TING KEY INVESTMENT LTD. AND ANOTHER v. THE SECRETARY FOR TRANSPORT

IN THE COURT OF APPEAL

1996, No. 160
(Civil)

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J U D G M E N T

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Nazareth, V.-P. (giving the judgment of the Court) :

Introduction

1. The 1st appellant ("Ting Key") is the owner of a petrol filling station adjacent to the Pok Wai section of Castle Peak Road in the New Territories ("the CRC station"). The 2nd appellant was between 15th March 1990 and 31st March 1992 the operator of the CRC station under an agreement between the two appellants. On 23rd February 1988 a notice was published in the Gazette in pursuance of ss. 17 and 18 of the Roads (Works, Use and Compensation) Ordinance, Cap. 370 ("the Ordinance") of the closure and modification of roads associated with part of the New Territories Circular Road Improvements (NTCR Improvements) which affected the Pok Wai section of the Castle Peak Road. The improvement works in the vicinity of the CRC station were planned in nine stages.

2. The CRC station was adversely affected and in June 1991 the appellant's solicitors wrote to the respondent complaining. This was followed by an application for compensation under s. 27 of the Ordinance by way of a solicitors' letter dated 26th February 1992, and on 21st December 1992 by an application to the Lands Tribunal claiming compensation "in the region of $2 million". On 23rd November 1994 the claim was amended to specify the loss for the June 1991 to January 1993 period of disruption ($2.9 million in respect of Ting Key and $0.2 million in respect of Well Field).

3. The claim came before the Lands Tribunal in March 1996. Because of the Tribunal's case load, the original estimated hearing time of 10 days was reduced by the Tribunal to 5 days. On 11th July 1996 the Tribunal allowed the appellants' claim for mitigation expenses of $1,000. It dismissed claims of $2,906,295 by Ting Key and $256,586 by Well Field for loss of profits resulting from disturbance as unsubstantiated. It also made no decision or order upon a further claim for a disturbance payment in respect of permanent loss, in the sum of HK$22,090,500.00.

4. Thereupon the appellants appealed to this Court for an order that they be awarded disturbance payments to be quantified by the Lands Tribunal or alternatively to be assessed by this Court.

The broad facts

5. Prior to the commencement of the NTCR Improvements, the CRC station could be freely accessed by north-bound motorists. Up to that time the Castle Peak Road was a single lane dual carriage-way. The improvements involved the construction of a dual carriage-way of two lanes in each direction with two-way service roads one on each side of the carriage-way. The Pok Wai section of the old Castle Peak Road became one of the service roads. This service road now leaves the expressway about 500 metres before reaching the CRC station.

6. Further along the same service road, about 250 metres beyond the CRC station there is a Caltex petrol station ("the Caltex station") which competed with the CRC station after it commenced business, upon the Tribunal's findings "some time in June but not later than 1 July 1991".

The grounds of appeal

7. In pursuing the grounds in the appellants' notice of appeal, Mr Warren Chan QC, who with Mr Malcolm Merry, appeared for the appellants, relied upon the following three matters, in which he claims the appellants were unfairly treated:

(1) The imputation that the appellants did not produce fuel sales data in a deliberate attempt to gloss over weaknesses in their case.

(2) The respondent being allowed, without any notice to the appellants, to say that his expert's opinion as to a 30% discount should not be relied upon when the same was agreed to by the appellants' expert, so that the appellants did not have an opportunity to consider adducing evidence in that respect.

(3) The appellants being held to have failed to overcome the statutory bar in para. 4(2) of Part I of the Schedule to the Ordinance, to claims for disturbance payment where the interruption or interference does not subsist for a period exceeding 14 days.

We turn now to consider those matters individually.

Absence of evidence of fuel sales

8. A convenient starting point for consideration of this matter is the Schedule to the Ordinance, which provides that a disturbance payment is the basis upon which compensation is to be assessed in respect of the closure, modification or restriction of a private right in respect of a road or part of a road under s. 17 so that access to any land is adversely affected. In that regard para. 2 of Part I of the Schedule provides the following definition:

" 'disturbance' means ... the interruption or interference with a trade or business, whether such ... interruption or interference is temporary or permanent;

'disturbance payment' means a sum equal to -

(a) ...

(b) in the case of a disturbance of a trade or business or any land, the expenditure or loss of money actually and reasonably incurred or to be reasonably incurred and arising from the disturbance of the trade or business by reason of the matter for which the claimant is entitled to claim compensation under Part II of the Schedule:"

And, it is convenient to note, that para. 4(2) of Part I provides that:

"No disturbance payment shall be payable in respect of any interference with a trade or business in any case in which such interference does not subsist for a period exceeding 14 days."

9. It was in the foregoing context that the appellants had to establish their loss. They relied upon the evidence given by their expert accountant, Mr James Wardell, a partner of Deloitte Touche Tohmatsu Management Consultants. He based his report on figures of fuel stock purchases by the CRC station made between March 1988 and December 1993. Having set out those figures for the period January 1991 to December 1993, the Tribunal went on to say this in para. 25:

"The [appellants] maintain that these purchase figures reflect the demand at the material times for fuel products sold by the CRC station. To a certain extent, this must be true. However, they are of little assistance in this case. In the first place, they are monthly rather than weekly or, better still, daily figures. They do not eliminate our concern with the 14 days statutory bar. In the second place, purchases by the CRC station go into the stock of the station, depending on the capacity of the fuel holding tanks at the station, there is room for the [appellants] to arrange supplies to corroborate their claim for disturbance payment. In the third place, these figures do not help us to relate the business of the CRC station to the various factors that may cause loss of trade to the station. For instance, the uneven stage 7 figures would appear as a jagged curve when plotted on a graph, this may mean that the traffic arrangement for this stage did not have uniform effect throughout this stage, but if remedial measures had been taken to reduce the problem of access to the CRC station we do not understand how business for the station would drop again. Could there be some other adverse factor at play? ..."

Later at the end of para. 26, the Tribunal added:

"In view of the fact that the [appellants] do not even produce fuel sales data, we wonder if there has been a deliberate attempt to gloss over weaknesses in the [appellants'] case."

10. Mr Chan complains that there was no suggestion at the hearing least of all from the respondent of anything in the nature of orchestration of deliveries to suggest a drop in their volume. He submits that what should have been addressed were the probabilities rather than the possibilities. It is, of course, only right that the courts should be alive to the possibility of parties to litigation, as it were, manufacturing evidence; that, however, is a very different matter from actual suspicion of such action and acting upon such suspicions. But that, in effect, is what the Tribunal here appears to have done. And in that respect, it seems to us that Mr Chan's complaint of unfairness must be accepted, for not only was there no suggestion of such action on the part of the appellants by the respondent, but no opportunity to refute such suspicions. Being in the nature of fraudulent conduct, it was all the more important that such an indication should have been given in accordance with the traditional insistence of the courts that notice be given of allegations of fraudulent conduct. It has to be said in this respect that there was one piece of evidence that entitled the Tribunal to be wary; this was the involvement in the matter of solicitors acting for the appellants as early as June 1991, i.e. the commencement of the period of disturbance. It would be remarkable indeed if they had not alerted the appellants to the necessity to collect and preserve evidence of their losses. That said, it could, however, not have been other than unfair to form what were at the very least grave suspicions of the appellants' conduct, and apparently to rely upon them to the detriment of the appellants without giving them notice or an opportunity of dispelling the suspicions.

Expert's agreement on a discount of 30%

11. Mr Chan's submission here quite shortly is that Mr Hague, the respondent's expert, was prepared to accept the discount of 30% for the effect of competition suggested by Mr Wardell, the appellants' expert, as reasonable. Thus, in Mr Chan's submission, the respondent having put forward a figure and the appellants having agreed to it in order to cooperate to save time, it was unfair to the appellants for the respondent to say only at the very end of the trial in his written final submissions in effect that he did not accept his own expert's opinion. Again, this resulted in unfairness to the appellants, for they must have been prejudiced in being taken by surprise and probably not having sufficient time for adequate consideration and any necessary action.

Failure to satisfy the 14-day disturbance period

12. It will have been seen from the provisions of the Schedule to the Ordinance already quoted, that no disturbance payment is due for any disturbance that does not exceed 14 days in duration. The Tribunal identified this point early in its judgment and returned to it several times, addressing it primarily at p. 6 as a separate part of the judgment under the heading "Limitation", where its discursive observations are not of assistance; returning to it at p. 14 with the suggestion that remedial arrangements made by the contractor at the request of the appellants might have broken up the interruption or interference into periods of less than 14 days, or rendered it so trivial as not to be eligible for compensation under the Ordinance; at p. 15 pointing to the shortcomings of the appellants' evidence not directed to the "limitation" point and concluding at p. 19 that the record of fuel stock purchases, being monthly and not weekly or daily figures, did "not eliminate our concern with the 14-days statutory bar".

13. The appellants' complaint is that the statutory bar was never raised and never addressed and that it was accordingly unfair of the Tribunal to have relied upon the point in their judgment.

14. The appellants' claims were for disturbance for a period in excess of 14 months caused by major road construction works, which by their very nature, particularly here, could be expected to be of a continuing nature extending well beyond 14 days. There was no suggestion, and particularly none from the respondent, that the disturbance was of so highly intermittent and transitory a nature as to raise a real possibility that it all occurred in short bursts each not exceeding 14 days. Nor, in retrospect, having reviewed the material before this Court, can we accept that the evidence viewed in any reasonable way raises such a possibility.

15. Plainly, in the same way that the courts ordinarily do not concern themselves with limitation unless pleaded, the appellants were entitled to assume that the 14-day bar was not engaged, and indeed, that would be the ordinary position in the same way that limitation, to which the Tribunal assimilated it, is dealt with. That would not preclude the Tribunal from raising the 14-day bar, but in the particular circumstances, it should only have been relied upon if the appellants had been given both notice and opportunity to meet it. That was not done and it unfairly and materially prejudiced the appellants.

16. Ironically, in that regard, the Tribunal referred at p. 21 of their judgment to the judgment of this Court in Chui Man-on v Tam Yu-hung, Civil Appeal No. 284 of 1995, surprisingly misconceiving its effect as requiring in every instance the entire case against any party, however extraordinary, to be put to him. That is not what the Court said. Moreover, the approach adopted there at first instance left the relevant factual defence of the landlord unaddressed and the Court of Appeal unable to deal with it, extraordinary though it seemed to be, when the landlord sought seriously to pursue it on appeal.

17. Reverting to the present appeal, the unfairness and prejudice to the appellants was compounded by the pressure of time resulting from the curtailment of the hearing to 5 days from the original 10 days for which it was listed, because of the Tribunal's staffing difficulties. In the result, the appellants' complaint of unfairness and prejudice must be upheld, and the appeal allowed. Moreover, on the evidence and, the manner in which the proceedings before the Tribunal unfolded, there should have been no question that the duration of the disturbance exceeded 14 days; equally plain is that there was some resulting loss. Clearly, the appeal must be allowed and the damages assessed. The appellants have asked that this Court assess the damages. That does not seem to us to be right or appropriate in the circumstances.

18. What does seem to be inescapable is that the matter should go back to the Tribunal for damages to be assessed. But that course is clearly fraught with difficulty. Given the original estimate of a 10-day hearing, disproportionate additional costs of prohibitive amounts are likely to be incurred. Given the strong views expressed by the Tribunal it is difficult to avoid the conclusion that it would have to be differently constituted for the purpose. So constituted, the Tribunal may find it difficult, if not impossible, to make necessary findings of fact from the record. One or both sides may want to amend their pleadings and to raise new points.

19. In these circumstances we think it essential before making any orders to hear the parties as to their content and upon any directions that might facilitate the assessment of damages, save costs or otherwise be expedient.