Hong Kong Appeal Court backs govt against Swire

Property company Swire Pacific has lost its battle to gain leave to appeal an arbitration decision made in January. The Court of Appeal upheld the arbitrator's conclusion that the Hong Kong Special Administrative Region (SAR) government had the right to demand a land premium from Swire for extending its commercial development beyond 1.6 million feet. 20 Essex Street head Iain Milligan QC, instructed by Linklaters, acted for the government.
The dispute between Swire and the government arose over the premiums due to the authorities for a commercial development that was built where only residential projects are permitted. Following the court's decision, the company faces an estimated HK$4.5bn (£387.1bn) premium bill for its Taikoo Shing development. The development includes office towers Cityplaza One, Three and Four, and the Horizon Gardens residential scheme.
Judges agreed with earlier rulings that Swire was allowed 1.6 million square feet of commercial floorspace. As it had developed 3.2 million, it would have to pay the additional premium. According to the original 1975 deeds, Swire was permitted to develop 8.9 million square feet for residential use and 3.6 million for commercial projects.
Swire requested that the residential provision be ext-ended to 10.2 million square feet; the government agreed to the extra 1.3 million on condition that the commercial area be reduced. The two sides were unable to reach an agreement and the dispute went to arbitration in October 2000.
The arbitrator, 20 Essex Street's Sir Christopher Staughton, ruled that the commercial area should be reduced to 1.6 million square feet and that Swire pay a premium for the additional commercial development. Swire was ada-mant that it could develop the original 3.6 million square feet.
The court ruled against Swire. Mr Justice Yeung said: “When Swire extended its commercial development… it took a gamble. Swire lost and must take the consequences.”
Local firm Johnson Stokes & Master advised Swire, with Michael Thomas SC representing the company before the court. A statement from Swire said: “The company is deeply disappointed with this decision but will consider its options before deciding how to proceed.”
Marc Harvey, the Linklaters partner handling the case, said: “The government's looking forward to proceeding swiftly to the next stage of the arbitration, whereby the premium payable will be determined, and to a final resolution of this matter.”