HAPPY DRAGON RESTAURANT LTD v. DIRECTOR OF LANDS

LDLR 17/2006

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Lands Resumption Application No. 17 of 2006

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DECISION

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Background

1.  On 28 April 2009, we gave judgment in this case and awarded no compensation to the applicant.  We also ordered that 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.  On 27 May 2009, upon the applicant’s application for review, we decided not to review our judgment.

2.  The applicant then appealed to the Court of Appeal.  On 30 March 2010, the Court of Appeal set aside our judgment and ordered that:-

“(1) compensation for disturbance in the sum of $5,337,969 be paid to the applicant within 14 days of the date of this judgment, together with interest to be paid on such sum at the rate of 1% over Hong Kong prime rate from time to time prevailing for the period commencing on the date of resumption until the date of judgment herein, and thereafter upon the resultant sum at the judgment rate from time to time prevailing until payment; and

(2) the issue of quantum under the extinguishment claim be remitted to the tribunal for determination.”

3.  On 4 October 2011, pursuant to the order of the Court of Appeal and after hearing submissions from the parties, we ordered that:-

“compensation for extinguishment of the Applicant’s business in the sum of $7,027,710 be paid to the Applicant. The matters of professional fees, interest and costs shall be adjourned to a date to be fixed, with liberty to apply for any other ancillary and consequential matters.”

4.  On 12 December 2011, the applicant took out a summons asking for an order that:-

“1. the Respondent do pay to the Applicant interest on the compensation for extinguishment of the Applicant’s business in the sum of HK$7,027,710 at the rate of 1% over Hong Kong prime rate from time to time prevailing for the period commencing on the date of resumption until 4th October 2011, and thereafter at the judgment rate from time to time prevailing until payment in accordance with the order made by the Court of Appeal in CACV 201 of 2009; and

2. Costs of this application be to the Applicant in any event.”

5.  On 19 December 2011, the applicant took out another summons asking for an order that:-

“1. the Respondent do pay to the Applicant costs of and occasioned by the Applicant for determination of the compensation for extinguishment pursuant to the Order of Court of Appeal in CACV 201 of 2009 dated 30th March 2010 with certificate for 2 counsel and the professional fees incurred by the Applicant for the whole proceedings, the amount of which shall be taxed and/or assessed by the Tribunal; and

2. Costs of this application be to the Applicant.”

6.  Both summonses were heard together by us on 10 January 2012.  Only two issues are contested by the respondent, namely the interest should be at the lowest time deposit rate and one certificate for counsel should be allowed instead of two.

Interest rate

7.  The applicant submits that interest rate is at the discretion of the tribunal and/or the court hearing the matter. Sections 17(3), (3A) and (3B) of the Lands Resumption Ordinance, Cap 124 (“the LRO”) merely provide the tribunal and/or the court hearing the matter some reference or guidance but do not fetter the discretionary power at all.  As the Court of Appeal has already ordered the interest rate for compensation for disturbance to be at 1% over HK prime rate and both compensation for disturbance and compensation for extinguishment arose from the same series of fact and/or same cause of action, there is no reason that interest rate on the two heads of claims should be awarded differently.

8.  The applicant further submits that the issue of interest has become res judicata between the parties and the respondent is not open to argue this again, more so in the present case when the respondent had unsuccessfully sought leave to appeal on various matters including interest rate awarded on the compensation for disturbance. Thus, for the compensation for extinguishment, the applicant asks the tribunal to adopt the same interest rate as adjudicated by the Court of Appeal regarding the compensation for disturbance.

9.  We, however, agree with the respondent that the applicant’s submissions are incorrect.  Sections 17(3), (3A) and (3B) of the LRO stipulates that:-

“(3) Subject to section 16A(3), any sum of money payable as compensation by virtue of a determination of the Lands Tribunal or an agreement under this Ordinance shall bear interest from the date of resumption of the land until the expiration of the time specified in the notice referred to in subsection (2). No interest shall be payable on any costs or remuneration.

(3A) Subject to subsection (3B), the rate of interest for the purposes of subsection (3) shall be such rate as the Lands Tribunal may fix.

(3B) The rate of interest fixed under subsection (3A)-

(a) in respect of a working day must not be lower than the lowest of the interest rates paid on deposits at 24 hours' call by note-issuing banks at the close of business on that day; and
(b) in respect of a non-working day must not be lower than the lowest of the interest rates paid on deposits at 24 hours' call by note-issuing banks at the close of business on the last working day before that day.”

10.  It is clear from the above provisions that although the tribunal has discretion to fix the interest rate under section 17(3A), the discretion is expressly made subject to the provision in section 17(3B), ie it must not be lower than the lowest of the interest rates paid on deposits at 24 hours’ call by note-issuing banks.  In other words, the tribunal’s discretion is not “unfettered” as suggested by the applicant, but is restricted by these statutory provisions.

11.  In Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111, the Privy Council held that although section 17(3A) of the Ordinance gave the Lands Tribunal a discretion as to the rate of interest on the compensation awarded, the rate should be the lowest time deposit rate as specified in that subsection unless there were good reasons for fixing a different rate.  Lord Nicholls, in that case, delivered the following judgment:-

“In their Lordships’ view, in requiring the tribunal to have regard to the lowest time deposit rate the legislative purpose must be that this should be the rate fixed by the tribunal unless in the particular case there is good reason for departing from it. The rate specified is a low one, but the legislature must be taken to have intended that ordinarily this should be adequate recompense to a claimant for being kept out of his money. This would not cover a case where one of the parties has behaved unreasonably, and by his conduct protracted the time taken in determining the claim. In a suitable case that could furnish good reason for the tribunal fixing a higher or lower rate, depending on who was at fault.”

12.  Lord Nicholls’ judgment was adopted and applied in many cases, such as Gain Talent Development Limited v The Secretary for Environment, Transport and Works, LDMR 7 of 2003, Mingo Properties Limited v The Director of Lands, LDLR 6 of 2005, and So Kee Transportation Co Ltd v The Secretary for the Environment, Transport and Works, LDRW 36 of 2003.

13.  We also follow Lord Nicholls’ judgment.  Thus, the applicant has to establish a good reason for departing from the general rule that the interest should be the lowest time deposit rate as specified in section 17(3B) of the LRO.  However, we do not find that the applicant has established any good reason for the departure from the general rule.

14.  First of all, we do not find that the respondent had behaved unreasonably or that the time in determining the claim was protracted by the respondent’s conduct.  As held in So Kee Transportation Co Ltd, supra, the respondent was entitled to raise legal objections to the applicant’s right to claim compensation.  We had in fact ruled in favour of the respondent.  It shows that the respondent’s objections are not totally without merit.  The mere fact that the Court of Appeal ruled against the respondent on appeal does not render the respondent’s conduct of the proceedings unreasonable.

15.  The fact that the Court of Appeal awarded interest for compensation on the disturbance claim at the rate of 1% over Hong Kong prime rate does not establish a good reason to depart from the general rule either.  The Court of Appeal gave no reason for the interest award and did not refer to sections 17(3), (3A) and (3B) of the LRO or the case of Shun Fung Ironworks Ltd, supra, in its judgment.  In fact, we had not decided on the question of interest and there was no judgment on interest by the tribunal for the applicant to appeal to the Court of Appeal.  It is not disputed that the applicant advanced no grounds of appeal relating to interest and did not address this issue at the hearing of the appeal.  Thus, the Court of Appeal had not had the opportunity to hear arguments on this issue before it made the decision to award the rate of 1% over Hong Kong prime rate.

16.  The respondent tried to raise the question of interest with the Court of Appeal at the application for leave to appeal to the Court of Final Appeal.  The Court of Appeal refused leave to appeal to the Court of Final Appeal on the ground that no “exceptional circumstances” were shown.  The Court of Appeal also noted that “the respondent never addressed the court at the appeal hearing on the appropriateness or otherwise of awarding interest at 1% above prime”.  Clearly, the question of interest was never argued at the appeal.

17.  As the Court of Appeal did not indicate why the case of Shun Fung Ironworks Ltd, supra, was not followed, nor give any reason for awarding interest at 1% above prime, we see no reason to ignore Shun Fung and blindly adopt the rate awarded by the Court of Appeal.  We do not think that it is a good reason to depart from the general rule merely because the Court of Appeal has adopted a different rate in such circumstances.

18.  The applicant’s submission that the interest rates on the two heads of claims should not be awarded differently is not supported with any authority.  We find no law that the interest rates for different heads of claim cannot be different.  Thus, this is also not a good reason for departure from the general rule.

19.  The doctrine of res judicata is not applicable to the present case at all.  The Court of Appeal only awarded interest on the quantum under the disturbance claim.  The Court of Appeal expressly remitted the issue of quantum under the extinguishment claim to the tribunal for determination.  Clearly, the Court of Appeal did not decide on the interest that should be awarded under the extinguishment claim, and did not in any way rule that the interest on the quantum under the extinguishment claim should be the same as the rate for the award under the disturbance claim.  It simply left the matter to the tribunal.  Thus, there was no judgment or decision on the rate of interest for the award under the extinguishment claim to enable the applicant to rely on the doctrine of res judicata.

20.  We therefore reject the applicant’s submissions and adopt the practice of awarding interest at the lowest time deposit rate as laid down in Shun Fung’s case.

Certificate for two counsel

21.  Sections 12(1) and (5) of the Lands Tribunal Ordinance, Cap 17 stipulate that:-

“(1) The costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid.

...

(5) Where the Tribunal has made an award of costs under subsection (1) … it may order that those costs be taxed in accordance with –

(a) the First Schedule … to Order 62 of the Rules of the High Court …”

22.  Paragraph 2(3) of Part II of the First Schedule to Order 62 of the Rules of the High Court states that:-

“No costs shall be allowed in respect of counsel appearing before a master in chambers, or of more counsel than one appearing before a master in open court or a judge or the Court of Appeal, unless the master or judge or the Court of Appeal, as the case may be, has certified the attendance as being proper in the circumstances of the case.”

23.  Thus, the general rule is that no costs are to be allowed in respect of the appearance of two (or more) counsel before a High Court judge unless the judge has certified that such attendance is proper in the circumstances of the case.  This applies equally to cases in the Lands Tribunal.

24.  The test on whether the instruction of a leader, in addition to a junior, is justified is set out in the judgment of Master Poon (as he then was) in Xin Juan Trading Co Ltd v NPH Petrochemical Ltd, HCA No. 18159 of 1998 and CACV No. 276 of 1998 as follows:-

“After the abrogation of the two counsel rule, the client and his solicitor, when instructing counsel, have to decide whether to instruct a leader and if so, whether to instruct a junior also? Depending on the choice made, the client will be represented either by a junior counsel alone, or by leading counsel alone, or by both. On taxation, the taxing master has to determine whether or not the costs were necessary or proper and he must necessarily do so after the event, when leading counsel was in fact instructed. Because leading counsel can now accept instructions without a junior, the first step is to ask whether it was necessary or proper to instruct a leader, even if one counsel was required or actually briefed. In this connection, the following factors are relevant:

(1) the nature of the case;

(2) difficult questions of fact or law;

(3) the complexity, difficulty or novelty of the issues involved;

(4) the skill, specialized knowledge or expertise required for the case;

(5) where money or property is involved, its amount or value;

(6) the importance of the matter to client;

(7) the general importance of the case, for example as affecting other cases;

(8) if a junior counsel had already been instructed, the experience, competency and seniority of that junior;

(9) whether the other side has instructed a leader: see British Metals Corporation Ltd v. Ludlow Brothers (1913) Ltd [1938] Ch. 774.

The above list is not exhaustive. Depending on the circumstances, other reasons why a leader is required may exist.

The next question is if a leader is instructed, should a junior be instructed also. Again, the taxing master will have to decide if the employment of the junior was necessary or proper in the circumstances. Particular reasons why a junior may be necessary or proper include:

(1) assisting with the proper preparation of the case, for example, when the case was complex or heavy documentation is involved;

(2) assisting with the court proceedings by, for example, examining or cross-examining some witnesses, or dealing with a certain part of the case, for example, expert evidence or damages, etc;

(3) carrying out legal research on difficult or novel questions of law.

Again, these reasons are not exhaustive. Other may exist. But I do not think that senior counsel’s own wish to have a junior to assist him is relevant. Instructing a junior is justified only if the interests of lay client require so: cf. para.3, Annex 6 of the Hong Kong Bar Code.

Where a junior counsel has been instructed first and a leader is subsequently instructed, the same questions arise, namely, was it necessary or proper to instruct the leader and if so, was it necessary or proper to instruct or to retain the junior.  The relevant factors are the same.”

25.  The applicant asks for certificate for two counsel on the ground that the junior counsel has been involved in these proceedings from the very beginning whilst the leading counsel has been involved since the lodging of the notice of appeal before the Court of Appeal, and the determination made by the tribunal was much assisted by the submissions of the leading counsel as well as the junior counsel who was more familiar with the evidence already adduced.

26.  However, applying the test laid down in Xin Juan Trading Co Ltd, supra, we agree with the respondent that it is not necessary or proper to have the attendance of two counsel at the hearing for the determination of the quantum under the extinguishment claim.

27.  The nature of the hearing is only for determination of the amount of compensation.  The legal issues concerning the applicant’s entitlement has already been determined by the Court of Appeal. What remained to be dealt with by us was just the quantum of one of the heads of claim.  All the evidence has already been adduced at the trial.  No further examination or cross-examination of factual or expert witnesses was involved.  No difficult questions of fact or law and no novel questions of law were involved for assessing the quantum.  The issues involved were just matters concerning valuation, and they were not complex, difficult or new.

28.  Although a lot of evidence had been adduced at the trial, the junior counsel, Mr Leung, should be familiar with all the evidence as he was involved throughout the proceedings.  He alone could handle the case.  Alternatively, the leading counsel, Mr Mok SC, should also be familiar with the evidence as he was involved in the appeal.  There should be no reason to suggest that Mr Mok was not familiar with the evidence, as transcripts of the proceedings were made available for the appeal.  Even if Mr Mok might need some assistance on some of the evidence, we see no reason why the solicitors instructing him could not provide the assistance.  We are of the view that Mr Leung’s assistance is not necessarily required.

29.  No doubt, Mr Mok’s submissions were very helpful, and in fact a lot of time and work were saved as a result of Mr Mok’s concessions.  However, we do not find that any special skill, specialized knowledge or expertise was required for the case so as to justify the presence of two counsel.  If any specialized knowledge or expertise is required, it should just be concerned with valuation and the assistance should be rendered by the applicant’s valuation expert, rather than an additional counsel.  Mr Leung could handle all the issues on his own with the assistance of the valuation expert. In fact, he had already argued all the issues concerning the quantum of the extinguishment claim at the trial on his own.  We see no justification for engaging two counsel to deal with the same issues again.

30.  Although the amount of money involved was large and the case was important to the applicant, the applicant has already recovered $5,337,969 and the Court of Appeal has already ruled that the applicant is entitled to compensation under the extinguishment claim.  It was just a matter of how much more the applicant could claim.  The hearing for the determination of the amount of compensation has no general importance and will not affect other cases.  Mr Leung himself is experienced, competent and senior enough to conduct the case on his own.  On the other hand, the respondent did not instruct a leader at the hearing for the determination of the quantum.

31.  Thus, we are of the view that it is not necessary or proper to have two counsel appearing for the applicant. Either Mr Leung or Mr Mok could have appeared for the applicant alone.  In the circumstances, certificate for one counsel instead of two will be granted.

Conclusion

32.  We therefore order as follows:-

(1) The respondent do pay to the applicant interest on the compensation for extinguishment of the applicant’s business in the sum of $7,027,710 at the rate specified in paragraphs (2) and (3) below for the period commencing on the date of resumption until 4 October 2011, and thereafter at the judgment rate from time to time prevailing until payment.

(2)In respect of a working day, the interest rate shall be the lowest of the interest rates paid on deposits at 24 hours' call by note-issuing banks at the close of business on that day.

(3) In respect of a non-working day, the interest rate shall be the lowest of the interest rates paid on deposits at 24 hours' call by note-issuing banks at the close of business on the last working day before that day.

(4) The respondent do pay to the applicant costs of and occasioned by the applicant for determination of the compensation for extinguishment pursuant to the order of the Court of Appeal in CACV 201 of 2009 dated 30 March 2010 with certificate for one counsel to be taxed on High Court Scale if not agreed and the professional fees incurred by the applicant for the whole proceedings, the amount of which shall be taxed and/or assessed by the tribunal if not agreed.

(5) There be a costs order nisi that the applicant do pay the respondent costs of both the summons dated 12 December 2011 and the summons dated 19 December 2011 with certificate for counsel to be taxed on High Court Scale if not agreed.  If there is no application to vary the costs order nisi within the next 14 days, it shall become absolute.