HO KONG, THE SOLE EXECUTOR OF THE ESTATE OF FONG MI YEE DECEASED v. DIRECTOR OF LANDS AND ANOTHER

HCAL 1135/2022

[2023] HKCFI 2343

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 1135 OF 2022

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J U D G M E N T

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A. Introduction

1.  Occam’s Razor is a problem-solving principle which recommends searching for the explanation or answer constructed with the smallest set of elements.  Although not quite an accurate summary of the principle, it is sometimes paraphrased as ‘the simplest explanation is usually the best one’.

2.  In this case, the simplest answer is indeed the best one:

(1)  The Applicant was the owner of a flat (“Flat”) by possessory title, and he was the occupier of it.

(2)  The flat was resumed by the Government under the Lands Resumption Ordinance Cap 124 (“LRO”).

(3)  Because he was the owner of the resumed Flat, the Applicant was offered and received statutory compensation from the Government of the Flat’s open market value.

(4)  But a person who is an “owner-occupier” is also entitled to the ex gratia compensation payable to an “owner-occupier”, known as ‘Home Purchase Allowance’ (“HPA”).

(5)  Because the Applicant was the owner and he was also the occupier, the simple ‘answer’ would be that he was obviously entitled to the HPA.

3.  However, he was not offered or paid the HPA, on the Government’s rather more complicated assertion or ‘answer’ that he was not in fact an “owner-occupier”, as that phrase did not include owners by possessory title, but only registered or paper owners.

4.  That frames the contest in the proceedings, and I shall explain why I have concluded that the Applicant must succeed.  In doing so, I shall also explain why I think there is powerful reason to disagree with, and so not to follow, the decision of a fellow Judge on the same point.

5.  After the Government, via the Lands Department (“LandsD”), offered compensation to the Applicant but the offer did not include the HPA component on the basis that the Applicant was not eligible to receive HPA, the Applicant appealed to the Home Purchase Allowance Appeals Committee (“Appeal Committee”).  By its decision dated 26 July 2022 (“Appeal Decision”), the Appeal Committee dismissed the Applicant’s appeal.  The Appeal Decision was later accepted by the Director of Lands (“Director”) on 29 July 2022 (“Director’s Decision”).

6.  By way of a Form 86 filed on 26 October 2022, the Applicant sought leave to challenge by way of judicial review the Appeal Decision and the Director’s Decision.  I do not think it necessary to distinguish between the two decisions for the purpose of the present proceeding and I shall refer to them below jointly as “the Decision”.

7.  I directed a ‘rolled-up’ hearing, which was heard before me on 9 June 2023.  The Applicant was represented by Mr Adrian Lai and Mr Han Sheng Lim of Counsel.  The Appeal Committee was excused as would be expected.  The Director was represented by Mr Gary CC Lam of Counsel.  At the conclusion of the hearing, I reserved my decision.

8.  This is my Judgment.

B.  The Land Resumption Process and the Compensation Scheme

B.1  Statutory compensation and HPA/SA for domestic properties

9.  Some understanding about the land resumption process and the compensation package, which a person may obtain from the Government, is necessary before delving into the facts of this case.

10.  The Government outlines the land resumption procedures in urban areas, and the claims to compensation for those affected by the resumption, in a pamphlet titled ‘Land Resumption and Compensation in the Urban Area Guidelines for Owners, Occupiers and surveyors’ (“Guidelines”) published by the LandsD.  The version applicable to the Applicant was published in July 2013.

11.  Though it is necessary to examine the text of the Guidelines more closely below, it is convenient to provide a summary at this juncture.

12.  The Guidelines are not specific for land resumption under the LRO, but cover resumption under different ordinances for different purposes.  The Guidelines cover compensation for different types of property resumed – i.e. commercial or domestic.  The part focusing on compensation for domestic properties will be most pertinent for present purposes, since the Flat was of this nature.

13.  Broadly speaking, a person affected by land resumption may obtain two main types of compensation: (1) statutory compensation, and (2) an ex gratia payment known as ‘Home Purchase Allowance’ (i.e. HPA) or ‘Supplementary Allowance’ (“SA”).

14.  Statutory compensation refers to the compensation provided by the relevant statute under which the land or property is resumed.  The Guidelines provide that ‘legal owners’ are entitled to the open market value of the resumed property as statutory compensation.

15.  On top of statutory compensation, ‘owners’ who (or whose immediate family) used to live in the resumed property – thus regarded as ‘owner-occupiers’ – are eligible to HPA.  The amount of HPA is the difference between the value of a notional replacement flat and the open market value of the resumed flat.  The notional replacement flat is a comparable but newer flat in a similar locality.  The purpose of HPA is to enable ‘owner-occupiers’ to purchase a replacement flat and to prevent them from being forced out of home-ownership after their ‘home’ has been resumed.  The policy intent reflects a recognition that statutory compensation (i.e. the open market value of the resumed flat) alone may be insufficient for purchasing a similar (but newer) flat in a similar locality.  Therefore, owners who occupy their own property which is resumed should be compensated with both the statutory compensation and the HPA.

16.  SA is for those whose resumed flat was not occupied by a person or his immediate family, but was leased out for rental income or was left vacant.  SA is currently half the amount of HPA.

17.  Crucial to the present case are the proper interpretation of the phrases ‘owners-occupiers’, ‘owners’, ‘legal owners’, etc., which are not defined in the Guidelines.  But it may be thought that ‘owner-occupier’ is unlikely a difficult term to construe: it seems plainly to refer to a person who is the owner of the property which he occupies.

B.2  Freezing Survey to determine occupancy status

18.  HPA has the effect of substantially increasing the realisable value of the property upon resumption, beyond its open market value.  ‘Imposters’ may abuse the policy by taking up residence in the resumption area or by evicting tenants to ‘fake’ self-occupation after a resumption project has been announced.  To prevent such abuse, the Government will conduct a ‘Freezing Survey’ to determine the eligibility for HPA on the date on which the resumption project is gazetted without prior notice. Relevantly, the Freezing Survey records the ‘occupancy status’ and the ‘use’ – i.e. commercial or residential – of the flats in the resumption area at the date when the project is announced.

B.3  Compensation Offer made by Urban Renewal Authority

19.  The Applicant’s Flat was amongst properties resumed for urban renewal purposes.  Since around 2000, resumption projects for urban renewal purposes have been implemented by the Urban Renewal Authority (“URA”). The URA is an independent statutory body established under the Urban Renewal Authority Ordinance Cap 563 (“URAO”).

20.  The URA has to start a resumption project by publishing a commencement notice in the Gazette under section 23 of the URAO.  After a resumption project has been gazetted, the URA will first try to acquire land from private owners by agreement before commencing the statutory procedures by which the land will eventually revert to the Government under the LRO.

21.  The URA has a policy (“URA Policy”) in determining the consideration to be offered to private owners to acquire their properties.  It would be fair to say that the offer made by the URA before the land is reverted to the Government is supposed to be largely in line with the offer to be made by the Government after the reversion.  But it seems the URA’s offer is expected to be more ‘generous’ than the Government’s offer, although the parties dispute exactly how the two offers may differ.

22.  If the URA fails to acquire the property from its original owner and the property reverts to the Government under section 5 of the LRO, the Director of Lands will take over the process to negotiate compensation with those affected upon reversion.  The date of reversion will be gazetted in advance by the Government as required by section 4 of the LRO.

C.  Factual Background of the Applicant’s Case

23.  The Applicant acquired possessory title in the Flat – located in a building on Wing Kwong Street, Kowloon – by way of adverse possession.

24.  The commencement of the relevant resumption project involving the Flat was gazetted on 22 June 2018.  The notice for resumption was gazetted on 26 February 2021, which notice set midnight of 26 May 2021 as the date for the relevant land to revert to the Government.  Therefore, on 26 May 2021, the neighbourhood where the Flat was situated was resumed by the Government.

25.  The Applicant’s possessory title was recognized or established pursuant to declarations made by the District Court in a Judgment dated 4 November 2020 (“DC Judgment”).  The DC Judgment was made in a claim for adverse possession, originally instituted by a Madam Fong in 2016.  Madam Fong was the Applicant’s mother-in-law.  Madam Fong passed away shortly after the adverse possession claim had been instituted and the civil action was ordered to be carried on by the Applicant, as the sole executor of Madam Fong’s estate.  It is concluded in the DC Judgment that Madam Fong had been in possession of the Flat since 2003 and had completed the necessary 12-year period to acquire a possessory title by way of adverse possession by 2015.

26.  According to the DC Judgment, the Applicant had acquired his possessory title years before the resumption project was announced in 2018 and before the land eventually reverted to the Government in 2021.  The DC Judgment also declared that the registered owner’s paper title had been extinguished by virtue of section 17 of the Limitation Ordinance Cap 347.  A sealed copy of the DC Judgment was registered against the Flat in the Land Registry on 2 December 2020.

27.  The Applicant and his two sons were at home when the relevant Freezing Survey was conducted on 22 June 2018.  Their occupation of the Property was recorded in a ‘Freezing Survey Domestic Registration Form and Social Impact Assessment’ which the Applicant and his sons were asked to sign.  In the Form, it was recorded that the entire Flat was occupied by the household of 4, comprising the Applicant, his wife and the two sons.  It was also remarked that the Applicant claimed that he had submitted application to court to claim adverse possession of the Flat.  But, by the time of the Freezing Survey, the District Court Judgment had not yet been delivered.

28.  By letter dated 30 March 2021 issued by the URA to the Applicant, the URA offered privately to acquire the Applicant’s Flat for a total sum of HK$12,070,000 comprising (i) the purchase price of HK$6,836,000 being the market value of the Property as at 1 March 2021; (ii) HPA of HK$5,088,000 and (iii) an incidental costs allowance of HK$146,000.  It is expressly stated in the letter that the offer was made by reference to the occupancy status as determined in the Freezing Survey conducted on 22 June 2018.  In the schedule attached to the letter, the Applicant was identified as the ‘owner业主’, the permitted use in the occupation permit of the Property was ‘domestic住宅’, the actual use was ‘domestic住宅’, and the occupancy status was ‘owner occupied业主自住’.

29.  The URA’s offer was valid until 13 April 2021. The Applicant did not take up the offer by the deadline.  Since the Property was not sold to the URA by agreement, then by operation of section 5 of the LRO, the Property reverted to the Financial Secretary Incorporated (which for the present purpose could be conveniently understood as the ‘Government’) at midnight of 26 May 2021.

30.  By letter dated 16 June 2021, the LandsD notified the Applicant that the Flat had been resumed and requested him to submit his claim for compensation by filling in the attached form.  The Applicant duly did so.  The Applicant later also submitted a surveyor’s valuation report which valued the open market value of the Property at HK$6,860,000 and an HPA in the sum of HK$7,400,000.

31.  By letter dated 10 January 2022, the LandsD rejected the Applicant’s claim as excessive and offered a total sum of HK$5,434,000 (HK$5.4m).  It was not made clear in the letter that the sum represented only the amount of statutory compensation but not the HPA.  Nor was it stated in the letter that the LandsD considered the Applicant ineligible to receive HPA because he had only a possessory title.  But both points were subsequently made clear by LandsD to the Applicant in two telephone calls made in January 2022 and a letter dated 4 March 2022.  In the telephone conversation, the Applicant’s attention was specifically drawn to the judgment in Tang Lai v Director of Lands and the Home Purchase Allowance Appeals Committee [2021] HKCFI 1529 (“Tang Lai”).  In that case, Chow J (as Chow JA then was) decided that a person who acquired a possessory title by way of adverse possession is not an ‘owner’ or ‘owner-occupier’ for the purpose of eligibility for HPA under the proper construction of the Guidelines.

32.  The Applicant appealed to the Appeal Committee which essentially adopted Chow J’s reasoning and conclusion in Tang Lai in its entirety, and rejected the Applicant’s appeal.

D.  Proposed Grounds of Review

D.1  The Four Grounds

33.  The Applicant raised four proposed grounds in the Form 86:

(1)  Ground 1: The Appeal Committee made an error of law in that it wrongly construed the government’s policy regarding eligibility to HPA.  The committee wrongly concluded a person who has acquired a possessory title by way of adverse possession is not an ‘owner’ or ‘owner-occupier’ under the policy.

(2)  Ground 2: The Appeal Committee breached its duty of investigation in that it failed to ask itself the right questions and to take reasonable steps to acquaint itself with the relevant information to enable it to answer the questions correctly.  It can be noted that the ‘right questions’ concern a person’s eligibility to HPA and the ‘relevant information’ is that seen as supportive of the position that the Applicant was eligible for HPA.

(3)  Ground 3: The Applicant had a legitimate expectation that the Government would adopt the same policy as, or would not depart from the policy of, the URA in offering him HPA.

(4)  Ground 4: The Appeal Committee failed to consider the Applicant was deprived of a fair opportunity to prepare his appeal because his requests to the LandsD for disclosure of essential materials and the rationale behind the LandsD’s decision were persistently refused.

34.  The argument on Ground 1 took up the lion’s share of the submissions time at the oral hearing.  Some efforts were also spent on Ground 3.

D.2  Grounds 2 and 4

35.  As to Ground 2 and Ground 4, Mr Lai made it clear at the beginning of his submissions that they were not seen as the Applicant’s strongest points.  Indeed, Ground 2 is but the Applicant’s submissions or reasoning in support of Ground 1.  Ground 2 does not add anything to Ground 1.  At the hearing, Mr Lai fairly conceded that the disposal Ground 1 would also be determinative of Ground 2.

36.  As to Ground 4, Mr Lai said he was not conceding Ground 4, but it is perhaps convenient quickly to dispose of this ground now.

37.  It is not entirely clear what were the ‘essential materials’ – a phrase borrowed from Mr Lai’s written submissions – the disclosure of which the Applicant was denied.  In the Form 86, the Applicant said he referred to five letters he sent to LandsD as evidence that he had repeatedly requested for documents which he was denied.  The letters are dated 14 February 2022, 7 March 2022, 18 March 2022, 28 March 2022, and 20 April 2022.  In my summary of them, by these letters the Applicant: asked for the basis of calculating the amount of statutory compensation offered to him and the relevant valuation and assessment report; asked about the latest status of the Tang Lai case; made submissions as to why his case could be distinguished from Tang Lai; or requested for more detailed reasoning as to why the Director would take the view that a possessory title holder should be excluded from HPA; requested for the documents including LegCo papers about the Government’s compensation policy; made enquiries about the title checking exercise and subsequent legal procedures; and requested for some information and guidelines about appealing to the Appeal Committee.

38.  It was not as if there was complete silence from the Director.  Indeed, during the period, the Director had been communicating with the Applicant either by phone or by letters.  The Applicant was able to make enquiry about Tang Lai in the very first letter amongst the five, because he had already been informed about the Director’s basis for excluding him from HPA.  The Applicant’s subsequent request for the policy documents about the Government’s compensation policy was but the response to being told that the offer made to him was based on that policy.  There is no substance in the complaint that he was not given an explanation as to why he was not eligible for HPA under the government’s policy.

39.  He was also told that the statutory compensation was calculated based on the open market value of the property as of midnight of 26 May 2021.

40.  The only documents he requested and which were not provided were the valuation report assessing the open market value of the Flat and the HPA policy documents including the LegCo papers.  But I am not satisfied that these had unfairly prejudiced the Applicant in the appeal.  The amount of statutory compensation or its assessment basis was not a complaint before the Appeal Committee.  The Applicant was able to and did make submissions before the Appeal Committee regarding the Government’s policy on HPA and why he thought he should be granted such allowance.

41.  Ground 2 and Ground 4 are not reasonably arguable.

42.  Therefore, I will only focus on Ground 1 and Ground 3 below, after first identifying the correct legal approach to interpretation of Government policy documents.

E.  The law on interpretation of Government policies

43.  The law on construction of an administrative policy is well settled.  The true meaning and effect of a policy is a matter of law for the Courts to determine.  It is an error of law for the Government to misconstrue its own policy.  The Court’s task is to ascertain the intention as expressed in the language of the policy objectively.  The Court should adopt a purposive approach, having regard to the document’s context and purpose.

44.  Cheung CJHC’s (as the CJ then was) reminder at §49 of Hong Kong Television Network Ltd v Chief Executive in Council [2016] 2 HKLRD 1005 bears repetition.  The Courts should avoid an overly technical approach in construing an administrative policy.  Policy statements should not be construed as though settled by Parliamentary Counsel.  Rather, they should be approached as announcements setting matters out in layman’s language and in broad terms.

F.  Ground 1: Error of Law

F.1   Simple Answer

45.  Ground 1 turns on whether the Applicant was an ‘owner-occupier’ of the Flat such that he would be eligible for HPA under the Government’s policy as found in the Guidelines.

46.  As already indicated, the simple answer might be thought to be readily apparent.  On the basis that the term ‘owner-occupier’ is not defined in the Guidelines, but is an ordinary term in common usage, the simple answer can be found in posing and answering the following questions:

(1)  Was the Applicant the owner of the Flat?  Yes, he was.  The DC Judgment said so.

(2)  Can anyone else be regarded as the owner of the Flat?  No, they cannot.  The DC Judgment said so.

(3)  Has the Government recognised the Applicant as the owner of the Flat?  Yes, it has.  The Government has paid the Applicant the statutory compensation payable to the owner of the Flat.

(4)  Was the Applicant the occupier of the Flat? Yes, he was.  The Freezing Survey recorded it.

(5)  Was anyone else (other than the Applicant’s family members) the occupier of the Flat?  No, they were not.  The Freezing Survey said so.

(6)  Was the Applicant, therefore, the owner-occupier of the Flat?  Yes, he was.  He owned it, and he occupied it.

(7)  Would the Applicant be able to afford to rehouse himself in a comparable flat in a similar locality using just the statutory compensation?  No, he would not.

(8)  Would the Applicant be able to afford to rehouse himself in a comparable flat in a similar locality using both the statutory compensation and the HPA?  Yes, he would.

(9)  Would paying the HPA to the Applicant meet the stated policy intent – i.e. its purpose in context – of payment of HPA?  Yes, it would.

47.  Having reached the simple answer, the matter can also be tested by reference to a more complicated consideration.

F.2   The Applicant’s and LandsD’s Argument

48.  There were three strands to Mr Lai’s argument:

(1)  The HPA policy is to be consistently applied across all ordinances under which land may be resumed for urban renewal purposes.  Some of these ordinances expressly include a possessory title owner within the statutory definition of ‘owner’.  A person should be taken as an ‘owner’ if he falls within the definition of any of the resumption ordinances.

(2)  To include possessory title owners within the meaning of ‘owners’ or ‘owner-occupiers’ for the purpose of HPA is consistent with common sense for the word ‘owner’.  The common sense of the ‘owner’ is also reinforced by the legal sense of the word and the sense as used by the LandsD in its correspondence with the Applicant.

(3)  The reasoning in Tang Lai is not satisfactory.

49.  Mr Lam, on behalf of LandsD, contended that only registered owners or paper owners are eligible to HPA under the Government’s policy.

F.3  Approaching Tang Lai

50.  At the outset, it is of course impossible to overlook that the very same issue has already been decided by Chow J (as Chow JA then was) in Tang Lai.  Chow J decided that a person with a possessory title is not an ‘owner’ or ‘owner-occupier’ and is thus not eligible to HPA.

51.  Unsurprisingly, the Appeal Committee and Mr Lam now acting for LandsD heavily relied on Tang Lai,whilst Mr Lai sought to convince this Court why none of the reasoning relied upon by Chow J was persuasive.

52.  Tang Lai is a decision of the Court First Instance (“CFI”) and is thus not binding on this Court as a matter of precedent.  But Mr Lam drew my attention to Willers v Joyce (No.2) [2018] AC 843 where the House of Lords had to decide the binding effect on a first instance judge of two conflicting decisions, one made by the House of Lords earlier in time and the other made by the Judicial Committee of the Privy Council latter in time.  At §9, Lord Neuburger reiterated that High Court Judges are not technically bound by decisions of their peers, but suggested that they should generally follow a decision of a court of coordinate jurisdiction unless there is a powerful reason for not doing so.

53.  I adopt that approach.

54.  Tang Lai is obviously to be accorded great weight by this Court.  But at the same time, in the absence of a binding precedent, it is also incumbent on this Court – now seized with this issue – to think for itself, as well as carefully to examine the parties’ arguments, alongside Chow J’s reasoning in Tang Lai.

55.  In doing so, I can broadly follow the structure adopted by Mr Lai.

F.4   Text of the Guidelines

56.  The specific paragraph on eligibility to HPA is at §6.1.2(a) of the Guidelines, but it will be helpful to set out other parts of the Guidelines to put the pertinent paragraph in context.  The following part of the Guidelines are materially relevant (capitals, bold and underlining as in original):

1.  PURPOSE

This pamphlet briefly outlines the procedures and compensation provisions for private land resumed in Urban Area (defined as Hong Kong Island, Kowloon and New Kowloon). Resumption proceedings are instituted under the relevant Ordinances for different purposes. As the procedures and compensation provisions of various Ordinances differ, the following paragraphs only intend to give a general guideline on resumption matters. Any person whose interest is affected by a land resumption project is advised to refer to the provisions of the respective Ordinances for details or consult professional consultants.

2.  LAND RESUMPTION

The Government may acquire private land by resumption for the implementation of public projects such as a road scheme, a public housing development, an urban renewal project, an open space, a drainage improvement project, a new market, a school or any item in the Public Works Programme. According to the purpose of public projects, resumption proceedings may be instituted mainly under the provisions of:-

(a)  the Lands Resumption Ordinance, Chapter 124;

(b)  the Roads (Works, Use and Compensation) Ordinance, Chapter 370;

(c)  the Railways Ordinance, Chapter 519;

(d)  the Land Acquisition (Possessory Title) Ordinance, Chapter 130;

(e)  the Land Drainage Ordinance, Chapter 446;

(f)  the Urban Renewal Authority Ordinance, Chapter 563;

(g)  The Mass Transit Railway (Land Resumption and Related Provisions) Ordinance, Chapter 276

The Director of Lands is given the authority to implement resumption and compensation provisions of these Ordinances.

3.  NOTICE OF RESUMPTION

When a resumption is ordered, a Government Notice will be published in the Gazette and a freezing survey will be conducted.  …

4.  OFFER OF COMPENSATION

When the private land is resumed or otherwise adversely affected by the actions of the Government, the Ordinance under which the legal interest is extinguished or affected provides for the payment of compensation. The former owner or persons having an interest in the land such as the tenant, will be entitled to statutory compensation for the value of the land and building (if any) or other land interests resumed in accordance with the provisions of the Ordinance.

(a)  For land resumed under the Lands Resumption Ordinance (Chapter 124), the Government will make an offer of compensation in respect of the resumption 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 or invite claims for compensation from them within 28 days from the date of reversion. Any person who considers that he has a compensatable interest in the land resumed, and who has not been offered compensation nor been invited to claim compensation may, within one year from the date of reversion, submit a claim stating the nature of his estate or interest in the land and the amount of compensation which he claims for the resumption of that estate or interest.

(b)  For land resumed under the Roads (Works, Use and Compensation) Ordinance (Chapter 370) and the Railways Ordinance (Chapter 519), any person having compensatable interests in the land resumed should submit a claim within the period as specified in Part II of the Schedule of the respective Ordinances.

(c)  The amount of compensation will be assessed on the basis prescribed in the respective Ordinances. Upon acceptance of the amount of compensation offered and the proof of title to the satisfaction of the Government, the claimant is required to sign necessary documents. Thereafter, the release of compensation will be arranged accordingly. In straightforward cases, cheques for the amount of compensation offered will be made available for collection within 4 weeks following receipt of acceptance and proof of title.

5.  ASSESSMENT OF OPEN MARKET VALUE FOR RESUMED PROPERTIES

Under the Ordinance, compensation payable to the registered owners is based on the open market value of the resumed properties at the date of resumption. Valuation principles and practices adopted by the Lands Department in assessing the value of resumed properties are outlined below:-

…

6.  STATUTORY AND EX-GRATIA COMPENSATION TO DIFFERENT PARTIES

The type of compensation to a party affected by a land resumption scheme may vary according to the type of property in question and the legal interest held by the party in the property. The details are set out in the following paragraphs.

6.1     DOMESTIC PROPERTY

6.1.1  STATUTORY COMPENSATION

(a)  Owners’ Property interest

Legal owners are entitled to the open market value of the resumed properties assessed on a vacant possession basis or subject to tenancy basis as appropriate as at the date of reversion. Where appropriate, the redevelopment value of the resumed properties, will also be considered. Details of the assessment of the open market value for resumed properties are depicted in paragraph 5 above.

(b)  Tenant’s property interest

Legal tenants are entitled to the open market value, if any, of their interest in the domestic properties (for example, the value of an unexpired lease terms subject to an existing rent below the prevailing open market rent).

(c)  Removal costs and expenses

(i)   Legal domestic occupiers (including owner-occupiers and tenants) are entitled to claim the losses and expenses reasonably incurred by them in moving from the resumed flat to a replacement flat due to the land resumption.  Ex-gratia a removal allowance will normally be offered to them in lieu of statutory compensation.  However, if the actual removal costs incurred including stamp duty, agency fee, legal cost etc. exceed the ex-gratia removal allowance offered by the Government, the occupiers can submit claims for reimbursement of actual costs that have been reasonably incurred.

(ii)  In the event that the redevelopment value of the resumed properties is offered as compensation to the owners, they will not be entitled to claim compensation for removal costs and expenses.

6.1.2  HOME PURCHASE ALLOWANCE AND SUPPLEMENTARY ALLOWANCE

(a)  Owner-occupiers

(i)   In addition to the statutory compensation, owner-occupiers may also receive an ex-gratia allowance, namely the Home Purchase Allowance (HPA).

(ii)  The HPA is payable to owner-occupiers to enable them to purchase a relatively new replacement flat of a similar size in the locality of the resumed flat. The amount of HPA payable to individual owners is the difference between the value of a notional replacement flat (based on a seven year old flat of a size similar to the resumed flat and in the same locality) and the open market value of the resumed flat. The eligibility for receiving the HPA will be subject to screening in accordance with the prevailing Government policy. The HPA will not be offered if the owner-occupier has already accepted rehousing by the Government.

(iii) The full HPA will be paid to an owner who is occupying the entire flat or if he can prove that the entire flat is occupied by his immediate family members, including children, parents and dependent brothers and sisters, grandparents, grandchildren, step-parents, spouse’s parents and spouse’s step-parents.

(b)  Owners of tenanted flats or tenanted areas

(i)   In addition to the statutory compensation, owners of tenanted flats or tenanted areas are eligible for the Supplementary Allowance (SA) which is a supplement to the open market value of the resumed flat subject to tenancy.

…

(iv) The SA will be paid at 50% of the full HPA for a first wholly-tenanted flat and at 25% of the full HPA for a second wholly-tenanted flat. No SA will be paid for a third wholly-tenanted flat.

(c)  How is the HPA assessed

For all resumed flats in old buildings within a resumption project, the Director of Lands will assess the unit rate (i.e. $ per square meter) of a notional replacement flat of 7 years old. The notional replacement flat is assumed to be in a comparable quality building, situated in a similar locality in terms of characteristics and accessibility. The notional replacement flat will be situated at the middle floor of a notional building with average orientation, i.e. not facing south or west, and without sea view. Normally, comparables aged around 7 years and transacted around the date of reversion will be selected. Based on these comparables, appropriate adjustments for time, age, orientation, floor, quality, size, accessibility, environment etc will be made so as to arrive at the unit rate of a notional replacement flat for a resumption project. A single notional replacement flat unit rate will be used throughout a resumption project.

The HPA for a resumed flat is the difference between the value of a notional replacement flat (the area of the resumed flat multiplied by the notional replacement flat unit rate) and the open market value of the resumed flat.

(d)  General issues in relation to the HPA/SA

(i)   An owner of a vacant flat is eligible for the same amount of SA as an owner of a tenanted flat.

(ii)  The HPA/SA will be payable for a maximum of three flats per owner per resumption exercise.

…

(ix) For railway projects, Government’s survey or for urban renewal projects, the URA’s survey (both surveys carried out at the time of announcement of the project) will normally be adopted for the purpose of determining the eligibility for HPA/SA. Government’s update survey (carried out at the time of gazetting of the Resumption Notice) will be used to counter check if the owner is still entitled to HPA/SA or the same amount of HPA/SA. No additional HPA/SA entitlement or increased amount of HPA/SA will be allowed as a result of the update survey in normal circumstances.

(e)  Appeal mechanism

(i)   An owner, who considers himself aggrieved by the decision of the Director of Lands in respect of the payment of the HPA/SA (on contentious issues regarding the eligibility for the HPA/SA, the calculation of floor area for payment of the HPA/SA and other related matters) could, within 60 days of such decision, submit an appeal in writing to an Appeals Committee. The Appeals Committee, after hearing and investigation, would then make a determination on the decision of the Director of Lands, if necessary…

          …

12.   INFORMATION REQUIRED

…

12.2   PROOF OF TITLE

Before compensation for the resumption of land is released to the claimant, he is required to prove that he has a good title to the land being resumed. The claimant is requested to submit all the title deeds and documents listed in the schedule attached to the offer letter to the District Legal Advisory and Conveyancing Office…”

F.5   The purpose of HPA within the overall compensation scheme

57.  As said, the terms such as ‘legal owners’, ‘owners’ and ‘owner-occupier’ are not defined in the Guidelines.  Those terms can be considered in light of the purpose and the overall context of the HPA policy.

58.  Reading the Guidelines as a whole, and viewing HPA against the overall compensation scheme, the following broad points could be noted.

59.  First, on the nature of statutory compensation:

(1)  As said, the Guidelines cover not only resumption under the LRO but also other ordinances.  The Guidelines list seven such ordinances, but the list is not meant to be exhaustive.

(2)  Statutory compensation, both in terms of entitlement and the amount of compensation, is to be governed by the specific ordinance under which land is resumed.  The Government is mindful about that and advises readers to refer to the provisions of the relevant ordinance(s) at the very first paragraph of the Guidelines.

(3)  The Government is also well aware that the relevant ordinances make compensation provisions for a wide range of different types of interests in land, ranging from the more typical types of ownership and tenancy to less common interests such as easement, right of way, etc.  The statutory provisions determine the nature of interests deemed compensatable, the persons who will be compensated and the measures of compensation.  Broadly speaking, the interests in land affected are compensated by their open market value.

(4)  §4(a) refers to LRO and tracks the language of section 6(1)(a) of the LRO which provides compensation to ‘former owner’ and ‘any person having an estate or interest in the land immediately before reversion under an instrument registered in the Land Registry’.

(5)  §4(b) refers to Cap 370 and Cap 519 and advises ‘any person having compensatable interests in the land resumed’ to refer to ‘Part II of the Schedule of the respective Ordinances’. Those Schedules cover interests in land far more complicated than ownership or tenancy.  By way of example, §3(a) of the Schedule to Cap 370 includes ‘easement’ over the land which was resumed as a compensatable interest and the amount of compensation is the expense incurred to remedy or mitigate the extinction of that easement or the diminution in the open market value of the claimant’s interest in the land not resumed after such expense has been incurred.

(6)  §6.1 provides that owners are entitled to the open market value of the resumed property; tenants are entitled to the open market value of the lease (e.g. when the value of the expired lease terms are subject to rent below open market rent); legal domestic occupiers (including owner-occupier and tenants) are also entitled to the losses and expenses for moving from the resumed flat to a replacement flat.  In practice, the Government will issue an ex-gratia removal allowance to cover such ‘moving costs’.

60.  Statutory compensation is meant to compensate not only for loss of ownership and its measure is not limited to the market value of the resumed property.  But for convenience, I shall use ‘statutory compensation’ as the shorthand for compensation payable to an owner which is measured by the open market value of the resumed flat below.

61.  Second, HPA cannot exist on its own as an isolated compensation component, but is expected to work in tandem with statutory compensation:

(1)  The function of HPA is to bridge the gap between the amount of the statutory compensation and the cost needed to purchase a replacement flat.

(2)  HPA is a ‘top-up’ to statutory compensation.  It is only payable to those who are already entitled to statutory compensation. People who are eligible to HPA must also be entitled to statutory compensation.  But not vice versa.  This is plain from the fact that the amount of HPA is calculated by reference to the amount of statutory compensation.

62.  Third, the entitlement to statutory compensation and the eligibility to HPA are connected:

(1)  The policy intent of the Guidelines is an overall compensation scheme working in the following manner.  An ‘owner’ of the resumed property is entitled to the open market value of the property as statutory compensation.  If that ‘owner’ is also an ‘occupier’ in the sense that he and/or his family used to reside in the resumed property as his/their home, he is also entitled to HPA on top of statutory compensation.

(2)  Eligibility to HPA turns on ‘occupancy status’.  Occupancy status is determined by reference to the Freezing Survey (referred to in §6.1.2(d)(ix)) which aims to record the relevant property’s occupancy status at the time when the project was announced.

(3)  For a person who is already entitled to statutory compensation as an ‘owner’ or ‘legal owner’, there is only one more hurdle to overcome for him to also claim HPA – that he has to prove his occupancy status.  In other words, that owner does not have to be assessed again to see if he has the necessary type of interest/ownership to bring him within the meaning of ‘owner-occupier’.

63.  §6.1.1 refers to ‘owners’ and ‘legal owners’ as those entitled to statutory compensation.  §6.1.2 refers to ‘owner-occupiers’ and ‘owners’ as those eligible to HPA.  What is implicit in the preceding paragraphs is that the ‘legal owner’ or ‘owner’ entitled to statutory compensation and the ‘owner’ who (if also an ‘occupier’) is entitled to HPA bear the same meaning.  In other words, by using ‘legal owner’ or ‘owner’ in §6.1.1 on the one hand, and ‘owner’ and ‘owner-occupier’ in §6.1.2, the policy is referring to the same type (as opposed two different types) of ownership interest.

64.  This also explains why the policy maker apparently gives very little thought as to who might qualify as an ‘owner’ in the HPA context, but much care has been given to come up with a precise method to decide who may be regarded as the proper ‘occupier’ – through the Freezing Survey.  The distinction in treatment can be easily understood if those entitled to claim statutory compensation ‘as an owner’ under the relevant ordinances are also to be taken as an ‘owner’ who will also be entitled to HPA if the necessary occupancy requirement is met.  The sole focus on determining eligibility to HPA is on ascertaining ‘occupancy’ status, because by then, ‘ownership’ will already have been established.

65.  In my view, this understanding is natural, instinctive and perhaps layman-like.  Indeed, I suspect a layman may think that I have taken an unnecessarily convoluted path when the same conclusion is plain and obvious in the language itself (see above).  Those entitled to be compensated for the market value of the resumed property are ‘owners’.  Those who, on top of the market value of the property, are also entitled to HPA are the ‘owner-occupiers’.  ‘Owner-occupiers’, as the language itself suggests, are but owners who are also occupiers of the property they own.

66.  This view is also expressly stated in LegCo papers related to the HPA policy.  According to the affidavit evidence filed by the LandsD, HPA (or something in the same spirit albeit not formally known as such) was first paid out by the Government as early as in 1979.  But it settled into the now recognizable shape in about 1997, when the policy was modified and approved by the Finance Committee of the LegCo.

67.  The term ‘owner-occupier’ now used in the Guidelines is taken from the a LegCo paper submitted by the Government to the LegCo on 19 July 1996 (“1996 LegCo Paper”) as a criterion to restrict eligibility of HPA in order to prevent abuse.

68.  In the 1996 LegCo Paper, it is stated at §3 (italics in original):

3.  HPA is an ex-gratia payment, made as a simple cash addition to the statutory compensation payable on a number of Ordinances related to land resumption and clearances. The intention of paying HPA is to enable individual home owners to purchase a replacement flat of similar size in the neighbourhood of the resumed flat. The amount of HPA payable was the difference between the cost of replacement flat and the statutory compensation of the resumed premises to which claimants are entitled. This is to ensure that we do not force affected owners out of home ownership as a result of resumption.

69.  That last sentence is of real importance as to understanding the true nature of HPA, and the intention behind its payment.

70.  The paper then set out how speculators abused the policy by purchasing a ‘slum’ property after the Government has announced resumption of the area in which such properties were situated in order to profit from the HPA payment.  At §9, the Government stated:

9.  To discourage abuse by speculators, HPA should only be payable in general to owner-occupiers already in occupation of the premises prior to gazetting of the resumption. This restriction would also help to discourage unscrupulous landlords from circumventing the owner-occupier criterion by terminating tenancy and moving in themselves, however briefly, after receiving notice of the resumption, in order to claim HPA.

71.  Under the heading ‘Criteria for the payment of HPA’, §11 stated:

11.  To safeguard the use of public funds, we consider it necessary to tighten the eligibility for HPA as follows –

a.  HPA should normally be payable only to an owner who is an owner-occupier;

b.  we should adopt the guidelines set out in the Enclosure to determine whether a claimant for HPA is an owner-occupier;

c.  a person who is not an owner-occupier before the date of the setting of resumption should not be eligible for HPA, notwithstanding the fact that the owner has acquired the ownership and has also moved into the premises after gazetted of resumption.  However, a person who has executed a sale and purchase agreement before the Gazette in presumption, and has completed the purchase and obtained vacant possession of, or occupied, the property as his sole residence, should be treated as the owner-occupier eligible for HPA;

d.  …

e.  …

f.   …

g.  we should assess HPA on the basis of a replacement flat in the same locality and of a size similar to that under resumption rather than a brand-new flat; and

h.  we should pay HPA to an owner-occupier if his domestic premises are resumed under any of the legislation referred to in paragraph 14 below or any other legislation, including those which may be enacted in the future, under which statutory compensation is payable on the basis of the assessment described in paragraph 14.

72.  It seems to me clear that:

(1)  §11a identifies that the word ‘owner’ in the term ‘owner-occupier’ is the same person as the ‘owner’ to whom the statutory compensation is payable.

(2)  §11h identifies that it is intended that the HPA should be applicable to all land resumption exercises.

73.  It was also pointed out in §15 that it should no longer be necessary for the owner to actually purchase a replacement flat in order to be eligible to claim HPA.  This was intended to address the grievances associated with the practical difficulty experienced by some affected owners in purchasing a replacement flat in the same locality before being eligible for HPA and the delay in payment arising from the need for reassessment of the actual amount of HPA payable in each and every case.

74.  The Enclosure to the 1996 LegCo Paper referenced in §11b (see above) set out in more detail the proposed guidelines to determine who is an ‘owner-occupier’:

HPA is normally payable to owner of domestic property upon resumption if he is an owner occupier.  The following guidelines determine whether an owner is an owner-occupier –

a.  An owner-occupier is one who occupies the affected property as his sole residence.

b.  An owner or does not occupy the affected property may be treated as an owner occupier provided that (i) the premises is occupied as sole residence by his immediate family (i.e. children, parents or dependents siblings); (ii) the immediate family does not occupy the property by virtue of any tenancy agreement in relation to premises; and (iii) the occupier(s) does not own another property in Hong Kong.

c.  …

d.  A person, who owns a property being resumed, is not occupying it at the time the resumption notice is gazetted, may be regarded as an owner occupier provided that (i) the property resumed is the only property owned by that person in Hong Kong when the notice of resumption is gazetted; and (ii) he is currently living elsewhere because of his occupation (e.g. he has been posted abroad) or is occupying a quarter provided by his employer or renting one using a tenancy allowance provided by his employer.

e.  Where a property is occupied partly by its owner as sole residence and partly by other persons as tenants, then the owner may be treated as an owner-occupier for such area of the premises as occupied by him for his own residential purposes.

f.  A person who has executed a sale and purchase agreement to purchase a property before the gazetting of resumption, and has completed the purchase and obtained vacant possession of, or occupied, the property as his sole residence, is treated as an owner occupier.

75.  It might be thought that paragraph or item (a) is merely a statement of the blindingly obvious, and it might be asked why anybody would seek to find a different meaning.

76.  It is also convenient at this juncture to note that Mr Lam attempted to rely on item (f) and the reference to sale and purchase agreement in support of his proposition that ‘owners’ or ‘owner-occupiers’ refer to paper owner.  Item (f) is plainly intended to cater to the situation when someone has already brought a flat when the resumption is gazetted, and intends to live there – note the reference to ‘as his sole residence’ – but has not yet moved in there.

77.  All the guidelines turn on whether the owner resided or intended to reside in the resumed flat as his sole residence.  There was no hint in the 1996 LegCo Paper that when consideration moves from statutory compensation to HPA, a person’s ‘ownership’ would be re-assessed and a person might be ‘owner’ for receiving statutory compensation but not an ‘owner’ for receiving HPA.

78.  To divorce the meaning of ‘legal owner’/’owner’ for statutory compensation under §6.1.1 from the meaning of ‘owner’/‘owner-occupier’ for HPA under §6.1.2 would be at odds with the very purpose of HPA.  If that were to be done, there would be persons who would be considered as an ‘owner’ to be entitled to the open market value of the resumed property, but not an ‘owner’ for the purpose of receiving HPA, despite the fact that he used to live in the resumed property and would be thus driven out of home ownership upon resumption.  This runs contrary to the purpose to be served by HPA in the overall compensation scheme and is inconsistent with HPA’s apparent focus on ‘occupancy’ rather the ‘ownership’.

79.  Mr Lam seems to think that the Government’s position would not necessarily lead to a divorce between the meanings of ‘owners’ in the statutory compensation context and ‘owners’ in the HPA context. At the hearing, I asked Mr Lam why the Applicant would be an ‘owner’ for the statutory compensation purpose receiving the statutory compensation, but not an ‘owner’ for the HPA purpose.  Mr Lam said the Applicant’s entitlement for statutory compensation arises not from his being a ‘former owner’ but from being a ‘person having an estate or interest in the land immediately before reversion registered in the Land Registry’ under section 6(1) of the LRO. So, whilst §6.1.1(a) of the Guidelines only refers to ‘legal owners’/’owners’ as those being entitled to the open market value of the resumed properties, the Guidelines do not have the effect of overriding the LRO.  Mr Lam also drew my attention to the introductory paragraph of the Guidelines which expressly advises readers to refer to the provisions of the respective Ordinances.

80.  Simply put, Mr Lam’s answer is that the Applicant was neither an ‘owner’ in the statutory compensation context nor an ‘owner’ in the HPA policy context.

81.  Perhaps I am not asked to adjudicate on whether the Applicant was entitled to the open market value of the resumed Flat and in what capacity.  However, it seems obvious to me that the Applicant was entitled to, and was compensated with, the open market value of the resumed Flat, because it was recognised that his interest in the Flat was one of ownership.

82.  But even if one proceeds on the basis that the Applicant was compensated not as an ‘owner’ but as a ‘person having an estate or interest in the land’ under section 6(1) of the LRO, Mr Lam’s explanation is still at odds with the purpose of HPA and the overall compensation scheme:

(1)  First, the Applicant was offered the open market value of the Flat.  One would have thought only ‘owners’ would be entitled to be compensated for the value of the resumed property, for it is owners (as opposed to say tenants) who would have lost the resumed flat.

(2)  Mr Lam said that the figure offered to the Applicant (i.e. HK$5.4m) by LandsD was slightly lower than what would be offered to a paper owner, to reflect the difference in market value between paper ownership and a possessory title.

(3)  Be that as it may, what was offered remained the value of the resumed flat, to which one would think only the owner of the resumed flat would be entitled.  Mr Lai suggested that the adjustment in property value is akin to the situation when the property has some encumbrances, e.g. building orders arising from unauthorized building works which may lead to an adjustment in the selling price of a property.  That may or may not be right, but it remains compensation for removal of ownership.

(4)  Second, Mr Lam’s argument sidesteps the importance of ‘occupancy’ which is supposed to be determinative of eligibility for HPA.  It is not disputed that the Applicant is recorded in the Freezing Survey as having resided with his family in the Property.

(5)  Third, it runs contrary to the purpose of the HPA if the Applicant who was considered to have lost the resumed flat (hence his receipt of the statutory compensation) is driven out of home ownership but nonetheless not be provided with the policy intended assistance to purchase a replacement flat.

83.  I have come to the view that the ‘owner/legal owner’ entitled to statutory compensation as stated in §6.1.1 of the Guidelines and the ‘owner/owner-occupier’ eligible to HPA as stated in §6.1.2 refer to the same type of owners, but the latter also has to be an occupier in order for him to be eligible for HPA.  I have also said that the reason for the Guidelines’ apparent lack of detail in deciding who is an ‘owner’ may be because that question is supposed to be governed by statutes.  The statutes govern who should be compensated for the value of the resumed flat.

84.  It follows that the relevant resumption ordinances are relevant in construing the meaning of ‘legal owner’, ‘owner’ and ‘owner-occupier’ in the Guidelines.  This statement, as general as it is stated, was agreed by both LandsD and the Applicant.  But parties sought to make use of the resumption ordinances in different ways.

85.  This brings us to the first strand of Mr Lai’s argument – a person should be taken as ‘owner’ for HPA purposes if he falls within the definition of ‘owner’ in any of the resumption ordinances.

F.6   The relevancy of the ordinances in construing the HPA policy

86.  Both Mr Lai and LandsD (though not particularly emphasized by Mr Lam) ascribed to the words ‘owner’ or ‘legal owners’ in the Guidelines the meaning given to the word ‘owner’ in the ordinances.

87.  The question arises as to which ordinance’s meaning of ‘owner’ is to be applied, when there are at least seven resumption ordinances which are covered by the Guidelines.  LandsD said the Court should only take the meaning from the LRO, but Mr Lai said the Court has to take into account all seven resumption ordinances.

88.  LandsD said the meaning of owner in the HPA policy should be ‘suitably adapted’ from the LRO, being the Ordinance applied in the instant case.  Section 2 of the LRO defines ‘owner’ as ‘the person registered or entitled to be registered in the Land Registry…’.  On this basis, the Government suggested that ‘owner’ in the HPA policy is meant to be the registered owner or the paper owner.  The same argument was also made by Counsel representing the Government in Tang Lai, but Chow J did not expressly offer his view on this argument.

89.  Mr Lai proposed a broader view.  He said the Court should not single out the LRO in the construing the HPA policy, because the Government plainly intends for the HPA policy to apply consistently regardless of the statute under which or the purpose for which the land is resumed.  Otherwise, Mr Lai submitted, it would result in arbitrariness and unfairness when the availability of HPA is dependent on the particular ordinance chosen by the Government to implement the resumption project.

90.  Mr Lai also drew my attention to a Discussion Paper (“2001 Paper”) prepared for, and the minutes of, a meeting of the Finance Committee of the LegCo held on 9 March 2001 (“2001 Meeting”).  Looking first at the 2001 Paper, the Members of the Finance Committee were invited to approve, amongst other things, (a) a revision to the basis for calculating the HPA payable to owners of domestic properties affected by land resumption and the eligibility criteria for the HPA, and (b) the re-titling of the HPA for owners of a tenanted flat (or tenanted area) as Supplementary Allowance (i.e. SA), and revision to the basis and eligibility criteria for the SA.

91.  As part of the ‘Justification’ for the revised basis for calculating HPA, the 2001 Paper stated, at §3:

At present, owners of domestic properties are eligible for statutory compensation if their properties are resumed by the Government. Under the Lands Resumption Ordinance (Cap. 124), this statutory compensation will be the open market value of the resumed properties.  The open market value is the amount which a property, if sold on the open market by willing seller, might reasonably be expected to realise.  Owner-occupiers are also eligible for the HPA, which is an EGA [ex-gratia allowance] payable to enable them to purchase a relatively new replacement flat of a similar size in the locality of the resumed flat.  Owners of tenanted flats are eligible for the HPA at 50% of the full rate for their first tenanted flat.  The eligibility for the HPA and the amount payable were last approved by the Finance Committee of the Legislative Council on 25 April 1997 … .

92.  This again clearly identified the core purpose of the HPA.

93.  The 2001 Paper at §6 stated that, having reviewed the HPA and taking into consideration the views of property owners and Members of the LegCo, it was proposed to revise the package on a basis then set out.  One of the revisions was to re-title the HPA for owners of a tenanted flat as the SA, to make it clear that it was a supplement to the open market value of the resumed flat, and to avoid confusion or any misunderstanding that the then existing EGA for owners of a tenanted flat was actually for home purchase.  Another proposed revision was at §6(d) that “the full HPA should be paid to an owner-occupier, i.e. an owner who is occupying the entire flat”.  That proposal obviously simply meant that if you are the owner of the resumed flat and you occupy it, then you should get the HPA.

94.  At the time, the URA was about to be established.  In that context, the 2001 Paper also stated at §14:

We expect that most of the future resumption of land under the Lands Resumption Ordinance would be carried out for projects of the URA.  However, there would be other cases of resumption for public works, rail or other non-URA projects.  For equity reasons, we propose that the new HPA and SA and the new EGA for owners and tenants of commercial properties should be made applicable to all land resumption exercises under any relevant ordinance.

95.  This is also consistent with my view of the intention behind the Guidelines.

96.  The minutes of the 2001 Meeting, amongst other things, traversed where it was discussed whether the URA should offer a more generous HPA by reducing the age of the notional replacement flat from 7 years to 5 years.  It was recorded (at §10) that the Government opposed the proposal because it would not be appropriate for the URA to offer an HPA that is distinct from other land resumption projects.  The Government also said that since the HPA compensation package would also apply to other land resumption projects, the number and scope of the impact on the Government’s finance could not be readily ascertained.  This is consistent with the expression of view at §14 of the 2001 Paper mentioned above, namely that the new HPA and SA should be applicable to all resumption exercises under any ordinance, for equity reasons.

97.  Mr Lai further points to the fact that amongst the seven ordinances listed in the Guidelines, three of them employ a definition of ‘owner’ which includes a possessory title holder.  In the Railways Ordinance, owner is defined as including those ‘holding the land by way of a possessory title’.  In the Land Acquisition (Possessory Title) Ordinance, owner is defined as a person who has a possessory title to land and possessory tile is defined as ‘a possessory title against the Government to land by virtue of sections 7(1) and 17 of the Limitation Ordinance, Cap 347’. The URAO does not expressly include those with a possessory title in the definition of owner, but its definition includes those ‘receiving the rent of any premises…or who would receive the same if such premises were let to a tenant’.  Mr Lai, citing §7 of Cheung Yat Fuk v Tang Tat Hong (2004) 7 HKCFAR 70, said that it is trite that a possessory owner can rent the relevant premises out and receive rent accordingly.

98.  Mr Lai said since the Government intends to treat owners consistently and fairly in terms of its HPA policy regardless of the particular ordinance used for resumption, it follows that a person considered an owner under any of the seven listed ordinances ought to be regarded as an owner for the purpose of receiving HPA.

99.  If Mr Lai’s expansive interpretation was intended to mean that a person should be eligible for HPA if he is an ‘owner’ under any of the other resumption ordinances, even if he is not entitled to statutory compensation under the actually applied ordinance, I disagree with it. Statutory compensation remains to be governed by the particular ordinance under which the land is resumption.  As already said, HPA is only available to those who are already entitled to statutory compensation being the market value of the property.  Without a figure representing the open market value of the resumed flat to start with, it is not even possible to arrive at a figure for HPA.  But I am not sure that was Mr Lai’s offered interpretation.

100.  Anyway, I do agree that the meaning of ‘owner’ adopted in the HPA policy is connected with the particular statute invoked by the Government in any particular land resumption exercise.  The LRO is thus the relevant ordinance in the present case.  But that does not necessarily mean that the LRO has to apply in the way LandsD suggested – to ascribe to the word ‘owner’ used in the HPA policy the meaning for the same word in the LRO.

101.  In my view, the relevant ‘owner’ in the HPA policy is intended to be the person who is to be compensated in an owner-like manner.  On the Government’s case, paper/registered owners are to be compensated the open market value of the flat resumed, and possessory title owners are to be compensated on a similar basis but with the figure slightly adjusted downward to reflect that – from LandsD’s view – the claimant’s title is not as good as paper/registered title owners.  It appears to me that ordinary people would probably care little how the wide range of different interests in land are carefully defined or delineated under the various resumption ordinances.  But to a layman, if one’s interest in the resumed flat is to be compensated for by the market value of the flat, the interest he had could be properly regarded as some sort of ‘ownership’ or akin to ownership. But bluntly, a layman would think that only an owner would be entitled to the market value of the flat when the person is dispossessed of his ownership when the flat is resumed.

102.  For most people, it matters little whether a person – having been given a sum equal to the market value of the resumed flat under the LRO – has derived his entitlement in the capacity as an ‘registered owner’, ‘owner’ or ‘a person having an estate or interest in the land’ under the law.  In my view, what is intended by the HPA policy is that if a person is compensated as an owner under the statute – i.e. he is entitled to claim the market value of the resumed flat – he is to be regarded as an owner under the HPA policy and will be eligible to claim HPA if he also used to live in the resumed flat, i.e. if he was an owner-occupier.

103.  Putting aside Tang Lai, I think there is a compelling argument in favour of including possessory title owners such as the Applicant as an ‘owner’ or ‘owner-occupier’ for the purpose of claiming HPA.

F.7   Common sense, legal sense and sense as used by LandsD

104.  I turn now to the second strand of Mr Lai’s argument on Ground 1.  Mr Lai said the common sense meaning of the word ‘owners’ undoubtedly include possessory title holders, which is reinforced by the legal sense of the word, as well as the sense as used by LandsD in its correspondence with the Applicant.

105.  Mr Lai said the layman’s meaning of ‘owner’ is a person who holds something as property, which entails exclusive right to possession, use or disposal of a thing.  As a matter of law, a possessory title owner is entitled do those things: see Chung Chiu Hing v Law Sam (unrep., HCMP 2384/2011, 9 June 2017, per B Chu J).  Mr Lai also said it defies common sense not to regard a possessory owner as an owner, since otherwise the relevant property would be ‘ownerless’ despite someone exercising rights of ownership in respect of it.  The original owner – the paper owner – is no longer the owner since his interest has already been extinguished by operation of the Limitation Ordinance Cap 347.

106.  On the other hand, Mr Lam said an adverse possessor is usually referred to colloquially as an “霸地人” or adverse occupier.  Further, the owner is generally understood as someone who has acquired the title deeds of properties, and can sell the land by transferring the title deeds to the purchaser.  A possessory title owner cannot do that.  Mr Lam also asked why a squatter, who has acquired the property at much lower cost – simply by staying in the flat – than a regular paper owner, should be given a windfall by way of an HPA. 

107.  I do not think it helpful to talk about a windfall.  As Mr Lai said, it is the law of adverse possession which makes the squatter the lawful owner of the property.  The fact is that, whether it is thought to be a windfall or not, the law recognizes that the person who gains possessory title is the owner of the property.

108.  Nor do I think that discussion of this sort is very relevant to shedding light on how ordinary people my understand the word ‘owners’/’owner-occupier’ for the purpose of determining eligibility to HPA.

109.  I doubt if a layman, if asked, could quickly form a view as to whether a possessory title holder is an owner generally.  But if one is informed of the working of the overall compensation scheme, and the purpose of to be served by HPA within the scheme, I think the majority will tend to think that a possessory title holder will be eligible to HPA as long he used to occupy the resumed flat as his residence and was driven out of home ownership as a result of the resumption.  I also think that a layman will take the view that the Applicant, who has already been given the market value of the Property as statutory compensation, was regarded as an ‘owner’ under the overall compensation package.  Most people would think that it makes no sense to treat a person as an owner to pay him some compensation, then say he is not an owner for the rest of the compensation.

110.  Mr Lai and Mr Lai also disputed as to the similarities (or differences) as to the exact legal entitlement between an owner in law and an adverse possessor.  I do not intend to delve into the details of that discussion.  As a matter of principle, an administrative policy is to be construed in accordance with its ordinary meaning.  It is the ordinary meaning of ‘owner’ or ‘owner-occupier’ that this Court has to answer, not their technical legal meanings.

111.  I respectfully place even less weight on LandsD’s understanding of those phrases as reflected in its correspondence with the Applicant.  The meaning of a policy statement is to be objectively construed by the Court.

F.8   Mr Lam’s analysis of the text of the Guidelines

112.  At the hearing, Mr Lam closely analysed the text of the Guidelines, to support his position that all references to ‘owner’ in §§5-6 are to be read consistently as referring to paper owners.  First, I might point out that such an exercise in close textual analysis is probably inapt to the relevant exercise of interpretation of a policy.

113.  §6.1.1(a) is reproduced below for convenience. Mr Lam’s focus was on the last sentence (emphasis added):

Legal owners are entitled to the open market value of the resumed properties assessed on a vacant possession basis or subject to tenancy basis as appropriate as at the date of reversion. Where appropriate, the redevelopment value of the resumed properties, will also be considered. Details of the assessment of the open market value for resumed properties are depicted in paragraph 5 above.

114.  §5 is headed ‘Assessment for Open Market Value of Resumed Properties’.  Mr Lam’s focus was on the opening sentence:

Under the Ordinance, compensation payable to the registered owners is based on the open market value of the resumed properties at the date of resumption.

115.  ‘Ordinance’ is not defined in the Guidelines, but the context suggests the word refers to each of the seven land resumption ordinances listed in the §2.  Mr Lam drew the Court’s attention to the reference to ‘registered owners’ in that sentence.  He said a reader reading §6 will, as instructed, refer back to §5 and thus understand ‘owners’ as referring to ‘registered owners’.  From there he said that all references to ‘owners’ in §§5-6 should be consistently read as ‘registered owners’.

116.  I do not agree.

(1)  As its heading suggests, §5 concerns the assessment basis of open market value of the resumed properties, rather than who will be entitled to be compensated for such value.  §6 also expressly tells its readers to refer to §5 for “details of the assessment of open market value”, rather than for determining who will be entitled to such compensation, which is set out in §6 itself.

(2)  As Mr Lai pointed out, those who drafted the Guidelines could have easily replace ‘legal owners’ at the beginning of §6.1.1(a) with ‘registered owners’, if that were what was intended.  But those who drafted the Guidelines deliberately chose ‘legal owners’ when it comes to entitlement to statutory compensation; and ‘owner-occupiers’ when it comes to eligibility to HPA in §6, vis-à-vis ‘registered owners’ in §5.

(3)  Generally, when various different phrases pertaining to ownership have been used in a document or part of it, contrary to Mr Lam’s suggestion, I do not think ordinary readers would take one particular phrase – ‘registered owners’ – and then apply it to all other differently worded phrases.

(4)  Mr Lam’s reading also does not sit well with the fact that the Applicant – indisputably not a registered owner – was considered as being entitled to the open market value of the resumed Property. In reply to that inconsistency, Mr Lam again referred to the Guidelines’ introductory paragraph telling readers to refer to the statutory provisions for details.  If what he meant to say was that §5 (and §6) does not exhaustively list all categories of person that are entitled to statutory compensation, that would not help his case.  Because it follows that it matters not that a possessory title owner is not a ‘registered owner’, given the Guidelines does not mean to exhaustively define who will be entitled to compensation, including HPA.  If ‘registered owners’ is only given as an example for statutory compensation, so could it be an example only for HPA.

(5)  As Mr Lai pointed out, if all references to ‘owners’ in the Guidelines were to be read consistently as ‘registered owners’, it would mean that the Applicant could not even appeal to the Appeal Committee. §6.1.2(e)(i) provides that ‘an owner’ aggrieved by HPA-related decisions can appeal to the Appeal Committee.

F.9   Tang Lai

117.  In the Tang Lai case, Chow J (as Chow JA then was) relied on 5 points in support of his conclusion, as set out in §§42-46 of the Judgement.  I shall address them in turn.

118.  At §42, Chow J said:

42.  First, as a matter of language and ordinary usage, I do not believe that a person who has acquired title to a property by adverse possession would be regarded by the general public in Hong Kong as the owner of the property.  It seems to me that the word “owner” of a property as ordinarily and generally understood would mean the person who has acquired paper title to the relevant property in a conventional way (eg through sale and purchase, gift, succession, etc).

119.  Mr Lai said Chow J has fallen into ‘labellism’ – looking at the label rather than the substance of ownership.  This ties in with his submission that a possessory title owner is capable of dealing with his property in ways as would be ordinarily expected of an owner – i.e. exclusive possession, use and disposal.

120.  Chow J focused on the method by which property is acquired, whilst Mr Lai focused on what an owner can do with his property.  I think that both aspects are what one may think of if one has to define ownership.  Acquiring paper title through sale and purchase is undoubtedly the first to spring to one’s mind when it comes to property acquisition.  But it does not mean those falling outside the typical or most common method would be seen as fatal to ownership acquisition.  Further, I tend to think that when it comes to the periphery of the concept of ownership, what the person is entitled to do with a relevant property may well be considered by most people as the more defining feature of ownership.

121.  In any event, in the context of the Guidelines, the relevant value of ownership is the value of receiving compensation.  In my view, the person identified by the Government as the right person to receive compensation would be regarded by the general public as the owner.

122.  At §43, Chow J said:

43.  ;Second, whatever may be the strict legal rights associated with a possessory title, in practice there are real and substantial differences between it and a paper title, eg in terms of marketability and open market value, and the ability to utilize the property as security for a loan by way of legal charge or mortgage.  The absence of title deeds also means, by definition, that the owner of a possessory title cannot create an equitable mortgage by way of deposit of title deeds of the property in question.

123.  These practical differences are true.  But the question is not whether there are differences between paper titles and possessory titles.  The question is whether ‘ownership’ in the context of the HPA policy includes possessory title.  These differences suggest that a possessory title owner may not be identical for all aspects of the ownership concept, since it is different from paper title in certain ways.  As Mr Lai put it, these differences make the a possessory title more ‘inconvenient’ to deploy than a paper title.  But it seems to me to argue backwards if the starting point is the presumption that the relevant interest must perfectly coincide with paper ownership for it to be ‘owner’ in the HPA context.  I do not think the differences underscored by Chow J – such as the ability to create equitable mortgages – are what ordinary people would consider as the defining features of ownership.  I repeat my previous points.

124.  The third to the fifth points can be conveniently dealt with together.  At §§44-46, Chow J said:

44.  Third, in the Compensation Policy, §6.1.1 refers to “legal owners”, “legal tenants” and “legal domestic occupiers (including owner-occupiers and tenants)” as being entitled to receive “Statutory Compensation”, while §6.1.2 refers “owner-occupiers”, “owners of tenanted flats” and “owner of a vacant flat” as being entitled to receive HPA/SA.  It seems to me that the various references to “owner”/“owners” should be read consistently as a reference to the paper owner/owners.

45.  Fourth, §12.2 of the Compensation Policy provides that before compensation is released to the claimant, he is required to prove that he has a good title to the land being resumed and submit “all the title deeds and documents” listed in the schedule attached to the offer letter. This supports the view that the word “owner” as used in the Compensation Policy is not intended to refer to a person who has only a possessory title to the relevant property.

46.  Fifth, I consider there is force in Ms Chan’s argument that the Director’s construction of the Compensation Policy (viz a person who has acquired title to a property by adverse possession does not qualify as the “owner” or “owner-occupier” of the property for the purpose of eligibility for HPA) would promote certainty and consistency in the application the Compensation Policy.  In her skeleton submission (at §36), she puts it thus:

“More fundamentally, the Policy as properly construed by [the Director] can be practically applied with certainty and consistency for achieving the purpose of the Policy and facilitating relocation of home owners within the limited project time… Conversely, the Applicant’s interpretation if adopted will lead to uncertainty as to the identity of the recipient of the ex-gratia payment and the timing of making the payment when there are competing interests in a resumed property … It would also lead to absurdity in that significant ex-gratia payment would need to be made to a squatter who has not even commenced any adverse possession claim against the paper title owner (even if the claim has been commenced, it remains uncertain whether it will eventually succeed).”

125.  As I have already set out above, I agree that the various reference to ‘owner’ or ‘owners’ in §6.1.1 and §6.1.2 should be read consistently.  But I do not agree with Chow J that they have to be consistently read as referring to paper owners.  That reading would not sit well with the facts in the instant case.  The Applicant was offered and has received the HK$5.4m, being the open market value of the Property as statutory compensation, despite not being a paper owner.  Plainly, the Government thought that the Applicant was the owner entitled to compensation.

126.  The same observation can also be made about the requirement for proof of title by provision of title deeds and documents.  LandsD was satisfied that the Applicant had proved his ‘title’ for the purpose of releasing the statutory compensation to him despite the absence of title documents.

127.  The fifth point was on administrative efficiency – the idea that determining eligibility to HPA by reference to paper titles promotes certainty and efficiency in completing a relocation project.  Whilst understandably claims for HPA based on paper titles will be easier to ascertain, to include claims also based on possessory titles will not necessarily slow down the processing time for the paper title claims. Anyway, I do not see why administrative convenience should count for much in this context.  If the sole benefit of excluding claims based on possessory title is to save administrative time and resources for the Government, I am not persuaded that that is a valid reason for driving residents out of their home and yet refuse to facilitate relocation by providing them with HPA.

128.  Most importantly, since ‘owners’ entitled to statutory compensation and ‘owners’ eligible to HPA are to be read consistently and possessory titles are taken as sufficient for statutory compensation, determining possessory titles is inevitable in any event.  No further resources have to be consumed at the HPA stage since any such possessory titles will have already been determined at the statutory compensation stage.

129.  I have respectfully come to agree with Mr Lai that the reasoning in the five points in Tang Lai, whether individually or cumulatively, are not satisfactory.  With respect, I think the decision is wrong.  In other words, I think there is powerful reason for not following Tang Lai, and I shall not follow it.  ‘Owner’ and ‘owner-occupier’ in §6.1.2 of the Guidelines include a possessory title owner.

130.  Ground 1 has met the arguability threshold for granting leave to apply for judicial review, and has also been substantively made out.  This alone is sufficient to dispose of this Application.

G.  Ground 3: Legitimate Expectation

131.  I will, however, also deal with Ground 3, under which the Applicant claims to have a legitimate expectation to be eligible for HPA.

132.  The law on legitimate expectation is well settled, and Ng Siu Tung v Director of Immigration (2002) 5 HKCFAR 1 is the leading authority.  In gist, a legitimate expectation arises from a promise or representation made by the Government, the expectation being that the promise or representation would be honoured in the absence of any overriding reason of law or policy to exclude its operation.  The representation relied upon must be clear and unambiguous.  Where a representation is reasonably susceptible of competing constructions, the correct approach is to adopt the interpretation applied by the public authority, subject only to the scrutiny of the Courts through the rationality test.

133.  The representations said to have given rise to the Applicant’s legitimate expectation are the HPA offered by the URA in its letter dated 30 March 2021, and what LandsD said in its correspondence with the Applicant.  Whilst LandsD may at times refer to the Applicant’s claim as ‘owners’ claim’ and refer to the Applicant as ‘owner’ in its correspondence, I agree with Mr Lam that the exchange between parties in the course of negotiation cannot be taken as confirmation to the Applicant’s eligibility to HPA, when the letters were clearly not issued for such purposes.  I see no clear and unambiguous representations from the LandsD that the Applicant would be eligible to HPA.

134.  Clearly the URA’s representations – offering HPA in the sum of HK$6.8m in the 30 March 2022 letter – is the stronger basis for the Applicant to claim legitimate expectation.  But URA is not a party to this action.  The Applicant did not accept the URA’s offer.

135.  However, Mr Lai said the Applicant was entitled to rely upon URA’s representations as much as the LandsD’s.  Mr Lai said the two entities work together to implement the same strategy – being the Urban Renewal Strategy of the Development Bureau.  Thus, he submitted, the actions of URA and of LandsD should be viewed as a collective whole.  Further, it was URA’s declared position, as documented in a press release, that the URA’s compensation policy is based on the statutory compensation under the LRO and the Government’s HPA policy, plus some applicable ex-gratia allowances to act as an incentive to encourage affected owners to accept the URA’s acquisition offers voluntarily.  Also, at §2.4 in a policy paper dated March 2005 provided to the LegCo, the URA said “when implementing its redevelopment projects, the URA follows the same policy and approach in making offers in attempt to acquire the relevant domestic properties by agreement”. Therefore, Mr Lai said the Applicant was entitled to expect that the LandsD/Government would also consider him eligible for HPA, as the URA did.

136.  The second point is obviously dependent on the first point for unless the two entities are to be taken as one, what the URA represented cannot bind the LandsD.

137.  Mr Lam said the URA is a separate statutory body established by the URAO and operates independently from the Government. The LandsD and the URA operate at different stages of the resumption projects. It is stated in LandsD’s affidavit that the URA formulates its own compensation policy.  Mr Lam also took me to another LegCo paper where the Government said the compensation offered by the URA, whilst in line with that of the Government, is supposed to be more generous so that as much land as possible could be acquired without invoking the resumption powers.

138.  Mr Lam’s strongest point is that the URA offer was specifically made subject to contract, which means that no clear and unambiguous representation can arise from the offer made in the 30 March 2021 letter.  It is expressly provided:

If the Property is resumed by the Government under the Lands Resumption Ordinance, the Government may adopt a basis different from the [URA] in assessing their compensation offers (e.g. whether the actual user of the Property is in breach of the user restriction clause in the Government lease, whether the actual user of the Property is different from that stated in the relevant Occupation Permit, the occupancy status of the Property, etc.).

139.  Mr Lai submitted that the letter was referring to difference in assessment basis of compensation, rather than entitlement or eligibility to such compensation.  In the same vein, he also said the more generous measure offered by the URA as stated in the LegCo paper referred to the assessment basis or the exact amount to be offered, rather than eligibility to HPA.

140.  But I do not read the quoted passage as limited as Mr Lai has invited me to.  The basis for assessment is further elaborated by examples given in the bracket, one of which is occupancy status.  Occupancy status is determinative of one’s eligibility to HPA.  I do not think it is clear and unambiguous that the possible difference in compensation would only concern the exact amount to be offered but not eligibility to, say, HPA.  The 30 March 2021 letter is at least open to the interpretation that the difference in compensation may include eligibility to HPA, so as the ‘more generous’ measure as referred to in the LegCo paper.  I am bound to take the Government’s interpretation when the representation is open to competing readings.

141.  If necessary, I would find that Ground 3 has crossed the threshold for the grant of leave to apply for judicial review, but it is not sufficient to succeed substantively.  Therefore, Ground 3 is not made out.

H.  Result

142.  Ground 1 is made out and the Application is allowed.

143.  The Appeal Committee Decision of 26 July 2022 is quashed, and the corresponding Director’s Decision of 29 July 2022 is also quashed.

144.  I see no point in remitting the matter for reconsideration by the Director, except with the benefit of my declaration which I grant that the Applicant qualifies as an owner and owner-occupier for the purposes of determining his eligibility to HPA.

145.  I see no reason why the costs should not follow the event.  Therefore, I order the Director to pay the Applicant’s costs, to be taxed if not agreed.  For the avoidance of doubt, I do not grant a certificate for two Counsel.