Oriental Generation Ltd and Others v. Luk Yung and Others

LDCS 4000/2013

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDCS 4000 OF 2013

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BETWEEN

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D E C I S I O N

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1.On 19 January 2015, I handed down a decision dismissing R40’s discovery application for court documents in the applicants’ various judicial reviews and High Court proceedings and for documents to the Town Planning Board (“TPB”) in their re-zoning application (“discovery decision”). These documents are all related to the applicants’ proposed redevelopment of the KTM site. Background and reasons for my decision are set out therein and I not intend to recite them here.

2.This is the hearing of a second batch of interlocutory applications complained by the applicants to have been orchestrated by some respondents with a view to delay the trial. The hearing is originally scheduled to hear the summons of R22, R33 and R34 (“Rs”) dated 21 October 2014 to stay the proceedings, with an alternative request (“staying summons”) but later extended to cover an additional summons issued by R40 dated 20 January 2015 for leave to file and serve additional expert evidence (“expert summons”).

3.The staying summons was issued before the CA handed down its decision on 3 out of 4 the 1^st applicant’s JRs and was later amended[1]. By the amended summons, Rs now ask for the Application herein be stayed pending the final disposal of the appeal procedures arising from CACV 127/2012 and CACV 129/2012 or alternatively, there be a determination of the preliminary issue as to the proper development parameters of the subject lot for the purpose of determining the reserve price.

4.By the expert summons, R40 seeks leave to file and serve two expert reports, respectively:

i) By a planning expert on issues relating to:

a) The likelihood of success of the applicant’s town planning application No. Y/K13/1; and

b) The impact on the development parameters of the KTM site in the event the applicant’s town planning application No. Y/K13/1 is granted; and

ii) By an Authorized Person on the issue of whether the maximum plot ratio of the KTM could be fully utilized in view of the 3 restrictions imposed on OZP 28.

5.R40 indicates through Mr Hui that R40 is prepared to accept reports to be prepared by a single joint expert in each area. Rs are also of the same position.

6.The applicants oppose the 2 summonses.

R40’s Expert Summons

7.As set out in my discovery decision, the KTM site is currently subject to a number of redevelopment restrictions contained in various OZPs (including the 3 restrictions) and the Government lease. Now that the CA has quashed the TPB’s decision on the 3 restrictions for being arbitrary. Given the nature of the legal proceedings being judicial reviews, the questions of whether or not any or all of the 3 building restrictions will be upheld in the end is expected to be uncertain[2] for considerable time unless in the upcoming legal proceedings, the CFA confirms the 3 restrictions or gives definitive directions having the effect of ultimately disposing of the restriction issues. Even if it is the case, there is the impending re-zoning application before the TPB and the possible challenge to the restrictions contained in the Government lease. The restrictions applicable to the KTM site therefore will be subject to change and becoming uncertain and are expected to be in a state of flux for quite some time. Any valuation expert in the compulsory sale application has to take into account all these factors in order to come up with his own redevelopment value for the site. Discovery of documents requested by R40 in her discovery summons cannot help resolve the issues. That application has already been rejected.

8.It is fair to summarize the gist of Mr Hui’s submission on behalf of R40 as this. Unless and until whether the maximum plot ratio of the KTM site can be fully utilized is known given the 3 restrictions currently imposed by OZP 28 (not covered by the CA decision and thus not be so covered by any CFA decision), and the prospect of success of the re-zoning ascertained, valuation experts are in no position to assess the redevelopment value of the site. Further, valuation experts are no experts in these two areas. They should therefore be assisted by two further experts before they can do their job.

9.Mr Mak on behalf of Rs submits that if the tribunal is minded to grant the directions sought by R40 in her expert summons and directs RDV by the respondents be filed within a reasonable time thereafter, it would not be necessary for Rs to ask for relief to be granted under the staying summons[3].

10.Mr Ismail’s opposing submission can be summarized into the following three broad grounds:

i) There has been substantial delay on the parts of R40 making the present application. The trial of the application scheduled to take place on 2 March 2015 was in fact set down during the directions hearing on 17 June 2014. Expert directions were then made. No issue in connection with the aforesaid difficulties was raised until October 2014. It was not until one and a half months before trial that R40 made the present application. The order, if made, will prejudice the applicants as it means that the trial date will be adjourned. Mr Ismail refers to §21 of Capital Well Ltd v Bond Star Development Ltd[4] where Ribeiro PJ said the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“LCSRO”) aims to facilitate urban renewal in respect of old and dilapidated buildings and provides a statutory scheme to, inter alia, prevent “… indefinite obstruction of a redevelopment by any minority owners who may seek to extract a wholly unreasonable price or ‘ransom’ for permitting the redevelopment to proceed”. Counsel also relies on the comments of Litton PJ in §§ 24-25 of Sin Ho Yuen v Fineway Properties Ltd[5] that the tribunal should discharge its function in an effective and efficient manner otherwise the protection afforded by the LCSRO will be “…whittled down through inefficiency and delay”. Mr Ismail also submits the application is inconsistent with the underlying objectives of the RHC which require that a case be dealt with as expeditiously as is reasonably practicable;

ii) Valuation surveyors are qualified to assess the issues raised by R40 in the expert summons;

iii) As a fallback, under s.10 (6) of the Lands Tribunal Ordinance (“LTO”) hearsay evidence is admissible. As such R40 and Rs should not have any difficulty in compiling their RDV reports because they can always consult town planning expert and authorized person before doing the reports.

11.In the tribunal’s view, the accusation that there has been delay on the part of at least R40 is not without bases. R40 purchased a car parking space from R22 pursuant to a sale and purchase agreement dated 4 November 2013 at a consideration of $1.89 million[6]. Completion took place on 22 January 2014. Almost when the said agreement for sale and purchase was registered, the applicants were alerted and issued a joinder application on 20 December 2013. By a consent summons of 22 January 2014, R40 was joined as a party to the application. R40 was made a respondent as soon as she became the car park owner.

12.Further, the purchase was made after the application herein was made to the tribunal on 21 February 2013. Under s.3(3)(b) of the LCSRO, a copy of the application should be registered with the Land Registry against the land lot and in fact was so registered on 30 July 2013[7]. Accordingly, R40 purchased the car park with full knowledge of the litigation. Her lawyers should have advised her that in the circumstances, there was a real risk that her car park would be compulsorily purchased soon after completion if the statutory requirements under the LCSRO are met. She would then be compensated according to the redevelopment potential of the lot. Any reasonable purchaser would then be alerted to whether she would suffer loss, and if not, how good is her bargain. The inference that she knowingly and willingly joins the present litigation for a bargain she considers good is a strong one. She may be an investor and perhaps, is doing a speculation.

13.She was then represented. No matter for what reason she purchased the car parking space it is reasonable to infer that she had or should have made enquiries as to the redevelopment potential of the lot, and thus the return of this bargain when she made the purchase. Upon proper enquiries, she should have discovered the OZPs relevant to the KTM site having been subject to legal challenges. If she considered the documents requested in the discovery summons relevant she should have taken out the discovery application earlier, or at least when the discovery summons was taken out, either as a separate or alternative request. She does not.

14.Having considered that there has been delay on the part of R40, this tribunal has to take into account the extent the applicants’ interest will be prejudiced as a result of the late application, and whether without the expert evidence now being sought, the parties’ dispute can be resolved in a just and fair manner in accordance with the parties’ substantive rights.

15.In this connection, the tribunal has not forgotten the special nature of the present proceedings. Unlike other litigation where there is normally a party at fault, minority owners in a LCSRO application face the law suit through no legal wrong committed by them. However, they face serious consequence as their interest in their own properties may be sold against their will. Though R40 can be regarded as an investor knowingly participating the litigation apparently with a view to make a profit, the tribunal is told at the hearing that there are 14 minority owners still defending, a number of them unrepresented, and presumably not investors.

16.In the recent decision of Good Faith Properties Ltd v Cibean Development Co Ltd[8], the CA decided that a compensation approach should be adopted in respect of costs in LCSRO cases due to its special nature. In coming to its conclusion, the learned Lam V-P considered the LCSRO a statutory compromise balancing the competing interests of the majority and minority owners[9]. The learned V-P is of the view the minority owners are protected on two levels. The first tier safeguard is requiring the majority to justify the redevelopment by going through a statutory process before the tribunal. The second tier is to compensate the minority by a fair share of the sale proceeds after the statutory justifications for a compulsory sale order is shown. The amount of the sale proceeds which a minority owner can share will in turn be affected by setting of the reserve price which is basically a valuation exercise determined after considering expert evidence.

17.It appears from Good Faith that without proper expert opinion from the opposing minorities, the court may not be able to come to a full and satisfactory picture of the opinion adduced before the court. This will impact on the compensation payable to the minorities which the statute serves to protect. The learned V-P has this to say in §17(b) of Good Faith:

“In many cases, the expert opinions put forward by one side had to be calibrated in the wake of the opinions from another expert. Thus, the exercise of the statutory right by the minority owner by putting forward respectable expert opinions from another expert will assist the Tribunal in coming to a proper assessment.”

18.Although the aforesaid was said in the context of highlighting minorities engaging experts being only an exercise of their rights helping the tribunal go through the statutory process and not to be regarded as unreasonable, it stresses the importance of good quality and proper expert evidence in the statutory process. Such evidence ensures minorities’ interests are properly protected by payment of fair and reasonable compensation if a compulsory order is made. The learned V-P stressed it to be an important statutory safeguard[10] for protection of minorities, citing the following paragraph (§25) by Litton NPJ in Sin Ho Yuen:

“In order that the entrenched right of private ownership of property in Articles 6 and 105 of the Basic Law be not infringed, the protection of minority interest under the Ordinance [LCSRO] becomes therefore a key factor”.

19.In the tribunal’s judgment, the issues raised in the expert summons are important ones required to be dealt with at trial. They are live issues and are relevant to the setting of the reserve price, which will definitely be one of the hotly disputed issues, if not the most disputed one. The question is whether valuation experts whose appointment has already been directed are competent to assist the tribunal on the specific issues raised.

20.In relation to whether the plot ratio can be maximized given the 3 restrictions, it has been submitted by Mr Hui that plot ratio issue has been raised in the CA which eventually directed expert evidence be adduced. Parties to the CA proceedings engaged authorized persons (architect) and not valuation surveyors to be their experts on this area. Mr Ismail does not seek to disagree.

21.Mr Mak further submitted that an authorized person will be in a better position than valuation expert to know, given the restrictions, whether the maximum plot ratio can be fully utilized taking into consideration the various statutory and lease requirements.

22.This tribunal tends to agree on a balance.

23.In the present case plot ratio has been a very controversial issue since the 3 restrictions were imposed. The complaints of the 1st applicant[11] to the TPB that the restrictions introduced in OZP 25 limited the gross floor areas of the site led to relaxation of the height restriction from 110 to 130 mPD in mid-2011. It was then said by the TPB to accommodate the permissible GFA allowed on site[12]. As seen from the Reyes’ decision, it was contended by the 1^st applicant the relaxation being insufficient in lights of other considerations, such as the emergency vehicle access and road setback[13]. This issue is more a matter of opinion falling within the ambit of an authorized person, usually an architect, who is conversant with the limitations prescribed by the Buildings Ordinance, the various regulations and practices adopted by the Buildings Department and the lease documents. He can take into considerations of all paper restrictions as well as the on-site conditions, juggling around the various building blocks of a proposed model to see what the maximum achievable plot ratio is.

24.On the other hand, valuation experts are normally professional surveyors belonging to the branch of general practice of their profession. Although when advising on the valuation of a piece of land inevitably plot ratio will be touched upon and be evaluated, in the tribunal’s judgment they are only competent enough to advise on plot ratio generally and in a broad brush manner but not on matters as complicated as the present one. They are not the sort of experts that are expected to develop an in-depth and professional understanding of the Building Ordinance, regulations and practices expected of an authorized person, though a few of them may do so. If they do they are the exception rather than the norm.

25.On the town planning issue, this tribunal is also of similar view. A valuation surveyor is expected to know the town planning procedure and practice generally, and thus can advise his client generally whether to apply for re-zoning when a piece of land is purchased. However, a professional town planner, who normally has more direct experience in re-zoning application, will be in a far better position to advise the tribunal on the prospect of the current re-zoning application by reviewing the documents, representation and opposition already submitted to the TPB. Re-zoning application is obviously not the usual area of work of a surveyor though some of them, because of his particular exposure, may develop an expertise. It is again an exception rather than the norm.

26.This tribunal notes that the trial has been scheduled to commence on 2 March 2015 with 10 days reserved. Whether the direction of the additional reports will upset the trial is an important factor to consider. However, it is also noted that the respondents will take issues on all fronts. The aforesaid additional expert evidence, if ordered, relates to RDV but not EUV. By a realistic assessment, the trial can still go ahead to deal with issues other than RDV which can stand on its own. A considerable part of the trial dates can be saved. Although the trial will be delayed for a while, by the directions given below, the trial on RDV can resume shortly. The prejudice done to the applicants is considered acceptable when balanced against the importance of good and proper valuation opinion in setting of the reserve price.

27.By reasons of the above, although delay is a factor, after considering other relevant factors it would be appropriate to make an order in terms of the expert summons.

28.As regards whether single or separate experts be appointed, this tribunal is guided by O.38 r.4A (5) of the RHC. As stated above, the issues are high controversial and important to the parties. It is very likely that the applicants have already retained their own team of experts in these 2 areas. Since the opinion of any single joint expert will have a significant bearing on the RDV, it is expected his opinion will be severely scrutinized by a party with a view to gain the most out of it. In the tribunal’s judgment his opinion may end up critically challenged by some or all camps. In the circumstances of this case, it will not be appropriate to direct joint single experts be appointed.

The Staying Summons

29.In view of this tribunal’s decision on the expert summons, it will not be necessary for this tribunal to deal with the staying summons because of Rs’ position[14]. However, since the summons has been argued, it would be appropriate for this tribunal to give a ruling on this summons with very brief reasons.

30.In Willow Wren Canal Carrying Co. Ltd v British Transport Commission[15], the defendant therein applied for a stay of action except for an inquiry of damages which the defendant has conceded until the fate of a bill, which has already been deposited with the Parliament, was known. The plaintiff in that action sought injunctive relieves. Upjohn J assessed the case being very heavy with voluminous papers and expert evidence and would take days to finish. It was argued that if the court found in favour of the plaintiff the injunction was bound to be suspended pending the outcome of the bill in the Parliament because the bill, if passed intact, would affect the right of the parties.

31.The learned judge considered it not right to wait for what the Parliament would in its wisdom consider right in the ordinary course of event and if the case was ready. He considered it a principle[16]. The learned judge said at 576D and F:

“… sitting in this court, it is my duty to see that litigants have their cases tried as they are entitled to, and I cannot take into account the possible effect of some Bill now before Parliament which, if passed into law in its present form, may have effect on the rights of the parties. … It is plain, however, that it is not right for this court either now or at the hearing to take into account the possible effect of a Bill which is at present before Parliament and which, so far as this court is concerned, may never become law, or, if passed into law, may contain provisions which ultimately do not affect the rights of the parties before the court. In other words, it is a matter of speculation on which this court will not embark whether a Bill at present before Parliament will be passed into law in its present form.”

32.The scenario in the present case is similar if not worse. As discussed in the discovery decision, there is no telling of what the CFA will at the end of the day say on the 3 restrictions. Their ruling may or may not conclusively dispose of the crucial issues in the present case. Even if so there is a re-zoning complication. Accordingly paragraph 1 of the staying summons is not premised on sound principle and should be dismissed.

33.Concerning the alternative position, the Rs simply fail to show that they are the only scenarios faced by the tribunal when the application comes to trial. They are not exhaustive and are only some of the likely scenarios. In the circumstances the tribunal will make no order in respect of the alternative position.

Conclusion and Orders

34.By reasons of the above, this tribunal now makes an order that the parties do have leave to adduce expert evidence by:

i) an Authorized Person on the issue of whether the maximum plot ratio of the KTM could be fully utilized in view of the 3 restrictions imposed by OZP 28; and

ii) a town planning expert on issues relating to:

(a) The prospect of success of the applicant’s town planning application No. Y/K13/1;

(b) The impact on the development parameters of the KTM site in the event the applicant’s town planning application No. Y/K13/1 is granted.

35.This tribunal also makes the following consequential directions:

i) Parties do file and exchange the aforesaid expert reports within 2 weeks from the date of the order;

ii) There will a meeting “without prejudice” of such experts after exchange of their reports for the purpose of preparing a joint statement pursuant to O.38 r. 38 of the RHC indicating those parts of their evidence on which they are, and those on which they are not, in agreement, such joint statement be filed with the tribunal within 2 weeks from the exchange;

iii) Each expert report shall contain:

a) a declaration of compliance with the Code of Conduct pursuant to O.38. r.37C of the RHC; and

b) a statement to the effect that those appointing him/her have explained to him/her paragraphs 483-493, 498 & 500 of Chinachem Charitable Foundation Ltd v Chan Chun Chuen (unrep) HCAP 8/2007, Lam J (as he then was) 2 February 2010and he/she understands the meaning and effect of these paragraphs;

iv) The solicitors acting for the parties have to file and serve a statement to the effect that they have explained to their experts the aforesaid paragraphs in Chan Chun Chuen when the two experts file their respective reports;

v) The filing and service of the updated valuation report on RDV be extended to 2 weeks after the filing of the aforesaid joint statements;

vi) The trial fixed on 2 March 2015 do stand as scheduled to deal with disputes other than those relating to RDV; and

vii) There be liberty to apply for further directions.

36.As regards costs of the expert summons, although R40 succeeds in persuading this tribunal to appoint 2 further experts, as stated above she should have taken out the proceedings earlier. As costs are in the discretion of the court, in order to reflect the tribunal’s dissatisfaction of the delay in her application, this tribunal proposes each party to bear its own costs of the application.

37.Regarding the staying summons, although the summons is dismissed by the tribunal, basically much of the hearing time was used to support and deal with the expert summons. Taking into consideration the principles in Good Faith, this tribunal also proposes that the parties do bear their own costs.

38.Accordingly, this tribunal now makes a costs order nisi to the effect setting out in the preceding 2 paragraphs, such order be made absolute if within 14 days there is no application made to vary the same.

MR ANTHONY ISMAIL , instructed by Philip T F Wong & Co, for the 1^st to 4^th applicants

The 2^nd, 8^th, 9^th and 17^th respondents appeared in person

Mr Fung LAM, of Lam Fung & Co, for the 13^rd respondent (did not make any submissions)

MR BERNARD MAK , instructed by Li, Wong, Lam & W I Cheung, for the 22^nd, 33^rd and 34^th respondents

The 24^th, 26^th, 27^th, 39^th, 41^st, 42^nd, 43^rd and 46^th respondents were not represented and did not appear

Attendance of Bobby Tse & Co, for the 35^th, 36^th, 37^th, 38^th and 45^th respondents, was excused

Mr George HUI, instructed by Lui & Law, for the 40^th respondent

The 44^th respondent represented by Simon C W Yung & Co, did not appear