TANG SING SHENG v. DIRECTOR OF LANDS

CACV 272/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 272 OF 2003

(ON APPEAL FROM LDGA NO. 38 OF 2003)

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J U D G M E N T

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Hon Tang VP (giving the judgment of the Court):

Introduction

1.  Mr Tang Sing-sheng (“Mr Tang”), the appellant in the Lands Tribunal, is the registered owner of Lot No. 1052 in Demarcation District No.5 in Tai Po (“the Lot”).

2.  The Lot was assigned to him by the managers of Tang Wing Yu Tong (“the Tong”) on the 30 October 1990.

3.  The Lot was the subject of New Grant No. 12329 (“the New Grant”), which was made on 25 February 1988 by the government to the managers of the Tong.

4.  The New Grant was of a lease for 99 years from 1 July 1898 less the last three days thereof.

5.  It appeared from the New Grant that the crown rent was $20 per annum up to the 30 June 1997, and thereafter at an amount equal to 3% of the rateable value for the time being of the Lot.

6.  The New Grant was extended by virtue of the New Territories Leases (Extension) Ordinance, Cap. 150 (“the Extension Ordinance”) for 50 years.

7.  Section 8 (now repealed) of the Extension Ordinance dealt with new rent generally, which was to be 3% of the rateable value from time to time of the land leased.  Section 9 (now repealed), however, provided for certain exemption in the case of rural holdings, such that in the case of such rural holdings:

“	… the annual rent shall be the annual rent payable immediately before the period of extension”  Section 9(1).

8.  The Extension Ordinance came into effect as to Parts I and IV thereof on 26 February 1988 and as to Parts II and III on 25 April 1988.  Part I applied to every New Territories lease that existed at the commencement of Part I (with certain irrelevant exceptions).  As noted the New Grant was made on 25 February 1988 and therefore covered by Part I.  Part II of the Extension Ordinance extended leases such as the New Grant “until the expiry of 30 June 2047, without payment of any additional premium”.  Part III dealt with “Rent During Extension”, which would be “equal to 3% of the rateable value from time to time of the land leased” subject to the section 9 exceptions.

9.  The Extension Ordinance followed Annex III to the Sino-British Joint Declaration, whereby the two Governments “agreed that with effect from the entry into force of the Joint Declaration, land leases in Hong Kong and other related matters shall be dealt with in accordance with (the provisions of Annex III)”.  Annex 3 provided for the extension of relevant leases to 30 June 2047 and a new rent equal to 3% of the rateable value from time to time of the property in question except:

“

… In the case of old schedule lots, village lots, small houses and similar rural holdings, where the property was on 30 June 1984 held by, or, in the case of small houses granted after that date, the property is granted to, a person descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong, the rent shall remain unchanged so long as the property is held by that person or by one of his lawful successors in the male line. …”

10.  This exception has been repeated by Article 122 of the Basic Law.

11.  Part III of the Extension Ordinance has been replaced by Government Rent (Assessment and Collection) Ordinance, Cap. 515 (“the Rent Ordinance”).

12.  Section 9 in the Extension Ordinance was the predecessor of section 4 of the Rent Ordinance.

The appeal

13.  It is unnecessary to consider the provisions of the Extension Ordinance, since section 4 of the Rent Ordinance is the governing provision.  The issue in this appeal is whether the Lot falls within the exemptions in section 4.

14.  This appeal arose because Mr Tang was aggrieved when he was required to pay rent as from 28 June 1997 (see the Director’s letter of 7 January 2003), at the rate of 3% of the rateable value.  On 30 January 2002, Mr Tang appealed under section 4(11) of the Rent Ordinance.

15.  District Judge Yung, sitting as the Lands Tribunal, on review, held that the appellant was not liable to pay government rent at 3% of the rateable value (“the government rent”) because:

“

9.

Whether the Appellant shall be exempted from paying Government rent under Section 4(1) depends on (i) whether he held any equitable interest when the subject grant was made to the Tong; and (ii) whether he continues to hold the original equitable interest upon the conveyance of the subject grant to him by the Tong. Mr. Chau’s arguments are valid under normal circumstances but not in the Appellant’s case. When the Tong entered into a village removal agreement with the Government, there were 16 members in the Tong. As the Government undertook to grant 16 pieces of land to the Tong, all members thus agreed that each member would be allocated one piece of land and had to redevelop his land at his own cost. Afterwards, the subject land was allocated to the Appellant and the village house erected thereon was also built at his own cost according to the terms of the subject grant. When the Government made the 16 resite house grants according to the village removal agreement, even though the legal interest was held by the Tong, the Tong only held these pieces of land as a trustee (Reference Case: Kan Fat-Tat v. Kan Yin Tat [1987] HKLR 516), and as all beneficiaries under the trust had agreed that the subject land would be allocated to the Appellant, the Appellant was thus the only member of the Tong that held the equitable interest of the subject grant in whole. As such, the conveyance of the subject grant has only merged the legal and equitable interests concerned, and the Tong has not conveyed any equitable interest to the Appellant, who continues to hold the equitable interest he has held since the subject grant was originally made by the Government. Therefore, he shall be exempted from paying Government rent under Section 4(1).”

16.  The appeal came before this court then differently constituted on 1 June 2006.  Mr Tang had informed the court prior to the hearing that he had decided not to contest the appeal because of the potential adverse cost consequence.  However, Mr Tang did appear in person before us.

17.  On 1 June 2006, as a result of queries raised by this court, the matter was adjourned to enable the Director of Lands (“the Director”) to provide a more comprehensive written submission.  At the time the court also expressed the view that since the appeal might have impact on other indigenous persons, the Heung Yee Kuk might wish to be informed of the proceedings and to offer assistance to the court.

18.  The hearing resumed before us on 18 May 2007 and we have been supplied with a comprehensive written submission prepared by Mr Mok, SC, on behalf of the Director.  The Heung Yee Kuk also appeared by counsel, Mr Anthony Lo, who has also supplied us with a helpful written submission.  We are indebted to both counsel.

Devolution of the Lot

19.  In order to understand how the Lot came to be assigned to Mr Tang, it may be helpful to go back to November 1982, when by a letter dated 12 November 1982, the District Lands Officer, Tai Po informed the managers of the Tong that he was:

“	… prepared to recommend to the Government to offer you, in exchange (for land to be surrendered), the grant of sixteen resite houses on the following basic terms applicable to each resite house:
	(a)	Terms	:  Usual N.T. Lease
	(b)	User	:  Non-industrial purpose only
	(c)	Area	:  65.03m2
	(d)	Height	:  Not exceeding 3 storeys nor 7.62 m
	(e)	Premium	:  Nil
	(f)	Crown Rent	:  $20.00 per annum”

20.  That was followed by an “agreement as to compensation” of which we have a specimen copy dated 10 November 1983 (“the Agreement”).  The Agreement recorded that the Director had made:

“	(c)	… an offer of compensation to the former owner in respect of the land so resumed in the following manner :-
		(i)	a grant of four house sites of 65.03m2 each in area;
		(ii)	a total sum of $1,192,000.00 being the house allowance payable to the former owner for the development of the said sites in lieu of four government-built resite houses; and
		(iii)	a total sum of $40,000.00 being the removal and decoration allowance for the new houses;
	(d)	the former owner has agreed to accept the Director’s said offer.”

21.  So it appeared from the Agreement that the Tong’s land was resumed and not surrendered.  However, nothing turns on that.

22.  It was pursuant to the Agreement that eventually the New Grant was made.  It is clear from the correspondence that despite further negotiation between the Tong and the District Lands Office, the government did not agree to make the grants directly to the members of the Tong.  It also appeared that the Tong had by internal arrangement agreed that the 16 lots to be granted should be assigned in turn to 16 of its members.  This appeal only concerns one of the new grants, namely, the grant of the Lot which was assigned by the Tong to Mr Tang on 30 October 1990.

23.  The learned judge said in his judgment that at the time of the Agreement:

“	… there were 16 members in the Tong.”

24.  Mr Mok submitted that there was no evidence to such effect.  Indeed, the evidence before the learned judge did not support that conclusion.  We asked Mr Tang about the composition of the Tong.  We were told that the Tong was established by his great grandfather who died before Mr Tang was born in 1962.  He did not know when the Tong was established, but it must have been established decades ago.

25.  Mr Tang told us that at the time of the creation of the Tong, there were 16 members, who were all male descendents of his great grandfather.  One of such members was Mr Tang’s grandfather.  Since then, other male descendants were born to those 16 members such that by 1992, the membership had substantially increased.

Discussion

26.  It is helpful to set out sections 4(1), (2) and (3) of the Rent Ordinance in full:

“	4.	Exemption from liability to pay Government rent
		(1)	Subject to other provisions of this section, an exemption from liability to pay Government rent applies to an interest held under-
			(a)	an applicable lease of a rural holding that an indigenous villager held on 30 June 1984;
			(b)	a small house grant made to an indigenous villager after 30 June 1984; or
			(c)	a resite house grant-
				(i)	held by an indigenous villager on 30 June 1984;
				(ii)	made to an indigenous villager to replace an applicable lease of a rural holding that the indigenous villager held on 30 June 1984; or
				(iii)	made to an indigenous villager to replace a small house grant made to the indigenous villager after 30 June 1984,
		and-
			(i)	which the indigenous villager continues to hold; or
			(ii)	which-
				(A)	has not since its ceasing to be held by the indigenous villager been conveyed to any person who is not a lawful successor in the male line of the indigenous villager; and
				(B)	continues to be held by a person who is a lawful successor in the male line of the indigenous villager.
		(2)	Subject to other provisions of this section, an exemption from liability to pay Government rent applies to an interest held under an applicable lease of a rural holding or a resite house grant that an eligible tso or tong held on 30 June 1984 and has since 30 June 1984 continued to be so held.
		(3)	An exemption from liability to pay Government rent under subsection (1) or (2) applies to an interest that is a section of or an undivided share in the land leased, whether that interest was the interest held on 30 June 1984 or is the interest retained by the indigenous villager or the eligible tso or tong, as the case may be, after a subsequent transaction in relation to the land leased.”

27.  And to note the definitions in section 2 of the Rent Ordinance:

“	‘indigenous villager’ (原居村民) means a person who was in 1898 a resident of an established village in Hong Kong or who is descended through the male line from that person;
	‘interest’ (權益) means a legal or equitable interest in a lot, a section of a lot or an undivided share in a lot or section, but does not include an interest in the nature of an easement, wayleave, tenancy or sub-lease;
	……
	‘land leased’ (租出土地) includes an undivided share in the land leased;
	‘lawful succession’ (合法繼承) means succession whether testate or intestate or in accordance with Chinese customary law operating in the New Territories and includes a succession on a succession;
	‘lawful successor’ (合法繼承人) means a person, male or female, who on the death of an indigenous villager is or becomes entitled to an interest in the estate of the deceased by lawful succession and which person is a descendant through the male line of the deceased;
	‘resite house grant’ (遷置屋宇批租約) means a grant made to an indigenous villager or to a tso or tong under the village removal policy;”

28.  In the present case, the New Grant which was made in 1988 was not made to an indigenous villager.  It was a grant made to the Tong.  “Tong or tso” are not defined in the Rent Ordinance, however, “eligible tso or tong” are defined under section 4(13)(c):

“

For the purposes of this section, a reference to an eligible tso or tong shall be a reference to a tso or tong - (i) which is a tso or tong recognized as such under Chinese custom; (ii) all members of which have been on and since 30 June 1984 indigenous villagers; and (iii) in respect of which prescribed certificates, reports and information have been submitted in accordance with the regulations.”

29.  In our opinion, the effect of section 4(2) is that an eligible tso or tong is entitled to similar exemption available to an indigenous village under section 4(1)(a) and (c).  The difference, however, between an indigenous villager and an eligible tso or tong is that the provision in section 4(1)(ii) covering devolution is not applicable to an eligible tso or tong.  On the other hand, section 4(2) applies to an eligible tso or tong.

30.  In other words, so far as resite house grants held by a tso or tong are concerned, the exemption only applies to an interest under a resite house grant that:

“	an eligible tso or tong held on 30 June 1984 and has since 30 June 1984 continued to be so held.”  Section 4(2).  (Emphasis added.)

31.  Mr Anthony Lo, who appeared on behalf of Heung Yee Kuk, queried whether the Rent Ordinance which was enacted in 1997, should have retrospective effect.  But no question of retrospective effect is involved.  As we have pointed out, the New Grant which was initially made to the Tong was for 99 years less the last three days, from 1 July 1898.  That has been extended by the Extension Ordinance on terms as to the rent payable in accordance with sections 8 and 9 of the Extension Ordinance.  These sections have been replaced by sections 3 and 4 of the Rent Ordinance.

32.  Mr Anthony Lo further submitted that having regard to the Agreement made in 1983, the Tong had the right to demand the issue of a resite grant, and that would give the Tong an equitable interest to the land to be conveyed such that the Tong could be regarded as holding a resite house grant on 30 June 1984 (section 4(1)(c)(i)) or that the New Grant which was a resite house grant should be regarded as having been made to the Tong to replace an applicable lease of a rural holding that the Tong held on 30 June 1984 (section 4(1)(c)(ii)).  We find it difficult to accept the argument that even before the site to be granted has been identified, the Tong could be said to have an interest in the site which was eventually granted.  In any event, Mr Tang would still fall outside section 4(2), because the Lot is no longer held by the Tong.

33.  The learned judge’s approach was based on his mistaken belief that the Tong had only 16 members and that all of them agreed that they should hold the Grants made collectively to the Tong individually.

34.  However, the learned judge also said:

“

whether the appellant shall be exempted from paying government rent under section 4(1) depends on (i) whether he held any equitable interest when the subject grant was made to the Tong; and (ii) whether he continues to hold the original equitable interest upon the conveyance of the subject grant to him by the Tong.” (Emphasis added.)

35.  The New Grant was made to the Tong.  Mr Tang was one of its members.  But, the assignment of 30 October 1990 was made to him alone.  It bore no resemblance to any interest which he had or might have had in the New Grant by virtue of his membership in the Tong. Thus section 4(3) cannot apply because the New Grant was not “the interest retained” by him.  So even if, and we do not decide because it is not necessary to do so, Mr Tang could be said to have an equitable interest in the New Grant to the Tong, that would not help him.

36.  Moreover, we agree with Mr Mok that in section 4, a clear distinction was drawn between leases held by an indigenous villager and by an eligible tso or tong.

37.  In the case of a tso or tong, any devolution by them would to the extent of the devolution result in the loss of the exemption.

38.  It follows that the appeal is allowed and the order of the Lands Tribunal is set aside.  We make no order as to costs.  The Director, has rightly conceded, that in the circumstances of this case, costs should not be borne by Mr Tang.