Precise Lucky Ltd v. Ko Kai Kwun Miguel and Others
Read the full judgment text of LDCS 18000/2022 on BabelCite. This LDCS judgment was delivered on 21 October 2025.
1. This is the applicant’s application for a compulsory sale order issued on 31 August 2022 (“the Application”) under section 3 of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”). The applicant seeks to sell all the undivided shares of the Remaining Portion of Subsection 1 of Section H of Inland Lot No 1460 (“the Lot”) on which a building known as Comfort Building (“the Building”) with a postal address of Nos 59 & 61 Wong Nai Chung Road and Nos 36 & 38 Ventris R
Cited by 2 cases · Cites 32 cases
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LDCS 18000/2022 [2025] HKLdT 63 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO 18000 OF 2022 __________________________ BETWEEN
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________________ J U D G M E N T ________________ BACKGROUND 1.This is the applicant’s application for a compulsory sale order issued on 31 August 2022 (“the Application”) under section 3 of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”). The applicant seeks to sell all the undivided shares of the Remaining Portion of Subsection 1 of Section H of Inland Lot No 1460 (“the Lot”) on which a building known as Comfort Building (“the Building”) with a postal address of Nos 59 & 61 Wong Nai Chung Road and Nos 36 & 38 Ventris Road, Hong Kong is erected. 2.Because of the topography of the site, the Building consists of two portions, one facing Wong Nai Chung Road, which is usually identified as the Front Portion, and the other facing Ventris Road, which is usually identified as the Rear Portion. The two portions are connected by a common staircase in the middle which serves both portions. Additionally, each portion is served by a lift and another staircase. Thus, there are 3 staircases and 2 lifts altogether. 3.The Building was built in accordance with a set of building plans with reference no 2/3281/60, approved by the Building Authority from 1961 to 1964. The Approved Building Plans have two sets of Ground Floor (“G/F”) and 1st Floor (“1/F”) Plans, one approved on 19 October 1963 and the other approved on 8 July 1964. With reference to a Permit to Occupy a New Building (Permit No H182/64) issued on 8 July 1964 by the Building Authority (“the Occupation Permit”) [1], the G/F and rear part of 1/F appeared to be built in accordance with the plan approved in 1963, while the front part of the 1/F appeared to be built according to the plan approved in 1964. 4.According to the Approved Building Plans, the Front Portion, namely Nos 59 & 61 Wong Nai Chung Road, consisted of a shop on G/F fronting Wong Nai Chung Road and two domestic units on each of the 1/F to 9/F per floor. The Rear Portion, namely Nos 36 & 38 Ventris Road, consisted of a lobby at the basement (at the Rear Portion of 1/F of the Front Portion) and 2 domestic units on each of the G/F to 8/F (at the level of the 2/F of the Front Portion to what the Occupation Permit identified as 10/F). Thus, altogether 1 shop and 36 domestic units were planned: 5.According to the Land Registry records, however, the G/F shop has been divided into two shops, namely G/F of 59 Wong Nai Chung Road and G/F of 61 Wong Nai Chung Road respectively. Also, the lobby at the basement of the Rear Portion has been converted into 2 domestic units, namely Basement of 36 Ventris Road and Basement of 38 Ventris Road. Currently, there are 2 shops and 38 domestic units in the Building. 6.According to the Deed of Covenant dated 20 March 1968 and the Land Registry records,
7.Mr Mok Yeuk Chi (“Mr Mok”), counsel for the applicant, summarized in his opening submission that as at the commencement of the trial on 2 December 2024, the applicant owned all the units (and the allotted undivided shares) save those owned by the following remaining respondents (“Remaining Respondents”):
8.Whilst Mr Mok acted on behalf of the applicant, the Remaining Respondents were legally represented, if any, as follows:
9.Thus R5 and R8 have not been legally represented and their attendance had been excused. The Evidence 10.For the purpose of the present proceedings, the applicant and R3, R4, R6 & R7 have produced the following expert reports:
11.The applicant also produced their factual witness, Mr C K Yu (“Mr Yu”)’s witness statement dated 30 June 2023, whereas R3, R4, R5 & R6 filed their witness statements dated 21 December 2023. Mr Yu and R6 then filed their reply/ supplemental witness statement dated 30 April 2024 and 31 July 2024 respectively. WHETHER THE APPLICANT IS ENTITLED TO MAKE THE APPLICATION 12.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. 13.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. 14.The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice (“the 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)”. 15.As mentioned above, the Occupation Permit was issued on 8 July 1964, ie not less than 50 years before the date of the Application. The Notice is therefore applicable and the threshold percentage should be 80%. 16.At the time of the filing of the Application on 31 August 2022, the applicant owned 80.95% of the undivided shares of the Lot. We agree therefore that the applicant was entitled to make the Application under section 3(1) of the Ordinance. EUV AS AT 10 JUNE 2022 17.As afore-mentioned, Mr Chan and Dr Wong had set out the disputes they had on the EUV assessment of the various units of the Building in their 1st joint statement dated 6 March 2024. 18.One main dispute was whether values had to be given to various unauthorized building works within the units:
Unauthorized Structures Inside G/F, Nos 59 & 61 Wong Nai Chung Road 19.For the two G/F shops fronting Wong Nai Chung Road, there appear to be “unauthorized extensions” beyond the rear boundary wall onto the “unexcavated” portion of the Lot. A cockloft built within each of the two shops with a staircase leading thereto from the G/F has also been built in the extended area but the extent of this floor is even more intrusive. In addition, the open yard between the front portion of each of the two shops and their respective rear portions has been enclosed to become part of the shop premises. In respect of G/F, 61 Wong Nai Chung Road, there exists another unauthorized cockloft over the rear portion of the shop area.[2] 20.Indeed, such “unauthorized extensions” beyond the rear boundary wall in basement of premises are not unfamiliar. In Hong Kong Telephone Company Limited v The Hong Kong Land Company Limited, LDLA 5/1982 (unreported, 5 November 1982), the Tribunal considered market rent appropriate for the premises although there was an illegal addition in the form of an enclosed void at ground level having been converted into a playroom. In that case, “(b)ecause of the steep slope down from the road level the foundations of the building continue for a considerable further distance below the lower level floor opening onto a paved open garden area. The area of these foundations below the lower level floor has been closed to provide a playroom”. In that case, therefore, the conversion created a 4th storey but the Government Lease limited the building to only 3 storeys. The Tribunal held that while the enclosed foundation area used as a playroom did not form part of the legal gross floor area, it was part of the suit premises and must for valuation purposes be taken into account as ancillary to the residential area, in the same way as the garden and car park areas were likewise ancillary. The Tribunal was satisfied that its existence could reasonably be expected to attract a slightly higher rent than if it did not exist, in the same way as other ancillary features add value to premises. The possibility that the landlord may at sometime have to remove the glass doors enclosing the area could not be discounted, nor could the probability that it is allowed for the time being. 21.More recently, in Gainfield Investment Limited & Others v Legend Time Limited & Others, LDCS 16000/2014 (unreported, 17 October 2016), the Tribunal observed at §42 as follows:
22.In that case, one of the respondents reported the unauthorized extension to the Buildings Department. Subsequently, the Building Authority issued a letter dated 7 April 2016 which read as follows:
23.Mr Lam, who had worked with the Buildings Department for 37 years, stated in his report dated 17 July 2024 that the extensions at the rear of the two shops were formed by removing the soil under area originally designated as “Lobby” on the G/F abutting Ventris Road. Mr C M Wong rebutted however that the word “unexcavated” as appearing on the G/F plan of the Building misleading. Referring to the framing plans of the Building[3] which was approved by the Building Authority on 29 October 1963 subsequent to the approval of the General Building Plans on 19 October 1963, Mr C M Wong confirmed that the structural elements were constructed according to the framing plans. He asserted that there should have been excavation in the first place when foundation of the building works was carried out. The “unexcavated” portion was supposed to be backfilled after the construction of the structural elements. 24.When Mr C M Wong was asked by the bench if such removal of the substantial volume of backfill would be likely after the Building was completed, he expressed his opinion that in the most likely scenario, there was simply no backfilling and the owners of the G/F premises made use of it from the very beginning[4]. The Tribunal then took judicial notice that in the past, due to policy, the Building Authority usually takes action in the order of priorities. The Tribunal accepted, as what the Tribunal did in Hong Kong Telephone, supra, that there should be value attached to this appurtenance. 25.Indeed, G/F, 59 Wong Nai Chung Road & 61 Wong Nai Chung Road were transacted together once under one Agreement for Sale and Purchase dated 24 May 2021[5]. Attached thereto was a “Supplemental Agreement for Alterations with a Property” dated 10 May 2021 annexed, stipulating that the purchaser, Lion Star Oriental Limited, was aware of additions and alterations and was willing to accept the units and raise no objection or requisition on title. 26.Mr Chan happened to be also the valuation expert on behalf of the applicant in Gainfield Investment. In the present case, Mr Chan followed suit and applied a value in respect of the “unauthorized extensions”. In addition, he assigned values to the mezzanine floors and the enclosed yard following the market reality principle expounded by the Tribunal ever since Suen Sun-yau v. Director of Buildings and Lands [1991] HKDCLR 33, Cheer Capital Limited v Unibase Investment Limited & Others, LDCS 5000 & 6000/2013 (unreported, dated 12 June 2015) at §64 and Gainfield Investment, supra[6]:
27.Dr Wong opined otherwise and considered there was a significant enforcement risk if they were made known to the Buildings Department. Dr Wong did not assign any value of these alterations and therefore his converted areas of the shop premises are as follows:
28.Dr Wong had even deducted reinstatement cost estimated by Mr Lau in the sum of $860,000 from his valuation. 29.In Transport for London (London Underground Limited) v Spirerose Limited [2009] 1 WLR 1797, [2009] UKHL 44, Lord Neuberger pointed out at paragraph 50 as follows:
30.More recently, in Newbigin (VO) v SJ & J Monk (A Firm) [2015] 1 WLR 4817, Lewison LJ discussed “the reality principle” in these terms:
31.In Director of Lands v Yin Shuen Enterprises Ltd & Another [2003] 2 HKLRD 399 , (2003) 6 HKCFAR 1, the Court of Final Appeal expressed at §14 its cognizance of market reality as follows:
32.The Court of Final Appeal overruled the judgment of H H Judge Cruden in Suen Sun Yau only because it necessarily rejected his view that the compensation payable to the owner on resumption should reflect more than the value of the land subject to the restrictions in the lease because of the prospect of obtaining a modification or discharge of the restrictions[8]. In the present case, however, Part 1A in Schedule 1 to the Ordinance only requires assessment of market value of each property on the Lot on a vacant possession basis; there is no similar provision like sections 11(3)(a) and 12(b) of the Lands Resumption Ordinance that qualifies the definition of market value. 33.The market reality principle was also explained by Lewison LJ earlier in Harbinger Capital Partners v Caldwell (As the Independent Valuer of Northern Rock Plc) [2013] EWCA Civ 492 at §23. Where a valuation is made on the basis of a notional sale in the open market then, the hypothetical transaction “is only a mechanism for enabling one to arrive at a value of particular property for a particular purpose”. He added that “it does not entitle the valuer to depart from the real world further than the hypothesis compels. The various hypotheses must be taken no further than their terms make strictly necessary”. A little later, he added this: “Where the hypothesis inevitably entails a particular consequence, the valuer must take that consequence into account” but “where the alleged consequence is not inevitable, but merely possible (or even probable), then the consequence cannot be assumed to have happened”. This principle was affirmed and adopted by the Court of Final Appeal in Penny’s Bay Investment Co Ltd v Director of Lands (No. 2) (2017) 20 HKCFAR 465 at §82. 34.In spite of the above, counsel for the respondents argued that the unauthorized building works should not be given any value as a matter of law. They referred to the original Land (Compulsory Sale for Redevelopment) Bill which required the assessment of “market value” “on a vacant possession existing use basis”. However, the phrase “existing use” was discarded from the Bill to address the concern of the Bills Committee that “existing use might be unauthorized eg operation of a restaurant within domestic premises” and it would “encourage owners to let out their premises for unlawful uses” [9]. 35.Their attention was misdirected. The rationale for the deletion of “existing use” was explained in the preceding paragraph of the Minutes:
36.Mr Yuen for R6 referred in particular to Bennion on Statutory Interpretation (7th Edition) at §26.6 which states that:
37.However, if the legislature were really to exclude the value of the unauthorized building works as well as “existing use”, there was good example of, for instance, sections 11 and 12 of the Lands Resumption Ordinance, Cap 124 but the legislature did not take the opportunity to adopt. Instead, as the then Principal Assistant Secretary for Planning, Environment and Lands explained later at para 18 of the Minutes, “the intent of assessing the value of the property on an existing use basis was meant to disregard its redevelopment potential. In response to members, the Administration agreed to delete the words "and existing use basis" from Part 2 of Schedule 1. An explicit provision would be added to provide that the assessed market value should not take into account the redevelopment of the property or the lot.” There was no intention whatsoever to qualify or restrict the definition of “market value” as in the case of the Lands Resumption Ordinance. More importantly, there was no members’ concern recorded about unauthorized buildings works. 38.While assigning value to the enclosed yard would certainly increase the EUV of an owner’s interest, and its pro rata share of the proceeds of sale of the Lot, such “enrichment” is not unjust because such value for “unauthorized use”, which is not illegal[10], is generally recognized in the market as demonstrated by the authorities stated above. In Monat Investment Ltd v All Person(s) in Occupation of Part of The Remaining Portion of Lot No 591 in Mui Wo DD 4 No 16 Ma Po Tsuen, Mui Wo, Lantau Island [2023] 2 HKC 627, [2023] 2 HKLRD 1311, Yuen JA (as she then was) remarked at §62.2 that:
39.Referring back to Transport for London, supra, we do not consider any particular evidence be needed to prove the existence of market value of an unauthorised structure, save for quantum, when this is recognized as a market reality. In Almond v Ash Brothers & Heaton Ltd [1969] 2 AC 366, Lord Pearce stated, at p 382 that “one only excludes the human realities to a limited and necessary extent, since it is only the human realities that give any value at all to hereditaments.” And in the same case, Lord Wilberforce described the reality principle at pp 385—386 as “mainly devised to meet, and it does deal with, an obvious type of case where the character or condition of the property either has undergone a change or is about to do so.” 40.We then drew Dr Wong’s attention to the market practice if such an owner put the premises in the market for sale or letting without bothering to carry out the “reinstatement works”. Certainly the estate agents would not advise the owner otherwise as they would refrain from giving such an advice on the excuse that they are not trained as professional in such regard. Neither the prospectively buyer nor tenant would be in the position to do so or the owner would simply tell the prospectively buyer or tenant to pass on. Thus, the prospectively buyer or tenant, if he/she is interested in the property, has simply had to take and eat it on “as-is” basis. Of course, in that event, the prospective buyer or tenant would have to pay something for the extra. 41.A good example was the sale and purchase of ground floor and yard of No. 2 Cannon Street, Causeway Bay in Polyset Limited v Panhandat Limited, HCMP 1840/1998 (unreported, dated 23 November 1999). The sale and purchase was dated 23 May 1997 but prior to the completion date on 2 April 1998, the Buildings Department issued an advisory letter dated 27 March 1998 referring to three items of illegal structure or building works on the property[12]. There was only a provision to rescind the contract but not any compensation as suggested by Dr Wong in the present case. 42.A similar incidence was found by the Tribunal in Welland Resources Limited & Another v Mega Joyful Limited, LDCS 6000/2022 (unreported, 11 August 2023) where a yard of about 26.5 sq m was covered and enclosed as part of the unit. The purchaser of the G/F did request a deduction of $40,000 from the purchase price agreed at $7,380,000 (ie a deduction of 0.5%) upon finding a Notice issued by the Building Authority under section 24(C) dated 3 January 2011 which required the demolition of the structure. The Tribunal remarked at §27 that the requested reduction in purchase price was nominal and appeared to be a negotiation tactic rather than a genuine concern about the enforcement of the Building Notice. In any event, no enforcement action happened thereafter in the 12 years after January 2011. 43.In Join Union Investment Limited v China Tree Investment Limited, [2016] 2 HKLRD 901, there was a subdivision of the ground floor premises into four shops. The structural engineering expert in that case could not cite any example or authority where, in similar circumstances, the Government or the Building Authority took enforcement action requiring demolition of the partitioning and reinstatement of the property to its original state. Chow J (as he then was) was of the view that there was no real risk of enforcement by the Government or Building Authority in respect of the alleged unauthorized partitions. See §§97-103 of the judgment. 44.At §107 of the judgment Chow J (as he then was) observed that:
45.As stated in §25 above, the two shops on G/F were indeed sold together via an Agreement for Sale and Purchase dated 24 May 2021[13]. This happened some 9 months prior to the acquisition by the applicant on 23 Feb 2022. Apart from there being a Clause 22 stating that “The Purchaser agreed to be sold and is satisfied with its present state and condition and takes it as it stands”, according to a “Supplemental Agreement for Alterations with a Property” dated 10 May 2021 annexed to the Agreement for Sale and Purchase, it was agreed by the vendor and purchaser that:
46.In fact, the Agreement for Sale and Purchase was subject to a tenancy (in Chinese) dated 3 May 2021 in favour of the sitting tenant of G/F, No 59 Wong Nai Chung Road, ie Mr Law of Lordmende Decorators & Furnishers Co though the tenancy was only for a term of half a year. There was a remark towards the end of the tenancy as follows:
(which is translated as: as portion of the subject premises contains additional works, in case the Buildings Department of the Government requests demolition, the tenant should co-operate with the landlord to deal with it without raising dispute or seeking compensation.) 47.Thus, the risk of enforcement that a prospective tenant knowingly takes to rent a property with illegal unauthorized works could be regarded as the value attributable to such structures[14]. This also defeats Mr But’s argument in his Closing Submission dated 24 February 2025 at §168 that “the presence of UBWs also drives away potential buyers who require high standing and/or tenants who demand security of tenure and enjoyment”. Mr But’s argument also defies market reality. 48.Dr Wong conceded that he had no experience in dealing with such sale or letting in the market. 49.Initially, there was a suspicion that the purchaser, Lion Star Oriental Limited, may somehow be related to the applicant and this special purchase should be disregarded. Dr Wong conceded however that there is no proof to support this speculation. 50.Mr Lam’s opinion on the enforcement risks of those unauthorized works afore-mentioned failed to address the market reality. He simply stated the enforcement policy of the Building Authority as though he is still working with the Buildings Department. For instance, he stated that the landslide incident at Redhill Peninsula in September 2023 and other fatal incidents of unauthorized building works had caused the Buildings Department to have declared to the public regarding its policy against erection of unauthorized building works and its “serious stance” towards enforcement[15]. Mr Lam even referred to a letter dated 6 November 2023 issued by the Director of Buildings on “Compliance with the Buildings Ordinance – Concerning Erection of Unauthorized Building Works.”[16] However, the relevant date for assessing the EUV was 10 June 2022. 51.In spite of Mr Lam’s earnest reciting of the enforcement policies of the Buildings Department, the hard fact is that the unauthorized works complained of remain as they are as at the date of trial and as at the date of joint inspection on 3 December 2024. Like Welland Resources, supra, the Building Authority did issue a Notice under section 24(C) of the Buildings Ordinance to the then owner of G/F, 59 Wong Nai Chung Road on 23 May 2008 stating that: “A structure erected on the yard at the side” had been erected in contravention of the Buildings Ordinance[17]; the Building Authority did not however issue a statutory removal order under section 24 of the Buildings Ordinance. The Building Authority has not taken any enforcement action since then. 52.In Bwllfa and Merthyr Dare Steam Collieries (1981) Ltd v Pontypridd Waterworks Company [1903] AC 426 HL, owners of coal mines under and near waterworks gave the undertakers notice under s 22 of the Waterworks Clauses Act, 1847, that they intended to work the coal. The undertakers replied by a counter-notice requiring the mine owners not to work and stating their willingness to make compensation. In an arbitration under the Act and the Lands Clauses Acts to assess the compensation, the mine owners gave evidence to prove that coal rose in value after the date of the counter-notice. The House of Lords held that where the valuation task involves a forecast into the future, then if that valuation is later judicially reviewed, it is proper to take into account facts not known at the date the forecast was made. Lord Macnaghten at page 431 of the judgment justified this sensible approach in these term:
53.Applying this Bwllfa principle, which has derived its name from the above case, we consider it is sensible to take into account the value of the unauthorized works as they were as at 10 June 2022. Basement Structures, Nos 36 & 38 Ventris Road 54.Pursuant to the Approved Building Plans and Occupation Permit for the Building, the Basement of the Rear Portion of the Building was designated as a lobby for non-domestic use and was accessible from the side of the Building via an exit route leading to the right of way (“the Right-of-Way”) that connects the adjoining lots on both sides[18]. 55.However, according to the land register records from the Land Registry, the lobby on the Basement has been divided into 2 units, namely Basement, No 36 Ventris Road and Basement, No 38 Ventris Road. 56.By virtue of the following paragraphs in the Deed of Mutual Covenant dated 17 August 1964, the Basement (and the Ground Floor) have never been intended for the common use of the occupiers of the Building:
57.The two Basement units have been used as two domestic units, and the common staircase from G/F to 8/F of the Rear Portion now runs down to the Basement, providing access to the two Basement units. Nevertheless, there are no relevant plans registered in the Land Registry or otherwise showing the boundaries and layouts of the sub-divided units of the Basement. Neither is there any record showing how the building plan in respect of the Basement was amended. 58.As regards Basement, No 36 Ventris Road, Dr Wong remarked in his Valuation and Rebuttal Report dated 20 December 2023 at para 5.26 as follows[21]:
59.As regards Basement, No 38 Ventris Road, Dr Wong remarked in his Valuation and Rebuttal Report dated 20 December 2023 at para 5.26 as follows[25]:
60.Further at para 7.104, Dr Wong stated his valuation approach in respect of these two Basement units[28]:
61.We do not agree. 62.Firstly, Dr Wong’s approach has defied the principle that property must be valued rebus sic stantibus as stated by the English Court of Appeal in Newbigin (VO), supra. 63.Secondly, in Wing Hong Investment Company Limited v Fung Sok Han & Others, [2016] 1 HKLRD 1, Chan J found at §235 of the judgment that there is no provision in the Buildings Ordinance to suggest that it is an offence to adopt a user of premises which is materially different from that stated in the occupation permit although the Building Authority may serve an order on the owner under section 25(2) to prohibit the intended user or require the changed user to be discontinued if it is found that the changed or intended new user is not acceptable. 64.Indeed, according to the Preliminary Agreement for Sale and Purchase of Basement, No 38 Ventris Road dated 14 October 2008, the purchaser had been invited to inspect the unit, and the purchaser had declared， agreed and accepted that the purchase of the unit was on “as-is” basis. The purchaser also declared that he clearly knew that the unit had not received approval from the Buildings Department or Lands Department or other government departments for domestic use and the alterations of the unit. However, the purchaser declared not to make any further inquiries or objections to the use and alterations of the unit, nor may it be used to refuse the transaction of the unit. The relevant wordings in the Preliminary Agreement for Sale and Purchase (in Chinese) are recited as follows:[29]
65.Furthermore, it is noted that the Building Authority issued a Building Order to the owner of Basement, No 36 Ventris Road on 11 July 2006 regarding two unauthorized building works (ie “A metal cage attached to the external wall at the front” and “structures on the rear exit route on basement floor, blocking the means of escape.”) However, the Building Authority did not mention that the unit violated the occupation permit and Approved Building Plans of the property, nor did it require the owner to reinstate the unit to a “Lobby”. 66.Similarly, the Building Authority issued a Building Order to the owner of Basement, No 38 Ventris Road on 11 July 2006 regarding two unauthorized building works (ie “A metal cage attached to the external wall at the front” and “structures on the rear exit route on basement floor, blocking the means of escape.”). Again, the Building Authority did not mention that the unit violated the occupation permit and Approved Building Plans of the property, nor did it require the owner to reinstate the unit to a “Lobby”. 67.By reference to the land register records, neither the “non-conforming” domestic use of the two basement units was ever mentioned nor challenged by the Building Authority and other government departments. On the other hand, Basement, No 36 Ventris Road was transacted 6 times with none of its Agreement for Sale and Purchase ever mentioning any unauthorized building works or unauthorized domestic use. Likewise, Basement, No 38 Ventris Road was transacted twice, one in 2008 and the other in 2010, both of which with an annexure to the Agreements for Sale and Purchase clearly stating that the purchasers knew the unit had not received approval from the relevant Government departments for (1) domestic use and (2) the alterations and make no objection to the same. 68.In Peace Ever Limited & Others v Chan Sui Ching & Others, LDCS 28000/2018 (unreported, dated 1 August 2023), the Tribunal cited an example in respect of Caineway Mansion at 128-132 Caine Road which has its “office” units on lower floors all converted into domestic units. In that example, the Buildings Department in fact declined to take any enforcement action. 69.In light of the history of the sub-division of the “Lobby” into two domestic units and the market reality principle discussed earlier, we again agree with Mr Chan that the two Basement units should be assessed accordingly as follows[30]:
Other Unauthorized Structures 70.There exists an open flat roof from the kitchen area at the rear part of G/F, No 36 Ventris Road[31]. In fact, this open flat roof is built on the top of the L-shape extension of Basement, No 36 Ventris Road. The unit had been transacted 7 times and each time with an acknowledgement of certain alterations. 71.There exists also a small staircase landing outside the back door of 8/F, 38 Ventris Road which has now been enclosed for use in conjunction with the unit. The unit had been transacted 6 times without any mention of the unauthorized building works or encroachment. 72.On the premise of the above discussions, we similarly prefer Mr Chan’s approach in assigning a value to them[32]:
Assessment of Market Value (“EUV”) of Shop Premises on G/F 73.On the basis of the above, the particulars of the two shops are set out as follows:
74.Mr Chan and Dr Wong agreed to adopt G/F, No 59 Wong Nai Chung Road as the Reference Shop Unit. On the basis of the following transactions, Mr Chan and Dr Wong assessed the EUV of the Reference Shop Unit at $340,000 per sq m and $317,600 per sq m respectively:
75.Mr Chan and Dr Wong had the following agreements and disagreements on the adjustments applicable[35]:
76.In any event, Mr Chan had applied the following adjustments as shown in the table below while the adjustments applied by Dr Wong, if any and if they are different, are shown in parenthesis:
Choice of Comparables and Location Adjustments 77.The location of a shop is of paramount importance and is therefore the chief factor affecting value of the shop. Shops only a short distance apart can vary considerably in values. Indeed, in Modern Methods of Valuation by Shapiro, Mackmin and Sams, 12th edition (2019), Routledge, at p 327, the location factor is explained as follows:
78.The subject locality, generally known as the Happy Valley area, is a traditional residential neighbourhood in the middle part of Hong Kong Island for the higher income group. Wong Nai Chung Road is, in effect, running around the Happy Valley Racecourse and Sports Ground which is the landmark of the district. Retail shops in the immediate neighbourhood along the subject section of Wong Nai Chung Road are mainly characterized by luxury home designers and furniture stores. G/F, No 59 Wong Nai Chung Road has been occupied by one of such furniture shops - Lordmende Decorators & Furnishers Co at least since 2009. 79.Comparable R1 is situated off the busy junction of Sing Woo Road and King Kwong Street on a side street beside the Wong Nai Chung Municipal Service Building which houses a wet market and indoor games hall. There are no shops at street level on the opposite side of this comparable. On the other hand, King Kwong Street is the busiest hub of Happy Valley where a variety of trades including banks serve the daily necessities of the residents in the locality are located. For instance, this comparable is occupied by a hardware chain store but with its neighbours all occupied by trades that are complementary to the wet market. We agree with Dr Wong that this location has a totally different trade mix when compared with the subject. If this transaction were to be taken into consideration at all, we would rather prefer Dr Wong’s nil adjustment for location to Mr Chan’s positive adjustment, not to mention the latter adjustment came up to as much as +20%. 80.Comparable R2 used to be occupied by an Italian restaurant but has now fallen vacant. Mr Chan considered this shop too small when compared with the Reference Shop Unit and did not adopt this as comparable. On the other hand, we do not agree with the nil location adjustment as proposed by Dr Wong. We consider a downward adjustment of 20% more appropriate. 81.Comparable R4 is situated obliquely opposite Comparable R2 across King Kwong Street. Again it was occupied by a restaurant and next to it across the entrance to that building is a branch of Bank of China (Hong Kong), being situated at G/F, No 11 King Kwong Street. Other banks located in the vicinity are shown as follows:
82.Again, therefore, we consider a downward adjustment of 20% more appropriate than Mr Chan’s +15% adjustment or Dr Wong’s nil adjustment. 83.Though Comparable R5 is also situated on Wong Nai Chung Road, it is located far away from the Building. This comparable is situated closer to the Causeway Bay district, closer to the junction of Wong Nai Chung Road and Leighton Road where a greater variety of trades are provided. In fact, this comparable shop is occupied by a Japanese restaurant and next to it is an estate agency. In addition to residents of nearby developments, for example, The Leighton Hill (which comprises 8 blocks of high-end residential units offering 543 units) and other residential developments on Ventris Road, pedestrians passing by here also include people going to Craigengower Cricket Club, Hong Kong Football Club and the main entrance to Happy Valley Racecourse and Happy Valley Sports Ground which lie on the opposite side of this section of Wong Nai Chung Road. Again, we considered a downward adjustment of 10% more appropriate than Mr Chan’s +15% adjustment or Dr Wong’s nil adjustment. 84.Comparable R6 is another transaction of a shop situated on King Kwong Street. It is in fact not far away from Comparable R2, being separated by a hair salon and the entrance to that building. Likewise, if this transaction were to be taken into consideration at all despite it being dated, we would consider a downward adjustment of 20% more appropriate. 85.Comparable R7 was another dated transaction. Perhaps it was chosen by the valuation experts because it is situated on Wong Nai Chung Road. However, it is located in close proximity to the junction between Wong Nai Chung Road and Blue Pool Road where a bus station is situated. While this comparable is occupied by a kitchen designer, it is situated next to a recycling store towards the junction of Wong Nai Chung Road and Blue Pool Road. Mr Chan was content to apply nil adjustment for location but +15% for comparables situated on King Kwong Street. Did he mean that a recycling store is ready to or could afford to pay more in terms of unit rate than a bank? 86.Mr Chan commented on its location in his Rebuttal Report dated 22 January 2024 as follows[36]:
87.At this juncture, we note that Mr Chan tried to justify his location adjustments by comparing the rentals reserved in this comparable with that of R4, suggesting the location on Wong Nai Chung Road being superior than that on King Kwong Street[37]:
88.While this appears to be the case as suggested by Mr Chan, this is contradicted by the rent being paid by the sitting tenant of G/F, No 59 Wong Nai Chung Road at $65,000 per month[40]. In the absence of better direct rental evidence to the contrary, the actual rent would generally be the best indicator of the market rent[41]. On the basis of the converted area of 172.3 sq m, therefore, the unit rental for the Reference Shop Unit was $377.2 per sq m only[42]. The RVD Private Retail Rental Index as at May 2021 was 171.2 which was not significantly different from that as at December 2020. 89.Mr Chan’s proposition of conglomeration of high-quality interior design companies etc along this section of Wong Nai Chung Road might be valid some time in the past but for instance, this Comparable R7 had fallen vacant since February 2022, and remained so until mid-2023. And so had been Shop B, Ocean View Mansion at No 55 Wong Nai Chung Road (which is the subject of another compulsory sale application, LDCS 17000/2022), which is still vacant. 90.In Valuation: Principles into Practice, 6th Edition, 2008, Estates Gazette, the author on the Chapter on “Retail Properties” stated at p 123 as follows:
91.For the time being, we adopt a location adjustment of -15% in preference to Dr Wong’s -5%. Size Adjustment 92.While the difference in opinion between the two valuation experts is not significant, we prefer to adopt Mr Chan’s proposed adjustment of 1% per 10 sq m. As explained by him, the size of the Reference Shop Unit with a converted area of 172.3 sq m is relatively large and Happy Valley is not a prime shopping area, a less sensitive adjustment appears to be adequate. Layout Adjustment 93.While the depth of the Reference Shop Unit including the extension is relatively long at 27.3 m, we are prepared to adopt Mr Chan’s adjustment for layout. 94.Thus, in view of the above analysis, the EUV of the Reference Shop Unit is assessed as follows:
95.While we are going to adopt the same adjustment factor to assess the market value of G/F, 61 Wong Nai Chung Road, we note Dr Wong applied -5% to reflect the issue of water seepage. 96.Mr Lau in his Condition Survey Report dated 20 December 2023 mentioned this G/F unit had “water seepage, paint peeling off and dirt stain on wall and ceiling soffits”.[44] However, Mr Benson Wong did not state the unit had been suffering from water seepage in his Condition Survey Report of 30 June 2023. Instead, Mr Benson Wong only stated “the condition of the wall surfaces is generally poor with peeled and stained paintwork due to normal wear and tear”[45] , referring to photo 5.6-93[46]. 97.We note there was a time difference of around 6 months when the two experts prepared their reports and during this period, the unit was unoccupied and fell into neglect. In any event, when we conducted our joint inspection on 3 December 2024, we found no further deterioration when compared with the photo provided by Mr Lau[47]. We consider there be no water seepage as suggested by Mr Lau and the patches just result from dampness. As such, we do not consider the adjustment of -5% by Dr Wong justified. 98.We proceed to consider if the $80,058,000 as found above reasonable or otherwise by cross-checking with the consideration agreed to be paid by Lion Star Oriental Limited on 10 May 2021 at $83,800,000. Taking into account the Private Retail Price Index was 542.3 as at 10 May 2021 whereas that as at the relevant dates was 532.5, we consider the $80,058,000 well supported[48]. Like what happened in Best Origin Limited v Commissioner of Rating and Valuation, LDGA 14/1998 (unreported, dated 25 February 2008)[49], we do not find sufficient justification to reject the use of the actual sale price for the same unit(s) in the present case. 99.Incidentally, it is noted there was a transaction of Shop C, G/F, Broadview Mansion, No 73B Wong Nai Chung, ie within stone throwing distance of the Building, ie Comparable CR4 that had been adopted by the valuation experts in assessing the GDV of the ground units of the hypothetical development. The particulars of the sale are as follows:
100.While this transaction took place some 8 months after the relevant date of 10 June 2022, it might be arguable that its transaction price was affected by the Application. However, the sale was subject to a tenancy for a term of three years from 1 January 2022 to 31 December 2024 at a monthly rent of $29,800 inclusive of rates. 101.At first glance, this comparable unit might be too small to compare with G/F, No 59 Wong Nai Chung Road which has a converted or effective area of 172.3 sq m. However, if the zoning method is applied, it may be able to assess the market rent of G/F, No 59 Wong Nai Chung Road. 102.The zoning concept is based on the principle that the area closest to the frontage (Zone A) is the most valuable part of a shop, but as the distance away from the front of the shop increases the value per unit of area decreases. Thus, when a value per square metre is arrived at Zone A by reference to sales or lettings of comparables, rates for the other zones in the rear will be derived formulaically and from that the value for the shop is analyzed whereby a process, often known as ‘halving back”, is used most extensively. 103.Assuming the monthly rent of $29,800 inclusive of rates can be deducted 5% to convert it into exclusive of rates, ie $29,800 x 0.95 = say $28,300 (ie the yield provided for the sale in February 2023 was
104.If this $1,169 per sq m is adjusted for the higher headroom of G/F, No 59 Wong Nai Chung Road at 5.2%, it becomes $1,229.8 per sq m. Thus the market rent for G/F, No 59 Wong Nai Chung Road may be assessed as follows:
105.Although this $85,000 per month appears to be 30% higher than the $65,000 per month being paid for G/F, No 59 Wong Nai Chung Road since 16 May 2021, we can check if our earlier assessment of $44,798,000 is reasonable or otherwise by the income capitalization method of valuation. Whereas the private retail yield published by RVD as at June 2022 was 2.5%, if we apply this 2.5% yield to this $85,000 per month, we would get $40,800,000 which is even 9% lower than our earlier assessment of $44,798,000. Alternatively, if we apply 2.37% yield instead, we would get approximately $43,000,000 which is only 4.0% lower than our earlier assessment of $44,798,000. Assessment of Market Value (“EUV”) of Domestic Premises on Upper Floors 106.The Happy Valley locality is characterized by its close proximity to the Happy Valley Racecourse which has a history of over 150 years. Residential buildings in the area, mostly situated along Wong Nai Chung Road, Ventris Road and Broadwood Road, enjoy views over the racecourse. They mainly comprise units of larger sizes and generally considered to be more prestigious than those in other parts of Happy Valley where smaller units prevail. The section of Ventris Road behind the Lot is planted with trees providing a tranquil living neighbourhood. 107.The direct comparison method of valuation is based on comparing the property to be valued with similar properties and the prices achieved for them and allowing for differences between them to determine the market value. Thus, as a matter of valuation practice comparables needing large adjustment should be avoided. However, the better practice is in fact to avoid comparables requiring many adjustments. 108.Save for the dispute on the Basement units discussed above, Mr Chan and Dr Wong agreed the saleable areas of the domestic units on the upper floors:
109.Mr Chan had adopted 5/F, No 61 Wong Nai Chung Road as Reference Domestic Unit but in view of the fact that the Front Portion of the Building fronts enjoys panoramic view of the racecourse, Dr Wong adopted two reference units as the basis of comparison:
110.Notwithstanding the above, Mr Chan and Dr Wong adopted the following transactions as comparables and assessed the EUV of 5/F, No 61 Wong Nai Chung Road at $208,000 per sq m and $231,400 per sq m respectively:
111.Mr Chan did not adopt Comparable D2 as a “comparable”. According to the land register record, the property is subject to an Order issued by the Building Authority under section 24(1) of the Buildings Ordinance dated 20 May 2010 (“the Building Order 2010”) which stated that the following building works had been carried out in or at the property[53]:
112.While this Building Order 2010 was registered against “the comparable” in May 2010, it appears that the Building Authority did not take further action up to 9 July 2022 when the transaction took place, ie a lapse of more than 12 years. Pursuant to the Agreement for Sale and Purchase then, the purchaser acknowledged the existence of the Building Order 2010 and “the comparable” was transacted on an “as-is” basis. In Mr Chan’s opinion, the seller and purchaser of the property may have considered the added value of the unauthorized building structures or the reinstatement cost of removing the unauthorized structures during negotiation. He considered therefore it was not an appropriate transaction to be included as comparable so long as there are sufficient comparables in place. We agree. 113.In addition, Mr Chan did not adopt Comparable D4 as a “comparable”. Arts Mansion comprises a residential tower with 3 domestic units on each of 4/F to 26/F[54] and a total of 68 private car parking spaces. That is, one domestic unit is supposed to be able to own one car parking space. In Mr Chan’s opinion, parking facilities are an integral part of the high-end residential development in Happy Valley. The price of residential units in buildings with parking facilities is generally higher than that of the units in building without parking facilities because residents in buildings with parking facilities may have a choice to rent or purchase a parking space. 114.Mr Chan had also conducted paired analysis on the basis of past transactions as follows and found that sales of other premises without car park spaces could be -14% to -19% lower than those in Arts Mansion[55]:
115.While the above analysis may not be conclusive because of the numerous assumptions on adjustments, Mr Chan did show that Dr Wong’s adjustment for facilities for Arts Mansion at -1% is too minimal to reflect the added value of having car parking facilities in a building. 116.In addition, Arts Mansion was built in 1979, so 15 years newer than the Building. Mr Chan was of the opinion that given there are sufficient number of comparables of ages closer to that of the Building, it would be appropriate not to adopt transactions in Arts Mansion as comparables. We agree. 117.Furthermore, Mr Chan and Dr Wong had the following agreements and disagreements on the adjustments applicable:[56]
Size Adjustment 118.The saleable areas of the domestic units of the Building range mainly from 70 to 85 sq m. While Mr Chan’s proposed adjustment of 1% per 10 sq m difference may be appropriate on many occasions[57], the sizes of the comparables in the present case vary considerably from those of the domestic units of the Building. We prefer therefore Dr Wong’s proposed adjustment for size at 0.15% per 1 sq m. View Adjustment 119.Apart from the adjustment factors listed in the table at §114 above, Mr Chan and Dr Wong had different opinions on the view adjustments for the comparables in Amigo Mansion at No 79A Wong Nai Chung Road and Champion Court at Nos 67 & 69 Wong Nai Chung Road:[58]
120.Mr Chan’s contention was that comparables enjoying additional side and rear views rather than the single view onto the racecourse should have higher values. He had also conducted paired analysis on the basis of past transactions as follows for the purpose of supporting his view[59]:
121.On the basis of the above analysis, Mr Chan found the unit rates of properties in the Building were about -11% to -17%. We find Mr Chan’s analysis persuasive and agree with his proposed adjustments for view. 122.Similarly, insofar as Dr Wong had adopted 5/F, No 38 Ventris Road as the second Reference Domestic Unit, Mr Chan had prepared an analysis of the adjustments for view proposed by Dr Wong[60]:
123.Firstly, Mr Chan referred to Dr Wong’s remark at para 8.3.1 of his Valuation and Rebuttal Report dated 20 December 2023 that Comparable D1 “has its main view onto the future Ventria Residence which is a high-rise building” where Dr Wong considered it should have “Building” view instead of “Partial Greenery and Buildings” view[61]. 124.Ventria Residence is a newly completed senior retirement home that offers comprehensive living, medical and nursing care facilities at 17A and 17B Ventris Road opposite the rear portion of Amigo Mansion on Ventris Road. According to Mr Chan, Amigo Mansion or more particularly Comparable D1 “does not completely face the high-rise block of Ventria Residence, but partially overlooks the podium of Ventria Residence, facing greenery and other buildings.” 125.However, Mr Chan may have overlooked that a high-rise residential development immediately behind Amigo Mansion would be built at 18 Ventris Road though it remains as a construction site for some time. This being the case, we consider the proposed adjustment of +2% by Dr Wong not unreasonable. 126.Similarly, we are prepared to adopt the adjustments for view proposed by Dr Wong in respect of the other comparables. Adjustment for Lighting & Ventilation 127.In addition, the valuation experts had made downward adjustments to comparables which have side and/ or back windows so that they may enjoy better lighting and ventilation. 128.Mr Chan had also compiled a table to show the difference in opinion between him and Dr Wong on the adjustments for light and ventilation for the comparables in Amigo Mansion at No 79A Wong Nai Chung Road and Champion Court at Nos 67 & 69 Wong Nai Chung Road in his Rebuttal Report dated 22 January 2024[62]:
129.At first glance, the adjustments for view above should have taken into account the difference in general impression of the environmental factors between the Reference Domestic Unit and the comparables. We are cautious that the adjustments for lighting and ventilation may have double-counted those for the views. 130.We are prone to adopt Dr Wong’s proposed adjustments rather than the marginal higher rates proposed by Mr Chan. 131.On the other hand, Dr Wong only proposed nominal adjustments for lighting and ventilation with regard to his second Reference Domestic Unit[63]:
132.Such nominal adjustments are hard to justify and can be ignored especially when we have made allowance for view. Adjustment for Building Management & Facilities 133.Mr Chan had allowed adjustments to reflect the difference in building management and facilities between the Building and the comparables. 134.For instance, in Mr Chan’s opinion, the entrance lobby of the Building either at Wong Nai Chung Road or Ventris Road is narrow and small, resulting in insufficient spaces to provide appropriate building management facilities and services, such as a management counter. Although the Building is managed by Knight Frank (Services) Limited (“Knight Frank”), a reputable management company, there is no security guard on site. 135.In addition, the Building has one lift that serves the Front Portion (“Lift 1”) and another lift that serves the Rear Portion (“Lift 2”). In comparison, the comparables all provide two lifts. When the only lift is out of order or undergoes repair and maintenance, the residents would have no choice but to take the stairs instead. Mr Chan recited his experience on 11 January 2024 during his inspection when the lift serving the domestic units facing Ventris Road was out of order and had been under repair for some time. According to the letter regarding the arrangement for inspection of the unit owned by R6 (ie 6/F, Comfort Mansion, No 36 Ventris Road), R6 explicitly requested him to meet at the door gate of the Building on street level since his representative was “… elderly and wants to make sure that the expert shows up before he walks up the 6 floors of stairs.”[64] 136.In this regard, Mr Chan also referred to Crown Centre Development Limited & Another v Wong Wai Ping & Others, LDCS 12000/2021 (unreported, dated 8 December 2023) where the Tribunal accepted his proposed adjustment of -3% when the building concerned was served by only one lift[65]. 137.On the other hand, Dr Wong had allowed only -1% to reflect the difference in lift provision between the Building and that of the comparables[66]:
138.We agree with Mr Chan’s adjustments to reflect the difference in building management and facilities between the Reference Domestic Unit and the comparables. EUV Assessment of the Upper Floor Domestic Units as at 10 June 2022 139.Thus, our determination of the EUV of 5/F, No 61 Wong Nai Chung Road is as follows:
140.As stated in §106 above, Mr Chan adopted only 5/F, No 61 Wong Nai Chung Road as Reference Domestic Unit. After arriving at the EUV assessment of this unit, he applied significant adjustments for view, as much as 15% or above, to assess those units that front onto Ventris Road. 141.On the other hand, Dr Wong adopted 5/F, No 38 Ventris Road as Reference Domestic Unit that looks at the rear. When good comparables are available, Dr Wong’s approach should be preferred as this would minimize the number of adjustments and especially such adjustments were merely based on professional judgment instead of concrete market evidence. 142.In the present case, Dr Wong relied on the following comparables and assessed the EUV of this second reference unit at $190,000 per sq m:
143.Following our discussion on the adjustment factors above, we assess the EUV of 5/F, No 38 Ventris Road as follows[67]:
144.Notwithstanding the above, we note the comment by Mr Chan that the transaction at Arts Mansion, ie D4 may not be a good comparable. If this comparable is excluded, the average would become $185,737 per sq m instead. This happens to be just 2.6% above $213,000 per sq m x (1 – 15%) = $181,050 per sq m resulted from Mr Chan’s approach. We are then content to follow Mr Chan’s approach. 145.Also, in determining the EUV of the various domestic units, we agree with Mr Chan’s further adjustment for location in respect of those units that front onto Ventris Road – the Rear Portion. Compared with the units in the Front Portion, these units are only accessible via one entrance from the sloping Ventris Road, while the other comparables all have entrances abutting Wong Nai Chung Road. However, we prefer to adopt -2% instead of Mr Chan’s -3%. 146.We prefer also to adopt a size adjustment at 1% per 10 sq m when the sizes of the units are very close. 147.We also prefer the view adjustments proposed by Mr Chan to those of Dr Wong. For those units that face Wong Nai Chung Road, Dr Wong suggested in his Valuation and Rebuttal Report dated 20 December 2023 at para 8.9 & 8.10 that the main view of such units from 1/F to 3/F, for instance, was only “Trees”. Dr Wong adopted a -15% downward adjustments to those units from 1/F to 3/F. We agree however with Mr Chan that the units on 1/F & 2/F mainly face the greenery and pavement of Wong Nai Chung Road while the units on 3/F & 4/F face not only trees, but also more of Happy Valley Racecourse[69]. 148.Mr Chan and Dr Wong also failed to agree on the internal conditions of a few units. Having reviewed the photographs taken by Mr Chan and Dr Wong, and having carried out our inspection on 3 December 2024, we set out our opinion below vis-à-vis those of Mr Chan and Dr Wong:
149.In addition, Dr Wong suggested that units on the lower floors were subject to higher noise level emitted from traffic along Wong Nai Chung Road or Ventris Road. He had made downward adjustments of -3% to those units. In Peace Ever, supra, however, we explained there had been the misconception that units on lower floors abutting a busy street would suffer from higher noise emitted from the passing traffic. Residents of upper floor units do not necessarily suffer less noise from passing traffic because they hear noise emitted from a larger area, so more sources of noise from the moving traffic whereas residents on lower floors hear noises mainly in close proximity. 150.There was also another adjustment factor – privacy that Mr Chan and Dr Wong could not agree. For the domestic units facing Ventris Road, Dr Wong allowed a -10% privacy adjustment to the units on G/F and -2% adjustment to the units on 1/F for reason that “the windows of the two Ground Floor units of Nos 36 and 38 Ventris Road are at eye level of the pedestrians along Ventris Road and the privacy of these two units is adversely affected” whereas “The privacy of the units on 1st Floor of Nos 36 and 38 Ventris Road would also be affected but to a lesser extent” [71]. 151.We agree with Mr Chan that the adjustments proposed by Dr Wong are excessive. As suggested by Dr Wong in his Valuation and Rebuttal Report dated 20 December 2023 at para 3.4[72], this section of Ventris Road is a “tranquil living neighbourhood”. We further agree with Mr Chan that the units concerned are not directly abutting Ventris Road but separated by the Right-of-Way. In other words, there is a gap and a certain distance between the units on G/F and the pedestrian path of Ventris Road. 152.We prefer adjustments of -5% and 0% respectively. 153.Thus, our determination of the EUV of the various domestic units is shown as follows:
154.The total EUV of the Building as at 10 June 2022, according to our assessment, is as follows:
Conclusion on EUV as at 10 June 2022 155.From the above, it is our view that the total EUV for the Building is $609,268,000. The corresponding EUV and proportionate share of the sale proceeds of the respondents pursuant to Part 3 of Schedule 1 to the Ordinance are as follows:
RDV OF THE LOT AS AT DECEMBER 2024 156.Pursuant to section 5(1) of the Ordinance, if an order for sale is granted and the trustees under the order have complied with section 7(1) in respect of the Lot, the Lot shall be sold by public auction subject to a reserve price which takes into account the redevelopment potential of the lot on its own. Dispute on Site Area 157.Both Mr Chan and Dr Wong agreed that the site area of the Lot is 524.7 sq m. However, they had a dispute on whether the area of the Right-of-Way (in the sum of 25.2 sq m) should be deducted from the site area to arrive at the developable site area on the basis of which the gross floor area and the site area should be calculated under the Building (Planning) Regulations (“B(P)R”). 158.By reference to regulation 23(2) of the latter, in determining for the purposes of regulation 20, 21 or 22 the area of the site on which a building is erected:
159.Paragraph 6 of Practice Note for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers (“PNAP”) APP-73 explains, however, where an abutting private lane is in the ownership of the developer but is not specifically required for any purpose under the Buildings Ordinance for the proposed scheme, the Building Authority will give favourable consideration to including the relevant area of such lane in site coverage and plot ratio calculations. Where the legal status of a lane has been clearly established by the existence of rights-of-way, it would be necessary to apply formally for a modification of Building (Planning) Regulation 23(2)(a). 160.As pointed out by Mr Lam in his Rebuttal Report dated 16 August 2024[74], we agree that the phrase “not specifically required for any purpose under the Buildings Ordinance for the proposed scheme” is important for considering whether the area of the Right-of-Way qualifies in site coverage and plot ratio calculations. 161.Mr Lam explained further that the floor area of the Right-of-Way should be included in site coverage and plot ratio calculations for the following reasons[75]:
162.Mr Ng disagreed, stating the Right-of-Way serves important functions and purposes that are integral to the proposed redevelopment scheme[77]:
163.Mr Ng cited three precedent cases to demonstrate that if the Right-of-Way is required for any purpose under the Buildings Ordinance for the proposed scheme, the area for the Right-of-Way should be excluded from the site area for the purposes of the site coverage and plot ratio calculations. One of them is The Summa at Nos 18-27 Hing Hon Road, Sai Ying Pun, Hong Kong which is surrounded by “private right of way” on all four sides[78]. The rights of way along the western, southern, and eastern sides of the site are considered specified streets for the purposes of site classification under B(P)R 18A. The perimeters abutting these specified streets are accounted for in the calculation, constituting a Class C site and therefore the afore-said right of way are required for purposes under the Buildings Ordnance; their areas are excluded from the site area for the purposed of site coverage and plot ratio calculations under paragraph 6 of PNAP APP-73. 164.On the other hand, as further pointed out by Mr Ng, the right of way along the northern side of the site is not required for any purpose under the Buildings Ordinance. A modification of B(P)R 23(2) was applied to permit its inclusion in the site area but this right of way shall not be built in, over, upon, or under. Unfortunately, by reference to Dr Wong’s scheme, the Right-of-Way has to be built over by the ‘bridge’ giving access to Ventris Road. In his opinion, therefore, this Hing Hon Road example does not support the respondents’ case. 165.In response, Mr Lam cited three other examples, one of them is the development at No 15 Western Street where a right of way dissecting the centre of the site was built over from 1/F and above for commercial and domestic purposes, a situation contradictory to the Hing Hon Road example. According to Mr Lam, as long as the G/F area is maintained as “right of way” with character as a covered walkway for the benefit of access, the entirety of such right of way was allowed by the Building Authority to be included as part of the site area. 166.In such regard, Mr Ng found that the original right of way was intended to be a continuation of Fuk Sau Lane as shown in the Plan attached to the Indenture of Assignment dated 13 February 1904 registered vide memorial UB35242 in the Land Registry[79]. Upon the development of the adjoining Hang Hing Court at Nos 123-125 Third Street, the section of Fuk Sau Lane through this site had been extinguished. As a result, the connection of this right of way to other portions of the original lot, ie Inland Lot No 747 (“IL747”) no longer exists, and the right of way has becomes a “diverted lane”. On the other hand, sites on other portions of IL747, namely Hang Fai Building, Fu Wah Building, Hang Fook Mansion and Hang Hing Court, have direct access to Pok Fu Lam Road, Fuk Sau Lane and Third Street respectively. The necessity of the right of way to serve other portions of IL747 has diminished. Mr Ng then referred to paragraph 8 of PNAP APP-73 which states that:
167.In Mr Ng’s opinion, the right of way dissecting the site in this case is no longer required for any purpose of the Buildings Ordinance, making it more likely for the Building Authority to grant modification to B(P)R 23(2) to include the area of the right of way into the site area for plot ratio and site coverage calculations[80]. We agree however with Mr Lam that the right of way is still servient to the other developments nearby. There is clearly “alien interest” within the site; otherwise it could have been extinguished by the developer already. 168.Another example cited by Mr Lam is the development of AVA 62 at No 62 Shanghai Street in Kowloon. Here, a clear and unobstructed space of not less than 2.3 metres is provided on each of the two sides of the development. Together with the right of way of 2.3 metre-wide at the rear, the building becomes a detached building pursuant to B(P)R 28(1)(b). Besides, the development in the rear, ie Ealing Court at 259A Temple Street, has similar unobstructed spaces on its sides. As a result, the right of way at AVA 62 is not required as a service lane for compliance with Reg 28 of B(P)R for both its own development as well as the development at 259A Temple Street. According to Mr Ng, the lane remains only for a useful neighbourhood pattern and according to him, the staircases that discharge onto the right of way are not used as means of escape. One of them is for accessing the transformer room and cable duct room above while the other is for accessing the plant room area below G/F[81]. The right of way is not required to comply with any specific requirements and can therefore be included in the site area for plot ratio and site coverage calculations. We find no difference between this example and the captioned case. 169.The third example cited by Mr Lam is The Zutten at No 50 Ma Tau Kok Road. Mr Ng found that in order to permit a portion of the existing lane which traversed the site to be built over and included in the site area, the following three conditions applied[82]:
170.On the other hand, while the existing lane running in parallel to Ma Tau Kok Road was permitted to be diverted, Mr Ng highlighted that the portion that runs perpendicular and is still serving the rear exits of the buildings at Nos 179-183C Kowloon City Road was excluded from site area as it is required for those adjoining sites as a service lane under B(P)R 28. 171.However, Mr Ng failed to mention that the new diversionary lane was also included in the site area calculation[83]. 172.In our opinion, this latter point is detrimental to Mr Ng’s argument. We agree with Mr Lam that the Right-of-Way that would be preserved and maintained in the proposed development can continue to serve “useful neighbourhood pattern”. The inclusion of the same into site area is very likely to be viewed favourably by the Buildings Department as one of its important considerations. 173.We further agree with Mr Lam that in principle, even if a right of way becomes incidentally used by other adjacent developments to “comply” with requirements under the Buildings Ordinance, it should not result in reduction of redevelopment potential of the dominant site. A right of way merely being granted to others to “pass through” does not mean that it must be allowed to be used for “compliance” for specific purposes (eg means of escape) at the expense of the development rights of the owner of the servient land. 174.Therefore, although Mr Ng had produced the record plan of the adjoining Bonny View House at Nos 63-65 Wong Nai Chung Road in order to show that the Right-of-Way is also required for its means of escape[84], we agree with Mr Lam that the Right-of-Way was not granted as a “means of escape” leading to an ultimate place of safety from adjoining buildings. 175.Mr Ng referred further to the development of Yoo 18 BONHAM at Nos 16 & 18 Bonham Road where the right of way on its southwestern side has been excluded from the site area for plot ratio and site coverage calculation. In this case, however, the means of escape of its adjoining All Fit Garden requires this right of way to connect to Breezy Path, which is a street. This can be however distinguished from the captioned case where the adjoining buildings on each side of the Lot can have their own access to Ventris Road. 176.Mr Lam gave a further example of the development of Central 8 at Nos 8-10 Mosque Street where rights of way were granted in favour of owners of adjoining houses at Nos 2, 4, 6, 8 & 12[85], a situation likened to the present case. From the extracts of General Building Plan as approved on 13 November 2020, both the rights of way in the front portion and rear portion were approved by the Buildings Department to be included as the site area for plot ratio[86]. That Mr Ng suggested the right of way in respect of the front portion is, by virtue of the Indenture of Assignment dated 27 September 1912, only a “passage for the owners and occupiers of adjoining houses in through along and upon that portion of the basement of the premises”[87] does not distinguish from the present case where the Right-of-Way is also situated at the basement level. Also, in this case, the front portion was built over by a deck at G/F as the main entrance with planters, similar to the proposed ‘bridge’ in the present case. 177.Lastly, Mr Lam referred to the Pan Hoi Street example, ie the hypothetical development proposed in Peace Ever, supra. In this case, a right of way, being a “scavenging lane” at the rear of the hypothetical development, is used as access to transformer room and staircase, possibly as means of escape of the adjoining development, Sunway Garden. In the hypothetical development, the right of way also serves as “means of escape” to the G/F shops, “means of access”/ “fire fighting and rescue stairway” to the underground basement shops and carparks, service lift lobby and other functions too to comply with all building regulations. Yet the Buildings Department allowed the right of way to be included as site area for calculation of the plot ratio. 178.All in all, we agree with Mr Lam that the chances of the Buildings Department approving the Right-of-Way to be included as part of the site area for calculating the plot ratio is very high. 179.In light of the above, we are content to adopt 524.7 sq m as the developable site area without deduction of the area of the Right-of-Way. Hypothetical Development 180.Mr Chan for the applicant and Dr Wong for the respondents agreed to resort to the residual valuation method in determining the RDV. This can be done by deducting development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development. 181.However, their hypothetical schemes of development differ as follows[88]:
182.From the above, it appears that the main difference between the two valuation experts is whether there should be two residential units or one residential unit per each upper floor. However, it is surprising that they arrived at values wide apart: Mr Chan arrived at a residual land value of $346 million (with an accommodation value of $84,040 per sq m)[92] while Dr Wong arrived at a residual land value of $843.3 million (with an accommodation value of $192,461 per sq m). 183.The Lot is located in the more prestigious area of Happy Valley with a full view of the racecourse, a valuable feature which is quite unique in Hong Kong. The hypothetical development therefore should reflect the high-end nature of the locality and superior features of the Lot to cater for buyers who are targeting to purchase a residential unit in a prestigious position. 184.New developments with such peculiar feature even in Happy Valley are limited in supply. For instance, lying close to Hong Kong Sanatorium & Hospital, One Jardine’s Lookout is a new development in Happy Valley which does not enjoy such a feature. Whereas Mr Chan was content to prepare his analysis on the basis of transactions in this development, we agree with Dr Wong that those transactions are not suitable comparables for the following reasons:
185.Notwithstanding the above, Mr Chan’s own analysis told that smaller units in One Jardine’s Lookout would give a lower value than those of units having larger area. For instance, Mr Chan had analyzed the sales of Units B on 25/F and 26/F of One Jardine’s Lookout, each with a saleable area of 47.8 sq m. He arrived at a unit rate of $223,563 per sq m and $226,255 per sq m respectively[93]. But when he analyzed the sales of Units C on 25/F and 26/F which took place on similar dates, he arrived at a unit rate of $267,094 per sq m and $285,403 per sq m respectively[94]. More particularly, Mr Chan agreed that when buyers decide to buy the two larger units, they should have been aware that the smaller units on the same floors adjacent to their larger units were sold and offered at a much lower rate. This being the case, the unit rates achieved for the two larger units may have been dampened. 186.Whereas the market value of a site is usually derived from its highest and best use, we decide to proceed with our determination following Dr Wong’s approach to see if his high value is sustainable. 2-storey Car Parking Basement 187.Owing to the narrowness of the Lot (with a width less than 13 metres)[95], Mr Ng for the applicant firstly raised the issue that the 2 basement floors are insufficient to house the intended quantity of car parking spaces designed by Dr Wong because of the thickness of the basement walls. But with the illustration by Dr Lau as demonstrated by Exhibit R10, we are persuaded that the socketed steel H-pile walls proposed by him can resolve the problem. The H-piles would not be relied on for structural strength but as a permanent/ reinforcement wall to take soil pressure. Using this design, the total wall thickness would be 373.9 mm. Further, if the flanges on the inward side of the H-piles were cut off after the reinforced concrete wall is built, the thickness of the wall would be thinner at 323.9 mm. 188.In the course of the hearing, the bench referred to another site at No 13 Ho Man Tin Street where the width of the site is only 9 metres. Dr Lau found that socketed H-piles are used in this Ho Man Tin site. Obviously, it would be more difficult to construct piles in a building with a width of 9 metres than one with a width of some 13 metres. We are also satisfied that the construction cost for the basement of the hypothetical development proposed by Dr Wong is similar to the construction cost of other developments with basements in the urban area. Vertical Core at G/F Level 189.“Ultimate place of safety” is defined in the Code of Practice for Fire Safety in Buildings 2011 (“the Fire Safety Code”) as “a place of safety for final exit discharge where a protected exit terminates that provides access to an area clear of the effects of fire, where people may safely disperse. The ultimate place of safety is a street or an open area outside the subject building and connects directly with a street …” 190.By Clause B5.2 of the Fire Safety Code, every exit route should lead directly to an ultimate place of safety. Mr Lam asserted that the Buildings Department allows some latitude for the “exit/discharge point” from the residential tower above to an ultimate place of safety to be built over provided that such built over area is not too large (or constructed of temporary/filmsy materials) that may be easily affected by fire. In Mr Lam’s opinion, the proposed structure of Dr Wong would fall within such latitude extended by the Buildings Department. For such reason, the “exit/discharge point” can be a covered area without a protected corridor design. 191.In Dr Wong’s scheme, ST-4 discharges onto the main lobby while ST-5 discharged onto the Fireman’s Lift Lobby as a separate compartment[96]. After that, the exit routes were separately discharged into the open area outside the lifts through different doors as terminal exits before further reaching the podium pavement. Mr Lam explained that there is no “merging” of two or more required staircases into a common lobby before discharging into an ultimate place of safety. 192.According to Mr Lam, the built-over area immediately outside the lobby/firemen lift lobby is very small. He opined that it is highly likely to be acceptable by the Buildings Department not to be affected by the effect of fire. The open area outside the building line is the ultimate place of safety which connects with Ventris Road. 193.Mr Ng commented that the vertical core at G/F of Dr Wong’s scheme is inadequate to comply with Clause D8.3 of the Fire Safety Code which states as follows:
194.Subsection D7 refers to “Access to a Fireman’s Lift at Ground Storey”. Mr Ng suggested that the fire service access point should be situated on the G/F at Ventris Road. 195.Mr Ng appears to say that exit routes staircases cannot discharge upwards save and except for a basement. Mr Lam suggested that Mr Ng was in fact referring to Clause B17.3 of the Fire Safety Code which reads:
196.We agree with Mr Lam that Mr Ng’s comment was misconceived because the LG2/F proposed by Dr Wong is at the same level of Wong Nai Chung Road. Both LG1/F and LG2/F would be constructed above ground and above street level without any excavation. It is not a “basement” and the discontinuation requirement is not applicable. 197.In such regard, Mr Ng also queried the arrangement of the escape routes but we agree with Mr Lam that such concern can be resolved by the directional signages as required in Clauses B5.5 and B5.10 of the Fire Safety Code. There would be clear signs at ST-4 and ST-5 to direct all discharging occupants arriving at G/F to escape outwards into the lobby/firman’s lift lobby respectively and avoid taking wrong turns downwards or upwards. According to Mr Lam, a light source having 30 lux would be visible from about 8 metres away. 198.Mr Lam illustrated that the “merger concept” resembles “river branches” flowing into a “mainstream”, which has been adequately tested by the Buildings Department with reference to “discharge values” of a staircase and corridor governing its width. So long as there is a continuous stream of escaping occupants moving in a main direction, occupants from different branches would merge into the main stream, and no overflow would be caused. Based on such concept, the designed “convergence” of ST-04 and ST-05 at G/F is permissible which does not contravene the intent and spirit of the Fire Safety Code. 199.In addition, there were disputes between Mr Ng and Mr Lam on various technicalities of Dr Wong’s scheme. We appreciate however that Dr Wong’s schematic design is on conceptual level under a high degree of generality which can be resolved in the detailed design stage[97]. In fact, Dr Wong has provided a revised scheme incorporated into the 2nd Joint Expert Statement with Mr Chan at Appendix B10[98]. Calculation of Saleable Area of Residential Units 200.In Dr Wong’s hypothetical scheme, there will be only one residential unit on each of the upper floors. He himself has designated the relevant areas including the staircase enclosure, the protected lobbies of the staircases, the firemen lift and its lobby and the temporary refuge spaces (TRS) etc as common areas. He however included the lift lobby outside the 2 passenger lifts as saleable areas. 201.We agree with Mr Ng that such latter area cannot be enclosed for exclusive use, occupation or enjoyment of the unit next to it. By Clause B8.2 of the the Fire Safety Code, it is essential to provide an access corridor from one staircase to the other at least every 5 storeys and on the main roof. Mr Lam’s suggestion that such an access corridor can be regulated by the Deed of Mutual Covenant to keep free of any obstruction cannot overcome the definition of “saleable area” of a unit as defined by Code of Measuring Practice issued by the Hong Kong Institute of Surveyors that it comprises the floor area exclusively allocated to that unit. Particularly, “saleable area” shall be the area contained within the enclosing walls of the unit. The floor plans for Belfran Peak (at No 9 Belfran Road) provided by Mr Lam himself obviously exclude the private lift lobby from the calculation of the floor area exclusively allocated to the residential units[99]. Regrettably, those for Mount Nicholson (at No 8 Mount Nicholson Road) and ATAL Tower are of different layout arrangement where the lift lobby is completely separated from the stairwell[100]. 202.While conceding that the area for the staircase interchange cannot be regarded as part of the saleable area, Mr But referred to Asia Rich Incorporation Limited & Others v Well Step Holdings Limited, LDCS 15000/2019 (unreported, dated 1 February 2023) where the Tribunal accepted the notional corridor for staircase interchange from 15th to 23rd floors at 1/2 of the main unit rate[101]. In our opinion, this case should be distinguished from the present case where the present hypothetical development is supposed to be a high-end residential development instead of an office building as in Asia Rich. 203.In view of the above, by reference to the “Amended Details of the Hypothetical Development” as proposed by Dr Wong[102], the saleable areas for the various floor are shown as follows:
GDV for Upper Floors Residential Units 204.Dr Wong adopted the simplex on 13/F as the domestic reference unit for the purpose of assessing the GDV for the typical simplex units on the upper floors of the hypothetical development. He then referred to various transactions of the following developments, made adjustments for time (on the basis of the RVD Private Domestic Price Index for Classes D & E), location, size (at 0.5% per 10 sq m difference), building age (1% per 1year difference +5%), floor level (at 0.5% per floor difference), view, scale & facilities, headroom, aspect, entrance, Government rent liability, exclusiveness and privacy[103]. He arrived at the following adjusted unit rate(s) [104]:
205.As regards the transactions in The Aster, according to the price list, these comparables are eligible for the following cash rebates and benefit, which will be offset directly from the balance of the purchase price:
206.We cannot agree with Dr Wong paying no regard to the rebates by the developer. We therefore have rebates deducted from the consideration after deducting therefrom the value of car parking space proposed by Dr Wong. On the other hand, we agree to most of Dr Wong’s adjustments, save for location where he applied as much as +15%. We consider it excessive and would apply +10% instead. 207.In addition, owing to the small scale of the hypothetical development, the area of recreational facilities is approximately 200 sq m. The club facilities that can be provided will be minimum or lacking. At trial, for instance, Mr Lam conceded that the swimming pool proposed by Dr Wong will be less than 10 metres. It can hardly be justified. We do not agree to the +2% adjustment proposed by Dr Wong for scale and facilities. Thus, the average of the adjusted unit rates would become $387,936 per sq m. 208.We have no comments on the adjustments for Broadwood Twelve save that for scale and facilities. Broadwood Twelve has a clubhouse and a range of recreational facilities including an outdoor swimming pool, childrens' facilities, gym room as well as entertainment facilities. Therefore, we cannot agree with Dr Wong’s applying no adjustment for scale & facilities. We would adopt -10% instead and the average of the adjusted unit rates would become $344,533 per sq m. On the other hand, the transactions were dated. This notwithstanding, we have no objection to Dr Wong applying half weighting to his adjusted average. 209.The Leighton Hill has a wide range of recreational facilities which include a decent clubhouse, indoor and outdoor swimming pools, children paddling pool, children playground/ playroom, fitness room, sauna, steam room, tennis court, billiard room, banquet hall, multi-purpose activity room etc. Therefore, we would increase Dr Wong’s -10% for scale & facilities to -15%. The average of the adjusted unit rates would become $398,323 per sq m. 210.Likewise in Winfield Building, there are swimming pool up to 24 metres long, an equestrian-themed flat roof garden, fitness room, covered playing area, children playing area and indoor function room etc[107]. We cannot agree with Dr Wong’s 2% for scale & facilities. We would adopt -15% instead and the average of the adjusted unit rate would become $370,286 per sq m. 211.The same comment is applicable to The Attitude where clubhouse, entertainment facilities, catering facilities are available. We cannot agree with Dr Wong’s 2% for scale & facilities. We would adopt -10% instead. Also, we consider Dr Wong’s adjustments for location at +15% excessive and would apply +10% instead. The average of the adjusted unit rate would become $365,485 per sq m. 212.Based on the above revised figures, we shall follow Dr Wong’s approach in applying weighting to the adjusted results as follows:
213.We note that Mr Chan also relied on transactions in The Aster but they were in respect of smaller units. This was because his reference unit has a saleable area of 57.7 sq m only when his hypothetical scheme proposed 2 residential units per floor. He arrived at an average of $302,000 per sq m only[108]. 214.And because Mr Chan’s reference unit has a smaller size, he relied heavily on transactions in another development, One Jardine’s Lookout at No 1 Wang Tak Street, which started the pre-sales in September 2024. One Jardine's Lookout has 123 units in total, ranging from studio to four-bedroom flat, as well as some special units. Mr Chan arrived at an average of $267,100 per sq m[109]. 215.Obviously from the above analysis, Dr Wong’s hypothetical scheme is to be preferred as it is likely to derive the highest and best use of the Lot. 216.As regards the duplex unit on the top floors, both Mr Chan and Dr Wong could not find any direct comparable. In such regard, we accept the approach by Dr Wong in applying +25% to the average adjusted unit rate of his reference residential unit, ie $377,000 per sq m x (1 +25%) = $471,250 per sq m. 217.Hence, our determination of the GDV for the residential portion of the hypothetical development is as follows:
GDV for Car Parking Spaces 218.Mr Chan and Dr Wong had referred to the following transactions for the purpose of assessing the market value of a carparking space in the hypothetical development[112]:
219.Whereas Dr Wong’s hypothetical scheme proposed a total of 24 car parking spaces to serve the 22 units, the carparking to flat ratio will be about 1.091. In view of the above transactions, we are content to adopt $3,600,000 as proposed by Dr Wong as a value of a car parking space[113]. 220.Mr Chan and Dr Wong had agreed that the value of an Accessible Parking Space is 10% higher and that of a motorcycle parking space be about 1/10. Therefore, the total GDV of the parking spaces in the hypothetical development is determined as follows:
GDV for Shops on LG2/F 221.According to Dr Wong’s hypothetical scheme, there will be 2 shops on LG2/F, ie at the level of Wong Nai Chung Road:
222.Dr Wong adopted Shop B as his reference shop unit. 223.Firstly, Dr Wong refused to adopt the following comparable on the ground that it was sold to a person related to the existing tenant[114] and the unit price was unreasonably low:
224.It appears that Dr Wong was correct when Mr Chan made adjustments and arrived at a low unit rate of $123,337 per sq m. Indeed, Mr Chan relied on it as one of his comparables, deriving a unit rate of $133,000 per sq m which is substantially less than his assessment for the EUV for G/F, No 59 Wong Nai Chung Road at $340,000 per sq m. 225.Thus, we focus on the other comparables relied on by Dr Wong as follows:
226.As regards the adjustment factors, Mr Chan and Dr Wong had the following agreements/ disagreements[115]:
227.Dr Wong in his Valuation and Rebuttal Report regarding RDV dated 20 December 2023 stated at para 7.33 as follow[116]:
228.Mr Chan disagreed, stating in the 2nd Joint Statement with Dr Wong dated 20 November 2024 as follows:[117]
229.We agree with Mr Chan though his acknowledgement of the deterioration of trades of the interior design companies, furniture, and home appliances shops in this section of Wong Nai Chung Road contradicts his positive location adjustments to comparables in King Kwong Street, for instance. 230.We may test the justification of 1.5% per 5 years difference proposed by Dr Wong by looking at his actual adjustments. For Comparable CR1, he applied an adjustment of 12% which is equivalent to $15,150,000 x 14.1% = $2,136,150 which appears excessive. Similar phenomenon is found if we repeat such a checking exercise:
231.On the other hand, we tend to agree to Dr Wong’s proposed adjustment for size when for instance, there is significant difference in size between his reference unit and Comparable CR2. Portion B of Shop B, UG/F, Kam Kwong Mansion (CR2) 232.Comparable CR2 is occupied by a 7-Eleven convenience store on King Kwong Road. As in the case of assessing the EUV of the shop premises, we are going to apply -20% for location. 233.As regards layout, Mr Chan had the following comment which we agree:
234.We are prepared to apply an adjustment for layout at -5% instead. Shops 1-4, LG/F, Yee Fung Building (CR3) 235.The comparable comprises a capsule-shape shop with its curved or ellipse frontage around the junction of Wong Nai Chung and Shan Kwong Road. It is occupied as a restaurant, Milk Café. To a certain extent, its position is the entrance to Happy Valley and it lies close to Hong Kong Sanatorium & Hospital, benefiting from the passing pedestrian flow. We prefer a location adjustment at -15%. 236.In respect of layout, Dr Wong commented as follows:
237.Again, Mr Chan disagreed:
238.We agree with Mr Chan and in view of the comparable’s regular shape, prefer a layout adjustment of +5% instead. 239.This comparable has a return or secondary frontage on Shan Kwong Road which is a relatively quiet street. We agree with Dr Wong’s adjustment of -5%. Shop C, G/F, Broadview Mansion (CR4) 240.We have already made use of this comparable in the determination of the EUV of the shop premise of the Building. However, the transaction in February 2023 was dated more than 2 years ago. This comparable is extremely small in size when compared with the reference shop unit adopted by Dr Wong. However, we are prepared to include it for analysis because this comparable is situated in close proximity to the reference shop unit. Again, the layout adjustment applied by Dr Wong at -5% is grossly inadequate. We prefer -20%, just de bene esse. 241.The other comparables relied on by Dr Wong were all dated more than two years from the current date. We would not regard them as good comparables. Thus, subject to what has been discussed above, we present our analysis as follows:
242.Unfortunately, the analysed results show disparate figures and for reasons stated above, we are going to place only half weight on the adjusted result for Comparable CR4 as it took place nearly two years ago and was outdated. Thus, the weighted average of the analysis produced a unit rate of $235,800 per sq m, on the basis of which we determine the market value of the hypothetical Shop B proposed by Dr Wong as follows:
243.In view of the scarcity of the good comparables, Dr Wong tried to check the valuation by income capitalization method on the basis of the following two lettings:
244.Although Comparable RR1 has its address at Blue Pool Road, it in fact abuts a pavement which is a continuation of Wong Nai Chung Road. It and its adjoining shops are/ were occupied by restaurant with sitting area opposite the pedestrian crossing across the junction of Wong Nai Chung Road and Blue Pool Road, catching the pedestrian traffic between the tram terminal outside Nos 21-23 Wong Nai Chung Road and the bus terminus at the street junction. We consider this 20% superior in location than the reference shop unit. 245.Comparable RR2 lies close to Comparable RR1 along the same pavement but closer to the junction between Wong Nai Chung Road and Shing Woo Road. One would have expected the two comparable to fetch a similar unit rate but it turns out, if the RVD index for Private Retail Rental is abided by, it achieved a much higher rental:
246.Adopting the prevailing yield of 3.4% published by RVD for Private Retail, the capitalized value of the reference shop unit is:
247.We are content to place more weight on this $13,810,000 which is derived from the direct comparison method and supported by more recent sales in the vicinity. Hence, we are prepared to adopt it as the market value for the hypothetical Shop B proposed by Dr Wong. 248.On the basis of the adjustments adopted by Dr Wong, we determine the market value for his hypothetical Shop A as follows:
249.However, because of the longitudinal shape of this Shop A, we may use Comparable CR4 to check the above result on the basis of zoning analysis:
250.If this $590,665 per sq m is adjusted for the higher headroom of the shop unit at 5.4%, it becomes $622,561 per sq m:
251.Having reviewed the above, we are prepared to adopt $46,000,000 as the market value for the hypothetical Shop A. Other Parameters in Residual Valuation 252.In respect of the other parameters in the residual valuation, Mr Chan and Dr Wong also had the following agreements/ disagreements[120]:
Interest Rate 253.While interest and finance on borrowings do not normally appear in a formal discounted cash flow individual project appraisal, but when it does occur in practice, the implicit assumption is made on 100 per cent financing of both costs and land value. This is the case in residual valuation which is often regarded as a short form of discounted cash flow exercise[123]. 254.The finance is rolled up through the development and deducted from the development proceeds at the end of the development (or before if the development is deemed to go into profit before the development appraisal period is complete). This application of this valuation approach also allows profit to be identified at the end of the development as a single lump sum that is then often tied to the GDV or the overall costs of the development as a simple percentage of GDV or costs. 255.The rate of interest depends on the prevailing rates being charged and will also vary with the status of the borrower and the risks attached to the development scheme. The table below shows the HKD Interest Settlement Rate on the first working day of the previous months:
256.In addition, HSBC’s best lending rate is 5.125%. 257.Bearing in mind the above, we agree with Mr Chan that it is unrealistic to assume that banks are willing to lend to developers at interest rates barely higher than their own costs. We confirm our preference of an interest rate of 5.5% proposed by Mr Chan. Demolition & Construction Cost 258.The two valuation experts had no dispute on the demolition cost which was calculated at a rate of $2,200 per sq m. However, they could not agree on the demolition period. For the purpose of this exercise, we adopt 6 months. 259.As regards construction cost, their difference was not significant. We prefer to adopt $312,000,000 in light of the inflationary trend of the construction cost. Developer’s Profit 260.As for any risky enterprise a profit is required to compensate for risk. Target levels of profit will depend on the nature of the development and related risks, the competition and market demand for the type of development scheme, the period of development and the general optimism or, in the present moment, pessimism in relation to that form of development. 261.A usual approach for assessing developer’s profit is a certain percentage of the cost outlays, covering:
262.While straightforward developments catering to strong market demand will serve to reduce risk, this should not be the case here as there had been dispute on the construction of the basement, the proposed residential type etc. We prefer a developer’s profit in the region of 20%. 263.Thus on the basis of the above discussion, our residual valuation is set out in Appendix I of this judgment. 264.We have arrived at a residual land value of $625,200,000 or an accommodation value of $142,686 per sq m. This will be the reserve price if an order for sale of the Lot be granted. Whether development of the Lot is justified due to age and/or state of repair of the Building 265.Section 4(2) of the Ordinance provides that the Tribunal shall not make an order for sale unless it is satisfied that the "age or state of repair" of the Building is justified and that the applicant has taken "reasonable steps" to acquire all the undivided shares of the Lot. These criteria or requirements have not been changed despite the overall revamp of the Ordinance in 2024. 266.The applicant relies on the guidelines laid down in Top Sail International Limited v Cheng Kai Ming, LDCS 18000/2010 (unreported, dated 15 November 2011 (“Top Sail”) and Charmlink Limited v Lee Tong Hing & Others, LDCS 16000/2010 (unreported, dated 29 November 2011) (“Charmlink”) on the factors that the Tribunal should consider in order to decide whether redevelopment is justified due to age and state of repair. 267.In Top Sail, the Tribunal stated:
268.Such a discretion by the Tribunal was followed in Charmlink:
269.There is no argument on the principles set out in Top Sail and Charmlink. It is agreed that they are guidelines guiding the Tribunal in the exercise of its discretion. Structural Conditions of the Building 270.Mr C M Wong had commissioned and prepared a Structural Assessment Report dated 28 June 2023. In so doing, he had conducted the following tests which are summarized as follows[124]:
Visual Inspection 271.By virtue of the Joint Expert Statement dated 2 February 2024, Mr C M Wong and Dr Lau agreed that there were 11 defects on structural members of the Building as follows[125]:
272.Obviously from the above, the number of defects found in such a 60-year old building was extremely small or minimal. Interestingly, only 4 defects were found in the common areas and the other 7 defects were found in the units owned by the applicant. More particularly, both Mr C M Wong and Dr Lau agreed that these 11 defects were minor superficial defects which could be readily rectified by patch repair[126]. Mr C M Wong recommended the costs in the sum of $15,450 only[127]. Dr Lau added that none of them were structural defects that may require expensive structural strengthening work to rectify. Having conducted out joint inspection on 3 December 2024, we agree with Dr Lau’s observation. Open-up Inspection 273.As regards open up inspection, 162 reinforcement bars (“rebars”) in total at the Building were exposed and tested by the MaterialLab Division of Fugro Technical Services Limited. The corrosion conditions of the rebars are summarized in the table below:
274.The definition of the corrosion grades is as follows[128]:
275.As commented by Dr Lau, the corrosion grade of the rebars were mostly 2 to 3 with minimal loss of section. The 17 rebars with grade 4 corrosion are located on two slabs and one beam. Obviously, the loss in sectional area in this instance infers less reinforcement area to perform its structural functions, and this reduction of reinforcement has reduced the ultimate structural capacity of the Building and lowered the originally intended margin of structural safety. Dr Lau took the trouble to investigate further into the location of these 17 rebars but found they were not serious enough to cause bulging, cracking or spalling on the slabs or beams[129]. We note particularly that the situation for the beams and columns, being the main structural elements used for support and carriage of the main loadings within the structural frame, is far better than that of slabs. In Dr Lau’s opinion, the conditions of the rebars were extremely good for a 60-year old building. This explained why the number of defects discovered by Mr C M Wong in his visual inspection was so minimum. We agree with Dr Lau. Core Compression Test 276.Then comes the core compression tests which were carried out by a Hong Kong Laboratory Accreditation Scheme (HOKLAS) accredited laboratory. The summary of the test results is presented below[130]:
277.Again, based on the core compression test results, all the tested strengths of concrete are much higher than those specified in the design. In slabs, the tested strengths are 145% to 271% higher than the design strength. In beams, the tested strengths are 113% to 274% higher than the design strength. In the columns, the tested strengths are 121% to 242% higher than the design strength. 278.Apparently, the cement and concrete mix used for the Building was of very high quality. Concrete of higher compression strength are usually more “dense” with lesser volume of holes/voids to allow oxygen and moisture which are the agents for corrosion to seep into the rebars. Depth of Carbonation Test 279.And for depth of carbonation, however, the test results indicate that carbonation has reached the reinforcement bars in all the slab samples and most of the beam samples of the Building[131]:
280.On the basis of the above results, Mr C M Wong commented that the deterioration of the structural elements, especially the slabs and the beams, has entered the propagation phase. He explained that the reasons for only 11 defects found were that the previous cracks had been repaired and/or the deterioration of the structure is not in the late stage of the propagation phase. 281.On the other hand, Dr Lau commented that the depth of carbonation only showed how deep the alkaline nature of concrete had been neutralized by carbon, such that the carbonation provided the environment for the corrosion of rebars. The latter would always lead to cracks and spalling but the seriousness of corrosion had been refuted by the presence of only 11 defects found. In saturated concrete, the moisture will also present a barrier to the penetration of carbon dioxide and again carbonation will be slow. We find this comment by Dr Lau accords with Mr C M Wong’s opinion that the deterioration of the structure is not in the late stage of the propagation phase. There was no signs of swelling up of the rebars. 282.More particularly, Dr Lau pointed out that based on Mr C M Wong’s estimated defective areas and his adopted unit rate for repair, the total cost for repair would be only $15,450 or $5,700 (based on the actual defective areas) or $8,550 (based on the actual defective areas increased by 50% to cater for uncertainties). These figures were so small that in the opinion of Dr Lau, the amount of repair cost was insignificant. 283.Dr Lau further elaborated that if the owners carry out repair in accordance with Mr C M Wong’s recommendations and spend the amount of $15,450 in patch repair, then the Building would not require major repairs in the next 10 years. This is despite what Mr C M Wong suggested that the Building condition was only mediocre and that the Building had entered the propagation phase. Chloride Content Test 284.In accordance with the Code of Practice for Structural Use of Concrete 2013, chloride content in concrete should not exceed 0.35% by mass of cement. Mr C M Wong and Dr Lau had further difference in opinion on the risk of the chloride content[132]:
285.The test results indicate that chloride content higher than 0.35% by mass of cement was found in 33% of the slab samples, 8% of the beam samples and 85 of the columns samples. Again, those samples which had a higher or “moderate” corrosion risk were mostly found in slabs. This might be owing to the application of cleaning agents/detergents used for cleaning purposes or flushing seawater having high salt chloride contents. In fact, as admitted by Mr C M Wong in his Rebuttal Report dated 18 January 2024 at para 2.7.14, corrosion caused by “chloride attacks” would be the result of the acidic environment in the localized corroded areas[133]. Based on this result, we agree with Dr Lau that the risk of corrosion due to chloride attached is not as high as suggested by Mr C M Wong. Otherwise, there should be at least thousands/ or even tens of thousands of defects found in the Building. Design Working Life 286.Although Mr C M Wong commented that if the Building were designed to comply with the Code of Practice for Structural Use of Concrete 2013, the design working life of the Building would be 50 years. Therefore, conceptually, the Building has passed its design working life where the costs of maintenance and repair can be astronomical. 287.In Hong Kong, the first code that mentioned the requirement for design working life is the Code of Practice for Structural Use of Concrete 2004 (“2004 Code”). In 2013, this code was updated (“2013 Code”) but Clause 2.1.5 remains unchanged as follows:
288.In spite of the above, however, Mr C M Wong estimated the total repair cost for the Building was $129,000, including $114,000 from hammer tapping and $15,450 from patch repair. We agree with Dr Lau that these figures were just too low to be the reason to justify the demolition of the Building. 289.There was then the concern for fire safety of the Building. Mr C M Wong had compared the actual concrete cover of the Building and the current concrete cover re quired for fire safety under the Fire Safety Code:
290.From the table above, the provision for fire resisting construction of the Building is below the current standard. However, Mr C M Wong agreed that the current standard is the result of the evolution of the codes whereby the concrete cover of slab has been increased from 15mm to 20mm to achieve a fire resisting period of 1 hour. Indeed, in Bright Full Limited & Others v Hing May Properties Limited, LDCS 36000/2019 (unreported, dated 6 January 2023), the Tribunal found at §143 that the main issue for the more stringent requirement of 20mm in the prevailing codes is on durability instead of on fire resistant. By reference to the building plans approved by the Building Authority dated 16 November 1961[134], for instance, the thickness of the concrete slab, beam and column to withstand a fire resisting period of 1 hour was only 1/2” (12.7mm), 1” (25.4mm) and 1” (25.4mm) respectively. 291.Dr Lau stated he and Mr C M Wong both sat on the steering committee of the Code of Practice For Structural Use of Concrete 2004. At the time because of concerns of the widespread concrete spalling incidents, the committee members were of the view that more stringent requirements on the thickness of concrete covers were required. The decision for the increase in thickness was not caused by more stringent fire resistance period (“FRP”) or the change of the term to fire resistance rating (“FRR”) in the Fire Safety Code. The purpose of having 1 hour’s FRR (or FRP) is to provide concrete of sufficient thickness to protect the reinforcement bars inside. This would ensure that a building under fire would not collapse within 1 hour so that people can escape from the building. 292.Dr Lau added that he was a research assistant in civil engineering department at King’s College, University from 1973 to 1977 where one of his duties was to supervise undergraduates and post-graduate students with their fire tests in the College’s fire chamber. The structural components that were tested were reinforced concrete structure designed in accordance with concrete and fire codes of the early 1970’s. Before 1997, these codes were also adopted by Hong Kong designers for their reinforced concrete structures. In every case, the fire tests carried out in fire chambers confirmed that the resisting period provided by concrete covers based on these early concrete and fire codes were significantly longer than the fire resisting period required under the fire code[135]. 293.We cannot agree that concrete covers that were certified to resist fire for 1 hour would have suddenly become inadequate because of the change in standard. 294.Lastly, Mr C M Wong commented that for a structure to be called as a reinforced concrete structure, the rebars must be continuous from one member to another member. Therefore, a reinforced concrete framed structure intrinsically always possesses a certain degree of ductility. But this degree of ductility has been considered to be not sufficient after the enactment of the Code of Practice for Structural Use of Concrete 2004. 295.Mr C M Wong had checked the Building against the requirements for ductility listed in the Code of Practice for Structural Use of Concrete 2013. He found various locations of the Building do not comply with a number of ductility requirements. The most notable non-compliances are the way of anchorage of reinforcement into the columns and the locations of lapping of column reinforcement. There is also absence of shear reinforcement in the beam-column joint. 296.Notwithstanding the above, Dr Lau rebutted that the Building was designed as a reinforced concrete framed structure with ductile beams/columns connection, though at the time when the Building was built, the Code of Practice for Structural Use of Concrete 2013 did not exist. That is, the concept of design working life of concrete did not exist when the Building was built but this does not mean that the requirement for durability was necessarily compromised. Dr Lau stated that the Building would have collapsed as a mechanism if there were no ductile joints but it had withstood many instances of strong typhoons in the past 60 years. 297.Dr Lau further disagreed that there were deficiencies in the provision of anchorage of reinforcements into the columns or the lapping of column reinforcements. He stated that if there were such deficiencies as pointed out by Mr C M Wong, the joints and the columns would have cracked under the dead, live and wind loads acting on the structural concrete frames. The defects so found by Mr C M Wong were merely superficial defects which could be rectified by the patch repair method. In Dr Lau’s opinion, this clearly demonstrated that there were no structural deficiencies in the original design of the Building. We find Dr Lau’s explanation persuasive as Mr C M Wong could only find 11 structural defects. Age and State of Repair 298.The Building is now over 60 years old. According to Mr Benson Wong, it is amongst the oldest buildings in the immediate neighbourhood. A paper of the Sub-committee on Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice – Profile of Old Buildings in Hong Kong dated 19 February 2010 stated at its concluding paragraph 8 as follows:[136]
299.Mr Benson Wong firstly commented that the external appearance of the Building is just a plain looking block with monotonous elevations[137]. On the other hand, Mr Lau disagreed, stating that the façade design of the Building is constituted by simple systematic grid. The grid not only speaks to the beauty of order and proportion, but also gives systematization to construction and fabrication. 300.Having conducted the joint site inspection on 3 December 2024, we do not agree that the Building’s elevations by themselves can be regarded as signs of physical obsolescence. Neither can we accept Mr Benson Wong’s comment that the external wall finishing of cement rendering and paintwork is a sign of physical obsolescence. Although one may argue that different people may have different taste and choice of physical appearance, we consider that such should be viewed generally from the perspective of most of the citizens, particularly the citizens in the district. In the least, the Building does not appear to be “worn out” as a 60-year old building. 301.Consideration should be made to the existing physical and functional conditions of the Building and its maintenance and housekeeping standards. Building age is certainly not a conclusive indicator for redevelopment. In the present case, we are content to cite the following criteria adopted by the Tribunal Intelligent House Limited v Chan Tung Shing & Others [2008] 4 HKC 421 at §145:
302.For instance, the entrance lobby of the Building on Wong Nai Chung Road is well decorated with marble-like finishes. It is modernised with a warm and classy theme. The soffit of balconies are in good condition without any spalling or paint peeling off. 303.The rear entrance on Ventris Road is also sheltered. It contains similar devices for intercom control access. The floor of the rear entrance and lobby are mounted with granite finished walls, floorings and handrails. Fire Services Installation 304.Mr Benson Wong commented that the Building is sub-standard in terms of fire services installation when comparing with the essential fire service systems and equipment required under the current Code of Practice for Minimum Fire Service Installations and Equipment 2022 which is applicable to buildings approved and constructed after 2022. Certainly, the Building was built much earlier. 305.On the other hand, Mr Lau had appointed Mr Francis Yu Hin Siu (“Mr Siu”) as the Building Services Expert for inspection of the building service installations in the Building. Mr Siu found that the Building is not outdated in fire safety aspects. For instance, Mr Siu identified numerous Fire Service Installations and Equipment like fireman’s lifts, dry-type design fire hydrant system, fire extinguishers and separate lighting circuits in both front and rear staircases in the Building. 306.In terms of emergency electricity supply, Mr Siu agreed with Mr Benson Wong’s recommendation by installing a 4-pole automatic changeover switch for the supply mains of both the front and rear portions of the Building but the cost estimate should be minimum. 307.Separate lighting circuits and light fittings are installed in both front and rear staircases of the Building though there is no emergency lighting installed in the middle staircase in compliance with the Means of Escape requirements in the Fire Safety Code. Again, the costs for providing the emergency light fittings etc would not be significant. 308.Mr Siu also found two street fire hydrants locating at a distance not greater than 100m from the Building. That has complied with the requirements of the Code of Practice for Minimum Fire Service Installations and Equipment 2022 at paragraph 1.5. 309.In addition, the Building is situated in the “built-up” area as stated in the “Performance Pledge’ of the Fire Services Department such that they would respond to a fire call within 5 minutes. The location and height of the Building would enable fire engines to gain direct access to Wong Nai Chung Road or Ventris Road as the case may be to carry out rescues and put out fires occurring within units through aerial ladders and fire hoses. In Success Active Limited v Harbourview International Holdings Limited & Others, LDCS 31000/2018 (unreported, dated 19 April 2021) at §138, the Tribunal noted that Mr Benson Wong, who was also the expert on building conditions in that case, agreed that upon arrival of the firemen on scene, the latter can connect the fire engine to the street hydrant for water supply and they can physically bring the hosereel which is connected to the fire engine to any floor of a building. 310.The main difference between the two experts was on the provision of automatic sprinkler system for the shops of the Building. By Schedule 1 of the Fire Safety (Buildings) Ordinance, Cap 572, an automatic sprinkler system, manual fire alarm, fire hydrant and hose reel systems for the non-domestic portion of the Building are required. This Ordinance came into operation on 1 July 2007. Thus, the automatic sprinkler system, manual fire alarm, fire hydrant and hose reel systems were not required when the Building was built. The provision of an automatic sprinkler system, together with the new sprinkler pump room and water tank etc is therefore a challenge to the Building. 311.Then, on 8 August 2007, the Fire Services Department issued Circular Letter No 3/2007 as follows[138]:
312.This circular gave examples of possible relaxation and Mr Siu considered improvised design for sprinkler, fire hydrant and hose reel systems in accordance with the above circular letter issued by the Fire Services Department adequate. Mr Benson Wong stated during cross-examination that he had seen cases where the Fire Services Department would approve the improvised system while he had also seen cases where the Fire Services Department rejected it. More importantly, Mr Benson Wong himself admitted during cross-examination that just because there was an improvised sprinkler system in the Building did not mean that the Building was not in a tenantable condition or that it was functionally obsolete. Mr Benson Wong only gave his opinion that an improvised system is less safe when compared to the standard system required by the code. He gave an example that when one of the improvised system obtains water supply from a government main, it might happen that the government main could be shut off during road works and for such periods, the Building would be without the fire-fighting protection. We are afraid this suggestion by Mr Benson Wong is too speculative. In any event, we have not witnessed too many shops on the street having fire sprinklers installed. 313.Mr Benson Wong also commented that the existing doors installed to the front entrances and rear exits of flats and to staircases on upper floors of the Building are not fire rated doors. Mr Siu responded that the existing doors are of 50mm thick hard wood doors. They have complied with the approved general building plans though they could not meet the latest fire resisting construction requirements as stipulated in Clause C6.1(b) of the Fire Safety Code. Obviously such doors can be readily replaced with minimum costs. 314.As regards Mr Benson Wong’s comment that the three staircases in the Building are not interconnected with each other and are separated from one another by the flat units on every floor, Mr Siu responded that for the Front Portion, the front staircase could be able to gain access to the middle staircase via the roof of the Building. We agree this is less than ideal. 315.Mr Benson Wong further referred to the two lifts in the Building each of which was certified as a fireman’s lift. However, each lift has a rated load capacity of only 400kg for 5 passengers. This load capacity is less than the current requirement of 680kg and the net internal floor area of each car is less than 1.35 sq m as specified in Clause D10.1 of the Fire Safety Code. However, Mr Siu made reference to Table D1 in Section 2 of the Code and stated that fireman’s lift for the Building is not mandatory as the height of the Building falls below 30m above mean level of the lowest street. According to Mr Siu, the height of the Building facing Wong Nai Chung Road is 27.1m and that facing Ventris Road is 23.9m[139]. In other words, the requirements of fireman’s lift and associated lift lobby are not applicable to the Building. 316.Mr Benson Wong however disagreed with the method of measurement, pointing out that the Building consists of a Front Portion and a Rear Portion where the latter is 4.5 metres higher than the former. Thus, the total height of the Building above the street level of Wong Nai Chung Road is over 30 m. Mr Siu stated otherwise, claiming that the two portions of the Building should be measured separately from both accessible roads. 317.In view of the above disagreement, we made reference to regulation 41B of the B(P)R which states the requirement for fireman’s lifts. Paragraph (5) thereof states “… the height of a building shall be measured in accordance with regulation 23(1).” By the latter, the height of a building shall be measured from the mean level of the street or streets on which it fronts or abuts being a specified street or specified streets not less than 4.5 m wide, or where the building abuts on specified streets not less than 4.5 m wide having different levels, from the mean level of the lower or lowest of such streets, to the mean height of the roof over the highest usable floor space in the building. Obviously, Ventris Road is a specified street. 318.We note however from the approved plan for calculations dated 16 November 1961[140], the Building Authority seemed to have treated the Front Portion and the Rear Portion separately as two buildings. This was also the case when Occupation Permit was issued on 8 July 1964[141]. In such regard, we agree with Mr Siu. Barrier Free Access 319.On the other hand, Mr Benson Wong pointed out that the two lifts have not been upgraded to become an accessible lift. Furthermore, there is no accessible route connecting the public pavement with either one of the lifts as the lowest lift landings of the front lift and the rear lift are separated from their respective front and rear building entrance by a couple of steps. Mr Siu agreed that there is no barrier free access provision of the Building as such requirements were not in force when the Building was completed. Nonetheless, we do not regard this as a fatal deficiency that alone can justify its demolition for redevelopment. Equipotential Bonding Connections 320.Mr Benson Wong suggested equipotential bonding connections for exposed metal fixtures are essential electrical safety installations required under Paragraph 11E of the Code of Practice for the Electricity (Wiring) Regulations to prevent electrical accident. In general, however, equipotential bonding connections are only partially provided to the metal handrails and windows in the staircases and metal gates to the flats of the Building. Mr Siu agreed but not much equipotential bonding work is required as per the Code of Practice for the Electricity (Wiring) Regulations. In any event, for the deficiency occurred inside individual privately owned premises, it should be the responsibility of the individual owner instead of a good reason for redevelopment of the Building. Staircase Railings 321.In addition, Mr Benson Wong found the height of railings installed along the outer edges around the staircase well is only about 900 mm which is less than the minimum height of 1,100 mm specified for protective barriers under the Building (Construction) Regulations. Mr Siu responded that this can be improved by simple improvement works. Underground Drainage 322.Mr Benson Wong also discovered that underground soil and waste water from above after discharging into underground drains in the open yards, run underneath and through the private areas of Shops Nos 59 & 61 Wong Nai Chung Road. We agree with Mr Lau that all manholes and vertical drainage stacks on G/F located at the open yards are common parts of the Building. The Deed of Mutual Covenant has already provided for the access right through the shops for routine inspection and maintenance. Mr Lau proposed installing two cat ladders from 1/F flat roofs leading to G/F yards so that the maintenance personnel could gain access to the yards directly without the need of gaining access through the shops. 323.In Mr Lau’s opinion, except for complete replacement of new underground drains, any inspection and repair, like routine inspection, clear blocked drains or internal lining works for cracked drains, could be carried out at the locations of the manholes situations. It is seldom to carry out excavation works for pipe replacement inside the shops unless no maintenance works have ever been conducted over several decades which would be very unlikely. Lightning Protection 324.There is no dispute between Mr Benson Wong and Mr Lau that there is no lightning protection system on the front and rear roofs of the Building. Nevertheless, according to Mr Lau, this item does not even come under a checklist item for periodic inspection, testing and certification of fixed electrical installations (WR2 inspection). 325.Mr Siu was also of the opinion that the Building does not fall into any of those categories under the Practice Note issued by the Building Authority on Lightning Protection for Buildings (PNAP ADV-6) where risk assessment shall need to be conducted for lightning protection measures for buildings which are very tall or isolated. In fact, most of the buildings nearby are almost of the same height. In any event, Mr Siu agreed with Mr Benson Wong proposed cost estimated in the sum of $70,000. Building Management 326.Whereas Mr Benson Wong suggested there being no building management systems to control and monitoring the various building services, such as intercom phones, CCTV, instant fault control systems for water pumps, electricity supply, and control of artificial lighting, Mr Lau responded that those items are not strictly a necessity. 327.Mr Lau further elaborated that with only a relatively small number of units and occupants, the requirements should be balanced against time, cost and expertise on repair and maintenance of the Building. For instance, as water supply to the Building is directly fed from the Water Supplies Department, there is no fresh or flushing water supply pumps installed in the Building. Similarly, electricity supply is fed by the power company directly. There is no transformer and main switch board installed in the Building. As a result, a sophisticated building management system is not necessary. Many “boutique” brand new developments do not have a management office due to site constraints. Mr Benson Wong clarified that he only proposed three commonly installed systems that can be added individually for more efficient management and keeping up with modern-day expectation of similar residence in the neighbourhood. 328.On the other hand, Mr Benson Wong commented that there is no management and access facility such as a management counter, telecommunication and broadcasting service (TBE) room/duct provided in the Building, notwithstanding that these can be provided with certain GFA exemption/ concession. While this is true, we are aware that the Building is being managed by Knight Frank, a reputable management company. The common areas and lift cars are monitored by CCTV cameras. Each unit has its own letter box. The entrance is also equipped with a fully functional doorbell and access control system which enables passcode access and direct communication with upstairs units through intercom and camera. 329.The good management over the years also featured the following devices in compliance with ‘safety’ and ‘good practice’:
330.We would have assumed that the management of the Building is in good hands save that the lift that serves the Rear Portion of the Building, ie Lift 2, had been suspended for service since 18 December 2023. This is totally unacceptable especially when the lift expert appointed by Mr Benson Wong did not explain why the lift cannot be put back into service. On the contrary, Mr Benson Wong agreed that the lift was serviceable[142]. At this juncture, we remind ourselves that the applicant has acquired the whole of the Rear Portion save the units owned by R6 and R7 since 23 February 2022. Conclusion on Age of the Building 331.Mr Benson Wong accepted in his joint statement with Mr Lau that it would be the extent to which the Building falls short of modern-day standards that would justify redevelopment on the ground of age. There are four main aspects of functional obsolescence that Mr Benson Wong had raised, including
332.We have reviewed all those aspects above and cannot but agree with Mr Lau that the obsolescence as alleged is minor and does not affect the reasonable use and enjoyment of the Building. Nor would such obsolescence materially impair the safety, hygiene, comfort or convenience of the occupiers or visitors. State of Repair 333.In Intelligent House, supra, the Tribunal had accepted that “tenantable condition” should be used as a benchmark to formulate the repair works required:
334.Mr Benson Wong in fact stated in his Condition Survey Report dated 30 June 2023 at §5.1.5 that he was NOT contending the following[143]:
335.As regards state of repair or tenantable condition, Proudfoot v Hart (1890) 25 QBD 42 is the leading authority where Lord Esher MR stated:
336.The Tribunal in Intelligent House, supra, came to a similar view at §119 of the judgment:
337.And for the purpose of preparing the Condition Survey Report, Mr Benson Wong had adopted the following definitions for recording the existing conditions of individual members of the structural frames, the components, the finishes and the service installations of the Building. Mr Lau also agreed[145]:
338.Having said that, we agree with Mr Benson Wong that “preventive repair / maintenance may be considered in order to maintain the existing condition untill the next repair cycle” to prevent the concerned components, finishes or service installations from further deterioration. This accords, for instance, with the ruling that prophylactic measures taken to avoid the recurrence of the deterioration may also be repair; Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB12, 22, McDougall v Easington District Council (1989) 58 P & CR 201, 206. 339.Both Mr Benson Wong and Mr Lau agreed that the Buildings Department had in February 2014 served 19 numbers of Mandatory Building Inspection Scheme (MBIS) notices and 41 numbers of Mandatory Window Inspection Scheme (MWIS) notices requiring the respective owners of the common parts and private units to carry out prescribed inspections and necessary repairs[146]. Most of them were complied with in the following 2 or 3 years. As at June 2023, only the two following 2 MBIS notices remain outstanding and not been complied with:
340.On the other hand, the following Building Notices or Orders remain outstanding:
341.The units above are all owned by the applicant except 7/F, No 61 Wong Nai Chung Road which is owned by R9. 342.Save for the above Building Notices or Building Orders which concern unauthorized structures, as remarked by Mr Lau, the high compliance rate in the MBIS notices shows the individual owners and the owners’ corporation had put effort to maintain the Building in good condition and in compliance with the latest legislative requirements. 343.There are records showing that the Building had undergone major repair and renovation works carried out in around 2016-17 by a registered general building contractor under the supervision of an Authorized Person[154]. Key scope of works included but not limited to[155]:
344.Notwithstanding the above, Mr Benson Wong considered that the renovation works were for common area of the Building excluding the shops, flats, main and flat roof areas which are privately owned. As a matter of principle and construction of the Ordinance, it is relevant to look at the state of repairs concerning every part of a building, including common parts and parts privately owned. However, the ill repair or non-repair of privately owned area should not go as far as to justify the demolition of the Building as a whole unless the structural frame of the Building is damaged. 345.Mr Benson Wong was also of the view that no rapid infrared thermographic survey (RITS) and hammer tapping were carried out to identify rendering and concrete defects on external walls. We consider this comment neither here nor there as there were only 11 structural defects identified by Mr C M Wong. 346.In fact, by reference to Item 2 of the Schedule of Works done for the Building, the works relating to the external walls were carried out by hacking off all loose and defective plastering (with full double-scaffolding erected and catch fans)[156], and further applying various protective coating layers onto the entire surface of external wall of 2,900 sq m.[157] After that, all necessary tests by HOKLAS were performed to ensure the protective surface was intact and functional without defects. That is, the external walls were repaired not long ago and definitely less than 10 years ago. Indeed, by reference to page 3 of the Work Schedule dated 26 November 2021 at item 7.3.2, a total area of 62 sq m of concrete was repaired. Unsurprisingly, the infrared consultant employed by Mr Benson Wong, Building Diagnostic Consultants Limited (BDCL), could only detect cracks or spalls up to a total area of 22 sq m and hollow spots of 3 sq m.[158] This is de minimis. 347.At most, Mr Benson Wong could only identify the following deficiencies, many of which have been stated above[159]:
348.Also, Mr Benson Wong commented that the scope of the prescribed inspections and repairs under MBIS and MWIS applies to only 5 building elements and the windows of the Building. The 5 elements are:
349.In Mr Benson Wong’s opnion, other building elements not covered by the MBIS and MWIS such as the waterproofing to roof areas, components and finishes inside privately owned areas; plumbing and electrical installation other than the main electricity supply system will continue to be subject to no periodic mandatory inspection and suffering from various deteriorations throughout the remaining life of the Building. 350.Thus, Mr Benson Wong and Mr Lau proposed repair works as follows:[160]
351.We note however that Mr Lau, in trying to distinguish “which are reasonable in the present day circumstances for the type of building in question” had divided the costs into two distinct dichotomies between repair and improvement. Mr Lau’s approach is misconceived. In the Court of Appeal judgment in Morcom v Campbell-Johnson [1956] 1 QB 106 at page 115, Lord Denning said:
352.And in Conn v Robins Brothers Ltd [1966] where the taxpayer undertook a comprehensive refurbishment of a property that was, in places, up to 400 years old. Unsurprisingly, the work involved the use of more modern building techniques and materials (such as steel beams instead of timber). It was held that even so, the character of the property was essentially unchanged and the contested expenditure should be treated as repairs. What was regarded as repair would change with the passage of time to reflect improvements in technology. Structural Frames 353.Both Mr Benson Wong and Mr Lau agreed the costs for repairing concrete spalling with modified mortal in the sum of $15,450. They differed because Mr Lau did not agree to the cost of $114,000 proposed by Mr Benson Wong for hammer tapping works to the structural frame. In their joint statement dated 6 March 2024[161], however, Mr Lau stated that he had in fact allowed a sum of $70,600 as shown in Appendix XII of his Rebuttal Report dated 20 December 2023[162]. While the difference now between the two experts is no longer significant, on the safe side, we are prepared to adopt $114,000 as proposed by Mr Benson Wong. Building Facades 354.Mr Benson Wong pointed out that some of the flats had their original mild steel windows replaced by aluminium windows of different colours and patterns at different periods of time. He opined that these new aluminium windows are untidy. We agree with Mr Lau that the untidy appearance of the windows is totally irrelevant to the reasonable use and enjoyment of the Building. 355.Mr Benson Wong also pointed out that the compliance of the MWIS notices is either 5 years ago or approaching 5 years. He recommended appointing a Qualified Person (QP) to check and repair those aluminium windows to comply with the statutory requirements. Not to speak of the minimum fees to check and repair those aluminium windows, if any (as they have passed the test 5 years ago), we agree with Mr Lau that the checking would be the responsibility of the respective owners. Further, as the window inspection is less relevant to either “age” or the “state of repair” of the Building, we agree with Mr Lau that the proposed costs in the sum of $51,000 should be deleted. 356.As well, MWIS notices for the Building had been complied with 5 years ago. As pointed out by counsel for the respondents, it was wrong for Mr Benson Wong to include the costs for the so-called preventive MWIS works as the repair cost. 357.Similarly, we agree with Mr Lau that the proposed replacement cost of $24,000 for replacing the remaining mild steel windows to aluminium windows should be omitted. On the one hand, such replacement is not mandatory and more importantly, it is a matter of the sole discretion of the owners at their own expense. 358.And as stated in §343 above, Mr Benson Wong had also engaged BDCL to carry out three different surveys to the external walls of the Building. On the basis of the defective areas measured by BDCL, ie 22 sq m, Mr Benson Wong then calculated the total repair area in the sum of 514.40 sq m[163] as follows[164]:
359.Mr Lau disagreed with Mr Benson Wong’s calculation especially on the high rate in error estimation. He alleged that in the building renovation industry, the following market practice is adopted to establish the total repair area:[165]
360.In their joint statement dated 6 March 2024, a comparison table was produced as follows[166]:
361.Having regarded to the spots of nominal area found by BDCL to be defective[167], we agree with Mr Lau that Mr Benson Wong’s projection was excessive. On the other hand, we are prepared to adopt a more modest area of 150 sq m and the repair cost is estimated as follows:
362.As a result of the above, the comprehensive rendering works proposed by Mr Benson Wong can be omitted. Covered Walkway 363.Another disagreement between Mr Benson Wong and Mr Lau was on the provision of steel framed covered walkway. Covered walkway is normally required for demolition works or other heavy duty construction works so as to protect the public during the course of works. In Mr Lau’s opinion, the proposed works on the external walls of the Building are relatively light duty and minor in nature (ie hammer tapping test, repair of defective concrete/ rendering and painting works). Mr Lau classified such works as Minor Works and according to the Technical Guidelines of Minor Works Control System issued by the Buildings Department, use of bamboo scaffoldings as an access to works is recommended. We agree and therefore disregard the cost estimate of the covered walkway proposed by Mr Benson Wong. Scaffoldings 364.Notwithstanding the above, for carrying out the repair works to the external walls, scaffoldings including protective screens and catch fans need to be erected to all façades of the Building. Mr Benson Wong and Mr Lau had also arrived at different estimate:
365.Mr Benson Wong pointed out that in calculating the cost of scaffoldings, Mr Lau had incorrectly adopted the external wall area of 2,530 sq m instead of the façade area of 3,501 sq m, thereby resulting in a substantial reduction in the cost of works. We accept Mr Benson Wong’s explanation and his estimate of $1,050,300. Window Surrounds 366.In addition, Mr Benson Wong noted signs of water seepage in the interiors adjoining the windows of the following units:
367.Mr Benson Wong was of the view that water seepages were resulted from rainwater penetrating through the junctions between the windows and the rendering. He recommended complete replacement of window sealants of all windows in the Building. Mr Lau disagreed, stating most flats had no water seepage issues due to the failure of sealant of window surrounds. He suspected that the water seepage marks inside some of the flats were due to rainwater running into the flats directly through opened windows. 368.However, by reference to the photos provided by Mr Benson Wong, we do not agree with Mr Lau. Owing to the age of the Building, we agree with Mr Benson Wong that for preventive repair consideration and repair of the existing water seepages through the junctions between the windows and the rendering, the existing sealants around the windows should be cut out and re-applied. We accept Mr Benson Wong’s estimate at $342,900. Minor Amenity Features 369.Mr Benson Wong observed that throughout the elevations around the Building, there are external fixtures such as metal frames for A/C units, drying racks and window canopies fixed onto the window frames or external walls. Nevertheless he conceded that under the prevailing policy of the Buildings Department, unauthorized building works of these kinds would be tolerated as amenity fixtures and no enforcement action would be taken unless they are found to be abandoned and/or are seriously dilapidated. More particularly, it should be the responsibility of individual owners to engage competent minor works contractor to take care of them. Therefore, the estimated costs of $70,000 proposed by Mr Benson Wong for general inspection and repair of these items should be omitted. Asbestos Containing Materials (ACM) 370.Mr Benson Wong had engaged Mr Markus Chui (“Mr Chui”), a qualified asbestos consultant, to identify asbestos containing materials (ACMs) in the Building. Mr Chui concluded the presence of ACMs in the form of cement sheet and mastic below vinyl floor tile, switch box, lift brake lining and cable trunk caulking. For the sake of health and environmental impact, Mr Lau also agreed to appoint a competent contractor to remove these ACMs but he did not agree with Mr Chui’s estimate of $1,135,000. Instead, Mr Lau found the quote of another consultant was only $865,000, ie a difference of 24%[173]. 371.Mr Chui pointed out that the cost difference is probably due to one or more of the following essential work items not covered by Mr Lau’s appointed consultant[174]:
372.Mr Chui also pointed out the costs of the following works were not addressed by Mr Lau’s appointed consultant[176]:
373.Having read Mr Chui’s report carefully however, we find those cement sheet and mastic below vinyl floor tile, switch box, lift brake lining and cable trunk caulking which contained the ACM were in “good condition”, with low accessibility and low hazard risk. Mr Chui’s recommended response was to keep them intact or remove ACM only prior to any work that may disturb the ACM[177]. Mr Benson Wong’s concern that during the repair project some workers might accidentally disturb the components containing ACMs is undue or over worry. Why should the owners of the Building spend a million dollars that is not necessarily to spend? 374.Thus, we have reformulated the costs of works for the building facades as follows:
Roof Areas Unauthorized Roof-top Structures 375.There are two unauthorized building structures constructed on the main roof of the Front Portion. As stated in §336 above, Building Orders Nos C/TB/001892/19/HK and C/TB/001893/19/HK both dated 30 May 2019 have been served to the owners of 9/F, No 59 Wong Nai Chung Road and 9/F, No 61 Wong Nai Chung Road requiring them to remove the unauthorized roof structures. The cost of reinstatement should be borne by the individual owners and more importantly, it has no bearing on the age and state of repair of the Building. Main Roof Area 376.Mr Benson Wong observed some dry watermarks and peeled paintwork on the ceiling of 8/F, No 38 Ventris Road[179]. He suspected there was water seepage through the roof slabs of the main roof or upper roofs of the Building. The waterproofing membrane of the Building would also be aged and should have well passed its useful life. In addition, the waterproofing membrane would inevitably be damaged during the course of demolition of the unauthorized rooftop structures on the Roofs of Nos 59 & 61 Wong Nai Chung Road. In view of the above, Mr Benson Wong proposed a complete replacement of the existing waterproofing and coverings to the Roofs of Nos 59 & 61 Wong Nai Chung Road and No 38 Ventris Road. Mr Lau disagreed but suggested patch repair of those two suspected seepage locations of water proofing on the main roof. 377.We appreciate that water seepage through the roof are very common for old buildings in Hong Kong. In nearly all the cases of water seepage problem heard in Hong Kong, the courts have never approved patch repair to cure the problem. We agree with Mr Benson Wong that the ingress locations and paths of water seepage through the roof coverings and slab are usually very difficult to identify. As pointed out by Deputy District Judge Simon Ho in Yik Yuen Ling v Tso Wing Yan, DCCJ 813/2004 (unreported, dated 18th October 2017) at §122 (citing Building Management in Hong Kong (3rd Ed) at para 7.30), “water is notoriously able to find conduits to run along and to penetrate weak points some distance from its origin”. 378.More recently, in Chu Cheung Cheung & Another v The Incorporated Owners of Provident Centre No 21-53 Wharf Road, North Point, Hong Kong, DCCJ 244/2021 (unreported, dated 18 November 2024), for instance, HHJ Alan Kwong rejected the evidence that some specialized waterproofing materials with crystallization ability can be applied to stop the ingress of water[180]. We agree with Mr Benson Wong that the primary objective for repair of waterproofing on the main roof is to achieve a water-tight roof which should be effective for at least 10 years until the next repair cycle. 379.In fact, Mr Benson Wong only recommended replacing the waterproofing and the roof coverings on the three roof areas at an estimated cost of $373,000 only. We accept Mr Benson Wong’s proposal and his cost estimate. 380.Similarly, we agree to Mr Benson Wong’s proposal to re-cover the Upper Roof Area, the parapet walls, the external walls of staircase housings and water tanks. Staircase Housing Door, Cat Ladders & Wind Guards 381.The wooden door to the front staircase housing is rotted with lifted surface laminates. The metal door to the rear staircase housing is also rusted with peeled paint off the metal surface. For weather protection and durability, Mr Benson Wong recommended new stainless-steel door with wired glass vision panel to replace the two existing doors. 382.In addition, Mr Benson Wong found the water tanks not being provided with cat ladder for maintenance access and the existing cat ladder installed to the front lift machine room badly rusted and without a lockable panel. For the purpose of work safety and compliance with the occupational safety requirements, Mr Benson Wong recommended new cat ladders with a lockable panel to prevent unauthorized use to be installed to the flushing water tanks and the front lift machine room. The water tank manhole covers are rusted as well as need replacement. 383.Mr Benson Wong also found the metal wind guards installed to the external walls of the two lift machine rooms rusted in their frames and the one to front lift machine room missing. 384.Mr Lau did not object to the above replacement save for the installation of new cat ladders for access to flushing tanks on the ground that the tanks are just around 1 metre deep. However, he came up with cost estimates much lower than those proposed by Mr Benson Wong:
385.We are afraid that Mr Lau’s estimate is too rough to provide good comparison. In such regard, we accept Mr Benson Wong’s estimate of $126,000. 386.Thus, we have reformulated the costs of works for the roof areas as follows:
Staircases and Lobby 387.As regards the costs for repair or improvements for the staircase and lobby, Mr Benson Wong and Mr Lau had come up with estimates wide apart:
Unauthorized Metal Structure over Bridge 388.At present, 1/F of the Rear Portion (which used to be the lobby) of the Building is connected to Ventris Road by a staired bridge leading upwards. This bridge is now covered by a corrugated cement sheet (“the Canopy”)[181] and installed with metal fences. According to Mr Benson Wong, they are unauthorized building structures and have to be removed although Mr Markus Chui, a Registered Asbestos Consultant, engaged by Mr Benson Wong commented that the Canopy is in good condition and recommended to have it remaining intact (or remove the ACM prior to any work that may disturb the ACM) [182]. 389.Meanwhile, however, non-concrete projections from the external wall of a building over an entrance to the building not exceeding 2 metres are classified Class I Minor Works (item 1.27 of the Building (Minor Works) Regulation). Obviously, although the Canopy extends over 2 metres, it has existed over a long period not subject to any enforcement action by the Buildings Department. No Building Notice or Building Order has ever been served to the owners of the Buildings[183] despite Building Orders Nos C/TB/001892/19/HK and C/TB/001893/19/HK both dated 30 May 2019 having been served to the owners of 9/F, No 59 Wong Nai Chung Road and 9/F, No 61 Wong Nai Chung Road. 390. In the end of 2024, the Development Bureau issued a Legislative Council paper proposing to amend the Buildings Ordinance[184]. The following paragraphs in the consultation paper are important:
391.Having reviewed the above, we considered that the proposed removal by Mr Benson Wong is not necessary at least for some time into the future. Staircase Railings and Handrails 392.There are plastic covered handrails and railings installed in the front and wooden handrails in the rear staircases but none in the middle staircase. Mr Benson Wong accepted that the wall mounted handrails appear in fair condition and requires no repair at this stage. However, he considered the metal railings installed along the outer edge of stairs of height about 900 mm less than the minimum height of 1,100 mm which is specified for protective barriers[187]. Mr Benson Wong proposed that the existing railings to the front and rear staircases should be replaced and new handrails should be installed to both sides of the middle staircase. 393.In Intelligent House, supra, at §238, Mr Benson Wong recommended installing and repairing the railings on the parapet wall to the height of 1.1m as required by the 1990 Building Regulations. At §240, the Tribunal ruled as follows:
394.Again, the repair or replacement of the protective barriers is classified Class II Minor Works (item 2.5 of the Building (Minor Works) Regulation). We agree with Mr Lau that Mr Benson Wong’s estimate of $363,000 was excessive and prefer Mr Lau’s cost estimate of $100,000. Staircase Windows 395.Mr Benson Wong accepted that the original mild steel windows installed to the front staircase have been generally been replaced with fixed-light windows. However, those installed to the rear staircase have not been replaced. In addition, Mr Benson Wong found water marks and rust stains on the window frame members and wall surfaces under the window. As a result, he believed both the replaced window and the original window should have been suffering from water seepage that caused corrosion. Mr Benson Wong proposed that the sealants to the glass panels should be cut out and resealed to prevent further corrosion of the metal windows. He also proposed the metal frames of the windows should be brushed to remove rust and repainted. 396.Having reviewed the above, we considered Mr Benson Wong’s estimate of $180,000 more reasonable. Staircase Floors 397.For the flooring of staircases and corridors of the Building, we do not agree with Mr Benson Wong that the conditions are poor. We agree with Mr Lau that there are only isolated damaged nosing tile of steps. All these defects can be readily repaired and Mr Benson Wong’s estimate of $45,000 was excessive. We prefer a cost estimate of $20,000. Staircase Walls and Ceilings 398.We agree with Mr Benson Wong that the staircase walls and ceilings are in poor decorative conditions with areas of spalling and off-key plaster[188]. However, he also agreed during the cross-examination that the defects are localized and can be resolved by patch repair. Thus, Mr Lau’s estimate of $27,400 is adopted. 399.Thus, we have reformulated the costs of works for the staircase and lobby as follows:
Flats and Shops Internally 400.The Building consists of common parts such as external walls, roofs, staircases as well as private parts like the flats and shops. Therefore, in reporting the state of repair of the Building, the conditions and necessary repairs relating to the building components in both the common and private parts of the Building should be included. However, this must be distinguished from the decorative conditions or unauthorized building works within the private premises. We agree with Mr Lau that for those defects, deficiencies or unauthorized building works noted inside or associated with individual flats or shops, the respective owners should be responsible. In Greatmax International Limited & Others v Lo Sha Kam Ha Teresa & Others, LDCS 7000/2019 (unreported, 16 June 2023), the Tribunal had remarked at §55 that the finishing of internal units should be irrelevant as it is a matter of personal choice of the owner or tenant. Similarly, whether the owner or tenant choose to keep the unauthorized building works for value depends on their own assessment of risk and value attributed to them. 401.We have reviewed the works proposed by Mr Benson Wong as contained in Appendix 8 as well as the respective photographs contained in Appendix 9 of his Condition Survey Report dated 30 June 2023. They mainly covered the following reinstatement works for the unauthorized structures that he conceded in his Rebuttal Report dated 16 August 2024 that the enforcement risk is insignificant[189]:
402.In respect of the remaining items, they comprise, for instance:
403.Those latter items are exactly what new owners are prepared to do when they acquire the respective flats or shops for which they would have paid the market prices (ie the EUV as determined earlier) that reflect their value for money. Open kitchens, particularly, are favoured by prospective purchasers and recommended by most, if not all, interior designers. This would particularly be the case when the subject units are located in the more prestigious position than other parts of Happy Valley. Shop owners or occupiers are of course ready to carry out the renovation and fitting out themselves. 404.More importantly, those units occupied by the respondents are found in fair or good conditions: 405.In comparison, the “loosen paintwork and wall surfaces”, “defective floor/wall tiles” happened all to be found in the units owned by the applicant. Surprisingly, many flat items like doorsets, washing basin, water closet, bathtub, sink and cabinet were also mysteriously missing in the applicant’s units. It would be highly unfair to include the fitting out or repair cost of the other units owned by the applicant which happen to fall into disrepair through neglect or otherwise. The inclusion in fact distorts the state and repair costs of the Building as a whole. 406.Mr Benson Wong referred to Intelligent House, supra, at §248 which he alleged the Tribunal approved his practice of including the repair costs in the determination of the state of repair of Kam Kwok Building and National Building[193] which were both some 46 years old and situated at the junction of Marsh Road and Jaffe Road:
407.What the Tribunal stated in Intelligent House, supra, should be distinguished from the present case for the following reasons:
408.In the present case, we do not consider the costs proposed by Mr Benson Wong for the flats and shops internally relevant. Aboveground Plumbing 409.Mr Benson Wong agreed that the fresh water supplies to the flats and shops are in serviceable order. 410.However, Mr Benson Wong found that the individual water meters and stop valves that are installed on the external walls at the four open yards at ground level are not housed inside lockable cabinet for protection against vandalism. He estimated that a total of 3 lockable cabinets should be provided to house the individual water meters and stop valves. Mr Benson Wong proposed a cost estimate of $30,000 while Mr Lau allowed a cost of $20,000 instead only for 2 stainless steel cabinet for water meters and associated works. In such regard, we accept Mr Benson Wong’s $30,000. 411.The Building has already had the original galvanized iron pipework for freshwater replaced by copper pipes and fittings. While Mr Benson Wong was of the view that the copper pipework for fresh water supplies are in serviceable order, he suspected there might be numerous minor defects such as misaligned pipework, loosened fixings, missing bolts, hardened or otherwise defective plastic sleeves in the copper pipework. 412.Similarly, the Building has already had the original galvanized iron pipework for flushing water replaced by plastic pipework. Mr Benson Wong proposed general inspection and repair should be carried out to the upfeed and downfeed pipework of the flushing water supply system. 413.However, the alleged defects were only a suspicion of Mr Benson Wong. We agree with Mr Lau that the general inspection and repair of the system proposed by Mr Benson Wong is just part of the routine maintenance. All works in this respect should be excluded from the repair cost. 414.Thus, we have reformulated the costs of works for the aboveground plumbing as follows:
Aboveground and Underground Drainage 415.Again, Mr Benson Wong accepted that the original aboveground cast iron drainage pipes and rainwater drainpipes had been replaced by plastic pipes fixed with stainless-steel pipe brackets. He further accepted that the replaced plastic pipework is serviceable and requires no major repair. However, for the same reasons and purposes as stated for the other external pipework, general inspection and repair of the drainage pipework should be conducted when scaffoldings for carrying out work to the external walls are erected. 416.We agree with Mr Lau that the general inspection and repair of the system proposed by Mr Benson Wong is just part of the routine maintenance that might be required for every building regardless of its age. Particularly, we note from the Interim Payment Application – No 12 by the contractor who carried out renovation for the Building dated 26 November 2021, item 7.5.2 covered “repairing all existing common above ground drain pipes (including AC condensation pipes, soil, water, rain water & vent pipes) including unused and abandoned pipes together with all fittings and accessories” and item 7.5.4 covered “investigate and report on the existing conditions of all underground drains and manholes, using CCTV survey and visual inspection” [195]. 417.We agree with Mr Lau that all works in this respect should be excluded from the repair cost. Electrical Installation 418.Mr Benson Wong accepted that the electricity supply and distribution systems in the Building are serviceable. However, he stated that the main electricity supply system to the flats and shops in the Building required under the Electricity (Wiring) Regulations a WR2 certificate every five years. In that regard, we do not consider the Building have any deficiency or defect in the state of repair. 419.Moreover, Mr Siu found a WR2 certificate with validity up to 6 May 2026. We agree with Mr Siu that Mr Benson Wong’s concern is routine maintenance and not “repair” in any sense. The cost estimate of Mr Benson Wong should be omitted. Equipotential Bonding 420.Mr Benson Wong found that equipotential bonding connections have been made to some of the staircase handrails and windows in the common areas of the Building but some were found loosened or disconnected. He estimated the cost of works for checking and reconnecting equipotential bonding connections to all exposed metal fixtures in the staircases of the Building was $35,000. As this is related to the common parts of the Building, we have no dispute on this item. 421.Thus, we have reformulated the costs of works for the electrical installation as follows:
Fire Services Installations 422.We have already stated in §§302-315 above that Mr Siu found that the Building is not outdated in fire safety aspects and we agreed with him. For instance, Mr Siu identified numerous Fire Service Installations and Equipment like fireman’s lifts, dry-type design fire hydrant system, fire extinguishers and separate lighting circuits in both front staircases in the Building. 423.Therefore, we prefer to adopt the costs proposed by Mr Siu/Mr Lau which is in the sum of $749,500, say $750,000. Lifts 424.Mr Benson Wong had engaged Mr C F Hung, a Registered Lift Engineer to carry out a condition survey of the lifts in the Building. Mr Fung concluded in his survey report dated 13 June 2023 as follows[196]:
425.Based on Mr Hung’s report, Mr Benson Wong recommended “unintended car movement protection (UCMP)”[197] and “ascending car overspeed protection (ACOP)”[198] to improve safety. 426.The new requirements for UCMP came into effect to all new installations of lifts with tendering date on or after 1 September 2011[199] and those for ACOP came into operation on 1 January 2001 and shall be applicable to lifts tendered on or after that date[200]. According to the “Guidelines for Modernising Existing Lifts” issued by the Electrical and Mechanical Services Department (“EMSD”) in 2011, lifts installed before 2007 may not have incorporated UCMP and lifts installed before 2003 may not have incorporated ACOP. 427.Then on 8 April 2018, there was a lift accident at Waterside Plaza in Tsuen Wan when the lift moved upwards to the roof without stopping, causing serious injuries to two passengers. The investigation conducted by the EMSD revealed that that the cause of the incident might have been insufficient traction between the suspension ropes and the traction sheave or the failure of the braking system. Then on 11 May 2018, another fatal accident occurred at Paris Court in Sheung Shui Town Centre. Investigation revealed that the braking force of the brake system of the lift associated with the incident was insufficient, so that when the lift car travelled from the ground floor to the destination floor and the lift doors opened for passenger entry, the lift car failed to stop completely and continued to move upwards, thereby leading to the incident. The main cause of the problem was that a component of the lift braking system was found to have been not lubricated for a long time and hence could not operate smoothly. As a result, the brake was continuously rubbed when the lift was running, leading to overheating and hence significant reduction in the braking force. 428.On 14 July 2018, the Government issued a press release stating that “EMSD implements short-term safety enhancement measures for aged lifts and announces investigation result of lift incident at Waterside Plaza in Tsuen Wan” [201]:
429.In spite of the above, up to now, the installation of UCMP and ACOP is not mandatory for existing buildings. According to the latest requirement, if any lift is not installed with UCMP and ACOP, the owners should undertake special maintenance twice a year. Mr Lau estimated the cost would be around $3,500/lift/time. In any event, as highlighted above, the more comprehensive safety devices are for improvement and enhancement only. 430.In addition, there was record of comprehensive replacement of lift control system for the Building from original AC type to VVVF drive. By a letter dated 12 December 2007 from Knight Frank, the owners of the Building were informed that “an Owner’s Meeting of Comfort Mansion was held on 27 November 2007. Resolution unanimously passed on appointing a professional lift contractors to carry out a comprehensive replacement of the lift system which includes replacement of major lift machine, lift car finishes, display, button, landing doors and etc at a project sum around HK$351,000 (the lowest tender).”[202] By reference to the lift site survey checklist procured by Mr Benson Wong, completion of the above replacement of lift system took place in November 2008[203] and June 2009[204]. 431.Notwithstanding the above, Mr Hung recommended further modernization of the lifts in the sum of $1,775,000 as follows:
432.Again, having read Mr Hung’s report carefully, the two lifts of the Building have already been equipped with machine brakes, emergency stopping device, and overspeed governors which serve the function of stopping lifts in case of accidental fall or accelerations[205]. The lifts also contain “Instantaneous Type with Captive Roller” or “Progressive Type” safety gears which are capable of braking lifts in short braking distances in both ascent and decent. In our opinion, the more “advanced system” of ACOP/UCMP merely serve to improve the safety functions to a higher margin. As ACOP/UCMP is not mandated by law except for lifts in new developments. In our opinion, the lifts are both in tenantable standard. 433.Then the question comes again. Why should the owners spend $1,775,000 when the special maintenance twice a year would only cost $3,500/lift/time? Conclusion of Works required to address the age and state of repair of the Building 434.Having reviewed the above, we find the following costs of works are required to address the age and state of repair of the Building:
435.The purpose of formulating the above costs is in accordance with what Mr Benson Wong stated in his Condition Survey Report dated 30 June 2023 at para 5.13.3 which is repeated as follows[208]:
436.As regards Mr Lau’s comment that no one in the real world would nowadays building such a superstructure and the plans of this new building could not be approved by the Buildings Department etc, we are afraid that Mr Lau’s had missed the point that the comparison is theoretical in nature with apple-to-apple so as to give an indication of the physical state of repair of the Building. 437.Estimating the construction cost for building a new similar superstructure is not a novel or unrealistic concept. In Valuation: Principles into Practice, 6th Edition (2008), Estates Gazette in the Chapter 21 on “Assessments for Insurance Purposes” at 546, the authored stated:
438.In providing valuation opinion for fire insurance purpose for a multi-storey building in Hong Kong, for instance, it is usually the assumption that the whole building is unlikely to be burnt down[209]. Dr Lau gave two examples:
439.Thus, the valuation must be distinguished from the cost of reconstructing a building following total destruction. Where the building is only damaged or out of repair, it is unlikely to be completely rebuilt with a new foundation. Thus, the correct comparison should be with construction cost exclusive of foundation and demolition cost. In any event, as Mr Benson Wong explained, his comparison was to illustrate the degree of deterioration and hence the state of repair of the Building when compared with the modern standards. Indeed, as in most of the cases, the “state of repair of the existing development on the lot” pursuant to section 4(2)(a)(i) of the Ordinance could only refer to the superstructure of the Building but not its foundation. 440.In the present case, Mr Benson Wong, with the assistance of Mr K C Tang (“Mr Tang”), a quantity surveyor, estimated the construction cost for constructing a new superstructure similar in physical and provision aspects to that of the Building in the sum of $66,850,000. Mr Tang is a member of Task Force 3 (Cost Reference Centre) under the Technical Committee of the HK Building rehabilitation Facilitation Services Limited of the Urban Renewal Authority (“URA”) since December 2017. 441.Mr Tang explained in his Repair Cost Assessment Report dated 23 June 2023 in para 4 of Section C that his cost estimates were achieved by obtaining cost data from previous building projects of similar nature, with due adjustments for price level, site factors and building particulars[210]. Certainly every building is unique in terms of age or design. Therefore, we would not question Mr Tang’s cost estimates simply because his previous building projects were at different location or different ages. Indeed, the Tribunal in Able Luck Development Limited & Others v Public Global Investments Limited & Others, LDCS 7000/2014 (unreported, dated 6 October 2017) had remarked at §105 that construction cost “is usually territory-wide and subject to less variation within a short period of time”. We are persuaded that Mr Tang could have derived good cost estimates from his previous projects at Robinson Road (“Project A”), Perkins Road (“Project B”) and Kotewall Road (“Project C”) all in the Mid-Levels or the Peak, particularly when the Lot is situated on a sloping site between Wong Nai Chung Road and Ventris Road. 442.In contrast, Mr Lau had relied on the reference unit rates published by the URA for rehabilitation projects. 443.In the above regard, Mr Tang explained in his Repair Works Cost Assessment Report dated 23 June 2023 as follows[211]:
444.Mr Tang commented that such reference unit rates are not appropriate in the present case because the cost data were sampled from the contracts of building rehabilitation works projects, which were awarded from 2009 to 2019, under various assistance schemes (“Assistance Schemes”) administered by the URA. To be eligible to join the Assistance Schemes, the average annual rateable value of the domestic units of each building rehabilitation works project shall not exceed the limit set at the time for application of the respective scheme, which is generally at the lower level of the market. Therefore, the unit rates are mainly derived from smaller projects where the scopes of works were small and the owners were less demanding on the materials and quality standards. For instance, based on DATA.GOV.HK’s data published on 7 August 2022, the number of projects subsidized by URA ad their average costs are as follows[212]:
445.In comparison, in Mr Tang’s opinion, the total repair cost of the Building is much bigger. The owners’ demand in terms of materials and workmanship may be higher. We would have been content to adopt Mr Tang’s estimate save that Mr Tang may have mistakenly identified the wrong site for comparison. In Mr Tang’s report dated 23 June 2023, he stated the headnote on every page that it was a
446.Unfortunately, in section D of his report at para 6(c), Mr Tang stated as follows[213]:
447.Obviously, Mr Tang had referred to another site which was the subject of Victory Super Limited v Loi Wai Yung & Others, LDCS 2000/2023 (unreported, 30 September 2025). 448.Notwithstanding the above discrepancy, as a result of our analysis, the total repair cost of $5,500,000 just accounts for some 8.2% of the construction cost for constructing a similar new superstructure. If Mr Tang had overestimated his cost estimate because he had made comparison to the wrong site, the percentage would be even lower. 449.On the other hand, as pointed out by Mr Lau, the ratio of repair cost to the EUV appears to be more useful. That is the repair costs required to put the Building into up-to-date tenantable condition would be 450.In the past, the residents or owners of the Building had consistently cared for the repair and maintenance of the Building. Renovations were carried out in 2008 and in 2021. In 2022, the MBIS/MWIS notices were readily complied with. On the basis of the history of maintenance and renovation of the Building, we trust the owners of the Building would be ready to spend that mere amount to bring the Building into tenantable standard. Conclusion on Age and State of Repair 451.Although the Building is aged more than 60 years, it is still in fair structural condition. Only 11 defects were found on the structural members of the Building. The corrosion grade of the rebars were mostly 2 to 3 with minimal loss of section. All the tested strengths of concrete are much higher than those specified in the design. Despite the depth of carbonation test showed the alkaline nature of concrete had been neutralised by carbon to a great extent, we agree with Dr Lau that the deterioration of the structure is not in the late stage of the propagation phase[214]. Obviously, the carbonation or corrosion of rebars only took place at a very slow rate over the Building’s lifespan or the process has been slowed down by proper use and maintenance of the units and the Building as a whole. In effect, the useful life of the Building has been prolonged. To a large extent, this can be confirmed by that 25 sq m of hollow spots could be found. The defects so found by Mr C M Wong were merely superficial defects which could be rectified by the patch repair method. In Dr Lau’s opinion, this clearly demonstrated that there were no structural deficiencies in the original design of the Building. 452.Indeed, the Building had undergone renovation works incurring more than $4,000,000 since 2015[215]. The obsolescence as alleged is minor and does not affect the reasonable use and enjoyment of the Building. Most of the deficiencies when comparied with today’s standard as identified by Mr Benson Wong can be dealt with by spending some $5,500,000. This accounts for merely 1.1% of the market value of the Building in 2022. 453.Even if Mr Benson Wong’s estimate of $22,713,977 is adopted, the ratio is just 3.7% which is still very small when compared with the market value of the Building. For instance, Mr Chan had agreed the value difference between the unit as “poor” and as “fair” would be 3% and that between the unit as “fair” and as “good” would also be 3%. 454.In 16/18 Princess Street (Ipswich) Ltd v Bond (VO) 2002 RA 212, it was held that any reasonable landlord would weigh up the likely level of income and the prospect of receiving this over time as compared to the necessary expenditure on repairs. The judgment would have regard to the style of and demand for the property. If prime, the considerations were likely to be different from what they would be if the property were tertiary. 455.This was exactly what the Tribunal had decided in Bright Full, supra. Having regard to “the age, character, and locality of the (Building)”, therefore, we are of the opinion that the repair cost required appears not to be much, as prospective purchasers of a residential unit in the Building lying at a prestigious location would likely spend at least a similar sum on renovation. 456.Having reviewed the above, therefore, we do not consider redevelopment of the Lot is justified due to the age or state of repair of the existing development on the Lot. As compared with modern buildings, the Building’s design may be to a degree dated in certain aspects. That notwithstanding, the Building is still maintained in tenantable condition with modern installations and well-maintained facilities serving its occupants satisfactorily. Despite its age, the Building as a whole is not in a poor physical state nor is it so obsolete, physically or functionally, as to justify a complete pull-down and immediate redevelopment. Most of the so-called defects are repairable to “tenantable standards” at affordable costs relative to the Building and owners tolerance. Regardless of the length of its design life, with adequate repair and maintenance, the Building can likely stand well and continue to serve its residents satisfactorily for some years to come. Like the Tribunal noted in Wah Ha Property Development Limited & Others v Rosehawk Group Limited & Others, LDCS 25000/2018 (unreported, dated 30 April 2021) at §89, the residents of the Development are probably in a living condition that is far better than many ordinary households in Hong Kong. 457.The Application shall be dismissed. Section 4(2)(b) – Whether Applicant has taken reasonable steps 458.The applicant is under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interest of the respondents under Section 4(2)(b) of the Ordinance. 459.Although we have decided not to grant the order for sale, we are going to address the issue of reasonable steps as particular issues have been raised and for completeness. 460.By reference to the witness statement of Mr Yu dated 30 June 2023[216], prior to the commencement of the Application on 31 August 2022, the applicant had through its present solicitors, Messrs Lo & Lo, made an offer to each of the respondents by a letter dated 24 June 2022 or 22 July 2022 (for R4 only). The offers were made on the pro-rata share of the EUV of corresponding respondents’ unit to the total EUV of the Building of the RDV of the Lot based on the advice of Savills:
R3’s Reply 461.R3 are the registered owners of 4/F, No 59 Wong Nai Chung Road as joint tenants. Ko Kai Kwun Miguel (“Mr Ko”) on behalf of R3 stated at §5 of his witness statement dated 21 December 2021 that they had spent more than $1,300,000 in renovating their unit in mid-2020[218]. Then in early 2021, their son was approach by a Mr Albert Leung (“Mr Leung”) of Union Honest Agency Limited, suggesting the applicant was interested in purchasing the Building for redevelopment purposes[219]. 462.According to R3, they had reached a consensus and/or mutual understanding (“the Consensus”) that the applicant would acquire their unit at a total consideration of $30,000,000, which comprised (i) the purchase price of $28,040,709 and (ii) a sum of $1,959,291 as the compensation for the costs and expenses that they had incurred on the renovation. 463.The applicant had instructed its then solicitors, Messrs Deacons, to prepare the draft Provisional Agreement for the Sale and Purchase (“the draft PSPA”)[220] and a draft Compensation Agreement to set out the details of the Consensus. R3 had also instructed their then solicitors, Law Offices of Y C Lee (“Y C Lee”), Solicitors & American Attorney at Law, to act for them in the contemplated sale and purchase. 464.R3 stated that they were advised by Y C Lee that pursuant to Clause 2 of the draft PSPA, they were required to deliver the original title deeds and documents (“Title Deeds and Documents”) in respect of their unit to Messrs Deacons for perusal within 21 working days from the date of the signing the draft PSPA[221]. However, the Title Deeds and Documents were kept in their safe deposit box in Hang Seng Bank. As they had been living in Singapore, they were unable to return to Hong Kong to retrieve the Title Deeds and Documents at the material time owing to the travel restrictions and quarantine measurements imposed by the Government of Hong Kong SAR in response to the COVID-19 pandemic then in place. 465.R3 had instructed Y C Lee, through Mr Leung, to propose to the applicant that (i) certified copies of the Title Deeds and Documents would be provided for their title due diligence upon signing of the PSPA instead, and (ii) an additional provision shall be added to Clause 2 of the draft PSPA providing that should they fail to deliver to the applicant the original Title Deeds and Documents relating exclusively to his unit on or before 16 December 2021, R3 would undertake to provide a statutory declaration duly executed before completion of the contemplated sale and purchase declaring that they had never pledged or deposited the Title Deeds and Documents with a third party to secure any loan or debt whether for themselves or any other persons (“the Proposal”). 466.By a letter dated 27 December 2021[222], Mr Leung wrote to R3, stating that he wished to discuss with them the options or possible solutions in relation to the production of the Title Deeds and Documents. R3 did not respond. Nonetheless, neither Y C Lee nor R3 had received any further updates from the applicant, Messrs Deacons or Mr Leung in respect of the contemplated sale and purchase since then. 467.R3 had instructed Y C Lee to follow up with Mr Leung on the matter. But subsequently, on 22 March 2022, Mr Leung sent an email to Y C Lee informing R3 that (i) the Applicant had already acquired over 80% of the undivided shares in the Lot by 23 February 2022, and (ii) the applicant would not consider the Proposal and would not proceed with the purchase in accordance with the Consensus. 468.Subsequently, by way of letter dated 24 June 2022, the applicant made a new offer to R3 at a purchase price of $18,890,000. R3 considered this offer too low to be acceptable and therefore they rejected the offer through their new solicitors, Messrs Wilkinson & Grist, on 25 August 2022. 469.In view of the above, R3 considered the applicant had not taken reasonable steps to acquire their undivided shares in the Lot. R4’s Reply 470.R4’s son, Mr Kwan Wing Kin (“Mr Kwan”), prepared a witness statement dated 20 December 2023 on behalf of his mother. In gist, Mr Kwan confirmed that his mother would be ready and willing to pay for her share of the relevant repair works so as to keep the Building at a tenantable standard. Again, Mr Kwan pointed out that the repair works proposed by Mr Benson Wong accounted for only some 3% of the EUV of the Building. R6’s Reply 471.R6 is the administrator of the estate of Lee Hubert Wai Hon (“the Deceased”), who owned 6/F, No 36 Ventris Road (“the Deceased’s property”). He had prepared a witness statement dated 21 December 2023. 472.Similar to R3’s position, by a Provisional Agreement for Sale and Purchase dated 15 November 2021 (“PASP”), the Deceased agreed to sell and the applicant agreed to purchase the Deceased’s property at the consideration of $21,956,400 pursuant to the terms and conditions contained therein. Unlike R3, the R6 PASP was actually signed. Nevertheless, R6 alleged (in his Supplemental Witness Statement dated 31 July 2024) that the PASP was not registered in the Land Registry nor stamped under the Stamp Duty Ordinance, Cap 117[223]. 473.Further, by a separate agreement entitled Compensation Agreement of even date, the applicant agreed, upon completion of the sale of the Deceased’s property, to pay $300,000 as compensation for the removal cost already incurred by the Deceased due to the sale of the Deceased’s property. 474.By a separate agreement entitled License Agreement made between the Deceased and the applicant, the applicant agreed to permit the Deceased to use the Deceased’s property as a licensee for a period of 6 months from the completion date of the PASP. 475.Pursuant to the PASP, the applicant had made three payments in the total of $2,196,640 which is equivalent to 10% of the agreed purchase price. Pursuant to Clause 2(d) of the PASP. However, the completion of the sale and purchase of the Deceased’s property was scheduled to take place on 18 January 2022. There was also a Clause 12 that permitted the applicant to back out:
476.Further, pursuant to Clause 14 of the PASP, during the period after the signing of the PASP and on or before the Completion Date, the parties agreed to postpone the Completion Date to respective time period depending on the types of restriction arising from COVID-19 imposed to the parties and their respective solicitors as the case may be as specified therein. 477.On or about 2 December 2021, the title deeds of the Deceased’s property were sent to the applicant’s solicitors, Messrs Deacons, for title checking. 478.Then by letter dated 13 December 2021 from Messrs Deacons to Messrs V Hau & Chow, the solicitors of the Deceased and also some vendors of the units of the Relevant Premises, the applicant asked for an extension of the Notice Date to 26 January 2022 and the Completion Date to 23 February 2022. The letter referred to the fact that there had been discussion between the parties as facilitated by the estate agent under the PASP to extend the Notice Date and the Completion Date. 479.Unfortunately, prior to the said letter dated 13 December 2021, on or about 8 December 2021, the Deceased passed away and was unable to sign any written agreement to extend the time of the Notice Date and the Completion Date under PASP. Notwithstanding the above, the letter from Messrs Deacons dated 13 December 2021 did record that there was discussion about extension of time. According to R6, it was in fact not only discussion but there was oral agreement reached. Prior to the passing of the Deceased, the Deceased, the estate agent under the PASP, namely Mr Leung, and the applicant had all orally agreed to the extension of both the Notice Date and the Completion Date on the ground that:
480.According to R6, the applicant must have known that the extensions had been verbally agreed by the Deceased because Mr Leung as the applicant’s agent would have notified the applicant about it. Otherwise, Messrs Deacons would not have sent out the said letter dated 13 December 2021 to invite the parties for signature. 481.Nonetheless, on or about 16 December 2021, namely the Notice Date, by a letter of even date (“the Notice Date Letter”) from Messrs Deacons to Messrs V Hau & Chow, the applicant notified the Deceased, among others vendors represented by Messrs V Hau & Chow, that:
482.R6 complained that the Notice Date Letter did not give any particulars whatsoever as to which units of the Relevant Premises to which title the applicant’s solicitors were not satisfied and how the applicant’s solicitors were not satisfied. In any event, no requisitions were raised by the applicant in respect of the title of the Deceased’s property prior to the Notice Date nor the units to which title the applicant’s solicitors were not satisfied. 483.By a letter dated 5 January 2022 from Messrs V Hau & Chow to Messrs Deacons, the applicant was informed that the Deceased had passed away. Further, in response to the earlier request by the applicant for an extension of time in Messrs Deacons’ letter dated 13 December 2021, Messrs V Hau & Chow asked the applicant to extend the Completion Date to a date on or before 18 April 2022 (beyond 23 February 2022 as originally proposed by Messrs Deacons) so as to enable the personal representative of the estate of the Deceased to apply for the grant of probate or letters of administration to deal with the sale of the Deceased’s property. 484.R6 says that pursuant to Clause 16 of the PASP, the parties agreed that the PASP is binding on either party’s personal representatives and successors. According to R6, the request for extension of the Completion Date was therefore fair and reasonable and is well envisaged and harnessed by the terms of the PASP. 485.It was only by a letter dated 6 January 2022 from Messrs Deacons that the applicant raised requisitions for the first time on the title of the Deceased’s property. 486.However, R6 was informed by Mr Leung in a telephone call on 5 January 2022 that in a meeting in early January 2022 between Mr Leung and the representatives of the applicant, it was orally agreed that the Completion Date should be extended to permit the successor of the Deceased to complete the sale in accordance with the PASP and that the applicant still maintained this position as of 5 pm of 4 January 2022. R6 also stated that Mr Leung told him in the same telephone call that such agreement was reached between the applicant and Messrs V Hau & Chow. 487.On the basis of the above oral agreement, therefore, R6 gave no reply to Messrs Deacons’ requisition letter dated 6 January 2022. 488.By letter dated 17 January 2022, one day before the original Completion Date, from Messrs Deacons to Messrs V Hau & Chow, the applicant purportedly terminated the PASP purely based on the Notice Date Letter by electing the option under Clause 12(B) of the PASP. 489.Subsequently, R6 said, he was informed by Mr Leung, via a telephone call on 16 May 2022, that in another meeting, which he supposed to occur between 5 to 17 January 2022, among the applicant, Messrs Deacons and Mr Leung, the applicant and Messrs Deacons said they could terminate the PASP because they had then acquired more than 80% interests from other owners and therefore could then put the Deceased’s property into a compulsory sale application and force down a much lower purchase price later on. 490.According to R6, the purported termination of the PASP was unreasonable in the following circumstances:
491.Despite the purported termination of the PASP by the applicant, no cancellation agreement had ever been requested by the applicant or executed by the parties pursuant to 12(B) of the PASP. 492.R6 was appointed the Administrator of the estate of the Deceased by a Letter of Administration dated 15 July 2022. 493.By a letter dated 24 June 2022 from Messrs Lo & Lo, the present solicitors of the applicant, the applicant offered to purchase the Deceased’s property at the price of $14,778,000 which was 32.6% lower than the consideration under PASP. The said offer however did not include the agreed $300,000 compensation for removal fee under the PASP. 494.On 28 September 2022, the applicant, through Mr Leung, made an offer for purchase the Deceased’s property at $15,516,900 with an additional term that R6 would be allowed to stay in the Deceased’s property as licensee for 4 months after completion without payment of rent. R6 rejected such offer as it was still substantially lower than that of the original purchase price under the PASP. R6 also mentioned that the offer of 4-month licence for occupation of the Deceased’s property after completion under the revised offer clearly showed that time was not of the essence for delivery of the possession of the Deceased’s property to the applicant. 495.Lastly, R6 also mentioned that, as one of the co-owners of the Building, he agreed to bear and pay the necessary contribution towards completion of the repairs to the common areas and facilities of the Building and the costs for the repairs to the Deceased’s property as recommended by Mr Lau. R7’s Reply 496.R7’s witness statement dated 21 December 2023 included that her property was let to a tenant for a term of two years from 1 June 2019 at a monthly rent of $37,000 per month inclusive of rates, government rent and management fee. Upon its expiry on 30 May 2021, the tenancy was extended on month-to-month basis at the same rental until the tenant vacated her property in or around February/March 2023. 497.In or about the end of May 2021, R7 received a draft Provisional Agreement for Sale and Purchase from an estate agent acting on behalf of the applicant. 498.According to R7, she had instructed her then legal representative, Messrs Lo & Lo to accept the offer and she delivered the title deeds to Messrs Lo & Lo for completion. At that time the applicant was represented by Messrs Deacons. On or around 10 June 2021, Messrs Lo & Lo sent various emails to the applicant’s estate agent with their proposed amendments to the draft Provisional Agreement for Sale and Purchase. These proposed amendments were not accepted by the applicant and negotiations with the applicant fell through. 499.R7 also mentioned that she was willing to contribute and/or carry out any necessary repair/maintenance works to the Building/her property (if necessary). Reasonable Steps to Acquire Interests of Minority Owners 500.First, in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578, [2005] 4 HKLRD 363, Ribeiro PJ and the Court of Final Appeal held at §33 that:
501.Ribeiro PJ stated further at §36 of the judgment that:
502.Obviously, by reference to the offers made by the applicant on 24 June 2022 or 22 July 2022 as the case may be as stated in §457 above, they were higher than the determination of the EUV of the respective units by the Tribunal. At that time, we note Mr Chan of Savills assessed the RDV of the Lot in the sum of $722,000,000 which was higher than the RDV determined by the Tribunal at $625,200,000 though the latter is as at present day. We do not agree with Mr But that the offers made on 24 June 2022 were “bare minimal” or “insulting offers”. 503.It was unfortunate that the market was falling. If any offer were made by the applicant thereafter, it would clearly be lower. 504.In fact, the applicant, through Messrs Lo & Lo’s letters dated 29 November 2024, made the following offers to the remaining respondents:
505.Obviously, the offers made by the applicant on 29 November 2024 were much lower than those made in 2022. According to the applicant, these offers had already included a 15% premium above Mr Chan’s latest RDV assessment. Section 4(2)(b) had not specified whether pre-application and/or post-application reasonable steps should be considered, but it required the Tribunal to consider, after hearing the objection from the minority owner, if the majority owner has taken reasonable steps before it can proceed to make the order for sale. In Good Faith Properties Limited & Others v Cibean Development Company Limited, LDCS 42000/2011 (unreported, dated 31 May 2013), the Tribunal, having reviewed the above, stated at §61 that:
506.Thus, on the basis of the offers made by the applicant to the respondents, we are satisfied that the offers fell within the range of what may broadly be regarded as fair and reasonable compensation for the interest in question. 507.The respondents’ counsel make a point to the effect that under section 4(2)(b) of the Ordinance the Tribunal is not confined to considering the sum of any offer in monetary terms in determining whether it is satisfied that the majority owner has taken reasonable steps to acquire all the undivided shares in the lot. Capital Well supra held that the Tribunal was not to conduct a valuation exercise but must be satisfied that the offer falls within the range of what would broadly be regarded as fair and reasonable compensation for the interest in question. Mr But submits that Capital Well gave a guideline which was non-exhaustive. It was not a mere guideline. Capital Well sets out what the Tribunal must do when considering an offer. The Tribunal is not to conduct a valuation exercise. The section requires the Tribunal to consider whether reasonable steps were taken. We do accept that the Court of Final Appeal was addressing offers and not prescribing what does or does not amount to reasonable steps. In our view, the Tribunal is not confined to considering only the monetary sum of an offer in determining whether it is satisfied that reasonable steps had been taken. 508.The situations for R3 and R6 require further consideration. 509.In R3’s case, nobody had signed the draft PSPA. Under section 3(1) of the Conveyancing and Property Ordinance, Cap 219:
510.And section 6(1) of the same Ordinance:
511.The type of Consensus which R3 relied on would occur every day in daily life and, the particular Consensus, is prevented by the above provisions of the Conveyancing and Property Ordinance from being enforceable. Even if the draft PSPA was binding, there was a backout clause, namely clause 12, which resembled that for R6 set out in §472 above. This entitled the applicant to exercise the option (B) to terminate the agreement “if the Purchaser’s solicitors are not satisfied with the title to the Relevant Premises or any part or parts thereof on or before the Notice Date (of 16 December 2021)” [224]. 512.Instead, R3 instructed Y C Lee to propose to Messrs Deacons amendments to the draft PASP clause 2 to provide for an alternative to the supply of the title deeds, namely to supply certified copies of the title deeds of R3’s unit (rather than the originals) and a statutory declaration in case R3 should fail to deliver the originals[225]. The parties were still negotiating terms. R3 did not simply accept the offer and sign. We agree with the applicant that R3 had not taken the consensus/undertaking forward but sideways. 513.On 27 December 2021, Mr Leung wrote to R3, stating that he wished to discuss with them the options or possible solutions in relation to the production of the Title Deeds and Documents[226]. Regrettably, R3 failed to respond or instruct Mr Leung to respond. Instead, R3 was just waiting further updates from the applicant, Messrs Deacons or Mr Leung. 514.Ms Cheung of Y C Lee only communicated with Mr Leung in the week prior to Mr Leung’s email of 22 March 2022. This was already a lapse of time subsequent to the original completion date of 18 January 2022. By then the applicant had acquired more than 80% of the Building as well as those of the two adjoining Lots. 515.In the circumstances, contrary to R3’s case it can hardly be considered unreasonable, disingenuous or dishonourable for the applicant to proceed with the Application. In Starex Development Limited v Yau So Ching & Others, DCCJ 2372 & 2374/2021, the intending purchaser, the plaintiff, entered into two provisional sale and purchase agreements in Chinese, one with the 1st and 2nd defendants and another with the 3rd and 4th defendants. In each of the two provisional sale and purchase agreements, there was a similar backout clause the English translation of which was set out in §11 of the judgment as follows:
516.The defendants in that case pleaded, inter alia, that on a proper construction of Clause 10 of the Agreements:-
517.Alternatively, the plaintiff had waived its right to terminate the Agreements on the ground of its failure to acquire the Requisite Undivided Shares by 30 July 2019 under Clause 10(1) of the Agreements and/or was estopped from asserting its right to terminate the Agreements. 518.DDJ C K Siu explained in §31 of the judgment as follows:
519.In gist, DDJ C K Siu concluded that the backout clause was not unfair, unreasonable or inequitable. He repeated at §46 that “the plaintiff enjoyed its contractual right under the Agreements, including the right to serve the Termination Notice on or before the completion date.” 520.In the present case, the completion date of 18 January 2022 as specified in Clause 2(d) of the draft PSAP lapsed without R3 being able to produce their Title Deeds and Documents to prove their title. The applicant was entitled to exercise its option to serve the termination notice on 22 March 2022. 521.We accept Mr Mok’s submission that if a minority owner fails to bring an offer to a binding agreement the majority owner is not nonetheless bound to make a subsequent offer matching the previous level or face a ruling that it has failed in the reasonable steps hurdle. The subsequent offer would be dictated by the market at time of offer. We have considered all of the circumstances and arguments and find that the applicant had taken reasonable steps to acquire the interest of R3 in terms of the Ordinance. 522.By comparison, R6’s position was a little better for R6. The Deceased had signed the PASP on 15 November 2021. Whether the PASP was registered in the Land Registry was neither here nor there because under section 3 of the Land Registration Ordinance, Cap 128, registration or otherwise only affects the priority of the documents. A registrable document which is not registered would be absolutely null and void to all intents and purposes against only any subsequent bona fide purchaser or mortgagee for valuable consideration of the same parcels of ground, tenements, or premises. The document is still binding between the parties thereto. 523.On the other hand, if a stamp duty chargeable document is not stamped under section 4 of the Stamp Duty Ordinance, Cap 117, the person or persons liable for stamping the document with that duty is liable, or are jointly and severally liable, civilly to the Collector of Stamp Duty for the payment of that duty and any penalty payable under section 9. Again, the document may still be binding between the parties although under section 15 of the Stamp Duty Ordinance, it cannot be received in evidence in any civil proceedings whatsoever or be available for any other purpose whatsoever until such document is duly stamped. 524.As pointed out by R6, Messrs Deacons sent a letter dated 13 December 2021 to Messrs V Hau & Chow, referring to the discussion between their respective clients to extend the Notice Date from 16 December 2021 to 26 January 2022 and the Completion Date from 18 January 2022 to 23 February 2022, supplied Messrs V Hau & Chow with a Supplemental Agreement for such extensions for the approval of Messrs V Hau & Chow and requested Messrs V Hau & Chow to arrange the Deceased to sign the Supplemental Agreement and return the signed document to Messrs Deacons on or before 15 December 2021. This letter was expressed to be subject to contract and without prejudice to “provisional agreements” [227]. 525.At most, what is alleged to have been orally agreed between Mr Leung and the Deceased was that “the Deceased had given his express agreement to (Ms Flora Tsui of Messrs V Hau & Chow) that he would sign the extension agreement and that they were just waiting for the Applicant to send over such agreement for signature.”[228] Any agreement was still subject to signing a document with the precise terms. 526.While this signature was pending there was no binding agreement to extend time of the Notice Date and the Completion Date. 527.As admitted by R6, the Supplemental Agreement was not signed nor returned to Messrs Deacons because the Deceased passed away on or about 8 December 2021. Further, thus, under section 6(1) of the Conveyancing and Property Ordinance, all interests in land created by parol but not put in writing and signed by the persons creating the same, or by their agents thereunto lawfully authorized in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only. In any event, the letter was subject to contract and without prejudice to “provisional agreements”. 528.Then, as admitted by R6, when the Notice Date of 16 December 2021 arrived (and after the requirement for signing the Supplemental Agreement lapsed on 15 December 2021), Messrs Deacons sent to Messrs V Hau & Chow a letter regarding a number of units owned by the Deceased and others vendors represented by Messrs V Hau & Chow, serving the Notice Date Letter under clause 12 of the PASP to give notice that Messrs Deacons were not yet satisfied with the title to the Relevant Premises (instead of the Deceased’s property alone)[229] and reserved the applicant’s right to elect option A (to proceed with the purchase) or option B (to terminate the PASP(s)) [230]. There was nothing improper or wrong with such a reminder letter. That is similar to Starex Development, supra, when the applicant had not yet been satisfied with the title to the Relevant Premises to acquire the sufficient threshold to make an application under the Ordinance. The applicant was entitled to stand on its rights. We do not agree with R6 that this letter was pre-maturely sent. The Notice Date of 16 December 2021 was not extended for the Deceased as the Supplemental Agreement was not signed. 529.Again, as admitted by R6, Messrs V Hau & Chow sent a letter of 5 January 2022 to Messrs Deacons, informing the latter that the Deceased had passed away and requesting to postpone the Completion Date to 18 April 2022. Contrary to what R6 alleged, there was no mention of any oral agreement. The applicant was not obliged to agree to such a request. 530.R6 alleged that in a telephone call on 5 January 2022, he was informed by Mr Leung that in a meeting among the representatives of the applicant in early January 2022, it was orally agreed that the Completion Date should be extended to permit the successor of the Deceased to complete the sale. That could not be an agreement with R6. According to the cross-examination of R6, however, Mr Leung was only present in the meeting but did not participate in the discussion. Therefore, even if Mr Leung could validly act for the Deceased’s estate, it still could not be any agreement between the applicant and R6. The applicant maintains, and we accept, that there was no agreement with R6. 531.In any event, Messrs Deacons sent to Messrs V Hau & Chow a letter dated 6 January 2022, raising 10 items of title requisitions. As admitted by R6, these requisitions were not answered. Nor did Messrs V Hau & Chow write to Messrs Deacons to suggest the title requisition were not valid or material pending the grant of the probate. Messrs V Hau only wrote a letter of 5 January 2022, in addition to informing Messrs Deacons’ of the death of the Deceased, requesting the applicant “to postpone the completion of the sale and purchase of the Property to a date on or before 18 April 2022” [231]. R6 confirmed, during cross-examination, that Messrs V Hau’s letter was issued on his instructions. The request made in the letter refuted any suggestion that there was already in place any agreement “to postpone the completion of the sale and purchase of the Property”. 532.Then, like Starex Development, supra, Messrs Deacons sent a letter to Messrs V Hau & Chow dated 17 January 2022, giving notice that the applicant had exercised the right under option B of clause 12 of the PASP to terminate the PASP and requested the return of all the earnest money and deposits. As Mr Yu explained in his witness statement dated 30 April 2024 in reply to R6, the death of the Deceased and the uncertainty with R6’s application for grant of probate created a loose end which might disrupt the timeline planned for the acquisition of sufficient units of the Relevant Premises and the start of the Application. 533.In the first meeting of the Bills Committee of the Provisional Legislative Council on the Land (Compulsory Sale for Redevelopment) Bill on 10 February 1998, the then Principal Assistant Secretary for Planning, Environment and Lands explained that one of the purposes of the Bill was to “provide a solution to the problem of property acquisition for redevelopment due to defective titles, untraceable owners, owners who had died intestate or owners demanding unreasonably high prices.”[232] 534.Ribeiro PJ also stated at the beginning of Capital Well, supra at §2, that:
535.That explains why Mr Yu said that if the threshold of 80% interest in the Lot/Building were not coordinated to be executed all at the same time, in the present case on 23 Feb 2022, the applicant would incur additional interest when trying to acquire additional units to achieve the threshold. Certainly, once the applicant was successful in acquiring the threshold, we find nothing improper with the applicant resorting to the Application in the case for R3 or R6. Then by section 8 of the Ordinance:
536.At this juncture, it is worth noting that the Bill originally required the majority owner to take “all” reasonable steps to acquire all the undivided shares in the lot. It was agreed in the meeting of the Bills Committee of the Provisional Legislative Council on Land (Compulsory Sale for Redevelopment) Bill on 24 February 1998 that the word “all” would be deleted[233]. 537.R6’s argues that the time specified in the PASP for completion was not of the essence. However, under clause 12 of the PASP, “(t)he parties hereto agree that notwithstanding anything herein contained to the contrary, if the Purchaser is not able to acquire the specified majority of the undivided shares of the Relevant Premises of the Sites as required by the Ordinance and/or enter into provisional agreement for sale and purchase / formal agreement for sale and purchase with the owners of the Relevant Premises on or before 16th December 2021 (“the Notice Date”), the Purchaser shall have the right at any time before the Completion Date to choose from option (A) or (B) below and to notify the Vendor and/or its solicitors in writing”. That is, the sale or purchase was conditional upon the applicant successfully acquiring the threshold under the Ordinance of 80% interest of the Lot as well as the adjoining lots at Nos 55-57 Wong Nai Chung Road on which Green View Mansion is erected or at Nos 63 & 65 Wong Nai Chung Road on which Bonny View House is erected. The conditional offer of $21,956,400 comprised “a premium value as the last bit in the jigsaw to assemble the development site” as stated by the English Upper Tribunal (Lands Chamber) in Michael v Salford City Council [2016] UKUT 370 (LC) at §§13 & 127. The English Tribunal remarked further at §128 that this premium value “ignores the effect that this would have an impact on the viability of the reference land under the residual method. I am not satisfied that the claimant has shown that (the premium) is warranted.” 538.The Court of Appeal in Bond Star Development Limited v Capital Well Limited [2004] 2 HKLRD 855 recognised such a premium at §27 as follows:
539.In addition, market prices changed since November 2021:
540.By reference to the above table, the market value for the type of residential premises proposed by Dr Wong was dropping rapidly from in the first half of 2022. Up to June 2022, the market had dropped by approximately 5% and was continuously dropping. The applicant was not obliged to make the same level of offer to R6 as it did previously. 541.When the applicant acquired the interest of R1 and R2 who owned 1/F, No 59 Wong Nai Chung Road and 1/F, No 61 Wong Nai Chung Road respectively, it dropped much of the "last unit" premium. This can be discerned by comparing the consideration registered in the Lands Registry between these two units and the units on the upper floors as shown in Appendix II of this judgment. 542.We find on the evidence that neither the first, nor either version of the second oral agreements are proved by R6. Further, there was not a common understanding that matters were meant to be treated informally such that certain formalities could be dispensed with to allow flexibility or that formal agreements need not be executed. The circumstances involve serious matters of property rights and the parties had engaged solicitors. Significantly, when the applicant exercised the option to terminate by Messrs Deacons letter dated 17 January 2022, Messrs V Hau & Chow’s letter dated 27 January 2022 recorded the disappointment that the applicant would not extend the completion date in the circumstances and returned the sum of $1,097,820 earnest money and deposit held as stakeholder. We have considered whether the applicant had taken reasonable steps when it terminated the PASP while the estate was willing to complete the sale and whether this undermines subsequent steps, such that the applicant cannot satisfy the burden under the Ordinance. The decent or honourable thing to do may have been to extend time in the circumstances. However, the applicant acted within its legal rights and the previous conduct does not negate subsequent reasonable steps. Oppressive Means of Acquisition 543.The Tribunal will not countenance any form of oppressive means to be enlisted by a majority owner to acquire all the undivided shares of the minority owner. 544.However, we find that the lift that serves the Rear Portion of the Building had been suspended for service since 18 December 2023. This is totally unacceptable. Mr But had stated in his Closing Submission dated 24 February 2025 at §59.1:
545.At this juncture, we note that the applicant had acquired the whole of the Rear Portion save the units owned by R6 and R7 since early 2022. Owning the majority shares of the interest of the Building, the applicant should have taken up the responsibility for overseeing the continuous management of the Building or convened a meeting under section 3 or section 4 of the Building Management Ordinance, Cap 344 for the appointment of a management committee. 546.The applicant having failed to do so at best adopted a laissez faire approach if not oppressive means in acquiring the interest of R6 and R7, who rely heavily on such lift service[234]. We have held that the application shall be dismissed. It is not necessary to determine whether, notwithstanding the applicant having made reasonable offers, other conduct of the applicant is such that in all the circumstances it has failed to take reasonable steps in terms of section 4((2)(b) of the Ordinance. We are of the view that some aspects of the applicant’s treatment of the minority owners, particularly of R6, has been unreasonable. Order 547.We have found that the redevelopment of the Lot is not justified on the ground of age or state of repair. We do not condone aspects of the applicant’s conduct but we do not determine this application on that basis. The Application is hereby dismissed. Costs 548.We make a costs order nisi that the applicant do pay the costs of these proceedings (including any reserved costs) to R3, R4, R5, R6 and R7 & R8, with certificate for counsel, to be taxed on the High Court scale if not agreed. Unless any parties apply by summons to vary the costs order nisi, it shall become absolute upon expiration of 14 days from the date of this judgment. 549.Last, but not least, we thank Counsel for their able assistance.
Mr Mok Yeuk Chi, instructed by Messrs Howse Williams, for the applicant Mr Adrian But, instructed by Messrs Wilkinson & Grist, for the 3rd respondent Mr Harrison Miao, instructed by Messrs Ho, Tse, Wai & Partners, for the 4th respondent and instructed by Messrs K C Ho & Fong, for the 7th respondent Mr Ross M Y Yuen, instructed by Messrs Simon Reid-Kay & Associates, for the 6th respondent Attendance of 5th respondent and 8th respondent excused Appendix I
Appendix II
[1] See Bundle C1/997. [2] See Bundle E1/5319-5322. [3] See Bundle D1/4033-4040. [4] If Mr C M Wong’s proposition is true, there were no excavations as alleged by Dr Wong in his Valuation and Rebuttal Report dated 20 December 2023 at para 5.22. See Bundle E1/5511. [5] See Exhibit A11. [6] See Bundle E3/6022-6023. [7] Although this judgment of the English Court of Appeal was overturned by the Supreme Court ([2017] UKSC 14) on the facts found by the English Tribunal that the premises were undergoing reconstruction at the material day, and it was therefore entitled to alter the rating list to reflect that reality, there is no real inconsistency between the two decisions in terms of principle. [8] See Dragon House Investment Limited & Another v The Secretary for Transport [2005] 4 HKLRD 480, (2005) 8 HKCFAR 668 at §20. [9] See https://www.legco.gov.hk/yr97-98/english/bc/bc06/minutes/bc062602.htm at para 17. [10] When one speaks of “illegality”, one must be referring to a criminal act, a quasi-criminal act, a non-criminal act which engaged the public interest, or an infringement of rules enacted for the protection of the public (together referred to as “Relevant Offensive Acts”), instead of an ordinary civil wrong. The mere occupation of a structure, legal or illegal, without more, is not one of these Relevant Offensive Acts. While section 40 of the Buildings Ordinance creates a large number of criminal offences, in the absence of an allegation that the respondent here has committed any of these offences, they are irrelevant in the present case. [11] Patel v Mirza [2016] UKSC 42, [2016] 3 WLR 399. [12] See §§3, 9 & 40 of the judgment. [13] See Exhibit A11. [14] See Hantec Investment Limited v Lam Kan Yau, LDPE 393/2022 (unreported, dated 31 December 2024) at §150(5). [15] See Bundle F1/6280. [16] See Bundle F1/6398. [17] See Bundle E2/5900-5902. [18] See Bundle E1/5345 or 5355. [19] See Bundle E1/5360-5361. [20] See Bundle E1/5367. [21] See Bundle E1/5514. [22] See Bundle E1/5327. [23] See Bundle E1/5328. [24] Ditto. [25] See Bundle E1/5514. [26] See Bundle E1/5329. [27] Ditto. [28] See Bundle E1/5551. [29] See Bundle E2/5896. [30] See Bundle E3/6024-6025. [31] See Bundle E1/5517. [32] See Bundle E3/6024-6025. [33] P-ASP denotes provisional agreement for sale and purchase. [34] This comparable was also sold on “as is” basis and subject to an existing tenancy and to Fire Service Orders. See Bundle E2/5907, 5911 & 5926. By reference to the Additional Term (2) found in Annexure 2 of the Agreement for Sale and Purchase, the Purchaser was aware of and accepted that the Vendor had verbally undertaken to reduce the rent to $59,000 per month until the expiry of the tenancy agreement on 30 November 2022. See Bundle E2/5926.1. [35] See Bundle E3/6035-6036. [36] See Bundle E2/5806. [37] See Bundle E2/5806. [38] This tenancy was a renewal of the tenancy agreement dated 19 February 2016 for a term of 3 years from 16 January 2019 to 15 January 2022. See Bundle E2/5972-5973. [39] See Bundle E2/5920. [40] This was stated in Part IV of the Second Schedule to the Agreement for Sale and Purchase of G/F, No 59 Wong Nai Chung Road on 24 May 2021 which has been attached as Appendix 2 of Exhibit A11. [41] See The Hong Kong School of Motoring Limited v Commissioner of Rating and Valuation, LDRA 418/2004 (unreported, dated 22 May 2007) at §32 and also Lotus and Delta Limited v Culverwell (VO) v Leicester City Council [1976] RA 141 at 153-4. [42] Even if Dr Wong’s converted area of 155.2 sq m were adopted, the unit rental would be $418.8 per sq m. [43] With a size adjustment of 4.2% on the unit rate. [44] See Bundle C6/2517. [45] See Bundle C1/926. [46] See Bundle C2/1376 or C3/1824. [47] See Bundle C7/2935. [49] See the judgment at §206. [50] This is the approximate depth at which the shop tapered towards the inside like a flask. [51] 149.1 sq m is the saleable area for G/F, No 59 Wong Nai Chung Road agreed by both Mr Chan and Dr Wong without taking into account the ancillary area or the unauthorized extension at the rear. [52] The consideration for this transaction was in fact $28.5 million. But in arriving at the adjusted consideration for the domestic unit solely, Dr Wong deducted the value of the car parking space at a value of $2,440,000 from the total consideration. [53] See Bundle E2/5986. [54] There are however only two units on 21/F. [55] See Bundle E3/6179. [56] See Bundle E3/6052-6053. [57] See, for example, Gainfield Investment, supra, at §129 and Onbrave Limited v Malkani, Sunita Bhagwan & Others, LDCS 27000/2020 (unreported, dated 14 December 2021) at §13 where both valuation experts in the cases agreed to adopt size adjustment at 1% per 10 sq m difference. [58] See Bundle E2/5819-5824. [59] See Bundle E3/6181. [60] See Bundle E2/5827. [61] See Bundle E1/5561. [62] See Bundle E2/5830. [63] See Bundle E2/5832. [64] See Bundle E2/5995. [65] See §§27-29 of the judgment. [66] See Bundle E3/6057. [67] See Bundle E3/6187. [68] Dr Wong applied a location adjustment of -2% to all these comparables. We have no comment on that. [69] See Bundle E2/5837. [70] This is R3’s unit which was renovated in 2020 for a sum of more than $1,300,000. Mr Chan accepted that this unit has been reasonably maintained. However, we agree with him that there does not have any extraordinary and sophisticated fittings, finishes and features which were, as suggested by Dr Wong, “substantially above tenantable standard”. [71] See Bundle E1/5550. [72] See Bundle E1/5497. [73] Dr Wong assessed the EUV of this unit at $13,712,000. [74] See Bundle F1/6478. [75] Ditto. [76] By virtue of the hypothetical scheme proposed by Dr Wong, the exit of the hypothetical building will be connected to Ventris Road via a bridge over the Right-of-Way. [77] See Bundle F1/6411. [78] See Bundle F1/6423. [79] See Bundle F1/6494 or F2/6634. [80] See Bundle F1/6412 or F2/6591. [81] See Bundle F2/6641. [82] See Bundle F2/6647. [83] See Bundle F2/6649. [84] See Bundle F2/6651-6652. [85] See Bundle F2/6715-6717. [86] See Bundle F2/6720. [87] See Bundle F2/6717. [88] See Bundle E4/6228.207-211. [89] The Tribunal was advised that the length of this swimming pool will be less than 10 metres. We consider such a swimming pool undersized and not reasonable to be provided. [90] Mr Chan’s transfer plate is to be provided between G/F and 1/F. [91] The saleable area includes balcony, utility platform and curtain wall area of 11.68 m2. [92] See Exhibit A10 p 2. [93] See Bundle E2/5741. [94] See Bundle E2/5743. [95] See Bundle E1/5349. [96] “ST” denotes “staircase”. [97] See Exhibit R2 at pp 40-41. [98] See Bundle E5/6228.678-682. [99] See page 9 of Exhibit R2. [100] See page 10 of Exhibit R2 and Appendix 10 in Exhibit A5. [101] See the judgment at §85. [102] See Bundle E5/6228.660. [103] See Bundle E4/6228.264-268. [104] See Bundle E5/6228.668. [105] This unit does not enjoy view over the racecourse while the other units do. [106] These units only enjoy view of buildings nearby while the other units enjoy open view. [107] See Exhibit A11. [108] See Bundle E5/6228.309. [109] See Bundle E5/6228.308. [110] 0.5% per floor difference. [111] Assume the unit rate of flat roof is 1/8 of the adjoining floor. [112] See Bundle E4/6228.296. [113] See Bundle E5/6228.673. [114] It is occupied as a pet hotel which offers pet fashion accessories and spa grooming services. [115] See Bundle E4/6228.228-230. [116] See Bundle E2/6228.228. [117] See Bundle E2/5876. [118] This was subject to rent free periods from 11 Jul 24 to 10 Aug 25 & from 11 Jul 2025 to 10 Aug 25. [119] This is the approximate depth at which the shop tapered towards the inside like a flask. [120] See Bundle E4/6228.212-218. [121] This figure was revised from $355,760,000. [122] This figure was inclusive of $4,500,000 for each of the two car lifts. [123] See Valuation of development property, published by the Royal Institution of Chartered Surveyors (RICS) at para B1.2.8. [124] See Bundle D1/3943. [125] See Bundle D1/3950. [126] See Bundle D4/5278. [127] See Bundle D1/3984. [128] Bundle D1/3961. [129] Bundle D2/4692. [130] Bundle D1/3966. [131] See Bundle D4/5284. [132] See Bundle D4/5287. [133] See Bundle D4/5229. [134] See Bundle C1/991. [135] See Bundle D3/4719. [136] See Bundle C5/2370: https://www.legco.gov.hk/yr09-10/english/hc/sub_leg/sc05/papers/sc050209cb1-1163-1-e.pdf. [137] See Bundle C2/1272. [138] See Exhibit R11. [139] See Bundle C6/2481. [140] See Bundle C1/991. [141] See Bundle C1/997. [142] See Bundle C1/939 at para 5.11.6. [143] See Bundle C1/884-885. [144] In fact, Mr Benson Wong’s said suggestion under his definition of tenantable condition was not challenged by any of the respondents. [145] See Bundle C9/3722. [146] See Bundle C4/2149-2150. [147] Regrettably these two units are all owned by the applicant. [148] See Bundle C4/2151. [149] See Bundle B2/845.68 or C4/2155. [150] See Bundle B2/845.74 or C4/2153. [151] See Bundle B2/845.80. [152] See Bundle B2/845.85 or C4/2154. [153] See Bundle B2/845.92. [154] See Bundle C9/3910-3914.7. [155] See Bundle C9/3726. [156] See Bundle C9/3911 or 3914.1 [157] See Bundle C9/3914.2. [158] See Bundle C1/895 & 1107. [159] See Bundle C9/3727-8. [160] See Bundle C9/3743-3885. [161] See Bundle C9/3743. [162] See Bundle C8/3525 at Item 2. [163] This figure amounts to 20% of the total external wall area of the Building of 2,529 sq m. [164] See Bundle C1/895. [165] See Bundle C6/2534-2536. [166] See Bundle C9/3755. [167] See Bundle C1/1110-1114. [168] See Items 4.1 & 4.2 at Bundle C8/3525. [169] See photos at Bundle C2/1289. [170] See photos at Bundle C2/1290-1291. [171] See photos at Bundle C2/1291. [172] See photos at Bundle C2/1292. [173] See Bundle C6/2539 or C9/3761. [174] See Bundle C9/3581 or C9/3769. [175] However, according to the appendix of the URA rate adopted by Mr Lau, the items of “Employees’ Compensation Insurance” and “Contractors’ All Risks and Third Party Liability Insurance” had already been included in the category of “Site Preparation and Preliminaries” URA rate for Asbestos removal. See Exhibit R12. [176] See Bundle C9/3581-3582 or C9/3770. [177] See Bundle C2/1239. [178] $70,600 + $204,000 = $274,600. [179] See Bundle C2/1297. [180] See §223 of the judgment. [181] See Photo at Bundle C2/1266. [182] See Bundle C2/1239. [183] The Building does not have an owners’ corporation. [184] See https://www.legco.gov.hk/yr2024/english/panels/dev/papers/dev20241218cb1-1681-1-e.pdf [185] Minor Works Control System. [186] The Minor Works Control System provides for 30 items of “Designated Exempted Works” (DEWs), such as drying racks of smaller dimensions and not too high above the ground level, etc. The works are not subject to the approval of BD or the simplified requirements of the Minor Works Control System. [187] See para 2 of PNAP APP-110. [188] See photos in Bundle C2/1324-1329. [189] See Bundle F1/6459. [190] According to the witness statement of R3 dated 21 December 2023, he has spent a total of more than $1,300.000 in renovating his unit in late 2019. See Bundle B2/571. See also the photographs of the unit at Bundle C7/2998 & 3008. [191] See the photographs of the unit at Bundle C7/3036-3037. [192] See the photographs of the unit at Bundle C7/3062-3063. [193] These two buildings had been demolished and developed into a new composite development called The Gloucester. [194] See §§225 & 226(3) of the judgment. [195] See Bundle C9/3910, 3913 & 3914.5. [196] See Bundle C2/1177. [197] UCMP is composed of additional components and structural modifications, avoiding the accidents caused by unintended car movement during the door is opened. [198] ACOP is composed of components replacement, avoiding the overspeed of ascending car and reduce the chance of collision with the top of lift shaft. [199] https://www.emsd.gov.hk/filemanager/en/content_841/15_2011.pdf [200] https://www.emsd.gov.hk/filemanager/en/content_841/22_2000.pdf [201] See Bundle C9/3658. [202] See Bundle C9/3916-3918. [203] See Bundle C2/1220. [204] See Bundle C2/1210. [205] See Bundle C2/1191, 1196, 1212 and 1222. [206] The site preparation cost and preliminaries estimated by Mr Benson Wong in the sum of $3,568,040 was around 22.8% of the total costs whereas that of Mr Lau was about 15%. We adopt now 20% as site preparation cost and preliminaries. [207] The contract contingencies estimated by Mr Benson Wong was 10.38% of his “repair works sub-total” of $15,651,853 while that adopted by Mr Lau was 12%. [208] See Bundle C1/944. [209] See Crown Centre Development Limited & Another v Wong Wai Ping & Others, LDCS 12000/2021 (unreported, 8 December 2023) at §70(h). [210] See Bundle C4/1839. [211] See C4/1846. [212] See Bundle C4/1847. [213] See Bundle C4/1845. [214] Mr C M Wong provided the definition of propagation phase as “The protective barrier is completely lost and corrosion actively deteriorates the rebars”. See Bundle D4/5222. [215] See Bundle C9/3909. [216] See Bundle B1/208. [217] As said, the offer to R4 was made on 22 July 2022 instead of on 24 June 2022 for the other properties. See Bundle B1/536-541. [218] See Bundle B2/605-610. [219] See Bundle B2/572. [220] Clause 2(d) of the draft PSAP specified a completion date on 18 January 2022 and Clause 12(B) specified a special condition permitting the intending purchaser to back out. See Bundle B2/618-619. [221] Nobody had yet signed the PSPA. [222] See Bundle B2/639. [223] See Bundle B2/845.2. [224] See Bundle B2/619-620. [225] See Bundle B2/573 at §12. [226] See Bundle B2/639. [227] See Bundle B2/748-751. [228] See Bundle B2/667 at §12(b). [229] According to Mr Yu in his witness statement in reply to R6 dated 30 April 2024, “the Applicant had before 16 December 2021 entered into PASPs with enough units of the Relevant Premises of the specified majority of the undivided shares required by Cap 545, however those PASPs were still subjected to title checking and Special Condition Clause 12”. “When Deacons were not satisfied with the title on 16 December 2021, the acquisition planned by the Applicant was kept hanging in the balance.” See Bundle B2/720. [230] See Bundle B2/752-756. [231] See Bundle B2/757. [232] See https://www.legco.gov.hk/yr97-98/english/bc/bc06/minutes/bc061002.htm [233] See para 8 of the Minutes: https://www.legco.gov.hk/yr97-98/english/bc/bc06/minutes/bc062402.htm. [234] See §132 above. [235] See Bundle B1/276. [236] See Bundle B1/305. [237] See Bundle B1/333. [238] See Bundle B1/283. [239] See Bundle B1/312. [240] See Bundle B1/342. [241] See Bundle B1/297. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
= 2.37%) and its Zone A value may be derived as follows:
= 0.9%.
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