1 Housing bosses face HK$440m claims over construction deals
Scarlett Chiang, SCMP 21 January 2008

The Housing Authority may be forced to pay more than HK$440 million in legal claims relating to housing contracts.

According to accounts published by the government, a developer has claimed about HK$200 million from the authority due to "the cancellation of flats" and another has claimed HK$240 million relating to disputes over a construction contract.

The developers of two public subsidised housing projects have also claimed damages relating to alleged breaches of land grant conditions by the authority and government, with both saying they would defend themselves against the allegations.

The claim of HK$200 million against the authority relating to the "cancellation of flats" is understood to involve Oriental Sharp, a subsidiary of listed Chevalier Development International, suing over the authority's handling of the Charming Garden project, the Home Ownership Scheme flats near Yau Ma Tei. A Treasury Bureau spokeswoman said the Housing Authority, not the government, was liable to pay any claims ruled valid.

A spokeswoman for the authority said arbitration of the cases was confidential and the parties were bound not to divulge details.

Housing Authority member Wong Kwun said the authority was capable of paying the claims. Such payments would put no pressure on its finances but he thought it would be unfair because the situation was caused by government policy changes.

Those changes led to cancellation of about 1,000 buyer contracts for flats which were built. "If the developer can claim compensation, the Housing Authority can ask the government to compensate the loss," he said.

The Court of First Instance ruled last year that the Housing Authority did not need to compensate Oriental Sharp for any losses it had incurred, but Oriental appealed against that decision earlier this month. Oriental Sharp alleged the Housing Authority broke its contract when it allowed people to withdraw from the subsidised housing project without penalty.

The property market crashed in 1998 after the government's pledge to provide 85,000 flats each year, in 1997. Oriental Sharp claims the authority acted unilaterally and reacted in ways which induced, encouraged and resulted in massive cancellations.

Oriental Sharp built about 4,000 flats for the government in 1995 in Charming Garden under the Private Sector Participation Scheme.

The company was guaranteed a fixed price of HK$15,000 per square metre. The Housing Authority eventually paid but the company claimed losses because of delays in selling the homes.