WELL HONOUR DEVELOPMENT LTD v. THE DIRECTOR OF LANDS OF LANDS DEPARTMENT HEADQUARTERS

CACV 412/2024, [2025] HKCA 950

On Appeal From [2024] HKCFI 2221

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 412 OF 2024

(ON APPEAL FROM HCAL NO. 2198 OF 2023)

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JUDGMENT

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Hon Anthony Chan JA (giving the Judgment of the Court) :

1.  This is the Applicant’s appeal against the Judgment of Coleman J dated 4 September 2024 (“Judgment”) by which the Applicant’s substantive application for judicial review (“Judicial Review”) was dismissed with costs to the Respondent (“Director”).

2.  The Judicial Review concerned the decision of the Director dated 11 September 2023 (“Decision”) refusing the Applicant’s claim for compensation under the Lands Resumption Ordinance, Cap 124 (“LRO”).

3.  There were 3 issues in the Judicial Review, namely, (1) whether on the proper construction of the LRO an assignee of a right to claim compensation was entitled to make a claim for compensation thereunder; (2) whether the claim of such an assignee would violate the law of maintenance and champerty; and (3) whether the Lands Tribunal provided an available alternative remedy which the Applicant had failed to make use of prior to its application for judicial review.

4.  The same 3 issues are raised in this appeal. Unless the Applicant succeeds on the construction issue, the remainder do not arise.

Background

5.  The background facts, mainly based on the Judgment, may be summarised as follows. Madam Yeung Chi-king and Mr Shum Chik-kai (“Shum”) were the owners of Lots 52 and 57 of D.D. 131 in the New Territories (“Land”), being tenants-in-common in equal shares (collectively referred to as “Owners”). Madam Yeung passed away on 6 February 1976 (“Deceased”).

6.  By a Notice dated 25 May 1976, which was published in the Government Gazette on 28 May 1976 and posted on the Land on 31 May 1976, the Owners were notified of the resumption of the Land under the Crown Lands Resumption Ordinance, Cap 124 (the predecessor of LRO[1]) (“CLRO”) which would take effect on 2 July 1976.

7.  A pre-reversion[2] offer dated 8 June 1976 was issued to the Owners offering to them a grant of land in exchange for the land to be resumed. The offer was not accepted and lapsed because the Deceased had passed away. After the Land was resumed and reverted to the Government (on 2 July 1976), on 29 July 1976 a statutory offer of compensation was made to the Owners pursuant to s.6(1)(a) of the CLRO. This offer was again unaccepted and lapsed.

8.  Subsequently, a Modified Letter B (a land exchange entitlement) dated 27 October 1987 was granted to Shum in respect of his half share of the Land.

9.  The Applicant was incorporated in Hong Kong on 11 August 2006, founded by Mr Lai Choi Fat (“Lai”) and his wife. Lai was in the business of dealing in land exchange entitlements, making searches to track down and contact the owners of such entitlements so as to acquire them for resale.

10.  Lai managed to track down the beneficiaries of the Deceased’s estate (her nieces), and helped them obtain the Letters of Administration of the Deceased’s estate (“Estate”) dated 8 September 2006. By an Assignment dated 23 November 2006 (“Assignment”), the Administratrixes of the Estate assigned for consideration to the Applicant, inter alia, one-half share of “the right benefit and interest of and in the compensation and/or grant of land in exchange by the Government of Hong Kong … in respect of [the Land] which were surrendered or reverted to the Government under a Notice … dated 25 May 1976”.

11.  On 4 December 2015, the Applicant submitted a Notice of Claim for compensation in respect of the Land to the Director under s.5 of the New Territories Land Exchange Entitlements (Resumption) Ordinance, Cap 495. The claim was rejected because, inter alia, no land exchange entitlement had been granted for the Deceased’s half share of the Land. However, the Applicant’s solicitors were informed by the Director that it might advise the Applicant to submit a claim under the LRO if they considered that the Applicant was entitled to compensation thereunder regarding the resumption of the Land.

12.  A claim for compensation under the LRO in respect of the Deceased’s half share of the Land was submitted by the Applicant to the Director on 17 March 2020. The claim did not specify the provision relied upon by the Applicant, and as noted by the Judge, it was made almost 44 years after the Land had reverted to the Government.

13.  By the Decision (dated 11 September 2023), the claim was rejected for the following reasons :

“(a) The [LRO] requires the Government to pay compensation to the former owner. The term ‘former owner’ is defined in section 2 of the [LRO] 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 section 5’;

(b) [The Assignment] is private dealing between the parties and we are not in a position to advise whether it is valid and has the intended effect to assign the right to the [Applicant]; and

(c) In order to comply with the statutory requirement under the [LRO], we are only able to deal with and pay compensation to [Deceased’s] personal representatives (or any other party acting in the name of the [Deceased’s] personal representatives under a valid power of attorney).”

14.  The Applicant filed its Form 86 on 8 December 2023. In summary, the Applicant contended that there was no reason to doubt the validity of the Assignment. By virtue of the Assignment, the Applicant had acquired the right to claim compensation, which was a chose in action, and had legally stepped into the shoes of the “owner” as defined under the LRO. The Decision was the result of an error of law. Leave to apply for judicial review was granted by the Judge on 19 March 2024.

The Judgment

15.  The details of the Judgment will be considered below. At this juncture, it suffices to note that the Judicial Review was dismissed because (1) on the proper construction of the LRO as a whole, the right to claim compensation was not assignable; and (2) the Applicant failed to pursue the alternative remedy, namely, making a claim in the Lands Tribunal. The Judge did not find it necessary to rule on the maintenance and champerty issue.

Grounds of appeal

16.  There are 3 grounds of appeal which respectively addresses the construction issue, the available alternative remedy issue and the maintenance and champerty issue. Again, they will be considered below under individual headings.

Construction of the LRO

17.  The Judge began his analysis by referring to the submissions of the parties on the provisions of s.8 of the LRO[3], which was the section relied upon by the Applicant for its compensation claim[4]. For the present purpose, s.8(1) and (2) are set out below :

“8. Claims for compensation

(1) Any person claiming compensation by reason of the resumption of any land under this Ordinance, and being a person who has not been offered in writing compensation under section 6(1)(a), or has not been served with a notice under section 6(1)(b), may submit a claim in writing to the Authority stating the nature of his estate or interest in the land and the amount which he seeks to recover.

(2) If any such person and the Authority do not agree as to the amount of compensation (if any) to be paid either party may submit the claim to the Lands Tribunal for determination of the amount of compensation (if any) to be paid.”

18.  The Judge then identified the correct principles on statutory interpretation which should be applied: HKSAR v Chen Keen (alias Jack Chen) (2023) 26 HKCFAR 157, [12][5].

19.  The Judge went on to consider all the relevant provisions of the LRO to ascertain the context and purpose of the LRO. Sections 5, 6, 8 and 10 were identified as the key provisions[6]. Those sections were described, in broad terms, as “[identifying] who is entitled to compensation for the resumption of land and who can be offered or claim that compensation, and how any disagreement as to the compensation is to be determined”. The relevant parts of ss.5, 6 and 10, as well as the definitions of “former owner” and “owner”, are as follows :

“former owner (前業主) means, 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 section 5;

owner (業主) means 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;

5. Reversion of ownership to the Government

On the expiration of 1 month, or any longer period authorized under section 4(3), the land other than any land purchased by agreement under section 4A shall—

…

(b) in all other cases, revert to the Government,

and all the rights of the owner, his assigns or representatives and of any other person in or over the land or any part thereof shall absolutely cease.

6. Compensation

(1) Within a period of 28 days from the date on which land reverts to the Government under section 5, the Authority shall—

(a) write to the former owner and to any person having an estate or interest in the land immediately before reversion under an instrument registered in the Land Registry, making an offer of compensation in respect of the resumption of the land; or

(b) serve on any of the persons referred to in paragraph (a) a notice in such form as the Authority may specify, requiring him to submit his claim for compensation within the time stipulated in such notice.

(2) Where a notice is served on a person under subsection (1)(b) he shall submit his claim in a form specified by the Authority and shall furnish to the Authority such accounts, documents and particulars as the Authority may reasonably require in support of such claim.

…

(3) If—

(a) a person to whom an offer has been made under subsection (1)(a) does not accept the offer within 28 days from the date thereof; or

(b) a person on whom a notice has been served under subsection (1)(b)—

(i) does not submit his claim within the time stipulated therein; or

(ii) submits his claim but he and the Authority do not agree as to the amount of compensation,

such person or the Authority may then refer the matter to the Lands Tribunal for determination of the amount of compensation to be paid.

10. Determination by Tribunal of compensation payable by Government

(1) The Tribunal shall determine the amount of compensation (if any) payable in respect of a claim submitted to it under section 6(3) or 8(2) on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim.

(2) The Tribunal shall determine the compensation (if any) payable under subsection (1) on the basis of—

(a) the value of the land resumed and any buildings erected thereon at the date of resumption;

(b) the value of any easement or other right in the land resumed, owned, held or enjoyed by a claimant at the date of resumption;

(c) the amount of loss or damage suffered by any claimant due to the severance of the land resumed or any building erected thereon from any other land of the claimant, or building erected thereon, contiguous or adjacent thereto;

(d) the amount of loss or damage to a business conducted by a claimant at the date of resumption on the land resumed or in any building erected thereon, due to the removal of the business from that land or building as a result of the resumption;

…”

20.  Next, the Judge set out the proper interpretation of the various provisions in a logical flow. Paragraphs 52(12) to (20) addressed s.8 of the LRO as follows :

“(12) Section 8 caters for the situation where a person wishes to claim compensation, but that person has not been given either a 6(1)(a) Offer or a 6(1)(b) Notice.

(13) Hence, a section 8 claimant cannot be a former owner or any person having an estate or interest in the land immediately before reversion under an instrument registered in the Land Registry.

(14) Under section 8, such a person may submit a claim in writing to the Director to claim compensation.

(15) The fact that a section 8 claim must be to seek compensation by reason of resumption of the land is made express, and that is why the claimant must state (a) the nature of his estate or interest in the land, as well as being required to state (b) the amount which he seeks to recover.

(16) This identifies the danger of reading the words ‘any person claiming compensation’ in isolation and out of context of the provisions as a whole.

(17) If a section 8 claimant and the Director do not agree as to the amount of compensation (if any), either of them may submit the claim to the Lands Tribunal for determination of the amount of compensation (if any) to be paid.

(18) The addition of the words ‘if any’ identifies that a section 8 claimant – who, in contrast to a person given a 6(1)(a) Offer or 6(1)(b) Notice, has no registered estate or interest in the land – has yet to establish his entitlement to ‘any’ compensation, let alone the amount.

(19) In other words, the Director may disagree with the section 8 claim for either or both the reasons that (a) he does not accept that the claimant has a compensable estate or interest in the land, and/or (b) he does not accept the amount which the claimant seeks to recover.

(20) Whether a claim is made to the Lands Tribunal under section 6(3) or section 8(2), the Lands Tribunal is mandated under section 10(1) to determine the amount of compensation (if any) payable on the same basis.”

21.  Paragraph 52 was followed by the Judge’s analysis of the context and purpose of the LRO. The relevant parts of paragraph 53 are as follows :

“(3) The identification of the persons to whom compensation will be offered, or who will be invited to make a claim, begins by reference to instruments registered in the Land Registry.

(4) The focus is on the identification of persons having an estate or interest in the land at a particular point in time, being immediately before the reversion.

(5) Those persons identified from the Land Registry must either be given an offer of compensation or be invited to make a claim for compensation.

(6) Because they have registered interests, they will be entitled to compensation, and the only question will be as to the amount of compensation.

…

(9) But, it is recognised that persons other than as may be identified from the Land Registry might also have an estate or interest in the land which might entitle them to claim compensation by reason of the resumption of that land.

…

(12) If that person making a claim does not state his estate or interest in the land – and, obviously, if that person does not have any estate or interest in the land – he is not entitled to claim compensation under the LRO.

(13) No other form of right, estate or interest except one in the land which has been resumed will give rise to any right to receive or claim compensation.

(14) In other words, whether the compensation arises under section 6 (through identification by the Land Registry documents) or under section 8 (by self-identification), compensation is only relevantly available to the former owner or persons with an estate or interest in the land immediately before reversion.

…

(17) The fact that the Lands Tribunal can determine the amount of compensation (if any) identifies that it may decide no compensation is payable.”

22.  The Judge concluded that the only persons entitled to claim compensation are the former owner or persons with an estate or interest in the land immediately before reversion. Properly construed, s.8 does not give rise to some freestanding assignable commodity[7]. On the construction issue alone, the Judicial Review should be dismissed because the Applicant never had any estate or interest in the Land[8].

23.  We are of the view that the Judge’s interpretation of the LRO is detailed, careful and with which we largely agree. However, the Applicant’s claim for compensation under that Ordinance did not actually turn upon the question whether a claim for compensation under the LRO may be assigned (in the sense that the assignee would acquire the right to claim compensation which is enforceable against the Government under the LRO).

24.  It is clear from the provisions of the LRO that there are only two classes of people entitled to compensation as a result of land resumption. First, the former owner or his agent or representative in Hong Kong, and any person having an estate or interest in the land immediately before reversion under a registered instrument. This class of people will come under s.6 of the LRO. Second, those who do not come within s.6, but had an estate or interest in the resumed land and are claiming compensation by reason of the resumption. The claims of this class of claimants are governed by s.8.

25.  We are unable to see how the Applicant can come within s.8. Firstly, it has no estate or interest in the Land. At the highest, the Applicant is only an assignee of a right to claim compensation.

26.  Secondly, the submission of Mr Tang, who appeared for the Applicant, that since the Applicant stands in the shoes of the Deceased it is entitled to state the nature of the Deceased’s estate or interest in the Land in compliance with s.8 does not assist the Applicant. As former owner of the Land, the Deceased’s compensation claim would fall to be considered under s.6. Indeed, a written offer of compensation pursuant to s.6(1)(a) had been made. Section 8 is irrelevant to a claim by the Estate.

27.  Mr Tang submitted that the s.6(1)(a) offer was made at a time when the Deceased had passed away. The Letters of Administration only came into existence many years later. Thus, the offer could not have come to the notice of the Deceased’s agent or representative. We do not believe that whether a s.6(1)(a) offer came to the notice of the offeree is critical. Rather, the issue is the treatment of the two different classes of claimants. It is clear that the LRO distinguishes the two classes of claimants and they are to be dealt with under separate provisions. Section 6(3) provides that where the s.6(1)(a) offer is not accepted within time the offeree or the Director may then refer the matter to the Lands Tribunal for determination of the amount of compensation to be paid. The non-acceptance of offer would not take the case outside s.6.

28.  On this narrower basis, plainly the Applicant has no valid claim for compensation and the Judicial Review was rightly rejected. The facts of the present case do not call for a determination on whether entitlement to compensation under the LRO can be assigned (contrast paragraphs 67 and 70 of the Judgment where it was held that there was no scope in the statutory scheme for an assignee to claim compensation), and we rest our decision within this narrower compass.

Maintenance and Champerty

29.  Given the lack of a valid claim to ground the Judicial Review, like the Judge we decline to express a view on this issue.

Available alternative remedy

30.  Although it is unnecessary to deal with this issue, we do so because there may appear to be inconsistent authorities on whether it is within the jurisdiction of the Lands Tribunal to resolve the issue of entitlement to compensation as opposed to the quantum of compensation.

31.  The apparently conflicting cases are Tsang Hung and Tsang Shek-Yeung v Secretary for the New Territories [1977] HKLTLR 29 and Tong Kwong Hong Co Ltd v Director of Public Works [1981] HKDCLR 22. Those cases were considered by Rhind J in Suen Sun-yau v Wong Wai-kwan [1988] 2 HKLR 71, at 79I to 80B :

“I perceive no conflict between the Tsang Hung and the Tong Kwong Hong Co. Ltd. cases. The former deals with the situation where multiple claimants dispute the same estate or interest, whereas the latter deals with the entirely different situation where there is only the one claimant but his title is disputed by the Crown. I can see no reason why a dispute as to title between the Crown and the one claimant should not be resolved by the Lands Tribunal. It makes no sense to force such a claimant to run off first to the High Court and then the Lands Tribunal when the Lands Tribunal by itself is quite capable of dealing with such an issue. In practice , the Lands Tribunal always sits with either the President, who is the Chief Justice, or a presiding officer who is a District Judge. Can anyone seriously suggest it is not within the competence of such people to resolve a dispute as to title between the Crown and a claimant?”

32.  We agree with the dicta of Rhind J. In particular, the observation that it makes no sense for the Lands Tribunal to decline jurisdiction so that a claimant will have to resolve his entitlement to compensation in another court and, if successful, then return to the Tribunal to have the quantification of compensation resolved.

33.  Further, we agree with the Judge’s construction that the Lands Tribunal’s power to “determine the amount of compensation (if any)” embraces the power to determine that no compensation is payable pursuant to s.8(2) because the claimant is not entitled to any by reason of, eg, the absence of any estate or interest in the resumed land.

34.  Furthermore, it is implicit that the power granted to the Lands Tribunal to determine the amount of compensation must include the necessary and incidental power to decide whether any compensation is payable at all.

35.  In the premises, we agree with the Judge that the Judicial Review should not have been commenced without exhausting the alternative remedy specified under s.8(2) of the LRO[9].

Disposition

36.  For the above reasons, this appeal is dismissed. The parties are in agreement that costs should follow the event. We make an order that the costs of this appeal be paid by the Applicant to the Director with a certificate for two counsel, to be taxed if not agreed.