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

HCMP222, 223, 224 AND 225/2015
(Heard together)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 222 OF 2015

(ON AN INTENDED APPEAL FROM LDMR NO. 23 OF 1999)

________________________

________________________

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 223 OF 2015

(ON AN INTENDED APPEAL FROM LDMR NO. 23 OF 1999)

________________________

________________________

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 224 OF 2015

(ON AN INTENDED APPEAL FROM LDMR NO. 1 OF 2005)

________________________

________________________

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 225 OF 2015

(ON AN INTENDED APPEAL FROM LDMR NO. 1 OF 2005)

________________________

________________________

(Heard together)

________________________

REASONS FOR JUDGMENT
________________________

Hon Lam VP (giving the Reasons for Judgment of the Court):

1.  In these applications, the parties applied respectively for leave to appeal against the determination of the Lands Tribunal on compensation payable to the Applicant under the Foreshore and Seabed (Reclamations) Ordinance Cap 127. Both parties obtained leave to appeal from the Tribunal on some of the grounds which they had respectively advanced. However, leave was refused by the Tribunal on some other grounds. They now come to this court to seek leave to appeal in respect of the refused grounds. Neither side has put in any submissions to oppose the other side’s applications.

2.  After hearing the parties, we granted leave to the Applicant to rely on its Ground 5 (as per original numbering[1], same below) but not on the other grounds.  We also granted leave to the Respondent to rely on his Grounds 3, 6 and 10 but not on the other grounds.  

3.  Since it is an appeal from the Lands Tribunal, the applications are governed by s 11(2) and s 11AA of the Lands Tribunal Ordinance Cap 17.  The former restricts appeals from the Tribunal to appeals on the grounds that the determination of the Tribunal is erroneous in law.  The latter, in particular s11AA(6) requires this court to be satisfied that the appeal has reasonable prospect of success or there is some other reasons in the interests of justice for the appeal to be heard before we can grant leave to appeal. 

4.  Further, it has to be remembered that the Tribunal is a specialist tribunal and the Presiding Officer sits with a member who has the relevant professional qualification in hearing cases.  In the present case, the Presiding Officer sat together with a temporary member who has the relevant qualification on valuation. 

5.  Another point which we wish to make at the outset is that by its nature, a leave application should not be regarded as an occasion for a party to rehearse his substantive appeal at length.  The purpose of the leave requirement is to filter out intended appeals (or, in a context like the present applications, intended grounds of appeal) which cannot satisfy the requirements set out at para 2.  At the level of the Court of Appeal, it has to be remembered that a party has already had one go before the Tribunal in seeking leave.  The Tribunal has given a decision in which it had explained why leave is granted or refused.  In this connection, we wish to remind practitioners of the general observations made in Singh Arjun v Secretary for Justice [2014] 2 HKLRD 678 concerning the need to reflect on the refusal of leave at the first tier before renewing a leave application before the Court of Appeal.  As we shall discuss below, the importance of the Tribunal’s decision in refusing leave in the first place cannot be under-estimated and the shift of focus in respect of some of the grounds advanced by the Applicant led us to take the course we did in respect of those “amended” grounds.

6.  Thus, as a general rule, this court does not entertain lengthy oral submissions in a leave application.  Practice Direction 4.1 paragraph 15 imposes a page limit for skeleton submissions in such application to 5 pages. 

7.  In the present case, given the complexity of the matter, we have given more leeway to counsel both in respect of the length of their written submissions and their oral submissions. 

8.  We now turn to the applications by the Applicant.   There are altogether 11 additional grounds which the Applicant sought leave to argue, all of them have been considered and refused by the Tribunal. 

9.  Having heard Mr Chang SC and considered all his submissions (including the written submissions), we decided to grant leave in respect of what he identified as Ground 5.  In respect of the other grounds, subject to what we said below regarding Grounds 9 and 14, we are not minded to grant leave. 

10.  Dealing with those other grounds briefly. First, Ground 2: in light of the discussion at paragraphs 108 to 118 of the judgment of the Tribunal of 15 October 2014, we do not think the Tribunal ignored the evidence on the view prevalent in the industry regarding CT10 and CT 11.  Nor do we agree with the submission that the Tribunal made a finding without regard to the overall evidence.  The Tribunal had given due to the fact that there was some uncertainty over CT10 and CT11 and reflected that in its valuation, see paragraph 428.  In our view, it is an approach which is open to the Tribunal to take and we do not think there is error of law which warrants intervention on appeal.  In substance, the Applicant disagreed with the assessment of the evidence by the Tribunal and the weight it placed on the various matters set out in paragraphs 108 to 118 of the judgment.  This is not an arguable ground of appeal in this type of appeal.

11.  Grounds 6 to 12: Mr Chang submitted that the Tribunal’s various findings on valuation matters were flawed because it failed to take account of relevant matters and erred in principles.  He also submitted that the Tribunal speculated without evidential basis and proceeded against uncontroverted evidence. 

12.  With respect, we do not accept these submissions.  To start with, it has to be remembered that valuation is an art, not a science.  There are matters on valuation which the Tribunal could properly adopt approaches or assess primary materials differently from the views put forward by the expert witnesses and such differences are not error of law, see China Light & Power Co Ltd v Commissioner for Rating & Valuation [1995] 2 HKC 42 at p.46; Hong Kong Electric Co Ltd v Commissioner of Rating and Valuation (No 2) (2011) 14 HKCFAR 579 at paragraphs 6, 116 to 123 and 133.

13.  We have examined the challenges put forward by Mr Chang under Grounds 6 to 12.  In our judgment, subject to the revisions which Mr Chang put forward at the hearing before us (as discussed below) they were all points of valuation, not points of law.  The Tribunal was quite entitled to take the view that the expert of the Applicants’ evidence was flawed for the reasons given by the Tribunal.  As a specialist tribunal with valuation expertise, the Tribunal could exercise its own valuation judgment on the respective subjects as set out in the various paragraphs in the judgment and we do not accept the submissions that those judgments were tainted by speculation:

(a) Rental rates for using the Lot as a godown for mid-stream operation (grounds 6 and 12): paragraphs 326 to 346 of the judgment;

(b) Height restriction adjustments (ground 7): paragraphs 243 to 245 of the judgment;

(c) Quay length adjustment (ground 8): paragraphs 246 to 248 of the judgment;

(d) Location and remoteness adjustment (ground 9): paragraphs 273 to 277 of the judgment; and

(e) Consideration of KCTL comparables (grounds 10 and 11): paragraphs 285 to 315.

14.  Under ground 13, the Applicant contended that the Tribunal should proceed to value the Industrial/Godown area by a rate for ship-repairing use since it found that the land could be used for ship-repairing.  This is to take the finding of the Tribunal out of context. As observed by the Tribunal at paragraph 39 of the Decision on the application for leave (16 Jan 2015), the lot size was also a relevant consideration and it is within the Tribunal’s valuation judgment to take into account of marketability and come to the view that it would be unreasonable to apply the rate for ship-building or ship-repairing on the remaining portion of the Lot.

15.  For the reason given by the Tribunal at paragraph 42 of the Decision of 16 Jan 2015, and bearing in mind what had been said at paragraphs 228 and 229 of the judgment, we agree with the Tribunal that ground 14 as originally drafted is misconceived.

16.  Coming to the application by the Respondent, as in the application by the Applicant, we shall refer to the grounds by reference to their original numbering.

17.  We gave leave in respect of Grounds 3, 6 and 10.  We refused leave in respect of the other grounds.

18.  Ground 1: the Tribunal proceeded on the basis that the deferment attributable to the demolition of the unauthorised structures could be absorbed within the deferment for the construction works. Mr Yim could not explain to us why this was not be a basis which the Tribunal could legitimately adopt in its valuation judgment.

19.  Ground 5: Mr Yim (who appeared on his own at the hearing, though the written submissions were also signed by leading counsel) submitted that the Tribunal should not use $1,200 as starting point for considering the STT comparables in relation to open storage use when the finding was that the optimum use was open storage as opposed to godown. However, the Tribunal ultimately found the KCTL comparables to be the more suitable ones (as advocated by the Respondent, see paragraph 285) and worked out the valuation of mid-stream operation by reference to those instead of the STT comparables, see paragraph 339.  Mr Yim was unable to explain to us why the Court of Appeal should be concerned with the treatment of the STT comparables in such circumstances.  

20.  Ground 7: though it could have been expressed in clearer terms, the Tribunal considered that it would not be necessary to have deferment for the KCTL comparables, see paragraph 67 of the Decision of 16 Jan 2015.  One may legitimately query whether there should be any deferment in respect of the STT comparables. However, in light of the Tribunal’s adoption of KCTL comparables as the more suitable ones (and in view of our refusal of leave to challenge that aspect of the decision), that question is academic.  It does not appear that the expert for the Respondent (or the expert of the Applicant for that matter) had suggested that there should be deferment for the KCTL comparables.  In light of what was said by the Tribunal at paragraph   66 of the Decision of 16 Jan (in which the Tribunal acknowledgment that deferment should not be made in respect of STT comparables), the Respondent could not rely on the treatment of the STT comparables to contend that there should be similar deferment for KCTL comparables.  Whether there should be any deferment in respect of the KCTL comparables is a matter of valuation judgment and we do not think this court should interfere in the present circumstances.

21.  In the course of his submissions, Mr Chang put forward amendments to his Grounds 9 and 14.  Though they were put forward as amendments, in our view there is a significant shift in focus in the amended Ground 9 and the amended Ground 14 is fundamentally different from the original Ground 14. 

22.  We reiterate what had been said in Jenho Development Ltd v Pensonic Technology (HK) Ltd HCMP 277 of 2013, 25 March 2013, concerning fresh grounds of appeal being put forward at a renewed application for leave before this court:

“ 5.  Whilst it is open to an applicant to put forward some fresh grounds of appeal (viz those not advanced before the primary judge when leave was sought below) when he or she applies for leave in this court, the underlying spirit for requiring a leave application to be made in the first instance to the court below is that there could be matters relevant to a ground of appeal which may not be readily apparent on the papers included in the application bundle.   As such, the primary judge, who usually would have first-hand knowledge of the proceedings resulted in the judgment in question, is in a much better position than this court in assessing what are the relevant considerations.   In this respect, this court would be greatly assisted by having the benefit of the relevant considerations identified by the primary judge in the decision on refusing leave.   When a ground is advanced for the first time when a leave application is made to the Court of Appeal, this court would not have such benefit.

6. Thus, this court is entitled to an explanation from an applicant on why the fresh grounds were not advanced below before they are entertained.   Without such explanation, in an appropriate case this court may infer that it is a tactical move by an applicant trying to circumvent the scrutiny of the grounds of appeal by the judge below.   In such case, this court may consider exercising its discretion by refusing leave. 

7. For cases with a proper explanation, if there is no good reason why those grounds should not be considered by the judge below, this court may exercise its discretion in different manners, depending on the circumstances:

(a) if the materials before this court are sufficient to lead to a decision on leave, we may give such decision right away;

(b) if this court has reasons to believe that we may not have all relevant information placed before us, we may direct the party applying for leave to write to the judge below seeking his comments on the fresh grounds.  The comments by the judge would then be taken into account by this court in processing the leave application.”

23.  In the present case, the amended grounds are not straightforward point of law and touched on matters which may involve the specialist valuation judgment of the Tribunal.  Further, how the case was conducted before the Tribunal and the evidence assessed by the Tribunal could have a bearing on the arguability of the same.  Mr Yim said he was taken by surprise by these amendments.  We are not certain we have all the relevant information before us.  In the circumstances, we do not think it is right to allow Mr Chang to proceed with those amended grounds before us without first seeking the views of the Tribunal on the same.  We therefore directed the Applicant to make an application for leave before the Tribunal on these amended grounds within 7 days if it wishes to pursue these grounds.  Matters can be taken from there and we trust the Tribunal would provide us with the necessary assistance in dealing with these grounds.    

24.  Though neither party can be said to be wholly successful (since we refuse to grant leave on some grounds), bearing in mind that neither of them oppose the other’s applications, we think as fair order of costs for these applications is to order the same to be costs in the cause of the appeals.  We have so ordered at the hearing.

Mr Denis Chang SC, Mr Johnny Ma and Mr Jeremy Chan, instructed by Wilkinson & Grist, for the applicant

Mr Valentine Yim, instructed by the Department of Justice, for the respondent