Final Appeal No 8-2009 (Civil) Iinternational Cases [2010] Part 9 Case 4 [CFA]



Penny's Bay Investment Co Ltd

- vs -

Director of Lands






26 MARCH 2010


Justice Bokhary PJ

  1. I agree with the judgment of Lord Hoffmann NPJ.

    Justice Chan PJ

  2. I agree with the judgment of Lord Hoffmann NPJ.

    Justice Ribeiro PJ

  3. I agree with the judgment of Lord Hoffmann NPJ.

    Justice Litton NPJ

  4. I agree with Lord Hoffmann NPJ’s judgment and the order he proposed.  I limit my remarks to the process which led to this matter being heard in this Court, nearly 15 years after the 1995 authorization of the reclamation.

  5. I make my remarks in the light of this dominant fact: From beginning to end, the parties were unable to agree preliminary questions of law for determination of the claim brought by Penny’s Bay Investment Company Limited (“PBIL”) for compensation arising out of injurious affection caused by the reclamation. 

  6. The claim was lodged by PBIL with the Lands Tribunal back in November 1999.  An application was then made by PBIL to the Tribunal in July 2003 for the determination of preliminary issues arising from its claim.  This was refused.  PBIL then appealed against such refusal to the Court of Appeal which allowed the appeal, in November 2004.  The reason, as Rogers VP explained (see para.18 of his judgment in the present appeal) was to avoid unnecessary expense involved in preparing evidence on alternative bases of computation.  So the matter went back to the Tribunal and Lam J, the Tribunal President, was constrained to formulate himself 4 preliminary questions of law, in the absence of agreement between the parties: Questions which counsel on both sides in the appeal before us agreed were not particularly illuminating or helpful.

  7. The hearing of the “preliminary issues” lasted 7 days, resulting in an order of Lam J dated 25 May 2007 which the Court of Appeal set aside.  Paragraph 2 of the Court of Appeal’s own order was a declaration as follows:


    the compensation payable to the Applicant be quantified by assessing and capitalising the diminution in value of Lot No. 22 as at 05 May 1995, being the difference between the open market value of the Lot on that date with and without the marine rights – namely, the right of access to the sea which were extinguished;

  8. Apart from the word “capitalising”, para.2 is clear enough.  But the Court of Appeal went on:


    the Lands Tribunal do consider and determine how the following subsequent events are relevant and may be taken into account:-


    enjoyment of de facto access to the sea for 6 years and 1 month by the Applicant’s lessee;


    the Government’s acquisition of Lot 22 in 2001, by means of voluntary surrender from the Applicant, for a consideration which reflected the fact that the land no longer enjoyed the right to access the sea;


    ex gratia payment for Lot 22 at the basic rate for building land within Zone A plus 20%;


    the parties’ agreement that the surrender was made without prejudice to the Applicant’s claim for compensation under the FSRO and that the payment will not be taken into account in or prejudice the assessment of the Applicant’s claim under the FSRO.  That is to say, both issues are delinked one from the other;

  9. As can be seen, the Court of Appeal determined nothing in para.3.  The question as to whether any of the matters set out in subparas (a) to (d) is “relevant” is left to the Tribunal.  So the whole process of determining preliminary questions was in vain.  The matter might just as well have been left to the Tribunal back in 2003 to determine PBIL’s claim for compensation, as best it could.  At least an award would have been made, and the entire matter, including the basis for the award, would have had clear focus.

  10. This case illustrates yet once again the danger inherent in the trial of preliminary issues.  I had adverted to this in Commissioner of Rating & Valuation and Agrila Ltd (2001) 4 HKCFAR 83 at 93.  There, at least, the parties had agreed on the approach. 

  11. In my judgment it is seldom if ever helpful to approach issues of law as an academic exercise.

    Lord Hoffmann NPJ

  12. Penny’s Bay lies near the eastern end of Lantau Island.  It is now the site of Hong Kong Disneyland, which opened in 2005 and was built on about 300 hectares of land that had been reclaimed from the waters of the bay.  It has its own MTR station and fast road connections to Hong Kong Island and the airport.  In 1994, however, it was a remote corner of the coastline, inaccessible except from the sea or on foot.  The land around the bay was held on the usual New Territories lease, extended to 2047, by Penny’s Bay Investment Company Limited (“PBIL”).  It was let to a subsidiary which carried on the business of shipbuilding and repairing. 

  13. In 1994 the Government produced a scheme for building two container terminals on a large area of land (some 1260 hectares) to be reclaimed from the bay.  It did not need to resume PBIL’s land but the effect of the proposed reclamation would have been to prevent access to sea and put an end to the ship building and repairing business.  In 1995 the Government took the necessary formal steps to obtain statutory authorisation for the scheme.  As a result of the provisions of the Foreshore and Sea-bed (Reclamations) Ordinance Cap. 127 (“the Ordinance”), which I shall later have to examine in more detail, the authorisation entitled PBIL to make a claim for compensation for the loss of its access to the sea.

  14. Four years later the Government abandoned the container terminal scheme and decided to promote the Disneyland project instead.  In 2000 the 1995 authorisation for reclamation was revoked and authorisation given for reclamation of the somewhat more modest area required for Disneyland.  This time PBIL’s land was required and in 2001 the Government acquired it by purchasing a surrender of the lease.  The question in this appeal is how the compensation which had become payable by virtue of the 1995 authorisation should be calculated and, in particular, the effect (if any) of the subsequent events.

  15. Reclamation has been an important source of building land in crowded Hong Kong for more than 150 years.  Many of its busiest streets once lay under the waters of the Harbour.  It has always been recognised that landowners who are adversely affected by interference with their rights of access to the sea should be entitled to claim compensation.  Until the Public Reclamation Validation and Clauses Ordinance 1936, the practice appears to have been to include, in every Ordinance which authorised reclamation work, a specific provision for compensating owners whose marine rights had been injuriously affected.  So, for example, the Harbour of Refuge Ordinance, No. 31 of 1909, which authorised the creation of a harbour of refuge at Yaumati, provided in s.12 that any person who was the owner of a marine lot which he “deemed would be injuriously affected by reason of its access to the sea being interfered with” might make a claim and receive compensation in the discretion of the Governor, with an appeal to the Court.  This provision gave rise to litigation and a reported case (In the matter of an Award of Compensation made by His Excellency the Governor (1912) 7 HKLR 110) which is an interesting example of how these matters were dealt with at the time and to which I shall later return.

  16. The 1936 Ordinance provided for standard clauses which were to be deemed to be incorporated into every Ordinance authorising a reclamation, rather like the clauses in the English Land Clauses Consolidation Act 1845 were deemed to be included in every Act authorising the compulsory acquisition of land.  The current Ordinance, however, creates a procedure for authorising reclamations without the need for a special Ordinance each time and contains general provisions about compensation.  Since the construction of the Ordinance is at the heart of this case, I must set out its provisions in some detail.

  17. By s.2 (the definition section) the term reclamation “includes any work over and upon any foreshore and sea-bed”.  Sections 3 to 8 then deal with the procedure for obtaining authorisation.  The Director of Lands (“the Director”) must prepare a plan “delineating and describing the proposed reclamation and the foreshore and sea-bed intended to be affected thereby” (s.3) and publish notice of it in various newspapers and public places (s.5(1)).  The notice must describe the foreshore and sea-bed affected, describe the manner in which it will be affected (s.5(2)(a)) and state that a person who has “an interest, right or easement in or over the foreshore so described” (which I shall compendiously call a “marine right”) may object within a specified period, being at least 2 months: s.6(1).  Marine rights would include private easements or public rights of way giving access to the foreshore or sea, or simply the right of an owner of land adjoining tidal water or the sea to go to and from the water as a public highway: see Attorney-General of the Straits Settlements v. Wemyss (1888) 13 App Cas 192.

  18. If there are no objections, the Chief Executive may authorise the reclamation: s.7.  If there are, the matter must go to the Chief Executive in Council, which must consider the objections and either decline to authorise the reclamation or authorise it in whole or in part: s.8.

  19. Sections 9 to 11 then deal with the legal consequences of authorisation.  Notice of authorisation must be published in the same way as the notice of the proposed reclamation and must state that any person who considers that he has a marine right “that will be injuriously affected by the reclamation” may claim compensation by notice in writing delivered before a specified date, being not less than 12 months after publication of the notice: s.9(2)(c).  Upon publication of the notice, all marine rights over the land designated for reclamation are extinguished (s.10(1)(a)) and no one has a right to restrain the Government from carrying out the scheme: s.10(1)(b).  Furthermore, “no action shall be brought or continued in respect of the extinguishment [of the marine rights]”: s.10(2).  The sole remedy of anyone injuriously affected is a claim for compensation: s.11.

  20. Section 12 deals with the claim for compensation and I must set out the relevant parts:


    Any person who claims that his [marine right] will be injuriously affected by the reclamation may deliver to the Director a written claim stating the sum of money which he is willing to accept in full and final settlement of his claim ....


    A claim under subsection (1) shall be made before the expiry of the time specified in the notice served by the Director and published under section 9(1) in respect of the reclamation ....

  21. When a claim has been served, the Director has 6 months in which to decide whether to admit or reject it: s.13(1).  If the claim is rejected or the amount of compensation has not been agreed within 7 months of service of the claim, the Director or the claimant may refer the claim to the Lands Tribunal “to determine in accordance with this Ordinance and the Lands Tribunal Ordinance (Cap. 17) the amount of compensation to be paid”.  The jurisdiction of the Lands Tribunal is then to –

    determine the amount of compensation payable by the Government to the claimant in respect of any [marine right] injuriously affected by the reclamation in full and final settlement of the claim.
  22. By s.15(3), money payable as compensation bears interest as from the date of the publication of the notice of authorisation under s.9(1)(b), but the Government may make a provisional payment under s.14 which will pro tanto stop the running of interest.

  23. So much for the statutory provisions.  The Director of Lands published notice of the proposed reclamation in the Gazette on 5 May 1995.  He specified one year as the period within which claims for compensation for injurious affection had to be made.  PBIL lodged its claim on 3 May 1996, stating that it would accept $2.539 billion in full and final settlement.  Neither side appears to have been very energetic in dealing with the claim.  Perhaps, in the period immediately before and after the resumption of the exercise of Chinese sovereignty, they both preferred to wait and see.  But on 2 November 1999, the Government not yet having accepted the claim, PBIL referred it to the Lands Tribunal.

  24. By this time, as I have said, the Government had changed its mind and decided to abandon the container terminal scheme.  By notice dated 10 April 2000 the 1995 reclamation authorisation was revoked and four days later, on 14 April 2000 the new authorisation for the Disneyland reclamation was published.  It is accepted, however, that the revocation did not revive PBIL’s marine rights and that it had a vested right to compensation by virtue of the 1995 authorisation.

  25. In practice, however, nothing happened at Penny’s Bay to disturb the shipbuilding business.  Only in March 2001, with the reclamation to build Disneyland imminent, did PBIL’s tenant surrender its tenancy.  On 3 April 2001 the company surrendered its lease of Lot 22 to the Government.  The Government paid the company $1,506,098,750, of which $22,710,000 was said to be the value of the land without marine rights and $1,483,380,000 was said to be a payment ex gratia.  This had been under discussion for some time.  On 1 February 2000 the company’s surveyor had written to the Director recording that the Government was considering acquisition of the lease for an amount equal to its full market value plus professional fees, together with –

    An ex gratia payment on the basis that the Property falls within the areas affected by essential projects with territory-wide significance and will therefore be regarded as within a Zone A classification.
  26. The same letter recorded what was said to be an agreement that –

    [T]he owner’s compensation under [the Ordinance] arising from [the 1995 authorisation] will be treated as a separate issue.  That is to say that any compensation/payment arising from the voluntary surrender of the Property currently under negotiation will not be taken into account in or prejudice the assessment of the Owner’s claim under the Ordinance.  That is to say, both issues are ‘delinked’ one from the other.
  27. Proceedings before the Lands Tribunal took a leisurely course.  There was a dispute about how the compensation should be assessed in the light of the facts that the original authorisation had been revoked and that there had been no actual interference with marine access before the company surrendered its lease.  PBIL’s view was that subsequent events were irrelevant.  The compensation should be the difference between the value of its land on 5 May 1995 without the reclamation and its value on the assumption that on that date the reclamation had taken place.  For some reason, this method of calculation was referred to as a “notional purchase by reference to principles of contract”, although that does not seem to me a particularly illuminating way of describing it.  The Government’s view was that the notice of authorisation should be treated as if it had been a tort by which PBIL’s marine rights were wrongfully extinguished on that date.  In accordance with general principles of tort law, damages should be the loss which, at the time of the hearing in the Tribunal, could be proved to have been caused by the notional tort, together with an estimate of any loss which would occur in the future.  In this case, that would mean any loss which was caused by the situation of the ship building business being precarious after the authorisation and before the sale, together with the difference in the price for which the lease had been surrendered and what its value would have been with marine rights. 

  28. The Government also had an alternative argument on the assumption that it was wrong about the compensation being for a notional tort.  If the correct measure was the difference between the value on 5 May 1995 with marine rights and its value after their extinction, the latter valuation should also take into account that the container terminal scheme was expected to bring road connections to PBIL’s land which would increase its value, probably more than any diminution caused by the loss of marine rights.  So no compensation would be payable.  PBIL responded that if this method was adopted (or indeed, if the Government’s notional tort method was adopted) its rights under art.105 of the Basic Law not to have its property taken without compensation would be infringed.

  29. PBIL applied to the Lands Tribunal for an order that these questions of principle should be tried as preliminary issues.  The Tribunal refused the application and PBIL appealed.  The Court of Appeal said that the Government’s position was vacillating and unclear.  It ordered pleadings to be served and gave PBIL leave to apply again to the Tribunal for the trial of preliminary issues after they had been more clearly defined.  This seems to have been only moderately successful.  On the second application the parties were unable to agree as to what the issues were and so on 8 February 2006 the President of the Tribunal, Mr. Justice Lam, ordered the trial of four preliminary issues which he had drafted himself:

    1. On a proper construction of [the Ordinance], whether the proper basis for assessing compensation is one based on actual damages sustained by the applicant by reference to principles in tort as at the date of the assessment (as contended by [the Director]) or one based on a notional purchase on the date of the 1995 authorisation of [PBIL’s] right that has been extinguished by reference to principles in contract (as contended by the [PBIL]).

    2. If the correct basis is one of contract, whether betterment arising from the scheme relating to the 1995 authorisation can be taken into account.  In other words, whether the Pointe Gourde principle has any application in the context of a claim under [the Ordinance].

    3. If the correct interpretation of [the Ordinance] is the one contended by the [Director], whether there is any infringement of art.105 of the Basic Law.

    4. If the correct interpretation of [the Ordinance] is the one as contended by [PBIL] and the Pointe Gourde principle is applicable, whether there is any infringement of art.105 of the Basic Law.

  30. I am not sure that it was a good idea to have these preliminary issues, not only because of the delay which they caused, but because an understanding of the practical consequences of applying a principle can sometimes demonstrate that it cannot possibly be right.  In addition, the language in which the questions were expressed (“notional purchase”, “betterment”, “Pointe Gourde principle”) was calculated to give rise to further problems of construction when they came to be applied to the facts.  With hindsight and some years on, I think it might have been better to start by establishing the facts and then argue over the valuation principles which the Ordinance required to be applied to them.  However, the Director did not appeal against the decision to order a preliminary issue and PBIL, which pressed for the order, is in no position to complain about the consequent delay.

  31. The President’s opinion on the first preliminary issue was that compensation ought to be calculated as if PBIL was complaining of the commission of a tortious interference with its marine rights, but that the extinguishment of those rights counted as a tortious interference without the need for any physical act of reclamation.  In view of that decision, the Government’s alternative case raised by issue (b) did not arise.  The tortious measure gave full compensation for any loss actually suffered and therefore satisfied art.105 of the Basic Law.

  32. In the Court of Appeal, Yuen JA agreed with the President and was for dismissing the appeal.  Cheung JA, on the other hand, agreed with PBIL’s submission that compensation was payable for the difference between the value of the land with and without marine rights on 5 May 1995.  What happened afterwards was irrelevant.  Nor was it permissible to take into account any enhancement in value which might follow from implementation of the container terminal scheme and its associated road works.  He was therefore for allowing the appeal.  The opinion of Rogers VP contains some valuable insights but his view about what the outcome should be is a little difficult to pin down.  At any rate, he was for allowing the appeal and remitting the matter to the Lands Tribunal to make the best it could of the views expressed in the Court of Appeal.

  33. In this Court, the appeal was argued with great clarity and economy by Mr. Michael Barnes QC (“Mr. Barnes”) for the Government and Mr. Denis Chang SC (“Mr. Chang”) for PBIL. No one, I think, would claim that s.12 of the Ordinance was well drafted.  First, it does not actually say that there is a right to compensation.  As Lord Cairns said of s.68 of the Land Clauses Consolidation Act 1845, it appears to assume that there is a right to compensation and “contents itself with pointing out the manner in which that compensation shall be obtained”: see Hammersmith and City Railway Co. v. Brand (1869) LR 4 HL 171, 217-218.  Obscurity seems to be something of a tradition in land compensation legislation.  Secondly, the section speaks of the marine rights being injuriously affected when in fact they are not so much injuriously affected as extinguished.  It is the owner’s other land which is injuriously affected by the loss of the marine rights.  Thirdly, it does not say how the compensation should be calculated.  That is left to be gathered from the use of the term “injurious affection” and the scheme of the Ordinance as a whole.

  34. There is no doubt about what “injurious affection” means.  It is an expression which goes back to the Land Clauses Consolidation Act 1845, if not to the standard clauses in earlier private Acts which the 1845 Act superseded.  It means a diminution in the value of land caused by works authorised by statute which would otherwise have been tortious: In re Penny and South Eastern Railway Co. (1857) 7 E & B 660, 669.  Thus the landowner cannot claim compensation for matters such as interference with his view of the sea, which would not have been actionable even in the absence of statutory authority.  But he can claim for deprivation of the common law right of access to which I earlier referred.

  35. In English law, the right to compensation for injurious affection arises only when there is actual interference with the rights in question.  The fact that a statutory scheme has been authorised, so that the owner is prospectively deprived of a legal right to complain of the interference, does not entitle him to make any claim before the scheme has been actually implemented and the damage caused: see Re Poulter (1888) 20 QBD 132.  When damage does occur, the owner then has the normal limitation period within which to make a claim, as if it had been caused by a tort.  He may then claim for both past and prospective loss, which will be assessed by the Tribunal on the facts as they appear at the time of the hearing.

  36. Mr. Barnes urged upon the Court that we should adopt the same method of calculation.  The use of the term “injurious affection” showed an intention, he said, to follow English law.  In my opinion, however, that gets him only part of the way.  It certainly shows that the claim is for damage which, but for the statute, would be tortious.  But it does not mandate the same method of assessing the compensation.

  37. There are certain difficulties about reconciling the English law on this point with the scheme of the Hong Kong statute.  First, unlike the position in England, the claim under s.12 must be made within a period which will usually be (and in this case was) one year.  In many cases the reclamation will not have started by that time.  If, therefore, the owner can claim only for actual loss, the period for making a claim will have expired before it can be made.

  38. Mr. Barnes said that one could get over that difficulty by treating the statutory extinguishment of rights under s.10(2) as itself causing compensatable loss.  It meant that the owner’s exercise of marine rights was thereafter “precarious” and that in itself might be reflected in a diminution in the value of the land.  But s.12 provides for a claim by a person whose marine rights “will be injuriously affected by the reclamation”.  As Rogers VP pointed out, the reclamation is the recovery of the land from the sea, not the authorisation or the extinguishment of rights which precedes and permits it.  Mr. Barnes said that “reclamation” was a defined expression which could be given a wide meaning.  It was said to include “any work over and upon any foreshore and sea-bed”.  I do not see how that helps.  When Parliamentary draftsman says that a term shall “include” something, he means that in addition to the term having its ordinary, conventional meaning, it shall be deemed also to cover other things which might not be regarded as coming within that meaning.  Thus “work upon the foreshore” would include buildings and other structures which would normally be regarded as additional to the reclamation rather than forming part of the reclamation itself.  But the extinguishment of rights by publication of the authorisation is neither a reclamation in the conventional sense of that word, nor a work upon the foreshore.  It cannot therefore be a ground for recovery of compensation under s.12.

  39. Secondly, s.12 requires the owner to state the sum “which he is willing to accept in full and final settlement of his claim”.  That suggests that the injurious affection will then be a quantifiable amount.  If the future is uncertain, the owner cannot, as in a personal injury action, ask for the assessment of damages to be adjourned until his condition stabilises.  He must put forward a figure which, if accepted by the Director, will settle his claim for once and for all.   And if the Director does not accept it, the duty of the Lands Tribunal under s.13(4)(b) is to determine the amount of compensation “payable .... in full and final settlement of the claim”.  That again suggests that the claim was quantifiable at the time it was made and that the duty of the Tribunal is simply to say what the right figure is.

  40. Thirdly, as Cheung JA pointed out, interest on the entire compensation starts running from the date of the authorisation.  That too suggests that the whole right to compensation accrues on that date.

  41. Thus we have a statute which provides for compensation for injurious affection which will be caused by the reclamation but assumes that this has accrued and can be fully quantified before the reclamation has taken place – indeed, when it may be uncertain whether a reclamation will take place at all.  In my opinion this can only mean that for the purposes of assessing the compensation, it must be assumed that on the date of authorisation it was certain that the reclamation would take place.  This gives effect to the future tense in s.12: the owner claims that his land “will be” injuriously affected, not that it has been or may be so affected.  The statute cannot have contemplated that the Government, having given notice that a reclamation was authorised, would be able to invite the Tribunal to speculate as to whether and, if so, when it might happen and have the compensation discounted accordingly.

  42. What this means in practice is that the reclamation is treated as having taken place on the date of publication of the authorisation and the compensation is the difference between the open market value of land in actual enjoyment of its marine rights and its open market value when deprived de facto as well as de jure of its access to the sea.  Although there was no discussion of the point, that appears to have been the way the question was decided in the case of In the matter of an Award of Compensation made by His Excellency the Governor (1912) 7 HKLR 110, to which I have referred.  In that case, as here, claims for compensation had to be made within a short period from the passing of the Ordinance which authorised the reclamation and it is clear from the judgment that it had not yet taken place when the matter came before the Chief Justice on appeal against the compensation awarded by the Governor.  The harbour of refuge was “hereafter to be newly created”: see p.112.  Nevertheless, the measure of compensation adopted by the Chief Justice was the difference between the rental values of the properties at the time of the passing of the Ordinance and “after the completion of the proposed reclamation”: see p.113.  In other words, for valuation purposes, the reclamation was assumed to have taken place.  Of course the question of principle which I am now considering was not argued, so the case is not an authority on the point, but it does show that the method of calculation which I think is necessarily implied by the structure of the legislation seemed obvious to everyone who was involved.

  43. As the measure of compensation is the difference between the respective values of the land with and without access to the sea on 5 May 1995, Cheung JA must be right in saying that nothing which happened after that date can affect the valuation.  The value of a property means the price which it would have fetched on a sale in the open market between a willing seller and a willing purchaser on the relevant date.  That obviously cannot be affected by what happened afterwards.

  44. On the other hand, the parties to the hypothetical sale on 5 May 1995 would have had expectations about the future which, whether right or wrong, would have influenced the price at which they were willing to deal.  The plan for the container terminal had been published in 1994 and, when the scheme had got to the point of authorisation in May 1995, it is possible that the owners of land in rural Lantau entertained lively expectations about how the value of their land would be enhanced by the proposed works.  Such a view may have been shared by developers in Hong Kong from whom the hypothetical purchaser would be drawn.  Whether such expectations existed and the extent, if any, to which they would have affected the open market value of the land is a matter for evidence when the valuation comes to be done.  But if they did exist and would, as a matter of reality, have affected the price which the land would have fetched, they cannot be ignored.

  45. It is true that the prospect of new uses for the land, and the increased value which that may have generated, would have entered into the valuations both with and without access to the sea.  It is however important to bear in mind that such access, while obviously vital to sustain the value of the land as a shipyard, may have played little part in its value for uses which would be served by the anticipated new access by road.  If, therefore, the price which the land would have fetched would have been heavily influenced by the prospect of a new use rather than a continuation of the shipbuilding business, the difference between such value with access to the sea and without may not have been very substantial.

  46. I emphasise these matters because Mr. Chang laid some stress upon the fact that the valuers had agreed that on 5 May 1995 the value of the land without marine access would have been 10% of its value with such access.  We do not know anything about the assumptions upon which this valuation was based.  But the huge difference in values suggests the possibility that it was made on the assumption that the alternative to ship building was the prospect of the land being confined to permanent agricultural use, without taking into account the expectations which would have been created by the announcement of the container terminal scheme.  If that was the case, then the valuation would not have been in accordance with reality.  The valuations must take into account all the information which was public knowledge at the time and (apart from the assumptions about marine rights) not be based on any artificial assumptions.

  47. The matter must therefore go back to the Lands Tribunal for the compensation to be determined in accordance with the opinion of this Court.  There was some discussion in the lower courts of whether any liability for compensation calculated on this basis could be said already to have been discharged by the ex gratia payment, which, as I understand it, was made to reflect the fact, in the light of the proposals for the development of Lantau, the land was at the time worth much more than its existing use value.  But this is not a matter upon which this Court can express an opinion.  The Lands Tribunal’s jurisdiction under the Ordinance is to determine the amount of the compensation payable, not to determine whether that liability has been discharged.  This Court on appeal can have no greater jurisdiction.  I would therefore set aside the order of the Court of Appeal, discharge the declarations made on the preliminary issues and declare that the compensation payable to the claimant is the difference between (a) the price which Lot 22 would have fetched on a sale in the open market between a willing seller and a willing buyer on 5 May 1995 on the assumption that it enjoyed access to the sea as it had done up to that date and (b) the price which it would have fetched on such a sale on the assumption that access to the sea had been lawfully interrupted by the completion of the proposed reclamation.

    Justice Bokhary PJ

  48. By the unanimous decision of the Court, the appeal is allowed in the terms set out in the concluding paragraph of Lord Hoffmann NPJ’s judgment.  As the parties were informed at the conclusion of the hearing, costs here and below will be dealt with upon written submissions as to which they should seek procedural directions from the Registrar.


Mr. Michael Barnes, QC and Mr. Valentine Yim (instructed by the Department of Justice) for the appellant

Mr. Denis Chang, SC, Mr. Johannes Chan, SC and Mr. Jeremy S K Chan (instructed by Messrs Wilkinson & Grist) for the respondent.

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