DEACON Te-KEN CHIU v. RONALD LI-KAI CHU AND OTHERS

HCMP1071/1990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.1071 OF 1990

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J U D G M E N T

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1. The petitioner applied for another surveyor to be appointed to assess the market value of the property in question.  Mr Nelson Miu, counsel for the respondents, opposed this application.  He submitted that the Report of the surveyor appointed pursuant to the settlement between the parties should be final.  He cited a number of authorities in support.

2. However, this case is different from the usual case when the agreement was silent as to whether the valuer’s report is final and binding on the parties.

3. On the contrary, the Schedule to the Tomlin order had provided a mechanism of objection, and it is therefore open to the applicant to make use of that mechanism and raise the objection.  Failing any agreement he could apply to court according to the terms of the agreement.  Therefore, this court has jurisdiction to decide whether there should be a new surveyor to be appointed.

4. The respondents, on their second front, have submitted to this court that the new valuer should restrict itself to the Hope Value of the property.  However, I accept counsel for the petitioner, Mr Paul Lam’s submission that the criticism of Mr Lynch is reasonable and fair.  I take one example, and that is paragraph 12.9 of page 9 in “Opinion Given By Mr Simon Lynch”.  He said :

“Paragraph 5.8 of the LCH report establishes from the income generated from the property over the years, a rental value of 300,000 per annum.  No analysis is provided to show these workings.  But it is apparent from the commentary that it has been arrived at from the actual cinemas cashflow.  However, these are negative and it is therefore impossible to establish a positive rent from this data.  I would therefore be interested to understand how this value is arrived at and supported.”

Paragraph 12.10 :

“Whilst the assumed rental value has been cross-checked with the rateable value, I will not recommend that this be done.  This is because, for such premises, it is not uncommon for these assessments to be incorrect.”

Then, paragraph 12.11 :

“At paragraph 5.9, ‘a market yield of 9.9% is’ adopted to capitalise the rental value to the properties capital value.  This appears to be based on Flatted Factory/Godown Yields which is wholly different property asset class, having its own risk and   growth factors than cinemas.  It is not appropriate at all to use the industrial yields in a valuation of this nature.”

I do not think I need to read any further; paragraphs 12.12 and 12.13 are also relevant.  They are the other criticism of the LCH reports.

5. I also accept Mr Lam’s second submission and that is the comparable method could be used with adjustments.  Adjustment has been made by DTZ.  Whilst Mr Lam was not submitting to this court to accept DTZ’s method and the conclusion, he submitted that it has not been demonstrated why this adjustment would be at fault.

6. I do agree that the LCH report has totally ignored the redevelopment value; although, because of the restriction, it is difficult to assess the redevelopment value.  But Hope Value is a reality which most surveyors adopted and, usually, it is between 10 to 20 per cent.  LCH, apparently after the last hearing, they had adopted the lower figure of 10 per cent and added to it.  I think, all in all, I agree with Mr Lam that it is not appropriate to accept LCH’s report partially and ask another valuer to develop from the figure of three million and just give an opinion of the Hope Value.

7. For the aforesaid reason, I do not accept that three million is an acceptable figure, even with their further explanation in the further report.  I therefore accede to the request of the petitioner and order in terms of the application with costs to the petitioner.  Liberty to apply by either party.