FOOK LEE HOLDINGS LTD v. THE SECRETARY FOR TRANSPORT AND HOUSING

CAMP 435/2021

[2022] HKCA 1855

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 435 OF 2021

(ON AN INTENDED APPEAL FROM LDMR NO 2 OF 2016)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  This is the renewed application of the applicant, Fook Lee Holdings Ltd, for leave to appeal to the Court of Appeal from the judgment of the Lands Tribunal given by a member Mr Lawrence Pang on 21 May 2021 (“the Judgment”)[1]. Leave to appeal was refused by the Tribunal on 23 September 2021 (“the Leave Decision”)[2], as it was held that the intended appeal has no reasonable prospect of success.

2.  By the Judgment, the Tribunal adjudged that nil compensation was to be paid to the applicant for the temporary occupation of 1,480 m² (the temporary occupation area, hereinafter “the TOA”) of Section A of Inland Lot No 7106 and the Extension thereto (collectively “the Lot”) by the Government from 26 February 2014 to 26 April 2017 (“the Relevant Period”) under the Roads (Works, Use and Compensation) Ordinance, Cap 370 (“the Ordinance”), to facilitate the construction of the Central-Wan Chai Bypass and Island Eastern Corridor Link.

Factual background and the Judgment

3.  The relevant background matters may first be related as follows.

4.  The applicant is the registered owner of the Lot, located at the south-western side of Oil Street, North Point on which the Harbour Grand Hotel (“the Hotel”) is erected. By Special Condition 3 of the Government Lease, the Lot is restricted for hotel purposes within “the Pink Area”, and for non-industrial (excluding private residential, office, hotel, petrol filling station and godown) purposes in relation to cultural leisure and tourist-related activities within the “Pink Hatched Green Area”, the “Pink Cross-hatched Green Area”, the “Pink Stippled Black Cross-hatched Green Areas” and the “Pink Hatched Black Area” (collectively “the Non-Pink Areas”).

5.  The TOA falls partly within the “Pink Cross-hatched Green Area” and partly within the “Pink Stippled Black Cross-hatched Green Areas”. The majority portion of the TOA was the ancillary carpark for the Hotel accommodating the parking and loading/unloading spaces as required under Special Conditions 54, 55, 56 and 57 of the Government Lease. Immediately prior to the creation of the TOA, 20 car-parking spaces had been designated there and a small portion of the TOA was part of the landscaped terrace of the Hotel’s café.

6.  At the applicant’s request, the Government consented to the relocation of the ancillary carpark for the Hotel in the TOA to the seaward side of the Lot temporarily during the Relevant Period (“the Temporary Carpark”), to reduce the disturbance to the operation of the Hotel and to comply with Special Conditions 54, 55, 56 and 57. The Temporary Carpark could accommodate 29 car-parking spaces (including 9 lorry car-parking spaces that were not provided in the TOA) instead of the original 20[3]. There was no evidence that the land within the Lot which became the Temporary Carpark had any beneficial use to the applicant prior to the creation of the right of temporary occupation of the TOA and the relocation of the car-parking spaces[4].

7.  In April 2016, the applicant filed a notice of application to the Tribunal for compensation in respect of the temporary occupation of the TOA for a total sum of $19,274,470, under Part II of the Schedule to the Ordinance in respect of items 2(a), 2(b) and 6(a). At the trial before the Tribunal in February 2021, the only head of compensation in dispute was item 2(a), as the Government had already undertaken the reinstatement works arising out of or in connection with the creation of the TOA (item 6(a)) and the amount of compensation for disturbance was agreed[5] (item 2(b)).

8.  Item 2(a) relates to “the creation of … a right of temporary occupation under section 15” of the Ordinance and the basis of compensation as provided in the Schedule is “the amount of an open market rent[6] for claimant’s interest in the land occupied during the period of the easement”. It is pertinent to note that the applicant’s only claim under item 2(a) was that it is entitled to the open market rent of the TOA to be valued on the basis that it could be put to fee-paying public carpark use with 74 car-parking spaces on the TOA (instead of 20 car-parking spaces, paying no heed to Special Conditions 54, 55, 56 and 57)[7], and its case was that “the loss suffered by the applicant which was still pending to be determined was the loss of use of the TOA during the Relevant Period”[8].

9.  The applicant’s expert initially assessed the total market rent at $18,904,799 over the Relevant Period. On the respondent’s case, the total market rent was assessed at $3,933,000.

10.  In the Judgment, the Tribunal decided that:

(1)  The open market rent of the TOA in the Relevant Period is assessed at $4,935,840, taking the number of car-parking spaces within the TOA that can be increased by 5% (by Special Condition 57) to 21 and on the basis of a fee-paying carpark in that the provision of car-parking next to a hotel is important and the applicant as a hotel operator would bid for the TOA at least equal to the open market rent payable for a public fee-paying carpark[9].

(2)  However, in light of item 13 of Part I of the Schedule to the Ordinance, which is headed “No double compensation” and provides that nothing in the Ordinance “shall enable any person to recover compensation – (a) in respect of a loss or expense which he has not suffered or incurred; or (b) which is greater than the loss suffered or expense incurred by him”, as the car-parking spaces on the TOA were all relocated to the Temporary Carpark within the Lot and there was no loss of use of the car-parking spaces, the applicant is not entitled to compensation under item 2(a)[10].

The intended appeal

11.  In its intended appeal, the applicant seeks to set aside the judgment aforesaid and, in lieu of the sum of $4,935,840 which the Tribunal would have ordered but for its decision to award nil compensation in respect of item 2(a), seeks an order for compensation of $17,405,670.20 in that the open market rent of the TOA should be assessed on the basis of a fee-paying carpark that could accommodate 74 car-parking spaces.

12.  Under section 11(2) of the Lands Tribunal Ordinance, Cap 17, subject to section 11AA and the provisions of any Ordinance relating to appeals from the Tribunal, any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law.

13.  Under section 11AA(6), leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that: (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard. Both limbs in section 11AA(6)(a) and (b) are relied on by the applicant. A reasonable prospect of success means an appeal with prospects that are more than “fanciful” but do not need to be shown to be “probable”[11]. In respect of the other limb, it is the applicant’s contention that the intended appeal would raise a question of general principle, to be decided for the first time by the Court of Appeal; or that a question of importance would be raised such that a decision would be to the public advantage; or that much needed clarification ought to be provided by the Court of Appeal on an area of the law or that the law ought to be changed[12].

14.  The applicant put forward eight grounds of appeal in its draft notice of appeal, which are the same as those placed before the Tribunal in the leave application. Mr Anthony Ismail[13], who appeared for the applicant in the leave application before the Tribunal and in this court, helpfully summarised the eight grounds as three broad grounds in this manner:

(1)  the applicant’s right to compensation under item 2(a) in Part II of the Schedule to the Ordinance is concerned with temporary loss of occupation of the TOA, not (as wrongly held by the Tribunal) the temporary loss of use (Grounds (1) to (3); “the Statutory Construction Grounds”);

(2)  the Pointe Gourde principle[14] does not (as the Tribunal wrongly held) apply as a matter of law in the present instance, and consequently the restriction on user in Special Conditions 54, 55, 56 and 57 of the Government Lease was removed or, more accurately, suspended, during the Relevant Period and the TOA could have accommodated 74 car-parking spaces for the purpose of assessing open market rent; alternatively, the Tribunal erred in its interpretation of the Special Conditions (Ground (4), with Grounds (5) to (7) serving as alternatives; “the Interpretation Grounds”);

(3)  the Tribunal acted contrary to the rules of natural justice before making certain findings adverse to the applicant without first giving it the opportunity to adduce evidence and make full submissions thereon (Ground (8); “the Natural Justice Ground”).

15.  Having considered the submissions of Mr Ismail and of Ms Bonnie Cheng for the respondent, we think it is appropriate to exercise our discretion under Order 59 rule 2A(5)(a) of the Rules of the High Court to determine this application on paper without an oral hearing.

The Statutory Construction Grounds (Grounds 1 to 3)

16.  Mr Ismail’s submissions are along the following lines:

(1)  Section 15(1) of the Ordinance provides for the creation of “rights of temporary occupation of land” in the works area in favour of the Government. In respect of item 2(a) in Part II of the Schedule to the Ordinance, under the first column headed “Matters for which compensation may be claimed”, provision is made inter alia for “The creation of … a right of temporary occupation under section 15”. It is the creation of the “right of temporary occupation” for which compensation may be claimed, not the creation of the temporary occupation area itself. As for the basis on which compensation is to be assessed “[in] the case of the creation of a right of temporary occupation”, it is stated under the second column that it should be “the amount of an open market rent for claimant’s interest in the land occupied during the period of the easement”. It should be noted that the wording of the relevant statutory provisions does not refer to temporary loss of use.

(2)  Hence, the Ordinance is designed to compensate the claimant for the temporary loss of its right of occupation of the TOA during the Relevant Period, not the temporary loss of use. The claimant’s right to occupy the TOA is the “interest” which it has lost as the result of the creation of a right of temporary occupation. Such temporary loss exists regardless of whether the TOA is used.

(3)  The Tribunal wrongly elided the temporary loss of occupation with the temporary loss of use. Temporary loss of occupation arises out of the creation of a right of temporary occupation in favour of the Government, for which compensation is assessed under item 2(a). Temporary loss of use arises out of the disturbance of the claimant’s use of the TOA, in this case the applicant’s use of the TOA as an ancillary carpark for the Hotel, for which compensation is assessed under item 2(b).

(4)  Open market rent can only serve as compensation for the temporary loss of occupation of the TOA. It is inappropriate to use it to assess compensation for the temporary loss of use, which is a different kind of loss. In assessing compensation for temporary loss of use, what would be taken into account would include matters such as the rent or expenses incurred by the applicant for renting another piece of land for the ancillary carpark, or the loss of profits the ancillary carpark may have generated during the Relevant Period.

(5)  Thus, whether the area occupied by the Temporary Carpark was of any beneficial use to the applicant prior to the creation of a right of temporary occupation of the TOA and the relocation of the car-parking spaces is irrelevant to the assessment of compensation under item 2(a).

(6)  It makes no sense for the Tribunal to award nil compensation to the applicant for temporary loss of its right of occupation of the TOA (under item 2(a)) just because the applicant had the ability and resources to mitigate the disturbance loss (under item 2(b)) by relocating to the Temporary Carpark with the consent of the Government. In effect, this discriminates against landowners like the applicant who agreed to mitigate the disturbance by relocating to other land it owned.

17.  Two other relevant provisions in the Ordinance have been referred to in the supporting affidavit filed on behalf of the applicant[15] and were considered in the Leave Decision. They are as follows:

“26. No recovery of money except under this Ordinance

No person shall have any right against the Crown or any other person to recover any money—

(a) in respect of any use authorized under this Ordinance; or

(b) in respect of any works or anything else authorized under this Ordinance except to the extent of the rights to compensation provided for in section 27.

27. Compensation

(1) The compensation referred to in section 26 is the right to recover from the Crown for the matters set out in the first column of Part II of the Schedule a sum assessed on the basis specified opposite thereto in the second column thereof and with regard to the provisions of Part I of the Schedule, subject to—

(a) the claim being served on the Secretary within the appropriate period specified in the fourth column of Part II of the Schedule; and

(b) the other provisions of this Ordinance.

(2) Every person who is described in the third column of Part II of the Schedule shall have the right to recover compensation for the matters set out opposite thereto in the first column to the extent suffered or incurred by him as assessed under this Ordinance.

…” (Emphasis supplied)

18.  Apart from item 13 in Part I of the Schedule to the Ordinance, which is crucial to the Tribunal’s decision to award nil compensation in this instance, item 1 in Part I is also relevant and was referred to in the Leave Decision. Both provisions are set out below for easy reference:

“1. General effect of this Part

The provisions in this Part shall, where applicable, have effect for the purpose of assessing compensation under Part II of this Schedule and shall—

(a) be in addition to such of the provisions of the Lands Resumption Ordinance (Cap. 124) as apply, by virtue of Part II, to the assessment of compensation; and

(b) prevail over any provision referred to in subparagraph (a) which is inconsistent or in conflict with a provision in this Part.”

“13. No double compensation

Nothing in this Ordinance shall enable any person to recover compensation—

(a) in respect of a loss or expense which he has not suffered or incurred; or

(b) which is greater than the loss suffered or expense incurred by him:

Provided that in assessing compensation under this Ordinance, no account shall be taken of any amount recovered by the claimant under a policy of insurance.” (Emphasis supplied)

19.  It could not be gainsaid there was no loss of use of the car-parking spaces in light of the relocation to the Temporary Carpark. The question is whether it is correct to draw a distinction between temporary loss of the right of occupation and temporary loss of use, as argued for the applicant.

20.  We agree with the Tribunal the applicant’s contention should be rejected for these reasons:

(1)  In construing the right to compensation provided for in item 2(a) in Part II of the Schedule to the Ordinance, it would not be right to focus merely on the words “rights of temporary occupation of land” in section 15(1) and the creation of “a right of temporary occupation” in the first and second columns in respect of item 2(a). These provisions must be read in the context of other relevant provisions in the Ordinance (sections 26 and 27) and Part I of the Schedule (items 1 and 13) such that all the relevant provisions are read and construed as a coherent whole.

(2)  When the provisions on the right to compensation in item 2(a) are construed in the context of the other relevant provisions, it is clearly provided in sections 26 and 27 that the right to recover compensation for the matters in the first column of Part II of the Schedule (in this instance, the creation of a right of temporary occupation under section 15) is to be assessed on the basis specified in the second column of Part II “and with regard to the provisions of Part I of the Schedule”. It is further provided in item 1 of Part I of the Schedule that the provisions in Part I (which include item 13 of Part I) “shall, where applicable, have effect for the purpose of assessing compensation under Part II”. There is no or no clear indication to suggest that item 13 of Part I shall not apply to the assessment of compensation regarding the creation of a right of temporary occupation under section 15[16].

(3)  The language of item 13 of Part I, which is provided to avoid “double compensation”, is equally clear: nothing in the Ordinance shall enable any person to recover compensation “in respect of a loss or expense which he has not suffered or incurred”. This applied squarely to the facts as found by the Tribunal that there was no loss of use of the car-parking spaces in light of the relocation to the Temporary Carpark[17] and no evidence that the land which had become the Temporary Carpark had any beneficial use to the applicant prior to the creation of a right of temporary occupation and the relocation of the car-parking spaces[18]. In other words, any loss that might be suffered by the applicant when the right of temporary occupation of the TOA was created had been mitigated and avoided by the applicant when the Government consented to the relocation of the ancillary car-parking spaces to the Temporary Carpark during the Relevant Period at the request of the applicant, see the letter dated 15 January 2014 from the Highways Department[19]. Hence, no double compensation should be allowed in this instance.

(4)  The distinction sought to be drawn between temporary loss of the right of occupation and temporary loss of use is not borne out by the wording of the relevant provisions. Further, if temporary loss of the right of occupation is to be compensated so long as the right of temporary occupation has been created and there could be no mitigation or avoidance of such loss, item 13 of Part I would be deprived of meaning and effect in this situation.

(5)  There is no reason to deviate from the concept of fair compensation that the amount of compensation to which a claimant is entitled must be affected by whether he has suffered the loss, as embodied in item 13 of Part I. In Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 at 126A to H, the Privy Council laid down three conditions which must be satisfied to qualify for fair and adequate compensation in the context of compulsory resumption of land: (a) a causal connection between the resumption or acquisition and the loss in question; (b) the loss must not be too remote; and (c) the law expects those who claim recompense to behave reasonably, so if a reasonable person in the position of the claimant would have taken steps to eliminate or reduce the loss and the claimant failed to do so, he cannot fairly expect to be compensated for the loss or the unreasonable part of it[20]. There is no reason why the condition regarding avoidable loss or loss that has been avoided should not apply to the assessment of compensation in the present context.

(6)  It was emphasised by Rogers VP, albeit in the context of a claim for compensation based on relocation arising out of resumption of land under the Railways Ordinance, Cap 519, in Yip Kui trading as Tai Wo Trading Company v The Secretary for Transport, CACV 379/2002, 13 June 2003 at §21:

“I have already emphasised the point that compensation can only be awarded in respect of loss or damage which has been suffered or expenses which have been incurred.”

Similar to the provisions of the Railways Ordinance[21] and the Land Resumption Ordinance, Cap 124[22] considered by the Court of Appeal, section 27(1) of the Ordinance provides that the right to recover for the matters set out in the first column of Part II of the Schedule is assessed “with regard to the provisions of Part I of the Schedule” and subject to “the other provisions of this Ordinance”. Section 27(2) provides that the right to recover compensation for the matters set out in the first column is “to the extent suffered or incurred by him as assessed under this Ordinance”.

(7) It is telling that at the trial, the applicant’s case for assessing the open market rent under item 2(a) was put on the sole basis of “the loss of use of the TOA during the Relevant Period”[23] and “the applicant’s loss of use and possession over the TOA”[24] by Mr Ismail’s predecessor, and no distinction was sought to be drawn between temporary loss of occupation and temporary loss of use.

(8) As rightly observed by the Tribunal, the second column in respect of item 2(a) only specifies that the basis on which compensation is to be assessed for the creation of a right of temporary occupation is the open market rent. It does not say open market rent must be paid as a matter of compensation[25]. Examples were cited by the Tribunal in which nil compensation was ordered under comparable legislation[26].

(9) The contentions of Mr Ismail are premised on the erroneous distinction he sought to draw between temporary loss of right of occupation and temporary loss of use. There is no basis to suggest that the Tribunal had conflated the claim based on open market rent in item 2(a)(ii) with the claim for disturbance payment in item 2(b). “Disturbance” and “disturbance payments” have been defined in item 2 of Part I to the Schedule.

21.  For the reasons aforesaid, it is clear that the Tribunal has made no error of law in ordering nil compensation in this situation and we do not consider Mr Ismail’s submissions in respect of Grounds 1 to 3 reasonably arguable. Nor is there any other reason in the interest of justice why an appeal on these grounds should be heard. As rightly pointed out by Ms Cheng, the decision to award nil compensation in this situation is a case-specific and fact-sensitive exercise and the present case is peculiar on its own facts. Leave to bring the intended appeal should be refused with the rejection of Grounds 1 to 3.

The Interpretation Grounds (Grounds 4 to 7)

22.  In light of our conclusion that it is correct for the Tribunal to order nil compensation, Grounds 4 to 7 (premised on the contention that the restrictions on user in Special Conditions 54, 55, 56 and 57 of the Government Lease should have no application to the TOA during the Relevant Period such that open market rent should be assessed on the hypothesis that the TOA could have accommodated 74 car-parking spaces) have been rendered academic.

23.  Hence, we do not propose to deal with these grounds of appeal save to say that we have considered the detailed reasoning of the Tribunal in the Leave Decision[27] and we are in broad agreement with the Tribunal that these grounds have no merit.

24.  Insofar as the Leave Decision did not deal specifically with these two contentions raised in support of these grounds, we agree with Ms Cheng’s submissions on them:

(1)  Mr Ismail contended that so long as the car-parking spaces relocated to the Temporary Carpark had complied with Special Conditions 54, 55, 56 and 57 during the Relevant Period, there should be no need to comply with the requirements on user restriction for the Non-Pink Areas so the TOA should be treated as capable of accommodating 74 car-parking spaces in assessing the open market rent. This cannot be right. It was not in dispute at the trial that for the purpose of assessing open market rent for the claim in item 2(a), the matters to be taken into account would include “the lease conditions”[28]. The lease conditions would obviously include conditions and restrictions under the Government Lease.

(2)  It was contended that the Tribunal erred in finding that Special Conditions 54(b) and 55(a) were applicable, because no building was erected or approved to be erected on the Non-Pink Areas during the Relevant Period. This contention does not assist the applicant. The reference to Special Conditions 54(b) and 55(a) in §74 of the Judgment was merely to draw attention to the fact that there are specific requirements governing the number of car-parking spaces that may have to be provided in the Non-Pink Areas, on top of the general requirements in Special Conditions 54(a) and 55(b) that apply to the whole Lot comprising the Pink Area and the Non-Pink Areas.

25.  The contention that there should be no restrictions on car-parking spaces in the TOA during the Relevant Period for assessing the open market rent is untenable.

The Natural Justice Ground (Ground 8)

26.  The complaint that the Tribunal did not give an opportunity to the applicant to adduce evidence and make full submissions before making adverse findings is plainly of no merit, in view of the fact that the Tribunal had invited the parties after hearing the evidence of the experts on valuation but well before the closing submissions to consider the application of item 13 of Part I[29].

Conclusion and costs

27.  As none of the grounds of appeal meet the threshold requirement for granting leave to appeal, and there is no other reason in the interests of justice why the intended appeal should be heard, we exercise our discretion to refuse leave to appeal from the Judgment.

28.  We make a further order under Order 59 rule 2A(8) of the Rules of the High Court that no party may under rule 2A(7) request the application for leave to appeal to be reconsidered at an oral hearing inter partes, as this application is totally without merit.

29.  Costs of this application should follow the event. We order the applicant to pay the respondent’s costs of this application. Having considered the respondent’s statement of costs for summary assessment, we allow the costs in full in the amount of $66,250.

30.  The costs order and summary assessment are orders nisi; they will be made absolute if there is no application for variation within 14 days of the handing down of this judgment.