Excellent Group Inc Ltd v. Wah Fung Shing Land Investment Company Ltd and Others
Read the full judgment text of LDCS 8000/2021 on BabelCite. This LDCS judgment was delivered on 3 June 2025.
1. This is the applicant’s application for a compulsory sale order by filing of the Notice of Application on 9 August 2021 (“Application”) (as amended on 9 February 2024) under section 3 of the Land (Compulsory Sale for Redevelopment) Ordinance [1] , Cap 545 (“Ordinance”).
Cites 25 cases
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LDCS 8000/2021 [2025] HKLdT 27 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO 8000 OF 2021 __________________________ BETWEEN
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_______________________ J U D G M E N T _______________________ APPLICATION 1.This is the applicant’s application for a compulsory sale order by filing of the Notice of Application on 9 August 2021 (“Application”) (as amended on 9 February 2024) under section 3 of the Land (Compulsory Sale for Redevelopment) Ordinance[1], Cap 545 (“Ordinance”). 2.The applicant seeks to sell all the undivided shares of the Remaining Portion of Inland Lot Nos. 5910, 5911, 5912, 5913, 5914, 5915, 5916 and 5917 (collectively, the “Lots”) on which 3 contiguous blocks of 11-storey composite building (“Building”) is erected. Each block is served by one lift and two common staircases. The postal address of the Building (known as “Hong Lok Building”) is Nos. 77, 77A, 79, 81, 81A, 83, 85, 85A and 87 Marble Road, Hong Kong. BACKGROUND 3.The occupation permit of the Building (“OP”) was issued on 23 January 1964, which is not less than 50 years before the date of the Application. 4.According to the approved building plans (“Plans”) and the OP, there are 3 contiguous 11-storey blocks containing 6 shops on the ground floor (“Ground Floor”), 9 office units on the 1st floor (“1st Floor”) and 9 domestic units on each floor from the 2nd to 10th floors. 5.The Building is governed by a deed of mutual covenant dated 12 March 1964 (“DMC”). The DMC provides 102 undivided shares for the Lots. Each of the 6 shops is allotted 2/102 undivided shares, each of the 9 office units and each of the 81 domestic units is allotted 1/102 undivided shares. There is no undivided share allotted to the roof (“Roof”). THE PARTIES 6.At the time of the filing of the Application, the applicant owned not less than 80% undivided shares of the Lots (which is not disputed) and the remaining shares were held by the remaining respondents as follows:
7.The 1st respondent filed a Notice of Opposition disputing:
8.The 2nd respondent is missing and by the Order dated 11 February 2022, service of the Notice of Application on the 2nd respondent was dispensed with and substituted by publication in newspaper, which was duly effected. 9.The 3rd respondent, acting in person, filed a Notice of Opposition on 6 March 2023, which stated that the 3rd respondent does not oppose granting of a sale order but rejected the applicant’s offer. 10.The 4th to 12th respondents are the latest purported purchasers or assignees of 11 purported roof units (“Roof Units”) at the Roof as registered in the Land Registry as follows:
11.According to the records kept by the Land Registry, there has been no undivided share allotted to the Roof or any of the Roof Units and the 4th to 12th respondents own no undivided shares of the Building/ Lots. 12.The 4th to 6th respondents and the 11th respondent are missing. By the Order dated 28 October 2021, service of the Notice of Application on them was dispensed with and substituted by publication in newspapers, which was duly effected. 13.Subsequently, the applicant discontinued its application against the 7th, 8th, 9th, 10th and 12th respondents upon their confirmations by Deeds of Confirmation[3] that they had no interests in any of the Roof Units[4]. 14.The trial originally scheduled for 8 March 2024 was adjourned and listed before this Tribunal on 19 August 2024 because shortly before the commencement of the original trial, the applicant’s condition survey expert and structural engineer discovered that the applicant and/or the Incorporated Owners of the Building (“IO”) had conducted some repair works in the common areas and some of the subject units, ending up with the applicant’s condition survey expert’s submission of the ‘Statement on proposed deductions to “Repair Costs” dated 29 February 2024. THE EVIDENCE 15.For the purpose of the present proceedings, the applicant and the 1st respondent have produced the following expert reports:
16.For factual witness evidence, the applicant arranged Mr Yeung Chung Kit to give evidence for it and the 1st respondent adduced the evidence given by Mr Tang Che Soo. 17.The 3rd respondent did not adduce any expert evidence or factual witness evidence. 18.The issues to be determined in this case are as follows:-
ISSUE 1: ENTITLEMENT TO MAKE APPLICATION 19.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. 20.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. 21.The Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice (“Notice”) was gazetted on 22 January 2010 and came into operation on 1 April 2010. Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%. Those classes of lots include “a lot with each of the building erected on the lot issued with an occupation permit at least 50 years before the relevant date (ie the date of the application under the Ordinance)”. 22.Given the OP was issued on 23 January 1964, over 50 years before the date of the Application, the Notice is applicable and the threshold percentage should be 80%. Accordingly, we accept that the applicant, being the owner of 86.27% of the undivided shares of the Lots upon the filing of the Application is entitled to make the Application under section 3(1) of the Ordinance. ISSUE 2: MARKET VALUE GROUND FLOOR AND ROOF 23.There are two issues concerning the assessments of existing market value (EUV) of two portions of the Building as follows: -
24.The background facts giving rise to the two issues can be summarized as follows: -
25.In conducting the EUV assessment of these two portions of the Building, the parties’ respective valuation experts take the following stances: -
26.In support of Mr Charles Chan’s assessment approach, Mr Mok, counsel for the applicant, relies heavily on the interpretation of Part 1 of Schedule 1 of the Ordinance (“Part 1”) to contend that the Part 1 restricts the market value of “each property of the lot” to be assessed in strict compliance with the approved building plan. 27.The Part 1 provides that:-
28.Mr Mok’s argument runs as follows:
SHOPS ON GROUND FLOOR 29.Regarding the Ground Shops Issue, Mr Mok contends that the 6-shop Approach should be adopted and the 8-shop Approach should be rejected. He stresses that the Planned 6 Shops formed the factual basis of the DMC and hence, the allotment of undivided shares among the units of the Building, leading to each of the Planned 6 Shops allotted 2/102 undivided shares. The Planned 6 Shops are according to the Plans and properly registered at the Land Registry. Each of them is allotted undivided shares to support the right of exclusive use via the DMC and accordingly, qualifies as “each property of the lot” in the Part 1. Hence, the 6-shop Approach (and the adoption of Shop C as the reference unit) is in compliance with the requirement of Part 1. 30.Mr Mok argues that on the contrary, seven of the Existing 8 Shops (with the exception of Shop F) do not qualify as “each property of the lot” and failed the “immovable property” requirement of the Part 1. It is because neither of them is allotted specific undivided shares with a sub-DMC to provide the right of exclusive possession of the area of each shop, nor are they configured individually in accordance with the Plans or registered with the Land Registry. On such basis, he challenges that the Existing 8 Shops, at the valuation date on 28 May 2021, did not qualify as an immovable property for the reason that each shop could not be sold individually with the legal result of providing the purchaser with the exclusive right to use the area of the shop. 31.He argues that even if the highest and best use valuation principle might apply as a matter of valuation to the factual situation of the Existing 8 Shops, the Existing 8 Shops do not qualify as the “immovable property” under the Part 1 to form a proper subject matter of assessment of EUV and the 8-Shop Approach should be rejected. 32.To us, Mr Mok’s argument is an attractive one which at first sight appeared to be straightforward impressive, which we have carefully considered, but the difficulty with it is that, the Part 1, properly construed, does not impose the requirement as advanced by the applicant. 33.We should start with the rulings of two recent judgments in that similar arguments have been considered and rejected by the Tribunal. In the recent case of Wheelock SDL Finance Ltd & Ors v I-Automation Limited & Ors, LDCS 10000/2022 (unreported, dated 21 June 2024), multi-floor units (each floor unit was provided in the approved plan and allotted undivided shares) were converted to be used as two merged units and the dispute was whether they should be assessed on the basis of the two merged units on the “As-is Approach” or as separate units with a deduction of reinstatement costs on the “Reinstatement Approach”. The rulings of the Tribunal (before HH Judge M Wong sitting together with Temporary Member Mr Edwin Chan) which are relevant to the present application can be briefly summarized as follows: -
34.Likewise, similar arguments were also rejected by the Tribunal (before HH Judge M Wong sitting together with Member Mr Alex Ng) in Asia Bright Enterprises Ltd & Ors v Liu Cheuk Man & Ors, LDCS 35000/2019 (unreported, dated 21 April 2023). In that case, 4 ground floor shops (each according to the approved plan and allotted undivided shares) were used as one single merged shop and the question is whether it should be assessed as one single merged shop or 4 shops. The minority owner raised similar argument that the Part 1 compels each shop to be separately sold in the open market and it would be impermissible for market values of each property to be assessed on the basis of a joint sale of multiple units (§22). 35.Such argument was rejected. The Tribunal held that: -
36.We share the aforesaid views of the learned Tribunal in the two judgments and thankfully adopt their rulings concerning the interpretation of the Part 1 in the present case that the Ordinance, including the Part 1, does not impose a restriction as contended for the applicant that “each property of the lot” must refer to each unit according to the approved building plans. The applicant’s construction cannot be right. 37.Despite repeated rejections by the Tribunal in the previous decided cases, the applicant now seeks to read the same and even more words into the Part 1 as “on its own”, “in accordance with the approved building plans” and that “each property of the lot” should mean each property as defined by the DMC and registered at the Land Registry which is not permissible as the applicant failed to justify. 38.Mr Yuen, counsel for the 1st respondent, submits that Part 3 of Schedule 1 of the Ordinance provides apportionment of sale proceeds on a pro rata basis according to “the values of the respective properties of each majority owner and each minority owner.” and the use of the word “properties” with plurality makes it obvious that the owners, be that majority owners or minority owners, could own more than one property of the lot. 39.We accept Mr Yuen’s submissions that the applicant’s construction that each property refers to each unit shown in the approved building plans is plainly wrong for such construction does not have general application and cannot be the legislative intent. In particular, it is not workable in reality especially in the not uncommon situations where the approved building plans do not show the partition or configuration of each unit, or there are no plans attached to the deed of mutual covenants or the relevant assignments. 40.Coupled with the fact that the owners have the rights to configure or arrange their properties in a way they deem fit or to achieve the highest and best use of their own properties if they find appropriate, we are slow to consider the Ordinance, without expressly so specified, intends to exclude from assessment all actual configurations which is physically workable and in existence but merely not according to the approved building plans, bearing in mind that the actual configuration which is in existence indeed indicates the “existing” value that the property can realistically achieve (even though that may not be the highest and best use of that property). 41.In further consideration of the purpose of the EUV assessment is to ascertain the apportionment of the auction sale proceeds for fair compensation for the owners of the lot, there is no reason that the actual configuration, which is the actual use of the properties, should not be considered as indicating the existing value that the properties can achieve unless there is evidence to show that the properties can be configured and used in another way giving rise to higher and better value. It is illogical that the Ordinance would not have expressly specified the way of assessment which is inconsistent with the actual configuration and the use of the properties in reality. 42.By the operation of the highest and best use principle, so long as the summation of the value of the Existing 8 Shops is higher than that of the value of the Planned 6 Shops, there is no reason that the 8-shop Approach should not be adopted. 43.Thus analyzed, we take the view that properly construed, “each property of the lot” in the Ordinance is not restricted to “each unit” according to the approved building plans. It is only a matter of valuation. 44.In our view, the applicant’s another argument that the highest and best use valuation principle was excluded by the stipulation of “each property of the lot” by drawing analogy to the assessment of RDV of the redevelopment potential of the lot “on its own”[6] is misconceived. We fail to see the logic of such argument. It is difficult to see how the statutory provisions can be interpreted to have excluded such an important valuation guiding principle in the absence of a clear provision to so specify. 45.Suffice it to say that it is beyond dispute that the principle of the highest and best use and the principle of reality are two well-established guiding valuation principles which have been widely adopted not only in the property-valuation industry, but also the applications under the Ordinance and were accepted by the Tribunal as well as the higher levels of courts for the past decades. We should not burden this Judgment with the many references to all those authorities. 46.As pointed out by Mr Yuen, the suggestion in §19 of the applicant’s opening submissions that the line of judgments in the past only apply to amalgamation but not subdivision does not advance the applicant’s position any further. It was only a matter of valuation that in some previous cases amalgamation was the highest and best use as decided on their own facts. The applicant fails to logically justify on what basis the value of the properties in amalgamation can be assessed whereas the properties in subdivision cannot. We refer to the following two cases for demonstration. 47.In Asia Bright (supra.), the approach of assessing four units shown on the approved building plan as one given their existing amalgamation is adopted. The valuation of the one combined shop as it actually stood was accepted as reflecting the total EUV of the four shops (shown on the approved plan) owned by the same owner. In Top Harmony Ltd v Cheung Yuet Sheung & Ors, LDCS 39000/2018 (unreported, dated 15 October 2020), there were 2 shops which have been combined into one. The Tribunal applied the highest and best use principle to have them assessed as two individual units because the aggregate value of the 2 undivided units was higher than the value of the combined units. 48.We do not ignore the fact that all shops on the Ground Floor are allotted undivided shares which are solely owned by the 1st respondent. The 1st respondent, being the registered owner, is at liberty to sell them in whatever ways it deems fit or sub-divide the undivided shares among the Existing 8 Shops by a sub-DMC. In reality, the Existing 8 Shops have been physically divided, in use and leased out for years. Absent any solid evidence to suggest otherwise, it is obvious that there have been consistent demands for the use and renting of the Existing 8 Shops for years. Hence, the Existing 8 Shops configuration has long been adopted which supports the 1st respondent’s contention that the Existing 8 Shops reflect the true existing value. 49.The applicant further argues that by adopting the Existing 8-shop Approach, Mr Lee merely assessed the EUV of the Existing 8 Shops to be sold individually without regard to the impact arisen from title defects, and accordingly, Mr Lee failed to establish that the EUV assessed by the 8-Shop Approach is higher than that of the 6-Shop Approach. 50.We are not convinced. The operation of the highest and best use principle leaves no room for such an argument of title defects. For the highest and best use, it is open for the 1st respondent to effect a sale of the Existing 8 Shops altogether in one go or by grouping them into 3 groups of shops, ie group (1) : the summation of the value of the Shop A (enlarged), Shop BC1, Shop BC2, Shop BC3 ultimately reflects the total EUV of Shop A, Shop B and Shop C; group (2) : the summation of the value of Shop DE1, Shop DE2 and Shop DE3 reflects the total EUV of Shop D and Shop E and group (3) Shop F. We also do not lose sight of the fact that the execution of a sub-DMC for allotment of undivided shares is another viable option. 51.Such methods of sale were confirmed by Mr Charles Chan to be workable. He however said that in such a case a bulk discount should be applied. Hence, the remaining question concerning the 8-shop Approach is whether a bulk discount is applicable. 52.As a start, there is no strict rule that bulk discount applies to all sales involving multiple units. As explained by Mr Lee, in the case where the buyer would like to buy the Planned 6 Shops for the purpose of acquiring the Existing 8 Shops, which generate rental incomes, no bulk discount is applicable because the rental return to the purchaser should be maintained the same as that to the seller. Besides, Mr Lee also elaborated that bulk discount is applicable in a case where the parties are negotiating the sale and purchase of one shop, and the seller would like to induce the buyer to buy more, which is not the case here. 53.We agree with Mr Yuen that Mr Lee’s opinion accords with commercial sense, the valuation assumption of willing buyer and willing seller as well as the background facts of the present case. The fact that the Existing 8 Shops have been owned solely, so used separately and leased out for rental incomes individually by one single owner is a solid proof of the highest and best use of the shops on the Ground Floor. We also share their views that the so-called “long term use” is not a prerequisite but can be taken into account as evidence for proof of the highest and best use. It is a matter for valuation. 54.The long-term leasing of each of the Existing 8 Shops individually by the sole owner stands as solid evidence which justifies the valuation assumption of willing seller and willing buyer to purchase the Existing 8 Shops individually altogether in one go. The principle of the highest and best use and the principle of reality lend support to the valuation be made on the basis of a notional sale in the open market, purchasers may be willing to buy such land in the expectation that the current use will continue, and, sellers may only be willing to sell for the highest and best value. As such, no willing seller will agree to sell the Existing 8 Shops which have existed for years at a discount. 55.The operation of such valuation principles are well illustrated in a series of land resumption cases. For the present purpose, reference is made to the rationale of the valuation principles as elaborated in the following cases but not the application of the land resumption ordinances, which are different from the legal regime of the Ordinance.
56.Viewed in this light, Mr Lee’s adoption of the 8-shop Approach by assessing the EUV value of each of the Existing 8 Shops individually, making reference to the actual configuration measured at site and basing on the highest and best use valuation principle cannot be faulted. We are not persuaded that an assessment of the Existing 8 Shops is wrong in principle or prohibited by the Ordinance, especially the Part 1. 57.The applicant further argues that demolition and relocation of the whole or part of each of the partition walls are in breach of the Buildings Ordinance, Cap 123 and clause 13(a) of the DMC, which disallows any structural alteration in the premises in the Building or cutting of the walls thereof. 58.In our view, such argument does not assist the applicant. Not only that such argument has not been seriously pursued with solid evidence or legal analysis, but also that the 1st respondent has not been provided with a reasonable opportunity to meet such new allegations and to adduce evidence in opposition. 59.After all, in view of the fact that those are plainly partition walls and in the absence of any evidence to suggest that those partition walls are not “Building works (other than drainage works, ground investigation in the scheduled areas, site formation works or minor works) the works do not involve the structure of the building.”, which are the exemption works being exempted from the control and approval requirement under section 41(3) of the Buildings Ordinance, the applicant’s contention is unsubstantiated. The mere fact that the partition walls were demolished and/ or relocated to reconfigure the shops is not illegal: Mingo Properties (supra) and Snowland (supra). Indeed, there is no solid evidence to indicate any real or imminent risk of enforcement of reinstatement of the Existing 8 Shops to the Planned 6 Shops. Nor is there any indication that the costs of the removal and reinstatement of such partition walls is not minimal. 60.Besides, the belated argument premised on the breach of the DMC is unjustified for lack of particulars and solid evidence as well as without giving the respondents a fair chance to deal with the allegations. Hence, such argument lends no support to the applicant’s case. ROOF UNITS 61.Regarding the Roof Units Issue, the parties attending the trial have no disagreement that no EUV should be assessed for the Roof or any of the Roof Units. That said, given the 4th to 6th respondents and the 11th respondent are missing, the issue remains a live issue which we now turn to. 62.The undisputed fact is that all the structures at the Roof had been demolished for more than ten years and the entire Roof has been under the exclusive management and control of the IO as a common area since then. 63.The history of the dealings of the Roof Units can be traced from the records kept at the Land Registry, including the assignments. According to those records, each of the Roof Units, though purported to have been assigned to various assignees at different times, had never been assigned with any undivided shares and the 4th to 12th respondents do not own any undivided shares of the Building/ Lots. 64.The legal principle that a right to exclusive use of land as an incident in land can be created only as an incident to the ownership of an undivided share in the land is well illustrated in the following authorities:-
65.Applying the aforementioned legal principles to the present case, we accept Mr Mok’s submission that the exclusive right to use the Roof, which was reserved to the developer of the Building in the DMC, fell away and reverted to common ownership after the developer had sold out all his shares in the Building. The developer is clearly neither a majority owner nor minority owner under the Ordinance and has no role to play in the present proceedings. 66.Further, the developer’s purported assignments of the Roof Units without any undivided shares (as well as the subsequent further assignments) do not create any interest in land and do not bind the owners of the other units of the Building. 67.Given none of the Roof Units is allotted with any undivided shares to create an interest in land and the right to use the Roof Units has reverted to common ownership, none of the 4th to 12th respondents hold any interest in land having the meaning of “each property of the lot” under the Part 1 or qualify as “minority owner” under the Ordinance. Hence, no EUV assessment on the Roof Units is required. As neither of the 4th to 12th respondents have any proprietary interest in the Building/ Lots, they are strictly not entitled to any share of the sale proceeds of the Building/ Lots. EUV AS AT 28 May 2021 68.Mr Charles Chan and Mr Lee outline their agreements and differences in opinion in relation to the EUV assessment in their 1st joint statement dated 24 April 2023. GROUND FLOOR SHOPS 69.The two valuation surveyors do not agree on the EUV of the shops on the Ground Floor. By making reference to Shop C, Mr Charles Chan arrived at a unit rate of $291,000 per sq m, giving a total of $166,660,000 for the Ground Floor. In contrast, Mr Lee’s figure was $467,000 per sq m based on an existing unit Shop BC2, giving a total value of $252,200,000. 70.For the reference unit Shop C with a saleable area of 95.6 sq m, Mr Charles Chan considers a total of 10 transactions in the vicinity as comparables. Mr Lee only adopts 5 of them as comparables for his reference unit (Shop BC2) which has a saleable area of 51.7 sq m. 71.We agree with Mr Charles Chan that, in general, his 10 transactions are relevant for analysis purpose in terms of the location. However, we consider appropriate to treat with caution the size difference and overall adjustments of these transactions. 72.Both valuation surveyors agree on adjustments for frontage and return frontage only, but they disagree on layout assumption, reference unit, size, layout and headroom adjustments. The various adjustments applied by Mr Charles Chan are shown in the table below (whereas those adjustments made by Mr Lee, if different, are shown in italics): 73.Their disagreement primarily focuses on the choice of the reference unit. Mr Charles Chan has adopted the 6-shop Approach and Shop C as reference unit whereas Mr Lee adopted the Existing 8-shop Approach and Shop BC2 as reference unit in preparing their respective valuation. We note that Mr Mok accepts in his closing submission that, as a matter of valuation, Shop BC2 may be chosen by a valuer as the reference unit, whether or not Shop BC2 can be sold individually in the market[7]. As elaborated in paragraphs 29-60 above, this Tribunal prefers Mr Lee’s assumption on the layout of the shops and the reference unit. Size 74.It is not disputed that the unit rate of a shop normally increases as the size decreases. Mr Lee suggests a linear adjustment of 1% per 5 sq m difference. On the other hand, Mr Charles Chan proposes a progressive size adjustment of 1% per 5 sq m difference (over 40 sq m) and 10% per 5 sq m difference (under 40 sq m), citing the Tribunal’s adoption of progressive size adjustment in Lead Harvest Group Ltd & Ors v Cheong Wing Electric Ltd & Anor, LDCS 6000/2018 (unreported, dated 7 February 2022) and Sound Advice Property Ltd & Ors v Mok Wai Ching & Anor, LDCS 18000/2020 (unreported, dated 21 December 2021). 75.In reply, Mr Yuen points out that Mr Charles Chan’s proposal is unprecedented. In Lead Harvest, the progressive adjustment was 1% per 5 sq m difference (under 100 sq m) and 1% per 10 sq m difference (over 100 sq m). In Sound Advice, it was 1% per 5 sq m difference (under 35 sq m) and 1% per 10 sq m difference (over 35 sq m). During cross-examination, Mr Charles Chan conceded that he could not remember if 10% per 5 sq m difference had been accepted by the Tribunal before. Mr Yuen submits in his closing submissions that Mr Charles Chan’s reliance on these cases is misplaced, if not misleading. The Tribunal has never accepted a size adjustment of 10 times more sensitive than the usual adjustment rate of 1% per 5 sq m difference. We agree with Mr Yuen. 76.We accept that it is open to an expert to argue for a precedent, but any such proposal must be backed by valid reasons or solid evidence. Mr Charles Chan fails to substantiate his suggestion. He conceded during cross-examination that his progressive rate is not supported by any scientific research or study and rather, any single adjustment exceeding 30% should be treated with caution. This Tribunal notes that on size adjustment alone, 4 of Mr Charles Chan’s comparables (A3, A4, A6 and A7) are over 40%, including one nearly 60% discount (A4). We opine that such comparables are not really “comparable” with probative value and that the proposed progressive adjustment is problematic. We therefore prefer Mr Lee’s linear adjustment in this instance. Headroom 77.For headroom, it is not disputed that higher headroom leads to higher value. The question is how much higher. Mr Charles Chan adopts an adjustment of 6% per 1 m difference, whereas Mr Lee proposes the commonly accepted rate of 4%. Again, Mr Charles Chan provides no scientific research or study to justify his suggestion and he conceded during cross-examination that 6% adjustment is unprecedented in the Tribunal. We prefer a 4% adjustment for this item. Location, Visibility and Layout 78.Having inspected the Building and the comparables with the parties on 20 August 2024, we gain a general understanding of the locality. The subject shops were/are occupied by businesses of vegetables stall, freight forwarder, direct marketing, pet grooming, selling construction materials, car accessories and recycling collection. We also note that there are on-street parking meters in front of the shops, thereby affecting visibility of the subject shops. 79.Both valuation experts make adjustments to comparables as regards location, visibility and layout aspects, though they disagree on the extent of those adjustments. 80.A1 is in a better location than the Building, we agree with Mr Charles Chan’s proposed -5% adjustment. A2 and A8 are in better locations and in the same building. Mr Charles Chan and Mr Lee propose -30% and -20% adjustment respectively. We consider -25% is more appropriate. A5 and A9 are no doubt in better locations and we accept Mr Charles Chan’s adjustments of -20% and -10% respectively. For A11, which is located at King’s Road, we agree with Mr Lee’s proposed adjustment of -30% (as opposed to Mr Charles Chan’s -40%). This is sufficient to reflect the superiority of this comparable. 81.Both experts agree that A5 should be adjusted for visibility as there are market stalls in front of it. There are also on-street parking meters in front of the subject shops. We prefer Mr Charles Chan’s 10% adjustment over Mr Lee’s 15%. 82.We generally agree with Mr Charles Chan’s layout adjustments, except for A5, which should not have a layout adjustment. 83.In view of the above observations, our determination of various adjustments (in BOLD) is shown as follows – 84.Disregarding comparables A3, A4, A6 and A7 – which are of much smaller size, the average adjusted unit rate for the remaining comparables is $324,201 per sq m. We adopt $324,000 per sq m for valuation purpose. 85.Our assessment of the EUV of the shops on the Ground Floor, based on the Existing 8 Shops layout, is $174,970,000. This is shown in Appendix 1. FIRST FLOOR OFFICES 86.Mr Charles Chan and Mr Lee agree on the reference unit (Flat B, 1st Floor) and the unit rate of the reference unit ($124,000 per sq m). They also agree on most of the applicable adjustments, except the internal condition adjustment for 3 offices that were not inspected. Mr Charles Chan assumes the 3 offices are in fair condition and suggests no adjustment. In contrast, Mr Lee assumes they are in poor condition and therefore -3% adjustment should be applied. 87.Given all office units on the 1st Floor are owned by the applicant, the fact that the experts had not been arranged to inspect 3 offices[8] is understandably to have attracted suspicion of poor or even very poor condition of those uninspected offices. We however find that the suspicion is unjustified for the following reasons. 88.We accept Mr Mok’s submissions that there is no evidence indicating any deliberate avoidance of inspections or that the failure to give consent to inspect was owing to a desire to hide any poor internal condition of the uninspected units. Further, there is solid witness evidence[9] that the uninspected units were all rented out at the time of the arrangement of inspection and it is understandable for the tenants not to agree to inspection “because the arrangement of unit inspection took place before the lifting of COVID-19 restrictions in around February or March 2023”. It is undisputed fact that at the time of preparing the existing use valuation (around June 2021), COVID-19 pandemic was still prevalent and people were cautious about the spreading of the disease. 89.Besides, we accept Mr Charles Chan’s suggestion that of the 6 inspected offices, 5 of them are in fair condition and as such, we should not lightly assume the 3 uninspected offices are in poor condition. It is in particular that one of the 6 inspected offices (Flat G), which is in poor condition, has also been arranged for inspection. Such arrangement weakens the suggestion that the applicant intended to take benefit from ‘not allowing inspection’. Otherwise, the applicant could have disallowed inspection of Flat G. 90.Moreover, we have not ignored the opinion given by Mr Kenneth Chan, the 1st respondent’s building condition expert, that according to his inspection to 9 offices, the general condition of them is fair with minor spalling, debonded plastering and broken tiles[10]. 91.Thus considered, we are loathe to accept the suggestion of Mr Lee. We find no sufficient basis to draw adverse inference against the applicant in this matter. We agree with Mr Charles Chan’s opinion. We opine the valuation of the offices at the 1st Floor at $47,030,000. UPPER FLOOR DOMESTIC UNITS 92.Mr Charles Chan and Mr Lee do not agree on the EUV of the upper floor domestic units. By making reference to Unit B on the 5th Floor No. 79 Marble Road (“Unit 5B) as a typical unit, Mr Charles Chan arrives at $126,000 per sq m, giving a total of $502,720,000 for units from 2/F to 10/F. On the other hand, Mr Lee arrives at a total of $445,230,000 on the basis of $113,000 per sq m for the same domestic units. 93.For the reference unit of Unit 5B, which has a saleable area of 53 sq m, Mr Lee relies on a total of 8 transactions in the vicinity as comparables, whereas Mr Charles Chan considers the same 8 transactions plus one more transaction as follows: 94.Mr Charles Chan and Mr Lee agree on most of the adjustments such as time, age, floor, top floor, view, lighting & ventilation, nuisance and noise, but they disagree on the location and size adjustments. The various adjustments made by Mr Charles Chan are shown in the table below, with Mr Lee’s differing adjustments in italics : Location 95.Both Mr Charles Chan and Mr Lee agree that C1 and C5 are in locations inferior to the subject. Mr Charles Chan proposes an adjustment of 15% as opposed to Mr Lee’s 5%. We determine an adjustment of 10%. For location adjustment for C3, C4, C6 and C7, we prefer Mr Charles Chan’s figures. For C8, whilst Mr Charles Chan proposes 15% and Mr Lee suggests no adjustment, we consider a 10% adjustment more appropriate. Clearly, the Building is in a better location than C8, but 15% adjustment is excessive. Size 96.Mr Charles Chan proposes an adjustment of 1% per 10 sq m difference, whereas Mr Lee proposes 1% per 5 sq m difference. Mr Lee opines that
We prefer Mr Lee’s adjustment. 97.Based on the above agreed adjustments between the parties and the Tribunal’s determination on the disagreed adjustments, our determination of the reference unit (Unit 5B) as at 28 May 2021 is $120,000 per sq m as shown below in BOLD ( after excluding C9, which we consider an outlier): Internal Condition of the Domestic Units 98.Both valuation experts agree to adjust the unit rates in accordance with the internal condition of the domestic units: Good +3%; Fair 0%; Poor -3%; Very Poor -6%. They have inspected 37 units and agree that 14 are in good condition, 12 in fair condition, 8 in poor condition and 1 in very poor condition. They do not agree on the internal conditions of 2 units. For those agreed ones, 26 are in fair or good condition (74%); 9 are in poor or very poor condition (26%). 99.Similar to the arguments regarding the offices on the 1st Floor, for the units that both experts could not gain access for inspection, Mr Charles Chan assumes they are in fair condition with no adjustment, whereas Mr Lee assumes they are in poor condition and applies a -3% adjustment. For the similar concerns we have elaborated in determining the similar arguments regarding the offices on the 1st Floor and the fact that the period of inspection was in the midst of COVID-19 pandemic, it is understandable that some tenants would have refused internal inspection by outsiders, we do not agree with Mr Lee’s assumption as it tends to be speculative without concrete basis. 100.Understandably, the generally reduced rental rates offered by the applicant might arguably be a pointer indicating the rather unsatisfactory conditions of the units leased out by the applicant. We however cannot ignore Mr Yeung’s undisputed evidence that the applicant had the practice of carrying out basic repair and maintenance to its units before leasing out and on regular basis to ensure safety and cleanliness of the same[12]. Recurring repair works to walls and to prevent electricity leakage caused by water seepage as well as to replace water pipes and windows were performed from time to time. 101.Coupled with the implication of having 74% of the inspected units being in fair or good condition as well as the 3rd respondent’s denial of her property, Unit 10E (which was not inspected), being in poor condition, we are not persuaded that the uninspected units are in poor or very poor condition in average necessitating further adjustment as advanced by Mr Lee. 102.In view of the above observations, the EUV of the upper domestic units is determined as shown in Appendix 2. The total market value is $481,670,000. 103.According to our assessment, the EUV of the Building as at 28 May 2021, is as follows –
CONCLUSION OF EUV AS AT 28 MAY 2021 104.From the above, it is our view that the total EUV for the Building is $703,670,000. The corresponding EUV and proportionate share of the sale proceeds of the 1st, 2nd and 3rd respondents pursuant to Part 3 of Schedule 1 to the Ordinance are as follows:
ISSUE 3: AGE & STATE OF REPAIR LAW ON WHETHER REDEVELOPMENT IS JUSTIFIED 105.Section 4(2) of the Ordinance provides that the Tribunal shall not make an order for sale unless it is satisfied that the “age or state of repair” of the Building justifies it and that the applicant has taken “reasonable steps” to acquire all undivided shares of the Lot. SECTION 4(2)(a)(i) – AGE OR STATE OF REPAIR PROPER APPROACH 106.Mr Mok submits that the evidence of the building condition expert, Mr Benson Wong, and the structural expert, Mr Dennis Wong, has fully established that redevelopment is justified both on age and state of repair of the Building, and in contrast, the 1st respondent’s building condition expert, Mr Kenneth Chan, and structural expert, Dr Lo, have applied the wrong test in forming their opinions[13]. 107.As regards factors or matters that the Tribunal is entitled to look at under Section 4(2) of the Ordinance and on the ground of state of repair, the parties and their experts have no disagreement that “tenantable condition” should be the standard guiding the formulation of repair work and assessing the condition of the Building. 108.That said, in light of Mr Kenneth Chan’s testimony under cross-examination that: -
Mr Mok submits, and we accept, that Mr Kenneth Chan’s aforesaid approach is wrong. 109.Mr Kenneth Chan’s standard of “tenantable condition”, being “if tenanted, deemed tenantable condition”, is obviously problematic. Given there can be all sorts of reason for a tenant to rent a premises which is definitely not restricted to the condition of the premises, such approach has long been strictly rejected by the Tribunal[14]. 110.We share the view with Mr Mok that Mr Kenneth Chan’s aforesaid approach is erroneous and in direct contradiction to §145(4) of the ruling in Intelligent House Ltd v Chan Tung Shing & Ors [2008] 4 HKC 421 which reads:-
Indeed, the factor as 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, has been recognized in the subsequent decisions[15]. 111.In the premises, Mr Kenneth Chan’s evaluation of the condition of the Building and his formulation of the repair items in so far as they are basing on the problematic approach as elaborated above should be rejected. 112.On the other hand, we agree with Mr Yuen’s submission that a mere comparison of the physical appearance and design of the Building as well as its functional features and facilities with the modern standards and current legislative requirement is not meaningful. It is a question of extent and degree and to be considered in the physical and functional conditions of the Building and in the reality. 113.Mr Benson Wong’s definition of “tenantable condition” as “the building is fit for the enjoyment of its tenants and visitors, in the sense that it is safe and hygienic, and provides a standard of comfort and convenience which is reasonable in the present day circumstances for the type of buildings in question, and would result the building’s structural frames, components, finishes and service installation in either fair or good condition, requiring no repair in the near future.” essentially adopts the definition used in Intelligent House[16] (supra.). 114.Notwithstanding that the standard of “fair or good condition” has been commented as a logical fallacy of internal contradiction, Mr Yuen has nevertheless raised no serious challenge to such definition. We also take note of Mr Benson Wong’s clarification during cross-examination that the phrase should be best described as “in fair condition” and, in any event, we have considered Mr Benson Wong’s evidence with caution bearing in mind the proper approach of assessing tenantable condition as elaborated above. 115.We have also considered Mr Yuen’s complaints about Mr Benson Wong’s theoretical “apple-to-apple” comparison approach. It is submitted that such approach (ie comparison of repair costs and construction cost) ending up with a disproportionately high percentage of some 35.7% should be rejected for the following reasons:
116.We nevertheless take note that arguments of similar nature as the first reason have been dealt with and rejected by the Tribunal in previous cases: Greatmax International Ltd & Ors v Lo Sha Kam Ha Teresa & Ors, LDCS 7000/2019 (unreported, dated 16 June 2023) §76 and Nice Beauty Ltd v Yan Yan Motors Ltd & Ors, LDCS 14000/2019 (unreported, dated 6 December 2021) §53. We accept that Mr Benson Wong’s approach is the usual approach which has long been accepted by the Tribunal and should be adopted. 117.In the estimation of repair costs, Mr Benson Wong relies on the unit rates suggested by Mr Tang, who has explained how he obtained the unit rates from 3 reference projects[17], how he adjusted the unit rates from the 3 projects[18] and how he decided on other items where no similar items were found in the 3 projects[19]. In particular, Mr Tang stated that –
118.In Mr Kenneth Chan’s reports, he relies on the 25 published Urban Renewal Authority (“URA”) unit rates in arriving at his estimation. Despite Mr Kenneth Chan, during re-examination, said that he also adopted over 100 other items of URA - internal circulated unit rates, he has never disclosed what those internal unit rates are, how they were produced, what the quantum/range of each such internal unit rates is, why they are kept internal by the URA etc. Those rates were not put to Mr Benson Wong during cross-examination. 119.Thus viewed, the evidence of Mr Tang, on the unit rate, is more credible than Mr Kenneth Chan’s evidence. Indeed, Mr Tang’s evidence is not contradicted by any quantity surveyor. 120.Having considered all the relevant evidence carefully, we are of the view that the evidence and expert opinions of the applicant’s experts, ie Mr Benson Wong, Mr So and Mr Dennis Wong are more reliable than the 1st respondent’s experts, Mr Kenneth Chan and Dr Lo. Hence, we adopt the applicant’s experts’ evidence and opinions as discussed below. AGE 121.Mr Benson Wong identifies 4 issues with respect to the age of the Building:
He concludes that the redevelopment of the Building is justified on the ground of “age” alone. 122.Mr Yuen disagrees with all four aspects of the assessment of the age of the Building. As elaborated above, he suggests that reliance on the concept of obsolescence and a mere comparison with the modern standard is not meaningful. It is a question of extent and degree. It is not meaningful to make a comparison in relation to the changing standard in vacuum without regard to how the Building is actually performing, ie physical and functional conditions. The subjective element of physical obsolescence is of little weight. The matters such as external façade appearance, choice of building materials, etc, are a matter of choice, the subjective view and the budget of the occupiers. 123.We also note that in relation to the fire escape deficiency identified by Mr Benson Wong at page 18 of his first report[21], Mr Kenneth Chan is of the view that given the actual measurement even according to the Fire Safety Code 2011 is only slightly less than the requirement, and the Building complies with the 1996 Code, it has no material impact on the fire risk at all[22]. 124.However, Mr Yuen does not propose any test for “age”. There is just opinion given by Mr Kenneth Chan that the tenants of the Building had accepted the physical appearance of the Building before their acceptance of their tenancy agreements and that a building’s life can be extended by normal maintenance. 125.With the parties’ arguments in mind, we now turn to consider the 4 issues in dispute. Physical age 126.In terms of physical age, the Building was 57 years old at the time when the Application was filed. It is one of the oldest buildings in its immediate neighbourhood even though it may not be the oldest. Such an old physical age is clearly one of the many factors that the Tribunal can take into consideration. Design working life 127.According to Mr So, the design and construction of the structural frames of the Building comply with the less stringent requirements in terms of the current standards. The structural frames were designed and constructed more than 60 years ago and the then applicable standards were the London County Council Constructional By-law 1952 (the LCC By-laws). The current standard is the Code of Practice for the Structural Use of Concrete - 2013 (the 2013 Concrete Code)[23]. 128.Mr So considers that the Building is aging and has an obsolete design. There are 8 structural design and construction aspects where the Building does not comply with the current structural engineering design requirements specified in the 2013 Concrete Code, particularly the requirement on robustness. Therefore, beside other structural engineering deficiencies, the Building might not possess adequate robustness to avoid disproportionate collapse due to accidents. 129.Mr So stated in his Structural Assessment Report dated 13 July 2022 that ‘design working life’ is the ‘period of time during which a structure that has undergone normal maintenance is unlikely to require major repairs’. In designing the reinforced concrete structures under the 2013 Concrete Code, all the recommendations on aspects such as robustness, ductility, durability, workmanship, materials as well as the intended maintenance are based on a design working life of 50 years[24]. Given that the requirements laid down by the LCC By-laws are less stringent than those of the 2013 Concrete Code, Mr So infers that the design working life of the Building would not have been longer than 50 years[25]. In other words, the structural frames of the Building have exceeded their design working life. 130.Dr Lo accepts that the Building does not strictly comply with the robustness and ductility requirements of the 2013 Concrete Code. Yet, he qualifies that directly applying these latest criteria to assess the Building is not appropriate[26]. 131.We note that the Tribunal in Harvest Treasure Ltd & Ors v Cheung Fat Enterprises Ltd & Ors, LDCS 8000/2014 (unreported, dated 31 December 2015) §134 also accepted the relevancy of comparing the structural design of the building in question with the modern construction requirements and said:-
132.As held in the above case and indeed, has been consistently held by the Tribunal in the other cases, we are also of the view that comparing the structural design of the building in question with the modern construction requirements is a relevant consideration to check against the age of the Building. We accept this is a correct approach in considering ‘the age’ of the Building. Based on Mr So’s evidence, we accept that the Building can be regarded as old in terms of its design working life. Physical obsolescence 133.Having compared with 10 other more modern buildings of similar development type and size, Mr Benson Wong identifies 3 areas of physical obsolescence of the Building’s features and facilities as follows. It is said that the appearance of the Building is a plain looking block with monotonous elevations. Although the external walls of the Building were finished with cement rendering and paintwork and were acceptable in the post-war era, these finishes have made the Building’s appearance outdated nowadays. Moreover, new buildings are more commonly finished externally with curtain walls, aluminum windows, ceramic tiles, metal grilles etc. Piecemeal replacement of original painted mild steel windows by different types, materials and colours of windows by individual flat owners have resulted in an untidy overall appearance. 134.In this regard, Mr Kenneth Chan considers that “tenants of the property represent the perspective of most of the citizens. Most units of the property are under tenants’ agreement. I believe that tenants accepted the physical appearance of the entire building before accepting of tenants’ agreement.”[27] 135.We agree that the external appearance of a building in the context of what Mr Benson Wong suggests, is a factor to consider. That said, Mr Yuen submits and we agree that the subjective element of physical obsolescence is of little weight in the question as to whether redevelopment is justified. Those matters such as external façade appearance, choice of building materials, etc, is a matter of choice and affordability. 136.It is well established that the Tribunal can consider anything directly or indirectly related to age. It is within the Tribunal’s discretion to decide what are relevant or not and how much weight should put on a certain factor. In this case, we find that physical obsolescence can be a relevant factor but its significance should not be overstated. Functional Obsolescence 137.By comparing to the latest regulations and standards of safety, hygiene, comfort and convenience, Mr Benson Wong identifies 10 areas where the Building is significantly inferior[28]:-
138.Mr Benson Wong opines that some of these 10 aspects of functional obsolescence including (1), (3), (4), (5) and (10) cannot be rectified unless the Building is demolished and redeveloped. 139.On the other hand, Mr Kenneth Chan only agrees with the following aspects of functional obsolescence:
140.The fundamental reason for Mr Kenneth Chan’s disagreement with the other aspects of functional obsolescence is that those facilities are not statutorily required nor essential to the Building. Moreover, his disagreement with Mr Benson Wong’s obsolescence comparison and items of physical and functional obsolescence also arose from his apparent disagreement that the Tribunal is entitled to compare the facilities of the Building with what a modern day building could offer as required by the present day regulations or law or because of advance of technology or because of the rising expectations of the public for proper, safe and hygienic habitation and residence[29] as well as his assumption that if units are tenanted, they are deemed tenantable. As elaborated above, such approach is not correct. 141.Indeed, the 1st respondent does not provide any reasonable answers to counter the applicant’s contention of functional obsolescence, which is clearly a factor that we should consider in respect of the age of the Building. Conclusion on Age 142.Overall, we are convinced that the applicant has satisfied the requirement for “age” under section 4(2)(a)(i) of the Ordinance. The redevelopment of the Lots is justified due to the age of the Building. STATE OF REPAIR Structural Assessment 143.It is apparent from the structural joint statement and during cross-examination that Dr Lo uses “imminent danger” as the test to interpret and evaluate the structural defects. We agree with Mr Mok that “imminent danger” is a wrong test, which is inconsistent with the wording and intention of section 4(2)(a)(i) of the Ordinance where the statutory requirement is whether “redevelopment is justified owing to age or state of repair of the existing development”. The Tribunal has consistently rejected the suggestion that the buildings have to become dangerous before an order for sale can be made[30]. Corrosion of Reinforcement Bars 144.Both experts agree that loss of sectional area of reinforcement bars is an aspect that should be addressed in an open-up inspection because the structural capability in the structural elements of the structural frames can be reduced if there is loss in the sectional areas. In severe cases where the reduction in the steel sectional area is large then there may be the need to strengthen these structural elements or to recast them in order to restore them to their originally approved state. 145.We note that out of the 5 columns and 6 beams selected for open-up surveys by Dr Lo, 9 bars and 5 bars suffered loss of sectional areas respectively, ranging from 2.3% to 8.6% for columns and 4.2% to 8.3% for beams. In respect of Mr So’s open-up inspection, there are 142 bars which suffered loss of sectional area ranging from 3.83% to 17.56%. Under the Code of Practice for the Mandatory Building Inspection Scheme, a reinforcement bar with loss of sectional area of more than 15% should be considered to have corroded seriously and “shall be replaced by new reinforcement”. 146.Assuming Mr So’s test results are representative, 2 out of 11 (18%) slab reinforcement bars of Block B may probably be suffering from serious corrosion (more than 15% loss of sectional area) that required replacement. Mr So’s test results also reveal that many other reinforcement bars are suffering from loss of sectional area of more than 10% and close to 15%. We agree with Mr So (adopted by Mr Dennis Wong) that the assessment of the corrosion condition should be done on the combined results from him and Dr Lo, which in our view, cannot be classified as not severe. Concrete Repair Costs 147.Mr So calculates repair costs basing on the actual area of spalling of the structural elements he identified during his inspection and projects these to areas he did not inspect. Dr Lo’s costs are also similarly calculated. On such basis, we agree with Mr Mok that the concrete repair costs proposed by the two structural experts would not address the general severe corrosion condition of the reinforcement bars of the structural elements and such general corrosion condition would remain an inherent deficiency of the Building. As observed by Mr Dennis Wong, in agreement with Mr So, he comes to the conclusion in his report that “…deterioration of the Subject Building has entered the propagation stage.”[31]. 148.Viewed in this light, we are convinced that the Building has entered the propagation stage and it is an inherent deficiency of the Building which will continually plague the Building, notwithstanding the repair costs estimated by Mr So and Dr Lo. Concrete Cover 149.Mr So and Mr Dennis Wong express concerns about poor condition and workmanship revealed by the concrete cover test. Almost all the individual test readings are way above the required standards[32] which may reduce the structural capability of the structural elements, rendering the structural elements unsafe[33]. We do not hear any solid contrary evidence to ease these concerns. We therefore accept their findings. This is another inherent deficiency not addressed by the repair costs proposed by both experts. Robustness and Ductility 150.It is not in dispute that the Building has basic provisions for ductility and robustness as designed and constructed, but there are more stringent requirements introduced in the 2013 Concrete Code than LCC By-laws (under which the Building was designed and built), including aspects in design, material, workmanship and maintenance. Both parties acknowledge that the Building does not fully comply with the robustness and ductility requirements of Concrete Code 2013 and that the old code (under which the Building was designed and built) merely allows a degree of ductility requirement. 151.Moreover, the concrete covers specified for the constructions of the Building do not satisfy the requirements of the Concrete Code 2013 and Hong Kong Fire Code. Dr Lo relies on his Extended Three-dimensional Analysis of Building Systems (ETABS) analysis to argue that the Building provides intrinsic provisions of robustness and ductility. We nevertheless note that similar analysis conducted by Dr Lo was rejected by Member Mr Alex Ng in Asia Rich (Supra) “that the ETABS test carried out by Mr Raymond Lo, a computer model that shows the lateral deflection under codified wind load, cannot assess robustness and ductility effectively because this model can prove mainly the requirements of deformations due to wind only.” §64. We share the same view of the learned Member. 152.Similar to the view of the learned Member in Asia Rich (Supra) §65, we take the view that the 1st respondent’s reliance on the Mandatory Building Inspection Scheme (MBIS) is misplaced. Compliance with MBIS, if any, cannot be readily taken to mean that the Building’s physical life would be automatically extended for 10 years after completing the relevant works as required under the Scheme. Government control like MBIS may sometimes set the minimum requirements only, and these requirements can never be assumed as a guarantee of the building condition before the next enforcement date. Some components may require regular maintenance to ensure the repairs last until the next inspection cycle. Depth of Carbonation 153.The structural experts agree that carbonation has reached the reinforcement bars in most samples. Dr Lo does not consider the defect serious, but Mr Dennis Wong (shares the view of Mr So) suggests otherwise. We prefer Mr Dennis Wong and Mr So’s view and accept that carbonation is a serious structural defect in the present case as elaborated in their reports. Chloride Content 154.The structural experts agree that the chloride content level of the Building is not satisfactory. Mr So (as endorsed by Mr Dennis Wong) considered the effect of high chloride content on structural frame of reinforced concrete is wide spread and very serious. Dr Lo takes a contrary view. In consideration of the percentage of individual test location with excessive chloride content as set out in Mr So’s report[34], illustrating 86.7% of column, 93.7% of beam and 100% of slab have chloride content way above the limit of 0.35%, we agree with Mr So that the chloride content is very serious and the presence of chloride together with high carbonation depth shall trigger the corrosion process of the embedded steel bar reinforcement[35]. Building Condition Survey 155.As elaborated above, Mr Kenneth Chan has adopted a wrong standard of “if tenanted, deemed tenantable condition” in assessing tenantable condition, leading to differences between his assessment and Mr Benson Wong’s assessment regarding the Building’s state of repair. We should not repeat our analysis on the applicable standards, repair costs, the comparison with construction costs and Mr Benson Wong’s approach in formulating his repair items and evaluation of building condition of the Building which have been set out above. 156.Regarding the other major disagreements between Mr Benson Wong and Mr Kenneth Chan on repair costs (above $500,000), we have the following findings. Building Facades 157.Adopting the “tenantable standard” in the assessment, we prefer complete replacement of external rendering on wall surfaces (4,098 sq m) as proposed by Mr Benson Wong to patch repair of 3% only of the overall building facades as suggested by Mr Kenneth Chan. We agree with Mr Benson Wong that localized patch repair will not bring the external facades of the Building to the requisite “tenantable standard”. 158.With the benefit of site inspection, we also agree with Mr Benson Wong that the condition of the external rendering is poor. Even though generally we could only observe the external façade by visual inspection at a far distance, the overall condition of it was observed to be poor. Other than the external wall was riddled with holes and cracks, there were at least 3 significant signs of extensive fallen concrete at the external façade facing Marble Road. We also do not lose sight of the fact that on 17 April 2024, concrete lumps fell from the external wall of the Building down the street below necessitating emergency repair action taken by the Buildings Department. 159.We accept that Infra-red can only detect hollow spots but no other defects commonly found on external rendering such as cracks and water seepages. Complete replacement of external rendering will achieve a completely sound and watertight envelope to prevent external water seepages and in turn mitigate spalling defects externally and damp defects internally. It is a pragmatic practice to add movement joints to minimize spalling and cracking of rendering in the future as well as to cut out the existing sealants around the windows and to re-apply with new sealants to ensure the window surrounds to be water resistant. It is also an acceptable safety measure to construct a light steel frames covered walkway on the public pavement of Marble Road and hoardings alongside the side and rear scavenging lanes during the course of works to the front façade of the Building. 160.On the removal of asbestos containing materials (ACM) and suspected ACM, we accept Mr Benson Wong’s advice to remove both the hazard rank 1 items (switch box and cable trunk) and rank 3 item (lift brake lining). 161.Regarding the Main Roof, we observed during site inspection that there were obvious signs of serious water seepage as well as apparently unsatisfactory repair works almost all over the place. We endorse Mr Benson Wong’s recommendation for complete replacement of the main roof coverings, waterproofing and related components. This is a more direct and cost-effective measure to get rid of the extensive and persistent water seepage problem for at least until the next repair cycle. 162.Regarding the domestic units, offices and shops internally, the difference in the total costs between $3,979,877 and $1,482,756 arose from the different standard of tenantable condition adopted by the two experts. As explained earlier, we prefer Mr Benson Wong’s approach. 163.Regarding the fire service installations, there was no Fire Safety Improvement Direction issued to the IO. However, we agree with Mr Benson Wong that, in order to render the Building to tenantable standard and improve the fire safety, there should be provision of essential fire service installations including automatic sprinklers system, manual fire alarm system, fire hydrant and hose reel system, emergency lighting system and secondary electricity supply. 164.Regarding the lifts, we do not accept the recommendations of Mr Benson Wong and his lift engineer of total replacement of the 3 existing lifts, bearing in mind of Mr Benson Wong’s confirmation that the lifts are in serviceable condition, which was certified by EMSD with the issuance of a lift certificate. Conclusion on State of Repair 165.In conclusion, we prefer generally the evidence and expert opinion of Mr Benson Wong, which incorporate the evidence and expert opinion of Mr So and Mr Dennis Wong, to those of Mr Kenneth Chan. We agree with Mr Benson Wong that the age and state of repair, each on its own, is a justification for redevelopment of the Building. 166.We accept that the Building, erected more than 60 years ago, is in poor condition and has come to the end of its design working life. The design of the Building has become functionally obsolete, and fails to conform to modern safety standards and statutory requirements. 167.Further, we also shares Mr Benson Wong’s view that the Building is in poor state of repair and the costs of repair to bring the Building to tenantable condition is disproportionate to the costs for constructing a new similar superstructure. Adopting Mr Benson Wong’s estimates on the repair work, with proper modifications for the reasons set out above as excluding the costs of the total replacement of the 3 existing lifts, and the construction cost of a new similar superstructure estimated by Mr Tang, the percentage is nearly 30%. ISSUE 4 : REASONABLE STEPS TO ACQUIRE Section 4(2)(b) – REASONABLE STEPS 168.The applicant is required to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interest of the respondents under Section 4(2)(b) of the Ordinance. 169.It is not disputed that the applicant has made the following offers to the respondents directly or through its solicitors to acquire their units or interests:-
The 1st respondent sensibly raised no serious argument in this aspect whereas the 3rd respondent was discontent with the reducing offers. 170.The Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd [2005] 4 HKLRD 363 §33 emphasizes that:
171.The Court of Final Appeal stated further at paragraph 36 of the judgment that:
172.With these principles in mind, we are satisfied that the applicant has fulfilled such requirement for those offers were well-supported by detailed analysis of experienced valuation expert. The first offers dated 22 June 2021 were all supported by the letters of advice of Savills. The subsequent offers were made with reference to Mr Charles Chan’s revised and updated valuation in the Joint Statement on Valuation dated 2 February 2024 (filed on 8 February 2024) and the second supplemental report prepared by Mr Charles Chan dated 19 July 2024 (filed on 22 July 2024). 173.In the subsequent written offers, the assessment basis and calculation of the offer prices were set out therein, with the relevant expert reports be specifically referred to. The offer prices were clearly based on Mr Charles Chan’s assessments by applying his assessed pro-rata share of sale proceeds of the Ground Floor and Unit 10E to his assessed market value of the Lots on redevelopment basis. As to the 3rd respondent’s complaint about the reducing offer, we note that for Unit 10E for the 3rd respondent:
174.Given the offers were supported by detailed analysis of experienced valuation surveyor as elaborated in his expert reports, we form the view that the requirement under Section 4(2)(b) of the Ordinance has been satisfied. It is also noted that Mr Charles Chan’s assessments on the pro-rata share of sale proceeds of Unit 10E is indeed very close to our determination of 0.6423% as set out in paragraph 104 above and his RDV assessment also falls within the band of our determination on RDV which will be elaborated further below. 175.Applying the guiding principle aforesaid to the present case, it is clear to us that the applicant’s offers plainly fall within the range of what may broadly be regarded as fair and reasonable compensation for the interest of the respondents. We are satisfied that on the evidence available and in the circumstances of the Application, the applicant has taken reasonable steps to acquire all the undivided shares in the Lots including negotiating for the purchase of such of those shares owned by the 1st, 2nd and 3rd respondents on terms that are fair and reasonable. 176.We note the 3rd respondent’s complaint about the applicant’s reducing offers to her. However, as elaborated above, the reducing offers were justified with valid reasons and consistent with the declining property market. We wish to point out that the property market fluctuates over time and there are ups and downs depending on the economic conditions, market demands and market expectations. For the reason set out in paragraph 170 to 174 above, we are satisfied that in making offers to purchase the interest of the minority owners, the applicant has sought professional advice from valuation surveyor to assess the market values reflecting the then market situations, upon which the offers were based. ISSUE 5 : RESERVE PRICE ESTIMATION OF THE RDV 177.Both Mr Charles Chan and Mr Lee agree to resort to the residual method of valuation in determining the RDV. This involves deducting development cost (including construction cost, professional fees, finance cost etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development. 178.By their Updated Joint Statement dated 6 August 2024, the two valuation experts agree that the Lots has a net site area of 713.49 sq m for Gross Floor Area (“GFA”) calculation and the proposed GFA is 6,255.76 sq m. The date of valuation is 15 July 2024. 179.Both experts agree on all the parameters of the residual method except the interest rate and developer’s profit. The agreed parameters are as follows:
HYPOTHETICAL DEVELOPMENT MODEL GROUND FLOOR RETAIL 180.Both valuation experts agree to adopt hypothetical shop no. 4 on the ground floor as the reference unit. However, they disagree on the adjusted unit rate of the comparables. Mr Lee relies on 5 comparables in the vicinity, whereas Mr Charles Chan only adopts 4 in his valuation exercise. 181.Based on the comparables, Mr Charles Chan arrives at an adjusted unit rate of $337,000 per sq m, while Mr Lee at $455,506 per sq m due to their different views on the adjustment rates for size and headroom. They also disagree on the return frontage, layout and business condition. The various adjustments applied by Mr Charles Chan are shown in the table below (whereas those adjustments applied by Mr Lee, if different, are shown in italics): Size and Headroom 182.As mentioned at paragraphs 74 to 77 above, we prefer Mr Lee’s proposed adjustment rates – linear adjustment of 1% per 5 sq m difference for size and 4% per 1 m difference for headroom. Location 183.Both valuation experts agree that all five comparables are in better locations than the Building. However, they disagree on the magnitude of adjustments. With the benefit of the site inspection, we determine that location adjustment for E1 (facing King’s Road) should be -35%. For E4 and E5 (facing Chun Yeung Street), the appropriate adjustment should be -30%. For E2, which is facing Shu Kuk Street and E3 facing Kam Hong Street, we prefer Mr Charles Chan’s adjustment of -25% and -10% respectively, as opposed to Mr Lee’s adjustment of -20% and -5%. Return frontage 184.E3 has a return frontage onto a service lane. Mr Charles Chan considers that this side return frontage can be at least used for display of signage or placement of air-conditioning units. He further adds that the DMC of the building where E3 is situated does not prohibit removal of the external wall on the return frontage which appears to be a non-structural wall. Mr Yuen submits that the reliance of the DMC by Mr Charles Chan that one may make an opening to the external wall is wrong in law, citing the Court of Appeal decision in The Incorporated Owners of Elite Garden v Profit More Co Ltd [2002] 2 HKLRD 518. At §7 and §11 of that case, structural alteration does not bear any technical meaning confining to alteration of the structural bearing wall, and it was held that alteration to the external wall of the building amounts to structural alteration. We agree with Mr Yuen’s submission. 185.During cross-examination, Mr Charles Chan admits that pedestrians walking down Kam Hong Street cannot see the return frontage. However, he stresses that pedestrians walking up Kam Hong Street can see the return frontage easily. He proposes a -3% adjustment. On the other hand, Mr Lee argues for no adjustment by reason that the return frontage’s value, if any, for use for advertisement purposes is only trivial as its visibility to those pedestrians walking up the pavement from King’s Road is largely blocked by the existing unauthorized protrusion of shop front of the neighbouring unit on the other side of the service lane. 186.Overall, we consider there is a nominal added value for the return frontage and a downward 1% adjustment is appropriate. Layout 187.Both valuation experts agree that the layout of comparable E1 affects the usability of the shop but they differ in the adjustment magnitude. Mr Charles Chan proposes 3% adjustment, whereas Mr Lee proposes 5%. We prefer Mr Charles Chan’s adjustment in this instance. Business Condition 188.Mr Lee proposes an upward adjustment of 10% to reflect the enhancement of pedestrian flow and hence trading potential of shops in the area brought about by the completion of the hypothetical development and a newly completed subsidized housing development next door – Kei Wah Court. Mr Charles Chan argues that completion of one piecemeal development cannot enhance the overall environment or business potential of a locality significantly. He points out that there are only 144 units in the hypothetical development and 248 units in Kei Wah Court. The subject section of Marble Road is expected to be a “Yin Yeung Street” (陰陽街) (ie a street with huge difference in pedestrian flow and trading potential on different sides of the street) with the proposed hypothetical development located on the side with less pedestrian flow and trading potential. 189.The convenience store and the supermarket located next door do not have decorated shop fronts facing Marble Road apart from a small entrance to the supermarket for goods delivery. North Point Kai Fong Welfare Association is located to the immediate east of the Building with its main entrance opens onto Java Road, leaving a dull and unappealing walled frontage onto Marble Road. Kei Wah Court’s only main occupier entrance opens onto Tin Chiu Street. Its frontage onto Marble Road accommodates the carpark vehicular entrance and plant rooms only. Moreover, there are ample shopping provisions provided by Harbour North (a large scale shopping centre), Java Road Market and shops along King’s Road and Java Road. Hence, completion of the proposed hypothetical development will hardly change the retail pattern in the locality[36]. 190.We agree with Mr Charles Chan’s view. The redevelopment of the Lots, together with the nearby buildings, will unlikely bring in serious impact to the immediate environment or significant new business potential. Valuation of the reference unit 191.In view of the matters set out above, we determine, as marked in BOLD in the following table, the appropriate adjustments of the disputed figures between the parties. In our view, the adjusted unit rate of the agreed reference ground floor unit is $403,000 per sq m, after excluding comparable E5 – which is apparently an outlier. 192.Taking into account the agreed configuration of the ground floor units of the proposed hypothetical development and the agreed adjustments between the parties, the adjusted unit rate to be adopted in the residual method of valuation for the ground floor retail is determined at $408,000 per sq m : UPPER DOMESTIC 193.In respect of the GDV for the upper floors for domestic purpose, Mr Charles Chan and Mr Lee rely on recent transactions in 3 developments in the vicinity: 194.Mr Charles Chan arrives at an adjusted unit rate of $222,000 per sq m for the agreed reference unit, whereas Mr Lee suggests $242,896 per sq m. For the purpose of inputs in the residual valuation, Mr Charles Chan’s weighted average unit rate is $228,000 per sq m. Mr Lee is $249,000 per sq m. 195.The agreement and disagreement between the two valuation experts on the adjustment rates are set out as follows:-
196.The various adjustments applied by Mr Charles Chan are shown in the following table (whereas those adjustments applied by Mr Lee, if different, are shown in italics): Age 197.Mr Lee suggests that –
198.Mr Charles Chan counters that his adjustment rate of 1% per 1 year difference is sufficient to reflect difference in state of building fabric and building services between the comparables and the hypothetical development as all are of the similar age. He disagrees with Mr Lee’s concept of “brand new” building. He seeks support from Sound Advice Property Ltd & Ors v Mok Wai Ching & Anor, LDCS 18000/2020 (unreported, dated 21 December 2021), in that he and Mr Lee agreed an adjustment of 1% per 1 year difference and the Tribunal accepted their agreed adjustment. 199.We do not agree with Mr Lee’s proposed 1.5% adjustment to reflect the purported “extra difference”. With respect, this is a novel idea without supporting evidence or solid basis. We prefer to follow the normal practice of 1% per 1 year difference in this case. Fittings and Appliances 200.Mr Lee proposes a 4% adjustment to reflect the better and more up-to-date standard and specification of the fittings and appliances that can only be enjoyed by buyers of properties in new developments. Mr Charles Chan opines that no adjustment is needed as the differences in standard of fittings and appliances should already be covered by the “Age” adjustment. He further points out that, if Mr Lee is right, values of all new residential flats would depreciate by 4% immediately upon first occupancy. Mr Charles Chan suggests this is most unrealistic and unreasonable. We agree with Mr Charles Chan. Location 201.The two valuation experts disagree on the location adjustment for comparables in The Consonance at Jupiter Street. Mr Charles Chan opines that the accessibility to public transportation of The Consonance is only slightly inferior to the proposed hypothetical development and +10% adjustment adopted by Mr Lee is excessive. He adopts +5%. 202.Mr Lee’s suggestion that the proposed hypothetical development has a superb accessibility to the Island Eastern Corridor and hence to the cross harbour tunnels in particular the Eastern Harbour Crossing is neither here nor there. Mr Charles Chan has rightly pointed out that there is no carpark provision in the hypothetical development. 203.We prefer Mr Charles Chan’s adjustment of 5%. View 204.Both valuation experts agree on the adjustment on view aspects on most comparables except two situated at Novum East (F12 and F13). Mr Charles Chan, making reference to a property agency’s advertising photos, opines that F12 and F13 enjoy seaview and that the Hong Kong Funeral Home cannot be seen. He proposes -15% adjustment. On the other hand, Mr Lee opines that those two comparables, being on high floor, may only have a glimpse of the sea through gaps between distant buildings and indeed overlook the funeral home. He adopts -3% adjustment. 205.We consider that F12 and F13 only enjoy distant seaview which is partially blocked by nearby high-rise buildings. An adjustment of - 9% is appropriate for these small-size units (F12 - 21.7 sq m and F13 - 26.9 sq m SA). For the funeral home aspect, we do not agree with Mr Lee. The funeral home is only a 4-storey building, whereas F12 and F13 is at 30/F and 21/F respectively. In our view, the funeral home could not be seen by occupants of those two units. Unit rate of the agreed reference unit 206.In view of the matters above, the unit rate of the agreed domestic reference unit is determined at $223,500 per sq m as shown in Appendix 3. The Tribunal’s figures are in BOLD if different from the parties’ figures. 207.Based on the agreed parameters and adjustments for the hypothetical development, the weighted average unit rate for the upper domestic units is assessed at $229,000 per sq m (See Appendix 4). This is one of the inputs in the residual method of valuation. 208.We note that the 3rd respondent in her closing submission suggests that the unit rate should be at least $30,000 per sq feet ($323,000 per sq m). However, this is her personal opinion without any solid evidence in support. No expert evidence has been adduced. She only refers to some advertisements, offers for sale and magazine clipping of some property agencies (which are attached to her written closing submissions) for support. Not only that those documents merely show some asking prices of various properties (but not the actual transaction prices), but also that the inter-relationship between the asking prices of those properties and the Building is unaccounted for. Hence, they do not reflect the actual market price and cannot lend any support to the 3rd respondent’s contention. 209.Thus considered, we prefer to adopt the valuation reports prepared by the two professional valuation surveyors and their oral evidence, with appropriate adjustments as determined by the Tribunal as above. Interest Rate 210.Mr Charles Chan and Mr Lee differ in their opinion on interest rate: Mr Charles Chan adopts 5.5% by reference to the Hong Kong Dollar Interest Settlement Rate published by Hong Kong Association of Banks (which is very similar to the Hong Kong Interbank Borrowing Rate (HIBOR)) and the Hong Kong Best Lending Rate (BLR) published by HSBC[38]. At the time of RDV valuation (15 July 2024), the Hong Kong Dollar Interest Settlement Rate were 4.65149%, 4.70000% and 4.83835% respectively for 1-month, 3-month and 12-month. The HSBC BLR was 5.875%. 211.Mr Charles Chan submits that low interest rate environment has already ended – since March 2022, the US Federal Reserve consecutively approved 11 rounds of increase in interest rate with a total increase of 5.25% at the date of his report (August 2024). He cites Lands Tribunal’s adoption of 4% interest rates in many compulsory sales cases before the aggressive increase of Federal Reserve interest rate. Since then, HIBOR has increased significantly. He therefore considers it reasonable to adopt 5.5%. He acknowledges that the US Federal Reserve may adopt the trend of interest rate reduction from 2024, but interest rates in Hong Kong may not follow the pattern of the US Federal Reserve interest rate. It may take years for interest rate to come down to the level before March 2022. He adds that the Tribunal has adopted 5.5% interest rate in recent cases such as LDCS 23000/2019 (Billion Glory) with date of hearing in October 2023 and LDCS 16000/2021 (Smart Base) with date of hearing in May 2024. 212.On the other hand, Mr Lee opines that it is beyond doubt that the US Federal Reserve will start its first interest rate cut in September and it is expected that rounds of further cut will not be long. He comments that Mr Charles Chan’s suggestion that “it may take years for interest rate to come down to the level before March 2022” is purely baseless speculation. He proposes interest rates at 4.5%. 213.During cross-examination, Mr Lee concedes that the hypothetical developer will be charged at HIBOR plus a spread (around 1%). As the one-month Hong Kong Dollar Interest Settlement Rate was 4.65149%, Mr Mok submits that the rate of 4.5% proposed by Mr Lee is low. Even though Mr Lee says he looks at the trend of interest rate instead of purely the actual rate at the date of valuation, we agree with Mr Mok’s submissions that 4.5% is too low. 214.In the recent case of Wheelock (supra) heard in October 2023, the Tribunal accepted that under the then overall economic environment, both the Hong Kong Dollar Interest Settlement Rate and the Hong Kong Dollar BLR are relevant yardsticks to determine the appropriate interest rate to be applied for residual valuation of a small-scale property development comprising one multi-storey building. Having taken into account the interest rate movement trend prior to the date of RDV valuation (13 September 2023) and the then interest rates, in particular the rate of 3-month Hong Kong Dollar Interest Settlement Rate, the Tribunal determined an interest rate of 5.4%. 215.We note that at the date of valuation of this case (15 July 2024), the Hong Kong Dollar Interest Settlement Rate are generally lower than that at the Wheelock (supra) case by at least 0.3%. Moreover, it was the market expectation that the US Federal Reserve would embark on the trend of interest rate cut and that Hong Kong would follow suit, though might be at a different steps[39]. We consider it appropriate to adopt an interest rate of 5.2% for the residual valuation of the Lots. Developer’s Profit 216.As in most of the applications for compulsory sale, the two valuation experts disagree on the quantum of the developer’s profit in a residual valuation: Mr Charles Chan adopts 18% and Mr Lee adopts 15%. 217.Developer’s profit should reflect marketing risks for sales and lettings, risks of construction difficulties and cost overruns, and delays in obtaining relevant development approvals. Moreover, the developer needs to consider the competition and market demand for the type of development scheme and the development duration. 218.Mr Charles Chan cites various factors affecting the confidence in the economy of Hong Kong, including, inter alia, the US-China conflict, the war in Ukraine, high inflation environment in US and hence the aggressive plan for interest rate increase, and the unsuccessful recent land sales etc. He argues that the Tribunal usually adopts a profit of 15% before the start of the interest rate hike in 2022, a higher profit margin should be allowed to reflect the negative factors since then[40]. On the other hand, Mr Lee argues that the interest rate is coming down and the reasons for developers to ask for a higher return no longer exist. 219.We agree that the interest rate is expected to come down further. Yet, there are other factors, such as market condition, which may support developers’ demand for a higher return. We do not agree with Mr Lee’s suggestion that the residential market demand has revived following the abolishment of the additional stamp duty measures. Instead, we are persuaded by Mr Charles Chan that the effect of the abolishment has faded out and some developers have to reduce their prices of new projects to boost sales volume. Having reviewed the above matters, we are prepared to adopt 16.5% as the developer’s profit. Finding on RDV and the Reserve Price 220.The 3rd respondent, in her Notice of Opposition and in her oral closing submission (through her representative Madam Ho), confirmed that she does not oppose the grant of a sale order. On the other hand, in her written closing submissions dated 3 September 2024, she opined that her Unit 10E should at least worth $6,320,000 and the RDV should be at least 943,500,000. Yet, as expounded above, there is no relevant evidence of probative value, still less of expert evidence, to support her bare assertion. 221.Thus, subject to what we have stated above, we shall follow Mr Charles Chan’s residual valuation model (except the minor difference in treating the legal cost and stamp duty) as contained in Appendix A7 of the Joint Statement dated 6 August 2024[41] in the determination of the RDV which is reproduced at Appendix 5 to this judgment. We determine the land value of the Lots at $600,000,000 (ie accommodation value of $95,912/m2). 222.We shall adopt the estimated RDV of $600,000,000 as the Reserve Price for the auction of the Lots. Other Incidental Matters 223.The applicant proposes to appoint Mr Ma Ho Fai and Ms Kung Ying Chang, solicitors of Messrs Woo Kwan Lee & Lo, as the trustees for sale. Based on the information on their background and experience as set out in their letter dated 26 January 2024[42], we are satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on trustees under the Ordinance. The remuneration package proposed in the said letter appears to be reasonable. 224.The applicant has prepared a set of draft Particulars and Conditions of Sale of the Lots[43]. Subject to any amendment that may become necessary as a result of our ruling on the arrangement of auction above, the particulars and conditions of sale of the Lots by public auction submitted by the applicant are also reasonable. ORDER 225.Having considered all the relevant evidence and the submissions of the parties, we are satisfied that the redevelopment of the Lots is justified due to the “age” and “state of repair” of the Building and that the applicant has taken reasonable steps to acquire all the undivided shares in the Lots including those of the 1st, 2nd & 3rd respondents. 226.We therefore make the following orders:
COSTS 227.In accordance with the compensation approach as determined by the Court of Appeal in Good Faith Properties Ltd & Ors v Cibean Development Co Ltd [2014] 5 HKLRD 534, the respondents are entitled to costs notwithstanding the outcome of the application. 228.We make a costs order nisi that:
229.This Costs Order Nisi shall become absolute in the absence of application to vary by filing of Form 1 within the next 14 days. 230.We thank both Counsel for their able assistance.
Mr Mok Yeuk Chi, instructed by Johnson Stokes & Master, for the applicant Mr Ross Yuen, instructed by Waller Ma Huang & Yeung, for the 1st respondent The 2nd respondent, was not represented and did not appear The 3rd respondent, represented by Ms Ho Tung Hung, acting in person The 4th respondent, was not represented and did not appear The 5th respondent, was not represented and did not appear The 6th respondent, was not represented and did not appear The 11th respondent, was not represented and did not appear Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5
[1] before the Land (Compulsory Sale for Redevelopment)(Amendment) Ordinance 2024 came into effect on 6 December 2024. [2] The 6 registered shops as appearing in the records of the Land Registry are Shop A (No. 77 Marble Road), Shop B (No. 79), Shop C (No. 81), Shop D (No. 83), Shop E (No. 85), Shop F (No. 87) [3] After the death of the 7th Respondent and Madam Tao, the 8th Respondent has been the sole surviving joint tenant of portion of roof unit no. 81 and Madam Tao before her death was the sole surviving tenant of portion of roof unit no. 81 and 83 and portion of roof unit no. 83. [4] Madam Tao’s executor confirmed to the applicant that she did not wish to be joined as a respondent and that the estate of Madam Tao has no interest in the portion of the roof units No. 81 and 83 and portion of roof unit no. 83. Hence, the executor of Madam Tao was not joined as a respondent. [5] Bundle B/66-68 [6] §§19-20 of the applicant’s Opening Submission. [7] §3(II) of the applicant’s skeleton closing submissions [8] Offices E, F and I on the 1st Floor. [9] Bundle E/49 [10] Rebuttal Condition Survey Report by Mr Kenneth Chan : Bundle C5/1876/§5.4.7.6 [11] Bundle B /293/§4.6.20.2 [12] Bundle E/41-42 [13] Mr Mok’s closing submissions §§78-81 [14] in Able Luck Development Ltd & Ors v Public Global Investments Ltd & Ors LDCS 7000/2014 (unreported, dated 6 October 2017) §§180-182 [15] Top Sail International Ltd v Cheng Kai Ming, LDCS 18000/2010 (unreported, dated 15 November 2011) and Charmlink Ltd v Lee Tong Hing & Ors, LDCS 16000/2010 (unreported, dated 29 November 2011) [16] §145(5) of Intelligent House (supra) [17] Bundle C3/1213-1214 §§4 &5 [18] Bundle C3/1215-1216 §§6-8 [19] Bundle C3/1215-1216 §§9-10 [20] Bundle C3/1216 §8 [21] Bundle C1/0022 [22] Bundle C12/5263-5264 [23] Bundle D1/§§14.1, 14.3 & 14.5 of Mr So’s Structural Assessment Report [24] Bundle D1/201/0013 §7.5 [25] Bundle D1/201/0013 §7.6 [26] Bundle D5/204/2020 §§5.3 & 5.4 [27] Bundle C6/200/2195 §10 [28] Bundle C1/197/0020-0026 §4.5.3 [29] Bundle C6/200/2195 §9 [30] Fortress Jet Ltd & Ors v Tang Hoi Yip and Cheung Sau Chan Property Ltd & Ors, LDCS 3000/2015 (unreported, dated 11 August 2017) §37, Fancy Million Ltd & Ors v Year Glory Ltd & Ors, LDCS 15000/2018 (unreported, dated 23 November 2021) §§103-104; Asia Rich Incorporation Ltd & Ors v Wealth Step Holdings Ltd & Anor, LDCS 15000/2019 (unreported, dated 1 February 2023) §59. [31] Bundle D5/204B/2450 §23 [32] The two tables of Mr Lo at Bundle D3/203/1052-1053 §§6.3.1 & 6.3.2. [33] Bundle D5/204/2033 Mr So’s report §22.1 [34] Bundle D5/2036 §2 [35] Bundle D5/204/2036 §3 [36] Bundle B1 /196C/592 [37] Bundle B1/196B/593 [38] Bundle B1 196C/582 [39] The Fed announced on 18 September 2024 a cut of 50 basis points. Commercial banks in Hong Kong began to follow by adjusting best lending rates, albeit only by 25 basis points. On 7 November 2024, the Fed made a further cut of 25 basis points. Commercial banks in Hong Kong reduced the BLR by the same amount. [40] Bundle B1 /196C/583 [41] Bundle B1/196C/637. [42] Bundle A4/187/1811-1812 [43] Bundle A4/188/1813-1943. [44] The Land (Compulsory Sale for Redevelopment) (Amendment) Ordinance 2024 (the “Amendment Ordinance”) came into effect on 6 December 2024 amending the Land (Compulsory Sale for Redevelopment) Ordinance (“Cap 545”). Section 9(2) and section 1(a)(ii) of Schedule 3 of the amended ordinance provide that notwithstanding that the application for an order for sale was made before the commencement of the Amendment Ordinance, the applicable redevelopment period for an order for sale of 2 or more lots to be made after 6 December 2024 should be 7 years after the date on which the purchaser of the lots becomes the owner of the lots. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment