GAIN TALENT DEVELOPMNET LTD v. THE SECRETARY FOR ENVIRONMENT TRANSPORT AND WORKS

LDMR 7 of 2003

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 7 OF 2003

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J U D G M E N T

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1. This is an application by the Applicant under section 29(7) of the Roads (Works, Use and Compensation) Ordinance Cap. 370 ("the Ordinance") to the Lands Tribunal for determination of its claim for compensation in respect of the resumption of 13 lots of land in D. D. 224, namely, 899, 893, 901, S. A. 911, R. P. 902, 912, 915, 983, 927, 980, 913, R. P. 984 and 975 ("the Land resumed").

The facts

2. Golden Root Development Limited ("Golden Root") was the registered owners of 30 lots of land in D. D. 244, namely 738, S. A. 1939, S. B. 1939, 1941, 1942, 1943, R. P. 721, 931, 949, 955, 956, 932, 929, 554, 835, S. A. 1945, R. P. 1945 and the Land resumed.

2.1 On 21st March, 1993, there was a Sale and Purchase Agreement ("SPA") between the Applicant and Golden Root in respect of the said 30 lots of Land in D. D. 224 at the consideration of HK$420 millions, which is to be paid in 3 stages: -

(a) The initial deposit in the sum of HK$105,000,000 upon signing of the SPA;

(b) further deposits in the sum of HK$189,000,000 within 30 days of the SPA; and

(c) the balance in the sum of HK$126,000,000 upon completion of the sale and purchase.

The completion was to take place within 12 months of the SPA. Upon signing of the SPA, the Applicant paid to Golden Root $105 millions. The SPA was registered in the Land Registry.

2.2 After the SPA was entered into, it was apparently varied by a supplemental agreement date 8th April 1993, which limited the sum to be paid by the Applicant to not more than US$30 millions (HK$234 millions).

2.3 A total sum of $255.3 millions was paid by the Applicant to Golden Root pursuant to the SPA.

2.4 On 15th October, 1998, the government gave notice of an order under Section 13 of the Ordinance in respect of the resumption of, amongst others, 13 of the 30 lots of land, which was to take place upon the expiry of 3 months. The resumption took place on 15th January, 1999.

2.5 On 1st December, 1999, the Applicant instituted in the High Court an action against Golden Root, for specific performance of the SPA, or alternatively, recission of the SPA and damages, together with the return of the money paid in the sum of HK255.3 millions, and HK$122,544 millions, being interest charged on the sum of HK$255.3 millions at the rate of 8% per annum.

2.6 On 8th March, 2000, the Applicant obtained judgment against Golden Root in default of defence in the sum of HK$122.544 millions plus other damages to be assessed in respect of loss caused by delay in completion. The Applicant made no election between the remedy of specific performance or recission.

2.7 On 5th May, 2000, the Applicant obtained a Charging Order absolute and on 15th November, 2000 an order for sale in respect of the remaining 17 lots of land in D. D. 244 of Golden Root. The 17 lots of land in D. D. 244 was sold at a consideration of HK$15.9 millions on 17th November, 2003.

3. Statutory provisions

3.1 The right to claim compensation is specifically governed by section 27(2) of the Ordinance, which provides:

"(2) Every person who is described in the third column of Part II of the Schedule shall have the right to recover compensation for the matters set out opposite thereto in the first column to the extent suffered or incurred by him as assessed under the Ordinance......"

Item 1 of Part II of the Schedule to the Ordinance is applicable to the present case. It reads as follows: -

"(1) ......

(2) ......

(3) 3rd column, viz, persons who may claim compensation for their respective losses; Any person who would be entitled to claim compensation for land resumed under the Land Resumption Ordinance; and

(4) ......"

3.3 Section 6(1)(a) of the Lands Resumption Ordinance provides for the person who may claim for compensation, namely, "the former owner" or "any person having an estate or interest in the Land immediately before reversion under an instrument registered in the Land Registry." In order to be entitled to receive any compensation under the Ordinance, the Applicant must establish that section 6(1)(a) of the Lands Resumption Ordinance applies in its case.

3.4 Section 2 of the Lands Resumption Ordinance defines "former owner" to mean "in relation to land resumed by the government, the person who was the owner of the land immediately before the land reverted to the government under section5", and "owner" to mean "the person registered or entitled to be registered in the Land Registry in respect of any land sought to be resumed or, if such person is absent from Hong Kong or cannot be found, or is bankrupt or dead, his agent or representative in Hong Kong".

3.5 It was decided in the case of Wing Tung Yick Investment Co. V A. G. (1997) 4HKC that a purchaser of land qualified as a "former owner". In that case at P. 435 Keith J stated:

"It is common ground that anyone who has a beneficial interest in land is entitled to have that interest registered in the Land Registry. It is also common ground that the Sale and Purchase agreements had the effect of passing a beneficial interest in the land to the company provided that the vendor had a good and valid title to pass."

The Respondent has no dispute on this decision. Its objection is that there was a Memorandum of Agreement reached between the Applicant as the vendor and Everett Group Limited ("Everett") as the purchaser on 31st March, 1993 in respect of the same 30 lots of land in D. D. 244 as referred to in the SPA. The Memorandum of Agreement provides as follows: -

"The Vendor agrees to enter into a Sale and Purchase Agreement agreeing to sell and the Purchaser agrees to enter into a Sale and Purchase Agreement agreeing to purchase the said Properties together with the messuages erections and buildings to be erected thereon on the following terms and conditions ......."

3.7 A deposit in the sum of HK$21 millions was paid by Everett to the Applicant pursuant to the Memorandum of Agreement.

3.8 The Respondent argued that "it is the title law that an agreement for the sale of land operates as an alienation by the vendor of his beneficial interest in the property. As from the date of the contract, the beneficial interest of the vendor is transferred from the land to the purchase money. As regards the land, he becomes, as between himself and the purchaser a constructive trustee for the purchaser. Thus the purchaser becomes a beneficial owner, with the right to dispose of the property by sale ......" The Respondent further argued that "Following the SPA, Gain Talent became a beneficial owner of the Land resumed and had the right to dispose it by sale. The Memorandum of Agreement operated as a sub-sale of the Land resumed by Gain Talent to Everett, as a result of which Everett, as opposed to Gain Talent became the beneficial owner."

3.9 It is wrong for the Respondent to equate the Memorandum of Agreement as a sale and purchase agreement. Very clearly the Memorandum of Agreement is an agreement to enter into a sale and purchase agreement. Pursuant to the Memorandum of Agreement, was there any sale and purchase agreement entered into? There is absolutely no evidence in this respect. After the Memorandum of Agreement was entered into, the matter stopped there. There was no sale and purchase agreement entered into between the Applicant and Everett. The Memorandum of Agreement never operated as a sub-sale of the Land resumed, and Everett never became the beneficial owner thereof. As a result, the Applicant is still "the former owner" within the meaning of section 2 of the Lands Resumption Ordinance, and therefore it has the right to claim for compensation in respect of the Land resumed.

The Open market value of the Land resumed at the date of resumption has been agreed between the parties at HK$4,741,000.

Orders:
1.	The Respondent is to pay the aforesaid sum of $4,741,000 to the Applicant;
2.	The Tribunal makes an order nisi, to be made absolute in 21 days' time, that the Respondent is to pay costs of these proceedings to the Applicant, to be taxed, if not agreed, on High Court Scale, with certificate for counsel;
3.	Matters relating to interest on compensation, and costs on remuneration reasonably incurred or paid by the Applicant in employing persons to act in a professional capacity in connection with the claim under S. 6 (2A) of the Lands Resumption Ordinance be heard and determined at a date to be fixed by the Registrar of the Lands Tribunal.