Secretary for Transport v. Wong Bun

LDRW000014/2001

LDRW 14 OF 2001

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

RAILWAYS ORDINANCE APPLICATION NO. 14 OF 2001

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Date of Judgment : 3rd May 2002

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J U D G M E N T

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Background

1.This is an application by the Applicant, the Secretary for Transport for the determination of (i) Unit 8 on the 19/F of Block A, ("Premises"), (ii) Car Parking Space No. P7 on Upper Ground Floor and (iii) Car Parking Space No. L17 on Ground floor (these two car parking spaces hereinafter collectively referred to as "Car Parks"), Wah Kai Industrial Centre ("Wah Kai"), No. 221 Texaco Road, Tsuen Wan, New Territories. The scheme for the construction of West Rail (Phase 1), which affects Wah Kai, was gazetted on 3 October 1997 pursuant to Section 6(4) of the Railways Ordinance (Cap. 519) ("the Ordinance") and objections, including one from the Incorporated Owners of Wah Kai Industrial Centre, were subsequently heard. The Railway Scheme was eventually authorized by the Chief Executive in Council on 22 September 1998. Wah Kai was resumed by the Government under Section 16 of the Ordinance pursuant to a G.N. 3673 dated 30 June 1999 gazetted on 2 July 1999. The reversion date was 2 October 1999.

2.For the resumption of land under Section 16 of the Ordinance, the basis on which compensation is to be assessed is set out, inter alias, in Item 1 of Part II of the Schedule to the Ordinance: "as if the claim were made under the Lands Resumption Ordinance (Cap. 124) for land resumed under that Ordinance." Therefore, the Lands Tribunal is empowered under Section 10(2)(a) of the Lands Resumption Ordinance to assess the amount of compensation for the resumed properties formerly owned by the Respondent, i.e., the open market values of the Premises and the Car Parks on the date of reversion, 2 October 1999.

3.On 7 July 2001, the Applicant applied to the Lands Tribunal to determine the amount of compensation for the Premises under the Ordinance. On 14 August 2001, the Respondent requested the determination of the Lands Tribunal to include the Car Parks. On 28 August 2001, the Applicant applied to list for hearing. After a call-over hearing in the Tribunal, the parties exchanged the valuation reports prepared by their expert surveyors. According to the experts, the compensation for various heads of claims should be as follows: -

4.The Applicant called for the evidence of an expert surveyor, Mr. Pang Ho Chuen Lawrence ("AW") whilst the Respondent called for the evidence of another expert surveyor, Mr. Tam Fung Cheung ("RW"). Both these two experts and the Counsels appearing for the parties in the present application were the same as those appearing for the parties in a recent Lands Tribunal's case on the resumption of another industrial unit of Wah Kai, i.e. Secretary for Transport v. Poon Chi Man and Ho Sai Mui, unreported case, reference LDMR 42 of 2000 ("Poon Chi Man case"). Incidentally, the Poon Chi Man case was heard and decided by the same constituted Tribunal as for the present application.

Agreement between the parties

5.The following facts in this application are not in dispute: -

(a) The saleable area of the Premises is 236.8 sq. m.;

(b) Wah Kai is an industrial building subject to the Government Lease of Tsuen Wan Inland Lot No. 53 and the user covenant of the same is for industrial purposes;

(c) The date of resumption is the valuation date, namely 2 October 1999.

6.It is common ground that the direct sales comparison method be used in the determination of the open market values of the resumed properties, the Premises and the Car Parks. Also, the parties agreed that since the Premises and the Car Parks were tenanted to parties related to the Respondent prior to reversion, the compensation payable to the Respondent should be computed on existing use basis with the benefit of vacant possession. It is noted that although AW further used the investment method of valuation to check his valuation for the Premises, he formed his opinion of value primarily on the direct comparison method.

Issues before the Tribunal

7.The issues before us are entirely within the ambit of valuation. In this judgment, we would have to decide on the following issues: -

(1) What are the suitable buildings and comparables for the valuation of the Premises and the Car Parks; and

(2) What relevant and suitable adjustments should be made to the comparables?

Choice of comparables for the Premises

8.The difference between the value propounded by AW, at $1,234,000 and the value estimate suggested by RW, at $1,288,000, was only $54,000 or less than 5%. We agree with the parties that as valuation of properties is not an exact science, these value estimates by AW and RW are well within the normal range of opinion of value for the Premises. Nevertheless, since this is one of the test cases for assessment of compensation for resumed properties in Wah Kai, we decide not to take the average of the experts' two valuations but to go through their evidence and the parties' submission in details before arriving at our conclusion of value for the Premises.

9.Both experts agreed that the transactions in the following buildings should be used as the comparables for the Premises: -

Po Yip Building ("Po Yip")

Wang Lung Industrial Building ("Wang Lung")

Tsuen Wan Industrial Centre ("Tsuen Wan")

Texaco Road Industrial Centre ("Texaco")

However, AW disagreed with RW that the following buildings provided suitable comparables as well: -

Tak Fung Industrial Centre ("Tak Fung")

Lucida Industrial Building ("Lucida")

Sunwise Industrial Building ("Sunwise")

10.AW in his original Rule 20 document stated that he had chosen transaction records in four similar industrial buildings, i.e., Po Yip, Wang Lung, Tsuen Wan and Texaco for direct comparison in this valuation exercise. These four buildings were chosen because they were completed between 1980 and 1989 and provide comparables transactions of units of similar size as the Premises. Also, these four buildings, similar to Wah Kai which was completed in 1981, were distinguishable from the more recently built buildings completed in the 1990's. AW admitted that among the transactions collected and analysed, he had tried to avoid "those that appear to be mortgagee sales, sales of units with appurtenances attached thereto and non-arm's length sales, in order to minimize subjective adjustments that may be required." As a result, AW set out in his valuation a total of 13 comparables in four buildings. Applying the levels of adjustments decided by the Tribunal in the Poon Chi Man case, AW arrived at an average adjusted unit rate of $5,039 per sq. m. for the Premises. However, AW considered that "the resultant figures for transactions in the Tsuen Wan Industrial Centre were a little out of line with the other three. If the transactions in the Tsuen Wan Industrial Centre were excluded from consideration, the average result of my analysis becomes $5,214 per sq. m. In this regard, I am of the opinion that the unit rate applicable to the Property is $5,210 per sq. m." On this basis, AW estimated that the Open Market Value of the Premises as at the date of valuation, with the benefit of vacant possession, was $1,233,728, which was rounded up to $1,234,000.

11.AW re-affirmed in his supplementary report and his evidence during the hearing the rationale for his choice of relevant buildings and hence the relevant comparables for the valuation of the Premises. He added that in the Poon Chi Man case, he had then submitted that "(Tak Fung Industrial Centre) is not a particularly good comparable for Wah Kai, ... but is quoted mainly because it provides industrial units of similar sizes to Wah Kai and lies in close proximity." AW suggested that the Tribunal in the Poon Chi Man case might have, perhaps for the same reason, taken into consideration the sales in Lucida despite the vast differences in age and character between Lucida and Wah Kai. In addition, the difference in size between the Premises in the present application and the unit in the Poon Chi Man case led one to conclude that the very reason for introducing similar, smaller sized comparables in Tak Fung and Lucida would no longer be valid in the present application, as was the case in the Poon Chi Man case. AW opined that for the same reasons as for Lucida and Tak Fung, the transactions in Sunwise would not provide reasonable guidance to the Open Market Value of the Premises.

12.The Applicant submitted that even if the Tribunal considered appropriate to include RW's comparables in Sunwise, the three other comparables in Sunwise cited by AW should also be included as they were only about four and a half months away from the valuation date. Further, the location adjustment of 8% for Sunwise put forward by RW was considered by the Applicant to be excessive. On the basis that all the comparables from all of these seven buildings were included and assuming 0% location adjustment for Sunwise, AW made a computation which was annexed to the Applicant's final written submission. The resultant figure was $5,272 per sq. m. or $1,248,410, a difference of a mere 1.17% from AW's original valuation figure of $1,234,000.

13.On the other hand, RW gave evidence that after he had researched all the transactions of industrial units in Tsuen Wan near the valuation date, he found that his chosen comparables in Sunwise were relevant. Consequently, a total of 24 comparable transactions in all of these seven buildings were analyzed and after making adjustments, RW arrived at an adjusted unit rate of $5,492 for the Premises (Bundle P. 179A). The Respondent in the final submission submitted that the character of Tak Fung, Lucida and Sunwise were similar to Wah Kai. Although the Respondent agreed that Tak Fung, Lucida and Sunwise were better in condition because they were relatively newer in age, it was suggested that a fair comparison could still be made by making appropriate adjustments as in the Poon Chi Man case.

Valuation for the Premises

14.We reproduce below the comparison table prepared by AW setting out the year of completion and the approximate size of comparable units for each comparable building and Wah Kai.

15.We decide that whilst Wah Kai provided a large number of industrial units with varying sizes, we should concentrate on the size of the unit which is the subject of each valuation and find, as far as possible, comparable transactions of similar sizes in comparable buildings. If there are already sufficient number of transactions of comparable units of similar sizes in these comparable buildings, such as in the original Rule 20 valuation submitted by AW, there is no reason for the Tribunal to extend the choice of comparables unnecessarily just for the sake of introducing more comparable transactions. In the present application, we have carefully considered the different opinion of the two experts and decide that on the evidence before us, the comparables adopted by AW are superior to the additional comparables used by RW in terms of age of building and size of unit. In addition, we accept that AW's adjustments as well as his final reconciliation of value are fair and reasonable. Consequently, we concur with AW's final estimate of the Open Market Value of Premises, in the sum of $1,234,000.

Choice of comparables for the private car parking space no. P7

16.AW and RW together assembled and analyzed a total of 13 comparable transactions of private car parking space. For ease of reference, we have adopted the comparable reference number used by the Applicant's counsel in the summary sheet attached to his written opening submission. These are summed up below:

17.AW assembled 8 comparables of private car parking spaces in 7 comparable buildings in his valuation report dated 28 November 2001. The sale prices ranged from $200,000 to $420,000. After making adjustments for the differences in "direct access from ground floor entry" and "car parking ratio", he arrived at an adjusted unit price of between $200,000 and $432,600, with an average of $284,950. In conclusion, he considered it more appropriate to adopt $300,000 instead of the adjusted average as to be the Open Market Value for the private car parking space no. P7.

18.Initially, RW assessed in his valuation report a figure of $372,500. Subsequently, based on different comparables and different adjustments, he amended his assessment to $446,200. RW assembled in his valuation report and supplementary valuation report a total of 8 comparables of private car parking spaces from 4 comparable buildings. These 8 comparables, of which 3 were common comparables of AW, show a price range between $200,000 and $420,000, similar to the price range of those comparables considered by AW. RW rejected two of the three comparables in Po Yip and subsequently adjusted his other chosen comparables in terms of various factors of adjustments: location, time, facility, nature of trade and provision of other public parking space in the vicinity. For 5 of the remaining 6 comparables, he arrived at adjusted sale prices of between $295,120 and $563,520, and an average adjusted price of $443,450. Alternatively, he opined that four of his comparables were better comparables but these also show an average of $446,238. In the final analysis, he concluded that the Open Market Value for the private car parking space no. P7 should be $446,200.

19.RW also opined in his supplementary reports and oral evidence during the hearing that all the comparables analyzed by AW, with the exception of one comparable (i.e. AC3/RC5) which was also used by him, were not appropriate comparables. Similarly but to a lesser degree, AW gave evidence that two of RW's comparables (one of which is common to AW) should be rejected.

20.Therefore, it would be necessary for this Tribunal to consider one by one all the comparables assembled and analyzed by the two experts and decide whether they are relevant comparables for the purpose of this valuation. For convenience, we group the comparables according to the buildings in which they are located, as follows: -

(1) Tsuen Tung (AC1 and AC2)

The Respondent submitted that AC1 and AC2 were grossly inferior to the private car parking space no. P7 of Wah Kai, in terms of the accessibility and maneuverability due to the elongated shape of the building. The Applicant disagreed that they were so inferior that they should be ignored altogether. Alternatively, the Applicant submitted that AW had already made 5% adjustment to account for the inferior access and maneuverability. It was also suggested by the Applicant that AC1, being next to the lift lobby, covered and well protected from the inclement weather, was superior to the subject car parking space no. P7 in Wah Kai in that respect. We inspected the comparable and agreed with the Applicant that these two comparables should not be rejected.

(2) Superluck, Phase 2 (AC3/RC5, RC4 and RC7)

The Applicant submitted that as for the three comparables in Superluck, Phase 2, only RC4 was suitable as a comparable. Firstly, RC7 which was initially mistook by RW as a lorry comparable should be rejected because physically speaking, it was an entirely enclosed space. There was no information as to whether the enclosed space was used for the parking of a car or as a storeroom. Also, it appeared from inspection that the owner had parked another car in front of the locked space. On the other hand, RW suggested that RC7 could still be used although he agreed that a discount of about 5 to 10% should be applied because of the extra security measure afforded to this space. We decide to accept the Applicant's submission regarding RC7. It is clearly a case that the comparable should be rejected because of the uncertainty involved in the actual and potential use of the car parking space. Secondly, the Applicant submitted that the price for AC3/RC5 was clearly out of line with the rest of the comparables. The Respondent disagreed and suggested, since AC3/RC5 was the only commonly accepted comparable, more weight should be attached. This statement however was incorrect because as rightly pointed out by the Applicant, there were in fact three common comparables. However, we decide to leave the decision of whether the price fetched was out of line to a later stage, after we have analysed and adjusted all the comparables.

(3) Superluck, Phase 1 (AC4 and RC3)

The Respondent submitted that since AC4 was not a good comparable in terms of accessibility, maneuverability and headroom, it should either be discarded or a large adjustment should be made. The Applicant disagreed saying that little, if any, adjustment would be warranted. The Applicant admitted that there was lower headroom but a van could be parked with the iron railing removed. Also, the Applicant suggested that the protective railing on the side of AC4 next to the driveway did give better protection to the car though it may cause a bit of trouble in removing and restating before and after parking of a car. On the other hand, AC4 was considered to be superior to the subject space no. P7 in Wah Kai as AC4 was better protected from rain and sunshine. We decide that AC4 is also a suitable comparable having regard to the existence of iron railing and its location within the car parking floor of Superluck, Phase 1. As for RC3, the Applicant submitted that as it was long enough to accommodate an ordinary lorry, its higher price might reflect this increased flexibility and advantage.

(4) Po Yip (AC5/RC2B, RC1 and RC2A)

RW commented that all the comparables in Po Yip were not good comparables as two developments in close proximity to Po Yip, namely East Asia Building and Panda Hotel provided public car parking facilities. We find this not a reasonable excuse for discarding a comparable. The existence of competitive supply of car parking space elsewhere in the neighbourhood, be they for sale or for letting, could not by itself be the reason for the rejection of a comparable. In addition, the Respondent submitted that since AC5/RC2B and RC2A were part of a bulk purchase of 6 units in Po Yip, they should be discarded as they were likely to be purchased below market rate. RW was of the view that there was a high probability of a substantial discount given to these spaces whilst AW disagreed, saying that there was no reason that a lower value should be assigned to a car parking space which was the subject of a separate transaction. For Po Yip, we decide that RC1 should be retained as a comparable whilst RC2A and AC5/RC2B be rejected because they were part of a bulk purchase even though they were stated as different transactions.

(5) Wah Chun (AC6/RC6)

The Respondent submitted that since AC6/RC6 was again a transaction of more than one car parking space, a downward discount of unknown quantum would be warranted. Thus, "in view of many other better comparables, this again should be ignored." The Applicant disagreed and submitted that the purchase of two car parking spaces could hardly be described as a "bulk purchase". Moreover, since the two car parking spaces adjoined each other, this could be an added attraction to any purchaser. We agreed that this transaction should not be discarded simply because it involved two spaces.

(6) Juko Tower/TCL Tower (AC7)

The Respondent submitted that since AC7 was located at the basement with poor internal accessibility and maneuverability, it should be discarded. The Applicant opposed and submitted that its accessibility and maneuverability, contrary to what the Respondent submitted, were very good. Besides, the car parking space AC7 did "enable a lorry to be parked and for loading to take place if necessary." In addition, this space was better protected from rain and sunshine than the subject space no. P17 in Wah Kai. The Applicant's case is so obvious that we agree not to reject this comparable!

(7) Metro Factory and Warehouse (AC8)

The Respondent submitted that "in view of the substantially low car parking ratio of only 1.8 units per car parking space (namely large internal supply of parking spaces), this building is in a complete different character from WKIC." The Applicant submitted that "the better car parking ratio is a factor for adjustment, not for ignoring the comparable altogether". In this regard, we note that Wah Kai had a ratio of 11.5 units per private car parking space. We therefore agree with the Respondent that in light of the vast difference in the car parking ratio, this comparable should be discarded.

21.Overall, we note that in many instances that have been summarized above, RW and the Respondent in their respective analysis and submission proposed to the Tribunal that because of the existence of many other better comparables, certain comparables should be disregarded entirely. However, RW at the end relied mainly on 4 comparables, out of a total of 13 comparables considered between AW and RW, before arriving at his opinion of value. Therefore, the availability of suitable comparables for the subject private car parking space was not as abundant as what RW had suggested. Hence, we do not agree to reject a comparable outright simply because there are some differences between the said comparable and the property which is the subject of valuation. The differences should be dealt with by appropriate adjustments, if necessary.

Valuation for the private car parking space no. P7

22.To sum up, we agree that RC7, RC2A, AC5/RC2B and AC8 should be rejected as comparables before further analysis and adjustments be made. Therefore, the remaining 9 transactions should be used as comparables for the subject private car parking space no. P7 in Wah Kai. Also, we agree with AW that his suggested factors for adjustments are more relevant and appropriate for the valuation of a private car parking space in an industrial building such as Wah Kai. As for the levels of adjustments, we consider AW's adjustments for "access from ground floor entry" to be reasonable and we therefore adopt those adjustments in this valuation. On the other hand, for the adjustments relating to the differences in car parking ratio, we consider that more progressive adjustments are appropriate. We set out below our adopted adjustments for the comparables and their application to the sale prices in order to arrive at the adjusted sale prices for the present valuation exercise: -

Our adjusted sale price from the adopted 9 transactions are, in ascending orders: $194,000 (AC4), $264,500 (AC2), $285,200 (RC1), $287,500 (AC1), $294,000 (AC6/RC6), $306,000 (AC7), $306,035 (RC3), $349,800(RC4) and $445,200 (AC3/RC5). They show a range of between $194,000 and $445,200, a mean of $305,381 and a median figure of $294,000. We agree to discard the comparable AC3/RC5 as it, being over 45% from the arithmetic mean of all 9 comparables, is obviously out of line with the other 8 comparables. From the above analysis, we estimate the average of the average adjusted sale price of the comparables in each building after excluding AC3/AC5, to be $293,503. This is rounded up to $294,000. We therefore decide that the Open Market Value of the car parking space no. P7 in Wah Kai as recommended by AW, at $300,000 to be acceptable.

Choice of comparables for the lorry car parking space no. L17

23.For the valuation of the lorry car parking space, the experts AW and RW had undertaken a similar process of analysis and elimination although the total number of comparables that were available were far less than those for private car parking space.

24.We first summarized the comparable transactions of lorry car parking space, adopting the comparable reference number used by the Applicant's counsel: -

# It was later agreed by both AW and RW that this comparable, RL3, was in fact a private car parking space. This became PC7, according to the reference number given by the Applicant's counsel and has been considered in the section on the valuation of private car parking space.

25.Altogether, AW and RW considered and analyzed a total of 7 transactions of lorry car parking space. In the original valuation report, AW, basing on his 3 comparables, calculated the average price for the lorry car parking space to be $368,000. However, as he considered the comparable in Waylee Industrial Centre (i.e. AL2) to be a little out of tune with the other two comparables, he adopted a figure of $390,000 based on AL1 and AL3. In the final submission, the Applicant submitted that the only suitable comparables were AL1, AL2, AL3 and RL3A, with appropriate adjustments. On the other hand, the Respondent submitted that the RW's comparables were much better and should be adopted.

26.Before deciding whether to discard any of the parties' comparables, we have considered and analyzed the comparables one by one as follows: -

Po Yi Building (AL1) and Waylee Industrial Centre (AL2)

We disagree with RW that these should not be taken as comparables for lorry car parking space.

Wah Lik Industrial Centre (AL3)

We again disagree with RW that this should be discarded because Wah Lik Industrial Centre had a lorry parking space ratio of 13.6, against Wah Kai's ratio of about 20 (20.5 per AW and 19.9 per RW). This should be a matter of adjustment in the analysis of comparables.

Tak Fung Industrial Centre (RL1)

AW gave evidence that this space, which could accommodate two private cars, was relatively much larger than the subject space no. L17 in Wah Kai. The Respondent submitted that although a private car was parking at RL1, the space remained a lorry parking space. We decide to reject this comparable for its physical difference when compared with the subject space in Wah Kai.

Wang Lung Industrial Building (RL2)

Similarly, the Applicant submitted that this comparable should be rejected because it comprised an extra space sufficient for the parking of a car. The Respondent admitted that RL2 was purchased with a space next to it although it was not a proper extra parking space. Notwithstanding this, we decide to reject this comparable.

Wah Chun Industrial Centre (RL3)

Both experts agree to accept this as a lorry comparable. In the final submission, the Applicant submitted that an overall upward adjustment would be appropriate. On the other hand, RW in his valuation after adjusting for a number of factors applied an overall upward adjustment of 21% to the sale price to arrive at an adjusted value of $544,500. Since we disagree with the factors of adjustments adopted by RW, we decide to use the Applicant's final estimated figure of $450,000 plus 3%, or $463,500 as the adjusted value for this comparable in this valuation.

Southeast Industrial Building (RL4)

The Applicant submitted that RL4 was the only comparable where the parking space was actually used for loading and unloading. Besides, it also abutted loading and unloading platform. As a result, the Applicant suggested that since this lorry space was not similar to the subject lorry space at Wah Kai, it should be rejected. The Respondent disagreed that this building was of different character from Wah Kai and submitted that this should be adopted as a comparable. We agree with the Respondent that this comparable should not be rejected because it was being used as a lorry car park. Instead, we agree that a substantial adjustment should be made to reflect the superior position of the space.

Summing up, we decide that after rejecting RL1 and RL2, there are a total of 5 lorry comparables.

Valuation for the lorry car parking space no. L17

27.As for the adjustments, both parties agreed that the important considerations for the valuation of a lorry car park were: -

(a) lorry parking space ratio in the building;

(b) accessibility and maneuverability.

28.However, we find that RW in making adjustments did not quite follow what he had agreed as to be the important considerations. Instead, he adjusted his comparables for a host of factors such as location, time, facility, nature of trade and provision of other public parking space in the vicinity. Therefore, we have no hesitation but to follow the type of adjustments proposed by AW, with minor amendments to the levels of adjustments in respect of the differences in the lorry parking space ratio between Wah Kai and the comparable buildings. As for the timing of transactions, we have also studied the rental index produced by the experts. We agree with AW that for the period in question, no adjustment is needed. The results of the Tribunal's adjustments to the comparables are as follow: -

#We adopt an overall upward adjustment of 3% as submitted by the Applicant.

*Adjustment to account for RL4's position.

Therefore, we find from the above analysis that the average adjusted sale price of the lorry comparables is $430,000. We adopt this as to be the Open Market Value of the car parking space no. L17 in Wah Kai.

Employment of alternative methods of valuation by the Applicant as a counter-heck

29.Because of the limited number of comparables for the subject lorry car parking space, the Applicant also submitted that the tribunal should use two other alternative methods as a counter-check. Firstly, it was submitted that "the Tribunal may consider using the ratio of rental charged for lorry parking space and private parking space in Wah Kai and use this to project a proper capital value for lorry parking space". Secondly, it was submitted that sale data of private car parking space in Wah Kai in earlier years prior to the valuation date could provide "a very useful checking on what the ultimate figure should be". The Respondent in the final submission disagreed and urged the Tribunal to rely solely on the result of the direct sales comparison approach.

30.As a matter of principle, AW's approach is perfectly correct. Indeed, this should be recognized as something commendable particularly when the data for the best valuation method, as is in the present case for the valuation of lorry car parking space, is limited but the data for alternative valuations are available. It is well recognized that direct sales comparison approach is the most preferred approach for valuation of real estate properties in Hong Kong or indeed in most other free market economies. This is simply because all the players in the market, the owners, the vendors, the purchasers, their consultants and financiers all based on this approach in arriving at their estimates of the open market values of properties. However, it is also well known that most owners and purchasers and particularly financing institution, would also consider the open market values of properties on investment basis (or which could be described as the income approach). Throughout the world, it is gaining more recognition that most valuations of properties should best be done on different bases of valuation which the appraiser should consider and make a conclusion of his final estimate of value based on his reconciliation of values arrived at from different approaches.

31.We acknowledge that in the present application, the parties came to an agreement, which we also endorse, that the most appropriate method of valuation should be the direct sales comparison approach. Yet, for reasons set out above, we see no reason that the experts should not, if they prefer, set out alternative valuations as a check.

32.In this regard, the Applicant submitted that before resumption, the Incorporated Owners in Wah Kai was letting the private car parking space and the lorry car parking space in the monthly sums of $2,000 and $2,800 respectively. Therefore, the Applicant submitted, in the written opening submission, "if the Tribunal should determine the value of a private car parking space in Wah Kai to be $300,000, the value of a lorry parking space (if one assumes the same 40% premium) may be assessed to be $420,000." On the other hand, the Respondent submitted that "it would not be appropriate to use the relativity of the renal value of car parking spaces and lorry parking spaces to 'infer' the relativity of capital value of the same because (a) they belong to entirely different markets because rental market is for end-users only whereas sale market is for investors and end-users and (b) the yields for car parking space and lorry parking space are different."

33.The Applicant also sought to use historical sale data of private car parking space in Wah Kai in 1994 and 1996 to support his contention that the Respondent's proposed figures were very unreasonable, especially when there was no evidence that the prices of car parking spaces had shot up in 1998 and 1999, contrary to the general trend of falling prices for flatted factories.

34.The Tribunal agrees with the Applicant's submission that the two counter-check calculations proposed by the Applicant do support their contention that the Respondent's proposed figures were not supported at all by these alternative methods of assessments. However, we find that these approximate counter-checks were not helpful to the Tribunal in the determination of the open market value of the Car Parks. Therefore, notwithstanding the limited number of relevant comparables we still rely on the results of the direct sales comparison method to arrive at the figures for the Car Parks, including that for the lorry car parking space no. L17.

Cost of acquisition of alternative premises

35.In the second supplementary report dated 1 March 2002, RW submitted evidence of the expenses reasonably incurred by the Respondent in respect of an acquisition of an industrial unit in Leader Industrial Centre, 188-202 Texaco Road, Tsuen Wan (Bundle, p.211-221) as a replacement of the Premises. The Respondent did not dispute that the Respondent did not acquire the alternative premises using his own name but through a limited company, namely City Leader Realty Limited ("City Leader"). The Respondent however submitted that City Leader was a company owned and controlled by the Respondent, with other shareholders and directors being the relatives and nominees of the Respondent. Hence, the Respondent submitted that the Tribunal should lift the corporate veil of City Leader and award compensation to the Respondent in the sum of $88,543 as assessed by RW.

36.The Applicant submitted that even on the evidence produced, the Respondent only owned just 50.00005% of City Leader. There was no sufficient evidence that the Respondent was the beneficial owner of all the shares of City leader. There was therefore no material for the Tribunal to even consider lifting the corporal veil and the law is settled that a company does not hold property as agent or trustee for its shareholders or directors. We totally agree with what was submitted by the Applicant. We therefore hold that none of the expenses incurred by City Leader should be allowed.

Orders

37.Accordingly, we order that the Applicant do pay the Respondent compensation in the sum of $1,964,000 (Hong Kong Dollars One Million Nine Hundred And Sixty Four Thousand), a break-down of which is as follows: -

(i) $1,234,000 in respect of the Open Market Value of the Premises

(ii) $300,000 in respect of the Open Market Value of Car Parking Space No. P7 and

(iii) $430,000 in respect of the Open Market Value of Car Parking Space No. L17

(iv) Nil compensation in respect of the Respondent's claim for cost of acquisition of alternative premises.

38.The matters of professional fees, interest and costs be adjourned to a date to be fixed by the Assistant Registrar, with liberty to apply for any other ancillary and consequential matters.

Representation:

Applicant : represented by Secretary for Justice

Respondent : represented by Messrs. Simon C. W. YUNG & Co., Solicitors