MRS. VERONICA BOURKE v. MAXWELL INDUSTRIAL BUILDING MANAGEMENT CO. LTD.

Head Note

Review - Approach in exercise of Discretion - New tenancy - Valuation - Prevalent Market Rent

LDNT 345/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

NEW TENANCY APPLICATION NO. 345 OF 2000

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JUDGEMENT

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I. Introduction

1. This is an application for review by the Respondent on 16th November 2001 under Section 11A of the Lands Tribunal Ordinance, Cap. 17 of the decision of this Tribunal given on 19th October 2001 ("the Judgment"). Section 11A provides that :-

"11A. (1) The Tribunal may, within 1 month from the date of any decision by it, decide to review that decision and, on such grounds as it may think sufficient, may set aside, reverse, vary or confirm it."

2. In support of its application, the Respondent filed an affirmation of Chan Kai Leung dated 16th November 2001, applying for review of the following decisions of the Judgment :-

(a) that no adjustment of the sum of HK$30,000 in the valuation of the prevailing market rent is necessary, and reference was made to paragraphs 29 to 31 of the Judgment ;

(b) that when comparing the subject premises and Comparable CA2, two factors ought to have been taken into account, namely, that :-

(i) the subject premises had a better layout than Comparable CA2 ;

(ii) the subject premises is a "corner premises" on the First Floor, with windows on 3 sides and therefore commands a better view.

3. In support of Ground (b), the Respondent adduced a "supplemental" report by his expert, Mr. Brian Li.

4. The Applicant in response filed an affirmation of Wong Ngai Lee Barbara dated 19th December 2001, also enclosing a supplemental report of Mr. Simon Lynch.

II. The Proper Approach in review

5. Section 11A(1) of the Lands Tribunal Ordinance provides that this Tribunal may review its decision and "on such grounds as it may think sufficient" may set aside, reverse, vary or confirm it.

6. Under Section 11A(4) of the same Ordinance, the Tribunal may, in any review, hear and receive any decision it thinks fit for the purpose of determining the issue between the parties.

7. No doubt the Tribunal has a discretion to exercise its jurisdiction to review its decision where there has been a trial or hearing on merits. Upon what principles then should this jurisdiction in this case ought to be exercised ? In my judgment, Section 11A was designed to do justice between parties. It is an injustice to the winning party to be deprived of the fruits of the judgment. If the losing party is allowed to merely repeat what it had already said in the previous hearing this can amount to an abuse. If a party is allowed to adduce new evidence at the review hearing and such evidence could be obtained with reasonable diligence for use at the hearing, this could also amount to abuse. The exception is perhaps where the opposing party is not taken by surprise.

8. On the other hand justice must be done and where justice clearly lies it should not prevent a party from repeating himself on important point of law and adducing evidence of material importance or even decisive notwithstanding this could have been obtained earlier. The procedure of the Tribunal was designed to be more flexible than a court where procedures and rules of evidence are expected to be followed. This view is also supported by the fact that under Section 11A(4), it is expressly provided that this Tribunal may hear decisions, and those decisions would necessarily include those decisions which had not (but should have) been put forward in the initial hearing before the Tribunal, notwithstanding the Tribunal is being asked to look at the same issues again at the review hearing. However, in a case where the parties had all along been legally represented and with assistance of experts, the discretion to review would normally be exercised more stringently than say where parties were unrepresented at the initial hearing.

9. What then is the scope for review in a case such as the present one ? This is a case for determination of prevailing market rent where valuation experts play a large part. There is no shortage of expertise and indeed the Respondent's expert had been involved in a previous case on a similar property in the same development. The previous case was considered too long ago, in case no. LDNT 123/2000 and judgment was given on 22 February 2001. The Respondent is the landlord and owner of the previous property and indeed of the units of the whole development. The Respondent was in a relatively better position to provide evidence necessary for determination of the prevailing market rent. Where commercial information is required but touched upon commercially sensitive information safeguards might be necessary for disclosure but this is not such a case and certainly the Respondent has not made any such suggestion.

10. In my view, it would be appropriate that this Tribunal should proceed on the following exercise :-

(a) if there be new evidence adduced, then that evidence must be evidence which is of material importance or decisive, and could not be obtained with reasonable diligence for use at the hearing, otherwise there ought to be a proper explanation from those who seek to adduce that evidence as to the delay of adducing it ;

(b) if there be no proper explanation of the delay, then in the absence of fresh arguments on point(s) of law, this Tribunal should be slow in exercising its jurisdiction to review ;

(c) if there be proper explanation of the delay, then this Tribunal should proceed to review its decision.

III. Ground (b)

11. In respect of this ground the Respondent relies upon the supplemental report of Mr. Brian Li. This report sought to adduce mainly evidence as to the difference between a comparable (Comparable CA2) and the subject premises. At the hearing of the review, the Respondent rightly conceded that this report sought to adduce new evidence. This evidence could have been obtained with reasonable diligence for use at the hearing. There was no explanation of the delay in advancing evidence in the supplemental report of Mr. Brian Li. The Respondent at my invitation was not able to give any. The Applicant complained that Mr. Brian Li had previous experience in this Tribunal and could not have missed the Applicant was relying upon Comparable CA2 as the better comparable for the subject premises. The Respondent is the owner of another premises in the same development which the Tribunal had been asked to consider the prevailing market rent not so long ago.

12. I accept the complaints of the Applicant. Both Mr. Lynch's and Mr. Li's expert reports adduced at the previous hearing had considered a number of comparables within the same development including Comparable CA2. The parties had been asked to provide list of their differences and at the invitation of this Tribunal this was further revised. The parties were also given the opportunity of providing written final submissions. The Respondent had ample opportunity to raise the point that if their valuation is not accepted then Mr. Lynch's comparables should be properly adjusted, including that of Comparable CA2. This had not been done. No explanation of lack of opportunity or the delay in adducing Mr. Li's supplemental report had been offered.

13. In the exercise of my discretion, I consider that the supplemental report of Mr. Brian Li should not be admitted. Therefore it would not be necessary to consider Mr. Lynch's supplemental report.

14. Ground (b) would therefore fail.

15. Even if I were to exercise my discretion to admit the supplemental report of Mr. Brian Li, the result would have been the same. Mr. Brian Li sought to argue (which as an expert should not normally do) that the subject premises was better located than Comparable CA2. The subject premises, so it was claimed, was located at the southern corner of the development, and there were three windows (as compared to only one in Comparable CA2. Mr. Li then went on to give a +1.5% adjustment to the unit rate.

16. The Applicant said the 1.5% was not supported by evidence. I am satisfied that no sufficient evidence had been adduced. This must be right, bearing in mind the corner where the subject premises was located and the direction which the windows were facing all opened to heavier road traffic. There is no objective foundation upon which 1.5% had been derived.

17. Secondly, Mr. Li said Comparable CA2 had only 3 bedrooms and the subject premises had 4 bedrooms. He then went on to say there was "hot" demand for such larger units. I find the evidence given by Mr. Li simply insufficient to show there was any greater demand for the subject premises than Comparable CA2. Evidence of demand should normally be adduced by the landlord or his property agent and supported by a full picture of speed of take up rates with rental figures properly adjusted. The evidence of Mr. Li in his supplemental report is piecemeal and selective. There is no explanation on why a full picture could not be presented in the present case. The lack of objectively of Mr. Li's supplemental report is quite apparent.

IV. Ground (a)

18. In respect of Ground (a), while accepting Clause C(4) of Second Schedule of the tenancy of the subject premises is unique to the subject premises, the Respondent suggested that "Comparable CA2 might also suffer from similar degree of defects as they were in the same development, or there is no evidence to show that Comparable CA2 had a better internal condition". So the Respondent argued that there should not be an adjustment of $30,000 per annum (or $1,250 per month) to the rental. The Applicant said that the Respondent were in a better position to give discovery. Secondly, the Applicant adduced a copy of a quotation indicating the repair costs was much larger than $30,000.

19. I am satisfied with the Applicant's arguments. There is no explanation from the Respondent as to why the internal conditions of both the subject premises and Comparable CA2 could not be properly surveyed. It is important to note that this is the second case within a relatively short period of time in which the Tribunal had been asked to consider the prevailing market rent in the same development in which the Respondent is the owner. The same expert has been engaged by the Respondent. The Respondent cannot complain that it does not have the means to advice and expertise.

V. Conclusion

20. I would therefore order that the Respondent's application for review be dismissed.

21. As regards the question of costs, I consider this is a suitable case that the Respondent should pay the costs of the Applicant. In the exercise of my discretion I shall give an order nisi that the Respondent should pay the costs of the Applicant of and occasioned by the application for review by the Respondent, including costs of the hearing on 27 December 2001 on a party to party basis. Both parties will have leave to apply within 14 days to vary or discharge this costs order.