Billion Glory Properties Ltd and Others v. Li Baozhu and Others
Read the full judgment text of LDCS 23000/2019 on BabelCite. This LDCS judgment was delivered on 31 May 2024.
1. This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of Section C of Inland Lot No 2147 (“the Lot”) on which building known as the Haven Court (“the Building”) stands with the address of Nos 2-30 Haven Street & Nos 128-138 Leighton Road, Hong Kong.
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LDCS 23000/2019 [2024] HKLdT 50 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO 23000 OF 2019 __________________________ BETWEEN
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_________________ D E C I S I O N _________________ 1.This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of Section C of Inland Lot No 2147 (“the Lot”) on which building known as the Haven Court (“the Building”) stands with the address of Nos 2-30 Haven Street & Nos 128-138 Leighton Road, Hong Kong. 2.After a trial of 7 days in September last year (“the Trial”), judgment was handed on 29 February 2024 (“the Judgment”) which, inter alia, granted an order for sale of the Lot by way of a public auction (“the Order for Sale”) subject to a reserve price of $2,425,000,000. 3.It is undisputed that the applicants had arranged a public auction on 17 April 2024 but no bid was received either from the applicants or from somebody else; that is, the auction became abortive. 4.By reference to section 5(4) of the Ordinance, if the Lot is not sold with the 3 months immediately following the date on which the Order for Sale is made, ie 29 May 2024, or within such further period of 3 months as the Tribunal may specify in directions given on application made to it by the trustees under the order or the majority owner or any minority owner of the lot, the Order for Sale shall immediately be deemed to be of no effect as if it had been cancelled by the Tribunal. 5.On 29 April 2024, the applicants filed a Summons, applying the period for sale be extended therefore for another 3 months, ie until 29 August 2024 and a leave be granted to re-fix the reserve price. According to an affirmation filed by the applicants on the same date (“the Affirmation”), Soundwill Holdings Limited (“Soundwill”), a listed company on the Stock Exchanged of Hong Kong and being the parent company of the applicants, had engaged Vigers Appraisal and Consulting Limited (“Vigers”) to make an independent assessment on the value of the properties related, which was required under the listing rules. The public announcement by Soundwill dated 2 April 2024[1] referred on its page 5 to Vigers’ assessment of the market value of the Lot on the basis of its redevelopment potential, as at 29 February 2024, at approximately $2.1 billion[2]. The latter was submitted to be noticeably lower than the reserved price fixed by the Tribunal at $2,425,000,000. 6.The Affirmation above also intimated that the applicants had obtained the opinion of Mr Charles Chan (“Mr Chan”), the valuation expert acting on behalf of the applicants in the Trial, dated 25 April 2024 which is summarized as follows:
R7’s Objection 7.On 29 April 2024, the 7th respondent (“R7”) who owns 1/379 undivided shares of the Lot with the right to exclusive use and occupation of Shop 44 on G/F of the Building objected to the application for the re-fixing the reserve price in the vein that the court had no jurisdiction to further vary the Order for sale as it was functus officio:
R2’s Objection 8.Subsequent to the above, on 10 May 2024, the 2nd respondent (“R2”) wrote in opposing the application for re-fixing the reserve price as it would be “extremely unfair” to the minority owners that include R2:
9.R2 also opposed against the application for time extension of the Order for Sale pending a new reserve price to be fixed by the Tribunal as it would effectively mean that R2 and other respondents cannot be reimbursed timely of the huge costs incurred in the appointment of counsel and experts after the Judgment was handed down. According to R2, she had spent more than a million dollars since the call-over hearing on 2 September 2022. She had become impecunious and relied on loans from finance company charging against her property. 10.Furthermore, R2 alleged that the economy is reviving after the pandemic and there being no ground to support re-fixing the reserve price:
R11, R20 and R22’s Objection 11.On 13 May 2024, the 11th respondent (“R11”), the 20th respondent (“R20”) and the 22nd respondent (“R22”) also objected to the application for re-fixing the reserve price on the following grounds:[6]
12.R11, R20 and R22 submitted however that if the Tribunal is confident that the matter could be resolved on or before 29 May 2024, just for the sake of short-term preservation of the Order for Sale and allowing some time for further debate, they would adopt a neutral stance on the grant of one extension for the statutory period of 3 months pursuant to section 5(4)(b) of the Ordinance but not any further extension thereafter. This latter position was joined by the 10th respondent (“R10”) by the time of hearing on 14 May 2024. 13.In the hearing on 14 May 2024, I have directed the parties to file further submissions on their corresponding arguments. The Applicants’ Submission 14.The applicants, as represented by Mr Mok Yeuk Chi (“Mr Mok”) filed the submission on 23 May 2024. 15.Firstly, in the hearing on 14 May 2024, the issue was raised as regards whether the Tribunal does have jurisdiction to grant extension of time after the Tribunal had granted a further period of 3 months under section 5(4) of the Ordinance. Mr Mok referred to a stay of the order for sale granted by the Tribunal on 23 June 2008 in Intelligent House Limited v Chan Tung Shing & Others [2008] 4 HKC 421, pending appeal by China Superior Limited, the 13th respondent in that case, to the Court of Appeal. 16.In the meantime, Intelligent House Limited had scheduled an auction implementing the order for sale on 28 August 2008, ie in 5 days afterwards while the hearing of the appeal would not be heard until 1 April 2009. 17.In the Notes of Reasons for Decision (unreported, dated 23 August 2008) at §12, the Tribunal stated its preference to the submission of the leading counsel for China Superior Limited. That is, to give a proper construction of section 5(4) of the Ordinance, coupled with the effect of section 39 of the Interpretation and General Clauses Ordinance, the provision should be interpreted to give the effect that owners of the subject property, whether the majority or the minority, and the trustees for sale can repeatedly apply to the Tribunal for extension of the effect of an order for sale, each time for a period of 3 months. 18.The Tribunal then remarked at §13 that such an interpretation would not fall foul of the language of section 5(4) of the Ordinance. Instead of leading to the absurd consequence on the rights and effect of any pending appeal from the order for sale, the more liberal interpretation would reconcile the rights of a party to appeal on points of law an order for sale granted under the Ordinance. 19.Although the Court of Appeal subsequently set aside the stay in Intelligent House Limited v China Superior Ltd [2008] 6 HKC 256, it, at §33, expressed its agreement with the Tribunal that it may grant more than one period extension and in doing so may make such consequential order including the revision of the reserve price, as it may deem fit. 20.Returning to the present application, Mr Mok submitted therefore that the Court of Appeal had conclusively ruled that
21.Mr Mok further emphasized that section 5(4) of the Ordinance permits the Tribunal to grant validity extensions where the subject lot of a sale order “is not sold”. He submitted there is no further qualification or limitation in addition to the requirement that the subject lot “is not sold” and in the present case, the Lot was not sold because of the failed auction. 22.Mr Mok submitted therefore the power given to the Tribunal to extend the validity of the sale order upon the subject lot being “not sold” must be intended to permit steps to be taken to enable the subject lot to be sold. One such step to be taken in the event of a failed auction is to grant leave for the refixing of the reserve price. 23.Mr Mok then referred to Sin Ho Yuen v Fineway Properties Ltd (2011) HKCFAR 497 where the Court of Final Appeal was originally invited to decide on:
24.The Court of Final Appeal stated at §15 the following:
25.Mr Mok did not accept that the statement was made obiter as in the beginning at §1, the Court of Final Appeal stated clearly that although the parties had achieved a settlement:
26.Mr Mok also submitted that, in addition to the Order for Sale, the Judgment also granted liberty to the parties and the trustees to apply to the Tribunal for further direction(s) pursuant to section 4(9) of the Ordinance. According to Mr Mok, this provision dovetails with the view of the Court of Final Appeal in case of a significant fall in property prices after a reserve price has been set. The Tribunal has jurisdiction, Mr Mok argued, to reset the reserve price on evidence of a material change of circumstances. 27.In addition to the above, Mr Mok drew my attention to other provisions under section 4 of the Ordinance, suggesting the scope of powers given by the Ordinance to the Tribunal to give directions are all intentionally formulated to be wide, enabling, encompassing and not restrictive:
28.Mr Mok was aware that similar submissions were made by a minority owner in Pacific Base Holdings Limited & Others v Lee Hop Biu & Others, LDCS 14000/2017 (unreported, 4 June 2020) after the auction pursuant to the order for sale in that case failed but the Tribunal then refused to refix the reserve. On that occasion, the Tribunal did not give a written decision nor any oral reasoning for why the Tribunal exercised its discretion to refuse leave to refix the reserve price. Mr Mok acknowledged that maybe in that case, there was no evidence in support of the application save for the fact that there was a failed auction.[7] Ground for Re-fixing the Auction Reserve Price 29.In the present case, the applicants relied heavily on the fact that the auction on 17 April 2024 failed to attract any bids. 30.It also appears that the applicants relied heavily on a third party bidder for sale of its interest in the Lot, if any. The applicants referred to the public announcement by Soundwill dated 2 April 2024 that at the time of the announcement Soundwill had not resolved whether to bid or not. Page 11 of the announcement particularly referred to the situation if the successful bidder at the auction was an independent third party, “(t)he sale proceeds received from the Possible Very Substantial Disposal will be used by the Group in or towards financing other projects and for general working capital.” 31.It then stated that: “Based on the above reasons, the Directors are of the view that the Possible Very Substantial Disposal conducted at the final winning bid by a third party bidder is in the interests of the Company and the Shareholders as a whole and that the terms of the sale by the Auction will be fair and reasonable.” 32.Page 14 of the announcement further stated:
33.Mr Mok submitted the announcement above constituted a clear signal that Soundwill or its subsidiaries had taken steps in preparation for selling the majority undivided shares via the auction and the directors were of the view that so to sell was in the interest of Soundwill and its shareholders. Perhaps this may be read in light of an earlier announcement by Soundwill dated 11 August 2022 that by a Sale and Purchase Agreement dated 9 August 2022, its indirect wholly-owned subsidiary had agreed to sell the company who owns the applicants and their assets to United Endeavors Limited whose ultimate beneficial owner was a madam named Tsui Yee. Unfortunately the sale fell through and it was confirmed in a public announcement by Soundwill dated 13 September 2023:
34.Notwithstanding the above, Mr Mok submitted that the auction failed because the reserve price fixed at $2.425 billion was higher than what the market found acceptable. 35.On 14 May 2024, I had reminded Mr Mok that his assertion above may not be adequate support to refix the reserve price in the absence of evidence of market to quantify the difference. Here Mr Mok referred again to Mr Chan’s evidence that the market from August 2023 to February 2024 was most uncertain and difficult, with massive drop in the retail market and a severe lack of transactions in the office market in the Wanchai/ Causeway Bay area. 36.Mr Mok submitted once again that in the severely contracted, uncertain and dropping market as comprehensively captured by Mr Chan and with Soundwill’s public announcement giving notice that Soundwill might or might not bid at the auction, the failed auction is the best and direct evidence that the reserve price was fixed too high to be accepted by the market on 17 April 2024. 37.In the hearing on 14 May 2024, I had drawn Mr Mok’s attention to that the valuation date for the residual valuation conducted by me might not be as at 15 August 2023 as alleged because I have relied on a transaction A2 which took place on 20 November 2023 and Private Offices Price Index (Grade B) published by RVD up to the end of 2023[8]. Now in response, Mr Mok stated in his submission that in November 2023, the Retail Price (psm) of Hong Kong Island as published by RVD was $569,236. When this is compared to that of February 2024’s $197,145, there was a drop of around -65% which was even more than the -53% drop between August 2023’s $420,686 and February 2024’s $197,145. 38.Subject to the above caveat, Mr Mok submitted that it is not necessary to quantify the market drop for the purposes of the applicants’ application for at least the following reasons:
R2’s Submission dated 27 May 2024 39.R2’s submission dated 27 May 2024 again objected to the applicants’ application to refix the reserve price in the absence of evidence of comparable transactions. According to her, the reserve price fixed by the Tribunal on 29 February 2024 should have reflected the prevailing market conditions, there being no justification for revision. 40.R2 also objected to incessant applications for extension of the period allowed by section 5(4) of the Ordinance alluded to by the applicants as it would be prejudicial to the minority owners who then have to shoulder additional legal costs, financial and psychological burdens. R7’s Submission dated 27 May 2024 41.R7’s submission dated 27 May 2024 was very similar to R2’s except that she still failed to appreciate the application of saleable area in preference to gross floor area in valuation exercise as explained in §§159-168 of the Judgment. The application of saleable area does not decrease the actual area of the premises concerned because it would correspondingly increase the unit rate of the sale price for the same consideration paid in the market. The difference between saleable area and gross floor area is likened to the use of Celsius versus Fahrenheit in measuring temperature or the use of metric versus imperial measurement though the application of gross floor area is subject to abuse of unscrupulous sales agent or developers. 42.All the more, R7 tried to distinguish the situation in Sin Ho Yuen, supra from the present proceedings. In Sin Ho Yuen, supra, the reserve price was agreed by the parties much ahead of the order for sale granted by the Tribunal during which there had been a substantial change of market conditions because of the financial tsunami (as it was often called) in 2008. In the present proceedings, however, the Tribunal determined the reserve price on the basis of the most recent transactions of comparables. 43.Further, R7 referred to §24 of Sin Ho Yuen, supra, which remarked that: “The object of the statute could only be achieved if the tribunal discharged its function in an effective and efficient manner.” The Court of Final Appeal also stated in §25 that:
44.According to R7, the applicants’ application for refixing the reserve price here is tantamount to defeat the legislative protection of minority owners under the Ordinance. 45.In addition, R7 referred to the abortive sale to United Endeavors Limited whereby Soundwill or its subsidiary secured a forfeiture of deposit in the sum of $364 million or thereabouts.[9] In comparison, the outstanding pro-rata share belonging to the minority’s owners of 11.5%[10] to the reserve price of $2,425,000,000 is equivalent only to some $279,000,000[11] which is less than $364 million. Submission dated 27 May 2024 on behalf of R10, R11, R18, R20 and R22 46.Now R10, R11, R18, R20 and R22 are jointly represented by Mr Adrian But leading Mr Iverson Wong who submitted their arguments against the applicants’ application. 47.While Mr But’s submission is quite comprehensive and up to 124 paragraphs, I do not intend to repeat its contents here save to quote it from time to time during the discussions that follow. Reserve Price at Auction 48.In Asia Bright Enterprises Limited & Another v The Personal Representative of the Estate of Law King Yin & Others, LDCS 11000/2019 (unreported, dated 15 October 2021), the Tribunal had the following observation at §72:
49.Thus, unlike a normal public auction, it is a common phenomenon that the majority owner(s) is/are the only bidder in an auction resulted from a compulsory sale under the Ordinance when other potential bidders consider not worth the trouble to compete. Thus, a failed auction in a compulsory sale under the Ordinance does not necessarily mean, as alleged by the applicants, that the reserve price was fixed higher than the real market value. Otherwise, the majority owner(s) enjoying the peculiar advantage in a compulsory sale under the Ordinance would be tempted to arrange a failed auction in the first instance and come back to the Tribunal seeking a reduction of the reserve price to its/their advantage. 50.Mr Mok emphasized that in the public announcement on 2 April 2024, Soundwill disclosed it was to evaluate and had not yet resolved if it (or its subsidiary) would bid at the auction and acquire the lot. It is however neither here nor there so long as the applicants (which are its indirect wholly owned subsidiaries) still enjoy the peculiar advantage in a compulsory sale under the Ordinance. 51.I agree with Asia Bright Enterprises, supra, that “it is still the upmost duty of the tribunal to determine a fair and reasonable reserve price reflecting the redevelopment potential irrespective of the private agenda if any and worries of the parties.” 52.In the captioned case, the Tribunal was faced with two different valuations and I had to find a way of distinguishing the two and the ultimate function was to reach my own determination on the basis of the evidence before me:[12]
53.The applicants had tendered that Vigers assessed the market value of the Lot on the basis of its redevelopment potential, as at 29 February 2024, at approximately $2.1 billion, which was noticeably lower than the reserved price fixed by the Tribunal at $2,425,000,000. However, there is no evidence or comparables disclosed together with the Vigers’ assessment to support its valuation as is normally required in an expert’s valuation in court. While not adjudicating on whether a valuation is right or wrong, it is trite that the process of valuing real property has strong subjective elements; it is an art not a science which may lead to the presence of a “bracket” as elaborated in Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84 at 85G-H. 54.As summarised in K/S Lincoln v CB Richard Ellis [2010] EWHC 1156 (TCC) at §183, for a standard residential property, the bracket may be as low as plus or minus 5 per cent; for a valuation of a one-off property, the bracket will usually be plus or minus 10 per cent; if there are exceptional features of the property in question, the bracket could be plus or minus 15 per cent, or even higher in an appropriate case. In the present case, the difference between reserve price fixed at $2.425 billion and $2,100,000,000 is at most 15%. This appears within a reasonable range bearing in mind the wide range of opinions expressed as to the RDV of the Lot by Mr Chan and the valuation expert appointed by the minority owners and the variety of issues that have been discussed in §§64-101 of the Judgment.[13] 55.Neither am I persuaded that the three transactions of whole block commercial buildings found by Mr Chan can provide any indication that the market value was or is substantially lower than the reserve price fixed at $2.425 billion in terms of the unit rates. If this were the case, Vigers’ assessment in the sum $2,100,000,000 would be equivalent to some $4,500,000,000 for the GDV or $245,568 per sq m (as can be iteratively derived from a residual valuation). This is still much higher than $119,133 per sq m for the sale of 88WL, $165,047 per sq m for the sale of Harbour East or $105,837 for the sale of Golden Wheel Plaza. In any event, all 88WL, Harbour East or Golden Wheel Plaza are not good comparable at all when they are situated at quite different locations and had much smaller site areas. The compositions between the valuable retail portion and the upper floor portion of these developments vis-à-vis the subject may also be different. See §78 of the Judgment. They fall a long way short of supporting the valuation of some $2,100,000,000 contended for by Vigers. 56.Here the remarks by the Tribunal in Hofei Estates Limited v Secretary for City and New Territories Administration, LDLR 1/1982, dated 30 November 1982 (which has been reported at [1980-82] CPR 486 ) at §§14-15 are relevant:
57.In spite of the above, it is noted that Harbour East, having the largest GFA in the sum of 13,377.99 sq m which is closest to the 18,324.88 sq m for the hypothetical development on the Lot, was able to fetch $165,047 per sq m, ie some 50% higher than that of the other two smaller development. 58.As regards the indices referred to by Mr Chan, I had already stated in the Judgment at §114 that “the use of indices is only acceptable when there is little evidence to go by”. The retail prices, for instance, published by the RVD suffer obviously from the lack of data as a result of which the published prices per sq m would be skewed by few transactions not comparable to the captioned location. This is particularly manifest when the retail price in Hong Kong Island quoted for February 2024 by RVD was $197,145 per sq m or $188,145 per sq m as recently amended, I determined that the market rate applicable to the hypothetical shop 3 should be $550,000 per sq m on the basis of comparable transactions.[14] Interestingly, this $550,000 per sq m was much lower than what Mr Chan assessed at $710,000 per sq m.[15] 59.In any event, Mr Chan was not in the position to provide an up-to-date valuation of the Lot. All the applicants are asking is a leave to refix the reserve price and new valuation evidence will only then be available later. 60.Having reviewed the above, I am not persuaded that there exist a scenario of significant fall in property prices as envisaged by the Court of Final Appeal in Sin Ho Yuen, supra at §15. The reserved price fixed by the Tribunal at $2,425,000,000 and the assessment by Vigers at $2,100,000,000 come within a reasonable bracket at about 15%. Jurisdiction for Extending the Order for Sale beyond one 3-month Period 61.Despite Mr Mok’s peruasive authorities in support of the applicants’ intending application for extending the Order for Sale beyond the statutory one 3-month period, Mr But, leading Mr Iverson Wong, now acting on behalf of R10, R11, R18 R20 and R22 opined otherwise. 62.Mr But refer to the Hansard and Bill Committee Minutes leading to the “Committee Stage Amendments” (“CSAs”) in redrafting section 5(4)(a) as now enacted where the original provision “or such longer period as the Tribunal may specify in directions” has been deleted. On 16 February 1998 in the Bill Committee Meeting, the then Senior Assistant Law Draftsman (“SALD”) who spoke on behalf of the Government considered it not advisable for the majority owners to be given the chance to pick and choose the most opportune time to set the auction price:
63.Then in the meeting on 28 February 1998 that followed, section 5(4) had been amended to empower the Tribunal to extend on application the period from three to six months within which the auction for sale had to be held. Again the then Senior Assistant Law Draftsman explained that to deem an order for sale of no effect if no bid was made at the auction was meant to avoid any manipulation of the reserve price on the part of the majority owners and prevent them from picking and choosing the most opportune time to cast their bid. He believed that the majority owners, who were keen in acquiring the remaining shares from the minority owners, would try their best to buy such shares at the auction:
64.From the above, members of the Bill Committee did foresee that the majority owners who considered the reserve price too high might choose not to bid at the auction. This was explicable because the reserve price, which was determined by the Tribunal, took into account the redevelopment potential of the lot and could be higher than that expected by the majority owners. In such a case, the majority owners might choose not to bid or would only bid if there were purchasers bidding at the auction. After the deliberation at the meeting, the Administration agreed that: “as long as there was no change in the reserve price and the conditions of the order, no limit should be set on the number of auctions held within the specified or any extended time which in any case would be a maximum period of six months from the date of the application.” 65.Thus Mr But submitted, and I agree, that the legislature has never intended the reserve price to be reset and “reduced” until the lot could be successfully sold. I appreciate that the Court of Final Appeal in Sin Ho Yuen, supra, at §15 did envisage a scenario of significant fall in property prices after a reserve price has been set. It further remarked that there being a statutory power for the Tribunal to set a new and lower reserve price for a fresh auction. Where is the statutory power then? Obviously it is section 11A(1) of the Lands Tribunal Ordinance which provides that:
66.As regards Mr Mok’s referral to section 4(6)(a)(i), the provision only states the Tribunal may make an order for sale which relates to the sale and purchase of the lot the subject of the order. Certainly it can lay down the reserve price but it appears that this subsection does not empower the Tribunal to revisit the order from time to time. 67.Section 4(6)(c) is not applicable because it manifestly states that the order that can be made should not be inconsistent with the other provisions of the Ordinance which definitely include section 5(4). 68.Section 4(9) may be more arguable because it states that:
69.Obviously Mr Mok found support from Sin Ho Yuen, supra, at §17 where the Court of Final Appeal envisaged that a minority owner (or the majority owner(s) as well) can simply apply to the Lands Tribunal, under the implied liberty to apply, to reset the reserve price on evidence of a material change of circumstance. But unfortunately, the section or even the remark by the Court of Final Appeal, if more properly read, concerns the situation, doubt or difficulty prior to the auction or other means of sale. Indeed, section 4 as a whole precedes section 5. 70.Section 5 deals with the various situations where the lot in concerned is arranged to be sold by auction or other means. Particularly in subsection (4) it deals with the situation where the lot the subject of an order for sale is not sold by auction or other means. It clearly obviates against a matter “not provided for under this Ordinance”. 71.Similarly, when the Tribunal or the Court of Appeal in Intelligent House, supra, talked about more than one period of extension under section 5(4) of the Ordinance, it was dealing with a situation before an auction or other means of sale could be arranged. 72.Mr But even submitted that in the event of a “stay of execution” being granted by the Tribunal or the Court of Appeal as the case may be, the stay would stop the order for sale from being executed. According to Mr But, the time for running to the auction would be stopped and therefore an auction would become “resumed” as after the determination of appeal. Section 5(4) of the Ordinance therefore would not frustrate appeals, but facilitates to preserve an order for sale in case an appeal is allowed. Mr But submitted this answers the absurdity feared by the Tribunal in Intelligent House Ltd, supra that the right of appeal to higher courts might be taken away by the strict application of Section 5(4). 73.Thus, while the authorities relied upon by Mr Mok, including Sin Ho Yuen, supra and Intelligent House Ltd, supra, are persuasive, whether the Tribunal has jurisdiction for extending a compulsory sale order beyond one 3-month period after an abortive sale by auction was never canvassed or argued. I agree with Mr But that these authorities are distinguishable on their facts, dealing with the situations prior to the arrangement of an auction pursuant to an order for sale. They therefore constituted obiter dicta remarks in relation to the present case that I am not going to follow. Functus Officio 74.The legal principles regarding functus officio are well established. The history and development of the functus officio doctrine were helpfully set out by Baroness Hale in In re L (Children) [2013] 1 WLR 634, [16]-[19]. 75.The rationale or purpose of the functus officio doctrine is essentially threefold:[16]
76.In the present case, Mr But submitted that the Tribunal is established as a “court of record” under section 3 of the Lands Tribunal Ordinance whereby the Tribunal becomes functus officio after a full trial. Upon the Tribunal’s determination of the reserve price when making an order for sale, such determination is final for the purpose of the entire proceedings.[17] 77.As explained by Keith JA in Andayani v Chan Oi Ling [2000] 4 HKC 233, 237D:-
78.Mr But submitted the reserve price (and the EUV too) forms part of a sealed final order made in the proceedings. The Order for Sale embodying the reserve price and other findings made based on evidence before the Tribunal should be the final judgment that binds all owners of the Lot in the Application. 79.Of course, section 11A of the Lands Tribunal Ordinance, which was stated in §65 above, is perhaps peculiar to the Lands Tribunal proceedings. The Tribunal may, within 1 month from the date of any decision by it, decide to review that decision on the application of any party. 80.Indeed, there was such an application for review of the reserve price in Perfect Horizon Limited v Co Sam & Others, LDCS 23000/2018 (unreported, dated 11 September 2020). The Tribunal observed that there had been no decrease in value by reference to both the Private Domestic Prices Indices and the Private Retail Price Index. Further, media reported that the domestic property market was vigorous and vibrant as manifested by the sales of units in Pavilla Farm, refuting the allegation of the adverse impact of the COVID-19 pandemic, economic lockdown or anti-gathering etc. 81.The Tribunal also reviewed other compulsory sale applications around the date, including Orient Sea Investment Limited & Others v Lok Sing Tom & Others, LDCS 27000/2018 (unreported, dated 24 August 2020) and Top Harmony Limited v Cheung Yuet Sheung & Others, LDCS 39000/2018 (unreported, dated 15 October 2020) where the valuation experts concerned conceded that the political environment and economic outlook had improved. 82.The Tribunal in Perfect Horizon then found no merit in the application for review and refused to exercise its power of review on 16 October 2020. 83.In the present case, the 1-month period for review lapsed on 29 March 2024. Although it was only in the announcement by Soundwill on 2 April 2024 that Vigers’s assessment of $2.1 billion was disclosed, given the time to arrange the public announcement, it is reasonably expected that Soundwill would have learned the assessment of Vigers few days beforehand. Unfortunately the applicants did not make any such application for review within the statutory time frame. In such regard, Mr But submitted that the reserve price (together with the valuation parameters used) cannot be reopened due to, inter alia, the principles of res judicata and issue estoppel. 84.Mr But submitted that the “liberty to apply” provision (whether express or implied) as contained in the Order for Sale is only confined to implementation/ execution of an order. As stated in §26 above, the provision was made pursuant to section 4(9) of the Ordinance which states:
85.Thus, contrary to Mr Mok’s submission, section 5(4) of the Ordinance does provide that:
86.Indeed, some other provisions in the Ordinance do take care of the situation when the lot is not sold or there is no purchaser of the lot:
87.Save from the above, there are no provisions which were enacted to stipulate the consequences following the event of a failed auction. None provisions says that a reserve price shall or can be “refixed” by then if the lot the subject of an order for sale is not sold. 88.Furthermore, the general power to extend time under O 3 r 5(1) of the Rules of the High Court (Cap. 4A) does not apply to a stipulation of time under a final judgment disposing of the entire proceedings. Paragraph 3/5/2 of the Hong Kong Civil Procedure 2024 specifically provides that where mandatory time limits are provided by statute it is not possible to invoke the inherent jurisdiction of the court or the provisions of O 3 r 5(1) to extend the same. 89.Lastly, Mr But submitted that given the legislative intention of the Ordinance under section 5(4) as it stands now, as well as the hardship/ difficulties faced by the minority owners, it is unfair, oppressive and prejudicial to accede to the applicants’ application, which essentially is an attempt to cherry-pick another reserve price favourable to them at everyone else’s expense. It would have serious and adverse consequences on the conduct of future compulsory sale applications. Any “discretion” to refix the reserve price must not be exercise. I agree. 90.Mr But also drew my attention to the applicants’ deliberate inaction to register to participate in the public auction on 17 April 2024 despite they alleged in the Affirmation that they had the ability to do so. Then the applicants instructed Mr Chan to “comment” on the result of the failed auction on post-mortem basis. With respect, Mr Chan’s conclusion dated 25 April 2024 that the present redevelopment value of the Lot is significantly lower than the reserve price simply re-echoed his opinion of $2,000,000,000 which the Tribunal was not persuaded. Similarly, most of the “Market Commentary” given by Mr Chan was put forward by him at trial already and considered by the Tribunal. See §§179-185 of the Judgment. But if such economic and political arguments have any probative value at all, does it mean that the Tribunal has to take into account the ramification of the Hang Seng Index having recently increase 19% or 3,000 points in one month? According to the latest research by Savills, a property advisor of international fame, dated 24 May 2024, for instance, office prices will rebound in the next 3 months.[18] There are too many noises from the public media that have to be dealt with. 91.Rather, I agree with Mr But that in determining the applicants’ present application, the most intuitive question to ask is whether it is necessary to refix the reserve price at all because it ‘failed’ to reflect the true ‘RDV’ as at auction which received no bid. But by reference to Mr Chan’s opinion dated 25 April 2024, they are not conclusive evidence of any significant change in the market conditions that renders the reserve price defective as at the auction to justify the reserve price to be re-fixed. I agree. 92.Furthermore, Mr But submitted that against the peculiarity in an auction pursuant to compulsory sale under the Ordinance, the applicants should not be allowed to complain that the reserve price is too high after deliberately not bidding for the Lot at the auction when in reality they were actually the only willing and potential participant. Mr But suggested, and I agree, that they are simply pulling themselves up by own bootstraps. 93.At the end, I agree with Mr But that the property market is inherently imperfect and bound to experience fluctuations from time to time. Any attempt of valuers, on behalf of the majority owners or the minority owners, to submit more market updates to the Tribunal after the fixing of the reserve price and assert that the market conditions have change is undesirable. This would cause never ending disturbance to the finality of a piece of concluded litigation; the reserve price could become “perpetually revised” either in a failing market by the majority owners or in a rising market by the minority owners. Mr But referred to Billion Land Investment Limited v Union Joyce Limited & Others, HCMP 2145/2011 (unreported, dated 13 August 2015) which held at §25 that valuation by a valuer was final and binding on parties under a Tomlin Order. While the Tomlin Order also gave liberty for the parties to apply to the court for directions in connection with valuation and generally, the Court of First Instance remarked that whether the final draft of valuation was completed should not depend on whether a party chooses to invoke the liberty to apply provision. “Otherwise, a dissatisfied party can hold up the completion of the valuation exercise by issuing one summons after another for directions.” 94.Reference to Hansard demonstrates it has been the legislative intent that the sale order must automatically and immediately lapse at most after a total period of 6 months if the lot concerned is not sold by auction. The enactment of the clause “that order shall immediately be deemed to be of no effect as if it had been cancelled by the Tribunal” under section 5(4) of the Ordinance is the clearest indication by the legislature that the parties, especially the minority owners and the Tribunal should no longer be troubled by any further litigation. This, as submitted by Mr But, confers finality and protection to the minority owners against multiplicity of proceedings as a matter of policy. It also ensures a timely final resolution in the interest of minority owners to have their costs refunded because taxation proceedings need to be commenced right afterwards if cost could not be agreed. Conclusion 95.I agree with Mr But that the Ordinance literally says nothing about the power of the Tribunal in (1) granting further extension(s) of the order for sale beyond the statutory period and/or (2) reopening of the reserve price if the lot subject of an order for sale is not sold under section 5(4) of the Ordinance. 96.In any event, I am not persuaded there has been “a significant fall in property prices occurs after a reserve price has been set” as envisaged by the Court of Final Appeal in Sin Ho Yuen, supra, at §15. 97.Nevertheless, having considered all the circumstances, I am prepared to exercise my discretion to grant an extension of time of three months till 29 August 2024 under section 5(4)(b) of the Ordinance subject to there being no change in the reserve price fixed in the Judgment. That is, I refuse leave be granted to refix the reserve price. 98.I make a costs order nisi that:
99.Finally, should any respondent acting in person require interpretation of this judgment into Chinese, he/she should approach my clerk to make prior appointment with court interpreter to arrange for the same.
Mr Mok Yeuk Chi, instructed by Messrs Lo, Wong & Tsui, Solicitors & Notaries, for the 1st to 3rd Applicants 1st Respondent, absent Ms Bethany Chiu of Messrs Woo Kwan Lee & Lo, Solicitors, Notaries, Agents for Trademarks & Patents, for the 2nd Respondent 3rd Respondents, absent 4th Respondent, absent 5th Respondent, absent 6th Respondent, absent 7th Respondent, appearing in person 9th Respondent, absent Mr Adrian But, leading Mr Iverson Wong, instructed by Messrs Cheung, Chan & Chung, Solicitors & Notaries, Agents for Trademarks & Patents, for the 10th, 11th, 18th, 20th and 22nd Respondents 13th Respondent, absent 16th Respondent, absent 19th Respondent, absent 21st Respondent, absent 23rd Respondent, absent 25th Respondent, absent Attendance of Messrs V Hau & Chow, for the 26th Respondent, was excused [1] https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0402/2024040204035.pdf [2] Pursuant to a circular issued by Soundwill on 23 September 2022, Vigers had also carried out a valuation of the Lot on the basis of vacant possession in the amount of $2,560,000,000 as at 8 August 2022: https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0922/2022092200553.pdf [3] This figure has been revised by RVD to $188,145. [4] This figure has been revised by RVD to 453. [5] This figure has been revised by RVD to 397.1. [6] By the time of the hearing on 14 May 2024, the 18th respondent (“R18”) had also joint the objection, which was represented by Mr Adrian But. [7] This is found to be the case when the Reasons for Decision was released on 30 May 2024, ie one day before the present decision is handed down. It also happened after the hearing of the parties’ submissions was completed in the morning of 30 May 2024. [8] See §184 of the Judgment. [9] See Soundwill’s public announcement dated 13 September 2023: https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0913/2023091300944.pdf [10] This is different to the total of the last column in the table at §32 of the Judgment which should be 12.03%. [11] If the calculation is based on $2,100,000,000 as assessed by Vigers, 11.5% is equivalent to $241,500,000, which is some $37,375,000 less. [12] See §65 of the Judgment and Stanley J Holmes &Sons Ltd and Others v Davenham Trust Plc [2006] EWCA Civ 1568 at §19. [13] See Dunfermline Building Society v CBRE Ltd [2017] EWHC 2745 (Ch) and Bratt v Jones [2024] EWHC 631 (Ch) both of which involved a valuation of a site for residential development where the experts or the court had agreed on a margin of error of +/- 15%, [14] See §§123-132 of the Judgment. [15] See Trial Bundle F3/467c [16] Wong, Anna SP, Doctrine of Functus Officio: The Changing Face of Finality's Old Guard (2020) 98 The Canadian Bar Review 543, 547-549. [17] See section 11(1)(b) of the Lands Tribunal Ordinance. [18] https://pdf.savills.asia/asia-pacific-research/hong-kong-research/hong-kong-sales-and-investment/market-in-minutes-investment-may-2024-c.pdf. |
Cases cited in this judgment
Further hearings and rulings under LDCS 23000/2019