KERRYFORD HOLDINGS LTD AND OTHERS v. PROFIT VALLEY LTD AND OTHERS

LDCS 8000/2022

[2025] HKLdT 75

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO. 8000 OF 2022

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DECISION

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Background

1.  This hearing originated from an application for a compulsory sale order (“the Application”) under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap. 545 (“the Ordinance”) to sell all the undivided shares of the following lots (which are hereinafter identified as 1^st Lot, 2^nd Lot and 3^rd Lot or where appropriate, collectively as the Lots) with the corresponding three buildings (which are hereinafter identified as 1^st Building, 2^nd Building and 3^rd Building or where appropriate, collectively as the Buildings) erected thereon:

Lot	Lot No	Section	Building Thereon	Corresponding Address
1st Lot	Marine Lot 365	Section A Remaining Portion	1st Building	Nos 54, 56, 58 & 60 Percival Street also known as Nos 5, 7, 9 & 11 Lee Garden Road
		Section C Remaining Portion
	Inland Lot 29	Section W Subsection 1 Remaining Portion
2nd Lot	Inland Lot 29	Section W Subsection 1 Section A & Section W Subsection 2	2nd Building, known as Happy Mansion	Nos 62, 62A, 64, 64A, 66, 66A, 68 & 68A Percival Street also known as Nos 13, 15, 17 & 19 Lee Garden Road
3rd Lot	Inland Lot 29	Section W Remaining Portion	3rd Building	Nos 70, 72, 74 & 76 Percival Street, No 60 Russell Street and Nos 21, 23, 25 & 27 Lee Garden Road

2.  On 21 August 2025, we handed down the judgment (“the Judgment”), as amended by the Corrigenda dated 5 September 2025 which was subsequently superseded by the 2^nd Corrigenda dated 11 September 2025 (collectively referred to as “the Amended Judgment”).

3.  The reserve price for the auction was, as corrected, $2,679,000,000. An application for review by the 2^nd Respondent and the 42^nd Respondent was dismissed on 17 September 2025.

4.  On the other hand, the Applicants applied by summons dated 30 September 2025 for the following orders:

(1)  The Particulars and Conditions of Sale be amended as per the draft appended, which shall be elaborated upon below;

(2)  The Order for Sale of the Lots be extended for a period of 3 months under section 4(1)(b) of the Ordinance upon the expiration of the first 3 month period (“the Extended Period”); and

(3)  The first auction sale of the Lots be directed to take place during the Extended Period.

5.  Further, on 3 October 2025, the Applicants applied by summons for an interim stay of execution of the Order for Sale of the Lots pending the Tribunal’s determination of the Summons taken out by the Applicants dated 30 September 2025.

6.  On 9 October 2025, we granted an order in terms of the Applicants’ Summons dated 3 October 2025 above.

Amendments in the Particulars and Conditions of Sale

7.  Prior to handing down our Judgment on 21 August 2025, the Applicants had prepared a set of draft Particulars and Conditions of Sale of the Lots[1] for our approval which we found reasonable and approved for the purposes of the sale (including amendments if proposed by the Trustees) to be initialed and approved by the Tribunal, in the Judgment.

8.  However, the Applicants now say there is a need to address the scenario where the net sale proceeds as apportioned to a unit(s) may be insufficient to fully repay and discharge its existing mortgage secured over such unit(s) probably owing to the downturn of the market. In such event, the title of the properties to be conveyed to the purchaser may not be “free from encumbrances”.

9.  Therefore the Applicants propose to amend the draft Particulars and Conditions of Sale of the Lots which we had approved in the Judgment allegedly to safeguard the integrity of the intended sale.

10.  The parties had no comment on the amendments save to the following clauses, with the controversial proposed amendments underlined:

“Clause 10(b): Completion of the transaction shall take place by way of solicitors’ cross-undertakings in the form from time to time recommended by the Law Society of Hong Kong with such variations thereto as the solicitors for the Purchaser and the Vendor’s Solicitors may reasonably agree unless either party shall serve on the other party or the other party’s solicitors not less than seven (7) business days before completion a notice in writing requesting formal completion, in which case formal completion shall take place.

Clause 10(d): Subject to Clause 25(a)(i), each of the Owners shall (i) deliver up vacant possession of that part or parts of the Property owned by him which is not subject to any existing lettings, tenancies and licences thereof as referred to in Clause 25(a) below and (ii) deliver all relevant title deeds and documents in relation to that part or parts of the Property owned by him as required for the purposes of proving and giving title to such part or parts of the Property under section 13 and 13A of the Conveyancing and Property Ordinance to the Purchaser on completion, but no Owner shall be liable to the Purchaser in respect of the failure by any other Owner (the “Defaulting Owner”) to deliver vacant possession and all relevant title deeds and documents to the Purchaser of that part or parts of the Property owned by the Defaulting Owner. The Defaulting Owner shall indemnify and keep each of the Purchaser and the other Owners who has not defaulted in delivering vacant possession and/or all title deeds and documents to the Purchaser and the other Owners who has not defaulted in delivering vacant possession and/or all relevant title deeds and documents to the Purchaser (the “Non-Defaulting Owner”) against all actions, proceedings, loss, damage, costs and expenses incurred by the Purchaser and/or the Non-Defaulting Owner arising from or in connection with the failure on the part of the Defaulting Owner to deliver up vacant possession of his part or parts of the Property and all relevant title deeds and documents to the Purchaser.

Clause 11(b) Notwithstanding anything provided herein to the contrary, each of the Owners shall, where applicable, at its own cost and expense (including but not limited to the Trustees’ use of the relevant proceeds of sales as apportioned to that part of the Property owned by him and such Owner’s making further payments to cover the shortfall required, if any) cause all encumbrances (including but not limited to mortgages, charges, assignment of rent and any instruments of the same nature ) (collectively, the “Mortgages”) in respect of that part or parts of the Property owned by him upon completion be discharged or released. For this purpose, each of the Owners undertakes to all other Owners and the Purchaser that he will, after signing of the Memorandum of Assignment:-

(i) obtain full particulars of the outstanding Mortgages affecting his part of the Property including the amount of the then outstanding indebtedness as secured by the same, both registered and not registered at the Land Registry, and provided the same to the Trustees within 7 business days after the date of signing of the Memorandum of Agreement.

(ii) arrange with the relevant mortgagee(s) or charge(s) of the Mortgage … for early release of all title deeds and documents to the Trustees so as to facilitate the Trustees to deliver the same to the Purchaser on completion.

(iii) …

(iv) arrange and agree with the Mortgagees of all necessary steps, arrangement and logistics for execution of the Releases/Discharges, and procure that the following documents shall be delivered to the Purchaser within 21 days from the date of completion:-

(1) …

(2) …

(3) …

Clause 11(c) If any Owner shall fail to release and/or discharge the Mortgages in respect of that part of the Property owned by him and/or shall be in breach of his obligations under Clause 11(b) (the “Defaulting Owner”), such Defaulting Owner undertakes to indemnify and keep each of the Purchaser and all other Owners (the “Non-Defaulting Owners”) against all actions, proceedings, loss, damage, costs and expenses suffered or incurred by the Purchaser and/or the Non-Defaulting Owners arising from or in connection with such failure or breach as aforesaid.”

11.  Mr Chris Wong (“Mr Wong”), on behalf of the 40^th Respondent (“R40”), raised concerns in his submission dated 14 October 2025 as follows:

(1)  Clause 10(b) – Right for either party to request for formal completion by way of written notice in not less than 7 business days prior to the completion:

a.  Formal completion is rare and unnecessary, especially in a property sale of such a large scale as the present one which involves numerous different unit owners.

b.  It could be envisaged that there would be huge practical difficulty to carry out the present Order for Sale by way of completion in person.

c.  Such unnecessary hurdle should be eliminated to avoid the intended sale falling through merely due to some practical difficulties.

(2)  Clause 10(d) – Delivery of title deeds and documents upon completion:

While the title deeds and other relevant documents are held by the banks or mortgagees for units with encumbrances, minority owners have little control over the timing of the receipt of such documents.

(3)  Clause 11(b) and (c) – Causing all encumbrances to be discharged or released at the owners’ own costs and expenses upon completion:

a.  Section 11 of the Ordinance expressly provides for the mechanism for the Trustee in applying the sale proceeds to discharge any encumbrance affecting the Lots.

b.  Notably, the Ordinance does not expressly empower the Tribunal to impose any such obligation upon the unit owners to discharge the encumbrance to their units at their own expenses.

c.  It is trite that the Tribunal is a creature of statute and it has only such jurisdiction as has been conferred upon it by the legislature. It is particularly the case for the unique statutory scheme of compulsory sale under the Ordinance.

d.  The hypothetical scenario where a property with a mortgage in negative equity being sold by compulsory sale was specifically discussed by the legislature in its deliberation of the latest amendment of the Ordinance. Report of the Bills Committee on Land (Compulsory Sale for Redevelopment) (Amendment) Bill 2023 dated 5 July 2024 reported as follows:[2]

“40. … some members have pointed out that amid the downturn of the property market in recent years, if a property with a mortgage in negative equity is sold by compulsory sale, the bank will press the owner for repayment of the mortgage loan on the one hand, and the sale proceeds apportioned to the minority owner may not be sufficient to pay up the mortgage on the other. Given that compulsory sale deprives minority owners of the right to decide the timing of selling their properties, some members are of the view that the Administration should support such minority owners who are owner-occupiers in addressing the relevant financial difficulties. …

41. … the Administration considers it inappropriate to provide financial assistance for owner-occupiers who are unable to pay off the mortgage as a result of compulsory sale.”

Nonetheless, it is not expressly provided for in the Ordinance that unit owners would be required to discharge the encumbrance at their own expense where the sale proceeds apportioned to them may not be sufficient.

e.  The absence of such provision in the Ordinance even after the deliberation on this very issue clearly showcases it was never the legislative intent of the Ordinance to impose any active obligation to discharge at their own expense upon the minority owners, especially where the judicial mechanism of compulsory sale deprives them of the right to decide the timing of selling their properties.

f.  It is emphasized that the fact that the sale cannot in practice be effected does not justify the “invention” of an otherwise non-existent jurisdiction in compelling a unit-owner to discharge an encumbrance at his own costs and expense in order to effect a sale against his will: Ng Kam Kuk v Chan Fung Chun [2018] 2 HKLRD 606, per Peter Ng J at §24.

g.  Accordingly, for the lack of express provision in the Ordinance in this regard, making such order as to compel the unit owners to discharge their encumbrance in a judicial sale out of their own expenses would be acting outside of the Tribunal’s jurisdiction.

h.  Further, requiring the unit owners who failed to discharge the encumbrance of the property to “undertake to indemnify” the other parties for any loss arising therefrom would impose a disproportionate obligation and inordinate burden on the minority owners.

12.  We agree with most of Mr Wong’s points and understand the concerns as afore-stated. He provided a real example, being what happened to R40.

13.  According to Mr Wong, with a view to facilitating the Trustee’s execution of the public auction pursuant to the Order for Sale, once R40 was notified of the Applicants’ proposed amendment to the draft Particulars and Conditions of Sale of the Lots, it had immediately issued a letter dated 30 September 2025 to HSBC seeking to enquire about the amount of the currently outstanding indebtedness and making a request for all relevant title deeds and documents of its property, so as to prepare for the discharge of mortgage.

14.  However, as of the date of the hearing, HSBC had not replied as to the amount of outstanding indebtedness for R40’s mortgage over its unit.

15.  Due to the late and unavailing response on part of the mortgagee, R40 was not in the position to ascertain to what extent the amended draft Particulars and Conditions of Sale would affect its interest.

16.  In fact, owners of properties with negative equity facing compulsory acquisition of their units is not a new issue. In 2002, the Legislative Council held a number of Case Conferences to discuss the compensation arrangement for the resumption of Wah Kai Industrial Centre. At a meeting held on 5 July 2002, the Government expressly declined to assist factory operators facing negative equity[3].

17.  In light of the above, we are at a loss why the Applicants would have insisted that the minority owners should “deliver all relevant title deeds and documents in relation to that part or parts of the Property owned by him as required for the purposes of proving and giving title to such part or parts of the Property … to the Purchaser on completion”, under draft amended Clause 10(d)(ii).

18.  In the case of resumption by Government, section 5 of the Lands Resumption Ordinance, Cap 124 provides that all the rights of the owner, his assigns or representatives and of any other person in or over the land or any part thereof shall absolutely cease. The Government never insisted that the owners whose land were resumed should deliver all relevant title deeds and documents before resumption taking effect.

19.  A similar provision has been provided in the Ordinance by modelling that of the Lands Resumption Ordinance[4]. By virtue of section 8(1)(a) of the Ordinance, where the lot the subject of an order for sale is sold, “immediately upon the purchaser of the lot becoming the owner of the lot all the rights of any prior owner (including the prior owner’s assigns or personal representatives) in or over the lot or any part thereof shall absolutely cease except to the extent, if any, specified in the order”. When compared with the Lands Resumption Ordinance, there is specific provision under 8(1)(b)(ii) of the Ordinance that allows 6 months for the tenant(s) to deliver up vacant possession of the property.

20.  There is no need or any specific requirement for the owners to “deliver all relevant title deeds and documents in relation to that part or parts of the Property owned by him as required for the purposes of proving and giving title to such part or parts of the Property … to the Purchaser on completion”. That is one reason why, we believe, section 5(4) of the Ordinance is able to provide that the lot the subject of an order for sale should be sold within 3 months immediately following the date on which the order for sale is made.

21.  If the lot the subject of an order for sale is to be sold by auction, that 3 months’ period would only be barely adequate to allow the proper preparation and marketing for the auction. It does not allow for the time for proving title of the various owners of the lot which might be cumbersome and time consuming.

22.  In the meeting of the Bills Committee on Land (Compulsory Sale for Redevelopment) Bill on 10 February 1998, for instance, nothing was mentioned as regards the minority proving title within that 3 months’ period[5]:

“14. Members noted the Administration's acceptance of the proposal to empower the Lands Tribunal to extend on application the period from three to six months within which the auction for the sale of the lot had to be held. They were however concerned about the existing provisions of the Bill which deemed the order for sale to be of no effect if no bid was made at the auction. Since substantial time and resources would be incurred in preparing for an auction, members felt that the order should not be automatically cancelled if there was no bid at the auction. Instead, the number of auctions to be held should not be limited as long as the reserve price remained unchanged and the auction was held within the specified time frame. As it would normally take about three months to arrange an auction, the number of auctions which could be held within a period of six months could be very limited. In any case, the expenses of the auction were to be borne by the majority owners.” (underlined added)

23.  More importantly, by reference to the first meeting of the Bills Committee on Land (Compulsory Sale for Redevelopment) Bill on 10 February 1998 at §3, one of the main purposes for the introduction of the Ordinance is to “provide a solution to the problem of property acquisition for redevelopment due to defective titles, untraceable owners, owners who had died intestate or owners demanding unreasonably high prices”[6]. How could owners with defective titles or missing owners pass good titles to a prospective purchaser?

24.  The same minutes also addressed the appointment of trustees:

“8. … Noting the complications involved should there be more than one majority owner, SALD[7] agreed to consider advancing the appointment of trustees such that they could step in at an early stage by order of the Court, through a power of attorney executed by the owners ...

9. SALD further advised that upon the sale of the lot at the auction, the trustees would complete the assignment with the successful purchaser. The proceeds of the sale should be paid to the trustees who would apply them in payment to the owners on a pro rata basis in accordance with the values of their respective properties, irrespective of the number of undivided shares they held …

10. On the application of proceeds of sale, SALD advised that the proceeds of the sale would be paid to trustees who would then apply them firstly in the discharge of any liability due to the Government; secondly in the discharge of any incumbrance affecting the lot; and then in payment of the residue to be split between the majority owners and minority owners.”

25.  The intention above was incorporated into the Ordinance at section 11(1) and (2):

“(1) The proceeds of sale for the lot the subject of an order for sale shall, after deduction of—

(a) the expenses referred to in section 10(1) (unless such expenses have already been deducted in accordance with section 10(2) or otherwise paid); and

(b) the legal costs on the assignment of the lot incurred by the trustees under the order as assignor to the assignment,

be paid to the trustees.

(2) The trustees under an order for sale shall apply the proceeds of sale paid to them in respect of the lot the subject of the order in the following order—

(a) first, in the discharge of any liability due to the Government in respect of the lot;

(b) second, subject to subsection (3), in the discharge of any incumbrance affecting the lot;

(c) third, subject to any directions given by virtue of section 4(6)(a)(iii)(A) and (B) and to subsections (4) and (4A), in payment of the residue to—

(i) the majority owner of the lot in accordance with directions but only after any compensation payable by the majority owner under section 8(3) to the tenant concerned has been deducted by the trustees out of the residue payable to the majority owner;

(ii) the minority owner of the lot (other than an owner-occupier of a property on the lot) in accordance with directions but only after any compensation payable by the minority owner under section 8(3) to the tenant concerned has been deducted by the trustees out of the residue payable to the minority owner; and

(iii) every owner-occupier of a property on the lot but only after any amount payable by the owner-occupier under section 4B(2) to the purchaser concerned has been deducted by the trustees out of the residue payable to the owner-occupier.”

26.  In our opinion, therefore, the process of the sale by auction would run as follows:

1.  Auction taking place and purchase completed within 3 months of order for sale where the trustees have received the proceeds of sale;

2.  The trustees shall then apply the proceeds of sale paid to them, after deductions under section 11(1) of the Ordinance, under section 11(2) above;

3.  The minority owners of the lot will receive their apportioned sale proceeds subject to proof of title.

27.  Certainly, if the minority owners intend to receive their corresponding proceeds of sale earlier, they should deliver all relevant title deeds and documents in relation to that part or parts of the property owned by them to the trustees as soon as possible. However, there should be no requirement for them to deliver those title deeds and documents before the completion of the purchase.

28.  For the avoidance of doubt, we would like to remind the trustees that a compulsory sale under the Ordinance is not simply a normal sale and purchase of properties in the open market. The statutory provisions prevail over any practice to the contrary. Missing documents such as the Government lease or Deed of Mutual Covenant, which do not directly impact the title of an individual owner, should not be an excuse for holding up the payment process.

29.  On the other hand, we agree that minority owners are required to prove their own title and/or to discharge an encumbrance at their own cost and expense following normal conveyancing practice in order to obtain their payments.

Conclusion

30.  Having reviewed the above, we order that those sentences that are underlined in §10 above should be deleted from the Particulars and Conditions of Sale as amended and the draft so amended be submitted to be initialed by the Tribunal in terms of paragraph 433 of the Judgment.

31.  Whereas all parties concerned are neutral towards the application for extension for a period of 3 months under section 4(1)(b) of the Ordinance and the first auction sale of the Lots be directed to take place during the Extended Period, we order that leave be granted as applied in terms of paragraphs 2 and 3 of the Summons dated 30 September 2025.

Costs

32.  We make a costs order nisi that:

(i)  The applicants do pay the 2^nd, 7^th, 15^th, 16^th, 19^th, 33^rd, 36^th, 38^th, 39^th, 40^th, 42^nd, 46^th respondents and the Trustees the costs of these proceedings;

(ii)  Costs awarded are to be taxed on the High Court scale if not agreed, with certificate for one counsel for 40^th respondent.

33.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days from the date of this judgment.