WAH HA PROPERTY DEVELOPMENT LTD AND OTHERS v. ROSEHAWK GROUP LTD AND OTHERS

LDCS 25000/2018

[2023] HKLdT 24

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 25000 OF 2018

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BETWEEN

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D E C I S I O N

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BACKGROUND

1.  On 30 April 2021, the tribunal handed down its judgment (“the Judgment”) in relation to the applicants’ application for an order for sale under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap.545 of all the undivided shares of and in Rural Building Lot No 299, Rural Building Lot No 300, Rural Building Lot No 301, Rural Building Lot No 302, Rural Building Lot No 303, Rural Building Lot No 304, Rural Building Lot No 305 and Rural Building Lot No 306 (“the Lots”), together with a development erected thereon known as Stewart Terrace, Nos 81-95 Peak Road, Hong Kong (“the Development”).

2.  The tribunal dismissed the application upon finding the applicants have failed to fulfill the ownership prerequisites (i.e. do not own more than 80% of the undivided shares in Lot 299) for making the application[1]. This ground alone would be sufficient to dispose of the application. The tribunal further considered that redevelopment of the Lots was not justified due to age and/or state of repair of the Development in accordance with section 4(2)(a) of the Ordinance.

3.  The tribunal made a costs order nisi that the applicants do pay the costs of these proceedings (including any reserved costs) to R1 and R2, with certificate for one counsel to each of R1 and R2, to be taxed on the High Court scale if not agreed which shall become absolute upon expiration of 14 days from the date of judgment.

4.  On 28 May 2021, the applicants applied for leave to appeal on two grounds. First, the tribunal erred in law in concluding that the applicants did not own the requisite percentage of 80% of the undivided shares in Rural Building Lot 299 in compliance with section 3 of the Ordinance (“Ownership Ground”). Secondly, the tribunal erred in holding that redevelopment was not justified due to the age and state of repair of the Development (“Age and State of Repair Ground”).

5.  The applicants also applied for variation of the costs order nisi.

6.  By consent, the applications for leave to appeal and to vary the costs order nisi be dealt with by paper disposal.

OWNERSHIP GROUND

7.  In short, the applicants’ line of argument is that they do not rely on section 3(2)(b) of the Ordinance. They rely on section 3(2)(a) which requires the applicants to own not less than 80% of the undivided shares in Lot 299 as the prerequisite to file a compulsory sale application.

8.  The applicants submit that under the Deed of Mutual Covenant dated 15 February 1989 (“the DMC”), the Lots including Lot 299 were collectively and notionally divided into 1,180 equal undivided shares. As the applicants have acquired proprietary interest in the Lots by being assigned 960 out of those 1,180 undivided shares under various assignments which represents 81.4% (i.e. 960/1,180) of the overall undivided shares in the Lots (including Lot 299), they should be taken as having fulfilled section 3(2)(a) of the Ordinance. In making such argument, the applicants are simply repeating their previous analyses which were rejected in paragraphs 19 to 42 of the Judgment. We shall adopt those paragraphs without repetition save to highlight a few points.

9.  The wording of section 3(2)(a) of the Ordinance is that “2 or more lots where the majority owner owns not less than the percentage specified in subsection (1) of the undivided shares in each lot” (emphasis added). The plain and ordinary meaning of the provision is that the statutory requirement about ownership percentage is applicable to each lot. This literally means that the majority owners must hold not less than the statutory required percentage of undivided shares in respect of each and every lot covered by the application for compulsory sale.

10.  We do not think the applicants’ heavy reliance of the DMC could avail them. The Ordinance has not stipulated or mentioned that another approach, like the DMC-based approach as suggested by the applicants, shall apply in place of the lot-based approach in event the lots in questions are governed by the same DMC. In short, the Ordinance does not create any exception or alternative approach in the calculation of undivided shares for situation where the lots concerned are governed by the same DMC.

11.  Whilst denying reliance of section 3(2)(b) of the Ordinance, the applicants by counting the undivided shares of all the individual lots together are, in effect, relying on the method under section 3(2)(b). It is not up to the applicants to employ the section 3(2)(b) approach but to deny its relevance at the same time. Fundamentally, their adopting that approach is unjustified because the precondition for the application of section 3(2)(b) (i.e. the existence of a common staircase intended for the common use by the occupiers of the buildings connecting buildings on the lots) simply is not fulfilled.

12.  In challenging the tribunal’s reasoning, the applicants also complain that the lot-based approach could not reconcile with or be applied in harmony in developments having buildings situated on different lots but sharing the same DMC. They further complained that some illustrative discussions in the Judgment in relation to the calculation of undivided shares in the various lots cannot sit comfortably with the system of land holding in Hong Kong by way of undivided shares.

13.  In our view, such complaints can serve no useful purpose. The incompatibility between the calculation of undivided shares on a lot-based approach in the Ordinance and the system of notional division of undivided shares of several lots under any DMC all the more suggest that compulsory sale application by the lot-based approach may not necessarily operate smoothly in all situations in reality. One must not be confused about the tribunal’s function, which is not to ensure harmonious application of section 3(2) to every real-life situation but to make sure that the legislation is properly construed and applied.

14.  As already explained in the Judgment, the Hansard of 7 April 1998 meeting records that the Bills Committee was well aware of some implications of adopting a lot-based approach and the potential incompatibility between such an approach and some situations (say buildings spreading over different lots and the adverse consequences of having pencil buildings etc). Being apprised of these, the legislature maintained the decision that a lot-based approach should be adopted and that the ownership requirement should be counted by reference to each lot subject to the exception where buildings are connected by a common staircase as specified in section 3(2)(b).

15.  In Max Win Development (HK) Limited v Lam Ngok Hing & others[2], the tribunal comprehensively discussed in paragraphs 21 to 33 of the judgment the legislative history of the Ordinance whilst construing sections 3(1) and 3(2). We call attention to the following paragraphs which are particularly relevant:-

“21. On 21 January 1998, the Land (Compulsory Sale for Redevelopment) Bill (“the Bill”) was proposed by the Secretary for Planning, Environment and Lands (“SPEL”) and laid before the Provisional Legislative Council for its first reading. The preamble of the Bill and the original section 3 provided for “the person or persons who owns or own … … not less than 90% of the undivided shares in a lot may make an application to the Tribunal for an order to sell all the undivided shares in the lot for the purposes of the redevelopment of the lot”. (emphasis added)

22. The debate of the Bill was then adjourned to the Bills Committee for further discussion between 10 February and 24 March 1998, during which various interested parties were invited to make submissions. A common question raised concerned the scope of the Bill, in particular, whether multiple or contiguous lots would be covered thereby. In particular:-

(1) The representatives of the Real Estate Developers Association (“REDA”) were particularly concerned about the restrictive definition of “lot” and opined that redevelopment should be considered on a project basis rather than on a “lot” basis and suggested that the Bill should allow majority owners holding an average of 90% aggregate undivided shares in contiguous lots to apply for an order for sale;

(2) Representatives of the Hong Kong Institute of Surveyors (“HKIS”) proposed to widen the scope of the Bill to cover schemes comprising several contiguous lots as it was more cost-effective and economical to redevelop a larger site than a single lot.

23. In view of the concerns raised, Members of the Bills Committee agreed to discuss the scope of the Bill as to whether its application should apply to a single lot or contiguous lots. As recorded in paragraphs 12 – 13 of the Minutes for the Bills Committee on 12 March 1998, the members noted in relation to “Buildings connected by common staircase” that it was necessary to have clearer provisions to specify how the minimum threshold would apply in cases where buildings were connected by a common staircase. The Administration agreed to introduce Committee Stage Amendments to the effect that “the minimum acquisition level of buildings connected by a common staircase should be an average of 90% of the undivided shares in the lots on which these buildings respectively stood”.

24. In t he Paper for the House Committee meeting on 27 March 1998 – report of the Bills Committee on Land (Compulsory Sale for Redevelopment) Bill, it summarized the concerns of some members and deputations that thriving “pencil” developments would result if the 90% threshold were to be applied to a single lot:-

… …

25. The corresponding proposed amendments were set out in Appendix III of that Paper and it was this Clause 3 amendment that introduced the current version of section 3(2) of the Ordinance.

26. On 7 April 1998, the Provisional Legislative Council resumed Second Reading debate of the Bill. On the scope of the Bill, the Chairman of the Bills Committee, Mr Ronald Arculli said that:-

“Another focal point of discussion in the Bills Committee was whether owners holding an average of 90% of aggregate undivided shares in contiguous lots should be allowed to make an application to redevelop the lots as a package. Whilst we fully support the concept of comprehensive redevelopment, our concern was that should such approach be adopted, there may be situations where an applicant did not own any undivided shares in one of the lots whilst holding 90% of the aggregate undivided shares. The Bills Committee considered that it could not be justified on the sole ground of comprehensive redevelopment to compel all the owners of such a lot to sell their properties against their will. We, therefore, agreed that the ownership percentage should apply to each lot except where two buildings served by a common staircase in which case it would be the average of the undivided shares of the lots on which the buildings stand.”

(emphasis added)

27. In respect of the proposed amendments to clause 3 of the Bill (ie current version of section 3(2)(a) and (b) of the Ordinance), SPEL said that:-

“Sub-clause (1A) [i.e. current section 3(2)(a) and (b)] specifies that if the majority owner makes an application covering two or more lots, he must own not less than 90% of the undivided shares in each lot. It also provides for the average to be taken for the purpose of calculating the percentage of the undivided shares of two or more lots on which there are two buildings joined by a common staircase.”

28. On the same day, the Committee passed the Bill with the amendments as proposed. The Bill was read a third time and passed by the Provisional Legislative Council.

Construction of the Ordinance

29. As revealed by the legislative history of the Ordinance mentioned above, we accept Mr Ho’s submissions that the focus of the scheme of compulsory sale is “lot-based” as opposed to “building-based” or “redevelopment area/site-based”. At its inception, the Bill was drafted to apply only to a “single lot”. Despite deputations from interested bodies, such as REDA and HKIS, to expand the scope of the Bill to enable the minimum percentage threshold to be applied by average to multiple or contiguous lots, such calls for expansion were not accepted save and except where there is a common staircase connecting two buildings straddling 2 or more lots. Apart from the common-staircase exception, the Ordinance maintains the adoption of a lot-based approach and the requirement of applying the minimum threshold to each of the lot(s).

30. The lot-based approach is reflected clearly in various provisions of the Ordinance as follows:- … …

31. Section 3(1) is the enabling provision for person or persons who owns or own not less than 90% (80% in the present case) of undivided shares in a lot to make an application to the Tribunal for an order to sell all the undivided shares in the lot for the purposes of redevelopment of the lot. It is plain from the wordings that section 3(1) covers an application that relates only to a single lot; and that “the lot” – the subject of the order for sale – must be referable to that very same lot to which the subject undivided shares relate.

32. On the other hand, where 2 or more lots are involved, section 3(2) provides 2 separate scenarios in which an application may be made to the Tribunal:-

(1) Where the majority owner owns not less than 90% (80% in the present case) of the undivided shares in each lot (section 3(2)(a));

(2) Where there is a common staircase connecting the two buildings, and the average of the undivided shares held by the applicant(s) for those 2 or more lots is not less than 90% (80% for the present case) (section 3(2)(b)).

33. It is clear from the wordings in section 3(2) that, whilst an application may include multiple or contiguous lots, such application is permissible if, and only if, the conditions in sub-section (2)(a) or (2)(b) are satisfied. There is no other basis to permit an application to encompass multiple or contiguous lots. It must follow that non-fulfilment of the conditions in either limb of section 3(2) will result in the multiple-lots application being invalid.”

(emphasis added)

16.  Paragraphs 29 to 33 of the judgement especially the contents underlined above are directly to the point.

17.  The applicants’ application for compulsory sale encompasses 8 lots together. It cannot be disputed that section 3(2)(a) cannot be satisfied as the applicants do not own not less than 80% of the undivided shares in each lot. Section 3(2)(b) cannot be satisfied either as there is no common staircase connecting the buildings to enable the undivided shares of the lots to be counted altogether. As none of the two limbs under section 3(2) can be fulfilled, the applicants’ application for compulsory sale of the lots altogether is doomed to fail from the start.

18.  The Court of Appeal, on 31 May 2021 (after the handing down of judgment by the tribunal in the present case), gave judgment in the case Pacific Base Holdings Limited & Ors v Lee Hop Biu & Ors[3] wherein the Court of Appeal ruled that the lot-based approach was the mechanism adopted under the Ordinance. The following paragraphs in the judgment are particularly relevant :-

“17. But we cannot discern any contextual reasons compelling the exclusion of a redevelopment of part of a building (assuming it is one building straddling over two different lots) from the scope of LCSRO if it is structurally possible to do so in light of modern engineering technology. In the scheme of the LCSRO, the focus is on the lot as it refers to “redevelopment of the lot”:

(a) The preamble set out the object and purpose of the ordinance: “to enable persons who own a specified majority of the undivided shares in a lot to make an application to the Tribunal for an order for the sale of all of the undivided shares in the lot for the purposes of the redevelopment of the lot …”;

(emphasis added)

(b) Lot is defined under Section 2(1) to refer to any piece or parcel of ground the subject of a Government lease and includes a section and subsection of a lot. Hence it is by reference to the root of title of the land in question;

(c) This ties in with the scheme for working out the requisite majority in the ownership of the land on the part of the applicants. The underlying premise of this is common ownership;

(d) Thus, the definitions of “majority owner” and “minority owner”, “mortgage” and “purchaser” are all related to “a lot”. The same can be said regarding mortgagee in possession in Section 2(3) and purchaser and owner under Section 2(1);

(e) “Redevelopment” refers to replacement of a building (which, as defined, includes part of a building) on “the lot”;

(f) In Section 3, the application is to be made by those who own not less than 90% of the undivided shares in a lot. The same formula is applicable in cases where the application is made in respect of 2 or more lots (under Section 3(2)(a)) though there is a special route for cases where “one building is connected to another building by a staircase intended for common use” (under Section 3(2)(b), in respect of which the 90% can be achieved by average across the relevant lots);

(g) The application is to be registered under the Land Registration Ordinance Cap 128 against the lot (Section 3(3)(b)) and the specified notice(s) under Section 3(3)(c) has/have to be affixed on the lot(s);

(h) The respondents to an application are the minority owners of the lot(s);

(i) Subject to the special route under Section 3(2)(b), the calculation of percentage for majority and minority is by reference to ownership of shares in the lot, excluding shares relating solely to common parts, see Section 3(7)(a);

(j) If the application succeeds, the Tribunal will make an order that all undivided shares in the lot(s) be sold for the purposes of the redevelopment of the lot(s), see Section 4(1)(b);

(k) The matters that the Tribunal has to be satisfied of under Section 4(2) are that (a) the redevelopment of the lot is justified due to the age or state of repair of the existing development on the lot; and (b) reasonable steps have been taken to acquire all the undivided shares in the lot;

(l) The sale and purchase under an order of the Tribunal is the sale and purchase of the lot(s), see Section 5;

(m) The assignment by the trustee appointed under Section 4(1)(c) would be the assignment of interest in the lot(s), see Section 7(1)(i), (4) and (5)(b); and

(n) The conditions to be incorporated under Schedule 3 were to be incorporated into the Government lease of the lot.

18. A lot-based scheme (as opposed to a building-based scheme) is the natural and logical mechanism for compulsory sale by reason of the system of landholding in Hong Kong. When a building is constructed on a piece of land, the building is regarded as a fixture and becomes part of the land and its ownership is held by way of ownership in the land. There is no separate ownership of the building. Co-ownership of landed interest is operated by the holding of undivided shares in a lot. In Hong Kong, the relationship between co-owners is usually regulated by a deed of mutual covenant. Thus, the sale of the interest in land is effected by the sale of the undivided shares in the lot. This is the mechanism adopted under the LCSRO.”

(emphasis added)

19.  To conclude, the applicants’ contention that for the purpose of determining if the ownership prerequisite under the Ordinance can be satisfied, the undivided shares of the entire development (which consists of multiple buildings standing on different lots) should be counted together by reason of the sheer fact that the development/buildings are governed by the same DMC is no more than a proposition out of their own invention unsupported by authority. Such is at variance with the unambiguous words and intent of the Ordinance and must be rejected. With the ownership requirement cannot even be satisfied, the application for compulsory sale of the Lots should not have been made.

AGE & STATE OF REPAIR

20.  The applicants also challenge that the tribunal erred in finding that redevelopment was not justified by reason of the age or state of repair of the existing developments on the Lots.

21.  Citing paragraph 3-003 of Civil Appeals: Principle and Procedures which states that a finding of fact is “usually a decision about an act, action, event, quality or condition …”, R1, represented by Mr Alexander Wong, submitted that tribunal’s determination of the age or state of repair of the Development is no doubt a finding of the quality and/or condition of the Lot. Such rulings were strictly based, among other things, on the tribunal’s own in-person observation of the Lots in addition to the evidence adduced by the parties.

22.  R1 highlighted that the tribunal was shown with evidence that all units of the Lots, both from the Inspection Report and from the tribunal’s site visit, were of tenantable conditions (except flat 20 which was vacant). Most if not all, were occupied by owners or leased out. Evidence from the applicants’ factual witness Mr Hugo Christopher Barret showed that his flat fetched a rental of $75,000 which was neither in a state of disrepair or in a poor condition. The repair costs was low relatively which was only 2.3% of the applicants’ EUV and was much lower as demonstrated by paragraph 116-128 of R1’s closing submissions (which was only 0.667% of the applicants’ EUV figure on the JES on EUV).

23.  R1 further submitted that as opposed to the situation where a court came to a ruling solely based on the evidence advanced, a site visit had actually been arranged for the tribunal and the parties in the course of trial on 12 January 2021. It was during the site visit the tribunal observed that the Development in the Lots was not in a poor physical state nor was it so physically or functionally obsolete that justified a pull-down and redevelopment. It was based on its own empirical findings and observations during the site visit together with all the evidence proffered the tribunal found that the statutory prerequisite about repair and state of condition could not be fulfilled. R1 considered that appealing these findings in the Judgment would not even be an academic exercise and an appellant court should not entertain it.

24.  In relation to the applicants’ criticism against the tribunal for omitting to consider the expert evidence given in the applicants’ favour. R1 considered that the applicants were in fact overly generalising their experts’ evidence which had actually been negated by cross-examination[4]. The tribunal already expressed in the Judgment its reservation about Mr Benson Wong’s opinions and pointed out that the two valuation experts appointed by the applicants and R1 both considered the internal conditions of all flats in the Development are either good or very good.

25.  Relying on Kwan VP’s observation at paragraph 27 of Chan Shiu Chong v Director of Lands[5] (see below), R1 reminded that the tribunal is a specialist tribunal. The applicants should not shoehorn the evidence the tribunal did not specifically articulated in the Judgment as the tribunal’s error in law.

“The Tribunal is entitled to set out the main thrust of its decision in a judgment, without having to set out, discuss and then reject, each and every contention raised. On top of that, it is a specialist tribunal. Unless there were plainly obvious errors in respect of material factors which the Tribunal failed to take into account, it is not open to applicants to ask the Court of Appeal to re-hear all the arguments they had advanced before the Tribunal by dressing up the omission of the Tribunal to address each such argument as an error of law.”

26.  R1 recapitulated the various matters that had been drawn by them to the tribunal’s attention and their detailed analyses of the evidence adduced in relation to age and state of repair. R1 submitted that the tribunal, having taken all evidence, arguments and also R1’s position into account, was rightly and perfectly entitled to rule that redevelopment of the Lots was not justified on the ground of age or state of repair.

27.  On the evidence available to this tribunal, we shall point out that in this case only the applicants adduced expert evidence from a structural engineer (i.e. Mr So Kin Shing) and a building surveyor (i.e. Mr Benson Wong) to comment on the condition and structural aspects of the building whereas other parties did not adduce any expert evidence in this regard. Mr Benson Wong and Mr So collectively was therefore the “solo” expert to give expert opinion about the structure and condition of the Development.

28.  Be that as it may, it does not mean that the tribunal must accept Mr So and Mr Benson Wong’s opinion in their entirety. Even for the situation of a single joint expert appointed by the parties to an action, the court is not bound to accept the single joint expert’s evidence[6], not to mention the evidence from the solo expert appointed by the majority owners. We see no reason why their evidence could not be objectively assessed in light of their answers in cross-examinations and all materials available that may shed light on the quality of the expert opinion given as well as the condition of the buildings in question.

29.  Without the expert evidence from the minority owners, it was only natural that the tribunal did not have the materials against which some tests results by the applicants’ experts could be scrutinized and compared. That notwithstanding, the fact that an expert witness could produce some test results in respect of some samples taken does not by that fact alone make his opinion conclusive and determinative of whether the statutory requirements for redevelopment can be satisfied. That question remains one to be assessed and decided by the court taking into account all relevant circumstances. After all, whether the age and/or state of repair of the Development justify redevelopment is not only about test results. The tribunal has already set out the discussions in paragraphs 85 to 95 of the Judgment which shall not be repeated here.

30.  The applicants’ counsel also tended to grasp one or two sentences or picked one or two phrases here and there out of the Judgment and sought to raise them to the higher plane of principle that the tribunal took into account irrelevant considerations. We say that those sentences or phrases must be understood in the proper context instead of to be quoted out of context.

31.  The applicants picked up one last sentence from paragraph 93 of the Judgment wherein the tribunal expressed that realistically speaking reasonably-maintained apartments in low-density environment particularly in the luxury residential district, like the Peak, were still in demand irrespective of their age. That partly relates to the consideration of whether renovation and maintenance would be worthwhile.

32.  As for the comment that the Development was not of the type and condition that should be accorded with redevelopment priority quoted by the applicants out of paragraph 90, such was no more than an expression of the tribunal’s conclusion, having considered the design and condition of the building of this case, that redevelopment was not considered justified in the present case. Nowhere in that paragraph or even in the entire judgment the tribunal ever categorically exclude buildings of certain type from the compulsory sale scheme or lay down any scale of redevelopment priority. But unfortunately those appears to be the things baselessly insinuated by the applicants.

33.  As for the comment that the living environment in the Development was way better than many ordinary household in Hong Kong in paragraph 89 which the applicants quibbled about, that was the truthful impression and observations of the tribunal being physically present at the scene during the site visit. We have yet to be told why the tribunal should be criticized for expressing such honest impression in its judgment. If the applicants insist to perceive and take this one sentence as the comparison made by the tribunal between the Development and other buildings (which was not actually), we still have no clue why such comparison is so objectionable.

34.  In the judgment of Century Supreme International Limited v Kam Chi Kit Charles and Hui Pui Kuen & Others[7] the senior counsel representing the minority owner in this case challenged the test of “tenantable condition” being employed as the standard to assess “age” and “state of repair” of a building. The tribunal there (of the same composition as the tribunal in the present case) was not persuaded and had the following discussions, those underlined are relevant:-

“… …

64. Premised on the above discussions, we now specifically answer Mr Ho’s [senior counsel representing the minority owners] challenge to the tenantable condition standard as summarised in paragraph 46 above. Mr Ho considers that standard deficient because it requires comparison of a building subject to a compulsory sale application (constructed some 50 years ago) with what are reasonably expected of in modern-day standard. In his view, such comparison is wrong because:- (1) old building must fall short of a building built in modern-day standard and will not be able to satisfy the tenantable condition standard any way; and (2) on the natural and ordinary meaning of the phrase “state of development of the existing development on the lot” in section 4(2)(a) of the Ordinance, since it makes no mention of any other building, the tribunal should focus on the state of repair of the subject building rather than making comparison with other developments.

65. With respect, we cannot agree to this view. In relation to point (1), whilst it may bear some truth to say that generally old buildings would fall short of buildings constructed in modern-day standard, it is a misconception to think that whenever the subject building is found to be inferior than modern buildings, then the tribunal must reach the conclusion that redevelopment is justified. To what extent the existing building falls short of modern-day standard certainly is one of the considerations to be taken into account. To suggest that in the evaluation exercise under section 4(2)(a), the tribunal must strictly confine its scope of vision to the subject building and must ignore the current living standard as demonstrated by more up-to-date buildings is just like sticking to the beaten track and resting complacently on one’s laurels. In relation to point number (2) (i.e. natural and ordinary meaning of the phrase in section 4(2)(a)), whilst it is true that the phrase does not mention any building other than the subject building, it is clear that the words “redevelopment” and “justified” in section 4(2)(a) provide the context against which the grounds of “age” and “state of repair” could be assessed. Therefore, in considering whether it is “justified” to demolish and replace the existing building with a new development, the court certainly could compare the state of the existing building with what a new building could provide. To suggest otherwise is to limit our own progress in achieving betterment.

(emphasis added)

35.  We trust the above have sufficiently dealt with the “irrelevance argument” of the applicants.

36.  In any case, even assuming that the sentence or phrase quoted by the applicants do not directly concern the issues in dispute (which we cannot agree for the reasons explained above), we learn of no authority which requires that each and every sentence in a judgment and the entirety of its contents must all be referring to the issues in dispute, lest the tribunal shall be labelled as having taken irrelevant factors into consideration.

COSTS ORDER NISI

37.  The applicants applied for the costs order nisi be varied to the extent that:-

(a) R1 do pay the costs of the applicants on the issues of whether (i) the valuation report accompanying the application complied with section 3(1)(a) and Part 1 of Schedule 1 of the Ordinance; and (ii) whether the staircase, basement floor and basement extension currently occupied by R1 should be included in the valuation of the existing use value of Flat 1;

(b) The costs of the expert evidence of R1’s expert Mr Chris Tang relied on by R1 be disallowed; and

(c) R1 do pay costs of R2 on the issue of whether the staircase, basement floor and basement extension currently occupied by R1 should be included in the valuation of the existing use value of Flat 1; or

(d) Alternatively, applicants do pay 50% of the costs of the proceedings to R1 with certificate for one counsel.

38.  Pursuant to section 12(1) of the Lands Tribunal Ordinance, the costs of and incidental to all proceedings in the tribunal are in the discretion of the tribunal which shall have the full power to determine by whom and to what extent the costs are to be paid.

39.  In Sin Ho Yuen the administrator of the Estate of SIN TAT, deceased v Fineway Properties Ltd[8], the Court of Final Appeal emphasised in paragraph 25 of the judgment that:-

“As the title of the Ordinance states, it provides mechanism for the compulsory sale of land for redevelopment, by giving to the tribunal the power to order the sale of a property in multiple ownership, over the objections of a minority owner. In order that the entrenched right of private ownership of property in Articles 6 and 105 of the Basic Law be not infringed, the protection of minority interest under the Ordinance becomes therefore a key factor. In turn, it behoves the tribunal, in carrying out the scheme of the Ordinance, to ensure that such protection be not diminished, or be whittled down through inefficiency and delay. And there would be diminution if, for instance, the minority owner bore, at the end of the day, an inordinate burden of costs, so that what he got by way of his share of the proceeds of sale was largely taken away by the costs incurred in the legal process.”

40.  In Good Faith Properties Ltd and Others v Cibean Development Co Ltd[9], it is held that compensation approach on costs in resumption cases is applicable to compulsory sale cases with the following elaborations:-

(a) Costs should not be dealt with in the same manner as ordinary hostile litigation and the expenses for the determination of the proper compensation for taking the land compulsorily are regarded as part of the reasonable and necessary expense attributable to the acquisition process as a whole. The starting point is that such costs should be paid by the acquiring authority.

(b) All the litigation expenses incurred throughout the land compulsory sales proceedings, as well as the price the applicants have to pay in order to compel the minority owners, who have no fault on their part, to sell the property are regarded to be reasonable and necessary.

(c) If a minority owner raises objection and puts forward proper evidence to support his objections, he is only exercising his legitimate right to object as conferred by the Ordinance. He should not be penalized even though he is doing so for a motive which the applicant may, perhaps with some justification, characterize as an attempt to extract a ransom.

(d) Only in very plain cases where the rejection of an offer of or the pursuit of a line of opposition is obviously unreasonable that the Tribunal should consider imposing costs sanction.

(e) Where a minority owner pursued an issue which had no real chance of success in an unreasonable manner, the Tribunal can, in addition to ordering that he be deprived of his costs in such pursuit, in a serious case, order him to bear the costs of the applicant in meeting such hopeless challenge. To decide whether it is a serious case, the tribunal must also consider with regard to the position of the applicant.

41.  The compensation approach was formulated in a case where consequential sale of the lot was ordered with fair and reasonable compensation to the minority owners for their consequential losses of ownership over the lots. In the present case, an order for sale was not even granted because the applicants could not meet the statutory requirements. Their failure to own the minimum percentage of undivided shares of the Lots at the time of application (and also thereafter) as required by the statute was a devastating blow to this enterprise of compulsory sale for redevelopment. It is clear that the application was fundamentally flawed and unwarrantedly made.

42.  R2’s position is essentially that they should be entitled to costs as a minority owner to protect its interest and they adopt a neutral stance as to whether it is the applicants or R1 who should pay.

43.  Having considered the relevant factors including but not limited to the manner in which the trial actually took place, parties’ conduct and the time spent (the duration of the trial was shorter than scheduled), we do not observe unreasonable pursuit of issues by R1 or any unreasonable litigation conduct on their part that justifies deprivation of the costs protection which they as the minority owner normally deserve. Bearing in mind that minority owners who are unsuccessful in their opposition should still normally be compensated for their costs incurred in resisting the compulsory sale application, we simply fail to see any reason why R1, which succeeded in their opposition and is actually the winning party, should not have their costs covered but should even be made to bear the costs of the applicants and/or the co-respondent.

DISPOSITION & COSTS

44.  To conclude, we find no reasonable prospect of success in the intended appeal of the applicants, nor is there other reason in the interest of justice that the appeal should be heard. Leave to appeal is refused.

45.  This tribunal shall maintain the costs order in terms of the nisi which should now become absolute. The applicants’ application for variation of the costs order nisi is dismissed.

46.  We order that the applicants, having failed the leave application and the application for variation of costs order nisi, do pay R1’s and R2’s costs thereof with certificate for one counsel granted for each of them, to be taxed on the High Court scale if not agreed.

POST-SCRIPT

47.  As a post-script to our decision, this tribunal received a “Statement of the Position of the 3^rd Respondent” from Mr Adrian Huggins SC (i.e. R3) on 22 June 2021 after the Judgment was handed down on 30 April 2021. By the statement, Mr Huggins drew the tribunal’s attention to some incorrect and misleading information provided by the applicants’ counsel, Mr Julian Chan, in his opening submissions.

48.  To tell the story, the timeline has to be slightly rewind to the time of trial and the arguments over the question of whether the applicants had taken reasonable steps to acquire all undivided shares of the Lots.

49.  At trial, the tribunal was informed by Mr Julian Chan that the applicants have settled with Mr Huggins and R4 who therefore no longer opposed the application. The tribunal was also informed that despite the settlement, Mr Huggins’ and R4’s undivided shares had not been acquired by the applicants because Mr Huggins and R4 had decided that instead of selling their properties to the applicants, they would prefer to receive a share of the sale proceeds upon a successful auction of the Lots. The tribunal was further told that as R2 also did not contest the issue of reasonable steps, R1 became the only party who opposed a compulsory sale order and contested the reasonable step issue.

50.  At trial, Mr Alexander Wong on behalf of R1 submitted that the applicants had not taken reasonable steps to acquire all undivided shares. The legal definition of an offer was an expression of both intention and willingness to contract on certain terms but the applicants’ offer lacked this essential quality. It was said that the applicants actually did not possess the slightest intention nor financial capability to carry the terms of the offer into effect even if such is accepted. The so-called “offer” made by the applicants to R1 was in reality a “sham” and “bogus” made only to superficially satisfy the statutory requirement.

51.  Mr Julian Chan counter-argued that R1’s suggestion of funding problem on the applicants’ part was a pure speculation without evidential basis.

52.  The tribunal was persuaded by Mr Julian Chan and agreed that there was no evidence about lack of genuine offer or financial capability on the applicants’ part to honour the offer. The tribunal found on a balance of probabilities that the applicants had already taken reasonable steps in an attempt to acquire all the undivided shares in the Lots.

53.  On 22 June 2021, that was around two months after the Judgment was handed down, the tribunal received Mr Huggins’ statement informing, inter alia, that:-

(1) By a formal agreement with the applicants, Mr Huggins agreed to withdraw his opposition expressed in his Notice of Opposition in return for a written compromise that in the event of there being an order for sale by public auction, he would receive for his undivided shares in the property 4.13% of the total proceeds.

(2) Prior to the settlement and the withdrawal of his opposition, what had actually happened was, the applicants had made an offer as required by the Ordinance to purchase Mr Huggins’ undivided shares for HK$137.3m. Mr Huggins accepted the offer but the applicants then changed mind and maintained (erroneously as a matter of fact and law in Mr Huggins’ opinion) that Mr Huggins’ acceptance was “too late” and refused to acquire his undivided shares.

(3) Mr Huggins considered it misleading and factually inaccurate for Mr Julian Chan to say in paragraph 33 of his written submissions that “None of the Respondents accepted the respective offers made by the Applicants to purchase their undivided shares” because the truth was he did accept the offer only that the applicants erroneously treated his acceptance as ineffective.

(4) As a matter of fact, upon discovering the problem in Mr Julian Chan’s opening submissions before trial, Mr Huggins already contacted the applicants’ solicitors and Mr Julian Chan to make it clear that unless they agreed to amend their written opening submissions, he would feel constrained to put in a written opening himself to draw the tribunal’s attention to the misstatement.

(5) According to Mr Huggins, Mr Julian Chan agreed to do that and consequently Mr Huggins did not put in his submission dated 4 January 2021 (which had already been prepared).

(6) Mr Huggins said he had been specific in his request and Mr Julian Chan was also specific in his response (see below):-

“I am happy to qualify paragraph 33 of the Opening accordingly as it relates to you. The Applicants will rely simply upon the fact that no binding contract was concluded rather than saying “the offer was not accepted” and I will mention this orally in opening.”

(7) Mr Huggins was therefore surprised and troubled to see paragraph 79 of the Judgment in which the tribunal said that “According to Mr Julian Chan, R2 to R4 have decided that instead of selling their properties to the applicants, they would prefer to receive a share of the sale proceedings upon a successful auction of the Lots.”

(8) What was said in paragraph 79 of the Judgment (which Mr Huggins believed had come from paragraph 33 of Mr Julian Chan’s opening submissions) was incorrect and misleading and was not in accordance with the previous correspondence. He was very concerned about the misstatement which had found its way to the Judgment because it might give the false impression to anyone reading the judgment that he preferred to take his chances of receiving a higher sum rather than the sum offered to him by the applicants.

(9) Mr Huggins emphasized that contrary to what Mr Julian Chan said, he preferred to accept the offer than being a party to the proceedings which he believed had a real risk of failure because, in his opinion, insufficient ground had been shown by the applicants to justify an order for sale by reason of the age or state of repair of the building.

54.  Having received Mr Huggins’ statement, this tribunal gave a chance for the applicants to file an affirmation in reply to what are said therein.

55.  In the affirmation of Mr Hugo Christopher Barrett filed on behalf of the applicants, it was said that Mr Huggins’ statement does not have a bearing on the leave application or any future appeal, his concern of false impression is irrelevant, his opposition was already settled hence he no longer opposed the compulsory sale application and leave had been granted for Mr Huggins to withdraw.

56.  Except brushing aside the significance of Mr Huggins’ complaints on the name of irrelevance, the applicants basically said nothing to deny or counter Mr Huggins’ account of events. Such being the case, it is only fair for us to assume that the matters said in Mr Huggins’ statement are basically true.

57.  As to the question why misleading information had been provided by Mr Julian Chan in his written opening submissions in the first place and why such had not been corrected in his oral opening submissions despite promised, the applicants were evasive and only briefly mention in paragraph 6 of the affirmation that:-

“The Tribunal was made aware of the dispute and subsequent settlement with the 3rd Respondent and during trial had been referred to the Notice of Opposition of the 3^rd Respondent and the Order dated 18 January 2019”.

58.  As the applicants did not tell the exact occasion when the correction/clarification was made, how exactly it was made and what the tribunal was “made aware” of, the tribunal commissioned the transcript of the audio recording of the first day of trial[10] and managed to find the following exchanges between the applicants’ counsel and the bench at his opening submissions:-

“Date :	11 January 2021 at 10:08 a.m.
Present:	Mr Julian S F Chan, instructed by Messrs Ho, Tse, Wai & Partners, for all Applicants Mr Alexander Wong and Mr Christopher C P Law, instructed by Messrs Philip Chan & Co., for the 1st Respondent Mr Adrian T But, instructed by Messrs So, Lung & Associates, for the 2nd Respondent
Absent:	The 3rd Respondent The 4th Respondent
MR CHAN:	Yes, may it please the tribunal. I appear on behalf of the applicants; my learned friends Mr Alexander Wong, leading Mr Christopher Law, appear on behalf of the 1st respondent; and Mr Adrian But appears on behalf of the 2nd respondent. Just to be clear about the position of the 3rd and 4th respondents, after the applicants made the offers, there were amicable negotiations and, although no sale was concluded, the parties trying to sue reach a settlement whereby the 3rd and 4th respondents agreed not to oppose the application. Now, the 3rd respondent has contacted us to ask us to convey the message that he wishes to be excused from attendance of the trial and I understand that the -- one of the -- 4th respondents is in person, although he is not opposing the application.
(Muted discussion between judge and member)
MR CHAN:	Yes.
COURT:	Because I cannot hear clearly your submissions, could clerk, please, assist counsel to place the amplifier on top of the shelf in front of him?
MEMBER NG:	And, when the parties speak at this court, please, speak slowly because we have mask and shelled before us, yes.
MR CHAN:	Yes, I understand, Sir. Yes, so, just to clarify the position of the 3rd and 4th respondents, after the applicants made the offers, the 3rd and 4th respondents and the parties engaged in negotiations and, although no sale could be concluded, the parties managed to reach a settlement whereby the 3rd and 4th respondents agreed not to oppose the application. So, for completeness, if I could refer the tribunal to bundle A, tab 15. (Pause) Yes, so, at page 140, ...
MEMBER NG:	“One-hundred-and ...”?
MR CHAN:	Forty.
MEMBER NG:	“Forty”?
MR CHAN:	One-four-zero. Yes, so, it can be seen in paragraph 2, so: “Leave to the 3rd and 4th respondents to withdraw their opposition to the applicants’ application but they will remain as respondents.” So the only active respondents are the 1st and 2nd respondents. Yes, okay, with that out of the way, I wonder if the tribunal has had time to read through the written opening submissions of the parties.” (Mr Julian Chan then moved to other submissions)

59.  From the transcript, it could be seen that despite Mr Julian Chan promised Mr Huggins that he would in his oral opening submissions qualify paragraph 33 of his written submissions accordingly, Mr Julian Chan actually did not qualify paragraph 33 or even mention about it at all.

60.  Despite Mr Julian Chan said the applicants would simply rely upon the fact that no binding contract was concluded rather than saying “the offer was not accepted”, transcript shows that he did not tell the tribunal anything to that effect or even close to that effect. The misstatement in paragraph 33 has never been withdrawn or retracted and remained to be part of the applicants’ submissions.

61.  Worse still, in the course of verifying what are said in Mr Huggins’ statement, the tribunal noticed that Mr Julian Chan had even in his written closing submissions repeated the same untrue and misleading statement in relation to Mr Huggins (and R4) only that this time the misstatement was further elaborated for formulation of arguments to advance the applicants’ case. Here are the relevant paragraphs extracted from Mr Julian Chan’s written closing submissions:-

“76. Given the above legal principles, the fact that the 2^nd to 4^th Respondents do not argue the issue of reasonable steps and also that the offers made were based upon expert valuation of Mr Chan, there is no doubt that reasonable steps were taken by the Applicants in relation to the 2^nd to 4^th Respondents.

77. It is recognised that the 2^nd to 4^th Respondents do not oppose a compulsory sale order being made. Ultimately, they have decided that rather than selling their properties they would prefer to receive a share of the sales proceeds upon a successful auction of the Lots. The 2^nd to 4^th Respondents are perfectly entitled to take that position and indeed a successful auction may end up with a sale price higher than any reserve price set.

(emphasis added)

78. As such, the 1^st Respondent is the only one opposing a compulsory sale order and arguing on the issue of reasonable steps.

… …

93 It is not as if the 1^st Respondent had accepted the offer but the Applicants refused to purchase her flat or provide a draft agreement for sale and purchase. The 1^st Respondent had deliberately failed to respond and took no steps whatsoever to explore or advance the possible sale of Flat 1.

(original emphasis made by Mr Julian Chan)

… …

98. As noted above, it is not as if the 1^st Respondent had accepted the offer but the Applicants refused to complete the transaction or provide a draft agreement for sale and purchase. It is the 1^st Respondent who did not wish to even communicate or negotiate over a sale and purchase of her flat.”

(original emphasis made by Mr Julian Chan)

62.  We surmise that Mr Huggins actually was not aware of the various further untrue statements about him in Mr Julian Chan’s written closing submissions lest he would have mentioned about these in his statement to the tribunal.

63.  As said above, the tribunal gave the applicants and their counsel one last chance to explain the predicament by filing an affirmation in reply to Mr Huggins’ statement. The tribunal found in dismay that instead of seizing the opportunity to come clean or to confess, the applicants and those advising them tried to slip away by claiming irrelevance, by giving muddled response and by providing further untrue information.

64.  Paragraph 6 of the applicants’ affirmation in reply[11] deposed that “The Tribunal was made aware of the dispute and subsequent settlement with the 3^rd Respondent and during trial had been referred to the Notice of Opposition of the 3^rd Respondent and the Order dated 18 January 2019”. (emphasis added).

65.  However, neither the presiding judge nor the member[12] who conducted the trial have recollection of the occasion when Mr Julian Chan in his opening submissions draw the tribunal’s attention to the dispute between the applicants and Mr Huggins, at least the transcript shows no such record.

66.  As shown in the transcript quoted above, quite to the contrary, Mr Julian Chan during his opening submissions told the presiding judge and the member that there was “amicable” negotiations and then settlement between the applicants and Mr Huggins (and R4) who therefore no longer opposed and have their oppositions withdrawn and, “with that out of the way”, Mr Julian Chan then moved on to his other submissions.

67.  Instead of pointing out the misstatement unfairly made against Mr Huggins in paragraph 33 of his opening submissions and sought to correct, qualify or withdraw it, Mr Julian Chan was doing exactly the opposite by impressing upon the tribunal that things were amicable and uneventful as between the applicants and Mr Huggins hence the tribunal could move on without any concern.

68.  The presiding judge and the member also have no recollection of Mr Julian Chan having referred them to Mr Huggins’ Notice of Opposition at trial, at least the transcript has no such record.

69.  Transcript[13] actually shows that Mr Julian Chan did not draw the tribunal’s attention to the Notice of Opposition. It was R1’s counsel, Mr Alexander Wong, who tried to make reference to Mr Huggins’ Notice of Opposition during cross-examination of the applicants’ factual witness, Mr Hugo Christopher Barrett. However, Mr Julian Chan interrupted to object, reminding everyone that the Notice of Opposition had already been withdrawn, was not evidence and carried no evidential weight. The tribunal then suggested Mr Alexander Wong to ask question without referring to Mr Huggins’ Notice of Opposition. In any event, whether Mr Huggins’ Notice of Opposition had been drawn to the tribunal’s attention was neither here nor there as his opposition, upon withdrawal, became water under the bridge by the stage of trial. The more important question appeared to be why a settlement was reached between the applicants and Mr Huggins without transfer of the latter’s undivided shares. This will be discussed in paragraphs 73 to 75 below.

70.  Therefore, the affirmation in reply which was made on oath was another piece of incorrect or misleading information provided by the applicants.

71.  Let us sum up what have happened here to have a bird’s eye view of the picture. Mr Julian Chan took the initiative to represent to the tribunal in paragraph 33 of his written opening submissions that none of the respondents including Mr Huggins accepted the applicants’ offer. That according to Mr Huggins was untrue and misleading. When this was discovered by Mr Huggins (being a minority owner) before trial, he formally voiced out the problem to Mr Julian Chan and demanded rectification. Mr Julian Chan then assured Mr Huggins that corrections would be made in his oral opening in a specific way. In reliance of such assurance, Mr Huggins refrained from filing his own submissions to clarify. However, during the trial when Mr Huggins was not present, Mr Chan did not make the correction whether in the way promised or at all. To make the matter worse, in his closing submissions, Mr Julian Chan repeated the same misstatement and had it further elaborated to formulate arguments to the applicants’ favour. Misled by Mr Julian Chan’s submissions, the tribunal in paragraph 79 of the Judgment mentioned the untrue information about Mr Huggins which came to Mr Huggins’ attention after handing down. Mr Huggins then put in his own statement to set records straight. The tribunal gave the applicants (and their counsel Mr Julian Chan) one last chance to explain by filing affirmation in reply. Upon legal advice, the applicants filed an affirmation in reply which provides further convoluted and misleading information.

72.  Given Mr Julian Chan’s seniority in the legal profession, we do not believe the above faults, or progressive intensification of faults as more precisely described, was a result of mere blunder or careless mistakes on his part.

73.  When one comes to think about it, a settlement between the majority owners and a minority owner in the context of compulsory sale applications will usually lead to assignment of the latter’s undivided shares to the former. The scenario in the present case as between the applicants and Mr Huggins that is, a settlement with consensus on price but without assignment of undivided shares, was rather unusual and could point to two possibilities.

74.  One possibility was that the applicants were willing to buy but Mr Huggins was unwilling to sell for some reasons say, taking chances of receiving a higher sum from the proceeds of sale in an auction. The other possibility was that Mr Huggins was willing to sell but the applicants were unwilling to buy due to some reasons say, the applicants lacked the sincerity or financial capacity to acquire. Had the second possibility come to the tribunal’s awareness at the time of trial, that could have been damaging to the applicants’ case as the tribunal could have found that the statutory requirement of taking reasonable steps to acquire all undivided shares had not been satisfied.

75.  Mr Julian Chan told the tribunal that Mr Huggins had decided that rather than selling his undivided shares to the applicants, he would prefer to receive a share of the sales proceeds upon a successful auction of the Lots, fully knowing that such was his own fabrication, was a distortion of the fact and was totally at odds with Mr Huggins’ position. We could not think of any motive behind such behaviour other than to deliberately throw dust in the tribunal’s eyes so that doubt would not be casted on the applicants’ sincerity and capability to acquire undivided shares. This tribunal verily believes that the misstatements, its repetition and the elaboration thereof by Mr Julian Chan in his opening and closing submissions were all calculated to mislead the court in order to unfairly undermine R1’s case and to advance his clients’ case.

76.  With the benefit of hindsight, Mr Huggins’ clarification seems to suggest that R1’s complaints about the applicants’ failure to make genuine offer and lacking the sincerity and financial capability to honour the offer was not entirely speculative but may have some substances. Had such information come to light and considered at trial, the line of questioning of the factual witnesses about the previous attempts to acquire/sell the undivided shares could have been different. Chances are the tribunal may have come to a different conclusion on the issue of whether the applicants had taken reasonable steps to acquire all undivided shares from the minority owners, which was determinative of the question of whether an order for sale shall be made.

77.  This is particularly true when we recall that in rebutting R1’s arguments about taking of reasonable steps, Mr Julian Chan more than once submitted[14] that “it is not a case where R1 had accepted the offer but the applicants refused to purchase its flat or provide a draft agreement for sale and purchase by relying on some unfair terms in the offer letter. The situation was that R1 had deliberately failed to respond and took no step whatsoever to consider or explore the sale of its flat.”. So to follow Mr Julian Chan’s logic and reasoning, if a minority owner accepted the offer but the majority owners refused to purchase (which appears to be Mr Huggins’ situation), the tribunal should probably find that the reasonable steps criteria had not been met.

78.  Had the tribunal after trial granted an order for sale in the applicants’ favour, what Mr Julian Chan had done could possibly become a ground of appeal taken by R1, or become a ground of cross-appeal in event leave to appeal from the Judgment should be granted.

79.  Whilst the applicants claim that Mr Huggins’ statement do not concern the present leave application, we believe the matter shall be fully set out to put the records straight. Such mendacious litigation conduct must be condemned.

80.  We shall conclude by citing the relevant paragraphs from the Code of Conduct adopted by the Hong Kong Bar Association in relation to a practising barrister’s duties to the Court and his duties to opponents in Chapter 10 :-

Duty to the Court and Conduct in Court

10.29	A practising barrister has an overriding duty to the Court to act with candour and independence in the interests of justice.
10.30	A practising barrister must not knowingly deceive or mislead the Court.
10.31	A practising barrister must not devise facts to advance his client’s case.

Duties to Opponents

10.47	(a)	A practising barrister must not knowingly make a false or misleading statement to an opponent in relation to the case.
	(b)	A practising barrister must take all necessary steps to correct any false or misleading statement in relation to the case that has been made by him to an opponent as soon as possible after the barrister becomes aware that the statement was false or misleading.
	(c)	A practising barrister does not make a false or misleading statement to an opponent simply by failing to correct an error on any matter stated to the barrister by the opponent.

81.  This tribunal shall cause a copy of this decision be provided to the Bar Council for their attention.