梁續有(以天祥參茸藥行的名營業) v. 地政總署署長

LDLR 4/2006

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Lands Resumption Application No. 4 of 2006

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JUDGMENT ON PROFESSIONAL FEES AND COSTS

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Background

1.  On 24 April 2006, the Applicant took out the application herein for determination of compensation pursuant to the Lands Resumption Ordinance, Cap. 124 (“the Ordinance”).  At first, the Applicant claimed for the following items:-

(1)  $904,400.00 plus interest for land taken under section 10(2)(b) of the Ordinance;

(2)  $2,159,000.00 plus interest for loss of goodwill under section 10(2)(d) of the Ordinance;

(3)  $100,031.40 plus interest for forced sale of stock under section 10(2)(e)(i) of the Ordinance;

(4)  $4,000.00 plus interest for transportation fee under section 10(2)(e)(i) of the Ordinance;

(5)  $20,000.00 plus interest for rental of storeroom under section 10(2)(e)(i) of the Ordinance; and

(6)  surveyor’s fee to be calculated in accordance with the HKIS Fee Scale 10 under section 10(2)(e)(ii) of the Ordinance.

2.  On 12 May 2006, the Respondent filed the Notice of Opposition to deny that the Applicant has any right to claim compensation or alternatively the amount claimed was assessed in accordance with the Ordinance.  The Respondent also contended that the amount claimed was excessive.  However, the parties reached partial settlement and filed a consent summons on 31 December 2007 to settle the first item of claim, i.e. the Respondent agreed to pay the Applicant $800,000.00 as compensation for the value of land resumed.

The remaining items were not settled and hence the trial of the remaining items proceeded on divers dates in January 2008.

3.  After trial, we gave our judgment on 22 February 2008 and ordered that:-

(1)  The Respondent do pay the Applicant the agreed compensation for transportation fee in the sum of $4,000.00;

(2)  No compensation is payable in respect of the Applicant’s claims for loss of goodwill, forced sale of stock and rental of storeroom; and

(3)  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.

4.  The parties cannot agree on the liabilities for professional fees and costs and hence these two matters come back before us for determination.

The Respondent’s position

5.   At the hearing on 9 September 2008, the Respondent contended that costs should follow the event and relies on section 12 of the Lands Tribunal Ordinance, Cap. 127, which stipulates as follows:-

“(1) Subject to the provisions of the Ordinance giving the Tribunal jurisdiction in any matter, the Tribunal may award costs to and against any party to any proceedings and may order that those costs be taxed on the basis of any one of the Scales of Costs set out in the Schedules to Order 62 of:-

(a)    the Rules of the High Court (Cap. 4 sub. leg. A); or

(b)   the Rules of the District Court (Cap. 336 sub. leg. H).

(2) Subject to any rules made by the Chief Justice under section 10(3), Order 62 of the Rules of the High Court (Cap. 4 sub. leg. A) shall apply to the award, taxation and recovery of costs in the Tribunal.”

6.  The Respondent submitted that the Tribunal should award costs in accordance with section 12 as stipulated above and that there should be no difference between compensation cases and any other civil cases.  Thus, costs should follow the event even in compensation cases.  Since it was held by the Tribunal that the Applicant had acted unreasonably in extinguishing instead of relocating his business and the only loss that he could recover was the transportation fee of $4,000.00, which was agreed by the Respondent, the Respondent should be entitled to costs for the whole proceedings.

7.  However, after we invited the parties to consider the Decision on Costs delivered by Lam J. on 7 November 2007 in Penny’s Bay Investment Company Limited v. Director of Lands, LDMR 23/1999 and LDMR 1/2005 (Heard together), the Respondent seeks to distinguish three sets of costs as follows:-

(1)  pre-trial costs, inclusive of professional fees;

(2)  costs for the trial, taken place on 10, 11, 14 to 18, 22 & 23 January 2008, inclusive of professional fees; and

(3)  costs of the hearing on 9 September 2008.

8. The Respondent accepts that the Applicant is entitled to claim for costs or remuneration reasonably incurred under section 10(2)(e)(ii) of the Ordinance, but submits that under Order 62, rule 5 of the Rules of the High Court, Cap. 4A, the court in exercising its discretion on costs shall take into account any written offer made under Order 22, rule 14 provided that the court shall not take such an offer into account if at the time it is made the party making it could have protected his position as to costs by means of a payment into court under Order 22.  Order 22, rule 1 provides for a defendant making a payment into court “in any action for a debt or damages”.  It is by now clear that a claim for compensation made to the Lands Tribunal is not such an action: Director of Buildings & Lands v. Shun Fung Ironworks Ltd [1995] 1 HKC 417, per Lord Nicholls, at p.443B-D.  Accordingly, the Respondent submits that the Tribunal, in exercising its discretion on costs, shall take into account the Respondent’s written offers.

9. The Respondent refers to 4 letters issued by the Lands Department to the Respondent dated 16 December 2003, 14 January 2004, 5 May 2004 and 4 October 2005 respectively, by which the Respondent had offered $288,000.00 to settle the Applicant’s claim for compensation for disturbance, but the offer was rejected by the Applicant.  There was also another offer of $400,000.00 made by the Department of Justice to the Applicant’s solicitors by way of letter dated 21 December 2007, shortly before the trial commenced.

10. The Respondent submits that the pre-trial costs should, broadly speaking, be viewed in two stages:-

(1)  Those incurred during the period between the commencement of resumption (even thought the relevant date for determination of claim for disturbance is the date of removal of the business from the land, in which case it should be 16^th March 2004) and 4 October 2005; and

(2)   Those incurred after 4 October 2005.

11. Having considered the Penny’s Bay case, the Respondent seems to concede that the compulsory nature of a resumption, in which the owner is not a person at fault, is a factor that should be taken into account.  Hence, the Respondent agrees that the Applicant can legitimately argue that he should be entitled to costs incurred during the period between the commencement of resumption to 4 October 2005, even though the Applicant did not accept the Respondent’s offers in the 4 letters sent by the Lands Department. 

12. However, the Respondent contends that the same argument cannot assist the Applicant for costs incurred after 4 October 2005, as they cannot be regarded as having been reasonably incurred.  The Respondent submits that even though it is perfectly reasonable for a claimant to put forward his claim on the maximum basis, it must be a claim that can reasonably be supported (see the Penny’s Bay case).  Mr. Tony TN Chan and/or Vigers Appraisal & Consulting Limited had assisted the Applicant as his consultant since 17 June 2004, but the claims maintained by the Applicant in the sums of $2,283.031.40 (as set out in his Rule 20 Report dated 28 July 2006) and $1,923,031.40 (as set out in his supplemental Rule 20 Report dated 24 November 2006) were grossly excessive by reference to the amount of $4,000.00 awarded after trial.  The fundamental basis of the Applicant’s claim was flawed, namely he should have relocated, as opposed to have extinguished his business.  The Respondent’s offer was generous to encourage amicable settlement with the Applicant and had been in the air for the Applicant’s consideration since 16 December 2003, i.e. more than four years before the case was finally taken to the Tribunal for adjudication and accordingly, the Respondent submits that not only should the Applicant be refused costs subsequent to 4 October 2005, he should on the other hand be liable for the costs that the Respondent was forced to incur as a result of the Applicant’s refusal to accept its offer from 4 October 2005 onwards.

13. As to the costs of the trial, that being costs incurred after 4 October 2005, the Respondent submits that it should also be awarded in their favour.  Alternatively, the Respondent submits that there exists no valid reason for depriving them costs incurred after 21 December 2007 when the final offer of $400,000.00 was made.  The offer was extremely favourable to the Applicant and the Applicant’s team of advisors should have assessed the offer cautiously bearing in mind that substantial costs would need to be incurred with the imminence of the trial.

14. Concerning the costs of the hearing on 9 September 2008, the Respondent submits that there should be no order as to costs, as both parties would need to seek the Tribunal’s determination on the above matters.

The Applicant’s position

15.  The Applicant also seeks professional fees and costs against the Respondent, and relies on the following observation of the court in Wong Yik Po & Ors v Director of Lands, [1996] 1 HKC 586:-

“Perhaps the Privy Council was prepared to elevate the status of the particular Shun Fung letters, because of the identity of the offeror. It may have inferred that if the offers were accepted, the Hong Kong Government would have both the good faith and the financial resources, unconditionally to make immediate payment. We will not dwell on whether, in civil litigation, this places the Government in an undesirably privileged position or whether it is accurate to assume that prompt payment may not be adversely affected by bureaucratic delays or difficulties”.

16.  The Applicant submits that the Respondent was in an undesirably privileged position while conducting this case in that they had unlimited resources and could have access to material and information that the Applicant could never obtain.  For example, in the middle of the trial, the Respondent produced copies of computer printouts from the Rating and Valuation Department, which contained detail information of the properties involved.  The Applicant had no chance whatsoever to gain access to such information.  Such inequality of power is quite similar to a criminal trial in that a defendant is facing the prosecution from the government, while the government has unlimited resources and manpower.  Further, the new information provided by the Rating and Valuation Department contained important information or evidence that was vital to both parties.  Had the Respondent provided such information to the Applicant at an earlier stage, the Applicant would have a better chance to assess his case and have a fuller picture.  The Applicant lost his fair chance to properly inspect the information and fully consider his case.  The Applicant therefore submits that as the Respondent had acted unreasonably, professional fees and costs should be granted to the Applicant.

17. After considering the Penny’s Bay case, the Applicant concedes that he cannot be considered as a successful claimant, as he could not beat the offer of the Respondent.  However, the Applicant contends that he cannot be considered as an “unsuccessful claimant” when the Respondent failed to make full disclosure of all the necessary information on time, which renders their offer becoming defective, and the situation becomes extremely unfair when the Applicant is challenging the whole government by using his own resources..

The Tribunal’s determination

18. Having considered the submissions of both parties, we are of the view that both the Respondent and the Applicant have argued their cases on wrong footings.  In the Penny’s Bay case, Lam J. has made a very clear ruling on the approach of the Tribunal in compensation cases.  In sum, costs in respect of compensation cases should not be dealt with in the same manner as ordinary hostile litigation.  His ruling is well supported by English Authorities, such as Emslie & Simpson Ltd v. Aberdeen District Council (No. 2) [1995] RVR

159, where 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 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 expense these cases.”

19. We do not find it necessary to go through all the cases referred to by Lam J.  Suffice to say is that we agree with the approach of Lam J.  The starting point must be that the Respondent, as the acquiring authority, should bear the expenses of determining the amount of disputed compensation.  Thus, even though the Respondent succeeded at the trial, they will not be entitled to the costs for the whole proceedings.  The Respondent must bear the Applicant’s costs that are reasonably incurred.

20. Even though the Respondent has now conceded that part of the pre-trial costs should be borne by them, we do not agree with the Respondent’s approach in apportioning the costs by reference to the date of 4 October 2005 or the date of 21 December 2007.  The case was proceeded with not just for disturbance claims, but also for compensation for the land resumed.  In fact, before the trial started, the Respondent still disputed the Applicant’s entitlement to claim any of the items claimed.  The parties only reached settlement for the compensation for the land resumed on 31 December 2007.  If there were no settlement of this part of the claim, the Applicant would still need to argue this item of claim at the trial.  The Applicant was certainly entitled to retain his legal advisers and surveyors all the way up to the point when the partial settlement was reached.  The professional fees and costs incurred up to this point should definitely be borne by the Respondent.

21. However, we are of the view that it is unreasonable for the Applicant not to accept the final offer made on 21 December 2007.  The offer of $400,000.00 far exceeded the award of $4,000.00.  The Applicant should have accepted this offer at the same time when the settlement of the value of land was reached.  If he had done so, all the costs incurred after 31 December 2007 could have been saved.  Thus, the Applicant should bear the Respondent’s costs after 31 December 2007.

22. We do not accept the Applicant’s argument on the non-disclosure of information by the Respondent at all.  The Applicant bears the burden of proof.  He should get all the evidence in support of his case on his own account.  The Respondent has no burden to prove anything, nor do they have any duty to assist the Applicant.  There is absolutely no reason to penalize the Respondent for providing information voluntarily at the trial, when they do not even need to adduce the information in the first place.  The Applicant’s argument in this respect is totally illogical.

23. As to the costs for the hearing on 9 September 2008, we are of the view that there should be no order as to costs, as both parties have not succeeded in their own arguments.

24. Both parties have agreed that the scale of costs should be on District Court Scale.  We also agree that District Court Scale is appropriate for this case.

Conclusion

25. We therefore order as follows:-

(1)  The Respondent do pay the Applicant professional fees and costs for the proceedings incurred up to and including 31 December 2007;

(2)  The Applicant do pay the Respondent professional fees and costs incurred after 31 December 2007, save that there be no order as to costs in relation to the hearing on 9 September 2008;

(3)  The amounts of the professional fees are to be assessed by the Tribunal if not agreed; and

(4)  The costs are to be taxed on District Court Scale with certificate for counsel if not agreed.