Wall Street 38 Ltd v. Commissioner of Rating and Valuation

LDRA 11/2022

[2024] HKLdT 1

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

RATING APPEAL NO.11 OF 2022

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BETWEEN

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D E C I S I O N

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1.This is my decision on the costs of this rating appeal after the appellant elected to discontinue it.

Procedural History

2.The appellant began this appeal by filing its Form 19 on 2 March 2022. It challenged the respondent’s decisions dated 7 February 2022 in the assessment year 2018/2019 to delete 28 tenements all at Success Centre, Tai Chuen Ping Street (Subject Building), from the valuation list as from 9 January 2019 and contended on appeal that deletion should have been done earlier on 11 October 2018.

3.Annexed to the aforesaid Form 19 is an 8-page “factual background and chronology” consisting of 30 paragraphs. Paragraphs 17 to 30 thereof are “grounds on which the appeal is sought” and references were made to UK Supreme Court judgment[1] and Hong Kong Court of Final Appeal judgment[2].

4.On 21 April 2022, the respondent through Department of Justice (DOJ) filed its 1-page Form 7 opposing this appeal. Among others, it was said that the appellant should not file one single Form 19 against respondent’s 28 separate decisions for 28 tenements and that the basis of deletion was correct in law and in fact.

5.On 12 May 2022, this appeal came for 1^st hearing before this Tribunal, who, inter alia, 1) gave leave to the appellant to amend Form 19 to confine it to one tenement at 16/F of Subject Building (the Tenement); 2) required the respondent to comply with r.61[3] of Lands Tribunal Rules (LTR)[4]; and 3) ordered stay of these appeal proceedings until 14 October 2022 for settlement negotiation.

6.On 13 May 2022, pursuant to my leave, the appellant filed its Amended Form 19 over the Tenement alone, contending that Subject Building had, as from 11 October 2018, became a site for wholesale conversion and thus it was no longer capable of beneficial occupation. Hence, the Tenement ceased to be liable for rates, and it ought to have been deleted from the valuation list, as from that date.

7.On 2 June 2022, the respondent filed its 2-page Amended Form 7, contending that the Tenement only became incapable of beneficial occupation from 9 January 2019 when the Addition and Alteration Works (A&A works) commenced, as there was no structural alteration between 11 October 2018 and 8 January 2019. The Tenement was, it was said, deleted from valuation list in line with the Rating Ordinance[5] as from 9 January 2019.

8.Moreover, a chronology of major events of conversion of Subject Building (with reference to documents concerned) from 11 October 2018 (site handover to contractor) to 9 January 2019 (commencement of A&A works) was included to the said Amended Form 7, which was signed by Mr Edward Chik (Mr Chik), Senior Government Counsel (Acting) of DOJ acting for the respondent.

9.On 10 November 2022, this appeal was, on parties’ joint application by letter, adjourned sine die for parties to attempt, and to report, settlement negotiation by 28 April 2023. In April 2023, parties reported to this Tribunal that no settlement could be reached.

10.At restored hearing on 24 May 2023, this Tribunal ordered 1) exchange of witness statements with relevant documents by 28 July 2023; 2) exchange of supplemental witness statement with additional documents, if any, by 29 September 2023; and 3) gave leave to set this appeal down for substantive hearing no later than 13 October 2023.

11.On 28 July 2023, DOJ filed on behalf of respondent witness statement of Li Ying Wai (Mr Li). Mr Li is Acting Senior Valuation Surveyor of Rating and Valuation Department. The body of his statement consists of 18 pages analyzing, inter alia, contents (including photos) of site progress reports of Subject Building to see if structural alteration works were carried out or not.

12.There are bulky Appendix A to L to the above witness statement of Mr Li, comprising, among others, of land search records, copy letters, copy floor plans, copy forms and notices, copy site photos, copy notices of deletion, copy letters from appellant’s agents and authorized representative (AR) i.e. Mr Liu Sing Keung, and site progress reports of Subject Building.

13.On 8 August 2023, the appellant filed and served Notice of Discontinuance. DOJ on behalf of the respondent wrote letter on 11 August 2023 to the Tribunal seeking costs from the appellant pursuant to r.27(2) of LTR.

14.On my directions, DOJ on behalf of the respondent filed on 24 August 2023 a Form 1 Application (R’s Application) asking 1) for this appeal to be dismissed; and 2) costs of respondent incurred in this appeal be paid by the appellant. This Tribunal thereafter gave directions for paper disposal of R’s Application and timetable for parties to lodge and serve written submissions, statement of costs for summary assessment and written grounds of objection. Before its deadline to lodge and serve reply submissions expired on 9 October 2023, DOJ advised by letter on 6 October 2023 that the respondent elected not to lodge reply submissions.

Respondent’s submissions

15.This Tribunal, the respondent stressed, has a wide discretion on costs and the said discretion is to be exercised in accordance with principles and with a view to reality and justice. In particular, this Tribunal may consider whether it was reasonable for a party to take an issue, the extent of success, and conduct of the parties[6].

16.The respondent submitted that costs of the appeal should follow the event. The successful party is the respondent as the appellant had discontinued these appeal proceedings.

17.The respondent has, it was said, also acted reasonably and compiled with court orders all along, including amendments of Form 7 and exchange of witness statement.

18.This appeal, the respondent submitted, has no merit either. The appellant had misconceived that taking possession by contractor on 11 October 2018 meant that the Tenement was no longer capable of beneficial occupation, and missed the fundamental issue of structural alteration (if any) in the Tenement.

19.There is, said the respondent, nothing in this case to justify departing from the starting point in [15]. The appellant should be ordered to pay the respondent’s costs of and incidental to the appeal.

20.The respondent submitted for consideration by this Tribunal a statement of costs for summary assessment in the total sum of $108,404 (SOC).

Appellant’s submissions

21.At para 20 of its submissions, the appellant explained that the appeal was not continued as its “[AR] cannot cope with the court time schedule and the dispute amount is only $5,000”.

22.At para 21 of its submissions, the appellant said it “is not appealing that he is not responsible to pay any of the legal costs as claimed by the Respondent but considered that the Respondent has acted unreasonably or improperly as above mentioned such that the quantum of legal costs claimed, inter alia, scope, time spent and hourly rates, is not reasonable, not fair and excessive”.

23.The appellant submitted that the respondent had acted unreasonably in breach of court order dated 12 May 2022 in failing to give a detailed response in the Amended Form 7.

24.Had the respondent strictly followed court’s instructions and responded in Amended Form 7 to all points raised in Amended Form 19, the appellant might, it was argued, have stopped all subsequent proceedings preventing accumulation of legal costs thereafter.

25.On the merits of the appeal, it is submitted on behalf of the appellant that, at law, the Tenement had, on 11 October 2018, become a building site upon possession being taken by contractor for conversion of then industrial building into a commercial complex. Relying on the authority of Kinco Investment Holdings Ltd v Commissioner of Rating & Valuation[7], it is said to be inappropriate to rely on “structural alteration” as alleged by the respondent. In any event, judicial decisions have held that a building site or “assets under construction” is incapable of beneficial occupation and thus not liable to rates.

26.The dispute is, said the appellant, in the region of $5,000 only and, hence, procedures relevant to court hearing should be avoided for costs reason. According to AR of appellant, the respondent once gave the appellant a breakdown of legal costs totaling $48,311 up to 24 May 2023 after the hearing on 24 May 2023.

27.At para 11 to 19 of its submissions, the appellant made a number of submissions on the quantum of respondent’s costs claimed in SOC prepared by DOJ on behalf of the respondent, including on:

(1) contents of (and time spent on) witness statement of Mr Li (including site progress reports therein);

(2) recovery of costs expended by staff of DOJ and/or Rating and Valuation Department;

(3) hourly rates of Mr Li and of Mr Chik; and

(4) counsel fee.

Discussion

Applicable rules and principles

28.S.27(2) of LTR reads: “A party upon whom a notice [of discontinuance] is served may, within 14 days of that service, apply to the Tribunal for an order for costs and, …, the Tribunal may make such order as it thinks fit”.

29.S.12(1) of Lands Tribunal Ordinance (LTO)[8] reads: “The costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid”.

30.S.12(7) of LTO reads: “… Order 62 of the Rules of the High Court[9] (RHC) applies, with the necessary modifications, to the award, taxation and recovery of costs in the Tribunal”.

31.For final proceedings, O.62 r.3(2), RHC provides for costs to follow the event, except where it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.

32.Under O.62, r.5, RHC, the Court in exercising its discretion as to costs, shall, to such extent as may be appropriate, take into account – (aa) the underlying objectives; and (e) the conduct of all the parties[10].

33.On the authorities[11], where a party has discontinued its claim without a trial on its merits, the usual approach is for the party discontinuing to pay costs of its opponent unless there is a good reason to order otherwise. It is called the “successful party approach”, reflecting the rule that costs following the event. The approach of the court is that the starting point is to ask which party has succeeded by substantially obtaining the reliefs sought. Only when it is unclear which side succeeded then is it necessary for the court to consider the substantive issues, adopting a broad-brush approach. When the court is not in a position to come to a decision, an order directing no costs is appropriate. The overall consideration is to do justice between the parties without incurring unnecessary costs and time.

Discussion

Liability to pay costs, if any

34.I agree with respondent’s submission at [16] that the respondent is the successful party to this appeal. The respondent has substantially obtained his intended result, namely, the end of these appeal proceedings after the appellant has discontinued them.

35.Hence, on the principles applied in the authorities in [33] and pursuant to O.62 r.3(2), RHC, the starting point is, I think, for the appellant to pay the respondent the costs of this appeal.

36.I further agree with the respondent that there is no good reason to order otherwise. While the appellant did not, on its submissions, acknowledge defeat by serving notice of discontinuance, I find its explanation to discontinue no good reason either.

(1) The appellant should, I think, be well aware of (and should have taken into its account) the relatively small amount at stake before it decided to take out this appeal or not.

(2) In addition, the appellant could have, if it so desire, appointed another AR if its current AR has alleged difficulties meeting the court diary or schedule.

37.Hence, for the reasons given in the last 3 paragraphs, it is not necessary for this Tribunal to decide or rule on the substantive issue on this appeal. I therefore prefer not to express any view on parties’ respective submissions on merits at [18] and [25].

38.Reading contents of Amended Form 7 filed by DOJ on behalf of the respondent, I cannot agree that the respondent was in breach of r.61 of LTR as alleged by the appellant at [23].

(1) Sufficient facts relied by respondent for its case has, I think, been put down in the said Amended Form 7.

(2) Submissions on the authorities and on the law are, I think, to be made at substantive hearing of this appeal and not earlier.

39.Moreover, given that the respondent relied on its Amended Form 7 the same ground it gave in its earlier Notice of Decision to delete the Tenement from the Valuation List as from 9 January 2019, the way DOJ drafted the Amended Form 7 should unlikely, I think, affect appellant’s decision to continue this appeal one way or another. I therefore cannot accept appellant’s submissions at [24].

40.Accordingly, for all the reasons given in this section, I decide to award costs of this appeal to the respondent.

41.Indeed, at [22], the appellant did not object paying the respondent the costs of this appeal.

Quantum of costs

42.However, the appellant objected to the amount of costs sought by the respondent in SOC. In view of the relatively small sum involved, formal taxation should, in my view, be avoided. This Tribunal therefore proceeds with summary assessment of the costs awarded to the respondent at [40].

43.On a summary assessment of costs, this Tribunal would only adopt a broad-brush approach to ensure the final figure assessed was not disproportionate and/or unreasonable. This Tribunal will not embark on a mini-taxation[12].

44.Considering the total figure of $108,404 claimed in SOC against the short procedural history of this appeal, its limited issues and the small amount of tax at stake, I find such sum disproportionately high and unreasonable.

45.Having carefully considered all grounds of objection raised by the appellant in its submissions, this Tribunal decide to:

(1) reduce drafting time spent by Mr Li (i.e. item E1 of SOC) to about 10 hours in total; and

(2) disallow all counsel fee found at item D5 of SOC (and make corresponding slight increase in total time charged by Mr Chik to cover same work done).

46.With respect, counsel engagement for this case is, in my view, unwarranted. Two fee earners of sufficient seniority i.e. Mr Chik and Mr Li should, I think, be sufficient. I find their costs recoverable and their hourly rate reasonable.

47.In the end, I summarily assess the costs of this appeal in the total sum of $50,000.

Disposition

48.As this appeal has already been discontinued by appellant’s service (and filing) of notice of discontinuance on the respondent, I make no further order to dismiss the appeal.

49.Thus, the only order I make on R’s Application is that the appellant do pay the respondent the costs of this appeal, which costs are summarily assessed by Lands Tribunal in the sum of $50,000.

Mr Liu Sing Keung, Authorized Representative of the Appellant, acting in person

Mr Edward Chik, Government Counsel of the Department of Justice, for the Respondent