Snowland Ltd v. Director of Lands

LDLR 2/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND RESUMPTION APPLICATION NO 2 OF 2014

_________________

_________________

Before:  Her Honour Judge KOT, Presiding Officer, Lands Tribunal and Mr. Lawrence PANG, Member of the Lands Tribunal

Date of Filing of Submissions:  13 January 2017

Date of Filing of Reply Submissions:  10 February 2017

Date of Filing of Supplemental Submissions by the Respondent :  2 March 2017

Date of Filing of Supplemental Submissions by the Applicant :  16 March 2017

Date of Decision :  31 March 2017

_________________

D E C I S I O N

_________________

Background

1.On 19 June 2014, the applicant applied for determination of compensation in respect of the Subject Property pursuant to section 10(2)(a) of the Lands Resumption Ordinance, Cap 124 (“the LRO”). 

2.Before the applicant issued these proceedings, a provisional payment of $53,485,000 had been accepted by the applicant on a without prejudice basis on 15 November 2011 (“Provisional Payment).

3.By the judgment handed down on 11 November 2016 (“the Judgment”), it is ordered that the respondent do pay the applicant compensation in the sum of HK$97,356,000 (“the Award”) and the matters of professional fees, interest and costs be adjourned to a date to be fixed with liberty to apply for any other ancillary and consequential matters.

4.By an order made on 16 December 2016, it is directed that the dispute over professional fees, interest and costs be dealt with by paper disposal.  This is the decision on the issues of professional fees, interest and costs.

Interest

5.The question on the rate of pre-judgment interest had been dealt with in the case of Waddington Limited v Chan Chun Hoo Thomas & Ors, unreported, CACV 10 of 2014, 20 May 2016.  It is the findings of the Court of Appeal that:

“172. ... Pre-judgment interest is awarded to compensate a plaintiff for being kept out of its money, on the footing that it is to be taken as having borrowed commercially the amount of its successful claim so that it would not have any shortfall in its funds pending the determination of its action.

...

174. The practice in Hong Kong of awarding pre-judgment interest at a usual rate of 1% over prime rate began with the decision of the Court of Appeal in Komala Deccof v Pertamina [1984] HKLR 219. In that case, Cons JA (at p.223), observed that while that the rate of such interest was a matter for the discretion of the trial judge, it was undesirable to have arbitrary variations between similar cases, and suggested the adoption of a rate of 1% above prime rate as being an appropriate measure to compensate a party for being kept out of his damages. He went on to say that the guideline could be adjusted if experience were to show that this rate was not realistic, and that a different rate could always be ordered in a particular case if there was evidence to justify that being done.

175. Since the decision in Komala Deccof,the courts have consistently awarded pre-judgment interest at the rate of 1% above prime, although there have been occasions when this practice has been departed from. This rate has also been endorsed by the Court of Final Appeal as the ‘theoretical cost to the plaintiff of borrowing the sums withheld’ (see Polyset Ltd v Panhandat Ltd, unrep, FACV No. 28 of 2000, Determination dated 25 April 2002, paragraph 13).

...

183. ... the HSBC Best Lending Rate, which is the commonly adopted proxy for prime rate, has remained at comparatively high levels over that period. The continued publication of this rate suggests that it is still in use for the purpose of fixing lending rates, and cannot be regarded as having been supplanted by HIBOR for such purpose.

...

185. We therefore do not think that the material available to the judge could justify his view that 1% above prime rate is no longer the appropriate standard to use for awarding pre-judgment interest generally, or that such material justified a departure from the conventional rate in this case.

186. That is not to say that there may not, in the future, arise a case in which the necessary evidential foundation will be laid for a consideration of whether or not the time has come to move away from prime rate plus 1% as the starting point for pre-judgment interest.” (emphasis added)

6.In the case Tadjudin Sunny v Bank of America, National Association, unreported, CACV 12/2015, 20 May 2016, it is found that “having regard to the long standing practice of taking 1% over prime as the starting point for the award of pre-judgment interest, any suggestion that this starting point should be changed is something that should be considered only where there is evidence before the court to support such a change” (at §179) (emphasis added).

Respondent’s Submission

7.Mr Ismail submitted that it would not be appropriate for the Tribunal to adopt the interest rate of Prime +1% or the applicant should be denied part of the pre-judgment interest based on 2 reasons:

a. There is evidence in this case to warrant a departure from the conventional rate; and

b. The applicant had delayed in prosecuting its claim contrary to the underlying objective in Rules of High Court Order 1A r 1(b).

8.It is submitted that it is open to the Tribunal to infer that the applicant would be able to borrow money to purchase a replacement shop after the resumption of the Subject Property at less than Prime +1% per annum given the applicant’s major business was property investment and holdings.  The applicant was the sole legal and beneficial owner of the Subject Property which, as revealed from the land search document, had never been mortgaged or charged.  It also held 9 other landed properties which it acquired before the resumption and rental income was its major source of income.  The applicant could use the 9 other properties as security for borrowing.  Mr Lee, the director of the applicant, an experienced property investor and not an unsophisticated novice who was also a shareholder and director of the owner in Comparable T9 in this case, could act as a guarantor of loans made to the applicant. All these evidence point to the reasonable inference that the applicant could borrow the amount of its successful claim commercially at interest either at 1-month fixed deposit rate or a rate equivalent to the cost of borrowing. 

9.As for the delay by the applicant, the respondent alleged that:

a. The applicant had rejected the respondent’s revised offer of $60,348,000 on 26 March 2013 and stated that it “shall apply to the Lands Tribunal to determine the amount of compensation”.  However, it failed to make its application, despite 7 reminders issued by the respondent, until 19 June 2014, ie more than a year later; and

b. The applicant should file its expert report within 90 days from 23 September 2014 but with the consent of the respondent, an extension of time was granted and the report was only filed on 30 January 2015.  However, the extension was wasted since Mr Charles C K Chan (“Mr Chan”) of Savills Valuation and Professional Services Limited later changed his opinion of the market value of the Subject Property.  The respondent had only been awarded costs for the extension of time at the agreed costs of $500 and it would be unfair if the respondent had to pay the applicant interest especially at Prime +1%.

10.The respondent submitted that the appropriate rate of interest to compensate the applicant from being kept out of the compensation fairly and fully and not be a windfall or profit is the 1-month fixed deposit rate from the date of resumption to the date of judgment and thereafter at the judgment rate until payment.

Applicant’s Reply

11.The applicant contended that the appropriate order for interest in this case should be:

a. The respondent do pay the applicant interest on the Provisional Payment from the date of reversion (ie 18 May 2011) to the date of payment (ie 15 November 2011) at the rate of 1% above the HSBC’s prevailing best lending rate;

b. The respondent do pay the applicant interest on the sum of $43,871,000 (being the balance of the Award less the Provisional Payment) from the date of reversion (ie 18 May 2011) to the date of judgment (ie 11 November 2016) at the rate of 1% above the HSBC’s prevailing best lending rate;

c. The respondent do pay the applicant interest on the sum of $43,871,000 from the date of judgment until payment (ie 3 December 2016) at the judgment rate; and

d. Credit be given to the interest which had previously been paid by the respondent to the applicant (if any).

12.Ms Ngai submitted that it would not reflect adequately the applicant’s loss of use of the compensation money by awarding interest at 1-month fixed deposit rate but instead should be compensated for the loss of return from the use of the money in making investments. 

13.On the evidence of Mr Lee, the applicant was trying to purchase a replacement shop in the immediate area for investment after resumption of the Subject Property.  It would be wrong to assume that the applicant would keep the money in a bank and just earn interest at the deposit rate and the compensation approach is more appropriate in the circumstances of the applicant in this case (Happy Dragon Restaurant Ltd v Director of Lands [2014] 3 HKC 538 at §§53-55).

14.The applicant, being in the business of real estate investment, was similar to the applicant in the case of Eltron Development Limited v Director of Lands, unreported, LDLR 4/2013, 28 January 2016 where the Tribunal awarded interest at Prime +1%.  Ms Ngai urged this Tribunal to adopt the same approach in Eltron.

15.As for the allegation of delay, it is accepted that only 5 reminders had been sent by the respondent.  In any event, it is the applicant’s contention that the delay in prosecuting the claim was due to the need to seek senior and junior counsels’ advice between 26 March 2013 and 19 June 2014.  And relying on section 6(3) of the LRO which provided that the Director of Lands could also apply to the Tribunal for determination of the amount of compensation in order to expedite the legal proceedings and minimize the amount of interest payable, the applicant should not be the only one to blame for such delay. 

16.As for the waste in granting the extension of time for the expert report, it is submitted that since Mr Chan was not the one preparing the valuation for negotiation with the respondent in November 2011, time was required for him to carry out his own independent valuation.  There is no waste as a result of the subsequent change in Mr Chan’s opinion since majority parts of the said report, including the majority number of sale comparables and the rental comparables remained applicable.  Such report of Mr Chan formed the back bone of his subsequent revisions of the assessed Open Market Value of the Subject Property and never a waste.

Discussion

17.We agree with Ms Ngai that it is unrealistic to award interest at 1-month fixed deposit rate in this case.  This is basically the return the applicant will have by leaving the money in a bank.  Given the applicant’s nature of business, it is more unlikely than not that the applicant would just leave the compensation money in a bank and not utilize the same in other investment to earn more profits than the 1-month fixed deposit rate interest.

18.If adopting such investment approach, the applicant would have to borrow the money from a bank for such purpose when the compensation money had not been in hand.  We do not accept that there is evidence before us that the applicant was in a position to secure a loan at a rate of interest much lower than Prime +1%. 

19.The applicant and Mr Lee may well be a successful and experienced investor in real estate property but there is no evidence before us as to their borrowing ability.  Even though the Subject Property was never mortgaged or charged, there is no evidence as to how it was being acquired and where the investment sum came from.  There is also no evidence as to the net equity of the other 9 landed properties held by the applicant and the net proceeds of the rental income.  It would be a gross over-generalisation to conclude that since the applicant was an experienced investor, it would necessarily have been able to borrow at less than Prime +1% at all times.

20.As for the delay alleged by the respondent, we accept the submission by Ms Ngai.

21.Section 6(3) of LRO provides that:

“3. If –

(a) a person to whom an offer has been made under subsection (1)(a) does not accept the offer within 28 days from the date thereof; or

(b) ...

such person or the Authority may then refer the matter to the Lands Tribunal for determination of the amount of compensation to be paid.” (emphasis added)

22.Even though the applicant may have indicated that it would apply to the Lands Tribunal to determine the amount of compensation, when the respondent found that the applicant had taken no action after such indication, the respondent was entitled to bring the matter to the Lands Tribunal.  Yet, the respondent had done nothing as well except to send reminders.  We find the respondent cannot put the blame on the applicant for the delay in referring the matter to this Tribunal when it was also entitled to do so on the inaction of the applicant.  In any event, we accept that 15 months taken to seek counsel’s advice and valuer’s opinion was not unreasonable given the complexity of this case.

23.We also find no merits in the contention of the respondent that there was waste as a result of the extension of time in filing of the valuation report of Mr Chan dated 30 January 2015 to justify a departure from the conventional rate of interest.  

24.We do not find any waste as a result of the extension of time.  Mr Chan was required to submit such report in answer to the one prepared by Mr Lai at that stage of the proceedings.  We also accept that such valuation report of Mr Chan had been used in these proceedings so we do not agree that there was a waste.  Save for comparable RC1, all the comparables adopted by the Tribunal for the Direct Comparison Method came from this valuation report of Mr Chan.  At §41 of the Judgment, we also affirmed that “we consider (§7.3 of the valuation report) would be just an application of the Income Capitalisation Method in reverse for checking purpose”.  For such latter purpose, at least comparables T1 and T3 were found useful for the determination of the market value of the Subject Property.

25.Even if there was any waste, such was caused by the subsequent change of opinion by Mr Chan and not by the extension of time to file the valuation report.  Since we have found that such change of opinion of an expert was acceptable (§51 of Judgment), we do not agree that such change of opinion should be a factor that turns on the issue of interest.

26.Having considered the above, this Tribunal is not satisfied that the contention by the respondent justifies a departure from the convention of awarding interest at the rate of Prime +1% or a deprivation of part of the interest to be awarded to the applicant. 

Professional Fee

27.Professional fees is part and parcel of the costs of these proceedings.

28.Section 6(2A) of the LRO provides that:

“Where, in the case of land resumed under an order made under section 3 on or after the commencement of the Crown Lands Resumption (Amendment) Ordinance 1984 (5 of 1984), an offer of compensation is made or a claim for compensation is submitted to or by any person under this section, such offer may provide for the payment by the Authority to that person of, or such claim may include a claim for, any costs or remuneration reasonably incurred or paid by him in employing persons to act in a professional capacity in connection with such offer or claim.”

29.Further, section 10(2)(e)(ii) provides that the Tribunal shall determine the compensation payable on the basis of “the amount of any costs or remuneration mentioned in sections 6(2A) and 8(4).”

Respondent’s Submission

30.In spite of the above provision, it is the respondent’s case that the applicant should only be entitled to 50% of the professional fees of its expert, Mr Chan.

31.Firstly, the respondent suggested that the Tribunal found Mr Chan guilty of “deplorable’ conduct in further revising his valuation on 14 April 2016 by referring to §48 of the Judgment as follows:

“48. It is deplored that when Mr Chan began to give evidence on 14 April 2016, he revised his valuation again to $105,132,852 on the excuse that he had reviewed his valuation particularly on seeing the comments on location by Mr Lai[1] in his Rebuttal Report of 13 April 2016 and taking into account the new evidence of Comparable T9. Mr Chan had submitted his revised assessment and marked as Exhibit A2 and A3 respectively.”

32.Mr Ismail elaborated that Mr Chan’s conduct was deplorable in the extreme because:

(a) he had caused Mr Lai’s Rebuttal Report dated 13 April 2016 to be filed since it was to rebut his change of opinion in his Letter of Supplemental Opinion dated 11 April 2016; and

(b) he left the Tribunal with no choice but to admit his further revised valuation.

33.Secondly, the respondent accused Mr Chan of failing to be concerned about, let alone to reconcile, the 22% difference in his valuations based on the Direct Comparison Method and the Income Capitalization Method which difference the Tribunal found a competent valuer would have been concerned about, referring to §§50 and 123 of the Judgment for instance:

“50. In the present case, Mr Chan’s revised valuation as at 11 April 2016 was $92,000,000 based on the Direct Comparison Method but his valuation based on the Income Capitalization Method was $112,163,238, ie a difference of about 22%. This should be a matter of concern for the valuer though it may not necessarily lead to that the value arrived at by direct sales comparison was not reliable and should be abandoned.

123.  As we stated at §50 above, a difference in indication of values of about 22% arrived by two valuation methods for cross-checking or otherwise should be a matter of concern for the valuer and such a difference must be reconciled.”

34.Thirdly, the respondent suggested Mr Chan provide only limited assistance or help to the Tribunal because he:-

(a) failed to reconcile the 22% difference in his valuations and in any event, his valuation approach and valuations were not adopted by the Tribunal, referring to §§122 to 131 of the Judgment. The Tribunal adopted:-

(i) its own valuation method in arriving at the Award, namely, to give equal weight to the Direct Comparison Method and the Income Capitalization Method (and not Mr Chan’s approach of using the latter for cross checking purposes only); and

(ii) the average of its own valuation arrived at by both methods (and not Mr Chan’s valuations). Mr Chan never suggested this approach although he changed his opinion on several occasions; and

(b) gave contradictory and even worse, misleading evidence, under cross-examination.

35.Fourthly, the respondent suggested Mr Chan’s last revised valuation of $105,132,852 be exaggerated because it was $7,776,852 more than the Award and $17,420,852 more than the Tribunal’s valuation of $87,712,000 using the Direct Comparison Method. Even accepting that valuation is an inexact science, the reason for such wide disparities was because the Tribunal adopted its own valuation method and valuation based on the Direct Comparison Method and the Income Capitalization Method and totally rejected Mr Chan’s method and valuations. It was not simply a difference of opinion on the choice of comparables or adjustments to common comparables. In fact, the Tribunal found that all the comparables were not reliable. Accordingly, Mr Chan’s valuations, and in particular, the last revised valuation of $105,132,852, were indefensible. The extra time spent and the costs incurred by both parties and the Tribunal in disposing of Mr Chan’s haphazard valuations were relatively significant.

Applicant’s Reply

36.In response, Ms Ngai submitted that the respondent has no basis to ask for any reduction (let alone 50% reduction) in the amount of professional fees actually incurred and recoverable by the applicant.  Ms Ngai submitted, on the other hand, throughout the entire proceedings, Mr Chan had been working towards the sole objective of fulfilling his duty to the court as an independent expert by producing all relevant market evidence which he was able to obtain from time to time and providing his most up-to-date opinion only for the purpose of assisting the Tribunal to make a correct determination on the open market value of the Subject Property resumed by the Government.

37.In reply to the respondent’s first ground, Ms Ngai submitted that the Tribunal, had at §51 of the Judgment, ruled that Mr Chan, being an expert witness, should not be disallowed to give his opinion evidence:-

“51. Be that as it may, we do not see any reason to bar an expert from changing his opinion upon trial bearing in mind the underlying objective under O.1A r.2(2) RHC. In particular, we have to accept the change in opinion as produced at Exhibits A2 and A3. In any event, when we discuss the location adjustment for the comparables below, we find the revision by Mr Chan is justifiable in seeing the comments/ criticism made by Mr Lai in his Rebuttal Report of 13 April 2016.”

38.Furthermore, Ms Ngai submitted that the Tribunal had at the trial on 12 April 2016 already ordered the costs of and occasioned by the applicant’s Summons dated 9 April 2016 seeking leave to produce Mr Chan’s letter of Supplemental Opinion dated 11 April 2016 be to the respondent. Ms Ngai submitted that the respondent should not obtain double benefits by asking for a reduction of the professional fees payable to the applicant.

39.In relation to the respondent’s allegations that the Tribunal “totally rejected Mr Chan’s method and valuations” and “the Tribunal found that all the comparables were not reliable”, ie the respondent’s  fourth ground, Ms Ngai submitted that, on the contrary, the Tribunal had adopted most of Mr Chan’s opinion, citing the following examples:

(a) The Tribunal agreed with Mr Chan that total adjustment in respect of each comparable should be calculated by multiplication process and rejected the summation approach suggested by Mr Lai;[2]

(b) The Tribunal retained Mr Chan’s application of 1% for 10 sq m adjustment for quantum after the first 50 sq m;[3]

(c) The Tribunal agreed with Mr Chan that full frontage should be preferred in dealing with frontage adjustments;[4]

(d) The Tribunal found that the approach which Mr Lai had adopted in his adjustment for return frontage was wrong in principle and preferred Mr Chan’s opinion;[5]

(e) The Tribunal shared with Mr Chan that comparable RC3 adopted by Mr Lai should be rejected;[6]

(f) The Tribunal shared with Mr Chan that the location of comparable T9 was superior to the Subject Property by 10%;[7]

(g) The Tribunal agreed with the +25% adjustment  proposed by Mr Chan when comparing Comparable AC4/RC4 with the Subject Property;[8]

(h) The Tribunal had accepted the 3 Comparables AC1, AC2 and AC 4 adopted by Mr Chan;[9]

(i) The Tribunal agreed with Mr Chan to adopt Comparables T1, T3 and T9;[10]

(j) The Tribunal agreed with Mr Chan that the effect of the resumption should not have increased the value of Comparable T9;[11]

(k) The respective market values assessed by the Tribunal by both the Direct Comparison Method (HK$87,712,000) and the Income Capitalization Method (HK$107,000,000) were closer to the same assessments by Mr Chan but much higher than those assessed by Mr Lai.

40.Ms Ngai considered that the respondent is wholly unjustified in alleging that “the extra time spent and the costs incurred by both parties and the Tribunal in disposing of Mr Chan’s haphazard valuations are relatively significant”.

Discussion

41.The Court of Appeal in Good Faith Properties Limited & Others v Cibean Development Company Limited [2014] 5 HKLRD 534 has reviewed the general approach on costs in compulsory acquisition cases (where land is acquired by the government or public authorities), relying on particularly the judgment of Potter LJ in Purfleet Farms Ltd v Secretary of State for Transport, Local Government and the Regions [2003] 1 P & CR 20 (“Purfleet Farms”) as follows:

“29  ... the costs of a successful claimant (i.e. a claimant who is awarded more than the amount of an unconditional offer by the respondent) should be that he is entitled to his costs incurred in the proceedings in the absence of some “special reason” to the contrary ... special reasons should only be regarded as established where the Tribunal considers that an item of costs incurred or an issue raised was such that it could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation...

...

36  ... exaggeration alone is not enough in the event of a large disparity between the sum claimed and the sum awarded. The matters to which the Tribunal should have regard are (a) the reasons for that disparity, and (b) their effect upon the conduct of the claim. As to (a), if the reasons are defensible, in the sense that there was a legitimate, albeit unsuccessful, argument put forward in support of the figure concerned, there can be no good reason to regard the claim as exaggerated in the pejorative sense necessary to justify a sanction in costs. ...

37  ... if the amount of the “exaggerated” claim is based on the valuation, opinion and evidence of the claimant’s expert witness, it will rarely be appropriate in my view to make an adverse costs order against the successful claimant. Valuation is an inexact science ...

38  ... in such cases, disallowance of a proportion of the claimant’s costs will usually only be justified where the Tribunal is satisfied that (a) no competent valuer could reasonably have regarded the comparable as of real relevance or assistance in the valuation exercise; (b) as a result of its introduction and discussion, a significant amount of the Tribunal’s time has been wasted and the proceedings unduly prolonged; (c) no equivalent or near equivalent proportion of the proceedings has been spent dealing with issues unreasonably and unsuccessfully raised by the respondent; (d) the amount or proportion of the costs disallowed is proportionate to the time wasted.”

42.Indeed, §29 of Purfleet Farms as cited by the Court of Appeal did not include the full context which should be as follows:

“29 ... the costs of a successful claimant (i.e. a claimant who is awarded more than the amount of an unconditional offer by the respondent) should be that he is entitled to his costs incurred in the proceedings in the absence of some ‘special reason’ to the contrary. Whether such special reason exists in any given case is a matter for the judgment of the Lands Tribunal. Plainly it may exist where a special reason for departing from the usual order for costs should only be found to exist in circumstances where the Tribunal can readily identify a situation in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation. wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant (e.g. abandoned issues, unnecessary adjournments, or failure to comply with directions of the Tribunal). However, so far as the nature and substance of the case advanced by the claimant is concerned, special reasons should only be regarded as established where the Tribunal considers that an item of costs incurred or an issue raised was such that it could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation. This would apply not only to a claim advanced without any statutory basis but to other examples of manifestly unreasonable conduct which may give rise to unnecessary expense in the course of the proceedings. It means, in my view, that, following the hearing of a compensation reference in the Lands Tribunal in which the claimant has been successful,” (emphasis added)

43.That is, the “special reason” for departing from the general rule on costs in compulsory acquisition cases may only exist “where wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant (e.g. abandoned issues, unnecessary adjournments, or failure to comply with directions of the Tribunal)” or “where the Tribunal can readily identify a situation in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation”.

44.In light of the above, the conduct of Mr Chan as pointed out by the respondent, though “deplorable” because of the late revision of opinion, did not amount to a “special reason”; for instance, no unnecessary adjournment was required as we observed that all relevant evidence had been in place and produced before the Tribunal by that time. As we explained at that instant and at §51 of the judgment, “we do not see any reason to bar an expert from changing his opinion upon trial”. The Tribunal, being a specialized Tribunal with expertise of a Member sitting at trial, can adopt in evidence any statement, document, information or matter, whether or not it would otherwise be admissible in evidence and attach such weight to it as may be appropriate in the circumstances.[12] The Tribunal is not bound to accept the submission of any party.

45.Neither can we accept that the last minute revision “could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation”. On the contrary, we find the revision by Mr Chan be justifiable in seeing the comments/criticism made by Mr Lai in his Rebuttal Report of 13 April 2016.  It was only “deplorable” to the extent that it came only at a very late stage of the trial.

46.The further referral to §50 of the Judgment by the respondent regarding the 22% difference in Mr Chan’s valuations based on the Direct Comparison Method and the Income Capitalization Method respectively indeed supports our ruling that followed at §51 that “the revision by Mr Chan is justifiable” rather than providing a “special reason” for departing from the principle that the applicant is entitled to his costs incurred in the proceedings.

47.As regards Mr Chan’s Letter of Supplemental Opinion dated 11 April 2016, we accept the submission by Ms Ngai that the respondent is seeking “double benefits” by asking for a reduction of the professional fees payable to the applicant because costs of and occasioned by the applicant’s Summons dated 9 April 2016 on the issue had been awarded to the respondent.

48.Furthermore, the fact that the Tribunal did not accept Mr Chan’s valuations in full is not a “special reason” either as this happens nearly in all disputed cases before the Tribunal. At §37 of Purfleet Farms, it was also pointed out that “if the amount of the “exaggerated” claim is based on the valuation, opinion and evidence of the claimant’s expert witness, it will rarely be appropriate in my view to make an adverse costs order against the successful claimant.”

49.Here, what Mr Ismail for the respondent pointed out as exaggeration by Mr Chan at a revised valuation of $105,132,852 is completely misleading. The so-called exaggeration at $7,776,852 was merely some 8% above the Tribunal’s Award of $97,356,000 which is well within a permissible margin of 10% accepted by courts or tribunals[13]. In exceptional circumstances the margin could even be 15 per cent or more[14].

50.In comparison, “Mr Lai has not revised this valuation at $58,692,000 in spite of the preparation of a joint expert statement and supplemental joint statement dated 11 January 2016 and 31 March 2016 respectively” (§47 of the Judgment). This was some 40% below the Award by the Tribunal and appears completely out of range and unreasonable. Even at the beginning of the trial, Mr Lai saw fit to revise his valuation to $57,852,000 which was further wider apart from the Award by the Tribunal.

51.Further, by reference to the examples cited by Ms Ngai in §39 above, we agree that the respondent’s allegation that the Tribunal “totally rejected Mr Chan’s method and valuations” is totally unfounded and without support.

52.The fact that “the Tribunal found that all the comparables were not reliable” cannot be a reason to blame either of the two experts if there were indeed no suitable comparables in the market. This indeed explains why cross checking the valuation by the Income Capitalization Method became necessary and this was exactly the approach proposed by Mr Chan and adopted by the Tribunal. Reconciliation of the valuations arrived by different valuation methods is only a consequential process when the cross checking does not produce a matching result[15].

53.In light of the above, we fully agree with Ms Ngai’s submission that the respondent has no basis to ask for any reduction (let alone 50% reduction) in the amount of professional fees actually incurred and recoverable by the applicant.

Costs

54.There is no argument that:

a. The respondent should pay the applicant its costs of these proceedings reasonably incurred; and

b. costs should be taxed on party and party basis at High Court scale with certificate for counsel.

Respondent’s Submission

55.The respondent contended that the applicant should pay the respondent costs wasted or unnecessarily incurred, namely costs of and occasioned by :

a. The applicant’s unsuccessful argument before the Tribunal that the question of interest should be dealt with at trial together with liability and quantum at the hearing on 13 April 2016; and

b. The revised valuation of Mr Chan when he gave evidence on 14 April 2016.

Applicant’s Reply

56.The applicant contended that since the Award is more than the sealed offer made by the respondent, the respondent should pay to the applicant costs of the entire application except for the summons dated 9 April 2016 taken out by the applicant (which had already been dealt with at trial). 

57.The question of interest should be dealt with at trial is part and parcel of the application for determination of compensation in these proceedings.  Hence the compensation approach about costs should be applicable in relation to the time incurred in the determination of this question.  No costs had been wasted or unnecessarily incurred as a result of the revised valuation by Mr Chan when he gave evidence on 14 April 2016.

Discussion

58.We refer to §§41-42 above about the consideration of costs in compulsory acquisition cases in particular the highlighted part at §42. 

59.We do not find the argument on question of interest to be dealt with at trial amounts to any issue raised that “could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation” nor did it amount to “manifestly unreasonable conduct which may give rise to unnecessary expense in the course of the proceedings” or “led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation”.  As for the revised valuation by Mr Chan, we repeat our findings at §§44-45 above.

60.Given our findings above, we do not find any special reason to justify depriving the applicant of any costs in the 2 matters raised by the respondent at §55.

Orders

61.It is order that :

a. The respondent shall pay the applicant the professional remuneration reasonably incurred by the applicant by virtue of section 6(2A) and 10(2)(e)(ii) of the LRO, ie the professional remuneration of Mr Charles CK Chan, expert for the applicant, with the amount to be determined by the Tribunal if not agreed;

b. The respondent do pay the applicant interest on the Provisional Payment from the date of reversion (ie 18 May 2011) to the date of payment (ie 15 November 2011) at the rate of 1% above the HSBC’s prevailing best lending rate;

c. The respondent do pay the applicant interest on the sum of $43,871,000 (being the balance of the Award less the Provisional Payment) from the date of reversion (ie 18 May 2011) to the date of judgment (ie 11 November 2016) at the rate of 1% above the HSBC’s prevailing best lending rate;

d. The respondent do pay the applicant interest on the sum of $43,871,000 from the date of judgment until payment (ie 3 December 2016) at judgment rate;

e. Credit be given to the interest which had previously been paid by the respondent to the applicant (if any);

f. The respondent do pay the applicant costs of this application, with Certificate for Counsel, to be taxed on  party and party basis at High Court scale if not agreed; and

g. Costs order nisi that the respondent do pay the applicant costs of this paper disposal with Certificate for Counsel, to be taxed at High Court scale if not agreed.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.

Ms. Nancy Ngai, instructed by Messrs Deacons, for the applicant

Mr. Anthony Ismail, instructed by the Department of Justice, for the respondent

[1] Mr Patrick Lai was the expert acting on behalf of the respondent in the present case.

[2] §63 of the Judgment.

[3] §64 of the Judgment.

[4] §70 of the Judgment.

[5] §§75 & 76 of the Judgment.

[6] §83 of the Judgment.

[7] §§92 & 93 of the Judgment.

[8] §107 of the Judgment.

[9] §112 of the Judgment.

[10] §§116 & 120 of the Judgment.

[11] §102 of the Judgment.

[12] See Section 10(6) of the Lands Tribunal Ordinance.

[13] See Singer and Friedlander Limited v John D Wood & Co (1977) 243 EG 212; (1977) 2 EGLR 84.

[14] See Muldoon v Maps of Lilliput Limited (1993) 14 EG 100.

[15] “Resolving the differences among various value indications is called reconciliation.” See Appraisal Institute, The Appraisal of Real Estate, 14th Edition, 2013, Chapter 30: Reconciling Value Indications, at p 641.