First Kind Ltd and Another v. Liu Keng Chor, The Administrator of the Estate of Li Fung Man Deceased and Another
Read the full judgment text of LDCS 12000/2014 on BabelCite. This LDCS judgment was delivered on 6 May 2016.
1. This hearing raises important issues of whether the Lands Tribunal can direct sales of adjoining lots, which are subjects of different applications under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“LCSRO”) by the same or similar groups of majority owners against their will as a merged site; and whether in so doing, the reserve price of the auction should be set taking into consideration of the redevelopment potential (normally referred to as the redevelopment value “RDV”
Cited by 2 cases · Cites 11 cases
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LDCS 12000/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE APPLICATION NO. 12000 OF 2014 ___________________
___________________ LDCS 13000/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE APPLICATION NO. 13000 OF 2014 ___________________
___________________ LDCS 14000/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE APPLICATION NO. 14000 OF 2014 ___________________
___________________ LDCS 15000/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE APPLICATION NO. 15000 OF 2014 ___________________
___________________ LDCS 20000/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE APPLICATION NO. 20000 OF 2014 ___________________
___________________ LDCS 21000/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE APPLICATION NO. 21000 OF 2014 ___________________
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___________________ D E C I S I O N ___________________ 1.This hearing raises important issues of whether the Lands Tribunal can direct sales of adjoining lots, which are subjects of different applications under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“LCSRO”) by the same or similar groups of majority owners against their will as a merged site; and whether in so doing, the reserve price of the auction should be set taking into consideration of the redevelopment potential (normally referred to as the redevelopment value “RDV”) on a merged site basis instead of on individual lots basis. It boils down to a matter of construction of certain provisions of the LCSRO. Background 2.Along a certain section of Canton Road between Dundas Street and Soy Street in Mongkok there are 6 pairs of 5-storey contiguous buildings erected on 6 pairs of consecutive lots with each building standing on a lot. Each building pair is served with 2 common staircases but they are otherwise not connected except they appear to share a common rooftop. For each pair of buildings, there are 2 retail shops on the ground floor and 2 residential units on each of the 1st to 4th floors. The buildings in the 6 pairs are assigned street numbers, counting from the direction of Dundas Street, Nos. 925-927, 929-931, 933-935, 937-939, 941-943 and 945-947 of Canton Road. These building pairs were subject to 2 occupation permits issued in early 1956. One of the occupation permits cover 6 building pairs 3 of which (No. 913-915, 917-919, 921- 923 Canton Road) are not subjects of the present applications and had, presumably, been demolished and the lots rebuilt upon[1]. All the 6 pairs of buildings in question are now over 60 years old. 3.The majority owners who own an average of 80% or more in each pair of buildings made 6 separate applications to the Tribunal for 6 orders for sale of the pair-lot comprised in each application, presumably relying on s.3(2)(b)[2] of the LCSRO. The applicants in the 6 applications are either the same A1 alone or the same A1 and A2. Both of them have the same directors and shareholder[3]. They are represented by the same firm of solicitors, Lo, Wong & Tsui, in the 6 applications. 4.The minority owners are represented by various legal teams. Lo & Lo act for some owners in 4 applications, namely,
5.Chui & Lau represented all Rs, i.e. R1 to R8, in LDCS20000/2014 (No.925-927 Canton Road) (“CS-20”). TK Tsui & Co act for R1 and R2 in LDCS21000/2014 (No.945-947 Canton Road) (“CS-21”). There are 3 Rs in 3 applications represented by 3 other firms of solicitors [4]. One R in CS-14 acts in person. As such there are 7 defending groups of respondents in these 6 applications with Lo & Lo representing minority owners in 4 different applications. 6.On 25 November 2014, Lo & Lo, for their clients in 4 applications, took out a summons in each of the 4 applications[5] for consolidation of all the 6 applications and that they are to be tried together (“consolidation summonses”). The grounds include, inter alia, that there are common questions of law and facts as the buildings are similar tenement buildings; built and to be demolished at the same time; and are to be re-developed as an amalgamated site. Further, experts’ evidence on both valuation and the age and conditions of theses building are expected to be overlapping. Substantial time and costs can be saved if the 6 applications are consolidated. 7.As Lo & Lo only represented Rs in 4 applications, they were requested by the Tribunal to notify the other minority owners in CS-20 and CS-21 and for their position to be ascertained if similar applications are to be taken out. The matter was adjourned to 18 December 2014. 8.On 17 December 2014, Lo & Lo on behalf of their clients in the 4 applications issued another set of summonses asking the Tribunal to determine a number of preliminary issues, including whether the Tribunal has power to make consequential directions for the 6 pairs of lots to be sold together as a merged site and setting a reserving price to reflect the full redevelopment potential of the 6 pairs of lots. Details of the issues sought to be determined were amended once on 17 June 2015, and will be discussed below[6] (“preliminary issues summonses”). 9.Like the case of the consolidation application, Lo & Lo were directed to notify the Rs in CS-20 and CS-21. At the end of the day, 2 more minority teams agreed to participate and support Lo & Lo’s aforesaid 2 applications. They are Chui & Lau represented all Rs in CS-20 and TK Tsui & Co for R1 and R2 in CS-21. TK Tsui & Co took out 2 summonses in CS-21 on 21 April 2015 and 19 June 2015 for matters similar to those raised by Lo & Lo. Chui & Lau also took out 2 summonses in CS-20 on 26 June 2015 on respectively the same issues. Contents of all these further summonses are exactly the same as those taken out by Lo & Lo. All others Rs are either adopting a neutral stance and agreeing to abide by the decisions of the Tribunal or not showing up. Their attendance of hearings relating to the consolidation and preliminary issues applications is dispensed with. 10.It is the parties’ common ground that the redevelopment potential of the 6 pairs as a merged site is significantly greater than that of the aggregate of individual lots. If the 6 pairs are sold as a merged site, it means each R will end up receiving more compensation than it would have received if each pair is sold individually. According to the estimate of surveyor Mr CW Wong of Grandmax instructed by the minorities, the RDV for the 12 lots as a merged site is $1,148 million whereas the aggregate of RDV for the 6 pairs is only $760 million[7]. The RDV is inflated by as much as 51%. Although the majority owners may disagree with the difference there is no dispute that the RDV on a merged site basis will be greatly enhanced compared with those of lots individually. The participating minority owners contend that upon a true construction of the LCSRO, the Tribunal has power and in fact a duty to direct sale of the 6 lots together and set the reserve price taking the redevelopment potential of the lots as a single enlarged lot. By directing the sale of lots together, the statutory formula for setting of reserve price under Schedule 2 paragraph 2 of the LCSRO will be switched from the “on its own” to the “on their own” basis. It is common ground of all the minorities that ordering a consolidation and sale of all the lots as a whole will further the policy objective of the LCSRO of protecting the minorities by affording them fair and reasonable compensation before their properties are compulsorily acquired. 11.The majority owners oppose the 2 applications on the following broad grounds:
12.On 17 June 2015, this Tribunal directed that the parties, save and except those not taking part in the present 2 applications, do file a joint statements of issues to be determined by the Tribunal at the hearing scheduled for disposal of the preliminary issues summonses and consolidation summonses. Joint Statements of Issues 13.The applicants’ solicitors and the 3 teams of solicitors acting for the participating minorities finally agreed on 14 July 2015 the issues set out in the joint statement. Leave to file the same out of time was granted at the first day of hearing. Agreed Understanding 14.Part A of the joint statement sets out basically the parties’ agreed understanding or common ground, namely, the more lots in the present 6 applications are to be joined together and sold in one single auction, the higher will be the redevelopment potential and thus the reserve price for the auction in respect of the joint lots. That in turn will result in more compensation payable to each minority in the event of sale under the LCSRO or by the majorities[10]. Preliminary Issues To be Determined 15.Part B of the joint statement sets out the agreed issues to be determined by the Tribunal pursuant to the aforesaid 2 sets of applications. This Tribunal considers it more appropriate to determine first the preliminary issues before determining the consolidation issue. The issues to be determined can fairly be summarized as follows:
16.Issues No. 1 to 6 are basically questions sought to be determined by the preliminary issues summonses while issue No. 7 the consolidation summonses. Issue Nos. 1 to 6 17.The 6 issues can be divided into 2 main groups. Issues 1 to 3 cover the Tribunal’s power and jurisdiction to order sales of different lots which are subjects of different applications to the Tribunal as a merged site or a combination of different numbers of lots in a single auction. Issues 4 to 6 concern the setting of reserve prices consequent upon the combined sale orders. 18.Under s.5(1) of the LCSRO, if an order for sale of all the undivided shares is granted, and that the parties cannot agree on other means of sale, the lot in question shall be sold by public auction in accordance with the conditions specified in Schedule 2. Paragraph 2 of Schedule 2 of LSCRO provides:
19.It is this statutory “on its/their own” formula that lies at the heart of the present dispute. It is submitted on behalf of the minority owners that the more lots to be injected in a single auction, the higher will be the reserve price according to the “on their own” formulation compared with the aggregate of each of the lots set individually which engages only the “on its own” formulation. Understandably, the minorities would like to combine as many lots as possible with a view to recouping the highest possible compensation even though the lots are subjects of different applications. Some developers, however, wish to proceed on individual lot basis for their own reasons. 20.In a nutshell, Mr Patrick Fung SC leading Ms Nancy Ngai for the lead minorities’ camp rely on s.4(6)(a)(i) of the LCSRO. It is their submission that the second of the two “may” in s.4(6) making directions relating to the sale and purchase of the subject of the order for sale, is imperative insofar as that sub-section is concerned. In that connection “may” mean “must”. Based on the principle of equivalence under the law of compensation and that fair and reasonable compensation should be paid before deprivation of the right of one’s private ownership which is protected constitutionally, it is only fair that this Tribunal should make directions for individual lots under different applications to be sold as a merged site and in a single auction. In so doing, the “on their own” instead of “on its own” formulation can be engaged. The redevelopment potential of the 12 lots on their own will be taken into account. It is their submission that the statutory intention and language of paragraph 2 Schedule 2 of LCSRO relating to determination of reserve price is clear and unambiguous. No extrinsic evidence, such as Hansard, is required for ascertaining the basis of the assessment of reserve price. This construction, they submitted, is consistent with the objective of LCSRO, namely to ensure that the minority owner receive fair and reasonable compensation for his interests in the lot. In this respect they rely on 2 Court of Final Appeal (“CFA”) decisions in Capital Well Limited v Bond Star Development Limited[13] and Sin Ho Yuen v Fineway Properties Ltd[14] and the Court of Appeal (“CA”) in Good Faith Properties Ltd v Cibean Development Co Ltd[15]. Further, it is their submission that in order to fulfill the objectives of the LCSRO, namely, to facilitate urban renewal (preferably in a comprehensive manner if possible instead of in a piecemeal manner) and to ensure that the minorities would receive fair and reasonable compensation,
21.The answers given by Mr Fung SC and Ms Ngai to the 6 issues are[16]:
22.It is fair to say that Mr Vincent Lung and Ms Candy Tang as well as Mr Gary Lam representing the other 2 teams support the conclusion of Mr Fung aforesaid, the construction of s.4(6)(a)(i) and paragraph 2 Schedule 2 of the LCSRO. Mr Lung submitted that had the legislature intended that the subject of the auction should be restricted to the subject of the application, the legislature could have used the words “subject of the application” or “subject of the order” instead of “subject of the auction” as now used in paragraph 2 Schedule 2 of LCSRO. Both criticize the lodging of 6 applications for 6 lots intended to be redeveloped as a merged site an abuse of process because it is entirely in the hand of the majorities to include or exclude any lots at any stage of the proceedings as they wish. The minority owners’ entitlement to fair and reasonable compensation promised by the legislature under the LCSRO should not (and cannot) depend on the conscience of the majority owners. 23.It has also been pointed out by Mr Lam that it may lead to arbitrary result among minorities because bidders for the last pair can bid up the price in the auction with a view to getting a “windfall” if the majorities have already successfully purchased 5 out of the 6 pairs. Such windfall may not be available to the minorities of lots which are put up for auction earlier. 24.Mr Lam also relies on Golden Bay Investment Ltd v Chou Hung[17] which was a CA decision under the Partition Ordinance, Cap 352 (“PO”). The CA in Golden Bay then made directions under s.6(4) of PO to direct sales of the lands together as a whole and for distribution of proceeds. It is therefore submitted likewise, the Tribunal can make consequential directions, ordering the 12 lots to be sold together with greatly enhanced value, and the proceeds to be shared accordingly. 25.The gist of Mr Shum’s submission on behalf of the majority owners is that the power of the Tribunal is purely statutory and has been exhaustively set out in the LCSRO. The duties and powers of the Tribunal are therefore to be exercised in strict accordance with the provisions of LCSRO[18]. Its power and jurisdiction are triggered by an application by the majorities under section 3 of the LCSRO. The Tribunal does not have any power to initiate or commence any application on its own volition or make any order in relation to subject(s) other than that of the application. It is his submission that on a proper construction, the Tribunal does not have power under the LCSRO to order sale of lots not subject of the application, and thus the reserve price to be set must be limited to the redevelopment potential of the lot(s) the subject of the said application. Mr Shum relies on the CA decision of Bond Star Development Ltd v Capital Wall Ltd[19] and a decision of this Tribunal (comprising me and Member Pang) in Day Bright Development Ltd & Ors v Choi Pak Ling & Ors[20] (except §51) in support. It is further submitted that there is no provision in LCSRO stipulating that if the majority owners own 2 or more lots which can fit in either s.3(1) (i.e. covering 1 lot) or s.3(2) (i.e. covering 2 or more lots) of the LCSRO the majority owner must go about its application under section 3(2) thus a duty to combine all lots owned by the majority. According to Mr Shum, S.3(2) is permissive and not mandatory in nature because the word “may” is used. Under section 3, the Tribunal has no power to compel an applicant to either restrict his application to only one lot or enlarge it to include more lots against the applicant’s own will. S.4(6)(a)(i) only empowers the Tribunal to make “administrative” or “procedural” directions in respect of the subject of an application after a sale order in respect of which has been made. There is no provision in LCSRO to enable “cross-over” of 2 or more orders and make directions for lots to be sold together or to a single purchaser. Two Lines of Decisions 26.These are highly controversial issues and have been repeatedly argued before the Tribunal many times over the last ten years or so. The minority owners’ applications are primarily premised on the ground that once different lots are put in a single auction, the reserve price would automatically be set on merged site basis according to Schedule 2 paragraph 2. It boils down to the interpretation of the said Schedule and the extent a minority owner is to be compensated under the LCSRO upon its proper construction. The Tribunal would like to approach the matter from a discussion of some of the recent cases that have been decided by the Tribunal and higher courts to trace the development of argument on this area. 27.The questions of joining or separating lots comprised in applications under the LCSRO and whether redevelopment potentials of adjoining lots need be taken into account in setting the reserve price have been the subject matters of differently constituted panels of this Tribunal in the past few years. In fact the joining of lots is always for the purpose of engaging the statutory formulation of “on their own” in Schedule 2. The decisions end up in basically 2 lines of decisions, with e.g. Fairtex Development Limited v Tso Pee Hong & Others[21], Supergoal Investment Limited v Five Ming House Limited & Others[22] and Many Gain Investment Limited v Chan Fai Ho & Others[23] as one line suggesting valuation on a “joint site basis” and Top Sail International Limited v Wong Lai Wei[24], Super Fortune Investment Limited v Keynote Enterprises Limited[25] and Day Bright (supra)[26] representing the other suggesting valuation on a “individual site basis”. All except Top Sail and Super Fortune aforementioned were unopposed as the minority owners are either missing, no longer contesting or not showing up. 28.It is interesting to note that in Super Fortune exactly the same legal team, i.e. Mr Fung SC leading Ms Ngai on the instruction of Lo & Lo, appeared for the majority owner in that case. They argued basically the opposite to what they have contended this time. It does not appear Super Fortune was referred to by them this time.
29.Bond Star and Capital Well are two of the often cited authorities in the 2 lines of cases. Bond Star was first heard in the Tribunal in December 2002. It concerned an application comprising 5 contiguous properties standing on 6 lots. Of the 6 lots, the majority owner had already wholly owned 5 of them when the application was made. Of the 5 buildings, one stood on 2 lots with the remaining 4 each standing on one lot. Two buildings were connected by common staircases, but all buildings were otherwise not connected. All buildings had been demolished when the application was taken out. Only half-share of a unit situated in a building with common staircase had not been acquired by the majority owner. It was suggested ransom compensation had been demanded by the minority. Before the Tribunal, the minority contended, inter alia, that s.3(2)(a) of the LCSRO did not apply to lots of which the applicant wholly owned. The Tribunal ruled that it did, or at least it did not preclude joining of wholly owned lots to one single application. 30.On appeal, it was held by the CA that on a true and purposive construction of ss.3(1), (2) and 4(1) of the LSCRO, s.3(2) did not apply to land of which an applicant had already owned. It varied the Tribunal’s order and confined it to sale of the lot the majority owner did not wholly own. It left open as to whether the applicant is entitled to make the application under s.3(2)(b) because the minority’s premises was situated in a building connected to the adjacent building (wholly owned by the majority) by a common staircase. This might need be further dealt with by the Tribunal as it had not been argued below[29]. 31.Relying on different grounds the minority owner in Bond Star appealed to the CFA and the case was reported as Capital Well. The appeal was dismissed. However, Ribeiro PJ seemed to have reservation on CA’s construction of section 3 which rendered it impermissible to the sale of 6 lots in a single batch by the applicant, and had the following to say (§§ 39 and 42):
32.The CA’s decision restricting sale to lot(s) the majority owner not already owned, thus setting a restrictive reserve price, was not upset by the CFA. As a matter of fact, the reserve price of the lot in Bond Star was fixed by the Tribunal subsequently at a hearing in March 2006[30]. It was fixed at $15.79 million[31] which was presumably the RDV of the only lot which the majority owner did not wholly owned without reference to the other 5 lots. 33.The aforesaid comments of the CFA in Capital Well were quoted in full because they are extensively referred to and relied on in reaching different conclusions in the 2 lines of cases. They led the Tribunal in Supergoal to come to a conclusion that Bond Star had been undermined and no longer binding on the Tribunal. The Tribunal in Supergoal came to a conclusion different from Bond Star on the construction of s.3(2). Fairtex 34.In Fairtex the applicant put in one single application 4 contiguous buildings on 4 lots, consisting of 2 pairs each connected by common staircases internally but the 2 pairs were otherwise not connected. The applicant had already wholly owned one of these 4 lots at the time of the application. It was also conceded that the 4 lots would be developed as a composite site. The said panel of the Tribunal treated the application as two, presumably because of the technical difficulties arising from whether s.3(1) permits to be included in one single application any combination of s.3(2)(a) and (b) lots or two or more s.3(2)(b). 35.However, the said panel of the Tribunal went on to distinguish Top Sail (see paragraph 62 below), and considered that if a majority owner conceded that the redevelopment plan included some other lots it owned, and these lots were the subject matter of another application before the Tribunal, there was strong reason for the Tribunal to consider the redevelopment potential of the merged lots before setting the reserve price, in compliance with the said provision of Schedule 2 of the LCSRO: see §39 of Fairtex. Further it was stated that when all the lots are subject of different applications, for good case management they should be consolidated, and the subject lots of the auction should be the subject lots of the consolidated application: see §40 of Fairtex. Supergoal 36.In Supergoal, the majority owner combined 8 buildings standing on 8 lots in a single application. The 8 buildings appeared to form a complex but could be divided into 2 groups each comprising 4 buildings. The buildings within each group were connected by common staircases and lift but the 2 groups were otherwise not connected except sharing the same main entrance. Although the percentage of undivided shares per lot when averaged over the 8 lots, or on per group basis, was not less than 80%, the majority did only own 78.78%[32] in respect one lot in one group (“group one”) when the application commenced[33]. Further, in respect of the other group (“group two”), the majority owner owned 100% in 3 lots. The questions of whether Bond Star is binding, and which of s.3(2)(a) or 3(2)(b) is applicable, must necessarily engage. 37.Since the application the applicant continued to acquire undivided shares in the lots. By the time of trial, the applicant had already wholly owned 2 lots in group one, and 3 lots in the group two. On a per group basis, the majority owner then owned not less than 90% undivided shares in each group. 38.The Tribunal in Supergoal then went through certain authorities, and in particular, relying on the decision of Commissioner of Inland Revenue v Indosuez WI Carr Securities Ltd[34] which applied a principle that a lower court is not bound to follow the ratio of a CA decision in light of the subsequent dicta of the Privy Council. The Tribunal then departed from Bond Star, and come to the conclusion that an applicant contemplating composite site redevelopment may either[35]:
39.There had been application by the majority owner to treat the application as two each under s.3(2)(b) of the LRSCO, but they are to be consolidated and tried together so that all the lots could be sold as a merged site along the line of Fairtex. Apparently this application of the majority was made to overcome an apparent threshold problem because that application comprising 8 lots might not be able satisfy s.3(2)(a) or 3(2)(b). The Tribunal in Supergoal considered that section 3 of LCSRO does not forbid anyone from joining more than one application, i.e. 2 groups each constitutes a s.3(2)(b) application in a case. No order as requested has been made but the Tribunal said it would bear in mind that it was dealing with 2 applications: see §§71-73 of Supergoal. 40.That panel of the Tribunal then made 2 orders for sale of respectively the group one and group two. The 8 lots were to be sold in a single auction and a reserve price taking into account the RDV of the 8 lots as a merged site was set[36]. It is noted that the applicant in Supergoal had from the start agreed to have the 8 lots sold together with RDV fixed on a merged site basis. No matter what was the outcome, the RDV would be set by reference to the 8 lots on a merged site basis anyway. Many Gain 41.There are 3 decisions of the Tribunal written on Many Gain (LDCS28000/2012), and we are here to concern with the first of these series of decisions which deals with costs and adjournment of trial [37]. After the hearing the trial was adjourned. There was another hearing on the preliminary issue of RDV by another presiding officer of the Tribunal as the learned judge initially dealing with Many Gain had left the Tribunal. The decision on the preliminary issue was Many Gain (No.2)[38] for better identification. The case was subsequently disposed of as Many Gain (No.3)[39] before a member of the Tribunal as it had by then become uncontested, and was more of a valuation exercise. 42.The facts of Many Gain are very similar to the present case. Instead of putting together all lots intended to be jointly redeveloped in a single application as in Supergoal, the majority owner took out an application confining to a pair of lots only. On each pair of lots there stood a pair of buildings connected to each other by a common staircase. In fact the same applicant took out 6 such applications (including the one under consideration) in respect of 6 pairs of contiguous buildings erected on 6 pairs of adjoining lots. At the hearing for adjournment, the applicant had already discontinued 4 of the 6 applications because it had become 100% owner in 4 pairs. The trial of another pair had completed but judgment had not yet been handed down. 43.It appeared that the Tribunal in Many Gain considered that in order for minority owners to receive fair and reasonable compensation in composite sits development, all lots intended to be redeveloped together should be specifically pleaded in the Notice of Application even those lots are wholly owned, otherwise the applicant could not satisfy s.4(2)(b)[40] of the LCSRO. According to that panel of the Tribunal, it would be difficult for the applicant to satisfy s.4(2)(b) if the offer only takes into account the redevelopment potential of the lot on its own when all along the applicant had been planning a grander composite site redevelopment. Even though the applicant only acquires 100% of the adjoining lot(s) after the commencement of the case, the Notice of Application should be amended to reflect such factual development to enable direction under s.4(6)(a)(i) in relation to the sale to be made so that the lot the subject of the application may be sold together with those adjoining lot(s) in one public auction. The Tribunal in Many Gain adjourned the trial to enable the applicant to make further application to deal with the already tried case with a view to enlarging the scope of that case to encompass all lots: see §48 of Many Gain. 44.Accordingly, Many Gain suggests all lots needs be disclosed, no matter 100% owned or not by the applicant, to enable the Tribunal to make directions under s.4(6)(a)(i) of the LCSRO so that the reserve price should be set reflecting the RDV of the merged site, not individual lots. 45.It was provided in Many Gain (§46):
46.When Many Gain came back to the Tribunal on the preliminary issue as to whether RDV should be set on a merged site basis, the Tribunal was told that the applicant had settled with the minority owner in the other case of which trial had already taken place. That other application had in fact been discontinued and a judgment was no longer necessary. Ms Ngai, who also appeared for the majority owner in Many Gain, relied on Day Bright (see §§47-49 below), and submitted that the RDV should be confined to the lots the subject of the application only. Her submission was accepted: see Many Gain (No.2). Day Bright 47.The case of Day Bright was very similar to that of Many Gain and in fact, the present case. In Day Bright, the majority owners took out an application confining to a building connected internally by common staircases standing on 2 lots. In fact the building was part of a larger complex known as Kut Cheong Mansion comprising a total of 14 such tenement buildings, arranged in 2 rows of 7 adjoining buildings. Each tenement building was not connected to the other by common staircase and was with its own DMC. The 2 rows were also not connected and were separated by a private street. The allegation that they were intended to be developed as a merged site was not challenged. The majority owners managed to obtain 100% in certain tenement buildings. In the end, only 6 applications under the LSCRO comprising 7 tenement buildings were commenced by the same group of majority owners[41]. At the time of trial, 2 applications had been concluded with 2 separate orders of sale. By then the lots in question had already been sold in separate auctions. Soon after disposal of Day Bright[42], the other 3 applications were also concluded, and the lots the subject of individual applications were sold with reserve price set based on individual lot basis. 48.I was sitting in the panel of the Tribunal hearing Day Bright[43]. Since Supergoal and Many Gain were only decided less than 2 months before its trial, the Tribunal invited submission from counsel acting for the majority owners despite the fact the case was basically uncontested. It is because if Supergoal and Many Gain were to be followed, they would have a serious implication on the future conduct of Day Bright, at least in respect of how the reserve price for lot(s) in that case and other finished/unfinished cases were to be set. 49.Since I have set out my reasoning in full in Day Bright[44] I do not intend to repeat the same here. Suffice for me to highlight the Tribunal’s following views expressed in Day Bright:
Super Fortune 50.Super Fortune was determined prior to Supergoal, Many Gain and Day Bright. In Super Fortune the majority owner put in a pair of buildings connected by common staircases standing on a pair of lots in a single application. It was in fact part of 6 pairs of contiguous tenement buildings along Ma Tau Kok Road. The majority owner had already acquired 100% ownership in 11 lots and that was why the application comprised only one pair of lots. It was argued by the only minority that the reserve price of the lots should reflect the potential of joint redevelopment with all the adjacent lots which were owned by the applicant. The majority owner contended that the wordings of ss.3(2), 4(1)(b), 5(1)(a) and Schedule 2 paragraph 2 of LCSRO restricted the subject of the auction to that of the application, and the Tribunal simply had no discretion to enlarge[48]. The majority owner’s contention was accepted by the Tribunal. 51.From the above, differently constituted panels of the Tribunal come to different conclusion on the same issue, namely, whether a developer contemplating comprehensive redevelopment of several adjoining lots is obliged to go about its LSCRO application as a merged site, and if not, it can be compelled. More importantly, once lots comprised in separate applications are to be sold in a single auction by directions, whether under s.4(6)(a)(i) or otherwise, Schedule 2 paragraph 2 has the effect of inflating the reserve price by treating the lots on an enlarged site basis. Discussion 52.It is submitted by Mr Shum that s.3(2) of LCSRO does not empower the Tribunal to consolidate lots comprised in separate applications to form an enlarged site so as to engage the “on their own” formulation of reserve price. By reason of what I have said in Day Bright, I accept his submission. In any event the minority camp does not seek to rely on s.3. They are only relying on s.4(6)(a)(i). 53.S.4(6)(a)(i) provides:
54.It is Mr Fung’s submission that the word “may” highlighted in the preceding paragraph, in the context of s.4(6), must be imperative and means “must” because the objective for which the power is conferred is for the purpose of enforcing a right, and there is a duty on the part of the Tribunal to exercise it for the benefit of those who have that right. He relies on Julius v Bishop of Oxford (1880) 5 AC 214 and Singway v AG [1974] HKLR 275. So far as can be discerned from his argument, the “right” referred to by Mr Fung is the “fair and reasonable compensation” which a minority owner is entitled to receive for the deprivation of his property right which is protected under Article 6 and 105 of the Basic Law. It is Mr Fung’s submission that compensation based on the merged site development represents such fair and reasonable compensation. The Tribunal is therefore duty bound to make directions for the lots to be sold together. 55.With due respect his said argument is not convincing. It is because his argument pre-supposes fair and reasonable compensation must mean the higher compensation deriving from a joint site development basis. I totally agree that it sounds attractive and may be morally and politically correct. However, we are here to deal with the setting of a reserve price according to a statutory formula fixed by the legislature. The Tribunal has no power to re-write the legislation for the benefit of the minority or according to what we consider to be morally correct or fair. In addition, the compensation eventually payable to the minorities may be different from the reserve price because the former will eventually be determined by the market through auction. In my view, the merged lot potentiality being the “fair and reasonable” compensation does not seem to sit well with the legislative intent as revealed from the Hansard as discussed in §52-56 of Day Bright. 56.In Fully HK Investment v Poon Vai Ching and others[49], the Tribunal was asked to determine, whether the lot the subject of the application should be valued on the basis of a plot ratio of 5 or 9. Plot ratio 5 was based on the RDV of the lot on its own. Plot ratio 9 was based on a set of approved plans owned by the applicant’s related company taking into consideration of the potentiality of the adjoining lots if these lots were to be developed together. There was then unchallenged suggestion that the applicant therein could be able to make use of the approved plans and develop the lot on plot ratio 9 after it had acquired it. That panel of the Tribunal, after hearing full argument, had adopted the plot ratio of 5 (at §14):
57.I agree with the Tribunal’s analysis. The approved plans are rights reserved to the owners holding that rights, and not to be shared with the minority owner directly through the setting of the reserve price. It is an added value that accrues to the developer by reason of it putting in efforts and time, injecting substantial capitals as well as taking the commercial risk by collocating adjoining lots for a joint redevelopment. 58.The minority in Fully sought leave to appeal but was rejected by Hon Le Pichon JA. It was the CA’s view that even if there was a “Clay factor”[50], i.e. a value attributable to a special factor, and there would be an auction, the reserve price should continue to be set on the “on its own” formulation and the special attribute was to be left to the auction:
59.In my judgment, although Fully was decided in the context of wholly-owned adjoining lot, the reasoning is applicable to co-owned adjoining lots, i.e. the values brought about by reasons of its joint redevelopment with adjoining lots should to left to the auction. What is submitted on behalf of the minorities here, led by Mr Fung SC and Ms Ngai, that the “fair and reasonable” compensation should be the higher compensation taking into joint development may not be correct. 60.Fully in the CA can be relied on to support a proposition that the redevelopment potential arising from the majority owner’s ownership of adjoining lots is a piece of property owned by the majority owners. The minority owners trying to reach into the development potential of the adjoining lots may be intruding into something which it does not own as of right. Having said that, the statutory scheme under LCSRO does not exclude the reaping of the potentiality attributable to adjoining lots. It is because if the Tribunal is minded to grant an order for sale, unless the parties can agree on some other form of sale, the lot in question will be sold in an auction. It will be left to the market to determine whether a higher price than the reserve price can be achieved. 61.Further, as will be discussed below and stated in paragraph 51 of Day Bright, when the Tribunal is seized of all the applications (as in the present cases where there is no lot the majority owners wholly own otherwise it should be excluded according to Bond Star), the Tribunal can give parallel directions for these adjoining lots be sold at the same time in an auction to a single purchaser. By so doing, in effect the lots will be sold as a single property and the sale’s price ultimately achieved will be determined by market force. In a free market like Hong Kong, the market force may drive the bidding closed to or even beyond the price set on merged site basis. However, under the present LSCRO regime, the reserve price for each lot should continue to be set according to the “on its own” formula, and their aggregate will be adopted as the total reserve price for the auction of all lots in the circumstances. This is supported by the conclusion in Fully in CA. 62.Infact, the Tribunal in Top Sail[51] had reached similar situation. In Top Sail, the minority owner there did not ask for auction of all other contiguous lots together, as the minority owners did in the present case. It only asked for the reserve price to reflect the redevelopment potential of the entire merged site. It was rejected by the Tribunal. 63.As stated in Day Bright, s.4(6) empowers the Tribunal to make incidental directions after the making of an order for sales of all the undivided shares of lots comprised in the application. What directions need be made depends entirely on circumstances. In many instances, no tenancy as required under s.4(6)(a)(ii) needs be terminated. To construe the second word “may” in s.4(6) to mean “must” is, in my view, doing violence to the language used in the provision. It does not fit in well with other provision such as subsection (b)(a)(ii). 64.The minority owners rely on paragraph 51 of Day Bright to support their submission that adjoining lots of different applications can be directed to be sold along the line in Golden Bay. By so doing the “on their own” formula for setting the reserve price of the auction under Schedule 2 paragraph 2 formula will automatically engage by reasons of its plain wording. Mr Lam submitted that in Golden Bay, the CA considered that even the word “proper” under s.6(4) of the PO is sufficient to enable the court to combine lots and set a higher reserve price. The Tribunal is entitled likewise to do so the same under s.4(6)(a)(i) of LSCRO. 65.S.6(4) of the PO is stated below for easy reference:
66.As analyzed in Day Bright, there are no provisions in the LCSRO that mandate the majority owners to put in all wholly or co-owned lots in a single application. In fact wholly owned lots are to be disallowed according to Bond Star. The multiple-lot application is, apparently, subject to very stringent conditions as set out in s.3(2) which was introduced to deal with a concern - the oppressive “snatching” of land the majority does not own by his bundling to it with lots he wholly owns in a single application. The applicant(s) therefore is required to have at least 90% in each lot he puts in, i.e. a s.3(2)(a) case. Only when the buildings straddling different lots connected by common staircases will the requirement be relaxed. However his average ownership in each lot must still be at least 90%, i.e. a s.3(2)(b) case. That is why the Tribunal in Day Bright observed that the legislature did not envisage all lots which a developer owns, whether 100% owned or otherwise, to be put in an application: see §54(ii) of Day Bright. 67.As s.3(1) and s.3(2) are the only provisions by which an application can be made to the Tribunal, the right of choice of the number of lots to be included in an application appears to be given to the applicants. Despite the very appealing submission of Mr Lung and Mr Lam suggesting that unfairness may have created, I am afraid that is the reality given the present drafting of the LCSRO. However the Tribunal is not powerless in the situation. As stated in paragraph 51 of Day Bright, the Tribunal may, in appropriate cases, order them to be sold in a single auction and to a single purchaser, with a view that a higher price can be achieved by market force. However, s.4(6)(a)(i) is only a provision for giving incidental direction(s) after an order for sale is made. It does not even start to engage when the application is made or before an order for sale is made. In my view, it cannot have the direct effect of giving substantive right of enlarging compensation available to minority by affecting the setting of reserve price. I would like to repeat below what the Tribunal has stated in Day Bright (§46 at page 380C-E):
68.In Golden Bay there were 4 separate applications under the PO for the respective sale of 4 adjoining lots. The applications were consolidated for trial. The applicants wanted the 4 lots to be sold as if a single lot, failing that, each of them individually[52]. At the first instance trial, 2 orders were made for 2 lots to be sold individually. The deputy judge refused to grant sales for the other 2 because the co-owner defendants opposed. On appeal, the CA considered otherwise because it did not appear to it that co-owners would like to hold on the lands as long-term investments. Instead, they wanted to have their interest bought out at an inflated price by other co-owners. It occurred to the CA that sale of the lands suited the parties’ common interest. The CA ordered all 4 properties be sold at a joint value[53] and that all four sales take place together. 69.It was stated in the decision (at 199E-F):
70.It is noted that the CA then made 2 separate sets of orders for the 2 properties under appeal, and directed the applicants to seek similar directions from the trial judge in the two proceedings not under appeal. Each set of directions provide, inter alia, that the auction was to take place on the same date; advertized together with the sale of the other 3 properties; be sold to the highest bidder of all lots; and that every bidder shall offer a single purchase price for the purchase of the 4 properties. 71.This Tribunal has no quarrel that directions can be made along the line in Golden Bay. However, as acknowledged in Golden Bay, s.6(4) of PO is meant to give consequential directions and does not give power to amalgamate different sites, even though procedurally the 4 applications had already been consolidated. From a survey of the directions given in Golden Bay, they were parallel sets of directions for 2 separate sales[54], with appropriate directions to enable them to take place together so that the two take place at the same time as if one[55]. It is worth noting the CA there did not make one single set of directions. It made two. The directions made tallied with the CA’s conclusion that the PO did not empower the amalgamation of different sites, and thus 2 separate but related sets of directions were necessitated. 72.In the Tribunal’s judgment, s.4(6)(a)(i) of the LCSRO serves exactly the same purpose as s.6(4) of PO and is subject to similar limitations. Like its counter-part, s.4(6)(a)(i) cannot give rise to substantive rights of amalgamating sites comprised in different applications, though parallel directions in each application can be made to enable them to be sold at the same auction in appropriate cases. Accordingly, if directions are to be given for the 6 lots here to be sold together in an auction, each set are in fact directions parallel to the other and should only concern the subject lot of the individual applications. The directions given under s.4(6)(a)(i) “relating to settling of particulars and conditions of sale of the lot” are necessarily qualified by the phrase “the lot the subject of the order” appeared in the same sub-paragraph (a)(i). Further, s.4(6)(b) requires the trustee under the order for sale to pay into Tribunal the proceeds of sale of “the lot the subject of the order”[56]. The intention is clear. Only the lot the subject of the application is contemplated under s.4(6). Like the case of Golden Bay, ancillary directions to synchronize sales and how proceeds are to be shared can be built in. It is not prohibited in s.4(6)(a)(i). However, directions cannot be stretched beyond lots not subject of the application. The combined effect of parallel directions in different applications is to enable lots to be sold together so as to facilitate comprehensive development of the lots as a whole. 73.It has been argued on behalf of the minority owners that s.4(6) empowers the Tribunal to give such direction “as it thinks fit”. This will be good enough to enable the Tribunal to give directions covering other lots. By reason of what has been discussed in the preceding paragraph, the directions can only include provisions to synchronize sale with adjoining lots but not covering adjoining lots. It is through such parallel directions that a concerted sale is possible. This is what exactly was done in Golden Bay where, instead of a single sets of directions, 2 parallel sets of directions each relating to only one property the subject of a particular application was made. 74.On the other hand, there is no provision in the PO similar to ss.3(1) & (2), 4(6), 5(1)(a) and Schedule 2 paragraph 2 of LSCRO which, upon their proper construction, have the effect of confining the reserve price of the subject of auction to that of the application. In my view, the PO is less restrictive in respect of the setting of the reserve price. That is why after directing the lots to be sold in an auction by separate sets of directions, the CA in Golden Bay was free to set the reserve price on an amalgamated site basis, so far as it considered that in so doing, it was [57]“… in the legitimate interests of all co-owners and workable in practice…” thus satisfying the meaning of “proper” under s.6(4) of PO. There is no provision in the PO prohibiting setting of reserve price in that manner. It is not, however, permitted under the LSCRO[58]. 75.It is also submitted that once directions under s.4(6)(a)(i) have been made for lots to be sold in a single auction, the subject of the auction, being the enlarged site, has sufficiently been identified. There is no need to resort to Hansard to construe Schedule 2 paragraph 2 because it is sufficiently clear. Had the legislature intended the reserve price be set by confining it always to the lot the subject of the application only it would have used the words “the lot subject of the order” instead of “the lot subject of the auction”. 76.With the greatest respect to counsel for the minority owners, I cannot share their views. In the case of LSCRO, the subject of the auction referred to in Schedule 2 paragraph 2 must necessarily, by reasons of the Tribunal’s analysis above, refer to the “… the lot the subject of the order” under section 5(1) which mean the lots comprised in an application under section 3. The said Schedule 2 was only referred to in section 5(1) and is necessarily the latter’s extension expanding on matters relating to auction. The fact that Schedule 2 employs “the lot the subject of the auction” is neither here nor there and, in my view, must be qualified by the lot being subject of the order under s.5(1), and further by s.3(1) or s.3(2) the lot the subject of the application. The parallel directions directing several auctions, each for a lot, to take place together are for the purpose of enabling them to be sold as if one. As seen in the preceding paragraph, the set of directions given in an application can only relate to the lot(s) comprised in that application. It cannot enlarge the scope of Schedule 2 which is restricted by other provisions of the LSCRO. S.4(6)(c) expressly stated that the directions so given cannot be inconsistent with other provisions of the LSCRO[59]. 77.It has been argued on behalf of the minority owners that s.4(1) says that the Tribunal shall determine an application under s.3(1). Since it is common ground that s.3(2) expands the scope of s.3(1) for multiple lots, all section in the LSCRO should cover lot or lots, including lots which are put together by s.4(6)(a)(i). That is why, as far as can be discerned from submission of Ms. Ngai, the Tribunal did not consider it necessary in the case of Supergoal to ask for amendment of the Application[60]. It is her case that the Tribunal in Supergoal had exercised its power under s.4(6)(a)(i). This Tribunal cannot accept her submission. It is correct to say that s.3(2) expands the scope of s.3(1) to cover multiple lots application, and accordingly the reference to s.3(1) in s.4(1) in fact covers s.3(2) applications as well. However, the Tribunal in Supergoal was approaching the matter in a very pragmatic way, given that the Application is basically unopposed and that all the issues were raised only at the time of trial. The fact that there were 2 orders of sales supports the observation that the Tribunal was then hearing 2 applications together. So in respect of the said point raised by Ms Ngai, the decision in Supergoal is unique and should be confined to its own facts and circumstances. 78.To the extent as discussed above, the LSCRO is clear. This Tribunal accepts no Hansard is necessary to construe Schedule 2. However, in case Hansard is required to aid in the construction it helps arrive at the same conclusion as the legislative intent appears to set the redevelopment potential to which a minority owner is entitled to that of the lot on its own, or if more lots are put together in an application, on their own. 79.By reason of the above, when several lots are ordered to be sold together in an auction, given the constraint of the LSCRO discussed above, the reserve price should be the aggregate of that of the lots assessed individually. Market force will then come into play. The price may eventually be bid up above the aggregate of all the reserve price assessed individually, to close to or even beyond that assessed on merged site basis. 80.The Tribunal observed in Golden Bay, after directing sales of all the properties as if they constituted a single property and considered it a “proper” exercise of its power, Bokhary JA (as the learned PJ then was) remarked that in some cases the court may restrain from exercising that power[61]:
81.I agree with the learned Judge’s observation because by not exercising such power, co-owner of a single lot having “genuine and viable” plan for his own lot need not bid lot(s) he does not require. In my view, such principle should also be applicable to any majority who has a “genuine and viable” plan for that lot on its own. Why he, because being a majority owner or having interest in the adjacent lots, should be treated differently. Accordingly if any co-owner, no matter a majority or minority one, having a “genuine and viable” plan for a particular lot, the lot in question should not be ordered to be sold with adjoining lots in one auction even if the applications are to be heard together. 82.By reason of the above, save and except s.4(6)(a)(i), there is no provisions in the LSCRO that can be invoked to enable the Tribunal to order sale of lots together with adjacent lots which are subjects of another applications before the Tribunal. My answer to the first 6 preliminary issues set out in paragraphs 15 above are, respectively, as follows:
Issue No.7 83.The minority owners’ applications are based on Order 4 rule 9 of the RHC which stipulates:
84.It is also Mr Fung’s submission that this Tribunal has a discretionary power under Order 1B rule 1(2) of the RHC to give effect to the underlying objectives of the rules set out in Order 1A rule 1 of the RHC, and in fact shall seek to give effect to them under Order 1A rule 2. Those underlying objectives include,
85.The main objective of having two or more cases heard at the same hearing or one after the other is to save costs and time. The court will usually not give such directions unless there is “some common question of law or fact bearing sufficient importance in proportion to the rest” of the subject-matter of the actions “to render it desirable that the whole should be disposed of at the same time”. It is a case management decision. In deciding whether to order consolidation of actions, the court has an unfettered discretion. The power is to be exercised in a flexible way with regard to the particular circumstances of the situation. There is no hard and fast rule that just because the parties are identical and some common question of fact or law is involved in both actions, it would be expedient and proper to order consolidation. : see §4/9/2 of Hong Kong Civil Procedure 2016, Vol 1 at p.66, and Sincere View International Ltd v Kenco Investments Ltd[62]. 86.The main purpose of consolidation asked by the minority owners is to enable the 6 pairs of lots to be sold in an auction so as to engage the “on their own” formula in Schedule 2 paragraph 2 as construed by them. This common question of law has already been disposed of by the present applications, and has been construed against them: see the Tribunal’s answers to the preliminary issues nos. 4 to 6 above[63]. It will be unnecessary for the applications to be consolidated or heard together purely for this reason. In any event, I do not accept that the “rights to relief claimed” can be said to be “in respect of or arise out of the same transaction or series of transactions”. I share Mr Shum’s submission that once this preliminary issue has been disposed of, the common questions of law may not be a material factor. I am also of the view that the mere fact these applications are all taken under LSCRO is not a sufficient reason for the applications to consolidated or heard together. 87.However, one needs to consider further whether there is any common question of facts as well. Since the parties have not yet filed their evidence, this assessment has to be done by reference to their pleadings. 88.The applicants enclosed in each of their applications a valuation report of the existing use value (“EUV”), i.e. valuation of the units without reference to redevelopment. It is noted that the same expert of Savills was engaged by the applicants to prepare the 6 reports. After perusing the 6 reports, it is noted that in each of them he adopted:
89.From a brief survey of the Notices of opposition filed in the 6 applications, the defence can be grouped under the following main broad grounds:
90.Since the EUV of the minorities’ units will be challenged, and the applicants’ valuations are based on the same set of comparables and adjustments, a consolidated trial will obviously have the benefit of saving time and costs because the minority owners’ challenges, if not withdrawn by the time of trial, will be similar if not identical, and can be disposed of in one go. 91.In Anling Limited & Others v Hultuck Enterprises Limited & 33 Others[66], I have directed that in multi-respondent compulsory sale litigation, in order to limit the number of experts who should be independent and are there to assist the court instead of to advance a party’s case, a single joint expert will be appointed on each discipline for each of the applicants’ side and the respondents’ side. 92.In the present case the 6 lots are adjacent to each other. The attributes of the each lot are expected to be very similar. If they are to be tried together, it will enable the Tribunal to make directions along the line of Anling so that costs and time can be saved. 93.As regards RDV, even though in the present proceedings the Tribunal has decided the bases upon which the reserve price is to be fixed, experience tells its assessment is very often highly controversial. Unless there is good reason, the Tribunal sees no reasons why O.4 r.9 RHC cannot be applicable to enable all applications to be heard together so that similar valuation issues can be dealt with in one go. 94.Further, unless there is good reason not to do, it appears that it is to the benefit of all the parties for the lots to be sold together because by so doing it is possible that a higher sale price can eventually be achieved. By having the application heard together, the Tribunal would make appropriate directions at the same time for the concerted sales. The Tribunal doubts, as submitted by Mr Lam, that in the event the lots are to be sold separately, it is the last lot to be put up for sale that may attract the ransom bid. It may or may not be true. The Tribunal believes that the relative position of the lot in the amalgamated site will be more determinative in the overall bidding strategy if the lots are to be bid separately. In any event Mr Lam is correct in saying that if the 6 lots are to be sold separately, arbitrary and/or unfair results may arise. By having all of them sold together, such results or the snipping attack of market opportunist can be avoided. The developer applicant, because of its financial background, very often stands a better chance than the other minorities in the bidding. If the price proves too high to be affordable by the developer applicant, its overall interest will be bought off by the successful bidder. The majority can still reap his fair share of profit in his abortive development plan. It operates also to the developer applicant’s benefit. On the other hand comprehensive redevelopment of the merged lots will be carried out by the successful bidder and not impeded. Even if one or a combination of lots are not to be sold together at the end, the Tribunal believes a consolidated trial will enable the same expert to be appointed for all the minority owners to deal with the common valuation issues, thus saving costs and time. 95.This Tribunal appreciates that for the state of repair, there may be certain degree of differences between each pair of buildings. At trial their respective conditions need be raised and tested. The same applies to whether reasonable steps have been taken to acquire each of the minority owners’ units. To that extent, not much time can be saved. 96.On the other hand, given the fact that the 6 pairs of buildings were all constructed at around the same time and seem to be part of a development comprising tenement buildings, the Tribunal believes there are bound to be common issues relating to design, general structure and age which are relevant to the crucial question of structural soundness. Further, the question of whether each pair of buildings can be free standing or that its structural integrity may be compromised if buildings on one or both sides are pulled down is also relevant in the overall assessment of the repair and redevelopment issues. By having the 6 cases heard together the Tribunal believes it can help form an overall view, thus do a better and realistic assessment in a more costs effective manner. Obviously, expert directions along the line of Anling on the building condition and structural integrity of the tenement buildings, if necessary, can help save costs. 97.The tribunal understands that in the event of a consolidated trial, more and sometimes complex issues will be loaded in a single trial. It is a balancing exercise and each case has to be assessed on its own facts. My present assessment is that there is no excessive overloading of issues rendering the trial beyond manageable limits. In any event, the 6 applications are proceeding at similar pace. Directions for factual and expert evidence have not yet been given. Expert directions along the line of Anling can be given to restrict the numbers of experts because of increasing number of minority parties attending trial. 98.The 6 applications here cover different pair of lots each with a separate title and against different minority owners. Each still has evidence unique to its own. Since the majority owners not being able to succeed in one or some of the applications cannot possibly be ruled out, on a balance it would be better for the 6 applications to be heard and tried together and before the same panel of Tribunal instead of being treated as a single application. Further, whether there will be joint directions for the lots to be sold together and whether the 6 applications are to be heard together are two different, though sometimes related, matters. The former will depend, for instance, on whether there is any, and if so the number of co-owners having “genuine and viable” plan for redevelopment of lot(s) which they own. Failing such “genuine and viable” plan, it appears that for the common benefits of both the majority and minority all the lot are to be sold together. 99.Having come to the conclusion in the preceding paragraphs, the Tribunal would like to reiterate that consolidation is a matter of convenience and economy in case management. It cannot operate to change the parties’ substantive rights, or make those who are parties in one application parties in another, otherwise it will be a backdoor to enlarge the scope of lots comprised in an application under s.3(1) or s.3(2) of the LSCRO. The hearing together of the 6 applications does not merge them into a single cause, or change the parties’ substantive rights. 100.Ms Ngai on behalf the lead minority camp refers to Cheer Capital Limited v Unibase Investment Ltd as trustee for Kam Yee Wai Andrew, Lam Yin Ming Lawrence and Lam Hon Keung Keith and others[67], in which the Tribunal consolidated 2 applications and assessed the RDV on a merged site basis. Ms Ngai submitted had the Tribunal not have the jurisdiction, the Tribunal would not have assessed the RDV on a merged site basis even with the parties’ consent. 101.In Cheer Capital, each application comprised a building standing on 2 lots connected internally by common staircases. The consolidation application was apparently taken out to overcome the technical difficulty in that although each application satisfied s.3(2)(b), the 4 lots put together could not satisfy s.3(2)(a) because the majority owns only 71.43%[68] in one of the 4 lots. When making the consolidation application, the applicants had expressly indicated to the Tribunal that they agreed to assess the RDV on merged site basis so that all the minorities could benefit from such consolidated application. The consolidation applications were either unopposed or consented to by the minorities. In the Tribunal’s judgment, the consolidation in the sense that the 2 applications were to be heard together was a case management direction not offending s.3(2)(a) by reason of what has been set out in paragraph 97 above. According to Tribunal’s record, order to the following effect was made on 7 March 2014:
102.Accordingly, the merged site basis was agreed upon by the parties prior to the consolidation. The Tribunal cannot see why such agreed basis of valuation, which is more beneficial to the receiving parties than that provided by the LSCRO, cannot be accepted. It is quite different from the present case where the parties cannot come to terms on any basis of valuation, and the strict terms of the LSCRO have to be resorted to. 103.The answer to Issue No.7 is “yes”. The 6 applications are to be heard and tried together by the same judge or panel of Tribunal. Conclusion and Costs 104.The Tribunal’s answers to preliminary issues Nos. 1 to 6 raised in the preliminary issues summonses are set out in paragraph 82 above. The Tribunal’s answers to preliminary issue No. 7 raised in the consolidation summonses are set out in paragraph 103 above. 105.Following the principles laid down in Good Faith, I make a costs order nisi that the applicants do pay the Rs their costs, including all costs reserved, together with certificate for 2 counsel in CS-12, CS-13, CS-14 and CS-15, and certificate for counsel in CS-20 and CS-21, such order be made absolute after 14 days if no application is made to vary the said costs order.
Mr Erik SHUM, instructed by Lo, Wong & Tsui, for the applicants (LDCS 12000/2014, LDCS 13000/2014, LDCS 14000/2014, LDCS 15000/2014, LDCS 20000/2014 and LDCS 21000/2014 Attendance of William Lee & Associates, for the 1st respondent, was excused (LDCS 12000/2014) Mr Patrick FUNG SC and Ms Nancy NGAI, instructed by Lo & Lo, for the 2nd respondent (LDCS 12000/2014, LDCS 13000/2014 and LDCS 14000/2014) Attendance of K B Chau & Co, for the 1st respondent, was excused (LDCS 13000/2014) The 1st respondent was not represented and did not appear (LDCS 14000/2014) Mr Patrick FUNG SC and Ms Nancy NGAI, instructed by Lo & Lo, for the 1st , 2nd and 3rd respondents (LDCS 15000/2014) Mr LAM Chin Ching Gary instructed by Chui & Lau, for the 1st to 8th respondents (LDCS 20000/2014) Mr Vincent LUNG and Ms Candy TANG instructed by T K Tsui & Co, for the 1st and 2nd respondents (LDCS 21000/2014) Attendance of Li, Wong, Lam & W I Cheung, for the 3rd respondent was excused (LDCS21000/2014) [1] Occupation Permit No. 75 dated 10 February 1956 covered “Chinese houses at No 913 to 935 Canton Road”. However, No 913-923 Canton Road is now being occupied by a newer composite building known as Shun Cheong Mansion which had been there from as early as 1989: see the Plan entitled “Resumption and Repair of Private Street Kam Fong Street and Scavenging Lanes within Kowloon Marine Lot No 47 under Roads (Works, Use and Compensation) Ordinance (Chapter 370)” (“Cap 370 plan”) which bore a date of 5 January 1989. This Cap 370 plan is attached to the valuation report of each application. On the other hand, according to the Building Plan approved by the Building Authority (Reference No 2/4220/54) (Bundle D/1052), the approved plan covered 18 tenement buildings (9 pairs) from No. 913–947 Canton Road. From the approved plan, the buildings then intended to be built upon No.913 to 923 were of similar design to the 6 pairs of buildings the subjects of the present applications. By comparing the said approved building plan with the Cap 370 plan, the buildings at No. 913–923 Canton Road then appeared is very different from what is currently there. The other Occupation Permit No. 122 dated 22 March 1956 covered “6 Chinese houses at Nos.937-947 Canton Road”. [2] Section 3(2)(a) says that section 3(1) may cover 2 or more lots while 3(2)(b) for 2 or more lots connected by a staircase intended for common use. In a 3(2)(a) scenario, the majority needs to own not less than the prescribed percentage (80% or 90% depending on the age) of undivided shares in each lot it put in an application. For 3(2)(b), the overall average of undivided shares owned by the majority for the lots on which the buildings straddle should not be less than the prescribed percentage (i.e. 80% or 90% depending on the age). [3] See the companies search at Bundle B1/229-244 [4] R1 in CS-12 is represented by William Lee & Associates; R1 in CS-13 is represented by K B Chau & Co and R3 in CS-21 are represented by Li, Wong, Lam & WI Cheung [5] i.e. CS-12, CS-13, CS-14 and CS-15 [6] For the agreed issues see §15 below [7] See §§5 and 6 of the 2nd Affirmation of Janet Chan filed on behalf of R2 in CS-12 [8] See §8 of the Affirmation of Ho Wing Hang affirmed on 13 January 2015 (Bundle B1/268) [9] (Bundle B1/268, §9) [10] The exact wordings of the agreed proposition/common ground are as follows: “The greater the number of lots (i.e. the subjects of the 6 applications in the 6 Actions) to be included in one single sale, the greater will be the redevelopment potential of such lots and the higher the redevelopment value of such lots and, hence, the higher the reserve price for the sale of the aforesaid lots which in turn will result in more compensation for the Respondents in the 6 Actions in the sale of their properties pursuant to an order/orders for compulsory sale sought by First Kind Limited and/or All Bright Hong Kong Investments Limited (the Applicants in the 6 Actions).” [11] It will be inconceivable that only one lot will be directed to be sold because there are 2 lots comprised in each application and on each lot there stands one building which is connected to the other one by 2 common staircases. [12] The 3 teams of minorities do not ask for hearing of the 6 Applications one after the other. [13] (2005) 8 HKCFAR 578 [14] (2011) 14 HKCFAR 497 [15] [2014] 5 HKLRD 534 [16] For details of issues see §15 above. [17] [1994] 2 HKC 197 [18] This proposition is accepted by Mr Fung SC and Ms Ngai: see §7 of their reply submission dated 22 July 2015 [19] [2004] 2 HKLRD 856 [20] [2014] 4 HKC 364 [21] (unreported) LDCS20000, 12 September 2012 [22] [2014] 1 HKLRD 286 [23] (unreported) LDCS28000/2012, 29 November 2013 [24] (unreported) LDCS19000 of 2010, 25 November 2011 [25] (unreported) LDCS19000 of 2012, 18 June 2013 [26] [2014] 4 HKC 364 [27] [2004] 2 HKLRD 855 [28] (2005) 8 HKCFAR 578 [29] This issue was not argued when it went back to the Tribunal. [30] See Bond Star Development Limited v Capital Well Limited (unreported) LDCS2000/2001 20 April 2006 [31] See §§12 and 19 of Bond Star (20 April 2006) [32] Thus it cannot possibly an application by virtue of section 3(2)(a) of the LCSRO. [33] See §8 of Supergoal, and the threshold for the application was 80% because the buildings were over 50 years’ old. [34] [2002] 1 HKLRD 308 [35] See §65 of Supergoal [36] See §§129, 132 and 136 [37] (unreported) LDCS28000/2012 29 November 2013. There were in fact 2 subsequent decisions made in Many Gain and can be distinguished as Many Gain (No.2) (unreported) LDCS28000/2012 29 May 2014 and Many Gain (No.3) (unreported) LDCS28000/2012, 18 June 2014. [38] (unreported) LDCS28000/2012, 29 May 2014 [39] (unreported) LDCS28000/2012, 18 June 2014 [40] Section 4(2)(b) of LCSRO provides that no order for sale shall be made unless the Tribunal is satisfied that the applicant has taken reasonable steps to acquire all the undivided shares in the lot the subject of the application. [41] As such there are a total of 6 unreported cases with the same applicants, i.e. Day Bright & Others. In chronological orders they are: (i) Day Bright & others v Man Shiu Investment Co Ltd & others (unreported), LDCS15000, 3/4/2013; (ii) Day Bright & others v The Personal Representatives of Wongbing (Deceased) & others (unreported), LDCS16000, 6/9/2013; (iii) Day Bright & others v Choi Pak Ling & others [2014] 4 HKC 364; (iv) Day Bright & others v Wong Sai Mui & others (unreported), LDCS21000, 21/3/2014; (v) Day Bright & others v U Ion Fai & others (unreported), LDCS12000, 26/3/2013; and (vi) Day Bright & others v Chow Bowen Chun-sing & others (unreported), LDCS20000, 7/5/2013. The Day Bright referred to in this decision is in fact the 3rd decision involving the same applicants but different respondents. [42] [2014] 4 HKC 364, the 3rd Day Bright referred to in Note 41 above [43] [2014] 4 HKC 364, the 3rd Day Bright referred to in Note 41 above [44] [2014] 4 HKC 364, the 3rd Day Bright referred to in Note 41 above [45] See §31 above [46] Section 4(2)(a) refers to the “age and condition” tests, and section 4(2)(b) refers to the reasonable step test. [47] Section 4(1)(b)(i) states “…making an order that all the undivided shares in the lot the subject of the application be sold…” (emphasis added) [48] See §57 of Super Fortune [49] (unreported) LDSC3000/2005, 26 February 2007 [50] From the decision of Inland Revenue Commissioners v Clay [1914] 3 KB 466 [51] (unreported) LDCS19000 of 2010, 25 November 2011 [52] Golden Bay [1994] 2 HKC 197 at 198F [53] There is no mention what the “joint value’ was in Golden Bay but presumably, judging from the decision, it was on an amalgamated site basis, and each lot was to share ratably according to a ratio set out in the direction. [54] In Golden Bay there were 2 sets of directions but in the end it was expected there would be 4 sets of orders relating to the 4 lots to be sold together as if they constitute a single lot. [55] See page 200BC of 197 [1994] 2 HKC [56] For the terms of the provision please refers to §53 above. [57] Golden Bay Investment [1994] 2 HKC 197 at 199F [58] See §76 below [59] See §53 above for the provision of section 4(6)(c) of LSCRO [60] Her Closing Submission §6.6 refers. Presumably Ms Ngai was saying amendment of the Application to become two, and then consolidating the two to be heard together.. [61] See [1994] 2 HKC 197 at 199F-G [62] (unreported) HCA 301 & 569/2005, 3 February 2006, [2006] HKCU 221 [63] See §82 above. [64] Appendices IV and V in each of the report [65] Appendices VI and VII in each of the report [66] (unreported) LDCS1000/2015, 27 November 2015 [67] (unreported) LDCS 5000/2013 and LDCS6000/2013 (Consolidated), 12 June 2015 [68] The buildings were of 57 years old when the 2 applications were lodged, and therefore the threshold percentage is 80%. |
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