Leung Kee Investment Co. Ltd. v. Secretary for Transport

LDMR 26-28/1999 (Consolidated)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Lands Tribunal Application No. LDMR 26 of 1999

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J U D G M E N T

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1. On 25.5.2000, LDMR 26 of 1999, LDMR 27 of 1999 and LDMR 28 of 1999 were consolidated for trial. The applicants in these 3 cases were respectively the owners of Sections B and A of Lot No. 131, and the Remaining Portion of Lot No. 131, in D.D. 120, Fung Chi Village, Yuen Long, New Territories.

2. Pursuant to sections 16 and 18 of the Railways Ordinance, Cap. 519, a notice of resumption was served on the Applicants and published in the Government Gazette on 16th Oct., 1998. The land affected by the said notice included the three pieces of land referred to above, and they were reverted to the Government when the said notice expired on 16.1.1999.

3. In these proceedings the Applicants claimed for the following heads of compensation from the Respondent, in accordance with the Lands Resumption Ordinance ("the Ordinance") : -

(I) value of the resumed lots, under section 10(2)(a) of the Ordinance.

(II) losses and expenses, under section 10(2)(e) of the Ordinance.

Agreement between the parties

4. Regarding the valuation of the resumed lots in the present applications, the parties have no dispute on the following : -

(a) Compensation is payable on the principle of the open market value of the existing properties on these lots which shall be valued on existing use bases;

(b) The relevant date of valuation of the properties is 16 January 1999;

(c) The method of valuation of the properties is the direct comparison method.

5. The parties have also agreed on the physical measurements of the properties in question, which are set out below : -

(a) The property on the lot known as Section A of Lot 131 "Lot 131 s.A" (Application No. LDMR27 of 1999) is a detached house of 3 storeys in height. It has (1) a total house gross floor area of 171.87 sq.m. consisting of ground floor area of 64.04 sq.m.; first floor area of 43.79 sq.m. and second floor area of 64.04 sq.m.; (2) roof area of 64.04 sq.m., (3) balcony area of 9.28 sq.m. and (4) garden area of 256.40 sq.m.;

(b) The property on the lot known as Section B of Lot 131 "Lot 131 s.B" (Application No. LDMR26 of 1999) is a 3-storey detached house. It has the identical house gross floor area including their individual floor areas, identical roof area, balcony area and garden area as those for the property on Lot 131 s.A; and

(c) The property on the lot known as Remaining Portion of Lot 131 "Lot 131 R.P." is a 3-storey detached house. It (Application No. LDMR 28 of 1999) has the identical house gross including their individual floor areas, identical roof area and balcony area as those for the property known on Lot 131 s.A but has a different garden area of 266.10 sq.m.

6. In other words, all the three properties have identical gross house areas (including areas in individual floors), roof areas and balcony areas. The garden area of the property on Lot 131 s.A is the same as that on Lot 131 s.B whilst the garden area of the third property on Lot 131 R.P. is marginally larger than those of the other two properties.

( I ) Value of the resumed lots

7. The valuation issues of the three subject properties are reduced to the following : -

(a) Whether the Tribunal should first determine the unit value for the main accommodation (i.e. the unit value for the gross floor areas of the houses erected on the resumed lots before the resumption) and then determine separately the unit value for the ancillary accommodation?

(b) The usual issue of the choice of the best comparables for the floor areas of the subject houses, in applying the direct method of comparison.

(c) The basis of adjustments to the comparables proposed by the parties and the final choice of appropriate adjustments by the Tribunal

(d) The choice of the appropriate method of valuation for the garden areas, the choice of the best comparables, their analysis and finally, the determination of the appropriate unit rate for the garden areas.

Determination of the unit values for the main and ancillary accommodation

8. The two experts called by the parties have adopted different methodology in their determination of the unit value for the main and ancillary accommodation. Mr. James Ip, Chartered Surveyor, the Applicants' expert, in the analysis of his comparables (for example, see Exhibit A-3, Page 9 of his Valuation Report for Lot 131 s.A), ascribed separate values to the floor area, roof area and balcony area of the comparables but he did not use the same method in the valuation of the subject properties. Mr. Simon Lam, counsel for the Respondent pointed out that Mr. Ip had not valued the roof and balcony areas separately but "simply adjusted his unit rate for the floor area upward, purportedly so as to take the roof and balcony areas into account." Mr. Lam criticized Mr. Ip for being "contradictory (to his earlier approach in the analysis of his comparables), arbitrary, and undesirable. We shared with Mr. Lam's observation and criticism. In the valuation of real estate, there is a fundamental principle subscribed by the major valuation professional bodies, both in Hong Kong and overseas. This is the principle that whatever method a valuation surveyor used to "devalue" (analyze) the comparables, he should use the same method in his valuation. Mr. Ip did not follow this principle and obviously erred in his approach.

9. In addition, the Tribunal notes that in Mr. Ip's analysis of comparables, at Page 8 of Exhibit A-3 (for the property at Lot 131 s.A), he had identified and analysed 4 comparables, comprising two ground floor units, one first floor unit and one second floor unit (including top roof), each of which formed part of three-storey buildings. Mr. Ip prepared a table of adjustment and suggested various percentage adjustments to all the factors of adjustments. He did not, however, actually apply his final total adjustment to the unadjusted unit rates of his comparables in arriving at the adjusted unit rates to be used in his valuation. His so-called adjusted rates were merely his "spot value" figures, in valuation terms. This approach is wrong and cannot be accepted by the Tribunal.

10. Mr. Ip went one step further and suggested an "overall average unit rate" out of his table of adjusted rate for each floor level and ancillary accommodation. However, he failed to show how his overall average unit rate were computed from his table of chosen adjusted rates. This figure of overall average unit rate has no basis and cannot be accepted by the Tribunal.

11. Mr. Yeung Wai Man, Chartered Surveyor, the expert surveyor called by the Respondent did not try to arrive at different unit rates for accommodation at different floor levels. Instead, he analysed the comparables and used the results of his analysis in arriving at the same overall unit rate for the valuation of the three subject properties. Also, Mr. Yeung used, for the separate value of the roof and balcony accommodation, the adopted ratios of 1/8 and 1/4 respectively of the overall unit rate for the main gross floor area. He applied the identical assumptions in both the analysis of the comparables and the valuation of the properties. In practice, unless there are sufficient comparable transactions to enable a valuation surveyor to carry out a thorough "paired sales" analysis for the purpose of determining the values of roof area, balconies or other ancillary areas, we could not avoid using a method adopted by Mr. Yeung in the analysis of the comparables and valuation of properties that have ancillary accommodation. The dispute is very often on the percentages or fractions adopted by different valuation surveyors.

12. During the hearing, Mr. Ip said he usually adopted slightly different fractions of 1/10 and 1/5 of the main gross floor area for the unit rate of the roof and balcony area respectively. He did not explain why he had not used the same method in his valuation report.

13. In the absence of better and more rental evidence, Mr. Yeung's methodology is preferred. Firstly, he used the same method in his devaluation (analysis) of his comparables and the valuation of the subject properties. Secondly, the Tribunal has reasons to believe that in the marketing and setting of sale prices by developers for new developments and in the valuation of similar properties by the valuation profession in Hong Kong, they use a similar method as that adopted by Mr. Yeung. Finally, although the experts' suggested ratios is within reasonable range of each other, this Tribunal agrees to use Mr. Yeung's ratios as we find him to be a more reliable expert.

14. As to the unit rate for the garden area, this will be considered later in this Judgment.

Choice of the best comparables by the Tribunal

15. Mr. Simon Lui, counsel for the Applicants, summarized in his final submission all the comparables that had been identified and analysed by the parties. He stated that both parties had mutually agreed that a number of comparables identified by the Respondent were not "direct" comparables and were therefore ignored. In addition, the Applicants conceded that as two of his comparables were transacted too long before the relevant valuation date, they should be ignored as well.

16. In summary, Mr. Lui agreed in his final submission that the Tribunal should concentrate on the six comparables out of the original four and eleven comparables identified respectively by the Applicants and the Respondent. They were Comparable 4 of the Applicant ("Comparable A-4"), Comparable 2, 3, 4, 5 of the Respondent ("Comparable R-2, R-3, R-4 and R-5") and one common comparable (being Comparable 3 of the Applicant and Comparable 1 of the Respondent, referenced as "Comparable C-1"). Mr. Lui further submitted that as Comparable C-1 was within the acceptable range, it should not be disregarded simply because it appeared to be out of the range when it was compared with only Comparable R-2 and R-3, as suggested by the Respondent's expert. Moreover, Mr. Lui submitted that the Tribunal should not totally disregard Comparable 4, based on "a bare assertion" by the Respondent's expert that it was not a normal sale because it was out of range with the rest. In other words, Mr. Lui asked the Tribunal to give weight to all the above said six comparables.

17. The addresses of these comparables, their sale prices, the dates of transactions and the analysed unit rates, based on the Respondent's expert report, (with the exception of Comparable A-4 which was calculated during the cross examination) are reproduced below for ease of reference : -

Table 1

# For Comparable C-1, the average unit rate becomes $31,305 if it is analyzed assuming that value of garden area is equivalent to 1/10 of the value of house floor area.

18. Mr. Simon Lam for the Respondent submitted that both experts had agreed that the comparables in Chun Wah Villa were closest in nature to the subject properties. However, Mr. Lam commented that the Applicants' expert, Mr. Ip, had only two comparables (Comparable A-1 and A-3) that were in Chun Wah Villa. Mr. Lam suggested that since Comparable A-1 was transacted too far away from the relevant valuation date, only Comparable A-3 should be accepted as a good comparable. However, Mr. Lam suggested that based on his expert's evidence, even that comparable is out of line with the other two comparables, Comparable R-2 and R-3, in Chun Wah Villa.

19. In conclusion, Mr. Lam submitted that the Applicants' expert, Mr. James Ip's choice of comparables in his valuation report is "irrational and cannot be right". On the other hand, Mr. Lam submitted that the Tribunal should accept the Respondent's Comparables R-2 and R-3 as to be the best comparables. As a result, the Tribunal should accept the Respondent's expert, Mr. Yeung's base unit rate (pre-adjustment) of $26,500 per sq.m. of gross floor area arrived at from these two best comparables.

20. The Tribunal concurs with the parties that the best comparables are the transactions in Chun Wah Villa. However, the Tribunal finds that the comparables at Pretticoins Garden and Ching Yu Terrace are also good comparables as they are located very close to Chun Wah Villa. In addition, the Tribunal finds that the valuation of the subject properties should preferably be based on a larger number of comparable transactions, instead of relying on only two comparables as suggested by the Respondent.

21. Therefore, we have considered all the six comparables identified by the Applicants and set out in the above Table 1. We accept Mr. Yeung's opinion that Comparable A-4 is definitely out of line, among the six comparables as its unit rate is far above those of all other comparables. It is within the realm of professional judgment that a valuation surveyor could discard a certain comparable if it is found to be out of line with the pattern of value demonstrated by the remaining comparables. This is perfectly acceptable as to be the considered opinion of an expert. However, we agree with the Applicants that Comparable C-1 in Table 1 should not be discarded simply because it appeared to be out of range when it was compared with only 2 other comparables, namely Comparable R-2 and R-3. We find that the unit rate of Comparable C-1, at $31,305 is about 23% higher than the average unit rate of the remaining comparables (after excluding Comparable A-4). We decide this to be within the marginally acceptable range of values as far as these comparables are concerned. The margin of acceptable range of values varies for different types of properties. For properties such as the subject properties and the comparables, we consider that the margin to be higher as the unit sale prices of properties in low-rise developments in the New Territories usually fluctuate much more than the unit sale price of high-rise developments in the urban areas or the urban centres of the New Territories.

22. In the final analysis, we calculate the average of the unadjusted unit rates of all the Comparables in Table 1 above with the exception of Comparable A-4 to be $26,637 per sq.m. Before using this in the valuation of the subject properties, the Tribunal has to consider the appropriate adjustments that should be applied.

Adjustments to the comparables by the parties and the Tribunal's final choice of appropriate adjustments

Mr. Simon Lui again helpfully summarized in the Appendix 1 (Amendment) of his written final submission the various adjustments made by the two experts giving evidence for the present applications. For ease of reference, they are reproduced below : -

23. Both experts had considered all the above stated factors of adjustments in details. They had common opinion and percentage of adjustments for the factors of building age maintenance and time. They had similar opinion in the direction of adjustment for the factors of design & layout, environment and privacy & services although they differed in the degree of adjustments. As for the two remaining groups of factors, location and vehicular access, and the factors of car parking facilities and estate management, they differed in the direction of adjustments.

Design and layout

24. Despite what the Applicant's expert said in evidence that the subject properties had better design, more superior building materials, and were more unique, he had made no adjustment for this factor in his valuation (Bundle page 125). The Respondent's expert recommended an overall +3% for this factor. We accept this proposed percentage.

Environment and privacy & services

25. Both experts agreed that the subject properties enjoyed a more superior environment. The Applicant's expert gave evidence that the subject properties enjoyed a better view, had more plantation, were less congested with neighbouring properties and in general, had a more pleasant environment. The Applicant submitted that a total of 20% to 25% upward adjustment, as against a 5% adjustment conceded by the Respondent, was warranted. The Tribunal decides to adopt an adjustment percentage of +8%.

Location and vehicular access

26. The Applicant's expert stressed the superior location of the subject properties and their better vehicular access. He gave adjustments of +5% and +2% respectively for these two factors. He also gave evidence that the area in which the comparables was situated had been susceptible to flooding in the past. The Tribunal finds that the Applicant failed to show that Chun Wah Villa and the other comparables nearby had suffered from flooding although Ma Tin Tsuen to its west was subject to flooding in the past. The Tribunal agrees that there is no material difference between the subject properties and the comparables as far as location and vehicular access are concerned. No adjustment is warranted.

Car parking facilities and estate management

27. The Applicant's experts gave evidence that the garden area of the subject properties could accommodate 8 to 10 cars. Besides, visitors to the properties could make use of the parking space along the access road and outside the rural committee building nearby. However, the Applicant's expert might have forgotten that we are also attributing values to the garden areas ancillary to the subject houses. So, it amounts to double counting if the garden areas were also to be valued on the basis of their being used for car parking purposes. We share with the view of the Respondent that regarding the parking along the access road or outside the rural committee building, the owners of the subject houses had in any event to compete with other residents served by the same access road. Also, the Applicant submitted that the subject properties, being three adjoining houses surrounded by a boundary wall, could be managed by the owners themselves while the comparables had to be managed by a management company. The Respondent argued that management by a management company was indeed an advantage and was preferred by most people. The Applicant suggested an upward adjustment of 5% for these two factors combined together while the Respondent a -5%. After weighing the evidence and the arguments of both parties, the Tribunal decides that an upward adjustment of +3% to account for these two factors is appropriate.

Building Age Maintenance and time

There was no dispute between the parties on these two factors. Their recommended adjustments are accepted by the Tribunal.

To summarize, the Tribunal decides that the following adjustments are appropriate : -

Design & Layout-	+3%
Environment and Privacy & Service-	+8%
Location	0%
Vehicular Access	0%
Car Parking Facilities and Estate Management	+3%
Building Age Maintenance	- 5%
Time	0%
Overall	+9%

Therefore, the overall adjustment percentage of +9% should be applied to the unadjusted base unit rate of $26,637 per sq.m. determined earlier in this Judgment. This gives a figure of $29,034 per sq.m. which we round off to $29,000 per sq.m.

Choice of the appropriate method of valuation of the garden area and the Tribunal's final choice of the appropriate unit rate

28. Mr. James Ip, the Applicant's expert identified three comparable sales of agricultural land (Exh. A-3 page 10) in D.D. 120 and D.D. 122 as the basis of his valuation of the garden area of the properties. The comparables have unadjusted unit rates of $3,229, $6,269 and $13,994 per sq.m. As a result of this findings, Mr. Ip adopted an overall unit rate of $7,800 per sq.m. for the purpose of valuing the garden areas.

29. The Applicant submitted that Mr. Ip's valuation, following the fundamental principle of direct comparison, should be preferred. The Applicant further submitted that Mr. Ip's comparables were situated very near the resumed lots.

30. However, Mr. Ip's valuation was criticized by the Respondent as to be wholly unsatisfactory, for the following reasons : -

(a) None of the three comparables were garden land.

(b) Mr. Ip initially arrived at his unit rate for garden areas by averaging the unit value of his three comparables. After the Respondent pointed to him that unadjusted averaging is a meaningless exercise, he carried out very unreasonable, arbitrary and unsupported adjustments to arrive at the same unit rate for the garden areas. Mr. Ip could provide no justification for his adjustments to the extent of 30% or 40% (Bundle page 126A) for a single factor of location, other than saying that they were his judgment and experience. The Respondent submitted that if such a large adjustment had to be made to the comparables, they are not meaningful comparables at all.

(c) Mr. Ip's adopted unit rate of $7,800 per sq.m. for the garden areas was equivalent to about 17% of his adopted unit rate of the main gross floor areas of the properties. This was inconsistent with Mr. Ip's own evidence that, from his experience, the unit rate for garden area was usually 10% that of the floor area, same as what he actually used in the analysis of his comparables.

31. Moreover, the Respondent submitted that Mr. Ip's criticism of the Respondent's expert's valuation of the garden areas, based on compensation rates adopted by the Lands Department for different zones in Yuen Long district, is unsustainable, as these are ex-gratia rates with very little relevance to open market values.

32. On the other hand, Mr. Yeung Wai Man, the Respondent's expert opined in his valuation report that "the open market value of garden area should be approximately $4,500 per sq.m. if its area falls below 70 sq.m. For any area exceeding 70 sq.m., the value should be lowered to approximately $1,200 per sq.m." (Bundle page 305). Mr. Yeung's opinion was based on his analysis of the sales of properties with garden areas of different sizes in the development known as Bellevue Court, Lot 4289, D.D. 124, Hung Shui Kiu (Bundle page 370).

33. Mr. Yeung's methodology was heavily criticized by the Respondent : -

"(a) it was not an usual method for valuation of garden/agricultural land,

(b) it had never been accepted as a reliable method of valuation for garden/agricultural land in Court;

(c) it was admitted that it was "invented" by Respondent's expert and was not empirically tested;

(d) Bellevue Court was too far away from the resumed lots and was situated in a materially different location;

(e) It was an unsound assumption that part of a garden over 70 sq.m. commanded a substantially lower value than the first 70 sq.m. (almost 4 times less valuable);

(f) The analysis ignored that a large garden could be put in a more variety of use like the resumed lots than a small one in Bellevue Court;

(g) The garden/agricultural land of the resumed lots also served as car parking space but Bellevue Court had separate car parking spaces in front of the house...."

34. The Tribunal decides that the valuation of both experts are unsatisfactory for reasons that had been summed up by the parties in their submissions. The Tribunal agrees with the Respondent that Mr. Ip's comparables were very poor comparables. With the exception that they were located quite close to the subject properties, there were no similarity between the comparable lots and the garden areas of the subject properties. We are trying to determine the value of the garden areas which are ancillary accommodation for the subject houses. However, none of Mr. Ip's comparable was being put to similar uses. One could argue that they were Old Schedule Agricultural lots and could be put for garden uses. But even then, they would be used primarily for garden, for example, market gardening purposes but not as garden areas ancillary to houses. In addition, we note that the sale prices of Mr. Ip's three comparables were in the region of $1.96 million, $8.37 million and $7.28 million. We do not agree that these are the considerations paid by any purchaser for ancillary garden areas. We are satisfied that they were most probably transacted for other intended purposes.

35. Similarly, the Tribunal agrees with the Respondent that Mr. Yeung failed to account for the very substantial differences between the unit rates for garden areas of over or under 70 sq.m. We note that Mr. Yeung came to his conclusion from his analysis of "paired sales" of houses with garden areas in Bellevue Court. Although Mr. Yeung admitted that he thought of this method when analyzing the comparable sales of houses in Bellevue Court, we find that this is certainly not a method "invented" by Mr. Yeung. The problem of Mr. Yeung's conclusion, we think, is that there might be other reasons affecting the values of houses, other than the garden areas. These could include the dates of actual sale of the houses (especially in Hong Kong where the market could change abruptly over a very short span of time), the differences in orientation aspects and location of the houses, the different bargaining power of the purchasers and the imperfection of the market. These could mask the values of the gardens of different sizes in an estate such as Bellevue Court. Therefore, after carrying out any analysis, a valuer should have second thoughts of both the processes and the end results. This is especially so if there are some assumptions or questions that could not be accounted for, in which case a valuer should use some other method to test his analysis. In this valuation exercise, the Tribunal agrees with the Respondent that Mr. Yeung basically failed to account for the substantial differences in the unit rates for garden area of over or under 70 sq.m. Therefore, the results of his analysis based on the few paired sales of houses in Bellevue Court should not be accepted as the basis for valuing garden areas in these applications.

36. In the circumstances and in the absence of a better approach or evidence, the Tribunal prefers to adopt the commonly used method of assuming that the value of garden area represents about 1/10 of the value of the main house area.

Determination of the value of the resumed lots

Based on the estimated after-adjusted unit price derived from the comparables, the Tribunal has estimated the open market value of the subject properties in these applications. We set out below, for ease of comparison, the Applicants' compensation claims, the Respondents' estimates of the amounts of compensation payable to the Applicants and the Tribunal's final determination amounts: -

(II) Losses and expenses under section 10(2)(e) (i)of the Ordinance

37. Section 10(1) of the Ordinance provides that the Lands 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.

38. Section 10(2) provides for the bases on which the compensation is to be determined. One of the bases which the Applicants relied on is related to moving and acquisition expenses, as set out in subsection (2)(e)(i) : -

" (e) in the case of land resumed under an order made under section 3 on or after the commencement of the Crown Lands Resumption (Amendment) Ordinance 1984 (5 of 1984):-

(i) the amount of any expenses reasonably incurred by him in moving from any premises owned or occupied by him on the land resumed to, or in connection with the acquisition of, alternative land or land and buildings ......."

(Underlines provided)

39. The Applicants argued that the principles set out by the Court of Appeal in England in the case of Harvey v Crawley Development Corporation [1975] IQB485 applies to Hong Kong, and in support of this contention, they quoted the following comments made by Mr. Gordon Cruden at P. 143 in his book "Land Compensation and Valuation Law in Hong Kong" (Butterworths, 2nd edition, 1999) : -

"The enactment of section 10(2)(e) means that the law in Hong Kong relating to removal expenses is basically the same as that which exists in England. The principles set out in the leading Court of Appeal judgment Harvey v Crawley Development Corporation [1975] 1 QB 485 therefore now apply equally in Hong Kong. In that case, Mrs Harvey claimed the expenses of moving here furniture to her new home; having curtains and carpets adjusted to fit into the new house; valuer's fees; legal costs; and travelling expenses. The latter sums included those relating to an abortive proposed purchase of another new home.

The Court of Appeal allowed those items, Lord Denning explaining:

"Mrs Harvey tried to find another house for herself to go into. She saw a house which she liked and was proposing to buy it but she had a surveyor's report for it and when she got the surveyor's report she discovered it was an unsatisfactory house and she did not go on with purchase. Afterwards she did find a house which suited here and she bough it. She had to pay the solicitors' costs and the surveyor's fees when she bought it; she had some travelling expenses and so on. The total expense to which she was put for surveyor's fees and legal costs (on the proposed house and the house she bought) comes altogether to ￡241.10.1."

Lord Denning rejected the contention that Mrs Harvey was in effect claiming equivalent reinstatement in circumstances where that right did not apply:

"Mrs Harvey gets compensation for having to move out her furniture and put it into the new house: she gets compensation for having to alter the curtains and carpets and remake them to fit the new windows and floors ... this ￡200 odd which is the direct consequence of Mrs Harvey being turned out of her house, is properly to be regarded as compensation for disturbance."

The provisions of section 10(2)(e) are more explicit than the statutory provisions in England. The categories of removal and incidental expenses allowed by the Court of Appeal in Harvey v Crawley Development Corporation would now also be granted in Hong Kong."

40. The facts of that case were conveniently set in the head note of that case:-

"As householder whose home had been compulsorily purchased by a new town development corporation at an agreed price of ￡4,148, which included the legal costs of that purchase and expenses incurred in moving her furniture and having curtains and carpets adjusted to fit a new house, claimed in addition as "compensation for disturbance" under rule (6) of section 2 of the Acquisition of Land (Assessment of Compensation) Act, 1919, the surveyors' fees, legal costs and travelling expenses totalling ￡241 incurred by her, first, in an abortive proposed purchase of a new home and, secondly, in the purchase of a new home.........."

41. The provisions of section 2 of the Acquisition of Land (Assessment of Compensation) Act 1919 ('the 1919 Act") were set out in that case :-

"In assessing compensation, an official arbitrator shall act in accordance with the following rules:-

(1) no allowance shall be made on account of the acquisition being compulsory; (2) The value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sole in the open market by a willing seller might be expected to realize: .........(5) Where land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, the compensation may, if the official arbitrator is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement: (6) The provisions of Rule (2) shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land......."

(Underlines provided)

42. The issue to be decided in Harvey's case is shown in the following extracts taken out from the judgment of Lord Denning : -

"The Principles of compensation have been gradually developed over the years in cases decided on the Lands Clause Consolidation Act, 1845, but specific rules are now stated in section 2 of the Acquisition of Land (Assessment of Compensation) Act, 1919. Under those Acts the law is settled, both in this country and in Scotland, by two cases. The Scottish case is Venables v. Department of Agriculture for Scotland, ¹ and the English case is Horn v. Sunderland Corpration, ² in this court. Those cases show that, in addition to the actual market value of the house, when sold with vacant possession, Mr. Harvey is entitled to "compensation for disturbance," which is specifically preserved by section 2, rule (6), of the Act of 1919, and includes all damage directly consequent on the taking of the house under statutory powers. The question is whether these costs of ￡241 10s. ld. come within that head."

"......It seems to me that, as these costs of ￡241 10s. 1d. were reasonably incurred by Mrs. Harvey in getting another house, they can fairly be regarded as a direct consequence of the compulsory acquisition. Prima facie, therefore, they fall within the heading of compensation for disturbance...............I would therefore say that this money which has been expended, this ￡200 odd, which is the direct consequence of Mrs. Harvey being turned out of her house, is properly to be regarded as compensation for disturbance........."

43. The basis on which the claimant in Harvey's case grounded her claim is Rule 6 of section 2 of 1919 Act, which is different in wording from section 10(2)(e)(i) of the Ordinance. According to the judgment of Romer L.J., an element of "reinstatement or replacement" may be involved in rule (6), when he said at page 11 of the judgment,

"The fact that in some sense reinstatement or replacement may be involved does not appear to me to disqualify the claim under rule (6) of section 2 of the Act of 1919; ......"

But such an element does not exist in section 10(2)(e)(i). Harvey's case is a decision simply showing how Rule 6 applied to the facts of that case. Rule 6 is different from section 10(2)(e)(i). Therefore in these proceedings the Tribunal should not apply Rule 6, and it should not rely on Harvey's case. If it does so, it would be applying Rule 6 to the facts of these proceedings. It must only apply section 10(2)(e)(i), when determining whether a particular item of expenditure comes within its scope.

Lot 131 s. A.

44. The Applicant claimed a total of 41 items in respect of losses and expenses (as set out in "Exhibit A1") under section 10(2)(e)(i) of the Ordinance. The Respondent does not dispute the following items : -

1. Legal cost (Solicitors' stamp duty for the new house)	$104,360
2. Legal cost (disbursement) to John Chan & Co.	$1,090
4. Legal cost to Wong Hui & Co.	$1,500
5. Agency fee to Shine Management Co. Ltd.	$35,000
6. Removal cost to Kwong's Piano Service Co. Ltd.	$10,000
Total:	$151,950 =======

45. The Tribunal allows the above items in the total amount of $151,950.

46. The Tribunal does not allow item 3, because it was already included under item 1.

47. Items 7 & 13 are in respect of costs of purchasing new furniture.

48. Items 14 to 32 and 32a are decoration costs spent.

49. Items 33, 34, 37, 38, 39 and 40 are costs involved in purchasing electrical appliances and green plants etc.

50. Items 35 and 36 are installation costs of electrical appliances and antenna.

51. Apart from items 1, 2, 4, 5 and 6, all the other items are not expenses incurred in moving from the premises owned by him on the land resumed to the new house, or in connection with the acquisition of the new house. These expenses do not come within the ambit of section 10(2)(e)(i). Therefore no compensation will be made to the Applicant in respect of these expenses.

Lot 131 s. B

52. The Applicant claimed a total of 37 items in respect of losses and expenses (as stated in " Exhibit A3") under section 10(2)(e)(i) of the Ordinance. The Respondent does not dispute the following items of claims : -

1. Legal cost (solicitors' fee & disbursement) to John Chan & Co.	$104,360
3. Legal cost to Wong Hui & Co.	$1,500
4. Estate Agency's commission	$35,000
5. Removal charge	$10,000
Total:	$150,860

53. The Tribunal allows the above items in the total amount of $150,860.

54. The Tribunal does not allow item 2, as it was already included in item 1.

55. Items 6 to 9 are costs of purchasing new furniture from Chi Fu Furniture Ltd.

56. Items 10 to 29 are decoration costs.

57. Items 30 to 32, and 37 are costs for purchasing new lighting appliance and new electrical appliances.

58. Items 33, 35 and 36 are costs for installation of electrical appliances and satellite antenna.

59. Item 34 is the cost for repairing a VHS tape recorder.

60. Apart from items 1, 3, 4 and 5, the expenses involved in the other items do not come within the ambit of section 10(2)(e)(i). They are not expenses incurred in moving from the premises owned by him to the new house, or in connection with the acquisition of the new house. Therefore no compensation will be made to the Applicant in respect of these expenses.

Lot 131 R.P.

61. The "replacement house" was acquired in March 1997 in the name of Ms. Ngo To Muoi, one of the 2 directors of the Applicant, but it is her husband, another director of the Applicant Mr. Yuen Yeung Kiu ("Mr. Yuen"), who made the expenses in acquiring and decorating the new house. The Applicant only received in August 1997 a letter formally informing it about a possible resumption. Notice of resumption was gazetted on 16.10.1998. The land was reverted to the Government on 16.1.1999.

62. In Director of Building and Lands v, Shun Fung Ironworks Ltd. [1995] 2AC111 the Privy Council held that, if certain requirements are met, compensation is payable during the "shadow period", namely, the period between an owner becoming aware of the resumption scheme and its later formal notification. Lord Nicholls explained the principles in these terms : -

"So where can the boundary be drawn sensibly?... there is not sensible stopping place short of recognising that losses incurred in anticipation of resumption and because of the threat which resumption presented are to be regarded as losses caused by the resumption as much as losses arising after resumption.

This involves giving the concept of causal connection an extended meaning, wide enough to embrace all such losses. To qualify for compensation a loss suffered post-resumption must satisfy the three conditions of being causally connected, not too remote and not a loss which a reasonable person would have avoided. A loss sustained post-scheme and pre-resumption will not fail for lack of causal connection by reason only that the loss arose before resumption, provided it arose in anticipation of resumption and because of the threat which resumption presented. In terms of the Resumption Ordinance, a pre-resumption loss which satisfies these criteria is as much 'due' to the resumption as a post-resumption loss."

(Underlines provided)

63. In paras. 49 and 50 of his written submission, Mr. Lui, Counsel for the Applicant stated : -

"49. It was AW3's evidence that the Government stated to carry out some land surveys in the Resumed Lots back in the 2nd-half of 1996 and, as a result, it alarmed the Lifeworld of this resumption. AW2 also gave a version of the event happened in late 1996.

50. At the same time, AW3 was further informed by the Fung Chi Tsuen Rural Committee that the resumption would take places and they were planning for raising objection to the Government. In the light of all these events, AW3 and his family made a decision to move early in order not to avoid last minute rush."

(Underlines provided)

64. The word "not" must have been wrongly inserted in the underlined phrase. In any event Mr. Lui's assertion is totally unsupported by evidence.

65. The decision to purchase a new home was made in 1996, as revealed by Mr. Yuen in Paragraphs 8 and 9 of his statement : -

"8. Therefore, in early 1996, as the property prices at that time were rising extremely rapidly and it seemed to me that if I had to move from the houses on Lot R P eventually, the later I moved, the higher price I had to pay for a new home, with discussion with my wife, we decided to purchase a new home as soon as we could find a suitable place. Where I say suitable place, I mean a suitable place for us to live and a suitable place for my orchids.

9. In March, 1997, my wife and I identified a "suitable" house at Fair View Park, Yuen Long of a house area of about 1700 sf. (159 sq. m.) ("the New Home") for the whole family to move to. After careful consideration, in view of the likely resumption of the Lot R P. we decided to purchase the house at Fair View Park. The provisional agreement for sale and purchase was executed in March, 1997 and the completion of the transaction was scheduled to take place on 31st July, 1997."

66. During trial Mr. Lui ascertained from him if the year 1996 referred to in Paragraph 8 should be 1997. Mr. Yuen confirmed that the year 1996 was correctly stated. According to his statement, it was only in the second half of 1996 that when some workmen went into Lot 131 R. P. to do surveying work that he was told that the West Rail Project would pass through the Lot 131 R. P. and the land would be eventually resumed by the Government.

67. Thus when the 2 directors of the Applicants made the decision in early 1996 to purchase a new home, the element of resumption of the Lot 131 R. P. was not within their consideration. That is why nothing was mentioned about resumption in Paragraph 8. When he referred to moving away from the house on the Lot 131 R. P., he said, "it seemed to me that if I had to move from the house on the Lot 131 R. P. eventually". He did not say that the cause of his moving away was due to resumption of the Lot 131 R. P. They made that decision because the property prices at that time was rising extremely rapidly, and the later he moved the higher price he had to pay for a new home.

68. The provisional agreement for the house in Fair View Park was executed in March 1997. Mr. Yuen said, "After careful consideration, in view of the likely resumption of the Lot 131 R. P., we decided to purchase the house at Fair View Park". He did not elaborate on the effect "the likely resumption" of the Lot 131 R. P. had on their mind when they decided to purchase the new home. According to his evidence, the head of the Fung Chi Tsuen told him that in early 1997 the resumption would be gazetted. Despite this, it did not come within his consideration as to when the Government would resume his house. It is not his case that the new home was purchased for the purpose of moving away early in order to avoid the last minute rush caused by resumption. Had the purchase been made in anticipation of resumption, he would have considered when the Government would resume his house, in order to consider the appropriate timing relating to the purchase of the new home. He never mentioned any threat brought about by resumption that caused them to make the decision to buy the new home. The purchase of the new home in early 1997 was only the implementation of the decision made in 1996. It is not related to the resumption of the Lot 131 R. P. Therefore the losses claimed by the Applicant under section 10(2)(e) are not grounded and must fail. They are accordingly dismissed.

Orders of compensation

69. This Tribunal makes the following orders : -