Oriental Moon Ltd v. Golden Sino Link Ltd and Others

LDCS 32000/2019

[2023] HKLdT 3

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 32000 OF 2019

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BETWEEN

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Before: Mr Lawrence Pang, Member of the Lands Tribunal

Decision: 9 January 2023

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D E C I S I O N

(Leave to Appeal and Stay of Execution)

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Introduction and Background

1.Pursuant to a judgment handed down by the Tribunal on 21 November 2022 ie [2022] HKLdT 60 (“the Judgment”), all the undivided shares of Section B of Inland Lot No 444 (“the Lot”) with the building thereon (“the Building”) which has an address of Nos 19-21 Wood Road and Nos 22-30 Wing Cheung Street (formerly known as No 8 Wood Road), Wan Chai, Hong Kong were ordered for sale by public auction following an application for the purposes of redevelopment (“the Application”) pursuant to section 3(1) of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”).

2.On 16 December 2022, the 1^st and 4^th respondents (“R1” and “R4” respectively or collectively referred to as the respondents hereinafter) took out an Interlocutory Application for leave to appeal against the Judgment. They also sought an order that the execution of the Judgment (ie the order for sale) be stayed. Whereas the date fixed for auction pursuant to the order for sale is imminent, the Tribunal is minded to accept the suggestion of Counsel that the applications be disposed of on paper without oral hearing.

3.Mr Wilfred Tsui (“Mr Tsui”) on behalf of R1 and R4 filed his submission dated 16 December 2022. In response, Ms Nancy Ngai (“Ms Ngai”) filed her submission dated 28 December 2022 on behalf of the applicant.

Relevant laws concerning appeal

4.Section 11AA(6) of the Land Tribunal Ordinance (“LTO”) provides that :

“(6) Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

5.The intended appellant must “show more than just an arguable case, but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed” (Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515 at paragraph 19).

Grounds of Appeal

6.The draft Notice of Appeal was annexed to the Interlocutory Application for leave to appeal. Mr Tsui for R1 and R4 raised the following grounds in support of the intended appeal:

(1) The Tribunal erred in law in ruling that redevelopment of the Lot is justified due to the “age” and “state of repair” of the Building without taking all factors and circumstances or had taken irrelevant matters into consideration.

(2) Further or alternatively, the Tribunal erred in law in adhering rigidly to modern standards on structural and safety matters, in assessing “age” and “state of repair” of the Building, without regard to the extent to which the Building actually falls short of those standards.

(3) Further or alternatively, the Tribunal erred in law in not taking the evidence of the respondents into account, that the Building was in a reasonable tenantable condition.

(4) Further or alternatively, the Tribunal erred in law in finding the applicant has taken reasonable steps to acquire all the undivided shares in the Lot, including those of the respondents.

7.Mr Tsui elaborated further in his submission (the “Appeal Submission”) of even date in the following.

Ground 1 – Not considering all factors and circumstances or considering irrelevant matters in assessing age and state of repair

8.As expected for the Building which was about 60 years old, corrosion on steel bars in slab/beams and columns, and other shortfalls in protective covers thereto were found by Mr C M Wong and Professor Chan, experts on structural assessment for the applicant and respondents’ respectively, as follows:

Location	Corrosion at mild grade and above	Cover ˂ design	Depth of carbonation ˃ average actual cover	Chloride content ˃ 0.35%	In-situ concrete strength ˂ original intent
Slab	59%	16%	80%	35%	0
Beam		73%	100%		33%
Column	8%	14%	20%	0	0

9.Mr C M Wong accepted that while defects and deteriorations were found in the structural elements, with frequent maintenance and repairs, the Building could be kept in a safe and functional state. In his opinion, the structural condition of the Building was “mediocre”, not poor or dilapidated.

10.To deal with the above issues, Professor Chan suggested the application of anti-carbonation paints which could provide an impermeable membrane to prevent the ingress of moisture into, yet allowing vapour to egress from the structural elements. Professor Chan added that though corrosion was irreversible, if entry of moisture could be denied by anti-carbonation coating, couple with epoxy paint being applied to the external walls, carbonation and chloride content, hence corrosion, of the structural elements of the Building could be arrested. As evidenced by a pamphlet from Fosroc Hong Kong Ltd, its anti-carbonation product Dekguard E2000 had been widely applied since 2001 by Government Departments, the MTR Corporation, Western Harbour Tunnel, and other established consultant companies, as well as to residential premises at Kau To Shan and Sau Chuk Yuen Road.

11.However, instead of following the approach suggested in Fancy Million Limited & Others v Year Glory Limited & Others [2021] HKLdT 76 (unreported, 23 November 2021), which was 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”

the Tribunal erred in dismissing the use of anti-carbonation paints because:

(a) the applicant’s interest would wholly be prejudiced;

(b) anti-carbonation paints or epoxy paints should also be applied to the external walls because they embodied certain reinforced concrete;

(c) it had not been applied in refurbishment projects approved by the URA; and it needed 2 hours (at 20⁰C) to dry, which was hard to achieve in an external environment.

12.Mr Tsui argued that reason (a) above should only be partly relevant because the rights of the respondents over their private property should also be protected; (b) had missed the evidence of Professor Chan that he actually proposed epoxy paint be applied to external walls, and he disagreed using anti-carbonation paint on them because the extent of corrosion/carbonation there was not tested, hence unknown; in respect of (c), like many other building/construction materials, Dekguard E2000 had been applied in external environments; it might yet have to become popular among professionals, some of whom, like Mr C M Wong, had not studied it; and it was wrong for the Tribunal to rule it out without contrary evidence on its effectiveness.

Ground 2 – adhering rigidly to modern standards in assessing age and state of repair

13.There is no definition for “age” and “state of repair” in the Ordinance, it was open to the Tribunal to consider all relevant factors, rendering it to a tenantable condition which is reasonable in the present-day circumstances for the enjoyment of its tenants and visitors.

14.Mr Tsui suggested the Tribunal had misunderstood him as proposing redevelopment was not appropriate because there was no obvious structural distress at the Building. Mr Tsui stated he had actually made clear the opposite in his submissions. On the other hand, he had also cautioned against seeking the utopia, because to do so, the Tribunal would only be pointing one way, leading to only one conclusion, making applications to the Tribunal seemed just like a standard drill.

15.Mr Tsui submitted that the respondents were not asking the Tribunal to take the place of the Building and Fire Services authorities to determine whether the revised proposals of Professor Chan would be risk-free or acceptable under the various codes of practice. Nor was the respondents asking the Tribunal to ignore the codes of practice for, though not being the law, they represent progress and development. They were merely seeking the Tribunal to assess, in the few places where such requirements were impossible to meet because of practical constraint, eg lower headroom in the staircase (with actual height of 6’3”) and lack of protected lobbies, whether the risks involved after the various enhancements (eg smoke-sealed/fire-resistant doors) were put into place, were still so high that the Building was not in a reasonable tenantable condition and redevelopment was justified.

16.Mr Tsui referred to Professor Chan’s evidence that though when the Building was built, statements (not specifications) on ductility and robustness found in modern codes of practice were absent, there was no evidence that the Building was inferior. He said for the Building which was low rise, with only 6 storeys, the provision of a sprinkler system with connection to main water supply, fire extinguishers, and a break-glass type of fire alarm system, the risk of fire causing casualties would be low, having regard also to the fact that the Wanchai Fire Station was only a few minutes’ drive away. Indeed, Mr Dennis Wong, the building surveyor on behalf of the applicant, accepted that under the 1994 Fire Code, for low rise buildings (not exceeding 30m high) of which the Building is one, a fire alarm system with a hose reel system/fire extinguisher would be sufficient.

17.Mr Tsui suggested that the Tribunal erred in following Mr Dennis Wong in relying rigidly on the codes of practice for modern composite buildings in respect of fire safety, health and hygiene, environment, management, and maintenance, and viewed the practical remedial measures proposed by Professor Chan as “only compromising measures”. The Tribunal was agreeing with Mr Dennis Wong that that even after the repairs were carried out, they would “not able to provide the same quality of accommodation that a new building can offer”, ie fallen into the trap of pursuing the utopia.

18.The Building had an Owners’ Corporation and the 3^rd respondent (“R3”) was its chairman. There was evidence that the Owners’ Corporation was prepared to spend and had actually spent money on repairs to common parts of the Building in the past 2 years, it could not be concluded that the Building would suffer from the lack of repair in the future. Mr Tsui suggested that the Tribunal had possibly misinterpreted the submission of R3, who meant that co-operation from the applicant who owned the majority units, was difficult when the Owners’ Corporation wanted to get consensus.

Ground 3 – not taking the evidence of the respondents into consideration

19.It was the evidence of the respondents set out in their witness statements admitted to the Tribunal without cross-examination, that the state of repair of the Building was tenantable, the structure of the Building had never been an issue that would justify redevelopment, and that they were prepared to spend and had spent money to rectify defects in the common areas.

20.Mr Tsui suggested that dwelling tenantably was related to the concept of tenant, with its associated rights and responsibilities. The respondents were citizens of modern society. In such determination, their subjective element of tenantability (as distinguished from their personal emotional or nostalgic reasons for not selling their units), should also be considered.

21.Mr Tsui submitted that the object of the Ordinance was indeed to “expedite urban renewal”, but at the same time, it requires all applications to go through the Tribunal, because as pointed out by the Court of Appeal in Good Faith Properties Limited & Others v Cibean Development Company Limited [2014] 5 GHKLRD 534:

“The proceedings in the Lands Tribunal should be regarded as a statutory means to justify this exceptional interference with the right of private ownership of property. The right to raise objections is part and parcel of the process, without which the process cannot be a fair one.” (§18)

22.Mr Tsui submitted that justice has to be seen to be done. The fact that the views of the respondents on tanantability were ignored would make the conclusion in the Judgment unsafe.

Ground 4 – steps taken to acquire the respondents’ share not reasonable

23.Mr Tsui submitted that the applicant’s evidence was that offers to the respondents was based on the redevelopment value (“RDV”) of the Lot with the adjacent lot, and Mr Ng, the applicant’s valuer, confirmed that the RDV of the Lot was derived from allotting the total RDV according to the area of the Lot relative to the total area of the merged site. Mr Ng also confirmed that the plot ratio of the residential part of the Lot was 9, whereas the plot ratio of the residential part of the adjacent lot was 8, and when they were redeveloped together, the plot ratio of the residential part of the merged site became 9, meaning the adjacent site obtained an enhancement because of the merger. An equitable way to apportion the RDV of the merged site should be the market value (or the “Existing Use Value” or just “EUV” as termed by valuers in similar compulsory sale applications) of the respondents’ units as a proportion of total EUV of the merged site, instead of allocation by relative area. Mr Ng admitted that he did not work out the EUV of the adjacent lot. Mr Tsui suggested that had it been done, the offer would have been higher than the one made and the respondents could have accepted it. Mr Tsui submitted that the offers made, based on an inequitable method, had not been reasonable.

Relevant Provisions under the Ordinance

24.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 Lot.

25.It is correct for Mr Tsui to state that there is no definition for “age” and “state of repair” in the Ordinance. But in Top Sail International Limited v Cheng Kai Ming, LDCS 18000/2010 (unreported, dated 15 November 2011), the Tribunal held that age and state of repair were two separate grounds and even though there may be considerations common to both, the Tribunal should still consider them separately. However, even though the section speaks of “age” or ‘state of repair” in disjunctive and it had been held in Intelligent House Limited v Chan Tung Shing & Others [2008] 4 HKC 421 at §165(3) that they should be separately considered:

“On the grounds of both the “age” and “state of repair” of the old building, the Tribunal is entitled to look at all of the above factors or tests collectively to see if that justifies redevelopment, even though when each of them is considered alone, it is insufficient to do so.”

26.Lately, in Century Supreme International Limited v Kam Chi Kit Charles and Hui Pui Kuen & Others, LDCS 24000/2018 (unreported, 21 January 2022), the Tribunal repeated its observation above as follows:

“50. In our view, since the Ordinance does not specify any particular age of the building that merits redevelopment, nor does the Ordinance indicate what state of repair of the building would justify redevelopment, the two factors despite being put in the alternatives in section 4(2)(a) must be related as they both relate to the physical state of the building in question. To discuss whether “age” and “state of repair” are two separate grounds does not serve useful purpose.

51. As for whether a general test is needed, in our opinion, the respondent’s proposition that it was not necessary to formulate a general test for state of repair would not further the respondents’ case because such proposition does not entail the conclusion that the assessment could be done in a vacuum. Whilst each case must depend on its own facts, there is a set of factors which are always relevant to the tribunal’s exercise of its discretion in this regard. In Top Sail International Limited v Cheng Kai Ming, Executor of the Estate of Chan Hue also known as Chan Sum Hiu, Deceased, the tribunal acknowledged that factors such as physical age, physical conditions and the obsolete design of a building are all pertinent to the issue of whether redevelopment is justified on the ground of the age of the building…

52. The same set of criteria was adopted by the tribunal in Charmlink Limited v Lee Tong Hing and Others which aptly demonstrate that obsolescence and maintenance costs are relevant consideration…

…

62. As rightly observed by the tribunal in Pacific Base Holdings Limited and Others v Lee Hop Biu and Others, the Court of Appeal in Fineway actually did not make any adverse comment on the standard of “tenantable condition” or other related considerations as discussed above. Putting aside the different labels of “habitable standard” and “tenantable standard”, the tribunal in previous cases has approached the matter consistently and has essentially considered the same or similar set of factors when the age and state of repair of a building came to be assessed.

63. In our view, Fineway as properly construed and comprehended, does not assist the respondents in attacking the consideration of obsolescence and the adoption of the tenantable standard in assessing whether the statutory criterion of “age or state of repair” is satisfied.

64. Premised on the above discussions, we now specifically answer Mr Ho's challenge to the tenantable condition standard as summarised in paragraph 46 above. Mr Ho considers that standard deficient because it requires comparison of a building subject to a compulsory sale application (constructed some 50 years ago) with what are reasonably expected of in modern-day standard. In his view, such comparison is wrong because:- (1) old building must fall short of a building built in modern-day standard and will not be able to satisfy the tenantable condition standard any way; and (2) on the natural and ordinary meaning of the phrase "state of development of the existing development on the lot" in section 4(2)(a) of the Ordinance, since it makes no mention of any other building, the tribunal should focus on the state of repair of the subject building rather than making comparison with other developments.

65. With respect, we cannot agree to this view. In relation to point (1), whilst it may bear some truth to say that generally old buildings would fall short of buildings constructed in modern-day standard, it is a misconception to think that whenever the subject building is found to be inferior than modern buildings, then the tribunal must reach the conclusion that redevelopment is justified. To what extent the existing building falls short of modern-day standard certainly is one of the considerations to be taken into account. To suggest that in the evaluation exercise under section 4(2)(a), the tribunal must strictly confine its scope of vision to the subject building and must ignore the current living standard as demonstrated by more up-to-date buildings is just like sticking to the beaten track and resting complacently on one's laurels. In relation to point number (2) (i.e. natural and ordinary meaning of the phrase in section 4(2)(a)), whilst it is true that the phrase does not mention any building other than the subject building, it is clear that the words “redevelopment” and “justified” in section 4(2)(a) provide the context against which the grounds of “age” and “state of repair” could be assessed. Therefore, in considering whether it is “justified” to demolish and replace the existing building with a new development, the court certainly could compare the state of the existing building with what a new building could provide. To suggest otherwise is to limit our own progress in achieving betterment.

…

90. … As a matter of principle and policy, the Ordinance was passed for the purpose of assisting assembly of land for redevelopment which is plainly for improvement of the environment. It makes more sense to say that in considering the age and state of repairs, one should put emphasis on or at least be receptive to the up-dating of the environment rather than being gratified by a mere satisfaction of the minimum safety requirement for the public and the occupiers. Having considered all the evidence available with or without the application of any particular test, we are satisfied that redevelopment is justified by reason of the age or state of repair of the Building.” (underline added)

27.It appears that even in this Appeal Submission, Mr Tsui had no quarrel with the above principles.[1]

28.It was open to the Tribunal to consider all relevant factors, rendering it to a tenantable condition which is reasonable in the present-day circumstances for the enjoyment of its occupiers and residents.

Tribunal’s View on Ground 1

29.In the Judgment at §80, the Tribunal stated:

“… both Mr C M Wong and Professor Chan agreed that most rebars for slabs and beams were suffering from partly to moderate corrosion. Professor Chan agreed that for a building of over 50 years of age, this is not unusual. The similar result for columns is not shown here as the corrosion of the rebars in slabs and beams were found to be relatively worse than that in columns.”

The Tribunal did not state that the structural condition of the Building was poor or dilapidated.

30.As repeated from the table by Mr Tsui as cited in §8 above,

- some 73% of the beam sample had actual concrete cover less than the design cover;[2]

- in respect of 80% of the samples in slabs, 100% of the samples in beams, carbonation has exceeded the actual cover to the outermost rebars;[3]

- 35% of the spots checked in slabs and beams are found to have chloride content higher than the current maximum allowable value in the Code of Practice for Structural Use of Concrete 2013;[4]

- 33% of the beam samples had concrete marginally failed to satisfy the original design intent.[5]

31.I did note that Professor Chan recommended the application of anti-carbonation paints to prevent the further worsening of the corrosion.[6] However, Professor Chan admitted that he only had experience in applying similar anti-carbonation paint once to a canopy of an industrial building some 20 years ago instead of to a whole building. “He also explained that in many refurbishment projects that he came across, the degree of carbonation was seldom checked and therefore, it is not common to apply this anti-carbonation paint.”

32.In §91 of the Judgment, ie the paragraph that followed, I in fact agreed “that the application of anti-carbonation paint can reduce the possibility of rusting and resume the protection to the reinforcement bars of the Building.” But I did not “agree that nuisance to residents due to the application of anti-carbonation paint should be minimal as suggested by Professor Chan. These many units are currently vacant because the applicant owns them and is now applying for compulsory sale order. Otherwise, the currently vacant units would have been let out and occupied. Why should the applicant’s interest be prejudiced wholly owing to the prospective scheme?”

33.With respect, Mr Tsui’s emphasis on the last sentence above is taking the words out of the context. What I stated in the Judgment is that if the applicant’s units were occupied, the nuisance to the residents due to the application of anti-carbonation paint would not be minimal as suggested by Professor Chan.

34.In §92 of the Judgment, I explained that water may permeate into the concrete and pass to the structural elements by hydrostatic pressure, water vapor gradient or capillary action etc if the anti-carbonation paint or epoxy paint over it be not applied to the external concrete wall surfaces. In any event, it had not been the respondent’s case that epoxy paint is as effective as anti-carbonation paint.

35.As a summary, at §§124 & 125 of the Judgment, I explained that there was paucity of evidence to support the application of the anti-carbonation paint despite what the catalogue stated. Details of the refurbishment project say for South Court were unknown. Anti-carbonation coating had never been applied in any refurbishment project approved by the URA. While Professor Chan or Mr Tsui criticized Mr C M Wong for not having studied the effectiveness of the anti-carbonation coating, they could not explain why the many other qualified professionals except Professor Chan had not taken into account of it in refurbishment projects if the anti-carbonation paint be so effective. Even Professor Chan himself had the experience of such application once to a canopy of an industrial building some 20 years ago instead of to a whole building. Based on the above, the Tribunal was entitled to agree with Mr C M Wong’s concern about whether such anti-carbonation coating can be applied extensively and effectively on the outside of the Building, ie to provide “an unbroken coating” subject to extensive weathering. I cannot agree that the Tribunal must accept the evidence of Professor Chan in preference to that of Mr C M Wong.

Tribunal’s View on Ground 2

36.Certainly, the structural conditions of the Building were only part of the issues taken into account by the Tribunal in assessing the age and state of repair of the Building.

37.In respect of the latter, the Tribunal is entitled to compare them with a benchmark which must be the modern standards; the age or state of repair must be relative concept. As stated in §119 of the Judgment, the Court of Appeal in Pacific Base Holdings Limited & Others v Lee Hop Biu & Others, CACV 426/2020 (unreported, dated 31 May 2021) affirmed that the Tribunal is required to consider if the lot is ripe for redevelopment by reason of the age and state of repair of the existing development on the lot. Then at §36 of the judgment, the Court of Appeal stated further that “given the public interest in the facilitation of urban renewal and the interest of the majority owners in the realization of the redevelopment potential of their proprietary interests in the lot, it is plain to us that the scheme under the (Ordinance) serves legitimate aims”. The preamble of the Ordinance states as follows:

“An Ordinance to enable persons who own a specified majority of the undivided shares in a lot to make an application to the Tribunal for an order for the sale of all of the undivided shares in the lot for the purposes of the redevelopment of the lot; to enable the Tribunal to make such an order if specified criteria are met; and for matters incidental thereto or connected therewith.” (underline added)

38.Certainly the Tribunal would not go to the extreme of seeking the utopia as suggested by Mr Tsui. In Wah Ha Property Development Limited & Others v Rosehawk Group Limited & Other, LDCS 25000/2018 (unreported, dated 30 April 2021), the application for compulsory sale was refused by the Tribunal. In §93 of the judgment, the Tribunal remarked as follows:

“It is not in dispute that the Development, consists of low-rise buildings, was erected more than 72 years ago. As compared with modern buildings, its design may be to a certain degree dated in certain aspects. That notwithstanding, we observe no major safety or any hygienic issue in the Development and there is no convincing evidence which may suggest that a reasonable living standard cannot be achieved without significant alteration or renovation work being undertaken thereto. It is clear that the Development is not in a poor physical state nor is it so obsolete, physically or functionally, that justifies a complete pull-down and immediate redevelopment. As the Development was renovated some 30 years ago, we take the view that regardless the length of its design life, with adequate repair and maintenance it can likely stand well and continue to serve its function for some days in the years to come. In fact, it is also not the conclusion of the building experts that there is any immediate danger or great safety concerns which warrants demolition of the Development at this stage. Realistically speaking, such reasonably-maintained apartments in low-density environment particularly in the luxury residential district, like the Peak, are still in demand irrespective of their age.”

39.In comparison, the Building comprises a 6-storey building built in 1961 without any lift service. In §117 of the Judgment, I had considered the following:

“Although in Professor Chan’s opinion, the general condition of the Building is better than that of many buildings in Hong Kong aged 50 or more, he agreed that most rebars for slabs and beams of the Building were suffering from partly to moderate corrosion as graded by the same independent laboratory. Thus, I agree that the margin of safety of the structural elements concerned has been reduced though I have no dispute with Professor Chan’s opinion that the Building is safe and sound. And as stated in §§81-82 above, overall speaking, 37% of the tested spots have actual concrete cover less than the design cover. I cannot agree that the 37% is not significant. Both Mr C M Wong and Professor Chan agreed that, for 80% of the samples in slabs, 100% of the samples in beams and 20% of the samples in columns, carbonation has exceeded the actual cover to the outermost rebars. The protection of the passive layer of the concrete cover has been lost and thus the rebars are susceptible to corrosion. I agree with Mr C M Wong that such weakness in concrete cover is not reversible.”

40.Further at §109 of the Judgment, I had listed out various fire safety concerns in the Building which were agreed by experts of both sides. These include the following:

(1) “There were insufficient fire service installations in the Building which cannot comply with the requirements of the Fire Safety (Buildings) Ordinance, Cap 572 and Code of Practice for Minimum Fire Service Installations and Equipment 2012;

(2) Part of the exit route/ required staircase, which is the only staircase that serves the Building, does not have a clear headroom of not less than 2m;

(3) No fire protected lobbies for access to the escape staircase was provided at each storey;

(4) The security gate at the G/F entrance has reduced the effective width of the escape route/ required staircase;

(5) The required staircase has accommodated services other than emergency services and such non-emergency services were not enclosed by fire barriers have a fire resistance rating;

(6) The main roof is designed as refuge floor but the kerb at the exits of the stairhood on the main roof is too high, contravening the requirement that an escape route should be “clear of any obstruction.”

41.Then at §115, I stated that the experts on both sides agreed that the Buildings Department or the Fire Services Department would unlikely issue any direction to demand rectification of the fire escape deficiencies because it is impractical to carry out the remedial works in reality.

42.Thus I was entitled to find at §122 of the Judgment that:

“the Building has only one common staircase which also serves as the only means of escape in case of fire outbreak. Even Professor Chan admitted that his proposed remedial measures on fire safety just focused on the actual needs of the Building owing to its design constraint. In my view, those are only compromising measures.”

These latter are indeed affirmed by Mr Tsui in the Appeal Submission at §13 that the respondents “were merely seeking the Tribunal to assess, in the few places where such requirements were impossible to meet because of practical constraint …”

43.For instance, the present case must be distinguished from Bright Full Limited & Others v Hing May Properties Limited, LDCS 36000/2019 (unreported, dated 6 January 2023) where the Tribunal found that the requirements under Codes of Practice for Minimum Fire Service Installations and Equipment and Inspection, Testing and Maintenance of Installations and Equipment 2022 were not applicable or there was express provision under Building (Planning) Regulations so that certain requirement was exempted.

44.That the Building had an Owners’ Corporation or R3 is its chairman is neither here nor there. The Tribunal had a lot of experience in dealing with disputes among owners even though they had formed Owners’ Corporations. By virtue of para 5(1) in Schedule 2 to the Building Management Ordinance, Cap 344, at the second annual general meeting of a corporation convened in accordance with paragraph 1(1)(b) of Schedule 3 and thereafter at every alternate annual general meeting, all members of the management committee which includes the chairman shall retire from office.

45.In Able Wide Corporation Limited & Others v Makharia Alka & Another, LDCS 1000/2020 (unreported, 23 December 2022) at §102, the Tribunal had observed the difficulty in obtaining the consensus among owners on revitalization (or large scale repair in the present case) when a building is multi-owned. Then comes the remarked that:

“Why should the applicants be enjoined to opt for revitalization which is not the highest and best use of the Building? Even as suggested by Mr. Leung, if we are to look at the issue from the prospect of a reasonable majority owner, there should be sufficient reason for a reasonable majority owner to choose revitalisation instead of redevelopment.”

46.In the present case, the Owners’ Corporation was prepared to spend and had actually spent money on repairs to common parts of the Building in the past 2 years in the sum of $72,700[7]. This was in stark contrast to what Professor Chan had recommended (even if his evidence was accepted in full) in the sum of $5,323,064[8].

Tribunal’s View on Ground 3

47.During the hearing, as was commonly the case for most compulsory sale applications, the Tribunal heard various conflicting “professional” views from two qualified experts, who professed to have good knowledge of the issues. Which view should the Tribunal take is certainly one of the judicial functions that it has to carry out. It would make decisions from time to time as to whether the Tribunal should accept, with or without qualifications, all or only some of the conclusions of the professional experts giving testimony in the Tribunal.

48.Under section 10(6) of the Lands Tribunal Ordinance, Cap 17, the Tribunal may admit in evidence any statement, document, information or matter, whether or not it would otherwise be admissible in evidence and attach such weight to it as may be appropriate in the circumstances. In Lingrade Development Limited v Secretary for Environment, Transport and Works (2011) 14 HKCFAR 439, the Court of Final Appeal said as follows:

“20. These remarks seem to me to demonstrate some degree of misapprehension about the exercise which the Tribunal was required to undertake. It had to form the most accurate view it could about what apartments built according to the original scheme would have fetched, and how quickly they would have sold, if they had been ready for sale in April 2000. For this purpose, the best evidence would have been what apartments in all respects comparable were actually being sold for at the time. However, as is often the case, there was no such evidence. They had evidence of what apartments in Mr Wong’s other development were actually selling for, but did not think that they were sufficiently comparable to be helpful. So they took instead the actual sales of Lingrade apartments under the revised scheme in 2001-2003 and adjusted them to reflect the general decline in the market since 2000. Valuation is not of course an exact science, but the Tribunal’s assessment was solidly based upon which actually happened to very similar apartments soon after the relevant time.

…

23. … The question is not whether Mr Wong’s evidence was accepted or rejected but whether there was evidence to support the decision of the Tribunal. They had before them the evidence of the sales of apartments by Lingrade and the index which they thought appropriate. There is no challenge to the methodology which they, as an expert specialist tribunal, chose to adopt.”

49.In Cheer Capital Limited v Unibase Investment Limited & Others, LDCS 5000 & 6000/2013 (unreported, 12 June 2015), the Tribunal, citing Myers v. South Lakeland District Council [2005] EWCA Civ 498, [2005] RVR 301 and Checkpoint Limited v. Strathclyde Pension Fund [2003] 14 EG 124, [2003] EWCA Civ 84, had pointed out at §188 that it is not bound to accept the submission of any party and may rely upon its own experience in determining the dispute under section 4(1)(a) of the Ordinance.

50.In the present case there was ample evidence for the Tribunal to conclude that the Building was obsolete when compared with today’s standards and its redevelopment is justified due to its age or state of repair. With respect, the subjective opinions of the respondents are irrelevant. While Mr Tsui was correct, citing Good Faith Properties Limited & Others v Cibean Development Limited [2014] 5 HKLRD 534, to point out that the right to raise objections is part of parcel of the proceedings in the Tribunal, he had gone too far to suggest that those objections must be accepted by the Tribunal.

51.The Tribunal, as a specialized tribunal, has to make decisions from time to time as to whether the Tribunal should accept, with or without qualifications, all or only some of the conclusions of the professional expert giving testimony in the Tribunal. Indeed, in Chan Shiu Chong & Others v Director of Lands, CAMP 54-56/2019 (unreported, dated 11 July 2019) at §27, the Court of Appeal remarked that the Tribunal is entitled to set out the main thrust of its decision in a judgment, without having to set out, discuss and then reject, each and every contention raised.

Tribunal’s View on Ground 4

52.In the present case, the application under the Ordinance to sell all the undivided shares of Section B of Inland Lot No 444, ie the Lot, with the Building thereon. In para 2 of Schedule 2 to the Ordinance, it is expressly specified that the Lot the subject of the auction shall be sold subject to a reserve price which takes into account the redevelopment potential of the lot on its own. Under section 4(2)(b) of the Ordinance, the Tribunal is only required to be satisfied that the majority owners, ie the applicant in the present case, have taken reasonable steps to acquire all the undivided shares in the Lot, including negotiating for the purchase of such of those shares as are owned by that minority owner on terms that are fair and reasonable.

53.Whereas Mr Tsui acknowledged that the applicant had made offers to the respondents on the basis of the RDV the Lot with the adjacent lot. That the applicant in the present case had adopted a more generous approach by taking into account the development potential of the adjacent lot to make offers to the respondents to their benefits, if any, should be welcomed. However, this does not mean the Tribunal had to criticize or scrutinize this generous approach.

54.In the Judgment at §§134 & 135, I had repeated the view of the Court of Final Appeal as follows:

“134. 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:

“In making that assessment (whether an offer is reasonable) 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.”

135. The Court of Final Appeal stated further at §36 of the judgment that:

“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.”

55.Grounds 1 to 4 have no merit.

56.I find that none of the R1 and R4’s intended grounds of appeal is arguable let alone having any “reasonable prospect of success”. Nor there is some other reason in the interests of justice why the appeal should be heard. No leave to appeal ought to be granted.

Stay or Interim Stay Applications

57.While I have ruled that R1’s and R4’s intended appeal is not arguable, it falls short of the “minimum” requirement for grant of a stay. See paragraph 9(6) of Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 per Geoffrey Ma J (as he then was).

58.In addition, the auction following a compulsory sale order must be held as soon as possible (ie the lots have to be sold within 3 months under section 5(4)(a) of the Ordinance) to best reflect the valuation made by the Tribunal at trial (ie the Reserve Price). The auction is due to take place on 11 January 2023. Any postponement of the auction at a later time will expose the parties including R1 and R4 to huge risks and uncertainties in current volatile market conditions. The uncertainty and probability of changes in potential bidders’ incentives and interest in acquiring the Lot increase with the passing of time. Under such socio-economic climate, if the auction is postponed because of the stay (or interim stay), the parties may not be able to obtain the price they are legitimately entitled to receive from the auction. This was manifested in the Pacific Base Holdings Limited & Others v Lee Hop Biu & Others, LDCS 14000/2017 (unreported, 4 June 2020) when the auction subsequent to the stay received no bid at all.

59.More importantly, a stay, if granted, will cause loss to the other parties:

(i) It will keep the other respondent, eg R3 from receiving her share of the net auction proceeds.

(ii) It will keep the applicant from its share of the net auction proceeds if a non-party should succeed in the Auction.

(iii) If the applicant should succeed in the auction, the stay will delay the redevelopment project and to calculate that loss is not straight forward.

60.For the reasons set out above, the balance clearly cannot and does not lie in favour of R1 and R4 and the granting of a stay (or interim stay) of execution of the auction. R1 and R4’s application for stay (or interim stay) be refused.

Conclusion

61.I am of the view that this application for leave to appeal shall be dismissed as it has no reasonable prospect of success nor any other reason in the interests of justice why the appeal should be heard.

62.As costs shall follow event, I order that R1 and R4 do pay the applicant the costs of this application for leave to appeal as well as the application for stay of execution with Certificate for Counsel at the High Court scale, to be taxed, if not agreed by the parties.

Ms Nancy Ngai, instructed by Messrs Lo & Lo, for the Applicant

Mr Wilfred Tsui, instructed by Messrs H Y Leung & Co LLP for the 1^st and 4^th Respondents