CAPITAL LAKE PROPERTY LTD AND OTHERS v. YAU LUEN STEVEDORING TRANSPORTATION PACKERS COMPANY LTD

LDCS 15000/2022

[2024] HKLdT 42

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 15000 OF 2022

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BETWEEN

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JUDGMENT

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Background

1.  This is the applicants’ application for a compulsory sale order (“the Application”) issued on 29 July 2022 under section 3 of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”). The applicants seek to sell all the undivided shares of Kwai Chung Town Lot No 120 (“the Lot”) together with the building erected thereon known as The Venus Industrial Building (“the Building”) for the purposes of redevelopment.

2.  The Building, being situated at Nos 45-51 Tai Lin Pai Road, Kwai Chung, New Territories of Hong Kong, comprises a 7-storey industrial building. Occupation permit (“OP”) for the Building, No NT 85/72, was issued on 8 May 1972, permitting the following occupation:

Lower Ground Floor (“LG/F”)	:	Storage area, transformer room, switch room, rubbish store and lavatories for non-domestic use.
Ground Floor (“G/F”)	:	Factory space, covered parking area for 14 vehicles and lavatories for non-domestic use.
1st (“1/F”) -5th (“5/F”) Floors	:	Factory space and lavatories per floor for non-domestic use.

3.  The following undivided shares of the Lot have been allotted to the various units of accommodation:

Unit	Undivided Share of and in the Lot
LG/F and Water Tank on the Upper Roof of the Building	112/812
G/F	84/812
Parking Spaces Nos 1 to 14 on G/F	14 x 2/812 (each)
1/F	112/812
2/F	112/812
Front Portion on 3/F	56/812
Rear Portion on 3/F	56/812
Front Portion on 4/F	56/812
Rear Portion on 4/F	56/812
5/F	112/812
Roof	28/812

4.  As at the date of the Application, the applicants collectively owned all the undivided shares of the Lot save for the following owned by the respondent:

Unit	Undivided Share of and in the Lot
LG/F and Water Tank on the Upper Roof	112/812
Parking Spaces No 13 on G/F	2/812
Parking Spaces No 14 on G/F	2/812
Total:	116/812 (ie 14.29%)

5.  The applicants are represented by Ms Nancy Ngai (“Ms Ngai”) together with Ms Catherine Hau, instructed by Messrs Simon Reid-Kay & Associates while the respondent is represented by Ms Verna Lui (“Ms Lui”), instructed by Messrs Yu, Chan & Yeung, Solicitors.

6.  The issues in dispute and for the determination by the Tribunal are:

(a) Whether the applicants collectively owned (and still own) not less than 80% of the undivided shares in the Lot thereby entitling them to make the Application under section 3 of the Ordinance?

(b) Whether redevelopment of the Lot is justified due to the age and/or state of repair of the Building pursuant to section 4(a) of the Ordinance?

(c) Whether the applicants have taken reasonable steps to acquire all the undivided shares in the Lot in compliance with section 4(2)(b) of the Ordinance?

(d) What was the market value (which is usually termed by the valuation profession as the Existing Use Value or just “EUV”) of each of the units in the Building as at 10 May 2022 as assessed in accordance with Part 1 of Schedule 1 to the Ordinance; and

(e) If an order for sale of the Lot be granted, what the redevelopment value (“RDV”) of the Lot should be for the purpose of setting a reserve price of the public auction according to paragraph 2 of Schedule 2 to the Ordinance.

The Evidence

7.  The applicants have filed the following documents in support of the Application:

(a) a witness statement dated 6 March 2023 and two supplemental statements dated 22 February 2024 and 12 March 2024 respectively from Mr Ng King Ming (“Mr Ng”), Director of the applicants;

(b) a Building Condition Survey Report and a Structural Survey Report both dated 6 March 2023 by Mr Wong Wing Cheung, Dennis (“Mr Wong”) of Prudential Surveyors International Limited;

(c) the following reports by Ms Dorothy Yeuk Yu Chow (“Ms Chow”) of Colliers International (Hong Kong) Limited (“Colliers”);

(i) an Application Report dated 18 July 2022 pursuant to Part 1 of Schedule 1 to the Ordinance;

(ii) a Supplemental EUV Report dated 3 March 2023 on the revised EUV as at 10 May 2022 and RDV;

(iii) a Rebuttal Report dated 27 November 2023 against the Valuation Report relied on by the respondent prepared by Mr Samson Ho (“Mr Ho”) of Jones Lang LaSalle Limited (Jones Lang LaSalle); and

(iv) an Updated RDV Report dated 25 January 2024.

8.  As said, the respondent relied on the following reports by Mr Ho

(i) a Valuation Report dated 16 October 2023 on the EUV as at 10 May 2022 and RDV;

(ii) a Rebuttal Report dated 16 October 2023; and

(iii) an Updated RDV Report dated 29 January 2024.

9.  Ms Chow and Mr Ho prepared a joint statement dated 19 February 2024 setting out their agreements and disagreements on EUV and RDV together with their consequential amendments.

Whether the Applicant is entitled to make the Application

10.  Section 3(1) of the Ordinance requires an applicant to have not less than 90% of the undivided shares in a lot before he can make an application.

11.  Section 3(5) of the Ordinance provides that the Chief Executive in Council may, by notice in the Gazette, specify a percentage lower than the percentage mentioned in section 3(1) in respect of a lot belonging to a class of lots specified in the notice.

12.  The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice was gazetted on 22 January 2010 and came into operation on 1 April 2010 (“the Notice”). Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%. Those classes of lots include “a lot that is not located within an industrial zone and each of the buildings erected on the lot—

(i) is an industrial building; and

(ii) was issued with an occupation permit at least 30 years before the relevant date (ie the date of the application under the Ordinance).”

13.  Despite the Lot is located within an industrial zone under the Draft Kwai Chung Outline Zoning Plan No S/KC/30 exhibited on 10 June 2022 prior to the Application, the OP for the Building was issued on 8 May 1972, that is not less than 30 years before the date of the Application. Therefore, the Notice is applicable and the threshold percentage should be 80%.

14.  I am satisfied that as at the date of Application, the applicants, then owning 85.71% of the undivided shares of the Lot, were entitled to file the Application under section 3(1) of the Ordinance.

EUV as at 10 May 2022

15.  Pursuant to section 4(1)(a)(i) of the Ordinance, if there is a dispute between the parties on the EUV of the units as assessed in the application, the Tribunal shall determine the proper value.

Assessment of EUV of LG/F of the Building

16.  The Building fronts on two streets each with pedestrian entrance, one on the LG/F facing Tai Lin Pai Road which is served by a passenger lift and a common staircase that lead to the upper floors and the second, with a cargo lift and also another common staircase on the G/F facing Wah Sing Street which is a cul-de-sac sloping from its junction with Tai Lin Pai Road to a higher level at the rear. There is as well a vehicular entrance to the Building lying beside the second pedestrian entrance. Inside that vehicular entrance are the 14 carparking spaces referred to in §2 above. In respect of this second pedestrian entrance, however, it abuts an open area (within the lot boundary) which has been modified to provide direct vehicular access to the G/F unit in 2017[1].

17.  Furthermore, there are two side lanes by the sides of the Building abutting Tai Lin Pai Road, one to the right and one to the left each leading to a common staircase that serves the upper floors. As at the date of inspection on 13 March 2024, the access to each of these side lanes was locked by a gate possibly for security reasons.

18.  By their joint statement dated 19 February 2024, Ms Chow and Mr Ho agreed on the following particulars of the G/F and LG/F units in the Building:

Floor	Saleable Area (m2)	Frontage (m)	Depth (m)	Headroom (m)
LG/F	1,649.51	23.93	61.85	4.88
G/F	1,257.69	5.73	60.65	4.42

19.  In addition, the two experts had reached the following agreements:

(1) Each of the 14 car parking spaces on G/F had an EUV of $1,750,000;

(2) Unit rate for the Roof of the Building at 1/10^th of the unit rate of 5/F; and

(3) Unit rate for the Upper Roof of the Building at 1/18^th of the unit rate of 5/F.

20.  Ms Chow and Mr Ho however had differences in opinion on the assessed EUV in respect of the remaining parts of the Building. They relied on the following transactions all in the Kwai Chung district as comparables for the assessment of the EUV of the LG/F unit:[2]

Comp Ref	Address	Date of OP	Transaction Date	Consideration	Saleable Area (m2)	Frontage (m)	Depth (m)	Headroom (m)	Unit Rate (/m2)
EG1	Workshop A, G/F, So Tao Centre, 11-15 Kwai Sau Road	1990	23 Jul 2021	$8,800,000	67.35	8.10 + 4.23	11.11	5.00	$130,661
EG 2	Factory Unit 3, G/F, Private Car Parking Space No P22 on 1/F & Lorry Parking Space No L26 on 1/F Vanta Industrial Centre, 21-33 Tai Lin Pai Road	1988	7 Jun 2021	$88,500,000	815.15	21.51	46.35	4.98	$102,435*
EG 3	Unit B, G/F & Parking Space No 17 on 3/F, Gold King Industrial Building, 35-41 Tai Lin Pai Road	1987	24 May 2021[3]	$33,800,000	246.28	9.51	28.28	4.95	$125,061*
EG 4	Workshop 01 & 02, G/F (together with Air-Conditioning), The Star, 18 Yip Shing Street	2017	27 May 2019	$16,890,000	129.51	10.93	12.38	4.84	$130,415

* The experts agreed to assume the value of a carparking space at $2,000,000 and that of a lorry carparking space at $3,000,000.

21.  Then, save for the agreement on the adjustments for time on the basis of the Private Flatted Factories Price Index published by the Rating and Valuation Department (“RVD”), that for age of premises on the basis of 1% per 2 years, and for the presence of waiver for Comparable EG3 at -7.5%, Ms Chow and Mr Ho differed in their opinion on the following adjustments:[4]

	Ms Chow	Mr Ho
Location	EG1: +5% EG2: 0% EG3: 0% EG4: +5%	EG1: 0% EG2: 0% EG3: 0% EG4: 0%	EG1: +5% EG2: 0% EG3: 0% EG4: +10%
Accessibility		EG1: 5% EG2: 0% EG3: 0% EG4: +10%
Frontage	1% per 2 m	1% per 1 m
Return Frontage	-10% for EG1 and EG4	-5% for EG1 but -3% for EG4
Quantum/ Size	1% per 40 m2	1% per 50 m2
Headroom	1% per 0.25 m	1% per 0.5 m
Layout	EG1: -20% EG2: -5% EG3: -10% EG4: -20%	EG1: +5% EG2: 0% EG3: 0% EG4: +5%

22.  On the basis of the above, Ms Chow assessed the EUV of the LG/F unit of the Building at a unit rate of $62,500 per sq m[5] whereas Mr Ho arrived at $88,900 per sq m[6].

Comparable EG1

23.  So Tao Centre is situated on Kwai Sau Road close to the ingress of Tai Lin Pai Road which has been a traditional industrial area flanked on both sides by industrial buildings of various ages. In fact, Comparable EG1 is located opposite to Hotel Cozi – Oasis, a 4 star hotel which was converted from an industrial building. According to Ms Chow, this comparable was previously occupied as a car repairing workshop.

24.  Ms Chow initially did not make any location adjustment. After further review, Ms Chow agreed with Mr Ho to adopt +5% according to the general accessibility and environment of this comparable.

25.  While Mr Ho also made no location adjustment, he opined that the Building is more accessible by pedestrian visitors or workers from the nearest MTR Kwai Hing Station. He applied +5%. Ms Chow, as afore-said and I agree. The nearest footbridge that leads from the MTR station across Kwai Chung Road, the main distributor in the locality, indeed comes close to the junction of Tai Lin Pai Road and Wah Sing Street where trades such as estate agents, convenience stores, money changers are situated. Previously a branch of the Standard Chartered Bank was situated there as well. This is a convenient retail location where for instance, the Incorporated Owners of the Building sees fit to install a vending machine at the pedestrian entrance on Tai Lin Pai Road so as to collect some income.

26.  Notwithstanding the above, I agree with Ms Chow that a frontage adjustment of 1% per 2 metres appears more appropriate. Even for shops with high retail potential, the Tribunal had indicated in Tai Ping Restaurant Limited v Director of Lands, LDLR 1/2013 (unreported, dated 8 December 2014) at §48 that there should not be any adjustment for frontage unless the frontage in consideration is clearly superior or inferior to the norm that the benefits or disabilities which the frontage produces are clearly evident. In that case, the Tribunal adopted an adjustment rate of 2% per 1 metre difference in full frontage.

27.  Indeed, this comparable comprises two slanting contiguous frontages which as explained by Mr Ho, both fronting onto the same Kwai Sau Road. I prefer, like Mr Ho, to treat these two frontages altogether as one continuous, extensive frontage and therefore adopt his adjustment for “return frontage” at -5%.

28.  On the other hand, in view of the retail potential of LG/F of the Building on Tai Lin Pai Road and the significant difference in size between this comparable (at a saleable area of 67.35 sq m) and the accommodation of the LG/F of the Building (at a saleable area of 1,649.51 sq m), I am prepared to adopt Ms Chow’s adjustment for size at 1% per 40 m². And in view of its shallow depth of some 11.11 metres when compared with that of the LG/F unit at 61.85 metres, I would treat it as some sort of a Zone A tantamount to a zoning analysis for shops. Therefore, I agree with Mr Chow’s proposed layout adjustment of -20% in preference to Mr Ho’s +5%.

29.  Similarly, I prefer Ms Chow’s more sensitive adjustment for headroom at 1% per 0.25 m as sometimes, a cockloft can be added within a workshop that possesses a high headroom either for storage purposes or for use as an ancillary office. In any event, as submitted by Ms Lui in her closing submission, the difference in headroom between the LG/F unit and the common comparables is minimal.

Comparable EG2

30.  Comparable EG2 is situated very close to the junction of Tai Lin Pai Road and Kwai Sau Road. As at the date of joint inspection on 13 March 2024, it appeared to be vacant but to be previously occupied as a car servicing workshop. Although both Ms Chow and Mr Ho agreed no adjustment should be allowed for its location/accessibility, I am prepared to apply a similar +5% as for Comparable EG1.

31.  Similarly, I am prepared to apply 1% per 2 metres of frontage and a less sensitive adjustment of 1% per 50 m² for size because of its sheer size up to a saleable area of 815.51 sq m. Again, I prefer Ms Chow’s more sensitive adjustment for headroom at 1% per 0.25 m.

32.  In respect of layout, however, I agree with Mr Ho that as the subject or the comparable are not truly shop premises, the deeper or the higher depth-to-frontage ratio does not necessarily mean an inferior layout or shape. “It depends on the actual usage/function of the premises.”[7] Here Mr Ho made a useful comparison of the comparable and LG/F of the Building by having their floor plans laying side by side.[8] I agree to having no adjustment for layout as suggested by Mr Ho.

Comparable EG3

33.  Gold King Industrial Building is situated just to the northeast of the Building on Tai Lin Pai Road. Comparable EG3 comprises an industrial workshop next to the LG/F unit of the Building, being separated mainly by the vehicular entrance to Gold King Industrial Building. On the other hand, there exists a temporary waiver granted by the Lands Department since 14 April 2011 allowing a small portion (24 sq m) of the workshop unit to be used for the purpose of a metalware retail shop. The workshop, ie Unit A across the entrance of this building on the other side has been subdivided to become a canteen and a retail showroom for stationery.

34.  Ms Chow and Mr Ho agreed that there should be no adjustment for location/accessibility. I have no further comment.

35.  Again, I agree to adopt 1% per 2 metres of frontage, and an adjustment of 1% per 40 m² for size and an adjustment of at 1% per 0.25 m for headroom. I also prefer Mr Ho’s nil adjustment for layout to Ms Chow’s -10%.

36.  Ms Chow and Mr Ho had agreed that there should be an adjustment of -7.5% for the presence of the waiver above referred to.

Comparable EG4

37.  Compared with the Building, The Star is situated away from Tai Lin Pai Road, separated further by some 110 steps uphill. This is relatively an isolated location near the dead end of Yip Shing Street the vehicular access to which is from Castle Peak Road – Kwai Chung, another distributor in the district further up the hill. I agree with Mr Ho that accessibility to this comparable is relatively inferior and an adjustment of +10% is appropriate.

38.  And because of its relatively inferior accessibility and little retail potential, I agree to adopt Ms Chow’s less sensitive adjustment for frontage at 1% per 2 metres. Its so-called “return frontage” referred to by the experts is mainly a display window and I agree therefore to adopt Mr Ho’s proposed adjustment of -3%.

39.  I am prepared to adopt an adjustment at 1% per 40 m² for size and at 1% per 0.25 m for headroom. The latter is particularly justified when, during the joint site inspection on 13 March 2024, the comparable was observed to have headroom high enough to accommodate a double-decker for parking of two vehicles on the same footprint.

40.  The greatest dispute between the two valuation experts is on the adjustment for layout because this comparable comprises in fact two workshops which are separated by an entrance that leads to a common staircase: Ms Chow proposed -20% while Mr Ho proposed +5%.

41.  This comparable is currently occupied as a car servicing centre. Although each of the two workshops has a relatively small size, either of them is of regular shape and is big enough to accommodate the parking of a car for repair and service. In comparison, the LG/F of the Building is relatively deep and a lot of space would have to be dedicated as passageway for transporting goods inside the property. I agree with Mr Chow’s proposed layout adjustment of -20% in preference to Mr Ho’s +5%.

42.  Thus, on the basis of the analysis above, I arrive at the following:

Comp Ref	Unit Rate (/m2)	Adjustments										Adjusted Unit Rate (/m2)
		Time	Location/ Accessibility	Frontage	Return Frontage	Quantum/ Size	Head room	Layout	Temporary Waiver	Age	Total
EG1	$130,661	1.6%	5.0%	7.9%	-5.0%	-39.6%	-0.5%	-20.0%	0.0%	-9.0%	-52.2%	$62,456
EG 2	$102,435	0.8%	5.0%	1.2%	0.0%	-16.7%	-0.4%	0.0%	0.0%	-8.0%	-18.2%	$83,792
EG 3	$125,061	1.7%	0.0%	7.2%	0.0%	-35.1%	-0.3%	0.0%	-7.5%	-7.5%	-39.6%	$75,537
EG 4	$130,415	-3.4%	10.0%	6.5%	-3.0%	-38.0%	0.2%	-20.0%	0.0%	-22.5%	-57.7%	$55,166
										Average:		$69,238

43.  Obviously, all the transactions analysed above are not good as comparables in terms of timing[9] and particularly the vast differences in size when compared with the relevant date of 10 May 2022 and the relatively large size of the LG/F unit of the Building. The adjusted results for Comparables EG1 and EG4 come up to a discount of more than 50%. If I focus instead on Comparables EG2 and EG3 which lie closer to the subject on Tai Lin Pai Road and have bigger sizes, the average of the two has an adjusted unit rate of $79,665 per sq m.

44.  While Comparables EG1, EG2, EG3 and EG4 were dated some 10 months or more prior to the relevant date of 10 May 2022, I note the valuation experts had found more recent transactions for use in the assessment of the gross development value (“GDV”) in the residual valuation that aims at determining the market value of the Lot:

Comp Ref:	Address	Age	Date of Transaction	Consideration	Saleable Area (m2)	Frontage (m)	Headroom (m)	Depth (m)	Unit Price (/m2)
NG1	Workshop D, G/F, Effort Industrial Centre, 2-8 Kung Yip Street	1978	28 Jun 2023	$20,680,000	157.41	4.85 on Tai Lin Pai Road	5.49	21.3	$131,377
NG2	Workshops G1 & G2, G/F, Kam Shing Industrial Building, 1-11 Kwai Wing Road	1972	21 Apr 2023	$24,780,000	410.20	13.06 on Kwai Chung Road	4.27	30.54	$60,410

Comparable NG1

45.  Comparable NG1 is in respect of Workshop D, G/F, Effort Industrial Centre the transaction of which took place some 13 months after the relevant date of valuation. This is not a good reason to exclude it only when it occurred post the valuation date. At §23.43 on p712 of Land Compensation & Valuation Law in Hong Kong, 4^th Edn, by Gordon N Cruden & Liza Jane Cruden, it is stated as follows:

“The Hong Kong practice of admitting and relying on hindsight is firmly established and frequently followed. Any evidence of value after the relevant date is admissible, unless the particular statutory provisions clearly prohibit it being considered. Valuers are therefore generally able to use hindsight, as do the courts.”

46.  Similarly, in Bishopsgate Parking (No2) Ltd v The Welsh Ministers [2012] RVR 237 at §63, the judgment stated as follows:

“ … evidence of a post valuation date event may be relied on to establish an objective fact as at the valuation date. Thus a comparable may provide evidence of what the hypothetical vendor and purchaser would in fact have agreed. That an actual vendor and an actual purchaser have agreed a price on a property that is comparable with the reference property is undoubtedly capable of constituting evidence of what would have been agreed in the hypothetical transaction for the reference property itself. It is this evidential function that was accepted in Melwood. To put it in the most obvious way, the open market value of a precisely comparable property on the day after the valuation date would clearly be good evidence of the price that would have been agreed the day before for the subject property since the factors affecting the minds of the parties to the actual transaction would have been the same as those which would have affected the minds of the parties to the hypothetical sale on the previous day. Of course, the degree to which the comparable transaction will assist in determining the price of the reference property will depend on how similar the factors that are material to the valuation were at, respectively, the date of the transaction and the date of the valuation and on whether adjustments can satisfactorily be made for such differences as there were. But this applies both to pre valuation date comparables and to post valuation date comparables.” (underline added)

47.  Although Effort Industrial Building has its address as 2-8 Kung Yip Street, Workshop D on G/F in fact abuts Tai Lin Pai Road and has been occupied by a convenience store since as early as January 2005[10]. In terms of distance, this comparable lies at approximately 25 metres southwest of the junction between Tai Lin Pai Road and Wah Sing Street while the LG/F of the Building, on the other hand, is about twice its distance northeast of that street junction. I agree with Mr Ho that adjustment for location is not required.

48.  Having said that, this comparable unit has been granted a waiver so as to permit its current use as a convenience store since 2008 following a planning approval on 17 November 2006. By the agreement for sale and purchase dated 28 June 2023, this comparable was agreed to be sold and purchased on an “as is” basis and in the physical state and condition as it stands. This was then subject to the existing tenancy in favour of the convenience store operation for a term of three years commencing from 2 January 2023 at a monthly rent of $65,000 (exclusive of rates, management fees and the waiver fees payable to the Government). For this reason, I agree that a discount is necessary but not as much as proposed by Mr Ho at 20% which might be equivalent to $20,680,000 x 20% = $4,136,000; in the case for adjustment for Comparable EG3 above, only a discount of 7.5% was agreed by both valuation experts. Although Ms Chow tried to distinguish that the waiver for Comparable EG3 was in respect of a very small portion (24 sq m) of the property, I consider the timing and difficulty in applying waiver for use as a convenience store would not be significantly different. I consider a discount of 10% adequate.

49.  In passing, I note Ms Ngai submitted that Comparable NG1 should not be adopted as comparable. She tried to gain support by referring, in her closing submission, to Dragon House Investment Limited & Another v Secretary for Transport & Another [2005] 4 HKLRD 480, (2005) 8 HKCFAR 668 at 686 to 687 where the Court of Final Appeal held that:

“48. In the light of later experience we think that, unless there is no alternative, the two-stage approach should be discarded. The object of the inquiry is to ascertain the value of the subject land without taking into account the prospect of obtaining a modification of the terms of the lease to permit development. The best evidence of this is likely to be provided by prices paid for comparable lands which have no prospect of development. The two-stage approach is a curiously roundabout method of determining the amount of compensation payable on resumption. It involves taking the open market value of land obtained by the use of comparables with development potential and attempting to quantify the element which must be left out of account in order to arrive at the value of the land subject to restrictions. But the only objective way of quantifying the element to be left out of account is to ascertain the value of the land subject to restrictions and deduct it from the open market value. And once the value of the land subject to restrictions has been ascertained, the job is done, making the two-stage approach unnecessary.” (highlight added)

50.  In the present case, however, I consider the best comparable in terms of timing and location is Comparable NG1. Dragon House Investment has to be distinguished particularly when the open market of land resumed under the Lands Resumption Ordinance, Cap 124 is assessed, no account may be taken of any element in the open market value which reflects the prospect of a modification of the terms of the Government lease. See §14 of the judgment. The market value, ie the EUV of a property to be assessed pursuant to Part 1 of Schedule 1 to the Ordinance is not subject to such qualification or restriction.

51.  Again, I agree with Ms Chow’s less sensitive frontage adjustment at 1% per 2 metres but a higher adjustment rate for size at 1% per 10 sq m because of the significant difference in size between the reference unit and this comparable. I further agree with Ms Chow for her adjustment for headroom at 1% per 0.25 metre.

52.  And because of the longitudinal shape of this comparable, I do not apply any adjustment for layout.

Comparable NG2

53.  The transaction date for Comparable NG1 was even closer to the relevant date of 10 May 2022. However, Kam Shing Industrial Building is situated further away while its Workshops G1 & G2 on G/F enjoys a good frontage onto Kwai Chung Road and a rear frontage on Kwai Wing Road which lies in proximity to Comparable EG1. However, I consider Ms Chow’s adjustment for location for industrial premises in the same locality at +20% excessive; I prefer an adjustment of +5%.

54.  Again, the saleable area of this comparable is 410.20 sq m which is just 25% of that of the LG/F of the Building. I am prepared to adopt Ms Chow’s adjustment for size at 1% per 40 m².

55.  When compared with the LG/F unit of the Building, this comparable has a more regular shape and a shallower depth. I therefore adopt a layout adjustment -5%.

56.  Similarly, I prefer Ms Chow’s more sensitive adjustment for headroom at 1% per 0.25 m.

57.  Hence, my analysis for these more recent comparables is as follows:

Comp Ref:	Unit Price (/m2)	Adjustments									Adjusted Unit Price (/m2)
		Time	Location/ Accessibility	Frontage	Quantum/ Size	Headroom	Layout	Temporary Waiver	Age	Total
NG1	$131,377	-4.2%	0.0%	9.5%	-37.3%	-2.4%	0.0%	-10.0%	-3.0%	-44.0%	$73,571
NG2	$60,410	-3.9%	+5.0%	5.4%	-31.0%	2.4%	-5.0%	0.0%	0.0%	-28.6%	$43,133

58.  Having reviewed the above, I consider the adjusted unit rate for Comparable NG2 significantly out of line with the others. I am prepared to adopt a round figure of $74,000 per sq m in respect of the EUV of the LG/F unit of the Building, ie

1,649.51 sq m x $74,000 per sq m = $122,063,740

                                                       Say $122,100,000

Assessment of EUV of G/F of the Building

59.  When the valuation experts proceeded to assess the EUV of the G/F unit of the Building, they made use of their assessed result for LG/F and tried to apply various adjustments on it. For instance, Ms Chow made the following adjustments:[11]

Floor	Saleable Area (m2)	Depth (m)	Frontage (m)	Headroom (m)	Adjustments					Unit Rate (/m2)
					Location	Quantum	Frontage	Headroom	Total
LG/F	1,649.51	61.85	23.93	4.88						$62,500
G/F	1,257.69	60.65	5.73	4.42	0.0%	9.8%	-9.1%	-1.8%	-2.0%	$61,250

60.  Mr Ho, on the other hand, applied different adjustments:[12]

Floor	Saleable Area (m2)	Depth (m)	Frontage (m)	Headroom (m)	Adjustments							Unit Rate (/m2)
					Size	Headroom	Frontage	Layout	Internal Condition	Accessibility	Total
LG/F	1,649.51	61.85	23.93	4.88								$88,900
G/F	1,257.69	60.65	5.73	4.42	7.8%	-0.9%	-18.2%	-5.0%	-5.0%	-5.0%	-25.1%	$66,586

That is, Mr Ho made further adjustments for layout, internal condition and accessibility.

61.  In his Rebuttal Report dated 16 October 2023 at §2.2[13], Mr Ho commented that the G/F unit can be accessible from the entrance on Tai Lin Pai Road through the common staircase[14]. In his opinion, “it is less convenient compared to lower ground floor with direct access from Tai Lin Pai Road.”

62.  On the other hand, I agree with the applicants that vehicular access to the G/F unit from Wah Sing Street is no inferior, if not better, than that to the LG/F unit. And as Wah Sing Street is a cul-de-sac, traffic is not busy and loading and unloading is even more convenient than on Tai Lin Pai Road. Direct vehicular access to the G/F is also facilitated by the run-in and run-out modification as described in §16 above. I agree with Ms Chow that the adjustment for accessibility proposed by Mr Ho is not justified.

63.  In respect of the layout, Mr Ho again in his Rebuttal Report dated 16 October 2023 at §2.2[15] suggested that the G/F unit is “L” in shape with a relatively narrow entrance. As agreed by both valuation experts, the entrance has a width of some 5.73 metres (18’9”) which is still adequate for vehicular access. However, I agree with Mr Ho that manoeuvring of vehicles is affected and so is the flexibility of usage of the workshop.

64.  In comparison, as commented by me at trial, the front portion of the LG/F unit is capable of subdivision into uses by different occupiers as is what happens to Unit A, G/F of Gold King Industrial Building. Mr Ho has helpfully placed the layout plans of the two side by side for comparison which is copied herein at Appendix II.

65.  Although the partitioning within the LG/F unit had been changed by virtue of an addition and alteration plan approved by the Building Authority on 15 January 2008 so as to accommodate a dangerous goods store[16], I opine that at the end of the day, the intending purchaser can do what he/she wishes to do with this rectangular space. Ms Chow accepted that it would not be difficult to obtain approval for changing the present layout. I agree therefore with Mr Ho’s adjustment for layout at -5%. I am not persuaded by Ms Chow that the adjustment would have double-counted the effect of frontage on the value of the G/F when I have chosen a less sensitive adjustment for frontage.

66.  As regards internal condition, Mr Ho explained at trial that the fitting out conditions of the LG/F unit appeared to be better, However, Part 1 of Schedule 1 to the Ordinance requires the market value, ie the EUV, of the property included in the compulsory sale application to be assessed on a vacant possession basis.

67.  In Cumberland Consolidated Holdings Limited v Ireland [1946] KB 264, Lord Green MR said at 270-271 explained the meaning of vacant possession of a property in the sense that its physical condition was such that there was no substantial impediment to the landlord's use of the property, or a substantial part of it. As has been pointed out by me in many other compulsory sale applications, such fitting out, for better or worse, therefore should not affect the market value to be paid by a prospective purchaser when the property was assessed on a vacant possession basis. For instance, in Gainfield Investment Limited & Others v Legend Time Limited & Others, LDCS 16000/2014 (unreported, 17 October 2016), the Tribunal, though commenting on the adjustment for layout instead of on the internal condition, illustrated the point at §138 of the judgment that “when old units are purchased, new purchasers are prepared to renovate the units”. Thus, the question we should ask is on the basis of vacant possession, would a prospective purchaser of a unit pay an additional value for its particular internal condition. I share the view of Ms Chow that both the LG/F and G/F units of the Building are in a similar building condition so that no adjustment on internal condition is necessary.

68.  Then, as the size difference between the LG/F and G/F units is not significant, I prefer Mr Ho’s proposed size adjustment at 1% per 50 m².

69.  Finally, I agree to adopt 1% per 2 metres of frontage and an adjustment at 1% per 0.25 m for headroom.

70.  In view of the above, my determination of the EUV of the G/F unit of the Building is as follows:

Floor	Saleable Area (m2)	Depth (m)	Frontage (m)	Headroom (m)	Adjustments						Unit Rate (/m2)
					Location/ Accessibility	Quantum	Frontage	Headroom	Layout	Total
LG/F	1,649.51	61.85	23.93	4.88							$74,000
G/F	1,257.69	60.65	5.73	4.42	0.0%	7.8%	-9.1%	-1.8%	-5.0%	-8.6%	$67,636

71.  That is the EUV for the G/F unit of the Building is

1,257.69 sq m x $67,636 per sq m = $85,065,121

                                                       Say $85,100,000

Assessment of EUV of Upper Floor Units of the Building

72.  In respect of the upper floor units, Ms Dorothy Chow and Mr Ho agreed their particulars as follows:[17]

Floor Level (Portion)	Saleable Area (m2)	Headroom (m)	Internal Condition	Loading Capacity (lb/sq ft)
1	1,710.77	3.66	Fair (0%)	200
2	1,698.09	3.66	Fair (0%)	150
3 (Front Portion)	829.13	3.66	Fair (0%)	150
3 (Rear Portion)	859.74	3.66	Fair (0%)	150
4 (Front Portion)	829.13	3.66	Reasonable (+3%)	150
4 (Rear Portion)	859.74	3.66	Reasonable (+3%)	150
5	1,698.09	3.35	Poor (-3%)	150
Roof (Portion A)	755.60
Roof (Portion B)	427.21
Roof (Portion C)	282.49
Upper Roof	23.36

73.  Further, the two experts relied on the following transactions all in Kwai Chung district as comparables for the assessment of the EUV of Front Portion of 3/F which was adopted as the reference unit:[18]

Comp Ref	Address	OP	Transaction Date	Consideration	Saleable Area (m2)	Headroom (m)	Loading Capacity (lb/sq ft)	Unit Rate (/m2)
EU1*	Factory A & B, 9/F and Car Parking Space No 13 on 1/F, Kwai Fong Industrial Building, 9-15 Kwai Cheong Road	1975	16 Mar 2022	$31,000,000	640.23	3.2	150	$46,077[19]
EU2*	Factory B, 6/F, Kam Bun Industrial Building, 13-19 Kwai Wing Road	1973	10 Feb 2022	$19,900,000	505.53	3.51	150	$39,365
EU3*	Workshop A & B, 13/F, Ching Cheong Industrial Building, 1-7 Kwai Cheong Road	1972	18 Jan 2022	$35,250,000	793.57	3.30	150	$44,420
EU4	Factory 13, 9/F, Vanta Industrial Centre, 21-33 Tai Lin Pai Road	1988	27 Sep 2021	$28,180,000	575.94	3.30	150	$48,929
EU5	Factory E, 1/F, Kwai Shing Industrial Building (Phase II), 42-46 Tai Lin Pai Road	1973	8 Sep 2021	$13,000,000	367.22	3.35	150	$35,401
EU6	Units 2, 4 & 5, 4/F, Block C, Wah Tat Industrial Centre, 8 Wah Sing Street	1985[20]	1 Sep 2021	$19,380,000	427.69	3.85	256	$45,313
EU7	Units A & B, 1/F, Gold King Industrial Building, 35-41 Tai Lin Pai Road	1987	2 Aug 2021	$41,880,000	825.68 + F/R: 31.62	3.15	208.85	$50,400
EU8	Factory Flat A & B, 17/F, On Dak Industrial Building, 2-6 Wah Sing Street	1979	23 Jul 2021	$27,000,000	596.63	3.35	150	$45,254
EU9	Factory 19, 15/F, Vanta Industrial Centre, 21-33 Tai Lin Pai Road	1988	21 Jul 2021	$29,340,000	546.13	3.30	150	$53,723
EU10	Factory 19, 16/F, Vanta Industrial Centre, 21-33 Tai Lin Pai Road	1988	1 Jun 2021	$25,700,000	546.13	3.30	150	$47,058
EU11*	Factory B, 4/F and Car Parking Space No 4 on G/F, Kwai Shing Industrial Building (Phase I), 36-40 Tai Lin Pai Road	1972	22 Apr 2022	$15,650,000	387.57 + F/R: 51.35	3.30	150	$34,458[21]
EU12	Factory E, 13/F, Kwai Shing Industrial Building (Phase II), 42-46 Tai Lin Pai Road	1973	21 Mar 2022	$10,500,000	269.45	3.30	150	$38,968
EU13*	Factory A, 5/F, Kwai Fong Industrial Building, 9-15 Kwai Cheong Road	1975	30 Mar 2022	$14,880,000	318.66	3.20	150	$46,696
EU14*	Factory B, 6/F, Tai Tak Industrial Building, 2-12 Kwai Fat Road	1972	23 Aug 2022	$23,790,000	628.68	3.43	150	$37,841

* These are common comparables adopted by the two valuation experts.

74.  The greatest dispute between the two valuation experts lies on their choice of comparables as well as the consequential adjustments. Ms Chow adopted most of the comparables above save for EU11, EU12 and EU13 which, as argued by her, are not comparable because of their relatively small sizes. Eventually, Ms Chow agreed only to make reference to EU11 and EU13 because they were transactions close to the relevant date of 10 May 2022. On the other hand, Mr Ho only agreed to make reference to those comparables that were transacted in 2022.

75.  The two experts however agreed on the adjustments for time, building age and floor level difference. They failed to agree on the adjustments for headroom, size and building facilities:[22]

	Ms Chow	Mr Ho
Time	By reference to Private Flatted Factories Price Index published by RVD
Age	1% per 2 years
Floor	Workshops on lower floors are better because of more convenience in delivery of goods at 0.5% per floor
Headroom	1% per 0.25m	1% per 0.5m
Quantum/ Size	1% per 100 m2	1% per 60 m2
Building Facilities	Nil because the total floor area and/or number of industrial units contained within the comparable buildings are much larger.	On the basis of quality of lobby lift, ese of loading/unloading, provision of passenger/cargo lifts and quality of management

Comparables EU1 & EU13

76.  Kwai Fong Industrial Building lies on Kwai Cheong Road which branches off Tai Lin Pai Road at its junction opposite Vanta Industrial Centre. The two experts agreed there be no adjustment for location and therefore both agreed to adopt the transaction of Factories A & B on 9/F together with a carparking space of the building as comparable.

77.  Ms Chow and Mr Ho however failed to agree on the value of the carparking space that has to be deducted from the transaction price so as to deduce the unit rate of the transaction: Ms Chow proposed $1,800,000 while Mr Ho proposed $1,300,000. Neither of them provided any explanation on how they arrived at their respective proposal or assumption.

78.  Notwithstanding this, the valuation experts happened to have agreed the value of a carparking space inside the Building at $1,750,000. Indeed, Ms Chow had, in her Supplemental Report dated 3 March 2023, provided the following comparables in the vicinity:[23]

Comp Ref	Address	Age of Building	Date of Agreement	Consideration
NCPS1	Car Parking Space No 10, 1/F, Mai On Industrial Building, 17-21 Kung Yip Street	1977	4 Apr 2022	$1,480,000
CPS1	Parking Space No 21, G/F, Hoover Industrial Building, 26-38 Kwai Cheong Road	1974	15 Mar 2022	$1,750,000
CPS2	Car Parking Space No 18, 1/F, Mai Wah Industrial Building, 1-7 Wah Sing Street	1974	5 Jan 2022	$2,200,000
CPS3	Car Parking Space No 11, G/F, Tai Tak Industrial Building, 2-12 Kwai Fat Road	1972	18 Nov 2021	$1,740,000
CPS4	Car Parking Space No 10, G/F, Tai Tak Industrial Building, 2-12 Kwai Fat Road	1972	18 Nov 2021	$1,740,000
CPS5	Parking Space No 27, G/F, Wing Cheong Industrial Building, 58-70 Kwai Cheong Road	1974	10 Sep 2021	$2,000,000
CPS6	Car Parking Space No P7, LG/F, Wah Sing Industrial Building, 12-14 Wah Sing Street	1980	1 Sep 2021	$1,650,000
CPS7	Car Parking Space No 16, 1/F, Mai Wah Industrial Building, 1-7 Wah Sing Street	1974	24 Jun 2021	$2,020,000
CPS8	Private Car Parking Space No P30, 1/F, Vanta Industrial Building, 21-33 Tai Lin Pai Road	1988	15 Jun 2021	$1,800,000

79.  Judging from the above carparking transactions which range from a low of $1,480,000 (in April 2022) in an industrial building built in 1977 to a high of $2,020,000 (in June 2021) or $2,200,000 (in January 2022) in another industrial building built in 1974, it appears that the age or even the relative location of the building may not have a direct impact on the value of a carparking space therein.

80.  During the period from 24 June 2021 to 4 April 2022, the Private Flatted Factories Price Index moved from 891.2 to 876.6, ie a drop of mere 1.6%. Thus, the difference between $1,480,000 and $2,020,000 or $2,200,000 cannot be explained by the time change.

81.  In the determination of the market value of a carparking space in Secretary for Transport v Wong Bun, LDRW 14 of 2001 (unreported, dated 3 May 2002), the Tribunal agreed at §22 that the carparking ratio of a particular building is an important element of comparison. This observation was followed in Oriental Generation Limited & Others v Luk Yung & Others, LDCS 4000/2013 and more recently in Century Supreme International Limited v Kam Chi Kit Charles & Others, LDCS 24000/2018 (unreported, dated 21 January 2022). Unfortunately, the two valuation experts had not provided the carparking ratio of these comparable buildings for the Tribunal’s consideration.

82.  During the joint site inspection on 13 March 2024, however, I was given to understand that the Incorporated Owners of the Building sees fit to allow their carparking spaces to be rented out to outsiders at $28 per hour. I have recorded the hourly carparking rates in the vicinity as follows:

Name of Building	Address	Hourly Rate for Parking	Remark
Reason Group Tower	403 Castle Peak Road	$33	Entrance on Wah Sing Street behind the Building
Wah Sing Industrial Building	12-14 Wah Sing Street	$24	In fact, the rate is valid for the first half hour only
Mai Wah Industrial Building (the carparking spaces of which achieved the highest prices in the comparables provided by Ms Chow)	1-7 Wah Sing Street	$40	In fact, the rate is $20 for the first half hour and then $60 for the first hour and thereafter $70 per hour
On Dak Industrial Building	2-6 Wah Sing Street	$30	In fact, the rate is $15 for the first and second half hour and then $30 for the third and fourth half hour and thereafter $120 per hour
Kwai Shing Industrial Building Phase 1	36-40 Tai Lin Pai Road	$35	$70 for two hours but $170 for 3 hours, and thereafter $100 per hour
Ching Cheong Industrial Building	1-7 Kwai Cheong Road	$28	In fact, the rate applicable private car parking is $14 for the first 2 half hour, $28 for the third hour, $56 for the fourth half hour
Kwai Fong Industrial Building (ie Comparable EU1)	9-15 Kwai Cheong Road	$15	In fact, the rate is $15 for the first hour, $30 for the second hour, $60 for the third hour, $120 for the fourth hour and thereafter $120 per hour
Manhattan Centre	8 Kwai Cheong Road	$21
Tai Tak Industrial Building	2-12 Kwai Fat Road	$20	In fact, the rate is $20 for the first hour, $40 for the second hour, $80 for the third hour, and thereafter $120 per hour
Kam Bun Industrial Building	13-19 Kwai Wing Road	$10	In fact, the rate is $10 for the first hour, $30 for the second hour, $80 for the third hour, and thereafter $60 per hour

83.  Having reviewed the above, I am prepared to adopt $1,500,000 as the value of the carparking space in Comparable EU1.

84.  And as Factories A & B on 9/F altogether has a relatively large size, up to about 75% of that the reference unit, ie Front Portion of 3/F of the Building, I prefer to adopt the size adjustment proposed by Ms Chow at 1% per 100 m².

85.  However, in view of the smaller size for Factory A on 5/F which has a saleable area of about 38% of that the reference unit, I would rather adopt a size adjustment of 1% per 60 m² as proposed by Mr Ho.

86.  I also prefer to adopt the higher adjustment for headroom at 1% per 0.25m.

87.  As regards the adjustment for building facilities, as I pointed out at trial, the Building is only served by one passenger lift and one cargo lift. It may be sufficient in the normal days but if one of the lifts is under repair or fails to function as in the case of the joint site inspection on 13 March 2024, it will affect the efficiency of the industrial operation that may be carried out at the Building. I therefore prefer to adopt Mr Ho’s proposed adjustment of -5% for the building facilities.

Comparable EU2

88.  Kam Bun Industrial Building is situated on Kwai Wing Road which branches off from Tai Lin Pai Road after turning in from Kwai Chung Road which runs in parallel to it. It is indeed situated opposite to an open carparking area which is located at the junction of Kwai Wing Road and Kwai Sau Road on which Comparable EG1 abuts. Perhaps for reasons discussed in §25 above, Ms Chow and Mr Ho agreed there be an adjustment of +5% for location/accessibility.

89.  Factory B, 6/F of Kam Bun Industrial Building has a saleable area of about 61% of that of the reference unit. Again, I prefer to adopt the size adjustment proposed by Ms Chow at 1% per 100 m². I adopt also the higher adjustment for headroom at 1% per 0.25m.

90.  No adjustment for building facilities is applied by Mr Ho for this comparable and I have no comment.

Comparable EU3

91.  Ching Cheong Industrial Building is situated at the corner of Tai Lin Pai Road and Kwai Cheong Road. I agree with the two experts there should be no adjustment for location.

92.  Workshop A & B, 13/F of Ching Cheong Industrial Building has a saleable area up to 96% of that of the reference unit. I prefer to adopt the size adjustment proposed by Ms Chow at 1% per 100 m². I adopt also the higher adjustment for headroom at 1% per 0.25m.

93.  As described by Mr Ho in his Rebuttal Report dated 16 October 2023 at §2.3.2, Ching Cheong Industrial Building is well-maintained and served by three spacious passenger/cargo lifts.[24] He proposed an adjustment of -10% for building facilities and I agree.

Comparables EU4, EU9 & EU10

94.  Owing to these transactions taking place in June or September 2021 instead of around the relevant date in May 2022, Mr Ho did not adopt them as comparables.

95.  I have discussed the location of Vanta Industrial Centre in §30 above. Ms Chow allowed no adjustment for its location/accessibility and I am content to agree with it though in the EUV assessment for the G/F unit, I have applied +5% for Comparable EG2.

96.  Factory 13 on 9/F, Factory 19 on 15/F & 16/F of Vanta Industrial Centre have saleable areas up to 66% or 69% of that of the reference unit. I prefer to adopt the size adjustment proposed by Ms Chow at 1% per 100 m². I adopt also the higher adjustment for headroom at 1% per 0.25m.

97.  While Mr Ho did not adopt this transaction as a comparable, he found that Vanta Industrial Centre is served by 18 passenger/cargo lifts. It is accessible by a 40-feet container. Certainly, this is a newer industrial building with better building specifications and quality. I consider there should be at least a -15% adjustment for building facilities.

Comparables EU5, EU11 & EU12

98.  Kwai Shing Industrial Building is situated on Tai Lin Pai Road, relatively close to the Building Therefore, both Ms Chow and Mr Ho agreed that there should no adjustment for location and/or accessibility.

99.  However, Factory E on 1/F of Phase II comprises a relatively small unit at about 44% of that of the reference unit while Factory B on 4/F of Phase I comprises also a relatively small unit at about 47% of that of the reference unit. The saleable area of Factory E on 13/F of Phase II is even less. They are not good comparables and if I were to adopt them for reference, I would apply a higher size adjustment of 1% per 60 m²as proposed by Mr Ho.

100.  Also, as either Phase I or Phase II of this industrial building is served by 4 passenger/cargo lifts, I am prepared to apply a -5% adjustment for building facilities as proposed by Mr Ho.

Comparable EU6

101.  Wah Tat Industrial Centre is situated opposite the Building across Wah Sing Street. In terms of accessibility, I consider it inferior because workers or visitors have to negotiate uphill along Wah Sing Street. I am prepared to apply an adjustment of +5% for this.

102.  Units 2, 4 & 5, 4/F, Block C of Wah Tat Industrial Centre comprise altogether a saleable area of 427.69 sq m which is about 52% of that of the reference unit. I prefer to adopt the size adjustment proposed by Ms Chow at 1% per 100 m². I adopt also the higher adjustment for headroom at 1% per 0.25m.

103.  In terms of building facilities, Block C of Wah Tat Industrial Centre is served by 2 passenger lifts and 8 cargo lifts. Also, the building has spacious loading and unloading platforms accessible by containers. I consider there should be at least a -15% adjustment for building facilities.

Comparable EU7

104.  As described in §33 above, Gold King Industrial Building is situated just next to the Building on Tai Lin Pai Road. I agree with Ms Chow that there should be no adjustment for location. However, in Tai Fat Development (Holding) Co Ltd v The Incorporated Owners of Gold King Industrial Building (2017) 20 HKCFAR 325, it was confirmed that parking spaces nos. 1, 2, 4, 5, 11, 12, 13, 14, 20, 36, 37, 38 and 39 belong to the common areas of Gold King Industrial Building and incidentally, parking spaces nos 1 & 2 lie just outside Units A & B, 1/F, ie the subject of this comparable. I consider there should be at least -10% adjustment for this because of the loading and unloading convenience.

105.  There would be however no adjustment for size as the saleable area of Units A & B, 1/F altogether is similar to the reference unit. I adopt also the higher adjustment for headroom at 1% per 0.25m.

106.  As well, Gold King Industrial Building is a relatively newer industrial building served by 8 passenger/cargo lifts. During the joint inspection on 13 March 2024, I found this comparable building is also well maintained. I consider there should be at least a -15% adjustment for building facilities.

107.  In passing, Mr Ho had referred to the Government’s intention to upgrade the fire safety standards of pre-1987 industrial buildings by passing the Fire Safety (Industrial Buildings) Ordinance, Cap 636. Mr Wong had explained in his Condition Survey Report dated 6 March 2023 at 5.2.1.1 as follows:[25]

“The Fire Safety (Industrial Buildings) Ordinance (Cap 636) has come into operation since 19 June 2020 and its implementation is divided mainly into phases:

Phase 1: Inspection for target industrial buildings which were constructed or had their building plans submitted in or before March 1973;

Phase 2: Inspection for target industrial buildings which were constructed or had their building plans submitted in or before 1 March 1987.

As the Building was completed in 1972, it falls within Phase 1 of the implementation.

Pursuant to the site inspection, it was found that some provisions of the Building in respect of means of escape, fire resisting construction, means of access for firefighting and rescue, as well as the fire service installations and equipment cannot fully comply with the above-mentioned standards …”

108.  In Mr Ho’s opinion, therefore, sales of units in industrial buildings constructed after 1987, eg Vanta Industrial Centre and Gold King Industrial Building should not be adopted to value by the direct comparison method the subject industrial premises which was built in 1972. It is also for this reason that I agree to apply a -15% adjustment for building facilities as afore-said.

Comparable EU8

109.  On Dak Industrial Building is also situated on Wah Sing Street behind the Building. I am prepared to accept Ms Chow’s nil adjustment for location.

110.  Factory Flat A & B, 17/F altogether comprises a saleable area of some 72% of that of the reference unit. I prefer to adopt the size adjustment proposed by Ms Chow at 1% per 100 m². I adopt also the higher adjustment for headroom at 1% per 0.25m.

111.  This industrial building is also newer than the Building and is served by 1 passenger lift and 2 cargo lifts. I consider an adjustment of -5% for building facilities appropriate.

Comparable EU14

112.  Tai Tak Industrial Building is situated at a corner site surrounded by Kwai Fat Road, Kwai Wing Road, Kwai Sau Road and Tai Lin Pai Road, obliquely opposite Vanta Industrial Centre. Both Ms Chow and Mr Ho agreed to allow +5% for location/accessibility.

113.  Factory B, 6/F, Tai Tak Industrial Building has a saleable area of about 76% of that of the reference unit. Again, I prefer to adopt the size adjustment proposed by Ms Chow at 1% per 100 m². I adopt also the higher adjustment for headroom at 1% per 0.25m.

114.  Notwithstanding its similar age as the Building, Tai Tak Industrial Building is served by two cargo lifts and 1 passenger lift. I agree with Mr Ho that an adjustment of -5% for building facilities is appropriate.

115.  On the basis of the above, I arrive at the following:

Comp Ref	Unit Rate (/m2)	Adjustments									Adjusted Unit Rate (/m2)
		Time	Location/ Accessibility	Age	Size	Floor	Headroom	Loading Capacity	Building Facilities	Total
EU1*	$46,077	2.1%	0.0%	-1.5%	-1.9%	3.0%	1.8%	0.0%	-5.0%	-1.7%	$45,294
EU2*	$39,365	0.4%	5.0%	-0.5%	-3.2%	1.5%	0.6%	0.0%	0.0%	3.7%	$40,822
EU3*	$44,420	-1.4%	0.0%	0.0%	-0.4%	5.0%	1.4%	0.0%	-10.0%	-5.9%	$41,799
EU4	$48,929	1.5%	0.0%	-8.0%	-2.5%	3.0%	1.4%	0.0%	-15.0%	-19.2%	$39,535
EU5	$35,401	1.5%	0.0%	-0.5%	-7.7%	-1.0%	1.2%	0.0%	-5.0%	-11.3%	$31,401
EU6	$45,313	1.5%	5.0%	-6.5%	-4.0%	0.5%	-0.8%	-5.0%	-15.0%	-23.0%	$34,891
EU7	$50,400	0.7%	-10.0%	-7.5%	0.0%	-1.0%	2.0%	-5.0%	-15.0%	-31.6%	$34,474
EU8	$45,254	1.6%	0.0%	-3.5%	-2.3%	7.0%	1.2%	0.0%	-5.0%	-1.5%	$44,575
EU9	$53,723	1.6%	0.0%	-8.0%	-2.8%	6.0%	1.4%	0.0%	-15.0%	-17.0%	$44,590
EU10	$47,058	0.8%	0.0%	-8.0%	-2.8%	6.5%	1.4%	0.0%	-15.0%	-17.3%	$38,917
EU11*	$34,458	2.5%	0.0%	0.0%	-7.2%	0.5%	1.4%	0.0%	-5.0%	-7.9%	$31,736
EU12	$38,968	2.1%	0.0%	-0.5%	-9.3%	5.0%	1.4%	0.0%	-5.0%	-6.8%	$36,318
EU13*	$46,696	2.1%	0.0%	-1.5%	-8.5%	1.0%	1.8%	0.0%	-5.0%	-10.1%	$41,980
EU14*	$37,841	0.9%	5.0%	0.0%	-2.0%	1.5%	0.9%	0.0%	-5.0%	1.0%	$38,219
									Average:		$38,897
								Average (including those transacted only in 2022):			$39,453
								Average (including only the common comparables):			$39,975

* These are common comparables adopted by the two valuation experts.

116.  In light of the above analysis, I am prepared to adopt $40,000 per sq in determining the EUV of the reference unit, ie Front Portion of 3/F.

117.  My assessment of the EUV of upper floor units is shown in the table below:[26]

Floor Level (Portion)	Saleable Area (m2)	Adjustments						Adjusted Unit Rate (/m2)	EUV
		Floor	Quantum/ Size	Headroom	Internal Condition[27]	Loading Capacity	Total
1	1,710.77	1.0%	-8.8%	0.0%	0.0%	5.0%	-3.3%	$38,680	$66,170,000
2	1,698.09	0.5%	-8.7%	0.0%	0.0%	0.0%	-8.2%	$36,720	$62,350,000
3 (Front Portion)	829.13	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	$40,000	$33,170,000
3 (Rear Portion)	859.74	0.0%	-0.3%	0.0%	0.0%	0.0%	-0.3%	$39,880	$34,290,000
4 (Front Portion)	829.13	-0.5%	0.0%	0.0%	3.0%	0.0%	2.5%	$41,000	$33,990,000
4 (Rear Portion)	859.74	-0.5%	-0.3%	0.0%	3.0%	0.0%	2.2%	$40,880	$35,150,000
5	1,698.09	-6.0%	-8.7%	-1.2%	-3.0%	0.0%	-17.8%	$32,880	$55,830,000
Roof (Portion A)	755.60							$3,288*	$2,480,000
Roof (Portion B)	427.21							$3,288*	$1,400,000
Roof (Portion C)	282.49							$3,288*	$930,000
Upper Roof	23.36							$1,830*	$40,000
								Total:	$325,800,000

* The unit value of the roof and the upper roof had been agreed by the experts at 1/10 and 1/18 of the 5/F respectively.

118.  Whereas Ms Chow and Mr Ho had agreed the value of each car parking space of the Building at $1,750,000, the total EUV for the Building is as follows:

Unit	EUV
LG/F	$122,100,000
G/F	$85,100,000
Upper Floors	$325,800,000
14 Carparking Spaces	$24,500,000
Total:	$557,500,000

119.  Therefore, the EUV of the respondent’s interest is

$122,100,000 + $40,000 + $3,500,000 = $125,640,000

and its pro rata share of interest is 22.5363%.

Whether Redevelopment of the Lot is Justified

120.  In accordance with Section 4(2) of the Ordinance, the Tribunal shall not make an order for sale unless it is satisfied that redevelopment of the Lot due to the “age or state of repair” of the Building is justified.

121.  For the age and state of repair requirements, the applicants have adduced the expert evidence of Mr Wong, who is a building surveyor as well as a structural engineer.

122.  Mr Wong had conducted a structural assessment of the Building and prepared a report dated 6 March 2023. On the age of the Building, Mr Wong stated that the design of the Building had become obsolete over time in many aspects, both physically and functionally. The Building, in his opinion, does not meet current safety standards as it fails to conform to modern construction standard in terms of the statutory requirements on concrete cover, minimum concrete strength, cement content and ductility.

123.  Mr Wong also found the following problems in the Building:

(i) During visual inspection, cracks and spalling were observed scattering around the building envelop and inside the Building.

(ii) In the open-up inspection which was carried out to identify the conditions of the concrete beneath its surface and the actual type, size and state of individual reinforcement bars, it was revealed that all the 128 reinforcement bars are under corrosion at various extents. The corrosion problem is not only widespread but also serious. It can reduce the load carrying capacity of the structural members and impair the building structure as a whole.[28]

(iii) As regards the minimum concrete cover, 47/64 or 73.4% of slab samples, 24/52 or 46.2% of beam samples and 4/38 or 10.5% of column samples failed to meet the requirement of the current concrete code: Code of Practice for Structural Use of Concrete 2013 (2020 Edition).[29]

(iv) As regards concrete strength, sample cores of concrete were cut from the structural elements: 4/6 or 66% of the slab samples, 5/6 or 83.3% of the beam samples failed to meet the requirement of the current concrete code.[30]

(v) Carbonation has reached the steel reinforcement bars in all of the 6 test samples from either slabs or beams and 50% of the 6 wall samples. Such carbonation will make the steel reinforcement bars susceptible to corrosion as it has destroyed the passive alkaline layer of protection provided by the concrete cover.[31]

(vi) 13.6% of the test samples with cement content in the range of 11.7%-11.8% lay below the minimum cement content requirement of 12.08%.[32]

(vii) 86.7% of the beam samples and 100% of the column samples failed to comply with the ductility requirement. This affects the Building’s ability to redistribute loads from an overloaded and yielded member to the other parts of the structure. This will result in abrupt failures of such members.[33]

124.  In Mr Wong’s opinion, the problems of undersized re-bars, poor workmanship, insufficient concrete cover, low concrete strength, carbonation and low cement content are either irreversible or cannot be practically resolved. He stated further that the corrosion of the reinforcement bars in the Building has already entered the propagation phase. Patch repair will not be able to solve the carbonation and other inherent deficiencies. This means that immediate repair cannot stop the deterioration of the reinforcement bars, and extensive and frequent maintenance and repair work will be required in the near future, and unavoidable for the remaining life of the Building.

125.  Based on the above findings, Mr Wong concluded that the structural elements of the Building are currently in a poor state of repair and any attempt to carry out repair and prolong the life of the Building is uneconomical and futile.

126.  Mr Wong, in his Condition Survey Report dated 6 March 2023, also stated that the Building is aged more than 50 years and has many problems as a result of its age which impairs its appearance and function. As well, owing to the changes in statutory requirements, advanced technology and higher expectations of owners over the years, the Building has become substandard and obsolete in respect of the following aspects when compared to a new building if the Lot is redeveloped:

- Safety;

- Comfort and convenience;

- Expectations and enjoyment;

- Environment; and

- Management and maintenance.

127.  Mr Wong further commented that the Building is in a poor state of repair due to its age, wear and tear over the years. The costs of essential repairs was estimated at $63,612,467.00 or $4,805.96 per sq m of the existing Gross Floor Area of the Building. This unit cost of essential repairs is about 24.13% of the unit cost of $19.920.02 per sq m for re-construction of the superstructure of a new similar building. But this carrying out of essential repair works will cause considerable disturbance and will require a long implementation period. It is inevitable that the occupation of the units and enjoyment of the owners/occupants will be adversely affected during the course of the repair.

128.  On the other hand, even after the essential repair works have been implemented, the Building will remain an old industrial building with its design and construction outdated/obsolete, below current standards and market/public expectations.

129.  Finally, Mr Wong was of the opinion that as the Building is suffering from a host of deficiencies and defects, and the problems on undersized re-bars, poor workmanship (eg excess spacing of re-bars and congested re-bars), insufficient concrete cover, low concrete strength, carbonation, and low cement content of the structural elements are either irreversible or cannot be practically resolved, demolition of the Building will relieve the owners from heavy repair responsibilities.

130.  Despite what was stated in the respondent’s Notice of Opposition dated 22 August 2022, Ms Lui confirmed in her opening submission that the respondent no longer takes any issue on this matter. The respondent has not provided any evidence to the contrary in any event.

131.  Pursuant to paragraph 8 of the Order of H H Judge M Wong, Presiding Officer of the Lands Tribunal, dated 31 August 2023, Mr Wong could produce the above reports without him being called to give oral evidence at the trial. Thus, I accept the applicants’ evidence in whole. I am satisfied that based on the evidence of Mr Wong, redevelopment of the Lot is justified due to the age and the state of repair of the Building.

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

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

133.  By reference to the supplemental witness statement of Mr Ng dated 22 February 2024, the applicants had through its solicitors, Messrs Simon Reid-Kay & Associates, made four rounds of open offers to the respondent:

Date of Offer	Purchase Price Offered	Private Flatted Factories Prices Index
17 May 2022	$148,957,841	898.2
10 March 2023	$117,824.762	865.7 (-3.6%)
31 January 2024	$109.275,962	779.1* (-10%)
20 February 2024	$109.275,962	765.0* (-1.8%)

* Provisional figures

134.  The offers was made on the basis of the pro-rata share of the EUV of respondent’s unit to the total EUV of the Building as at 10 May 2022 and of the RDV of the Lot based on the advice of Ms Chow. While it appears that only the first offer made on 17 May 2022 was higher than the EUV of the property owned by the respondent by 18.5%, the Private Flatted Factories Prices Index as published by RVD had been suffering from a drop. Ms Lui for the respondent then complained that the applicants failed to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interests of the respondents.

135.  In Good Faith Properties Limited & Others v Cibean Development Company Limited, LDCS 42000/2011 (unreported, dated 31 May 2013), the Tribunal found that, on a purposive interpretation of the Ordinance, all the steps taken up to the point an order for sale was to be made should be considered by the Tribunal. At §44, the Tribunal gave an example to illustrate that it should not turn a blind eye to the rising market trend.[34] And at §69, the Tribunal concluded that should it be the case, there should not be any question of lateness of offers.

136.  And when the market drops, Starex Development Limited v Yau So Ching & Others, DCCJ 2372 & 2374/2021 (unreported, dated 13 February 2023) has affirmed that the developer or the majority owners in similar compulsory sale applications can pay regard to the changes in market conditions.

137.  Contemporaneously, in Allied Future Limited v Lee Yuk Sim, LDCS 23000/2020 (unreported, 8 May 2023), the counsel for a respondent made a similar complaint against the then applicant. At §§85-87, the Tribunal ruled, on timing of offers, as follows:

“85. …, (the counsel) on behalf of R3 submitted that the applicant had not made a post-application offer in time after the Application commenced on 4 September 2020. With respect, I find no such requirement as stipulated under the Ordinance. While the Tribunal in Good Faith Properties Limited & Others v Cibean Development Company Limited, LDCS 42000/2011 (unreported, dated 31 May 2013), as referred to by (the counsel), had at §40 commented that “(t)he time for the Tribunal to be satisfied is at trial and not before”, this did not mean that a post-application offer had to be made. “There can be offers made to acquire the minority interest even after the filing of the Application” but it did not say post-application offers were a must. It only addressed the question of whether post-application offers could be taken into account in considering the question of reasonable steps that had been taken by the applicant to satisfy the Tribunal:

“To confine the reasonable steps to pre-application is apparently inconsistent with the intention of the legislation and deprived the minority owners the protection they are entitled under the Ordinance.”

86. For instance, when a pre-application offer has been very high, with the benefit of hindsight for instance, it does not mean that a post-application has to be made; a post-application offer which is substantially lower than the pre-application offer in the amount may not serve good purposes. Recently, §31 of Starex Development Limited v Yau So Ching & Others, DCCJ 2372 & 2374/2021 (unreported, dated 13 February 2023) had affirmed that the offers in the acquisition scheme are matters of commercial decisions. I agree with the judgment in that same paragraph that “the peculiar factual matrix” had to be viewed as a whole. An offer that had given a minority a better or higher offer does not mean that the same or even a much better offer had to be followed. Of course, if a post-application offer has been made, the pre-application offer(s) may not be so relevant as stated in Top Harmony Limited v Cheung Yuet Sheung & Others, LDCS 39000/2018 (unreported, dated 15 October 2020) at §94 but the Tribunal did not lay down any proposition that a post-application offer must be made.

87. Whenever an offer is made by the applicant, whether pre- or post-application, the decision of the minority owner as an offeree is just a give and take exercise.”

138.  More recently, in Winland Property Limited & Others v Chang Sai Ho & Others, LDCS 7000/2022 (unreported, 28 March 2024), the counsel for a respondent also complained in a similar vein as Ms Lui that the majority owners made no offer to buy the minority owners’ shares after commencement of the compulsory sale application till shortly before the trial when the market had dropped. The Tribunal then found the majority owners had made two offers which appeared to be reasonable before the market dropped. It ruled at §102 that it was only to the minority owners’s regret that they missed the opportunity to accept the majority owners’ offer before the market dropped.

139.  I am prepared to adopt the same answer in reply to Ms Lui’s complaint. To repeat the holding of the Court of Final Appeal in Capital Well Limited v Bond Star Development Limited [2005] 4 HKLRD 363, (2005) 8 HKCFAR 578, the Tribunal only “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.” Indeed, in the preceding paragraph of the judgment, the Court of Final Appeal remarked as follows:

“32. In our view, that argument rests on a misconception as to the nature of the s4(2)(b) requirements and must be rejected. As noted above, the Ordinance stipulates that before the Tribunal can make a compulsory order, the majority owner should try to reach agreement with the minority to purchase the latter’s interest on fair and reasonable terms. It is only after such an offer is made – and rejected by the minority – that the Tribunal may proceed to order a sale by public auction. The Ordinance therefore recognizes that the minority is perfectly entitled to take its own view and to refuse to sell at the price offered even though the Tribunal may regard that price as fair and reasonable.”

140.  In the present case, there is also evidence that there was a mediation between the parties on 13 March 2023 but of no avail.[35] This is neither here nor there as “the minority is perfectly entitled to take its own view and to refuse to sell at the price offered even though the Tribunal may regard that price as fair and reasonable.”

141.  In the present case, however, Ms Ngai referred to the full factual matrix surrounding the respondent as a private limited company so as to demonstrate that the respondent had difficulty in accepting any offer by the applicants.

142.  In the table below, there are two camps of shareholders of the respondent, one comprising Mr Leung Ka Lam and Mr Leung Ka Chuen owning a total of 49% shares of the company, and the other comprising Mr Tsoi Hak Kong Herbert and Mr Chui Pak Ming owning a total of 51% shares of the company:

Shareholder	Shareholding
Mr Leung Ka Lam*	2,475/10,000
Leung Ka Chuen	2,425/10,000
Total:	49%
Tsoi Hak Kong Herbert*	2,550/10,000
Chui Pak Ming*	2,550/10,000
Total:	51%

* Persons denoted by * are also direct of the respondent.

143.  By paragraph 4 of the respondent’s Skeleton Submission dated 30 August 2023[36], Mr Tsoi Hak Kong Herbert and Mr Chui Pak Ming are the joint administrators of the estate of Leung Wai Kit, Roger, deceased (“the Deceased”) who was the governing director of the respondent. On behalf of the respondent, he executed the first assignment dated 17 November 1972 of the 116/812^th equal and undivided shares of and in the Lot from the developer of the Building. The Deceased passed away in 1996 and thereafter the surviving spouse and his descendants have been embroiled in litigation against each other in relation to the Deceased’ estate:

(1) Norman Chui Pak Ming & Another v Robert Leung Sai Lun & Others, CACV 687/2000 dated 23 March 2001 (“Beddoe CA”);

(2) Norman Chui Pak Ming & Another v Robert Leung Sai Lun & Others, HCMP 7845/1999 dated 5 October 2000 (“Beddoe HCMP”);

(3) Leung Sai Lun Robert & Others v Leung May Ling & Others, FACV 5/1998 dated 29 January 1999 (“Will CFA”);

(4) Leung May Ling & Others v Leung Sai Lun Robert & Others, CACV 119/1997 dated 19 December 1997 (“Will CA”);

(5) Leung May Ling & Others v Leung Sai Lun Robert & Others, HCAP No P18/1996 dated 12 May 1997 (“Will HCAP”); and

(6) Reasons of the Ontario Superior Court of Justice Estates List in Re: In the Estate of Leung Wai Kit, Roger, Deceased Late of Hong Kong dated 5 April 2004 (“Ontario Judgment”).

144.  Ms Ngai submitted that from the judgments, there are two camps of beneficiaries to the Deceased’ estate litigating against each other as parties in the various proceedings in Hong Kong and Ontario, Canada:

(1) One camp led by Leung Sai Lun Rebert (“Robert Leung”) comprising himself, Leung Sai Tat Dennis, Leung Sai Cheung Eric and Leung Sin (or Seen) Yee Lina, who are all children of the Deceased and his first wife; and

(2) Second camp led by Leung May Ling (“Madam Leung”) (being the second wife and surviving spouse of the Deceased) comprising herself and her children with the Deceased, Leung Seen Man Jacqueline, Leung See Wei Rebecca and Leung Sai Kit Alfred.

145.  Following Will CFA, the Deceased was held to have died intestate. According to the intestacy rules, Robert Leung’s camp is entitled to 28% of the Deceased’s estate whereas Madam Leung’s camp is entitled to 72% of the Deceased’s estate. In the year of 2000, the size of the Deceased’s estate was estimated to be between HK$200 million and HK$450 million.[37]

146.  Ms Ngai submitted further that, notwithstanding the applicants’ efforts to acquire the respondent’s interest in the properties by negotiation (whether before or after they commenced the Application), it is highly unlikely (if not wholly impossible) that the applicants would have been able to acquire the respondent’s interest in the properties by negotiation without resorting to trial of the present proceedings.

147.  Ms Ngai added that, even if the two camps of beneficiaries to the Deceased’s estate are not in deadlock like Francis Leung and Winnie Ng in Apex Intelligence Limited v Cha Hoi Kuen & Others, LDCS 5000/2019 (unreported, date 19 October 2022), a strong influence can be drawn from the court cases in Hong Kong and Ontario, Canada that the relationship between the two camps has been strained and tumultuous for years.

148.  Ms Ngai then referred to the approach by the respondent in conducting its opposition to the Application which she considered as dilatory:

(1) On 22 August 2022, the respondent filed its Notice of Opposition in which it opposed the Application on three grounds:

(a) EUV and RDV of the respondent’s properties assessed by Ms Chow were less than fair and reasonable,

(b) Redevelopment was not justified by reference to age and/or state of repair of the Building, and

(c) Failure to take reasonable steps to negotiate on terms that were fair and reasonable.

(2) Notwithstanding the grounds of opposition adopted in its Notice of Opposition and being legally represented, the respondent did not file any factual or expert evidence in opposition by 8 May 2023 (which was the deadline after the second time extension by the parties’ consent).

(3) On 23 August 2023, the parties signed the Agreed List of Issues for Trial by which the respondent confirmed that it no longer took issue on whether redevelopment is justified due to age and/or repair of the Building.

(4) Hence, from 23 August 2023 onwards, the respondent’s opposition to the Application was limited to disputing valuation and whether the applicants had taken reasonable steps to acquire the respondent’s properties.

(5) It was not until the day before the Further Call-over hearing before H H Judge M Wong on 31 August 2023 that the respondent filed a summons seeking to extend the time for filing evidence in opposition despite that it was already more than 2.5 months after its filing deadline of 8 May 2023.

(6) More particularly, it was revealed in the respondent’s Skeleton Submission for the Further Call-over dated 30 August 2023 that its directors “had only resolved recently and reached consensus on the issue of expert report and sought quotations accordingly”.

149.  This was by then more than one year since the respondent filed its Notice of Opposition on 22 August 2022 and it appears that the respondent was not in the position to consider the applicants’ offers dated 17 May 2022 and 10 March 2023.

150.  With respect to Ms Ngai, the personal circumstances or affairs of the respondent are irrelevant insofar as section 4(2)(b) of the Ordinance is concerned where the Tribunal is only required to be satisfied that “the majority owner has taken reasonable steps to acquire all the undivided shares in the lot”. See also Peace Ever Limited & Others v Chan Sui Ching & Others, LDCS 28000/2018 (unreported, 1 August 2023) at §§348-361.

151.  In any event, in the following para 33 in Capital Well, Mr Ribeiro PJ continued:

“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 recognize that there will often be differences of opinion on that matter. If duly satisfied that the rejected offer was fair and reasonable, the Tribunal may make the order, leaving the value and level of compensation to be determined by the public auction. The auction results may prove that the minority’s assessment was commercially wise. Or they may show that the majority’s offer exceeded what was realised at the auction.” (underlined added)

152.  More importantly, at §36 that ensued, Mr Ribeiro PJ stated that it is not “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.”

153.  To an extent, Ms Lui accused the applicants of failing to consider Mr Ho’s valuation opinion but “blindly followed” Ms Chow’s opinion. However, in Intelligent House Ltd v Chan Tung Shing & Others [2008] 4 HKC 421 where the majority owner relied on its valuation expert to formulate some of the offers, the Tribunal ruled at paragraph 334(3) that:

“… it is not disputed that Savills is a reputable firm of valuers. In our view, it is also reasonable for Intelligent House to rely on Savills’ expert opinion to formulate the purchase prices offered to the minority owners. There is also no reason for us to believe, nor is there such evidence to suggest, that the advices from Savills were not properly made based on professional valuation of the EUV and RDV of the minority owners’ units.”

154.  In the present case, whereas Colliers and Jones Lang LaSalle are both reputable firm of valuers, why should the applicant adopt Mr Ho’s opinion in preference to Ms Chow? Moreover, it is the evidence of Mr Ng that the applicants had considered the opinion of Mr Ho and also looked into the advice from Ms Chow but considered Ms Chow’s opinion to be more reasonable after deliberation.[38]

155.  Thus, having considered that the applicants had made offers to the respondents, which were based on professional valuation and had reflected the then RDV attributable to the respective units as assessed by the valuation experts, I am satisfied that the applicants have taken reasonable steps to acquire all the undivided shares in the Lot.

156.  By reason of being satisfied that redevelopment of the Lot is justified and that the applicants have taken reasonable steps to acquire all the undivided shares in the Lot, I am satisfied an order for sale should be granted in favour of the applicants.

Disputes on the estimation of the RDV of the Lot

157.  The Lot occupies a site area of 2,189.70 sq m

158.  Both Ms Chow and Mr Ho relied on the residual valuation method to determine or the RDV of the Lot. This can be done by deducting development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated GDV of the completed optimum development.

159.  Ms Chow and Mr Ho had agreed most of the aspects in their respective assessment of the RDV of the Lot by the residual valuation method:

Plot Ratio		11.778
Total Gross Floor Area		25,790.61 sq m
Optimum Development		Scheme stated in the planning application (Application No A/KC/474) [39]
Total Number of Car Parking Space		Light Goods Vehicles: 25 nos Heavy Goods Vehicles: 13 no Private Cars: 12 nos Private Cars (Double Deck): 7 nos Motorcycle: 3 nos
LG/F[40]	Unit	Saleable Area (m2)	Frontage (m)		Depth (m)	Headroom (m)
	1	530.72	22.33 onto Tai Lin Pai Road and 20.81 onto Entrance Courtyard		30.07	5.0
	2	274.85	8.65 onto Common Corridor		20.85	5.0
	3	199.35	7.82 onto Common Corridor		15.72	5.0
	4	93.51	9.04 onto Entrance Courtyard 10.34 onto Internal Corridor		10.34	5.0
UG/F[41]	1	188.03	4.50 onto Common Corridor		13.92	5.0
	2	127.42	4.50 onto Common Corridor		13.92	5.0
	3	191.83	9.19 onto Wah Sing Street 16.35 onto Common Corridor		20.38	5.0
1/F	Unit	Saleable Area (m2)		Ancillary Area (m2)		Headroom (m)
	1	187.83				5.0
	2	127.07				5.0
	3	88.28		Flat Roof: 33.36		5.0
	4	90.28		Flat Roof: 15.89		5.0
	5	84.48				5.0
2/F	Unit	Saleable Area (m2)		Ancillary Area (m2)		Headroom (m)
	1	90.6		Flat Roof: 14.73		5.0
	2	106.04		Flat Roof: 18.07		5.0
	3	114.24				5.0
	4	92.79		Flat Roof: 63.46		5.0
	5	86.25		Flat Roof: 91.99		5.0
	6	90.83		Flat Roof: 95.11		5.0
	7	96.31		Flat Roof: 22.25		5.0
	8	93.27		Flat Roof: 16.99		5.0
3/F	Unit	Saleable Area (m2)		Ancillary Area (m2)		Headroom (m)
	1	147.27				3.5
	2	108.47				3.5
	3	112.21				3.5
	4	93.33				3.5
	5	82.05				3.5
	6	119.03				3.5
	7	170.34				3.5
5/F	Unit	Saleable Area (m2)		Ancillary Area (m2)		Headroom (m)
	1	146.05				3.5
	2	94.77		Flat Roof: 13.92		3.5
	3	84.20		Flat Roof: 28.38		3.5
	4	92.08				3.5
	5	82.43				3.5
	6	119.68				3.5
	7	166.61		Flat Roof: 9.76		3.5
7/F – 17/F (without 13/F & 14/F)	Unit	Saleable Area (m2)				Headroom (m)
	1	147.56				3.5
	2	118.38				3.5
	3	83.13				3.5
	4	92.59				3.5
	5	82.53				3.5
	6	119.62				3.5
	7	166.87				3.5
18/F -25/F (without 24/F)	Unit	Saleable Area (m2)				Headroom (m)
	1	125.08				3.5
	2	118.38				3.5
	3	83.13				3.5
	4	92.59				3.5
	5	82.53				3.5
	6	119.62				3.5
	7	134.62				3.5
26/F -27/F	Unit	Saleable Area (m2)				Headroom (m)
	1	125.08				5.0
	2	118.38				5.0
	3	83.13				5.0
	4	92.59				5.0
	5	82.53				5.0
	6	119.62				5.0
	7	134.37				5.0
28/F	Unit	Saleable Area (m2)		Ancillary Area (m2)		Headroom (m)
	1	88.66		Flat Roof: 32.51		5.0
	2	94.74		Flat Roof: 24.10		5.0
	3	83.13				5.0
	4	92.59				5.0
	5	82.53				5.0
	6	88.37		Flat Roof: 31.01		5.0
	7	97.78		Flat Roof: 36.19		5.0
29/F	Unit	Saleable Area (m2)				Headroom (m)
	1	88.66				5.0
	2	94.74				5.0
	3	83.13				5.0
	4	92.59				5.0
	5	82.53				5.0
	6	88.37				5.0
	7	97.78				5.0

160.  In assessing the GDV for the LG/F and UG/F of the hypothetical development, Ms Chow took Unit 3 on UG/F as the reference unit but Mr Ho preferred to take Unit 1 on LG/F. While, in my opinion, this difference in opinion can be readily resolved, I have been surprised that the two valuation experts arrived at significantly different RDV as at 5 January 2024 (ie a difference of over 50%):

	Ms Chow	Mr Ho
RDV	$586,000,000	$888,200,000
Accommodation Value (“AV”)	$22,721 per m2	$34,439 per m2

GDV for LG/F & UG/F

161.  Whereas both Ms Dorothy Chow and Mr Ho respectively relied on transactions of premises that lies mostly on Tai Lin Pai Road, I prefer to adopt, as proposed by Mr Ho, Unit 1 on LG/F as the reference unit because the adjustment for location, which is a very important element for valuation, would be minimized:

Comp Ref:	Address	Age	Date of Transaction	Consideration	Saleable Floor Area (m2)	Frontage (m)	Headroom (m)	Depth (m)	Effective Unit Price (/m2)
Ref Unit	Unit 1 on LG/F	New			530.72	20.81 onto Entrance	5.0	30.07
NG1	Workshop D, G/F, Effort Industrial Centre, 2-8 Kung Yip Street	1978	28 Jun 2023	$20,680,000	157.41	4.85 on Tai Lin Pai Road	5.49	21.3	$131,377
NG2	Workshops G1 & G2, G/F, Kam Shing Industrial Building, 1-11 Kwai Wing Road	1972	21 Apr 2023	$24,780,000	410.20	13.06 on Kwai Chung Road	4.27	30.54	$60,410
NG3*	Workshop A, G/F, So Tao Centre, 11-15 Kwai Sau Road	1990	23 Jul 2021	$8,800,000	67.35	8.1 + 4.23 on Kwai Sau Road	5.0	11.11	$224,719
NG4*	Factory Unit 3 , G/F & Parking Space No P22 on 1/F, Vanta Industrial Centre, 21-23 Tai Lin Pai Road	1988	7 Jun 2021	$88,500,000	815.15	21.51 on Tai Lin Pai Road	4.98	46.35	$196,663
NG5*	Unit B, G/F& Parking Space No 17 on 3/F  Gold King Industrial Building, 35-41 Tai Lin Pai Road	1987	8 Jun 2021	$33,800,000	246.28	9.51 on Tai Lin Pai Road	4.95	28.28	$147,658
NG6	Workshop 01 & 02, G/F  The Star, 18 Yip Shing Street	2017	27 May 2019	$16,890,000	129.51	10.93 + 5.81 on Yip Shing Street	4.84	12.38	$218,930

* These are common comparables adopted by the two valuation experts.

162.  As can be seen from the above, save for Comparables NG1 & NG2, the two valuation experts in fact adopted the same comparables that they considered appropriate in assessing the EUV for LG/F of the Building. On the other hand, with the new Comparable NG1 included, I agree with Ms Chow that Comparable NG6, ie the same as Comparable EG4, has to be discarded because it was significantly outdated and was situated far away from the Building.

163.  Thus, by reference to the proposed LG/F, a copy of which is now shown at Appendix III at the end of this judgment, and bearing in mind the discussions in determining the EUV of LG/F of the Building, my analysis for determining the market value of Unit 1 on LG/F is shown as follows:

Comp Ref	Unit Rate (/m2)	Adjustments										Adjusted Unit Rate (/m2)
		Time	Location/ Accessibility	Frontage	Return Frontage	Quantum/ Size	Head room	Layout	Temporary Waiver	Age	Total
NG1	$131,377	-9.5%	0.0%	8.7%	5.0%	-9.3%	-2.0%	5.0%	-10.0%	23.0%	6.7%	$140,179
NG3 (EG1)	$130,661	-11.9%	5.0%	7.1%	0.0%	-11.6%	0.0%	-5.0%	0.0%	17.0%	-2.7%	$127,133
NG4 (EG 2)	$102,390	-12.6%	5.0%	0.8%	5.0%	5.7%	0.1%	0.0%	0.0%	18.0%	21.3%	$124,199
NG5 (EG 3)	$125,061	-11.8%	0.0%	6.4%	5.0%	-7.1%	0.2%	0.0%	-7.5%	18.5%	0.5%	$125,686
										Average:		$129,299

164.  And for the reason that Comparables NG3, NG4 and NG5 were all dated in 2021 which was some 3 years ago, I prefer to rely mainly on the adjusted unit rate derived from Comparable NG1, ie $140,000 per sq m.

165.  The table below shows my determination on the GDV for the proposed LG/F and UG/F (the proposed floor plan of the latter is attached at Appendix IV of this judgment):

Floor	Unit	Saleable Area (m2)	Adjustments							Adjusted Unit Rate (/m2)	GDV
			Location	Frontage	Return Frontage[42]	Quantum/ Size	Layout	Accessibility[43]	Total
LG/F	1	530.72	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	$140,000	$74,300,000
LG/F	2	274.85	-15.0%	0.0%*	-5.0%	6.4%	0.0%	-10.0%	-22.7%	$108,220	$29,740,000
LG/F	3	199.35	-15.0%	0.0%*	-5.0%	8.3%	0.0%	-10.0%	-21.3%	$110,180	$21,960,000
LG/F	4	93.51	-10.0%	0.0%*	0.0%	10.9%	10.0%	-5.0%	4.3%	$146,020	$13,650,000
UG/F	1	188.03	-15.0%	0.0%*	-5.0%	8.6%	0.0%	-10.0%	-21.1%	$110,460	$20,770,000
UG/F	2	127.42	-15.0%	0.0%*	-5.0%	10.1%	0.0%	-10.0%	-20.0%	$112,000	$14,270,000
UG/F	3	191.83	0.0%	-6.6%	0.0%	8.5%	0.0%	-5.0%	-3.7%	$134,820	$25,860,000
										Total:	$200,500,000

* When these units are tucked inside the proposed development, they enjoy in effect no frontage to the street all. I prefer the difference to be reflected by the location adjustments as proposed by Ms Chow rather than the arbitrary frontage adjustments as proposed by Mr Ho.

GDV for Upper Floors

166.  In assessing the GDV for the upper floors of the hypothetical development, Ms Chow and Mr Ho both referred to sales of units outside the Kwai Chung district:

Building	Year Built	Dates of Agreement	Size Range (m2)
International Enterprise Centre II, 73 Chai Wan Kok Street, Tsuen Wan	2021	May 2022 – Sep 2023	55.1 - 122.82
W212 No 212 Texaco Road, Tsuen Wan	2019	Jan 2022	31.12 - 44.31
iPlace, Nos 301-305 Castle Peak Road, Kwai Chung	2017	Jul 2022 – Jun 2023	25.83 - 29.17
Reason Group Tower, Nos 403-413 Castle Peak Road, Kwai Chung	2014	Feb 2022 – Jun 2023	84.91 – 151.24
The Galaxy, Nos 311-317 Castle Peak Road, Kwai Chung	2014	Jan 2022 - Nov 2023	49.52 – 53.05
The Star, No 18 Yip Shing Street, Kwai Chung	2017	Apr 2022 – Apr 2023	20.35 – 21.65
iCity, Nos 105-113 Ta Chuen Ping Street, Kwai Chung	2023	Nov 2023 – Dec 2023	23.5 – 24.71
Orient International Tower, Nos 1016-1018 Tai Nan West Street	2022	Jun 2023 – Oct 2023	89.28 – 90.86
The Cloud, No 111 Tung Chau Street	2022	Apr 2023 – Sep 2023	23.50 - 198.07

International Enterprise Centre II

167.  International Enterprise Centre II is situated not in the subject locality but in the neighbouring Tsuen Wan district which has transformed from an old New Town into a sub-urban town centre with commercial/office development sites along both sides of Chai Wan Kok Street. For instance, the area in which International Enterprise Centre II is situated was formerly zoned for industrial uses but has been rezoned for business uses. In comparison, the Lot still falls within an area zoned under the Kwai Chung Outline Zoning Plan No S/KC/32 for “Industrial” purposes though the area on the opposite side of Tai Lin Pai Road has also been re-zoned for business uses. It is not possible to phase out existing polluting and hazardous industrial uses all at once. In view of the substantial difference in business environment, I do not consider sales of units in International Enterprise Centre II relevant for determining the GDV of the proposed industrial development in pursuant to the Application No A/KC/474.

168.  In spite of the above, Ms Chow and Mr Ho both agreed to adopt the following transactions in International Enterprise Centre II as comparables:

Comp Ref	Unit	Date of Agreement	Consideration	Effective Floor Area (m2)	Headroom (m)	Private Lavatory	Unit Rate (/m2)
NU1	Unit 5 on 9/F	13 Sep 2023	$8,869,500	67.73	4.55	No	$130,954
NU2	Unit 5 on 2/F	18 Mar 2023	$11,542,000	72.79*	4.55	No	$158,566
NU3	Unit 5 on 3/F	15 May 2023	$8,262,000	67.73	4.55	No	$121,984

* This includes the converted area of Flat Roof at the rate of 1/6 of the floor proper.

169.  If the above sales have to be included as comparables, I prefer Ms Chow’s location adjustment at -10% to Mr Ho’s -5% for location and +5% for accessibility because International Enterprise Centre II has also the advantage that it lies close to the inlet and exit of Tuen Mun Road, the highway leading from the urban areas, via Tsuen Wan to Tuen Mun, another new town in the New Territories.

W212

170.  W212 comprises a modern industrial development within an area still zoned for general industrial uses to ensure an adequate supply of industrial floor space to meet demand from production-oriented industries and to provide employment for the labour force in Tsuen Wan New Town. Ms Chow, however, could only find two transactions as follows that took place two years ago for the reason of which Mr Ho refused to consider them as comparables:

Comp Ref	Unit	Date of Agreement	Consideration	Effective Floor Area (m2)	Headroom (m)	Private Lavatory	Unit Rate (/m2)
NU21	Unit 12 on 5/F	27 Jan 2022	$6,830,000	44.31	3.5	Yes	$154,141
NU22	Unit 15 on 5/F	27 Jan 2022	$4,676,000	31.12	3.5	Yes	$150,257

171.  Again, I am content to adopt Ms Chow’s adjustment for location at -10%.

iPlace

172.  Abutting Castle Peak Road – Kwai Chung close to its junction with Yip Shing Street, iPlace comprises a modern building presumably for industrial purposes. However, because of the relatively small sizes of the units there which contained also en suite toilet facilities and stringent security control with smart card for entry etc, many of the units of iPlace have been suspected for non-industrial uses: see for example, LDPE 172/2020 (unreported, 6 August 2020) at §5.

173.  Indeed, the Buildings Department issued in October 2016 a Practice Note for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers – APP-159 which pronounced measures to deter misuse of industrial buildings for residential use. In para 2(b), it states: “Modification to permit the non-provision of natural lighting and ventilation to the toilets will not be granted generally except for toilets designed for communal use.[44]

174.  More particularly, an article from Ta Kung Pao dated 26 March 2018 reported that many youngsters tended to rent such modern industrial units for residential purposes (年輕族「偷雞」租住「工作室」成風)[45]. It cited such examples common in iPlace and The Star.

175.  In any event, there exists a secluded, high-end residential development, Greenknoll Court[46], on the opposite side of Castle Peak Road – Kwai Chung at its junction with Yip Shing Street and because of such substantial difference in environment, I do not consider sales of units in iPlace relevant for determining the GDV of the proposed industrial development in pursuant to the Application No A/KC/474.

176.  Certainly, the units in iPlace are also too small for comparison purposes with the proposed industrial development.

Reason Group Tower

177.  Although Reason Group Tower also has its address at Castle Peak Road – Kwai Chung, its vehicular entrance is situated behind the Building off the end of Wah Sing Street. Both Ms Chow and Mr Ho agreed to have sales of units in this development as comparables:

Comp Ref	Unit	Date of Agreement	Consideration	Effective Floor Area (m2)	Headroom (m)	Private Lavatory	Unit Rate (/m2)
NU7	Unit G on 11/F	6 Jun 2023	$6,760,000	89.93	4.0	No	$75,170
NU8	Unit G on 10/F	19 May 2023	$6,680,000	89.93	4.0	No	$74,280
NU9	Unit A on 19/F	18 May 2023	$12,000,000	151.25	4.0	Yes	$79,339

178.  Thus sales of units in Reason Group Tower appear to provide the best comparable in terms of location but I am at a loss as to the explanation by Mr Ho that he would only rely on three comparables in each building. Mr Ho may have conflated the concept of fixing the number of samples in a control group the same in carrying out scientific experiments, just like what Mr Wong did in conducting the concrete strength test or the carbonation test where samples had to be drilled from the structural elements.

179.  Property valuation by the comparison method, on the other hand, aims to look for a market transaction that is as close as possible to that which he has to value. He then works on the premise that if the subject matter of his valuation were to be the subject of a similar transaction, it would command the same value as the comparable. Unfortunately, the property market is imperfect and worse still, the comparable will seldom be identical to the subject matter of the valuation. Therefore many valuation tests suggest ideally there should be at least three qualitative comparables. This however does not support the premise that three qualitative comparables are adequate. Generally, in situations when there are no particular good comparables, the more comparables in the basket, the more reliable the end result data would be.

180.  In the present case, therefore, three further sales of units in Reason Group Tower in 2023 as proposed by Ms Chow should be included:

Comp Ref	Unit	Date of Agreement	Consideration	Effective Floor Area (m2)	Headroom (m)	Private Lavatory	Unit Rate (/m2)
NU10	Unit C on 21/F	21 Mar 2023	$6,607,250	87.73	4.0	No	$75,313
NU11	Unit H on 6/F	25 Feb 2023	$5,380,000	84.91	4.0	No	$63,361
NU12	Unit D on 16/F	10 Feb 2023	$6,638,000	92.35	4.0	No	$71,879

181.  Notwithstanding the above, there is a further disagreement between Ms Chow and Mr Ho on the adjustment for location/ accessibility for this comparable building: Ms Chow proposed +5% while Mr Ho proposed +20%. I prefer Ms Chow’s +5% as Reason Group Tower is situated just behind the Building. I agree with Ms Ngai that Mr Ho was wholly inconsistent to apply the location/accessibility adjustments when he considered there is no difference between the subject and International Enterprise Centre II which lies miles away.

The Galaxy

182.  The Galaxy comprises another modern industrial development on Castle Peak Road – Kwai Chung which lies in close proximity to iPlace but closer to the junction between Castle Peak Road – Kwai Chung and Yip Shing Street.

183.  In comparison with iPlace, however, the unit sizes in The Galaxy are little larger and the units do not have the benefits of en suite toilet facilities. This development has also stringent security control with smart card for entry etc. The advantage of including sales of units in this development is that one of the two units considered by Ms Chow took place in the end of 14 November 2023, ie very close to the present days:

Comp Ref	Unit	Date of Agreement	Consideration	Effective Floor Area (m2)	Headroom (m)	Private Lavatory	Unit Rate (/m2)
NU29	Unit 8 on 25/F	14 Nov 2023	$3,100,000	49.52	3.5	No	$62,601
NU30	Unit 3 on 16/F	22 Apr 2022	$3,700,000	51.56	3.5	No	$71,761

184.  The only reason proposed by Mr Ho for not adopting sales in The Galaxy was that there was only one transaction happening in 2023. However, this should not be a good excuse because the “low” value of the sale of Comparable NU29 is supported by Comparable NU30.

185.  On the other hand, Ms Chow had proposed an adjustment for location at +15% mostly for the reason of its poorer vehicular accessibility from Yip Shing Street. I consider it excessive and I prefer to adopt +10% instead.

The Star

186.  As discussed in §37 above, The Star is situated near the end of Yip Shing Street which is a cul-de-sac. Pedestrian access from Tai Lin Pai Road has to take the 110 steps uphill.

187.  Furthermore, like iPlace, the unit sizes in The Star are small; for instance, the sales of units which Mr Ho intended to adopt as comparables comprise 20.35 sq m to 21.65 sq m and they also enjoy the benefit of en suite toilet facilities. I am prepared to discard them as comparables for the similar reasons as those for the sales of units in iPlace.

iCity

188.  iCity is located close to the street junction of Ta Chuen Ping Street and Wo Yi Hop Road opposite a major residential area across the street. The surroundings for instance can be discerned also from Hsin Kuang Restaurant (Holdings) Limited v Commissioner of Rating and Valuation, LDRA 52/1997 (unreported, dated 27 October 1998), which concerned a rating appeal tenement in Kwai Sing Centre, which is a composite development comprising two 24-storey residential blocks standing on a 5-storey podium “on a sloping site at the junction of Wo Yi Hop Road and Castle Peak Road, Kwai Chung, at the fringe of a residential area adjacent to industrial areas. Several public housing estates (Shek Lei Estate, Shek Yam Estate and On Yam Estate) are in the near locality.”[47] In such regard, the following remark by the Tribunal in Urban Parking Limited v Commissioner of Rating and Valuation, LDRA 377 & 378/2002 (unreported, 10 September 2003) is apposite if the district described is changed from “Shatin” to “Kwai Chung” in the present case:

“16. I find that the choice of the most relevant and suitable comparables in this appeal is a matter of fact finding only. I do not agree ... that because all Mr. Wong's comparables were located in the same Shatin district, they should be considered as suitable comparables for the tenement. Shatin district is a geographical district for census, planning, land and other civil administration purpose. It is not necessarily the case that properties located within the same Shatin district are appropriate comparables to each other. This is the same regardless of whether the properties in question are residential, commercial, industrial or special properties.

17. Therefore, I find that the general rule of valuation for properties should still apply in the present rating appeal regardless of whether the tenement, or fee-paying open car-parks are special properties or not. That is, if suitable comparables are available in locations close to the subject tenement, they are invariably preferred to the other comparables, even though the latter were also located in the same district of Shatin.” (emphasis added)

189.  I agree with Ms Chow that the surrounding environment of iCity is materially different from that of the hypothetical development on the Lot.

190.  Indeed, Ms Chow had included in her Rebuttal Report dated 27 November 2023 a copy of sales brochure for iCity[48]. It is of interest to note on the one hand the brochure referred to certain commercial buildings (商業大廈) in the vicinity which included The Star, iPlace and The Galaxy which are supposed to be industrial buildings by both Ms Chow and Mr Ho.[49] Then the brochure described iCity was designed as “Service Apartment” with hotel-like facilities (酒店級設施) etc.[50]

191.  There was then a press release by the Lands Department dated 22 July 2022.[51] According to this press release, the Lands Department had warned the developer of iCity regarding inaccurate information on permissible uses in the marketing materials which stated that that the premises will be used for workshops including intelligent video conference room, studio for video recording, sound recording and live streaming, and e-sports gaming room, etc., with sports, recreational, dining, and/or co-working areas on the podium garden and individual units designed for supporting vertical living.

192.  The Lands Department clarified that the government lease for iCity, like that for the Lot[52], restricts the user to “industrial and/or godown purposes” (“the Permitted User”). The Lands Department stressed that “for leases carrying such a specific user clause, the industrial use within the lot must involve a process of manufacturing (which is unlike a modern industrial site where the lease may carry a user clause allowing a wider range of uses including non-polluting industrial uses and other uses such as art studios, design and media production permitted in the "Industrial" zones in Outline Zoning Plans); whereas godown use within the lot must involve storage of goods and/or transient deposit and storage for delivery purpose. Residential use is also not permitted.”

193.  The Lands Department was therefore of the opinion that those non-industrial uses as advertised in the marketing materials may not entail manufacturing or storage activities. If such non-industrial uses are eventually being carried out on the lot, it may constitute a breach of the Permitted User and the Lands Department is entitled to take enforcement action against such breach.

194.  Furthermore, according to the Lands Department, condonement of such a breach would upset the principle of level playing field in the market where many lot owners are making proper applications for a lease modification or waiver and paying additional land premium/waiver fees to allow non-industrial uses which would not have been permitted under conventional industrial leases. The Lands Department demanded the developer of iCity to cease making any inaccurate or misleading misrepresentation; to immediately inform the buyers, the prospective buyers and other parties who had entered or would enter into a sale and purchase agreement or the like with it that those non-industrial uses mentioned in their marketing materials contradict the Permitted User; and to take or to procure necessary remedial measures to rectify any breach.

195.  In addition, by this press release, private land owners and prospective property buyers were reminded of the need for strict observance of government lease conditions regarding the redevelopment or use of private lots. The Lands Department would take a serious stance against breaches of government lease in respect of private properties and would take lease enforcement action in respect of the breach including but not limited to the Government exercising its right of re-entry under the Government Rights (Re-entry and Vesting Remedies) Ordinance, Chapter 126.

196.  In view of the above and the relatively small sizes of the units in iCity, I do not consider any of the sales of units in iCity comparable at all.

Orient International Tower

197.  Orient International Tower, a new industrial development completed in 2022, is located in the urban area in Kowloon, Hong Kong which is completely different in environment and characteristics when compared to the subject locality. Like that for International Enterprise Centre II, the vicinity of this development which was previously zoned for industrial uses has been re-zoned for business purposes under the Lai Chi Kok Outline Zoning Plan dated as early as at 18 October 2013.

198.  Mr Ho had tried to rescue his “comparables” in Orient International Tower by making so-called pairing analysis to determine the location adjustment that may be applicable between the two different localities:[53]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Adjusted Unit Rate without regard to location (/m2)
Subject Location	Unit 17, 9/F, Vanta Industrial Centre, 21-33 Tai Lin Pai Road	1988	21 Jul 23	174.01	$51,491	$47,372
	Unit 8, 17/F, Vanta Industrial Centre, 21-33 Tai Lin Pai Road	1988	13 Jan 23	174.01	$47,124	$45,380
	Unit 16, 16/F, Vanta Industrial Centre, 21-33 Tai Lin Pai Road	1988	23 Mar 23	174.01	$48,848	$46,015
					Average:	$46,256
Lai Chi Kok	Unit 8, 10/F, Hong Kong Industrial Centre  Block B, 489-491 Castle Peak Road	1982	16 Nov 23	114.27	$51,037	$51,292
	Units  9 & 10, 6/F, Wing Kut Industrial Building, 608 Castle Peak Road	1983	16 Nov 23	162.39	$52,836	$52,255
	Unit 5, 9/F, Hong Kong Industrial Centre  Block C, 489-491 Castle Peak Road	1982	25 Aug 23	152.82	$55,948	$53,822
					Average:	$52,456

199.  On the basis of the above, Mr Ho suggested that if he applied a location adjustment of -15% for sales of units in Orient International Tower, though in a different locality, he can obtain the approximate unit rate of a new development in the subject locality.

200.  With respect, the above analysis suffers from a major defect: Mr Ho was comparing old industrial premises in the two different areas rather than new industrial premises in the two areas. In Able Luck Development Limited & Others v Public Global Investments Limited & Others, LDCS 7000/2014 (unreported, dated 6 October 2017), the Tribunal has pointed out at §110 that nowadays, the trend of industrial development is moving towards to better or office-like design and quality so as to cater for clean industrial and industrial-office uses. At §165 of the judgment, the Tribunal commented that “no developer would be reasonably expected to build new development whose standard is only commensurate with those built more than 20 years ago.”

201.  Now in the so-called paired analysis, Mr Ho tried to make use of transactions of industrial premises built some 40 years ago to derive an adjustment for industrial premises of modern or recently built.

202.  While Ms Ngai had heavily criticized the approach of Mr Ho above, She, perhaps with the assistance of Ms Chow, put to Mr Ho the following paired analysis during cross-examination:

Reason Group Tower v International Enterprise Centre II[54]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit G, 10/F, Reason Group Tower (ie Comparable NU8)	2014	18 May 2023	89.93	$74,280
International Enterprise Centre II	Unit 5, 2/F (ie Comparable NU2)	2021	18 May 2023	72.81	$158,529	99.6% (ie -0.4%)	114.27%*
	Unit 5, 3/F (ie Comparable NU3)		15 May 2023	67.73	$121,984	100.71% (ie +0.71%)	63.07%*

* $74,280 x 99.6% x 214.27% = $158,529 approximately

and $74,280 x 100.71% x 163.07% = $121,984 approximately

Reason Group Tower v iPlace[55]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit G, 10/F, Reason Group Tower (ie Comparable NU8)	2014	18 May 2023	89.93	$74,280
iPlace	Unit 1, 6/F (ie Comparable NU27)	2017	30 May 2023	29.17	$87,761	122.50% (ie +22.5%)	-3.55%*
	Unit 20, 15/F (ie Comparable NU28)		24 May 2023	25.83	$90,921	121.55% (ie +21.55%)	0.7%*

* $74,280 x 122.5% x 96.45% = $87,761 approximately

and $74,280 x 121.55% x 100.7% = $90,921 approximately

Reason Group Tower v iCity[56]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit G, 11/F, Reason Group Tower (ie Comparable NU7)	2014	6 Jun 2023	89.93	$75,170
iCity	Unit 17, 10/F (ie Comparable NU38)	2023	17 Nov 2023	23.5	$182,128	128.25% (ie +28.25%)	88.92%*
	Unit 18, 10/F (ie Comparable NU37)		4 Dec 2023	23.5	$182,979	140.13% (ie +40.13%)	73.71%*

* $75,170 x 128.25% x 188.92% = $182,128 approximately

and $75,170 x 140.13% x 173.71% = $182,979 approximately

Reason Group Tower v Orient International Tower (1)[57]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit G, 11/F, Reason Group Tower (ie Comparable NU7)	2014	6 Jun 2023	89.93	$75,170
	Unit G, 10/F, Reason Group Tower (ie Comparable NU8)		18 May 2023	89.93	$74,280
Orient International Tower	Unit 1, 9/F (ie Comparable NU42)	2022	19 Jun 2023	89.28	$168,972	109.76% (ie +9.76%) and 110.24 (ie +10.24%)	104.79% and 106.35*

* $75,170 x 109.76% x 204.79% = $168,972 approximately

and $74,280 x 110.24% x 206.35% = $168,972 approximately

Reason Group Tower v Orient International Tower (2)[58]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit G, 11/F, Reason Group Tower (ie Comparable NU7)	2014	6 Jun 2023	89.93	$75,170
Orient International Tower	Unit 7, 7/F (ie Comparable NU40)	2022	13 Oct 2023	90.86	$163,983	102.69% (ie +2.69%)	112.44*

* $75,170 x 102.69% x 212.44% = $163,983 approximately

Reason Group Tower v The Cloud (1)[59]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit G, 10/F, Reason Group Tower (ie Comparable NU8)	2014	18 May 2023	89.93	$74,280
The Cloud	Unit 2, 25/F (ie Comparable NU45)	2022	24 May 2023	23.50	$141,038	137.44% (ie +37.44%)	38.15*
	Unit 2, 20/F (ie Comparable NU46)		26 Apr 2023	23.50	$132,638	135.09% (ie +35.09%)	32.19*

* $74,280 x 137.44% x 138.15% = $141,038 approximately

and $74,280 x 135.09% x 132.19% = $132,638 approximately

Reason Group Tower v The Cloud (2)[60]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit G, 11/F, Reason Group Tower (ie Comparable NU7)	2014	6 Jun 2023	89.93	$75,170
The Cloud	Unit 2, 16/F (ie Comparable NU44)	2022	14 Aug 2023	23.50	$132,226	129.15% (ie +29.15%)	36.2%*

* $75,170 x 129.15% x 136.20% = $132,226 approximately

Reason Group Tower v The Cloud (3)[61]

Location	Address	Building Age	Date of Sale	Saleable Area (m2)	Unit Rate (/m2)	Total Adjusted Percentage save for location	Implied difference for location
Subject Location	Unit A, 19/F, Reason Group Tower (ie Comparable NU9)	2014	21 Mar 2023	151.25	$79,339
The Cloud	Unit 1, 21F (ie Comparable NU43)	2022	7 Sep 2023	198.07	$100,520	95.94 (ie -4.06%)	32.1%*

* $79,339 x 95.94% x 132.10% = $100,520 approximately

203.  On the basis of these alternative paired analysis above as suggested by Ms Ngai, the location difference between the subject location which is represented by Reason Group Tower that lies at the back of the Lot and Orient International Tower might be more than -100% rather than Mr Ho’s suggestion of mere of -15%.

204.  While Mr Ho had no question on the calculation of Ms Ngai pairing analysis, he raised doubt on the reliability because each “pairing” consisted of basically one particular unit in Reason Group Tower versus another. He queried whether a particular transaction accurately reflected the market value at the time.

205.  Certainly the above analysis adopted either Unit G, 11/F, Reason Group Tower (ie Comparable NU7) or Unit G, 10/F, Reason Group Tower (ie Comparable NU8) as the basis of comparison but their unit prices appear to be consistent with each other and be supported by other transactions in Reason Group Tower.

206.  In addition, Mr Ho challenged that using and comparing Reason Group Tower as the basis of the paired analysis may not be sufficient to draw any firm conclusion on the appropriate location adjustment to be adopted. However, as can be seen from §198 above, Mr Ho was as well using only transactions within one building - Vanta Industrial Centre.

207.  I find Ms Ngai’s paired analysis more persuasive even though I have borne in mind that I have accepted Ms Chow’s adjustment for location at +5%.

208.  But even if this were not the case, when I am faced with such disparate findings by the two different analysis, common sense tells me that, with respect, Mr Ho’s analysis must be wrong.

209.  Indeed, the Tribunal in Tin Kung Investment Limited v Secretary for Transport, LDRW 16/2001 (unreported, dated 29 June 2004) had the following remark at §3(1):

“Putting before anyone these statistics, there must be the concern whether the Comparables selected for valuation are indeed suitable for comparison. Making adjustment to compensate for the difference between two properties is not a perfect and effective valuation tool. What the experts have built in the valuation formula are largely subjective views (and such formula may be manipulated to arrive at an intended result). The subjective views tend to cause error, the risk of which goes in proportion to the quantum of adjustment made. Its application therefore is with limitation. It is suitable for use only if the two properties are in great similar but in minor place different. In the case where a large number of factors and amount of adjustment as the above are applied in the valuation, the risk of getting the valuation wrong is high. If this fundamental principle of application is not observed, the price of a commercial property in a central business area can be absurdly taken to find out the value of a piece of farmland in the green belt zone through adjustments.” (underline added)

210.  Mr Ho had further tried to support his location adjustment by referring to the pilot scheme for “Charging Land Premiums at Standard Rates for Lease Modifications for Redevelopment of Industrial Buildings” promulgated by the Lands Department since March 2021 where the “Before Lease Modification” unit rates for industrial/ godown of both New Territories South and Kowloon West are the same at $35,000. With respect, as a professional valuer, Mr Ho should have realized that such is a policy of Government to encourage revitalization of industrial buildings. This is a land administration policy rather than a valuation exercise per se:

“The pilot scheme is clear and simple. Standard rates are set for five broad regions in Hong Kong and three types of uses involved in lease modifications for IBs (namely "industrial/godown" use before redevelopment, as well as "commercial/modern industrial" use and "residential" use after redevelopment), and have been formulated with reference to a basket of relevant market data.”[62]

211.  The press release by the Lands Department dated 4 March 2021 continued to state the following:

“The aforementioned standard rates will remain unchanged for the two-year period of the pilot scheme for greater certainty under the scheme. During the period, IB owners may compute the land premiums payable based on the uses and gross floor areas (GFAs) before and after lease modification by applying the promulgated standard rates, to consider whether to apply for lease modification for redevelopment of IBs.

…

The spokesperson emphasised, "The objective of the pilot scheme is not to provide premium concessions for owners, but to enhance the certainty on land premiums payable to expedite revitalisation of IBs. By definition, standard rates are not tailor-made for individual cases, and hence cannot precisely reflect the attributes of individual cases. If lease modification applicants do not find it attractive to have land premiums calculated at standard rates, they may opt to have their cases processed using the existing conventional approach for land premium assessment."” (underline added)

212.  With respect, Mr Ho, as a professional valuer should have realized that market value of premises will unlikely remain unchanged for two years. A fortiori, he should have noted that “standard rates are not tailor-made for individual cases, and hence cannot precisely reflect the attributes of individual cases”

213.  Indeed, I had intimated to Mr Ho that such land administration policy of the Lands Department is not uncommon in Hong Kong. Another good example is the ex-gratia compensation system for land in the New Territories which has been revamped recently to consist of two compensation zones only instead of the previous four for instance. In Chan Sau Ying v Director of Lands, LDLR 11/1983 (which has been reported as [1983-85] CPR 487), the Tribunal had ruled at §20 as follows:

“We strongly emphasise that these zonal rates are only of background interest. They merely assist in explaining the attitude of the parties during the negotiations before the reference to this Tribunal and also the applicant's stance at the hearing. However, they are not relevant to the determination of compensation under the Crown Lands Resumption Ordinance. For as we have already indicated the basis of compensation under the Ordinance is the amount which the land, if sold by a willing seller is the open market, might be expected to realise.”

214.  Also, in Kwong Fat Loong Shipyard v Commissioner of Rating and Valuation [1990] HKDCLR 5, the Tribunal accepted the evidence of the valuation expert for the respondent at §18 that “(t)o the extent that shipyard rentals from other localities were taken into account, they too were based on standard rates and not open market rents.”

215.  To conclude, I do not consider sales of units in Orient International Tower capable of providing any evidential value to the market value of new industrial premises in the subject location.

The Cloud

216.  The Cloud, which comprises also a new industrial building completed in 2022, like Orient International Tower, is situated in the urban area of Kowloon zoned “Other Specified Uses (Business)” on the Mong Kok Outline Zoning Plan No S/K3/37 dated 22 March 2024.

217.  While I maintain my opinion that it is difficult to quantify the locational difference of comparables if they are in a very different locality, I am totally at a loss as to why Mr Ho adopted a locational adjustment of +5% to sales of units in The Cloud, ie he believed the location of The Cloud is even poorer than the subject which cannot be the case in real life in terms of accessibility and transportation arrangements etc.

218.  As what the paired analysis set out in §202 above shows, the location adjustment should be the other way round at as much as -30% or more.

219.  Also, three out of the four sales of units in The Cloud adopted by Mr Ho as comparable have a saleable area of mere 23.5 sq m.

220.  I do not consider sales of units in The Cloud capable of providing any evidential value to the market value of new industrial premises in the subject location.

Assessment of GDV for Upper Floors

221.  To recap, I would only rely on the following transactions (which include sales of unit in International Enterprise Centre II and W212 for the time being so as to provide a better picture) as comparables to determine the GDV for the upper floors of the proposed development pursuant to the Application No A/KC/474:

Comp Ref	Unit	Date of Agreement	Consideration	Effective Floor Area (m2)	Headroom (m)	Private Lavatory	Unit Rate (/m2)
NU1	Unit 5 on 9/F, International Enterprise Centre II	13 Sep 2023	$8,869,500	67.73	4.55	No	$130,954
NU2	Unit 5 on 2/F, International Enterprise Centre II	18 Mar 2023	$11,542,000	72.79*	4.55	No	$158,566
NU3	Unit 5 on 3/F, International Enterprise Centre II	15 May 2023	$8,262,000	67.73	4.55	No	$121,984
NU21	Unit 12 on 5/F, W212	27 Jan 2022	$6,830,000	44.31	3.5	Yes	$154,141
NU22	Unit 15 on 5/F, , W212	27 Jan 2022	$4,676,000	31.12	3.5	Yes	$150,257
NU7	Unit G on 11/F, Reason Group Tower	6 Jun 2023	$6,760,000	89.93	4.0	No	$75,170
NU8	Unit G on 10/F, Reason Group Tower	18 May 2023	$6,680,000	89.93	4.0	No	$74,280
NU9	Unit A on 19/F, Reason Group Tower	21 Mar 2023	$12,000,000	151.25	4.0	Yes	$79,339
NU10	Unit C on 21/F, Reason Group Tower	19 May 2023	$6,607,250	87.73	4.0	No	$75,313
NU11	Unit H on 6/F, Reason Group Tower	22 Feb 2023	$5,380,000	84.91	4.0	No	$63,361
NU12	Unit D on 16/F, Reason Group Tower	10 Feb 2023	$6,638,000	92.35	4.0	No	$71,879
NU29	Unit 8 on 25/F, The Galaxy	14 Nov 2023	$3,100,000	49.52	3.5	No	$62,601
NU30	Unit 3 on 16/F, The Galaxy	22 Apr 2022	$3,700,000	51.56	3.5	No	$71,761

* This includes the converted area of Flat Roof at the rate of 1/6 of the floor proper.

222.  Ms Chow and Mr Ho agreed to adopt a hypothetical unit, more particularly Unit 2 on 16/F of the proposed development pursuant to the Application No A/KC/474 as the reference unit. This unit, which will look west, will have a saleable area of 118.38 sq m, a headroom of 3.5 metres and will have an ensuite toilet.

223.  As regards the view of this hypothetical unit, I and the parties had carried out a joint inspection on the 26/F of Golden King Industrial Building at a height about 93.18 mHKPD. I agree with Mr Ho that this hypothetical unit will likely enjoy a close building view towards buildings on the opposite side of Tai Lin Pai Road. However, I consider his adjustment as much as 5% for some of the comparables excessive; I prefer to adopt Ms Chow’s 3% instead.

224.  On the basis of the discussions above, I carry out the analysis in the following:

Comp Ref	Unit Rate (/m2)	Adjustments									Adjusted Unit Rate (/m2)
		Time	Location	Floor	View	Headroom	Quantum/ Size	Age	Exclusive Toilet	Total
NU1	$130,954	-3.3%	-10.0%	3.0%	3.0%	-4.2%	-10.1%	1.5%	5.0%	-15.3%	$110,918
NU2	$158,566	-6.8%	-10.0%	6.0%	3.0%	-4.2%	-9.1%	1.5%	5.0%	-15.0%	$134,781
NU3	$121,984	-6.8%	-10.0%	5.5%	3.0%	-4.2%	-10.1%	1.5%	5.0%	-16.3%	$102,101
NU21	$154,141	-11.9%	-10.0%	5.0%	0.0%	0.0%	-14.8%	2.5%	0.0%	-27.3%	$112,061
NU22	$150,257	-11.9%	-10.0%	5.0%	0.0%	0.0%	-17.5%	2.5%	0.0%	-29.6%	$105,781
NU7	$75,170	-6.7%	5.0%	1.0%	0.0%	-2.0%	-5.7%	5.0%	5.0%	0.8%	$75,771
NU8	$74,280	-6.8%	5.0%	1.5%	0.0%	-2.0%	-5.7%	5.0%	5.0%	1.2%	$75,171
NU9	$79,339	-7.3%	5.0%	-2.0%	-3.0%	-2.0%	6.6%	5.0%	0.0%	1.5%	$80,529
NU10	$75,313	-6.8%	5.0%	-3.0%	-3.0%	-2.0%	-6.1%	5.0%	5.0%	-6.6%	$70,342
NU11	$63,361	-7.0%	5.0%	3.5%	0.0%	-2.0%	-6.7%	5.0%	5.0%	1.9%	$64,565
NU12	$71,879	-7.0%	5.0%	-0.5%	-3.0%	-2.0%	-5.2%	5.0%	5.0%	-3.5%	$69,363
NU29	$62,601	-0.7%	10.0%	-3.5%	-3.0%	0.0%	-13.8%	5.0%	5.0%	-2.8%	$60,848
NU30	$71,761	-8.4%	10.0%	0.5%	0.0%	0.0%	-13.4%	5.0%	5.0%	-3.3%	$69,393

225.  As stated in §169 above, I prefer Ms Chow’s location adjustment for sales in International Enterprise Centre II at -10% to Mr Ho’s -5% for location and +5% for accessibility. However, the paired analysis as prepared by Ms Ngai that was put to Mr Ho shows that the location adjustment at -10% could have been underestimated. If location adjustment at -15% be applied instead, the average of the three sales in International Enterprise Centre II will become $109,486 per sq m. This is more in line with the adjusted result for sales in W212.

226.  Mr Ho had reservation on the sales of units in Reason Group Tower which, according to him, appear on the low side. But in terms of location, they are the best comparables and therefore I would put more weight on them, particularly Comparables NU7, NU8 and NU9 which took place in the later half of 2023. On the other hand, the allegation of the low value for Reason Group Tower is rebutted by sales of units in The Galaxy.

227.  Thus, upon refining the comparables to only the six common comparables agreed by both experts[63], I arrive at the following:

Comp Ref	Unit Rate (/m2)	Adjustments									Adjusted Unit Rate (/m2)
		Time	Location	Floor	View	Headroom	Quantum/ Size	Age	Exclusive Toilet	Total
NU1	$130,954	-3.3%	-15.0%	3.0%	3.0%	-4.2%	-10.1%	1.5%	5.0%	-20.0%	$104,763
NU2	$158,566	-6.8%	-15.0%	6.0%	3.0%	-4.2%	-9.1%	1.5%	5.0%	-19.7%	$127,328
NU3	$121,984	-6.8%	-15.0%	5.5%	3.0%	-4.2%	-10.1%	1.5%	5.0%	-21.0%	$96,367
NU7	$75,170	-6.7%	5.0%	1.0%	0.0%	-2.0%	-5.7%	5.0%	5.0%	0.8%	$75,771
NU8	$74,280	-6.8%	5.0%	1.5%	0.0%	-2.0%	-5.7%	5.0%	5.0%	1.2%	$75,171
NU9	$79,339	-7.3%	5.0%	-2.0%	-3.0%	-2.0%	6.6%	5.0%	0.0%	1.5%	$80,529
									Weighted Average:		$87,933

228.  Therefore, I am prepared to adopt $88,000 per sq m as the unit rate for Unit 2 on 16/F of the hypothetical development and I follow the adjustments proposed by Ms Chow in determining the GDV for the upper floors:[64]

Floor	Unit	Saleable Area (m2)	Adjustments						Adjusted Unit Rate	GDV
			Floor	View[65]	Size	Accessibility	Headroom	Total
1/F	1	187.83	-6.0%	0.0%	-13.9%	15.0%*	6.0%	-1.3%	$86,856	$16,310,000
	2	127.07	-6.0%	0.0%	-1.7%	15.0%*	6.0%	12.6%	$99,088	$12,590,000
	3	88.28	-6.0%	0.0%	6.0%	15.0%*	6.0%	21.5%	$106,920	$9,440,000
	4	90.28	-6.0%	0.0%	5.6%	15.0%*	6.0%	21.0%	$106,480	$9,610,000
	5	84.48	-6.0%	0.0%	6.8%	15.0%*	6.0%	22.4%	$107,712	$9,100,000
2/F	1	90.60	-5.5%	0.0%	5.6%	0.0%	6.0%	5.8%	$93,104	$8,440,000
	2	106.04	-5.5%	0.0%	2.5%	0.0%	6.0%	2.7%	$90,376	$9,580,000
	3	114.24	-5.5%	0.0%	0.8%	0.0%	6.0%	1.0%	$88,880	$10,150,000
	4	92.79	-5.5%	0.0%	5.1%	0.0%	6.0%	5.3%	$92,664	$8,600,000
	5	86.25	-5.5%	0.0%	6.4%	0.0%	6.0%	6.6%	$93,808	$8,090,000
	6	90.83	-5.5%	0.0%	5.5%	0.0%	6.0%	5.7%	$93,016	$8,450,000
	7	96.31	-5.5%	0.0%	4.4%	0.0%	6.0%	4.6%	$92,048	$8,870,000
	8	93.27	-5.5%	0.0%	5.0%	0.0%	6.0%	5.2%	$92,576	$8,630,000
3/F	1	147.27	-5.0%	0.0%	-5.8%	0.0%	0.0%	-10.5%	$78,760	$11,600,000
	2	108.47	-5.0%	0.0%	2.0%	0.0%	0.0%	-3.1%	$85,272	$9,250,000
	3	112.21	-5.0%	0.0%	1.2%	0.0%	0.0%	-3.9%	$84,568	$9,490,000
	4	93.33	-5.0%	0.0%	5.0%	0.0%	0.0%	-0.3%	$87,824	$8,200,000
	5	82.05	-5.0%	0.0%	7.3%	0.0%	0.0%	1.9%	$89,672	$7,360,000
	6	119.03	-5.0%	0.0%	-0.1%	0.0%	0.0%	-5.1%	$83,512	$9,940,000
	7	170.34	-5.0%	0.0%	-10.4%	0.0%	0.0%	-14.9%	$74,888	$12,760,000
5/F	1	146.05	-4.5%	0.0%	-5.5%	0.0%	0.0%	-9.8%	$79,376	$11,590,000
	2	94.77	-4.5%	0.0%	4.7%	0.0%	0.0%	0.0%	$88,000	$8,340,000
	3	84.20	-4.5%	0.0%	6.8%	0.0%	0.0%	2.0%	$89,760	$7,560,000
	4	92.08	-4.5%	0.0%	5.3%	0.0%	0.0%	0.6%	$88,528	$8,150,000
	5	82.43	-4.5%	0.0%	7.2%	0.0%	0.0%	2.4%	$90,112	$7,430,000
	6	119.68	-4.5%	0.0%	-0.3%	0.0%	0.0%	-4.8%	$83,776	$10,030,000
	7	166.61	-4.5%	0.0%	-9.6%	0.0%	0.0%	-13.7%	$75,944	$12,650,000
7/F – 17/F (with no 13/F & 14/F)	1	147.56	-1.5%	0.0%	-5.8%	0.0%	0.0%	-7.2%	$81,664	$108,450,000
	2	118.38	-1.5%	0.0%	0.0%	0.0%	0.0%	-1.5%	$86,680	$92,340,000
	3	83.13	-1.5%	0.0%	7.1%	0.0%	0.0%	5.5%	$92,840	$69,480,000
	4	92.59	-1.5%	0.0%	5.2%	0.0%	0.0%	3.6%	$91,168	$75,960,000
	5	82.53	-1.5%	0.0%	7.2%	0.0%	0.0%	5.6%	$92,928	$69,030,000
	6	119.62	-1.5%	0.0%	-0.2%	0.0%	0.0%	-1.7%	$86,504	$93,150,000
	7	166.87	-1.5%	0.0%	-9.7%	0.0%	0.0%	-11.1%	$78,232	$117,450,000
18/F -25/F (with no 24/F)	1	125.08	2.5%	0.0%	-1.3%	0.0%	0.0%	1.2%	$89,056	$77,980,000
	2	118.38	2.5%	0.0%	0.0%	0.0%	0.0%	2.5%	$90,200	$74,760,000
	3	83.13	2.5%	0.0%	7.1%	0.0%	0.0%	9.8%	$96,624	$56,210,000
	4	92.59	2.5%	0.0%	5.2%	0.0%	0.0%	7.8%	$94,864	$61,460,000
	5	82.53	2.5%	0.0%	7.2%	0.0%	0.0%	9.9%	$96,712	$55,860,000
	6	119.62	2.5%	3.0%	-0.2%	0.0%	0.0%	5.4%	$92,752	$77,630,000
	7	134.62	2.5%	0.0%	-3.2%	0.0%	0.0%	-0.8%	$87,296	$82,250,000
26/F -27/F	1	125.08	4.8%	3.0%	-1.3%	0.0%	6.0%	12.9%	$99,352	$24,860,000
	2	118.38	4.8%	3.0%	0.0%	0.0%	6.0%	14.4%	$100,672	$23,840,000
	3	83.13	4.8%	3.0%	7.1%	0.0%	6.0%	22.5%	$107,800	$17,920,000
	4	92.59	4.8%	3.0%	5.2%	0.0%	6.0%	20.4%	$105,952	$19,620,000
	5	82.53	4.8%	3.0%	7.2%	0.0%	6.0%	22.7%	$107,976	$17,820,000
	6	119.62	4.8%	3.0%	-0.2%	0.0%	6.0%	14.2%	$100,496	$24,040,000
	7	134.37	4.8%	0.0%	-3.2%	0.0%	6.0%	7.5%	$94,600	$25,420,000
28/F	1	88.66	5.5%	3.0%	5.9%	0.0%	6.0%	22.0%	$107,360	$9,520,000
	2	94.74	5.5%	3.0%	4.7%	0.0%	6.0%	20.6%	$106,128	$10,050,000
	3	83.13	5.5%	3.0%	7.1%	0.0%	6.0%	23.4%	$108,592	$9,030,000
	4	92.59	5.5%	3.0%	5.2%	0.0%	6.0%	21.2%	$106,656	$9,880,000
	5	82.53	5.5%	3.0%	7.2%	0.0%	6.0%	23.5%	$108,680	$8,970,000
	6	88.37	5.5%	3.0%	6.0%	0.0%	6.0%	22.1%	$107,448	$9,500,000
	7	97.78	5.5%	3.0%	4.1%	0.0%	6.0%	19.9%	$105,512	$10,320,000
29/F	1	88.66	6.0%	3.0%	5.9%	0.0%	6.0%	22.6%	$107,888	$9,570,000
	2	94.74	6.0%	3.0%	4.7%	0.0%	6.0%	21.2%	$106,656	$10,100,000
	3	83.13	6.0%	3.0%	7.1%	0.0%	6.0%	23.9%	$109,032	$9,060,000
	4	92.59	6.0%	3.0%	5.2%	0.0%	6.0%	21.7%	$107,096	$9,920,000
	5	82.53	6.0%	3.0%	7.2%	0.0%	6.0%	24.1%	$109,208	$9,010,000
	6	88.37	6.0%	3.0%	6.0%	0.0%	6.0%	22.7%	$107,976	$9,540,000
	7	97.78	6.0%	3.0%	4.1%	0.0%	6.0%	20.5%	$106,040	$10,370,000
									Total:	$1,662,580,000

* I agree with Ms Chow to apply an adjustment of +15% in preference to Mr Ho’s +5% to reflect the fact that those units can also be accessed via a pair of escalators from the ground floor. In §104 above, I have accepted a discount of -10% from the sale price of an industrial unit in Gold King Industrial Building which lies on the 1/F, close to the common carparking space.

GDV for Private Carparking Spaces

229.  Ms Chow and Mr Ho agreed to adopt a Private Carparking Space on the proposed basement for reference to determine the GDV of the carparking spaces which will be served by 2 car lifts. They then referred to the following transactions as comparables:[66]

Comp Ref	Unit	Carpark Ratio per sq m (GFA)[67]	Year Built	Date of Sale	Consideration	Accessibility	Unit Rate per Space
NCP1	Nos 1-4 & 14, G/F, Reason Group Tower	1:590	2014	20 Sep 2021	$10,950,000	By 2 car lifts	$2,190,000
NCP2	No 11, LG/F, Reason Group Tower	1:590	2014	17 Jun 2021	$1,550,000	By 2 car lifts	$1,550,000
NCP3	No 5, LG/F, Reason Group Tower	1:590	2014	3 Nov 2020	$1,980,000	By 2 car lifts	$1,980,000
NCP4	CP0P2, LG/F, iPlace	1:1,170	2017	23 Aug 2023	$1,000,000	By 1 car lift	$1,000,000
NCP5	CP0P5, LG/F, iPlace	1:1,170	2017	8 Mar 2023	$1,030,000	By 1 car lift	$1,030,000
NCP6	CP0P8, LG/F, iPlace	1:1,170	2017	24 Feb 2023	$1,020,000	By 1 car lift	$1,020,000
NCP7	CP0P9, LG/F, iPlace	1:1,170	2017	24 Feb 2023	$1,020,000	By 1 car lift	$1,020,000
NCP8	CP0P4, LG/F, iPlace	1:1,170	2017	20 Feb 2023	$1,020,000	By 1 car lift	$1,020,000
NCP9	CP0P10, LG/F, iPlace	1:1,170	2017	17 Feb 2023	$1,200,000	By 1 car lift	$1,200,000
NCP10	CP0P1, LG/F, iPlace	1:1,170	2017	17 Feb 2023	$1,050,000	By 1 car lift	$1,050,000
NCP11	CP0P6, LG/F, iPlace	1:1,170	2017	17 Feb 2023	$1,050,000	By 1 car lift	$1,050,000
NCP12	CP0P3, LG/F, iPlace	1:1,170	2017	15 Feb 2023	$1,020,000	By 1 car lift	$1,020,000
NCP13	CP0P7, LG/F, iPlace	1:1,170	2017	3 Feb 2023	$1,050,000	By 1 car lift	$1,050,000
NCP14	Nos 1-4 & 6, 1/F, The Galaxy	1:1,179	2014	2 Sep 2021 – 11 Sep 2021	$5,000,000	By 1 car lift	$5,000,000
NCP15	No 5, 1/F, The Galaxy	1:1,179	2014	20 Apr 2021	$1,280,000	By 1 car lift	$1,280,000
NCP16	PC-03, 1/F, The Star	1:1,102	2017	20 Jan 2022	$1,450,000	By 1 car lift	$1,450,000
NCP17	PC-03, 1/F, The Star	1:1,102	2017	4 Jan 2021	$1,490,000	By 1 car lift	$1,490,000
NCP18	PC-01, 1/F, The Star	1:1,102	2017	23 Jun 2020	$1,220,000	By 1 car lift	$1,220,000
NCP19	PC-02, 1/F, The Star	1:1,102	2017	23 Jun 2020	$1,220,000	By 1 car lift	$1,220,000
NCP20	P58, B2/F, K83, 83 Tai Lin Pai Road	1:155	2019	7 Dec 2023	$2,500,000	By 2 car lifts	$2,500,000
NCP21	P16, B3/F, Orient International Tower	1:600	2022	21 Dec 2023	$3,000,000	Ramp	$3,000,000
NCP22	P17, B3/F, Orient International Tower	1:600	2022	27 Dec 2023	$3,000,000	Ramp	$3,000,000
NCP23	F76, B1/F, International Enterprise Centre I, 11 Chai Wan Kok Street	1:148	2022	17 Nov 2023	$2,500,000	Ramp	$2,500,000
NCP24	F81, B1/F, International Enterprise Centre I, 11 Chai Wan Kok Street	1:148	2022	17 Nov 2023	$2,500,000	Ramp	$2,500,000
NCP25	F14, B1/F, International Enterprise Centre II, 73 Chai Wan Kok Street	1:588	2021	17 Oct 2023	$2,500,000	By 2 car lifts	$2,500,000
NCP26	F15, B1/F, International Enterprise Centre II, 73 Chai Wan Kok Street	1:588	2021	3 Oct 2023	$2,500,000	By 2 car lifts	$2,500,000
NCP27	P3, B/F, The Cloud	1:696	2022	7 Sep 2023	$1,600,000	By 1 car lift	$1,600,000

230.  Among the “comparables” above, only Comparable NCP4 was the common comparable adopted by both experts and their analysis is shown in the table below:

Valuation Expert	Adjustments					Adjusted Unit Value
	Time	Location	Age	Accessibility	Total
Ms Chow	-5.0%	0.0%	1.4%	10.0%	6.0%	$1,060,000
Mr Ho	-5.0%	0.0%	3.5%	40.0%	37.7%	$1,377,000

231.  Obviously from the above, Mr Ho’s adjustment for accessibility by car lift was excessive. I do not see any reason for adjustment for the road network either when iPlace can be readily accessed from Yip Shing Street via Castle Peak Road.

232.  On the other hand, Ms Chow also relied on Comparables NCP1 to NCP3 and NCP5 to NCP19 but as commented by Mr Ho, they were relatively dated.

233.  Whereas Mr Ho relied therefore on Comparables NCP20 to NCP27, I have already stated in the paragraphs above that International Enterprise Centre II, Orient International Tower and The Cloud are situated in different localities whereby transactions of workshop units or even carparking spaces should not in any way be regarded as comparables.

234.  International Enterprise Centre I is a Grade A office building which must be distinguished from International Enterprise Centre II which is an industrial building though they have similar building names and lie on the same street. As regards K83, which though lies on the same street as the Building but at a distance, it is also a Grade A office building rather than an industrial building where the demand for carparking would be materially different.

235.  Bearing in mind the above, there seems to leave in effect a single comparable, ie Comparable NCP4 which took place in the 2^nd half of 2023. Although its value was supported by the other comparables which accorded with the falling trend of the market, I do note that carparking spaces in Reason Group Tower fetched much higher prices though in 2020 or 2021 at $1,550,000 or up to $2,190,00.

236.  Although I am hesitant to adopt the carparking sale in K83 as comparable, I am persuaded that a potential and willing purchaser of a unit in K83, for instance, would be interested in buying one of the carparking space in the hypothetical development if there is a sufficient discount in price

237.  I am prepared to adopt $1,800,000 per carparking for the hypothetical development on the Lot as proposed by Mr Ho.

GDV for Light Goods/Heavy Goods Vehicles Parking Spaces

238.  In respect of the value for light goods/heavy goods vehicles parking spaces in the hypothetical development, Ms Chow and Mr Ho referred to the following transactions as comparables:[68]

Comp Ref	Unit	Carpark Ratio per sq m (GFA)	Year Built	Date of Sale	Consideration	Accessibility	Unit Rate per Space
NLG1	Unit 2-4, 1/F, The Galaxy	1:884	2014	2 Sep 2021 – 11 Sep 2021	$5,000,000	By 1 car lift	$1,666,667
NLG 2	LGV-01, 1/F, The Star	1:882	2017	16 Oct 2020	$1,650,000	By 1 car lift	$1,650,000
NLG 3	LGV9-LVG12, LG3/F, iPlace	1:900	2017	20 Sep 2023	$5,320,000	By 1 car lift	$1,330,000
NLG 4	LGV5 & LVG6, LG2/F, iPlace	1:900	2017	16 Mar 2023	$2,460,000	By 1 car lift	$1,230,000
NLG 5	LVG12, LG3/F, iPlace	1:900	2017	20 Sep 2023	$1,330,000	By 1 car lift	$1,330,000
NLG 6	LGV03, G/F, The Cloud	1:1,855	2022	7 Sep 2023	$2,500,000	By 1 car lift	$2,500,000
NHG1	HGV-01, 1/F, The Star	1:882	2017	2 Apr 2019	$2,000,000	By 1 car lift	$2,000,000
NHG 2	HGV-02, 1/F, The Star	1:882	2017	1 Apr 2019	$2,000,000	By 1 car lift	$2,000,000
NHG 3	HGV-03, 1/F, The Star	1:882	2017	1 Apr 2019	$2,000,000	By 1 car lift	$2,000,000

239.  Again, as stated in §81 above, the two valuation experts had not relied on the carparking ratio of these comparable buildings for the purpose of their valuation. Those carparking ratios were provided only at my request at the beginning of the trial as Exhibit AR- 2. In comparison, the assumed light goods or heavy goods vehicles ratio for the hypothetical development is 1 : 679. That means more light goods or heavy goods vehicles will be provided than those in iPlace or The Star.

240.  Although the most recent transaction of the light goods vehicle parking space in iPlace in September 2023 fetched a value of $1,330,000, I consider, owing to the peculiar occupation and location of the building, the demand for carparking or goods vehicles parking not reflecting that of the hypothetical development at Tai Lin Pai Road. Whereas I have adopted the value of private car parking space in the hypothetical building at $1,800,000, I consider an appropriate value for a light goods vehicle parking space within the hypothetical development be $2,000,000.

241.  As regards the value of a heavy goods carparking space, I agree with the experts’ opinion that it would be 10% higher than that of a light goods vehicle. Therefore, I determine the value of a heavy goods carparking space at $2,200,000. This, to a certain extent, is supported by the sales of heavy goods carparking spaces in The Star.

GDV for Double Deck Parking Spaces

242.  Ms Chow and Mr Ho agreed that it would be $1,000,000 per each space or $2,000,000 per each double deck space.

GDV for Motorcycle Parking Spaces

243.  Ms Chow could not find any comparable for assessing the value of a motorcycle parking space. She assumed it would be about 10% of that of a private carparking space.

244.  On the other hand, Mr Ho again relied on transactions in International Enterprise Centre I, Orient International Tower and The Cloud as follow:

Comp Ref	Unit	Carpark Ratio per sq m (GFA)[69]	Year Built	Date of Sale	Consideration	Accessibility	Unit Rate per Space
NMP1	M1-M4, B3/F, Orient International Tower	1:4,946	2022	25 Sep 2023	$1,400,000	Ramp	$350,000
NMP2	M2, B/F, The Cloud	1:2,782	2022	14 Dec 2023	$300,000	By 1 car lift	$300,000
NMP3	M6, B3/F, International Enterprise Centre I	1:1,439	2022	4 Aug 2023	$280,000	Ramp	$280,000

245.  Whereas I have already ruled that transactions in International Enterprise Centre I, Orient International Tower and The Cloud are not appropriate comparables, I agree to adopt Ms Chow’s assessment of 10% of the value of the private car parking space, ie $180,000 each for a motorcycle parking space.

Other Development Parameters

246.  Both Ms Chow and Mr Ho have agreed the following parameters in a residual valuation:

Developer’s Profit	20%
Legal Cost	0.1%
Stamp Duty	4.25%
Demolition Cost	$29,119,376
Construction Cost	$704,663,813
Professional Fee	6%
Demolition Period	1 year
Construction Period	2.5 years

247.  However, they failed to agree the following:

	Ms Chow	Mr Ho
Marketing Cost	3% on GDV	5% on GDV
Finance Cost	4.75%	4.5%

Marketing Cost

248.  Whereas marketing cost is allowed in a residual valuation to cover the agency fees, costs for setting sale offices, preparation of sales brochure, cost of advertising etc, it has been set usually at 3% on GDV. Mr Ho suggested however the agency fee for such new industrial building would be higher than normal new residential development. Unfortunately, Mr Ho had not provided any evidence on his assertion in the absence of which I prefer to adopt the same 3% as the marketing cost: at least, for sales of industrial and/or office development, it is highly unlikely a high profile marketing campaign will be conducted and a show flat would be seldomly arranged.

Finance Cost

249.  In the present financial climate where the HIBOR has been maintained at around 4.6%, I prefer to adopt 4.75% , if not higher, as the finance cost.

Residual Valuation

250.  On the basis of the preceding analysis or determination, the residual valuation of the Lot is set out in Appendix V of this judgment. The Lot is assessed at $633,000,000, which is equivalent to an accommodation value of about $24,544/ m².

Direct Comparison

251.  While the residual method is a useful tool to assess the viability of a hypothetical development, it is inherently very sensitive to even small changes in the input variables. Thus, if market evidence exists, it is always encouraged to compare it with the result of a residual valuation.

252.  Mr Ho, therefore, sought to rely on the following land sales for the purpose of making direct comparison with the Lot:[70]

Address	Nos 47-51 Tai Lin Pai Road (ie the Lot)	Shui Hong Industrial Building, Nos 543-549 Castle Peak Road – Kwai Chung	Central Industrial Building, Nos 57-61 Ta Chuen Ping Street	Toppy Tower, Nos 45-51 Kwok Shui Road
Lot No	Kwai Chung Town Lot No 120	Kwai Chung Town Lot No 4	DD 444 Lot 277 Section E Remaining Portion & Extension thereto	Kwai Chung Town Lot No 49 & Extension thereto
Site Area	2,189.70 sq m	1,327.677 sq m	2,261 sq m	1,182 sq m
Date of Sale	Present in 2024	July 2021	June 2021	October 2021
Consideration		$448,000,000	$900,000,000	$585,000,000
Class of Site under Building (Planning) Regulations	Class A	Class A	Class A	Class C
Government Lease Restriction	Industrial and/or godown	Industrial and/or godown	Industrial	Industrial and/or godown
Zoning	Industrial	Other Specified Use (Business)	Other Specified Use (Business)	Other Specified Use (Business)
Building Height Restriction	120 mHKPD	105 mHKPD	130 mHKPD	105 mHKPD
Proposed  Use	Industrial Use	Non-polluting Industrial Use	Data Centre	Non-polluting Industrial Use
Permissible Plot Ratio	11.778	12.371 (Planning Application A/KC/487)	11.4 (Planning Application A/KC/484)	11.4 (Planning Application A/KC/463)
Max GFA	25,790.61 sq m	16,425 sq m	25,775 sq m	13,472 sq m
Accommodation Value (/m2)		$27,276	$34,917	$43,424
Adjustments:
Time[71]		-13.5%	-14.2%	-14.1%
Location		20.0%	0.0%	20.0%
Accessibility		0.0%	10.0%	0.0%
View		0.0%	0.0%	-10.0%
Class of Site		0.0%	0.0%	-10.0%
Development Scale		0.0%	0.0%	0.0%
Total Adjustments		3.8%	-5.6%	-16.5%
Adjusted AV		$28,312	$32,962	$36,259

253.  Firstly, Mr Ho relied on the Private Flatted Factories Price Index published by RVD in applying his adjustment for time. However, in Able Luck Development, supra, the Tribunal had commented at §100 that owing to the lapse of two years, the time adjustment on the basis of the Private Flatted Factories Price Index published by RVD failed to reflect the changes in the market conditions. The same remark should be applicable to the present case when the time lapses are more than 2 years apart.

254.  Secondly, the Tribunal had pointed out that “the index applied (if correct) is expressly qualified by RVD that it applies to upper floor flatted factory units only. Because of the difference in market sentiment, the increase in land value can be more significant than the upper floor units.” In the present case, the reverse should be true when the property market is falling.

255.  In her Rebuttal Report dated 27 November 2023, Ms Chow had already pointed out at §4.11.2.2 that these land sales comparables had the benefit of different zoning, ie “Other Specified Use (Business)” that is intended for general business uses[72]. Although the use and development of the sites are still restricted by the Government leases for “industrial and/or godown” purposes, the proposed development within such zoning would cater for more flexibility in light of the revitalization encouraged by the Government.

256.  For instance, the Lands Department stated in response to the Planning Application No A/KC/463 as follows:[73]

“ ‘Non-polluting industrial use’ in planning terms would constitute uses in breach of the lease conditions. If the proposed industrial development is intended to be used for “non-polluting industrial uses” that are in breach of the lease conditions, the lot owner shall need to apply to LandsD for a lease modification for the proposed development. Upon receipt of the lease modification application to implement the proposed redevelopment …, LandsD will impose such appropriate terms and conditions including, user restriction, payment of full premium and administration fee. Under the 2018 IB revitalization measure for redevelopment, the lease modification letter/conditions of land exchange shall be executed within 3 years from the date of the Board’s approval letter and the proposed redevelopment shall be completed within 5 years from the date of execution of the lease modification letter/conditions of land exchange…”

257.  Furthermore, the Tribunal in Able Luck Development, supra, illustrated at §§104-105 that, because the value of land is derived from its development potential to produce revenues (or the GDV as it is known in a residual valuation) in excess of the required payments to all other factors of production, any change in land value would be amplified by any change of the other factors of production.

Shui Hong Industrial Building, Nos 543-549 Castle Peak Road – Kwai Chung

258.  Apart from the adjustment for time, Mr Ho proposed a location adjustment of 20% for the sale of Shui Hong Industrial Building which I consider having been exaggerated. At most, I consider an adjustment of +10% applicable. If this were the case, even if no further adjustment is allowed for the different zoning, the total adjustment would have become -3.8% which will result in an adjusted AV of $25,967 per sq m without having taken into account the magnifying effect as stated in §257 above. This revised AV sits well with the $24,544 per sq m derived from the residual valuation.

Central Industrial Building, Nos 57-61 Ta Chuen Ping Street

259.  Again, I have difficulty in agreeing an adjustment for accessibility of +10% for the sale of Central Industrial Building as suggested by Mr Ho. This “comparable” is situated within a few minutes’ distance from iCity along the same street. As demonstrated by the paired analysis put to Mr Ho as set out in §202 above, there may be negative adjustment instead of a positive adjustment for location and/or accessibility.

260.  And in response to the Planning Application No A/KC/484, the Lands Department commented as follows:[74]

“the proposed development is a data centre which contravenes the user restriction under the Lease. If planning approval is given, the lot owner(s) should jointly apply for a lease modification from LandsD prior to its redevelopment. Upon receipt of a lease modification application, it will be considered by LandsD acting in the capacity as landlord at its sole discretion… In the event that an application is approved, it will be subject to such terms and conditions as the Government shall see fit, including, among others, the payment of premium and administrative fee;”

261.  If no adjustment for location, accessibility or the proposed use as data centre is allowed for the time being, the total adjustment would have been just -14.2% which will result in an adjusted AV of $29,959 per sq m without having taken into account the magnifying effect as stated in §257 above.

Toppy Tower, Nos 45-51 Kwok Shui Road

262.  Similarly, I have difficulty in agreeing an adjustment for location of +20% for the sale of Toppy Tower as suggested by Mr Ho. Rightly, Toppy Tower is situated on an island site next to the Cheong Wing Road roundabout as it was formerly called before the site next to it was resumed by the Government vide GN 1107 in 1987 for the purpose of constructing two 2-lane flyovers and a subway under Castle Peak Road connecting to Yiu Wing Lane etc in improving the traffic network there.[75] Thus the adjustment of +20% appears excessive and I would rather adopt +10% for the time being.

263.  Thus, if a lower adjustment for location at +10% is allowed for the time being, the total adjustment would have been just -23.5% which will result in an adjusted AV of $33,219 per sq m without having taken into account the magnifying effect as stated in §257 above.

264.  Notwithstanding the above, during the joint inspection on site on 13 March 2024, Mr Ho alleged that the owner of Toppy Tower no longer pursued redevelopment in pursuant to Planning Application No A/KC/463 which was approved by the Town Planning Board on 17 March 2020 subject to conditions. In any event, the planning permission would only be valid until 17 March 2024, and after the said date, the permission should cease to have effect unless before the said date, the development permitted was commenced or the permission was renewed. According to Mr Ho, the owner of Toppy Tower is considering refurbishment instead. In retrospect, therefore, the price paid in October 2021 would be on the high side and shall be subject to further discount even if it is accepted as a comparable.

Determination of Reserve Price

265.  Having reviewed the above, I consider the result of the residual valuation as carried out at Appendix V should be preferred and I am prepared to adopt the value of $633,000,000 as the reserve price for auction.

Other Incidental Matters

266.  The applicants proposed to appoint Mr Chow Wing Kin Anthony and Ms Chow Suk Han Anna, both being consultants of Messrs Guantao & Chow, Solicitors & Notaries, as the sale trustees. Based on the information on his background and experience as set out in their letter dated 19 January 2024, I am satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on trustee under the Ordinance. The remuneration package proposed in the said letter appears reasonable.

267.  The applicants have prepared a set of draft Particulars and Conditions of Sale of the Lot. Subject to any amendment that may become necessary as a result of our ruling on the arrangement of auction above, the particulars and conditions of sale of the Lot by public auction submitted by the applicants are also reasonable.

Order

268.  This Tribunal make the following orders:

(1) This Tribunal is satisfied that the redevelopment of the Lot is justified due to the “age” and “state of repair” of the Building and that the applicants have taken reasonable steps to acquire all the undivided shares in the Lot including those of the respondent;

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

(3) Mr Chow Wing Kin Anthony and Ms Chow Suk Han Anna of Messrs Guantao & Chow, Solicitors & Notaries, nominated by the applicants, be appointed trustees (“the Trustees”) to discharge the duties imposed on trustees under the Ordinance in relation to sale of the Lot and the Trustee be authorized to charge such remuneration for their services in accordance with the terms set out in the letter of Messrs Guantao & Chow, Solicitors & Notaries, dated 19 January 2024.

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

(i) The sale of the Lot be on the particulars and conditions of sale substantially the same as those in the draft Particulars and Conditions of Sale to be initialed and approved by the Tribunal.

(ii) The reserve price be set at $633,000,000.

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

(iv) Liberty to the applicants, the respondent and the Trustee to apply to the Tribunal for further direction(s) under the Ordinance.

Costs

269.  In accordance with the compensation approach as determined by the Court of Appeal in Good Faith Properties Ltd and Others v Cibean Development Co Ltd [2014] 5 HKLRD 534, the respondent is entitled to costs notwithstanding the outcome of the Application.

270.  Accordingly, I order that the applicants do pay the respondent’s costs in these proceedings on High Court scale with certificate for counsel, including any costs reserved, to be taxed if not agreed.

271.  Last but not least, the Tribunal thanks the Counsel for their assistance.

Appendix I

Appendix II

Appendix III

Appendix IV

Appendix V