Resumption of land — Company required to give up site — Business closed down and relocated — Fair compensation payable — Lands Tribunal holding that business extinguished — Cost of moving and re-establishing business not compensatable — Privy Council holding Appeal Court not entitled to interfere with that decision — Owner entitled to compensation for loss of profits between notification and actual resumption date
In November 1981 the company was notified that the government intended to develop an area, including their premises at Junk Bay in Hong Kong, and that the company would have to give up its site. The company could not obtain another suitable site before the resumption date when it was required to vacate the premises and had to close down its business. The company’s claim for compensation came before the Lands Tribunal in October 1988.
In 1987 it had found a suitable site in Shunde, China. It lodged a claim for losses and expenses, including the cost of setting up a new plant, and continuing its business there. With ongoing items, the total amount of this claim on a “relocation basis” was more than HK$1bn. The Crown contended that the business should be valued as at the date of resumption in 1986 (the “extinguishment basis”) for assessing compensation and that the company was entitled to less than HK$100m. The tribunal awarded the company HK$131m. The Court of Appeal increased the award to HK$519m. The director of buildings and land appealed and the company cross-appealed to the Privy Council against that decision.
Held The appeal was allowed. The cross-appeal was allowed by a majority.
1. The purpose of the compensation provisions in both Hong Kong and England was to provide fair compensation for a claimant whose land had been compulsorily taken from him.
2. The Lands Tribunal took the view that in 1986 the land resumption forced the company to close its business and liquidate most of its operations. Its business was effectually extinguished at that time. The issue was essentially one of fact and degree and the Court of Appeal was not entitled to depart from the conclusions reached by the tribunal on the basis of its primary findings of fact. The company’s claim for compensation to cover the cost of moving and re-establishing its business failed.
3. To qualify for compensation a loss suffered post-resumption had to 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 would 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: see Aberdeen City District Council v Sim (1982) 264 EG 621.
4. In the present case, the scheme, of which the resumption of the company’s site was an integral part, started on November 5 1981 with the Crown’s announcement of its intention to resume the land. Accordingly, all the company’s pre-resumption losses totalling HK$18,173m ranked for compensation.
5. Per Lords Mustill and Slynn dissenting: The relevant loss or damage was that which “resulted from the resumption”. That loss and damage could only flow from a resumption after it had occurred and not five years before.
Michael Barnes QC and Robert Bailey-King (instructed by Lovell White Durrant) appeared for the director; Lionel Read QC and Simon Pickles (instructed by Carey & Lui, of Hong Kong) appeared for the company.
