Grand Creation Development Ltd v. Jonathan K Fung and Another

LDCS 3000/2019

[2020] HKLdT 54

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 3000 OF 2019

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BETWEEN

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JUDGMENT

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BACKGROUND

1.This is the applicant’s application for an order for sale, for the purposes of redevelopment under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”), of all the undivided shares of and in sub-section 3 of section A of New Kowloon Inland Lot No 1897 (“the 1^st Lot”), the Remaining Portion of section A of New Kowloon Inland Lot No 1897 (“the 2^nd Lot”), subsection 2 of section A of New Kowloon Inland Lot No 1897 (“the 3^rd Lot”) and subsection 1 of section A of New Kowloon Inland Lot No 1897 (“the 4^th Lot”) (collectively referred to as “the Lots”) together with 2 buildings erected thereon known as Nos 223 and 223A Hai Tan Street, Hong Kong (“the 1^st Building”) and Nos 225 and 255A Hai Tan Street, Hong Kong (“the 2^nd Building”) (collectively referred to as “the Buildings”).

2.Each of the 1^st Building and the 2^nd Building is a 5-storey (excluding the cockloft attached to the ground floor) tenement building served by 2 common staircases. An occupation permit No 165 dated 12 April 1955 was issued for the Buildings granting permission to occupy and use the Buildings for domestic purposes. Though the two buildings are adjoining, they are not interconnected.

3.The 1^st Lot together with part of the 1^st Building (No 223 Hai Tan Street) standing thereon is allocated 5 undivided shares, and each of the units therein is given 1 undivided share, making up a total of 5 undivided shares. The 2^nd Lot together with part of the 1^st Building (No 223A Hai Tan Street) standing thereon, the 3^rd Lot together with part of the 2^nd Building (No 225 Hai Tan Street) standing thereon and the 4^th Lot together with part of the 2^nd Building (No 225A Hai Tan Street) standing thereon have the same allocation of undivided shares as that of the 1^st Lot together with part of the 1^st Building (No 223 Hai Tan Street) standing thereon.

SECTION 3 OF THE ORDINANCE – OWNERSHIP OF THE APPLICANT

4.The applicant filed a Notice of Application (“NOA”) on 1 February 2019. At the time of filing of the NOA, there were 2 respondents and the applicant owned 4/5^th (i.e. 80%) undivided shares in the 1^st Lot and all (i.e. 100%) undivided shares in the 2^nd Lot (i.e. on average 90% in the 1^st and 2^nd Lots together with the 1^st Building standing thereon), 4/5^th (i.e. 80%) undivided shares in the 3^rd Lot and 4/5^th (i.e. 80%) undivided shares in the 4^th Lot (i.e. on average 80% in the 3^rd and 4^th Lots together with the 2^nd Building standing thereon), more than the threshold of 80% required for building aged 50 years or above.

5.Section 3(1) of the Ordinance prescribes that the minimum percentage of undivided shares that an applicant or applicants should possess before making an application under the Ordinance is 90%.  Section 3(2) of the Ordinance prescribes that an application under subsection (1) may cover (a) 2 or more lots where the majority owner owns not less than the percentage specified in subsection (1) of the undivided shares in each lot; or (b) 2 or more lots (i) on which one building is connected to another building by a staircase intended for common use by the occupiers of the buildings; and (ii) where the average of (A) the percentage of the undivided shares owned by the majority owner in the lot or lots on which one of the buildings stands; and (B) the percentage of the undivided shares owned by the majority owner in the lot or lots on which the other of the buildings stands, is not less than the percentage specified in subsection (1).

6.Section 3(5) of the Ordinance provides that the Chief Executive in Council may, by notice in the Gazette, specify a lower percentage in respect of a lot belonging to a class of lots specified in that notice. 

7.The Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice, made under section 3(5) of the Ordinance (“the Notice”), was gazetted on 22 January 2010 and came into operation on 1 April 2010.  Section 3 of the Notice lowered the threshold for compulsory sale of specified classes of lots from 90% to 80%.  Those classes of lots include:

“a lot with each of the buildings erected on the Lots issued with an occupation permit at least 50 years before the relevant date”

8.Since the occupation permit of the Buildings was issued in 1955, i.e. more than 50 years before the date of application (i.e. 1 February 2019; the relevant date under the Notice), the applicable percentage is therefore 80%.

9.I am satisfied, as at the date of application, the applicant owned more than 80% of the undivided shares in the 1^st and 2^nd Lots and the 3^rd and 4^th Lots and the Lots.  I am therefore satisfied the applicant is entitled to make the present application under section 3 of the Ordinance.

THE REMAINING RESPONDENT

10.After the commencement of the application, the applicant acquired undivided shares from the 1^st respondent, and subsequently discontinued the proceedings against him. At trial, the applicant owned all undivided shares in the 1^st and 2^nd Lots and on average 80% undivided shares in the 3^rd and 4^th Lots.

11.The 2^nd respondent (“R2”), who owns both 1^st Floor of No 225 Hai Tan Street and 1^st Floor of No 225A Hai Tan Street is the only live respondent on record in these proceedings, and he is represented by Mr Benjamin Chain (“Mr Chain”) at trial.  Mr Chain submits, apart from a discreet point on whether the applicant has taken reasonable steps to acquire all the undivided shares in the Lots on terms that are fair and reasonable, the issues between the parties are all valuation matters.

12.Whilst Mr Mok Yeuk Chi (“Mr Mok”), counsel for the applicant, proposes to sell the Lots (i.e. the 4 lots together with the 2 buildings standing thereon) as a merged site by one public auction, R2 has no reply or submissions in this connection.

ISSUES FOR DETERMINATION BY THE TRIBUNAL

13.The remaining issues to be decided in this case are as follows:

1)     What was the respective existing use value (“EUV”) of all units in the Buildings as at 3 December 2018, the valuation date adopted in the application valuation report dated 25 January 2019, as assessed in accordance with Part 1 of Schedule 1 of the Ordinance?

2)     Whether the redevelopment of the Lots is justified due to age and/or state of repair of the Buildings in accordance with section 4(2)(a) of the Ordinance?

3)     Whether the applicant has taken reasonable steps to acquire all the undivided shares in the Lots on terms that are fair and reasonable in accordance with section 4(2)(b) of the Ordinance?

4)     If an order for sale should be granted, what should be the reserve price (i.e. redevelopment value (“RDV”) of the Lots or redevelopment potential of the Lots as named by Mr Chain) for the purpose of auction sale?

DETERMINATION OF THE EUV OF ALL UNITS IN THE BUILDING

14.Pursuant to section 4(1)(a)(i) of the Ordinance, if there is a dispute between the parties on the EUV of the units as assessed in the application, the tribunal shall determine the proper value. Section 4(1)(a)(ii) further provides that, in the case of any minority owner of the lot who cannot be found, the majority owner of the lot is required to satisfy the tribunal that the value of the minority owner’s property as assessed in the application is: -

“(A) not less than fair and reasonable; and

(B) not less than fair and reasonable when compared with the value of the majority owner’s property as assessed in the application.”

15.The applicant appoints Mr Alnwick Chan Chi Hing (“Mr Chan”) of Knight Frank Petty Limited to give his opinion on valuation. Mr Francis Choi Fun Chi (“Mr Choi”) of SH Ng & Company Limited is appointed by R2.

16.Mr Chan and Mr Choi have reached agreement on the EUVs of all domestic units on the upper floors in the Buildings. While there is no missing owner in these proceedings, I agree to adopt the EUVs of the domestic units as agreed by the parties.

17.The valuation experts have also agreed the particulars and conversion factors of the 4 G/F units, but they adopted different methods to assess their respective EUV. Mr Chan valued the 4 G/F units as shops by direct comparison. He firstly assessed the unit rate of the reference G/F unit (i.e. G/F of No 233 Hai Tan Street) at $196,000 with reference to 6 comparables (i.e. 1 of them was finally excluded in the assessment), and then compared the reference G/F unit with the other 3 G/F units and derived a sub-total EUV at $72,467,080.  He applied different adjustment rates in scale to different adjustment factors, and the parties name it as scaling method.

18.Whilst, Mr Choi considered, other than the transactions in the Lots, there were no relevant comparables in this section of Hai Tan Street, and 4 out of the 6 comparables adopted by Mr Chan might include redevelopment potential that should be excluded in the EUV valuation, and therefore he relied on mainly the actual transactions of the subject 3 G/F units (i.e. G/F of No 223A, 225 and 225A Hai Tan Street) at the price of each $21,000,000 as at 27 February 2018 for assessment. He accepted that the transaction price of $21,000,000 was also embedded with redevelopment potential, and therefore he proposed to extract such redevelopment potential by comparing the transaction prices of the domestic units in the Buildings as at 27 February 2018 (i.e. the applicant had acquired the subject 3 G/F units and 12 domestic units in the Buildings at the same time as at 27 February 2018) with their EUVs assessed by Mr Chan and then calculated the average difference in percentage between these two groups of data at about 47.89%.  He envisaged the retail owners would expect a share of the redevelopment potential somewhat similar to those of the residential owners, and therefore he applied the said average percentage to value the subject 3 G/F units at $10,943,100 (i.e. $21,000,000 x (1 – 47.89%)). He then applied further adjustment for time, and each of the subject 3 G/F units was assessed at $11,100,000. G/F of No 223 Hai Tan Street was assessed at $10,300,000 with reference to the unit rate of the subject 3 G/F units.  The parties name it as pairing method.

19.Mr Choi also cross-checked his valuation by investment method.  He made reference to the respective 2019/2020 rateable value of the 4 G/F units and the respective rent of two tenancies (i.e. monthly rent of $20,000 as at 1 November 2014 for G/F of No 227B Hai Tan Street and monthly rent of $21,000 as at 30 June 2018 for G/F of No 225A of Hai Tan Street) and then capitalized them by private retail market yield (i.e. 2.3% as in November 2014 and 2.4% as in December 2018) published by Rating and Valuation Department.  While he had also analysed the yield of 2 shop transactions in the district, he made further adjustment for time to the capital value derived from G/F of No 227B Hai Tan Street.

20.Mr Chain argues that Mr Chan’s adoption of adjustment rates employed in previous tribunal cases in his scaling method (i.e. application of adjustment rate in scale to respective adjustment factor) is wrong in principle. Whilst, Mr Mok submits Mr Chan is entitled to adopt the scaling method which has been developed and employed by the tribunal for many years.  I consider, unless there is another better method, the scaling method as named by the parties, which is relatively simple and straight forward, is still the best method in direct comparison, even if this would have relied on subjective judgment of the valuer. I understand it is very often difficult to find market evidence to justify each adjustment rate objectively and therefore a valuer may have to rely on his/her judgment to determine the adjustment rates. However, I have reservation to apply the adjustment rates employed in previous tribunal cases directly in these proceedings. I am of the view each adjustment rate in each case should be assessed and/or reviewed independently with reference to market evidence and/or the valuer’s judgment.  In making the valuer’s judgment, although a valuer may make reference to the adjustment rates employed in previous tribunal cases, they are certainly not the market evidence and therefore should not be applied directly.

21.Mr Mok submits Mr Choi’s proposition that the subject 3 G/F unit owners were asking for about twice their respective EUV as the transaction price of $21,000,000 is pure speculation. He further submits the pairing method proposed by Mr Choi should be rejected. I agree.

22.I am of the view the extraction of redevelopment potential by Mr Choi in his pairing method is unreliable. There is no creditable evidence to prove what had been alleged by Mr Choi. In addition, he cannot answer satisfactorily why another G/F unit transaction (i.e. G/F of No 223 Hai Tan Street) at $30,303,000 as at 7 March 2019 could not be paired for comparison as well, which would show a much different result.

23.Mr Mok also submits Mr Choi’s investment method analysis should be rejected.  While Mr Choi admitted during cross-examination that his investment method analysis might be tainted with uncertainties (i.e. the uncertainty whether the passing rental was at the then prevailing market level, the uncertainty of the correct yield and the uncertainty of the time adjustment of a 2014 rent to the valuation date as at 3 December 2018), the adoption of rateable value as a substitute for actual rental value in the investment method analysis is inherently unreliable and this had been rejected by the tribunal.  I agree Mr Choi’s investment method analysis has a lot of limitations, and as compared with analysis of sales transactions is not a reliable valuation method. Although I have no objection to take investment method analysis for reference in cross-checking, I consider it could not affect the valuation result derived from the analysis of sales transactions in these proceedings.

24.Except for the adjustments for location, I accept Mr Chan’s analysis of sales transactions. Mr Choi has not commented Mr Chan’s assessment in details, but he said that this section of Hai Tan Street was relatively poor and was almost undeveloped as at the valuation date in December 2018 and Mr Chan’s assessment has over-valued the G/F units.

25.I agree with Mr Choi that this section of Hai Tan Street in the west of Yen Chow Street, which accommodated mainly engineering workshops on G/F, was relatively poor as at the valuation date in December 2018. Although I do not accept Mr Choi’s assessment, I agree with him Mr Chan has over-valued the G/F units.  By adjusting the 5 selected comparables with an additional -5% for location, the G/F reference unit (i.e. G/F of No 223 Hai Tan Street) would be assessed at about $186,000 per square meter saleable instead of $196,000 as proposed by Mr Chan.  The 4 G/F units would then be assessed at about $68,770,000 after rounding.

26.The EUVs of all units in the Building, including the 4 G/F units as determined by the tribunal and the 16 upper floor units as agreed by the parties, as at the relevant date of valuation, i.e. 3 December 2018, are appended below: -

No

Floor

EUV

223	G	$16,230,000
223A	G	$17,540,000
225	G	$17,480,000
225A	G	$17,520,000
223	1	$5,466,752
223A	1	$5,413,949
225	1	$5,413,949
225A	1	$5,414,687
223	2	$5,362,623
223A	2	$5,309,834
225	2	$5,309,834
225A	2	$5,310,559
223	3	$5,092,844
223A	3	$5,041,710
225	3	$5,041,710
225A	3	$5,042,420
223	4	$4,748,090
223A	4	$4,699,433
225	4	$4,699,433
225A	4	$4,700,129

27.I accept the EUVs of all units in the Buildings as listed above and the total EUV of $150,837,956.

SECTION 4(2) OF THE ORDINANCE - JUSTIFICATION AND REASONABLE STEPS

28.Section 4(2) of the Ordinance provides as follows: -

“2. The Tribunal shall not make an order for sale unless, after hearing the objections, if any, of the minority owners of the lot the subject of the application under section 3(1) concerned, the Tribunal is satisfied that—

(a)     the redevelopment of the lot is justified (and whether or not the majority owner proposes to or is capable of undertaking the redevelopment)—

(i) due to the age or state of repair of the existing development on the lot; or

(ii) on 1 or more grounds, if any, specified in regulations made under section 12; and

(b)     the majority owner has taken reasonable steps to acquire all the undivided shares in the lot (including, in the case of a minority owner whose whereabouts are known, negotiating for the purchase of such of those shares as are owned by that minority owner on terms that are fair and reasonable).”

29.The applicant must satisfy this tribunal the above statutory requirements are met; otherwise, an order for compulsory sale would not be granted.

Whether development of the Lots is justified due to the age and/or state of repair of the Building

30.The applicant adduces expert evidence of Mr Wong Chi Ming (“Mr CM Wong”), a structural engineer, of CM Wong & Associates Limited and Mr Dennis Wong Wing Cheung (“Mr Dennis Wong”), a building surveyor, of Prudential Surveyors International Limited. Mr CM Wong conducted a structural survey of the Buildings and prepared a Structural Assessment Report dated 12 September 2019.  Mr Dennis Wong conducted a condition survey of the Buildings and prepared a Condition Survey Report dated 18 September 2019.

31.R2 has not adduced expert evidence to rebut the reports compiled by Mr CM Wong and Mr Dennis Wong.

32.Having considered the reports of Mr CM Wong and Mr Dennis Wong, I accept their expert opinion. The Buildings, being erected more than 65 years ago, are in poor condition and have come to the end of their design life.  The design of the Buildings has become obsolete over time in many aspects, both physically and functionally, and fails to conform to modern construction standards and statutory requirements.

33.I am also of the view the Buildings are in poor state of repair and the costs of repair to bring the Buildings to tenantable condition is disproportionate to the costs of redevelopment.  Even if repair works are carried out, such works will bring about a modest improvement only to the existing condition of the Buildings, and the Buildings will continue remain a sub-standard one.

34.By reason of the matters set out above, I am satisfied the redevelopment of the Buildings is justified.

Whether the applicant has taken reasonable steps

35.In assessing the reasonableness of the offers, I have considered the case of Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578. In particular, I have considered paragraphs 33 and 36 of the judgment in which   Ribeiro PJ stated: -

“33. In making that assessment the Tribunal is not conducting a valuation exercise. It does not need to adjudicate upon any disputes about the correct valuation principles to be applied. It does not itself arrive at any conclusion as to what figure represents the correct valuation. It merely needs to be satisfied that, on the evidence available, the offer falls within the range of what may broadly be regarded as fair and reasonable compensation for the interest in question. It is obviously necessary to recognise that there will often be differences of opinion on that matter……”

“36. ...... We are of course not suggesting that it is necessary for the offer to “beat” the valuation as if it were a payment into court. What the Tribunal must do is to consider whether, in the circumstances of each case, the offer falls within a band of what represents a fair and reasonable assessment of the value of the minority owner’s interest reflecting a proportionate share of the redevelopment value of the whole site……”

36.Before the applicant filed the application, the applicant had made 5 batches of offer to R2 on 2 May 2018, 7 August 2018, 8 October 2018, 21 December 2018 and 2 January 2019. The applicant’s offers of 2 January 2019 at $9,260,000 and $9,270,000 for the 2 units owned by R2 respectively were accompanied with Mr Chan’s apportionment letter providing the pro-rata share of the RDV as at 3 December 2018.  The applicant made a further offer to R2 on 13 February 2020 at $10,030,000 to each of the R2’s units and this was also accompanied with Mr Chan’s apportionment letter.

37.Mr Chain submits there is a discreet point on fair and reasonable steps only. Mr Chain contends the applicant in order to be fair should deal with all respondents equally, but the premium to the 1^st respondent was better than the final offer to R2. Whilst, Mr Mok submits the applicant have already taken reasonable steps to acquire all the undivided shares in the Lots. I agree.

38.On the condition that two of the applicant’s offers were based on the valuations of Mr Chan, an independent valuation expert, and had reflected the then RDV attributable to the units owned by R2, and there is no evidence Mr Chan’s valuations were at serious fault, I consider they meet the criteria laid down in Capital Well.  I consider these applicant’s offers fall within the range of what may broadly be regarded as fair and reasonable.

39.Further, I agree with Mr Mok that the majority owner should not be deprived of his free choice to make a commercial decision to settle with one of the minority owners on a level of offer higher than those given to the other minority owners, whether it is out of compassion or for some special threat or risk that may be perceived as coming from the minority owner. That free choice is a proprietary right of the majority owner which should not be removed unless there is absolutely clear statutory stipulation to that effect.

RESERVE PRICE FOR THE AUCTION

40.By reason of being satisfied that redevelopment of the Lots is justified and that the applicant has taken reasonable steps to acquire all the undivided shares in the Lots, I am satisfied an order for sale should be granted in favour of the applicant.

41.In the 2^nd Joint Statement of the valuation experts dated 21 August 2020, Mr Chan and Mr Choi have come into agreement on the hypothetical development model (i.e. a 25-storey commercial / residential composite development on a net site area of 410.36 square meters at the plot ratio of 8.4375 and the total gross floor area of 3,462.41 square meters) and all the development parameters, except the gross development value, the construction costs and the developer’s profit in the residual valuation. They also argue whether the site transactions in 2020 are relevant for comparison or reference in the subject valuation.

42.Although they agree on the conversion rate for the 1/F shop at 1/3 of the G/F shop, they have adopted different unit rates for the G/F shop. Mr Chan assesses the reference G/F shop at $243,000 per square meter saleable by direct comparison with 12 G/F comparables (i.e. 3 of them along Hai Tan Street are finally adopted in his final analysis), whilst Mr Choi makes reference to the EUVs as assessed by Mr Chan (i.e. RDV is about 1.5 times of Mr Chan’s EUV) and him (i.e. RDV is about 2.5 times of Mr Choi’s EUV) only. Mr Choi considers there should be some correlation between the EUV and the RDV of the shops. Nevertheless, Mr Choi has further commented at trial his assessment can also be supported by 2 of the comparables proposed by Mr Chan (i.e. Shops 6 & 7 of Park One transacted in October 2019).

43.No doubt, Mr Choi’s adoption of conversion rate with reference to EUV is totally subjective without any sound basis, and therefore should be rejected. I also agree with Mr Chan that the 3 Hai Tan Street transactions are the most relevant comparables. In the circumstances, I accept the gross development value of the shops on G/F and 1/F proposed by Mr Chan.

44.Regarding the gross development value of the domestic flats on upper floors, Mr Choi analyses 1 comparable (i.e. 19C of Astoria Crest) transacted on 7 March 2018 only and then adjusts for time to derive an average figure of $232,000 per square meter saleable.  Whilst, Mr Chan analyses 13 transactions of Harbour Park, Ava 228 and Astoria Crest in 2019 and 2020, and has also made reference to various transactions of West Park and Cullinan West in 2020. Although the adoption of the comparbles in Ava 228 that has not been completed is arguable, I accept Mr Chan’s assessment at $221,000 per square meter saleable for the reference domestic unit (i.e. a domestic unit with open view on 14/F).  Even if the comparables in Ava 228 are excluded, the other comparables can still support Mr Chan’s assessment. In any event, I consider it is inappropriate to adopt 1 comparable transacted in 2018 only.

45.In addition, I accept the construction costs at $123,576,549 (i.e. on average $35,691 per square meter gross) and the developer’s profit at 20% proposed by Mr Chan.  Mr Chan’s assessment of the construction costs is supported by his Building Cost Proforma, which has shown the components of construction costs in details. Without the allowance for stamp duty and legal costs on residual land value, the developer’s profits at 20% is reasonable as at the valuation date in August 2020.  Being affected by the pandemic and the US-China dispute, there are a lot of uncertainties in the market.  I consider as at the valuation date it is reasonable for the hypothetical developer to demand a higher profit at 20% on costs.  Accordingly, I accept the RDV assessed by Mr Chan at $293,100,000.

46.Mr Choi has also contended reference should be made to the site transactions by public tender in 2020 particularly the site at the junction of Tonkin Street and Fuk Wing Street, an Urban Renewal Authority’s project, at the consideration of $912,800,000 (i.e. accommodation value of about $94,395 per square meter). Mr Chan disagrees and argues the development agreements of this project that is subject to a profit sharing and other development conditions are unknown and therefore no meaningful comparison can be made.  I agree to the observations of Mr Chan in this regard.  I am also of the view this project which occupies a better location and is larger in size can achieve a higher site value (i.e. in terms of accommodation value) because of higher gross development value and better efficiency.

RDV of the Lot as in August 2020

47.Based on the agreements between the valuation experts and the above determinations, the Lots are assessed at $293,100,000, equivalent to an accommodation value of about $84,652 per square meter (i.e. about $7,864 per square foot).

48.Nonetheless, Mr Chain contends RDV is never used in the Ordinance. The relevant term is redevelopment potential, and the context in which this term appeared plainly shows that the legislation does not contemplate it to be a valuation exercise.  Mr Chain further submits assessment of the RDV by reference to what the future building is worth today, while a possible basis, should not be the only approach. Therefore, he urges the tribunal to adopt a more robust approach to redevelopment potential, as Mr Choi did.  However, after I have considered Mr Choi’s opinion and evidence, I accept Mr Chan’s RDV assessment.  R2 including Mr Choi has failed to put forward an alternative approach and/or reliable evidence acceptable to the tribunal, which can rebut the applicant’s submissions.

ORDERS

49.For reasons given in this judgment, I have set out reasons why I am satisfied an order for sale should be granted and I therefore make the following orders: -

1)     All the undivided shares in the Lots, the subject of the application, be sold by way of public auction for the purposes of redevelopment of the Lots;

2)     Mr Tam Tak Hing and Mrs Li Lau Hing Joanna, nominated by the applicant, be appointed trustees (“the Trustees”) to discharge the duties imposed on them as trustees by the Ordinance in relation to the sale of the Lots;

3)     The Trustees be authorized to charge such remuneration for their services in accordance with the terms set out in the letter of Messrs King & Company dated 5 December 2019;

4)     For the purposes of the sale of the Lots by public auction: -

a)     the sale of the Lots be on the particulars and conditions of sale the same or substantially the same as those set out in the draft Particulars and Conditions of Sale to be approved and initialed by the tribunal; and

b)     the reserve price be set at $293,100,000;

5)     Subject to further extensions that the tribunal may subsequently allow upon the application of the purchaser of the Lots or its successor in title, the redevelopment of the Lots and the Buildings shall be completed and made fit for occupation within a period of 6 years after the date on which the purchaser of the Lots shall become the owner of the Lots; and

6)     Liberty to the applicant, the 2^nd respondent and the Trustees to apply to the tribunal for further directions.

COSTS

50.Mr Mok submits Mr Choi’s 3 main cases on EUV G/F value, RDV G/F value and RDV domestic value are all unreasonable and therefore it is legitimate that R2 should be responsible to the applicant for costs incurred to meet these 3 main cases and the counterchecks and reference (or at least some of them).  In taking a broad-brush approach, he invites the tribunal to grant a costs order that the applicant do pay R2 costs of these proceedings, except that there should be no order as to costs for the costs of and occasioned by R2’s valuation evidence, or there should be a deprivation of at least a substantial portion, such as 80%.

51.I consider Mr Choi’s valuation evidence is generally not helpful, but is not totally without merit. Although his innovative and/or robust approaches are generally not well founded and/or are unreliable, particularly his assessments of the G/F value, he has successfully argued that Mr Chan has over-valued the EUV G/F value and has also brought an important message to the tribunal that the RDV may be under-valued, though the tribunal has finally accepted Mr Chan’s RDV assessment. In the circumstances, under the compensation approach on costs, I agree to deprive 20% only of R2’s costs on valuation evidence.

52.I therefore make a costs order nisi that the applicant do pay costs of these proceedings to R2, except 20% of R2’s costs on valuation evidence, on High Court scale with certificate for counsel and including any reserved costs, to be taxed if not agreed.  Unless any parties apply by summons to vary, the costs order nisi shall be made absolute upon expiry of 14 days from the date of this judgment.

Mr Mok Yeuk Chi, instructed by Messrs Lo & Lo, for the applicant

Mr Benjamin Chain, instructed by Messrs Vincent TK Cheung, Yap & Co, for the 2^nd respondent