Penny's Bay Investment Co Ltd v. Director of Lands

CACV 13/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 13 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 14/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 14 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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CACV 15/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 15 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 16/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 16 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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CACV 115/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 115 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 116/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 116 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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CACV 119/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 119 OF 2015

(ON APPEAL FROM LDMR NO 23 OF 1999)

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CACV 120/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 120 OF 2015

(ON APPEAL FROM LDMR NO 1 OF 2005)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

Introduction

1.We handed down our judgment in these appeals on 16 May 2016.  There are three outstanding matters which we shall deal with in this judgment:

(a)  The formal order giving effect to our judgment;

(b)  Costs of the appeals; and

(c)  Applications for leave to appeal to the Court of Final Appeal.

2.Pursuant to the directions of the Court, counsel lodged written submissions on these outstanding matters and we have read and considered the same.

Terms of the Order

3.The parties are unable to reach agreement on the terms of the formal order.  In the draft order prepared by those acting for the Applicant, apart from the disposal of the appeals the draft contained some declarations.  As it turned out, the disagreements between the parties mainly revolved around the proposed declarations.

4.With respect, we are not persuaded that it is helpful to reduce what we have decided in our judgment of 16 May 2016 into several declarations.  We take the view that it would be better to remit the case back to the Tribunal to determine the compensation in accordance with our judgment.  The Tribunal can read our judgment and proceed with the assessment of compensation accordingly.

5.Hence, we would simply make the following order:

(a)  The Applicant’s appeals in CACV 15-16 /2015 is allowed on ground (1);

(b)  The Applicant’s appeals in CACV 119-120/2015 is dismissed;

(c)  The Respondent’s appeals in CACV 13-14/2015 is allowed on grounds (1) and (2);

(d)  The Respondents’ appeals in CACV 115-116/2015 is allowed on grounds (6) and (8);

(e)  The award of the Tribunal is set aside and the case is remitted back to the Tribunal for determination in accordance with our judgment.

Costs of the appeals

6.On the question of costs, it is obvious from our judgment that each side has adopted positions which we rejected.  We agree with Mr Barnes QC that the approach in Good Faith Properties Ltd v Cibean Development Co Ltd [2014] 5 HKLRD 534 has no general application in an appeal.

7.In Leung Kwok Hung v President of the Legislative Council (No 2) (2014) 17 HKCFAR 841 at [17], the Court of Final Appeal said at (8):

“ The position on appeal to the Court of Appeal is different. At this stage, although an appeal lies as of right, the applicant will already have had the benefit of a hearing before the judge and the reasons for the judge’s refusal of leave. He will also have had the protection of the rule that he will only be at risk for an opposing party’s costs where special circumstances are shown. An appeal against a judge’s refusal of leave, which in practice proceeds on an inter partes basis, should therefore be subject to the usual rules as to costs, namely that the starting point in civil litigation …is that costs should follow the event.”

8.We readily accept that these were said in a different context.  However, we believe the same approach should be adopted in respect of an appeal from the determination of the Lands Tribunal in compensation cases.  The interest of a landowner whose land or interest in land or marine rights (as in the present appeals) were compulsory acquired or extinguished had already had the benefit of the protection of the rule in Good Faith Properties Ltd v Cibean Development Co Ltd, supra, which should afford him with proper legal representation at the Tribunal.  The Tribunal should have duly considered his case and arrived at a fair compensation.  He also has the benefit of the judgment of the Tribunal.  If he pursues an appeal with merits, like other successful litigants in civil appeal, he could recover the costs of the appeal based on the general starting point of costs following event.  However, if he pursues an unmeritorious appeal, we do not see any justification for shifting the costs burden to the respondent who has successfully resisted the appeal. 

9.This conclusion is consistent with the approach adopted in England in Transport for London Ltd v Spirerose Ltd [2009] 1 WLR 1797.  We do not agree that it is distinguishable on the ground that it was the acquiring authority who successfully appealed in that case. 

10.Mr Chang SC submitted that the appellate proceedings should be regarded as part of the process for the determination of the proper compensation.  We cannot accept such sweeping proposition.         

11.At the same time, we wish to stress that costs following event is only the starting point.   In the exercise of the discretion on costs, this Court also has regard to other relevant factors.  We can see that there may be room for departing from this starting point when an award was set aside on ground which the applicant has not advocated nor defended in the appeal.  But this is not the case here.

12.Having regard to the issues raised in these appeals and the outcomes, we do not think it is appropriate to award costs on an issue-based approach in these appeals.  As we have explained in our judgment of 16 May 2016, both the Applicant and the Respondent had adopted rather extreme positions on the main issues and we have not fully adopted their respective approach.  It seems to us such polarisation in approach contributed to the errors in the award by the Tribunal.  In respect of other issues, the Applicant is mostly unsuccessful and the Respondent succeeds on a few issues.  Of those issues, the success on the go-down issue is not dispositive on the final determination of the valuation based on mid-stream operation in light of the contentions on industrial use.  In any case, the time spent on those issues was not that significant.  

13.In the circumstances, we think a fair order is that each party shall bear his own costs in these appeals.

Leave to Appeal to the Court of Final Appeal

14.Turning now to the applications for leave to appeal, we shall first deal with the Notice of Motion of 13 June 2016 of the Applicant.  That motion is opposed by the Respondent.  Before we do so, we should reiterate that one should not try to re-argue the merit of a point as if it is a second round of appeal before this Court in the context a leave application.  It is not the proper function of a judgment in a leave application to supplement or re-visit what had already been determined in the main judgment.  Unfortunately, substantial parts of counsel’s submissions attempted to re-argue the issues which had already been determined.  This Court explained in Ho Sin Ying v Chan Yui Ling CACV 221 of 2013, unreported 14 November 2014 why such a course is unnecessary and inappropriate.  

15.Three questions were put forward as questions of great, general or public importance.   

16.The first question relates to the meaning of “godown purpose” in Special Condition 3(a) of the Grant for Lot 22.  We addressed the relevant arguments at [117] to [131] of our judgment.  Mr Chang raised a new facet to his arguments on the meaning of this phrase which counsel did not canvass at the substantive appeal.  He made reference to the meaning of “godown” in the context of OZP and referred to [76] to [82] of the judgment of the Tribunal.  A proper reading of the judgment of the Tribunal would immediately show that in those paragraphs the Tribunal was discussing “warehouse/godown” in the index to the OZP instead of addressing the meaning of “godown purpose” in Special Condition 3(a).  As Mr Barnes submitted, due to the difference in context, no assistance can be derived from the discussion in those paragraphs. With respect, we cannot understand how the reference to those paragraphs could take the Applicant’s case on the meaning of “godown purpose” in Special Condition 3(a) further. 

17.Even assuming that the phrase is used in many government leases, there is no evidence on the prevalence of use of lots with similar condition in terms of container storage for mid-stream operation.  We do not accept that the construction of this phrase raise a question of great general or public importance.

18.The second question relates to Scenario 3 put forward by the Applicant.  We have explained at [109] to [115] why that scenario is unrealistic and there is simply no evidential basis to support such market expectation, see [111] in particular.  It is clear that it is a decision on the facts of this case. 

19.Mr Chang submitted that the issue should not be determined as a matter of market expectation.  Counsel said it is a matter of legal assumption.  With respect, though it is a matter of legal assumption that the land shall continue to enjoy marine rights, it is clear from the judgment of the Court of Final Appeal that the market value shall be fixed by reference to the prevailing market expectation.  Without any market expectation that there would be road access when the land shall continue to enjoy marine rights, Scenario 3 is unrealistic.  As we said, what the Applicant tried to achieve is to obtain compensation for something which it never had acquired and could never have acquired, see [112].

20.In substance, it is an argument on how the approach espoused by the Court of Final Appeal is to be applied on the facts of the present case.  It does not raise any question of great general or public importance.

21.The third question relates to the sequence in which the value of the shipyard is to be assessed in terms of adjustment for time difference and adjustment for yield based on the length of the leases.  We held at [139] to [140] that this is a matter of valuation eminently falling within the exercise of specialist expertise and judgment by the Tribunal and this Court saw no basis to intervene.

22.Mr Chang submitted it is a question of law.  Mr Barnes contended there is no conceivable issue of law. 

23.In substance, the Applicant argued that it is not a correct methodology to adjust the time adjustment first when there is no statistical yield data referable to a 15-year lease and the comparables had to be transposed.  Once this is appreciated, it is obviously a matter of valuation judgment.

24.Further, the question only arises from the special factual context of this case.  We cannot see how it can be a question of great general or public importance.

25.The Applicant’s submissions on the “or otherwise” limb premised on certain formulation of the draft order.  We have adopted a different course for the reasons given above.  We cannot see any grave injustice being inflicted on the Applicant nor any other exceptional circumstances to warrant this Court granting leave on the “or otherwise” limb in respect of the questions (which are admittedly not questions of great, general or public importance) put forward by the Applicant under this head.                 

26.We shall turn to the Notice of Motion of the Respondent of 13 June 2016.  This motion is opposed by the Applicant.

27.Though 8 questions were put forward in the Notice of Motion, we agree with Mr Chang that they can conveniently be put under 2 categories:

(a)  Questions 1 to 5 relate to the “After Value”; and

(b)  Questions 6 to 8 relate to the “Before Value”.

28.In respect of the questions on the “After Value”, they focused on our holding that there should not be any differentiation in assessing the “Before Value” and the “After Value” with regard to the deferment period and the uncertainty/risk factor.  We arrived at such conclusion by reference to the judgment of the Court of Final Appeal and held that the Tribunal had misunderstood that judgment in these respects.  Thus, we clearly had jurisdiction to correct the Tribunal on the basis that there were errors of law in the Tribunal’s decision. 

29.Mr Barnes submitted that even if we could intervene on questions of law, we should have remitted to the Tribunal to determine the period of deferment and the risk/uncertainty factor which are matters of fact and valuation judgment.  But counsel ignored the fact that the Tribunal had already determined these in relation to the “Before Value”.  We only held that the Tribunal erred in law in making adjustments in these respects for the “After Value”.  Thus, we did not usurp the province of the Tribunal.

30.With respect, Questions 1 and 3 (which suggested we had no jurisdiction to intervene) are plainly misconceived.

31.Questions 2, 4 and 5 queried whether we understood the judgment of Lord Hoffmann correctly.  We discussed the judgment of Lord Hoffmann at [65] to [80].  In particular, we explained at [73] to [80] why there should not be any differentiations regarding the two values.  We reiterate that the expressions “Before Value” and “After Value” are misleading.  What is required is to carry out valuation on the same date with the same prevailing market conditions (and thus market expectations), the only difference is about valuation of land with and without marine rights. 

32.We are not going to engage in a discussion of the submissions of Mr Barnes in this respect, which in substance is a second round of the submissions in the appeal.  We respectfully agree with Mr Chang that Mr Barnes’ reading of a sentence in [42] of the judgment of Lord Hoffmann in isolation is plainly wrong in light of the other parts of the judgment.  We explained why this is so in our judgment and it is not necessary for us to repeat what had been said.  And the rest of the arguments of Mr Barnes proceeded from such fallacy. 

33.We agree with Mr Chang that questions 2, 4 and 5 are not even reasonably arguable.

34.Question 6 is actually another way of putting the same challenge in terms of the differentiation in expectations between the “Before Value” and “After Value” though it is now argued in the context of the “Before Value”.  As submitted by Mr Chang, Lord Hoffmann at [45] and Ribeiro PJ’s judgment on costs clearly indicated that enhancement to the value of the land by reason of prevailing market condition should be applied to both values.  The arguments based on English law are of no avail to the Applicant bearing in mind the differences in the relevant statutory schemes as noted by Lord Hoffmann at [36] and [37].  

35.Like Mr Barnes, we can address Questions 7 and 8 together.  These questions relate to [105] of our judgment where we rejected the submission of the Respondent that the Tribunal was in error at [391] of its judgment in taking account of the prospect of compensation in assessing H.  The context in which the issue was discussed was the treatment of market expectation in arriving at H for the “Before Value”, see [92] to [105].  In line with our holdings in other parts of the judgment, we held that the same prevailing market expectation should inform the valuation of the “Before Value” as well as the “After Value”.  At that part of our judgment, we considered the submission of Mr Barnes that it is internally inconsistent to adopt different premises for L and H in assessing the “Before Value”.  We explained at [94] that it was not inconsistent as L was based on existing use whilst H was based on market expectation on the optimum land use and further at [99] that there was no requirement that the land should be valued on the basis that it would continue to enjoy marine rights even though the optimum land use is otherwise. We also highlighted the prevailing market expectation on optimum land use could be one with marine rights or one without marine rights.  It was simply a matter of evidence, see [102] to [103].  Our reference to the transformation of marine rights into compensation for the loss at [105] should be understood in such context. 

36.In short, we held that we had no ground to disturb the finding of the Tribunal at [391] of its judgment which is in these terms,

“ 391. Regarding the shipyard value, both the land owner and the prospective purchaser understood that the marine access would be resumed soon if the Container Terminal Scheme were implemented. However, the owner is unlikely to accept a price lower than the market value of the shipyard and we believe that the prospective purchaser would still be prepared to pay $751.60/sq ft as the market value of the shipyard (the value we assessed at Section F.(4) above) since this would be compensated in any event if the marine access is lost upon reclamation.”

37.Thus, the only issue raised in the appeal before us (and for which leave had been granted to argue before us in the substantive appeal) was the so-called inconsistent premises for the assessment of L and H. Having read the submissions advanced in the substantive appeal again, we cannot find any trace of the argument now advanced in Mr Barnes’ submission based on circulus inextricabalis.  Nor can we see how the point is engaged when the context in which the reference to compensation being taken into account was made is properly understood.  

38.In The Law Society v A Solicitor CACV 78/2014, 10 July 2015, this Court (another division) explained why we should not grant leave to appeal to the Court of Final Appeal in respect of a point which had not been argued before us.  We are not minded to take a course contrary to the general approach.

39.In any event, given the context in which reference was made to compensation at [105], it can hardly give rise to a point of great, general or public importance.

40.For these reasons, we will not grant leave to the Respondent to appeal to the Court of Final Appeal.

Disposition

41.We shall order each party to pay his own costs in the appeals.  We shall also dismiss the 2 notices of motion (one by the Applicant and one by the Respondent, seeking leave to appeal to the Court of Final Appeal) with costs, such costs are to be taxed if not agreed.

42.As for the costs of the submissions on the form of order and on costs, we are content to deal with in the same way as the costs of the appeals, viz each party shall bear his own costs.

Mr Denis Chang SC, Mr Johnny Ma and Mr Jeremy Chan, instructed by Wilkinson & Grist, for the applicant

Mr Michael Barnes QC and Mr Valentine Yim, instructed by Department of Justice, for the respondent