Lead Harvest Group Ltd and Others v. Cheong Wing Electric Ltd and Another

LDCS 6000/2018
& LDCS 7000/2018
(Heard Together)
[2019] HKLdT 25

LDCS 6000/2018

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 6000 OF 2018

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LDCS 7000/2018

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 7000 OF 2018

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D E C I S I O N

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Background

1.There are two cases before me, namely LDCS 6000 of 2018 and LDCS 7000 of 2018.  On 19 November 2018, I ordered these two cases to be heard and tried together, and hence I am dealing with these two cases together.

2.In LDCS 6000 of 2018, the 2^nd respondent filed a summons dated 12 October 2018 seeking for determination of 3 questions of law by way of a preliminary hearing.

3.Likewise, the 2^nd, 6^th, 8^th, and 9^th respondents in LDCS 7000 of 2018 filed a summons on the same day seeking for determination of 3 similar questions of law by way of a preliminary hearing.

4.In gist, the 3 questions of law in both summonses relate to the construction of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) and can be summarised as follows:-

(1)   Does the tribunal have power/discretion under section 4(6)(c) of the Ordinance, in addition to section 4(6)(a)(i), to direct a combined sale of 2 lots as a whole in one public auction if orders for sale are made by the tribunal for both lots under the Ordinance? ("Question 1");

(2)   Must the tribunal direct a combined sale of 2 lots as a whole in one public auction under section 4(6)(a)(i) and/or section 4(6)(c) when the tribunal makes orders for sale for both lots under the Ordinance and is satisfied that the 2 lots are capable of being jointly redeveloped as a merged/composite site on the expert and/or factual evidence? ("Question 2"); and

(3)   Should the reserve price for the auction be set on a merged-site basis under paragraph 2 of Schedule 2 of the Ordinance if the tribunal directs a combined sale of 2 lots as a whole in one public auction? ("Question 3").

5.According to the margin notes of the two summonses, the aforesaid respondents took out the two summonses pursuant to Order 33, rule 4 of the Rules of the High Court, Cap 4A (“RHC”) and Rule 18 of the Lands Tribunal Rules, Cap 17 (“LTR”).

6.Order 33, rule 4(2) of the RHC stipulates that “In any such action different questions or issues may be ordered to be tried at different places or by different modes of trial and one or more questions or issues may be ordered to be tried before the others.” (underline added)

7.Rule 18(1) of the LTR stipulates that “… a presiding officer may, on the application of any party, order any point of law … to be disposed of at a preliminary hearing …” (underline added)

8.However, the aforesaid respondents submit that the applications under the two summonses are not for an order that the 3 questions of law be determined by the tribunal by way of a preliminary hearing which will be heard later but before trial.  Their applications are in fact for this tribunal to determine the 3 questions of law under the 2 summonses forthwith.

9.On the other hand, all the applicants in both cases submit that this cannot be done.  Both provisions cited by the respondents as mentioned above refer to the court or the tribunal making an order for such preliminary issues to be tried or disposed of before the other issues.  Thus, the respondents must first obtain an order from the tribunal for the 3 questions of law to be tried at a preliminary hearing before they can proceed to ask the tribunal to consider the answers to the 3 questions of law.

10.The applicants further submit that there should not be a preliminary hearing to determine the 3 questions of law and they should be determined together with all the other issues at the trial of the 2 cases.

11.Apart from the aforesaid respondents, all the other respondents in both cases have no comments on the applications and save that the 10^th respondent in LDCS 7000 of 2018 appeared at the hearing of the applications in person, all the other respondents’ attendance were excused.

Is an order for preliminary hearing required?

12.First of all, Rule 18 of the LTR makes it clear that the tribunal may, on the application of any party, “order” any point of law to be disposed of at a preliminary hearing.  It does not say that the tribunal may “determine” any point of law on the application of any party, when the application is an interlocutory application before trial.  The word “order” undoubtedly indicates that the tribunal has to make an order for the point of law to be disposed of at a preliminary hearing which will happen later on but before trial.

13.Of course, the tribunal may also order the preliminary hearing to be held immediately after the order under Rule 18 is made.  However, these are still 2 separate steps in the proceedings.

14.What the aforesaid respondents are trying to do is to ask the tribunal to forgo the first step and conduct the preliminary hearing there and then at the applications by way of the two summonses.  This is clearly wrong from the plain reading of Rule 18.  It also defies the general principle that all issues should be determined at the same trial unless split trial has been ordered. 

15.Thus, I agree with the applicants that there must be an order from the tribunal to have the 3 questions of law to be disposed of at a preliminary hearing before the tribunal goes on to consider the answers to the 3 questions of law.

16.The aforesaid respondents insist that the 3 questions of law are pure questions of law.  If so, Rule 18 of the LTR has already given the tribunal power or discretion to deal with them by way of a preliminary hearing if so ordered.  There is no need for the tribunal to rely on Order 33, rule 4 of the RHC, even though the tribunal has the power under section 10 of the Lands Tribunal Ordinance to follow the practice and procedure of the Court of First Instance.

17.In my view, the general rule is that when there are specific provisions governing the practice and procedure of the tribunal under the Lands Tribunal Ordinance or the LTR, there is no need to adopt the RHC. Thus, there is no need for me to refer to Order 33, rule 4 of the RHC if the 3 questions of law are really pure questions of law.

18.Nevertheless, even if the tribunal needs to refer to Order 33, rule 4, it is also clear from the wordings of Order 33, rule 4(2) that an order is necessary for an issue to be tried before the others.

19.I have no doubt that it is wrong for the aforesaid respondents to ask this tribunal to consider the answers to the 3 questions of law without first obtaining an order to have a preliminary hearing of the 3 questions of law under Rule 18 of the LTR or an order for split trial under Order 33, rule 4 of the RHC.

20.Thus, if the aforesaid respondents’ applications were to proceed on the basis as they have submitted, ie the tribunal should just consider the answers to the 3 questions of law at these applications, the applications can be dismissed straight away for failing to obtain an order to do so.

21.Nevertheless, for the avoidance of doubt and for the sake of completeness, I will proceed with the applications on the basis that the aforesaid respondents are asking for an order for the 3 questions of law to be determined at a preliminary hearing.

Should a preliminary hearing be ordered?

22.In Gallium Development Limited and others v Winning Properties Management Limited and another, LDBM 121/2000, HH Judge Chow, in the context of Rule 18 of the LTR, held that:-

"Therefore in order to ascertain whether Rule 18 has been complied with, the Tribunal must firstly be satisfied that there is a set of agreed facts or a set of facts admitted in the pleadings.  If this is satisfied, the Tribunal will then proceed to consider whether the point of law appears to be in issue in the proceedings."

23.HH Judge Chow’s view is supported by the Court of Final Appeal in Bank of America, National Association v Tadjudin Sunny, FAMV 42/2010, where it was held that:-

"Even a pure point of law is, at least in general, best resolved in the context of a set of facts found at trial.  That has always been the judicial thinking.  And it is strengthened by recent civil justice reforms."

24.In the present two cases, there has not been a set of facts agreed by the parties or a set of facts admitted in the pleadings.  It is clear from the above authorities that the 3 questions of law, even assuming they are pure questions of law, should not be dealt with separately without any factual basis.

25.In fact, all 3 questions are premised on the assumptions that the tribunal is going to order sale of the two subject lots and they are capable of being jointly redeveloped as a merged/composite site based on the expert and/or factual evidence.  However, all these are disputed by the parties.  At the trial, the tribunal may refuse to order sale of either or both of the lots, or may find that the two lots are not capable of being redeveloped together.  If that happens, all 3 questions will become academic. 

26.Actually, none of these 3 questions, if answered at this stage, will dispose of the proceedings or any part of them.  The parties have disputes about whether the applicants have taken reasonable steps to acquire the respondents’ units and whether redevelopment is justified due to the age or state of repair of the existing development on the lots. The tribunal has to determine these disputed issues to see whether orders for sale should be granted.  In other words, the parties would still need to prepare all the evidence to argue these issues.  Time and costs cannot be saved by answering the 3 questions.

27.However, the aforesaid respondents argue that they need to know the interpretation of paragraph 2 of Schedule 2 of the Ordinance in advance so that they know the statutory basis for setting the reserve price. In the absence of a definite answer as to whether the reserve price should be the RDV of the merged site or not, it would be difficult (if not impossible) for the tribunal to judge whether the purchase prices already offered and to be offered by the applicants to the minority owners are fair and reasonable and hence whether the applicants have taken fair and reasonable steps to acquire the minority owners’ properties.

28.I do not accept this submission at all.  It is for the applicants to present their own cases to the tribunal.  If they say the RDV should be set individually for each lot and make such offers accordingly, they have to bear the risk that if the tribunal rules that the RDV should be set on a merged site basis, they would lose the cases.   There is no reason for the tribunal to indicate to the applicants that they should argue otherwise.

29.Likewise, there is no reason for the tribunal to indicate whether the respondents should accept offers based on a merged site basis or not.  In fact, the respondents bear no duty to prove that they were reasonable in rejecting the applicants’ offers.  The burden is only on the applicants to satisfy the tribunal that they have made reasonable offers.  If it is the respondents’ case that the RDV should be set on a merged site basis, then it is for them to argue that the applicants’ offers based on individual sites were not reasonable.  If they succeed in this argument, then it means that the applicants have failed to discharge their burden and have not satisfied the tribunal that they have taken reasonable steps to acquire the respondents’ units and the applications would fail.

30.It is therefore up to the respondents to adopt their own stance as to whether the RDV should be set on a merged site basis or not.  It is not right for the tribunal to tell them what to do.

31.In fact, the tribunal cannot determine whether the two lots can be redeveloped together or not, as this should be determined at the trial after hearing all the factual and expert evidence.  It is pointless to indicate whether the RDV should be set on a merged site basis or not when the question of whether the two lots can be redeveloped together has not been determined.

32.The aforesaid respondents’ Question 2 is actually framed in the context that if the two subject lots are capable of being jointly redeveloped on the expert and/or factual evidence, whether the tribunal must direct a combined sale of the two subject lots.  This is not a pure question of law, but depends on the expert and/or factual evidence available.  There is no way for the tribunal to know whether a combined sale should be ordered or not without hearing the expert and/or factual evidence at the trial.

33.The same applies to Question 3.  Whether the reserve price should be set on a merged site basis or not also depends on the expert and/or factual evidence available in respect of the two subject lots.  This is not a pure question of law.

34.Relying on the case of First Mate Development Ltd v Gee Wing Chung, [2018] 1 HKLRD 668, the aforesaid respondents argue that the tribunal should exercise case management in determining the correct basis for setting the reserve price at the earliest possible opportunity at the interlocutory stage so that no irrelevant valuation opinion was put into the proceedings.

35.However, the First Mate case involved adjoining lots which were 100% owned by the majority owner applicant.  This is not the case here.  Whether the RDV should be set on a merged site basis or not is a live issue here.  The evidence concerning valuations based on individual lots and a merged site are both relevant.  There is no reason to stop the parties to produce either of them by way of case management in the present proceedings.

36.Since the answers to the 3 questions of law will not dispose of any part of the proceedings herein, there is no reason to order a preliminary hearing under Rule 18 of the LTR or a split trial (when the 3 questions are not pure points of law and Order 33, rule 4 is relied upon).  As said by Le Pichon JA in Mai Gou v Mak Chik Lun [2001] 3 HKLRD 248, “trials of preliminary issues should only be ordered if, whichever way they are decided, they would be determinative of the case or at least part of the case”.

37.As held by the Court of Appeal in Lee Yiu Kwan v Ting Tin Wah, CACV 311/2002:

"An order for the separate trial of separate issues is a departure from the general rule that all disputes should be tried together, and therefore, generally speaking, such an order should only be made in exceptional circumstances or on special grounds."

38.However, I do not find any exceptional circumstances or special grounds to justify a separate trial of the 3 questions of law.  In fact, they should be more conveniently and fully answered at the main trial instead of a separate trial when all the facts and evidence are available.

39.Furthermore, I agree with the applicants that ordering a separate trial of these 3 questions would likely cause a delay of the proceedings as the chances of having an appeal against the tribunal’s decision on these 3 questions are high in view of the tribunal’s previous conflicting decisions on similar questions and such decisions have not been considered by the Court of Appeal (see First Kind Limited and another v Liu Keng Chor and another, LDCS 12000/2014).

40.It is therefore desirable to have these 3 questions decided at the main trial together with all the other issues so that the final outcome would not be delayed by separate appeals.  As said by Anthony Chan J in The Securities and Futures Commission v Young Bik Fung and others, HCMP 2575/2010:-

"separating the issues in a case into different hearings usually only has the effect of delaying the final outcome, particularly where each hearing is then the subject of further appeals. A single hearing allows all issues (and appeals) to be decided together, avoiding multiplicity of proceedings and the consequential additional delay and expense."

41.Saving time and costs is especially important when the applicants generally bear the respondents' costs in compulsory sale cases (see: Good Faith Properties Ltd v Cibean Development Co Ltd [2014] 5 HKLRD 534).

42.Although adducing evidence on RDV on both individual lot basis and merged site basis may lengthen the preparations to be done by the parties, I do not think that such an increase in time and costs would be as much as having a preliminary hearing of the 3 questions and a separate appeal later on.  This is a balancing exercise that I have to make.  I accept that not having a preliminary hearing would be more time and costs saving than having one.

43.I am therefore of the view that a preliminary hearing for the 3 questions proposed by the aforesaid respondents should not be ordered.

Conclusion

44.By reasons aforesaid, I order as follows:-

(1)   In LDCS 6000 of 2018, the 2^nd respondent’s summons for determination of questions of law by way of a preliminary hearing dated 12 October 2018 be dismissed, and there be a costs order nisi that the 2^nd respondent do pay the applicants costs of the said summons on High Court Scale with certificate for counsel to be assessed summarily on paper.

(2)   In LDCS 7000 of 2018, the 2^nd, 6^th, 8^th and 9th respondents’ summons for determination of questions of law by way of a preliminary hearing dated 12 October 2018 be dismissed, and there be a costs order nisi that the 2^nd, 6^th, 8^th and 9^th respondents do pay the applicants costs of the said summons on High Court Scale with certificate for counsel to be assessed summarily on paper.

(3)   In both cases, the applicants do submit and serve their Statement of Costs within 14 days from the date hereof, and the aforesaid respondents do submit and serve their Statement of Objection on Costs within 14 days thereafter.

(4)   The aforesaid costs order nisi shall become absolute after 14 days from the date hereof if no application is made in respect of the said costs order nisi within this period.

Mr Jonathan LEE, instructed by Mayer Brown, for the applicants in LDCS 6000/2018 and LDCS 7000/2018

Mr Patrick FUNG SC and Ms Nancy NGAI, instructed by Simon Reid- Kay & Associates, for the 2^nd respondent in LDCS 6000/2018, and, instructed by Lo & Lo, for the 2^nd, 6^th, 8^th and 9^th respondents in LDCS 7000/2018

The 10^th respondent in LDCS 7000/2018 appeared in person

Attendance of Edward Ko & Company, for the 1^st respondent in LDCS 6000/2018, was excused

Attendance of P C Woo & Co, for the 1^st respondent in LDCS 7000/2018, was excused

Attendance of Raymond Chan, Kenneth Yuen & Co, for the 3^rd respondent in LDCS 7000/2018, was excused

Attendance of Lo, Wong & Tsui, for the 4^th, 5^th and 7^th respondents in LDCS 7000/2018, was excused