GREAT MIGHTY LTD v. DIRECTOR OF LANDS AND ANOTHER

HCAL 125 & 126/2014

[2018] HKCFI 1171

HCAL 125/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 125 OF 2014

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and

HCAL 126/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 126 OF 2014

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________________

J U D G M E N T

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A.  INTRODUCTION

1.  The applicant in HCAL 125/2014 (“Great Mighty”) and the applicant in HCAL 126/2014 (“Both Host”) were the respective registered owners of residential properties respectively known as 2/F, No 43G Mai Tau Wai Road (“No 43G”), and 2/F, No 45B, Ma Tau Wai Road (“No 45B”).  Great Mighty and Both Host shared the same director and address.[1]

2.  No 43G and No 45B were resumed by and reverted to the Government on 11 April 2013 under the Land Resumption Ordinance (Cap 124) (“the LRO”) for the implementation of an urban renewal development by the Urban Renewal Authority (“the URA”).

3.  By the decision of the Director of Lands (“the Director”) dated 19 December 2013 (“the Director’s No 43G Decision”), the Director offered to Great Mighty an ex gratia Supplemental Allowance (“the SA”) which was 24% of the full Home Purchase Allowance (“HPA”) for the resumption of No 43G on top of the already accepted statutory compensation of $3,384,000.

4.  Also by a decision of the Director dated 19 December 2013 (“the Director’s No 45B Decision”), the Director decided that Both Host was not eligible for the ex gratia SA on top of the already accepted statutory compensation of $3,371,000.

5.  The Director’s reasons for the Director’s No 43G Decision and the Director’s No 45B Decision (collectively “the Director’s Decisions”) are that:

(1)   Under the relevant Government policy, SA as ex gratia payment is only payable to owner of a resumed tenanted domestic property if it is actually used for domestic purpose.

(2)   Applying the policy, Great Might was only eligible for 24% of the HPA of No 43G as the SA (instead of the maximum 50% of the HPA) since two of its subdivided units, Rooms C and D, were used for non-domestic purpose, and only Rooms A and B were used for domestic purpose.

(3)   Both Host was not eligible for the SA at all because No 45B was not used for domestic purpose at the relevant time.

6.  Great Mighty and Both Host appealed the Director’s decisions to the Home Purchase Allowance Appeals Committee (“the Appeals Committee”).  The appeals (“the Appeals”) were heard together.

7.  By a decision dated 7 July 2014:

(1)   The Appeals Committee varied the Director’s No 43G Decision to the extent that Great Mighty should also be eligible for the SA in relation to Room D as it was vacant at the relevant time.  It however upheld the Director’s decision that Great Mighty is not eligible for the SA for Room C as it was used for non-domestic purpose (“the No 43G Appeal Decision”).

(2)   The Appeals Committee upheld the Director’s No 45B Decision as it agreed that No 45B was used for non-domestic purpose at the relevant time (“the No 45B Appeal Decision”).

For convenience, I will refer to these two appeal decisions collectively as “the Appeal Decisions”.

8.  By way of these judicial reviews, the applicants challenge the Director’s Decisions and the Appeal Decisions (collectively “the Decisions”).  It is the applicants’ principal contentions that the Decisions are unlawful as (a) under the relevant Government policy, the SA is payable to owners of tenanted domestic premises based on the nature of the premises but not on its actual user, (b) alternatively, even if the Government policy is otherwise, the applicants had a legitimate expectation based on the Government’s representation that they were eligible for the full SA based on the nature of the premises but not its actual user, and the Decisions failed to take into account this legitimate expectation.  Finally, it is also the applicants’ challenge that the decisions are tainted with various procedural unfairness in any event.

9.  Before I deal with the grounds of challenge in detail, it is helpful to set out the relevant background to put the matters in proper context.

B.  RELEVANT BACKGROUND

B1.  Land resumption under the LRO and the HPA and SA

10.  Leaving aside for the moment the main opposing arguments on what is the relevant Government policy for SA, the following background is largely not disputed or indisputable.[2]

11.  The Government of Hong Kong Special Administrative Region (“the Government”) may acquire private land by resumption for a public purpose.  The Director is authorized to implement resumption and compensation provisions of the LRO.

12.  When a private land is resumed, under the LRO, the former legal owners are entitled to a statutory compensation equivalent to the open market value of the resumed property at the date of resumption.[3] In addition, owner-occupiers may receive HPA whereas owners of tenanted flats or vacant flats may receive SA, as ex gratia allowances.  They are voluntary and discretionary payments offered by the Government to the affected owners whose properties are resumed by the Government.  The eligibility for receiving HPA or SA is subject to screening in accordance with the relevant Government policy.

13.  In the beginning, there was only the ex gratia payment entitled HPA.  The intention of HPA is to ensure that affected owners will not be forced out of home ownership as a result of resumption of land by the Government.

14.  The HPA goes towards supplementing the costs of purchasing a replacement flat of a similar size in the neighbourhood of the resumed flat for affected owner-occupiers to live in (and hence the title of “Home Purchase Allowance”).  Initially, the HPA was paid to all owners of domestic premises regardless of whether the premises were vacant, let or occupied by the owners.  Later, such practice was regarded by the legislature as unjustifiably generous to absentee landlords or investment owners who have no genuine need to purchase a replacement flat to live in.  As a result, there was discussion by the Legislative Council (“the LegCo”) since about 1996 of the revision to the eligibility for HPA to owners of domestic premises affected by resumption.  Eventually, the revised eligibility for the HPA and the amount payable were approved by the Finance Committee of the LegCo (“the FC”) on 25 April 1997.  See: the FC Paper FCR(97-98)7 (“the 1997 FC Paper”).

15.  On 27 June 2000, the URA Bill was passed by the LegCo.  In the course of examining such Bill, the relevant Bills Committee requested the Government to review the basis for calculating the HPA.  There was therefore further discussion and revision by the LegCo on the payment of HPA and ex gratia allowance for owners of domestic properties affected by land resumption in 2001.  See: the Finance Committee paper FCR(2000-01)83 titled “Home Purchase Allowance and Ex gratia Allowance for Owners and Legal Occupiers of Commercial Properties” for discussion by the FC on 9 March 2001 (“the 2001 FC Paper”).

16.  As set out in the paper, members of the FC were invited to approve the retitling of HPA for owners of a tenanted flat as SA (ie, Supplementary Allowance) to make it clear that it is a supplement to the open market value of the resumed flat, and to avoid confusion or any misunderstanding that the existing ex gratia payments for owners of a tenanted flat is actually for home purchase.

B2.  URA renewal project and surveys in general

17.  When an urban renewal project is announced, a freezing survey will be conducted by the URA which will normally be adopted by the Lands Department for the purpose of screening an affected owner’s eligibility for HPA or SA.  A freezing survey is an actual location survey conducted by the URA before making an offer to acquire a property to ascertain, among others, its size, status and usage.  This is conducted without prior notice to the owners or occupiers of the property.

18.  When resumption is ordered for the implementation of the urban renewal project, a Government Notice will be published in the Gazette.

19.  When the Government Notice is gazetted, an update survey will be conducted by the URA which serves as a counter-check in the screening process of an affected owner’s eligibility for HPA or SA.  However, it is the Director’s position that no additional HPA or SA entitlement or increased amount of HPA or SA will be allowed as a result of the update survey.

20.  To briefly outline the procedures and compensation mechanism for private land resumed in urban area, the Lands Department has published an information pamphlet titled “Land Resumption and Compensation in the Urban Area – Guidelines for Owners, Occupiers and Surveyors”.  For the present purpose, the relevant information pamphlet is the one of the June 2012 Revised Version (“the Information Pamphlet”).

B3.  The resumption of No 43G and No 45B

21.  Since 1 December 2007, Great Mighty had rented No 43G out to a Mr Pang.  The tenancy agreement provided that No 43G could only be used for domestic purpose, and that without the owner’s consent, Mr Pang as tenant could not change or alter the property’s internal partition.

22.  Both Host had also since 1 July 2009 rented No 45B out to Mr Pang.  Similarly, the tenancy agreement provided that No 45B could only be used for domestic purpose, and that without the owner’s consent, Mr Pang as tenant could not change or alter the property’s internal partition.

23.  It is the applicants’ case that without their knowledge or consent, Mr Pang subdivided:

(1)   No 43G into four rooms, namely, Rooms A, B, C and D.

(2)   No 45B also into four rooms, namely, Rooms A, B, C and D.

24.  Later, Mr Pang had sublet Room C of No 43G to a Ms Ma since 12 November 2010.  The sub-tenancy agreement of Room C also provided that Room C shall be used for domestic purpose only.  Again, it is Great Mighty’s case that it had no knowledge of this subletting (or any subletting of the other Rooms) until after No 43G was resumed and reverted back to the Government.

25.  On 24 February 2010, the URA conducted the freezing survey respectively of Nos 43G (“the No 43G Freezing Survey”) and 45B (“the No 45B Freezing Survey”).  I would refer to these freezing surveys collectively as the “Freezing Surveys”.

26.  The result of the Freezing Surveys showed that:

(1)   For No 43G, Rooms A, B and C were sublet to three domestic sub-tenants, whereas the occupier of Room D could not be contacted on eight different occasions.

(2)   The actual use of No 45B was found to be “domestic” and its occupancy status was alleged to be “wholly tenanted”.

27.  On 30 May 2011, based on the results of the Freezing Surveys, the URA offered:

(1)   Great Mighty to acquire No 43G with the proposed purchase price of $2,845,000 (as the open market value of the property) and a SA of $1,726,000.[4] Great Mighty did not accept the offer.

(2)   Both Host to acquire No 45B with the proposed purchase price of $2,838,000 (as its market value) and a SA of $1,715,000.[5] Both Host did not accept the offer.

28.  On 11 January 2013, the Lands Department gazetted a notice of resumption to the effect that No 43G and No 45B shall be resumed and reverted to the Government on 11 April 2013 for the implementation of a URA development project.

29.  By respective letters both dated 11 January 2013, the Director informed both applicants of the reversion date of No 43G and No 45B, and requested access to each of them to “undertake internal measurement and to interview occupiers to up-date ‘[the Freezing Survey] record”.  By way of the letters, Great Mighty and Both Host were respectively provided with a copy of the Information Pamphlet.

30.  Without knowledge to Great Mighty and Both Host at that time, an update survey was conducted by the URA in January 2013 respectively of Nos 43G (“the No 43G Update Survey”) and 45B (“the No 45B Update Survey”).  I will refer to these two update surveys collectively as “the Update Surveys”.

31.  Relevantly, the Update Surveys recorded that:

(1)   Room C of No 43G had been used by Ms Ma for carrying on a foot massage business under the name of “馬千惠足健康”.

(2)   No 45B was let to Mr Pang and divided into four rooms, and there was no sub‑tenancy for it.  However, inside these four rooms, except with the provision of a simple bed, TV set and toilet, ordinary household items could not be seen and the walls of all the bedrooms were painted in pink colour.  At the survey, Mr Pang claimed to occupy the four partitioned rooms as a whole.

32.  After Nos 43G and 45B were respectively reverted to the Government on 11 April 2013, by respective letters dated 3 May 2013:

(1)   the Director offered Great Mighty compensation in the sum of $4,256,201 which consisted of (a) $3,384,000 as the statutory compensation based on the open market value of the property, and (b) $872,201 as the SA calculated based on 24% of No 43G’s saleable area.  The Director stated in the letter that the SA offered was equal to only 24% of the full HPA “as no survey information was available for portions of the premises, and a portion of the premises was suspected for non-domestic use”.

(2)   The Director offered Both Host compensation in the sum of $3,371,000 as statutory compensation, but no SA.  The Director explained that Both Host was not offered SA as “the Premises was suspected for non-domestic use before reversion”.

33.  Great Mighty later accepted the statutory compensation of $3,384,000, but negotiated through its solicitors with the Director on the amount of SA.  It was Great Mighty’s position that it should be eligible for the full SA (which is 50% of the HPA) as the whole No 43G was for domestic use.  In support, Great Mighty provided the Director with copies of the tenancy agreement it had with Mr Pang, and Mr Pang’s sub-tenancy agreements.  As mentioned earlier, these agreements provided that the premises should be used for domestic purpose.

34.  Both Host accepted the statutory compensation of $3,371,000.  It however through its solicitors disputed with the Director on his refusal to pay the SA to Both Host.

35.  In correspondence, the Director advised Great Mighty and Both Host that it was the actual user of the property at the time of the Freezing Surveys and the Update Surveys that was relevant for his consideration for offering the HPA or SA for the property in concern.  In this respect, it is the Director’s position that:

(1)   In relation to No 43G, according to those surveys, Room C was used for foot massage purpose (ie, not for domestic purpose),[6] while no information could be obtained for Room D.  In the premises, only Rooms A and B were actually used for domestic purpose, and hence (by reference to their respective areas), Great Mighty was eligible only for the SA equalled to 24% of the HPA.

(2)   In relation to No 45B, in light of the finding of the Update Survey that the property was partitioned into four separate areas, with each area having its own room equipped with individual bedding facilities, and there was no sub‑tenancy of these rooms, the Director suspected that the property was not used for domestic purpose and hence Both Host was not eligible for the SA.

36.  Great Mighty and Both Host respectively continued to engage in correspondences with the Director contending that they should be eligible for the full SA.  In particular:

(1)   Great Mighty provided to the Director the relevant sub-tenancy agreements to say that Rooms C and D were respectively sublet to Ms Ma and another subtenant by Mr Pang for domestic purpose.  It also denied that Room C was used for business purpose.

(2)   Both Host provided the Director with the tenancy agreement with Mr Pang, and sub-tenancy agreements entered into by Mr Pang (or his agent) with the sub-tenants to say that it should be entitled to SA for the whole of No 45B.  In particular, Both Host submitted to the Director a signed statement by Mr Pang confirming that he had sublet Rooms A, C and D to other subtenants, while Room B had always been occupied by him.  However, by end of 2012 (ie, before the Update Surveys were conducted), all the subtenants had moved out.

37.  Finally:

(1)   By a letter dated 19 December 2013, the Director advised Great Mighty that, after reviewing all the further information provided by Great Mighty, and according to the prevailing Government policy, he maintained that Great Mighty was eligible only for the SA which equalled to 24% of the full HPA (ie, the Director’s No 43G Decision).

(2)   Also by a letter dated 19 December 2013, the Director advised Both Host that, after reviewing all the further information and documents provided by Both Host, according to the prevailing Government policy and based on the relevant survey findings, Both Host was not eligible for SA for No 45B as it was used for non-domestic purpose at the time of the Update Survey (ie, the Director’s No 45B Decision).

38.  On 10 February 2014, Great Mighty and Both Host appealed the Director’s Decisions to the Appeals Committee.  Among the grounds of appeal, Great Mighty and Both Host also challenged the Director’s position that as a matter of policy SA was only payable to tenanted domestic owner only if the premises was used for domestic purpose.  In this respect, the applicants pointed out in the Notices of Appeal that the Information Pamphlet did not refer to any actual domestic user requirement for SA eligibility.

39.  The Appeals were heard together on 9 April 2014.  At the hearing, the applicants did not call Mr Pang, Ms Ma or any other subtenants to give evidence.  The Director also did not call any URA staff who had conducted the surveys to give evidence.

40.  The Appeals Committee handed down its decision on 7 July 2014:

(1)   In relation to No 43G, it upheld the Director’s No 43G Decision in part but not in whole.  It decided that Great Mighty should also be eligible for SA in relation to Room D as the Appeals Committee “noted that an owner of a vacant flat is eligible for the same amount of [SA] (ie, at 50% of full [HPA] as an owner of a tenanted flat”.  However, it accepted the Director’s finding that Room C was used for non-domestic purpose at the time of the Update Survey, and hence its owner was not eligible for SA.

(2)   In relation to No 45B, it upheld the Director’s No 45B Decision.  It agreed with the Director’s finding that the owner was not eligible to any SA as it was found during the Update Survey that No 45B was operated for business and not for domestic use.

41.  By way of these judicial reviews, Great Mighty and Both Host challenge the Director’s Decisions and the Appeal Decisions.

C.  THESE JUDICIAL REVIEWS

42.  As mentioned above, Ms Eu SC (together with Ms Christine Yu) for the applicants raise essentially three main grounds in support of these judicial reviews.  As helpfully summarised in their skeleton, they are in gist that in making the respective Decisions:

(1)   The Director and the Appeals Committee misinterpreted or misapplied the policy, which was set out in the Information Pamphlet, or failed to honour or take into account the applicants’ legitimate expectation arising from the representation made in the Information Pamphlet (“the Policy/Legitimate Expectation Ground”).

(2)   The Director and the Appeals Committee failed to make adequate disclosure of primary materials containing prejudicial allegations made against the applicants (essentially the records and photos of the Update Surveys).  Further, the Director and the Appeals Committee failed to allow the staff of the URA conducting the Update Surveys to be cross-examined by the applicants (“the Procedural Irregularity Ground”).

(3)   It was unreasonable in public law sense for the Director and the Appeals Committee to find that the actual user of No 43G Room C and actual use of No 45B were “non-domestic” at the time of the Update Surveys (“the Wednesbury Unreasonable Ground”).

43.  In addition, Both Host also raises the ground that, based on the evidence disclosed to it at the material time, there was no evidence of any actual non-domestic use of No 45B at the material time.  There was also no evidence that any non-domestic use (which is denied) was due to the tenancy or sub-tenancy or Both Host’s consent (“the No Evidence Ground”).

44.  I will look at these grounds in turn.

C1.  The Policy/Legitimate Expectation Ground

45.  There is no dispute that the eligibility and payment of the ex gratia payment of HPA and SA are subject to the relevant Government policy.

46.  Fundamental to the challenge made under this ground, Ms Eu SC for the applicants says that the relevant Government policy is found and has been set out in the Information Pamphlet, which does not refer to any actual user requirement for SA eligibility.

47.  On the other hand, Mr Suen for the Director submits that the relevant prevailing policy is not set out in the Information Pamphlet but in the relevant LegCo papers.  The policy as set out therein and as approved by the FC has expressly stipulated actual user as one of the SA eligibility criteria.

48.  These opposing arguments raise the principal issue of whether the relevant Government policy is found and as set out in the Information Pamphlet or in the relevant LegCo papers. 

49.  Ms Eu submits that any government policy, in particular ones that would significantly affect the public or private individual’s rights, must be transparent, consistent, and easily accessible by the affected public and individuals.  In the premises, in the present context, the relevant policy relating to SA that has been published and made known to the affected public (ie, the owners of domestic premises) is the one as set out and contained in the Information Pamphlet.

50.  In the Information Pamphlet, the relevant parts that deals with an affected owner’s eligibility for HPA and SA are as follows:

“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.

…

6.1.2 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.

(ii) An owner who partially occupies his flat and lets out part of it will be paid the full HPA for the area he occupies and the SA at 75% of the full HPA for the tenanted area.

(iii) For a flat partially occupied by an owner’s immediate family members and partially tenanted, the full HPA will be paid for the area occupied by the immediate family members and the SA at 75% of the full HPA for the tenanted area.

(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.

(iii) In computing the amount of the HPA/SA payable, the saleable area of the flat in which the owner is occupying shall form the basis of calculation. However, unauthorized building works will not be included in the computation of saleable floor area. The definition of saleable area shall follow the Code of Measuring Practice issued by the Hong Kong Institute of Surveyors on 1 March 1999.

(iv) The HPA/SA is not payable to owners of unauthorized roof-top structures. The legal owner-occupier will still be eligible for a compensation assessed at the open market value of the roof-top itself together with rehousing (if eligible).

(v) Where statutory compensation for the land resumed is assessed on redevelopment basis, an owner is not entitled to claim the HPA/SA. In the event that the redevelopment value is greater than the existing use value, the owner is entitled to claim existing use value plus the HPA if it is to his benefit.

(vi) For urban renewal projects, if an owner of sub-divided flat elects not to receive the HPA, he may be offered rehousing.

(vii) The HPA is payable to owner-occupiers of non-domestic properties which have been issued with an occupation permit other than for domestic use but which have been used for domestic purpose for a long time provided that such use is not prohibited under the lease.

(viii) For urban renewal projects, the HPA/SA is not payable to an owner who has acquired the affected property after the commencement date of the project published in the Gazette under section 23 of the Urban Renewal Authority Ordinance.

(ix)  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.”

51.  Ms Eu points out that nowhere in these parts of the Information Pamphlet refers to the actual user of the resumed tenanted domestic premises as a requirement for SA eligibility.  They only refer to the nature of the premises being a domestic one.  Hence, objectively construed, it is clear that the relevant policy only provides that SA would be payable to an owner if (a) the premises is domestic in nature, and (b) it is tenanted.  It does not set out any additional criteria.

52.  Mr Suen for the Director however says the relevant SA policy is not found or set out in the Information Pamphlet, but principally in the 1997 FC Paper.  The 1997 FC Paper was prepared by the policy bureau for the FC’s consideration, which set out in detail the policy and its eligibility criteria for payment of HPA.  The proposed policy therein was approved by the FC at the hearing on 25 April 1997.

53.  For our present purpose, the 1997 FC Paper relevantly provides as follows:

“PROBLEM

The current Home Purchase Allowance (HPA) is over generous in certain respects and has given opportunities for abuse by speculators.

PROPOSAL

2. We propose to revise the eligibility for HPA and the amount of the allowance payable as set out in paragraph 6 below.

JUSTIFICATION

Current position

3. Owners of domestic premises are eligible for statutory compensation if their premises are resumed by the Government. These owners are also eligible for HPA, which is an ex-gratia allowance payable to enable affected owners to purchase a replacement flat of a similar size in the neighbourhood of the resumed flat. The amount of HPA payable is the difference between the cost of a replacement flat and the amount of statutory compensation. Under current practice, we estimate the cost of a replacement flat on the basis of a brand new one of a size similar to the one being resumed and in the same locality. Also, at present, HPA is paid to the owners, irrespective of whether the premises are vacant, tenanted or occupied by the owners. This is too generous to non-owner-occupiers and investment owners because they do not need replacement flats for occupation upon resumption, which was the original purpose of HPA. Moreover, owners of tenanted premises effectively receive a higher amount of HPA than those whose premises are vacant, as shown in Enclosure 1. This has created an opportunity for speculators to acquire properties with a view to profiting from the payment of HPA The Public Accounts Committee of the Legislative Council has asked for a review of the policy on the grant of HPA payments to owners of multiple flats.

Members’ views on the original proposal

4. On 19 July 1996, we put forward to Finance Committee a proposal to revise the eligibility for HPA. Details of the proposal areas follows –

(a) HPA should normally be payable only to owner-occupiers, and restricted to one residential property per owner;

(b) guidelines should be drawn up for determining whether a claimant is an owner-occupier and to address exceptional situations where payment to non-owner-occupiers and/or multiple payments to an owner may be allowed;

(c) for partly tenanted properties, HPA should be paid only for the area occupied by the owner, but not for those occupied by the tenants;

(d) residential property used for non-domestic purposes should not be eligible;

(e) owners whose claims are rejected should be able to appeal to the Secretary for Planning, Environment and Lands (SPEL); and

(f) HPA should be based on a reasonably modern, but not necessarily brand new, replacement flat in the same locality as the resumed property.

Members recognised the financial burden of HPA on the Government and agreed that there should be a restriction on the number pf payments made to a single owner. However, they expressed reservations about the details of the proposed arrangements such as the calculation of compensation and the implementation plan, and considered that these issues should be given further thought. Specifically, in subsequent consultations, some Members felt that it was too restrictive for HPA to be payable to owner-occupiers only and on the basis of one residential proporty per owner. They argued that some affected property owners might be elderly people who depended on income from tenanted flats, and they should not be penalised by changes to the policy, which has been in place for many years. They took the view that owners of fully of partly tenanted flats should remain eligible for HPA.

5. Also in those consultations, there was support for certain changes to address the present deficiencies in HPA along the following lines –

(a) a cap on the number of flats for which HPA will be paid at two per eligible owner, because an owner may live in one flat and rent out the other to generate income;

(b) basing HPA on the replacement cost of a reasonably modern flat, rather than a brand new one; and

(c) making a deduction from the full HPA, if rehousing of, and/or cash compensation to, tenants are required.

They also considered that non-domestic premises being used for non-profit-making purposes, such as churches, hostels for the aged, etc. should be eligible for HPA, and generally favoured an independent appeal channel, rather than appeals to SPEL.

The revised proposal

6. Having carefully considered the above views, we propose to revise the eligibility for HPA and the amount of the allowance payable as follows –

(a) HPA should be calculated on the basis of the vacant possession value of the property only; namely, HPA is the cost of a replacement flat (subject to (h) below) less the amount of statutory compensation assessed on the assumption that the property were vacant. Owner-occupiers and owners of tenanted flats would be paid HPA on this basis, but the differential in statutory compensation and a deduction in the amount of HPA payable (see (c) below) would mean that the owners of tenanted flats would receive less overall;

(b) HPA (calculated as in (a)above and subject to (c) to (g) below) will only be payable in respect of the ownership or partial ownership of a maximum of two flats per resumption exercise (subject to (e) below), in recognition of the fact that some owners, may live in one flat and rent out the other to generate income;

(c) full HPA should be paid for owners occupying the whole of one flat. For tenanted flats and the tenanted portion of flats which are partially rented out, HPA will still be payable, but a deduction will be made to take into account the fact that the Government rehouses the tenants;

(d) full HPA entitlement will arise from a second flat if the owners can show that the flat is occupied by their immediate family members, i.e. children, parents or dependent siblings, prior to the gazetting of the resumption, and that the occupiers do not own another property elsewhere in Hong Kong;

(e) HPA should be paid at 50% of the full allowance for one tenanted flat per owner per resumption exercise. Where an owner is paid full HPA for one flat occupied by himself or his immediate family, he should be eligible for 50% HPA for a second, tenanted flat. Where an owner receives full HPA for two flats under (d) above, he should not be eligible for any further payments in view of (b) above. An owner who does not occupy a flat (or part of a flat) being resumed in a particular exercise but owns one or more affected tenanted flats, should be eligible for 50% HPA in respect of one flat only;

(f) an owner who partially occupies his flat and lets out part of it should be eligible for full HPA, on a pro-rata basis, for the area he occupies and 50% HFA for the tenanted area;

(g) for joint owners or company owners, the same principles in (a) to (f) above should apply for each individual owner, or shareholder in the case of company ownership. The principle is that an individual owner/shareholder should be eligible for HPA in respect of up to two flats, with the HPA calculated pro-rata to the share for each joint owner/shareholder;

(h) HPA should be assessed on the basis of a reasonably modern flat (about ten years old) in the same locality and having a similar area as that of the resumed property, rather than a brand new flat;

(i) no HPA will be paid for vacant flats, unless the owner can prove that the property resumed is the only property owned by him in Hong Kong when the notice of resumption is gazetted, and he is currently living elsewhere because of his occupation or is occupying a quarter provided by his employer or renting one, using a tenancy allowance provided by his employer; and

(j) domestic property being used for non-domestic purposes should not be eligible for HPA, except for such non-profit-making uses as churches, hostels for the aged, etc., provided that the use is not in breach of the lease conditions or any legislation, or that it has been approved by the relevant authorities. (Non-profit-making owners are favoured because of the public purposes they serve.)

The revised proposal recognises the fact that some property owners depend on rent from tenanted properties as a source of income and takes into account the cost to the Government, not the owners, of rehousing tenants. Some examples of how the revised proposal would work in practice are set out in Enclosure 2.

…

BACKGROUND INFORMATION

12. The original proposal was endorsed by the Governor in Council in June 1996 before it was presented to Finance Committee on 19 July 1996. In view of Members’ views on the original proposal, we revised the proposal and obtained the Governor in Council’s endorsement of the revised proposal in March 1997. We briefed the Legislative Council Panel on Planning, Lands and Works on the revised proposal on 15 April 1997. The Panel supported the revised proposal. Some Panel members asked if the revised proposal allowed more than two HPA payments to an owner who could show that his properties were occupied by his immediate family members. We explained that the revised proposal provided for a maximum of two HPA payments per eligible owner, and hence the owner in question would not be eligible for HPA for the third or other properties.” (emphasis added)

54.  As shown in the 1997 FC Paper, in gist, under the policy as at April 1997, owners of tenanted flats are eligible for the HPA at 50% of the full rate for their first tenanted flat.  This is in line with the discussion and revision by the LegCo during 1996 ‑ 1997 on the basis that non owner-occupiers and investment owners do not need replacement flats for occupation upon resumption, which is the original intention of the HPA.  In principle, there is no reason why owners who do not occupy their flat should get full HPA, which was provided for protecting home ownership only.

55.  Among other things, it was discussed and agreed by the LegCo, as set out in paragraph 6(j) of the 1997 FC Paper, that domestic property being used for non-domestic purpose should not be eligible for HPA, except for such non‑profit‑making uses as churches, hostels for the aged, etc, provided that the use is not in breach of the lease conditions or any legislation, or that it has been approved by the relevant authorities. As mentioned in paragraph 4(d) thereof, the proposal put forward to the FC on 19 July 1996 already provided that residential property used for non-domestic purpose should not be eligible.  Paragraph 5 of the 1997 FC Paper then stated that, following subsequent consultations, members of the LegCo considered that non‑domestic premises used for non‑profit-making purpose should be eligible for HPA.  Paragraph 6(j) further mentioned that non-profit-making owners are favoured because of the public purpose they serve.  In other words, under the policy concerning ex gratia allowances in general as stated in April 1997 (“the 1997 Policy”), insofar as it relates to owners of tenanted premises, save for the exceptions identified by the legislature, domestic properties being used for non-domestic purpose should not be eligible for HPA, and this covers both HPA for owner-occupiers and the maximum 50% of HPA for investment owners at that time.

56.  Mr Suen therefore submits that the relevant part of the policy relating to ex gratia payment for tenanted domestic premises owners as approved by the FC is the one as set out at paragraph 6(j) of this paper.  That is “domestic property being used for non-domestic purpose should not be eligible for HPA, except for such non-profit making uses as churches, hostels for the aged, etc., …” (emphasis added).

57.  Further, as mentioned in the background section above, in 2001 after the LegCo had passed the URA Bill, the Government submitted to the FC a further proposal to revise the then ex gratia payment policy (ie, the 1997 Policy) on land resumption in response to the LegCo members’ request and condition added on when passing the URA Bill.  The revised proposal is first set out in the LegCo paper “CB(1)630/00-01(02)” prepared by the Government in February 2001 for the LegCo’s Panel on Planning, Lands and Works (“the 2001 Panel Paper”).  It provides relevantly as follows:

“Introduction

During the consideration of the Urban Renewal Authority Bill, some Legislative Council (LegCo) Members asked the Administration to review the proposed compensation package for owners and tenants affected by the resumption of land, in particular the proposed basis for calculating the Home Purchase Allowance (HPA) and to bring the Urban Renewal Authority Ordinance into operation only after the revised package has been endorsed by the Finance Committee of LegCo. The Bill was passed by LegCo on 27 June 2000. The Administration has now reviewed the current ex gratia allowances and our proposals are set out below.

Background

2. To arrest the problem of urban decay and to improve the living conditions of residents in old dilapidated areas, the Government will adopt a proactive and people‑oriented approach to urban renewal. Our approach to urban renewal will be guided by three underlying principles –

(a) affected property owners should be offered fair and reasonable compensation;

(b) affected tenants should be provided with proper rehousing; and

(c) the community at large should benefit from urban renewal.

3. If the ex gratia compensation package proposed below is approved by the Finance Committee of LegCo, the Urban Renewal Authority (URA) will be set up. It will be tasked to implement a 20-year urban renewal programme, consisting of 200 urban redevelopment projects and 25 uncompleted projects of the Land Development Corporation (LDC).

Proposals

4. Having reviewed the existing ex gratia compensation policy, the Administration proposes that –

(a) the basis for calculating the HPA be revised from a replacement flat of about ten years’ old to a replacement flat of about seven years’ old;

(b) the HPA for owners of a tenanted flat (or tenanted area) be retitled as the Supplementary Allowance (SA) to avoid confusion or misunderstanding;

(c) the eligibility criteria for the new HPA/SA and the amount payable, as set out in paragraph 12 below and at Annex A, be adopted;

(d) owner-occupiers of commercial properties be offered an ex gratia allowance of four times the amount of the rateable value of the resumed properties, partly in lieu of the right to claim disturbance payments consisting of loss or damage to the business conducted in the resumed properties under section 10(2)(d) of the Lands Resumption Ordinance (Cap. 124), removal costs under section 10(2)(e)(i) and professional fees in relation to the claim for business loss under section 10(2)(e)(ii) of the same Ordinance (disturbance payments), and partly as a solatium (Note 1);

(e) tenants of commercial properties be offered an ex gratia allowance of three times the amount of the rateable value of the resumed properties in lieu of the right to claim disturbance payments;

(f) owners of tenanted or vacant commercial properties be offered an ex gratia allowance of the amount of the rateable value of the resumed properties as a solatium; and

(g) the revised HPA for owner-occupiers of domestic properties and owners of domestic properties which are occupied by their immediate family members; the new SA for owners of tenanted/vacant domestic properties, and the new ex gratia allowance for owners and tenants of commercial properties be applicable to all land resumption exercises under any ordinance.

Review

(i) Background

5. We have reviewed the ex gratia allowances for owners and tenants affected by the resumption of land, taking into account the practices of the LDC, the current compensation policy of the Government for resumed land and the views of LegCo Members. A number of improvements to the existing package are recommended. The details of the proposed package are set out below in the following paragraphs.

(ii) HPA

6. At present, owners of domestic properties are eligible for statutory compensation if their properties are resumed by the Government. Under the Lands Resumption Ordinance, this statutory compensation will be the open market value of the resumed properties (Note 2). The open market value is the amount which a property, if sold in the open market by a willing seller, might reasonably be expected to realize. Owner occupiers are also eligible for the HPA, which is an ex gratia allowance payable to enable them to purchase a relatively modem 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.

7. The amount of HPA payable in individual cases is the difference between the cost of a replacement flat and the amount of statutory compensation. Under the current Government policy approved by the Finance Committee of the then LegCo in April 1997, the cost of a replacement flat is based on a flat of about ten years’ old of a size similar to the one being resumed and in the same locality.

8. Under the Land Development Corporation Ordinance (Cap. 15), the LDC is required to take all reasonable steps to acquire properties within a project area, including negotiating for the purchase of the required properties on terms that are fair and reasonable. During the acquisition stage of its land assembly process, the LDC mostly follows the compensation terms offered by the Government, although the LDC terms are more flexible and generous in some aspects. However, if the LDC is unable to acquire some properties for a project and if these remaining properties are resumed under the Lands Resumption Ordinance for the project, the Government's compensation terms are used.

9. The Administration previously proposed to the Bills Committee on the Urban Renewal Authority Bill that the basis for calculating the HPA be revised from a replacement flat of about ten years’ old to a replacement flat of about eight to ten years’ old. However, the Bills Committee was not satisfied with this proposal and asked the Administration to reconsider the proposal with a view to further enhancing the HPA. Members also asked the Administration to review the eligibility criteria for the HPA and the amount of the allowance payable with a view to relaxing the established criteria.

10. In our review, we have taken as the starting point that a reasonably modern flat in the same locality and having a similar area as that of the resumed property should be used as the basis for calculating the cost of a replacement flat. A seven years’ old flat is reasonably modern, yet no longer perceived as new. It fits our concept of a reasonably modern flat.

11. It has been pointed out to us that some elderly people are living on income from rents of flats in old buildings. At present, the HPA is payable for a maximum of two flats per owner per resumption exercise. We have reviewed the existing eligibility criteria to see if they could be relaxed to improve the ex gratia compensation for owners of tenanted flats. However, a maximum number of flats that are eligible for ex gratia compensation has to be set to avoid abuse or speculation.

12. Having reviewed the HPA and its eligibility criteria and taking into consideration the views of the property owners and Members, we propose that –

(a) the basis for calculating the HPA be revised from a replacement flat of about ten years’ old to a replacement flat of about seven years’ old (a flat which is five years’ old is still generally perceived as ‘new’ and the depreciation in value is moderate; however, a flat which is seven years’ old is generally no longer perceived as ‘new’ and this perception is reflected in the value of such a flat);

(b) the HPA for owners of a tenanted flat (or tenanted area) be retitled as the SA to avoid confusion or misunderstanding (the existing ex gratia allowance for owners of a tenanted flat is not really for home purchase; it is a supplement to the open market value of the resumed flat);

(c) the HPA/SA be payable for a maximum of three flats per owner per resumption exercise (instead of two per owner as at present) (Note 3);

(d) the full HPA be paid to an owner-occupier (ie, an owner who is occupying the entire flat);

(e) the full HPA be paid to an owner if he could prove that the entire flat is occupied by his immediate family members (Note 4);

(f) an owner, who partially occupies his flat and lets out part of it, be paid the HPA for the area he occupies and the SA at 75% of the HPA for the tenanted area on a pro rata basis;

(g) for a flat partially occupied by an owner’s immediate family members and partially tenanted, the HPA be paid for the area occupied by the immediate family members and the SA at 75% of the HPA for the tenanted area on a pro rata basis;

(h) the SA be paid at 50% of the HPA for a first wholly tenanted flat;

(i) the SA be paid at 25% of the HPA for a second wholly tenanted flat; and

(j) no SA be paid for a third wholly tenanted flat.

…

The Way Forward

27. Subject to LegCo Members’ views, we intend to make a submission to the Finance Committee of the LegCo for approval of the proposals.” (emphasis added)

58.  After having briefed the Panel by the 2001 Panel Paper, the bureau prepared the 2001 FC Paper[7] for the FC’s approval at its meeting on 9 March 2001.  The FC approved the proposal.  The relevant parts of the 2001 FC Paper (which are similar to the relevant parts of the 2001 Panel Paper) provide as follows:

“PROBLEM

The current Home Purchase Allowance (HPA) and the ex gratia allowance (EGA) for commercial property owners and tenants affected by land resumption are perceived as being inadequate by many owners and residents in older urban areas.

PROPOSAL

2. We propose to revise the basis for calculating the HPA for owner-occupiers of domestic properties and the Supplementary Allowance (SA) for owners of tenanted flats; the eligibility for HPA/SA; and the EGAs for owner-occupiers, owners and tenants of commercial properties affected by land resumption, as set out in paragraphs 6 and 10 to 12 below.

JUSTIFICATION

(A) Revised basis for calculating HPA

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 in the open market by a willing seller, might reasonably be expected to realize. Owner-occupiers are also eligible for the HPA, which is an EGA 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, vide FCR(97-98)7.

4. The amount of HPA payable to individual owners is the difference between the cost of a replacement flat and the amount of statutory compensation. As part of the package approved in April 1997, the cost of a replacement flat is based on a flat of about ten years’ old of a size similar to the one being resumed and in the same locality. Examples on how the current eligibility criteria work in practice are in Enclosure 1.

5. In the course of examining the Urban Renewal Authority (URA) Bill, the relevant Bills Committee requested the Administration to review the basis for calculating the HPA.

6. Having reviewed the HPA and taking into consideration the views of property owners and Members of the Legislative Council, we propose to revise the package as follows –

(a) the basis for calculating the HPA should be revised from a replacement flat of about ten years’ old to one of about seven years’ old;

(b) the HPA for owners of a tenanted flat (or tenanted area) should be retitled as the SA to make it clear that it is a supplement to the open market value of the resumed flat, and to avoid confusion or any misunderstanding that the existing EGA for owners of a tenanted flat is actually for home purhcases;

(c) the HPA or SA should be payable for a maximum of three flats per owner per resumption exercise, instead of two per owner as at present;

(d) the full HPA should be paid to an owner-occupier, i.e. an owner who is occupying the entire flat;

(e) the full HPA should be paid to an owner 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;

(f) an owner who partially occupies his flat and lets out part of it should be paid the HPA for the area he occupies and the SA at 75% of the HPA for the tenanted area on a pro rata basis;

(g) for a flat partially occupied by an owner’s immediate family members and partially tenanted, the HPA should be paid for the area occupied by the immediate family members and the SA at 75% of the HPA for the tenanted area on a pro rata basis;

(h) the SA should be paid at 50% of the HPA for a first wholly-tenanted flat;

(i) the SA should be paid at 25% of the HPA for a second wholly-tenanted flat; and

(j) no SA should be paid for a third wholly-tenanted flat.

Some examples of how the proposed revised HPA/SA scheme would work in practice are set out in Enclosure 2.

…

BACKGROUND INFORMATION

18. The URA Bill Was passed by the Legislative Council on 27 June 2000. Members had views on our earlier proposed compensation package for owners and tenants affected by land resumption. Accordingly, we undertook to review the package and to invited the Finance Committee to approve a revised proposal before bringing the URA Ordinance into operation.” (emphasis added)

59.  Hence, Mr Suen continues, insofar as the payment of ex gratia allowance is concerned, the FC approved the continuation of the 1997 Policy subject to the following revisions:[8]

(1)   The HPA for owners of resumed tenanted domestic properties would be retitled SA, as these owners needed not to resettle by purchasing a nearby replacement flat.  Thus, the title of “Home Purchase Allowance” was not accurate, since the ex gratia allowance was to compensate their loss of rental income because of the resumption.

(2)   Such owners are only eligible for SA for a maximum two wholly tenanted flats, where the SA should be paid at 50% of the HPA for the first wholly-tenanted flat, and 25% for a second wholly-owned flat.

60.  As a result, for the present purpose, since March 2001, the relevant prevailing Government policy relating to eligibility of owners of tenanted domestic property for SA has been the same as the 1997 Policy with the above revisions.

61.  In other words, Mr Suen submits, under the 1997 Policy as revised, the same criterion (as stated under the 1997 Policy) that owners are only eligible for SA if the tenanted domestic premises is actually used for domestic purpose still applies.  For convenience, I will refer this criterion as “the Actual User Criterion”.

62.  In light of the above contentions, as submitted by Ms Eu, the real issue that arises is not so much about the interpretation or construction of the policy, but rather whether the policy is found in the Information Pamphlet (as the applicants say) or in the LegCo papers (“the LegCo Papers”) referred to above (as submitted by the Director).

63.  In my view, for the following reasons, it is clear that as a matter of fact the relevant policy is to be found and as stated in the LegCo Papers:

(1)   There can be no dispute that the policy, which involves the use of significant public funds, was and had to be approved by the FC.  Hence, it is clear that the Government had to and did set out clearly what the proposed policy was in these LegCo papers in order to brief the Panel as well as to obtain approval from the FC.  These papers therefore must represent and contain what the relevant policy indeed was.  It is also only the policy as set out in these papers that has been approved by the FC for the necessary funding.

(2)   Moreover, as pointed out by Mr Suen, it is stated expressly at paragraph 1 of the Information Pamphlet that the pamphlet is to “briefly outlines the procedures and compensation provisions” and is intended “only to give a general guideline” in relation to resumption matters. More specifically, at paragraph 6.1.2(a)(ii), the pamphlet also expressly provides the caveat that the eligibility for receiving HPA (which is the original root of SA) will be subject to “screening in accordance with the prevailing Government policy”.  Objectively read, these express statements go against the proposition that the pamphlet itself is intended to set out the relevant policy comprehensively.

(3)   Finally, the relevant LegCo Papers are also public documents which are accessible to the public.

(4)   In this respect, I note Mr Eu’s arguments to say that it cannot be good public administration practice when the Government on one hand publish the Information Pamphlet for affected owners’ information concerning ex gratia payment without setting out effectively the entire policy, but on the other hand require the affected individuals to search and dig out LegCo Papers which could well be more than 10 to 20 years old to try to find out what the relevant policy is.  This is particularly so, as Ms Eu emphasizes, the Lands Department in the present cases had consistently referred the applicants only to the Information Pamphlet in the correspondences without even once mentioned anything about any of the LegCo Papers.

(5)   Ms Eu also brings the court’s attention to the fact that in response to LegCo Member Ms Cyd Ho’s suggestion made at the Panel meeting on 2 March 2001, the then Deputy Secretary for Planning and Lands Bureau undertook to issue a set of guidelines on resumption and valuation matters, hoping to minimize the differences between the Administration’s valuation and that of the owners.  The bureau then presented a draft guideline to the Panel for their information and endorsement.[9] This draft guideline in all material aspects is the same as the Information Pamphlet.  Ms Eu therefore says this shows that the Information Pamphlet was intended to set out the relevant Government policy.

(6)   In my view, all these submissions may well be relevant to the question of good and effective practical administration and the question of legitimate expectation based on representation (which I would deal with below).  However, they cannot override the above overwhelming objective considerations which show that the relevant policy must be the one as stated and found in the LegCo Papers.  In particular, the fact that the bureau did provide the draft guideline which became the Information Pamphlet is equally consistent with the above observations that the policy is the one as set out in the LegCo Papers. This is so since, as reflected in the meeting, the pamphlet was only intended to be a guideline and similarly subject to the caveat that the eligibility HPA was subject to the screening criteria provided under the prevailing Government policy.

64.  For the above reasons, I therefore conclude that the relevant policy relating to eligibility for the payment of SA is found and provided in the LegCo Papers as explained above, but not in the Information Pamphlet.

65.  Given this conclusion, it would now be necessary for me to further deal with a number of other contentions made by Ms Eu under this ground.

66.  First, Ms Eu says if the policy is indeed contained and found in the LegCo Papers, it is the 2001 Panel or FC Papers which are relevant for the present purpose.  Leading counsel submits these papers show that an entirely new policy was formulated and approved by the FC in 2001 which superseded and replaced the 1997 Policy entirely.  As such, when one looks at these two papers, there is again no reference at all to the Actual User Criterion.

67.  Ms Eu says this is supported also by the fact there had not been any discussions by LegCo members about this criterion in the Panel meeting and the FC meeting held respectively in March 2001. The lack of any discussions on this very important matter (as it affects an owners’ property rights as protected under Article 105 of the Basic Law) shows that the members in approving the new policy did not regard this as a necessary criterion.

68.  With the greatest respect, I am unable to accept this submission.

69.  It is clear from reading these two papers objectively that the Government was proposing to make some revisions to the then existing policy (ie, the 1997 Policy) in response to various observations made by the LegCo members when passing the URA Bill (see the italicised parts of these papers as quoted above).  In the premises, the papers would only contain and focus on the proposed revisions, and members were to discuss only on those.  The objective intention of the Government as set out in these papers was clearly to continue the then existing policy (the 1997 Policy) with the proposed revisions as an improvement to that policy.  Objectively looked at, it was not the intention of the Government to scrap the 1997 Policy and replace it with an entirely different one.

70.  Second, Ms Eu argues that if the policy is as stated in the LegCo Papers which incorporates the Actual User Criterion, then the Decisions are still unlawful as it represents an unpublished or unbeknown policy the Director applies which is inconsistent with the policy published to the public by way of the Information Pamphlet.  In support, Ms Eu relies on the authority of R (Lumba) v Secretary of State for the Home Department [2012] 1 AC 245 at paragraphs 20 and 26, per Lord Dyson.

71.  I do not think R (Lumba) assists Ms Eu.  As I have concluded above, the relevant policy is in fact stated and contained in the LegCo Papers but not the Information Pamphlet.  The LegCo Papers are also public documents accessible by the public.  There is therefore no question in the present case of two inconsistent policies, one published and the other not published.

72.  Lastly, Ms Eu says even if the Information Pamphlet does contain or set out the policy, it amounts at least to a representation made by the Government to affected owners that they are eligible for the SA as long as their domestic nature premises are tenanted.

73.  The legal principles governing the doctrine of legitimate expectation are now well established and laid down by the Court of Final Appeal in Ng Siu Tung v Director of Immigration (2002) 5 HKCFAR 1 at paragraphs 94 ‑ 98.  In summary, these principles are:

(1)   Generally speaking, a legitimate expectation arises as a result of a promise, representation, practice or policy made, adopted or announced by or on behalf of the Government (at paragraph 92).

(2)   While it is essential that the Government and the relevant government agency remain free to change its policy, the adoption of a new policy does not relieve a decision‑maker from his duty to take account of a legitimate expectation (at paragraph 93).

(3)   The law requires that a legitimate expectation arising from a promise or representation be properly taken into account in the decision‑making process so long as to do so falls within the power, statutory or otherwise, of the decision‑maker (at paragraph 94).

(4)   Unless there are reasons recognized by law for not giving effect to legitimate expectations, then effect should be given to them; fairness also requires that, if effect is not given to the expectation, then the decision‑maker should express its reasons so that they may be tested by the court when the decision is challenged (at paragraph 95).

(5)   Even if the decision involves the making of a political choice by reference to policy considerations, the decision‑maker must make the choice in the light of the legitimate expectation (at paragraph 96).

(6)   If the decision‑maker fails to do so, the decision will be vitiated by reason of a failure to take into account a relevant consideration; the failure to take account of the legitimate expectation constitutes an abuse of power and once the court has established such an abuse, it may ask the decision‑maker to exercise his discretion by taking the legitimate expectation into account (at paragraph 97).

74.  Ms Eu submits that through the Information Pamphlet, the Lands Department has made a clear representation that an owner’s eligibility for SA is dependent on whether the premises is tenanted or not only. This is so as its paragraph 6 (as quoted above) only refers to the “type” of property and “legal interest” held by the party in the property as the determining factors for deciding which “type” of compensation (including the ex gratia compensation) is payable.  Then at paragraph 6.1.2 (b)(i), it only states that “owners of tenanted flats” are “eligible for the [SA]” as a supplement to the open market value of the resumed flat subject to tenancy. Further, in none of the paragraphs under section 6.1.2(b) has there been any reference to the eligibility being subject to an additional actual domestic user criterion.

75.  When all these are read together, says Ms Eu, it objectively represents to an owner that he would be regarded as eligible for SA if his flat is tenanted.  It would not in any way appear to the owner that there would be any other additional eligibility criteria.

76.  Ms Eu then emphasizes that the said representation is reinforced and repeated by the Director to the applicants in his correspondences with the applicants, whereby the Director repeatedly referred the applicants to the Information Pamphlet.

77.  In the premises, Ms Eu submits that the applicants had a legitimate expectation that the consideration of their eligibility for the SA is only dependent upon the domestic nature of No 43G and No 45B (without any additional condition or criteria).  The Director and the Appeals Committee (as decision maker) in assessing the applicants’ SA eligibility must take into account this legitimate expectation, which they had failed to do so in making the Decisions.  The Decisions should therefore be quashed and remitted to the decision makers for reconsideration by taking into account the applicants’ said legitimate expectation.

78.  Although Ms Eu’s arguments are attractive, on reflection, I am with respect still not persuaded.  My reasons are these.

79.  As said by the Court of Final Appeal in Ng Siu Tung at paragraphs 94, 101 and 360, a legitimate expectation in law arising from a representation relates to an expectation that the representation would be honoured, and that it is legitimate or reasonable to have that expectation.  Further, the subject representation generally must be clear, unambiguous and devoid of relevant qualification: Ng Siu Tung, at paragraphs 103 - 104.

80.  Moreover, in determining whether such an unambiguous and clear representation has been made by the relevant authority, it is important to assess it in the relevant context and objectively.  See: Hong Kong Television Network [2016] 2 HKLRD 1005 (CA) at paragraphs 55 - 59 per Cheung CJHC; Ng Siu Tung, at paragraph 355; Lam Yuet Mei v Permanent Secretary for Education and Manpower [2004] 3 HKLRD 524 at paragraphs 74 and 80, per Chu J (as she then was); Secretary of State for the Home Department v Zeqiri [2002] Imm AR 296 at paragraph 44, per Lord Hoffmann.

81.  Viewed objectively and in the relevant proper context as a whole, I am not satisfied that (a) the Director had made such a clear representation as Ms Eu now submits, and (b) in any event it is legitimate for the applicants to have such an expectation.  This is so because:

(1)   As I have concluded above, the Government has at all material time a published policy that an owner of a resumed tenanted domestic flat is eligible for SA if it is actually used for domestic purpose.

(2)   Moreover, the Information Pamphlet in its opening paragraph has expressly stated that it is only to “briefly” outline the procedures and compensation provisions for resumption matter, and its information is to give a “general guideline” only.  People affected by land resumption is advised to consult professional consultants.

(3)   It is also expressly provided under section 6.1.2 that the eligibility for receiving the HPA will be subject to “screening in accordance with the prevailing Government policy”.  Under that section, the HPA and SA are considered together as the same form of ex gratia compensation allowance (see for examples paragraphs 6.1.2(d) and (e)).  In other words, readers of the Information Pamphlet are expressly alerted to the existence of other potential screening criteria under the relevant prevailing Government policy that may affect their entitlements and eligibility for ex gratia allowance.

(4)   When the Information Pamphlet is read and understood in the above context as a whole, it would not reasonably appear to a reader that the Information Pamphlet is intended to set out comprehensively all the relevant matters relating to, say, eligibility for a particular kind of compensation (statutory or ex gratia).  In other words, this would not amount to a clear and unambiguous representation that an owner of a domestic property would be eligible for SA as long as his property is tenanted without being subject to any other policy screening criteria.

(5)   Indeed, as a matter of fact, in the Lands Department’s letter dated 11 January 2013, in informing each of the applicants that No 43G and No 45B would be reverted to the Government, it provided to the applicants the Information Pamphlet and a “Notes”.  The Notes is related to the details concerning the freezing survey that needed to be carried out for the purpose of determining the owner’s eligible compensation or ex gratia payment.  It was stated expressly at paragraph 5 of the Notes that the URA staff carrying out the freezing survey would need to record the actual use of the various areas of the premises.[10]

(6)   In the premises, when the Notes are read together with the Information Pamphlet, as the applicants should be doing, objectively, it would not reasonably appear to the applicants that the Director had made a clear and unambiguous representation that they would be entitled to the SA as long as their flats were tenanted, irrespective of their actual user.

(7)   In the premises, I do not accept that there is the clear and unambiguous representation made by way of the Information Pamphlet as submitted by the applicants.

82.  In any event, in light of the published Government policy as I have concluded above, it would not be legitimate for the applicants to be under the expectation that the alleged representation (even if there is one) would be honoured, as that would be inconsistent with the published policy itself.  See: Hong Kong Television Network, supra, at paragraph 79, per Cheung CJHC.

83.  For all the above reasons, I would reject this ground of judicial review.

C2.  The Procedural Irregularity Ground

84.  The applicants raise a number of complaints about procedural irregularities.  I will consider them in turn.

C2.1  Failure to make available the URA staff for cross examination and to disclose relevant documents provided to the Appeals Committee

85.  Under this, the applicants complain that:

(1)   The Director failed to call and the Appeals Committee failed to require the attendance of the URA staff who had conducted the Freezing and Update Surveys (in particular the Update Surveys) to give evidence at the Appeals.  As a result, the applicants were prejudiced procedurally since they were not able to cross-examine them in relation to the findings of these surveys.

(2)   Further, the Director failed to disclose to the applicants the full Information Papers he had provided to the Appeals Committee for the purpose of the respective Appeals.  The Information Papers consist of the Director’s written summary of the case and the basis of his decision, and the documents he relied on to make the decision.  These documents included the URA’s survey records and photos taken during the Freezing and Update Surveys.  This failure had materially prejudiced the applicants as they were not able to make full informed submissions or representations concerning the adverse findings of non-domestic use of No 43G and No 45B.

86.  For the first complaint, I agree with Mr Suen’s submissions that there is no merit in it:

(1)   Both the Director and the applicants are at liberty to call their own witnesses.  No obligation can be imposed on either of them to call particular witnesses.

(2)   Moreover, there is no evidence to suggest that the Director can compel the staff of the URA to give evidence, having regard to the fact that the URA is a separate legal entity.[11]

(3)   In any event, the fact that the staff of the URA were not called upon to attend as witness goes to the weight of any evidence.  There is nothing to stop the applicants from making submissions as to the weight of evidence.  In fact, the applicants indeed had made submissions in this respect in their solicitors’ letter dated 25 April 2014, asking the Appeals Committee to disregard the documents included in the Information Papers as the makers of those documents were not cross-examined.

(4)   More importantly, the URA staff can only speak to the situation of the premises during the Update Survey conducted in January 2013. It would be up to the applicants to call upon witnesses, including their tenant Mr Pang and sub-tenants, to explain the occupation status, not only during January 2013, and, if necessary, throughout the period from 2010 to 2013. Yet, the applicants chose not to call upon any witness to testify on their behalf.

87.  There is therefore no procedural irregularity on this complaint.

88.  However, in relation to the complaint that the Director had failed to provide the applicants all the documents under the Information Papers, I agree with Ms Eu that this amounted to procedural irregularity in the Appeals.

89.  There is no dispute that the relevant principles governing procedural fairness in this respect have been summarized by the Court of Appeal in ATV v Communications Authority (No 2) [2013] 3 HKLRD 618 at paragraph 54 (footnote omitted):

“54. It would be convenient to start with the legal principles so comprehensively formulated by the Judge in [50] of his judgment, derived from the authorities in applications for judicial review based on a complaint of procedural unfairness for non-disclosure of information, documents or material adverse to the applicant:

(1) Procedural fairness is not rationed at its source on whether a decision being administrative or judicial. It is about the duty to act fairly, which is a key element of procedural propriety: De Smith’s Judicial Review, 6th ed., paragraph 7-003.

(2) Although it is for the decision-maker to determine what procedure is to be adopted, whether that procedure meets the necessary standard of fairness as required by the law is to be decided by the court: R v Secretary of State for the Home Department, ex parte Hickey (No 2) [1995] 1 WLR 734 at 742B to C, per Simon Brown LJ, adopting R v Secretary of State for the Home Department, ex parte Doody [1994] 1 AC 531 at 560 per Lord Mustill.

(3) In considering whether fairness has been so met, two principles are relevant:

(a) A right to be heard, which right would be worthless unless the person involved knows in adequate form what is being said against him.

(b) It is generally unfair for the decision-maker to have access to damaging or adverse material to which the person at risk has no access.

See Kanda v Government of the Federation of Malaya [1962] AC 322 (PC), at 337-8 per Lord Denning; R v The Governing Body of Dunraven School, ex parte B [2000] ELR 156 at paragraphs 18-27 per Sedley LJ.

(4) The heart of a fair procedure and hearing is that there should be a reasonable opportunity for a person to know about and respond to adverse materials received by and relied on by the decision-maker. As a starting point, there is thus a strong presumption in favour of disclosing to a party any materials relating to him or her: Re D (Minors) (Adoption Reports: Confidentiality) [1996] AC 593 , 609A-B, per Lord Mustill.

(5) Thus, generally if prejudicial allegations are to be made against a person, he must normally be given particulars of them so that he can prepare his answers, and the details required of the disclosure must be such so as to enable him to make ‘meaningful and focused representations’ to the adverse materials and allegations contained therein. The person must be enabled to controvert, correct or comment on such evidence and materials that may be relevant to the decision and influential materials on which the decision-maker intends to rely: De Smith’s, supra, paragraph 7-057; R v Secretary of State for the Home Department, ex parte Harry [1998] 1 WLR 1737 at 1748 per Lightman J; Administrative Law by Wade and Forsyth, 10th ed., p.426.

(6) However, the extent of what fairness demands is dependent on the context of each case. In this regard, the scope of disclosure to the affected person of any adverse evidence and materials received by the decision-maker required by the law to meet the minimum procedural fairness would depend, inter alia, on:

(a) The statute that creates the discretion: ex parte Hickey (No 2), supra, 742D per Simon Brown LJ.

(b) The prima facie relevance, credibility and significance of the evidence or materials vis-à-vis the decision which is to be made. See Kioa v West (1985) 159 CLR 550 at 628-9 per Brennan J.

(c) The nature of the relevant decision and its objective significance to the affected person. The more serious the significance and nature of the decision, the higher the standard or extent of procedural fairness for disclosure is generally required: R v The Governing Body of Dunraven School, ex parte B, supra, at paragraphs 18-27 per Sedley LJ.

(d) Whether there are any countervailing factors against disclosure, such as: confidentiality for the protection of the witness from genuine fear of, say reprisal or harm, or national security. If there are such factors, the decision-maker would have to make a balancing exercise (in the circumstances of each case, including the nature and seriousness of the decision to be made) to see whether (a) notwithstanding the factors, disclosure is still needed to be made to ensure fairness, (b) he would no longer rely on this material and continue the investigation or hearing without it, or (c) he would abandon the hearing or investigation entirely: R v The Governing Body of Dunraven School, ex parte B, supra, at paragraphs 18-27 per Sedley LJ.

(7) On the other hand, confidentiality per se does not invariably or necessarily restrict disclosure in light of procedural fairness. At times, circumstances may at least imply into the confidentiality a condition that the information requested would need to be disclosed to the affected person as a matter of fairness: R v The Council of the Borough of Poole, ex parte Cooper (1995) 27 HLR 605 (Lexis transcript, 3 October 1994) per Sir Louis Blom-Cooper QC, pp.6-7.

(8) Even if it is shown in a judicial review that as a matter of fairness and natural justice, the documents or material ought to have been disclosed by the decision-maker to the applicant so as to afford him an opportunity to respond to them, the court should still proceed to the next stage to consider whether to exercise its discretion to quash the decision. At this stage, one of the factors that the court should consider is whether there is absence of prejudice caused by the procedural unfairness. In assessing this factor, the test here is not whether the person is in fact prejudiced in not having the disclosure, but rather whether there is a risk of prejudice: Kanda, supra, 338 per Lord Denning. It is only in rare cases where, when procedural unfairness is demonstrated, the court would refuse to grant substantive relief under judicial review. One of such rare occasions is where it can be shown that the outcome (in the form of the original substantive decision) is inevitable even with the disclosure: Chelsea College of Art & Design, ex parte Nash (unreported, Lexis transcript, 10 May 2000, Elias J), at paragraphs 46-48; Chu Ping Tak v Commissioner of Police [2002] 3 HKLRD 679 at paragraphs 59-66 per Deputy Judge A Cheung (as the learned CJHC then was).”

90.  It is obvious that the records of non-domestic user in the respective Update Surveys together with their photos were crucial to the Director’s Decisions that Great Mighty was eligible only for 24% of the SA and Both Host was not eligible at all.  These materials are not only prejudicial to the applicants’ interest at the Appeals, but also significantly relevant and material to the Appeals.  This is underlined by the fact that the Director provided all of them under the Information Papers to the Appeals Committee.

91.  In this respect, it is also pertinent to note that the Appeals Committee in its letter dated 14 April 2014 (ie, after the hearing of the Appeals) indeed requested the Director to consider providing the applicants with copies of “all the documents submitted to the Appeals Committee (in particular the photos taken during the on-site Surveys)” by 23 April 2014.  The Appeals Committee also stated that the applicants shall have 14 days to make further submissions on those documents if so provided with.

92.  However, by his letter dated 23 April 2014 to the Appeals Committee, the Director stated that it decided not to provide to the applicants the written case summary (which effectively set out the Director’s reasons for his decisions under appeal) and the extract of the Lands Instruction because they were internal documents not intended to be released to the public.  The Director also refused to provide the applicants the URA’s survey records and photos taken during the Freezing and Update Surveys on the basis that they contained personal information collected, which was governed by the Personal Data (Privacy) Ordinance.  He was therefore not in a position to release them to a third party including the former owner.

93.  Bearing the relevant principles on procedural fairness in this respect as quoted at paragraph 89 above in mind (in particular the quoted subparagraphs (3) ‑ (5)), in my view, it is procedurally unfair in the Appeals for the Director not to disclose the survey records and photos to the applicants.  Without those materials, the applicants simply could not properly consider the evidence which had been received and considered by the Appeals Committee and to make proper and informed representations and submissions on it.  Their interest must thus also be adversely prejudiced.

94.  Mr Suen seeks to contend that there is no material prejudice caused to the applicants in the present cases, because the respective applicants should still have been able to make full and informed representations given that the Director in fact provided some relevant materials to the applicants.  The provided materials Mr Suen refers to are these.

95.  In relation to No 43G:

(1)   By a letter dated 10 July 2013, the Director informed Great Mighty that the URA had carried out the Update Survey on 11 January 2013.  Further, the URA’s information of the Update Survey on 24 January 2013 revealed that Room C of No 43G was used for foot massage purpose (“馬千惠足健康”), ie, not used for domestic purpose.

(2)   In response, by a letter dated 5 August 2013, Great Mighty’s solicitors produced the tenancy agreement with Mr Pang and sub-tenancies entered into by Mr Pang with others to deny the allegation that Room C was at the material times not used for domestic purpose.  It is therefore clear that Great Mighty knew the case it had to meet, and proactively adduced evidence to rebut such case.

(3)   Significantly, Great Mighty itself had produced the sub-tenancy with Ms Ma. The ID card number and telephone number of the sub-tenant Ms Ma were recorded in such sub-tenancy.  Hence, it is open to Great Mighty to contact Ms Ma and to call her as witness, or otherwise conduct necessary investigations to rebut the Director’s case.

(4)   Further, by a letter dated 24 September 2013, the Director further enclosed for Great Mighty’s consideration a copy of the Business Registration Certificate showing the foot massage business of “馬千惠足健康” at Room C of No 43G.  The certificate recorded the personal particulars of Ms Ma and her foot massage business.  Great Mighty was thus once again informed of the case it had to meet.

(5)    Significantly, under the said certificate, both the residential address and the place of business were reported to be Room C of No 43G. Hence, Great Mighty would be in a position to make any submissions that Room C was used for both domestic and non-domestic purpose, and that allegedly domestic purpose was the primary use.

(6)    In response, Great Mighty denied by a letter dated 7 October 2013 that Room C had been used for business purpose.  However, Great Mighty had adduced no evidence from Ms Ma by way of rebuttal.

(7)   Further, during the proceedings before the Appeals Committee, the Director has provided Great Mighty with the photo of call-up notice, sample call-up notice the survey reports complied by the URA that had not been submitted to the Appeals Committee before.  Records in the freezing survey carried out by the URA in 2010: see the letter dated 23 April 2014 from the Director.

96.  In relation to No 45B:

(1)   By a letter dated 10 July 2013, the Director informed Both Host that the URA had carried out the Update Survey on 11 January 2013.  According to the URA information, the tenant at the time of the Update Survey was Mr Pang and there was no record of any sub-tenancy for No 45B.  Having considered the situation of No 45B, in particular the internal setting (being partitioned into four separate areas, with each partitioned area having its own room equipped with individual bedding facilities, TV sets, and individual toilets inside), it was suspected that No 45B was not used for domestic purpose.

(2)   In response, by a letter dated 5 August 2013, Both Host’s solicitors produced the tenancy agreement with Mr Pang and sub-tenancies entered into by Mr Pang with others to deny the allegation that No 45B was at the material times not used for domestic purpose.  Both Host thus knew the case it had to meet, and proactively adduced evidence to rebut such case.

(3)   Further, by a letter dated 7 October 2013, Both Host further enclosed a Chinese statement from Mr Pang in support.[12] Again, Both Host knew the case it had to meet.

97.  Mr Suen submits effectively that, with these materials, and that the applicants clearly knowing what case they had to meet, the applicants simply had no answer to the surveys’ findings.  Hence, despite the non-disclosure of the Information Papers, the applicants have suffered no material prejudice since the results of the Appeals are bound to be the same.

98.  With respect to Mr Suen, I am unable to agree.  It does not appear to me that it can be said with practical certainty that the applicants would not have been able to make any further useful or relevant submissions on the findings in particular of the Freezing Surveys even if they were indeed given the full materials relating to them. 

99.  For example, with the relevant photographs provided, the applicants might well be in a position to consider raising and arguing the question of whether the subject premises could be regarded as being used primarily for domestic purpose by reference to the degree and extent of its alleged business use as they now seek to argue under the Wednesbury Unreasonable Ground (see paragraph 116 below and the court’s observation at paragraph 135 below).  They may also be in a different position to argue whether the Director had sufficient evidence to show that No 45B was used for non-domestic purpose, in particular in light of Mr Pang’s statement that all the sub-tenants had moved out before the Update Survey (see paragraphs 36(2) above, and 116(3) and 126 - 135 below).

100.  Further, in relation to the Director’s position that the full materials of the Surveys could not be disclosed to the applicants as they contained certain personal information, as submitted by Ms Eu, this cannot be a legitimate justification to refuse to disclose all those materials.  The concern of personal information, if any, can easily be addressed by redacting the relevant parts of those materials which contained confidential personal information before disclosure.  In any event, those materials indeed had been provided to the Appeals Committee which is a third party itself.

101.  I therefore conclude that there is procedural unfairness in the Appeals as a result of the Director’s refusal to provide the applicants with the Information Papers, which were however only provided to the Appeals Committee.

102.  On this basis, I would quash the Appeal Decisions, and remit them to a differently constituted Appeals Committee to reconsider the Appeals.  In this respect, it is noted that the Director has eventually already disclosed all these materials in evidence in these judicial reviews.  It would now be open to the applicants to make relevant representations relating to these materials to the Appeals Committee at the rehearing, and for the Appeals Committee to make the necessary factual findings on actual user as at the time of the Update Survey based on the evidence before it.   At the reconsideration of the Appeals, the applicants should also be entitled to raise the matters mentioned at paragraph 135 below, and make submissions thereto.

C2.2 Failure to disclose to the applicants the LegCo Papers and the Lands Instructions

103.  In the Information Papers, the Director had included an extract of the Lands Instructions.  The Lands Instructions is an internal document of the Lands Department.  The extract stated that “Domestic properties being used for non-domestic purpose should not be eligible for HPA/SA, except for such non-profit making uses as churches, hostels for the aged, etc, provided that the use is not in breach of the lease conditions or any legislation, or that it has been approved by the relevant authorities”.  In other words, it set out the relevant Government policy. 

104.  Ms Eu complains that the non-disclosure of this document to the applicants was procedurally unfair and prejudicial to their interest.

105.  In relation to this, I accept Mr Suen’s submissions that the non-disclosure of them did not cause any material prejudice to the applicants for these reasons.

106.  First, the applicants at the time of the Appeals must be fully aware of the Director’s position that the relevant policy was that owners of resumed tenanted premises were not eligible for SA if the actual user was not domestic:

(1)   In the Notice of Appeal lodged by Great Mighty to the Appeals Committee, it already stated its understanding that SA was reduced or not paid on the ground that the relevant premises “were at the material times used for non-domestic purpose and according to the prevailing Government policy, no Supplementary Allowance would be paid in respect therefor”.  Similar contention was made in the Notice of Appeal by Both Host.

(2)   Similarly, in the Amended Form 86, Great Mighty contended that, as early as 27 June 2013, it had urged the Director to make available to it all the evidence and materials on which the Director made “the allegation that No. 43G was used for non-domestic purposes”.  Similar contention was made by Both Host.

(3)   In fact, the applicants have themselves adduced evidence in an attempt to persuade the Director and the Appeals Committee that No 43G and No 45B were used for domestic purpose: see eg, letters from the applicants’ solicitors.

(4)   The above contradict the applicants’ argument that they were not informed of the Government’s policy, or were otherwise not told of the case they have to meet.

107.  Second, given my above conclusion that the relevant Government policy is contained in the LegCo Papers accessible by the public, there is no question that the applicants were then prejudiced without being provided with the Lands Instructions which only repeats, but is not the source of, the Government Policy.

108.  In the premises, the applicants were aware of the Director’s position about the Government policy, and they were in as good as a position to make any submissions they wish to make in that respect, whether they had or did not have in sight of the extract of the Lands Instructions.

109.  This conveniently brings me to the procedural complaint that the applicants were not provided with the LegCo Papers.

110.  There is nothing in this.  This is so as the Appeals Committee was also not provided with the LegCo Papers.  The Appeals Committee did not rely on them for the Appeals.  There is therefore simply no procedural unfairness demonstrated.

111.  For these reasons, I would reject these complaints.

C3.  The Wednesbury Unreasonable Ground and the No Evidence Ground

112.  These two grounds are advanced by Ms Eu together, and can be conveniently considered as such.

113.  Ms Eu submits that even if the question of whether the resumed tenanted flat is actually used for domestic purpose is relevant to the owner’s eligibility for SA, in determining that factual question, it should look at two important related issues:

(1)   The actual extent and degree of the use of the subject premises for domestic and non-domestic purpose (in terms of time and physical space) to determine whether the primary or principle user of the premises is domestic or not (“the Extent and Degree Issue”).

(2)   Whether the owner is aware of or has consented to the said non-domestic use (“the Knowledge Issue”).

114.  Leading counsel says these must be relevant issues as they are consistent with common sense and in any event supported by way of analogy by the law on the Landlord and Tenant (Consolidation) Ordinance (Cap 7).[13]

115.  Moreover, Ms Eu submits that the primary user approach is also the position adopted by the URA.  In the Director’s letter dated 14 May 2014 to the Appeals Committee in relation to the Freezing Surveys, it was stated that the URA’s advice to the Director was that “as the majority use” of No 43G was for domestic purpose, “the actual use was therefore domestic”.  In the premises, the URA determined whether No 43G as a whole was used for domestic purpose by looking at whether “the majority” (and hence the extent and degree approach) of No 43G was used for domestic purpose.  The same approach should be adopted in looking at the question of whether each of the sub-divided rooms would be regarded as actually used for domestic or non-domestic purpose.

116.  Premised on the above, Ms Eu therefore says the Decisions are clearly Wednesbury unreasonable or unlawful in the sense that the Director and the Appeals Committee had simply failed in its Tameside duty[14] as a decision-maker to engage the right questions:

(1)   In relation to No 43G, the photos now disclosed in the proceedings show that Room C might well also have been used by Ms Ma for domestic purpose, as domestic household items such as television, plastic storage boxes, electric stove, clothes hangers, toothbrush and toothpaste and other toiletries can be seen in them.  This therefore gave rise to the question of to what extent Room C was actually used for non-domestic purpose (ie, foot massage business) both as to time (say within a day, and within a month) and the physical space.  However, in both the Director’s No 43G Decision and the No 43G Appeal Decisions, there is nothing to indicate that the Director and the Appeals Committee had engaged and looked at this issue.  Without looking at and determining the Extent and Degree Issue, the determination that Room C of No 43G was actually used for non-domestic purpose is irrational (as there is no proper foundation for that conclusion) or is unlawful (since the Director and Appeals Committee had failed to properly engage the question before them).

(2)   Moreover, the Director accepts that he does not know if both applicants had given consent to the non-domestic use in relation to Nos 43G and 45B.  Indeed, both applicants had consistently denied that they were aware of any non-domestic use of these premises, and had produced the relevant tenancies and sub-tenancies to show that the premises were only to be let for domestic purpose.

(3)   Further, insofar as No 45B is concerned, Mr Pang (the head tenant) had stated in a statement provided to the Appeals Committee that all the sub-tenants moved out by the end of 2012,[15] that is before the time of the Update Survey.  In the premises, there is no evidence that whatever was found in the photographs of the Update Survey was due to any tenancy or sub-tenancy of Both Host.  For this same reason, and in light of Mr Pang’s statement, there is practically no evidence to support the non-domestic user finding for No 45B as at the time of the Update Survey (and hence the No Evidence Ground).

(4)   In the premises, the Director and the Appeals Committee failed to engage and determine the issue of whether Great Mighty and Both Host knew or agreed to the alleged non-domestic user.

(5)   Again, without looking at and determining this crucial Knowledge Issue, the respective determinations that Room C of No 43G and the whole of No 45B were actually used for non-domestic purpose are irrational (as there is no proper foundation for that conclusion) or are unlawful (since the Director and Appeals Committee had failed to properly engage the question before them).

117.  With respect, I am unable to agree with Ms Eu despite her forceful submissions.

118.  First, it appears to me that the Extent and Degree Issue and the Knowledge Issue had not been directly raised by the applicants in the Appeals.

119.  The respective Notices of Appeal in the Appeals effectively raised the same grounds of appeal.  As an example, I quote the Notice of Appeal in the No 43G as follows:

“NOTICE OF APPEAL

1. TAKE NOTICE that Great Mighty Limited (‘the Appellant’), a company duly incorporated in Hong Kong whose registered office is situated at 19^th Floor, Tower II, Admiralty Centre, No.18 Harcourt Road, Hong Kong intends to appeal against the decision of the Director of Lands made on 19^th December 2013 (‘the Decision’) whereby the Director of Lands decided that the Appellant is only entitled by way of Supplementary Allowance 24% of the Home Purchase Allowance following the resumption of the Appellant’s property at 2^nd Floor, No.43G Ma Tau Wai Road, Kowloon erected on Kowloon Inland Lot No.10073 (‘the Property’) on the ground that Rooms C and D of the Property were at the material times used for non-domestic purpose and according to the prevailing Government policy, no Supplementary Allowance would be paid in respect therefor. A copy of the Decision is annexed hereto and marked ‘A’.

2. The Appellant contends that the Director of Lands has erred in finding as a fact that Rooms C and D were at the material time used for non-domestic purpose. The Appellant avers that the Property was let by the Appellant to Pang Kim Hung (彭劍鴻) for domestic purpose. A copy of the Tenancy Agreement entered into between the Appellant and Pang Kim Hung is annexed hereto and marked ‘B’. Pang Kim Hung subsequently sublet Rooms C and D for domestick purpose to ma Chin Wai (馬千惠) and Cheung Tak Fai Felix (張德輝). Copies of the two Sub-Tenancy Agreements are annexed hereto and marked ‘C’.

3. The Director of Lands contends that the sub-tenant of Room C had been using the same for non-domestic purpose and had produced a copy of Business Registration Certificate taken out by sub-tenant of Room C. A copy of the Business Registration Certificate is annexed hereto and marked ‘D’.

4. The Director Lands contends that Room D was at the material time used for non-domestic purpose because the Director of Lands could not contact the sub-tenant thereof.

5. The Appellant contends that the aforesaid findings of facts by the Director of Lands are wrong and in fact, Rooms C and D of the Property were at the material times used for domestic purposes. The Appellant further contends that even, which is denied, Rooms C and D were at the material times used for non-domestic purpose, there is no rational reason why the Director of lands decided not to give Supplementary Allowance in respect thereof.

6. Further, the Director of Lands has not disclosed the reason for the so called prevailing Government policy in not paying the Supplementary Allowance to the owners of the domestic premises part whereof were used by the sub-tenants for alleged non-domestic purpose. The Appellant contends that such policy is irrational and is ‘wednesbury’ unreasonable. The Director of Lands has not disclosed the reasoning behind the policy despite repeated requests. The Guidelines for Owners, Occupiers and Surveyors issued by the Lands Department do not state that no Supplementary Allowance will be paid if domestic premises or parts thereof are used for non-domestic purpose.

7. The Appellant therefore contends that the Appellant should be entitled to 50% of the Home Purchase Allowance by way of Supplementary Allowance following the resumption of the property.”

120.  Hence, in substance the applicants contended in the Appeals that (a) the Director was wrong in finding that the subject premises were used for non-domestic purpose since they were in fact used domestically on the basis that they were let to Mr Pang and his sub-tenants for domestic purpose as provided in the relevant tenancies; (b) it was unreasonable for the Director to deny the applicants the SA even if those premises were used for non-domestic purpose; and (c) in any event the policy is irrational and Wednesbury unreasonable to have the Actual User Criterion for an owner’s eligibility for SA.

121.  The Extent and Degree Issue and the Knowledge Issue, which were fact sensitive, were therefore not raised in the grounds of appeal before the Appeals Committee.  Further, there is also no evidence before me to show that these issues were in any event raised by the applicants with the Director or the Appeals Committee in the course of submissions (written or otherwise).

122.  These fact-sensitive issues were therefore not engaged by the parties whether at the time when the Director had to make the determination or at the Appeals.  In the premises, the Director and the Appeals Committee were not under a duty to look into these issues to determine the question of actual user.  Moreover, if they were not so raised in the Appeals, it is trite that, as fact-sensitive issues, generally it is not open to the applicants to challenge the Appeal Decisions relating to these issues in a judicial review.

123.  Second, insofar as if the applicants are contending that these issues were so obvious in the circumstances that it is natural and incumbent on the Director and the Appeals Committee to raise and look into them on their own, I do not agree.

124.  If these were indeed such obvious and natural issues, the applicants themselves should similarly have raised them with the Appeals Committee.  The fact that the applicants did not raise them in the Appeals shows that either these issues are not such obvious and natural ones and thus must be raised specifically by the parties, or that the applicants had for their own reasons decided not to pursue them.  In either way, it would not then fall upon the Appeals Committee a duty to raise them on its own.

125.  Third, if Ms Eu is also to contend that in any event the Appeal Decisions are Wednesbury unreasonable as the non-domestic user findings are not one that a reasonable committee would have arrived at after looking at the Extent and Degree Issue and the Knowledge Issue (if I was wrong above and these issues had indeed been raised before the Appeals Committee), I am still not convinced.

126.  The Extent and Degree Issue is a fact-sensitive issue and is to be determined by the Appeals Committee based on the available evidence placed before it.  The assessment and weighing of evidence is a matter for the decision maker and the court in judicial review would and should not interfere unless it can be shown that the decision maker’s finding based on evidence assessment is not one that a reasonable authority could have formed.

127.  In my view, it must be reasonable for the Appeals Committee to make the non-domestic user findings based on the then available evidence before it.

128.  In relation to Room C of No 43G, given (a) the photos which display to a noticeable extent the room was equipped with items related to the foot massage business; (b) the foot massage business certificate identifying that place as its business address; and (c) the absence of Ms Ma’s evidence saying how comparatively little she had been using Room C (both in terms of time and space) for her foot massage business, it must be reasonably open to the Appeals Committee to place much weight on (a) and (b) (which are objective evidence) and come to the view that the primary user of Room C as a matter of degree and extent was non-domestic.

129.  In relation to No 45B, it is clear from the Director’s reasons (as explained in the correspondence) for his non-domestic user finding as at the time of the Update Survey was based on the way the four subdivided rooms of No 45B were furnished and decorated as recorded at the time of the Update Survey (see paragraphs 31(2) and 35 above), in particular the absence of any usual or ordinary household items in these rooms.  On that basis, the Director clearly did not accept Mr Pang’s suggestion as recorded in the No 45B Update Survey that he himself had occupied all the four rooms as a whole as at that time.  In light of this, whether there were previous subtenants who had allegedly moved out of these rooms before the time of the Update Survey was therefore neither here nor there (even leaving aside the fact that Mr Pang did not in fact say at the Update Survey that all the subtenants had just moved out, but only said he occupied all of them as a whole).  The Director’s finding was adopted by the Appeals Committee in the No 45B Appeal Decision.

130.  Considered as such, Both Host may well disagree with the Director and Appeals Committee’s assessment and weighing of the evidence, but it cannot be said that there is no evidential basis at all or Wednesbury unreasonable for them to make the non-domestic user finding (in particular when Mr Pang did not give evidence in the Appeals).

131.  In relation to the Knowledge Issue, as submitted by Mr Suen, it is clear from a proper reading of the 1997 Policy as revised, the Actual User Criterion does not require on the part of the Director to prove actual knowledge of the owner as to the actual user. Moreover, actual user by its own plain ordinary meaning does not depend on or is not qualified by the actual knowledge or consent of the owner or landlord. Hence, it cannot be said to be Wednesbury unreasonable if the Appeals Committee found that the actual user of Room C of No 43G and No 45B was non-domestic even if the applicants did not know about or consent to that.

132.  For these reasons, I would reject the Wednesbury Unreasonable Ground.

133.  Insofar as the No Evidence Ground is concerned, Both Host’s fundamental argument is that, in light of Mr Pang’s statement saying that all the subtenants had moved out of by the end of 2012 (and thus just before the Update Survey), coupled with the Freezing Survey finding in 2011 that No 45B was all tenanted for domestic purpose, that was no evidential foundation at all for the Director and the Appeals Committee to find that No 45B was used for non-domestic purpose.

134.  For the same reasons I have set out at paragraphs 129 and 130 above, there is again no merit in this ground.  I would also reject the same.

135.  Although I have rejected these two grounds, I would add one caveat.  As mentioned above, the applicants were not provided with the photos and records of the Update Surveys.  They might therefore not be alerted at the time of the Appeals to the potential arguments in relation to the Extent and Degree Issue and the Knowledge Issue in the actual circumstances of the present cases (see for example Ms Eu’s arguments on this summarized at paragraphs 116(1) and (3) above).  Both Host might also be unfairly handicapped in running the arguments that there was no sufficient evidential basis for the Appeals Committee to find that No 45B was used for non-domestic purpose.  In the premises, it should be open to the applicants to raise these issues (if they wish to do so) when the Appeals are remitted to the Appeals Committee for reconsideration.

C4.  Other matters

136.  There are two other subsidiary matters that I need to dispose of.

137.  First, Mr Suen submits that the Director should not have been joined as a respondent in these judicial reviews since it is not necessary for the applicants to seek to challenge the Directors’ Decisions.  This is so since the Appeals are effectively a de novo hearing and determination of the subject matter and the Appeals Committee is to investigate and decide on the facts afresh whether the appellant is eligible for the HPA or SA payment according to the Government policy and the Information Pamphlet.[16]

138.  I agree with Mr Suen.  Therefore, the applicants should only challenge the Appeal Decisions, and it is not necessary for them to challenge the Director’s Decisions.  The Director should not be joined as a respondent in these applications.  On the other hand, for the present purpose, given that the Appeals Committee has (in accordance with usual practice) rightly remained neutral in these judicial review and not participated in the proceedings, the Director should in any event be joined as an interested party and is the real and effective opponent to the challenges.

139.  Second, in the Director’s opposition affirmation, he appears to have raised an objection to these judicial reviews on the basis that the Decisions are not amenable to judicial review.  However, Mr Suen has rightly not made any submissions whether in his skeleton or at the hearing in support of that.  I would treat this as an abandonment of this basis of opposition.  In any event, as rightly submitted by Ms Eu, the authorities show that these form of decisions have been consistently subject to judicial review challenge.[17]

D.  CONCLUSION

140.  The applicants therefore succeed only on the Procedural Irregularity Ground to the extent that the failure to provide the applicants with the Freezing and Update Surveys records and the photos amounted to procedural irregularity in the Appeals.  They have however failed on all the other grounds.

141.  I therefore order that the Appeal Decisions be remitted to a differently constituted Appeals Committee for reconsideration after the applicants have a chance to make further submissions on the survey records and photos (which by now have been fully disclosed in these judicial reviews), with the caveat mentioned at paragraph 135 above.

142.  Taking into account that the applicants are successful in these judicial reviews, but only on a limited ground, I think it is only fair and just in all the circumstances to award each of them half of its costs.  I therefore make a costs order nisi in each of the applications that the Director should pay the applicant half of its costs of the judicial review, to be taxed if not agreed, with certificate for two counsel.

143.  Lastly, I thank counsel for their assistance in these matters.