BEST ORIGIN LTD v. COMMISSIONER OF RATING AND VALUATION

LDGA 14/1998

 IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

GOVERNMENT RENT APPEAL NO. 14 OF 1998

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J U D G M E N T

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1.  There are in substance two application before me, one is for discovery and the other is for further and better particulars. 

2.  Discovery is made pursuant to section 10 sub-section 2(a) of the Lands Tribunal Ordinance and the request for further and better particulars with regard to certain appendices in the expert report is made pursuant to rule 13 of the Lands Tribunal Rules.  In both sections the statute provides for discretion to be exercised by the tribunal.  Under section 10 sub-section (2)(a) it provides that the tribunal may make order with regard to disclosure of existence of documents and order the production of such documents.  Section 13 of the Lands Tribunal Rules, sub-section (1) provides the tribunal may order or require further and better particulars to be given.  Although the underlying statutory framework are not worded in the same way, it is agreed between the parties that on the exercise of such discretions the tribunal should have regard to the requirement under Order 24, rule 13.  That rule provides that production of documents shall only be made if the court is of the opinion that it is necessary either for disposing fairly of the cause of matter or for saving costs. 

3.  In the exercise of the discretions in the present context, I am of the view that the following are the relevant considerations amongst others.  The tribunal should consider the materiality of the information sought, if the information required is essential to the fair disposal of the matter to the extent that if the appellant is deprived of the opportunity of getting such information on discovery, there would be some litigation unfairness caused to the applicant which may have a substantial impact on the potential outcome, this is something the tribunal must have serious regard to.  On the other hand, the tribunal should also have regard to the stage at which this application is made and also the potential disruption that such an order for discovery might have on the final resolution of the matter. 

4.  In the present case it is also relevant to bear in mind that although this is not a test case in terms of being strictly ordered by the court to be a test case for other rating appeals of similar nature, in practice parties have regard the final resolution of this case as providing guidance as to other similar rating appeals and how they should be disposed of.  It is for that purpose the tribunal has exercised considerable case management and directions have been given for that purpose to ensure that the matter can come on for substantive hearing in October to December this year.  Another relevant consideration is the explanation for the timing of the application and I shall come back to it later.

5.  Further, the request is in regard to some information to enable the expert for the appellant to put forward some alternative calculations, or as Mr Wong would prefer to put it another way, to give the tribunal the necessary assistance to come up with a fair determination of the appeal.  In this regard an important consideration is what I have said in paragraph 15 of my judgment in the case of Hong Kong Air Cargo Terminals v Commissioner of Rating and Valuation, in Rating Appeal No. 12 of 2001, handed down on 12 March 2004.  It is primarily the duty of the experts to do their own research and to use their resources to come up with their opinions.  Related to that is an expert’s duty towards the court.  I think parties accept that not only is an expert obliged to give the court his honest opinion, it is also the duty of an expert to take into account of all relevant factors which might have a bearing on the opinion he expressed.

6.  In this connection I would also refer back to another judgment I have delivered in the context of the Hong Kong Air Cargo Terminals Limited [2004] 2 HKLRD702.  I have stressed in paragraph 16 of that judgment:

“In addition to the overriding duty to provide independent and unbiased assistance report, expert should also ensure that he does not omit to consider material facts which could detract from his concluded opinion and should also make it clear to the court when a particular question or issue falls outside his expertise.  And if I may add, if a particular omission has been drawn to his attention which might affect his opinion he should also inform the court accordingly if there is anything that suggests the opinion set out in the existing report could be misleading by reason of some other matters, which only came to the expert’s attention subsequent to the writing of his report, the tribunal expects the expert to correct it and give disclosure voluntarily.”

7.  In the case of L & L, HCMC 1 of 2003, 18 November 2005, I also considered the importance of this duty.  In particular in paragraphs 154 to 155, I explained because of limitation of a valuation exercise and the many assumptions or projections that are built into each valuation exercise, it is important for an expert to observe his duty, particularly when the exercise is not purely a matter of science.  Very often valuation involves matters which are not simple arithmetical calculations and the court will have to rely heavily on the impartiality as well as integrity of an expert.  As a corollary of that the tribunal should be entitled to work on the assumption that these duties are observed.

8.  Coming back to the application for discovery, I shall first deal with paragraphs 5 to 7.  In short, I am not satisfied that the documents requested in paragraphs 5 to 7 of the schedules are necessary for the fair disposal of the matter in issues or that they would be necessary for saving costs.  To the contrary, in my judgment, if I were to order discovery of these documents the exercise would probably add to the costs of the proceedings and may even generate a number of collateral issues, which ultimately may not be of much assistance in terms of the resolution of the real issues.  To start with, there are some difficulties in terms of identifying exactly what are the documents that would fall within the scope of these paragraphs.  In this connection I would reiterate what I have said in the Hong Kong Air Cargo Terminals case on the obligation of the party seeking discovery to formulate the application precisely and specifically.  

9.  Mr Wong had advanced several reasons for justifying the discovery of these documents.  Firstly, he said it is relevant to the resolution of the dispute as to whether the subject property falls under grade A or grade B buildings.  As I have said in the course of argument, it seems to me whether it is grade A or grade B, it is just a matter of labelling.  What is more important is to examine the references that the commissioner’s expert used for arriving at the initial rental income and then to work on the projection thereof by reference to various indexes and see whether this methodology is sound in terms of the comparability of the references.       If the appellant disputes the comparability by reference to the facilities of the building, that is a question of fact and we can have evidence of that at the trial.  For that purpose, I do not think historical data with regard to rent and rates for other buildings and also the terms of the tenancy and information with regard to management fees and air-conditioning fees would be of great significance.  If the question is considered in the context of a hypothetical tenant and whether a hypothetical tenant would develop the land by erecting a grade A building on this piece of property, again I do not think the historical data now sought by way of discovery is to be of much assistance. 

10.  As far as the use of some grade A indexes are concerned, I think one must go back to the fundamental premises.  By its very nature a valuation exercise is necessarily imprecise.  Of course, one can easily fall within the trap of saying that the more underlying data we have the more reliable calculation can be made.  I do not think that can be right when one is talking about indexes for the purposes of projections into the future.  These indexes are basically an average out from figures across the board, they are not verifiable by reference to arithmetical precision.  The commissioner has chose to adopt a particular methodology by choosing some snapshots, if I may use that expression, in some of these appendices.  Of course the appellant’s expert can criticise whether this is an adequate approach, but the problem is where to draw the line?  And I think I have already explained in the course of the arguments why I see a difficulty in that regard if I were to accede to the present application by the appellant. 

11.  The same observation can be made with regard to occupancy rate and also the depreciation in terms of the growth rate for rent due to the age of the building.  Going back to the principle that each side’s expert should come up with his own opinion by his own research, it is to be noted that these disputes about whether the building in question is grade A or grade B, and the occupancy rate and its depreciation for the growth rate have all been raised in the second round of the reports.  If the appellant wishes to undertake a more extensive review by reference to historical data, to come up with what it claims to be a better analysis in order to assist the tribunal, work should have been done well before today.  If they consider that in order to come up with the necessary analysis it is required to have the information or the historical data from the commissioner, they should have made the application earlier.

12.  I wish to say this: further rounds of expert reports are not meant to be giving an opportunity to the parties to raise new issues.  On the contrary, further rounds of expert reports should aim at narrowing disputes.  If I were to permit the appellant to embark on this exercise at this stage there is a great risk that the trial dates might be disrupted.  Even though we are still in June and the hearing is not going to start until October, due to the complexity of this matter all parties involved, including counsel, experts, as well as members of the tribunal and the assessor have to have sufficient time to read the papers and to identify the issues at an early stage.  For that purposes this tribunal has already arranged for written expert evidence to be closed in July and also for hearing bundles to be filed, as well as meeting with the assessor in August. 

13.  As Mr Litton has demonstrated in his skeleton and also in the evidence filed on behalf of the commissioner, if discovery is ordered pursuant to the request of the appellant, bearing in mind the extensiveness in which the application is formulated, there is a likelihood that the written expert evidence cannot be closed in July.  Even though parties are expected to work diligently in terms of the preparation of the matter, one has to bear in mind that people might have plans for holidays in August, especially the preparation of this matter would involve not only counsel but also quite a number of experts on each side.  Hence there is a risk that the trial dates will be disrupted if I were to accede to this application.

14.  Coming back to the question of the materiality of the documents sought, bearing in mind the submissions of parties, and I must say that I have been given full written submissions by both parties and they have been very helpful, my conclusion is that the refusal of this application would not cause great prejudice to the appellant.  The appellant’s expert can still challenge the methodology of the commissioner, the various appendices which the appellant referred to in support of his application can still be attacked and the matter will be tested in the course of the trial.  As I have said, it seems to me that to go down the course as suggested by the appellant would only serve to prolong the trial and brought unnecessary issues into the proceedings.

15.  I have to assume that the experts would observe their duties towards the tribunal and therefore if there is any fallacy or inaccuracies in the commissioner’s expert’s report, bearing in mind the argument canvassed in the context of the present application, this tribunal expects the expert to come up with the necessary corrections on a voluntary basis.  Of course, the appellant is still at liberty to challenge this opinion at the trial and if it turns out that there are areas that an expert has failed to take into account despite attention having been drawn to it, this will be something that the tribunal will consider in assessing the weight that the tribunal can attach to that expert’s evidence.

16.  So broadly speaking I am in agreement with Mr Litton’s submissions.  It seems to me that the application is more in the nature of a fishing expedition by the appellant and this is not something that I should allow in the exercise of my discretion. 

17.  As regards the application for further and better particulars, I agree with Mr Litton that to an extent the answer has been provided in the report itself.  I do not think that further particulars should be ordered at this stage.  Of course, this does not mean that the appellant cannot raise this question by way of cross-examination of the expert.  But that should be a matter that is left for the substantive hearing rather than for pre-trial disclosure.

18.  For these reasons I will dismiss the application as far as paragraphs 5 to 7 is concerned.  The only outstanding item is paragraph 1.  I understand from Mr Litton that the commissioner is willing to file an affirmation to set out their position formally.  Subject to an undertaking to be given to that effect, I will make no order for that paragraph.

Discussion re costs

19.  The appellant to bear the costs of this application, including the costs of the hearing on 20 June in any event.