Super Lion Enterprises Ltd and Others v. Commissioner of Rating and Valuation

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NOS. 71 AND 95 OF 2005

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HCAL 71/2005

BETWEEN

AND

HCAL 95/2005

BETWEEN

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(HEARD TOGETHER)

Before : Hon Hartmann J in Chambers

Dates of Hearing : 15 and 16 December 2005

Date of Handing Down Ruling : 17 January 2006

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R U L I N G

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Introduction

1.In 1997, the respondent, the Commissioner of Rating and Valuation, demanded payment of rental from the applicants in respect of land held under Government leases.  The individual sites were not yet developed.  The applicants objected both to the lawfulness of the demands and the accuracy of their assessments and appealed.  Pending the outcome of their appeals, the Commissioner agreed to hold over the rental he had demanded.

2.In April 2005, after protracted litigation, but with the applicants’ appeals not yet finally determined, the Commissioner sought to set aside his holding over orders and demands for accumulated rental were made.

3.Shortly thereafter the applicants instituted judicial review proceedings to quash the Commissioner’s decision to set aside his holding over orders.  Leave was granted on the papers.  In addition, the applicants sought a stay, preventing the Commissioner’s decision from having effect prior to the determination of their application for judicial review.  In the absence of a stay, each of the applicants would become liable to pay rental to the Commissioner on the basis of his disputed assessments back-dated to July 1997.  On a consideration of the papers only; that is, on an ex parte basis, I granted the stay, liberty being given to the Commissioner to apply to set it aside.

4.By summons filed on 1 August 2005, later amended, the Commissioner sought either to have the stay set aside or, if the stay was not set aside, sought an order that it be made subject to each of the applicants giving a suitable undertaking.  This ruling determines the Commissioner’s application.

The interest rate issue

5.In respect of the provision of undertakings, I understand the position to be that the applicants have agreed to providing undertakings.  The issue, however, goes to the question of the appropriate rate of interest that should be charged on any outstanding rents that may be found to be payable.

6.The Commissioner, I am told, has agreed to any one of the following orders :

(i)	prime plus 2%, this being the rate charged by Government when it acts as a lender on a commercial basis;
(ii)	the rate of return of Government’s investment in the Exchange Fund, or
(iii)	an order simply that there be the usual undertaking as to damages, the rate to be determined, if necessary, after the substantive hearing of the application for judicial review.

7.The applicants, in response, I am told, have contended that the most equitable rate in the circumstances would be the Hong Kong interbank bid rate on three months deposits.

Background

8.On 30 May 1997, the Government Rent (Assessment and Collection) Ordinance, Cap.515 (‘the Rent Ordinance’) was enacted.  The short title to the Ordinance states that it was enacted ‘to provide for the assessment and collection of rents on certain Government leases extending past 30 June 1997’.  S.2 of the Rent Ordinance describes the leases to which the Ordinance applies as ‘applicable leases’.  S.6(1) of the Ordinance lays down that the annual rent payable on applicable leases shall be an amount equal to 3% of the rateable value of the land.  Accordingly, in order to assess the annual rent of an applicable lease, the rateable value of the land itself must first be assessed.

9.In terms of s.2 of the Government Rent (Assessment and Collection) Regulations (‘the Regulations’), land that is leased but has not yet been developed must nevertheless be given a rateable value so that an annual rental may be assessed in accordance with that value.  S.2 of the Regulations reads :

“Where any leased land has not been developed after the commencement of the term of the applicable lease under which it is leased, the rateable value of the leased land at any time before any part of it is developed shall be ascertained as if the leased land were a tenement liable for assessment to rates under the Rating Ordinance (Cap 116).”

10.In 1997, after the enactment of the Rent Ordinance, the Commissioner made his first assessments of the rateable value of sites that were leased but not yet developed (‘development sites’) and served notices on the applicants demanding the payment of annual rental.

11.The applicants objected, appeals being made to the Lands Tribunal.  However, despite the lodging of their objections, the applicants were still liable to pay the rental demanded unless the Commissioner agreed to hold over payment.  To avoid this consequence, at the same time as they lodged their objections, the applicants requested the Commissioner to agree to hold over payment pending the determination of their appeals. 

12.The Commissioner’s power to hold over payment is given in terms of s.29(1) of the Rent Ordinance which reads :

“A lessee, owner or occupier must pay Government rent as demanded despite any proposal, objection or appeal that has not been finalised unless the Commissioner orders that payment of the Government rent, or a part of the Government rent, be held over pending the determination of the appeal.”

13.The lodging of an appeal against an assessment does not therefore allow an appellant to hold back payment of the disputed rental until the appeal has been determined.  The clear legislative purpose is that the rental must still flow into government unless, in the exercise of his discretion, the Commissioner determines otherwise.

14.During the course of submissions, it was not disputed that the Ordinance makes no provision for the payment of interest in any circumstances.  Accordingly, if an appellant, who is obliged to pay the rental in dispute, is successful in his appeal, he will be refunded the rental but will not be able to claim any interest for that period of time when the capital sum of the rental was lost to him.  Equally, if the Commissioner makes a holding over order and the appeal fails, it was agreed that, in terms of the statutory scheme, while the rental would then be payable, it would not carry with it any interest payment.

15.In looking to the statutory scheme, it is to be noted that s.29(5) gives the power to the Commissioner in certain specific circumstances to cancel holding over orders.  S.29(5) reads :

“The Commissioner may cancel an order and make a fresh order where he is of the opinion either that the Government rent or any part held over is likely to become irrecoverable, or that the person appealing is unreasonably delaying his appeal.”

16.As it was, the applications to hold over payment of rent were granted by the Commissioner.  In a memorandum dated 28 July 1997 addressed to the Secretary for the Treasury, the Commissioner explained his reasoning :

“Despite what is provided in section 2 of the Regulation, there is still some doubt regarding the reteability of land under development and the method of assessment.  For this reason, I am inclined to issue the necessary orders to suspend full payment of Government rent including surcharges (if any) until the appeal is determined, subject to the conditions of section 29(2) and (3) being met.  If the appellant has deliberately delayed the appeal, I can cancel the order under section 29(5) of the Ordinance.”

17.In the result, formal holding over orders were made.  An illustration is provided by an order made on 13 August 1997 :

“	I hereby issue an order under Section 29(1) of the Government Rent (Assessment and Collection) Ordinance (the Ordinance) to hold over the payment of Government rent in respect of the properties listed in the attached schedule (the Properties) pending the determination of the appeal, subject to the following conditions:
	(i)	An undertaking … to pay an amount equal to the Government rent the payment of which is held over in respect of the Properties.  Such undertaking shall be given to me within 14 days of this letter;
	(ii)	I may cancel this order if I consider either that the Government rent or part thereof held over is likely to become irrecoverable, or that your client is unreasonably delaying his appeal; and
	(iii)	Upon cancellation of the order under (ii), all outstanding Government rent shall be paid within 14 days of the date of cancellation of the order.”

18.The appeal to the Lands Tribunal, in the first instance, took the form of an agreed request that the Tribunal determine a number of preliminary issues.  As I understand it, in the main, if not entirely, these issues went to matters of law.  They were issues which the Commissioner agreed were novel and complex.  The Lands Tribunal made determinations which were appealed both to the Court of Appeal and the Court of Final Appeal.

19.In its judgment given in March 2001, the Court of Final Appeal held that the Commissioner was lawfully empowered to ascertain the rateable value of development sites and to charge annual rentals.  As to the ‘appropriate mode’ of valuation, the Court of Final Appeal held that this was a matter for the Lands Tribunal.  In this regard, the following was said :

“It follows that, in ascertaining the rateable value of the sites, it is permissible to have regard to their character as development sites for that is an intrinsic characteristic of each property.  Having regard to that characteristic entails taking account of the likelihood of development taking place and proceeding to completion.  But this does not mean that the sites should be valued as completed developments.  Nor does it mean that either of the Commissioner’s methods of valuation or what has been described as ‘the contractor’s method’ of valuation should be adopted.  The appropriate mode of valuation, apart from what is prescribed by relevant principles of law, is a matter for the Lands Tribunal to determine.  It is not for this Court to express an opinion about valuation or about the appropriateness of any method of valuation.”  [Commissioner of Rating and Valuation v. Agrila Ltd and others (2001) 4 HKCFAR 83, at 108G]

20.As I understand it, the judgment of the Court of Final Appeal essentially settled the issues in dispute going to the lawfulness of the Commissioner’s actions.  What remained to be determined was whether, in lawfully assessing the amount of rent due (based on the rateable value of the development sites), the Commissioner had assessed that rent accurately or, to use a broader term, had done so correctly.  These remaining issues also, it was agreed by the Commissioner, were novel and complex.

21.Issues going to the ‘appropriate mode of valuation’ were returned to the Lands Tribunal.  A representative test case was chosen, that of ‘Best Origin’.  Expert reports were obtained but these revealed a huge difference in outcome.  It seems almost certain, therefore, that matters going to valuation will have to be determined by the courts.

22.After the Court of Final Appeal judgment, the Commissioner considered cancelling his holding over orders but received legal advice which prompted him not to do so at that time.

23.However, by mid-2004 the Commissioner had apparently become increasingly concerned as to the slow progress of the continuing litigation.  In his affirmation of 10 November 2005, Mr Siu Kuen Sang, the Assistant Commissioner of Rating and Valuation, has enlarged upon this concern :

“With the slow progress that was being made in the Best Origin case came an increasing concern by the Commissioner as to the amount of Government rent being held over on development sites which as at 27 September 2004 amounted to $1.241 billion and would continue to increase if payment continued to be held over on existing sites and new holding over orders were granted for new development sites.  As a consequence the Commissioner considered it appropriate to seek advice from Leading Counsel as to whether in addition to the specific powers contained in section 29(5) to withdraw holding over orders he also had a general power to withdraw such orders. Leading Counsel advised in September 2004 that there is a general power under section 46 of the Interpretation and General Clauses Ordinance, Cap. 1, to withdraw the holding over orders.  Having received Leading Counsel’s advice, the Commissioner set about reviewing the justification for allowing the holding over orders to remain in place.”  [my emphasis]

24.Reference is made in that extract from Mr Siu’s affirmation of s.46 of the Interpretation and General Clauses Ordinance.  That section reads :

“	Where any Ordinance confers power upon any person to make, grant, issue or approve any proclamation, order, notice, declaration, instrument, notification, licence, permit, exemption, register or list, such power shall include power—
	(a)	to amend or suspend such proclamation, order, notice, declaration, instrument, notification, licence, permit, exemption, register or list;
	(b)	to substitute another proclamation, order, notice, declaration, instrument, notification, licence, permit, exemption, register or list for one already made, granted, issued or approved;
	(c)	to withdraw approval of any proclamation, order, notice, declaration, instrument, notification, licence, permit, exemption, register or list so approved …”

25.According to Mr Siu Kuen Sang, the Commissioner’s review, made in the light of the fresh legal advice, involved—

“… an extensive perusal of past records to find out what in each case the exact basis was upon which the holding over orders had been made and what had been said in correspondence with WKLL and other applicants about the applications to hold over payment.  It also involved careful consideration as to whether the original justification for making the holding over orders still existed and/or whether there was any other justification for them.”

26.In the result, having given the applicants an opportunity to make representations, the Commissioner made the decision to cancel all of his holding over orders.  This decision was contained in letters dated 29 April 2005.

27.Inter alia, the Commissioner’s reasons for cancelling the holding over orders included :

(i)

That, within the contemplation of s.29(5) of the Ordinance, there had been an unreasonable delay in pursuing the ‘Best Origin case’ (the test case appeal).  That delay had been caused, at least in material part, by issues already decided by the Court of Final Appeal being canvassed a second time.

(ii)

That, in addition to his specific powers under s.29(5), he had a general power to set aside orders by virtue of s.46 of the Interpretation and General Clauses Ordinance.  In light of this, he had taken into account the fact, first, that his powers in law to assess and levy rent on development sites had been settled by the Court of Final Appeal and, second, that the rateable values assessed by him had been based on the advice of experts.

28.In the result, notices demanding payment of rent were issued in late May 2005.  Each demand, I understand, when applicable, was back-dated to 1 July 1997.

29.The applicants’ notice of application for leave to apply for judicial review was filed on 8 July 2005.  Both the leave to apply for judicial review and the stay, which the Commissioner now seeks to set aside or have made subject to suitable undertakings, were granted ex parte.

30.At this moment, the substantive hearing of the application for judicial review is set for June – some six months hence.

A consideration of the legal principles

31.In terms of O.53, r.3(10)(a), this court has the power to order a stay.  In these circumstances, a stay amounts effectively to the granting of a prohibitory injunction.  Because leave to apply for judicial review is granted, it does not automatically follow that a stay should be granted.

32.On behalf of the applicants, their leading counsel, Mr Roots QC, submitted that the purpose of a stay is to maintain the status quo until the issues in dispute can be resolved by a final determination of the courts.  The maintenance of the status quo is, of course, a material consideration but, in my view, is not to be read so broadly that in all cases all issues in dispute must simply be put on hold.  That would be the equivalent in practice of holding that, whenever leave is granted, a stay must follow.  Mr Roots never sought such a result.

33.While the circumstances affecting the grant of an interlocutory injunction are, in public law cases, somewhat different to those prevailing in private law cases – a matter to which I shall refer shortly – the starting point must be the guidelines set out in American Cyanamid Co. v. Ethicon Ltd [1975] AC 396.

34.On the basis of the American Cyanamid guidelines, accepting, as I do, leave having been granted, that the applicants do have an arguable case for the relief sought by way of judicial review, I must consider, first, whether the applicants have established that, if they are successful, damages will not be an adequate remedy and, if so, second, whether ‘the balance of convenience’ favours the maintaining of the interlocutory injunction.

35.I believe the adequacy of damages issue is an important one in this case.  I say that because, although the applicants’ challenge to the lawfulness of the Commissioner’s decisions makes this a public law case, when matters are stripped down, the dispute is focused on monetary matters.  The applicants contend that in law they are not obliged to pay any rent to the Commissioner, not until a final determination of the appropriate mode of valuation has been made by the courts or agreed.  Until then they are entitled, by reason of the Commissioner’s holding over orders made in 1997, some eight years ago, to keep any money that they would otherwise have to pay over by way of assessed rental and to put it to profitable use.  The Commissioner on the other hand contends that he is under a statutory obligation to collect rent for the general public good. 

36.As to the adequacy of damages issue, Lord Diplock said the following in American Cyanamid (at 408B) :

“As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing this right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial.  If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage.  If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial.  If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.”

Lord Diplock continued by saying :

“It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises.  It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them.  These will vary from case to case.”

37.While I consider the adequacy of damages issue to be of importance, I do acknowledge that in public law cases – the present case being one – broader questions of the public interest must be taken into account.  As Dillon LJ expressed it in Sierbein and others v. Westminister City Council (1988) 86 LGR 431 :

“I myself feel that in a case where what is sought to be restrained is the act of a public authority in a matter of public law, the public interest is very important to be considered and the ordinary financial considerations in American Cyanamid case, though no doubt to some extent relevant, must be qualified by a recognition of the public interest.”

38.The House of Lords supported this approach in the later case of R. v. Transport Secretary, ex parte v. Factortame Ltd (No.2) [1991] 1 AC 603.  Lord Goff, in considering the American Cyanamid guidelines given by Lord Diplock, observed (at 673B) :

“Turning then to the balance of convenience, it is necessary in cases in which a party is a public authority performing duties to the public that ‘one must look at the balance of convenience more widely, and take into account the interests of the public in general to whom these duties are owed:’ see Smith v. Inner London Education Authority [1978] 1 All E.R. 411, 422, per Browne L.J. …”

Lord Goff continued :

“In this context, particular stress should be placed upon the importance of upholding the law of the land, in the public interest, bearing in mind the need for stability in our society, and the duty placed upon certain authorities to enforce the law in the public interest.  This is of itself an important factor to be weighed in the balance when assessing the balance of convenience.  So if a public authority seeks to enforce what is on its face the law of the land, and the person against whom such action is taken challenges the validity of that law, matters of considerable weight have to be put into the balance to outweigh the desirability of enforcing, in the public interest, what is on its face the law …”

39.If the adequacy of damages issue is not fully determinative, and I accept that in the present case it is not, it is necessary to look to what Lord Diplock described as ‘the balance of convenience’.  In seeking the balance of convenience, the court should look to the course that appears to carry the lower risk of injustice if it should turn out to have been wrong to grant, or refuse, the interlocutory injunction.  Hoffmann J (as he then was) expressed the test in the following terms in Films Rover Ltd v. Cannon Film Sales Ltd [1987] WLR 670, at 680 :

“But I think it is important in this area to distinguish between fundamental principles and what are sometimes described as ‘guidelines,’ i.e. useful generalisation about the way to deal with the normal run of cases falling within a particular category.  The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the ‘wrong’ decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trail) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial.  A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ in the sense I have described.  The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.”

40.As I understand it, therefore, in cases of the present kind, if an award for damages will not provide adequate damages, I am obliged, in the exercise of a broad discretion, to determine the balance of convenience.  In making that determination, I must look to the course which seems most likely to minimise the risk of injustice, doing so within the context of the broader public interest.

My conclusions

41.Directing myself in accordance with these guidelines, and doing so with the necessary degree of caution to try and minimise injustice, I confess that I have not found this to be an easy matter to resolve.  In several respects, in my view, the issues have been finally balanced.  In the final analysis, however, I have been drawn to the conclusion that the stay should not be set aside.

(a) Adequacy of damages

42.On behalf of the Commissioner, it has been argued that, if the applicants are successful in their application for judicial review, they will be adequately compensated by an award of damages.  The damages will consists of the rental paid which will be refunded to them in full.  That being the case, the stay should be set aside.

43.It has been accepted that the applicants would not receive any compensation by way of interest.  But the statutory scheme contained in the Ordinance, it has been said, makes no provision for payment of interest, a matter to which I have referred earlier in para.14 of this judgment.  The legislature, therefore, in terms of the Ordinance, has defined the adequacy of damages in these cases. 

44.But in the present case, of course, the issues to be determined do not go to whether the Commissioner has exercised his confirmed lawful powers to assess rental correctly, they go to another matter entirely, namely, whether the Commissioner has acted lawfully in setting aside the holding over orders.  This judicial review brings into focus a number of broad issues of public law which go to the lawful exercise of executive power.  That being so, in my view this is not a case to be judged solely within the context of the scheme contained within the Ordinance.  The fact that the Commissioner, if the stay is not set aside, seeks undertaking which incorporate the payment of interest must, in my view, go someway to supporting my finding that this judicial review is to be considered not simply within the context of the scheme of the Ordinance.

45.On this basis it may be said, I think, that, if the applicants are successful in showing that the Commissioner has acted outside of his powers, the damages which they will recover for the temporary loss of their money will not be damages which at common law constitute an adequate remedy.

46.By differentiating between the present judicial review and the broader appeal proceedings presently before the Lands Tribunal, I do not believe I have made a distinction which is only one of form.  The issues to be determined in the two sets of proceedings are very different.

47.Even if, looking to the broader issues, some consideration must be given to the statutory scheme and the legislative intent under that scheme, this, in my judgment, must be balanced against those issues to be canvassed in the judicial review going to crucial matters of lawful administration.

48.In the circumstances, while I accept that what is at stake in this judicial review proceedings may, in the final analysis, be defined purely in monetary terms, I do not think that the Commissioner’s application to set aside the stay can be determined purely on the issue of adequacy of damages.

(b) Balance of convenience

49.In the present case, what is sought to be restrained is the act of an executive authority.  In considering the balance of convenience, therefore, the public interest becomes a matter of considerable importance.

50.It is self-evident, I think, that, no matter how healthy the Government’s finances may be, the public interest will benefit from the early receipt of rentals.  During the course of submissions, it has been emphasised that the applicants have not paid any rental since 1997.  It has further been emphasised that at this time, if the Commissioner is shown to be correct in his assessments, rental in a sum of approximately $1.241 billion is outstanding.  

51.In my judgment, however, not too much can be made of the fact that the cumulative amount now claimed by the Commissioner against all the applicants is so substantial.  As Mr Roots pointed out, this amount flows directly from the number of cases in which the Commissioner granted holding over orders.  He granted those orders, even if only in part – quite correctly, I think – because complex and novel issues going to his powers under law were at stake.  Issues of that nature remain to be determined in these judicial review proceedings. 

52.One of the matters which I cannot ignore is the fact that this judicial review is set down for substantive hearing in June of this year; that is, in some six months’ time.  Depriving the public of the benefit of approximately $1.24 billion for that period is of course a matter which I cannot ignore.  However, in the broader context, this period of some six months is, in my view, relatively short.

53.It must be remembered that the Commissioner first began to make holding over orders in 1997, some nine years ago.  By contrast, it is likely that these judicial review proceedings will be determined, at least at first instance, within the next six to seven months.  If the Commissioner is successful at first instance then, of course, whatever the intentions of the applicants by way of further litigation, this court can look afresh at the issue of the continuance of the stay.

54.In my opinion, bearing in mind the relatively short time frame and also that the issues to be determined in the judicial review go not to the wisdom of the Commissioner’s decision but its lawfulness, I believe that the lesser risk of injustice in this case lies in maintaining the status quo.

55.It has been argued that if there is a stay and the Commissioner’s decision to cancel the holding over orders is found to be lawful, the public will suffer a substantial loss for which it will not be compensated.  That may, to a degree, be correct.  However, substantial compensation can be provided in the form of undertakings incorporating a provision for payment of interest, a matter which has been agreed between the parties.  In any event, in my judgment, any potential such loss to the public, in this particular case, must be weighed against the very real benefit to our society as a whole of the assurance that, before any executive authority is entitled to demand the payment of monies from the public, that demand, whether correct or not in its calculation, is at least a lawful demand.

56.It has been argued on behalf of the Commissioner that there is a significant public interest to be taken into account, both in terms of the contribution that the payment of rental to the Government makes to Government revenue and the ability of the Commissioner to meet his own performance targets.  As I think I have made clear, I have not ignored the significant contribution that the payment of rental makes to the Government coffers.  However, in looking to the public interest, and seeking to minimise injustice, I have weighed this against the fact that the profound question of the lawfulness of the Commissioner’s actions are, judged in the broader context of litigation which has been on-going since 1997, to be determined within a relatively short period of time. 

(c) The provision of undertakings

57.As Mr Roots pointed out, it is far from clear that an undertaking in damages incorporating an interest factor is necessary in this case.  However, there has been an agreement in principle in this regard.  In his submissions, Mr Roots said that the purpose of an undertaking to pay interest would be to compensate the Commissioner for any loss directly attributable to the delay in payment of Government rent caused by the grant of the stay.  Any undertaking as to interest is to that degree a limited undertaking.

58.As I have said earlier, the issue in dispute has been the rate of interest.  The parties, it seems, for purposes of certainty seek to have an appropriate rate set now rather than determined after judgment in the judicial review. 

59.It seems to me, as a basic principle, that the interest factor, as part of the undertaking in damages, must in the present case look more to what it would have cost Government to borrow the funds in issue rather than what profit Government could make if the funds were made immediately available.  That being the case, bearing in mind Government’s status as a borrower, it seems to me in principle that the rate proposed by Professor Gordon Hughes is the most realistic, or is closes to what in the circumstances is the most equitable rate.

60.I was impressed by the analysis of Professor Hughes, even if it approach the matter from a different angle, one equally valid in my view.  Professor Hughes, in para.26 of his affidavit, concluded that an undertaking that the applicants pay an interest rate equal to HIBID on three month deposits would compensate the Commissioner appropriately for loss due to the delay caused by the ordering of the stay.  The interest rate would be adjusted every three months in line with the relevant daily Interbank Deposit Rate. 

61.I do not intend to embark upon a detailed analysis of the various contentions as to an appropriate rate.  I am not happy with the suggestion that the applicants should pay prime plus two, the explanation of Professor Hughes in this regard is one with which I agree.  Nor am I happy with the suggestion that the rate should be linked to that of the Exchange Fund.  Again, in broad principle, I agree with the observations of Professor Hughes.  

62.Doing the best I can, and bearing in mind the relatively short timeframe before judgment is given in respect of the judicial review, I therefore direct that interest be calculated in accordance with Professor Hughes’ mechanism described in para.59 above.

My orders

63.I therefore order that the stay do remain until the determination at first instance of the application for judicial review.  This is to be subject to undertakings as to damages incorporating an interest rate equal to HIBID on three month deposits as described in the body of this ruling.

Mr Guy Roots, QC leading Mr Nigel Kat, instructed by Messrs Woo, Kwan, Lee & Lo, for the Applicants in HCAL 71/2005 and 95/2005

Mr Benjamin Yu, SC leading Mr John Litton, instructed by Department of Justice, for the Respondent in HCAL 71/2005 and 95/2005