Anling Ltd and Others v. Hultucktong Enterprises Ltd and Others

LDCS 1000/2015

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION

NO 1000 OF 2015

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BETWEEN

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REASONS FOR DECISION

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1.Before us is an application by the 2^nd, 3^rd, 24^th and 25^th respondents (collectively referred to as the Rs) by way of summons (“the Summons”) for leave to adduce expert evidence on 3 additional areas, namely town planning, traffic impact and plot ratio and gross floor area (“3 Areas”).

2.Upon hearing from all parties present, it is ordered that:

i) Leave be granted for R2, R3, R24 and R25 to adduce expert evidence on or before 2 August 2017 on maximum plot ratio and maximum gross floor area by Mr K M Mo (“Mo”) .

ii) Leave be granted for R2, R3, R24 and R25 to adduce expert evidence on or before 16 August 2017 on:

(a) town planning by Ms Anna Chow (“Chow”); and

(b) traffic impact by Mr S L Ng (“Ng”);

iii) Messrs. Vincent T.K. Cheung, Yap & Co., solicitors for R24 and R25, be appointed as the coordinator on experts in the 3 Areas for R2, R3, R24 and R25 and the costs arising out of such coordinating work be reserved.

iv) Applicants and R2, R3, R24 and R25 do file rebuttal expert reports in the 3 Areas on or before 13 September 2017.

v) The experts of applicants on one part and R2, R3, R24 and R25 on the other part on the 3 Areas, do hold without prejudice meeting after the filing of the aforesaid rebuttal reports and file Joint Statements on matters agreed and disagreed (with the reason for disagreement) on or before 4 October 2017.

vi) The applicants do lodge and serve paginated trial bundles on or before 6 October 2017.

vii) The applicants do lodge and serve written opening submissions and authorities (if any) on or before 9 October 2017.

viii) Unless otherwise discontinued, the respondents do lodge and serve written opening submissions and authorities (if any) on or before 12 October 2017.

ix) The pre-trial review fixed on 21 August 2017 at Court 2 be vacated and be re-fixed to 6 October 2017 at 11 am Court 2.

x) Save and except those orders which had been varied by this order, all other orders in Order dated 22 March 2017 do stand.

xi) Costs order nisi that costs of this application be no order as to costs.

xii) 26^th, 27^th, 30^th, 31^st of October 2017 and 2^nd and 3^rd of November 2017 be reserved for the trial as well[1].

xiii) Detailed reasons for decision to be handed down in due course.

3.This is the reason for our ruling.

Background

4.Mr Wayne Lee (“Lee”) was appointed as the single joint valuation expert for R2 to R8, R15, R16, R24 and R25 in this case on 15 January 2016. In the Valuation Report on RDV dated 10 June 2016 (“RDV Report”), Lee opined that one of the proposed optimal developments would be an office/commercial development model (“Office Model”). This is not accepted by the valuation expert of the applicant who opined that the only viable development model is one for residential/commercial model (“Residential Model”).

5.According to Lee’s assessment, the Office Model can bring about higher RDV but that entails consideration of a successful application for planning permission for the Lots under Section 16 of the Town Planning Ordinance Cap. 131 (“S.16 Application”) since the Lots are zoned “Residential (Group A)” under the draft Wan Chai Outline Zoning Plan No. S/H5/27 and the proposed change of use to office/commercial etc would require permission from the Town Planning Board.

6.Besides, the maximum gross floor area and the maximum plot ratio for the Lots would be governed by provisions of the Buildings Ordinance Cap. 123 and its ancillary regulations. Matters such as classification of site, provisions of open space, service lanes and setback would impact upon the maximum gross floor area permitted. The likelihood of success of the S.16 Application, traffic impact assessment and the maximum gross floor area (ie the 3 Areas) are highly significant in assessing the RDV of the Lots. And Lee confirmed that the 3 Areas would be outside the scope of his expertise. Such a fact was made clear to the Rs in the letter dated 27 February 2016 from Lee.

7.In the Order dated 18 April 2016, leave was granted to the applicants and R2, R3, R6, R7 and R8 to adduce further expert evidence and call no more than one expert witness on each side in each of the 3 Areas. If R2, R3, R6, R7 and R8 failed to agree on the appointment of a single joint expert amongst themselves, each of the respondents who wished to adduce expert evidence on particular discipline should write to the Tribunal for nominating no more than two experts of their choice in order of priority, together with their resumes and proposed fees. The Tribunal would then appoint a single joint expert for the respondents in that discipline, with or without a hearing (A/74-81). 

8.By a further order dated 11 May 2016, Chow, Ng and Mr Siu Tong Lam (“Lam”) were appointed as the single joint experts for R6-R8 in the 3 Areas respectively. It was also ordered that “no respondents will be entitled to appoint their own expert on the 3 additional disciplines save and except they agree to appoint the aforesaid as a single joint expert together with R6-R8 and share the fees of the experts as may be agreed between all the respondents participating in the appointment” (A/82-87) (“Order dated 11 May 2016”).

9.R2 did not join in the appointment of Chow, Ng and Lam because of dispute with R6-R8 on the sharing of fees while R24 and R25 had indicated not joining the engagement of experts in the 3 Areas at the hearing on 18 April 2016. The explanation offered in the supporting affirmation for the Summons is that it was unnecessary for them to do so because R6-R8 would have procured the reports in any event and R24 and R25 did not want to increase costs which might become payable by the applicants under the compensation approach.

10.The applicants and R6-R8 had arranged their respective experts to file and exchange expert reports, rebuttal reports and Joint Statements on the 3 Areas (except no Joint Statement had been prepared in the area of maximum plot ratio and maximum gross floor area due to some disagreement between the 2 experts).

11.On 6 March 2017, R6-R8 had settled the proceedings with the applicants. By 3 consent summonses, leave was granted on 9 March 2017 and 21 March 2017 for R6-R8 to withdraw their Notice of Opposition and the expert evidence on the 3 Areas. This was being done without any prior notice to the other respondents.

12.At the hearing on 22 March 2017, this case was set down for trial commencing on 9 October 2017 with 8 days reserved upon indication by the legal representatives of the Rs that the case should be ready for trial. The trial date was subsequently refixed to 16 October 2017 due to change of circumstances (for details, refer to Reasons for Decision dated 19 May 2017).

13.The Summons was then taken out, in the sequence of by R24 and R25 on 8 May 2017, by R2 on 28 June 2017 and by R3 on 3 July 2017.

Respondents’ Argument

14.Senior Counsel Mr C Y Li appeared for R24 and R25 and Counsel Mr Desmond Leung appeared for R2 and R3.

15.It is the submissions of the Rs that the order sought in the Summons is relevant to an issue in the proceedings, namely the optimal development model in fixing the RDV, hence it is necessary and justified since it can assist the Tribunal in resolving the matter or issue. The unilateral settlement of R6-R8 without prior notice and the withdrawal of the expert evidence on the 3 Areas without consultation of the Rs is a change of circumstances which justified the Summons. If not, the Rs will suffer severe prejudice as there will not be necessary expert evidence to back up the Office Model contended by Lee. When the difference in RDV between the 2 models is so substantial, the minority owners will be deprived of their rights to a fair and reasonable compensation.

16.By granting leave to the Rs to adduce the expert evidence in the 3 Areas, no prejudice will be caused to the applicants or jeopardise the trial since Chow and Ng will be retained and they had already filed their reports before. Lam refused to act for the Rs so Mo will be engaged instead but Mo held similar opinion as Lam save for a few points and Mo’s report is expected to be quite similar to the one prepared by Lam. Subject to addressing new matters raised by Mo, it is also expected that the reports of Chow and Ng will be more or less the same as those already been filed.  According to the timetable suggested by Rs, the expert evidence on the 3 Areas as well as the updated valuation reports would have been completed at the latest by 4 October 2017 which is well before the scheduled trial on 16 October 2017 and would not derail the trial. There is nothing to indicate that the expert evidence to be adduced in the 3 Areas would affect the preparation of the updated reports and Joint Statement by the valuation experts. The experts of the applicants in the 3 Areas had already investigated the matter and prepared their reports. There is no evidence to support the contention that the building expert would require at least 6 weeks to prepare his rebuttal report. It is accepted that with the evidence of the 3 Areas being introduced, the 8 days fixed for the trial will be tight but the days can still be maintained with 6 more days be reserved to cater for the additional evidence.

Applicants’ Reply

17.Mr Y C Mok appeared for the applicants. Mr Mok submitted that the Rs should not be allowed to adduce expert evidence on the 3 Areas since the Rs did not raise the issue about the 3 Areas in their Notice of Opposition and the Summons is an attempt to raise the issue not pleaded.  In any event, the Rs had previously made a deliberate decision not to join R6-R8 in the appointment of the experts in the 3 Areas and the Order dated 11 May 2016 should be a bar to such an application.

18.Furthermore, the Rs’ application is far too late after the trial date is fixed when they were made aware of the necessity of the evidence in the 3 Areas since 29 February 2016 and the settlement of R6-R8 in March 2017. Granting the order sought in the Summons would inevitably move the litigation goalposts and cause a proliferation of expert evidence, with a real risk of at least derailing the current timetable. No evidence of prejudice to the applicants is required and the applicants did suffer significant financial costs on the money already spent on the acquisition of the units in the Lots.

Discussion

19.In reaching the decision and the order dated 19 July 2017, it is stated that “this Tribunal agreed with the contention of the R2, R3, R24 and R25 that leave should be granted for them to adduce expert evidence in the 3 areas (specified below) on the ground that such evidence is relevant to an issue in this proceedings and also to safeguard that the minority owners’ interests are protected by payment of fair and reasonable compensation if a compulsory order is made whereas no prejudice is likely to be caused to the applicants”.

20.That the issue concerning the 3 Areas had not been pleaded in any of the respondents’ (including R6-R8) Notice of Opposition is not surprising since this issue was only raised after Lee was engaged, a time after the Notice of Opposition had been filed. R7 and R8 had, as a result amended their Notice of Opposition to include such a defence but not for the other respondents. Be that as it may, the fact that this is a live issue between all the parties was crystallised at the time R6-R8 took out the summons for leave to adduce expert evidence on the 3 Areas in March/April 2016. Even though the Rs had eventually not involved in the engagement of experts in the 3 Areas, that they are relying on the opinion of Lee which required the assistance of the experts in the 3 Areas is beyond argument. It would be absurd to say that the Rs who had indicated their reliance of Lee’s opinion on RDV are not taking issue on the 3 Areas just because of the fact that they had not so pleaded in their Notice of Opposition. The purpose of the pleadings is to allow the other side to know the case they have to meet and the applicants are not taken by surprise by the issue on the 3 Areas even if this was not pleaded. We do not agree that the Summons should be dismissed on such a pleading point.

21.The Rs may have decided to take a pragmatic approach in not joining the appointment of the experts in the 3 Areas in view of the fact that R6-R8 had already taken up the task or taking the advantage of a “free ride”, yet they should not be deprived of such a chance when R6-R8 settled with the applicants and withdrawn all the expert evidence on the 3 Areas, a change of circumstances that this Tribunal cannot ignore. Even though the Rs were all along legally represented and may well be sophisticated investors, or the settlement by R6-R8 and its consequences should be within the anticipation of the Rs, the Rs should not be deprived of the right in putting all the evidence before this Tribunal for a just resolution of dispute in accordance with the substantive rights of the parties.

22.A claim under the Land (Compulsory Sale for Redevelopment Ordinance, Cap 545 (“LCSRO”) has the distinct characteristics that the interests of the minority owners have to be protected in the sense that the rights of the minority owners to be compensated by a fair share of the sale proceeds after the statutory justification for a compulsory sale order is shown must be safeguard. The amount of the compensation turns on the RDV set after consideration of the expert evidence. If the Rs are not allowed to adduce the expert evidence on the 3 Areas at trial, the contention by Lee on the Office Model cannot be substantiated. There is no dispute that the difference between the Residential Model and the Office Model amounts up to $1,360 million. Without the expert evidence on the 3 Areas, this will impact on the compensation and the minorities’ right to a fair compensation cannot be protected. This is contrary to the intention of the legislature to safeguard the protection a minority should have. Given such distinct characteristics required under the LCSRO, the authorities relied upon by Mr Mok in the determination of late interlocutory applications are to be distinguished and cannot be applicable.

23.We also do not accept that the Order dated 11 May 2016 is to the effect that the Rs, who had not joined in the initial appointment of the experts in the 3 Areas, should be debarred from adducing expert evidence on the 3 Areas after those filed by R6-R8 had been withdrawn. This Tribunal had the chance of listening to the recordings of the hearing on 22 March 2017 and confirmed that HHJ Wong had, at the hearing, reminded the Rs of the need for them to adduce any evidence on the 3 Areas and had specifically mentioned that, if need be, the Rs can take out application based on the “liberty to apply for further directions” order made on the day.  So, it is already envisaged at the hearing that there may be an application like the Summons even after the trial date had been fixed.

24.Yet, we agree with Mr Mok that the Rs had delayed in the taking out of the Summons till May 2017 with hearing fixed for July 2017.  Judging from the timetable suggested by the Rs at this hearing, however there is no delay or derailing of the trial since the original hearing dates are maintained and the timeline for the evidence, though may have been put back a bit, will have no effect on the trial dates originally fixed. And if the order sought in the Summons is granted, the original 8 days allotted for trial will not be sufficient and another 6 days is required for the trial to complete.  Given the fact that the court diary can accommodate a 6 days’ time slot close to the original 8 days keeping the original trial dates intact, and in consideration of the protection the minorities should have as guaranteed by the LCSRO, such a lengthening of the trial is acceptable and should be entertained.

25.Mr Mok had empahsised at the hearing the fact that the Rs failed to produce the report of Mo and the applicants, as well as this Tribunal, had not been told what are the few points that Mo is in disagreement. Without details of the same, this may have impact on the timetable to be fixed since Mo’s new evidence may raise new issues which may have an impact on the valuation expert’s evidence. There may be a risk of experts not agreeing on the Joint Statement and if there is disagreement between the 3 pairs of experts, the applicants may have to come back to apply for vacating the trial dates to deal with the new evidence. It is also stated in the applicants’ affirmation in opposition that their Building Surveyor required at least 6 weeks to prepare a rebuttal in reply. 

26.We agree with the Rs that even without a Joint Statement between any pair of experts, the trial can still proceed. For Chow and Ng, they had been engaged by R6-R8 and had already adduced their reports.  Even with the new evidence from Mo, it is quite unlikely that they would say something much different from their report filed. As for the new evidence likely to be adduced by Mo, it is the evidence of R24/R25 that Mo has perused the reports previously prepared by Lam and basically holds similar opinion as Lam, though with different views on a few points discussed in Lam’s report. Given such an indication, Mo’s evidence should still be in the same framework as in Lam’s report save it may well be a different view on certain points leading to the conclusion. And this Tribunal cannot accept the applicants’ Building Surveyor’s estimate of time required for the rebuttal report before having sight of Mo’s report.

27.Lastly, we found no prejudice is likely to be caused to the applicants by granting the order sought in the Summons and even if there is any, balancing the likely prejudice to both parties, the prejudice suffered by the Rs in being deprived of the protection guaranteed by the LCSRO outweighs that of the applicants.

28.Having considered all the above, we have made the order at §2 above at the end of the hearing.

29.As for costs of the Summons, to indicate the disapproval of this Tribunal in the late application, we made a costs order nisi that there shall be no order as to costs for the Summons including this hearing. Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days from the handing down of this reasons for decision.

Mr Y C Mok, instructed by Mayer Brown JSM, for the 1^st to 7^th applicants

The 1^st, 10^th, 11^th, 19^th, 28^th, 29^th and 33^rd respondents were not represented and did not appear

Mr Desmond Leung, instructed by Li, Wong, Lam & W.I. Cheung, for the 2^nd respondent

Mr Desmond Leung, instructed by Anthony Chiang & Partners, for the 3^rd respondent

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

Mr C Y Li, Senior Counsel instructed by Vincent T.K. Cheung, Yap & Co., for the 24^th and 25^th respondents

[1] The original extended trial date on 26-27, 30-31 Oct & 2-3 November is subsequently vacated with 13, 15-17 & 20-21 Nov 2017 be reserved for the extended trial instead