GAIN TALENT DEVELOPMENT LTD v. THE SECRETARY FOR ENVIRONMENT, TRANSPORT AND WORKS

LDMR 7 of 2003

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Miscellaneous Reference Application No. 7 of 2003

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J U D G M E N T

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1. On 25/6/2004 the Tribunal gave judgment in favour of the applicant for compensation for resumption under s.13 of the Roads (Works, Use and Compensation) Ordinance (Cap. 370) (“the Ordinance”) in the sum of HK$4,741,000 and ordered that matters relating to interest on compensation, and costs on remuneration of professionals to be heard and determined at a date to be fixed by the Lands Tribunal.

2. The parties have since been able to reach agreement on costs and the periods in which interest is to accrue.  Under item 1 of Part II of the Schedule to the said Ordinance, by s.33(1)(a), the Tribunal may direct interest to be paid as if the claim were made under the Lands Resumption Ordinance (Cap. 124) for land resumed under that Ordinance. S.17(3) of the Lands Resumption Ordinance provides:

“(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).”

The parties have agreed that interest shall run from 15/1/1999 to 15/1/2000, and from 27/5/2002 to 28/6/2004.  The interim period of 16/1/2000 to 26/5/2002 relates to an agreed extension of time for the Applicant to make its claim on condition that no interest is claimed for that period.  The only outstanding issue which this Tribunal has to determine relates to the rates at which interest shall accrue.

6. S.17 of the Lands Resumption Ordinance (Cap. 124) was amended on 12/4/2001.  The old s. 17(3A) of the Lands Resumption Ordinance (Cap. 124) provided that :

“(3A)

The rate of interest for the purposes of subsection (3) shall be such rate as the Lands Tribunal may fix having regard to the lowest rate payable from time to time by members of The Hong Kong Association of Banks on time deposits.”

As from 12/4/2001, the new s.17(3A) & (3B) provide as follows :-

“	(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.”

By virtue of the transition provisions set out in s.13(2)(a) of the Interest Rates (Miscellaneous Amendments) Ordinance (Ord. No. 6 of 2001), the old law applies to the first period (15/1/1999 to 15/1/2000) and the new law applies to the second period (27/5/2002 to 28/6/2004).

First Period

8. Under the old s.17(3A), the Tribunal shall fix the interest rate “having regard to the lowest rate payable from time to time by members of The Hong Kong Association of Banks on time deposits”.  This provision was construed by the Privy Council in Director of Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 where Lord Nicholls said (at 139E-G):

“In their Lordships’ views, 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”. 
(Underlines provided)

10. The Applicant submitted that, under the old s. 17, the Tribunal should award interest at a higher rate than the 7-day call deposit rate in respect of the first period, for the following grounds :-

‘	(1)	The Respondent had all along contested the Applicant’s entitlement to compensation on the basis that the Respondent was not a “former owner” within the meaning of the Lands Resumption Ordinance, or that its entitlement was limited to a fraction only of the value of the resumed land because, the Respondent maintained, the Applicant had not paid the full price.  These objections were dropped at the eleventh hour and not relied upon at all at the hearing before the Tribunal on 29/4/2004.
	(2)	Instead, at the hearing on 29/4/2004, the Respondent raised a new ground of objection to the Applicant’s claim which had not been mentioned before, namely, that there was a Memorandum of Agreement between the Applicant and Everett, which ground was rejected by the Tribunal: see paras 3.5 to 3.9 of the Judgment of the Tribunal.
	(3)	The Tribunal found that there was “absolutely no evidence” that any formal agreement of sale and purchase had been entered into between the Applicant and Everett.  Yet the Respondent had persisted in opposing the Applicant’s claim.
	(4)	The Government had previously appeared to accept the Applicant’s claim (see Deacons’ letter of 29/12/99) and yet various grounds of objection were subsequently raised, none of which was pursued at the hearing of the claim on 29/4/2004.
	(5)	The resumption took place on 15/1/1999 and a long time had elapsed before any compensation was paid to the Applicant.  There was no acceptable offer from the Respondent and no provisional payment was made under s.16A of the Lands Resumption Ordinance.
	(6)	The Applicant is a company in insolvent liquidation and there is no reason why the creditors should be deprived of proper compensation by way of interest for the delay in receipt of the resumption compensation caused by the stance taken by the Respondent.’

Second Period

11. In respect of the second period, the Applicant submitted that in Weco Textiles Manufactures Ltd v Secretary for Transport [1991] HKLTLR 77 at 103C, H.H. Judge Cruden stated that under the wording of s.33 of the Ordinance, “the Tribunal has an unfettered discretion as to interest, subject to not fixing a rate below the Association’s lowest rate”, and for the various grounds stated above, the Tribunal should apply a rate substantially higher than the minimum rates in s.17(3B).  A commercial rate should be applied for the deprivation of use of the money in question.

13. In Li Po Chun Estate Ltd. V Director of Lands (No. 1) [1997] CPR 330, the Tribunal canvassed what constitutes the lowest time deposit interest rate.  The Tribunal accepted the Government’s submission that a 24-hour call deposit rate should be adopted as the lowest time deposit rate within the meaning of the old section 17(3A).  In that case, the interest rate was increased by 1% on top of the 24-hour call rate due to the Government’s delay in payment of the compensation.

14. The Applicant advanced 6 grounds to urge the Tribunal to award interest at a rate higher than the 7-day call deposit rate.  For ground (1), this Tribunal has no knowledge why the Respondent dropped the original objections.  The change of stance adopted by a party may constitute an unreasonable behaviour, but sometimes it may not.  It all depends on the circumstances of the case.  The burden is on the Applicant to satisfy me that this is an unreasonable behaviour, but the Applicant has failed to do so.  The same reasoning applies to ground (4).

15. For ground (2), the Respondent explained that it was only when the Applicant filed their witness statement in January 2004 that it came to know that there was a memorandum of agreement. But the witness concerned did not exhibit any memorandum of agreement to that statement.  It is only later, upon its request, that it was provided a copy of it.  But that was a time very near to the hearing of the case in April, 2004.  The Respondent was duty bound to challenge this memorandum of agreement.  It is in these circumstances that it raised the new ground.  That cannot be an unreasonable behaviour.

16. As for ground (3), it is only after the trial that the Tribunal found that there was “absolutely no evidence” that any formal agreement had been entered into between the parties concerned. It is illogical for the Applicant to say that the Respondent had persisted in opposing the Applicant’s claim, because the Respondent could not have foretold what judgment the Tribunal would pass in this case.

18. For ground (5), the Applicant failed to file in a claim within time, thereby causing a delay in the claim.  It only has itself to blame.  I cannot see how this can attribute to any unreasonable behaviour on the part of the Respondent.

19. For ground (6), again I fail to see in what way the Respondent behaved unreasonably.  The Applicant has not shown how the Respondent caused any delay in this case.

20. The hearing took place on 29.4.2004, and whether or not the Respondent’s has merit in its opposition, the hearing was completed on that day.  The Applicant has absolutely failed to show how the Respondent’s conduct protracted the time taken in determining the claim.

21. This Tribunal finds that the grounds advanced by the Applicant cannot stand.  There is no reason for the Tribunal to fix a higher or lower interest rate as stipulated by statute.  Following the decision in Li Po Chun (supra), this Tribunal adjudges that a 24-hours’ call deposit rate is to be adopted as the lowest time deposit rate within the meaning of the old section 17(3A) for the first period.  For the accord period, it is beyond doubt that the same interest rate applies.  Accordingly, this Tribunal orders that the applicable interest rate on the compensation sum for the periods from 15.1.1999 to 15.1.2000, and from 27.5.2002 to 28.6.2004 is the 24-hours’ call deposit rate.

Costs

22. The Applicant is entitled to have interest on the compensation sum.  The only issue is at what rate.  It is not a case in which if the Applicant loses its arguments it will lose its entitlement to interest.  Had the whole case been heard at one go, this Tribunal would have awarded costs to the Applicant for the proceedings, save and except for the part relating to the issue on the interest rate.  There should be no difference in this regard when this issue is heard separately.  Therefore this Tribunal makes an order nisi, to be made absolute in 14 days’ time, that there be no order as to costs in respect of the present hearing.