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Great Mighty Ltd v Director Of Lands And Another

Judgment Cited authorities 13 Cited in Precedent Map Related
Vincent
Judgment Date01 June 2018
Neutral Citation[2018] HKCFI 1171
Judgement NumberHCAL125/2014
Subject MatterConstitutional and Administrative Law Proceedings
CourtCourt of First Instance (Hong Kong)
HCAL125/2014 GREAT MIGHTY LTD v. DIRECTOR OF LANDS AND ANOTHER

HCAL 125 & 126/2014

[2018] HKCFI 1171

HCAL 125/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 125 OF 2014

________________

BETWEEN
GREAT MIGHTY LTD Applicant

and
DIRECTOR OF LANDS 1st Respondent
HOME PURCHASE ALLOWANCE APPEALS COMMITTEE 2nd Respondent

________________

and

HCAL 126/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 126 OF 2014

________________

BETWEEN
BOTH HOST INTERNATIONAL LTD Applicant

and
DIRECTOR OF LANDS 1st Respondent
HOME PURCHASE ALLOWANCE APPEALS COMMITTEE 2nd Respondent
________________
(heard together)

Before: Hon Au J in Court

Date of Hearing: 12 April 2016

Date of Judgment: 1 June 2018

________________

J U D G M E N T

________________

A. INTRODUCTION

1. The applicant in HCAL 125/2014 (“Great Mighty”) and the applicant in HCAL 126/2014 (“Both Host”) were the respective registered owners of residential properties respectively known as 2/F, No 43G Mai Tau Wai Road (“No 43G”), and 2/F, No 45B, Ma Tau Wai Road (“No 45B”). Great Mighty and Both Host shared the same director and address.[1]

2. No 43G and No 45B were resumed by and reverted to the Government on 11 April 2013 under the Land Resumption Ordinance (Cap 124) (“the LRO”) for the implementation of an urban renewal development by the Urban Renewal Authority (“the URA”).

3. By the decision of the Director of Lands (“the Director”) dated 19 December 2013 (“the Director’s No 43G Decision”), the Director offered to Great Mighty an ex gratia Supplemental Allowance (“the SA”) which was 24% of the full Home Purchase Allowance (“HPA”) for the resumption of No 43G on top of the already accepted statutory compensation of $3,384,000.

4. Also by a decision of the Director dated 19 December 2013 (“the Director’s No 45B Decision”), the Director decided that Both Host was not eligible for the ex gratia SA on top of the already accepted statutory compensation of $3,371,000.

5. The Director’s reasons for the Director’s No 43G Decision and the Director’s No 45B Decision (collectively “the Director’s Decisions”) are that:

(1) Under the relevant Government policy, SA as ex gratia payment is only payable to owner of a resumed tenanted domestic property if it is actually used for domestic purpose.

(2) Applying the policy, Great Might was only eligible for 24% of the HPA of No 43G as the SA (instead of the maximum 50% of the HPA) since two of its subdivided units, Rooms C and D, were used for non-domestic purpose, and only Rooms A and B were used for domestic purpose.

(3) Both Host was not eligible for the SA at all because No 45B was not used for domestic purpose at the relevant time.

6. Great Mighty and Both Host appealed the Director’s decisions to the Home Purchase Allowance Appeals Committee (“the Appeals Committee”). The appeals (“the Appeals”) were heard together.

7. By a decision dated 7 July 2014:

(1) The Appeals Committee varied the Director’s No 43G Decision to the extent that Great Mighty should also be eligible for the SA in relation to Room D as it was vacant at the relevant time. It however upheld the Director’s decision that Great Mighty is not eligible for the SA for Room C as it was used for non-domestic purpose (“the No 43G Appeal Decision”).

(2) The Appeals Committee upheld the Director’s No 45B Decision as it agreed that No 45B was used for non-domestic purpose at the relevant time (“the No 45B Appeal Decision”).

For convenience, I will refer to these two appeal decisions collectively as “the Appeal Decisions”.

8. By way of these judicial reviews, the applicants challenge the Director’s Decisions and the Appeal Decisions (collectively “the Decisions”). It is the applicants’ principal contentions that the Decisions are unlawful as (a) under the relevant Government policy, the SA is payable to owners of tenanted domestic premises based on the nature of the premises but not on its actual user, (b) alternatively, even if the Government policy is otherwise, the applicants had a legitimate expectation based on the Government’s representation that they were eligible for the full SA based on the nature of the premises but not its actual user, and the Decisions failed to take into account this legitimate expectation. Finally, it is also the applicants’ challenge that the decisions are tainted with various procedural unfairness in any event.

9. Before I deal with the grounds of challenge in detail, it is helpful to set out the relevant background to put the matters in proper context.

B. RELEVANT BACKGROUND

B1. Land resumption under the LRO and the HPA and SA

10. Leaving aside for the moment the main opposing arguments on what is the relevant Government policy for SA, the following background is largely not disputed or indisputable.[2]

11. The Government of Hong Kong Special Administrative Region (“the Government”) may acquire private land by resumption for a public purpose. The Director is authorized to implement resumption and compensation provisions of the LRO.

12. When a private land is resumed, under the LRO, the former legal owners are entitled to a statutory compensation equivalent to the open market value of the resumed property at the date of resumption.[3] In addition, owner-occupiers may receive HPA whereas owners of tenanted flats or vacant flats may receive SA, as ex gratia allowances. They are voluntary and discretionary payments offered by the Government to the affected owners whose properties are resumed by the Government. The eligibility for receiving HPA or SA is subject to screening in accordance with the relevant Government policy.

13. In the beginning, there was only the ex gratia payment entitled HPA. The intention of HPA is to ensure that affected owners will not be forced out of home ownership as a result of resumption of land by the Government.

14. The HPA goes towards supplementing the costs of purchasing a replacement flat of a similar size in the neighbourhood of the resumed flat for affected owner-occupiers to live in (and hence the title of “Home Purchase Allowance”). Initially, the HPA was paid to all owners of domestic premises regardless of whether the premises were vacant, let or occupied by the owners. Later, such practice was regarded by the legislature as unjustifiably generous to absentee landlords or investment owners who have no genuine need to purchase a replacement flat to live in. As a result, there was discussion by the Legislative Council (“the LegCo”) since about 1996 of the revision to the eligibility for HPA to owners of domestic premises affected by resumption. Eventually, the revised eligibility for the HPA and the amount payable were approved by the Finance Committee of the LegCo (“the FC”) on 25 April 1997. See: the FC Paper FCR(97-98)7 (“the 1997 FC Paper”).

15. On 27 June 2000, the URA Bill was passed by the LegCo. In the course of examining such Bill, the relevant Bills Committee requested the Government to review the basis for calculating the HPA. There was therefore further discussion and revision by the LegCo on the payment of HPA and ex gratia allowance for owners of domestic properties affected by land resumption in 2001. See: the Finance Committee paper FCR(2000-01)83 titled “Home Purchase Allowance and Ex gratia Allowance for Owners and Legal Occupiers of Commercial Properties” for discussion by the FC on 9 March 2001 (“the 2001 FC Paper”).

16. As set out in the paper, members of the FC were invited to approve the retitling of HPA for owners of a tenanted flat as SA (ie, Supplementary Allowance) to make it clear that it is a supplement to the open market value of the resumed flat, and to avoid confusion or any misunderstanding that the existing ex gratia payments for owners of a tenanted flat is actually for home purchase.

B2. URA renewal project and surveys in general

17. When an urban renewal project is announced, a freezing survey will be conducted by the URA which will normally be adopted by the Lands Department for the purpose of screening an affected owner’s eligibility for HPA or SA. A freezing survey is an actual location survey conducted by the URA before making an offer to acquire a property to ascertain, among others, its size, status and usage. This is conducted without prior notice to the owners or occupiers of the property.

18. When resumption is ordered for the implementation of the urban renewal project, a Government Notice will be published in the Gazette.

19. When the Government Notice is gazetted, an update survey will be conducted by the URA which serves as a counter-check in the screening process of an affected owner’s eligibility for HPA or SA. However, it is the Director’s position that no additional HPA or SA entitlement or increased amount of HPA or SA will be allowed as a result of the update survey.

20. To briefly outline the procedures and compensation mechanism for private land resumed in urban area, the Lands Department has published an information pamphlet titled “Land Resumption and Compensation in the Urban Area – Guidelines for Owners, Occupiers and Surveyors”. For the present purpose, the relevant information pamphlet is the one of the June 2012 Revised Version (“the Information Pamphlet”).

B3. The resumption of No 43G and No 45B

21. Since 1 December 2007, Great Mighty had rented No 43G out to a Mr Pang. The tenancy agreement provided that No 43G could only be used for domestic purpose, and that without the owner’s consent, Mr Pang as tenant could not change or alter the property’s internal partition.

22. Both Host...

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