Good Faith Properties Ltd and Others v. Cibean Development Company Ltd

LDCS 42000/2011

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION

NO. 42000 OF 2011

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D E C I S I O N

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1.We handed down our decision on the question of costs in this case on 11 November 2013 (“the Costs Order”), ordering the respondent to pay the applicants costs in these proceedings except the costs for:

(a) satisfying the age and repair test;

(b) the initial EUV and RDV reports as well as the Updated RDV reports; and

(c) the application to adduce further report at the hearing on 6 November 2012,

with certificate for counsel, to be taxed if not agreed on party and party basis at High Court scale and there be an order nisi to be made absolute in 14 days that there should be no order as to costs of the application for variation of the costs order nisi dated 31 May 2013.

2.By a summons filed on 9 December 2013, the respondent asked for leave to appeal be granted for the Costs Orders and a stay of execution of the Costs Order until the determination of the appeal.

Leave to Appeal

3.Section 11 (2) of the Lands Tribunal Ordinance (“LTO”) provides that :

“Subject to section 11AA and the provisions of any Ordinance relating to appeals from the Tribunal, any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law.”

4.Section 11AA(6) of the LTO provides that :

“(6) Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

5.It is the contention of the respondent that leave to appeal should be granted against the Costs Order since both limbs of Section 11AA are satisfied in that :

(a) There is reasonable prospect of success in the following points of law :

(i) whether the special context and approach to costs in compulsory acquisition cases are applicable to compulsory sale cases (Ground No. 1 of the Draft Notice of Appeal);

(ii) who is the successful party as far as the quantum of compensation is concerned (Ground No. 2 of the Draft Notice of Appeal);

(iii) whether any adverse costs order made against the successful party should fairly be restricted to the proportion of time and costs wasted on improper, unnecessary and/or unreasonable issues (Ground No. 8 of the Draft Notice of Appeal);

(iv) whether any or any proper effect had been given to the “compensation objective” of the Land (Compulsory Sale for Redevelopment) Ordinance (Ground No. 7 of the Draft Notice of Appeal);

(v) whether the respondent should be deprived of its costs in relation to the applicants’ failed application for leave to adduce further expert evidence (Ground No. 10 of the Draft Notice of Appeal);

(vi) whether the respondent was only exempt from paying some but not all of the costs which were in any event incurred by the applicants in proving their case (Ground No. 9 of the Draft Notice of Appeal);

(vii) whether rejection of the respondent’s arguments ipso facto meant that costs ought to be awarded against the respondent (Ground No. 3 to 5 of the Draft Notice of Appeal); and

(viii) whether the approach adopted in relation to improper arguments raised by the parties are inconsistent and self-contradictory (Ground No. 6 of the Draft Notice of Appeal);

(b) The question is one of general principle or of importance, decided for the first time and a decision of the Court of Appeal would be to the public advantage.

6.Having heard and considered the submissions, we agreed with the respondent that leave to appeal should be granted for the Costs Order on the ground that there is some other reason in the interests of justice that the appeal should be heard.

7.The main argument of the Costs Order is whether the compensation approach in compulsory acquisition cases should also be applicable to compulsory sale cases, i.e. the costs of litigation should fall on the one who caused it and the cost of determining the amount of the disputed compensation would fall on the applicants without whose resort to the use of compulsory powers, there would have been no need for the owner to be compensated.

8.This is an argument that is decided for the first time and involved a question of general principle.  It is stated in Hong Kong Civil Procedure 2014 Vol 1 that “the Court of Appeal may grant leave if the question is one of general principle, decided for the first time; or a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage” (at 59/2A/4).  We are satisfied that the argument concerning the Costs Order falls squarely within the ambit where leave to appeal should be granted so that the matter can be dealt with by the Court of Appeal for the advantage of future cases.

9.Mr. Mok for the applicants had raised the argument that in considering whether to grant leave to appeal under the second limb of Section 11AA(6), merits of the case should also be considered.  We disagree.  Whilst the first limb of Section 11AA(6) required a reasonable prospect of success which must turn on the merits of the appeal, nothing in the second limb required the same consideration.  If what Mr. Mok said is right, the second limb is superfluous.

10.And even if we were to consider the merits of the appeal, we found the grounds stated in paragraph 5(a) above are reasonable and the respondent has an arguable case in the appeal.

11.Mr. Mok for the applicants had also raised the argument that the Draft Notice of Appeal had raised no question of law to be decided by the Court of Appeal and cannot secure a just, expeditious and economical disposal of the respondent’s intended appeal as required under Section 11AA(5)(b) of the LTO.

12.We found, the Draft Notice of Appeal could have been better drafted, but did reveal points of law as summarized in para. 5 above.  And Section 11AA(5)(b) does not impose an additional requirement in the consideration as to whether leave should be granted but rather empowering the Tribunal to grant leave to appeal with conditions to enable the just, expeditious and economical disposal of the appeal only.

Stay of Execution

13.The respondent is asking for a stay of execution of the Costs Order since there is strong merit in the appeal and there is a risk that the respondent would not be able to recover any sum paid to the applicants since the 1^st applicant is only a shell company used as a vehicle for holding the Lot for the time being and the 2^nd to 4^th applicants are corporations with paid up share capital at nominal sum and do not have any realizable assets given their interests in the Lot had been assigned to the 1^st applicant.  It is further submitted that if a stay of execution is not granted and taxation proceedings are proceeded with in the meantime, should the appeal be successful, it would ultimately be rendered useless and all the time, resources and costs of all the parties and also the court spent in taxation would have been completely wasted.

14.The applicants object to this application on the ground that the Draft Notice of Appeal is totally lacking in merits and the 1^st applicant being owner of the Lot and the 2^nd to 4^th applicants being holder of the consideration specified in the respective assignments of their interests to the 1^st applicant, can definitely have the means to repay the respondent should the appeal be successful.  And according to the Hong Kong Civil Procedure 59/13/7, “the taxation of the costs below cannot be merely adjourned because an appeal is pending”.

15.The relevant principles governing whether a stay of execution pending appeal should be granted are discussed by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at §§6-10, which can be summarised as follows:

(i) it is in the court’s discretion whether or not to grant a stay (§6);

(ii) a stay of execution will not be ordered unless the defendant can justify a stay, and the practice of the court is that justification can be demonstrated only if good reasons exist (§7);

(iii) good reason can exist in a variety of forms, and merits of the appeal and whether the appeal will be rendered nugatory are matters which may go to whether good reasons exist (§8);

(iv) however exceptional the circumstances may be otherwise justifying a stay of execution, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted, and so the existence of an arguable appeal is the minimum requirement for the grant of a stay (§9(6));

(v) the court would have to form a preliminary view of the merits and strengths of an appeal.  Where there is an arguable appeal, then the appellant will have to provide additional reasons to justify a stay, for example that without a stay the appeal would be rendered nugatory.  In the absence of any additional reasons, strong grounds of appeal or a strong likelihood of success would be required (§§9(5) & 9(8));

(vi) if the order appealed against is a money judgment, the court will require evidence as to why the levying of execution will result in the appeal being rendered nugatory, such as, for example, an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal (§9(1));

(vii) it is important to stress that the court must not at any stage forget the position of the successful party.  It is always relevant to consider the prejudice that would be caused to the successful party in the event a stay is granted, and if necessary, to impose conditions so as to minimize the prejudice caused to him (§9(9)); and

(viii) ultimately, the court embarks on a balancing exercise and uses its common sense, but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success (§10).

16.As to what would constitute a strong ground of appeal, Ma J in Wenden Engineering Service Co Ltd v Lee Shing Yue Construction Co Ltd, unrep, HCCT 90/1999 (17 July 2002) stated that the requisite strength of the appeal must be such that the court takes the view that “something has grievously gone wrong with the process of law in the court below”.

17.Applying the legal principles stated above, if the respondent failed to show very strong prospects of success on the appeal, it must establish a good reason to justify a stay of execution.

18.As can be seen from our ruling above, leave is being granted basically on the ground of justice required the appeal to be heard. And even though we found the merits of the appeal to be reasonable and arguable, we do not agree that “something has grievously gone wrong” in the Costs Order. We found that the respondent can only establish arguable grounds and this is not a case where the respondent can show a very strong prospect of success on appeal.

19.And we also accept the submission of Mr. Mok for the applicants that the respondent failed to show that without a stay, the appeal will be rendered nugatory.  We are satisfied that the applicants do have assets to repay the respondent in the event of a successful appeal.

20.Having said so, we found the respondent had established another good reason, i.e. if the Costs Order is not stayed, there will be costs incurred for the taxation exercise which may be wasted.  Given the complexity of this case, the taxation exercise would be a lengthy and substantial one. Should the appeal be allowed, the costs for taxation will be wasted.  Such unnecessary expenditure should be avoided.  Paragraph 59/13/7 relied upon by Mr. Mok is not applicable to an application for stay but catered for an adjournment before the Taxing Master which is not the scenario here.

21.Having considered the submission, we found that there is good reason to justify an order for stay of execution of the Costs Order pending the determination of the appeal.

22.It is ordered that :

(a) Leave to appeal be granted to the respondent against the Costs Order;

(b) There shall be a stay of execution of the Costs Order until the determination of the appeal; and

(c) Costs of this application be in the cause of the appeal.

Mr Y C Mok, instructed by Mayer Brown JSM, for the applicants

Mr Julian Chan, instructed by Clayton Wong & Co., for the respondent