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Best Star Holdings Ltd v Lam Chun Hing And Others

Judgment Cited authorities 7 Cited in Precedent Map Related
Vincent
Judgment Date22 February 2012
Subject MatterCivil Action
Judgement NumberHCA409/2008
CourtHigh Court (Hong Kong)
HCA409/2008 BEST STAR HOLDINGS LTD v. LAM CHUN HING AND OTHERS

HCA 409/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 409 OF 2008

____________

BETWEEN

BEST STAR HOLDINGS LIMITED Plaintiff
and
LAM CHUN HING 1st Defendant
LAM YAT HUNG 2nd Defendant
RICH UNITED DEVELOPMENT LIMTED 3rd Defendant

____________

Before: Mr Recorder H Wong SC in Court

Dates of Hearing: 6-8 and 30 September 2010

Date of Judgment: 22 February 2012

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J U D G M E N T

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INTRODUCTION

1. This is yet another action that concerns the development of “small houses” in the New Territories. A host of legal and factual issues have been raised. The resolution of some of the issues raised in this case requires a careful consideration of the same in the context of, and against the special features peculiar to, the Government’s New Territories Small House Policy (“Small House Policy”). That policy has been described by the Court of Appeal in Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd [2001] 2 HKLRD 471 and 473E-I as follows:

“This policy, implemented since December 1972, is designed to allow male indigenous villagers of a village which has been in existence since 1 July 1898 to apply for permission to erect small houses for their own habitation. Strict limitations apply to the building of such houses. Under the Buildings Ordinance (Application to the New Territories) Ordinance (Cap. 121), a small house is to be no more than three storey or 27 ft in height with a maximum roofed-over area of 700 sq ft but the building of such a house does not require the employment of an authorised person or approval of building plans under the Buildings Ordinance (Cap. 123), which are significant privileges, quite apart from the concessionary terms mentioned below.

Where a villager owns his own piece of land either in the village or within 30 ft of it, he is entitled to apply for a free building licence on this land or the Government might agree to grant new building land in return for the surrender of land elsewhere. If he does not own any land in the village, he may apply for a private grant of land from the Government at a concessionary rate, generally between $1,000 and $2,000….”

2. Because of the concessionary terms and other “significant privileges” afforded to an indigenous villager who is granted permission under the Small House Policy, strict limitations are imposed not only in respect of the design, height and size of the house that is permitted to be built (as pointed out by the Court of Appeal), but also in other respects as well. Of particular relevance to this case is the restriction that is imposed on the indigenous villager to sell, charge, demise, or otherwise dispose of the small house that is built. Such restriction is commonly referred to as the “restriction against alienation”, which is generally included as part of the terms of the relevant land grant, building licence or exchange issued under the Small House Policy.

THE NEW GRANTS

3. In this action, the 1st and 2nd defendants are respectively the registered owners of Lot no 2441 (“Lot 2441”) and Lot no 2442 (“Lot 2442”) in Demarcation District No 19, Tai Po, New Territories (in this Judgment, when I refer to Lot 2441 and Lot 2442 collectively, I will refer to them either as “Lots 2441 and 2442” or simply, as “the two Lots”). They are respectively the Grantees under New Grant no 13556 and 13557 dated 6 July 1998 and 30 June 1998 (collectively as “the New Grants”). Under the terms of the New Grants, Lot 2441 and Lot 2442 were granted to the 1st and 2nd defendants respectively in exchange for the surrender of certain old lots (being respectively s A and s B of Lot no 2276 in Demarcation District no 19) referred to in the Second Schedule of each of the New Grants. The premium payable (as set out in the First Schedule) for each of the New Grants was $1,000 only.

4. The terms of the 2 New Grants are similar. Both of them contain an express condition (being Special Condition 6(a)) providing for restriction on alienation, as follows:

“6(a) Except as provided in sub-clauses (b), (c) and (d) hereof, the Grantee (which expression shall, for the purpose of this Special Condition, include any mortgagee, whether legal or equitable, or an assignee of such mortgagee), having obtained this grant by way of private treaty at a concessionary premium, shall not assign, partition, mortgage, charge, demise, underlet, part with the possession of or otherwise dispose of the lot or any part thereof or any interest therein or enter into any agreement so to do, whether directly or indirectly, or whether by way of direct or indirect reservation, grant of any right of first refusal, option, power of attorney, building agreement or through a solicitor, agent, contractor, trustee or otherwise howsoever unless:

(i) a period of five years has elapsed from the date of a letter issued by the District Lands Officer confirming that these Conditions have been complied with to his satisfaction; or

(ii) the Grantee has paid to the Government the additional premium in accordance with sub-clause (d)(ii) of this Special Condition”

5. Sub-clause (a) is subject to sub-clauses (b), (c) and (d) of Special Condition 6. For the purpose of the present case, only sub‑clause (d) is relevant. That sub-clause provides as follows:

“(d) Upon certification by the District Lands Officer that these Conditions have been complied with to his satisfaction the Grantee may, with the prior written consent of the District Lands Officer and on such conditions as may be imposed by him (including the payment of such fee as may be required by him), assign (but not partition), mortgage or charge the lot (as a whole only and not a part thereof) or, subject to sub-clause (c) hereof, any interest or undivided share therein or part with possession of the lot and the building thereon or part with possession of part of the building on the lot, or enter into any agreement so to do but only to:

(i) a male person at least 18 years of age who has satisfied the District Lands Officer that at the date of the application for such consent he is descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong; or

(ii) a person other than a person referred to in sub-clause (d)(i) hereof provided the Grantee shall have first paid to the Government an additional premium equivalent to the difference between the amount of premium (if any) paid by the Grantee to the Government at the date of this grant and the full market value of the lot as at the date of the application to the District Lands Officer for such consent, such value to be determined by the District Lands Officer whose decision shall be final and binding upon the Grantee, whereupon, such additional premium having been paid and such consent having been obtained, sub-clauses (a), (b), (c) and (d) hereof shall be null and void and shall cease to have effect.”

6. It is plain from Special Condition 6(a) that the Grantee is restricted from alienating the lot for a specified period, which restriction would expire at the end of 5 years from the date of a letter issued by the District Lands Officer (“DLO”) confirming that the conditions provided under the Grant have been complied with to his satisfaction. The letter issued by the DLO confirming his being satisfied with the compliance is often referred to as the “certificate of compliance”, and will be referred to as such in this Judgment. The restriction against alienation, however, is subject to an important exception provided under Special Condition 6(d). After the certificate of compliance has been issued, the Grantee may apply for consent from the DLO to assign, mortgage or charge the lot, or part with possession of the lot and the building erected thereon, by paying to the Government an amount of additional premium equal to the difference between the amount of premium paid by the Grantee and the full market value of the lot as at the date of the application for consent. Upon the granting of the consent and payment of the premium, the restriction on alienation is removed. In this way, although the avowed purpose of the Small House Policy is to enable male indigenous villagers to erect small houses for their own habitation, a way is open to such villagers to build small houses, not for their own residence, but for the purpose of developing them for sale to third parties, no doubt with a view to profit. Cases are known – and some are reported in the law reports – of indigenous villagers (who never have the intention of building small houses for their own habitation) “co-operating” with developers to build small houses for sale. The types of co-operation may differ in different cases, from the villager simply selling to the developer their right to apply for permission to build small houses pursuant to the Small House Policy (for convenience I will refer to such right as the “indigenous right”, following the use of the term by A Cheung J, as he then was, in the case of Cheung Chi Fai v Wan Hang Ping, HCA 193/2002, unreported, 17 November 2004) to very elaborate scheme of co-operation between the villager concerned and the developer. There can of course be “genuine” cases where the original intention of the indigenous villager was to build a small house for his own habitation, but changed his mind after having built the house and for that purpose sought the consent of the DLO for removal of the restriction against alienation. Whatever might be the situation, where disputes arise which requires the court’s adjudication, each case must be examined on its own facts. In some cases, illegal conduct is revealed by the evidence (eg misrepresentation or...

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