HKSAR v. LUCKCAN DEVELOPMENT LTD

HCMA 492/2012

[2019] HKCA 326

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MAGISTRACY APPEAL NO 492 OF 2012

(ON APPEAL FROM TMS NOS 8794 OF 2011 AND 9352 OF 2011)

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J U D G M E N T

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Hon Poon JA (giving the Judgment of the Court) :

A.     INTRODUCTION

1.  The appellant was convicted by Deputy Magistrate Hui Chun Sing (“the Magistrate”) on 26 June 2012 of two offences :[1]

(1)  failing to comply with the Building Order[2] without reasonable excuse, contrary to section 40(1BA) of the Buildings Ordinance, Cap 123 (“BO”);[3] and

(2)  failing to cease occupying the government land as required by the Notice[4] without reasonable excuse, contrary to section 6(4) of the Land (Miscellaneous Provisions) Ordinance, Cap 28 (“LMPO”).[5]

2.  The Magistrate fined the appellant HK$50,000 for the 1^st offence and HK$3,000 for the 2^nd offence respectively.

3.  The appellant appealed against both convictions.  The appeal was originally heard by Barnes J on 15 September and 10 November 2015 and 22 January 2016.[6] One of the questions raised was whether the appellant could raise collateral challenges against the validity of the Building Order and the Notice based on public law grounds in the criminal proceedings before the Magistrate in which it was charged with the two offences arising from its failure to comply with them without reasonable excuse.

4.  On the 3^rd day of the hearing, Barnes J acceded to the respondent’s application and reserved the appeal to this Court under section 118(1)(d) of the Magistrates Ordinance, Cap 227 (“MO”).  Apparently, the learned judge was convinced that the above question of collateral challenge merited a determination by the Court of Appeal.

5.  We heard the appeal on 22 and 23 January 2019.[7] We then reserved judgment, which we now hand down.

B.    BACKGROUND

B1.    The Lot and the Government Land

6.  The proceedings before the Magistrate concerned Lot No.1005 in Demarcation District No.381, Tuen Mun, New Territories (“the Lot”) and a piece of government land surrounding the Lot (“the Government Land”).

7.  The Lot is subject to New Grant No.2832 dated 4 December 1987 (“the New Grant”).[8]  According to the Particulars of the Lot contained in the First Schedule of the New Grant, read together with the plan attached, the Lot is rectangular in shape and is about 177.8 square metres in size.[9] The Lot is divided into two areas : building area and agricultural area.

8.  The building area is also rectangular in shape and is 65.03 square metres in size.[10]  Under Special Condition 3(a), the total gross area of the building to be erected on the Lot shall not be more than 195.09 square metres[11] or less than 65.30 square metres.  Under Special Condition 4(a), no structure shall be erected on the Lot other than one building, which shall neither contain more than three storeys nor exceed a height of 7.62 metres, and the maximum built-over area of the Lot shall not exceed 65.03 square metres.

9.  The agricultural area is about 112.69 square metres in size.  Pursuant to Special Condition 4(b), no building or structure other than boundary walls and fences shall be erected on or over the agricultural land except with the prior written approval of the District Lands Office.

10.  In short, the division of the Lot into two areas and the Special Conditions pertaining to the building to be erected on the building area ensure that only a 3-storey building with the permissible maximum height and floor area for each storey could be built on the Lot.[12] That is because, as explained by PW1, a senior land executive of District Lands Office (Tuen Mun), under the New Grant permission was only granted to erect a 3 storey-small house of 700 square feet for each storey on the Lot.

11.  The Government Land encircling the Lot is irregular in shape and is about 3,680 square metres in size,[13] which is more than 20 times the size of the Lot.

B2.    Short Term Waiver and Short Term Tenancy

12.  Great Yield Investment Limited (“Great Yield”) became the registered owner of the Lot on 16 January 2002 and had since occupied the Government Land also until 23 October 2008 when it sold its interest in the land to the appellant.

13.  In about 2002, the Lands Department found out that some building developments had been carried out on the agricultural area of the Lot and the Government Land.  In order to “regularize” the situation, the Lands Department on 2 and 4 April 2003 respectively offered to Great Yield (a) a Short Term Waiver No.768[14] in respect of the unauthorized buildings works on the Lot (“Short Term Waiver”); and (b) a Short Term Tenancy No.1269 in respect of the Government Land.  The intention was to enable Great Yield to continue occupation of the Lot and the Government Land on conditions as set out in those instruments.  However, Great Yield did not accept the offer.  As a result, the offer in respect of the Short Term Tenancy No.1269 lapsed.

14.  In September 2005, Mr Chan Ying-kai (“Mr Chan”[15]) became the legally authorized person of Great Yield.  Mr Chan is also the director of the appellant.  It is Mr Chan’s evidence that in 2005, he was interested in buying the land in question from Great Yield.  After he became the legally authorized person of Great Yield, he in that capacity negotiated with the District Land Office’s officers on the matters of short term tenancy and short term waiver.[16]

15.  Following negotiations, the Lands Department offered a Short Term Tenancy No.1340[17] in respect of the Government Land to Great Yield on 18 October 2007 (“Short Term Tenancy”). Great Yield accepted the Short Term Tenancy on 30 October 2007.  On 14 November 2007, Great Yield also accepted the Short Term Waiver.

16.  The Short Term Waiver covered the entire agricultural area of the Lot.  One of the basic terms stipulated that the built-over area shall not exceed 112.69 square metres (which is the entirety of the agricultural area) and the building shall not exceed 7.62 metres in height.[18] Condition (b) stipulates :[19]

“ At the expiration or sooner determination of the waiver, you will at your own expense and to the satisfaction of the District Lands Officer demolish and remove all structures on the waiver area.”

17.  Under the Short Term Tenancy, Great Yield was allowed to use the Government Land for the purposes of a private garden including vehicle parking, residential extension, swimming pool and store room on the parts of the land as designated on Plan I attached, which shall only be used in connection with the building on the Lot and subject to the conditions set out.  Under the basic terms, the built-over area shall not exceed 517 square metres, including, among other things, the residential extension which shall not exceed 317.8 square metres in build-over area and 7.62 meters in height.[20] Further, under Special Condition (iii) :[21]

“ At the expiration or sooner determination of the tenancy, the tenant shall at his own expense demolish and remove all structures on the tenancy area to the satisfaction of the District Lands Officer.”

18.  As said, Great Yield sold and transferred all its proprietary interest in the land concerned to the appellant on 23 October 2008.  The appellant took the land in question subject to the Short Term Waiver and the Short Term Tenancy.

B3.    Termination of the Short Term Waiver and the Short Term Tenancy

19.  In around September and October 2008, the District Lands Office received a referral from the Buildings Department claiming that there were unauthorized building works on the land concerned.  To follow up, PW3, a Land Executive of the District Lands Office, carried out two site inspections in March and October 2009.  After taking measurements and calculations, PW3 found out that the built-over area of the building, which was a house, was 519.6 square metres with a height of 11.48 metres.[22] According to the measurements taken by PW3 on 10 January 2010, the built-over area was 555 square metres.[23]  Both the built-over area of the building and the height far exceeded the permitted measurements under the Short Term Waiver and the Short Term Tenancy.

20.  By a letter dated 20 March 2009, the appellant’s solicitors asked the District Lands Office to “regularize” the build-over area and height restrictions.  This was refused by the Lands Department by a letter dated 25 May 2009 on the ground that the existing structures were “too extensive and have exceeded the height restrictions”.

21.  In the event, the District Lands Office took action to terminate the Short Term Waiver and the Short Term Tenancy.

22.  By a letter dated 8 December 2009, the District Lands Office notified the appellant that the Short Term Waiver would be terminated in 3 months.[24] The appellant was specifically reminded :

“ to revert [the Lot] to the original uses and the development conditions governed by [the New Grant] under which [the Lot] was held on the date of termination of [the Short Term Waiver].”

23.  By another letter also dated 8 December 2009, the District Lands Office notified the appellant that the Short Term Tenancy would be terminated in 3 months.[25]  The appellant was required to quit and deliver up vacant possession of the Government Land upon termination.

24.  The appellant’s solicitors requested the District Lands Office to withhold the termination by a letter dated 13 January 2010.

25.  The appellant’s solicitor on 22 January 2010 requested the District Lands Office for the findings of the inspection carried out by PW3.  By a letter dated 2 March 2010,[26] the District Lands Office advised the appellant that both the built-over area (555.7 square metres) and the height (11.48 metres) of the house was beyond the scope of the Buildings Ordinance (Application to the New Territories) Ordinance, Cap 121 and it was built without its or the Building Authority’s prior approval.  In the circumstances, the District Lands Office was unable to issue a short term tenancy or short term waiver to “regularize” the existing building. Importantly, the District Lands Office also advised the appellant that :

“ … you are obliged to purge the excessive building coverage and building height not permitted under [the New Grant] under which the Lot is held. You are obliged to submit a demolition proposal to Building Authority for approval before commencing any demolition works on the Lot.”

26.  On 7 March 2010, both the Short Term Waiver and the Short Term Tenancy were terminated.  The appellant had not taken any step to purge the excessive built-over area or the height of the house.

B4.    The Building Order and the Notice

27.  Eventually on 13 October 2010, the Building Authority issued an order under section 24(1) of the BO,[27] requiring the appellant to demolish the building works on the Lot and to reinstate the affected area in the Lot within 90 days thereof (that is, by 11 January 2010) (“the Building Order”).[28]  On the same date, the Director of Lands, as the Authority designated, served a notice on the appellant under section 6(1) of the LMPO,[29] requiring the appellant to cease occupation of the Government Land on or before 11 January 2011 (“the Notice”).[30]

28.  When the appellant failed to comply with both the Building Order and the Notice, criminal proceedings ensued.

C.    PROCEEDINGS BEFORE THE MAGISTRATE

29.  The appellant was charged with two offences :

(1)  failing to comply with the Building Order without reasonable excuse, contrary to section 40(1BA) of the BO[31]; and

(2)  failing to cease occupying the Government Land as required by the Notice without reasonable excuse, contrary to section 6(4) of the LMPO.[32]

30.  For present purposes, it is not necessary to recite the prosecution’s case at trial in detail.  The background facts outlined above, which formed the basis of the prosecution case, were basically not in dispute.

31.  For the defence, Mr Chan adduced a chain of correspondence between the Lands Department and his solicitors to show that he had endeavoured to obtain the Lands Department’s regularization of the matters.[33] He said he had not complied with the Building Order and the Notice because the Lands Department refused to give him instructions as to how rectification action could be taken.  He did not know how to carry out the demolition works without such instructions.  It would appear to be the appellant’s case that part of the building was built with authorization and it needed to know which part was authorized and which was not in order to carry out the demolition works in compliance with the Building Order.[34]

32.  The appellant’s principal defence was that it had a reasonable excuse for not complying with the Building Order and the Notice because the appellant had a legitimate expectation that the Lands Department would continue to regularize the building structures.[35] We need not dwell upon this line of defence as it is no longer pursued on appeal.

33.  Significantly for present purposes, the Magistrate observed :[36]

“ 73. Even though the defence did not state it expressly, the defence actually challenged the propriety and reasonableness of the notice and order, and the propriety of the District Lands Officer in exercising his/her discretion under paragraph 2(b) of the General Condition in the New Grant to reject (the applications) to ‘regularize’ the Structure, thereby had improperly terminated the original [Short Term Waiver] and [the Short Term Tenancy].”

34.  After citing and applying HKSAR v The Incorporated Owners of No 10 Bonham Strand, HCMA 239/2004, unreported, 28 May 2004, McMahon J, the Magistrate held that the appellant was not entitled to mount any collateral challenge against the Building Order based on grounds that could have been raised in the administrative appeal to the Buildings Appeal Tribunal.  Otherwise, it would render the appeal process within the BO meaningless.  Nor could it rely on those grounds to establish a reasonable excuse for non-compliance of the Building Order because for the same reason it could not possibly be the legislative intent.[37] The Magistrate went on to find that the appellant could have taken action such as applying for a review of the Notice or the Lands Department’s decision to terminate the Short Term Waiver and the Short Term Tenancy but had failed to do so.[38]

35.  In the end, the Magistrate found that the defence of reasonable excuse was not made out in respect of both offences.  He therefore convicted the appellant of the two offences and fined it as indicated.

D.    REFERRAL BY BARNES J

36.  The appellant appealed against both convictions.[39] It raised three grounds of appeal :

(1)  The Magistrate erred in law and in fact in deciding that he lacked jurisdiction to decide that the Building Order and the Notice were unlawful and of no effect, when the Building Order and the Notice were nullities on their face and/or ultra vires and/or unreasonably issued or made, and/or uncertain, and/or issued or made under a mistaken factual basis. (Ground 1)

(2)  The Magistrate, in any event, wrongly held that the appellant had not established an evidential burden of reasonable excuse under each of the BO and LMPO and in each instance further wrongly concluded that such defence did not succeed.  (Ground 2)

(3)  The Building Order and the Notice were both invalid as the appellant could not have reasonably been able to comply with either of them within the 90-day period specified therein.  (Ground 3)

37.  In support of Ground 3, the appellant sought leave under section 118(1)(b) of the MO to adduce as fresh evidence :

(1)  an affirmation of Lui Man, watchman, dated 23 March 2015;

(2)  an affidavit of Choi Fun Chi, registered surveyor, dated 23 March 2015;

(3)  an affidavit of Cheung Kwok Ho, registered surveyor, dated 24 March 2015; and

(4)  an affidavit of Lam Wai Keung, sole proprietor of a construction company, dated 14 January 2016.

In gist, the appellant wished to establish by way of fresh evidence that it would take at least 270 days to completely demolish all the building works.  The original 90-day deadline was therefore unreasonable.

38.  The respondent objected to the appellant’s application to adduce fresh evidence.  In the event that fresh evidence is to be admitted, the respondent also applied for leave to adduce an affirmation of Lo Yan-kit, building surveyor of the Buildings Department, dated 9 September 2015; and two affirmations of To Ka Yi, land surveyor of the Lands Department, dated 5 November and 18 December 2015 respectively.  The respondent wished to adduce the further correspondence between the Buildings Department and the appellant between 19 November 2010 and 30 May 2011 to show that upon the appellant’s request, an extension to comply with the Building Order was granted on 14 February 2010.  But the appellant failed to comply with the Building Order despite the extension.  There were further requests for further extension for compliance but all were refused. The respondent also sought to adduce some aerial photos of the Lot and the Government Land to give a more complete picture of how the building works, including the house, were carried out at the material times.

39.  As said, Barnes J reserved the appeal to this Court under section 118(1)(d) of the MO on the basis that the question whether the appellant was entitled to raise a collateral challenge against the validity of the Building Order and the Notice merited referral to the Court of Appeal for determination.  Her referral also left the parties’ applications for adducing fresh evidence, which evidence we have received on a de bene esse basis at the hearing, for our disposal.

E.    DISCUSSION

40.  As already seen, the main thrust of the defence below was that the appellant had a legitimate expectation that the District Lands Office would “regularize” the contraventions of built-over area and height restrictions by extending the Short Term Waiver and the Short Term Tenancy.  Such legitimate expectation formed the factual basis for both the implicit collateral challenge against the validity of the Building Order and the Notice and the statutory defence of reasonable excuse.  However, as said, such legitimate expectation is no longer pursued on appeal.

41.  Instead, Mr McCoy SC (together with Mr Hui and Ms Cheung), for the appellant, who did not appear below, took two new points.  He contended that :

(1)  the terms of the Building Order and the Notice were hopelessly vague and uncertain, thus rendering compliance impossible (“1^st Complaint”); and

(2)  the 90-day period for compliance was in any event wholly unreasonable (“2^nd Complaint”).

42.  Mr McCoy relied on the 1^st and 2^nd Complaints as the factual basis to mount the collateral challenges against the validity of the Building Order and the Notice (Ground 1); and to establish the statutory defence of reasonable excuse for non-compliance of both the Building Order and the Notice (Grounds 2 and 3).

43.  The 1^st and 2^nd Complaints were never raised before the Magistrate.  So it is strictly wrong to assert that the Magistrate had erred in the way as alleged by Grounds 1 to 3 because he was never asked to deal with them.  More importantly, the 1^st and 2^nd Complaints are wholly different from the legitimate expectation relied on at trial both in nature and in substance.  In the circumstances, the appellant’s case on appeal has now been substantially reformulated if not overhauled.  Furthermore, the appellant now needs to adduce fresh evidence to substantiate his case on unreasonableness in terms of the time for compliance.  The appellant’s conduct of the appeal begs the very question if it is entitled to do so.

E1.    The 1^st Complaint

44.  We first consider the 1^st Complaint, which does not involve any fresh evidence and can be determined on the evidence adduced before the Magistrate.

45.  The 1^st Complaint is premised on the assumption that prior approval had been given to some of the building works in question.  Based on that assumption, the appellant complained that absent clear instructions from the authority, the terms of the Building Order and the Notice were hopelessly vague as it could not be ascertained with reasonable certainty the steps that had to be taken to remedy the alleged breaches in order to comply with them.  But that assumption is entirely misconceived.  For it was an admitted fact that no prior approval had ever been given to carry out any of the building works on the Lot or the Government Land.[40]  Factually, all the buildings works on the Lot and on the Government Land were unauthorized.

46.  Construed against the undisputed factual matrix that all building works were unauthorized, the effect of the Building Order and the Notice is crystal clear.  The Building Order asked the appellant to demolish the unauthorized building works on the Lot and to reinstate it in accordance with the provisions in the New Grant.  The Notice asked the appellant to deliver vacant possession of the Government Land.  And to be able to deliver vacant possession, the appellant must first demolish all the unauthorized building works on the Government Land.  Properly understood, there is simply no ambiguity or vagueness in the Building Order or the Notice as contended.

47.  In fact, upon termination of the Short Term Waiver and the Short Term Tenancy, the appellant was contractually bound to demolish all the unauthorized works on the Lot and on the Government Land, as the case may be, respectively.[41]  The appellant had also been reminded to do so when the Lands Department served the notices of termination on 8 December 2009.  When the appellant’s contractual failure persisted, the authority had to issue the Building Order and the Notice to compel performance.  There is no substance in the appellant’s assertion that it did not know how to comply with the Building Order and the Notice when it was asked to do no more than what it had failed to do contractually in the first place.

48.  Upon the above analysis, there is no basis whatsoever, whether factual or legal, for the appellant to mount the 1^st Complaint.  The 1^st Complaint is incapable of lending any support to any of Grounds 1 to 3 or indeed any credible defence.  As we have concluded that there is no merit in this Complaint, it is not necessary for us to decide whether, because it attacks the jurisdiction of the court, the appellant should be permitted to raise it for the first time on appeal.

E2.    Unreasonableness

49.  We next turn to the 2^nd Complaint.  As seen, fresh conflicting evidence is sought to be adduced by the parties regarding this Complaint.

50.  Entertaining the 2^nd Complaint would materially impact on the conduct of this appeal.  The question whether it was reasonable to ask the appellant to demolish the unauthorized building works within 90 days is a fact-sensitive question.  As it was not alluded to by any of the witnesses or in any of the documentary evidence before the Magistrate, neither the transcript nor any of the documentary evidence would be able to shed a single light on it.  The Court of Appeal would have to admit the fresh conflicting evidence, and then perform all the duties of a trial court in hearing the evidence, determining the credibility of witnesses if necessary, making findings of fact on the reasonable time required to comply with the Building Order and the Notice, and if it is found that the original 90-day deadline was unreasonable, resolving the issues of law pertaining to the purported collateral challenge against the validity of the Building Order and the Notice, and determining if the statutory defence of reasonable excuse is made out.  In short, the 2^nd Complaint, if allowed to be raised now, would effectively turn the appeal into a retrial de novo of the entire defence case by reference to 2^nd Complaint itself and the fresh conflicting evidence relating to it.  That is a most exceptional course to take indeed.

51.  Mr McCoy attempted to justify the appellant’s extraordinary way of conducting the appeal by submitting that as a magistracy appeal, the appeal was by way of rehearing. With respect, we disagree.

52.  First, it is well established that an appeal under section 113 of the MO is by way of rehearing. The rehearing is however primarily based on the evidence before the magistrate.  The appellate court would examine that evidence and form its own view if it proves the essential elements of the offence beyond reasonable doubt.  It is not a rehearing de novo which is effectively a retrial conducted by the appellate court as if it were the trial court.[42]  To permit a magistracy appeal to be run as if it were a retrial de novo, as the appellant asks us to do, would significantly adulterate the appellate court’s functions and duties in rehearing it.

53.  Second, the appellant’s application to adduce fresh evidence does not assist.  It is true that in a magistracy appeal, the appellate court may admit fresh evidence if it is in the interest of justice to do so.  However, admission of fresh evidence does not change the nature of the magistracy appeal.  It remains a rehearing and not a retrial de novo.  Admission of fresh evidence should not be used as a backdoor means of turning the magistracy appeal into a retrial de novo.  This is, however, exactly what the appellant seeks to do.  On this ground alone, we dismiss the appellant’s application to adduce the fresh evidence.  It follows that we also dismiss the respondent’s countering application.

54.  Third, on any view, the 2^nd Complaint is so obvious that it must be the first point to take at trial.  One rhetorically asks : why did the appellant not raise it at trial?  As a matter of fact, Mr Chan did not even mention in his evidence that the time for compliance was unreasonable.  The appellant must provide a credible explanation why such an obvious point was not taken before the Magistrate.  Such an explanation is conspicuous by its absence.

55.  Finally, the appellant was legally represented below.  Since the 2^nd Complaint was a most obvious point to take, it must have been a deliberate, tactical decision by the appellant’s lawyers not to take it.  A deliberate, tactical decision taken by one’s trial lawyer would ordinarily bind a party in the absence of an allegation of flagrant incompetence against the lawyer.  So before the appellant could raise the 2^nd Complaint now, it must satisfy us with cogent reasons why it should be reprieved from its lawyers’ tactical decision not to do so at trial.  But none has been advanced by the appellant.

56.  For the above reasons, we hold that the appellant is not entitled to raise the 2^nd Complaint for the first time on appeal.

F.    DISPOSITION

57.  Stripped of the 1^st and 2^nd Complaints as the stratum, none of Grounds 1 to 3 is maintainable.  They must all fail in limine.  Nor is there any basis to enable the appellant to mount the purported collateral challenge against the validity of the Building Order and the Notice.  The question if the appellant is entitled to do so is academic and does not arise for our determination.

58.  We accordingly dismiss the appeal.