Good Faith Properties Ltd and Others v. Cibean Development Co Ltd

LDCS 42000 of 2011

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE APPLICATION NO.42000 OF 2011

_________________

_________________

_________________

REASONS FOR DECISION

_________________

1.Mr. Chang for the respondent had raised the following question for this Tribunal to decide, i.e. whether there is any agreement between the parties that the Tribunal should proceed on the basis that the internal condition of the reference unit is good, notwithstanding Mr. Chan, the expert for the applicant (“Mr. Chan”) opined that the internal condition of the reference unit is poor, not only for the purpose of calibration or grading but also for the purpose of comparing with comparables.  It is Mr. Chang’s submission that there is no such agreement.

2.The circumstances leading to the alleged agreement is relevant.  On the 1^st day of trial on 31 October 2012, in his opening submission, Mr. Mok, Counsel for the applicant mentioned :

“And, your Honour, that, in a nutshell, is the conceptual differences between the two sides on the presale question, and your Honour, if I main detail the court a little bit more, jumping ahead to the inspection, a site inspection?

Now, for site inspection I would have to come clean with the court that there is one difficulty that try as I may for days, I can’t find a solution, and that is the dispute between the two experts on the internal condition of the units.

So, the reference unit, they rate it differently - one is good, one is poor. And then the difference between grades from good to fair to poor or very poor - one give five per cent, the other one two per cent, and when they rated the condition of individual units, again there are differences, and there is no similar pattern so that we cannot have just concentrate on a dispute on a condition of a few units which would have solved everything because once you adopt that, you apply the pattern to it.

But at the moment, there is such no agreement. Now the only way to proceed, therefore, is something I hate to report but I have to - it would seem that the tribunal would then have to go through 76 units or 75 units and really jot down the condition of each individual unit.

Now I -- that is something I would not recommend and that is something I would try to avoid as much as I can. I had a word with my learned friend this morning, appealing to his superior mental faculty to see if he can come up with some practical solution whether we can agree on something so that we can resolve the question without having -- without involving the court to go each individual units.

I can’t come up with anything. My learned friend hasn’t come with anything, and I’m just wondering whether the court might have some thoughts on this question and if there some thoughts from the court, I would certainly welcome it very much.

Now, that is the first problem. The second problem is if we are going to go through 76 units, then it’s going to take time. Assume that we spend three minutes each unit, then, you know, it’s going to take a whole morning already.

So inspection may well take more than a day, just actual inspection itself. Now - and then we have many more comparables to go through and my learned friend and myself would invite the court to consider going to the site inspection as early as possible after the submissions on the opening.…” (at page 66-67 of transcript)

3.On 1 November 2012 when the trial resumed, Mr. Mok then told the Tribunal that :

“The second matter to report is this: your Honour remembers that we each mentioned the problem of site visit and the internal conditions. The two questions there - one is the initial reaction from the bench, and the other one is the practical problem that if we were going to look at the -- all the units, then it’s going to take a long time, and really it’s not practicable.

Whilst I believe, I genuinely believe that there are valid and legitimate arguments against the tentative view, I do believe I will be able to come with legitimate arguments against the preliminary review, that really I was trying to work out a way of avoiding the need of looking at all the units as a matter of practicality.

After some arm twisting, I managed to obtain instructions that in the Statement of Agreement and Disagreement and your Honour sees at the moment the second page of that document -- the first page are the agreements; the second page starts with the disagreements. And if one runs to paragraph 9, or the 9th heading, in bold letter, at the bottom, it’s “Suitability of Flat Comparables”, and after that, really, the last bold heading is 10, “Assessment of other Domestic Units”

Now, at the moment, there is A, B, C -- A, B, C are on the differences of whether it’s one per cent per floor, views, orientations and so on, and D, at the moment - D is the items that I would like the court to look at - internal condition differences between the flat and reference domestic unit is not agreed, and hence the adjustment per -- and then set out the different tables for the internal condition.

Now, after some arm twisting, I managed to have instructions to inform the court that we can proceed on the basis that that item is agreed.

So AA’s internal condition differences between the flats and reference domestic unit is agreed.

And once that is done, and if time is -- then, you know, that can be uplifted to the first page, then we don’t need to have the inspections of every unit.

So that’s the little amendment for the statement of Disagreement. I’ve indicated that, and I don’t suppose my learned friend would insist me from actually having the document amended and so on, so we can proceed on the basis that Item 10D is now agreed.” (at page 80-81 of transcript)

4.This brings Paragraph 10(d) of the Statement of Disagreement into context.  The answer to the question posed by Mr. Chang at paragraph 1 above turns on what was actually agreed under Paragraph 10(d).

The Respondent’s Argument

5.It is the contention by Mr. Chang that what had been agreed under Paragraph 10(d) is in no way referring to the internal condition of the flats including the reference unit at the Subject Lot.  Paragraph 10(d) reads “Internal condition differences between the flats and Reference Domestic Unit is not agreed and hence the adjustment percentage”.  From the wordings of Paragraph 10(d), what is being agreed is that there are great differences found by Mr. Lai in terms of internal condition between the flats and the reference unit by reference to the reference unit itself; and not difference between the 2 experts on the assessment of internal condition of the units.  If Paragraph 10(d) is taken to be an agreement as to the internal condition of the reference unit, the respondent will be bound to say that the condition of the reference unit is good whilst the applicant is free to say that the condition of the comparable is fair and take the advantage of 5% adjustment on internal condition when the reference unit is being compared to the comparables.  Rather, the internal condition of the flats as well as the reference unit are covered under Paragraph 10(f) which is something still in dispute.  So the Tribunal should not allow this case to proceed as if the internal condition of the reference unit had been agreed to be good.  The agreement only concerned the findings by Mr. Lai on the difference in the internal condition between the other units and the reference unit and when compared to the comparables, it should be assumed that there is no difference between the reference unit and the comparables as far as internal condition is concerned.

The Applicant’s Reply

6.Mr. Mok relied upon the transcript of the hearing on 31 October 2012 and 1 November 2012 to emphasise that the agreement under Paragraph 10(d) indicated on 1 November 2012 is on the internal condition of the flats including the reference unit so as to avoid the need for site visit to all 75 units involved and save the Tribunal’s time in making assessment on the internal condition of the units. The applicant is only taking a practical approach to the problem by agreeing whatever difference there may have between the 2 experts on internal condition.  The agreement touches upon nothing about the grading of internal conditions nor had anything said about how to link the findings on internal condition to the comparables.  Paragraph 10(f) concerns whether 4 or 5 grades should be fixed for the assessment of the internal condition as well as the percentage to be assigned for the difference between 2 grades.  This has nothing to do with the actual internal condition of the flats.  Given this agreement, the internal condition of the reference unit should be taken to be good as assessed by Mr. Lai and agreed by the applicant.

Discussion

7.Upon reading through the transcript of the hearing, we agree with Mr. Mok that it has been agreed on 1 November 2012 that Mr. Lai’s assessment of the internal condition of all the units of the Subject Lot should be accepted.  From the exchange in court on 31 October 2012 and 1 November 2012 (as quoted above), it is apparent that the purpose for the applicant to make the concession is to avoid a time consuming exercise to go through each and every unit in order to decide which assessment between the 2 experts on the internal condition of the flats were to be accepted.  If what is being agreed is just the finding by Mr. Lai of the fact that there are great differences between the flats and the reference unit, this will not serve the purpose aimed at by Mr. Mok.  Had it been raised on 1 November 2012 that this is the stance of the respondent, I don’t think Mr. Mok will be prepared to give the concession. 

8.And we also agree with Mr. Mok, and apparent from the transcript that nothing touches upon the internal condition of the comparables, lest to say to assume that they are in line with the reference unit. 

9.Mr. Chang had also laid his emphasis on the wordings of Paragraph 10(d) to argue that the difference addressed thereat is not difference between the experts but between the flats and the reference unit.  We found this to be inconsistent with the nature of the document as well as the Reason for Disagreement/Remarks named therein.  The Statement of Disagreement is prepared by the experts to itemise the area of disagreement between them.  If Paragraph 10(d) is for the difference found by Mr. Lai and not difference between the 2 experts, such should not have been included in the document in the first place.  And the Remarks at the end of each Paragraph are intended to highlight the relevant part of the expert report in dispute.  The part of the expert report stated after Paragraph 10(d) all points to the assessment of the internal condition of the units and their challenge to the assessment by their counterpart.  On the part relied upon by Mr. Lai, nothing had been mentioned about his own finding of difference between the other flats and the reference units.  The contention of the respondent in this regard is not supported by the Remarks.

10.And from the reading of the part of the expert report stated at the Remarks of Paragraph 10(f), we also agree with Mr. Mok that Paragraph 10(f) concerned the different grading and its percentage difference adopted by each expert and not the actual internal condition as such.

11.Even if Paragraph 10(d) is not catered for the internal condition of the flats, from the exchange in court, it is clearly the indication by Mr. Mok that the internal condition of the flats as assessed by Mr. Lai are agreed and nothing else.  It would be unfair if the respondent is allowed to argue otherwise by the mere fact that Mr. Mok may have pointed to a wrong section of the Statement of Disagreement.

12.We found that the agreement is that the assessment by Mr. Lai for the internal condition of the units including the reference unit is agreed and the answer to the question posed in paragraph 1 above should be answered in the affirmative. 

Mr. Y. C. Mok, instructed by Messrs Mayer Brown JSM, for the applicants

Mr. Denis Chang leading Mr. Julian Chan, instructed by Messrs Clayton Wong & Co., for the respondent