CHAN KAM CHUEN v. SECRETARY FOR THE ENVIRONMENT, TRANSPORT AND WORKS

[English Translation – 英譯本]
CACV 69/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. CACV 69 OF 2007

(ON APPEAL FROM LDRW NO. 7 OF 2005)

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J U D G M E N T

Hon Cheung JA:

1. The background of the present case has been detailed in the judgment of Chu J, with which I agree.  I shall only discuss two of the issues in the present appeal, namely whether the Applicant is entitled to compensation for the buildings constructed on the resumed land and other facilities on the farm.

Buildings on the land

2. The Applicant was the tenant and user of the land, on which he ran a farm engaged in pig rearing business and farming.  Apart from buildings used for pig rearing, he had also constructed other buildings on the land as residence for himself and his family.

3. The Hong Kong Government resumed the land pursuant to the Railways Ordinance (Cap. 519 of the Laws of Hong Kong).  Part II of the Ordinance provides that land resumption compensation is to be assessed according to the provisions of the Lands Resumption Ordinance (Cap. 124 of the Laws of Hong Kong).  Section 10(2)(a) of this Ordinance makes it clear that, upon resumption of land by the government, compensation is certainly payable in respect of buildings constructed on the land.  The provision reads as follows:

10.     (1)     The [Lands] Tribunal shall determine the amount of compensation (if any) payable in respect of a claim submitted to it under section 6(3) or 8(2) on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim.

(2)     The [Lands] Tribunal shall determine the compensation (if any) payable under subsection (1) on the basis of ―

     (a)   the value of the land resumed and any buildings erected thereon at the date of resumption; 

Grounds for refusing compensation

4. The Respondent refused to pay compensation to the Applicant for the buildings in question, on the ground that as the Applicant was a tenant of the land and the buildings thereon would vest in the landlord upon expiry of the tenancy, the Respondent did not have to pay compensation to the Applicant for the buildings.  In support of his argument, the Respondent cited the case of Wong Hoi Nung formerly trading as Bailey Trading Company v. The Secretary for Transport (LDMR 1/2000), in which the Lands Tribunal stated on page 12 of the judgment that “… anything fixed to the land becomes part of the land, unless the tenant is entitled to remove them at the determination of the tenancy by agreement or operation of law.”  On appeal, the Court of Appeal did not address the relevant legal principles because it was not necessary to do so (see CACV 521/2001).

5. In the present case, the Lands Tribunal also accepted the same argument put forward by the Respondent and ruled that the Applicant was not entitled to any compensation.

Case law

6. In my judgment, in Wong Hoi Nung the Lands Tribunal did not thoroughly explain the relevant legal principles.  In fact, back in 1883, Kindersley VC had provided a comprehensive explanation on the legal principles in Gibson v. The Hammersmith Railway Company (1883) 32 LJ Ch 337:

(1) An item permanently affixed by the tenant to the landlord’s land becomes part of the land.

(2) An exception to this legal principle is that, if a tenant engages in trade or business on the land and builds a “fixture” thereon, he may remove the fixture during the tenancy, failing which the fixture will vest in the landlord.

(3) The power to remove the fixture rests with the tenant.

7. Furthermore, in Lee Chun v. The Director of Lands [1983-85] CPR 426, Judge Cruden of the Lands Tribunal also cited Gibson and pointed out that if the land was resumed during the tenancy, the tenant was entitled to remove the relevant fixture or leave it on the land.  If the tenant left it on the land, the government had to pay compensation to him for the fixture upon resumption.  See also Davis, Law of Compulsory Purchase and Compensation (5^th edition) paragraph 10.39.    

8. I entirely agree with the ruling of Judge Cruden, which is in line with the legal principles laid down in Gibson.

The buildings for pig rearing in the present case

9. In the present case, the government resumed the land 3 years prior to expiry of the Applicant’s tenancy.  This being the case, it is not open to the Respondent to reject the Applicant’s claim by relying on the principle that the buildings erected by the Applicant have become fixtures on the land and hence belong to the landlord.  This legal principle does not apply to the present case because upon resumption the Applicant’s tenancy had not yet expired, and furthermore, as the buildings erected by him on the land for pig rearing were business fixtures, he was entitled to remove them.  At the time of resumption, those buildings still belonged to the Applicant.  If he did not remove them, the government would be liable to compensate him.

Other buildings

10. However, the same cannot be said of the buildings which plainly have nothing to do with pig rearing business.  The Government Lease of the land contains the following term:

… the Lessee or any other person or persons shall not, nor will, during the continuance of this demise, … convert any ground hereby expressed to be devised as agricultural or garden ground into use for building purposes other than for the proper occupation of the same ground as agricultural or garden ground without the previous, licence of His said Majesty, His Heirs, Successors or Assigns … AND FURTHER that the Lessee or any other person or persons shall not nor will at any time during the said term erect or construct any building or structure of any description on the said demised premises or any part thereof whether demised as agricultural or garden ground or otherwise without first having obtained the approval thereof of the surveyor to His said Majesty, His Heirs, Successors or Assigns …   

11. Put simply, the Government Lease provides that “the Lessee or any other person or persons shall not construct any building on the land without official approval.”  The Applicant held a “Livestock Keeping Licence” issued by the government, which allowed him to keep livestock on the land.  The licence also specified the area of the pig sheds and feed storage buildings on the land, which means that the buildings were constructed with the approval of the government.

12. Having said that, I do not agree that the Applicant may claim compensation against the Respondent in respect of the buildings constructed by him for residential purpose on the land, because Clause 3 of the Licence provided that “the approved areas shall not be used for residential purpose”.  According to section 12(b) of the Lands Resumption Ordinance, “no compensation shall be given in respect of any use of the land which is not in accordance with the terms of the Government lease under which the land is held”.

13. As the government only allowed the Applicant to construct buildings on the land for the purposes of pig rearing and feed storage but not buildings for residential purpose, the Applicant is not entitled to claim compensation for the latter type of buildings.

Other farm facilities

14. The Lands Tribunal also ruled, for the same reason, that four of the facilities installed by the Applicant on the farm — namely, the electricity supply system, the main entrance gate and side door gate, the protective brick walls, and the concrete slab — were fixtures constructed on the leased land and hence no compensation was payable in respect thereof.

15. In my judgment, the aforesaid legal principles equally apply to these four facilities and the Applicant should be compensated accordingly.

Conclusion

16. In my view, the Applicant should be compensated by the government in respect of the buildings that he constructed for pig rearing and feed storage purposes and also the aforesaid four facilities on the farm.  The amount of compensation is to be assessed by the Lands Tribunal.

Hon Yeung JA:

17. I agree with the judgments of Cheung JA and Chu J.

Hon Chu J:

18. By its ruling on 13 February 2007 the Lands Tribunal refused to review its determination on the statutory compensation payable to the Applicant.  The Applicant now appeals against the ruling, seeking to set aside the determination of the Lands Tribunal on 13 October 2006 and to have the case remitted to the Lands Tribunal for retrial before two other members thereof.

Factual background

19. The Applicant is the former tenant/occupier of the Remaining Portion of Lot 1174, Lot 1175 and Lot 1177 in Demarcation District 124 in Hung Shui Kiu, Yuen Long, New Territories.  Since 1983, he had been running a farm on the land called “Kam Wah Yuen”, which focused on pig rearing.  He also practised farming on part of the land.

20. On 15 October 1998, the government announced by Gazette that the land in question together with other land were to be resumed pursuant to section 16 of the Railways Ordinance (Cap. 519 of the Laws of Hong Kong) for the purpose of constructing part of the Kowloon-Canton Railway West Rail Phase 1.  By legislation, the title of the land in question reverted to the government on 16 January 1999, and the buildings on the land were demolished in early June 1999.  As a result of the land resumption and removal of buildings by the government, the Applicant had to close down his entire farm business.

21. On 16 June 2005, the Applicant applied, pursuant to the Railways Ordinance, to the Lands Tribunal for a determination on the quantum of the land resumption compensation.  The total amount of claim as stated in his Application was $41,301,298 plus interest.  The Respondent filed a Notice of Opposition, taking issue on the Applicant’s entitlement to make a claim, but the Department of Justice acting for the Respondent wrote to the Lands Tribunal on 31 March 2006, confirming withdrawal of the challenge to the Applicant’s eligibility to claim compensation.  Therefore, the Lands Tribunal only had to determine the quantum of the compensation payable to the Applicant.

22. After trial, the Lands Tribunal handed down a determination on 13 October 2006.  The amount of statutory compensation was assessed to be $1,590,000, whereas matters regarding interest, professional fees and costs were to be heard by the Registrar on a date to be fixed.

23. On 9 November 2006, the Applicant applied to the Lands Tribunal for a review of the determination.  After hearing, the Lands Tribunal made an order on 13 February 2007 setting aside the application for review and also made an order nisi that the Respondent’s costs of the review application were to be paid by the Applicant.

24. On 5 March 2007, the Applicant lodged the present appeal against the ruling of the Lands Tribunal.

The Applicant’s claims and the Lands Tribunal’s determination

25. In his Application, the Applicant put forward a total of 10 items of claim.

(1)       Loss of business to the farm

26. The Applicant said that during the 3 years from 1 January 1996 to 31 December 1998 the pig rearing business on the farm generated an average net income of $1,355,442 per annum.  Had the government not resumed the land, he could have continued with the business for another 30 years.  On this basis, he claimed compensation for loss of business for a 23-year period from the demolition of his farm to his retirement, i.e. $1,355,442 x 23 years = $31,175,166.

(2)       Compensation for goodwill

27. In respect of the compensation for goodwill of the farm, the Applicant also adopted the average annual income of the farm during the 3 years from 1996 to 1998 as the base figure and multiplied it by 3, i.e. $1,355,442 x 3 years = $4,066,326.

(3)       Loss of pig rearing income from 24 May to 31 December 1999

28. The Applicant said that as he had to move out of the land no later than 24 May 1999, he was forced to close down his pig rearing business on that date, as a result of which he suffered from a loss of income.  Therefore, he claimed compensation for the loss of pig rearing income from 24 May to 31 December 1999.  Based on an annual income of $1,300,000, he arrived at the figure of $782,133, which was the amount he claimed.

(4)       Business income from seedling

29. The Applicant said that during the 3 years from 1996 to 1998 the seedling generated an average net profit of $51,236 per annum.  On this basis, the commercial loss he sustained in this respect up to the year of his retirement would be $51,236 x 23 years = $1,178,428.

30. Regarding the aforesaid items (1) to (4), the Respondent took the view that it should be subsumed under the heading of compensation for goodwill.

31. The Lands Tribunal accepted the Respondent’s submissions in this regard.  Relying on the discussion on page 131 of Gordon N. Cruden, Land Compensation and Valuation Law in Hong Kong (2^nd Edition), the Tribunal held that loss of profits and loss of goodwill were claims of different nature.  The former was an income item which referred to the actual loss of income and profits as a result of land resumption; the latter was a capital item which referred to the capitalized loss of future profits.  As items (1) to (4) claimed by the Applicant were projected future losses as opposed to actual losses sustained by him, they could only be subsumed under the claim for loss of goodwill, and calculation of compensation should be based on capitalization of future income. 

32. The Lands Tribunal took the view that the Applicant had failed to provide any reliable written evidence showing his income from pig rearing and seedling prior to the land resumption and explaining how he calculated the total income for the 3 years from 1996 to 1998.  That notwithstanding, the Tribunal still adopted the Applicant’s assessment of the gross income (i.e. without deducting expenses) of the farm from pig rearing and seedling from 1996 to 1998, and then arrived at the annual net profit of the farm by deducting the operational expenses (e.g. feeds, electricity charges, vaccination and medical expenses, rent, etc.).  As the Applicant’s tenancy was then due to expire on 14 June 2002, the Tribunal applied section 12(c) of the Lands Resumption Ordinance and multiplied the net profit by the remaining term of the lease (i.e. 3 years) and the discount rate of 35%, resulting in a figure of $825,100 which represented the loss of goodwill.

(5)       Compensation for machinery and facilities

33. The Applicant claimed compensation for the machinery and facilities on the farm, the value of which was estimated to be $927,276.  The expert witness for the Respondent, on the other hand, assessed the value of the items on the basis of “loss following forced sale”, which was calculated by subtracting the “estimated forced sale value” from the “consumption market value” of the items.  In the end, the Lands Tribunal accepted the assessment made by the Respondent’s expert and adopted the figure of $632,100 as compensation for the machinery and facilities. 

(6)       Compensation for the price difference arising from the pigs sold

34.  The Applicant said that approximately 700 pigs were being raised on the farm at the time of resumption.  He subtracted the proceeds of selling the pigs from his valuation of their market price and arrived at the price difference of $464,870, for which he claimed compensation.  The expert witness for the Respondent disagreed with the actual loss suffered and the assessment made by the Applicant in this respect.

35. The Lands Tribunal agreed with the assessment made by the expert witness for the Respondent.  The Tribunal also took the view that the Applicant could have mitigated his loss by selling the pigs at an earlier time.  Furthermore, as the number of pigs kept by the Applicant had exceeded the number allowed under his licence (500), the Lands Tribunal reduced the figure as assessed by the Respondent’s expert by 2/7, arriving at a figure of $125,000 as compensation under this head.

(7)       Compensation for pig sheds and residential building

36. The Applicant had constructed on the land a number of buildings, one of which as residence for him and his family and the others for the purposes of pig sheds and feeds and tools storage.  He claimed compensation of $2,344,500 for these buildings.

37. On 18 April 1983, the Yuen Long District Lands Office issued a letter approving the construction of agricultural structures on Lot 1175.  The annex to that letter specified the approved structures, namely a watchman shed, a storeroom and 8 pig sheds.  Special condition (c) of the approval provided that “the approved structures shall not be used for residential or industrial purposes or for human habitation”.

38. The Livestock Keeping Licence for 1998 to 2001 held by the Applicant was accompanied by a plan, which showed that on the farm there were a building for feed storage and 6 pig sheds, 4 of which were numbered.  The numbered pig sheds and the building for feed storage were licensed farm structures.  For the remaining two unnumbered buildings, the plan stipulated that, in the absence of supplementary approval from the Director of Lands, they would be subject to the squatter control action.  The Respondent objected to this item of claim on the ground that the Applicant was a tenant of the land, and under the common law, the fixtures constructed by him on the leased land were owned by the landlord, and hence the Applicant was not entitled to compensation for the buildings on the land.

39. The Lands Tribunal agreed with this argument and therefore ruled that no compensation was payable to the Applicant under this head.

(8)       Compensation for other facilities on the farm

40. In his Application, the Applicant listed 7 facilities on his farm, in respect of which he claimed compensation of $230,150.  At the hearing, he abandoned the claim of $67,300 in respect of the water supply system.  Of the remaining 6 facilities, the Respondent argued that 4 items (namely the electricity supply system, the main entrance gate and side door gate, the protective brick walls and the concrete slab) were fixtures constructed on the leased land and, for the same reason as that stated above, no compensation was payable to the Applicant for those items.  The Lands Tribunal accepted this argument.  As for the remaining 2 facilities (namely, the tanning lamp for keeping pregnant sow warm, and the desk and cabinet for miscellaneous items), the Tribunal accepted the assessment made by the Respondent’s expert witness and ruled that compensation of $2,300 was payable to the Applicant.

(9)       Compensation for the price difference of feeds

41.  The Applicant claimed a sum of $5,128 being the shortfall in price upon sale of the feeds which had not been used by the time of demolition.  The Respondent did not dispute this item, and therefore the Lands Tribunal assessed compensation under this head on the basis of the amount claimed.

(10)     Compensation for disturbance to residential building and removal expenses

42. The Applicant claimed that he suffered losses as a result of the removal of his residence which was necessitated by the land resumption.  He claimed a sum of $127,330 in respect of those losses, which included domestic electrical appliances, furniture, transportation expenses and decoration of the residential building.

43. The Lands Tribunal accepted the Respondent’s defence that the Applicant had acted in breach of the government lease and Livestock Keeping Licence by residing on the farm with his family and should therefore not be entitled to any compensation under section 12(b) of the Lands Resumption Ordinance.  The Tribunal also held that the valuation made by the Applicant was unreliable and that he had failed to provide any satisfactory evidence to prove his losses.  For these reasons, no compensation was awarded to him under this head of claim.

Grounds of appeal

44. In his Notice of Appeal, the Applicant has put forward 7 grounds of appeal, as follows:

(1)        The Lands Department on 14 June 2002 agreed in writing to pay compensation of $3,337,000 to the Applicant.  This is a valid agreement.

(2)        The Lands Tribunal should not have refused to award compensation for the pig rearing business on the farm, which yielded a net profit of $135,000 (sic) per annum during the 3 years from 1996 to 1998.

(3)        On the farm there were pig sheds and a residential building, which occupied more than 9,000 square feet and were worth $2,344,500.  The Lands Tribunal should not have refused to award compensation for this head of claim.

(4)        Regarding the facilities on the farm, it was unreasonable for the Lands Tribunal to award compensation of only $2,300 because the facilities were built with funds supplied by the Applicant.

(5)        The Applicant’s whole family had been residing on the farm since 1983.  The Lands Tribunal should not have refused to award compensation for the removal expenses.

(6)        The farm did not have any pigs for sale from 24 May to 31 December 1999, but the Lands Tribunal failed to award compensation for the loss of income during that period.

(7)        In making its determination, the Lands Tribunal should not have applied the Lands Resumption Ordinance (Cap. 124 of the Laws of Hong Kong).  The Tribunal should have applied the Railway Ordinance, pursuant to which the land was resumed.

Ground of appeal (1): Letter of the Lands Department dated 14 June 2002

45. In 2001, the Applicant made a claim against the Lands Department for land resumption compensation.  The Lands Department wrote to the Official Receiver on 14 June 2002 on the matter of compensation since at that time the Applicant was a bankrupt (a bankruptcy order was made against him on 12 May 2001) and the Official Receiver was the trustee of his assets.  The letter of the Lands Department, which was marked “without prejudice”, reads as follows:

I refer to the letters of Chan Kam Chuen dated 17 December and 29 August 2001 regarding his claim for compensation of HK$38,559,237.00 for interference with the business of Kam Wah Yuen run by him.  Having carefully considered the information submitted by Mr. Chan, I regret to inform you that we cannot agree with the amount of claim as assessed by him.  As you are his trustee in bankruptcy, his right to compensation has vested in you.  If you can prove that Chan Kam Chuen was the occupier of the said land and as such is entitled to compensation pursuant to the Ordinance, then I have instructions to release to you a sum of HK$3,337,000.00 as interference compensation for the loss and damage suffered by the business run on the said land, in full and final settlement of all claims, fees and demands which may be made, pursuant to the Ordinance or other ordinances, by you and Chan Kam Chuen against the government, its officer and agent arising from or related to the government resumption of the title or interest which Chan Kam Chuen previously had in the said land, but not including any claim for interest on compensation and for professional fees.  Please note that, as the compensation of $3,337,000 has included the previously proposed ex gratia allowances for and including the structures, tools and facilities for the permanent improvement of miscellaneous items on the farm, all compensation offers previously made to Chan Kam Chuen (including the proposed ex gratia allowances) are hereby withdrawn.

If you intend to accept the said offer for compensation, please sign the attached Form A and return it to us together with this letter within 28 days from the date of this letter.  Otherwise, this offer will automatically lapse and be deemed withdrawn, and the government may consider commencing legal proceedings in the Lands Tribunal.  Upon being satisfied that the right to compensation of Chan Kam Chuen has been established and upon executing the formal agreement and indemnity regarding this compensation, the government will release the compensation and interest thereon.  For this purpose, you are required to submit originals of the requisite documents and other relevant documents to our Legal Advisory and Conveyancing Office or the lawyer specified by the government.

If you do not intend to accept the said offer for compensation, you are entitled pursuant to the Ordinance to refer the claim to the Lands Tribunal for a determination on the amount of compensation.  Although you may make an application to the Lands Tribunal, the government is still prepared to release to you a sum of HK$2,502,750.00 as provisional compensation in respect of such interference compensation for the damage suffered by the business run on the said land as may be assessed pursuant to the Ordinance, together with interest on the provisional compensation from the date of the land resumption to date of release of such compensation, with the interest rate to be assessed by reference to the lowest of the interest rates paid from time to time on 24-hour call deposits by the three note-issuing banks of Hong Kong; provided that the provisional compensation and interest thereon shall be used to offset any compensation and interest thereon to be determined by the Lands Tribunal.  If the amount of the released provisional compensation and interest thereon exceeds the compensation and interest to be determined by the Lands Tribunal in respect of the claim, the excess shall be returned to the government.

Whether you are willing to accept the provisional compensation or not, please sign the attached Form B and return it to us together with this letter within 28 days from the date of this letter.  Otherwise, the offer for provisional compensation will automatically lapse and be deemed withdrawn.  The acceptance of this amount shall be without any prejudice to your right to make any claim to the Lands Tribunal pursuant to the Ordinance regarding the amount of compensation in respect of the interest which Chan Kam Chuen previously had in the said land.

46. Although the letter contained an offer for compensation of $3,337,000, it expressly requested the Applicant to sign and return Form A to the Lands Department within 28 days from the date of the letter, failing which the offer would automatically lapse and be deemed withdrawn.  It is beyond dispute that the Applicant had not, within the specified period or at any time, accepted the offer made by the Lands Department in the letter.  This being the case, the offer lapsed in 2002, and now it is not open to the Applicant to seek compensation of $3,337,000 by relying on the letter.

47. Regarding the other sum mentioned in the letter, namely the provisional compensation of $2,502,750, the Applicant submitted at the hearing that he had accepted the offer but had not received the sum.  The Respondent informed us through Mr. Lam of Counsel that the Lands Department had released provisional compensation in a sum of $400,000 to the Official Receiver.  As the Applicant took issue with this, we asked the Respondent to submit additional information in that respect after the hearing.  On 27 March 2008, the Respondent provided us and the Applicant with 6 items of correspondence between the Lands Department and the Official Receiver’s Office from 5 May 2004 to 27 May 2005 with attachments thereto, including a Provisional Agreement on Payment signed by representatives of the Official Receiver’s Office and the Lands Department on 24 March 2005.  Paragraphs (d) and (e) of the Preamble to the Agreement mentioned that the Lands Department had made an offer for compensation of $3,337,000 to the Applicant and that the Applicant had not accepted the offer.  Paragraph (e) also mentioned that the Applicant agreed to accept, on a without prejudice basis, a sum of $400,000 as provisional compensation.  These documents show that the Lands Department did pay $400,000 to the Official Receiver in 2005 as provisional compensation, which enabled the Official Receiver to repay the debts of the Applicant.  The bankruptcy order against the Applicant was set aside by the court on 4 May 2005. 

48. Furthermore, although the letter of the Lands Department dated 14 June 2002 made mention of the provisional compensation of $2,502,750, it also expressly stated that if the amount of the released provisional compensation and interest exceeded the compensation to be awarded by the Lands Tribunal, the excess had to be returned to the government.  Therefore, the letter of the Lands Department did not constitute any undertaking to pay compensation of $2,502,750.

49. Given that the letter of the Lands Department dated 14 June 2002 was expressed to be without prejudice to any party, and on the above analysis, the Lands Tribunal in assessing the Applicant’s claim for compensation should not have been influenced or bound by the compensation offer or the provisional compensation mentioned in the letter.  The Applicant’s ground of appeal (1) must fail.

Grounds of appeal (2) & (6): Compensation for pig rearing business and loss of pig rearing income from 24 May to 31 December 1999

50. The Applicant advanced three items of claim in respect of his pig rearing business on the farm, namely, loss of business income, compensation for goodwill, and loss of income from 24 May to 31 December 1999.  In quantifying these three items, the Applicant adopted an annual net income of approximately $1,300,000 as the base figure and then multiplied it by different multipliers.  This figure of $1,300,000 represented, the Applicant said, the average annual net income of the farm for the 3 years from 1996 to 1998.

51. These three items of claim had one thing in common: they were for the profits which might be lost after the land resumption as the Applicant could no longer run the pig rearing business.  In other words, they were for loss of future profits, which were hypothetical assessments.   They did not reflect actual, substantiated losses which arose from a reduction in the Applicant’s income following the land resumption.

52. As the Lands Tribunal pointed out, the Applicant had duplicated his claim by dividing them into three heads.  The Lands Tribunal correctly grouped them together with the claim for the business loss for the seedling to form one item of loss of future income for the purpose of assessment.  Nor was there anything improper with the Lands Tribunal’s approach in calculating loss of goodwill, i.e. the capitalization of future income as suggested by the expert for the Respondent.  Furthermore, in assessing the claim under this head, the Lands Tribunal had made assumptions favourable to the Applicant in many respects.

53.  Regarding the Lands Tribunal’s adoption of the remaining term of the tenancy (i.e. 3 years) as the multiplier for calculating the compensation for goodwill, the Applicant argues that his tenancy had thrice been renewed since 1983 and that, but for the resumption, the tenancy could have been further renewed until his retirement.  However, section 12(c) of the Lands Resumption Ordinance provides that, for the purpose of determining the compensation payable, “no compensation shall be given in respect of any expectancy or probability of the grant or renewal or continuance, by the Government or by any person, of any licence, permission, lease or permit whatsoever”.  Therefore, although the Applicant expected to be able to have his tenancy renewed, the Lands Tribunal could not adopt the length of the period up to his retirement as the multiplier for calculating the compensation for goodwill.

54. In my judgment, the Lands Tribunal’s approach in assessing the loss from the pig rearing business and seedling and the resulting assessment were not wrong in principle.  Grounds of appeal (2) and (6) are devoid of merit.

Grounds of appeal (3) & (4): Compensation of pig sheds, residential building and farm facilities

55. On the claim for compensation in respect of the pig sheds and residential building, the Lands Tribunal ruled against the Applicant on the ground that he was a tenant and the fixtures he constructed on the leased land were owned by the landlord.  For the same reason, the Tribunal ruled that the Applicant was in principle not entitled to compensation in respect of 4 of the 7 items of pig rearing facilities on the farm.

56. I respectfully agree with Cheung JA’s discussion on the rights over fixtures constructed by a tenant on the land and the legal principles in relation thereto.  I also agree that, in considering the Applicant’s claim in respect of fixtures that he had constructed, the court must ascertain whether those fixtures were buildings that had been constructed under approval and whether they related to pig rearing business.  As pointed out by Cheung JA, the building constructed by the Applicant as residence for himself and his family was not an approved building whether in the approval granted by the Yuen Long District Lands Office in 1983 or in the plan attached to the Livestock Keeping Licence.  That building also contravened the express provisions of the said approval and Licence.  Therefore, the Applicant was not entitled to compensation in respect of the residential building.

57. On the basis of the legal principles explained by Cheung JA, the Applicant should be awarded compensation in respect of the pig sheds and buildings for feed storage which he had constructed under approval, as well as the facilities for pig rearing business (i.e. items 2 to 5 of other facilities on the farm).  The amount of compensation should be assessed by the Lands Tribunal.

Ground of appeal (5): Compensation for removal

58. As stated above, the Applicant’s residence on the farm with his family was in breach of the Government lease and also contravened the provisions of the approval granted by the Yuen Long District Lands Office in 1983 and the Livestock Keeping Licence held by the Applicant.  Pursuant to section 12(b) of the Lands Resumption Ordinance, no compensation can be awarded in respect of any use which is unapproved and inconsistent with the terms of the Government lease.  The Lands Tribunal was therefore correct in refusing to award compensation for removal.

Ground of appeal (7): Applicability of the Lands Resumption Ordinance

59. The Applicant’s case is that, as the land was resumed pursuant to the Railways Ordinance, compensation should be awarded in accordance with that Ordinance.  Although the Applicant’s right to compensation was derived from the Railways Ordinance, this does not mean that the Lands Tribunal could not rely on the relevant provisions of the Lands Resumption Ordinance in assessing and calculating compensation. 

60. On the contrary, item 1 in Part II of the Schedule to the Railways Ordinance provides that if a claim for compensation is made as a result of resumption of land under the Ordinance, compensation is to be assessed “as if the claim were made under the Lands Resumption Ordinance (Cap. 124) for land resumed under that Ordinance.”

61. Therefore, in assessing compensation for land resumed pursuant to the Railways Ordinance, the Lands Tribunal is bound to act in accordance with the principles and bases of assessment as set out in the Lands Resumption Ordinance.  The Lands Tribunal had clearly explained this in its determination (paragraph 11) and ruling on review (paragraphs 7 to 9).

62. This ground of appeal fails accordingly.

Other grounds

63. The Applicant also submitted at the hearing that in its determination the Lands Tribunal had misstated certain background information, such as the case number of the Applicant’s first claim and the outcome of his appeal on that claim, etc.  The Tribunal had rectified those mistakes in its ruling on review, see paragraphs 3 to 5.  Furthermore, as the Tribunal pointed out, those mistakes in the background information did not materially affect the analysis and findings in the original determination of the Lands Tribunal.

64. The Applicant has also contended that it was improper for the Lands Tribunal to order at the end of its determination that matters relating to interest on the statutory compensation, professional fees and costs were to be heard on a date to be fixed by the Registrar, because those matters should be resolved by a judge instead.

65. The Applicant has evidently misunderstood the order of the Lands Tribunal, which only required the Registrar to fix a hearing date and not to hear the relevant matters.

Conclusion

66. On the foregoing analysis and for the above reasons, I allow the appeal in respect of the pig sheds and buildings for feed storage which had been erected on the land under approval and the facilities for the pig rearing business, with compensation to be assessed by the Lands Tribunal.  The remaining items of the appeal are dismissed.  Each party is to bear his own costs of the appeal.  I set aside the costs order made by the Lands Tribunal regarding the Applicant’s application for review and, in its stead, order that each party is to bear his own costs thereof.

Hon Cheung JA:

Orders

67. We make the following orders:

(1)   We allow the Applicant’s appeal against compensation in respect of the buildings on the land for pig rearing and feed storage and four facilities on the farm, namely, the electricity supply system, the main entrance gate and side door gate, the protective brick walls and the concrete slab, with the assessment of compensation to be remitted to the Lands Tribunal.

(2)        We dismiss the Applicant’s other appeals.

(3)        We make an order nisi that each party is to bear his own costs of the present appeal.

(4)        We set aside the costs order made by the Lands Tribunal on 13 February 2007 that the Applicant was to pay to the Respondent costs of the application for review, and make an order in its stead that each party is to bear his own costs thereof.