TANG YUE CHUNG AND OTHERS v. THE DIRECTOR OF LANDS

Lands Tribunal - Crown Lands Resumption Ordinance Cap. 124 - compensation on resumption of land designated as firing area under Defence (Firing Areas) Ordinance Cap. 196 - whether fact that land part of firing area is to be disregarded when assessing compensation - Melwood Units Pty, Ltd., v. Commissioner of Main Roads (1979) A. C. 426 followed: 'reverse Pointe Gourds principle" applied.

The Crown resumed land which had for many years been part of a designated firing area under the Defences (Firing Areas) Ordinance Cap. 196. There was evidence that the land probably contained unexploded shells and bombs. Clearing the land of unexploded ordnance would be very difficult and expensive and the result could not be guaranteed.

It was necessary for the Lands Tribunal to decide whether the fact that the land was part of a firing area and probably contained unexploded ordnance was to be disregarded for the purpose of assessing compensation.

IN THE LANDS TRIBUNAL OF HONG KCNG

Crown Lands Reference No. 3/85

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DECISION

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1. This is an application under Section 6(3) of the Crown Lands Resumption Ordinance, Cap. 124 for determination of the amount of compensation to be paid in respect of the resumption of Lots No. 80 and 81 in Demarcation District 133, which reverted to the Crown on 12th March 1985. An offer was made to the applicants under Section 6(1)(a) of the Ordinance, but was rejected. The offer amounted to $52,966.40.

2. Lot 80 is 80.9 square metres in area and lies in such close proximity to Lot 81, the area of which is 687.9 square metres, that for the purposes of valuation we have treated both lots as one unit of 768.8 square metres, or 8276 square feet.

3. The land in question forms part of a firing area, comprising the greater part of the Castle Peak Peninsula in the New Territories, designated  as Firing Area D in Part I of the First Schedule to the Defences (Firing Areas) Ordinance Cap. 196 (originally Cap. 1 of 1936). The boundaries of the firing area and the location of Lots 80 and 81 are shown on an identification plan annexed as Exhibit 1 to the statement of Stephen M.W. Yip filed by the Respondent under Rule 18 of the Lands Tribunal Rules Cap. 17.

4. Under the Defences (Firing Areas) Ordinance practice firing may take place over the firing areas described in Part I of the First Schedule from "any gun site on land within the Colony or any gun sited upon any vessel operating within the Colony or its territorial waters." Part I has been amended from time to time but the greater part of the Castle peak area in the New Territories appears to have been designated as Firing Area D since at the latest 1958 (G.N.A. 33/58).

5. There are provisions in that ordinance for notice to be given that firing is taking place and while such notice is being given by the hoisting or display of signals then (with certain exceptions), "no person shall enter or remain within the area, nor bring, take or suffer to remain therein any vessel aircraft or thing". Contravention is a criminal offence (sections 6 and 8, Defences (Firing Areas) Ordinance.

6. The preamble to the Ordinance has remained the same since 1936 and reads as follows:

"To regulate practice firing from Hong Kong defences and for clearing of certain sea areas in connexion therewith."

7. All the designated firing areas prior to the Second World War appear to have been sea areas but land areas apparently began to be designated after that war, as may be seen from the various amendments to the schedule which have been published from time to time. The current boundaries of the Castle Peak firing area were gazetted as LN 106 of 1975.

8. We heard evidence from Mr. Michael Arnold, an administrative officer in the Security Branch of the Hong Kong Government as to the history of the Castle Peak range area which history he described as somewhat confusing. He confirmed that the earliest record of the range area in question was after the Second World Ear when Cap. 196 was passed. Prior to 1981 both the Hong Kong Government and the Government of the United Kingdom provided land in Hong Kong for military use. In 1981, both governments entered into a Defence Costs Agreement under which the Hong Kong Government became responsible for providing all land for the garrison.

9. According to Mr. Arnold, most of the Castle Peak range area is Crown Land. Only very small areas are privately owned. Up to 1981 that private land was leased direct from the villagers to the Property Services Agency (P.S.A.) which dealt for the United Kingdom Government in relation to land matters in Hong Kong.

10. In 1984, the P.S.A. approached the Hong Kong Government asking it to undertake the payment of rent under the private lettings. Some leases were due to expire. The P.S.A. was finding it very difficult to find the individuals to whom the rents were payable.

11. Pursuant to the 1981 Defence Costs Agreement, the Hong Kong Government took over payment of the rents, and discovered that some of the landowners could not be found. Because the Hong Kong Government was concerned to retain the land for use by the garrison as a firing range until, at the earliest, the 30th June 1997, it was decided to resume it.

12. There was another matter which my well have given concern to the Hong Kong Government.

13. In each of the leases, copies of which were provided to the Tribunal, appears a clause of which the following is an example, taken from Exhibit R2:

"At the expiration or sooner determination of this Agreement the Tenant shall pay to the landlords such sum or sums as shall be agreed by and between Her majesty's Director of Agriculture and Fisheries and the Tenant as the fair and reasonable cost of leaving the said premises in the same condition as the same were in at the commencement of the term hereby created.." (There is provision for arbitration in case of disagreement).

14. Major Rowlandson, an officer of the Royal Artillery and a staff officer in Headquarters British Forces, Hong Kong, gave evidence as to the difficulties involved in attempting to clear land of explosives. It is very labour intensive and costly. The resources for such work do not exist in Hong Kong. High explosive artillery shells of various calibres and mortar bombs have been fired onto the range area and bombs may also have been dropped from aeroplanes of the Royal Air Force in the past. There could most certainly be unexploded items on the range.

15. Even after an attempt to clear the land, there would be no guarantee of the result.

16. Mr. Arnold said: "Because of the need to keep the land within the range and worries about not being able to hand it back, we had to do something." The answer was resumption. The Hong Kong Government may well have seen the advantage of avoiding attempted enforcement by the landowners of the clause quoted above, as well as avoiding the inconvenience of paying small sums to many difficult to find landlords.

17. The first question for the Tribunal to answer was this. Should we, in assessing the market value of the land, disregard the fact that it was part of a designated firing areas, affected by the possibility of the presence of unexploded ordnance?

18. The applicants, who were unrepresented, were not in a position to advance any legal arguments, out they did express a view. As Mr. TANG Ting-kwan put its:- "As it was the Government which designated the lard a range area, and Government is resuming, the fact that it is a range area should be disregarded when assessing compensation."

19. We note that there is no provision in the Defences (Firing Areas Ordinance for the payment of compensation.

20. Section 10(1) of the Crown Lands Resumption Ordinance provides that "The Tribunal shall determine the amount of compensation (if any) payable in respect of any claim... on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim." On one view, all the claimants lost was land already devalued by the fact that it had been designated and used as a firing range for many years prior to the resumption.

21. Mr. Elkinson in opening for the Director of Lands submitted that we should not take account of the detriment to the value of the land occasioned by its designation as a firing range. He based his argument on the common law principle commonly referred to as the Pointe Gourde principle and reminded us of a line of decisions starting with Pointe Gourde Quarrying and Transport Company Limited v. Sub-intendent of Crown Lands (1947) AC 565, and including Wilson and another (personal representatives of F.H. Wilson deceased v. Liverpool City Council (1971) 1 ALL. E.R. 628 as well as Jelson Ltd. v. Blaby District Council (1978) 1 ALL. E. R. 548. In the last mentioned case, the Court of Appeal held that the Pointe Gourde principle applied to depreciation as well as appreciation in value.

22. In addition to the cases cited by Mr. Elkinson, we have taken note of the decision of the Privy Council in Melwood Units Pty. Ltd. v. Commissioner of Main Roads, (1979) AC 426. The decision in Jelson Ltd. v. Blaby District Council was apparently net cited at the appeal hearing. In delivering the judgment of their Lordships, Lord Russell of Killowen (at p. 434), referring to the Pointe Gourde principle, said:

"The landowner cannot claim compensation to the extent to which the value of his land is enhanced by the very scheme of which the resumption forms an integral parts: that principle in their Lordships opinion operates also in reverse. A resuming authority cannot by its project of resumption destroy the potential of the whole 37 acres for development as a drive-in shopping centre, and then resume and sever on the basis that the destroyed potential had never existed."

Later he said at p. 435,

"In their Lordships' opinion it is a part of the common law as a matter of principle from the nature of compensation for resumption or compulsory acquisition, that neither relevantly attributable appreciation nor depreciation in value is to be regarded in the assessment of land compensation."

23. There can be no doubt as to the existence of what Lord Russell of Killowen described in the judgment as "the reverse Pointe Gourde principle". We have looked at the Crown Lands Resumption Ordinance to see whether there is any provision excluding the application of the principle and we have not found one.

24. We are well aware that the facts of the present case are rather different from those of the cases to which we have referred, and which have related to what might be termed development projects. Mr. Elkinson, however, submits that there is a scheme hare, which gives rise to the application of the "reverse Pointe Gourde principle". We agree. Tic resumption was made in pursuance of a long standing scheme of the Hong Kong Government to provide facilities in the Castle Peak area for the training of the garrison.

25. As Lord Widgery L.J., said in Wilson v. Liverpool City Councils:

"Whenever land is to be compulsorily acquired, this must be in consequence of some scheme or undertaking or project. Unless there is some scheme or undertaking or project compulsory powers of acquisition will not arise at all and it would I think be a great mistake if we tended to focus our attention on the word 'scheme' as though it had some magic of its own."

Later he said:

"The extent of the scheme is a matter of fact in every case.... It is for the tribunal of fact to consider just what activities - past, present or future - are properly to be regarded as the scheme within the meaning of this proposition."

26. The fact that the details of the scheme which we arc considering have changed from time to time does not, in our view, prevent the application of the principle.

27. We consider that in assessing compensation we must disregard the fact that the land in question is designated as a firing range. It appears to us, moreover, that physical detriment, in the form of the possible presence of unexploded ordnance, should also be disregarded since it flows from the existence and implementation of the scheme. In his closing address, Mr. Elkinson conceded as much. It follows that we must value the land on the basis of section 12(d) of the Crown Lands Resumption Ordinance, which provides, subject to certain exceptions (none of which appear to apply) that,

"the value of the land resumed shall be taken to be the amount which the land if sold by a willing seller in the open market might be expected to realise"

On the hypothetical basis that it is not and never has been part of a firing range.

28. On the subject of valuation, we heard from the applicants that they valued the land at $8 per square foot. They were unable to support their valuation with any evidence other than a list of figures published by the Hong Kong Government indicating what it was prepared to offer ex-gratia for certain classes of land. The document was the only evidence filed by the applicants under Rule 18. (The rules of evidence do not apply in the Lands Tribunal, s.10(6), lands Tribunal Ordinance).

29. Mr. Stephen YIP Moon-wah, Chartered Surveyor, who is an Estate Surveyor in the District Lands Office, Tuen Mun gave evidence as to the value of the resumed land. He produced his written evidence which had been filed under Rule 18 of the lands Tribunal Rules (Exhibit R1) and supplemented that evidence in the witness box.

30. Relying upon comparables, details of which were tendered as Exhibit 3, Mr. Yip valued the land on what he described as a "full open market basis", that is "disregarding the possible existence of unexploded ordnance", at $6.30 per square foot. He would have reduced that figure by 50% if the costs of clearing Live ordnance were to be taken into account but he admitted that the reduction was purely arbitrary and quite unsupported by any evidence of the cost of such clearance. As Mr. Yip listed his comparable areas in square feet, we find it more convenient to adopt the imperial unit in this case rather than convert each to a metric basis.

31. Mr. Yip felt that of all the transactions he had considered, those he listed at 1 to 6 inclusive in his Rule 18 document, were directly comparable because they were all of reasonable size, all greater than 3,000 sq. ft., and there was no apparent relationship between the parties (a particularly relevant consideration in the rural New Territories); and, as with the subject lots, there were no structures erected on them. 0f those six comparable, Numbers 1, 2 and 3 were preferred by him because the transaction dates were closer to the reversion date of the 12th March 1985.

32. In the view of Mr. Yip his best comparable was No. 2 (Exh 3C) which sold at $6.89 per sq. ft. The next best comparable was No. 1 (Exh 3B) and the only other one he thought useful was No. 3 (Exh 3D).

33. Mr. Yip placed considerable emphasis on the factors of location and accessibility. His best comparable, No. 2, was more accessible, in his opinion, than the land in question, in a village environment, close to developed areas.

34. We have had the advantage of making an aerial inspection by helicopter of the comparables we mention here, the subject lots and the general area in which the various parcels of land arc situated.

35. We agree with Mr. Yip that the bast comparables in this case are his comparables 1 and 2 but we do not agree that the subject land is any more remote or less accessible than those comparables.

36. The subject land is padi, Lots 80 and 81 being described as 3rd class and 2nd class agricultural land respectively. They lie very close together. Lot 80 at its nearest point is only 20 metres from the Nim Wan Road about 7.3 km from Lau Fau Shan. The lots are level grassland near a village environment and cultivated areas.

37. Comparable 1 is an area of 5,662.8 sq. ft., at Nam Hang. It is an uncultivated field in a valley, next to a stream, in a village environment next to cultivated land and is accessible to vehicles over a track. On the 28th September 1984 it sold for $40,000 ($7.06 per sq. ft.).

38. Comparable 2 is a level site of 6,534 sq. ft. at Mong Tseng Tsuen, Yuen Long, used for growing sweet potatoes. It is accessible along a motor track which joins Deep Bay Road and it lies in a village environment among cultivated fields. It sold on the 12th December 1984 for $45,000 (66,89 per sq. ft.).

39. Comparable 3 is much larger; 31,363.2 sq. ft. in area, consisting of level uncultivated fields, chain link fenced, near villages and among cultivated fields. It lies about a kilometre from Castle Peak Road and the only access is by footpath. It sold on the 21st May 1985 for $244,633 ($7.80 per sq. ft.). We consider that its proximity to the town of Tuen Mum may account for its slightly higher price. In addition Mr. Yip suspected that its use for building of squatter huts may be contemplated. Such speculation of a proposed illegal use is not a factor we may consider and we ignore it.

40. Comparable 6, a level field near Tsim Bei Tsui, Yuen Long, 5,662.8 sq. ft. in area, sold en the 17th May 1984 for $65,090 ($11.49 per sq. ft.). It is out of line with sales in the general area and we disregard it.

41. Comparables 7 and 8, at Tai Lam Chung, are adjacent to a container storage site, and have commercial potential, which probably accounts for the fact that they sold for rather higher prices ($10 and $8 per sq. ft. respectively) than comparables 1 and 2.

42. Although the listed comparables were for sales over most of 1984 and the first half of 1985, there was nothing to show that the market in agricultural land improved significantly over the period.

43. With regard to the prices paid for comparables 1 and 2 which we consider to be the best comparables we conclude that they support a unit rate value of somewhere in the region of $7 per sq. ft. The area of the lots is 8276 sq. ft. which multiplied by seven gives a figure of $57,932. Having regard to the variations in the comparables which we have received together with the subject land and its surroundings we are of the opinion that the subject land, as at the relevant date might be expected to realise $60,000.

44. Accordingly we determine that the amount of compensation payable to the applicants in respect of their claim is $60,000. Interest at the rate of 7.75% shall be paid thereon from 12th March 1985 to the date of payment.

45. We would add that in his Rule 18 statement, Mr. Yip said that if the existence and effect of the firing range were to be taken into account, the value of Lots 80 and 81 would be nil, since there would be no market for them. At the hearing we asked him to consider a valuation based on a capitalisation of the rental income of $4,020 per acre per annum under the leases. He produced a figure of $15,310 on the basis of twenty years purchase (a return of 5%). If we had decided to take into account the existence and effect of the range, we may not have come to the same conclusions as Mr. Yip, but we would have regarded his figure as an irreducible minimum. There were no transactions relating to land within the firing area brought to our attention and if we had sought to value the land as it stands with its restricted access and potential hazards there would have been no comparables to guide us. We would have been obliged to proceed on the basis of the potential for letting the land as part of the range area.

46. The applicants are entitled to their costs to be taxed, if not agreed, in accordance with the Supreme Court scale pursuant to Order 62 of the Rules of the Supreme Court.

47. Dated this 19th day of February 1986.