JOY TAKE DEVELOPMENT LTD AND OTHERS v. DIRECTOR OF LANDS

CACV 254/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 254 OF 2008

(ON APPEAL FROM LDLR NO. 8 OF 2006)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a judgment of the Lands Tribunal given on 14 July 2008.  The matter before the Tribunal was an application pursuant to section 6(3) of the Lands Resumption Ordinance, Cap. 124, (“the Ordinance”) for compensation in respect of land which had been resumed in the course of implementation of Development Proposal K3 by the Urban Renewal Authority at Cherry Street, Kowloon.  The land reverted to the Government on 7 June 2003 which was thus the relevant reversion date.  The applicants had made a joint application on the basis that the compensation should be based upon the market value of the site as a whole on the basis of redevelopment value.  Although the claim had been put at $82 million and the Tribunal held that the assessment should be made on the basis put forward by the applicants, the compensation ordered was $61,833,000.

2.  It was against that order that the Director of Lands appealed.  At the conclusion of the hearing, the appeal was dismissed with costs with reasons to be given in writing.

Background

3.  There were 2 groups of owners who were the applicants in this matter.  They were referred to as the Group A and the Group B owners.  Between them they owned a number of premises in Chun Wing Street in Tai Kok Tsui, Kowloon.   Mr Walter Liu, who is a solicitor with his own firm, was in control of the Group A owners.  That Group consisted of the first and second applicants.  The first applicant was the registered owner of Nos. 1, 3, 5 and the 1^st and 2^nd floors of No. 7 and the second applicant was the registered owner of Nos. 9, 11, 13, the 2^nd and 3^rd floors of No. 15 and Nos. 17 and 19 Chun Wing Street.

4.  The Group B owners were the third, fourth and fifth applicants.  They are members of the Peterson Group.  The third applicant was the registered owner of the Ground Floor of No. 7, the fourth applicant was the registered owner of the Ground Floor and the 1^st Floor of No. 15 and the fifth applicant was the registered owner of the 3^rd Floor and roof of No. 7 Chun Wing Street.

5.  It can thus be seen that together the 2 groups owned Nos. 1-19 of Chun Wing Street.

6.  The Tribunal heard evidence over what was possibly an extended period.  Some of the initial conclusions to which it came are set out in paragraph 9 of the judgment:

“ (1)  Both the Group A Owners and the Group B Owners were experienced property developers.

(2)  Both the Groups A Owners and the Group B Owners were capable of redeveloping the Site either on their own or jointly together.

(3)  On the date of reversion, the Group A Owners and the Group B Owners jointly owned the whole of the Site.

(4)  The Group B Owners bought the last unit (3^rd Floor & Roof of No. 7 Chun Wing Street) it owned in April 2002, some 12 months before the date of resumption.

(5)  As submitted by the Applicants, “there were discussions (to say the least) between the 2 groups of owners regarding redeveloping the whole of the Site as a joint site”.

(6)  The Group A Owners and the Group B Owners did enter into a joint venture agreement on 22^nd May 2003, about 15 days before the date of reversion but after the resumption notice GN1487 was affixed on the Site.”

7.  In paragraph 10 of the judgment the Tribunal posed the question in the following way:

“Given the above uncontroversial facts and findings of the Tribunal, it is necessary for the Tribunal to find, on the balance of probabilities, in a “no-scheme” world where in the absence of the subject resumption affecting the Site, the Group A and Group B Owners would have co-operated in jointly redeveloping the Site.  If the answer is yes, it is not disputed by the Respondent that the compensation payable to the Group A and Group B Owners should be calculated on the market value of the Site, on a joint-site redevelopment basis.  Both experts have prepared and given evidence on that basis even though Mr. Mo took that basis as his primary approach whilst Mr. Lai only put that as his fall back approach.  Alternatively, if the answer to the above question is no, it is not disputed by the Applicants that the compensation payable to the different Applicants should be computed on the individual sites or units basis,…”

8.  The Tribunal was firm in the conclusions to which it came.  In paragraphs 17-19 it said:

“17.  We are also satisfied that without the resumption, it would be inconceivable that these 2 groups of owners would be prepared to sell to the URA voluntarily, to the other purchasers or other developers for any value other than these 2 groups’ fair share of the market value of the Site on a joint site redevelopment basis.  In reaching this conclusion, we have taken into account the time that these 2 groups of owners have been acquiring the properties owned by all the Applicants in this case.  Being experienced property developers, it is inconceivable to believe that these 2 groups of owners would not jointly ask for the market value of the Site as a joint redevelopment site.

18.   The Respondent submitted that “a credible and possible reason why the Applicants would not have jointly develop the Site even if they came to some commercial agreement to co-operate at that time is SARS.”  We agree with the Applicants that the Respondent might have focused on the actual timing of when the JV Agreement was signed (i.e. May 2003).  Further, we agree with the Applicants that without the resumption, the parties would have concluded the joint venture agreement much earlier, at a time before the SARS had that significant impact on the property market.

19.   The Respondent emphasized in the submission that it would be better off for the Group B Owners, the group who had a lesser interest and who together owned 4 out of a total of 20 units in the existing buildings in the Site, to play a waiting game and to hold the Group A Owners to ransom.  However, we agree with the Applicants that on the balance of probabilities, it is reasonable to conclude that but for the resumption, it is more likely than not that the Group B Owners would have co-operated with the Group A Owners to jointly redevelop the Site as a single site.  We reach this conclusion because, as submitted by the Applicants, there was undeniable evidence that the Group B Owners was a reputable developer who “has frequently co-operated with other major developers and on its own developed some landmark developments like the Lan Kwai Fong Tower and Hotel Panorama in Tsimshatsui.”  Also, there was no evidence that the Group B Owners were “some straw companies or some ordinary citizens with no proven track records or the means to participate in a joint redevelopment”.”

9.  It was on that basis that the Tribunal made the award that it did.

This appeal

10.  On this appeal, Mr Ismail, who appeared on behalf of the Director of Lands, took three main points.  In the first place, he said that the Tribunal had not made any findings in relation to the credibility of the witnesses.  In the second place, he said that the Tribunal had overlooked the fact that the applicants would have had to have agreed to redevelop the land jointly by 7 June 2003.  He said that there was no evidence to support the finding that, without the resumption, the applicants would have concluded a joint venture agreement at a time before the SARS had had significant impact on the property market.  In the third place, he relied upon the provisions of section 12(c) of the Ordinance.  It was submitted that although the point had been put in a new way on this appeal, that section of the Ordinance had been before the Tribunal.  It was submitted that the effect of the provision was that the Tribunal could not grant compensation on the basis of a single site redevelopment because that was based upon a probability of the grant of permission of redevelopment by the other group of owners and such basis was excluded by the section.

11.  The first two points taken on behalf of the Director were, to a certain extent, intertwined.  Taken on its own, the first point cannot succeed in this case.  The Tribunal had heard the evidence and it is trite to say that its position is so different from that of this court that, quite apart from the fact that an appeal only lies in relation to law and not fact, this court could only differ from the Tribunal on a question of fact if the circumstances were very clear that it should do so.  Contrary to Mr Ismail’s first point, the Tribunal said in paragraph 25 of the judgment:

“…However, in the present case, the Respondent submitted that both Mr. Liu and Mr. Yip were not credible and reliable witnesses.  The Respondent submitted at lengths, in the final written submission, its analysis of the evidence of these 2 witnesses to show that they are not reliable because for Mr. Liu, it consisted of untruths, inconsistencies or implausible statements, material omissions or new allegations, and inaccuracies on material matters, and for Mr. Yip, it contains material omission, reckless errors on material matter and absurdities, and it is inconsistent with Mr. Liu’s evidence on material matters.

26.  However, on the whole, we find that what we have relied on in reaching our finding of facts in this case really is the few rather uncontroversial facts of this case as summarized earlier.  We therefore do not intend to go through all these criticisms one by one in this Judgment.”

12.  The submissions which had been made before the Tribunal in respect of the applicants’ witnesses’ credibility were reproduced in an appendix to the skeleton argument on behalf of the Director.  Two points can be made.  In the first place, the Tribunal had the submissions as to the credibility of those witnesses and ruled on it.  It was well aware of the submissions which had been made but it held that those submissions had no impact in respect of the evidence which was accepted.  That, in reality, concludes the matter.  The second point, which amplifies the first, is that whether taken severally or together I do not consider that those submissions so undermine the credibility of the witnesses that their evidence in other respects cannot be accepted.  For the most part the points made in the appendix are minor and such that I consider that the Tribunal was justified in taking the dismissive approach which it did.

13.  The second point taken was that in formulating the question, as it did in paragraph 10 of the judgment, the Tribunal overlooked the fact that any agreement for mutual cooperation between the applicants would have had to have been reached before 7 June 2003.  In my view, the most that can be said about the point is that in setting out the proposition in paragraph 10 of the judgment, the Tribunal did not specifically mention the date of 7 June 2003.  However, it is clear on reading the whole of the judgment that the Tribunal was well aware of that date and its significance.  It was mentioned first of all in paragraph 4.  Then in paragraph 9(4) specific reference was made to the fact that the last unit was acquired “some 12 months before the date of resumption”.  When that is taken together with what has been said in paragraphs 17-19, which have been quoted above, it is clear that this criticism of the Tribunal is unfounded.

14.  I would only add that the conclusion to which the Tribunal came appears to me to have been entirely logical and rational.  Given the identity of the applicants and the fact of their acquisition of the different properties, the joint development of the site at a relatively early date is something that I consider would have been inevitable, had the Urban Renewal Authority not intervened.

15.  The final point taken was in respect of section 12(c).  That section reads:

“12.  Additional rules for determining compensation

In the determination of the compensation to be paid under this Ordinance-

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(c) no compensation shall be given in respect of any expectancy or probability of the grant or renewal or continuance, by the Government or by any person, of any licence, permission, lease or permit whatsoever”

16.  It was argued that compensation could only have been given on the basis of an amalgamated site if the applicants had mutually granted each other something in the form of a licence or permission or permit to redevelop their land.  It was said that all that could be said was that it was a probability that that might happen and, therefore, the section excluded compensation payable.

17.  In my view, section 12(c) is concerned with a situation where the land owner does not have a legal right to carry out the specific activity upon which his claim for compensation is based.  In cases, for example, where the land owner does not have a right to build on the land or otherwise to redevelop it, although the grant of such right might be anticipated, compensation cannot be claimed on the basis of the probability that the right would be granted.  But in the present case, both sets of applicants have the right to develop their land.  The Tribunal has held that they would have developed it together.  That is a right that both applicants always had, namely to develop their land together.

18.  The appeal was therefore dismissed with costs.

Hon Yuen JA:

19.  I agree.

Hon Sakhrani J:

20.  I agree with the judgment of Rogers VP and have nothing to add.