GOLDEN BAY INVESTMENT LTD. v. CHOU HUNG AND OTHERS

H E A D N O T E

Partition Ordinance, Cap 352 - Court cannot amalgamate separate properties to form single property - But where each of a number of properties are to be sold, then, if it appears to be in legitimate interests of all co-owners and workable in practice, Court may make directions for sale of all the properties as if they constituted a single property.

IN THE COURT OF APPEAL

1992, No. 160
(Civil)

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J U D G M E N T

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Bokhary, J.A.:

1. Nos 26, 28, 30 and 32 Kam Fong Street in Mongkok are adjoining vacant lots at the end of a cul-de-sac. They are vacant because the buildings which stood on them had become unsafe, had had a closure order made against them, had to be demolished pursuant to a demolition order, and have been demolished.

2. Each lot is a separate property with a separate title. There are seven equal undivided shares in each lot. The plaintiffs own five in No. 26, four-and-a-third in No. 28, four-and-a-half in No. 30 and six in No. 32. The remainder are owned by the various defendants. What the plaintiffs want is a sale of all four lots as or as if a single lot. Failing that, they want a sale of each of them individually.

3. The only valuation evidence in the court below was that adduced by the plaintiffs. Such evidence was that the four lots would fetch $52.5 million sold as a single lot but only $17.51 million if sold individually, the $17.51 million being made up of $4.37 million for No. 26, another $4.37 million for No. 28, $4.33 million for No. 30 and $4.44 million for No. 32.

4. Separate proceedings by way of originating summons were taken out in respect of each lot. Those proceedings were consolidated.

5. The consolidated proceedings were heard before Miss Gladys Li Q.C. sitting as a Deputy Judge of the High Court in September last year. By her judgment delivered on the 26th of that month, the learned Deputy Judge ordered only that Nos 26 and 32 be sold and sold individually. She held that she had no power to order more than one property to be sold as a single property. And, as far as Nos 28 and 30 were concerned, she declined to exercise her power to order any sale of either. She so declined for this reason. The plaintiffs had acquired their interests in each of the four properties after the closure order had been made. But, as far as Nos 28 and 30 are concerned, there are individual owners who acquired their interests before the closure order, and who opposed a sale, as they still do.

6. Even looked at separately, each property should, in my judgment, be sold. The learned Deputy Judge has ordered the sale of two. It seems to me that the other two should also be sold. In parting company with her, I am in no way criticising the learned Deputy Judge. As so often happens, the issues have contracted and come into sharper focus on appeal. Her concern for the interests of the individual owners is, of course, proper. But we have had a fuller opportunity to assess those interests. Through no fault of the plaintiffs, those individual's flats, which had become unsafe, have gone. Only the land remains. And it does not seem to me to be realistic to think that they really wish to hold on to their interests in the land as long-term investments. It is understandable that they would like to be bought out at an inflated price by other co-owners keen to acquire all the land for development. That is particularly understandable in people who have suffered the misfortune of their building being condemned and who would naturally want to recoup that loss from somewhere if possible. But I do not think that the Partition Ordinance, Cap 352, was designed to further ambitions of that kind, understandable as they may be. So I think that each lot should be sold even if sold separately.

7. The Partition Ordinance does not empower the court to amalgamate separate properties to form a single property. But where the court considers that each of a number of properties should be sold, so that it has become a matter of consequential directions only thereafter, then, if it appears to be in the legitimate interests of all the co-owners and workable in practice, the court may make directions for the sale of all the properties as if they constituted a single property. Such directions would be "proper" within the meaning of s. 6(4) of the Ordinance.

8. Of course, the fact that the court has power to make such directions does not mean that the court will inevitably do so in every case. For example, if in the present case any co-owner of one property only had a genuine and viable plan to bid for the same with a view to acquiring it for development, the position might be very different. For such directions may then frustrate his plan by removing any chance which he may have had of acquiring that one property. But it seems to me that all the facts and figures in the present case point to it being appropriate to make directions along the lines sought by the appellants. Here, I am not in conflict with the view taken by the learned Deputy Judge, since I am advancing from the point at which it has been decided that each property should be sold, and she never reached that point for reasons which I have explained. Moreover, the directions mooted before her were too vague.

9. At the conclusion of the hearing before the long adjournment which we granted, it became apparent that, even if what the appellants wanted was just in a general sort of way, certain matters had to be sorted out before the case could be taken further. First of all, the valuation placed before the learned Deputy Judge has by now become out of date. Secondly, it was apparent that the mechanics required further thought. Hence the adjournment between May 28 and June 18, 1993.

10. Over the adjournment, counsel for the plaintiffs produced draft minutes of judgment in each appeal.

11. Having heard all the parties, I would allow both appeals, ordering that all four properties be sold and that all four sales take place together.

12. Save as to costs, the precise orders and directions which I would make in the appeal in respect of No. 28, Civil Appeal No. 161 of 1992 are these, based on the draft submitted by counsel for the plaintiffs:

"1. There be an Order for sale of the property known as No. 28 Kam Fong Street, Kowloon (the 'Second Property') by public auction.

2. The conduct of the said sale be committed to Messrs Yam & Co., solicitors, and the said sale of the Second Property shall take place together with the sale of No. 26 Kam Fong Street (the 'First Property'), No. 30 Kam Fong Street (the 'Third Property') and No. 32 Kam Fong Street (the 'Fourth Property') subject to the terms and directions of this Order.

3. Any person having an interest in the Second Property may purchase the Second Property in the sale ordered herein.

4. Messrs Jones Lang Wootton Limited is hereby appointed auctioneers for the sale on the terms set out in the draft Appointment Letters annexed hereto in Schedule 3 and shall have the authority to sign a memorandum of sale binding on all owners of the Second Property in favour of the successful bidder in the auction.

5. The fees of the auctioneers (exclusive of disbursements and marketing expenses) shall be not more than 1% of the purchase price of the Second Property and the fees of the auctioneers (exclusive of disbursement and marketing expenses) for sale of the First, Second, Third and Fourth Properties shall not be more than 1% of the purchase price of the said 4 properties.

6. The auction shall take place before 15th October 1993.

7. The sale of the Second Property shall be advertised together with the sale of the First Property, Third Property and Fourth Property in accordance with the provisions specified in Schedule 1 of this Order.

8. The reserve price of the Second Property be 437/1,751th of the Joint Value of the First, Second, Third and Fourth Properties to be ascertained in the manner set out in Schedule 2 of this Order.

9. The Second Property shall not be sold and assigned to any one who does not satisfy all the following conditions:-

(1) he shall be the highest bidder for the Second Property,

(2) he shall also be the highest bidder for the First, Third and Fourth Properties,

(3) he shall have bid for the First, Second, Third and Fourth Properties respectively at the ratio of 437:437:433:444,

(4) he shall be able and willing to complete the sale and purchase in respect of the First, Third and Fourth Properties.

10. each of the co-owners of the Second Property shall bear the cost and expenses of the sale in the proportion of their respective undivided shares in the Second Property. The cost and expenses of the sale shall include inter alia (i) fees of the auctioneers and their disbursement and marketing expenses such as the cost for the publication and distribution of auction brochure, advertisement, preparation and erection of signboard at site, and the booking of auction room (if appropriate), (ii) the costs and disbursement of the solicitors having conduct of the sale, and in respect of work done in pursuance of and for the purpose of carrying out the Order herein including the cost for the preparation of the bidding conditions, the general and special conditions of sale but otherwise excluding any cost incurred in the prosecution of these proceedings.

11. The proceeds of sale of the Second Property shall be applied by the solicitors having conduct of the sale appointed herein in the following manner and priority:-

(a) payment of the costs and expenses of the sale,

(b) subject to paragraphs 12 and 13 herein, payment to all co-owners in proportion to the undivided shares held by each co-owners in the Second Property.

12. In the event that the interest of any of the co-owners in the Second Property is subject to any encumbrances which may be discharged by payment, the solicitors herein appointed having conduct of the sale shall be authorised and be at liberty to discharge such encumbrance immediately before completion of the sale ordered herein and deduct the amount required to discharge such encumbrance together with the costs thereof from the share of the proceeds of the sale of that co-owner whose interest in the Second Property is so encumbered.

13. In the event of any co-owner to the Second Property having no less than 1/21 undivided shares in the Second Property becoming the purchaser of the Second Property, he shall be entitled to pay so much of the last payment of purchase price by way of set off from the amount of net proceeds of sale to which he would have been entitled.

14. All parties herein do within 14 days after service upon them of this Order deliver up possession of all title deeds and documents and take all necessary steps to ensure that all title deeds and documents relating to the Second Property be delivered to the Solicitors having conduct of the sale appointed herein, and shall use their best endeavours to furnish such further information and documents to answer all such requisitions on title as the solicitors having conduct of sale and/or the solicitors for the purchaser may require.

15. A partner or, where appropriate, the sole proprietor of the solicitors having conduct of the sale appointed herein is hereby authorised:-

(i) to sign any sale and purchase agreement including supplemental agreements required for the purpose of the sale of the Second Property in pursuance of this Order, and

(ii) to execute any assignment (including confirmatory assignment) required for the purpose of the sale of the Second Property in pursuance of this Order,

on behalf of any of the co-owners of the Second Property.

16. The draft auction brochure containing the particulars of the First, Second, Third and Fourth Properties, the bidding conditions, the general condition of sale, the special conditions for the sale of the First, Second, Third and Fourth Properties, the memoranda of agreements to be executed upon the conclusion of the auction, identified by the initial of Mr Justice Litton, Justice of Appeal on the front page of the draft brochure, be hereby approved.

17. Liberty to apply to a High Court Judge for further direction."

13. I would make precisely the same orders and directions in the appeal in respect of No. 30, Civil Appeal No. 160 of 1992, save that references to No. 28 will be to No. 30 instead and that the formula 431/1,751th in paragraph 8 will be replaced by one of 437/1,751th.

14. Three things need to be said.

15. First, it should be made clear that each bid will be in respect of all four properties. Nothing else would be workable. That is why the first bidding condition contained in the brochures opens by declaring that "Every bidder shall offer a single purchase price for the purchase of the First, Second, Third and Fourth Property ...".

16. Secondly, as can be seen from paragraph 12(b) of the minutes of order, the distribution of the proceeds of sale will be in accordance with equal undivided shares in the land. That seems to me to be appropriate - and indeed inevitable - once the buildings have gone, so that all that remain are equal undivided shares in the land. The fact that the buildings had to be demolished and were demolished is a greater misfortune for those who had a right to exclusive occupation of more valuable ground floor units than for those who had a right to exclusive occupation of less valuable higher units. But we are concerned with the what remain, namely, equal undivided shares in the land. No value can be ascribed to what had to go and no longer exists. No right to exclusive occupation remains. All such rights went with the buildings.

17. Thirdly, with proper safeguards - and these are built into the directions here - letting the co-owners bid benefits the small as well as the large owners, because it increases healthy competition which is conducive to achieving the best possible price.

18. There is no need to burden this judgment with a recitation of the schedules and brochures referred to in the minutes of order.

19. As far as Nos 26 and 32 are concerned, orders and directions consistent with the foregoing can be sought from the learned judge who has adjourned those matters in respect of those properties pending these appeals.

20. As far as costs are concerned, I would make an order nisi that each party bear its own costs here and below. It is true that the plaintiffs' appeals have succeeded. But in achieving their primary purpose, a sale of all four properties as if they constituted a single property, the plaintiffs have succeeded on a fresh basis and only after considerable intervention by and indulgence from this Court. That is not to say that their counsel are not to be congratulated for putting such intervention and indulgence to good use. But that is a different matter.

21. In the result, for the reasons given, I would allow the appeals and make the orders indicated.

Litton, J.A.:

22. I concur with the judgment of my Lord Mr Justice Bokhary JA and the orders he has proposed.

Mayo, J.:

23. I likewise concur.