HALESWEET LTD v. DIRECTOR OF LANDS

LDLR 8/2015
[2018] HKLdT 5

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 8 OF 2015

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DECISION

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The Issue

1.  The parties have already come to a settlement of almost the entire Application for resumption compensation and the only outstanding issue left for determination by this Tribunal is interest. There is no dispute that the applicant is entitled to interest (including pre-judgment and post judgment) for the compensation but the parties have difficulties in agreeing the interest rates. The parties also come to an agreement that this remaining dispute is to be dealt with by this Tribunal on paper without hearing.

Background

2.  Pursuant to the Government Gazette Notice No. 175 dated 27 December 2012, the property known as No. 45J, Ma Tau Wai Road, Kowloon, Hong Kong, namely Kowloon Inland Lot No. 8627, (“the Property”) was resumed by the Government at midnight on 11 April 2013. On 21 December 2015, the applicant applied to this Tribunal for determination of compensation for the resumption of the Property pursuant to section 10(2)(a) of the Lands Resumption Ordinance, Cap 124 (“the Ordinance”).

3.  On 1 September 2015, a provisional payment of $36.488 million was made to the applicant on a without prejudice basis (“Provisional Payment”).

4.  And after some further without prejudice discussion between the parties, the matter was subsequently resolved by way of settlement.  Pursuant to the terms of the settlement, a consent order dated 30 August 2017 (“Consent Order”) was granted and it was ordered that the respondent do pay the applicant resumption compensation in the sum of $44 million, professional fees (subject to assessment, if not agreed) and costs (subject to taxation, if not agreed) in full and final settlement of the Application except the issue of interest. Consequently, on 13 September 2017, the applicant received the balance of the compensation in the sum of $7.512 million (“Balance Payment”).

Interest for Land Resumption Compensation

5.  Generally speaking, counsel for the applicant, Mr Chow and counsel for the respondent, Mr Ismail are in agreement of the law in relation to interest awarded for land resumption compensation. Sections 16A and 17 of the Ordinance are the relevant provisions for the Tribunal to award interest. Further, counsel agree that both pre-judgment and post-judgment interests are payable under section 12C of the Lands Tribunal Ordinance, Cap 17 at such rate as the Tribunal may order or in the absence of an order at judgment rate and interest may be calculated at different rates in respect of different periods.

Pre-judgment Interest

6.  For pre-judgment interest, counsel agree that it is the practice of the Tribunal that the starting point is usually fixed at a rate of 1% over prime rate: see Waddington Limited v Chan Chun Hoo Thomas & Ors, CACV10/2014 (unreported, 20 May 2016) and recently applied by this Tribunal in Snowland Ltd v Director of Lands, LDLR2/2014 (unreported, 31 March 2017) and Eltron Development Limited v Director of Lands, LDLR4/2013 (unreported, 28 January 2016 and 18 May 2016). Further, it is also agreed that the party seeking to depart from the usual starting point will carry the burden of satisfying the Tribunal by adducing evidence to prove otherwise. (see Tadjudin Sunny v Bank of America, National Association, CACV 12/2015 (unreported, 20 May 2016) at paragraph 179, namely :-

“179. …With respect to the judge, we are of the view that having regard to the long standing practice of taking 1% over prime as the starting point for the award of pre-judgment interest, any suggestion that this starting point should be changed is something that should be considered only where there is evidence before the court to support such a change. It is, with respect, not satisfactory to proceed on the basis of the impressions (however well founded they may turn out to be) of the individual judge. In the present case, there was simply no evidence to support the suggestion that prime plus 1% was no longer an appropriate point from which to start. On this basic alone, we would be minded to interfere with the judge’s award of pre-judgment interest.”

7.  In essence, the parties have no dispute that the purpose of pre-judgment interest is for the compensation of the applicant being effectively deprived of the use of money and being kept out of pocket of the amount of compensation. The parties therefore agree that 1% over prime rate is a fair and just pre-judgment interest rate.

Post-judgment Interest

8.  As to post-judgment interest, counsel, however, have entirely different views. Mr Ismail suggests that the same “1% over prime rate” should be applied but Mr Chow disagrees and submits that judgment rate should be used.

9.  There is no dispute that the judgment rate is currently 8% per annum which is significantly higher than the usual commercial borrowings rates of 1% over prime rate. The proper question to ask is, therefore, why the applicant is then entitled to this higher rate of interest after the judgment is granted?

10.  In answering this question, Mr Ismail helpfully invites this Tribunal to look at 2 Court of Final Appeal authorities, namely Man Ping Nam v Man Fong Hang (No 2) (2007) 10 HKCFAR 140 and Hong Kong Electric Company Limited v Commissioner of Rating and Valuation (No 3) (2012) 15 HKCFAR 1, in which, Ribeiro PJ provided an answer that:-

“the prescribed judgment rate is generally “charged at a significantly higher rate than applies to commercial borrowings to give the judgment debtor an incentive promptly to satisfy the judgment debt” ” (Hong Kong Electric Company Limited v Commissioner of Rating and Valuation (No 3) (2012) 15 HKCFAR 1, para 36)

11.  Relying on these authorities, Mr Ismail submits that no such incentive or encouragement was needed.  First of all, the applicant’s entitlement of compensation by reason of a consent order is quite different from a judgment after a contested determination. Secondly, since the respondent paid the applicant the Provisional Payment long ago on 1 September 2015 and the Balance Payment was only about 17.07% of the whole sum, the applicant knew that such payment would be honoured because it was to come from the public funds. It is therefore unnecessary to “give the judgment debtor an incentive promptly to satisfy the judgment debt”. Mr Ismail therefore invites this Tribunal to order that the usual commercial borrowing rate of 1% over prime rate should be applied.

12.  Mr Chow however disagrees with these submissions and points out that the facts in the 2 Court of Final Appeal authorities simply do not support them. Further, he submits that it is irrelevant that the payments were to come from the public funds. The same incentive to promptly satisfy judgment should also be given to the public authorities so as to avoid keeping the applicant out of pocket and avoid incurring further interest.

13.  In my judgment, I agree with Mr Chow. The Court of Final Appeal was never asked to deal with the question of post-judgment interest for a “settled” dispute. The Court of Final Appeal was, in fact, asked to decide, when the appeal was allowed, what was the proper interest rate for certain “re-payments” by the losing party to the wining party on appeal for the period between the dates of judgment below and the appeal judgment. I agree with Mr Chow that, in both authorities, the Court of Final Appeal was actually dealing with certain questions on “pre-judgment interest” instead of “post-judgment interest”, and they therefore have no bearing on the question before me.

14.  On the contrary, for the purpose of deciding post-judgment interest rate, I do not see the Court of Final Appeal, in both authorities, have suggested to distinguish judgments after contested proceedings and those obtained by consent.

15.  Although I appreciate that the payments were to come from the public funds and therefore the judgment is likely to be honoured, I agree with Mr Chow that the same incentive to promptly pay for the judgment debt is also needed for avoiding delay.

16.  By reasons of above, I agree with the applicant that the post-judgment interest should be at judgment rate.

Credit for Paid Interest

17.  As per parties’ agreement, credit should be given to the interest which had previously been paid by the respondent to the applicant.

Costs

18.  The parties have no dispute that costs should be to the applicant with certificate for counsel, to be taxed on the High Court scale, if not agreed.

Orders

19.  I therefore order that:-

(1) pre-judgment interest on the Provisional Payment at 1% above the HSBC’s prevailing best lending rate from 12 April 2013 to 1 September 2015;

(2) pre-judgment interest on the Balance Payment at 1% above the HSBC’s prevailing best lending rate from 12 April 2013 to 30 August 2017;

(3) post-judgment interest on the Balance Payment at judgment rate from 31 August 2017 to 13 September 2017; and

(4) costs of this determination be to the applicant with certificate for counsel, to be taxed on the High Court scale, if not agreed.

20.  Lastly, I thank counsel, Mr Chow and Mr Ismail, for their invaluable assistance.