Law Fat Kam V.The Director of Lands
Read the full judgment text of LDMT 1/2004 on BabelCite. This LDMT judgment was delivered on 12 July 2006.
1. In connection with MTR Quarry Bay Extension, certain area of alley and land next to the shop premises leased and occupied by the Applicant as a tenant was temporarily closed for a period of time by an Order made by the Secretary for Planning and Lands under Mass Transit Railway (Land Resumption and Related Provisions) Ordinance (Cap. 276) (“the Ordinance”). As a result, the Applicant who was a waste paper operator, acted upon by Landscope Surveyors Ltd. (“the Surveyor”), submitted on 6 Augus
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LDMT 1/2004 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MTR Ordinance Application No. 1 of 2004 ______________________ BETWEEN
Coram: Mr. W. K. LO, Member of the Lands Tribunal Date of Hearing: 7 June 2006 Date of Handing down Judgment: 12 July 2006 ______________________ D E C I S I O N ______________________ Background 1.In connection with MTR Quarry Bay Extension, certain area of alley and land next to the shop premises leased and occupied by the Applicant as a tenant was temporarily closed for a period of time by an Order made by the Secretary for Planning and Lands under Mass Transit Railway (Land Resumption and Related Provisions) Ordinance (Cap. 276) (“the Ordinance”). As a result, the Applicant who was a waste paper operator, acted upon by Landscope Surveyors Ltd. (“the Surveyor”), submitted on 6 August 2002 a claim to the Respondent for compensation pursuant to Section 18 and Item 4 of Part 1 to the First Schedule of the Ordinance. Initially, the claim for pecuniary loss was for the period from 1 March 1998 to 31 October 2001 and was estimated to be $1,080,904, plus surveyor’s fee of $38,309, then calculated on the basis of Scale 10.1 of the Scale of Charges for Professional Services prepared by HKIS (initials for Hong Kong Institute of Surveyors) (“HKIS Scale of Charges”). 2.From October 2002 onwards, the Respondent then entered into a long series of correspondence with the Surveyor, seeking information, clarification, supporting documents and rationale in connection with the Surveyor’s submitted claim. The Surveyor also submitted supplementary information in the form of reports and letters, revising the claims a number of times but the amount of the total claim for business loss of the Applicant was always in the region of slightly over $1 million, and with the surveyor’s fee always calculated according to the HKIS Scale of Charges. 3.On 17 February 2004, the Respondent offered a compensation of $336,000 to the Applicant. On 27 February 2004, the Applicant rejected this offer and submitted an appeal to the Respondent for the compensation claim for pecuniary loss at the revised sum of $668,341, about two thirds of his previous claims. Then on 8 June 2004, the Surveyor submitted further details to substantiate the appeal, reducing the claim to $555,194. 4.On 29 July 2004, the Applicant filed an application to the Lands Tribunal for determination of the amount of compensation pursuant to the Ordinance. The original Surveyors’ report dated 6 August 2002 was attached to the application in support of the claim in the sum of $1,119,213. On 18 August 2004, the Department of Justice on behalf of the Respondent filed a Notice of Opposition in the Lands Tribunal. The application was opposed on two grounds: “(A) the Applicant is not entitled to claim statutory compensation … and (B), without prejudice to (A), the Applicant’s claim is excessive.” 5.Subsequent to a call-over hearing and the exchange of “Rule 20” Report, the Applicant accepted an offer in the sum of $503,000 as full and final settlement of the claim. The parties agreed as part of the Consent Order that “the Respondent shall pay professional remuneration reasonably incurred in connection with the claim herein up to 4 February 2005 which amount is to be assessed by the Lands Tribunal, if not agreed”. Also, the parties agreed that “the Respondent shall pay the Applicant’s legal costs incurred in connection with the claim herein up to 4 February 2005 to be taxed, if not agreed.” The parties eventually settled the legal costs at the sum of $95,000. 6.On 21 April 2005, the Applicant submitted the Surveyor’s Bill of Charges in the total sum of $628,250, comprising (i) professional remuneration charged and calculated on time charge basis, in the sum of $613,275, and (ii) disbursement of $14,975. On the other hand, the Respondent made an offer of $25,075, as full and final settlement of professional remuneration in connection with the claim, calculated in accordance with Scale 10.1 of the HKIS Scale of Charges. This was not accepted by the Applicant as a result of which an application to the Lands Tribunal was made on 4 August 2005 to determine the amount of professional remuneration payable to the Applicant. The Issues 7.This is an application by the Applicant for the determination of the quantum of professional costs or remuneration under section 6(2A) and 8(4) of the Lands Resumption Ordinance, Cap. 124. There is no dispute between the parties that the Applicant is entitled to professional remuneration reasonably incurred by the Applicant in making a claim for compensation under the Ordinance. But the Respondent disputes that the amount of fees including disbursements in the total sum of $628,250 was not reasonably incurred. Under the Consent Order, the parties could, failing agreement, apply to the Tribunal for the assessment of professional remuneration. However, the Consent Order was silent as to the basis to be adopted for the computation of the professional remuneration reasonably incurred in connection with the claim. 8.Therefore, there are two issues that have to be decided by this Tribunal: - (1) whether, as submitted by the Respondent, the scale as set down in Scale 10.1 of the current HKIS Scale of Charges should be adopted as the only basis on which the quantum of professional costs or remuneration in this case is to be determined, or whether, as submitted by the Applicant, the time basis should be adopted; (2) whether the individual items of costs or remuneration (i.e. mainly the professional fees of surveyors and accountants) are reasonably incurred and the Tribunal’s award to the Applicant of all these individual items of costs or remuneration including disbursements. As it stands, the latter issue is analogous to the taxation of legal costs. Hearing for the determination of professional costs or remuneration payable to the Applicant 9.The Applicant relied on the Surveyor’s Bill (pages 5 to 19 of Exhibit AR-2, an agreed bundle of documents) previously submitted and chose not to call any witness. The Applicant gave submission, quoting a local Lands Tribunal case as well as two cases in UK in support of the principle that firstly, time charges should be the norm, instead of the one fee “Scale” Charge for in the latter situation, it was impossible for the Lands Tribunal to decide whether the professional costs or remuneration were reasonably incurred (Chan Kwong Man and Other v. The Secretary for Transport LDMR 36 of 2000; Unreported; Date of Decision: 15 August 2003); secondly, “management time” for making the claim should also be an item of compensation payable to the Applicant (Matthews v. Environment Agency [2002] 3 EGLR 168); and thirdly, the amount of professional remuneration incurred should be unrelated to the amount of compensation actually awarded by the Lands Tribunal or settled by consent of the parties. In summary, the Applicant submitted that this Tribunal should apply the test of “reasonableness” for each and every item shown in the Surveyor’s Bill in deciding the sum of professional costs or remuneration that should be paid by the Respondent to the Applicant. 10.In response to the Applicant’s Surveyor’s Bill, the Respondent filed a List of Objections to the Applicant’s Professional Remuneration (pages 21 to 46 of Exhibit AR-2). The Respondent also submitted a Rule 20 Report prepared by Ms. Tsang Ka Pui Peggy, an estate surveyor working in the Lands Department. In her report (pages 47 to 120 of Exhibit AR-2), she set out the background of the case, the rationale for adopting the HKIS Scale of Charges, in particular Scale 10.1 which applies in the present case, as well as her comments on the “unreasonableness” of certain items in the Surveyor’s Bill. She suggested that some of the times claimed and shown in the Surveyor’s Bill were excessive and unreasonable. She also challenged the Applicant in the adoption of unit rates for certain professional and non-professional staffs. 11.Notwithstanding her preference for the adoption of Scale 10.1 of HKIS Scale of Charges for this case, Ms. Tsang submitted that the HKIS Scale of Charges did allow for the assessment of professional remuneration by time charge basis. Using the time charge basis, she calculated that the total professional remuneration should be in the sum of $36,075. The details of her calculation and the rationale were shown in the Respondent’s filed List of Objections to Applicant’s Professional Remuneration. 12.During the hearing, counsel for the Applicant helpfully compiled a table of itemised list of works done by the Applicant’s surveyors and accountant, in chronological order, detailing the document bundle reference, the person handling the said item of work, the time claimed to be used by the respective surveyors and accountant, as well as the corresponding figures suggested by the Respondent. On my request, the Applicant and the Respondent agreed to jointly verify the accuracies of all data entries in the said table. On 12 June 2006, the lawyer for the Applicant sent to the Tribunal a soft copy of the said table which has been checked by the parties. Counsel for the Respondent also wrote to the Tribunal on 14 June 2006 confirming that “the accuracy of the data entries in the said table has been verified” but “the Respondent has not approved the assessment on time-charge basis” as it is still the Respondent’s primary contention that the HKIS Scale charge shall apply to the assessment of professional remuneration herein. This table is reproduced as Appendix 1 at the bottom of this Decision. The following summarizes the working hours of various individual staffs of the Surveyor and the consulting accountant as adopted by both parties, their respective adopted hourly rates and their summation of the total professional costs or remuneration and disbursement incurred. Applicant’s claim
Respondent’s suggested amount
The current HKIS Scale of Charges 13.Scale 10.1 of the HKIS Scale of Charges provides that,
14.In addition, Scale 10.4, sub-para. (b) provides that “In cases where a negotiated settlement of a compensation claim is not possible and the matter is referred to the Lands Tribunal, Government will in such a situation pay only such fees as shall be awarded by the Tribunal.” (my underline). So, it appears from this remark that Scale 10 fees mainly apply when the Government settles the matter entirely with the claimant, prior to the reference of the claim by the claimant to the Lands Tribunal. In the present case, although there was a settlement leading to a consent order, the claimant has already lodged the claim to the Lands Tribunal. Therefore, it appears from the above that Scale 10 fees are not intended to apply to the present situation. 15.During the hearing, it has come to the Tribunal’s notice that the HKIS Scale of Charges is actually a document with an effective date of 1 October 1995. It is also a joint publication of the Hong Kong Institute of Surveyors and Royal Institution of Chartered Surveyors (Hong Kong Branch). Upon my request, the Respondent undertook to find out whether this was still the current edition. On 13 June 2006, Counsel for the Respondent wrote to the Tribunal with copy to the Applicant that “the current Scale of Charges for Professional Services (General Practice) reprinted in June 2005 and taking effect from 1 October 2005 is still valid”. 16.Therefore, notwithstanding a statement (para. 1.4) in the HKIS Scale of Charges that both institutes “will review this Scale on a regular basis to reflect market conditions and it is subject to change without notice”, this Scale of Charges remains unchanged over the last 11 years, when Hong Kong has witnessed unprecedented “ups and downs’ in both the economy in general and the property market in particular. The property market has also in theory bears a strong relationship to the demand and supply of professional surveying services which I believe will have obvious impacts on the hourly rates of professional staffs, and the general level of charges payable for professional surveying services. Yet, both institutes see fit as not to review this Scale over the span of 11 years. Therefore, even if one assumes that the two institutes have undertaken a broad survey of market participants and that the scale reflected market realities before formulating this 1995 edition of the HKIS Scale of Charges, one cannot assume that all these remain unchanged over the last 11 years. For this reason, I find that the level of charges shown in this “current” version of the HKIS Scale of Charges is out-dated and should not be accepted by this Tribunal as to necessarily represent “reasonably incurred professional costs or remuneration” for works done by professional surveyors. One fee “Scale” charge or time charges 17.There are other general arguments in favour of or against the adopting of one-fee scale charge (as in the HKIS Scale of Charges) or time charges. For example, the Applicant submitted that the Tribunal has been accepting time basis as a proper way for assessment of professional fees for surveyors. On the other hand, the Respondent submitted that Scale 10.1 of the HKIS Scale of Charges has been commonly used by Government and the private consultancy practice in connection with compensation claims cases. Ms. Tsang Ka Pui Peggy, MHKIS (member of HKIS) gave evidence in her Rule 20 Report that “according to market practice, a surveyor in general would not charge on hourly basis save for attendance of a formal meeting or during Court or Lands Tribunal proceedings.” 18.In recent years, the Lands Tribunal in Hong Kong has also come across similar disputes like the present case. For example, in Chan Kwong Man case (supra.), it was decided by the Tribunal that “the Respondent has not demonstrated how the ‘reasonableness’ test could be applied” by using the one fee scale. The Tribunal further elaborated in paragraph 10 of the Decision of Chan Kwong Man case,
19.In the present case, although this is a claim under the Ordinance, the same provisions of the Lands Resumption Ordinance, Cap. 124 apply. Therefore, I find that the reasons stated by the Lands Tribunal in Chan Kwong Man case similarly applies here even though in that case, there was no settlement and the compensation was awarded by the Tribunal whereas in the present case, there was a settlement leading to a Consent Order, but with no consensus on professional fees. In addition, there is similarity between this case and Chan Kwong Man case in that in both cases, the amounts of professional costs or remuneration sought by the claimants are higher than the amounts of compensation paid to the claimants. However, as stated in paragraph 7 of the Decision of Chan Kwong Man case, whether the fees/costs claimed are out of proportion to the compensation should not be an issue: -
20.In summary, I decide in favour of the Applicant that instead of adopting Scale 10.1 of the current (1995 edition) HKIS Scale of Charges, the determination of the professional costs or remuneration payable to the Applicant should be made on the basis of time charges. Unit hourly rates for various professional and non-professional staffs 21.The Respondent applied the suggested hourly rates of the said HKIS Scale of Charges whilst the Applicant suggested slightly higher hourly rates but otherwise, there was no evidence from either parties (in support of the suggested). Because the HKIS Scale of Charges was out-dated, I prefer to adopt the Applicant suggested hourly rates to reflect the overall inflationary change over the past 11 years. That is, for Mr. Kok Keng Shing (“KSK”), $3,000 per hour and for Mr. Eric Chan (“EC”), $1,650 per hour. For Mr. Ian Leung (“IL”), I only agree to award the same rate as for EC, at $1,650 per hour. However, I agree with the Respondent that Mr. Clive Lau (“CL”) should be awarded at the same rate of $750 per hour as the other two non-professional surveyors, Mr. Karen Chan (“KC”) and Mr. Jack Chan (“JC”). Tribunal’s assessment 22.After taking into consideration all the evidence and the submission that I have received, and having regard to the “reasonableness” criteria as stated in the relevant provisions of the Lands Resumption Ordinance, I have completed my assessment using the itemized schedule of the table at Appendix 1 as the base table. My assessment is shown in the table at Appendix 2 below. A summary of the assessment is as follows: -
23.In particular, I have the following comments on the few areas where there were much disputes between the parties or where the costs or remuneration claimed are substantial. Time spent for Advance Payment of Compensation 24.I have checked the table of itemized works prepared by the Applicant’s Surveyor and the Bundles produced. The Applicant first wrote to the Lands Department (“the Department”) on 25 March 1998 applying for Advance Payment of Compensation for Loss of Business “to assist him to tide over the hardship period during the construction works, as he is the operator of small shop whose business is seriously affected by the hoardings”. 25.After exchanges of correspondence, the Department notified the Applicant by a letter dated 23 November 1998 that his application had been approved with effect from 1 May 8250 at $8,250 per month. The Applicant was requested to call at the Department’s office to sign an agreement bringing with him his identity card, bank account book/account number card and company chop. Finally, the Applicant was reminded that “this amount of compensation will be paid monthly into your bank account after you have sent me a letter certifying that your shop is still in operation at the beginning of each month. I shall inform you in writing when you cease to qualify for this advance”. 26.The Department informed the Applicant by a letter dated 21 November 2001 that “the Applicant have ceased to qualify for advance compensation with effect from the month of August 2001 because obstructions in front of your premises were already removed and, according to MTR Corporation, reinstatement of the alley along Cheong Yuen Building has been competed on 8 August 2001” (page 182 Exhibit AR1). In addition, the Department also reminded the Applicant his obligation to submit a statutory claim under the Ordinance in due course. 27.Ms. Leung commented that the Surveyor prepared several letters for the Applicant in respect of this Advance Payment of Compensation application (Item Nos. 5, 8, 15 and 22 in the List of Objections). She said, “Those letters are simple and straightforward letters with each comprising 1 page excluding attachments. The Surveyor charged 0.5 hour to prepare the draft letter and another 0.5 hour to approve the letter is considered unwarranted and excessive.” She added that although the application form “is of 2 pages requiring to fill-in the basic information of the applicant and the premises affected”, yet “the Surveyor charged a total of 1 hour to complete filing of the form” (item No. 6 in the List of Objections). Therefore, she submitted that this was also excessive and unreasonable. She further commented that the Surveyor claimed charges in relation to telephone conversations to the Applicant for the purpose of seeking the provision of the documents required by the Department for the processing of the Advance Payment of Compensation (Item Nos. 13 and 16 in the List of Objections). Ms. Leung explained that the letters dated 28 July 1998 and 10 August 1998 from the Department were to urge for early provision of document and for information on monthly sales breakdown. She therefore suggested that, “If the Surveyor was experienced and the documents were collected in the first place, the need for the telephone conversations would not arise. The time that is unnecessarily expended should be avoidable and therefore not allowed”. 28.I find that it is unfair to criticize the Surveyor that he should have asked for all the documents from the Applicant in the first place. Sometimes, it is beyond the expertise of any professional surveyor to know how much information and evidence the acquiring authority such as the Respondent would require before the latter is satisfied as to the claim, be it an Advance Payment of Compensation application or other formal claim for compensation. It is impracticable to assume that the Applicant would transfer all the documents in his possession in respect of a suit premises and his business to any surveyor who acts on the Applicant’s behalf for the purpose of claiming compensation. Therefore, I find that it is a matter of fact in each occasion as to whether it is reasonable or not for the Surveyor to undertake the work which is claimed as professional costs or remuneration. The test of reasonableness would have to be applied for each item of such work. 29.As to some of the work done by the Surveyor prior to the approval of Advance Payment compensation, I have reduced the time slots allowed. The details are shown in Appendix 2. On the other hand, although the Applicant’s Surveyor chose to prepare a covering letter attaching the monthly rental receipt and send it to the Department for the period from January 1999 to July 2001 (Items 25 to 57), I do not find these to be excessive and unreasonable since the Applicant was only complying with the requirement stated in the Department’s letter of approval dated 23 November 1998. However, I do not find the work for the letters dated 17 July 2000 and 1 November 2000 (Items 44 and 48) to be relevant as they were respectively made in connection with other road works and neighourhood improvements. Time spent for conducting researches on waste paper trading business. 30.The Surveyor altogether claimed a total of 34 hours of research hours (Item Nos. 64, 69 and 94) that were carried out by Mr. Eric Chan. I agree with the Surveyor that Mr. Eric Chan was required to carry out some researches on the waste paper trading business, including on how the business was conducted generally in Hong Kong and in particular, as to what sort of reliable and publicly available statistical data that could be collected to show the business trend and to assist the Surveyor in the analysis of the revenue and costs of the Applicant with and without the effect of the construction works that were the subject matter of the Order given under the Ordinance. However, there is no evidence from the Surveyor on why Mr. Eric Chan was required to carry out such long hours of researches. And from the reports including the attached supporting Appendices, there is evidence to show that Mr. Eric Chan had done such long hours of researches. In the circumstances, I have reduced substantially the hours of research done by Mr. Eric Chan. Time spent in preparing Rule 20 Surveyor’s Report and Supplemental Report (Item 118 & Item 129) 31.The Surveyor charged 26 hours for Mr. Eric Chan’s work and 6 hours for Mr. Kok Keng Shing’s. I agree with the Respondent that these are excessive, bearing in mind that Mr. Eric Chan has been dealing with this case since July 2002 and that much of the material were adapted from his previous reports and letters, only making certain amendments to reflect his latest position on the subject matter. Likewise, I find that although for reasons unknown to the Respondent and the Tribunal, the Surveyor decided to ask Mr. Kok Keng Shing to act as the expert witness instead of Mr. Eric Chan, Mr. Kok could not charge long hours in studying the Report which was prepared by Mr. Eric Chan in the first place. Otherwise, in the future, any surveyor firm could change the signatories of a valuation report and claim professional remuneration several times. This is obviously unacceptable and cannot be allowed. 32.I agree that the Surveyor could claim the time for preparing Supplemental Report dated 28 January 2005. However, I concur that the time claimed is excessive. I have reduced the figures the details of which are shown in Appendix 2. Time spent to study the past correspondence & prepare Rule 20 Report by Mr. Ian Leung (Items 119 & 120) 33.I accept that Mr. Ian Leung who was instructed to prepare an accountant’s report for the Tribunal’s hearing had to spend some time to study the background of the matter, including the past correspondence of this case. However, I find that the times claimed (i.e. 15 hours for Item 119 and 26 hours for Item 120) are excessive and unreasonable. I have instead made my estimates the details of which are shown in Appendix 2. Meetings of Surveyor and Accountant (Items 122 & 127) 34.The Surveyor claimed many hours of work (meeting time between surveyor and accountant), as shown below: Item 122- Meeting on 17 December 2004, attended by Mr. Eric Chan (2 hours), Mr. Kok Keng Shing (2 hours) and Mr. Ian Leung (2 hours); Item 127- Meeting on 7 January 2005, attended by Mr. Eric Chan (1 hour), Mr. Kok Keng Shing (1 hour) and Mr. Ian Leung (1 hour). I agree with the Respondent that these meetings were unnecessary. I have disallowed these items. Costs of the proceedings 35.The parties failed to come to any agreement on the amount of professional costs or remuneration payable to the Applicant by the Respondent after the Tribunal granted the Consent Order. The Applicant sought professional remuneration in the sum of $628,250 including disbursement of $14,975. The Respondent only agreed a one-fee remuneration in the sum of $25,075 based on Scale 10.1 of HKIS Scale of Charges. Alternatively, if calculated on time charge basis, the Respondent suggested paying the Applicant remuneration in the sum of $36,075 and disbursement in the sum of $1,000. 36.I decide in favour of the Applicant in adopting the time charge basis on which I estimated that the total amount of professional remuneration reasonably incurred is in the sum of $152,520. I also allow disbursement in the sum of $2,000. Therefore, I find that the Applicant is entitled costs for the present proceeding. Orders 37.The Respondent do pay the Applicant professional remuneration (including disbursement) reasonably incurred in connection with the claim herein up to 4 February 2005 in the sum of $154,520. There also be a order nisi for costs in favour of the Applicant on District Court Scale, to be taxed if not agreed, with Certificate for Counsel and with liberty to apply. The costs order nisi shall become absolute if no application is made within 21 days.
Mr. Simon K. M. Lui, instructed by Messrs. Fairbairn Catley Low & Kong, for the Applicant Mr. HO Chi-sum, SGC of the Department of Justice, for the Respondent |
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