LEUNG MAN CHEUNG v. SECRETARY FOR PLANNING AND LANDS AND ANOTHER

HCAL274, 376-382, 390-394, 396,
900-904, 906, 907, and 909-915/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NOS. 274 of 2000, 376 of 2000, 377 of 2000, 378 of 2000,
379 of 2000, 380 of 2000, 381 of 2000, 382 of 2000, 390 of 2000,
391 of 2000, 392 of 2000, 393 of 2000, 394 of 2000 & 396 of 2000

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J U D G M E N T

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APPLICATIONS FOR JUDICIAL REVIEW

1. These are the applications for judicial review by the owners of 15 properties ("the properties") in Kennedy Town against first, the decision of the Secretary for Planning and Lands ("the Secretary") dated 10 March 2000 recommending to the Chief Executive in Council for the resumption of their properties under the Lands Resumption Ordinance ("LR Ordinance"), and, second against the decision of the Chief Executive in Council on 2 May 2000 resuming the properties. The Land Development Corporation ("the Corporation") intervened as an interested party.

THE PROPERTIES

2. The particulars of the ownership and properties are set out below :

THE DEVELOPMENT PROPOSAL

3. The properties are situated in an area which is designated as a Comprehensive Development Area ("CDA") on the draft Kennedy Town and Mount Davis Outline Zoning Plan No.S/HI/8. Initially, the Housing Society was to implement the redevelopment scheme of these properties. However, it was unable to do so and the Corporation was appointed by the Government in March 1997 to proceed with the redevelopment. In April 1997, the Secretary designated the CDA as an area which the Corporation may purchase or otherwise acquire or hold land under section 5(2)(a)(i) of the Lands Development Corporation Ordinance ("the LDC Ordinance").

4. The Corporation implements urban renewal projects either by way of a development scheme under section 13 of the LDC Ordinance or by a development proposal under section 5(2)(b) of the LDC Ordinance. In a development proposal, no rezoning is required and no approval by the Town Planning Board ("the Board") under section 14 of the LDC Ordinance is required. In this case, the project was being carried out as a development proposal since the project area had already been zoned a CDA, the Board's approval of a Master Layout Plan ("MLP") was required. The MLP was approved. The development proposal is undertaken by the Corporation with a partner.

5. The project covers an area of about 6,072 square metres and is located by the seafront of Kennedy Town. The area comprises run-down and dilapidated buildings (built in the 1950s) containing substandard domestic accommodation including caged apartments and ground floor shops. The project is known as the H12 Project. In three months from the start of this project, the Corporation made its first offer to all owners on 9 July 1997. By June 1998, the Corporation had successfully acquired by agreement 247 out of 310 (or 80% of the premises affected by the project). The rest was the subject of an application by the Corporation to the Secretary for recommendation of resumption. The recommendation was made on 15 March 2000. The Chief Executive in Council ordered resumption on 2 May 2000.

STATUTORY FRAMEWORK

6. The operation of the statutory framework of the LDC Ordinance, the Town Planning Ordinance and the LR Ordinance had been considered by me in the recent decision of Kaisilk Development Ltd v. Secretary for Planning Environment and Lands (HCAL148/1999). It is not necessary for me to repeat them here. The only matter to note is that in respect of a development proposal there is no requirement that an application for recommendation to resume has to be made not later than 12 months after the approval by the Chief Executive in Council under section 9 of the Town Planning Ordinance of a draft plan.

Recommendation for resumption

7. In respect of the development proposal, section 15(4) of the LDC Ordinance provides that :

"(4) The Secretary shall not make a recommendation in pursuance of subsection (2)(b) - (i.e. the Corporation has been unable to acquire any land which it requires to implement a development proposal authorized under section 5(2)(b) of this Ordinance),

(a) unless the development proposal may lawfully be implemented by virtue of the provisions of any draft or approved plan for the purposes of the Town Planning Ordinance (Cap.131) and, in the case where by virtue of such plan, permission under section 16 of that Ordinance is required for that implementation, the permission required has been obtained;

(b) unless the application for resumption is accompanied by a statement -

(i) setting out how the Corporation intends that the proposal will be implemented, including whether implementation will be by the Corporation alone or the Corporation in association with another person and in relation to land within the boundaries of the proposal, what portion of the land is owned or leased by the Corporation and what arrangements have been made or are contemplated by the Corporation for the acquisition of any land not so owned or leased;

(ii) containing an assessment by the Corporation as to the likely effect of the implementation of the proposal, including, in relation to the residential accommodation of persons who will be displaced by the implementation of the proposal, an assessment as to whether or not, insofar as suitable accommodation for such persons does not already exist, arrangements can be made for the provision of such residential accommodation in advance of any such displacement which will result as the proposal is implemented; and

(c) unless he is satisfied that the Corporation has been taken all reasonable steps to otherwise acquire the land including negotiating for the purchase thereof on terms that are fair and reasonable. (emphasis added)

(5) For the purpose of this section, in considering whether or not the Corporation has negotiated for the purchase of the land on terms that are fair and reasonable, the Secretary may consult any person not being a public officer whom he considers may be able to assist him in forming an opinion on which to base his decision in respect of that negotiation."

THE ISSUES

8. In these applications, the Applicants have, first of all, identified the issues that are common to all the applications and then dealt with issues that are unique to the individual Applicants. I will follow this structure in my judgment.

CHALLENGE TO THE DECISION OF THE SECRETARY

The common issues

9. The Applicants complained that the decisions should be quashed by reason of the following common issues :

(1) The Corporation's offers were too low.

(2) The Corporation failed to disclose comparables of valuation.

(3) The Corporation failed to really negotiate with the Applicants.

(4) The Secretary had, in breach of section 15(5) of the LDC Ordinance, consulted public officers in considering whether or not the Corporation had negotiated for the purchase of land on terms that are fair and reasonable.

(5) The decisions are Wednesbury irrationally.

(6) There are procedural impropriety involved in the decision-making process in that the Secretary had failed to give reasons for his decision.

(7) The Lands Tribunal did not provide the Applicants with adequate relief.

(8) Is the High Court in judicial review an appropriate forum to deal with valuation issues?

(9) Court's discretion.

Issues unique to individual applications

10. The following are issues unique to individual applications :

(1) Redevelopment potential not taking into account (this relates only to HCAL No.274 of 2000).

(2) An area of land over which there are private rights of passage in favour of an adjoining occupier can be taken into account for the purpose of determining the area of the site (this relates to HCAL No.274 of 2000 only).

(3) The Corporation failed to give Home Purchase Allowance ("HPA") (this relates to HCAL No.274 of 2000 only).

(4) Unauthorised structures ought to be taken into account for valuation (this relates to HCAL Nos.376, 377, 378, 379, 380, 381 and 392 of 2000).

(5) The area of the cockloft (this relates to HCAL No.377 of 2000).

(6) Inadequate response to counteroffers (this relates to HCAL Nos.379, 380, 381, 382, 390, 392, 394 and 396 of 2000).

(7) The Corporation failed to conduct measurements on site (this relates to HCAL Nos.377, 378, 380, 381 and 382 of 2000).

(8) The Corporation failed to deal timeously with business loss (this relates to HCAL No.390 of 2000).

(9) The Corporation should value a cockloft as a mezzanine floor (this relates to HCAL No.380 of 2000).

CHALLENGE TO THE DECISION OF THE CHIEF EXECUTIVE IN COUNCIL

11. The grounds which are common to all the applications against the decision of the Chief Executive in Council are as follows :

(1) The resumption orders were based on the recommendations of the Secretary under section 15 of the LDC Ordinance and would have no legs to stand on upon the recommendation being quashed.

(2) There were procedural impropriety in that the Chief Executive in Council should have waited for the court's ruling on the application against the Secretary before acting on the recommendation, and that the Applicants had been deprived of the opportunity to properly making representations to the Chief Executive in Council.

(3) The Lands Tribunal is not the proper forum.

(4) Court's discretion.

12. The Applicants are also relying on the same issues unique to individual applications.

THE FOCUS

13. Although I will follow the structure of the issues identified by the Applicants, it is necessary to bear in mind that the challenge is against the decision of the Secretary in making the recommendation to the Chief Executive in Council and the latter's decision to order resumption of the properties. Hence, the focus must be on the decision and the decision-making process of these two decision-makers.

Ambit of judicial review

14. In judicial review proceedings, the court is not concerned with the merits of the decision : In re Amin [1983] 2 AC 818 per Lord Frazer at 829A. Furthermore, the court is not concerned with mistake of fact unless facts are objective in the nature of independently ascertainable and measurable and the decision-makers' concept of the facts is plainly or unassailably wrong : Chan Sau Mui v. Director of Immigration [1992] 6 HKPLR 479 at page 486 per Cons Ag CJ.

15. Under section 15(4)(c), the Secretary shall not make a recommendation unless he is satisfied that the Corporation has taken all reasonable steps to acquire the land including negotiating for the purchase on terms that are fair and reasonable. Clearly, by this provision, it is the Secretary who has to be satisfied with the requirements. Where the words "are satisfied" are used, they leave the decision, on these issues of fact, to the decision-maker; there is no appeal to a court against such a decision, but it may be subject to judicial review for error of law including absence of any material on which the decision could reasonably be reached : Din v. Wandsworth L.B.C [1983] AC 657, at page 664 per Lord Wilberforce. Where the existence or non-existence of the fact is left to the judgment and discretion of a public body, and that fact involves a wide spectrum ranging from the obvious to the debatable or to the just conceivable, it is the duty of the court to leave the decision of that fact to the public body to whom Parliament has entrusted the decision-making power save in a case where it is obvious that the public body, consciously or unconsciously, are acting perversely : Reg v. Hillingdon L.B.C , ex parte Puhlhofer [1986] AC 484, at page 518 per Lord Brightman.

Judicial review and land resumption

16. It is necessary at the very beginning to set out the ambit of judicial review in resumption cases. The principles are recently considered by the Court of Appeal in Wong Tak Woon v. The Secretary for Planning, Environment and Lands, CACV339, and approved by the Court of Final Appeal in an application for leave to appeal against the decision of the Court of Appeal (FAMV No.9 of 2000). Keith JA in the Court of Appeal stated that :

"... it was not arguable that, in assessing the compensation for land resumed pursuant to a recommendation to the Chief Executive under the Land Development Corporation Ordinance (Cap.15), account may be taken of the value of such property as would be built on the land under any proposed development."

Ribeiro J (as he then was) stated that :

"... a judicial review of the offer of acquisition was precluded by the Ordinance because it provides the intended machinery under the Lands Resumption Ordinance for determining the value at which land should be acquired when an offer of acquisition is unacceptable to the land owner [and] this left no room for an application for judicial review of an offer considered to be too low.

... it was entirely proper for the [Land Development Corporation] to be guided by the amount of compensation achievable under the prescribed [Lands Resumption Ordinance] machinery when deciding what would be a fair and reasonable offer since that was the fallback position if agreement could not be reached."

17. It should be pointed out that when Keith JA referred to the value of the property that would be built on the land under any proposed development, he was not referring to the development value of the property itself, but rather the value of redevelopment of the applicant's own property together with other properties resulting from the implementation of the development scheme. Keith JA stated that he had some reservations on the view expressed by Ribeiro J on whether a challenge to the fairness and reasonableness of terms offered by the Corporation as prima facie not the subject of judicial review because "the statutory regime for the assessment of compensation under the Lands Resumption Ordinance only becomes relevant once the Secretary is satisfied that the terms of the offer were fair and reasonable". He, however, stated that it was not necessary for him to say any more about the matter in view of his opinion on the case.

Mr Leong's submission

18. Mr Leong SC, counsel for the Applicants, accepted that no case can be made out in a judicial review of the Secretary's unreasonableness and unfairness based only on different views taken by valuers on pure figures that are within their professional expertise to take. However, he relied on the comment of Keith JA and submitted that the statutory framework contemplated a two-stage process, and the court is entitled to adjudicate on whether the Corporation had behaved fairly and reasonably relating to matters more fundamental than just figures. These matters affect whether the Secretary is justified in declaring himself satisfied about the fairness and reasonableness of the Corporation's offer for the purposes of section 15(5). These matters include whether the Corporation had fairly and reasonably engaged land owners by its manners of conducting negotiations with them, and whether the approaches of valuation were wrong in principle. The Applicants seek to distinguish Tsang Kam Lan v. Secretary for Planning, Environment and Lands and Governor-in-Council, HCMP325/1997 and Wong Tak Woon on the basis that the owners there were seeking a compensation based on the marriage value of the properties, i.e. the value of the owners' property together with other properties in the redevelopment scheme. As such their claim was bound to fail, hence these two cases are not authority to exclude from consideration matters of valuation in a judicial review if such matters affect the principles of valuation.

19. Mr Leong submitted that the Lands Tribunal is the expert for valuation of the affected properties but it has no jurisdiction to review whether the valuations by the Corporation are fair and reasonable, or whether the Secretary is legal, rational or procedurally proper in his decision to make the recommendation. The Lands Tribunal cannot always compensate the Applicants for loss suffered consequential upon an illegal, irrational, procedurally improper decision of the Secretary. In this case, property value had dropped since the offer was made by the Corporation. Mr Leong submitted that only the court can bring about a fresh offer by the Corporation based on a higher valuation at the time of the Corporation's offer by quashing the Secretary's decision to recommend resumption.

No further room for argument

20. Despite the reservation of Keith JA on this matter, what Ribeiro J had stated was expressly approved by the Court of Final Appeal. In my view, there really is no further room for argument on the issue of valuation not being subject to judicial review. Many of the issues relied by the Applicants fall within this ambit. On the so-called principles of valuation, on analysis, some of them are really not principles as such. Of the others, and on the manner of negotiation, the focus must be on whether the Secretary had material on which his decision could reasonably be reached.

21. The Applicants further argued that the compensation to be decided by the Lands Tribunal would not provide them with adequate relief because any valuation of the properties by the Lands Tribunal would be based on the date of resumption and not on 23 June 1997, the valuation date on which the Corporation made its offer. The current market value of the properties is less than that on 23 June 1997.

22. This is also one of the arguments advanced before the Court of Appeal in Wong Tak Woon. Nonetheless, Ribeiro J (as he then was) was of the view that matters relating to valuation are not amiable to judicial review.

THE OFFER BEING MADE TOO LOW

23. This is clearly a matter that falls outside the ambit of judicial review. The Applicants retained two firms of valuers, namely, F. C. Tam Surveyors Limited and First Pacific Davis (Hong Kong) Limited in valuing their properties. The Corporation instructed two firms of valuers, namely, Vigers (Hong Kong) Limited and Larry H.C. Tam & Associates Limited to value the properties. The higher of the two valuations received by the Corporation was used as the basis of its offer to the Applicants. On the authority of Wong Tak Woon, the court is clearly precluded from going into matters purely on the differences in the valuation of the experts.

24. In discharging his duty, the Secretary instructed a firm of independent consultant, namely, Messrs James Ng Surveyor Limited ("the Government Consultant"), to prepare a valuation of the properties. The Applicants relied on a table provided to members of the Central and Western District Board in about March 2000, showing a comparison of the offers made by the Corporation and a valuation of the properties by the Government Consultant. The assessment of the Government Consultant is on the open market value of the properties. The Applicants contended that, while each and every item of the Corporation's offer is higher than the valuation of the Government Consultant, the table is misleading in the sense that the Corporation's offers represented not only the market value of the properties as at July 1997 but also an award of ex gratia payment on top of the market value.

25. In my view, this is an argument which is difficult to accept. The offer made by the Corporation was based on the open market value of the properties plus an ex gratia payment. It must be the offer as a whole which has to be judged in determining whether the offer is reasonable. The Secretary had consulted an independent consultant whose valuation showed that the offer made by the Corporation is higher than his own valuation. This is the basis on which he concluded that the term offered was fair and reasonable. As Godfrey JA stated in Secretary for Justice v. Prudential Hotel BVI Limited [1997] 3 HKC 244, it is not appropriate for the judge to compare the evidence of the two experts and to express his preference for one of the experts and disregarded the other. It is not the function of the judge even to consider which of the two is to be preferred. The function of a judge is simply to see whether there is evidence before the decision-maker upon which he can legitimately and rationally draw the conclusion. In the circumstances, there clearly is evidence on which the Secretary can be legitimately and rationally satisfied that the statutory requirement had been met.

Home purchase allowance

The offers made to No.2 and No.4 Kin Man Street

26. Related to the issue of the offers being made too low is the payment of an ex gratia payment called Home Purchase Allowance ("HPA"). In the majority of the cases, the Corporation had made two offers to the Applicants, the first is on the basis of a sale of their properties with vacant possession and the second offer is on the basis of a sale subject to tenancy. In respect of shop premises an additional 5% incentive payment was included. In certain cases, additional offers were also made. The argument relied by the Applicants is the huge disparity in the offer made to one of the properties, namely No.4 Kin Man Street ("No.4") and its immediate neighbour, No.2 Kin Man Street ("No.2"). No.4 is a four-storey building. The Corporation made an offer of $4.726 million to the owners for the whole building. However, the Corporation acquired the ground floor of No.2 for the sum of $4.3 million.

The breakdown of this sum of $4.3 million showed that $1,667,000 was for the open market value, $2,693,000 was for an ex gratia allowance, and $100,000 was for other costs.

The policy and its rationale

27. The policy of the Corporation is that if the occupation permit of the premises shows that the premises is for domestic use, then it will pay the HPA to the owner irrespective of the actual use of the premises. If the premises is owner-occupier, the HPA is the full 100%. If the premises is tenanted, then the owner will receive between 50-70% of the HPA. HPA is not provided to the owner if the owner owns the whole building. In such a case, the offer will be the higher of the redevelopment value or the existing use value of the building plus an ex gratia allowance of 10%. No.4 is a single ownership building, and as a result, the owners were not offered any HPA.

28. Although there is no written statement on this matter, it seems that the rationale for excluding the payment of HPA to single ownership building is because the owner can redevelop the whole of the building, and therefore does not require HPA. The irony in this case is that the redevelopment value of No.4 is lower than the existing use value. There is no dispute that the area of the ground floor of both No.2 and No.4 is the same size. While No.2 is owner-occupier, No.4 is tenanted. But apart from this, if No.4 is not owned by a single owner, its owners will be entitled to HPA although at a lower percentage. The question becomes whether the difference in offers made in respect of these two adjoining buildings are so anomalous that the decision of the Corporation can be termed as an irrational decision. It follows from this whether the Secretary can be satisfied that the Corporation had been negotiating for the purchase on terms that are fair and reasonable.

Decision not unfair or unreasonable

29. Although, on the facts, No.4 may have received a much lower offer because of the exclusion of HPA, I have come to the view, after some initial hesitation, that the Applicants are precluded from contending that the Corporation had negotiated on terms that are unfair and unreasonable. First, the payment of HPA is based on a Government policy which had been approved by the Legislative Council. The exclusion of payment of HPA to single ownership buildings seems to be based on rational grounds because of the redevelopment potential that is available to the owner of the building. Until such a policy is changed, the Corporation really has to abide by the policy. Second, as shown in cases such as Chan Mok Yee and Cheung Fung Jan trading under the name of Ocean Paper Products Factory v. The Attorney General, HCA6881/1980, and Chan Sik Cheung v. The Director of Lands [1995] 3 HKC 199, an ex gratia payment is a voluntary payment of a gratuitous nature and is not justiciable. This by itself is not determinative of the issue because more importantly, as Henry LJ said in R. v. Independent Television Commissioners ex parte Virgin Television Limited [1996] EMLR 318 at page 336, fairness means the decision-maker's duty "to be even-handed, to treat all applications alike in the sense that the same rules are applied to them and that each applicant receives or would receive the same treatment under those rules ... they must be treated alike, in that the same criteria for judgment under the Rules must be applied to each, even though the results would be different." (emphasis added). This is precisely what happened in the present case, the ex gratia payment was applied in accordance with the same set of policy that was applicable to owners affected by the redevelopment although the result was different. Third, the owners of No.4 had never accepted that the redevelopment value of their property is lower than the existing use value. On the contrary, their own valuer assessed the redevelopment value at $9 million. The owners of No.4 had never indicated that they were prepared to accept the HPA on the basis that the existing use value is higher than the redevelopment value. Had they so indicated, and if the Corporation had nonetheless refused to grant them the HPA, then there may be some ground for saying that the Corporation had not negotiated on terms that are fair and reasonable. This is not the situation here.

30. The Applicants relied on a Singapore case : Seah Hong Say (trading as Seah Heng Construction Co.) v. Housing and Development Board [1993] ISLR in which land owners issued a writ claiming ex gratia payment awarded in respect of a building compulsory acquired by the government. The Court of Appeal of Singapore dismissed the application. Lai Kew Chai J held that :

"In our judgment there can, by definition, be no legal entitlement to an ex gratia payment, though the potential recipient of such payment might have a right to expect that the decision as to his award should be properly made, and may enforce that right by the process of judicial review, to ask, for example, that a decision improperly arrived at be quashed by certiorari or that a proper process be followed by mandamus."

Read in the context of the case, what the judge said clearly is not an authority for saying that claim for ex gratia payment can be made in judicial review proceedings. This case does not assist the Applicants.

FAILURE TO DISCLOSE COMPARABLES

The Applicants' argument

31. The Applicants contended that the Corporation had acted unfairly and unreasonably by failing to provide comparables on which the Corporation's surveyors had relied to value their properties. In the absence of such comparables, they were unable to make worthwhile representations to the Corporation during the negotiation. Mr Leong characterised this complaint as one which relates to the manner in which the Corporation carried out the negotiation. He submitted that the Secretary must not only be concerned with the question of valuation, but also the manner in which the negotiation was made in order to satisfy himself that the Corporation has taken all reasonable steps to acquire the land including negotiating for the purchase on terms that are fair and reasonable.

The factual disputes

32. To deal with this issue, it is first of all a matter of fact that the valuation reports from the Corporation's valuers were disclosed to the Applicants and their valuers upon request. Mr Keen of the Corporation stated that the Corporation does not normally provide comparables to property owners directly since the interpretation of comparables more often than not requires expert's knowledge on valuation principles which the owners may not possess. It is and has always been the Corporation's practice to provide copies of its valuers' reports to property owners and their valuers upon request, and to disclose comparables to the Applicants' valuers. As disclosed in the evidence of Mr Keen, comparables were discussed at various meetings with the owners' experts on the following properties, namely :

(1) 2A, 10 and 10A Davis Street.

(2) 107 Catchick Street

(3) 1, 15, 17 and 27 Cadogan Street

33. As to the allegation of the Corporation failing to disclose comparables, all that the Applicants had identified was one instance in which the owner of No.2H Davis Street ("No.2H") requested comparables on 9 November 1998. The Corporation refused to provide the comparables to this representative. The owner of No.2H had in fact at that stage instructed a surveyor on his behalf. Clearly, if the surveyor considered that comparables were required, he could have asked for them. In my view, the Applicants had failed to make out a case on the facts that the Corporation had failed to disclose comparables to them.

No obligation to discuss comparables

34. What is more important is whether the Applicants are entitled to the comparables as of right. Under the LDC Ordinance, the Corporation is required to conduct its business according to prudent commercial principles : section 10(1). The task of the Corporation is to purchase the properties of the owners in order to carry out the redevelopment scheme.

No lis between the parties

35. Mr Leong submitted that the role of the Corporation is unique because once it is known that properties are to be resumed, then really the owners cannot freely dispose of their properties except to the Corporation. Even proceeding on the basis that the role of the Corporation is unique, the fact remains that in negotiating for the purchase of the Applicants' properties, the Corporation is merely an intended purchaser of the properties. Apart from a purchaser and buyer situation, there really is no lis, or in modern language a suit, action, controversy or dispute between them. This being the case, there is no question of the Applicants being entitled to have comparables of valuation provided to them in order for them to make representations. In Johnson & Co. (Builders), Ltd v. Minister of Health [Aug 6, 1947] 2 All ER 395, the owners of land in a compulsory purchase order applied to quash the order on a ground that the Minister of Health, in considering objections to it, was bound to act in a quasi judicial manner and that he had failed in that duty by not making available to the objectors the contents of certain documents. It was held that there was no obligation on the Minister to provide the material. Lord Greene, MR stated that :

"... Lis, of course, implies the conception of an issue joined between two parties. The decision of a lis, in the ordinary use of legal language, is the decision of that issue. The consideration of the objections, in that sense, does not arise out of a lis at all. What is described here as a lis - the raising of the objections to the order, the consideration of the matters so raised and the representations of the local authority and the objectors - is merely a stage in the process of arriving at an administrative decision."

Commercial dispute

36. In Mass Energy Ltd v. Birmingham City Council [1993] Env. L.R.298, different parties submitted tenders for a contract to the local authority. The local authority accepted one of the tenders. Another party who had their tender rejected applied for judicial review against the decision to accept the tender. It was held that it was open to the local authority to choose one tenderer in preference to others. Glidewell LJ held that, on its face, it is a commercial dispute between a successful and an unsuccessful tenderer. The fact that the local authority is restricted by statute on how to accept contracts does not make it a public law dispute. Evans LJ stated that "In commerce, life is not always fair". The authority "was entitled to act as a commercial animal at the stage when it was considering the tenders they had received. I find it impossible to say more than that the council were bound to act commercially. That unfortunately, does not guarantee complete fairness and may be the plaintiffs did not receive it, but that is not a ground, in my view, for complaining under the Act."

37. Lord Ackner in Walford v. Miles [1992] 2 AC 128, at 138E held that :

"... However the concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations. Each party to the negotiations is entitled to pursue his (or her) own interest, so long as he avoids making misrepresentations."

38. In my view the opinions expressed in these cases are clearly applicable to the present case. Mr Leong submitted that since the Secretary was obliged to consider whether there was negotiation on terms which are fair and reasonable, this means the Corporation could not simply apply prudent commercial practice in its dealings with the Applicants. I agreed with Mr Yu SC, counsel for the Corporation, that one has to focus on the terms and asked whether they are fair and reasonable, and one must not confuse with the notion of "terms which are fair and reasonable" with any concept of duty to act fairly.

FAILURE TO REALLY NEGOTIATE WITH THE APPLICANTS

The complaint

39. The Applicants contended that the Corporation failed to really negotiate with them to arrive at an offer agreeable to all parties, but remained firm in its own stance throughout. They complained that the offers made by the Corporation were simply on the basis of vacant possession or subject to tenancy. In some cases, a further offer with an additional 5% incentive was given. This demonstrated inflexibility on the part of the Corporation. The Corporation rejected the counter-offers of the Applicants without explanation, thus leaving no room for further negotiations. The Corporation had further failed to provide comparables of the valuation. This last matter is one I had already dealt with.

Falling market

40. In my view, there is no merit in this argument. According to the Corporation, its position is that it does not offer at below market price and bargain upwards. Its practice is to make offers according to the higher of two independent valuations. The offers are open for acceptance for a sufficient time to enable the owners to take advice and consider acceptance. Once these offers lapsed, any new offers that the Corporation makes would have to take into account the prevailing market condition. In the present case, the Corporation made its first offers in July 1997. The deadline for the first offer was three months which was subsequently extended. These offers were left open until 8 January 1998 or 28 February 1998 despite the falling market. The Corporation in adopting the practice had successfully acquired 90% of the properties affected by the development proposal. In Silver Mountain v. Attorney General [1994] 2 HKLR 297, a number of offers were made in view of a rising market. It is not the case here. The fact that the Corporation had in the majority of cases only made two offers to the Applicants is not something that could be held against it.

Failure to give reasons for rejecting the counter-offer

41. As to the failure by the Corporation to give reasons in rejecting the counter-offer, there really is no duty on the Corporation to do so. It was simply purchasing the properties from the owners. Furthermore, a comparison of the Corporation's offers and the Applicants' counter-offers in eight properties revealed that the majority of the counter-offers in fact exceeded the offers by as much as two times. This being the case, it would be unreal to demand the Corporation to give reasons for rejecting the counter-offer.

A Comparison of the Corporation's Offers and Applicants' Counter-offers

BREACH OF SECTION 15(5) OF THE LDC ORDINANCE

42. In a letter dated 16 June 1999 from the Director of Lands ("the Director") of the Lands Department to the owners of No.4 Kin Man Street, the Director referred to the assessment of the open market value of the properties by the Government Consultant. He stated, among other things, that :

" Please be assured that the valuation assessment was prepared by the Consultant and audited by the LDC Section of the Lands Department. The assessment is to assist SPEL in deciding if LDC's offer is fair and reasonable for the purpose of handling the land resumption application submitted by LDC. ..."

43. The Applicants seized on the word "audited" and argued that by allowing the LDC Section to audit the valuation assessment prepared by the Government Consultant, the Secretary was in breach of section 15(5) of the LDC Ordinance. In Kaisilk, I stated that this section is both an enabling and a prohibition section. The prohibition is against the Secretary from consulting a public officer on matters such as valuation which are relevant to determine whether a fair and reasonable offer had been made.

44. The Applicants argued that as the auditor of the Government Consultant, the LDC Section was actively involved in matters of valuation which are relevant to determining whether a fair and reasonable offer had been made. It is natural and reasonable to assume that if the LDC Section's auditing indicate that the valuation of the Government Consultant is wrong, the Secretary would not have made the decision. They also referred to the affirmation of Patrick Lau ("Mr Lau"), the Deputy Secretary for Planning and Lands who held the position of the Secretary for Planning and Lands (Acting). Mr Lau stated that on 2 March 2000, Mr Ho Siu Shun ("Mr Ho") who is the Assistant Secretary in the Urban Renewal Unit of the Planning and Lands Bureau, had reported to him about all aspects of the Corporation's application; after fully considering all the materials submitted to him including the various contentions of the Applicants, he (i.e. Mr Lau) was satisfied that, among other things, "Mr Ho, the LDCS and the government consultant had thoroughly considered the representations from the owners and concluded that the grounds of objection raised by the owners were unfounded to which conclusion I have in agreement".

Mr Ho's explanation

45. Mr Ho in his affirmation stated that the "auditing" of the valuation assessments prepared by the consultant was meant to refer to work of the LDC Section in checking the accuracy of the data, calculations and measurements. The LDC Section could not and did not in any way attempt to change, interfere with or overrule the consultant's opinion on valuation matters or on the terms of the Corporation's offers. Mr Ho explained that the LDC Section is a section of staff who possess expertise in property valuation and market practices. Apart from collating and summarising the representations made by the Applicants and the Corporation in respect of the section 15 applications for the Secretary's consideration, the LDC Section is entrusted with the work of instructing the Government Consultant to give advice as to the value of the properties and whether the Corporation's offer had been reasonable in monetary terms. The Director himself played no part in the section 15 applications or the Secretary's decision to recommend resumption. In relation to the processing of these applications, the LDC Section takes instructions from and reports to the Secretary directly. The reason why the Director wrote to the Applicants in June 1999 was because of specific complaints made to him about the alleged misconduct of the LDC Section which had to be replied to and addressed.

My view

46. In my view, what Mr Ho said must be the end of the matter. The Applicants had read too much into the word "auditing". Further, Lord Diplock in Bushell v. Secretary of State for the Environment [1981] AC 75 had held that :

"The collective knowledge, technical as well as factual, of the civil servants in the department and their collective expertise is to be treated as the Minister's own knowledge, his own expertise. ... This is an integral part of the decision-making process itself. It is not to be equiparated with the Minister receiving, expert opinion or advice from sources outside the department ..."

As I had said in Kaisilk, the Secretary's reliance on the assistance of the LDC Section is not by way of consultation. The work of the LDC Section is a necessary part of the process in order to enable the Secretary to reach a decision on the matter. The Secretary is clearly entitled to rely on the collective knowledge, experience and expertise of the government offices serving directly or indirectly under his bureau. In my view, there is no breach of section 15(5). This being my view, it is not necessary for me to consider further the arguments of the Respondents and the Corporation that since the Applicants had specifically asked the Lands Department to use its expertise and knowledge of the property market in advising the Secretary, they must have waived any breach of nature justice : Supperstone and Goudie, Judicial Review, 2nd Edn. para.8.60. It is also not necessary to revisit the arguments on the Carltona principle.

WEDNESBURY IRRATIONAL

47. The Applicants contended that in all the circumstances no reasonable Secretary would have made the recommendation. It is not necessary for me to repeat the general principles stated in cases such as Associated Provincial Picture House Limited v. Wednesbury Corporation [1948] 1 KB 223 or Secretary of State for Education and Service v. Tameside Metropolitan Borough Council [1977] AC 1014. In my view the Applicants clearly failed to make out a case of Wednesbury unreasonableness.

THE SECRETARY FAILING TO GIVE REASONS FOR HIS DECISION

The correspondence

48. The Applicants complained to the Director by letter dated 26 May 1999. They said that they were dissatisfied with the "unfair handling of the relevant acquisition procedure" by the Corporation, the "unfair valuation assessment" by the surveyor of the Corporation and the "improper handling of their complaints" by the Acquisition Department - LDC Section. A similar letter was written to the Secretary. In response, the Director by letter dated 16 June 1999 wrote to the Applicants stating, among other things, that if the Secretary is satisfied that a recommendation for land resumption to the Executive Council can be made, "you will be informed of the reasons leading to this decision". On 10 March 2000, the Director wrote to two of the Applicants stating that :

" I am instructed to inform you that the Secretary has carefully considered your representation together with all other relevant information available, and he is now satisfied that the Corporation has taken all reasonable steps to otherwise acquire the land including negotiating for the purchase thereof on terms that are fair and reasonable, and the Secretary has under section 15 of Land Development Corporation Ordinance (Cap.15) decided to recommend to the Chief Executive in Council the resumption of your above property under the Lands Resumption Ordinance (Cap.124)."

The complaint

49. The Applicants complained that they were promised to be given reasons for the decision. The letter of 10 March 2000 did not give any reasons, instead the letter merely repeated the wording of section 15(4)(c) of the LDC Ordinance without providing specific grounds. As a result, they are precluded from making any useful representations to the Chief Executive in Council. The Applicants argued that the promise by the Director had given rise to a legitimate expectation on their part. The statement which gives rise to the legitimate expectation is clear, unambiguous and devoid of relevant qualification; further, it is not necessary for the Applicants to have changed their position or to have acted to their detriment in order to obtain the benefit of a legitimate expectation : Hong Kong and China Gas Company Limited v. Director of Lands [1997] 3 HKC 520. Procedural fairness will very often require that a person affected be informed of the gist of the case which he has to answer in order to make worthwhile representations : R v. Home Secretary, ex parte Doody [1994] 1 AC 531, followed in Fok Lai Ying v. The Governor-in-Council and others [1997] HKLRD 810.

Justification for legitimate expectation

50. The justification for the principle of legitimate expectation is that when a public authority has promised to follow a certain procedure, it is in the interest of good administration that it should act fairly and should implement its promise, so long as implementation does not interfere with its statutory duty. Further, when the promise is made, the authority must have considered that it will be assisted in discharging its duty fairly by any representation from interested parties : Attorney General of Hong Kong v. Ng Yuen Shiu [1993] 2 AC 629 at page 638, per Lord Fraser of Tully Belton. See further, the comment of Megarry J in John v. Rees [1970] 1 Ch.345 at page 402 on the importance of the rule of natural justice.

Obligation to give reasons

51. On the requirement to give reasons, the common law, which encompasses the principle of natural justice, does not of itself require a public law authority or tribunal always, or even usually, to give reasons for its decision; nevertheless, circumstances might establish a special case in which natural justice would require reasons to be given : Lau Tak Pui & Others v. Immigration Tribunal [1992] 1 HKLR 374. The case reviewed the authorities in this area including the decision of the High Court of Australia in Public Service Board of New South Wales v. Osmond [1985] 159 CLR 656. Lord Lane CJ in R. v. Immigration Appeal Tribunal ex parte Khan [1983] 1 QB 790 stated that in respect of the issue which a tribunal is determining and the basis upon which the tribunal had reached its determination upon that issue, in many cases it may be quite obvious without the necessity of stating it, in other cases it may not.

My view

52. The decision made by the Secretary to recommend resumption is purely an administrative decision. As a general rule, he is not obliged to give reasons for his decision. However, in this case, the Director had informed the Applicants that if the Secretary should decide to make the recommendation, he would give reasons. The Lands Department is one of the departments under the Planning and Lands Bureau ("the Bureau") headed by the Secretary. The Bureau is responsible for policy formulation. The departments under it, including the Lands Department, are responsible for policy implementation : Kaisilk. It would be too much to expect from the laymen that they should know precisely about the hierarchy of the government structure. All that they were concerned with is how their properties would be dealt with by the authority. Although the promise to give reasons for the decision was not given by the Secretary himself, in my view, the present case is one of the special cases, in which the Secretary is required to give reasons for his decision because of the earlier promise by the Director.

53. What is a special case depends on the facts of each case. It is not necessary for me to rule whether with this promise, the right had become crystallised. It is sufficient for me to say that as a matter of good administration, the authority should observe what it had openly stated on this issue. This is in fact what happened in this case : the reasons for the decision were given in the letter dated 10 March 1999. In my view, the reasons given by the Secretary were sufficient reasons. It identified the issues in which the Secretary had to decide. This is not a case where the Secretary was not aware of the concerns of the land owners prior to his recommendation. The LDC Section had been in correspondence with the land owners. The land owners had complained about the manner of negotiation of the Corporation and its disregard of the valuation and evidence produced by the owners' surveyors. The LDC Section had called for the Corporation's comments, a summary of the owners' complaints and the comments were provided to the owners. In the letter dated 18 May 1999, the LDC Section informed the land owners that their comments and the LDC's response would be presented to the Secretary for his consideration under section 15 of the LDC Ordinance. The land owners had made further representations to the Secretary.

54. Mr Wong, counsel for the Respondents, referred to Bolton MDC v. Secretary for Environment [1995] 3 PLR 37 in which the House of Lords was concerned with town planning rules which required the Secretary of State to notify his decision and his reasons for it in writing to persons affected. The regulation also required the Secretary of State to have regard to the provisions of the development plan and to any other material considerations. Lord Lloyd stated that there is nothing in the statutory language which requires the Secretary of State, in stating his reasons, to deal specifically with every material consideration, otherwise, his task would never have been done and the decision letter would be as long as the inspector's report; he has to have regard to every material consideration but he needs not mention them all. Latham J stated in R v. The Secretary of State for Education, ex parte G [1995] VLR 58 at page 67G that : "What might appear to the uninformed observer to be a statement of a conclusion will be to the other person concerned with the way in which a dispute has developed, a full and sufficient explanation of the reason for the decision." The reasoning of the two cases apply equally here. See also R. v. The Chief Constable of the Thames Valley Police ex parte Cotton [1990] IRLR 344.

55. The letter of 10 March 2000 clearly provides a full and sufficient explanation of the reasons for the decision bearing in mind the history of the matter. In any event, Mr Ho had given detailed reasons of the decision on affidavit. The authors of De Smith, Judicial Review of Administrative Actions, 5th Edn. para.9-005 suggested that where a decision-maker attempts to remedy a failure to give reasons by providing justification of the decision in affidavit evidence on judicial review, the court is unlikely to quash the decision or make any order unless the reasons so disclosed are inadequate or unlawful. The reasons disclosed in the affidavit clearly cannot be so described.

56. The Applicants complained that the failure to give reasons by the Secretary at the time of the recommendation precluded them from making any useful representation to the Chief Executive in Council. The reality of the situation is that the Applicants had not indicated what new representations they would have made in the light of all the reasons disclosed. The Applicants further relied on In re Le Tu Phuong and Another [1993] 2 HKLR 303 where Liu J (as he then was) held that where reasons are given, they must not be so vague, inadequate and unintelligible as to cloud the issue and the evidential basis. Once given, the reasons ought to measure up to the standard of administrative law principles. In my view, the reasons given for the Secretary's decision, in the whole context of the negotiation, clearly fulfill the obligations imposed by administrative law principles.

MATTERS RELATING TO THE LANDS TRIBUNAL AND HIGH COURT JUDICIAL REVIEW

57. I had already dealt with the arguments on these matters earlier.

INDIVIDUAL CASES

REDEVELOPMENT VALUE OF NO.4 KIN MAN STREET

58. No.4 Kin Man Street is a four-storey building. The Corporation obtained a valuation report from Vigers who assessed the existing use value of the property at $5,101,000 and the redevelopment value at $4 million. The redevelopment value was based on a plot ratio of 2.2. The offer made by the Corporation to the owners of No.4 Kin Man Street was based on the higher of the two valuations plus an ex gratia payment. Thereafter, there were discussions between the owners and the Corporation regarding the plot ratio of the property. The owners argued that the property could have attracted a much higher plot ratio and a six-storey building could be built.

59. On 20 May 1998, Vigers prepared a further valuation of the property using a plot ratio of 4.5 on the assumption that a six-storey building could be built. The redevelopment value based on this assumption came up to $5.2 million. However, after deducting domestic tenant compensation of $948,000 and other adjustments, the redevelopment value was assessed at $4,268,000. This is still lower than the existing use value. By letter dated 28 May 1998, the Corporation informed the expert instructed on behalf of the owners of No.4 Kin Man Street that although it did accept the argument that the property could be redeveloped to a six-storey building, it had obtained further valuation on the redevelopment value of the property under this assumption. The value that was assessed was still lower than the existing use value.

60. In January 1999, the expert for the owners asked the Building Authority to determine the plot ratio of the property. The Building Authority, on 12 February 1999, stated that it would allow a plot ratio of 4.37 for the redevelopment of the property. By then the offers made by the Corporation had long lapsed and the Corporation had requested the Secretary to make the recommendation.

61. Factually, the Applicants were wrong when they said that the Corporation had not taken into account, the redevelopment potential of their properties. Furthermore, the plot ratio used by the Corporation was in fact higher than the one permitted by the Building Authority. The owners complained that the valuation report of Vigers of May 1998 was not supplied to them until much later in August 1999. I do not see how this would assist the owners because the Corporation had clearly stated in the letter of 28 May 1998 that a further assessment had been made by the valuation consultants. Surely, the experts for the owners could have asked for a copy of this report instead of making the request much later on. Furthermore, on the authority of Wong Tak Woon, matters relating to the actual calculation of plot ratio are valuation matters and are not subject to judicial review. More importantly, the Secretary clearly had a rational basis to make the recommendation because the Government Consultant was of the view that the offers made by the Corporation were reasonable.

RIGHT OF WAY

62. The owners of No.4 Kin Man Street granted a right of way to the adjoining property owner in respect of a side lane. The Applicants now contended that the side lane should not be excluded from valuation. Factually, the owners' own experts had excluded the lane from the calculation of the value of the property. The owners now relied on two cases in support of their argument that the right of way should be included for the purpose of calculating the property value. In Cinat Company Ltd v. The Attorney General [1994-95] CPR 59 it was held by the Privy Council that :

" A development site might include some particular area of land owned or controlled by the developer which was not intended to be built on but which was necessary to enable the proposed building to comply with regulations. There was no basis for assuming that the unbuilt on part of land in a proposed development was to be confined within some notional curtilage. ..."

As rightly pointed out by Mr Yu, the question there was whether the redevelopment could take place on a vacant piece of land once it had been included as part of a site for the purpose of calculating permissible site coverage and plot ratio of another development. It does not establish the principle that land which is subject to a right of way can be included in the site area for the purpose of assessing the plot ratio. In Lea Tai Property Development Ltd v. Incorporated Owners of Leapoint Industrial Building Ltd. [1996] 1 HKC 193, Godfrey JA (as he then was) held that in relation to interference with an easement :

"... the owner of the dominant tenement had no absolute right to use each and every portion of the right of way. He was entitled to complain only of substantial interference with that right by the owner of the servient tenement. The owner of the servient tenement was the owner of the land and was accordingly entitled to use it for whatever purposes he liked, so long as he did not substantially interfere with the use of the way by the owner of the dominant tenement."

The issue there was whether one party to a deed granting mutual right of way in respect of a driveway could restrain the other party from using the driveway. Again, it does not support the Applicants' contention that the right of way should be included in calculating the plot ratio.

63. The position is governed by Regulation 23(2)(a) of the Building (Planning) Regulations which provides :

"'In determining for the purposes of regulation 20, 21 or 22, the area of the site on which a building is erected -

(a) no account shall be taken of any part of any street or service lane;

(b) there shall be included any area dedicated to the public for the purposes of the passage.'"

Regulation 20 deals with permitted site coverage. Regulation 21 deals with permitted plot ratio. Regulation 2 defines 'street' to include any footpath and private and public street."

64. The principle is that an area of land over which there are private rights of passage in an adjoining occupier cannot be taken into account for the purpose of determining the area of the site by reason of regulation 23(2)(a); unless and until the rights of adjoining occupiers are surrendered or extinguished, such an area remains as unavailable for building purposes as an area dedicated for passage by the general public : Hinge Well Co. Ltd v. The Attorney General [1988] 1 HKLR 32, per Lord Oliver of the Privy Council.

TAKING ILLEGAL STRUCTURES INTO ACCOUNT FOR THE VALUATION

65. The Applicants submitted that the Corporation in assessing the valuation should take into account the existence of unauthorized structures. The structures had existed in the properties for many years and they had not been challenged by the Building Authority. The Corporation's stand is that in calculating the floor areas, it would only adopt the latest approved building plans to measure the floor areas. The reason is to discourage people from constructing unauthorized structures in contravention of the Buildings Regulations.

The authorities

66. In my view, reliance on property cases such as Active Keen Industries Ltd v. Fok Chi Keung [1994] 2 HKC 67 or the recent decision of the Court of Appeal in Spark Rich (China) Ltd v. Valrose Ltd, CACV249/1998 is not helpful. They are all concerned with the question of whether illegal structures present in a property would constitute a defect in title in conveyancing transactions.

67. It has been established by a series of land resumption cases that unauthorized structures do not attract compensation : Cruden, Land Compensation and Valuation Law in Hong Kong, 2nd Ed., page 81, Director of Lands and Survey v. Lau Kin and Chan Yau and Others [1977] HKLTR 95, Director of Lands and Survey v. Lee Yat Ping and Others [1977] HKLTR 138, Cham Hon Chi v. Director of Lands (Crown Lands Resumption Ref. No.8 of 1995).

68. Mr Leong relied on Linen Export Co. Ltd v. Director of Lands (Crown Lands Resumption Ref. No.24 of 1994), in which the Lands Tribunal was assessing a claim for compensation under the LR Ordinance. It expressed the view that whether a cockloft is approved by the Building Authority or not, such a cockloft affects the market price realized for shops. This is clearly not a case which establishes that unauthorized structures will attract compensation in land resumption. All that the tribunal was concerned with was how the price of a property used as a comparable could be affected by the presence of a cockloft. In Chan Kai Yuen and Another v. The Director of Lands (Lands Resumption Application No.LDLR8/1999), the Lands Tribunal recognized that the established practice is that the value of unauthorized buildings is to be excluded from the assessment of compensation. In that case, it enhanced the unit rate in assessing the ground floor of the premises merely because of the extra headroom space occupied by an unauthorized cockloft. In other words, the height of the ground floor was higher than the normal headroom height in calculating compensation. It does not show that a cockloft is to be valued for compensation.

COUNTER-OFFER ARGUMENTS

69. I had already dealt with arguments on failure to give reasons for rejecting the counter-offers.

FAILURE TO CONDUCT SITE MEASUREMENTS

70. The Applicants complained that the Corporation should conduct actual site measurements instead of measuring from the building plans. In my view as the Corporation is merely purchasing the properties from the land owners on a commercial basis, there is no duty imposed on it to conduct a site measurement. Unless it can be shown that the measurement adopted by the Corporation is so substantially different from that of the owners, this is hardly a ground of complaint. As a matter of fact the Corporation was always willing to conduct a measurement of the properties jointly with the Applicants or their valuers if requested to do so. This had happened in No.27 Cadogan Street and Nos.105, 107, 115, 117 Catchick Street.

71. The Applicants stated that the LDC Section had in fact arranged for a site inspection of the ground floor and cockloft of No.27 Cadogan Street and there is no justifiable reason not to measure other properties on site. As explained by Mr Ho, the LDC Section attended No.27 Cadogan Street in response to repeated request by the owners to visit the property. The LDC Section agreed to do so with a view to ascertaining the owners' contention on whether there was any unauthorized structure in the cockloft which might trigger the difference between the difference in measurement. It was never the LDC Section's intention to take measurements of the floor area of the cockloft or other parts of the property. The LDC Section had advised the owners at the site that the latest approved building plans should be used and that site measurements should not be relied on.

FAILURE TO TIMELY ADDRESS THE CLAIM FOR BUSINESS LOSS

72. This concerns Nos.15 & 17 Cadogan Street. A lard factory by the name of Hoi Yau Lard Factory ("the Factory") operated on the ground floor of these two premises. The owners of these two premises claimed that the Factory was operated as a family concern. The owners claimed that it was not until 4 November 1999 that the Corporation agreed to take the business loss into consideration.

73. The policy of the Corporation in buying business premises would depend on whether the business is operated by the owner or by a tenant. In respect of owner occupier, the Corporation will offer the valuation plus a 35% ex gratia sum unless the owner can prove actual loss of business exceeding 35% of valuation, in which case the Corporation will compensate the owners for actual loss of business. Where the premises is tenanted, the Corporation will offer valuation plus a 20% ex gratia sum to the owner and the Corporation will deal with the tenant separately to compensate him for business loss.

74. When the Corporation first made its offers to the owners of these two premises, they were treated as separate properties because the Corporation was not aware at that time that the owners were related or that they were related to the proprietor of the Factory. The offers were not accepted. On 30 December 1997, the owners first mentioned about the claim for compensation for the business loss of the Factory. The Corporation explained that it would pay the business loss if owners could provide evidence to prove the business loss was over 35% of the market value of the property. The owners' surveyor agreed to provide evidence for claiming business loss.

75. On 9 June 1998, the owners' surveyor submitted a claim for business loss to the Corporation. However, it was not possible for the Corporation to assess any claim for business loss because it did not have access to any audited accounts or tax returns to verify the information. Then on 10 June 1998, the owners confirmed that they would want the Corporation to treat the properties as subject to tenancies. However, they changed their mind again in October 1999 when they informed the Corporation that they would wish to deal with the acquisition of the two properties and the question of business loss as one matter. In reply, the Corporation, on 4 November 1999, asked the owners for the audited accounts and tax returns of the Factory in order for it to consider the business loss claim. However, the owners had not responded to this request.

76. The owners explained that at the meeting on 10 June 1998, the Corporation had suggested that the premises should be first sold to the Corporation under existing tenancy and thereafter the Factory could still claim business loss as the tenant of the two properties. It was also suggested that this alternative would be an easier and quicker alternative for the Corporation to handle. After a further discussion with the Corporation, the owners were given the impression that if the claim for business loss was to be separated, it would facilitate the Corporation's valuation of the overall compensation, including business loss of the Factory, and would facilitate the Corporation to make a new offer. The owners were led to believe that by picking this alternative, they might end up with a greater compensation.

77. Irrespective of the reasons why the owners changed their mind, the fact remains that after October 1999, when they wished to claim for business loss, they had not provided proof of their loss. Without providing the Corporation with such documents, I fail to see how it could be argued that the Corporation had failed to deal timely with the matter of business loss of the owners.

INDEPENDENT MEZZANINE FLOOR

78. In respect of the ground floor of No.27 Cadogan Street, the Building Authority had approved the extension of a cockloft so that the whole of the headroom space above the ground floor was covered by the cockloft. The Applicants contended that the area had become an independent mezzanine floor so that the salable area of the cockloft should not be computed as a common cockloft being confined to the interior of the four walls. They referred to Hinex Universal Design Consultants Co. Ltd v. Chan Lai Hing [1998] 1 HKC 317, in which Le Pichon J held that a subsequent owner had the same unfettered right as the developer in the allocation of undivided shares vested in him, subject to any prior prohibition which existed in the deed of mutual covenant or some other documents. The deed of mutual covenant of No.27 Cadogan Street enabled the owners to dispose of the whole or any part of their share in the building and their right to use floor of the building allotted to them for their exclusive use and enjoyment to any person they may think fit. They further argued that the mezzanine floor had an independent entrance, hence it should also attract HPA as well.

79. To deal with this problem, the starting point must be that the owners had not formally subdivided their interest. There is no formal documentation that a separate independent floor had come into existence. In the circumstances, it is hardly reasonable for them to say that HPA should have been given to them in respect of a separate independent floor of the building. In any event, there was never any claim for extra HPA until the matter was raised in these proceedings.

80. As to the method of valuing the cockloft, this clearly is a matter of valuation which is not subject to judicial review. The issue here is whether there are grounds for the Secretary to be satisfied that the Corporation had negotiated on terms that are fair and reasonable. In my view, there clearly are such grounds. The measurement by the Corporation and by one of the valuers of the owners of this property of the cockloft area is about the same. The valuation by the Corporation is based on existing guidelines for valuing cockloft.

81. There is a further argument by the Applicants that the rate used for valuing the cockloft is only one-sixth of the value of the ground floor. It is suggested that the Corporation had in fact agreed to this rate in the correspondence. Reading the letter of 13 March 1998 from the Corporation, one just cannot say that it had agreed to this rate at all.

82. Similar arguments advanced for 105 Chickick Street was abandoned.

CASE AGAINST THE SECRETARY

83. The Applicants failed in their case against the Secretary.

CHALLENGE AGAINST THE DECISION OF THE CHIEF EXECUTIVE IN COUNCIL

THE DECISION IS BASED ON THE RECOMMENDATION

84. As the Applicants have failed to set aside the recommendation of the Secretary, the Chief Executive in Council could clearly acted upon the recommendation in ordering the resumption. This being the case, it is not necessary for me to deal with the alternative argument that the Chief Executive in Council could, in any event, make an order for resumption independently.

REPRESENTATIONS TO THE CHIEF EXECUTIVE IN COUNCIL

85. A fundamental question arises as to whether the Applicants are entitled to make representations to the Chief Executive in Council on matters of valuation and the reasonableness of the steps to be taken by the Corporation in the negotiation. The Secretary informed the Applicants that they were entitled to make representations to the Chief Executive in Council other than on these two matters.

86. Whenever the Chief Executive in Council decides that the resumption of any land is required for a public purpose, the Chief Executive may order the resumption thereof under section 3 of the LR Ordinance. Resumption in pursuance of a recommendation by the Secretary shall be deemed to be a resumption for a public purpose within the meaning of the LR Ordinance (section 15(6)). Assistance can be gathered from the case of The State of South Australia v. O'Shea [1987] 163 CLR 378. The Criminal Law Consolidation Act 1935 in Australia empowers a judge to declare a person convicted of sexual offences against young children to be incapable of exercising proper control over his sexual instincts, and to order that he be detained during her Majesty's pleasure. This Act also provides that the Governor-in-Council might, on the recommendation of the parole board, release an offender on licence. The Correctional Services Act provided that the parole board was not to recommend to the Governor-in-Council, the release of a person declared to be incapable of exercising proper control over his sexual instincts unless two medical practitioners had examined him and were of opinion that he was fit to be released. In that case, two medical practitioners had examined the offender and reported that he was fit to be released on licence. The board considered the report at a meeting at which the offender and his counsel were present. Submissions were made on his behalf. The board recommended that the offender be released on licence, but the Governor-in-Council declined to act on the recommendation. The offender commenced proceedings for an order quashing the determination of the Governor-in-Council and a declaration that the Minister for Correctional Services was obliged to afford him a hearing before making a recommendation to the Governor-in-Council. Mason CJ held that the statutory scheme :

" ... allows a place for the presentation of the offender's case - before the Board when it is considering whether it should make a recommendation for release. There are many illustrations of this legislative model which entails the holding of an inquiry by a body authorized to make a recommendation to a Board or Minister which may make a decision rejecting the recommendation without conducting any further inquiry: see Taylor v. Public Service Board (N.S.W.); Kioa v. West; Minister for Aboriginal Affairs v. Peko-Wallsend Ltd. The hearing before the recommending body provides a sufficient opportunity for a party to present his case so that the decision-making process, viewed in its entirety, entails procedural fairness. If the decision-maker intends to take account of some new matter, not appearing in the report of the recommending body, and the party has had no opportunity of dealing with it, the decision-maker should give him that opportunity: Peko-Wallsend."

Brennan J held that :

" ... The pyramidal structure of administration by which the powers of discretionary decision-making are reposed in a Governor (acting on the advice of the Executive Council), Minister or senior official standing at the peak of a bureaucracy could not operate efficiently if the decision-maker were required to give an opportunity for a hearing in every case affecting an individual after that individual had had an opportunity, in the course of the administrative process, of dealing with every fact which is to be taken into account in reaching the decision."

87. The Privy Council in Fok Lai Ying v. Governor in Council & Others [1997] HKLRD 810 held that it was :

" ... not willing to reject the conclusion that s.3 of the Land Resumption Ordinance should now be construed, at least when the compulsory acquisition of a home or part of a home is at stake, to require a fair procedure including a reasonable opportunity of objection."

88. The issue before the Privy Council was not about a statutory scheme involving a body evaluating facts and making a recommendation to a decision-maker as in this case. Its decision on the LR Ordinance must be the binding authority on our courts. The position in this case is different : it deals with the relationship between the LDC Ordinance and the LR Ordinance. If the approach of the High Court of Australia is adopted in the present case, then it would appear that procedural fairness had been observed if the Applicants were given the opportunity of making representations to the Secretary on the two issues. On this issue, confining myself specifically to the statutory scheme under the LDC Ordinance and the LR Ordinance, since the Secretary is specifically required to be satisfied that the Corporation has taken all reasonable steps to acquire the land including negotiating for the purchase on term that are fair and reasonable and representations had been made by the Applicants to the Secretary on these issues, procedural fairness will indeed preclude the Applicants from raising the same representations to the Chief Executive in Council. In any event, as disclosed in the affirmations of Ms Cheng Mei Sze, Maisie, the clerk to the Executive Council, representations, including submissions on these two topics, were made by the Applicants to the Executive Council. In the circumstances, there is clearly no cause for complaint of any lack of procedural fairness.

THE CHIEF EXECUTIVE IN COUNCIL TO AWAIT FOR THE RESULT OF THE CHALLENGE AGAINST THE SECRETARY

89. As to the complaint that the Chief Executive in Council should wait for the decision of the Court against the Secretary before making the resumption, Mr Wong stated that there is no question of the Chief Executive in Council being disrespectful to the Court. It is stated that "any order of the Court would be obeyed subject to appeals".

90. The reality of the situation is that the demolition of the properties will not take place until February 2001, the resumption would not cause immediate irreparable damage to the Applicants. Furthermore, as disclosed in the evidence, the Applicants are not challenging the redevelopment proposal of the Corporation, their emphasis is really on matters of a monetary nature. This is not a ground that will assist the Applicants.

DISCRETION

91. In my view the Applicants have failed to make out a case against the Secretary and the Chief Executive in Council. Both parties have argued extensively on the question of discretion. Their arguments are fully set out in their written submissions. As the Applicants have failed in their application, it is not necessary for me to consider the question of discretion or to repeat the arguments here.

CONCLUSION

92. The applications against the Secretary and the Chief Executive in Council are dismissed.

COSTS

93. There shall be costs nisi to the Secretary, the Chief Executive in Council and the Corporation. The Corporation is justified to intervene in view of the allegations made against it. In the applications for judicial review against the decision of the Chief Executive in Council, the Applicants' solicitors prepared separate bundles consisting the same documents used in their applications against the Secretary. This is a complete waste of costs. I would make an order nisi that in respect of the applications against the Chief Executive in Council, all the costs relating to the preparation of the bundles and photocopying charges are disallowed on the solicitor and own client taxation.