DELUXE ASCENT LTD v. THE DIRECTOR OF LANDS

CAMP 310/2022 & CACV 316/2023
(Heard together)

[2023] HKCA 1330

CAMP 310/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 310 OF 2022

(ON AN INTENDED APPEAL FROM LDLR NO 9 OF 2018)

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CACV 316/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 316 OF 2023

(ON APPEAL FROM LDLR NO 9 OF 2018)

________________________

________________________

(Heard together)

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JUDGMENT

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G Lam JA (giving the Judgment of the Court):

A.  Introduction

1.  This case concerns the amount of compensation payable by the Government to the applicant for the resumption of certain land co-owned by the applicant with others and for severance damage caused to neighbouring land likewise co-owned by the applicant.  The dispute was determined by the Lands Tribunal (“Tribunal”) in its judgment dated 28 February 2022 (“Judgment”).[1]  In a subsequent decision, the Tribunal refused to grant the applicant leave to appeal (“Leave Decision”).[2]  The applicant had since applied to this court for leave to appeal.[3]  At the rolled-up hearing, we gave leave to appeal,[4] and reserved our judgment on the appeal, which we now give.

2.  An appeal lies from the Tribunal to this court only on an error in point of law: s 11(2) of the Lands Tribunal Ordinance (Cap 17).  We are not concerned with the valuation itself but with issues of law relating to the parameters of the valuation exercise.  The principal issues arising in the appeal concern whether the resumed land abutted a specified street, whether that land had a right of way to the nearby public road, whether the Tribunal was correct to cap the site coverage by reference to the marketability of the hypothetical development on the land, and whether there was any severance damage to neighbouring land.

B.  Background

3.  There are 6 lots of land in Demarcation District 95 in the New Territories relevant in these proceedings.  They used to be co-owned by Henry Fok and Stanley Ho, two well-known businessmen in Hong Kong, as tenants in common.  The applicant acquired Dr Ho’s undivided shares in those lots in November 2011.  The other co-owner, Mr Fok, had died and his title had transmitted to his executors. 

4.  The particulars of the 6 lots and their ownership are as follows:

Lot number	Applicant’s share	The Other Co-owner’s share
Lot 1941 Section A (“Lot 1941A”)	1/2	1/2
Lot 391 Section B (“Lot 391B”)	144/200	56/200
Lot 394 Section D Remaining Portion (“Lot 394DRP”)	144/200	56/200
Lot 2030 Remaining Portion (“Lot 2030RP”)	144/200	56/200
Lot 2054	1/2	1/2
Lot 392 Section C Remaining Portion (“Lot 392CRP”)	144/200	56/200

5.  The subject matter of the resumption in question was a portion of Lot 1941A and the whole of Lot 391B.  These two parcels of land, to which we shall refer as the “Resumed Lots”, were resumed pursuant to the Lands Resumption Ordinance (Cap 124) (“LRO”) for the purposes of the construction of residential care facilities for the elderly.  The Resumed Lots reverted to the Government at midnight on 12 November 2016, which is agreed as the date of valuation for compensation purposes.  The other lots mentioned above as well as the remainder of Lot 1941A not resumed will be referred to collectively as the “Remaining Lots”. 

6.  Prior to the resumption, the Resumed Lots and the Remaining Lots formed a continuous piece of land.  This was split by the resumption, with the Resumed Lots in the middle.  As a result, in addition to compensation for resumption, the applicant also claimed compensation for severance damage to the Remaining Lots.

7.  The Resumed Lots and the Remaining Lots are all located on the north side of Castle Peak Road – Chau Tau Section / Fanling Highway in the area known as Kwu Tung North.  To their east was an existing private elderly home development in Dills Corner Garden.  Apart from this facility, the neighbourhood was largely undeveloped but scattered with temporary structures, village houses and vacant sites.  On the south side of Castle Peak Road was Fanling Highway.  Further south there existed some low-rise private estate-type residential developments such as Europa Garden, Valais I and Valais II.

8.  For ease of understanding, we set out a plan of the area in question here.

9.  It can be seen that except for the part behind the small plot Lot 392CRP, Lot 391B fronted Castle Peak Road. Lot 1941A was mostly situated to the north of other lots that fronted Castle Peak Road, but it had an elongated southward protrusion (about 10.5 m wide), located between Lot 1941RP and Lot 391B, which, together with part of Lot 2054, form what has been called in these proceedings the “Tongue”, the southern tip of which also fronts Castle Peak Road.

10.  The amount of compensation to which the applicant was entitled could not be agreed and so the applicant made an application to the Tribunal against the Director of Lands (“Director”) pursuant to s 10(2) of the LRO for determination of that question.  Compensation for resumption is determined on the basis of the value of the land resumed: s 10(2)(a).  Both parties’ experts adopted the residual valuation method, which involved deducting development cost (including construction cost, professional fees, finance cost etc) and developer’s profit from the estimated gross development value of the completed optimal development.  On the facts of this case this in turn gave rise to three main questions: (1) whether the values of the pieces of land involved ought to be assessed on a joint / amalgamated development basis, or whether they should be valued separately and individually; (2) the accessibility of the various pieces of land involved; and (3) the permissible or appropriate site coverage of the hypothetical development on the Resumed Lots.  The first question is not relevant in this appeal but the applicant challenges the Tribunal’s judgment in relation to both site coverage and access.

C.  Site Coverage

C1.    The dispute

11.  Lot 391B was agricultural land.  Lot 1941A was building land, albeit subject to a restriction in the lease to the erection of 2-storey houses.  Its development potential, and hence its value, therefore depended on the size of the footprint of the houses that could be built there.  This gave rise to the first major dispute between the parties, which is whether the Resumed Lots “abut” on Castle Peak Road at their southern boundary.  If they do, they are “class A” sites under the Building (Planning) Regulations (Cap 123F) (“BPR”) and, as such, entitled to the specified site coverage for class A sites under reg 20(1)(a) of and the First Schedule to the BPR.  The specified maximum site coverage varies with the building height and, for example, is 66.6% for a building not taller than 15 m.  The applicant’s case in the Tribunal was based on hypothetical developments with site coverage of 39.44%, which fell below the maximum because of the need to provide for amenities such as emergency vehicular access.  But if the Resumed Lots do not so abut, they are not class A sites (nor class B or class C sites), with the result that the permitted maximum site coverage falls to be determined by the Building Authority under reg 19(3) of the BPR.  The Tribunal found that, left to his discretion, the Building Authority would have permitted a maximum site coverage of 20%.  This finding is not challenged on this appeal.  We are told that the difference between the compensation payable in the two scenarios, in monetary terms, may well exceed $200 million.

12.  The relevant provisions of the BPR are as follows:

(1)  Reg 18A(1) provides:

“ class A site (甲類地盤) means a site … that abuts on one specified street not less than 4.5 m wide or on more than one such street”

(2)  Reg 18A(3) provides:

“ (3) A street is to be regarded as a specified street—

(a) if there exists, with respect to the street, any of the following circumstances—

(i) the street is vested in the Government and is maintained by the Highways Department;

(ii) the street is a private street on land held under the same Government lease as the site and under the terms of the lease the lessee has to surrender (when required to do so) the land on which the street is situated to the Government;

(iii) the street is a street required to be constructed on unleased Government land by the lessee of the Government lease under which the site is held pursuant to the terms of that lease;

(iv) the street is on land over which the owner of the site is expressly granted, by or by virtue of an instrument, a right of way exercisable at all times;

(v) the street is on land held under a Government lease by the owner of the site; or

(b) if—

(i) one or more of the circumstances mentioned in subparagraph (a)(i), (ii), (iii), (iv) and (v) exist with respect to different parts of the street; and

(ii)  those parts together constitute the street.”

(3)  Reg 19(3) provides:

“ The height of a building or buildings on a site that is not a class A site, class B site or class C site, and the maximum site coverage and maximum plot ratio permitted in respect of such a building or buildings, shall be determined by the Building Authority.”

13.  There is no dispute that Castle Peak Road is a “specified street” not less than 4.5 m wide within the meaning of the BPR.  According to the undisputed maintenance record plan for Castle Peak Road, however, only the metalled road traversed by vehicles is maintained by the Highways Department and thus falls within reg 18A(3)(a)(i).  Neither the Tongue nor Lot 391B is actually contiguous with the road as such because there is a strip of Government land lying between them and the road, running east-west from the Tongue to the eastern boundary of Lot 394DRP.  This strip of land, which is a few metres wide and has been called in these proceedings the “Government Strip”, separates the private lots on its north from the maintained road on its south. 

14.  The applicant has raised two arguments that despite the existence of the Government Strip, the tip of the Tongue (and therefore the Resumed Lots as a single site) abut a specified street:

(1)  Applying a “fact and degree test” established by the authorities, the Tongue at its southern tip abuts on Castle Peak Road which is a specified street under reg 18A(3)(a)(i), even without being actually contiguous with it.

(2)  Alternatively, if actual contiguity with a specified street is required, the owner of the site was expressly granted, by virtue of the instrument that granted Lot 2054, a right of way over that part of the Government Strip abutting the southern tip of the Tongue, so that that part is itself a specified street by reason of reg 18A(3)(a)(iv).

15.  Both arguments were rejected by the Tribunal. We shall deal with them in turn below.

C2.    The fact and degree test

16.  In its Judgment, the Tribunal stated that it had reservation whether the authorities on the “fact and degree” test relied upon by the applicant were applicable because of the change made to the relevant provisions in the BPR in 2005, in particular, the introduction of the concept of “specified street” under reg 18A.[5]  As a result, in its Judgment the Tribunal did not discuss or apply the fact and degree test.

C2(a).  The authorities

17.  We shall first set out how the so-called fact and degree test was applied in the authorities.  The test seems to have originated from the decision of Fuad J in Mightystream Ltd v Attorney General (HCMP 586/1981, 8 October 1981).  There the site was on one side separated by a nullah from Borrett Road.  At that time, reg 2(1) of the BPR defined classes of sites by reference to abutment on a “street”, not “specified street”, so that a “class A site” was a site that “abuts on one street not less than 4.5 m wide”.  “Street” in turn was defined in s 2(1) of the Buildings Ordinance to include “the whole or any part of any square, court or alley, highway, lane, road, road-bridge, footpath, or passage whether a thoroughfare or not”, and also defined in reg 2(1) of the BPR to include “any footpath and private and public street …”.  There was no dispute that Borrett Road was a street not less than 4.5 m wide.  The developer submitted building plans with site coverage and plot ratio based on a class A site, which were rejected by the Building Authority on the ground that the site did not abut a street.  Seeking a declaration from the High Court in its favour, the developer argued that for a site to abut a street, it did not have to touch the road itself and so for that purpose the nullah could be ignored.  In respect of this argument Fuad J stated in his judgment:

“ It seems to me that in any given case it must be a question of fact, depending on the facts and the application of any rules which may have been laid down in the cases (slightly to paraphrase the words of Lord Esher, MR in Lightbound at p.580[6]) whether a site abuts a street in the ordinary meaning of the word abut, in the absence of a definition. I think, too, that the court must approach the problem in a practical and common sense way, bearing in mind that it is for the authority seeking to restrict the owner’s user of the land to satisfy the court that his contention cannot be right. Clearly every slight obstruction or intervention between a site and a street could not be said to prevent the former from abutting the latter. It will be a question of degree.”

Applying that approach, Fuad J found that the nullah was a very substantial feature which lay between Borrett Road and the site throughout its length and was “far from something in the nature of a mere gulley which might perhaps properly be disregarded, if precise contiguity is not required”.  He said that in any fair use of language the site did not have a common boundary with a street, nor did it border or end up on a street.  The learned judge also rejected a separate argument of the developer that the site on its other side abutted a road-bridge which was a “street” for the relevant purpose, and therefore dismissed the developer’s claim.

18.  On appeal, the Court of Appeal agreed with Fuad J on the point relating to the nullah: see [1982] HKLR 56.  Leonard VP said that “the trial judge was right in his conclusion that whether or not a given site ‘abuts’ a street is a question of fact and degree”.[7]  Cons JA referred to the passage in Fuad J’s judgment quoted above and said he agreed with it “as a correct assessment of the position”.[8] Zimmern JA said: “Mr Ogden [counsel for the developer] had to admit that the learned judge had applied the right principles in his determination.  The conclusion he came to was based on a finding of fact and in my view cannot be successfully challenged.”[9]  The Court of Appeal, however, differed from the judge on the point relating to the road-bridge, and allowed the appeal on that basis.

19.  The Privy Council dismissed the Government’s appeal: Attorney General of Hong Kong v Mightystream Ltd [1983] 1 WLR 980.  On the point relating to the nullah, Lord Wilberforce, giving the opinion of the Board, said:[10]

“ The trial judge inspected the location and formed the view that the nullah was a very substantial natural feature separating the site from Borrett Road, that it must be a matter of fact and degree whether in such a case the site could, nevertheless, be said to abut on the road, and that in this case it did not. … The plaintiff invited their Lordships to disagree with the decision of the trial judge and to hold that the site does abut on Borrett Road, but their Lordships do not consider that they would be justified in reversing what is in effect a finding based upon observation and local knowledge which appears to be a reasonable conclusion on the facts.”

20.  A similar question arose in Multi-Strategic Investments Ltd v Attorney General [1984] HKC 178, where the site was separated from the metalled part of Mount Davis Road by what was described in the judgment as an “embankment”, which was Government land.  The issue, again arising under the then definition of class A site under the BPR, was whether the site abutted the road.  Mantell J considered that the fact and degree test applied in Mightystream could, on its own, be seen either as an approach for fixing the boundary of the street or alternatively as suggesting there need not be actual contiguity for there to be abutment.  He held, however, that he was bound by the Privy Council’s decision in Aik San Realty Ltd v Attorney General [1982] HKC 322 to give a more literal and restricted meaning to the words “abut on” in the sense of being contiguous with the boundary of the street.[11]  Nevertheless, he felt able to employ the fact and degree test for the purpose of determining the boundary of the road and, doing so, held that the embankment was part of the road so that its boundary touched the site.[12]

21.  In Building Authority v Appeal Tribunal (Buildings) and Estoree (HCAL 147/2002, 25 July 2003), the question was raised whether a site separated from a street by a covered drainage channel about half a metre wide nevertheless abutted the street.  Hartmann J did not find it necessary to decide the issue (since the tribunal below, following Multi-Strategic, decided that as a matter of fact and degree the drainage channel was part of the street), but opined nevertheless that “‘abut’ does not always import actual contiguity.”[13]

22.  In International Trader Ltd v Appeal Tribunal (Buildings) [2006] 3 HKC 501, the site was separated from a street by a 225 mm thick fence wall.  The tribunal reasoned that, for there to be abuttal, it had to be shown there was “contiguity as a matter of fact and degree”.  It considered the wall to be a substantial feature separating the way from the site, and concluded the site did not abut on the way.  On an application for judicial review of the tribunal’s decision, Reyes J said that the tribunal had applied the correct test and that its conclusion was not irrational.[14]

23.  In Building Authority v Appeal Tribunal (Buildings) (re: Methodist Church) [2015] 5 HKLRD 108, the site was, along part of one side, separated from Kennedy Road by a triangular plot of Government land allocated to the Department of Health and used as part of an open car park of a polyclinic.  The landowner submitted that even if the triangular area could not be regarded as part of Kennedy Road, applying the fact and degree test, the site abutted on Kennedy Road despite the triangular area.  It was common ground in that case that the fact and degree test was as laid down in Mightystream and Estoree and was applicable. Au J stated that the test “is in essence that the word ‘abut’ does not always import actual contiguity or adjoining or touching”, and that “whether a site can be regarded as abutting on a specified street notwithstanding the existence of a gap in between is to be determined as a matter of fact and degree by reference to the width and function of the intervening gap”.[15] In the result, Au J found that the tribunal had not properly made findings based on the fact and degree test and remitted the case to the tribunal.

C2(b).  Whether Aik San Realty is binding on the meaning of “abut”

24.  Mr Simon K C Lam, who appears for the Director of Lands, submits that Mantell J was right in Multi-Strategic in considering himself bound by Aik San Realty to give “abut” a literal, narrow meaning and that this court is likewise bound to hold that “abut” means nothing less than actual contiguity.  We do not agree.  Aik San Realty concerned reg 16 of the BPR, a different regulation that served a different purpose.  It governed the permissible height of a building where it “abuts, fronts or projects over a street”, by reference to the street shadow area.  The permissible maximum street shadow area in turn depended on, inter alia, the length of the “boundary of a site … which abuts or fronts a street”.  The landowner there, after transferring to a third party a 15-inch wide strip of land lying between the site boundary and the street, argued that the site boundary no longer “fronted” the street.  It is in this context that Lord Diplock said in Aik San Realty at p 323H:

“ In their Lordships’ view, the regulation is intended to apply to every building which has a side that faces on a street that is more than 4.5m wide. … The situation in relation to the street itself of that side of the building that faces on it may be of any of the three different kinds … It may ‘abut’ the street, i.e. be contiguous with the boundary of the street at street level; it may ‘front’ the street, i.e. be set back from the street without being contiguous with its boundary; or it may ‘project over’ the street, i.e. be constructed … with a colonnaded a footpath at street level dedicated to the public and so forming part of the street itself …”

25.  Immediately following this passage, Lord Diplock noted (at pp 323I-324F) that the Privy Council was there concerned with the distinction that reg 16 (and reg 23(1)(a)) drew between “abut” and “front”, observing that the use of two different words could not be brushed aside as a “mere inconsiderate divagation into pleonasm”.  The Privy Council did not consider the meaning of “abut” in the definitions of classes of sites. Specifically, Lord Diplock said (at p 326F) in relation to the then reg 19 (now reg 19(3)) that “reg 19, whatever it does mean, is incapable of throwing any light upon the meaning of reg 16”.  Properly examined, we do not think that Aik San Realty is binding authority that “abut” in the context of site classification requires actual contiguity in every case.  We note that although Multi-Strategic was cited before him, Hartmann J took the view in Estoree that for site classification purposes, “abut” does not always import actual contiguity, and that in the Methodist Church case, the Building Authority himself accepted that abutment is judged as a question of fact and degree.

26.  In our view, whilst Fuad J’s judgment in Mightystream concerned the combined concept of abutment on a street, its focus was on the meaning of the word “abut”.  Because Mantell J considered himself bound to give a literal meaning to “abut”, he felt constrained to regard the “fact and degree” approach as applicable solely to the scope of a street.  We do not think the principle is so restricted.  As Fuad J said, not every slight obstruction or intervention between a site and a street will prevent the former from abutting the latter.  It is a question of fact and degree.  It must, of course, still be remembered that one is applying the word “abut” and not words such as “face” or “front”, and the test must not be so widely applied by ignoring significant intervening features as to denude the word of its proper content.

C2(c).  Whether fact and degree test superseded by introduction of “specified street”

27.  Mr Lam further submits that as part of the amendment of the BPR in 2005, the concept of “specified street” was substituted in order to create certainty, leaving no scope for the continued operation of the fact and degree test.  Contrary to this contention, we do not see any reason in principle why the test is inapplicable after the amendment to the BPR.  The purpose of the 2005 amendment, as shown in the relevant Legislative Council Brief,[16] was to address the uncertainties in the definition of “street” for site classification, following a recommendation in the Director of Audit’s Report No. 37 (Chapter 7).  The Explanatory Note in the Gazette notice[17] stated that the new reg 18A “sets out clearly the circumstances that must be present with respect to a street if a site is to be regarded as abutting on that street for the purposes of site classification”.  There is nothing to suggest any legislative intention to exclude the application of the fact and degree test to abutment.

28.  The Tribunal may have been influenced by Mantell J’s opinion expressed in Multi-Strategic that only the boundary of a “street” was a matter of fact and degree, and thought that when the term was amended to “specified street” with a precise definition, the fact and degree approach was no longer applicable.  But once it is accepted that the fact and degree test qualifies the meaning of “abut”, there is no reason to think that the test is displaced by the amendment of the BPR in 2005.

29.  We conclude therefore that the Tribunal fell into error in not applying the fact and degree approach at all in the Judgment.  Ground 1(1) & (2) in the notice of appeal is made out.

C2(d).  The proper conclusion applying the fact and degree test

30.  Since an appeal lies from the Tribunal only on errors of law, where the Tribunal has erred in its approach to a finding which involves a question of fact and degree, ordinarily the correct course for this court will be to remit the matter to the Tribunal.

31.  In this case, however, the Tribunal had stated in the Leave Decision that the Government Strip was “far from something in the nature of a mere gulley or roadside curb which could be disregarded, even if precise contiguity was not required”, and went so far as to conclude that no reasonable person would consider that the Resumed Lots abutted the metalled road instead of merely fronting it.[18] 

32.  In his written submissions in this court, Mr Lam relied on this as a finding of fact not amenable to appeal.  We reject this submission.  As pointed out by Mr Benjamin Yu SC, who appears for the applicant, the relevant question before the Tribunal in the application for leave to appeal was simply whether there was a reasonable prospect of success in the applicant’s contention that the Tribunal had erred in law by failing to apply the fact and degree test to the question of abutment.  The Tribunal was not called upon, and in our view had no power, to make such a new finding in determining the application for leave to appeal, which went wholly beyond explaining or elaborating upon something already expressed.  At the hearing, Mr Lam effectively accepted that the Tribunal went beyond its remit in the Leave Decision.  That “finding” does not, therefore, preclude this court from allowing the appeal and remitting the question to the Tribunal.  If a remitter on this point had been necessary, we would have directed that the matter go before a differently constituted Tribunal.

33.  The applicant goes further, however, and says that a remitter is unnecessary.  It submits that on the facts of this case, the true and only reasonable conclusion is that the Resumed Lots do abut Castle Peak Road.  If so, the failure by the Tribunal so to conclude is an error of law and, on appeal, instead of remitting the matter to the Tribunal, this court may – indeed is duty-bound to – substitute that conclusion as the correct finding: Kwong Mile Services Ltd v Commissioner of Inland Revenue (2004) 7 HKCFAR 275, §§31-37.

34.  For this argument the applicant relies on the Tribunal’s own observations in the Judgment that the Government Strip existed because back in the 1920s when the Castle Peak Road was built, the Government did not build the road immediately next to the land resumed but left a strip of land as buffer or shoulder for use by pedestrians, that the Government Strip “was reserved as the access to and from Castle Peak Road for Lot 1941A”, and that “those portions of government land not forming Castle Peak Road – Chau Tau itself had been occupied and used as an access point to Lots 1941RP and 1941A or the open channel or nullah”.[19] 

35.  As can be seen from the evidence including the video recording of the locus in quo, the Government Strip served as the pavement of Castle Peak Road, and was freely accessible to the public.  Mr Lam told us on instructions that in ordinary urban areas, the pavement of a road is, like the vehicular part of the road itself, also maintained by the Highways Department.  There is force in the applicant’s statement that the Government Strip was visually and physically indistinguishable and inseparable with the pavement of the road.  The nullah was covered over and no open channel could be seen.  The road, the pavement and the Resumed Lots were broadly at the same level, with a kerb at the edge of the pavement.  There was no fence or obstacle between the road and the pavement, though there was a wire mesh fence (erected by the owners) between the pavement and the private land, with a gate near the tip of the Tongue.  There may at certain points along the Government Strip be a culvert near its boundary with private land, but there was none visible near the Tongue.  Immediately outside the Tongue the precise width of the Government Strip is not in evidence but appears to be about 4 m.  There the kerbline curved in to create a run-in/out for vehicles to and from the Tongue, so that the Government Strip there merged with the road without a kerb.  It appears that after another land resumption in 2016, cycle tracks were later laid out along the Government Strip, but the tracks broke off at the run-in/out, no doubt in order to avoid blocking vehicular access to the Tongue.  Thus the Government Strip at that point is not only not an obstacle between the Resumed Lots and Castle Peak Road, but facilitates the passage of vehicles between them. 

36.  Furthermore, the question is to be approached in light of the fact that, as explained in §§44-45 and 51-54 below, there is a right of way over the part of the Government Strip outside the gate in favour of the Resumed Lots, which in our view had not been extinguished contrary to the Tribunal’s conclusion.

37.  Based on the very special circumstances in this case, we accept the applicant’s submission that, applying the correct principles, the true and only reasonable conclusion is that the Resumed Lots abut on Castle Peak Road.  We are conscious of the fact that the Tribunal took the view that no reasonable person would consider that the Resumed Lots abutted Castle Peak Road instead of merely fronting it.  Normally, on a question like this, we would have the greatest hesitation in coming to a conclusion exactly opposite to that reached by the Tribunal, especially given that it had the advantage of a site inspection not available to us.  But here we consider we are justified in doing so because (1) the Tribunal’s view seems to relate to the entire Government Strip, whereas the correct focus, in our view, is on the very small part of the Government Strip at the tip of the Tongue; and (2) the Tribunal had proceeded, erroneously as explained below, on the basis that there was no extant right of way over that part of the Government Strip in favour of the Resumed Lots.

38.  For these reasons, we hold that the Resumed Lots do abut on Castle Peak Road and should accordingly be valued as a class A site.  Ground 2 in the notice of appeal is made out.

C3.    Right of way over the Government Strip

C3(a).  The issue

39.  As an alternative argument, the applicant contends that there was a right of way over the part of the Government Strip immediately outside the Tongue for access to Castle Peak Road and that, on this basis, that part of the Government Strip satisfies reg 18A(3)(a)(iv) of the BPR and, by virtue of reg 18A(3)(b), itself forms a specified street together with Castle Peak Road.

40.  It can be seen from the wording of reg 18A(3)(a)(iv) that for any particular area to be a specified street or part thereof under that head, it must be land over which (1) the owner of the site is (2) expressly granted by or by virtue of an instrument (3) a right of way (4) exercisable at all times.

41.  In the Tribunal, the respondent admitted the existence of a right of way but contended that it was for pedestrian access only.[20]  The Tribunal did not think the right of way was so limited.[21] In any event reg 18A(3)(a)(iv) does not require there to be a vehicular right of way over the land in question.  The requirement is that the right of way is exercisable at all times, which is not disputed.  The real question here is whether the owner of the site has been expressly granted by or by virtue of an instrument that right of way.

C3(b).  Prescriptive right of way

42.  As can be seen from the plan above, the Tongue is rectangular in shape but made up of two parcels: (1) part of Lot 2054 which takes the shape of a segment of a circle, and (2) part of Lot 1941A which makes up the remainder of the rectangle.

43.  Lot 1941 has been said to be an “Old New Grant Lot”.  It was granted in exchange for the surrender of various lots in D.D. 95 in 1922, but the grant document could no longer be found.  In 1923, together with other lots in the area, Lot 1941A was sold, suggesting that Lot 1941 was carved up into Lot 1941A and Lot 1941RP either earlier or by virtue of that sale.  Only the memorial (no. N56395) of the conveyance on sale can now be found.  In any event, this partition, which created the Tongue, would have been done by the owner, not by the Government, so that one cannot infer from it that any right of way was thereby granted over the Government Strip near the tip of the Tongue.  The terms of the lease of Lot 1941A, which was apparently agricultural land, were subsequently changed by letter dated 27 September 1965 to permit the erection of buildings not exceeding 2 storeys (25 ft), but the modification letter did not mention any grant of right of way over the Government Strip.

44.  It was argued by the applicant at trial that the owner of the site had a right of way over the Government Strip at the tip of the Tongue by prescription.  As to this, the Tribunal stated:

“ 64. The applicant’s case is based on firstly the vehicular right of way on the basis of prescription, following China Field Ltd v Appeal Tribunal (Buildings) [2009] 5 HKLRD 662, (2009) 12 HKCFAR 342 at §41. As discussed in § 28 above, ever since the aerial photo taken in November 1945, an access running from north to south in Lot 1941A connecting to Castle Peak Road had been found. The access was so visible based on a aerial photo scale of 1:2000 that we do not think it was merely a pedestrian footpath. We agree with Mr Mok that the survey sheets dated November 1971, October 1973 and October 1975 and the aerial photos read together show more likely than not that the temporary structures along the access were construction containers which by their size and weight must require vehicular transportation. Mr Mok relied on TLC Trade Land Co Ltd v Samuel N & Co Ltd [2005] 2 HKLRD 756 citing §§64-65 that ‘The true rule would appear to be that mere non-user [of a discontinuous easement, such as a right of way] without more, however long, cannot amount to abandonment’. We agree with the applicant on this.”

45.  There is no dispute that in so saying, the Tribunal accepted that there had arisen by prescription, at least by 20 years after 1945, a vehicular right of way in favour of Lot 1941A over the Government Strip at the tip of the Tongue.  The Tribunal went on to find that that right of way had been extinguished in 1984 – a point we deal with in the next section.  On the basis that this prescriptive right of way exists, the applicant does not suggest that this can qualify as a right of way “expressly granted by or by virtue of an instrument” under reg 18A(3)(a)(iv).  Nor does it place any reliance on the doctrine of lost modern grant.

C3(c).  New Grant No. 9594

46.  We therefore turn to the segment-shaped portion of the Tongue.  This used to be Lot 391A.  On 22 October 1965, Lot 391A, together with another lot adjoining Lot 1941A on its west, namely, Lot 375, were surrendered in exchange (apparently in situ) for the grant of a new lease of two parcels both of which were numbered Lot 2054 by New Grant No. 9594.  The purpose of the surrender and re-grant appears to have been to turn the land in Lot 375 into building land for residential purposes.  Thus Special Condition 3 of New Grant No. 9594 provided:

“ The area coloured red on Plan I annexed hereto [i.e. the land previously in Lot 375] shall be used for private residential purposes only and the area shown coloured red hatched black on the said Plan I [i.e. the segment-shaped land that was previously Lot 391A] shall be used solely as an access road.”

47.  The applicant relies on this as satisfying the requirements of reg 18A(3)(a)(iv).  It contends that this must mean that the owner was also given the right to pass on that part of the Government Strip between the Tongue and Castle Peak Road, for otherwise the Tongue could not be used as an “access road”.  The Tribunal stated in its Judgment at §65:

“ … New Grant No 9594 of Lot 2054 dated 22 October 1965 provides in Special Condition 3 and the grant plan states that the portion falling within the Tongue ‘shall be used solely as an access road’. By looking at the grant plan which was of a scale of 330 feet to 1 inch (ie 1:3960), the width of this portion occupied at least 2/3^rd of the width of the Tongue. That is more than 7.0 m (23 feet) which appears too wide if it is for pedestrian access only. We agree with Mr Mok that this can be regarded as an express grant, or alternatively an implied grant of access to Castle Peak Road. Otherwise, the restriction on use as an access road would make no sense.”

48.  The Tribunal did not actually decide whether this would satisfy reg 18A(3)(a)(iv), perhaps because of their view that the right of way no longer existed after 1984.  In this court, Mr Yu emphasises that the requirement in the regulation is that the right of way was expressly granted “by or by virtue of” an instrument, as opposed to simply “by” an instrument.  He submits that since it is clear from New Grant No. 9594 that the owner must enjoy a right of way over the Government Strip immediately outside the Tongue, there was a right of way “expressly granted by virtue of” that instrument.

49.  We note that this requirement has been the subject of debate in a different case, Leading Well Ltd v Secretary for Justice [2022] HKCFI 3246, and that an appeal in that case has been heard by this court, with judgment pending.  In the present case it is unnecessary for us to decide whether there was an express grant by virtue of an instrument because there is another difficulty with the applicant’s reliance on reg 18A(3)(a)(iv). The regulation requires that “the owner of the site” is expressly granted a right of way.  So far as New Grant No. 9594 is concerned, it seems to us that any right of way granted by virtue of it would have been in favour of the owner of Lot 2054.  As Mr Yu submitted at the hearing, the dominant tenement in relation to the right of way granted by virtue of the instrument is Lot 2054.  It follows that there was no express grant in favour of the owners of “the site”, namely, the Resumed Lots, who were not even named as parties to the instrument.  While a person may take an interest in land granted to him by an instrument even though he is not named as a party (see s 26 of the Conveyancing and Property Ordinance (Cap 219)), we are unable to see that the instrument here had that intention or effect.  The applicant submits that it is clear that the right of way granted is to be enjoyed by the owner of Lot 2054 together with the owner of Lot 1941A, and that New Grant No. 9594 confirms implicitly or recognises there is a right of way over the whole of the Tongue.  These submissions do not, in our view, show that by any stretch of the meaning of the language used, the owners of the Resumed Lots can be said to have been expressly granted by or by virtue of that instrument a right of way over the Government Strip. Accordingly, we reject Ground 1(3) of the notice of appeal.

C4.    Conclusion on site coverage

50.  It follows from the above that the Resumed Lots formed a class A site and were entitled to the corresponding site coverage stipulated in the BPR.  The hypothetical development with site coverage of 39.44% proposed by the applicant’s valuer is permissible so far as site coverage is concerned.  To this extent, Ground 3 in the notice of appeal is made out.

D.  Whether right of way extinguished by 1984 resumption

51.  An issue arose in the proceedings below as to whether the Resumed Lots had a right of vehicular access through the Tongue to Castle Peak Road.  As mentioned above, the Tribunal held there was a right of way before 1984 but it was extinguished by a resumption of land in 1984.  This had two consequences.  First, as explained above, this contributed to the Tribunal’s conclusion that the Resumed Lots were not a class A site and as such would only be permitted a discretionary site coverage of 20%.  Secondly, since in its view there was uncertainty both in securing site coverage of 20% and in obtaining vehicular access, the Tribunal applied a discount of 5% to the market value.[22]

52.  Mr Yu submits that in its Judgment the Tribunal only discussed the arguments but did not actually find that the right of way was extinguished in 1984 and that the Tribunal only did so in the Leave Decision.  We do not agree.  It seems to us clear from the Judgment (see §§53, 55, 66, 72, 73, 77 and 80) that the Tribunal did make that finding even if it was not spelt out in so many words.

53.  That finding, however, is in our view wrong in law.  The resumption in question took place in 1984 pursuant to the Roads (Works, Use and Compensation) Ordinance (Cap 370).  That Ordinance provides that land may be resumed for road works. Section 13 provided that the Governor might by order direct the resumption of land.  By s 13(3),

“ the resumption of the land described in the order shall be effective upon expiration of the period of notice specified in the order and, thereupon, that land shall—

(a) where it is an undivided share in land, vest in The Financial Secretary Incorporated together with such rights to the use and occupation of any building or part thereof as may be appurtenant to the ownership of that share; and

(b) in all other cases, revert to the Government,

but in either case the land shall vest or revert without any conveyance and free of all mortgages, charges, claims, estates, easements, rights or interests of any kind in favour of any person.”

54.  The relevant order made in 1984 enumerated the lots to be resumed but did not mention the Government Strip.  Nor was the Government Strip marked on the resumption plan (No. NDR 37D) as land to be resumed.  This is to be expected as it was Government land, which did not need to be resumed, as confirmed by the Director’s expert witness in her report.  Mr Lam asserts that the Government Strip lay within the resumption limit on the plan, but examination of the plan shows that it lay within an area delineated by a line noted as the “Resumption/Clearance Limit”.  Plainly it would be an error to think that every piece of land within that area was resumed. Nor is there any basis to think that all easements on Government land within the area would be extinguished.  Had the Government wished to extinguish any right of way over land forming a road, it could have made an order for closure of the road under s 17(1) of the Roads (Works, Use and Compensation) Ordinance, which by virtue of s 17(2) could have the effect of extinguishing “every public and private right in, upon, under or over the road”.  No such order was made in relation to the Government Strip in 1984 or otherwise.

55.  It follows that the Tribunal proceeded on an erroneous basis in applying a 5% discount.  Ground 4 of the notice of appeal is made out.

E.  Whether site coverage limited to 20% in order to be marketable and competitive

56.  Having concluded that the site was not a class A site, the Tribunal rejected the Director’s argument that Lot 1941A was subject to a lease condition limiting site coverage of any building erected on it to 20%,[23] and also rejected the Director’s further argument that the Resumed Lots were subject to a site coverage limit of 20% under the relevant outline zoning plan.[24]  In its Judgment at §§90-101, the Tribunal went on to explain and conclude that under reg 19(3) of the BPR, the Building Authority would have permitted a site coverage of 20% at the maximum.  There is no appeal against this finding.  What the Tribunal went on to state at §102, as follows, is however challenged by the applicant:

“ It is also of relevance to note that in Mr Charles Chan’s calculation, the European-styled house comparables, whether those adopted by himself or by Mr Lee, all have a site coverage below 20%. In all probability, the site coverage of any proposed development of Lot 1941A would be around 20% in order to make it competitive and marketable.”

57.  It can readily be seen that, if it is suggested that the site coverage of any development there would practically be limited to 20% in order to be competitive and marketable even if the Resumed Lots might be entitled as a matter of law to a higher site coverage, then this is a fundamental point which renders the debate on abutment entirely academic.

58.  The applicant contends that in coming to this conclusion, the Tribunal acted unfairly and procedurally irregularly, and that the finding was irrational or made without evidence.  It is also said that the Tribunal took into account irrelevant considerations.

59.  In our view, the conclusion was not open to the Tribunal.  There was no relevant averment in the “pleadings” filed;[25] the point was not identified in the agreed list of issues lodged 6 months before the trial and not addressed by counsel in opening submissions; the question of competitiveness and marketability was not an issue opined upon by either expert, and in particular there was no cross-examination of the applicant’s expert on this point.  The subject matter of the site coverage of the comparables was raised by the Tribunal itself, but if the Tribunal did so for the purpose of examining whether market conditions would in any event impose a cap on site coverage, the applicant ought to have been invited to deal with the point.  The mere fact that the European-style house comparables advanced by the experts all had a site coverage within 20% (for reasons that were not investigated) is not evidence that, in the absence of legal restrictions, the site coverage of a development of the same style on the Resumed Lots would have had to be limited to 20%.  The applicant did not have a fair opportunity of dealing with the point with proper evidence.  In these circumstances, the bare assertion made by Mr Lam for the first time in his closing submissions to the Tribunal that the site coverage should in any event be kept below 20% for competitiveness and marketability should not have been entertained, at any rate without further investigations and affording the applicant a fair opportunity to respond.  This is an error of law, specifically a breach of the principles of natural justice, which entitles this court to intervene.

60.  Yeung Lai Ping v Secretary for Justice [2021] 3 HKC 529, relied upon by Mr Lam in this appeal, is a very different case.  The statement there[26] that the judge was entitled to use his common sense to fill a gap that was not wholly covered by the medical evidence was based on the facts of that case.  Here, it can hardly be suggested that it is a matter of common sense, or a matter of which judicial notice can be taken, that a European-style houses development with site coverage higher than 20% would not be feasible in the market.

61.  Accordingly, Ground 5 in the notice of appeal is made out.

F.  Severance claim in relation to Lots 2030RP and 394DRP

62.  The final ground relates to the applicant’s claim for severance damage to Lots 2030RP and 394DRP.[27] As can be seen from the plan above, after the resumption these two lots can no longer have access to Castle Peak Road through the Tongue as they could before based on our conclusion that the right of way over the Government Strip outside the gate had not been extinguished.

63.  The Tribunal took the view in §191 of its Judgment that:

“ In respect of Lot 2030RP, although it can no longer be accessible to the Castle Peak Road – Chau Tau through Lot 1941A via the Tongue after the Resumption, we find no reason why an alternative vehicular access cannot be proposed across Lot 394D.”

64.  On that basis, the Tribunal did not find that the applicant suffered any loss in value in relation to Lots 2030RP and 394DRP by reason of the resumption, and determined the compensation payable to be nil.

65.  That proposed access was not based on any right of way, for the Tribunal had rejected the applicant’s case that there was a common law right of vehicular access in favour of Lot 394DRP as a property adjoining a highway.[28]  Instead, as explained by the Tribunal in its Leave Decision at §§89-90, it was based on an assumption that the Building Authority would permit vehicular access through Lot 394DRP to Castle Peak Road.  As the applicant points out, however, the Building Authority has no power to grant any right of access over Government land.  It would have to be done by the Government, presumably acting through the Director of Lands as its land agent and in consideration of a premium.  In any event, in the light of our conclusions above, prior to the resumption, the applicant could as of right have access from Lots 2030RP and 394DRP to Castle Peak Road via the Tongue and the Government Strip immediately outside the Tongue.  After the resumption, it has to rely on a discretionary grant of vehicular access over a certain part of the Government Strip lying to the south of Lot 394DRP.  This, in our view, is capable of being “loss or damage suffered by [the applicant] due to the severance of the land resumed … from any other land of [the applicant] contiguous or adjacent thereto” as provided for in s 10(2)(c) of the LRO. 

66.  Accordingly, in our judgment the Tribunal’s determination of the compensation payable in respect of severance damage to Lots 2030RP and 394DRP was vitiated by an error of law.  Ground 8 of the notice of appeal is established.

G.  Conclusion

67.  For all these reasons, the applicant’s appeal is allowed, the Tribunal’s Judgment is set aside, and the applicant’s claim for compensation is remitted to the Tribunal for re-assessment in the light of the judgment of this court.  We give liberty to apply in case any consequential orders or directions are necessary.

68.  We make an order nisi that (1) the applicant do have the costs of the appeal and the applications to the Tribunal and to this court for leave to appeal, with a certificate for two counsel; and (2) the costs below be reserved to the Tribunal upon the remitter.