WEALTH MASTER INTERNATIONAL LTD AND OTHERS v. WONG WENG WA VINCENT, ADMINSTRATOR OF THE ESTATE OF WONG SHING KWONG, DECEASED

LDCS 18000/2014

[2021] HKLdT 16

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE APPLICATION NO. 18000 OF 2014

BETWEEN

______________

DECISION

APPLICATION FOR EXTENSION OF TIME

 TO COMPLETE REDEVELOPMENT

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Background

1.  On 8 May 2015, I handed down a judgment (“the Judgment”) which ordered, inter alia, all the undivided shares in the Remaining Portion of Marine Lot No 479 and the Remaining Portion of Marine Lot No 484 (“the Lots”) which were then erected a building at Nos 101-102 Connaught Road West, Hong Kong be sold by way of public auction for the purposes of redevelopment pursuant to section 3(1) of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”).

2.  Included in the Order for Sale is a condition (“the Condition”) whereby the purchaser of the Lots or its successor in title were to complete redevelopment of the Lots and make the redevelopment fit for occupation within a period of 6 years after the date on which the purchaser of the Lots became the owner of the Lots.

3.  Placed before me was an Ex-Parte Summons filed on 23 November 2020 (“the Ex Parte Summons”) (as subsequently amended on 9 February 2021) by Messrs Mayer Brown on behalf of Grand Connaught Company Limited (“GCCL”) applying for extension of the period abovementioned from 31 July 2021 to 28 August 2026, ie a period as much as more than 5 years.

4.  There was also a Joinder Summons filed on 4 January 2020 directed to be made by me on 14 December 2020 to invite the Director of Lands or more appropriately the Secretary for Development to be joined as an interested party. Under the Crown Proceedings Ordinance, Cap 300, civil proceedings against the Government should be instituted against the Secretary for Justice and it is the case of GCCL that the Department of Justice, acting for the Secretary for Justice, would be in a better position to determine whether the Director of Lands or the Secretary for Development would be a more appropriate party from whom instructions are to be taken.

5.  Having heard the submission of Mr Mok Yeuk Chi (“Mr Mok”), counsel for GCCL, I made an order that:

(1) The Secretary for Justice be joined as an interested party to the Ex Parte Summons taken out by GCCL dated and filed on 23 November 2020 in these proceedings;

(2) Leave be granted for GCCL to amend the Ex Parte Summons as the result of (1) above (“the Amended Summons”);

(3) Service on the Secretary for Justice of copies of the following documents be dispensed with:

(a) the Ex Parte Summons;

(b) the Amended Summons;

(c) the Affidavit of Pan Wai Hung Christopher (“Mr Pan”) filed on 23 November 2020; and

(d) the Affirmation of Wong Chi Kin Kenneth (“Mr Wong”) filed on 23 November 2020.

6.  Here are my reasons.

The Condition

7.  The Condition was imposed pursuant to paragraph 1(b) in Schedule 3 of the Ordinance.

8.  By virtue of section 9 of the Ordinance, such condition specified in Schedule 3 shall be deemed to be a condition of the Government lease of the lot the subject of an order for sale and, accordingly, a breach of such a condition shall entitle the Government to re-enter the lot under and in accordance with the provisions of the Government Rights (Re-entry and Vesting Remedies) Ordinance, Cap 126. This was confirmed in the Bills Committee on the Bill on 17 February 1998: this section would apply to “cases involving breach of conditions after completion of sale, for example, delay in completing redevelopment of the lot.”[1]

The Secretary for Justice as Interested Party

9.  And in the same meeting, the Chairman concurred that encouraging private redevelopment to improve urban environment should be regarded as a ground of public interest.

10.  In this regard, reference is made to the Official Record of Proceedings of the Provisional Legislative Council dated 21 January 1998 on the then Land (Compulsory Sale for Redevelopment) Bill (“the Bill”) which later became the Ordinance. The then Secretary for Planning, Environment and Lands stated at the beginning of the second reading of the Bill as follows:

“The purpose of the Bill is to provide a solution to some problems which are often encountered in the course of land assembly for private property redevelopment; thereby quickening the pace of redevelopment and improving environment in derelict urban area…

In view of the deteriorating environment in the old districts and the serious threat which may be posed to public and residents’ safety by the state of disrepair of buildings in these districts, expediting urban renewal is a pressing task. While the Land Development Corporation and the Urban Renewal authority to be set up next year will have to make all-out efforts to meet the task, the active participation of the private sector and property owners is also indispensable. However, because of various problems encountered in the land assembly process, the replacement rate of existing buildings is slowing down. In view of the circumstances, it is necessary to implement as soon as possible the mechanism provided by the Bill so as to assist in resolving the issue of land assembly in redevelopment, thereby speeding up urban renewal and ensuring that private redevelopment projects can be conducted smoothly and quickly.” (emphasis added)

11.  Thence, it is noted that sections 3A and 3B of the Partition Ordinance, Cap 352, provide a mechanism for the Secretary for Justice to intervene and join as a party to the proceedings if she so wished. Indeed, the Secretary for Justice would have a right of intervention in a private suit whenever it affected the Government’s prerogatives. She also had a right of intervention at the invitation or with the permission of the court where the suit raised any question of public policy on which the executive might have a view which it desired to bring to the notice of the court. In the Bills Committee on the Bill on 11 March 1998, the Principal Assistance Secretary for Planning, Environment and Lands concurred that where necessary, the Lands Tribunal could invite the Secretary for Justice to intervene.

12.  In the present case, I was of the view that the Director of Lands or more appropriately the Secretary for Development should be invited to join as an interested party. This is because the Condition is fact an equivalent to a building covenant usually included in a Government lease. A full review of the government’s policy on building covenants can be found in Shun Shing Hing Investment Company Limited v Attorney General [1983] HKLR 432. See also, Ying Ho Company Limited and Others v Secretary for Justice [2005] 1 HKLRD 135, (2004) 7 HKCFAR 333 where the developers missed the deadline for fulfilling the building covenant and in order to avoid re-entry by the Government, paid over $1/2 billion in waiver premia and liquidated damages.

13.  The Ex-Parte Summons was amended on 9 February 2021 to have the Secretary for Justice be joined.

Reasons for Applying Extension

14.  Mr Pan, the Director of the Property Department of Tai Hung Fai Enterprise Company Limited (“the Group”), filed an Ex Parte Summons together with an affidavit (“the Affidavit”). Mr Pan stated that Swift China Limited was the successful purchaser of the Lots in the public auction held on 30 June 2015 and completed the purchase on 31 July 2015. GCCL, being the successor in title to Swift China Limited as a result of an intra-group internal transfer within the Group, became the registered owner of the Lots on 12 June 2020. By reason of the above, Swift China Limited and now GCCL as its successor in title were to complete redevelopment of the Lots and make the redevelopment fit for occupation within a period of 6 years from 31 July 2015, ie on or before 31 July 2021.

15.  The Affidavit intimated that an opportunity arose to redevelop the Lots together with all of the Neighbouring Lots (as shall be defined more particularly in paragraph 22 below) which include the lots occupied by premises at Nos 99-103A Connaught Road West (“CRW99-103A”) as a larger commercial development (“the Joint Development”) with improved efficiency and design. The lot area of the amalgamated site is approximately 155% larger than that of CRW99-103A. Due to unexpected complications in acquisitions of the neighbouring lots, GCCL anticipated that, if one could ignore the impact of the coronavirus outbreak, it would need around slightly more than 4 years from 31 July 2021 to complete the Joint Development.

16.  But the coronavirus outbreak had added uncertainty to the overall project programme. Factors such as (i) limited services resulting from the adoption of the Work-From-Home policy by both consultancy firms and Government departments, (ii) longer lead time of materials, (iii) fluctuating supply of workers and (iv) potential delay of work due to suspected or confirmed cases within the project team might cause delay or disruption to the construction works of the Joint Development. Such factors will therefore have to be reflected in the construction programme.

17.  GCCL further pleaded a buffer of 3 to 6 months for general bad weather/inclement weather for prudence sake.

18.  Mr Wong has been engaged as the authorised person for the Joint Development since 21 March 2017. He had deposed to the current best estimation that GCCL could complete the building works of the Joint Development, with the occupation permit granted, would be in or around August 2026. Mr Wong had filed an affirmation on 23 November 2020 which sets out the development progress and benefits of the Joint Development.

19.  The affirmation further explained that development of two of the Neighbouring Lots, namely Inland Lot 2963 and Inland Lot 3035 on which the premises thereon were known as No 99 Des Voeux Road West and No 101 Des Voeux Road West, were other pieces of land included in the Joint Development and were subject to a compulsory sale order granted in New Dorset Investments Limited v Leung Wing Hing Joss Sticks Factory (Hong Kong) Limited & Others, LDCS 30000/2018 dated 9 June 2020 ([2020] HKLdT 22) whereby redevelopment has to be completed by 28 August 2026. Therefore, the current best estimation by Mr Wong above is consistent.

Background of the Original Application for Compulsory Sale

20.  The Affidavit further explained that one of the applicants, Beauti-Sight Limited, had in fact, by a provisional agreement for sale and purchase in Chinese dated 21 September 2011, procured the respondent to sell the only outstanding unit in the Lots, namely Flat B on 10/F, Man Fung Building, Nos 101 & 102 Connaught Road West. However, there was a title problem that made it impossible for this only respondent to give good title (“the Title Issue”) despite his willingness to sell[2]. After having waited for more than 3 years for the respondent to cure the title problem of no avail, the applicants had no better alternative but to proceed with the application for compulsory sale in October 2014 so as to acquire all of the undivided shares in the Lots. The respondent was absent throughout the trial in 2015.

21.  Mr Pan emphasised that the initial plan for the redevelopment of CRW99-103A, of which the Lots formed part, was ready to proceed immediately upon completion of the sale and purchase of the respondent’s unit in 2011 but for the Title Issue[3].

Neighbouring Lots

22.  Mr Pan gave the particulars of the Neighbouring Lots as follows:

Lot No	Address	Date of Acquisition by the Group	Remarks
Inland Lot 2217	No 91 Des Voeux Road West	29 May 2017
Inland Lot 2963	No 99 Des Voeux Road West	28 Aug 2020	Subject of Compulsory Sale Application  LDCS 30000/2018
Inland Lot 3035	No 101 Des Voeux Road West
Remaining Portion of Marine Lot 404	No 92 Connaught Road West	19 Aug 2019
Remaining Portion of Marine Lot 403 and Remaining Portion of Section A of Marine Lot 404	No 93 Connaught Road West	16 Sep 2019
Remaining Portion of Marine Lot 402	No 94 Connaught Road West	20 Jun 2018
Section A of Marine Lot 401	No 95 Connaught Road West
Remaining Portion of Marine Lot 400	No 96 Connaught Road West	13 Jan 2020	Subject of Compulsory Sale Application  LDCS 6000/2017
Marine Lot 399	No 97 Connaught Road West	17 Jun  2016
Remaining Portion of Marine Lot 398	No 98 Connaught Road West
Remaining Portion of Inland Lot 2231	No 99 Connaught Road West	7 Apr  2011
Remaining Portion of Marine Lot 478	No 100 Connaught Road West
Remaining Portion of Marine Lot 479 and Remaining Portion of Marine Lot 484	Nos 101-102 Connaught Road West	31 July 2015	The Lots
Marine Lot 483	Nos 103-103A Connaught Road West	7 Apr  2011
Section A of Marine Lot 479		8 Jan 2019
Section A of Marine Lot 484		28 Mar 2018

23.  Mr Pan explained that the initial plan (“Plan A”) was to redevelop CRW99-103A which included the Lots in between into a hotel development. As early as on 15 September 2010, an application was made for approval of proposals in respect of demolition for CRW99-103A approval of which was obtained on 11 November 2010. The Buildings Department also approved the development plan on 16 March 2011. But then Plan A was held up by the Title Issue.

24.  Mr Pan stated that in or around March 2011, attempt was first made to acquire ownership of Lee Hing Building (which occupied No 96 Connaught Road West), No 97 Connaught Road West and No 98 Connaught Road West as well as No 91 Des Voeux Road West at its back (collectively referred to as “CRW96-98”).

25.  On 7 December 2012, a building amendment plan was submitted and was approved on 4 January 2013.

26.  Mr Pan suggested that at the material time of July 2015, that is, by the time when Swift China Limited was prepared to purchase the Lots through public auction, it was still expected to shortly acquire all of the interest in CRW96-98 to enable the Joint Development to be completed within the 6-year building covenant under the Order for Sale. If those lots were included in the redevelopment project, with the increased site area, the extended project (“Plan B”) could be turned into a commercial development of Grade A private offices instead of the original hotel use.

27.  This Plan B was thwarted owing to unexpected difficulty in acquiring from the owner of the only outstanding unit in Lee Hing Building. On 19 June 2017, Swift China Limited made a compulsory sale application to the Tribunal, ie LDCS 6000/2017 and only after the trial by the Tribunal in December 2019 did Swift China Limited successfully acquire that outstanding interest in Lee Hing Building on 13 January 2020.

28.  Meanwhile, Mr Wong and his firm, Ronald Lu & partners (Hong Kong) Limited were engaged for this development project from 21 March 2017.

29.  The Group had acquired the entirety or majority of the interests in the Neighbouring Lots and intended to develop with them a Grade A private office building on an even a greater scale (“Plan C”) which, according to Mr Pan, would have (1) a larger site area, (2) more gross floor area, (3) higher efficiency, and (4) improvement to neighbourhood. According to Mr Wong, The Neighbouring Lots and the Lots (“the Amalgamated Site”) together constitute a site area of 20,223 sq ft (1,878.76 sq m) and a potential gross floor area (“GFA”) of 303,345 sq ft (28,181 sq m), which is approximately 155% larger than the originally intended redevelopment CRW99-103A, ie Plan A[4].

30.  On 1 April 2020, GCCL submitted a building plan for the Amalgamated Site under Plan C for approval. On 19 August 2020, GCCL submitted another building plan for Plan C for approval. The revised General Building Plans were submitted on 28 October 2020 and were approved by the Buildings Department for the Building Authority on 4 January 2021.

31.  Mr Wong, in his Affirmation dated 20 November 2020 and filed to the Tribunal also on 23 November 2020, explained that Plan C would bring positive impact to the neighbourhood:[5]

(a) The Amalgamated Site would not be plagued by piecemeal developments and, if the Lots were to be developed on their own, ie a site area of merely 252.38 sq m, that development would be a pencil-type one by comparison.

(b) The Joint Development of the Amalgamated Site, which is substantially larger and much more efficient than the development of the Lots on their own, does have a public dimension: it satisfies the need of maximizing utility of the limited supply of land in Hong Kong and the market need of offices in the western district of Hong Kong.

(c) With its critical mass of 303,345 sq ft (28,181 sq m) in GFA, Plan C can set a positive example for urban renewal of the neighbourhood and may likely quicken the regeneration of a wider area.

(d) The design of the Amalgamated Site will comply with the Sustainable Building Design Guidelines issued by the Buildings Department (PNAP-APP 152):

(i) The Amalgamated Site, having a site area of over 1,000 sq m (20,223 sq ft or 1,878.76 sq m), will provide the required greenery coverage for the enjoyment by the public;

(ii) The provision of greenery will benefit the pedestrians and building users in terms of visual relief and ease off the urban heat island effect.

Submission of GCCL

32.  Mr Mok submitted that due to the unexpected complications in the acquisition of the last unit in Lee Hing Building at No 98 Connaught Road West and the outbreak of the coronavirus, GCCL is now advised by its authorised person, Mr Wong, that it should be able to complete the Plan C development by 28 August 2026.

33.  Mr Mok further submitted that GCCL, the 2^nd applicant and their associated companies had been taking active and continuing efforts to implement and expand the redevelopment (which always included the Lots) since the acquisition of the Lots in 2015 and the expanded redevelopment of Plan C is capable of bringing about positive impacts to the neighbourhood area.

34.  Finally, Mr Mok pointed out that the Order for Sale was not obtained against the wish of the respondent. In fact, the respondent had agreed to sell his unit before the proceedings were commenced but the agreement was not able to be completed because the respondent failed to remove a title problem. There was never any contest from the respondent against the Order for Sale.

Discussion

35.  While I accept that encouraging private redevelopment to improve urban environment should be regarded as a ground of public interest, I appreciate in Ying Ho Company Limited, supra, it was decided that there was only an implied term to the effect that the building covenant period would be extended if there is culpable conduct or undue delay on the part of the Government resulting the developers in that case not being able to comply with the building covenant.

36.  Having regard to the reasons for the Joint Development as described above, the Government was clearly not at fault or in any way culpable for delaying the development of the Lots. Once the applicants in the present case commenced the proceedings under the Ordinance in October 2014, they should have been aware of the provisions of the Ordinance which includes section 9 and the consequence of the breach of the 6-year completion period. That they chose to defer the development for an alternative scheme, Plan C or otherwise, was out of their own volition that they cannot complain. They could have deferred commencing the application for compulsory sale in the first place if the opportunity for the Joint Development so alleged arose.

37.  In Bond Star Development Limited v Capital Well Limited [2004] 2 HKLRD 855, the Court of Appeal did refer to the second reading of the Bill on 7 April 1998 and affirmed that the legislation would apply to single lots only irrespective of the following comments made by the Provisional Legislative Councillors:[6]

(a) Mr Edward Ho was reported to have said: “The key lies in the Bill being applicable to single lots only. It is therefore not applicable to consolidated redevelopment plans for buildings straddling several lots. As a result, development of pencil buildings will result. From the angle of town planning and of increasing space and basic community facilities for an area, ‘pencil buildings’ are far from being satisfactory. Hence I hope the Government can look into other ways, which better conform to town planning principles, to help the private sector to conduct redevelopment.”

(b) Mr Ronald Arculli expressed his concern that due to the stringent requirement that an applicant for an order for compulsory sale will have to own 90% of the undivided share of the lot or lots which may be the subject of an application, this might result in pencil rather than comprehensive redevelopment.

(c) Mr Ngan Kam-chuen also referred to the “pencil’ developments which he referred to as not being conductive to comprehensive urban redevelopment.

38.  The Secretary for Planning, Environment and Lands did not say anything to disagree but he also did not further address the issue. Neither the town planning issue has been included as one of the considerations in section 4(2)(a) of the Ordinance or as a criterion of granting an order for sale. In my view, therefore, the purpose of achieving a better development scheme for the reason of better town planning, improving the environment of the neighbourhood or otherwise should not be regarded as a good excuse for not complying with the 6-year development completion period.

39.  Nevertheless, in a letter dated 29 January 2021, the Department of Justice intimated that the Director of Lands had no comment on the present application to extend the time for completion of the redevelopment of the Lots from 31 July 2021 to 28 August 2026.

40.  I have also taken note of the peculiar background of this case that the Order for Sale was not obtained against the wish of the respondent. In fact, the respondent had agreed to sell his unit before the proceedings were commenced in 2014 but the agreement was not able to be completed because of the Title Issue. There was never any contest from the respondent against the Order for Sale. That is, there would not be any prejudice to the respondent if the time for completion of the redevelopment of the Lots is extended.

41.  As a result, I made the order as granted.

Costs

42.  I make a costs order that costs of the Joinder Summons be paid by GCCL to the Secretary for Justice on High Court Scale, to be taxed if not agreed.