BILLION GLORY PROPERTIES LTD AND OTHERS v. LI BAOZHU AND OTHERS

CACV 266 /2024, [2024] HKCA 826

On appeal from [2024] HKLdT 50

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 266 OF 2024

(ON APPEAL FROM LDCS NO 23000 OF 2019)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  This appeal is brought by the applicants against the decision of Mr Lawrence Pang, Member of the Lands Tribunal, given on 31 May 2024 (“Decision”)[1]. By the Decision, the Tribunal held it has no jurisdiction under the Land (Compulsory Sale for Redevelopment)  Ordinance, Cap 545 (“the Ordinance”)[2] to refix the reserve price of Section C of Inland Lot No 2147 (“the Lot”)[3] in an order for sale made on 29 February 2024 (“Order for Sale”)  after a failed auction, or to grant further extension of the Order for Sale beyond a total period of six months. The Tribunal further held that even if it had jurisdiction, it would not have exercised its discretion to refix the reserve price in this instance.

2.  The applicants brought this appeal with leave of the Tribunal granted on 25 June 2024 to challenge the rulings on the lack of jurisdiction and the exercise of discretion.  A counsel’s certificate of urgency was lodged on 4 July 2024 in view of the ruling on jurisdiction and that the Tribunal has only granted an extension of the Order for Sale until 29 August 2024 under section 5(4)(b).  Directions were given on 5 July 2024 for this appeal to be heard on 13 August 2024.

3.  At the conclusion of the hearing, we dismissed the applicants’ appeal with costs to those respondents who attended the hearing, to be taxed if not agreed.  These are the reasons of the court.  

Background

4.  The relevant background may be stated as follows.

5.  The applicants, which are indirect wholly owned subsidiaries of a listed company, Soundwill Holdings Limited (“Soundwill”), made an application on 22 July 2019 for an order for sale of all the undivided shares in the Lot for redevelopment.  At the time of the filing of the application, they together owned approximately 84.04%[4] of the equal undivided shares.  In between the Lot and Haven Street is a longitudinal strip of land owned by an associated company.  As a result, their valuation expert Mr Charles Chan of Savills was instructed to assess the redevelopment value (“RDV”)  of the Lot on the assumption that the Lot is a Class B site under the Building (Planning)  Regulations with frontage onto both Leighton Road and Haven Street.

6.  The trial of the application took seven days in September 2023 before Member Pang.  Judgment was given on 29 February 2024 (“Judgment”)[5]. Those respondents who filed notices of opposition did not produce any expert evidence on building condition and structural assessment.  The only disputes were on expert evidence concerning the assessment of the market value of the corresponding units in the building on the Lot known as Haven Court (the Existing Use Value; “EUV”)  and the RDV of the Lot, on the basis of which the reserve price for the prospective sale by auction was fixed.  The estimation of the RDV was the main dispute. 

7.  In the Judgment, the Tribunal estimated the RDV of the Lot at $2.425 billion and made the Order for Sale by way of a public auction subject to a reserve price of $2.425 billion.  Trustees nominated by the applicants were appointed to discharge the duties imposed under the Ordinance in relation to the sale.  Liberty to apply was given to the applicants, the respondents and the trustees for further directions under the Ordinance.

8.  On 2 April 2024, Soundwill made a public announcement in relation to the auction of Haven Court.  These statements were made on page 10 regarding the auction process:

“Under section 5(4)  of the Ordinance, in the event that the Lot is not sold by auction within three (3)  months immediately following the date of the Sale Order, the Lands Tribunal may direct that a further period of three (3)  months be given on application made to the Lands Tribunal by the trustees under the Sale Order or the Company (being the majority owner of the Lot)  or any minority owner of the Lot (as the case may be). In the event that there is no bidder putting forward a bid equal to or higher than the Reserve Price at the Auction held within the first three (3)  months, application may be made to the Lands Tribunal for an extension of time to conduct another auction together with an application to adjust the Reserve Price. In such event, the Lands Tribunal may order to stay the execution of the order for sale and so allow time for stakeholders (including the majority owner or any minority owners of Haven Court)  to make submissions together with a valuation report and provide a ruling afterwards. According to the Company’s past experience, whenever there is submission on valuation made by any party to the Lands Tribunal, the Lands Tribunal would usually allow time for all parties to prepare and submit valuation reports and to be heard before ruling by the Lands Tribunal would be made. Such process would take months. Therefore, the extension of time and/or an adjustment of the Reserve Price application may likely only be determined close to or even after the six (6)  months period under section 5(4)  of the Ordinance. …

According to section 5(4)  of the Ordinance, if the Lot is not sold by auction within the initial three (3)  months or within any further extension of time by the Lands Tribunal (with or without adjustment of the Reserve Price), then the Sale Order ceases to have any legal effect. The consequence will be that every party will go back to the situation it was in before the making of the compulsory sale application, as if the compulsory sale order had never been made by the Lands Tribunal and [the applicants] have never lodged the compulsory sale application.” (Emphasis supplied)

9.  The above in essence is the stance taken by the applicants before the Tribunal in seeking an extension of validity of the Order for Sale and refixing of the reserve price and on appeal.  Their contention is that they have the support of the Court of Appeal in Intelligent House Ltd v China Superior Ltd [2008] 6 HKC 256 (“Intelligent House CA”)  and the Court of Final Appeal in Sin Ho Yuen v Fineway Properties Ltd (2011)  14 HKCFAR 497 (“Fineway CFA”).

10.  Based on the reserve price of $2.425 billion, the consideration for the possible discloseable transaction would be approximately $278.8 million (if the applicants were the successful bidders, being 11.5% of the selling price to be paid by them)  and the consideration for the possible very substantial disposal would be approximately $2.1462 billion (if the successful bidder was an independent third party, being 88.5% of the selling price received by the applicants).  Page 5 of the announcement referred to a valuation report by Vigers of the market value upon redevelopment of the Lot as at 29 February 2024 (the date of the Order for Sale)  at approximately $2.1 billion.  It was stated on page 11 of the announcement that the directors were of the view that the possible very substantial disposal by a third party bidder was in the interests of Soundwill and the shareholders as a whole.

11.  The public auction was held on 17 April 2024.  No bid was received from the applicants or from any third party.

12.  Soundwill made another public announcement on 17 April 2024 to give an update on the auction, stating that it “finally decided not to place a bid at the Auction after having taken into careful consideration the current economic conditions and the real property market in Hong Kong, and in particular, real property value is likely to continue undergoing downwards adjustments.”  Mention was made of the Vigers valuation of the market value upon redevelopment of the Lot as at 29 February 2024, noting that it is below the reserve price of $2.425 billion.

13.  On 29 April 2024, the applicants issued a summons (“the Summons”)  seeking: (1)  the effect of the Order for Sale be extended for three months as from 29 May 2024 to expire on 29 August 2024; (2)  leave to the applicants to refix the reserve price; and (3)  in the event leave to refix is granted, directions be given for trial of the refixing of reserve price with three days reserved and steps for preparation of the trial.  The Summons was issued under sections 4(6), 4(9)  and 5(4)  and Schedule 2, the inherent jurisdiction of the Tribunal, and the liberty to apply provision in the Order for Sale.

14.  In support of the Summons, the applicants filed an affirmation of Tse Wai Hang, an executive director of Soundwill, in which he deposed that the financial situation of Soundwill was “in good shape and has not been suffering any cash flow constraint”.  According to the audited consolidated financial statements in the annual report of Soundwill, in 2023 the total revenue of Soundwill was about $395 million, financial costs were $84 million and the gearing ratio was 8% as at 31 December 2023.  Its cash flow position remained “healthy and strong” with short term bank deposits and cash or cash equivalents being respectively $635 million and $503 million while its total comprehensive expense in 2023 was $659 million.  Mr Tse confirmed that Soundwill is not suffering from any cash flow constraint or gearing problem which prevented it from bidding in the auction according to the reserve price of $2.425 billion.

15.  Exhibited to his affirmation was the opinion of Mr Charles Chan dated 25 April 2024, which was also relied on to justify the application to refix the reserve price.  Mr Chan was the applicants’ valuation expert at the trial in September 2023.  He had given an opinion that the RDV was $2 billion, whereas the valuation expert of the minority owners opined that the RDV was $3.4967 billion.

16.  The Summons was heard by Member Pang on 14 and 30 May 2024.  He handed down the Decision on 31 May 2024 refusing leave to refix the reserve price and granting an extension of the Order for Sale only up to 29 August 2024.  Costs were awarded to the respondents who appeared in person or by counsel on the High Court scale.

17.  In another case of the Lands Tribunal cited to us (Pacific Base Holdings Ltd & Ors v Lee Hop Biu & Ors)[6], the Presiding Officer HH Judge M Wong heard an application for extension of the order for sale and for leave to refix the reserve price by a majority owner in a similar situation that there was a failed public auction as no one had placed any bid.

18.  The order for sale in that case was made on 4 June 2020, with leave to appeal granted to a minority owner by the Court of Appeal on 28 August 2020 and the order was stayed pending appeal.  Consent orders were obtained on four occasions to have the order for sale extended for three months on each occasion. The stay was lifted when the appeal was determined on 31 May 2021.  The public auction, which had no bidders, took place on 27 July 2021.  The applicants then applied by summons on 23 August 2021 for further extension of the order for three months from 4 September 2021 and that the application be set down for trial for refixing the reserve price, taking the view that they could apply to the Tribunal “as of right” to have a new reserve price set, citing Fineway CFA and Intelligent House CA.  They contended that the reserve price of the failed auction was based on valuation in August 2019 which was more than two years ago and the failed auction in July 2021 was evidence by itself that the market price had fallen below the reserve price.

19.  Judge M Wong held, on the basis of Intelligent House CA, that the Tribunal does have jurisdiction to grant more than one period of extension under section 5(4)  and to refix the reserve price.  He stated that he was in no position to disagree with the ruling of the Court of Appeal, which was reinforced in Fineway CFA.  Even if the statements in Fineway CFA were obiter dicta, they lend “great support” to the ruling in Intelligent House CA.  He declined to consider the legislative materials, taking the view that the underlying objectives of the Ordinance and the wordings of the provisions in question are “clear enough”, and it is not open to the Tribunal to rule otherwise as Intelligent House CA and Fineway CFA are “very clear binding decisions on the Tribunal”.

20.  Even though the presiding officer was of the view that the Tribunal does have jurisdiction, he was not satisfied that the applicants had established any valid ground for him to exercise his discretion. The applicants’ own failure to bid per se did not amount to valid ground, and there was no evidence that the market price had changed to the extent that the reserve price had to be revised.  He dismissed the application on that basis.

21.  Both the applicants in Pacific Base and in the present case did not appeal against the reserve price.  This may or may not be due to the provision in the Lands Tribunal Ordinance, Cap 17 that appeals against any decision of the Tribunal are only permitted with leave on the ground that the decision is erroneous in point of law.  Instead, they applied to the Tribunal to refix the reserve price after the failed auction, in which the applicants did not bid.  In Pacific Base, the auction was just over a year after the order for sale was made.  In the present case, the auction was less than two months after the Order for Sale.

The applicants’ arguments

22.  Mr Mok Yeuk Chi’s arguments for the applicants in this appeal may be stated as follows.

23.  The ruling in the Decision that the Lands Tribunal has no jurisdiction to refix the reserve price after the failed auction is contrary to Fineway CFA and Intelligent House CA.  It is clearly stated in the judgment of Bokhary PJ in Fineway CFA (with whom the other members of the court agreed)  at §15 that the Tribunal has “statutory power to set a new and lower reserve price for a fresh auction.”  Although Bokhary PJ did not identify the provision in the Ordinance giving this statutory power to the Tribunal, this must be §2 of Schedule 2, having regard to what he said in §17 which provided the “conceptual basis” for this statutory power.

24.  Schedule 2 sets out the conditions in accordance with which the lot shall be sold by public auction as provided in section 5(1). The relevant part of §2 of Schedule 2 provides as follows:

“2 The lot the subject of the auction shall be sold subject to a reserve price –

(a)  which takes into account the redevelopment potential of the lot on its own …; and

(b)  approved by the Tribunal.”

25.  The relevant part of what Bokhary PJ said in §17 reads as follows:

“It is immaterial whether the reserve price was fixed by consensus or upon evidence, since in either case the reserve price is fixed by reference to the value of the land (found or agreed)  as at the date of the order, and is subject to a subsequent change of circumstance.”

26.  What was said about fixing the reserve price “by reference to the value of the land” fits neatly with fixing the reserve price by “[taking] into account the redevelopment potential of the lot”, and is a clear pointer that the statutory power mentioned in §15 is to be found in §2 of Schedule 2.  This statutory power is not to be found in section 11A(1)  of the Lands Tribunal Ordinance[7], as erroneously thought by Member Pang in §65 of the Decision.

27.  As stated in §17, the reserve price “fixed by reference to the value of the land … as at the date of the order … is subject to a subsequent change of circumstance”.  Guidance for exercising the power to refix the reserve price is found in §15:

“If the Lands Tribunal is satisfied that an auction at the existing reserve price would be unsuccessful, the proper course for it to take would be to set a new reserve price.”

28.  Based on the above, the proper test may be formulated in this way: After a failed auction, the Tribunal should normally grant leave to refix a new reserve price on new valuation evidence on a new valuation date, unless there is good reason not to do so[8].

29.  This is because a failed auction is the best direct evidence that the reserve price fixed by the Tribunal was found unacceptable by the market on the auction date.  There is no need to look for a significant fall in property prices after the reserve price has been set to exercise the power to refix.  The Tribunal erred in law in holding there must be a significant fall in property prices to refix the reserve price less than two months after the Order for Sale was made.

30.  The Tribunal’s ruling that it has no jurisdiction to grant extensions beyond the total period of six months under section 5(4)  is contrary to Intelligent House CA.  The Court of Appeal in §33 stated that it is “in respectful agreement with the Tribunal that under s 5(4), the court may grant more than one period of extension and in doing so may make such consequential order including the revision of the reserve price, as it may deem fit.”

31.  The Lands Tribunal in Intelligent House rejected the argument that a stay pending appeal should not be granted for if the appeal was to be heard more than six months from the date of the order for sale, under section 5(4)  the order would be deemed cancelled and of no effect.  The Tribunal held that on a proper construction of section 5(4)(b), coupled with section 39 of Interpretation and General Clauses Ordinance, Cap 1[9], the objective intention of the legislature in enacting the provision must be that owners of the property and trustees for sale “can repeatedly apply to the Tribunal for extension of the effect of an order for sale, each time for a period of 3 months.”

32.  Intelligent House CA is right to hold that section 5(4)  not only gives power to grant repeated extensions but also to make consequential directions to revise the reserve price.  This is because the need to accommodate the right to appeal with repeated extensions would mean that when the auction is to be held afterwards, the reserve price fixed before the appeal would probably not reflect the current land value.  It will work injustice to minority owners if there is no power to reopen the reserve price where property prices have gone up considerably after the appeal.  Intelligent House CA clearly has the support of Fineway CFA.

33.  Had the Tribunal applied the proper test as mentioned above, it should have concluded that after Soundwill had given sufficient notice in the public announcement on 2 April 2024 it had not resolved whether to bid and that the property market was extremely contracted, uncertain, dropping and searching for the bottom, the failed auction should be the best direct evidence that the reserve price was fixed at a level higher than acceptable by the market on 17 April 2024, which would justify the exercise of discretion to refix the reserve price.

The arguments of the represented respondents

34.  Mr Adrian But[10] appeared for the 11^th, 18^th, 20^th and 22^nd respondents on appeal.  The arguments of these respondents may be stated as follows.

35.  Member Pang is correct in holding that the Tribunal has no jurisdiction to reset the reserved price after a failed auction, and to extend an order for sale beyond “3+3” months as prescribed under section 5(4).  The issue boils down to the proper construction of the provisions in light of the underlying legislative intent.

36.  The relevant parts of the judgment of Bokhary PJ in Fineway CFA were extra-judicial remarks, or at most obiter dicta.  Likewise, the statement in §33 of Intelligent House CA was obiter.  The materials on the legislative history of section 5(4)  (the Land (Compulsory Sale for Redevelopment)  Bill (“the Bill”), the Minutes of the Bills Committee, the Hansard of the Provisional Legislative Council on the second and third readings of the Bill)  were not cited to and considered by the Lands Tribunal and the Court of Appeal in Intelligent House, or the Court of Final Appeal in Fineway.  The legislative materials gave clear explanation how section 5(4)  came about and why the lawmakers did not enact any provision for revising the reserve price when the lot is not sold and a new auction is held.  The legislative intent for section 5(4)  is clear: an order for sale can only be valid for “3+3” months, and the reserve price cannot be changed.

37.  A failed auction does not mean that the reserve price was wrongly set.  There could be many reasons why an auction failed, and they may not have anything to do with the reserve price.  In the absence of any successful review or appeal against it (and there is none in this instance), the reserve price must stand and be treated as fair and reasonable assessment of the ‘base level’ of compensation to owners by taking into account the redevelopment potential of the Lot.

38.  As to the potential ‘usurping of appeal rights’ in light of the “3+3” timeframe under section 5(4), there are good reasons for appeals under the Ordinance to be urgently resolved within six months to allow auctions to go ahead expeditiously.  As a fallback position, a stay pending appeal could be granted and this would suspend the operation of the order for sale and stop time from running in section 5(4)[11].

39.  The Tribunal did not err in taking into account irrelevant matters or failing to take into account relevant ones.  There is no basis to interfere with the exercise of discretion in refusing to refix the reserve price.

The arguments of unrepresented respondents

40.  The 2^nd respondent and the 7^th respondents (by their daughter), attended the hearing and made submissions supporting the Decision.  They emphasised that the minority owners are old and weak.  Some have incurred substantial costs over five years.  Others have suffered reduction in rental income and termination of leases due to the unstable situation.  It would not be fair to allow the applicants to run their case endlessly until they are satisfied with the reserve price.  This defeats one of the objectives of the Ordinance, which is “to ensure that the minority owner receives fair and reasonable compensation for his interests in the lot”[12].  The reserve price should not be overturned unless there is substantive evidence.  The auction failed because the applicants did not bid, and was not caused by misjudgement of the Tribunal on the reserve price.  Other developers would usually not make a bid in an auction under a compulsory sale.  An additional factor is that there is a strip of land in between the Lot and Haven Street owned by an associated company, and to acquire this strip for the redevelopment would increase the costs and risks.

The exercise of discretion

41.  We turn to consider the issues in this appeal.  Logically speaking, the issue of jurisdiction should be dealt before considering whether the Tribunal was in error in the exercise of its discretion on the basis that there is jurisdiction.  We propose to deal with the exercise of discretion first, as it is clear in the present situation that the Tribunal’s exercise of discretion is plainly right, and that is why we dismissed the appeal at the conclusion of the hearing.

42.  It is a bridge too far to ask the Tribunal to refix a reserve price that was set less than two months ahead of the failed auction.  Mr Mok pointed out that experts on both sides provided their valuation on the RDV in August 2023 for the trial in September 2023, which was six months from the date the Order for Sale was made and eight months from the auction.  Notwithstanding that the valuation prepared shortly before trial was used, when the Tribunal assessed the RDV on which the reserve price is based, it had taken into account updates on market evidence adduced at trial and subjected this to fine-tuning until the Judgment was handed down 29 February 2024[13].  The date when judgment was given is mere happenstance.  Neither party could have any complaint about whether the price level at such timing is too high or too low. Where there is no appeal or review of the decision in fixing the reserve price (as in the present case), an application to refix the reserve price should proceed on the premise that the reserve price is correct and demonstrate material changes in circumstances to justify refixing it.

43.  Other than the failed auction which the applicants asserted is the best direct evidence that the reserve price was higher than was acceptable by the market at the auction date, the valuation evidence they relied on consisted of the valuation of Vigers of the market value of the Lot on the basis of its redevelopment potential as at 29 February 2024, and the opinion of Mr Charles Chan dated 25 April 2024 on the result of the auction on 17 April 2024.

44.  For the Vigers valuation of $2.1 billion, there is no evidence or comparables disclosed[14]. The difference between the reserve price fixed at $2.425 billion and $2.1 billion is at most 15%.  The Tribunal rightly took the view that this difference is within a reasonable range, bearing in mind the wide range of opinions expressed on the RDV by Mr Chan ($2 billion)  and the valuation expert of minority owners ($3.4967 billion)  and the variety of issues discussed in §§64 to 101 of the Judgment[15].

45.  As pointed out in the Decision[16], Mr Chan’s conclusion in his April opinion that the present redevelopment value of the Lot in April is significantly lower than the reserve price simply echoed his opinion at the trial on the RDV, of which the Tribunal was not persuaded.  Most of the matters in his “Market Commentary” had been put forward by him at the trial and considered by the Tribunal in §§179 to 185 of the Judgment.

46.  For the reasons explained in the Decision[17], the Tribunal was not persuaded that the three transactions of whole block commercial buildings found by Mr Chan[18] can provide any indication that the market value of the Lot was or is substantially lower than the reserve price, nor did it think they are good comparables.

47.  As regards the retail price index and the office price index during August 2023 to February 2024 referred to by Mr Chan[19], the Tribunal took the view that the use of indices is only acceptable when there is little evidence to go by, and that the retail prices published by Rating and Valuation Department suffer obviously from the lack of data as a result of which the published prices per sq m would be skewed by a few transactions not comparable to the present location[20].  In any event, the Tribunal did not think Mr Chan was in a position to provide an up-to-date valuation of the Lot[21].

48.  Having considered the above evidence, the Tribunal was not persuaded that there exists a scenario of “significant fall in property prices” after a reserve price has been set as contemplated in Fineway CFA at §15[22], or that there is “significant change in the market conditions that renders the reserve price defective as at the auction to justify the reserve price to be re-fixed”[23]. The applicants should not be allowed to complain that the reserve price is too high after deliberately not bidding for the Lot despite having the apparent ability to do so and when in reality they were the only willing and potential participant[24].

49.  The reasons given by the Tribunal for exercising its discretion to refuse to refix the reserve price are unassailable.  We do not think the Tribunal has applied the wrong test in looking for significant change in the market to justify the refixing of the reserve price.  The mere fact of a failed auction is insufficient.  It would be reading the statements in Fineway CFA §§15 and 17 out of context if the discretion to refix the reserve price should be exercised once the Tribunal is presented with an unsuccessful auction or is satisfied that the auction would not be successful. An auction could fail for a variety of reasons, not just due to decline of the market price.  Short-term fluctuations and fluctuations within range of the reserve price do not justify revising the reserve price.

50.  Nor do we think the Tribunal had taken into account irrelevant matters and/or failed to take into account relevant ones in the manner it considered the public announcements of Soundwill made on 2 April 2024[25] and 13 September 2023[26].  We do not read the announcement on 2 April 2024 that the public was informed Soundwill “had not resolved to bid” and so would have the effect of not deterring potential bidders to enter into competitive bidding, had they found the reserve price acceptable.  What may properly be deduced from the announcement was merely that Soundwill was still considering the position.  The Tribunal made no error of law in giving little or no weight to the announcement. 

51.  In fixing the reserve price in the Judgment, the Tribunal had already taken into account that “the property market has entered a period submerged in a pervasive atmosphere of gloom and doom”, as emphasised by Mr Mok on a previous occasion[27]. As to the applicants’ contention that the application to refix the reserve price was not “an attempt to cherry-pick another reserve price favourable to them at everyone else’s expense” as found by the Tribunal[28], the fact remains that they are seeking a reserve price more favourable to them in light of their view that “real property value is likely to continue undergoing downwards adjustments”[29]. The Tribunal is entitled to take the view that to exercise the discretion in favour of the applicants in such circumstances would have “serious and adverse consequences on the conduct of future compulsory sale applications”[30].

52.  There is no basis to interfere with the exercise of discretion of the Tribunal in refusing to refix the reserve price.

Jurisdiction

53.  We come to the issue of jurisdiction.  We would consider first how the relevant provisions should be construed before we look at the cases.

54.  It is not in dispute that in enacting the Ordinance, the legislature has not expressly enacted any provision to refix a reserve price in a compulsory sale auction.  The key provision is section 5(4). To ascertain the legislative intent in respect of this provision, it is appropriate and instructive to consider the legislative materials which inform how this provision came to be enacted.  The Lands Tribunal in Pacific Base declined to consider the legislative materials.  The Decision would appear to be the first occasion that the legislative materials were considered by any court in construing the relevant provisions of the Ordinance[31]. 

55.  Mr Mok did not dispute that legislative materials may be considered to ascertain the purpose of the statutory provision. His submission was that it would not be helpful or appropriate to look at those materials in this situation because the provision in the Bill discussed at the meetings of the Bills Committee was very different from the provision which went through Committee Stage amendments (“CSAs”)  and it was the later version that was enacted as section 5(4).  We will return to this argument after going through the legislative materials.

(1)  The legislative history and materials

56.  The Bill was gazetted on 16 January 1998.  The major provisions may be summarised as follows:

(a)  to enable persons who own not less than 90% of the undivided shares in a lot (the majority owners)  to make an application to the Lands Tribunal for an order to sell all the undivided shares in the lot by public auction for the purposes of redevelopment of the lot; and

(b)  to empower the Tribunal to grant an order for sale if certain criteria are met and to make directions in relation to the sale and purchase of the lot, the termination of tenancies including the payment of compensation, the appointment of trustees, the application of sale proceeds and the redevelopment of the lot.

57.  The material parts of Clause 5 of the Bill read as follows:

“5. Lot to be sold by auction

(1)  Where an order for sale is granted, the lot the subject of the order shall be sold by public auction –

(a)  after the majority owner of the lot has complied with section 7 in respect of the lot; and

(b)  in accordance with the conditions specified in Schedule 2.

(2)  Where –

(a)  the auction is not held within the 3 months immediately following the date on which the order for sale of the lot is made (or such longer period as the Tribunal may specify in directions); or

(b)  at the auction –

(i)  no bid is made for the lot; or

(ii)  the highest bid is less than the reserve price to which the lot is subject,

then that order shall immediately be deemed to be of no effect as if it had been cancelled by the Tribunal.”

58.  A total of 12 meetings were held by the Bills Committee between early February and late March 1998.  At three of the meetings, there were discussions on whether the reserve price could be revised when the lot was not sold and extending the period within which the auction must be held.

59.  At the meeting of the Bills Committee on 10 February 1998, the Senior Assistant Law Draftsman (“SALD”)  spoke about clause 5:

“9. SALD further advised that upon the sale of the lot at the auction, the trustees would complete the assignment with the successful purchaser. The proceeds of the sale should be paid to the trustees who would apply them in payment to the owners on a pro rata basis in accordance with the values of their respective properties, irrespective of the number of undivided shares they held. Where the property was not sold at the auction, the sale order would be deemed to be cancelled and the majority owners would have to remove it from registration, including the registration of trustees. To this end, a provision could be added to clause 7. At members’ request, the Administration agreed to provide information on the appointment of trustees under the Partition Ordinance, Cap 352, including persons/entities being appointed as trustees, terms of appointment, remuneration to trustees etc.”[32] (Emphasis supplied.)

60.  At the next Bills Committee meeting on 16 February 1998, there were discussions on whether the reserve price could be revised to take account of market conditions and extending the three-month period for the auction to be held:

“4. Referring to clause 5(2)(a)  on auction procedures, the Chairman was concerned that the order for sale would be deemed of no effect if the auction was not held within three months after the date of the order and enquired if there were provisions for extension of time to cater for special situations. The Senior Assistant Law Draftsman (SALD)  said in response that where a longer time was needed to hold an auction the majority owners might so request at the time when the Lands Tribunal made an order of sale, or thereafter.

5.  As regards the Chairman’s further enquiry as to whether the reserve price could be revised to take account of market conditions after the making of a sale order, SALD said that this was a sensitive issue and he considered it not advisable for the majority owners to be given the chance to pick and choose the most opportune time to set the price.  He added that the Administration was considering introducing Committee Stage amendments (CSAs)  to allow the Lands Tribunal to specify in directions what the appointed trustees should do in the event of the purchaser’s failure to complete the transaction.”

“14. As agreed, the Administration would introduce CSAs to allow the Lands Tribunal to extend a further period of three months within which the auction for the sale of the lot had to be held after the date of an order for sale under special circumstances.” ^[33] (Emphasis supplied.)

61.  There was consensus that there would be no revision to the reserve price when discussion on clause 5 of the Bill continued at the Bills Committee meeting on 28 February 1998:

“14. Members noted the Administration’s acceptance of the proposal to empower the Lands Tribunal to extend on application the period from three to six months within which the auction for the sale of the lot had to be held. They were however concerned about the existing provisions of the Bill which deemed the order for sale to be of no effect if no bid was made at the auction. Since substantial time and resources would be incurred in preparing for an auction, members felt that the order should not be automatically cancelled if there was no bid at the auction. Instead, the number of auctions to be held should not be limited as long as the reserve price remained unchanged and the auction was held within the specified time frame. As it would normally take about three months to arrange an auction, the number of auctions which could be held within a period of six months could be very limited. In any case, the expenses of the auction were to be borne by the majority owners.

15. SALD explained that to deem an order for sale of no effect if no bid was made at the auction was meant to avoid any manipulation of the reserve price on the part of the majority owners and prevent them from picking and choosing the most opportune time to cast their bid. He believed that the majority owners, who were keen in acquiring the remaining shares, would try their best to buy such shares at the auction.

16. Members pointed out that the majority owners who considered the reserve price too high might choose not to bid at the auction. This was because the reserve price, which was determined by the Lands Tribunal, took into account the redevelopment potential of the lot and could be higher than that expected by the majority owners. In such a case, the majority owners might choose not to bid or would only bid if there were other purchasers bidding at the auction.

17. After discussions, the Administration agreed that as long as there was no change in the reserve price and the conditions of the order, no limit should be set on the number of auctions held within the specified or any extended time which in any case would be a maximum period of six months from the date of the application. CSAs to these effects would be moved by the Administration.”[34] (Emphasis supplied.)

62.  A report of the Bills Committee was tabled before the Provisional Legislative Council at the meeting on 7 April 1998.  The report set out the deliberations of the Bills Committee on major issues of the Bill, stating that the Committee supported the Bill subject to the CSAs to be moved by the Administration and recommended the resumption of the second reading debate of the Bill on 7 April 1998[35].

63.  As a result of the aforesaid discussions in the Bills Committee, these CSAs were put forward in relation to clause 5: clause 5 was deleted and substituted by a version which became section 5 in its current form when it was passed into law.  The material parts of this provision read as follows:

“5. Lot to be sold by auction or other means and default on payment by the purchaser of the lot

(1)  Where an order for sale is granted and the trustees under the order have complied with section 7(1)  in respect of the lot the subject of the order—

(a)  subject to paragraph (b), the lot shall be sold by public auction in accordance with the conditions specified in Schedule 2; or …

(3)  Where the purchaser of a lot the subject of an order for sale defaults on a payment for the lot —

(a)  the trustees under the order shall, with the agreement in writing of the majority owner of the lot, institute legal proceedings to seek —

(i)  relief for the loss and damages caused to the owners by reason of the purchaser’s default;

(ii)  specific performance of the purchaser’s agreement to purchase the lot,

as may be applicable; and

(b)  subject to paragraph (a), the deposit money paid by the purchaser of the lot shall be forfeited to the trustees for the benefit of the majority owner and minority owner of the lot.

(4)  Where the lot the subject of an order for sale is not sold —

(a)  subject to paragraph (b), within the 3 months immediately following the date on which the order is made; or

(b)  within such further period of 3 months as the Tribunal may specify in directions given on application made to it by the trustees under the order or the majority owner or any minority owner of the lot,

then that order shall immediately be deemed to be of no effect as if it had been cancelled by the Tribunal.”

64.  When the Chairman of the Bills Committee addressed the Provisional Legislative Council on 7 April 1998 on the report of the Committee, he mentioned that the CSAs to be moved by the Secretary for Planning, Environment and Lands (“the Secretary”)  were “the product of concerted efforts on the part of the deputations appearing before the Bills Committee, members of the Bills Committee and the Administration so as to ensure a fair and balanced new policy to expedite urban renewal in order to provide environmental improvement as well as much needed housing for the community”[36].

65.  The second reading debate of the Bill then resumed.  In moving the amendments to the Bill, the Secretary stated that the Administration had reached consensus with the Bills Committee on the CSAs[37]. The Bill passed through the second reading and went into Committee stage of the whole council.  The Secretary moved that clause 5 be amended as set out in the paper circularized to members.  The CSAs of clause 5 were passed[38]. The Bill as amended proceeded to third reading and was passed[39].

66.  We do not agree with Mr Mok that it would be inappropriate to consider the legislative materials because clause 5 of the Bill when discussed at the Bills Committee meetings was very different from the version substituted by the CSAs which became enacted as section 5 in the Ordinance.  Nor do we agree with him that the discussions merely reflected the subjective intentions of the speakers of what they intended as they did not know at the time what form the CSAs would take.

67.  To the contrary, the legislative materials gave a clear and objective indication of the purpose of and the mischief addressed by the statutory provision as amended by the CSAs.  As a result of discussions in the Bills Committee meetings, consensus was reached by the Committee and the Administration that the reserve price should not be revised to take account of market conditions after the making of an order for sale.  This was to avoid any manipulation of the reserve price by majority owners and prevent them from picking and choosing the most opportune time to cast their bid.  There was also consensus that the specified timeframe to hold any number of auctions should be a maximum of six months, as long as the reserve price should remain unchanged.

68.  The CSAs formulated by the Administration for clause 5 of the Bill brought into effect the consensus reached on the above and other issues.  Thus, section 5(3)  in the CSAs provided for the situation where the purchaser of a lot the subject of an order for sale failed to complete the transaction, as alluded to by SALD at the Bills Committee meeting on 16 February 1998.  In substitution of clause 5(2)  of the Bill, section 5(4)  in the CSAs provided for a power to extend the three-month period immediately following the date of the order for sale by “such further period of 3 months”, without providing for any consequential order to revise the reserve price where an extension is granted, as postulated in Intelligent House CA at §33.  Whereas under clause 5(2)  of the Bill the auction may be held within “such longer period as the Tribunal may specify in directions”, section 5(4)  provided that the auction must be held “within such further period of 3 months as the Tribunal may specify in directions”.

69.  Having regard to the legislative history of this provision, the clear consensus reached, and that the CSAs were to give effect to the consensus, we are inclined to think that the absence of any provision for revising the reserve price on extending the three-month period is deliberate, and that the provision of “such further period of 3 months” as a definite period of extension is indicative that there would be no further extension beyond the period specified.

70.  The CSAs were circulated to the Bills Committee and had the agreement of its members before they were moved by the Secretary, as mentioned by the Chairman and the Secretary when they addressed the legislature on 7 April 1998.  We reject the argument that the discussions at the Bills Committee meetings merely reflected the subjective intentions of the speakers and were not given effect to by the CSAs.

71.  We are inclined to agree with Mr But the objective of the arrangement in section 5(4)  is to confer expeditiousness and some measure of finality to an order for sale.  As completion should take place promptly, the reserve price would be protected and any change in market conditions minimised.  Minority owners would receive compensation promptly and, in the event the lot cannot be sold, they would cease to be troubled by further applications for compulsory sale by the majority owner unless there is no abuse of process in bringing fresh proceedings. 

(2)  The construction of section 5(4)  and other relevant provisions

72.  We turn to the construction of section 5(4), leaving aside for the time being Intelligent House CA and Fineway CFA.

73.  Having ascertained the legislative purpose of this provision, it seems to us fairly clear that on a proper construction of section 5(4), there is no power for the Tribunal to revise the reserve price on extending the three-month period immediately following the order for sale, or to grant more than one further period of three-month extension.

74.  Mr Mok submitted that this is a literal and restrictive construction and would lead to absurdity as it would effectively take away the parties’ right of appeal against an order for sale.  He pointed out that the time taken for an appeal to be disposed of was apparently not considered by the Bills Committee or the Administration and this is more likely than not to take more than six months in many instances. 

75.  It is correct that the time taken for an appeal to be resolved was not apparently considered in the legislative process.  However, we do not think the construction discussed above would effectively take away the right of appeal.  The Tribunal has power to stay the execution of the order for sale pending appeal.  The effect of a stay of execution is to suspend the operation of the order, so that no auction may be held during the stay.  As submitted by Mr But in his fallback argument, a stay of execution would stop time from running in section 5(4).  On a proper construction of section 5(4), the reference to “the lot the subject of an order for sale is not sold” refers in our view to an operative order, so that where the lot is not sold simply because the order for sale has been stayed pending appeal, the consequences stipulated in section 5(4)  are not engaged.  On the determination of the appeal, the stay can be lifted and the Tribunal may grant “such further period of 3 months” as extension.  On a proper reading of section 5(4), the three-month extension does not have to be immediately after the three months following the date of the order for sale.  There appeared to be a practice of majority owners making repeated applications for three-month extension during the time when there was a stay pending appeal[40]. We do not think this is necessary or correct.

76.  Mr Mok prayed in aid other provisions in the Ordinance and elsewhere to support his argument that there is power to revise the reserve price on extending the three-month period immediately after the order for sale. His arguments may be summarised as follows:

(1)  Under §2 of Schedule 2, the reserve price of the lot must “[take] into account the redevelopment potential of the lot on its own”.

(2)  Section 4(6)  provides “Where the Tribunal makes an order for sale, … it may also give such directions as it thinks fit – (a)  relating to – (i)  the sale and purchase of the lot the subject of the order, including (but without limiting the generality of the foregoing)  settling the particulars and conditions of sale of the lot.”  Fixing the reserve price is settling a condition of the particulars and conditions of the sale by auction.

(3)  Section 39(1)  of Cap 1 provides that “Where any Ordinance confers any power or imposes any duty, then the power may be exercised and the duty shall be performed from time to time as occasion requires”.  That should apply to the fixing of the reserve price under §2 of Schedule 2 and section 4(6)(a)(i).

(4)  Section 4(6)(c)  further provides “Where the Tribunal makes an order for sale, … it may also give such directions as it thinks fit – (c)  which are not inconsistent with the other provisions of this Ordinance”.  There is no provision in the Ordinance which prohibits the Tribunal from making a direction to refix the reserve price, after a failed auction or for any other reason.

(5)  Section 4(9)  provides “In any case of doubt or difficulty or in any matter not provided for under this Ordinance, the trustees under an order for sale, or the majority owner or any minority owner of the lot the subject of the order, may apply to the Tribunal for directions.”  This extremely wide provision with no delineation of the scope of possible directions must be able to accommodate a direction to refix the reserve price, after a failed auction or for any other reason.

(6)  Last but not least, the Order for Sale provides for “liberty to the applicants … to apply to the Tribunal for further direction(s)  under the Ordinance”.

77.  We do not think the provisions mentioned above assist the applicants.

78.  The wording of §2 of Schedule 2 (that the reserve price must “[take] into account the redevelopment potential”), whether read on its own or with the other provisions cited by Mr Mok, cannot reasonably be read as empowering the Tribunal to refix the reserve price.  As for the directions the Tribunal may give under section 4(6), they are in relation to the situation “Where the Tribunal makes an order for sale”, not where an order for sale has already been made.  The provisions in section 4 deal with the determination of an application for compulsory sale, and orders and directions that may be made upon that determination.  Section 5 deals with the situation that an order for sale has been granted under section 4(1)(b)(i).  It is inappropriate to pray in aid seemingly wide provisions in section 4 to augment the powers in a different situation in section 5.  The liberty to apply provision is confined to logistic matters in an order that requires working out, and does not permit varying matters of substance adjudicated upon.  Section 39(1)  of Cap 1 does not add anything to the debate.

79.  In summary, stripped of the assistance derived from passages in CFA Fineway and Intelligent House CA, on a proper construction of section 5(4), there is no power to refix the reserve price on extending the three-month period immediately following the date of the order for sale and no power to grant extension beyond such further period of three months.

(3)  Intelligent House CA

80.  By the stare decisis principle, a judgment of a two-judge court in the Court of Appeal in an interlocutory appeal has the same authority as a three-judge court and it is binding on the Court of Appeal. (Chiu Hoi Po v Commissioner of Police [2008] 4 HKLRD 67 at §§33, 45; Solicitor (24/07)  v Law Society of Hong Kong (2008)  11 HKCFAR 117 at §57)   The Court of Appeal is bound by its previous decisions, but may depart from a previous decision where it is satisfied that it is plainly wrong. (Solicitor (24/07)  v Law Society of Hong Kong at 45)

81.  What is binding in Intelligent House CA is the ratio decidendi, which is “any rule of law expressly or impliedly treated by the judge as a necessary step in reaching his conclusion, having regard to the line of reasoning adopted by him”.  The ratio is “the principle or statement of law on which the previous decision is based to the extent to which it is essential to the decision, it being recognised that there may be more than one ratio when the court assigns more than one ground for its decision”. (Solicitor (24/07)  v Law Society of Hong Kong at §25 and footnote 11)

82.  The Lands Tribunal in Intelligent House granted an unconditional stay of execution of the order for sale on the application of one of the minority owners, pending the determination of its appeal against the order for sale to the Court of Appeal.  In doing so, the Tribunal rejected the majority owner’s submission that the effect of section 5(4)  was that if there were delay of more than six months from the date of the order, the order for sale would be automatically deemed to have been cancelled and have no effect.  The Tribunal accepted the minority owner’s submission.  It held that on a proper construction of section 5(4), coupled with the effect of section 39 of Cap 1, section 5(4)  should be interpreted to give the effect that owners of the lot and trustees for sale “can repeatedly apply to the Tribunal for extension of the effect of an order for sale, each time for a period of 3 months”.  The Tribunal concluded as follows:

“In our view, in the balance exercise, after weighing this potential financial loss of Intelligent House in the event of an unsuccessful appeal against the effect of the appeal being rendered nugatory if a stay is not granted, coupled with our conclusion that there is an arguable appeal and the fact that the possibility of appeals are an integral part of every litigation, we come to the view that the discretion should be exercised in favour of granting a stay in the circumstances of this case.”

83.  On appeal by the majority owner to the Court of Appeal against the unconditional stay granted by the Tribunal, the Court took into consideration if the sale scheduled to take place just two days after were stayed pending the substantive appeal to be heard eight months away, the majority owner would suffer significant financial loss in excess of $29 million being interest loss on the capital it had put into the purchase of the buildings.  The Court took the view there should be no stay unless the minority owner, which was a shell company and had purchased the unit as an investment, should undertake to indemnify the majority owner for this unchallenged potential loss, and fortify its undertaking (at §§17, 18).  The minority owner asserted it was not in a position to provide a fortified undertaking for a reasonable amount, but adduced no evidence on its financial resources.  It was content to proceed on the basis it had no means, and just offered its own unit as security which was not even sufficient to cover the costs in the Tribunal that it was liable to pay the majority owner (at §§22, 23).  The Court was not prepared to accept that the minority owner was not in a position to offer a meaningful fortified undertaking, and declined to proceed on the basis that the appeal would be stifled if it were to refuse a stay except upon terms (at §25). It came to the view that the Tribunal’s exercise of discretion to grant an unconditional stay was outside the generous ambit within which a reasonable disagreement was possible (at §32).  It therefore allowed the appeal and set aside the unconditional stay pending appeal.

84.  As the Court of Appeal had refused to grant a stay pending appeal, what it said at §33 regarding the majority owner’s alternative argument under section 5(4)  (in agreeing with the Tribunal that it may grant more than one period of extension under section 5(4)  and make consequential order as it deem fit including revision of the reserve price)  is not essential to its decision and not part of the ratio.  The Court did not appear to have considered the legislative materials and gave no reason why the Tribunal should have power to revise the reserve price on granting an extension other than this being a consequential order.  We respectfully decline to follow the obiter dicta in §33 of Intelligent House CA.

(4)  Fineway CFA

85.  In Fineway, the hearing of the application for compulsory sale commenced in the Lands Tribunal in June 2008.  Shortly after the hearing began, the parties informed the Tribunal they had agreed on a reserve price of $122 million.  The application was adjourned part-heard and resumed in December 2008.  Between June and December, there was an “unimaginable drastic market drop” due to the “Financial Tsunami”.  At the resumed hearing, Fineway sought to re-open the reserve price on inter alia this ground, which was permitted by the Tribunal.  Judgment was given on 20 March 2009, by which an order for sale was made with a reserve price at $70.5 million.  No stay of execution pending appeal was sought, the auction proceeded with Fineway as the only bidder and it acquired the lot at the reserve price.

86.  An appeal was brought by the minority owner on the ground that the Tribunal erred in allowing the reserve price to be re-opened and $122 million should be substituted.  The Court of Appeal was of the view that the reserve price or RDV should not have been re-opened.  However, the minority owner had not applied for a stay of the order for sale and so there was no available remedy.  Hence, the appeal was dismissed.  The Court of Appeal made this observation in §17[41]:

“That leaves the economic crisis that occurred in the autumn of 2008. In W v H and Z, (unreported)  CACV 127 of 2008, 12 May 2009, this court rejected an attempt to reopen an order for ancillary relief on the basis that the assets retained by the husband had diminished in value in a way that had not been anticipated because of the economic turmoil of 2008 that ensued following compliance with the order. If the diminution in value of assets through the natural processes of price fluctuation, however dramatic, normally does not warrant the variation of orders made, by parity of reasoning, it can have no impact on a concluded agreement and does not constitute a valid reason for reopening it.”

87.  The Court of Appeal granted leave to appeal to the Court of Final Appeal on the question of “whether there is a remedy available to a minority owner after an auction has taken place when it has been held the reserve price at the auction was the wrong price”.  Fineway was permitted to include a ground in a supplemental printed case to challenge the decision of the Court of Appeal that the reserve price should not have been re-opened.

88.  The Court of Final Appeal did not hear any arguments, as on the day of the hearing it was informed by counsel that the parties had achieved a settlement, the terms of which they wished to keep confidential.  The Court of Final Appeal was concerned about the substantial costs incurred in the Lands Tribunal.  Having received assurance that the settlement catered for those costs, it acceded to the invitation to dismiss the appeal with no order as to costs of the appeal.  It indicated to the parties that in acceding to that invitation, reasons for doing so would be handed down as “there were a number of things which ought not to be left unsaid”. (at §1)

89.  It referred to the two questions framed by the parties: (1)  whether, and if so under what circumstances, an agreement between the parties as to the reserve price for the Lands Tribunal to approve can be re-opened at the instance of one party and despite the objection of the other party; and (2)  whether an appellate court can accord the objecting party a remedy if such an agreement is wrongly re-opened and the property is sold at a price less favourable to that party than the reserve price originally agreed. (at §2)

90.  In §§13 to 18, the Court of Final Appeal discussed why the Court of Appeal were of the view that the reserve price should not have been re-opened in those circumstances.  It was in the context of that discussion that the Court of Final Appeal made various statements relied on by Mr Mok to support his arguments on jurisdiction.  It is best to quote the relevant paragraphs in full[42]. The parts particularly emphasised in Mr Mok’s submissions are italicised for ease of reference:

“14. It is for the Lands Tribunal to set a reserve price. But if there is a consensus between the parties on the reserve price to be set, then it is open to the Lands Tribunal to set the reserve price in accordance with such consensus unless there appears to be good reason not to do so. Indeed, it is only to be expected that the Lands Tribunal would normally proceed on the basis of any such consensus.

15. Suppose a significant fall in property prices occurs after a reserve price has been set (whether by consensus or upon evidence). Strictly speaking, there would be no need to ask the Lands Tribunal to re-open the agreed reserve price and set a lower one, for neither the would-be redeveloper nor anyone else would bid up to the reserve price. The Lands Tribunal would then have to exercise its statutory power to set a new and lower reserve price for a fresh auction. There is, however, no need to go through the pointless exercise of holding an unsuccessful auction. The parties could simply return to the Lands Tribunal and ask it to set a new reserve price. If the Lands Tribunal is satisfied that an auction at the existing reserve price would be unsuccessful, the proper course for it to take would be to set a new reserve price.

16. Now suppose instead that a significant rise in property prices occurs after a reserve price has been set (whether by consensus or upon evidence). Then the proper course to take depends on whether or not other bidders are likely. If they are, there may be no need to increase the reserve price, since bidders will bid beyond the existing reserve price. Where, as in the present case, other bidders are unlikely, not re-opening the reserve price would enable the would-be redeveloper to acquire the property at a price which would result in something less than fair and reasonable compensation for the minority owner.

17. In such a case it is to be observed that there will have been no error of law in fixing the reserve price (whether by consensus or upon evidence). So it would not be a matter of the minority owner appealing and seeking a stay pending appeal. He should simply apply to the Lands Tribunal, under the implied liberty to apply, to reset the reserve price on evidence of a material change of circumstance. It is immaterial whether the reserve price was fixed by consensus or upon evidence, since in either case the reserve price is fixed by reference to the value of the land (found or agreed)  as at the date of the order, and is subject to a subsequent change of circumstance.

18.  As for the point on which the Court of Appeal granted leave to appeal to this Court, all that can usefully be said is this.  Suppose there arises a situation of the following nature.  A consensus is reached on a reserve price.  One party later asks the Lands Tribunal to set a different reserve price while the other party opposes that course.  The Lands Tribunal sets a different reserve price.  It is subsequently held on appeal that the Lands Tribunal was wrong in the circumstances to do so. Unfortunately the auction had gone ahead because no stay pending appeal was sought or because such a stay was refused.  And it appears that the party who had justifiably but unsuccessfully opposed the re-opening of the reserve price would have been materially better off financially if it had not been re-opened. Can there ever be a remedy for the party who opposed departure from the earlier consensus? ‘Never’ is a word sparingly to be employed in the law.  And this is not an occasion on which to employ it.”

91.  Mr Mok did not suggest that the above paragraphs were not obiter dicta.  That must be right.  The parties reached a settlement at the commencement of the hearing and the Court of Final Appeal did not make any decision on any issue in dispute.  Mr Mok’s contention was that “Whether technically obiter dictum or not”, the statements in the above paragraphs should be followed by the lower courts.  The parts italicised do seem to support a case there is “statutory power to set a new and lower reserve price for a fresh auction”, “[if] the Lands Tribunal is satisfied that an auction at the existing reserve price would be unsuccessful”, as the reserve price “is fixed by reference to the value of the land (found or agreed)  as at the date of the order, and is subject to a subsequent change of circumstance”.

92.  The above paragraphs are not the ratio in Fineway CFA and do not bind the lower courts.  That said, the statements in the judgment of Bokhary PJ, “which ought not to be left unsaid”, received the approval of all the other members of the court and should be accorded due respect.  For a number of reasons, we respectfully decline to take the cue from the above statements.

93.  There was little discussion of where the power to re-open the reserve price is to be found.  The statutory power to set a new reserve price in §15 was not identified.  In §17, it was mentioned that an owner could apply to the Lands Tribunal, “under the implied liberty to apply, to reset the reserve price on evidence of a material change of circumstance.”  Section 5(4)  was not mentioned at all.  Intelligent House CA, though cited to the court, was not mentioned either.  The focus of the paragraphs quoted above would appear to be on discretion (to be exercised where “a significant fall in property prices occurs after a reserve price has been set”, or where “a significant rise in property prices occurs after a reserve price has been set”, and “on evidence of a material change of circumstance”)  rather than on jurisdiction which appears to have been assumed, there being no argument presented to the Court of Final Appeal that the dictum in Intelligent House CA at §33 is incorrect.  We do not consider the paragraphs quoted above would provide useful guidance to resolve the issue whether there is jurisdiction or power to refix the reserve price.

94.  We also have doubts whether the statements should be so broadly interpreted to support the applicants’ stance that as the reserve price is fixed by reference to the value of the land at the date of the order for sale and subject to a subsequent change of circumstance (which does not have to be a significant rise or fall in property prices), so long as the Tribunal is “satisfied that an auction at the existing reserve price would be unsuccessful”, the proper course for it to take would be to set a new reserve price.  As Mr But has put it, it begs the question why a majority owner, often the only potential bidder, should be allowed to keep coming back for revaluation so long as it is not satisfied with the reserve price and does not place a bid.  

(5)  Conclusion on jurisdiction 

95.  For the above reasons, we uphold the ruling of the Tribunal that it has no jurisdiction to refix the reserve price after a failed auction, or to grant further extension of the Order for Sale beyond a total period of six months.