WAN KWOK KEUNG v. DIRECTOR OF LANDS

LDLR 4 - 12/2016 (Heard Together)

[2019] HKLdT 6

LDLR 4/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 4 OF 2016

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LDLR 5/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 5 OF 2016

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LDLR 6/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 6 OF 2016

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LDLR 7/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 7 OF 2016

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LDLR 8/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 8 OF 2016

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LDLR 9/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 9 OF 2016

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LDLR 10/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 10 OF 2016

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LDLR 11/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 11 OF 2016

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LDLR 12/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 12 OF 2016

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J U D G M E N T

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Introduction and Background

1.  These are applications for determination of the amount of compensation for the lands resumed by the same respondent under the Lands Resumption Ordinance, Cap 124 (“the LRO”). 

2.  The subject lands in these applications are all located in Tai Po, which were part of the lands described in the Drainage Improvement Works and River Improvement Works in Tai Po referred to in the Government Notice No 5807 dated 29 August 2007 (“the Notice”).

3.  The date of affixing the Notice was 13 September 2007 when the Lands Department announced to resume 116 private agricultural lots with a total area of about 16,453 square metres in the vicinity of Upper Lam Tsuen River, She Shan River and Upper Tai Po River, Tai Po, to facilitate river improvement works to alleviate the flooding problem (“the Resumption”).  The Lots were reverted to the Government on 14 December 2007 (“the Resumption Date”).

4.  The applicant in each of these applications was the former registered owner of the lands in question (“the Lots”) in the respective applications.

5.  The following shows a summary of the application numbers, the applicants and the particulars of the Lots:

Application Number	Applicant	Lot No	Original Registered Area	Area of the Lots Resumed
LDLR 4/2016	Wan Kwok Keung	Section K of Lot 1203 in DD 7	132 sq m (1,421 sq ft)	17.8 sq m (192 sq ft)
LDLR 5/2016	Chung Wai Kwong	Section C of Lot 1203 in DD 7	160 sq m (1,722 sq ft)	16.9 sq m (182 sq ft)
LDLR 6/2016	Chung Sze Hong	Section D of Lot 1203 in DD 7	150 sq m (1,615 sq ft)	14.8 sq m (159 sq ft)
LDLR 7/2016	Lee Chong Yip	Section E of Lot 1203 in DD 7	190 sq m (2,045 sq ft)	12.8 sq m (138 sq ft)
LDLR 8/2016	Wan Fat Shing	Section M of Lot 1203 in DD 7	133 sq m (1,432 sq ft)	9.9 sq m (107 sq ft)
LDLR 9/2016	Ma Yiu Ming	Section N of Lot 1203 in DD 7	152 sq m (1,636, sq ft)	44.9 sq m (483 sq ft)
LDLR 10/2016	Lam Yik Hei	Section P of Lot 1203 in DD 7	75 sq m (807 sq ft)	41 sq m (441 sq ft)
LDLR 11/2016	Join Ease Investment Limited	Remaining Portion of Lot 1203 in DD 7	261 sq m (2,810 sq ft)	261 sq m (2,810 sq ft)
		Remaining Portion of Lot 1205 in DD 7	24 sq m (258 sq ft)	5.4 sq m (58 sq ft)
		Remaining Portion of Lot 1209 in DD 7	33 sq m (357 sq ft)	25.3 sq m (272 sq ft)
LDLR 12/2016	Cheng Kam	Section B of Lot 1203 in DD 7	138 sq m (1,486 sq ft)	10.9 sq m (117 sq ft)
		Total:	1,448 sq m (15,589 sq ft or thereabouts)	460.7 sq m (4,959 sq ft or thereabouts)

6.  The Lots were located at the north-western periphery of Tai Po town centre and in the area locally known as Lam Tsuen.  They were situated along the south-eastern side of Lam Kam Road close to its junction with the Tolo Highway.  The Lam Kam Road Interchange is a major connection point which connects Lam Tsuen and the Kam Tin Area with the Fanling Highway and the Tolo Highway.

7.  The general environment was largely undeveloped, scattered with temporary structures and village houses with some vacant sites According to the photo records before the Resumption, it appears that the Lots were vacant land.

8.  The Lots were classified as old schedule agricultural lots held under a Block Crown (now Government) Lease.

9.  They were zoned “Agriculture” on the Approved Lam Tsuen Outline Zoning Plan No S/NE-LT//11 in October 2006.  The planning intention was to control development or redevelopment in the area to retain and safeguard good quality agricultural land/farm/fish ponds for agricultural purposes and to retain fallow arable land with good potential for rehabilitation for cultivation and other agricultural purpose.

Issues in Dispute

10.  The relevant section in the LRO is section 10 which provides that:-

“10. Determination by Tribunal of compensation payable by Government

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

(2) The 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;

(b) the value of any easement or other right in the land resumed, owned, held or enjoyed by a claimant at the date of resumption;

(c) the amount of loss or damage suffered by any claimant due to the severance of the land resumed or any building erected thereon from any other land of the claimant, or building erected thereon, contiguous or adjacent thereto;

(d) the amount of loss or damage to a business conducted by a claimant at the date of resumption on the land resumed or in any building erected thereon, due to the removal of the business from that land or building as a result of the resumption;

…”

11.  The parties have agreed that the main issue is the “Best Use” of the Lots.

12.  In his valuation report dated 6 June 2017, Mr Chris Tang (“Mr Tang”), the valuation expert of the applicants, considered that the best use of the Lots (with the exception of Lot No 1203RP, Lot No1205RP and Lot No 1209RP) is New Territories Exempted House (“NTEH”) developments or uses to support the surrounding NTEH developments, such as uses like vehicular access road, garden, etc.  The basis of his opinion is that the Lots were within 300-feet limit boundary of the Recognized Village Environs of Hang Ha Po Village in the Tai Po District.  Each indigenous male villager might apply for permission to build a NTEH on a suitable site within his own village.  Article 40 of the Basic Law provides that “the lawful traditional rights and interest of the indigenous inhabitants of the New Territories shall be protected by the Hong Kong Special Administrative Region”. 

13.  On the other hand, according to the respondent’s expert, Mr Lee Chi Ping (“Mr Lee”), the respondent’s stance is that the Lots have no vehicular access and that the best use should be open storage with restricted access since the Lots are all old schedule agricultural lots held under a Block Government Lease where the express covenant of the lease prohibited landowner in general from using the lands for building purposes without the Government’s approval.  The respondent mainly relies on the following covenant in the Block Government Lease (“Relevant Covenant”):

“…AND FURTHER that the Lessee or any other person or persons shall not nor will at any time during the said term erect or construct any building or structure of any description on the said demised premises or any part thereof whether demised as agricultural or garden ground or otherwise without first having obtained the approval thereof of the Surveyor to His said Majesty, His Heirs, Successors or Assigns, or other person duly authorized by the Governor of the said Colony of Hong Kong, in that behalf…” (emphasis added)

14.  Ms Ebony Ling (“Ms Ling”), Counsel for the respondent, submitted that zoning for a use which is not permitted by the lease has no value capable of being realized unless the terms of the lease are modified, and for the purpose of assessing the compensation, no account may be taken of the prospect of obtaining such modification since section 12(c) of the LRO is applicable in the present case.

15.  Section 12 states:

“12. Additional rules for determining compensation

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

…

(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 is 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.”

16.  Hence, before making the determination of the “Best Use”, the Tribunal has to decide the side issues as follows:

(i)  Accessibility of the Lots;

(ii)  Whether section 12(c) of the LRO is applicable;

17.  After determining the “Best Use”, the Tribunal shall then decide what the compensation should be.

Accessibility of the Lots

18.  By reference to the resumption plan as shown in Exhibit A1, the Lots resumed can be divided into two parts, which are detached.  While there was a strip of private lots ie Section F and Section H of Lot No 1203 in Demarcation District 7, in between the boundary of Section B (Portion), Section C (Portion), Section D (Portion), Section E (Portion) and Remaining Portion (northern portion) of Lot 1203 in Demarcation District 7 (hereinafter referred to as “Northern Site”) and Section K (Portion), Section M (Portion), Section N (Portion), Section P (Portion) and Remaining Portion (southern portion) of Lot 1203, Remaining Portion (Portion) of Lot 1205 and Remaining Portion (Portion) of Lot 1209 in Demarcation District 7 (hereinafter referred to as “Southern Site”), it appears that the Northern Site is only accessible via a footbridge with a width of 1.4m at its narrowest section, land-locked and thus accessible on foot.

19.  Further, Section A and Section B of Lot 1213 and Lot 1210 in Demarcation District 7 were noted to form part of the access branching off from a village road off from Lam Kam Road leading to the Southern Site.  Whereas these lands were in different ownership, there is no document suggesting any explicit right of way reserved from or granted over such private lots, such as Lot No 1213 Section A and Section B, Lot 1210 or even 1209 Section A etc in Demarcation District 7, which form part of the access to the Southern Site could be found from the Land Registry.

20.  According to Mr Lee, it could not be ascertained that the private owner of Lot 1210 in Demarcation District 7 would allow his land for vehicular access to the Lots.  The applicants may however try to make use of the access via Lot No 1211 in Demarcation District 7 on foot.  The Southern Site and the village road was segmented by the aforesaid private lots.

21.  Further, Mr Lee is of the opinion that that part of access leading to the Southern Site was via a track, a footbridge, and a footpath branching off from the village road.  By scaling-off from the resumption plan, Mr Lee finds the narrowest portion of the footbridge is about 2.4 m approximately.  The width and loading capacity of the South Footbridge for vehicular access were in question.

22.  Mr Tang did not elaborate on the vehicular access issue and did not dispute that the Northern Site was land-locked and was only accessible on foot in his report.  In respect of the Southern Site, on 20 May 2017 when he inspected the area that used to be, he only parked his car at the end of the village road.  At trial, Mr Tang explained that the track further away was muddy and a reasonable man would not be supposed to drive his car further though he saw trucks continue its way to and fro.  Mr Tang explained further that he might be able to continue his way towards the Southern Site if he was driving an off-road vehicle or jeep.  In this regard, the Tribunal simply takes the ordinary meaning of vehicular access for the purpose of assessing compensation or value of the Lots, which shall mean that an ordinary vehicle instead of truck, off-road vehicle or jeep is able to have access to the Lots by way of a paved road rather than a muddy path.

23.  It is regrettable that the applicant does not provide any evidence that the Southern Site was vehicular accessible by an ordinary vehicle as at the Resumption Date.  Mr Tang was only instructed in January 2017.  Even though trucks were allowed to gain access to the Lots and village houses were built in 2017, it does not mean that the same situation had happened in 2007.  Mr Tang should be able to but did not provide any document to prove that the applications for building licences which were granted in respect of a number of lots, were made before the Resumption Date.  In our view, his evidence concerning vehicular access in the Southern Site is not reliable as it cannot reflect the actual situation as at the Resumption Date ie about 10 years ago. 

24.  We are only drawn attention to an aerial photo taken in 2007 which was produced as Exhibit A2.  We can hardly find in this photo any paved road or even footpath that may lead to the Southern Site.  The area was almost wholly covered with green vegetation.  Therefore, we agree with the respondent that as at the Resumption Date, the applicant fails to prove that both of the Northern Site and the Southern Site had vehicular access.

Whether section 12(c) of the LRO is applicable

25.  In respect of Lot No 1203 Section B (LDLR 12/2016), Lot No 1203 Section C (LDLR 5/2016), Lot No1203 Section D (LDLR 6/2016) and Lot No1203 Section E (LDLR 7/2016), planning permission was first approved by the Town Planning Board on 8 October 1999 (ie before the Resumption Date) and building licences were granted by the Lands Department and registered on 31 October 2008 (ie after the Resumption Date).

26.  In respect of Lot No 1203 Section K (LDLR 4/2016) and Lot No 1203 Section N (LDLR 9/2016), planning permission was first approved on 17 March 2000 and building licences were granted by the Lands Department and registered on 12 March 2009 and 8 April 2009 respectively (ie also after the Resumption Date).

27.  In respect of Lot No 1203 Section M (LDLR 8/2016) and Lot No1203 Section P (LDLR 10/2016), planning permission was first approved on 17 March 2000.  Building licences were yet to be granted by the Lands Department.

28.  To start with, the Tribunal is of the view that the approval of planning permission by the Town Planning Board is irrelevant to the assessment of the compensation under the LRO. In Delight World Ltd v The Secretary For Transport[1] , para. 6.3 said:

“6.3 The Affected Lots fell in an area zoned for AGR purposes under the Kam Tin North outline Zoning Plan No. S/YL - KTN/3. Section 4(1)(h) of the Town Planning Ordinance includes zones or districts set apart for agricultural use. Section 12(aa) of the Lands Resumption Ordinance provides that the Lands Tribunal shall take this fact into account when determining the compensation to be paid. In the premises the Lands Tribunal must ignore any zoning effect that may have on the Affected Lots, and for the same reason, sections 16 and 20 of the Town Planning Ordinance have no relevance in the determination of compensation.”

29.  Also in Dragon House Investment Ltd & Another v Secretary for Transport & Another[2], CFA said in para 37 of the judgment that:

“…….Zoning does not have an independent value of its own, and zoning for residential purposes is of value only if it can be realised by developing the land for such purposes. As the Government’s valuer observed in Nam Chun:

…planning permission in itself has no value, it is the right to develop the land that is valuable.

The syllogism is straightforward:

(i) zoning for a use which is not permitted by the lease has no value capable of being realised unless the terms of the lease are modified;

(ii) in assessing the compensation to be paid on resumption no account may be taken of the prospect of obtaining such a modification; and

(iii) therefore no value may be attributed to zoning which can only be realised by obtaining a modification.”

30.  In the present case, the building licences of the Lots have yet to be granted by the Lands Department as at the Resumption Date.  The Tribunal has difficulty to understand the opinion of Mr Tang in para 3.3.1.1, 3.3.1.2 and 3.3.1.3 of his report dated 6 June 2017 that the applicants’ cases in respect of Lot No1203 Section B (LDLR 12/2016), Lot No1203 Section C (LDLR 5/2016), Lot No1203 Section D (LDLR 6/2016), Lot No1203 Section E (LDLR 7/2016) Lot No1203 Section K (LDLR 4/2016), Lot No1203 Section N (LDLR 9/2016), Lot No1203 Section M (LDLR 8/2016) and Lot No1203 Section P (LDLR 10/2016) for NTEH should be treated as if it were granted “as of right”.   During cross-examination by Ms Ling, Mr Tang clarified that what he meant “as of right” only referred to the time after obtaining the relevant building licences[3].

31.  The most authoritative and landmark case on the applicability of section 12(c) of the LRO is Director of Lands v Yin Shuen Enterprises Ltd & Another[4], in which the CFA faced the covenant in the Block Government Lease exactly the same as the present one[5] and decided against the applicant in that case.

32.  Mr Michael Chai (“Mr Chai”) for the applicants argued that the Relevant Covenant is a building covenant but not a user covenant and is not caught by section 12(c) of the LRO.  He relied on HH Judge Cruden’s judgment in Wong Wai Tsak Tong & Another v Secretary for Transport [6]at 309G-I,

“Counsel for the Crown went on to submit, that the later penultimate covenant, which unlike the earlier restrictive covenants, extends to non-agricultural land, also imposes a restriction on user. The covenant provides:

AND FURTHER that the Lessee or any other person or persons shall not nor will at any time during the said term erect or construct any building or structure of any description on the said demised premises or any part thereof whether demised as agricultural or garden ground or otherwise without first having obtained the approval thereto of the Surveyor to His said Majesty …

This covenant is, prima facie, a building and not a user covenant...”

33.  With the greatest respect, we disagree and consider that this case was wrongly decided in view of the decision of Yin Shuen’s case. We also share with the comments of HH Judge Chow in Delight World’s case, in which Wong Wai Tsak Tong’s case was heavily criticized.  The Tribunal concludes that the Relevant Covenant is a user instead of building covenant.

34.  Furthermore, another case Suen Sun Yau v Director of Buildings and Lands[7] decided by HH Judge Cruden was expressly overruled by the CFA’s decision in Dragon House Investment’s case.  The CFA further said:

“21. ………Lord Millett NPJ pointed out (para.50) that “insofar as the intrinsic value of the land includes its development potential” (emphasis added), it could not be realised without a modification of the terms of the lease, and that the prospect of obtaining such a modification fell squarely within the words of s.12(c). He added that, insofar as “the realities of the commercial world” reflect the willingness of purchasers to pay “a speculative price in the hope of obtaining a modification of the terms of the lease”, s.12(d) was subject to s.12(c) which directed that no account should be taken of the prospect of obtaining a modification. In this context the expression “a speculative price” can only mean a price in excess of the value of the land subject to the restrictions in the lease and which reflects the purchaser’s assessment of the chances of obtaining a modification of the terms of the lease.”

35.  Mr Chai for the applicants also relied on another HH Judge Cruden’s judgment in Niceboard Development Limited v China Light & Power Company Limited [8] which was approved in para. 40 of the decision of Yin Shuen’s case.  In Niceboard’s case, HH Judge Cruden made a finding of fact that based on the secondary evidence instead of the primary evidence, the user had been changed from agricultural land to building land.  Because of the missing title deeds, the full text of the subject covenant was not set out in the body of the judgment.  The Tribunal considers that this case is to be distinguished from the present case due to the specific finding of facts by the learned judge.  We are of the view that if the learned judge found as a fact that the subject lands are agricultural lands rather than building lands, the result should be entirely different.  Further, it is uncertain whether the subject covenant in Niceboard’s case is exactly the same as the Relevant Covenant.

36.  In the Court of Appeal case, Chan Kam Chuen v Secretary for Environment, Transport and Works[9], which was also dealing with exactly the same covenant as the Relevant Covenant, it was held that as the government only allowed the applicant to construct buildings on the land for the purposes of pig rearing and feed storage but not buildings for residential purpose, the applicant in that case was not entitled to claim compensation for the latter type of buildings[10]. In the circumstances, we fail to see how the best use in the present case can be NTEH development which is for residential purpose.

37.  Mr Chai for the applicants further argued that the right to build on their own lands under the Small House Policy notwithstanding the restriction imposed under the Block Government Lease is a traditional right of the New Territories male indigenous inhabitant which is formally recognized and protected by Article 40 of the Basic Law.  He cited para. 36 of the judgment of Mr. Justice A. To in Kan Wai Chung v Hau Wun Fai[11], in the context of discussing the nature of such “ding” right under the Small House Policy:

“36. That aside, while there is no dispute that an indigenous villager has a once in a lifetime ding right, Mr Yip is factually incorrect about the Policy. To exercise the ding right, the indigenous villager has to have a plot of land registered under his name first. Then, he may apply for the licence and build a village-type house on his land. He has to be the legal and beneficial owner of the land on which the village-type house is to be built in the first place, whether by way of purchase, inheritance or gift, before the licence would be issued. He has to remain so throughout the course of construction of the house as each piece of brick was laid and when the house was erected. The ding right is a personal right and not a proprietary right.” (emphasis added)

38.  In general, this statement may be correct.  However, in view of the existence of the Relevant Covenant in the present case, the applicants still have to apply for the modification of the term of the lease, ie a licence to build a NTEH and no matter how likely the prospect of obtaining such a modification is which may be a near certainty[12], no account shall be taken pursuant to section 12 (c) of the LRO.  The Tribunal cannot agree that the grant of a building licence to an indigenous inhabitant pursuant to the Small House Policy can be regarded as “as of right” in the context of assessing the compensation or the value of the land under the LRO.  In any event, “the ding right” was not forfeited by the Resumption and the “ding” was free to “apply for the licence and build a village-type house on his land” once in his lifetime as what had really happened subsequent to the Resumption.

39.  And in any event, save for the Remaining Portion of Lot 1203 in Demarcation District 7 which was resumed (with an area about 261 sq m), Mr Tang agreed that the Lots resumed were too small to be erected with a standard NTEH (with a coverage of 65.03 sq m); they had to be combined with other adjoining lots of the same ownership, if any, before a standard NTEH could be erected thereon[13].

40.  We do not think that it is necessary to determine whether the Lots were demised as agricultural or garden ground since the Relevant Covenant applies not only to agricultural but to all demised land.  If it is necessary for the Tribunal to make such determination, we would rely on two Court of Appeal decisions: Watford Construction Co v Secretary for New Territories[14] and Attorney General v Melhado Investment Ltd[15].  We conclude that since the Lots were described as “padi” in the Schedule of the Block Government Lease, therefore they are “demised as agricultural or garden ground” and licence was required for building use.

41.  The Tribunal also relies on paras. 5.6 and 5.7 in the judgment of Delight World’s case and rejects the submission of Mr Chai concerning the Crown Rent.  Indeed, according to paras. 4.1(f) to 4.11(f) of Mr Tang’s report dated 6 June 2017, the user permitted under the Block Government Lease of the Lots is stated as agricultural land but not building land.  We conclude that as the expectancy of obtaining the building licence which affects the intrinsic value of the Lots falls squarely within the words of section 12 (c), the best use of the Lots cannot be NTEH developments.

42.  The applicants also argue that even no building licence is obtained, the Lots can still be used to support the surrounding NTEH developments, such as uses like ancillary vehicular access road, garden, etc. Nonetheless, there is no evidence before the Tribunal that as at the Resumption Date, the Lots were or had been surrounded by any NTEH developments.  In most likelihood, the NTEH developments that building licences for which had subsequently been granted in the surroundings had benefited from the Resumption which has improved the accessibility of the environ.  In the circumstances, we reject this argument.  

The “Best Use” of the Lots

43.  In light of the above and particularly the physical features of the Lots as evidenced, for instance, by the aerial photo in 2007[16], we agree with Mr Lee that the best use of the Lots was open storage with pedestrian access only (as opposed to vehicular access), such as nursery for growing and selling of plants and flowers, storage of goods/stuff such as metal scrap etc.

What should be the compensation?

44.  Mr Tang has not provided a fallback approach apart from his basis of valuation of the Lots assuming the NTEH related uses that we reject.  For instance, of the three comparables proposed by Mr Tang, two are occupied for carparking purpose next to a NTEH and the remaining one is occupied as a private garden to the adjoining NTEH.  We agree with Mr Lee that therefore they have special value because of the presence of the NTEHs.  In this regard, we can only rely on the valuation of Mr Lee in his Rule 20 document dated 25 April 2017.

45.  Mr Lee in his report afore-mentioned conceded that “sales transaction of agricultural land with pedestrian access only and used for nursery or storage of metal scrap purpose without development potential in the Tai Po district is scarce.  Further, land sale comparables in the Lam Tsuen district mostly reflect the hope value for development approval at some time in the future.” Mr Lee eventually adopted those sale transactions within “OS” (ie open storage) zoning as “there are very limited opportunities in this area for alternative use other than open storage or container storage.”

46.  As explained by Mr Lee, “building licences were granted to the owners of the remaining lots in 2008 even though the Lots and remaining lots were zoned “Agriculture” in 2006.  Apparently, while the direct sale comparison approach should be adopted on “compare (sic) like with like” basis, it appears that we could not rule out that hope value to reflect a possibility of development potential of those agricultural lots under “Agriculture” zoning.”[17]  We must emphasize that such “hope value” or “the speculative element” was particularly ruled to be disregarded in Dragon House’s case by the Court of Final Appeal. We therefore agree with the Mr Lee’s approach.

47.  However, Mr Lee relied on only two comparables as follows:

Ref No	Address	Site Area	Unit Rate	Date of Instrument	Remarks
R1	Lot No 2489 in DD 102, Luk Mei Tsuen	323.72 sq m approx (3,484.48 sq ft)	$161.5/sq m ($15/sq ft)	24 Jul 2007	Land for open storage use with doubtful vehicular access (ingress / egress segmented by Government land)
R2	Lot No 818 in DD 111, Sheung Che	728.43 sq m approx (7,840.80 sq ft)	$409/sq m ($38/sq ft)	10 Dec 2007	Land for open storage use with doubtful vehicular access (ingress / egress segmented by private land in different ownership)

48.  Mr Lee proceeded to analyse his comparables as follows:

“ Location

5.7.1 Regarding those open storage sites in this district mainly for logistics operations, it appears that the transportation cost i.e. from the subject site to the Lok Ma Chau Control Point, should be a main factor to be considered. Hence, I opine to allow a downward adjustment for Comparable R1 with a shorter distance to Lok Ma Chau in order to align the difference in characteristics of the comparable and the Lots in term of the location factor.

Layout/Shape

5.7.2 In view of the S-shape or “long string” shape of the Lots which affects the efficiency in the storage of goods/stuff, I opine to allow a larger adjustment on this factor.

Planning Enforcement Factor

5.7.3 In The Secretary for Transport v Delight World Limited FACV No 19 of 2005, it was ruled that the need for Section 16 permission before the land could have been put to Melhado use is not to be taken into account when compensation for the resumption of the land is assessed on the basis of such use. While those comparables are under “OS” zoning, I opine that adjustment for planning enforcement is not required.”

49.  In respect of the location factor, Mr Chai challenges Mr Lee’s experience in only 1 single case that the operation of a nursery for growing and selling plant would involve transportation from Lok Ma Chau.  By reference to the map shown in Mr Lee’s report, however, we consider Mr Lee’s assertion or adjustment reasonable.

50.  Turning to the layout/shape adjustment, Mr Chai once again challenges Mr Lee’s experience or knowledge in respect of the business of nursery for growing and selling plant.  On the other hand, Mr Lee has stated at the beginning of his report that he had been providing professional advice on valuation matters and land related matters to the Government, KCRC (now the operation of which merged with the MTR Corporation) and affected owners / tenants in the acquisition of land for the construction of the West Rail etc.  This experience of Mr Lee was not challenged or questioned.  On the other hand, as can be seen from the table at para. 5 above, the Lots resumed were very small and belonged to different owners.  In this regard, we consider Mr Lee has placed too much emphasis on the Lots as a whole either as the Northern Site or the Southern Site.  We consider there should not be any adjustment for layout or shape; rather, we would allow +20% for the vast difference in size between the Lots and the two comparables[18].

51.  Accordingly, we summarise below our adjustments for the two comparables:

Ref	Location	Layout/ Shape	Time[19]	Size	Total Adjustment[20]	Adjusted Unit Rate
R1	-10% (2.6km to Lok Ma Chau approx.)	0%	+12.3%	+20%	+34.76%	$217.6/sq m ($20.22/sq ft)
R2	0% (12.4km to Lok Ma Chau approx.)	0%	0%	+20%	+20%	$490.8/sq m ($45.60/sq ft)
					Average:	$354.2/sq m ($32.91/sq ft)

52.  We regret that there are only two comparables and particularly they are situated far away from the Lots resumed.  In the absence of further evidence, we can only adopt the average of the analysis as the market value of the Lots for the purpose of compensation under the LRO.

53.  Thus the compensation of the various Lots is shown as follows:

Application Number	Applicant	Lot No	Resumed Area	Compensation
LDLR 4/2016	Wan Kwok Keung	Section K of Lot 1203 in DD 7	17.8 sq m (192 sq ft)	$6,305
LDLR 5/2016	Chung Wai Kwong	Section C of Lot 1203 in DD 7	16.9 sq m (182 sq ft)	$5,986
LDLR 6/2016	Chung Sze Hong	Section D of Lot 1203 in DD 7	14.8 sq m (159 sq ft)	$5,242
LDLR 7/2016	Lee Chong Yip	Section E of Lot 1203 in DD 7	12.8 sq m (138 sq ft)	$4,534
LDLR 8/2016	Wan Fat Shing	Section M of Lot 1203 in DD 7	9.9 sq m (107 sq ft)	$3,507
LDLR 9/2016	Ma Yiu Ming	Section N of Lot 1203 in DD 7	44.9 sq m (483 sq ft)	$15,904
LDLR 10/2016	Lam Yik Hei	Section P of Lot 1203 in DD 7	41 sq m (441 sq ft)	$14,522
LDLR 11/2016	Join Ease Investment Limited	Remaining Portion of Lot 1203 in DD 7	261 sq m (2,810 sq ft)	$92,446
		Remaining Portion of Lot 1205 in DD 7	5.4 sq m (58 sq ft)	$1,913
		Remaining Portion of Lot 1209 in DD 7	25.3 sq m (272 sq ft)	$8,961
LDLR 12/2016	Cheng Kam	Section B of Lot 1203 in DD 7	10.9 sq m (117 sq ft)	$3,861
		Total:	460.7 sq m (4,959 sq ft or thereabouts)	$163,181

Order

54.  Accordingly, we order the respondent to pay the respective applicants the compensation in the respective sums as set out above.  The matters of professional fees, interest, costs and any other ancillary and consequential matters shall be adjourned to a date to be fixed by parties in consultation with counsel’s diaries if it needs.

55.  Last but not least, the Tribunal thanks all Counsel for their helpful assistance.