APEX INTELLIGENCE LTD v. CHAN HOI KUEN AND OTHERS

LDCS 5000/2019

[2022] HKLdT 55

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 5000 OF 2019

__________________________

__________________________

_________________

J U D G M E N T

_________________

1.  This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of the following lots (collectively referred to as “the Lots”) located at Nos 163 to 169 Yee Kuk Street, Sham Shui Po, Kowloon:

	Lot No	Address
1st Pair of Lots	New Kowloon Inland Lot 183 Section A (“1st Lot”)	163 Yee Kuk Street
	New Kowloon Inland Lot 175 Section A (“2nd Lot”)	165 Yee Kuk Street
2nd Pair of Lots	New Kowloon Inland Lot 175 Section B (“3rd Lot”)	167 Yee Kuk Street
	New Kowloon Inland Lot 175 Remaining Portion (“4th Lot”)	169 Yee Kuk Street

2.  Standing thereon are two pairs of tenement buildings (collectively referred to as “the Buildings”), the 1^st pair being of 6 storeys sharing only one common staircase whereas the 2^nd pair, though being of 5 storeys, is served by two common staircases, one fronting onto Yee Kuk Street and the other fronting the rear lane.

3.  The occupation permit of the 1^st pair of Buildings, Permit No K39/57, was issued on 19 June 1957 pursuant to the then Buildings Ordinance of 1955 permitting the ground floor for non-domestic use and the upper floors of domestic use.

4.  The occupation permit of the 2^nd pair of Buildings, Permit No D558/55, was issued on 30 November 1955 pursuant to the then Building Ordinance of 1950 permitting the Buildings for domestic use. Under this 1950 Edition, there were the following significant differences to the current issue of the Buildings Ordinance:

(a)  Section 2 defines ‘domestic building’ to mean “any building constructed, used or adapted to be used, wholly or partly, for human habitation, but does not include any building where caretakers only, not exceeding two in number, pass the night” (underline added) whereas the current version of the Buildings Ordinance defines ‘domestic building’ to mean “a building constructed or intended to be used for habitation and the expression domestic purposes shall be construed accordingly” In other words, unlike under the 1950 Edition, a domestic building under the current Buildings Ordinance has to be wholly for human habitation and cannot be partly for non-domestic use.

(b)  There is no provision prohibiting material change of use as found in section 25 of the current Buildings Ordinance.

(c)  Whereas section 137(1) provided for the need of a written permit from the Building Authority to occupy a new building, the first sentence of section 137(2) provided: “In issuing permits the Building Authority shall have regard to the nature of the building and its fitness for occupation or use as a domestic or as a non-domestic building and shall accordingly issue permits appropriate to such occupation or use”. Thus, a domestic permit issued to a new building under the 1950 Edition could be partly (such as Ground Floors and cocklofts) for non-domestic use and were not inconsistent with the approved building plans providing for Ground Floor shops and cocklofts.

(d)  The second sentence of section 137(2) provided: “And no person shall wilfully use or knowingly permit to be used any building with respect to which a non-domestic permit has been issued as a domestic building”. Thus, unlike the current Buildings Ordinance, the prohibition went only one way to prohibit non-domestic buildings to be used as domestic buildings but not the other way round.

5.  As per the land search obtained from the Land Registry, the 1^st pair of Buildings at 163 and 165 Yee Kuk Street each comprises one ground floor unit. The building at 163 Yee Kuk Street comprises one unit on each upper floor from 1/F to 5/F, whilst the building at 165 Yee Kuk Street comprises one unit on 1/F, three units (namely Portions/Flats A, B and C) on 2/F, one unit on 3/F, two units (namely Front Portion and Rear Portion) on 4/F, and also three units (namely Portions/Flats A, B and C) on 5/F.

6.  On the other hand, the 2^nd pair of Buildings at 167 and 169 Yee Kuk Street each comprise one unit per floor.

7.  Also according to the land search obtained from the Land Registry on 29 January 2019, the ownership of the respective units is as follows:[1]

Address	Floor	Unit	Registered Owner	Undivided Share allotted under respective Deed of Mutual Covenant
163 Yee Kuk Street	G/F		1st Respondent (“R1”)	1/6
	1/F		Applicant	1/6
	2/F		Applicant	1/6
	3/F		Applicant	1/6
	4/F		2nd Respondent (“R2”)	1/6
	5/F		Applicant	1/6
165 Yee Kuk Street	G/F		Applicant	1/6
	1/F		Applicant	1/6
	2/F	Portion A	Applicant	1/3 of 1/6
		Portion B	Applicant	1/3 of 1/6
		Portion C	Applicant	1/3 of 1/6
	3/F		Applicant	1/6
	4/F	Front Portion	Applicant	1/3 of 1/6
		Rear Portion	Applicant	2/3 of 1/6
	5/F	Flat A	Applicant	1/3 of 1/6
		Flat B	Applicant	1/3 of 1/6
		Flat C	Applicant	1/3 of 1/6
167 Yee Kuk Street	G/F		3rd Respondent (“R3”)	1/5
	1/F		Applicant	1/5
	2/F		Applicant	1/5
	3/F		Applicant	1/5
	4/F		Applicant	1/5
169 Yee Kuk Street	G/F		Applicant	1/5
	1/F		Applicant	1/5
	2/F		4th Respondent (“R4”)	1/5
	3/F		Applicant	1/5
	4/F		Applicant	1/5

8.  From the above, at the commencement of the Application on 14 March 2019, the applicant owned the following number of undivided shares in the Lots:

	1st Pair		2nd Pair
	1st Lot	2nd Lot	3rd Lot	4th Lot
Number of Undivided Shares	4/6th	6/6th	4/5th	4/5th
Percentage of Undivided Shares	66.67%	100%	80%	80%
Average	83.34%		80.0%

9.  Then after the commencement of the Application, the applicant successfully acquired the undivided shares previously owned by R1 and R3. Proceedings against them have been discontinued. The applicant now owns 91.67% of the 1^st pair of Lots and 90% of the 2^nd pair of Lots.

10.  The 1^st named R2, ie Chan Hoi Kuen, is the registered owner of R2’s property. The 2^nd named R2, ie Chan Yuk Lun and 3^rd named R2, ie Chan Yuk Keung, are the beneficial owners of the same property. However, all the three named R2 above could not be found. Substituted service of the Application on them was effected on 16 December 2019 pursuant to para 5 of an Order of H H Judge M Wong of the Tribunal dated 5 December 2019. After expiration of the 21-day’s period as specified in the substituted service notices, none of the three named R2 appeared. Pursuant to para 7 of the same Order, service of subsequent documents on R2 was dispensed with.

11.  Madam Leung Hong Wah, ie R4, is the registered owner of R4’s property. She passed away on 9 January 2019. The title of R4 was therefore amended to the Personal Representatives of Leung Hong Wah, deceased, pursuant to the above-mentioned order of the Tribunal dated 5 December 2019. Pursuant to the same Order, substituted service of the Application on R4 was also effected on 16 December 2019. After expiration of the 21-day’s period as specified in the substituted service notices, R4 has not appeared and pursuant to para 6 and 7 of the said Order, all persons claiming to be the minority owners of the Lots shall be bound by the proceedings as if they have been duly served with the Application in accordance with section 3(3) of the Ordinance and service of subsequent documents on R4 was dispensed with.

12.  Meanwhile, in about September 2019, the applicant’s solicitor learned from Messrs Hau, Lau, Li & Yeung, Solicitors that its client at that time, Madam Liang Tunghua also known as Leung Tung Wah (“Madam Liang”), claimed as the executrix of the estate of the late Madam Leung Hong Wah.[2]

13.  Then there was a Summons taken out on 15 May 2020 by Messrs Tai, Tang & Chong, Solicitors, applying for the joinder of R5, ie the personal representative of Madam Chan Ngan Ping, deceased, who was believed to have beneficial interest in R4’s property. Whereas Madam Chan Ngan Ping passed away on 24 April 2002, she left the following surviving children:

(1)  Mr Leung Foo She, also known as Leung Foo Su (or Shu), a son, who subsequently passed away in 2008, leaving Madam Li Ping Chun as one of the co-administratrices of his estate;

(2)  Mr Leung Wu-hon Francis also known as Leung Foo Hong (“Mr Francis Leung”), a son;

(3)  Madam Liang, a daughter;

(4)  R4;

(5)  Madam Leung Koon Wah, also known as Winnie L Ng (“Ms Winnie Ng”), a daughter.

14.  Mr Francis Leung and his sister, Ms Winnie Ng were subsequently appointed by the Order of H H Judge M Wong dated 23 October 2020 to jointly represent the estate of R5, deceased, for the purpose of the present proceedings. To facilitate taking instructions, Messrs Cheung & Yeung was jointly engaged by Mr Francis Leung via Messrs Tai, Tang & Chong, Solicitors and by Ms Winnie Ng via Messrs Hau, Lau, Li & Yeung, Solicitors.

15.  On the other hand, legal proceedings in HCA 138/2007, HCA 745/2011 and HCA 2239/2017 registered against R4’ Property in the Land Registry were noted. The main parties in the legal proceedings are in fact the siblings and/or family members of the late Madam Leung Hong Wah and Madam Liang.

16.  According to the applicant, its solicitors continued to carry out probate searches on 12 April 2021, 26 July 2022 and 27 July 2022 but found no grant of probate or letter of administration in respect of R4’s estate. However, Mr Francis Leung entered the following Caveats against R4’s estate:

(a)  Caveat No HCCA 000923/21 entered on 3 March 2021, and

(b)  Caveat No HCCA 000996/22 entered on 3 March 2022.

17.  Then by a letter dated 18 May 2022 from Messrs Tai, Tang & Chong, Solicitor, the latter informed Messrs Cheung & Yeung that Messrs Tai, Tang & Chong, Solicitors, no longer acted for Mr Francis Leung and further instruction should be taken from Messrs Wong Shum & Co on the part of Mr Francis Leung.

18.  And on 26 July 2022[3], there was then an application by Messrs Cheung & Yeung, Solicitors for ceasing to act for R5. In the Affidavit filed by Mr Yeung Wai Hon, partner of Messrs Cheung & Yeung of even date, Mr Yeung explained that since or about 15 April 2021, both Mr Francis Leung and Ms Winnie Ng failed to pay further costs on account so as to proceed with the preparation of surveyor report. Also no further instructions were received from either Mr Francis Leung or Ms Winnie Ng.

19.  Further on 9 August 2022, a Summons was taken out by Messrs Wong Shum & Co on behalf of Mr Francis Leung seeking to remove Ms Winnie Ng from her office as one of R5’s representatives and have Mr Francis Leung appointed to solely represent the estate of Madam Chan Ngan Ping, deceased. In the Affidavit filed by Mr Wong Tak Shing (“Mr Wong”) of Messrs Cheung & Yeung of even date[4], Mr Wong explained that Mr Francis Leung has agreed with Ms Winnie Ng that the cost on account of R5 payable to Messrs Cheung & Yeung shall be paid by Mr Francis Leung and Ms Winnie Ng on equal basis. Even up to 1 August 2022 when the Tribunal granted on Order for Messrs Cheung & Yeung to cease to act, Mr Francis Leung still maintained a credit balance with Messrs Cheung & Yeung whilst Ms Winnie Ng had refused to make up her part of contribution. Mr Wong further explained the difficulty of Ms Winnie Ng failing to give her instructions to the possible settlement offers and/or engagement of Counsel.

20.  On 2 September 2022, after the trial commenced on 1 September 2022, Ms Winnie Ng applied for an Order to appoint her as the representative of R5 in substitution of Mr Francis Leung. On 5 September 2022, the Tribunal refused to remove Mr Francis Leung from the office of representative but resurrected Ms Winnie Ng’s office of co-representative to represent the estate of Madam Chan Ngan Ping, deceased, jointly with Mr Francis Leung for the purpose of the subject main compulsory sale application proceedings.

21.  At trial, Ms Nancy Ngai (“Ms Ngai”) acted on behalf of the applicant while Mr Vincent Shum (“Mr Shum”) acted on behalf of Mr Francis Leung, the 1^st named R5.

22.  Ms Winnie Ng, the 2^nd named R5, joined the trial on 5 September 2022 and was acting in person.

The Issues in the Application

23.  Ms Ngai submitted in her opening the following issues for determination by the Tribunal at the trial:

(1)  Whether the applicant is entitled to make the Application under the Ordinance;

(2)  Whether Orders for sale of the Lots should be made? To answer this question, the Tribunal has to determine the following two matters:

(a)   Whether redevelopment of the Lots is justified due to the age or state of repair of the Buildings according to section 4(2)(a) of the Ordinance; and

(b)  Whether the applicant has taken reasonable steps to acquire all the undivided shares of the Lots on terms that are fair and reasonable in accordance with section 4(2)(b) of the Ordinance.

(3)  the Tribunal shall determine the market value (commonly termed the Existing Use Value (“EUV”) of “each property on the lot” according to Part 1 of Schedule 1 to the Ordinance, the relevant date of valuation being 18 December 2018;

(4)  Whether a direction should be made to direct sale of the Lots as a composite site in one single auction?

(5)  If the Tribunal makes the sale order, the Tribunal shall determine the redevelopment value (“RDV”) of the Lots for the purpose of setting the reserve price of the public auction according to clause 2 of Schedule 2 to the Ordinance.

24.  R5 has no objection to the Orders for sale of, inter alia, R4’s property and agrees that the redevelopment of, inter alia, R4’s property, is justified.

The Evidence

25.  The applicant has filed the following documents in support of the Application:

(a)  a witness statement and a supplemental witness statement by Mr Chan Kam Tong, the applicant’s representative, dated 30 June 2021 and 11 August 2021 respectively;

(b)  a Building Condition Survey Report by Mr Chan Man Ho Calvin (“Mr Calvin Chan”) dated 26 July 2019;

(c)  a Structural Survey Report by Dr James C W Lau (“Dr Lau”) dated 18 July 2019;

(d)  the following reports by Mr Chan Chi Hing Alnwick (“Mr Alnwick Chan”) of Knight Frank Petty Limited (“Knight Frank”);

(i)  an Application Report pursuant to Part 1 of Schedule 1 to the Ordinance dated 14 February 2019 on the EUV as at 18 December 2018;

(ii)  Valuation Report dated 22 July 2021 on RDV of the Lots;

(iii)  Supplemental Report dated 22 July 2021 on the EUV as at 18 December 2018;

(iv)  Rebuttal Report dated 20 August 2021 on the Valuation Report prepared by Mr Patrick Lai dated 2 July 2021 instructed by Messrs Wong Shum & Co for the 1^st named R5, and

(v)  an Updated Report dated 27 July 2022 on RDV of the Lots on 11 July 2022.

Whether the Applicant is entitled to make the Application

26.  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.

27.  Section 3(2) of the Ordinance provides that without prejudice to the operation of subsection (5), an application under subsection (1) may cover—

(a)  2 or more lots where the majority owner owns not less than the percentage specified in subsection (1) of the undivided shares in each lot; or

(b)  2 or more lots—

(i)  on which one building is connected to another building by a staircase intended for common use by the occupiers of the buildings; and

(ii)  where the average of—

(A)  the percentage of the undivided shares owned by the majority owner in the lot or lots on which one of the buildings stands; and

(B)  the percentage of the undivided shares owned by the majority owner in the lot or lots on which the other of the buildings stands,

is not less than the percentage specified in subsection (1).

28.  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.

29.  The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice was gazetted on 22 January 2010 and came into operation on 1 April 2010 (“the Notice”). 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 building 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).

30.  Insofar as the occupation permits for the Buildings were issued on 19 June 1957 and 30 November 1955, ie not less than 60 years before the date of the Application, the Notice is applicable and the threshold percentage should be 80%.

31.  However, soon after the parties had presented their closing submissions in person on 14 September 2022, the Tribunal (which was differently constituted by a presiding officer and another member) handed down its decision in Max Win Development (HK) Limited v Gain Excel Limited, LDCS 37000/2019 (unreported, dated 30 September 2022) dismissing the application for compulsory sale under the Ordinance. Among the grounds of its decision, the Tribunal cast doubt on whether an applicant owning 100% of a lot on which one building is connected to another building on an adjoining lot by a staircase intended for common use by the occupiers of the buildings could make an application under the Ordinance despite the average of—

(A)  the percentage of the undivided shares owned by the applicant in the lot on which one of the buildings stands; and

(B)  the percentage of the undivided shares owned by the owner in the adjoining lot on which the other of the buildings stands,

is not less than the percentage specified in subsection (1).

32.  In that case, the Tribunal cited the legislative history of the Ordinance. Particularly, paragraphs 12-13 of the Minutes for the Bills Committee dated 12 March 1998 were recorded as follows:

“Buildings connected by common staircase

12. Members noted that for the purposes of title transfer, units in a building straddling several lots were sold as undivided shares of and in each lot on which the building stood. Hence, in the redevelopment of buildings straddling several lots, the general principles of the Bill requiring the minimum acquisition of 90% of undivided shares of each lot would apply.

13. Members considered it necessary to have clearer provisions to specify how the minimum threshold would apply in cases where buildings were connected by a common staircase. The Administration took on board members' suggestion and agreed to introduce CSAs[5] to the effect that the minimum acquisition level of buildings connected by a common staircase should be an average of 90% of the undivided shares in the lots on which these buildings respectively stood.” (underline added)

33.  Then in the Minutes for the Bills Committee dated 24 March 1998 at §24, the following was further recorded:

“Buildings connected by common staircase - clause 3(1A)(b)

14. SALD[6] explained that in response to members’ request, the Administration proposed to amend clause 3 to specify that the minimum acquisition level of buildings connected by common staircases should be an average of 90% of undivided shares in the lots on which these buildings respectively stood.” (underline added)

34.  The Paper for the House Committee meeting on 27 March 1998 - Report of the Bills Committee on Land (Compulsory Sale for Redevelopment) Bill summarized the provision for special consideration for buildings connected to one another by a staircase which is intended for common use by their occupiers as follows:

“Whilst supporting the concept of comprehensive redevelopment, the majority members of the Bills Committee are concerned that should such approach be adopted, there may be situations in which the applicants have not acquired any undivided shares in one of the lots notwithstanding the holding of 90% of the aggregate undivided shares. In these circumstances, they consider it not justifiable on the sole ground of comprehensive redevelopment to compel all the owners of that lot to dispose of their properties against their will. As the Bill does not prohibit the majority owners holding 90% of the undivided shares in each of the lots to make one application for a sale order in order to redevelop the lots together, the Bills Committee accepts that the minimum acquisition percentage should apply to a lot per se. However, to address the technical problems in respect of buildings connected to one another by a staircase which is intended for common use by their occupiers, the Administration takes on board members' suggestion to provide in the Bill that the minimum acquisition level should be an average of 90% of the undivided shares in the lots on which these buildings respectively stand (clause 3).” (underline added)

35.  Thus while The Bills Committee accepted that the minimum acquisition percentage should apply to a lot per se, there is an exception: the minimum acquisition level should be an average of 90% of the undivided shares in the lots on which buildings connected to one another by a staircase respectively stand. The corresponding proposed amendments were set out in Appendix III of that Paper and it was this Clause 3 amendment that introduced the current version of section 3(2) of the Ordinance.

36.  Again, on 7 April 1998, the Provisional Legislative Council resumed Second Reading debate of the Bill. On the scope of the Bill, the Chairman of the Bills Committee, Mr. Ronald Arculli said that: -

“Another focal point of discussion in the Bills Committee was whether owners holding an average of 90% of aggregate undivided shares in contiguous lots should be allowed to make an application to redevelop the lots as a package. Whilst we fully support the concept of comprehensive redevelopment, our concern was that should such approach be adopted, there may be situations where an applicant did not own any undivided shares in one of the lots whilst holding 90% of the aggregate undivided shares. The Bills Committee considered that it could not be justified on the sole ground of comprehensive redevelopment to compel all the owners of such a lot to sell their properties against their will. We, therefore, agreed that the ownership percentage should apply to each lot except where two buildings served by a common staircase in which case it would be the average of the undivided shares of the lots on which the buildings stand.” (underline added)

37.  In respect of the proposed amendments to clause 3 of the Bill (ie current version of section 3(2)(a) and (b) of the Ordinance), the Secretary for Planning, Environment and Lands said that: -

“Subclause (1A) [i.e. current section 3(2)(a) and (b)] specifies that if the majority owner makes an application covering two or more lots, he must own not less than 90% of the undivided shares in each lot. It also provides for the average to be taken for the purpose of calculating the percentage of the undivided shares of two or more lots on which there are two buildings joined by a common staircase.” (underline added)

38.  On the same day, the Committee passed the Bill with the amendments as proposed. The Bill was read a third time and passed by the Provisional Legislative Council.

39.  The Tribunal in Max Win Development, supra, was concerned about what the Court of Appeal stated in Bond Star Development Limited v Capital Well Limited [2004] 2 HKLRD 855 which was an application under section 3(1)(b) of the Ordinance for redevelopment of premises situated at 24, 26, 28, 30 and 32 of Ming Yuen Western Street:[7]

	% of undivided share of the respective lot(s) of each street no.
Floor	No. 24	No. 26	No. 28	No. 30	No. 32
Basement	10/51	1/5^	1/6	1/6	1/9
Ground	10/51	1/5	1/6	1/6	2/9
1st	10/51	1/5	1/6	1/6	2/9
2nd	10/51	1/5	1/6	1/6	2/9
3rd	11/51#	1/5	½ of 1/6	1/6	2/9*
Top	--	--	1/6	1/6	--
Total % owned by the Applicant	51/51 or 100%	5/5 or 100%	11/12 or 91.66%	6/6 or 100%	9/9 or 100%

#  This was the % of undivided share of No. 24 for “the 3^rd Floor and Roof of No. 24”

^  This was the % of undivided share of No. 26 for “the Garage of No. 26”

*  This was the % of undivided share of No. 32 for “the 3^rd Floor and Roof of No. 32”

40.  At §16 of Bond Star Development, supra, the Court of Appeal addressed as follows:

“If section 3(2) were to be construed as permitting a single application which comprised a lot in respect of which the applicant was not the full owner together with one or more other lots in respect of which the applicant was the full owner, the definition of minority owner would have to be construed as if the words “or one of the lots” were inserted after the word “lot” in both places where the word appeared. This difficulty of construction would exist despite the fact that section 3(2) does not contain reference to the minority owner.”

41.  Whereas in the present case, the Tribunal is dealing with the Application under section 3(2)(b) which is an exception providing the minimum acquisition level should be an average of 90% of the undivided shares in the lots on which buildings connected to one another by a staircase respectively stand, the Court of Appeal did not, with respect, at §16 above, distinguish between section 3(2)(a) and section 3(2)(b) the latter of which was specifically added to tackle for lots on which one building is connected to another building by a staircase intended for common use by the occupiers of the buildings.

42.  It is however of interest to note the conclusion of the judgment where the Court of Appeal stated at §35 as follows:

“… The only question which might arise is as to whether the applicant was entitled to make an application under section 3(2)(b) on the basis that the building on No. 28 Ming Yuen Western Street had been connected to an adjacent building by a staircase for common use. This point has not been argued as such.”

43.  That is, the Court of Appeal had left out the question on section 3(2)(b) on the basis that the building on one lot had been connected to an adjacent building on another lot by a staircase for common use. Thus, the decision of the Court of Appeal in Bond Star Development, supra, is not binding on the Tribunal in the present case.

44.  In the present case, the 1^st Pair of lots on which the 2 buildings stand are connected by a staircase for common use and the Application is certainly under section 3(2)(b) of the Ordinance where the provision is re-stated as follows where an application under subsection (1) may cover:

“(b) 2 or more lots—

(i) on which one building is connected to another building by a staircase intended for common use by the occupiers of the buildings; and

(ii) where the average of—

(A) the percentage of the undivided shares owned by the majority owner in the lot or lots on which one of the buildings stands; and

(B) the percentage of the undivided shares owned by the majority owner in the lot or lots on which the other of the buildings stands,

is not less than the percentage specified in subsection (1).”

45.  “Majority owner” is defined at section 2 of the Ordinance to mean the person or persons who has or have made an application under section 3(1) which covers now 2 or more lots as a result of the legislative amendment in the Bills stage. Thus, in my opinion, the words “majority owner” in section 3(2)(b)(ii) must mean the majority owner of the 2 or more lots on which one building is connected to another building by a staircase intended for common use by the occupiers of the buildings especially when it refers to “the majority owner in the lot or lots” where the average percentage specified in subsection (1) is of paramount importance.

46.  In the present case, therefore, the applicant, owning then an average of 83.34% of the 1^st pair of Lots and an average of 80% of the 2^nd pair of Lots at the time of the Application, was entitled to file the Application under section 3(2)(b) of the Ordinance.

EUV as at 18 December 2018

Assessment of EUV of G/F Units

47.  Pursuant to Part 1 of Schedule 1 to the Ordinance, a valuation report, prepared not earlier than 3 months before the date on which the application under section 3(1) of the Ordinance is made, is required in setting out the assessed market value of each property on the lot—

(a)  on a vacant possession basis;

(b)  assessed as if the lot could not be made the subject of an application for an order for sale; and

(c)  not taking into account the redevelopment potential of the property or the lot.

This was what had been done by Mr Alnwick Chan in his Application Report dated 14 February 2019.

48.  In his Supplemental Report dated 22 July 2021, Mr Alnwick Chan assessed the EUV of the Buildings as at 18 December 2018 as follows:[8]

	163 Yee Kuk Street	165 Yee Kuk Street					167 Yee Kuk Street	169 Yee Kuk Street
G/F	$17,647,610	$18,044,650					$14,356,659	$14,077,419
1/F	$4,804,010	$4,766,597					$4,925,213	$4,983,638
2/F	$4,711,625	A	B		C		$4,829,578	$4,791,960
		$2,071,980	$1,535,698		$1,393,306
3/F	$4,619,240	$4,677,720					$4,587,185	$4,643,720
4/F	$4,526,855	Front		Rear			$4,279,485	$4,333,599
		$1,639,604		$3,027,904
5/F	$4,346,705	A	B			C	-	-
		$1,705,077	$1,057,502			$1,891,515

49.  Mr Patrick Lai was not called to give evidence. Mr Shum, however, insisted that the Tribunal may admit in evidence any statement, document, information or matter, whether or not it would otherwise be admissible in evidence and attach such weight to it as may be appropriate in the circumstances.[9]

50.  At this juncture, it is noted that the EUV as assessed by Mr Alnwick Chan in section 6 of his Supplemental Report dated 22 July 2021 would result in R2 and R4 each receiving more compensation for the sale of their properties than those assessed by Mr Patrick Lai:

EUV assessment by:	Total EUV of the Buildings	R2’s property		R4’s property
Mr Alnwick Chan	$148,276,054	$4,526,855	3.05% of total EUV	$4,370,000	3.23% of total EUV
Mr Patrick Lai	$161,600,000	$4,379,000	2.70% of total EUV	$5,130,000	3.17% of total EUV

51.  This is the case because Mr Patrick Lai assessed the EUV of the G/F premises higher than that of Mr Alnwick Chan by more than 20%. In other words, Mr Patrick Lai’s assessments in respect of the domestic units of the Buildings, including those that are owned by R2 and R4, are lower than that of Mr Alnwick Chan:[10]

	163 Yee Kuk Street	165 Yee Kuk Street	167 Yee Kuk Street	169 Yee Kuk Street	Total
Mr Alnwick Chan	$17,647,610	$18,044,650	$14,356,659	$14,077,419	$64,126,388
Mr Patrick Lai	$21,890,000	$21,010,000	$17,880,000	$17,590,000	$78,370,000

52.  While Mr Patrick Lai had some comments in his Rebuttal Report dated 19 August 2021 on the G/F assessment, I do not think Mr Shum was going so far as to challenge Mr Alnwick Chan’s valuation for the ground floor premises.

53.  As I explained to Ms Winnie Ng on the date of closing submission, the purpose of assessing the EUV of the respective units is to determine the apportionment of proceeds of sale of the Lots, if an order for sale be granted, on a pro rata basis pursuant to Part 3 in Schedule 1 to the Ordinance. The relative assessments are more important than the absolute value of the assessments.

54.  In fact, Mr Shum took issue on the statement below in para 6.5 of Mr Alnwick Chan’s Supplemental Report dated 22 July 2021 after he had set out his EUV assessments as stated above:[11]

“6.5 While my EUV assessment of the Property is assessed and set out in paragraph 6.1 to 6.4 above, I received a specific instruction from the Applicant to assume the internal condition of 2/f of No 169 Yee Kuk Street as “Fair” notwithstanding the actual condition is considered “Poor” according to my internal inspection on 28 May 2021.”

55.  While the above statement is quite self-explanatory, I fail to understand, with respect, why Mr Shum had taken the view that Mr Alnwick Chan had not been holding a strong view that the actual condition of R4’s property as “Poor”.

56.  As explained by Ms Ngai, this specific instruction given to Mr Alnwick Chan was only for the applicant to consider increasing the offer to R4, if possible. Indeed, such kind of special assumption is quite common in property valuations and is provided for in VS8 of the HKIS Valuation Standards 2020 or its earlier version:

“8.2.0 Special Assumptions

8.2.1 A special assumption is made by the valuer where an assumption either assumes facts that differ from those existing at the valuation date or that would not be made by a typical market participant in a transaction on that valuation date.

8.2.2 Where special assumptions are necessary in order to provide the client with the valuation required, these must be expressly agreed and confirmed in writing to the client and intended users before the report is issued.

…

8.2.4 Special assumptions are often used to illustrate the effect of possible changes on the value of an asset. They are designated as “special” so as to highlight to a valuation user that the valuation is contingent upon a change in the current circumstances or that it reflects a view that would not be taken by participants generally on the valuation date.”

57.  As a matter of fact, as pointed out by Ms Ngai, Mr Patrick Lai also described the internal condition of R4’s property as “Poor”[12] which is exactly the same basis as adopted by Mr Alnwick Chan. And by reference to the photographs taken by Mr Patrick Lai[13], R4’s property appears to have been subdivided as defined under section 120AA of the Landlord and Tenant (Consolidation) Ordinance Cap 7.

58.  In any event, Mr Shum confirmed in his closing submission that he had no dispute on the adoption of the pro rata ratio as assessed by Mr Alnwick Chan.

Whether Redevelopment of the Lot is Justified on “Age” or “State of Repair”

59.  Section 4(2)(a) of the Ordinance stipulates that the Tribunal shall not make an order for sale unless it is satisfied that redevelopment of the Lots due to the “age or state of repair” of the Buildings is justified.

Experts’ Evidence

60.  On this issue, the applicant adduced the Condition Survey Report dated 26 July 2019 by Mr Calvin Chan, the Building Surveyor and the Structural Assessment Report dated 18 July 2019 by Dr Lau, the Structural Engineer.

61.  In the Structural Survey Report, Dr Lau concluded as follows:[14]

(1)  The conditions of the structure in the Buildings were very poor;

(2)  Many slabs, beams and columns have deep cracks and spalling;

(3)  In some important structural elements, such as columns, the concrete strengths only had 25% of its original design strength;

(4)  Due to corrosion, the diameters of some steel reinforcements were reduced to zero. The reduced concrete strengths and heavily corroded steel reinforcements had drastically reduced the strengths of the structural members and directly affect the stability of the Buildings;

(5)  The Buildings have to be repaired immediately and the estimated costs amounted to $39 million. It is cost effective to demolish and rebuild the Buildings.

62.  In the Condition Survey Report, Mr Calvin Chan concluded that the condition for the external walls, the staircase, the roof, the domestic flats and the common areas were poor. He was of the view that no matter how good the internal areas are in terms of decoration, if the basic structure is not in a satisfactory condition, the Buildings would not be fit for occupation. Mr Calvin Chan further concluded that the Buildings are not up to tenantable standards.[15]

63.  Mr Calvin Chan also found that the Buildings had not been provided with sufficient and up-to-date provisions and services installations including proper means of escape, fire resisting construction, fire services installations, building facilities to protect life and properties of building occupants and users in case of emergency.[16]

64.  Mr Calvin Chan estimated the initial repair costs to restore the Buildings to a tenantable condition at $53,726,370 which is about 108% of the unit cost of building a new similar building while the long term maintenance costs are expected to grow and become more frequent.

65.  No one took issue over the question as to whether redevelopment of the Lots is justified. In the absence of evidence to the contrary, I am satisfied that redevelopment of the Buildings is justified due to the age and state of repair.

Section 4(2)(b) – Whether Applicant has taken reasonable steps

66.  The applicant is under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interests of the respondents under section 4(2)(b) of the Ordinance.

67.  Ms Ngai submitted that despite the applicant had commenced the Application on 14 March 2019, it continued to negotiate with the respondents where available. The applicant has indeed successfully acquired the undivided shares previously owned by R1 and R3 by negotiation.

68.  Ms Ngai also submitted that the applicant had not been able to acquire R2’s property solely because all the 3 named R2 are missing. There has been no way to carry out negotiation with them at all.

69.  As regards R4’s property, Ms Ngai submitted that the applicant had not been able to purchase the interest because of the following facts:

(a)  The registered owner of R4’s property had passed away on 9 January 2019 but there is no grant of probate or letter of administration in respect of her estate.

(b)  In addition, Mr Francis Leung has entered a Caveat in respect of R4’s estate.

(c)  In any event, the registered owner of R4’s property (and her estate after her death) has been prohibited from dealing with and disposing of the property by two injunction orders made by the Court.

(d)  Whether R5 is or is not the owner of R4’s property is yet to be determined. R5 does not have any authority to sell R4’s property. This latter was acknowledged by Mr Francis Leung in his witness statement dated 8 August 2021.

70.  Despite Ms Winnie Ng trying to suggest otherwise in her closing submission, on the evidence available, I am satisfied that the applicant has taken reasonable steps to acquire all the undivided shares in the Lots.

71.  Indeed, I agree with Ms Ngai that this Application serves a good example to demonstrate that the Ordinance achieves its objective to provide a solution to the problem of property acquisition for redevelopment due to defective titles, untraceable owners, owners who had died intestate etc as stated in the first meeting of the Bills Committee of the Provisional Legislative Council on the Land (Compulsory Sale for Redevelopment) Bill (before the Ordinance was enacted) on 10 February 1998.[17]

RDV of the Lots

Hypothetical Development Model

72.  Mr Alnwick Chan resorted 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.

73.  As stated in §25(d)(v) above, Mr Alnwick Chan had prepared an Updated Report dated 27 July 2022 on RDV of the Lots on 11 July 2022. On the other hand, Mr Patrick Lai was not instructed to provide any valuation evidence on the up-to-date RDV of the Lots.

74.  The Lots have a site area of 402.17 sq m. It is sandwiched between a commercial/ residential composite development named Hey Home, which was completed in 2008, and a service lane next to another older commercial/ residential composite building at the corner of Yee Kuk Street and Pei Ho Street. Because of the Building (Planning) Regulations’ requirement, some 10.81 sq m at the rear has to be set back. Mr Patrick Lai, by reference to his Valuation Report dated 2 July 2021, had no dispute on it[18]. The net developable area becomes 391.36 sq m.

75.  Mr Alnwick Chan, in his Updated Report dated 27 July 2022, proposed a 24-storey commercial/residential composite development with ground floor going to accommodate 3 shops together with the entrance lobby of the domestic portion above. A retail shop will be connected by internal staircases to the 1/F which will also accommodate a club house. The domestic portion above will be from 2/F to 23/F with 4 units per floor. The upper floors would be served by two lifts and two common staircases. The hypothetical development will comprise a total gross floor area of 3,302.10 sq m or a plot ratio of 8.4375.[19]

76.  However, in his Rebuttal Report of 19 August 2021, Mr Patrick Lai expressed his reservation on a G/F setback proposed by Mr Alnwick Chan at the side for “Access passage for Transformer (3m)” for the reason that a new development at No 164 Hai Tan Street has no provision for transformer room[20]. However, in my view, this comparison is not appropriate as this new development at No 164 Hai Tan Street is a single block development comprising 6 storeys only.

77.  A Code of Practice 101 for Distribution Substation Design Version 15 was issued by CLP Power Hong Kong Limited on 30 June 2020 to provide the details of the general principles to be applied to the design of distribution substations, including substations located at ground floor, basement, upper floor level including at high level in high rise building and outdoor areas.[21] In particular para 5.12 and 5.1.4 state as follows:

“5.1.2 … The minimum width for plant delivery shall not be less than 3 meters taking into consideration the size of the major electrical plant such as transformers and switchgear being used.

…

5.1.4 The layout shall be designed to be adequate for the lifetime of the substation and the ultimate quantities of electrical equipment to be installed such that any civil work in the substation can be avoided or will be minmal when additional electrical equipment is necessary to install.”

78.  In the absence of further evidence to the contrary, I accept Mr Alnwick Chan’s set back proposal.

GDV for Shops

79.  In his Updated Report dated 27 July 2022, Mr Alnwick Chan adopted 7 shop transactions as comparables in assessing the GDV for his proposed shops:[22]

Comp Ref	Address	Age	Date of Agreement	Consideration	Saleable Area (m2)	Yard (m2)	Frontage (m)	Head room (m)	Depth (m)	Unit Price* (/m2)
	Reference Unit B, G/F	New			76.25		5	5	15.25
1	G/F, 117 Apliu Street	1962	11 Apr 22	$18,000,000	78.18	5.75	4.52 + Return Frontage: 8.41	5.33	18.29	$227,445
2	G/F, 80 & 82 Nam Cheong Street	1965	21 Dec 21	$31,300,000	79.47 + C/L 71.38	11.82	9.53	3.33	8.41	$315,238
3	G/F, 190 Tai Nan Street	1963	8 Sep 21	$18,000,000	71.30	5.73	5.19	3.51	17.53	$249,100
4	G/F, 200 Tai Nan Street	1967	2 Jul 21	$13,980,000	61.70	7.29	4.04	3.05	14.25	$191,822
5	Shop B, G/F, 145 Ki Lung Street	1984	10 May 21	$17,000,000	71.16	10.90	4.15	3.62	15.0	$232,941
6	G/F, 169 Ki Lung Street	1964	18 Mar 21	$12,180,000	60.15	5.56	3.96	3.96	17.53	$199,411
7	G/F, 174 Yee Kuk Street	1964	10 Feb 21	$17,580,000	89.26	1.40	4.08	3.66	21.34	$196,447

*  Value of Rear Yard assumed at 1/6 that of G/F proper

  Value of Cockloft assumed at 1/4 that of G/F proper

80.  Mr Shum proposed to include for consideration those comparables adopted by Mr Patrick Lai in his Valuation Report dated 2 July 2021, ie those dated more than 1 year ago. Save for the comparable at G/F, 174 Yee Kuk Street above, ie Comparable 7, Mr Patrick Lai adopted transactions from 28 October 2019 to 27 November 2020[23].

81.  Although these comparables adopted by Mr Patrick Lai were dated, Mr Shum suggested that adjustments could be made by reference to the price index published, for instance, by the Rating and Valuation Department (“RVD”). However, the Private Retail Price Index published by RVD is a territory wide index and, like every other index, is more or less an averaging exercise and there is no guarantee that the price trend for the subject location or property necessarily follows the index. This is particularly the case for shop premises where a slight variation in location would lead to significant difference in value. Therefore, the larger the extent of the adjustment, the higher probability of error would ensue.

82.  In fact, initially I have hesitation in accepting the transaction of at G/F, 174 Yee Kuk Street above, ie Comparable 7, as a comparable but I find this to be the best comparable in terms of location. I am not going to adopt any of the other comparables adopted by Mr Patrick Lai as they were dated.

83.  The locality of the Lots is a residential area where developments comprise mainly aged tenement blocks with retail shops on G/F intermixed with high-rise commercial/residential composite developments. Majority of the ground floor premises are occupied by ironmongers, traders of second hand electrical appliances, old-style salons, etc. Also, towards the opposite side of the street around the corner of Yee Kuk Street and Pei Ho Street is a public refuse collection station. This comparable 7 is situated on the other side of Pei Ho Street where minimum or nil adjustment was proposed by Mr Alnwick Chan. I agree this is reasonable.

84.  On the other hand, Comparable 1 is situated far away from the locality and in a better location where trades mixes are varied. Mr Alnwick Chan proposed an adjustment for location at -10% which appears to be reasonable as well.

85.  Comparable 2 comprises a corner shop at the junction of Nam Cheong Street and Tai Nan Street. Again, Mr Alnwick Chan proposed an adjustment for location at -10% which appears to be reasonable as well.

86.  Comparables 3 and 4 are occupied by an engineering company and a shop selling construction materials within the same section of Tai Nan Street. Tai Nan Street used to be a home to a lot of factories that produced leather, fabrics and accessories. In recent years, a lot of boutique cafés, stores, leather shops, terrarium shops and even indie music, and more are relocated there offering a more elegant and clean environment. Again, Mr Alnwick Chan proposed an adjustment for location at -10% which appears to be reasonable as well.

87.  Comparable 5 is occupied by a coffee shop at Ki Lung Street. Ki Lung Street used to be known colloquially as ‘button street’ due to the amount of wholesale vendors selling different types of garment fasteners. Aside from buttons, zippers and clasps, there are stores here that sell ready-to-wear pieces, as well as various textiles. In fact, Ki Lung Street is also home to a fabric market that is frequented by local designers. But like Tai Nan Street, its environment is changing to pace way for more elegant and clean environment. Mr Alnwick Chan also proposed an adjustment for location at -10% which appears to be reasonable as well.

88.  Also on Ki Lung Street, Comparable 6 is occupied by a company selling a variety of fabrics. However, there are a continuous row of fixed pitched hawkers along this side of the street. This limits the view of this comparable from vehicles passing by, if any and pedestrian across the street. For this reason, Mr Alnwick Chan had proposed an adjustment for location of -5% instead of -10%. I agree this is reasonable.

89.  Applying various other adjustments like time, age, frontage, headroom, size and layout etc, Mr Alnwick Chan arrived at a unit rate of about $222,000 per sq m. In the absence of further evidence to the contrary, I agree with Mr Alnwick Chan though he proceeded to derive from this $222,000 per sq m the values of the two remaining hypothetical shop, arriving at an overall average of $219,000 per sq m. In respect of the latter, I do not find it necessary since the proposed redevelopment was only presented to the Tribunal on a conceptual level with a high degree of generality. In the absence of further dispute, there is no requirement on the parties to submit a detailed redevelopment plan at this stage.

90.  In respect of Mr Shum’s suggestion that the distance between the Lots and the Sham Shui Po MTR station exit located at the junction of Ap Liu Street and Pei Ho Street is close, with respect, I cannot agree.

91.  Indeed, as explained earlier, both Tai Nan Street and Ki Lung Street are more popular streets. They are streets that are worth the introduction by the Hong Kong Tourist Board.

92.  As regards the GDV of the upper floor domestic units, Mr Alnwick Chan relied on transactions all in 2022 in the following developments and arrived at an average unit rate of $223,000 per sq m:[24]

i.  Harbour Park (海柏匯) at No 208 Tung Chau Street;

ii.  The Concerto (弦雅) at No 203 Yee Kuk Street；

iii.  Astoria Crest (傲凱) at No 229 Hai Tan Street.

93.  Mr Shum noted that Mr Alnwick Chan had relied on more transactions in the same developments in his earlier Valuation Report dated 22 July 2021 in which he got an average of about $227,000 per sq m[25]. This is however neither here or there as those transactions all took place in early 2021. They were dated.

94.  Indeed, in Gain Union Limited v Leung Chi Man, LDCS 5000/2021, ie another compulsory sale application in a similar locality, the judgment of which was handed down on 6 September 2022, the valuation expert in that case arrived at a unit rate of $223,000 per sq m.

Other Parameters in Residual Valuations

95.  I have reviewed the other parameters adopted by Mr Alnwick Chan in his residual valuation and found that they are in par with Gain Union, supra.[26]

Residual Valuation

96.  I determine the RDV of $260,000,000 (ie an accommodation value of $78,737 per sq m) instead of Mr Alnwick Chan’s $259,400,000. Thus, I am prepared to set the reserve price for the auction of the Lots in one go at $260,000,000.

Other Incidental Matters

97.  The applicant proposed to appoint Mr Cheung Wood Keung and Ms Chan Pui Kwan Bonny, being principals of Messrs Lo & Lo, Solicitors & Notaries Public as the sale trustees. Based on the information on their background and experience as set out in their letter dated 9 August 2022[27], I are satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on trustees under the Ordinance. The remuneration package proposed in the said letter appears reasonable.

98.  Section 8 of the Ordinance provides as follows:

“(1) Where the lot the subject of an order for sale is sold—

(a) immediately upon the purchaser of the lot becoming the owner of the lot all the rights of any prior owner (including the prior owner’s assigns or personal representatives) in or over the lot or any part thereof shall absolutely cease except to the extent, if any, specified in the order;

(b) notwithstanding the terms of any lease or the provisions of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) but in accordance with such conditions, if any, as the Tribunal specifies in directions—

(i) immediately upon the day on which the purchaser of the lot becomes the owner of the lot it shall be deemed, by virtue of this section and for all purposes, that there has on that day been terminated the tenancy of any tenant of any property on the lot who is such a tenant by virtue of any lease entered into at any time before the purchaser became such owner; and

(ii) immediately upon the expiration of 6 months immediately following that day, the purchaser is entitled to, and the tenant is required to deliver up, vacant possession of the property.

(2) Where there is any tenancy terminated by virtue of subsection (1)(b)(i), the purchaser of the lot to which the tenancy relates shall, not later than 14 days after the day on which he became the owner of the lot, cause a notice, as specified in Schedule 4 and in the Chinese and English languages, to be served on the tenant of the tenancy by leaving the notice with an adult occupier of the property in which the tenant resides and to which the tenancy relates.

(3) Subject to subsections (4) and (5), the order for compensation referred to in section 4(6) may relate to compensation—

(a) payable by—

(i) the majority owner of the lot concerned to the tenant under a lease referred to in subsection (1)(b) which relates to property on the lot which was owned by the majority owner immediately before the purchaser of the lot became the owner of the lot (and whether or not the majority owner is the purchaser);

(ii) the minority owner of the lot concerned to the tenant under a lease referred to in subsection (1)(b) which relates to property on the lot which was owned by the minority owner immediately before the purchaser of the lot became the owner of the lot (and whether or not the minority owner is the purchaser);

(b) determined by reference to any of the provisions of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7), and whether with or without modifications thereto specified in the order.

(4) Without prejudice to the generality of subsection (3), the Tribunal may take into account—

(a) the representations, if any, of the tenant as to whether compensation should be payable and, if so, the amount of the compensation;

(b) for the purposes of determining any such compensation, the benefit, if any, afforded the tenant by virtue of the operation of subsection (1)(b)(ii).

(5) No compensation shall be payable under this Ordinance to the tenant in relation to any lease entered into on or after the date on which the order for sale of the lot concerned was made.”

99.  The applicant has prepared a set of draft Particulars and Conditions of Sale of the Lots[28]. Subject to any amendment that may become necessary as a result of my ruling on the arrangement of auction above, the particulars and conditions of sale of the Lots by public auction submitted by the applicant are also reasonable.

Order

100.  This Tribunal make the following orders:

(1)  This Tribunal is satisfied that the redevelopment of the Lots is justified due to the “age” or “state of repair” of the Buildings and that the applicant has taken reasonable steps to acquire all the undivided shares in the Lots;

(2)  All the undivided shares in the Lots, the subject of the Application herein, be sold by way of a public auction for the purposes of the redevelopment of the Lots under s.4(1)(b) of the Land (Compulsory Sale for Redevelopment) Ordinance (“the Ordinance”);

(3)  Mr Cheung Wood Keung and Ms Chan Pui Kwan Bonny of Messrs Lo & Lo, Solicitors & Notaries Public, nominated by the applicant, be appointed trustees (“the Trustees”) to discharge the duties imposed on trustees under the Ordinance in relation to sale of the Lots and the Trustees be authorized to charge such remuneration for their services in accordance with the terms set out in the letter of Messrs Lo & Lo, Solicitors & Notaries Public dated 9 August 2022.

(4)  For the purpose of the sale of the Lots by public auction under section 5(1)(a) of the Ordinance:

(i)  The sale of the Lots be on the particulars and conditions of sale substantially the same as those in the draft Particulars and Conditions of Sale, subject to suitable improvement/amendments to reflect, among other things, the additional directions mentioned hereunder in paragraph (5) and to be initialed and approved by the Tribunal.

(ii)  The reserve price be set at $260,000,000.

(iii)  Subject to further extensions that the Tribunal may subsequently allow upon the application of the purchaser of the Lots or its successor in title, the redevelopment of the Lots and the Buildings shall be completed and made fit for occupation within a period of 6 years after the date on which the purchaser of the Lot shall become the owner of the Lots.

(iv)  Liberty to the applicant, the respondents and the Trustees to apply to the Tribunal for further direction(s) under the Ordinance.

(5)  All the incumbrances affecting R4’s property including but not limited to possessory title to R4’s property (if any) and the incumbrances listed immediately below and currently registered against R4’s property in the Land Registry shall be discharged and/or vacated from registration with the proceeds of sale of the Lots attributable to R4’s property (gross or net) whether before or after payment into the Tribunal:

(a)  A sealed copy of Writ of Summons dated 20 January 2007 in relation to the legal proceedings in HCA 138/2007 and registered by memorial No 07012001510035;

(b)  A sealed copy Order dated 26 May 2017 in relation to the legal proceedings in HCA 138/2007 and registered by memorial No 17061400780029;

(c)  A sealed copy of Writ of Summons dated 26 September 2017 in relation to the legal proceedings in HCA 2239/2017 and registered by memorial No 17092702260019;

(d)  A sealed copy of Injunction Prohibiting Disposal of Assets in Hong Kong dated 6 October 2017 made in the legal proceedings in HCA 745/2011 and registered by memorial No 17101002470028;

(e)  A sealed copy of Injunction Prohibiting Disposal of Assets in Hong Kong dated 6 October 2017 made in the legal proceedings in HCA 2239/2017 and registered by memorial No 17101002470033;

(f)  A sealed copy Order dated 3 November 2017 made in the legal proceedings in HCA 2239/2017 and registered by memorial No 18053102040017;

(g)  A sealed copy Order dated 3 November 2017 made in the legal proceedings in HCA 745/2011 and registered by memorial No 18053102040020;

(h)  A sealed copy Order dated 28 December 2018 made in the legal proceedings in HCA 745/2011 and registered by memorial No 19020801410014;

(i)  A sealed copy Order dated 28 December 2018 made in the legal proceedings in HCA 2239/2017 and registered by memorial No 19020801410023;

(j)  A sealed copy Charging Order: Notice to show cause dated 19 June 2017 made in the legal proceedings in HCA 745/2011;

(k)  A sealed copy Charging Order Absolute dated 8 August 2017 made in the legal proceedings in HCA 745/2011.

(6)  After deduction of the auction expenses, the legal costs on the assignment of the Lots incurred by the Trustees, compensation paid to the tenants of R4’s property pursuant to section 11 of the Ordinance, that part of the net proceeds of sale attributable to the R4’s property be paid into the Lands Tribunal until availability of proof of the ownership of R4’s property to the satisfaction of the Lands Tribunal; or alternatively, pending final determination of ownership of R4’s property by the Court of competent jurisdiction;

101.  Since R2 and R4 are missing, the applicant do publish notices once in a Chinese language newspaper (and in the Chinese language) once in an English newspaper (and in the English language) circulating generally in Hong Kong within 7 days from the date of the sealed judgment to be made herein by the Tribunal informing R2 and R4 and all persons claiming to the owners of the Lots;

(a)  that the Tribunal has made Orders for sale of the Lots;

(b)  that the Lots be sold by public auction; and

(c)  where and the times during which copy of the Orders for sale to be made herein can be obtained.

Costs

102.  Whereas in accordance with the compensation approach as determined by the Court of Appeal in Good Faith Properties Ltd and Others v Cibean Development Co Ltd [2014] 5 HKLRD 534, I agree with Ms Ngai that Mr Francis Leung’s application on 9 August 2022 for the removal of Ms Winnie Ng from her office of co-representative was an indoor affair between Mr Francis Leung and Ms Winnie Ng arising out of and incidental to the conduct of Ms Winnie Ng and/or the communication breakdown between Mr Francis Leung and Ms Winnie Ng, which was not caused by the applicant and was beyond the applicant’s control. At the hearing of Mr Francis Leung’s application on 15 August 2022 and on the hearing of Ms Winnie Ng’s application on 5 September 2022, the applicant took a neutral stance and therefore should not be responsible for the costs in relation to Mr Francis Leung’s application for removal of Ms Winnie Ng from her office of co-representative by the Summons filed on 9 August 2022.

103.  Also, I agree with Ms Ngai that in the period between 2 August 2022 and 14 August 2022, both Mr Francis Leung and Ms Winnie Ng were not in the position to represent R5 unless they acted jointly. On the evidence available, in the particular the Notice to Act for Mr Francis Leung alone filed by Messrs Wong Shum & Co on 5 August 2022 and the Affirmation of Wong Tak Shing filed by Messrs Wong Shum & Co of even date, Mr Francis Leung and Ms Winnie Ng were not working hand in hand with each other in representing R5 between 2 August 2022 and 14 August 2022. During the said period, as Messrs Wong Shum & Co had expressly stated in the Notice to Act filed on 5 August 2022, they were merely the solicitors for Mr Francis Leung but not R5.

104.  I therefore order that:

(1)  the applicant do pay to R5 cost of the main compulsory sale application proceedings from 6 November 2020 (the date of filing of the Notice to Act for R5 by Messrs Cheung & Yeung, the former solicitors for R5) to 1 August 2022 (the date of the Order for Messrs Cheung & Yeung’s cessation to act for R5), both days inclusive, to be taxed at High Court Scale if not agreed without Certificate for Counsel;

(2)  the applicant do pay to R5 cost of the main compulsory sale application proceedings from 15 August 2022 (the date of the Order for appointing Francis Leung as the sole representative of R5) to 4 September 2022 (the date immediately prior to the restoration of Winnie’s office of co-representative), both days inclusive, to be taxed at High Court Scale if not agreed with one Certificate for Counsel;

(3)  the applicant do pay to the 1^st named R5 (ie Mr Francis Leung) cost of the main compulsory sale application proceedings from and inclusive of 5 September 2022, to be taxed at High Court Scale if not agreed with one Certificate for Counsel;

(4)  there be no order as to costs between the applicant and R2 and R4 and the 2^nd named R5 (ie Ms Winnie Ng) for the period from 2 August 2022 to 14 August 2022 and in respect of Mr Francis Leung’s application to remove Ms Winnie Ng from her office of co-representative of the estate of Madam Chan Ngan Ping, deceased, and to appoint him as the sole representative of R5 made by the Summons filed by on 9 August 2022 and the hearing of the aforesaid application on 15 August 2022 and in respect of appearance at the Pre-Trial Review on 9 August 2022 on behalf of Mr Francis Leung.

105.  Last but not least, the Tribunal thank Counsel for their assistance.

Appendix