HO KONG, THE SOLE EXECUTOR OF THE ESTATE OF FONG MI YEE DECEASED v. DIRECTOR OF LANDS AND ANOTHER

CACV 15/2024, [2025] HKCA 1122

On Appeal From [2023] HKCFI 2343

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 15 OF 2024

(ON APPEAL FROM HCAL NO 1135 OF 2022)

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

Introduction

1.  This appeal concerns the proper interpretation of the Government’s policy for the grant of ex gratia compensation called “Home Purchase Allowance” (“HPA”) upon the resumption of domestic property in urban areas.  The Applicant was aggrieved by the Lands Department’s (“LandsD”) decision that he was not eligible for such compensation and brought judicial review proceedings.  He succeeded before Coleman J.  The Director of Lands (“Director”) now appeals to this court.

2.  Broadly speaking, depending on his interest in the property, a person affected by resumption may obtain two main types of compensation: (1) compensation payable by virtue of the statute under which the property is resumed, which may conveniently be referred to as “statutory compensation”, and (2) HPA, an ex gratia payment payable pursuant to the policy that is the subject matter of this appeal.  In particular, in addition to statutory compensation, “owners” who (or whose immediate family) lived in the resumed property – thus regarded as “owner-occupiers” – are eligible for HPA.  Its amount is the difference between the value of a notional 7-year-old replacement flat in a similar locality and the open market value of the resumed flat.  The purpose of HPA is to top up the statutory compensation so as to enable “owner-occupiers” to purchase a replacement flat and to prevent them from being forced out of home-ownership after their home has been resumed.  The key question in this case is whether the Applicant was an “owner-occupier” of the resumed flat within the meaning of the policy.

Background

3.  The property in question is a flat at First Floor, 118 Wing Kwong Street, Kowloon (“Flat”).  The registered owner of the Flat was Mr Lao Kim, in his capacity as administrator of the late Lao Po’s estate.  According to Land Registry records, Lao Po acquired the Flat in 1960 and, after her death, Lao Kim as administrator was registered as owner in 1972.

4.  Neither Lao Kim nor any successor could be found and the Flat had for a long time been in the possession of Madam Fong Mi Yee who was not related to the registered owner.  On 1 March 2016, Madam Fong brought an action in the District Court claiming the Flat by adverse possession, but she passed away shortly afterwards on 16 April 2016.  Those proceedings were carried on by her son-in-law and the executor of her estate, Mr Ho Kong, the applicant in the judicial review proceedings below (“Applicant”). Lao Kim was named the defendant but he did not respond and did not enter an appearance to contest the claim.  Eventually, on 4 November 2020, District Judge K C Chan gave judgment after trial in favour of the Applicant, declaring that (1) Lao Kim’s title, interest and/or rights in and/or over the Flat had been extinguished by virtue of section 17 of the Limitation Ordinance (Cap 347);[1] and (2) Madam Fong had been in adverse possession of the Flat for a period of no less than 12 years prior to the commencement of the action and had thereby acquired and was entitled to possessory title, interest and/or right in and/or over the Flat (“DC Judgment”).  In other words, the court declared that she had acquired an absolute possessory title to the Flat by 1 March 2016.  The DC Judgment was registered in the Land Registry in respect of the Flat on 2 December 2020.

5.  Meanwhile, on 22 June 2018, the Urban Renewal Authority (“URA”), a statutory body charged with the function of undertaking and promoting urban renewal, had pursuant to section 23 of the Urban Renewal Authority Ordinance (Cap 563) gazetted the commencement of the implementation of a redevelopment project called the Wing Kwong Street / Sung On Street Development Project, which covered the building in which the Flat was located. 

6.  On the same day, the URA conducted a “freezing survey” to determine the eligibility of persons affected by the project for ex gratia allowances or re-housing.  “Freezing surveys” are conducted by the URA immediately after the publication of a proposed project to record the occupancy status and the use of affected properties.  The Applicant and his two sons were at home when the survey was conducted.  The URA recorded that the entire Flat was occupied by the household of four, comprising the Applicant, his wife and their two sons, and that the Applicant claimed he had brought legal proceedings to claim the Flat on the basis of adverse possession.  At that time, the District Court had not yet heard the action.

7.  Under section 29 of the Urban Renewal Authority Ordinance, the URA may apply to the Secretary for Development requesting him to recommend to the Chief Executive in Council the resumption under the Lands Resumption Ordinance (Cap 124) (“LRO”) of land required to implement a development project.  However, in general, after a project requiring resumption has been published, the URA will first try to acquire land from private owners by agreement before commencing the statutory procedures by which land is resumed under the LRO.  Because the District Court proceedings were still underway, compensation negotiations between the Applicant and URA were delayed.  Eventually, the statutory resumption procedures were initiated.

8.  On 26 February 2021, a resumption notice issued under section 4 of the LRO covering, inter alia, 118 Wing Kwong Street, was gazetted, pursuant to which the Flat would revert to the Government on the expiration of the 3 months’ notice period.

9.  Notwithstanding a resumption notice had been issued, on 30 March 2021, the URA made an offer to the Applicant to purchase the Flat, offering to pay (i) $6,836,000 as the purchase price, (ii) $5,088,000 as Home Purchase Allowance, which was payable under the URA’s policy, and (iii) another sum as an allowance for incidental costs. Apparently because of the lack of time for the Applicant to deal with the URA’s demand for a bank guarantee to guarantee his title to the Flat, the offer was not accepted and lapsed on 13 April 2021.

10.  A private purchase having failed, pursuant to the resumption notice, the Flat reverted to the Government by virtue of section 5 of the LRO immediately after midnight of 26 May 2021.  After that, the LandsD took over the process of negotiating compensation with the Applicant.

11.  On 16 June 2021, the LandsD wrote to the Applicant pursuant to section 6(1)(b) of the LRO in these terms:

“ According to the Land Registry’s records, you are the sole executor of the estate of FONG MI YEE, deceased, who had acquired the possessory title to an interest in the above lot under the sealed copy judgment (DCCJ 949/2016) dated 4 November 2020 granted by the District Court of the Hong Kong Special Administrative Region and registered in the Land Registry against the above property … I have to inform you that the land described above reverted to the Government … at midnight on 26 May 2021 under G.N. 1059 dated 26 February 2021 …

Under Section 6(1)(b) of the Ordinance, you are hereby required within 42 days from the date hereof to submit in writing your claim for compensation in respect of the resumption of the land described above by completing one of the enclosed duplicate claim forms and returning it to me. You are requested to read the Information Pamphlet ‘Land Resumption and Compensation in the Urban Area – Guidelines for Owners, Occupiers and Surveyors’ issued by this Department before submitting any written claim.

This office is dealing with owners’ claims as a matter of priority and it would therefore be appreciated if you would give this matter your immediate and urgent attention. …”

A similar letter was also written to the registered owner, Lao Kim, but it was addressed to the Flat and presumably did not reach him.

12.  The Applicant thereafter entered into correspondence with the LandsD in relation to compensation for resumption.  At the end, as stated in the LandsD’s letters dated 10 January and 4 and 28 March 2022, the Director offered the Applicant $5,434,000 as statutory compensation, being the “open market value of [the Applicant’s] possessory title interest of the Property assessed on a vacant possession basis as at the date of reversion”, but took the position that the Applicant was not eligible for HPA under the applicable policy, essentially because he was not regarded as an “owner” or “owner-occupier” within the meaning of the policy.  As far as statutory compensation was concerned, the Applicant accepted the offered payment on a provisional basis pursuant to section 16A of the LRO without prejudice to his right to refer the matter to the Lands Tribunal.  The Applicant did not accept the Director’s decision on HPA.

13.  There is an avenue of appeal from the Director’s decisions on HPA to a non-statutory body called the Home Purchase Allowance Appeals Committee (“Appeals Committee”) whose members are appointed by the Secretary for Development.  This is merely an administrative arrangement and its decisions are not binding on the Director.  If the Director does not accept a decision of the Appeals Committee, the matter will go to the Secretary for Development who will make a final decision on the appeal.

14.  The Applicant lodged an appeal with the Appeals Committee, contending that HPA should be granted.  After a hearing on 15 June 2022, the Appeals Committee issued its decision in writing on 26 July 2022 dismissing the appeal, essentially for the reason that the Court of First Instance had already decided in Tang Lai v Director of Lands [2021] 3 HKLRD 44 (on 2 June 2021) that a possessory title holder was not entitled to HPA.

15.  The Director accepted the Appeals Committee’s decision. The Applicant did not, and applied for judicial review.

HPA and the policy

16.  The history of the HPA can be traced back to 1981 when the Legislative Council (“LegCo”) approved an ex gratia compensation package in respect of all resumptions and clearances.  One of the components of the package was the HPA.  The need for HPA arises because the amount of statutory compensation for resumption is fixed at the open market value of the property resumed.  This may be significantly lower than the price of flats of similar size in the locality, especially in the case of urban renewal projects in which the property resumed is likely to be old and possibly dilapidated.  Statutory compensation alone would not enable the owner to purchase a home in the neighbourhood; hence a “home purchase” allowance was created.  The rationale was explained in a subsequent LegCo Finance Committee paper of July 1996 (“1996 LegCo paper”) as follows:[2]

“ HPA is an ex-gratia payment, made as a simple cash addition to the statutory compensation payable under a number of Ordinances related to land resumption and clearances. The intention of paying HPA is to enable individual home owners to purchase a replacement flat of a similar size in the neighbourhood of the resumed flat. The amount of HPA payable is the difference between the cost of a replacement flat and the statutory compensation of the resumed premises to which claimants are entitled. This is to ensure that we do not force affected owners out of home ownership as a result of resumption.”

17.  The HPA was originally payable to all owners of resumed domestic premises, and proof of purchase of a replacement flat was required, but that requirement was removed in around 1990.  In 1996, because of the perceived anomaly that owners of tenanted properties would be paid more HPA than owners who occupied their own properties (since the open market value, and hence the statutory compensation, for a tenanted flat would be less than a flat that could be sold with vacant possession), and in order to stem profiteering by speculators, the Government proposed to restrict payment of HPA to owners who occupy domestic premises affected by resumption.  Thus it was proposed that “HPA should normally be payable only to an owner who is an owner-occupier” and that “[a]n owner-occupier is one who occupies the affected property as his sole residence.” [3]  There was however resistance to that proposal, and as a result it was slightly relaxed in 1997.  Under the revised proposal, full HPA would be paid to owners occupying the whole of a flat, and HPA would be paid at 50% rate for one tenanted flat per owner.[4] The revised amendment proposal was adopted.

18.  A further revision was made in 2001.  As a result, HPA in relation to a tenanted (or vacant) flat was renamed “Supplementary Allowance” (“SA”), and the HPA or SA would be payable for a maximum of three flats per owner per resumption exercise instead of the existing limit of two.  It was also resolved that the HPA and SA would be made applicable to all land resumption exercises irrespective of the specific Ordinance under which property is resumed.

19.  It is common ground that the Government’s HPA policy has since been set out in a pamphlet titled “LAND RESUMPTION AND COMPENSATION IN THE URBAN AREA – Guidelines for Owners, Occupiers and Surveyors” published by the LandsD (“Guidelines”).  The version applicable in this case was published in July 2013.  It contains guidelines not only on HPA, but also statutory compensation and ex gratia allowances for commercial and industrial properties.

20.  The critical part of the Guidelines is §6.1.2 with the heading “Home Purchase Allowance and Supplementary Allowance”. §6.1.2(a), headed “Owner-occupiers”, states as follows:

“ (i) In addition to the statutory compensation, owner-occupiers may also receive an ex-gratia allowance, namely the Home Purchase Allowance (HPA).

(ii) The HPA is payable to owner-occupiers to enable them to purchase a relatively new replacement flat of a similar size in the locality of the resumed flat. The amount of HPA payable to individual owners is the difference between the value of a notional replacement flat (based on a seven year old flat of a size similar to the resumed flat and in the same locality) and the open market value of the resumed flat. The eligibility for receiving the HPA will be subject to screening in accordance with the prevailing Government policy. The HPA will not be offered if the owner-occupier has already accepted rehousing by the Government.

(iii) The full HPA will be paid to an owner who is occupying the entire flat or if he can prove that the entire flat is occupied by his immediate family members, including children, parents and dependent brothers and sisters, grandparents, grandchildren, step-parents, spouse’s parents and spouse’s step-parents.”

21.  §6.1.2(b), headed “Owners of tenanted flats or tenanted areas”, states:

“ (i) In addition to the statutory compensation, owners of tenanted flats or tenanted areas are eligible for the Supplementary Allowance (SA) which is a supplement to the open market value of the resumed flat subject to tenancy.

…

(iv) The SA will be paid at 50% of the full HPA for a first wholly-tenanted flat and at 25% of the full HPA for a second wholly-tenanted flat.  No SA will be paid for a third wholly-tenanted flat.”

22.  The crucial question in this case is the meaning of these passages in the HPA policy and in particular whether the Applicant is an “owner” or “owner-occupier” within the meaning of §6.1.2(a).  To provide the wider context, relevant parts of the Guidelines are set out in the Appendix to this judgment.

23.  The URA has its own acquisition and compensation policies, but so far as HPA is concerned, its policy is the same as the Government’s.  The Secretary for Housing, Planning and Lands stated in 2004: “The URA’s compensation policy is based on the statutory compensation under the Lands Resumption Ordinance and the Government’s HPA policy, plus some applicable ex-gratia allowances to act as an incentive to encourage affected owners to accept the URA’s acquisition offers voluntarily.”[5]  The URA itself stated in 2005 with reference to the Government’s HPA policy: “When implementing its redevelopment projects, the URA follows the same policy and approach in making offers in attempt to acquire the relevant domestic properties by agreement.”[6]  The URA’s policy is published in a pamphlet with the title “Principles Adopted by the Urban Renewal Authority in Property Acquisition (Other than Industrial Properties)”,[7] which states:[8]

“ URA will offer an owner-occupier of domestic property the market value … of his property plus an ex-gratia allowance, namely Home Purchase Allowance (‘HPA’), for purchase of the property. The amount of HPA payable to individual owners is the difference between the value of a notional replacement flat and the market value of the property being acquired. … ‘Owner-occupier’ here means an owner who occupies the affected property as his/her sole residence. …”

Proceedings in the Court of First Instance

24.  On 24 October 2022, the Applicant filed an application for leave to apply for judicial review of the Appeals Committee’s decision and the Director of Lands’ acceptance of that decision.  Four grounds were raised, but only two are relevant to this appeal, namely:

(1)  Ground 1 – that the Appeals Committee wrongly construed the Government’s policy in holding that a person who had acquired a possessory title by adverse possession was not an “owner” or “owner-occupier” under the policy and thus not eligible for HPA;

(2)  Ground 3 – that the Applicant had a legitimate expectation that the Government would adopt the same policy as, or would not depart from the policy of, the URA in offering him HPA. 

25.  Coleman J directed a rolled-up hearing, at which the Applicant and the Director were the contestants, the Appeals Committee having been excused from attendance.  On 18 December 2023, the judge handed down his judgment in favour of the Applicant (“Judgment”).[9]  He rejected the two other grounds raised as not reasonably arguable,[10] but held that Grounds 1 and 3 passed the threshold for the grant of leave, though only Ground 1 was substantively made out.[11]  By way of relief the judge quashed the decisions impugned, remitted the matter to the Director, and declared that the Applicant qualifies as an owner and owner-occupier for the purposes of determining his eligibility to HPA.[12]

26.  On Ground 1, the judge considered that a simple answer was evident: the term “owner-occupier” is not defined in the Guidelines and based on its ordinary, common-sense meaning, the Applicant was both the owner (by virtue of the DC Judgment declaring possessory title) and the occupier (as recorded in the freezing survey).  Therefore, he was an “owner-occupier” entitled to HPA under the policy.[13]

27.  The judge also conducted a more detailed analysis of the terms and purposes of the policy.  First, he noted that HPA is intended to work in tandem with statutory compensation as a “top-up”.  An owner of the resumed property is entitled to statutory compensation and if he is also an occupier, he is in addition entitled to HPA.  The “owners” and “legal owners” referred to in §6.1.1 of the Guidelines and the “owner” in the phrase “owner-occupiers” used in §6.1.2 have essentially the same meaning and refer to the same type of ownership interest.  Those entitled to claim statutory compensation “as an owner” under the relevant Ordinances are also to be taken as an “owner” who will also be entitled to HPA if the occupancy requirement is met.  This is also evident from the proposed guidelines set out in the 1996 LegCo paper.[14]

28.  Even if the Applicant was entitled to statutory compensation not as an “owner” but as a “person having an estate or interest in the land immediately before reversion under an instrument registered in the Land Registry” within the meaning of section 6(1)(a) of the LRO, the Applicant was compensated with the open market value of the Flat (even if slightly lower than what would be offered to an ordinary registered owner), to which only the owner of the Flat would be entitled.  It would run contrary to the purpose of the HPA if the Applicant who was considered to have lost the Flat was driven out of home ownership but nonetheless not provided with the intended assistance to purchase a replacement flat.[15]

29.  The judge agreed with the Director that the meaning of “owner” in the HPA policy is connected with the particular statute involved for the particular resumption exercise.  In his view, however, the “owner” in the HPA policy is not just the registered owner or paper owner, but intended to be the person who is to be compensated under the relevant statute “in an owner-like manner”. Possessory title holders are compensated with the open market value of the flat resumed, even if the figure is slightly adjusted downward to reflect that, from the LandsD’s viewpoint, such a title is not as good as an ordinary registered title.  Ordinary people would think that only an owner would be entitled to the market value of the flat when it is resumed.  If the person is compensated as an owner under the statute (i.e. with the market value of the resumed flat), he is to be regarded as an owner under the HPA policy and will be eligible to claim HPA if he also occupied it.[16]

30.  For the reasons he gave, the judge considered the decision in Tang Lai to be wrong and declined to follow it.[17]

31.  As to Ground 3, the judge noted that the URA’s offer of 30 March 2021 expressly stated that if the Flat was resumed under the LRO, “the Government may adopt a basis different from the [URA] in assessing their compensation offers”.  That difference could include eligibility to HPA.  It follows that there was no clear representation giving rise to a legitimate expectation that the Applicant would be entitled to HPA in a resumption exercise.  The judge also found that there was no requisite clear and unambiguous representation in the correspondence between the LandsD and the Applicant.[18]  That ground accordingly failed.

Tang Lai v Director of Lands

32.  It is convenient at this point to refer to the earlier case of Tang Lai v Director of Lands.  That case also concerned a URA development project which led to the resumption, under the LRO, of a flat occupied by one Madam Tang Lai.  The project was gazetted on 25 November 2011. The resumption notice was gazetted on 25 April 2014 and the property in question reverted to the Government at midnight on 25 July 2014.  In December 2014, Madam Tang commenced proceedings in the District Court seeking declaratory relief and obtained default judgment in June 2017 declaring that the registered owners’ title had been extinguished and that she had established possessory title to the property “immediately prior to” the resumption.[19]  The LandsD offered her statutory compensation equivalent to the open market value of the property subject to possessory title,[20] but refused to pay her any HPA on the ground, among others, that she was not an “owner” within the meaning of the HPA policy.  The Appeals Committee upheld that decision.  On Madam Tang’s application for leave to apply for judicial review, contending that the Director erred in his interpretation of the policy, Chow J held that the contention was reasonably arguable and therefore gave leave, but dismissed the substantive application for judicial review.[21]  His Lordship stated his reasons as follows:

“ 42. First, as a matter of language and ordinary usage, I do not believe that a person who has acquired title to a property by adverse possession would be regarded by the general public in Hong Kong as the owner of the property. It seems to me that the word ‘owner’ of a property as ordinarily and generally understood would mean the person who has acquired paper title to the relevant property in a conventional way (eg through sale and purchase, gift, succession, etc).

43. Second, whatever may be the strict legal rights associated with a possessory title, in practice there are real and substantial differences between it and a paper title, eg in terms of marketability and open market value, and the ability to utilize the property as security for a loan by way of legal charge or mortgage. The absence of title deeds also means, by definition, that the owner of a possessory title cannot create an equitable mortgage by way of deposit of title deeds of the property in question.

44. Third, in the Compensation Policy, §6.1.1 refers to ‘legal owners’, ‘legal tenants’ and ‘legal domestic occupiers (including owner-occupiers and tenants)’ as being entitled to receive ‘Statutory Compensation’, while §6.1.2 refers ‘owner-occupiers’, ‘owners of tenanted flats’ and ‘owner of a vacant flat’ as being entitled to receive HPA/SA. It seems to me that the various references to ‘owner’/‘owners’ should be read consistently as a reference to the paper owner/owners.

45. Fourth, §12.2 of the Compensation Policy provides that before compensation is released to the claimant, he is required to prove that he has a good title to the land being resumed and submit ‘all the title deeds and documents’ listed in the schedule attached to the offer letter. This supports the view that the word ‘owner’ as used in the Compensation Policy is not intended to refer to a person who has only a possessory title to the relevant property.

46. Fifth, I consider there is force in Ms Chan’s argument that the Director’s construction of the Compensation Policy (viz a person who has acquired title to a property by adverse possession does not qualify as the ‘owner’ or ‘owner-occupier’ of the property for the purpose of eligibility for HPA) would promote certainty and consistency in the application the Compensation Policy. In her skeleton submission (at §36), she puts it thus:

‘  More fundamentally, the Policy as properly construed by [the Director] can be practically applied with certainty and consistency for achieving the purpose of the Policy and facilitating relocation of home owners within the limited project time… Conversely, the Applicant’s interpretation if adopted will lead to uncertainty as to the identity of the recipient of the ex-gratia payment and the timing of making the payment when there are competing interests in a resumed property … It would also lead to absurdity in that significant ex-gratia payment would need to be made to a squatter who has not even commenced any adverse possession claim against the paper title owner (even if the claim has been commenced, it remains uncertain whether it will eventually succeed).’ ”

33.  It may be noted that Madam Tang only brought her action after the announcement of the URA project and after the resumption, and that the declaration she obtained was that the registered owners’ title was extinguished and her possessory title was established only “immediately prior to” the resumption in question.  If she acquired the property only immediately prior to the resumption (25 July 2014), that would be long after the published commencement of the project (25 November 2011).  There may be a question, arising under §6.1.2(d)(viii) of the Guidelines, as to whether she acquired the property after the project was gazetted and was thus not entitled to HPA in any event.  However, that argument was apparently not raised before Chow J, and his Lordship decided the case on the basis of the proper construction of the policy in relation to the words “owner” and “owner-occupier”.  Unavoidably, therefore, it falls on this court to resolve the conflict between Tang Lai and Coleman J’s decision in the present case.

The appeal

34.  The arguments advanced by counsel on behalf of the Director for this appeal may be broadly summarised as follows:

(1)  The simple answer given by the judge at the beginning of his Judgment presupposes the answer to the question asked.  Resort to generalised and unverifiable assumptions about laymen’s understanding of the word “owner” is not helpful.  If anything, a layman informed of relevant matters may well conclude that a possessory title holder is not an “owner” under the Guidelines.

(2)  There are substantive qualitative and quantitative differences between a possessory title and a paper title in terms of their marketability, inability to be used as security, and market value.

(3)  The natural and textual reading of the word “owner” refers to a person who has acquired paper title by conventional means and is able to sell the property by transferring the title deeds.  By contrast, an adverse possessor is more commonly known as an adverse “occupier” (霸地人).

(4)  The references to “registered owners” in §5 and “legal owners” in §6.1.1(a) of the Guidelines and also the reference to “title deeds” in §12.2 support the construction adopted in Tang Lai.

(5)  Not everyone who receives statutory compensation is an “owner”.  Persons having an interest in the land (such as tenants) may also be eligible for statutory compensation.  The LRO distinguishes between a “former owner” and a “person having an estate or interest in the land immediately before reversion”.  The Applicant was entitled to statutory compensation as the latter, not the former.  The $5.4 million statutory compensation offered to him was the open market value of his possessory title interest in the Flat.  The Applicant was not thereby compensated as an owner or in an owner-like manner.

(6)  The rationale for HPA does not apply to adverse possessors.  Since an adverse possessor typically acquires land at little cost, statutory compensation alone would in most cases be sufficient to fully compensate him for his out-of-pocket losses and his cost of finding a replacement flat.  The amount of HPA is based on the notional value of a replacement flat with ordinary good title.  Since a possessory title has a lower market value than an ordinary paper title, a possessory title holder would receive a larger sum of HPA than an ordinary registered owner if he were entitled to HPA, and would be enabled to purchase a better title than what he had.  This is counter-intuitive. 

(7)  Eligibility for HPA is a policy matter for the Government, and the judge erred in substituting his own subjective view of who ought to be compensated, such as by reference to the notion of “being driven out of home ownership”.

(8)  Determining HPA eligibility by reference to paper ownership avoids the uncertainties as to the identity of the recipient of the allowance and the timing of the payment when there are competing interests in a resumed property.

35.  For his part, the Applicant has by respondent’s notice revived the contention that he had a legitimate expectation that he was entitled to HPA, arising from the URA’s letter to him dated 30 March 2021 or the LandsD’s letter to him dated 16 June 2021.

Proper approach to the construction of policies

36.  We start by reminding ourselves of the proper approach to the construction of administrative policies.  There is no dispute on this.  As stated by Chow J in Tang Lai at §§39-40 (original footnote omitted):

“ 39. The principles for the proper construction of an administrative policy are well settled. In Deluxe Ascent Limited v Director of Lands [2021] HKCFI 811, I summarized them at §24, as follows:

(1) the true meaning and effect of a policy is a matter of law for the court to determine;

(2) the court’s task is to ascertain the intention as expressed in the language of the policy objectively; and

(3) when interpreting the policy, the court should adopt a purposive approach, having regard to the document’s context and purpose.[22]

40. For the purpose of the present case, it is important to emphasise the importance of avoiding a technical construction to an administrative policy expressed in ordinary language.  In Hong Kong Television Network Ltd v Chief Executive in Council [2016] 2 HKLRD 1005, Cheung CJHC (as he then was) said at §49: ‘It is essential that statements of administrative policy ‘should not be construed as though settled by parliamentary counsel but should be given effect to for what they are, viz administrative announcements setting out in layman’s language and in broad terms the polices which are to be followed’ ’, borrowing the words of Lord Browne-Wilkinson in R v Secretary of State for the Home Department, ex p Pierson [1998] AC 539, 576G/H to 577A.  See also Data Key Ltd v Director of Lands [2018] 2 HKLRD 158, at §25 per Au J (as he then was).”

37.  Coleman J adopted the same approach in the present case.[23]

38.  In addition, it is worth noting the following passage from Hong Kong Television Network Ltd v Chief Executive in Council [2016] 2 HKLRD 1005 at §55, where Cheung CJHC emphasised the importance of reading policy statements as a whole and in their proper context:

“ … Policy statements must be read in their proper contexts and with common sense. More often than not, they are not prepared by lawyers but by politicians and government officials. Technical approaches to their interpretation such as those adopted in interpreting statutes, wills, contracts or constitutional documents should generally be avoided. Moreover, a policy statement must be read as a whole, and undue emphasis on individual expressions or passages in isolation is inappropriate. … In all cases, one must bear firmly in mind the context and background, in order to have a full and complete understanding of the policy concerned.”

Nature and scope of rights of possessory title holders

39.  Before turning to the Guidelines, it is pertinent to examine the nature and extent of the rights of a person who has been in adverse possession of a property for the limitation period.  This is largely uncontroversial.  In Perry v Clissold [1907] AC 73 at 79, the title of a person in possession was described by Lord Macnaghten (giving the opinion of the Privy Council sitting with 7 members) in the following passage which was quoted with approval in Cheung Yat Fuk v Tang Tak Hong (2004) 7 HKCFAR 70 at §5:

“ It cannot be disputed that a person in possession of land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner. And if the rightful owner does not come forward and assert his title by process of law within the period prescribed by the provisions of the Statute of Limitations applicable to the case, his right is for ever extinguished, and the possessory owner acquires an absolute title.”

40.  The title becomes absolute upon the expiry of the limitation period in the sense that it is good against whole world including the erstwhile paper owner: see In re Atkinson and Horsell’s Contract [1912] 2 Ch 1, 9.  In Buckinghamshire County Council v Moran [1990] Ch 623 at 644, it was said that once the paper owner’s right is extinguished by limitation, “the squatter’s possession becomes impregnable, giving him a title superior to all others.”  It is an independent title derived from possession of the land, not one based on a statutory conveyance of the paper owner’s title to the possessor: Wong King Lim v Incorporated Owners of Peony House [2013] 3 HKC 295 at §37.  For convenience, we shall refer to the holder of such absolute possessory title as a “possessory owner”, borrowing the term from Perry v Clissold. 

41.  In the present case, the Flat represented a share of the lot on which the building stood (namely, the Remaining Portion of Sub-section 26 of Section B of Kowloon Marine Lot No. 52).  The land, like other private land in Hong Kong, was held on a Government lease.  It was a lease for a term from 1899 for 75 years renewable for another 75 years.  The possessory title of the Applicant is good for the duration of the entire lease, including any statutory extension that operates by extending the original lease (as opposed to granting a new term): Chan Tin Shi v Li Tin Sung (2006) 9 HKCFAR 29.  In theory, a possessory title arising from adverse possession of private land in Hong Kong can be defeated if the Government lessee surrenders the lease and the Government accepts the surrender, assuming Fairweather v Marylebone Property Co Ltd [1963] AC 510 is good law:[24]see Wong King Lim at §37.  But there is no suggestion that the Government will generally accept such surrender so as to extinguish possessory titles.

42.  A possessory owner is entitled to exclusive possession of the property.  He may exclude everyone from the property, and is accountable to no one for its use.  He is able to sell and transfer his title and give vacant possession to a purchaser, though he needs to take care to specify the title he undertakes to give.  In Chan Chu Hang v Man Yun Sau [1997] 2 HKC 144, Le Pichon J said this at p 150B-D:

“ Good holding titles, namely those that present no probability of an adverse claim being made, include titles which can be forced on the purchaser under a special condition. See Re Scott and Alvarez’s Contract (1895) 2 Ch 603 and Blaiberg v Keeves [1906] 2 Ch 175.

It is stated in Sihombing & Wilkinson’s Hong Kong Conveyancing, Vol 1 V[176] that:

‘ Adverse possession does not vest in the person in possession good title, but merely a good holding title.’

In such cases, the contract should contain a special condition to make it clear that what is being sold is a possessory title.  The vendor should supplement his title by a statutory declaration that he has been in undisturbed possession of the property for so many years without acknowledging the right of any person.  Such a title, though not a good title, is readily saleable: see Sihombing and Wilkinson above; Barnsley[25] at 331-332.”

43.  The possessory owner can also let the property for rent (see Cheung Yat Fuk v Tang Tak Hong (supra)) and give his tenant the right to exclusive possession good against the whole world.  He has an estate that can be conveyed by assignment in his lifetime or devised by will or devolve on intestacy upon his death: Jourdan & Radley-Gardner, Adverse Possession (2^nd ed), §20-33, and on that basis, there is no reason in law why he cannot mortgage the property.  He can perhaps seek a partition of the land: Fan Kiu v Li Kwai Wan [2020] 1 HKLRD 659.[26] It has also been held that he is to be treated as the owner of the relevant undivided shares in the land for the purposes of receiving the proceeds of a compulsory sale under the Land (Compulsory Sale for Redevelopment) Ordinance (Cap 545): see Chung Chiu Hing v The Personal Representative of Law Sam, deceased (HCMP 2384/2011, 9 June 2017), §134 per B Chu J.

44.  As for the ability to create an equitable mortgage by deposit of title deeds (referred to in Tang Lai at §43), we note that it has been said that once the true owner’s title has been extinguished, the squatter is entitled to the title deeds to the property: see Jourdan & Radley-Gardner, Adverse Possession (2^nd ed), §20-47, citing Lewis v Plunket [1937] 1 All ER 530, [1937] Ch 306.  This point was however not argued before us, and there can be argument whether the same principle applies in a case of adverse possession against a lessee.  In any event the paper owner (and with him, the title deeds) may be untraceable, as in this case.  We shall therefore assume that the possessory owner does not have the title deeds relating to the paper owner’s title.

45.  A deposit of title deeds for the purpose of securing a loan takes effect as an equitable mortgage because it evidences a contract to create a mortgage, which is enforceable despite the lack of writing by reason of the doctrine of part performance: see United Bank of Kuwait plc v Sahib [1997] Ch 107.  On this basis, it may be argued – and we put it no higher since we have not heard argument on this – that a possessory owner such as the Applicant can create an equitable mortgage by depositing the judgment declaring his title which has indeed been registered in the Land Registry.  Even if he cannot, he is in no worse position in this respect than a paper owner who has lost his title deeds. 

46.  In short, it seems to us that a person in the position of the Applicant has for all intents and purposes the right to enjoy all the incidents of ownership of the property in question.

Construction of the policy

47.  The precise meaning of the word “owner” depends on the context in which it is used.  We do not think that the word itself, in its common usage in connection with landed property, is necessarily confined to the person who has acquired the paper title in a conventional way (cf. Tang Lai, §42).  Mr Jin Pao SC submits on behalf of the Director that an adverse possessor is more commonly known as an adverse occupier (霸地人).  That may well be so before the limitation period has expired, and we can understand the general antipathy to the notion that a squatter can be regarded as an owner.  But under our law, once the limitation period has expired, the squatter is no longer a trespasser; on the contrary the paper owner’s title is extinguished vis-à-vis him who acquires an absolute title.  If the paper owner comes back onto the land he can be turned out as a trespasser.  As explained above, the possessory owner enjoys all the incidents of ownership.  In a law-abiding society like ours, once that is shown to be the indisputable position in law, and a fortiori where the court has declared to that effect, it seems to us it will generally be accepted that the squatter has acquired controlling rights with an absolute possessory title over the property and is no longer in wrongful occupation, and that conversely, the paper owner has effectively lost all his rights with regard to the property and is no longer in any real sense its owner. In itself the word “owner” seems to us to be wide enough to be capable of encompassing a possessory owner.  Whether it does so in the HPA policy has to be examined with reference to its purpose and context. 

48.  The HPA is intended to be a “top up” of the statutory compensation that a person receives under the relevant statute for resumption of his property.  It recognises that the statutory compensation, assessed with reference to the property’s existing conditions, may be insufficient to fund the purchase of a property of similar size in the same neighbourhood.  Its principal purpose, as recorded in the 1996 LegCo paper, is “to ensure that we do not force affected owners out of home ownership as a result of resumption.”  From the outset, the policy is intended to benefit home owners.  Originally HPA was available to all owners of resumed domestic premises, but was from 1997 restricted to owner-occupiers, with owners who are not occupiers being given an allowance at half-rate (later re-named the SA), subject to a maximum number of flats per owner per resumption exercise. 

49.  This explains the dichotomy drawn in §6.1.2 of the Guidelines between owner-occupiers and owners of tenanted flats (including vacant flats).  But there is nothing in the purpose of the policy that suggests any intention to draw a further distinction between ordinary registered owners and possessory owners.  As Mr Adrian Lai submits on behalf of the Applicant, both act as owners having exclusive possession (for the term of the Government lease) and full control over their flats; both use their flats as their homes (in the case of self-occupation); both are forced out of their homes by the resumption; both are entitled to statutory compensation; and both face difficulties in purchasing a replacement flat in the locality with that compensation.

50.  The difference, says Mr Pao, is that a paper/registered owner is offered statutory compensation under section 6(1) of the LRO as a “former owner” as defined in that Ordinance (quoted in §52(1) below), whereas a possessory owner is offered statutory compensation under that section, not as a “former owner”, but as a “person having an estate or interest in the land immediately before reversion under an instrument registered in the Land Registry”, and the amount is slightly lower reflecting the inferiority of his title.

51.  Mr Adrian Lai, counsel for the Applicant, says “it is not accepted” that the Applicant is not an “owner” under the LRO, since the DC Judgment has been registered in the Land Registry, so that the Applicant is a “person registered in respect of” the Flat. Mr Pao replies that this does not count, as it is only registered under “Incumbrances” and not under “Owner Particulars” (and this court has held that a possessory owner is not entitled to be registered as the “owner”in the Land Registry: Lam Sai Wan v Minloy Ltd [2022] HKCA 37, §§36-37).  The judge did not rule on this and apparently proceeded on the basis that the Applicant was granted statutory compensation as a “person having an estate or interest in the land” and not as a “former owner” as defined in the LRO.[27] There is no respondent’s notice on this point and little argument before us.  Accordingly, we proceed on the same basis without deciding the question.

52.  But we do not think that the word “owner” in §6.1.2 of the Guidelines should be interpreted by reference to the definition in section 2 of the LRO.  The Guidelines, as its terms indicate, is envisaged to apply to resumption undertaken pursuant to a number of different Ordinances. This is consistent with the intention shown in the 2001 revision of the policy, as evidenced in the explanation paper,[28] that for “equity reasons”, HPA and SA “should be made applicable to all land resumption exercises under any relevant ordinance.”  Some of these statutes have their own definition of the term “owner” or provisions on entitlement to compensation for resumption.  As part of the legal background, the somewhat complex position under the 7 statutes mentioned in §2 of the Guidelines may be stated as follows:

(1)  In the LRO, “owner” is defined in section 2 to mean:

“ the person registered or entitled to be registered in the Land Registry in respect of any land sought to be resumed, or, if such person is absent from Hong Kong, or cannot be found, or is bankrupt or dead, his agent or representative in Hong Kong”

and “former owner” is defined in section 2 to mean:

“ the person who was the owner of the land immediately before the land reverted to the Government under section 5”.

Under section 6(1):

“ (1) Within a period of 28 days from the date on which land reverts to the Government under section 5, the Authority shall—

(a) write to the former owner and to any person having an estate or interest in the land immediately before reversion under an instrument registered in the Land Registry, making an offer of compensation in respect of the resumption of the land; or

(b) serve on any of the persons referred to in paragraph (a) a notice in such form as the Authority may specify, requiring him to submit his claim for compensation within the time stipulated in such notice.”

Section 8(1) provides that any person claiming compensation, who has not been offered compensation or served with a notice under section 6(1), may submit a claim to the Director of Lands stating the nature of his estate or interest in the land and the amount he seeks to recover.

(2)  Under the Urban Renewal Authority Ordinance, “owner” is defined to have the same meaning as “owner” in section 2(1) of the Buildings Ordinance (Cap 123), which in turn provides that an “owner”:

“ includes any person holding premises direct from the Government whether under lease, licence or otherwise, any mortgagee in possession and any person receiving the rent of any premises, solely or with another, on his own behalf or that of any person, or who would receive the same if such premises were let to a tenant, and where such owner as above defined cannot be found or ascertained or is absent from Hong Kong or is under disability, the agent of such owner”.

Resumption may be sought by the URA, but if agreed to by the Government, it will be exercised under the LRO (see section 29), so that compensation will be paid pursuant to the LRO.

(3)  The Mass Transit Railway (Land Resumption and Related Provisions) Ordinance (Cap 276) contains no general definition of “owner” (except for specific purposes in sections 14(6) and 15(5)).  Resumption may be ordered under this statute (section 4).  By virtue of section 18 and Part I of the First Schedule, the basis of compensation and the persons who may claim compensation for resumption are the same as in the case of resumption under the LRO.

(4)  In both the Roads (Works, Use and Compensation) Ordinance (Cap 370) and the Land Drainage Ordinance (Cap 446), “owner” means:

“ the person holding that land –

(a) directly under a Government lease; or

(b) under another title directly from the Government registered in the Land Registry”.

Under both statutes, resumption may be ordered, and the basis of compensation and the persons who may claim compensation for resumption are the same as in the case of resumption under the LRO: see section 27 of and Part II of the Schedule to the Roads (Works, Use and Compensation) Ordinance, and section 36 of and Part II of the Schedule to the Land Drainage Ordinance.

(5) Under the Railways Ordinance (Cap 519), “owner” means:

“ the person holding the land—

(a) directly under a Government lease;

(b) under another title directly from the Government registered in the Land Registry;

(c) vested by legislation; or

(d) by way of possessory title”.

Resumption may be ordered under this statute (section 18). The basis of compensation and the persons who may claim compensation for resumption are the same as in the case of resumption under the LRO: see section 32 and Part II of the Schedule.

(6) In the Land Acquisition (Possessory Title) Ordinance (Cap 130), “owner” means “a person who has a possessory title to land” and “possessory title” means “a possessory title against the Government to land by virtue of sections 7(1) and 17 of the Limitation Ordinance”. An “acquisition order”, equivalent to resumption, may be made by the Government under this statute (section 3). The “owner” whose land is thus acquired may claim compensation (section 7), which is assessed on the basis of, inter alia, the value of the land acquired together with any buildings erected thereon (section 8(2)(a)).

53.  Mr Pao says one should “suitably adapt” the meaning of “owner” for the purposes of HPA by reference to the statute that is being used for the resumption exercise.  Therefore, in a resumption under the LRO, “owner” in §6.1.2 of the Guidelines means in essence only the registered owner pursuant to the definition in the LRO.  In a resumption under the Railways Ordinance, however, he submits that even though that statute defines “owner” as including a person holding land by way of possessory title, such a possessory holder will not be entitled to HPA because the statute incorporates the machinery of compensation under the LRO, and if the land had been resumed under the LRO, a possessory holder would receive statutory compensation not as an “owner” but as a “person having an estate or interest in the land”.  Further, in the case of an acquisition under the Land Acquisition (Possessory Title) Ordinance, even though that statute defines “owner” to mean a person who has a possessory title to land against the Government and contains its own provisions for compensation without reference to the LRO, Mr Pao still says on instructions that it is “unlikely” that the Director would consider such a possessory holder to be entitled to HPA.

54.  With respect, Mr Pao’s submissions can hardly be said to represent the broad, untechnical and purposive approach that the court ought to adopt in construing a policy document such as the Guidelines.  Given the various statutory contexts in which the Guidelines may have to be applied, it seems to us that the judge was correct to seek an autonomous meaning that best gives effect to the purpose of the policy itself.

55.  Turning to the text of the Guidelines, §4 refers to “former owner or persons having an interest in the land such as the tenant”, but this is found under the heading of “Offer of Compensation” and clearly deals only with statutory compensation, with §4(a) reflecting the provisions of sections 6 and 8 of the LRO. 

56.  Under the heading “Assessment of Open Market Value for Resumed Properties”, §5 says: “Under the Ordinance, compensation payable to the registered owners is based on the open market value …”  Again, this is clearly an explanation concerning statutory compensation. 

57.  The next section (§6) of the Guidelines is headed “Statutory and Ex-gratia Compensation to Different Parties”.  The opening paragraph explains that the “type of compensation to a party affected by a land resumption scheme may vary according to the type of property in question and the legal interest held by the party in the property.”  Under “Domestic Property” (§6.1) and “Statutory Compensation”, §6.1.1 sets out 3 kinds of statutory compensation, respectively for (a) owners’ property interest (“Legal owners are entitled to the open market value of the resumed properties …”); (b) tenants’ property interest (“Legal tenants are entitled to the open market value, if any, of their interest …”); and (c) removal costs and expenses (“Legal domestic occupiers (including owner-occupiers and tenants) are entitled to claim the losses and expenses reasonably incurred by them in moving …”).  Thus insofar as statutory compensation is concerned, the distinction is drawn in the Guidelines between owners and tenants, not between different kinds of owners such as registered owners and possessory owners.

58.  Under the heading “Home Purchase Allowance and Supplementary Allowance”, §6.1.2 sets out 2 categories of owners, namely, “owner-occupiers” who may receive HPA (see §6.1.2(a)) and “owners of tenanted flats or tenanted areas” who may receive SA (see §6.1.2(b)).  Thus so far as ex gratia allowance is concerned, a distinction is drawn by reference to occupation status; there is no distinction drawn by reference to the kind of title held.

59.  Mr Pao relies on the phrase “legal owners” in §6.1.1(a), which he says reflects the same category of owners mentioned in §5, i.e. registered owners.  We think this reads too much into the word “legal” in §6.1.1(a).  §6.1.1(b) & (c) also refer respectively to “legal tenants” and “legal domestic occupiers”. All 3 “legal” phrases seem to flow from the phrase “legal interest held by the party in the property” in the opening paragraph of §6 and, in our view, signify that the interest must be an interest in the property in law and not just an interest in fact.  There is further scattered appearance of “legal” in the Guidelines,[29] but we do not read the word as meaning “registered”, as Mr Pao seems to suggest.  

60.  Mr Pao refers to the first sentence in §6.1.1(a) that says, in relation to statutory compensation: “Legal owners are entitled to the open market value of the resumed properties …”.  He submits that the statutory compensation payable to a possessory owner is not the full open market value of the property based on good title, but a discounted value based on possessory title, and that since a possessory owner gets less than the open market value of the resumed flat, this shows he is not a “legal owner” contemplated in §6.1.1(a) and, consequently, not an “owner” in §6.1.2. 

61.  There is actually no evidence what difference there would be in the market value of a property sold with good title and the same property sold with possessory title or good holding title backed up by a court judgment such as the DC Judgment.  (In this case the Applicant’s valuer estimated the market value of the Flat to be $6,860,000, while the LandsD offered $5,434,000, apparently discounted from an undisclosed value.)  The LandsD claimed that the statutory compensation offered to the Applicant was “slightly lower” than what would have been offered to a registered owner.[30] The judge did not expressly accept or reject this assertion, though he clearly did not think it was a significant difference.

62.  But even assuming the statutory compensation offered to the Applicant was indeed slightly reduced in this way during LandsD’s calculations, we do not think Mr Pao’s argument is correct.

(1)  The “slightly lower” value is the open market value of the Flat as it was immediately before its reversion to the Government.  The “imperfection” in the title acquired by the Applicant was intrinsic to the Flat since its registered owner had been permanently dispossessed and his title extinguished.  There could no longer be a sale of the Flat with good registered title.  Any sale of the Flat would have to stem from the title of Madam Fong, held by the Applicant as her executor.  Section 12 of the LRO provides: “In the determination of the compensation to be paid under this Ordinance – … (d) … the value of the land resumed shall be taken to be the amount which the land if sold by a willing seller in the open market might be expected to realize.”  The statutory compensation paid to the Applicant represented the entire value of the Flat which it might be expected to realise if sold in the open market, i.e. sold with the only title that remained. 

(2)  This may be illustrated using the Flat as an example. The LandsD says the Flat with the Applicant’s possessory title had a market value of $5.4 million.  Let us assume that a flat next door, identical to the Flat in every respect except for adverse possession, had a market value of $6 million if sold by its registered owner.  But the Flat no longer had a good registered title; it could not fetch $6 million.  No one would buy Mr Lao Kim’s title, which had been extinguished.  If the Flat was to be sold in the open market, it could only be expected to realise $5.4 million.  That is its open market value.

(3)  Indeed, for the purpose of his arguments based on the amount of HPA, it can be seen that the Director’s case is that the statutory compensation payable to a possessory owner is “the open market value of the resumed flat”.  Both §§6.1.2(a)(ii) and 6.1.2(c) of the Guidelines provide that the amount of the HPA payable “is the difference between the value of a notional replacement flat … and the open market value of the resumed flat”.  Assuming that a notional replacement flat in the locality cost $10 million, the Director’s case is that, upon resumption, the HPA for the Applicant as possessory owner (assuming eligibility) would be $4.6 million, i.e. the value of a notional replacement flat ($10 million) minus the open market value of the resumed flat ($5.4 million), which is more than the $4 million that the next-door registered owner would receive.  The Director’s argument is that if HPA was payable to a possessory owner, this would lead to the anomaly that he would almost always receive a larger sum of HPA than a registered owner.

(4)  We will deal with the alleged anomaly below, but the point here is that the Director has clearly proceeded on the basis that the market value of the Flat sold with possessory title (i.e. $5.4 million) is “the open market value of the resumed flat” for the purpose of §§6.1.2(a)(ii) and 6.1.2(c).  It is inconsistent for Mr Pao to argue that in §6.1.1(a) of the Guidelines, “the open market of the resumed properties” can only mean the value based on a good registered title and that a possessory title “is necessarily worth less than the open market value of the resumed property”.

(5)  In our view, Coleman J was correct to think that upon resumption, possessory owners receive statutory compensation representing the open market value of their flats, and that as a matter of ordinary language this shows that they ought to be regarded as owners, and eligible for HPA if they also occupied the flats.

63.  Mr Pao further relies on §§4(c) and 12.2 which refer to proof of title and supply of title deeds.  There is in our view nothing incongruous in requiring a possessory owner to prove to the LandsD his title to the land in question.  In this context the request for title deeds is simply a request for documentary evidence of title, whatever the title may be.  §4(c) solely concerns statutory compensation and §12.2 applies to both statutory compensation and HPA.  There is no dispute these requirements apply to a possessory owner at least as far as statutory compensation is concerned. In our view, therefore, these 2 paragraphs do not evince an intention to exclude a possessory owner.  If a possessory owner is unable to recover the title deeds from the paper owner, there may still be a judgment of the court declaring his possessory title which can be supplied as evidence of that title. In the present case the DC Judgment was available and the LandsD was satisfied with the proof of the Applicant’s title; hence the offer of statutory compensation.

64.  In truth we doubt that those who formulated the policy or drafted the Guidelines ever thought about the position of possessory owners.  Reading the Guidelines as a whole, one can see that so far as statutory compensation is concerned, the division drawn is between owners and tenants.  In that context the Applicant’s claim was apparently dealt with by the LandsD as an owner’s claim, as shown by the LandsD’s letter to the Applicant dated 16 June 2021 which stated: “This office is dealing with owners’ claims as a matter of priority and it would therefore be appreciated if you would give this matter your immediate and urgent attention.”  So far as HPA is concerned, the distinction drawn is that between owner-occupiers and non-occupying owners, rather than by reference to the nature of the title held.  We do not find any pointer that possessory owners are not “owners” for the purpose of HPA. 

65.  Mr Pao submits that the rationale for offering both statutory compensation and HPA to registered owners is to compensate them financially both for the loss of capital investment in the resumed property and for their cost of securing a new home, and that this does not apply to an adverse possessor who has typically acquired land simply by staying there.  Statutory compensation alone would be sufficient to compensate him for his actual out-of-pocket losses and his cost of getting a replacement flat.  We do not think this is a valid argument.  First, statutory compensation does not depend on what the person has paid to acquire the property, but is based on “the loss or damage suffered by the claimant due to the resumption of the land specified in the claim” (section 10(1) of the LRO).  It does not matter that the person was given the property for free, or inherited it, or acquired it by adverse possession, rather than purchased it with his own savings.  Compensation is paid because resumption has taken away something of value that he owns.  HPA, on the other hand, is intended to assist the owner in the purchase of a replacement home, and that object applies equally to a possessory owner.  Further, the Director’s construction would mean that a person who has purchased a possessory title at market value is still not entitled to HPA, even though he has acquired the property using substantial funds.

66.  As mentioned above, Mr Pao submits that Coleman J’s decision leads to the anomaly that a possessory owner would get a higher amount of HPA than an ordinary registered owner.  Associated with that point is his submission that an owner with a possessory title should not be given a subsidy to purchase a replacement home with good title.  On analysis we agree with Mr Lai that this is not really an anomaly.  By adopting an assessment method that is based on a “single notional replacement flat unit rate” for the entire project (situated at the middle floor of a notional 7-year-old building with average orientation and without sea view[31]), it is the policy intention that individual features of the flats resumed (other than its occupation status) are to be disregarded.  A simple and egalitarian approach is taken, eschewing individual differences in the flats resumed, with the result that the affected owner-occupiers all receive the same overall compensation (combining statutory compensation and HPA) per unit area.  Since the amount of HPA is the value of a notional replacement flat less the open market of the resumed flat, it necessarily follows that the owner-occupier of a flat with a lower market value (whether due to its being on a lower floor with poor orientation, or its bad ‘feng shui’, or its being sold with possessory title instead of registered title) will upon resumption receive a higher sum of HPA than the owner-occupier of a superior flat.  Thus, for example, the owner of a reputedly ‘haunted’ flat would be given the subsidy based on the cost of a normal replacement flat, not another haunted flat.  Under this approach, some may say that the owners of flats with lower market value have “done better” than those with higher market value (e.g. higher floor, south-facing, sea-view). But this is a policy choice on the use of public funds for the welfare of affected residents, and the result does not in our view militate against the judge’s construction of the Guidelines.

67.  On the contrary it seems to us there would be a real anomaly if the Guidelines were construed in such a way that HPA is not granted to a possessory owner upon resumption of his flat, whether he was the adverse possessor himself, or inherited or purchased it from one.  This might well result in his being forced out of home ownership as a result of resumption, the very mischief targeted by the policy.  He would receive statutory compensation equivalent to the open market value of his flat, but unlike other owner-occupiers in the same building, he would not be given any subsidy to purchase a replacement flat.  The flat in question would in effect be treated as “ownerless” so far as ex gratia allowance is concerned, with neither the possessory owner nor the paper owner being entitled to any HPA or SA.

68.  This last point is also relevant to the Director’s argument that his construction would promote certainty, as recorded in Tang Lai at §46 (quoted above).  As we understand the Director’s position, he agrees with the Applicant on at least one matter: that the registered owner whose title has been extinguished by a possessory owner will not be paid any ex gratia allowance.  The Director’s position is that he will pay neither the paper owner nor the possessory owner any HPA or SA.  It follows that where there is a contested claim by a person that he has acquired title by adverse possession, the Director cannot responsibly simply pay HPA or SA to the registered owner before the contest is resolved to his satisfaction.  The uncertainty is therefore not avoided by holding that a possessory owner is not eligible for HPA. Moreover, the uncertainty would in any event have to be resolved for the purpose of determining the entitlement to statutory compensation.

69.  For the above reasons, we agree with Coleman J’s construction of the Guidelines and respectfully disagree with that in Tang Lai.

Legitimate expectation

70.  Whilst strictly unnecessary for us to do so, we will briefly deal with the respondent’s notice.  In our view, in implying that the Applicant’s claim was being dealt with as an “owner’s claim”, the LandsD’s letter of 16 June 2021 was distinguishing such claims from tenants’ claims and the like, which is a significant distinction for the purposes of statutory compensation.  It was not an unequivocal representation that the Applicant was regarded as an owner for the purposes of the HPA policy.  URA’s letter of 30 March 2021 at most only evidenced URA’s understanding of the HPA policy.  We are not satisfied that it can be read as a representation made by or binding on the LandsD.

Conclusion

71.  For these reasons, we consider that the order made by Coleman J is correct.  The Director’s appeal is dismissed.  There will be an order nisi that the Director do pay the Applicant the costs of the appeal.

APPENDIX

The relevant parts of the Guidelines (capitals, bold and underlining as in original):

“1.  PURPOSE

This pamphlet briefly outlines the procedures and compensation provisions for private land resumed in Urban Area (defined as Hong Kong Island, Kowloon and New Kowloon).  Resumption proceedings are instituted under the relevant Ordinances for different purposes. As the procedures and compensation provisions of various Ordinances differ, the following paragraphs only intend to give a general guideline on resumption matters.  Any person whose interest is affected by a land resumption project is advised to refer to the provisions of the respective Ordinances for details or consult professional consultants.

2.  LAND RESUMPTION

The Government may acquire private land by resumption for the implementation of public projects such as a road scheme, a public housing development, an urban renewal project, an open space, a drainage improvement project, a new market, a school or any item in the Public Works Programme.  According to the purpose of public projects, resumption proceedings may be instituted mainly under the provisions of:-

(a)  the Lands Resumption Ordinance, Chapter 124;

(b)  the Roads (Works, Use and Compensation) Ordinance, Chapter 370;

(c)  the Railways Ordinance, Chapter 519;

(d)  the Land Acquisition (Possessory Title) Ordinance, Chapter 130;

(e)  the Land Drainage Ordinance, Chapter 446;

(f)  the Urban Renewal Authority Ordinance, Chapter 563;

(g)  The Mass Transit Railway (Land Resumption and Related Provisions) Ordinance, Chapter 276.

The Director of Lands is given the authority to implement resumption and compensation provisions of these Ordinances.

3.  NOTICE OF RESUMPTION

When a resumption is ordered, a Government Notice will be published in the Gazette and a freezing survey will be conducted.  …  Under normal circumstances, the Government will give a period of notice of three months from the date upon which the notice was fixed on or near the properties and upon expiry of the period specified in the notice, the ownership of the properties will revert to the Government.  If there is an urgency to acquire the properties, a shorter period may be given.  Upon the date of reversion, all legal rights and interests are extinguished. Henceforth, the former owner is not entitled to collect rents or fees of any kind from his tenant or the occupant.

4.  OFFER OF COMPENSATION

When the private land is resumed or otherwise adversely affected by the actions of the Government, the Ordinance under which the legal interest is extinguished or affected provides for the payment of compensation.  The former owner or persons having an interest in the land such as the tenant, will be entitled to statutory compensation for the value of the land and building (if any) or other land interests resumed in accordance with the provisions of the Ordinance.

(a)  For land resumed under the Lands Resumption Ordinance (Chapter 124), the Government will make an offer of compensation in respect of the resumption to the former owner and to any person having an estate or interest in the land immediately before reversion under an instrument registered in the Land Registry or invite claims for compensation from them within 28 days from the date of reversion.  Any person who considers that he has a compensatable interest in the land resumed, and who has not been offered compensation nor been invited to claim compensation may, within one year from the date of reversion, submit a claim stating the nature of his estate or interest in the land and the amount of compensation which he claims for the resumption of that estate or interest.

(b)  For land resumed under the Roads (Works, Use and Compensation) Ordinance (Chapter 370) and the Railways Ordinance (Chapter 519), any person having compensatable interests in the land resumed should submit a claim within the period as specified in Part II of the Schedule of the respective Ordinances.

(c)  The amount of compensation will be assessed on the basis prescribed in the respective Ordinances.  Upon acceptance of the amount of compensation offered and the proof of title to the satisfaction of the Government, the claimant is required to sign necessary documents.  Thereafter, the release of compensation will be arranged accordingly.  In straightforward cases, cheques for the amount of compensation offered will be made available for collection within 4 weeks following receipt of acceptance and proof of title.

5.  ASSESSMENT OF OPEN MARKET VALUE FOR RESUMED PROPERTIES

Under the Ordinance, compensation payable to the registered owners is based on the open market value of the resumed properties at the date of resumption.  Valuation principles and practices adopted by the Lands Department in assessing the value of resumed properties are outlined below:-

(a)  In assessing the open market value of resumed properties, reference is made to the market evidence of similar properties in similar locality around the date of resumption.  The assessment involves comparing the resumed properties with the sale transactions of similar properties and making necessary adjustments for various factors such as location, environment, building condition, age, accessibility, date of transaction, floor, size, orientation, facilities etc.

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6.  STATUTORY AND EX-GRATIA COMPENSATION TO DIFFERENT PARTIES

The type of compensation to a party affected by a land resumption scheme may vary according to the type of property in question and the legal interest held by the party in the property.  The details are set out in the following paragraphs.

6.1  DOMESTIC PROPERTY

6.1.1  STATUTORY COMPENSATION

(a)  Owners’ Property interest

Legal owners are entitled to the open market value of the resumed properties assessed on a vacant possession basis or subject to tenancy basis as appropriate as at the date of reversion.  Where appropriate, the redevelopment value of the resumed properties, will also be considered.  Details of the assessment of the open market value for resumed properties are depicted in paragraph 5 above.

(b)  Tenant’s property interest

Legal tenants are entitled to the open market value, if any, of their interest in the domestic properties (for example, the value of an unexpired lease term subject to an existing rent below the prevailing open market rent).

(c)  Removal costs and expenses

(i)   Legal domestic occupiers (including owner-occupiers and tenants) are entitled to claim the losses and expenses reasonably incurred by them in moving from the resumed flat to a replacement flat due to the land resumption.  Ex-gratia a removal allowance will normally be offered to them in lieu of statutory compensation.  However, if the actual removal costs incurred including stamp duty, agency fee, legal cost etc. exceed the ex-gratia removal allowance offered by the Government, the occupiers can submit claims for reimbursement of actual costs that have been reasonably incurred.

(ii)  In the event that the redevelopment value of the resumed properties is offered as compensation to the owners, they will not be entitled to claim compensation for removal costs and expenses.

6.1.2    HOME PURCHASE ALLOWANCE AND SUPPLEMENTARY ALLOWANCE

(a)  Owner-occupiers

(i)   In addition to the statutory compensation, owner-occupiers may also receive an ex-gratia allowance, namely the Home Purchase Allowance (HPA).

(ii)  The HPA is payable to owner-occupiers to enable them to purchase a relatively new replacement flat of a similar size in the locality of the resumed flat.  The amount of HPA payable to individual owners is the difference between the value of a notional replacement flat (based on a seven year old flat of a size similar to the resumed flat and in the same locality) and the open market value of the resumed flat.  The eligibility for receiving the HPA will be subject to screening in accordance with the prevailing Government policy.  The HPA will not be offered if the owner-occupier has already accepted rehousing by the Government.

(iii)  The full HPA will be paid to an owner who is occupying the entire flat or if he can prove that the entire flat is occupied by his immediate family members, including children, parents and dependent brothers and sisters, grandparents, grandchildren, step-parents, spouse’s parents and spouse’s step-parents.

(b)  Owners of tenanted flats or tenanted areas

(i)   In addition to the statutory compensation, owners of tenanted flats or tenanted areas are eligible for the Supplementary Allowance (SA) which is a supplement to the open market value of the resumed flat subject to tenancy.

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(iv)  The SA will be paid at 50% of the full HPA for a first wholly-tenanted flat and at 25% of the full HPA for a second wholly-tenanted flat.  No SA will be paid for a third wholly-tenanted flat.

(c)  How is the HPA assessed

For all resumed flats in old buildings within a resumption project, the Director of Lands will assess the unit rate (i.e. $ per square meter) of a notional replacement flat of 7 years old.  The notional replacement flat is assumed to be in a comparable quality building, situated in a similar locality in terms of characteristics and accessibility.  The notional replacement flat will be situated at the middle floor of a notional building with average orientation, i.e. not facing south or west, and without sea view.  Normally, comparables aged around 7 years and transacted around the date of reversion will be selected.  Based on these comparables, appropriate adjustments for time, age, orientation, floor, quality, size, accessibility, environment etc will be made so as to arrive at the unit rate of a notional replacement flat for a resumption project.  A single notional replacement flat unit rate will be used throughout a resumption project.

The HPA for a resumed flat is the difference between the value of a notional replacement flat (the area of the resumed flat multiplied by the notional replacement flat unit rate) and the open market value of the resumed flat.

(d)  General issues in relation to the HPA/SA

(i)   An owner of a vacant flat is eligible for the same amount of SA as an owner of a tenanted flat.

(ii)  The HPA/SA will be payable for a maximum of three flats per owner per resumption exercise.

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(viii) For urban renewal projects, the HPA/SA is not payable to an owner who has acquired the affected property after the commencement date of the project published in the Gazette under section 23 of the Urban Renewal Authority Ordinance.

(ix)  For railway projects, Government’s survey or for urban renewal projects, the URA’s survey (both surveys carried out at the time of announcement of the project) will normally be adopted for the purpose of determining the eligibility for HPA/SA.  Government’s update survey (carried out at the time of gazetting of the Resumption Notice) will be used to counter check if the owner is still entitled to HPA/SA or the same amount of HPA/SA.  No additional HPA/SA entitlement or increased amount of HPA/SA will be allowed as a result of the update survey in normal circumstances.

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12.  INFORMATION REQUIRED

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12.2  PROOF OF TITLE

Before compensation for the resumption of land is released to the claimant, he is required to prove that he has a good title to the land being resumed.  The claimant is requested to submit all the title deeds and documents listed in the schedule attached to the offer letter to the District Legal Advisory and Conveyancing Office …”