Read the full judgment text of LDCS 4000/2013 on BabelCite. This Lands Tribunal judgment was delivered on 29 February 2016 before His Honour Judge KW Wong, Presiding Officer and Mr Lawrence PANG, Member.
Land law – compulsory sale – Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 – Order for sale – Building Management Ordinance – common parts – valuation evidence – direct comparison method versus investment method – 'hope value' – expert evidence – disciplinary proceedings against expert. KTM is a 7-storey commercial/residential estate at 53, 53A, 55 and 55A Kwun Tong Road with occupation permit issued on 27 April 1962, comprising 16 shops, 288 residential units and 100 car parking spaces. The applicants owning more than 80% of the undivided shares in each of the four lots made application for compulsory sale under section 3(2) of the Ordinance read with the Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice, which lowered the threshold to 80% for lots with buildings over 50 years old. The Tribunal held that the applicants satisfied the 80% threshold as at the date of the application. On EUV of the residential and shop units, the Tribunal accepted the methodology of Mr Charles Chan of Savills over Mr Keith Siu (R22, R33 and R34) and Ms Sat Wai Ling (R40/R44), adopting direct comparison using market comparables with appropriate adjustments. The Tribunal refused to add R13's adjoining toilet area to the saleable area of his shop because the 1963 Assignment granted only a non-exclusive 'right' to use the toilet, not an exclusive right to possession, occupation or enjoyment, applying the Court of Appeal decisions in The Incorporated Owners of Goa Building v Wui Tat Company Limited and The Incorporated Owners of Shatin New Town v Yeung Kui, and the BMO. As regards the 100 CPS, the Tribunal found that most of the covered CPS had been converted into 'Garage CPS' by R22 in breach of the user clause in the Government Leases, attracting warning letters from the Lands Department dated 26 January 2010 and 23 July 2010, and a forbearance fee of approximately $1,000,000. The Tribunal rejected Mr Siu's investment method of valuation, which capitalised pre-enforcement (2009/2010) rentals using a retail yield plus a notional 1-2% risk premium, as inherently unreliable and as producing irrational and anomalous results, preferring the direct comparison method of Mr Chan. The Tribunal further rejected Ms Sat's proposed 'hope value' reflecting prospects in Town Planning Board interpretation proceedings, applying Spirerose Ltd v Inland Revenue Commissioners, on the basis that no evidence of realistic prospect of success had been adduced. The Tribunal's assessment adopted Mr Chan's RDV of $2,293,000,000 (agreed with Ms Sat), with developer's profit at 15%, marketing cost at 3% of GDV, and rejected the 2% hope value uplift suggested by Mr Mak. The Tribunal also rejected the argument that Mr Chan's expert evidence should be rejected or given reduced weight because of disciplinary action against him by the Disciplinary Board of the HKIS, holding that the disclosure duty in HKSAR v Lee Ming Tee applies primarily to criminal cases, and that under section 58(1) of the Evidence Ordinance and section 10(6) of the Lands Tribunal Ordinance, the Tribunal had discretion to admit and attach weight as it considered appropriate. Application granted with order for sale and auction reserve price to be determined in accordance with the Tribunal's assessment.
Legal issues: Sufficiency of ownership threshold for compulsory sale · Methodology for valuing covered car parking spaces (CPS) · Treatment of the toilet area in R13's shop · Inclusion of 'hope value' in redevelopment value · Admissibility and weight of Mr Chan's expert evidence given his disciplinary history
Outcome: Application for compulsory sale granted; order for sale made in respect of all undivided shares in the Lots, with auction reserve price to be determined on the basis of the EUVs and RDV assessed by the Tribunal.
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