Kaisilk Development Ltd v. Urban Renewal Authority

HCA010017/2000

HCA 10017/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10017 OF 2000

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Coram: Deputy High Court Judge Woolley in Court

Dates of Hearing: 19-22 February 2002

Date of Handing Down Judgment: 12 March 2002

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J U D G M E N T

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1.This is an application on the part of the defendant to strike out the plaintiff's amended statement of claim under the provisions of Order 18, rule 19, namely that it discloses no reasonable cause of action, that it is frivolous and vexatious, and that it is an abuse of the process of the Court.

2.The proceedings arise out of negotiations which took place between the plaintiff and the Land Development Corporation (the LDC), the defendant's predecessor, between 1996 and 1998, in respect of property in Wanchai Road, and Stone Nullah Lane, Wanchai, owned by the plaintiff, within an area the subject of a Development Scheme Plan for which the LDC had obtained the approval of the Town Planning Board and the Governor in Council, as required by the Land Development Corporation Ordinance, Cap. 15 (the Ordinance). Those negotiations continued from November 1996, when the LDC made its first offer to purchase the property, to 1998, with further increased offers in August 1997 (the second offer) and May 1998 (the third offer). The third offer not having been accepted by the plaintiff within the time specified therein, namely 14 days, the LDC, after further negotiations, refused to continue negotiations on the basis of that offer, which in turn was based on values as at July 1997, but only on current market values. The plaintiff belatedly sought to accept the third offer in September 1998, which acceptance was refused by the LDC. I will return to the sequence of events leading to this situation shortly. Suffice it to say at this point that the plaintiff claims that the LDC failed to negotiate, or to continue to negotiate, on terms which were fair and reasonable, and should have acquired the property on the same terms as in the third offer, and they now seek damages amounting to the difference between that offer and the sum realized on resumption.

The Ordinance

3.Before looking at the factual background, it is useful to consider the statutory framework within which the LDC operated, their powers thereunder, and the duties imposed on them. Under the Ordinance, the LDC's, and now the defendant's, functions are to improve housing and the environment by undertaking urban renewal. For this purpose they may, under section 5, purchase or otherwise acquire land and prepare and implement development proposals. Under the same section they have wide powers to manage, sell or let properties developed by them, in the same way as a private business, although they must, under section 10, conduct their business according to prudent commercial principles. Under section 13, the LDC may prepare a development scheme for any area, which may also provide for any development not compatible with it to be prohibited, and may, under section 14, request the Secretary for Planning and Lands (the Secretary) to submit any such plan for development to the Town Planning Board for approval. If approval is granted by the Town Planning Board, the LDC's plan replaces or amends any pre-existing approved or draft plan, unless rejected by the Governor, now the Chief Executive, in Council.

4.Under section 15, where the LDC is unable to acquire land within the area of their proposed development, they may apply to the Secretary to request him to recommend the resumption of such land under the Lands Resumption Ordinance, Cap. 124. However, section 15(3), upon which the plaintiff largely relies, reads as follows:

"(3) The Secretary shall not make a recommendation in pursuance of subsection (2)(a)?

(a) unless application is made to him not later than 12 months after the approval by the Chief Executive in Council under section 9 of the Town Planning Ordinance (Cap. 131) of such plan or such further period as the Secretary may allow; and

(b) unless he is satisfied that the Corporation has taken all reasonable steps to otherwise acquire the land including negotiating for the purchase thereof on terms that are fair and reasonable."

A resumption in pursuance of such a recommendation is deemed, under section 15(6), to be a resumption for a public purpose within the meaning of the Lands Resumption Ordinance. There is no dispute here that the Town Planning Board approved the LDC scheme on 12 May 1995, that the Governor in Council approved the plan on 24 September 1996, and that the LDC applied to the Secretary for a recommendation under section 15 on 22 September 1997, in accordance with section 15(3)(a).

5.It is apparent from this that the LDC had, and the defendant has, wide powers to select land within an area, propose a development scheme, have it submitted to the Town Planning Board and the Governor in Council for approval, and, upon such approval, proceed to acquire the land by negotiation, knowing that, should the negotiations fail, they would in all probability be able to rely on an application for resumption. In effect they have access to machinery, not available to private bodies, to compel the owner of land to part with their property. Mr Holgate Q.C. for the plaintiff says that this places them under a heavy duty, by statute and under Common Law, of which they have been in breach. He further contends that they are in breach of Articles 6 and 105 of the Basic Law, and that the facts of this case give rise to estoppel by convention. I will consider these in turn after looking at the conduct of the negotiations and the background to them.

Background to the negotiations

6.Although the plaintiff was the owner of several properties within the development area, three of which were purchased after the LDC's scheme had been gazetted and approved, there are only two properties in issue here: a site at 10-16 Wanchai Road (the site), and the 3rd floor and roof of 18 Wanchai Road and 48 Stone Nullah Lane (the unit). The plaintiff purchased 12-16 Wanchai Road in October 1992, number 10 in November 1993 and the unit in June 1994. In December 1994, the LDC's scheme was submitted to the Town Planning Board, approved on 12 May 1995 and gazetted on 19 May 1995. Objections were raised by the plaintiff in a submission to the Town Planning Board on 30 May 1995, and the objection was considered by the latter on 10 November 1995 with a further hearing on 29 March 1996 attended by the plaintiff by solicitors. The plaintiff's objections and proposals were rejected by the Town Planning Board who submitted the plan, together with the plaintiff's objections, to the Governor in Council, who approved the LDC scheme plan on 24 September 1996, the approval being published in the Gazette on 4 October 1996.

7.By letters dated 11 November 1996 the LDC made their first offers to the plaintiff to purchase the site for $102,960,000.00 and the unit at $3,607,000.00, with the offers remaining open for 3 months, until 10 February 1997 and both marked "subject to contract", with the additional proviso that nothing in the letters was binding on the LDC unless and until a formal agreement for sale and purchase had been executed and exchanged. The basis of their offers was set out in a document called LDC Property Acquisition Principles, which stated that, to ensure the fairness and reasonableness of an offered price, the terms would be determined according to market values assessed by at least two independent professional firms of surveyors, the offer being based on the highest of the two, and the higher of the existing use, and development values, plus 10%. They also encouraged owners to engage their own surveyors for advice and assistance, the cost of which the LDC would bear. The first offers were not accepted by the plaintiff and accordingly lapsed.

8.By further letters dated 1 August 1997 the second offers were made, to purchase the site for $123,838,000.00 and the unit for $4,294,000.000, with the same subject to contract provisos, the offers to remain open until 8 September 1997. In these letters it was pointed out that the LDC intended to rely on resumption if it was unable to reach an agreement. These offers similarly not being accepted by the plaintiff, on 30 September 1997 the LDC advised that it had applied to the Secretary with a request to recommend resumption of the plaintiff's property, but stating that it was prepared to continue discussions to arrive at an agreement for acquisition, "on a strictly ex-gratia basis and also entirely without prejudice to the statutory procedures that have been initiated under Section 15(1)".

9.Throughout the negotiations leading to these offers the plaintiff had engaged its own surveyors, CHK Surveyors Ltd., while the LDC was relying on advice from their surveyors, Knight Frank. The principal differences between the surveyors were as to the use to which a potential development of the site could be put, purely commercial or composite, and whether an allowance for profits on development, architectural and construction costs should be made as it was the plaintiff's intention to keep the project within its group. There were also differences relating to the gross floor area and the amount assessed to be payable as compensation to tenants. There is no suggestion by the plaintiff that the Acquisition Principles had not been adhered to in the appointment of independent surveyors and basing their offer on the higher valuation.

10.Over the next seven months there was considerable correspondence between the parties, their solicitors and their surveyors in an attempt to arrive at a mutually agreeable price for purchase, and a number of meetings between them. On 27 March 1998 the plaintiff made a counter-offer which was followed by further correspondence and a meeting on 30 April 1998 between Mr Tsang, the director of the plaintiff, and the Chief Executive of LDC. On 4 May 1998, the third offer was made, at a lower figure than the second offer as it was subject to tenancies, and took into account compensation and a longer completion time, but otherwise based on the 1997 valuation. The offer was stated to be open for 14 days, and was described as their last and final offer, and again, subject to contract. The plaintiff requested a copy of the valuer's report upon which the offer was based, which was not supplied until 11 May, and from which it was clear that the valuation was still on the basis of July 1997 figures, as had been the second offer. On 12 May 1998 the plaintiff accepted the third offer in respect of all its properties except for the site and the unit. On 18 May the plaintiff's solicitors wrote to the LDC with their surveyor's comments on the LDC's valuation and made a counter-offer, which was rejected by the LDC on 22 May. A further counter-offer was made by the plaintiff on 29 May, which the LDC referred to its valuers, Knight Frank. The latter's advice, on 8 June 1998, was to accept some items of the plaintiff's valuer's comments, while still rejecting the overall valuation as too high. This letter was not supplied to the plaintiff until 4 August 1998. On 9 July 1998 Mr Alexander-Webber of the LDC wrote to the Secretary setting out the history of the negotiations and saying that he did not anticipate being able to reach an agreement with the plaintiff in the near future, and on 4 August informed the plaintiff that their counter-offer of 29 May was unacceptable. On 21 August the plaintiff's solicitors sent a further revised counter-offer to the LDC, and on 28 August Mr Alexander-Webber rejected this also, adding that "I must now advise you that the Corporation is not prepared to continue discussion with your client on the basis of its previous offers. If your client wishes to continue negotiations with the Corporation, on an ex-gratia basis and without prejudice to our application for resumption of outstanding interests, then those discussions must be on the basis of current market values."

11.The significance of the last few words is that, as is not in dispute, the market in real property had declined dramatically from late 1997 into 1998, and the third offer in May 1998 was already well in excess of the market value at that time. Although the plaintiff attempted to continue discussions on the basis of their last counter-offers, and complained that a switch to current market values was unreasonable in view of the blighting effect that the scheme had on the plaintiff's properties, the LDC was not prepared to change its stance. On 21 September 1998 the plaintiff's solicitors wrote to the LDC and agreed to accept the third offer, but this was rejected by the LDC on the ground that that offer had been withdrawn because it was not accepted within the time allowed.

12.On 6 October 1999 the Secretary recommended that an order for resumption be made, and this was approved by the Chief Executive in Council on 30 November 1999, the resumption order being gazetted on 6 December 1999. The properties reverted to the Government on 10 January 2000.

13.It is the plaintiff's contention that there was a willingness on their part to negotiate and to make concessions, that the LDC did not follow the advice of Knight Frank, or to continue to negotiate to arrive at a sale on terms which were fair and reasonable, and that the LDC's valuation policy was changed in the middle of negotiations without giving prior notice to the plaintiff. I will look at the grounds which the plaintiff claims gives them a right of action against the defendant in turn.

The Basic Law

14.The plaintiff bases this part of the claim on Articles 6 and 105 of the Basic Law which read as follows:

"Article 6

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

Article 105

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

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

and pleads in the statement of claim that they were deprived of the right to use and dispose of the property, or such right was infringed, by the blighting effect of the LDC scheme since at least 1995, in that they could not develop, mortgage or sell the property. Mr Yu S.C. submits that deprivation here does not include control over the use of property or blighting, but is restricted to extinction of all an owner's legal rights by way of compulsory acquisition, and in any event would only give a cause of action against the Government, not the LDC.

15.The first point to consider is whether acting to restrict an owner's use of land is deprivation within the meaning of Article 105. A similar point was in issue in the case of Belfast Corporation v. O. D. Cars Ltd [1960] AC 490 where the phrase "take any property without compensation" in the Government of Ireland Act was in question. Viscount Simonds looked first at the simple meaning of the words in plain English, at page 517:

"I should like, however, before I venture upon it, to consider for a moment the simple language of the constitutional Act with which we are concerned. I hope that I do not over-simplify the problem, if I ask whether anyone using the English language in its ordinary signification would say of a local authority which imposed some restriction upon the user of property by its owner that that authority had "taken" that owner's "property." He would not make any fine distinction between "take," "take over" or "take away." He would agree that "property" is a word of very wide import, including intangible and tangible property. But he would surely deny that any one of those rights which in the aggregate constituted ownership of property could itself and by itself aptly be called "property" and to come to the instant case, he would deny that the right to use property in a particular way was itself property, and that the restriction or denial of that right by a local authority was a "taking," "taking away" or "taking over" of "property.""

However, he went on to point out, at page 520, that:

"But, having said so much, and fully recognising the distinction that may exist between measures that are regulatory and measures that are confiscatory, and that a measure which is ex facie regulatory may in substance be confiscatory, I must add that, if as I supposed it is the question is one of degree and the dividing line is difficult to draw, yet I have no doubt that such an enactment as the Act of 1931, and in particular section 10(2), falls well on the regulatory side of it."

16.But this does not help the plaintiff here for two reasons. The first is that the wording of the Basic Law is clear both in English and Chinese that it refers to the deprivation of ownership. The second is that, if the Basic Law right to compensation extends to loss of use, or infringement of rights through blighting, then that is a matter which can and should be argued before the Lands Tribunal when the question of the plaintiff's compensation under the land Resumption Ordinance is considered. I cannot conceive of any way in which the Basic Law gives a right of action against the defendant here. It is not the defendant or the LDC who have deprived the plaintiff of their property or use of it. Although they were the prime movers of the scheme, the deprivation, if any, was in the hands of the Government through the procedure of resumption, including the recommendation for such resumption by the Secretary. The plaintiff has already challenged the recommendation of the Secretary through judicial review proceedings which were unsuccessful. It is difficult to see how a claim can be sustained in damages now against those who requested the Secretary to make such recommendation.

17.Mr Holgate sought to rely on the decision of the European Court of Human Rights in Sporrong and Lönnroth v. Sweden 5 E.H.R.R. 35 where there was held to be a violation of Article 1 of Protocol No. 1 of the European Convention in circumstances where there had been an expropriation permit and a prohibition on construction in respect of the claimants' property for some 25 years. However, this decision was based on the very different wording of the Convention from that in the Basic Law, and the facts of that case, where the length of time was the principal consideration in finding an interference with ownership. As Leigh-Ann Mulcahy says in her work on Human Rights and Civil Practice, at page 593, in respect of this decision:

"A de facto expropriation of this kind can only occur where there has been so substantial an interference with the ownership and use of the possession concerned that it effectively equates to the total extinction of ownership notwithstanding the fact that the owner retains legal title. Deprivation may thus occur if the owner is deprived of all meaningful use of his property. However, any form of provisional or temporary loss of rights is very unlikely to constitute deprivation."

18.I would add to this the opinion of Lord Hoffmann in Grape Bay Ltd v. Attorney General of Bermuda [2000] 1 W.L.R. 574 where he says at page 583:

"It is well settled that restrictions on the use of property imposed in the public interest by general regulatory laws do not constitute a deprivation of that property for which compensation should be paid. The best example is planning control (Westminster Bank Ltd v Beverley Borough Council [1971] AC 508) or, in American terminology, zoning laws (Village of Euclid v Ambler Realty Co (1926) 272 US 365). The give and take of civil society frequently requires that the exercise of private rights should be restricted in the general public interest. The principles which underlie the right of the individual not to be deprived of his property without compensation are, first, that some public interest is necessary to justify the taking of private property for the benefit of the state and, secondly, that when the public interest does so require, the loss should not fall upon the individual whose property has been taken but should be borne by the public as a whole. But these principles do not require the payment of compensation to anyone whose private rights are restricted by legislation of general application which is enacted for the public benefit. This is so even if, as will inevitably be the case, the legislation in general terms affects some people more than others."

19.I find myself therefore bound to agree with Mr Yu that there never has been a right to compensation in Hong Kong to owners affected by planning or building control and the Basic Law does not change that. I am therefore of the view that there is no arguable case in this action on that basis.

Statutory and Common Law Duty

20.The statement of claim pleads that the LDC owed the plaintiff implied statutory duties, namely to take all reasonable steps to acquire the properties on fair and reasonable terms, to carry out its functions and exercise its powers in a fair and reasonable manner, and not to conduct itself towards the plaintiff as to deprive the plaintiff of the opportunity to accept offers on terms that were fair and reasonable. Although the plaintiff pleads the constitutional protection they claim under the Basic Law, as I have already found, this only imposes an obligation on the Government not to deprive an owner of property without proper compensation, corresponding to the real value of the property at the time. There is no obligation upon the LDC which, under the Ordinance, is not part of the Government nor a servant or agent of it. The plaintiff's principal argument therefore must rest on the construction of the ordinance itself.

21.In this they can only point to section 15(3)(b) and the reference to the Secretary being satisfied that the terms offered were fair and reasonable. This, Mr Holgate submits, puts the LDC under an implied duty as pleaded in the statement of claim. The ordinance does not of course impose any direct statutory duty upon the LDC, except, under section 10, to conduct its business according to prudent commercial principles. The duty under section 15(3) is upon the Secretary, not to make a recommendation for resumption unless he is satisfied that all reasonable steps have been taken to otherwise acquire the land including negotiating on terms that are fair and reasonable. If the owner believes that the terms negotiated on were not fair and reasonable, then his remedy is to make objections to the Secretary or to seek a judicial review of the Secretary's decision. This the plaintiff has already done, and has been unsuccessful. I will return to those proceedings when I consider the matter of issue estoppel shortly.

22.The ordinance gives powers to the LDC to formulate schemes and acquire and manage land within those schemes, but gives no direct power to force owners to sell. The LDC can only request, through the Secretary, for planning approval for their schemes, and for a recommendation for resumption in the event of failing to acquire land through negotiation. At every stage there is provision in other ordinances for those affected to object to ensure that their interests are protected, and to seek a review of decisions made. The LDC is the originator, not the executor of those schemes, and their only function at the stage of acquisition is to attempt to purchase the land on reasonable terms by negotiation. It might well be argued that there is no duty under the ordinance to negotiate at all. However, failure to do so would inevitably result in no recommendation being made for resumption. Is it then possible, as a matter of construction, to argue that the legislature intended to impose a statutory duty upon the LDC and confer on those affected a right of action for breach of it?

23.One way if testing whether a right of action for breach of statutory duty was intended is to see if any other remedy is available. As Lord Browne-Wilkinson said in X v. Bedfordshire County Council [1995] 2 A.C. 633, at page 731:

"There is no general rule by reference to which it can be decided whether a statute does create such a right of action but there are a number of indicators. If the statute provides no other remedy for its breach and the Parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action since otherwise there is no method of securing the protection the statute was intended to confer. If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action: Cutler v. Wandsworth Stadium Ltd. [1949] A.C. 398; Lonrho Ltd. v. Shell Petroleum Co. Ltd. (No. 2) [1982] A.C. 173. However, the mere existence of some other statutory remedy is not necessarily decisive. It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy. Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition by the statutes of criminal penalties for any breach: see Groves v. Wimborne (Lord)[1898] 2 Q.B. 402."

24.While it is true that, once the LDC's scheme has been approved by the Chief Executive, owners affected have no other way to object to the merits of the scheme, or of their land being acquired, it is not the scheme or the acquisition which is complained of here. The plaintiff is objecting to the course of the negotiations and the terms offered. For these there are other remedies, by representations and objections to the Secretary and by judicial review of his decisions, and, in the event of resumption, by way of the Lands Tribunal. It is true that the LDC had offered, in their Property Acquisition Principles, to pay 10% more than the assessed value, and consequently more than would likely be available on resumption. There is therefore an incentive for, and possibly pressure on, an owner to agree a figure with the LDC by negotiation, but this is still far from imposing a duty on the LDC enforceable by action.

25.It is important too to see what the plaintiff is claiming and what they say should have happened. The duty it appears they claim is to continue negotiations in 1998 on the basis of valuations as at July 1997. As to this, I find it inconceivable that there can be any implied duty to continue negotiations, presumably indefinitely, until a result agreeable to the plaintiff is arrived at. These negotiations had been in progress for 18 months by the third offer, and that offer was, as is conceded by the plaintiff, in excess of the then market value. There is certainly no duty to negotiate on anything other than market value. Indeed, as Keith JA held in Wong Tak Woon v. Secretary for Planning and Lands CACV 339 of 1999 :

"Moreover, it would be odd if the Corporation was required to negotiate on the basis of terms more favourable to the owner of the land than the provisions for the assessment of compensation under the Lands Resumption Ordinance, when the consequence of a failure to agree terms would entitled the Corporation to request the Secretary to take a course which would result in compensation being assessed in accordance with the provisions of the Lands Resumption Ordinance."

This was confirmed by Ribeiro J in the same case when he said:

"Given that the section prescribes a negotiation against the backdrop of machinery for resumption in the event that agreement cannot be reached, it is in my view clear that when formulating purchase offers intended to be "fair and reasonable", it is entirely proper that the LDC should be guided by considering the level of compensation which the landowner could achieve if he were to reject that offer and compel the LDC to invoke the machinery for resumption. The LDC may, in other words, steer a "fair and reasonable" course by reference to what is possible under the LRO."

26.Further, under the latter ordinance, the date of the value is the date of resumption. There can therefore be no duty to assess the value as at any other historical date. While it is true the early 1998 negotiations had been conducted on the basis of an original valuation by Knight Frank in July 1997, once the plaintiff had decided not to accept what was clearly described as a final offer from the LDC, it is equally inconceivable that there is a duty on the LDC to recommence or continue negotiations on the same basis. These were commercial negotiations based on market values which might have gone either way during the course of them and the LDC was entitled to take the market into account. The fact that they were prepared to still offer a price in May 1998 based on far higher 1997 figures can hardly be a ground for arguing lack of reasonableness, nor can a failure to continue on the same basis after that offer is refused. As Mr Yu pointed out, one wonders whether the plaintiff would feel the same about the 1997 valuation if the market had risen. It can hardly be argued that there was duty to negotiate on the basis of the highest value available at any time during the negotiations.

27.For these reasons I find that there is no arguable case on breach of either statutory duty or a Common Law duty to take care.

Estoppel by convention and legitimate expectation

28.The plaintiff pleads that there was both a legitimate expectation that the LDC would continue to negotiate, prior to resumption, on the basis of the July 1997 values, and was estopped by convention from doing otherwise. Mr Yu says that there can be no basis for this and the fact that offers have been made on a particular basis cannot found a claim that the defendant is estopped from changing that basis of the negotiations. It is important to note that the offers had been refused. Negotiations were at an end, although the LDC had left the door open if the plaintiff wished to make a further attempt to reach agreement. The plaintiff must have known that, failing agreement, any compensation from resumption would only be at the then market value, and it is clear from the pleaded facts that the plaintiff took that risk.

29.For there to be estoppel by convention there must be a common mistaken assumption by both parties. It was described by Kerr LJ in The "August Leonhardt" [1985] 2 Lloyds Rep. 28, at page 34 as follows:

"This form of estoppel is founded, not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter. When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped against the other from questioning the truth of the statement of facts so assumed."

And further:

"All estoppels must involve some statement or conduct by the party alleged to be estopped on which the alleged representee was entitled to rely and did rely. In this sense all estoppels may be regarded as requiring some manifest representation which crosses the line between representor and representee, either by statement or conduct. It may be an express statement or it may be implied from conduct, e.g. a failure by the alleged representor to react to something said or done by the alleged representee so as to imply a manifestation of assent which leads to an estoppel by silence or acquiescence. Similarly, in cases of so-called estoppels by convention, there must be some mutually manifest conduct by the parties which is based on a common but mistaken assumption. The alleged representor's participation in this conduct can then be relied upon by the representee as a basis for this form of estoppel."

30.There are here three periods to consider. The first is between the first offer, in November 1996 and August 1997, for the most part of which any negotiations could only have been on the basis of 1996 values. The market having risen, a new valuation in July 1997 formed the basis of the August 1997 offer, and the second period, until May 1998, was taken up with negotiations on that basis. In relying on the conduct of the negotiations prior to the offer in May 1998, the plaintiff ignores the fact that those negotiations ended with that offer and the refusal of it by them. The third period is after that offer, being described as final and without prejudice to the application for resumption, was rejected by the plaintiff. There was no obligation on the LDC to continue negotiations at all, but to rely on resumption, and this was made clear in their letter of 22 May 1998 rejecting the plaintiff's counter-offer. There was no continuing relationship between the parties sufficient to found a common purpose or relationship, and even if the plaintiff was under the mistaken belief both that negotiations would continue, and on what had become an artificial basis unconnected with market values, on the facts pleaded there is no ground for that belief, nor conduct on the part of the LDC to engender it. The only representations made by the LDC were in their offer letters, which seem to accept that the terms offered should be fair and reasonable, and the published Acquisition Principles which the plaintiff would be entitled to rely on to expect a 10% allowance on market value, but no more.

31.As I have noted earlier, all the offers were carefully marked "subject to contract", with the LDC retaining its right to change its mind and withdraw. On the authority of Attorney General of Hong Kong v. Humphreys Estate (Queen's Gardens) Ltd [1987] 1 A.C. 114, even where there is a belief from previous conduct that the representee will not withdraw from an agreement in principle, where the representor has expressly reserved their right to withdraw, there can be no estoppel by convention nor legitimate expectation that the agreement will proceed to its conclusion. Here there is not even an agreement, merely a series of negotiations, continued for a time on a certain basis. There is no clear communication of an intention to continue indefinitely on that basis, but it is clear from the correspondence that either party my withdraw at any stage.

32.Mr Holgate says that this right to withdraw does not in fact exist here as the plaintiff, being compelled to allow the property to be acquired, cannot withdraw. This is not strictly correct. While it has to be admitted that, on a falling market, the plaintiff is at a disadvantage, knowing that to withdraw and rely on compensation for resumption they will almost certainly receive less, by at least the 10% allowance given by the LDC, it is still a choice, which, on a rising market they may well have taken. By rejecting the LDC's offer in May 1998 the plaintiff took a commercial decision, possibly under the mistaken beliefs that the LDC would continue to negotiate, in spite of being told that the offer was final, and that such further negotiations would be on the, by then artificial, basis of the July 1997 historical values. Taking the plaintiff's case at its highest, as I must for the purposes of this application, I can see nothing to justify this belief, or any pleaded facts which support it.

Issue estoppel

33.Although my findings above are sufficient to dispose of this matter, I will deal briefly with the question of issue estoppel raised by Mr Yu for the defendant. He submits that certain issues which were raised by the plaintiff at the hearing of the judicial review of the Secretary's decision before Mr Justice Cheung, and finally determined by the judge at that hearing, cannot now be raised again in support of this action. These issues may be summarized as follows:

(1) the LDC did not act unreasonably in rejecting the plaintiff's offer of 21 September 1998;

(2) The LDC did not act unreasonably in stipulating the 14 day period to accept the third offer in May 1998;

(3) The LDC did not act unreasonably in not continuing negotiations with the plaintiff on the basis of the 1997 values.

34.Mr Holgate does not deny that such determinations were made at that hearing, but contends that the judge in the judicial review proceedings was not entitled to make findings of fact, and that these were only observations in respect of reviewing the decision of the Secretary, and how that decision was arrived at. To some extent that may be right. But the judge had the same facts before him, he was entitled to take a view on those facts, and in so doing has in fact made a finding as to the issues they cover. I have to agree therefore with Mr Yu that, in so far as the issues determined by the judge in those proceedings have been repeated in the particulars set out in the statement of claim, it is an abuse of process and should be struck out.

Conclusion

35.For the reasons given above, I am staisfied that none of the grounds of claim pleaded in the statement of claim are sustainable and it should be struck out and the action dismissed, and I order accordingly. There will also be an order nisi that the plaintiff pay the costs of the defendant to be taxed, of this application and the action, with a certificate for two counsel.

Representation:

Mr David Holgate Q.C. and Mr Anthony K. K. Chan, instructed by Messrs King & Co. for the Plaintiff

Mr Benjamin Yu S.C. and Mr Y. L. Wong, instructed by Messrs Kao, Lee & Yip, for the Defendant

Remarks:
Appeal by Plaintiff to Court of Appeal. Appeal dismissed. Please refer to appeal judgment of CACV000191/2002.