Wellcity Development Ltd and Others v. Mak Chun Fu and Others

LDCS 22000/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION

NO 22000 OF 2014

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BETWEEN

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D E C I S I O N

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1.By a written judgment dated 28 April 2017 (“the said Judgment”) this Tribunal ordered, inter alia, sale of all undivided shares of and in the Lot on which Hoi Hing Building[1] (“Building”) stands by auction for the purpose of redevelopment pursuant to the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“Ordinance”). A reserve price for the auction was also set. This is the hearing of the 2^nd Respondent’s (“R2”) summons of 23 May 2017 for leave to appeal to the Court of Appeal (“CA”) and stay of execution of the Tribunal’s orders.

2.Originally, because of the alleged unavailability of R2 in June and July 2017 the hearing of the said summons was fixed to be heard on 18 August 2017. However, there is always a likelihood that the auction will take place soon after any order for sale is made. In order that any staying order, if considers appropriate, would not be defeated by prior execution of the sale order, this Tribunal, out of its own motion, proposed to bring forward the hearing to this afternoon. This was eventually acceded to by the Applicants and R2 with proper notice to R7(1). Our worry proves to be justified. We were told this afternoon that an auction had been scheduled to take place next Tuesday, i.e. 13 June 2017. R2’s hearing has become urgent. 

Discussion

3.R2 together with R7(1) are the only active defending respondents. The Lot and the Building are assigned 278 undivided shares. R2 owns 1 such share occupying Flat A2 on the 2^nd floor, amounting to 0.36% of the entire interest in the Lot. R7(1) is a co-owner of another residential unit and his interest is 78.5% of 1 undivided share, i.e. 0.28% of the entire Lot. R7(2) and R5 are missing owners. They respectively own 0.08% and 0.36% of the entire interest in the Lot. The Applicants hold 275 undivided shares (i.e. 98.92%) of and in the Lot and the Building at the time of trial. Details of the ownership of the Lot and Building are set out in [2] to [12] of the said Judgment.

4.R7(1) did not oppose an order for sale to be made under the Ordinance for redevelopment of the Lot. Despite the title problem concerning R7’s unit, R7(1) would like to have the full amount in respect of that unit. He also wants his entitlement to take into account of the gross floor area of his unit. He also expresses that he would like the auction to take place as soon as possible.

5.R2 put up various grounds of opposition which are more particularly set out in [17] of the said Judgment. Almost all are grounded on Basic Law. He also appointed his own valuer, one Ms Sat, to produce a valuation of the redevelopment value (“RDV”) of the Lot at $1,689 million. It was accepted by the Applicants. The reasons for the Tribunal’s decision have been set out in the said Judgment and the Tribunal does not intend to repeat the same herein. Suffice it to say that all R2’s grounds of opposition are not accepted by the Tribunal.

6.R2 set out his grounds of appeal in his affirmation affirmed on 23 May 2017 filed in support of his present application. So far as can be discerned from the said affirmation, they can broadly be grouped under the following heads:

i)  The Ordinance offends Article 105 (“BL105”) of the Basic Law in that the Chinese version, which is the more authentic version than the English one if there is discrepancy[2], employs the words “徵用” (Punti transliteration: jing¹yung⁵ or Putunghua transliteration: zhengyong). These words, according to R2, have the dictionary meaning of “taking away for use by the Government for a public purpose i.e. for public use (公用)” instead of simply “deprivation of their property” in the English version. He relied on the respective definitions in《漢語大詞典》 “Hanyu Da Cidian, or literally, The Comprehensive Chinese Dictionary of Words” (1997) and 《辭海》 “Cihai, or literally, Encyclopedic Dictionary of Chinese” (1989) regarding jing¹yung⁵ (徵用). Now the Applicants, being private developers, relied on the Ordinance for redevelopment for commercial gain. It is obviously not for public use. The Ordinance is therefore BL105 non-compliant;

ii) R2 was subject to unequal treatment under the present system when land is being resumed by different bodies, namely, the Government and private developers. The Ordinance therefore offends Article 25 and Article 39 of the Basic Law (respectively, “BL25” and “BL39”)[3]; and

iii) The compensation provided under the said Ordinance is neither sufficient nor freely convertible, thus offending BL105[4].

7.In the Tribunal’s judgment, all the above grounds have been ventilated by R2 at length at trial, though with some dress-up and further elaborations now, and have been dealt with in the said Judgment.

R2’s First Broad Ground

8.Regarding the first broad ground, R2 relied on the following 2 definitions of jing¹yung⁵ (徵用)to support his contention that BL105 only provides deprivation of private property right by Government:

i)  《漢語大詞典》 “Hanyu Da Cidian, or The Comprehensive Chinese Dictionary of Words” (1997):-

“國家依法將個人或集體所有的土地或其他生產資料收歸公用” (meaning: The State resumes land or other production resources from private individuals or aggregate of individuals for public use according to laws)

ii)   《辭海》“Cihai, or Encyclopedic Dictionary of Chinese” (1989)

“國家依法將土地或其他生產資料收作公用的措施” (meaning: a measure which the State adopts to resume land or other production resources for public use according to laws)

In other words, no one, except the Government, can be allowed under our constitution to deprive private property rights and only for public use. So it seems that according to R2, private property right is absolute.

9.Although R2 did not rely on any dictionary definitions to support his opposition at trial, this first broad ground is in fact the same as one of his grounds raised at trial: see [17(i)] of the said Judgment[5]. It is noted that at trial he relied on 2 Articles of the Basic Law, namely, Article 6 (“BL6”) and BL105. In the present appeal it seems that his argument is only restricted to BL105. No mention is made of BL6.

10.For ease of discussion these 2 Articles are reproduced below:

Article 6

“The Hong Kong Special Administrative Region shall protect the right of private ownership of property in accordance with law.”

Article 105

“The Hong Kong Special Administrative Region shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property.

Such compensation shall correspond to the real value of the    property concerned at the time and shall be freely   convertible and paid without undue delay.

The ownership of enterprise and the investments from    outside the Region shall be protected by law.”

11.His contentions at trial concerning BL6 and BL105 were dealt with in [22] to [39] of the said Judgment. This Tribunal basically relied on the Court of Final Appeal (“CFA”) decisions of Capital Well Ltd v Bond Star Development Ltd[6] and Sin Ho Yuen v Fineway Properties Ltd[7], and the CA decision of Good Faith Properties Ltd v Cibean Development Ltd[8]. In the said 3 decisions the CFA and CA discussed protection of private property rights in the context of the Ordinance. Contrary to what was contended by R2, our higher courts came to the conclusion that private property right, particularly protected under BL6, can be overridden provided the strict requirements laid down in the Ordinance are complied with. All these 3 decisions are binding on the Tribunal. It is noted that in the present leave to appeal it is not R2’s case that these authorities have been wrongly decided. It is his case that BL105 is not the subject matter of appeal in each of the aforesaid CFA/CA decisions, and the decisions are therefore irrelevant to BL105[9].

12.It is true, as contended by R2, that BL105 is not the subject matter of the appeal in the aforesaid authorities relied on by the Tribunal in the said Judgment. However, it is also true that our higher courts have in fact of its own motion discussed the protection of private property right in the context of constitutionally entrenched/protected right under the Basic Law. In Sin Ho Yuen, it was considered that private property rights as set out in BL6 and BL105 of the Basic Law can be overridden when the protection afforded by the scheme of the Ordinance is carried out: see [25] of Sin Ho Yuen. Private property right under BL6 not being absolute and can be overridden with justifications was accepted by the CA in Good Faith: see [11] of Good Faith, per Lam VP. It is also considered that the Ordinance provides a means for the majority owner(s) to override the will of the minority owner by releasing their jointly owned property to be sold for redevelopment: see [11], [13] and [33] of Good Faith, and by paying them a fair and reasonable compensation: see [33] of Good Faith. If private property right were absolute, a minority owner would be able to obstruct any proposed redevelopment by a majority owner. A “ransom price” can be extracted from the majority. This is exactly what Ribeiro PJ said in [21] of Capital Well that the Ordinance seeks to avoid.

13.As stated in the said authorities, the land subject to a compulsory sale order is for redevelopment purpose. It must satisfy the Tribunal on the age and state of repair tests referred to in the Ordinance. R2 in fact raises no objection to the facts that the age and state of repair of the Building are such that it deserves to be pulled down for redevelopment. The gist of his overall opposition is on the price to be paid by the Applicants to him. In his supporting affirmation, he does not elaborate on the meaning of “public use (公用)”. As analyzed in Capital Well by Ribeiro PJ, the Ordinance aims to facilitate urban renewal in respect of old and dilapidated buildings by assisting private developers[10]. It is the Tribunal’s judgment that redevelopment of these old and dilapidated buildings serves the purposes of urban renewal and removal of potential hazards caused by dangerous and rundown buildings for the benefit of the public at large. It satisfies the broader meaning of “for public use”. If the restrictive meaning of BL105 as contended by R2 were accepted by the CA and/or CFA, we believe at least the principles would have been set out in these decisions. The suggestion that BL105 is only applicable to Government, at least, does not sit well with [25] of Sin Ho Yuen (supra) which expressly referred to rights protected under BL105 when the learned Litton PJ discussed protection of minority interest under the Ordinance.

14.We notice the dictionary definition raised by R2 may create controversy. In fact, this has been noted in [33] of Good Faith (supra) by the learned Lam V-P. In the said paragraph the learned Vice President stated:

“At the same time, it must be recognised that in common with compulsory acquisition by the government or other public authorities, a sale ordered by the Tribunal under the LCSRO is the compulsory deprivation of the minority owner’s private ownership of property.  Though there could be debate as to the applicability of Article 105 of the Basic Law in light of the expression “徵用” in the Chinese version, there is no doubt that Article 6 of the Basic Law is engaged. As observed by Litton NPJ in Sin Ho Yuen v Fineway Properties Ltd, supra, the deprivation    of private ownership without fair and reasonable compensation is an infringement of the constitutional right of the minority owner. Thus, even though Mr Mok sought to argue otherwise, we have no doubt that the principle of equivalence is as much engaged in LCSRO proceedings as    in resumption cases notwithstanding the absence of specific provisions like ss 6(2A),8(4) and 10(2)(e)(ii) of the Lands Resumption Ordinance.” (Emphasis added)

15.We respectfully share the Vice President’s view stated above. We consider that the Tribunal needs not address the issue of discrepancy between the Chinese and English versions of BL105 in this application. It is because, as observed by the learned Lam V-P above, BL6 is obviously engaged. So even assuming (without accepting and for the sake of discussion only) BL105 can only be invoked by the Government, BL6 remains relevant but it is not absolute constitutional rights that cannot be overridden. Both Good Faith[11] and Sin Ho Yuen[12] considered private property rights (protected under BL6) not absolute and can be overridden if the proper safeguards prescribed in the Ordinance have been satisfied, and a fair and reasonable compensation paid.

16.As this Tribunal has pointed out in the said Judgment, in the recent CFA decision of Hysan Development Co Ltd & Ors v Town Planning Board[13], the CFA did not consider the rights created in BL6 and BL105 absolute: see [38] of the said Judgment relying, inter alia, [43] and [44] of Hysan. In fact, Article 39(2) (“BL39(2)”) of the Basic Law permits, though in a negative way, limits to be created on rights of Hong Kong residents. BL39 provides:

“(1) The provisions of the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and international labour conventions as applied to Hong Kong shall remain in force and shall be implemented through the laws of the Hong Kong Special Administrative Region.

(2)The rights and freedoms enjoyed by Hong Kong residents shall not be restricted unless as prescribed by law. Such restrictions shall not contravene the provisions of the preceding paragraph of this Article.”

(emphasis added)

17.In order to examine whether the restrictions imposed on the constitutionally rights under the Ordinance are lawful, Hysan proposed a 4-stage proportionality test. Since the higher courts have in the aforementioned 3 cases referred to in the said Judgment dealt with this constitutional issue of private property rights and do not come to the conclusion that the Ordinance offends either BL6 or BL105 or both, we are satisfied that the Ordinance can survive the proportionality test propounded in Hysan.

18.We are of the view that R2’s contention concerning BL105 in the present leave to appeal application cannot help him.

R2’s Second Broad Ground

19.R2 stresses that BL25, which provides for all Hong Kong residents shall be equal before the law, entitles him to equal compensation for resumption of lands whether by Government or private developers. He now receives less under the Ordinance than if the redevelopment is Urban Renewal Authority (“URA”) or Government initiated. The Ordinance is, according to him, Basic Law non-compliant.

20.Exactly the same argument was raised at trial. It was basically covered in [40] to [58] of the said judgment. After reading R2’s argument in the supporting affirmation, it is obvious that R2 does not accept the Tribunal’s analysis and seeks to re-argue his case again by including reference to cases such as HCAL109/2014 and FACV22-23/2008. He also raises the issue that the discrepancy in the compensation schemes between the Land Resumption Ordinance, Cap 124 (“LRO”) and the Ordinance is “有違公眾合理的期望”, meaning “against the legitimate expectation of the public”.

21.It is R2’s case that what would have been received, no matter offered by the developer prior to trial or after the ordered auction, would be insufficient for him to buy another unit of similar size in the same district. As stated in Good Faith (supra) and repeated in [34] and [47] of the said Judgment, the principle of equivalence is the compensation yardstick of the Ordinance. It serves to compensate the real value of the property deprived, and was protected under BL105. A corollary to this principle is that a claimant is not entitled to receive more[14]. It was discussed and upheld in a number of CFA decisions, including Director of Lands v Yin Shuen Enterprises Ltd & Another[15], and the same was discussed and referred to in [46] and [49] of the said Judgment.

22.In Good Faith (supra), it was considered by the CA that the compensation scheme of the LRO and that of the Ordinance adopt the same principle of equivalence when property of individual is deprived. The same was discussed in the said Judgment[16], Therefore the compensation for schemes initiated by the Government and private developers are not, as suggested by R2, based on different principles. They are the same. Again, as discussed in the said Judgment, the 7-year formula is only a policy, not law.  There is an ex-gratia paid by the URA with a view to, perhaps, expedite redevelopment. There is also nothing in the Ordinance which prevents payment of a premium, on the top of any sum based on the statutory formula, by the developers with a view to speeding up the acquisition process. The principle of law regarding compensation payable in both Government and private developer initiated resumptions for redevelopment remains the principle of equivalence. Those whose properties have deprived are treated the same and are equal before the law.

23.R2 is complaining that with the compensation payable under the Ordinance he would be unable to buy another unit of the same or similar size in the same district. However, there is no logical basis to say that a 50-year old unit, with redevelopment potential factored in, should be equal in value to that of a 7-year old unit of the same size in the same district. Neither can R2 refer this Tribunal to any legal principle(s) that justify his case. In the circumstances, there is no basis to say that BL25 is offended. As this Tribunal has stated[17], R2 is simply not getting more. There should not be any legitimate expectation for anyone to get more than one is entitled to.

24.It is to be emphasized that in the present leave to appeal application there is no suggestion whatsoever from R2 that the valuation of Ms Sat, his appointed expert whose valuation has been accepted by the Applicants, is wrong. Neither is there any evidence to suggest that the reserve price no longer up-to-date. In the circumstances, the value of R2’s unit derived from the agreed professional valuation without any premium or ex-gratia remains the real value of the property deprived. It is the value which BL6 and BL105 seek to protect, even upon satisfaction of the 4-stage proportionality test.

25.HCAL 109/2014 is the case of Leung Kwok Hung aka “Long Hair” and Commissioner of Correctional Service[18]. It is a judicial review instituted by a well-known politician in Hong Kong against the decision of the Commissioner of Correctional Service to cut his long hair when he was held in custody upon conviction. It is the Commissioner’s Standing Order to keep all male prisoners’ hair cut sufficiently close. There is, however, no similar requirement for female prisoners.  It was held by Au J, inter alia, that the Order was bad for sex discrimination and was inconsistent with BL25.

26.FACV22-23/2008 is the case of Leung Ka Lau & Others v The Hospital Authority[19]. In that case three doctors, on behalf of another 162 doctors working for the Hospital Authority (“HA”) in a representative action, sued the HA for overtime, or in default, payment in lieu, additional overtime payment, rest days and statutory holidays or payments in lieu. The CFA dismissed the doctors’ claims for overtime and additional overtime but accepted their claims for rest days and statutory holidays or damages in lieu.

27.In the Tribunal’s judgment, Leung Kwok Hung aka “Long Hair” (supra) has its own facts. It adds nothing more than re-affirming all residents of Hong Kong shall be equal before the law.

28.Further, after reading R2’s affirmation, this Tribunal considers R2 has misconceived what has been discussed in Leung Ka Lau (supra). In that case it was argued by the HA that when a doctor was on-call he might not in fact called upon to work. He might be able to engage in his own activities without interruption and therefore suffered no loss. This argument is regarded fallacious by the CFA in that there is actual loss of a rest day or holiday as the doctors have to make themselves available for work for that day. An on-call doctor is not free to do whatever he wanted to do that day. The fact that eventually he has actually worked the whole day, or only for an hour or even does not work is beside the point. Missing a rest day is a real and substantial loss and cannot be compensated for by nominal damages. The damage awarded should not therefore be restricted to loss of work for the actual hours of work, or nominal damage if he simply did not work.

29.So far as can be discerned from R2’s argument relying on Leung Ka Lau (supra), it is his case that minority should be compensated a unit of similar size in the same district following acquisition of his unit by the developer[20], just like doctors to be compensated for a whole day even if only deprived for an hour. Obviously, Leung Ka Lau (supra), properly understood, cannot be authority to support R2’s said contention.

R2’s Third Broad Ground

30.This ground of appeal overlaps with his second ground. Those parts which have been discussed in the preceding paragraphs will not be repeated under this head again. R2 relied on the view expressed by Litton PJ in Sin Ho Yuen (supra) on valuation being an inexact science. He is probably referring to [29] of the said decision. He, however, went on to rely on that paragraph and came to his views that the valuation arrived at by the expert was insufficient for him to buy a unit “not too far away and of similar size”, thus not convertible because his old unit in Taikoktsui cannot be converted to a new unit of similar size in the same district [21]. BL105 is therefore no complied with.

31.It appears that R2 has totally misconceived what has been said in [29] of Sin Ho Yuen (supra). For sake of discussion [29] is repeated as follow:

“29. Valuation is at best an inexact science. No two experts can be expected to agree 100% on the matter, however well-intentioned.  It is based on a comparison with other transactions within the “locality”, not too distant in time and not too dissimilar in size from the subject property.  Adjustments of a more or less arbitrary nature have therefore to be made to render those transactions “comparable”: which by definition they are not, if 100% perfection is sought. It would therefore be an unwise tribunal which allows counsel to cross examine the “experts” too closely and lengthily on such matters.  We do not know if this is what occurred in this case to account for the extraordinary length of time taken to resolve this one issue.”

32.Obviously, His Lordship was then talking about the nature of “comparable” for the purpose of doing valuation, which is an inexact science. He was then criticizing the trial taking too long to finish. He considered transactions qualified as comparable being within the locality, transacted not too distant in time and are not too dissimilar in size. Adjustments of more or less an arbitrary nature would then be made. As such, there was no need to subject the experts to lengthy cross-examination, thus the trial could be cut short. It does not mean that the product of the valuation exercise should result in compensation good enough to purchase a unit of similar size and located in the same locality. It follows his argument about convertibility within the same district is misconceived and totally without basis. Convertibility, in the Tribunal’s judgment, refers to the consideration paid to the person whose property has been deprived. Compensation in the form of legal tender is, prima facie, freely convertible. There is no suggestion that after the auction, the trustees holding the sale proceeds will be paying R2 in a form other than money.

33.Valuation, though an inexact science, remains the best evidence relied on by the Tribunal to come up with the reserve price for the auction. This Tribunal would like to emphasize that it is not R2’s case that Ms Sat’s valuation, which was accepted by the Applicants, is wrong. He simply puts in no evidence in the present application to challenge the valuation evidence being wrong or not up-to-date.

Conclusion

34.Section 11(2) of the Lands Tribunal Ordinance, Cap 17 (“LTO”) provides that any appeal to the CA against a decision of the Tribunal shall be on the ground that such decision is erroneous in point of law. This Tribunal accepts that the issues now sought to be appealed concern points of law. However, in the Tribunal’s judgment they have all been answered by both CA and CFA decisions which are binding on this Tribunal, and are considered settled. This Tribunal would like to reiterate that it is also not R2’s case that the aforesaid CA and CFA decisions have been wrongly decided. Section 11AA(6) of LTO:

“Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that-

(a) the appeal has a reasonable prospect of success; or

(b)  there is some other reason in the interest of justice why the appeal should be heard.”

35.By reason of the discussion aforesaid, this Tribunal does not consider R2 having a reasonable prospect of success in his intended appeal. Further, we do not consider R2 has a good case under the “interest of justice” limb either. It is because the Basic Law issues so raised have, as stated in the said Judgment, been visited by the CA and CFA on a number of occasions. It is also not R2’s case that Good Faith (supra), Sin Ho Yuen (supra) and Capital Well (supra) have been wrongly decided. Further, R2 only raised issues concerning BL105 in the present application. The decisions concerning BL6 made in these cases and applied by the Tribunal are not challenged by him. We are afraid that it will be unlikely that the CA will entertain R2’s application under the “interest of justice” limb as it is not the first time that such issues are considered by the CA/CFA: see paragraph 59/2A/4 Hong Kong Civil Procedure 2017 (Vol 1). Accordingly, we dismiss R2’s application for leave to appeal.

36.Since we have dismissed R2’s leave to appeal application on the ground the prospect of success is slim, there is no reason to grant a stay of execution of the orders made in the said Judgment. We therefore dismiss R2’s said application accordingly.

37.Concerning costs, R2 has the benefit of the said judgment to decide whether to lodge the leave to appeal. Further, he is basically repeating his argument which has all been rejected. We consider the situation will be different from when he was defending an application under the Ordinance. We consider the usual rule of costs to follow the event should come into play. We therefore order that R2 do pay the costs of the Applicants and R7(1) in the application, with certificate for counsel, and be assessed on the High Court scale. The Applicants’ costs are now assessed by summary assessment, upon request of parties, at $76,120. R7(1) indicates that he will not be claiming against R2 for costs of this application.

Ms Gekko LAN, instructed by Zhong Lun Law Firm, for the 1^st to 3^rd applicants

The 2^nd respondent appeared in person

The 5^th respondent was not represented and did not appear

The 1^st named 7^th respondent appeared in person

The 2^nd named 7^th respondent was not represented and did not appear