Fancy Million Ltd and Others v. Year Glory Ltd and Others
Read the full judgment text of LDCS 15000/2018 on BabelCite. This LDCS judgment was delivered on 23 November 2021.
1. This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of the following 7 lots (“the Lots”), on which stands the building known as Tai Wah Building situated at Nos 3-13 Nga Tsin Long Road, Kowloon (“the Building”):
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LDCS 15000/2018 [2021] HKLdT 76 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO 15000 OF 2018 __________________________ BETWEEN
__________________________ Before: Mr Lawrence Pang, Member of the Lands Tribunal Dates of Hearing: 18-22 October 2021 Date of Closing Submission: 29 October 2021 Date of Judgment: 23 November 2021 _________________ J U D G M E N T _________________ 1.This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of the following 7 lots (“the Lots”), on which stands the building known as Tai Wah Building situated at Nos 3-13 Nga Tsin Long Road, Kowloon (“the Building”):
2.According to the occupation permit (“OP”) dated 19 July 1967, there were 7 shops on Ground Floor (“G/F”), 1 non-domestic unit on each of 1/F to 3/F and 10 domestic units on each of 4/F & 5/F making a total of 30 units. The Building is served by two common staircases. 3.By a Deed of Mutual Covenant dated 8 November 1967, each of the 7 G/F shops and the 20 residential units is allotted 1/60 equal and undivided share and each unit from 1/F to 3/F is allotted 10/60 equal and undivided shares. 4.Mr Mok Yeuk Chi (“Mr Mok”), counsel for the applicants, summarized in his opening submission that at the time of the Application dated 18 July 2018, the applicants together owned all the undivided shares except those owned by the following 3 respondents:
5.By an Inter Partes Summons dated 8 October 2021, the applicants applied leave from the Tribunal to, inter alia, amend the Application because the 3rd applicant and the 4th applicant had assigned their interest to the 1st applicant both on 28 September 2021. The 3rd applicant and the 4th applicant have withdrawn their application forthwith. Leave was granted on the 1st day of trial and service of the amended Notice of Application (Form 32) was dispensed with. The remaining 1st and 2nd applicants will be referred hereinafter collectively as “the applicants” where appropriate 6.By a letter dated 30 September 2021, R1’s solicitors, Messrs Iu, Lai & Li, informed the applicants’ solicitors, Messrs So, Lung & Associates, that R1 is no longer disputing the Application and is withdrawing its opposition, its Form 33 and its evidence. 7.R2 was represented by Mr Vincent Lung (“Mr Lung”), instructed by Messrs Ince & Co, Solicitors but R3 were not legally represented and acted in person by Mr Ngan Kwok Fat (“Mr Ngan”) who attended the trial only on the 1st day and on the day of closing submission. Whether the Applicant is entitled to make the Application 8.Section 3(1) of the Ordinance requires an applicant to have not less than 90% of the undivided shares in a lot before he can make an application. 9.Section 3(5) of the Ordinance provides that the Chief Executive in Council may, by notice in the Gazette, specify a percentage lower than the percentage mentioned in section 3(1) in respect of a lot belonging to a class of lots specified in the notice. 10.The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice was gazetted on 22 January 2010 and came into operation on 1 April 2010 (“the Notice”). Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%. Those classes of lots include “a lot with each of the building erected on the lot issued with an occupation permit at least 50 years before the relevant date (ie the date of the application under the Ordinance)”. 11.As the OP for the Buildings was issued on 19 July 1967, not less than 50 years before the date of the Application, the Notice is applicable and the threshold percentage should be 80%. 12.The 1st, 2nd, 3rd and 4th applicants, at the commencement of the Application, owning altogether 80% of the undivided shares of the Lots, were entitled to file the Application under section 3(2)(a) of the Ordinance. The Issues in the Application 13.Mr Lung, in his opening submission, summarized R2’s opposition of the Application on the following issues:
14.Notwithstanding the above, Mr Lung agreed with Mr Mok that there was no new or difficult point of law that a presiding officer is required to sit in the trial. As to whether redevelopment is justified, R2 did not dispute that the principles laid down in Top Sail International Ltd v Cheng Kai Ming, LDCS 18000/2015 (unreported, dated 15 November 2011) and Charmlink Ltd v Lee Tong Hing & Others, LDCS 16000/2010 (unreported, dated 29 November 2011) are applicable. The Tribunal will be assisted by the condition survey and structural assessment experts. 15.Mr Lung equally had no dispute that as regards whether reasonable steps to acquire all the undivided shares of the Lots on terms that are fair and reasonable, the Court of Final Appeal’s decision in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578 at §§33-36 is pertinent. 16.Mr Ngan agreed as well as he considered this trial was basically fact finding and determination. In his Notice of Opposition, Mr Ngan referred, for instance, to previous offers by the applicants in December 2017 and May 2018 for R3’s interest in the sum of $38,000,000 and $50,000,000 respectively. But more importantly, Mr Ngan emphasized at the beginning of the trial that there had been much improvement in environment since the opening of the Tuen Ma Line (formerly known as the Shatin to Central Link) of the Mass Transit Railway with a station entrance at Nam Kok Road, ie next street one block away. He expected that there will be further improvement when the area around the Kai Tak Sports Park is developed say in 5 years and the Government’s initiative in the transformation of Kowloon East into an attractive, alternative Central Business District. He saw no reason to sell R3’s interest before then when the market value would be higher. 17.Mr Ngan repeated his wish that he should be allowed to stay at least for another 5 years when the value of his interest would be much enhanced. The Evidence 18.The applicants have filed the following documents in support of the Application:
19.The respondents rely on the following documents rebutting the Application:
20.Mr B Wong and Professor Chan have prepared a Joint Expert Statement on Condition Survey on 15 October 2020; likewise, Mr CM Wong and Professor Chan have prepared a Joint Expert Statement on Structural Assessment on 16 October 2020. 21.Mr A Chan and Ms Sat have prepared two joint statements, one dated 16 October 2020 setting out their agreements and disagreements on EUV and RDV, followed by another one dated 24 September 2021 on RDV. Then on 11 October 2021, they provided a joint letter to the Tribunal setting out the updated EUV tables. EUV as at 24 April 2018 Assessment of EUV of G/F Units 22.Notwithstanding the OP dated 19 July 1967 which provided for 7 shops on G/F, 1 non-domestic unit on each of 1/F to 3/F etc, by reference to a set of approved building plans (“GBP”) dated 7 April 1967 and its subsequent Alteration and Addition (“A&A”) plans dated 20 February 2017, portion of Shops 1 and 3, whole of 1/F to 3/F were converted to a Residential Care Home for Elderly (“the RCHE”) served by 2 newly constructed exclusive lifts and 2 internal staircases. In addition, the four shops on G/F (ie Shops 1, 3, 5 & 7) on the GBP were merged into an enlarged shop; portion of Shops 1 and 3 were converted to a new lift lobby serving the RCHE. A new transformer room and fire service control centre were constructed at the rear of the enlarged shop. 23.Besides, Flat G on 4/F was converted to a lift machine room and A/C Plant room for lift shaft. 24.More particularly, there was a tenancy agreement dated 23 May 2016 (“1st tenancy agreement”) whereby portion of Shops 1 and 3 on G/F, the whole of 1/F, 2/F & 3/F and Flat H on 4/F were leased by the 1st applicant to Tsui Lee trading as Pok Hong Home for Aged for a period of 3 years from 1 January 2017 at a rental of $638,000 per month exclusive of rates and management charges but inclusive of Government rent. This tenancy agreement was superseded by another one dated 31 October 2016 (“2nd tenancy agreement”) whereby portion of Shops 1 and 3 on G/F, the whole of 1/F, 2/F & 3/F and Flat H on 4/F (“Main Portion of RCHE”) was leased by the 1st applicant to Hong Kong Hang Yue Medical Care Limited (with Tsui Lee providing personal guarantee) for a period of 3 years from 1 November 2016 to 31 October 2019 at the same rental of $638,000 per month exclusive of rates and management charges but inclusive of Government rent. 25.Like the previous tenancy agreement, ie the 1st tenancy agreement, the 2nd tenancy agreement contained the following special conditions:[1]
26.Thus, it is apparent that the conversion into the RCHE was carried out pursuant to this tenancy agreement. Then on 7 May 2018, there was a further tenancy agreement (“3rd tenancy agreement”) whereby portion of Shops 1, 3, 5 and 7 on G/F, and Flat I on 4/F were leased by the 1st applicant and the 3rd applicant to Hong Kong Hang Yue Medical Care Limited for a period of 2 years from 2 May 2018 to 1 May 2020 at a rental of $160,000 per month exclusive of rates and management charges but inclusive of Government rent. 27.At the present moment, therefore, the Building comprises the RCHE, 3 shops (ie Shops 9, 11 and 13) on G/F and 10 units on each of the 4/F and 5/F. 28.By virtue of the joint letter to the Tribunal dated 11 October 2021, Mr A Chan and Ms Sat have agreed the following particulars of the non-domestic units of the Building:[2]
EUV for Shops 29.Both experts have agreed to adopt Shop 9 on G/F of the Building as the reference shop unit for comparison analysis. 30.Whereas Mr A Chan analyzed 4 shop comparables, he eventually adopted only what he called as the “star comparable” which is located very close to the Building at 19-21 Nga Tsin Long Road. Its adjusted unit rate was $366,000 per sq m[3]. It is within the range of the adjusted unit rates of the other 3 shop comparables. 31.Ms Sat analyzed 5 shop comparables, including the “star comparable” above and arrived at an average adjusted unit rate of $375,000 per sq m. It is further noted that her adjusted unit rate for the “star comparable” was $363,950 per sq m.[4] 32.The comparables adopted by Mr A Chan and Ms Sat in assessing the EUV for shops on G/F as at 24 April 2018 are as follows:[5]
Choice of G/F Comparables 33.The subject premises are situated on the western side of Nga Tsin Long Road, one of the local access roads running in parallel to each other leading mostly from Prince Edward Road West to Carpenter Road in the Kowloon City district. 34.Kowloon City district itself is a relatively confined areas bounded on the west by Grampian Road and on the east by Sa Po Road with shopping activities particularly concentrated in the areas around Kowloon City Plaza and the wet market inside the Kowloon City Municipal Services Building. The latter is bounded on the north by Carpenter Road, ie the road abutted by Kowloon City Plaza, on the east by Nga Tsin Long Road, on the south by Nga Tsin Wai Road and on the west by Hau Wong Road which is one block to the west of Nga Tsin Long Road. 35.As well, the Kowloon City district is generally popular for its local restaurants serving a variety of Southeast Asian cuisines. 36.However, when compared with other roads in parallel, this section of Nga Tsin Long Road cannot be accessed through Nga Tsin Wai Road nor Prince Edward Road West. Vehicles designated for this section of Nga Tsin Long Road have to drive through the southern section of Nam Kok Road to its east and make a detour. I agree with Mr A Chan that the number of spontaneous patrons are bounded to be lesser than other busy parts of Kowloon City. I also agree with him that the near-by off-course betting centre on the opposite side of Nga Tsin Long Road at its corner and the RCHE itself do not always attract pedestrian flow along the captioned side of Nga Tsin Long Road in front of the Building. 37.Comparable 1 is situated near the end of Lion Rock Road close to Kowloon City Plaza. Mr Chan refused to adopt this comparable on the ground that around the relevant date, ie as at 24 April 2018, there was unforeseeable major change in market sentiment due to the China-US Trade War which became intensified in mid-2018, rendering this post-valuation date transaction less reliable. Ms Sat submitted and I agree that such concern would have been largely reflected by the Retail Price Index compiled by the Rating and Valuation Department (“RVD”); Ms Sat made an adjustment for location at -10%. 38.In fact, this comparable appeared in Perfect Horizon Limited v Co Sam & Others, LDCS 23000/2018 (unreported, dated 11 September 2020) which was another compulsory sale application with the relevant date as at 25 June 2018. Compared with comparable 4 in the present case, which was also one of the comparables adopted by the experts in Perfect Horizon, the Tribunal considered this Lion Rock Road comparable more superior in location and allowed an adjustment of 25%[6]. Having conducted the joint inspection on 19 October 2021 again, I considered the adjustment by Ms Sat grossly inadequate; I am prepared to adopt an adjustment of -20%[7]. 39.Comparable 2 is situated close to the wet market near the junction of Hau Wong Road and Nga Tsin Wai Road. Again, this was one of the comparables in Perfect Horizon. For the same reason as state in §37 above, Mr A Chan refused to adopt this comparable but Ms Sat made no allowance for location. Again, I considered the nil adjustment by Ms Sat not reflecting the difference in location; I am prepared to adopt an adjustment of -15%. 40.Comparable 3 is situated on South Wall Road the trading environment of which I consider resembling the subject. While Mr A Chan refused to adopt this comparable also for the reason as state in §37 above, I agree with Ms Sat that there should be no adjustment for location. 41.Comparable 4 is one of the two common comparables adopted by Mr A Chan and Ms Sat for the reason that it lies on the same section of Nga Tsin Long Road. They both agreed to make no adjustment for location. 42.Comparable 5 is situated at the far end of Lung Kong Road north of Nga Tsin Wai Road which separates the local streets in Kowloon City into two sections. Trading potential in this section of Lung Kong Road appears inferior. Ground floor premises in the vicinity are dominated by car-repairing workshops and those selling car accessories. It lies opposite to a refuse collection station. Mr A Chan chose and analysed this comparable but eventually relied on comparable 4 only[8]. In any event, I considered the location adjustment of +5% adopted by Mr A Chan grossly inadequate. 43.Comparable 6 is the only other common comparable adopted by Mr A Chan and Ms Sat. It is however situated on Prince Edward Road West which is a main distributor in the region along which there appears a more variety of trades. More particularly, this comparable is/was occupied as a portion of a supermarket. The transaction might be tainted by the presence of a special purchaser who is the owner nextdoor which comprises the other portion of the supermarket. Mr A Chan chose and analysed this comparable but eventually relied on comparable 4 only.[9] If I were to adopt this comparable for consideration, I would have allowed an adjustment of -20% for location. 44.Like comparable 5, comparable 7 is situated on Lung Kong Road but closer to its junction with Nga Tsin Wai Road which is a busy local distributor. For the latter reason, it enjoys a better retail potential than comparable 5. Nonetheless, Mr A Chan chose and analysed this comparable but eventually relied on comparable 4 only.[10] Other Adjustments on G/F Comparables 45.Mr A Chan and Ms Sat had the following agreements/ disagreements on adjustments[11]:
46.As can be seen from the table above, Mr A Chan and Ms Sat agreed on most of the adjustment factors. 47.As regards the frontage adjustment, the Tribunal has on many occasions stated that there shall not be any adjustment for frontage “unless the frontage in consideration is clearly superior or inferior to the norm that the benefits or disabilities which the frontage produces are clearly evident.”[12] In such a secondary location as the subject, I preferred 2% for every 1 metre difference to 3% for every 1 metre difference. 48.In respect of the adjustment for size, again the Tribunal is of the view that such an adjustment cannot be linear and therefore Mr A Chan’s methodology is usually preferred. However, in the present case, as pointed out by Mr Lung, the reference shop unit has an effective floor area of 72.27 sq m. Comparable 4, which appears to be the best comparable in terms of location, has an effective area of 80.89 sq m (ie some 12% larger). It is not reasonable to assume there be no adjustment on size. In such regard, Ms Sat’s adjustments for size is adopted in this case. 49.In terms of layout, the reference shop unit has an agreed depth of 18.29 metres (60 feet) but a frontage of mere 4.34 metres (13’11”). This is a relatively narrow shop. I agree with the adjustments proposed by Ms Sat. 50.Although the experts seemed to have agreed there might be adjustment for internal condition of the comparables, Ms Sat did not make any adjustment for that. In any event, shops usually cater for different trades and any new comers would be prepared to spend a vast sum of renovation costs to fit their own uses and purposes. Internal conditions are therefore seldom important for sale and purchase of shops (especially when tenants are often required to reinstate the shop premises to bare shell upon expiry of tenancies). This is particularly the case when most of the comparables are of similar ages to the reference unit. I would not allow any adjustment for internal conditions of shops. Conclusion on EUV 51.My assessment of the EUV is as follows:[13]
52.Despite the average arrived at $346,740 per sq m, both experts agreed that comparable 4 is the best comparable. I determine the unit value of the reference shop unit at $366,000 per sq m. 53.Thus, my assessment of the EUV of G/F would be as follows:
54.By reference to Part 1 of Schedule 1 to the Ordinance, the EUV should be assessed in respect of each property on the Lots. Then in section 2 of the Ordinance, “property” is defined as immovable property without further qualification. 55.But in reality, at least Portions of Shops 1 & 3 on G/F, the whole of 1/F, 2/F & 3/F and Flats G & H on 4/F have been converted or occupied as the RCHE.[14] Therefore, I would rather treat the premises occupied by the Main Portion of RCHE (including Flat G on 4/F) as one property as defined in the Ordinance. 56.In fact, both valuation experts were content to assess the premises by the Income Capitalization Method which is an investment method of valuation. 57.Mr A Chan’s valuation in respect of Portions of Shops 1 & 3 on G/F, the whole of 1/F, 2/F & 3/F and Flat H on 4/F is as follows:[15]
58.In arriving at the market rent of RCHE, Mr A Chan stated that he made reference to the nearby RCHE rental transactions. Three rental comparables were collected which were Unit B on G/F, 1/F and 2/F respectively at 351 Prince Edward Road West, a 3-storey premises built in 1993:
59.Mr A Chan then relied on the letting of the 1/F, 351 Prince Edward Road West which occurred closest to the relevant date as at 24 April 2018, made adjustments for time, location, age of building, lease term, lift provision, size, Government rent etc and arrived at a unit rental of $387.93 per sq m. Then Mr A Chan came up to a market rental about $650,000 per month. 60.It is trite that where an actual rent is being paid for a property, this is usually the best comparable to employ[17]. In Mobil Oil Hong Kong Limited v Commissioner of Rating and Valuation [1993] HKDCLR at p83, the Tribunal found, in the absence of substantial comparable evidence usually available, the actual rental agreement was most helpful. At p87, the Tribunal remarked as follows:
61.This latter remark is particularly apposite to the RCHE which has been specifically converted for the convenience and benefit of its actual use. Without going into Mr A Chan’s details of analysis or adjustment for his Prince Edward Road West comparable, his end result of $650,000 per month comes very close to the actual rent of $638,000 per month in the 1st tenancy agreement or the 2nd tenancy agreement. It is also nearly the same as the adjusted rental below. I see no reason why, therefore, $638,000 per month should not be adopted as a starting point. 62.This rental of $638,000 per month was indeed agreed in the 1st tenancy agreement in May 2016. To adjust for time by reference to the Private Retail Price Index of the RVD from 178.4 to 185.8 as at the relevant date, I arrive at a market rental of $664,464 per month, or say $665,000 per month. 63.According to Ms Sat, the magnitude of change for the upper floor commercial premises should be less and therefore adopt +3% for time adjustment instead. Also Ms Sat considered the rent-free period excessive and adopted -3% to account for this. 64.At trial, Mr Mok pointed out to Ms Sat that in fact the conversion works were only completed in February 2017 and therefore the rent free period, if counting from the commencement date of 1 November 2016, was not that long. By reference to Exhibit A7, it also confirmed that the tenant had started to pay rent on 1 May 2017 notwithstanding Special Condition 4 of the 2nd tenancy agreement. So I agree with Mr Mok that the rent-free period was indeed less than 6 months in reality and the rent-free period was not excessive. Ms Sat’s -3% is not necessary. 65.Ms Sat went further by making an adjustment of -3% to allow for the payment of Government rent by the landlord, ie the 1st applicant. 66.In Fan Chun Keung v The Secretary for the Environment, Transport and Works, LDMR 5/2004 (unreported, dated 2 November 2005) at §§25-54, the Tribunal had the following observation concerning valuation by investment method:
67.I share this view in Fan Chun Keung. If the figures applied to the formula for the investment method are so unreliable or fraught with inherent problem, the capital value arrived at will be unreliable as any mistake will be greatly amplified. Accordingly, whether or not a valuation obtained using investment method can be used as a check entirely depends on whether the sets of figures adopted are reliable or representative. 68.But in the present case, with the actual rental being in place, and largely supported by Mr A Chan’s analysis, the only concern is the determination of the capitalization yield. 69.In this regard, Ms Sat referred to an agreement for sale and purchase of Portion B on G/F, 1/F, 2/F, 3/F & portion of 4/F etc, Tai Koon Mansion, Nos 42, 44, 46, 48, 50 & 52 Woosung Street dated 14 May 2018 in the sum of $240,000,000 (“the Agreement for Sale and Purchase”). These premises were, according to Ms Sat, let for a term of 5 years from 1 August 2015 to 31 July 2020 at a monthly rent of $660,000 exclusive of rates, Government rent and management charges for the first 2 years and then at a monthly rent of $700,000 for the last 3 years. Ms Sat arrived at a yield of 3.5%.[18] Based on the rental of $638,000 in the 2nd tenancy agreement, Ms Sat assessed the EUV of the RCHE at $212,180,000[19]. 70.However, Mr A Chan had, in his Rebuttal Report dated 24 September 2020, pointed out that the address as stated in the Agreement for Sale and Purchase was different from that as stated in the tenancy agreement dated 8 June 2015 the contents of which was referred to by Ms Sat.[20] 71.At trial, it was further pointed out to Ms Sat that the tenancy agreement dated 8 June 2015 was demised for use as a licensed guesthouse/hotel instead of for an elderly home[21]. Mr A Chan also found that this tenancy agreement, before its expiry, was later superseded by another one whereby the premises were let for a term of 4 years commencing from 1 November 2019 to 31 October 2023 at a monthly rental of $640,000. 72.With regret, Ms Sat failed to make the correction even at trial[22] which would have ended on 21 October 2021 instead of on 22 October 2021. Further, in the morning of 22 October 2021, Mr Lung came to her rescue by pointing out that the sale and purchase of Portion B on G/F, 1/F, 2/F, 3/F & portion of 4/F etc, Tai Koon Mansion should include a further consideration of $10,000,000[23] and the total rental from 1 November 2019 to 31 October 2023 should be $700,000[24]. 73.On the basis of Ms Sat’s revised analysis therefore, the yield should be calculated as follows:
74.In view of this revised yield, Mr A Chan explained that Kowloon City at which the RCHE is accommodated is composed of by residents of higher middle class whereas the premises at Woosung Street are situated in an older district where capital growth potential should be weaker. Mr A Chan also stated that operators of such elderly homes are very secure tenants and hence a lower yield is justified. He also produced Exhibit A5 to demonstrate that according to information of the Social Welfare Department, there is always a substantial shortfall between the number of applicants for subsidized elderly residential care places and the number of subsidized elderly care resident units and a 40-month average waiting time for subsidized elderly residential care places. 75.Although I agree with Mr A Chan, there was incidentally an application for recovery of vacant possession of premises being occupied as an elderly centre at Yue Sun Mansion, Nos 177-191 Wuhu Street, Hung Hom, Kowloon in late 2017 on the ground that the tenant occupier had failed to pay rent. This case, being LDPE 1075/2017, ended up in the bailiff taking possession of the premises on 2 May 2018, which was very close to the relevant in the present case. 76.I also consider that the retail yield compiled by RVD is more or less an average figure which includes the analysis of ground floor shops of Hong Kong overall. Whereas the latter should enjoy a relatively lower yield because of its usual higher growth potential, I consider a yield around 3.36% reasonable for the RCHE when it is specifically derived from a real transaction pertaining to an elderly home. The failure of the original guesthouse/hotel in Tai Koon Mansion in 2019 might be owing to the sudden drop of mainland visitors during the social movement that occurred in the middle of the year. It should not be linked to or affect the level of rent under the subsequent letting to the elderly home. 77.Mr A Chan also considered that Ms Sat should not have made an adjustment of -3% to allow for the payment of Government rent by the landlord as the latter should be the landlord’s responsibility. However, it has been confirmed that the landlord of the Woosung Street comparable is not required to pay the Government rent as much as 3% of the rateable value[25]. Thus, for the sake of comparing like with like, I agree with the deduction proposed by Ms Sat. 78.Thus my assessment of the EUV for the RDHE is as follows:
79.In respect of the other portion of the RCHE (ie portion of Shops 1, 3, 5 and 7 on G/F, and Flat I on 4/F) which was let under the 3rd tenancy agreement for a period of 2 years from 2 May 2018 to 1 May 2020 at a rental of $160,000 per month, I am pleased to adopt the yield of 2.5%. Therefore, my assessment of this portion is as follows:
80.I consider the sub-division of the G/F premises occupied by the RCHE into Shops A and B by Mr A Chan too arbitrary and particularly not reflecting the actual configuration of the premises in reality[27]. Also, as pointed out by Ms Sat, the apportionment of the market value of Shops 1 to 7 on a pro-rata basis failed to take into account the adjustment for frontage, size and layout of the units. 81.Whereas Mr A Chan and Ms Sat have agreed the EUV for all the domestic units, the total EUV for the Building is shown as follows[28]:
82.Thus, the pro-rata shares of R1’s, R2’s and R3’s interests are as follows:
Whether Redevelopment of the Lot is Justified 83.Section 4(2) of the Ordinance provides that the Tribunal shall not make an order for sale unless it is satisfied that the "age or state of repair" of the Building is justified and that the applicant has taken "reasonable steps" to acquire all undivided shares of the Lots. The only challenge raised by the respondents in the present application is whether redevelopment is justified and the applicant is put to strict proof thereof. 84.As stated in §14 above, Mr Lung has no dispute on the principles laid down in Top Sail International Ltd v Cheng Kai Ming, LDCS 18000/2015 (unreported, dated 15 November 2011) and Charmlink Ltd v Lee Tong Hing & Others, LDCS 16000/2010 (unreported, dated 29 November 2011). 85.In Top Sail, the Tribunal stated:
86.Such a discretion by the Tribunal was followed in Charmlink:
87.The applicant adduced the expert evidence of two experts namely, Mr B Wong who is an Authorised Person and a building surveyor, and Mr CM Wong who is an Authorised Person and a structural engineer. R2 adduced the expert evidence of Professor Chan, who is an Authorised Person, a building surveyor as well as a structural engineer. 88.Firstly, as regards the Joint Expert Statement on Structural Assessment, Mr CM Wong and Professor Chan agreed that the alkaline protective environment to the reinforcement bars in some structural elements have been lost and should be dealt with. They also agreed that anti-carbonation coating can be applied to stop pollutants and water penetrating into concrete matric whilst protecting the internal reinforcement. 89.One of their disagreements came from the in-situ concrete strength test as follows:[29]
90.From the above, Mr CM Wong found all 8 (ie 100%) of the beams and slabs samples showed carbonation of the concrete reaching beyond the concrete cover towards the reinforcement bars and 2 column samples (ie 50%) showed carbonation of the concrete reaching beyond the concrete cover towards the reinforcement bars. It is agreed that the alkaline protective environment to the rebars in some structural elements have been lost and should be dealt with.” 91.At trial, Mr CM Wong explained that to his best knowledge, there is no precedent in Hong Kong of applying carbonation coating to all the structural elements of an old building as a remedy for the carbonation of concrete. While the latter may work in theory, it would be very disturbing to occupiers because the coating has to be applied to the face of the concrete which means all the decoration, tiles and rendering covering the structural elements found in the exterior and interior of the Building would have to be removed before the application of the coating and would have to be reinstated afterwards. 92.With respect, Professor Chan had conducted just one sample testing on slabs & beams and one sample testing on columns. While the difference in opinion on the compressive strengths of the samples is not significant, Mr CM Wong expressed more concern on the chloride cement test which showed that 50% of the tested column locations had a chloride content of more than 1% by mass of cement, which can be inferred as high risk of corrosion.[30] According to him, there is no remedy to stop the steel corrosion due to chloride attack. 93.Professor Chan was of the opinion that a high risk of corrosion to the steel reinforcement bar might not represent the risk of corrosion of all columns where only 4 out of the 19 columns in the Building were tested. I consider Professor Chan imprudent to have drawn this conclusion when he had conducted just one sample testing on the column though I appreciate Professor Chan’s difficulty in getting access to many private residential units including the RCHE. 94.More significant divergence of opinion came from the so-called design working life of a reinforced concrete structure. 95.Mr CM Wong stated that, in Hong Kong, the first code mentioned the requirement for the design life was Code of Practice for Structural Use of Concrete 2004. In 2013, this code was updated (“2013HK Code”) but Clause 2.1.5 remains unchanged:
96.Mr CM Wong explained that the design working life of a building is the period of use intended by the designer or the client at the time of designing the building. It is a nominal value, which represents an estimated target period of time, as opposed to an actual period. If the design working life of a building is set at 50 years at the design stage, this building is expected not to require major repair within 50 years, assuming it has undergone normal maintenance. Mr CM Wong confirmed that the concept is “philosophical” and should not be understood as if buildings that have passed their “design working life” have to be demolished and rebuilt. 97.Notwithstanding the above, Mr CM Wong found the following aspects not complying with the 2013HK Code:
98.Professor Chan responded that it is not appropriate to judge the design life of a building by comparing values adopted in the original design against current requirements. For example, the minimum required concrete strength in the 2013HK Code is 30MPa while the designed strength of the Building was 15MPa for beam/slab and 20 MPa for column, which was widely used for designs at that time. The design strength was almost 50% of the required strength in 2013HK Code. That is, it is almost impossible to meet the required value in the 2013HK Code. 99.Professor Chan also referred to the “Code of Practice for Mandatory Building Inspection Scheme and Mandatory Window Inspection Scheme 2012” which states, at Clause 4.3.3, that for an existing building, one should conduct assessment to ascertain the safety level of the structural elements based on the standards and codes of practice prevailing at the time the building was constructed. 100.In Able Luck Development Limited & Others v Public Global Investments Limited & Others, LDCS 7000/2014 (unreported, dated 6 October 2017), the Tribunal had already ruled that similar reliance on the requirement for the Mandatory Building Inspection Scheme (“MBIS”) projects to support the argument that patch repair is sufficient or certain repair works are not necessary in order to satisfy safety requirement of the Buildings Department is unjustified. The repair standard of MBIS developed from the Buildings Ordinance and Regulations is only concerned with safety and hygienic aspects of buildings and its scope of work is rather limited and the owners are only required to repair to the standard applicable at the time when the building was built[31]. 101.The Tribunal agreed with the findings in Intelligent House Ltd v Chan Tung Shing & Others [2008] 4 HKC 421 that for redevelopment under the Ordinance, the Tribunal is entitled to “look at repairs which would render the building to a tenantable condition fit for the enjoyment of its tenants and visitors, which is reasonable in the present day circumstances for the type of building in question” (at §182). Such a consideration is apparently not canvassed by MBIS which only aimed at restoring safety to the buildings. 102.In short, the standard under the Mandatory Inspection regimes concern the safety and health of the buildings. No consideration is given to the question of redevelopment. It is a lower standard when compare with the tenantable condition. 103.More recently, in Success Active Limited v Harbourview international Holdings Limited & Others, LDCS 31000/2018 (unreported, 19 April 2021), the experts on behalf of the respondents in that case also claimed that the buildings at 472-478 Chatham Road North were not suffering from physical and functional obsolescence on the basis of the prevailing state of repair and building conditions. They also added that the buildings were not dilapidated as there was no outstanding MBIS order for both Nos 476-478 Chatham Road North although the building at 474 Chatham Road North was subject to both MBIS and Mandatory Window Inspection Scheme notices issued by the Buildings Department on 18 September 2019. To conclude, the experts emphasized that the buildings were safe, not dangerous or imminently dangerous by reference to the Operation Building Bright and MBIS. 104.Then the Tribunal remarked[32] that if the intent of the Ordinance is to permit redevelopment only when the age or state of repair renders the building a serious threat to public and residents’ safety, there is no reason why the particular section(s) was not worded to reflect the same. The Tribunal did not agree that the buildings have to become dangerous before an order for sale can be made. Such is not consistent with the wording and intention of section 4(2)(a)(i) of the Ordinance where the statutory requirement is whether “redevelopment is justified owing to age or state of repair of the existing development”. 105.Then in the Joint Expert Statement on Condition Survey, Mr B Wong repeated his view as stated in his Condition Survey Report dated 10 June 2020 that since the completion of the Building, newer versions of the Buildings Ordinance and related regulations have been enacted with the objectives to improve the safety and/or hygiene of buildings in Hong Kong[33]. Professor Chan just fell into the same trap of the respondents in Success Active Limited in commenting that there is no provision in the Buildings Ordinance and related regulations requiring the old buildings to comply with the current standards. Professor Chan has mixed up the purpose of the Buildings Ordinance and the Ordinance. In the preamble or long title of the Building Ordinance, its purposes are stated
106.In contrast, the preamble of the Ordinance states as follows:
107.More particularly, as the then Chairman of the Land Development Corporation (“LDC”), the predecessor of the Urban Renewal Authority (“URA”) put it in the Bills Committee Meeting on the Bill (which later became the Ordinance) on 19 February 1998, the objects of the Bill was to expedite urban renewal. “He related to members the many obstacles experienced by LDC over the past ten years in undertaking redevelopment projects including title problems, resistance from individual owners, rehousing problem and costs of compensation. The difficulties in settling disputes over valuation which was subjective to a certain extent warranted particular attention. … LDC projects aimed at achieving comprehensive development, whereas the Bill was intended to facilitate ad hoc redevelopment of smaller lots…”[34] This purpose of the Ordinance is recently echoed by the Court of Appeal in Pacific Base Holdings Limited & Others v Lee Hop Biu & Others, CACV 426/2020 (unreported, dated 31 May 2021) at §36:
108.Indeed, there has not been any evidence that the many properties identified by the URA for redevelopment had the age or state of repair rendering a serious threat to public and residents’ safety. In any event, Professor Chan agreed that many of the functional obsolescence suggested by Mr B Wong are related to substandard building services provisions[35]. 109.And because of the different basis on which the costs of repairs were recommended, Professor Chan did not agree with the $3,879,950 proposed by Mr B Wong:[36]
110.Professor Chan commented that a significant part of such cost is for the complete replacement of the external walls: Mr B Wong’s estimate was $1,482,000. He considered patch repair should be a sufficient remedy as the defects are largely localized: his estimate was only $101,120.[38] Professor Chan formed this opinion on the basis that 24 out of 25 hollow spots were found on the external wall facing Nga Tsin Long Road. With respect, I appreciate the difficulty in undertaking the Infrared Thermographic Survey on the other façades of the external wall. As reported by Building Diagnostic Consultants Limited (“BDCL”), an infrared specialist engaged by Mr B Wong, either the scan angle was too steep or there were obstructive objects in between[39]. Hollow spots, if any, would not be easily detected but on the basis of the high percentage of hollow spot samples found, I agree with Mr B Wong’s approach in allowing for the complete replacement of the external walls. 111.In addition, I accept the comment of BDCL on Professor Chan’s infrared Thermographic Survey as follows:[40]
112.Another difference in opinion arose because Professor Chan considered certain cost items should not be included because they were in respect of works inside the respective units and therefore had to paid by the respective owners. I agree with Mr Mok that Professor Chan’s view should be rejected if only for the following reasons:
113.And as Mr Mok pointed out in his closing submission, Professor Chan’s stance to exclude the repair costs in individual units is inconsistent with his own position in §2.1.4 of the Joint Statement dated 15 October 2020 where he agreed with Mr B Wong that: “For the consideration of “state of repair” of the existing building under section 4(2)(a)(i) of the Ordinance, the conditions of the structural frames, components, finishes and service installations in both the common and private parts of the Building should be reported.”[41] 114.In any event, Mr Lung, in his closing submission, acknowledged that in Intelligent House Ltd, supra, at §226, the Tribunal found it appropriate to include repairs that need to be carried out to privately own parts of the buildings, for the purpose of considering whether the ground of “state of repair” is satisfied under the statutory provision. 115.Mr B Wong also had supplemented the condition survey and structural assessment findings by making a like-to-like comparison of the “Repair Costs” required to restore the superstructure excluding the foundations of the Building to a fair state of repair, with the “Construction Cost” of a new superstructure to the same standard as the existing one in all aspects, including size, height, number of storeys, design, material and workmanship. For this purpose, the “Construction Cost” of a new superstructure excluded all costs of demolition, site formation, ground investigation and foundation works. Mr B Wong estimated this “Construction Cost” in the sum of $64,975,000 and therefore, the “Repair Costs” amount to some 26% of the “Construction Cost”. 116.Professor Chan criticized this approach as he was of the opinion that in real life when the hypothetical rebuilding has to be re-constructed, it has to take into account the costs of demolition works, ground investigation works, site formation works and foundation works etc. With respect, Professor Chan failed to observe this approach by Mr B Wong was just a comparison exercise which gives a brief indication of the overall condition of the superstructure of the Building. Indeed, this approach by Mr B Wong is comparable to the assessment for insurance purposes. Most buildings affected by a fire are damaged but not destroyed. It is likely that the damaged building will be repaired using existing materials etc without replacement of the foundation save for the debris removal costs. A key point to emphasise is that Mr B Wong’s figure is based on a reinstatement basis, not replacement. 117.According to Mr B Wong, the Building is in a poor state of repair. The Building is some 52 years old and its structural frames have already entered the propagation phase and therefore, extensive maintenance and repair works are required in the near future in order to keep the Building in safe condition. The repair cost of more than $17,000,000 (or even smaller because of the deduction the removal of the unauthorized building works (“UBW”) in private areas) is quite substantial when comparing with construction of a new similar superstructure. I consider Mr B Wong’s estimated repair costs more reliable because Professor Chan, owing to the inaccessibility to many private residential units and the RCHE, failed to report many defects in the structural frames, components, finishes and service installations. 118.Mr B Wong added that the implementation of the repair works and discharge of other repair obligations will be disturbing and onerous for the existing occupiers and building owners. The future mandatory and voluntary repairs concerning safety and hygiene improvements will make the continued occupation of the Building uneconomical. Even Professor Chan agreed that even after repair, the Building will not be up to the standard of a new building because of its inherent limitations.[42] 119.As regards Professor Chan’s remark that many residential buildings in Hong Kong are not up to the new building standard but that does not mean those buildings should be completely demolished and eliminated, this is indeed the purpose of urban renewal or the purpose of implementation of the Ordinance. 120.By and large, I am of the view that the Building is suffering from physical and functional obsolescence. Although Professor Chan did not agree that the state of repair of the Building is poor, his comment is “fair’. I agree with Mr B Wong that further maintenance or repair is just a compromise of the prevailing standards. Demolition of the existing dilapidated buildings for redevelopment is not only economically more viable but will also improve both the safety and living standard of the new occupants. 121.That said, I would like to comment that the future prospect of the property market or the growth in a particular area as suggested by Mr Ngan is not a consideration for granting an order for sale under the Ordinance. In any event, the market value of an asset is in effect the present value of the future cash flow and benefits therefrom. Comparables, if properly chosen, should have already reflected the future prospect of the property market or the growth in a particular area. As stated by the House of Lords in Transport for London v Spirerose Ltd [2009] UKHL 44, [2009] 1 WLR 1797 (HL), one should not mix up possibilities with realized possibilities[43]. The future is full of vagaries. Section 4(2)(b) – Whether Applicant has taken reasonable steps 122.The applicants are under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interests of the respondents under Section 4(2)(b) of the Ordinance. 123.The applicants have made the following offers to the respondents through its solicitors to acquire the respondents’ units or interests they own:
124.The Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578, [2005] 4 HKLRD 363 (“Capital Well”) has emphasized at §33 that:
125.However, Mr Lung referred to the acquisition by the 2nd applicant of Shop 13 on G/F of the Building in January 2018 (ie prior to commencement of the Application) in the sum of $43,800,000. 126.Obviously this acquisition was made to obtain the required threshold of 80% of the interest of the Lots so as to commence the Application. The 2nd applicant may have paid a premium higher than the proportionate share of the redevelopment value of the Lots as the last bit in the jigsaw to assemble the development site” which can be equated to the “ransom power”. As held by the English Upper Tribunal (Lands Chamber) in Michael v Salford City Council [2016] UKUT 370 (LC), this premium value “ignores the effect that this would have an impact on the viability of the reference land under the residual method[44]. I am not satisfied that the claimant has shown that (such a premium) is warranted.”[45] 127.I agree with Mr Mok in his closing submission that there is no requirement under the Ordinance that the offers to the minority owners after the commencement of the Application has to be commensurate with each one and another. Particularly, the insistence of the respondents on receiving the similar premium would have the effect of deterring majority owners to be more generous in making early offers. That would run against the legislative intent of the Ordinance to encourage negotiation and settlement among the majority owner and the minority owners. 128.As the Court of Final Appeal stated further at §36 in Capital Well Ltd:
129.On the evidence available, therefore, I am satisfied that the applicants have taken reasonable steps to acquire all the undivided shares in the Lots including negotiating for the purchase of such of those shares as are owned by R1, R2 and R3 on terms that are fair and reasonable. Disputes on the estimation of the RDV of the Lots Optimum Hypothetical Development Model 130.As no suitable redevelopment site comparables could be adduced as evidence for this Tribunal to consider, both Mr A Chan and Ms Sat agreed to resort to the residual valuation method in determining the RDV. This can be done by deducting development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development. 131.However, as per the Joint Expert Statement dated 24 September 2021, Mr A Chan and Ms Sat had different opinion on the hypothetical development model:[46]
Assessment of the Value for the hypothetical shop units on G/F 132.Mr A Chan proposed 4 shops on G/F each with a saleable area of around 132.0 sq m and a frontage of up to 7.3 metres which appears excessive in the subject location. Particularly when compared with the comparables as shall be seen below, such assumption by Mr A Chan is out of tone in the district. For the purpose of comparing like-with-like, I prefer the 7-shop layout proposed by Ms Sat. 133.Then I proceed to consider the comparables adopted by the two experts:
Choice of G/F Comparables and Location Adjustment 134.Comparable 1 is situated on the southern side Nga Tsin Wai Road, a better location than comparable 7 initially adopted by Mr A Chan for the EUV assessment. I agree with Mr A Chan’s 5% adjustment for location in preference to the 10% proposed by Ms Sat. 135.Comparable 2 is in fact an up-to-date sale of comparable 2 in the EUV assessment. I am prepared to adopt the same location adjustment of -15%. 136.Comparables 3 & 4 are both situated along Fuk Lo Tsun Road which is the busiest street in Kowloon City where banks and other financial institutions are also found. It also enjoys proximity to the pedestrian crossing across Prince Edward Road West where people living in Kowloon City usually shuttle to and fro to take the public transport across the road. I am prepared to adopt a location adjustment of -25%. 137.Comparable 5 is situated near the end of Nam Kok Road close to its junction with Carpenter Road. Pedestrian flow along this section of Nam Kok Road is thin and the premises on G/F are predominantly occupied as car repairing workshops, hardware stores etc. While substantial upwards location adjustment is required, I agree with Ms Sat that it should be disregarded as a comparable. 138.Though Comparable 6 is situated at Lung Kong Road near its junction with Prince Edward Road West, the pedestrian flow there is poor. I agree with Ms Sat’s adjustment of +10%. 139.Thus, following the other adjustments agreed by the two experts which are similar to those in the EUV assessments, my assessment of the hypothetical G/F unit is as follows:[47]
140.I follow further Ms Sat’s analysis of the 7th hypothetical shop which comprises a saleable area of 28.35 sq m with a frontage of 4.09, a depth of 6.93 metres:
Assessment of the Value for the hypothetical shop units on 1/F 141.To the extent that both experts agreed that the unit value of the 1/F would be equal to 1/3 of that of G/F, the value of the 1/F would become $123,700 per sq m. Assessment of the Value for the hypothetical residential units on U/F 142.As stated in the table at §131 above, Mr A Chan and Ms Sat differed in opinion on the provision of residential flats on each floor, Mr A Chan recommending 5 units each having a saleable area of 23.59 sq m and one larger unit of 53.93 sq m whereas Ms Sat recommending just 6 small units each of 29.58 sq m on average. Notwithstanding this difference, it is interesting to note that they arrive at a GDV very close to each other (ie a difference of less than 9%):
143.In Pacific Base Holdings Limited & Others v Lee Hop Biu & Other, CACV 426/2020 (unreported, dated 31 May 2021), the Court of Appeal affirmed, at §43 of the judgment, that “(f)rom a practical point of view, since there is no requirement on the majority owners to submit a detailed redevelopment plan at this stage, the proposed redevelopment could only be presented to the Tribunal on a conceptual level with a high degree of generality.” 144.In the present case, I note that the two experts have relied on comparable sales in High Place at 33 Carpenter Road having saleable areas around 20 sq m, comparable sales in The Avery at 16 Hau Wong Road having saleable areas mostly around 20.87 sq m and comparable sales in AVA 55 having saleable areas around 25 sq m on average. But the Tribunal in Success Active Limited, supra, has indicated its preference for a hypothetical unit with 31.83 m2 on the explanation by the expert that seasoned developers nowadays like the Henderson Land Group prefer to have larger typical residential units. If this be the case, it is interesting to note that when Mr A Chan attempted to assess the unit value of his proposed larger unit, he arrived at a much smaller unit rate of $222,000 per sq m when compared with his unit rate of $262,000 per sq m for the smaller units[50] (whereas Ms Sat arrived at $263,000 per sq m[51]). He appears to have underestimated the value of the GDV of the hypothetical development. In such regard, whereas valuation is not an exact science, I am prepared to adopt $1,000,000,000 as the GDV for the domestic portion. Finding on RDV and the Reserve Price 145.Thus, when most of the other parameters of the residual valuation are agreed by the two experts, I follow Ms Sat’s residual valuation model as contained at Appendix 3.2 of the Joint Expert Statement dated 24 September 2021[52] in the determination of the RDV which is reproduced at Appendix 1 to this judgment. I arrive at a land value of $700,000,000. 146.Recently, in Famous Concept Development Limited v Thousand Treasure Investment Limited & Others, LDCS 30000/2019 (unreported, dated 2 November 2021), I accepted the evidence of an expert that the HIBOR had gone to a very low level[53] and the discount (interest) rate of 3.5% was adopted instead of the 4% as agreed by the experts in the present case. Should I re-do the residual valuation by adopting 3.5%, I would have arrived at $708,663,000 or thereabouts. 147.I determine the land value of the Lots at $705,000,000 (ie accommodation value of $127,937/m2). 148.I shall adopt the estimated RDV of $705,000,000 as the Reserve Price for the auction of the Lots. Other Incidental Matters 149.The applicant proposed to appoint Mr Lam San Keung and Ms Ma Lap Yan, being senior partner and partner of Messrs F Zimmern & Co, Solicitors & Notaries, as the sale trustees. Based on the information on their background and experience as set out in their letter dated 8 October 2021 and Ms Ma’s email of 15 October 2021[54], I am satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on trustees under the Ordinance. The remuneration package proposed in the said letter appears reasonable. 150.The applicant has prepared a set of draft Particulars and Conditions of Sale of the Lots[55]. Subject to any amendment that may become necessary as a result of our ruling on the arrangement of auction above, the particulars and conditions of sale of the Lots by public auction submitted by the applicants are also reasonable. Order 151.This Tribunal make the following orders:
Costs 152.In accordance with the compensation approach as determined by the Court of Appeal in Good Faith Properties Ltd and Others v Cibean Development Co Ltd [2014] 5 HKLRD 534, the respondents are entitled to costs notwithstanding the outcome of the Application. 153.However, as pointed out by Mr Mok in his closing submission, Ms Sat had made a serious blunder in the determination of market yield for capitalization of the rent being paid by the RCHE as discussed in §§69-73 above. This had led to the lengthening of the trial by one morning. 154.Having reviewed the above, I make a costs order nisi as follows:
This is an order nisi, and will be made absolute if there is no application to vary the same within 14 days from today. 155.Last but not least, the Tribunal thanks both Counsel for their assistance.
Mr Mok Yeuk Chi, instructed by Messrs So, Lung and Associates, for the Applicant Attendance of Messrs Iu, Lai & Li, Solicitors & Notaries, for the 1st Respondent, was excused Mr Vincent Lung, instructed by Messrs Ince & Co, Solicitors, for the 2nd Respondents The 3rd Respondents are not legally represented and Mr Ngan Kwok Fat only appeared on the 1st day of trial and on the day of closing submission
[1] See Bundle C2/664. [2] See Bundle D2/769 & D3/896. [3] See Bundle D3/898. [4] See Bundle D3/902. [5] See Bundle D2/772 & 773. [6] See §45 of the judgment. [7] (1+25%) x (1-20%) =1 [8] See D3/898. [9] Ditto. [10] Ditto. [11] See Bundle D2/773. [12] See Tai Ping Restaurant Ltd v Director of Lands, LDLR 1/2013 (unreported, dated 8 December 2014) at §48. [13] See also D3/898 & 902. [14] Although Flat G on 4/F is not included in the tenancy agreement in favour of the RCHE, the 1st Applicant and the tenant agreed that it would be used as the air conditioning plant room for the lift shaft which is included in the tenancy. [15] See Bundle D3/900. [16] On the basis of the Private Market Yields – Private Non-Domestic (Retail) in Hong Kong Property Review – Monthly Supplement June 2020 as published by RVD. [17] See Lotus and Delta Ltd v Culverwell (VO) and Leicester City Council (1976) RA 141, [1976] 239 EG 287 and Land Compensation & Valuation Law in Hong Kong by Gordon N Cruden & Liza Jane Cruden, 4th Ed, 2017 at para 17.155, p532. [18] See Ms Sat’s valuation report dated 23 July 2020, §12.5, ie Bundle D2/517. [19] See Bundle D2/518. [20] See Bundle D2/589. [21] See Bundle D2/610. [22] See Exhibit R1 & R4. [23] See Exhibit R6 & R7. [24] See Exhibit R8. [25] See Exhibit R5 & R6. [26] Time adjustment on the basis of the Private Retail Price Index of the Rating and Valuation Department. [27] See Bundle C2/669 & 706. [28] See Bundle D2/768 & D3/896. [29] See E6/2284 & 2286. [30] See Bundle E3/1024-1026. [31] See §189 of the judgment. [32] See §122 of the Judgment. [33] See Bundle E6/2167. [34] See §23 of the minutes of the meeting: https://www.legco.gov.hk/yr97-98/english/bc/bc06/minutes/bc061902.htm [35] See E6/2172. [36] See E6/2239. [37] I agree with Professor Chan that the removal of the unauthorized building works (“UBW”) in private areas should not have come into the picture. [38] See Bundle E6/2136. [39] See Bundle E1/133-136. [40] See Bundle E6/2051. [41] See Bundle E6/2175. [42] See Bundle E6/2265. [43] See §95 of the judgment per Lord Collins. [44] The residual method of valuation is often applied in the valuation of land in Hong Kong. It works on the premise that the price a buyer can pay for a parcel of land or property ripe for redevelopment is the surplus after deducting the costs of construction, the costs of buying and selling, the cost of finance and the amount of profit required to carry out the project, from the estimated sale price or market value of the finished development. A residual valuation, having established the development potential, can be expressed as a simple equation:
[45] See §§127-128 of the judgment. [46] See Bundle D3/874. [47] See Bundle D3/888. [48] See Bundle D3/880. [49] See Bundle D3/893. [50] See Bundle D881(A) in Exhibit A2. [51] See Bundle D3/890. [52] See Bundle D3/893. [53] The HIBOR is at a new low for the past 12 years. [54] See Bundle C3/1005-1009. [55] See Bundle C3/976-1002. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under LDCS 15000/2018