THE DIRECTOR OF LANDS v. ZITTA INVESTMENTS LTD (formerly known as KIND BOSS INVESTMENTS LTD)

LDLR 6 /2023

[2024] HKLdT 73

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 6 OF 2023

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J U D G M E N T

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Introduction and Background

1.  This is an application by the Applicant, ie the Director of Lands, for determination of the amount of compensation payable to the Respondent for land resumed under the Lands Resumption Ordinance, Cap 124 (“the Ordinance”) on 12 October 2023.

2.  The Respondent was the former registered owner of Ground Floor including the Cockloft of a 6-storey tenement building (“the Building”) situated at No 24 San Shan Road, Kowloon, Hong Kong (“the Property”), being 1/6^th equal and undivided share of and in Subsection 5 of Section C of Kowloon Inland Lot No 1445 (“the Lot”).

3.  By a notice of resumption dated 5 June 2012 and published in Gazette Notice No 4130 (“the Notice”), the Government informed the applicant that the Lot would be resumed for the implementation of the Urban Renewal Authority Development Project MTK/1/002 at San Shan Road/ Pau Chung Street, Ma Tau Kok, Kowloon on the expiration of three months from the date of affixing of the Notice to the Property. The Notice was affixed to the Property on 15 June 2012 and the date of reversion would be the midnight of 15 September 2012 (ie 16 September 2012). Hence, the latter should be the date of valuation.

4.  On 5 October 2012, pursuant to section 6(1)(a) of the Ordinance, the Applicant made an offer of compensation in respect of the resumption of the Property. The Respondent did not accept the compensation offer but accepted provisional payment on 30 October 2012 which was subsequently paid on 27 November 2014.

5.  In the meantime, the Respondent had applied for leave to apply for judicial review in HCAL 89/2013 alleging that certain guidelines published by the Lands Department in relation to compensation for resumption of land are unlawful, with the result that the compensation offered to the applicant for the resumption of its property is inadequate. This application was dismissed by the Court of First Instance on 11 October 2013.

6.  By section 4(1)(d) of the Limitation Ordinance, Cap 347, any action to recover any sum recoverable by virtue of the Ordinance had become statute barred after the expiration of 6 years from the date on which the cause of action[1]  but on 12 October 2023, the Applicant filed a Notice of Application to Determine Compensation for Land Resumed under the Ordinance (“Form 5”), requesting the Lands Tribunal to determine the amount of compensation payable in respect of the resumption of the Property. Service of the Form 5, the Applicant’s witness statement dated 13 March 2024 by Ms Ng Hoi Ling and an expert report prepared by Ms Sat Wei Ling (“Ms Sat”) dated 5 February 2024 (“the Expert Report”) as well as the Order dated 24 June 2024 fixing the date of trial on 26 August 2024, and the Trial Bundle have all been duly effected by ordinary post to / by leaving at the registered office address of the Respondent, in compliance with rule 7 of the Lands Tribunal Rules, Cap 17A (“the Rules”).

7.  Despite rule 36 of the Rules and the Order of the Tribunal dated 1 December 2023 granting leave for the Respondent to file and serve its Notice of Opposition on or before 22 December 2023, the Respondent has failed to do so nor filed any evidence in opposition in this action by the time stipulated by the Rules and the Court’s order.

8.  I am satisfied that the Respondent has been duly informed of this hearing and by the start of the hearing on 26 August 2024, nobody that has been duly authorised by the Respondent appeared. No expert report as regards the assessment of the open market value of the Property as at 16 September 2012 had been submitted by the Respondent either.

9.  Also, I confirmed with Ms Tessa Chan, counsel for the Applicant, that the Applicant has waived the limitation issue in the present case. Thus, I proceeded with this hearing in the absence of the Respondent.

The Property

10.  By reference to the Expert Report, the Property comprised a shop unit on the ground floor (including the Cockloft) of the Building which was built on 28 March 1957. It was situated on the southwestern side of San Shan Road some midway between its junctions with Pak Tai Street to the northwest and Pau Chung Street to the southeast in the Ma Tau Kok/ To Kwa Wan district. Save for residential-cum commercial development named as Jubilant Place[2] which lies on the opposite side of the street, developments in the vicinity comprise a mixture of similar old tenement buildings built in the 1950s to 1960s and a few high-rise commercial/residential composite buildings. This is predominately a residential neighbourhood served by trades that catered for the daily necessities of the residents.

11.  According to the Applicant, the parties have failed to agree over the amount of compensation payable to date. The Applicant now applies for the determination of the amount of compensation to be paid in respect of the resumption of the Property at HK$14,570,000 as suggested by the Expert Report.

Legal Basis of Compensation

12.  Pursuant to section 10(1) of the Ordinance, the Tribunal shall determine the amount of compensation (if any) payable in respect of a claim submitted to it under section 6(3) or 8(2) “on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim.” Pursuant to section 10(2)(a), this is to be determined on the basis of “the value of the land resumed and any buildings erected thereon at the date of resumption”. (underline added)

13.  Further, pursuant to section 12(d) of the Ordinance, subject to the provisions of section 11 and to the provisions of paragraphs (aa), (b) and (c) of this section, “the value of the land resumed shall be taken to be the amount which the land if sold by a willing seller in the open market might be expected to realize”.

14.  The Applicant submitted that, accordingly, the compensation payable to the Respondent as the former registered owner of the Property shall be determined based on an objective assessment of the open market value of the Property. Here, the Applicant referred particularly to Siu Sau Kuen v Director of Lands [2013] 6 HKC 557, 567C-E at §34 where the Court of Appeal stated the test as follows:

“Whether, on a balance of probabilities, the evidence discloses that, as at the date of resumption, redevelopment of the property resumed was likely. Such likelihood may be demonstrated by:

(i) actual proposals by the applicant to redevelop the property (or unlikelihood demonstrated by the absence of such proposals) whether on its own or by merger with other properties, or

(ii) evidence of redevelopment in the vicinity of the resumed property (whether accompanied by evidence of redevelopment plans for the resumed property or not), so long as such evidence of redevelopment in the vicinity supports a finding that redevelopment on its own or merger of the resumed property with other properties giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale.” (underline added)

15.  In Chan Shiu Chong & Others v Director of Lands, LDLR 1-3/2012 (unreported, dated 19 November 2018) in which the Tribunal refused to assess the subject properties on the redevelopment basis upon applying the test in Siu Sau Kuen, taking into account, inter alia, the facts (i) that the combined site areas were too small for similar developments in the vicinity, (ii) that the applicants there were only 1of the many owners of the multi-owned buildings concerned, with no evidence of suspected acquisition transaction, (iii) that it could not be true that buildings with the same physical attributes shall all have redevelopment potential and (iv) that there was no evidence of interest from private developer acquiring the subject properties, with no transaction over a long period of time. See §§20-25 of the judgment.

16.  In the present case, the Lot has a site area of about 15’ x 60’, ie 83.61 sq m. In the absence of evidence to the contrary, I agree with the Applicant that the similar facts in Chan Shiu Chong afore-stated apply to the captioned and therefore the open market value of the Property should be assessed on its existing use value without any redevelopment potential.

The Valuation

17.  By reference to the Expert Report again, the Property had the following particulars:

Saleable Area of Main Accommodation on G/F (with headroom of up to 5.08 metres at the front and rear)	53.25 sq m
Space under Staircase (headroom <2 metres)	2.45 sq m
Yard at the rear	19.96 sq m
Cockloft in the middle	14.64 sq m
Flat Roof over Showers/toilet on Cockloft level (about 70%)	4.51 sq m
Frontage onto San Shan Road	3.18 metres

18.  Ms Sat applied the direct comparison method in the assessment of the open market value of the Property as at 16 September 2012. She relied on 5 comparable transactions in the vicinity and made the following adjustments thereto:

Comparable	S5	S4	S3	S2	S1
Address	Shop E, G/F, Fung Yue Mansion, Nos 47/53 Kowloon City Road	Shop D, G/F, Fung Yue Mansion, Nos 47/53 Kowloon City Road	Shop 3, G/F, Fok On Building, Nos 90-98D Ma Tau Chung Road	Shop 3, G/F, Sanford Mansion, Nos 143-155 Pak Tai Street	Shop 2 with Yard, G/F, Siu Fung Court, No 98 Tam Kung Road
Particulars
Date of Sale	25 October 2012	25 October 2012	12 September 2012	13 July 2012	14 June 2012
Consideration	HK$10,000,000	HK$15,500,000	HK$16,000,000	HK$20,350,000	HK$12,680,000
Building Age	1982	1982	1976	1987	1993
Saleable Area	50.00 sq m	72.80 sq m	65.03 sq m	74.08 sq m	48.34 sq m
Yard[3]	0.00 sq m	0.00 sq m	0.00 sq m	0.00 sq m	6.60 sq m
Effective Area	50.00 sq m	72.80 sq m	65.03 sq m	74.08 sq m	49.44 sq m
Unit Rate (/m2)	HK$200,000	HK$212,912	HK$246,040	HK$274,703	HK$256,472
Clear Frontage	3.66 m	3.15 m	4.02 m	4.45 m	2.20 m
Headroom	3.57 m	3.57 m in front & rear (65%)	3.53	2.53	3.15
Adjustments
Time[4]	-3.6%	-3.6%	0.0%	4.3%	8.1%
Location	15.0%	15.0%	-20.0%	-10.0%	-15.0%
Frontage[5]	-1.9%	0.1%	-3.4%	-5.1%	3.9%
Layout	0.0%	2.0%	3.0%	0.0%	0.0%
Headroom[6]	1.6%	2.2%	1.7%	3.7%	2.5%
Quantum[7]	-2.9%	2.8%	0.8%	3.1%	-3.1%
Overall	8.2%	18.5%	-17.9%	-4.0%	-3.6%
Valuation
Adjusted Unit Rate (/m2)	HK$216,400	HK$252,301	HK$201,999	HK$263,715	HK$247,239

19.  Applying equal weighting to the above adjusted unit rates, Ms Sat arrived at an average of HK$236,331 per sq m.

20.  Further, applying the following conversion factors to the Property:

Space under Staircase – ½;

Yard – 1/6;

Cockloft – ¼;

Flat Roof over Shower/Toilet on Cockloft level – 1/24,

Ms Sat assessed the market value of the Property as at 16 September 2012 at HK$14,570,000.

Conclusion

21.  Having reviewed the valuation by Ms Sat and her respective assumptions, I consider that they were all reasonable. And in the absence of evidence to the contrary, I determine the open market value of the Property for the purpose of section 10(2)(a) of the LRO in the sum of $14,570,000.

Orders

22.  Accordingly, I order that the Applicant do pay the Respondent compensation for the resumption of the Property in the sum of $14,570,000.

23.  The matters of professional fees, interest, costs and any other ancillary and consequential matters shall be adjourned to a date to be fixed by parties if it needs.