TSOI CHING MAN v. CHIEF ESTATE SURVEYORS/ACQUISITION, LANDS DEPARTMENT

1996, No.M.P.2336

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is an application by the applicant for judicial review of the decision of the Chief Estate Surveyor/Acquisition, Lands Department, made on or about 1st February 1996. By that decision, the Lands Department refused to offer Home Purchase Allowance to the applicant in respect of the resumption of the property at 2nd Floor, 9 Wang Chung Street, Kowloon ("the Property"). The applicant is now seeking an order of certiorari to quash that decision. She also seeks a declaration that the Hong Kong Government should determine her eligibility for the Home Purchase Allowance in accordance with the policy approved by the Governor in Council.

The Background

2. The applicant's case is this. In 1992, she was 75 years of age and in ill-health. Her daughter was then in Canada and planned to return to Hong Kong to look after her. She said that she wished to buy a flat in Hunghom as accommodation for her daughter and herself and that in May 1992, she looked for a suitable flat. According to her, in early June, she entered into an oral agreement with a Madam Leung who was then the registered owner of the Property.

3. On 26th June 1992, the Government published in the Gazette a notice to the effect that the Property and other properties in the vicinity would be resumed and reverted to the Crown three months from the date the Gazette notice was affixed to the properties concerned. The Gazette notice was affixed on 3rd July 1992. The resumption would therefore take effect on 3rd October 1992.

4. On 8th July 1992, the Buildings and Lands Department (as it was then known) wrote a letter to Madam Leung informing her that she could apply for compensation and ex gratia Home Purchase Allowance as a result of the resumption of the Property.

5. According to the applicant, on 15th September 1992, she entered into a provisional sale and purchase agreement for the Property at the price of $950,000. The sale was completed and the assignment executed on 24th September 1992. That was only a little more than a week before the resumption became effective.

6. On 20th October 1992, the applicant received a letter from the Buildings and Lands Department ("BLD") inviting her to make an application for compensation. The applicant submitted a claim for a global sum of $1.7 million as compensation for the resumption of the Property. This was done on 1st November 1992 in a claim form which was prepared by her surveyors. I shall come back to this form later. It was only on 26th May 1993 that the Chief Estate Surveyor rejected her claim and offered to pay her $407,000. Five months passed. On 30th October 1993, the applicant submitted a valuation report in support of her $1.7 million claim. The BLD replied on 24th December 1993 confirming the previous offer of $407,000. This was not accepted by the applicant. In March 1994 she vacated the Property and the Government re-entered.

7. On 8th July 1994, the applicant lodged a complaint to the Commissioner for Administrative Complaint ("COMAC") against the BLD for refusing to grant her Home Purchase Allowance.

8. After several reminders from the applicant, the COMAC issued a report concluding that after their investigation, they found that the applicant's complaint was not substantiated. Almost ten months later, on 19th January 1996, the applicant's solicitors wrote to the Lands Department (as the BLD is presently known) appealing against the rejection of the applicant's claim for Home Purchase Allowance.

9. On 1st February 1996, the LD declined to review the applicant's case and rejected her appeal. That is the decision which is sought to be judicially reviewed.

10. I should also mention that on 7th February 1996, the applicant's solicitors requested an explanation for the decision and sought certain information. This was refused by the LD on 19th March 1996. The original application for leave to apply for judicial review sought to review the decision made on 19th March 1996. It was then clear that this was a mistake and hence the applicant sought and I granted leave to amend the application.

Oral agreement to purchase the Property

11. The applicant's allegation that there was already an oral agreement in early June 1992 to purchase the property in question is, in my view, rather dubious. No detail was given in her affirmations about this alleged oral agreement, including particulars such as the price of the purchase and the date of completion. There was also no mention about any deposit having been paid in respect of this sale and purchase. It is rather unusual to have such an oral agreement to purchase a property. This is not only a matter of enforceability of a contract relating to the sale of land. It also casts serious doubts as to whether there was indeed such an oral agreement. Furthermore it was more than three months after the alleged oral agreement that the applicant and the former registered owner entered into a provisional sale and purchase agreement on 15th September 1992 which was not an agreement prepared by lawyers but by estate agents. Then the parties completed the sale and purchase and executed the Assignment within just 10 days. Yet according to the Assignment, the parties agreed that vacant possession would only be given "before the end of December 1992".

12. The applicant sought to explain that all this was done because it was not sure when her daughter would return to Hong Kong. But that was a rather unsatisfactory excuse for the way in which the whole transaction was conducted. It was also shown that during that period of time she was the registered owner of another property. In her letter of complaint (at page 67 of the Bundle), the applicant further said that the price was reasonable and the flat was sufficient for the daughter and herself to live in. She also said that even if there was to be a resumption of the Property, they were able to secure reprovisioning. That was the explanation given as to why she was prepared to purchase the Property notwithstanding the impending resumption. However, there is no evidence that the applicant and/or her daughter had ever made any attempt to apply for rehousing.

13. I find her evidence as disclosed in her affirmations about her reasons to purchase the Property and the existence of an oral agreement unsatisfactory and unacceptable. From the evidence, it is quite clear that the whole exercise was aimed at making the applicant the registered owner before the date of resumption of the Property on 3rd October 1992. I have grave doubts on her need to buy the property as an accommodation. I am inclined to hold that it was the intention of the applicant to take advantage of the resumption exercise in order to get compensation.

Knowledge of her claims

14. The resumption of the area was known through the press long before the notice of resumption was published in the Gazette. It can hardly be disputed that the applicant was aware of the resumption and the date of reversion at the latest when she entered into the provisional sale and purchase agreement on 15th September 1992, even if she was not aware of that earlier. At the end of the provisional agreement (at pages 8 and 9 of the Bundle), it was provided that the sale and purchase agreement was expressed to be :-

"also subject to vendor to assign all his rights of compensation and claims against the Crown in respect of the compulsory acquisition by Government under Crown Lands Resumption Ordinance."

15. The applicant should also be aware of the letter dated 8th July 1992 which was addressed by the BLD to the former owner Madam Leung. After she became the registered owner of the Property, the applicant also received a letter dated 20th November 1992 from that Department inviting an application for compensation. In the letter dated 8th July 1992 to Madam Leung (which was issued before the resumption), it was stated :-

"Compensation will be paid to those entitled and will be assessed in accordance with the provisions of the Crown Lands Resumption Ordinance on the basis of current market value.

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For owners of single domestic units whose statutory compensation is assessed on existing use value, an additional ex-gratia Home Purchase Allowance may be payable provided no rehousing offer is accepted. Additionally an ex-gratia removal allowance will be offered to owner - occupiers or they may submit a formal claim based upon actual expenditure. The Home Purchase Allowance is an ex-gratia allowance which is not negotiable and is based upon the difference between the assumed cost of replacement domestic premises and the compensation paid for the resumed premises."

16. On the other hand, in the letter to the applicant dated 20th October 1992 (which was issued after the resumption), the following was stated :-

"Pursuant to s.6(1)(a) of the Crown Lands Resumption Ordinance, you are hereby required within forty-two days from the date hereof to submit in writing your claim for compensation in respect of the resumption of the land described above by completing one of the enclosed duplicate claim forms and returning it to me."

17. The main difference is quite clear. For persons who were owners before the resumption, they were invited to submit claims for compensation; to seek an additional ex gratia Home Purchase Allowance or Rehousing; and an ex gratia Removal Allowance. However, for owners who acquired property after the Government Notice in the Gazette of the resumption, they were only told to make a claim for compensation. There was no reference to any rehousing, ex gratia Home Purchase Allowance or ex gratia Removal Allowance. The BLD clearly stated the sort of payments which would be made to the owners. In effect, what it said amounted to this. Owner occupiers would be offered rehousing. If this was not acceptable, they could claim Home Purchase Allowance (or Removal Allowance). But such allowance was ex gratia in nature and not negotiable.

The applicant's claim

18. It is clear that the claim lodged by the applicant through her surveyors was a claim for a global figure. The original application made by the applicant to the BLD appeared on pages 257 to 262 of the Bundle. Under the heading "Particulars of Claim" (see s.10(2) of Cap.124), the applicant's surveyors stated thus :-

"We are prepared to accept your total compensation package in the region of about HK$1.7 million (i.e. statutory compensation plus Home Purchase Allowance) as offered to similar premises at the subject street affected by this resumption."

19. The applicant must have been advised by her surveyors. They were certainly aware of what they were claiming for. I should also think that they must be aware of the differences between the letter dated 8th July 1992 to the former owner and the letter dated 20th October 1992 to the applicant. They made specific reference to both statutory compensation and Home Purchase Allowance in her application.

20. In the reply from the BLD, the Department's position was clear. The figure of $407,000 was stated as "compensation in full and final settlement of all or any claims arising out of the provisions of the Ordinance or otherwise arising out of the resumption of the land and (your) interest therein" subject to certain conditions. In the subsequent exchange of correspondence, the applicant's surveyors were asked to provide a valuation report. It is therefore quite clear that the applicant's surveyors were made aware that whilst they made a claim for a global figure which included an element for Home Purchase Allowance, the BLD was not prepared to entertain such a claim.

21. When the valuation report was later submitted to the BLD, there was again no separate claim for Home Purchase Allowance. In fact, it was not even mentioned. It is also interesting to note that the figures given by the surveyors in the valuation report only showed comparables for ground floor properties, mostly business premises and not domestic. It is not clear whether by then the applicant's surveyors were content to negotiate with the BLD without any further claim for the Home Purchase Allowance.

Applicant's case for Home Purchase Allowance

22. Counsel for the applicant submitted that it was well known that Home Purchase Allowance was paid. But the policy and details thereof were not made known to the public. Owners of properties under resumption were under the impression that they were eligible. They had the legitimate expectation that they would be paid Home Purchase Allowance apart from compensation. It was submitted that such expectation had acquired the status of a right - a constitutional right. Owners should be compensated adequately for the deprivation of such a right. They were also entitled to expect that Government should be fair to them.

23. The second ground relied on by the applicant was that the 1990 guidelines given by the authorities to their staff who were responsible for processing claims for Home Purchase Allowance did not refer to any policy of the Government. There was no reference to the payment of this allowance only to purchasers prior to the Government Gazette. The guidelines said that Home Purchase Allowance "will" be paid. It was only in 1996 that the Government said that the allowance would not be paid to post Gazette owners since they would be regarded as speculators. Counsel submitted that the rationale behind the Home Purchase Allowance was to compensate owners as a result of resumption by the Crown. It should not matter whether the purchase was before or after the Government Gazette. This ground of refusal was not formulated earlier. The decision to turn down the applicant's application for Home Purchase Allowance was only formally made on 1st February 1996. It should be the 1990 guidelines which should be applicable and not the Government's thinking in 1996.

24. Finally, it was submitted that the Government had treated the applicant unfairly because there were cases which were similar to the applicant's case in which Home Purchase Allowance was granted. There was no reason why the applicant should not also be entitled to such allowance.

Legitimate expectation

25. Counsel for the respondent argued that a legitimate expectation could only arise either expressly, by promise or by a course of conduct by the respondent to the applicant or to a class of persons or to the world at large such that the court could say that this could be relied on. It was argued that in the present case nothing had come from the Government giving rise to such legitimate expectation. The Government had not made any specific promise to the applicant nor had agreed to pay Home Purchase Allowance to the applicant either as an individual or as a member of a class of persons. The only reference to Home Purchase Allowance was contained in the letter to Madam Leung which was different from the letter to the applicant. It was quite clear that the applicant's claim for Home Purchase Allowance was not acceptable by the BLD.

26. In my view, the doctrine of legitimate expectation is based on the premise that Government departments are expected to honour their policy and/or intention which they have made known to the public and to treat citizens with the fullest personal consideration. A legitimate expectation does not arise in every case. Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service [1985] AC 374 at 408-9 said :-

"For a legitimate expectation to arise, the decision,

must affect the other person ... by depriving him of some benefit or advantage which either :

(i) he had in the past been permitted by the decision-maker to enjoy and which he can legitimately expect to be permitted to continue to do until there has been communicated to him some rational grounds for withdrawing it on which he has been given an opportunity to comment; or

(ii) he has received assurance from the decision-maker which would not be withdrawn without giving him first an opportunity of advancing reasons for contending that they should not be withdrawn.' " (my emphasis)

27. At page 401B of the same case, Lord Fraser also said that a legitimate expectation may arise :-

"... either from an expressed promise given on behalf of the public authority or from the existence of a regular practice which the claimant can reasonably expect to continue." (my emphasis)

28. This doctrine of legitimate expectation was expanded by Bingham L.J. in R. v. Board of Inland Revenue, ex-parte MFK Underwriting Agencies Ltd. and others [1990] 1 All ER 91 in which he said it was necessary that the ruling or statement of policy should be clear, unambiguous and devoid of relevant qualification. He added at page 110 :-

"In so stating these requirements, I do not, I hope, diminish or emasculate the valuable developing doctrine of legitimate expectation. If a public authority so conducts itself as to create a legitimate expectation that a certain course will be followed it would often be unfair if the authority were permitted to follow a different course to the detriment of one who entertained the expectation, particularly if he acted on it. If in private law, a body would be in breach of contract in so acting or estopped from so acting a public authority should generally be in no better position. The doctrine of legitimate expectation is rooted in fairness but fairness is not a one-way street. It imports the notion of equitableness, of fair and open dealing, to which the authority is as much entitled as the citizen."

29. The requirements which have to be satisfied before a legitimate expectation can arise were further explained by Stuart-Smith L.J. in R. v. Jockey Club, ex parte RAM Racecourses Ltd. [1993] 2 All ER 225 :-

" The doctrine has many similarities with the principles of estoppel in private law. In my judgment the matters that the applicant has to prove in this case are these. (1) A clear and unambiguous representation (see per Bingham L.J. in Exp MFK Underwriting Agencies Ltd. [1990]1 All ER 91 at 110, [1990]1WLR 1545 at 1569-1570). (2) That since the applicant was not the person to whom any representation was directly made it was within the class of persons who are entitled to rely upon it; or at any rate that it was reasonable for the applicant to rely upon it without more (see AG of Hong Kong v. Ng Yuen Shiu [1983] 2 All ER 346 at 351, [1983] 2 AC 629 at 638). (3)that it did so rely upon it. (4) That it did so to its detriment. While in some cases it is not altogether clear that this is a necessary ingredient, since a public body is entitled to change its policy if it is acting in good faith, it is a necessary ingredient where, as here, an applicant is saying, you cannot alter your policy now in my case; it is too late'. (5) That there is no overriding interest arising from their duties and the responsibilities for the proper conduct or due encouragement of horse-racing as required in their charter which entitled the Jockey Club to change their policy to the detriment of the applicant.

The burden of proving the first four points is, in my judgment, upon the applicant. ... as to the fifth requirement, it seems to me that that is a matter for the Jockey Club to establish."

30. In the present case, it is quite clear that there was no expressed promise or representation made by the BLD to the applicant that she would be paid Home Purchase Allowance. There was no contact between the Department and the applicant prior to her entering into the alleged oral agreement or the provisional sale and purchase agreement.

31. Was there any representation implied from a established practice based upon past actions or settled conduct of the Department ? It may be known to the public that certain areas in the district would be subject to resumption and that some compensation would be paid to the owners. But the applicant accepted that the policy of the Department with regard to the payment of Home Purchase Allowance and the details of any such policy were not made known to the public. She said in her affirmations that she was given to understand by the estate agents that she would be entitled to the statutory compensation as well as the Home Purchase Allowance. It is not known how she came to have this understanding. Such evidence can hardly be sufficient to show that there had been an established practice that Home Purchase Allowance would be paid in every case. It was also accepted that at the relevant time, the 1990 guidelines which were contained in an internal statement for the staff carrying out the resumption exercise were never known to the public.

32. Under the provisional sale and purchase agreement, it was stated expressly that the rights and interests of any compensation which are vested in the former registered owner would also be assigned to the applicant. This provisional sale and purchase agreement was entered into on 15th September. By then, the former registered owner would have received the letter sent by the BLDF dated 8th July 1992 which clearly stated that the Home Purchase Allowance would be an ex gratia payment and non-negotiable. It would be to the applicant's interest to find out what rights and interests were to be assigned to her. If she had done that (as she should have), she should have known that such allowance was ex gratia and non-negotiable. There would be no room for any legitimate expectation. But whether she did or not find out, it cannot be said that there was any express or implied promise or representation made by the BLD to her which would have led her to believe she had a right to claim Home Purchase Allowance or there was an established practice that Home Purchase Allowance would be paid in all circumstances.

33. Even if it could be argued that there was an established practice that Home Purchase Allowance would be paid, any representation which might be said to have been implied through a previous course of conduct or past action by the Department would only have been made to the class of persons affected by the resumption exercise. This class of persons would, in my view, clearly refer to those existing registered owners at the time of the Gazette Notice. Purchasers subsequent to such notice were not anticipated. The purpose of the compensation and allowance must be this. The registered owner whose property is resumed by the Government would be entitled to statutory compensation. He would be relocated or rehoused. If he does not accept relocation or rehousing, he may be paid an ex gratia non-negotiable Home Purchase Allowance. It is clearly not within the anticipation of the policy-maker that persons whose aim is to claim compensation by becoming a registered owner after the Gazette Notice should also benefit from the payment of ex gratia Home Purchase Allowance. In any event, it cannot be said that there was a clear unambiguous promise or representation, either expressly or impliedly by conduct made by the Department to the applicant that Home Purchase Allowance would be granted.

34. I am firmly of the view that no legitimate expectation had arisen in the present case and that the applicant cannot rely on it to lodge a claim for Home Purchase Allowance.

The 1990 guidelines

35. It is true that the internal guidelines did not mention anything about exclusion of speculators. However, in my view, the guidelines were simply aimed at helping the staff who carried out the resumption exercise to calculate the amount of allowance to be paid. The guidelines mentioned that the allowance would be paid irrespective of whether the recipient would actually purchase a replacement flat or not. That, in my view, is far from saying that Home Purchase Allowance would be paid to anyone who happened to be the registered owner at the time of the actual resumption. It is quite clear from a reading of the internal guidelines that persons who became owners after the Gazette notice would not be the type of persons intended for such allowance.

36. The Department had never made any general representation that the Home Purchase Allowance would be paid to flat owners on resumption. It is also accepted no detail criterion had been set out. There was no clear and unambiguous representation by the BLD.

37. The Government was entitled to make the policy that owners were not to receive Home Purchase Allowance if they were not bona fide purchasers or owners. There was a good reason for the change in the compensation process. According to Mr Cheung's affirmation filed on bahalf of the BLD, the Department had discovered that there were speculators, estate agents and land developers who had tried to buy up properties within the area of resumption, particularly after the publication of the resumption notice in order to claim compensation. This was not seriously disputed. It is therefore quite reasonable for the Department to refuse to offer Home Purchase Allowance to these people. That is why when the Department wrote to the applicant in October after the resumption, Home Purchase Allowance was not even mentioned.

38. Given the intended purpose of the Home Purchase Allowance, I take the view that the decision of the Department not to provide Home Purchase Allowance to purchasers who acquired property after the Gazette notice cannot be regarded as unreasonable.

BLD's inconsistent and unfair treatment

39. The applicant also relied on the ground that the Department had not been consistent and had been unfair in the carrying out of its policy. She pointed out a number of cases in which the owners who were in a similar position to that of the applicant and yet they were given Home Purchase Allowance. The four cases had been dealt with by Mr Cheung for the respondent in his affirmation.

40. In the first case, the Property was 1st Floor, 42D Pak Tai Street. It was pointed out that the provisional sale and purchase agreement was entered into by the previous owner with the occupier in the November 1990 and June 1992. The new owner was in fact the sitting tenant. The agreement for sale and purchase was entered into on 3rd July 1992 when the notice was gazetted. It is therefore quite clear that this was not a case of speculation.

41. The second case concerned the property at 3rd Floor and roof at 24 Wang Cheung Street. The transaction was commenced before the Gazette notice. However, it is clear that the vendor was the mother and the purchaser was her daughter. The Department was satisfied that the purchase was a family arrangement and there was no question of any double benefit. The purchaser was paid Home Purchase Allowance even though she acquired the property from her mother after the Gazette notice.

42. There were two other cases mentioned by the applicant. One of them concerned the property at 42K and 42G, Pak Tai Street. However the record shows that the purchase of the upper floor domestic units of these two numbers were completed in May and October 1991. Another one concerned the property at 6 Kui Lun Street. The transaction was completed in November 1991. These transactions were dated well before 3rd July 1992.

43. It would seem that there were good reasons for the Department to refuse to grant Home Purchase Allowance to the applicant.

Conclusion

44. It is for the applicant to show that she had a reasonable and legitimate expectation to the payment of Home Purchase Allowance. In my view, she has failed to do so. She has also failed to show that she has been treated unfairly. The other cases were clearly distinguishable from her case. She purchased the Property at $900,000 odd. Through her surveyors, she asked for a compensation at $1.7 million. That estimate was clearly made on the basis of nearby business or commercial premises. That was a basis which was not a genuine estimate of the value of the Property which was a domestic flat. Bearing in mind the date when she entered into the provisional sale and purchase agreement and completed the transaction which was shortly before the resumption date, it is reasonable for the Department to have come to the conclusion that she was nothing but a speculator. From the evidence before the court, there was every indication that she was.

45. In the circumstances, I take the view that the decision of the Department cannot be regarded as in any way wrong, or that it had taken into consideration irrelevant factors, or had failed to take relevant factors into consideration or that it is Wednesbury unreasonable.

46. For the reasons given above, the application is refused. I would also make an order nisi that the applicant should pay the costs of the respondent.