PARGO LTD v. SECRETARY FOR JUSTICE

HCAL 106/1999
HCAL 107/1999
HCAL 2169/2000
HCAL 2170/2000

IN THE MATTER of applications for Judicial Review pursuant to Section 21K of the High Court Ordinance and Order 53, rule 3 of the Rules of the High Court, Cap. 4, Laws of Hong Kong

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HCAL 106/1999
HCAL 2169/2000

BETWEEN

HCAL 107/1999
HCAL 2170/2000

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J U D G M E N T

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1. In these proceedings for judicial review the two Applicants seek to challenge the decisions of a committee known as the Committee on Planning and Land Development.  The decisions under challenge have all been made pursuant to an administrative scheme in terms of which the Government seeks by way of ex gratia payments to compensate private land owners in the New Territories who have had their land resumed for the purpose of public works.

2. The Applicants contend that, in awarding compensation for land resumed from them, the committee has frustrated their legitimate expectations that the ex gratia compensation scheme will be administered by it consistently and fairly in accordance with established policy and bearing in mind the objects and intent of the scheme.  Flowing from the allegation that the committee has wrongfully administered the scheme, it is contended that the decisions are in any event unreasonable as that term has been defined in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1947] 2 All ER 680.

3. The Applicants therefore seek orders of certiorari to quash the decisions of the committee and orders of mandamus directing the committee to make specific awards of compensation or, failing that, the Applicants seek orders that the matter be remitted to the committee for reconsideration.

Introduction

4. The Applicants are land development companies working in association with each other.  In December 1996 and January 1997 each of the Applicants, together with a third associated company, Super Asset Development Limited, purchased parcels of land in the north western part of the New Territories.  At that time the land was zoned for agricultural use but the Applicants had identified it as having potential for urban housing and commercial development and made the various purchases on the basis that it would be possible to obtain a change of usage from the planning authorities.

5. The reasons why the Applicants identified the various parcels of land as being ripe for development are complex.  At this juncture, however, stating the matter in broad terms, it is sufficient to record that the land is all in the vicinity of the market town of Kam Tin which itself lies a little to the south west of the military airfield and barracks at Sek Kong.  The Applicants learnt that Kam Tin was in an area designated by Government (at the highest levels of planning) as a strategic growth area, an area which, in the opinion of the Applicants, would inevitably be zoned as a new town or as an area for urban and office development.  A new highway, Route 3, ran past Kam Tin close to the Applicants’ land.  In addition, there were plans for a major railway project that would lay a line of rail through Kam Tin and which would not only open up the north west of the New Territories but would also carry passengers and freight across the border between Hong Kong and the Mainland.

6. The railway project has, in fact, come to fruition; at least Phase One of that project which is known as ‘West Rail’.  I am told that work on Phase One has commenced and that its target completion date is 2003.  A total of 9 stations are (at this time) planned for West Rail.  The railway line will run north from Kowloon up into the north western hinterland of the New Territories before looping south west to terminate in Tuen Mun.  The 7 intermediate stations planned are Mei Foo, Tsuen Wan West, Kam Tin, Yuen Long, Long Ping, Tin Shui Wai and Tuen Mun North.  In addition to the stations, a rail depot for the carrying out of repairs and the like will be required and this has been sited in the immediate vicinity of the Kam Tin Station.  In short, Kam Tin will enjoy the economic advantages of both a station and a depot.

7. In early 1998, the Applicants (together with their associated company, Super Asset Development) made an application to the Town Planning Board, proposing to utilise a large percentage of their Kam Tin

holdings in the building of a residential and commercial complex.  The complex would be in the immediate vicinity of the proposed Kam Tin Station, indeed just some 150 metres from it.  The application was refused.  However, it was not possible at that time to pursue the matter further.  This arose because Government proceeded to order the resumption of the land.

8. In historical terms, the first resumption was constituted by the need for a drainage project.  Kam Tin and Sek Kong are both situated in areas of low lying land which have been prone to the risk of flooding.  In order to alleviate the risk it was necessary for Government to embark on major works which encompassed part of the Applicants’ land.  The second resumption was constituted by the West Rail project itself; that is, the need to construct the rail line, the station, the depot and their associated facilities in the Kam Tin area.

9. In October 1998, the Applicants were informed that the land required for West Rail was being resumed in terms of the Railways Ordinance, Chapter 518.  On this occasion, Funco was dispossessed of some 78,000 square feet while Pargo lost approximately 82,000 square feet.  Early the next year, in April 1999, the Applicants were informed that the land required for the drainage project was being resumed in terms of the Lands Resumption Ordinance, Chapter 124.  On this occasion, Funco was dispossessed of some 94,000 square feet while Pargo lost some 95,000 square feet.

10. The 4 applications for judicial review (consolidated for the purposes of hearing) relate to the 4 parcels of land that have been resumed.  Applications 106 and 107 of 1999 concern, in each case, the land resumed from the Applicants under the Lands Resumption Ordinance for the drainage project while applications 2169 and 2170 of 2000 concern the land resumed from the Applicants under the Railways Ordinance.

11. As I have earlier indicated, the Applicants do not challenge the orders for resumption.  The challenge in each case relates to the decisions of the Committee on Planning and Land Development (‘the CPLD’).  The decisions in issue are those in terms of which the CPLD rejected the Applicants’ claims for enhanced ex gratia compensation. 

The ex gratia compensation scheme

12. If land is resumed by Government under the Railways Ordinance or the Lands Resumption Ordinance and compensation is assessed in terms of those statutes, no provision may be made for the assessment to include what is called the ‘hope value’ of the land.  The ‘hope value’ may be described as that portion of the value which acknowledges the inherent potential of the land for a more valuable use.  If, for example, agricultural land in the New Territories carries with it a real expectation that permission will be granted for it to be exploited for urban use, the price placed on that expectation is its ‘hope value’.  Essentially, therefore, the ‘hope value’ is part of a property’s market value.

13. In the 1960s when, in order to meet the needs of Hong Kong’s burgeoning population, the Government began to develop new towns in the New Territories, it recognised that the statutory restrictions on what factors may influence the quantum of compensation often impeded the efficient and fair resumption of land.  As a result, an administrative system of compensation was developed.  Initially, this system involved an exchange of land.  When agricultural land was resumed for urban use, a letter of exchange was issued giving land owners the right to receive a certain amount of land in the new towns calculated according to the amount of agricultural land which they had been forced to surrender.  It was accepted that this land exchange scheme gave an opportunity to land owners to participate in the profits of urban development.  In short, the scheme encompassed the ‘hope value’ of land that had to be resumed.

14. However, for reasons which are not relevant to this judgment, the system was found to be unworkable.  As a result, in 1978 a working group under the chairmanship of Sir Y K Kan recommended a revised system which would allow for ex gratia cash compensation. The recommendations were accepted by Government and, as I understand it, today (in almost all cases) cash compensation is offered rather than land exchange.

15. This new system of monetary compensation was founded on a basic rate of compensation which was re-assessed from time to time, there being one basic rate for agricultural land and one for building land.  But so that the land owners who were forced to surrender their land could share in the enhanced use of that land, an adjustment was made to the basic rate calculated according to whatever was the intended use of the land.  The intended uses were divided into categories and, as they were to be applied across the New Territories, they were called compensation zones.  These zones were identified alphabetically.  Zone A – in the main being land required for the development of the new towns – has always offered the highest rate of compensation.

16. In addition to this incorporation of a hope value into the calculation of ex gratia compensation, the working party recommended a set of principles in terms of which the scheme should be administered.  These principles have not been disavowed by Government and it can be taken that the scheme is governed in accordance with those principles.  The principles include the following:

(i)    The scheme must be fair and acceptable to those affected by it;

(ii)         it must be capable of reasonably easy administration and explanation;

(iii)       it must provide for a system of continuous review of the compensation rate;

(iv)      it must provide for uniform rates of compensation for land acquired at any given time in any urban layout in the New Territories.

17. In order to put the new scheme into effect, all land in the New territories has been classified into compensation zones.  These zones have been recorded onto maps or plans called zonal compensation plans which are periodically updated to take account of the changing intended use of land.  It is apparent that in planning matters the need to respond to changing socio-economic imperatives is a well accepted principle. 

18. Originally, the land in the New Territories was divided into one of 7 compensation zones.  However, in 1986 the number of zones was reduced to 4 and there was some adjustment to the rates of compensation.  In 1996, the Executive Council authorised certain further modifications to the classifications.  There remained just 4 compensation zones but the definition of Zone A was, to use the term then employed, ‘refined’.  The 1986 definition had read simply: “New Town Development’.  However, with the 1996 amendments the 4 zones are today defined (in respect of agricultural land in the New Territories) as follows:

19. It will be seen that the definitions are broadly worded.  The working group which recommended the 1996 amendments was aware of this.  However, it was not considered practical to supply the CPLD, the decision-making body, with more specific guidelines.  Instead, it was recommended that each case be considered on its own merits and that ‘reference should be made to precedent cases and the advice of the relevant policy branch’.  Government agreed with the working party recommendations and no detailed guidelines were set. 

20. Before leaving the compensation scheme, it should be mentioned that the scheme has incorporated into its machinery of calculating compensation two concepts; namely, the ‘envelop’ and ‘linear’ concepts. 

21. If it is necessary to resume an area of land to accommodate a public works project then all the various parcels falling into that ‘envelope’ will be treated the same even though they may fall into different compensation zones.  It has been considered that this method of compensation which accords a uniform rate of compensation to all land sealed into the same planning ‘envelope’ will protect Government from charges of ‘inconsistency’ or from criticisms of ‘apparent unfairness’.  This itself, of course, is evidence that Government has always considered it necessary to ensure fairness and consistency in the administration of the scheme.  The exception to the ‘envelope concept’ occurs when a project which is linear in design – for example, a road or railway – extends through widely differing compensation zones.  In this case, the ‘linear’ concept dictates that there will not be a uniform rate of compensation payable unless the project is (in its entirety) an essential project with territory – wide significance.

The decisions of the CPLD in respect of the Applicants’ lands

22. In terms of the ex gratia compensation scheme, all offers are expressed in monetary terms without reference to any compensation zone.  It has therefore been for the Applicants to deduce into which zone of compensation their individual parcels of land have been placed.  That being said, the Respondent has taken no objection to the zones deduced and I therefore take them to be correctly deduced.  The offers of compensation may be summarised as follows:

(i)The land resumed from Funco for the purposes of the drainage project (the subject of application HCAL 106/1999) was all classified as falling into compensation zone ‘C’; that is:

‘Areas in which no urban development is planned and which are unlikely to be affected by later extension to layout areas but where resumptions are required sometimes for purposes directly connected with urban layout development and sometimes for local improvement schemes.’

(ii)        The land resumed from Pargo for the purposes of the drainage project (the subject of application HCAL 107/1999) was all classified as falling into compensation Zone ‘C’.

(iii)The land resumed from Funco for the purposes of the West Rail project (the subject of application HCAL 2169/2000) was classified in part as falling into compensation Zone ‘B’; that is:

‘Areas which may be brought under urban development in the near future, either by extensions to the adjoining layout areas due to their proximity to such areas or by reason of their known potential for urban development.’

23. That portion of Funco’s land which was classified as ‘B’ fell within the boundaries of the land required for the Kam Tin Station and its associated facilities.  It was therefore assessed in accordance with what has been described as the ‘envelope’ concept.  The balance of the land was classified as ‘C’.

(iv)The land resumed from Pargo for the purposes of the West Rail project (the subject of application HCAL 2170/2000) was all classified as falling into Zone ‘C’.

24. It was on the basis of these zonings that the Applicants instituted judicial review proceedings.

25. In suggesting that, in its assessment of compensation, the CPLD has arbitrarily and/or unfairly administered the ex gratia scheme or has done so in a manner that is Wednesbury unreasonable, Mr Neoh, who appeared as leading counsel for the Applicants, argued that the decisions of the CPLD must be viewed in an historical context.  This must be so, he said, because the 1996 amendments did not create a new scheme, they merely ‘refined’ the scheme.  In addition, the CPLD has at all times been under an obligation to administer the scheme not only consistently and in light of precedent but equally in light of the obvious consequences of the Government’s stated planning policies.

26. In opposition, Mr Tsang, leading counsel for the Respondent, submitted that, in so far as the Zone A amendments are concerned, the 1996 amendments were so far reaching that, in effect, a whole new set of criteria must now be determined by the CPLD.  This, said Mr Tsang, rendered consideration of what went before redundant.

27. While I accept that the 1996 amendments presented the CPLD with a substantially broadened definition of Zone A which required fresh consideration, I do not accept that the committee was thereby entitled to ignore all past cases, certainly not if there was to be some attempt at meeting the obligations of consistency and fairness.  Government did not accept the recommended amendments on the basis that they constituted an entirely new policy independent of what had gone before.

28. In considering the historical (and factual) context in which the CPLD made (or should have made) its decisions, Mr Neoh spoke of three separate matters, each of which, he said, were integral to each other.  For ease of consideration, they may be described as: ‘Kam Tin as a strategic growth area’, ‘the drainage project’ and, thirdly, ‘the Western Corridor Railway’.

Kam Tin as a strategic growth area

29. As a territory of such limited size subject to such population pressures, Hong Kong has had to place considerable emphasis on strategic planning for future development.  At the apex of the strategic planning hierarchy stands the Territorial Development Strategy which must be approved by the Executive Council.  While it is broad in scope, it is nevertheless the fountainhead from which more detailed planning flows.  Dr E G Pryor, a town planning consultant who submitted two reports on behalf of the Applicants, said that the hierarchy of strategy plans was based on the principle that ‘each succeeding lower level of plans should have regard to the concepts and proposals of plans at a higher level’.  This system, he said, had evolved in or about 1971 when the first strategic development plan was produced in order to set in place ‘a broad policy – led framework for the development of new towns, key transport infrastructure and other projects of territorial significance’.  Lower in the hierarchy come sub Regional Plans, which must be approved by the CPLD, and then District Plans which must be approved by the Town Planning Board.

30. In respect of the Territorial Development Strategy, Mr Neoh referred to a review document published for public consultation in 1993.  That document stated the goal of the strategy review in the following terms:

“The primary goal of the TDS review is to establish a broad, long term land use-transport-environmental planning framework within which the necessary land and infrastructure can be provided, having regard to resource availability, to enable Hong Kong to continue to grow as a regional and an international city and become a better place in which to live and work.”

31. This broad goal would be subject to a number of ‘principal objectives’ which included the following:

“To ensure that adequate provision is made to satisfy the land use and infrastructure needs arising from sectoral policies on industry, housing, commercial, rural, recreation and other major socio-economic activities.

To provide a framework within which to develop a multi-choice, high capacity transport system that is financially and economically viable, environmentally acceptable, energy efficient and makes provision for the safe and convenient movement of people and goods.

To formulate a strategy that can be carried out both by the public and private sectors under variable circumstances, particularly with respect to the availability of resources and significant changes of demand.” [my emphasis]

32. Mr Neoh emphasised that here, as in many other planning statements, Government spoke of the participation of the private sector in the implementation of planning strategies.  The private sector must therefore be expected to pay attention to such strategies to identify those areas where it could effectively participate in development. 

33. In respect of the development of the North West New Territories, the review document said the following:

“Development pressures in the NWNT will intensify with improved cross-border links (e.g. Route 3 and NWNT passenger and freight rail) and increased cross-border trade.  Apart from committed and planned development in Tuen Mun, Yuen Long and Tin Shui Wai Phase I areas, it is the intention of the TDS to identify comprehensive development areas along the strategic transport routes as against allowing sporadic haphazard development to spread, which may jeopardise long term planning objectives and infrastructural capacities.” [my emphasis]

34. Kam Tin was specifically mentioned in the following terms:

“The market town of Kam Tin has the potential to expand to serve as a satellite community between Yuen Long and Tsuen Wan around the transport interchange of Route 3 and the proposed NWNT passenger rail link.  While Government may provide basic infrastructure and development guidelines, private developers could be the main development agents in this area.” [my emphasis]

35. A number of plans attached to the review documents presented options for future development in the New Territories.  Each of those plans identified Kam Tin as either an ‘existing/planned urban area’ or as a ‘strategic growth area’.  Two of the plans suggested that, in addition, Kam Tin could become a ‘secondary business/office node’.

36. In 1994, an executive summary prepared by the Planning Department spoke of increased population pressures in the north western part of the New Territories and, in light of a ‘firm commitment’ to proceed with the West Rail project, commented that in respect of the ‘Ngau Tam Mei, Kam Tin and Sek Kong’ areas:

“Kam Tin would become the major development core of the area focusing around a rail station.  Medium/low density development would take place along the strategic rail link.” [my emphasis]

37. Further to the matter of population pressures in the North West New Territories, a planning and development study has commented:

“the development capacity of currently approved plans and programmes, especially to meet forecast housing needs, will be virtually exhausted by 2001;

for the period 2001-2006, there would be a need to provide housing for about 1 million above the base growth population.  In carrying forward work to complete the TDSR, current indications are that about 0.75 million of this total would need to be accommodated in new strategic growth areas with the remainder to be accommodated through redevelopment and by making use of residual capacities in current plans;” [my emphasis]

38. In order to meet expanding population needs in the New Territories, Government has commissioned a number of private studies.  In briefing papers prepared in 1996, it is stated that Government has identified Kam Tin as a location offering development opportunities.  The briefing papers state that, in light of the major transport infrastructure being built in the area, 3 ‘main strategic growth areas’ have been identified; one of them being Kam Tin.  The brief continued:

“Kam Tin is located at a strategic location and has ample land areas with opportunities for development.  Apart from being a potential residential area and situated next to the Yuen Long New Town between the Border and Metro Areas, and with a WCR Railway station and a depot planned at Kam Tin, the area offers opportunities for development into a major business/activity centre and a multi-modal transport node to cater for the growth in trade and business between China and Hong Kong as well as to allow decentralization of employment from the Metro Areas.”  [my emphasis]

39. Although this was a briefing paper and not, as such, a document for public review, Mr Neoh pointed to the fact that in 1998 the Executive Council approved the new TDS which contained clear proposals for urban development in Kam Tin, classified as a strategic growth area, and other strategic growth areas.  Flowing from this, work has been done with a view to preparing more detailed plans (known as outline development plans) for such areas as Kam Tin and Hung Shui Kiu.

40. But as I have indicated earlier, nothing in planning matters of this kind can be set in stone.  As an illustration, in the final executive report on the new TDS published in 1998, the Secretary for Planning, Environment and Lands said:

“… the final outcome of the current review of the TDS is not intended to put forward proposals that are “cast in tablets of stone”, especially with regard to the designation of potential areas for new strategic growth, the alignments of major new transport links and the timing of associated works.  Rather, the TDSR puts forward broad concepts that need to be explored by way of more detailed investigations of options. Also, it must be remembered that the TDSR is based on a number of working assumptions as to conditions that might prevail over the long term. The level of certainty of any assumption is always open to question and, as new trends and conditions become apparent, it will be necessary to make balanced adjustments to current TDSR proposals.”

41. In my view, it also remains important to appreciate that Kam Tin – never, as far as I can see, designated as a ‘major’ development area – has constituted only one of a number of areas identified by Government planners as strategic growth areas in the north west of the New Territories. 

42. In fact, Government planners have preferred Hung Shui Kiu as the site for the next new town development rather than Kam Tin.  In this regard, detailed proposals were published in 1999 for public consultation with comments expected by the end of January 2000.  The proposals include residential plans for a population of some 160,000 persons of whom approximately 100,000 will be housed in high density developments.  However, despite these planning developments, no outline plan for Hung Shui Kiu has been gazetted as yet.

The drainage project

43. In his affirmations, Mr Yan Kwok Wong, a Senior Engineer of the Drainage Services Department, set out the history of the project.  He said that in 1983 a study recommended a series of ‘river training works’ to alleviate the risk of flooding in the north western part of the New Territories including Kam Tin and Yuen Long.  Following from this, the detailed design of the river training projects took place in the 1980s and early 1990s. 

44. Mr Yan said that the first phase of the drainage project commenced in October 1993 and was completed in August 1999.  The second phase of the project – which encompasses the Applicants’ land – was commenced in July 1999 and is scheduled to be completed in or about March 2002.

45. As to the relationship between the drainage project and West Rail, Mr Yan said the following:

“The project … was not designed for the West Rail project.  It is a project for flood alleviation.  It was designed and proposed before the West Rail project.” 

46. Mr Yan went on to explain that in early 1997 it was discovered that the proposed route for West Rail overlapped sections of the proposed drainage project.  It was therefore agreed with the Kowloon and Canton Railway Corporation (‘KCRC’) that the KCRC would prepare a design to ‘re-align and modify’ sections of the drainage project which overlapped with West Rail so as to avoid ‘interface’ problems.

47. Mr Yan explained that it was also learnt that work on the drainage project and the Kam Tin portion of West Rail would take place at about the same time.  In order to avoid similar ‘interface’ problems, it was agreed that KCRC would be responsible in the Kam Tin area for the construction of both the rail and drainage project.

48. Finally, on a more general note, Mr Yan said:

“In the course of designing and constructing the drainage channel in the Kam Tin catchment, the Drainage Services Department did not receive any instructions from any other Government departments to the effect that Kam Tin will “form an integral part of urban development” …

49. Having said that, Mr Yan did accept that the drainage project would benefit all forms of development in the area as its principal purpose was flood prevention.

50. But whatever the history of the drainage project, Mr Geoffrey Lovegrove, a consultant engineer who prepared a report for the Applicants, was of the view that the drainage works were essential for West Rail and therefore an integral part of that project.  In this regard, he said:

“Any flooding of the area affecting either the station and its related infrastructure/development or the operation of the railway would be considered both significant and unacceptable by KCRC, Government and the travelling public.  The proposed drainage channels separating the Applicants’ site from Kam Tin Station are an essential part of drainage measures designed to prevent such flooding.

The West-Rail Depot is a facility that is essential for the operation and maintenance of the railway.  It will be located in the Kam Tin catchment about 1,000 metres south of the Applicants’ site and its drainage will depend on the proposed channel adjoining the southwest side of the site.  There is little doubt that if the depot site is not properly drained then the economic consequences for the West-Rail system would be enormous …”

51. On a more general note, Mr Lovegrove emphasised the wider importance of the drainage project.  The new channels, he said, constituted essential infrastructure that will allow development of the general area to take place free of the present risk of flooding.

The Western Corridor Railway

52. On behalf of the Applicants, Mr Neoh submitted that it was erroneous to view West Rail as a project standing alone; a project of great importance (and expense) but nevertheless no more than a regional passenger rail service connecting Kowloon with the north western part of the New Territories.  West Rail, said Mr Neoh, had to be viewed as part of a greater project – the Western Corridor Railway – that encompassed a cross-border passenger service and, a major freight service between the Kwai Chung Container Port and the Mainland. 

53. To support his submissions, Mr Neoh referred to a number of statements made by the Secretary of Transport.  On 9 March 1994, the Secretary, by way of background, informed the Legislative Council:

“The Railway Development Study (RDS) was commissioned in 1991, and was completed last year.  The purpose was to help the Government devise a blueprint for the future development of the railway network in the territory.  The key recommendations centred on the establishment of two strategic rail corridors – a new Western Corridor through the northwest New Territories connecting the border and the urban area, and also an improved Eastern Corridor to serve the eastern New Territories and East Kowloon…

Because the Government recognized that the Study would be of such vital importance in the development of overall transport modes and services in the territory, a public consultation exercise was conducted from April to July last year.”

54. Later that year, on 14 December, the Secretary announced the publication of the Railway Development Strategy.  He informed members of the Council that the Strategy had identified three priorities:

“First, the Western Corridor Railway.  This will be a new rail corridor through the northwestern part of the territory.  It will accommodate three services largely sharing the same tracks, namely, a freight line from Lo Wu to the Kwai Chung Container Port: a cross-border passenger service from Lo Wu, and possibly Lok Ma Chau, to a new terminus on the West Kowloon Reclamation: and a domestic passenger service from Tuen Mun North via Tin Shui Wan and Yuen Long to the same terminus in West Kowloon.”

55. To illustrate the degree to which West Rail had been conceived as an integral part of a broader scheme, including a major cross-border freight service, Mr Neoh referred to the fact that the tunnels designed for West Rail had been made larger in order to accommodate future freight movement while the tracks had been designed to cope with heavier traffic for the same purpose.

56. Mr Neoh made further references to public statements by the Secretary for Transport for example, to his statement to the Legislative Council on 31 January 1996.

“Our target is to complete the Western Corridor Railway by late 2001.  It must however be recognized that this project will be the largest single railway project ever undertaken in Hong Kong.  In terms of size, its rail length is about one and half times that of the Airport Railway.  Complicated land, environmental, financial and engineering considerations will arise and will need to be resolved.  Steering and Project Working Groups have already been set up within the Transport Branch and Highways Department to co-ordinate work related to the WCR.  We will do our best to press ahead with this enormous task.” [my emphasis]

57. On 3 July 1996, the Secretary said the following to Council members:

“The WCR has always been a priority project for the Government.  Upon completion, the three services provided by the railway, namely a passenger service between the North-west New Territories (NWNT) and the urban area, a cross-border passenger service and a freight service, will certainly help to provide the much needed transport capacity to the NWNT, ease road congestion and enhance our transportation links with China.  We are thus committed to embarking on all necessary planning and preparatory work with a view to the speedy implementation of the project.

On the make-up of the railway … the Government has always envisaged the WCR to be a freight/passenger line.” [my emphasis]

58. In February 1997, the Transport Branch of Government submitted an information note to the Yuen Long District Board in which recent decisions made for the construction of the Western Corridor Railway were summarised:

“At the meeting of the Executive Council on 10 December 1996, the Council advised and the Governor ordered that the way forward for the WCR should be as follows:

(i)   the route proposed by the Kowloon Canton railway Corporation (KCRC) should be adopted;

(ii)the construction should proceed in two phases – with Phase I, comprising the domestic passenger line from West Kowloon via Tsuen Wan, Kam Tin, Yuen Long and Tin Shui Wai to Tuen Mun to be built first, leaving the cross border passenger and freight services (Phase II) to a later date …”

59. The information note continued by saying:

“… we concluded that the domestic passenger line from West Kowloon via Tsuen Wan, Kam Tin, Yuen Long and Tin Shui Wai to Tuen Mun should be built first (Phase I), with provisions such as reinforced track and higher tunnels etc to accommodate the cross border passenger and freight services.”

60. To emphasis the economic impact of the Western Corridor Railway, Mr Neoh referred to the minutes of a meeting of a subcommittee of the Legislative Council’s Transport Panel held on 12 July 1996.  In those minutes a KCRC representative is recorded as informing the subcommittee that the ‘cumulative return on investment to Government’ would reach $1,000 billion by the year 2034.  This apparently represented a 12% rate of return which, when discounted to take inflation into account, represented a real rate of return of 5%.

61. As for the population pressures that compelled the need for the rail link to the north western part of the New Territories, the information note commented:

“On domestic passenger forecasts, KCRC’s proposal adopted a territorial population of 7.37 million by 2011 and a population of 1.23 million in Northwest New Territories (NWNT).  The recently announced Hong Kong Territorial Development Strategy Review forecast a population ranging from 7.52 million to 8.09 million by 2011, and a population of 1.43 million in NWNT.  There is an urgent and undisputed need for a mass transit service to Yuen Long, Tin Shui Wai and Tuen Mun.” [my emphasis]

62. Of course, population pressures create not only a need for mass transport services but also for urban housing and in this regard Government has long planned to link urban housing development to the railway project.  To support this, Mr Neoh made reference to a statement by the Secretary for Planning, Environment and Lands to the Legislative Council on 4 April 1998:

“The three priority rail-links will be completed between 2002 to 2004, by which time the traffic condition of the Northwest and Northeast New Territories and Tsueng Kwan O will improve greatly and the future development of these areas greatly benefited.  This will tie in perfectly with the Government’s objective of increasing housing construction.”  [my emphasis]

63. Mr Neoh also referred to a recent Government white paper entitled ‘Better Housing for All’ in which it was said that ‘our planned railway developments (including West Rail) will improve our transport infrastructure and maximise the potential of individual housing sites’.

64. Perhaps the most tangible evidence of the link between the railway project and the ability to supply high density housing, said Mr Neoh, were the stated intentions of the KCRC, a corporation wholly owned by Government.  In mid-1997, in an interview with the Oriental Daily News, the chairman of the KCRC said that the construction of West Rail would, in part, be financed with the building and sale of housing developments situated on and around the various West Rail stations.  The chairman identified 7 of the 9 stations along the route as being intended for building development, the two most extensive being Kam Tin and Tsuen Wan West, both with 6 million square feet of intended development, about 80% of which will be residential.

65. It is accepted, however, that the fact that the KCRC desires to build high-density housing does not imply that the planning authorities will necessarily consent to such high-density development.  This was recognised in a technical planning and development study on the North West New Territories prepared by consultants in March 1998 when the following was said:

“It should be noted that Planning Department’s assumed committed residential development includes development proposed by KCRC in association with proposed stations and a depot on West Rail, although this inclusion for planning purposes in no way implies government agreement to the development quantities proposed.”  [my emphasis]

The decisions of the CPLD concerning the Applicants’ claims

66. While the Applicant’s challenges in this case arise out of a complex history of inter-related planning and development matters, they nevertheless focus essentially on the decisions of the CPLD made at just one meeting.  That meeting was held on 27 April 2000.

67. I say that because it does not appear that the CPLD had convened at any earlier date to decide upon the quantum of the ex gratia compensation payable to the Applicants.  The original offers would have been processed administratively.  The calculations of the compensation would have been based upon the zonal compensation plan current at the time (either the one effective from 1 April 1998 or 1 April 1999) with the necessary amendments being made to ensure a uniform rate of compensation when various parcels of land were included in a single project ‘envelope’.

68. Being dissatisfied with the offers of compensation, the Applicants made enquiries with the Lands Department.  This resulted in a number of conversations, various meetings and a good deal of correspondence which stretched from late 1998 until the first applications for leave to apply for judicial review (in cases HCAL 106 and 107) were filed at the end of August 1999.  During this time the Applicants were advised that the CPLD was responsible for all final decisions in respect of the Zonal Compensation Plan and for reviewing any request for reclassification, each request to be decided on its own merits.  However, for reasons not relevant to this judgment, no request for reclassification came before the CPLD before the issue of the first judicial review proceedings.

69. As I have said, it was only on 27 April 2000 that the CPLD met to consider the Applicants’ individual requests.  By that time, of course, litigation had been in process for several months, at least in respect of the land resumed under the Railways Ordinance.  The second series of judicial review proceedings were not filed until late September 2000, some 5 months later.

70. The CPLD appears to have met to consider representations made on behalf of the Applicants by their solicitors.  Those representations were contained in a lengthy letter (running to some 25 pages) dated 4 March 2000.  That letter sought reclassification for a number of reasons which were summarised at the end of the letter in the following form:

“In summary, our clients reiterate that the above lots should be re-classified and accorded the status of Zone A …. for the following reasons : -

1.   they are in an area affected by an essential project with territory-wide significance, namely, the West Rail Project; and in particular, the West Rail Kam Tin Station as part of the project;

2.   they are within an area in Kam Tin for new town/urban development;

3.   they are at the heart of the Kam Tin Strategic Growth Area and hence within an area for new town/urban development, SGA being a new concept and device of new town development;

4.   with the resumptions of the above lots which signal implementation of such new town/urban development, they are indeed within an area which is part of a de facto new town.  The requirement of new town OZP [outline zoning plan] to be gazetted first before the above lots are classified Zone A is both unfair, unreasonable and inconsistent with the spirit and intent of long established Government policy and practice; and

5.   they clearly merit classification of an order higher than Zone B and should therefore logically fall within Zone A.”

71. In respect of the CPLD’s decision under challenge, one of the matters I have considered is the degree to which those decisions(rejecting the various applications) may have been affected by the on-going litigation; namely, the Applicants’ judicial review proceedings.  The timing of the reasons must mean that there is some danger of rationalisation.  It is today settled law that anything suggestive of ex post facto reasoning must be carefully scrutinised.  But in respect of the CPLD’s meeting of 27 April 2000 I am satisfied that there is no evidence of such rationalisation or of any attempt simply to ‘stand one’s ground’.  As I have said, the meeting of 27 April appears, in part of least, to have been convened specifically to consider the various applications made by the Applicants.  This was the first time that the Applicants’ matters had come before the committee; it was the first opportunity given to it to debate the specific issues.  In the circumstances, I do not believe the existence of litigation would in any way have affected the issue.

72. This leads to the constitution of the CPLD itself.  From the minutes of its various meetings it is patently an august body constituted at the highest rank of the public service.  The minutes indicate that the committee was chaired by the Secretary for Planning, Environment and Lands.  While its fifteen other members included the Director of Planning, the Director of Lands and representatives of other Government departments such as Home Affairs, Architectural Services and Finance Branch.

73. It is customary in Hong Kong (and no doubt in many other public services) to refer to an individual’s rank and post by its initials rather than spelling them out in full.  The minutes follow this tradition and it was not always possible for counsel or myself to decipher the initials appearing in those minutes.  In any quoted extract from those minutes therefore the initials remain as originally recorded.  The key matter of course, is not the actual identity of the individual committee member but the fact that it is the voice of the committee.

74. Before moving to consider those minutes, it is to be noted that the requests submitted to the CPLD by the Applicants’ solicitors did not include a request that, failing a reclassification at Zone A level, the land should nevertheless be zoned at the intermediate level of B.  It appears from the minutes, however that the CPDL did consider this level, the minutes reading as follows:

“In response to the Chairman, DD/T, Plan D said that although the Consultants of the NWNT Planning and Development Study Plan D had identified Kam Tin as one of the potential strategic growth areas (SGAs) in the New Territories, this Committee decided not to give priority to develop Kam Tin as a SGA in 1999.  In this connection, there was no timeframe for carrying out detailed studies for SGA development in Kam Tin.  As Kam Tin would not be developed in the near future, Members concluded that the affected lots should not attract either Zone A or Zone B compensation. [my emphasis]

75. As to the submission that West Rail was an essential project of territory-wide significance, the minutes record the following:

“DS(1), TB said that TB, as the policy bureau for the West Rail project, did not think that West Rail was an essential project of territory wide significance.  He explained that there would be other, albeit less convenient, means of transportation to serve the residents in northwest NT even if the rail were not built.”

76. In respect of this matter, the minutes continue:

“AD(2), HAD highlighted para 2-6 of a paper submitted to the then Provisional District Boards in 1997 which set out the need for the railway and its significance to the development of the territory.  He worried that such a reference might be used in any dispute or future claims that the West Rail project was an essential project with territory wide significance.  Members noted and agreed that these statements only supported the importance of the railway but did not provide sufficient justifications of an essential project.

DS(1), TB remarked that the West Rail was different from the Disney Theme Park which had been regarded as an essential project with territory wide significance.  The Chairman agreed and elaborated that the Disney Theme Park project would have significant impact on the whole territory in terms of its economic benefit and the recreational values it would bring to all Hong Kong people.  In comparison, the West Rail project would mostly benefit people living or going to work along its alignment.  D of Lands (Ag) added that another project which was categorised as essential with territory wide significance was the Black Point Power Station project.”

77. In respect of the drainage project and the suggestion that it should be classified as an essential project of territory-wide significance, the minutes record the following:

“PAS(Tsy)W, FB said that according to the policy approved by ExCo, the authority to decide on zonal upgrading rests with the Chairman of the CPLD having taken full account of the views of the committee.  Where the upgrading involves projects which are believed to be essential and of territorial significance, each case should be considered on its own merit and reference should be made to precedent cases as well as the advice of the relevant Policy Bureau.  GE(INCO), WB confirmed that WB, as the policy bureau for the “Main Drainage Channels for Yuen Long & Kam Tin, Stage II, Phase I, Yuen Long, New Territories” project, was of the view that this project was only a regional project.  It could not meet the criteria of being an essential project with territory wide significance.”

78. In respect of the inter-relationship between West Rail and the drainage project, the CPLD was of the opinion that the two should not, in respect of the Applicants’ lands, be seen as an integrated whole.  The minutes read:

“D of Lands (Ag) opined that there was no linkage between the Drainage Channel project and the West Rail project as the former would still be needed even if the latter were not carried out.  Therefore, compensation rate for land resumed under the Drainage Channel project should be determined by the nature of the Drainage Channel project itself, i.e. Zone C.

In response to DS(B), EFB, DTD believed that some people might confuse the two projects because TDD entrusted the Drainage Channel project to the contractors of the West Rail.  He clarified that the land required for the Drainage Channel project had been resumed under the Land Resumption Ordinance instead of Railway Ordinance.  The works were entrusted to West Rail contractors to minimize interface problems as there were overlapping areas between the two projects.”

79. The CPLD therefore decided that there was insufficient justification to upgrade the compensation payable in respect of the Applicants’ resumed lands.

80. The CPLD held a later meeting in respect of the Applicants’ claims.  This was held on 27 July 2000.  To a degree (I can put it no higher than that) it appears to have been convened in response to certain remarks of Stock J made during an interlocutory hearing of the first judicial review proceedings.  On 10 July, at that hearing, Stock J indicated that it may be of assistance to learn what matters were relied upon by the CPLD when it determined that West Rail was not an essential project of territory-wide significance and, generally, what criteria where considered in determining issues of that nature.

81. At the meeting of 27 July, after discussion, the chairman of the CPLD directed that a list of criteria be drawn up for determining the issue of what amounted to an essential project of territory-wide significance and such a list was later approved.  The list, however, was not so much one of ‘criteria’ as ‘possible examples’; it being accepted that, as each case had to be decided on its own merits, it could not constitute an exhaustive list.  In my judgement, the list is of little, if any, assistance in the present case.  I am of this view because it appears to have been compiled not as an historical record to reflect what the CPLD had in fact decided in respect of the Applicants’ claims but rather as a general guide for future use.  This, I believe, is made clear in the final paragraph of the paper which contained the list, that paragraph reading:

“Members are recommended to adopt the above criteria as being ones which would qualify a project as being “essential with territory wide significance”, whilst accepting that there would readily be others not listed.  In every case the project must still be considered on its own merits, and CPLD will remain the authority to approve or reject any such recommendation.” [my emphasis]

82. In my judgment, however, some limited assistance may be obtained from the minutes of 27 July 2000.  I say that because, when approached cautiously, there can be found in them some true reflection of the manner in which the committee had set about its decision making process in respect of the Applicants’ claims at its April meeting.  For example, the minutes recall the following:

“DS(1), TB re-affirmed his view expressed at the 59^th CPLD meeting that the WR project, which was the first phase of the development of the rail network in the west of the New Territories, was not an essential project with territory-wide significance.  He explained that the primary aim of the WR was to provide an alternative mode of transportation to NWNT to meet the long term demand.  Whilst it would provide a quick and environmental friendly way of transport for people living in Tuen Mun and Yuen Long, he stressed that the WR was not the only means of passenger transport as there were a lot of bus routes plying between the region and Kowloon via Route 3 and Tuen Mun Highway.  Although there might be occasional traffic congestion that caused inconvenience to the road traffic, there was no major road problem.” [my emphasis]

83. In my view too, some window into the thinking of the CPLD at its April meeting can be obtained from the comments recorded in the minutes to the effect that Route 3, the road link with the New Territories, had not been classified as an essential project of territory-wide significance and there was no good reason why essentially the same rail link should be so classified.  In this regard, the minutes read:

“In the case of WR, the road alternative, Route 3, ran almost parallel.  Therefore, it would be very difficult to conclude that any part of the railway could meet the Zone A definition unless Route 3 was previously also so classified.”

84. As to precedent cases, the minutes record the following comments made concerning those projects which had in the past been classified as essential and of territory-wide significance:

“D of Lands reminded Members that so far there were only two projects classified as essential projects with territory-wide significance, i.e. the Black Point power station and the Disneyland.  DS(1), TB considered that the Black Point power station was essential and so important that the whole territory could not function properly without steady power supply as some essential facilitates for survival of the entire Hong Kong were accommodated in Kowloon and New Territories sides.  He further said that the Disneyland, as discussed in the April’s Meeting, was very important to the economy of Hong Kong.  On the contrary, the WR was only a regional significant project that benefited the people living or going to NWNT.”

85. The minutes conclude:

“Members considered that there was no reason for classifying the WR as an essential project of territory-wide significance.  The Chairman requested LandsD to prepare the criteria for determining “an essential project with territory-wide significance” taking account of Members’ view and TB to prepare a point-by-point commentary to the applicant’s affirmation for the submission to court.”

The Applicants’ contentions as to compensation zones

86. The Applicants contend that all of the resumed land should be compensated for at the level contemplated by Zone ‘A’; that is:

“New Town Development Areas (namely areas within the New Town boundaries as shown on gazetted outline zoning plans for new towns), and those areas that are affected by essential projects with territory-wide significance.”

87. The submissions concerning zoning made by Mr Neoh, may be summarised as follows:

                   (i)Although the CPLD found the West Rail Project to be of regional significance only and not to be an essential project of territory – wide significance, this decision was not in accordance with a fair and consistent application of the compensation scheme, and/or was ‘Wednesbury’ unreasonable.  Accordingly, it is open to the Court to quash that finding and, on the basis that West Rail is an essential project of territory – wide significance, to order that compensation in respect of the land resumed for the West Rail project be calculated at the rate applicable to Zone A.

(ii)The land resumed from the Applicants for the drainage project, although not required directly for the West Rail project was nevertheless ‘affected’ by it in that inter alia the drainage scheme was essential for the construction of West Rail.  As a result, compensation for that land should be calculated at the rate applicable to Zone A.

(iii)       If the West Rail project is not considered to be an essential project with territory –wide significance, it must nevertheless have been patent to the CPLD that Kam Tin (and its immediate environs) was bound to be brought under urban development in the near future so that it will become, in reality, a new town.  The CPLD has in the past awarded a compensation classification of A to such a development (Sai Kung) which, although not within boundaries shown on gazetted outline zoning plans for new towns, nevertheless exhibited the same urbanisation patterns.  This does not appear to have been considered by the CPLD and the matter should therefore be remitted to it to consider whether the classification of compensation should ‘exceptionally’ be re-zoned as ‘A’.

(iv)In addition, as the drainage project was necessary for the maintenance of the infrastructure of both Yuen Long (a new town) and the Sek Kong military cantonment area, and as this does not appear to have been considered by the CPLD, the matter should be remitted to it to consider whether the land resumed from the Applicants for the drainage project should not ‘exceptionally’ be re-zoned as A.

(v)That since it must have been patent that Kam Tin (and its immediate environs) is to be brought under urban development in the near future by reason of (a) the existence of the West rail project, (b) the closeness of Route 3 and, (c) the fact that Kam Tin had long been identified as an area of strategic growth, all the resumed land should at least be zoned as ‘B’.  The failure of the CPLD to make such a finding is not in accordance with a fair and consistent application of the compensation scheme and/or is ‘Wednesbury’ unreasonable.  If, however, the Court is not prepared to quash the findings of the CPLD on this basis, the matter should be remitted to it to consider whether such a classification should be made.

A consideration of the applicable legal principles

88. In determining ex gratia compensation under the scheme it is, in my view, clear that Government has entrusted the CPLD with a broad discretion.  As such, it is for the CPLD to weigh the relevant considerations and to come to a finding.  This Court has no jurisdiction to alter any such finding because, on the merits, it has come to a different conclusion.  Proceedings before this Court do not constitute an appeal nor especially do they constitute a hearing de novo in which all relevant matters are canvassed and the Court then substitutes its findings for those of the CPLD.

89. As to the reasonableness of a public body’s decisions, Lord Woolf MR, in R v. Lord Saville of Newdigate and others, ex parte A [1999] 4 All ER 860 (at page 871) said:

“… it is as well to start by remembering that the reason for the usual Wednesbury standard (see Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680) being applied is because the body whose activities are being reviewed has the responsibility of making the decision and not the courts.  In addition that body in the majority of situations is going to be better qualified to make decisions than the courts.  It is only where the decision is unlawful in the broadest sense that the courts can intervene.  The courts have the final responsibility of deciding (whether a decision is unlawful) and not the body being reviewed.  The courts therefore can and do intervene when unlawfulness is established.  This can be because a body such as a tribunal has misdirected itself in law, has not taken into account a consideration it is required to take into account or taken into account a consideration which it is not entitled to take into account when exercising its discretion.  A court can also decide a decision was unlawful because it was reached in an unfair or unjust manner.”

90. To that recitation, of course, is to be added the test of what is or is not Wednesbury unreasonable.  In that regard, only decisions that verge on an absurdity; or expressed another way, only reasons that are so irrational or perverse that no reasonable decision-maker could ever have made them will be quashed by the courts.  In this regard, in R v. Hillingdon London Borough Council, ex parte Pulhoffer and another [1986] 1 AC 484, Lord Brightman said:

“Where the existence or non-existence of a fact is left to the judgment and discretion of a public body and that fact involves a broad spectrum ranging from the obvious to the debatable to the just conceivable, it is the duty of the court to leave the decision of that fact to the public body to whom Parliament has entrusted the decision-making power save in a case where it is obvious that the public body, consciously or unconsciously, are acting perversely.”

91. That test has been followed in Hong Kong.  See, for example, Aita Bahadur Limbu v. Director of Immigration HCAL 133/1999 in which Stock J (as he then was) said:

“The legislature has entrusted to the Director a discretionary power to grant permission to reside to individuals who, in the first instance, have no right to reside here and that discretion is a very wide one. It must not be exercised in bad faith, or arbitrarily, or perversely and the policy which the Director has adopted is one which must not be exercised without considering the circumstances of each individual case.  To that extent the courts will review the exercise of the discretion, but the courts are concerned with legality and not with merits.  Where the determination of facts are left to the Director and the facts sweep across a range ‘from the obvious to the debatable to the just conceivable, it is the duty of the court to leave the decision of that fact to the public body save in a case where it is obvious that the public body are acting perversely.”

92. Finally, I would seek only to emphasise what was said by Lord Woolf MR in R v. Lord Saville of Newdigate ex parte A (supra); namely, that the courts have to bear in mind at all times that the members of a public body, such as the CPLD, have a greater understanding of their task than the courts.

93. In the light of these authorities, it seems to me that the courts are not concerned with the merits of decisions made by public bodies unless, in the circumstances, the decisions are so perverse or irrational that they patently have no merit.  Thereafter, essentially, the courts are concerned only with the lawful process of the decision-making.

94. That lawful process, in respect of the CPLD, means that, although it is given a mandate to decide each case on its own merits, it must do so fairly and consistently and –

(a)        in accordance with stated policy; that is, by taking the advice of the relevant policy branch and having regard to ‘precedent cases’;

(b)       in accordance with the principles laid down by the Sir Y K Kan working group; for example, that decisions must incorporate a continuous review of compensation rates;

(c)        in accordance with the terms of the scheme; that is, in accordance with its true intent and purpose.

95. Mr Neoh has submitted on behalf of the Applicants that, with planning matters always being subject to changing socio-economic imperatives, the CPLD, in reaching its decisions lawfully, cannot ‘slavishly adhere’ to existing development plans.  If a particular plan (or policy) is seen to be outdated and superceded by more recent developments, the CPLD is obliged to act flexibly in assessing compensation.  In principle, I would agree with that.  See, for example, City of Edinburgh Council v. Secretary of State for Scotland [1997] 1 WLR 1447 (at pages 1450C-G and 1458E-F).

96. As indicated at the beginning of this judgment, Mr Neoh has founded his challenge on the doctrine of legitimate expectation.  As he expressed it in his skeleton argument: … ‘the court must ensure that the legitimate expectation of the Applicants to have the scheme fairly applied to them is safeguarded’.

97. As I understand it, therefore, the matter in issue is whether, in assessing compensation, the CPLD acted fairly or whether, unconsciously, it abused its powers.  If that is so, it seems that the matter can better be resolved by reference to the basic principle of fairness rather than legitimate expectation.

98. I say that because there is no suggestion that the CPLD has made a specific promise or given an undertaking to the Applicants that it will award compensation at a specific rate or that it will go through the process of exercising its discretion in a particular way.  If there had been any such promise or undertaking, that may well have given rise to a legitimate expectation on the part of the Applicants.  No doubt the Applicants purchased their land in the expectation that the planning authorities would allow them to develop the land in the manner that they, as entrepreneurs, hoped.  But with planning matters being fluid, there was always an inherent risk which must have been appreciated by the Applicants.  Nor, in my opinion, can it be said that the CPLD has so specifically and overtly conducted its affairs in the past that such conduct amounted to an undertaking or a code of conduct equivalent to an undertaking.  As I say, the issue is essentially one of fairness.  As was said by Dawson J in AG for New South Wales v. Quin (1990) 93 ALR 1 (at page 39):

“No doubt people expect fairness in their dealings with those who make decisions affecting their interests, but it is to my mind quite artificial to say that this is the reason why, if the expectation is legitimate in the sense of well founded, the law imposes a duty to observe procedural fairness.  Such a duty arises, if at all, because the circumstances call for a fair procedure and it adds nothing to say that they also are such as to lead to a legitimate expectation that a fair procedure will be adopted.”

99. As to fairness, Lord Scarman has said in Preston v. IRC [1985] 2 All ER 327 (at 329):

“I must make clear my view that the principle of fairness has an important place in the law of judicial review, and that in an appropriate case it is a ground on which the court can intervene to quash a decision made by a public officer or authority in purported exercise of a power conferred by law.”

100. In the same case, Lord Templeman reached the following conclusion (at page 341):

“In principle I see no reason why the taxpayer should not be entitled to judicial review of a decision taken by the commissioners if that decision is unfair to the taxpayer because the conduct of the commissioners is equivalent to a breach of contract or a breach of representation.  Such a decision falls within the ambit of an abuse of power for which in the present case judicial review is the sole remedy and an appropriate remedy.  There may be cases in which conduct which savours of breach of [contract] or breach of representation does not constitute an abuse of power; there may be circumstances in which the court in its discretion might not grant relief by judicial review notwithstanding conduct which savours of breach of contract or breach of representation.  In the present case, however, I consider that the taxpayer is entitled to relief by way of judicial review for “unfairness” amounting to abuse of power if the commissioners have been guilty of conduct equivalent to a breach of contract or breach of representation on their part.”

101. Unfairness, therefore, in the purported exercise of power can amount to an abuse or excess of that power.

The CPLD’s decision not to classify the West Rail project as an essential project with territory – wide significance

102. For resumed land to fall into compensation zone A, it must be intended for new town development or it must be ‘affected by essential projects with territory – wide significance’.  It is the Applicants’ contention that the railway project (together with the drainage project) quite patently constitute not only essential projects for Hong Kong’s development but also, when taken together, are projects with territory – wide significance.  The CPLD did not come to that finding; at least not in respect of West Rail (together with the drainage project) which is now under construction.

103. I have earlier spoken of the fact that the working group which refined the definition of Zone A was aware that the phrase ‘essential projects of territory – wide significance’ is a broad phrase and capable of accommodating a number of meanings.  Nevertheless, the decision was made not to impose guidelines but to leave the matter to the experience and professionalism of the members of the CPLD.

104. In a geographically limited territory such as Hong Kong with a high density of population, it may no doubt be said that a great many projects are essential to its development and, because everything is planned to be an essential part of the greater whole, that many such projects have ‘territory – wide significance’.  The CPLD, however, has concluded that only two projects have in recent times met the necessary criteria to be so classified.  Expressed in plain language, it may be said that it has set a high standard.  But that per se cannot be classified as perverse or irrational.  It is, in my view, well within the boundaries of rationality to set the standard high by holding that the phrase ‘essential projects of territory-wide significance’ implies that the projects must not only be essential to Hong Kong’s development but also of manifest consequence to the entire territory; in short, projects that transcend their regional importance and become of both central and lasting importance to the development of the entire territory.

105. The only two projects which have to date merited this classification in the opinion of the CPLD are Disneyland and a project known as the Black Point Power Station project.  It appears that the building of Hong Kong’s new airport did not fall for classification under the scheme but clearly would have been so classified.

106. In respect of Disneyland, at the meeting of the CPLD held on 27 April 2000, it was said by the chairman that the theme park would have a significant impact on the whole territory in terms of its economic benefit (generated through tourism) and the recreational value that it would provide for all the people of Hong Kong (regardless of where they lived).

107. As for the Black Point Power Station project, Mr Tsang, for the Respondent, stated that, although there are other power stations in Hong Kong, Black Point has the capacity to act as a territory – wide back-up facility.  In addition, the land resumed for the project included land required for Pearl River marine facility, a port of sorts catering to the many vessels which ply their trade up and down the river.

108. In respect of the power station itself, the minutes of the CPLD meeting of 27 July 2000 record one of the members saying that it was of such high importance because the territory as a whole would not be able to function properly without the ‘steady power supply’ that it provided and which complemented or was in addition to the existing regional sources.

109. The relevant minutes of the CPLD’s meetings make it plain, in my view, that precedent cases were taken into account when considering how to classify West Rail.  These included the Disneyland and Black Point projects but also included the Route 3 project, a major road project into the New Territories which was not classified as an essential project with territory – wide significance.  While the CPLD is obliged to give due consideration to precedent cases and while fairness will dictate the need for consistency other than in cases where pressing public policy dictates otherwise, it must be remembered that it is not bound by these cases.  Past cases do not constitute any form of legally binding precedent.  That being said, I can find nothing in the relevant minutes to suggest that, in considering precedent cases and comparing them with West Rail, the CPLD reached conclusions that fell outside of that very broad spectrum allowed to it, a spectrum of findings which range from the obvious to the debatable.  With respect, this Court is not greatly assisted by expert reports which come to a different conclusion on the comparative merits.  It was always a matter of judgment for the CPLD.  The fact therefore that other experts may reasonably disagree with the CPLD is of no consequence, not unless that disagreement illustrates the fact that the CPLD reached a decision which was irrational or unlawful.

110. Similarly, bearing in mind the standard set by the committee in considering earlier cases, I am unable to come to the conclusion that the CPLD’s classification of West Rail (as an independent, free-standing project) was perverse or irrational or made in defiance of historical planning imperatives.  It appears to me that the CPLD considered the nature of the project and, while it was found to be of great importance to the New Territories (in particular the north western areas), its importance was found to be ‘regional’ only and not of what I have earlier described as of manifest consequence to the development of the entire territory.  West Rail is a passenger service only, helping to open up the areas along its line of rail.  In that respect, the CPLD compared it with Route 3, the road project which linked the same area to the metropolitan area of Kowloon.  There was, therefore, in comparing two linear projects of great importance – one road and one rail – a consistency of approach.

111. But Mr Neoh argues that the CPLD has not proceeded fairly in reaching its decision nor has it acted in a way that is Wednesbury reasonable; that is, by taking into account all matters that it was obliged to take account.  The CPLD, said Mr Neoh, ommitted in its decision making to take into account a consideration of fundamental importance; namely that West Rail does not stand on its own as a regional rail service.  It has at all times been planned (and publicly heralded) as part only of a far greater project, one that will encompass not only a passenger rail service into the north west of the New Territories but a critically important cross-border commercial service that directly links Hong Kong’s container port at Kwai Chung with the mainland.

112. Mr Neoh contended that all the available evidence pointed to the fact that the completion of the full Western Corridor Railway project was not merely a planning spes (a mere hope) but was being actively planned and prepared.  It is only rational therefore to conclude that in the relatively near future Kam Tin will stand on a commercial and passenger rail line that will not only open up the north west of the New Territories but, by carrying freight to and from Kwai Chung through the New Territories and into the Mainland, will add a new dimension to Hong Kong’s ability to continue to prosper as an international centre for trade.

113. The ex gratia compensation scheme is designed, said Mr Neoh, to incorporate the ‘hope value’ of land; in simple terms, it looks to the future use and therefore the future value of resumed land.  In such circumstances, it is manifestly unfair (and therefore an abuse of power) on the part of the CPLD to ignore the ‘prospective’ nature of the Western Corridor Railway as a whole and to assess the true nature of the project on Phase One only; namely, the passenger service into the North West of the New Territories.

114. At its meeting on 27 April 2000, the CPLD does not appear (on the face of the minutes) to have turned its mind to the question of whether West Rail should be considered on its own or as part of the intended Western Corridor Railway project.  But was it obliged to do so?  Mr Tsang, for the Respondent, argued that the project had been planned in stages and was being built in stages.  While therefore prudence dictated that West Rail should include tunnels with larger dimensions and rails capable of taking heavier loads, this was done in anticipation only of the possible building of the next stages, not their certain building.  Nothing was set in stone; infrastructure projects which are on the drawing board may well remain there.  There may be many reasons for this: funds may run low, priorities may change.  It was, therefore, said Mr Tsang, entirely rational for the CPLD to consider the classification of West Rail on its own rather than as part of an intended but nevertheless uncertain project of greater dimensions.

115. It may well be, of course, that, if the matter had been considered by the CPLD, it would have come to the conclusion that (at this time) it was rational to ignore the later intended phases of the project.  But in my judgment, in exercising the scheme in a fair manner; that is, in recognition of the fact that the scheme incorporates the ‘hope value’ of land, it was incumbent upon the CPLD at least to ask itself if, in assessing the nature of the West Rail, it should look at it on its own (as a purely regional railway service) or as part of a greater project (with perhaps a greater impact on Hong Kong as a whole).  The membership of the CPLD is, as I have said, chosen from the senior ranks of Government planners.  Whether the future intended stages of the Western Corridor Railway remain uncertain or whether, to the contrary, the other phases are about to become reality, will be matters within the CPLD’s knowledge.

116. As to the ‘near future’ (which in planning terms may be four or five years hence), I can certainly imagine a justified sense of grievance on the part of the Applicants if the go-ahead is given for the other stages and land resumed for those other stages is given a higher grading because the fundamental nature of the railway project has now changed and is now considered to be both essential and of territory-wide significance.

117. As Mr Neoh expressed it in his skeleton argument: ‘splitting Phase I and Phase II is not the right approach as the West Rail is clearly intended to be part of one project.  If Government is allowed to do this, then it can split all essential projects into parts and thereby avoid having to pay the right amount of compensation under the scheme’.

118. But, in light of the CPLD’s findings on the nature of West Rail – findings which I am satisfied were informed and rational – is it realistic to suppose that the committee will classify the full project differently?  I can only say that, in my view, there exists a case worth consideration which is to the effect that West Rail, once incorporated into the completed Western Corridor Railway project, will be transformed.  Accordingly, it seems to me that the CPLD was obliged to ask itself two questions.  First, did it consider West Rail on its own or as part of the greater project?  Second, if it held that, bearing in mind the prospective nature of the scheme, it should view it in terms of the full project, did it consider the full project to be one that was essential and of territory – wide significance?  There is nothing I can find on the papers presented to me to indicate that the CPLD asked itself these questions or ones that would have the same effect.  But how could it properly and fairly come to an assessment of the correct compensation grade without doing so?

119. Must it perhaps be presumed that the CPLD, in reaching its decision, was aware that the next stages of the Western Corridor Railway remain uncertain?  In my judgment, no such presumption can be made.  It was a fundamental question and one which the CPLD (on the face of its records) appears not to have considered.  That, in my view, is sufficient to bring into play the supervisory jurisdiction of this Court.

120. In short, I am satisfied that the CPLD failed to take into account a consideration which it was required to take into account. The process of its decision-making was therefore flawed.  The matter must therefore be remitted to the CPLD to allow it to consider the questions which I have earlier defined.

The CPLD’s decision not to find that the drainage project was ‘affected by’ the Western Corridor Railway.

121. It is contended on behalf of the Applicants that, whatever the genesis of the drainage project, the fact remains that it is today, at least in so far as the Applicant’s resumed land is concerned, an essential component of the railway project.  This is illustrated by the fact that the KCRC has taken over the work on the drainage project where it impacts on the building of the railway.  As such, so the argument is put, the areas of the Applicants’ land resumed for the drainage works are at the very least ‘affected by’ the Western Corridor Railway and should therefore be classified as the Western Corridor Railway is classified.

122. That begs the question: within the context of the phrase – ‘those areas that are affected by essential projects with territory-wide significance’ – what is meant by the words ‘affected by’?  The CPLD at its meetings called to resolve the Applicants’ claims does not appear to have asked itself this question, not directly at least.  It is apparent from the minutes, however, that in the view of the CPLD the drainage project and the railway project were considered to be independent of each other.  Physically, the one may cross or overlap the other but they nevertheless remain separate.  In this regard, for example, the Director of Lands is recorded as saying that, in his opinion, there was no ‘linkage’ between the drainage project and the railway project as ‘the former would still be needed even if the latter were not carried out’.  As to the degree to which the involvement of the KCRC in the drainage engineering works shows some form of integration of the two projects, the minutes, in my view, do not accept this to be so.  Cost and convenience appear to be the reasons for the KCRC’s involvement.  As the minutes say: ‘the works were entrusted to West Rail contractors to minimize interface problems as there were overlapping areas between the two projects’.  In summary, it is clear, I believe, that the CPLD did not accept that the words ‘affected by’ were to be interpreted so liberally as to include mere physical proximity or influence.

123. In my view, this restricted reading of the words ‘affected by’ is entirely rational.  If mere proximity or influence or some physical overlapping were sufficient it could lead to absurd results.  For example, land required for a rural road of purely local significance would be transformed if it ran near to or crossed an essential project of territory-wide significance.

124. But what then do the words mean?  It was, of course, for the CPLD to interpret the meaning of the words and Mr Tsang has pointed to the manner in which, he says, the CPLD must have interpreted them.  In this regard, Mr Tsang pointed out that not all land resumed for an essential project with territory-wide significance will necessarily be the land upon which the project itself is built.  Take a nuclear power station as an example.  Land will be required for the station itself but may also be required to constitute a cordon sanitaire around the station.  That second parcel of land will be resumed for the power station not because it will constitute the station itself but because it will be essential to the safety of its management.  Similarly, he said, with a linear project such as a railway line it may be necessary to resume land in the immediate vicinity to enable the line to be built; this will be land running alongside the line of rail or abutting from it but not land on which the rail itself is built.  That, in my view, is a rational approach to why the words ‘affected by’ are used.  In summary, it refers to land which is specifically resumed for an essential project of territory-wide significance and is therefore integral to it even though its use may be collateral to the project itself.  In respect of the land resumed for the drainage project, the CPLD found that it was land resumed for that project only and was integral to that project only.

125. It is, of course, a fine decision.  No doubt some drainage in that area would be required for the railway (together with the Kam Tin Station and depot).  To that extent, another committee may have come to a more liberal view.  But that is not the issue.  In coming to its decision that the drainage project was not linked to the railway project, was independent of it, and could not therefore be ‘affected by it’, I am unable to say that the CPLD made a finding so unreasonable that it fell outside of the broad discretion with which it was vested.

The alleged failure of the CPLD to consider whether Kam Tin would become a new town although not gazetted as such

126. Resumed land which falls into zone A in the ex gratia compensation scheme includes new town development areas; that is, areas within the boundaries shown on gazetted outline zoning plans for new towns.  There is no suggestion that Kam Tin has been gazetted as a new town area.  Accordingly the Applicants’ land did not fall for consideration under that heading.  It is, however, the Applicants’ case that such are the development imperatives for Kam Tin that it is bound in the near future to become in reality a new town even if not gazetted as such.  It is accordingly argued that the CPLD was obliged to consider whether the realities dictated a new town environment.  This obligation was vested in the CPLD because on a previous occasion it had awarded compensation on this basis, the occasion being in respect of the urban development of Sai Kung.  This constituted a precedent case which had to be considered.

127. It is apparent, however, that the CPLD did consider the future development of Kam Tin as a strategic growth area and, on the basis that Kam Tin would not be developed as such in the near future, concluded that the Applicants’ land should not attract zone A compensation.  This conclusion was reached in answer to the suggestion made by the Applicants’ solicitors (in their letter of 4 March 2000) that the Applicants’ land lay –

‘at the heart of the Kam Tin Strategic Growth Area and hence within an area for new town/urban development, SGA being a new concept and device of new town development’

and

‘with the resumption of the above lots which signal implementation of such new town/urban development, they are indeed within an area which is part of, a de facto new town.’

128. The term ‘new town’ is, in my view, to be contrasted with the term ‘urban development’.  The term ‘new town’ suggests a development of far greater extent and complexity, one in fact which creates a fully accomplished town environment.  As such, I am satisfied that the CPLD was entitled to consider the extent to which the preliminary strategic growth area studies had progressed in deciding whether a de facto new town was being brought into existence.  The CPLD decided that, despite the coming into existence of the Kam Tin Station and depot, no ‘new town’ was to follow inexorably in its wake.  In such circumstances, being vested with such a broad discretion, I do not see that it was necessary for the CPLD to make a direct comparison between Kam Tin and Sai Kung.  The committee applied its mind to the ‘de facto new town’ argument and I cannot say that the conclusion it reached was irrational.

The CPLD’s alleged failure to consider whether the drainage project should ‘exceptionally’ be zoned A

129. The Applicants contend that the drainage project is necessary for both the maintenance of Yuen Long, a new town, and the Sek Kong cantonment area which contains a military airfield and barracks.  As such, the Applicants contend that the CPLD should have considered whether, by so essentially supporting these two infrastructures, the drainage project should not itself be considered either integral to new town development and/or to an essential project of territory-wide significance; namely, the military airfield and army barracks.

130. It is clear, however, that the CPLD saw the drainage project as being of purely regional significance.  Of course, like so many projects in Hong Kong, its benefits were hopefully to be enjoyed in an area wider than its immediate environs.  But, for reasons given earlier, that by itself did not mean that it was to be considered as anything other than an independent, free-standing project despite the fact that it may have a broad beneficial influence on any number of other projects both in existence or planned.

131. As I have already indicated, I consider that approach to be well within the CPLD’s broad discretion.  As such, I do not believe, as the Applicants have contended, that the committee failed to consider a material matter by not looking at the consequences of the drainage project’s general influence in the area.

The failure of the CPLD to classify all the land as at least falling into zone B

132. The ex gratia compensation scheme holds that resumed land is to be classified as zone B when it consists of –

‘areas which may be brought under urban development in the near future, either by extensions to the adjoining layout areas due to their proximity to such areas or by reason of their known potential for urban development.’

133. In terms of the scheme, the CPLD was therefore obliged to consider whether the Applicants’ lands fell into areas which may be brought under urban development in the near future and to consider whether that would be so because those areas have a known potential for such development.

134. It was not necessary for the CPLD to, find as a fact that the Applicants’ lands (not already classified as B) would definitely be the subject of urban development in the near future.  The committee needed only to be satisfied that, in the light of all the circumstances, there was a recognised potential for such development in the near future.

135. It was the Applicants’ contention that, even if they failed on all their other challenges, there was quite patently a potential for the urban development of their resumed lands not already classified as B and that accordingly, at the minimum, all of their resumed lands should have received compensation at that intermediate level rather than level C.

136. The Applicants recognised that at this time Government has decided that Hung Shui Kiu will meet expanding population needs in the north west of the New Territories.  But that, said Mr Neoh on their behalf, could not detract from the fact that Kam Tin, by reason of its location just below the fork in the completed railway project (one leading into the north west of the New territories, the other to the border) was manifestly more important as a transport hub.  The strategic location of the railway depot made this even more obvious.  The stated intention of the KCRC was to build some of its most extensive residential and commercial developments at Kam Tin over the station and depot.  To that had to be added the fact that Kam Tin had long been recognised as a strategic growth area and an area for office development.  When all of these matters were taken into account, said Mr Neoh, it was irrational to hold that the Applicants’ lands – some within 150 metres of the station – would not have the very clearest potential for urban development in the form of high rise housing, offices, shops and the like.  The development may (at this time) be purely local in the sense that it would grow organically in the immediate environs of the station and depot but it would nevertheless constitute urban development.  Mr Neoh completed his argument by saying that reality dictated that, with the completion of the station and depot and the building of the KCRC developments, there would be a demand for further development immediately around the station.  Certain land in the area was classified as U (for ‘undetermined’) which made it open for urban exploitation.  The natural impetus to create an urban enviroment in the direct precincts of the Kam Tin Station, while not guaranteed, was therefore so patently likely that it could not be ignored.  But it had been ignored, said Mr Neoh.

137. From a study of the minutes, it does appear to me that the CPLD only considered the potential of Kam Tin within the framework of a formal strategic growth area plan and not within the context of more localised urban growth; that is, within the vicinity of the station and depot, growth dictated by and complementing the KCRC developments and the transport infrastructure which will gather around the station.

138. But that, of course, begs the question: what is meant by the term ‘urban development’ within the context of the scheme?  Clearly, as I have said, it cannot be the equivalent of a ‘new town’ development.  But does it encompass isolated pockets of development or only a more generalised form of development moving towards but falling short of a new town?  That, it seems to me, is a matter for the CPLD to decide.  The phrase ‘urban development’ can accommodate a broad range of meanings.  The same may be said of the phrases ‘known potential’ and ‘in the near future’. 

139. In order fairly and consistently to decide the issue of whether all of the Applicants’ lands should have been classified as B, it seems to me that the CPLD was obliged, first, to agree on the meaning and extent of the definitions and then to resolve the factual issues within the ambit of that agreement.  That, I am satisfied, would be the only fair way to proceed and if the CPLD failed to proceed in this way I am satisfied that it would be acting outside of its mandate.

140. But with respect to the committee, it does not appear that it did proceed in this way.  Is it sufficient, as the minutes indicate, to equate ‘urban development’ with the adoption of a formal plan for strategic growth area development?  I do not think so.  Within the terms of the definition, ‘urban development’ does not appear to be a term of art.  Therefore, rationally, it may be argued that pockets of urban development may spring up around such important infrastructural projects as railway stations.  Whether such urban development falls within the terms of the scheme is a matter for the judgment of the CPLD.  But it must at least consider the matter and, in my judgment, it has not done so.  The process of its decision-making was materially flawed.  The matter must therefore be remitted to the CPLD for reconsideration.

Conclusion

141. For the reasons contained in the body of this judgment, I am satisfied that the CPLD decisions fell outside of its mandate and/or were Wednesbury unreasonable.  Its errors go to the root of its decision-making process.  Accordingly, its decisions concerning compensation reached at its meeting of 27 April 2000 must be quashed and the matter remitted for reconsideration.

142. I have not had the benefit of counsels’ advice but (provisionally) it appears to me that the Applicants have been successful and are therefore entitled to their costs.  There will be an order nisi for costs in favour of the Applicants, that order to be made final within 30 days from the date of the handing down of this judgment unless an application to argue the matter is made prior to that date.

143. Finally, it should be said that Mr Neoh on behalf of the Applicants, sought liberty to apply concerning the practical consequences of my judgment.  I agree that would be a wise step.

144. My orders, therefore, are as follows:

(i)that there be an order of certiorari to bring up and quash the decisions of the Committee on Planning and Land Development made in assessing the basis of compensation payable to the Applicants in respect of their resumed lands;

(ii) that the matter be remitted to the Committee on Planning and Land Development for reconsideration;

(iii) that there be liberty to apply;

(iv)that there be an order nisi for costs in favour of the Applicants, the order to be made final within 30 days of the date of handing down this judgment unless application is earlier made to seek a different order.