LUCK MOST LTD AND OTHERS v. GOOD MOVEMENT LTD

LDCS 11000/2020

[2022] HKLdT 43

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 11000 OF 2020

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BETWEEN

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DECISION

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1.  There are 2 summonses before me today and I shall first deal with the summons taken out by the applicants. This is a summons to expunge 3 of the expert reports filed by the valuation expert of the respondent from Court file and inadmissible for these proceedings.

2.  As background, this is an application under Cap. 545 for compulsory sale of Nos. 10 & 12 of Matheson Street (“the Property”). The only respondent is the owner of 5/F, 12 Matheson Street, as the applicants have acquired all the other units.

3.  I begin my consideration on some procedural matters.

4.  Mr. Chain, counsel for the respondent suggests that the Lands Tribunal may not have the jurisdiction to hear the application, i.e., an application to exclude the expert report at the interlocutory stage. He refers to the judgment of Deputy Judge Wong (as he then was) given in Chung Wing Fat Polybag Printing Factory Limited v Secretary for Transport, LDRW 15/2001, (unreported and handed down on 7 April 2005). Deputy Judge Wong referred to the judgment of Hon Chung J given in Ko Chi Keung v Lee Ping Yan [2001] 1 HKLRD 830 when considering a similar challenge to the jurisdiction of the High Court. Hon Chung J came to the conclusion that the power to rule on the admissibility of expert evidence before trial derives from the inherent jurisdiction of the High Court. As the Lands Tribunal is a statutory creature, it does not have inherent jurisdiction. Deputy Judge Wong also considered the old section 10(1) of the Lands Tribunal Ordinance and concluded that Lands Tribunal has not been conferred with power to exclude evidence of a witness before trial.

5.  It must be noted that section 10 has been amended in 2009. And the current section reads:

“(1) The Tribunal may, so far as it thinks fit, follow the practice and procedure of the Court of First Instance in the exercise of its civil jurisdiction, and for this purpose, has the same jurisdiction, powers and duties of the Court of First Instance in respect of such practice and procedure.”

6.  Mr. Mok, counsel for the applicants refers me to a later judgment by HHJ Wong given in First Kind Ltd v Yuet Loong Investment Co Ltd [2018] 2 HKLRD 83 when HHJ Wong agrees that the new section 10 has extended the powers of this Tribunal with inherent jurisdiction of the High Court, which I agree. Before the opening, Mr. Chain agrees to abandon this argument, and this discussion is included for completeness.

7.  And I would add this, in the case management regime, Court would be proactive in case management and the exclusion of expert report must be part of the case management power, both to save costs and the Court’s time. Mr. Mok also refers to a Direction issued by the President of the Lands Tribunal dated 12 February 2009 which provides that the Tribunal shall adopt a flexible approach in adopting the new measures under the Civil Justice Reform. In particular, Order 1A, and rule 4A and Part IV of Order 38 of the Rules of High Court on expert evidence are applicable in the Lands Tribunal.

8.  I also remind myself the principle given by the Court of Appeal in Good Faith Properties Limited and others v Cibean Development Company Limited [2014] 5 HKLRD 534 that:

“a. The Tribunal should exercise firm and effective case management to ensure that its proceedings are conducted efficiently and in a proportionate manner; and

b. The Tribunal should impose costs sanction against unreasonable litigation conduct, including the unreasonable rejection of reasonable offers.”

9.  While not strictly on the issue, I see no reason why the power to limit expert report is not within the case management power of this Tribunal, and why it should not be exercised before the trial, as in High Court civil cases. Under this legal background, I would now consider the application by Mr. Mok.

10.  Order on expert evidence on valuation has been given by the Tribunal on 12 October 2020 (“October Order”). Paragraph 3 of the order read:

“Leave be granted to the Applicants and the Respondent to call no more than 1 expert witness on each side at the trial in each of the following 3 disciplines, namely, (a) valuation; (b)…”

11.  The valuation report by the respondent’s expert, Mr. Raymond Hui has been filed on 30 July 2021. In fact, he has filed 4 reports at the same time. Report 1 is the report on the EUV and RDV of the Property (“Report 1”). For the other 3 reports, they all started with the EUV of the Property which is the exact copy of Report 1.

12.  The 2^nd report gives the RDV of Nos. 9, 9A & 9B Sharp Street East and Nos. 10, 12, 14 & 16 Matheson Street (“Report 2”). The valuation covers the Property and some adjacent lots. The 3^rd report gives the RDV of 5, 7, 9, 9A & 9B of Sharp Street East and Nos. 10, 12, 14, 16 & 18 of Matheson Street (“Report 3”). And report 4 given the RDV of 5, 7, 9, 9A & 9B of Sharp Street East, Nos. 10, 12, 14, 16 & 18 of Matheson Street, and Leighton Centre (“Report 4”). There is no valuation on the RDV of the Property itself given in these 3 reports.

13.  First, Mr. Mok argues that no leave has been granted for the filing of Reports 2-4 as these reports give no RDV valuation of the Property.

14.  Mr. Chain, counsel for the respondent argues that the October Order covers all the 4 reports by Mr. Raymond Hui. I cannot agree.

15.  It is correct to note that the order for leave to the parties to adduce expert evidence by, inter alia, a valuer, does not specify that the opinion is on the EUV and RDV of the Property. And different from civil cases, there is no issues set out for comment and opinion by the expert. But it cannot be understood to grant leave for the parties to adduce whatever opinion by a valuer that the respondent wishes to adduce. The order is given to parties to prepare evidence for the Application and must be understood to give leave to the parties to adduce valuer’s report on the EUV and RDV of the Property. Without further explanation by the expert on how the valuation relates to the Property, the RDV for other lots would not be covered by the order.

16.  Assuming I found the reports are adduced without leave, Mr. Chain submits that he could apply for leave to adduce them. With consent from Mr. Mok, I would accept the oral application of Mr. Chain on behalf of the respondent for leave to file these reports if I found that these reports are relevant.

17.  Mr. Chain submits that these reports would be relevant to the argument on issue of merged site factor or special interest factor on the RDV of the Property. It is the argument of Mr. Mok that the assessment of merged site and special interest factor on the valuation of the Property are not matters that this Tribunal should take into account in assessing the reserved price of the Property, if an order for sale is to be granted. He relies on the case law he set out in his written submission which I do not repeat. He invited me to strike out the reports on the ground that they are for unarguable basis of valuation. Mr. Chain submitted that this would be a pleading point and if Mr. Mok wishes to take this point, he should first apply to strike out those paragraphs in the Amended Notice of Opposition.

18.  I agree with Mr. Chain that I should not rule on the admissibility of these reports by determining whether the issues of merged site and special interest factor are arguable at the trial without taking care of the pleading point at the same time. It runs the danger that if I struck out these reports without striking the corresponding parts in the Amended Notice of Opposition, technically Mr. Chain still can run the argument at trial. If he were successful, this Tribunal would be derived of expert evidence to assess the effect of merged site and/or special interest factor on the RDV and hence the reserved price of the Property for auction.

19.  Mr. Mok orally applied to include an application for striking out, but later agreed to give up this argument for the time being. He would consider taking out separate application for striking out the relevant paragraphs in the Amended Notice of Opposition related to merged site and special interest factor. But he retains his argument that the reports should be struck out for being irrelevant and unhelpful.

20.  As a remark, parties must be familiar with the principle that the Notice of Application and Notice of Opposition are strictly speaking not pleadings, but serve the purpose of letting the other parties know the issues and evidence that he would be facing. However, in Grand Power International Ltd v Chan Sing Hoi Enterprises Ltd and others, [2020] 2 HKLRD 142, the Court of Appeal held that the Judge below is clearly in error in supposing that no real prejudice would be occasioned to the applicant in allowing the respondent to run an unpleaded case. The Notice of Application and Notice of Opposition were prepared with such details in no way different from a pleading. Even if the Notice of Opposition is not to be treated as a pleading, it can hardly be regarded as giving “fair indication” of the issues likely to be raised. And the Judge below should not allow the respondent to run an unpleaded case. Hence application of striking out issues raised in Notices filed in the Lands Tribunal is a proper case management step and may shorten the length of trial.

21.  Having resolved the procedural matters, I shall come back to the applicants’ only objection to these reports.

22.  And the main and remaining objection by Mr. Mok is that there is no opinion on the RDV or enhanced RDV of the Property in Reports 2-4 and the Tribunal would have no assistance from these reports, even if Mr. Chain is successful with his argument on merged site and/or special interest factor. Hence the reports should be expunged from the Court file and inadmissible at trial.

23.  In opposition, the respondent filed an affirmation of Mr. Hui. The respondent later filed another application to file the 5th report of Mr. Hui (“Report 5”), which claims to explain why he has to prepare Reports 2-4. I shall come to Report 5 later.

24.  And there is a joint statement on the Property prepared by Mr. Hui with the expert of the applicant, Mr. Charles Chan. This is prepared on the bases of the valuation report prepared by Mr. Charles Chan and Report 1 of Mr. Hui. As explained in Mr. Hui’s affirmation, no joint statement for Reports 2-4 have been prepared because Mr. Chan refused. Mr. Hui agrees that the disagreement should be set out in the joint statement, which he has not.

25.  If I take Report 2 as an example, the RDV is in respect of a bigger Lot which consists of the Property. There is no apportionment to reflect the RDV of the Property. Mr. Mok submits that there is no linkage to Report 1, which is the RDV of the Property. Hence, if this Tribunal agrees with Mr. Chain on the merged site or special interest factor argument, it is impossible to assess what is the additional RDV value that should be added to the Property over and above the figure in Report 1, or how to assess the enhanced value.

26.  Mr. Mok submits that for Reports 2-4, and Report 5 to be relevant and admissible, they should serve the function of informing this Tribunal and the applicants at least the following questions on the pleaded special interest:

(1) What is alleged to be the quantum of the value of the special interest of the Property?

(2) What are the relevant steps of the valuation exercise to assess the quantum of the special interest of the Property?

(3) What are the justifications for the valuation exercise and assessment?

27.  And at this junction, I should also refer briefly to the Amended Notice of Opposition. It is pleaded in paragraph 1(b) that “the respondent avers that in assessing the value of its property, in particular its redevelopment potential, the applicants ought but have failed to have regard to any or all of the [matters pleaded in paragraph 1(b)].” I do not repeat all the matters set out in paragraph 1(b)(i) to (xxiii).

28.  Mr. Mok interprets the contention of the respondent as pleaded is that the Property would be of “special interest” to the majority owners in the lots set out in that paragraph. He refers specially to paragraph 1(b)(xxiii) and I also set out 1(b)(xxii):

“(xxii) based on the above, it is the respondent’s belief that on the basis the 10 sub-lots in Inland Lot No. 734 are given equal shares, Hysan Group and those companies related to or beneficially owned or controlled by it will together be the majority owners holding over 80% in Inland Lot No. 734,

(xxiii) in the premises, some or all of the sub-lots in Inland Lot No.734 including [the Property] are at least potentially capable of being redeveloped together, and possibly even together with Inland Lot No. 1451, and therefore are or will be of special interest to the current majority owners (including all the Applicants in all the other applications under Cap. 545 referred to above) irrespective of whether they (or some of them) are related to or beneficially owned or controlled by the Hysan Group.”

29.  Mr. Mok suggests that merged site factor is not pleaded. The claim is on special interest.

30.  Mr. Mok also explains the difference between special interest as a factor to enhance the value of the subject lot, and the concept of the RDV of a subject lot to be derived from the assessment of a hypothetical development of a merged site formed by the subject lot and some adjoining lots. His main argument is the Reports 2-4 do not provide the RDV of the Property on its own, or explain how the redevelopment value of the Property would be enhanced. It is not helpful and could not assist this Tribunal to assess the reserve price of the Property, if the merged site or special interest factor is adopted. They are therefore irrelevant and inadmissible.

31.  The distinction between special interest and merged site factor is agreed by Mr. Chain. However, he submits that when the respondent pleads redevelopment potential, it covers both factors. And the report on RDV is just a piece of expert evidence to be considered by this Tribunal and to fix the reserved price of the Property. And whether these 2 factors, or any of them may be accepted is a matter of finding of facts. But for today’s purpose, I would simply take it that merged site and/or special interest factors are raised as issues that may affect the redevelopment potential of the Property.

32.  Mr. Chain also submits that the applicants are wrong to say that the report must set out the RDV of the Property. He submits that it is not necessary, at least for the purpose of admissibility.

33.  This may be a convenient time to look at Report 5, the report that the respondent seeks to adduce by its summons, and which Mr. Hui seeks to explain why Reports 2-4 are necessary and admissible.

34.  Mr. Hui said in paragraph 3 that “a property valuation report lets the surveyor to express their professional opinions on and findings about the market value of a property. The surveyor always takes into account the specific purpose of the valuation, whether it is to sell, to buy, to let, or for another reason altogether. In this case, the market value of a redevelopment [of the Property] has to be assessed. It is vital for [him] to decide the basis of valuation and the use of valuation methodology that why the report has been written in the first place.” It is not clear the basis of valuation or methodology he is referring to in the Report 5, or Reports 2-4.

35.  He said at paragraphs 4-5 that according to his own research, Hysan Group is very active in the property market of Causeway Bay recently and has very strong interest in acquiring developing sites. He then explains the enhancing effect when more than one lot is developed together and I do not repeat.

36.  He opines that given Hysan Group’s interest in the vicinities, the market value of the Property would not be limited to the RDV of the Property, but would definitely be of a higher figure. And if that is his opinion, how is the higher figure for the Property to be assessed? Unfortunately, this has not been stated in Report 5, or the other reports.

37.  He goes on to consider the various possibilities of merge sites and explains why he selects the scenario of merged sites in each of his Reports 2-4. He claims that they are to assist the Tribunal to arrive at an appropriate reserved price.

38.  Mr. Mok submits that Report 5 does not provide any information on how the 3 RDVs obtained from Reports 2-4 relate to any of the crucial questions on the special interest of the Property that I set out in paragraph 26 above. It would prejudice the applicants and is wrong in principle to fair litigation.

39.  In considering admission of expert evidence, relevance and probative value are two of the key considerations, equally for valuation reports for application under Cap. 545. To consider the relevance, one has to consider the pleaded case of the parties. And as there is no direction given on the issues to be commented by the experts, my consideration would start with the record of instruction given to the expert in the report itself, and compare that with the pleaded case. I would use Report 2 again. On page 1, the instruction given as follows:

“I refer to your recent instruction for me to prepare a valuation report on the following basis:

(i) Existing Use Value (“EUV”) of the Property as at 31 March 2020; and

(ii) Redevelopment Value (“RDV”) of Nos. 9, 9A & 9B Sharp Street East and Nos. 10, 12 14 & 16 Matheson Street, Causeway Bay as at 4 February 2021.”

40.  Besides these 2 paragraphs, he has not mentioned that he was instructed specifically to take into account the special interest as pleaded to comment on the enhanced value. For these reports to the relevant and of probation value, one has to look at the pleaded case. In fact, at paragraphs 4-5 of Report 5, he explains that he had done he own research and considered, because of the land ownership of Hysan Group, the market value of the Property would not be limited to the figure of the so-called RDV in both Report 1 and the report of Mr. Charles Chan, but would definitely be of a high figure.

41.  As an example, Mr. Mok complains that Report 2 is for the RDV of 9, 9A & 9B Sharp Street East and 10, 12, 14 & 16 Matheson Street. It has not set out the RDV for the Property in the merged site scenario. But what is missing is his opinion of the enhanced figure of the Property, or how the RDVs of the larger lot is to affect the RDV of the Property. How is Report 2 helpful?

42.  There appears to be no instruction to assess the quantum of the special interest, or to assess the RDV of the Property by taking into account of the special interest as pleaded. Mr. Chain said the quantum is to be determined by this Tribunal after trial, and RDV is just a factor to be considered. But I agree with Mr. Mok that for the expert report to be relevant, it has to set out the methodology it employed to arrive at the enhanced value of the Property for special interest factor or merged site factor. Otherwise, they cannot assist this Tribunal. And I do not expect the expert to supplement his opinion when giving oral evidence, as this is a matter that he should comment on at the early stage, or otherwise the applicants would be prejudiced.

43.  Mr. Chain suggests that the RDV could be apportioned according to the area of each lot to show the enhance RDV for the Property. He further submits that there are many possibility of the mode of development, assuming that he could convince this Tribunal that the Hysan Group controls the adjacent lots to the Property. And at the end, it is a matter of assessment by this Tribunal as to the increase that should be allowed for the Property taking into account of the merged site or the special interest factor.

44.  Mr. Mok responded that, from his experience in this Tribunal, when question of merged site or special interest assessment has to be apportioned, there has been apportionment by EUV. It is possible for apportionment according to RDV of each lot, or their respective area. The expert has to work out the apportionment and his reason for choosing that basis in order to be helpful to this Tribunal. I agree and would add, if the respondent consider the basis of assessment a matter of law and he has argument with the applicants on say 2 apportionment methods, all the experts should be instructed to do is to apportion for both methods and leave the final decision on apportionment method to be adopted by this Tribunal after trial.

45.  As I am not ruling on whether the special interest factor or merged site factor may be arguable, I am proceeding on the basis that if they were argued, are the reports relevant and helpful. As Mr. Mok submitted and which I agree, the merged site and special interest factor would affect the reserved price to be set for the sale of the Property. We have the RDV of the Property (Report 1). And I believe Mr. Chain would argue that because of the merged site and/or special interest factor, the reserved price would be higher. He submits that the question is ultimately a ruling by this Court. I agree. But that does not mean the expert could prepare his reports 2-4 without reference to the enhanced value of the Property or the methodology to assess the enhanced value for the reports to be admissible.

46.  It is sufficient for today to say that these reports are unhelpful and of no probative value without the apportionment of RDVs and/or methodology being set out as how the RDV in Reports 2-4 would affect the RDV of the Property. Report 5 is also not helping at all.

47.  On the apportionment point, Mr. Chain has suggested in his closing that his expert could supplement that by giving a supplemental report. I am not going to consider this suggestion without sight of the further supplemental report. And if necessary, I believe that should be a separate application.

48.  And with the above analysis, I come to the conclusion that the reports 2-4 are not the reports for the valuation of the Property and not covered by the October Order. And in the alternative, they should be struck out for being irrelevant, unhelpful and inadmissible. And Report 5 should not be admitted.

49.  I therefore order and direct as follows:

(1) As no leave have been given for RDV of the lots as set out in Reports 2-4, and in any event, in their current position, they are not relevant or helpful, I would expunge Reports 2-4 from the Court file and inadmissible;

(2) For better case management, the applicants shall confirm with the respondent within 14 days if they are to take out an application to strike out part of the Amended Notice of Opposition. If the answer is affirmative, and subject to further direction of this Tribunal, further directions on expert report shall be given after the hearing of the summons for striking out or immediately thereafter;

(3) If the applicants elect not to strike out the Amended Notice of Opposition, the respondent shall advise the applicants if further directions on expert evidence is necessary. The parties shall endeavor to agree the issues for comment on the special interest factor and/or merged site factor by the valuers of the parties. And failing agreement, parties may apply to this Tribunal for directions.

50.  And for this hearing, parties should be aware that costs in Cap. 545 applications has special consideration. I note the applicants ask for costs. I would suggest the issue be determined by paper disposal and parties shall jointly report if that is agreeable, failing which the applicants shall fix a short hearing before me with 1 hour reserved. And to save costs, attendance of Counsel at such hearing could be excused.

51.  And I dismiss the respondent’s summons and the costs shall be dealt with at the same time with the applicants’ summons.