PRECISE LUCKY LTD v. KO KAI KWUN MIGUEL AND OTHERS

LDCS 18000/2022

[2025] HKLdT 63

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 18000 OF 2022

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BETWEEN

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J U D G M E N T

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BACKGROUND

1.  This is the applicant’s application for a compulsory sale order issued on 31 August 2022 (“the Application”) under section 3 of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”). The applicant seeks to sell all the undivided shares of the Remaining Portion of Subsection 1 of Section H of Inland Lot No 1460 (“the Lot”) on which a building known as Comfort Building (“the Building”) with a postal address of Nos 59 & 61 Wong Nai Chung Road and Nos 36 & 38 Ventris Road, Hong Kong is erected.

2.  Because of the topography of the site, the Building consists of two portions, one facing Wong Nai Chung Road, which is usually identified as the Front Portion, and the other facing Ventris Road, which is usually identified as the Rear Portion. The two portions are connected by a common staircase in the middle which serves both portions. Additionally, each portion is served by a lift and another staircase. Thus, there are 3 staircases and 2 lifts altogether.

3.  The Building was built in accordance with a set of building plans with reference no 2/3281/60, approved by the Building Authority from 1961 to 1964. The Approved Building Plans have two sets of Ground Floor (“G/F”) and 1^st Floor (“1/F”) Plans, one approved on 19 October 1963 and the other approved on 8 July 1964. With reference to a Permit to Occupy a New Building (Permit No H182/64) issued on 8 July 1964 by the Building Authority (“the Occupation Permit”) [1], the G/F and rear part of 1/F appeared to be built in accordance with the plan approved in 1963, while the front part of the 1/F appeared to be built according to the plan approved in 1964.

4.  According to the Approved Building Plans, the Front Portion, namely Nos 59 & 61 Wong Nai Chung Road, consisted of a shop on G/F fronting Wong Nai Chung Road and two domestic units on each of the 1/F to 9/F per floor. The Rear Portion, namely Nos 36 & 38 Ventris Road, consisted of a lobby at the basement (at the Rear Portion of 1/F of the Front Portion) and 2 domestic units on each of the G/F to 8/F (at the level of the 2/F of the Front Portion to what the Occupation Permit identified as 10/F). Thus, altogether 1 shop and 36 domestic units were planned:

5.  According to the Land Registry records, however, the G/F shop has been divided into two shops, namely G/F of 59 Wong Nai Chung Road and G/F of 61 Wong Nai Chung Road respectively. Also, the lobby at the basement of the Rear Portion has been converted into 2 domestic units, namely Basement of 36 Ventris Road and Basement of 38 Ventris Road. Currently, there are 2 shops and 38 domestic units in the Building.

6.  According to the Deed of Covenant dated 20 March 1968 and the Land Registry records,

(1) each of the 2 shops is allotted 2/42 undivided shares;

(2) each of the 38 domestic units (including the 2 Basement units) has been allotted 1/42 undivided share; and

(3) the top units of the Front and Rear Portions also own the respective portion of the roof.

7.  Mr Mok Yeuk Chi (“Mr Mok”), counsel for the applicant, summarized in his opening submission that as at the commencement of the trial on 2 December 2024, the applicant owned all the units (and the allotted undivided shares) save those owned by the following remaining respondents (“Remaining Respondents”):

(1) 3^rd respondents (“R3”) who own 4/F, 59 Wong Nai Chung Road also filed a Notice of Opposition (a) putting in dispute valuation; (b) raising the issue that the applicant had reached consensus and/or mutual understanding with them to acquire their unit but unreasonably refused to proceed. According to them, the applicant hence failed to have taken reasonable step to acquire their corresponding undivided share. R3 also referred to two compulsory sale proceedings, being LDCS 17000/2022 and LDCS 19000/2022, as regards the adjoining lots on which two similar buildings, being Green View Mansion and Bonny View House are erected thereon respectively, stating that they will refer to the remarks of the Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578 that “on the conduct of the proceedings and/or sale of the Lot as with the said adjacent lots, if so ordered.”

(2) 4^th respondent (“R4”) who owns 5/F, 59 Wong Nai Chung Road filed a Notice of Opposition (a) putting in dispute valuation, whether the applicant had taken reasonable steps to acquire all the undivided shares of the Lot, and whether redevelopment of the Lot is justified and (b) making a point similar to the argument on adjoining lots by R3.

(3) 5^th respondent (“R5”) which owns 5/F, 61 Wong Nai Chung Road filed a Notice of Opposition putting in dispute valuation and whether redevelopment is justified.

(4) 6^th respondent (“R6”) is the personal representative of the Deceased who before his death owned 6/F, 36 Ventris Road and was the original R6. He filed a Notice of Opposition putting in dispute valuation, whether redevelopment of the Lot is justified and whether the applicant had taken reasonable steps to acquire all the undivided shares of the Lot. In his Pre-Trial Review note, R6 put the last point that “Whether the Applicant has taken reasonable steps to acquire all the undivided shares in the Lot in the circumstance that the Applicant refused to extend the time of completion of the Provisional Agreement for Sale and Purchase upon the premature demised of the Deceased”. According to him, the death was “premature” because the Deceased died soon after the Provisional Agreement.

(5) 7^th respondent (“R7”) who owns 7/F, 36 Ventris Road filed a Notice of Opposition putting in dispute valuation and whether redevelopment of the Lot is justified and the applicant had taken reasonable steps to acquire all the undivided shares of the Lot.

(6) 8^th respondents (“R8”) who own 7/F, 61 Wong Nai Chung Road filed a Notice of Opposition putting in dispute valuation and whether the applicant had taken reasonable steps to acquire all the undivided shares of the Lot.

8.  Whilst Mr Mok acted on behalf of the applicant, the Remaining Respondents were legally represented, if any, as follows:

Respondent(s)	Property	Legal Representation (if any)	Name of Counsel (if any)
R3	4/F, 59 Wong Nai Chung Road	Wilkinson & Grist	Mr Adrian But
R4	5/F, 59 Wong Nai Chung Road	Ho, Tse, Wai & Partners	Mr Harrison Miao
R6	6/F, 36 Ventris Road	Simon Reid-Kay & Associates	Mr Ross M Y Yuen
R7	7/F, 36 Ventris Road	K C Ho & Fong	Mr Harrison Miao

9.  Thus R5 and R8 have not been legally represented and their attendance had been excused.

The Evidence

10.  For the purpose of the present proceedings, the applicant and R3, R4, R6 & R7 have produced the following expert reports:

Condition Survey

(1) Mr Wong Sai Ning Benson (“Mr Benson Wong”), a Chartered Building Surveyor, on behalf of the applicant, filed the following reports:

(1) Condition Survey Report dated 30 June 2023;

(2) Rebuttal Report dated 22 January 2024.

(2) Mr John Lau (“Mr Lau”), also a Chartered Building Surveyor, on behalf of R3, R4, R6 & R7, filed a Rebuttal Report dated 20 December 2023.

(3) Mr Benson Wong and Mr Lau’s joint statement dated 24 April 2023.

Structural Assessment

(1) Mr Wong Chi Ming (“Mr C M Wong”), a Registered Structural Engineer, on behalf of the applicant, filed the following reports:

(a) Structural Assessment Report dated 28 June 2023;

(b) Rebuttal Report dated 18 January 2024.

(2) Dr James Lau (“Dr Lau”), also a Registered Structural Engineer, on behalf of R3, R4, R6 & R7, filed a Structural Assessment Report dated 15 December 2023.

(3) Mr C M Wong and Dr Lau’s joint statement dated 2 February 2024.

Redevelopment Potential of the Lot

(1) Mr C H Ng (“Mr Ng”), Authorized Person, on behalf of the applicant, filed the following reports:

(a) Expert Evidence dated 16 July 2024;

(b) Rebuttal Evidence dated 16 August 2024.

(2) Mr Lam Siu Tong (“Mr Lam”), Authorized Person, on behalf of R3, R4, R6 & R7, filed the following reports:

(a) Expert Evidence dated 17 July 2024;

(b) Rebuttal Evidence dated 16 August 2024.

(3) Mr Ng and Mr Lam’s joint statement dated 17 October 2024

Enforcement Risk of Unauthorized Building Works

(1) Mr Benson Wong, also an Authorized Person, on behalf of the applicant, filed the following reports:

(a) Expert Evidence on the enforcement risk of unauthorized structures dated 17 July 2024;

(b) Rebuttal Evidence dated 16 August 2024

(2) Mr Benson Wong and Mr Lam’s joint statement dated 14 October 2024.

Valuation

(1) Mr Charles C K Chan (“Mr Chan”), a Chartered Valuation Surveyor, on behalf of the applicant, filed the following reports:

(a) Valuation Report dated 29 August 2022 pursuant to section 3(1)(a) of the Ordinance and Part 1 of Schedule 1 thereto setting out the market value of each property in the Building as at 10 June 2022 (which is commonly coined by the valuation profession in similar compulsory sale applications as the “Existing Use Value” or simply “EUV”;

(b) Supplemental Report dated 29 June 2023 on the EUV of the Building as at 10 June 2022;

(c) Rebuttal Report dated 22 January 2024 on the RDV of the Lot;

(d) Updated EUV Report dated 8 January 2024;

(e) Updated RDV Report dated 13 November 2024.

(2) Dr T C Wong (“Dr Wong”), also a Chartered Valuation Surveyor, on behalf of R3, R4, R6 & R7, filed the following reports:

(a) EUV valuation and rebuttal Report dated 20 December 2023;

(b) RDV valuation and rebuttal Report dated 20 December 2023;

(c) Updated RDV Report dated 4 November 2024.

(3) Mr Chan and Dr Wong’s 1^st joint statement dated 6 March 2024.

(4) Mr Chan and Dr Wong’s 2^nd joint statement dated 20 November 2024.

11.  The applicant also produced their factual witness, Mr C K Yu (“Mr Yu”)’s witness statement dated 30 June 2023, whereas R3, R4, R5 & R6 filed their witness statements dated 21 December 2023. Mr Yu and R6 then filed their reply/ supplemental witness statement dated 30 April 2024 and 31 July 2024 respectively.

WHETHER THE APPLICANT IS ENTITLED TO MAKE THE APPLICATION

12.  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.

13.  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.

14.  The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice (“the Notice”) was gazetted on 22 January 2010 and came into operation on 1 April 2010. Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%. Those classes of lots include: “a lot with each of the 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)”.

15.  As mentioned above, the Occupation Permit was issued on 8 July 1964, ie not less than 50 years before the date of the Application. The Notice is therefore applicable and the threshold percentage should be 80%.

16.  At the time of the filing of the Application on 31 August 2022, the applicant owned 80.95% of the undivided shares of the Lot. We agree therefore that the applicant was entitled to make the Application under section 3(1) of the Ordinance.

EUV AS AT 10 JUNE 2022

17.  As afore-mentioned, Mr Chan and Dr Wong had set out the disputes they had on the EUV assessment of the various units of the Building in their 1st joint statement dated 6 March 2024.

18.  One main dispute was whether values had to be given to various unauthorized building works within the units:

Unit	Unauthorized Structures
G/F, 59 Wong Nai Chung Road	(a) Covered and enclosed unauthorized structure on the rear yard; (b) Unauthorized extension/ excavation on the lower part of G/F; and (c) Unauthorized cockloft above the unauthorized extension/ excavation, accessible via a staircase.
G/F, 61 Wong Nai Chung Road	In addition to the items (a), (b) and (c) above, this unit has an unauthorized cockloft above the unauthorized shop area.
Basement, 36 Ventris Road	Unauthorized extension and unauthorized extension under common staircase.
Basement, 38 Ventris Road	Unauthorized extension.
G/F, 36 Ventris Road	Unauthorized open flat roof.
8/F & Roof, 38 Ventris Road	Unauthorized encroachment of common staircase landing
9/F & Roof, 59 Wong Nai Chung Road	Unauthorized covered structure on roof.*
9/F & Roof, 61 Wong Nai Chung Road	Unauthorized covered structure on roof.*

* Neither Mr Chan nor Dr Wong assigned any value.

Unauthorized Structures Inside G/F, Nos 59 & 61 Wong Nai Chung Road

19.  For the two G/F shops fronting Wong Nai Chung Road, there appear to be “unauthorized extensions” beyond the rear boundary wall onto the “unexcavated” portion of the Lot. A cockloft built within each of the two shops with a staircase leading thereto from the G/F has also been built in the extended area but the extent of this floor is even more intrusive. In addition, the open yard between the front portion of each of the two shops and their respective rear portions has been enclosed to become part of the shop premises. In respect of G/F, 61 Wong Nai Chung Road, there exists another unauthorized cockloft over the rear portion of the shop area.[2]

20.  Indeed, such “unauthorized extensions” beyond the rear boundary wall in basement of premises are not unfamiliar. In Hong Kong Telephone Company Limited v The Hong Kong Land Company Limited, LDLA 5/1982 (unreported, 5 November 1982), the Tribunal considered market rent appropriate for the premises although there was an illegal addition in the form of an enclosed void at ground level having been converted into a playroom. In that case, “(b)ecause of the steep slope down from the road level the foundations of the building continue for a considerable further distance below the lower level floor opening onto a paved open garden area. The area of these foundations below the lower level floor has been closed to provide a playroom”. In that case, therefore, the conversion created a 4^th storey but the Government Lease limited the building to only 3 storeys. The Tribunal held that while the enclosed foundation area used as a playroom did not form part of the legal gross floor area, it was part of the suit premises and must for valuation purposes be taken into account as ancillary to the residential area, in the same way as the garden and car park areas were likewise ancillary. The Tribunal was satisfied that its existence could reasonably be expected to attract a slightly higher rent than if it did not exist, in the same way as other ancillary features add value to premises. The possibility that the landlord may at sometime have to remove the glass doors enclosing the area could not be discounted, nor could the probability that it is allowed for the time being.

21.  More recently, in Gainfield Investment Limited & Others v Legend Time Limited & Others, LDCS 16000/2014 (unreported, 17 October 2016), the Tribunal observed at §42 as follows:

“According to the Approved Building Plans, behind the walls of the 2 garages on Basement was an unspecified portion beneath units 2C, 2D, 2E and 2F on Ground Floor – the Basement Extension. There is no dispute that the 2 garages in the front had been converted into shops before their respective acquisition by the applicants. There was no evidence before us to say how and when the Basement Extension came into being except that it is not disputed for the purpose of these proceedings that it was created without the approval of the Building Authority and was converted into an extension to Garage 2A, a part of which abutting Tak Shing Street has also been partitioned and dedicated to provide an access to the Basement Extension. We noticed during our joint inspection an internal memo displayed on the wall therein, the Basement Extension had most probably been occupied as an office ancillary to the shop at Garage 2A in the front as early as in 1998 by Yue Hwa Chinese Products Emporium Limited which has been running department stores in Hong Kong.”

22.  In that case, one of the respondents reported the unauthorized extension to the Buildings Department. Subsequently, the Building Authority issued a letter dated 7 April 2016 which read as follows:

“Regarding the suspected unauthorised building works below the ground floor level, you are advised that site inspection was carried out by staff of the Buildings Department and no obvious structural danger was noted during the inspection. Nevertheless, the department will follow-up with enforcement actions against the unauthorised building works in the subject premises in accordance with the prevailing enforcement policy. As this building has been selected as one of the target building for large scale operation, this department will serve a removal order against the pertaining unauthorised building works.” (underline added)

23.  Mr Lam, who had worked with the Buildings Department for 37 years, stated in his report dated 17 July 2024 that the extensions at the rear of the two shops were formed by removing the soil under area originally designated as “Lobby” on the G/F abutting Ventris Road. Mr C M Wong rebutted however that the word “unexcavated” as appearing on the G/F plan of the Building misleading. Referring to the framing plans of the Building[3] which was approved by the Building Authority on 29 October 1963 subsequent to the approval of the General Building Plans on 19 October 1963, Mr C M Wong confirmed that the structural elements were constructed according to the framing plans. He asserted that there should have been excavation in the first place when foundation of the building works was carried out. The “unexcavated” portion was supposed to be backfilled after the construction of the structural elements.

24.  When Mr C M Wong was asked by the bench if such removal of the substantial volume of backfill would be likely after the Building was completed, he expressed his opinion that in the most likely scenario, there was simply no backfilling and the owners of the G/F premises made use of it from the very beginning[4]. The Tribunal then took judicial notice that in the past, due to policy, the Building Authority usually takes action in the order of priorities. The Tribunal accepted, as what the Tribunal did in Hong Kong Telephone, supra, that there should be value attached to this appurtenance.

25.  Indeed, G/F, 59 Wong Nai Chung Road & 61 Wong Nai Chung Road were transacted together once under one Agreement for Sale and Purchase dated 24 May 2021[5]. Attached thereto was a “Supplemental Agreement for Alterations with a Property” dated 10 May 2021 annexed, stipulating that the purchaser, Lion Star Oriental Limited, was aware of additions and alterations and was willing to accept the units and raise no objection or requisition on title.

26.  Mr Chan happened to be also the valuation expert on behalf of the applicant in Gainfield Investment. In the present case, Mr Chan followed suit and applied a value in respect of the “unauthorized extensions”. In addition, he assigned values to the mezzanine floors and the enclosed yard following the market reality principle expounded by the Tribunal ever since Suen Sun-yau v. Director of Buildings and Lands [1991] HKDCLR 33, Cheer Capital Limited v Unibase Investment Limited & Others, LDCS 5000 & 6000/2013 (unreported, dated 12 June 2015) at §64 and Gainfield Investment, supra[6]:

The Property	Saleable Area (m2)	Open Yard (m2)	Covered & Enclosed Yard (m2)	Unauthorized Extension on G/F (m2)	Unauthorized Cockloft above Shop, accessible via staircase (m2)	Unauthorized Cockloft above Shop, accessible via cat ladder (m2)	Unauthorized Cockloft above Unauthorized Extension (m2)	Converted Area (m2)
G/F, 59 Wong Nai Chung Road	149.1	18.6	18.2	26.7	47.8	0.0	23.4	172.3
G/F, 61 Wong Nai Chung Road	103.4	0.0	40.4	14.9	5.3	7.5	25.8	130.4
Conversion Factor:	@1		@1/2	@1/4	@1/8	@1/10	@1/16

27.  Dr Wong opined otherwise and considered there was a significant enforcement risk if they were made known to the Buildings Department. Dr Wong did not assign any value of these alterations and therefore his converted areas of the shop premises are as follows:

The Property	Saleable Area (m2)	Open Yard (m2)	Covered & Enclosed Yard (m2)	Converted Area (m2)
G/F, 59 Wong Nai Chung Road	149.1	18.6 + 18.2 = 36.8		155.2
G/F, 61 Wong Nai Chung Road	103.4	36.8		109.5
Conversion Factor:	@1	@1/6

28.  Dr Wong had even deducted reinstatement cost estimated by Mr Lau in the sum of $860,000 from his valuation.

29.  In Transport for London (London Underground Limited) v Spirerose Limited [2009] 1 WLR 1797, [2009] UKHL 44, Lord Neuberger pointed out at paragraph 50 as follows:

“First, if a statute directs that property is to be valued on an open market basis as at a certain date, one would not expect any counter-factual assumptions to be made other than those which are inherent in the valuation exercise (such as the assumption that the property has been on the market and is the subject of a sale agreement on the valuation date) or those which are directed by the statute.”

30.  More recently, in Newbigin (VO) v SJ & J Monk (A Firm) [2015] 1 WLR 4817, Lewison LJ discussed “the reality principle” in these terms:

“It is a well-known principle of valuation, not confined to rating, that in principle you must value the property as it stands on the valuation date. This is the principle of reality; or as classicists prefer to call it, the principle that property must be valued rebus sic stantibus. This principle can be displaced by contrary instructions in the statute or contract under which the valuation takes place[7].”

31.  In Director of Lands v Yin Shuen Enterprises Ltd & Another [2003] 2 HKLRD 399 , (2003) 6 HKCFAR 1, the Court of Final Appeal expressed at §14 its cognizance of market reality as follows:

“Purchasers are often willing to pay more for land than its intrinsic value would justify. Thus the land may be used for an illegal or non-conforming purpose. In a free market purchasers may be willing to buy such land in the hope or expectation that the current use will continue to be tolerated. Such purchasers may be prepared to pay a higher price than would otherwise be justified. On resuming the land, however, the Government obviously ought not to be required to pay compensation on this basis. Sections 11(3)(a) and 12(b) accordingly preclude the assessment of compensation on the basis of the current use where it is illegal or not in conformity with the terms of the lease under which it is held.…”

32.  The Court of Final Appeal overruled the judgment of H H Judge Cruden in Suen Sun Yau only because it necessarily rejected his view that the compensation payable to the owner on resumption should reflect more than the value of the land subject to the restrictions in the lease because of the prospect of obtaining a modification or discharge of the restrictions[8]. In the present case, however, Part 1A in Schedule 1 to the Ordinance only requires assessment of market value of each property on the Lot on a vacant possession basis; there is no similar provision like sections 11(3)(a) and 12(b) of the Lands Resumption Ordinance that qualifies the definition of market value.

33.  The market reality principle was also explained by Lewison LJ earlier in Harbinger Capital Partners v Caldwell (As the Independent Valuer of Northern Rock Plc) [2013] EWCA Civ 492 at §23. Where a valuation is made on the basis of a notional sale in the open market then, the hypothetical transaction “is only a mechanism for enabling one to arrive at a value of particular property for a particular purpose”. He added that “it does not entitle the valuer to depart from the real world further than the hypothesis compels. The various hypotheses must be taken no further than their terms make strictly necessary”. A little later, he added this: “Where the hypothesis inevitably entails a particular consequence, the valuer must take that consequence into account” but “where the alleged consequence is not inevitable, but merely possible (or even probable), then the consequence cannot be assumed to have happened”. This principle was affirmed and adopted by the Court of Final Appeal in Penny’s Bay Investment Co Ltd v Director of Lands (No. 2) (2017) 20 HKCFAR 465 at §82.

34.  In spite of the above, counsel for the respondents argued that the unauthorized building works should not be given any value as a matter of law. They referred to the original Land (Compulsory Sale for Redevelopment) Bill which required the assessment of “market value” “on a vacant possession existing use basis”. However, the phrase “existing use” was discarded from the Bill to address the concern of the Bills Committee that “existing use might be unauthorized eg operation of a restaurant within domestic premises” and it would “encourage owners to let out their premises for unlawful uses” [9].

35.  Their attention was misdirected. The rationale for the deletion of “existing use” was explained in the preceding paragraph of the Minutes:

“If the valuation report stated the respective assessed values of each property on a vacant possession and existing use basis, difficulties would arise as to which values should be used in the apportionment of proceeds which was calculated on a pro-rata basis of the assessed value of the property.”

36.  Mr Yuen for R6 referred in particular to Bennion on Statutory Interpretation (7^th Edition) at §26.6 which states that:

“It is a principle of legal policy that a person should not be allowed to profit from their own wrongdoing. This principle forms part of the context against which legislation is enacted and, when interpreting legislation, a court should take it into account.”

37.  However, if the legislature were really to exclude the value of the unauthorized building works as well as “existing use”, there was good example of, for instance, sections 11 and 12 of the Lands Resumption Ordinance, Cap 124 but the legislature did not take the opportunity to adopt. Instead, as the then Principal Assistant Secretary for Planning, Environment and Lands explained later at para 18 of the Minutes, “the intent of assessing the value of the property on an existing use basis was meant to disregard its redevelopment potential. In response to members, the Administration agreed to delete the words "and existing use basis" from Part 2 of Schedule 1. An explicit provision would be added to provide that the assessed market value should not take into account the redevelopment of the property or the lot.” There was no intention whatsoever to qualify or restrict the definition of “market value” as in the case of the Lands Resumption Ordinance. More importantly, there was no members’ concern recorded about unauthorized buildings works.

38.  While assigning value to the enclosed yard would certainly increase the EUV of an owner’s interest, and its pro rata share of the proceeds of sale of the Lot, such “enrichment” is not unjust because such value for “unauthorized use”, which is not illegal[10], is generally recognized in the market as demonstrated by the authorities stated above. In Monat Investment Ltd v All Person(s) in Occupation of Part of The Remaining Portion of Lot No 591 in Mui Wo DD 4 No 16 Ma Po Tsuen, Mui Wo, Lantau Island [2023] 2 HKC 627, [2023] 2 HKLRD 1311, Yuen JA (as she then was) remarked at §62.2 that:

“The judge did not articulate what he considered to be the underlying purpose of s.14 BO (the first consideration in Patel[11]). I tend to agree with the 2^nd defendant’s submission that it was to ensure public safety in the construction of buildings by ensuring that plans are submitted and approved before building takes place. In our case, the brick house was built by the father, not by the mother or by the 2^nd defendant. The plaintiff has not proved that mere occupation by the mother and the 2^nd defendant would be in breach of s.14 BO. …”

39.  Referring back to Transport for London, supra, we do not consider any particular evidence be needed to prove the existence of market value of an unauthorised structure, save for quantum, when this is recognized as a market reality. In Almond v Ash Brothers & Heaton Ltd [1969] 2 AC 366, Lord Pearce stated, at p 382 that “one only excludes the human realities to a limited and necessary extent, since it is only the human realities that give any value at all to hereditaments.” And in the same case, Lord Wilberforce described the reality principle at pp 385—386 as “mainly devised to meet, and it does deal with, an obvious type of case where the character or condition of the property either has undergone a change or is about to do so.”

40.  We then drew Dr Wong’s attention to the market practice if such an owner put the premises in the market for sale or letting without bothering to carry out the “reinstatement works”. Certainly the estate agents would not advise the owner otherwise as they would refrain from giving such an advice on the excuse that they are not trained as professional in such regard. Neither the prospectively buyer nor tenant would be in the position to do so or the owner would simply tell the prospectively buyer or tenant to pass on. Thus, the prospectively buyer or tenant, if he/she is interested in the property, has simply had to take and eat it on “as-is” basis. Of course, in that event, the prospective buyer or tenant would have to pay something for the extra.

41.  A good example was the sale and purchase of ground floor and yard of No. 2 Cannon Street, Causeway Bay in Polyset Limited v Panhandat Limited, HCMP 1840/1998 (unreported, dated 23 November 1999). The sale and purchase was dated 23 May 1997 but prior to the completion date on 2 April 1998, the Buildings Department issued an advisory letter dated 27 March 1998 referring to three items of illegal structure or building works on the property[12]. There was only a provision to rescind the contract but not any compensation as suggested by Dr Wong in the present case.

42.  A similar incidence was found by the Tribunal in Welland Resources Limited & Another v Mega Joyful Limited, LDCS 6000/2022 (unreported, 11 August 2023) where a yard of about 26.5 sq m was covered and enclosed as part of the unit. The purchaser of the G/F did request a deduction of $40,000 from the purchase price agreed at $7,380,000 (ie a deduction of 0.5%) upon finding a Notice issued by the Building Authority under section 24(C) dated 3 January 2011 which required the demolition of the structure. The Tribunal remarked at §27 that the requested reduction in purchase price was nominal and appeared to be a negotiation tactic rather than a genuine concern about the enforcement of the Building Notice. In any event, no enforcement action happened thereafter in the 12 years after January 2011.

43.  In Join Union Investment Limited v China Tree Investment Limited, [2016] 2 HKLRD 901, there was a subdivision of the ground floor premises into four shops. The structural engineering expert in that case could not cite any example or authority where, in similar circumstances, the Government or the Building Authority took enforcement action requiring demolition of the partitioning and reinstatement of the property to its original state. Chow J (as he then was) was of the view that there was no real risk of enforcement by the Government or Building Authority in respect of the alleged unauthorized partitions. See §§97-103 of the judgment.

44.  At §107 of the judgment Chow J (as he then was) observed that:

“... it is apparent, form the evidence of Mr Lai, Madam Chan and Madam Shiu, that none of them considered the 2010 Building Order, or indeed any unauthorised building works in the Property, to be of any great moment. Prior to the respective purchases of the Property by the defendant (through Madam Chan) and the plaintiff (through Madam Shiu), none of them took the trouble to go inside the Property to inspect its physical conditions, or ascertain whether there might be any unauthorised building works in the Property. Even after her attention had been drawn to the 2010 Building Order, Madam Shiu did not carry out any further investigation prior to entering into a binding contract to purchase the Property, and was prepared to accept a modest sum of HK$20,000 from the defendant as sufficient compensation for the costs of complying with the 2010 Building Order. The existence of unauthorised building works in retail premises, especially in the older districts in Hong Kong, is common place and does not appear to have any significant impact on their market or capital values. These properties change hands frequently like ordinary commercial commodities, as demonstrated in the present case by the fact that the defendant (through Madam Chan) purchased the Property in September 2010 and sold it to the plaintiff (through Madam Shiu) in March 2011 for a handsome profit. It is contrary to market reality to treat the existence of an unauthorised cockloft, even of a substantial size like the present one, as constituting a title defect going to the root of title....” (emphasis added)

45.  As stated in §25 above, the two shops on G/F were indeed sold together via an Agreement for Sale and Purchase dated 24 May 2021[13]. This happened some 9 months prior to the acquisition by the applicant on 23 Feb 2022. Apart from there being a Clause 22 stating that “The Purchaser agreed to be sold and is satisfied with its present state and condition and takes it as it stands”, according to a “Supplemental Agreement for Alterations with a Property” dated 10 May 2021 annexed to the Agreement for Sale and Purchase, it was agreed by the vendor and purchaser that:

“1. The Purchaser is aware that there are additions and alterations of the said Premises.

2. Despite the existence of the Alteration(s), the Purchaser is willing to accept the said premises and the Purchaser shall raise no objection or requisition on title in respect of the Alteration(s).”

46.  In fact, the Agreement for Sale and Purchase was subject to a tenancy (in Chinese) dated 3 May 2021 in favour of the sitting tenant of G/F, No 59 Wong Nai Chung Road, ie Mr Law of Lordmende Decorators & Furnishers Co though the tenancy was only for a term of half a year. There was a remark towards the end of the tenancy as follows:

「因本物業內有部份建築物屬加建部份，如政府屋宇署要求拆除，租客要配合業主處理， 不得異議和追究賠償」

(which is translated as: as portion of the subject premises contains additional works, in case the Buildings Department of the Government requests demolition, the tenant should co-operate with the landlord to deal with it without raising dispute or seeking compensation.)

47.  Thus, the risk of enforcement that a prospective tenant knowingly takes to rent a property with illegal unauthorized works could be regarded as the value attributable to such structures[14]. This also defeats Mr But’s argument in his Closing Submission dated 24 February 2025 at §168 that “the presence of UBWs also drives away potential buyers who require high standing and/or tenants who demand security of tenure and enjoyment”. Mr But’s argument also defies market reality.

48.  Dr Wong conceded that he had no experience in dealing with such sale or letting in the market.

49.  Initially, there was a suspicion that the purchaser, Lion Star Oriental Limited, may somehow be related to the applicant and this special purchase should be disregarded. Dr Wong conceded however that there is no proof to support this speculation.

50.  Mr Lam’s opinion on the enforcement risks of those unauthorized works afore-mentioned failed to address the market reality. He simply stated the enforcement policy of the Building Authority as though he is still working with the Buildings Department. For instance, he stated that the landslide incident at Redhill Peninsula in September 2023 and other fatal incidents of unauthorized building works had caused the Buildings Department to have declared to the public regarding its policy against erection of unauthorized building works and its “serious stance” towards enforcement[15]. Mr Lam even referred to a letter dated 6 November 2023 issued by the Director of Buildings on “Compliance with the Buildings Ordinance – Concerning Erection of Unauthorized Building Works.”[16] However, the relevant date for assessing the EUV was 10 June 2022.

51.  In spite of Mr Lam’s earnest reciting of the enforcement policies of the Buildings Department, the hard fact is that the unauthorized works complained of remain as they are as at the date of trial and as at the date of joint inspection on 3 December 2024. Like Welland Resources, supra, the Building Authority did issue a Notice under section 24(C) of the Buildings Ordinance to the then owner of G/F, 59 Wong Nai Chung Road on 23 May 2008 stating that: “A structure erected on the yard at the side” had been erected in contravention of the Buildings Ordinance[17]; the Building Authority did not however issue a statutory removal order under section 24 of the Buildings Ordinance. The Building Authority has not taken any enforcement action since then.

52.  In Bwllfa and Merthyr Dare Steam Collieries (1981) Ltd v Pontypridd Waterworks Company [1903] AC 426 HL, owners of coal mines under and near waterworks gave the undertakers notice under s 22 of the Waterworks Clauses Act, 1847, that they intended to work the coal. The undertakers replied by a counter-notice requiring the mine owners not to work and stating their willingness to make compensation. In an arbitration under the Act and the Lands Clauses Acts to assess the compensation, the mine owners gave evidence to prove that coal rose in value after the date of the counter-notice. The House of Lords held that where the valuation task involves a forecast into the future, then if that valuation is later judicially reviewed, it is proper to take into account facts not known at the date the forecast was made. Lord Macnaghten at page 431 of the judgment justified this sensible approach in these term:

“The counter-notice by the undertakers following a notice of the mine owners under s 22 does not operate to make a contract or to transfer property. … The property remains where it was. The mine owner is prohibited from working, and the undertakers are bound to make full compensation. That is all. If the question goes to arbitration, the arbitrator’s duty is to determine the amount of compensation payable. In order to enable him to come to a just and true conclusion it is his duty, I think, to avail himself of all the information at hand at the time of making his award which may be laid before him. Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess if he can calculate? With the light before him, why should he shut his eyes and grope in the dark?”

53.  Applying this Bwllfa principle, which has derived its name from the above case, we consider it is sensible to take into account the value of the unauthorized works as they were as at 10 June 2022.

Basement Structures, Nos 36 & 38 Ventris Road

54.  Pursuant to the Approved Building Plans and Occupation Permit for the Building, the Basement of the Rear Portion of the Building was designated as a lobby for non-domestic use and was accessible from the side of the Building via an exit route leading to the right of way (“the Right-of-Way”) that connects the adjoining lots on both sides[18].

55.  However, according to the land register records from the Land Registry, the lobby on the Basement has been divided into 2 units, namely Basement, No 36 Ventris Road and Basement, No 38 Ventris Road.

56.  By virtue of the following paragraphs in the Deed of Mutual Covenant dated 17 August 1964, the Basement (and the Ground Floor) have never been intended for the common use of the occupiers of the Building:

“2(b) Each of the parties hereto who is entitled to the exclusive use occupation and enjoyment of the following portion of the said Building, viz the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth and Ninth Floors of the said Building his tenants and licensees shall in common with others having the like right have access to and be entitled to use the lifts installed in the said Building for all purposes connected with the proper use and enjoyment of his portion of the said Building as the case may be to the exclusion of the owners of all portions of the Ground floors and basements of the said Building.[19]

14. PROVIDE ALWAYS AND IT IS HEREBY DECLARED THAT

(a) Notwithstanding anything hereinbefore appearing the owners entitled to the exclusive right to use occupy and enjoy all parts of the ground floors and basements shall be under no liability or obligation to contribute anything towards the cost and expense of insuring operating servicing maintaining repairing and replacing the lift of the said Building which said cost and expenses shall be borne by the other co-owners of the First to the Ninth Floors in manner aforesaid.

(b) In respect of the Ground floor and basement of the said building the owner of each unit shall pay the sum of $10.00 per calendar months … [20]” (underline added)

57.  The two Basement units have been used as two domestic units, and the common staircase from G/F to 8/F of the Rear Portion now runs down to the Basement, providing access to the two Basement units. Nevertheless, there are no relevant plans registered in the Land Registry or otherwise showing the boundaries and layouts of the sub-divided units of the Basement. Neither is there any record showing how the building plan in respect of the Basement was amended.

58.  As regards Basement, No 36 Ventris Road, Dr Wong remarked in his Valuation and Rebuttal Report dated 20 December 2023 at para 5.26 as follows[21]:

• It appeared to be previously used for domestic purpose which does not comply with the permitted uses under the Occupation Permit.

• The area between the “Lobby” and the “Right-of-Way” is enclosed to become part of the unit. This area, according to Drawings A/R1 and A/R2, should be an unenclosed covered area[22].

• There is an L-shape extension over the covered yard and self-built cockloft area of Ground Floor, No 61 Wong Nai Chung Road[23].

• Certain part of the “Exit Route” is included in the unit[24].

59.  As regards Basement, No 38 Ventris Road, Dr Wong remarked in his Valuation and Rebuttal Report dated 20 December 2023 at para 5.26 as follows[25]:

• It appeared to be previously used for domestic purpose which does not comply with the permitted uses under the Occupation Permit.

• The area between the “Lobby” and the “Right-of-Way” is enclosed to become part of the unit. Similar to the situation in Basement No 36 Ventris Road, this area, according to Drawings A/R1 and A/R2, should be an unenclosed covered area[26].

• Certain part of the “Exit Route” in L-shape is included in the unit[27].

60.  Further at para 7.104, Dr Wong stated his valuation approach in respect of these two Basement units[28]:

“I do not consider these two units can be used for domestic purposes but would be similar to a “covered” version of the Top Roof. In assessing these two units, I have adopted conversion rate of 1/4 based on the average unit rates of the Ground Floor units of the Ventris Portion.”

61.  We do not agree.

62.  Firstly, Dr Wong’s approach has defied the principle that property must be valued rebus sic stantibus as stated by the English Court of Appeal in Newbigin (VO), supra.

63.  Secondly, in Wing Hong Investment Company Limited v Fung Sok Han & Others, [2016] 1 HKLRD 1, Chan J found at §235 of the judgment that there is no provision in the Buildings Ordinance to suggest that it is an offence to adopt a user of premises which is materially different from that stated in the occupation permit although the Building Authority may serve an order on the owner under section 25(2) to prohibit the intended user or require the changed user to be discontinued if it is found that the changed or intended new user is not acceptable.

64.  Indeed, according to the Preliminary Agreement for Sale and Purchase of Basement, No 38 Ventris Road dated 14 October 2008, the purchaser had been invited to inspect the unit, and the purchaser had declared， agreed and accepted that the purchase of the unit was on “as-is” basis. The purchaser also declared that he clearly knew that the unit had not received approval from the Buildings Department or Lands Department or other government departments for domestic use and the alterations of the unit. However, the purchaser declared not to make any further inquiries or objections to the use and alterations of the unit, nor may it be used to refuse the transaction of the unit. The relevant wordings in the Preliminary Agreement for Sale and Purchase (in Chinese) are recited as follows:[29]

“買方曾被邀檢查該物業，買方聲明、同意及接受購買該物業之現狀，亦清楚知道該物業未經屋宇署或地政署或香港特區政府有關部門授權或申請該物業之住宅用途及單位內之間隔存有改動（以下稱： 該物業用途及改建物），並同意賣方不須提供政府認可建築師安全結構證明書或上述有關部門批准審查文件給買方，因此買方不可向賣方作出任何質詢及反對物業用途及改建物的問題，亦不得藉此而拒絕該物業之交易。”

65.  Furthermore, it is noted that the Building Authority issued a Building Order to the owner of Basement, No 36 Ventris Road on 11 July 2006 regarding two unauthorized building works (ie “A metal cage attached to the external wall at the front” and “structures on the rear exit route on basement floor, blocking the means of escape.”) However, the Building Authority did not mention that the unit violated the occupation permit and Approved Building Plans of the property, nor did it require the owner to reinstate the unit to a “Lobby”.

66.  Similarly, the Building Authority issued a Building Order to the owner of Basement, No 38 Ventris Road on 11 July 2006 regarding two unauthorized building works (ie “A metal cage attached to the external wall at the front” and “structures on the rear exit route on basement floor, blocking the means of escape.”). Again, the Building Authority did not mention that the unit violated the occupation permit and Approved Building Plans of the property, nor did it require the owner to reinstate the unit to a “Lobby”.

67.  By reference to the land register records, neither the “non-conforming” domestic use of the two basement units was ever mentioned nor challenged by the Building Authority and other government departments. On the other hand, Basement, No 36 Ventris Road was transacted 6 times with none of its Agreement for Sale and Purchase ever mentioning any unauthorized building works or unauthorized domestic use. Likewise, Basement, No 38 Ventris Road was transacted twice, one in 2008 and the other in 2010, both of which with an annexure to the Agreements for Sale and Purchase clearly stating that the purchasers knew the unit had not received approval from the relevant Government departments for (1) domestic use and (2) the alterations and make no objection to the same.

68.  In Peace Ever Limited & Others v Chan Sui Ching & Others, LDCS 28000/2018 (unreported, dated 1 August 2023), the Tribunal cited an example in respect of Caineway Mansion at 128-132 Caine Road which has its “office” units on lower floors all converted into domestic units. In that example, the Buildings Department in fact declined to take any enforcement action.

69.  In light of the history of the sub-division of the “Lobby” into two domestic units and the market reality principle discussed earlier, we again agree with Mr Chan that the two Basement units should be assessed accordingly as follows[30]:

The Property	Saleable Area (m2)	Unauthorized Extension (m2)	Unauthorized Extension under Common Staircase (m2)	Converted Area (m2)
Basement, 36 Ventris Road	39.4	44.8	3.7	62.7
Basement, 38 Ventris Road	30.0	31.6		45.8
Conversion Factor:	@1	@1/2	@1/4

Other Unauthorized Structures

70.  There exists an open flat roof from the kitchen area at the rear part of G/F, No 36 Ventris Road[31]. In fact, this open flat roof is built on the top of the L-shape extension of Basement, No 36 Ventris Road. The unit had been transacted 7 times and each time with an acknowledgement of certain alterations.

71.  There exists also a small staircase landing outside the back door of 8/F, 38 Ventris Road which has now been enclosed for use in conjunction with the unit. The unit had been transacted 6 times without any mention of the unauthorized building works or encroachment.

72.  On the premise of the above discussions, we similarly prefer Mr Chan’s approach in assigning a value to them[32]:

The Property	Saleable Area (m2)	Top Roof (m2)	Unauthorized open flat roof (m2)	Encroachment onto common staircase landing (m2)	Converted Area (m2)
G/F, 36 Ventris Road	71.9		10.7		72.8
8/F & Roof, 38 Ventris Road	74.4	56.6		1.3	82.1
Conversion Factor:	@1	@1/8*	@1/12	@1/2

* This conversion factor had been agreed by Dr Wong.

Assessment of Market Value (“EUV”) of Shop Premises on G/F

73.  On the basis of the above, the particulars of the two shops are set out as follows:

Shop on G/F	Converted / Effective Area (m2)	Frontage (m)	Depth (m)	Headroom (m)
59 Wong Nai Chung Road	172.3	5.8	27.3	4.2
61 Wong Nai Chung Road	130.4	5.8	25.9	4.1

74.  Mr Chan and Dr Wong agreed to adopt G/F, No 59 Wong Nai Chung Road as the Reference Shop Unit. On the basis of the following transactions, Mr Chan and Dr Wong assessed the EUV of the Reference Shop Unit at $340,000 per sq m and $317,600 per sq m respectively:

Ref	Address	Date of P-ASP[33]	Age of Building	Consideration	Saleable Area (m2)	Converted Area (m2)	Frontage (m)	Depth (m)	Headroom (m)	Unit Price (/m2)
R1	Shop 3, G/F, King Cheung Mansions, 14-16 Tsap Tseung Street	4 Aug 22	1966	$32,800,000	96.8 + Yard: 17.2 + Lavatory: 4.9	102.1	6.0	16.2	4.1	$321,254
R2	Shop 1, G/F, King Kwong Mansion, 8 King Kwong Street	26 Jul 22	1989	$27,400,000	57.1	57.1	4.1	14.6	4.6	$479,860
R4	G/F & C/L, 13 King Kwong Street	9 Mar 22	1972	$38,380,000[34]	100.0 + Yard: 7.2 + C/L: 47.0	113.0	4.9	25.6	4.1*	$339,646
R5	G/F, 163 Wong Nai Chung Road	29 Jan 22	1958	$28,000,000	74.6 + Yard: 23.4	78.5	4.9	16.9	3.4	$356,688
R6	Shop B, G/F and Flat B on M/F, King Tai House, 10 & 12 King Kwong Street	22 Jul 21	1965	$27,388,000	59.0 + Yard: 5.8 + C/L 36.6 + Lavatory: 2.9	70.6	4.3	14.6	3.3*	$387,932
R7	Shop 2, G/F, Green Valley Mansion, 51 Wong Nai Chung Road	21 Dec 20	1964	$39,000,000	85.0	85.0	4.7	21.0	4.0	$458,824

* Dr Wong’s adoption of weighted average is preferred to Mr Chan’s adoption of full headroom. The latter would lead to double counting when he assigned a value to the cockloft but still considered the premises enjoying full headroom which is no longer the case.

75.  Mr Chan and Dr Wong had the following agreements and disagreements on the adjustments applicable[35]:

Adjustment	Mr Chan	Dr Wong
Time	Private Retail Price Index published by Rating and Valuation Department (RVD)
Size/Quantum	1% per 10 sq m	0.15% per 1 sq m
Age	0.2% per year
Frontage	2% per 1 m
Headroom	4% per 1 m based on Full Headroom	4% per 1 m based on Weighted Averaged Headroom
Totaling Adjustments	By Multiplication

76.  In any event, Mr Chan had applied the following adjustments as shown in the table below while the adjustments applied by Dr Wong, if any and if they are different, are shown in parenthesis:

Ref	Unit Price (/m2)	Adjustments								Adj Unit Price (/m2)
		Time	Location	Size	Building Age	Frontage	Layout	Headroom	Total
R1	$321,254	2.8%	20.0%	-7.0%	-0.4%	-0.4%	-15.0%	0.8%	-2.5%	$313,222
R2	$479,860	(2.2%)	(0.0%)	(-14.7%)	(-5.0%)	(3.4%)	(-15.0%)	(-1.6%)	(-28.4%)	($343,580)
R4	$339,646	0.4%	15.0% (0.0%)	-6.1% (-6.3%)	-1.6%	1.8%	-10.0% (-9.0%)	-3.2% (0.4%)	-5.4% (13.9%)	$324,754 ($292,435)
R5	$356,688	-4.1%	15.0% (0.0%)	-9.4% (-11.5%)	1.2%	1.8%	-15.0% (-12.0%)	3.6% (3.2%)	-9.4% (-20.6%)	$323,159 ($283,210)
R6	$387,932	(-5.1%)	(0.0%)	(-12.7%)	(-0.2%)	(3.0%)	(-15.0%)	(3.6%)	(-25.0%)	$290,949)
R7	$458,824	2.1%	0.0% (-5.0%)	-8.7% (-10.5%)	0.0%	2.2%	-10.0% (-8.0%)	1.2% (0.8%)	-13.2% (-17.7%)	$398,259 ($377,612)
						Average of R1, R4, R5 & R7: (Average of R2, R4, R5, R6 & R7:)				$339,849 ($317,557)

Choice of Comparables and Location Adjustments

77.  The location of a shop is of paramount importance and is therefore the chief factor affecting value of the shop. Shops only a short distance apart can vary considerably in values. Indeed, in Modern Methods of Valuation by Shapiro, Mackmin and Sams, 12^th edition (2019), Routledge, at p 327, the location factor is explained as follows:

“Some of the most important points regarding retail location are: the class of the area; the type of street and the type of shopper; the position of the unit in the street; the proximity to any multiple stores or other “magnet” such as a department store; proximity to any breaks such as a town hall, bank or cinema; the relationship to the “prime” pitch – the location with the highest footfall; and proximity to car parks or public transport … Overall, consideration must be given to the catchment area and its spending power. ”

78.  The subject locality, generally known as the Happy Valley area, is a traditional residential neighbourhood in the middle part of Hong Kong Island for the higher income group. Wong Nai Chung Road is, in effect, running around the Happy Valley Racecourse and Sports Ground which is the landmark of the district. Retail shops in the immediate neighbourhood along the subject section of Wong Nai Chung Road are mainly characterized by luxury home designers and furniture stores. G/F, No 59 Wong Nai Chung Road has been occupied by one of such furniture shops - Lordmende Decorators & Furnishers Co at least since 2009.

79.  Comparable R1 is situated off the busy junction of Sing Woo Road and King Kwong Street on a side street beside the Wong Nai Chung Municipal Service Building which houses a wet market and indoor games hall. There are no shops at street level on the opposite side of this comparable. On the other hand, King Kwong Street is the busiest hub of Happy Valley where a variety of trades including banks serve the daily necessities of the residents in the locality are located. For instance, this comparable is occupied by a hardware chain store but with its neighbours all occupied by trades that are complementary to the wet market. We agree with Dr Wong that this location has a totally different trade mix when compared with the subject. If this transaction were to be taken into consideration at all, we would rather prefer Dr Wong’s nil adjustment for location to Mr Chan’s positive adjustment, not to mention the latter adjustment came up to as much as +20%.

80.  Comparable R2 used to be occupied by an Italian restaurant but has now fallen vacant. Mr Chan considered this shop too small when compared with the Reference Shop Unit and did not adopt this as comparable. On the other hand, we do not agree with the nil location adjustment as proposed by Dr Wong. We consider a downward adjustment of 20% more appropriate.

81.  Comparable R4 is situated obliquely opposite Comparable R2 across King Kwong Street. Again it was occupied by a restaurant and next to it across the entrance to that building is a branch of Bank of China (Hong Kong), being situated at G/F, No 11 King Kwong Street. Other banks located in the vicinity are shown as follows:

Name of Bank	Address (starting from the one closest to the Building)
Nanyang Commercial Bank	G/F, 29 Wong Nai Chung Road, at its junction with Sing Woo Road
Bank of East Asia	G/F, No 5-7 Sing Woo Road
China Construction Bank Asia	G/F, No 37 Sing Woo Road, opposite its junction with King Kwong Street
OCBC Bank	Shop 2, G/F, Nos 15-17 King Kwong Street, beside which is a McDonald’s restaurant
Standard Chartered Bank	G/F, No 16 King Kwong Street
Hang Seng Bank	G/F, Nos 18A-22 King Kwong Street
Industrial and Commercial Bank of China (Asia)	G/F, No 23 King Kwong Street
CMB Wing Lung Bank	G/F, No 44 King Kwong Street, at its junction with Shan Kwong Road

82.  Again, therefore, we consider a downward adjustment of 20% more appropriate than Mr Chan’s +15% adjustment or Dr Wong’s nil adjustment.

83.  Though Comparable R5 is also situated on Wong Nai Chung Road, it is located far away from the Building. This comparable is situated closer to the Causeway Bay district, closer to the junction of Wong Nai Chung Road and Leighton Road where a greater variety of trades are provided. In fact, this comparable shop is occupied by a Japanese restaurant and next to it is an estate agency. In addition to residents of nearby developments, for example, The Leighton Hill (which comprises 8 blocks of high-end residential units offering 543 units) and other residential developments on Ventris Road, pedestrians passing by here also include people going to Craigengower Cricket Club, Hong Kong Football Club and the main entrance to Happy Valley Racecourse and Happy Valley Sports Ground which lie on the opposite side of this section of Wong Nai Chung Road. Again, we considered a downward adjustment of 10% more appropriate than Mr Chan’s +15% adjustment or Dr Wong’s nil adjustment.

84.  Comparable R6 is another transaction of a shop situated on King Kwong Street. It is in fact not far away from Comparable R2, being separated by a hair salon and the entrance to that building. Likewise, if this transaction were to be taken into consideration at all despite it being dated, we would consider a downward adjustment of 20% more appropriate.

85.  Comparable R7 was another dated transaction. Perhaps it was chosen by the valuation experts because it is situated on Wong Nai Chung Road. However, it is located in close proximity to the junction between Wong Nai Chung Road and Blue Pool Road where a bus station is situated. While this comparable is occupied by a kitchen designer, it is situated next to a recycling store towards the junction of Wong Nai Chung Road and Blue Pool Road. Mr Chan was content to apply nil adjustment for location but +15% for comparables situated on King Kwong Street. Did he mean that a recycling store is ready to or could afford to pay more in terms of unit rate than a bank?

86.  Mr Chan commented on its location in his Rebuttal Report dated 22 January 2024 as follows[36]:

“4.2.6 A street featuring a particular trade can attract customers to visit. The ground floor shops of this section of Wong Nai Chung Road where the Property is located are mainly high-quality interior design companies, furniture and home appliances shops, serving residents in Happy Valley and Mid-Levels areas that are popular with expats and high-income groups.

4.2.7 Since shops in this locality sell or provide high-priced products and high-quality services to customers, even if there are lesser pedestrian flow, their turnovers, profits, and rental affordability could be much higher than that of shops servicing local needs. Thus, the rental and price of the ground floor shops along this section of Wong Nai Chung Road are higher than that of shops on King Kwong Street which have inferior quality in terms of tenant mix, and they only serve local needs.”

87.  At this juncture, we note that Mr Chan tried to justify his location adjustments by comparing the rentals reserved in this comparable with that of R4, suggesting the location on Wong Nai Chung Road being superior than that on King Kwong Street[37]:

Ref	Tenancy Commencement Date	Monthly Rent	Converted Area (m2)	Unit Rent before other adjustments	Private Retail Rental Index
R7	15 Jan 2019[38]	$140,000	85.0	$1,647	188.0
R4	1 Dec 2020	$79,000*	113.0	$699	172.4

* It is the average during the term where $68,000 per month was payable from 1 December 2020 to 31 January 2021 and $80,000 per month was payable from 1 February 2021 to 30 November 2022[39]. That is, as at the sale on 22 March 2022, the tenancy had 8 months unexpired.

88.  While this appears to be the case as suggested by Mr Chan, this is contradicted by the rent being paid by the sitting tenant of G/F, No 59 Wong Nai Chung Road at $65,000 per month[40]. In the absence of better direct rental evidence to the contrary, the actual rent would generally be the best indicator of the market rent[41]. On the basis of the converted area of 172.3 sq m, therefore, the unit rental for the Reference Shop Unit was $377.2 per sq m only[42]. The RVD Private Retail Rental Index as at May 2021 was 171.2 which was not significantly different from that as at December 2020.

89.  Mr Chan’s proposition of conglomeration of high-quality interior design companies etc along this section of Wong Nai Chung Road might be valid some time in the past but for instance, this Comparable R7 had fallen vacant since February 2022, and remained so until mid-2023. And so had been Shop B, Ocean View Mansion at No 55 Wong Nai Chung Road (which is the subject of another compulsory sale application, LDCS 17000/2022), which is still vacant.

90.  In Valuation: Principles into Practice, 6^th Edition, 2008, Estates Gazette, the author on the Chapter on “Retail Properties” stated at p 123 as follows:

“Where there are long, continuous parades of shops the points at which rental values change may be difficult to identify and may in fact be constantly moving.”

91.  For the time being, we adopt a location adjustment of -15% in preference to Dr Wong’s -5%.

Size Adjustment

92.  While the difference in opinion between the two valuation experts is not significant, we prefer to adopt Mr Chan’s proposed adjustment of 1% per 10 sq m. As explained by him, the size of the Reference Shop Unit with a converted area of 172.3 sq m is relatively large and Happy Valley is not a prime shopping area, a less sensitive adjustment appears to be adequate.

Layout Adjustment

93.  While the depth of the Reference Shop Unit including the extension is relatively long at 27.3 m, we are prepared to adopt Mr Chan’s adjustment for layout.

94.  Thus, in view of the above analysis, the EUV of the Reference Shop Unit is assessed as follows:

Ref	Unit Price (/m2)	Adjustments								Adj Unit Price (/m2)
		Time	Location	Size	Building Age	Frontage	Layout	Headroom	Total
R1	$321,254	2.8%	0.0%	-7.0%	-0.4%	-0.4%	-15.0%	0.8%	-18.7%	$261,180
R2	$479,860	2.2%	-20.0%	-11.5%	-5.0%	3.4%	-15.0%	-1.2%	-40.3%	$286,476
R4	$339,646	0.4%	-20.0%	-5.9%	-1.6%	1.8%	-10.0%	0.8%	-31.3%	$233,337
R5	$356,688	-4.1%	-10.0%	-9.4%	1.2%	1.8%	-15.0%	3.6%	-29.1%	$252,892
R6	$387,932	-5.1%	-20.0%	-10.2%	-0.2%	3.0%	-15.0%	4.0%	-38.0%	$240,518
R7	$458,824	2.1%	-15.0%	-8.7%	0.0%	2.2%	-10.0%	1.2%	-26.2%	$338,612
							Average (excluding R7): Average of R2 & R4:			$254,881 $259,907
							Say			$260,000
		G/F, 59 Wong Nai Chung Road				172.3 sq m (Converted Area)				$44,798,000
		G/F, 61 Wong Nai Chung Road				130.4 sq m (Converted Area)				$35,260,000[43]
						Total:				$80,058,000

95.  While we are going to adopt the same adjustment factor to assess the market value of G/F, 61 Wong Nai Chung Road, we note Dr Wong applied -5% to reflect the issue of water seepage.

96.  Mr Lau in his Condition Survey Report dated 20 December 2023 mentioned this G/F unit had “water seepage, paint peeling off and dirt stain on wall and ceiling soffits”.[44] However, Mr Benson Wong did not state the unit had been suffering from water seepage in his Condition Survey Report of 30 June 2023. Instead, Mr Benson Wong only stated “the condition of the wall surfaces is generally poor with peeled and stained paintwork due to normal wear and tear”[45] , referring to photo 5.6-93[46].

97.  We note there was a time difference of around 6 months when the two experts prepared their reports and during this period, the unit was unoccupied and fell into neglect. In any event, when we conducted our joint inspection on 3 December 2024, we found no further deterioration when compared with the photo provided by Mr Lau[47]. We consider there be no water seepage as suggested by Mr Lau and the patches just result from dampness. As such, we do not consider the adjustment of -5% by Dr Wong justified.

98.  We proceed to consider if the $80,058,000 as found above reasonable or otherwise by cross-checking with the consideration agreed to be paid by Lion Star Oriental Limited on 10 May 2021 at $83,800,000. Taking into account the Private Retail Price Index was 542.3 as at 10 May 2021 whereas that as at the relevant dates was 532.5, we consider the $80,058,000 well supported[48]. Like what happened in Best Origin Limited v Commissioner of Rating and Valuation, LDGA 14/1998 (unreported, dated 25 February 2008)[49], we do not find sufficient justification to reject the use of the actual sale price for the same unit(s) in the present case.

99.  Incidentally, it is noted there was a transaction of Shop C, G/F, Broadview Mansion, No 73B Wong Nai Chung, ie within stone throwing distance of the Building, ie Comparable CR4 that had been adopted by the valuation experts in assessing the GDV of the ground units of the hypothetical development. The particulars of the sale are as follows:

Date of Sale	Age of Building	Consideration	Saleable Area (m2)	Effective Area (m2)*	Frontage (m)	Depth (m)	Headroom (m)	Unit Rate (m2)
21 Feb 2023	1963	$14,300,000	25.5 + Lavatory 4.4	27.7	3.7	8.6	2.9	$516,245

* Assuming the unit value of the detached lavatory at the rear was worth 1/2 of the ground floor proper.

100.  While this transaction took place some 8 months after the relevant date of 10 June 2022, it might be arguable that its transaction price was affected by the Application. However, the sale was subject to a tenancy for a term of three years from 1 January 2022 to 31 December 2024 at a monthly rent of $29,800 inclusive of rates.

101.  At first glance, this comparable unit might be too small to compare with G/F, No 59 Wong Nai Chung Road which has a converted or effective area of 172.3 sq m. However, if the zoning method is applied, it may be able to assess the market rent of G/F, No 59 Wong Nai Chung Road.

102.  The zoning concept is based on the principle that the area closest to the frontage (Zone A) is the most valuable part of a shop, but as the distance away from the front of the shop increases the value per unit of area decreases. Thus, when a value per square metre is arrived at Zone A by reference to sales or lettings of comparables, rates for the other zones in the rear will be derived formulaically and from that the value for the shop is analyzed whereby a process, often known as ‘halving back”, is used most extensively.

103.  Assuming the monthly rent of $29,800 inclusive of rates can be deducted 5% to convert it into exclusive of rates, ie $29,800 x 0.95 = say $28,300 (ie the yield provided for the sale in February 2023 was = 2.37%) and its Zone A value may be derived as follows:

Zone	Frontage (m)	Depth (m)	Area (m2)	In Terms of Zone A (m2)	Zone A Value
A	3.7	5.6[50]	20.72	20.72	$28,300 ÷ 24.21 = $1,169
B			27.7 - 20.72 = 6.98	3.49
		Total:	27.7	24.21

104.  If this $1,169 per sq m is adjusted for the higher headroom of G/F, No 59 Wong Nai Chung Road at 5.2%, it becomes $1,229.8 per sq m. Thus the market rent for G/F, No 59 Wong Nai Chung Road may be assessed as follows:

Zone	Frontage (m)	Depth (m)	Area (m2)	Unit Rent (/m2)	Market Rent	Private Retail Rental Index
A	5.8	5.6	32.48	$1,229.8	$39,944
B	5.8	5.6	32.48	$614.9	$19,972
C	149.1[51] – 32.48 x 2 =		84.14	$307.5	$25,873
Remainder	172.3 – 149.1 =		23.20	$153.8	$3,568
				Total:	$89,357	175.1 as at Dec 2021
				Adj for time difference:	say $85,000	167.0 as at Jun 2022

105.  Although this $85,000 per month appears to be 30% higher than the $65,000 per month being paid for G/F, No 59 Wong Nai Chung Road since 16 May 2021, we can check if our earlier assessment of $44,798,000 is reasonable or otherwise by the income capitalization method of valuation. Whereas the private retail yield published by RVD as at June 2022 was 2.5%, if we apply this 2.5% yield to this $85,000 per month, we would get $40,800,000 which is even 9% lower than our earlier assessment of $44,798,000. Alternatively, if we apply 2.37% yield instead, we would get approximately $43,000,000 which is only 4.0% lower than our earlier assessment of $44,798,000.

Assessment of Market Value (“EUV”) of Domestic Premises on Upper Floors

106.  The Happy Valley locality is characterized by its close proximity to the Happy Valley Racecourse which has a history of over 150 years. Residential buildings in the area, mostly situated along Wong Nai Chung Road, Ventris Road and Broadwood Road, enjoy views over the racecourse. They mainly comprise units of larger sizes and generally considered to be more prestigious than those in other parts of Happy Valley where smaller units prevail. The section of Ventris Road behind the Lot is planted with trees providing a tranquil living neighbourhood.

107.  The direct comparison method of valuation is based on comparing the property to be valued with similar properties and the prices achieved for them and allowing for differences between them to determine the market value. Thus, as a matter of valuation practice comparables needing large adjustment should be avoided. However, the better practice is in fact to avoid comparables requiring many adjustments.

108.  Save for the dispute on the Basement units discussed above, Mr Chan and Dr Wong agreed the saleable areas of the domestic units on the upper floors:

Floor	59 Wong Nai Chung Road (m2)	61 Wong Nai Chung Road (m2)	36 Ventris Road (m2)	38 Ventris Road (m2)
Basement			39.4 + Extension: 44.8 + Extension under Staircase: 3.7	30.0 + Extension: 31.6
G/F			71.9 + Flat Roof: 10.7	74.4
1/F	84.2	75.8	71.9	74.4
2/F	84.2	75.8	71.9	74.4
3/F	84.2	75.8	71.9	74.4
4/F	84.2	75.8	71.9	74.4
5/F	84.2	75.8	71.9	74.4
6/F	84.2	75.8	71.9	74.4
7/F	84.2	75.8	71.9	74.4
8/F	81.0	72.6	71.9 + Roof: 58.2	74.4 + Roof: 56.6 + Encroachment on Stair Landing: 1.3
9/F	77.0 + Roof: 54.5	68.7 + Roof: 54.5

109.  Mr Chan had adopted 5/F, No 61 Wong Nai Chung Road as Reference Domestic Unit but in view of the fact that the Front Portion of the Building fronts enjoys panoramic view of the racecourse, Dr Wong adopted two reference units as the basis of comparison:

(i) 5/F, No 61 Wong Nai Chung Road as Reference Domestic Unit that enjoys view of the racecourse; and

(ii) 5/F, No 38 Ventris Road as Reference Domestic Unit that looks at the rear.

110.  Notwithstanding the above, Mr Chan and Dr Wong adopted the following transactions as comparables and assessed the EUV of 5/F, No 61 Wong Nai Chung Road at $208,000 per sq m and $231,400 per sq m respectively:

Comp Ref	Address	Date of Sale	Building Age	Consideration	Saleable Area (m2)	Unit Rate (/m2)
D1	Flat C, 12/F, Amigo Mansion, 79A Wong Nai Chung Road	12 Nov 22	1975	$7,900,000	42.2	$187,204
D2	Flat A, 11/F, Green Valley Mansion, 51 Wong Nai Chung Road	9 Jul 22	1964	$21,500,000	99.2	$216,734
D3	Flat A, 20/F, Amigo Mansion, 79A Wong Nai Chung Road	25 Apr 22	1975	$13,450,000	48.0	$280,208
D4*	Flat C, 8/F, Arts Mansion, 43 Wong Nai Chung Road	24 Apr 22	1979	$15,600,000	72.7	$214,580
D5	Flat B, 15/F, Amigo Mansion, 79A Wong Nai Chung Road	23 Feb 22	1975	$12,500,000	47.6	$262,605
D6*	Flat B, 16/F & Car Parking Space 12, 1/F, Arts Mansion, 43 Wong Nai Chung Road	25 Jan 22	1979	$26,060,000[52]	98.3	$265,107
D7	Flat D, 5/F, Green Valley Mansion, 51 Wong Nai Chung Road	1 Dec 21	1964	$18,400,000	92.5	$198,919
D8	Flat A, 16/F, Champion Court, 67 & 69 Wong Nai Chung Road	16 Nov 21	1972	$26,800,000	92.2	$290,672
D9	4/F, Blue Pool Mansion, 3 Blue Pool Road	1 Nov 21	1959	$16,500,000	102.6	$160,819
D10	Flat B, 20/F, Champion Court, 67 & 69 Wong Nai Chung Road	23 Jun 21	1972	$25,200,000	92.4	$272,727
D11	9/F, Blue Pool Mansion, 1 Blue Pool Road	2 Jun 21	1959	$20,700,000	119.5	$173,222

* Mr Chan did not adopt transactions in Arts Mansion as comparables.

111.  Mr Chan did not adopt Comparable D2 as a “comparable”. According to the land register record, the property is subject to an Order issued by the Building Authority under section 24(1) of the Buildings Ordinance dated 20 May 2010 (“the Building Order 2010”) which stated that the following building works had been carried out in or at the property[53]:

“(i) A structure on and over the approved flower box facing Wong Nai Chung Road of the premises; and

a. A projecting structure with canopy attached to the external wall at the re-entrant facing No 53 Wong Nai Chung Road.”

112.  While this Building Order 2010 was registered against “the comparable” in May 2010, it appears that the Building Authority did not take further action up to 9 July 2022 when the transaction took place, ie a lapse of more than 12 years. Pursuant to the Agreement for Sale and Purchase then, the purchaser acknowledged the existence of the Building Order 2010 and “the comparable” was transacted on an “as-is” basis. In Mr Chan’s opinion, the seller and purchaser of the property may have considered the added value of the unauthorized building structures or the reinstatement cost of removing the unauthorized structures during negotiation. He considered therefore it was not an appropriate transaction to be included as comparable so long as there are sufficient comparables in place. We agree.

113.  In addition, Mr Chan did not adopt Comparable D4 as a “comparable”. Arts Mansion comprises a residential tower with 3 domestic units on each of 4/F to 26/F[54] and a total of 68 private car parking spaces. That is, one domestic unit is supposed to be able to own one car parking space. In Mr Chan’s opinion, parking facilities are an integral part of the high-end residential development in Happy Valley. The price of residential units in buildings with parking facilities is generally higher than that of the units in building without parking facilities because residents in buildings with parking facilities may have a choice to rent or purchase a parking space.

114.  Mr Chan had also conducted paired analysis on the basis of past transactions as follows and found that sales of other premises without car park spaces could be -14% to -19% lower than those in Arts Mansion[55]:

Property Address	Date of Sale	Consideration	Unit Rate before adjustments (/m2)	Unit Rate after adjustments for other factors (/m2)	% diff
Pair No 1
Flat B, 6/F, Arts Mansion, 43 Wong Nai Chung Road	13 Jul 2018	$27,500,000	$279,756	$279,756	24% (-19%)
9/F & Roof, Comfort Mansion, 61 Wong Nai Chung Road	13 Aug 2018	$16,300,000	$219,973*	$226,132*
Pair No 2
Flat A, 10/F, Arts Mansion, 43 Wong Nai Chung Road	25 Oct 2020	$25,000,000	$254,323	$254,323	16% (-14%)
Flat A, 7/F, Green Valley Mansion, 51 Wong Nai Chung Road	14 Apr 2021	$21,180,000	$213,508	$219,700
Pair No 3
Flat B, 6/F, Arts Mansion, 43 Wong Nai Chung Road	13 Jul 2018	$27,500,000	$279,756	$279,756	17% (-14%)
Flat B, 9/F, Green Valley Mansion, 51 Wong Nai Chung Road	11 May 2018	$22,980,000	$227,300	$240,028
Pair No 4
Flat A, 10/F, Arts Mansion, 43 Wong Nai Chung Road	25 Oct 2020	$25,000,000	$254,323	$254,323	3% (-3%)
Flat B, 9/F, Champion Court, 67 & 69 Wong Nai Chung Road	21 May 2010	$22,800,000	$246,753	$247,494
Pair No 5
Flat A, 10/F, Arts Mansion, 43 Wong Nai Chung Road	25 Oct 2020	$25,000,000	$254,323	$254,323	20% (-16%)
Flat B, 21/F, Amigo Mansion, 79A Wong Nai Chung Road	13 Sep 2020	$12,100,000	$254,436	$212,513

* Unit value of top roof is assumed at 1/8 of that of floor below.

115.  While the above analysis may not be conclusive because of the numerous assumptions on adjustments, Mr Chan did show that Dr Wong’s adjustment for facilities for Arts Mansion at -1% is too minimal to reflect the added value of having car parking facilities in a building.

116.  In addition, Arts Mansion was built in 1979, so 15 years newer than the Building. Mr Chan was of the opinion that given there are sufficient number of comparables of ages closer to that of the Building, it would be appropriate not to adopt transactions in Arts Mansion as comparables. We agree.

117.  Furthermore, Mr Chan and Dr Wong had the following agreements and disagreements on the adjustments applicable:[56]

Adjustment	Mr Chan	Dr Wong
Time	Private Domestic Price Index by Classes A, B & C published by RVD
Size/Quantum	1% per 10 sq m	0.15% per 1 sq m
Building Age	0.25% per year
Floor Level	0.5% per floor difference
Totaling Adjustments	By Multiplication

Size Adjustment

118.  The saleable areas of the domestic units of the Building range mainly from 70 to 85 sq m. While Mr Chan’s proposed adjustment of 1% per 10 sq m difference may be appropriate on many occasions[57], the sizes of the comparables in the present case vary considerably from those of the domestic units of the Building. We prefer therefore Dr Wong’s proposed adjustment for size at 0.15% per 1 sq m.

View Adjustment

119.  Apart from the adjustment factors listed in the table at §114 above, Mr Chan and Dr Wong had different opinions on the view adjustments for the comparables in Amigo Mansion at No 79A Wong Nai Chung Road and Champion Court at Nos 67 & 69 Wong Nai Chung Road:[58]

Comp	Address	Views			Adjustment
		Front	Rear	Side	Mr Chan	Dr Wong
Reference Domestic Unit	5/F, No 61 Wong Nai Chung Road	Racecourse (SW aspect)	Blocked by Close Buildings (NE aspect)	Blocked by Close Buildings (NW aspect)	-	-
D3	Flat A, 20/F, Amigo Mansion	Racecourse (SW aspect)	Distant Buildings (NE aspect)	Distant Buildings and Partial Racecourse (NW aspect)	-10%	0%
D5	Flat B, 15/F, Amigo Mansion	Racecourse (SW aspect)	Distant Buildings (NE aspect)	Distant Buildings (SE aspect)	-5%	0%
D8	Flat A, 16/F, Champion Court	Racecourse (SW aspect)	Distant Buildings (NE aspect)	Distant Buildings and Partial Racecourse (NW aspect)	-15%	0%
D10	Flat B, 20/F, Champion Court	Racecourse (SW aspect)	Distant Buildings (NE aspect)	Distant Buildings (SE aspect)	-10%	0%

120.  Mr Chan’s contention was that comparables enjoying additional side and rear views rather than the single view onto the racecourse should have higher values. He had also conducted paired analysis on the basis of past transactions as follows for the purpose of supporting his view[59]:

Property Address	Date of Sale	Consideration	Unit Rate before adjustments (/m2)	Unit Rate after adjustments for other factors (/m2)	% diff
Pair No 1
9/F & Roof, Comfort Mansion, 61 Wong Nai Chung Road	13 Apr 2006	$5,770,000	$77,868*	$77,868*	-11% (12%)
Flat A, 8/F, Amigo Mansion	20 Apr 2006	$4,680,000	$97,500	$87,263
Pair No 2
9/F & Roof, Comfort Mansion, 59 Wong Nai Chung Road	15 Mar 2011	$11,000,000	$131,265*	$131,265*	-15% (18%)
Flat B, 15/F, Amigo Mansion	13 Mar 2012	$9,200,000	$193,277	$155,008
Pair No 3
8/F, Comfort Mansion, 59 Wong Nai Chung Road	3 Feb 2010	$9,280,000	$114,568	$114,568	-15% (18%)
Flat B, 12/F, Amigo Mansion	26 Oct 2010	$8,186,000	$172,017	$134,689
Pair No 4
8/F, Comfort Mansion, 59 Wong Nai Chung Road	3 Feb 2010	$9,280,000	$114,568	$114,568	-17% (20%)
Flat A, 20/F, Champion Court	29 Mar 2010	$14,360,000	$155,748	$137,682
Pair No 5
8/F, Comfort Mansion, 59 Wong Nai Chung Road	3 Feb 2010	$9,280,000	$114,568	$114,568	-13% (15%)
Flat B, 17/F, Champion Court	14 Jul 2010	$14,380,000	$155,628	$132,284

* Unit value of top roof is assumed at 1/8 of that of floor below.

121.  On the basis of the above analysis, Mr Chan found the unit rates of properties in the Building were about -11% to -17%. We find Mr Chan’s analysis persuasive and agree with his proposed adjustments for view.

122.  Similarly, insofar as Dr Wong had adopted 5/F, No 38 Ventris Road as the second Reference Domestic Unit, Mr Chan had prepared an analysis of the adjustments for view proposed by Dr Wong[60]:

Comp	Address	Views			Adjustment
		Front	Rear	Side
Reference Domestic Unit	5/F, No 38 Ventris Road	Nearby Developments (NE aspect)	Blocked by Close Buildings (SW aspect)	Buildings (SE aspect)	-
D1	Flat C, 12/F, Amigo Mansion	Partial Greenery and Building (NE aspect)	N/A	Distant Buildings (NW aspect) and Buildings (SE aspect)	2%
D4	Flat C, 8/F, Arts Mansion	Buildings (NE aspect)	Blocked by Close Buildings (SW aspect)	Buildings (NW aspect and SE aspect)	0%
D7	Flat D, 5/F, Green Valley Mansion	Partial Greenery and Building (NE aspect)	Blocked by Close Buildings (SW aspect)	Buildings (SE aspect)	5%
D9	4/F, Blue Pool Mansion	Close Buildings (SW aspect)	Blocked by Close Buildings (NE aspect)	Blocked by Close Buildings (SE aspect)	15%
D11	9/F, Blue Pool Mansion	Buildings and pavement (SW aspect)	Blocked by Close Buildings (NE aspect)	Blocked by Close Buildings (NW aspect)	5%

123.  Firstly, Mr Chan referred to Dr Wong’s remark at para 8.3.1 of his Valuation and Rebuttal Report dated 20 December 2023 that Comparable D1 “has its main view onto the future Ventria Residence which is a high-rise building” where Dr Wong considered it should have “Building” view instead of “Partial Greenery and Buildings” view[61].

124.  Ventria Residence is a newly completed senior retirement home that offers comprehensive living, medical and nursing care facilities at 17A and 17B Ventris Road opposite the rear portion of Amigo Mansion on Ventris Road. According to Mr Chan, Amigo Mansion or more particularly Comparable D1 “does not completely face the high-rise block of Ventria Residence, but partially overlooks the podium of Ventria Residence, facing greenery and other buildings.”

125.  However, Mr Chan may have overlooked that a high-rise residential development immediately behind Amigo Mansion would be built at 18 Ventris Road though it remains as a construction site for some time. This being the case, we consider the proposed adjustment of +2% by Dr Wong not unreasonable.

126.  Similarly, we are prepared to adopt the adjustments for view proposed by Dr Wong in respect of the other comparables.

Adjustment for Lighting & Ventilation

127.  In addition, the valuation experts had made downward adjustments to comparables which have side and/ or back windows so that they may enjoy better lighting and ventilation.

128.  Mr Chan had also compiled a table to show the difference in opinion between him and Dr Wong on the adjustments for light and ventilation for the comparables in Amigo Mansion at No 79A Wong Nai Chung Road and Champion Court at Nos 67 & 69 Wong Nai Chung Road in his Rebuttal Report dated 22 January 2024[62]:

Comp	Address	Components of flat with windows or balcony that enjoys lighting and ventilation			Adjustment
		Front	Rear	Side	Mr Chan	Dr Wong
Reference Domestic Unit	5/F, No 61 Wong Nai Chung Road	Front part of living / dining area and a bedroom (SW aspect)	N/A (Blocked by Nearby Buildings)	N/A (Blocked by Nearby Buildings)	-	-
D3	Flat A, 20/F, Amigo Mansion	Living / dining area and 1st bedroom (SW aspect)	2nd bedroom (NE aspect)	1st & 2nd bedrooms (NW aspect)	-3%	-2%
D5	Flat B, 15/F, Amigo Mansion	Living / dining area and 1st bedroom (SW aspect)	2nd bedroom (NE aspect)	1st & 2nd bedrooms (SE aspect)	-3%	-2%
D8	Flat A, 16/F, Champion Court	Living area and master bedroom (SW aspect)	Balcony and another bedroom (NE aspect)	Dining area, master bedroom and another bedroom (NW aspect)	-5%	-3%
D10	Flat B, 20/F, Champion Court	Living area and master bedroom (SW aspect)	Balcony and another bedroom (NE aspect)	Dining area, master bedroom and another bedroom (SE aspect)	-5%	-3%

129.  At first glance, the adjustments for view above should have taken into account the difference in general impression of the environmental factors between the Reference Domestic Unit and the comparables. We are cautious that the adjustments for lighting and ventilation may have double-counted those for the views.

130.  We are prone to adopt Dr Wong’s proposed adjustments rather than the marginal higher rates proposed by Mr Chan.

131.  On the other hand, Dr Wong only proposed nominal adjustments for lighting and ventilation with regard to his second Reference Domestic Unit[63]:

Comp	Address	Adjustment
Reference Domestic Unit	5/F, No 38 Ventris Road
D1	Flat C, 12/F, Amigo Mansion	-2%
D4	Flat C, 8/F, Arts Mansion	-1%
D7	Flat D, 5/F, Green Valley Mansion	-1%
D9	4/F, Blue Pool Mansion	1%
D11	9/F, Blue Pool Mansion	1%

132.  Such nominal adjustments are hard to justify and can be ignored especially when we have made allowance for view.

Adjustment for Building Management & Facilities

133.  Mr Chan had allowed adjustments to reflect the difference in building management and facilities between the Building and the comparables.

134.  For instance, in Mr Chan’s opinion, the entrance lobby of the Building either at Wong Nai Chung Road or Ventris Road is narrow and small, resulting in insufficient spaces to provide appropriate building management facilities and services, such as a management counter. Although the Building is managed by Knight Frank (Services) Limited (“Knight Frank”), a reputable management company, there is no security guard on site.

135.  In addition, the Building has one lift that serves the Front Portion (“Lift 1”) and another lift that serves the Rear Portion (“Lift 2”). In comparison, the comparables all provide two lifts. When the only lift is out of order or undergoes repair and maintenance, the residents would have no choice but to take the stairs instead. Mr Chan recited his experience on 11 January 2024 during his inspection when the lift serving the domestic units facing Ventris Road was out of order and had been under repair for some time. According to the letter regarding the arrangement for inspection of the unit owned by R6 (ie 6/F, Comfort Mansion, No 36 Ventris Road), R6 explicitly requested him to meet at the door gate of the Building on street level since his representative was “… elderly and wants to make sure that the expert shows up before he walks up the 6 floors of stairs.”[64]

136.  In this regard, Mr Chan also referred to Crown Centre Development Limited & Another v Wong Wai Ping & Others, LDCS 12000/2021 (unreported, dated 8 December 2023) where the Tribunal accepted his proposed adjustment of -3% when the building concerned was served by only one lift[65].

137.  On the other hand, Dr Wong had allowed only -1% to reflect the difference in lift provision between the Building and that of the comparables[66]:

Comp Ref	Mr Chan	Dr Wong
	Building Management and Facilities	Building Management and Facilities	Lift Provision
D1	-3.0%	0.0%	-1.0%
D2	-3.0%	0.0%	-1.0%
D3	-3.0%	0.0%	-1.0%
D4	*	-1.0%	-1.0%
D5	-3.0%	0.0%	-1.0%
D6	*	-1.0%	-1.0%
D7	-3.0%	0.0%	-1.0%
D8	-3.0%	0.0%	-1.0%
D9	-3.0%	0.0%	-1.0%
D10	-3.0%	0.0%	-1.0%
D11	-3.0%	0.0%	-1.0%
D1	-3.0%	0.0%	-1.0%
D2	-3.0%	0.0%	-1.0%

* Mr Chan did not adopt the transactions in Arts Mansion as comparables.

138.  We agree with Mr Chan’s adjustments to reflect the difference in building management and facilities between the Reference Domestic Unit and the comparables.

EUV Assessment of the Upper Floor Domestic Units as at 10 June 2022

139.  Thus, our determination of the EUV of 5/F, No 61 Wong Nai Chung Road is as follows:

Comp Ref	Unit Rate (/m2)	Adjustments							Adj Unit Rate (/m2)
		Time	Size	Building Age	Floor Level	View	Building Management / Facilities	Total
D1	$187,204	13.3%	-5.0%	-2.8%	-2.0%	10.0%	-3.0%	9.4%	$204,801
D2	$216,734	1.5%	3.5%	0.0%	-3.0%	0.0%	-3.0%	-1.2%	$214,133
D3	$280,208	-0.9%	-4.2%	-2.8%	-7.0%	-10.0%	-3.0%	-25.1%	$209,876
D5	$262,605	-0.5%	-4.2%	-2.8%	-4.5%	-5.0%	-3.0%	-18.5%	$214,023
D7	$198,919	-3.1%	2.5%	0.0%	1.0%	20.0%	-3.0%	16.8%	$232,337
D8	$290,672	-2.9%	2.5%	-2.0%	-5.8%	-15.0%	-3.0%	-24.2%	$220,329
D9	$160,819	-2.9%	4.0%	1.3%	0.0%	30.0%	-3.0%	29.0%	$207,457
D10	$272,727	-3.0%	2.5%	-2.0%	-7.8%	-10.0%	-3.0%	-21.6%	$213,818
D11	$173,222	-3.0%	6.6%	1.3%	-2.5%	20.0%	-3.0%	18.9%	$205,961
						Average:			$213,637
						Average (excluding D7, D9 & D11 where there are significant view adjustments):			$212,830
						Say:			$213,000

140.  As stated in §106 above, Mr Chan adopted only 5/F, No 61 Wong Nai Chung Road as Reference Domestic Unit. After arriving at the EUV assessment of this unit, he applied significant adjustments for view, as much as 15% or above, to assess those units that front onto Ventris Road.

141.  On the other hand, Dr Wong adopted 5/F, No 38 Ventris Road as Reference Domestic Unit that looks at the rear. When good comparables are available, Dr Wong’s approach should be preferred as this would minimize the number of adjustments and especially such adjustments were merely based on professional judgment instead of concrete market evidence.

142.  In the present case, Dr Wong relied on the following comparables and assessed the EUV of this second reference unit at $190,000 per sq m:

Comp Ref	Address	Date of Sale	Building Age	Consideration	Saleable Area (m2)	Unit Rate (/m2)
D1	Flat C, 12/F, Amigo Mansion, 79A Wong Nai Chung Road	12 Nov 22	1975	$7,900,000	42.2	$187,204
D4	Flat C, 8/F, Arts Mansion, 43 Wong Nai Chung Road	24 Apr 22	1979	$15,600,000	72.7	$214,580
D7	Flat D, 5/F, Green Valley Mansion, 51 Wong Nai Chung Road	1 Dec 21	1964	$18,400,000	92.5	$198,919
D9	4/F, Blue Pool Mansion, 3 Blue Pool Road	1 Nov 21	1959	$16,500,000	102.6	$160,819
D11	9/F, Blue Pool Mansion, 1 Blue Pool Road	2 Jun 21	1959	$20,700,000	119.5	$173,222

143.  Following our discussion on the adjustment factors above, we assess the EUV of 5/F, No 38 Ventris Road as follows[67]:

Comp Ref	Unit Rate (/m2)	Adjustments								Adj Unit Rate (/m2)
		Time	Location[68]	Size	Building Age	Floor Level	View	Building Management / Facilities	Total
D1	$187,204	13.3%	-2.0%	-4.8%	-2.8%	-2.0%	2.0%	-3.0%	-0.4%	$186,455
D4	$214,580	-0.5%	-2.0%	-0.3%	-3.8%	-0.5%	0.0%	-3.0%	-9.7%	$193,766
D7	$198,919	-3.1%	-2.0%	2.7%	0.0%	1.0%	5.0%	-3.0%	0.3%	$199,516
D9	$160,819	-2.9%	-2.0%	4.2%	1.3%	0.0%	15.0%	-3.0%	12.0%	$180,117
D11	$173,222	-3.0%	-2.0%	6.8%	1.3%	-2.5%	5.0%	-3.0%	2.1%	$176,860
							Average:			$187,343

144.  Notwithstanding the above, we note the comment by Mr Chan that the transaction at Arts Mansion, ie D4 may not be a good comparable. If this comparable is excluded, the average would become $185,737 per sq m instead. This happens to be just 2.6% above $213,000 per sq m x (1 – 15%) = $181,050 per sq m resulted from Mr Chan’s approach. We are then content to follow Mr Chan’s approach.

145.  Also, in determining the EUV of the various domestic units, we agree with Mr Chan’s further adjustment for location in respect of those units that front onto Ventris Road – the Rear Portion. Compared with the units in the Front Portion, these units are only accessible via one entrance from the sloping Ventris Road, while the other comparables all have entrances abutting Wong Nai Chung Road. However, we prefer to adopt -2% instead of Mr Chan’s -3%.

146.  We prefer also to adopt a size adjustment at 1% per 10 sq m when the sizes of the units are very close.

147.  We also prefer the view adjustments proposed by Mr Chan to those of Dr Wong. For those units that face Wong Nai Chung Road, Dr Wong suggested in his Valuation and Rebuttal Report dated 20 December 2023 at para 8.9 & 8.10 that the main view of such units from 1/F to 3/F, for instance, was only “Trees”. Dr Wong adopted a -15% downward adjustments to those units from 1/F to 3/F. We agree however with Mr Chan that the units on 1/F & 2/F mainly face the greenery and pavement of Wong Nai Chung Road while the units on 3/F & 4/F face not only trees, but also more of Happy Valley Racecourse[69].

148.  Mr Chan and Dr Wong also failed to agree on the internal conditions of a few units. Having reviewed the photographs taken by Mr Chan and Dr Wong, and having carried out our inspection on 3 December 2024, we set out our opinion below vis-à-vis those of Mr Chan and Dr Wong:

Property	Mr Chan	Dr Wong	Tribunal
3/F. 59 Wong Nai Chung Road	Fair	Poor	Fair
4/F. 59 Wong Nai Chung Road	Good	Very Good	Good[70]
5/F. 61 Wong Nai Chung Road	Uninspected	Good	Good
8/F. 61 Wong Nai Chung Road	Uninspected	Good	Good
5/F, 38 Ventris Road	Fair	Poor	Fair
6/F, 36 Ventris Road	Poor	Fair	Fair

149.  In addition, Dr Wong suggested that units on the lower floors were subject to higher noise level emitted from traffic along Wong Nai Chung Road or Ventris Road. He had made downward adjustments of -3% to those units. In Peace Ever, supra, however, we explained there had been the misconception that units on lower floors abutting a busy street would suffer from higher noise emitted from the passing traffic. Residents of upper floor units do not necessarily suffer less noise from passing traffic because they hear noise emitted from a larger area, so more sources of noise from the moving traffic whereas residents on lower floors hear noises mainly in close proximity.

150.  There was also another adjustment factor – privacy that Mr Chan and Dr Wong could not agree. For the domestic units facing Ventris Road, Dr Wong allowed a -10% privacy adjustment to the units on G/F and -2% adjustment to the units on 1/F for reason that “the windows of the two Ground Floor units of Nos 36 and 38 Ventris Road are at eye level of the pedestrians along Ventris Road and the privacy of these two units is adversely affected” whereas “The privacy of the units on 1^st Floor of Nos 36 and 38 Ventris Road would also be affected but to a lesser extent” [71].

151.  We agree with Mr Chan that the adjustments proposed by Dr Wong are excessive. As suggested by Dr Wong in his Valuation and Rebuttal Report dated 20 December 2023 at para 3.4[72], this section of Ventris Road is a “tranquil living neighbourhood”. We further agree with Mr Chan that the units concerned are not directly abutting Ventris Road but separated by the Right-of-Way. In other words, there is a gap and a certain distance between the units on G/F and the pedestrian path of Ventris Road.

152.  We prefer adjustments of -5% and 0% respectively.

153.  Thus, our determination of the EUV of the various domestic units is shown as follows:

Wong Nai Chung Road

No	Floor	Saleable / Effective Area (m2)	Adjustments					Adj Unit Rate (/m2)	EUV
			Floor Level	Size	View	Internal Condition	Total
59	1/F	84.2	-2.0%	-0.8%	-10.0%	0.0%	-12.5%	$186,375	$15,690,000
61	1/F	75.8	-2.0%	0.0%	-10.0%	0.0%	-11.8%	$187,866	$14,240,000
59	2/F	84.2	-1.5%	-0.8%	-10.0%	0.0%	-12.1%	$187,227	$15,760,000
61	2/F	75.8	-1.5%	0.0%	-10.0%	0.0%	-11.3%	$188,931	$14,320,000
59	3/F	84.2	-1.0%	-0.8%	-5.0%	0.0%	-6.7%	$198,729	$16,730,000
61	3/F	75.8	-1.0%	0.0%	-5.0%	0.0%	-5.9%	$200,433	$15,190,000
59	4/F	84.2	-0.5%	-0.8%	-5.0%	3.0%	-3.4%	$205,758	$17,320,000
61	4/F	75.8	-0.5%	0.0%	-5.0%	0.0%	-5.5%	$201,285	$15,260,000
59	5/F	84.2	0.0%	-0.8%	0.0%	0.0%	-0.8%	$211,296	$17,790,000
61	5/F	75.8	0.0%	0.0%	0.0%	3.0%	3.0%	$219,390	$16,630,000
59	6/F	84.2	0.5%	-0.8%	0.0%	-6.0%	-6.3%	$199,581	$16,800,000
61	6/F	75.8	0.5%	0.0%	0.0%	-3.0%	-2.5%	$207,675	$15,740,000
59	7/F	84.2	1.0%	-0.8%	0.0%	-3.0%	-2.8%	$207,036	$17,430,000
61	7/F	75.8	1.0%	0.0%	0.0%	3.0%	4.0%	$221,520	$16,790,000
59	8/F	81.0	1.5%	-0.5%	0.0%	0.0%	1.0%	$215,130	$17,430,000
61	8/F	72.6	1.5%	0.3%	0.0%	0.0%	1.8%	$216,834	$15,740,000
59	9/F + Roof	83.8	-1.0%	-0.8%	0.0%	-3.0%	-4.7%	$202,989	$17,010,000
61	9/F + Roof	74.1	-1.0%	0.2%	0.0%	0.0%	-0.8%	$211,296	$15,660,000
								Total:	$291,530,000

Ventris Road

No	Floor	Saleable / Effective Area (m2)								Adj Unit Rate (/m2)	EUV
			Location	Floor Level	Size	View	Internal Condition	Privacy	Total
36	Basement	62.7	-2.0%	-2.5%	1.3%	-30.0%	0.0%	0.0%	-32.2%	$144,414	$9,050,000
38	Basement	45.8	-2.0%	-2.5%	4.5%	-30.0%	-3.0%	0.0%	-32.2%	$144,414	$6,610,000
36	G/F	72.8	-2.0%	-2.5%	0.3%	-25.0%	0.0%	-5.0%	-31.7%	$145,479	$10,590,000
38	G/F	74.4	-2.0%	-2.5%	0.1%	-25.0%	-3.0%	-5.0%	-33.9%	$140,793	$10,470,000
36	1/F	71.9	-2.0%	-2.0%	0.4%	-25.0%	0.0%	0.0%	-27.7%	$153,999	$11,070,000
38	1/F	74.4	-2.0%	-2.0%	0.1%	-25.0%	0.0%	0.0%	-27.9%	$153,573	$11,430,000
36	2/F	71.9	-2.0%	-1.5%	0.4%	-20.0%	0.0%	0.0%	-22.5%	$165,075	$11,870,000
38	2/F	74.4	-2.0%	-1.5%	0.1%	-20.0%	-3.0%	0.0%	-25.0%	$159,750	$11,890,000
36	3/F	71.9	-2.0%	-1.0%	0.4%	-20.0%	0.0%	0.0%	-22.1%	$165,927	$11,930,000
38	3/F	74.4	-2.0%	-1.0%	0.1%	-20.0%	0.0%	0.0%	-22.3%	$165,501	$12,310,000
36	4/F	71.9	-2.0%	-0.5%	0.4%	-20.0%	0.0%	0.0%	-21.7%	$166,779	$11,990,000
38	4/F	74.4	-2.0%	-0.5%	0.1%	-20.0%	0.0%	0.0%	-21.9%	$166,353	$12,380,000
36	5/F	71.9	-2.0%	0.0%	0.4%	-15.0%	0.0%	0.0%	-16.4%	$178,068	$12,800,000
38	5/F	74.4	-2.0%	0.0%	0.1%	-15.0%	0.0%	0.0%	-16.6%	$177,642	$13,220,000[73]
36	6/F	71.9	-2.0%	0.5%	0.4%	-15.0%	0.0%	0.0%	-15.9%	$179,133	$12,880,000
38	6/F	74.4	-2.0%	0.5%	0.1%	-15.0%	0.0%	0.0%	-16.2%	$178,494	$13,280,000
36	7/F	71.9	-2.0%	1.0%	0.4%	-15.0%	0.0%	0.0%	-15.5%	$179,985	$12,940,000
38	7/F	74.4	-2.0%	1.0%	0.1%	-15.0%	0.0%	0.0%	-15.8%	$179,346	$13,340,000
36	8/F + Roof	79.2	-2.0%	-1.5%	-0.3%	-15.0%	0.0%	0.0%	-18.2%	$174,234	$13,800,000
38	8/F + Roof	82.1	-2.0%	-1.5%	-0.6%	-15.0%	-3.0%	0.0%	-20.9%	$168,483	$13,830,000
										Total:	$237,680,000

154.  The total EUV of the Building as at 10 June 2022, according to our assessment, is as follows:

Address	EUV
Shops on Nos 59 & 61 Wong Nai Chung Road	$80,058,000
Domestic units on Wong Nai Chung Road	$291,530,000
Domestic units on Ventris Road	$237,680,000
Total:	$609,268,000

Conclusion on EUV as at 10 June 2022

155.  From the above, it is our view that the total EUV for the Building is $609,268,000. The corresponding EUV and proportionate share of the sale proceeds of the respondents pursuant to Part 3 of Schedule 1 to the Ordinance are as follows:

Respondent(s)	Unit	EUV	Pro Rata Share of Sale Proceeds
R3	4/F, No 59 Wong Nai Chung Road	$17,320,000	2.8428%
R4	5/F, No 59 Wong Nai Chung Road	$17,790,000	2.9199%
R5	5/F, No 61 Wong Nai Chung Road	$16,630,000	2.7295%
R6	6/F, No 38 Ventris Road	$12,880,000	2.1140%
R7	7/F, No 36 Ventris Road	$12,940,000	2.1239%
R8	7/F, No 61 Wong Nai Chung Road	$16,790,000	2.7558%

RDV OF THE LOT AS AT DECEMBER 2024

156.  Pursuant to section 5(1) of the Ordinance, if an order for sale is granted and the trustees under the order have complied with section 7(1) in respect of the Lot, the Lot shall be sold by public auction subject to a reserve price which takes into account the redevelopment potential of the lot on its own.

Dispute on Site Area

157.  Both Mr Chan and Dr Wong agreed that the site area of the Lot is 524.7 sq m. However, they had a dispute on whether the area of the Right-of-Way (in the sum of 25.2 sq m) should be deducted from the site area to arrive at the developable site area on the basis of which the gross floor area and the site area should be calculated under the Building (Planning) Regulations (“B(P)R”).

158.  By reference to regulation 23(2) of the latter, in determining for the purposes of regulation 20, 21 or 22 the area of the site on which a building is erected:

“(a) no account shall be taken of any part of any street or service lane; and

(b) there shall be included any area dedicated to the public for the purposes of passage.”

159.  Paragraph 6 of Practice Note for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers (“PNAP”) APP-73 explains, however, where an abutting private lane is in the ownership of the developer but is not specifically required for any purpose under the Buildings Ordinance for the proposed scheme, the Building Authority will give favourable consideration to including the relevant area of such lane in site coverage and plot ratio calculations. Where the legal status of a lane has been clearly established by the existence of rights-of-way, it would be necessary to apply formally for a modification of Building (Planning) Regulation 23(2)(a).

160.  As pointed out by Mr Lam in his Rebuttal Report dated 16 August 2024[74], we agree that the phrase “not specifically required for any purpose under the Buildings Ordinance for the proposed scheme” is important for considering whether the area of the Right-of-Way qualifies in site coverage and plot ratio calculations.

161.  Mr Lam explained further that the floor area of the Right-of-Way should be included in site coverage and plot ratio calculations for the following reasons[75]:

“(iv) Firstly, the main function of a ROW is to allow owners, occupiers and relevant adjoining owners to pass and repass the passageway. Under Dr Wong’s design, the existing private ROW at the rear of the existing building (which exists at the same level of Wong Nai Chung Road) will be preserved and maintained to serve as a clear passageway to connect the neighbouring lots and free of obstruction. It is the same arrangement as with before. It is not something to be newly created in order to fulfil any “specific” purpose under the BO, and thus would fall outside the consideration of “specifically required” in PNAP APP 73 under the practice of the Building Authority.

(v) Secondly, the user of the ‘bridge’[76] as built over the ROW does not alter the nature of the ROW as not being used for any “specific purposes” under the BO.

(vi) Thirdly, the fact that the ‘bridge’ and as built and/or the ROW may so happen to constitute part of the routes for gaining access to facilities in the building for the purposes of providing the barrier free access, exit routes discharge and firemen access etc into Ventris Road should not be taken as “specifically required” for the purposes of the BO.”

162.  Mr Ng disagreed, stating the Right-of-Way serves important functions and purposes that are integral to the proposed redevelopment scheme[77]:

“These purposes include providing means of escape in case of emergency, facilitating means of access in the event of a fire, ensuring barrier free access for individuals with disabilities, and enabling access to the building as per Building (Planning) Regulation no 5 through the bridge structure built over the ROW within the Respondents’ scheme. Therefore, the ROW is essential to ensure compliance with the requirements set forth by the Buildings Ordinance.”

163.  Mr Ng cited three precedent cases to demonstrate that if the Right-of-Way is required for any purpose under the Buildings Ordinance for the proposed scheme, the area for the Right-of-Way should be excluded from the site area for the purposes of the site coverage and plot ratio calculations. One of them is The Summa at Nos 18-27 Hing Hon Road, Sai Ying Pun, Hong Kong which is surrounded by “private right of way” on all four sides[78]. The rights of way along the western, southern, and eastern sides of the site are considered specified streets for the purposes of site classification under B(P)R 18A. The perimeters abutting these specified streets are accounted for in the calculation, constituting a Class C site and therefore the afore-said right of way are required for purposes under the Buildings Ordnance; their areas are excluded from the site area for the purposed of site coverage and plot ratio calculations under paragraph 6 of PNAP APP-73.

164.  On the other hand, as further pointed out by Mr Ng, the right of way along the northern side of the site is not required for any purpose under the Buildings Ordinance. A modification of B(P)R 23(2) was applied to permit its inclusion in the site area but this right of way shall not be built in, over, upon, or under. Unfortunately, by reference to Dr Wong’s scheme, the Right-of-Way has to be built over by the ‘bridge’ giving access to Ventris Road. In his opinion, therefore, this Hing Hon Road example does not support the respondents’ case.

165.  In response, Mr Lam cited three other examples, one of them is the development at No 15 Western Street where a right of way dissecting the centre of the site was built over from 1/F and above for commercial and domestic purposes, a situation contradictory to the Hing Hon Road example. According to Mr Lam, as long as the G/F area is maintained as “right of way” with character as a covered walkway for the benefit of access, the entirety of such right of way was allowed by the Building Authority to be included as part of the site area.

166.  In such regard, Mr Ng found that the original right of way was intended to be a continuation of Fuk Sau Lane as shown in the Plan attached to the Indenture of Assignment dated 13 February 1904 registered vide memorial UB35242 in the Land Registry[79]. Upon the development of the adjoining Hang Hing Court at Nos 123-125 Third Street, the section of Fuk Sau Lane through this site had been extinguished. As a result, the connection of this right of way to other portions of the original lot, ie Inland Lot No 747 (“IL747”) no longer exists, and the right of way has becomes a “diverted lane”. On the other hand, sites on other portions of IL747, namely Hang Fai Building, Fu Wah Building, Hang Fook Mansion and Hang Hing Court, have direct access to Pok Fu Lam Road, Fuk Sau Lane and Third Street respectively. The necessity of the right of way to serve other portions of IL747 has diminished. Mr Ng then referred to paragraph 8 of PNAP APP-73 which states that:

“It is often in the interest of a developer as well as good urban planning to amalgamate sites. This can result in the extinguishment and diversion of existing lanes. Generally speaking, if a diverted lane is required only for a useful neighbourhood pattern and not specifically for a proposed development, then the Building Authority will give favourable consideration to including the relevant area of such lane in site coverage and plot ratio calculations.”

167.  In Mr Ng’s opinion, the right of way dissecting the site in this case is no longer required for any purpose of the Buildings Ordinance, making it more likely for the Building Authority to grant modification to B(P)R 23(2) to include the area of the right of way into the site area for plot ratio and site coverage calculations[80]. We agree however with Mr Lam that the right of way is still servient to the other developments nearby. There is clearly “alien interest” within the site; otherwise it could have been extinguished by the developer already.

168.  Another example cited by Mr Lam is the development of AVA 62 at No 62 Shanghai Street in Kowloon. Here, a clear and unobstructed space of not less than 2.3 metres is provided on each of the two sides of the development. Together with the right of way of 2.3 metre-wide at the rear, the building becomes a detached building pursuant to B(P)R 28(1)(b). Besides, the development in the rear, ie Ealing Court at 259A Temple Street, has similar unobstructed spaces on its sides. As a result, the right of way at AVA 62 is not required as a service lane for compliance with Reg 28 of B(P)R for both its own development as well as the development at 259A Temple Street. According to Mr Ng, the lane remains only for a useful neighbourhood pattern and according to him, the staircases that discharge onto the right of way are not used as means of escape. One of them is for accessing the transformer room and cable duct room above while the other is for accessing the plant room area below G/F[81]. The right of way is not required to comply with any specific requirements and can therefore be included in the site area for plot ratio and site coverage calculations. We find no difference between this example and the captioned case.

169.  The third example cited by Mr Lam is The Zutten at No 50 Ma Tau Kok Road. Mr Ng found that in order to permit a portion of the existing lane which traversed the site to be built over and included in the site area, the following three conditions applied[82]:

(i) A new diversionary lane is to be provided to the satisfaction of the Building Authority;

(ii) The new diversionary lane shall not be built in, over, upon and under;

(iii) The covered passage and the new diversionary lane at G/F shall be maintained as a right of way for the owners and users of the adjoining buildings.

170.  On the other hand, while the existing lane running in parallel to Ma Tau Kok Road was permitted to be diverted, Mr Ng highlighted that the portion that runs perpendicular and is still serving the rear exits of the buildings at Nos 179-183C Kowloon City Road was excluded from site area as it is required for those adjoining sites as a service lane under B(P)R 28.

171.  However, Mr Ng failed to mention that the new diversionary lane was also included in the site area calculation[83].

172.  In our opinion, this latter point is detrimental to Mr Ng’s argument. We agree with Mr Lam that the Right-of-Way that would be preserved and maintained in the proposed development can continue to serve “useful neighbourhood pattern”. The inclusion of the same into site area is very likely to be viewed favourably by the Buildings Department as one of its important considerations.

173.  We further agree with Mr Lam that in principle, even if a right of way becomes incidentally used by other adjacent developments to “comply” with requirements under the Buildings Ordinance, it should not result in reduction of redevelopment potential of the dominant site. A right of way merely being granted to others to “pass through” does not mean that it must be allowed to be used for “compliance” for specific purposes (eg means of escape) at the expense of the development rights of the owner of the servient land.

174.  Therefore, although Mr Ng had produced the record plan of the adjoining Bonny View House at Nos 63-65 Wong Nai Chung Road in order to show that the Right-of-Way is also required for its means of escape[84], we agree with Mr Lam that the Right-of-Way was not granted as a “means of escape” leading to an ultimate place of safety from adjoining buildings.

175.  Mr Ng referred further to the development of Yoo 18 BONHAM at Nos 16 & 18 Bonham Road where the right of way on its southwestern side has been excluded from the site area for plot ratio and site coverage calculation. In this case, however, the means of escape of its adjoining All Fit Garden requires this right of way to connect to Breezy Path, which is a street. This can be however distinguished from the captioned case where the adjoining buildings on each side of the Lot can have their own access to Ventris Road.

176.  Mr Lam gave a further example of the development of Central 8 at Nos 8-10 Mosque Street where rights of way were granted in favour of owners of adjoining houses at Nos 2, 4, 6, 8 & 12[85], a situation likened to the present case. From the extracts of General Building Plan as approved on 13 November 2020, both the rights of way in the front portion and rear portion were approved by the Buildings Department to be included as the site area for plot ratio[86]. That Mr Ng suggested the right of way in respect of the front portion is, by virtue of the Indenture of Assignment dated 27 September 1912, only a “passage for the owners and occupiers of adjoining houses in through along and upon that portion of the basement of the premises”[87] does not distinguish from the present case where the Right-of-Way is also situated at the basement level. Also, in this case, the front portion was built over by a deck at G/F as the main entrance with planters, similar to the proposed ‘bridge’ in the present case.

177.  Lastly, Mr Lam referred to the Pan Hoi Street example, ie the hypothetical development proposed in Peace Ever, supra. In this case, a right of way, being a “scavenging lane” at the rear of the hypothetical development, is used as access to transformer room and staircase, possibly as means of escape of the adjoining development, Sunway Garden. In the hypothetical development, the right of way also serves as “means of escape” to the G/F shops, “means of access”/ “fire fighting and rescue stairway” to the underground basement shops and carparks, service lift lobby and other functions too to comply with all building regulations. Yet the Buildings Department allowed the right of way to be included as site area for calculation of the plot ratio.

178.  All in all, we agree with Mr Lam that the chances of the Buildings Department approving the Right-of-Way to be included as part of the site area for calculating the plot ratio is very high.

179.  In light of the above, we are content to adopt 524.7 sq m as the developable site area without deduction of the area of the Right-of-Way.

Hypothetical Development

180.  Mr Chan for the applicant and Dr Wong for the respondents agreed to resort to the residual valuation method in determining the RDV. This can be done by deducting development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development.

181.  However, their hypothetical schemes of development differ as follows[88]:

Hypothetical Development	Mr Chan	Dr Wong
Basement 2	Basement Carpark and Associated Carpark Ancillary Area, and Plant Rooms	1 Accessible Parking, 9 Private Car Parking Spaces and 1 Motorcycle Parking Spaces
Basement 1	Basement Carpark and Associated Carpark Ancillary Area, and Plant Rooms	10 Private Car Parking Spaces
LG2/F at Wong Nai Chung Road	One Retail Shop (Saleable Area: 302.2 m2 + Ancillary Shop Area: 14.5 m2)	Retail Shop A: Saleable Area: 296.75 m2 Retail Shop B: Saleable Area: 58.57 m2
	Residential Entrance & Lobby	Fireman’s Lift and Fireman’s Lift Lobby and Staircases, Domestic Lift Shaft/ Car Lift Shaft
	Carpark Ancillary Area & Plant Rooms	M/E and Carpark Means of Escape
LG1/F	Residential Core and Carpark Ancillary Area & Plant Rooms	4 Private Car Parking Spaces & 1 Visitor Parking Space
G/F at Ventris Road	Entrance Lobby & Recreational Facilities
	Carpark Entrance, Carpark Ancillary Area & Plant Rooms	Circulation Area, Turntable and Loading & Unloading Bay and M/E and Refuse Room
1/F	2 Typical Residential Units	Covered Landscape Area, Outdoor Swimming Pool[89] etc
2/F	2 Typical Residential Units	Transfer Plate[90]
3/F - 22/F	2 Typical Residential Units on each floor	One Simplex Unit on each floor up to 23/F (For 6/F, 11/F, 16/F & 21/F with Saleable Area: 130.68 m2 each & Other Floors with Saleable Area: 140.98 m2 each[91]
Duplex Residential Flats	23/F & 24/F (2 duplex units with respective top roofs)	24/F & 25/F (1 duplex unit with top roof and swimming pool) Saleable Area: 267.38 m2
Plot Ratio	8.389	8.351

182.  From the above, it appears that the main difference between the two valuation experts is whether there should be two residential units or one residential unit per each upper floor. However, it is surprising that they arrived at values wide apart: Mr Chan arrived at a residual land value of $346 million (with an accommodation value of $84,040 per sq m)[92] while Dr Wong arrived at a residual land value of $843.3 million (with an accommodation value of $192,461 per sq m).

183.  The Lot is located in the more prestigious area of Happy Valley with a full view of the racecourse, a valuable feature which is quite unique in Hong Kong. The hypothetical development therefore should reflect the high-end nature of the locality and superior features of the Lot to cater for buyers who are targeting to purchase a residential unit in a prestigious position.

184.  New developments with such peculiar feature even in Happy Valley are limited in supply. For instance, lying close to Hong Kong Sanatorium & Hospital, One Jardine’s Lookout is a new development in Happy Valley which does not enjoy such a feature. Whereas Mr Chan was content to prepare his analysis on the basis of transactions in this development, we agree with Dr Wong that those transactions are not suitable comparables for the following reasons:

1. Whilst One Jardine’s Lookout’s typical floor comprises 5 to 6 units per floor, its internal flat mix and density is vastly different to the hypothetical development;

2. One Jardine’s Lookout consists of two lifts only to serve a total of 123 units over 25 floors in a single block, with only 15-16 carparking spaces, ie a far lower carparking ratio;

3. Many units in One Jardine’s Lookout comprise studio flats and 1-2 bedroom units, some of which do not have any open view at all.

185.  Notwithstanding the above, Mr Chan’s own analysis told that smaller units in One Jardine’s Lookout would give a lower value than those of units having larger area. For instance, Mr Chan had analyzed the sales of Units B on 25/F and 26/F of One Jardine’s Lookout, each with a saleable area of 47.8 sq m. He arrived at a unit rate of $223,563 per sq m and $226,255 per sq m respectively[93]. But when he analyzed the sales of Units C on 25/F and 26/F which took place on similar dates, he arrived at a unit rate of $267,094 per sq m and $285,403 per sq m respectively[94]. More particularly, Mr Chan agreed that when buyers decide to buy the two larger units, they should have been aware that the smaller units on the same floors adjacent to their larger units were sold and offered at a much lower rate. This being the case, the unit rates achieved for the two larger units may have been dampened.

186.  Whereas the market value of a site is usually derived from its highest and best use, we decide to proceed with our determination following Dr Wong’s approach to see if his high value is sustainable.

2-storey Car Parking Basement

187.  Owing to the narrowness of the Lot (with a width less than 13 metres)[95], Mr Ng for the applicant firstly raised the issue that the 2 basement floors are insufficient to house the intended quantity of car parking spaces designed by Dr Wong because of the thickness of the basement walls. But with the illustration by Dr Lau as demonstrated by Exhibit R10, we are persuaded that the socketed steel H-pile walls proposed by him can resolve the problem. The H-piles would not be relied on for structural strength but as a permanent/ reinforcement wall to take soil pressure. Using this design, the total wall thickness would be 373.9 mm. Further, if the flanges on the inward side of the H-piles were cut off after the reinforced concrete wall is built, the thickness of the wall would be thinner at 323.9 mm.

188.  In the course of the hearing, the bench referred to another site at No 13 Ho Man Tin Street where the width of the site is only 9 metres. Dr Lau found that socketed H-piles are used in this Ho Man Tin site. Obviously, it would be more difficult to construct piles in a building with a width of 9 metres than one with a width of some 13 metres. We are also satisfied that the construction cost for the basement of the hypothetical development proposed by Dr Wong is similar to the construction cost of other developments with basements in the urban area.

Vertical Core at G/F Level

189.  “Ultimate place of safety” is defined in the Code of Practice for Fire Safety in Buildings 2011 (“the Fire Safety Code”) as “a place of safety for final exit discharge where a protected exit terminates that provides access to an area clear of the effects of fire, where people may safely disperse. The ultimate place of safety is a street or an open area outside the subject building and connects directly with a street …”

190.  By Clause B5.2 of the Fire Safety Code, every exit route should lead directly to an ultimate place of safety. Mr Lam asserted that the Buildings Department allows some latitude for the “exit/discharge point” from the residential tower above to an ultimate place of safety to be built over provided that such built over area is not too large (or constructed of temporary/filmsy materials) that may be easily affected by fire. In Mr Lam’s opinion, the proposed structure of Dr Wong would fall within such latitude extended by the Buildings Department. For such reason, the “exit/discharge point” can be a covered area without a protected corridor design.

191.  In Dr Wong’s scheme, ST-4 discharges onto the main lobby while ST-5 discharged onto the Fireman’s Lift Lobby as a separate compartment[96]. After that, the exit routes were separately discharged into the open area outside the lifts through different doors as terminal exits before further reaching the podium pavement. Mr Lam explained that there is no “merging” of two or more required staircases into a common lobby before discharging into an ultimate place of safety.

192.  According to Mr Lam, the built-over area immediately outside the lobby/firemen lift lobby is very small. He opined that it is highly likely to be acceptable by the Buildings Department not to be affected by the effect of fire. The open area outside the building line is the ultimate place of safety which connects with Ventris Road.

193.  Mr Ng commented that the vertical core at G/F of Dr Wong’s scheme is inadequate to comply with Clause D8.3 of the Fire Safety Code which states as follows:

“The lowest landing of a fireman’s lift serving the storeys above ground storey or topmost landing of a fireman’s lift serving the basement, as the case may be, should be situated at the level of the fire service access point in Subsection D7.”

194.  Subsection D7 refers to “Access to a Fireman’s Lift at Ground Storey”. Mr Ng suggested that the fire service access point should be situated on the G/F at Ventris Road.

195.  Mr Ng appears to say that exit routes staircases cannot discharge upwards save and except for a basement. Mr Lam suggested that Mr Ng was in fact referring to Clause B17.3 of the Fire Safety Code which reads:

“No required staircase serving the storeys of a building above the ground storey should be continued direct to a basement.”

196.  We agree with Mr Lam that Mr Ng’s comment was misconceived because the LG2/F proposed by Dr Wong is at the same level of Wong Nai Chung Road. Both LG1/F and LG2/F would be constructed above ground and above street level without any excavation. It is not a “basement” and the discontinuation requirement is not applicable.

197.  In such regard, Mr Ng also queried the arrangement of the escape routes but we agree with Mr Lam that such concern can be resolved by the directional signages as required in Clauses B5.5 and B5.10 of the Fire Safety Code. There would be clear signs at ST-4 and ST-5 to direct all discharging occupants arriving at G/F to escape outwards into the lobby/firman’s lift lobby respectively and avoid taking wrong turns downwards or upwards. According to Mr Lam, a light source having 30 lux would be visible from about 8 metres away.

198.  Mr Lam illustrated that the “merger concept” resembles “river branches” flowing into a “mainstream”, which has been adequately tested by the Buildings Department with reference to “discharge values” of a staircase and corridor governing its width. So long as there is a continuous stream of escaping occupants moving in a main direction, occupants from different branches would merge into the main stream, and no overflow would be caused. Based on such concept, the designed “convergence” of ST-04 and ST-05 at G/F is permissible which does not contravene the intent and spirit of the Fire Safety Code.

199.  In addition, there were disputes between Mr Ng and Mr Lam on various technicalities of Dr Wong’s scheme. We appreciate however that Dr Wong’s schematic design is on conceptual level under a high degree of generality which can be resolved in the detailed design stage[97]. In fact, Dr Wong has provided a revised scheme incorporated into the 2^nd Joint Expert Statement with Mr Chan at Appendix B10[98].

Calculation of Saleable Area of Residential Units

200.  In Dr Wong’s hypothetical scheme, there will be only one residential unit on each of the upper floors. He himself has designated the relevant areas including the staircase enclosure, the protected lobbies of the staircases, the firemen lift and its lobby and the temporary refuge spaces (TRS) etc as common areas. He however included the lift lobby outside the 2 passenger lifts as saleable areas.

201.  We agree with Mr Ng that such latter area cannot be enclosed for exclusive use, occupation or enjoyment of the unit next to it. By Clause B8.2 of the the Fire Safety Code, it is essential to provide an access corridor from one staircase to the other at least every 5 storeys and on the main roof. Mr Lam’s suggestion that such an access corridor can be regulated by the Deed of Mutual Covenant to keep free of any obstruction cannot overcome the definition of “saleable area” of a unit as defined by Code of Measuring Practice issued by the Hong Kong Institute of Surveyors that it comprises the floor area exclusively allocated to that unit. Particularly, “saleable area” shall be the area contained within the enclosing walls of the unit. The floor plans for Belfran Peak (at No 9 Belfran Road) provided by Mr Lam himself obviously exclude the private lift lobby from the calculation of the floor area exclusively allocated to the residential units[99]. Regrettably, those for Mount Nicholson (at No 8 Mount Nicholson Road) and ATAL Tower are of different layout arrangement where the lift lobby is completely separated from the stairwell[100].

202.  While conceding that the area for the staircase interchange cannot be regarded as part of the saleable area, Mr But referred to Asia Rich Incorporation Limited & Others v Well Step Holdings Limited, LDCS 15000/2019 (unreported, dated 1 February 2023) where the Tribunal accepted the notional corridor for staircase interchange from 15^th to 23^rd floors at 1/2 of the main unit rate[101]. In our opinion, this case should be distinguished from the present case where the present hypothetical development is supposed to be a high-end residential development instead of an office building as in Asia Rich.

203.  In view of the above, by reference to the “Amended Details of the Hypothetical Development” as proposed by Dr Wong[102], the saleable areas for the various floor are shown as follows:

Units/ Floor	Saleable Area (m2) of Each Unit
3/F	140.98
Flat Roof on 3/F	58.75
4/F-23/F (excluding 6, 11, 16 & 21/F)	140.98
6, 11, 16 & 21/F	130.68
24/F & 25/F	267.38
Total:	3186.76

GDV for Upper Floors Residential Units

204.  Dr Wong adopted the simplex on 13/F as the domestic reference unit for the purpose of assessing the GDV for the typical simplex units on the upper floors of the hypothetical development. He then referred to various transactions of the following developments, made adjustments for time (on the basis of the RVD Private Domestic Price Index for Classes D & E), location, size (at 0.5% per 10 sq m difference), building age (1% per 1year difference +5%), floor level (at 0.5% per floor difference), view, scale & facilities, headroom, aspect, entrance, Government rent liability, exclusiveness and privacy[103]. He arrived at the following adjusted unit rate(s) [104]:

The Aster, No 7A Shan Kwong Road (built in 2017 but renovated recently in 2023)

Unit	Date of Sale	CPS Involved	Consideration	Value of CPS	Cash Rebate by Developer	Saleable Area (m2)	Unit Rate* (/m2)	Total Adjustment	Adj Unit Rate (/m2)
Flat B on 31/F	12 Sep 24	P08 on LG2/F	$49,397,000	$3,620,000	11.45%	116.1 + Bay Window: 4.7 + Flat Roof: 2.2	$344,690	27.5%	$439,480
Flat A on 31/F	17 Jan 24	P13 on LG2/F	$45,400,000	$3,790,000	11.45%	116.1 + Bay Window: 4.7 + Flat Roof: 2.2	$313,313	23.8%	$387,881
								Average:	$413,681

* The cash rebate by developer has been deducted from the consideration adjusted for the car park value.

Broadwood Twelve at No 12 Broadwood Road (built in 2010)

Unit	Date of Sale	CPS Involved	Consideration	Value of CPS	Saleable Area (m2)	Unit Rate (/m2)	Total Adjustment	Adj Unit Rate (/m2)
Flat B on 42/F	28 Jan 22	322	$54,800,000	$4,250,000	118.9 + Bay Window: 3.8	$421,601	-9.5%	$381,549
Flat B on 26/F	24 May 21	515	$52,400,000	$4,330,000	118.9 + Bay Window: 3.8	$400,917	-4.2%	$384,078
							Average:	$382,814

The Leighton Hill at 12 Broadwood Road (built in 2002)

Unit	Date of Sale	CPS Involved	Consideration	Value of CPS	Saleable Area (m2)	Unit Rate (/m2)	Total Adjustment	Adj Unit Rate (/m2)
Flat A on 15/F, Tower 3	6 Aug 24	C63 on 2/F	$53,500,000	$3,600,000	138.0 + Bay Window: 4.9	$358,477	9.5%	$392,532
Flat A on 26/F, Tower 8	4 Aug 24	A150 on 1/F	$49,800,000	$3,580,000	116.9 + Bay Window: 3.9	$392,027	2.9%	$403,396
Flat C on 7/F, Tower 1	27 Jul 24	E11 on 3/F	$37,600,000	$3,630,000	106.7 + Bay Window: 4.4	$315,121	26.8%	$399,573
Flat A on 36/F, Tower 6	18 Jul 24	A120 on 1/F	$75,800,000	$3,630,000	157.6 + Bay Window: 4.3	$454,757	-1.9%	$446,117
Flat A on 27/F, Tower 5	8 Jul 24	C80 on 2/F	$86,000,000	$3,650,000	161.9 + Bay Window: 5.4	$504,287	2.6%	$517,398
Flat A on 22/F, Tower 7	2 Jul 24	A3 on 1/F	$55,000,000	$3,630,000	138.0 + Bay Window: 4.9	$369,037	4.2%	$384,537
Flat B on 23/F, Tower 3	25 Jun 24	A68 on 1/F	$56,380,000	$3,680,000	138.0 + Bay Window: 4.9	$378,592	2.1%	$386,542
							Average:	$418,585
				Average (discarding Flat C on 7/F, Tower 1[105]):				$421,754

Winfield Building at No 1 Ventris Road (built in 1984 but renovated in 2012)

Unit	Date of Sale	CPS Involved	Consideration	Value of CPS	Saleable Area (m2)	Unit Rate (/m2)	Total Adjustment	Adj Unit Rate (/m2)
Unit 2, 21/F, Tower A	20 May 23	G44 on G/F	$83,600,000	$3,200,000	186.4	$431,330	6.5%	$459,366
Unit 2, 19/F, Tower A	20 Sep 22	G41 on G/F	$78,000,000	$3,210,000	186.4	$401,234	7.0%	$429,320
							Average:	$444,343

The Attitude at No 20 Shan Kwong Road (built in 2011)

Unit	Date of Sale	CPS Involved	Consideration	Value of CPS	Saleable Area (m2)	Unit Rate (/m2)	Total Adjustment	Adj Unit Rate (/m2)
Flat C on 41/F	10 May 24	C11 on 1/F	$44,730,000	$1,800,000	135.2	$317,530	39.1%	$441,684
Flat A on 8/F	23 Apr 24		$31,750,000		140.2	$226,462	85.1%	$419,181
Flat B on 12/F	25 Febl 24		$32,000,000		134.9 + Bay Window: 2.6	$235,988	71.3%	$404,247
Flat D on 26/F	14 Feb 24	C36 on 1/F	$41,300,000	$1,750,000	142.2 + Bay Window: 1.3	$277,544	56.6%	$431,858
Flat C on 15/F	26 Jan 24		$34,400,000		134.9 + Bay Window: 2.6	$253,687	68.2%	$426,702
Flat A on 21/F	22 Nov 23	P15 on UG/F	$40,500,000	$1,830,000	140.2	$275,820	54.3%	$425,590
							Average:	$424,877
		Average (discarding Flat A on 8/F, Flat B on 12/F and Flat C on 15/F[106]):						$433,044

205.  As regards the transactions in The Aster, according to the price list, these comparables are eligible for the following cash rebates and benefit, which will be offset directly from the balance of the purchase price:

(i) Ad Valorem Stamp Duty Benefit (maximum of 3.75% of the purchase price);

a. Government Rent & Rates Subsidy Benefit: a rebate of 2.5% of the reduced purchase price (ie the purchase price minus the amount of “Ad Valorem Stamp Duty Benefit”);

b. Move-in Decoration Rebate Benefit: a rebate of 5.5% of the reduced purchase price (ie the purchase price minus the amount of “Ad Valorem Stamp Duty Benefit”).

206.  We cannot agree with Dr Wong paying no regard to the rebates by the developer. We therefore have rebates deducted from the consideration after deducting therefrom the value of car parking space proposed by Dr Wong. On the other hand, we agree to most of Dr Wong’s adjustments, save for location where he applied as much as +15%. We consider it excessive and would apply +10% instead.

207.  In addition, owing to the small scale of the hypothetical development, the area of recreational facilities is approximately 200 sq m. The club facilities that can be provided will be minimum or lacking. At trial, for instance, Mr Lam conceded that the swimming pool proposed by Dr Wong will be less than 10 metres. It can hardly be justified. We do not agree to the +2% adjustment proposed by Dr Wong for scale and facilities. Thus, the average of the adjusted unit rates would become $387,936 per sq m.

208.  We have no comments on the adjustments for Broadwood Twelve save that for scale and facilities. Broadwood Twelve has a clubhouse and a range of recreational facilities including an outdoor swimming pool, childrens' facilities, gym room as well as entertainment facilities. Therefore, we cannot agree with Dr Wong’s applying no adjustment for scale & facilities. We would adopt -10% instead and the average of the adjusted unit rates would become $344,533 per sq m. On the other hand, the transactions were dated. This notwithstanding, we have no objection to Dr Wong applying half weighting to his adjusted average.

209.  The Leighton Hill has a wide range of recreational facilities which include a decent clubhouse, indoor and outdoor swimming pools, children paddling pool, children playground/ playroom, fitness room, sauna, steam room, tennis court, billiard room, banquet hall, multi-purpose activity room etc. Therefore, we would increase Dr Wong’s -10% for scale & facilities to -15%. The average of the adjusted unit rates would become $398,323 per sq m.

210.  Likewise in Winfield Building, there are swimming pool up to 24 metres long, an equestrian-themed flat roof garden, fitness room, covered playing area, children playing area and indoor function room etc[107]. We cannot agree with Dr Wong’s 2% for scale & facilities. We would adopt -15% instead and the average of the adjusted unit rate would become $370,286 per sq m.

211.  The same comment is applicable to The Attitude where clubhouse, entertainment facilities, catering facilities are available. We cannot agree with Dr Wong’s 2% for scale & facilities. We would adopt -10% instead. Also, we consider Dr Wong’s adjustments for location at +15% excessive and would apply +10% instead. The average of the adjusted unit rate would become $365,485 per sq m.

212.  Based on the above revised figures, we shall follow Dr Wong’s approach in applying weighting to the adjusted results as follows:

Development	Averaged Adjusted Unit Rate (/m2)	Weighting
The Aster	$387,936	1
Broadwood Twelve	$344,533	0.5
The Leighton Hill	$398,323	1
Winfield Building	$370,286	0.5
The Attitude	$365,485	1
	Weighted Average:	$377,288
	Say:	$377,000

213.  We note that Mr Chan also relied on transactions in The Aster but they were in respect of smaller units. This was because his reference unit has a saleable area of 57.7 sq m only when his hypothetical scheme proposed 2 residential units per floor. He arrived at an average of $302,000 per sq m only[108].

214.  And because Mr Chan’s reference unit has a smaller size, he relied heavily on transactions in another development, One Jardine’s Lookout at No 1 Wang Tak Street, which started the pre-sales in September 2024. One Jardine's Lookout has 123 units in total, ranging from studio to four-bedroom flat, as well as some special units. Mr Chan arrived at an average of $267,100 per sq m[109].

215.  Obviously from the above analysis, Dr Wong’s hypothetical scheme is to be preferred as it is likely to derive the highest and best use of the Lot.

216.  As regards the duplex unit on the top floors, both Mr Chan and Dr Wong could not find any direct comparable. In such regard, we accept the approach by Dr Wong in applying +25% to the average adjusted unit rate of his reference residential unit, ie $377,000 per sq m x (1 +25%) = $471,250 per sq m.

217.  Hence, our determination of the GDV for the residential portion of the hypothetical development is as follows:

Units	Saleable Area (m2)	Reference Unit Rate (m2)	Adjustments			Adj Unit Rate (m2)	No of Units	GDV
			Floor[110]	Headroom	Total
3/F	140.98	$377,000	-5.0%	0.0%	-5.0%	$358,150	1	$50,491,987
Flat Roof on 3/F	58.75	$47,125[111]						$2,630,179
4/F-23/F (excluding 6, 11, 16 & 21/F)	140.98	$377,000	0.25%	0.0%	0.25%	$377,942.5	16	$852,518,466
6, 11, 16 & 21/F	138.41	$377,000	0.25%	0.0%	0.25%	$377,942.5	4	$209,244,363
24/F & 25/F	267.38	$471,250	5.75%	0.4%	6.17%	$500,326	1	$133,777,166
						Total:		$1,248,662,160
						Say		$1,250,000,000

GDV for Car Parking Spaces

218.  Mr Chan and Dr Wong had referred to the following transactions for the purpose of assessing the market value of a carparking space in the hypothetical development[112]:

Comparable	Date of sale	Total No of CPS in Development	Total No of Units in Development	Car Parking to Flat Ratio	Consideration
Residential Parking Space P03 on LG2/F, The Aster	21 May 24	13	106	0.123	$3,800,000
Residential Parking Space P10 on LG2/F, The Aster	19 Jul 23	13	106	0.123	$3,800,000
Residential Parking Space P07 on LG2/F, The Aster	18 Jul 23	13	106	0.123	$4,000,000
Residential Parking Space P11 on LG2/F, The Aster	19 Jun 23	13	106	0.123	$4,200,000
Car Parking Space No A164, 1/F, The Leighton Hill	26 Oct 22	544	544	1	$4,950,000
Car Parking Space No D28, 3/F, The Leighton Hill	13 Jul 21	544	544	1	$4,980,000
Car Parking Space No D13, 3/F, The Leighton Hill	27 Nov 20	544	544	1	$3,500,000
Car Parking Space No 326, 3/F, Broadwood Twelve	22 Sep 20	65	76	0.855	$4,150,000

219.  Whereas Dr Wong’s hypothetical scheme proposed a total of 24 car parking spaces to serve the 22 units, the carparking to flat ratio will be about 1.091. In view of the above transactions, we are content to adopt $3,600,000 as proposed by Dr Wong as a value of a car parking space[113].

220.  Mr Chan and Dr Wong had agreed that the value of an Accessible Parking Space is 10% higher and that of a motorcycle parking space be about 1/10. Therefore, the total GDV of the parking spaces in the hypothetical development is determined as follows:

Parking Space	Number	Unit Value	GDV
Private Car	23	$3,600,000	$82,800,000
Accessible Parking Space	1	$3,960,000	$3,960,000
Motorcycle	1	$360,000	$360,000
		Total:	$87,120,000

GDV for Shops on LG2/F

221.  According to Dr Wong’s hypothetical scheme, there will be 2 shops on LG2/F, ie at the level of Wong Nai Chung Road:

Shop	Saleable Area (m2)	Frontage (m)	Depth (m)	headroom (m)
B	58.57	4.91	14.8	4.25
A	296.75	6.64	36.2	4.25

222.  Dr Wong adopted Shop B as his reference shop unit.

223.  Firstly, Dr Wong refused to adopt the following comparable on the ground that it was sold to a person related to the existing tenant[114] and the unit price was unreasonably low:

Comp	Address	Date of Sale	Age of Building	Consideration	Saleable Area (m2)	Converted Area (m2)	Frontage (m)	Depth (m)	Headroom (m)	Unit Rate (m2)
CR1	Shop C, G/F, Evone Court, 24 Yik Yam Street	1 Aug 24	1964	$16,000,000	91.4 + Yard: 19.8	94.7	5.0	13.9	3.5	$168,955

224.  It appears that Dr Wong was correct when Mr Chan made adjustments and arrived at a low unit rate of $123,337 per sq m. Indeed, Mr Chan relied on it as one of his comparables, deriving a unit rate of $133,000 per sq m which is substantially less than his assessment for the EUV for G/F, No 59 Wong Nai Chung Road at $340,000 per sq m.

225.  Thus, we focus on the other comparables relied on by Dr Wong as follows:

Comp	Address	Date of PASP	Age of Building	Consideration	Saleable Area (m2)	Converted Area (m2)	Frontage (m)	Depth (m)	Headroom (m)	Unit Rate (m2)
CR2	Portion B of Shop B, UG/F, Kam Kwong Mansion, 36-44 King Kwong Street	24 Jun 24	1977	$15,150,000	58.5	58.5	4.6	12.8	4.9	$258,974
CR3	Shops 1-4, LG/F, Yee Fung Building, 1A Wong Nai Chung Road	14 Jun 23	1972	$63,800,000	235.7	235.7	16.5 + Return Frontage:18.7	17.5	3.5	$270,683
CR4	Shop C, G/F, Broadview Mansion, 73B Wong Nai Chung Road	21 Feb 23	1963	$14,300,000	25.5 + Lavatory: 4.4	27.7	3.7	8.6	2.9	$516,245
CR5	Shop 1, G/F, King Kwong Mansion, 8 King Kwong Street	28 Jul 22	1989	$27,400,000	57.1	57.1	4.1	14.6	4.6	$479,860
CR6	Shops 8A & 8B, G/F, King Cheung Mansion, 1-9 King Kwong Street & 2- 20 Tsap Tseung Street	3 May 22	1966	$40,800,000	53.4	53.4	7.1 + Return Frontage:7.1	7.1	3.1	$764,045
CR7	G/F & C/L, 13 King Kwong Street	9 Mar 22	1972	$38,380,000	100.0 + Yard: 7.2 + C/L 47.0	113.0	4.9	20.6	4.1	$339,646
CR8	G/F, 163 Wong Nai Chung Road	29 Jan 22	1958	$28,000,000	74.6 + Yard: 23.4	78.5	4.9	16.9	3.4	$356,688
CR9	Shop B, G/F & Flat B, M/F, King Tak House, 12 King Kwong Street	22 Jul 21	1965	$27,388,000	59.0 + Yard: 5.8 + C/L 36.6 + Toilet: 2.9	70.6	4.3	14.6	3.3	$387,932
CR10	Shop 2, G/F, Green Valley Mansion, 51 Wong Nai Chung Road	21 Dec 20	1964	$39,000,000	85.0	85.0	4.7	21.0	4.0	$458,824

* PASP denotes Provisional Agreement for Sale and Purchase.

226.  As regards the adjustment factors, Mr Chan and Dr Wong had the following agreements/ disagreements[115]:

Adjustment Factors	Mr Chan	Dr Wong
Time	RVD Private Retail Price Indices
Building Age	1% per 5 years difference	1.5% per 5 years difference
Size	1% per 10 sq m difference	1.5% per 10 sq m difference
Frontage	2% per 1 m
Return Frontage	-10% for CR3	-20% for CR3
Headroom	4% per 1 m difference

227.  Dr Wong in his Valuation and Rebuttal Report regarding RDV dated 20 December 2023 stated at para 7.33 as follow[116]:

“… shop units in brand-new buildings are considered to be better than those in old buildings in terms of quality of building services, hygiene condition, as well as the potential liability on inspection and repair works necessary on the common parts and the external walls of the building. I consider it is more reasonable to apply a more sensitive rate at 0.3% per annum based on building age difference, …”

228.  Mr Chan disagreed, stating in the 2^nd Joint Statement with Dr Wong dated 20 November 2024 as follows:[117]

“Although the business of interior design companies, furniture, and home appliances shops has deteriorated and the number vacant shop has increased sharply, there are not many alternative trades be found along the subject section of Wong Nai Chung Road due to lack of pedestrian flow. The proposed shop of hypothetical development are likely to open design companies, furniture, and home appliances shops. They will of course spend their own money refurbishing and designing the shop to showcase their designs and products to their customers, and do not have high requirements for building services.

Dr Wong did not elaborate on why the hygiene condition of the old buildings must be worse than that of the new buildings, and how this affects the value of street shops. I consider that the hygiene condition of the building is a matter of building management, not the age of the building.”

229.  We agree with Mr Chan though his acknowledgement of the deterioration of trades of the interior design companies, furniture, and home appliances shops in this section of Wong Nai Chung Road contradicts his positive location adjustments to comparables in King Kwong Street, for instance.

230.  We may test the justification of 1.5% per 5 years difference proposed by Dr Wong by looking at his actual adjustments. For Comparable CR1, he applied an adjustment of 12% which is equivalent to $15,150,000 x 14.1% = $2,136,150 which appears excessive. Similar phenomenon is found if we repeat such a checking exercise:

Comp	Consideration	Building Age Adjustment	Absolute Value of Adjustment
CR2	$15,150,000	14.1%	$2,136,150
CR3	$63,800,000	15.6%	$9,952,800
CR4	$14,300,000	18.3%	$2,616,900
CR5	$27,400,000	10.5%	$2,877,000
CR6	$40,800,000	17.4%	$7,099,200
CR7	$38,380,000	15.6%	$5,987,280
CR8	$28,000,000	19.8%	$5,544,000
CR9	$27,388,000	17.7%	$4,847,676
CR10	$39,000,000	18.0%	$7,020,000

231.  On the other hand, we tend to agree to Dr Wong’s proposed adjustment for size when for instance, there is significant difference in size between his reference unit and Comparable CR2.

Portion B of Shop B, UG/F, Kam Kwong Mansion (CR2)

232.  Comparable CR2 is occupied by a 7-Eleven convenience store on King Kwong Road. As in the case of assessing the EUV of the shop premises, we are going to apply -20% for location.

233.  As regards layout, Mr Chan had the following comment which we agree:

“I consider Dr Wong’s layout adjustments to the comparables are inadequate. Dr Wong’s reference unit is an elongated shop with a frontag of 4.91 m and a depth of 14.8 m. In comparison, the frontage of the Comparable CR2 is slightly shorter than that of his reference unit, but the depth of his reference unit is much longer than that of the Comparable CR2 for approximately 15.6%. Dr Wong’s -2% layout adjustment to Comparable CR2 is inadequate to reflect the layout difference between his reference unit and Comparable CR2.”

234.  We are prepared to apply an adjustment for layout at -5% instead.

Shops 1-4, LG/F, Yee Fung Building (CR3)

235.  The comparable comprises a capsule-shape shop with its curved or ellipse frontage around the junction of Wong Nai Chung and Shan Kwong Road. It is occupied as a restaurant, Milk Café. To a certain extent, its position is the entrance to Happy Valley and it lies close to Hong Kong Sanatorium & Hospital, benefiting from the passing pedestrian flow. We prefer a location adjustment at -15%.

236.  In respect of layout, Dr Wong commented as follows:

“CR3 has a curved layout which is less efficient when compared to a shop with regular layout. Headroom of about 1/3 of the shop is affected by the lift pit and entrance to Ground Floor which limits the use of the relevant area.”

237.  Again, Mr Chan disagreed:

“Given that the Comparable CR3 has a large saleable area of 235.7 sq m, the curved layout will not place a significant issue on the layout and could be neglected. Furthermore, Dr Wong overstated that 1/3 of the shop was affected by lower headroom. According to the Lower Ground Floor Plan, Section A-A and Section B-B of the Approved General Building Plans, only the lift pit area is affected by the lower headroom with approximately 6.3 sq m (approximately 2.7% of the saleable area). The limitation on the use of the lift pit area would not be obvious and could be neglected.”

238.  We agree with Mr Chan and in view of the comparable’s regular shape, prefer a layout adjustment of +5% instead.

239.  This comparable has a return or secondary frontage on Shan Kwong Road which is a relatively quiet street. We agree with Dr Wong’s adjustment of -5%.

Shop C, G/F, Broadview Mansion (CR4)

240.  We have already made use of this comparable in the determination of the EUV of the shop premise of the Building. However, the transaction in February 2023 was dated more than 2 years ago. This comparable is extremely small in size when compared with the reference shop unit adopted by Dr Wong. However, we are prepared to include it for analysis because this comparable is situated in close proximity to the reference shop unit. Again, the layout adjustment applied by Dr Wong at -5% is grossly inadequate. We prefer -20%, just de bene esse.

241.  The other comparables relied on by Dr Wong were all dated more than two years from the current date. We would not regard them as good comparables. Thus, subject to what has been discussed above, we present our analysis as follows: