SUPERGOAL INVESTMENT LTD v. FIVE F MING HOUSE LTD AND OTHERS

LDCS 46000 / 2011

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE APPLICATION NO 46000 OF 2011

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BETWEEN

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J U D G M E N T

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1.  This case necessarily engages the question of whether the Land (Compulsory Sale for Redevelopment) Ordinance (“the Ordinance”) should apply to land of which the applicant is already 100 percent owner.  That question was answered by the Court of Appeal in the negative,[1] but the decision was doubted by the Court of Final Appeal upon appeal.[2]  The question for us is whether we should follow the Court of Appeal decision.

2.  Unfortunately, the application is not opposed and we only have the submissions of the applicant.  Nonetheless, we are grateful to the applicant’s counsel (Nancy Ngai) for her thoughtful and helpful submissions.

3.  Before we attempt to deal with the conundrum, we shall set out the background.

Background

4.  The applicant is applying for the compulsory sale of all the undivided shares in Sections C, D, E, F, G, H, I and Remaining Portion of Kowloon Inland Lot No 1322, otherwise known as Nos 7, 7A, 7B, 7C, 7D, 7E, 7F and 7G of Victory Avenue, Kowloon for the purposes of redevelopment.  For ease of reference, we shall call each lot by their street number (eg No 7C) and the lots collectively as “the Lots”. 

5.  There is erected on each lot a 9-storey composite building with shops in the basement and domestic units on the upper floors.  The buildings on Nos 7, 7A, 7D and 7E are connected and served by one common lift and two common staircases. We shall call this group of buildings “the 1^st Group”.  Similarly, the buildings on Nos 7B, 7C, 7F and 7G are served by a common lift and two common staircases.  We shall call them “the 2^nd Group”.  There is no common staircase between the 1^st Group and the 2^nd Group, although they share the same main entrance on the basement level fronting onto the street level of Victory Avenue.  We shall call the existing development on the Lots (ie both the 1^st Group and the 2^nd Group) “the Complex”. The Complex is depicted pictorially in an index diagram provided by Ms Ngai, which is annexed hereto as Annex A.

6.  According to Land Registry record, there are altogether 65 units in the Complex excluding the roofs.  The distribution of the undivided shares in the Lots/Complex is shown in the table at Annex B.

7.  As at the commencement of this case on 21 December 2011, the applicant owned all the undivided shares in the Lots except the following:

Ownership	Address of the unit	Undivided Share
1st respondent	Northern Portion of Basement, 7 Victory Avenue	1/18th of No 7
2nd respondent	6th Floor, 7 Victory Avenue	2/18th of No 7
3rd respondent	Basement , 7A Victory Avenue	1/9th of No 7A
4th respondent	7th Floor & Flat Roof, 7A Victory Avenue	1/9th of No 7A
5th respondent	Basement, 7C Victory Avenue	1/9th of No 7C
6th respondent	5th Floor, 7D Victory Avenue	1/8th of No 7D
7th respondent	5th Floor, 7E Victory Avenue	1/8th of No 7E

8.  The percentage of the undivided shares in each lot owned by the applicant at that time was:

	Lots / Complex
	1st Group				2nd Group
	No 7	No 7A	No 7D	No 7E	No 7B	No 7C	No 7F	No 7G
Undivided shares owned by the applicant	15/18th	7/9th	7/8th	7/8th	9/9th	8/9th	8/8th	8/8th
Percentage of undivided shares owned by the applicant in each lot	83.33%	78.78%	87.5%	87.5%	100%	88.89%	100%	100%
Average percentage of undivided shares owned by the applicant in each group	84.028%				97.222%
Average percentage of undivided shares owned by the applicant in the Lots	90.75%

9.  Since then, the applicant has acquired the interests of the 1^st, 2^nd, 3^rd and 6^th respondents and discontinued the application against them.  By the time of trial, only the 4^th, 5^th and 7^th respondents remain.

10.  The 4^th respondent is the owner of 7^th Floor & Flat Roof of No 7A.  He was adjudicated bankrupt on 20 November 2002 and the Bankruptcy Order has not been discharged.  By virtue of section 58 of the Bankruptcy Ordinance, the interests of the 4^th respondent in his unit has been vested with the Official Receiver.  The application had been served on the Official Receiver but the 4^th respondent filed no opposition and did not attend the trial. 

11.  The 5^th respondent is the owner of Basement of No 7C.  He filed a Notice of Opposition on 11 January 2012 alleging that “the valuation of the premise is low”.  He, however, did not call any evidence and was absent at the trial.

12.  The original owner of 5^th Floor of No 7E (Don Ngell Lee) passed away on 12 January 1996.  A Justice of the Probate and Family Court in the United States of America decreed on 26 April 1996 that William D Chin be appointed administrator of the estate. The said Mr Chin appointed Tsui Robert Che-Kwong to represent the estate.  By an order of this tribunal dated 4 December 2012, Mr Tsui was appointed to represent the estate in these proceedings as the 7^th respondent.  

13.  We are given to understand that the applicant and Mr Tsui entered into a settlement on 4 July 2013 although completion of the sale of the 7^th respondent’s unit to the applicant is yet to take place pending formal grant of probate.  Consequently, Mr Tsui withdrew his Notice of Opposition and offered no evidence to dispute the application despite the expert evidence previously filed.  The 7^th respondent was absent at the trial but sent a representative to attend the site inspection on 10 September 2013.

14.  The percentage of the undivided shares in each lot owned by the applicant by the time of trial is therefore:

15.  In view of the absence of any real opposition, the applicant simply called its witnesses at trial to confirm their evidence.  The applicant contends that all the requirements of the Ordinance have been satisfied and asks for an order for sale under the Ordinance and consequential directions.

(1) Section 3 of the Ordinance – Ownership of the applicant

(1a) The threshold percentage

16.  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. 

17.  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.

18.  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 includes: “a lot with each of the building erected on the lot issued with an occupation permit at least 50 years before the relevant date [ie the date of the application under the Ordinance]”. 

19.  The occupation permit for the Complex was issued on 16 July 1958 and the Complex was more than 50 years old when this case was commenced.  The Notice is applicable and the threshold percentage should be 80%.

(1b) The applicant’s case

20.  According to the Re-Re-Amended Notice of Application dated 9 July 2013, the applicant applies for an order to sell all the undivided shares in the Lots for the purposes of redevelopment on the ground that the applicant is the legal owner of not less than 80% of the undivided shares in the Lots.

21.  However, Ms Ngai invited us, in her written opening, to treat this case as two applications – one for the sale of the 1^st Group and one for the sale of the 2^nd Group.  She observed that the buildings in each group are connected by common staircases and the average percentage of the undivided shares owned by the applicant in each group is more than 80%.  She submitted that the applicant is entitled to apply under section 3(2)(b) of the Ordinance for the compulsory sale of each group.  Relying on the judgment of this tribunal (differently constituted) in Fairtex Development v Tso Pee Hong,[3] she suggested that the two applications should be “consolidated” and tried together.  She therefore invited us to make two orders for sale at the end of the day with directions that the Lots be sold in one public auction.

22.  To facilitate our ruling, the applicant took out the summons dated 9 September 2013 applying for an order that:

“the application for an order for sale of [the 1^st Group] and the application for an order for sale of [the 2^nd Group] be consolidated and considered as one and single application and be tried at the same time.”

(1c) Our concerns

23.  We note that Fairtex was concerned with a similar situation.  The applicant there sought an order under the Ordinance for the sale of four adjoining lots on which two pairs of composite buildings were erected.  The buildings in each pair were served by common staircases but the two pairs were otherwise not connected. Initially, the applicant relied on section 3(2)(a) of the Ordinance to justify its application.  The tribunal drew the applicant’s attention to the Court of Appeal decision in Bond Star and, as a result, the applicant abandoned its initial contention and invoked section 3(2)(b) instead.

24.  In dealing with that alternative contention, the tribunal in Fairtex referred to the decisions of the Court of Appeal and the Court of Final Appeal in Bond Star and said:

“24. In our view, until there is a ruling by another superior court, we are bound to follow the decision of the Court of Appeal in Bond Star. However, we agree with [the Applicant’s counsel] what is determined in Bond Star is that section 3(1) application is only available to an owner with less than 100% and more than 90% shareholding in a lot…

25. We also note that … the Hon Rogers VP recognises that an application under section 3(1) of the Ordinance may cover more than one lots, if the conditions set out in section 3(2) are satisfied. And indeed, in the conclusion of the judgment in Bond Star, the Hon Rogers VP remits the case to the Lands Tribunal for it to decide, amount other matter, whether the applicant is entitled to make an application under section 3(2)(b) in respect of the lot that is connected to an adjacent building by a staircase for common use.

…

31. The issue determined by the Court of Appeal in Bond Star is not on the point. We only need to refer to issue one as set out in paragraph 4 of the judgment:

‘Whether the Ordinance applies to land in respect of which the applicant is already the full owner?  If so, how should the Tribunal approach an application in which the applicant asks for an order for sale to include land which the applicant already owns?”

32.   In our view, the Court of Appeal has not been asked to and has not determined the procedure on how application under section 3(1) or 3(2) shall be made.

33.   Subject to legislation, making one or two application must be a matter of procedural necessity.  This may not be an appropriate case to determine an issue, as the Application is uncontested and the main concern of [the applicants’ counsel] is that the Lots should be put up for auction as one composite site.

34.   Even if the Applicant is required to issue 2 applications for the 2 pair Buildings, once issued, we see no reason why in appropriate cases, this Tribunal cannot consolidate the 2 applications as one. One of the considerations if 2 applications should be consolidated must be whether there are common issues.

35.   If the Applicant concedes in the evidence that the Lots are to be developed as one composite site, there have to be common witnesses and it would be cost saving for the 2 applications be heard together…

…

39.   But in the case when a majority owner concedes the redevelopment plan included some other lots it owns, and those lots are the subject lots of another application before this Tribunal, there is strong reason for the Tribunal to consider redevelopment potential of the merged lots before setting the reserve prove, in compliance with the said provision of Schedule 2 of the Ordinance.

…

41.   And we also refer to the comment of the Hon Riberio PJ in the appeal to the Court of Final Appeal in Bond Star, as set out above, when the issue whether the Ordinance precludes the Tribunal from making an order for sale in respect of composite site is left open.  This is not an opportunity to consider the point in details as we only have the argument from the Applicant.  But the comment supports our view that in appropriate cases, the Tribunal may consider giving appropriate direction for auction of more than one lot as a composite site.

…

42.   Accordingly, we come to the conclusion that the Application herein should be treated as 2 applications, one for each pair Buildings, but consolidated into one application.  For the order of sale, we would rule separately in respect of each pair Buildings.  And if the Applicant could satisfy this Tribunal that order for sale of each pair Buildings should be granted, and they are to be developed as a composite site, we would direct an auction of the Lots together with a reserved price reflecting the redevelopment potential of the Lots as one composite site.”

25.  Having read Ms Ngai’s opening in advance, we posed the following questions for her at the beginning of the trial before she opened her case:

(1)     Given the Court of Appeal decision that an applicant may not include any lot that is 100% owned by it in an application under the Ordinance, will that also forbid the applicant in this case from including in this application any lot that it already owns (ie Nos 7B, 7F & 7G at the time of application; and Nos 7, 7B, 7D, 7F & 7G at the time of trial)?

(2)     Given the subsequent comment of the Court of Final Appeal, is the Court of Appeal decision still binding on us?  In this regard, we referred Ms Ngai to the judgment in Commissioner of Inland Revenue v Indosuez WI Carr Securities Ltd.[4]

26.  Bond Star was concerned with an application for the compulsory sale of five lots of land known as Nos 24, 26, 28, 30 and 32 Ming Yuen Western Street, Hong Kong.  No 28 shared a common staircase with No 30, but was not connected to Nos 24, 26 and 32.  By the time of the trial before the Lands Tribunal, the applicant owned all the properties in the lots except Flat A, 3/F of No 28 which belonged to the respondent. 

27.  The applicant there contended that it was entitled under section 3(2)(a) to make one single application covering all five lots.  The respondent, in opposing the application, argued that that section was not applicable as the applicant already owned all the undivided shares in Nos 24, 26, 30 and 32 and there was no need to seek any order for sale in respect of those lots. 

28.  After a contested trial, the tribunal (differently constituted) accepted the applicant’s argument and ruled that:

“21. We are of the view that Sections 3(2)(a) and 3(2)(b) respectively cater for two situations where 2 or more lots can be covered in a single application. The wordings of Section 3(2)(a) clearly allow 2 or more lots to be covered in a single application if the majority owner was (sic) not less than 90% of the undivided shares in each lot. We therefore agree that the Applicant can rely on Section 3(2)(a) to make an application for sale in respect of 2 or more lots. We do not accept the Respondent’s argument that Section 3(2)(a) does not apply to an owner of 100% of the undivided shares of a lot… Redevelopment would not necessarily be confined to one particular lot. Very often, 2 or more lots will be redeveloped together. So the Tribunal has to consider whether the redevelopment concerning 2 or more lots as a whole is justified before granting the order for sale. Thus, it is necessary to include in the application for sale those other lots where the majority owner has 100% of the undivided shares.

22. Section 3(2)(b) does not concern us as the Applicant did not rely on the situation in Section 3(2)(B) to make this Application…

23. We therefore find that the Application can cover 2 or more lots by virtue of Section 3(2)(a) of the Ordinance, and hence the subject matter of the Application includes all 5 properties, ie the Lots.”

29.  The respondent appealed and one of the points taken before the Court of Appeal was: Whether the Ordinance applies to land in respect of which the applicant is already the full owner? 

30.  The Court of Appeal answered the above question in the negative.  We set out the relevant part of the judgment in full below (“CA Decision”):

“Whether the Ordinance applies to land of which the applicant is already 100 percent owner?

12. In my view the first question, whether the Ordinance applies to land that the applicant already owns, is answered by reference to the Ordinance itself...

13. It seems to me that the purpose of section 3(2) is to provide for 2 situations. The first is where there are 2 lots in respect of which the applicant does not own all the undivided shares. The other is where there is one building connected to another by a common staircase and the 2 buildings straddle two lots. There is the safeguard that the overall average percentage of undivided shares which the applicant owns must still satisfy the 90% rule.

14. As was pointed out in the course of argument by Mr Tong SC, who appeared for the applicant, there is no specific wording in section 3(2)(a) that precludes an application being made by an applicant who owns the entirety of a lot that is the subject of an application. Nevertheless, there would be no purpose in permitting an applicant to join, in an application in respect of one lot, a number of other lots where no order for sale is needed. It is clear from section 4(2) that the legislature envisaged there would be minority owners "of the lot the subject of the application." If one were to apply a purposive construction to the Ordinance it would be clear that such a course would not lead to a construction which would enable an applicant to so apply. The only effect of such an application would be that, if it were granted, all the lots would be sold as the subject of one auction and that a minority owner would be faced with a reserve price reflecting the (larger) size of the subject of the auction. As Mr Chain put it, the effect would be to swamp the minority owner and prevent it from bidding at the auction.

15. Moreover, applying a purposive construction to the Ordinance, it seems to me that the intent behind the Ordinance is that a developer can obtain the last portion of a lot which he does not already own. There is thus no purpose in an owner of a lot asking for an order to put up the lot for auction if he already owns all the shares in that lot. He could do so without an order. Furthermore, as already noted, the Ordinance specifically defines the word "lot". The word "lot" is used throughout the Ordinance, but there is no place in the Ordinance where, as far as I can determine, that word has been used in a loose sense. Whereas, normally the use of a singular noun would include the plural, the drafting of section 3 makes it quite clear that applications in respect of 2 or more lots can only be made in accordance with subsection 3(2).

16. It would put a considerable strain on the construction of the Ordinance if section 3(2) were to be construed in such a way as to permit an application to be made in respect of a number of lots where the applicant already was the full owner of one or more of those lots. As was pointed out in the course of argument, "minority owner" is defined in section 2 as follows "in relation to a lot which is the subject of an application under section 3(1) means the person or persons who owns or own undivided shares in the lot...". If section 3(2) were to be construed as permitting a single application which comprised a lot in respect of which the applicant was not the full owner together with one or more other lots in respect of which the applicant was the full owner, the definition of minority owner would have to be construed as if the words "or one of the lots" were inserted after the word "lot" in both places where the word appeared. This difficulty of construction would exist despite the fact that section 3(2) does not contain reference to the minority owner.

17. No doubt there are practical difficulties which may face a developer, for example, in a situation where the applicant has put together a number of lots and wishes to redevelop them together. If such an applicant owns a number of adjacent lots that are intended to be developed together but is forced to make an application in respect of one lot alone, it may well arise that if that single lot were put up for auction an unrealistic price might be bid for that lot. The person bidding could in effect force the applicant to pay a premium because, unless the applicant were prepared to pay an unrealistic price for the particular lot, he might be deprived of that lot by reason of being out bid at the auction and thus would not be able to pursue his original development. Whilst that is true, it is also relevant to take into account the fact that the majority owner might in such circumstances be forced to bid up to the full redevelopment value, thus benefiting the minority owner.

18. In my view the construction of the Ordinance is clear. In those circumstances, there is no basis to go to the legislative history of the Ordinance, since there is no ambiguity to clarify. Nevertheless, I take some comfort from the fact that at the second reading of the Bill on 7 April 1998 it appears to have been recognised that the legislation would apply to single lots only. Mr Edward Ho is reported to have said:

"The key lies in the Bill being applicable to single lots only. It is therefore not applicable to consolidated redevelopment plans for buildings straddling several lots. As a result, development of pencil buildings will result. From the angle of town planning and of increasing space and basic community facilities for an area, 'pencil buildings' are far from being satisfactory. Hence I hope the Government can look into other ways, which better conform to town planning principles, to help the private sector to conduct redevelopments."

19. Reference was also made to the "pencil" effect by Mr Ronald Arculli. Mr Ngan Kam-chuen also referred to the "pencil" developments which he referred to as not being conducive to comprehensive urban redevelopment. The Secretary for Planning, Environment and Lands did not say anything to disagree with what had been said in this respect by the members of the Legislative Council.

20. As already noted, the Ordinance provides that the minority owner should obtain a proportion of the redevelopment potential of the lot. Of course, this is dependent upon a successful auction. But, again, the legislation is clearly predicated on the assumption that the applicant will pursue his development. If the applicant does not pursue his redevelopment and no other person seeks to do so, the minority owner is left undisturbed.”

31.  Feeling aggrieved, the respondent in Bond Star appealed further to the Court of Final Appeal.  The points actually argued before the Court of Final Appeal did not include the above question.  Nonetheless, Ribeiro PJ made this comment at the end of the judgment (“CFA Decision”):

“Power to order sale of all the lots

37. For the foregoing reasons the appeal was dismissed. We wish additionally to comment on one aspect of the case, not under appeal, which gives cause for some concern.

38. The Tribunal had, on the respondent’s application, ordered the sale of the six (sic) lots intended for redevelopment in a single batch. However, the Court of Appeal held (§§12-20) that on the true construction of the Ordinance this was impermissible. It varied the Tribunal’s order to confine it to an order solely for sale of the Lot [ie No 28]. The order as varied is not under challenge and stands as between the parties.

39. There is, however, a danger that if the power is so confined the policy objectives of the Ordinance may be undermined. As the Court of Appeal recognized (§17), the minority owner, if sufficiently funded, might be able to bid up the single lot to a highly inflated price thereby exercising ‘ransom power’ through the medium of the public auction. And if the minority owner or a third party actually acquired the auctioned lot, the intended redevelopment might have to be abandoned or face lengthy delays subject to the uncertainties of negotiations with the new owner of the lot. Such consequences plainly run counter to the statutory objectives.

40. If, on the other hand, it were open to the majority owner to combine sale of the Lot with sale of the other lots already owned, the entire developable site would be put up for sale. Such an auction could be expected to attract only bids from genuine developers. There would be no room for ransom-motivated bids. An appropriate reserve price would have to be fixed to ensure that the minority owner receives a proper share of the redevelopment value of the site. But whether the successful bidder should prove to be the majority owner or someone else, a redevelopment of the entire site would be able to proceed without impediment, in line with the objectives of the Ordinance.

41. Plainly, the power coercively to order sale is confined to ordering the sale of a lot or lots in which a majority owner and a minority owner each hold a proprietary interest. However, in cases where a majority owner qualifies for the making of such a compulsory order and wishes to have that lot put up for auction together with adjacent redevelopment lots wholly owned by him, the question arises as to whether, on its true construction, the Ordinance precludes the Tribunal from making an order for sale in respect of the composite site. That matter was not in issue and was not argued before us. In the light of the policy concerns noted above, we wish expressly to leave that question open for possible future consideration.

42. Additionally, if a restrictive construction of the Ordinance is required, we wish expressly to leave it open for possible future consideration whether the Tribunal has a discretion to give suitable directions (under s 4(6)(a) of the Ordinance or otherwise) concerning conduct of the sale designed to secure that the sale of the single lot, the subject of its order, can take place together with the sale of the other redevelopment lots, similar to the directions given by the Court of Appeal in Golden Bay Investment Ltd v Chou Hung [1994] 2 HKC 197 at pp 200-202, or along analogous lines.

43.   These issues raise difficult questions and the best course may be for them to be addressed by the legislature with a view to ensuring that the objectives of the Ordinance are not frustrated.”

32.  We have quoted extensively from the judgments in Bond Star so that the arguments at each level of court may be fully appreciated.

(1d)     Discussion

33.  The first issue that we need to tackle is whether CA Decision is binding on us as a matter of law.

34.  Initially, Ms Ngai relied on §41 of CFA Decision and contended that:

“By saying the aforesaid, no doubt, His Lordship agreed with the CA that the Tribunal had no power to order sale of a lot or lots which was/were wholly owned a majority owner applicant (save and except that the application was made under s 3(2)(b) of the Ordinance). It is submitted that the CA’s decision that the Ordinance is not applicable to any lot which is wholly owned by an applicant unless the application is legitimately made pursuant to s 3(2)(b) is plainly correct and binding on the Tribunal.”

35.  She prayed in aid the judgment in Fairtex (quoted above) as well as the following judgment of another panel of this tribunal in Top Sail International Ltd v Wong Lai Wei in support of her contention.

“23. Furthermore, this Tribunal do agree with Mr. Li that the Court of Appeal had already found in Bond Star (supra) that even if the Applicant were to carry out a much greater scheme of redevelopment involving, not just the 2 lots in question, but also some other adjacent sites, this Tribunal is entitled not to take these adjacent sites into consideration (at paragraph 32-36). Even though this case goes up to the Court of Final Appeal, this part of the ruling is not overturned. The Court of Final Appeal had in fact observed that this issue was not argued before them and expressly leave it open for possible future consideration (at paragraph 41). The Court of Appeal decision is still binding on this Tribunal.

…

25. The merged site approach adopted by Mr. Wong is against the requirement under the Ordinance and without basis. The valuation based on such an approach is irrelevant and should be excluded.” [5]

36.  In our view, the matter is not that simple.  It is imperative to read §41 of CFA Decision in its proper context.  The Court of Final Appeal dismissed the appeal in Bond Star based on the arguments taken before it.  The order (of the Court of Appeal) confining the sale to No 28 was not disturbed because the order was not under appeal and remained valid as between the parties.  The Court of Final Appeal did not have the opportunity to fully consider the question under discussion.  Nonetheless, the Court of Final Appeal was concerned that the Court of Appeal’s approach might undermine the policy objectives of the Ordinance and made the comment it did.  If the issue was so open and shut as Ms Ngai would have it, then there will be no room for any future argument.

37.  Ms Ngai concedes, after revisiting CA Decision, that the Court of Appeal did not in fact rule that their decision should not be applicable to section 3(2)(b).  She agrees that no valid distinction may be drawn between the subsections in section 3(2).

38.  We are mindful of the reminder of the Privy Council in Ogden Industries Pty Ltd v Lucas[6] that:

“It is quite clear that judicial statements as to the construction and intention of an Act must never be allowed to supplant or supersede its proper construction and courts must beware of falling into the error of treating the law to be that laid down by the judge in construing the Act rather than found in the words of the Act itself.

No doubt a decision on particular words binds inferior courts on the construction of those words on similar facts but beyond that the observation of judges on the construction of statutes may be of the greatest help and guidance but are entitled to no more than respect and cannot absolve the court from its duty of exercising an independent judgment.”

39.  We certainly abide by the doctrine of precedent[7] and recognise the authority of the Court of Appeal.  However, it is well recognised that:

“A High Court judge of first instance confronted with a decision of the Court of Appeal which has not been expressly overruled by a later House of Lords’ case may cease to be bound by it because the House of Lords considered that the Court of Appeal misinterpreted the authorities on which the impugned decision was based. The judge is then not obliged to follow the Court of Appeal, but he is not bound to dissent from their conclusion. The previous decision is undermined rather than directly overruled.” [8]

40.  That proposition was applied locally in Indosuez WI Carr Securities.  In that case, Deputy High Court Judge Longley decided that he was not bound to follow the ratio of a relevant Court of Appeal decision in the light of the dicta of the Privy Council in a subsequent case so that he might depart from the ruling of the Court of Appeal if he considered it appropriate to do so.[9]

41.  Applying that proposition to this case, although CA Decision was not overruled it has, in our view, been undermined by the subsequent comment of the Court of Final Appeal.  We take the view that CA Decision is no longer binding on us and we may depart from it if we consider it appropriate so to do.

42.  The next issue is whether we should depart from CA Decision.

43.  CA Decision is a well reasoned judgment.  Although we are not bound by it in a strict legal sense, it remains highly persuasive.  In accordance with the proposition mentioned above, we are not obliged to dissent and should only depart from it if we consider it appropriate to do so.

44.  We appreciate that the Court of Appeal had considered the legislative history, the framework and scheme of the Ordinance, noting, in particular, the definition of “lot”, “majority owner” and “minority owner”.  It appears that CA Decision was based on the following considerations:

(a) “… there would be no purpose in permitting an applicant to join, in an application in respect of one lot, a number of other lots where no order for sale is needed. It is clear from section 4(2) that the legislature envisaged there would be minority owners "of the lot the subject of the application." If one were to apply a purposive construction to the Ordinance it would be clear that such a course would not lead to a construction which would enable an applicant to so apply. The only effect of such an application would be that, if it were granted, all the lots would be sold as the subject of one auction and that a minority owner would be faced with a reserve price reflecting the (larger) size of the subject of the auction. As Mr Chain put it, the effect would be to swamp the minority owner and prevent it from bidding at the auction.”

(b) “… applying a purposive construction to the Ordinance, it seems … that the intent behind the Ordinance is that a developer can obtain the last portion of a lot which he does not already own. There is thus no purpose in an owner of a lot asking for an order to put up the lot for auction if he already owns all the shares in that lot. He could do so without an order.”

(c) “… the Ordinance specifically defines the word "lot". The word "lot" is used throughout the Ordinance, but there is no place in the Ordinance where … that word has been used in a loose sense. Whereas, normally the use of a singular noun would include the plural, the drafting of section 3 makes it quite clear that applications in respect of 2 or more lots can only be made in accordance with subsection 3(2).”

(d) “It would put a considerable strain on the construction of the Ordinance if section 3(2) were to be construed in such a way as to permit an application to be made in respect of a number of lots where the applicant already was the full owner of one or more of those lots. As was pointed out in the course of argument, "minority owner" is defined in section 2 as follows: "in relation to a lot which is the subject of an application under section 3(1) means the person or persons who owns or own undivided shares in the lot...". If section 3(2) were to be construed as permitting a single application which comprised a lot in respect of which the applicant was not the full owner together with one or more other lots in respect of which the applicant was the full owner, the definition of minority owner would have to be construed as if the words "or one of the lots" were inserted after the word "lot" in both places where the word appeared. This difficulty of construction would exist despite the fact that section 3(2) does not contain reference to the minority owner.”

(e)       “the fact that at the second reading of the Bill on 7 April 1998, it appears to have been recognised that the legislation would apply to single lots only … Reference was also made to the “pencil” effect … [and] “pencil” developments … as not being conducive to comprehensive urban redevelopment.  The Secretary for Planning, Environment and Lands did not say anything to disagree with what had been said in this respect by the members of the Legislative Council.”

45.  The Court of Appeal recognised that its approach might lead to practical difficulties but considered it justified.[10]

46.  The Court of Final Appeal also considered the Ordinance in detail.  It observed that there are 4 distinct phases in an application which resulted in a compulsory sale under the Ordinance, and said that the two-fold objective underlying the whole process is:

“On the one hand, the Ordinance aims to facilitate urban renewal in respect of old and dilapidated buildings by assisting private developers to complete their acquisition where they already own at least 90% of the lot in question and by preventing the indefinite obstruction of a redevelopment by any minority owners who may seek to extract a wholly unreasonable price or “ransom” for permitting the redevelopment to proceed. On the other hand, it aims to ensure that the minority owner receives fair and reasonable compensation for his interest in the lot. Such compensation may be that which the minority owner agrees to accept or that which represents his share of the market value of the lot (reflecting its redevelopment value) as determined at a public auction, subject to a reserve price approved by the Tribunal.”[11]

47.  We agree with the Court of Final Appeal that CA Decision would undermine the objectives of the Ordinance when it comes to composite site redevelopment.

(a) As explained by the Court of Final Appeal in §39 of CFA Decision, a developer applicant would be subject to the “random power” of minority owners or third parties if it could only apply for the compulsory sale of a lot that it does not fully own.  This would not facilitate urban redevelopment in respect of old and dilapidated buildings.

(b) Faced with such a possibility, an applicant contemplating composite site redevelopment may elect not to acquire all the undivided shares in an adjourning lot after he has achieved the threshold percentage so that the application may cover the adjourning lot as well.  This does not sit comfortably with the requirement of section 4(2)(b) of the Ordinance that: “the majority owner has taken reasonable steps to acquire all the undivided shares in the lot (including, in the case of a minority owner whose whereabouts are known, negotiating for the purchase of such of those shares as are owned by that minority owner on terms that are fair and reasonable).”  

Take this case as an example, the applicant has improved its ownership from 83.33% to 100% for No 7 and from 87.5% to 100% for No 7D after the commencement of this case.  The applicant might not be interested in taking steps to acquire the remaining shares in the Lots if CA Decision were to apply with full rigor.

(c) If a developer applicant is indeed contemplating a composite site redevelopment, there is no reason why the minority owners should not be entitled to a share of the development value on that basis.  A restrictive construction of the Ordinance may affect the ability of the tribunal in taking the full development potential into account when setting the reserve price.  This was the point made by the Court of Final Appeal in §§40 and 42 of CFA Decision. 

It should be remembered that when Bond Star was before the appellate courts, the Lands Tribunal had yet to set the reserve price.[12]  So, the interworking between the scope of an application (under section 3(1)), the scope of an order for sale (under section 4(1)(b)(i)) and the scope of any public auction (see sections 5(1)(a) and 4(6)((a)(i)) might not have been fully argued and appreciated.  The scope of the public auction would dictate how much the tribunal may take into account in setting a reserve price (see paragraph 2 of Schedule 2).  We believe that was why the Court of Final Appeal specifically left it open for possible future consideration “whether the Tribunal has a discretion to give suitable directions (under s 4(6)(a) of the Ordinance or otherwise) concerning conduct of the sale designed to secure that the sale of the single lot, the subject of its order, can take place together with the sale of the other redevelopment lots…”.

48.  With the greatest respect, we beg to differ from CA Decision.

49.  The Court of Appeal made references to the legislative history although it considered that the Ordinance was clear and there was no basis so to do.[13]

50.  On our part, we have taken guidance from §§11-17 of the Court of Final Appeal judgment in HKSAR v. Cheung Kwun Yin. [14]  We consider that the 3 conditions laid down in Pepper v Hart are met in this case so that we can refer to legislative materials as an aid to interpretation for the purpose of ascertaining the meaning of the statutory language used in the Ordinance.

51.  Ms Ngai has diligently located the Land (Compulsory Sale for Redevelopment) Bill as well as the official record of the relevant proceedings of the Provisional Legislative Council for our reference. 

52.  As the Court of Appeal has pointed out, the Bill was drafted with single lots in mind and did not contain section 3(2) of the Ordinance. 

53.  At the second reading of the Bill, The Hon Ip Kwok-Him was reported to have said that:

“But the Bill only provides for a lot to be treated as a unit in an application for an order for sale. This limits the possibility for mass redevelopment.”

Similarly, The Hon Edward Ho commented that:

“The key lies in the Bill being applicable to single lots only.  It is therefore not applicable to consolidated redevelopment plans for buildings straddling several lots.  As a result development of pencil buildings will result.  From the angle of town planning and of increasing space and basic community facilities for an area, “pencil buildings” are far from being satisfactory.  Hence I hope the Government can look into other ways, which better conform to town planning principles, to help the private sector to conduct redevelopment.

Secondly, in the discussions of the Bill Committee, I pointed out some buildings sit on more than one lot.  This is especially true for some old buildings in which many units share one common staircase.  In such cases, redevelopment cannot be limited to a single lot.  For this reason, the Government will move an amendment at the Committee stage, suggesting the inclusion of subclause 1(A) in clause 3(b) to tackle the problem I have just mentioned.  I welcome the amendment.”

Later on, The Hon Ngan Kam-Chuen warned that:

“… the Bill provides that a developer can apply for an order for compulsory sale only when it has acquired 90% of the undivided shares of a single lot.  We foresee the thriving of “pencil” developments which is not conducive to comprehensive urban redevelopment.  So the DAB reckons that the Bill will only play a complementary rile in environmental improvement of the old area and it is just better than none.”

54.  And as noted by the Court of Appeal, The Hon Ronald Arculli said that:

“One concern we have is that, due to the stringent requirement that an applicant for an order for compulsory sale will have to own 90% of the undivided share of the lot or lots which may be the subject of an application, this might result in pencil rather than comprehensive redevelopment. We should keep this issue under scrutiny and see whether it achieves good results. If not, we should not be afraid to review the situation.” (emphasis added)

But he did not explain how several lots might form the subject of an application given the design of the Bill.

55.  When the Bill reached the Committee Stage, the Secretary for Planning, Environment and Lands moved that clause 3 of the Bill be amended.  This was how he introduced the amendment:

“Subclause (1A) specifies that if the majority owner makes an application covering two or more lots, he must own not less than 90% of the undivided shares in each lot. It also provides for the undivided shares of two or more lots on which there are two buildings joined by a common staircase.”

He also moved some “technical amendments” to Schedule 2 of the Bill.  Eventually, clause 3 and Schedule 2 as amended, among other provisions, were passed.

56.  A comparison of the Bill and the Ordinance would reveal that:

(a) section 3(2) of the Ordinance was added; and

(b) paragraph 2 of Schedule 2 was also amended.

57.  Therefore, the Court of Appeal’s understanding that the Ordinance should only apply to single lots may not be correct (see §44(e) above).

58.  In our view, we must look at the Ordinance in a different light, ie that the Ordinance also applies to multiple lots applications.  The starting premises is still section 3(1) which caters for single lot applications.  The Ordinance permits “an application under subsection (1)” to cover more than one lot provided that the conditions set out in section 3(2) are satisfied.

59.  Since the Ordinance has inherited the language of the Bill, it has retained definitions referable to single lots.  For example:

(a) “lot” is in the singular;

(b) “majority owner in relation to a lot” is defined as “the person or persons who has or have made an application under section 3(1) in respect of the lot”; (emphasis added) and

(c)      “minority owner in relation to a lot which is the subject of an application under section 3(1)” is defined to mean “the persons who (i) owns or own undivided shares in the lot … but (ii) is or are not the person or persons who has or have made the application.” (emphasis added)

60.  Given the way section 3(2) is drafted, a multiple lots application satisfying the requirements of section 3(2) is to be regarded as “an application under subsection (1)” which is “an application … to the Tribunal for an order to sell all the undivided shares in the lot for the purposes of the redevelopment of the lot”. Therefore, the context does not exclude but instead presumes the application of section 7(2) of the Interpretation and General Clauses Ordinance that: “Words and expressions in the singular include the plural…”.  The word “lot” therefore can mean “2 or more lots” in the context of the Ordinance (compare §44(c) above).

61.  The Court of Final Appeal said that: “the power coercively to order sale is confined to ordering the sale of a lot or lots in which a majority owner and a minority owner each hold a proprietary interest.”  In the context of multiple lots applications where some of the lots the subject of the application are wholly owned by the applicant, there will still be minority owners of “the lot the subject of the application” if we read “the lot” in plural and the difficulty of construction foresaw by the Court of Appeal (see §44(d)above) will not arise.  Alternatively, an applicant contemplating composite site redevelopment may apply for the compulsory sale of the lot or lots that he does not already own, and then ask for directions under section 4(6)(a)(i) for the lot or lots, the subject of any order for sale, be sold together with other adjourning lot or lots that he owns.

62.  The purpose of permitting an application to include a lot or lots that is or are wholly owned by the applicant in a multiple lots situation is:

(a) to facilitate urban renewal by preventing minority owners from exercising “ransom power” through the medium of the public auction; and

(b) to enable minority owners to receive a proper share of the redevelopment value of the entire developable site. (compare §44(a) and (b)above).

63.  For the above reasons, we shall depart from CA Decision.  We answer the question posed in §41 of CFA Decision in the negative.

64.  Given our decision, it is not necessary for us to discuss the alternative question posed in §42 of CFA Decision.  However for completeness sake, we feel obliged to explain ourselves fully.

65.  As we have said above, an applicant contemplating composite site redevelopment may either: (i) ask for an order for sale covering the adjourning lots that he already owns; or (ii) confine the order for sale to the lots with minority interests and then ask for directions for those lots to be sold together with adjourning lots that he already owns in one public auction.  In our view, so long as the applicant appreciates the need to satisfy the requirements under section 4(2)(a) in relation to the adjourning lots if he opts for option (i), it does not matter how he chooses.  The present case falls within this category and the applicant is prepared to justify the whole composite site redevelopment.

(1e) Disposition

66.  In anticipation of our ruling, the applicant has further taken out the summons dated 10 October 2013 for leave to amend the Re-Re-Amended Notice of Application to enable it to invoke section 3(2)(a) as well as section 3(2)(b).

67. Section 3(2) is in these terms:

“Without prejudice to the operation of subsection (5), an application under subsection (1) may cover –

(a) 2 or more lots where the majority owner owns not less than the percentage specified in subsection (1) of the undivided shares in each lot; or

(b) 2 or more lots –

(i) on which one building is connected to another building by a staircase intended for common use by the occupiers of the buildings; and

(ii) where the average of –

(A) the percentage of the undivided shares owned by the majority owner in the lot or lots on which one of the buildings stands; and

(B) the percentage of the undivided shares owned by the majority owner in the lot or lots on which the other of the buildings stands,”

(emphasis added)

68.  Ms Ngai has very fairly drawn our attention to the fact that the applicant owned less than 80% in No 7A when this case was commenced and concedes that section 3(2)(a) was not satisfied.  She confirms that the applicant will only rely on section 3(2)(b). We shall approve the summons dated 10 October 2013 to enable the applicant to invoke section 3(2)(b).

69.  In view of the fact that the buildings in the 1^st Group and the buildings in the 2^nd Group are not connected by any common staircase, Ms Ngai concedes that the applicant should have made two applications, one in respect of each group.  Modelling on Fairtex, she invites us to “consolidate” the two applications in terms of the summons dated 9 September 2013.

70.  We do not think any order on this summons is necessary.  First, Ms Ngai has clarified that she is not asking for a formal “consolidation”.  Secondly, it would be in breach of section 3 to treat the applications as “one and single application” (in terms of the summons) as (i) section 3(2)(a) was not satisfied by reason of the ownership in No 7A and (ii) there is no common staircase connecting the buildings in the two groups. 

71.  In our view, section 3 only sets out the conditions for one application to cover more than one lot. It does not forbid anyone from joining more than one application in a case. More importantly, having all 8 lots included in the present case will enable us to give directions for them to be sold in one single auction and to set a reserve price taking into account their full redevelopment potential.  Since all the lots are already before us, we do not need to make any order for “consolidation”. We make no order on the summons.

72.  Since the average of the percentage of the undivided shares owned by the applicant in the lots comprising the 1^st Group and the 2^nd Group respectively is not less than 80%, the applicant is entitled to invoke section 3(2)(b) in relation to each group. 

73.  In the light of the above, we shall deal this case bearing in mind that we are in fact dealing with two applications, one for each group.  The further issues that require determination, as provided in section 4 of the Ordinance, are:

(a) What is the market value of the units without taking into account their redevelopment potential?  The profession has called this “existing use value” or “EUV”.  

(b) Whether the redevelopment of each group is justified due to the age or state of repair of the existing development there?

(c) Whether the applicant has taken reasonable steps to acquire all the undivided shares in each group, including, in the case of a minority owner whose whereabouts are known, negotiating for the purchase of those shares as are owned by that minority owner on terms that are fair and reasonable?

(d) If the tribunal makes an order for sale for each group, whether there should be directions for the Lots to be sold in one public auction and what should the reserve price be?  The profession has called this “redevelopment value” or “RDV”.

(e) Matters incidental to an order for sale, such as the appointment and remuneration of the sale trustees and the conditions of sale.

(2) Determination of the EUV of the units

74.  The applicant has filed one Notice of Application for both applications. The Notice of Application was accompanied by a valuation report dated 6 December 2011 (“Application Report”) of Wong Chi-Wai of Lawson David and Sung Surveyors Limited (“Mr CW Wong”).  Mr CW Wong is a Registered Professional Surveyor (General Practice Division) and a member of the Hong Kong Institute of Surveyor and the Royal Institution of Chartered Surveyors.  He has 14 years’ post-qualification experience in the surveying profession and has substantial experience in valuation of properties.  We accept his expertise.

75.  Mr CW Wong set out in the Application Report his assessment of the EUV of each unit in the Complex as at 29 November 2011.  The report was prepared not earlier than 3 months before the filing of the Notice of Application in accordance with section 3 of the Ordinance. 

76.  He explained in his report the method of valuation as well as the process of his assessment.

77.  He adopted the following methodology to assess the EUV of the domestic units of the Complex:

(a) He selected the domestic unit on the 4/F of No 7A, which was situated on the middle floor of the domestic portion of the Complex, as the reference unit for the purpose of assessing the unit price (“the Reference Domestic Unit”). 

(b) The unit price of the Reference Domestic Unit was assessed by making reference to market comparables.  He took into account 11 comparable transactions in 7 different buildings nearby.  After making what he regarded as the necessary adjustments (for location, floor, time, size, building age, view, building quality and lighting & ventilation), he took the average of the adjusted unit rate of the comparables to come to the unit price of the Reference Domestic Unit (at $77,000/sq m).

(c) He then compared the floor difference, size, view and internal condition of the Reference Domestic Unit and the other domestic units within the Complex to arrive at the EUV of all the domestic units (at Enclosure 11 of the Application Report).

78.  Mr CW Wong converted the saleable area of the Flat Roofs on the 7/F or the top Roofs of the Complex by using a conversion factor of 1:3.

79.  In assessing the EUV of the shop units on the Basement Floor (actually, on street level of Victory Avenue), Mr CW Wong adopted the following methodology:

(a) He selected the shop on the Basement of No 7A as the reference unit (“the Reference Shop Unit”).  He then took into account 5 comparable transactions in 4 different buildings nearby. After making what he regarded as the necessary adjustments (for location, layout, headroom, return frontage, size, time and building quality), he took the average of the adjusted unit rate of the comparables to come to the unit price of the Reference Shop Unit (at $358,000/sq m).

(b) He then used the unit rate of the Reference Shop Unit to assess the other Basement floor units, see Enclosure 10 of the Application Report.

80.  Mr CW Wong updated his EUV assessment by a supplemental report dated 2 April 2013 (“the Supplemental Report”).  He inspected more units of the Complex and took into account the updated property index prepared by the Rating and Valuation Department.  He also took into account more domestic and retail comparable transactions.  For example, he considered 2 more comparable transactions for the assessment of the unit price of the Reference Domestic Unit (which he maintained at $77,000/sq m) and altogether 7 comparable transactions from 6 nearby buildings in revising the unit price of the Reference Shop Unit (revised upward to $370,000/sq m).

81.  Although none of the respondents has disputed the applicant’s assessment, the tribunal is not bound to accept the applicant’s case and may rely on its own experience in evaluating the assessment.[15]

(2a)     The retail comparables

82.  We have extracted some of Mr CW Wong’s adjustments for the retail comparables below (from Enclosure 6 of the Supplemental Report) for discussion purposes:

Ref No	Address	Effective Saleable Area (sq m)	Clear Frontage (m)	Depth (m)	Adjustments
					Location	Layout	Size	Others
Ref Shop Unit	Basement, 7A Victory Avenue	57.3	4.1	14.1	–	–	–	–
A1	Unit B, G/F, 16 Victory Avenue	55.3	4.0	16.8	0.0%	0.0%	0.0%	-18.2%
A2	Unit A1, G/F, 14F & 14 G, Victory Avenue	66.0	3.4	13.2	0.0%	0.0%	2.0%	-11.3%
A3	G/F, 71A Waterloo Road	155.1	9.6	17.1	-10%	-25%	20.0%	7.0%
A4	Unit 1, G/F, 9A & 9B Peace Avenue	60.3	3.1	10.5	0.0%	0.0%	1.0%	2.5%
A5	G/F, 25A Soares Avenue	43.9	3.9	10.4	10.0%	0.0%	-3%	1.5%
A6	Unit 1, G/F, 1A-D Peace Avenue	22.1	2.8	7.0	-5%	-10%	-7%	8.9%
A7	Unit 3, G/F, 1A-D Peace Avenue	78.7	4.8	12.6	-5%	-5%	4%	8.9%

* According to Mr CW Wong the same party purchased Comparable Nos A4, A6 & A7.

83.  We find the adjustments for location and layout untoward.

(2a)(i) Adjustments for Location

84.  Mr CW Wong adopted comparable transactions of nearby retail shops fronting onto Victory Avenue (Comparables A1 & A2), Waterloo Road (Comparable A3), Peace Avenue (Comparables A4, A6 & A7), and Soares Avenue (Comparable A5) respectively.

85.  As regards location, Mr CW Wong generally applied a –5% adjustment to reflect the difference between the Reference Shop Unit on Victory Avenue and the comparables located on Peace Avenue.  It appears to us that Victory Avenue may be a busier street as it has shops flanking both sides whereas Peace Avenue runs parallel to a railway embankment on one side.  When we pointed this out to Mr Wong at the trial, he immediately admitted that there was a typographical error and the correct adjustment should have been +5%.  He then revised the unit price of the Reference Shop Unit to $384,000/sq m. [16]  Even so, we consider that a +5% adjustment may not be adequate given the level of general margin of error in valuation.[17]

86.  We inspected all the retail comparables in the afternoon of 10 October 2013 together with Ms Ngai and Mr CW Wong. We observed that Peace Avenue was much quieter than Victory Avenue.  There were many eateries and pet shops on Victory Avenue making the street popular.  Notably, Comparable A4 on Peace Avenue was used as an office and Comparable A6 (also on Peace Avenue) had no shop window display.  These examples illustrate that the opportunity cost for occupying these shop premises on Peace Avenue is low.  The inspection therefore confirms our suspicion that a mere 5% allowance for the locational difference between Peace Avenue and Victory Avenue should not be adequate.

87.  We also disagree with Mr CW Wong’s treatment of Comparable A3.  He considered that the comparable was located on a main street (Waterloo Road) with bus stops and schools nearby and had higher pedestrian flow.  Comparable A3, according to his opinion, was superior in terms of location than the Reference Shop Unit and justified a –10% adjustment for location.  

88.  We pointed out to him that apart from pedestrian flow, the location value of a shop would also depend on “the character of the pedestrians (who they are, what they are there for, etc)”.[18]  During the inspection, we drew Mr Wong’s attention to the fact that the shop immediately next to Comparable A3 was in the business of selling household stuffs and supplies.[19]  To us, this indicates that the locality may be more suitable for low tier or local trade.  We also queried Mr Wong whether his assessment of high pedestrian flow was due to the schools nearby.  Mr Wong said he had not visited the area during non-school hours and conceded that Victory Avenue might after all be more popular on account of the eateries and pet shops there.  

89.  During the inspection, we identified another shop on Argyle Street selling household stuffs and supplies and Mr Wong agreed that that location was inferior to Victory Avenue.

90.  We invited Mr Wong to rate the locations we had visited in terms of superiority and he opined that:

Locational Superiority	Name of Street
1	Waterloo Road (north of Soares Avenue)
2	Victory Avenue
3	Peace Avenue
4	Soares Avenue / Argyle Street (east of Soares Avenue)

91.  We do not quite agree with Mr Wong’s opinion.  We are not convinced that a shop on Argyle Street (which is a main street similar to Waterloo Road) should attract a unit value lower than a shop on Peace Avenue or as low a unit value as a shop on Soares Avenue (which is relatively quiet with few retail trades).

92.  In view of the above analysis, we shall not adopt Mr Wong’s adjustments for location but make our own adjustment as follows:

Locational Superiority	Name of Street	Adjustment
1	Victory Avenue	–
2	Waterloo Road (north of Soares Avenue)	+5%
3	Argyle Street (east of Soares Avenue)	+10%
4	Peace Avenue	+15%
5	Soares Avenue	+20%

(2a)(ii) Adjustments for Layout

93.  Valuation usually proceeds by way of comparison where the valuer looks 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. Since the comparable will never be identical to the subject matter of the valuation, the valuer will have to make adjustments to the value revealed by the comparable in order to reflect the differences between the comparable and the subject matter of his own valuation.  

94.  In the case of valuation of a shop, it is well understood that a shop with a wider street frontage (and hence, a bigger shop window) is more valuable than a shop of the same area but with a narrower shop front and a greater depth.  This explains why, sometimes, an adjustment for the depth to frontage ratio is required. [20]  However, this does not mean that the combination of, say, two standard sized shops of equal frontage and depth (thus yielding 1/2^nd the depth to frontage ratio) would justify a higher unit price.  Mechanical application of depth to frontage adjustments clearly defies common sense and market expectation that retail shops with long shop fronts can be subdivided and let/sold more profitably (in terms of unit rate) in parts. [21]

95.  Using the Reference Shop Unit and Comparable A3 on Waterloo Road as an example:

Shop Unit	Clear Frontage (m)	Depth (m)	Depth to Frontage Ratio
Ref Shop Unit	4.1	14.1	3.44 : 1
Comparable A3	9.6	17.1	1.78 : 1

Mr CW Wong applied an adjustment of –25% to account for its apparent low depth to frontage ratio.  However, he might have been clouded by the illusion that the low depth to frontage ratio of Comparable A3 was really caused by the combination of two standard sized shops into one.  If he is correct, then the value of Comparable A3 will drop by 25% if the owner subdivides it into two shops each having half of the frontage.  The adjustment is clearly inappropriate.

96.  While it is not suggested that the “zoning” method should be adopted here, we can use the principle that the immediate area behind the frontage of a shop should fetch a higher value “in terms of zone A” to confirm the correctness of the above analysis. Everything being equal, the immediate area behind the frontage should fetch a similar zone A value whether the frontage is 9.6 metres or 4.8 metres.[22]  There is no room for making an adjustment of –25% for the difference in layout.[23]  Indeed, Comparable A3 is deeper than the Reference Shop Unit and may fetch a lower unit value (instead of a higher one).

97.  Although Mr CW Wong did try to compensate the size of the large shop by making an adjustment for size (ie quantum) by 20%. The two adjustments adding together end up with some -5%, ie the unit price of this comparable is more valuable in terms of layout and size than the Reference Shop Unit which, according to our view, may not be the case. Conceptually, the shop depth and size should be independent factors and the adjustment for one should not compensate the other. This was indeed the case for Comparables A6 and A7. In any event, the application of two or more adjustments which are subjective in nature but intending to compensate each other would only tend to present a picture of false accuracy and mask the error, if any. For instance, when we put to Mr CW Wong that if, by reason of the above analysis, there should be no adjustment for layout, what should be the adjustment for size only. He replied that he would make an adjustment in the order of 5 to 7%.

(2a)(iii)   Conclusion on EUV

98.  We accept the other adjustments of Mr CW Wong and determine the total adjustments for the valuation of the Reference Shop Unit to be as per Annex C.

99.  We consider that the adjusted unit rate for the Reference Shop Unit should be $418,183 (which is 8.9% higher than the revised assessment by Mr. CW Wong at trial or 13% higher than his original assessment in the Supplemental Report)and the EUV assessment of the subject shops are at Annex D.

100.  We therefore determine the EUV of the units in the 1^st Group as at 29 November 2011 to be as follows:

	1st Group
	No 7	No 7A	No 7D	No 7E
Basement	$33,800,000	$23,960,000	–	–
G/F	$6,100,000	$6,120,000	$4,140,000	$4,270,000
1/F	$6,140,000	$6,200,000	$4,380,000	$4,260,000
2/F	$6,170,000	$6,240,000	$4,270,000	$4,370,000
3/F	$6,200,000	$6,270,000	$4,520,000	$4,390,000
4/F	$6,230,000	$6,300,000	$4,540,000	$4,410,000
5/F	$6,570,000	$6,330,000	$4,560,000	$4,430,000
6/F	$6,290,000	$6,050,000	$4,810,000	$4,240,000
7/F (& Flat Roof)	$3,570,000	$3,570,000	–	–
Roof	–	–	$1,560,000	$1,340,000
Sub-Total	$81,070,000	$71,040,000	$32,780,000	$31,710,000
Total	$216,600,000

101.  And the EUV of the units in the 2^nd Group as at 29 November 2011 should be:

	2nd Group
	No7B	No 7C	No 7F	No 7G
Basement	$36,890,000	$36,750,000	–	–
G/F	$5,810,000	$6,100,000	$4,050,000	$4,360,000
1/F	$6,520,000	$6,450,000	$4,260,000	$4,160,000
2/F	$6,240,000	$6,170,000	$4,370,000	$4,500,000
3/F	$6,270,000	$6,510,000	$4,390,000	$4,290,000
4/F	$6,300,000	$6,540,000	$4,410,000	$4,540,000
5/F	$6,650,000	$6,260,000	$4,650,000	$4,560,000
6/F	$6,360,000	$6,600,000	$4,670,000	$4,580,000
7/F (& Flat Roof)	$3,570,000	$3,400,000	–	–
Roof	–	–	$1,400,000	$1,560,000
Sub-Total	$84,610,000	$84,780,000	$32,200,000	$46,630,000
Total	$234,140,000

102.  More particularly, the EUV of the 4^th, 5^th and 7^th respondents’ units are:

(a) the 4^th respondent’s unit at the 7/F & Flat Roof of No 7A is assessed at $3,570,000, representing 1.648% of the total EUV for 1^st Group;

(b) the 5^th respondent’s unit at the Basement of No 7C is assessed at $36,750,000, representing 15.696% of the total EUV for 2^nd Group; and

(c) the 7^th respondent’s unit at the 5/F of No 7E is assessed at $4,430,000, representing 2.045% of the total EUV for 1^st Group.

(3) Justification for redevelopment

103.  The next matter that we are concerned with is whether the redevelopment of the 1^st Group and the 2^nd Group is justified respectively.  This involves, according to section 4(2) of the Ordinance, two considerations, namely:

(a) Whether the redevelopment is justified due to the age or state of repair of the existing development there?

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

104.  There is one occupation permit issued for the 1^st Group and the 2^nd Group, which was dated 16 July 1958.  In other words, the Complex is about 55 years old.

105.  We have considered the expert evidence of Mr Benson Wong Sai-Ning (“Mr B Wong”), a building surveyor, and Mr Wong Chi-Ming (“Mr CM Wong”), a structural engineer, adduced by the applicant for the 1^st Group and the 2^nd Group.  Their expertise is not disputed.

106.  Mr CM Wong conducted a structural assessment and prepared a report dated 28 March 2013.  He identified the following defects in the Complex:

(a) 91% of the steel reinforcement bars are suffering from mild to moderate corrosion;

(b) cracks and spalling at 56 locations are observed during visual inspection;

(c) carbonation has reached the concrete surrounding the steel reinforcement bars in 87% of the test samples;

(d) 70% of the core samples has chloride content exceeding 0.40%;

(e) 53% of the samples are found to pose a “high” risk of corrosion of the steel reinforcement bars, whilst 43% of the bars are at “moderate” risk;

(f) 97% of the core samples of the structural element has either “considerable” or numerous voids; and

(g) the average cement content is about 265kg/m³, which is lower than the current standard of 290kg/m³.

107.  Based on his findings, Mr CM Wong concluded that the structural elements of the Complex were in a poor condition.  He opined that the structural elements have passed their design working life of 50 years and are inferior to the current standard.  The corrosion of the reinforcement bars has entered the propagation phase and extensive maintenance and repair works are required in the near future.  He said that the design and construction of the structural frames have become obsolete over time and the structure failed the current safety standard.  He recommended that hammer tapping works be carried out to all the structural members and all revealed cracks and spalling should be patch repaired.

108.  Mr B Wong, in his condition survey report dated 28 September 2012, stated that:

(a) the Complex is in a very poor state of repair due to general wear and tear;

(b) infrared thermographic survey carried out on the external rendering revealed 106 hidden hollow spots scattered throughout the external walls on all elevations posing threats to public safety;

(c) the building envelope is not external seepage resistant with extensive damp penetrations through the external walls and  roofs;

(d) the staircases, corridors and lift lobbies are unsatisfactory means of fire escape for the upper floors;

(e) no improvement has been made to the fire resisting construction and fire service installation in the Complex, and fire service systems will have to be added to comply with the requirements of the Fire Safety (Buildings) Ordinance;

(f) the condition of the internal finishes to the living rooms, bedrooms, bathrooms and kitchens are poor; the most common defects in the flats are dampness and spalling to the internal floors, walls and ceilings;

(g) sanitary fitments and fittings in the bathrooms are generally soiled and some of them are not in working order and needed replacement;

(h) the old mild steel windows in the flats are corroded and not watertight;

(i) the electrical installations inside 17 flats have been haphazardly altered and are in poor condition and required complete replacement for safety reason;

(j) the equipotential bonding connections are not provided for the metal parts inside 54 flats;

(k) closed circuit television survey carried out to the underground drainage revealed defective drainpipes and manholes requiring replacements of underground drainpipes, mechanical cleaning and lining underground drainpipes; repairs to manholes and replacement of manhole covers are also required; and

(l) defects in the electrical installation requiring repair and maintenance.

109.  Mr B Wong estimated that the total costs of immediate repair works to restore the 1^st Group and the 2^nd Group to tenantable standard come to $21,425,472 which is about 30% of the cost of constructing a new building similar to the Complex.  He concluded that the Complex has deteriorated to a state which is beyond reasonable economic repair.  As more rapid deterioration would occur in the future, the necessary maintenance and repairs would inevitably be more frequent and extensive making the continued occupation of the Complex not economical and even unsafe.  He recommended the owners to redevelop rather than repair given that neither the 1^st Group nor the 2^nd Group possesses any historical value or architectural merit. 

110.  No one seeks to challenge these expert evidence and we accept them.  Having considered the evidence, we are satisfied that redevelopment of the 1^st Group and the 2^nd Group is respectively justified due to the age and state of repair of the existing buildings in each group.

(4) Reasonable steps to acquire all the undivided shares?

111.  The applicant is under an obligation to take reasonable steps to acquire all the undivided shares in the lot the subject of the application.  For minority owners whose whereabouts are known, the application is obliged to negotiate for the purchase of such of those shares as are owned by those minority owners on terms that are fair and reasonable. See Section 4(2)(b) of the Ordinance.

112.  The minority owners remaining on the 1^st Group are the 4^th and 7^th respondents.  The only minority owner remaining on the 2^nd Group is the 5^th respondent.  The fact that all the other minority owners have accepted the applicant’s offer is telltale of the reasonableness of the steps taken respecting them.

113.  According to the applicant’s witness Lui Wing-Yan, Senior Property Development Manager of the applicant’s holding company, Henderson Land Development Co Ltd, the applicant made the following offers to the 4^th and 7^th respondents respectively for the purchase of their units:

Date of offer	Offer to the 4th respondent	Offer to the 7th respondent
21 November 2011	$5,149,000	$6,389,000
5 December 2011	$5,314,000	$6,594,000
18 April 2013	$6,213,000	$7,710,000
2 July 2013	$6,737,000	$8,976,000
12 August 2013	$6,856,000	–

114.  The applicant also made the following offers to the 5^th respondent:

Date of offer	Offer to the 5th respondent
21 November 2011	$45,328,000
5 December 2011	$46,781,000
18 April 2013	$56,596,000
2 July 2013	$56,596,000
12 August 2013	$58,099,000

115.  Ms Lui said that all the offers made by the applicant were based on the assessment of independent valuer, Lawson David and Sung Surveyors Limited.  We note from the offer letters in evidence that the applicant had disclosed the basis of the offer and the expert’s valuation for the reference of the minority owners. These offers included a premium over the expert’s valuation. 

116.  In considering the reasonableness of the applicant’s offers, we bear in mind the following guidance from the Court of Final Appeal:

“… 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.”[24]

117.  We appreciate that the applicant was guided by expert opinion in making its offers.  No one has really challenged the reasonableness of these offers and there is nothing to suggest that the assessments are other than proper and professional.

118.  As we have noted in the introductory part of this judgment, the 7^th respondent has now settled with the applicant.  We are not apprised of the terms of the settlement and do not know if the offer dated 2 July 2013 had been accepted.  Nonetheless, we can safely infer from the settlement that the 7^th respondent must have found the applicant’s terms fair and reasonable.

119.  The last offers made to the 4^th and 5^th respondent also farewell against our determination:

Respondent	Last offer	Respondent’s share of RDV as determined by us
R4	$6,856,000	$3,570,000 x $751.3 million/ ($216,600,000 + $234,140,000) = $5,950,528
R5	$58,099,000	$36,750,000 x $751.3 million/ ($216,600,000 + $234,140,000) = $61,255,436[25]

120.  Based on the above considerations, we are satisfied that the applicant’s offers fall “within the range of what may broadly be regards as fair and reasonable” and the requirement of section 4(2)(b) is satisfied.

(5) Whether there should directions for the public auction of all 8 lots and determination of RDV

121.  Although the applicant asks for two orders for sale, it is seeking directions to have all 8 lots sold in one single auction.  In our view, this is permissible under the Ordinance.

122.  Section 4(6)(a)(i) provides that:

“Where the Tribunal makes an order for sale, … it may also give such directions as it thinks fit relating to the sale and purchase of the lot the subject of the order, including (but without limiting the generality of the foregoing) settling the particulars and conditions of sale of the lot…” (emphasis added)

In our view, the power to give directions “relating to” the sale and purchase of the lot the subject of the order enables us to go beyond the subject of the application or the order for sale. 

123.  Section 5(1)(a) of the Ordinance provides that:

“Where an order for sale is granted and the trustees under the order have complied with section 7(1) in respect of the lot the subject of the order –

(a) subject to paragraph (b), the lot shall be sold by public auction in accordance with the conditions specified in Schedule 2…”

And paragraph 2 of Schedule 2 is in these terms:

“The lot the subject of the auction shall be sold subject to a reserve price –

(a) which takes into account the redevelopment potential of the lot on its own (or, where 2 or more lots are the subject of the auction, on their own); and

(b) approved by the Tribunal.” (emphasis added)

124.  After we have made an order for the sale of the 1^st Group and an order for the sale of the 2^nd Group in the present case, we may then consider if we should direct both groups to be sold together in one public auction.  If so directed, all 8 lots will be sold to one single purchaser in the public auction. 

125.  The consequence of directing all 8 lots to be sold in one public auction as “the subject of the auction” is that we may take into account their redevelopment potential “on their own” and set a reserve price reflecting their full redevelopment potential in terms of paragraph 2 of Schedule 2.

126.  In our view, the above approach will fulfil the objectives of the Ordinance.

(a) A single purchaser (whoever that may be) will purchase all 8 lots.  This will prevent any minority owner or third party from exercising “ransom power” through the medium of public auction as cautioned by the Court of Final Appeal in Bond Star. [26]  This will facilitate urban renewal.

(b) The minority owners will receive fair and reasonable compensation for their respective interest in the lots having regard to the full redevelopment potential of the land.

127.  There are also practical concerns in this case as to why the 1^st Group and the 2^nd Group must be redeveloped together.  According to Mr CM Wong, upon demolition of either one of the two groups of buildings, the remaining group would have to be strengthened to prevent it from collapsing.  He said that the design of the Complex is such that one group of buildings would shield the other and it is unlikely that the effect of lateral wind load acting upon the superstructure has been taken into account in the design of the structural elements.  Either group of buildings, without the other, would be too slender to withstand the effect of strong wind.  He said that in order to carry out strengthening works for one group, it will be necessary to enter and make use of the land where the other group is.  That would be impracticable (if not impossible) if the 1^st Group and the 2^nd Group end up with different purchasers.

128.  Furthermore, Mr CM Wong said that the overall process of demolition and construction would be less complicated and the time required for the redevelopment would be shortened accordingly.

129.  For the above reasons, we shall, in accordance with paragraph 2 of Schedule 2, take into account the redevelopment potential of all 8 lots (ie the Lots) in assessing the RDV. 

130.  Indeed, the applicant’s valuation expert, Mr CW Wong, has prepared a report dated 12 August 2013 for the purpose of assessing the RDV of all 8 lots as at 9 August 2013.  We agree with him that the residual method is the appropriate method of assessment.  This is done by deducting the development costs (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value of the completed development.

131.  Mr CW Wong opined that the optimum development comprised a block of 27-storey composite development with:

(a) retail shops, domestic entrance lobby, pump room, refuge storage, fire services control room, etc on the G/F;

(b) shops and plant room on the 1/F;

(c) recreational facilities and landscape garden on the 2/F; and

(d) domestic units on the 3/F to 26/F with 4 flats per floor.

The details of the hypothetical development and residual valuation were set out in Enclosure 14 of the RDV Report.[27]  He then assessed the RDV of the Lots as a whole as at 9 August 2013 to be $733 million.

132.  Mr CW Wong revised his assessment at the hearing on 11 September 2013. [28]  His final assessment is $734 million and Ms Ngai submits that the reserve price for the auction of the Lots should be set at $734 million.

133.  Having looked at Mr CW Wong’s revised assessment, however, we would like to repeat our concerns (discussed above) regarding his retail comparables adopted for determining the RDV of the Lots.  In the light of our concerns, we have revised his adjustments for location and layout based on the same rationale discussed above but accept the other adjustments.  The result is appended at AnnexE.

134.  We have gone through the other parts of his assessment in detail. We are satisfied with his valuation assumptions and the values and costs parameters he used.  We note that he has adopted the Development Cost Pro-forma recently promulgated by the Hong Kong Institute of Surveyors to facilitate consideration of construction costs in land value assessments.[29]

135.  Using Mr CW Wong’s residual valuation format as set out in page 3 of Exhibit A11 but applying $488,000/sq m in assessing the GDV for the shops, our determination of the RDV of the Lots is attached hereto as AnnexF.

136.  For these reasons, we adopt $751.3 million as the reserve price for the auction of the Lots.

137.  During the course of trial, we discussed with Ms Ngai how the proceeds of sale should be apportioned amongst the majority owner and the remaining owners given the proposal to sell the Lots in one public auction.

138.  Ms Ngai initially suggested that the proceeds should first be apportioned to the 1^st Group and the 2^nd Group pro rata to their respective RDV.  Thereafter, she continued, the portion apportioned to each group would be apportioned to the majority and the minority owners of that group on a pro rata basis in accordance with the EUV of their respective units.  She submitted that her suggestion was fair having regard to the difference in value of the 1^st Group and the 2^nd Group by reason of the presence of some rights of way within them.  She also said that the RDV of the 2 groups should turn out to be equal as the owners would prefer to release all the rights of way to maximise the redevelopment potential of the land.

139.  In our view, Ms Ngai’s suggestion is not consistent with the legislative scheme.  Section 10(3)(a) of the Ordinance governs the basis of apportionment of the proceeds of sale.  It provides that:

“The apportionment between the majority owner and minority owner of the lot the subject of an order for sale of the proceeds of sale of the lot … shall be on the basis specified in Part 3 of Schedule 1.”

And part 3 of Schedule 1 mandates the apportionment to be:

“On a pro rata basis in accordance with –

(a) subject to paragraph (b), the values of the respective properties of each majority owner and each minority owner of the lot as assessed in the application concerned under section 3(1) of the ordinance;

(b) where –

(i) there has been a dispute referred to in section 4(1)(a)(i) of the Ordinance which has resulted in a variation of those values; or

(ii) in consequence of the requirement under section 4(1)(a)(ii) on the majority owner to satisfy the Tribunal as to the matter referred to in that section, there has been a variation of those values,

those values as varied.”

Thus, the suggestion to apportion the proceeds to each group by reference to their respective RDV is not sanctioned by the Ordinance. The only basis of apportionment is the EUV of the constituent units.

140.  We appreciate that the main concern driving Ms Ngai to her suggestion is the presence of those mutual rights of way within the area of the Lots (depicted in yellow in Exhibit A12(a), annexed hereto as AnnexG).  If we direct one public auction for the sale of the Lots, both the 1^st Group and the 2^nd Group will end up in one single purchaser.  There will be unity of ownership and possession of both the dominant and servient tenements and any right of way will be extinguished.[30]

141.  In our view, the only basis of apportionment of the proceeds of sale sanctioned by the Ordinance is pro rata in accordance with the EUV of the constituent units.  On account of the fact that there will be two orders for sale, the proceeds (after deducting the expenses and legal costs etc as provided for by the Ordinance) should first be apportioned to the 1^st Group and the 2^nd Group pro rata to their respective total EUV.  The portion apportioned to each group can then be apportioned to the owners pro rata in accordance with the EUV of their respective units. 

142.  To test the correctness of our theory, we invited Ms Ngai to consider what the basis of apportionment would be if the applicant had been qualified to invoke section 3(2)(a) of the Ordinance.

143.  It can be recalled that the applicant was driven to invoke section 3(2)(b) because it owned less than the specified percentage (80%) of the undivided shares of No 7A at the time of application. Had it waited longer, say, until after it had acquired the undivided shares of the 3rd respondent, it would have been qualified to apply under section 3(2)(a).

144.  If the applicant had invoked section 3(2)(a), there would be one single application covering the Lots and the applicant would be asking for one order for sale.  All 8 lots would be sold in one auction and section 10(3)(a) and part 3 of Schedule 1 would mandate the apportionment to be pro rata on the basis of the EUV of the constituent units of the Complex.  So, the result (from the perspective of the entitlement of the majority and the minority owners) would be the same for both models.

(6)       Other Incidental Matters

145.  The applicant proposes to appoint Chow Wing-Kin Anthony and Chow Suk-Han Anna, both solicitors of Peter C Wong, Chow & Chow, as the sale trustees.  Based on the information on their background and experience as set out in their letter dated 6 August 2013, we are satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on trustees under the Ordinance.  The remuneration package proposed in the said letter appears to be reasonable too.

146.  The particulars and conditions of sale of the Lots by public auction submitted by the Applicant are also reasonable.

Conclusion

147.  By the foregoing discussion, we are satisfied that the redevelopment of the 1^st Group and the redevelopment of the 2^nd Group are respectively justified due to the age and the state of repair of the existing buildings there and that Supergoal Investment Limited (as the majority owner) has taken reasonable steps to acquire the undivided shares in each group.  We therefore make an order that all the undivided shares in the 1^st Group be sold for the purposes of redevelopment.  We also make an order that all the undivided shares in the 2^nd Group be sold for the purposes of redevelopment.  And we direct that all 8 lots be sold by one public auction. 

148.  We appoint Mr Chow and Ms Chow as the sale trustees to discharge the duties imposed on them under the Ordinance in relation to the Lots and authorised their remuneration for their service as trustees as provided in their letter dated 6 August 2013.  We approve the particulars and conditions of sale of the Lots placed before us and grant liberty to the parties and to the trustees to apply for further directions if necessary.

149.  Since the applicant is not asking for costs, we shall make no order as to costs.

Annex A

Annex F

Annex G

[1] Bond Star Development Ltd v Capital Well Ltd [2004] 2 HKLRD 855.

[2] Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578.

[3] Unreported, LDCS 20000/2011, 12 September 2012.

[4] [2002] 1 HKLRD 308

[5] Unreported, LDCS 19000/2010, 25 November 2011.  In addition, we note that this tribunal (differently constituted) has recently applied CA Decision in Super Fortune Investment Limited v Keynote Enterprises Limited, unreported, LDCS 19000/2012, 18 June 2013.

[6] [1970] AC 113 at 127

[7] Li CJ said in Solicitor (24/07) v Law Society of Hong Kong (2008) 11 HKCFAR 117 at footnote 2 that: “The doctrine of precedent involves a decision of a superior court binding on a lower court.  The doctrine of precedent also includes the doctrine of stare decisis which involves a superior court being bound by its own previous decision.”

[8] See Cross and Harris, Precedents in English Law, 4th Edition (1991), p 129.

[9] Commissioner of Inland Revenue v Indosuez WI Carr Securities Ltd [2002] 1 HKLRD 308 at §§60-76.

[10] See §17 of CA Decision.

[11] See §§10-21 of the judgment.

[12] See Bond Star Development Limited v Capital Well Limited, supra, §§118-119 & 120(3).

[13] See §§18-19 of CA Decision.

[14] (2009) 12 HKCFAR 568.

[15] See Myers v South Lakeland District Council [2005] EWCA Civ 498; [2005] RVR 301 and Checkpoint Limited v Strathclyde Pension Fund [2003] 14 EG 124; [2003] EWCA Civ 84.

[16] See Exhibit A9 page 1.

[17] In Graham Miller (Hong Kong) Limited v. Heesing Company Limited, unreported,  LDLA 1822 of 1988, 23 September 1988, the Lands Tribunal remarked that 10% is usually considered as a reasonable margin of error in most valuation exercises.  And in Shun Fung Ironworks Limited v. Director of Buildings and Lands [1995] HKLR 311, the Lands Tribunal indicated, at § 973, that a margin of error of about 10% is an acknowledged fact in almost any valuation exercise.  During the trial, Mr CW Wong accepted a margin of error between 5 to 10%.

[18] See Siu Sau Kuen v. the Director of Lands, unreported, LDLR 1/2010, 9 March 2012 at §§160-169.

[19] ie 萬豐家居百貨.

[20] In Good Faith Properties Limited and Others v Cibean Development Company Limited, unreported, LDCS 42000/2011, 31 May 2013, the expert for the Applicant submitted “if RZM is not to be used for the common comparable, it should be given a downward adjustment, say -10% on layout to reflect its low depth to frontage ratio which is desirous for retail properties” though in the end, he only applied an additional downward adjustment of -5% for the layout and depth ratio difference to the common comparable but not to the other comparables.

[21] In contrast, reverse quantum, i.e. an increase in value for size, may otherwise occur when there is shortage of large units in a locality or where national multiples are prepared to pay a premium in competition for securing their presence.

[22] Except in the instance where an allowance has to be applied because of an excessive frontage or a narrow frontage

[23] Save perhaps for a marginal allowance for the more prominent frontage, say -5%

[24] Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578 at §33.

[25] Despite we have revised the EUV of the 5^th respondent’s unit to $36,750,000, this last offer of $58,099,000 is still within 5% of its share of the RDV as determined by us.

[26] See Capital Well Ltd v Bond Star Development Ltd, supra, at §§39-40.

[27] At Bundle E2/2978.

[28] See Exhibit A11.

[29] At Enclosure 15 of the RDV Report (Bundle E2/2982-2983).

[30] See Megarry & Wade, The Law of Real Property, 8^th Edition (2012), §29-014;Goo & Lee, Land Law in Hong Kong, page 709.