Case Detail

LDMR23/1999

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO 23 OF 1999

_________________

BETWEEN
	Penny’s Bay Investment Company Limited	Applicant
	and
	Director of Lands	Respondent

_________________

LDMR 1/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO 1 OF 2005

_________________

BETWEEN
	Penny’s Bay Investment Company Limited	Applicant
	and
	Director of Lands	Respondent

__________________

Before: Deputy Judge KOT, Presiding Officer, Lands Tribunal and Mr K K CHIU, Temporary Member of the Lands Tribunal

Dates of Hearing: 17 March 2016

Date of Decision: 17 March 2016

Date of Reasons for Decision: 18 March 2016

_________________

REASONS FOR DECISION
_________________

Background

1. On 15 October 2014, this Tribunal had handed down our judgment on the determination of the compensation to be paid to the applicant under the Foreshore and Seabed (Reclamations) Ordinance Cap 127 (“the Order”). In our judgment, we have also made an order for all consequential and ancillary matters, including professional fees, interest and costs, be adjourned to a date to be fixed by the listing officer at the request of the parties.

2. Upon the respective application by the parties, leave to appeal against the Order was granted by this Tribunal on 16 January 2015 and also by the Court of Appeal (“CA”) on 15 May 2015. The appeal is set down to be heard on 19 April 2016 with 4 days reserved.

3. On 12 August 2015, parties had approached the Listing Officer of the Lands Tribunal for a date to be fixed for the parties to argue on the question of professional fees, interest and costs. The case is then set down to be heard on 17 March 2016 (“the Hearing”).

4. Parties had filed and exchanged written submissions for the purpose of the Hearing. Mr Barnes QC for the respondent had raised in his submissions that it would be appropriate for the Tribunal to defer any decision on rates of interest and on costs until the decision of the CA has been given on the forthcoming appeals.

5. We invite parties to address us on the issue as to whether we should proceed to hear the argument on the question of interest and costs at the start of the Hearing. Upon hearing from the parties, this Tribunal decided that it would be inappropriate to deal with the question of interest and costs given the impending CA hearing and made an order that the question of interest and costs be adjourned sine die with liberty to restore after the CA’s decision of the appeal is known. We have indicated reasons for our decision will be handed down in due course. This we now do.

Applicant’sContention

6. Mr Chang SC for the applicant submitted that the decision on interest and costs should be one based on the findings made by this Tribunal. One cannot assume that there will not be further appeal after the CA decision and one would wonder till when the question of interest and costs should be dealt with. By not dealing with the argument at this Hearing, it is wrong in principle and in effect, a de facto stay of execution of the order. Furthermore, the CA may touch upon the question of costs in dealing with the appeal and with a decision from this Tribunal on costs, the CA will know what order it can make. If the question of interest and costs are only to be dealt with after any likely appeal to the Court of Final Appeal (“CFA”), there will be another round of appeal on the question of costs and interest. In any event, no authority had been cited by the respondent in support of its contention.

Respondent’sContention

7. Mr Barnes QC submitted that this court has a discretion as to when to hear the question of interest and costs. The appeal before the CA involved 3 main issues, ie whether there should be any compensation, if yes how much should it be and the legal argument on the interpretation of the documents involved in this case. The possible result of the appeal can be the CA is with either party and overturned the Tribunal’s decision or with the Tribunal and uphold the decision. The question of interest and costs is dependent on the result of the appeal in the sense that if the CA found no compensation is payable, no interest is payable and the respondent should have costs of the proceedings and if the amount of compensation is found by the CA to be more than the Order, the rate of interest and costs will be affected. Given the fact that the appeal hearing is just 4 weeks from now, it is inappropriate and not in the interest of the parties or public interest for the question of costs and interest to be dealt with at this Hearing. Another month’s delay of the matter is acceptable and the applicant’s right to interest will not be lessened if the Hearing is adjourned. And it would be a procedural tragedy, if the decision of the Tribunal is overturned on appeal, for the whole matter on question of interest and costs to be dealt with again.

Discussion

8. We agree with the respondent’s submissions.

9. As can be seen from the written submissions filed by the parties for the Hearing, the question on interest and costs did turn on the reasonableness of the parties’ stance taken at trial and the correctness of the Tribunal’s findings on the expert evidence. These are also the subject matter of the appeal hearing. If the question of interest and costs are to be dealt with at the Hearing based on the findings of this Tribunal which turns out to be overturned by the CA on appeal, whatever ruling made at this Hearing will likely be subject to appeal and be overturned as well since the decision is made on a wrong premise. All the time and effort spent on the question of interest and costs at this Hearing will turn out to be a waste.

10. As for the argument of a de facto stay of execution raised by the applicant, we do not accept that by not dealing with the question of interest and costs at this Hearing, the applicant had been deprived of the fruits of his litigation or locking up funds to which prima facie he is entitled since the liability on interest and costs had not been finalised. Given our findings above and the impending hearing of the appeal in 4 weeks’ time, even if it may amount to a de facto stay of further proceedings in respect of interest and costs, this is more than justified. In any event, we cannot see how the applicant will be prejudiced or will suffer any loss if there is such a stay of execution.

11. Mr Chang had also suggested that the CA may deal with the matter of costs as well at the appeal and will know what order it can make if this Tribunal deals with costs at this Hearing. Since the grounds of appeal to be dealt with by the CA did not touch upon the question of costs, we fail to see why the CA will deal with the question of costs of this case whilst the costs of the appeal had nothing to do with the question of costs before us. We found no urgency for this Tribunal to deal with the question of interest or costs before the appeal hearing.

12. As for the concern of having another round of appeal against the question of interest and costs, this is inevitable if the parties so wish. We fail to see how can this be avoided if the question of interest and costs is to be dealt with at this Hearing given the fact that such a question is not within the ambit of the appeal to be heard next month. And as stated above, if the question of interest and costs is to be dealt with at this Hearing but the findings of this Tribunal is overturned on appeal, an appeal against our decision on question of interest and costs is also inevitable.

13. We must emphasise that the decision to adjourn the question of interest and costs till after the CA has delivered its decision on the appeal is based on the special circumstances that the appeal is to be heard in 4 weeks’ time. This does not mean that should there be further appeal after the CA to the CFA, it will necessarily mean that the question of interest and costs must be adjourned till final decision. The situation must be considered again in the context of the progress of the case then.

Deputy Judge KOT	Mr K K CHIU
Presiding Officer	Temporary Member
Lands Tribunal	Lands Tribunal

Mr Denis Chang SC, Mr Johnny Ma and Mr Jeremy Chan, instructed by Wilkinson & Grist, for the applicant

Mr Michael Barnes QC and Mr Valentine Yim, instructed by the Department of Justice, for the respondent

LDMR 23/1999

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 23 OF 1999

_________________

BETWEEN
	Penny’s Bay Investment Company Limited	Applicant
	and
	Director of Lands	Respondent

_________________

LDMR 1/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 1 OF 2005

_________________

BETWEEN
	Penny’s Bay Investment Company Limited	Applicant
	and
	Director of Lands	Respondent

__________________

Before:

Deputy Judge KOT, Presiding Officer, Lands Tribunaland Mr K K CHIU, Temporary Member of the Lands Tribunal

Date of Hearing:	19 December 2014
Date of Decision:	16 January 2015

_________________

D E C I S I O N

_________________

Background

1. This is the cross application for leave to appeal by the parties in this case against the judgment handed down by this Tribunal on 15 October 2014 (“Main Judgment”). We shall adopt the same abbreviations used in the Main Judgment.

2. In the Main Judgment, we have found that Lot 22 can be used for shipbuilding and mid-stream operation before the extinguishment of its marine rights (“Before Value”). The Before Value is enhanced by the prospect of the Container Terminal Scheme going ahead. It is also our finding that after the marine rights being extinguished with more certainty that the Container Terminal Scheme would go ahead, Lot 22 can be used for industrial purpose, which is the highest and best use when compared to the mid-stream use (“After Value”).

3. It is our conclusion that since the Before Value is in excess of the After Value, the applicant is entitled to receive compensation for the extinguishment of its marine rights in the sum of $10,952,500.

Leave to Appeal

4. 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.”

5. 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.”

6. Reasonable prospect of success involves the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful” without having to be “probable” (SMSE v KL [2009] 4 HKLRD 125 at §17). And if a finding of facts “is perverse or irrational; or there was no evidence to support it, or it was made by reference to irrelevant factors or without regard to relevant factors”, the decision may be quashed (Edwards v Bairstow [1956] AC 14).

7. Bearing in mind these legal principles, we shall deal with each ground of appeal raised by the parties in seriatim.

Applicant’s Application

Ground 1

8. This Tribunal erred in adopting inconsistent approach in reflecting the uncertainty as to whether the Container Terminal Scheme might proceed in the Before and After Value. Whilst the Tribunal accepted that there is a risk factor in the Before Value to reflect the uncertainty inherent in the factual expectation as to whether the Container Terminal Scheme might proceed at all, it had failed to do the same in the After Value when the Tribunal also acknowledged that there was still remained a degree of uncertainty for the scheme not proceeding at all.

9. The Tribunal erred in law in holding that artificial assumption about marine rights had any impact, or even significant impact upon the factual expectation as to whether the Container Terminal Scheme might proceed at all.

10. It is beyond argument that this Tribunal had not applied the same formula to reflect the uncertainty inherent in the factual expectation as to whether the Container Terminal Scheme would proceed in the Before and After Value. This Tribunal has given 50% discount to the hope value in the Before Value to reflect the uncertainty whilst there is none awarded in the After Value. This is because as one can see from Section F.(7) and H.(4) to H.(6) of the Main Judgment, it is the finding of this Tribunal that since the marine access had already extinguished, the only uncertainty in the After Value is the delay involved, hence there is no hope value to be reflected in the After Value and the formula adopted in the Before Value is not applicable.

11. Having said so, we do agree that Ground 1 raised by the applicant did involve a legal issue as to whether the artificial legal assumption about marine rights had any impact upon the factual expectation which cannot be said to be without any reasonable prospect of success. Leave to appeal should be granted under this ground.

Ground 2

12. The Tribunal’s findings that the Container Terminal Scheme and its associated roadworks were expected to proceed is perverse. The Tribunal failed to take into account the industry view back in 1995 which is not in dispute but instead based on the pure speculation that all the factors relied upon by the applicant should have been considered by the Government before the proposal was first published in 1994 and that the Government and the Governor in Council should have already approved in principle to proceed with the Container Terminal Scheme.

13. The industry view had been considered by this Tribunal in §112-118 of the Main Judgment and the findings at §114 are not speculation but are reasonable inferences to be drawn from the fact that the proposal was being published and authorized. We do not agree that such a finding of fact is in any way perverse and amounts to an error in law.

14. We found the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 3 and 4

15. The Tribunal failed to give full and proper recognition to the intent and effect of the Before-assumption about marine rights in the Before Value and adopted the value of Industrial Development which wholly dependent upon the existence of road access, ie a Before Value for the Godown/Industrial Area based on a new use without marine access, contrary to its own findings in §26 of the Main Judgment.

16. The Tribunal has not considered or discussed at all or in any details the applicant’s case on its Scenario 3 which assessed the Godown/Industrial Area with marine access and reflect the enhancement value arising from the anticipated road access brought by the expectation of road access without detracting from the Before-assumption about marine rights.

17. The Tribunal has already considered the new use of Lot 22 with marine access (i.e. mid-stream use value) but the Tribunal has also considered the expectation which the prospective purchaser would have in mind to reflect the enhancement value if the OZP and the Container Terminal Scheme were to proceed.

18. In the formula P=[(H-L)xR]+L adopted at §408 of the Main Judgment, L is the value of the subject property for mid-stream use with marine access whilst the value of the subject property with the expectation of the Container Terminal Scheme going ahead is H. The difference between L and H reflects the enhancement value resulted from the anticipated road access brought by the Container Terminal Scheme.

19. Having said so, we do agree that Ground 3-4 raised by the applicant did involve a legal issue as to the interpretation of the CFA Judgment in assessing the enhancement value which cannot be said to be without any reasonable prospect of success. Leave to appeal should be granted under this ground.

Ground 5

20. The Tribunal erred in its adjustment made to the NKML Comparables in relation to the Lease Term Adjustment by first performing a time adjustment and then applying the 1995 Yield. This has in effect applied statistical data which were indices for capital values to the leases.

21. Yield reflects the investment return in the market. A 1993 Yield does not reflect the situation in 1995 so a time adjustment must be performed before applying the 1995 Yield. We found the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 6

22. The Tribunal failed to consider the rental value suggested by the applicant’s industry expert Kong.

23. It is not a must that this Tribunal has to accept the rental value suggested by Kong when such evidence is not being challenged by the respondent. This Tribunal has adopted the unit rate derived from the STT Comparables which are transaction prices that the Tribunal found to be more reliable.

24. We found the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 7

25. The Tribunal erred in making a -35% adjustment on account of Height Restriction when the evidence showed that the operation contemplated on Lot 22 would be on the basis of ‘3 tiers’ and the Tribunal wrongly assumed or speculated that having a higher height restriction would be of substantial benefit.

26. This attacks our findings at §243-245 of the Main Judgment. As found at §244, AW also admitted that 8 layers of containers are possible for the storage of empty containers. With the height restriction, Lot 22 must be disadvantaged in the storage of, at least, empty containers. With a higher height restrictions allowed, it allows more flexibility for the operators and can be considered a benefit.

27. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 8

28. The Tribunal erred in making a -20% adjustment on account of Quay Length based on the wrong assumption or speculation that having a more than optimal quay length would be of substantial benefit. The fact that the quay length can be split into 3 should not be a disadvantage which warranted a downward adjustment.

29. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 9

30. The Tribunal erred in making a -41% adjustment on account of Location and an additional -15% adjustment on account of Remoteness which is wrong in principle and against the evidence.

31. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 10 and 11

32. The Tribunal erred in finding that the KCTL Comparables are appropriate comparables ignoring all matters and contentions raised by the applicant. And the Tribunal proceeded on the erroneous basis that the only difference between Lot 22 and the KCTL Comparables was location, lack of road access and time. The Tribunal also speculated that the KCTL Comparables were conducted on the basis that the bidder would consider that marine rights would continue undisturbed for the entire 50 year lease.

33. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 12

34. The Tribunal erred in rejecting the evidence of Kong on a false premise and speculated there were hidden reasons rendering Lot 22 unattractive and wrongly assumed that the owners of Lot 22 were keen to lease out the lot.

35. As stated in §331 of the Main Judgment, this Tribunal came to the conclusion that there were hidden reason because “the owner was willing to accept a rental substantially below the rental of $8/sq ft which Kong believed to be the market rental”. This is a reasonable inference to be drawn from the evidence. And the fact that there were the China Merchants’ offer to lease the Lot and upon the falling through of it, another tenancy agreement with the CLP, this Tribunal is entitled to come to the conclusion that the owners were keen to lease out the Lot.

36. We found the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 13

37. The Tribunal erred in not valuing the Non-Shipbuilding Area at a rate at least no less than the properly adjusted rate for the Shipbuilding Area since the Non-Shipbuilding Area is found to be capable for use for ship repairing purpose.

38. By the Non-Shipbuilding Area, this is termed as the Industrial/Godown Area of Lot 22 in the Main Judgment. It is never the parties’ case that the Industrial/Godown Area can be used for ship-repairing purpose and should be valued as such. The applicant and the respondent have contended that the optimum use of the Industrial/Godown Area should be for mid-stream and industrial developments respectively. In any event, it is the finding of this Tribunal that the optimal use of the Industrial/Godown Area is mid-stream use.

39. Furthermore, it is our findings at §176 of the Main Judgment that most of the comparables were less than 64,583.4 sq ft and it is unlikely and unreasonable that the entire remaining lot of over 1,725,000 sq ft at Lot 22 will be used for ship repairing purpose. Taking into account the marketability and the unreasonably large in area for ship repairing use, it is not reasonable to apply the rate for the Shipbuilding Area on the remaining portion of Lot 22.

40. We found the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 14

41. The Tribunal erred in failing to take into account the set up costs for covered or warehoused storage based on the wrong assumption that there was no evidence adduced.

42. It is not the finding of this Tribunal that the set up costs need not be taken into account because there was no evidence in this regard. Instead it is the finding of this Tribunal at §228 of the Main Judgment that the mid-stream use is for open storage so no covered or warehouse storage is involved, hence no set up costs is required to be considered.

43. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Respondent’s Application

Ground 1

44. This Tribunal erred in failing to make allowance for a period of demolition of unauthorized structures on Lot 22 based on the finding that such demolition could take place whilst construction work commenced on the unbuilt areas of Lot 22. However, this is inconsistent with the findings of the Tribunal that the construction of industrial structure on the unbuilt area was not expected to commence for some years after the valuation date. Under such circumstances, it does not make sense to say that there should be no period allowed for the demolition.

45. Since it is the finding by this Tribunal that there should be a deferment of 6 years in the construction work to commence, no additional period of demolition is required.

46. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 2

47. The Tribunal erred in adopting a wrong figure in the assessment of demolition costs. Whilst the Tribunal accepted the estimate of demolition costs of $11,091,798 suggested by Mok (the respondent’s expert), the Tribunal had adopted a figure of $8,049,200 without any apparent addition for professional fees or development profit.

48. The Tribunal admitted that we made a mistake for not accounting for professional fees of 6% and development profit of 30% in §345 and leave to appeal should be granted.

49. If professional fee and development profit is taken into account, the value of Lot 22 for mid-stream use will be as follow:

(a) Shipyard Value
285,000 sq ft @751.6/sq ft $214,206,000
(b) Mid-stream Use
1,725,000 sq ft @200/sq ft $345,000,000
$559,206,000
Less Demolition Costs (excluding canteen as only illegal structures would be demolished) $11,091,798

$8,049,200

Fee @6% x1.06
Development Profit @30% x1.3
$548,114,202
Say $548,114,000

50. For the benefit of the appeal hearing, the following figures in the respective paragraphs of the Main Judgment stated below would also be affected:

§408 So, applying the assessed figures to the formula:
P = [(H-L) x R] + L
P = [($841,828,000 - $548,114,000) x 0.5] + $548,114,000
P = $293,714,000 x 0.5 + $548,114,000
P = $694,971,000
The Before Value of Lot 22 is $694,971,000.
§480 The amount of compensation is the amount of Before Valuation in excess of After Valuation.
Before Valuation $694,971,000
After Valuation $685,540,000
Amount of Compensation $9,431,000

Ground 3

51. The Tribunal erred in making no downward adjustment for the limited use within the shipyard area based on the incorrect factual premise that ship repairing use as well as godown use can occur at the same time at the remaining portion of Lot 22.

52. Ship repairing and godown uses are permitted uses under the lease condition. Taking into account the huge size of the remaining portion of Lot 22, the Tribunal cannot exclude the possibility that both uses can practically occur at the same time. As the optimum use of the site was found to be mid-stream uses for open storage , it is possible that the occupier can use part of the remaining portion which is adjacent to shipbuilding area with marine frontage for ship repairing, if necessary. With this flexibility for using portion of the remaining lot for ship repairing use, whenever necessary, we do not think there is a need to make any adjustment for the limited use within the Shipyard Area.

53. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 4

54. The Tribunal erred in finding that the stacking of containers in the open air as part of their transit was a godown use in line with Special Condition 3(a).

55. We accept this ground involved the interpretation of the terms of the Special Condition which is a point of law and leave to appeal should be given for the same to be considered by the Court of Appeal.

Ground 5

56. The Tribunal erred in adopting a unit rate of $1,200/sq ft for open storage use whilst it is found by AW (applicant’s expert) and accepted by the Tribunal that the godown use is for open storage use and the unit rate for such use should be $1,000 only.

57. As we have found in §227-229 of the Main Judgment, we should consider the optimum use and this explains why we pick the higher figure of $1,200/sq ft in the assessment.

58. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 6

59. The Tribunal erred in failing to make a downward adjustment of 20% on the length of quay for the KCTL Comparables which, like Lot 22, had quay lengths which were satisfactory by reference to the optimum standard.

60. The Tribunal agreed that adjustment should be made on the length of quay for the KCTL comparables to reflect the optimum standard. As the valuers of both parties have not touched on the quay length of KCTL comparables, the Tribunal has not clearly stated in the judgment that a downward adjustment should be made on KCTL479 and an upward adjustment should be made on KCTL481 to reflect the optimum standard of quay length. Actually, on the Layout Plan (page 2145-2147 of Bundle E1), the quay length of KCTL479 is better than that of Lot 22, so a downward adjustment is needed. However, the shape and quay length of KCTL481 is poorer than that of Lot 22, an upward adjustment is needed.

61. To be clear, the adjustment table on §305 of the MainJudgment should be as follows:

Lot No Adjusted Unit Rate Adjustment Revised unit rate
KCTL481 159 +30% 207
KCTL479 240 -20% 192

62. The average unit rate was about $199.5/sq ft.

63. The Tribunal agreed that the judgment on this section is unclear, however this does not affect the resultant figure of unit rate adopted for assessment of the KCTL Comparables.

64. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 7

65. The Tribunal erred in failing to make equivalent deferment of 2 years to the KCTL Comparables for the time needed to prepare the ground at Lot 22 for godown use as it had done for the STT Comparables.

66. This Tribunal agreed that there should be no deferment for the STT Comparables as well as for the KCTL Comparables. The Tribunal has clearly stated in §229 of the Main Judgment that the STT comparables are for open storage purpose and AW has also not reflected any superstructure to be erected. As no superstructure is erected and no deferment is necessary for STTs, the Tribunal, as stated in §229, took the highest value as the optimum development (i.e. $1,200/sq ft).

67. Since the KCTL Comparables are being found to be the appropriate comparables, the fact that no deferment made cannot be considered an error and would not affect the end figure found by this Tribunal.

68. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 8

69. The Tribunal erred in finding that there will be a compensation for the resumption of land for the construction of a road to link Penny’s Bay area and the proposed North Lantau highway. Such a finding is inconsistent with the declaration made by the CFA that in the Before Value, it is based on the assumption that Lot 22 enjoyed access to the sea as it had done up to the valuation date. With the marine rights remained, no container port would or could have been built and no road would have been constructed.

70. We agree that this is plainly a point of law depending on the construction and application of the CFA Judgment and we cannot say that there is no reasonable prospect of success in the appeal. So leave should be granted in this regard.

Ground 9

71. The Tribunal erred in adopting the higher value between a combined shipyard and godown value on the assumption that the Container Terminal Scheme did go ahead and on the assumption that it did not go ahead. Given the uncertainty between the 2 different scenarios, the finding that the purchaser would pitch his bid on the higher value is erroneous without basis.

72. The term, Market Value, as defined by the International Valuation Standard and followed by the Hong Kong Institute of Surveyors is “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion.” Whether the prospective purchaser would pitch his bid on the higher value or on the lower value depends on whether it is a buyer market or a seller market. As at 1995, the market was going up and the vendor had a larger bargaining power and it is unlikely that the owner would accept a lower value between 2 different scenarios. That is why the Tribunal has decided to take the higher value between a combined shipyard and godown value.

73. We found this is just a matter of opinion and the applicant had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is therefore refused.

Ground 10

74. The Tribunal erred in failing to reflect the existence of the sub-tenancy of Cheoy Lee Shipyards Limited in the valuation of the mid-stream use on the assumption that the Container Terminal Scheme would go ahead whilst such factor had been taken into account in the assessment of the mid-stream use value on the assumption that the Container Terminal Scheme would not go ahead.

75. The Tribunal stated clearly at §343 of the Main Judgment that assuming the Container Terminal Scheme goes ahead, the area would be developed in accordance with the OZP. Therefore, in our assessment, we have taken account of the area to be resumed for road purpose, the area zoned for GI/C etc. The most important thing is the marine frontage should be resumed for Container Terminal Scheme and the sub-tenancy should be terminated and a 3-month notice is required.

76. However, if the Container Terminal Scheme does not go ahead as stated in §345 of the Main Judgment, the sub-tenant can continue to operate its shipbuilding use on the shipyard area and the remaining portion will be used for mid-stream purpose. Therefore, no deferment is required. This explains why there had been a different treatment as suggested by the respondent.

77. We found the respondent had failed to establish any reasonable prospect of success or there is any reason in the interests of justice that this ground should be heard. Leave to appeal under this ground is refused.

Ground 11

78. The Respondent contended that for the reasons submitted above, the value of Lot 22 for mid-stream use found at §345 of the Main Judgment is faulted.

79. This is just a catch all ground and the reasons behind this had already been dealt with above under respective grounds.

Ground 12

80. The Tribunal erred in its finding of the ultimate Before Value based on a radical misconception of law and was fundamentally contrary to the declaration stated by the CFA, namely the Before Value found is based primarily on the prospect of an industrial development of the non-shipyard area of Lot 22 with a 50% discount for the uncertainty.

81. The reason for our findings is based on the requirement stated in the CFA Judgment that prospect of new uses of the land would have entered into the valuation both with and without access to the sea.

82. Having said so, we agree that this point involved a point of law which cannot be said that there is no reasonable prospect of success on appeal, so leave should be granted.

Ground 13

83. The Tribunal erred in finding that in the After Value, the reclamation work and the Container Terminal Scheme or the construction of the linked road had not even commenced. This is inconsistent with the CFA Judgment which declared that the reclamation must be taken to have been completed by the valuation date. The Tribunal also erred in speculating as to the timing and the uncertainty of the Container Terminal Scheme which is specifically disallowed in the CFA Judgment (at §41).

84. We agree that this involved a point of law concerning the interpretation of the CFA Judgment and one which may arguably have a reasonable prospect of success, hence leave should be granted.

Conclusion

85. According to Section 11AA(5) of the LTO, “leave to appeal may be granted in respect of a particular issue arising out of the judgment, order or decision”. Hence, we made the following orders :

(a) Leave to appeal is granted to the applicant on Ground 1, 3 and 4 stated in the Grounds of Appeal whilst leave to appeal on all other grounds are dismissed.
(b) Leave to appeal is granted to the respondent on Ground 2, 4, 8, 12 and 13 stated in the Grounds of Appeal whilst leave to appeal on all other grounds are dismissed.
(c) Costs of this application for leave to appeal be costs in the cause of the appeal.

Deputy Judge KOT	Mr K K CHIU
Presiding Officer	Temporary Member
Lands Tribunal	Lands Tribunal

Mr Denis Chang SC, Mr Johnny Ma and Mr Jeremy Chan, instructed by Wilkinson & Grist, for the applicant

Mr Valentine Yim, instructed by the Department of Justice, for the respondent

LDMR 23/1999

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION UNDER FORESHORE

AND SEA-BED (RECLAMATIONS) ORDINANCE

APPLICATION NO. LDMR 23 OF 1999

______________________

BETWEEN

	PENNY’S BAY INVESTMENT COMPANY LIMITED	Applicant
	and
	DIRECTOR OF LANDS	Respondent

______________________

AND

LDMR 1/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION UNDER FORESHORE

AND SEA-BED (RECLAMATIONS) ORDINANCE

APPLICATION NO. LDMR 1 OF 2005

______________________

BETWEEN

	PENNY’S BAY INVESTMENT COMPANY LIMITED	Applicant
	and
	DIRECTOR OF LANDS	Respondent

______________________

(Heard together)

Before : Hon Lam J, the President of the Lands Tribunal in Chambers

Date of Hearing : 22 October 2007

Date of Decision on Costs : 7 November 2007

__________________________

DECISION ON COSTS

__________________________

1. On 25 May 2007, I handed down my determination on preliminary issues. Since then, parties made submissions on future conduct of the proceedings and the question of costs at the hearings on 2 August and 22 October 2007. Directions were given for the filing of amended pleadings. The outstanding question is costs.

2. There are three sets of costs:

(a) Costs of the hearings on the preliminary issues, including the application for such issues to be determined as preliminary issues;
(b) Costs of the amended pleadings and other directions for the future conduct of the proceedings;
(c) Costs of the arguments on the question of costs.

Section 12(3) of the Foreshores and Sea-bed (Reclamations) Ordinance

3. The arguments on costs brought up an important point on principle in respect of costs in compensation cases. The issue is whether costs of the proceedings in the Tribunal fall within the scope of Section 12(3) of the Foreshores and Sea-bed (Reclamations) Ordinance. That section provides:

“ Where any costs or remuneration are reasonably incurred or paid by a claimant in employing persons to act in a professional capacity in connection with the claim under subsection (1), such claim may include a claim for such costs or remuneration.”

4. Similar provision can be found in Section 8(4) of the Lands Resumption Ordinance. However, Section 10(2)(e)(ii) of the Lands Resumption Ordinance expressly provides that the Tribunal shall determine the compensation on the basis of, inter alias, the amount of any costs or remuneration referred to in those above-mentioned section. This has led the Tribunal in some previous cases to the conclusion that compensation includes such costs as a matter of law and the Tribunal proceeded to assess the costs and remuneration by reference to the test of reasonableness, see Li Po Chun Estates Ltd v Director of Lands CLR No.5 of 1996, 28 August 1997; Chan Kwong Man v The Secretary for Transport LDMR 36 of 2000, 15 August 2003; Chan Lok Tsun Tso v The Secretary for the Environment, Transport and Works LDMR 2 of 2004, 27 August 2004.

5. The approach for assessing compensation under the Lands Resumption Ordinance is applicable to compensation cases in other context: see Section 27 and Item 1 of Part II of the schedule to the Roads (Works, Use and Compensation) Ordinance, Section 32 and Item 1 of Part II of the schedule to the Railways Ordinance and Section 18 and Item 1 of Part I of the First Schedule to the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance. However, in those statutes, there are express provisions suggesting that the costs of the proceedings in the Tribunal are to be dealt with by the way of an order on costs rather than an item for compensation. Thus, Section 30(3) of the Roads (Works, Use and Compensation) Ordinance provides that unless there is special reason making it proper not to do so, the Tribunal shall order the claimant to bear his own costs and to pay the costs of the Secretary in so far as the costs are incurred after the making of an offer by the Secretary if the offer was not accepted and exceeds the amount of compensation later assessed by the Tribunal. It follows that a claimant cannot assert that he is immune from costs liability because the combined effect of Sections 8(4) and 10(2)(e)(ii) of the Lands Resumption Ordinance is to give him costs of the proceedings as an item of compensation. Similar provisions can be found at Section 35(3) of the Railways Ordinance and Section 23(3) of the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance.

6. Further, in Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111, though there was no reference to Sections 8(4) and 10(2)(e)(ii), the Privy Council plainly proceeded on the basis that costs of the proceedings in the Tribunal is subject to the general discretion of the Tribunal. The claimant in that case was ordered to pay the costs of the government incurred after a Calderbank offer on common fund basis.

7. There is no provision similar to Section 10(2)(e)(ii) under the Foreshores and Sea-bed (Reclamations) Ordinance. Thus, a decision on this issue may or may not have impact in other cases as well. The Claimant contends that legal costs of the proceedings in the Tribunal in compensation cases are covered by Section 12(3). The Respondent submits otherwise.

8. Though the phrase “costs or remuneration … incurred or paid by a claimant in employing persons to act in a professional capacity in connection with the claim” is wide enough to encompass legal costs incurred in pursuit of proceedings in the Tribunal, I am of the view that the legislature did not intend to curtail the general discretion of the Tribunal over costs for proceedings under the Foreshores and Sea-bed (Reclamations) Ordinance by virtue of Section 12(3).

9. Section 12(3) should not be construed on its own. It refers to the costs and remuneration in connection with a claim under Section 12(1). That is a claim to be delivered to the Director of Lands. It provides that the claim may include such costs and remuneration.

10. The claim will then be considered by the Director who can admit or reject the whole claim or admit a specified part and reject the remainder, see Section 13(1). If the claim delivered to the Director includes a claim for reasonable costs and remuneration in connection with the claim, the Director can consider and admit that part of the claim as well. However, a claimant must comply with Section 12(1) before he can expect the Director to give proper consideration to this part of his claim. Hence, a claimant must state the sum of money which he is willing to accept and give such particulars to substantiate the claim for costs and remuneration instead of a general unspecified claim for costs and remuneration.

11. It follows that the cost and remuneration that could be included in the claim must be the cost and remuneration incurred prior to the consideration of the claim to the Director, not the costs incurred thereafter.

12. It is only when the Director rejects the claim in whole or in part or when the parties do not agree as to the amount of compensation, the matter can be referred to the Lands Tribunal for determination. Section 13(4)(b) provides that the Lands Tribunal shall determine “the amount of compensation payable by the Government to the claimant in respect of any interest, right or easement of the claimant in or over any foreshore or sea-bed injuriously affected by the reclamation in full and final settlement of claim”. That sub-section does not provide for the costs of the proceedings in the Tribunal.

13. Instead, costs of the proceedings in the Tribunal are governed by Section 12 of the Lands Tribunal Ordinance. That section empowers the Tribunal to award costs to and against any party to any proceedings. Further, Section 12(2) provides that Order 62 of the Rules of the High Court shall apply to the award, taxation and recovery of costs in the Tribunal. The procedure for taxation of costs under Order 62 is quite different from the procedure for assessment of compensation by the Tribunal. Costs is taxed by the Registrar whilst compensation is assessed by a presiding officer with a member. The procedural steps that have to be taken prior to the hearing are also different.

14. Section 13 of the Lands Tribunal Ordinance is also relevant. It is quite plain from this section that costs of the proceedings (dealt with under sub-section (d) of the section) are treated separately from the compensation determined by the Tribunal (under sub-section (a) of that section).

15. Though Section 12(1) of the Lands Tribunal Ordinance explicitly provides that it is subject to the provisions of the ordinance giving the Tribunal jurisdiction in any matter, I do not read Section 12(3) of the Foreshores and Sea-bed (Reclamations) Ordinance as dictating how the Tribunal should exercise its general discretion as to costs of the proceedings. As analysed above, that section only gives the power to the Director to award reasonable costs and remuneration when a claim is delivered to him for his consideration.

16. In my view, on proper construction of Section 12(3), the costs and remuneration referred therein should be confined to cost and remuneration incurred prior to the delivery of a claim to the Direction and should not be extended to costs incurred in the proceedings before the Tribunal.

17. In any event, as discussed below, Section 12(3) is broadly in line with the general approach of the Tribunal as to costs in compensation cases.

The approach of the Tribunal on costs in compensation cases

18. There is not much disagreement between the parties as regards the approach under the common law. Mr Yim fairly accepted that costs in respect of compensation cases should not be dealt with in the same manner as ordinary hostile litigation. The special context in which such claim arises has to be borne in mind.

19. In Emslie & Simpson Ltd v Aberdeen District Council (No. 2) [1995] RVR 159, Lord Hope made the following observations regarding costs in compulsory acquisition cases:

“ It seems to me that the underlying principle in these cases is that the acquiring authority is liable to pay compensation to the owner or occupier of the lands taken. The expenses of determining the amount of disputed compensation may be seen to be part of the reasonably and necessary expense which is attributable to the taking of the lands compulsorily by the acquiring authority. The principle which applied to litigation … is that the costs of litigation should fall on him who caused it. The cost of determining the amount of the disputed compensation would seem, according to this principle, to fall on the acquiring authority without those resort to the use of compulsory powers there would have been no need for the owner or occupier to be compensated. That seems to me to be the proper starting point for an examination of the question of expenses in these cases.”

20. In the same case, Lord Morison said at para. 25:

“ In most cases … it is perfectly reasonable that … a claimant should put forward his claim on the maximum basis which he can reasonably support and should be entitled to the expenses of doing so if he is successful in the general assertion of his right.”

21. Along the same line, Potter LJ said the following in Purfleet Farms Ltd v Secretary of State for Transport [2003] 1 P& CR 20 at para. 29:

“ …the proper approach of the Tribunal for the costs of a successful claimant (i.e. a claimant who is awarded more than the amount of an unconditional offer by the respondent) should be that he is entitled to his costs incurred in the proceedings in the absence of some ‘special reason’ to the contrary. Whether such special reason exists in any given case is a matter for the judgment of the Lands Tribunal. Plainly it may exist where wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant (e.g. abandoned issues, unnecessary adjournments, or failure to comply with directions of the Tribunal). However, so far as the nature and substance of the case advanced by the claimant is concerned, special reasons should only be regarded as established where the Tribunal considers that an item of costs incurred or an issue raised was such that it could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation. This would apply not only to a claim advanced without any statutory basis but to other examples of manifestly unreasonable conduct which may give rise to unnecessary expense in the course of the proceedings. It means, in my view, that, following the hearing of a compensation reference in the Lands Tribunal in which the claimant has been successful, a special reason for departing from the usual order for costs should only be found to exist in circumstances where the Tribunal can readily identify a situation in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation.”

22. It is also of interest to note how Potter LJ dealt with exaggeration of claim in the overall costs position at Para. 36:

“ …in considering the question of whether or not special reason exists to depart from the usual order, it may usefully “have regard” to … whether or not the claimant has exaggerated his claim. In considering that last question, however, exaggeration alone is not enough in the event of a large disparity between the sum claimed and the sum awarded. The matters to which the Tribunal should have regard are (a) the reasons for that disparity, and (b) their effect upon the conduct of the claim. As to (a), if the reasons are defensible, in the sense that there was a legitimate, albeit unsuccessful, argument put forward in support of the figure concerned, there can be no good reason to regard the claim as exaggerated in the pejorative sense necessary to justify a sanction in costs. As to (b), if, in any event, the effect on the proceedings in terms of the time spent and the costs incurred in disposing of the issue or argument concerned is relatively insignificant, then again an adverse order is unlikely to be appropriate.”

23. His Lordship’s comments at paras. 38 and 37 on adverse costs order when an exaggerated claim is based on expert evidence are also pertinent. At para. 37, the general rule was explained: because valuation is an inexact science and where there is legitimate room for argument and difference of opinion, even if the Tribunal concluded that the comparable relied on is inapt, that should not ordinarily invite a penalty in costs. The exception was then set out at para. 38:

“ …disallowance of a proportion of the claimant’s costs will usually only be justified where the Tribunal is satisfied that (a) no competent valuer could reasonably have regarded the comparable as of real relevance or assistance in the valuation exercise; (b) as a result of its introduction and discussion, a significant amount of the Tribunal’s time has been wasted and the proceedings unduly prolonged; (c) no equivalent or near equivalent proportion of the proceedings has been spent dealing with issues unreasonably and unsuccessfully raised by the respondent; (d) the amount or proportion of the costs disallowed is proportionate to the time wasted.”

24. The principle of equivalence was identified as the underlying rationale of this approach, see Purfleet Farms paras. 22 and 42. Chadwick LJ put it concisely at para. 42:

“ …where there has been no offer or where the amount of the award exceeds the amount of the offer, then (again, prima facie) “the expenses of determining the amount of disputed compensation may be seen to be part of the reasonable and necessary expense which is attributable to the taking of the lands compulsorily by the acquiring authority” In such a case the refusal to allow the claimant some part of his costs of the reference must be justified by a finding that the costs to be disallowed have not been incurred as part of the reasonable and necessary expense of pursuing the reference. As Potter LJ has put it, the Tribunal must be able to identify circumstances ‘in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation’. Costs attributable to conduct that nature can form no part of “the losses fairly attributed to the taking of his land’ in respect of which the claimant is entitled to compensation.”

25. With respect, bearing in mind the applicability of the principle of equivalence in Hong Kong, I am of the view that the English approach on costs in compulsory acquisition cases is equally applicable in the present context.

Should there be an adverse costs order against Applicant for the determination of the preliminary issues?

26. Whilst I have determined the preliminary issues in favour of the Respondent and rejected the Applicant’s submissions on those issues, it does not follow automatically that the Applicant should be ordered to pay the costs of the hearings on the preliminary issues. In accordance with the approach set out above, it is necessary to consider whether the costs pertaining to the determination of the preliminary issues can be regarded as outside the scope of the reasonable and necessary expense of pursuing the compensation claim arising from the reclamation scheme.

27. At this stage, it is not known whether the Tribunal would award compensation to the Applicant. The Respondent’s primary position is that there should not be any further compensation. The Applicant disagreed.

28. The Applicant no doubt acted on the advice of its legal advisers in arguing for the notional contract approach and infringement of Article 105. Experienced leading counsel argued the case for the Applicant had advanced respectable arguments to support his contention. Though I come to different conclusions in my judgment, I do not regard the running of those arguments as unreasonable.

29. An analogy can be adopted with Potter LJ’s observations regarding expert evidence. Like valuation, the law is not an exact science and there is scope for reasonable disagreement. Given my view on the reasonableness of the arguments advanced on behalf of the Applicant on the preliminary issues, I do not think it is appropriate to penalize the Applicant on costs solely on account of my rejection of such arguments.

30. Mr Yim relied on the fact that the Respondent repeatedly explained to the Applicant as regards the correct approach for assessment of compensation for injurious affection. I do not think that renders the Applicant’s stance on the preliminary issues unreasonable. The legal arguments are complex and as I said, there was reasonable scope for disagreement. This is not a case where the Applicant’s contentions are plainly unmeritorious.

31. Counsel’s reliance on Roadchef Motorways Ltd v Secretary of State [2006] EW Lands ACQ/45/2005, 13 July 2006 is completely misplaced. The English Lands Tribunal decided in that case that the proper order for costs on preliminary issues in the special circumstances of that case should be no order as to costs. I do not need to go into the details of the special circumstances that were alluded to in paragraphs 18 to 19 of that judgment. Apparently there were changes of position on the part of the claimant in that case. The President found that in the light of the way in which the claim had been advanced and the disagreements between the parties have arisen, it was impossible to say that the Secretary of State was the cause of the costs of the preliminary issues being incurred. Suffice to say I am dealing with a completely different scenario and at this stage, I cannot say that the costs of the preliminary issues had been unreasonably incurred.

32. Thus, I am not prepared to make an adverse costs order regarding the costs of the preliminary issues against the Applicant at this stage.

Costs in the cause or costs reserved?

33. Parties have put forward two different proposed orders as to costs in the event I decline to make any adverse costs order against the Applicant. Mr Yim urged this Tribunal to order costs reserved. Counsel is concerned that an order of costs in the cause would somehow pre-empt the Tribunal from revisiting the costs of the preliminary issues separately from the costs of the proceedings as a whole.

34. Though Mr Chang had suggested costs in the cause, I understand that he was not seriously contesting that costs of the preliminary issued be reserved.

35. At this stage, I think it would be better to keep all options open and the Tribunal may, after all the dusts have been settled, wish to consider making a special order on the costs of the preliminary issues in the light of developments between now and the final disposal of the matter.

36. I will therefore order costs of the preliminary issues be reserved.

Costs of the amended pleadings and direction hearing

37. I think the usual rule as regards amendment of pleadings should apply and the Applicant should bear the costs of the amendment of the pleadings.

38. As regards the costs pertaining to directions on future conduct, I again see no reason to depart from the usual practice that the costs should be costs in the cause.

Costs on argument as to costs

39. The Respondent is unsuccessful in the application for an adverse costs order against the Applicant for the costs on preliminary issues. But I have reserved costs rather than ordering costs in the cause as advocated by Mr Chang.

40. Regarding the argument on costs, I will order the costs thereof be Applicant’s costs in the cause.

(M H Lam)
Judge of the Court of First Instance
High Court
the President of the Lands Tribunal

Mr Denis Chang, SC and Mr Johannes Chan, SC, instructed by Messrs Wilkinson & Grist, for the Applicant

Mr Valentine Yim, instructed by Department of Justice, for the Respondent

LDMR 23/1999

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION UNDER FORESHORE

AND SEA-BED (RECLAMATIONS) ORDINANCE

APPLICATION NO. LDMR 23 OF 1999

____________________

BETWEEN

	PENNY'S BAY INVESTMENT COMPANY LIMITED	Applicant
	and
	DIRECTOR OF LANDS	Respondent

____________________

AND

LDMR 1/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION UNDER FORESHORE

AND SEA-BED (RECLAMATIONS) ORDINANCE

APPLICATION NO. LDMR 1 OF 2005

____________________

BETWEEN

	PENNY'S BAY INVESTMENT COMPANY LIMITED	Applicant
	and
	DIRECTOR OF LANDS	Respondent

____________________

(Heard together)

Before : Hon Lam J, the President of the Lands Tribunal

Date of Hearing : 2 August 2007

Date of Ruling : 2 August 2007

______________________

RULING

______________________

1. As I have said - and I think all parties agree - that what directions I should give in light of the determination of the preliminary issues and the fact that there is a pending appeal to the Court of Appeal against my decision is a matter of case management. I bear in mind the general principle that the fact that there is an appeal does not mean there is a stay of proceedings. At today's hearing, I do not understand any party to be making an application for a stay of proceedings. At the same time, in the exercise of my power of case management, I must bear in mind that there is a pending appeal and I must also bear in mind the rationale for having matters decided by way of preliminary issues as set out in my ruling when I permit the matter be proceeded by way of preliminary issues.

2. It is a balancing exercise. On the one hand, I have to consider that costs should not be incurred unnecessarily and, in this regard, I bear in mind the submissions of Mr Yim and also the written submissions of Mr Yim together with his learned leader, that if we were to proceed with a full-blown hearing of the matter based on my determination of the preliminary issues, or go ahead with substantive preparations for that hearing, there is a risk that some costs might be wasted if the appeal is successful. That is one of the matters that I must bear in mind in the weighing exercise.

3. On the other hand, one must have regard to the expeditious disposal of cases. As a general rule, as I said, the fact that there is an appeal - even if it is an appeal against a determination of preliminary issues - does not mean that proceedings in the first instance court have to be stayed. It all depends on the facts of each particular case and I readily recognise the importance or the impact that the determination of the preliminary issues might have in terms of the preparation of the case in terms of evidence.

4. But as I said this morning, I can see no reason why in terms of the formulation of the case by way of pleadings, the matter cannot be proceeded with in the meantime. Provided we are confined to that, the costs that might be incurred or that might be wasted as a result of an appeal being allowed could not be too significant and that can be addressed by way of an appropriate order for costs eventually. That will certainly bring some progress in terms of the general preparation in these proceedings, irrespective of the result of the appeal.

5. Mr Chang SC urged this court to go further. In his draft directions, he asked for directions for filing of supplemental submission indicating not only amendments to pleadings but also to the nature of each parties case or alternative case and the nature of evidence or further evidence.

6. While I am quite confident that it is the right case-management decision to have amendment to the pleadings to be dealt with at this stage, I am not that certain in terms of the other matters. To start with, without sight of the proposed amendments and also without knowing whether leave for those amendments would be granted and how the respondent will be responding in terms of amendments to his own pleadings, I cannot say at this stage whether it is necessary to have the matters elaborated by way of a document called "The Nature of the Parties' Case". Still less can I contemplate what would be the shape or form of the evidence that will be necessary. To enable this court or this tribunal to exercise its case-management power properly, it is better to follow the conventional way of dealing with these matters step by step, that is, firstly, we should have the issues identified by way of pleadings first.

7. Another problem with Mr Chang's proposed directions is that counsel suggests the amendments be indicated by way of supplemental submission instead of putting forward a formal application for leave to amend. There might be some concern about prejudicing the right of appeal but, as I said, if the amendment is formulated clearly on a basis without prejudice to the right of appeal, I do not believe there would be problems. Even if the amendments are considered and even if leave to amend is granted, so long as it is clear in everybody's mind that it is without prejudice to the right of appeal, I do not think a formulation of the amendments in the pleadings would adversely affect the applicant's appeal. If necessary, after the appeal, pleading can be amended again in the light of the decision of the Court of Appeal.

8. I have some concern about whether a respondent should be required to respond to an indication of a proposed amendment without the amendments being put forward by way of an application for leave to appeal and without leave having been granted. If it is just being put forward by way of supplemental submissions, parties can always change their position with regard to these proposed documents. I do not think that is the correct way of proceeding with the matter.

9. What I will do is to give some directions about the applicant's filing an application for leave to amend at this stage. Then we can take it from there after the application has been taken out. If eventually amendments were granted, then we can consider whether the case should proceed further. After matters have been crystallised in the form of amended pleadings, the court will be in a better position to consider in the light of the amended pleadings what are the issues, what are the likely shapes and forms of evidence and, whether in the light of the fact that the appeal is going to be heard in September next year any other steps should be taken in terms of preparation of the case for hearing and whether the case should be set down for hearing before the appeal is disposed of. But these are decisions that this tribunal cannot properly entertain at this stage. Given the complexity of this case, I think we should proceed step by step.

(Discussion between the parties re documents already filed and future hearing dates)

(M H Lam)
Judge of the Court of First Instance
High Court
the President of the Lands Tribunal

Mr Denis Chang, SC, instructed by Messrs Wilkinson & Grist, for the Applicant

Mr Valentine Yim, instructed by the Department of Justice, for the Respondent

LDMR 23/1999

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application under Foreshore and Sea-bed (Reclamations) Ordinance

Application NO. LDMR 23 OF 1999

______________________

BETWEEN

	Penny’s Bay Investment Company Limited	Applicant
	and
	Director of Lands	Repsondent

______________________

Before : Hon Lam J, the President of the Lands Tribunal

Date of Hearing : 16 January 2006

Date of Decision : 8 February 2006

______________________

D E C I S I O N

______________________

1. By a summons of 26 October 2005, the Applicant asks for several points of law to be determined as preliminary issues. The application is opposed by the Respondent.

2. At the hearing on 16 January 2006, the Respondent sought an adjournment to enable London leading counsel to appear to resist the application. Having regard to the nature of the application and the assistance I already had from very full written submissions (which was signed by London leading counsel) filed on behalf of the Respondent, and the obvious desirability of dealing the application as soon as possible when this could be done without causing any injustice to any parties, I do not consider it necessary to adjourn the application.

3. Moving onto the merits of the application, even though the power of the Lands Tribunal to order preliminary point of law to be decided is derived from Rule 18 of the Lands Tribunal, I am of the view that some of the principles applicable in deciding whether there should be a split trial under Order 33 or trial of preliminary points of law under Order 14A of the Rules of the High Court are equally applicable.

4. The general rule is that all the issues should be decided at the same time. It is only in exceptional cases where it is just and convenient that the court will exercise its discretion to decide some preliminary issues in advance. There are good reasons for this general rule. When a determination of an issue could not finally dispose of the whole case, to permit such a course to be adopted will very often prolong the litigation process and add to the costs of the proceedings. This is because a party who fails in the first instance can appeal to the Court of Appeal and, in some cases, further appeal to the Court of Final Appeal. In the meantime, the trial of the remaining issues would either have to be stayed or be dealt with on a basis which might turn out to be erroneous in the event that the appeal on preliminary issue is successful. Moreover, in many instances, the appellate courts have deprecated attempts to short circuit a trial by resorting to determination of certain issues in advance. The problems associated with determination of points of law in vacuum often present great difficulties when the matter reaches the appellate level, see Commissioner of Rating and Valuation v Agrila [2001] 2 HKLRD 36; Tilling v Whiteman [1980] AC 1; Re Tai Ping Yeung Motors [2001] 2 HKC 611.

5. On the other hand, the very existence of Rule 18 (and Order 14A and Order 33) demonstrates that there are cases where it would be in the interest of just and fair disposal of a matter for preliminary points to be determined. It is not a prerequisite that the determination of the point in question would fully dispose of the action, see Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222. Yet it would not be appropriate to resort to this procedure when issues of facts were interwoven with the legal issues to be determined.

6. In the exercise of its discretion, it does not behove an opposing party (or indeed the judge) to consider whether the detriment or prejudice occasioned by a trial of preliminary issue outweigh the advantages achieved by adopting such a course. Rather it is incumbent on the party applying for such determination to demonstrate there are exceptional circumstances that justify a departure from the general rule: see Re Tai Ping Yeung Motors [2001] 2 HKC 611 at p.616B to C

7. Mr Chang SC contended that the present case is clearly an exceptional case as the determination of the preliminary issues formulated by the Applicant could save substantial costs and time if the issues were determined in favour of the Applicant. In particular, valuation issues and factual evidence regarding developments after 1995 would not be necessary. These developments include the betterment brought about by the container port proposal, the Disney project, the costs for decontamination, the ex gratia payment received by the Applicant upon surrender, the Withdrawal and Authorisation in 2000. Counsel submitted that the costs and time pertaining to the preparation of such evidence, which would be irrelevant if the issues were so determined, are likely to be colossal.

8. Counsel also suggested that in allowing the appeal in CACV 3 of 2004, the Court of Appeal had given an indication that this is indeed an exceptional case where, subject to proper identification of issues by way of pleadings, it would be appropriate to order trial of preliminary points.

9. I shall deal with the last point first. In allowing the appeal, Rogers VP expressly stated that the order made on the appeal should be without prejudice to the right of either party to renew an application under Rule 18 when pleadings are closed (see Paragraph 1 of the judgment of the Court of Appeal). Hence, there is no doubt that the Court of Appeal did not preclude either party from making a fresh application under Rule 18. However, I do not think the Court of Appeal went further to indicate that once issues were properly identified, preliminary issues should be ordered.

10. Mr Chang prayed in aid some remarks in Paragraphs 12 and 16 of the judgment to support his contention. With respect, I do not read those passages as an indication, whether tentative or otherwise, on the part of the Court of Appeal that it would be appropriate to order preliminary issues. In my judgment, the Vice President plainly left the question open for determination in the future after pleadings have been closed. Reading as a whole, the main concern of the Court of Appeal expressed in the judgment is the lack of clarity regarding the stance taken by the Government. Due to such deficiency the Court of Appeal found it difficult to decide whether there should be a trial of preliminary issues. It was precisely the reason why the Court of Appeal considered it necessary to have directions for pleadings to be filed. Against that background, it would be surprising for the Court of Appeal to conclude before any pleadings were filed that the case is suitable for preliminary points of law to be determined. The reasoning of the Vice President is made clear in Para. 18 of his judgment,

“ It is for this reason that this court considered it imperative that the issues both of fact and law should be clarified in a form of pleadings which could then form the basis of the determination of the claim to compensation. In that way it would be known whether there are indeed questions of law which arise and whether these can be usefully determined prior to the future conduct of the claim.” (My emphasis)

11. In essence, the Court of Appeal decided that in the absence of pleadings identifying the issues, it was premature to consider whether determination of preliminary points of law should be ordered. This is reflected in the order made by the Court of Appeal. Instead of ordering determination of points of law, the Court of Appeal remitted the matters to the Tribunal for directions regarding pleadings.

12. Therefore, the Court of Appeal could not have intended to fetter the discretion of the Tribunal in considering a fresh application for determination of preliminary points of law. I shall have to exercise my discretion to decide the summons afresh based on the materials before the Tribunal.

13. Based on the pleadings filed, there are a number of fundamental issues between the parties. I can see that a preliminary determination of such issues could have significant impacts on the scope of the factual and valuation evidence that is required. Paragraphs 49 to 54 of the Points of Defence give a succinct summary of the fundamental issues. The fundamental issues can be reduced into the following points of law,

(a) On proper construction of the Foreshore and Sea-bed (Reclamations) Ordinance [“FSRO”], whether the proper basis for assessing compensation is one based on actual damages sustained by the Applicant by reference to principles in tort as at the date of assessment (as contended by the Respondent) or one based on a notional purchase on the date of the 1995 Authorization of the Applicant’s right that has been extinguished by reference to principles in contract (as contended by the Applicant);
(b) If the correct basis is one of contract, whether betterment arising from the scheme relating to the 1995 Authorization can be taken into account. In other words, whether the Pointe Gourde principle has any application in the context of a claim under the FSRO;
(c) If the correct interpretation of the FSRO is the one as contended by the Respondent, whether there is any infringement of Article 105 of the Basic Law;
(d) If the correct interpretation of the FSRO is the one as contended by the Applicant and the Pointe Gourde principle is applicable, whether there is any infringement of Article 105 of the Basic Law.

14. The determination of these points of law will dictate what are relevant and what are not insofar as factual and valuation evidence are concerned. I have mentioned Mr Chang’s submissions in this regard based on the scenario that the preliminary points were determined in his client’s favour. On the other hand, if points (a) and (c) were determined in favour of the Respondent, there would also be a narrowing of the scope of the evidence as the inquiry would be focused on the actual loss suffered by the Applicant. The question relating to betterment arising from the Container Port scheme will cease to be relevant. Whilst I do not intend to pre-empt any submissions from the parties after the determination of preliminary issues, if there were a determination in favour of the Respondent on point (a), the parties may review whether there is any practical need to go beyond the surrender of the leasehold interest in 2001 and the continued enjoyment of access to the sea during the interim period as far as events after 1995 are concerned.

15. I accept the submissions of Mr Chang that without such narrowing of the scope of the evidence, parties would have to prepare for various eventualities and a lot of time and costs in terms of preparation and actual trial dates would have to be incurred on matters that would turn out to be wholly irrelevant. Without such confinement of the scope of evidence, there is indeed a risk that the trial will be so unfocused that the real issues could be clouded by a lot of irrelevancies. Counsel also told me that the Applicant is nowhere near the state of readiness to have the case set down for trial if all the eventualities have to be covered.

16. I have formulated the points of law slightly differently from those set out in the summons. I deliberately minimize any reference to any fact sensitive aspects whilst at the same time formulate the points in such a manner to cover broadly the fundamental issues of law raised in Mr Chang’s summons as well as the 14 issues raised in the Respondent’s written submissions. I believe the issues as formulated by me are sufficient to serve the purpose of narrowing down the scope of the factual and valuation evidence to a manageable level.

17. Further, I believe the issues as formulated in Paragraph 14 above could be determined without any resolution of any underlying disputes of facts. Some facts are not in dispute, e.g. the scheme under the 1995 Authorization, the actual enjoyment of access to the sea after the 1995 Authorization, the 2000 Withdrawal and the 2000 Authorization, the surrender in 2001 although the precise details surrounding such events may need to be explored at much greater length if any of these events shall turn out to be relevant on the assessment of compensation. Since the points of law are general points of principle with regard to the proper approach in assessment of compensation under the FSRO, one needs not go too much into the evidence and the factual issues to properly determine the same. In this connection, the concerns raised in Paragraph 15 of the written submissions of the Respondent as to the factual sensitivity of some of the issues formulated by them have no application.

18. I am of course mindful of the possibility of appeal against the determination of these issues and the disadvantage faced by the appellate court in dealing with an appeal without the benefit of all the factual findings. However, the way in which these points are formulated should minimize such handicap.

19. With written submissions filed in advance, I believe submissions on the points in Paragraph 14 can be dealt with at a hearing in terms of days. That could be arranged much more expeditiously than a trial in terms of weeks. Irrespective of the outcome on such determination, the length of trial is likely to be significantly reduced.

20. Given the exceptional nature of the present case in terms of the several alternatives raised on the pleadings which would entail quite detail investigation into different factual or even hypothetical scenarios (as in the case of betterment arising for the container port scheme) that could become wholly irrelevant if the points of law were determined and that such points could properly be determined at this stage, I am of the view that it is just and convenient to order the four points set out in Paragraph 14 to be determined first.

21. I order accordingly. I also make a cost order nisi that the costs of the summons be costs in the cause. For the purpose of giving further directions on the preparation for the determination of the points of law, I shall hear the parties at a short call-over hearing on a date to be notified by the court.

(M H Lam)
Judge of the Court of First Instance
High Court
the President of the Lands Tribunal

Mr Denis Chang, SC, Mr Edward Chan, SC and Mr Johannes Chan, SC, instructed by Messrs Wilkinson & Grist, for the Applicant

Mr Valentine Yim, instructed by the Department of Justice, for the Respondent

LDMR No. 23 of 1999

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application under Foreshore and Sea-bed (Reclamations) Ordinance

Application No. LDMR 23 of 1999

_________________

BETWEEN
	Penny's Bay Investment Company Limited	Applicant

	AND

	Director of Lands	Respondent

_________________

Coram: H.H. Judge Chow, Presiding Officer of the Lands Tribunal

Dates of Hearing: 28 October 2003

Date of Decision: 17 December 2003

_________________

D E C I S I O N

_________________

1. By the present summons, the Applicant applied for an order to be made that the points of law as identified in the attached Preliminary Points of Law to be "Statement of Facts and Determinedtrial of the Applicant's " be determined as preliminary issues before the Application herein under the Foreshore and SeaOrdinance ("the Ordinance") -Bed (Reclamations) in accordance with Rule 18 of the Lands Tribunal Rules.

2. The "Statement of Facts" include the following paragraphs of facts:-

"
1. In 1970, the Applicant, Penny's Bay Investment Company Limited ("PBIL") acquired Lot 22 in DD356, Penny's Bay, Lantau, Hong Kong ("Lot 22") by way of an Agreement and Conditions of Exchange dated 2 January 1970 registered in the Tsuen Wan Land Registry as new Grant No 4706 ("Exchange Agreement"). Pursuant to the Exchange Agreement, PBIL was granted a Lease of Lot 22 for a term of 99 years less the last 3 days beginning on 1 July 1898 and extended to 30 June 2047 by the New Territories leases (Extension) Ordinance (Cap.150). The lot was about 2,010,000 sq ft in area and shown on Plan I annexed to the Exchange Agreement.
2. Pursuant to Special Condition 31 of the Exchange Agreement, PBIL enjoyed a private proprietary right to use the foreshore of Penny's Bay as limited by Special Condition 31 for access between Lot 22 and the sea.
3. During the period of PBIL's ownership of Lot 22, the lot was let to Cheoy Lee Shipyards Limited who used the lot for the purpose of shipbuilding and related purposes. Throughout the period of PBIL's ownership, there was no effective landward access to Lot 22. Marine access in accordance with Special Condition 31 was the only effective means of access to the lot.
4. On 25 April 1995, the then Governor in Council, pursuant to section 8(1)(c) of the Foreshore and Sea-Bed (Reclamations) Ordinance ("the Ordinance"), authorized a proposal to reclaim about 1260 hectares of the foreshore and sea-bed at Penny's Bay at Lantau Island for the purpose of construction of CT10 and CT11 and related infrastructures. The authorization was published in Gazette Notice no GN1574 dated 5 May 1995 ("1995 Authorization") pursuant to section 9(1)(b) of the Ordinance.
5. By virtue of the 1995 Authorization, and pursuant to section 10(1) of the Ordinance, PBIL's right to the marine access at Penny's Bay to Lot 22 was legally extinguished.
6. Section 12(1) of the Ordinance provides for the payment of compensation to any person who claims that his interest, right or easement in or over the relevant area of foreshore and sea-bed will be injuriously affected by the 1995 Authorization.
7. On 3 May 1996, PBIL lodged a claim with the Director of Lands for compensation pursuant to section 12(1) of the Ordinance in the sum of HK$2,539,000,000 (including a claim for the loss of value in Lot 22 in the sum of HK$2,200,000,000). The claim is premised upon marine access as the only effective means of access of Lot 22 and extinguishment thereof by virtue of the 1995 Authorization will leave it completely landlocked with no alternative means of access.
8. Later, the Government changed its plan for the construction of CT10 and CT11 and instead thereof proposed the development of, inter alia, a theme park in joint venture with Disney Enterprise at the Penny's Bay area. In October 1999, the Directore published a new proposal to reclaim a part of the foreshore and sea-bed of Penny's Bay for, inter alia, the construction of a theme park, together with plan no ISM0308. The new proposal was published in Gazette Notice No GN5917 dated 15 October 1999. This proposed reclamation comprised a portion of the reclamation which would otherwise take place under the 1995 Authorization and a small area outside it.
9. On 2 November 1999, PHIL applied to the Lands Tribunal pursuant to section 13(3) of the Ordinance to determine its claim for compensation arising from the extinguishments of its marine access by the 1995 Authorization.
10. By a Notice of Opposition filed on 19 November 1999, the Director opposed PBIL's claim on the grounds that PBIL has suffered no loss compensable under section 12 of the Ordinance, or alternatively that the amount of compensation is excessive.
11. Be a letter dated 7 January 2000 to PBIL's solicitors, the Department of Justice, on behalf of the Director, stated that in assessing PBIL's claim for compensation, the benefits of the engineering and planning proposal as contained in the "Description of the Undertaking" stated in the 1995 Authorization had to be taken into account. They alleged that the infrastructure referred to in the 1995 Authorization covered roads, and the roads when completed or in the process of being completed would open up the full redevelopment potential of Lot 22. After taking into account such "betterment" element, they concluded that PBIL has suffered no loss.
12. On 28 March 2000, the Chief Executive in Council decided to withdraw the authorization of the 1995 Authorization ("2000 Withdrawal"). This decision was published in Gazette Notice No GN2230 dated 10 April 2000.
13. Also on 28 March 2000, the Chief Executive in Council decided to authorize the further reclamation as announced by the aforesaid Gazette Notice No GN5917 under section 8 of the Ordinance ("2000 Authorization"). This decision was published in Gazette Notice No GN2231 dated 14 April 2000.
14. By a Deed made on 3 April 2001, PBIL surrendered Lot 22 to the Hong Kong Government, without prejudice to its claim for compensation under the Ordinance."

3. The Tribunal is invited by the Applicant to determine the following preliminary points of law:-

"
1. Upon the proper construction of sections 10(2), 11 and 12 of the Ordinance, whether the claim for compensation by PBIL is subject to any set-off, diminution or otherwise adversely affected by the 2000 Withdrawal and/or the 2000 Authorization, which were events occurring after the relevant rights of PBIL to the foreshore and sea-bed had been extinguished in1995.
2. Upon the proper construction of sections 10(2), 11 and 12 of the Ordinance, whether the claim for compensation by PBIL is subject to any set-off or diminution by reason of any "betterment" referable to the infra-structural and other works authorized under the 1995 Authorization, which had not been and would no longer be carried out.
3. Whether Question 1 or Question 2 are to be answered differently when sections 10(2), 11 and 12 of the Ordinance are constructed in the light of Articles 6 and 105 of the Basic Law.
4. If the answer to Question 1 or Question 2 or to both is in the affirmative, whether sections 10(2), 11 and 12 of the Ordinance are invalid and to be struck down for being inconsistent with the constitutional provisions under Articles 6 and 105 of the Basic Law."

4. For the sake of determining whether the application satisfies the requirements of Rule 18 of the Lands Tribunal Rules, it is necessary to set out the rule in full:-

"
(1) The President or a presiding officer may, on the application of any party, order any point of law which is within the jurisdiction of the President or a presiding officer to decide and which appears to be in issue in the proceedings to be disposed of at a preliminary hearing before the President or a presiding officer.
(2) If the decision on the point of law substantially disposes of the proceedings, the President or a presiding officer may order that the argument shall be treated as the hearing of the case or may make such other order as the thinks fit."

5. The essential requirements to be satisfied before Rule 18 can be invoked are firstly that there is a point of law to be decided, secondly that the point of law is within the jurisdiction of the President or a presiding officer to decide, and thirdly that the point of law appears to be in issue in the proceedings. It is the Applicant who took out this application. Accordingly it bears the burden of satisfying this Tribunal that these requirements have been met. It follows, for the purpose of satisfying the first requirement, that it has to identify the points of law to be decided. In this regard the Applicant has set out the 4 "points of law". But are they really points of law within the context of Rule 18?

6. The first two points of law refer to sections 10(2), 11, and 12 of the Ordinance. It will be useful for this Tribunal to set out sections 10, 11, and 12 of the Ordinance for the purpose of determining the relevance of sections 10(2), 11 and 12 of the Ordinance in this interlocutory application. Sections 10, 11 and 12 provide as follows:-

"
10. Extinguishment of rights upon publication of notice of authorization
(1) Subject to section 17, upon the publication of a notice of authorization in the Gazette under section 9(1)(b)-
(a) all public and private rights in relation to the foreshore and sea-bed affected thereby shall be extinguished and cease to exist; and
(b) no person shall have any right against the Government of any other person to compel or restrain anything authorized under section 7, 8(1)(b) or 8(1)(c).
(2) No action shall be brought or continued in respect of the extinguishment under subsection (1), in whole or in part, of any public or private right.
11. No Claim for money except under this Ordinance
No person shall have any right against the Government or any other person to claim any money in respect of anything authorized under section 7, 8(1)(b) or 8(1)(c) except to the extent of the entitlement to claim compensation under section 12.
12. Claims for compensation
(1) Any person who claims that his interest, right or easement in or over such foreshore and sea-bed will be injuriously affected by the reclamation may deliver to the Director a written claim stating the sum of money which he is willing to accept in full and final settlement of his claim together with such particulars as he may possess to substantiate the claim and shall furnish to the Director such accounts, documents and further particulars as the Director may request him to furnish, in support of the claim.
(2) A claim under subsection (1) shall be made before the expiry of the time specified in the notice served by the Director and published under section 9(1) in respect of the reclamation.
(3) ...........................。"

7. In its submission the Applicant refers to section 10(1) of the Ordinance, but it has not shown how section 10(2) is related to "set off", "diminution" or "betterment" ("elements of defence") referred to in the first two points of law. It also has not demonstrated how section 11 is likewise connected with the elements of defence.

8. Section 10(2) and section 11 are simple and straight-forward rules. They cannot be related to the elements of defence. If section 10(1) is relevant for the Applicant's purpose, it should be included in the "points of law", instead of section 10(2).

9. The provisions of sections 10(2) and section 11 can never apply to the situations of the Respondent, and therefore these provisions cannot be related to the elements of defence.

10. Under the first 2 points of law, sections 10(2), 11 and 12 are bound together, and it is apparent that the points of law are derived from these statutory provisions as a whole. It is not up to the Tribunal to separate them from one another and determine which section is the correct one for forming the point of law. They are tied up together and must be considered together, and, if any statutory provision should not be included in the point of law, that point of law must fail. Here, sections 10(2) and 11 are not relevant, and should not be so included. Therefore the first two points of law must fail.

11. The next question which the Tribunal has to decide is whether under Rule 18(1) the Tribunal has the power to apply any legal rules to facts of the case. It is not the Applicant's case that Rule 18(2) is to be involved. In any event it is not applicable, because even if the Applicant succeeds in this application, the Tribunal will still have to determine its claim.

12. Under Rule 18(1) the Tribunal only has the power to dispose of any point of law. It is inappropriate to apply any rule of law to the facts of the case, because in disposing any point of law, it is unnecessary to make reference to any facts at all. To make reference to facts of the case is not to dispose a point of law, but to resolve issues in the case. There is no legal basis for the Tribunal to do this. But this is what the Applicant is asking the Tribunal to do. On this ground the Applicant's application must fail.

13. Under points of law No.3 and 4, the Applicant refers to Articles 6 and 105 of the Basic Law. I fail to see how these 2 Articles can be relevant for the purpose of this Rule 18 application. The Applicant proceeds with its claim under the relevant statutory provisions of the Ordinance. As submitted by the Applicant, these provisions give rise to the 4 points of law. Articles 6 and 105 cannot be related to these points of law. Further it seems irreconcilable that the Applicant is asking the Tribunal to declare invalid some statutory provisions upon which it lodged its claim for compensation.

14. Upon Rule 18, the onus is as the Applicant to identify the points of law to be disposed of. It has failed to do so. The alleged "points of law" attached to the summons are not points of law within the context of Rule 18.

15. In order to ascertain whether Rule 18 has been complied with, the Tribunal must firstly be satisfied that these is a set of agreed facts or a set of facts admitted in the pleadings giving rise to a point of law to be decided. In the present application the Applicant set out 14 paragraphs of facts. Whilst agreeing to the contents of these facts, the Respondent, in effect, submitted that these facts only represent a certain part of the case and are not conclusive of all the facts required for the purpose of this application.

16. No doubt in any export report the expert will set out the principles of assessment on the damages payable (if any) and apply these principles to the facts of the case and/or to comparables which are facts for form assessing compensation. The Applicant has already submitted its expert report, but the Respondent has not done so. However, it has a right to do so under Rule 20(6) of the Lands Tribunal Rules.

17. The Applicant submitted that the agreed fact are sufficient to provide the context for the determination of the points of law, and that the points of law will set the framework and determine the manner as to how the assessment of the compensation should the place. I do not agree. Since the points of law determine the manner or methodology on the assessment of compensation, it must necessarily follow that the Tribunal has to ascertain the methodology on assessing compensation. Such methodology will be fully disclosed in the parties' expert's report. The Respondent has not indicated that it will not prepare that expert report and the Applicant has not made such an allegation. It is only when the Respondent's expert report has been prepared and filed into court, then there will be sufficient factual materials for the Tribunal to decide whether all the material facts disclosed give rise to a point of law to be decided, and which appears to be in issue in the proceedings. In conclusion the Applicant has made a pre-mature contained application.

18. For these reasons the Applicant's application is dismissed. I make an order nisi for costs (to be made absolute in 4 week's time) in favour of the Respondent, (with certificates for its 2 Counsels), to be taxed on the High Court Scale, if not agreed.

H. H. Judge Chow
Presiding Officer, Lands Tribunal

Representation:

The Applicant: represented by M/S Wilkinson & Grist

The Respondent: represented by Secretary for Justice

Remarks Appeal by the Applicant to Court of Appeal. Appeal allowed. Please refer to CACV3/2004Remarks: Appeal by the Applicant to Court of Appeal. Appeal allowed. Please refer to CACV3/2004

PENNY\'S BAY INVESTMENT CO LTD v. DIRECTOR OF LANDS

Related cases with same parties

Files (8)

(a)	Shipyard Value 285,000 sq ft @751.6/sq ft	$214,206,000
(b)	Mid-stream Use 1,725,000 sq ft @200/sq ft	$345,000,000
		$559,206,000
Less	Demolition Costs (excluding canteen as only illegal structures would be demolished)	$11,091,798
	$8,049,200
	Fee @6% x1.06
	Development Profit @30% x1.3
		$548,114,202
		Say $548,114,000

Before Valuation	$694,971,000
After Valuation	$685,540,000
Amount of Compensation	$9,431,000

Lot No	Adjusted Unit Rate	Adjustment	Revised unit rate
KCTL481	159	+30%	207
KCTL479	240	-20%	192

(a)	Costs of the hearings on the preliminary issues, including the application for such issues to be determined as preliminary issues;
(b)	Costs of the amended pleadings and other directions for the future conduct of the proceedings;
(c)	Costs of the arguments on the question of costs.

(a)	On proper construction of the Foreshore and Sea-bed (Reclamations) Ordinance [“FSRO”], whether the proper basis for assessing compensation is one based on actual damages sustained by the Applicant by reference to principles in tort as at the date of assessment (as contended by the Respondent) or one based on a notional purchase on the date of the 1995 Authorization of the Applicant’s right that has been extinguished by reference to principles in contract (as contended by the Applicant);
(b)	If the correct basis is one of contract, whether betterment arising from the scheme relating to the 1995 Authorization can be taken into account. In other words, whether the Pointe Gourde principle has any application in the context of a claim under the FSRO;
(c)	If the correct interpretation of the FSRO is the one as contended by the Respondent, whether there is any infringement of Article 105 of the Basic Law;
(d)	If the correct interpretation of the FSRO is the one as contended by the Applicant and the Pointe Gourde principle is applicable, whether there is any infringement of Article 105 of the Basic Law.

"	1.	In 1970, the Applicant, Penny's Bay Investment Company Limited ("PBIL") acquired Lot 22 in DD356, Penny's Bay, Lantau, Hong Kong ("Lot 22") by way of an Agreement and Conditions of Exchange dated 2 January 1970 registered in the Tsuen Wan Land Registry as new Grant No 4706 ("Exchange Agreement"). Pursuant to the Exchange Agreement, PBIL was granted a Lease of Lot 22 for a term of 99 years less the last 3 days beginning on 1 July 1898 and extended to 30 June 2047 by the New Territories leases (Extension) Ordinance (Cap.150). The lot was about 2,010,000 sq ft in area and shown on Plan I annexed to the Exchange Agreement.

	2.	Pursuant to Special Condition 31 of the Exchange Agreement, PBIL enjoyed a private proprietary right to use the foreshore of Penny's Bay as limited by Special Condition 31 for access between Lot 22 and the sea.

	3.	During the period of PBIL's ownership of Lot 22, the lot was let to Cheoy Lee Shipyards Limited who used the lot for the purpose of shipbuilding and related purposes. Throughout the period of PBIL's ownership, there was no effective landward access to Lot 22. Marine access in accordance with Special Condition 31 was the only effective means of access to the lot.

	4.	On 25 April 1995, the then Governor in Council, pursuant to section 8(1)(c) of the Foreshore and Sea-Bed (Reclamations) Ordinance ("the Ordinance"), authorized a proposal to reclaim about 1260 hectares of the foreshore and sea-bed at Penny's Bay at Lantau Island for the purpose of construction of CT10 and CT11 and related infrastructures. The authorization was published in Gazette Notice no GN1574 dated 5 May 1995 ("1995 Authorization") pursuant to section 9(1)(b) of the Ordinance.

	5.	By virtue of the 1995 Authorization, and pursuant to section 10(1) of the Ordinance, PBIL's right to the marine access at Penny's Bay to Lot 22 was legally extinguished.

	6.	Section 12(1) of the Ordinance provides for the payment of compensation to any person who claims that his interest, right or easement in or over the relevant area of foreshore and sea-bed will be injuriously affected by the 1995 Authorization.

	7.	On 3 May 1996, PBIL lodged a claim with the Director of Lands for compensation pursuant to section 12(1) of the Ordinance in the sum of HK$2,539,000,000 (including a claim for the loss of value in Lot 22 in the sum of HK$2,200,000,000). The claim is premised upon marine access as the only effective means of access of Lot 22 and extinguishment thereof by virtue of the 1995 Authorization will leave it completely landlocked with no alternative means of access.

	8.	Later, the Government changed its plan for the construction of CT10 and CT11 and instead thereof proposed the development of, inter alia, a theme park in joint venture with Disney Enterprise at the Penny's Bay area. In October 1999, the Directore published a new proposal to reclaim a part of the foreshore and sea-bed of Penny's Bay for, inter alia, the construction of a theme park, together with plan no ISM0308. The new proposal was published in Gazette Notice No GN5917 dated 15 October 1999. This proposed reclamation comprised a portion of the reclamation which would otherwise take place under the 1995 Authorization and a small area outside it.

	9.	On 2 November 1999, PHIL applied to the Lands Tribunal pursuant to section 13(3) of the Ordinance to determine its claim for compensation arising from the extinguishments of its marine access by the 1995 Authorization.

	10.	By a Notice of Opposition filed on 19 November 1999, the Director opposed PBIL's claim on the grounds that PBIL has suffered no loss compensable under section 12 of the Ordinance, or alternatively that the amount of compensation is excessive.

	11.	Be a letter dated 7 January 2000 to PBIL's solicitors, the Department of Justice, on behalf of the Director, stated that in assessing PBIL's claim for compensation, the benefits of the engineering and planning proposal as contained in the "Description of the Undertaking" stated in the 1995 Authorization had to be taken into account. They alleged that the infrastructure referred to in the 1995 Authorization covered roads, and the roads when completed or in the process of being completed would open up the full redevelopment potential of Lot 22. After taking into account such "betterment" element, they concluded that PBIL has suffered no loss.

	12.	On 28 March 2000, the Chief Executive in Council decided to withdraw the authorization of the 1995 Authorization ("2000 Withdrawal"). This decision was published in Gazette Notice No GN2230 dated 10 April 2000.

	13.	Also on 28 March 2000, the Chief Executive in Council decided to authorize the further reclamation as announced by the aforesaid Gazette Notice No GN5917 under section 8 of the Ordinance ("2000 Authorization"). This decision was published in Gazette Notice No GN2231 dated 14 April 2000.

	14.	By a Deed made on 3 April 2001, PBIL surrendered Lot 22 to the Hong Kong Government, without prejudice to its claim for compensation under the Ordinance."

"	1.	Upon the proper construction of sections 10(2), 11 and 12 of the Ordinance, whether the claim for compensation by PBIL is subject to any set-off, diminution or otherwise adversely affected by the 2000 Withdrawal and/or the 2000 Authorization, which were events occurring after the relevant rights of PBIL to the foreshore and sea-bed had been extinguished in1995.

	2.	Upon the proper construction of sections 10(2), 11 and 12 of the Ordinance, whether the claim for compensation by PBIL is subject to any set-off or diminution by reason of any "betterment" referable to the infra-structural and other works authorized under the 1995 Authorization, which had not been and would no longer be carried out.

	3.	Whether Question 1 or Question 2 are to be answered differently when sections 10(2), 11 and 12 of the Ordinance are constructed in the light of Articles 6 and 105 of the Basic Law.

	4.	If the answer to Question 1 or Question 2 or to both is in the affirmative, whether sections 10(2), 11 and 12 of the Ordinance are invalid and to be struck down for being inconsistent with the constitutional provisions under Articles 6 and 105 of the Basic Law."

"	(1)	The President or a presiding officer may, on the application of any party, order any point of law which is within the jurisdiction of the President or a presiding officer to decide and which appears to be in issue in the proceedings to be disposed of at a preliminary hearing before the President or a presiding officer.

	(2)	If the decision on the point of law substantially disposes of the proceedings, the President or a presiding officer may order that the argument shall be treated as the hearing of the case or may make such other order as the thinks fit."