SIME DARBY MOTOR SERVICES LTD v. DIRECTOR OF LANDS

HCAL 933/2020

[2022] HKCFI 2809

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 933 OF 2020

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J U D G M E N T

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A. INTRODUCTION

1.  This is the substantive hearing of the applicant’s Originating Summons dated 18 March 2021 to judicially review the decision of the District Lands Officer/North, Lands Department (“DLO/N”) made on 21 February 2020 (“Decision”) refusing to process the applicant’s in-situ land exchange application (“Land Exchange Application”) concerning certain pieces of land owned by the applicant (“Subject Lots”), on the ground of a purported Government policy of not entertaining non-small house land exchange applications within village environ (“VE”) boundaries (“Purported Policy”).  At the hearing, the Director of Lands (“DoL”) confirmed that the DoL would not rely on the further purported justifications contained in a letter issued by the DoL dated 18 June 2020.

2.  This court granted the applicant leave to apply for judicial review against the Decision on the grounds set out in the Amended Form 86 on 8 March 2021.

3.  Put shortly, the applicant’s position can be outlined as follows:

(1)  First, the Decision is plainly amenable to judicial review.  Among others: (a) there is a presence of a public element of sufficient significance, touching on the existence (or otherwise) and rationality of a purported or asserted Government policy relating to the reservation of land for the Small House Policy (ie the Purported Policy defined in paragraph 1 above); and (b) the Decision relates to the special arrangements pertaining to the New Territories land involving the consideration of rights of indigenous inhabitants, and which plainly has an impact on the rights or interests of non-indigenous landowners.

(2)  In other words, the implementation of the Purported Policy in specific cases concerns the Government’s role as a protector of public interests, as opposed to an exercise of its rights as a private landlord.

(3)  Second, the existence of the Purported Policy is called into question.  Even with full evidence filed by both parties, there is no document which unequivocally records the existence and scope of the Purported Policy.  If the Purported Policy does not exist, the DLO/N’s purported reliance on the same in reaching the Decision would be impugnable on the basis of factual error.

(4)  Third, the scope and ambit of the Purported Policy (even if it exists), and its particular application to the facts of the present case, is unlawful, illogical, and Wednesbury unreasonable.  In particular, the Purported Policy would result in the scenario where certain pieces of land in the New Territories (including the Subject Lots) may not be legally utilised or put to any meaningful use at all - a scenario which is plainly contrary to public interests.

(5)  Fourth, by mechanically and rigidly applying the Purported Policy without due consideration of the specific circumstances of this case, DLO/N had impermissibly fettered its discretion and failed to take into account relevant considerations.

(6)  Fifth, and in any event, by refusing to process the Land Exchange Application, the Government had frustrated the applicant’s substantive and procedural legitimate expectation.

4.  The applicant hence invites the Court to:

(1)  quash the Decision;

(2)  order the applicant’s Land Exchange Application to be remitted to DLO/N for reconsideration and decision.

B.      MATERIAL BACKGROUND FACTS

5.  The factual background to this judicial review application consists of largely undisputed or incontrovertible facts.  For present purposes, the material background has been summarised by the applicant in its Skeleton Submissions as follows.

B1.    The applicant

6.  The applicant is a wholly-owned subsidiary of Sime Darby Motor Group (HK) Limited (“Sime Darby HK”).  Sime Darby HK’s subsidiaries have acquired the sole importation and distributorship rights in respect of motor vehicles marketed under the BMW brand in Hong Kong and Macau since about 1968.

7.  The applicant and Sime Darby HK are subsidiaries of Sime Darby Berhad, a Malaysian listed company and an international conglomerate with core businesses in automobile trading and logistics.

B2.    Sime Darby Group’s interest in the Subject Lots

8.  Following a dealer network study in November 2013, BMW recommended that Sime Darby HK should expand the existing dealership network and increase market coverage in Hong Kong by adding a new 5S Automobile Dealership Centre (“Proposed ADC”) at a strategic location in the New Territories North/West to capture the market potential, enhance its business growth and cope with future customer needs, especially in the northern and western parts of the New Territories.  As a result, the applicant started to look for a site to build the Proposed ADC.

9.  In around May to September 2014, through the introduction of Savills (Hong Kong) Limited (“Savills”), site inspections of certain pieces of land (collectively the “Subject Lots”)^[1], namely the Remaining Portion of Lot No 4250 (“Lot No 4250 RP”), Section A of Lot No 4252 (“Lot No 4252 s A”), the Remaining Portion of Lot No 4272 (“Lot No 4272 RP”), the Remaining Portion of Lot No 4897 (“Lot No 4897 RP”) and the Remaining Portion of section B of Lot No 4273 (“Lot No 4273 s B RP”) in Demarcation District 51 (“DD 51”) were carried out.  The Subject Lots are located at a strategic location at the gateway of Fanling New Town adjoining the Fanling Highway in Fanling Area 48 in northern New Territories.

B3.    Sime Darby Group’s acquisition of the Subject Lots

10.  On 17 September 2015, Marksworth Limited (“Marksworth”), a wholly-owned subsidiary of Sime Darby HK, acquired the Subject Lots from two vendors for a consideration of HK$329,000,000 (in respect of Lot No 4250 RP, Lot No 4252 s A, Lot No 4272 RP and Lot No 4897 RP in DD 51) and HK$53,100,000 (Lot No 4273 s B RP in DD 51).

11.  On 29 April 2016, Marksworth transferred the ownership of the Subject Lots to the applicant pursuant to two assignments.

12.  The Subject Lots were selected and acquired by the applicant specifically for the purpose of building the Proposed ADC.

B4.    The original zoning of the Subject Lots and user restrictions in the Government Lease

13.  At the time of the acquisition, the Subject Lots were mostly zoned “Industrial” (“I”) on the draft Fanling/Sheung Shui Outline Zoning Plan (“FSS OZP”) No S/FSS/19 (“OZP/19”) in force at the material time.

14.  According to the Schedule of Uses in the Notes (which forms a part of OZP/19), the Subject Lots may be used for the erection of the Proposed ADC, since uses including “Office Related to Industrial Use”, “Research, Design and Development Centre”, “Shop and Services (Motor-vehicle Showroom on ground floor, Service Trades only)” and “Vehicle Repair Workshop” were always permitted in the “I” zone as a matter of town planning control.

15.  It is also noteworthy that as a matter of town planning control under OZP/19, small houses may not be built on the Subject Lots, since “New Territories Exempted House” (“NTEH”) was neither a Column 1 nor a Column 2 use in the Schedule of Uses for the “I” zone.

16.  In contrast, the area to the immediate south of the Subject Lots was (and still is) zoned for “Village Type Development” (“V”) on the FSS OZP.  According to the Schedule of Uses of the Notes for the “V” zone:

“The planning intention of this zone is to designate both existing recognized villages and areas of land considered suitable for village expansion. Land within this zone is primarily intended for development of Small Houses by indigenous villagers. It is also intended to concentrate village type development within this zone for a more orderly development pattern, efficient use of land and provision of infrastructures and services.”

17.  On the other hand, as a matter of user restrictions in the relevant Government leases for the Subject Lots:

(1)  Under Block Government Lease dated 27 March 1905 for Lot Nos 4250 RP, 4252 s A, 4272 RP, 4273 s B RP, these lots were restricted to agricultural use only.

(2)  Under New Grant No 8755 dated 12 August 1958, Lot No 4897 may not be used for any purpose other than a Camphor Wood Furniture Factory.

18.  Throughout the years, the Government had granted temporary waivers for one of the previous owners to use part of the Subject Lots for “[erection of] a metal ware and electrical goods factory” and “the manufacturing of metal ware and electrical goods”.

B5.    The Government’s rezoning of the Subject Lots

19.  After Marksworth’s acquisition of the Subject Lots in September 2015, the Town Planning Board (“TPB”) exhibited amendments to the FSS OZP on 29 January 2016 to rezone the Subject Lots, including (a) changing the zoning of a majority portion of the Subject Lots from “I” use to that of “Government, Institution or Community” (“G/IC”); and (b) changing the zoning of a small portion of the Subject Lots from “I” use to “Residential (Group A)3” (“R(A)3”).

20.  A history of the proposed amendments to the then applicable FSS OZP (and the failed opposition mounted by Sime Darby Group’s town planning consultant) is outlined in the applicant’s affidavit evidence.

21.  The short point is that on 14 October 2016, the TPB refused to make amendment to the FSS OZP to meet the representations made on the applicant’s behalf.  As a result, as can be seen from the approved FSS OZP No S/FSS/22 (“OZP/22”), the “G/IC” zoning for the majority and the “R(A)3” zoning of a small portion of the Subject Lots remained on the approved OZP/22^[2].

22.  It is important to note that throughout the rezoning process, no indigenous villager had ever made any representation or submission to the TPB that the Subject Lots (or any land within the VE of Wo Hop Shek Village (“VE Land”) outside the “V” zone) should be reserved and/or rezoned to “V” for small house development.

23.  Consistent with the lack of objection by any indigenous villagers of Wo Hop Shek Village, a memorandum dated 7 July 2015 produced by the respondent shows that DLO/N had advised the Planning Department (“PlanD”) that there was sufficient land within the “V” zone to meet the current outstanding Small House Applications.

B6.    The applicant’s Proposed Wholesale Trade Facility

24.  In view of the rezoning of the Subject Lots (which made the erection of the Proposed ADC thereon legally unviable), the applicant decided to take a pragmatic approach by making a commercially viable modification of its original plan, namely the erection of a Wholesale Trade Facility (“Proposed Wholesale Trade Facility”) on the un-resumed land within the Subject Lots.

25.  As a matter of statutory town planning provision under the FSS OZP, the building of the Proposed Wholesale Trade Facility is permitted under the rezoned Subject Lots: see the Schedule of Uses in the Notes to OZP/24 currently in force, which provided that “Wholesale Trade” under Column 1 is always permitted in the “G/IC” zone in terms of town planning control.  “Wholesale Trade”, in turn, is defined by TPB to mean “any place or premises where goods, products or foodstuff are displayed and for sale in large quantities to mainly retailers or wholesalers”.

26.  On this basis, the applicant engaged MAP Architecture and Planning Limited (“MAP”) to seek general building plan approval from the Buildings Department (“BD”), and CBRE Limited (“CBRE”) to make a land exchange application to the DLO/N, for the building of the Proposed Wholesale Trade Facility.

27.  In this regard, PlanD specifically informed the BD that it has “no statutory planning objection to the proposed development as shown on the revised building plans”.

28.  It should also be noted that the construction of the Proposed Wholesale Trade Facility on the Subject Lots is of benefit to the local community, by improving the local environment, upgrading the locality, and contributing to the economic development of Hong Kong (including the creation of employment opportunities), and is in line with the Chief Executive’s policy address for the year 2021 as well as the Northern Metropolis Development Strategy announced by the Chief Executive on 6 October 2021.

29.  It was against this background that the applicant made the subject Land Exchange Application to DLO/N, which resulted in the Decision under challenge being made.

C.      THE LAND EXCHANGE APPLICATION AND THE DECISION

30.  On 4 February 2019, CBRE submitted the Land Exchange Application to DLO/N on behalf of the applicant (“CBRE’s 1^st Letter”), with the following proposals:

(1)  the applicant would surrender the Subject Lots which amounted to a total area of 7,047.3 m²;

(2)  the applicant wished to include the Government land under STT No 210 (45 m²) in the Land Exchange Application given the landlocked nature of the said piece of Government land;

(3)  the land that would be resumed (1.080.4 m²)^[3] would be deducted from the area to be re-granted to the applicant;

(4)  the total area to be regranted to the applicant would therefore be 6,011.9 m²;

(5)  the footprint of the Proposed Wholesale Trade Facility would be completely within land zoned “G/IC” within the Subject Lots, in compliance with the approved OZP/22 in force at that time.

31.  On 3 April 2019, CBRE wrote to DLO/N, requesting a meeting with DLO/N to discuss the Land Exchange Application.  On 15 April 2019, the applicant’s representatives and representatives from CBRE and MAP met with officials of DLO/N to discuss the Land Exchange Application.

32.  On 14 May 2019, CBRE wrote to DLO/N and submitted an updated schedule on the proposed site areas to be surrendered and re-granted under the Land Exchange Application which would supersede the schedule previously proposed in CBRE’s 1^st Letter (“CBRE’s 2^nd Letter”).  In gist, the net total area proposed to be regranted to the applicant would be 6,134.2 m².

33.  On 17 May 2019, DLO/N responded to the applicant (“DLO/N’s 1^st Letter”) as follows:

“Having regard to the land status, the subject site was found to be located within the Village Environ Boundary (VEB) of Wo Hop Shek Village. Under the current policy, non-Small House Policy land exchange application should not normally be entertained within defined village environs in the New Territories.” [Emphasis added]

34.  In other words, DLO/N:

(1)  mentioned the existence of the Purported Policy, ie a policy of DLO/N not entertaining non-Small House Policy land exchange applications in respect of land that is located within VE in the New Territories;

(2)  mentioned that (a portion of) the Subject Lots were within the VE Land, ie VE of Wo Hop Shek Village;

(3)  relied on the Purported Policy as the only reason of not entertaining the Land Exchange Application;

(4)  did not mention there could be exceptions to the Purported Policy or why the Land Exchange Application could not be treated as an exception.

35.  This was the very first time the applicant was informed by DLO/N of the existence of the Purported Policy.  In contrast, there was never any mention of the Purported Policy by DLO/N when commenting on the amendments proposed on the draft OZP.

36.  On 28 May 2019, CBRE wrote to DLO/N (“CBRE’s 3^rd Letter”), citing the following unique features of the Land Exchange Application which fully justified DLO/N’s special consideration of the case:

(1)  the Subject Lots fell mostly within the “G/IC” zone.  According to the Notes of the relevant OZP, NTEH was not a Column 1 use and thus planning permission from the TPB would be required should one intend to build an NTEH within the “G/IC” zone;

(2)  a majority of the Subject Lots was previously zoned “I”, not “V”, prior to the rezoning to “G/IC” by the TPB in 2016/17.  Industrial-and-related uses had long been in operation on the Subject Lots since 1950-60s, even prior to the implementation of the Small House Policy in 1972;

(3)  although a majority of the Subject Lots fell within VE, there was no evidence to show that PlanD or TPB primarily favoured NTEH development here as these lots did not fall within a “V” zone.  If the Subject Lots were considered suitable and necessary for the extension of the existing “V” zone for Wo Hop Shek Village, the Subject Lots would have already been rezoned to “V” which, according to the Notes of the OZP, is a zone intended for Small Houses development by indigenous villagers and to concentrate village type development (ie Small House development) therein for a more orderly development pattern, efficient use of land and provision of infrastructures and services;

(4)  according to TPB Paper No 10170, the Fanling District Rural Committee (“FDRC”) (comprising indigenous inhabitant representatives and resident representatives of Wo Hop Shek Village) was consulted and there was no adverse comment. Moreover, neither the Lands Department (“LandsD”) nor the villagers had objected to the rezoning.  Had there been existing or forecasted Small House demand which could not be accommodated within the existing “V” zone, the interested stakeholders would have already objected to the rezoning of the VE Land to “G/IC”;

(5)  given the “G/IC” zoning for the Subject Lots, LandsD could not entertain any Small House applications within the Subject Lots which did not fall within a “V” zone or had any valid planning permission granted by TPB to build Small Houses, even if such Small House applications were made by eligible indigenous villagers;

(6)  the present case was different in nature from other land exchange cases for land within village environs that also fell within a “V” zone;

(7)  the Land Exchange Application fully complied with the statutory zoning provisions under the OZP and was in line with the prevailing Government policy.  Its approval would enable the registered owner of the Subject Lots to make full use of scarce land resources in the vicinity of the North East New Territories New Development Area.

37.  By the end of July 2019, the applicant sent an email to DLO/N to seek an update on the progress of the Land Exchange Application.

38.  On 15 August 2019, DLO/N responded to the applicant (“DLO/N’s 2^nd Letter”).  In DLO/N’s 2^nd Letter, DLO/N noted the justifications put forward by the applicant, but simply reiterated their stance that land within VE boundaries would normally be reserved for Small House development (without mentioning that there could be exceptions):

“It is noted that you have put forward your justifications … mainly concerning town planning matter and the rezoning exercise back to 2016. However, as explained in our previous correspondence and several tele-conversations between your Mr Calvin Mak and our Mr Kenneth Kam in July and August 2019, the major portion of the lots under application falls within the Village Environ Boundary (VEB) of Wo Hop Shek Village and Wo Hing Tsuen and having regard to the prevailing policy, VEB would normally be reserved for small house development. Moreover, … the area zoned … “G/IC” … does not prohibit the development of small house. … …” [Emphasis added]

39.  On 24 September 2019, the applicant wrote to Mr Alan Lo Kam-lun (“Mr Lo”), who was the Assistant Director (Regional 3), at the Lands Administration Office/Headquarters (“LAO”) (“Applicant’s 1^st Letter”) and highlighted a number of key points for Mr Lo’s consideration:

(1)  a major portion of the Subject Lots, including the VE Land, was zoned “G/IC” on the statutory town plan currently in force where the “Wholesale Trade” building proposed by the applicant was a use always permitted under Column 1 of the Schedule of Uses in the Notes for the “G/IC” zone;

(2)  the Subject Lots had been occupied by industrial uses such as factories and workshops since the 1950-60s, well before the 1972 Small House Policy, and had not been occupied as a residence by any of the indigenous villagers in the past 40 years or longer.  In fact, the Subject Lots were not owned by any indigenous villagers as the applicant was the registered owner of these lots;

(3)  when the VE Land was rezoned from “I” to “G/IC” instead of to “V”, neither LandsD nor the villagers had objected to the rezoning;

(4)  the applicant honestly could not see how the planning intention of the “G/IC” zone could be implemented if a land exchange application for a genuine G/IC use would not even be entertained by DLO/N;

(5)  the applicant urged DLO/N to treat the present case as a unique case which merited to be treated differently in view of the special circumstances surrounding it.

40.  On 11 October 2019, the applicant sent a 2^nd letter to Mr Lo pointing out that land in Hong Kong was scarce and precious.  Rather than lying idle, they should be utilized to the maximum extent pursuant to Government’s planning intention.  Under the current situation, land exchange would be the only way to turn the idle situation around and permit the Subject Lots to be put to its maximum utilization in the long run (“Applicant’s 2^nd Letter”).

41.  A meeting was eventually held on 20 November 2019 between the applicant’s representatives and officials of DLO/N at the DLO/N’s office.  Regrettably, not much progress was made despite the justifications and explanations put forward by the applicant.  Other than DLO/N’s suggestion that they would consider the cancellation and re-issuing the existing short-term waivers as affected by the land resumption (the precise contents of which were not clear), the DLO/N did not point to anything that the applicant could do to move the Land Exchange Application forward.

42.  Further correspondences between the applicant and CES/NDA or DLO/N after the meeting on 20 November 2019 also did not advance the matter any further.

43.  Eventually, on 21 February 2020, the DoL gave a definite response not to process the Land Exchange Application on the strength of the Purported Policy (ie the Decision) (again without suggesting that the Purported Policy may allow exception or why the Land Exchange Application cannot be treated as an exception):

“Your application for the proposed land exchange has been processed according to the established procedure. I would like to reiterate that land in village environs for recognized villages in the New Territories should be excluded from any land exchange primarily to preserve the land for small house development by indigenous villagers. In this connection, non-small house developments within village environs would not normally be entertained.

After consulting my headquarters and carefully re-considered the justification as contained in the letter, we would advise that the subject land exchange application with majority part of the site area fell [sic] within defined village environs would not be further processed…” [emphasis added]

44.  On 19 May 2020, the applicant sought leave to apply for judicial review against the Decision.

D.      AMENABILITY OF THE DECISION TO JUDICIAL REVIEW

45.  As a starting point, the applicant accepts that:

(1)  Judicial review application is generally confined to reviewing matters of a public nature as opposed to those of a purely private character.  Hence, not every decision by the government or a public authority can be made the subject-matter of a judicial review application.

(2)  Generally speaking, the Government’s decision to grant, modify or terminate a Government lease is guided by the interest of the Government as landowner or landlord and governed by private law, and is hence not susceptible to judicial review.

(3)  The mere presence of some public element in a Government’s decision may not be sufficient to transform such a decision into a public law decision.  Since the Government administers land in Hong Kong for the benefit of the general public, its decisions on land matters would likely affect the public interest either directly or indirectly.

(4)  Further, the mere fact that the Government has acted pursuant to a policy in deciding whether or not to, for instance, grant short term tenancies does not, in itself, provide a sufficient public interest to take the decision into the public law domain.

See: Chau Tam Yuet Ching v Director of Lands [2013] 3 HKLRD 169 at §§22-23 (per Lam JA as he then was); Tang Hoi Sang v Director of Lands [2017] 4 HKC 230 at §18 (per G Lam J, as he then was).

46.  However, the presence of a public element of sufficient significance in the decision-making process may turn an otherwise commercial decision into a public law decision.  When determining whether a function falls within the ambit of the courts’ supervisory jurisdiction, the court considers: (1) the legal source of power exercised by the decision-maker; and (2) the characteristics of the function being performed.  See: De Smith’s Principles of Judicial Review, 2^nd edn, §3-030 (p 123); Judicial Review in Hong Kong, 2^nd edn, §1.39 (pp 9-10).

47.  In this regard, Andrew Cheung J (as the Chief Justice then was) summarised the relevant principles in Anderson Asphalt Ltd v Secretary for Justice [2009] 3 HKLRD 215 (upheld on appeal in [2010] 5 HKLRD 490) at §57:

(1)  Only a decision made in the public law domain is amenable to judicial review.

(2)  Whilst the nature of the source of power or discretion is by no means irrelevant, it is the nature of the functions that the decision-maker was performing when making the decision under challenge that is of crucial importance.

(3)  In the absence of fraud, corruption, bad faith and breach of law, a purely commercial decision, or a decision made in the performance of a purely commercial function, is most likely a private law decision, not amenable to judicial review.

(4)  Put another way, the presence of a public element(s) of sufficient significance in the decision-making process could turn an otherwise commercial decision into a public law decision, amenable to judicial review.

(5)  What is sufficient is a matter of fact and degree, depending very much on individual cases.  No hard and fast rule can be laid down.  It is, in a borderline case, very much a matter of overall impression and one of degree.

(6)  In relation to decisions made in land transactions, the same legal principles apply.  A complete statement of the Hang Wah Chong principle does not merely state that in lease modification cases, the Government’s decisions on whether to grant a modification and on the amount of premium to be extracted (if any) are in the nature of private commercial or economic decisions of a private landlord, and therefore not susceptible to judicial review.  A complete statement of the principle also says that where the Government official, in making the decision, acts in his role as protector of the public interest, his decision is almost certainly liable to judicial review.

(7)  Thus understood, the so-called Hang Wah Chong principle is no more than a special application of the general principles on the distinction of public/private law to land matters in Hong Kong.

(8)  In land matters, invariably, there are restrictive user covenants in the relevant leases or grants.  Plainly, they serve the commercial and economic interests of the Government as landlord.  But, equally plainly, they serve, to some extent, a purpose of town planning, which, no doubt, any responsible government must be responsible for, whether directly or indirectly.

(9)  Therefore, there is always a built-in town planning element in land grants and the system of land-holding in Hong Kong, leaving aside any specific town planning legislation.

(10)  That, however, is not sufficient in itself to turn a decision made by the Director in relation to modifying a restrictive user covenant in a grant or demanding a premium for the modification into a public law decision, amenable to judicial review, according to the decided cases.

(11)  This illustrates that the mere presence of some public element (ie town planning consideration) may not be sufficient to render the decision a public law decision.  The crucial question is whether some additional public element(s) of sufficient weight is/are present in the decision-making process to render the decision made a public one, amenable to judicial review.  Put another way, the crucial question is whether the role played or function performed by the Government official is sufficiently public to render the decision a public one, susceptible to judicial review.

48.  In R (Weaver) v London and Quadrant Housing Trust [2010] 1 WLR 363, the English Court of Appeal was asked to determine whether a local authority’s decision to terminate a tenancy and seek repossession of the premises was susceptible to judicial review, taking into account the nature of the tenancy as provision of social housing.  Elias LJ provided useful guidance at §§73-76:

“73. That still leaves the central question whether the act of termination itself can none the less be treated as a private act. Can it be said that since it involves the exercise of a contractual power, it is therefore to be characterised solely as a private act? It is true that in both the Aston Cantlow case [2004] 1 AC 546 and YL’s case [2008] AC 95 it is possible to find observations which appear to support an affirmative answer to that question. As I have said, in YL’s case Lord Scott considered that the termination of the tenancy in that case was a private act, essentially because it involved the exercise of private rights. And in the Aston Cantlow case their Lordships focused on the private law source of the right being exercised in concluding that it was a private act.

74. Those decisions certainly lend force to the argument that the character of the act is related to and may be defined by the source of the power being exercised. Where it is essentially contractual, so the argument goes, it necessarily involves the exercise of private rights.

75. In my judgment, that would be a misreading of those decisions. The observations about private acts in the Aston Cantlow case and YL’s case were in a context where it had already been determined that the function being exercised was not a public function. I do not consider that their Lordships would have reached the same conclusion if they had found that the nature of the functions in issue in those cases were public functions.

76.  In my judgment, the act of termination is so bound up with the provision of social housing that once the latter is seen, in the context of this particular body, as the exercise of a public function, then acts which are necessarily involved in the regulation of the function must also be public acts.  The grant of a tenancy and its subsequent termination are part and parcel of determining who should be allowed to take advantage of this public benefit.  This is not an act which is purely incidental or supplementary to the principal function, such as contracting out the cleaning of the windows of the trust’s properties.  That could readily be seen as a private function of a kind carried on by both public and private bodies.  No doubt the termination of such a contract would be a private act (unless the body were a core public authority).” [Emphasis added]

49.  Applying these principles in the present case, I agree that the Decision is clearly a decision amenable to judicial review, taking into account the following considerations:

(1)  This is not the type of cases concerning the Government’s commercial decision as to whether to grant or modify a Government lease.  Instead, it concerns the Government’s outright refusal to process the applicant’s Land Exchange Application on the sole basis of the Purported Policy which seeks to reserve land for the building of houses under the Small House Policy.  Accordingly, and as will be seen below, the crux of the matter concerns: (a) the existence or otherwise of the Purported Policy; (b) the irrationality and unlawfulness, in the public law sense, of the Purported Policy (if it exists); and (c) the mechanical or flawed implementation of the Purported Policy.

(2)  Viewed thus, neither the Purported Policy nor its implementation in specific cases (including the present case) involves the exercise of the Government’s rights as a private landlord.  On the contrary, it concerns the Government’s role as a protector of the public interests in at least the following aspects, namely: (a) the implementation of the Small House Policy (which itself is based on the Government’s obligations under Article 40 of the Basic Law regarding the lawful traditional rights and interests of indigenous inhabitants of the New Territories); (b) the efficient use of limited land resources in Hong Kong, taking into account Hong Kong’s public interests as a whole from a holistic perspective; and (c) the consequential promotion of Hong Kong’s economic development, whether in the area in question or Hong Kong as a whole.

(3)  A highly pertinent decision is Koon Ping Leung v Director of Lands [2012] 2 HKC 329, where a challenge was made against the District Lands Officer’s refusal to make a private treaty grant to an indigenous inhabitant under the Small House Policy.  At §§17 to 19 and 21, Johnson Lam J (as he then was) expounded as follows:

“17. Here I am concerned with the decision of the DLO on the grant of Government land by way of private treaty grant under the Small House Policy. As far as this particular aspect is concerned, it is my view that the decision has sufficient public character to render it amenable to judicial review: the DLO carried out a public function in making decision under a published policy of the Government dealing with the housing needs of the indigenous villagers of the New Territories. Though the source of power is different, the Small House Policy intends to meet similar needs of members of the public as the public housing scheme. Admittedly, the solutions offered are different: an indigenous villager who obtains a private treaty grant can build on a piece of Government land at his own costs a small house for his residence whilst a public housing tenant only gets a tenancy in a public housing estate. But that does not detract from the public character of the function exercised by the DLO in this regard.

18. Though the Small House Policy is non-statutory and the DLO can properly be described as acting as the land agent of the Government in making decision under the Policy, I do not think one can draw a parallel with the decision of the Director of Lands in modification of Government Lease. As observed by Lord Woolf, the same entity may exercise functions of different characters. In the present context, I do not think the labelling of the DLO as the land agent of the Government can be conclusive on the amenability issue: as demonstrated by the special purpose lease cases, there are cases where decisions would be amenable to judicial review though the Director of Lands acted as land agent.

19. A fundamental difference between the type of decision under discussion and a decision with respect to modification of Government Lease is that in the latter case there is a contractual context governing the matter and the court has to ask whether there is any scope for a further fetter by way of judicial review over the contractual right of the Government as landlord. The same cannot be said in respect of a decision on an application for Government land under the Small House Policy. The concern of the Court of Appeal at paragraph 60 in Anderson Asphalt would not arise in the present context. There is no contract between the applicant and the Government and if the matter is not amenable to judicial review, it is difficult to see what private law remedies is he can seek.

… …

21.  Whilst I have no difficulty with the proposition that the existence of a town-planning element in a decision may not be sufficient to turn it into a public law decision, the decision of the DLO in the present case did not simply predicate upon town planning consideration.  As I have explained, the Small House Policy also pays regard to the housing needs of indigenous villagers. … ” [emphasis added]

(4)  In Hung Hing v Director of Lands [2015] 5 HKLRD 516 §§17-18, Cheung CJHC (as the Chief Justice then was) endorsed Koon Ping Leung (ibid) as follows:

“17. Typically, whether the government sells a piece of land or makes a land grant to an individual is purely a private law matter not amenable to judicial review. In a place like Hong Kong where land is a scarce resource and all land is State property, this is a principle of great importance, for otherwise there would be no end to litigation involving government's use or disposal of land as landowner or landlord which, for obvious reasons, is not conducive to good governance.

18. The Small House Policy needs no introduction. In Koon Ping Leung v Director of Lands[2012] 2 HKC 329, where Johnson Lam J (as Lam V-P then was) gave a brief description of the policy in [2]-[4] of his judgment, the issue facing the Court was whether a refusal by the Director of Lands to grant a piece of land to an indigenous villager to erect a small house pursuant to the policy was amenable to judicial review. The learned Judge observed, bearing in mind the history leading to the implementation of the Small House Policy and the function that it was intended to serve, that there was a strong public element in its due administration which distinguished the role of the government from that of a private landlord. He therefore concluded that there was a sufficient public element in the decision of the District Lands Officer on a grant of government land under the Small House Policy to render it amenable to judicial review. Strongly affecting the Court's decision on amenability was the view taken that the Small House Policy has its origin in the government's effort to cater for the housing needs of indigenous villagers in the New Territories so that in that aspect, "there is an analogy with the function served by the public housing scheme administered by the Housing Authority" ([15]).” [Emphasis added]

(5) See also:

(a) The Hong Kong and China Gas Co Ltd v Director of Lands [1997] HKLRD 1291 (which involved a government policy statement) at p 1296E (per Keith J);

“Mr Mok argued that the decision of the Director of Lands not to extend the lease because the Company did not bring itself within the terms of the policy statement was no different from a private developer issuing a policy statement relating to the circumstances in which it would or would not renew the tenancies of its private tenants on their expiry.  I disagree.  A private developer need only have regard to its own economic interests.  However, in deciding whether to extend the Company's lease, the Director of Lands had to have regard to a host of competing interests.  Essentially, he had to balance the interests of the community at large in having an emergency and maintenance gas depot in Tsuen Wan, against the disadvantage of the current site being unavailable to other potential lessees at a significant premium in the event of the lease being extended.  Ultimately, what the Director of Lands had to decide, therefore, was whether these considerations justified a departure from the "general" policy in the policy statement which would "normally" be applied to public utility companies (upon the assumption that the site was still being used for the purpose for which the lease was originally granted).  In view of the competing interests which the Director of Lands had to balance in the context of the application of an important policy statement relating to the extension of large numbers of Crown leases in the New Territories, I have concluded that his decision whether or not to extend the Company’s lease was made by him in the exercise of his public functions, and is therefore amenable to judicial review.” [Emphasis added]

(b) Kam Lan Koon v Secretary for Justice [1999] 3 HKC 591 (which also involved a government policy) at 600B-G (per Rogers JA):

“The first question which arose on the appeal is as to whether the decision of the Director of Lands was subject to judicial review. It was maintained on behalf of the Secretary for Justice that the decision made by the Director of Lands not to renew the lease was the equivalent of a decision of a private landlord and was therefore not amenable to judicial review. The argument was based upon the proposition that the issues involved were issues which a private landlord would consider in the ordinary course of events. It was said that the agreed minute No 10 of the Sino-British Land Commission did not compel the Government to extend the term of a lease for special purposes even should the applicant fall within the terms which would have justified an extension. The term used was simply that the Government may extend the leases and not that it must extend the lease.

Clearly the Government in exercising rights in respect of leases is exercising the same powers as an ordinary landlord.  For the most part, decisions made in this regard are not judicially reviewable.  However, the policy statement which was reflected in the booklet entitled ‘Extension of Leases in the New Territories (including New Kowloon)’ expressed the Government’s policy.  Those affected had a legitimate right to expect the implementation of the Government policy in relation to the extension of leases following upon the agreement in the Sino-British Land Commission.  To this extent, therefore, the decision to extend leases for special purposes in the New Territories is not simply a decision of a private landlord but it is one which the Director of Lands takes as part of his public function.  In my view, any such decision is amenable to judicial review.” [Emphasis added]

(6)  In Rank Profit Industries Ltd v Director of Lands, FAMV 7/2009 (25.6.2009), Ribeiro PJ made highly instructive observations (§§11-12) in the context of The Hong Kong and China Gas and Kam Lan Koon and explained why the decisions made by the Government in those cases, even though touching on the renewal of Government leases, may constitute the exercise of a public function:

“11. We do not consider it necessary to express a view in these Reasons as to whether those two cases were or were not correctly decided. It is however important to note that they were both cases involving special purpose leases, that is, leases granted by the government for defined special purposes subject to a permanent prohibition against assignment. Both cases arose out of the passage of the New Territories Leases (Extension) Ordinance 12 and the government’s stated policy of considering extensions of such special purpose leases on a case-by-case basis, with the decision whether to extend being dependent on investigation into whether the land was no longer being used for its original purpose or unlikely to be so used for the full period or whether the land was required for a different public purpose. The decisions relating to the grant and extension of special purpose leases in the aforesaid context were therefore strongly coloured by public purposes.

12.  The Hong Kong and China Gas case was concerned with the gas utility company’s challenge to the government’s decision in 1996 refusing to extend the special purpose lease which the company had been granted in 1963 on the basis that the land was no longer required for the purpose for which it had been originally granted, namely to supply the Tsuen Wan area with a substitute form of gas on a temporary basis before the fully supply of towngas could be provided.  Keith J’s decision turned on his characterisation of the Director’s decision on the facts of that case as one made in the exercise of his public functions, making it amenable to judicial review.  A similar approach was adopted in Kam Lan Koon in relation to the government’s refusal to extend a lease granted for the limited special purpose of use as an ancestral temple which had in fact been used as a Taoist temple.” [Emphasis added]

(7)  In the circumstances, the examination of the scope, lawfulness and rationality of the Purported Policy is of a public character (rather than a private commercial matter of the Government qua landlord).

50.  As can be seen from the above, the question of whether government decisions concerning land in Hong Kong is amenable to judicial review has generated a body of case law.

51.  Of those cases where the Government’s decisions concerning land were held not to be amenable to judicial review, the decision was either: (1) made under an instrument affecting land, which constituted the contract between the Government and the applicant; or (2) in cases which are ordinarily land transactions which did not involve any public elements.

52.  By way of contrast, in cases where the decisions were held to be amenable to judicial review, they were either: (1) cases involving decisions with public elements (such as Koon Ping Leung v Director of Lands, which involved the Small House Policy); or (2) cases involving the special purpose leases (such as The Hong Kong and China Gas Co Ltd v Director of Lands and the Kam Lan Koon cases cited above).

53.  In the present case, the Purported Policy (if it exists) is plainly for the purpose of implementing the Small House Policy. See: (1) the Affidavit of Chan Oi Kwan Josephine (“Chan 1^st”) §§43 and 69(b); and (2) the VEB Internal Guideline.

54.  It is accepted by the applicant that the mere presence of a government policy does not by itself render a decision made pursuant to the policy amenable to judicial review.

55.  However, in the present case the Purported Policy is closely linked to the Small House Policy, and can be regarded as part and parcel of the overall scheme concerning the Small House Policy.  It follows that the Decision made in the present case, which was based on the Purported Policy, must also be amenable to judicial review.  As held by the Court of Final Appeal in Kwok Cheuk Kin v Director of Lands (No 2) (2021) 24 HKCFAR 349 at §17:

“17. The availability of Crown land for sale to indigenous villagers has always been an essential adjunct to the Small House Policy. As the population increased, more villagers found themselves without land on which to build a house, or without land of a size, shape or location suitable for building.” (Emphasis added)

56.  In Hung Hing v Director of Lands (supra), at the last sentence of §29, Cheung CJHC posed this question: “And can someone come forward and say that more land in the vicinity should be resumed in order to cater for that need in furtherance of the policy?” (Emphasis supplied).  At §30, his Lordship said this; “All these hypothetical questions, and it is not difficult to think of many others, simply demonstrate that there is wisdom in holding, as the cases have consistently decided, that as regards land leases and related matters, the government’s decisions as landowner or landlord are generally speaking not amenable to judicial review”.

57.  At first blush, this seems to suggest that the reservation of land by the Government in furtherance of the Small House Policy is not amenable to judicial review.

58.  However, on closer examination, (i) the obiter remark was made in the context of dealing with the applicants’ alternative argument that the Small House Policy itself was unreasonable or irrational in the public law sense; and (ii) more importantly, the reference to “that need” in the last sentence of paragraph 29 of Hung Hing was a reference to the need for vehicular access, medical clinic or facilities for young children or the elderly or such like, which had been held in that case not to be a feature of the Small House Policy.

E.      WHETHER THE PURPORTED POLICY EXISTS AND ITS SCOPE

59.  The applicant accepts that a public body may in appropriate circumstances adopt lawful policies to guide its proper performance of duties.  The court’s approach towards adoption of policies by public bodies is clear.  The learned author of Stephen Thomson, Administrative Law in Hong Kong explains as follows (at pp 177-178):

“However, policies also bring risks, and if not properly handled, can lead to violation of grounds of judicial review, including fettering of discretion. First, the policies themselves must be lawful, in compliance with constitutional, statutory and common law requirements. In the event that a policy is found to be unlawful, both the policy and decisions taken thereunder may be struck down. Second, the policy may be lawful, but be applied or adhered to in a way that is unlawful. In this scenario, the policy will stand as valid, but decisions taken thereunder may be quashed. Accordingly, a decision maker must not apply his or her policy blindly and rigidly. The policy must not preclude the decision maker from departing therefrom, nor preclude him from taking into account the circumstances and merits of individual cases, nor should it be implemented as if it was such a policy. The legality of the policy and the practical way in which the policy is implemented are therefore both of relevance.”

See also: Wise Union Industries Ltd v Hong Kong Science and Technology Parks Corp [2009] 5 HKLRD 620, per Andrew Cheung J (as he then was) at §§30-35.

60.  In the present case, insofar as the Purported Policy is concerned, three key issues call for consideration: (a) whether the Purported Policy exists; (b) the legality of the Purported Policy (if any); and (c) the flawed implementation of the Purported Policy (if any).

61.  Starting with the first question (ie whether the Purported Policy exists), it is pertinent to note that in Tong Wai-yee Winnie v Secretary for Education [2022] HKCFI 1402 §§153, 171, Coleman J observed the implausibility of there being a Government policy that was never documented and communicated in writing:

“153.  The Applicant points to the absence of any documents produced by the deponents for the EDB to prove any “internal policy”, and the absence of any documents purporting to communicate such a policy.  I agree that these are factors suggestive of the non-existence of the Policy.  If there is no document in which a policy is described and delineated, or by which its intended application can be communicated to those to whom the policy is relevant, that must cast grave doubt on whether such a policy really exists.

…

171.  In conclusion, I think there is a very strong argument that the Policy as now described did not in fact truly exist.  Nevertheless, I probably do not need to make a final determination on this point in light of my views on the other points: see below.” [Emphasis added]

62.  If the Government had purportedly based its decision on an alleged policy that was in fact non-existent, such decision would be unlawful on the ground that the decision maker had committed an error of fact: Tong Wai-yee Winnie (ibid) §123(1).

63.  The applicant has specifically put in issue the existence of the Purported Policy in both the Amended Form 86 and the Originating Summons.  Under such circumstances, one would expect the respondent to put in detailed or cogent evidence to prove the existence of the Purported Policy as well as to explain its origin, rationale and previous implementation. However, the best that the respondent’s deponent could do in Chan 1^st was to assert as follows:

“43. This was part of the Government’s long-standing internal guideline that non-Small House Policy land exchanges are not normally entertained within defined village environs or “V” zones for recognised New Territories villages, although there may however be justification for a non-Small House Policy land exchange in exceptional circumstances (“VEB Internal Guideline”). The VEB Internal Guideline is a long-standing internal guideline, or instruction, of LandsD which has been implemented since 1994 at the latest. There was no formal announcement of the guideline, because it guides the Government’s decision as to land exchange applications, which are private law matters.” [Emphasis original]

64.  This explanation proffered in Chan 1^st is difficult to understand and far from satisfactory.  Even if one is to proceed on the basis that land exchange applications are generally private law matters, the absence of documentary evidence to document such “internal guideline” or “instruction” raises a big question mark over whether such “guideline” or “instruction” really exists.

65.  Furthermore, as noted in the 3^rd Affirmation of Wong Man Wai Gary (“Wong 3^rd”):

(1)  It is the unequivocal evidence of the applicant that it only became aware of the existence of the Purported Policy (now termed as the VEB Internal Guideline) as disclosed in DLO/N’s 1^st Letter.

(2)  A search of the LandsD website shows that no press release, Lands Administration Office Practice Note or Joint Practice Notes can be found promulgating the alleged VEB Internal Guideline.  The respondent has also confirmed that there was no formal announcement of the VEB Internal Guideline: Chan 1^st §43.

(3)  It is noteworthy that the respondent had changed the description of the Purported Policy from that of a “policy” (in DLO/N’s 1^st Letter, DLO/N’s 2^nd Letter and the DoL 18 June Letter) to that of a “guideline” or “instruction”.  No explanation has been given for such changes.  Nor has the respondent offered any explanation as to the difference (if any) between a “policy” on the one hand and a “guideline” or “instruction” on the other hand.

(4)  While the respondent asserts that the VEB Internal Guideline was implemented since 1994, it is noteworthy that no evidence has been produced by the respondent at all to substantiate that contention.  No evidence or explanation have been provided by the respondent on matters such as (among others): (a) the rationale behind the VEB Internal Guideline and what circumstances led to the formulation of the VEB Internal Guideline; (b) whether the VEB Internal Guideline has been considered and endorsed by higher level of officials (such as the Secretary for Development or the Chief Secretary); and (c) whether and if so how the VEB Internal Guideline has been amended since it first came into existence, and what was the administrative procedure for making amendment to the VEB Internal Guideline.

(5)  These are all highly pertinent and relevant questions which are within the knowledge of the respondent, and which the court would expect the respondent to fully answer in discharge of its duty of candour.  Yet, Chan 1^st chose to remain silent on these questions.

(6)  On 15 October 2021, the applicant wrote to the Department of Justice (“DoJ”), requesting for a copy of the alleged VEB Internal Guideline.

(7)  In response, on 26 October 2021, the DoJ reverted by asserting that the “Technical Circular No 620C” dated 5 December 1994 “is the VEB Internal Guideline referred to in paragraph 43 of [Chan 1^st]”.  No explanation has been offered as to why Chan 1^st did not exhibit this Technical Circular.

(8)  However, it is difficult to make sense of Technical Circular No 620C (“TC 620C”) in the form as produced by the respondent:

(a)  TC 620C was issued by Senior Estate Surveyor/Technical Information and dated 5 December 1994. The first line in the heading indicates that it was issued by Lands Administration Office.  No information whatsoever has been included in TC 620C to explain its purpose, context and authority.  It is not stated in TC 620C that this is an “internal guideline” to “guide the Government’s decision as to land exchange applications” as claimed in Chan 1^st §43.

(b)  While the title of TC 620C is stated as “In-situ Exchange Policy in the N T”, the first paragraph of TC 620C dealt with cost allocation for clearance of Government land for implementation of a land exchange while the second paragraph addressed the payment of infrastructure works and costs for water connections and improved road access.

(c)  The 3^rd paragraph of TC 620C reads as follows:

“Following further deliberations at LAM, in connection with land exchanges in village environs, it has now been confirmed that ‘V’ zones for recognized N T villages should also be retained primarily for cases under the Small House Policy. Para 4(a) of TC 620, as amended in TC 620B, should therefore read:

“Land in either village environs or ‘V’ zones for recognized N T villages should be excluded from this exercise primarily to preserve the land for small house development by indigenous villagers under the Small House Policy. Non Small House Policy land exchanges should therefore not normally be entertained within defined village environs or ‘V’ zones for recognised N T villages. There may however be justification for a non Small House Policy land exchange in exceptional circumstances, in which case a LAM submission will be required.” (referred to hereinbelow as the “TC Statement”) [emphasis added].

(d) There is a reference to “this exercise” in the TC Statement as highlighted above. It is not known what “this exercise” means, which very likely qualifies the applicability of this purported direction in the original para 4(a) of TC 620 (as amended in TC 620B).

(e) No evidence has been adduced by the respondent to prove that TC 620C is still currently in force and whether there has been any review, revision and/or update made to the TC Statement since 5 December 1994.

(f) While the TC Statement made explicit reference to TC 620 and TC 620B and its paragraph 4 expressly stated that “[s]ave as the above, TC 620, 620A and 620B remain in force”, copies of TC 620, 620A and 620B (collectively referred to as the “Technical Circulars”) were not attached to DoJ’s letter of 26 October 2021. Without having an opportunity to consider TC 620, 620A and 620B, it is impossible to have a proper and accurate understanding of the TC Statement.

(g) In any event, the wording of the TC Statement is different from the Purported Policy as disclosed in DLO/N’s 1^st Letter, DLO/N’s 2^nd Letter and the DoL 18 June Letter. Among others, the references to the Small House Policy and “V” zones in the TC Statement have been left out in the 3 letters issued by DLO/N. There was also no reference in DLO/N’s letters to the last sentence of the TC Statement, namely that “[t]here may however be justification for a non Small House Policy land exchange in exceptional circumstances, in which case a LAM submission will be required” (the significance of which will be discussed below in the context of fettering of discretion).

(9) Despite multiple requests made by the applicant’s solicitors for a copy of the Technical Circulars (which is necessary to understand the context of the TC Statement, in circumstances where it was expressly stated to be an amendment to para 4(a) of TC 620, as amended by TC 620B), the respondent has refused to disclose the same notwithstanding its duty of candour. I agree that to say the least, the respondent’s refusal to produce the Technical Circulars is difficult to understand.

66.  In the absence of proper explanation and evidence, it would be most extraordinary that a Senior Estate Surveyor of the Lands Administration Office could issue a direction in 1994 that allegedly “guides the Government’s decisions as to land exchange applications” even up to this day.

67.  Besides, since it is the respondent who seeks to rely on the Purported Policy, the burden rests fairly and squarely on the respondent to establish the existence of the Purported Policy by cogent evidence.  By reason of the matters highlighted above, the evidence adduced by the respondent is hardly sufficient for the court to conclude that the Purported Policy exists.  However, like Coleman J in Tong Wai-yee Winnie v Secretary for Education (supra), I find that I do not need to make a final determination on this point in light of my views on the other points set out below.

F.      PURPORTED POLICY AND ITS IMPLEMENTATION WEDNESBURY UNREASONABLE

68.  The effect of the Purported Policy is that once the subject land falls within VE boundaries^[4], DLO/N would refuse to process the relevant land exchange application, irrespective of the applicable land use zoning under the relevant statutory plans, on the pretext of preserving such land for small house development.

69.  On that basis, the Purported Policy is itself clearly illogical, perverse, and irrational:

(1)  Under the Small House Policy, a small house grant would only be made if the land falls within “V” zones (ie village type development) under the relevant statutory plans, or if specific planning permission from TPB is given.

(2)  In other words, even if a particular piece of land falls within VE boundaries, it would not be possible to erect small houses thereon unless the applicable land use zonings allow for Small House development.

(3)  This would mean that the Purported Policy would potentially result in the scenario where certain pieces of land in the New Territories may not be legally utilized at all, in that:

(a)  The use as allowed for under the government lease may not be consistent with the use allowed for under the applicable statutory plans (such as plans which zoned the land for “I” use), such that unless the Government accedes to a land exchange application, there is legally no use to which the land may be put.

(b)  However, the Purported Policy would preclude the Government from even considering such a land exchange application if the subject matter land falls within VE boundaries.

(c)  Nor can such land be used for the erection of small houses (which is the apparent rationale behind the Purported Policy) since small house development may not be a use allowed for under the applicable statutory plans (such as plans specifying “I” use).

(d)  In this regard, it is noted that Chan 1^st §35 asserts that the erection of a house (which entails a Small House) may be permissible for land zoned for “G/IC” use.  However, it has never been the respondent’s case that the Purported Policy (or the alleged VEB Internal Guideline) is only applicable in respect of “G/IC” land. In other words, even on the face of the Purported Policy, it would prohibit non-Small House land exchange applications for “I” land (so long as it falls within VE boundaries), even though there is no prospect for such land to be used for the erection of small houses.

(4)  In a statement made by the then Secretary for Development Carrie Lam on 4 June 2008, it was said that the Government’s “existing land policy is to optimise the use of land within the framework of land use zonings”.

(5)  The Purported Policy, if it exists, would run directly counter to such avowed objectives of the Government, since under the Purported Policy the Government would not even consider modifying the terms of the Government lease to allow for development in accordance with the Government’s planning intention as manifested in the applicable statutory plans which were approved by the Chief Executive in Council after going through an extensive public consultation process stipulated in the Town Planning Ordinance, on the ground of preserving the land for future small house developments when there may be no prospect of any small house erected thereon.

70.  As submitted by the applicant, such irrationality of the Purported Policy is particularly highlighted as implemented and applied to the Subject Lots in the present case:

(1)  Under the Small House Policy, the Government would not appropriate private land owned by other private landlords for the use of indigenous inhabitants for their building of small houses (see paragraph (d) of the Explanatory Notes of the Small House Pamphlet).

(2)  With the Subject Lots being in the possession of the applicant, it is therefore both factually and objectively impossible for any application to be made by an indigenous inhabitant to erect any small house on the Subject Lots.

(3)  Furthermore, under the FSS OZP, the majority of the Subject Lots (and the entirety of the parts thereof intended for the use of the Wholesale Trade Facility) are zoned for G/IC use.  Absent a further amendment of the statutory plans (or specific permission being given by TPB), as a matter of law the Subject Lots cannot be used for the building of small houses by indigenous inhabitants.  On this note, contrary to the contention advanced in Chan 1^st §35: and as explained in Wong 3^rd §§63-64, the fact that “house” is a use listed under column 2 of the “G/IC” zone is neither here nor there:

(a)  As disclosed in a memorandum dated 7 July 2015 produced by the respondent, DLO/N advised PlanD that there was sufficient land within the “V” zone to meet the current outstanding Small House Applications;

(b)  The planning intention for the “G/IC” zone is “for the provision of Government, institution or community facilities serving the needs of the local residents and/or a wider district, region or the territory”, and for uses directly related to or in support of the work of the Government, organisations providing social services to meet community needs, and other institutional establishments;

(c)  According to the Interim Criteria for Consideration of Application for New Territories Exempted House (NTEH)/Small House in New Territories, which deals with planning applications for development of small houses, an application for Small House within this “G/IC” zone does not fall within a category that will be given sympathetic or favourable consideration by TPB, since (a) the erection of Small Houses is not in line with the planning intention of “G/IC” land; and (b) there is no “general shortage of land in meeting the demand for Small House development in the “V” zone”.

(d)  A search on the TPB website also reveals that there had not been any application for the construction of a “NTEH” within the said “G/IC” zone of the FSS OZP since the area has been rezoned to “G/IC” in 2016.

(4)  For this reason, the stated purpose of the Purported Policy/alleged VEB Internal Guideline, ie “to facilitate the implementation of the small house policy, namely that the indigenous villagers may apply to construct small houses within VE land under the small house policy” (see Chan 1^st §69(b)) cannot be achieved even if the said policy is applied to the Subject Lots.

(5)  Nor can the Subject Lots be put to any other meaningful or constructive use:

(a)  The relevant Government leases only allow for the Subject Lots to be used for agricultural or industrial uses respectively (see Section B4 above).  Neither agricultural use nor industrial use is permitted under the “G/IC” zoning of the FSS OZP currently in force.

(b)  Without the Government entertaining a land exchange application, the applicant would also not be able to utilize the Subject Lots in accordance with the FSS OZP (ie G/IC use).

(c)  In light of the aforesaid, the Purported Policy, as applied to the Subject Lots in the present case:

(i)    is both factually and legally in direct conflict with the planning intention of the Government policy as manifested in the FSS OZP;

(ii)   would result in the Subject Lots being deprived of any meaningful use; and

(iii)  would freeze the land for an indefinite period of time which would go counter to the Government policy of optimising the use of land, notwithstanding the fact that land resources are scarce in Hong Kong.

(6)  It is not to the point for Chan 1^st §68 to contend that the applicant does not have an “entitlement” to a land exchange.  The question has never been whether the Government, as a landlord, has a contractual/private law right to refuse the Land Exchange Application.  The real question is whether it is (ir)rational, in the public law sense, for the Government to effectively put scarce land resources in Hong Kong to no meaningful use, even though such may be the Government’s entitlement in an otherwise purely private law setting.

71.  In the premises, DLO/N’s Decision, on the pretext of the Purported Policy, is Wednesbury unreasonable, ie that it is so unreasonable that no rational public authority would reasonably have made the same decision: cf Ng Shek Wai v Independent Commission Against Corruption [2018] HKCFI 720 at §34; Jonnex International Ltd v Town Planning Board [2018] 1 HKLRD 577 at §§61-67.

G.      FETTERING OF DISCRETION AND FAILURE TO TAKE INTO ACCOUNT RELEVANT FACTORS

72.  As noted in paragraph 59 above, not only should a policy allow exception, a public body should not blindly or rigidly apply a policy.  In R v Secretary of State for the Home Department, ex parte Venables [1998] AC 407, Lord Browne-Wilkinson expounded as follows (at pp 496G-497C):

“ When Parliament confers a discretionary power exercisable from time to time over a period, such power must be exercised on each occasion in the light of the circumstances at that time. In consequence, the person on whom the power is conferred cannot fetter the future exercise of his discretion by committing himself now as to the way in which he will exercise his power in the future. He cannot exercise the power nunc pro tunc. By the same token, the person on whom the power has been conferred cannot fetter the way he will use that power by ruling out of consideration on the future exercise of that power factors which may then be relevant to such exercise.

         These considerations do not preclude the person on whom the power is conferred from developing and applying a policy as to the approach which he will adopt in the generality of cases …. But the position is different if the policy adopted is such as to preclude the person on whom the power is conferred from departing from the policy or from taking into account circumstances which are relevant to the particular case in relation to which the discretion is being exercised.  If such an inflexible and invariable policy is adopted, both the policy and the decision taken pursuant to it will be unlawful …” [Emphasis added]

73.  In short, the following principles on fettering of discretion and failure to take into account relevant factors are well-established:

(1)  A public body entrusted with duties or with discretionary powers for the public benefit may not avoid its duties or fetter itself in the discharge of its powers.

(2)  A body that does fetter its discretion in that way (including by way of a fixed rule of policy) may result in the decision reached both being illegal and procedurally unfair.

(3)  The rationale of the principle is to ensure that two perfectly legitimate administrative values, those of legal certainty and consistency, may be counteracted by another equally legitimate administrative value, namely that of responsiveness.  While allowing rules and policies to promote the former values, it insists that the full rigour of certainty and consistency be tempered by the willingness to make exceptions, to respond flexibly to unusual situations, and to apply justice in the individual case.

(4)  Thus, when the legislature confers a discretionary power exercisable from time to time over a period, such power must be exercised on each occasion in the light of the circumstances at that time.  In consequence, the person on whom the power is conferred cannot fetter the future exercise of his discretion by committing himself now as to the way in which he will exercise his power in the future.  He cannot exercise the power nunc pro tunc (meaning ‘now for then’).  By the same token, the person on whom the power has been conferred cannot fetter the way he will use that power by ruling out of consideration on the future exercise of that power factors which may then be relevant to such exercise.

(5)  These considerations do not preclude the person on whom the power is conferred from developing and applying a policy as to the approach which he will adopt in the generality of cases.  But the position is different if the policy adopted is such as to preclude the person on whom the power is conferred from departing from the policy or from taking into account circumstances which are relevant to the particular case in relation to which the discretion is being exercised.  If such an inflexible and invariable policy is adopted, both the policy and the decisions taken pursuant to it will be unlawful.

See: Lai Tak Shing v Director of Home Affairs, CACV 201/2005 (unrep, 9/10/2006) at §§23-24 (per Cheung JA); R v Home Secretary, ex p Venables (supra) at pp 496H-497C (per Lord Browne-Wilkinson); R v Secretary of State for the Environment, ex parte Halton Borough Council (1983) PCR 28 at p 33 (per Taylor J).

74.  Further, insofar as the question of whether a policy or its implementation is rigid or whether it admits any exception, the following principles are pertinent:

(1)  Policy in absolute terms prohibiting any discretionary awards could not be remedied by evidence that on occasions exceptions might be permitted.  The policy would remain unlawful: R v Warwickshire County Council, ex parte Collymore [1995] ELR 217, per Judge J at p 226.

(2)  It is incumbent on the respondent to adduce “convincing evidence” to show that exceptions did exist and that there have been proper operation of the exceptions: Durga Maya Gurung v Director of Immigration, CACV 1077/2001 (unrep, 19/04/2002), per Le Pichon JA^[5] at §§24-25.

(3)  Further, even if the evidence is not conclusive on whether a public body has adopted an inflexible policy, the court would consider whether the thinking of the relevant people has been so much affected by the policy that there was no meaningful consideration of other relevant factors in the deliberation process: Lo Yuet Hing v Hong Kong Housing Authority, HCAL 95/2002 (unrep, 25/09/2002) (DHCJ A Cheung, as he then was), §§27-32.  In other words, the actual operation of the policy is important, and evidence may show that an apparently flexible policy is being applied inflexibly.  See, by way of illustration: R (MP) v Secretary of State for Justice [2012] EWHC 214 (Admin), at §§179-184; FB v Director of Immigration [2009] 1 HKC 133, per Saunders J at §§85-139.

75.  In the present case, the only reason given by DLO/N for its Decision refusing to entertain the applicant’s Land Exchange Application was the existence of the Purported Policy: see DLO/N’s 1^st Letter, DLO/N’s 2^nd Letter, and the Decision.  Its reliance on the Purported Policy was misplaced and irrational, for reasons explained in Section F above.  By blindly and mechanically applying the Purported Policy to the Subject Lots (despite its irrationality), it follows that DLO/N had unlawfully fettered its discretion.

76.  In so fettering its discretion, DLO/N should have but had failed to take into account the following relevant factors (in addition to the matters stated in Section F above):

(1)  Throughout the Government’s rezoning process (ie rezoning the majority of the Subject Lots from “I” use to “G/IC” use), neither DLO/N nor the representatives of the indigenous villagers of the Wo Hop Shek Village raised any objection thereto or any possibility that any part of the Subject Lots ought to be preserved for small house development (see Section B5 above).  In any event, there is no or no sufficient evidence to suggest that there is a genuine need to reserve the Subject Lots for small house development.

(2)  The result of DLO/N’s Decision refusing to process the applicant’s Land Exchange Application is that the majority of the Subject Lots cannot be legally put to any meaningful use.

(3)  No inquiry had been made by DLO/N on the up-to-date existing and forecasted Small House demand for Wo Hop Shek Village which would have an important bearing on whether the Purported Policy ought to be maintained and the extent to which it should be flexibly applied in the present case.

(4)  Furthermore, as stated in Section D above, DLO/N had failed to consider the overall picture from a holistic perspective, including (a) whether there is real or genuine demand for building small houses in the area; (b) whether there is any legitimate competing demands, and the economic or other forms of benefit that would be brought about by such legitimate competing demands to the area in question and/or to Hong Kong as a whole; and (c) how would the limited land resources be best used in the overall interest of Hong Kong.  As a matter of good governance and/or for the purpose of promoting the overall interest of Hong Kong, DLO/N (acting on behalf of the Government) should at all material times act in a way which would be most conducive to or consistent with the objective of making the best use of limited land resources in Hong Kong.

77.  It is noted that Chan 1^st §50 attempts to answer the above points by way of ex post facto reasons proffered in Chan 1^st for the first time.  What is particularly noteworthy is that the observations given in Chan 1^st §50 do not actually address the core contention of the applicant.  Among others:

(1)  On the facts of this case, there is no real prospect of the Subject Lots being used for small house development, for the simple reason that the Subject Lots are owned by the applicant and there is no prospect of these pieces of land being used by indigenous villagers for the building of Small Houses;

(2)  As explained in Section F above, there is no meaningful use to which the Subject Lots could be put.  In other words, if the Land Exchange Application was rejected, the likely result is that scarce land resources (such as the Subject Lots) would sit idle, which outcome does not further the public interest and the stated objectives of the Government;

(3)  In particular, it is wrong for the respondent to say that “the Government as landlord is not bound to give a specific weight to town planning considerations”, thus implying that in considering whether to accede to the Land Exchange Application, DLO/N need not consider whether its rejection would mean that the land in question could not be put to any meaningful use due to a conflict between the approved plans and the user restrictions in the Government leases.  As is provided in section 13 of the Town Planning Ordinance (Cap 131):

“Approved plans shall be used by all public officers and bodies as standards for guidance in the exercise of any powers vested in them.”

(4)  DLO/N therefore ought to have considered (but failed to actually so consider) the overall picture from a holistic perspective as explained above.

78.  By reason of the matters aforesaid and considering the way in which the Land Exchange Application was being handled, it is clear that:

(1)  As explained by Le Pichon JA in Durga Maya Gurung (above) (cited in paragraph 74(2) above), the burden rests on the respondent to adduce “convincing evidence” to show that exceptions did exist and that there has been proper operation of the exceptions.  In the present case, the respondent glaringly failed to discharge this burden since Chan 1^st is completely silent in this regard.

(2)  Since there is not a single iota of evidence to show that exceptions did exist and that there has been proper operation of the exceptions, this court may and should draw the inference that no such exception had been allowed.  In this regard, it is pertinent to note that in Chan 1^st §§46 & 47 the respondent seeks to give examples as to the reference to the Purported Policy in the town planning context.  A total of six examples were given.  However, not one example of how the “exception” operated has been given by the respondent.

(3)  In the circumstances, it is clear that the Purported Policy or the VEB Internal Guideline was at all material times intended to be or laid down a rigid policy notwithstanding the reference to “exceptional circumstances” in the VEB Internal Guideline.

(4)  Regardless of the aforesaid, it is in any event clear from the evidence that the respondent (through DLO/N) at all material times regarded the Purported Policy or the VEB Internal Guideline as a rigid policy.  This explains why the question of exception was never mentioned in DLO/N’s 1^st Letter and/or DLO/N’s 2^nd Letter and/or the Decision itself.  Nor did the DLO/N ever explain in those letters why the Land Exchange Application did not constitute an exception.  This also demonstrates that the respondent (through DLO/N) was at all material times affixed with this mentality that once they believe a case fell within the ambit of the Purported Policy, they would for all practical purposes decline to entertain any land exchange application in an as-a-matter-of course manner.  In the circumstances, the legal principle summarized in paragraph 74(3) above applies with full force and it is clear that the respondent had acted in an unlawful manner in the public law sense.

H.      FRUSTRATION OF LEGITIMATE EXPECTATION

79.  The law on legitimate expectation, both procedural and substantive, is summarized by the English Court of Appeal in R v Secretary of State, ex parte Niazi [2008] EWCA Civ 755 at §50 (and recently endorsed by Chow J (as he then was) in Levaire Romain Pierre v Judiciary Administrator [2020] HKCFI 404 at §§23-25):

“A very broad summary of the place of legitimate expectations in public law might be expressed as follows. The power of public authorities to change policy is constrained by the legal duty to be fair (and other constraints which the law imposes). A change of policy which would otherwise be legally unexceptionable may be held unfair by reason of prior action, or inaction, by the authority. If it has distinctly promised to consult those affected or potentially affected, then ordinarily it must consult (the paradigm case of procedural expectation). If it has distinctly promised to preserve existing policy for a specific person or group who would be substantially affected by the change, then ordinarily it must keep its promise (substantive expectation). If, without any promise, it has established a policy distinctly and substantially affecting a specific person or group who in the circumstances was in reason entitled to rely on its continuance and did so, then ordinarily it must consult before effecting any change (the secondary case of procedural expectation). To do otherwise, in any of these instances, would be to act so unfairly as to perpetrate an abuse of power.”

80.  As far as substantive legitimate expectation is concerned:

(1)  The public body’s failure to honour a legitimate expectation of a substantive outcome or benefit might, in the absence of any overriding reason of law or policy excluding its operation, result in such unfairness to individuals as to amount to an abuse of power justifying intervention by the court.

(2)  The doctrine comprised four main aspects:

(a)  the legitimate expectation arising from a promise or representation, the expectation being that the promise or representation would be honoured, should be properly taken into account in the decision-making process so long as to do so fell within the power, statutory or otherwise, of the decision-maker;

(b)  in the absence of reasons recognized by law for not giving effect to legitimate expectations, effect should be given to them, and if effect was not given, the decision-maker should express its reasons so that they might be tested by a court in the event that the decision was challenged;

(c)  even if the decision involved the making of a political choice by reference to policy considerations, the decision-maker must make the choice in the light of the legitimate expectation of the parties, the failing of which would usually result in the decision being vitiated by reason of failure to take account of a relevant consideration and thereby constituting an abuse of power;

(d)  it was only in exceptional cases that the court would be satisfied that the failure to take account of a relevant consideration had not affected the decision.  But once the court was satisfied that this was the case, the decision would not be quashed.

(3)  To be legitimate, an expectation must be reasonable in light of the official conduct which was said to have given rise to the expectation.

(4)  A legitimate expectation could be based, in appropriate circumstances, on an implied representation or even broad policy statements, provided that the representation was clear and unambiguous.

See: Ng Siu Tung v Director of Immigration (2002) 5 HKCFAR 1 at §§92, 94-97, 101-102 (per Li CJ, Chan and Ribeiro PJJ and Sir Anthony Mason NPJ); Tung Chun Co Ltd v Town Planning Board [2018] 3 HKLRD 466 at §73 (per Chow J)^[6].

81.  The question of whether it is necessary to show detrimental reliance by the applicant has been left open in the majority Judgment of the Court of Final Appeal in Ng Siu Tung (at §110).  Bokhary PJ, in his dissenting judgment, opined that it was not an essential ingredient (at §358).  Chu J (as Chu JA then was), on the other hand, took the view that detrimental reliance would normally be required to ground a complaint of frustration of substantive legitimate expectation: Lam Yuet Mei v Permanent Secretary for Education and Manpower [2004] 3 HKLRD 524 at §76.

82.  However, the modern English jurisprudence overwhelmingly suggests that detrimental reliance is not an essential ingredient for a ground of review based on frustration of legitimate expectation due to the objective of good administration:  See R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2009] 1 AC 453 §60 (per Lord Hoffmann); Re Finucane’s Application for Judicial Review [2019] UKSC 7 §§62, 72 (per Lord Kerr).

83.  In the present case, by its decision to rezone the majority of the Subject Lots from “I” use to “G/IC” use, the Government had distinctly (although impliedly) promised the applicant and the general public that:

(1)  The Government’s planning intention in respect of the Subject Lots would be in accordance with the FSS OZP, ie that the majority of the Subject Lots, and specifically the parts on which the Proposed Wholesale Trade Facility is intended to be erected, would be reserved for “G/IC” use, rather than for small house development (ie substantive legitimate expectation).

(2)  Any intended deviation from such planning intention would require consultation of those affected or potentially affected by it (ie the 1^st type of procedural legitimate expectation as explained in Niazi (above)).

(3)  Further, the Government’s planning intention as manifested in amended FSS OZP (incorporating the Government’s rezoning plans) (ie OZP/21 and OZP/22) distinctly and substantially affected the applicant’s interest and that the applicant was reasonably entitled to rely on its continuance, such that the applicant ought to be consulted before the Government is to alter its planning intention(s) in respect of the Subject Lots (ie the 2^nd type of procedural legitimate expectation as explained in Niazi).

84.  In the event and to the extent detrimental reliance is required, the applicant had clearly relied on the Government’s representation, based on its rezoning of the Subject Lots from “I” use to “G/IC” use, that the Government’s planning intention in respect of the Subject Lots would be in accordance with the latest FSS OZP in force, and suffered detriment, in that:

(1)  Upon the rezoning, the applicant gave up its original intended plan to develop the Proposed ADC (ie an “I” use) on the Subject Lots;

(2)  Instead the applicant explored the option of erecting the Proposed Wholesale Trade Facility in accordance with the rezoned use under the FSS OZP in force, ie “G/IC” use, and in the process incurred substantial fees in engaging professional land consultants and architects to assist with the implementation of such proposal;

(3)  The applicant also forborne to challenge the rezoning process on public law grounds.

85.  For these reasons, I agree the Government (acting through DLO/N) had clearly frustrated the applicant’s legitimate expectation both substantively and procedurally, in that:

(1)  By DLO/N’s Decision refusing to process the applicant’s Land Exchange Application on the strength of the Purported Policy, the Government had clearly evinced a planning intention in respect of the Subject Lots that is inconsistent with and deviated from the current FSS OZP in force, hence frustrating the applicant’s substantive legitimate expectation;

(2)  By relying on the Purported Policy (which amounted to a departure from the Government’s planning intention as manifested in the FSS OZP), which policy was never publicized and made known to the general public (including the applicant), and in so doing failing to consult the applicant as a directly and substantially affected party, DLO/N had frustrated the applicant’s procedural legitimate expectation.

I.       CONCLUSION

86.  Land is a very limited resource in Hong Kong.  Consistent with the development of administrative law, the Government should not be allowed to rely on its capacity as a landowner when its policies or its handling of land matters containing a sufficient public element are being challenged.  In the present case, the existence of the Purported Policy is in doubt.  In any event, even if there is the Purported Policy, the Decision is plainly contrary to public law and should be addressed by way of remedies available in a judicial review application.

87.  In the circumstances, the court would grant the relief sought by the applicant, namely:

(1)  An order of certiorari to bring up and quash the Decision.

(2)  An order of mandamus directing the applicant’s Land Exchange Application be remitted to the District Lands Office for reconsideration and decision.

88.  I see no reason why costs should not follow the event.  Accordingly, I order that the respondent do pay to the applicant its costs of these proceedings (including all costs reserved, if any), such costs are to be taxed if not agreed with a certificate for 2 counsel.

89.  The above order as to costs is nisi and shall become absolute in the absence of any application within 21 days to vary the same.

90.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.