PENNY'S BAY INVESTMENT CO LTD v. DIRECTOR OF LANDS

CACV 13/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 13 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 14/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 14 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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CACV 15/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 15 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 16/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 16 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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CACV 115/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 115 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 116/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 116 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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CACV 119/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 119 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 120/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 120 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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JUDGMENT

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The Court:

A.      INTRODUCTION

1.  By a judgment handed down on 15 October 2014, the Lands Tribunal made an award of compensation in connection with the extinguishment of marine rights pertaining to Lot 22 in DD 356, Penny’s Bay, Lantau, Hong Kong (“Lot 22”), then held by Penny’s Bay Investment Company Limited (“the Applicant”).  The marine rights were extinguished under the Foreshore and Sea-Bed Ordinance (“FSRO”)[1] on 5 May 1995 upon the gazettal of the notice of reclamation proposal approved by the then Governor in Council (“the 1995 Authorization”).

2.  The award of compensation that the Tribunal made was in the sum of HK$10,952,500.[2]  However, in its decision of 16 January 2015, which dealt with the parties’ applications for leave to appeal, the Tribunal admitted that it had made a mistake and that the correct amount of compensation should be HK$9,431,000.[3]

3.  Both the Applicant and the Directors of Lands (“the Respondent”) were dissatisfied with the Tribunal’s award.  They first obtained leave to appeal from the Tribunal on 16 January 2015 on certain grounds, which resulted in CACV 13-14/2015 (with the Respondent as the appellant) and CACV 15-16/2015 (with the Applicant as the appellant).  Later on 15 May 2015, the parties obtained further leave from the Court of Appeal[4] to appeal on some other grounds which the Tribunal had refused.  That resulted in CACV 115-116/2015 (with the Respondent as the appellant) and CACV 119-120/2015 (with the Applicant as the appellant).

B.      Background

4.  The proceedings leading to the Tribunal’s award had a protracted history.[5]  For present purposes, we largely base our summary of facts on Lord Hoffmann NPJ’s summary in Penny’s Bay Investment Co Ltd v Director of Lands (2010) 13 HKCFAR 287and Lam J’s summary in his judgment dated 25 May 2007.  Where necessary, we will add some more details to paint a fuller backdrop.

B1.    Lot 22

5.  As already alluded to, Lot 22 was situated at Penny’s Bay, which lies near the eastern end of Lantau Island.  It is now the site of Hong Kong Disneyland, which opened in 2005 and was built on about 300 hectares of land that had been reclaimed from the waters of the bay.  It has its own MTR station and fast road connections to Hong Kong Island and the airport.  In 1994, however, Penny’s Bay was a remote corner of the coastline, inaccessible except from the sea or on foot.

6.  The land around Penny’s Bay was Lot 22.  It was acquired by the Applicant in 1970 by an Agreement and Conditions of Exchange dated 2 January 1970 registered in Tsuen Wan Land Registry as New Grant No 4706 (“the Grant”).  The initial term of the lease was 99 years less the last 3 days commencing 1 July 1898.  It was subsequently extended to 30 June 2047 by the New Territories Leases (Extension) Ordinance.[6] The Applicant enjoyed limited right to access to the sea from its land.

7.  Lot 22 was about 2,010,000 sq ft in size.  Under Condition 3(a) of the Special Conditions of the Grant, the Lot was to be used for general industrial and/or godown purposes excluding any offensive trade, and no less than 285,000 sq ft of the Lot shall be used for shipbuilding purposes only.  There were also restrictions on the erection of any building on the Lot under Condition 3(b) and (c).

8.  By a Tenancy Agreement dated 8 December 1975, the Applicant let Lot 22 to a subsidiary, Cheoy Lee Shipyards Limited (“Cheoy Lee”), which carried on the business of shipbuilding and repairing.  At all times thereafter until the surrender of the lease by the Applicant to the Government on 3 April 2001.  Lot 22 was used by Cheoy Lee for shipyard purposes utilizing the marine access.

B2.    The 1995 Authorization

9.  On 11 March 1994, the Director of Lands, pursuant to section 5 of the FSRO, published a Gazette Notice No GN 847 delineating and describing a proposed reclamation of foreshore and sea-bed situated at Penny’s Bay to provide for, inter alia, land for the construction of Container Terminals 10 and 11 (“CT10” and “CT11”), land for industry, back-up areas for container terminals and associated infrastructure (“the Container Terminal Scheme”).

10.  On 24 March 1995, a draft Outline Zoning Plan (OZP) No S/I-NELP/1 (“the Draft OZP”), outlining the development plan for the Container Terminal Scheme was published. The area to be reclaimed at Penny’s Bay, including part of Lot 22, was zoned for industrial use, container terminals, container back-up area, a business park, etc.  The majority area of Lot 22 was zoned for industrial use, with the rest mainly for “Government/Institution/Community”, “Other Specified Use (Service Area)” and “Road” uses.  There would be a new access road linking the North Lantau Expressway with the container terminal sites.  This access road would run through Lot 22.

11.  On 25 April 1995, the Secretary for Transport, pursuant to section 8(2) of the Roads (Works, Use and Compensation) Ordinance[7], published in the Gazette Notice No GN 1450 a road scheme associated with the Container Terminal Scheme.  The notice provided description of the general nature of the proposed road works.

12.  On the same day, the then Governor in Council, pursuant to section 8(1)(c) of the FSRO, published in Gazette Notice No GN 1574 dated 5 May 1995 the 1995 Authorization, which authorized a proposal to reclaim about 1260 hectares of the foreshore and sea-bed at Penny’s Bay for the purpose of construction of CT10 and CT11 and associated infrastructure.

B3.    Subsequent changes

13.  In or about August 1999, the Government abandoned the Container Terminal Scheme.  The road scheme, which was a necessary element of the Container Terminal Scheme and which had never been implemented, was aborted, too.  Instead, the Government decided to promote the Disney Project.

14.  Subsequently by a Gazette Notice GN 2230 dated 10 April 2000 the 1995 Authorization was revoked and four days later, on 14 April 2000 the new authorization for the Disneyland reclamation for the somewhat more modest area (about 330 hectares) was published in Gazette Notice GN 2231.

15.  To implement the Disneyland project, Lot 22 was required.  By a Deed of Surrender executed on 3 April 2001 the Government acquired Lot 22.  Upon the execution of the Deed of Surrender, the Government paid the Applicant a sum of $1,506,098,750, of which $1,483,380,000 was paid as ex gratia payment.

16.  It is not in dispute that the revocation of the 1995 Authorization did not revive the Applicant’s marine rights and that it had a vested right to compensation by virtue of the 1995 Authorization.  The question for the Tribunal in the proceedings below was how the compensation which had become payable to the Applicant by virtue of the 1995 Authorization should be calculated under section 12 of the FSRO.  Section 12 provides:

“ (1) Any person who claims that his interest, right or easement in or over such foreshore and sea-bed will be injuriously affected by the reclamation may deliver to the Director a written claim stating the sum of money which he is willing to accept in full and final settlement of his claim …”

17.  The proper approach to a valuation under section 12 was not authoritatively determined until the matter reached the Court of Final Appeal in early 2010.

B4.    CFA’s approach on valuation

18.  The leading judgment of the Court of Final Appeal was given by Lord Hoffmann, with which other judges concurred.  After drawing a distinction between the concept of “injurious affection” under the English law and what was envisaged under the statutory scheme of the FSRO, his Lordship said:

“41.       Thus we have a statute which provides for compensation for injurious affection which will be caused by the reclamation but assumes that this has accrued and can be fully quantified before the reclamation has taken place – indeed, when it may be uncertain whether a reclamation will take place at all. In my opinion this can only mean that for the purposes of assessing the compensation, it must be assumed that on the date of authorization it was certain that the reclamation would take place. This gives effect to the future tense in s.12: the owner claims that his land “will be” injuriously affected, not that it has been or may be so affected. The statute cannot have contemplated that the Government, having given notice that a reclamation was authorized, would be able to invite the Tribunal to speculate as to whether and, if so, when it might happen and have the compensation discounted accordingly.

42.       What this means in practice is that the reclamation is treated as having taken place on the date of publication of the authorization and the compensation is the difference between the open market value of land in actual enjoyment of its marine rights and its open market value when deprived de facto as well as de jure of its access to the sea. Although there was no discussion of the point, that appears to have been the way the question was decided in the case of In the matter of an Award of Compensation made by His Excellency the Governor (1912) 7 HKLR 110, to which I have referred. In that case, as here, claims for compensation had to be made within a short period from the passing of the Ordinance which authorized the reclamation and it is clear from the judgment that it had not yet taken place when the matter came before the Chief Justice on appeal against the compensation awarded by the Governor. The harbour of refuge was “hereafter to be newly created”: see p.112. Nevertheless, the measure of compensation adopted by the Chief Justice was the difference between the rental values of the properties at the time of the passing of the Ordinance and “after the completion of the proposed reclamation”: see p.113. In other words, for valuation purposes, the reclamation was assumed to have taken place. Of course the question of principle which I am now considering was not argued, so the case is not an authority on the point, but it does show that the method of calculation which I think is necessarily implied by the structure of the legislation seemed obvious to everyone who was involved.

43.       As the measure of compensation is the difference between the respective values of the land with and without access to the sea on 5 May 1995, Cheung JA must be right in saying that nothing which happened after that date can affect the valuation. The value of a property means the price which it would have fetched on a sale in the open market between a willing seller and a willing purchaser on the relevant date. That obviously cannot be affected by what happened afterwards.

44.       On the other hand, the parties to the hypothetical sale on 5 May 1995 would have had expectations about the future which, whether right or wrong, would have influenced the price at which they were willing to deal. The plan for the container terminal had been published in 1994 and, when the scheme had got to the point of authorization in May 1995, it is possible that the owners of land in rural Lantau entertained lively expectations about how the value of their land would be enhanced by the proposed works. Such a view may have been shared by developers in Hong Kong from whom the hypothetical purchaser would be drawn. Whether such expectations existed and the extent, if any, to which they would have affected the open market value of the land is a matter for evidence when the valuation comes to be done. But if they did exist and would, as a matter of reality, have affected the price which the land would have fetched, they cannot be ignored.

45.       It is true that the prospect of new uses for the land, and the increased value which that may have generated, would have entered into the valuations both with and without access to the sea. It is however important to bear in mind that such access, while obviously vital to sustain the value of the land as a shipyard, may have played little part in its value for uses which would be served by the anticipated new access by road. If, therefore, the price which the land would have fetched would have been heavily influenced by the prospect of a new use rather than a continuation of the shipbuilding business, the difference between such value with access to the sea and without may not have been very substantial.

46.       I emphasise these matters because Mr Chang laid some stress upon the fact that the valuers had agreed that on 5 May 1995 the value of the land without marine access would have been 10% of its value with such access. We do not know anything about the assumptions upon which this valuation was based. But the huge difference in values suggests the possibility that it was made on the assumption that the alternative to ship building was the prospect of the land being confined to permanent agricultural use, without taking into account the expectations which would have been created by the announcement of the container terminal scheme. If that was the case, then the valuation would not have been in accordance with reality. The valuations must take into account all the information which was public knowledge at the time and (apart from the assumptions about marine rights) not be based on any artificial assumptions.

47.       … I would therefore set aside the order of the Court of Appeal, discharge the declarations made on the preliminary issues and declare that the compensation payable to the claimant is the difference between (a) the price which Lot 22 would have fetched on a sale in the open market between a willing seller and a willing buyer on 5 May 1995 on the assumption that it enjoyed access to the sea as it had done up to that date and (b) the price which it would have fetched on such a sale on the assumption that access to the sea had been lawfully interrupted by the completion of the proposed reclamation.”

19.  The Court of Appeal then remitted the matter back to the Tribunal for the compensation to be determined in accordance with the approach laid down by Lord Hoffmann.

20.  In its Decision on Costs dated 27 August 2010, the Court of Final Appeal made further observations on the proper approach to valuation under section 12, which are also pertinent for present purposes. Ribeiro PJ said:

“9.  We cannot accept the Director’s submission. In the first place, Lord Hoffmann NPJ’s remarks in paragraphs 44 to 46 were not an acceptance of the Government’s alternative argument.  That argument was that enhancement to the value of the land by reason of an anticipated road network associated with a container port should only be taken into account in “the latter valuation”, that is, the valuation after extinction of the marine rights, thereby effectively nullifying PBIL’s claim.  That argument was rejected. The Court held that :

“ ...the prospect of new uses for the land, and the increased value which that may have generated, would have entered into the valuations both with and without access to the sea.” (emphasis supplied)

The Court saw no basis for taking the increased value into account only in the “after” valuation and ignoring it on the “before” side of the ledger.

10.  Secondly, the Court was certainly not purporting to decide that any such expectations in fact existed or, if they did exist, what their impact on the valuation might be.  Far less was the Court purporting to decide that such expectations would result in a valuation financially favourable to the Director, as opposed, for instance, to being mutually off-set in the “before” and “after” valuations.   The Court emphasised that :

“Whether such expectations existed and the extent, if any, to which they would have affected the open market value of the land is a matter for evidence when the valuation comes to be done.” ”

C.      The Tribunal’s Judgment

21.  After summarizing the judgment of the Court of Final Appeal at §6 of its judgment, the Tribunal referred to the positions of the parties.  It is important to note the common ground before the Tribunal, as set out at §21 of the judgment:

“21. In assessing the value of Lot 22, it is not in dispute that the valuation date falls on 5 May 1995 and Lot 22 involved areas for the following use :

(a) an area aggregating not less than 285,000 sq ft (or 26,477 sq m) which shall be used for shipbuilding purposes only (“the Shipbuilding Area”); and

(b) the remaining area shall be used for general industrial and/or godown purposes (“the Industrial/Godown Area”).”

22.  At Section E, the Tribunal considered the factors affecting the Before Value (i.e. the value of the land with marine access). The Tribunal first addressed the submission of the respondent that the potential purchaser would anticipate making an agreement with the Government to give up the marine rights voluntarily to enable the reclamation and road works to be carried out in order to facilitate the development of Lot 22 for industrial purposes. This argument was rejected by the Tribunal at §§25 to 29 as being inconsistent with the premise that for the Before Value, it had to be one with access to the sea.

23.  Then the Tribunal considered the permissible use of Lot 22 in light of Special Condition 3(a). At §§40 to 68, the Tribunal gave reasons for its conclusion that mid-stream operation involving the bringing in of empty containers by ocean going vessels from overseas and then taking the same to mainland destinations by barges to be filled up by goods for transport back to Hong Kong for loading back onto the ocean going vessels is within the permitted use. The Tribunal further found that such operation is likely to have the permission of the Town Planning Board: see §§76 to 83.  Notwithstanding such operation had not hitherto been carried on at Lot 22, the Tribunal found it to be economically viable: see §§93 to 101.

24.  The Tribunal next considered the expectation about the Container Terminal scheme and the associated road scheme. In so doing, the Tribunal had in mind the observations of Lord Hoffmann at §§44 and 45 of the CFA Judgment. The finding of the Tribunal at §118 was as follows:

“ We found that with the public information published, the land owner as well as the potential purchaser of Lot 22 should have the expectation that the Container Terminal Scheme as well as its Associated Road Scheme would proceed as planned. As for the extent as to how this expectation would affect the open market value of Lot 22, we shall deal with this below in the valuation process.”

25.  That finding should be read together with the findings at §§340, 344, 371 and 372, 378-9, 401 (on the Before Value) and 427-8, 464 to 467 and 477 (on the After Value (i.e. the value of the land without marine access)):

On the Before Value

“ 340. Having considered the availability of the OZP and the gazette notice as at the date of valuation, although there might be possible that the Container Terminal Scheme might not be implemented, the prospective purchaser would consider the most probable option, ie the schemes would be implemented.

344. However, when the owner considers the best selling price, he will definitely consider different options as well. As AW said, there may be a possibility that the Container Terminal Scheme will not go ahead. If that is the case, the zoning on the OZP will not be pursued and the entire remaining portion of Lot 22 will be used for mid-stream use only.

…

371. AW argued that Mok has not fully reflected the delay in the granting of the lease of CT9 and the deferment of CT10 and 11. There is no concrete evidence as to what is the reasonable approach to assess the uncertainty factor. It depends on whether the prospective purchaser would believe the Container Terminal Scheme would go ahead. As at the date of valuation, there was evidence that the Government has plan for the Container Terminal Scheme with reclamation authorized, OZP published and Associated Road Scheme gazetted. Therefore, we do not accept AW’s contention that there is 80% chance of the Container Terminal Scheme not going ahead.

372. However, taking into account the delay in the sale of CT9 and the dispute between China and the Hong Kong Government, the risk was not low. We consider that the 30% deduction might not be able to reflect the risk. We believe that the prospective purchaser would try to lower the price offered to buy the site and we consider a 50% discount to be more reasonable.

…

378. As discussed in Section E.(3) above, we found the prospective purchaser should have expectations on the implementation of the Container Terminal Scheme. However, as at the date of valuation, in the Before Situation, the reclamation scheme has not yet been confirmed and the OZP has just been published. There was a degree of uncertainty that the Container Terminal Scheme may not be proceeded and that will affect the resumption of marine access, the Associated Road Scheme, the link road to Lot 22 as well as the back-up area.

379. In a hypothetical sale, when a prospective purchaser considers the price to be offered to the land owner, the starting point should be the base value of the land, ie the price where the scheme proposed by the Government would not be implemented. In contrast, the prospective purchaser would also consider the value of the best use of the Lot with the Container Terminal Scheme going ahead. Should such value be in excess of the base value, this is what we considered the enhancement value arising from the expectations of the future.

401. Based on the evidence adduced before the Tribunal, it is likely that there would be a delay in the Container Terminal Scheme although there was no concrete evidence as at the date of valuation how long the delay would be.  We believe that the prospective purchasers would normally take a conservative approach taking into account the known uncertainties when they made an offer to the owner.  As suggested by AW, there would be a delay of, at least, 8 years from the date of valuation.  The Tribunal accepted that this might be the highest price the prospective purchaser was willing to pay for as at the date of valuation in view of the extent of uncertainties.”

On the After Value

“ 427. As for the expectations of the Container Terminal Scheme and its Associated Road Scheme in the After Situation, one must not ignore the fact that it has to be assumed that marine access had extinguished and it was certain that the reclamation would take place. All the public documents as particularized at §110 above had been published remained a fact in the After Situation. But with the marine access being extinguished and the certainty that the reclamation would take place as found by the CFA (see §414 above), the land owner as well as the potential purchaser should have greater expectation than in the Before Situation that the Container Terminal Scheme and its Associated Road Scheme was more likely to proceed as planned.

428. Having said that, we agree that there still remained a degree of uncertainty and/or delay which should be reflected in the valuation. This will be further dealt with below.

…

464. With the marine access being extinguished, one would expect that the Container Terminal Scheme would proceed as planned. The only uncertainty would be the delay in the carrying out of the scheme. As discussed in Section F.(7) above about the delay of the Container Terminal Scheme and its Associated Road Scheme, we decided that a deferment of 8 years is reasonable for the Before Situation. This is what we considered to be the best scenario anticipating the Container Terminal Scheme will go ahead with 8 years delay from the date of valuation.

465. In the After Situation, it would be more certain that the Container Terminal Scheme would go ahead as the Government has resumed the marine access of Lot 22 for reclamation work. It is likely that the most optimistic scenario would be 4 years from the date of valuation (that is what Mok suggested on his assessment of industrial land value) and the worst scenario would be 8 years from the date of valuation.

466. Taking into account the uncertainty for the disposal time of CT 9 and the probable delay in the construction of the Container Terminal Scheme and its Associated Road Scheme, it is highly unlikely that the road would be available in 4 years from the date of valuation. As the Government has taken action to proceed with the reclamation, it is unlikely that the road would be delayed for 8 years from the date of valuation.

467. Taking into account the above, we consider that it would be reasonable to assume that the road access would be readily available in 6 years’ time.

…

477. However, in the After Situation, with the assumption that marine access has been extinguished, it is more certain that the Government has decided to proceed with the Container Terminal Scheme.  The prospective purchaser would offer the price assuming that the site can be developed to the highest and best use, ie the highest value among different uses.  In this case, it should be the highest value between the mid-stream operation and industrial development use.”

26.  In Section F of its judgment, the Tribunal assessed the Before Value. After discussing some relatively peripheral issues like contamination, demolition cost and canteen, rental income, the Tribunal addressed the valuation for 285,000 sq ft for shipbuilding purpose as a component of the Before Value in Section F(4). After making adjustments to comparables, the Tribunal arrived at the value of $214,206,000 at §210.

27.  At Section F(5), the Tribunal assessed the valuation for mid-stream operation. It is clear from §236, 343 and 345 that the Tribunal, in accordance with the agreed position of the parties as stated in §21, confined this valuation to the part of the land which would not be used for shipbuilding purpose. After a lengthy discussion on the various sets of comparables and considering the relevant factors and making the relevant adjustments, the Tribunal at §§ 338 and 339 arrived at the unit value at $200 per sq ft. The Tribunal then considered the viewpoints of the prospective purchaser and the owner as vendor to come up with 2 different potential Before Value based on shipyard and godown uses: $511,101,761 from the angle of prospective purchaser with the assumption that the Container Port Scheme would go ahead (§§ 340 to 343); $551,157,000 from the angle of the owner vendor on the assumption that the Container Port Scheme not going ahead (§§ 344 to 346).

28.  At Section F(6), the Tribunal assessed another potential Before Value by reference to industrial development on the scenario of voluntary surrender (in case it was wrong to reject this scenario as per its earlier discussion). At §376, it arrived at the value of $391,309,077. It is noteworthy that the Tribunal found that industrial development is unlikely to happen without road access at §370.

29.  At Section F(7), the Tribunal discussed and applied the methodology in taking expectations as to the future in arriving at its final valuation on Before Value. Again the Tribunal reminded itself of the observations of Lord Hoffmann in the CFA judgment in so doing, see §377 of the judgment. For the reasons explained at §§ 379 to 382, the Tribunal considered the base figure should be $551.157 million. The reasoning appears at §§ 380 to 382:

“380. In assessing the value of Lot 22, it is not in dispute that the valuation date falls on 5 May 1995 and Lot 22 involved areas for the following use :

Mid-stream use with CT Scheme not going ahead	$551,157,000
Mid-stream use with CT Scheme going ahead	$511,101,761
Industrial development use	$391,309,077

381.     So, the base value the owner would consider should be $551.157 million.

382.     This is the value of Lot 22 as at the date of valuation, in its existing.  This figure, we believe, is the minimum amount the owner would accept or the prospective purchaser would offer if the property is put for sale.”

30.  The Tribunal then examined enhancement on account of expectations and adopted the formula proposed by the Applicant’s expert (with modification on the meaning of H) at §§ 385 and 387 to 390:

“385. AW has adopted a different approach and has used the following formula:

ie P = [ (H – L) x R ] + L

P	Price
H	Value of Lot 22 on the basis of the Container Terminal scheme definitely going ahead in accordance with a programme
L	Value of Lot 22 on the basis of the Container Terminal scheme not going ahead
R	Risk factor, expressed in percentage terms to be applied to the difference between “H” and “L” so as to work out the amount of the premium to be added on top of “L” for the transaction to be completed.

 ...                                

387.     On the other hand, we found AW’s approach is acceptable as it reflects the expectation a prospective purchaser would fetch on top of the base value or the minimum amount the owner would accept.  However, his assumption in the formula may not truly reflect the market practice.

388.     In the formula set out in §385 above, AW stated that L is the value of Lot 22 on the basis of the Container Terminal Scheme not going ahead whereas H is the value of Lot 22 on the basis of the Container Terminal Scheme will definitely go ahead in accordance with a programme.

389.     We consider that the definition of value “L” named by AW is correct and this equates the base value we found at §381 above.  However, we found the definition of “H” should be elaborated as follows:

“Value of Lot 22 on the basis that the Container Terminal Scheme definitely goes ahead which would bring in the development potential for other alternative highest and best uses that would generate the best price of the property.”

In a gist, H is the value representing the best use of Lot 22 with the benefit of the Container Terminal Scheme being materialized.

390.     The value of H consists of 2 parts, the Shipbuilding Area and the Industrial/Godown Area of Lot 22 where the expectations for future development potential would be located.”

31.  For the Shipbuilding Area, the Tribunal considered that the owner would be unlikely to accept a price lower than the market value of the shipyard and the purchaser would be prepared to pay such market value on the basis of compensation to be received if the marine access were to be extinguished by reclamation, see §391. Thus, the value would be the same as assessed under Section F(4).

32.  For the Industrial/Godown Area, the Tribunal assessed the mid-stream use at §§393 to 395 and concluded that the unit rate would be the same whether it is by way of marine access or road access. Thus, the Tribunal did not apply any enhancement on account of expectation in the context of Godown use. Instead, premised on the potential Industrial development discussed at Section F(6), the Tribunal adopted a conservative approach with a delay of 8 years and arrived at a present value of $431,135,728 : §§396 to 402.

33.  The calculation for H and its underlying premise were set out at §§403 to 405:

“403. If the CT scheme goes ahead, land will be resumed for road purpose in accordance with the OZP after the marine frontage is resumed and before the Container Terminal Scheme is completed. Therefore, as discussed we will take the 10% rule on the market value of industrial land as the market value for the land resumed. With the industrial land value being $431,135,728 and the net site area for industrial development is 1,143,749 sq.ft. The unit rate per site area for industrial development is $377/sq ft. Based on the 10% rule, the market value for the portion resumed for road is $37.7/sq ft.

404. The value of Lot 22 will be:

(1)	Rental Income		$115,872
(2)	Shipyard $285,000 @ $751.6/sq ft PV in 0.25 yr @ 9.6%		$214,206,000 0.97734 $209,352,092
(3)	Resumption of Land for Road purpose (i) 145,851 sf @ $37.7 (10% of unit rate of Industrial Value), i.e. $431,135,728 (ii) Ex-gratia @ 819.6		$5,498,583   $119,539,480 $125,038,063
(4)	Area zoned GI/C 316,997 @ $377/sq ft Allow 15% for street 75% Value for Industrial Use	$119,507,869 x 0.85 x 0.75	$76,186,266
(5)	Industrial Development (Demolition Costs of canteen & unauthorized structure have been reflected)		$431,135,728
	Total		$841,828,021

405.     Based on the formula stated in §385 above, the value for H is $841,828,021, say $841,828,000.”

34.  Applying a risk factor of 50% and the formula discussed earlier, the Tribunal arrived at a Before Value of $696,492,500.

35.  The Tribunal discussed factors affecting the After Value at Section G. The crucial issue in this respect was whether there should be an assumption that the reclamation had been completed on the date of valuation. The Tribunal agreed with the Applicant and held that such assumption was not mandated by the CFA judgment. It also follows that the Tribunal rejected the Respondent’s contentions that the road link with Lot 22 had been in place at the time of valuation. The Tribunal held that there would be a greater expectation on the CTS going ahead than the Before Situation though there would still be a degree of uncertainty.

36.  In Section H, the Tribunal assessed the After Value. For the Shipbuilding Area, after the land become landlocked, the Tribunal accepted the Applicant’s case that there would be an expectation for that area to be changed to other industrial use with the payment of full premium. By virtue of that, the After Value of that area would be diminished to 10% of its Before Value (see Section H(2) of the judgment).

37.  The Tribunal, like it did in the assessment of the Before Value, adopted the 10% rule on the market value to value the land resumed for road (plus an ex-gratia compensation at the unit rate of $819.60: see Section H(3).

38.  The Tribunal considered that the lot could still be used for mid-stream operation with road access as opposed to marine access, see §462. The same unit rate at $200 per square foot was adopted. In the After Situation, the Tribunal took the view that road access would be available in 6 years’ time and on these bases, the Tribunal arrived at a value of $231,977,000 as the After Value for mid-stream use : see Section H(4).

39.  For the Industrial development scenario, the Tribunal again adopted 6 years’ delay to the similar methodology used in the assessment of the Before Value and it arrived at a After Value for industrial development at $685,540,000: see Section H(5).

40.  Because the After Value for Industrial development is higher than the After Value for midstream operation, the Tribunal concluded that it should adopt the former in calculating the After Value.

41.  The difference between the Before Value and the After Value was therefore assessed by the Tribunal to be $10,925,500.

D.      Grounds of Appeal

D1.    Respondent’s GOAs

D1.1  In CACV 13-14/2015

42.  The Respondent raised 5 grounds of appeal in CACV 13-14/2015.

43.  First, the Tribunal erred in adopting HK$8,049,200 as the demolition cost without any regard for professional fees or developer’s profits which it had found were a part of that cost.  The correct figure should be HK$11,091,798.  (R’s GOA1”)  This concerns the calculation of the Before Value.

44.  As noted already, the Tribunal accepted that is had made the mistake.  So the Applicant rightly did not resist R’s GOA1.

45.  Second, the Tribunal erred in holding that a mid-stream use on the non-shipyard area of Lot 22 as contended by the Applicant was a “godown” use permitted by Special Condition 3(a).  (“R’s GOA2”)

46.  This Ground also concerns the calculation of the Before Value.  If the Tribunal did err as the Respondent submitted, then the valuation of the Tribunal was fundamentally incorrect so far as it relied on godown use.

47.  Third, in calculating the Before Value, the Tribunal erred in including the sum of HK$86,833,904 as compensation which would be paid for the resumption of land within Lot 22 for the purposes of the construction of a new link road, when according to the legal assumption in Lord Hoffmann’s approach that the marine rights continued to exist, there could not be any new road access.  (R’s GOA3”)

48.  In his written submissions, Mr Barnes, QC, for the Respondent, took an entirely different point, which deals with the second before value for mid-stream use, assuming that the Container Terminal Scheme did not go ahead.  As rightly pointed out by Mr Chang, SC, for the Applicant, the Respondent has not obtained leave to argue this point.  We therefore refused to allow Mr Barnes to argue it.  He must confine himself to R’s GOA3 as it was originally pleaded.

49.  The fourth ground of appeal raised by the Respondent also concerns the fourth before value.  Very briefly, the Respondent argued that the fourth before value was a value for a shipyard use over a part of Lot 22 and a value for industrial development over the remainder of the land using the new road for the construction and use of the industrial area.  That was however wrong because under Lord Hoffmann’s approach, if the marine rights remained in existence, the very foundation of the before value, there could and would not be no reclamation and no container terminals and no new road.  The Tribunal therefore erred in taking inconsistent assumptions in that regard.  (R’s GOA4”)

50.  The fifth ground of appeal concerns the After Value.  The Respondent argued that since the Court of Final Appeal had declared that for the After Value, the reclamation must have been completed by 5 Mary 1995, the Tribunal was thus prohibited from speculating as to the timing and uncertainty or the Container Terminal Scheme.  So the Tribunal could not have deferred the industrial development for uncertainty of timing for 6 years as it did.  (R’s GOA5”)

D1.2  In CACV 115-116/2015

51.  The Respondent raised 3 grounds of appeal in CACV 115-116/2015.  They all concern the Before Value.

52.  The first ground of appeal relates to the Tribunal’s valuation of the second before value.  There, the Tribunal attributed a value to the whole of the remaining 1,725,000 sq ft of Lot 22 beyond the 285,000 sq ft shipyard area and attributed that value on the basis that the whole of that remaining area would be for a container storage or godown purpose.  It is however impossible to use a piece of land for the storage of containers or godown purposes and at the same time to use it for ship repairing.  Thus the Tribunal fell into error when it rejected the deduction for the user limited to shipbuilding, which it said was otherwise reasonable and appropriate, on the basis that the 1,725,000 sq ft of the Lot could be used at the same time both for the storage of containers as a godown purpose for ship repairing.  (“R’s GOA6”)

53.  The second ground of appeal relates to the shared quay length.  In arriving at its open storage or its godown value the Tribunal relied on two sets of comparable, viz, the STT Comparable and the KCTL Comparables.  When making adjustments for the STT Comparables the Tribunal made a downward adjustment for quay length because of the difference in quay length between the Lot and the STT Comparables.   But the Tribunal gave no consideration when it came to the KCTL Comparables.  (R’s GOA7”)

54.  Mr Chang complained that R’s GOA7 raised a completely new point.  Before the Tribunal the Respondent had not made any submissions to the effect that any downward adjustment should be made to the KCTL Comparables on account of any alleged deficiency of quay length as they now contend by way of Rs’ GOA7.  Nor had the Respondent’s expert, Mr Mok, given any evidence as to any percentage adjustment to be made to the KCTL Comparables on account of quay length.  And in the Respondent’s closing submissions, the Respondent asserted that any such adjustment should be made to the STT Comparables.  No similar submission was made for the KCTL Comparables.

55.  Though Mr Barnes submitted that the point was raised by him in general in his closing submissions, having read those submissions, we agree with Mr Chang.  We do not think the Respondent is entitled to take this new point for the first time on appeal as had the point been properly taken below, the course of evidence might have been different and we do not have the benefit of the view of the Tribunal on the exercise of its valuation judgment in light of such evidence.  We therefore refused to let Mr Barnes argue R’s GOA7.

56.  The third ground of appeal advanced by the Respondent is on the effect of the sub-tenancy granted by the Applicant to Cheoy Lee.  The Tribunal accepted the Respondent’s contention that any valuation must take account of the fact that a purchaser would need to determine the sub-lease by giving a 3-month notice, and could not commence his use of the land until it had been done.  Yet in determining the first and second before values, the Tribunal had ignored the effect of the sub-tenancy altogether.  (“R’s GOA8”)

D2.    As’ GOAs

D2.1  In CACV 15-16/2015

57.  The Applicant raised two grounds of appeal.

58.  The first ground of appeal concerns the After Value.  Essentially, it contends that the Tribunal having found that there was 50% uncertainty in the Container Terminal Scheme going ahead in the Before Value situation, ought to have found that there was at least an equivalent of uncertainty of 50% in the After Value situation. (“A’s GOA1”)

59.  The third and fourth grounds of appeal[8] concern the Before Value.  They relate to the Applicant’s Scenario 3.  Very briefly, they complain that the Tribunal erred in failing to give due regard to the consideration that from the valuation date of 5 May 1995 onwards Lot 22 would have, starting at some date in the near future, an access by road as well as access by sea through its uses and activities could be conducted.  (“A’s GOA3&4”)

D2.2  In CACV 119-120/2015

60.  The Applicant raised only one ground of appeal, which concerns the valuation of shipyard use in the Before Value situation.  It complains that the Tribunal erred when in dealing with the NKML Comparables it first made the time adjustment and thereafter the lease-term adjustment; when the correct order should be the other way round.  (A’s GOA5”)

D3     Grouping the GOAs together

61.  It can be readily seen that the parties’ grounds of appeal fall into two broad categories of Before Value and After Value respectively.  And some grounds of appeal raise similar issues and touch upon similar subject matters too.  So for our discussion below, we will group and divide the grounds of appeal as follows.

62.  The Main Issues:

R’s GOAs3, 4 and 5 and A’s GOAs1, 3&4.  They all relate to the proper assumptions and expectations under the CFA’s approach for valuation.

63.  Miscellaneous points on the Before Value:

(1)  R’s GOA2 on the question whether godown for mid-stream operation is permissible under Special Condition 3(a).  It is a question of construction.

(2)  R’s GOA6 and A’s GOA5.  They all concern valuation of the shipyard use.

(3)  R’s GOA8 on the effect of sub-tenancy.

(4)  R’s GOA1 on demolition costs, which as noted, is unopposed.

E.      The Main Issues

E1.    Assumptions and expectations under the CFA’s approach

64.  As we shall discuss below, the resolution of the main issues in these appeals depends very much on the correct understanding of the CFA judgment, in particular the application of the CFA’s observations on expectations to the facts of the present case.

65.  We have set out the relevant paragraphs in the CFA judgment at Section B4 above. These paragraphs were at the forefront of the debate between Mr Chang SC and Mr Barnes QC.  For present purposes, the judgment of Lord Hoffmann directed the Tribunal to assess the compensation in the context of the FSRO according to these principles:

(1)  The injurious affection is deemed to have occurred on the date of authorization, which shall also be the date of valuation;

(2)  The compensation is the difference between the open market value of land in actual enjoyment of its marine rights and its open market value when deprived de facto as well as de jure of its access to the sea;

(3)  The open market values are to be assessed by reference to a price which the property would have fetched on a sale between a willing seller and a willing purchaser on the date of valuation. What happened afterwards could not affect the valuation;

(4)  At the same time, prevailing expectations on that date about future which would, as a matter of reality, have influenced the price at the hypothetical sale should be taken into account;

(5)  Whether such expectations existed and the extent, if any, to which they would have affected the open market value of the land is a matter for evidence;

(6)  Such expectations could embrace prospects of new uses for the land and the resultant increase in the values of the land both with and without access to the sea. The significance of the marine access may vary in respect of different uses;

(7)  The valuations must take into account all the information which was public knowledge at the date of valuation and (apart from assumptions about marine rights) be in accordance with reality instead of basing on any artificial assumptions.

66.  In reading the CFA judgment, it has to be borne in mind that at that stage the evidence on valuation was not before the court.  Thus, the CFA could not (and did not) form any view on what would be the expectations in the market at the date of valuation.  The CFA did not consider the uncertainty element in such expectations and it did not have expert evidence on the formula (such as the one eventually adopted by the Tribunal in the present case) to take account of such uncertainty in arriving at the market values in the hypothetical sales. The issue before the CFA was how in broad principle the compensation for injurious affection should be quantified when in reality the reclamation might not have been carried out at the date of valuation.  The CFA held that the measure of compensation is the difference between the open market value of land in actual enjoyment of its marine rights and its open market value when deprived de facto as well as de jure of its access to the sea.

67.  The principal disagreements between counsel are as follows:

(1)  Whether the deemed accrual of injurious affection imply that the proposed reclamation had physically been completed on the date of valuation;

(2)  Whether the expectations could be different for the valuations of the  Before Value and the After Value;

(3)  Whether the risk or uncertainty factor on the expected new use can vary as a matter of law as between the valuation of the land with marine rights and the valuation of the land without marine rights.

68.  We shall address these issues before we turn to the specific grounds of appeal because they have direct impacts on the resolution of the specific grounds of appeal.

69.  On the first question, viz, assumption of physical reclamation on the date of completion, Mr Barnes submitted that the CFA judgment, in particular the declarations of the CFA required the valuation for the After Value be conducted on the basis that on the valuation date the reclamation had been completed physically instead of its legal authorization being completed with the certainty that it would be executed in the future. The Tribunal rejected Mr Barne’s submissions and adopted the latter position : see §§412 to 418 of the judgment.

70.  With respect, we agree with Mr Barnes that the Tribunal erred in so holding.

71.  Apart from the wordings of declaration (b) at §47 (“on the assumption that access to the sea had been lawfully interrupted by the completion of the proposed reclamation”), counsel referred to the following parts of the CFA judgment to support his submission:

(1)  The rejection of the then submission of Mr Barnes that Section 12 referred to a reclamation in the future at §38 of the judgment of Lord Hoffmann and the endorsement of the observation of Rogers V-P to the effect that the reclamation was the physical process as opposed to the legal authorization for the reclamation. Lord Hoffmann further observed that extinguishment of rights by publication of the authorization could not be a ground for recovery of compensation under section 12 of the FSRO;

(2)  At §41 of the CFA judgment, at the last few paragraphs where Lord Hoffmann clearly drew a distinction between the authorization for reclamation and the reclamation taking place in the context of the statutory scheme of FSRO.  It was in such context, Lord Hoffmann said at the beginning of §42 that the reclamation is treated as having taken place on the date of publication of the authorization and referred to the de facto as well as de jure deprivation of access to the sea;

(3)  And it was in such context that Lord Hoffmann referred to the approach of the Chief Justice in Re Award of Compensation to Owners of Kowloon Marine Lots 29, 30, 31 and the assumption that the reclamation had taken place.

72.  In the CFA judgment, Lord Hoffmann held that as the scheme of FSRO requires a claim to be made within one year from the publication of the authorization, the injurious affection must be deemed to have accrued on the date of authorization. Because the injurious affection stems from physical reclamation as opposed to the publication of authorization (as explained by his Lordship in the paragraphs alluded above), the necessary assumption is that physical reclamation had taken place on the date of authorization, with the effect of de facto as well as de jure deprivation of access to the sea on that date, which is also the date of valuation.

73.  However, this is only a legal assumption to give effect to the accrual of the right to lodge a claim.  Thus, Lord Hoffmann referred to “reclamation treated as having taken place” and “assumed to have taken place” at §42.  It does not follow that this legal assumption would affect the expectation in the hypothetical sales. Lord Hoffmann was at pains to stress that expectations about the future which might impact on the open market value is a matter for evidence at §44:

“Whether such expectations existed and the extent, if any, to which they would have affected the open market value of the land is a matter for evidence when the valuation comes to be done. But if they did exist and would, as a matter of reality, have affected the price which the land would have fetched, they cannot be ignored.”

74.  This passage was reiterated by Ribeiro PJ at §10 in the CFA Costs Judgment.

75.  This brings us to the second question, whether the expectations could be different for the 2 scenarios.  We should point out at this stage that it can be misleading to refer to the 2 market values as the Before Value and the After Value though for convenience sake (as the Tribunal had adopted the same) we shall continue to adopt these expressions in this judgment.  At §42 of the CFA judgment, Lord Hoffmann held that the compensation is the difference between the open market value of land in actual enjoyment of its marine rights and its open market value when deprived  de facto as well as de jure of its access to the sea.  There was no reference to a Before Situation or an After Situation.  In our view, it is more accurate to refer to the 2 market values as value of the land with marine rights and value of the land without marine rights.  It is the valuations of the same piece of land with the same physical attributes and characteristics and subject to the same legal constraints on its use other than the marine rights.  It is to be valued by reference to the same prevailing market conditions (instead of market conditions at 2 different points in time, one “Before” and the other “After” the reclamation).  The only difference which Lord Hoffmann postulated is that one valuation must proceed on the basis that the land has marine rights whilst the other valuation shall proceed on the basis that the land does not have any marine rights.  If one goes back to the purpose of the exercise, viz, the valuation of the marine rights, the measure of compensation postulated by Lord Hoffmann must be applied on the basis that apart from such difference, all other things remain equal.  The adoption of an approach other than this would not be an accurate measure of the value of the marine rights as further variables will be introduced into the equation.

76.  In principle, with the same prevailing market condition, the expectation in the market on potential future use of the land should be the same.  Further, since the existence and impact of such expectation is a matter of evidence, it should not be affected by the legal assumption of reclamation having taken place when in reality it has not.  As submitted by Mr Chang, a potential purchaser on 5 May 1995 would be aware that there were uncertainties on the CT 10 irrespective of such legal assumption.  At §46, Lord Hoffmann stressed that the valuations must take account of all information in the public knowledge at that time instead of basing them on any artificial assumptions.

77.  When Lord Hoffmann referred to the expectations about the future, it is noteworthy that his Lordship referred to the expectations on the valuation date, not expectations based on events that happened after that date. And such expectations could, as highlighted at §44, be right or wrong.  But because the expectations would affect the hypothetical sale on the valuation date, they should be taken into account. At that paragraph, Lord Hoffmann did not draw a distinction between the expectations for the land with marine rights and the land without marine rights.

78.  Further, as highlighted by Mr Chang, the Court of Final Appeal had emphasised that the prospect of new uses for the land would affect the valuations of the land with marine access and the land without marine access : see §45 of the CFA judgment and §8 to 9 of the CFA Costs Judgment. In the context of the FSRO, the compensation is not the market value of the land itself (because the owner is not deprived of the land) but the difference in values between the land with marine rights and the land without such rights. The relevance in such context of the prospect of new uses was set out by Lord Hoffmann at §45:

“It is however important to bear in mind that such access, while obviously vital to sustain the value of the land as a shipyard, may have played little part in its value for uses which would be served by the anticipated new access by road. If, therefore, the price which the land would have fetched would have been heavily influenced by the prospect of a new use rather than a continuation of the shipbuilding business, the difference between such value with access to the sea and without may not have been very substantial.”

79.  Again Lord Hoffmann did not allude to different prospects of new use for the two scenarios.  Instead, the crucial question is to assess the difference in the market values of the land with and without marine rights taking into account the same prospect of a new use.

80.  The third question is actually an extension of the second question.  Though the Court of Final Appeal did not address the uncertainty/risk factor to reflect the prospect of new use in the market values in the hypothetical sale, as a matter of principle, as we are referring to a comparison based on the same prevailing market condition, the uncertainty/risk factor should be the same in terms of the land with marine rights and the land without marine rights.  By the same token, the legal assumption of the reclamation having been physically completed, which remained as an assumption, should not affect the assessment of the uncertainty/risk factor in the expectation in the real world for the purpose of working out the market values in the hypothetical sale.

81.  We now turn to deal with the specific grounds of appeal.

E2.    A’s GOA 1: different uncertainty/risk factor adopted by the Tribunal and R’s GOA 5: 6 years’ deferment for the After Value

82.  The Tribunal adopted the uncertainty/risk factor R of 0.5 in its application of the formula P = [(H – L) x R] + L in assessing the Before Value : see §§406 and 407 of its judgment.  Further, it took a conservative approach and applied a deferment period of 8 years in calculation of the value for industrial use: see §§401 and 402.

83.  However, when it came to assess the After Value, the Tribunal was greatly influenced by the greater prospect of the reclamation going ahead.  By reason of that, it held that there would be a higher expectation that CT10 would go ahead though there was still a degree of uncertainty.  In terms of figures, the Tribunal did not apply any uncertainty/risk factor and simply adopted a 90% diminution of the shipyard value, compensation for road resumption, value of area zoned G/IC plus the value of the lot for industrial development (with reference to a deferment period of 6 years) as the After Value : see §§474 to 479.

84.  Mr Chang submitted that the Tribunal effectively adopted an uncertainty/risk factor of 1 in the assessment of the After Value.  This is demonstrably correct and not disputed by Mr Barnes.

85.  However, Mr Barnes submitted that the Tribunal was entitled to adopt a different uncertainty/risk factor in view of the different valuation assumptions for the After Value.  In this respect, Mr Barnes went further and submitted that by reason of the assumption of reclamation having been physically completed on the date of valuation, there should not be 6 years’ deferment.  Though he would accept a 4 years’ deferment, counsel properly accepted that he could not say that the Tribunal would necessarily agree even on the footing the reclamation had physically completed on the date of valuation.  As the Tribunal did not assess the deferment period on the correct basis, though it could not be as high as 6 years, Mr Barnes invited this court to remit the matter to the Tribunal for assessment on a correct basis.

86.  We cannot accept this submission.  As explained above, the legal assumption that the reclamation had been physically completed does not have any bearing on the assessment of expectations in the real world. In our judgment, as the Court of Final Appeal observed repeatedly, the existence and the extent to which they affected the market values in the hypothetical sale is a matter of evidence, to be assessed by reference to reality rather than a matter of artificial assumptions.

87.  Based on the public information available on the date of valuation, the Tribunal came to the finding that the landowner and the potential purchaser would have an expectation that CT10 and its associate road scheme would proceed.  At the same time, the Tribunal found that there is a risk of uncertainty in light of the delay in the sale of CT9 and the dispute between the mainland Government and the Hong Kong government and quantified the same as a 50% uncertainty/risk factor.

88.  We have no reason to disturb these findings.  Later on, in the context of the discussion on the After Value, the reasons given by the Tribunal for a different uncertainty/risk factor were all attributable to the legal assumption on reclamation.  Though the Tribunal had mistakenly regarded that assumption as an assumption on the certainty of reclamation going to take place (as opposed to its physically having taken place), it was still basing its assessment of expectation on a legal fiction as opposed to the real life situation as at 5 May 1995. Thus, the Tribunal committed the same error as the submissions of Mr Barnes did in this respect.

89.  Hence, whilst we agree with Mr Barnes on the legal assumption as to the physical completion of reclamation, we do not agree with him that this would result in the reduction of deferment in respect of the valuation of the market value for the land without marine rights.  His GOA5 cannot achieve the result he wishes to achieve.

90.  The fallacy in the analysis of Mr Barnes and the Tribunal, in our judgment, stems from the drawing of a nexus between the reclamation (resulting in the increase of prospect of CT10) and the character of the land as a piece of land without marine rights.  We do not think this is justified.  Lord Hoffmann’s formulation of the measure of compensation did not require such nexus to be drawn.  As a matter of reality, such nexus could not be drawn since on 5 May 1995 the reclamation had not taken place.  Thus, if there were expectations in the market that the scheme associated with CT 10 proceeding which have an effect on the hypothetical sale, such expectations were not attributable to the reclamation having taken place or were certain to take place.

91.  We therefore agree with Mr Chang that the Tribunal erred in adopting a different uncertainty/risk factor for the After Value. We shall discuss the implications flowing from this conclusion later.

E3.    R’s GOA 3&4: inconsistencies in the assessment of the Before Value

92.  We can now come to Mr Barnes’ submission that the enhancement value given by the Tribunal to the Before Value was flawed as it is subject to internal inconsistency.  In a nutshell, counsel’s argument is that for the Before Value, the land had marine rights for the rest of the lease period and the necessary implication is that CT10 could not proceed.  Therefore there could not be any road access associated with the CT10 scheme and the scenario based on industrial development (for which the Tribunal found road access to be essential : see §370 of the judgment) and there is no evidence of any expected road access independent from the CT10.  Thus the assessment of H by the Tribunal based on industrial development at §404 is contradictory to the assumption of marine rights.

93.  It is correct that the enhancement value and the assessment of H by the Tribunal were based on availability of road access.  Such valuation is apparently inconsistent with the underlying premise for the base figure (the 2^nd Before Value) which was assessed with the assumption that the land shall have marine rights for the rest of the lease period.

94.  However, it should be remembered that H was to be derived from the expectation in the market that the land could be put to a new use.  If the expectations in the market at the valuation date were that the land would have road access and the optimum land use would be industrial development (as found by the Tribunal to be the case), the valuation of H should be conducted on such bases in order to give effect to such expectation (though discounted by a uncertainty/risk factor, built into the formula for the final figure for Before Value).

95.  The crucial issue is whether it is permissible to take account of an expectation which is inconsistent with the land having marine access for the rest of the lease period since in the Before Value the land is to be valued on the latter basis.  Mr Barnes submitted that the assumptions of marine access and the physical reclamation should dictate different expectations for the Before and the After scenarios.

96.  We have already explained why in principle the two scenarios should be valued on the same set of expectations.  With respect, we do not read the CFA judgment as requiring a distorted comparison to be made.  The CFA had stressed that the expectations are to be assessed as a matter of reality based on evidence and they should be applied to both sides of the ledger.

97.  The above analysis should be obviously correct if the expectations are derived from expected developments not related to the extinguishment of marine access by reclamation.  But we see no difference in principle when the expectations, as found by the Tribunal to be so in the present case, were generated by expected CT10 scheme.

98.  Although Mr Chang also advocated a continuation of marine access for the rest of the lease period (in advocating his GOA 3 and 4, which we shall address below), we are of the view that the CFA judgment did not require such assumption to be made in giving effect to expectations.  This is clear from the example of expectation given by Lord Hoffmann at §46 of the judgment commenting on the huge difference in values based on shipbuilding use:

“But the huge difference in values suggests the possibility that it was made on the assumption that the alternative to ship building was the prospect of the land being confined to permanent agricultural use, without taking into account the expectations which would have been created by the announcement of the container terminal scheme.” (our emphasis)

99.  Whilst Lord Hoffmann did refer to the assumptions about marine rights at the next sentence when he alluded to the need to conduct the valuations based on public knowledge at the time rather than artificial assumptions, we do not read that reference to such assumption as enjoining the Tribunal from taking into account expectations in the market in respect of a use which would entail the extinguishment of marine rights.  In our judgment, the assumption of marine rights only mean that the valuation of the Before Value should be conducted on the basis that the land enjoyed marine rights at the date of valuation.  It does not require the land to continue with such rights throughout the terms of the lease if the evidence is that there are market expectations of a higher value for the land if the marine rights were to be exchanged (not surrendered as postulated under the 3^rd Before Value) to facilitate another land use and a hypothetical sale of the land with marine rights on the date of valuation would capture such a market value.

100.  So understood, the Before Value assessed by the Tribunal is not a valuation of the land without marine rights.  The formula adopted a base figure L which was valued by the Tribunal by reference to the use of the land with marine rights. Whilst the valuation of H was based on expectations (which, as we held, should be common to both scenarios) premised on the extinguishment of marine rights in the future, it functions only as a premium or enhanced value to be placed on L with the appropriate discount on account of uncertainty.

101.  For the After Value, if one were to apply the same formula to the same set of expectations and uncertainty/risk factor, one would have to start with a much lower L.  In the present case, it was suggested that the value of land without marine access would only be 10% of the land with marine access based on shipyard use. Thus, even after expectations are taken into account, there would still be a difference between the value of the land with marine rights and the value of the land without marine rights.

102.  If H is much higher than L and the uncertainty/risk is low (thus a high probability of the expectations to become reality), it is possible that the difference would become very small.  There may even be a situation where the difference is completely removed. But this is only because the real optimal use of the land (as expected in the market and reflected in the hypothetical sale) does not depend on marine rights and its extinguishment would not result in injurious affection to the land.

103.  In theory, it is also possible for a higher H to be achieved for land with marine rights as compared with land without marine rights based on the same set of expectations provided the expectations are consistent with such parameters. In that case, the compensation would become larger. However, there is simply no such evidence in the present case because the only expectations supported by evidence before the Tribunal were expectations stemming from the CT 10 scheme which required the extinguishment of marine rights.  In other words, there were only expectations that the land would have land access (which is sufficient for the purpose of the industrial development assessed by the Tribunal under H). There was no expectation that the land would have both marine and land access.

104.  There is thus no internal inconsistency in the assessment of H on a different underlying basis from that for the assessment of the 2^nd Before Value. There is also no internal inconsistency in the Tribunal’s assessment of H by including a value for the land occupied by Shipyard. Under the assessment of H, it can be seen from the Tribunal’s explanation at §391for that part of the value that it was proceeding on the basis that the marine rights would be extinguished:

“391. Regarding the shipyard value, both the land owner and the prospective purchaser understood that the marine access would be resumed soon if the Container Terminal Scheme were implemented. However, the owner is unlikely to accept a price lower than the market value of the shipyard and we believe that the prospective purchaser would still be prepared to pay $751.60/sq ft as the market value of the shipyard (the value we assessed at Section F.(4) above) since this would be compensated in any event if the marine access is lost upon reclamation.”

105.  Mr Barnes submitted that assessment of value on the basis that compensation would be obtained for the loss of marine rights was impermissible. With respect, if that is how the market would value the land based on the relevant prevailing market expectations, we cannot find any reason in principle to pre-empt the approach adopted by the Tribunal. Once it is accepted that the CFA judgment does not require the marine rights to continue to exist throughout the term of the lease irrespective of the market conditions, there is no reason why there could not be an expected use based on such marine rights being transformed into something else (like compensation for the loss of the same) when commercially speaking such change would achieve a higher value for the land.

106.  Mr Barnes further submitted that it was inconsistent for the Tribunal to reject the contention of voluntary surrender of marine rights (§§25 to 29 of the judgment) and at the same time adopted the compensation for marine right in assessing H. We agree that the reasons given by the Tribunal to reject the voluntary surrender contention in those paragraphs may not be comprehensive enough. However, the Tribunal did carry out a valuation based on voluntary surrender scenario and came to a finding in terms of the 3^rd Before Value which is lower than the 1^st and 2^nd Before Value. As a result, the 2^nd Before Value was adopted as L and no reliance was placed on the 3^rd Before Value.

107.  Given that the 3^rd Before Value is much lower than H assessed by reference to compensation being received for the extinguishment of the marine rights associated with the shipyard, the Tribunal is correct after all in concluding that it would be artificial to adopt the voluntary surrender scenario as the basis for assessing the Before Value, whether by way of L or by way of H since it is simply unrealistic to suggest a willing seller will accept such a low offer in the hypothetical sale.  To put it simply, choosing between the extinguishment of marine rights with compensation and a voluntary surrender, there is no reason why the willing seller would choose the latter option.  Also the Tribunal is correct in holding that, unlike the valuation of H, the voluntary surrender option implies that the land is without marine rights on the date of valuation. As explained above, this is not the approach of the Tribunal in the assessment of H. Hence, quite properly, the Respondent had not appealed against the rejection of the voluntary surrender scenario. Reading the Tribunal’s judgment as a whole, we do not think there is any inconsistency between the rejection of the voluntary surrender scenario and its assessment of H.

108.  For these reasons we reject R’s GOAs3 and 4.

E4.    A’s GOAs3&4

109.  Mr Chang submitted that the Tribunal should adopt Scenario 3 put forward by the Applicant’s expert in the Before Value. In short, in addition to the scenario at H as assessed by the Tribunal, the land should have both marine rights and road access.

110.  It cannot be disputed that Scenario 3 cannot exist in the real world. The land as it was with marine rights did not have road access. Thus, to achieve such a value, it has to be done by way of expectations to such effect.

111.  We have no hesitation in rejecting this scenario because as we said earlier, there is no evidential basis for such expectations.  The only expectations in the market on the date of valuation were expectations of the land having road access without marine rights. There was no evidence to support any expectation that the land would enjoy both road access and marine access. The Tribunal quite rightly did not make any finding that such unrealistic expectation existed. Thus, there was simply no basis for suggesting that the hypothetical purchaser would make an offer on that basis by reason of expectations.

112.  In effect, Mr Chang’s Scenario 3 is an attempt to recover compensation for injurious affection to something which the Applicant never had and never could have: land with both road access and marine access. In this connection, though the following observation by Lord Nicholls on the principle of equivalence was made in another context in Shun Fung Ironwork v Director of Lands [1995] 2 AC 111 at p.125, with modifications we believe it is also apposite in the context of compensation under the FSRO:

“The purpose of these provisions, in Hong Kong and England, is to provide fair compensation for a claimant … This is sometimes described as the principle of equivalence. … a claimant is entitled to be compensated fairly and fully for his loss. Conversely, and built into the concept of fair compensation, is the corollary that a claimant is not entitled to receive more than fair compensation: a person is entitled to compensation for losses fairly attributable to the taking of his land, but not to any greater amount. It is ultimately by this touchstone, with its two facets, that all claims for compensation succeed or fail.”

113.  We do not believe Lord Hoffmann intended to depart from such fundamental precept in compensation for compulsory acquisition/ extinguishment of rights.  For reasons already canvassed, we do not read the CFA judgment as having such effect.

114.  Mr Chang submitted that the compensation should compensate for the loss of marine rights for 52 years and there was also a risk that CT 10 scheme would not be implemented. However, the base figure, viz L assessed by reference to the 2^nd Before Value, already represented the value of the land with marine rights for 52 years. On the enhancement arising from expectations, there is no basis for adding a premium on the enhancement for a scenario when the expectations were only in respect of road access upon extinguishment of marine access.

115.  For these reasons, we reject A’s GOAs 3 &4.

116.  We next turn to the miscellaneous points on the Before Value.

F.       Miscellaneous points on Before Value

F1.    R’s GOA2 – Godown for mid-stream operation under Special Condition 3(a)

117.  It is common ground between the parties that mid-stream operation involved the bringing in of containers (filled or empty) onto Lot 22 by barges and when they are needed, to be taken away by barges to its destination or onto going vessels.  Containers coming in from international waters, predominantly empty ones, could be barged to Lot 22, stored there until needed and then barged up the Pearl River Delta to the factories in the Mainland where they would then be filled.  Containers, after being filled in the Mainland, could be sorted and consolidated at Lot 22, and then be barged at the convenient and appropriate time to the large ocean going vessels destined for international waters.  While on Lot 22, the containers (filled or empty) would be placed in open space and not in a warehouse or building.

118.  The question is whether or not such mid-stream operation falls within the permitted use under Special Condition 3(a), which relevantly provided that Lot 22 “shall be used for general industrial and/or godown purposes” while “no less than 285,000 sq. ft. of the lot shall be used for shipbuilding purposes only”.  If the mid-stream operation is not a permitted “godown” use under Special Condition 3(a), subject to arguments on “general industrial purposes”, no value could be attributed to it.  It depends on a proper construction of Special Condition 3(a).

119.  Citing various authorities, including Cavendish Property Development Ltd v The Attorney General, HCMP 762/1987, unreported, 6 August 1988, the Applicant argued that “godown purposes” under Special Condition 3(a) plainly covered mid-stream operation.  The Respondent argued that the “godown” involved two essential elements, viz, (a) a warehouse or some storage building and (b) the use of the building must be for storage and not other purposes, citing some other authorities in support.  In the end, for the reasons set out at §§40 – 68 of its judgment, the Tribunal rejected the Respondent’s argument.

120.  Before us, Mr Barnes and Mr Chang basically rehearsed their arguments run before the Tribunal.  Though this court had raised questions relating to “general industrial purposes”, counsel agreed that such questions should be remitted to the Tribunal if we agree with Mr Barnes on the construction of “godown purposes”.

121.  Although Special Condition 3(a) has to be construed in the entire context of the Grant, Mr Barnes acknowledged that nothing much could be derived from other provisions on the meaning of “godown”.  He therefore did not rely on or even refer to other provisions in the Grant.  Neither did Mr Chang.  So the convenient starting point to ascertain the meaning of “godown” in Special Condition 3(a) is its dictionary meaning.

122.  In the Shorter Oxford English Dictionary, 6^th Edition, the word “godown” is said to be of Malay or Portuguese origin.  It is defined to mean: “In the Indian subcontinent and other parts of eastern Asia: a warehouse or store for goods.”  The word “warehouse” is in turn defined as “a building or part of a building for the storage of retail goods, furniture, etc”.  Black’s Law Dictionary, 9^th Edition, defines the word “store” as “a place where goods or supplies are stored for future use; a warehouse”.  As we understand counsel’s submissions, the dictionary meaning of the word “store” does not add much to the meaning of the word “godown”.  The ultimate questions are:

(1)  whether “godown” must involve a building, as a warehouse does; and

(2)  what constitutes storage for the purpose of a godown use.

123.  On (1), Mr Barnes submitted that as contemplated by the dictionary meaning, a godown use will be within a warehouse and a warehouse is a building or part of a building.  It does not cover open storage as is the case of mid-stream operation.  As a matter of plain and ordinary English, we think Mr Barnes must be right.

124.  The Tribunal relied on Cavendish, and so did Mr Chang, to support the construction that a “godown” could be under-cover or in the open.  In Cavendish, the owner of the Cavendish Centre sought a declaration that the use by its tenant of the leased premises as a data processing centre for banking was not in contravention of the permitted use under the relevant Special Condition of the Grant.  That Special Condition, which the Respondent accepted, substantially mirrored Special Condition 3(a) in the present case, stipulated that the premises were not to be used for a purpose “other than for industrial or godown purposes or both”.  For the reasons that he gave, Liu J (as he then was) rejected the owner’s argument.

125.  The Tribunal at §63 of its judgment said that Liu J had made three findings:

(a)   a godown is a place where at least movement of the stored items would be expected (at page 6);

(b)  storage of goods in a godown has attendant consequences, eg, transient deposit, storage for the purpose of sale or delivery or for some other commercial purpose, of goods either of your own or your customer’s (at page 9);

(c)   storage without more is not godown use or warehouse purpose (at page 10).

126.  The Tribunal then found at §64 that Cavendish is directly on the point.  It went on to say at §65 that the three criteria identified by Liu J were all satisfied in mid-stream operation.  In so doing, the Tribunal proceeded on the basis that when Liu J in (a) referred to “a place” as a godown, he must have decided that a godown did not necessarily involve any building.  With respect, we do not think Liu J had so decided.

127.  On the facts of Cavendish, there was a building, viz, Cavendish Centre.  The only issue was whether using the leased premises of the Centre as a data processing centre contravened the relevant Special Condition.  The thrust of the parties’ submissions and the tenor of Liu J’s judgment all concerned such usage.  Whether a godown must involve a building was simply not an issue at all.  As we understand his judgment, Liu J’s reference to “a place” as a godown is only descriptive.  He had not decided that on a proper construction of the relevant Special Condition, a godown does not necessarily involve any building.  With respect, the Tribunal had erred in this respect.

128.  In our view, on a proper construction of Special Condition 3(a), a “godown” must involve a building or part of a building.  It does not cover storage in the open, as Mr Chang contended.

129.  This is sufficient to dispose of the proper construction of Special Condition 3(a) in this appeal and hence R’s GOA2.  For completeness, we would very briefly deal with Mr Barnes’s submissions on what constitutes storage for “godown purposes” under Special Condition 3(a).

130.  Mr Barnes submitted that the purpose of putting the containers on Lot 22 would not be to store them there on occasions on which they are not needed elsewhere but simply to place or keep them there as part of their total transit.  The containers are not stored there for future use; they are kept there as part of their existing use which is their transit from point A to point B, both points of which are elsewhere.  With respect, such a meaning of “storage” is too restrictive.  Under the mid-stream operation, after the containers arrive at Lot 22, they would be placed there until needed.  When they are not needed or when they are not ready for transit yet, they would remain there.  While sitting on the Lot waiting for transit at some time in the future, they are being stored there.

131.  To conclude, the valuation of the Tribunal on the Before Value is fundamentally incorrect insofar as it relied on godown use.  This brings us to the next major components of the 2^nd Before Value, the shipyard value over the Shipbuilding Area.

F2.    R’s GOA6 & A’s GOA5 – Valuation of the shipyard use

132.  The first point is taken by Mr Barnes.

133.  The Tribunal at §345 of its judgment attributed a shipyard value of HK$212,406,000 over the Shipbuilding Area.  It was agreed between the parties that the shipyard value should be derived from 7 comparables known as the NKML Comparables.  They were grants of leases of shipyards for 15 years in September 1993.  The main issue between the parties was on the adjustments based on these comparables.  One of the 9 factors that the Tribunal took into account was the “user” factor.

134.  Under Special Condition 3(a), the Shipbuilding Area could only be used for shipbuilding purposes and not for ship repairing.  Under all the comparables, the land could be used for shipbuilding or for ship repairing.  The Respondent’s expert, Mr Mok, therefore opined that a downward adjustment of 20% should be made.  The Tribunal however disagreed.  It took the view that Mr Mok had misinterpreted the user clause of the lease and assumed that ship repairing could not be used on the remaining portion of Lot 22, via the Industrial/Godown Area, when such use fell within “industrial use”.  It would be reasonable to make the 20% downward adjustment, the Tribunal reasoned, but for the fact that the Industrial/Godown Area could also be used for ship repairing purposes, the effect on the user restriction on the Shipbuilding Area being eliminated.

135.  Mr Barnes submitted that there is a fundamental error in the Tribunal’s reasoning, which is this.  In the 2^nd Before Value, the Tribunal attributed a value to the whole of the Industrial/Godown Area on the basis that the whole of the Area would be for a container storage or godown purpose.  It is obviously impossible to use a piece of land for the storage of containers of godown purposes and at the same time to use it for ship repairing, as the Tribunal had reasoned.  This was a physical and logical impossibility, Mr Barnes complained.  We agree with Mr Barnes.

136.  Mr Chang submitted that the Industrial/Godown Area was huge in size and part of it could, if necessary, be set aside and used, to the minimum area limited to shipbuilding purposes, for both shipbuilding and ship repairing, a possibility that the Tribunal recognized: see its decision on leave applications at §§51 – 53.  When the shipyard rate was according to the Tribunal’s findings the highest among all other uses, and there was demand for more space by larger shipyards, to achieve the highest value of the Lot as a whole, the landowner would not have confined himself to using only the minimum 285,500 sq. ft. for a shipyard if this would have attracted a lower value for that portion of the land.  Since the Tribunal had valued the godown for mid-stream rate at only HK$200 psf, far below the rate for shipyard use, increasing the aggregate area for shipyard use at the expense of reducing relatively slightly the godown for mid-stream use would not result in less compensation.  With respect, we do not agree with Mr Chang.

137.  The possibility that the landowner might wish to use part of the Industrial/Godown Area for ship repairing purposes was never mentioned in the Tribunal’s reasoning in refusing the 20% downward adjustment.  If such possibility were relied on, in principle, there should be a corresponding adjustment on the area in the Industrial/Godown Area designated for the shipyard use, which might result in adjustment on its value.  At the same time, there would still be adjustment to the value of the Shipbuilding Area on account of its limited use for shipbuilding.  But the Tribunal made no such adjustments.  Absent such adjustments, the internal inconsistency and impossibility identified by Mr Barnes remains unresolved.

138.  The second point on shipyard value is taken by Mr Chang.

139.  As said, the parties agreed to use the NKML Comparables.  The hypothetical transaction needed to determine the Shipbuilding Area was the sale of a 52-year lease at May 1995.  Two adjustments had to be made to the value derived from the Comparables, one for the time difference (between September 1993 and May 1995) and the other for yield based on the length of the leases (between 15 years and 52 years).  The Tribunal at §161 of its judgment preferred to make the time adjustment first and then the yield adjustment.

140.  Mr Chang submitted that the Tribunal ought to have applied the yield adjustment first and then the time adjustment.  With respect, the order of applying the adjustment is eminently a matter of valuation by the Tribunal exercising its expertise and judgment.  We can see no basis to intervene.

F3.    R’s GOA8 – Effect of sub-tenancy

141.  The Tribunal did not take account of the time required for the termination of the tenancy of Cheoy Lee in the assessment of the 1^st and 2^nd Before Value. For our purposes, the material one is the 2^nd Before Value. The Tribunal acknowledged that the sub-tenancy had to be taken into account at §132 of the judgment. Mr Chang did not dispute the proposition advanced by Mr Barnes that in assessing compensation it has to be assumed that a tenancy determinable by notice would be determined at the earliest date on which it could be determined by a notice given on the valuation date (see Minister of Transport v Pettitt (1969) 20 P &CR 344 at 355, 359; Bishopsgate Space Management Ltd v London Underground Ltd [2004] 2 EGLR 175 at [63]-[77].

142.  In the assessment of the 2^nd Before Value, the Tribunal did not include the three months’ rent and did not make any deferment of the shipyard and go-down values on account of the three months required to terminate the sub-tenancy. Mr Barnes submitted that this is an error of law: the Tribunal failed to take account of a relevant consideration in assessing the 2^nd Before Value. Counsel submitted that the net effect of such deferments and rental income would reduce the 2^nd Before Value to $535,375,872.

143.  Mr Chang resisted this ground of appeal by relying on the evidence of the Applicant’s expert that the 3 months’ notice could coincide with the usual period for completing a sale and purchase agreement, thus vacant possession can be given on the date of completion.

144.  With respect, this was not the reason given by the Tribunal for not making the three months’ deferments. On the contrary, the Tribunal actually assessed rental income for 3 months in other scenarios and it would appear from §132 that the Tribunal did not accept the evidence of the Applicant’s expert that the tenancy was immaterial.

145.  Further, we do not see any basis for suggesting the completion period could absorb the 3 months’ deferments since the valuation date is the date of the sale and the Tribunal’s valuations of the shipyard as well as go-down uses commenced from that date.

146.  We agree with Mr Barnes that the 2^nd Before Value, viz L, should be adjusted in the manner suggested by counsel to take account of the Cheoy Lee sub-tenancy.

F4.    R’s GOA1 – Demolition cost

147.  In the Decision of the Tribunal of 16 January 2015, it accepted at §§47 to 49 that it made some mistakes in the 2^nd Before Value on account of demolition costs.  Adjustments were to be made in accordance with §49.  Mr Chang did not oppose this ground of appeal.

G.      Results and disposition

148.  To sum up, the Applicant succeeds on its GOA 1 but fails on its other GOAs. The Respondent succeeds on its GOAs1, 2, 6 and 8 (on the 2^nd Before Value) but fails on the other GOAs.

149.  Whilst it may be possible for this court, with the assistance of the parties, to work out the precise adjustments on the computation of compensation arising from some of the grounds, this is not possible in respect of the After Value as we held that the same market expectations should inform the H in the After Value and we need to have a L for the calculation.  Though it may be that the H in the After Value should be the same as H in the Before Value, we would not make such determination without inputs from the parties.  Counsel also agreed that if we held that mid-stream operation is not godown use under Special Condition 3(a) (as we did), whether such operation comes within “general industrial” use in Special Condition 3(a) should be remitted to the Tribunal for determination.

150.  In light of that, we would direct the parties to try to agree a draft order for the disposal of the appeals in light of our above determination and submit the same for our approval by 13 June 2016.  If parties cannot reach agreement, the Applicant shall submit its draft by 13 June 2016.  The Respondent shall submit its comment on that draft by 20 June 2016 (including arguments on costs) and the Applicant shall submit its reply by 27 June 2016.   This court will then decide whether it is necessary to list the matter for a short hearing or simply finalize our order on paper.

151.  Last but not least, we thank all counsel for their assistance in these appeals.