Deacons recently acted for the Plaintiff in Connaught Real Estate Limited v Dawns Light International Limited and others [2026] HKCFI 3315, securing an unprecedented Order for an en bloc sale of an entire multi-storey building in Sheung Wan under the Partition Ordinance (Cap. 352) (PO). [1]
Background
Shiu Fung Hong Building (Building) is a retail-cum-commercial building co-owned by the Plaintiff and 1st and 2nd Defendants, each of which are corporate vehicles held by different camps of descendants of the late Mr. Fung Ping Shan. The 3rd Defendant is the manager of the common parts of the Building, taking a neutral stance in the Action. Co-ownership has proven practically difficult, due to deterioration in family relationships, resulting in various disputes relating to the use and management of the Building between the two camps. During the past decade, the Plaintiff had obtained offers from interested purchasers for the Building which were all turned down by the 1st and 2nd Defendants. By the proceedings, the Plaintiff sought to rid itself of the shackles of co-ownership by making an application for an en bloc sale of the entire Building, or alternatively, the Commercial Accommodation of the Building.
Options for sale
Whether to make an order for sale under the PO is a matter for the court’s discretion, taking into account all the factual circumstances of the case. While the 1st and 2nd Defendants initially opposed the Plaintiff’s application entirely, over the course of the 4-day hearing, they accepted there should be an order for sale, but submitted that only the Commercial Accommodation should be sold. Based on the parties’ cases, the three options available to the court were: (1) sale of the entire building on an en bloc basis, (2) sale of the Commercial Accommodation in one transaction, or (3) sale of the Commercial Accommodation on a floor-by-floor basis.
Partition
Under section 4 of the PO, the court has jurisdiction to order partition of property, but shall not partition the property in any part unless that part of the building is self-contained and is not connected to the remainder of the building otherwise than by a party-wall or a mutual staircase, or both. It was not disputed that there should not be partition as opposed to a sale. In explaining why the court was unable to make an order to partition the Commercial Accommodation, the court found that the Commercial Accommodation (and the floors therein) were not self-contained. More importantly, the Commercial Accommodation was co-owned through the holding of undivided shares together with exclusive possession, and any allocation of exclusive possession of different parts of the Commercial Accommodation to different owners by a Sub-DMC would not amount to partition in the legal sense.
Order for sale
Under section 6 of the PO, where it appears to the court that a partition of the property would not be beneficial to all interested persons, the court may make an order for the sale of the property. This is a matter of the court’s discretion, and an order for sale would generally not be refused, unless an order for sale would be detrimental to all co-owners or result in very great hardship to one co-owner (citing Wong Chun Kei and Poon Vai Ching [2007] 1 HKLRD 825 and Re Lau Hiu Tuen (unrep, HCB 8430/2006, 20 August 2015), G Lam J). As to the threshold of very great hardship, mere inconvenience or difficulty is not enough, and the burden is on the Defendants to meet this threshold.
In the present case, the 2nd Defendant argued that an en bloc sale would impose a very great hardship on it because it would need to relocate its business which was within the dried seafood locality of the Building’s street. In dismissing this argument, the court found that the real hardship threshold was not satisfied because the 2nd Defendant had never attempted to look for an alternative place to continue its business in the event of the Building being sold. Moreover, there was no evidence to show that the 2nd Defendant’s share of the en bloc sale proceeds would be insufficient for it to relocate to a nearby location.
Upon evaluating the evidence given by the Plaintiff’s and 1st and 2nd Defendants’ respective structural and geotechnical engineering experts, the court found that the redevelopment value (RDV) of the Building would not be affected by the underlying MTR tunnels as alleged by the Defendants. The court considered that the RDV would be highest (at around HK$285,000,000) if a sale en bloc were to be made. In reaching its conclusion, the court preferred and attached weight to the evidence of the Plaintiff’s experts.
From the factual perspective, given the acrimonious relationship between the two camps, it was their common intention to resolve the disputes concerning the Building during the third generation of the Fung Family and not pass the burden on to the next generation. As a matter of fact, the members of the third generation all being of advanced age, there was an imminent need to end the co-ownership of the Building with a clean break. In addition, the majority of the third-generation members in the Fung Family (from both camps) were in support of having an en bloc sale of the Building, to end the co-ownership.
Sale of Commercial Accommodation in one transaction
In rejecting the alternative option of sale of only the Commercial Accommodation in one transaction, the court found this option to lack feasibility. While there had been numerous potential purchasers expressing interest in acquiring the entire Building over the past decade, no evidence was presented by the 1st and 2nd Defendants, who bore the burden of proof, to show there were potential purchasers interested in solely acquiring the Commercial Accommodation. This would not offer any solution to the present co-ownership dispute.
Sale of Commercial Accommodation on floor-by-floor basis
As to the option of sale of the Commercial Accommodation on floor-by-floor basis, the court rejected it for being unrealistic and undesirable. In particular, the sale of the Commercial Accommodation separately from the Building would require the parties to execute a sub-DMC to allocate exclusive possession of different parts of the Commercial Accommodation to different owners. Given the acrimonious relationship between the two sides, the drawing up of a sub-DMC would probably not be smooth or straightforward and issues regarding the terms of it could lead to further litigation, resulting in additional legal battles, delays and costs. Realistically, since the third-generation members, particularly those within the Plaintiff’s camp, are all of advanced age, it is unlikely that a floor-by-floor sale of the Commercial Accommodation would be completed during their lifetimes.
Implications
Since this is the first time that an order for the en bloc sale of a partly commercial building has been made under the PO, the factors that the Court considered provide useful guidance for potential future cases, especially given the prevalence of family-held multi-storey buildings in Hong Kong. In exercising its discretion, the court took a practical and sensible approach in assessing the viability of different options, with reference to the factual realities of the case.
For further information, please contact:
Paul Kwan, Partner, Deacons
paul.kwan@deacons.com
[1] An appeal against the judgment is pending.
