Able Luck Development Ltd and Others v. Pawling Ltd

CAMP 435/2022

[2023] HKCA 175

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 435 OF 2022

(ON AN INTENDED APPEAL FROM LAND COMPULSORY MAIN

APPLICATION NO 11000 OF 2018)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.This is the 4^th Respondent’s renewed application for leave to appeal against the judgment of Deputy District Judge Michelle Soong and Mr Alex Ng (“the Tribunal”) dated 22 April 2022 ordering, inter alia, that all the undivided shares in Kun Tong Inland Lot No 15 (“the Lot”) be sold by way of public auction for the purposes of redevelopment of the Lot pursuant to the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”).

2.Having considered the 4^th Respondent’s Written Statement in support of the application for leave to appeal dated 21 October 2022 and the Applicants’ Written Statement in opposition dated 10 November 2022, as well as the papers before us, we consider it appropriate to determine this leave application on the basis of written submissions only without an oral hearing pursuant to Order 59, rule 2A(5)(a) of the Rules of the High Court, Cap 4A.

BASIC FACTS

(i)  The Lot, the Building and the Parties

3.There is currently erected upon the Lot a building known as Yip Fat Factory Building, No 77 Hoi Yuen Road, Kowloon (“the Building”).

4.The Building is a 15-storey industrial building served by 3 cargo lifts and 5 common staircases. The occupation permit of the Building, No NK 11/78, was issued on 2 February 1978, granting permission to occupy:

(1)  the ground floor as car park, 1 workshop, 1 transformer room and 1 switch room for non-domestic use;

(2)  the 1^st floor as 2 workshops for non-domestic use; and

(3)  the 2^nd to 14^th floors as 4 workshops and 1 store room per floor for non-domestic use.

5.According to the approved building plans of the Building, there are 1 industrial unit, 13 private car parking spaces and 9 lorry parking spaces on the ground floor, 2 industrial units on the 1^st floor, and 4 industrial units and a store room on each of the 2^nd to 14^th floors.

6.The Lot together with the Building has been divided into 1,000 undivided shares, which have been allocated to various parts of the Building.

7.At the time of the filing of the Notice of Application below on 23 April 2018, the Applicants together owned 84% (840 out of the total of 1,000) of all the undivided shares in the Lot. The Applicants have since acquired a further 13.2%, and now own 97.2%, of all the undivided shares in the Lot.

8.The 4^th Respondent is the registered owner of Unit C and Unit D on the 8^th Floor of the Building, and holds 2.8% of all the undivided shares in the Lot.

(ii)  The zoning of the Lot

9.The Lot previously fell within an “Industrial” (“I”) zone in the Approved Kwun Tong (South) Outline Zoning Plan No S/K14S/8 (“the Approved OZP 8”), which was approved by the Chief Executive in Counsel under s 9(1)(a) of the Town Planning Ordinance (“the TPO”), Cap 131, on 10 July 2001.

10.The planning intention of the “I” zone is -

“to provide for industrial developments including general industrial uses, service trades and warehouses. Certain industrial uses such as concrete batching plant and motor-vehicle assembly plant will require planning permission from the Board”.

11.In January 2001, the Town Planning Board (“the TPB”) first introduced the “Other Specified Uses” annotated “Business” (“OU(B)”) zone for the purpose of allowing “maximum flexibility in the use of existing industrial and industrial-office buildings as well as in the development of new buildings for both commercial and clean industrial uses”. The planning intention of the “OU(B)” zone is “primarily for general employment uses, and a mix of non-polluting industrial, office and other commercial uses will be permitted in new ‘business’ developments”[1].

12.On 19 October 2001, the TPB published the Draft Kwun Tong (South) Outline Zoning Plan No S/K14S/9 (“the Draft OZP 9”) in the Gazette (G N 6394). The amendment to the Approved OZP 8 relevant for the present purpose was the rezoning of all industrial sites in Kwun Tong Industrial Area, including the Lot, from “I” to “OU(B)”. From then on, industrial zones ceased to exist in Kwun Tong Industrial Area.

13.As mentioned in the Explanatory Statement to the Draft OZP 9, the planning intention of the “OU(B)” zone is for -

“general employment uses. Under this zoning, a mix of information technology and telecommunications industries, non-polluting industrial, office and other commercial uses will be permitted as of right. However, in order to ensure that the concerns on fire safety and environmental impacts are properly addressed, only less fire hazard-prone office use that would not involve direct provision of customer services or goods to the general public will be permitted as of right in existing industrial and industrial-office (I-O) buildings within this zone…”.

14.The outline zoning plan currently in force in relation to the Lot is the Approved Kwun Tong (South) Outline Zoning Plan No S/K14S/22 (“the Approved OZP 22”), which was gazetted under s 9(1)(a) of the TPO on 9 November 2018. Under the Approved OZP 22, the Lot remains zoned “OU(B)”. The planning intention of this zone, as stated in the Schedule of Uses to the Approved OZP 22, is as follows:

“This zone is intended primarily for general business uses. A mix of information technology and telecommunications industries, non-polluting industrial, office and other commercial uses are always permitted in new ‘business’ buildings. Less fire hazard-prone office use that would not involve direct provision of customer services or goods to the general public is always permitted in existing industrial or industrial-office buildings.”

(iii)  The reduction of the application threshold to 80%

15.Under s 3(1) of the Ordinance, the ownership threshold normally required for making an application to the Lands Tribunal for compulsory sale of a lot for the purpose of redevelopment is “not less than 90%” of the undivided shares in the Lot.

16.However, under s 3(5) of the Ordinance, the Chief Executive in Council may, by notice in the Gazette, specify a percentage lower than the percentage mentioned in subsection (1) in respect of a lot belonging to a class of lots specified in the notice.

17.By the Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice (“the Notice”) published in the Gazette in January 2010 (LN 6 of 2010), the Chief Executive in Council exercised his power under s 3(5) of the Ordinance to specify a lower ownership threshold of 80% in respect of, inter alia, the following class of lot (hereinafter referred to as “the Old Industrial Building Class”), namely:

“a lot that is not located within an industrial zone and each of the buildings erected on the lot -

(i) is an industrial building; and

(ii) was issued with an occupation permit at least 30 years before the relevant date” (see s 4(1)(c) of the Notice).

18.For the purpose of the Notice:

(1)  the expression “industrial zone” is defined to mean “a zone that is set apart for industrial use in a draft plan prepared by the Town Planning Board or approved by the Chief Executive in Council under the Town Planning Ordinance”; and

(2)  the expression “relevant date”, in relation to a lot in respect of which an application is made under section 3(1) of the Ordinance, is defined to mean “the date of the application”. (see s 2 of the Notice).

19.The Notice came into operation on 1 April 2010.

(iv)  The Application

20.On 23 April 2018, the Applicants made an application for compulsory sale of the Lot under s 3(1) of the Ordinance. As earlier mentioned, at the time of the filing of the Notice of Application, the Applicants owned 84% of all the undivided shares in the Lot.

21.Originally, there were 8 respondents to the Application. Since the commencement of the proceedings, the Applicants have purchased the undivided shares of the 1^st to 3^rd and 5^th to 8^th Respondents (thereby increasing the Applicants’ total undivided shares in the Lot to 97.2%), leaving the 4^th Respondent, owning 2.8% of all the undivided shares in the Lot, as the only remaining respondent to the Application.

THE JUDGMENT

22.The Application was heard by the Tribunal in May and September 2021. At the hearing, the 4^th Respondent raised a variety of issues in opposition to the Application, including (i) the prerequisites on ownership for making the Application, and (ii) whether alternative options such as revitalization should be considered by the Tribunal.

23.On 22 April 2022, the Tribunal gave a written judgment (“the Judgment”) allowing the Application ([2022] HKLdT 17).

24.In relation to the issue of the prerequisites on ownership for making the Application, there was no dispute that the Building was an industrial building (§14 of the Judgment). Also, it could not be disputed that the occupation permit of the Building was issued more than 30 years before the date of the Application. The critical issue was whether the Lot was not located within an “industrial zone” so that the Applicants could take the advantage of the lower ownership threshold of 80% as prescribed by the Notice. The Tribunal held that the “OU(B)” zone within which the Lot fell was not an “industrial zone” within the meaning of the Notice, and thus the Applicants met the ownership threshold for making the Application. The Tribunal’s reasoning for coming to this conclusion was as follows:

“[33] The relevant LegCo Briefs clearly recount the history that with a view to releasing the potential of the precious land resources to meet the economic needs of Hong Kong and to avoid serious waster of such resources due to the existence of many vacant or under-utilized private flatted industrial buildings, the government has adopted a two-pronged approach to promote optimum use of our land resources: broadening the permissible uses in industrial buildings and rezoning surplus and suitable industrial land for non-industrial uses. In 2001, a new ‘OU(B)’ zone, which allows a mix of office, commercial and non-polluting industrial uses was introduced.

[34] But despite the large scale rezoning exercise and relaxation of uses of industrial buildings over the years, it was noted that not many owners of industrial buildings have responded by developing or converting their industrial buildings for higher value-added uses. It is specifically mentioned that Kwun Tong is one of such former industrial areas among the bulk of ‘OU(B)’ zone introduced in the rezoning exercise.

[35] The government considered that these planning gains can be materialized only upon redevelopment of the existing industrial buildings in those non-industrial zones. By the term ‘non-industrial zones’, the government obviously referred to or intended to cover those zones which became non-industrial after the rezoning exercise and the introduction of ‘OU(B)’.

[36] The government also observed that the hurdle of unifying multiple ownership of flatted factory buildings had hindered large scale redevelopment of the older industrial buildings in non-industrial zones. To tackle this problem, a package of measures was announced in the Chief Executive’s 2009-10 Policy Address, one of which was to lower the compulsory sale application threshold for the redevelopment of industrial buildings of 30 years of age or above, i.e. the introduction of Cap 545A reducing the application threshold from 90% to 80% undivided shares.

[37] R4’s contention that because the Lot is ‘OU(B)’ under which one of the permissible use is industrial, it should still be considered as set apart for ‘industrial zone’ and cannot benefit from the reduced threshold of 80% is, in our view, an indulgence to sophistry and an oblivion of the historical background and purpose of the rezoning exercise and the introduction of Cap 545A to reduce the ownership threshold. Such argument if accepted will undesirably counteract the tremendous efforts made over the years to utilize the valuable land resources to meet the needs of the society.

[38] Another argument of R4 is that the Lot cannot benefit from the reduced threshold of 80% because the subject building is an industrial building and there are many industrial buildings in the vicinity such that the Lot shall be treated as having been set apart for industrial use. Again, we do not see any merit in such a contention. It should come with no surprise to find industrial buildings in the locality of Kwun Tong. From the wording of the relevant provisions in Cap 545A, it is also plain that the existence of industrial buildings on the target lots is well within expectation. The suggestion that the mere existence of some industrial buildings in a lot shall render the reduction of ownership threshold to 80% inapplicable does not make any sense.

[39] R4’s further submits that the plain meaning of ‘industrial zone’ includes a zone which is set apart for industrial and other uses (such as the ‘OU(B)’ zone) because the phrase ‘a zone that is set apart for industrial use in a draft plan…’ in section 2 of Cap 545A does not contain the word ‘only’, and the insertion of the word “only” is contrary to the Hysan Development case where the Court of Final Appeal held that it was unwarranted to insert the word ‘only’ before the phrase ‘in accordance with law’ in that case.

…

[43] Even if we leave aside the rationale in Hysan Development for the time being and confine our mind to the superficial meaning of words for the sake of argument, our interpretation of section 2 of Cap 545A actually does not depend on inserting the word ‘only’ to the subject phrase as suggested by R4. It is actually not necessary to insert the word ‘only’ in order to arrive at the interpretation we adopt. The subject phrase is ‘a zone that is set apart for industrial use in a draft plan prepared by the Town Planning Board or approved by the Chief Executive in Council under the Town Planning Ordinance (Cap 131)’ and the Chinese version of which is ‘在根據《城市規劃條例》(第131章)由城市規劃委員會擬備的草圖或經行政長官會同行政會議核准的草圖中劃出作工業用途的地帶’. The words ‘set apart’ (「劃出」) means the carving out of a zone for certain use which term intrinsically bears the element of exclusiveness. One may also refer to Oxford Dictionaries which explain the phrasal verb ‘set apart’ as ‘to keep something for a special use or purpose’. Considering that the ‘subject’ being ‘set apart’ is a ‘zone’, it does not make sense to say that the ‘OU(B)’ zone which undisputedly allow a mix of office, commercial, and non-polluting industrial uses could be regarded as a zone ‘set apart’ for industrial use. The contention that the permission of some industrial uses in an ‘OU(B)’ zone would have the drastic effect of turning the ‘OU(B)’ zone into an industrial one, in our view, defies logic.

[44] R4 argues that the Lot shall be considered as within an industrial zone because the Conditions of Sale provides that no building shall be erected on the Lot except an industrial building. This argument is unpersuasive as it seeks to incorporate certain hand-picked contents of the Conditions of Sale into the definition of ‘industrial zone’ in section 2 of Cap 545A which is entirely without basis.

[45] By reasons of the above analyses, we rule that an ‘OU(B)’ zone shall not be considered or treated as an ‘industrial zone’ for the purpose of sections 2, 3 and 4(1)(c) of Cap 545A. We are satisfied that the applicants met the ownership threshold for filing an application for a compulsory sale order which is 80% undivided shares in the Lot.”

25.In relation to the issue of alternative options, in particular the option of revitalization raised by the 4^th Respondent, the Tribunal held that:

(1)  In determining a compulsory sale application, the Tribunal should not be concerned with the relative feasibility of redevelopment as compared with other options (§97 of the Judgment);

(2)  The Tribunal is not required to weigh the relative feasibility or benefits of redevelopment vis-à-vis revitalization or other options when considering whether an order for sale shall be made (§99 of the Judgment);

(3)  The Tribunal should instead focus on whether redevelopment is justified by reason of the age or state of repair of the building concerned. In the exercise, the Tribunal is not required to engage itself in weighing redevelopment against all other potential alternatives (such as conservation, revitalization, rehabilitation, urban renewal etc), nor is it obliged to satisfy itself that redevelopment is the best option among all possibilities before it could make an order for compulsory sale (§103 of the Judgment);

(4)  In any event, revitalization is not feasible in the present case because it requires the consent of all owners, but the Applicants do not agree to revitalizing the Building (§105 of the Judgment).

THE PRESENT APPLICATION FOR LEAVE TO APPEAL

26.The 4^th Respondent was not satisfied with the Judgment, and sought leave to appeal from the Tribunal. On 20 May 2022, the Tribunal gave a decision refusing to grant leave to appeal, holding that there was no reasonable prospect of success in the 4^th Respondent’s intended appeal, and there was no other reason in the interests of justice why the appeal should be heard ([2022] HKLdT 52).

27.By summons dated 21 October 2022 (“the Summons”) filed in the Court of Appeal, the 4^th Respondent renewed the application for leave to appeal. The 4^th Respondent’s Draft Notice of Appeal consists of 11 paragraphs, contending that:

(1)  §§1-9 of the Draft Notice of Appeal - the Tribunal erred in law in holding that the Lot is not located within an “industrial zone” within the meaning of the Notice (“the Zoning Ground”).

(2)  §§10-11 of the Draft Notice of Appeal - the Tribunal erred in law in holding that in an application for compulsory sale under the Ordinance, it should focus on whether redevelopment is justified by reason of the age or state of repair of the building concerned and is not required to engage itself in weighing redevelopment against all other potential alternatives (such as conservation, revitalisation, rehabilitation, urban renewal, etc), nor is it obliged to satisfy itself that redevelopment is the best option among all possibilities. The Tribunal further erred in law in taking into account an irrelevant consideration, namely, the fact that the consent of all owners is required for conservation, revitalization and rehabilitation. In any event, the fact of consent may well change if circumstances change and so little, if any, weight can be attached to it (“the Alternative Options Ground”).

DISCUSSION

28.By s 11(2) of the Lands Tribunal Ordinance, Cap 17, subject to s 11AA thereof and the provisions of any Ordinance relating to appeals from the Tribunal, any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law.

29.Under s 11AA(1)[2], no appeal may be made under section 11(2) unless leave to appeal has been granted by the Tribunal or the Court of Appeal.

30.Under s 11AA(6), leave to appeal shall not be granted unless the Tribunal or the Court of Appeal 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 interests of justice why the appeal should be heard. For this purpose, reasonable prospect of success means that the prospect must be more than “fanciful”, but does not have to be “probable”.

The Zoning Ground

31.The 4^th Respondent’s argument under this ground is stated at §8 of its Written Statement, as follows:

“In broad terms, Grounds 1 to 9 contend that the Tribunal should have found that the Applicants could not take advantage of the 80% threshold in [the Notice] applicable at the time of their application for a compulsory sale because the Lot is not a lot specified in s. 4(1)(c) of the Notice for the purpose of s. 3 of the Notice in turn because the Lot is located within an ‘industrial zone’, namely, the ‘Other Specified Uses (Business)’ (‘OU(B)’) zone in the [Approved OZP 22]. The ‘OU(B)’ zone is an ‘industrial zone’ as defined in s. 2 of the Notice … viz. a ‘zone’ that is set apart for industrial use in a draft plan prepared by the Town Planning Board or approved by the Chief Executive in Council under the Town Planning Ordinance (Cap. 131).”

32.In short, the 4^th Respondent’s argument is that the “OU(B)” zone is an “industrial zone” as defined in s 2 of the Notice because it is “zone” that has been set apart for industrial use in a draft plan prepared by the TPB or approved by the Chief Executive in Council under the TPO.

33.The validity of the 4^th Respondent’s argument depends on the true construction of the expression “industrial zone” in the Notice.

34.As in any exercise of statutory construction, the true construction of the expression “industrial zone” in the Notice must have regard to the context and purpose of the statutory provision as well as the language used in the statute.

35.The relevant context here is the specification of a statutory threshold of ownership of a lot for the purpose of making an application for compulsory sale under the Ordinance. The long title to the Ordinance states that it is “[a]n Ordinance to enable persons who own a specified majority of the undivided shares in a lot to make an application to the Tribunal for an order for the sale of all of the undivided shares in the lot for the purposes of the redevelopment of the lot; to enable the Tribunal to make such an order if specified criteria are met; and for matters incidental thereto or connected therewith”.

36.As earlier mentioned, the normal ownership threshold prescribed by s 3(1) of the Ordinance is “not less than 90% of the undivided shares in the lot”, but s 3(5) thereof allows the Chief Executive in Counsel to specify a lower percentage in respect of any specified class of lot by notice in the Gazette.

37.In exercise of his statutory power under s 3(5) of the Ordinance, the Chief Executive in Counsel issued the Notice to specify a lower percentage of 80% of the undivided shares in 3 specified classes of lot including, relevantly for the present purpose, the Old Industrial Building Class. In order to fall within this class, the lot in question must not be located within an “industrial zone”, and each of the buildings erected on the lot (i) must be an industrial building, and (ii) must have been issued with an occupation permit at least 30 years before the relevant application for compulsory sale in the Lands Tribunal.

38.The purpose of the reduction in the ownership threshold for an application for compulsory sale in respect of the Old Industrial Building Class is to facilitate redevelopment of under-utilized or disused industrial buildings older than 30 years situated in non-industrial zones to address the changing economic needs of Hong Kong: see Legislative Council Brief, “Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice”, prepared by the Development Bureau’s dated January 2010, at §16:

“To address the changing economic needs of Hong Kong, we propose to specify lots on which all the industrial buildings stand are aged 30 years or above, and that are not located within an industrial zone to be subject to the lower application threshold. This will facilitate the redevelopment of under-utilised or disused industrial buildings standing on land which, over the years, has been rezoned from industrial to non-industrial…”

39.The justification for this reduction of ownership threshold was explained in an earlier Legislative Council Brief, “Optimising the Use of Industrial Buildings to Meet Hong Kong’s Changing Economic and Social Needs”, prepared by the Development Bureau dated 15 October 2009 (“the 2009 Legco Brief”):

“Vacancy and under-utilisation of industrial buildings

[3] As a result of Hong Kong’s economic restructuring and relocation of traditional manufacturing activities to the Mainland, many private flatted industrial buildings are now vacant or under-utilised. This is a serious waste of our precious land resources. The TPB, with assistance from the Planning Department (PlanD), has adopted a two-pronged approach to promote optimum use of our land resources: broadening the permissible uses in industrial buildings and rezoning surplus and suitable industrial land for non-industrial uses. In 2001, TPB introduced a new OU(B) zone, which allows a mix of office, commercial and non-polluting industrial uses. During the past two decades, about 500 hectares of industrial land have been rezoned for non-industrial uses, including about 200 hectares to OU(B) use.

…

[6] The above demonstrate that despite the large scale rezoning and relaxation of uses by the TPB over the years, not that many owners of industrial buildings have responded by redeveloping or converting their industrial buildings for higher value-added uses.

Support to development of the six economic areas

[15] The Task Force on Economic Challenges (TFEC) has identified six economic areas where Hong Kong enjoys clear advantages and recommended that the Administration should consider policy initiatives to facilitate the conversion or redevelopment of under-utilised industrial buildings to provide more land and usable floor space for the cultural and creative industries and other suitable economic areas…

Challenges in revitalising existing industrial buildings

[17] We believe that the owners of industrial buildings in non-industrial zones are reluctant or unable to carry out redevelopment, wholesale conversion or even temporary change of use for these buildings because -

(a) the multiple ownership in flatted industrial buildings makes it difficult for all owners to reach a decision to convert or redevelop the buildings

…

PROPOSED MEASURES TO FACILITATE REDEVELOPMENT

Assembly of titles in industrial buildings with multiple owners

[18] The multiple ownership in flatted factory buildings is often a hurdle to their redevelopment. Under the current provision of the LCSRO, the majority owners (owning not less than 90% of the undivided shares) of a lot may apply to the Lands Tribunal for a compulsory order to sell the entire lot for redevelopment. The majority owners will have to satisfy the Lands Tribunal that redevelopment of the lot is justified on the ground of age or state of repair of the existing buildings and that the majority owners have taken reasonable steps to acquire all the undivided shares of the lots.

[19] The LCSRO provides that the Chief Executive in Council may designate a lower application threshold of not less than 80% for specified classes of lots. We propose that an application threshold of 80% be designated for lots with existing industrial buildings aged 30 years or above situated in non-industrial zones. About half of the existing industrial buildings in Hong Kong are at least 30 years old; as these buildings are relatively old and their current uses are often not entirely in line with the long-term planning intention for the lots, they should be given priority for redevelopment. This proposal leaves the decision of whether and when to redevelop the existing industrial buildings to the market.”

40.As for the language, the expression “industrial zone” is defined in the Notice to mean “a zone that is set apart for industrial use in a draft plan …”. This form of wording tracks the language of s 4(1)(b) of the TPO, which provides that the draft plans prepared by the TPB under s 3(1)(a) for the lay-out of any area may show or make provision for “zones or districts set apart for use for residential, commercial, industrial or other specified uses”.

41.In the present case, the Lot is located within the “OU(B)” zone in the Approved OZP 22. As stated in the Schedule of Uses to the Approved OZP 22, the planning intention of the “OU(B)” zone is for “general business uses. A mix of information technology and telecommunications industries, non-polluting industrial, office and other commercial uses are always permitted in new ‘business’ buildings. Less fire hazard-prone office use that would not involve direct provision of customer services or goods to the general public is always permitted in existing industrial or industrial-office buildings”.

42.As is customary, the Schedule of Uses for the “OU(B)” zone in the Approved OZP 22 consists of 2 columns of permissible uses: (i) Column 1 (Uses always permitted), and (ii) Column 2 (Uses that may be permitted with or without conditions on application to the Town Planning Board). It is not in dispute that some industrial uses are listed under Column 1 and Column 2. However, the two columns also contain many uses which cannot properly be regarded as industrial uses, including:

(1)  under Column 1: “Commercial Bathhouse/Message Establishment”, “Eating Place”, “Educational Institution”, “Exhibition or Convention Hall”, “Library”, “Off-course Betting Centre”, “Place of Entertainment”, “Place of Recreation, Sports and Culture”, “Private Club”, “Public Clinic”, “Religious Institution”, and “Shop and Services”; and

(2)  under Column 2: “Hotel”, “School (not elsewhere specified)”, “Wholesale Trade”, “Off-course Betting Centre”, “Place of Recreation, Sports or Culture (not elsewhere specified)”, “Private Club”, “Shop and Services (not elsewhere specified) (ground floor only except Ancillary Showroom which may be permitted on any floor)”, and “Social Welfare Facility (excluding those involving residential care)”.

43.The fact that the “OU(B)” zone in the Approved OZP 22 permits both industrial and non-industrial (general business or commercial) uses is entirely consistent with the planning intention of the zone as mentioned in §41 above.

44.On the other hand, it may be noted that some of the above non-industrial uses were also permissible uses of the Lot previously when it was zoned “I” in the Approved OZP 8, eg “Clinic/Polyclinic”, “Off-course Betting Centre”, “Place of Recreation, Sports and Culture”, “Private Club”, “Public Library”, and “Retail Shop”. The existence of these permissible non-industrial uses in the previous “I” zone in the Approved OZP 8 supports the Applicants’ contention that the zoning of an area or district, or the “setting apart” of a zone for some specific use (whether residential, commercial, industrial or other specified uses), is just a “broad land use designation” of the area or district in an outline zoning plan. In any event, it is clear that merely because some industrial uses are permitted in a zone does not mean that the zone is an “industrial” zone or is “set apart” for industrial use. Were it otherwise, the “OU(B)” zone in the Approved OZP 22, which permits some commercial uses, could also be regarded as a “commercial” zone or a zone set apart for commercial use. It would plainly be illogical for a zone to be “set apart” for industrial use and also “set apart” for commercial use, or to be regarded as being an “industrial” zone and an “commercial” zone, at the same time.

45.In our view, it is clear that the “OU(B)” zone in the Approved OZP 22 is not a zone set apart for industrial use, and the Lot is not located within an “industrial zone” within the meaning of s 4(1)(c) of the Notice. To hold otherwise would run counter to the purpose of the Government’s programme of rezoning all industrial sites in Kwun Tong Industrial Area from “I” to “OU(B)” effected by the Draft OZP 9 in 2001, as well as the purpose of reducing the application threshold to 80% of the undivided shares for compulsory sale of a lot within the Old Industrial Building Class effected by the Notice in 2010.

46.We shall now briefly deal with some of the points raised by Mr Anthony Ismail on behalf of the 4^th Respondent at §9 of his Written Statement dated 21 October 2022 in support of the argument that the “OU(B)” zone is an “industrial zone” as that expression is defined in s 2 of the Notice and the Lot is located within an “industrial zone” for the purpose of s 4(1)(c) of the Notice:

(1)  At §9(1), Mr Ismail submits that the legislature intended to link the meaning of “industrial zone” in s 2 of the Notice to the plan-making function of the TPB under s 4(1)(b) of the TPO. This submission is correct, but does not assist the 4^th Respondent. The definition of “industrial zone” in s 2 refers to a zone that is set apart for industrial use in a draft or approved plan, and the question is whether the “OU(B)” zone in the Approved OZP 22 is a zone “set apart” for industrial use. For reasons mentioned above, we consider it clear that the answer is “no”.

(2)  At §9(2), Mr Ismail submits that an industrial use that is set apart in a zone is of paramount importance and significance because it informs whether a zone is or is not an industrial zone, and that that the mere designation or name of the zone is secondary, because the law is concerned with substance and not form. Again, this submission does not assist the 4^th Respondent, because, in our view, as a matter of substance, the “OU(B)” zone in the Approved OZP 22 is not a zone set apart for industrial use. Mr Ismail further argues that if the TPB defined a zone by a boundary marked in an approved outline zoning plan with the designation “X” but permitted all or some industrial uses on land within the area of the boundary for that zone, such zone will be “set apart for industrial use”. We are unable to accept this argument. Merely because all or some industrial uses are permitted within the boundary of a zone does not mean that the zone is “set apart” for industrial use. The critical consideration is the planning intention of the zone. In the present case, the planning intention of the “OU(B)” zone is for general business use, including not only industrial but also non-industrial (commercial) uses, as demonstrated by the fact that numerous substantial commercial uses are permitted on land falling within the zone. On any view of the matter, the “OU(B)” zone cannot properly be described as a zone “set apart” for industrial use.

(3)  At §9(3), Mr Ismail argues that it is irrelevant that the zone is not set apart for only industrial uses, ie set apart for some industrial uses, and he prays in aid the fact that the Lot was previously in an industrial zone in the Approved OZP 8. In our view, this argument adds nothing to §9(2). The fact that the Lot was previously in an “industrial” zone in the Approved OZP 8 has no relevance to the question of whether the Lot is currently located within an “industrial zone”. Also, the fact that some industrial uses are permitted on a zone does not mean that the zone is set apart for industrial use.

(4)  At §9(4), Mr Ismail refers to the “Town Planning Board Guidelines for Development within ‘Other Specified Uses (Business)’ Zone” (“the Guidelines”) in support of the argument, inter alia, that the TPB decided that the “OU(B)” zone should be the only zone set apart for industrial uses. A proper reading of the Guidelines does not support the argument that the TPB decided that the “OU(B)” zone should be the only zone, or a zone, set apart for industrial uses. The following is stated at §1.1 of the Guidelines -

“The ‘Other Specified Uses’ annotated ‘Business’ (‘OU(Business)’) zone has been introduced to allow maximum flexibility in the use of existing industrial and industrial-office (I-O) buildings as well as in the development of new buildings for both commercial and clean industrial uses. It is perceived as a combination of the ‘Commercial’ and ‘Industrial’ zones. However, it is not intended to replace either of them as both zones will still have an important role to play in ensuring an adequate supply of land for core commercial and industrial activities at appropriate locations.” [emphasis added]

It is plain that the “OU(B)” zone was not intended by the TPB to be an “Industrial” zone, or “set apart” for industrial use.

(5)  At §9(5), Mr Ismail says that it is the for the TPB (not the Tribunal) to decide on the type and number of industrial uses in an “industrial” zone, ie all or only some, because it is the TPB which the legislature has entrusted to make plans under s 4(1)(b) of the TPO. The proposition that the legislature has entrusted the TPB, not the Lands Tribunal, with the power to make plans for the lay-out of any area, and such plans may set apart zones or districts for different uses in accordance with ss 3 and 4 of the TPO, is not controversial. The further proposition the TPB may determine the type and/or number of industrial uses which may be permitted in an industrial zone so set apart is also not controversial. They do not, however, address the critical question in the present case, namely, whether the “OU(B)” zone in the Approved OZP 22 is a zone which has been set apart for industrial use.

(6)  At §9(6), Mr Ismail argues that the Tribunal’s interpretation of s 2 is contrary to the plain meaning of the language used in s 2 and/or will lead to the following unreasonable and/or absurd results, viz-

(a)  The legislature intended that the industrial uses in the “OU(B)” zone which are numerous, different in nature and extensive are completely irrelevant to the definition of “industrial zone” in s 2 and must be ignored. Thus, the zone will not be set apart for industrial uses even if the entire Building and the whole Lot is used or revitalized for “non-polluting industrial uses” (which is an industrial use in Column 1 use) OR if the TPB granted planning permission for the entire Building to be used for “Industrial Use (not elsewhere specified)” (which is an industrial use in Column 2).

(b)  The Lot was never within an “Industrial” zone because the “Industrial” zone in the Approved OZP 8 permitted some industrial uses. Consequently, the rezoning to “OU(B)” made no difference at all because the 80% threshold would have applied even if the Lot had not been rezoned from “Industrial” to “OU(B)”.

(c)  The “Industrial” zone in the “Revised Master Schedule of Notes” for the “Industrial” zone produced by the TPB would not be an “Industrial” zone because it is set apart for some industrial uses.

Mr Ismail has not explained why the Tribunal’s interpretation of s 2 is contrary to the plain meaning of the language used. On the other hand, we consider the 4^th Respondent’s contention that a zone is an “industrial zone”, or is “set apart” for industrial use, merely because some industrial uses are permitted on land falling within the zone to be contrary to the language of the statutory definition of “industrial zone” in s 2 of the Notice. The so-called unreasonable and/or absurd results are, in our view, based on the incorrect premise that a zone is an “industrial zone” merely because it permits “some” industrial uses, or a failure to appreciate that the zoning of an area or district in an outline zoning plan is just a “broad land use designation” of the area or district. It does not mean that each and every permissible use of the area or district under the plan must fall within that broad land use designation.

(7)  At §9(7), Mr Ismail submits that the Tribunal’s interpretation of s 2 of the Notice to accelerate urban renewal is not permissible, and that the Tribunal’s approach is not necessary because the 90% threshold is also for the purposes of enabling urban renewal. We do not consider it helpful to characterise the Tribunal’s interpretation of s 2 as being for the purpose of “accelerating urban renewal”. To the extent that the Tribunal’s interpretation takes into account the context and purpose of the Notice, such approach is well supported and not objectionable.

47.In all, we are of the view that the Tribunal reached the correct conclusion that the Lot is not located within an industrial zone within the meaning of s 4(1)(c) of the Notice.

The Alternative Options Ground

48.This ground can be disposed briefly. The form of alternative option suggested by the 4^th Respondent before the Tribunal was that of revitalization under the Revitalization Scheme for Industrial Building re-introduced by the Government in 2019 (see §89 of the Judgment). The question for consideration is whether, when determining an application for compulsory sale under the Ordinance, the Tribunal is under a duty to consider or weigh the merits or benefits of alternative options (such as conservation, revitalization, rehabilitation, urban renewal) vis-à-vis redevelopment. The answer to this question can be found in the judgment of Lam VP (as he then was) in Good Faith Properties Ltd & Ors v Cibean Development Co Ltd [2014] 5 HKLRD 534:

“[5] … In Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578, Ribeiro PJ examined the scheme of the LCSRO at paras 10 to 21 of the judgment. His Lordship identified four distinct phases for the whole process: (a) application; (b) determination by the Tribunal; (c) the sale; and (d) apportionment and application of the proceeds of sale. The first phase is the application by the majority owner(s) who own(s) not less than 90% of the undivided shares in the lot in question. There are statutory requirements as to the criteria which the applicant(s) must satisfy and the filing of valuation reports.

[6] The second phase is the determination by the Tribunal. Such determination usually falls into two parts. First, the Tribunal must determine whether the applicant has satisfied the conditions under s 4(2) of the LCSRO. Expert evidence is usually required to satisfy the first condition, viz redevelopment is justified due to the age or state of repair of the existing building. As for the second condition, whether the majority owner(s) has taken reasonable steps to acquire all the shares, including negotiating on terms that are fair and reasonable, is a matter of fact and judgment. On the question of whether the terms offered falls within a band of what represents a fair and reasonable assessment of the value of the minority interest, it may, subject to what was said by Ribeiro PJ at paras 32 to 36 of the judgment in Capital Well, supra, on the object of the exercise under this limb, depend on expert evidence on valuation.

[7] If those conditions are met, the Tribunal would have to set the reserve price and decide how the proceeds of sale are to be apportioned by reference to the valuations in the s 3(1) report. The second stage is essentially a valuation exercise…

…

[11] We must recognise that the LCSRO is a statutory compromise balancing the competing interests of the co-owners: the majority owner’s interest in utilising his property by releasing the land for redevelopment versus the minority owner’s proprietary interest in the disposal of his own property. The right of private ownership protected under Article 6 of the Basic Law (see Litton NPJ in Sin Ho Yuen v Fineway Properties Ltd supra at para 24) should not be overridden without justification. Even if the right of private ownership of the minority owner were to be overridden when there is proper justification, there must be fair and reasonable compensation. Thus, the statutory compromise is to provide safeguards on two different levels:

(a) The majority owner(s) (who must hold at least 90% of the interest in the land) must establish his justification to the satisfaction of the Tribunal before he could override the private right of ownership of the minority owner. To do this, he must produce evidence to satisfy the statutory criteria; and

(b) If he manages to establish the grounds to the satisfaction of the court, the minority owner would have to sell his property even though he does not wish to do so. But he would get back a fair share of the sale proceeds on a pro rata apportionment determined by the Tribunal.

[12] It is necessary to analyse the first tier safeguard at greater length because the proper understanding of this safeguard is important for the purposes of this appeal. First, until the Tribunal is satisfied that the statutory criteria are met, the majority owner(s) does not have any right to compel the minority owner to sell…

[13] LCSRO gives the majority owner(s) a means to override the will of the minority owner not because the minority owner has done something wrong: there is no legal wrong committed by the minority owner against the legal interests of the majority owner(s). It merely gives the majority owner(s) an opportunity to establish the justification for doing so to the satisfaction of the Tribunal. And it is only upon the Tribunal deciding that the statutory criteria have been met that the minority owner becomes obliged to sell.”

49.In Able Luck Development Ltd and Others v Public Global Investments Ltd and Others, LDCS 7000/2014 (6 October 2017), the Tribunal (constituted by Her Honour Judge Kot and Mr Lawrence Pang), in reliance on the above judgment of Lam VP in Good Faith Properties Ltd, rejected the contention raised on behalf of an opposing owner to an application for compulsory sale that “since s.4(2) is deliberately drafted in a negative sense, the Tribunal is left with a residual discretion as to whether to make an order for sale even if it is satisfied that redevelopment is justified” (see §168 of Able Luck Development Ltd). The Tribunal stated the following conclusion at §170:

“As can be seen from the quotations cited above, whether the statutory criteria stipulated in s.4(2) have been met is the only requirement that this Tribunal needs to consider and once this Tribunal is satisfied that such statutory criteria had been met, an order for sale should be allowed, reserve price should then be set and the minority owners are obliged to sell. There is no room for other consideration on top of the statutory criteria of age or state of repair and reasonable steps taken to acquire all the shares.”

50.We agree with the Tribunal that in an application for compulsory sale under the Ordinance, there is no requirement on the part of the Tribunal to engage itself in weighing redevelopment against other potential alternatives (such as conservation, revitalization, rehabilitation, urban renewal etc), nor is it obliged to satisfy itself that redevelopment is the best option among all possibilities before it could make an order for compulsory sale.

51.In any event, as submitted by the Applicants, revitalization is a non-starter in the present case because it requires the consent of the owners of the Lot and the Building, but the Applicants do not agree to it (see §104 of the Judgment). At §11 of the draft Notice of Appeal, the 4^th Respondent argues that the Applicant’s disagreement to revitalization “may well change if circumstances change”. This argument is speculative. The Tribunal could only determine the Application based on the evidence and materials before it.

52.Finally, in view of the Tribunal’s finding that the revitalisation value of the Building is lower than the redevelopment value of the Lot (see §105 of the Judgment), there would be good reason to reject the alternative option of revitalisation.

53.Overall, we are not satisfied that the 4^th Respondent’s intended appeal has a reasonable prospect of success. We also do not see any other reason in the interests of justice why the appeal shall be heard.

DISPOSITION

54.The Summons is dismissed with costs to the Applicants, to be summarily assessed. In view of the fact that the application is a straight forward one, we would only allow certificate for 1 counsel. We summarily assess the Applicants’ costs in the amount HK$400,000. The above costs order is an order nisi, which shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment.

55.For the avoidance of doubt, the interim stay of execution of the Tribunal’s judgment granted on 24 October 2022 shall be lifted and cease to have effect upon the handing down of the present judgment.

56.Lastly, we consider the application for leave to appeal to be totally without merit. Accordingly, we make an order that no party may request the present determination to be reconsidered at an oral hearing inter partes under Order 59, rule 2A(8) of the Rules of the High Court.

Mr Edward Chan, SC and Mr Y C Mok instructed by Sit, Fung, Kwong & Shum, for the 1^st to 9^th Applicants

Mr Anthony Ismail instructed by Woo, Kwan, Lee & Lo, for the 4^th Respondent