bundle C3/4/564A.

[97] See Bundle C1/1/167.

[98] See Bundle C1/2/332.

[99] See Bundle C1/2/339B, 340B and 341B.

[100] See Bundle C1/2/343B. 344B, 345B and 346B.

[101] See Bundle E2/33/299.

[102] There is a minor discrepancy between the survey of Mr Henry Chan (59,752 m²) and that of the Government (59,526 m²) which is less than 1%.

[103] Bundle C1/1/159A.

[104] Bundle C2/3//386 at section 10.5.2

[105] Bundle C1/2/199.

[106] See Bundle C1/2/347B.