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Cheermark Investment Ltd v The Director Of Lands

Judgment Cited authorities 8 Cited in Precedent Map Related
Vincent
Judgment Date24 November 2017
Year2017
Citation[2018] 1 HKLRD 79
Judgement NumberCACV165/2016
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV165/2016 CHEERMARK INVESTMENT LTD v. THE DIRECTOR OF LANDS

CACV 165/2016 AND CACV 184/2016

CACV 165/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 165 OF 2016

(ON APPEAL FROM LDLR NO 2 OF 2013)

________________________

BETWEEN
CHEERMARK INVESTMENT LIMITED Applicant
and
THE DIRECTOR OF LANDS Respondent

________________________

AND

CACV 184/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 184 OF 2016

(ON APPEAL FROM LDLR NO 5 OF 2012)

________________________

BETWEEN
HAPPY ENOUGH LIMITED Applicant
and
THE DIRECTOR OF LANDS Respondent

________________________

Before: Hon Cheung CJHC, Yuen JA and Kwan JA
Dates of Hearing: 1 and 2 November 2017
Date of Judgment: 24 November 2017

________________________

J U D G M E N T

________________________

Hon Cheung CJHC:

1. I agree with the judgment of Kwan JA.

Hon Yuen JA:

2. I agree with the judgment of Kwan JA.

Hon Kwan JA:

3. The Director of Lands is the appellant in these two appeals which are heard together, as they raise common issues of law in the judgments of the Lands Tribunal (Deputy Judge Tracy Chan and Member Alex Ng) on 3 November 2015 and 17 March 2016 regarding compensation under the Lands Resumption Ordinance, Cap 124 (“the LRO”). The Tribunal had assessed compensation on the basis that the use of each of the premises as a shop is a permitted use under the user covenant in the government lease. So compensation was assessed at $9.7 million in the case concerning Cheermark Investment Limited (“Cheermark”; CACV 165/2017), and at $10.96 million in the case of Happy Enough Limited (“HEL”; CACV 184/2017). If the premises were to be valued as residential premises, compensation would have been assessed at $4.12 million for Cheermark and $3.846 million for HEL.

4. The two judgments of the Tribunal are referred to herein as “the Cheermark Judgment” and the “HEL Judgment”. The relevant background matters in each case will first be related.

Background: Cheermark

5. On 29 January 1917, the Government granted a Government Lease in respect of New Kowloon Inland Lot No 49 (“NKIL No 49”). The Government Lease contained this restriction on user:

“AND ALSO that he the said lessee his Executors, Administrators or Assigns, shall not at any time during the said term use or allow to be used the said demised premises or any part thereof for any other purposes than for Reclamation building dwelling houses workshops factories or godowns or similar purposes[1] without having first obtained the licence or consent of His said Majesty, His Heirs, Successors, or Assigns, signified in writing by the Governor for the time being of the Colony of Hong Kong …” (“the User Covenant”)

6. In 1954, a five-storey building standing on No 177 Hai Tan Street Kowloon was built on a piece of land registered in the Land Registry as NKIL No 49 Section C Sub-section 4 (“NKIL No 49 SC ss 4”). The occupation permit issued on 29 January 1954 was in respect of “the new buildings being one European & four Chinese houses”[2]. It was headed “Domestic Permit” and stated that the new buildings “comply in all respects with the provisions of the Building Ordinance (Chapter 123 of the Revised Edition, 1950)” and “Permission is hereby granted to occupy and use the buildings for domestic purposes.” The relevant building plan in 1953 approved by the Buildings Ordinance Office showed each of the ground floor premises of the five buildings marked as “shop”.

7. On 12 June 1970, Cheermark’s director and shareholder purchased the ground floor of the building at No 177 Hai Tan Street (“the Cheermark Property”) and later assigned it to the company by an assignment dated 12 June 1987. The Cheermark Property was purchased at a price which reflected commercial use. It is not disputed that it had been used as a shop. It is also not disputed that the 1st, 2nd, 3rd and 4th floors of the building were used for residential purpose.

8. The Government issued a notice of resumption dated 1 November 2010 in respect of inter alia NKIL No 49 SC ss 4. The date of resumption of this piece of land with the building was 19 February 2011.

9. Cheermark applied to the Lands Tribunal on 22 February 2013 under section 6(3) of the LRO for determination of the compensation payable by the Government.

10. The Tribunal held that “dwelling house” in the User Covenant, construed in the context of the statutory definition of “domestic building” in section 6(22) of the Public Health and Buildings Ordinance 1903 (“the 1903 Ordinance”), permitted the Cheermark Property to be used as a shop in that the five-storey building was primarily or partly used for residential purpose and this was not in breach of the User Covenant[3]. Further, the phrase “or similar purposes” in the User Covenant can be widely construed to cover user of commercial purpose and the ejusdem generis rule should not be applied[4].

11. The Tribunal also upheld the alternative case of Cheermark in that if the construction point should be decided against it, the Tribunal is satisfied there was an abandonment of the User Covenant on the part of the Government by acquiescence or waiver, as opposed to merely having waived or acquiesced in taking enforcement action[5].

12. As there was abandonment of the User Covenant on the part of the Government, the Tribunal ruled that section 12(b) of the LRO would not bar compensation according to the acquiesced use[6].

Background: HEL

13. HEL became the registered owner of the property concerned being the ground floor including the mezzanine floor at No 13 Pei Ho Street Kowloon (“the HEL Property”) by an assignment dated 10 January 2001. The HEL Property was in a four-storey tenement block constructed on a piece of land registered in the Land Registry as NKIL No 49 Section L. It stood at the junction of Pei Ho Street and Hai Tan Street. NKIL No 49 SL was granted to the lessee by the Government under the same Government Lease dated 29 January 1917 with the User Covenant as quoted above. The occupation permit issued on 18 June 1953 was in respect of “the new building being four Chinese type houses at Pei Ho Street”[7]. It was headed “Domestic Permit” and contained the same provisions mentioned above in the occupation permit covering the Cheermark Property.

14. HEL divided the HEL Property into five units for letting. The Tribunal did not think it necessary to analyse the existing uses in the five units separately as the permitted best-use is the question to be asked when dealing with the arguments on construction of the User Covenant. It found that the HEL Property had not been used for domestic purposes and had been used as a shop in the broad sense[8].

15. It is not in dispute that the 1st to 3rd floors of the building were used for residential purpose.

16. By the same notice of resumption issued on 1 November 2010, the Government gave notice to resume NKIL No 49 SL. The land with the building on it reverted to the Government on 19 February 2011.

17. HEL applied to the Lands Tribunal on 13 June 2012 for determination of compensation for resumption of its property.

18. The Tribunal reached the same conclusion on the construction of the User Covenant and held that shop use was not prohibited, when construed in the light of the definition of “domestic building” in the 1903 Ordinance. So long as the primary use of the building was domestic, it would fall within the ambit of “dwelling house” in the User Covenant and there was no breach. There was no breach of the occupation permit either[9]. And even if shop use does not come within “dwelling houses workshops factories or godowns”, it is caught by the general words “or similar purposes” and the ejusdem generis rule of construction did not apply[10].

19. On the alternative case that the Government had waived or abandoned the User Covenant by acquiescence over the long period of years, the Tribunal considered the evidence before it as well as the evidence it had viewed in the Cheermark case for which judgment was handed down earlier and came to the same conclusion there was abandonment of the covenant[11].

20. As in the Cheermark Judgment, the Tribunal held that compensation on the acquiesced use would not be barred by section 12(b) of the LRO[12].

The issues in these appeals

21. Three issues are raised in these appeals.

22. Firstly, whether the User Covenant would permit the use of the properties concerned as shops. It is the contention of Cheermark and HEL that the use of their properties would come within “dwelling house” and/or “or similar purposes” in the covenant.

23. Secondly, if the contention of Cheermark and HEL on the construction of the User Covenant is rejected, whether the Government had waived the User Covenant by abandonment.

24. Thirdly, if there was abandonment of the covenant by the Government, whether the Government can rely on section 12(b) of the LRO to bar compensation in respect of the acquiesced use.

25. The issues will be addressed in the above order. Before dealing with them, it would be appropriate to mention a preliminary objection taken by Mr Mok Yeuk Chi on behalf of the Director of Lands in CACV 184/2017.

Preliminary objection in CACV 184/2017

26. In the proceedings below, the Tribunal had before it a valuation report in which the expert witness of HEL, Mr Wayne Lee, addressed the contention of the expert for the Director of Lands, Mr Patrick Lai, that the occupation permit and the approved building plan in the 1950s permitted the use of the HEL Property for domestic purposes only. Mr Lee considered this in the...

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