Connaught Real Estate Ltd v. Dawns Light International Ltd and Others

HCMP 1557/2024

[2026] HKCFI 5637

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1557 OF 2024

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D E C I S I O N

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A.  INTRODUCTION

1.After a substantive hearing of 4 days taken place in February and April 2026, on 12 June 2026, I handed down a judgment in this case (“the Judgment”[1]), in which I allowed Connaught’s application and ordered that the Building be sold en bloc at the price and in the way to be determined by this Court. On nisi basis, I ordered that Connaught’s costs in these proceedings be paid by Dawns Light and SFHL on party and party basis, and Horizon Trading’s costs in these proceedings be paid by Dawns Light and SFHL on trustee basis. The terms of the sealed order (“the Order”) are as follows:

“1. There be a sale of [the Building] en bloc at the price and in the way to be determined by the Court;

2. [Connaught] and [Dawns Light] and [SFHL] do lodge the following with the Court within 28 days from the date hereof:

a. agreed directions for the determination of the price and the way to effect the sale of the Building; or

b. in the absence of an agreement, the parties’ respective proposed directions and the reasons in support of the respective proposals;

3. Pending the sale of the Building in accordance with paragraph (1) above, each of the parties in these proceedings shall not renew or cause the renewal of the existing tenancies concerning any part of the Building, or create any tenancy or cause the creation of any tenancy concerning any part of the Building;

4. There be liberty to apply;

5. There be a costs order nisi that:

a. [Connaught]’s costs in these proceedings (including costs reserved, if any) be paid by [Dawns Light] and [SFHL], with a certificate for two counsel, to be taxed if not agreed; and

b. [Horizon Trading]’s costs in these proceedings (including costs reserved, if any) be paid by [Dawns Light] and [SFHL] on trustee basis, to be taxed if not agreed;

6. Unless there is an application by an inter partes summons for variation of the aforesaid costs order nisi within 14 days from the date hereof, the costs order nisi shall become absolute without a further order.”

2.On 9 July 2026, Dawns Light and SFHL lodged an appeal against the Judgment, ie CACV 733/2026 (“the Appeal”). In the Appeal, Dawns Light and SFHL are seeking an order to set aside the Judgment, and an order that the Commercial Accommodation be sold on “floor-by-floor” basis or en bloc. On 23 July 2026, Dawns Light and SFHL issued a summons (“the Stay Summons”), applying for a stay of §§1, 2 and 5 of the Order pending the determination of the Appeal (“the Stay Application”).

3.Regarding the Stay Application, the parties has filed the following affidavits respectively with leave of the Court:

(1)  4^th Affidavit of Christine Fung dated 24 July 2026 in support of the Stay Application;

(2)  5^th Affidavit of Fung Hing Cheung Kenneth dated 14 August 2026 in opposition;

(3)  4^th Affidavit of Christine Fung dated 28 August 2026 in reply; and

(4)  6^th Affidavit of Fung Hing Cheung Kenneth dated 28 September 2026, being an additional affidavit from Connaught.

4.Regarding the proposed directions for the sale of the Building, Connaught, Dawns Light and SFHL have reached some agreement. However, there are some areas in which the parties are unable to reach an agreement and have put forward their respective proposals. The agreed and non-agreed proposed directions (“the Proposed Directions”) are annexed hereto as Annex I for reference.

5.The issues before me in this hearing are as follows:

(1)  the Stay Application; and

(2)  directions for the sale of the Building.

6.In this hearing, Mr Jason Fee represents Connaught. Mr Adrian But, together with Ms Jamie Pang, represent Dawns Light and SFHL. Ms Emily Ting represents Horizon Trading.

7.This decision should be read together with the Judgment. For ease of reference, the abbreviations used in the Judgment, and the abbreviations used in the Proposed Directions, are adopted in this decision.

B.  THE STAY APPLICATION

B1.  The parties’ respective stances

8.Originally in the Stay Summons, Dawns Light and SFHL proposed that §§1, 2 and 5 of the Order be stayed. However, Connaught, Dawns Light and SFHL have jointly provided the Proposed Directions to the Court. They also accept that the differences between them concerning the Proposed Directions be determined in this hearing. Mr But has clarified in the hearing that Dawns Light and SFHL are now seeking an ‌‌order to stay §§1 and 5 of the Order only pending the determination of the Appeal.

9.Connaught has no objection that the sale of the Building should not be completed before the determination of the Appeal. However, Connaught’s stance is that §1 of the Order should not be stayed beyond the aforesaid scope. Connaught’s view is that a direction that no binding sale and purchase agreement concerning the Building should be entered into before the determination of the Appeal would be sufficient for the purpose of holding the ring. Further, Connaught objects to the application to stay §5 of the Order. Connaught is also of the view that any stay granted should be conditional upon the parties fixing the appeal date within 14 days or within any other period which the Court deems appropriate.

10.There is one matter in respect of which Connaught, Dawns Light and SFHL are in agreement. They agree and request that notwithstanding §3 of the Order, there be leave to allow the parties to renew existing leases upon their expiry for a maximum period of one year, with an expiry date not beyond 30 June 2028. In view of the agreement reached by the parties, I would accede to this request.

11.Regarding the Stay Application, Horizon Trading adopts a neutral position.

12.Before discussing the parties’ respective submissions concerning the Stay Application, I would first state my view on the evidence adduced by Connaught through the 6^th Affidavit of Fung Hing Cheung Kenneth. The purpose of that affidavit is to produce an offer to purchase the Building made by a potential purchaser in a draft provisional sale and purchase agreement signed by that potential purchaser (“the PSPA”). The offer in the PSPA is to purchase the Building at the price of HK$285 million, and with a leaseback arrangement concerning the Shop Portion provided to SFHL. I decline to attach weight to the PSPA for the purpose of the Stay Application:

(1)  According to Connaught, it received the PSPA from Cushman & Wakefield (HK) Ltd (“Cushman”) on 23 September 2026. That would mean that Connaught must have given some instructions to Cushman previously. However, the instructions given to Cushman have not been disclosed. Further, there is no disclosure as to (a) whether there was any discussion between Connaught and the potential purchaser before the PSPA, and (b) if yes, what had been discussed. With the non-disclosure of all these, it would not be prudent if weight is attached to the PSPA.

(2)  The name of potential purchaser in the PSPA has been redacted. Hence, the identity of the potential purchaser is unknown. The background of the potential purchaser is also unknown. It is not known whether the potential purchaser is indeed someone with the necessary financial capability to complete the sale and purchase proposed in the PSPA. With all these unknowns, no weight can be attached to the PSPA.

(3)  One must not forget that Connaught’s position is that the Building would not be sold before the determination of the Appeal. Hence, it is a certainty that SFHL can still possess and occupy the Shop Portion before the disposal of the Appeal. In the circumstances, the leaseback arrangement concerning the Shop Portion as stated in the PSPA, for the purpose of considering the Stay Application, would not be relevant.

Stay of §1 of the Order

13.The principles concerning stay of execution pending appeal are well established and have been set out by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd[2]. Ultimately, the Court has to conduct a balancing exercise and uses its common sense to consider whether a stay should be granted, bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success.

14.In relation to the Stay Application, no party adopts an extreme position. Connaught is not saying that no stay should be granted because the Appeal is completely unarguable. At the same time, Dawns Light and SFHL are not saying that there should be a blanket stay covering everything because the Appeal is a very strong appeal and is bound to succeed. The dispute between the parties is in fact within a narrow compass, ie the scope of the stay. On the one hand, Dawns Light and SFHL contend that the whole §1 of the Order should be stayed before the determination of the Appeal. On the other hand, Connaught submits that the correct balance is to state that no binding sale and purchase agreement shall be entered into before the disposal of the Appeal, and that would be sufficient. Accordingly, my task is to determine the scope of the stay by conducting a balancing exercise. In conducting that balancing exercise, I should use commons sense, bearing in mind at all times the starting point is that Connaught, being the successful party in the litigation, should not be deprived of the fruits of its success.

15.Mr But on behalf of Dawns Light and SFHL submits that the stay with the extent proposed in the Stay Application is appropriate. He submits that:

(1)  If the stay proposed by Dawns Light and SFHL is not adopted, in accordance with the Proposed Directions, the parties will be required to incur costs for the following steps:

(a)  Engage WKLL to prepare tender documents and to conduct the sale of the Building;

(b)  Engage Savills to prepare updated valuation reports on EUV and RDV;

(c)  Nominate and engage a sole sale agent; and

(d)  Proceed with advertising, viewings, invitations for tender and all other work for the tender exercise.

(2)  There should be a stay of implementation of the above steps for the following reasons:

(a)  The enforcement of the said directions would impose an immediate and irreversible financial and operational burden on SFHL, and expose its general banking facilities to a material risk of reassessment, long before any sale proceeds could be available:

(i)  The Shop Portion has been the home to SFHL’s dried seafood wholesale business for 115 years. There is no available substitute premises (both location-wise and functionally) in the immediate vicinity that can accommodate SFHL’s business on the same scale and operational advantages. Without a stay of the directions implementing the sale of the Building, that would subject SFHL’s only operational premises to active sale and marketing processes. That would put SFHL under immediate pressure to look for alternative premises, relocation and financing arrangements, although the Appeal may ultimately show that no relocation is required.

(ii)  SFHL’s financial position heightens the prejudice it will suffer if the implementation of the directions for the sale of the Building is not stayed. SFHL only has bank and cash balances (available for use) of about HK$4.5 million, and such are barely sufficient to meet its operating expenses, current liabilities and other contingencies. One cannot reasonably expect SFHL to meet the financial demand/burden of an active sale and relocation process as if they were costs-neutral or merely a matter of ordinary business expenses.

(iii)  The Shop Portion has been mortgaged to HSBC to secure SFHL’s general banking facilities, meaning that any carrying-out of the directions for the sale of the Building (in particular marketing brochures or tender documents which are likely made available to the mortgagee bank) directly compromises the integrity of that collateral. In turn, it exposes SFHL to an immediate risk of lender risk reassessment or even repayment demands. As the operation/survival of SFHL’s business relies heavily on such banking facilities, the effect of any cancellation/reduction of such finances would be to cause severe damage to the viability and solvency of SFHL’s business, thereby rendering the Appeal nugatory even if SFHL eventually succeeds.

(iv)  The prejudice as shown in the above are not cured by an eventual successful appeal. Dawns Light and SFHL’s heavy financial commitments and serious disruption to the latter’s operations will already have occurred. The harm caused will be serious and irreparable. The stay should prevent that risk from materialising pending the determination of the Appeal. The fact that ownership would not be immediately transferred, or that vacant possession needs not be delivered, does not answer this prejudice.

(b)  Even if the Appeal is allowed, all costs involved in carrying out the directions for the sale of the Building will have been irreversibly and unnecessarily incurred:

(i)  The parties would need to retain and pay professionals upfront and incur ongoing and recurring costs and effort to prepare tender documents, undertake valuation work, appoint and manage a sale agent, market the Building, arrange viewings and solicit tenders. These are substantive acts of execution, not measures to preserve the status quo. Once undertaken, the relevant work, fees and expenses cannot be unwound.

(ii)  If the Court of Appeal eventually sets aside the order to sell the Building en bloc (and order either an en bloc or floor by floor sale of the Commercial Accommodation), there will be no basis for the tender process or the related valuation, agency and conveyancing work, ie the substantial costs will have been incurred for no useful or legitimate purpose.

(c)  Even if the Appeal is dismissed, the implementation of the directions for the sale of the Building does not necessarily save time or costs. In particular, several of the intended steps are inherently time-sensitive and will require updating, renewal or repetition by the time the Appeal is determined. An example being the updated valuation report on the EUV and RDV of the Building, its sole function being to set an accurate reserve price near the actual date of sale. Any valuation conducted now is likely to be rendered obsolete and unreliable before the determination of the Appeal. The same applies with equal force to the preparation of tender documents, engagement of sale agents and promotion and marketing works: all of which will become stale and require duplicative expenditure later. Essentially, these steps (including marketing and advertisement of the tender) can only be meaningfully prepared and practically carried out after determination of the Appeal and after fixing of the reserved price in accordance with the updated valuation report to be prepared by Savills.

(d)  Realistically, no buyer will be interested in looking into a prospective sale of the Building for which the essential aspects are still subject to change such as subject matter and manner of sale (en bloc or “floor-by-floor”), the tenancy status and, most importantly, its reserved price. Any promotion and marketing will be premature and meaningless without finalization of the above.

(e)  It is commercially unrealistic to engage professional entities (such as WKLL, Savills, and sale agents) now, while expecting them to put on hold all works pending the determination of the Appeal, the timeline of which is uncertain. Given that professional fees accrue based on work performed and time spent, the aforesaid professionals cannot commit operational, personnel and marketing resources without commencing the work for which they are engaged. As such, the implementation of the directions for the sale of the Building will incur immediate, unrecoverable but in fact futile effort and costs that serves little or no meaningful purpose.

16.Mr But relies upon (a) Child v Commonwealth Development Bank of Australia[3]; and (b) Shaohe Zhang v Xiaojun Zhai[4], in support of his submissions.

17.Mr But also submits that Connaught is unable to identify any specific prejudice apart from the general assertion that it has for over 20 years been striving to secure an exit. The historical duration of the parties’ dispute does not explain why Dawns Light and SFHL should now be compelled to incur the costs and assume the irreversible risks of implementing the directions for the sale of the Building.

18.With respect, I am not persuaded by Mr But’s submissions.

19.First, one must bear in mind that the starting point is that the successful party is not to be deprived of the fruits of its success. While Connaught is enjoying the fruits of its success in the litigation, Dawns Light and/or SFHL would have to face the music as a result of the Judgment at the same time. The fact that SFHL would need to spend time to look for another place to continue its business, and the fact that SFHL may have to face some financial pressure, are insufficient for justifying a stay of §1 of the Order in its entirety. SFHL has adduced evidence through the 3^rd and the 4^th Affidavits of Christine Fung to show the prejudice to SFHL if no stay is granted. I have duly considered the evidence. With respect, in my view, SFHL has not put forward cogent and sufficient evidence showing that without a blanket stay of §1 of the Order, SFHL would have a liquidity problem or its operation would be put to a halt.

20.Second, if the Appeal is allowed, that would mean that the Order would be set aside and would be replaced by an order that the Commercial Accommodation be sold. In that scenario, Dawns Light and SFHL may recover the costs incurred by them in complying with the Order (including the costs incurred in complying with the directions for the sale of the Building) from Connaught. It is indisputable that (a) Connaught has a substantial interest in the Commercial Accommodation; (b) if the Appeal is allowed, there would be an order directing that the Commercial Accommodation be sold; (c) Connaught would be entitled to have a substantial part of the sale proceeds; (d) it is certainly workable that a mechanism can be built in the order directing the sale of the Commercial Accommodation to make sure that any amount due from Connaught to Dawns Light and SFHL shall be deducted from the Connaught’s entitled sum first and paid to Dawns Light and SFHL, and only the balance after the deduction be released to Connaught; and (e) by reason of all these, Dawns Light and SFHL are well protected. In my view, by directing that no binding sale and purchase agreement shall be entered into before the disposal of the Appeal and not staying §1 of the Order in its entirety, the Appeal would not be rendered nugatory. If the Appeal is allowed, any prejudice to Dawns Light and SFHL is not something irreversible.

21.Third, apart from valuation, some other matters concerning the sale of the Building in fact can proceed before the determination of the Appeal. Mr Fee for Connaught submits that various steps in fact would need to be carried out before a reserve price is fixed and before the tender period even commences (Proposed Directions §§1-7), including (a) engagement of the conveyancing solicitors; (b) parties’ nomination of sale agents; (c) the solicitors’ consideration of the nominated agents; (d) engagement of the selected sole agent; (e) promoting and marketing the Property (including arrangement of viewings); and (f) advertisement by the agent. All these would require input from professionals from various disciplines. Further, all these steps would all take substantial time, especially in light of the acrimonious relationship between the parties.

22.I am in agreement with Mr Fee, save that I am of the view that advertising the sale of the Building (Proposed Directions §6) should be done within a specified period after the determination of the Appeal.

(1)  Mr Fee submits that the timing of the updated valuation as stated in the Proposed Directions §3 can be adjusted to “a date within 21 days after the determination of the Appeal in CACV 733/2026, or such other date as the Court may direct”. That would ensure that the reserve price would be fixed at a time close to the date of the tender so as to reflect the up-to-date market conditions. This suggestion is in accordance with common and commercial sense. I accept the suggestion.

(2)  In the advertisement concerning the sale of the Building, naturally the 1^st Reserved Price shall be stated in the advertisement. Thus, I am of the view that in Proposed Directions §6, “within 30 days of his appointment” shall be changed to “within 35 days after the determination of the Appeal or any other date as the Court may direct”.

23.Subject to the qualification as set out in the above, I accept Mr Fee’s submissions as set out in §21 above. I am of the view that there are further reasons for not holding up all the preparatory works concerning the sale of the Building before the determination of the Appeal:

(1)  WKLL would need time to prepare the draft tender documents (“Proposed Directions §1”). The co-owners would need time to consider the draft and may provide comments to WKLL. WKLL would then need time to consider the comments and to decide whether any amendment to the draft is necessary. If a co-owner is not satisfied with the decision made by WKLL, that co-owner may seek a direction to tackle the situation, and the dispute would be resolved by the Court. All the aforesaid would take time.

(2)  As to the preparation of the Agency Agreement (“Proposed Directions §5”), the consideration as set out in subparagraph (1) above is also applicable.

(3)  In the process of selecting the Agent (“Proposed Directions §5”), any co-owner not satisfied with WKLL’s choice may seek a direction from the Court to deal with the situation. This also would take time.

(4)  Bearing in mind what I have said in §§19 and 20 above, I do not see any valid reason for holding up all the preparatory works before the determination of the Appeal.

24.Fourth, there is no evidence showing that no one in the market would be interested in considering purchasing the Building while the Appeal is in place. The indisputable fact is that this Court has made the Judgment and ordered that the Building be sold en bloc. Purchasing the entire Building is not a small investment decision, and investors in the market would need time to consider all the information available. With respect, in my view, it is too bold to say that just because of the existence of the Appeal, no investor would come to inspect the Building, and no investor would consider purchasing the Building. On the contrary, I am of the view that investors would consider all the information available, and would act fast once the outcome of the Appeal is known.

25.Fifth, as to the cases cited by Mr But, with respect, I am not prepared to go into the details of those cases. I do not regard any principle is established in those cases. As said by Ma J (as he then was) at §10 in Star Play, ultimately whether a stay should be granted is a balancing exercise conducted by the Court by using common sense. Each case depends upon its own facts.

26.Sixth, I do not agree that staying §1 of the Order entirely would cause no prejudice to Connaught. If the stay sought by Dawns Light and SFHL is granted, that would mean that no preparatory work for the sale of the Building would be carried out before the determination of the Appeal. If the Appeal is dismissed eventually, that would mean that Connaught would need to wait for a longer period of time in order to see the sale of the Building en bloc. That would also mean that the chance that the third-generation members in the PF Camp (who are in their advanced age) seeing the final resolution of the disputes concerning the Building would become smaller.

27.Having considered the parties’ respective submissions, I am persuaded by Mr Fee that there is no sufficient reason to stay §1 of the Order in its entirety. In my view, bearing the parties’ respective interests in mind, by using common sense, the proper balance is that some preparatory steps for the sale of the Building should be allowed to proceed notwithstanding the existence of the Appeal, but no binding sale and purchase agreement shall be entered into by the parties in these proceedings (who are all the co-owners of the Building) before the determination of the Appeal.

Stay of §5 of the Order

28.Mr But submits that §5 of the Order should be stayed pending the determination of the Appeal for the following reasons:

(1)  Taxation of costs is a costly process and in the event the Judgment is overturned, such costs spent for taxation will be wasted. Moreover, Connaught is a company incorporated in Guernsey with no other landed property or business in Hong Kong, and its members (mostly comprising of members of the PF Camp) are individuals domiciled abroad.

(2)  As such, any taxed costs paid to Connaught, which are likely to be distributed to such parties for reimbursement or repayment purposes, will likely be irrecoverable by SFHL against Connaught in the event of a successful appeal. Connaught’s stake in the Commercial Accommodation will have to be sold in any event and is unlikely to be available for enforcement purposes.

(3)  Based on the above, §5 of the Order should be stayed altogether to preserve the status quo.

29.I have no hesitation in rejecting these submissions.

(1)  One must bear in mind that the starting point is that Connaught, being the successful party, should not be deprived of the fruits of its success.

(2)  It is incorrect to say that Connaught has no landed property in Hong Kong. It is an indisputable fact that Connaught is a co-owner of the Building, having a substantial interest in the Building.

(3)  As said in §20 above, if the Appeal is successful, there would be an order directing the Commercial Accommodation be sold, and Connaught would be entitled to substantial sale proceeds. There is no reason to say that in this scenario, Connaught would have difficulties in returning to Dawns Light and SFHL anything previously paid by them pursuant to the Judgment.

30.I would dismiss the application for staying §5 of the Order.

Conditional stay?

31.There is no dispute that this Court may grant a stay subject to condition(s), for example, requiring the parties to fix the appeal date within a prescribed period after the stay decision.[5]

32.Mr Fee submits that in order to avoid delay in prosecuting the Appeal by Dawns Light and SFHL, any stay granted by this Court should be conditional upon parties fixing the appeal date within 14 days, or within any other period which the Court deems fit.

33.Mr But submits that since the Judgment is impacting upon Dawns Light and SFHL, Dawns Light and SFHL have all the incentives to fix the appeal date sooner rather than later. However, depending upon the ruling of this Court on the directions for the sale of the Building, Dawns Light and SFHL may lodge an appeal against that ruling (“the Direction Appeal”). In that scenario, Dawn Light and SFHL may need to seek directions from the Court of Appeal to have the Appeal and the Direction Appeal to be heard at the same time, and only after that the appeal date can be fixed. For all these reasons, it is undesirable for this Court to impose the condition as suggested by Connaught.

34.On this issue, I agree with Mr But. The reality is that after knowing this Court’s ruling on the directions for the sale of the Building, the party or parties not satisfied with that ruling may lodge an appeal. It is probable that the Direction Appeal will be in place in the near future.  The analysis in Mr But’s submissions is correct. I would not adopt the condition suggested by Connaught.

35.Although the condition proposed by Connaught is not adopted, Dawns Light and SFHL have a duty to prosecute the Appeal with due diligence. If they fail to do so, Connaught may seek appropriate relief from the Court of Appeal.

C.  DIRECTIONS FOR THE SALE OF THE BUILDING

C1. The parties’ agreement and disagreement

36.As shown in the Proposed Directions, Connaught on the one hand, and Dawns Light and SFHL on the other hand, managed to reach an agreement on most of the directions for the sale of the Building. The differences between them are those shown in the Proposed Directions §§13A and 13B, and §§16A and 16B.

37.I would deal with these differences first.

C2. Proposed Directions §§13A and 13B

38.Mr Fee submits that after the sale of the Building, the net proceeds should be distributed to the parties pro rata in accordance with the undivided shares allocated to them under the DMC. Mr Fee submits that where an order for sale is made under the PO, the sale proceeds are routinely distributed to the co-owners in accordance with the ratio of their respective undivided shares in the land. See (a) Mayluck Investment Ltd v Lee Yih Ping[6]; (b) Wong Chun Kei v Poon Vai Ching[7]; and (c) Tsang Kwok Wai v Tsang Kam Wah[8].

39.Mr But submits that the net proceeds should be distributed to the parties on the basis of the ratio of the respective EUVs of the Commercial Accommodation and the Shop Portion as agreed and recorded in §43 of the Judgment, or alternatively in accordance with the EUV(s) in an updated valuation. Mr But submits that apportioning the sale proceeds by reference to the undivided shares is not a fair distribution. The correct approach is to use the EUVs of the different portions of the Building as the reference. Mr But submits that although these proceedings concern an application under the PO, the apportionment regime under the Land (Compulsory Sale for Redevelopment) Ordinance (“LCSRO”) is intrinsic. Its underlying rationale should be considered by this Court when exercising the discretion under s.6(4) of the PO, so that a fair distribution of the sale proceeds can be achieved. According to s.10(3)(a) and part 3 of Schedule 1 of the LCSRO, the basis for apportioning sale proceeds is the respective EUV(s) of the constituent units for a development governed by a single DMC (regardless of whether such development stands on single-lot or straddles over multiple lots).

40.As to the authorities cited by Mr Fee, Mr But submits that:

(1)  In Mayluck, the 1^st defendant put forward an argument same as the one now being advanced by Dawns Light and SFHL. However, in that case, the 1^st defendant only acquired their interest in the land after the building had been demolished.[9]  For this reason, the 1^st defendant’s argument was rejected by the Court. The situation in this case is different. In this case, SFHL was and is the owner of the Shop Portion at all material times. Hence, Mayluck can be distinguished.

(2)  In Wong Chun Kei, the Court merely set out the plaintiffs’ argument concerning the distribution of sale proceeds (ie distribution in accordance with undivided shares) at §81 of the judgment. The Court did not make a decision on the correctness of the suggested distribution.

(3)  Tsang Kwok Wai is a case concerning the sale of a village house, not a case concerning the sale of a multi-storey building. That case should be distinguished on this basis.

41.Mr But frankly and fairly admits that there is no decided case in support of the approach now being proposed by Dawns Light and SFHL. However, Mr But submits that approaching the matter by resorting to the first principles, Dawns Light and SFHL’s proposal is correct and should be accepted.

42.Ms Ting submits that Horizon Trading’s position is neutral. However, Ms Ting submits that the direction given should also cover Horizon Trading, so that Horizon Trading would be able to know whether it should do anything in relation to the net proceeds. Ms Ting emphasizes that Horizon Trading is a mere trustee and does not claim any beneficial entitlement to any net sale proceeds.

43.Having considered the parties’ respective submissions, I am of the following view:

(1)  In Mayluck, Le Pichon J rejected the 1^st defendant’s submissions for several reasons. One of the reasons is as follows:

“By way of analogy, counsel for the first defendant also referred to the Crown Lands Resumption Ordinance (Cap 124). Under s 10(1) of that Ordinance, the tribunal is authorised to determine the amount of the compensation payable on the basis of loss or damage suffered by the claimant due to the resumption of land. Subsection (2) sets out factors to be considered. Again, I do not see the relevance of this Ordinance to the present issue since we are not here dealing with the amount of compensation payable to each of the co-owners. The analogy to the Crown Lands Resumption Ordinance is inapposite.”[10]

For the same reason, I refuse to accept Mr But’s submission that the LCSRO can be a basis or reference in support of Dawns Light and SFHL’s position.

(2)  In Wong Chun Kei, Fok J set out the financial benefits (calculated in accordance with the undivided shares) of an order for sale in §81 of the judgment. The learned judge said that “[t]he argument based on the financial outcome of a sale of the Property seems to me to be the strongest argument for the plaintiffs.” (Emphasis added)

(a)  The following reminder recently given by Cheung CJ in Wong Chi Hung v Lo Wing Pun and Another[11] should be borne in mind (footnotes omitted):

“33. The Court of Appeal, and all courts in Hong Kong, are bound by the decisions of this Court. The Court of Appeal is also bound by its own previous decisions, subject to the “plainly wrong” exception as fully explained in Solicitor (24/07). What binds a subsequent court is, of course, only the ratio decidendi of the earlier decision. It has been said that “[a] case is not binding authority for a proposition that has been assumed sub silentio, rather than actually considered and decided.” However, the position in practice is considerably more nuanced than that formulation might suggest.

34. In R (Kadhim) v Brent London Borough Council Housing Benefit Review Board, Buxton LJ explained:

‘Like all exceptions to, and modifications of, the strict rule of precedent, this rule [that a subsequent court is not bound by a proposition of law assumed by an earlier court that was not the subject of argument before or consideration by that court] must only be applied in the most obvious of cases, and limited with great care. The basis of it is that the proposition in question must have been assumed, and not have been the subject of decision. That condition will almost always only be fulfilled when the point has not been expressly raised before the court and there has been no argument upon it…. And there may of course be cases, perhaps many cases, where a point has not been the subject of argument, but scrutiny of the judgment indicates that the court’s acceptance of the point went beyond mere assumption. Very little is likely to be required to draw that latter conclusion: because a later court will start from the position, encouraged by judicial comity, that its predecessor did indeed address all the matters essential for its decision.’

The subject was re-visited in some detail by Lewison LJ in the recent English Court of Appeal decision in Zedra Trust Co (Jersey) Ltd v THG Plc.

35. Echoing the observations of Buxton LJ in Kadhim, where a particular legal position has been treated by the courts – including the Court of Appeal, or even this Court – as representing the law of Hong Kong over a substantial period, and cases have been decided on that footing, it would take “very little” to conclude that the earlier cases’ acceptance of that position went beyond mere assumption. This also accords with sound legal policy. Apart from the basic requirement of justice that like cases be treated alike, the principal rationale for the doctrine of precedent, and its central importance to the common law, lies in the certainty, predictability, and consistency it brings to the law, thereby enabling individuals and businesses to order their affairs accordingly. Where the higher courts have long treated a particular legal position as the law, and decided cases accordingly, it would tend to undermine rather than promote that rationale to hold that the position may be readily departed from merely on the basis that it was apparently assumed rather than fully reasoned. In case of doubt (or save “in the most obvious of cases”), so far as the Court of Appeal is concerned, departure should ordinarily be permitted only where the earlier position is shown to be “plainly wrong”.

36. At the other end of the spectrum, where a legal position has been assumed without any, or any real, argument or discussion, is of relatively recent origin, and remains controversial either in local or overseas jurisprudence or in academic commentary, a subsequent court may find it easier to draw the conclusion that the legal position was merely assumed by the previous court. The relatively more relaxed approach in this latter situation likewise advances legal policy. For an equally important policy consideration underlying the doctrine of precedent is that an unduly overreaching, rigid or inflexible application of the doctrine risks stifling the proper development of the common law of Hong Kong, particularly in the Court of Appeal, where the great majority of civil appeals are finally determined.” (Emphasis added)

(b) In Wong Chun Kei, the plaintiffs put forward an argument that if an order for sale was granted, the sale proceeds would be distributed in accordance with the co-owner’s respective undivided shares, and that would be the financial befits of an order for sale. Fok J said at §81 of the judgment that this point was “the strongest argument for the plaintiffs”. The Court was of the view that there was force in that point, and the Court accepted that if an order for sale was made, the financial outcome would be the one suggested by the plaintiffs. However, the Court declined to make an order for sale because of some other considerations.

(c) Mayluck was decided in 1996. Wong Chun Kei was decided in 2005. These two cases show that over a long period of time, the Hong Kong Courts’ approach concerning distribution of the sale proceeds under the PO is consistent, ie distribution should be done in accordance with the co-owners’ respective undivided shares in the land.

(3) In Tsang Kwok Wai, the issue before Q Au-Yeung J was directions for the sale of the property in question. Previously, in 2003, DHCJ Gill had made an order for sale of the property and the net proceeds were to be divided amongst the co-owners in accordance with their shares in the property. That case is an example showing that net proceeds after the sale of the subject property (a building) would be distributed to the co-owners in accordance with their respective shares in the building. It is true that in Tsang Kwok Wai, the property in question is a village house. However, I do not think that this point alone can sufficiently distinguish that case from the present case.

(4) The fact that no case in which a different approach concerning the distribution of the sale proceeds under the PO can be found reinforces that indeed over a substantial period of time, the Hong Kong Courts adopt a consistent approach in this matter.

(5) In view of all the above, as a matter of judicial comity, there is no reason for me to depart from the approach repeatedly and consistently adopted by different judges in previous cases. I would direct that after the sale of the Building, the net proceeds shall be distributed to the co-owners in accordance with their respective undivided shares as stipulated in the DMC.

(6) There is a further reason in support of the aforesaid conclusion. If it is necessary to carry out some major renovation works concerning some common areas or common facilities in the Building, the renovation fees would be shared by the co-owners in accordance with the undivided shares, not in accordance with the EUVs. Conversely, it cannot be said that there is unfairness in distributing the net proceeds after the sale of the Building in accordance with the co-owners’ respective undivided shares.

44.For the reasons above, I would adopt Proposed Directions §13A as a direction given by this Court, subject to some necessary modifications covering Horizon Trading.

C3.  Proposed Directions §§16A and 16B

45.I have no hesitation in rejecting Proposed Directions §16B suggested by Dawns Light and SFHL.

(1)  The Order was made by this Court after a contentious hearing. The Order would not and should not be automatically annulled if 3 attempted sales of the Building are not successful. This is particularly so if the Appeal is dismissed and the Order is affirmed by the Court of Appeal. As rightly pointed out by Mr Fee, if 3 attempted sales are not successful, the parties may seek further directions from the Court.

(2)  There is also no reason to say that if 3 attempted sales of the Building are unsuccessful, costs and expenses of the sale should be borne by Connaught. There can be many reasons leading to the unsuccessful attempts. There is no basis to say that Connaught must be solely responsible for the unsuccessful attempts. In the absence of any special reason, the costs of the unsuccessful attempts should be borne by Connaught, Dawns Light and SFHL in accordance with the ratio by reference to their respective undivided shares. This should be the starting point. Any party intending to depart from this starting point shall make an application to the Court to seek an appropriate direction.

46.I would adopt Proposed Directions §16A. Since Horizon Trading is maintaining neutral stance, I would modify that paragraph to make it clear that “the parties” in that paragraph shall mean Connaught, Dawns Light and SFHL only.

C4.  Other matters

47.Having considered Ms Ting’s submissions, I would modify Proposed Directions §12 to cover Horizon Trading’s costs and expense incurred by Horizon Trading in complying with the directions for the sale of the Building.

48.With Ms Ting’s agreement, I would also add a direction that Horizon Trading be excused from participating in future application(s) concerning the sale of the Building pursuant to the directions given by this Court. For avoidance of doubt, papers of these application(s) shall be served on Horizon Trading, and Horizon Trading may elect to participate in a particular application if it wishes.

D.  DISPOSITION

49.I order that:

(1)  For the purpose of carrying out §1 of the Order, each of the parties in these proceedings shall not enter into any binding sale and purchase agreement before the determination of the Appeal.

(2)  Notwithstanding §3 of the Order, there be leave to the parties to renew existing leases upon their expiry for a maximum period of one year, with an expiry date not beyond 30 June 2028.

(3)  Save the aforesaid, the Stay Summons be dismissed.

50.I further make an order in terms of the Proposed Directions, subject to the following:

(1)  Amended §3:

“3.  The parties shall engage Savills as the single joint valuation expert for the purpose of preparing an updated valuation report on the EUV and RDV of the Property to be sold en bloc as at a date within 21 days of the determination of the appeal in CACV 733/2026 (“the Appeal”), or such other date as the Court may direct (the “Updated Valuation”). The reserve price for the Property shall be the higher of the assessed EUV and RDV (the “1^st Reserved Price”).”

(2)  Amended §6:

“The Agent shall, within 35 days after the determination of the Appeal or any other date as the Court may direct, and without prejudice to his other obligations set out under the Agency Agreement place an advertisement in at least one Chinese local newspaper for five days and one English local newspaper for three days, inviting offers for the purchase of the Property by public tender for a period of not less than 45 days from the date of the first publication of the advertisement (“the Tender Period”).”

(3)  Adding §12(4):

“12(4) Costs and expenses incurred by the 3^rd Defendant in complying with these directions.”

(4)  Amended §13A:

“13.  Any residual of the sale proceeds shall be paid to the Plaintiff, the 1^st, the 2^nd and the 3^rd Defendants pro rata in accordance with their equal undivided shares of the Property allocated in the Deed of Mutual Covenant incorporating the Management Agreement dated 10 August 2009 (“the DMC”) and registered in the Land Registry by Memorial No. 09082801370039. The 3^rd Defendant shall hold the sale proceeds received on trust for the Plaintiff, the 1^st and the 2^nd Defendants in the ratio determined by reference to their respective equal undivided shares of the Property allocated in the DMC.”

(5)  §13B not adopted;

(6)  Amended §16A:

“16. In the event of an unsuccessful sale of the Property after the repetition of the sale process for 3 times as aforesaid:-

(1) the Plaintiff, the 1^st and the 2^nd Defendants shall be at liberty to apply to Court for further directions.

(2) the Plaintiff, the 1^st and the 2^nd Defendants shall bear the costs and expenses of the unsuccessful sale in accordance with the ratio determined by reference to their respective equal undivided shares of the Property allocated in the DMC.”

(7)  §16B not adopted;

(8)  Adding §17:

“17. The 3^rd Defendant be excused from participating in future application(s) concerning the sale of the Building pursuant to these directions. For avoidance of doubt, papers of these application(s) shall be served on Horizon Trading, and Horizon Trading may elect to participate in a particular application if it wishes.”

51.Regarding costs, I am of the view that Connaught is the successful party in the hearing before me: (a) the scope of the stay is the one contended by Connaught; (b) as to the differences in the Proposed Directions, I adopt the version suggested by Connaught. Although I do not accept Connaught’s proposed condition attached to the stay, the time spent on arguing that matter is minimal and should not affect the overall costs position. Applying the general rule of costs following the event, I am of the view that costs of the Stay Summons and costs of the arguments concerning the Proposed Directions (including costs reserved, if any) shall be paid by Dawns Light and SFHL to Connaught. For the reasons set out in the Judgment §§87(2) and (3), those costs should be paid by Dawns Light and SFHL to Horizon Trading on trustee basis. Those costs are to be paid forthwith and be summarily assessed on paper. I make the aforesaid costs order on nisi basis. Unless there is an application by an inter partes summons for an order to vary the costs order nisi within 14 days, the costs order nisi shall become absolute without a further order. There be leave to Connaught and Horizon Trading to lodge and serve their respective statements of costs (each limited to 3 pages) within 7 days after the costs order nisi becoming absolute, and leave to Dawns Light and SFHL to lodge and serve a list of objections (limited to 3 pages) to each statement of costs within 7 days thereafter.

52.Lastly, it remains for me to thank all counsel for the very helpful assistance provided to the Court.

Mr Jason Fee, instructed by Deacons, for the plaintiff

Mr Adrian But and Ms Jamie Pang, instructed by Wilkinson & Grist, for the 1^st and 2^nd defendants

Ms Emily Ting, instructed by Hugill & Ip, for the 3^rd defendant

Annex: Proposed Directions