MANY GAIN INVESTMENT LTD v. CHAN FAI HO AND OTHERS

LDCS 28000/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE APPLICATION NO. 28000 OF 2012

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D E C I S I O N

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Preliminary Issue

1.  This court is to determine on a preliminary issue before trial of the application for effective case management.

2.  The issue is, in case an order for sale be granted by the Tribunal pursuant to section 4(1)(b) of Land (Compulsory Sale for Redevelopment) Ordinance, Cap. 545 (“the Ordinance”), whether the valuation of the reserve price for auction of lots 16-16A and 18-18A Ka Shin Street (‘the Lots”) shall be assessed on the basis of a single site on its own or to take into account the adjoining lots including lots 8-8A, 10-10A, 12-12A, 14-14A, 20-20A, 22-22A, 24-24A, 26-26A, 28-28A and 30-30A, Ka Shin Street (“the Adjoining Lots”).

Background

3.  The applicant is the majority owner of the Lots and it seeks an order for the compulsory sale of the same pursuant to section 3(2)(b) of the Ordinance.  The application was fixed for trial before HH Judge Ko and Member Pang (“the Penal”) on 11 November 2013 with 1 day reserved.  In short, the 4^th respondent was the only remaining opponent at the trial.

4.  The 4^th respondent opposed the application as it found the compensation offered by the applicant too low.  There had been certain negotiations going on and subject to the approval of the Tribunal, the parties had agreed that the assessment should reflect the redevelopment value of the Adjoining Lots (paragraph 31 of the Penal’s Judgment).  Both parties however agreed that no binding agreement had been reached one way or the other.  Notwithstanding its opposition, the 4^th respondent filed no evidence and has all along informed the Tribunal and the applicant that it would not send any representative to appear at any of the hearings.  

5.  At the commencement of trial on 11 November 2013, the Penal asked Ms Ngai, counsel for the applicant, to clarify certain questions arising from their perusing of the documents. In the trial bundles, there were two expert reports prepared by the same expert, one dated 25 July 2013, the other 25 October 2013.  The expert had revised his assessment on the redevelopment value from $140 million to $182 million.  The change was caused by different approaches for assessment being taken.  In the first report, he confined his assessment to the redevelopment of the Lots with a site area of 311.59m² then in the second, he enlarged the area to include the Adjoining Lots with a total area of 1,833.70m²  (“the Composite Site”). The factors for assessment changed from taking into account the development potential on the Lots alone to including the potential for joint redevelopment of the Composite Site.  The immediate concern of the Penal was that the Adjoining Lots had not been included in the present application at that time and there was no sufficient or any evidence at all for the Penal to rely on when assessing the reserve price.  It has to be noted that apart from the present application, there were 5 others proceedings concerning the Adjoining Lots with 1 pair of lots in each.  They are namely LDCS 26000/2012, LDCS 27000/2012, LDCS 29000/2012, LDCS 30000/2012, and LDCS 31000/2012.  However, at the time of trial of the present application, all have been discontinued as the applicant had come to successful settlement with the respective minority owners except LDCS 31000/2012 which had already been heard but a determination was still pending.

6.  At the conclusion of the hearing, HH Judge Ko directed that the applicant shall bring up all the lots in the Composite Site to enable the Penal to give directions for them to be sold together in one public auction and to set a reserve price that would reflect their full redevelopment potential.  HH Judge Ko further ordered that the trial of this application be adjourned sine die and the applicant shall seek leave from another differently constituted penal who had heard LDCS 31000/2012 to reopen the case to enlarge the scope of that case to encompass all the lots in the Composite site.

New Development since 29 November 2013

7.  When Ms Ngai returned to this court on 7 May 2014 for a call-over hearing of the present application, she made it clear that the applicant would no longer adopt the Composite Site approach.  It is submitted by Ms Ngai that notwithstanding the directions made by HH Judge Ko on 29 November there has been new development.  First the applicant has discontinued LDCS 31000/2012 on 22 January 2014 as the parties therein came to settlement as well.  As a result there is no Adjoining Site alive in the Tribunal to be brought to be heard together with the present application.  Secondly, a decision was handed down by HH Judge Wong on 14 March 2014 in which the operation of the relevant provisions in the Ordinance has been clarified.

8.  I directed that this be taken up as a preliminary issue to be heard before trial.  The hearing on the preliminary issue focused on one point which is the basis to be adopted for assessment of the reserve price for auction.  Ms Ngai has helpfully broken it down as below: -

(a)	If an Order for sale shall be granted, whether the subject of the Order should be comprised of the Lots (the subject of the Application) only?
(b)	If an Order for sale shall be granted, whether the subject of the auction should be comprised of the Lots (the subject of the Application) only?
(c)	If an Order for sale shall be granted, whether the reserve price should take into account the redevelopment potential of the Lots only without regard to the Adjoining Lots?

9.  It is also submitted by Ms Ngai that now the applicant takes the stance that the present application be heard and determined on its own.  Ms Ngai says that such approach is well within the relevant provisions of the Ordinance.  In this regard, she set out the following in her written submissions:

(i)	“the subject of the Application” consists of the Lots only;
(ii)	according to the Ordinance, in particular sections 4(1)(b) and 5(1)(a) thereof, the Lots “the subject of the Application” will become “the subject of the Order for sale” which, in turn, will become “the subject of the auction”;
(iii)	the Tribunal has no power under the Ordinance, in particular section 4(6)(a)(i) thereof, to compel a combined sale of the Lots together with the Adjoining Lots against the Applicant’s wish;
(iv)	according to Paragraph 2 of Schedule 2 of the Ordinance, the reserve price for sale of “the subject of the auction” which comprises the Lots only should therefore take into account the redevelopment potential of the Lots on their own only; and
(v)	hence, the reserve price should be the RDV of the Lots.

10.  For these reasons, she submits that the answer to the 3 questions posed by her at the beginning should be “Yes”.

Conclusion

11.  Having heard Ms Ngai, I accept her submissions that according to section 4(1)(b), the order to be made by the Tribunal is an order to sell the “subject of an application” made under the Ordinance.  I agree with Ms Ngai that in the present case, the subject of the application comprises the Lots only. 

12.  Further I accept that section 5(1)(a) provides that the subject of the auction should be the subject of the Order for sale.  This is fortified by section 7(1) which indicates that the lot to which the order for sale relates is the lot to be sold by the trustees.  Hence, the subject matter in the present application to be sold by the trustees should only be the Lots pursuant to section 5(1)(a).

13.  In brief, it is provided in the relevant provisions of the Ordinance that the Tribunal is entitled to make an order in relation to the subject of the application, for instance, the Lots in the present application.

14.  The same issue has been considered by HH Judge Wong in Day Bright Development Limited and others v. Choi Pak Ling LDCS 13000 of 2012.  He has said in paragraphs 47 to 50 of the judgment that the powers created by section 4(6)(a)(i) are restricted to directions incidental to the sale of the lot the subject of the application unless the court has already seized of other lots by other empowering provisions:

“47.  Further, section 4(6)(a)(i) cannot be read in isolation.  After the Tribunal has gone through the statutory exercise prescribed under section 4(1)(a) and is satisfied all conditions are satisfied, it may make an order under section 4(1)(b)(i), which states:
	“…making an order that all the undivided shares in the lot the subject of the application be sold…” (emphasis added)
48.  The other sub-sections of section 4 go on to deal with various situations likely to be encountered in the compulsory sale, such as rights of tenants. Section 4(6)(a)(i) stipulates:
	“Where the Tribunal makes an order for sale, it may order, subject to [not relevant to the present discussion] that … and it may also give directions as it think fit -
	(a)	Relating to -
		(i)	the sale and purchase of the lot the subject of the order, including (but without limiting the generosity of the foregoing) settling the particulars and conditions of sale of the lot;” (emphasis added)
49.  In our judgment, “the subject of the order” mentioned in section 4(6)(a)(i) refers to an order already made by the Tribunal under section 4(1)(b)(i). Necessarily it means the lot the subject of the application. So the powers created by section 4(6)(a)(i) are restricted to directions incidental to the sale of the lot the subject of the application unless the court has already seized of other lots by other empowering provisions.
50.  By reasons of the above and coupled with what this panel’s views on the legislative intent of the reserve price and section 3 after reviewing the Hansard, with the greatest respect to the differently constituted Tribunal in Many Gain, we do not consider section 4(6)(a)(i) empowers the tribunal to compel combination of lots not already before the Tribunal to form the subject matter of  the application. ”

15.  Having considered the submission of Ms Ngai in the light of relevant provisions and authorities, I agree with Ms Ngai that the answer to the 3 questions should be “Yes”.  As a result, the reserved price for the Lots is to be assessed by taking into account the redevelopment potential of the Lots on their own only without regard to the Adjoining Lots.

Costs

16.  I order that there be no order as to costs for this application.  This is an order nisi to become absolute within 14 days if no application is taken out to vary the same.