Chan Shiu Chong v. Director of Lands
Read the full judgment text of LDLR 1/2012 on BabelCite. This Lands Tribunal judgment was delivered on 19 November 2018.
1. The applicants of LDLR 1/2012 (“1 st Application”), LDLR 2/2012 (“2 nd Application”) and LDLR 3/2012 (“3 rd Application”) (collectively the “Applications”) ask this Tribunal to determine the amount of compensation payable by the same Respondent under the Lands Resumption Ordinance, Cap 124 (“the LRO”).
Cites 7 cases
|
LDLR 1 - 3/2012 (Heard Together) [2018] HKLdT 89 LDLR 1/2012 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LANDS RESUMPTION APPLICATION NO 1 OF 2012 ___________________
___________________ LDLR 2/2012 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LANDS RESUMPTION APPLICATION NO 2 OF 2012 ___________________
___________________ LDLR 3/2012 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LANDS RESUMPTION APPLICATION NO 3 OF 2012 ___________________
___________________
__________________ J U D G M E N T __________________ Introduction and Background 1.The applicants of LDLR 1/2012 (“1st Application”), LDLR 2/2012 (“2nd Application”) and LDLR 3/2012 (“3rd Application”) (collectively the “Applications”) ask this Tribunal to determine the amount of compensation payable by the same Respondent under the Lands Resumption Ordinance, Cap 124 (“the LRO”). 2.The applicant (“the 1st Applicant”) in the 1st Application was the owner of 1/5th equal and undivided share of and in New Kowloon Inland Lot No 1024 Section A Subsection 1 Section B with the right to exclusive use and occupation of Ground Floor including Cockloft of a 5-storey building erected thereon which is situated at No 187A Hai Tan Street, Kowloon (“Property 1”). The building was completed in 1955 and was physically connected with its adjacent building erected thereon at No 187B Hai Tan Street, Kowloon by a common staircase. 3.The applicant (“the 2nd Applicant”) in the 2nd Application was the owner of 1/5th equal and undivided share of and in New Kowloon Inland Lot No 1024 Section A Subsection 2 with the right to exclusive use and occupation of Ground Floor of a 5-storey building erected thereon which is situated at No 248 Tung Chau Street, Kowloon (“Property 2”). The building was completed in 1956 and was physically connected with its adjacent building erected thereon at No 250 Tung Chau Street, Kowloon by a common staircase. 4.The applicant (“the 3rd Applicant”) in the 3rd Application was the owner of 1/5th equal and undivided share of and in New Kowloon Inland Lot No 179 Section A Subsection 7 with the right to exclusive use and occupation of Ground Floor including the Mezzanine Floor of a 5-storey building erected thereon which is situated at No 220 Hai Tan Street, Kowloon (“Property 3”). The building was completed in 1956 and was physically connected with its adjacent building erected thereon at No 222 Hai Tan Street, Kowloon by a common staircase. 5.Their properties (collectively “the Subject Properties”) together with many others in the area including but not limited to the properties under consideration in Cheermark Investment Limited v Director of Lands, LDLR 2/2013 (unreported, 3 November 2015) and Happy Enough Limited v Director of Lands, LDLR 5/2012 (unreported, 17 March 2016) were compulsorily resumed under the LRO by Gazette Notice No 7187 dated 1 November 2010 for the implementation of the Development Scheme SSP/1/003, 004 and 005 Sham Shui Po (“the Development Scheme”) by the Urban Renewal Authority (“URA”). These properties subsequently reverted to the Government at midnight of 19 February 2011 (“the Resumption Date”). 6.The Subject Properties and all other properties resumed under the Development Scheme were situated at a parade of old tenement buildings along Hai Tan Street and Tung Chau Street which run parallel to each other, near their junctions with Kweilin Street and Pei Ho Street in the Sham Shui Po district. It is not disputed that developments in the immediate vicinity of the Subject Properties were dominated by out-moded low-rise commercial/ residential buildings with ground floor shops devoted mainly to car repairing workshops, engineering workshops and retailing of engineering accessories. 7.There are no factual witnesses. Mr Wayne W K Lee (“Mr Lee”) of the Applicants and Mr Lai Wah Chi (“Mr Lai”) of the Respondent gave their expert valuation opinion in the following reports:-
8.Although all three occupation permits stated that the subject buildings were permitted for domestic purpose, according to the approved building plans, the ground floor of the Subject Properties was designed for shop use. Following the Court of Appeal decision in Cheermark Investment Limited v Director of Lands and Happy Enough Limited v Director of Lands, ie CACV 165/2016 and CACV 184/2016 both reported as [2018] 1 HKLRD 79, the two experts have no dispute that the Subject Properties should be assessed as shop. 9.There is also no dispute that accessibility of the Subject Properties was good, with public transport such as franchised buses, public light buses and taxis readily available. The MTR Sham Shui Po Station is within 10 minutes’ walk from the Subject Properties. 10.The main difference between the experts is this. The Applicants’ case is that the Subject Properties should be assessed by residual analysis to take into account their redevelopment value (“RDV”); alternatively, the Applicants rely on the existing use value (“EUV”) of the Subject Properties as a fallback which are analyzed in the course of assessment of their sharing ratio in the RDV. On the other hand, the Respondent maintains that the Subject Properties did not have redevelopment potential so that only direct comparison method should be adopted to assess their EUV. In respect of the latter, both experts agree to follow Cheermark Investment and Happy Enough. Issues Arising 11.Thus it is not disputed that there are three main issues in the present case: -
Redevelopment Potential 12.The leading case on redevelopment potential in resumption of land is the Court of Appeal judgment of Siu Sau Kuen v Director of Lands [2013] 6 HKC 557, on appeal from the Tribunal’s judgment in LDLR 1/2010 (unreported, 9 March 2012). The starting point is that in determining the compensation for resumption of a property, the claimant is entitled to include the redevelopment value if so justified. 13.The Tribunal adopted a two-stage approach. Stage one is concerned with whether an element of redevelopment value should be included in the compensation to be paid on the resumption of land. This test was re-fined by Fok JA (as he then was) in the Court of Appeal as follows:
14.The Stage Two approach is concerned with valuation and was not altered on appeal. It is as follows:
15.It is the case of the Applicants that there was redevelopment potential as at the Resumption Date and that market value of the Subject Properties can be assessed on that basis. 16.Insofar as the Stage One approach is concerned, the Applicants solely rely on the second limb of the test, namely there is evidence of redevelopment in the vicinity of the Subject Properties which supports, on a balance of probabilities, a finding that redevelopment on its own or merger of the Subject Properties with other properties giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale as at the Resumption Date. 17.In his first Valuation Report dated 11 March 2013, Mr Lee relies on the following redevelopment projects as evidence of redevelopment in the vicinity of the Subject Properties:
18.Indeed, the first three of the above projects were relied on by Mr Lee in Happy Enough in support of his assertion that the property in issue was ripe for redevelopment. During cross-examination, Mr Lee agreed that for The Prominence and Harbour Park, acquisitions by private developers should have started sometime in the past, and the short periods of acquisition as shown from the transaction records cannot reflect the true acquisition time frame. In fact, Mr Lee did not know how long in the past the developers actually took in acquiring the former units for development of The Prominence or Harbour Park. 19.In respect of the two URA projects under the Demand-led Redevelopment Policy, it is important to note that the Board of the URA only approved the framework for a “demand-led” model on 31 May 2011, ie some 3 months after the Resumption Date. Also, only 3 out of 25 applications were selected. As at the Resumption Date, the Tribunal considers that the possibility of any of the Subject Properties having redevelopment potential under the Demand-led Redevelopment Policy of the URA was remote. In any event, there is no evidence that the URA has offered compensation to the former owners on redevelopment basis under the Demand-led Redevelopment Policy[1] given that the Subject Properties were also resumed for the purpose of the URA scheme anyway. These two development projects by the URA serve no purpose in illustrating the prospect of redevelopment in the vicinity in the absence of URA or its award of compensation on redevelopment basis or otherwise. 20.On the other hand, we agree that for redevelopment to be viable, the site on which the Subject Properties are situated should be acquired with their respective adjoining sites. For instance, the site for redevelopment for either Nos 187A or 187B Hai Tan Street is merely 92.13 sq m and the combined site area is 184.26 sq m which is still too small for a development like The Prominence[2], Harbor Park[3] or Park One[4]. Even Mr Lee was of the view that a merger of 4 to 6 adjoining lots would be more realistic. However, the 1st Applicant was the registered owner of only one unit, ie just one of 10 owners of the 5-storey building formerly standing at No 187A Hai Tan Street and No 187B Hai Tan Street and there was no evidence of any suspected acquisition transaction in the same building and the adjacent building. The same are true for the 2nd Applicant and 3rd Applicant in respect of Nos 248 & 250 Tung Chau Street[5] as well as Nos 220 & 222 Hai Tan Street[6]. In such circumstances it could not be said on the balance of probabilities that the hypothetical development on any of the 3 hypothetical sites would be forthcoming within a reasonably foreseeable time scale. 21.We agree that The Prominence[7], Harbour Park and Park One are new redevelopments of former old buildings in the vicinity of the Subject Properties. During the site inspection on 28 August 2018, however, we observed that there are still parades of 5 or 6-storey building at Hai Tan Street or Yee Kuk Street not being redeveloped in 2018 even though they all appear in poor building condition. In our opinion, it cannot be true that any building with the same physical attributes of, and sharing the same town planning considerations as the Subject Properties shall all have redevelopment potential as at the Resumption Date. This is particularly the case when The Prominence and Park One occupy more prominent corner locations. 22.We also consider that the increase in plot ratio of the hypothetical redevelopment model proposed by Mr Lee and the registration of the building orders are neither here or there. Otherwise all similar premises in the entire Sham Shui Po area shall have redevelopment potential forthcoming within a reasonably foreseeable time scale. 23.In any event, the Applicants or Mr Lee simply had no evidence to show that there was any interest from any private developer acquiring the Subject Properties either before February 2006, the month when URA announced the Development Scheme, or after that but before the Resumption Date. There was no sale and purchase transaction in any of the Subject Properties or their adjoining ones for over a long period of time. 24.We also agree with the Tribunal in Happy Enough that the redevelopments to the north of Tai Po Road cannot be considered as “in the vicinity” of the Subject Properties. Those redevelopments to the north of Tai Po Road including the NBY Area[8] are having different characteristics and situated at neighbourhoods different from the areas at which the Subject Properties were situated. 25.We are of the view that none of the Applicants had satisfied the second limb of the tests laid down in Siu Sau Kuen. We are of the opinion that the Applicants have failed to prove in a no-scheme world as at the Resumption Date that the Subject Properties had redevelopment potential for site assembly with other units in the same building and the adjacent buildings within a reasonably foreseeable time scale. There were some redevelopments in the district does not mean that the Subject Properties should have immediate redevelopment potential if there was no URA scheme. Therefore any assessment of the Subject Properties on the redevelopment basis is to be discarded and Issue (1) is resolved against the Applicants. Accordingly the Subject Properties will be assessed on EUV basis. Issue 3: Market Value of the Property Assessed on the EUV Basis The Evidence on Valuation 26.The parties do not dispute that the comparables that had been adopted in Cheermark Investment and Happy Enough are relevant in the assessment of the market value of the Subject Properties. We have conducted the site visit and external inspection to the sites formerly occupied by the Subject Properties and observed the comparables together with the parties and their experts on 28 August 2018. We are going to review the choices of and adjustments for shop comparables for the assessment of Subject Properties one by one. Market Value of Property 1 (Ground Floor including Cockloft, No 187A Hai Tan Street) 27.By reference to the Joint Statement prepared by the experts, Property 1, ie Ground Floor including Cockloft, 187A Hai Tan Street had the following attributes or particulars:
28.The following comparables are agreed by both experts[9]:
29.On top of those, Mr Lee adopts a comparable at Shop 1, G/F of 48 Pei Ho Street. During our joint inspection on 28 August 2018, we found this comparable proposed by Mr Lee was situated close to the junction of Pei Ho Street and Lai Chi Kok Road which is a main distributor in the area. Currently this is occupied by a 7-11 convenience store. We consider this comparable being situated at a much superior location should not be adopted as comparable in our assessment. That it was adopted by the Tribunal in Happy Enough might be solely for the reason that the subject in that case was situated at the corner of Pei Ho Street and Hoi Tan Street. This is no longer the case here. 30.The 2 experts further agree the following adjustment factors:
31.They nevertheless have the following disagreement:
32.As regards location, we consider the property in Cheermark Investment, ie No 177 Hai Tan Street was situated at the same portion of Hai Tan Street as Property 1 within a close distance. We opine that the location adjustments as decided by the Tribunal in Cheermark Investment are applicable to Property 1. 33.For the headroom, we share the opinion of the Tribunal in Happy Enough that there should not be a mechanical adjustment for headroom space in the captioned case when the rear portion of the ground floor had lower headroom because of the cockloft. We do not agree with Mr Lee that the cockloft only occupied a small fraction of that of the ground floor; it occupied some 25%. 34.In Happy Enough, the property in question had a headroom of 5.08 m and but half of it had a headroom of mere 2.82 m. Then the Tribunal in that case considered that it is appropriate to make downward adjustments at 8% to Comparable 1 to reflect its higher headroom on ground floor; nil adjustment to Comparable 2 because it has a higher headroom on ground floor but a lower headroom on cockloft and an overall lower headroom too; nil adjustment to Comparable 3 because it has a slightly higher headroom on ground floor only; and nil adjustment to Comparable 4 because it has a lower headroom on ground floor but a higher headroom on cockloft and an overall higher headroom too. In comparison, both the clear headroom and the headroom under cockloft for Property 1 is a little lower at 4.86 m and 2.74 m respectively. We consider it appropriate to follow the adjustments made by the Tribunal in Happy Enough.
35.Thus, the assessment of the market value of Property 1 is as follows: 36.Market Value for Property 1 =
37.It is undisputed that Property 1 was, as at the Resumption Date, subject to a tenancy entered into on 4 April 2007 when URA had already announced the Development Scheme in February 2006. The term of the tenancy was originally stated to expire on 4 April 2008 but such date was crossed-out and replaced by 「市區重建局指定收樓日止。」which is translated to “on the date to be specified by the URA to take up possession of the Property.” 38.In Chan Yuk Mui v 葉穎麟, DCCJ 2111 of 2007 (unreported, 9 November 2007), the tenancy in question was open ended, meaning for a period up to the time of demolition of the property by the URA. H H Judge Wong held that:
39.The learned judge also referred to Prudential Assurance Company Limited v. London Residuary Body and Others [1992] 3 All ER 504 where the House of Lords held that a grant for an uncertain term or duration did not create a lease since it was beyond the power of a landlord and his tenant to create a term which was uncertain. 40.Following the above, the presence of the tenancy or otherwise should not affect the market value as determined on the basis of vacant possession. Even if such a tenancy is taken to be a periodic monthly tenancy where one-month notice of termination is required, we consider the effect on value would be minimal and can be disregarded. Market Value of Property 3 (Ground Floor including the Mezzanine Floor, No 220 Hai Tan Street) 41.Before we carry out the assessment of the market value of Property 2, we consider appropriate to deal with the assessment of the market value of Property 3 first because it was also situated at Hai Tan Street, just one block away from Property 1 to the northwest. 42.By reference to the Joint Statement prepared by the experts, Property 3, ie Ground Floor including the Mezzanine Floor, No 220 Hai Tan Street had the following attributes or particulars:
* Effective Area is derived from assuming the following conversion factors: Cockloft: ¼, Yard: 1/6, Area under Staircase in Yard:1/6 x 1/2. 43.The same set of comparables are agreed by both experts as follows:
44.Again, on top of those, Mr Lee adopts the comparable at Shop 1, G/F of 48 Pei Ho Street. As explained above, we consider this comparable being situated at a much superior location should not be adopted as comparable in our assessment. 45.The 2 experts further agree the following adjustment factors:
46.They nevertheless have the following disagreement:
47.As regards location, Property 3 is situated close to Property 1 though on the opposite side of the street. Mr Lee argues that this side of the street should have less value because of the one-way traffic from right to left and cars could not stop in front of the shop. However, Mr Lee’s opinion is rebutted by the photographs attached to both Mr Lai’s report and his own reports; cars could stop readily in front of the shop for loading and unloading. We opine that the location adjustments as decided by the Tribunal in Cheermark Investment are applicable to Property 3 as well. 48.For the headroom, we share the opinion of the Tribunal in Happy Enough that there should not be a mechanical adjustment for headroom space in the captioned case when the rear portion of the ground floor had lower headroom because of the mezzanine floor. We do not agree with Mr Lee that the mezzanine floor only occupied a small fraction of that of the ground floor; it occupied some 25%. We consider it appropriate to follow the adjustments made by the Tribunal in Happy Enough. 49.Thus, the assessment of the market value of Property 3 is as follows:
50.Market Value for Property 3 =
Market Value of Property 2 (Ground Floor, No 248 Tung Chau Street) 51.By reference to the Joint Statement prepared by the experts, Property 2, ie Ground Floor, No 248 Tung Chau Street had the following attributes or particulars:
52.In respect of Property 2, the same set of comparables are agreed by both experts. Again, on top of those, Mr Lee adopts the comparable at Shop 1, G/F of 48 Pei Ho Street. As explained above, we consider this comparable being situated at a much superior location should not be adopted as comparable in our assessment. 53.On the other hand, Mr Lai introduces one additional comparable at G/F, 218 Tung Chau Street with which Mr Lee does not agree. 54.Tung Chau Street runs in parallel to Hoi Tan Street and is only one block to the southwest. It has composite developments with shops on one side and Tung Chau Street Park as well as a temporary market on the other side. In terms of pedestrian flow, it is more quiet and the shops are mostly occupied as engineering workshop. As Property 2 itself also lies on Tung Chau Street, we consider appropriate to have it included in the assessment. Thus, the comparables are as follows:
55.Save from the above, the 2 experts again agree the following adjustment factors:
56.Similarly, they have the following disagreement:
57.As regards location, Mr Lai applies an adjustment of -5% to the comparables at Hai Tan Street and G/F, 165 Yee Kuk Street. He applies -13% to the comparable at G/F, 156 Yee Kuk Street (ie additional -5% when compared with the assessment of Property 1 or 3). In respect of the new comparable at G/F, 218 Tung Chau Street, Mr Lai applies an adjustment of +5%. To the extent that Mr Lee does not agree to include the latter comparable, he applies adjustments between -2% to -4%. 58.Whereas we have already remarked that Tung Chau Street is inferior in terms of pedestrian flow, we agree with the adjustments proposed by Mr Lai. 59.For the headroom, we share the opinion of the Tribunal in Happy Enough that there should not be a mechanical adjustment for headroom space in the captioned case when the rear portion of the ground floor had lower headroom because of the cockloft. We do not agree with Mr Lee that the cockloft only occupied a small fraction of that of the ground floor; it occupied some 25%. We consider it appropriate to follow the adjustments made by the Tribunal in Happy Enough. 60.Thus, the assessment of the market value of Property 2 is as follows:
61.Market Value for Property 2 =
62.It is undisputed that Property 2 was, as at the Resumption Date, subject to a tenancy entered into on 15 February 2008 when URA had already announced the Development Scheme in February 2006. Similar to Property 1, the term of the tenancy was stated to expire on “on the date to be specified by the URA to take up possession of the Property” which is translated from「市區重建局指定收樓日止。」 63.Adopting the same reasoning as said in para. 38 to 40 above, we consider the effect on value would be minimal and can be disregarded. Conclusion 64.We determine the value of the Subject Properties for the purpose of section 10(2)(a) of the LRO should be in the following sums:
Orders 65.Accordingly, we order that the Respondent do pay:
66.The matters of professional fees, interest, costs and any other ancillary and consequential matters shall be adjourned to a date to be fixed by parties in consultation with counsel’s diaries if it needs. 67.Last but not least, the Tribunal thanks all Counsel for their helpful assistance.
Mr Ross M Y Yuen and Ms Evelyn L C Cheng, instructed by Cheung, Chan & Chung, for the applicants Mr Stanley Ng, instructed by the Department of Justice, for the respondent [1] The URA has a comprehensive policy of compensation other than on the basis of market value. Particularly for the domestic premises, owners of affected property may receive ex-gratia allowance, namely Home Purchase Allowance which will top up the difference between the market value of the property being acquired and the value of a notional replacement flat, which is a notional seven-year-old flat of similar size and in similar locality to the property being acquired. [2] The site area for The Prominence is about 472.50 sq m. [3] The site area for Harbour Park is about 597.92 sq m. [4] The site area for Park One is about 801.28 sq m. [5] The combined site area for Nos 248 & 250 Tung Chau Street was also 184.26 sq m. [6] The combined site area for Nos 220 & 222 Hai Tan Street was 195.10 sq m. [7] No 334 Tung Chau Street was wholly owned by a single owner prior to acquisition by the developer of The Prominence. See for instance A1/142, A2/142 or A3/138. [8] NBY was defined as Nam Cheong Street/Berwick Street/Yiu Tung Street in Happy Enough at para. 75 [9] These comparables were the same as those adopted by the Tribunal in Cheermark Investment. [10] According to the First Floor Plan, the A/C Plant Room serves only this comparable. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under LDLR 1/2012