Tang Yin Kwong and Others v. The Secretary for Transport

LDMR 34 OF 2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 34 OF 2000

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J U D G M E N T

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1. This is an application to the Lands Tribunal ("the Tribunal") by the Applicants for compensation in respect of Lot Nos. 301, 304 (Portion) and 305 in D. D. 109 ("the Lots") which were resumed by the Government of the Hong Kong Special Administrative Region pursuant to the Government Notice No. 4958 dated 15.10.1998 gazetted and published on 16.10.1998.

2. The resumption was made pursuant to section 16 of the Railways Ordinance (Cap. 519) and these proceedings were brought under section 34(7) of the said Ordinance. The basis on which compensation is to be assessed for the Lots under paragraph 1 of Part II of the Schedule to the said Ordinance is "as if the claim were made under the Lands Resumption Ordinance (Cap. 124) for land resumed under that Ordinance". Section 10 of the Lands Resumption Ordinance ("the Ordinance") provides: -

"(1) The Tribunal shall determine the amount of compensation (if any) payable in respect of a claim submitted to it ............. 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 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; ............... "

3. Additional rules for determining compensation are provided for under section 12 of the Ordinance. They are set out as follows: -

"In the determination of the compensation to be paid under this Ordinance -

(a) no allowance shall be made on account of the resumption being compulsory;

(aa) no account shall be taken of the fact that the land lies within or is affected by any area, zone or district reserved or set apart for the purposes specified in section 4(1)(a), (c), (d), (e), (f), (g), (h) or (i) of the Town Planning Ordinance (Cap. 131);

(b) 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;

(c) 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 :

Provided that this paragraph shall not apply to any case in which the grant or renewal or continuance of any licence, permission, lease or permit could have been enforced as of right if the land in question had not been resumed; and

(d) subject to the provisions of section 11 and to the provisions of paragraphs (aa), (b) and (c) of this section, the value of the land resumed shall be taken to be the amount which the land if sold by a willing seller in the open market might be expected to realize."

4. The loss suffered by the Applicants is the value of the land resumed under section 10; therefore the applicable rule for determining compensation is section 12(d). The first matter the Tribunal has to decide is whether the provisions of section 11, and the provisions of paragraphs (aa), (b) and (c) of section 12 apply to this case.

5. The provisions of sections 11 and 12(b) do not apply to this case. As far as section 12(aa) is concerned, since the land resumed does not lie within or is affected by any area, zone or district reserved or set apart for the purposes specified in section 4(1)(a), (c), (d), (e), (f), (g), (h) and (i) of the Town Planning Ordinance, this paragraph also does not apply to this case.

6. The provision of section 12(c)

Section 12(c) is in issue in this case as the Respondent's expert at paragraph 5.3.2 of his report expressed the view that the comparables adopted by the Applicants' Surveyors are inappropriate comparables because they contain an element of "hope value" which is not permissible under section 12(c). He stated: -

' I consider all of the comparables adopted by the Surveyors are inappropriate because the transacted prices could be distorted by the element of "hope value". This "hope value" is the additional value to the pure agricultural land value paid by the purchasers in expectancy of a future land exchange for the resident use permissible under the residential zones. This "hope value" must be disregarded under section 12(c) of the Lands Resumption Ordinance.'

6.1 On 19th June 2001, the Tribunal decided in Nam Chun Investment Company Limited v. The Director of Lands (LDLR 3 of 2000, unreported) that section 12(c) is only applicable to the land resumed. In that case the Tribunal referred to the proviso of section 12(c) and stated,

' Under the proviso, it is stipulated that this paragraph does not apply to any case where the grant, renewal or continuance of any licence, permission, lease or permit could have been enforced as of right if the land in question had not been resumed. It is implicit in this proviso that the grant, renewal or continuance of these rights could not have been enforced if the land had been resumed. The said enforcement is therefore dependent upon the condition that the land in question had not been resumed, and it follows that these rights must be those the grant, renewal or continuance of which can only be enforced against the land resumed. If the grant, renewal or continuance of these rights can only be enforced against a piece of land other than the land resumed, such enforcement will not be related to the land resumed, and it would be meaningless to make the said enforcement conditional upon the "non-resumption" of the land in question. The licence permission, lease or permit must therefore be rights pertaining to the land resumed, and paragraph (c) can only apply to such a piece of land.'

6.2 The Tribunal has to consider whether section 12(c) applies to this case. This turns upon whether there is any expectancy or probability of the grant by the Government of a permission or a permit to erect residential buildings on the Lots.

6.3 First of all, what is the meaning of "the grant of a permission"? The Advanced Learner's English Dictionary defines the verb "grant" as "consent to give or allow (what is asked for)". The noun "grant" simply means the act of consenting to give or allow (what is asked for). Thus the term, namely "the grant" comprises an element of "what is asked for", namely, an application. Then what is the meaning of "any expectancy or probability of the grant of a permission or a permit"? The determination of compensation payable is the value of the land resumed at the date of resumption. Clearly if prior to the time of resumption of the land in question, an applicant has made an application to the Government for a permission or a permit with regard to the land resumed, then an expectancy or probability of the grant of the permission or the permit will exist, and section 12(c) will apply to this scenario. But does it apply to a scenario in which an applicant on the day of resumption merely intends to apply for the grant of such a permission or a permit at some time in the future? In the latter case, the intended application will, of course, be made after the date of resumption. But then an applicant will no longer have any legal status to make the application because his land has been resumed. His application will never succeed, and hence there cannot be any expectancy or probability of the grant of the permission or permit intended to be applied for. Thus the expectancy or probability of the grant of a permission or a permit is the expectancy or probability existing at the date of the resumption of the land in question.

6.4 In the present case, there is no evidence that by the time of the resumption of the Lots the Applicants had applied to the Government for the grant of any permission or permit whatsoever. The issue of any expectancy or probability of the grant of any permission or permit whatsoever does not arise, and hence section 12(c) does not apply to this case.

7. The comment in respect of "hope value" made by the Respondent's valuer as quoted above is not supported by any evidence. There is no evidence that the purchasers of the land referred to in the comparables adopted by the Applicants made any payment in expectancy of a future land exchange for the residential use permissible under the residential zones. In any event, section 12(c) is not applicable to these comparables. Having no basis for making that comment, the Respondent's valuer was simply making a wrong statement.

8. Value of the land resumed

The compensation payable in respect of the Lots is to be determined on the basis of the value of the land resumed, which, according to section 12(d), is the amount which the land if sold by a willing seller in the open market might be expected to realize. In this case, the Applicants' valuer adopted a "like-with-like" comparison approach by using comparables, to which relevant adjustments were made. At page 3 of his report, the Applicants' valuer stated: -

"4.4.1 Comparables

The most direct comparables would be any sale of agricultural land within the same R(C) zone. But no such comparable was found. We have therefore extended the search area and found nine agricultural land sale comparables as listed in Appendix 3..........

4.4.2 Adjustment

All comparables were zoned for residential use in the OZP at their date of sale. Yet the following adjustments are considered necessary:

1) Time

.................

2) Location

.................

3) Accessibility

.................

4) Quantum

................."

9. The use of comparables has been recognized by the Tribunal as a proper approach adopted in the determination of compensation. In Latfore Construction Co. Ltd. v. Secretary for the New Territories [1978] HKLTLR 253 at 260, President Power of the Lands Tribunal stated: -

"................The Tribunal can see nothing in section 12 that would prevent it from approaching the valuation of land restricted to agricultural use by using the sales of comparable land which is similarly restricted. Indeed, in the present case, the Tribunal is satisfied that this is a proper and permitted approach under s.12 but also that it is the approach to the problem of valuation most likely to result in a correct valuation."

10. By adopting the "like-with-like" approach, invariably in this case, the Applicants' valuer took into account the zoning element of the Lots. This is permissible and is not prohibited by section 12(aa) of the Lands Resumption Ordinance. On the contrary, the Respondent's valuer discarded this element in his evaluation of the value of the Lots. He said: -

"5.2.3.4. ...............Any enhancement in value of the Lots attributable to the development potential or prospect of the land for the erection of buildings or change of use must be disregarded under section 12(c) of the Lands Resumption Ordinance. Therefore, the optional use of the Lots as at the resumption date was their then existing use. As a result, agricultural use is the basis of valuation.

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5.3.3. As a result, sales evidence of agricultural land is gathered, bearing in mind that the comparables selected should not include any hope value for the development potential, to be excluded by section 12(c) of the Lands Resumption Ordinance. I consider transactions of agricultural land zoned for agricultural use will generally satisfy this criterion. Therefore, a total of 6 comparable transactions are assembled........

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5.4.1. All comparables are zoned for "Agricultural" uses under two different Outline Zoning Plans............"

11. In view of the Tribunal's ruling on section 12(c) as referred to above, the approach adopted by the Respondent's valuer in selecting the comparables is wrong and his valuation of the Lots is therefore rejected.

12. Determination of the Open Market Value of the Lots

The Applicants' valuer summed up in page 5 of his valuation report the after adjustment unit rates of his comparables, as follows: -

He further summed up in paragraph 4.4.3 of his report the rationale of his reconciliation of values. This is reproduced below: -

'4.4.3 Unit Value of the Subject Property

The subject property was zoned "R(C)" which permits a plot ratio of 0.8 on the town plan. This plot ratio is in between that of R(D) and R(B)2. We are therefore of the opinion that the value of the subject property should also be in between those of C(6) & C(7) and those of C(8) & C(9). We consider that the unit rate of $5,500/m2 is reasonable, having regard to the comparables.'

13. In conclusion, the Applicants' valuer opined that, based on his estimated unit rate of $5,500 per sq. m., the open market value of the Lots was in the sum of $6,850,000.

14. The Respondent's legal challenge to the suitability of the Applicants' valuer's comparables has been dealt with earlier in this Judgment. It will suffice to say that we decide that his comparables are perfectly acceptable. There is also no proof that they are not transactions at arms length in the market. In the circumstances, we agree with the Applicants' valuer's opinion that based on his comparables, it would be reasonable to estimate that the open market value of the Lots was $6,850,000 on vacant possession basis.

15 ． Orders

Accordingly, we order that the Respondent pays the Applicants compensation in the sum of $6,850,000. Leave is reserved to apply for the rate of interest, if not agreed, to be determined under section 17(3A) of the Lands Resumption Ordinance, Cap. 124. There will also be an order nisi that the Respondent pays the Applicants' costs on the High Court party and party scale with certificate for counsel, to be taxed if not agreed, to be made absolute unless application is made by either party within 21 days for an order in place thereof. Liberty to apply is also reserved for ancillary and consequential matters.