HO LEE CHUI FOON v. DIRECTOR OF LANDS

HCAL 2176/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO. 2176 OF 2000

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J U D G M E N T

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1. The Applicant in this matter, Madam Ho Lee Chui Foon, seeks an order of certiorari to quash a decision of the Director of Lands refusing to offer her compensation for the revocation of what was, before 1 July 1997, called a crown land permit. The permit had been in her name and related to land situated in a village in the New Territories called Leung Tin. With the financial assistance of her husband, Mr Ho Sun Wing, the Applicant had operated a kindergarten on that land. In addition to the quashing of the decision refusing her compensation, the Applicant seeks orders directing the appropriate authority to enter into negotiations with her in order to come to a fair assessment of compensation.

2. What lies at the heart of these proceedings is the resumption of land in Leung Tin village in the 1980s to make way for urban development. At that time, Government reached agreement with the villagers regarding compensation for their removal. It is the Applicant's case that she was persuaded by Government to keep her kindergarten running on the undertaking that later, when it was necessary to resume the land on which the school stood, she would then be entitled, as the other villagers had done, to negotiate for compensation. She has, however, been refused compensation. This refusal, it is claimed by the Applicant, undermines her legitimate expectation that Government would enter into fresh negotiations, not ones governed by the agreement finally reached with the Leung Tin villages, an agreement from which she was originally excluded and in respect of which, therefore, she was unable to make representations.

The history of the matter

3. In or about 1980, the Government made a decision to build a new town in the Tuen Mun area of the New Territories. As a result, it was necessary for Government to acquire the land of several villages in the area. Leung Tin and San Wai Chai were 2 of the villages designated for resumption. The operation was one of considerable size, involving the uprooting of some 550 families.

4. Available records suggest that the Government first intimated to the villagers of Leung Tin that their land would be required for urban housing in or about the end of 1980. By March 1981, however, the District Officer in Tuen Mun had made it known to the villagers that all the village houses would have to be cleared within the next 2 years as Government required the land to establish a public housing estate which would be part of a new town.

5. By August 1981 a village committee was in negotiations with Government over arrangements for the removal of the villagers to a new area and the terms of compensation to be paid for their forced removal. Minutes of those meetings show that Mr Hong Sun Wing, the Applicant's husband, was a member of the village committee.

6. In February 1982, notice was published in the Government Gazette that under the then Crown Lands Resumption Ordinance, Chapter 124, specified portions of land in Leung Tin would be resumed.

7. In respect of compensation, the records held by the Lands Department indicated that Leung Tin was not an indigenous village which, in broad terms, means a village that was in existence at the time when the New Territories was first taken under lease. If it had been classified as an indigenous village then it would have been protected under the Peking Convention from expropriation or compulsion without suitable compensation.

8. Initially, it seems, the Government intended to remove the villagers and provide new housing and facilities for them elsewhere in the New Territories without payment of compensation for their uprooting and any losses sustained by reason of their removal from Leung Tin. However, in the general interests of fairness, Government then agreed to enter into negotiations with the villagers (represented by their village committee) on matters of compensation.

9. In early 1982, at or about the time when Government formally announced the resumption orders in the Government Gazette, the village committee submitted a petition seeking better terms of compensation than initially offered to them. The petition is a lengthy document. In part, it sets out the history of the village and emphasises the extent to which a traditional and well established community is now faced with the threat of being broken up. In detailing the achievements of the village, mention is made of education:

"Ming Tak Primary School, which is under the management of the Catholic Church, was established in 1935 with present enrolment of 222 students and in 1966 an additional Leung Tin Village Public Primary School was established with the present enrolment of 350 students ...There is also a kindergarten which can accommodate over 100 children ... The villagers have a good tradition of being on friendly terms with each other, mutually keeping watch and helping one another. Simple rural life prevails in our village, and the public order is good."

10. By March 1982 negotiations for compensation had substantially progressed. It is clear from various matters raised in the minutes of meetings between Government and the village committee that the Government was prepared to be flexible in order to achieve a fair result. For example, the following extract appears from the minutes of a meeting held on 4 March 1982:

"Mr Ho Sun Wing [the Applicant's husband] asked: "The 4 families of Ho Sun Ying, Ho Sau Ying, Chu Chi Cheong and Chan Luk are long term residents. Although their ancestors had settled in Leung Tin and Sun Wai Chai as early as 1908, they do not own any house lots but are holders of modification of tenancy permits. In accordance with the present removal terms, they do not qualify to apply for house sites, how do you propose to deal with these 4 families?"

Mr Lau Wong Fat proposed that these 4 families should be treated as exceptional cases and should be given special consideration entitling them to apply for house lots.

The District Office's view: He said the 4 families can be dealt with on the individual merits and should not be an obstacle affecting the Village Removal Committee's acceptance of the present removal terms. Although these 4 families should receive special consideration, the majority house lot owners' benefits should receive primary consideration first." [my emphasis]

11. This indication of willingness on the part of Government to negotiate in order to achieve a fair compensation and, in so doing, to consider exceptions to the generally anticipated scheme, is supported by the Applicant's husband who, of course, was one of the village negotiators. In an affirmation dated 11 January of this year he said:

"The compensation policy ("the Policy") for the Village is unique and was the result of a long period of negotiations with the Government. Initially, the Government did not intend to compensate the villagers at all. However, after strenuous and repeated requests by the villagers, the Government agreed to offer compensation. As far as I understand, whenever the Government negotiates the compensation terms of each removal village, it will consider firstly whether the village is an indigenous village. If it is the case, reference will be made to the previous indigenous village removal package. Under this package, a villager will normally be entitled to exchange 0.01 acre of house lot for 700 sq. ft. village-type house and there are other arrangements for their types of occupation removal. Having said all that, I understand that the Government also reckons the uniqueness of each removal village and hence is willing to negotiate with villagers and make modification to the compensation policy in order to suit the needs of each village. Thus, there is certain room of flexibility in dealing with each and every case of village removal. As a result, there is no absolute uniformity in the compensation package applicable to every village. Every removal has its unique compensation features and the compensation package offered in each instance of village removal is in accordance with the policy formulated after extensive discussion and consultation between the Government and the villagers concerned in each case." [my emphasis]

12. As the husband of the Applicant and a person who had invested in the kindergarten, it would be expected perhaps to find in the minutes of the various meetings some reference by Mr Ho Sun Wing of compensation for the school. But there is none. The reason, however, is not to be found in disinterest or an acceptance that no compensation would properly be due. It appears that the reason for the silence lies rather in an undertaking by Government to consider the payment of some form of compensation at a later stage.

13. Early in the process of removal, Government appreciated that it would necessary to make timeous arrangements for students attending schools destined for 'clearance' to be found places in new schools. One of the schools originally destined for clearance was the Leung Tin Kindergarten. Correspondence between the Tuen Mun District Officer and the Director of Education reveals that in or about mid 1981 some 17% of the children attending the kindergarten came from homes within the zone subject to removal while 83% came from homes outside the zone. All of them would have to be found new places.

14. In late 1981, however, Government made the decision to effect the removal of only one school, the one in San Wai Chai. The Applicant's kindergarten was not therefore to be made the subject of early 'clearance'. As to why this should be, the Applicant's husband recalls being told by the Tuen Mun District Officer that difficulties were being experienced in finding new places for students and, as a result, a request was made to keep the village primary school and kindergarten open. In his affirmation (dated 11 January of this year) the Applicant's husband recalls what happened in the following terms:

"However, before any formal dialogue on compensation took place, Mr Lam Chung Lun of the Tuen Mun District Office explained the difficulty of the Education Department in redeploying all the students affected by the closure of the School and the Kindergarten at one time, he then verbally requested me, as the husband of the Applicant as well as a member of the Committee, to postpone the relocation of the School and the Kindergarten and henceforth any discussion of compensation be likewise postponed. Since all members of the Committee (including myself) agreed that the education and the welfare of the students should be our main concern, we accepted the request by the said Mr Lam. Therefore, compensation for the removal of the school and the Kindergarten was omitted from the agenda during the subsequent negotiations. The omission was only intended to put the negotiation on the compensation terms of the Kindergarten and the School on hold or in abeyance. It was understood that as soon as the School and the Kindergarten were no longer required or resumed by the Government, discussion on the compensation terms should be resumed and the compensation for the Kindergarten and the School should be favourably considered." [my emphasis]

15. The Applicant's husband further explained the position by stating:

"As a result of the request by the said Mr Lam, the Policy formulated for the removal of the Village was based on the fact that the Kindergarten as well as the School were excluded from consideration. Had it not been for the verbal request by the said Mr Lam and the exclusion of the Kindergarten and the School from negotiation, the Committee would certainly insist that the compensation for the removal of the School and the Kindergarten be also discussed together with all other categories of occupation and we were confident that, given the circumstances existing then, the Government would have favourably compensated the Applicant along with the other villagers."

16. In my view, the recollection of Mr Billy Lam, the District Officer at the time, lends a measure of support to this optimistic view. Understandably, after a lapse of so many years, Mr Lam's memory of events is general at best. But he does recall an intention at some later stage to consider possible compensation for the kindergarten in terms of Government's compensation policy. In a letter dated 27 October 1999 addressed to the Director of Lands, Mr Lam wrote:

"I could not recollect what was exactly agreed at the discussion between myself and Messrs. Tang and Lam, and for that matter, between these two gentlemen and Madam Ho. However, I believe that the intention then was that when the premises concerned were eventually cleared, treatment would be given in accordance with the prevailing compensation policy." [my emphasis]

17. By the word 'treatment' I take Mr Lam to mean 'consideration'. In short, it is his recollection that, if the kindergarten was kept open, when eventually it was 'cleared', it would then be considered for compensation in accordance with 'the prevailing compensation policy'.

18. It is not in any way disputed that Mr Lam was at all times acting in good faith and if he held out that at some later stage, when the time came to 'clear' the kindergarten, compensation would be considered it can only mean that he believed it was possible, and within the boundaries of Government's discretion, that some form of compensation may, in fact, be payable. As the local District Officer, Mr Lam must be presumed to have had an in-depth knowledge of Government's compensation policy at that time and the extent to which on an ad hoc basis compensation may be payable by way of exception or in exceptional cases. To suggest that he would have held out the possibility of compensation knowing that there was no such possibility is to suggest an act of manifest bad faith on his part.

19. In a letter dated 18 August 1999 from the Director of Lands to the Applicant's representatives, the following was said about Mr Lam's recollection of events:

"I have now had a reply from Billy Lam the then D.O. Tuen Mun at the time when the clearance of the Leung Tin Kindergarten took place and he has advised that as far as he can recollect during some of the discussions DLO/TM staff had with the villagers/clearees affected, suggestions had been made that the kindergartens and one primary school should be allowed to remain so as to both cater for young children who were/would be moving into the estates as well as neighbouring Tai Hing Estates etc. and to provide premises for social activities and school children for villages not affected in the initial phases of the clearance exercise. Mr Lam believes that these proposals were discussed and agreed with him and were also conveyed to the people affected."

20. With respect, I do not see that this takes the matter further. Whether the suggestion to keep the schools and kindergarten open came originally from Government or from the local people, it is clear from the affirmation of the Applicant's husband and Mr Lam's own recollection that the eventual 'clearance' of these institutions was contemplated and that, in respect of the kindergarten at least, bona fide consideration would then be given to some form of compensation.

21. Negotiations with other villagers intended to arrive at a fair compensation were not finalised until about January 1983. In very broad terms, the 'compensation package' finally agreed may be summarised as follows:

"(1) A villager who acquired a house l ot either before or after World War II was entitled to a 700 Sq. ft. village-type house or a 700 Sq. ft. house site with HK$380,000 construction allowance;

(2) A villager who owned a house on private agricultural land under a Modification of Tenancy Permit was entitled to exchange 0.01 acre of house lot for a 700 Sq. ft. village-type house;

(3) A villager who owned a 400 Sq. ft. domestic house under a crown lands permit for more than 10 years was allowed to buy a 700 Sq ft. village type house site within the new village area at a nominal price;

(4) A villager who neither owned a permanent house lot nor held a crown land permit was permitted to buy a 700 Sq. ft. house site in the new village area at a low price, and could build a village-type house at his or her own expense;

(5) According to the 1972 Small House Policy, a person who has held a crown land permit for more than 10 years may apply for change of his temporary structure to a permanent one subject to a premium payment."

22. A crown land permit was the title given before the resumption of sovereignty to what is today called a government land licence.

23. As stated earlier, the Applicant held the land on which the kindergarten was operated by reason of a crown land permit. It was, in fact, the Applicant's father-in-law who, in or about 1969, was first granted such a permit in order to operate a kindergarten. In 1978, however, after the death of her father-in-law, the Applicant received transfer of the permit into her name and continued to run the school until its closure in 1985.

24. A crown land permit is not a grant of land; no interest passes. The terms of the Applicant's permit state that no relationship of landlord and tenant is formed and that the permit may be cancelled by Government, acting in its absolute discretion, upon 3 months notice. The argument has been made that, in the circumstances, Government had no obligation to offer any form of compensation to the Applicant. All that Government was obliged to do was to give the required notice. Mr Parker, on behalf of the Respondent, has pointed to the fact that the Crown Lands Resumption Ordinance, in terms of which all the land was resumed, did not apply to persons who occupied land by reason only of a crown land permit.

25. But, having said that, Mr Parker accepted that the scheme eventually agreed between Government and the villagers was a non-statutory scheme. Indeed, in terms of that scheme, the rules allowed for the giving of compensation to holders of crown land permits provided the permit was used for domestic purposes only. In this regard, Mr Parker referred to the 'Rules for the Grant of House Site' which read, in part, as follows:

"1. Licensee must prove himself/herself to be descendants of the earliest settlers in Leung Tin and San Wai Tsai to the satisfaction of Tuen Mun District Lands Office.

2. Licensee or his immediate family must not have through land exchange under village removal terms, got any resite house grant unless his need for an additional house site for the use of himself and his immediate family can be justified.

3. Licensee or his immediate family must confirm to have no house land in other village(s) suitable for redevelopment (statutory declaration is required) save in the case that the need for the grant of house site for the use of himself and his immediate family can still be justified.

4. The licence must have been held by the licensee or his/her immediate family for an undisrupted period of 10 years.

5. The Licensee or his immediate family must have been occupying the affected structure for domestic purpose in accordance with the conditions of the licence." [my emphasis]

26. But those rules are not taken from any statute or set of regulations. As I understand, they are no more than the terms of agreement negotiated between Government and the other villagers. The Applicant's submission is that the kindergarten, while a business, was also of public importance to the life of the village and its surrounding area; education being a responsibility of the community as a whole. Government asked that it be kept open in the greater public good and the Applicant (through her husband) agreed to do so for that reason subject to compensation being negotiated at a later stage.

27. At this juncture, it should be mentioned that, up until the time of the hearing of her application for judicial review, the Applicant was of the belief that compensation had, in fact, been paid to holders of crown land permits whether they held those permits for residential or commercial use. Her belief in this regard arose from 2 instances of compensation being paid to villagers operating commercial enterprises: a Mr Chan who operated a store under a permit and a Mr Ho who operated a small workshop under a permit. It appears, however, that Government paid compensation to these 2 persons on the understanding that their holdings were residential. The giving of compensation in these instances appears, therefore, to have been in error.

28. As it transpires, the Applicant kept her kindergarten in operation during the physical removal of the rest of the village. Indeed, it remained in operation until 1985 when the loss of pupils made it impractical to continue. By that time, it is apparent that the kindergarten was, to express it neutrally, not ideally situated. Leung Tin village had effectively been deserted, leaving the school marooned, and in the immediate vicinity extensive building operations were under way.

29. It was, however, only in1992 that the Applicant wrote to the Tuen Mun District Office seeking compensation. She based her claim on the broad equitable basis of how her work had been reduced to nothing by the land resumption and the new town development which left the kindergarten 'in a solitary state on deserted land'. In respect of the quantum of compensation due to her, she wrote (in translation):

"My kindergarten was built in 1969 at the cost of about HK$150,000. It is quite well equipped and sized with a gross area of about 10,000 square feet for the school structure. Under these circumstances, it is only reasonable for Government on the resumption of the kindergarten, other than the special compensation in cash payable to me, no less than 5 village-type houses should also be awarded as compensation."

30. In early March 1993, the Applicant was informed that her request for payment of compensation had been refused. This was on the basis that the village committee had reached an agreement with Government in terms of which only those holders of crown land permits who lived in a domestic dwelling on the land would receive compensation. The kindergarten did not fall into this category of usage. The letter also said that the kindergarten licence had not yet been resumed; Government was still considering what to do with the land and she would be advised of Government's intentions in due course.

31. In September 1994, the Applicant wrote again asking that her loss of the kindergarten be considered. She concluded her letter by saying:

"Recently, Tuen Mun Lands Department informed me that the kindergarten would be resumed for the use of resting area. I believe that the work will be in progress soon. I am sure that it is now the right moment to ask for a reasonable arrangement from the Government. Obviously your previous reply to me is not acceptable."

32. In the following month, the Applicant received the requisite 3 months notice to terminate her crown land permit, the reason being given that the land was required for an 'open space' area. In July 1995, the kindergarten was demolished.

The decision under challenge

33. The Applicant continued to press for compensation and in late 1998 a letter was written on her behalf to the Secretary for Home Affairs. In part, that letter read:

"The usual 'negotiations' took place between the villagers and the District Office prior to the removal. I don't propose to describe the process of negotiation or the outcome in detail here; but one aspect apparently not fully documented was an agreement which was reached that a building occupied by the village kindergarten should not be cleared at the same time as the rest of the village. As I understand it, the idea was that, given its location, the building would continue to be useful for some time after the removal. No discussions on its removal, relocation or compensation terms therefore took place at the time the village removal terms for the village as a whole were negotiated. Or, at least, there is no record of such discussions or any agreement reached. Had the removal the kindergarten taken place, terms for its relocation or compensation for it would almost certainly have been included in the village removal terms." [my emphasis]

34. On 1 December 1998, the Respondent wrote to the Applicant's representative refusing any form of compensation. It is the decision contained in this letter that the Applicant challenges by way of judicial review.

35. In setting out the background of the matter, the Respondent said as follows:

"Two primary schools and two kindergartens including Madam Ho's premises were situated within the resumption limits and should have been cleared. However, in view of the advice from the Director of Education that the Education Department had problems in redeploying all the students of the affected schools at one time and after repeated discussions with the Territory Development Department, it was finally decided that the resumption limits should be amended and only the Ming Tak School which was on private land should be included in the resumption ...

The Leung Tin Kindergarten was later affected by another project, namely the District Open Space, Area 2A in Tuen Mun. The licence was eventually cancelled on 27.1.1995 to allow for the implementation of this project."

36. As to the matter of compensation, the Respondent accepted that, under certain circumstances, operators of schools and kindergartens may be eligible for some form of compensation. But the letter continued:

"However, even if the subject licence had been included in the clearance exercise for the project ... it could not fulfill any of the requirements for village removal terms. Basically, all village removal terms were drawn up and offered to the clearees [those being cleared] on the basis that the affected structures were for domestic use."

37. The letter, however, was written (seemingly) in ignorance of Mr Billy Lam's memory of events; namely, that if the kindergarten remained open, compensation would be considered at a later time in accordance with the 'prevailing compensation policy'.

38. However, what can be drawn from the Respondent's letter is that it was possible for schools and kindergartens to receive some form of compensation. In short, there does not appear to have been any form of blanket policy on the part of Government to exclude claims made on behalf of schools and kindergartens.

39. As to why no compensation had been offered more recently, even though the kindergarten land had been resumed, the Respondent wrote to the following effect:

"In the clearance exercise carried out in 1995 in connection with the implementation of the District Open Space, Area 2A project, the pre-clearance survey conducted on 24.11.1994 by the Housing Department indicated that the said kindergarten was vacant and deserted and therefore did not qualify for any form of compensation payable for operating schools and kindergartens." [my emphasis]

40. In this latter regard, it seems to me, with respect, that Government may be accused of 'having its cake and eating it'. I say so for the following reasons:

(i) The kindergarten was originally situated within the resumption zone and would have been subject to clearance.

(ii) However, before any claim for compensation could be made on the basis that the kindergarten was a viable operating concern with a capital infrastructure, Government prevailed upon the Applicant to keep the school open. This was done on the basis that compensation would be considered later.

(iii) The kindergarten therefore continued in operation even though the rest of the village was removed and, because its compensation claims were only to be considered later, when it was resumed (or cleared), it was not included in the final compensation package agreed with the other villagers.

(iv) The kindergarten continued in operation even though it may reasonably be argued that its position in a deserted village surrounded by building sites made its future untenable. Eventually it had to close. Again, it may reasonably be argued that the cause of closure was Government's actions; that is, the removal of the village and the isolation of the kindergarten close to the building site of the new town.

(v) However, when Government eventually decided to resume the Applicant's land and did so at the end of January 1995, it would not consider compensation because the kindergarten was no longer in operation even though the closure had been as a result of its own actions.

The individuality of village removal schemes

41. The compensation scheme agreed with the villagers of Leung Tin was not a statutory scheme. That, said Mr Chan, on behalf of the Applicant, is of fundamental importance. While Government may have sought to adhere to broad policy guidelines, nothing was written in stone. Instead, the final terms of compensation were the result of often long and painstaking negotiations, the clear intent on the part of Government being to arrive at a fair compensation package. A village removal exercise, said Mr Chan, as in the case of Leung Tin, was 'no more than an exercise in which Government attempted to negotiate reasonably with the village representatives to arrive at a compensation package which equitably suited the particular circumstances of that particular removal'.

42. That, in my view, is an accurate description. Accordingly, I am satisfied that Government had the discretion legitimately to include the kindergarten (then in operation) into its scheme of arrangement if it considered it just and equitable to do so. That certainly, I believe, was the understanding at the time of Mr Billy Lam, the District Officer, who was the voice of Government in so many of the negotiations with the village committee.

What was the nature of Government's undertaking to the Applicant?

43. It is, of course, correct to say that the undertaking made by Government to the Applicant (through her husband) was not articulated in concrete terms. By that I mean that the undertaking was not reduced to a clear set of criteria or formulae which would enable an exact quantum of compensation to be calculated. In his letter of 27 October 1999, Mr Billy Lam recalls no more than an undertaking to consider the Applicant's claims in accordance with 'prevailing compensation policy'.

44. But what was the 'prevailing' policy at that time? As I have just found, each and every exercise of village removal was unique unto itself. If there was a policy, therefore, it was subject to an infinite number of variations. Terms were reached by negotiation. In that sense, the policy on the part of Government was to negotiate within broad policy parameters to ensure that, according to the circumstances of each case, fair compensation was offered.

45. In respect of the Applicant, what I believe was firmly articulated, if not in exact words then by overwhelming implication, was the following undertaking: "If you continue to operate the kindergarten for the benefit of the community rather than closing it down, you will in due course, when it is necessary to resume your land, be entitled to negotiate, as other villagers have done, to receive fair compensation".

Legitimate expectation

46. In a paper given to the Commonwealth Judicial Colloquium at Oxford in September 1992, Sir Robin Cooke, a non-permanent member of our Court of Final Appeal, said: "The administrator must act fairly, reasonably and according to law. That is the essence and the rest is mainly machinery'. In this matter, expressed in plain language, the Applicant seeks no more than that Government should discharge its obligations to her fairly and reasonably and according to law.

47. The Applicant accepts that she has no substantive right to demand a particular sum (or form) of compensation. It is her case, however, that she has a legitimate expectation, founded on Government's undertaking, to be able to negotiate in the real and reasonable expectation of receiving a fair compensation for the loss of her school.

48. I have already described the essence of the undertaking that I am satisfied was given to the Applicant by Government. But what, in the light of that undertaking, could the Applicant legitimately expect?

49. If it was the Government's case that, in the public interest, it had been forced to change its policy that would bring into being a broad range of considerations. Executive authorities must be in a position to change their policies in the public interest. As was said by Lord Woolf MR in R v. North and East Devon Health Authority, ex parte Coughlan [2000] 3 All ER 850 at page 873.

"The court's task in all these cases is not to impede executive activity but to reconcile its continuing need to initiate or respond to change with the legitimate interests or expectations of citizens or strangers who have relied, and have been justified in replying, on a current policy or an extant promise."

50. But, as I understand it, there has been no suggestion on the part of the Respondent that it has been forced to change its policy in respect of the Applicant. As I apprehend it, what the Respondent has said is simply that, although the power to negotiate still exists, the Applicant is not entitled to compensation. First, because the compensation scheme agreed with the villagers does not allow for any compensation for non-domestic use of crown land permits. Second, because when the kindergarten land was finally resumed, the school was no longer in operation. In respect of the first matter, I am satisfied that the preponderance of the evidence shows that the Applicant was persuaded not to seek compensation as the other villagers were doing and to wait for a later time. It was at Government's behest, therefore, that she was excluded from the scheme. That being the case, I do not see how Government can impose upon her terms of agreement reached through a negotiating process from which she was excluded. In respect of the second matter, I am again satisfied that the preponderance of evidence indicates that it was Government's actions which (effectively) forced the kindergarten to close. If Leung Tin had not been cleared and if the area surrounding it had not been transformed (for a material period of time) into a building site, I believe it could reasonably be asserted that the kindergarten would have continued to operate. Accordingly, in my judgment, if it was the root cause of the closure, Government cannot now refuse compensation because of that closure.

51. That being the case, I am satisfied that Government has failed to honour its undertaking and has thereby undermined the Applicant's legitimate expectation that she would, at the appropriate time, be entitled to enter into a negotiating process with the aim of assessing a fair compensation.

52. In R. v. Devon County Council, ex parte Baker and another [1995] 1 ALL ER 73, Simon Brown LJ identified some of the senses in which the broad doctrine of legitimate expectation has come to be used. In this regard, he spoke of the 'conventional' concept of legitimate expectation; that is, when it is used by a claimant not to assert any specific substantive right but rather an expectation that his or her 'interests' in that right will be honoured by the public authority:

"Here, therefore, it is the interest itself rather the benefit that is the substance of the expectation. In other words the expectation arises not because the claimant asserts any specific right to a benefit bur rather because his interest in it is one that the law holds protected by the requirements or procedural fairness; the law recognises that the interest cannot properly be withdrawn (or denied) without the claimant being given an opportunity to comment and without the authority communicating rational grounds for any adverse decision." [my emphasis]

53. I accept fully that the Respondent has already entered into extensive negotiations with the Applicant concerning compensation. It is not suggested that Government has refused to negotiate. In my judgment, however, to employ the language of Simon Brown L J in Devon County Council ex parte Baker (supra), I am not satisfied that the Respondent has communicated to the Applicant rational grounds for its adverse decision. For the reasons already given, in my view, the Respondent's negotiations were misconceived and therefore not rational in the sense given to that word in Associated Provincial Picture Houses Ltd v. Wednesbury Corporation [1947] 2 All ER 680. As was said by Lord Woolf MR in North and East Devon Health Authority, ex parte Coughlan (supra), at page 874:

"Rationality, as it has developed in modern public law, has two faces: one is the barely known decision which simply defies comprehension, the other is a decision which can be seen to have proceeded by flawed logic (though this can often be equally well allocated to the intrusion of an irrelevant factor)."

54. It is in this second sense that I consider the Respondent's decision to refuse compensation to the Applicant to be irrational.

55. It is not certain, of course, that the Respondent will, after a process of negotiations with the Applicant, agree to any form of compensation. The Respondent may have rational and adequate reasons for refusing compensation. This judgment does not pretend to be an exhaustive treatise on all the factors that may be relevant to future discussions. Nor is it for this court to dictate to the Respondent how the Respondent should exercise his discretion in respect of any future negotiations. To that extent, in my view, the Applicant's legitimate expectations have always been procedural in nature. However, Mr Parker, for the Respondent, has argued that the Applicant has founded her complaint on the legitimate expectation of a substantive benefit not merely a procedural one. That being so, she must establish that there was a clear and unambiguous representation. But, in my judgment, a clear and unambiguous representation was made. It was to the effect: "If you keep the kindergarten open then, when the time for resumption comes, we have the authority to negotiate a fair compensation with you". The authority to negotiate implies the authority to agree a form of compensation; namely, to agree a substantive benefit.

56. It is not always easy to differentiate between a legitimate expectation related to procedural matters as opposed to one seeking a substantive benefit. Procedure after all is only the avenue down which one rides to the mansion of substantive redress. A legitimate expectation may, of course, only be 'procedural in' the manner contemplated in R. v. Secretary of State for the Home Department, ex parte Hargreaves [1997] 1 All ER 397 in which it was held that prisoners seeking early release or home leave only had a legitimate expectation that their applications would be considered individually in the light of whatever policy was in force at the time. But in the present case, of course, there is no suggestion that the policy has changed. The Respondent has at all times founded its refusal on the policy negotiated with the villagers and not on the basis of a new overriding public interest.

57. But even if I am wrong in finding that the Respondent's adverse decision in respect of compensation was irrational in the limited Wednesbury sense, I am satisfied that the manner in which the Respondent has negotiated with the Applicant - for example, by excluding her from the original compensation negotiations but including her in the final agreement when assessing whether she was entitled to compensation - was, unconsciously, unfair and arbitrary. As a result, it amounted to an abuse of power. In this regard, for example, see Preston v. IRC [1985] 2 All ER 327 per Lord Scarman (at page 329):

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

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

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

The issue of delay

59. Order 53 r.4(1) of the Rules of the High Court provides that:

"An application for leave to apply for judicial review shall be made promptly and in any event within three months from the date when grounds for the application first arose unless the Court considers that there is good reason for extending the period within which the application shall be made."

60. The decision which has been challenged in these proceedings is the decision of the Respondent made on 1 December 1998. These proceedings, however, were only instituted on 21 September 2000. At first blush, the delay appears to be inordinate. It is apparent, however, that the Applicant attempted effectively to 'appeal' the decision of the Respondent and matters endured therefore for some considerable time thereafter. In addition, once legal advice was sought, it was necessary to identify the decision to be properly challenged among the many appearing in the extended correspondence.

61. It is apparent that this matter generally has endured over many years, let alone months. Mr Chan, for the Applicant, took me through the chronology of events in order to satisfy me that the delay should be condoned and, having regard to the exceptional circumstances of this case, I am prepared to exercise my discretion in favour of the Applicant.

Conclusion

62. For the reasons given in the body of this judgment, the application for judicial review is granted. There will be an order of certiorari to bring up and quash the decision of the Respondent dated 1 December 1998. There will, in addition, be an order of mandamus directing the Respondent to enter into negotiations with the Applicant in order to assess what compensation, if any, is properly due to her.

63. As for costs, there will be an order nisi for costs in favour of the Respondent, that order to be made final if neither party makes an application within 30 days of the date of the handing down of this judgment.