Pakatower Ltd v. The Incorporated Owners of Transport City Building
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LDBM 75/2019 [2026] HKLdT 45 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 75 OF 2019 ___________________ BETWEEN
___________________ IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 151 OF 2020 ___________________ BETWEEN
___________________ IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 152 OF 2020 ___________________ BETWEEN
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_________________ D E C I S I O N _________________ INTRODUCTION 1.This is an application by the applicant (“Pakatower”) for leave to appeal against §123(1) and §124 of the Review Decision handed down by this Tribunal on 4 February 2026[1] (“Review Decision”). 2.In gist, Pakatower now seeks to appeal from this Tribunal’s dismissal of its application for review of (what Pakatower purported to be) this Tribunal’s “rejection of the assessment basing on the Depreciated Replacement Cost method as set out in Appendix VIII of the valuation report of Pakatower’s expert dated 14 November 2022”[2] (“Cheung’s Report”) (“Dismissal Order”). BACKGROUND 3.This action involves substantial disputes between the two parties. After trial, this Tribunal handed down the Judgment on 3 March 2025[3] (“Judgment”). Subsequently, Pakatower applied for review of two aspects of the Judgment under section 11A of the Lands Tribunal Ordinance, Cap. 17 (“LTO”) (“Review Application”), ending up with the handing down of the Review Decision. 4.The background of this action and the many disputes between the parties have been set out in the Judgment and the Review Decision which will not be repeated here. For convenience, the definitions and abbreviations used in the Judgment and the Review Decision are adopted in this Decision, unless otherwise stated. 5.To understand Pakatower’s grounds of the present application, it is necessary to set out the litigation history relating to the Dismissal Order in some more details. STAGE 1-ORIGINAL CLAIM AT TRIAL 6.In so far as it relates to the Dismissal Order, the underlying issue in dispute at trial was the assessment of the mesne profits payable by IO to Pakatower for its unauthorized use and occupation of the Disputed Premises[4] after the expiry of the Last IO Tenancy Agreement [5]on the Expiry Date (30 April 2015) until delivery of vacant possession of the Disputed Premises. 7.For assessment of the mesne profits of the Disputed Premises, two experts gave evidence at trial, Cheung for Pakatower and Ng for IO. 8.Cheung adopted Cheung’s Report as his evidence at trial. It was his evidence that he used the Direct Comparison Method (“DCM”) as supplemented by the Depreciated Replacement Cost method (“DRC”) for valuation of the Disputed Premises. He classified and assessed the 17 premises of the Disputed Premises into 3 groups[6] as follows:
9.Based on Cheung’s Group Valuation, Cheung opined that: -
10.In §218 and §221 of Pakatower’s Opening Submission for trial dated 4 December 2023, Pakatower adopted Cheung’s Group Valuation for its claim for the mesne profits of the Disputed Premises. 11.In §9.2, §9.6, §9.7 and §12.3 of Pakatower’s Closing Submission for trial dated 12 March 2024, Pakatower adopted Cheung’s Group Valuation and Cheung’s Group Assessed Values and prayed for:
12.In §§9.7-9.8 of Pakatower’s Closing Submission for trial, Pakatower emphasized that the Last IO Tenancy Agreement should be taken into account for assessment of the mesne profits of the Disputed Premises. It reads:-
13.In §9.13 of Pakatower’s Closing Submission, Pakatower further criticized Ng to have wrongly ignored the Last IO Tenancy Agreement in her valuation exercise. JUDGMENT 14.In §291(3) and §291(6)(a) and (c) of the Judgment, this Tribunal ordered that:
STAGE 2-REVIEW APPLICATION 15.Departing from its Original Claim at trial, Pakatower, in the Review Application, purportedly applied for review (“MP Review Application”) of this Tribunal’s “rejection of the assessment of the mesne profits basing on DRC as set out in Appendix VIII of Cheung’s Report” and prayed for mesne profits for the Subject Premises (being the Disputed Premises excluding the Two Staircase Spaces, that was, only covered Group 2 Premises and Group 3 Premises)[10] for: -
16.As elaborated in the Review Decision, Pakatower’s allegation of this Tribunal’s “rejection of the assessment of the mesne profits basing on DRC as set out in Appendix VIII of Cheung’s Report” did not only take the ruling in the Judgment out of context, but also attempted to rewrite Cheung’s Report and further, sought to reformulate its claim for the mesne profits. 17.In the Review Decision, the Dismissal Order was made (§123(1)) with no order as to costs for the Review Application (§124) (“Review Costs Order”). In effect, the Judgment Mesne Profits were confirmed. STAGE-3: PRESENT APPLICATION 18.By the present Summons dated 11 March 2026, Pakatower now seeks leave to appeal against the Dismissal Order and the Review Costs Order. 19.Departing from not only its Original Claim but also the Review Claim, Pakatower now also seeks to vary the mesne profits for the Two Staircase Spaces to be nominal[11] (“Appeal Claim”). As an alternative, it seeks remittance of the claim for mesne profit for reassessment by a differently constituted Tribunal. 20.In the Draft Notice of Appeal, the present application is premised on the following two grounds:
LEGAL PRINCIPLES 21.Leave to appeal from the judgment or decision of the Lands Tribunal lies only on the ground that such judgment or decision is "erroneous in point of law": section 11(2) LTO. Leave will only be granted if the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard: section 11AA(6) LTO. 22.Reasonable prospects of success involve the notion that the prospects of succeeding must be reasonable and therefore more than fanciful, without having to be probable: SMSE v KL [2009] 4 HKLRD 125 at §17. 23.A decision is erroneous in point of law if “A decision may be quashed if it is based on a finding of fact or inference from the facts which is perverse or irrational; or there was no evidence to support it; or it was made by reference to irrelevant factors or without regard to relevant factors. It is not necessary to identify a specific error of law; if the decision cannot be supported the court will infer that the decision-making authority misunderstood or overlooked relevant evidence or misdirected itself in law.”: Chu Hoi (International) Ltd v Chow Kwok Fong (No. 2) [2024] 4 HKLRD 414 at §§19–21. 24.The relationship between original decision, review and leave to appeal was elaborated in CLP Power Hong Kong Ltd v Commissioner of Rating and Valuation [2013] 4 HKLRD 535 which can be summarized as follows:-
DISPUTED PREMISES 25.It is apparent that the intended two grounds of appeal are misleading and in complete departure from Pakatower’s pleaded case, its Original Claim and its own expert’s opinion. For ease of reference, it is convenient to have a general outline of the relevant parts of Pakatower’s case, the Judgment and the Review Decision stated herein. As the whole issue rests heavily on the peculiar nature of the subject matters for valuation, the Disputed Premises, I will start with identifying the Disputed Premises as follows:
JUDGMENT MESNE PROFITS 26.After trial, the assessment of the mesne profits was determined in §§189-221 of the Judgment. 27.Both experts accepted that: -
Rejection of Ng’s Valuation 28.Ng’s valuation of the Disputed Premises at nominal value was rejected in §§192-204 of the Judgment for: -
Rejection of Cheung’s Valuation 29.Cheung’s Group Assessed Values were rejected in §§205-213 of the Judgment because his valuation was problematic and unreliable for:-
Last IO Tenancy Agreement 30.Having rejected both experts’ opinions, this Tribunal adopted the Last IO Tenancy Agreement as the starting point for assessment because:-
31.According to Clause 3 of the Last IO Tenancy Agreement, IO, for renting the Disputed Premises and Unit 13 Staircase Space from 1 May 2014 to 30 April 2015, had to make two sets of monthly rental payments: -
32.Taking the two sets of payment under Clause 3A and Clause 3B as a starting point, adjustments were made firstly to deduct a sum of HK$638 from the monthly cash payment of HK$3,600 to reflect the agreed mesne profit of the Unit 13 Staircase Space, making up a total of HK$3,307 for the year commencing on 1 May 2015, and secondly, further adjustment on time was made to reflect the rental market during the period concerned, making reference to the Rental Indices, which has long been regarded (as Cheung confirmed) as the most reliable indicator in reflecting the overall sale and rental transaction market condition of industrial premises in Hong Kong (§§217-219 of the Judgment). 33.As to Clause 3B, Pakatower confirmed that IO had settled all those payments for it and it had never been asked for such payments during all the tenancy terms in the past until the deterioration of the relationship between the parties and the dispute relating to the counterclaim arose. Given Clause 3B was part of the rental consideration of the Last IO Tenancy Agreement, it should also form part of the mesne profit to be borne by IO from 1 May 2015 to the date of delivery of the vacant possession of the Disputed Premises (§221 of the Judgment). REVIEW DECISION 34.In the MP Review Application, Pakatower applied for review of (what Pakatower alleged to be) this Tribunal’s rejection of Cheung’s assessment basing on DRC as set out in Appendix VIII of Cheung’s Report (confined to the Subject Premises as no review was sought for the Two Staircase Spaces). However, such proposition was misleading. It has neither put Cheung’s opinion nor this Tribunal’s ruling into proper context, but instead, changing its pleaded case, Original Claim and expert opinion by way of counsel submissions (§3(1), §5 of the Review Decision). I should not repeat the Review Decision in full but just highlight some points for ease of reference.
35.First, it was not Cheung’s evidence in trial to base his valuation on Appendix VIII of Cheung’s Report. The MP Review Application in fact differs from Cheung’s opinion and Pakatower’s own case at trial as elaborated in §§6-11, 13-15, 25 and 27 above. 36.It was indeed Cheung’s opinion in Cheung’s Report and in Court that (which was adopted by Pakatower at trial) the mesne profits of the Disputed Premises should be assessed: -
37.Second, Cheung’s valuation was rejected because: -
38.Third, Pakatower’s Review Application for adoption of Cheung’s DRC Assessment for valuation of the Subject Premises were rejected because:-
39.Fourth, even though “solely for the reasons aforesaid, Cheung’s DRC Assessment was bound to be rejected”, a brief summary of its deficiencies and problems was provided as illustration “for completeness sake” as follows (§42): -
40.In conclusion, this Tribunal rejected Cheung’s DRC assessment for it failed to give a true and fair market value assessment of the Disputed Premises. It was unbelievable that a user or occupier would be willing to pay an average cost of constructing the whole building as the average cost for just some fragmentary parts of a building (§§59-61). 41.Fourth, this Tribunal adopted the Last IO Tenancy Agreement as a starting point for assessment of the mesne profits for:
42.It was undesirable for Pakatower to put up a number of unjustified arguments in the Review Application, which were unsupported by any evidence or even not canvassed at trial (§94). 43.Pakatower’s complaints that this Tribunal should not make observations on matters that have not been put to Cheung at trial were unsubstantiated for the following reasons:-
INTENDED GROUNDS OF APPEAL 44.In the present Draft Notice of Appeal and Pakatower’s submissions, much has been said by Pakatower that the assessments of the mesne profits were so problematic necessitating a revisit of the Judgment Mesne Profits or a re-trial for assessment. However, Pakatower’s complaints are unjustified and tended to complicate the matters by taking matters out of context, mixing up factual or legal matters or reversing its burden of proof. GROUND 1 45.Ground 1 is bound to fail for the following reasons. CHANGE OF CASE 46.First, Pakatower was bound by its own case and Original Claim in trial that its application for the mense profits of the Disputed Premises was based on Cheung’s Group Valuation (in that the Last IO Tenancy Agreement was expressly adopted as suitable comparable and DCM was used) and prayed for Cheung’s Group Assessed Values as in its pleadings, stated case at trial and opening submissions and closing submissions as elaborated in §§6-13, 15-16, 18-20, 25 and 27 above. As such, it was not entitled to change its case and its claim in the Review Application and to add further changes in the intended appeal to ask for a reassessment of the mense profits solely by its purported Cheung’s DRC Assessment and for the Review Claim, and further, revised the Review Claim in the intended appeal. The prejudice caused to IO is fundamentally serious that should not be allowed. 47.Pakatower’s contention that this Tribunal had misunderstood its Review Application, which was said to be “addressed what the proper valuation approach should be after the Tribunal had rejected both expert’s valuation in the Original Decision [the Judgment] and adopted the Last TA as the starting point for assessment on the limited evidence before it” (§55, Pakatower’s submission) is bound to be rejected. Plainly, Pakatower was debarred from changing its case and its claim after its original case and claim had been rejected in trial. Strictly, no second bite of the cherry should be allowed. 48.Second, much has been said by Pakatower that it “sought only to overturn the Tribunal’s rejection of Cheung’s DRC Assessment for the Subject Premises, but not his DCM valuation (based on the express wording of the Last IO TA) which had been rejected by the Tribunal” and that Cheung's report always contained separate standalone DRC (§55 of Pakatower’s submission). Such proposition is an attempt to misinterpret Cheung’s opinion at trial as well as to take the ruling of the Judgment out of context to suit its new purpose. 49.Pakatower’s so-called Cheung’s “assessment basing on the Depreciated Replacement Cost method as set out in Appendix VIII of the valuation report of Pakatower’s expert dated 14 November 2022” was not the actual valuation opined and adopted by Cheung in his Cheung’s Report or in trial for the assessment of the mesne profits of the Disputed Premises, and in fact, goes contrary to Cheung’s expert opinion. As elaborated in §§8-9 above, it was Cheung’s unequivocal evidence that the mense profits of the Disputed Premises should be assessed basing on Cheung’s Group Valuation and the Last Tenancy Agreement was suitable comparable and DCM should be used. 50.Pakatower was not allowed to rewrite Cheung’s expert’s report and reformulate its own expert’s opinion by just picking up an appendix to the Cheung’s Report (being Appendix VIII which was just added for simple illustration of the calculation of DRC, but was not adopted by Cheung as the basis of his valuation in trial), singling out the DRC and further, extending and expanding the DRC to cover all of the Disputed Premises/ Subject Premises, with Cheung’s adoption of the Last IO Tenancy Agreement and the DCM completely removed by way of counsel’s submissions and affidavit of factual witness, and then justified such prejudicial exercise by saying that the Judgment had rejected Cheung’s valuation of Group 2 Premises and Group 3 Premises, bearing in mind that Cheung’s valuation was not rejected because of the adoption of the Last IO Tenancy Agreement and the use of DCM but his confusion as to the subject matters of the Last IO Tenancy Agreement (in that he mistakenly considered Group 2 Premises were not covered therein). 51.Strictly, Pakatower was debarred from having partially lost its case with its expert evidence being rejected after a full trial, asking for completely changing its original case and its Original Claim and putting forward a completely new case and new claim by rewriting its own expert’s report through Counsel’s submissions and factual witness affidavit, which goes contrary to its own expert’s evidence in the Cheung’s Report and in trial with his original opinion basing on Cheung’s Group Valuation and the Group Valuation Assessed Value completely removed. Hence, Pakatower’s present application is plainly an attempt to get the second bite of the cherry and is bound to fail. 52.Third, all Pakatower’s complaints about this Tribunal’s rejection of Cheung’s DRC Assessment are doomed to fail for the fundamental reason that Cheung’s DRC Assessment was inherently unable to give a proper, true and fair valuation of the Disputed Premises, being just some utility rooms, accommodations and spaces of a multi-storey building as opposed to the whole multi-storey building. As repeatedly emphasized, this Tribunal had no disagreement that DRC could be used for valuation of the whole multi-storey building or the whole structure as a specialized plant or an equipment asset but not just some particular parts of a multi-storey building as the Disputed Premises by simply taking a general averge unit cost of the total hypothetical replacement cost of the entire building as the estimated costs of the Disputed Premises due to the inherent deficiencies and limitations of Cheung’s DRC method as elaborated in §§32-62 of the Review Decision). NEW CRITICISM & NEW MATERIALS 53.Fourth, solely for the reasons aforesaid, Ground 1 is hopeless. For completeness sake, I will now turn to concisely deal with Pakatower’s other arguments under ground 1, which focus mainly on complaining this Tribunal to have raised “new criticisms” on “Cheung’s DRC Assessment” by making reference to some “new materials”, which deprived it and Cheung of a fair chance to deal with them. 54.Fourth, solely for Such arguments are unmeritorious. In the Judgment, this Tribunal simply did not need to rely on such “new criticisms” or “new materials” in rejecting Cheung’s expert evidence and Pakatower’s Original Claim. It was only because of Pakatower’s dramatic attempts to change its case, claim and Cheung’s expert evidence in the Review Application by counsel’s submissions and factual witness affidavit, seeking to rely solely on the so-called Cheung’s ”assessment basing on the Depreciated Replacement Cost method as set out in Appendix VIII of the valuation report of Pakatower’s expert dated 14 November 2022” to assess the mesne profits of all of the Subject Premises with Cheung’s use of the Last IO Tenancy Agreement and DCM for assessment completely removed that made it appropriate, for completeness sake, to elaborate further as to how and why Cheung’s DRC Assessment should not be used as the sole method for assessing all of the Subject Premises. 55.§1(3), §1(6) and §1(7) of Ground 1 can be dealt with together. They complained this Tribunal to have introduced “new criticisms” (as defined by Pakatower in §1(2) of Ground 1 to have included §§32-41, 43-51, 53-62 of the Review Decision) and “new materials” during or after the Review Hearing. It said that those were matters of valuation opinions being introduced in the Review Decision as the so-called “well established basic principles” or “commonsense and logics” without expert opinion in support or sufficient analysis and had never been canvassed at trial and consequentially, depriving Pakatower of a fair chance to deal with them with proper expert evidence from Cheung. 56.Such complaints are unacceptable and indeed an attempt to shift the burden of proof as well as to side-track the real issue that it was Pakatower who initiated the change of its case, claim and expert evidence necessitating a detailed analysis as to how and why such new attempts should not be allowed and Cheung’s DRC Assessment could not properly, truly and fairly assess the mense profits of the Disputed Premises/ Subject Premises as newly advanced by Pakatower in the Review Application for such complaints simply ignored the fact that the so-called “new criticisms” and “new materials” were not strictly necessary for determination of the issues in dispute at trial as the Judgment now stands but for Pakatower’s new attempts to change its case, claim and expert opinion under the guise of “Cheung’s Report” through counsel’s submissions and factual witness evidence in the Review Application that gave rise to the needs of elaborating further how the purported Cheung’s DRC Assessment should not be adopted for valuation of all the Disputed/ Subject Premises. 57.Pakatower can seek no support from Deluxe Ascent Ltd v The Director of Lands [2024] 1 HKLRD 260. That was a case that only in the application for leave to appeal, the Tribunal entertained a new issue for valuation exercise ie whether site coverage be limited to 20% in order to be marketable and competitive. Such issue was neither an issue in the pleadings, list of issues, opening submissions or opinions of either expert, nor a matter of commonsense or a matter under judicial notice. It however was a fundamental point which would render the parties’ debate on abutment entirely academic (§§56-60). 58.On the contrary, in the present case, the “new criticisms” and the “new materials” were raised by this Tribunal not for putting forward a new issue for valuation exercise or calculation but strictly for responding to Pakatower’s new claim, new case and new reformulation of its expert evidence so as to state why Pakatower’s new attempts were unacceptable. They were not raised in an application for leave to appeal but in the review application. Reference was made to them not to put forward a new positive issue for re-valuation of the Disputed Premises but to give general references to illustrate some general principles as an aid to demonstrate how and why Pakatower’s new attempts were improper, illogical and prejudicial which were contrary to general principles and were an affront of commonsense. 59.The 5 items being complained of in the Notice of Appeal were just one decided case and 4 small footnotes, which were added to the Review Decision to give general references of some long-established general principles as follows:
60.A fair reading of the Review Decision will find that the “new criticisms” were actually matters of logic and commonsense drawn from the evidence adduced at trial, well-established general principles and decided cases. They were to demonstrate that Pakatower’s new attempts in the Review Application was bound to fail for Cheung’s DRC Assessment was inherently deficient and illogical for it only provided the costs for a hypothetical industrial building as a whole but not specifically for the Disputed Premises, not to mention that it’s calculation of the costs for the entire hypothetical industrial building was also problematic and unreliable. The “new materials” were just added as footnotes or supplementary notes for providing general references, and, the removal of them would not render the reasonings of the Review Decision illogical or irrational as summarized in §§34-43 above. 61.All of the “new materials” (except one) had been provided to the parties for their consideration and submissions long before the determination of the Review Application. To that, Pakatower was invited to and actually put in lengthy supplemental skeleton submissions and list of authorities in response and reply[19]. The complaint of lack of a fair opportunity to deal with the new materials is unjustified. 62.Thus analyzed, Pakatower’s complaints that the inclusion of such “new criticisms” and “new materials” amount to an error of law and a breach of natural justice, necessitating the intervention of the Appellate Court is without merit. 63.As to §1(4) of Ground 1, the general complaint of “other new criticisms on Cheung’s DRC Assessment were not referable to any identifiable materials at all” is neither here nor there. 64.In essence, one of the crucial reasons for rejecting Pakatower’s MP Review Application basing on Cheung’s DRC Assessment was that DRC is not suitable for assessment of just a particular part of a multi-storey building or multi-units building. As elaborated in §§34-43 above, the so-called “new criticisms” just listed out the inherent deficiencies and fundamental limitations of Cheung’s DRC Assessment which were so obvious as a matter of general principles, logics and commonsense. 65.Besides, the so-called “new materials” only served as supplementary notes to provide general references of those general principles. They did not bring in or add anything to the valuation exercise or calculation of Cheung’s DRC Assessment. They just pointed out the inherent deficiencies and fundamental limitations of Cheung’s DRC Assessment, which were so obvious as a matter of logics and commonsense. The problems were inherent which were not matters of degree or weight that could be adjusted or remedied by experts in trial. The absence of them would not have rendered the analysis of the relevant paragraphs unsubstantiated as demonstrated in §§34-43 above. 66.In light of the nature of and the circumstances giving rise to the so-called “new criticisms” and “new materials” in the Review Application as set out above, Pakatower’s complaints of being deprived of a fair chance to deal with them by it or its expert at trial amounting to an error law is unwarranted. INHERENT DEFICIENCIES 67.As explained in §§35-36 of the Review Decision, the inherent deficiency and fundamental limitation of Cheung’s DRC Assessment was that even though Cheung purportedly based his DRC on an estimate of “the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimization” and “A property market yield is adopted to decaptialize the effective capital value to arrive at the rental value”, Cheung’s DRC Assessment was in fact not a true valuation as such because it was not actually an estimate of the cost of replacing the Subject Premises with their equivalent assets. 68.Instead, Cheung’s DRC Assessment was premised on an estimate of the cost of replacing an industrial building as a whole, but not just the Subject Premises. It wrongly based on the estimated total cost of the land element and building element for construction of (not only the Subject Premises but) the entire hypothetical building with a deduction at a selected standard rate for deterioration and another for decapitalization and then averaged out the estimated total unit cost per sq ft generally, ending up with multiplying such general average unit cost per sq ft by the areas of the Subject Premises to determine the mesne profits of the Subject Premises. 69.It was such inherent deficiency and fundamental limitation of Cheung’s DRC Assessment, in principle and in practice, that rendered Cheung’s DRC Assessment unreliable for it could not have properly, truly or fairly reflected the true values of the Disputed Premises/ Subject Premises. It is not a matter of degree or weight that can be remedied by adjustment by expert in trial. 70.Thus considered, Pakatower’s argument (making references to a number of decided cases) that DRC has long been recognized as a valuation method in Hong Kong and this Tribunal has erred in rejecting such a well-recognized valuation method and Cheung’s DRC assessment is a red herring attempting to detract from the inherent limitation and fundamental deficiency of Cheung’s DRC Assessment aforesaid. 71.Suffice it to say that in §§40-41 of the Review Decision, this Tribunal specifically confirmed that this Tribunal had no disagreement that DRC might be used where there was no useful evidence of recent transactions due to the special nature of the premises and that DRC had been used for valuation of the whole building or the whole structure as a specialized plant or an equipment asset, ie oil plant, machinery plant, power station in a number of decided cases, DRC however was not an appropriate valuation method for strata title properties. NO DECIDED CASES 72.In the premises, Pakatower’s present attempts to mount the same arguments by making reference to a number of decided cases are fruitless for the crucial reason that the subject matters for valuation by DRC in all those decided cases were not a particular part of a multi-storey building or multi-units building and the DRC valuation used was not by way of taking an average of the estimated total cost of the entire hypothetical building. 73.Suffice it to say that up until now, neither Pakatower nor Cheung has been able to refer to any decided cases or authorities that DRC has been found to be a true, proper and fair valuation of just a particular part of a multi-storey building or a multi-units building still less of valuation by way of taking an average of the estimated total cost of the entire hypothetical building. 74.Pakatower’s complaint that Pakatower and its valuation expert could not have appreciated the need of providing any decided cases in support and that they had not been asked for such at trial does not assist it in explaining out its failure to come up to proof. No doubt, solely the absence of a precedent case will not automatically justify a rejection of the use of DRC for a particular part of a multi-storey building. That said, in this particular case, Pakatower is unable to logically or sensibly elaborate as to how Cheung’s DRC Assessment can truly, properly and fairly evaluate just the Disputed Premises instead of an entire industrial building. 75.Viewed in this light, the fact that neither of them was able to refer to any decided cases or authorities directly on this point, locally or overseas, notwithstanding both of them have referred to a number of decided cases and authorities in support of their many arguments, further points to the fact that DRC could not be used as a suitable valuation method for just a particular part of a mutli-storey building or multi-units building. LAND ELEMENT 76.In light of the matters set out above, §1(1) of Ground 1 does not assist Pakatower. It contends that this Tribunal’s “main criticism” was that Cheung had adopted enbloc industrial buildings as comparables and such complaint was invalid due to this Tribunal’s misunderstanding of the methodology of DRC by confusing the land element with the building element. Such contention is incorrect and is an oversimplification of the many main reasons for rejection as summarized in §§205-213 of the Judgment and §§30-62 of the Review Decision which should not be repeated here. 77.Further, the contention that this Tribunal has misunderstood the difference between the land element and the building element by taking into account of the “usage” of the to-be-demolished building of the enbloc-building-theory adopted by Cheung for the land element is misconceived. It is a misinterpretation of §§205-213 of the Judgment and §§42-51 of the Review Decision and a neglect of Cheung’s evidence under cross-examination[20] as summarized in §212 of the Judgment. 78.Under Cheung’s adoption of the sales transactions of some industrial redevelopment sites with to-be-demolished enbloc buildings as comparables for the land element, the issue of “usage” is still relevant when considering his accommodation value approach as elaborated in §§47, 49-51 of the Review Decision. In fact, under cross-examination, Cheung confirmed that he was not sure whether the utility rooms inside the enbloc building were normally not calculated within the GFA. He also confirmed that even if they are calculated within the GFA, a very substantial part of the enbloc industrial building would be normal workshop or factory units and these would be intrinsically be more valuable than the utility rooms in those buildings. This also demonstrated why Cheung’s accomodation value approach for the valuation of the Disputed Premises/ Subject Premises, being just utility rooms and accomodation and spaces, is problematic. 79.After all, this matter was just one of the many problems of Cheung’s DRC Assessment and in any event could not have rectified the inherent deficiencies and fundamental limitation of Cheung’s DRC Assessment as aforesaid. 80.Likewise, Pakatower’s other complaints about the reasons for rejection of Cheung’s evidence in the Judgment are just repetition of its arguments in the Review Application, which have been dealt with in the Review Decision. Pakatower fails to demonstrate how such rulings were wrong in law. 81.Pakatower’s complaints about this Tribunal’s rejection of Cheung’s analysis on land element were dealt with in §§42-51 of the Review Decision, in that his selection of the three comparables as well as his accommodation value approach were found unreliable for various reasons set out therein. In essence, his oversimplified average-taking of the three comparables with materially different plot ratio without proper adjustment cannot be treated as reliable. 82.In particular, Cheung’s accommodation value exercise was oversimplified in circumstances where his selected three comparables had differing site sizes, plot ratios and permissible gross floor areas. Not only that the Fanling site comparable was out of line from the other two sites and his accommodation value approach was problematic, but also that no proper adjustments (other than time adjustment) had been made to reflect the peculiar features of each site. All such factors have rendered Cheung’ analysis unsafe. 83.Amongst, comparable L3 (the Fanling site), with a plot ratio of only 3.5 compared to the other two comparable at 9.5, had a materially different efficiency profile from the other two comparables. Applying a simple average of the accommodation value exercise of all three without proper adjustment had distorted the result. The reference of the PJR book was just to illustrate the general principle of the accommodation value approach cannot replace detailed consideration of the potential of a site and the straight forward mathematical logic that “the greater the ratio between salable floor space and gross floor area, the higher will be the accommodation value”. 84.Pakatower’s bare assertion that the other two comparable sites “might offset” or “balance the comparison”, that the subject site should be considered as “midpoint position” to address the differences identified or that the Fanling site should be disregarded are unrealistic which cannot address the problems identified, bearing in mind that the remaining two comparable sites in different locations are insufficient and inadequate comparable not to mention that no appropriate adjustments had been made to address the obvious differences between them and the Building (other than time adjustment). 85.Pakatower’s complaint that there is no expert evidence to suggest that adjustment on location is required is no bar to this Tribunal’s finding that such omission has rendered the valuation unsound for the obvious reasons that the sharp differences between the four locations of the four sites concerned were something that this Tribunal can take judicial notice of. The Tribunal is entitled to make its own findings basing on general knowledge, logics and commonsense and will not be bound by the inaction or omission of experts. Further, the fact that accommodation value has been generally recognized as a method for valuation (to this this Tribunal has no disagreement) is no excuse for Pakatower to make an inappropriate application of such method. 86.This Tribunal’s criticism of Cheung’s oversimplified-averaging methodology was based on simple logic that it was wrong to average unadjusted or improperly adjusted comparables. Lands and compensation n valuation law in Hong Kong at §23.98 was just referred to in recognition of such simple logic. Given the three comparables adopted by Cheung differed materially from the Subject Premises, his averaging of the unadjusted or improperly adjusted values has undoubtedly produced incorrect result. BUILDING ELEMENT 87.Likewise, all Pakatower’s arguments relating to the “Building Element” are fruitless due to Cheung’s adoption of the RLB approximate average construction costs (“RLB Cost”) and the uniformed depreciation rate, etc. was fundamentally problematic for they were not catered for the Subject Premises. His adoption of the RLB cost (which only provide average costs for construction of an entire building, not for specific parts of the building as the Disputed Premises) and the uniformed depreciation rate was regardless of the individual characteristics, features or qualities of the Disputed Premises. It was an oversimplification which produced incorrect result. Therefore, the series of argument advanced by Pakatower in this area are bound to fail. I should be brief in dealing with them as follows. 88.§§36-40 of Pakatower’s skeleton submissions is an example of Pakatower taking the ruling of the Review Decision out of context and reversing its burden of proof. It was Pakatower who adopted the RLB cost in Cheung’s DRC Assessment as well as contended that such cost were only the cost of “bare shell” in its submissions in the Review Application. It was to such submissions that this Tribunal disagreed with in the Review Decision. 89.Pakatower now turned to resort to Cheung’s evidence that the building element represented the costs of the “shell of the structure” as well as this Tribunal’s reference to the fact that RLB tables included the costs of E&M Rooms in §53 of the Review Decision to argue that the RLB tables do not state that the figures only apply to construction of the entire building but explicitly state to cover E&M Rooms, and on such basis, changed to contend that there is no expert evidence that the construction costs of E&M Rooms should differ from the RLB tables, and further, complained that the finding that the approximate average construction costs did not capture only the costs of a “bare shell” was against its own position in the Review Application. 90.It is undesirable for Pakatower to have kept changing its position whenever it finds fit. Such argument neglects the full analysis of the issue in §53-60 of the Review Decision. It was Pakatower who failed to discharge its burden of proof to justify how the RLB cost, which were construction costs basing on prices obtained by competitive tendering for lump sum fixed price contracts for construction of entire buildings and not specifically based on the features or characteristics of the Subject Premises, even though they also cover “E&M rooms” but no evidence that those “E&M Rooms” were equivalent to the Subject Premises, could properly represent the building costs for only the Disputed Premises/ Subject Premises. 91.Pakatower’s another argument in §42 of the Skeleton Submission that “any equivalent replacement of the Subject Premises (which are utility rooms in a multi-stores building) would necessarily be constructed as part of a multi-storey building and cannot be built on a standalone basis without the building’s foundations, lifts, common structural frame, external envelope and other common parts, e.g. a meter room on 8/F cannot be built alone without these common parts” lends no support to Pakatower but rather, fully supports this Tribunal’s view and points to the true fact that DRC is inherently unsuitable and indeed, impossible to be used for valuation of just a particular part of a multi-storey building and in particular, the utility rooms, accommodation and spaces. Plainly, the RLB cost cannot represent the construction cost for the Subject Premises. That is precisely where the inherent deficiencies and fundamental limitation of Cheung’s DRC Assessment lie, which Pakatower cannot resolve. 92.Pakatower complains this Tribunal to have assumed the RLB construction costs include other elements as “foundations, lifts, windows, external rendering and waterproofing etc” without evidence in support is unmeritorious and is a result of its ignorance of the nature and composition of the RLB table. 93.Pakatower’s argument in §43-44 of the Skeleton Submission is without merit. It has confused the basic concepts of construction cost for the entire building as opposed to those for just the Disputed Premises/ Subject Premises, being just some utility rooms, accommodation and spaces owned by an owner. It also ignored the importance of and the differences between the construction costs of different parts of the building and the apportionment of the construction costs of the common areas and common parts of the building to the other parts of the building. It further mixed up with the ownership of the Disputed Premises/ Subject Premises and that of the common areas and common parts of a building. Those were the problems that Cheung’s DRC Assessment had not accounted for and obviously could not address to due to the inherent limitation of DRC. The RLB cost plainly has not catered for the construction cost for just the Disputed Premises/ Subject Premises but the whole building. Pakatower failed to explain how its suggestion of a broad-brush adjustment could be made when the whole valuation basis was wrong. 94.In §45 of the Skeleton Submission, Pakatower argues that Cheung was right in applying the same depreciation rate to all the Disputed Premises/ Subject Premises for both experts had rated the Subject Premises to be in “fair” or “reasonable” condition. Such argument oversimplifies the matter and without taking into account of the fact that depreciation varies according to intrinsic qualities and peculiar nature of each of the Subject Premises as elaborated in §15-18 and §38 of the Review Decision. 95.In §46 of the Skeleton Submission, Pakatower complains that this Tribunal had misunderstood Cheung to have only adopted time adjustment without any other adjustment for assessment of the building element was wrong because the RLB tables, depreciation rates and market yields used by Cheung had been updated. Such argument has again ignored the intrinsic qualities and the peculiar characteristics of each premises, which could not be properly reflected by the general RLB tables, uniformed depreciation rates and market yields. 96.Pakatower’s complaints in §§47-49 of the Skeleton Submissions are some more examples of taking the reasons for the ruling out of context and tend to change its case to serve its purpose. §§33-34 and §§58-59 of the Review Decision should not be read out of context from §§32-39 and §§52-60 of the Review Decision, which elaborated the general principle that the value of the specialized properties are intrinsically linked to their intrinsic qualities and special natures and features, hence, the unfavourable factors of the Subject Premises have taken the Subject Premises out of the normal usage and value of the industrial buildings and accordingly, Cheung’s DRC Assessment which involved comparable or general costs of replacing an industrial building as a whole (but not only the Subject Premises) chosen from normal industrial properties produced inaccurate outcome and was bound to be rejected. 97.Further, Pakatower’s complaints in §§(1) to (5) of §47 of the Skeleton Submissions must fail for the following reasons. First, Pakatower is debarred from making the complaints in §47(1) and (2) for they run counter to Cheung’s evidence that the Subject Premises should be valued according to the Approved Building Plan and his confirmation in court to the effect that his interpretation of the Approved Building Plans was that the Meter Rooms should be regarded as designated “Meter Rooms” in the Approved Building Plans and he actually valued those rooms as “meter rooms” in Cheung’s Report, as also recorded in §15 and §32-33 of the Review Decision. 98.Pakatower’s complaints in §§(3) to (5) of §47 of the Skeleton Submissions are contrary to the factual evidence in trial as recorded in the fact-findings in §16 of the Review Decision that Class D premises were only categorized by Pakatower/ Cheung as the premises that “had or might have been housing articles and/ or the equipment and facilities purportedly for provision of electricity, telephone.” as well as §18(e)-(g) of the Review Decision that “despite Class D Premises were broadly said to be housing systems, equipment or articles arranged or authorized by IO, the exact items contained therein remained unclear. No one could actually tell, still less of concrete evidence for proof, that they did not contain the DMC Facilities, despite repeated inquiries of this Tribunal at trial. The list prepared by IO’s witness was said to be incomplete.” and “Pakatower had never gained access to the Subject Premises. As to Cheung, it was his evidence that his knowledge about the interior of the Subject Premises was limited…..” (emphasis added). 99.After all, in view of the undisputed facts that the Subject Premises borne peculiar and unfavourable features as set out in §§15-18 of the Review Decision as well as the agreed facts that some of the Subject Premises did contain DMC Facilities, which occupied spaces and were operating, Pakatower’s arguments in §§47-49 of the Skeleton Submissions do not advance Pakatower’s position for such peculiar features have distinguished the Subject Premises from the other premises of the Building and the valuation of the Subject Premises could not be based on the general average unit costs of the whole building as in Cheung’s DRC Assessment. 100.Pakatower is not entitled to change its case again in this leave to appeal application by putting forward some more new arguments basing on its unjustified new allegations of “absence of user restriction” and “highest and best use” as advanced in §48 of the Skeleton Submissions, which were neither supported by Cheung’s Report nor properly canvassed at trial. The prejudice caused to IO was serious and should not be allowed. ALLEGATION OF MISUNDERSTANDING 101.As to §2 of Ground 1, Pakatower’s complaints that this Tribunal had misunderstood and failed to take into account its submissions, authorities and Cheung’s evidence are unjustified for the reasons set out above. For completeness sake, it’s specific complaints under (1) to (6) therein will be succinctly dealt with as follows. 102.The complaint under §2(1) of Ground 1 that this Tribunal erred in holding that it is “the well-established principle that DRC is conceptually unsuitable for use as the sole or primary valuation method for valuation, still less of just for a particular part of a multi-storey building’ which appeared to be solely based on the Canadian Bulletin” “when the position in Hong Kong is more properly governed by the Valuation Standards issued by the HKIS and Best Origin Ltd v Commissioner of Rating and Valuation (2012) 15 HKCFAR 816 (“Best Origin”), which clearly recognized the methodology of DRC for non-income producing assets, including portions of a tenement” is a non-starter. DECIDED CASES 103.Pakatower’s complaint that the Canadian Bulletin was a non-binding bulletin in Hong Kong is misconceived. The reference was made to it purely to illustrate the rationale for the general valuation principles on DRC, which also applies in Hong Kong. 104.Suffice it to say that as elaborated in §§72-75 above, none of the cases referred by Pakatower was for DRC valuation of a particular part of a multi-storey building by taking a general average cost of the entire hypothetical building. I shall not repeat my findings in §§40-41 of the Review Decision that this Tribunal had specifically recognized the use of DRC for valuation of the whole building or the whole structure as a specialized plant or an equipment asset as the subject matters in a number of decided cases but not for a particular part of a multi-storey building or multi-units building as elaborated above. 105.Much reliance has been placed by Pakatower upon Best Origin Ltd v Commissioner of Rating and Valuation (2012) 15 HKCFAR 816 to argue that it has been recognize that in evaluating an undertaking, it can be divided into portions directly productive of profits and portions only indirectly productive of profit, and the latter is to be assessed using DRC. Such proposition does not lend any support to Pakatower for that was a case clearly distinguished from the present case. That case concerned the assessment of Government rent payable under Government leases of land which is in course of construction for development or redevelopment. The subject matter was the development site and the construction of the site and the building thereon has yet been completed. It is not a case for valuation of a particular part of a multi-storey building as the present case. 106.Likewise, in Kwong Fat Loong Shipyard v Commissioner of Rating and Valuation, LDRA 5/ 1988 unreported, 9 January 1990, the subject property was divided into four items for valuation. Three of them were valued by DCM and only the slipway, being the whole structure of a special nature as “is principally a non-moveable fixture, analogous to the permanent way of a railway.” was valued by DRC separately and individually from the other parts of the subject property (§5, 15, 16, 22, 23-25, 38). It is not a case of adopting DRC for valuation of a particular part of a multi-storey building equivalent to the Disputed Premises. 107.Rather, that is a case that expressly confirmed the preference for DCM as “the comparable method is to be preferred to the contractor's method. However, the comparable method depends on the availability of adequate comparables and in their absence recourse may have to be made to more subjective and notional based alternatives such as the contractor's method or the profits method.” (§15). Given that was my ruling and fact-finding with valid reasons that Cheung’s DRC Assessment was inherently deficient and fundamental limited and that the Last IO Tenancy Agreement was an adequate comparable of high quality, no recourse could be made to the “more subjective and notional based alteratives” as Cheung’s DRC Assessment. 108.Under §2(2) of Ground 1, Pakatower complains this Tribunal to have misunderstood Mobil Oil Hong Kong Limited v Commissioner of Rating and Valuation [1993] HKDCLR 77 as authority for the proposition that DCM should be preferred over DRC even where the only available comparable was a “previous” tenancy agreement of the subject property but in fact in that case, the comparable was the “prevailing” tenancy of the subject property which was in force as at the valuation date and the Tribunal recognized the danger of relying on a sole comparable and accordingly revised down the DCM valuable by reference to DRC. 109.Such argument does not advance Pakatower’s position any further. In that case, the Tribunal expressly confirmed the general preference for DCM even though the risk of relying on only one comparable was stated. The said risk was further qualified as “unless there is other supporting evidence, it is normally unsatisfactory to rely on one comparable.”[21] Reference should also be made to §§63-67 of the Review Decision for the proper proposition extracted from Mobil Oil, in that not only the danger of relying on a sole comparable and the sole comparable used was an earlier agreement in respect of 36.7% of the subject tenement some 3 years earlier were specifically noted, it was emphasized that that was a case for determination of rateable value. The fact that the Court revised down the DCM valuation by reference to the DRC valuation was made on the peculiar facts of that case and no general principle could be drawn therefrom. 110.In the present case, there was sufficient supporting evidence and valid reasons as elaborated in §§214-221 of the Judgment and §§63-103 of the Review Decision for this Tribunal to find the Last IO Tenancy Agreement was the best evidence before me for assessment of the mesne profits and Cheung’s DRC Assessment was plainly wrong and inapplicable. There was no room for Pakatower’s suggestion of revising down the DCM valuation by reference to DRC valuation. 111.References have also been made by Pakatower to other decided cases including Tai Ping Restaurant Limited v Director of Lands (LDLR1/2013, unreported, 8 December 2014) to argue that three comparables were used for DCM as well as Nelson Plant Hire Ltd v Dawn Bunyan (VO) [2022] UKUT 309 (LC) to argue that while a single tenancy was adopted as the sole comparable for DCM, a cross-check with DRC would usually be conducted. 112.For the same reasons aforesaid, I fail to see how the many decided cases cited by Pakatower could lend any support to Pakatower. None of them are cases for valuation of a particular part of a multi-storey building equivalent to the Disputed Premises. Instead, some of those cases actually adopted a single tenancy as the sole comparable for DCM. In fact, the risk of adopting a single comparable for DCM valuation and a cross-check with alternative method was promoted in those cases was specifically noted in the Review Decision as highlighted in §§65-69 of the Review Decision. 113.The problem in the present case is that due to the inherent deficiency and fundamental limitation of Cheung’s DRC Assessment, there was no room for any application of Cheung’s DRC Assessment, be that as a part of the valuation, a cross-check or an overall adjustment of the DCM Valuation. 114.By reason of matters set out above, Pakatower’s argument in §64 of its skeleton submissions that none of the authorities relied upon by this Tribunal concerns similar facts of the present case, being the assessment of market rent by reference to a previous tenancy of the same premises between the same parties, with only time adjustment applied over a valuation period exceeding 10 years and this Tribunal failed to address the sole comparable concern identified by Cheung is unmeritorious and of no assistance to Pakatower. 115.Reference has also been made by Pakatower to a Canadian case of Saskatchewan Assessment Management Agency and Temple Gardens Mineral Spa Inc v Moose Jaw (city), 2013 SKMB 010 and an English case of Bunyan (Valuation Officer) v Acenden Ltd [2023] UKUT 17 (LC) to argue that DRC could be applied to the ancillary utility areas of a multi-storey/ unit building. However, such contentions are misconceived. 116.In the former case, DRC was used for valuation of the parkade, spa and pool facilities of a hotel complex individually and separately from the main portions of the complex which were valued using an income approach. In the latter case, it only suggested that if a hereditament comprised an office and industrial complex for areo engineering, and some unique facility was constructed in the grounds of the complex, it might be appropriate to value the offices and industrial elements by DCM and to value the bespoke unique facility using DRC. 117.Such two cases do not assist Pakatower but rather, support §41 of the Review Decision that “The truth is neither Pakatower nor Cheung has been able to come up with any decided cases or authorities that DRC has been applied for assessment of just a particular part of a multi-storey building or multi-units building, other than for the whole building or the whole structure as a specialized plant or an equipment asset, ie oil plant, machinery plant, power station.”. They fall squarely into the situation where DRC has been applied for assessment for “the whole structure as a specialized plant or an equipment asset” separately and individually. Kwong Fat Loong Shipyard case aforesaid is another example in that the subject matter was divided into four items. Only the slipway, being the whole structure of a special nature, was valued by DRC individually and separately from the other three items (which were valued by DCM). It is completely different from Cheung’s DRC Assessment in that the Subject Premises were valued by averaging the costs of the entire building. 118.In gist, no matter how Pakatower tried to refer to the decided cases, Cheung’s Report or some valuation principles in support of its case or to challenge the reasons for the Judgment or Review Decision, it in any event failed to discharge its burden of proof of Cheung’s DRC Assessment was the current cost of replacing the Disputed Premises/ Subject Premises (instead of the whole building) with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimisation” as defined in the HKIS Standards and “A property market yield is adopted to decaptialise the effective capital value to arrive at the rental value”, Cheung’s DRC assessment was in fact not a true assessment as such because it was not actually an estimate of the cost of replacing the Subject Premises with their equivalent assets (§35). 119.The problem was obvious. That was the inherent deficiency and fundamental limitation of Cheung’s DRC Assessment. Notwithstanding that a large amount of legal authorities and decided cases have been cited, Pakatower still failed to refer to any case that DRC had been found to be suitable valuation method for just a particular part of a multi-storey building or a mutli-units building. ACCOMMODATION VALUE 120.Under §2(3) of Ground 1, Pakatower’s complaints that this Tribunal had ignored several matters when criticizing Cheung’s use of the accommodation value approach are unjustified for the reasons set out in §§76-86 above. I should be brief in dealing with its further arguments under this ground. 121.The complaint that this Tribunal had failed to consider the approach of adopting accommodation value is well-recognized as a legitimate basis for analyzing land comparables is undermined by §45 of the Review Decision, in that this Tribunal specifically pointed out that such approach has been recognized just as a rule-of-thumb calculation for simplifying comparisons between different sites, just that it cannot replace detailed analysis of the potential of a site. 122.The complaint that the observation in pp. 48-49 of the Valuation of Development Land as summarized in footnote [3] of the Review Decision concerned residential sites rather than industrial sites is a misread of footnote [3]. Reading footnote [3] in its proper context by referring to §45 of the Review Decision will find that footnote [3] was added purely to illustrate the general principle that accommodation value approach does not cater for varying site areas and the ratio of saleable floor space to gross floor area, for the greater the ratio between saleable floor space and gross floor area, the higher will be the accommodation value. It centered on the illustration of the theory but not whether it was residential or industrial site. 123.As to the complaint that any issue concerning a particular comparable was a matter of weight or adjustment and this Tribunal had misdirected itself by treating disagreement with adjustments to particular comparable as a basis for rejecting the accommodation value methodology as a whole, such argument is unconvincing and without giving due regards to §42-51 of the Review Decision. The problem of Cheung’s treatment to his three comparable for the Land Element was not merely a matter of weight or extent for adjustment but his failure to apply adequate adjustment other than time adjustment. Further, this failure was just one of the many factors contributing to the rejection of Cheung’s accommodation value approach as explained in §§44-51 of the Review Decision and §§76-86 above. 124.Under §2(4) of Ground 1, Pakatower complains that this Tribunal’s reliance on Practice Note for the proposition that certain utility rooms are usually disregarded in the calculation of gross floor area was unsupported by any finding as to the actual accountable and non-accountable gross floor area of the Building, as to how the total of these GFA compares to the permissible GFA of the Building, or by any analysis of whether and how such a general guideline applied to the Building. Such complaint has ignored the fact that it was Pakatower that borne the burden of proof and that the Practice Note is applicable to the buildings completed in 1982 (see Footnote [5] of the Review Decision). Not only that Pakatower has not adduced any evidence for proof of Cheung’s consideration of the Practice Note in his accomodation value approach for conducting his DRC valuation in Cheung’s Report, but also that Cheung’s confirmation under cross-examination that he indeed was not sure whether the utility rooms inside the enbloc building were normally not calculated within the GFA as elaborated in §78 above. Pakatower’s complaint is an attempt to put the cart before the horse. CROSS-CHECK 125.Under §2(5) of Ground 1, Pakatower complains that this Tribunal’s rejection of Cheung’s cross-check exercise with four other premises in the same Building as “comparing apples and oranges” was a misapprehension of the purpose of the exercise which was to test the DRC-derived unit cost against observable market reality within the Building. In addition, further arguments have been made in §§50-54 of the skeleton submissions that this Tribunal had conflated the two cross-check exercises in Cheung’s Report, one being the unit price of three other sale transactions in the Building to test the reasonableness of the unit costs as calculated in DRC and the other was the comparison between the RVD yield adopted in DRC and the yield of four other sales transactions in the Building to test the reasonableness of the yield adopted in DRC. 126.Such arguments are illusory having an effect of shifting the focus from the crux of the ruling. The crux of the ruling was that all of Cheung’s selection of transactions of the premises of the Building, being a space underneath staircase (Space B on G/F), two factory units and the Roof Unit for comparison with the Subject Premises (not including the Two Staircases) were unreliable for they were not like-to-like comparisons due to the fact that all those premises were sharply different from the Subject Premises in nature, usage, location, size, layout, configuration, accessibility, functions and intrinsic qualities as summarized in §61 of the Review Decision. The ruling focused on the inappropriateness of all such comparables for comparisons which rendered all of Cheung’s cross-check analysis in these areas unsustainable. Thus considered, Pakatower’s present arguments are misplaced. 127.Plainly, the fact that Space B was a part of the “Other” Unit could not make it a suitable comparable for the Subject Premises bearing in mind that it was a space on the ground floor of a more prominent location, layout and size which had all along been used as the management office of the Building (as opposed to the use of the Subject Premises for housing facilities or storing miscellaneous items, etc) and generated much higher rent in the past. It could not be regarded as suitable comparable to the Subject Premises. Commonsense dictates that industrial workshops and a space fit for commercial use were vastly different from the Subject Premises which could hardly be a suitable comparable for a like-to-like cross-check exercise. 128.Pakatower further argues that this Tribunal was bound by the fact-finding that Space B and Roof Unit had commanded meaningful rents and Ng was criticized to have failed to conduct any cross-check exercise. Such argument is futile. It is difficult to see how purely a rental-generated premises or the other expert’s omission would have made Space B, the Roof Unit and the industrial workshops suitable comparables for the Subject Premises. PAKATOWER’S APPLICATION APPROACH IN REVIEW APPLICATION 129.Under §2(6) of Ground 1, Pakatower complains this Tribunal to have erred in rejecting its Review Application as trying to rewrite Cheung’s Report, simply because they were not on all fours with Cheung’s opinion and in doing so, this Tribunal had misunderstood Pakatower’s submissions, which were directed at the question of what was the proper approach to be adopted in terms of valuation, following the Tribunal’s rejection in the Judgment of both parties’ valuation, including Cheung’s DCM analysis, and its adoption of the Last IO Tenancy Agreement as the starting point. It was on such basis that at the review stage, it sought to overturn the Tribunal’s rejection of Cheung’s DRC Assessment, and submitted that, instead of rejecting the totality of Cheung’s valuation, Cheung’s DRC Assessment should still be adopted. 130.Such argument is unacceptable for reasons set out in §§46-52 above. In gist, such argument does not sit well with Pakatower’s Review Claim and its submissions in the Review Application as elaborated in §§15-16 above. Second, Pakatower’s denial of its attempts to re-write Cheung’s Report is bound to be rejected for the reasons set out in §§6-13, 15-16, 18-20, 25 and 27 above. Third, the MP Review Application was in substance an attempt to have a second bite of the cherry which must not be allowed for the reasons set out in §§34-43 above. 131.Fourth, Cheung’s evidence was rejected due to various reasons as set out in the Judgment and the Review Decision, inter alia, his adoption of DRC was rejected due to the inherent deficiency and fundamental limitation of Cheung’s DRC Assessment whereas his adoption of DCM and the Last IO Tenancy Agreement was rejected not because of any inherent deficiency or fundamental limitation of the methodology of DCM or the quality of the Last IO Tenancy Agreement but due to Cheung’s mistake of excluding Group 2 Premises from the Last IO Tenancy Agreement. 132.Given the basis upon which the DRC, DCM and the Last IO Tenancy Agreement were rejected was different, the former went to the fundamental root of the methodology whereas the latter was just caused by the application of them to the mistaken facts. Thus analyzed, it is wrong for Pakatower to ask for removal of DCM and the Last IO Tenancy Agreement leaving the inherently problematic DRC to be the sole assessment method and further, expanding it to cover all of the Disputed Premises. 133.Pakatower’s complaint that the rejection of Cheung’s DRC Assessment was in lack of evidence in support and without identifying what evidence was needed and how such evidence could be gathered is an attempt to reverse its burden of proof and bound to fail. THE NON-CASH ELEMENT 134.Under §1(5) of Ground 1, Pakatower complains that “the Tribunal raised a new reason in §72 of the Review Decision that the “Non-Cash Element” of the Last IO Tenancy Agreement could and should be taken into account in the consideration of whether the Last IO Tenancy Agreement reflected market rent, despite that there was no factual or expert evidence on the quantum of such element Non-Cash Element”. Such complaint is misleading and contrary to the fact-finding in the Judgment that the Non-Cash Element formed part and parcel of the consideration of the Last IO Tenancy Agreement and accordingly, had actually been taken into account for valuation and finally, adopted as part of the mense profits together with the Cash Element: 135.The fact that there was no factual or expert evidence on the quantum of the Non-Cash Element lends no support to Pakatower’s argument bearing in mind that there is no trite law that rental consideration and/ or mense profits must be quantified by exact figures. The Non-Cash Element has been adopted by the parties to form part and parcel of the consideration of the tenancy agreements between the parties for decades. Their intentions and the arrangements for such term were well-reflected in Clause 3B. Such term had been carried out for more than a decade and Pakatower admitted that it had all along enjoyed such benefits and had never been asked to make those payments until the relationship between the parties deteriorated and the dispute over the counterclaim surfaced. 136.Further, Pakatower’s another argument that there was no actual evidence for proof of the quantum under Clause 3B since 1997 until now does not take Pakatower’s case any further. In view of the fact that the Building is an industrial building with its occupation permit and approved building plan issued in 1982, that it contains nine floors and a roof and filled with workshops, factory units, loading and unloading bays, car parks, utilities rooms and utilities, that the DMC contains express terms obliging Pakatower to pay its share of contribution to the management fees and other payments and expenses “of the Building” according to its shares of contribution allocated to the Disputed Premises under Clause 46(4), 48(a) and the Third Schedule of the DMC (§8 & 225 of the Judgment), it is an affront to commonsense that the payments under Clause 3B were not significant and varied from time to time. GROUND 2 137.Ground 2 of the Draft Notice of Appeal that “in rejecting the Applicant’s submission that the Last IO Tenancy Agreement was not a good comparable and in deciding to use the Last IO Tenancy Agreement as a sole comparable (Review Decision at §§63-76, 82-91), the Tribunal failed to take into account and/ or misunderstood the following matters/ evidence” are without merits for the following reasons. LAST IO TENANCY AGREEMENT 138.First of all, such ground is unmeritorious for Pakatower failed to justify how and why it was entitled to completely change its original case and its Original Claim from basing the Last IO Tenancy Agreement as comparable for valuation to asserting that the “Last IO Tenancy Agreement was not a good comparable” after trial and in the Review Application and further, complains the Tribunal to have rejected such unjustified change of position. 139.This Tribunal’s adoption of the Last IO Tenancy Agreement was a fact-finding exercise basing on an assessment of all the relevant evidence before me and the reasons of such finding were set out in §§214-221 of the Judgment and §§63-103 of the Review Decision. Merely disagreement with fact-finding does not constitute an error of law for appeal. 140.Pakatower’s complaint in §3(1) of Ground 2 is a misinterpretation of §65 of the Review Decision by mixing up and reading in more words to the said paragraph. The relevant part of §65 was that “It cannot be denied that Cheung expressly confirmed that DCM should be preferred if suitable comparable is available and that DRC should only be used where no recent useful transactions for reference is available. Such position is supported by Mobil Oil Hong Kong Limited v Commissioner of Rating and Valuation [1993] HKDCLR 77 (“Mobil Case”) in that DCM was preferred over DRC even where the only available comparable was a previous tenancy of the subject property being valued, so long as that tenancy was adequate comparable.” (emphasis added) 141.Properly interpreted, it was in clear terms that Cheung’s position was that DCM should be preferred if suitable comparable is available. The Mobil Case was then cited to support such position. It was only in discussing the ruling of the Mobil Case that this Tribunal further pointed out that on the peculiar facts of that case, the Court found that DCM was still preferred over DRC “even where” the only comparable was a previous tenancy of the subject property providing that “so long as that tenancy was adequate comparable”. Pakatower’s present complaint that this Tribunal had misunderstood Cheung to have opined that DCM should be preferred even if there was only a single suitable comparable available by mixing up Cheung’s position and the ruling of the Mobil Case is unwarranted. 142.Such complaint also neglects §19 of the Review Decision, in that Cheung’s opinion of “In practice, market approach is generally preferred if adequate suitable comparable exist.” (emphasis added) was specifically cited. What actually stated in the Review Decision was the real fact that Cheung found the Last IO Tenancy Agreement a suitable comparable and actually adopted it as the sole comparable for DCM, notwithstanding that he then took an average of DCM and DRC for valuation of Group 3 Premises. 143.After all, even if this Tribunal takes Pakatower’s own stance to the highest that “Cheung’s evidence was merely that DCM is generally preferred if adequate suitable comparables exist.” as set out in §61 of the skeleton submissions, the fact of this case duly satisfied this requirement for reasons set out in §§214-221 of the Judgment and §§63-103 of the Review Decision. NG’s EVIDENCE 144.In §3(2) of Ground 2, Pakatower argues that “Ng was equally of the view that the rental of the Last IO Tenancy Agreement should not be taken as a comparable.”. Such argument is a non-starter for it kept silence on the reasons given by Ng was that “I consider the rental of 2014 Tenancy Agreement [Last IO Tenancy Agreement] does not reflect a market rent as stated in Para. 30 of Mr. Lee’s Statement, the Respondent entered the agreement not under ‘knowledgeably’ condition. This violate the definition of Market Rent and the rental should not be taken as a comparable.”. 145.Besides, Pakatower also ignored this Tribunal’s analysis on Ng’s explanation in §192 and §199 of the Judgment. In all, she was under the misconception (as told by IO) that the Disputed Premises were common parts and that IO had been misled into believing that it had to rent the Disputed Premises from Pakatower for its use and occupation of those premises that made her believe the Last IO Tenancy Agreement to be an unsuitable comparable (§192 and §199 of the Judgment). 146.It is noteworthy that referring to the Land Compensation and Valuation Law in Hong Kong and some decided cases[22], Ng also reiterated that “Market Approach is considered as the best approach in valuation” “the comparative method is universally regarded as the best method valuation.” and she considered DRC as not appropriate. ERROR IN INCREMENT 147.Pakatower’s complaint in §3(3) (a) of Ground 2 that this Tribunal had erred in finding that there had been gradual rent increase during the period between 1 May 1997 to 30 April 2013 in §§12, 70-72 of the Review Decision does not advance Pakatower’s position for the following reasons:
NON-CASH BENEFITS 148.Pakatower’s complaint in §3(3) (b) of Ground 2 that this Tribunal had erred in relying on the “Non-Cash Element” of the Last IO Tenancy Agreement in §§72, 90-91 of the Review Decision is unfounded due to the following reasons:-
149.For the reasons aforesaid, Pakatower’s complaints under §3(3) (b)(ii) of Ground 2 that there was no evidence at trial on the total monetary value or the variation of such expenses under Clause 3B and that such expenses “would have been varied year by year” or were “significant” in §§72, 90 of the Review Decision were not open to the Tribunal are unjustified. Regards should also be given to Pakatower’s own admission at trial that it was duty-bound to pay its share of contribution to the management fees and other payments and expenses “of the Building” according to its shares of contribution allocated to the Disputed Premises under Clause 46(4), 48(a) and the Third Schedule of the DMC (§8 & §225 of the Judgment), that the Building was a ninth-floor industrial building and a roof unit with the Occupation Permit issued in 1982 (§8 & §225 of the Judgment), that there were resolutions of occasional repair works of the Building at substantial costs (§224(a) & (c)) of the Judgment, that commonsense dictates that the costs and expenses incurred under Clause 46(4) of the DMC for such an industrial building of such peculiar features could not be minimal or unchanged from year to year. 150.In further consideration of the fact that the Non-Cash Element was part of the rental consideration of the Last IO Tenancy Agreement (not to mention that both parties had adopted such a contractual term consistently and continuously in their previous tenancy agreements throughout the years), that the Non-Cash Element was in monetary value, significant but not minimal and varied according to the reality under Clause 46(4) of the DMC from time to time, and that Cheung had failed to take into account of the implication and significance of the Non-Cash Element in his analysis, Pakatower’s complaints are devoid of merit. 151.For reasons aforesaid, Pakatower’s argument under §3(3) (b)(iii) of Ground 2 that it was internally inconsistent for the Tribunal to rely on the alleged variability of the “Non-Cash Element” to dismiss Cheung’s expert evidence, but assess mesne profits solely by reference to the cash contract rent under Clause 3A without quantifying the Non-Cash Element and without considering whether the total of the Cash Element and the Non-Cash Element aligned with the market variation during the period of wrongful occupation is based on a misinterpretation of the nature and implication of the Non-Cash Element and is pointless. I should not repeat my reasons for rejection of Cheung’s opinion and for adoption of both the Cash Element and the Non-Cash Element of the Last IO Tenancy Agreement as the mesne profits as set out in my analysis in §§205-221 of the Judgment and §§30-103 of the Review Decision. 152.Pakatower’s complaint under §3(4) of Ground 2 that this Tribunal erred in failing to address the sole comparable concern identified by the experts, in that none of the authorities relied upon by the Tribunal concerns the assessment of market rent by reference to a previous tenancy of the same premises between essentially the same parties, with only time adjustment applied over a valuation period exceeding 10 years and that the application of just a time adjustment is misconceived. Properly interpreted, the legal principle drawn from the authorities set out in §§65-69 of the Review Decision was that while it is not common for valuation to rely on one comparable for DCM, the Court has always been open and ready to adopt one single comparable for DCM assessment so long as the comparable is of good quality. The crux is the quality of the comparable should be good. The proof of it does not depend on whether there is a decided case of exactly the same set of facts. It has been recognized that the single comparable which is highly resemble to the subject matter for valuation takes on more importance. 153.The time adjustment on the Cash Element according to the Rental Indicies should not attract criticism bearing in mind that such adjustment was expressly recognized and in fact adopted by Cheung. DEDUCTION OF THE AGREED MESNE PROFITS 154.Pakatower’s complaint under §3(5) of Ground 2 that this Tribunal erred in treating the Last IO Tenancy Agreement as a comparable which “covered exactly the Subject Premises” with the same bundles of facilities in §26 and 69 of the Review Decision but the Last IO Tenancy Agreement in fact covered the Disputed Premises together with Unit 13 Staircase Space is misleading and without giving due regard to §§12, 13, 23, 27 and 70 of the Review Decision in that the fact that the Last IO Tenancy Agreement covered the Disputed Premises together with Unit 13 Staircase Space has been set out at the outset and the analysis in §§26 and 69 of the Review Decision were confined to specifically deal with the assessment of the mesne profits of the Subject Premises as sought by Pakatower in the Review Application. 155.Further, the analysis in §26 of the Review Decision, which focused on the analysis of the Disputed Premises, was followed and supplemented by §27 to deal with the impact of Unit 13 Staircase Space under the Last IO Tenancy Agreement and the assessment of the mesne profit by taking into account such factor. Thus viewed, there is no room giving rise to such complaint. 156.Pakatower further complained that this Tribunal was arbitrary in deducting HK$638 (being the agreed mesne profits for Unit 13 Staircase Space) from the Cash Element of HK$3,600 and treated the remainder as the rental value of the Disputed Premises, without analysis of the deduction in the context of the contractual rent history. Such complaint is baseless for the deduction exercise was conducted basing on the agreed fact of the two parties, which was the best evidence before me. 157.Not only that Pakatower was bound by its own agreed facts, but also that it was unable to challenge its own agreed fact by referring to any concrete evidence to show what actual contractual rent was attributable to Unit 13 Staircase Space in trial. Its present complaint that this Tribunal has failed to regard to the history of the contract rent where Unit 13 Staircase Space was only leased at a monthly rent of HK$100 is a mere speculation bearing in mind that such rent was valid up to 2008 only and no meaningful reference can be drawn from such fact happened for seven years ago, not to mention that there had been substantial increment of the monthly cash payment from 1 May 2013 to 30 April 2015. 158.It is noteworthy that the deduction solely rested on the agreed mesne profits for Unit 13 Staircase Space agreed by the parties but not Cheung’s valuation of the staircase space as Pakatower suggested. In any event, even if Pakatower argues that such agreed mesne profits were derived from Cheung’s valuation, it was an agreement that bound the parties and Cheung’s valuation basis of such item was DCM (but not DRC), which was made individually and separately from his mistaken valuation of Group 2 and Group 3 Premises. Thus considered, the deduction was made on valid basis. 159.Pakatower’s complaint under §3(6) of Ground 2 that this Tribunal erred in concluding that the Last IO Tenancy Agreement was the best comparable in §26 and §69 of the Review Decision, without due consideration to the general principle that rents for long-standing tenants may not be comparables and require further analysis/ testing against market evidence and consideration of its contractual context before being treated as determinative is unsubstantiated with valid proof and without due consideration of the reasoning giving in §§192-221 of the Judgment and §§63-103 of the Review Decision. 160.Besides, Pakatower neglected the analysis that the rental consideration for the Disputed Premises had been reviewed and adjusted twice by the parties with significant increment in the monthly cash payments in the two years immediately preceding the Expiry Date. After all, Pakatower failed to refer to any reliable “market evidence” or solid “contractual context” which were available at trial that merited further analysis and testing. 161.Under §3(7) of Ground 2, Pakatower complains that this Tribunal had, in §§77-81 of the Review Decision, misunderstood its submission at the review stage as a “new[factual] allegation” contradicting its pleaded case is unfounded. It now denies that it had sought to argue that the Tribunal should have found that the Last IO Tenancy Agreement did not cover Group 2 Premise and argues that it only put forward the argument that “given that there was dispute at trial over the scope of the Disputed Premises (which form the subject of the Last IO Tenancy Agreement) (§§41(2), 83, 206(b) of the Original Decision; §§15(#16), 21(II)) of the Review Decision), the reliability of the Last IO Tenancy as a comparable for valuation purpose was in doubt, since a transaction cannot serve as a reliable comparable where the scope of the premises comprised in it is itself uncertain or request judicial determination”. 162.Such argument is indeed, another attempt to change its position and slip in new evidence and argument through the back door. First, such argument is inconsistent with its submissions in the Review Application. Second, it is also contrary to its pleaded case, stated case and skeleton submissions in trial. Third, it was debarred from changing its position under the guise of “there was dispute at trial over the scope of the Disputed Premises made by its expert report”. 163.In fact, there was no dispute at trial over the scope of the Disputed Premises of the Last IO Tenancy Agreement between the two parties. The scope had already been mutually agreed and reduced into the “Agreed List of Issues” in writing and the trial was proceeded on such basis as elaborated in §§6-13, 15-16, 18-20, 25, 27, 30-33 and 41-43 above. It was merely Cheung who had made an unilateral mistake of excluding Group 2 Premises from the Last IO Tenancy Agreement. Pakatower was prohibited from taking advantage of the mistake made unilaterally by its own expert and on such basis, not only to shifting the blame but also inflating and misdirecting its own expert’s unilateral mistake to be a common dispute, and further, seeks to slip in a new case and new claim for getting the second bite of the cherry. OTHER GROUNDS 164.In this application, this Tribunal has considered each and every contention and argument put forward by Pakatower. The fact that I have not dealt with each of them specifically in this Decision should not be interpreted as giving no regard to them. Suffice it to say that all of them are without merit and I should not further burden this lengthy decision with further details on those unmeritorious arguments. In all, the question of assessment of mesne profits for the Disputed Premsies/ Subject Premises is fact-sensitive and does not raise any question of general importance or principle warranting the intervention of the Court of Appeal. 165.Looking at all the matters in the round, this Tribunal draws the conclusion that neither of the grounds of the present application advanced by Pakatower discloses any arguable error of law, still less of having any reasonable prospect of success. All of its arguments are without merit. There is no other reason in the intersts of justice why leave to appeal should be granted. I refuse to grant leave to appeal against the Dismissal Order and the Review Costs Order and the present Summons should be dismissed accordingly. DISPOSITION 166.Having considered all the submissions of both parties and all the relevant evidence and documents before me, I order that Pakatower’s Summons for leave to appeal be dismissed. COSTS 167.Taking into account the outcome of this application and all the relevant circumstances, there is no reason why costs should not follow the event in this application. 168.I make a Costs Order Nisi that: -
Mr Jeremy Kwong, instructed by Holman Fenwick Willan, for the Applicant Mr Billy Poon, instructed by K.M. Tang & Co, for the Respondent [2] Cheung’s report was finalized after the joint statement compiled by both experts dated 17 October 2022. [4] as defined in §15(a) of the Judgment and adopted in §1 of the Review Decision. That is, “the spaces underneath all staircases (other than the staircase situate beside Unit 13 as shown on the Ground Floor Plan annexed to the said Deed of Mutual Covenant), the spaces above the entrance halls on the Ground Floor, the Transformer Room, the Switch Room, the Meter Rooms, the Main Distribution Frame Room, the Fire Prevention Room and other utility room or accommodation (if any) on the Ground Floor, the Switch Rooms, Meter Rooms and other utility rooms or accommodation (if any) on the 1st Floor to 8th Floor.” [5] a Chinese agreement dated 24 April 2014 signed between the two parties on 24 April 2014 in that Pakatower leased the Disputed Premises and the Unit 13 Staircase Space to IO for one year, from 1 May 2014 to 30 April 2015: §27 of the Judgment. [6] §§7.2.3-7.2.6, 8-9 of Cheung’s Report [7] being the Last IO Tenancy Agreement [8] being the Disputed Premises [9] an abbreviation of the “rental indices of the Private Flatted Factories – Rental and Price Indices” published by the Rating and Valuation Department: §2(A)(3)(a) of the Review Decision. [10] as defined in §3(1) of the Review Decision to be “all premises of the Disputed Premises save and except the Two Staircase Spaces, that is, to cover all of the Group 2 Premises and the Group 3 Premises”. The Two Staircase Spaces being Unit 6 Staircase Space and Unit 10 Staircase Space. [11] The Two Staircase Spaces were the only premises that IO had reiterated its agreement that Pakatower was entitled to exclusive possession of them at trial. [12] same as the “Disputed Premises” as defined in §15(a) of the Judgment which was also adopted in the Review Decision. [13] being the Last IO Tenancy Agreement [14] being the Disputed Premises [15] whereas some of them housing electricity, telephone and internet service by service providers engaged by IO and/or individual owners. [16] [PP-16-E] September 1995 revised January 2007 [17] by Philip James Roberts Hong Kong University Press 3ed. 1981 [18] Gordon N. Cruden & Liza Jane Cruden, 4th Ed. 2017 at [23.98-23.100] [19] On 2 June 2025, Pakatower’s skeleton submissions: a total of 96 paragraphs with other sub-paragraphs and 19 legal authorities and valuation authorities.
[20] in the morning session of 23 January 2024 [21] p. 106 lines 1-20 [22] page 9 of the Joint Statement and section 6.3 of Ng‘s report dated 14 November 2022 |
Cases cited in this judgment
交通城大廈業主立案法團 v. Pakatower Ltd
中紀投資有限公司 v. 青山道國際工業大廈業主立案法團 and Others
Capital Lake Property Ltd and Others v. Yau Luen Stevedoring Transportation Packers Company Ltd
Further hearings and rulings under LDBM 75/2019