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

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

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D E C I S I O N

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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,

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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.