New Merit Ltd v. Lau So and Another

LDCS 3000/2022

[2023] HKLdT 57

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 3000 OF 2022

__________________________

__________________________

_________________

JUDGMENT

_________________

Background

1.This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of Section A and Section B of Aplichau Inland Lot No 32 (collectively referred to as “the Lot”) on which a 6-storey tenement building (“the Building”) known as Fa Chau Mansion is erected. The Building has a street address of No 5B Ping Lan Street and Nos 21 and 23 Main Street, Ap Lei Chau, Hong Kong.

2.By virtue of a set of building plans approved on 7 December 1963, the Building has 3 self-contained units on each floor from the ground to 5/F and is served by a common staircase. The occupation permit of the Building, Permit No H270/65, was issued on 21 October 1965 permitting 3 shops and 3 stores for non-domestic use on ground and mezzanine floors, and 3 tenements for domestic use on each of 1/F to 5/F. There is a Deed of Mutual Covenant dated 7 October 1966 governing the rights and obligations of all owners of the Building whereby each unit of the 18 units is assigned 1 equal and undivided share of the Lot.

3.At the time of filing the Application on 15 February 2022 (which was lately amended on 12 July 2023), the applicant had acquired all units of the Building save for the following owned by the respective respondents which are denoted by the acronym “R”:

Respondent	Unit Owned	Equal & Undivided Share
R1	3/F, 23 Main Street, Ap Lei Chau	1/18th
R2	4/F, 5B Ping Lan Street	1/18th
R3 & R4	G/F & M/F, 5B Ping Lan Street	1/18th

4.Thus, as at the date of the Application, the applicant had already owned 83.33% equal and undivided shares of the Lot.

5.Subsequently, the applicant acquired the interests of R1 and R2 and the Application was wholly discontinued against them on 10 June 2022 and 22 February 2023 respectively. Then, the only outstanding respondents are R3 and R4, who are the registered owners of G/F & M/F, 5B Ping Lan Street as tenants-in-common in equal shares.

6.R3 is now represented by Mr Matthew Choi (“Mr Choi”) as instructed by Messrs Chan & Chan and R4 acts in person. R3 and R4 had filed Notices of Opposition both dated 8 June 2022 which disputed the valuations presented by the applicant. However, they did not file (or sought leave to file) any valuation evidence.

The Issues

7.By reference to the applicant’s opening submission dated 26 July 2023 prepared by Mr Jonathan Lee as instructed by Messrs Mayer Brown on behalf of the applicant, the issues before the Tribunal are as follows:

(a)  First, the Tribunal shall determine the market value (which is commonly coined as the Existing Use Value or simply EUV) of “each property on the lot” according to Part 1 of Schedule 1 of the Ordinance;

(b)  Second, the Tribunal shall decide whether to make an order for sale under section 4(1)(b) of the Ordinance, which depends on whether:

(i)  the redevelopment of the Lot is justified due to the age or state of repair of the existing development, ie the Building under section 4(2)(a) of the Ordinance; and

(ii)  the applicant has taken reasonable steps to acquire all undivided shares in the Lot under section 4(2)(b) of the Ordinance.

(c)  Third, if the Tribunal makes an order for sale, the Tribunal shall:

(i)  determine the reserve price at the auction or redevelopment value (“RDV”) of the Lot in accordance with para 2 of Schedule 2 to the Ordinance;

(ii)  appoint trustees and authorize their remuneration; and

(iii)  give appropriate orders relating to particulars and conditions of the auction.

Evidences

8.The applicant has filed the following evidence:

(a)  Witness Statement of Law Suet Lun, being the senior manager of Property Investment team of Wang On Group (of which the applicant is a wholly-owned subsidiary thereof), dated 26 September 2022;

(b)  Valuation Reports by Ms Dorothy Chow (“Ms Chow”) of Colliers International (Hong Kong) Limited:

(i)  Application Report dated 14 February 2022;

(ii)  Supplemental Report dated 23 September 2022; and

(iii)  Updated RDV Report dated 10 July 2023.

(c)  Condition Survey Report by Mr Benson Wong (“Mr Wong”) of Benson Wong & Associates Limited dated 26 September 2022;

(d)  Structural Assessment Report by Mr So Kin Shing (“Mr So”) of K S So & Associates Limited dated 26 September 2022.

9.On the other hand, none of the respondents filed any factual or expert evidence.

The Applicant is entitled to make the Application

10.Section 3(1) of the Ordinance requires an applicant to have not less than 90% of the undivided shares in a lot before he can make an application to the Tribunal for an order to sell all the undivided shares in the lot for the purposes of the redevelopment of the lot.

11.Section 3(5) of the Ordinance provides that the Chief Executive in Council may, by notice in the Gazette, specify a percentage lower than the percentage mentioned in section 3(1) in respect of a lot belonging to a class of lots specified in the notice.

12.The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice was gazetted on 22 January 2010 and came into operation on 1 April 2010 (“the Notice”). Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%. Those classes of lots include: “a lot with each of the buildings erected on the lot issued with an occupation permit at least 50 years before the relevant date”.

13.By virtue of the occupation permit of the Building which was issued on 21 October 1965, the Building is more than 50 years old immediately prior to filing of the Application. The Notice is therefore applicable and the threshold percentage should be 80%.

14.Without prejudice to the above, section 3(2) of the Ordinance stipulates that an application under section 3(1) may cover:

(a)  2 or more lots where the majority owner owns not less than the percentage specified in subsection (1) of the undivided shares in each lot; or

(b)  2 or more lots –

(i)  on which one building is connected to another building by a staircase intended for common use by the occupiers of the buildings, and

(ii)  where the average of (A) the percentage of the undivided shares owned by the majority owner in the lot or lots on which one of the buildings stands (“Group A lot(s)”); and (B) the percentage of the undivided shares owned by the majority owner in the lot or lots on which the other of the buildings stands (“Group B lot(s)”),

is not less than the percentage specified in subsection (1).

15.It appears that on the date of Application, ie 15 February 2022, the applicant had owned 83.33% of the undivided shares of the Lot and was therefore entitled to file the Application.

EUV as at 31 December 2021

Assessment of EUV

16.In compliance with Part 1 of Schedule 1 to the Ordinance, Ms Chow had provided the Application Report dated 14 February 2022, setting out the EUV of each property on the Lot as at 31 December 2021 —

(a)  on a vacant possession basis;

(b)  assessed as if the Lot could not be made the subject of an application for an order for sale; and

(c)  not taking into account the redevelopment potential of the property or the Lot.

17.In her valuation of the EUV of the domestic units of the Building, Ms Chow adopted the following methodology:

(a)  She selected 3/F, No 23 Main Street, Ap Lei Chau, ie the corner unit of the Building, as the reference unit (“the Reference Domestic Unit”), which is situated on the middle floor of the domestic portion of the Building, for the purpose of valuing its unit price.

(b)  The unit price of the Reference Domestic Unit was first assessed by making reference to market comparables. She took into account 8 comparable transactions all in different buildings nearby. After making what she regarded as the necessary adjustments (for time, location, age, floor, top floor, quantum, view, noise, and lighting/ventilation) for all these comparable transactions, she took the average of the adjusted unit rate of the comparables (but excluding the highest and lowest) to come to the unit price of the Reference Domestic Unit at $123,800 per sq m.[1]

(c)  She further considered the floor difference, quantum, view and internal conditions of the Reference Domestic Unit and the remaining domestic units within the Building and made adjustments to arrive at the EUV of all the domestic units.

18.In assessing the EUV of all ground floor units of the Building, Ms Chow adopted G/F including M/F, No 21 Main Street, Ap Lei Chau as the reference unit (“the Reference Shop Unit”). She then took into account 7 comparable transactions in the buildings nearby. After making what she regarded as the necessary adjustments (for time, location, frontage, return frontage, quantum, headroom, layout and age/condition) for all these comparable transactions, she took the average of the adjusted unit rate of the comparables to come to the unit price of the Reference Shop Unit at $224,500 per sq m.[2] She applied similar adjustments to the other two ground floor units of the Building and arrived at the respective EUV.

19.Ms Chow had prepared a Supplemental Report dated 23 September 2022 reviewing the market value of each property on the Lot as at 31 December 2021 by reference to the updated Private Retail Price Index published by the Rating and Valuation Department (“RVD”). During the process, the internal conditions of the properties were also updated.

20.Ms Chow had revised the EUV for the Reference Domestic Unit and the Reference Shop Unit to an average of $123,000 per sq m and $239,900 per sq m respectively.

21.Although Mr Choi had some query on the adjustments on view and lighting/ventilation for the domestic units applied by Ms Chow, I consider the adjustments fair and reasonable bearing in mind that the Reference Domestic Unit is a corner unit with 2 side windows.

22.On the other hand, Ms Chow relied on the same set of shop comparable transactions in the following table for the purpose of assessing the EUV of the Reference Shop Unit:[3]

Ref No	Address	Occupation permit	Consideration  (Date of Sale)	Saleable Area (m2)	C/L or M/F	Flat Roof	Weighted Saleable Area (m2)	Depth (m)	Frontage (m)	Headroom (m)	Unit Price (/m2)
Reference Shop Unit	G/F & M/F, 21 Main Street, Ap Lei Chau	1965		36.67	27.42		43.53	8.15	4.91	5.64
R1	Shop B1B, G/F, Manly House, 105-113 Main Street, Ap Lei Chau	1980	$11,380,000 (22 Dec 20)	37.02			37.02	12.34	3.00	4.50	$307,401
R2	Shop 12, G/F, Yee Hing Building, 150 Main Street, Ap Lei Chau	1985	$7,000,000 (23 Dec 20)	22.88			22.88	6.45	3.03	5.13	$305,944
R3	Shop H, g/F, Shun King Court, 33 Main Street, Ap Lei Chau	1995	$8,000,000 (2 Nov 20)	21.62			21.62	7.55	2.88	5.10	$370,028
R4	G/F & Cockloft and Flat Roof, 18 Wai Fung Street	1967	$12,500,000 (12 Oct 20)	69.22 + Yard: 5.28	42.07		80.62	17.68	3.28	5.49	$155,048
R5	G/F & Cockloft, 14 Wai Fung Street	1967	$14,500,000 (6 Oct 20)	72.73 + Yard: 5.28	49.42		85.97	17.68	4.04	5.49	$168,663
R6	G/F & Cockloft, 16 Wai Fung Street	1967	$13,380,000 (25 Sep 20)	73.58 + Yard: 5.54	46.84		86.21	17.68	4.04	5.49	$155,202
R7	Shop H, G/F, Kam Fat Building, 145 Lee Chi Road	1986	$4,880,000 (4 Feb 19)	16.27			16.27	5.58	3.15	5.26	$299,939

23.In the course of the above analysis, Ms Chow assumed the value of a yard appurtenant to a premises being worth 1/6 of the floor proper and the value of a cockloft or mezzanine floor being ¼ of the floor proper.

24.Ms Chow had made further assumptions as regards the necessary adjustments that have to be applied to all these comparable transactions, arriving at her assessment of the EUV of the Reference Shop Unit at $239,900 per sq m:

Adjustment Factors	Adjustments
Time	On the basis of the Private Retail Price Index by RVD
Location	By reference to the difference in general accessibility and environment of the properties
Frontage	1% per 0.5m difference
Secondary Frontage	Comparable R5 enjoys a second frontage
Quantum	1% per 5 m2 difference
Headroom	1% per 0.5m difference
Layout	By reference to the difference in the depth and shape of the comparables
Age/Condition	1% per 5 years’ difference

25.However, by reference to the table at §22 above, all the sales were dated at least one year prior to the relevant date of 31 December 2021. On the other hand, Ms Chow found and relied on a comparable dated 29 March 2022 in her assessment of the gross development value in her residual valuation of the present day:

Address	Occupation permit	Consideration  (Date of Sale)	Saleable Area (m2)	C/L or M/F	Flat Roof	Weighted Saleable Area (m2)	Depth (m)	Frontage (m)	Headroom (m)	Unit Price (/m2)
Shop 4, G/F, Ning Fung Mansion, 25-31 Main Street, Ap Lei Chau	1981	$13,500,000	55.57			55.57	12.19	3.18	4.75	$242,937

26.Bwllfa and Merthyr Dare Stream Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426 involved a claim for statutory compensation where the measure of compensation was the loss of profits. The House of Lords held that where the valuation task involves a forecast into the future, then if that valuation is later judicially reviewed, it is proper to take into account facts not known at the date the forecast was made. Lord Macnaghten at page 431 of the judgment justified this sensible approach in these term:

“If the question goes to arbitration, the arbitrator’s duty is to determine the amount of compensation payable. In order to enable him to come to a just and true conclusion it is his duty, I think, to avail himself of all the information at hand at the time of making his award which may be laid before him. Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess if he can calculate? With the light before him, why should he shut his eyes and grope in the dark?”

27.Applying this Bwllfa principle, which has derived its name from the above case, the relevance, and admissibility, of evidence on comparable transactions that post-date the date of valuation was accepted by the Judicial Committee of the Privy Council in Melwood Units Pty Ltd v Commissioners of Main Roads [1979] AC 426 when Lord Russell observed at 436 that:

“.. Now it is plain that in assessing values for the purpose of compensation for resumption on compulsory acquisition a tribunal is not required to shut its mind to transactions subsequent to the date of resumption. They may well be relevant or of assistance to a greater or lesser degree …” (underline added)

28.More recently in Bishopsgate Parking (No2) Ltd v The Welsh Ministers [2012] RVR 237 at §63, the judgment stated as follows:

“ … evidence of a post valuation date event may be relied on to establish an objective fact as at the valuation date. Thus a comparable may provide evidence of what the hypothetical vendor and purchaser would in fact have agreed. That an actual vendor and an actual purchaser have agreed a price on a property that is comparable with the reference property is undoubtedly capable of constituting evidence of what would have been agreed in the hypothetical transaction for the reference property itself. It is this evidential function that was accepted in Melwood. To put it in the most obvious way, the open market value of a precisely comparable property on the day after the valuation date would clearly be good evidence of the price that would have been agreed the day before for the subject property since the factors affecting the minds of the parties to the actual transaction would have been the same as those which would have affected the minds of the parties to the hypothetical sale on the previous day. Of course, the degree to which the comparable transaction will assist in determining the price of the reference property will depend on how similar the factors that are material to the valuation were at, respectively, the date of the transaction and the date of the valuation and on whether adjustments can satisfactorily be made for such differences as there were. But this applies both to pre valuation date comparables and to post valuation date comparables.” (underline added)

29.And §23.43 at p712 of Land Compensation & Valuation Law in Hong Kong, 4^th Edn, by Gordon N Cruden & Liza Jane Cruden states as follows:

“The Hong Kong practice of admitting and relying on hindsight is firmly established and frequently followed. Any evidence of value after the relevant date is admissible, unless the particular statutory provisions clearly prohibit it being considered. Valuers are therefore generally able to use hindsight, as do the courts.”

30.Ms Chow defended her decision not to include this additional comparable by reference to the more serious social distancing measures imposed by the Government in early 2022 when the COVID-19 epidemic situation got worse in Hong Kong. On 5 January 2022, The Government announced it would tighten social distancing measures starting from 7 January including the cessation of mass events and dine-in services at catering businesses from 6pm to 4.59am. Then on 8 February 2022, the then Chief Executive announced further that while the maximum number of people permitted for group gatherings in public places would be lowered from four to two, the Government would, for the first time, impose restrictions on group gatherings in private premises by limiting multi-household gatherings in private premises to two families. From 24 February 2022, people entering all scheduled premises, including the six new categories of places of worship, shopping malls, department stores, supermarkets, wet markets and hair salons, had to adhere to the vaccine pass arrangements by using the LeaveHomeSafe mobile app and presenting their vaccination record. According to Ms Chow, this factor was not known to exist between the hypothetical transaction at the valuation date and the date of the comparable transaction.

31.Indeed, in Total Select Limited v Wong Wai Mau Enterprise Limited & Others, LDCS 13000/2017 (unreported, dated 30 January 2019), the Tribunal did state at §50 that “comparables occurring both before and after the date of valuation are usually relevant unless some event took place after the valuation date so that comparables after this event do not reflect the market conditions as at the valuation date”.

32.However, in my view, the events happening because of the Government tighten social distancing measures affected the property market overall during this period. By application of the overall market index as published by RVD, it can reasonably be inferred that a transaction on similar terms subject to time adjustment might have taken place at an earlier date. The “event” referred to in Total Select that affects either the Reference Shop Unit or any of the comparables singularly post valuation date is only to be excluded.

33.And as a matter of fact, in Sky Dynamic International Investment Limited v Ho Ping Fook & Ho Sai Ming, LDCS 12000/2022 (unreported, dated 13 March 2023) in respect of the application for compulsory sale of a 6-storey tenement building at Nos 26 and 28 Ho King Street together with the adjacent building at No 2 Ping Lan Street, Ms Chow happened to be also the valuation expert; Ms Chow was content to adopt this sale of Shop 4, G/F, Ning Fung Mansion as a market comparable in her assessment of the EUV as at 10 May 2022 then. I see no reason not to include this additional comparable for the assessment of the EUV in the present case though the relevant day is slightly different.

34.I shall denote this additional comparable at Shop 4, G/F, Ning Fung Mansion as R8 which is particularly useful when it is situated just on the opposite side of G/F & M/F, 5B Ping Lan Street, the unit owned by R3 and R4. I agree with Ms Chow that no adjustment for location is required.

35.In fact, the Building is situated at the far end of Main Street, Ap Lei Chau which lies the Ap Lei Chau Park and other recreational facilities. Traffic going this far would make a detour into Ping Lan Street, or Shan Ming Street to the further end, turning into San Shi Street and back to Main Street, Ap Lei Chau via Wai Fung Street. Ground floor units in this section of Main Street, Ap Lei Chau or Ping Lan Street are dominantly occupied garages, car repairing workshops, metalware shops and other engineering related businesses. Pedestrians would not walk to this section unless they live there or this is their destination.

36.The occupation of ground floor of the Building prior to the Application is shown below:

G/F & M/F, 21 Main Street, Ap Lei Chau	G/F & M/F, 23 Main Street, Ap Lei Chau	G/F & M/F, 5B Ping Lan Street
Hong Kong Dog Rescue	Man Kee Electrical （文記電器） & 怡富水電工程	Vacant

37.Comparable R1 is occupied by a dispensary. It is situated on Main Street, Ap Lei Chau close to the busiest section where a variety of shops serving the daily necessity of the residents are provided. It lies indeed close to the entrance of the MTR Lee Tung Station at Wah Ting Street around the corner. I consider however Ms Chow’s adjustment of -27% for location excessive and would rather adopt -20%.

38.On the other hand, I agree with Ms Chow’s adjustment for location at -15% for Comparable R2 which lies further west of Main Street, Ap Lei Chau where traffic turns off from Ap Lei Chau Bridge which connects the district with Wong Chuk Hang and Aberdeen on Hong Kong Island.

39.Comparable R3, on the other hand, is situated relatively close to the section of Main Street, Ap Lei Chau where the Building is located. Again, I consider Ms Chow’s adjustment of -25% for location excessive and would rather adopt -20%.

40.Comparables R4, R5 and R6 were sold by the same vendor on similar dates. They are situated in fact side by side on Wai Fung Street which lies one block away from Ping Lan Street. Although Ms Chow had applied a location adjustment of +5% (the direction of which I do not even agree), the resultant adjusted figures appear to be too low when compared with the others. I would disregard these 3 comparables altogether.

41.My view above is further supported by Comparable R7 which lies on an isolated plot away from Main Street, Ap Lei Chau. By allowing a -10% for location, Ms Chow arrived at an adjusted unit rate of some 15% or more higher than those obtained for Comparables R4, R5 and R6. Anyway, this comparable is dated some three years before the relevant date and should be discarded when there are other more appropriate comparables. The use of indices is only acceptable when there is little evidence to go by, but their effectiveness is more diluted the longer the period over which they are used.

42.I have no evidence whatsoever not to disagree with Ms Chow’s other adjustments. Thus, I would rely on the following in the determination of the EUV of the Reference Shop Unit:

Ref No	Unit Price (/m2)	Adjustments							Adjusted Unit Price (/m2)
		Time	Location	Frontage	Quantum	Headroom	Age/Condition	Total
R1	$307,401	6.6%	-20.0%	3.8%	-1.3%	2.3%	-3.0%	-13.3%	$266,517
R2	$305,944	6.6%	-15.0%	3.8%	-4.1%	1.0%	-4.0%	-12.5%	$267,701
R3	$370,028	8.8%	-20.0%	4.1%	-4.4%	1.1%	-6.0%	-17.7%	$304,533
R8	$242,937	4.8%	0.0%	3.5%	2.4%	1.8%	-3.2%	9.5%	$266,016
							Average (excluding R3):		$266,745

43.By reference to the above analysis, I get three adjusted rates which are very close to each other but one which is out of line. Particularly, I would place more weight on Comparable R8 which is the closest to the Building in terms of location and to the relevant date. I determine therefore unit value of $266,745 per sq m.

44.Upon our joint inspection on 2 August 2023 and by reference to the photographs taken by Ms Chow on 22 December 2021 and even earlier[4], the occupier of G/F & M/F of 23 Main Street, Ap Lei Chau did not make use of the frontage onto Main Street, Ap Lei Chau and had its shutter shut thereto all the time. I would rather apply the adjustment for return frontage at 5% in preference to Ms Chow’s 10%. Subject to that, I follow Ms Chow’s analysis[5] and determine the EUV of the respective ground floor units of the Building as follows:

Unit	Saleable Area (m2)	M/F (m2)	Weighted Average (m2)	Adjustments						Adjusted Unit Rate (/m2)	EUV
				Location	Frontage	Return Frontage	Quantum	Layout	Total
21 Main Street, Ap Lei Chau	36.67	27.42	43.53	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	$266,745	$11,611,000
23 Main Street, Ap Lei Chau	43.83	27.44	50.69	0.0%	-1.4%	5.0%	-1.4%	-0.5%	1.6%	$271,013	$13,738,000
5B Ping Lan Street	55.76	28.26	62.83	0.0%	2.5%	0.0%	-3.9%	0.0%	-1.5%	$262,744	$16,508,000
										Total:	$41,857,000

45.Incidentally, the EUV of the various units in the Building as follows:[6]

40. Floor	21 Main Street, Ap Lei Chau	23 Main Street, Ap Lei Chau	5B Ping Lan Street
G/F	$11,611,000	$13,738,000	$16,508,000
1/F	$5,470,000	$5,840,000	$6,100,000
2/F	$5,300,000	$5,560,000	$5,750,000
3/F	$5,040,000	$5,620,000	$5,640,000
4/F	$5,100,000	$5,350,000	$5,530,000
5/F	$5,170,000	$5,600,000	$5,340,000
Total:	$124,267,000

Conclusion on EUV

46.The total EUV of the Building is therefore $124,267,000

and the pro rata share of R3 & R4’s interest in G/F & M/F, 5B Ping Lan Street is in the total of 13.2843%.

Whether Redevelopment of the Lot is Justified on “Age” or “State of Repair”

47.Section 4(2)(a) of the Ordinance stipulates that the Tribunal shall not make an order for sale unless it is satisfied that redevelopment of the Lot due to the “age or state of repair” of the Building is justified. In such regard, the applicant had adduced the expert evidence of Mr Wong, the building surveyor and Mr So, the structural engineer.

48.Mr So had conducted a structural assessment of the Buildings and prepared a report dated 26 September 2022. He found the following defects in the Buildings:[7]

(a)  Visual inspections showed there being a total of 22 numbers of structural elements in the Building exhibiting defects in the form of spallings and cracks;

(b)  Cover-meter survey revealed that all 3 (or 100%) survey results for the beams did not comply with the required concrete cover of 25.4mm so as to (1) protect the embedded steel reinforcement bars against corrosion, (2) protect the bars against fire, and (3) provide sufficient depth of concrete for the safe transmission of bond forces;

(c)  Carbonation depth test results revealed that carbonation has penetrated past the concrete cover of all beam samples and slab samples. This means the alkaline environment in many of the concrete covers which gives protection to the reinforcement bars in the structural members against corrosion has been destroyed and steel bars in these structural members must have caused to corrode;

(d)  Compression tests revealed that the concrete strength of 1 out of 3 tested samples for columns did not comply with the requirement and 2 out of 3 tested samples for beams did not comply with the requirement, as a result of which, the structural capability of the columns and beams of the Building is impaired.

(e)  Cement content tests revealed that 1/3^rd of the tested samples for all structural elements failed to fulfill the requirement, meaning that the durability of the concrete of the structural elements in the Building has been impaired.

(f)  Chloride content tests showed that 1 out of 3 (or 33%) tested samples for slabs had the chloride content exceeded the 0.35% limit, which demonstrated an increased risk of corrosion of the embedded steel reinforcement bars in the reinforced concrete structural members;

(g)  Corrosion (open up) surveys revealed columns, beams and slabs exhibited rust of various magnitudes and suffered from reduction in their cross-sectional areas due to corrosion.

49.On the basis of the above, Mr So opined that the structural frames of the Building are deteriorating and they need to be repaired. On the other hand, the deficiency in concrete covers in the structural elements, deficiency in concrete strength, deficiency in cement content in concrete and excessive chloride content etc were mostly caused by defective workmanship, defective materials or defective supervision during construction of the Building that cannot be rectified. As a result, the structural performance of the structural frames of the Building may be adversely affected.

50.Mr So further opined that the deterioration the structural frames of the Building will continue steadily due to extensive carbonation and excessive chloride content of the reinforced concrete structural members. The process of carbonation and corrosion are irreversible. It is inevitable that new defects will occur and previous defects though repaired will relapse readily, requiring substantial repairs or even partial demolition and re-construction of some defective structural elements in the future when, for example, there are unacceptably high reductions in the structural performance factors in the reinforced concrete structural elements. Although repairs are possible, repair work will need to be carried out regularly in the future and that such repairs will be more and more extensive as the Building becomes older. Also, such costs of repair will escalate in future as the extent and seriousness of the deterioration of the structural elements increase with age.

51.Mr So also added that the Building was designed and constructed more than 56 years ago when the applicable standards were the less stringent LCC by-laws. There are at least 7 structural design and construction aspects where the Buildings cannot meet the current structural engineering design and construction requirements. For instance, the Building may not process adequate robustness to prevent it from damages arising from accidents or misuse.

52.Mr. Wong, in his Condition Survey Report also dated 26 September 2022 stated that:

(a)  The Building was built in 1965 and is 63 years old. It is structurally aged as with regard to durability provisions. The Building’s structure is considered to have passed the end of its design working life.

(b)  The Building is also aged functionally as it has been suffering from the following aspects of functional obsolescence:

(i)  The design and construction of the structural frames had only complied with the less stringent structural requirements applicable more than 50 years ago resulting in no improvement of the robustness of the structural frames in resisting disproportionate collapse due to accidents.

(ii)  The fire escape arrangement for the Building is unsatisfactory when no emergency lighting is provided to the protected lobbies in the required staircase of the Building and in respect of the latter, no handrails are provided on both sides of the required staircase from 1/F up to 5/F.

(iii)  The fire resisting construction is outdated when the existing concrete cover thickness of beam is 25.4mm and that of floor slab is 12.7mm, which are less than the currently required thickness of 30mm for beam and 20mm for floor slab. As well the existing flat entrance doors on the upper floors of the Building are not fire rated doors and the existing electrical installations and wirings installed in the protected lobbies are exposed thereby posing fire hazards to the fire escape.

(iv)  The Building has no barrier free access facilities such as an accessible lift and an accessible ramp.

(v)  The Building has no proper refuse disposal system whereby creating hygienic and fire safety problems.

(vi)  The Building has no equipotential bonding provided for exposed metal fixtures in both common and private areas of shops and flats thereby endangering the safety of occupants and breaching the requirement under Paragraph 11E of the Code of Practice for the Electricity (Wiring) Regulations.

(vii)  The Building has no lightning protection system installed on the roof to protect its occupants and building parts from lightning strikes.

53.Mr Wong also commented that the following defects and deficiencies found in the Building are of the nature and magnitude that cannot easily rectified by simple and piecemeal repairs:

(a)  The generally defective external rendering.

(b)  The existence of asbestos containing materials.

(c)  The defective waterproofing on various roofs.

(d)  The lack of emergency lighting to the protected lobbies which are parts of the fire escape routes.

(e)  The exposed electrical installations and wirings in the protected lobbies.

(f)  The lack of equipotential bonding for exposed metal fixtures.

(g)  The lack of a lightning protection system.

54.Mr Wong estimated a repair cost up to $6,713,984 or about 36% of the construction cost for a new similar superstructure would be required. Owing to the Building’s poor state of repair, Mr Wong recommended the Building to be redeveloped rather than being repaired, particularly bearing in mind that the Building does not possess any historical value or architectural merit.

55.R3 and R4 had not produced any expert report or evidence in relation to the question as to whether redevelopment of the Lots is justified due to the "age or state of repair" of the Buildings.

56.Top Sail International Limited v Cheng Kai Ming, LDCS 18000/2010, unreported, dated 15 November 2011 and Charmlink Limited v Lee Tong Hing & Others, LDCS 16000/2010, unreported, dated 29 November 2011 laid down the factors that the Tribunal should consider in determining whether redevelopment is justified due to age and state of repair.

57.In Top Sail, the Tribunal stated that:

“23. ……, we are of the view that when the requirement of “the age” of the Buildings is considered, we should not restrict our consideration to just the physical age of the Buildings.…… we are of the view that the absence of a specific physical age in the Ordinance indicates that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question.

24. The physical age of a building is clearly one of the considerations…... The physical conditions of a building and the amount that would be required to maintain the building are other factors that the Tribunal should consider, as they would affect the decision on whether the life of a building should be ended or prolonged. The obsolete design of a building should also be considered as it has an important impact on whether it is too old to serve a modern society.”

58.Such a discretion by the Tribunal was followed in Charmlink:

“30. We are of the view that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question. The relevant factors in the present case are that the Building is over 50 years old and it has passed its designed life. It is also obsolescent in design and not economical to maintain. All these factors point to the fact that the Building has come to an end of its physical as well as economical life. Thus, we find that redevelopment is justified on the ground of the age of the Building.

31.   …… It is also within the Tribunal’s discretion to determine in what conditions a building should be redeveloped after considering all the relevant factors concerning the state of repair of the building in question. With the clear evidence from the two experts that the Building is in a poor state of repair and in fact untenantable without substantial repair works to be carried out over a long period of time, we have no hesitation in finding that redevelopment is justified by the state of repair of the Building.”

59.Having considered the evidence above, I am satisfied that redevelopment of the Building is justified due to the age and state of repair.

Section 4(2)(b) – Whether Applicant has taken reasonable steps

60.The applicant is under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interest of the respondent under section 4(2)(b) of the Ordinance.

61.Whereas the applicant has successfully acquired the interest of R1 and R2, by reference to the Witness Statement of Ms Law dated 26 September 2022, the applicant took part in the following to acquire the interest of R3 and R4 of no avail:

(a)  On 21 January 2022, the applicant made an offer of $16,300,000 to R3 and R4 through its solicitors, Messrs Mayer Brown, which included an advice letter of even date by Ms Chow setting out the relevant valuation assessments and calculations of the share of R3 and R4’s unit.[8]

(b)  On 27 June 2022, the applicant, through its solicitors, Messrs Mayer Brown, invited R3 and R4 to attempt mediation to resolve the disputes but they did not respond.

(c)  By a letter dated 30 August 2022, R4 offered to purchase the applicant’s shares in the Lot for $160,000,000.[9]

(d)  On 16 September 2022, the applicant, through its solicitors, Messrs Mayer Brown rejected R4’s offer above and reopened its previous offer of $16,300,000.

(e)  On 18 July 2023, the applicant, through its solicitors, Messrs Mayer Brown made a fresh offer of $15,900,000 to R3 and R4.[10]

62.The Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578 has emphasized at paragraph 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.”

63.The Court of Final Appeal stated further at paragraph 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.”

64.By reference to the EUV of the R3 and R4’s unit as assessed by Ms Chow at $10,440,000, the two offers made by the applicant were much higher. Of course, in light of the changes in market conditions, I agree that the applicant was entitled to revise its offer on 18 July 2023. Such was a commercial decision that is not precluded by the Ordinance. See also Starex Development Limited v Yau So Ching & Others, DCCJ 2372 & 2374/2021 (unreported, dated 13 February 2023) at §31.

65.In the circumstances, I am satisfied that the applicant has taken reasonable steps to acquire all the undivided shares in the Lot. In fact, should R4 be genuine to acquire the applicant’s shares in the Lot for $160,000,000 or thereabout as suggested by him, this will well exceed the reserve price in the auction forthcoming. R4 would not be barred from making the bid during the auction.

RDV of the Lots

Hypothetical Development Model

66.Ms Chow resorted to the residual valuation method in determining the RDV of the Lot. This can be done by deducting the development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development.

67.The residual method of valuation is founded on the basis of a classic economic theory which suggests that the value of land as a factor of production depends on the ability of the land to produce revenues in excess of the required payments to all other factors of production. Payments to land are viewed as the residual productivity remaining after all other mobile factors of production have been compensated at their fair market values. It is reasonably expected that developers often use the land residual theory to determine the maximum potential value of a site after subtracting all other non-land costs from the total projected property value. A residual valuation, having established the development potential, can be expressed as a simple equation[11]:

Residual land value (economic rent) =

(Value of completed development) – (development costs + developer’s profit)  

68.Whereas the Lot comprises a registered site area of 170.25 sq m, it falls within an area zoned “Residential (Group A) 2” of the Approved Aberdeen & Ap Lei Chau Outline Zoning Plan No S/H15/33 gazetted on 31 August 2018. While “Flat” uses are always permitted within the “Residential (Group A)” zoning, “Eating Place”, “Office” and “Shop and Services” are uses permitted on the lowest three floors of the building or in the purpose-designed non-residential portion of the existing building. There is a maximum building height of 85 metres above the Hong Kong Principal Datum. On land designated “Residential (Group A) 2”, a maximum building height of 100 metres above Principal Datum would be permitted for sites with an area of 400 m² or more.

69.In her Updated RDV Report dated 7 July 2023, Ms Chow determined the RDV of the Lot in the sum of $129,000,000 or an accommodation value of $81,586 per sq m on the basis of the following:

(1)  A hypothetical model of a 24-storey residential cum commercial building with a total approximate gross floor area (“GFA”) of 1,581.16 sq m, ie a plot ratio of 9.2873 or thereabouts;[12]

(2)  Whereas Ms Chow assumed only the ground floor for retail purpose, she relied on the same set of retail comparable transactions adopted for the purpose of assessing the EUV of the Reference Shop Unit save that one additional transaction of Shop No 4 on G/F of Ning Fung Mansion, Nos 25-31 Main Street, Ap Lei Chau which took place on 29 March 2022 was adopted in place of Comparable R7 which has become dated. Ms Chow arrived at an average selling price of $292,924 per sq m or a GDV for shops at $35,810,000.[13]

(3)  In respect of the domestic flats to be provided from 2/F to 23/F of the hypothetical development, Ms Chow referred to the recent sales of units in The Upper South “逸南” at No 71 Main Street, Ap Lei Chau and determined an average selling price of $282,400 per sq m[14] or a GDV for domestic flats at $241,150,250[15].

(4)  Construction cost estimated at $73,600,080 or $46,548 per sq m by reference to the Building Cost Data (4^th Quarter 2022) published by Rider Levett Bucknall[16];

(5)  Demolition cost estimated at $1,912,438 or $2,200 per sq m;

(6)  Professional fee at 6% of construction cost;

(7)  Marketing cost at 3.5% of GDV;

(8)  Interest rate at 4.75% per annum;

(9)  Developer’s profit at 15% of total costs;

(10)  Legal cost: 0.10%;

(11)  Stamp duty: 4.25%; and

(12)  Development period: demolition period of 0.5 year and construction period of 1.75 years.

GDV of Ground Floor of Hypothetical Development

70.As said, in the assessment of the GDV for the ground floor of the hypothetical development, Ms Chow adopted the same set of comparables as in the assessment of the EUV save for the addition of R8, ie Shop 4, G/F, Ning Fung Mansion, 25-31 Main Street, Ap Lei Chau to replace Comparable R7. In the assessment for the EUV for shops, I also disagree with certain adjustments for location by Ms Chow. My same comments above apply therefore in the determination of the GDV of Shop B on G/F of the hypothetical development:

Ref No	Unit Price (/m2)	Adjustments									Adjusted Unit Price (/m2)
		Time	Location	Improvement in Environment	Front-age	Size	Head-room	Layout	Age	Total
Shop B, G/F of Hypothetical Development*
R1	$307,401	-4.5%	-20.0%	10.0%	12.6%	-4.8%	1.0%	5.0%	8.6%	3.8%	$319,082
R2	$305,944	-4.5%	-15.0%	10.0%	12.5%	-7.7%	-0.3%	5.0%	7.6%	-0.5%	$304,414
R3	$370,028	-2.5%	-20.0%	10.0%	12.8%	-7.9%	-0.2%	0.0%	5.6%	-6.1%	$347,456
R8	$242,937	-6.1%	0.0%	10.0%	12.2%	-1.1%	0.5%	0.0%	8.4%	31.1%	$318,490

* This hypothetical unit is assumed by Ms Chow at a saleable area of 61.13 sq m , having a frontage of 9.3 m, a depth of 7.01 m and a headroom of 5 m.

71.Again, placing more weight on Comparable R8, I am prepared to adopt a unit rate of $320,000 per sq m for Shop B on G/F of the hypothetical development.

72.Subject to the above, I follow Ms Chow’s analysis below:[17]

G/F	Saleable Area (m2)	Frontage (m)	onto	Depth (m)	Adjustment				Adjusted Unit Rate (/m2)	GDV
					Frontage	Return Frontage	Size	Total
Shop A	61.12	7.01 + Return Frontage: 9.30	Main Street, Ap Lei Chau	9.30	-4.6%	10.0%	0.0%	4.9%	$335,680	$20,517,000
Shop B	61.13	9.30	Ping Lan Street	7.01	0.0%	0.0%	0.0%	0.0%	$320,000	$19,562,000
									Total:	$40,079,000

GDV of Upper Floors of Hypothetical Development

73.As regards the GDV of the upper floor domestic units, Ms Chow envisaged that there would be two domestic flats on each of the 2/F to 23/F, being Unit A and Unit B. Ms Chow had not provided any layout plan nor schematic drawing but indicated that both the Unit As and Unit Bs would face Main Street, Ap Lei Chau while the Unit Bs, being the corner units, would also overlook Ping Lan Street.

74.Ms Chow made reference to various transactions of units in The Upper South at No 71 Main Street, Ap Lei Chau which is recently completed, arriving at an average rate of $282,400 per sq m for Flat A on 13/F.[18] Ms Chow made further adjustments below in assessing the GDV of the domestic units:

Floor	Unit	Saleable Area (m2)	Weighted Area (m2)	View	Adjustments				Adjusted Unit Rate on Weighted Area (m2)	Adjusted Unit Rate on Saleable Area (m2)	Proportion
					Floor	View	Quantum	Total
2/F	A	19.94	19.94	Open Building View	-5.5%	-5.0%	0.0%	-10.2%	$253,595	$253,595	2.27%
2/F	B	19.94	19.94	Open Building View	-5.5%	-5.0%	0.0%	-10.2%	$253,595	$253,595	2.27%
3/F-4/F	A	19.93	19.93	Open Building View	-4.8%	-5.0%	0.0%	-9.6%	$255,290	$255,290	4.55%
3/F-4/F	B	19.93	19.93	Open Building View	-4.8%	-5.0%	0.0%	-9.6%	$255,290	$255,290	4.55%
5/F-22/F	A	19.93	19.93	Open View & Limited Seaview	0.3%	0.0%	0.0%	0.3%	$283,247	$283,247	40.91%
5/F-22/F	B	19.93	19.93	Open Building View	0.3%	-5.0%	0.0%	-4.7%	$269,127	$269,127	40.91%
23/F*	A	19.94	21.79	Open View & Limited Seaview	5.0%	0.0%	-0.4%	-4.6%	$295,390	$322,796	2.27%
23/F*	B	19.94	21.79	Open Building View	5.0%	-5.0%	-0.4%	-0.6%	$280,706	$306,749	2.27%
								Average Unit Rate:		$275,014	100.0%
								Say:		$275,000

* with appurtenant Roof at 14.79 sq m which is valued by Ms Chow at a unit rate of 1/8 of the floor proper.

75.At trial, Mr Choi had pointed out that the hypothetical domestic units on 5/F or above would enjoy sea view to the northwest or northeast onto Shek Pai Wan, a strait between Aberdeen on Hong Kong Island and Ap Lei Chau, or even sea view to the east and southeast onto the Aberdeen Typhoon Shelter. Such seaview towards the northeast would however been partially blocked by Tobo Court, a 24-stroey residential/commercial composite building at No 5 Ping Lan Street on the opposite side of Main Street, Ap Lei Chau; such seaview towards the northwest would also be blocked by the new development of Aruna “弦岸” at No 8 Ping Lan Street and a prospective new development at No 2 Ping Lan Street, the subject of Sky Dynamic International Investments, supra, both on the opposite side of Main Street, Ap Lei Chau. Thus, Mr Choi submitted that the orientation or facing aspect of the domestic units would be just a matter of design so that most units would enjoy the advantages of the seaview.

76.At this juncture, Ms Chow also pointed out that Nos 17-19 Main Street, Ap Lei Chau next to the Building would also likely to be redeveloped soon blocking the view to the east and southeast.

77.As regards the quantum adjustment, Mr Choi submitted it is wrong in principle to apply downward adjustment of -0.4% to the two 23/F units with top roof because the two units on 23/F would have exactly the same size of 19.93 or 19.94 sq m as the rest of the other domestic units. Such adjustment would have partly cancelled out the value of the roof by applying the 1/8 conversion factor, particularly given the top roof with seaview would be valuable.

78.Mr Choi also disagreed with the -2% adjustment for “scale/facilities” to The Upper South because the recreational facilities would be simply provided in proportion to the number of units and residents. With respect, as I pointed out at trial, a development of larger scale like The Upper South would benefit from the economy of scale in providing recreational facilities while a small site like the Lot is limited in its capacity to offer much recreational facilities. See also my comment in the last 8 lines in Kinstar Development Limited v Tse Yiu Kuen & Another, LDCS 10000/2019 (unreported, dated 26 July 2021) at §102.

79.In any event, having reviewed Mr Choi’s comments, I am not persuaded that further adjustment or refinement to the average rate of $282,400 per sq m is necessary. I am prepared to adopt just the average rate of $282,400 per sq m for all the domestic units.

Marketing Cost

80.Mr Choi further queried why in Sky Dynamic International Investments, supra, Ms Chow adopted the marketing cost at 3.0% but in the present case, she changed it to 3.5%. Ms Chow explained that the domestic market had been weakening since the beginning of the year and a burgeoning inventory of new homes; developers are facing heavy competition in sales, which, in my opinion, is recently demonstrated by a price war initiated by sales of units in The Coast Line II “親海駅 II”. This can also be demonstrated by the Private Domestic Price Index (Class A)[19] as follows:

Months in 2023	Index
January	370.9
February	380.4
March	384.6
April	387.8
May	383.3*
June	379.3*
July	374.0*

81.Bearing in mind the numerous new developments being implemented in the vicinity of the Lot, including Aruna on the opposite of Main Street, Ap Lei Chau the sale of which was put on hold, as well as the prospective development of the lot in Sky Dynamic International Investments, supra, I agree with Ms Chow.

Construction Cost

82.During cross-examination, Ms Chow also explained that in the past, for instance, in her Supplemental Report dated 23 September 2022, she had applied different unit costs for the residential portion and the retail portion of a composite building. However, in a recent letter from Rider Levett Bucknall dated 17 May 2023 in reply to the General Practice Division of the Hong Kong Institute of Surveyors, it was suggested that in reading their Building Cost Data for Private Sector Developments in Hong Kong, “the same rate as the residential portion shall be adopted for such retail or commercial portion.” Ms Chow therefore applied the same unit cost for the residential buildings of “high to very high quality” to both residential and retail portions.

83.Indeed, in Sound Advice Property Limited & Others v Mok Wai Ching & Another, LDCS 18000/2020 (unreported, dated 21 December 2021) at §139, the Tribunal had ruled that in such circumstances, the apportionment of a different unit cost for the retail portion appeared arbitrary and unnecessary.

84.Similarly, in Holly Property Company Limited v Acewell Investments Limited & Others, LDCS 28000/2020 (unreported, 4 April 2022) at §255, the Tribunal remarked that the differentiation in construction costs of the hypothetical development into two parts, one for the retail podium and the other for the upper floors residential portion was unrealistic.

85.Mr Choi however referred to Lucktime Limited v Cho Kai Fung & Another, LDCS 2000/2018 (unreported, dated 29 January 2021) where the Tribunal, on the face of the evidence of the experts, accepted that the construction cost for the shop portion should be less than that of residential portion. However, in that case, the Tribunal had before him evidence of three valuation experts of variant construction costs:[20]

Experts	Residential Portion	Quality of Finishes	Retail Portion	Total Construction Cost
Mr CW Wong	$30,000 per m2	High to very high quality	$28,400 per m2	$159,857,851
Mr Wayne Lee	$29,800 per m2	High to very high quality	$21,000 per m2	$146,583,884
Mr TC Wong	$24,700 per m2	High quality	$24,700 per m2	$131,744,029

86.In the end, the Tribunal then considered appropriate to assume in the assessment the subject hypothetical development would have finishes slightly above high quality only. As a result, the construction cost proposed by Mr TC Wong must be too low and choosing between the remaining two, the Tribunal adopted that proposed by Mr Wayne Lee. This should not be regarded as the Tribunal approving the differentiation of the unit construction costs between the residential portion and retail portion when the author of the building cost data, Rider Levett Bucknall, did not make such distinction.

87.In any event, after the clarification by Rider Levett Bucknall itself, it is hoped that such misunderstanding should never venture again.

Interest Rate

88.Mr Choi also challenged the adoption of interest rate at 4.75% by Ms Chow, referring to her former adoption of 4.25% in say Sky Dynamic International Investments, supra. With respect, interest rate is not a constant in the residual valuation but subject to changes because of the changes in the economic environment. In Peace Ever Limited & Others v Chan Sui Ching & Others, LDCS 28000/2018 (unreported, dated 1 August 2023), the Tribunal had at §§452-458 referred to the substantial increase in interest rates since 2022. More particularly, the prevailing HKAB HKD Interest Settlement Rate for 3 months is over 4.7% but as at 13 March 2023 when the judgment for Sky Dynamic International Investments, supra, was handed down, it was only marginally above 4%. In that case, when Ms Chow was preparing her Updated RDV Report dated 9 February 2023, it was only 3.44% only.

89.Likewise, the prevailing HIBOR (ie Hong Kong Interbank Offered Rate for the interest period of 1 month for Hong Kong) is over 4% but it was only 3.25% and 2.25% as at 13 March 2023 and 9 February 2023 respectively.

90.I opine that in the present case, the interest rate at 4.75% adopted by Ms Chow had been very conservative indeed.

Determination of RDV of the Lot

91.Thus, on the basis of what I have stated above, I determine the RDV of the Lot at $137,122,000 (ie accommodation value of $86,722/m²) as shown in the Appendix 1 herein.

92.This $137,122,000   will be reserve price for the auction sale.

Other Incidental Matters

93.The applicant proposed to appoint Mr Antony Chow and Ms Anna Chow, both being consultants of Messrs Guantao & Chow, Solicitors and Notaries, as the sale trustees. Based on the information on their background and experience as set out in their letter dated 7 July 2023[21], I am satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on the trustees under the Ordinance. The remuneration package proposed in the said letter appears reasonable.

94.The applicant has prepared a set of draft Particulars and Conditions of Sale of the of the Lot[22]. Subject to any amendment that may become necessary as a result of my ruling on the arrangement of auction above, the particulars and conditions of sale of the Lot by public auction submitted by the applicant are also reasonable.

The Order

95.This Tribunal make the following orders:

(1)  This Tribunal is satisfied that the redevelopment of the Lot is justified due to the “age” or “state of repair” of the Building and that the applicant has taken reasonable steps to acquire all the undivided shares in the Lot including that of the respondents;

(2)  All the undivided shares in the Lot, the subject of the Application herein, be sold by way of public auction for the purposes of the redevelopment of the Lot under s.4(1)(b) of the Land (Compulsory Sale for Redevelopment) Ordinance (“the Ordinance”);

(3)  Mr Antony Chow and Ms Anna Chow of Messrs Guantao & Chow, Solicitors and Notaries, nominated by the applicant, be appointed the trustees (“the Trustees”) to discharge the duties imposed on the trustees under the Ordinance in relation to the sale and the Trustees be authorized to charge such remuneration for their services in accordance with the terms set out in the letter of Messrs Guantao & Chow, Solicitors and Notaries, dated 7 July 2023.

(4)  For the purpose of the sale of the Lot by public auction under section 5(1)(a) of the Ordinance:

(i)  The sale be on the particulars and conditions of sale substantially the same as those in the draft Particulars and Conditions of Sale to be initialed and approved by the Tribunal.

(ii)  The reserve price be set at $137,122,000.

(iii)  Subject to further extensions that the Tribunal may subsequently allow upon the application of the purchaser of the Lot in the public auction or its successor in title, the redevelopment of the Lot shall be completed and made fit for occupation within a period of 6 years after the date on which the purchaser shall become the owner of the Lot.

(iv)  Liberty to the applicant, the 3^rd respondent, the 4^th respondent and the Trustees to apply to the Tribunal for further direction(s) under the Ordinance.

Costs

96.In accordance with the compensation approach as determined by the Court of Appeal in Good Faith Properties Ltd and Others v Cibean Development Co Ltd [2014] 5 HKLRD 534, I order that the applicant do pay the respondents the costs of the Application, with certificate for counsel, to be taxed on the High Court scale if not agreed.

97.Last but not least, the Tribunal thank Counsel for their assistance.

Mr Jonathan Lee, instructed by Messrs Mayer Brown, for the Applicant

Mr Matthew Choi, instructed by Messrs Chan & Chan, for 3^rd Respondent

4^th Respondent, unrepresented, appearing in person

Appendix 1