SUCCESS BRAVO LTD v. THE CHINA HONG NIN LIFE INSURANCE COMPANY LTD AND OTHERS

LDCS 19000/2022

[2026] HKLdT 14

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 19000 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.  The Applicant commenced the present application on 5 September 2022 for an order for sale (“Application”) under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 the (“Ordinance”). The subject lot is the Remaining Portion of Section H of Inland Lot No 1460 (“Lot”) which has a total of 125 equal and undivided shares and a building erected thereon known as Bonny View House, Nos 63 & 65 Wong Nai Chung Road, Hong Kong (“Building”). The Lot is held under a Government Lease, which is virtually unrestricted for a term of 999 years commencing on 13 December 1897.

2.  The Building is a 13-storey (including a basement and a mezzanine floor) composite building fronting Wong Nai Chung Road on its western side and facing Ventris Road on its eastern side, served by 2 lifts and 2 common staircases, and governed by the Deed of Mutual Covenant dated 15 November 1971 (“DMC”). The Building was over 51 years old at the time when the proceedings herein commenced.[1]

3.  Occupation Permit No H 135/71 (“OP”) was issued for the Building on 21 July 1971 granting permission to occupy the Building for the following purposes:-

Floor	Use
Basement	Store for non-domestic use
Ground Floor	2 shops and 1 store for non-domestic use
Mezzanine Floor	4 shops for non-domestic use
1st to 10th Floors	4 European type flats per floor for domestic use

4.  According to the approved building plans in 1971 (“Approved Building Plans”) and on-site inspection, there are existing unauthorised building works (“UBW”) in the Building.

5.  From the Land Registry’s records, the undivided shares of the Lot have attached and are allotted as follows:-

Floor	Unit A Undivided Shares	Unit B Undivided Shares	Unit C Undivided Shares	Unit D Undivided Shares	Total
1st to 10th	3	3	2	2	100
Mezzanine	3	3	2	2	10
Ground	4	4	3	-	11
Basement	4				4
Total Undivided Shares					125

6.  The Applicant owns all the Units and the undivided shares save those owned by the following remaining 7 Respondents in these proceedings (Units together with their respective undivided shares):-

Respondents		Units (Undivided Shares)
1st Respondent	(“R1”)	Shop C on Mezzanine Floor (2/125)
2nd & 3rd Respondent	(“R2” & “R3”)	Flat B on 1st Floor & Flat Roof as tenants in common (3/125)
4th Respondent	(“R4”)	Flat A on 4th Floor (3/125)
5th Respondent	(“R5”)	Flat D on 4th Floor (2/125)
6th Respondent	(“R6”)	Flat A on 5th Floor (3/125)
8th Respondent	(“R8”)	Flat A on 10th Floor & Flat Roof (3/125)

7.  Thus, the Applicant owns a total of 109/125 undivided shares of the Lot. The Applicant is represented by Mr Mok Yeuk Chi.

8.  R1 to R5 are represented by Mr Adrian But and Ms Prisca Cheung. R6 is represented by Mr K S Chan, while R8 is represented by Mr Kin Lau.

EVIDENCE

9.  The parties filed factual witness statements that were admitted by agreement without calling the witnesses and without prejudice to any challenge by way of submissions.

Expert evidence

10.  The Applicant has appointed a building surveyor Mr Benson Wong Sai Ning (“Mr Benson Wong”) of Benson Wong & Associates Limited as its building condition expert and a structural engineer Mr Wong Chi Ming (“Mr C M Wong”) of C M Wong & Associates Limited as its structural assessment expert, as well as Mr Charles Chan (“Mr Charles Chan”) of Savills Valuation and Professional Services Limited (“Savills”) as its valuation expert.

11.  The Applicant’s expert evidence is based on the following Reports (1) to (10):-

(1) Mr C M Wong’s Structural Assessment Report dated 12 July 2023;

(2) Mr C M Wong’s Rebuttal Structural Assessment Report dated 9 January 2024;

(3) Mr C M Wong’s Supplemental Rebuttal Structural Assessment Report dated 2 February 2024;

(4) Mr Benson Wong’s Condition Survey Report dated 14 July 2023;

(5) Mr Benson Wong’s 1^st Rebuttal Condition Survey Report dated 10 January 2024;

(6) Mr Benson Wong’s 2^nd Rebuttal Condition Survey Report dated 16 February 2024;

(7) Mr Charles Chan’s Valuation Report dated 1 September 2022;

(8) Mr Charles Chan’s 1^st Supplemental Valuation Report dated 13 July 2023;

(9) Mr Charles Chan’s Rebuttal Report dated 28 December 2023; and

(10) Mr Charles Chan’s 2^nd Supplemental Valuation Report dated 6 January 2025.

12.  R1 to R5 have appointed a building surveyor Mr Raymond Yuk Ming Chan (“Mr Raymond Chan”) of Raymond Chan Surveyors Limited as their building condition expert and Dr Sammy Chan (“Dr Chan”) from Wong & Cheng Consulting Engineers Limited as their structural assessment expert. All Respondents have appointed Mr Paul Man Hong Li (“Mr Li”) of Man Hong Surveyors and Property Consultants Limited as their valuation expert.

13.  The Respondents’ expert evidence is based on the following Reports (11) to (16):-

(11) Dr Chan’s Structural Assessment Report dated 29 November 2023;

(12) Dr Chan’s Rebuttal Structural Assessment Report dated 9 January 2024;

(13) Mr Raymond Chan’s Condition Survey Report dated 11 December 2023

(14) Mr Raymond Chan’s Rebuttal Condition Survey Report dated 17 January 2024;

(15) Mr Li’s Valuation Report dated 27 November 2023; and

(16) Mr Li’s Updated Valuation Report dated 6 January 2025.

14.  Mr C M Wong and Dr Chan prepared their Joint Statement dated 25 March 2024 on issues in agreement and disagreement regarding Structural Assessment Experts.

15.  Mr Benson Wong and Mr Raymond Chan prepared their Joint Statement dated 11 March 2024 on issues in agreement and disagreement regarding Condition Survey Experts.

16.  Mr Charles Chan and Mr Li prepared their Joint Statements on Issues in agreement and disagreement dated 29 January 2024 (the “1^st Joint Statement of the Valuation Experts”) and 27 January 2025 (the “2^nd Joint Statement of the Valuation Experts”) regarding the market value and updated Redevelopment Value (the “RDV”) respectively, as well as the updated Consolidated Summary Tables.

17.  At the trial, the Applicant called Mr C M Wong, Mr Benson Wong and Mr Charles Chan as their expert witnesses. R1 to R5 called Dr Chan, Mr Raymond Chan and Mr Li as their expert witnesses.

18.  The parties produced various additional documents at trail marked as Exhibits “A1” to “A6” and “R1” to “R12”.

19.  The Tribunal has also had the benefit of a joint site inspection. All relevant parties attended the site inspection, including of comparables, on 25 February 2025.

ISSUES FOR DETERMINATION BY THE TRIBUNAL

20.  The issues to be decided are agreed by the parties as follows:-

(1) Whether the Applicant has fulfilled the prerequisites as set out in section 3(1) of the Ordinance and are entitled to make the Application? (“Issue 1”)

(2) What was the respective market value of each property on the Lot as at 13 June 2022 as assessed in accordance with sections 3(1)(a), section 4(1)(a)(i) and Part 1 of Schedule 1 of the Ordinance? (“Issue 2”)

(3) Whether the redevelopment of the Lot is justified due to the age or state of repair of the Building in accordance with section 4(2)(a)(i) of the Ordinance? (“Issue 3”)

(4) Whether the Applicant has taken reasonable steps to acquire all the undivided shares in the Lot on terms that are fair and reasonable in accordance with section 4(2)(b) of the Ordinance? (“Issue 4”)

(5) If an order for sale is granted, what should be the reserve price for the purpose of public auction? (“Issue 5”)

ISSUE 1 – PREREQUISITES FOR AN APPLICATION

Ownership of the Applicant

21.  At the time of the filing of the Notice of Application on 5 September 2022, the Applicant owned 87.2% (ie 109/125) of the undivided shares in the Lot and the Respondents owned the remaining 12.8% (ie 16/125) of the undivided shares.

22.  Section 3(1) of the Ordinance stipulates that the minimum percentage of undivided shares that an applicant or applicants should possess before making an application under the Ordinance is 90%.

23.  However, section 3(5) of the Ordinance provides that the Chief Executive in Council may, by notice in the Gazette, specify a lower percentage in respect of a lot belonging to a class of lots specified in that notice.

24.  The Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice (the “Notice”), which was issued pursuant to section 3(5) of the Ordinance and was gazetted on 22 January 2010, came into operation on 1 April 2010. Section 3 of the Notice lowered the threshold for compulsory sale of specified classes of lots from 90% to 80%. Those classes of lots include “a lot with each of the buildings erected on the lot issued with an occupation permit at least 50 years before the relevant date”.

25.  Since the OP was issued on 21 July 1971, which is more than 50 years before the date of the Application on 5 September 2022 (ie the relevant date), the applicable percentage is 80%. As the Applicant owned 87.2% of the undivided shares in the Lot at the time of making the Application, the requirement has been satisfied.

Valuation Report

26.  Section 3(1)(a) and Part 1 of Schedule 1 of the Ordinance stipulates that an application should be accompanied by a valuation report, prepared not earlier than 3 months before the date on which the application is made. In these proceedings, the accompanying valuation report was dated 1 September 2022, which is not earlier than 3 months before the Application. Thus, the Applicant has complied with the requirement in respect of an accompanying valuation report.

Entitlement

27.  Since the Applicant has fulfilled these prerequisites, we are satisfied that the Applicant is entitled to make the Application under section 3(1) of the Ordinance. Issue 1 is answered in the affirmative.

ISSUE 2 – DETERMINATION OF THE MARKET VALUE OF EACH PROPERTY

28.  According to section 4(1)(a)(i) of the Ordinance, if there is a dispute between the parties on the value of any property as assessed in the application, the Tribunal shall determine the dispute.

29.  Section 4(1)(a)(ii) of the Ordinance further provides that:-

“in the case of any minority owner of the lot who cannot be found, requiring the majority owner of the lot to satisfy the Tribunal that the value of the minority owner’s property as assessed in the application is: -

(A) not less than fair and reasonable; and

(B) not less than fair and reasonable when compared with the value of the majority owner’s property as assessed in the application.”

30.  There are disputes between the two valuation experts on the valuation of the market value of the domestic units of the Building and RDV of the Lot that we must determine.

Market Value of Non-domestic Units

31.  The valuation experts have no dispute on the market value of Non-Domestic Units of the Building. The joint view is accepted by the Tribunal and the market value is as follows[2]:-

Non-domestic Units	Market Value
Shop A on Ground Floor and Shop A on Mezzanine Floor	$47,870,000
Basement and Shop B on Ground Floor	$55,740,000
Store “C” on Ground Floor and Shop D on Mezzanine Floor	$13,330,000
Shop B on Mezzanine Floor	$13,180,000
Shop C on Mezzanine Floor	$5,430,000
Total	$135,550,000

Market Value of Domestic Units

Property Particulars of Domestic Units

32.  There is no dispute regarding the property particulars including the saleable area and ancillary area of domestic units. There are 4 domestic units on each floor of the domestic portion of the Building. Units A and B are facing Wong Nai Chung Road having view towards the Racecourse, while Units C and D are overlooking Ventris Road. The valuation experts however have disputes regarding the conversion factor of ancillary area, UBW and the internal conditions of some units for assessment of the market value.

Conversion Factor of Ancillary Area of Domestic Units

33.  There is no dispute as regards the basic conversion factor of ancillary area without UBW. As regards the unauthorised structure on and over the Roof of Unit 10A, being subject to an outstanding Building Order under section 24(1) of the Buildings Ordinance Cap 123, both valuation experts have agreed that the structure should be demolished and reinstatement cost of the affected roof area is $100,000.

34.  The valuation experts however have fundamental disputes on the conversion factor of ancillary area with UBW. The major disagreement is whether the likely enhancement value of UBW of the Building should be taken into account or not in the assessment of the market value. The UBW in question include (a) UBW-a: Covered Flat Roof of Unit 1A; (b) UBW-b: Enclosed Top Roof of Unit 10C; (c) UBW-c: Covered Light Well from 1^st to 10^th Floor; (d) UBW-d: Encroachment of Common Corridor on 4^th , 6^th , 7^th and 10^th Floor; and (e) UBW-e: Extension of Open Flat Roof of Unit 1C.

35.  Mr Charles Chan holds the view that in market reality, additional value of these UBW attributed to the units concerned should be taken into account. Accordingly a higher conversion factor has been applied for the respective ancillary area covered by UBW-a, UBW-b, UBW-c, UBW-d and UBW-e.

36.  Mr Li holds the view that consideration should be given to the legal implications and potential risks of facing enforcement action associated with these UBW. He gives no additional value to all of these UBW. He also referred to a Circular Letter from Buildings Department (“BD”) dated 6 November 2023, which was issued after a number of landslide incidents arising from the then recent rainstorm and had revealed blatant contravention of the Buildings Ordinance involving UBW. The Tribunal does not find this Circular advances the argument or applicable as it was to reiterate and reinforce awareness of the public as well as practitioners of the building industry on compliance with and consequences of contravention of the Buildings Ordinance concerning erection of UBW, and there was no amendment to the existing statutory enforcement power. Further, the Circular was issued after the relevant date of valuation (ie 13 June 2022) of the present market value assessment exercise[3].

37.  Market value is a well-established concept. It refers to a value at which a willing seller is prepared to sell and a willing buyer is prepared to purchase in an arm’s-length transaction when they are acting knowledgeably, prudently and without compulsion. On top of that, there are guiding principles in valuation, such as the principle of “the highest and best use” and the principle of “the market reality” that are material.

38.  From the valuation perspective, the principle of “the highest and best use” dictates the market value. In determining the highest and best use of a property, and when UBW like those in the present Application are involved, suitable assumptions and adjustments have to be considered before the market value can be derived.

39.  To conform with “the market reality”, the general principles in considering whether UBW have to be taken into account when assessing the market value of the property can be summarised as follows:-

(a) If UBW are under active legal enforcement action of BD or lease enforcement action of Lands Department, any enhancement in value resulting from the unauthorised conversion work would be disregarded and valuation of the property on the Reinstatement Approach is applicable. The unauthorised structure on and over the roof of Unit 10A of the Building is subject to an outstanding Building Order under section 24(1) of Cap 123 and is therefore within this category. Both valuation experts have agreed to give no additional value for such UBW and to deduct a reinstatement cost of $100,000 to arrive at the market value of the subject unit. The Tribunal accepts that is appropriate. (b) If UBW have no significant effect on the market value of the property, like a flat with 3 bedrooms having been converted to 2 bedrooms, it is not necessary to argue the valuation approach and no additional value is to be given. The Tribunal considers that as regards UBW-e, the Extension of Open Flat Roof of Unit 1C has an insignificant enhancement in value and is within this category, no addition value is given. (c) For cases consisting UBW, in a reasonable maintenance condition and causing no potential obstruction to means of fire escape, which result in enhancement of value, according to market reality, it may be necessary to apply a discount to the enhanced value assessment in order to reflect the lack of full certainty of the continuality of the conversion work. The Tribunal accepts the view of Mr Charles Chan that UBW-a, UBW-b, UBW-c and UBW-d fall within this category. The Tribunal considers that the conversion factor of “1/2”, as suggested by Mr Charles Chan for UBW-a, UBW-c and UBW-d is reasonable. We however do not accept the suggested conversion factor of “1/3” for UBW-b, as the respective conversion work is not in proper maintenance condition. The conversion factor for UBW-b as determined by the Tribunal is “1/4”.

40.  To conclude, the applicable conversion factor of ancillary area found by the Tribunal is summarised below[4]:

Conversion Factor of Ancillary Area in arriving at the Converted Floor Area	Mr Charles Chan	Mr Li	Lands Tribunal
Open Flat Roof of Unit 1A and Unit 1B	1/6
Open Flat Roof of Unit 1C and Unit 1D	1/8
Top Roof	1/8
Roof Top Structure of Unit 10A subject to Building Order	0
UBW-a: Covered Flat Roof of Unit 1A	1/2	0	1/2
UBW-b: Enclosed Top Roof of Unit 10C	1/3	0	1/4
UBW-c: Covered Light Well from 1st to 10th Floor	1/2	0	1/2
UBW-d: Encroachment of Common Corridor	1/2	0	1/2
UBW-e: Extension of Open Flat Roof of Unit 1C	1/16	0	0

41.  Details of the property particulars and respective converted area of Domestic Units are provided in Appendix I[5].

Internal Condition of Domestic Units

42.  There is no dispute on the Grade to reflect the Standard of Internal Condition applicable, which is summarised as follows[6]:

Grade	Standard of Condition
Good	The condition is above tenantable standard with no obvious defects noted.
Fair	The condition is up to tenantable standard with no obvious defects noted, although some minor defects might be noted.
Poor	The condition is below tenantable standard with some minor defects noted. The minor defects noted could be more and/or the extent of the defects noted could be relatively more serious.
Very Poor	The condition is substantially below tenantable standard with obvious defects noted. The defects noted are more and/or the extent of the defects are serious.
Unacceptable	The condition is unacceptably below tenantable standard. Extensive and serious defects are noted.

43.  Mr Charles Chan and Mr Li however have failed to agree on the internal conditions of 10 Units. Having reviewed the provided photographs and carried out our joint site inspection, the decision of the Tribunal on internal condition is as below:

Property	Mr Charles Chan	Mr Li	Lands Tribunal
Unit 1B	Fair	Good	Good
Unit 2D	Fair	Good	Good
Unit 4A	Fair	Good	Good
Unit 4C	Poor	Fair	Fair
Unit 4D	Poor	Good	Fair
Unit 5B	Fair	Good	Good
Unit 5D	Fair	Good	Good
Unit 8C	Fair	Poor	Fair
Unit 10B & Roof	Fair	Good	Good
Unit 10D & Roof	Poor	Fair	Fair

44.  Internal conditions of the various Domestic Units are summarised at Table 2 of Appendix II. To conclude, among a total of 45 Units in the Building, the determined grading of various units in percentage under “Good”, “Fair” and “Poor” is “18%”, “55%” and “27% respectively. Thus, the overall internal condition of the Building on average is considered by the Tribunal to be “Fair”.

Reference Domestic Unit

45.  Mr Charles Chan and Mr Li have agreed to adopt Unit 5A as the Reference Domestic Unit. The Unit has a saleable area of 64 sq m with a panoramic view over the Racecourse and no UBW identified.

Transactions selected for Direct Comparison

46.  The direct comparison method of valuation is based on comparing the property to be valued with similar properties and the considerations achieved for them and allowing for differences between them to determine the market value. Thus, as a matter of valuation practice, transactions requiring large scale or many adjustments should be avoided as far as possible. The better practice is in fact whenever sufficient useful comparables are available, transactions requiring many adjustments should be rejected for direct comparison.

47.  Both valuation experts have identified a total of 15 transactions, namely D1 to D15, for consideration. All of these transactions have met the general selection criteria including the location, date of transaction, age or use of premises for direct comparison. The experts however have disagreement on the selection of some of these transactions applicable for direct comparison for the reason that some specific selection criteria cannot be met by these transactions. The said specific selection factors include (a) some of the properties have outstanding building orders, (b) one of the property’s development enjoys car parking facilities, and (c) some of the properties lack a of view over the Racecourse.

48.  Mr Charles Chan does not agree to adopt D2, D4 and D15 for direct comparison. The main reason is that the properties are subject to building orders and, as both valuation experts can make no internal inspection, it is difficult to assess the value implication of the respective UBW towards the transaction price. The Tribunal accepts this and excludes them, bearing in mind that there are sufficient useful comparables available for the exercise.

49.  Mr Charles Chan has also rejected D6 for direct comparison as the transaction included a car parking space which the Building does not have. The Tribunal shall exclude D6, bearing in mind the price of residential units in buildings with parking facilities is generally higher than that of the units in buildings without parking facilities particularly for developments in the locality. Besides, there are sufficient useful comparables available for the exercise.

50.  Mr Li does not agree to adopt D1, D7, D9, D11, D12 and D14 for direct comparison. He considers that as the Reference Domestic Unit has a panoramic view over the Racecourse, only properties with a similar view should be selected for direct comparison. The Tribunal accepts this point, in particular as there are sufficient useful comparables for the exercise.

51.  Accordingly, only 5 transactions that are jointly agreed by both parties including D3, D5, D8, D10 and D13 are selected for direct comparison.

Adjustments of Domestic Comparables

52.  The valuation experts agree on the adjustment of factors for “Time”, “Size”, “Building Age” and “Floor Level”. The Tribunal accepts the magnitude of adjustments for these factors.

53.  Mr Charles Chan raises that while the Reference Domestic Unit enjoys direct view over the Racecourse, D3, D5, D8 and D10 are properties enjoying additional side or corner view over the Happy Valley district and should be assigned with extra market value. He has also conducted paired analysis based on past transactions to support his argument and accordingly adopts a downward “-5%” to “-15%” adjustment for the Reference Domestic Unit to reflect its lack of additional side view. Mr Li however does not allow any adjustment for the said additional side view for the main reason that the view of the respective properties as a whole has virtually no difference. The Tribunal considers that the point of Mr Charles Chan is reasonable and his approach is adopted.

54.  Mr Charles Chan applies a further adjustment factor for “Lighting & Ventilation”. Mr Li does not agree to applying this adjustment for the main reason that lighting and ventilation are baseline requirements that are expected to have been reasonably fulfilled in most properties. The Tribunal considers that given the “View” factor has been imposed for the subject valuation exercise, the general impression of the environmental factors between the Reference Domestic Unit and the Comparables is relatively immaterial. We are conscious that the adjustments for “Lighting and Ventilation” may have double-counting and, like Mr Li, we reject this adjustment.

55.  Adjustments of Comparables for the Reference Domestic Unit are summarised as below:

Adjustment	Mr Charles Chan	Mr Li	Lands Tribunal
Time	RVD Private Domestic Indices by (Classes A, B &C)
Size	1% per 10 sq m difference on Converted Area
Building Age	1% per 4 years difference
Floor Level	0.5% per floor difference, based on actual floor level
Side View	“-5%” to “-15%”	“0%”	“-5%” to “-15%”
Lighting & Ventilation	“0” to “5%”	“0%”	“0%”

56.  Mr Charles Chan and Mr Li had suggested an adopted unit rate for the Reference Domestic Unit of $213,000 / sq m and $244,000 / sq m respectively. The Tribunal having considered the prevailing market determines that the Reference Unit Rate is $220,000 / sq m and the assessment is in Table I of Appendix II.

Adjustments of Market Value Assessment of Domestic Units

57.  To assess the market value of the respective Units, there is no dispute between the valuation experts on the adjustment factor for “Floor Level” by applying “0.5% per actual floor level difference”. The adjustment factor for “Internal Condition” by applying “Good for +3% / Fair for 0% / Poor for -3%” is also agreed by the parties. We accept this approach.

58.  Mr Charles Chan has adopted an adjustment factor for “Top Floor Shortcomings” by applying “-3%”. Mr Li does not accept this adjustment. He argues that an old building must be subject to natural aging and envisages that the Building must be scrutinised by proper management and maintenance schemes. The Tribunal considers that although the assumption of Mr Li may not be correct for all cases, it is applicable for the Building, which is situated in a medium to high-end residential area. The Tribunal accepts the suggestion that the adjustment factor of “Top Floor Shortcomings” is not applicable here.

59.  Mr Charles Chan again has made a further adjustment for a “Lighting & Ventilation” factor but Mr Li. does not accept this. The Tribunal shares the view of Mr Li on the ground that lighting and ventilation are baseline requirements that are expected to be reasonably fulfilled in most properties.

60.  Mr Charles Chan has applied an adjustment factor for “Size” and “View” separately. Mr Li has applied a combined adjustment factor for “Size and View” instead, as he considers that the Building has just two typical classes of properties comprising “large units with Racecourse view” and “small units without Racecourse view”, and hence a combined factor is applicable. The Tribunal however finds the approach of Mr Charles Chan relatively more direct and is adopted.

61.  The Tribunal accepts the adjustment for “Size” as suggested by Mr Charles Chan of applying “1% per 10 sq m difference on Converted Area”.

62.  As regards the adjustment for the “View” factor between “Units A & B” and “Units C & D”, the major adjustment comes from Units of the Building facing Wong Nai Chung Road “i.e. Units A & B” have view over the Racecourse, while Units of the Building facing Ventris Road “i.e. Units C & D” have view over the pavement and nearby developments. Mr Charles Chan has applied a range of discount from “-15% to -30%” to reflect the lack of Racecourse view. An analysis of the combined adjustment factor as proposed by Mr Li reveals that the range of discount to reflect the lack of Racecourse view is from about “-10% to -18%” instead. The Tribunal having examined the evidence provided by the valuation experts considers that the range of discount as suggested by Mr Chan is excessive for some Units, and that a range of “-15% to -25%” should be applied as below:

Floor	Mr Charles Chan	Lands Tribunal
1st Floor	An adjustment of “-30%” for “Units C & D”	An adjustment of “-25%” for “Units C & D”
2nd to 3rd Floor	An adjustment of “-25%” for “Units C & D”	An adjustment of “-20%” for “Units C & D”
4th to 6th Floor	An adjustment of “-20%” for “Units C & D”	An adjustment of “-15%” for “Units C & D”
7th to 10th Floor	An adjustment of “-15%” for “Units C & D”

63.  For the “View” factor to differentiate its relative openness between “Units A” and “Unit B”, Mr Li has applied a “-5%” difference to reflect “Unit B” has a relatively inferior view to “Unit A”. Mr Charles Chan has applied a similar approach of “0 to -5%” with less discount given for “Unit B” on the lower floors. The Tribunal considers that the approach of Mr Li is reasonable and a general “-5%” is applied for “Unit B” on each floor.

64.  Apart from the above, the Tribunal is satisfied that no further adjustment is required as far as the “View” factor is concerned.

Market Value of Domestic Units

65.  The Tribunal considers the total Market Value of Domestic Units is $428,660,000 and the assessment is in Table 2 of Appendix II.

Total Market Value of all Properties in the Building

66.  Market Values of all properties in the Building as at the relevant valuation date 13 June 2022 as assessed by Mr Charles Chan and Mr Li are $536,840,000 and $605,930,000 respectively. The Market Values as assessed by the Tribunal are appended below:-

	Market Value
Shop A on Ground Floor & Shop A on Mezzanine Floor	$47,870,000
Basement & Shop B on Ground Floor	$55,740,000
Store “C” on Ground Floor & Shop D on Mezzanine Floor	$13,330,000
Shop B on Mezzanine Floor	$13,180,000
Shop C on Mezzanine Floor	$5,430,000
Sub-total of Non-domestic Units	$135,550,000
Sub-total of Domestic Units	$428,660,000
Total	$564,210,000

ISSUE 3 –AGE AND STATE OF REPAIR

67.  Section 4(2) of the Ordinance provides that: -

“The Tribunal shall not make an order for sale unless, after hearing the objections, if any, of the minority owners of the lot the subject of the application under section 3(1) concerned, the Tribunal is satisfied that —

(a) the redevelopment of the lot is justified (and whether or not the majority owner proposes to or is capable of undertaking the redevelopment) —

(i) due to the age or state of repair of the existing development on the lot; or

(ii) on 1 or more grounds, if any, specified in regulations made under section 12; and

(b) the majority owner has taken reasonable steps to acquire all the undivided shares in the lot (including, in the case of a minority owner whose whereabouts are known, negotiating for the purchase of such of those shares as are owned by that minority owner on terms that are fair and reasonable).”

68.  Thus, the Applicant has to satisfy the Tribunal that the redevelopment of the Lot is justified due to the age or state of repair of the Building (section 4(2)(a)(i)); and that the Applicant has taken reasonable steps to acquire the respondents’ undivided shares in the Lot (section 4(2)(b)). Otherwise, the Tribunal shall not make an order for sale.

General Approach

69.  Intelligent House Limited v Chan Tung Shing & Others [2008] 4 HKC 421 construed section 4(2)(a) of the Ordinance and laid down useful guidelines for the Tribunal’s determination of the statutory requirements. The Tribunal accepted the submissions of Mr Roots leading Mr Mok on the proper construction of the Ordinance in determining the requirements under section 4(2)(a)(i) at paragraph 145-146 and 147-151. Materially, at §145:

“145. However, Mr Roots submits that, on a proper construction of the Ordinance and the relevant provision, with reference to the intention and objective of the Ordinance to facilitate and assist urban renewal, in determining whether the requirements under s 4(2)(a)(i) are satisfied:

(1) The Tribunal is entitled to look at any factors or matters that are directly or indirectly related to the elements of “age” or “state of repair” of the existing building.

(2) While looking at these factors or matters to decide whether redevelopment is justified, the Tribunal is also entitled to look at any comparison made between the old/existing building and a new building or any proposed redevelopment.

(3) It is open to the Tribunal to consider and look at the obsolescence of an existing building in terms of its functional items or facilities, since this is something related (directly or indirectly) to the “age” of the building. The older a building is, the more obsolete and outdated its facilities are.

(4) Further, the Tribunal is entitled to compare these facilities of the old building with what a modern day building could correspondingly offer whether as required by the present day regulations or law, or because of the advance of technology, or because of the rising expectations of the public for proper, safe and hygienic habitation and residence.”

70.  As a general approach and in Top Sail International Limited v Cheng Kai Ming, LDCS 18000/2010 (unrep. 15 November 2011) the Tribunal held that age and state of repair were two separate grounds and even though there might be considerations common to both, the Tribunal should still consider them separately.

R1 to R5’s Refined Approach

71.  The submitted reports prepared by the structural assessment experts and condition survey experts of both parties generally follow the above general approach. However, in his Closing Submission, counsel for R1 to R5 suggested a refined approach focusing on 3 aspects including the new tests (“New Tests”), practical considerations / cautions (“Cautions”) and blight caused by the Applicant (“Blight”).

New Tests

72.  Counsel for R1 to R5 suggests the following 5 tests:

(a) Whether the living conditions and standards of maintenance of the units are similar or even better than many ordinary households;

(b) Whether the development is of such dilapidated condition that genuinely merits redevelopment which fulfils the objectives of urban renewal by replacing old and run-down areas with new buildings to achieve better utilisation of land;

(c) Whether the building can likely stand well and continue to serve its function for some days and years to come with adequate repair and maintenance;

(d) Whether the existing units are still in demand for the locality irrespective of its age; and

(e) Whether the development is of the type and condition that should be accorded with “redevelopment priority” that justifies complete pull-down and immediate redevelopment.

73.  Mr Mok argues that the New Tests contain undefined and vague concepts creating uncertainty which makes the administration of the tests by the Tribunal most difficult. Just for example on Test (b), Intelligent House rejected dilapidated condition as the test, Test (c) is contrary to the Intelligent House guidelines which stated that “130(1)(b)…whether they have naturally deteriorated due to age to the extent that they are no longer capable of performing function that they were intended to perform…”, while Test (e) would require the Tribunal enter into policy determinations regarding redevelopment priority, that are matters for the Administration.

74.  According to Intelligent House at paragraph 165(3), the Tribunal is entitled to look at all factors under “age” and “state of repair” collectively to see if that justifies redevelopment, even though, when each of them is considered alone, it is insufficient to do so. In gist, this is a comprehensive consideration approach and the goal is to make a judgment by evaluating a wide range of relevant factors under an additive and holistic process. The current jurisprudence relying mainly on the approach formulated in Intelligent House is functioning well.

75.  R1 to R5’s New Tests are an eliminating consideration approach by means of applying a reductive and sequential process. The Tribunal agrees with the view of Mr Mok that the New Tests would be difficult to administer. We consider that the New Tests lack of objective benchmark and difficulty in application do not offer useful assistance for determining this Application.

Cautions

76.  Counsel for R1 to R5 suggests 10 groups of practical considerations and cautions that the Tribunal should be aware of in determining contentious issues. The items of Cautions include (a) “design working life of a building”; (b) “experts relying on current regulatory requirements for comparison”; (c) “experts relying on statutory requirements which have no retrospective effect for application”; (d) “different components should be given different weight while safety must be balanced with utility and cost-efficiency; (e) “only defects due to natural aging should be taken into account”; (f) “absence of certain facilities like management office etc can be caused by physical constraint of the site initially”; (g) “indirect costs spent on inspection and preventive maintenance etc should be excluded”; (h) “what might happen in the future are irrelevant”; (i) “discussion on the merits and demerits of the construction cost comparison”; and (j) “tenantable standard is often an abstract and fictional benchmark and can be subjective”.

77.  Mr Mok’s overarching comment on the Cautions is that:

(a) The submissions are rather stream-of-consciousness type of discussions in the abstract, not connected to the evidence of this trail;

(b) They are not reduced into propositions / tests which would make more meaningful examination and discussion possible;

(c) They are all fact-sensitive and discussions in the abstract detached from the evidence of a particular case so would not be instructional on how the discussions could be applied to the actual facts of an individual case; and

(d) Any attempt to formulate proposition at the general direction of the 10 Cautions will be almost impossible, and leaving the discussion at the level of the submissions of them would be very unsatisfactory and counterproductive.

78.  Counsel for R1 to R5 has basically summarised and highlighted controversial items from previous rulings of the Tribunal where thorough consideration of them resulted in the given judgment. The arguments are not directly related to the evidence in this trail. Simply stating the theoretical possibility does not assist the Tribunal as each case is determined according to its facts and individual merit. The Tribunal accepts the observations of Mr Mok. R1 to R5’s submission on “Cautions” has only outlined factors that need to be considered, but lacks core reference significance that may assist to formulate a general guideline for application.

Blight

79.  Counsel for R1 to R5 makes a general submission that the majority owner may take years to reach the requisite threshold, and cause blight to the condition of the Building. Developers would typically neglect and refrain from carrying out repairs, as they expect the buildings will be demolished after unification of ownership.

80.  Mr Mok has rightly pointed out that this submission seems to be academic, as the alleged typically long acquisition period was not a concern in this Application. During the trail, Mr But confirmed that for the Blight issue he only referred to the inside portion of the private units owned by the Applicant, but not the common area of the Building. The Tribunal has to exercise due caution on this allegation. Any willful disrepair of a private unit may adversely affect its market value. This may in turn result in a discount to the Applicant’s ultimate pro-rata share of RDV of the Lot. Any attempt to create Blight is not without cost and besides, there is no guarantee that eventually an order of sale will be granted by the Tribunal. According to our site inspection and the evidence submitted, a claim that any part of the Building suffered from the Blight issue is not established. Thus, we consider that the argument of R1 to R5 in this regard is not relevant for this Application.

Structural Assessment

81.  Prior to delivering their expert opinions on the “age” and “state of repair” of the Building, both parties have prepared Structural Assessment Reports to ascertain the existing structural condition of the Building. The Joint Statement on Structural Assessment prepared by the two structural assessment experts Mr C M Wong and Dr Chan[7], addressing various structural aspects are discussed below.

UBW

82.  Both sides’ experts have identified 3 major classes of UBW including: (a) Alteration of the parapets (the railings) for some balconies; (b) Addition of slabs covering the light wells; and (c) Addition of a structure on the roof of the Building. Mr C M Wong opines that there are structural safety concerns for the said UBW as they may not have been properly designed and constructed. Dr Chan reports that during inspection of the UBW items, he found no sign of distress and that some of these UBW could be removed by Minor Work Procedures.

Visual Inspection

83.  For the 25 units that have been inspected by both parties experts, 47 defects were recorded comprising 9 spalling areas.

Open Up Inspection

84.  Based on the open-up locations, there is no dispute that all reinforcement bars are found to have rust on the surface. The agreed result is summarised as: (a) 33% of the bars have entered Grade 2-Partly Corrosion; (b) 60% of the bars have entered Grade 3-Mild Corrosion; (c) 14% of the reinforcement bars in slabs and 8% in beams have entered Grade 4-Modorate Corrosion; and (d) No reinforcement bars in columns are found to suffer from Grade 4-Modorate Corrosion.

Concrete Cover & Concrete Core Compression Test

85.  The two experts have fundamental disputes on the method of measurement and mode of test in deriving the result. This is unsatisfactory and there is room for improvement in carrying out the assessment with a view to minimising the dispute. Consideration should be given to appointing one accredited laboratory or for one mode of survey technology to be agreed, to obtain a common set of material data for further analysis of parties concerned such that more objective and helpful professional opinion could be provided.

86.  Notwithstanding the extent of disagreement on the technical aspect, the concluded results given by the two experts do not appear that far apart. Dr Chan stands by his test data showing that all the test results comply with / are higher than the designed concrete grade for slabs, beams and columns. Mr C M Wong reports that “Based on the combined result … all the concrete sample of slabs and beams satisfy the design concrete strength ... Only 1 in 12 samples in columns exhibit strength below the design requirements …”.

Carbonation

87.  The two experts again dispute the mode of laboratory carbonation test and thus there is no mutually acceptable test data. Mr C M Wong[8] based on his test data reports that “For 100% of the test samples in horizontal structural elements, and 67% of the test samples in vertical structural elements, carbonation has exceeded the actual cover to the utmost reinforcement. The protection of the passive layer on the surface of steel in these structural elements have been lost, and thus the steel reinforcements are susceptible to corrosion…the Building is already undergoing corrosion, and more significant cracking and spalling of concrete will occur in coming years if no improvement works are carried out…”.

88.  Dr Chan[9] opines that “The results of carbonation test indicate that…61% has not lost its function to protect the embedded reinforcement of the reinforced concrete members…”. In gist, he considers that most of the reinforced concrete columns are suffering from general corrosion only.

Chloride Content

89.  The parties dispute in particular the depth of samples that need to be obtained for the test. Based on the respective test result, Mr C M Wong advises that the reinforcements in the Building are susceptible to the attack of chloride ions. Dr Chan’s view is that “As high chloride content has not been detected in the building, these isolated cases of chloride content contamination would not cause rapid corrosion of reinforcement in the building structures. The defects in the building…considered acceptable for rectification by patch repair…”.

Sulphate Content

90.  There is agreement that the results indicate the sulphate content range for slab, beam and column of all tested locations are within the specified standard (not exceed 4%).

Structural Conditions

91.  Mr C M Wong is of the view that taking into account the results of the above tests, the structural elements of the Building are considered to be currently in a mediocre condition. Dr Chan opines that the Building is structurally sound and in fair condition that may need relatively mild repair works.

Conclusion on Structural Conditions

92.  While no major structural defect has been reported, the two experts give the same view that the Building has reached the age that would likely require maintenance and repair works. They have given a cost estimate, which will be discussed below together with all other repair cost items as a whole.

Age

93.  In Top Sail at paragraphs 23-24 the Tribunal stated:

“23. ……, we are of the view that when the requirement of “the age” of the Buildings is considered, we should not restrict our consideration to just the physical age of the Buildings.…… we are of the view that the absence of a specific physical age in the Ordinance indicates that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question.”

24. The physical age of a building is clearly one of the considerations…... The physical conditions of a building and the amount that would be required to maintain the building are other factors that the Tribunal should consider, as they would affect the decision on whether the life of a building should be ended or prolonged. The obsolete design of a building should also be considered as it has an important impact on whether it is too old to serve a modern society.”

94.  In Charmlink Limited v Lee Tong Hing & Others, LDCS 16000/2010 (unrep. 29 November 2011) at paragraphs 30-31, the Tribunal stated:

“30. We are of the view that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question. The relevant factors in the present case are that the Building is over 50 years old and it has passed its designed life. It is also obsolescent in design and not economical to maintain. All these factors point to the fact that the Building has come to an end of its physical as well as economical life. Thus, we find that redevelopment is justified on the ground of the age of the Building.

31. …It is also within the Tribunal’s discretion to determine in what conditions a building should be redeveloped after considering all the relevant factors concerning the state of repair of the building in question. With the clear evidence from the two experts that the Building is in a poor state of repair and in fact tenantable without substantial repair works to be carried out over a long period of time, we have no hesitation in finding that redevelopment is justified by the state of repair of the Building.”

95.  The two building condition experts have no dispute that the Building is now over 52 years old[10]. Mr Benson Wong observes that it is the oldest building in the immediate neighborhood, but both Mr Raymond Chan and the Tribunal do not agree with this observation. For example, Comfort Building at Nos 59 & 61 Wong Nai Chung Road, located next to the Building, is more than 60 years of age. In any event, age is not a conclusive indicator for redevelopment. Consideration should be given to the existing physical and functional conditions of the Building including its maintenance and housekeeping standards.

Design Working Life of the Structural Frames

96.  Mr Benson Wong relies on a policy paper of Government to promote Compulsory Sale[11] that provides “In Hong Kong, the design working life of an ordinary building in Hong Kong is 50 years”. The Building has passed the end of its design working life. It is commonly observed that building structure after its design working life is fraught with more structural defects that require more substantial repair.

97.  Mr Raymond Chan argues that the said statement adopts a general approach and does not apply to each individual case, that should be assessed individually. He stresses that based on the structural assessment report, the Building is in a structurally sound and fair condition, and its service life can be extended as long as regular repair and maintenance works are carried out. While redevelopment may be a tool to tackle the problem of urban decay, one should consider the cost effectiveness of the tool to determine its effectiveness. If rehabilitation only amounts to a small percentage of the redevelopment cost, rehabilitation is justified. The Tribunal accepts this view of Mr Raymond Chan in principle.

Current Legislative Requirements

98.  Mr Benson Wong emphasises that determination of whether redevelopment of a lot is justified on the ground of “age” includes the concept of “obsolescence”[12]. While “obsolescence” is a concept of comparison, thus current legislative requirements including construction standard should be used for comparison to assess obsolescence. Mr Raymond Chan argues that the current legislative requirements should not be used for comparison and that the condition of the Building must be assessed individually to come up with the conclusion on obsolescence.

99.  We share the view of Mr Benson Wong as it accords with the decision of Intelligent House. The obsolete design of a building should also be considered, as it has an important impact on whether or not it is too old to serve a modern society. However, a mere comparison of the physical appearance and design of the Building as well as its functional features and facilities with the modern standards and current legislative requirement is not meaningful. It is a question of extent and degree that needs to be considered in the physical and functional conditions of the Building in reality.

Physical Obsolescence

100.  Mr Benson Wong has compared the Building with 10 other more modern developments and considers that the Building has signs of physical obsolescence due to the following[13]:-

(a) The external walls of the Building are generally finished with cement rendering and paintwork. New buildings are commonly finished with ceramic tiles, full-height glass wall panels, granite / aluminum cladding panels, glass balustrades and aluminum features which are comparatively more modern looking, aesthetically pleasing, weather-resisting and self-cleansing; and

(b) In general, the original old mild steel windows have been replaced with lower quality aluminum windows of different patterns and colours at different period, and not been installed under qualified supervision.

101.  Mr Raymond Chan considers that cement sand rendering and paint external façade is still preferred by many occupiers who opt for a more classic, simple and down-to-earth design. Anyway, the external finishing and facade, including installation of aluminum window, is a choice dependent on the preference of individual owners.

102.  The Tribunal agrees that the external appearance of a building in the context and as Mr Benson Wong suggests is a factor to consider. That is not to accept personal taste or subjective views on aesthetics. Having said that, buildings constructed prior to 2000s and now under the age of 50 years are still commonly found in the market. Many of these buildings are finished externally with cement rendering and they are obviously not ripe for redevelopment. As regards replacement of mild steel windows by aluminum windows, it is an upgrade of the property fixture and cannot be prayed in aid as an element to reinforce justification for redevelopment here. We take the view that such subjective element of physical obsolescence due to appearance of the Building is of little weight in the question of whether redevelopment is justified.

Functional Obsolescence

103.  By comparing with the latest regulations and standards of safety and hygiene, advancement in technology and the rising expectation of the public as to the quality of living, Mr Benson Wong has identified 4 main areas where the Building is significantly inferior.

104.  First, the design and construction of the structural frames of the Building have become obsolete over time due[14] to advancement of building regulation and / or code requirements. In particular, the Building is far from meeting the ductility requirements. In this regard, as the Tribunal has accepted that the Building is in a structurally sound and fair condition in the earlier discussion, we consider this argument unpersuasive.

105.  Secondly, the Building is sub-standard in terms of fire services requirement[15] including the installation of automatic sprinkler system, fire hydrant & hose reel system, fire escape arrangement and fire resisting construction. In this regard, according to the Joint Statement on Structural Assessment prepared by the two structural assessment experts, they share the same view that there is at present no statutory requirements for upgrading the fire resisting construction provisions of an old building if there is no change in use. The Building is a composite building comprising shops and domestic flats and there is no report that any Unit has changed its initial permitted use. Inspection of the Building has also revealed that the existing fire services installation is under reasonable maintenance condition. Again, this argument of Mr Benson Wong does not advance the matter. The Tribunal considers that there is no reasonable doubt on the existing installation to maintain fire safety.

106.  Thirdly, the Building has insufficient Barrier Free Access (“BFA”) facilities provided[16]. It has two lifts installed but none of them has been upgraded to become an accessible lift. Furthermore, there is no accessible ramp connecting the public pavement with the lowest lift landings. Mr Raymond Chan opines that the Building does not need to upgrade the existing building to meet the current BFA standard unless major works with A & A Plan approval is required. The Tribunal is of the view that the Building is a medium-rise composite development with lift and is not situated in a highly populated area. The lack of such BFA facilities is not a strong justification for functional obsolescence.

107.  Fourthly, the Building is sub-standard in providing the essential facilities including equipotential bonding connections, height of staircase railing, maintenance access for the underground drainage, lighting protection system, building management systems, timer or sensor control of systems. Mr Raymond Chan argues that some of these items are improvements only and not related to the safety of the Building. Of course safety alone is not the test and we are considering obsolescence. The Tribunal is of the view that the lack of such modern standard facilities is not uncommon for buildings of the same age, while upgrading is not difficult as they are not structural element of the Building. They are items that will be reflected in the assessment of market value of the respective Units in the Building and are not material or weighty factors in determining functional obsolescence.

Useful Life

108.  It is not in dispute that in general all buildings are subject to wear and tear, and every building component has a useful life span. Mr Benson Wong suggests that bearing in mind the age of the Building and that there is no record of major repair done in the past, the following building components should have passed their useful life span[17]:-

(a) The original rendering on external wall surfaces;

(b) The original waterproof membranes on various roof areas; and

(c) The original underground cast iron drainpipes.

109.  Mr Raymond Chan has a conflicting view that as per visual inspection, the existing building condition and building components are in a fair condition. Therefore, the said building components and finishes have not yet passed their useful life. The Tribunal accepts this view.

Mandatory Building Inspection Scheme / Mandatory Window Inspection Scheme (“MBIS / MWIS”) Notices

110.  Another major dispute between the two experts is that Mr Benson Wong considers the completion of the prescribed inspection and repairs under MBIS and MWIS may only help to prevent building accidents but by their work nature, cannot prolong the useful life span. The older a building, the more fraught it is with defects.

111.  As regards MBIS and MWIS, in Mr Raymond Chan’s experience, further large scale repairs are unlikely to be required within a decade after the carrying out of large-scale repair works as the overall building condition will be substantially improved.

112.  The Tribunal agrees with Mr Benson Wong that the repair standard applied under the MBIS and MWIS regimes is “minimal” with the main concern being restoring safety and health aspects of a building to meet the minimum requirements only. However, we accept the view of Mr Raymond Chan that after completion of a major repair works project, no major repair work of the Building should be anticipated for the coming decade. We thus consider that the issue of MBIS and MWIS is mainly related to “state of repair” instead of “age”.

Conclusion on Age

113.  Overall, we find that the Applicant has not satisfied the “age” requirement under section 4(2)(a)(i) of the Ordinance. Redevelopment of the Lot is not justified due to the “age” of the Building.

State of Repair

114.  The “state of repair” of a property in general refers to its overall condition in terms of maintenance, structural soundness, and any necessary or pending repairs. It assesses whether the property is well-maintained, in good working order, or if it requires upgrades, or renovations. When a property owner considers undertaking major repair works, several key factors must be evaluated to ensure the project’s success including its cost-effectiveness, financial viability, and compliance with legal and safety standards. It may also be determined whether repairs are urgent (safety hazards, structural integrity) or preventive (long-term maintenance).

115.  For the ground of “state of repair”, Mr Benson Wong has relied on the guidelines as set out in Intelligent House where, inter alia, at paragraphs 145(6), 165(2)(c) and 199 the Tribunal accepted that “tenantable condition” should be used as a benchmark to formulate the repair works required[18]:

“145(6) … in considering the cost of the “state of repair”, the Tribunal is similarly entitled to look at repair works which are necessary to render the building a tenantable condition, which is reasonably fit for use in the sense that it should be safe and hygienic for occupiers and visitors, and provide a standard of comfort and convenience which is reasonable in the present day circumstances for the type of building in question. Mr Roots emphasizes in his closing submissions that he is not contending that (a) the repairs that needed to be carried out is to make the old building “as new” either by today’s standards or even by the standards when it was built, and (b) modern finishes and installations should replace the types originally provided except where that is required by law or good safety practice.

165(2)(c) Moreover, for the purpose of determining whether it is economically worthy to do so, the Tribunal is entitled to look at repairs which would render the building to a tenantable condition fit for the enjoyment of its tenants and visitors, which is reasonable in the present day circumstances for the type of building in question.

199 …, we accept that under the ground of “state of repair”, it is the standard of tenantable conditions that dictate what would be the necessary repairs that need to be carried out at the subject buildings. For what constitute tenantable conditions, we adopt our conclusion made at paragraph 165(2)(c) above and Mr Benson Wong’s view that, they should be those which would render the building fit for the enjoyment of its tenants and visitors, which are reasonable in the present day circumstances for the type of building in question, and with its structural frames, components, finishes and service installations in either fair or good conditions, requiring no repair in the near future.”

Tenantable Condition

116.  State of repair or tenantable condition was defined in Proudfoot v Hart (1890) 25 QBD 42 where Lord Esher MR stated “…Good tenantable repair is such repair as, having regard to the age, character, and locality of the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it ….”.

117.  Mr Benson Wong has adopted “tenantable condition”[19] as “the standard to formulate the necessary repairs which would render the building fit for the enjoyment of its tenants and visitors, in the sense that it is safe and hygienic, and provides a standard of comfort and convenience which is reasonable in the present-day circumstances for the type of buildings in question, and would render the building’s structural frames, components, finishes and service installations in a fair condition, requiring no repair till the next inspection / repair cycle”.

118.  Mr Benson Wong has confirmed in his Condition Survey Report that he was not contending for change to the following:

(a) The shortfall in fire resistance of structural members by increasing the concrete cover as currently specified in the Code of Practice for Fire Resisting Construction 1996, as there are obviously insurmountable difficulties in improving the concrete covers; and

(b) The lack of BFA facilities and refuse storage room, due to physical constraint of no spare common area for providing such facilities.

119.  Mr Raymond Chan has not made any comment on the above guidelines, which are accepted by the Tribunal.

Condition Classification

120.  For his Condition Survey Report, Mr Benson Wong has formulated 5 condition classifications[20] whereas Mr Raymond Chan has formulated 3 condition classifications to classify the condition of structural frames, components, finishes and service installations. The condition classifications are tabulated below:

Mr Benson Wong	Mr Raymond Chan
Unacceptable	Poor
Very Poor
Poor	Fair
Fair	Good
Good

121.  As for the repair standard, Mr Benson Wong follows the guidelines as set out in Intelligent House. Mr Raymond Chan simply submits that essential repair works should be carried out to achieve safe and hygienic conditions of the Building to keep it fit for occupation. Mr Mok cautions that Mr Raymond Chan has actually applied “habitable standard” rather than tenantable standard, in many aspects. The Tribunal does not consider there is fundamental difference between the views of the 2 experts on many material issues. That said we accept and place relatively more weight on the view of Mr Benson Wong when determining the difference in professional opinion as regards cost assessment of repair works, as more particularly found below.

122.  Mr Benson Wong considers that the formulation of repair works up to tenantable standard should include “improvement” and “preventive maintenance”, but this view has been totally rejected by Mr Raymond Chan who asserts that the scope of “preventive measure” should be the routine maintenance cost of the Building instead.

123.  The Tribunal notes that according to market reality, major repair works of a building should mainly focus on restoring a building’s structural integrity or fixing significant damage. This is different from renovation of a building, which involves updating or modernising a building to improve its appearance, functionality, or performance. However, “improvement” of items may also be justified to be material repair works. The justification may include for example, the usual replacement of dilapidated or worn out items by its modern equivalent. We also agree that “preventive maintenance” is a reasonable item to be included in order to maintain the existing condition until the next repair cycle.

MBIS / MWIS Notices and Building Orders

124.  The Building has been served with 19 MBIS and 48 MWIS notices[21] issued by BD requiring the concerned owners of the common parts and private units to carry out the prescribed inspections and necessary repairs. According to the 2 experts’ Joint Agreement dated 25 March 2024, the following 2 MBIS notices remain not complied with:

Notice No.	Owner Served	Date	Area
1	Flat 10A	29 November 2013	Private Area
2	The Building	29 November 2013	Common Area

125.  According to the 2 experts’ Joint Agreement dated 25 March 2024, there were 3 Building Orders remaining outstanding[22].

1	Building Order dated 6 December 2013, which was to require the owner of Flat 10A to remove the unauthorised main roof structure.
2	Building Order dated 14 January 2016, which was to require the owner of Shop MD to remove an unauthorised structure constructed on or over the below unauthorised yard structure and an unauthorised flat roof structure.
3	Building Order dated 14 January 2016, which was to require the owner of Store on G/F to remove 2 unauthorised yard structures.

126.  Apart from the above, there are other UBW that have not been served with Building Order but found at various locations in the Building including the unauthorised light well structure.

127.  Mr Benson Wong is of the view that the Building has lacked reasonable repair in the past. Mr Raymond Chan disagrees, pointing out that signs of repair works such as patch repair, enclosure of non-emergency services at protected exit are observed at the common part of the Building. During the site visit, the Tribunal did observe there were signs of maintenance and housekeeping works having been carried out to maintain the condition of the Building.

128.  Mr Benson Wong stresses that in general, the deficiencies and defects found in the structural frames, components, finishes and service installations of the Building are of the nature and magnitude that cannot be easily rectified by simple and piecemeal repairs. Mr Raymond Chan has a different view, that the Building is structurally sound and in a fair condition, and that the defects can be rectified within a reasonable budget.

129.  To conclude, the Tribunal is satisfied that the Building is not liable to become dangerous imposing threats to safety in near future. That is only the start as we must consider tenantable condition. Repair works are required but the scope of such is contentious. The total cost is crucial, as according to market reality, no repair works will be carried out unless they are considered cost effective and financially viable. The key differences in assessment of repair costs involve the external building façade and domestic units / shops internally. As discussed above, Mr Benson Wong has provided his estimate according to general guidelines previously determined by the Tribunal, while Mr Raymond Chan has applied a deviated approach. We have decided to use the estimate of Mr Benson Wong as the baseline to determine the reasonable repair costs, with adjustments made to reflect the valid comments and opinion of Mr Raymond Chan that we have accepted for the respective items.

Repair and Reconstruction Cost

Structural Frames

130.  The structural repair works include hammer tapping works and repair of concrete spalling. The cost of proposed works as advised by Mr Benson Wong and Mr Raymond Chan is $252,795 and $226,600 respectively[23]. The dispute is mainly due to the different formulation of repair works according to the standard of tenantable condition as applied by the 2 experts. The difference is insignificant and the Tribunal does not make any adjustment to the estimate of Mr Benson Wong.

Building Facades

131.  There are 2 major disputes on the repair cost estimate of building facades[24]. First, Mr Benson Wong opines that a steel frame covered shelter amounting to $378,000 is necessary while Mr Raymond Chan holds a different view. Covered shelter is normally required for demolition works or other heavy-duty construction works to protect the public during the course of works. However, the repair work proposal being examined is relatively minor in nature. The Tribunal notes that the main structure / conversion on the upper floors of the Building has been set back from the public pedestrian way, while Wong Nai Chung Road is neither a narrow road nor a busy street with heavy pedestrian flow. Thus, there is little justification for erecting a covered shelter to enhance public safety. We agree with Mr Raymond Chan that such shelter is not required.

132.  Secondly, notwithstanding patch repair of 18% of external rendering is proposed, Mr Benson Wong considers new paintwork covering 100% of external wall surfaces amounting to $808,860 is necessary. Mr Raymond Chan is of the view that new paintwork should only cover the patch repair. The Tribunal agrees with the view of Mr Raymond Chan as under the existing maintenance condition of the Building, new painting covering other than the area of patch repair is a renovation but not repair item. Thus, if new paintwork covering only 18% of external wall surfaces is allowed, the cost estimate is about $808,860 x 18% = $145,595. An adjustment of $808,860 - $145,595 = $663,265 is required.

133.  The total estimate of Mr Benson Wong is $4,034,422. The adjusted cost estimate of building facades having reflected the above determinations of the Tribunal is $4,034,422 - $378,000 - $663,265 = $2,993,157.

Roof Areas

134.  The major roof area repair works include the demolition of UBW erected thereupon. The cost of proposed works as advised by Mr Benson Wong and Mr Raymond Chan is $832,630 and $698,420 respectively. The dispute is mainly due to the different opinion of cost estimate applied by the two experts. The difference is insignificant in this context and the Tribunal does not make any adjustment to Mr Benson Wong’s figure.

Staircases, Lobbies, Lift Halls and Corridors

135.  There are 2 major disputes on the repair cost estimate of staircases, lobbies, lift halls and corridors[25]. First, Mr Benson Wong opines that the metal railings installed along the outer edge of the staircases having an effective height of 900 mm require replacement with new metal railings of 1,100 mm height for fire safety purpose and the total estimated cost is $360,000. Mr Raymond Chan is however of the view that the existing metal railing complied with the building safety standard at the time of construction and there is no requirement to improve the provisions in the Building to comply with the latest statutory requirement. The Tribunal considers that there is nothing to suggest the existing height of the metal railings would have rendered any obvious safety hazards to the residents. Under the market reality principle, this item would not be within a general repair project of a building. We agree with Mr Raymond Chan that this item does not require change.

136.  Secondly, Mr Benson Wong considers new paintwork covering the wall and column surfaces of staircases, lift lobbies and corridors amounting to $665,990 is necessary. Mr Raymond Chan is of the view that only patch redecoration / patch paintwork is necessary and his estimate in this regard is $20,400, making a difference of $645,590. The Tribunal having considered the state and condition of the Building as a whole according to site inspection agrees with the view of Mr Raymond Chan that complete painting covering this area should be disregarded.

137.  The total cost estimate of Mr Benson Wong in this regard is $1,537,830 but having deducted the above railings replacement work and complete paintwork the adjusted cost estimate should be $1,537,830 - $360,000 - $645,590 = $532,240.

Flats, Shops and Stores Internally

138.  The total cost of works as proposed by Mr Benson Wong and Mr Raymond Chan is $6,902,830 and $4,484,100 respectively. The dispute is mainly due to (a) “Different Assessment of Conditions”; (b) “Different Formulations of Repair Works”; (c) “Different Cost Estimate of Repair Works by respective Quantity Surveyors”; and (d) “Different View on Responsibility of Cost by Individual Owners”.

139.  As regards (a) “Different Assessment of Conditions” and (b) “Different Formulations of Repair Works”, the Tribunal having considered the general state of condition of the Building according to site inspection finds that the view of Mr Benson Wong is preferable.

140.  For (c) “Different Cost Estimate of Repair Works by respective Quantity Surveyors”, the Tribunal does not have any reasonable doubt on the figures proposed and would just accept this is the result of different opinion in professional judgement.

141.  The Building consists of common parts such as external walls, roofs, staircases as well as private parts being the flats and shops. Therefore, in reporting the state of repair of the Building, the conditions and necessary repairs relating to the building components in both the common and private parts of the Building should be included. However, this must be distinguished from the decorative conditions or in this case, unauthorised building works within the private premises. The Tribunal is of the view that for those defects or deficiencies of fitting out works or here also unauthorised building works noted inside or associated with individual units, that do not fall below safety or tenantable condition standards otherwise, the respective owners should be responsible. As regards (d) “Different View on Responsibility of Cost by Individual Owners”, we agree with Mr Raymond Chan that individual owners should bear their own cost to remove UBW within individual units and the cost of fitting out works should be borne by them.  Among the estimate cost items of Mr Benson Wong for demolition of UBW, the major one is the cost to demolish the light well structures from 1/F to 10/F (i.e. $1,600,000)[26]. For these structures, although they are UBW, being under a reasonable maintenance condition and causing no potential obstruction to means of fire escape, additional values have been assigned to the assessment of market value according to the market reality principle on the ground that enforcement risk is insignificant. Accordingly, it is unreasonable to assume inclusion of demolition in the repair works. Thus, the cost estimate of Mr Benson Wong in this regard should be adjusted to $$6,902,830 - $1,600,000 = $5,302,830.

Aboveground Plumbing and Electrical Installation

142.  Mr Benson Wong suggests a repair cost estimate for the aboveground plumbing and electrical installation of $231,000 and $105,000 respectively. Mr Raymond Chan has rejected these items and considered these are improvement works. The Tribunal does not find the evidence supports that works as proposed by Mr Benson Wong as necessary and thus the cost is nil.

Drainage

143.  The total cost of works as proposed by Mr Benson Wong and Mr Raymond Chan is $470,000 and $200,000 respectively. The dispute is mainly due to (a) “Different Assessment of Conditions” and (b) “Different Formulations of Repair Works”. The Tribunal does not consider there is fundamental difference between the view of the 2 experts and therefore makes no adjustment to Mr Benson Wong’s estimate.

Fire Services Installation

144.  Mr Benson Wong opines that although the requirements for providing fire services installation were not in force when the Building was constructed, the current Fire Safety (Buildings) Ordinance Cap 572 is applicable for a commercial / residential composite building. The installation cost as proposed by Mr Benson Wong is $1,282,350. Mr Raymond Chan excludes this item since there is no fire safety direction under the Cap 572 served on the Building and there is no statutory requirement to upgrade the installation to meet the current fire safety standard. We consider that under the circumstances and market reality, this item will not be within a general repair project of a building and thus the cost item is not allowable. Having said that, Mr Raymond Chan has proposed a cost estimate for general inspection and maintenance of the fire services installation in the Building of $50,000, which is accepted by the Tribunal. Thus, the adjusted cost estimate of Mr Benson Wong in this regard is $50,000.

Lifts

145.  There are 2 passenger-lifts provided in the Building serving floors from G/F up to 10/F. There is no dispute that overall, the lifts are in serviceable order and have the required lift certificate displayed inside each of the lift cars.

146.  Mr Benson Wong has engaged a Registered Lift Engineer to carry out a condition survey of the lifts. He concludes that: (a) the issuance of the lift permit only ensures a fair level of safety; and (b) the lift permits do not exempt the lifts from mandatory maintenance and improvement works required under current relevant lift regulations. An estimated cost of works amounting to $1,775,000 has been proposed, but is totally rejected by Mr Raymond Chan as unnecessary.

147.  The Tribunal shares the view of Mr Raymond Chan as this is an “improvement” item to modernise the lifts and there is a lack of justification to include it in the repair works.

Other Fees

148.  Other Costs include “Preliminaries & Contract Contingencies” and “Professional & Supervision Fees”. Mr Benson Wong and Mr Raymond Chan have provided an addition of about 34% and 24% of the repair works cost respectively to reflect “Preliminaries and Contract Contingencies”. The 2 experts have no dispute on allowing 10% for the “Professional Fee”. Having considered the scope of works included, we accept the view of Mr Benson Wong and allow a total rate of 44% to reflect these items. Apart from this, Mr Benson Wong has provided an additional “Supervision Fee” by employing a clerk-of-works, which the Tribunal agrees with Mr Raymond Chan is unreasonable, since such should have been reflected in the “Professional Fee”.

Adjusted Repair Works Cost Estimate

149.  The total Adjusted Repair Works Cost Estimate[27] of the 2 experts as found by the Tribunal based on Mr Benson Wong’s costs are as below:

Adjusted Repair Works Cost Estimate of Mr Benson Wong
Structural Frames	$252,795
Building Facades	$2,993,157*
Roof Areas	$832,630
Staircases, Protected Lobbies, Lift Halls and Corridors	$532,240*
Flats, Shops and Stores Internally	$5,302,830*
Aboveground Plumbing and Electrical Installation	0*
Drainage	$470,000
Fire Services Installation	$50,000*
Lifts	0*
Repair Works Sub-total	$10,433,652
Other Fees	x 1.44*
Total (say)	$15,024,459 ($15,000,000)

Note: *With adjustment as determined by the Tribunal.

Reconstruction Cost

150.  For reporting the state of repair of the Building, Mr Benson Wong and Mr Raymond Chan have no dispute on the principle of adopting an apple-to-apple comparison of the repair cost and construction cost of a new similar superstructure (“Reconstruction Cost”). The comparison exercise would form a reasonable baseline, in monetary terms, to determine the general state of repair of the Building.

151.  Mr Benson Wong having taken the professional advice of a quantity surveyor has submitted an estimate of the Reconstruction Cost[28] amounting to $68,540,000. The figure has been assessed by adopting (a) the same cost elements as the repair costs; (b) the same in the physical aspects of size, height, number of storeys and designs as the existing superstructures; and (c) the same provisions for the structural frames, component, finishes and service installations for the same type of buildings developed some 52 years ago. For the purpose of the comparison exercise that is hypothetical in nature, the Tribunal finds this approach acceptable subject to reasonable adjustments. A balanced judgement is required also considering the approach of Mr Raymond Chan.

152.  In arriving at the Reconstruction Cost as at November 2023, Mr Raymond Chan having taken the professional advice of a quantity surveyor[29] has submitted an estimate by referce to the Unit Cost published by Rider Levett Bucknall (“RLB”) for “Apartment, Ordinary Residential Building”. An analysis of his estimate is as below:

Construction Floor Area (sq m)	3,652.42
Unit Cost ($/sq m)	29,250
Cost	$106,833,285
Add Contract Contingencies (5%)	x 1.05
Add Professional/Supervision Fee (10%)	x 1.1
Less Foundation Cost (15%)	x 0.85
Reconstruction Cost (say)	$105,000,000

153.  Mr Benson Wong however points out that RLB has reclassified the Unit Cost starting from 4^th Quarter 2022. The index before and after the said period is as below:

Type of Building (Residential)	HK$ per sq m CFA (3rd Quarter 2022)	Type of Building (Residential)	HK$ per sq m CFA (4th Quarter 2022)
High rise, high quality	27,600 – 39,000	Apartment, superior quality	36,300 – 44,400
High rise, better quality	20,800 – 24,200	Apartment, ordinary quality	23,900 – 33,500
High rise, ordinary quality	19,300 – 20,400

154.  While not in principle objecting to the methodology of adopting the RLB Unit Cost, Mr Benson Wong considers that the 3^rd Quarter 2022 index published by RLB for “High-rise Ordinary Quality Residential Building ranging from $19,300 - $20,400 / sq m should be more suitable for use as reference. Judging from the RLB unit cost as compared between the 3^rd and 4^th Quarter of 2022, the Tribunal is persuaded that the unit rate adopted by Mr Raymond Chan of $29,250 /sq m is excessive. For this exercise, we consider it is not unreasonable to take the lowest range of unit rate under the 4^th Quarter 2022 aforesaid as well as the 4^th Quarter 2023 index of RLB (i.e. $24,700 - $34,800 / sq m) as reference, say $25,000 as the baseline. We also accept the view of Mr Benson Wong that the RLB Unit Cost should have reflected the likely Contract Contingencies and that adding 5% for such is overlapping. The adjusted estimate by adopting this approach is as below:

Construction Floor Area (sq m)	3,652.42
Unit Cost ($/sq m)	25,000
Cost	$91,310,500
Add Professional/Supervision Fee (10%)	x 1.1
Less Foundation Cost (15%)	x 0.85
Adjusted Reconstruction Cost (say)	$85,380,000

155.  For the purpose of this apple-to-apple comparison exercise, the Reconstruction Cost submitted by Mr Benson Wong and Mr Raymond Chan with the adjustments made by the Tribunal is $68,540,000 and $85,380,000 respectively. Having considered the above analysis, the Tribunal has decided to adopt an average of the 2 figures, say $77,000,000 (about $21,000 / sq m of Construction Floor Area) as the Reconstruction Cost for this comparison exercise.

Cost Benefit

156.  In market reality, sellers often address minor issues (e.g. painting & fixing leaks) to improve appeal, but major repairs (e.g. roof replacement & structural fixes) may not always yield a proportional increase in sale price. While minor repairs are almost universal, major repairs are situational. Accordingly, when applying this concept to the exercise, the prospective cost and economic benefit of works is crucial, as they will dictate whether the owners concerned would choose to do the repair project on the ground that the total cost is reasonable and thus reject redevelopment.

157.  In various Land Compulsory Sale application decisions the Tribunal has employed a proportionality test by comparing the repair cost and reconstruction cost (the “Cost Ratio”) as the baseline. In the case where the respective Cost Ratio was found as excessive, the Tribunal would accept the state of repair justified redevelopment of the building. The reason is that the owners would consider the repair proposal as not cost effective or worth carrying out.

158.  In previous Land Compulsory Sale application judgments, particularly when the Cost Ratio has reached the arguable threshold, the comparison of repair cost with total Existing Use Value (“EUV”) of the building (the “EUV Ratio”) was also employed. Where the cost was found not exceeding the likely enhancement of value arising from or attributable to the repairs, the Tribunal would not accept the state of repair justified redevelopment of the building. The reason is that the owners would find the repair proposal to be financially viable for implementation.

159.  The Cost Ratio and the EUV Ratio will reveal the cost effectiveness and financial viability of the project respectively. For marginal cases, the repair proposal may be considered as cost effective but not financially viable, or vice versa. Under the circumstances, setting a review benchmark for both ratios respectively may assist to reach a decision.

Cost Effectiveness

160.  In giving oral evidence, both building condition experts agreed that the repair cycle of the said works was 10 years or a decade. The Tribunal takes the view that given the general description of design working life of an ordinary building in Hong Kong is 50 years, completion of the works would represent the design working life will be extended by 20%, of which a general review benchmark for the Cost Ratio can be drawn following the same.

161.  The Tribunal however considers that the review benchmark applicable to each case should be a holistic and flexible one based on individual merits and locality of the building. For instance, a landowner of a flat within a high-rise composite building located in an old and run down area may not be willing to make a higher contribution for maintenance such that the review benchmark of 20% is the reasonable bottom line. However, a landowner of an apartment like the Building being a medium-rise composite building located in a more high-end residential area may expect the repair cycle can be prolonged for a few more years by means of proper routine maintenance. Under the circumstances, the review benchmark may be over 20%.

162.  Mr Benson Wong explained that from his experience, the review benchmark for the Cost Ratio would be 25% for a composite building comprising shops & domestic units. Mr Raymond Chan agreed with this statement. As the Building is a medium rise composite building located in a more high-end residential area of Happy Valley, we accept the common view of the 2 experts that a review benchmark of 25% is reasonable for the Application.

163.  The Adjusted Repair Cost from that as estimated by Mr Benson Wong is $15,000,000. Given the assessed Reconstruction Cost as adopted by the Tribunal is $77,000,000, the Cost Ratio is about 19.5% and that is well below the review benchmark of 25%. Thus, the Tribunal accepts that the proposed repair project is cost effective for implementation.

Financial Viability

164.  In the course of EUV valuation, among a total of 45 Units in the Building, we determined grading of various units in percentage terms under “Good”, “Fair” and “Poor” is “18%”, “55%” and “27% respectively. Thus, the overall internal condition of the Building on average is considered as “Fair”. After the proposed repair works are completed, all Units should be graded as “Good” representing that they are all recently refurbished and without obvious defects identified. For valuation of units under the grading of “Fair” to “Good”, the Tribunal has already determined a value increase of 3%, and which should be the review benchmark for financial viability of this exercise.

165.  Given the total EUV of the Building as assessed by the Tribunal is $564,210,000, the Adjusted Repair Cost of that estimated by Mr Benson Wong when compared with EUV is 2.7%, which is below the review benchmark of 3%. In our view the proposed repair project is financially viable to carry out.

Conclusion on State of Repair

166.  The proposed repair works are cost effective and financially viable for implementation. Overall, we are not convinced that the evidence meets the statutory threshold. The Applicant has not satisfied the requirement for “state of repair” under section 4(2)(a)(i) of the Ordinance. The redevelopment of the Lot is not justified due to the” state of repair” of the Building.

167.  Issue 3, whether redevelopment is justified due to age or state of repair, is answered in the negative. Therefore, we refuse to grant an order for sale of the Lot under the Ordinance.

ISSUE 4 – REASONABLE STEPS TAKEN

168.  The Applicant is under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interest of the Respondents under section 4(2)(b) of the Ordinance. Although we have decided not to grant the order for sale, we are going to deal with the issue of reasonable steps so that the judgment is complete.

169.  Prior to the commencement of the Application on 5 September 2022, the Applicant had through its solicitors, Messrs Lo & Lo, made an offer to each of the Respondents by letter dated 13 June 2022. The offer was made on the pro-rata share of RDV of the Lot by making reference to EUV of the corresponding Respondents’ Unit and total EUV of the Building based on the advice of Savills as follows[30]:

Respondent	Offer in 2022	Market Value as adopted by the Tribunal
R1 (Shop C on Mezzanine Floor)	$6,899,000	$5,430,000
R2 & R3 (Flat B on 1st Floor & Flat Roof)	$14,948,000	$13,830,000
R4 (Flat A on 4th Floor)	$16,481,000	$14,430,000
R5 (Flat D on 4th Floor)	$7,318,000	$7,630,000
R6 (Flat A on 5th Floor)	$16,553,000	$14,500,000
R8 (Flat A on 10th Floor & Flat Roof)	$17,762,000	$15,910,000

170.  In assessing the reasonableness of the offers, we have regard to the Court of Final Appeal’s judgment in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578, in particular paragraphs 33 and 36, where Ribeiro PJ held: -

“33. In making that assessment the Tribunal is not conducting a valuation exercise. It does not need to adjudicate upon any disputes about the correct valuation principles to be applied. It does not itself arrive at any conclusion as to what figure represents the correct valuation. It merely needs to be satisfied that, on the evidence available, the offer falls within the range of what may broadly be regarded as fair and reasonable compensation for the interest in question. It is obviously necessary to recognise that there will often be differences of opinion on that matter…

36. ...We are of course not suggesting that it is necessary for the offer to ‘beat’ the valuation as if it were a payment into court. What the Tribunal must do is to consider whether, in the circumstances of each case, the offer falls within a band of what represents a fair and reasonable assessment of the value of the minority owner’s interest reflecting a proportionate share of the redevelopment value of the whole site…”

171.  We are satisfied that the Applicant’s respective offer prices fall within the range of what may broadly be regarded as fair and reasonable compensation for the interest in question. In these proceedings, there is no evidence that the valuations of Savills were unreliable. Although we may not agree with each and every item in Savills’ assessments, particularly as regards Flat D on 4^th Floor, it is a matter of differences in valuation judgment or opinion, and the valuations before us have no serious flaw. Our determinations are not far from the assessments of Savills.

172.  Thus, we find that the Applicant has taken reasonable steps to acquire the Respondents’ properties in accordance with section 4(2)(b) of the Ordinance. Issue 4 is answered in the affirmative.

ISSUE 5 – RESERVE PRICE FOR THE PUBLIC AUCTION

173.  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. Although the Tribunal has decided not to grant the order for sale, we are going to deal with the issue of reserve price for completeness.

174.  Both valuation experts have agreed to adopt the residual valuation method and updated their respective RDV assessment of the Lot with 6 January 2025 as the date of valuation (“the RDV Date of Valuation”). The agreed factual information for assessment of RDV of the Lot is summarised as follows:

Factual Information of the Lot
Lot Area (sq m)	480.5
Area to be reserved for the existing Right of Way (the “ROW”) along Ventris Road	25.1 sq m
Area to be reserved for Retaining Wall	18.8 sq m
Net Built Over Area (sq m)	436.6 sq m
Developable Site Area for GFA Calculation	(in dispute)
Spot Level	8.5 m
Class of Site	Class A
Restriction under Lease	Rate and Range Clause, and the usual non-offensive trade clauses
Town Planning Zone	Residential (Group A)
Maximum Site Coverage under Building (Planning) Regulations (“B(P)R”)	100% (for non-domestic below 15 m) 33.3% (for domestic over 61 m)
Maximum Height of Building under OZP	100 m above HKPD

Developable Site Area for Gross Floor Area (“GFA”) Calculation

175.  Mr Charles Chan and Mr Li have agreed that the site area of the Lot is 480.5 sq m. However, they disagree on whether the area of the ROW (in the sum of 25.1 sq m) should be deducted from the Lot Area in order to derive the developable site area on the basis of which the GFA and site coverage should be calculated under the B(P)R.

176.  Initially, in the 1^st Joint Statement of the Valuation Experts, there was no dispute on this issue as both parties held the same view that deduction of the ROW area was not necessary. On this assumption, a hypothetical development of a 28-storey composite building with the main residential / car park entrance from Wong Nai Chung Road had once been agreed for assessment of RDV[31].

177.  In the 2^nd Joint Statement of the Valuation Experts, Mr Charles Chan however changed his view suggesting that the ROW area should be deducted instead. He stated in his report that:

“…I have learnt from another case under the Land (Compulsory Sale for Development Ordinance … LDCS 18000/2022 of which I am also the valuation expert, that the approval of vehicular entrance and driveway to and from the relevant section of Wong Nai Chung Road is controversial. Thus, the vehicular run-in/out of the hypothetical development is proposed to be located at Ventris Road. Moreover, the right of way of the Land is required for complying with specific regulations, codes of practice and practice notes for the hypothetical development and therefore the right of way area cannot be included in the site area for the purposes of GFA and site coverage calculations…”

Mr Li does not accept that statement of Mr Charles Chan. No further expert evidence was adduced to support either side’s contentions.

178.  Mr Charles Chan’s statement comprises two technical aspects namely (a) Traffic Impact with vehicular entrance on Wong Nai Chung Road; and (b) B(P)R Requirement for development over the ROW.

179.  For the Traffic Impact, Mr Charles Chan in giving oral evidence confirmed that no Traffic Impact Assessment Report had been conducted prior to or from which he could form his view that the approval of vehicular entrance and driveway to and from the relevant section of Wong Nai Chung Road would be controversial. The Tribunal considers that without a Traffic Impact Assessment Report, it is difficult to ascertain the impact, much less conclude such a vehicular entrance would have an insurmountable adverse impact on the existing local road networks. Even if there be an impact, suitable traffic management measure may be provided to fulfil the requirement of departments concerned for mitigating the impact. Further, there is no restriction under the lease that vehicular access for the Lot on Wong Nai Chung Road is prohibited or requires special approval. Some nearby developments have permitted vehicular entrances and exits along this section of Wong Nai Chung Road. Given the small size of the Lot that will only permit a small-scale development with limited number of car parking spaces, the assumption of Mr Chan cannot be justified.

180.  As regards the B(P)R Requirement, in our view, where an abutting private lane is not specifically required for any purpose under the Buildings Ordinance for the proposed development scheme, the Building Authority may give favorable consideration to including the relevant area of such lane in site coverage and plot ratio calculations. Thus, even if the vehicular entrance has to be located at Ventris Road, the Tribunal considers that there is justification for BD to approve the ROW area to be included as part of the site area for calculating the GFA and site coverage.

181.  To conclude, we accept the initial approach as agreed by the parties under the 1^st Joint Statement of the Valuation Experts that deduction of the ROW area for GFA and site coverage calculation is not required for the hypothetical development in assessing RDV of the Lot.

Hypothetical Development

182.  Apart from the ROW issue, the fundamental difference in the hypothetical schemes as submitted by the parties is summarised as follows:

Hypothetical Development	Mr Charles Chan	Mr Li
Developable Site Area	455.4 sq m	480.5 sq m
Carpark Entrance	Ventris Road	Wong Nai Chung Road
Type of Development	Composite with retail shop on LG/F and domestic units on upper floors	Purely domestic units on upper floors
Flat Mix (exclude the Duplex at top floor)	2 units per floor	1 unit per floor
Saleable Area of Reference Domestic Unit	about 54 sq m	about 124 sq m

183.  As we accept, with the assumptions made under the 1^st Joint Statement of the valuation experts, that the developable site area is 480.5 sq m and the carpark entrance can be on Wong Nai Chung Road, the hypothetical development as submitted by Mr Charles Chan has little merit.

184.  For further consideration of the hypothetical development proposed by Mr Li, its detail design is outlined below[32]:

Floor	Units & Facilities (Roof Area - sq m)	Gross Floor Area (sq m)	Saleable Area (excl. green features exemption) (sq m)	Saleable Area (incl. green features exemption) (sq m)
B2	Car park – 8 spaces	-	-	-
	1 Motorcycle park
	Car lift/plant room
B1	Car park – 8 spaces	-	-	-
	Car lift/plant room
LG2/F	Lobby/carpark entrance	50	-	-
	Car lift/plant room
LG1/F	Car park – 8 spaces	40	-	-
	Car lift/plant room
G/F	Club house	40	-	-
	Plant room
Transfer Plate
2-23/F	Flat – 1 unit per floor	3,404.5	2,610.5	2,741.4
	(Flat Roof 281.9 )	-	-	-
24-25/F	Duplex – 1 unit (Top Roof 29.5)	309.5	239.5	249
Total	Upper Floor Domestic Area	3,714	2,850	2,990.4
Efficiency Ratio (about)			77%	81%

185.  Apart from the disagreement on the developable site area to be adopted, the valuation experts have 2 major disputes first, on the flat mix and secondly, whether or not to provide a ground floor retail shop for the hypothetical development.

186.  In Mr Charles Chan’s opinion a medium-sized flat is more appropriate in particular for a single-block development, which cannot provide sufficient clubhouse facilities for families with children. Mr Li reports that according to his research, the subject locality is well-established for larger size apartments. In addition, the upfront and immediate Racecourse view can attract strong purchasing power and high-end flat purchasers. In this regard, the Tribunal considers first, that there are sufficient recreational facilities located nearby in the district of Happy Valley including private clubs, such as the Jockey Club or Football Club and public open space facilities, such as for sporting activities within and around the Racecourse. Secondly, under the current market parity, current demand for retail shops in the locality is low, with a number of vacant shops in the vicinity. Moreover we are not satisfied with the suggested hypothetical development of Mr Chan, as the Accommodation Value (“AV”) derived from his RDV assessment is very much lower than that of Mr Li.

187.  Apart from the above, Mr Charles Chan has also opined that under the floor layout of the hypothetical development of Mr Li, the provision of common area, including plant room facilities appears insufficient. However, according to a direct analysis of the floor layout, the respective Efficiency Ratio of saleable area excluding green features exemption is about 77%, which is within a reasonable range for a similar single block purely domestic development. Thus, this observation of Mr Charles Chan is not accepted.

188.  Though the Efficiency Ratio of saleable area excluding green features exemption of 77% as suggested by Mr Li is acceptable to the Tribunal, the suggested Efficiency Ratio of saleable area including green features exemption of 81% is considered to be marginally excessive. According to the relevant Joint Practice Notes issued by departments concerned to promote Green and Innovative Buildings, there is a maximum limit for areas of balcony and utility platform etc. that can be exempted from GFA and site coverage calculations. The Tribunal shall adopt an overall Efficiency Ratio of 80% to derive the saleable area including green features exemption for valuation of the RDV.

189.  In addition, there are disputes between Mr Charles Chan and Mr Li on various relatively minor technical matters. We appreciate however that Mr Li’s schematic design is on a conceptual level under a high degree of generality, and such matters can be resolved in the detailed design stage. Since redevelopment value of a site is usually derived from its highest and best use, we shall proceed following Mr Li’s approach, with a purely domestic and larger size domestic unit development.

Hypothetical Reference Domestic Unit

190.  For calculation of the GDV, Mr Li has selected the simplex unit on 13/F as the Hypothetical Reference Domestic Unit, of which the actual floor level is on the 16^th floor. The Tribunal accepts this choice and his assumed unit saleable area of about 124 sq m, enjoying a panoramic view over the Racecourse.

Comparables for Hypothetical Reference Domestic Unit

191.  The two valuation experts have identified 75 transactions covering 5 Developments, with reference number namely ND1 (T1-T36), ND2 (T1–T28), ND3 (T1-T6), ND4 (T1-T2) & ND5 (T1-T3), for consideration. All these transactions have basically met the general selection criteria, including the location, date of transaction, age or use of premises for direct comparison. The experts however have disagreement on the selection of some of these transactions applicable for direct comparison because some specific selection criteria cannot be met by these transactions. The said specific selection factors include (a) some of the properties lack a view over the Racecourse; (b) some of the properties are of relatively smaller size; (c) some transactions were completed long before the date of valuation; and (d) the developments of some transactions enjoy extensive recreational facilities.

192.  The development of ND1 refers to One Jardines Lookout situated at No.1 Wang Tak Street. Mr Charles Chan has adopted the transactions of ND1 for direct comparison. Mr Li does not accept the transactions of ND1 as comparables for the reasons that first, the domestic units therein have no view towards the Racecourse and secondly, the size of units have a saleable area of less than 52 sq m, highly incompatible with the size of the reference unit for assessment of RDV. The Tribunal considers Mr Li’s points valid and thus ND1 is rejected for direct comparison.

193.  The development of ND2 refers to The Aster situated at No 7A Shan Kwong Road. Mr Charles Chan has adopted 27 transactions of ND2 for direct comparison. Mr Li rejected 25 out of the 27 transactions namely ND2 (T1-T25) for direct comparison due to lack of view towards the Racecourse. Also, the unit size of these units have a saleable area of less than 65 sq m, which is not compatible with the size of the reference unit for direct comparison. Similar to the aforesaid, the Tribunal considers that transactions of ND2 (T1-T25) are not suitable for direct comparison and should be rejected.

194.  Mr Li however has no objection to adopting 2 transactions of ND2 (T26-T27) for direct comparison. His justification is that though the flats do not have open view directly towards the Racecourse, the size of these 2 units is compatible with the size of the reference unit of the hypothetical development. The Tribunal accepts the joint view that the ND2 (T26-T27) are suitable for direct comparison.

195.  Mr Charles Chan has rejected those transactions related to ND3 of The Leighton Hill at No. 28 Broadwood Road and ND4 of Winfield Building at No. 3 Ventris Road for direct comparison. The main reason is that these developments have extensive recreational facilities as compared with the hypothetical development for the subject RDV assessment. We however consider that there are sufficient recreational facilities located nearby and in the district of Happy Valley, including private clubs and public sports areas. Importantly, if an appropriate adjustment factor is made on the “Scale of Facilities”, these transactions are still suitable for direct comparison.

196.  Mr Charles Chan does not agree to adopt any transaction that was completed more than 6 months before the RDV Date of Valuation (i.e. 6 January 2025). Mr Li however, has adopted a few transactions with the date of completion beyond the said time limit by adjusting the time difference using RVD’s Price Indices for the relevant properties. As the transactions that can be identified are limited, we prefer the approach of Mr Li, but consider that any transaction completed more than 2 years before the RDV Date of Valuation has to be rejected. Under this criteria, transaction ND4 (T2) is not selected for direct comparison.

197.  For those transactions related to ND5, though the development does not have view directly of the Racecourse, the size of the units is about 140 sq m which is certainly compatible with the size of the reference unit. Thus, the development units are selected for direct comparison.

198.  To conclude, 12 transactions over 4 developments are selected for direct comparison including ND2 (T26-T27), ND3 (T1-T6), ND4 (T1) and ND5 (T1-T3).

199.  As for adjustments of comparables, since Mr Charles Chan has based his opinion on a different hypothetical development not selected by the Tribunal, his analysis is therefore not relevant for further consideration. Mr Li has made adjustments for “Time”, “Location”, “Size” (at 1% per 10 sq m difference), “Building Age” (at 1% per 1 year difference), “Floor Level” (at 0.5% per 1 floor difference), “View”, “Scale & Facilities”, and “Headroom” (at 4% per 1 m difference). We accept the adjustment of factors provided by Mr Li except for the factor of “Scale & Facilities”. The Tribunal considers that the hypothetical development does not provide the same “Scale & Facilities” of ND3, ND4 and ND5 and Mr Li has not made sufficient adjustment to reflect this factor. Detailed analysis of the transactions incorporating the decision of the Tribunal is in Appendix III.

200.  The adjusted unit rate of the respective developments is summarised as below:

Ref. No.	Development	Adjusted Unit Rate (about)
ND1	One Jardine’s Lockout	Rejected by LT
ND2	The Aster	$382,000/sq m
ND3	The Leighton Hill	$419,000/sq m
ND4	Block A, Winfield Building	$391,000/sq m
ND5	The Altitude	$375,000/sq m
Average		$391,750/sq m (say $392,000/sq m)

GDV for Domestic Units

201.  Given the hypothetical development is a purely domestic building with one unit per floor plus one top floor duplex, the view and layout of the units are similar. We accept the unit rate of $392,000/sq m is the average value for domestic units of the hypothetical development. As regards the duplex unit, Mr Li has applied a “special Unit” adjustment of 25% and we consider that is not unreasonable. Thus the Reference Duplex Unit is $392,000 x 1.25 = $490,000/sq m. Mr Li has also suggested putting a value to the “Staircase Interchange” area but this is unjustified, as the area forms part of the fire safety measures and is no part of the saleable area. Thus GDV of Domestic Units is assessed as follows:

Domestic Units	2/F	3 - 23/F	24 & 25/F (Duplex)
GFA (sq m)	154.75	3,249.75	309.5
Efficiency Ratio (overall)	80%	80%	80%
SA (incl. exempted structures)	123.8	2,599.8	247.6
Flat Roof	281.9	-	-
Top Roof	-	-	29.5
Converted Area (sq m)*	170.8	2,599.8	251.3
Reference Unit ($/ sq m)	392,000	392,000	490,000
Adjustment for Floor Level	-5.5%	-	5.8%
Adjustment for size	-4%	-	-12%
Market Value ($)	60,740,306	1,019,121,600	114,645,472
Total	$1,194,507,378 (say $1,194,510,000)

(* Note: applying a conversion factor for flat roof of 1/6 and top roof of 1/8)

GDV for Parking Space

202.  The following transactions for the purpose of assessing the market value of a car parking space in the hypothetical development have been identified:

	CP No. P03	CP No. P10	CP No. P07	CP No. P11
Development (7A Shan Kwong Road)	The Aster	The Aster	The Aster	The Aster
Floor	LG 2	LG 2	LG 2	LG 2
Sale date	21/5/2024	19/7/2023	18/7/2023	19/6/2023
Flats to Car Parks Ratio	0.123	0.123	0.123	0.123
Consideration ($)	3,800,000	3,800,000	4,000,000	4,200,000

203.  Mr Charles Chan has adopted all the four transactions for direct comparison and has applied the RVD private domestic price index for adjustment of the “Time” factor. Mr Li has only adopted CP No. P03 for direct comparison, which is the latest parking space transaction, so finds that time adjustment following the RVD index is unnecessary. The Tribunal considers that since all the transactions came from the same development on the same floor, the respective price achieved of CP No. P03 should have already reflected the market trend of car parking space during the period. Thus, there is no need to refer to the RVD index. Having considered the above and that the “Flats to Car Parks Ratio” of the hypothetical development is 1.043, we accept Mr Li’s assessment of $3,600,000 per car parking space.

204.  There is agreement to apply a conversion factor of 10% of the car parking space value to derive the motorcycle parking space value. Thus, the Tribunal accepts Mr Li’s assessment of $360,000 per motorcycle parking space.

Total GDV

205.  The total GDV is computed as below:

Domestic Units	$1,194,510,000
24 Car Parking Space @$3,600,000 / space	$86,400,000
1 motorcycle parking space	$360,000
Total GDV	$1,281,270,000

Agreed RDV Parameters for Residual Valuation

206.  The RDV parameters for residual valuation as agreed by the two valuation experts are as below:

Marketing Cost	3%
Demolition Cost	$7,948,600 (3,613 sq m x $2,200/sq m)
Demolition Period	9 months
Professional Fee	6%
Construction Period	30 months
Stamp Duty	4.25%
Legal Costs	0.10%

Interest Rate

207.  Following the general trend of the HSBC Best Lending Rate, Mr Li has lowered his applied interest rate from 5% in the first valuation report to 4.75% now suggested in the updated report.

208.  Mr Charles Chan adopts an interest rate of 5.5% having considered the Hong Kong Dollar Interest Settlement Rate on the RDV Date of Valuation of 1 month, 3 months and 12 months respectively. He stresses that there could be uncertainties about the direction of interest rates in particular the recent USA’s policies of imposing higher tariffs and stimulating economic growth that may lead to inflation resulting to climbing up of interest rate. He opines that given the severe recession in the property market, it is reasonable that the interest rate spread on property market financing will not be less than 1.3% above the Hong Kong Interest Settlement Rate (3 months). The Tribunal accepts this view in principle. Having considered the Hong Kong Interest Settlement Rate (3 months) as at the RDV Date of Valuation is about 4.1%, the Tribunal shall adopt 5.4% (i.e. 4.1% + 1.3%) for the subject residual valuation. As a reference, the HSBC Best Lending Rate in January 2025 was 5.25%, which is marginally below the determined interest rate of 5.4%.

Developer’s Profit

209.  Mr Charles Chan adopts a Developer’s Profit of 23%. He explains that in a rising market, developers can accept a lower profit margin due to lower associated risks and in a sluggish or uncertain market, developers may demand a high profit margin in mitigate market risks. He also considers that the confidence in the economy of Hong Kong is shadowed by a number of macroeconomic factors including (a) US-PRC conflict; (b) wars in Ukraine and Middle East result in increase in inflation rate and investment risks; (c) high inflation environment in US and many countries that prompts interest rate increase; (d) downturn of economy in PRC; and (e) loss of labour force of Hong Kong due to emigration. Moreover, the potential huge land supply from Kau Ti Chau Artificial Islands and the Northern Metropolis projects may dampen the future property price.

210.  Mr Li, on the other hand, adopts a figure of 15%. His argument is that the concept of profit is linked to the risk of the prospective developer in handling the redevelopment. Thus, if proper strategic planning, efficient project management and adaptive business practices are utilised, the risk will be mitigated. Mr Li opines that there is lack of explanation on why and how the macroeconomic factors referred to by Mr Charles Chan will adversely affect the risk of carrying out a development project.

211.  The Tribunal does not disagree with Mr Charles Chan that the market shows a declining demand in the immediate future. As regards the macroeconomic factors, apparently Mr Li takes a more optimistic view that the political conflicts and global high inflation environment are easing. Notwithstanding the uncertainty regarding the developable site area arising from the ROW issue, it is determined that such a project, being a small-scale and purely domestic development located within a relatively high-end residential area, presents a low to medium level of risk. A developer’s profit of 19% is therefore considered as reasonable.

Construction Cost

212.  The two valuation experts agree to adopt the Building Cost Data for Private Sector Developments in Hong Kong Published by RLB in December 2024 for the valuation. Mr Li has derived a figure of $281,086,686 while Mr Charles Chan has come up with a slightly lower figure. The margin is mainly due to the difference of hypothetical design. The Tribunal has adopted Mr Li’s design model, the same figure is taken.

RDV of the Lot

213.  Based on the above determinations, the residual valuation of the Lot is summarised in Appendix IV herein. RDV of the Lot as at 6 January 2025 is assessed at $579,000,000, equivalent to an accommodation value of about $150,624 per sq m. Answering Issue 5, if an order for sale had been granted, that would have been the reserve price for the purpose of public auction.

ORDER

214.  We have found that the redevelopment of the Lot is not justified on the ground of age or state of repair. The Application is hereby dismissed.

COSTS

215.  We make a costs order nisi that the Applicant do pay the costs of proceedings (including any reserved costs) to the Respondents, to R1 to R6 and R8 with certificate for counsel, to be taxed on the High Court scale if not agreed. Unless any party applies by summons to vary the costs order nisi, it shall become absolute upon expiration of 14 days from the date of this judgment.

216.  Last, but not least, we thank Counsel for their able assistance.

Appendix I

PROPERTY PARTICULARS (Domestic Units)

Unit	Actual Floor Level	Saleable Area (sq m)	Open Flat Roof Area (UBW-a: Covered Flat Roof Area) (sq m)	Top Roof Area (UBW-b: Enclosed Area Top Roof) (sq m)	(UBW-c: Covered Light Well Area) (sq m)	(UBW-d: Encroachment of Common Corridor Area) (sq m)	Converted Area (sq m)
1A	3	59.7	22.4 (4.1)	-	-	-	65.5
1B	3	59.7	36.1	-	-	-	65.7
1C	1	37.5	8.3 @	-	(4.7 )	-	40.9
1D	1	37.5	10.8	-	(4.7 )	-	41.2
2A	4	64	-	-	-	-	64
2B	4	64	-	-	-	-	64
2C	1	37.5	-	-	(4.7 )	-	39.9
2D	1	37.5	-	-	(4.7)	-	39.9
3A	5	64	-	-	-	-	64
3B	5	64	-	-	-	-	64
3C	2	37.5	-	-	(4.7)	-	39.9
3D	2	37.5	-	-	(4.7 )	-	39.9
4A	6	64	-	-	-	-	64
4B	6	64	-	-	-	-	64
4C	3	37.5	-	-	(4.7 )	(1.7)	40.7
4D	3	37.5	-	-	(4.7 )	(1.7 )	40.7
5A	7	64	-	-	-	-	64
5B	7	64	-	-	-	-	64
5C	4	37.5	-	-	(4.7 )	-	39.9
5D	4	37.5	-	-	(4.7 )	-	39.9
6A	8	64	-	-	-	-	64
6B	8	64	-	-	-	-	64
6C	5	37.5	-	-	(4.7 )	(1.5)	40.6
6D	5	37.5	-	-	(4.7)	-	39.9
7A	9	64	-	-	-	-	64
7B	9	64	-	-	-	-	64
7C	6	37.5	-	-	(4.7 )	(1.6)	40.7
7D	6	37.5	-	-	(4.7 )	(1.6 )	40.7
8A	10	64	-	-	-	-	64
8B	10	64	-	-	-	-	64
8C	7	37.5	-	-	(4.7 )	-	39.9
8D	7	37.5	-	-	(4.7)	-	39.9
9A	11	64	-	-	-	-	64
9B	11	64	-	-	-	-	64
9C	8	37.5	-	-	(4.7)	-	39.9
9D	8	37.5	-	-	(4.7)	-	39.9
10A & Roof	12	64	-	42.3 #	-	-	69.3
10B & Roof	12	64	-	36.4	-	-	68.6
10C & Roof	9	37.5		20.3 (13.7)	(4.7)	(2.7 )	47.2
10D & Roof	9	37.5		35.5	(4.7)	(2.7)	45.6

Notes

(@) UBW-e: extension area of open flat roof of Unit 1C is disregarded, as the enhanced value is insignificant.

(#) Potential enhancement value as regards an unauthorised structure on and over the roof of Unit 10A subject to an outstanding Building Order under section 24(1) of Cap 123 is disregarded. Both valuation experts have agreed the reinstatement cost of the affected roof area is $100,000.

Conversion Factor of Ancillary Area in arriving at the Converted Floor Area	Mr Charles Chan	Mr Li	Lands Tribunal
Open Flat Roof of Unit 1A and Unit 1B	1/6		1/6
Open Flat Roof of Unit 1C and Unit 1D	1/8		1/8
Top Roof	1/8		1/8
Roof Top Structure of Unit 10A subject to Building Order	0		0
UBW-a: Covered Flat Roof of Unit 1A	1/2	0	1/2
UBW-b: Enclosed Top Roof of Unit 10C	1/3	0	1/4
UBW-c: Covered Light Well from 1st to 10th Floor	1/2	0	1/2
UBW-d: Encroachment of Common Corridor	1/2	0	1/2
UBW-e: Extension of Open Flat Roof of Unit 1C	1/16	0	0

Appendix II

ASSESSMENT (EUV)

Table 1 – Assessment of the Market Value ($/sq m) of

Reference Domestic Unit

Reference Domestic Unit – Flat 5A, Bonny View House, 63-65 Wong Nai Chung Road

(Date of Valuation: 13 June 2022)

Domestic Comparable		Flat 20A, Amigo Mansion, 79A Wong Nai Chung Road	Flat 15B, Amigo Mansion, 79A Wong Nai Chung Road	Flat 16A, Champion Court, 67 & 69 Wong Nai Chung Road	Flat 20B, Champion Court, 67 & 69 Wong Nai Chung Road	Flat 7A, Green Valley Mansion, 51 Wong Nai Chung Road
Reference Number		D3	D5	D8	D10	D13
Actual Level		20	15	17	21	8
View		Racecourse	Racecourse	Racecourse & Building	Racecourse & Building	Racecourse
P-ASP Date		25/4/2022	23/2/2022	16/11/2021	23/6/2021	14/4/2021
OP		1975	1975	1972	1972	1964
Consideration ($)		13,450,000	12,500,000	26,800,000	25,200,000	21,180,000
Converted Saleable Area (sm)		50.9	49.3	92.4	92.7	102.1
Unit Rate ($/sm)		264,244	253,550	290,043	271,845	207,444
Adjustments Time Size Age Floor Level View		-0.9% -1.3% -1% -6.5% -10%	-0.5% -1.5% -1% -4% -5%	-2.9% 2.8% -0.3% -5% -15%	-3% 2.9% -0.3% -7% -10%	-2.2% 3.8% 1.8% -0.5% 0%
Total Adjustment		-18.5%	-11.5%	-19.6%	-16.7%	2.8%
Adjusted Unit Rate ($/sm)		215,359	224,392	233,195	226,447	213,252
Average Adjusted Unit Rate		$222,529/sq m (say $220,000/sq m)

Table 2 - Market Value of Domestic Unit

Domestic Unit	Actual Floor Level	Converted Area (sq m)	Adjustments					Reference Unit Rate (/m2)	Market Value ($,000) (about)
			Floor Level	Size	View	Internal Condition (*)	Total
1A	3/F	65.5	-2	-0.2	0	0	-2.2	220,000	14,090
1B	3/F	65.7	-2	-0.2	-5	3	-4.3	220,000	13,830
1C	1/F	40.9	-3	2.3	-25	-3	-27.8	220,000	6,500
1D	1/F	41.2	-3	2.3	-25	-3	-27.8	220,000	6,540
2A	4/F	64	-1.5	0	0	0	-1.5	220,000	13,870
2B	4/F	64	-1.5	0	-5	0	-6.4	220,000	13,180
2C	1/F	39.9	-3	2.4	-20	0	-20.5	220,000	6,980
2D	1/F	39.9	-3	2.4	-20	3	-18.2	220,000	7,180
3A	5/F	64	-1	0	0	-3	-4	220,000	13,520
3B	5/F	64	-1	0	-5	0	-6	220,000	13,240
3C	2/F	39.9	-2.5	2.4	-20	0	-20.1	220,000	7,010
3D	2/F	39.9	-2.5	2.4	-20	-3	-22.5	220,000	6,800
4A	6/F	64	-0.5	0	0	3	2.5	220,000	14,430
4B	6/F	64	-0.5	0	-5	0	-5.5	220,000	13,310
4C	3/F	40.7	-2	2.3	-15	0	-14.8	220,000	7,630
4D	3/F	40.7	-2	2.3	-15	0	-14.8	220,000	7,630
5A	7/F	64	0	0	0	3	3	220,000	14,500
5B	7/F	64	0	0	-5	3	-2.2	220,000	13,770
5C	4/F	39.9	-1.5	2.4	-15	-3	-16.8	220,000	7,300
5D	4/F	39.9	-1.5	2.4	-15	3	-11.7	220,000	7,750
6A	8/F	64	0.5	0	0	0	0.5	220,000	14,150
6B	8/F	64	0.5	0	-5	-3	-7.4	220,000	13,040
6C	5/F	40.6	-1	2.3	-15	-3	-16.5	220,000	7,460
6D	5/F	39.9	-1	2.4	-15	0	-13.8	220,000	7,570
7A	9/F	64	1	0	0	0	1	220,000	14,220
7B	9/F	64	1	0	-5	0	-4.1	220,000	13,500
7C	6/F	40.7	-0.5	2.3	-15	0	-13.5	220,000	7,750
7D	6/F	40.7	-0.5	2.3	-15	0	-13.5	220,000	7,750
8A	10/F	64	1.5	0	0	0	1.5	220,000	14,290
8B	10/F	64	1.5	0	-5	0	-3.6	220,000	13,570
8C	7/F	39.9	0	2.4	-15	0	-13	220,000	7,640
8D	7/F	39.9	0	2.4	-15	-3	-15.6	220,000	7,410
9A	11/F	64	2	0	0	0	2	220,000	14,360
9B	11/F	64	2	0	-5	-3	-6	220,000	13,240
9C	8/F	39.9	0.5	2.4	-15	0	-12.5	220,000	7,680
9D	8/F	39.9	0.5	2.4	-15	-3	-15.1	220,000	7,450
10A & Roof	12/F	69.3	2.5	-0.5	0	3	5	220,000	15,910#
10B & Roof	12/F	68.6	2.5	-0.5	-5	3	-0.2	220,000	15,060
10C & Roof	9/F	47.2	1	1.6	-15	-3	-15.4	220,000	8,780
10D & Roof	9/F	45.6	1	1.8	-15	0	-12.6	220,000	8,770
Total									428,660

Notes

(*) The adjustment for “Good”, “Fair” and “Poor” internal condition of the unit is “+3%”, “0%” and “-3%” respectively.

(#) An unauthorised structure on and over the Roof of Unit 10A subject to an outstanding Building Order under section 24(1) of Cap 123 is disregarded. Both sides’ valuation experts have agreed the reinstatement cost of the affected roof area is $100,000, which is deductible.

Appendix III

COMPARABLE (RDV)

Assessment of Hypothetical Reference Domestic Unit ($/sq m)

Reference Domestic Unit is the Simplex Unit on 13/F (Actual Floor Level of 16/F) of the Hypothetical Development

(Agreed Date of Valuation: 6 January 2025)

(1) Development ND2: The Aster, No 7A Shan Kwong Road (built in 2017 but renovated recently in 2023)

Flat	31B	31A
Adopted by	Both valuation experts have selected the 2 transactions. As Mr Charles Chan has based on a different hypothetical development not selected by the LT, his analysis is therefore irrelevant for further consideration.
Ref. No.	ND2 (T26)	ND2 (T27)
Carpark	1 space	1 space
Actual Level	28	30
View	Open	Open
P-ASP Date	12/9/2024	17/1/2024
Consideration (HK$,000)	49,397	45,400
Adjustment for Cash Rebate (HK$,000)*	5,656	5,198
Adjustment for Carpark (HK$,000)	3,800	3,800
Net Consideration (HK$,000)	39,941	36,402
Converted Salable Area (sq m)	117.6	117.6
Adjustment (adopted by Mr Li)	21%	14%
Adjusted Unit Rate (per sq m)	410,958	352,877
LT’s Adjusted Unit Rate (Average)	$381,918/sq m say $382,000/sq m
*Note	According to the price list, these comparables are eligible for cash rebate of 11.45%. The analysis of Mr Li has not taken this into account but the Tribunal considers such amount needs to be discounted for comparison analysis. Apart from this, LT accepts all adjustments of the other factors adopted by Mr Li.

(2) Development ND3: The Leighton Hill, No. 28 Broadwood Road (built in 2002)

Flat	15A, Tower 3	26A Tower 8	36A Tower 6	27A Tower 5	22A Tower 7	23B Tower 3
Adopted by	Only Mr Li has adopted these transactions for direct comparison.
Ref. No.	ND3(T1)	ND3(T2)	ND3(T3)	ND3(T4)	ND3(T5)	ND3(T6)
Carpark	1 space	1 space	1 space	1 space	1 space	1 space
Actual Level	14	24	33	25	21	22
View	Racecourse	Racecourse	Racecourse	Racecourse	Racecourse	Racecourse
P-ASP Date	8/8/2024	4/8/2024	18/7/2024	8/7/2024	2/7/2024	25/6/2024
Consideration (HK$,000)	53,500	49,800	75,800	86,000	55,000	56,380
Adjustment for Carpark (HK$,000)	4,950	4,950	4,950	4,950	4,950	4,950
Net Consideration (HK$,000)	48,550	44,850	70,850	81,050	50,050	51,430
Converted Saleable Area (sq m)	139.2	117.9	158.7	163.3	139.2	139.2
Adjustment (adopted by Mr Li)	17.9%	9.7%	6.3%	11.5%	11.9%	9.7%
Adjusted Unit Rate (per sq m)	$411,210	$417,307	$474,566	553,403	402,342	405,307
Average Unit Rate	$444,023/sq m
LT’s Adjusted Unit Rate	$444,023 x (0.85/0.9) = $419,355/sq m say $419,000/sq m (Note: The Leighton Hill has a wide range of recreational facilities that include a decent clubhouse, indoor and outdoor swimming pools etc. Mr Li’s adjustment for “Scale & Facilities” is “-10%” while LT considers it should be “-15%”. Apart from this, LT accepts all adjustments of the other factors adopted by Mr Li.)

(3) Development ND4: Block A Winfield Building, No. 3 Ventris Road (built in 1984 but renovated in 2012)

Flat	Unit 2 on 21/F, Tower A
Adopted by	Only Mr Li has adopted these transactions for direct comparison.
Ref No.	D4 (T1)
Carpark	1 space
Actual Level	23
View	Racecourse
P-ASP Date	20/5/2023
Consideration (HK$,000)	83,600
Adjustment for Carpark (HK$,000)	3,250
Net Consideration (HK$,000)	80,350
Converted Saleable Area (sq m)	186.4
Adjustment (adopted by Mr Li)	0.7%
Adjusted Unit Rate (per sq m)	$434,080
LT’s Adjusted Unit Rate	$434,080 x 0.9 = $390,672/sq m say $391,000/sq m (Note: Winfield Building has a swimming pool, fitness room, children playing area and indoor function room etc. Mr Li’s adjustment for “Scale & Facilities” is “0%” while LT considers it should be “-10%”. Apart from this, LT accepts all adjustments of the other factors adopted by Mr Li.)

(4) Development ND5: The Altitude, No 20 Shan Kwong Road (built in 2011)

Flat	41 C	26 D	21 A
Adopted	Mr Charles Chan has not adopted these transactions for direct comparison as they were completed more than 6 months before the RVD date of valuation. The Tribunal takes the view of Mr Li to include these transactions since the size of the flats is highly compatible with the reference unit.
Ref. No.	ND5 (T1)	ND5 (T2)	ND5 (T3)
Carpark	1 space	1 space	1 space
Actual Level	38	24	20
View	Open	Open	Open
P-ASP Date	10/5/2024	14/2/2024	22/11/2023
Consideration (HK$,000)	44,730	41,300	40,500
Adjustment for Carpark (HK$,000)	2,000	2,000	2,000
Net Consideration (HK$,000)	42,730	39,300	38,500
Converted Salable Area (sq m)	135.2	142.2	140.2
Adjustment (adopted by Mr Li)	27%	42.7%	41.3%
Adjusted Unit Rate (per sq m)	$401,384	$394,382	$388,021
Average Unit Rate	$394,596
LT’s Adjusted Unit Rate (Average)	$394,596 x 0.95 = $374,866/sq m say $375,000/sq m (Note The Attitude has clubhouse, entertainment and catering facilities are available. Mr Li’s adjustment for “Scale & Facilities” is “0%” while LT considers it should be “-5%”. Apart from this, LT accepts all adjustments of the other factors adopted by Mr Li)

Appendix IV

ASSESSMENT (RDV)

(Date of Valuation: 6 January 2025)

Residual Valuation

Gross Development Value (GDV)
Total GDV					$1,281,270,000
Marketing Cost	3%			x	0.97
Present Value for	3.25 years	@	5.4%	x	0.8429
GDV					$1,047,583,009
Less Cost
(i) Demolition Cost
Demolitions	3,613 sq m (G)	x	$2,200/sq m (G)		$7,948,600
Professional Fees		@	6%	x	1.06
Profits		@	19%	x	1.19
Present Value for	0.375 years	@	5.4%	x	0.9805
					$9,830,850
(ii) Development Cost	3,844 sq m				$281,086,686
Professional Fees		@	6%	x	1.06
Profits		@	19%	x	1.19
Present Value for	2 years	@	5.4%	x	0.9002
					$319,177,384
Gross Land Value					$718,574,775
Developer’s Profit on Land		@	19%	÷	1.19
					$603,844,349
Stamp Duty Legal Cost		@ @	4.25% 0.1%	÷ ÷	1.0425 1.001
Land Value					$578,648,545
			say		$579,000,000