Spotting Bright Ltd v. The Personal Representatives of Cheng Yu Chun, Deceased and Others
Read the full judgment text of LDCS 12000/2019 on BabelCite. This LDCS judgment was delivered on 30 November 2020.
1. This is an application for compulsory sale of all the undivided shares of and in section J of Marine Lot No 52 and the Extension thereto (“the Lot), together with a building erected thereon known as Sun On Mansion, Nos 20, 20A, 20B, 22, 24, 26, 26A, 26B and 28 Cannon Street, Hong Kong (“the Building”), for the purposes of redevelopment under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”).
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LDCS 12000/2019 [2020] HKLdT 57 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO 12000 OF 2019 __________________________ BETWEEN
__________________________ Before: Mr Alex Ng, Member of the Lands Tribunal Date of Hearing: 19 October 2020 Date of Judgment: 30 November 2020 __________________ JUDGMENT __________________ BACKGROUND 1.This is an application for compulsory sale of all the undivided shares of and in section J of Marine Lot No 52 and the Extension thereto (“the Lot), together with a building erected thereon known as Sun On Mansion, Nos 20, 20A, 20B, 22, 24, 26, 26A, 26B and 28 Cannon Street, Hong Kong (“the Building”), for the purposes of redevelopment under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”). 2.The Building is an 11-storey composite building served by 2 common lifts and 2 common staircases. An occupation permit No H318/64 dated 28 November 1964 was issued for the Building granting permission to occupy its ground floor (“G/F”) as shops for non‑domestic use, 1st floor (“1/F”) to 5th floor (“5/F”) as 8 tenements on each floor for domestic use, 6th Floor (“6/F”) and 7th floor (“7/F”) as 6 tenements on each floor for domestic use, and 8th floor (“8/F”) to 10th floor (“10/F”) as 4 tenements on each floor for domestic use. According to the assignment plans of the G/F units, there are 8 units planned on G/F. 4 of them (i.e. Nos 20, 22, 24 and 26) have frontage onto Cannon Street, and the remaining 4 units (i.e. Nos 20A, 20B, 26A and 26B) are situated at the rear part and do not have frontage onto street. 3.The Lot together with the Building standing thereon was allocated 72 undivided shares, and each of the 8 non-domestic units on G/F and the 64 domestic units on upper floors was given 1 undivided share, making up a total of 72 undivided shares. SECTION 3 OF THE ORDINANCE – OWNERSHIP OF THE APPLICANT 4.The applicants filed a Notice of Application (“the NOA”) on 18 April 2019, which was subsequently amended on 20 August 2020 pursuant to an Order of the tribunal made on the same date. At the time of filing of the NOA, the applicants owned on average 95.83% (i.e. 69 out of the total 72 undivided shares of the Lot) of the Building. 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%. I am satisfied the applicants were entitled to make the present application under the Ordinance. THE REMAINING RESPONDENTS 6.At the time of application, there were 2 respondents. Since then, the applicants acquired undivided shares from the 2nd respondent, and have discontinued the proceedings against him. At the time of trial, the applicants owned on average 98.61% (i.e. 71 out of the total 72 undivided shares of the Lot) of the Building. The 1st respondents (“R1”) is the only live respondent on record. 7.Cheng Yu Shun is the registered owner of Flat G on 1/F, Sun On Mansion, No 28 Cannon Street (“R1’s Property”). The Personal Representatives of Cheng Yu Chun was joined as the 1st named R1 in view that Cheng Yu Chun had passed away on 17 March 1983 without grant of administration of his estate. SEA-TIA NGANGYOO also known as SAE-TIA NGANGYOO or NGANGYOO, SAE TIA was joined as the 2nd named R1 in view that a trust of the R1’s Property in favour of her might have been created by virtue of paragraph 1 of the Judgment dated 30 December 1986 in High Court Action No A6103 of 1985. 2nd named R1 may be a beneficial owner of the R1’s Property. 8.The 1st named R1 cannot be found. Substituted service of the application on the 1st named R1 was effected on 8 June 2020 pursuant to an order of the tribunal dated 3 June 2020. No one has shown up after the expiration of the 1-month period as specified in the notices of substituted service. 9.Messrs Joseph CT Lee & Co (“JCTL”) had acted for the 2nd named R1 in entering two Caveats in respect of the estate of Cheng Yu Chun, deceased in 1984 and 1986. Apart from sending the NOA and the relevant documents to the 2nd named R1 to her last known address (i.e. the R1’s Property), the applicants have also sent the same to JCTL. On 9 June 2020, one day after the publication of the notices of substituted service, JCTL on behalf of the 2nd named R1 was applying for grant of administration in respect of that part of the estate of Cheng Yu Chun, deceased, constituting the deceased’s interest in the R1’s Property in HCEA 10/2019. The applicants have then on 17 June 2020 written to JCTL, but the 2nd named R1 has not responded to the notices of the substituted service. 10.Ms Ngai, counsel for the applicants, submits the 2nd named R1 who has been legally represented by JCTL should be able to obtain necessary professional and legal advice in order to protect her own interest and the interest of the estate of Cheng Yu Chun, deceased. Nevertheless, the 2nd named R1 has made her informed decision not to do anything in the present application. Ms Ngai further submits even on the assumption that the applicants have not effectively served the application on the 2nd named R1 (which the applicants disagree having regard of the facts of service), the notices of the substituted service are also applicable to her. 11.In any event, the present application is uncontested. ISSUES FOR DETERMINATION BY THE TRIBUNAL 12.The remaining issues to be decided in this case are as follows:
DETERMINATION OF THE EUV OF ALL UNITS IN THE BUILDING 13.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: -
14.The applicants appoint Mr Charles CK Chan (“Mr Chan”) of Savills Valuation and Professional Services Limited to give his opinion on valuation. In the application valuation report dated 30 January 2019, Mr Chan assessed the EUVs of all units in the Building by direct comparison method. Since Shop Nos 20, 20A, 20B and 22 on G/F have been merged as a large shop, and Shop Nos 24, 26A and 26B on G/F have also been merged as another large shop, he valued these shop units as 2 large shops to reflect the existing state. 15.In assessing the EUV of the shop units and the domestic units, Mr Chan selected Shop Nos 24, 26A and 26B as the reference shop unit and Flat C on 5/F as the reference domestic unit. After comparing the reference units with the comparables and the other units in the Building, he derived a total EUV of the Building at $767,030,000. 16.Mr Chan reviewed the EUV assessment in his 1st supplemental valuation report dated 10 September 2020, in which he had taken into consideration the latest property indices and the internal conditions of those units that were firstly inspected on 3 September 2020. In addition, he allowed reinstatement costs for the remedial works in respect of the outstanding registered building orders / notices, and had also provided breakdown of market value of the 2 large shops on a pro-rata basis with reference to their respective saleable areas. He finally assessed the reference shop unit at $1,240,000 per square meter saleable, the reference domestic unit at $149,000 per square meter saleable, and the total EUV of the Building at $770,090,000. 17.The EUVs of all units in the Building as assessed by Mr Chan, as at the relevant date of valuation, i.e. 30 January 2019, are appended below: -
18.Having reviewed Mr Chan’s assessment, I am satisfied the value of the R1’s Property is not less than fair and reasonable and not less than fair and reasonable when compared with the value of the applicants’ properties. I accept the EUVs of the units as listed above and the total EUV of $770,090,000. SECTION 4(2) OF THE ORDINANCE - JUSTIFICATION AND REASONABLE STEPS 19.Section 4(2) of the Ordinance provides as follows: -
20.The applicants must satisfy this tribunal the above statutory requirements are met; otherwise, an order for compulsory sale would not be granted. Whether development of the Lot is justified due to the age and/or state of repair of the Building 21.The applicants adduce expert evidence of Mr Dennis Wong Wing Cheung (“Mr Wong”), both a structural engineer and a building surveyor, of Prudential Surveyors International Limited. Mr Wong conducted both a structural survey and a condition survey of the Building and prepared a Structural Survey Report and a Condition Survey Report both dated 9 September 2020. 22.No expert evidence was filed to rebut the reports compiled by Mr Wong. 23.Having considered the reports of Mr Wong, I accept his expert opinion. The Building, being erected more than 56 years ago, is in poor condition and has come to the end of its design life. The design of the Building has become obsolete over time in many aspects, both physically and functionally, and fails to conform to modern construction standards and statutory requirements. 24.I am also of the view the Building is in poor state of repair and the costs of repair to bring the Building 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 Building, and the Building will continue remain a sub-standard one. 25.By reason of the matters set out above, I am satisfied the redevelopment of the Building is justified. Whether the applicant has taken reasonable steps 26.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: -
27.Before the applicants filed the application, the applicants had made an offer to both the 1st named R1 and the 2nd named R1 on 30 January 2019. The applicants’ offer at $11,660,000 for the R1’s Property had reflected the then pro-rata share of the RDV as assessed by an independent valuer. In response to the request of JCTL, the applicants had also furnished JCTL on about 5 March 2019 with a copy of the same offer letter. 28.Ms Ngai submits, irrespective of the applicants’ offer dated 30 January 2019, the applicants have not been able to acquire the undivided shares owned by R1 because the 1st named R1 cannot be found and no grant of administration of the estate of Cheng Yu Chun, deceased had been issued, and therefore it is impossible for the applicants to negotiate with anyone with the necessary authority to sell the R1’s Property. Hence, the applicants have taken reasonable steps in acquiring all the undivided shares in the Lot. I agree RESERVE PRICE FOR THE AUCTION 29.By reason of being satisfied that redevelopment of the Lot is justified and that the applicants have taken reasonable steps to acquire all the undivided shares in the Lot, I am satisfied an order for sale should be granted in favour of the applicants. 30.While Mr Chan considered there was no relevant land sale transaction for direct comparison, he adopted residual valuation method to assess the RDV of the Lot as at 24 September 2020. In the residual valuation, he opined that the optimum development on the Lot comprised a 26-story commercial building with retail shops and plant rooms on G/F to 2nd Floor (“2/F”), sky garden on 3rd Floor, plant rooms on 4th Floor, and commercial units on 5/F to 25th Floor. 31.Details of the hypothetical development including the site area of 500.465 square meters, the proposed gross floor area of 7,561.72 square meters and plot ratio of 15.1094 (i.e. including the bonus plot ratio for setback from existing lot boundary), the gross development value assessed (i.e. on average $1,360,000 per square meter saleable for retail premises on G/F, $453,000 per square meter saleable for retail premises on 1/F, $362,000 per square meter saleable for retail premises on 2/F, $307,000 per square meter saleable for commercial premises on upper floors with building view, and $374,000 per square meter saleable for commercial premises on upper floors with sea view), the development costs adopted (i.e. on average $34,787 per square meter gross), and the residual valuation (i.e. development period of 3 years, interest rate at 4% per annum, stamp duty and legal cost on land value at 4.25% and 0.1% respectively, and profit at 25% on costs) were set out in his 2nd supplemental valuation report dated 28 September 2020. RDV of the Lot as at 24 September 2020 32.Having gone through Mr Chan’s assessment in his 2nd supplemental valuation report dated 28 September 2020, I accept his residual valuation. The Lot is assessed at $1,450,000,000, equivalent to an accommodation value of about $191,755 per square meter (i.e. about $17,814 per square foot), which should be the reserve price for public auction. ORDERS 33.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: -
COSTS 34.I make a costs order nisi that there be no order as to costs. Unless any parties apply by summons to vary, the costs order nisi shall be made absolute upon expiry of 14 days from today.
Ms Nancy Ngai, instructed by Messrs Vincent TK Cheung, Yap & Co, for the applicants The 1st respondents were not represented and did not appear |
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