CHIU YUEN YIN previously known as CHIN SHIK SHIM v. THE DIRECTOR OF LANDS

LDLR 1/2019

[2021] HKLdT 57

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 1 OF 2019

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BETWEEN

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DECISION

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BACKGROUND

1.  On 13 April 2021, the tribunal handed down its judgment on the applicant’s application pursuant to the Lands Resumption Ordinance, Cap 124 (“the Ordinance”), which determined the compensation for the suit premises at $13,400,000.  In the judgment, the tribunal has also ordered the matters of professional fees, interest and costs shall be adjourned to a date to be fixed by parties in consultation with counsel’s diaries if it needs, with liberty to apply for any other ancillary and consequential matters.

2.  The parties dispute on the matters of interest, professional remuneration and costs in this case. Upon the joint application of the parties, it was by consent ordered by the tribunal on 25 May 2021 that the outstanding matters be disposed of on paper.

UNDISPUTED EVENTS

3.  The following events are not in dispute between the parties: -

(1) The respondent had offered to the applicant a provisional payment in the sum of $12,671,000 on 31 January 2019 (“1st Provisional Payment Offer) and another provisional payment in the sum of $12,354,000 on 21 October 2020 (“2nd Provisional Payment Offer”), and both offers were not accepted by the applicant.

(2) By way of a letter dated 4 May 2020, a copy of which was lodged with the tribunal in a sealed envelope, the respondent made a “without prejudice save as to costs” offer to the applicant to inter alia pay compensation in the sum of $13,949,000 with interest, professional remuneration and costs reasonably incurred up to 4 May 2020 (“1^st Sealed Offer).

(3) The applicant did not accept the 1^st Sealed Offer, which lapsed on 18 May 2020.

(4) By way of another letter dated 1 September 2020, a copy of which was also lodged with the tribunal in a sealed envelope, the respondent made another “without prejudice save as to costs” offer to the applicant to inter alia pay compensation in the sum of $13,949,000 with interest, professional remuneration and costs reasonably incurred up to 1 September 2020 (“2^nd Sealed Offer).

(5) The applicant did not accept the 2^nd Sealed Offer, which lapsed on 15 September 2020.

(6) The compensation as determined by the tribunal is less than the offered sum under the two Sealed Offers with a shortfall of $549,000 (i.e. $13,949,000 - $13,400,000).

(7) At trial, the applicant claimed for compensation in the sum of $19,520,000, but the respondent contended the compensation should be $12,588,000 only.

(8) Pursuant to the judgement dated 13 April 2021, the respondent paid to the applicant the compensation in the sum of $13,400,000 on 20 May 2021 (i.e. being the actual receipt date of the payment).

THE ISSUES

4.  It is also not in dispute that (i) post-judgment interest should be fixed at judgment rate; (ii) the respondent do pay the applicant interest on the amount of $13,400,000 at judgment rate from 13 April 2021 to 20 May 2021; (iii) the respondent do pay the applicant interest on the amount of $13,400,000 at pre-judgment interest rate, to be determined, from 20 January 2019 to 12 April 2021; (iv) the respondent do pay the applicant’s professional remuneration reasonably incurred and costs from 20 January 2019 to 18 May 2020; and (iv) costs are to be taxed on party-to-party basis on High Court scale, if not agreed, with certificate for counsel.

5.  Nevertheless, the following issues are to be determined by the tribunal: -

(1) Whether the pre-judgment interest rate should be fixed at prime (i.e. HSBC’s prevailing best lending rate during that period) plus 1% or the lowest interest rate paid on deposit at 24 hours’ call by note-issuing banks?

(2) Whether the respondent be liable for the applicant’s professional remuneration and costs from 19 May 2020 thereafter or conversely the applicant be liable for the respondent’s professional remuneration and costs from 19 May 2020 thereafter?

Pre-judgment Interest Rate

6.  Section 17(3A) of the Ordinance stipulates that the rate of interest shall be such rate as the tribunal may fix, and section 17(3B) sets the minimum rate of interest, being the lowest of the interest rates paid on deposits at 24 hours’ call by note-issuing banks.

7.  In Tai Ping Restaurant Limited v Director of Lands[1], the tribunal followed the approach set out in Happy Dragon Restaurant Limited v Director of Lands[2] namely to adopt the presumption that pre-judgment interest shall be set at the rate of prime plus 1% unless the respondent seeks to challenge this presumption and successfully discharges its burden of showing that this rate would be substantially unfair either to one party or the other.

8.  In these proceedings, the applicant claims for pre-judgment interest rate at prime plus 1%, whilst the respondent proposes the pre-judgment interest rate should be the lowest interest rate paid on deposit at 24 hours’ call by note-issuing banks only.

9.  Mr Ng, counsel for the respondent, submits that the applicant had unreasonably and repeatedly rejected the respondent’s Provisional Payment Offers and Sealed Offers. Therefore, the applicant was kept out of the money, which ought to have been paid to him due to his own choice only.  Had the applicant accepted the Sealed Offers in the sum of $13,949,000, the applicant could have used the money received, which in any event he could receive $549,000 more in compensation, for investment to derive profits. Hence, in view of the evidence, it would be substantially unfair that the respondent had to be penalized by a higher interest rate of prime plus 1% due to the unreasonableness on the part of the applicant of not accepting the respondent’s Provisional Payment Offers and Sealed Offers.

10.  Mr Lee, counsel for the applicant, submits that there is no evidence in this case that the applicant had acted unreasonably. The applicant’s rejection of the respondent’s offers could not be said to have been unreasonable. In any event, even if the applicant should have accepted the Sealed Offers, it does not mean the applicant should be penalised with a low interest rate for the entire pre-judgment period. Further, there is no rule requiring an applicant in resumption cases to accept provisional payment offers, particularly when the offer was made just after the date of resumption and at a time when the applicant would not and did not have had the full benefit of expert valuation evidence, as was the case here in relation to the 1^st Provisional Payment Offer.

11.  I agree with Mr Lee that there is no rule requiring an applicant in resumption cases to accept provisional payment offers. Although Mr Ng has commented that the applicant had unreasonably rejected the Provisional Payment Offers, he has not made further submissions in this regard. Nevertheless, I consider the applicant should have accepted the Sealed Offers, which he could receive $549,000 more in compensation. Accordingly, I am of the view the applicant should have interest at prime plus 1% from the date of resumption to the deadline for acceptance of the Sealed Offer only, and the interest thereafter up to the date immediately before the judgment should be fixed at the minimum rate of interest under section 17(3B) of the Ordinance.  I consider that the applicant’s rejection of the Sealed offers and at the same time enjoyment of a higher interest rate would be unfair to the respondent.

12.  Since the respondent has given a 2^nd chance to the applicant and made the 2^nd Sealed Offer, I consider it is fair to calculate the pre-judgment interest rate at prime plus 1% up to 15 September 2020, when the 2^nd Sealed Offer lapsed.

Professional Remuneration and Costs

13.  While the applicant asks the tribunal to order the respondent to pay the applicant’s professional remuneration and costs from the date of resumption, the respondent agrees to pay applicant’s professional remuneration and costs up to 18 May 2020 only, when the 1^st Sealed Offer lapsed. It is the respondent’s case that the respondent should be entitled to all costs and professional remuneration from 19 May 2020 thereafter because the applicant had unreasonably rejected the respondent’s Sealed Offers.

14.  Under section 12(1) of the Lands Tribunal Ordinance, Cap 17, the costs of and incidental to all proceedings in the tribunal are in the discretion of the tribunal, and the tribunal has full power to determine by whom and to what extent the costs are to be paid.  It is also well established that the “compensation approach” applies in the land resumption cases and that the starting point is that costs and professional remuneration should be paid by the acquiring authority unless there are special reasons to depart from the usual order for costs exist[3]. The underlying principle for the “compensation approach” is that the acquiring authority is the one that caused the litigation and hence it should be the one to pay the costs of the proceedings.

15.  It is also not in dispute that, as held in Good Faith, whether such special reasons to depart from the usual order for costs exist is a matter for the judgment of the tribunal.  It may exist where wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant, but a special reason 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 the vindication of his right to compensation. 

16.  The tribunal may also have regard to matters including whether or not the claimant has exaggerated his claim, including (a) the reasons for the disparity between the sum claimed and the sum awarded; and (b) their effect upon the conduct of the claim. In any event, 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; and (d) the amount or proportion of the costs disallowed is proportionate to the time wasted.

17.  Mr Ng submits that the applicant’s claim in the sum of $19,520,000, which exceeded the amount of $13,400,000 as determined by the tribunal, was grossly exaggerated. The applicant has also unreasonably and unsuccessfully raised the issues on the selection of comparables.  In addition, the tribunal has ruled in favour of the respondent in the other 3 out of the 6 issues in these proceedings, and the remaining 2 issues only took minimal time to deal with throughout the proceedings.

18.  Mr Lee submits that the tribunal in the present case has not made any findings in the judgment that the applicant’s claim or conduct of the proceedings was frivolous or unreasonable.  There were no abandoned issues, unnecessary adjournments or failure on the part of the applicant to comply with the tribunal’s directions, and there were also no obvious and substantial escalation of costs over what would be reasonable for the applicant to incur in vindication of his right to compensation. The tribunal has not found that no competent valuer could reasonably have chosen the comparables adopted by the applicant’s expert or valued the property as the applicant’s expert did.  There was also no finding by the tribunal that the applicant’s arguments were not legitimate or unmeritorious.

19.  Mr Lee further submits that the trial of this application was conducted efficiently, and the arguments and expert opinions put forward by the applicant, including the adjustments for return frontage, layout and headroom, have plainly assisted the tribunal in coming to a proper assessment.

20.  Regarding the Sealed Offers, Mr Lee contends that though the Sealed Offers may be taken into account by the tribunal when it comes to costs, such offers are not determinative of the costs outcome. In Oriental Generation Limited and Others v Ngo Kui Sing and Others[4], the tribunal has explained and held that there appears to be no distinction between a successful and unsuccessful applicant in resumption cases (successful in the sense that the applicant beats the respondent’s sealed offer and unsuccessful when the applicant fails to beat the offer).  While there are no hard and fast rules with respect to the Sealed Offers, the tribunal still retains its discretion on costs in the circumstances and have to adopt an exercise similar to identifying the special reasons in Good Faith.

21.  I am of the view that the applicant’s conduct in these proceedings is not unreasonable, and has not led to an obvious and substantial escalation in the costs. Although both the applicant’s claim in the sum of $19,520,000 and the Sealed Offers in the sum of $13,949,000 are higher than the amount of $13,400,000 as determined by the tribunal, the difference between the Sealed Offers and the determination is $549,000 (i.e. about 4.1% of the determination) only.  Whilst, the determination is higher than the respondent’s valuation at trial in the sum of $12,588,000 (i.e. about 6.1% below the determination).

22.  I consider the difference of about 4.1% only, or about 6.1%, is within the acceptable range of differences in valuation of shop premises in these proceedings. Valuation is not an exact science. The applicant who might rely on the valuation to make his then decision was not unreasonable not to accept the Sealed Offers, which with the benefit of hindsight is about 4.1% only above the market value as determined by the tribunal.  Further, the tribunal has in fact accepted in the judgment some of the arguments put forward by the applicant’s expert, and the determinations are not one-sided in favour of the respondent.

23.  Having considered all the circumstances in this case, I agree with Mr Lee that the respondent has failed to demonstrate any special reason(s) for justifying a departure from the compensation approach. Accordingly, I consider the applicant should not be penalised on professional remuneration and costs in these proceedings.

CONCLUSION

24.  In accordance with the above discussions, I decide that the pre-judgment interest rate should be fixed at (i) prime plus 1% for the period from 20 January 2019 to 15 September 2020; and (ii) the lowest interest rate paid on deposit at 24 hours’ call by note-issuing banks for the period from 16 September 2020 to 12 April 2021, and that the respondent be liable for the applicant’s professional remuneration and costs from 20 January 2019 thereafter.

25.  As to the costs in relation to this decision, since the applicant wins on the issue of professional remuneration and costs and also wins partly on the issue of pre-judgment interest rate, I consider that under the compensation approach the applicant should also be awarded with the costs of this decision.

ORDERS

26.  Accordingly, I order that: -

(1) The respondent do pay the applicant the pre-judgment interest on the amount of $13,400,000 at prime (i.e. HSBC’s prevailing best lending rate during that period) plus 1% for the period from 20 January 2019 to 15 September 2020;

(2) The respondent do pay the applicant the pre-judgment interest on the amount of $13,400,000 at the lowest interest rate paid on deposit at 24 hours’ call by note-issuing banks for the period from 16 September 2020 to 12 April 2021;

(3) The respondent do pay the applicant the post-judgment interest on the amount of $13,400,000 at judgment rate for the period from 13 April 2021 to 20 May 2021; and

(4) The respondent do pay the applicant the professional remuneration reasonably incurred and the applicant’s costs of these proceedings from 20 January 2019, including all costs reserved and the costs of and incidental to the disposal of the matters of interest, professional remuneration and costs, with certificate for counsel on High Court scale on party and party basis, to be taxed if any agreed.