Bright Full Ltd and Others v. Hing May Properties Ltd

LDCS 36000/2019

[2023] HKLdT 45

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 36000 OF 2019

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Before: Deputy District Judge Roy Yu, Presiding Officer of the Lands Tribunal and Mr Lawrence Pang, Member of the Lands Tribunal

Date of Leave to Appeal Application: 3 February 2023

Date of Applicants’ Written Submissions: 3 March 2023

Date of Respondent’s Written Submissions: 17 March 2023

Date of Applicants’ Reply Written Submissions: 27 March 2023

Date of Decision: 19 June 2023

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DECISION

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BACKGROUND

1.On 6 January 2023, the Tribunal handed down its judgment (“the Judgment”) in relation to the applicants’ application (“the Application”) for an order for sale under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) of all the undivided shares of and in the Remaining Portion of Rural Building Lot No 648 (“the Lot”) on which there exist a terrace of 5 townhouses, Houses A to E, which are collectively known as Provident Villas (“the Villas”) having an address of No 29 Sassoon Road, Pok Fu Lam, Hong Kong.

2.The Tribunal dismissed the Application upon finding redevelopment of the Lot being not justified due to the age or state of repair of the existing development on the Lot in accordance with section 4(2)(a)(i) of the Ordinance.

3.The Tribunal made a costs order nisi that the applicants do pay the costs of these proceedings (including any reserved costs) to the respondent, with certificate for counsel, to be taxed on the High Court scale if not agreed which shall become absolute upon expiration of 14 days from the date of the Judgment. The costs order nisi has become absolute as there is no application to vary the same.

4.On 3 February 2023, the applicants took out a summons (“the Summons”) for leave to appeal to the Court of Appeal against the Judgment on the following grounds:

(1)  The Tribunal erred in law in failing to apply the correct legal test in deciding whether redevelopment of the Lot is justified on the ground of “age” under section 4(2)(a)(i) of the Ordinance (“Ground 1”);

(2)  In considering whether redevelopment of the Lot is justified on the ground of “state of repair” under section 4(2)(a)(i) of the Ordinance, the Tribunal erred in law in that it had taken into account irrelevant considerations (“Ground 2”);

(3)  In addition to Ground 1 and Ground 2, in rejecting the Application by considering the question of age and state of repair, the Tribunal erred in law in failing to consider adequately or otherwise certain building aspects of the Villas which are germane to the determination of the question (“Ground 3”); and

(4)  The Tribunal erred in the exercising of its discretion in ordering the applicants to pay the costs of the proceedings to the respondent without taking into account the costs wasted by the respondent in adducing the Supplemental Note of Dr James Lau and that the respondent should therefore be only entitled to 70% of its costs (“Ground 4”).

5.On 13 February 2023, the Tribunal directed that the Summons for leave to appeal be dealt with by paper disposal.

GROUND 1

6.In short, the applicants submitted that the correct test for determining whether redevelopment of a lot is justified on the ground of “age” under section 4(2)(a)(i) of the Ordinance was set out in Intelligent House Ltd v Chan Tung Shing & Others [2008] 4 HKC 421 which was subsequently and consistently applied by the Tribunal. At §124 of the Judgment, the Tribunal stated the test as one by comparing an old building with what a modern-day building could offer under the present-day regulations.

7.In such regard, the applicants submitted that the Tribunal failed to apply the test correctly because the Tribunal wrongly accepted that the test for age was just a consideration of existing physical condition, functional condition, maintenance and housekeeping standards of the Villas and hence rejected the test of “obsolescence” which is by a direct comparison of the legislative regulations as at the time when the Villas were built and the current legislative requirements as the test for “age” under section 4(2)(a)(i) of the Ordinance.

8.In particular, the applicants suggested that the Tribunal misunderstood the significance of the Villas’ insufficient concrete cover to rebars of the slabs when

(a)  compared to the requirements in the Code of Practice for Structural Use of Concrete 2013 (“2013 Concrete Code”) in simply dismissing the same by referring to the carbonation depth results of the Villas at §130;

(b)  compared to the fire resisting construction requirements in Code of Practice for Fire Safety in Buildings 2011 (“2011 Fire Safety Code”) in relying on the fact that such insufficient concrete cover was approved by the Building Authority at the time the Villas were built, and in venturing into considerations of whether such insufficient concrete cover would affect the actual fire resistant period of the Villas at §§138-143.

9.As a result, the applicants submitted, the Tribunal failed to appreciate the objective fact that the concrete cover of the Villas fell short of the present-day regulations or law, and the real significance of this was that due to the advance of technology and/ or rising expectations of the public, the concrete requirements and the fire resisting construction requirements had been increased since the 1970s when the Villas were built.

10.The applicants further submitted that the Tribunal fell into error in concluding at §§139-143 that the increase of the concrete cover requirement from 15mm to 20mm was for the purpose of durability but not fire resistance. The applicants argued that the 20mm requirement could not have been imposed for the purpose of durability when it is specified in the 2011 Fire Safety Code which concerned fire resisting construction requirements, and did not concern durability at all.

11.Further, as a result of the adoption of the wrong test for “age” which the applicants suggested, the Tribunal erred at §127 in excluding from its consideration the outdated external finishing and appearance of the Villas, which was an aspect of physical obsolescence. The applicants argued that the cement rendering and paintwork of the external wall of the Villas is outdated when new buildings nowadays are finished with self-cleaning, durable and stylish materials like ceramic-faced tiles, granites, glasses and metal panels.

12.Referring to §§131-135 of the Judgment, the applicants submitted that the Tribunal erred in law in concluding that §4.22 of the FSI Code 2022 did not apply to the Villas and that the Villas are therefore not functionally obsolete in terms of the fire safety installations.

13.On this issue of “age”, the applicants further alleged that the Tribunal at §147 erred in treating the concept of design working life as a definite figure such that the Villas is deemed not to be obsolete simply because its physical age has not exceeded the design working life. The Tribunal has simply disregarded the fact, so the applicants alleged, that the Villas were built 41 years ago with the occupation permit issued on 23 November 1981. The applicants argued that the Tribunal ought to have treated the concept of design working life as a benchmark with a nominal value against which to cross-check its findings on the degree of obsolescence of the Villas.

GROUND 2

14.The applicants submitted that the Tribunal at §§153-154 wrongly decided that the relevant consideration on the estimated repair costs was the costs as attributed to each individual houses instead of the Villas as a whole, when the test under section 4(2)(a)(i) of the Ordinance, so the applicants alleged, is a lot-based test which does not differentiate between the states of repair of individual units within the lot and the lot as a whole, nor between the states of repairs of common areas and exclusively-owned areas on the lot.

15.The applicants then submitted that the Tribunal wrongly took into account the consideration that prospective purchasers of luxury houses would inevitably spend a vast sum of money for decoration and repair, when the inclination of a prospective purchase to renovate or decorate units on the lot is totally irrelevant to the question of the state of repair of the existing development on the lot, and forms no part of the test under section 4(2)(a)(i) of the Ordinance.

16.The applicants further submitted that the Tribunal at §155 wrongly took into account the consideration that the estimated repair costs of each house on the Lot only amounted to less than 5% of the existing use value (“EUV”) of each house, when the concept of economic lifespan of buildings on the lot forms no part of the test under section 4(2)(a)(i) of the Ordinance and/or the comparison between repair costs and EUV can never be a reliable benchmark of state of repair, if not indeed a misleading benchmark, as the EUV would have included the value of the land on the superstructure stands.

GROUND 3

17.In addition to Ground 1 and Ground 2, in rejecting the Application by considering the question of age and state of repair, the applicants submitted, the Tribunal erred in law in failing to consider adequately or otherwise the following building aspects of the Villas which are germane to the determination of the question:

(a)  The piecemeal and individual replacements of the mild steel windows and external doors of the Villas resulting in overall untidy appearance of the elevations of the Villas when new buildings commonly have:

(i)  Standardized aluminum windows and external doors with protective coating in the window frames and durable accessories; and

(ii)  Colour tinted and film coated glasses for light and heat reflectance.

(b)  The serious problem of carbonation of concrete cover as revealed by the investigation by Mr C M Wong, the applicants’ structural assessment expert, which was not disputed by Dr James Lau, the respondent’s structural assessment expert. The Tribunal erred at §116 in accepting that the problem can be met by removing carbonated concrete cover and replacing the same by new concrete cover when the carbonation process will continue as acknowledged by the Tribunal and there is no evidence adduced by the respondent as to how the alleged removal and replacement of concrete cover can be done and the costs entailed. The repair costs proposed by Mr C M Wong did not cover the costs of addressing the carbonation issue.

(c)  While there can be exemption for emergency of vehicular access (“EVA”) according to the Practice Note for Authorized Persons and Registered Structural Engineers APP-136, the Tribunal erred at §§136, 137 and 138 in finding that there could be exemption as the driveway of the Villas is 5 metres wide when the Tribunal ignored the fact that the driveway of the Villas has a dead-end so that fire services appliances need to reverse more than 30 metres from Houses D and E to the Villas entrance meaning that the existing driveway cannot be an EVA and if any exemption is granted it must be on the basis that sprinkler system has to be installed in accordance with paragraph 8 and Appendix B to APP-136.

(d)  The Tribunal at §§150, 151 and 152 misunderstood the evidence of Mr Benson Wong, the applicants’ building condition expert, that patch repairs would suffice to bring the building façade, the pitch roof and the flat roof of the Villas back to tenantable conditions when Mr Benson Wong had clearly stated in his rebuttal report, joint statement and oral evidence that patch repairs could only cover the hollow spots as detected from the infra-red thermographic survey and did not cover defects such as cracks and water seepages as well as the lack of movement joints at every floor level so much so that the whole external walls would not be in a sound and safe condition by only doing patch repairs. The evidence of Benson Wong is rather that in view of the age of the Villas which is more than 40 years and that there has been no repair of external rendering before, there should be complete replacement of the external rendering to bring it to tenantable condition.

(e)  The Tribunal further at §152 misunderstood Mr Benson Wong’s evidence that item 11 of the repair costs on swimming pool and other external areas were in the nature of improvement works when the same were repair works to bring the swimming pool and other external areas back to tenantable condition (except for 2 minor items on replacement of existing non-automatic backwash type filter and manual chemical doing with automatic type which are for hygiene improvement).

(f)  The Tribunal also failed to consider the various deficiencies in the Villas by simply listing out them as items of repairs at §149 and then dismissing them as being costs accrued to the individual houses instead of the Villas as a whole. Beside the items already mentioned above, there are the following deficiencies, according to the applicants, which the Tribunal did not even consider:

(i)  the presence of the asbestos containing materials.

(ii)  the problem of water leakage so that there should be complete replacement of the waterproofing and roof coverings to:

(1)  the pitched roofs of the 5 houses;

(2)  the flat roofs of Houses A, B, D and E; and

(3)  the roof of the watchman office.

(iii)  the external defectiveness in the interior of Houses A, B, D and E.

(iv)  the defects in the aboveground plumbing, aboveground and underground drainage.

(v)  the deficiencies in electrical installation.

(vi)  the deficiencies in air-conditioning system.

GROUND 4

18.The applicants submitted that the Tribunal erred in the exercise of its discretion in ordering that the applicants to pay the costs of the proceedings to the respondent by failing to take into account the unreasonable conduct of the respondent in adducing Dr James Lau’s Supplemental Note at the first day of trial which then necessitated Mr C M Wong to prepare his reply on urgent basis. Moreover, as it transpired at the trial, the purported evidence given by Dr James Lau in his Supplemental Notes were largely if not wholly wrong and misleading. The conduct of the Respondent was unreasonable and a proper reflection would mean that, in any event, the respondent should have some part of its costs knocked off so that the respondent should only be entitled to 70% of its costs taking into account the time wasted for addressing Dr James Lau’s Supplemental Note.

RELEVANT LAWS CONCERNING APPEAL

19.Section 11(2) of the Land Tribunal Ordinance (“LTO”) provides that:

“Subject to section 11AA and the provisions of any Ordinance relating to appeals from the Tribunal, any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law.”

20.Section 11AA states further 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.”

21.With respect to the applicants, save for Ground 4 which we shall come to later, all the other grounds, ie Ground 1, Ground 2 and Ground 3 are all applicants’ dissatisfaction with the Tribunal’s finding or view on fact in opposed to any point of law.

22.Further, section 4(1) of the Ordinance states:

“(1) Subject to subsection (2), the Tribunal shall determine an application under section 3(1) by—

(a) first—

(i) if any minority owner of the lot the subject of the application disputes the value of any property as assessed in the application, hearing and determining the dispute;

(ii)in the case of any minority owner of the lot who cannot be found, requiring the majority owner of the lot to satisfy the Tribunal that the value of the minority owner’s property as assessed in the application is—

(A) not less than fair and reasonable; and

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

(b) second—

(i) making an order that all the undivided shares in the lot the subject of the application be sold for the purposes of the redevelopment of the lot; or

(ii) refusing to make such an order; and

(c) …”

23.It is important to note that the power to order all the undivided shares in the lot be sold come from section 4(1)(b)(i). And this power is subject to provision in subsection (2). Section 4(2) of the Ordinance states:

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

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

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

24.The provision under section 4(1) does not specify how the Tribunal may exercise that power/discretion. But section 4(2) does set out the situation when the Tribunal shall not exercise that discretion to give an order of sale. It has been well established that unless we are satisfied that the redevelopment of the lot is justified due to the age or state of repair, we shall not make an order for sale.

25.Though it is understood that the Ordinance itself is now being under review by the Government who would put forward amendments, if any, to the legislature in the year to come, we are assessing the evidence on the existing legislation.

ADJUDIATION ON EVIDENCE

26.Thus up to the present, the Tribunal was shown with evidence that all units of the lot under application for compulsory sale pursuant to the Ordinance, both from the Condition Survey Report and the Structural Assessment Report prepared by corresponding experts from both parties and from the tribunal’s site visit to determine if the redevelopment of the lot is justified. In the present case, as usual, the applicants and the respondent have produced the following expert reports:

Structural Assessment

(1)  Mr Wong Chi Ming (“Mr CM Wong”), a Registered Structural Engineer, on behalf of the applicants, filed the following reports:

(a)  Structural Assessment Report dated 9 September 2020;

(b)  Rebuttal Report dated 29 April 2021.

(2)  Dr Lau Chi Wang James (“Dr James Lau”), also a Registered Structural Engineer, on behalf of the respondent, filed a Structural Assessment Report dated 23 March 2021.

(3)  Mr CM Wong and Dr James Lau’s joint statement dated 30 September 2021.

Condition Survey

(1)  Mr Wong Sai Ning Benson (“Mr Benson Wong”), a Chartered Building Surveyor, on behalf of the applicants, filed the following reports:

(a)  Condition Survey Report dated 10 September 2020;

(b)  Rebuttal Report dated 30 April 2021.

(2)  Mr Chan Kwok Wai Albert (“Mr Albert Chan”), also a Chartered Building Surveyor, on behalf of respondent, filed a Condition Survey Report dated 30 March 2021.

(3)  Mr Benson Wong and Mr Albert Chan’s joint statement dated 14 January 2022.

27.As a result, the Tribunal’s determination of the age or state of repair of the Lot was no doubt a finding of the quality and/or condition of the Lot. Such rulings were strictly based, among other things, on the Tribunal’s own in-person observation of the Lot in addition to the evidence adduced by the parties.

28.We agree that Intelligent House Ltd, supra, had laid down useful guidelines for the Tribunal’s determination for instance at §145(4):

“(1) The Tribunal is entitled to look at any factors or matters that are directly or indirectly related to the elements of “age” or “state of repair” of the existing building.

(2) While looking at these factors or matters to decide whether redevelopment is justified, the Tribunal is also entitled to look at any comparison made between the old/existing building and a new building or any proposed redevelopment.

(3) It is open to the Tribunal to consider and look at the obsolescence of an existing building in terms of its functional items or facilities, since this is something related (directly or indirectly) to the “age” of the building. The older a building is, the more obsolete and outdated its facilities are.

(4) Further, the Tribunal is entitled to compare these facilities of the old building with what a modern day building could correspondingly offer whether as required by the present day regulations or law, or because of the advance of technology, or because of the rising expectations of the public for proper, safe and hygienic habitation and residence.”

29.But how these guidelines can be applied may vary from case to case especially when in the present case, “the existing development on the lot” comprises “5 Nos 3-storey houses for domestic use over carpark with ancillary accommodation for non-domestic use” and “1 single-storey watchman office for non-domestic use”. The houses are each single owned and semi-detached in contrast to a low-rise or high-rise building which is multi-owned.[1]

30.In such regard, the applicants’ purported challenge that the Tribunal’s acceptance of Mr Albert Chan’s proposal at §126 that “Considerations should be made to the existing physical and functional conditions of the building and their maintenance and housekeeping standards” is wholly without merit. How can a Tribunal be satisfied that “the existing development” which comprises semi-detached houses in good physical and functional conditions is justified for redevelopment? Certainly, whether “the existing physical and functional conditions of the building and their maintenance and housekeeping standards” is good or otherwise is necessarily a “comparison made between the old/existing building and a new building or any proposed redevelopment” which is one of the guidelines laid down in Intelligent House Ltd, supra.

31.Further, we agree with the respondent’s submission in opposing the leave to appeal that the Draft Notice of Appeal submitted by the applicants is so profix that it appeared once again as a set of submission repeating arguments already deployed in closing submissions that had been rejected by the Tribunal. Such similar practice was criticized by the Court of Appeal in Yap Sui Kwong v Yip Fong Tim [2018] 4 HKLRD 791 at §§18 & 22.

AGE

32.Here, the referral by the applicants to Harvest Treasure Limited & Others v Cheung Fat Enterprises Limited & Others, LDCS 8000/2014 (unreported, 31 December 2015) at §135 is misconceived. There, the Tribunal accepted the opinion of Mr Benson Wong, who happened to be also the expert on building conditions then that “the design of the Building which had become obsolete by modern standard under the current construction conduct, such as the inadequacy or lack of fire safety equipment and installation, having no-lift or channel for the disabled etc.” In the present case, however, based on the expert evidence on the conditions of the Villas, we did not find the Villas were really “aged” by modern standard.

33.Similarly, we did not find the Villas were suffering from physical and functional obsolescence. At §129, for instance, we agreed with Mr Albert Chan that the Villas were not aged functionally. We have considered both his opinion and that of Mr Benson Wong before we come to the finding at §129.

34.Also, at §155, we found the physical conditions of the Villas were not serious when “the repair costs estimated by Mr Benson Wong at around $4,200,000 for each house (except House C) is not unreasonably high and is less than 5% of the EUV of each house.” The applicants had applied too rigid a definition of “cost of maintenance” as found for instance in Top Sail International Limited v Cheng Kai Ming, Executor of the Estate of Chan Hue also known as Chan Sum Hiu, deceased, LDCS 18000/2010 (unreported, dated 15 November 2011).

35.Pausing here, and to avoid further confusion, we would like to refer to Double Top Development Limited & Others v Kentone Limited & Others, LDCS 16000/2019 (unreported, dated 4 April 2023) where the Tribunal was content to compare the repair cost with the EUV at §30. It found “the ratio of 4.96% of the EUV is high, and many owners in this type of old building may not be willing to make such contribution for repair.” (underline added) But in the present case, the Tribunal had undisputed evidence that Mr Chung, the respondent and the owner of House C “spent a sum of about $2,800,000 when the respondent acquired House C in March 2006”[2]. This $2,800,000 in March 2006 would amount to $5,386,260 in today’s standard and exceed 5% of the EUV of each house in the Villas.

36.Lastly on “age”, the applicants had wrongly placed too much emphasis on the opinion of Mr Benson Wong that there was physical obsolescence to the appearance of the Villas. How can a Tribunal be satisfied that “the existing development” is justified for redevelopment on merely the so-called physical appearance such as cement rendering and painting finishing, piecemeal and individual replacements of steel windows etc which can readily be improved at minimum or moderate costs? At least, the opinion of Mr Albert Chan differed from that of Mr Benson Wong and we accepted, as rightly pointed out by the applicants, the former at §127.

37.With respect, we are of the view that the applicants are quoting the previous remarks of the Tribunal in other compulsory sale applications on the same issue out of context without regard to the actual circumstances. For instance, the applicants liked to refer to Nice Beauty Limited v Yan Yan Motors Limited & Others, LDCS 14000/2019 (unreported, dated 6 December 2021) where the Tribunal remarked at the end of §45:

“Although one may argue that different people may have different taste and choice of physical appearance, I consider that such should be viewed generally from the perspective of most of the citizens, particularly the citizens in the district.”

38.We repeat here that the taste and choice of physical appearance should be viewed generally from the perspective of most of the citizens, particularly the citizens in the district and having viewed the evidence before the Tribunal, we prefer that of Mr Albert Chan to that of Mr Benson Wong.

Concrete Cover to Rebars of Slabs

39.Again the applicants saw fit to suggest that Mr Benson Wong identified the insufficient concrete cover to rebars of the slabs as aspects of obsolescence in that they fell short of the requirement of the modern day requirement of 2013 Concrete Code and 2011 Fire Safety Code. With respect, once again, the applicants were not satisfied with the Tribunal’s observation and finding at §130 that “the 6 spots that were found having the carbonation depth going pass the depth of the concrete covers were particularly localized near House E. In contrast, there were a number of test results with very shallow carbonated depths.” As rebutted by the respondent, we simply examined the actual impact of concrete cover of slabs not meeting the latest standard as manifested by the tests performed by Mr C M Wong, one of which was carbonation. Thinner concrete cover means shorter distance for carbonation to reach the rebars. But if the actual extent of carbonation was not a concern in the present case, the fact that the Villas had thinner concrete cover is neither here nor there.

40.Further, the applicants chose not to see the Tribunal’s explanation on the adequacy on fire resistance. At §141, for instance, the Tribunal agreed with the respondent that “by reference to the approved building plan for the Villas dated 23 August 1979, it was approved by the Building Authority that the 15mm cover at that time could withstand a fire resistant period of 1 hour. We are persuaded that it could not be the case that the 15mm cover cannot suddenly withstand a fire resistant period of 1 hour despite the change in standard.” In fact, the applicants failed to point out that the Building Authority was wrong in stating that “the 15mm cover at that time could withstand a fire resistant period of 1 hour” when the 2011 Fire Safety Code also maintains that the concrete cover thickness has to withstand a fire resistant period of 60 minutes, ie 1 hour. See the table at §139 of the Judgment.

Design Working Life of Concrete

41.The applicants also challenged the Tribunal in referring to the design working life of concrete of 50 years at §147. With respect, this concept of design working life of concrete has been applied from time to time by the majority owners in compulsory sale applications with the aid of building experts including Mr Benson Wong to strengthen their cases in suggesting that “the existing development on the lot” was ripe for redevelopment. We are surprised that the applicants took volte-face here to suggest that the Tribunal was not warranted to assume that the Villas had a design working life of 50 years. While we appreciate that it would be wrong to declare indiscriminately any building over the age of 50 to be past its design working life, we are entitled to find such “philosophical” concept as termed by the applicants useful as one of the benchmarks to see if the Villas are approaching the end of its design working life. There was indeed no evidence from the applicants that the design working life of the Villas should be shorter than the norm.

42.As stated recently by the Tribunal in Double Top Development, supra at §30, the nominal 50-year design working life is just relevant as one of the many considerations only under the Ordinance.

Code of Practice for Minimum Fire Service Installations and Equipment 2022

43.At §131, the Tribunal recorded Mr Benson Wong’s referral to Code of Practice for Minimum Fire Service Installations and Equipment 2022 (“FSI Code 2022”) and his suggestion that by reference to the code, the Villas were obsolete in essential fire service system. The applicants challenged the Tribunal’s finding at §132 that the Villas were not over 3 storeys high because the occupation permit of the Villas described them as “5 Nos 3-storey houses for domestic use over carpark …”. The only ground raised by the applicants was why the ordinary meaning of the word “storey” in the FSI Code 2022 cannot be referring to a level used as a carpark. However, the opposite can also be true as found by the Tribunal in referring to the occupation permit for 77/79 Peak Road, a so-called comparable development relied upon by the applicants.

44.The applicants then tried to refer to authorities including Paquito Lima Buton v Rainbow Joy Shipping Ltd Inc (2008) 11 HKCFAR 464 where the Court of Final Appeal stated at §11 that the construction of written documents is a question of law. With respect, the applicants are going nowhere because we found the word “storey” in the FSI Code 2022 should be more realistically referring to a domestic storey by comparing the wordings of the occupation permits of the Villas and 77/79 Peak Road. If the applicants are correct, why did the respective occupation permits use the terms “3-storey houses for domestic use over carpark” for the Villas and instead “domestic use over 1-storey of carpark” for 77/79 Peak Road where the 1-storey covers more than one carpark and other accommodation. The question remains as to why the Building Authority did not simply refer to the Villas as 5 Nos 4-storey houses (instead of 3-storey houses) with 3-storey for domestic use over 1-storey of car park in the occupation permit.

45.Further, the applicants suggested that the Tribunal, by the word “storey” in the FSI Code 2022 does not include a level used as a carpark, failed to pay due regard to the consequence of its interpretation. The applicants suggested without any ground that it would be absurd for the Fire Services Department to adhere to whether or not the Building Authority had described a carpark as a “storey” in the occupation permit regardless of how many levels or how high the carpark actually occupies on the site. It is equally important in common sense that for fire safety purposes, a storey for domestic use should be more protected than a level for carpark. In any event, the Tribunal was facing two competing interpretations of the provision of the FSI Code 2022 by two experts, Mr Benson Wong and Mr Albert Chan and the Tribunal adopted that of Mr Albert Chan instead of that by Mr Benson Wong.

46.In the premises, Ground 1 has no reasonable prospect of success.

STATE OF REPAIR OF EXISTING DEVELOPMENT

47.Firstly, the applicants suggested the Tribunal was wrong to take into account the repair costs accrued to individual houses of the Villas instead of the Villas as a whole because the application for compulsory sale under the Ordinance is a lot-based application. We definitely agree with the lot-based requirement as specified under section 3 of the Ordinance. However, when coming to section 4(2)(a)(i), whether redevelopment of the lot is justified depends on “the age or state of repair of the existing development on the lot”. In considering state of repair of “the existing development”, it is absurd, using the word of the applicants, not to assess the existing development and its particular feature (and in this case that the development consists of 5 individual houses) to consider if redevelopment of the lot is justified due to the age or state of repair of the lot.

48.On the other side of the same coin, the experts on building conditions or structural assessment engaged by both parties would only carry out their survey or analysis on the basis of the existing development rather than on the lot.

49.Again, it is useful to refer again to Double Top Development, supra, where the Tribunal at §32 that:

“In terms of the repair costs for the sub-divided flats, I accept that these should be included in the analyses and it is also not the role of the building expert to differentiate who should bear the responsibility and the costs for the internal alteration(s) in individual flat, ... The overall repair costs can reflect the overall condition of the Building, and this is a relevant consideration under the Ordinance.”

50.Here, the applicants also referred to Fortress Jet Limited & Others v Tang Hoi Yip and Cheung Sau Chan Property Limited, LDCS 3000/2015 (unreported, dated 11 August 2017) when the Tribunal had commented as follows:

“38. Mr Li submitted that the repair cost of individual unit should not be included in the repair cost of the Buildings for the following reasons:

(a) This Tribunal should approach the matter on the legitimate assumption that each owner should discharge his obligations of maintaining and repairing his unit. As stated above, in this case, there are provisions in the DMCs governing such obligation. Hence, the condition of individual unit and the necessary repair costs for it should not be taken into account as its owner should have taken care of it.

(b) If this Tribunal does not approach in this way, one can end up in an anomalous situation in that the repair costs can be jacked up by the majority owners simply not maintaining their units. The other co-owners of the building or the manager and the incorporated owners has no right to ask those individual owners to repair and upkeep their units so long as they do not affect others or creates any nuisance.

(c) Moreover, the standard of repair and hence the amount of repair costs for an individual unit would depend on the choice of the owner concerned. It is not reliable to try to extrapolate the purported rate of repair from some other projects as allegedly done by Tang.

39. We agree with Mr Mok’s submission that safety improvement recognized no boundary between common areas and private areas. The question to be dealt with is whether redevelopment is justified due to the state of repair of the existing development on the lot, that would include the whole building.

40. Who should pay the cost of repair, in our view, is irrelevant. The concern here is the amount for the repair. The choice of individual owner here does not play any part as the standard was set to be tenantable condition.

41. If the majority owners try to jack up the cost by deliberately not maintaining their units, such cost, of course, may be disregarded. But there is no such evidence in this case.

42. It is also noted that in §226 of Intelligent House, it is stated that “under s.4(2)(a)(i), the Tribunal is entitled to consider any matter relating to the state of repair of the existing development. There is nothing to suggest that we could only look at matters concerning the state of repair of the common parts of the buildings. As a matter of principle and construction of the provision, we are of the view that it is relevant to look at the state of repairs concerning every part of the buildings, common parts and parts privately owned included.” (underline added)

51.As stated in §29 above, an important distinction between the present case and the many other compulsory sale applications is that the Villas comprise 5 individual semi-detached houses which are each single owned in contrast to a low-rise or high-rise building which is multi-owned. There are no common staircase or common lobby that serve the Villas. It is also unlike the wet market in Win Glories Limited v Majorluck Limited [2019] 5 HKLRD 471 in that there was no direct access from the wet market to the open street; in contrast, each house in the Villas can be accessed separately and directly from Sassoon Road, the public street, via a common vehicular access way. In other words, when the worse comes to worst, each individual house could be substantially renovated, dismantled or gutted without affecting the integrity or continuing enjoying of the remaining houses. Therefore, a better picture of the state of repair of the Villas was recognized by the Tribunal at the first instance by requesting Mr Benson Wong for a breakdown of the repair costs as allocated to each of the five houses in the Villas as stated at §153. “It is open to the Tribunal to consider and look at the obsolescence of an existing building in terms of its functional items or facilities”.

52.As the table at §153 of the Judgment made clear, “the so-called repair costs required accrue to individual houses instead of the Villas as a whole.” The Tribunal was fully entitled to consider the breakdown of repair costs accruing to each house because it comprised two elements: (1) repair cost attributed to each house internally; and (2) apportionment of repair cost of the common area areas to be borne by each individual owner. As submitted by the respondent, the Tribunal was entitled to give more weight to one matter and give less to another. In fact, we found at §155 the majority part of the repair costs went to the 4 houses owned by the applicants and not on the common parts. We found “the repair costs estimated by Mr Benson Wong at around $4,200,000 for each house (except House C) is not unreasonably high and is less than 5% of the EUV of each house.” That is a factor we took into account in assessing the state of repairs of the existing development on the Lot.

Prospective Purchasers

53.At §154 of the Judgment, we remarked that “the repair cost required for each house appears not to be too much as prospective purchasers of such luxury houses would inevitably spend a vast sum of money for decoration and repair according to his/her own taste.” We are surprised to note that the applicants chose to take issue on this objective standard in determining the repair cost is reasonable or otherwise.

54.With respect, the assumption of what a prospective purchaser would do is in no respect different from the assumption of a “willing buyer” in market valuation. Indeed, in the reply submission of the applicants dated 27 March 2023, the applicants realised at §22 that this was “the attitude of a hypothetical purchaser” though they failed to realise this should be relevant as an objective standard. We refer to 2 examples when the costs of repair to be incurred by a hypothetical purchaser is taken into account in assessing the state of repair.

55.In Gainfield Investment Limited & Others v Legend Time Limited & Others, LDCS 16000/2014 (unreported, dated 17 October 2016) at §138, the Tribunal had remarked that “old units are purchased, new purchasers are prepared to renovate the units including installing new partitioning.” And in Double Top Development Limited, supra, at §30, which had been quoted at §34 above, the Tribunal remarked that “many owners in this type of old building may not be willing to make such contribution for repair.” We are perfectly entitled to take into account the costs of repair from the prospective of a hypothetical purchaser.

56.And the assessment by the Tribunal was not as suggested by the applicants a “speculation”. It was the evidence of Mr Benson Wong (when asked by Member Pang) who accepted that prospective purchasers of the present type of property would spend considerable sums to rectify those defects identified by him.

57.As well, it was incorrect for the applicants to refer to Fineway Properties Ltd v Sin Ho Yuen Victor, the Administrator of the Estate of Sin Yat [2010] 4 HKLRD 1 where Hon Le Pichon JA at §35 doubted the correctness of the economic lifespan test which was applied in Intelligent House, supra. Then in Fineway at §32(2)(b), the Court of Appeal was considering specifically about the economic lifespan test as laid down in Intelligent House where “it has become economically unworthy to repair” in the situation where (a) the costs of repair exceeds the existing use value of the building, or (b) the costs of repair significantly exceeds the enhancement value arising from or attributable to the repairs”.

58.With respect, “the economic lifespan test” had never come into picture in the Judgment. What we were comparing was whether the repair cost or the state of repair was so worse or significant that the existing development was ripe for redevelopment. In essence, we found that the defects (each house internally and the common parts) could be made good in any event by prospective purchasers in the absence of any redevelopment. Repair costs as a percentage of EUV was not part of the economic lifespan test considered or doubted in Fineway.

59.Similarly, the applicants were incorrect to refer to Able Luck Development Limited & Others v Public Global Investments Limited, LDCS 7000/2014 (unreported, dated 6 October 2017) at §197 to say that repair costs as a percentage of EUV had been rejected as an economic lifespan test. The applicants simply failed to read in the proper context of the judgment which indeed referred to the enhancement value: “But even if we were to compare the repair cost to the EUV of the Building … a ratio of 5.9% is also a figure that cannot be lightly brushed aside since the enhancement value attributed from the repair is unlikely to be at such a high figure of at least 6%”.

60.Ground 2 must fail for having no reasonable prospect of success.

BUILDING ASPECTS OF THE VILLAS

61.In essence, Ground 3 is criticizing the Tribunal why not each and every part of Mr Benson Wong’s oral and written evidence were mentioned and dealt with in the Judgment.

62.Again, the applicants tried in this application for leave to appeal argued that the Tribunal should take Mr Benson Wong’s comment on the “obsolete appearance of the Villas” instead of Mr Albert Chan’s view that the external finishing of the Villas and untidy appearance cannot be regarded as out-classed or criticized as obsolescence at §127 of the Judgment.

63.Similarly, the applicants took issue on the Tribunal’s preference of Dr James Lau’s evidence to that of Mr C M Wong at §§116-117.

64.Further, the applicants challenged the Tribunal’s view at §138 on the possibility of exemption to be granted by the Building Authority and the MOA Code for the proposition that the width of EVA may be relaxed to 4.5 m by paying regard to the topography of the site and its surrounding environment. In fact, Mr Benson Wong acknowledge during cross-examination that he accepted that the Villas would likely be exempted from the EVA requirement though he qualified that in such event, other additional fire service system may be required as trade-off.

65.As regards the applicants’ complaint that the driveway of the Villas has a dead-end so that fire services appliances need to reverse more than 30 metres from Houses D and E to the Villas entrance meaning that the existing driveway cannot be an EVA, we are not persuaded this is a critical factor because fire services appliances or fire engines can readily reach House D and E anyway in case of fire.

66.Not to speak, the applicants recapitulated the various other matters that had been drawn by them to the tribunal’s attention but the Tribunal did not agree with them.

67.With respect, it does not mean that the Tribunal must accept Mr Benson Wong’s and Mr C M Wong’s opinion in their entirety. The Tribunal is a specialist tribunal. The applicants should not shoehorn the evidence the Tribunal did not specifically articulated in the Judgment as the Tribunal’s error in law. In Chan Shiu Chong v Director of Lands, CACV 54-56/2019 (unreported, dated 11 July 2019), Kwan VP 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. On top of that, it is a specialist tribunal. Unless there were plainly obvious errors in respect of material factors which the Tribunal failed to take into account, it is not open to applicants to ask the Court of Appeal to re-hear all the arguments they had advanced before the Tribunal by dressing up the omission of the Tribunal to address each such argument as an error of law.”

68.The Judgment in fact had dealt with most evidence and arguments raised by Mr Benson Wong and Mr C M Wong:

(1)  Structural assessment at §§99-101;

(2)  Visual Assessment at §§102-103;

(3)  Open-up inspection at §§104-106;

(4)  Concrete cover at §§107-112;

(5)  Carbonation at §§113-117;

(6)  Chloride content at §§118-120;

(7)  Concrete strength at §§121-123;

(8)  Age at §§124-126;

(9)  Physical obsolescence at §127;

(10)  6 aspects of functional obsolescence at §§128-148; and

(11)  Repair cost at §§149-155.

69.It was only then the Tribunal came to the conclusion at §156 of the Judgment that redevelopment of the Lot was not justified.

70.We see no reason why the evidence of the experts could not be objectively assessed in light of their answers in cross-examinations and all materials available that may shed light on the quality of the expert opinion given as well as the condition of the buildings in question. The Tribunal had also carried out a joint inspection of the Villas on 18 October 2022 to verify the evidence as well.

71.In such regard, the remark by the Tribunal in Century Supreme International Limited v Kam Chi Kit Charles and Hui Pui Kuen & Others, LDCS 24000/2018 (unreported, dated 21 January 2022) at §65 is relevant:

“… 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.”

72.In fact, the Court of Appeal in Welltus Ltd v Fornton Knitting Co Ltd [2013] 5 HKC 106, a case referred to by the applicants, cited English v Emery [2002] 1 WLR 2409 at §22 that:

“When giving reasons a Judge will often need to refer to a piece of evidence or to a submission which he has accepted or rejected. Provided that the reference is clear, it may be unnecessary to detail, or even summarise, the evidence or submission in question. The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the Judge’s decision.” (underline added)

73.But the applicants left out §23 that for the Court of Appeal to grant an appeal with a challenge based on inadequacy of reason, the threshold is high:

“Where permission is granted to appeal on the grounds that the judgment does not contain adequate reasons, the appellate court should first review the judgment, in the context of the material evidence and submissions at the trial, in order to determine whether, when all of these are considered, it is apparent why the Judge reached the decision that he did. If satisfied that the reason is apparent and that it is a valid basis for the judgment, the appeal will be dismissed.”

74.For instance, concerning carbonation, the applicants suggested that it is difficult to distil what finding the Tribunal actually made regarding the impact of carbonation on the Villas. However, all the test results of carbonation were set out in §113 of the Judgment. At §114 that followed, it was pointed out that there were a number of test results (ie 12 out of 18 samples) with very shallow carbonated depths. But the Tribunal accepted in §117 of the Judgment the evidence of Mr C M Wong that all of a sudden failure was unlikely and the evidence of Dr James Lau that replacement of the carbonated concrete covers would give the repaired structural members a new lease of life. Whereas the applicants submitted that Dr James Lau was incorrect to say that carbonated concrete could be replaced during patch repair but by replacement of the concrete cover, there was no evidence that replacement of concrete could not be done at all. §117 of the Judgment did not say the replacement was to be done in patch repair. Notwithstanding the above, it was Mr Benson Wong’s own oral evidence that patch repair would restore the rendering back to fair condition as defined his grading as up to tenantable condition. See §152 of the Judgment. The applicants tried to emphasize that the tenantable condition would last just 10-15 years. While this was the opinion of Mr Benson Wong, he supplemented his answer by saying that it would not be sensible to report to the owner that his building is up to the tenantable condition on the day of the completion of repair, it at least demonstrated that the “state of repair of the existing development” had at least that period to go. It was too early to talk of redevelopment.

75.As regards the repairs proposed by Mr Benson Wong in relation to the swimming pool and other external facilities, we regret it was just a re-run of the applicants’ closing submissions. It was Mr Benson Wong’s oral evidence that the upgrading of swimming pool filtration system was not required by any legislation, such that what remains is improvement works to be decided by the owners. This explained why the Tribunal accepted at §152 the respondent’s opinion that those improvements were at the option of the owners given that some of the existing facilities are already in tenantable condition.

76.The applicants further queried why the Tribunal came up with the repair cost of around $4 million of 3 items mentioned in §152 when the 3 items, according to the applicants, came up to more than $6 million. The applicants had failed to observe that the Tribunal had earlier on at §150 doubted the repair proposal of Mr Benson Wong which, according to the respondent, had been exaggerated. In any event, §152 should be read together with §155 where the Tribunal assumed that even if Mr Benson Wong’s estimates were entirely correct, redevelopment would still not be justified.

77.In light of the above, Ground 3 must also fail.

COSTS ORDER

78.The applicant under Ground 4 contended that the respondent should only be entitled to 70% of its costs. We agree with the respondent that that is an abuse of process and wholly unmeritorious.

79.Firstly, §157 of the Judgment expressly ordered that “(u)nless any parties apply by summons to vary the costs order nisi, it shall become absolute upon expiration of 14 days from the date of this judgment.” It is incumbent upon the dissatisfied applicant to vary the costs order nisi within time, to which the applicants have undoubtedly failed.

80.While the applicants had made submission in the closing submission on the costs, it is on the basis that they are successful with the application. And according to established guidelines set by the Court of Appeal in Good Faith Properties Limited and Others v Cibean Development Company, CACV35/2014, which is reported as [2014] 5 HKLRD 534, the compensation approach should be adopted for determination of costs of compulsory sale application. Hence, the unsuccessful respondent (minority owner) would still be entitled to their costs, unless there are special reason established that the Tribunal should depart from the usual order. The applicants then addressed the costs issue on the compensation approach.

81.But at the conclusion, we found that the applicants fail with their application. Then without reference to the compensation approach, the applicants should bear the costs of the respondent unless there are reasons to the contrary. That explains why we gave an order nisi in favour of the respondent with leave to the applicants to address the Tribunal if they consider otherwise. And the applicants have not returned to review our order nisi.

82.It was exactly what was condemned by the Court of Appeal in Chan Wai Yee v Kwong Wai Piu, CACV 411/2020 (unreported, dated 1 March 2022) as per Hon Yuen JA at §§3.3-5:

“3.3. Under Order 42 rule 5B(6) of the Rules of the High Court, either party can apply for variation of a costs order nisi within 14 days. However, the plaintiff did not do that. Instead, on 27 August 2020, she filed a notice of appeal in which she included a ground of appeal that “without any discussion or explanation, the judge ordered the plaintiff to pay costs of the action on an indemnity basis. There is no reason to depart from the usual cost order on a party to party basis”.

4.1. This approach was unacceptable. The purpose of a costs order nisi is to enable the party who is dissatisfied with that order to make submissions to the judge on the appropriate order of costs. Having considered all parties’ submissions, the judge would then decide on the order absolute, normally giving reasons for his decision. That way, on appeal, the appellate court would have the benefit of knowing the judge’s reasons which it would consider when deciding whether the costs order absolute should be disturbed.

4.2. It was therefore clearly unsatisfactory for the plaintiff to appeal against the indemnity costs order on the ground that the judge gave no explanation for it, when she had failed to follow the appropriate procedure provided under the rules of court for her to obtain such an explanation.

4.3. In seeking to justify that approach, counsel for the plaintiff submitted first that Ground (4) was not a stand-alone ground. However, that is not to the point. Stand-alone ground or not, a party cannot ignore the procedure provided by the rules for the judge to give a reasoned decision, and then complain that the judge did not give reasons. Counsel then relied on legal professional privilege. Whatever counsel’s instructions might have been, it is nevertheless his duty to the Court not to abuse the process. In light of those observations from the court, counsel then abandoned Ground (4).

5. In this court’s experience, this is not the first time that legal representatives have chosen to ignore O.42 rule 5B(6) and failed to apply to vary a costs order nisi, only to appeal the costs order absolute on the ground that the judge had failed to give reasons for the order. It is our view that to ignore the rules of court in this way is tantamount to an abuse of process. Such a ground of appeal, stand-alone or not, is liable to be struck out, with the possibility of a wasted costs order against legal representatives.” (underline added)

83.Furthermore, the Supplemental Note complained of by the applicants was prima facie relevant to the issues in dispute including, inter alia, the construction tolerance, the concept of Fire Resistance Period and Fire Resistance Rating, and clarification of the scope and area of hammer-tapping test performed by Dr James Lau. Indeed, the Tribunal did not expressly refer to the Supplemental Note in the Judgment but it did not mean that the Tribunal had rejected its content and expert opinion therein in its entirety. As pointed out by the respondent, the Tribunal in §141 accepted the argument of the respondent which was based on the evidence in the Supplemental Note.

84.In any event, the respondent appeared to be the overall winner and where the issues raised by Dr James Lau in the Supplemental Note were plainly relevant, there is no reason to discount the respondent’s costs.

85.In view of the above, there is no merits in Ground 4 of the proposed grounds of appeal.

DISPOSITION & COSTS

86.To conclude, we find no reasonable prospect of success in the intended appeal of the applicants, nor is there other reason in the interest of justice that the appeal should be heard. Leave to appeal is refused.

87.We order that the applicants, having failed the leave application do pay respondent’s costs thereof with certificate for one counsel. The respondent further applies for the costs to be taxed on the High Court scale if not agreed, and on indemnity basis.

SCALE OF COSTS FOR THE LEAVE APPLICATION

88.The respondent submits that the applicants’ leave to appeal application is totally unmeritorious and should not have been taken out. It is either a fact-finding challenge dressed up as alleged errors of law for Grounds 1 to 3 and an abuse of process for Ground 4.

89.The respondent asked for indemnity costs for this leave application on the basis of Leung Wing Sze Wins v Li Oi Lam [2020] 2 HKLRD 989 where the District Court awarded indemnity costs in a failed leave to appeal application where the Court found that the intended appellant had dressed up issues relating to finding of facts as issues of law, the alleged issues of law were badly framed and unarguable, and the intended appeal was based on distorted understanding of the judgment. In the judgment, HH Judge K W Wong reviewed a number of decisions in the Court of Final Appeal, and Court of Appeal.

90.The case is distinguishable from this application. We rule against the applicants on the merits of the grounds of appeal, 1-3, that they were finding of facts. Yet we would not go as far as in Leung Wing Sze Wins to find that the applicants deliberately dressed up issues relating to finding of facts as issues of law.

91.The respondent further submitted that awarding costs on indemnity basis is appropriate due to wholly inappropriate manner in which the application for leave to appeal had been conducted as held in Tang Ho Hei v Chan Po Mei, CACV 95/2020 (unreported, 8 June 2022) at §§77-78:

“77. We agree that costs should be made on indemnity basis due to the wholly inappropriate manner in which the appeal had been conducted in light of what we said in relation to the proper role of the court of appeal and the proper function of an appellate process.

78. As explained above, the defendant’s grounds of appeal are mostly regurgitations of the arguments that she had run and failed in the court below. Other than doing that, the defendant has singularly failed in the Notice of Appeal or skeleton submissions to identify any errors, let alone palpable errors, of the Judgment. This court has repeatedly said that these are improper and invalid grounds of appeal, in particular when the appeal is principally against the trial judge’s findings of fact.” (underline added)

92.Tang Ho Hei is a ruling on the substantive appeal and the decision of the Court of Appeal on costs is not directly applicable.

93.The respondent further submitted that the Court of Appeal had recently demonstrated in PC Enterprises (HK) Ltd v Chan Wai Ching, CAMP 592/2021 (unreported, dated 15 November 2022) at §§25-27 that applications seeking leave to appeal to the Court of Appeal that are ‘totally unmeritorious” would attract an order for indemnity costs. We are not prepared to hold this application as totally unmeritorious, though we rule the proposed ground of appeal has no reasonable prospect of success.

94.The respondent submits that the respondent has successfully opposed the application for an order for sale. It must follow that the respondent is plainly reasonable to oppose this leave application. A failed compulsory sale application means that the applicants have failed to meet the burden of proof to show that redevelopment is justified and therefore the costs orders to fully compensate the truly innocent minority owner should reflect the same.

95.But the applicants are also entitled to bring the proceedings under the Ordinance. Just as any unsuccessful application to the Lands Tribunal, the scale of costs would be on party and party basis, which in principle sufficiently compensate the costs of the respondent properly incurred. The costs awarded to the respondent after we rejected the application for sale herein was awarded on party and party basis. We agree with the respondent that the respondent should be compensated on costs of the leave application. We do not agree that there need to be special provision that in any failed leave application, taken out after the applicants fail to obtain an order for sale, the respondent’s costs should be paid on indemnity basis. The general principle on indemnity costs is trite and should equally apply to any application under the Ordinance, or for leave to appeal.

96.We only refer to paragraph 62/App/12 of Hong Kong Civil Procedure 2023 which provides as follows:-

“The Court of Appeal in Choy Yee Chun (The Representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd [1997] HKLRD 1327 (CA) reviewed the cases and summarised the law as follows. A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. …… However, the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described. ….”

97.There has to be special reason for the Tribunal to order costs on indemnity basis. And, as discussed above, we disagree with the respondent on the reason advanced for indemnity costs and distinguished the authorities relied upon. And we do not consider there is any other special reason that costs should be taxed on indemnity basis. Hence we would direct the costs awarded to the respondent be taxed at party and party scale, if not agreed.

Mr C Y Li, SC leading Mr Jeremy Kwong and Mr Chester Kwan instructed by Messrs Woo, Kwan, Lee & Lo, for the 1^st to 4^th Applicants

Mr Ross M Y Yuen, leading Ms Amy Chan, instructed by Messrs Mayer Brown, for the Respondent