Anling Ltd and Others v. Anling Ltd and Others

LDCS 1000/2015

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDCS 1000 OF 2015

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D E C I S I O N

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1.The 7 applicants altogether hold not less than 80% of the undivided shares in each of the 8 adjacent lots together with the buildings standing thereon (collectively referred to as “the Lots” and “the Buildings” respectively). By the Application dated 23 January 2015, they applied to the Tribunal for sale of all the undivided shares in the Lots and Buildings pursuant to the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“LCSRO”). The Buildings are over 50 years old as their occupation permits were issued between 1957 and 1961.

2.The Buildings are situated at prime location of Wan Chai near Admiralty. They are on the north eastern side of the Queen’s Road East bounded by Anton Street and Landale Street. According to the valuation attached to the Application, the existing use value (“EUV”)[1] of the Lots and the Buildings are in the region of $1.43 billion[2]. At the time of the Application, there are 34 respondents, including shop and residential unit owners, mortgagees and other potentially interested parties. It is fair to say the applicants are not doing well with their acquisition of the ground floor shops which are the most valuable part of the Buildings. About half of these shops remain in the hands of the minorities. According to the applicants’ own valuation, the EUV of a shop ranges from around 20 million to 53 million.

3.After the time for filing of notice of opposition has expired, the applicants listed this Application for a call-over on 7 September 2015. At that hearing, directions were given for certain respondents to attempt mediation with the applicants and filing of notice of opposition. There is no dispute that the following 3 areas, namely, valuation, building condition and structural assessment of the Buildings, require expert evidence.

4.Apparently, there were then over 10 actively defending respondents/groups of respondents. If no restriction is placed on experts, the tribunal will be flooded with experts when each party/group is to engage its own expert on each area. The trial may become a trial of experts and will be too clumsy to be manageable. It is most undesirable and cannot be right from a case management point of view.

5.In Good Faith Properties Ltd v Cibean Development Co Ltd[3], the Court of Appeal (“CA”) has indicated that the tribunal should exercise a firmer case management particularly on expert evidence in compensation cases where the costs of defending are generally paid by the applicant, and with a view to avoid delay. The tribunal had expressed to the parties its said concern at the first call-over. It was indicated to the parties that they should at least explore the option of a single joint expert (“SJE”) on each discipline for each side, i.e. the applicants’ and respondents’ sides. The parties are invited to address the tribunal on the feasibility of the tribunal’s proposed approach at the next hearing scheduled for 17 November 2015 in case the respondents could not agree on this issue.

The Argument on 17 November 2015

6.It is not in dispute that there are still some 20 defending (or potentially defending) respondents comprising a total of 13 groups. Of these 13 groups, there are now 8 legal teams representing 12 respondents. The remaining 5 groups comprising 8 respondents are all acting in persons. According to Mr Yip, solicitors for the applicants, they expected that a total of 8 to 9 groups of respondents will be contesting the proceedings until trial. The other respondents did not seek to dispute otherwise. So far, 3 groups representing 8 respondents have proposed to appoint 3 different valuation experts. Apart from a group (comprising 3 respondents) who at the direction hearing expressed they are not going to adduce valuation evidence, there are at least 8 respondents whose position is unclear. Assuming they will be appointing any of the already appointed ones or simply not appointing any valuation expert, there are still a total of 4 experts[4] on the area of valuation.

7.On the other hand, 5 respondents comprising 3 groups have indicated they will jointly appoint a surveyor to do the condition survey report and an engineer to do the structural condition report. Assuming no other respondents will do the same, there are at least a total of 4 experts on these 2 areas when the Application goes to trial.

8.The question therefore remains – whether it is proper and fair in the circumstances for the tribunal to limit the number of experts to be called by the parties to one SJE on each discipline for each of the applicant’s and respondents’ side. In other words, why do we need 4 experts or more on the single area of valuation?

Discussion

9.The applicants embrace the aforesaid SJE approach. Mr Yip submits for the applicants that:

i) This tribunal has jurisdiction to limit the number of experts to be called by each side of a litigation;

ii) The limitation on the number of experts in the manner proposed is consistent with the underlying objectives of the Rules of High Court (“RHC”) and a proper exercise of the case management power to achieve such objectives. It is also in line with what has been directed by the CA in Good Faith; and

iii) Support can be lent from the English CA case of Various Claimants v Various Defendants Related to Giambrone[5]. In that case it was said by the English CA that the 142 claimants should have been entitled to one single expert on foreign law had the matter been managed from the outset, and compelling reason needed be shown for more than one expert in relation to the same issue on each side.   

10.It is fair to say that all respondents appreciate the difficulties generated as a result of too many experts attending court on a particular subject. However, 8 out of 9 groups[6] oppose the proposed SJE approach. Quite a number of parties rely on the submission of Messrs Lo and Lo lodged on behalf of R7. The submission of the opposing parties can broadly be summarized as follows:

i) Good Faith does not prohibit the parties from adducing their own expert evidence.  On the other hand it stresses the importance of expert opinion to be adduced by the minorities. It is only when there is reason to believe that the parties’ experts are generating unreasonable differences instead of providing helpful assistance that the tribunal should consider appointing a SJE or even a court expert. It is therefore pre-mature for the tribunal to limit the number of experts to be called by the respondents in the meantime. The tribunal should allow each party/group to pick the experts of their choice and submit their reports. The tribunal may, after reviewing the issues stated in the joint statements of experts on areas of agreement and disagreement, direct appointment of SJE pursuant to Good Faith if the issues generated are unreasonable; and

ii) Many of the minorities’ properties are valuable shops. A different set of assumptions or variables used by a different valuation expert may impact significantly on the valuation arrived at which will mean a lot to a minority. A party would not feel comfortable and may lose faith in an expert not of his choice. 

11.It has to be emphasized that expert evidence, unlike factual evidence and being opinions in its nature, would only be admitted in order to assist or educate the court on a subject which it does not have any expertise. The court needs the expert’s special knowledge or experience on an area that he has acquired (but the court has not acquired) in order to help it arriving at its conclusion. Since an expert’s role is to assist the court, he cannot discharge his duty to the court unless he provides the opinion on which he has an expertise independently, impartially, unbiased and uninfluenced by the party who pays or instructs him. By reasons thereof, while a party may wish to engage an expert of his choice to support his case, due to the nature of expert evidence this expert cannot be the appointing party’s advocate. Since an expert is there to assist and educate the court he owes an overriding duty to the court and should not be a “hired gun” with a view to advancing a party’s case.

12.The issue of partisan experts has been a concern and a subject matter of the Civil Justice Reform. The misunderstanding of the an expert’s role is so deep-rooted that it is considered necessary to cause a cultural change among lawyers, experts and litigants. The relevant principles have now been entrenched in O.38, r.35A, 37B and 37C of RHC. Now an expert has to declare that he understands his paramount duty to the court and such being a continuing obligation when he accepts his appointment as an expert.

13.Given the duty of an expert to the court and the nature of his opinion, for the fairly and expedient disposal of the cause, it will be unnecessary for opinions on the same subject matter to be repeated by a number of experts simply because there are numerous parties. The worth of an expert’s opinion lies in the reasoning and reliability of facts/data based on which he comes to his conclusion. Although the court is not well qualified in the area of expertise of an expert, we are experienced and well trained in detecting whether the reasoning and logics of an expert can stand. Further, the panel of the tribunal hearing the Application comprises a member who is a valuation expert. We consider it unnecessary for numerous experts to express their views on the same matter simply because each adopts different assumptions. We believe a well qualified expert knows the reasonable range of assumptions to be applied and the extent the valuation of a unit relative to others can be stretched.

14.With the above principles for which expert opinion is required in mind, the tribunal should do active case management with a view to achieve the following underlying objectives of the RHC[7]:

i) To increase the cost-effectiveness of any practice and procedure to be followed;

ii) To ensure that the proceedings can be dealt with expeditiously as is reasonably practicable;

iii) To promote a sense of proportionality and reasonable procedural economy in the conduct of proceedings;

iv) To ensure fairness; and

v) To ensure that the resources of the court are distributed fairly.

15.O38 r. 36(1) RHC provides that leave of the court is required when a party seeks to adduce expert evidence. O.38 r.4 provides that the court may, at or before trial, limit the number of expert witnesses to be called. It is set out in O.35 r.3A(1)(b) that at any time before or during trial, the court may by direction limit the number of witnesses, including expert witnesses, that a party may call on a particular issue having regards to a number of factors including complexity and simplicity of the case set out in O.35 r.3A(2) RHC. These provisions are sensibly drawn up and provide a very wide power to enable the court to deal with a large variety of situations where expert opinions are required. In the tribunal’s judgment, given the nature of expert evidence discussed above and the court’s duty to achieve as far as possible the underlying objectives of the rule, expert evidence shall be restricted only to that which is reasonably required to resolve a particular issue. It is further stipulated under O.38 r.4A(1) RHC that:

“In any action in which any question for an expert witness arises, the Court may, at or before the trial of the action, order 2 or more parties to the action to appoint a single joint expert witness to give evidence on that question.” (Emphasis added)

16.It is therefore beyond doubt that, by the combined effect of the aforesaid rules, the tribunal has power to limit the number of experts to be called, either generally or specifically in respect of a particular issue where expert evidence is required. It is also apparent that the tribunal has power to direct a SJE be appointed for 2 or more parties in a proceeding either for one side or both sides. There is no good reason to restrict that “parties” referred to in O.38 r4A (1) RHC applies to only “parties of both sides”. It is also applicable to parties of the same side. 

17.Like most of the compulsory sale cases, the respondents will be contesting the issue of EUV of their own units and RDV[8] of the Lots. However, even though a respondent may own only a unit in the Buildings, the valuation required for the purpose of disposing of the valuation issue should cover all units of the entire Buildings. It is because, in the event the tribunal directs a sale of the Lots and the Buildings, a minority will be sharing the sale proceeds, on a pro rata basis, by reference to the EUV of all units of the Buildings. Inevitably, valuation of EUV of all units comprised in the Buildings needs be carried out no matter how many or what kind of units one may own. Needless to say, the expert is also required to cover the RDV of the Lots. If the tribunal allows all the groups/parties to adduce valuation reports, the 4 reports will cover precisely the same areas requiring valuation opinion.

18.It is noted that in Good Faith, although there were 4 applicants, there was only 1 respondent. It is a “one on one” situation. From the first instance decision[9], it did not appear that the respondent had adduced evidence on the age and state of repair of the building. It only put the applicants to strict proof of these 2 aspects and contested vigorously the valuation. Each side had appointed one valuation expert, and the trial lasted for 18 days.

19.In the present case, it is anticipated that the age and state of repair will be 2 other heated disputed areas. 4 experts, 2 from each side will be called on these 2 areas. No doubt valuation will be another hotly disputed area. If 4 more valuation experts were to be called, assuming for the purpose of discussion that there are 9 groups[10] contesting the trial and each is entitled to cross-examine an expert, it is the tribunal’s rough estimate the trial will last for at least some 28[11] days! It is a most conservative estimation. Given the experience in Good Faith, if this case is not actively managed from the outset and counsel’s cross-examination properly controlled, 28 days will be a meaningless under estimation.

20.It has been suggested by the respondents that the tribunal should not limit the filing of expert evidence for the time being and should wait until after perusal of the joint statements of the experts identifying the areas of disagreement for the purpose of the trial. Assuming they were to proceed as suggested, it will be about some 5 months[12] later before the tribunal is in a position to know whether the experts are assisting the tribunal by narrowing down the issues or they are just doing the opposite. If by then the unfortunate scenario occurs, the whole process has to start again by appointing one SJE for both sides, or for a side. The time and costs incurred in the first round will be totally wasted. It is noted that even though when SJE is appointed, it would not prevent a party from challenging the opinion of that SJE, though as correctly pointed out by Lam VP in Good Faith[13] the grounds of attack will be rather limited.

21.In the tribunal’s judgment, this tribunal is not giving effect to the underlying objectives of the rules if it permits what has been suggested by the respondents. The Application, with numerous interest groups represented by different legal teams or acting in person, will then not be proceeding in an expeditious and a cost-effective manner. This tribunal is well aware of the comments of Lam VP in Good Faith that in many cases, the expert opinions put forward by one side need be calibrated in the wake of the opinions from another expert[14]. This tribunal also shares Lam VP’s views that in most cases, a minority’s objection would not be too meaningful unless he adduces expert evidence to support his opposition[15]. These comments are in any event binding on the tribunal. However, this tribunal does not consider active management by limiting the number of valuation experts inconsistent with the aforesaid comments. This tribunal understands the importance of valuation evidence to the parties, and that valuable landed properties are now being compulsorily acquired. This tribunal also realizes if only one SJE is appointed for both sides from the beginning, the controversy likely to be generated will be so immense, rendering the option totally unrealistic. However, that does not mean that the tribunal should therefore allow whatever number of experts to be appointed as the parties wish. Certain control needs be in place.

22.After taking into account the role of an expert and with a view to generating a meaningful debate on valuation in our adversarial system, this tribunal considers a SJE on each discipline for each side, who have a general common interest in the subject matter, a pragmatic and fair expert direction as a start. The tribunal appreciates a litigant may feel comfortable with an expert of his choice. Therefore the parties will not be deprived of the opportunity to be involved in the choice of the SJE and give joint instructions. We believe that a professional, independent and impartial expert should be willing to consider reasonable comments and suggestions by any party which in the expert’s professional judgment can be advanced no matter he is jointly or solely appointed. On the other hand, a self-respecting, professional and impartial expert, again no matter solely or jointly appointed, should be prepared to exclude something the validity of which is considered by him doubtful. He should not allow himself to down-grade to become a party’s advocate. In the tribunal’s judgment, the interest of a party will not be compromised by appointment of a SJE in the manner proposed.

23.It has to be remembered that by so directing, the right of a party challenging the SJE’s opinion would not be taken away. After all, valuation opinion is, to a certain extent, a subjective judgment and an inexact science. Different experts are likely to come up with different valuation because of bona fide disagreement. However, a note of caution must be stated. As remarked by the learned Lam VP (then Lam J) in Chinachem Charitable Foundation Limited v Chan Chun Chuen[16], such disagreements should only be based on independent professional judgments instead of being client interest driven. A party launching unreasonable and/or trivial challenges to a SJE’s opinion with a view to put in from the backdoor its own valuation evidence is unlikely to be entertained and likely to be met with an adverse costs order.

24.Various Claimants v Various Defendants Related to Giambrone[17] is a complex professional liability claim by some 142 claimants against solicitors. However, the great numbers of claimants were initially divided into 2 groups and instituted proceedings in different venues and at different time. The 2 sets of proceedings were ultimately “managed” and were directed to be tried together. However, when they jointly attended the case management conference, one set of 51 claimants had already obtained expert evidence on Italian laws. At the end, the case management judge only allowed the other group of 91 claimants to put in expert evidence on issues not yet covered by the 51 claimants. In other words, only one expert opinion would be allowed to cover one subject matter. These 91 claimants lodged an appeal to the English CA.

25.It was considered by the Master of the Rolls that it was a rare case for the appeal court to interfere with a case management decision. The English CA expressed that it was procedurally unfair to the 91 claimants who were not given an opportunity to be involved in the selection and giving of instructions to the experts. However, the learned Master of the Rolls went on to say:

“§17 … If this had been managed litigation from the outset (that is to say, if the claims of all 142 claimants had been the subject of managed litigation from the beginning), then almost certainly the judge managing the case would have said that all the claimants were entitled to have only one expert dealing with Italian law. A compelling reason has to be given for granting permission to parties to rely upon more than one expert in relation to the same issue. There may be particularly complicated cases where such an exceptional course is justified. But nobody has suggested that the Italian law issues in this case fall into that exceptional category.

…

§20. It is unfortunate that there probably will be two experts giving evidence on Italian law on behalf of the two groups of claimants. This has come about for the historical reasons that I have already explained. I hope that, once all the experts’ reports have been disclosed and exchanged, it will be possible for them to narrow the issues. It may be that, when Notary Valente and the PM claimants’ expert have had an opportunity to consider their respective reports, they will be able to narrow the issues between them and indeed obviate the need for more than one of them to give evidence.” (Underline added)

26.From the above quoted paragraphs it is apparent that the decision in Giambrone to allow 2 experts for the claimants is an exception rather than norm. It was considered by the English CA that had the case been managed from the very beginning, unless there is a compelling reason, there should only be one expert representing the claimants’ side. The appointment of 2 experts for 2 groups of claimants on a subject was described by the English CA as unfortunate, and it was hoped that at the end, only one expert for that group would be called to give evidence. Although there is no express provision in the RHC similar to the English CPR 35.1 which provides expressly that expert evidence shall be restricted to that which is reasonably required to resolve the proceedings, in the tribunal judgment the above-quoted provisions of our RHC have the same effect[18]. The tribunal cannot see why there should be 3 expert opinions on precisely the same matters from the groups of respondents.

27.There has been suggestion by Mr Lau acting for R2 that expert valuation opinion is different from foreign law opinion. With due respect the tribunal cannot discern any rational difference, save that they concern 2 different areas, from his submission.

28.There is no reason why the same principles above should not be applicable to the expert evidence on building condition and structural assessment. 

Conclusions and Directions

29.By reasons of the above, in the circumstances of this case, the tribunal considers appropriate to give the following expert directions:

i) Leave be granted to the applicants and the respondents to adduce expert evidence and call no more than one expert witness on each side in each of the following 3 disciplines, namely, (1) valuation; (2) building condition; and (3) structural assessment (if so advised);

ii) The respondents who are minded to adduce expert evidence at trial have to try best endeavour to agree on the appointment of a single joint expert in each of the disciplines mentioned in (i) above for the respondents side and report the outcome of such appointment to the tribunal on or before 21 December 2015;

iii) If the respondents who are minded to adduce expert evidence at trial cannot agree on the appointment of a single joint expert in any of the disciplines above for the respondents’ side, each of the respondents who wish to adduce expert evidence on that particular discipline should write to the tribunal nominating at most three experts of their choice in order of priorities, together with their resumes and proposed fees on or before 7 January 2016 with copies to all other parties. The tribunal will then appoint a single joint expert for the respondents for that discipline, with or without a hearing;

iv) Any submission regarding the appropriateness or otherwise of a proposed expert, if known in advance to a party, shall be submitted together with the party’s written submission referred to (iii) above;

v)     After the appointment by the tribunal of a single joint expert for the respondents in a particular discipline, all instructions to the said expert should be given jointly, and for this purpose, the respondents who intend to adduce expert evidence in respect of that particular discipline should nominate among themselves a party/group to co-ordinate among themselves their communication with the said appointed expert;

vi) A copy of this direction (together with its Chinese translation) should be served on all respondents, unless service on the respondent has been ordered to be dispensed with by the tribunal or that proceedings against the respondent have been discontinued prior to the date hereof;

vii) A respondent will be debarred from adducing expert evidence at trial on a particular discipline requiring expert opinion unless he/she participates in the above appointment process or is willing to abide by the decision of the respondents or that of the tribunal in accordance with respectively (ii) or (iii) above; 

viii) There be liberty to apply for further directions;

ix) Costs of the direction hearing on 17 November 2015 be reserved.   

Mr Alan YIP of Mayer Brown JSM, for the 1^st to 7^th applicants

The 1^st, 10^th, 11^th 17^th, 18^th, 19^th, 20^th, 21^st, 28^th, 29^th, 30^th, 31^st and 33^rd respondents were not represented and did not appear

Mr Eddie LAU of Li, Wong, Lam & W.I. Cheung, for the 2^nd respondent

Ms WU Selina Wai Shan of Anthony Chiang & Partners, for the 3^rd respondent

The representative of the 4^th and 5^th Respondents appeared in person

Mr LEUNG Chun Cheung Jeff of Cheung, Chan & Chung, for the 6^th respondent

Mr W K CHEUNG of Lo & Lo, for the 7^th respondent

Mr LAU Joanna Lai Hing of King & Co., for the 8^th respondent

Attendance of the 12^th and 14^th respondents, unrepresented, was excused

Mr YEUNG Sai Man of Waller Ma Huang & Yeung, for the 15^th and 16^th respondents

Attendance of Lee & Wu, for the 22^nd and 23^rd respondents, was excused

Mr Lawrence LAM of Vincent T.K. Cheung, Yap & Co., for the 24^th and 25^th respondents

Mr K M LEE of Lo, Wong & Tsui, for the 26^th, 27^th and 32^nd respondents

Attendance of Hui & Lam, for the 34^th respondent, was excused