Developer should foot the bill: Urban Renewal Authority

It is Cheung Kong unit's responsibility to pay the HK$23 million to buy back land on which it built The Center, renewal authority tells court

PUBLISHED : Wednesday, 09 January, 2013, 12:00am
UPDATED : Wednesday, 09 January, 2013, 5:17am

A Cheung Kong unit agreed to pay for the resumption of land on which The Center was built, and the agreement is still in force, lawyers for the Urban Renewal Authority told a court yesterday.

The arguments were heard in the Court of First Instance, where a hearing on the claim taken out by the URA against the subsidiary and Cheung Kong began yesterday. The hearing is scheduled to last seven days.

Victor Li Tzar-kuoi, deputy chairman of Cheung Kong, might appear as a witness for the defence in the legal proceedings.

Although The Center, a 346 metre steel skyscraper on Queen's Road Central, was completed over a decade ago in 1998, the dispute over who must pay the cost of buying back the land, estimated at more than HK$23 million, continues.

The case goes back to 1989, when the Land Development Corporation, the former incarnation of the URA, entered into a joint venture with the Cheung Kong subsidiary, Agrila, to resume, or buy back, the land and develop it.

Under the agreement, Agrila was to foot the bill of resuming the land. Cheung Kong acted as Agrila's guarantor.

The URA filed the current suit in 2002.

It is seeking HK$3.2 million - which it claims is the total of payments that were not made from 2000 to 2002 - as well as a court ruling that the company must pay the resumption costs that have accrued since then. That sum is estimated at more than HK$20 million.

The joint venture has involved several agreements between the parties.

Besides the original agreement in 1989, there was one in 1997 that amended it, and one in 2000, which resulted from a dispute between the parties.

The URA says that the obligation to pay the resumption costs has always remained with the developer. This responsibility was not changed by the 1997 agreement, it says.

"We say it is clear that the developer would continue to pay for the resumption payments," said Benjamin Yu, senior counsel for the URA.

Yu noted that the company had continued to make payments between 1997 and 2000.

"After the [1997] agreement, the parties conducted themselves as if the developer were still responsible for the resumption payments," he said.

Yu denied that the Cheung Kong subsidiary was released from its obligation to make the resumption payments following a conversation in 2000 between Li and the chairman of the Land Development Corporation at the time, Lau Wah-sum.

He said the parties had all along proceeded on the basis that everything would be in writing.

Yu argued that no one would read the agreement made in 2000 as settling Agrila's obligation to pay the resumption costs.

The trial continues before Mr Justice Thomas Au Hin-cheung.