Sonic Success Ltd v. Leung Siu Hei and Ngai Ying Sun and Others
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LDCS 17000/2022 [2026] HKLdT 46 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO 17000 OF 2022 ________________________
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_____________________ JUDGMENT _____________________ 1.This is the applicant’s application for a compulsory sale order issued on 26 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 2 of Section H of Inland Lot No 1460 (“the Lot”) on which a 13-storey building known as Green View Mansion (“the Building”) with a postal address of Nos 55 & 57 Wong Nai Chung Road, Hong Kong is erected. 2.As per the Occupation Permit (“the Occupation Permit”) dated 28 July 1967, the Building comprises two shops on the ground floor (“G/F”) abutting Wong Nai Chung Road and three residential units, being Flat A, Flat B and Flat C, on each of the upper floors. Flat A and Flat B on each upper floor faces Wong Nai Chung Road while Flat C on each floor faces Ventris Road, which runs in parallel to Wong Nai Chung Road in the rear of the Building. The residential units are served by two lifts and two common staircases. 3.By a Deed of Mutual Covenant dated 20 March 1968,
4.Mr Mok Yeuk Chi (“Mr Mok”), counsel for the applicant, summarized in his opening submissions that as at the commencement of the trial on 6 January 2025, the applicant owned all the units (and the allotted undivided shares) save those owned by the following respondents:
5.Whilst R3 to R6 act in person, R1 and R2 are legally represented as follows:
6.For the purpose of the present proceedings, the applicant and R1 have produced the following expert reports:
7.The applicant called one factual witness, Mr C K Yu (“Mr Yu”). Mr Yu is the manager of the applicant. He has made a witness statement dated 30 June 2023 and two supplemental witness statements dated 23 December 2024 and 7 January 2025 respectively. The second supplemental witness statement was made in the course of the trial and admitted with the leave of the Tribunal. 8.R3, R4, R5 and R6 filed their respective witness statements in December 2023. With leave of the Tribunal, R3, R4 and R5 further filed their respective supplemental witness statements on 13 January 2025 largely in reply to Mr Yu’s second supplemental witness statement. 9.According to Mr Ho Kwong Hon of R3, the Building had undergone two renovations in 2002 and 2015 respectively when he was the Chairman of the Building’s incorporated owners. The documents in respect of the renovation in 2015 were only disclosed at the beginning of the trial. 10.The documents show that the Building had undergone a major renovation in 2015/2016 at a cost of $6,800,000 under the supervision of Fotton Ela Architects Ltd. The renovation works included:[1]
11.A Certificate of Making Good Defects was issued by Fotton Ela Architects Ltd on 20 January 2017, certifying that the contractor had completed the one-year defect liability period.[2] 12.The above evidence shows that renovation works as described were undertaken in 2015/2016. There is no reason to doubt the evidence, which is accepted. 13.We should state for the record that R1 wishes to rely on a witness statement made by 胡德森, a watchman of the Building, on 10 January 2025 (ie in the course of the trial) as hearsay evidence. According to the statement, a representative of the applicant had taken away several boxes of documents from the storage cabinet of the Building, which should include documents relating to the renovation in 2014. We accept that the hearsay evidence is admissible. However, we shall give no weight to its content as 胡德森 was eventually not called as a witness and he was therefore not subject to any cross-examination. We consider that it is not safe to give any weight to the factual allegation which was made for the first time after the commencement of the trial. WHETHER THE APPLICANT IS ENTITLED TO MAKE THE APPLICATION 14.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. 15.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. 16.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 buildings 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). 17.As mentioned above, the Occupation Permit was issued on 28 July 1967, ie not less than 50 years before the date of the Application. The Notice is therefore applicable and the threshold percentage should be 80%. 18.The applicant acquired ownership of its units all on 23 February 2022. At the time of the filing of the Application on 26 August 2022, therefore, the applicant owned 83.33% 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. 19.Mr Chan and Mr Kwan set out their agreement and disputes on the EUV assessment of the various units of the Building in their 1st joint statement dated 29 November 2023. 20.They agreed on the EUV of all the residential units and the portions of the main roof but could not reach agreement on the EUV of the two shops on G/F. 21.When determining the EUV of a shop, ancillary areas of the shop are usually valued at a fraction of the unit value of the main shop area (ie saleable area). Mr Chan and Mr Kwan agreed on the size of the areas of the two shops, the covered yard at the rear and the various ancillary areas (see table below). Whereas they agreed on the converted or effective area of Shop A, they disagreed on the converted or effective area of Shop B because they could not agree on the conversion factor of the covered yard at the rear as well as the conversion factors to be applied to certain unauthorized structures:[3]
22.By reference to the set of building plans with reference no 2/3299/63 approved by the Building Authority from 1965 to 1967 (“the Approved Building Plans”), there is a covered yard at the rear portion of Shop B separated however from the main portion by an open yard which is now covered. 23.As stated in para 3 above, this covered yard has been allotted 1/84 undivided share of the Lot and according to the transaction history, it had been purchased and sold together with Shop B. Also, the covered yard and Shop B had been leased together several times. We agree with Mr Chan that this covered yard should be considered part of the shop and therefore prefer his conversion factor of ½ to Mr Kwan’s ¼. Open Yard Covered by Unauthorized Structure 24.The open yard that connects Shop B and the rear covered yard has been covered without the approval of the Building Authority. 25.Mr Chan stated in his Rebuttal Report dated 19 October 2023 at para 3.2.5 as follows:[4]
26.We agree with Mr Chan’s observation and also agree with him that the open yard has been so converted or covered for a long period without any enforcement actions by the Building Authority. 27.While we agree that the enforcement risk is low especially with the benefit of hindsight, we prefer a conversion factor of ¼ instead of ½ proposed by Mr Chan or 1/6 proposed by Mr Kwan. 28.Further beyond the covered yard aforementioned, there is an extension onto an area marked as “Unexcavated” on the Approved Building Plans at the rear. This “Unexcavated” area exists because of the sloping topography of the site but, as explained by Mr C M Wong, the word “Unexcavated” is misleading because excavation had to be carried out first during the construction process and then had to be backfilled later when the construction was completed. 29.In the present case, Mr C M Wong suggested that the excavation might have been carried out after the issuance of the Occupation Permit because the unauthorized extension does not make use of the whole of the “Unexcavated” area; instead, the unauthorized extension comprises a relatively small rectangular portion beyond the covered yard. 30.In our opinion, it is unlikely to be the case. As explained by Mr Chan in his Rebuttal Report dated 19 October 2023 at para 3.2.18[5], the unauthorized extension is partly built under the structural slabs of the 1/F. The volume of soil that had to be excavated if it was carried out after the Building was built would create substantial disturbance or annoyance to the occupiers who would have complained to the relevant authorities. 31.However, whether Mr C M Wong’s opinion is true or otherwise is immaterial. According to the floor plan attached to the tenancy agreement in respect of Shop B dated 5 May 2001 vide memorial no UB8395650, the unauthorized extension was already marked on the floor plan and leased to the tenant. Obviously, the tenant would have paid something for the use of this unauthorized extension and at the least this unauthorized extension has existed for more than 24 years since 2001 without enforcement by the Building Authority. 32.In view of the above, we prefer a conversion factor of ¼ as proposed by Mr Chan. Mr Kwan referred however to the mudslide that occurred at Redhill Peninsula located on the south side of Hong Kong Island following the black rainstorm that hit Hong Kong on 8 September 2023 and argued that as a result of the mudslide, the Government took a very serious stance against such unauthorized work. He further pointed out that the mudslide led to the issue of a circular letter by the Buildings Department on 6 November 2023:[6]
33.With respect, the contents of this circular letter contain nothing new; the Buildings Department has been issuing statutory orders under the Buildings Ordinance, Cap 123, for years to the owners concerned requiring removal of unauthorized building works under established policies. 34.In the aftermath of the landslide at Redhill Peninsula, the Secretary for Development replied to the Legislative Council on 17 July 2024 as follows:
35.According to the above reply, the Government departments appeared to be focusing on tackling the safety risks of houses situated on hillside slopes rather than other buildings, such as the Building in the present case.[8] 36.We shall not adopt the conversion factor of 1/8 used by Mr Kwan as we do not agree with the underlying reasons for such factor. 37.Both Mr Chan and Mr Kwan agreed that the conversion factor for the area under staircase should be 1/8. 38.Having reviewed the above, therefore, we determine the converted or effective area for Shop B on G/F of the Building as follows:
39.Both Mr Chan and Mr Kwan used the direct comparison method to assess the market value, ie the EUV of Shop A of the Building. They referred to the following transactions for comparison:[9]
40.Property valuation usually proceeds by way of comparison where the valuer looks for a market transaction that is as close as possible to that which he has to value. He then works on the premise that if the subject matter of his valuation were to be the subject of a similar transaction, it would command the same value as the comparable. Whilst the comparable will never be identical to the subject matter of the valuation, the valuer will have to make adjustments to the value revealed by the comparable in order to reflect the differences between the comparable and the subject matter of his own valuation. 41.Mr Chan and Mr Kwan had agreements and disagreements on the following factors of adjustments:[10]
Choice of Comparables and Adjustment for Location 42.The location of a shop is of paramount importance and is therefore the chief factor affecting the 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:
43.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. Shop A on G/F of the Building has indeed been owner-occupied by one of such furniture shops since 2015 while G/F, No 59 Wong Nai Chung Road, the shop next door, has been occupied by another furniture shop, Lordmende Decorators & Furnishers Co, at least since 2009. 44.However, in recent years, the popularity of luxury home designers and furniture stores fades. Many of the shop premises nearby have fallen vacant. Mr Chan stated in his Rebuttal Report dated 19 October 2023 as follows:[11]
45.Comparable R1 is only adopted by Mr Chan and not by Mr Kwan. It is situated off the busy junction of Sing Woo Road and King Kwong Street on a side street opposite a Refuse Collection Point behind 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. Unlike shops on King Kwong Street which appears to be the busiest hub of Happy Valley where a variety of trades including banks serving the daily necessities of the residents in the locality are located, this comparable is occupied by a hardware chain store while its neighbours are all occupied by trades that are complementary to the wet market. 46.This location has a totally different trade mix when compared with the subject. Given the relatively quiet location of the subject section on Wong Nai Chung Road, we make no adjustment to this comparable. 47.Comparable R2 is situated at a corner location, at the junction between King Kwong Street and Tsap Tseung Street, the latter being the same street on which Comparable R1 is situated. However, the unit rate of this transaction was more than double of that for Comparable R1; even if we were to adjust for the time difference of the two transactions by reference to the private retail price index published by RVD, the result is approximately the same. Therefore, if these two transactions are abided by, shop values along King Kwong Street appear to be significantly higher. But owing to the two valuation experts having put forward other comparables along King Kwong Street and due to the relatively small size of this Comparable R2, we agree with Mr Chan that this comparable serves little purpose and should be disregarded. 48.Comparable R3 is situated on Wong Nai Chung Road, but it is located far away from the Building. Even along the same street, different sections of it may have different trade mix. Adjustments should be made accordingly to differentiate the different sections. 49.This comparable is situated closer to the Causeway Bay district, close to the junction of Wong Nai Chung Road and Leighton Road where more variety of trades are provided. This comparable shop is occupied by a restaurant and next to it is an estate agency. Indeed, in addition to residents of nearby developments, 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. In view of the above, we are a little puzzled when Mr Chan proposed +15% adjustment for location while Mr Kwan proposed +20%. Their positive adjustments mean that both of them took the view that shops closer to the Building than to Causeway Bay could fetch higher unit prices. We do not share that view. 50.During our joint site inspection on 7 January 2025, we walked along the section of Wong Nai Chung Road on which the Building is situated, ie from Nos 39-41 Wong Nai Chung Road to No 79A Wong Nai Chung Road[12]. If one excludes Nos 55-57 Wong Nai Chung Road to Nos 63-65 Wong Nai Chung Road which are the subjects of different compulsory sale applications, we estimate that the vacancy rate was about 58%. If the shops from Nos 55-57 Wong Nai Chung Road to Nos 63-65 Wong Nai Chung Road are included, the vacancy rate would become 63%.[13] 51.On the other hand, the shops on the section between No 135 Wong Nai Chung Road and No 173 Wong Nai Chung Road did not suffer from such high vacancy rate and were nearly all occupied. Thus, we are not persuaded that there should be positive adjustment for location for Comparable R3. We would apply an adjustment of -10%. 52.Comparable R4 is 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:
53.This appears to be the busiest hub in the vicinity. In comparison, as noted above, Mr Chan admitted in his Rebuttal Report dated 19 October 2023 at para 3.5.4 that the businesses of interior design companies, furniture and home appliances shops along Wong Nai Chung Road were declining. 54.Thus, we consider a downward adjustment of 20% more appropriate than an upward adjustment of 15% proposed by the valuation experts. 55.Comparable R5 is another transaction of a shop situated on the opposite side of Comparable R4 across King Kwong Street. However, this comparable has a relatively small size. In addition, it took place in the midst of the COVID-19 pandemic and for that reason we do not consider R5 to be a suitable comparable. In any event and if it is to be taken into account, we would consider a downward adjustment of 20% more appropriate as for comparable R4. 56.Comparable R6 is 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 applied nil adjustment for this comparable but applied +15% for comparables situated on King Kwong Street. We do not consider these adjustments, when looked at side by side, to be reasonable as a recycling store is unlikely to be able to pay a higher unit rent than a bank. 57.In Valuation: Principles into Practice, 6th Edition, 2008, Estates Gazette, in the chapter on “Retail Properties”, the author states at p 123 as follows:
58.For the time being, we adopt a location adjustment of -15% for its being situated closer to the junction between Wong Nai Chung Road and Blue Pool Road. 59.Whereas the two valuation experts agreed to adopt Shop A, G/F of the Building which has an effective area of 153.8 sq m as the reference unit for comparison (“the Reference Shop Unit”), all the comparables they adopted have much smaller areas. On the well settled premise of valuation that property, particularly shop units, having a smaller size would fetch higher unit value, we prefer to adopt a more sensitive adjustment of 1% per 10 sq m difference as proposed by Mr Chan. 60.Again, it is a well established valuation principle that the most valuable part of a shop is the area closest to the frontage and areas of sales space further back into the shop are less valuable. While the depth of the Reference Shop Unit including the extension is relatively long at 23 m, we are prepared to adopt Mr Chan’s adjustment for layout. 61.Shops having a higher headroom would give a more spacious impression and allow more flexibility for display. Whereas the Reference Shop Unit and shops in the vicinity were used to be occupied by high-end interior design companies, furniture and home appliances shops, we prefer the higher 4% per 1 m difference in headroom proposed by Mr Chan. 62.Thus, in view of the above analysis, the EUV of the Reference Shop Unit is assessed as follows:
63.We consider that the quality of the above comparables are not so good as they require certain subjective opinion to be formed on adjustment for location. At the trial, the Tribunal referred the parties to the transaction on 10 May 2021 in respect of the shop at G/F, Nos 59 & 61 Wong Nai Chung Road at the consideration of $83,800,000. 64.The valuation experts were hesitant to consider this transaction as comparable because it was the subject of a compulsory sale application. In Fraser v City of Fraserville [1917] AC 187, Lord Buckmaster said at p 194 that, in ascertaining the value of the property to the owner with all its advantages and possibilities, there should be excluded “any advantage due to the carrying out of the scheme for which the property is compulsorily acquired”. Then in Pointe Gourde Quarrying and Transport Co. Ltd v Sub-Intendent of Crown Lands [1947] AC 565, the British Government made an agreement with the United States Government for the latter to construct a naval base in Trinidad. The appellant company’s land, the most important feature of which was a limestone quarry, was compulsorily acquired for the use of quarried stone in building the naval base. Lord MacDermott, sitting in the Privy Council, formulated a famous statement at p 572 that:
65.This has become known as the Pointe Gourde principle whereby “compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition”. 66.However, the Pointe Gourde principle only requires “the increase in value which is entirely due to the scheme” to be disregarded. In this earlier transaction of the shops at Nos 59 & 61 Wong Nai Chung Road, the purchaser, Lion Star Oriental Limited (“Lion Star”) agreed to pay $83,800,000 for the two shops on G/F of Nos 59 & 61 Wong Nai Chung Road pursuant to a Provisional Agreement for Sale and Purchase signed on 10 May 2021. Subsequently, Lion Star sold the property to the applicant in Precise Lucky Ltd v Ko Kai Kwun Miguel [2025] HKLdT 63 in early 2022 for a consideration of $149,800,000. There appears to be no evidence to suggest that the $83,800,000 paid by Lion Star had included any “increase in value”. As Widgery LJ in Wilson v Liverpool Corporation [1971] 1 WLR 302 said at p 310, “… the purpose of the so-called Pointe Gourde rule is to prevent the acquisition of the land being at a price which is inflated by the very project or scheme which gives rise to the acquisition”. 67.At the trial, Mr Chan relied on this transaction of G/F, Nos 59 & 61 Wong Nai Chung Road to make his assessment of the EUV of the Reference Shop Unit as follows:[14]
68.With respect, Mr Chan’s analysis was wrong as the consideration paid was indeed for two shops separated by the entrance of the building and partition walls. For instance, the frontages of the two shops are not contiguous or next to each other:
69.Thus, if Mr Chan’s analysis is re-worked, we would arrive at a unit rate of $272,413, say $272,400, per sq m:
70.We trust therefore the market value (ie EUV) for Shop A of the Building at $272,400 per sq m is around the mark. The market value for each of the two shops is valued as follows:
* Shop B is situated closer to the junction between Wong Nai Chung Road and Blue Pool Road where pedestrian flow should be higher and therefore should fetch a marginally higher value in terms of location. 71.In respect of the residential units on the upper floors, Mr Chan and Mr Kwan agreed the EUV as follows:[15]
Conclusion on EUV as at 15 June 2022 72.Accordingly, we conclude that the total EUV of the Building is: $597,050,000 + $77,900,000 = $674,950,000 73.The corresponding EUV and proportionate share of the sale proceeds of the respondents pursuant to Part 3 of Schedule 1 to the Ordinance are therefore as follows:
74.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. 75.Mr Chan and Mr Kwan could not reach agreement on the site area of the Lot. Mr Chan adopted a site area of 591.9 sq m obtained from the Survey Report dated 29 June 2022 prepared by a land surveyor authorized under the Land Survey Ordinance, Cap 473, whereas Mr Kwan simply adopted the figure of 617.44 sq m as stated on the Deed Poll Plan dated 19 May 1967 registered in the Land Registry on 20 March 1968. 76.Indeed, in January 2017, the Buildings Department issued a Practice Note for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers on “Site Parameters – Documentary Proof” – ADM-21 as follows:
77.Pursuant to the above Practice Note, when the Lot is going to be developed, the Authorized Persons are required to substantiate the site parameters with either a detailed lease plan or Land Survey Plan. Deed Polls of subdivided lots with lot areas and boundaries can only be taken as provisional reference to facilitate plan approval. In line with this, we would adopt Mr Chan’s site area of 591.9 sq m which was obtained from the Survey Report prepared by an authorized land surveyor. 78.Whereas we have accepted Mr Chan’s site area of 591.9 sq m, he referred to an assignment of the adjoining lot situated at Nos 59 & 61 Wong Nai Chung Road dated 14 March 1929 together with a right of way at the rear of the Lot for the owners or occupiers for the time being “to go pass and repass”. Mr Chan was of the opinion that the area of the right of way with an area up to 41.81 sq m should be excluded from the site area for the purpose of calculating the maximum permissible site coverage and plot ratio of the Lot under the Building (Planning) Regulations, Cap 123F (“B(P)R”). 79.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:
80.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 regulation 23(2)(a) of B(P)R. 81.We take the view that the inclusion of such right of way into the site is very likely to be viewed favourably by the Buildings Department. We are therefore content to adopt 591.9 sq m as the developable site area without deduction of the area of the right of way. 82.Mr Chan for the applicant and Mr Kwan for R1 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. 83.However, their hypothetical schemes of development differed as follows:[16]
84.Mr Kwan did not provide carparking facilities for the hypothetical development. He explained that medium to small size residential flats were more marketable than large size flats. As a result, Mr Kwan considered there was no need to provide car parking facilities for such small or medium size units. However, we are not persuaded. Nor do we accept that residents in the hypothetical development would prefer to make use of a so-called public rental car park at Nos 12-22 Blue Pool Road which in itself comprises a 23-storey commercial/residential composite building called Friendship Court. This building itself comprises some 84 residential units and can only offer limited carparking spaces to the public. 85.Whereas the Lot is located at a more prestigious position than other parts of Happy Valley, with views directly over the Happy Valley Racecourse, it should be more desirable to have a residential development of a high class comprising residential units of larger sizes. 86.For the reasons explained above, Mr Kwan’s proposed hypothetical development should be disregarded. Unfortunately, Mr Chan’s proposed development is no better when his typical unit in the hypothetical development would only have a small (or medium) size of 70.4 sq m. Adopting a reference domestic unit on 12/F in a hypothetical development (but at a actual level of 15/F) and relying on transactions in The Aster, Mr Chan arrived at a unit rate of $297,000 per sq m.[17] When Mr Chan also referred to transactions in One Jardine’s Lookout which lies at No 1 Wang Tak Street, he arrived at even a lesser unit rate of $260,296 per sq m.[18] In the end, Mr Chan only adopted the unit rate of $297,000 per sq m.[19] 87.For the above reasons, we reject both of the proposed hypothetical development schemes. As will be seen below, we will not make an order for sale in the present case. Hence, the issue of reserve price is academic and we need not decide on it. WHETHER REDEVELOPMENT OF THE LOT IS JUSTIFIED DUE TO AGE AND/OR STATE OF REPAIR OF THE BUILDING 88.Section 4(2) of the Ordinance reads:
89.The term “redevelopment” is defined in section 2(1) and means:
90.Section 4(2) stipulates two conditions which need to be satisfied before the Tribunal can make an order for sale. In this section, we shall discuss the first condition in sub-section (a)(i), namely whether redevelopment is justified due to “age” or “state of repair”. 91.At the invitation of the Tribunal, counsel for the applicant and the 1st respondent conducted a review of the case authorities on section 4(2)(a)(i). They are in broad agreement on the general approach which the Tribunal should follow when determining the question posed by the sub-section – is redevelopment justified due to the age or state of repair of the existing building? The starting point of the discussion is the judgment in Intelligent House Ltd v Chan Tung Shing [2008] 4 HKC 421. 92.In this section, we shall set out the principles laid down in Intelligent House which, subject to one exception, have consistently been applied and followed in subsequent cases, and which we shall also follow in the present case. As was made clear in that case, the Tribunal should take into account any matters which are directly or indirectly related to the statutory criteria of age and state of repair, and what was discussed in the judgment was not meant to be an exhaustive list of those matters: paras 145(1) and 166. This section is therefore not an attempt to make a list of the non-exhaustive matters which have been taken into account by the Tribunal in the past. Rather, we shall look at the individual principles set out in Intelligent House one by one and see how they are applied in subsequent case law. In addition, we shall also look at two “repair costs” tests, which did not feature in Intelligent House but have been frequently conducted in many of the subsequent cases. It is not necessary to recite all the authorities cited by Mr Mok and Mr Li. We only need to refer to those cases which are more illustrative of the points in question. 93.The approach which the Tribunal should follow turns on a proper construction of section 4(2)(a)(i). It is therefore appropriate to first look at the objective of the Ordinance, the understanding of which would inform the construction process. 94.The Ordinance aims to facilitate urban renewal in the context of private sector land redevelopment while at the same time seeks to ensure that the right of private ownership is protected. It does so by means of conferring power on the Tribunal to make an order compelling a sale of the land in question against the will of the minority owners. The Tribunal will however make such an order only if the safeguards built into the Ordinance for protecting the minority owners’ right of private ownership are observed. This was explained by the Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578 and by the Court of Appeal in Good Faith Properties Ltd v Cibean Development Co Ltd [2014] 5 HKC 611. 95.In Capital Well, Ribeiro PJ said, at para 21:
96.In Good Faith, Lam VP described the Ordinance as a “statutory compromise” for co-owners of a lot and analysed the provisions in terms of a two-tier safeguard structure, the first tier safeguard being the statutory criteria of age and state of repair and the second tier safeguard being the fair and reasonable compensation payable to the minority owners in the event that an order for sale is made. His Lordship explained, at para 11, as follows:
97.It is now well established that under the statutory design of the Ordinance, once the two conditions stipulated in section 4(2) are satisfied, the Tribunal shall proceed to make an order for sale. It is not open to it take into account other matters to decide otherwise. In other words, once the applicant has met the two conditions, the Tribunal has no residual discretion to refuse to make the sale order. This conclusion is derived from a proper construction of the Ordinance. There is a long line of cases in support of this construction, including, most notably, the Court of Appeal decision in Able Luck Development Ltd v Pawling Ltd [2023] 1 HKLRD 1448, [2023] HKCA 175. 98.The line of cases starts with Able Luck Development Ltd v Public Global Investments Ltd LDCS 7000/2014, 6 October 2017 in which the Tribunal expressly rejected the suggestion that the Tribunal had a residual discretion as to whether to order a sale even upon the satisfaction of the conditions in section 4(2). It reached the opposite conclusion in para 170. In the subsequent Able Luck case decided in February 2023, that paragraph was quoted and the conclusion accepted by the Court of Appeal to be correct: paras 49 and 50. 99.The issue before the Court of Appeal was whether, when determining whether to make an order for sale, the Tribunal was under a duty to consider or weigh the merits of alternative options, such as conservation, revitalisation, rehabilitation, urban renewal, vis-à-vis redevelopment: para 48. And it was held that there is no requirement for the Tribunal to engage itself in weighing redevelopment against other options or to satisfy itself that redevelopment is the best option among all possibilities: para 50. 100.Notwithstanding the specific issue raised before the court, it is clear that the “no discretion” ruling was not confined to the issue of weighing of options but applied generally, as the court expressly agreed with the general conclusion reached in the earlier Able Luck case. 101.In our view, the decision of the Court of Appeal has really settled the matter. Since then, there have been attempts to revive the issue, with some respondents trying to put forward undue personal hardship resulting from a compulsory sale order as a ground of opposition. All these attempts have failed. The Tribunal (of different compositions) has repeatedly rejected these arguments by consistently applying either or both of the Able Luck decisions. See, eg, China Orchid International Ltd v Fujitec (HK) Co Ltd [2023] HKLdT 38 at para 206; Crown Centre Development Ltd v Wong Wai Ping [2023] HKLdT 73 at paras 127 to 128; Peace Ever Ltd v Au Kai [2023] HKLdT 41 at paras 351 to 356; and, Wise Grace Investment Ltd v Lui Man Dung [2025] HKLdT 5 at paras 118 and 119. 102.To complete the discussion here, we should mention Century Supreme International Ltd v Kam Chi Kit Charles [2022] HKLdT 6 in which the Tribunal took the different view that, as a matter of statutory construction, it could refuse to grant an order even upon the satisfaction of the two conditions in section 4(2): paras 38 to 44. It should however be noted that this case was decided in January 2022, more than one year before the Court of Appeal decided Able Luck. Furthermore, the earlier Able Luck decision in 2017 was not cited in the judgment. We are therefore of the view that the different conclusion reached in Century Supreme should not be followed. In this regard, we refer to the decision in Greatmax International Ltd v Lo Sha Kam Ha Teresa [2023] HKLdT 47, in which the view in Century Supreme was similarly not followed and the respondents’ argument that personal hardship should be considered was rejected: see paras 103 to 107. 103.Subject to one exception which may generally be referred to as “the land economic tests”, we follow the guidance laid down in Intelligent House when approaching the question of whether redevelopment is justified to due age or state of repair. We accept Mr Mok’s submission that the guidance has been comprehensively set out in paras 145(1) to (4) and (6), 165(2)(c) and (3) and 166. 104.We reproduce these paragraphs below:
105.Paras 145(5), 165(1)(b), 165(2)(b), which are not reproduced above, contain the land economic tests built upon the concept of economic lifespan of the building, the correctness of which was doubted by the Court of Appeal two years later in Fineway Properties Ltd v Sin Ho Yuen Victor [2010] 4 HKLRD 1. The appeal was not concerned with those tests but the Court of Appeal expressed reservations as to their correctness. It was said that the tests formulated in Intelligent House should be approached with a degree of circumspection and should not be applied as if they were part of the Ordinance itself: see paras 31 to 37 and 41. 106.Since then, however, as clearly shown in subsequent case law, the rest of the guidance laid down in Intelligent House have been consistently followed and applied. We would respectfully adopt the same approach. We agree with the observation made by Mr Li, with which Mr Mok is in general agreement, that the Court of Appeal in Fineway did not make any adverse comment on the rest of the guidance in Intelligent House, and that the guidance there, with the carve-out of the land economic tests formulated on the basis of the concept of economic lifespan, represents good law. This point was expressly made in, eg, Pacific Base Holdings Ltd v Lee Hop Biu [2020] HKLdT 20 at para 122; and, more recently, Century Supreme at paras 57 to 63. 107.Even though we are of the view that Intelligent House has set out the proper approach under section 4(2)(a)(i) in a comprehensive manner, it is still worth highlighting in this judgment the reasoning underpinning the approach as set out in that case, and citing by way of illustration some subsequent cases which have applied these propositions. Para 145(1): “any factors or matters” 108.Under para 145(1), the Tribunal is entitled to look at any factors or matters that are directly or indirectly related to the elements of age or state of repair of the existing building. 109.In Intelligent House, this proposition was reached by the Tribunal rejecting the restrictive approach advocated by one of the respondents in that case. The respondent’s submission (see para 130) was to the effect that the Tribunal could only look at certain matters and no more. For instance, under the criterion of age, the Tribunal should look to matters such as the type of building or construction materials used and ask whether they have naturally deteriorated due to age to the extent that they are no longer capable of performing function that they were intended to perform. Under the criterion of state of repair, the Tribunal should consider matters such as whether the building is dangerous to public health and safety, such that it ought to be demolished. The Tribunal should only look at defects in the building. 110.The Tribunal rejected such a restrictive approach. When construing section 4(2)(a)(i), it took note of the fact that the statutory criteria of “age” and “state of repair” (together with other key terms in the section, namely “justified”, “satisfied” and “existing development”) are not defined in the legislation, and concluded that the legislature intended to give the Tribunal a wide discretion to look at all the circumstances and factors relating to the grounds of age and state of repair of the existing building and see whether it is convinced that replacing the old building with a new one is shown to be warranted or supported. The Tribunal should have in mind the objective that the making of a compulsory sale order is to facilitate and assist urban renewal: paras 150 to 151. 111.It follows that there is no need to formulate any general test which the Tribunal must apply in each case. Each application turns on the individual circumstances of the case. The Tribunal should identify all the factors that can be said to be relating to the two statutory criteria, decide how much weight it should give to each factor and, based on such evaluation, answer the ultimate question, namely whether replacing the old building with a new one is justified or not. Both Mr Mok and Mr Li submit, and we agree, that the imposition of any overly prescriptive test on the ground of age and state of repair is not necessary and is likely to be counterproductive. 112.The wide discretion as advocated in Intelligent House has since been adopted by the Tribunal in subsequent cases. Top Sail International Ltd v Cheng Kai Ming LDCS 18000/2010, 15 November 2011 and Charmlink Ltd v Lee Tong Hing LDCS 16000/2010, 29 November 2011 are two cases which were decided around three years after Intelligent House and are often cited by later cases as additional authority in support of this general approach. 113.We find the discussion in paras 23 and 24 of Top Sail to be instructive. The Tribunal referred to a number of factors which could be relevant, including the physical age of a building, whether it has been and can be properly maintained, its physical conditions, the amount required to maintain it, and whether the design is obsolete. What is instructive is not the listing of such factors but the discussion on how the silence on these matters in the Ordinance reinforces the existence of the wide statutory discretion vested in the Tribunal. The discussion also makes clear that when exercising the discretion, the Tribunal should be engaged in a multi-dimensional evaluative exercise. 114.We reproduce the paragraphs below:
115.In Charmlink, the Tribunal applied the same approach as in Top Sail. It held:
116.Lastly, as an aspect of para 145(1) in Intelligent House, the Tribunal rejected the argument that a building needs to be in serious disrepair and require demolition on the ground of public safety in order to satisfy the statutory criteria: see paras 130(b), 159 to 160. The same argument was repeated and rejected in Success Active Ltd v Harbourview International Holdings Ltd [2021] HKLdT 24 at para 122. Paras 145(2) and (4): “comparison” between old and new building 117.Under paras 145(2) and (4), the Tribunal is entitled to look at any comparison between the existing building and a new building or any proposed redevelopment. It is also entitled to compare the facilities of the existing building with what a modern day building could correspondingly offer. 118.When arriving at this proposition in Intelligent House, the Tribunal expressly rejected the respondent’s submission (see para 141) that the Tribunal should not look at anything outside the existing building and should not make any comparison between the existing building and a proposed redevelopment. The reason was that the question posed by section 4(2)(a)(i) is whether redevelopment is justified and, as a matter of construction, the words “redevelopment” and “justified” provide the context against which the grounds of age and state of repair should be considered. It follows that when deciding whether it is justified to replace the old building with a new one, the Tribunal is not prohibited from making the comparison: paras 152(2), (3) and (7), 153 and 162. 119.Such comparison has since been consistently made by the Tribunal in subsequent cases. That it is open to (but not mandatory for) the Tribunal to make the comparison should be uncontroversial in light of the clear rationale explained in Intelligent House. Nevertheless, there has still been attempt by opposing minority owners to cast doubt on this approach by insisting that no comparison should be allowed. Such attempt has failed. See, eg, Century Supreme at paras 64 and 65. 120.We would highlight the following points:
121.In this regard, we have been referred to two decisions of the Tribunal in which the application for compulsory sale was refused. They are Wah Ha Property Development Ltd v Rosehawk Group Ltd [2021] HKLdT 27 and Bright Full Ltd v Hing May Properties Ltd [2023] HKLdT 1. According to the survey of the authorities by counsel, these two cases belong to the minority of cases in which the Tribunal declined to grant an order for sale. What is common in the two cases is that they both concern low-density buildings located in high-end residential areas in Hong Kong – a development of five adjoining low-rise buildings in the Peak (in Wah Ha) and a terrace of five townhouses in Sassoon Road, Pokfulam (in Bright Full). 122.It is plain that the Tribunal applied the approach in Intelligent House in both cases. 123.The development in Wah Ha was over 72 years old and was renovated “some 30 years ago” at the time of the decision. The Tribunal found that it was well maintained and the extent to which it fell short of the modern day standard became relevant in the deliberation process. We feel that it is worth highlighting the following passages solely to illustrate how the Tribunal took into account that factor. See:
124.The Tribunal concluded, at paras 94 and 95, that the Development was not of such a condition or in such a circumstance that genuinely merited redevelopment. 125.Under para 145(3), it is open to the Tribunal to take into account the obsolescence of an existing building in terms of its functional items or facilities. 126.In Intelligent House, this proposition was arrived at by the Tribunal rejecting the respondent’s submission (see para 142(1)) that one could not consider the obsolescence of a building or its facilities being outdated on the basis that it necessarily involved comparison with a modern day building, which should not be allowed. 127.As the Tribunal was of the view that a comparison between the existing building and a new one could legitimately be made, the respondent’s submission was rejected. It was held that any feature of obsolescence may be a matter directly or indirectly relating to the age of the building which can be relevant to the evaluation process: paras 155 to 156. 128.What counts as “obsolescence”? The answer will turn on the individual circumstances of each case. We, however, find the following passage in Bright Full to provide some general guidance, at para 126:
129.Lastly, the Tribunal should look at the extent of the obsolescence. In Crown Centre, on the facts of that case, the following was said, at para 61:
Paras 145(6) and 165(2)(c): “tenantable condition” 130.Under paras 145(6) and 165(2)(c), the Tribunal is entitled to look at repair works which are necessary to render the building a tenantable condition, which is reasonably fit for use in the sense that it should be safe and hygienic for occupiers and visitors, and provide a standard of comfort and convenience which is reasonable in the present day circumstances for the type of building in question. It is also worth highlighting here para 199 of the judgment which adds that for the building to be in a tenantable condition, its structural frames, components, finishes and service installations should be in either fair or good conditions, requiring no repair in the near future. 131.In Intelligent House, the Tribunal rejected the respondent’s submission (see para 161) that the Tribunal should not consider such repair works as are required to bring the state of the old building in line with or to modern day standards unless that is strictly required by any current regulations for safety or hygienic purposes expressly made applicable to even buildings built previously. 132.Same as in the consideration of the criterion of age, the Tribunal took the view that as a matter of construction, the words “justified” and “redevelopment” provide the context against which the Tribunal is to look at matters relating to the state of repair, and to decide whether it is justified to replace the old building with a new one: paras 162(3) and 163. 133.Subsequent cases have applied the standard of tenantable condition as set out in paras 145(6) and 165(2)(c) in Intelligent House. At times, attempts have been made to invoke the standard of habitable condition instead. These attempts have failed. See, eg, Century Supreme at paras 64, 65. In para 90 of that case, the Tribunal commented that the standard of habitable condition “is a disincentive to improvement in living/occupation condition” and the purpose of the Ordinance is “plainly for improvement of the environment”. See also China Orchid at paras 165 and 166, and Crown Centre at para 86. 134.On the one hand, the land economic tests formulated in Intelligent House on the basis of the concept of economic lifespan was doubted by the Court of Appeal in Fineway and have not been followed since. On the other hand, the Tribunal has in many subsequent cases do one or both of the following comparisons by reference to the repair costs required to bring the existing building to a tenantable condition:
135.We are of the view that it is open to the Tribunal to employ the above tests when considering whether the statutory criteria are met so long as it is borne in mind that the outcome of the tests is only one of the factors to be considered, and how much weight (if any) it should carry must depend on the circumstances of each individual case. Furthermore, the figures reached in past cases should not be treated as establishing any kind of benchmark which has ready application to subsequent cases. 136.The “repair costs versus construction costs” comparison is done in many cases. If the percentage of the repair costs as a proportion of the construction costs of a similar superstructure is considered to be high, it may indicate that the defects of the existing building are of a substantial degree and the repairs which are necessary to bring it back to a tenantable condition are likely to be extensive. Examples of such test being done include Harvest Treasure Ltd v Cheung Fat Enterprises Ltd LDCS 8000/2014, 31 December 2015 at para 188, Nice Beauty Ltd v Yan Yan Motors Ltd [2021] HKLdT 77 at paras 38(1) and 53, Greatmax at para 75, and Wise Grace at para 61. 137.The “repair costs versus EUV” comparison is frequently done. The percentage of the repair costs as a proportion of the EUV is often treated as an indicator to show how willing the owners would be to spend costs on repair. If the figure is a low one, it may indicate that the owners are likely to afford such repair costs and therefore may be more likely to be willing to incur them, and this factor may weigh against redevelopment. If the figure is a high one, it may be more likely that the owners would be reluctant to incur such costs and hence repair may not be a feasible option and redevelopment may seem more reasonable. 138.However, it is clear from the case law that the assessment of the affordability of the repair costs or the willingness to pay them would also depend on other factors, such as the locality of the building. For instance, in high-end residential areas, eg, the Peak (Wah Ha) and Sassoon Road, Pokfulam (Bright Full), the percentage figures may tend to be low (as the EUVs are usually high) and the owners may be taken to be prepared to meet such costs (as they have the means to do so). 139.Examples of the test being done include Nice Beauty at paras 54 and 55, Supreme Host Investments Ltd v The personal representative of the estate of Cheng Lai Chit, deceased [2023] HKLdT 22 at para 51(viii) as well as Wah Ha and Bright Full. 140.In the present case, the applicant’s primary position is that the “repair costs versus EUV” comparison should not be adopted on the ground that there is a conceptual weakness in such comparison, which is that the assessment of the willingness to spend the repair costs is primarily an assessment in investment based on the value, instead of the age or state of repair of the building, and that is because the EUV would largely be the land value as decided by its location and primarily unrelated to the physical state or obsolescence of the building. Alternatively, Mr Mok submits that the comparison should not be adopted as a standard comparison in every case. 141.The answer to the applicant’s position is what is stated in para 145(1) of Intelligent House. It is open to the Tribunal to take into account everything which is related to the two statutory criteria. In any given case, whether the comparison is a relevant and/or weighty factor must depend on the circumstances of each case. Therefore, we do not think it correct to impose a general bar on this comparison. Equally, it should not be the case that the test should be done as a matter of routine in every case. 142.To conclude, in each application for a compulsory sale order, the burden is on the applicant to put forward a case to satisfy one or both of the statutory criteria in section 4(2)(a)(i). The Tribunal should follow the general approach set out in Intelligent House subject to the carve-out of the land economic tests built upon the concept of economic lifepsan. The factors or matters put forward should be examined to see whether they are relevant to the statutory criteria and, if so, what weight should be given to them. 143.The question of weight is a fact-sensitive issue. We would end this section by illustrating the point by looking at the different treatments given to the same matter in two cases. The matter in question is the physical appearance of the building. 144.In Nice Beauty, three features in the external appearance of the building were identified as items of physical obsolescence, namely its plain look, its outdated external walls and the piecemeal and untidy replacement of the original painted mild steel windows. The Tribunal considered that they were relevant in the consideration of the criterion of age. It said, at para 45:
145.The above features in the external appearance of the building were one of the factors to which the Tribunal clearly gave weight in the final conclusion on “age”. It concluded, at para 50:
146.This may be contrasted with how a similar feature in the external appearance of the building was treated differently by the Tribunal in Bright Full, which, it will be recalled, concerned five terrace houses in Sassoon Road in Pokfulam. In that case, the Tribunal did not consider the untidy appearance arising from piecemeal replacement of windows to be obsolescent. It said, at para 127:
147.In the subsequent leave to appeal decision at [2023] HKLdT 45, the Tribunal reiterated the conclusion above and expressly referred to Nice Beauty emphasising that the taste and choice of physical appearance should be viewed from the perspective of the citizens in the district: see paras 36 to 38. Structural Conditions of the Building 148.On behalf of the applicant, Mr C M Wong had commissioned and prepared a Structural Assessment Report dated 28 June 2023 with the following objectives:[21]
149.In so doing, he had conducted the following tests which are summarized as follows:
150.The visual inspections were carried in all common areas and those units which were available for inspection.[22] The latter comprised mainly the units owned by the applicant[23]. 151.By virtue of the joint expert statement dated 27 November 2023, Mr C M Wong and Dr Lau agreed that there were 36 defects on the structural members of the Building as follows:[24]
152.Obviously from the above, given that the Building was already 56 years old, the number of defects found[25] was extremely small or minimal. Of the 36 defects identified, 11 were classified as cracks and 25 as spalling. The areas of slabs, beams and columns with defects were 12.3 sq m (1.41%), 5.4 sq m (0.52%) and 0 sq m (0%). 153.We cannot agree with Mr C M Wong that a defect of 1.41% is quite bad. More particularly, Dr Lau pointed out that these 36 defects were minor superficial defects which could be readily rectified by patch repair as recommended by Mr C M Wong.[26] Dr Lau added that none of them were structural defects that may require expensive structural strengthening work to rectify. Having conducted our joint site inspection on 7 January 2025, we agree with Dr Lau’s observation. 154.116 reinforcement bars in total at the Building were selected and opened up by removing concrete cover, each approximately 500 mm x 500 mm.[27] They were tested by the MateriaLab Division of Fugro Technical Services Limited. The corrosion conditions of the reinforcement bars are summarized in the table below:
155.The definition of the corrosion grades is as follows:[28]
156.Therefore, for slabs, 59% and 41% of the rebars were suffering from Grade 3 (Mild Corrosion) and Grade 4 (Moderate Corrosion) respectively. For beams, 36% and 64% were suffering from Grade 2 (Partly Corrosion) and Grade 3 (Mild Corrosion) respectively. For columns, all the rebars were suffering from Grade 2 (Partly Corrosion). 157.Notwithstanding the test results above, according to Dr Lau, should the conditions of rebars have reached the final stage, there would have been “cracks and spalling” found visible on the surface of the concrete.[29] 158.In this regard, we note that according to Appendix V of the Code of Practice for Mandatory Building Inspection Scheme[30], loss of section of more than 15% is considered serious corrosion and the reinforcement bar should be replaced. By reference to the open-up inspection results as stated above, there is no information on how many rebars categorized as “Moderate Corrosion” had loss of section of more than 15%. Therefore such characterization does not show the full picture as loss of section of a figure between 10% and 15% is also considered as “Moderate Corrosion” while it is not considered as serious under the Code. 159.Dr Lau commented that the test results only showed the corrosion grade of the rebars were mostly 2 to 3 with minimal loss of section (less than 10%). Of the 17 rebars with grade 4 corrosion, Dr Lau noted that they were concentrated on three slabs (or 3 groups). Seven rebars, ie the first group, were located entirely in slab FS-14 on 8/F, Flat C. Four rebars, ie the second group, were located in slab FS-6 on 11/F, Flat A. Six rebars, ie the third group, were located in slab FS-6 in Flat A on 12/F. He did not discover any cracks or spalling on the whole of 8/F. Neither did he find any cracks or spalling on slab FS-6 on 11/F nor on slab FS-6 on 12/F.[31] We agree with Mr Li that the moderately corroded rebars are concentrated and the result on corrosion does not represent the overall condition of the entire Building. 160.In any event, we agree with Dr Lau that the extent of the corrosion of the rebars was not bad for a 56-year-old building and that the corrosion of the rebars were not so serious as alleged by Mr C M Wong for the following reasons.[32] The number of defects discovered by Mr C M Wong in his visual inspection was so small in the number of 36. This is also explicable by the major renovation undergone by the Building in 2015/2016. By reference to the 8th certificate of payment, which was undated, there were two items of concrete repairs, giving a total cost of $278,382.23:[33]
161.In his oral evidence, Dr Lau opined that the renovation had apparently stopped the further deterioration and corrosion of the reinforcement bars. We agree with Dr Lau. Concrete Cover To Exposed Reinforcements 162.At para 5.2.1 of Mr C M Wong’s Structural Survey Report dated 28 June 2023, he explained the relationship between the concrete cover and the steel reinforcement embedded therein:[34]
163.The following findings on concrete cover to the exposed reinforcements are reproduced from Table 6.5 of Mr C M Wong’s Structural Assessment Report dated 28 June 2023:[35]
164.Mr C M Wong explained at para 7.3.3 that “(f)or members where the actual cover is smaller than the design cover, the protection to the steel reinforcement bars is less than that required in the original design. Agents of corrosion, ie moisture and oxygen, may have faster access to the steel reinforcement. As such, the corrosion rate of the steel reinforcement will be higher than the original design expected.”[36] 165.In this regard, we find Dr Lau’s explanation at paras 77and 78 in his Structural Assessment Report dated 21 September 2023 more illustrative and persuasive:[37]
166.In fact, Dr Lau’s observation was consistent with the corrosion conditions of the reinforcement bars in para 154 above and the findings on concrete cover to the exposed reinforcements added nothing more. As will be seen from the following paragraphs on core compression test, the tested strengths of the structural elements were all significantly higher than the design strengths. We agree with Dr Lau that the deficiency as suggested by the less than desirable concrete cover or the corrosions found has imposed minimal effect on the structural elements. 167.Core compression tests were carried out by a Hong Kong Laboratory Accreditation Scheme (HOKLAS) accredited laboratory. As stated by Mr C M Wong in his Structural Assessment Report dated 28 June 2023 at para 5.2.4[38], a core is a cylinder of concrete cut by utilizing a hollow drill barrel. Cores with diameters ranging from 75 to 100 mm are generally employed. Small diameter cores allow coring to take place in structural members with closely packed steel reinforcement. The core samples are crushed in a compression machines and the load at which the sample reaches failure is recorded. With this failure load, the actual cube strength of the concrete can be calculated. 168.The summary of the test results is presented below:[39]
169.Mr C M Wong noted there were confusions on the concrete mixes specified for the Building.[40] On the basis of the approved design calculation, he opined that Quality A mix concrete was adopted for the Building. It is likely that 1:1:2A concrete mix was poured for columns while 1:2:4A Ordinary mix was poured for beams and slabs. If this is correct, the 3 samples with low tested strengths were found on:
170.However, if Mr C M Wong’s estimate was wrong and for instance if concrete mix of 1:2:4 was poured for the beams, only the beam on Flat A on 11/F had strength lower than the designed intent. Indeed, note 17 of the approved plan stated that “All reinforced concrete to be 1:2:4 mix & 1:1:2 mix as following …”[41] 171.In the above regard, Dr Lau was of the view that the lower concrete strength would affect the amount of the rebars to be provided. Therefore, he re-checked the structural design calculations for these three structural elements using the reduced test strengths. In all three cases, Dr Lau found that the area of rebar provided in the design were much larger than the areas of steel required to support the applied loads.[42] In his opinion, this can be explained by the original design being conservative. In such event, the tested strengths were all significantly higher than the design strengths. 172.In light of the above, Mr C M Wong had gone through Dr Lau’s design checkings. Whilst he found certain mistakes in Dr Lau’s calculations, Mr C M Wong acknowledged at para 2.6.8.5 that the reinforcements actually provided for the 3 members are adequate with both 1:2:4 and 1:2:4A concrete.”[43] 173.However, the allowable stresses in concrete and reinforcement normally will not occur at the same time. If an excessive amount of reinforcement has been provided, the concrete will fail earlier than steel. In light of the finding in the paragraph above, Mr C M Wong further checked on beam FB-14 at 7/F and beam FB-28 at 1/F which appears to be “over-reinforced” sections based on elastic method, also known as modular ratio method, which was stipulated under LCC by-laws. Nevertheless, Mr C M Wong himself admitted at para 2.6.8.10 that “[s]uch method has an inherent inconsistency”.[44] In such case, we are not going to comment on it further. 174.Thus, we find no issue with the strength of the concrete with the reinforcement bars embedded in the samples. 175.Mr C M Wong stated in his Structural Assessment Report dated 28 June 2023 at para 5.2.2[45] as follows:
176.The carbonation test is done by drilling a 20 mm diameter hole into the concrete structure to approximately 50 mm deep so that the maximum and minimum distance from the exposed surface to the interface of colour change using the endoscope optical viewing device can be measured[46]. 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:[47]
177.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[48]. He explained that the reason for only 36 defects being found may be that the majority of the surface area of the structural elements are inaccessible. 178.On the other hand, Dr Lau commented that the corrosion of rebars would always lead to cracks and spalling but the seriousness of corrosion had been refuted by the presence of only 36 defects found. We agree with Dr Lau. 179.In any event, Mr C M Wong agreed in his joint expert statement with Dr Lau dated 27 November 2023 that: “Carbonation itself will not directly cause the corrosion of rebars but only provide an environment that facilitates corrosion.”[49] As commented by Dr Lau in his Structural Assessment Report dated 21 September 2023, carbonated concrete is only one of the conditions for the corrosion of rebars. For the rebars to corrode, other factors such as a supply of oxygen and the ingress of moisture are also required. This being the case, the carbonation process can be treated by replacing the concrete cover which will be coated with a protective coat.[50] We find this comment consistent with what Mr C M Wong stated in his Structural Assessment Report dated 28 June 2023 at para 5.2.2 which is cited in para 175 above. We would point out that concrete repairs were indeed carried out in the 2015/2016 renovation. This reinforces the conclusion that the renovation had stopped the deterioration and corrosion of the reinforcement bars. 180.Similarly, Mr C M Wong was of the opinion that chloride ions in concrete are a major threat to the steel reinforcement as they are capable of severely reducing the protective oxide layer covering the steel reinforcements. As such, the chloride content in the concrete is an indicator of how susceptible the steel reinforcement is to corrosion.[51] 181.The representative hardened concrete sample is prepared by crushing, grinding and sieving to pass a 150 ꭒm test sieve, which finally provide a sub-sample for chloride test. 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. Here is the summary of chloride content results of the Building by Mr C M Wong:[52]
182.The test results indicated that half of the slab samples and almost half of the beam samples had chloride content of more than 0.35%. Based on this result, Mr C M Wong opined that the chloride in concrete was inborn and not from external exposure. 183.At the same time, however, Mr C M Wong acknowledged that the average chloride content for columns was 0.18%, which was better than the average of 0.4% for slabs and beams. According to Mr C M Wong, at the time of construction of the Building, the fine aggregates were sand which might contribute to the chloride content, if any.[53] Dr Lau queried however if Mr C M Wong’s opinion was correct. Dr Lau opined that if Mr C M Wong was correct in that the chloride in concrete was inborn, there should be at least thousands or even tens of thousands of defects found in this 56-year-old building instead of just 36 defects. 184.In this connection, we note the opinion of Mr C M Wong that in the era when the Building was constructed, concrete was not supplied by concrete batching plants but were mostly mixed on-site; the source of fine aggregates were sand with a portion being sourced from marine origins which comprise chloride contents.[54] We accept that, for the reasons given by Mr C M Wong, there is a possibility that the chloride may be inborn. It is therefore worthwhile to cross-check the locations where high chloride content (more than 0.35%) was found against the locations where “Moderate Corrosion” was found in the results obtained from the Open-Up Inspection. The relevant figures are in bold in the table below:[55]
185.From the above table, one cannot see any absolute correlation between high chloride content and serious corrosion. For example, the test result showed 0.85 chloride content at beam 1201/B, but the corrosion grade was 3 for reinforcements which is similar to that of beam at 801/B with low chloride content. 186.Dr Lau further elaborated that if the owners carry out the patch repair in accordance with Mr C M Wong’s recommendations and spend the amount of $136,500, then the Building would not require major repairs in the next 10 years. This is despite what Mr C M Wong suggested that the condition of Building was only mediocre and that the Building had entered the propagation phase. The most relevant and important consideration is whether or not there are any defects. 187.In addition, the method of patch repair as agreed by both Mr C M Wong and Dr Lau included “application of anti-corrosion paint onto the steel reinforcement”[56]. Mr C M Wong accepted under cross-examination that there would then be an additional protective layer after patch repair is carried out. 188.Thus, we find Dr Lau’s argument persuasive. We agree with him that the risk of corrosion due to the chloride or carbonation is not as serious as suggested by Mr C M Wong. While we agree with Mr C M Wong that patch repair would only tackle the areas where defects have already emerged on the surface but not the rebars that had entered the propagation phase, we agree with Dr Lau that the corrosion may have been slowed down because of good maintenance including, for instance, the major renovation conducted in 2015/2016. Otherwise, there should be at least thousands or even tens of thousands of defects found in the Building. 189.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. 190.In Hong Kong, the first code that mentioned the requirement for design working life was 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:
191.In spite of the above, this concept bears little on the actual structural condition of the Building when it is well-maintained. Mr C M Wong estimated the total repair cost for the Building was $268,770, including $132,270 from hammer tapping and $136,500 from patch repair. Dr Law agreed with this estimate. We agree with Dr Lau that this sum is not significant. 192.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 required for fire safety under the Code of Practice for Fire Safety in Buildings 2011:[57]
193.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, the Tribunal found at para 143 that the main issue for the more stringent requirement of 20mm in the prevailing codes is on durability of the material of the slab instead of its fire resistant ability. Dr Lau in his Structural Assessment Report dated 21 September 2023 at para 169 stated the same.[58] By reference to the building plans approved by the Building Authority dated 26 January 1966[59], 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 1½” (38.1mm) respectively. 194.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 Code of Practice for Fire Safety in Buildings 2011. 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. 195.Dr Lau added that he was a research assistant in civil engineering department at King’s College, University of London 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 to 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 prevailing fire code.[60] 196.We therefore share the view expressed in Bright Full (at para 141) that concrete covers that were certified to resist fire for 1 hour would not have suddenly become inadequate because of the change in standard. 197.Lastly, Mr C M Wong commented that for a structure to be called 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. 198.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. 199.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. 200.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 36 structural defects. 201.The Building is now 59 years old (or was 56 years old when the building experts conducted their condition surveys). According to Mr Benson Wong, the Building 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:[61]
202.Mr Benson Wong further added that the Building is aged structurally (by reference to the Structural Assessment Report prepared by Mr C M Wong), physically and functionally.[62] 203.Mr Benson Wong firstly commented that the external walls of the Building are generally finished externally with cement rendering and paint work, rendering the Building’s external appearance outdated and obsolete when compared with the modern external wall finishes of new buildings nowadays.[63] However, having conducted the joint site inspection on 7 January 2025, we do not agree that the Building looks outdated or obsolete. We further agree with Mr Tam that paint work with cement rendering is not an obsolete material that is not adopted in new buildings. Mr Tam listed examples of relatively new buildings which are finished with cement rendering and paint works in his Condition Survey Report dated 21 September 2023 at para 16.[64] 204.We also agree with Mr Tam’s comments in his Condition Survey Report dated 21 September 2023 as follows:[65]
205.Mr Benson Wong however suggested that:[66]
206.For the purpose of illustration, a copy of the photo of the front elevation of the Building taken by Mr Benson Wong in 2023 is attached to this judgment as Appendix I[67]. We found the appearance of the Building more or less the same when we conducted the joint site inspection on 7 January 2025. We do not agree with Mr Benson Wong’s assertion that the Building’s balcony barriers and windows, being of different types and colours, resulted in an overall untidy external appearance. 207.On the contrary, we agree with Mr Tam that the visual impact induced by the different balcony barriers and windows is minimal, overall appearance is in good shape and systematicity of the building façade is properly maintained.[68] 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. We do not agree that the Building’s elevations by themselves can be regarded as signs of physical obsolescence especially when Mr Tam stated at para 82 of his Condition Survey Report that: “The external walls of the Subject Building were finished with cement/sand rendering and painting. Generally the external walls were maintained in a fair condition …” 208.There was a dispute on the extent of defect areas found on the external wall between Mr Tam and Building Diagnostic Consultants Ltd (“BDCL”), a contractor engaged by Mr Benson Wong. Mr Tam found 36.11 sq m[69] while BDCL found 115 sq m which included 8 hollow spots identified as Severity Grade 1 by BDCL:[70] Hollow Spot Areas
Cracks and Spalling Areas detected by HRPS-Drone Survey
209.In respect of the 8 hollow spots identified as Severity Grade 1, they were only “Suspected Debonding” which required “further investigation and regular monitoring”[71]. More importantly, Mr Benson Wong answered during cross-examination that the 8 hollow spots could be dealt with as scaffoldings would have to be erected anyway in case hammer tapping or other remedial works are to be carried out. We agree with Mr Tam that the number of “Suspected Debonding” was 8 only, raising no immediate concern. 210.However, Mr Benson Wong opined that the defects of hollow spots, cracks and spalled areas were of different lengths, sizes and shapes scattered throughout the external wall. He therefore grouped them together into repair areas according to the following guidelines:
211.BDCL stated that certain portions of the external walls could not properly be scanned or photographed due to steep angle position and/or there being no better survey position and/or the area being blocked by obstruction:
212.In the above regard, Mr Benson Wong made adjustments to the areas which required repairing by assuming that an additional 80%, 10%, 70% and 50% respectively of the four elevations would also require repairing and arrived at a total repair area of 215.46 sq m:[72]
213.Indeed, the above figures that were extracted from the joint expert statement between Mr Benson Wong and Mr Tam dated 1 December 2023 had been substantially reduced by 42% when compared with the original figures contained in Mr Benson Wong’s Condition Survey Report dated 30 June 2023[73]. However, by reference to the Consolidation Report prepared by BDCL[74], we agree with Mr Tam that the defects were mainly noted on the outer faces of the parapet walls on the roof and concrete projections around the window.[75] As a matter of common sense, those areas that could not be scanned are those areas which are not exposed and would not have suffered from much weathering. For that reason, we consider Mr Benson Wong’s inclusion of extra areas that could not be scanned into the calculations by a simple extrapolation to be inappropriate and the resulting total figure to be exaggerated. 214.To the contrary, Mr Tam had provided concise calculations of the possible debonded/delaminated areas as follows: Rapid Infrared Thermographic Survey[76]
High Resolution Photographic Survey on Cracks
High Resolution Photographic Survey on Spalled Area
215.According to Mr Tam, therefore, the possible defective area on the external walls of the Building is about 36.11 x 2,426.8[77]/1,529.42[78] = 57.64 sq m which accounts for only 2.38% of the entire external wall. We consider Mr Tam’s calculation to be more reasonable than Mr Benson Wong’s but at the same time we consider that some allowance should be given for the fact that there were areas that could not be scanned. Even if we inflate Mr Tam’s calculation by 3 times to arrive at the figure of 170 sq m or thereabouts, that still accounts for only 7% of the total area of the entire external walls. In other words, the extent of defect areas of the external wall cannot be said to be substantial. 216.Following from the above, there is a question on whether full scaffolding at all elevations is required, for instance for repairing the external façades, as suggested by Mr Benson Wong. 217.In Mr Tam’s opinion, when there was only a small amount of defective areas on the external walls that needed repair, gondola and scaffolding (in light wells) at a total cost of $145,750 are preferred over excessive scaffolding, covered walkways and hoarding which, in Mr Benson Wong’s opinion would cost as much as $1,118,100. Mr Tam explained, inter alia, that less scaffolding should be considered in view of the following:[79]
218.We fully appreciate Mr Tam’s concern. We agree with him that full scaffolding can and should be avoided in the present case. 219.There was concern however by Mr Benson Wong that Mr Tam had never explained how his gondola system at the roof can be installed as Roofs A, B and C are privately owned. With respect, this concern was over exaggerated because by clause 13 of the Deed of Mutual Covenant of the Building:[80]
220.Nevertheless, Mr Mok submitted in his closing submissions at para 271 as follows:
221.With respect, as we shall see, we do not accept Mr Benson Wong’s recommendation as aforesaid. We therefore agree with Mr Tam that his proposal to use gondola and scaffolding in light wells should be adopted. Full Painting of the Common Parts 222.Mr Benson Wong found some defects at the ceiling finishes of the Rear Staircase amounting to 11 sq m and defects at the ceiling finishes of corridor/lift lobbies amounting to mere 2 sq m. While he proposed patch repair of the defective areas, he also proposed full repainting. 223.We agree with Mr Tam that full repainting is not necessary in view of the relatively small areas of defects particularly in the corridor/lift lobbies. Even in the case of Mr Benson Wong, he himself admitted that there are no apparent serious defects and repainting is recommended to “ensure the decorative order” only. Asbestos Containing Material (“ACM”) 224.Mr Benson Wong commissioned an Asbestos Investigation Report dated 15 May 2023 from a registered asbestos consultant, Mr Markus Chui (“Mr Chui”). The report identified 3 items that were suspected to contain asbestos materials:[81]
225.According to Mr Chui, those items identified as hazard rank 3 or 4 should be abated as soon as possible. In such regard, Mr Tam agreed to the abatement work for cement sheet and lift brake lining proposed by Mr Benson Wong in the sum of $155,000. Therefore, there was no dispute on this figure which we shall adopt. 226.However, for the cable trunk caulking with hazard rank 1, Mr Chui’s proposal was just to have them remaining intact or to remove them prior to carrying out any maintenance works that may disturb the ACM. We note more particularly Mr Chui’s remark that he could only presume the existence of ACM because buildings constructed in Hong Kong in the mid-1980s or earlier may contain asbestos-containing caulking inside cable trunks. Notwithstanding this, Mr Chui was unable to verify it as opening the cable trunk for inspection will damage the cable trunk cover. But as we shall see, the lifts were in fact modernized in 2002. 227.In such regard and in view of the low hazard ranking for the cable trunk caulking, we agree with Mr Tam that it is at least at this stage that such removal works in the sum of $600,000 as estimated by Mr Benson Wong can be omitted. 228.Mr Benson Wong commented that the Building is sub-standard in terms of fire services installation when compared 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. 229.Particularly, Mr Benson Wong referred to the two shops on G/F of the Building which are not provided with automatic sprinkler system.[82] On 26 November 2021, the Fire Services Department issued Fire Safety Directions Nos FSD/FSDn/9435/2021 and FSD/FSDn/9436/2021 directly to the then owners of Shop A requiring certain fire service improvement works. In addition to the improvement to the existing fire hydrant/hose reel system, an automatic sprinkler installation should be provided though if there be structural or space constraints for retrofitting a standard sprinkler system, an improvised sprinkler system with water supply from a direct town’s main connection may be considered acceptable.[83] 230.Then on 21 July 2023, the Fire Services Department issued a letter to all owners of the Building, stating that:[84]
231.Notwithstanding the express statement quoted above that “the FSD has been adopting a flexible and pragmatic approach in handling individual cases”, Mr Benson Wong’s position was that he had no authority to grant relaxation to the FSI Code requirements. He stated at para 4.3 of his supplementary view, ie Exhibit A7, that “it is advisable for building professionals to include the standard automatic sprinkler system specified in the FSI Code for assessment …” 232.In Wise Grace, the Tribunal indeed had come across the same argument. It stated at para 58(3) that:
233.More particularly, 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. By reference to the FSD Circular Letter No 3/2007 Fire Services Installations and Equipment required under the Fire Safety (Buildings) Ordinance, Cap 572,[85] as well as the Fire Safety Directions mentioned above, Mr Siu in fact proposed connection of the ordinary “wet pipe sprinkler system” directly to the city water supply main with control/alarm valve instead of sprinkler pumps and tank system. He estimated the cost would only be $160,000.[86] We prefer Mr Siu’s view to Mr Benson Wong’s and accept Mr Siu’s estimated costs. 234.As regards fire hydrant and hose reel system, Mr Siu found there has been installed such a system in the Building complete with booster pumps, pipes, hydrant outlets at staircase, hose reel at lift lobby of each floor. Fire services water is originated from fresh water supply system with two sets of fresh water pumps at G/F water pump chamber feeding water to the 4,000-litre water tank which shares with fire services water by connecting the Fire Services booster pump on roof. Mr Siu opined that the entire installation was in very good working order.[87] Again, in compliance with the Fire Safety Directions mentioned above, Mr Siu proposed installing a standby fixed fire pump at the existing fire services pump chamber on roof to complete the existing fire hydrant and hose reel system at an estimated cost of $60,000. Mr Siu also proposed a hose reel set c/w approved type manual break-glass alarm system extended from the Building’s existing systems to the two shops on G/F at an estimated cost of $40,000. We accept Mr Siu’s proposal. 235.In spite of the above, Mr Siu agreed with Mr Benson Wong to replace all existing exit signs with conforming self-illuminated type at a total estimated cost of $56,400. He also agreed with Mr Benson Wong to provide adequate emergency light fittings with self-contained battery for the Building. Mr Siu could not however agree with the $197,400 proposed by Mr Benson Wong. Instead, Mr Siu proposed just $100,000, which we accept. 236.Also, Mr Siu did not agree with Mr Benson Wong that there is no secondary electricity supply for the Building. As a matter of fact, secondary power supply of 100A 3-phase has purposely been designed and installed as backup provision for the essential services of the Building such as lift systems, water pumps, fire services booster pump, general lighting and power supply for the common areas.[88] We agree with Mr Siu. 237.Meanwhile, Mr Benson Wong also commented in his Condition Survey Report dated 30 June 2023 that “most of the existing doors installed to the exits from flats and to staircases on upper floors of the Building … are not fire rated doors”.[89] Mr Siu responded that by reference to the approved General Building Plans, 2” H W S C[90] DOOR was designed / specified as the entrance door of the flat units and 2” H W S C DOORS WITH W G IN UPPER PANEL was designed / specified as the doors for the protected lobby.[91] They were approved by the Building Authority that the elements of construction at that time could withstand a fire resistant period of 1 hour which is the same as required for the fire resistance rating under the Code of Practice for Fire Safety in Buildings 2011. We are surprised by Mr Benson Wong stating in the joint statement with Mr Tam that there has been “enhancement requirement from fire resisting door of 1-hour FRP to fire rated door of 60 mins”.[92] We do not agree there is a difference between 1 hour and 60 minutes. 238.While Mr Siu conceded that some of the doors have been replaced, we note in the 2015/2016 renovation that there were “fire-rated enclosure to non-emergency facilities inside staircases” and “replacement of smoke doors at front staircase”.[93] Particularly, Mr Benson Wong included photos of various staircase doors numbered 5.5-5 to 5.5-10 in Appendix 7 of his Condition Survey Report, his description in respect of each of those doors was that “[it] is a fire resisting door and in fair condition”.[94] Therefore, there should be no need to replace the doors. 239.The Building has 2 lifts with one serving the G/F and upper floors of odd numbers and the other for the G/F and upper floors of even numbers. Mr C F Hung, a Registered Lift Engineer engaged by Mr Benson Wong to carry out a condition survey of the lifts in the Building, found both lifts were modernized in 2002[95]. 240.Mr Hung concluded in his survey report dated 13 January 2023 as follows:[96]
241.In response, however, Mr Tam referred to the Legislative Council Brief in January 2001 on the Fire Safety (Buildings) Bill which has later become the Fire Safety (Buildings) Ordinance in 2007. Para 12 of the Brief stated as follows:
242.By reading this Brief, we agree with Mr Tam that the Fire Safety (Buildings) Ordinance was tailor-made for the old private buildings to impose improved or additional fire safety measures in view of the actual fire risk of the existing buildings. We agree therefore with Mr Siu that the existing firemen’s lift solely serves the domestic portion which has relatively lower fire load and flow of people. The firemen’s lift is good enough to be used as a firemen’s lift and no improvement work is required as per the Fire Safety (Buildings) Ordinance. As well, Mr Tam had illustrated at Appendix H of his Condition Survey Report dated 21 September 2023 that a firemen’s lift lobby has been provided.[97] This rebutted Mr Benson Wong’s allegation that the upper floors are not provided with a firemen’s lift lobby separating the fireman’s lift and the floors. 243.Then Mr Hung complained that the two lifts had not been upgraded to become an accessible lift. He referred to the “Design Manual Barrier Free Access 2008”, by Division 19 of which, barrier free access facilities such as an accessible lift with its lowest landing at ground floor and external public pavement should be provided for the Building. However, the lift lobby of the Building is in fact abutting Wong Nai Chung Road save for a small kerb. Ms Cheng, being the daughter of R4, gave evidence that her late mother, who had been sitting on wheelchair, had no difficulty in going in and out of the Building especially with her or a domestic helper. Having carried out our joint site inspection on 7 January 2025, we agree with Ms Cheng’s observation.[98] 244.Similarly, Mr Hung also referred to the minimum dimension of a lift which should be 1200 mm x 1100 mm wide while the two lifts in the Building are of dimension around 1300 mm x 960 mm only. He also referred to Clause 10.1 of the Fire Safety Code 2011 which states that:[99]
245.In contrast, the actual rated loads of L1 and L2 are 550 kg for 7 passengers only and the car floor area was 1.248 m2. In short, the present firemen’s lift for the Building can accommodate 1 person less than the prevailing code whereas the difference in car floor area is mere 0.1 m2. The suggested lack of the required space and rated load capacity in Lift No 1 (ie the assigned fireman’s lift) has been exaggerated. 246.All in all, while we agree that obsolescence is a concept of comparison and we have no objection to referring to prevailing and updated requirements, certain lacking of or non-conformance with the latter does not necessarily render the existing development below reasonable, serviceable and safe standard. Therefore, we agree with Mr Siu’s conclusion at para 65 of his report that: “The existing lifts are capable to serve the wheelchair users and perform the function as accessible lifts with well-designed property management guideline and the caretaker’s attendance.”[100] We do not regard this as a fatal deficiency that alone can justify its demolition for redevelopment. Equipotential Bonding Connections 247.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. Here, Mr Siu remarked that proper earthing system had been provided for the Building with earthing terminal inside the main switch cubicle which is connected to an earthing conductor installed together with the rising main for earthing distribution on each floor in accordance with the Code of Practice for the Electricity (Wiring) Regulations.[101] 248.In addition, equipotential bonding installations had been observed on the extraneous conductive parts in the common areas of the Building such as metallic parts of door and door frames, water pipes etc. However, as all electrical installations inside staircase are enclosed properly in FRR[102] enclosure, no conductive components could be measured within 2 m to all staircase handrails and metal window frames etc. In Mr Siu’s opinion, equipotential bonding for the latter is not required. 249.We accept Mr Siu’s professional opinion. 250.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. We agree with Mr Siu. 251.By reference to the approved Drainage Plan for the Building, Mr Benson Wong found that the underground soil and waste water from above after discharging into underground drains in the open yards, run underneath and through the private areas of the shops on G/F with intermediate manholes located inside a small room in each of the two shops. This fails to comply with Paragraph 3(a) of the Practice Note for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers APP-93 which was only issued by the Buildings Department in August 1997. By this requirement, all common underground drains for new buildings shall run in a space or land which is ‘sterilized’ or otherwise designated as common parts of the building so as to facilitate future inspection or maintenance. 252.Obviously, the above requirement is applicable only for new buildings. Mr Tam considered that the drainage maintenance issues were thoroughly considered and the manholes are placed in the open yards, common corridor or isolated rooms which are physically “empty” and allow drainage inspection / maintenance. We agree as any inspection and repair, like routine inspection, clearing of blocked drains or internal lining works for cracked drains, could be carried out at the locations of the manholes. It is seldom necessary 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 for the Building which appears to have been well-maintained. 253.In any event, as stated by Mr Tam in his Condition Survey Report dated 21 September 2023 at para 52, the owners or the tenants on G/F would be the parties who suffer most in case where there is a blockage/ damage of the underground drainage. They would then have no hesitation or impose no difficulty on the necessary inspection/ maintenance/ repair works.[103] Hence we consider that the issue raised by Mr Benson Wong is a not a serious one. 254.There is no dispute between Mr Benson Wong and Mr Tam that there is no lightning protection system on the roof of the Building. Nevertheless, according to Mr Siu, this item does not even come under a checklist item for periodic inspection, testing and certification of fixed electrical installations (WR2 inspection). 255.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’s proposed cost estimated in the sum of $70,000. 256.Mr Benson Wong found that the following building management systems are lacking in the Building:
257.We agree with Mr Tam that those items are not strictly a necessity. 258.On the other hand, Mr Benson Wong also 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. Mr Tam rebutted however that at the G/F lobby, there is a guard booth provided with all essential security and monitoring systems, a notice board posting all communication package amongst occupants and property management team. There is no deficieny in telecommunication services in the Building and all such provisions from different fixed telecommunication network services (FTNS) operators have been installed properly at staircase of each of the floors readily available for subscription. These provisions could ensure up-to-date data access and digital TV enjoyment for residents and occupiers in the Building.[104] We agree. Conclusion on Age of the Building 259.Built in 1967, the age of the Building has well passed the conceptual design working life of 50 years where the costs of maintenance and repair can be astronomical. However, the Building appears to be well maintained. Only 36 defects of cracks and spalling were found on its structural members. Overall, we find it to be in a fair structural condition. We appreciate that high chloride content in concrete will increase the rate of embedded steel bar corrosion. However, the chemical process of steel under chloride ion attack can only be completed with adequate moisture in the concrete matrix around the steel bar in order to create the electro-chemical reaction of corrosion. Here, the corrosion grade of the rebars were mostly 2 to 3 with minimal loss of section. Nearly all the tested strengths of concrete are much higher than those specified in the design. Most probably, the corrosion of the embedded steel bar has been slowed down after the major renovation in 2015/2016. Similarly, despite the depth of carbonation test showed the alkaline nature of concrete had been neutralized by carbon to a certain extent, we agree with Dr Lau that the deterioration of the structure is not in the late stage of the propagation phase. Otherwise, there should have been more than 36 defects found in the Building. Therefore, the physical age of the Building is therefore not a major concern. 260.As for physical obsolescence, while there exist different balcony barriers and windows on the external façade of the Building, overall speaking, the building façade appears to be in good shape and is properly maintained. 261.Turning to the four aspects of functional obsolescence that Mr Benson Wong had raised, including
262.In accordance with the guidelines set out in Intelligent House, we have reviewed all those aspects above and agree with Mr Tam 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. 263.For the above reason, we conclude that redevelopment of the Lot is not justified on the statutory ground of age. 264.In this section, we shall first look at the repair and maintenance works which had been carried out at the Building in the past. 265.When Mr Benson Wong was preparing his Condition Survey Report dated 30 June 2023 or even his joint expert statement with Mr Tam dated 1 December 2023, his attention was not brought to the fact that the Building had undergone major renovation in 2015/2016 at a cost of $6,800,000 under supervision of Fotton Ela Architects Ltd.[105] 266.During cross-examination, Mr Benson Wong agreed with Mr Tam that his proposed remedial works for the building façade particularly which amounted to $13,441,100, representing some 58% of the repair cost proposed by him[106], had duplicated the renovation works undertaken for the Building.[107] And because of this, we are afraid that his opinion on repair costs had not been based on full facts and is therefore not reliable. 267.As stated by Mr Tam, evidence of the renovation can be reflected in the newly fire rated door, fire rated enclosure for the building services in the protected lobbies/staircases, replacement of external drains and finishes on external walls. In addition, by reference to the street view from Google map in December 2016, Mr Tam found that an unauthorized roof top structure was removed and different stylish floor tiling was noted during his inspection. We agree with his view that complete re-roofing works had been carried out and the waterproofing layer on the roof had been properly maintained. However, according to the Ponding Test Report prepared by BDCL dated 5 May 2023, there was one water mark of 1.5 sq m found on the ceiling of Flat B, 12/F.[108] 268.Indeed, Flat B on 12/F had a history of suffering from water seepage. The letter from the contractor for the 2015/2016 repairs dated 20 January 2017 recorded that the owner of this unit and the contractor both had done some waterproofing works on Roof B.[109] 269.Notwithstanding the above, we agree with Mr Benson Wong’s proposal to replace the existing waterproofing and coverings to the common roof area, Roofs A and B for the reason that the common roof areas, Roofs A and B are interconnected with each other. And the test findings indicated there was water seepage scattering throughout the ceiling of the common areas, Flat A and Flat B on 12/F, making patch repairs of water seepage over these roof areas impractical and ineffective.[110] 270.However, by reference to the photos 5.4-12 to 5.4-17 in Appendix 7 of Mr Benson Wong’s Condition Survey Report dated 30 June 2023[111], we do not agree with him that the inside surfaces of the parapet walls are in a poor condition. These photos may be compared with those taken by Mr Tam, being R1-R15 in Appendix K2 of his Condition Survey Report dated 21 September 2023[112]. We agree with Mr Tam that the localized cracks could be remedied by patch repair 271.At this juncture, we must state that we agree with Mr Benson Wong that “preventive repair / maintenance may be considered in order to maintain the existing condition till the next repair cycle” to prevent the concerned components, finishes or service installations from further deterioration. 272.Indeed, the Mandatory Building Inspection Scheme (MBIS) and the Mandatory Window Inspection Scheme (MWIS) are measures of preventive maintenance which cover the five areas concerning the major safety issues of building and windows of building to be improved respectively.[113] The rectification and repair works to be carried out shall make the Building safe until the next cycle of inspection. 273.On 22 August 2014, the Buildings Department had served 25 MBIS notices and 38 MWIS notices requiring the respective owners of the common parts and private units to carry out prescribed inspections and necessary repairs. As at December 2023, only the following 2 MBIS notices remained outstanding and were complied with:
274.The reason perhaps for R2 not having complied with the MBIS notice is that there is an extant Building Notice No WNZ/U09-012/0008/06 dated 9 August 2007 which requires the owner to remove the unauthorized flat roof structure.[114] 275.Save for the above Building Notices or Building Orders which concerns unauthorized structures, the high compliance rate with the MBIS and MWIS notices show that the individual owners and the owners’ corporation had put in efforts to maintain the Building in good condition and in compliance with the latest legislative requirements. In such regard, we do not agree with Mr Benson Wong to include the costs in the sum of $130,000 (ie $80,000 + $50,000) for appointing the qualified persons at sections 2.10 and 2.11 of his joint statement with Mr Tam dated 1 December 2023[115] to carry out the prescribed MBIS and MWIS inspections in the present case. Unauthorized Building Works (“UBWs”) 276.In his Condition Survey Report dated 30 June 2023, Mr Benson Wong 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:[116]
277.In fact, both the valuation experts, Mr Chan and Mr Kwan, adopted similar standards and found that most of the domestic units were all in fair internal conditions.[117] 278.Notwithstanding the above, Mr Benson Wong considered that those units with UBWs should automatically be classified to be in “poor” condition. Mr Tam disagreed. This therefore raises the general question of how UBWs should be treated in the context of assessing the statutory criterion of “state of repair” under the Ordinance. Are UBWs necessarily to be treated as deficiencies in a building in which they exist in the compulsory sale context? More specifically, is the Tribunal bound to conclude from the presence of an UBW (in whatever form) that the building in question is not in a tenantable condition? An interrelated question is this – must the costs of rectifying the UBWs be treated as part of the repair costs to bring the building to a tenantable condition? 279.We accept Mr Mok’s submission that, applying Lo Yin Ming v Appeal Tribunal (Buildings) [2011] 3 HKLRD 586 (at paras 28 and 29), as the construction of the Building was governed by the Buildings (Amendment) Ordinance 1959, any works undertaken in the absence of any approved plans by the Building Authority would be considered as UBWs, even if it can be proved that the works had been completed before the Occupation Permit was issued. On that premise, we shall treat the 6 items identified by Mr C M Wong (as detailed in para 292 below) as UBWs, which are in violation of the Buildings Ordinance. 280.In the context of enforcement actions taken by the Building Authority, an owner of premises in which UBWs are found does not have any right or legitimate expectation to retain them: Magic Key Ltd v Appeal Tribunal (Buildings) [2020] HKCFI 1716 at para 38. 281.Mr Mok submitted that once a structure is found to be an UBW, it amounts to a deficiency in the building in the context of section 4(2)(a)(i) of the Ordinance, and the costs of demolishing the UBW and reinstating the building in accordance with the approved plans must be counted as part of the repair costs when considering whether redevelopment is justified. 282.In our view, the existence of UBWs in a building does not in itself lead to the conclusion that the building is not in a tenantable condition. We do not think that there is a general proposition of law to that effect. The nature and extent of the UBWs, whether they pose safety issues, and the likelihood of the Building Authority taking enforcement actions in respect of them are all relevant factors which need to be looked into before the Tribunal comes to a conclusion on whether the UBWs will render the building untenantable. 283.In the compulsory sale context, the ultimate question which the Tribunal needs to answer is whether there is justification for pulling down the existing building and building a new one in its place. Consider a scenario where there are UBWs at the building in question but they are all very minor in nature posing no safety issue at all and therefore carrying a very low risk of enforcement by the Building Authority. As a matter of common sense, it is difficult to see how the existence of such UBWs would be a matter justify the pulling down of the building. As each UBW is different and its impact on a building and how it would affect the enjoyment of the building by its occupiers and visitors is different, the Tribunal in each case will need to consider the UBWs individually and answer the question whether they would render the building untenantable with respect to the specific circumstances in each case. 284.On authorities, Mr Mok referred us to Intelligent House at paras 261 to 262 and Able Luck Development Ltd v Public Global Investments Ltd at paras 176(d), 177 and 196. He submitted that these two authorities have firmly established that for the purpose of assessing the costs for restoring the building to a tenantable condition, any costs of demolishing UBWs and reinstating the building to its approved plans should be included. The reasoning is this:
285.Mr Mok highlighted that the Tribunal in Intelligent House stated the above propositions (at para 262) as a matter of principle, and that principle should be followed. Able Luck is an example of the Tribunal including the full costs of reinstating unauthorized constructions in the total repair costs. 286.In our view, Intelligent House does not lay down any general proposition that whenever there is an UBW, it will render the building untenantable and hence the costs of rectifying it should count towards the total repair costs. What is said in para 262 must be read in its proper context. And the proper context is that in that case, it had been accepted by the respondent that the UBWs in question ought to be demolished. It is against this background that the Tribunal stated that the costs should be included in the total repair costs. 287.The relevant paragraphs providing the context can be found in paras 189, 220, 224, 226(4) and 261.
288.Hence, on a proper reading of Intelligent House, para 262 is an answer to the question as to whether, as a matter of principle, the costs of demolishing an UBW should be included in the total repair costs in a situation where it is accepted (or ruled) that the UBW ought to be demolished in the first place. It is not an authority saying that the existence of UBWs would, as a matter of principle, always mean that the building is not in a tenantable condition. 289.As for Able Luck, it is clear from the judgment that the UBWs concerned were unsafe structures. It was stated, at para 176(d), that there was an unauthorized rooftop structure and five unauthorized staircase housings, which were “not structurally sound on their own”, and “their loads have overloaded the roof slabs and the structural frames of the Building”. There was no discussion at all of any general principles on UBWs. It is tolerably plain that the ruling that the costs for removing these unsafe structures should be included was due to safety concerns. It is not therefore an authority which supports Mr Mok’s submission. 290.In summary, we conclude that the existence of UBWs on its own does not automatically lead to the conclusion that the building would become untenantable for that reason and the costs for demolishing the UBWs should necessarily be included in the total repair costs. It follows that we do not agree with Mr Benson Wong’s classification of “poor” condition solely on the basis of the existence of the UBWs found in the Building. 291.We now turn to consider the issue of UBWs concerning the Building. 292.In the present case, there are 6 items of UBWs identified by Mr C M Wong as they are not shown on the latest building plans approved on 7 February 1967, which was only 5 months before the issue of the Occupation Permit on 28 July 1967:[118]
293.There is no dispute between the applicant and the 1st respondent over the treatment of UBW1, UBW2 and UBW4. For UBW1, it was agreed that it should be removed but the quantum of the repair costs was not agreed. For UBW2, it was agreed that there should be reinstatement and the estimated costs of the two experts were the same. For UBW4, neither expert had formulated any work item in respect of its reinstatement and therefore this item would not have any impact on the quantum of repair costs. Solely based on the above agreement reached between the applicant and R1, we need only deal with UBW3, UBW5 and UBW6 in this Application.[119] Alteration of Balconies (UBW3) 294.All the front balconies have been extended to the front with a standardized design of floor bulkhead extensions. According to the approved plans, the balconies were shown to be rectangular in shape but they are now trapezoidal in shape with the depth of the floor slab of the balcony increased and extended. This is UBW3, which can be seen in the photograph at para 3.2.5 of of Mr Chan’s Supplemental Valuation Report dated 29 June 2023, which is reproduced in Appendix II of this judgment[120]. 295.Dr Lau stated in his Structural Assessment Report dated 21 September 2023 at para 105 that the alterations were constructed of the same shape, size and appeared on all flats starting from 1/F. The chance of every flat owner working together to construct balconies of the same style and size is most unlikely. He was of the opinion that the balconies were designed by a registered structural engineer or authorized person and constructed by the developer before the issue of the Occupation Permit.[121] 296.Mr C M Wong disagreed. In his evidence in chief, based on the unnecessary thickness of the structural element constructed on the underside of the balcony extension as captured in the photograph marked as Exhibit A1-3, he gave his opinion that the balcony extensions were constructed after the issue of the Occupation Permit. By looking at the appearance of the façade of the Building, we agree that it is more likely that these structures were constructed by the developer with the help of his professional team. There is then a dispute on whether the developer constructed these features before or after the issue of the Occupation Permit. 297.In light of the above, we requested the applicant to provide the transaction history of the flats in the Building. We note that the first agreements for sale and purchase for 18 out of the 38 units of the Building were signed before the issue of the Occupation Permit on 28 July 1967:[122]
298.That is, before the issue of the Occupation Permit, almost half of the domestic units of the Building had been sold on the basis of the Agreements for Sale and Purchase by the developer, Luen Sun Investment Co Ltd (“Luen Sun”). On the face of it, there were no apparent reasons for Luen Sun to spend money on constructing UBW3 after the sale of these domestic units and the issue of the Occupation Permit. 299.Mr Mok queried this because of the corresponding late assignments:
300.Mr Mok submitted that the long lapse of time would have given more than sufficient time for Luen Sun to complete the construction of UBW3 after the issue of the Occupation Permit. It was also suggested that 1967 was the year where Hong Kong was hit by the well-known large-scale riot which had a severe and adverse impact on the property market, and Luen Sun would have sufficient incentive to do whatever was necessary to ensure that the purchasers would complete the purchase of the units. 301.At the invitation of the Tribunal, the applicant and the 1st respondent had spent some time at the trial looking into the circumstances surrounding the sale of the units in the Building. Observations were made on what seem to be rather unusual features in the payment of the purchase price in respect of some of the units, as revealed by the records from the Land Registry. For instance, some purchases were settled by payment in instalments but the assignments were recorded to have taken place on a date prior to the corresponding dates of the last scheduled instalments. The issue of whether Luen Sun was in financial difficulties at that time was also explored in light of the fact that the mortgagee bank of the lot was made a party to the deed of mutual covenant. (If Luen Sun was having financial difficulties, this may lend weight to the argument that it would have no resources to carry out works to construct UBW3.) 302.Having considered the materials, we feel that we cannot comfortably make any factual finding one way or the other as to the circumstances in which the sales and assignments of the units took place all those years ago, merely based on what must be incomplete materials before us. There is simply too much speculation involved. In any event, however, as a matter of inherent plausibility, we find it difficult to accept Mr Mok’s submission that Luen Sun would have constructed UBW3 as an incentive to entice the purchasers into completing the transactions. It seems unrealistic to suggest that slightly extending the balcony and changing it from a rectangular shape to a trapezoidal one would be a good or effective incentive. We therefore find that UBW3 was constructed by the developer before the issue of the Occupation Permit. 303.The above deals with when and by whom UBW3 was constructed. The next relevant matter is whether UBW3 poses any safety issue. We find that it does not, based on the following:
304.Next, we turn to look at the risk of enforcement in relation to UBW3. 305.In this regard, we agree with Mr Li’s submission that the risk of enforcement is low for the following reasons. We have found above that UBW3 does not pose any safety issue. We have also found that it was constructed by the developer before the issue of the Occupation Permit in mid-1967. It has therefore existed for as long as the Building itself was built. We further agree with Mr Tam’s opinion that UBW3 is minor in nature. There is no suggestion that there has ever been any enforcement action against it. 306.At the trial, again, at the invitation of the Tribunal, two matters were also looked into by the applicant and the 1st respondent for determining the risk of enforcement against UBW3. First, a real life example of the Building Authority not taking enforcement action against unauthorized structures found at balconies of almost all the flats in a large residential estate known as Hong Kong Garden (豪景花園) at No 100 Castle Peak Road, Tsing Lung Tau in New Territories. Second, the proposed amendments to the Buildings Ordinance put forward by the Development Bureau in late December 2024 reflecting potential changes in its enforcement policy to allow minor unauthorized structures. 307.The case of Hong Kong Garden concerned unauthorized building works done by nearly all the individual owners of the estate involving converting a flower box on the exterior of the unit concerned into a balcony with railings (probably because, as built, the slab of the flower box was at the same level as the interior of the unit). That led to enforcement action by the authority. However, as recorded in a minute of a meeting of the Tsuen Wan District Board on 29 May 2012, an understanding was reached that the Buildings Department would not insist on taking enforcement actions provided that certain conditions were met, including that the protective barriers constructed by the owners should be certified by a registered structural engineer to be safe and complying with applicable standards. These structures still remain up to now, as shown by the photographs taken by Mr Tam in the course of the trial. 308.The case of Hong Kong Garden is an example of how the Buildings Department has handled unauthorized structures of a large scale found in residential buildings. The fact that it did not take any enforcement action there of course does not mean that it will do the same in our case. When assessing the risk of enforcement, each case turns on its own facts. However, we take note that the unauthorized structures in Hong Kong Garden are of a far more serious nature than UBW3 in the Building. 309.The second matter is the proposed changes to the Buildings Ordinance announced in December 2024. 310.The following paragraphs of the consultation document, “Proposed Amendments to Buildings Ordinance”, gave an outline of the proposed amendments concerning UBWs and explained their rationale:[124]
311.There was an argument at the trial over whether UBW3 would come within the new scheme such that it would be either validated or tolerated if the proposed amendments are passed. 312.Having looked at the matters which are relevant to the evaluation of the risk of enforcement as regards UBW3, we are of the view that the risk is low, given that it was built by the developer at the time of the construction of the Building and before the issue of the Occupation Permit, it has existed for a very long time and it poses no safety issue. So far, there has been no enforcement action. Nor has there been any indication that any such action is forthcoming. It is not possible to predict whether it will be validated under the new scheme when the legislation is still at the amendment stage. However, given the past history, there is clearly a possibility that it will either be validated or tolerated under the new scheme, if passed. 313.For this reason, we conclude that the mere existence of UBW3 does not render the Building to be in an untenantable or “poor” condition. There is no need to include any costs of demolishing UBW3 into the total repair costs. Addition of Hood and Sill Projections and Vertical Fins for Most of the Windows (UBW5 and UBW6) 314.UBW5 and UBW6 are related. UBW5 is the addition of hood and sill (horizontal) projections, and UBW6 the addition of vertical fins, for most of the windows. They can be seen in the photograph marked Figure 6-13 of Mr C M Wong’s Structural Assessment Report dated 28 June 2023[126]. It is now reproduced at Appendix III. Dr Lau considered these projections architectural features. We agree with that description. Furthermore, what we have said above in relation to UBW3 equally applies to these two UBWs. 315.Accordingly, we reach the same conclusion that the existence of UBW5 and UBW6 do not render the Building to be in an untenantable or “poor” condition. There is no need to include any costs for removing the UBWs into the total repair costs. 316.Mr Benson Wong’s estimation of the total repair costs for the Building was in the sum of $33,653,277. R1 had engaged Mr S C Tse, a quantity surveyor, as the construction cost expert to estimate the amount of repair costs needed. Mr Tse’s estimation was in the sum of $7,437,586. On the whole, we prefer Mr Tse’s estimation to Mr Benson Wong’s for the following reasons. 317.It is unfortunate that Mr Benson Wong had not been aware of the renovation in 2015/2016. During cross-examination, he admitted that his estimated repair costs would have overlapped with the $6,800,000 spent. In the course of the trial, he tried to compare the repairs done with what he proposed.[127] He did not dispute the works that had been done but suggested in some cases that “[t]he repair works are not duplicated as these are based on localized defects identified in [his] condition survey in June 2023.” However, we find that his proposed costs still far exceed what is required to be spent to rectify the 36 defects. 318.Having inspected the Building ourselves on 7 January 2025, we consider that Mr Benson Wong had highly exaggerated the works required to be done. 319.Without going into the details, Mr Tse’s estimate is shown as follows:[128]
320.We consider that $300,000 should be added to “Roof Areas” for replacing the existing waterproofing and coverings to the common roof area, Roofs A and B, the item for “Roof Areas” should therefore become $357,100. The “Sub-Total” can then be rounded up to say $5,000,000. 321.Subject to some minor adjustments, we accept Mr Tse’s estimate and find that the estimated cost of repair should be about $7,883,897[131]:
322.Mr Benson Wong, with the assistance of Mr K C Tang (“Mr Tang”), a quantity surveyor, estimated the cost for constructing a new superstructure similar in physical and provision aspects to that of the Building to be in the sum of $77,370,000. By comparing the repair costs of $7,883,897 for restoring the existing superstructure to a tenantable state of repair with the construction cost, this gives only 10%. This gives an idea that the Building is in a fair state of repair. 323.Indeed, the ratio of repair costs to the EUV appears to
be more useful in the present case. The repair costs required to put the Building into up-to-date
tenantable condition would be 324.We repeat para 259 above, which equally applies to the consideration of the ground of state of repair. In addition, we agree with Dr Lau that, to a large extent, the 36 defects of cracks and spalling were merely superficial defects which could be rectified by the patch repair method[135]. 325.Indeed, the Building had undergone renovation works incurring some $6,800,000 in 2015/2016. Most of the deficiencies when compared with today’s standard can be dealt with by spending some $7,883,897. This accounts for merely 1.17% of the market value of the Building in 2022, which in our view is readily affordable by owners of the Building. 326.While every case is different, there is some similarity between the present case and Bright Full. Adopting the same approach, having regard to the age, character, and locality of the Building, we are of the opinion that the repair costs required are affordable to prospective purchasers of residential units in the Building which lies in a prestigious location in Hong Kong. 327.For the above reasons, we are of the view that redevelopment is not justified due to the state of repairs of the Building. Conclusion on Age and State of Repair 328.When both grounds of age and state of repairs are taken collectively, for the same reasons stated above, we are also of the view that redevelopment of the Lot is not justified due to the age and state of repair. 329.The Application is therefore dismissed. SECTION 4(2)(b) – WHETHER THE APPLICANT HAS TAKEN REASONABLE STEPS 330.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. 331.Although we have decided not to grant the order for sale, we shall go on to briefly deal with the issue of reasonable steps. 332.According to the witness statement of Mr Yu dated 30 June 2023[136], soon after the commencement of the Application on 26 August 2022, the applicant had through its solicitors, Messrs Lo & Lo, made an offer to each of the respondents by a letter dated 5 July 2022 (the “1st offers”). Then, on 3 January 2025, the applicant made another round of offers (the “2nd offers”). The offers, as shown below, were made based on the pro-rata share of the EUV of the corresponding respondents’ units as a proportion of the total EUV of the Building multiplied by the RDV of the Lot based on the then valuations of Savills:
333.The approach which the Tribunal should follow when determining the question of reasonable steps is set out by the Court of Final Appeal in Capital Well: :
334.Obviously, by reference to the 1st offers made to the applicant on 5 July 2022, they were much higher than the EUV of the respective units as determined by the Tribunal. 335.We appreciate that the applicant’s 2nd offers were lower than the 1st offers. Section 4(2)(b) does not specify whether pre-application and/or post-application reasonable steps should be considered but it requires 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 Ltd v Cibean Development Company Ltd LDCS 42000/2011, 31 May 2013, the Tribunal, having reviewed the provision, stated at para 61 of the judgment that:
336.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. 337.Ms Cheng is the daughter of R4 who owned Flat B, 2/F of the Building but passed away in 2022. In her closing submission dated 17 March 2025, she mentioned there was a higher offer to her late mother in the sum of $30,679,908. Her late mother was willing to accept this offer but unfortunately the title deed of her unit was deposited in the safety box of the Happy Valley Branch of Bank of China which was closed during the pandemic. There was also some issue with respect to her late mother’s name on the title deed. When all the above had been resolved on 14 March 2022, the offer of $30,679,908 from the applicant had lapsed. We, however, find that there is nothing wrong for the applicant to subsequently make the 1st and 2nd offers which were lower than the original offer made to R4. 338.Market prices had changed since November 2021:
339.By reference to the above table, the market values for various types of residential premises were dropping rapidly from the first half of 2022. The applicant was not obliged to make the same level of offer as it did previously to R4 or her administratrix. 340.On the evidence available, therefore, we are satisfied that the applicant has taken reasonable steps to acquire all the undivided shares in the Lot including negotiating for the purchase of such of those shares as are owned by R1, R2, R3, R4, R5 and R6 on terms that are fair and reasonable. 341.We have concluded that redevelopment of the Lot is not justified, whether on the ground of age or state of repair or both. For that reason, the Application is dismissed. 342.We make a costs order nisi that the applicant do pay the costs of these proceedings (including any reserved costs) to R1, R2, R3, R4, R5 and R6, with a certificate for two counsel, to be taxed on the High Court scale if not agreed. Unless any party applies by summons to vary the costs order nisi, it shall become absolute upon the expiration of 14 days from the date of handing down of this judgment.
Mr Mok Yeuk Chi, instructed by Messrs Lo & Lo, for the applicant Mr C Y Li, SC, leading Mr Solomon Lam and Ms Jamie Pang, instructed by Messrs Kwok Hei Law Office, for the 1st respondents Mr Chan Kwan Ho Lambert, of Messrs King & Wood Mallesons, for the 2nd respondent The 3rd respondents appeared in person The 4th respondent appeared in person The 5th respondent was represented by Ms Ip Mei Ki Maggie, with leave of the Tribunal The 6th respondents appeared in person (but were absent on 6 and 7 January 2025 and 23 July 2025)
[Rest of page deleted] [1] See Exhibits A13-6, 7, 28 & 29 and Bundle G/930-931. [2] See Bundle G/929. [3] See Bundle E2/5448. [4] See Bundle E2/5262. [5] See Bundle E2/5264. [6] https://www.bd.gov.hk/doc/en/resources/codes-and-references/practice-notes-and-circular-letters/circular/CL_CBOCEUBWA2023e.pdf. [7] https://www.info.gov.hk/gia/general/202407/17/P2024071700466.htm. [8] https://news.mingpao.com/pns/港聞/article/20250625/s00002/1750787975840/蟠龍僭建25宗提檢控-3業主已定罪判罰款. [9] See Bundle E2/5453-5455. [10] See Bundle E2/5456. [11] See Bundle E2/5276. [12] Pedestrian flow further down the street is broken by a series of retaining walls along which no shops are located. [13] See Exhibit A19. [14] See Exhibit A14-1. [15] See Bundle E2/5465. [16] See Bundle E3/5676. [17] See Bundle E3/5742. [18] See Bundle E3/5741. [19] See Bundle E3/5744. [20] Counsel’s submissions were accepted by the Tribunal in para 146. [21] See Bundle D1/3550. [22] See Bundle D1/3554. [23] See Bundle D3/4373. [24] See Bundle D1/3950. [25] Mr C M Wong prepared his Structural Survey Report in June 2023. At that time, the Building was 56 years old. [26] See Bundle D4/4872. [27] See Bundle D2/4130. [28] Bundle D1/3573. [29] See Bundle D4/4876. [30] https://www.bd.gov.hk/doc/en/resources/codes-and-references/code-and-design-manuals/CoP_MBIS_MWISe.pdf. [31] See Bundle D3/4381. [32] See Bundle D3/4380. [33] See Exhibit G/3/930. [34] See Bundle D1/3551. [35] See Bundle D1/3574-3575. [36] See Bundle D1/3583. [37] See Bundle D3/4385-4386. [38] See Bundle D1/3552-3553. [39] See Bundle D1/3583 & D3/4394-4395. [40] See Bundle D1/3544-3547. [41] See Bundle D1/3615. [42] See Bundle D3/4469-4472. [43] See Bundle D4/4796. [44] See Bundle D4/4798-4799. [45] See Bundle D1/3551. [46] See Bundle D2/4126. [47] See Bundle D4/4881. [48] The time between the initiation of corrosion and the cracking of the concrete cover represents the propagation period. Once corrosion has started, there is a loss of cross-section in the reinforcement, mechanical properties deteriorate, the cover concrete spalls, and the bond strength between the reinforcement and the concrete weakens. [49] See Bundle D4/4881. [50] See Bundle D3/4363. [51] See Bundle D1/3552. [52] See Bundle D1/3586. [53] Crushed rock is used nowadays. [54] See Bundle D4/4804 at para 2.8.2.1 [55] See Bundle D1/23/3572 at para 6.2.2. [56] See Bundle D1/3597. [57] See Bundle D1/3596. [58] See Bundle D3/4430. [59] See Bundle C1/555. [60] See Bundle D3/4719. [61] See Bundle C5/2370: https://www.legco.gov.hk/yr09-10/english/hc/sub_leg/sc05/papers/sc050209cb1-1163-1-e.pdf. [62] See Bundle C1/522 at paras 7.2-7.3. [63] See Bundle C1/427 at para 4.4.2. [64] See Bundle C5/2116-2117. [65] See Bundle C5/2117. [66] See Bundle C1/428. [67] See Bundle C2/913. [68] See Bundle C5/2117. [69] See Bundle C8/3190-3191. [70] See Bundle C1/674. [71] See Bundle C1/573. [72] See Bundle C8/3410-3418. [73] See Bundle C2/808. [74] See Bundle C1/678-681. [75] See Bundles C1/678-681 and C8/3191. [76] See Bundle C5/2134-2135. [77] Mr Tam’s calculation of external wall area. [78] Mr Tam’s calculation of scanned area. [79] See Bundle C5/2138-2139 at para 88. [80] See Bundle E1/4948. [81] See Bundle C2/887. [82] See Exhibit A7. [83] See Bundle C6/2405.3 - 2405.5 and C6/2405.8 - 2405.10. [84] See Bundle C6/2400. [85] This circular which was issued on 8 August 2007 provided examples of possible relaxation in case constraints on construction that would make compliance with the fire safety requirements difficult. [86] See Bundle C5/2217.9. [87] See Bundle C5/2217.8. [88] See Bundle C5/2212 at para 54. [89] See Bundle C1/434. [90] H W S C stands for hard wood solid core. [91] See Bundle C5/2122 at para 35. [92] See Bundle C8/3138. [93] See Exhibit A13-7 & 29. [94] See Bundle C2/941-943. [95] See Bundle C2/820. [96] See Bundle C2/831. [97] See Bundle C6/2430-2432. [98] The Building must be distinguished from the building in question in Crown Centre where residents from the upper floors after reaching the lobby have to negotiate down a flight of steps of 1.067 m in width before they can arrive at the open air on the street. See para 93 of the judgment. [99] See Bundle C2/832. [100] See Bundle C5/2217.12. [101] See Bundle C5/2217.5 at para 27. [102] FRR stands for fire resistance rating. See para 156 above. [103] See Bundle C5/2125. [104] See Bundle C5/2128. [105] See Bundle C8/3155. [106] See C8/3311. [107] See Exhibit A6 and Exhibit R14. [108] See Bundle C1/687. [109] See Bundle G/3/978. [110] See Bundle C1/468. [111] See Bundle C2/932-935. [112] See Bundle C6/2450-2456. [113] See the legislative council brief for the Buildings (Amendment) Bill 2010 at para 5: https://www.legco.gov.hk/yr11-12/english/panels/dev/papers/dev1025cb1-137-6-e.pdf. [114] See Bundle C4/1762. [115] See Bundle C8/3219-3220. [116] See Bundle C1/446. [117] See Bundle E1/5157 and E2/5269-5271. [118] See Bundle D1/3602 and D4/4868. [119] We should state here that this approach should not be taken as the Tribunal accepting that structures similar or comparable to UBW1, UBW2 and UBW4 should be afforded the same treatment in other cases. [120] See Bundle E1/4995. [121] See Bundle D3/4400-4401 and Bundle D4/4869. [122] See Exhibit A9 and Exhibit R10. [123] See Bundle G/32/194-213. [124]https://www.devb.gov.hk/filemanager/en/content_2419/Consultation%20Paper%20on%20BO%20Review.pdf. [125] “DEW” stands for “Designated Exempted Works”. [126] See Bundle D1/3566. [127] See Exhibit A6. [128] See Exhibit R8 page 9. [129] This figure was calculated on the basis of 10% the original cost estimate of $4,478,050. [130] This figure was calculated on the basis of 7.5% the original cost estimate of $6,728,759. [131] We should state here that we accept the estimate on the basis of the agreement reached between the applicant and R1 that a number of repair items should be included. [132] The costs of patch repair have been revised from $23,780 to $69,700 on the basis of inflated allowance as stated in para 215 above. [133] This figure was calculated on the basis of 10% of the “Sub-Total” cost estimate of $5,028,140. [134] This figure was calculated on the basis of 7.5% of the “Total” cost estimate of $7,333,858. [135] For the sake of clarification, we appreciate that patch repair cannot include the removal of the excessive chloride content inside. [136] See Bundle B1/208. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
= 1.17%. In view
of the past renovation history of the Building, it is more likely than not that the owners of the Building would
be ready and willing to cover the repair costs.
= 58%.Cases cited in this judgment