Vincent Investments Ltd v. Bright Way Real Estate Development Co Ltd
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LDCS12000/2011 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO. 12000 OF 2011 ________________ BETWEEN
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Dates of Hearing: 27 and 28 November 2012 Date of Judgment: 12 December 2012 _______________ JUDGMENT _______________ Introduction 1.This is the application of Vincent Investments Limited (“Vincent Investments”) for the compulsory sale of two lots of land known as Nos 575 and 575A of Nathan Road (“the Lots”) under the Land (Compulsory Sale for Redevelopment) Ordinance (“the Ordinance”). 2.There is erected on the Lots an 8-storey building served by two common staircases. Vincent Investments is entitled under s 3(2)(b) of the Ordinance to make this application to cover both lots of land. 3.There are two commercial units on the ground floor of the building and two units on each upper floor for residential use. Vincent Investments is the majority owner of the Lots owning all the undivided shares in the Lots except the shop premises on G/F of No 575A Nathan Road, which is owned by Bright Way Real Estate Development Co Ltd (“Bright Way”). The Trial 4.Initially, this application was set down for a 7-day trial with substantial disputes on the reasonableness of the steps taken by Vincent Investments to acquire all the undivided shares in the Lots (s 4(2)(b)) and on the assessment of what the profession affectionately called the EUVs (ie the market value of the properties comprising the Lots without taking into account their redevelopment potential) and the RDV (ie the reserve price for the sale by auction of the Lots taking into account its redevelopment potential) (s 4(1)(a)(i)). 5.On the first day of the trial, we were given to understand that Bright Way was agreeable, in principle, to the latest offer of Vincent Investments. The parties requested more time to work out the niceties of the sale as there is a sitting tenant on the property. When the parties returned on the second day, we were informed that the parties have agreed on the sale and purchase of the property (although we were not apprised of the details of the agreement) and Vincent Investments would proceed with the trial but Bright Way would offer no evidence. 6.Given the agreement reached, the issues disclosed in the pleadings become academic. Since Bright Way remains a minority owner as at this trial, Vincent Investments is entitled to proceed with the application. We consider the latest development, no doubt through sensible advice of both counsel and their legal team, to be consistent with the underlying objectives to ensure that a case is dealt with as expeditiously as is reasonably practicable, to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings, and to ensure that the resources of the Court are distributed fairly (O 1A, r 2). The tenant will not be prejudiced, as it is open to him to claim compensation for termination of his tenancy under s 8(1)(b) following the making of an order for sale (s 4(6) and Part XIVA of the Lands Tribunal Rules). 7.Consequently, the battle line is redrawn, a hotly-contested trial is averted and there will only be the evidence of Vincent Investments for us to consider. The issues 8.Notwithstanding the stance taken by Bright Way, we are still obliged by the Ordinance to consider the following matters:
Discussion Issue (1): Determination of EUVs 9.Vincent Investments has engaged Charles Chan, a professional valuation surveyor and the Managing Director of Savills Valuation and Professional Services Limited, to advise them on valuation of the Lots. 10.According to the valuation report dated 2 February 2011 accompanying the application (s 3(1)(a)), Mr Chan initially assessed the EUVs as follows:
11.As the proceedings progressed, Mr Chan took into account more up-to-date information (eg the confirmed property indices covering the date of valuation, and in relation to comparable 9), rectified a minor mistake (on the measurement of the saleable area for comparable 2), and took on board some of the comments made by Bright Way’s expert (eg on the basis of assessment for 1/F and 2/F) and revised his valuation. His latest opinion on EUVs is set out in his 2nd rebuttal and valuation report dated 30 October 2012:
12.There is no challenge from Bright Way. We have considered all 5 reports from Mr Chan. We are satisfied that he has taken the most up-to-date and relevant data into account. He is fair enough to admit and rectify mistakes in his earlier valuation (which is minor in nature) and to concede some of the points well taken by the other side’s expert. We accept Mr Chan’s latest opinion and determine the EUV of each property in the Lots accordingly. Issue (2): Whether the redevelopment of the Lots is justified? 13.On this, Vincent Investments is relying on the expert evidence of:
14.They all agree, based on their respective expertise, that redevelopment of the Lots is justified. As there is really no dispute, we shall be brief in recounting their opinions. Suffice it to say that we have considered their reports in detail.
15.Having considered these opinions, we agree that the redevelopment of the Lots is justified due to the age and state of repair of the existing building thereon. Issue (3): Whether Vincent Investments has taken reasonable steps to acquire all the undivided shares in the Lots? 16.There is only one minority owner in this case – Bright Way. Vincent Investments have altogether made 3 offers to acquire Bright Way’s property. The offer of:
17.We appreciate that Bright Way had its reasons not to accept the first two offers and we do not know if the latest offer of $150 million (or some other figure) has eventually been accepted. Initially, Bright Way was set to dispute the reasonableness of the offers in a full-brown trial by adducing its own expert evidence. As events unfold, the dispute falls away. In any event, we need only be satisfied, on the evidence, that the offers fall within the range of what may broadly be regarded as fair and reasonable compensation: see Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578 at para 32-33. 18.We note from the evidence of Rebecca Young (the director of Vincent Investments) that Vincent Investments was guided by the expert opinion of Mr Chan in making its offers. Mr Chan is a professional valuation surveyor from a reputable firm of surveyors in Hong Kong. There is nothing to suggest that his valuation is other than proper and professional. 19.In February 2011 before the first offer was made, Vincent Investments was advised by Mr Chan that the EUVs were as stated in paragraph 10 above and the RDV was $211 million as at 31 December 2011. The first offer (of $87 million) was therefore higher than the share of the RDV apportioned to Bright Way’s property (ie $71 million ÷ $181.41 million x $211 million = $82.58 million). The offer was not accepted and Vincent Investments commenced these proceedings in March 2011. 20.The parties then engaged in mediation. Despite two sessions held in August and September 2011, the parties were unable to come to an agreement. There is nothing to doubt the genuineness of Vincent Investments’ participation in the mediation. In October 2011, the Tribunal gave directions and set down the application for trial. 21.Vincent Investments made the last two offers in November 2012 very close to the time of trial as an attempt to avert the trial. They were both higher than the share of the RDV apportioned to Bright Way’s property based on Mr Chan’s latest opinion (ie $73.53 million ÷ $201.54 million x $333 million = $121.49 million). The fact that Bright Way’s Senior Counsel has indicated in his opening that the latest offer of $150 million is, in principle, acceptable goes some way to confirm the reasonableness of the offer. 22.In those circumstances, we are satisfied that Vincent Investments has taken reasonable steps to acquire all the undivided shares in the Lots including Bright Way’s property. Issue (4): What is the RDV for the sale of the Lots by auction? 23.According to the latest opinion of Mr Chan, the RDV of the Lots as at 30 October 2012 should be $333 million. 24.The valuation is made on a residual valuation model and is based on the proposal to redevelop the Lots into a 17-storey retail and commercial/office building with retail shops on G/F to 3/F and 4/F to 17/F for commercial or office use. Mr Chan estimated the gross development value (GDV) of the proposed development to be $501,277,180. After allowing for marketing cost (at 2.5%) and discounting the GDV at 4% for 2 years, he estimated the present value of the GDV to be $451,893,859. 25.Mr Chan then deducted therefrom the present value of the estimated cost of demolition (at $2,607,236) and construction cost (at $66,147,506) and allowed for professional fee (at 6%) and developer’s profit (at 15%). The residual figure is then rounded off to $333 million. A schedule of his detailed calculation is at p 564 in Bundle C3. We accept Mr Chan’s valuation and adopt $333 million as the reserve price for the auction of the Lots. Issue (5): Matters incidental to an order for sale 26.Vincent Investments proposed to appoint Mr Ma Ho Fai and Ms Tsang May Ping, who are respectively the senior partner and a partner of Woo Kwan Lee & Lo, solicitors, as the sale trustees. Based on the information on their background and experience as set out in the letter dated 22 October 2012 from their firm, we are satisfied that they are proper persons to be appointed. We also approve the remuneration package proposed in the said letter. 27.Mr Mok, counsel for Vincent Investments, has submitted a set of draft particulars and conditions of sale by public auction for our consideration. We understand these are the usual terms used for compulsory sale and we approve them. Conclusion 28.For the above reasons, we are satisfied that the redevelopment of the Lots is justified due to the age and state of repair of the existing building on the Lots and that Vincent Investments (as the majority owner) has taken reasonable steps to acquire all the undivided shares in the Lots. We therefore make an order that all the undivided shares in the Lots, the subject of this application, be sold for the purposes of development. We appoint Mr Ma Ho Fai and Ms Tsang May Ping as the sale trustees to discharge the duties imposed on them under the Ordinance in relation to the Lots and authorized their remuneration for their service as trustees as provided in the letter dated 22 October 2012. We approve the particulars and conditions of sale of the Lots placed before us and grant liberty to the parties and to the trustees to apply for further directions under s 4(6) of the Ordinance if necessary.
Mr Y.C. MOK instructed by Messrs Vincent T.K. Cheung, Yap & Co., for the applicant MrC.Y. LI, Senior Counsel, leading Mrs Angel Mark DALEY instructed by Messrs Ho & Wong, for the respondent | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment