In Far Union Investment Ltd And Others V. Ever Legend (H.K.) Ltd & Ors [2023] HKLDT 66, the Lands Tribunal dismissed the majority’s argument against an order for compulsory sale; and rejected the purported need to give notice to beneficiaries and to consider legal feasibility of redevelopment.
The Applicant purchased a majority of the undivided shares of a property (Block B of Champagne Court) and applied for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance. A number of Respondents argued that there was a legal feasibility issue since the property had a number of shared structures with Blocks A & C of Champagne Court (which was separate and not part of the present application for a compulsory sale order), namely:
- Structural Interlinkage: Shared columns, beams, and pile caps between Block B and Blocks A/C;
- Drainage System: Shared drainage connections requiring disconnection from other blocks; and
- Transformer Room: Located in Block B held by the estate of 15th Respondent on trust for all owners of block A, B & C, but serving electricity to all three blocks.
Some of the Respondents argued the owners of Block A & C were not served notice of the present proceedings since they are affected by the shared structures and more importantly, they were beneficiaries to the Transformer Room. They also argued that there was a legal feasibility that the owners of Blocks A and C, has not given their consent to the demolition of any structure or re-routing of any facility before demolition of the property.
Firstly, the Tribunal relied on the decision in Pacific Base Holdings Ltd v Lee Hop Biu ([2021] HKCA 780), in which the Court of Appeal confirmed that under common law, provided that the owner could put in place sufficient measure to safeguard the easements enjoyed by the owners of the adjoining lot, they need not secure the consent of the owners of the adjacent lot for the redevelopment of the subject. The Tribunal is not required to determine the technical or legal feasibility of redevelopment as a precondition for granting a compulsory sale order. Feasibility is a matter for the market (i.e., potential bidders at auction) and the Building Authority, not the Tribunal. The Tribunal’s role is to decide if the lot is “ripe for redevelopment” due to age or state of repair, not to guarantee that redevelopment can or will occur.
In the present case, the Tribunal acknowledged the unresolved technical issues (shared structures, drainage, transformer room), but it held that these issues do not bar the grant of a sale order; instead, they are risks for the purchaser to assess. If redevelopment proves unfeasible, the auction may fail, and the order for sale could lapse. The Tribunal refused to impose special conditions (such as requiring alternative electricity supply before demolition) in the sale, leaving such matters to be resolved by the successful bidder and relevant authorities.
Secondly, the Tribunal held that there was no separate notice requirement to give notice to all the beneficiaries of the Transformer Room (e.g. the owners of Block A & C), since that would involve a lot of investigation and costs of service. The purposive approach of the legislation was that only the legal ownership should be notified and that any trustee should notify the beneficiaries independently.
The Tribunal also held that the 8(1) of the Ordinance, all rights of the owners shall cease upon the purchaser becoming the owner of the Lot. Their right, if any, to the transformer room would cease. Hence the Tribunal ordered that the order for public auction of all the undivided shares of the property without any conditions regarding the transformer room.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case.