WONG WAN LEUNG & OTHERS v. DIRECTORS OF LANDS

MR 10 OF 1996

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS REFERENCE APPLICATION NO. 10 OF 1996

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D E C I S I O N

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1. This is the application by the Respondent for an order to be made by the Lands Tribunal ("the Tribunal") in respect of the following matters: -

"1. Paragraph (4) of the Order of His Honour Judge Z.E. LI, then Presiding Officer, dated 5th February 1999 which provides that the parties do exchange Expert Reports at least 2 months before the trial be varied;

2. Save for the matters referred in paragraphs 7 and 8 hereinbelow, the question or issue of liability of the Respondent, if any, to the Applicants in this application be tried as a preliminary issue before the question or issue of assessment of compensation, if any, and subject to the determination of the issue of liability in favour of the Applicants.

3. The issue of assessment of compensation, if any, be heard separately and subsequently and subject to the determination of the issue of liability and in such manner as may be directed by the Presiding Officer.

4. The Applicants and the Respondent do identify in each and every schedule annexed to the Applicants' Re-Re-Amended Notice of Application filed herein jointly acceptable lots or interests in land, which should be limited to 3 or such number as may be thought just and convenient in each of the schedule, for the purpose of determination of the issue of liability, if any.

5. Failing of agreement between the Applicants and the Respondent on jointly acceptable lots or interests in land within 14 days from the date of this Order, the Applicant and the Respondent can each identify 3 lots or interests in land in each of the schedule for the purpose of determination of the issue of liability, if any.

6. If the parties cannot agree to jointly acceptable lots or interests in land within 14 days, both the Applicants and Respondent have to inform the other party in writing within 5 days thereafter the 3 lots or interests in land for which they want to refer to for the purpose of determination of the issue of liability, if any.

7. The Applicants do within 21 days thereafter file and serve their expert report on the assessment of compensation of the lots or interest in land they identified in the manner referred to in either paragraph 4 or 5.

8. The Respondent do within 90 days thereafter file and serve his expert report on the assessment of compensation of the lots or interest in land he identified in the manner referred to in either paragraph 4 or 5."

2. By this application the Respondent seeks directions from the Tribunal in respect of the Applicants' claims for split trials of "liability" and "quantum of compensation", trial by samples and variation of the Tribunal's Order made on 5.2.1999 relating to the exchange of expert reports.

3. The Applicants agree that the issue of liability may be heard before the issue of assessment of compensation. The Tribunal holds the same view.

4. Trial by samples

In the course of submissions, Mr. Yin, Counsel for the Respondent, informed the Tribunal that he would utilize the criteria listed out at pp. 66 to 69 of the Hearing Bundle for the purpose of selecting samples under various schedules specified in the re-re-amended Notice of Application.

4.1 Miss Chan, Counsel for the Applicants, said that the Applicants do not object to trial by samples. But they do object to trial by samples which does not serve its proper purpose. Pointing that the Tong is ready for sample trial, but the Respondent is not, she said: -

"No evidence is disclosed so far regarding:

(a) conduct of any sublessee amounting to adverse possession;

(b) identification of sublessees (other than the two who have given statements) who refused to renew or pay rent because of the additional charges and conditions for renewal.

(c) Identification of sublessees who remained in occupation after refusing to renew or to pay rent.

(d) Identification of sublessees who did not renew the 1994 sublease because of the alleged additional terms in the sublease;

Without knowing whether there is any sublessee who supported a particular defence raised by the Respondent as in the case of adverse possession, or identifying sublessees (who will support the Respondent's case) of whom different samples represent, sample trial will not achieve the effect it should."

 

5. Criteria for selection of samples

In order to achieve the purpose of having a trial by samples, there must be a set of suitable criteria for selecting the samples. In this case the only criteria are those drawn up by the Respondent; but they are not accepted as suitable criteria by the Applicants. As a result, the Tribunal has to decide whether these criteria are suitable criteria for the purpose of selecting samples. If they are not, then no samples can be selected, and trial by samples cannot be held. The Respondent's written submissions made no reference to the basis upon which these criteria were chosen. However, they must have been drawn up on the basis of the Respondent's perceptions of the legal issues involved in this case. Unfortunately his perceptions differ from those of the Applicants.

6. The Applicants' perceptions of the legal issues

Miss Chan, Counsel for the Applicants, stated that the Tong's claim is for loss of interest in land on the basis that its land was not subject to a five year sub-lease at the operative dates of the Block Crown Lease (Cheung Chau) Ordinance. At different points in time, the sublessees failed to renew their subleases or pay rent and therefore lost their right to renew/to sublease. The Applicants compiled schedules A, C, D, F, H, E2, G, G(1), and G(2) showing different points in time when the respective sublessees ceased to renew their subleases or to pay rent. The schedules are compiled in accordance with the Land Registry Record and the materials the Tong has about the sublessees. Once these records are accepted by the Tribunal, the Applicants have proved their case. Alternatively it claims for loss of rental income and other income it derived from the landlord and tenant relationship.

6.1 The Respondent's defence is that the sublessees' refusal to renew or pay rent was justified and did not result in the loss of their right to renew the sublease. The alleged justifications are: -

(a) The Tong imposed new charges and conditions for renewal;

(b) The rent payable was so low, its non-payment was not taken seriously.

6.2 Miss Chan took the view that the onus is on the Respondent to prove its defence. But the Respondent's criteria would unnecessarily impose an evidential burden on the Applicants. She quoted schedule D(1) at Page 66 of the Hearing Bundle as an example. Under that schedule it was proposed by the Respondent that samples are selected from those sublessees who (i) did not renew; (ii) ceased to pay rent; (iii) remained in occupation. She drew one sample of a sublessee who refused to renew the sublease "because of the action of the Tong", and one sample from those who "voluntarily" refused to renew. She said that the Applicants' case is that once the sublessees refused to renew the sublease or pay rent, that is the end of the matter. All the sublessees within schedule D are at fault. The Applicants do not need to drag a sublessee to court to testify that he refused to renew the sublease "voluntarily". By the proposal as set out in the criteria, the Respondent is putting an additional evidential burden on the Applicants which is totally unfounded in the law of evidence.

6.3 In relation to the sample of "action by Wong Wai Tsak Tong", Miss Chan submitted that the Respondent has the burden to (a) prove the facts, and that (b) the facts have the legal effect as alleged. The Applicants cannot be expected to drag out a sublessee to support the Respondent's defence case. If the Respondent has the witness, he has to put the witness to the box and prove the defence case.

6.4 For those sublessees in respect of whom the Respondent fails to come up with the defence evidence, the Respondent simply has to accept that it does not have the evidence to contest the Applicants' established case. It is therefore ridiculous for the Respondent to suggest that the parties are to agree on a sample and in the absence of which, each to select one. She queried why a burden should be imposed on the Applicants to find a sublessee in support of the defence case and prove that the defence is wrong.

6.5 She stated that the same analogy applies to Schedule D(2), Schedule F, Schedule G2 and Schedule H.

7. The Respondent's perceptions of the legal issues

Mr. Yin, Counsel for the Respondent, argued that in order to succeed on their claim, the Applicants must prove that the Tong was entitled to terminate the subleases in question. There is no legal basis for the assertion that "the sublessees failed to renew their subleases or pay rent and therefore lost their right to renew/to subleases." A sublease does not automatically determine upon the mere failure on the part of the sublessee to pay rent or to renew his sublease formally. Insofar as the Tong's case is based on a sublessees' failure to pay rent, proof of the fact of non-payment of rent would be necessary, but not by itself sufficient, to establish the Tong's right to forfeit the lease. In the absence of any dispensation with formal demand, the Tong would not be entitled to forfeit the lease unless it had formally demanded rent.

7.1 Insofar as the Tong's case is based on a sublessee's failure to exercise the right to renew the sublease, it is likewise not sufficient to show that there has been no formal renewal of the sublease by the execution and registration of a written memorandum of the renewed term. An option to renew a lease can be exercised by the tenant merely by remaining in occupation of the demised premises and continue to pay rent. Since the Tong must prove that the subleases in question were not renewed (formally or otherwise), the onus is squarely upon the Tong to prove that it has not received rent from the sublessees who undoubtedly remained in possession. It follows from the above that the Applicants' contention that the Tong has proved its case upon adducing the schedules compiled from the Land Registry records is wholly misconceived. Mr. Yin said that the Applicants' contention that the Respondent has the burden of proving the so-called "specific defences" is simply misconceived. These proceedings are concerned with the Tong's claim for compensation and it alone has the burden of proving its entitlement to compensation, and insofar as the alleged entitlement is founded on a right to terminate certain subleases, the Tong must prove as part and parcel of its case that the sublessees concerned would not be able to successfully defend if actions for ejectment were to be brought by the Tong against them. There is no question of "a higher burden of proof being imposed on the Applicants."

7.2 It can be seen from the afore-said submissions that the parties have different perceptions of the legal issues involved in this case. They also have conflicting views of the onus of proof on essential matters raised in the pleadings. It is due to such differences that the Applicants do not agree to the criteria for selecting samples as proposed by the Respondent. If there are no common or agreed criteria for selecting samples, then there are no basis by which samples can be selected. It would not be right for the Tribunal merely to rely upon the Respondent's criteria for the selection of samples, because to do so would imply the acceptance by the Tribunal of these criteria as suitable criteria for this purpose, and the rejection of the Applicants' arguments in this regard. To determine whether the Respondent's criteria are suitable criteria or not, the Tribunal must decide in the first place what are the legal issues involved in this case, and who bears the onus of proof on the allegations raised in the pleadings. But these matters should only be decided by the trial judge during the trial; they should not be decided at this pre-trial stage. Even if it is appropriate for the Tribunal to do so, the Tribunal must first determine what are the materials facts involved in this case, so that the Tribunal can identify the legal issues. Whilst the Respondent admits some of the facts pleaded in the re-re-amended Notice of Application, he makes no admissions of other facts. Essentially the Respondent puts the Applicants to strict proof of their case. As the Tribunal cannot act upon the facts not admitted in the re-re-amended Notice of Application, it may not have all the material facts required for the purpose of ascertaining the legal issues, which are essential for determining the criteria for selection of samples for the trial by samples. That being the case, the Tribunal cannot decide whether the Respondent's criteria are suitable criteria or not. Furthermore the Respondent must have faced the same difficulty which confronts the Tribunal. It follows that it is doubtful whether his criteria are suitable criteria. Consequently they should not be adopted. There being no other criteria for the selection of samples, no samples can be selected. Therefore the applications made under paragraphs 4, 5 and 6 must fail.

8. Preparation of Expert Reports

The basis for the Respondent's application to vary the Tribunal's order made on 5th February 1999, as submitted by Mr. Yin, is that "it is unreasonable for the Tong to insist on expert reports on valuation to be prepared in respect of each and every lot of land or undivided shares in the lot which presently form part of the Tong's claim for compensation, given that a significant number of them ........ would be eliminated from the Tong's claim upon the trial of the preliminary issues. Given that one of the main objectives of seeking trial of preliminary issues is to save time and costs, for the time being it would be appropriate for the preparation of expert reports on valuation to be confined to such of the lots of land and/or undivided shares in the lots as are required for the trial of preliminary issues. This would avoid the incurring of much unnecessary costs in the valuation of lots of land or undivided shares in the lots in respect of which the Tong would not be able to maintain its claim for compensation in view of the outcome of the trial on preliminary issues." The Tribunal is unable to say at this stage whether any number of the lots of land would be eliminated from the Tong's claim upon the trial of the preliminary issues. Indeed, it should not make any such decision at this stage.

8.1 Whether the Respondent would succeed in its application under paragraphs 1, 7 and 8 of the Summons depends on the outcome of its application for selection of sample cases for the trial under paragraphs 4, 5 and 6 of the Summons. The Respondent fails in this regard. The Respondent has not advanced any other ground for varying the Tribunal's Order dated 5th February, 1999; the application to vary this order must fail.

9. I make the following orders: -

(1) I make an order in terms of paragraphs 2 and 3 of the Summons, but dismiss the applications under the other paragraphs;

(2) I order that the trial of the preliminary issues under paragraph 2 be held before a Presiding Officer, and the trial on the issue of assessment of compensation (if so required) be held before a Presiding Officer and a Member of the Tribunal;

(3) I order that 1/5 of the costs of this application be costs in the cause, and that the Respondent has to bear 4/5 of the costs of this application, to be taxed, if not agreed. Certificate for Counsel;

(4) I make an order that the parties do have liberty to apply.