JOINT HOPE LTD v. VECENT HONG KONG TRADING LTD AND OTHERS

LDCS 21000/2019

[2021] HKLdT 51

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 21000 OF 2019

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J U D G M E N T

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1.  This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of the following lots in Kowloon, Hong Kong (hereinafter collectively referred to as “the Lots”):

No	Lot	Address
1st	New Kowloon Inland Lot 4556	Kin Fung Mansion, Fung Wong Village, Nos 26, 26A, 28, 30, 32 & 32A Ming Fung Street
2nd	New Kowloon Inland Lot 4566	Fung Wong Mansion, Fung Wong Village, Nos 34 & 36 Ming Fung Street
3rd	New Kowloon Inland Lot 4470	Nos 38, 40, 42, 44, 46 & 48 Ming Fung Street

2.  Erected thereon the 1^st Lot is an 8-storey tenement building (“1^st Building”) with 4 retail shops on G/F (ie Shops A, B, C & D with No 32 being Shop A etc) and 6 residential units (A-F) on each of 1/F to 7/F being served by two common staircases. Each of the 4 shops has been allotted 2/50 undivided shares and each of the 42 domestic units has been allotted 1/50 under a Deed of Mutual Covenant dated 28 September 1965. The occupation permit of the building was issued on 7 July 1965.

3.  Erected thereon the 2^nd Lot is a 6-storey tenement building (“2^nd Building”) with 2 retail shops on G/F (ie Shops A & B) and 2 residential units (A & B) on each of 1/F to 5/F being served by one common staircase. Each of the 12 units has been allotted 1/12 undivided shares under a Deed of Mutual Covenant dated 28 June 1965. The occupation permit of the building was issued on 2 October 1964.

4.  Erected thereon the 3^rd Lot are six 6-storey tenement building (“3^rd Building”) with 6 retail shops on G/F (ie Shops 38-48) and 6 residential units on each of 1/F to 5/F being served by one common staircase. Each of the 36 units has been allotted 1/36 undivided shares under a Deed of Mutual Covenant dated 10 June 1970. The occupation permit of the building was issued on 21 November 1962.

5.  Where appropriate, the 1^st Building, the 2^nd Building and the 3^rd Building are collectively referred to as “the Buildings”.

6.  Mr Mok Yeuk Chi (“Mr Mok”), counsel for the applicant, contended that at the time of the Application dated 28 June 2019, the applicant owned all units of the Buildings which represent not less than 80% of the undivided shares of each of the Lots subject to the remaining shares as follows:

Respondent	Unit	Building	Undivided Share
R1	Shop B, G/F	1st	2/50	10/50
R2	Shop C, G/F	1st	2/50
R3	Unit D, 1/F	1st	1/50
R4 & R5	Shop D on G/F and Unit E on 1/F	1st	3/50
R6 & R7*	Unit F, 5/F	1st	1/50
R8*	2/12 of Unit C, 7/F	1st	2/12 of 1/50
R9	2/12 of Unit C, 7/F	1st	2/12 of 1/50
R10*	2/12 of Unit C, 7/F	1st	2/12 of 1/50
R11*	2/12 of Unit C, 7/F	1st	2/12 of 1/50
R12*	2/12 of Unit C, 7/F	1st	2/12 of 1/50
R13*	2/12 of Unit C, 7/F	1st	2/12 of 1/50
R14	Unit A, 1/F	2nd	1/12	2/12
R15*	Unit A, 3/F	2nd	1/12
R16	Shop 38 on G/F	3rd	1/36	7/36
R17	Shop 40 on G/F	3rd	1/36
R18 & R19	Shop 44 on G/F	3rd	1/36
R20	Shop 46 on G/F	3rd	1/36
R21	Shop 48 on G/F	3rd	1/36
R22	Unit 38 on 1/F	3rd	1/36
R23 & R24*	Unit 48 on 2/F	3rd	1/36

* After the filing of the Application, the applicant purchased the units or interests of R6, R7, R8, R10, R11, R12, R13, R15, R23 and R24 and has discontinued the proceedings against them.

7.  R1, R2, R4, R5 and R21 are represented by Mr Julian Chan (“Mr J Chan”), instructed by Messrs Joseph Li & Co, Solicitors & Notaries; R14 & R25 are represented by Mr Adrian But (“Mr But”), instructed by Messrs Liu, Chan and Lam, Solicitors & Notaries; R16 and R22 are represented by Mr Jonathan Lee (“Mr Lee”), instructed by Messrs Robertsons, Solicitors & Notaries; and R17, R18, R19 and Personal Representative of R20 are represented by Ms Elizabeth Yang of Messrs Samuel LC Yang & Co.

8.  The remaining live respondent, ie R3 is not represented but has settled on the minimum proceeds in case of an auction sale.

9.  R9 is a missing owner where service has been dispensed with.

Whether the Applicant is entitled to make the Application

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

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

12.  The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice was gazetted on 22 January 2010 and came into operation on 1 April 2010 (“the Notice”).  Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%.  Those classes of lots include “a lot 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)”. 

13.  As the occupation permits for the Buildings were issued on 7 July 1965, 2 October 1964 and 21 November 1962 respectively, not less than 50 years before the date of the Application, the Notice is applicable and the threshold percentage should be 80%.

14.  The applicant, owning not less than 80% of the undivided shares of each of the Lots at the time of the Application, was entitled to file the Application under section 3(2)(a) of the Ordinance which may cover two or more lots where the majority owner owns not less than the percentage specified in subsection (1) of the undivided shares in each lot.

The Issues in the Application

15.  Each of R1, R2, R4, R5, R14, R16, R18, R19, R21 and R22 filed a Notice of Opposition disputing the valuations as required under Schedule 1 and Schedule 2 to Ordinance and some also on whether the majority owner has taken reasonable steps to acquire all the undivided shares in the lots (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) under section 4(2)(b) of the Ordinance.

The Evidence

16.  The applicant has filed the following documents in support of the Application:

(a)  a witness statement and supplemental witness statement of Mr Li Ming Yeung (“Mr Li”), representative of the applicant dated 4 May 2020 and 4 March 2021 respectively;

(b)  a Building Condition Survey Report by Mr Benson Wong Sai Ning (“Mr B Wong”) of Benson Wong & Associates Limited dated 4 May 2020;

(c)  a Structural Survey Report by Mr So Kin Shing (“Mr So”) of K S So & Associates Ltd dated 4 May 2020;

(d)  the following reports by Mr Charles CK Chan (“Mr C Chan”) of Savills Valuation and Professional Services Limited (“Savills”);

(i)  an Application Report dated 4 June 2019 pursuant to Part 1 of Schedule 1 to the Ordinance on the market value (which is usually termed by the valuation profession as the Existing Use Value or just “EUV”) of each unit of the Buildings;

(ii)  a Supplemental Report dated 28 April 2020 on the revised EUV as at 4 June 2019 and on the redevelopment value (“RDV”) of the Lots for the purpose of setting the reserve price of the public auction, if an order for sale of the Lot be granted, according to clause 2 of Schedule 2 to the Ordinance;

(iii)  a Rebuttal Report dated 19 June 2020 on Dr Wong Tsz Choi (“Dr Wong”), the valuation expert of CBRE appointed by the respondents (save and except for R3 and R9) on the EUV and RDV;

(iv)  an Updated RDV Report of 16 February 2021.

17.  As said, Dr Wong had been appointed by the respondents (save and except for R3 and R9) and prepared the following reports:

(i)  a Valuation Report on the EUV as at 4 June 2019 and another report on RDV both dated 14 May 2020;

(ii)  two Rebuttal Reports both dated 22 June 2020 on Mr C Chan’s Rebuttal Report;

(iii)  an Updated RDV Report of 18 February 2021.

18.  Besides, Mr C Chan and Dr Wong prepared two joint statements, one dated 31 July 2020 setting out their agreements and disagreements on EUV (“1^st Valuation Joint Statement”) and another one dated 4 March 2021 on RDV as well as further agreements on the EUV in respect of the internal conditions of some domestic units (“2^nd Valuation Joint Statement”).

Whether Redevelopment of the Lot is Justified

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

20.  For the age and state of repair requirements, the applicants have adduced the expert evidence of Mr B Wong, the building surveyor and Mr So, a registered structural engineer. 

21.  Mr So had conducted a structural assessment of the Buildings and prepared a report dated 4 May 2020. He found the following defects in the Buildings[1]:

22.  1^st Building

22.1  Cracks and spalling at 33 locations were observed during the visual inspection.

22.2  Based on the results of cover-meter surveys, all 4 (or 100%) survey results for beams do not comply with the required concrete cover. The concrete covers in the beam are considered not sufficient to (1) provide protection to the embedded steel reinforcement bars against corrosion; (2) provide protection to the embedded steel reinforcement bars against fire; and (3) provide sufficient depth of concrete for the safe transmission of bond forces.

22.3  Based on the results of carbonation depth tests carbonation depth has penetrated the concrete cover of all tested samples for beams and slabs.

22.4  Based on the results of cement content tests, 50% or more of the tested samples for the structural elements do not fulfill the requirement.

22.5  Based on the results of chloride content tests, 25% and 50% of the tested samples of columns and slabs respectively had chloride content exceeding the 0.35% limit. There is, therefore, increased risk of corrosion of the embedded steel reinforcement bars in the columns and slabs.

22.6  Based on the results of reinforcement corrosion surveys (ie open-up inspections), all of the inspected bars are suffering from corrosion extensively.

23   2^nd Building

23.1  Cracks and spalling at 34 locations were observed during the visual inspection.

23.2  Based on the results of cover-meter surveys, nearly all the survey results for the structural elements do not comply with the required concrete cover. The concrete covers are considered not sufficient to (1) provide protection to the embedded steel reinforcement bars against corrosion; (2) provide protection to the embedded steel reinforcement bars against fire; and (3) provide sufficient depth of concrete for the safe transmission of bond forces.

23.3  Based on the results of carbonation depth tests carbonation depth has penetrated the concrete cover of all tested samples of columns, beams and slabs.

23.4  Based on the results of cement content tests, all tested samples for columns do not fulfill the requirement.

23.5  Based on the results of chloride content tests, 33% and 67% of the tested samples for columns and slabs respectively had chloride content exceeding the 0.35% limit. There is, therefore, increased risk of corrosion of the embedded steel reinforcement bars in the columns and slabs.

23.6  Based on the results of reinforcement corrosion surveys (ie open-up inspections), all of the inspected bars are suffering from corrosion extensively.

24  3rd Building

24.1  Cracks and spalling at 52 locations were observed during the visual inspection.

24.2  Based on the results of cover-meter surveys, all 5(or 100%) survey results for columns and beams do not comply with the required concrete cover. The concrete covers are considered not sufficient to (1) provide protection to the embedded steel reinforcement bars against corrosion; (2) provide protection to the embedded steel reinforcement bars against fire; and (3) provide sufficient depth of concrete for the safe transmission of bond forces.

24.3  Based on the results of carbonation depth tests carbonation depth has penetrated the concrete cover of nearly all tested samples of columns, beams and slabs.

24.4  Based on the results of compression tests, 60%, 80% and 60% of the tested samples for columns, beams and slabs respectively do not comply with the requirement.

24.5  Based on the results of cement content tests, 40% of the tested samples for columns and beams do not fulfill the requirement.

24.6  Based on the results of reinforcement corrosion surveys (ie open-up inspections), all of the inspected bars are suffering from corrosion extensively.

25.   Mr So considered that the structural frames of the Buildings are deteriorating. He also considered that the existence of cracks and spalling on the structural elements, the corrosion of the steel reinforcement bars and concrete covers being penetrated by carbonation are the results of the age and/or the lack of proper repair of the Buildings. The inadequacies as revealed cannot be rectified and the structural performance of the structural frames of the building may have already been adversely affected. The deterioration will continue steadily due to extensive carbonation of the reinforced concrete structural elements. It is inevitable that new defects will occur and previous defects though repaired will relapse readily, requiring substantial repairs or even partial demolition and re-construction of some defective structural elements in the future when, for example, there are unacceptably high reductions in the factors-of safety, or structural performance factors in the reinforced concrete structural elements due to loss of cross-sectional areas of the embedded steel reinforcement bars and deterioration in the quality of the concrete. Although repairs are possible, repair work will need to be carried out regularly in the future and that such repairs will be more and more extensive as the building grows older.

26.   While the present cost of repair may be relatively modest, such costs will escalate in future as the extent and seriousness of the deterioration of the structural elements increase with age.

27.   Mr So was of the opinion that the design and construction of the structural frames of the Buildings had complied with the less stringent requirements in terms of the current standards. The structural frames were designed and constructed more than 50 years ago and the applicable standards were the LCC By-laws. There are 7 structural design and construction aspects for the 1^st Building, the 2^nd Building and 3^rd Building respectively that do not comply with the current structural engineering design requirements specified in the Code of Practice for the Structural Use of Concrete 2004 and the Code of Practice for the Structural Use of Concrete 2013, especially the requirement on robustness. Therefore, let alone other structural engineering deficiencies, the Buildings might not possess adequate robustness to avoid disproportionate collapse due to accidents. Also the thickness of concrete covers for the beams and slabs do not comply with the requirements specified in the Code of Practice for Fire Safety in Buildings 2011.

28.   Mr B Wong, in his Condition Survey Report dated 4 May 2020, stated that:[2]

(i)  The Buildings are aged physically as shown by 3 signs of obsolescence in appearance:

(a)  A plain looking block with monotonous elevations.

(b)  The external walls are simply rendered and painted. These low-cost external building finishes were only acceptable in the post-war era but have been out-classed by buildings nowadays.

(c)  An overall untidy appearance from piecemeal replacements of the old windows with aluminum units of different types and colours.

(ii)  The Buildings are also aged functionally as it has been suffering from many obsolescence aspects which have safety and hygiene implications as compared with the current standards for buildings nowadays:

(a)  The design and construction of the structural frames are obsolete as these had only complied with the less stringent structural requirements applicable more than 50 years ago thereby adversely affecting the structural performance of the Building’s structural frames.

(b)  The fire services installation is sub-standard due to the following:

i.   No automatic sprinklers system is installed in the 3^rd Building;

ii.   No manual fire alarm system is installed in the 2^nd Building and 3^rd Building;

iii.  No fire hydrant/hose reel system in the 2^nd Building and 3^rd Building; the existing system in the 1^st Building is non-conforming as it has no instant fire service water supply.

(c)  The fire escape arrangements are unsatisfactory with the following deficiencies:

i.  Handrails are provided on one side of the stairs in the 1^st Building; and

ii.  No emergency lighting is provided to all the required staircases in the three buildings;

(d)  The fire resisting construction of the staircases and corridors which are fire escape routes is outdated:

i.  The concrete covers for both top and soffit surfaces of the floor slabs is only 12.7mm which is lower than the minimum thickness of 20mm for fire resistance;

ii.  The existing windows to the internal corridors of the 1^st Building are openable windows which undermines the fire resistance of the corridors as fire escape routes;

iii.  The existing flat entrance doors which open to the staircase or the corridor are not fire resisting doors as currently required;

iv.  The existing electrical installations and wirings installed in staircases or the corridor are exposed and not enclosed with fire resisting enclosures; and

(e)  The Buildings have no barrier free access facilities of an accessible lift or an accessible ramp.

(f)  The Buildings have no proper refuse disposal system thereby creating convenience, hygienic and fire safety problems.

(g)  Though equipotential bonding systems are provided in the Buildings, only the staircase window and railings are connected. Other exposed metal fixtures such as water pipes and flat entrances in common area and inside the units as well as shops are not connected to the equipotential bonding systems thereby endangering the safety of occupants and breach the Electrical Code.

(h)  The Buildings have no lightning protection system to protect its occupants and building parts from lightning strikes.

(i)  The Buildings have no building management systems which are commonly provided nowadays for convenience of the users as well as more effective use, operation and maintenance of the Building.

29.   Mr B Wong was of the view that most of the above functional obsolescence cannot be rectified unless the Buildings are demolished and redeveloped. Before then, the occupiers will have to remain in occupation of the Buildings which are aged, sub-standard or even unsafe by current standards.

30.   Finally, thought repairable, the rendering on the external wall surfaces and the waterproofing to roof areas have also passed their respective effective life.

31.   Mr B Wong was of the view that the Buildings are in a poor state of repair. He assessed the total cost of repair works at $26,513,567 which amounts to 35% of the construction cost of a new similar superstructure.  He considered the repair cost disproportionately high and the Buildings have reached a state which is beyond reasonable economic repair. He recommended the owners to redevelop rather than repair the Buildings, particularly the Buildings do not possess any historical value or architectural merit.

32.    The respondents have not provided any evidence to the contrary. Both Mr B Wong and Mr So were not cross-examined. Thus, I accept the applicant’s evidence in whole.  I am satisfied that based on the evidence of Mr So and Mr B Wong, redevelopment of the Lots is justified due to the age and the state of repair of the Buildings.

EUV as at 4 June 2019

Assessment of EUV of G/F Units

33.   By reference to the 1^st Valuation Joint Statement, the 2 experts agreed the particulars of the G/F units of the Buildings as follows[3]:

G/F:	Saleable Area (m2)		Space underneath Staircase (m2)	Yard (m2)	Frontage (m)	Depth (m)		Headroom (m)
Shop A, 1st Building, 26-32A Ming Fung Street	55.9			24.8	5.5	12.6		3.6
Shop B, 1st Building, 26-32A Ming Fung Street	68.2*		-	12.5	5.8	15.2		3.2
Shop C, 1st Building, 26-32A Ming Fung Street	59.0		-	12.4 (covered)	4.1	12.6		3.3
Shop D, 1st Building, 26-32A Ming Fung Street	55.9		-	24.8	5.5	12.6		3.1
Shop A, 2nd Building, 34-36 Ming Fung Street	Front Portion25.1	Rear Portion39.1	-	3.9 (elevated)	4.1	Front Portion: 6.1	Rear Portion: 15.2	Under C/L:   2.5	Under Front Portion: 5.3	Under Rear Portion 2.9
Shop B, 2nd Building, 34-36 Ming Fung Street	Front Portion25.1	Rear Portion 34.9	-	3.9 (elevated)	4.1	Front Portion: 6.1	Rear Portion: 15.2	-	Under Front Portion: 5.2	Under Rear Portion 2.9
No 38 Ming Fung Street	Front Portion24.3	Rear Portion32.1	4.2	6.6 (elevated)	4.6 (including space underneath staircase)**	Front Portion: 6.5	Rear Portion: 13.5	-	Under Front Portion: 5.2	Under Rear Portion 3.0
No 40 Ming Fung Street	Front Portion24.3	Rear Portion32.1	-	6.8 (elevated)	3.4	Front Portion: 6.5	Rear Portion: 13.5	-	Under Front Portion: 5.5	Under Rear Portion 3.1
No 42 Ming Fung Street	Front Portion24.3	Rear Portion32.1	4.2	6.8 (elevated)	4.6 (including space underneath staircase)**	Front Portion: 6.5	Rear Portion: 13.5	-	Under Front Portion: 5.5	Under Rear Portion 3.2
No 44 Ming Fung Street	Front Portion24.3	Rear Portion32.1	-	6.8 (elevated)	3.4	Front Portion: 6.5	Rear Portion: 13.5	-	Under Front Portion: 5.6	Under Rear Portion 3.3
No 46 Ming Fung Street	Front Portion24.0	Rear Portion32.1	4.5	6.8 (elevated)	4.6 (including space underneath staircase)**	Front Portion: 6.5	Rear Portion: 13.5	-	Under Front Portion: 5.7	Under Rear Portion 3.4
No 48 Ming Fung Street	Front Portion24.0	Rear Portion32.1	-	6.6 (elevated)	3.4	Front Portion: 6.5	Rear Portion: 13.5	-	Under Front Portion: 5.8	Under Rear Portion 3.5

* According to the approved building plan dated 22 June 1965, there supposed to be an area at the back of the unit to the right of its yard named “P.H.” According to the assignment plan dated 23 November 1988 vide memorial UB3916223, the P.H. portion is coloured “Orange” that the owner shall have “the sole and exclusive right and privilege to hold, use, occupy and enjoy”.  Upon the joint inspection conducted on 26 March 2021, both experts agreed that this P.H. portion was not found and was wholly enclosed by walls. I opine that in reality this P.H. cannot be occupied or made use of and therefore I agree with Mr C Chan that its area, if any, should be disregarded.

** The space underneath the staircase is separated by a wall which divides it from the main shop proper and is totally independent. However, I consider such frontages of a shop valuable and as evidenced from the on-site inspection, can be utilized for the display, for instance of the signage. Therefore, it should be included as part of the frontage of the respective shop.

Unauthorized Cocklofts

34.   As can be seen from the table above, the shops in the 2^nd Building and 3^rd Building are of split-level design each with a staircase leading from the front portions to the rear portions. In addition to the areas as quoted above, there are areas treated as “cockloft” by Mr C Chan which, I agree, are indeed extensions from the elevated rear portions which cover the void over the front portions.  By reference to the Code of Measuring Practice published by the Hong Kong Institute of Surveyors, Mr C Chan insisted such areas, if counted, should be measured in terms of “internal floor area”. I agree.

35.   On the other hand, Mr C Chan pointed out that some of these cocklofts or extensions from the elevated rear portions are subject to the following warning notices that request the owners to, inter alia, “alter or demolish” the cocklofts:[4]

Unit	Building Order	Memorial No	Date of instrument	Unauthorized Works
G/F, including the space underneath the staircase, 38 Ming Fung Street	Superseding Notice No WNZ/U05-04/0013/07 under s24C(1) of the Buildings Ordinance	10040100690036	28 August 2009	Structure at yard
	Notice No WC/TC00205/16/K-V12 under s24C(1) of the Buildings Ordinance	16091500510263	27 May 2016	Cockloft at high level of G/F Shop
G/F, including the space underneath the staircase, 44 Ming Fung Street	Notice No WNZ/U05-04/0004/07 under s24C(1) of the Buildings Ordinance	09072700890659	10 February 2009	Structure at yard
	Notice No WC/TC00206/16/K-V12 under s24C(1) of the Buildings Ordinance	16091500510272	27 May 2016	Cockloft at high level of G/F Shop

36.   Of particular interest is that, on 11 May 2018, the Building Authority issued to the owner of G/F, including the space underneath the staircase, 38 Ming Fung Street, a building order under section 24(1) which required the owner to demolish the unauthorized building works that include the structure erected on and over the yard but not the cockloft at high level of the G/F Shop. Then on 31 May 2019, the Building Authority issued a letter to the owner stating that: “As the building works have been modified, I am prepared to withhold further enforcement action for the time being, and withdraw my Order.”[5] As at the land search of 5 February 2021, no order was issued against the cockloft.

37.   As pointed out by Mr Lee, at the time of issuing the order of 11 May 2018, the Building Authority clearly knew about the unauthorized cockloft (against which notice was issued in 2016). Yet the Building Authority did not enforce against such cockloft in the order of 11 May 2018. Neither did the withdrawal letter of 31 May 2019 mention anything about the cockloft save to state that the premises were not free of any other unauthorized building works.

38.   Similarly, on 11 May 2018, the Building Authority issued to the owner of G/F, including the space underneath the staircase, 44 Ming Fung Street, a building order under section 24(1) which required the owner to demolish the unauthorized building works that include the structure erected on and over the yard but not the cockloft at high level of the G/F Shop. Then on 17 August 2018, the Building Authority issued a letter of compliance of the order[6].

39.   In Join Union Investment Limited v China Tree Investment Limited, [2016] 2 HKLRD 901, there was also a subdivision of the ground floor premises into four shops. The expert in the case, a registered structural engineer, could not give any example or authorities of the government or the Building Authority taking enforcement action to require reinstatement of the property to its original state in similar circumstances. Chow J was of the view that there was no real risk of enforcement by the government or Building Authority in respect of the alleged unauthorised partitions, see §§97-103 of the judgment.

40.   At §107 of the judgment, the learned judge further observed that:

“... it is apparent, form the evidence of Mr Lai, Madam Chan and Madam Shiu, that none of them considered the 2010 Building Order, or indeed any unauthorised building works in the Property, to be of any great moment. Prior to the respective purchases of the Property by the defendant (through Madam Chan) and the plaintiff (through Madam Shiu), none of them took the trouble to go inside the Property to inspect its physical conditions, or ascertain whether there might be any unauthorised building works in the Property. Even after her attention had been drawn to the 2010 Building Order, Madam Shiu did not carry out any further investigation prior to entering into a binding contract to purchase the Property, and was prepared to accept a modest sum of HK$20,000 from the defendant as sufficient compensation for the costs of complying with the 2010 Building Order. The existence of unauthorised building works in retail premises, especially in the older districts in Hong Kong, is common place and does not appear to have any significant impact on their market or capital values. These properties change hands frequently like ordinary commercial commodities, as demonstrated in the present case by the fact that the defendant (through Madam Chan) purchased the Property in September 2010 and sold it to the plaintiff (through Madam Shiu) in March 2011 for a handsome profit. It is contrary to market reality to treat the existence of an unauthorised cockloft, even of a substantial size like the present one, as constituting a title defect going to the root of title....” (emphasis added)

41.   In Circle Angle Limited v Orchard Enterprise (Hong Kong) Limited, DCCJ 1252/2011 (unreported, dated 6 February 2012), the purchaser was aware that the property which it intended to purchase was subject to a notice issued under section 24C(1) of the Buildings Ordinance:

“買方日后不能藉此拒絕交易”. Something similar took place in Gold Glory International (HK) Limited v K W Wong Investment Company Limited, HCMP 1618/2012 (unreported, dated 17 December 2013) where the parties agreed that: “The purchaser and vendor declare that they are both aware of the (two notices by the Building Authority under section 24C(1) of the Buildings Ordinance) where the property is situated. Both parties hereby agree to complete the transaction notwithstanding the (two Notices) ...”

42.   In Link Harvest Ltd v Wayhang Development [2001] 2 HKC 652[7], Recorder Edward Chan SC said, 

“Even though s24 gives the Building Authority a discretion on whether to exercise its power against a particular contravention and what order it would make if it has decided to exercise its power, in my judgment, prima facie, one would normally expect that the Building Authority would take enforcement action against the unauthorised building or structures. Thus, unless there is a good reason for believing that the Building Authority would not take any action, where a building or structure was erected in contravention of the Buildings Ordinance, there is the risk of an enforcement action by the Building Authority so as to render the title of that building or that structure to be defective. It is difficult to state exhaustively what would be the good reasons. The typical one would be where the breach is very trivial, or where because of the nature and the age of the structure, the enforcement priority within the Building Authority was so low that it could be expected that the time for enforcement would not come even by the end of the practical life of the building or structure in question.” (underline added)

43.   More recently in Wong Tin Chor v The Appeal Tribunal (Buildings Ordinance) & The Building Authority, HCAL 1662/2019 (unreported, dated 15 July 2020), it was disclosed that there had not been much change in the enforcement policy by the Building Authority since 2001[8] which was revised in 2011 to extend to include all unauthorized building works on roof-tops and flat roofs as well as those in yards and back-lanes of buildings, irrespective of their risk to public safety or whether they are newly constructed.

44.   Dr Wong, indeed, had referred to the Buildings Department’s website which in effect states prevailing enforcement policy as follows:[9]

“The Buildings Department (BD) will issue Statutory Orders to the owners concerned requiring removal of the following actionable items and register the orders in the Land Registry against the relevant property titles.

• Items constituting obvious hazard or imminent danger to life or property

• New UBWs[10] items irrespective of the date of completion of the building where such items have been carried out (excluding statutorily exempted building works under the Buildings Ordinance (Cap 123))

• Items on the exterior of buildings, including:

      - On rooftops and podiums

      - In yards and lanes

      - Projecting from external walls (excluding those structures covered by the Household Minor Works Validation Scheme and Validation Scheme for Unauthorised Signboards and other minor amenity features)

• Items in the interior of buildings, constituting obvious hazard or imminent danger to life or property (e.g. building works associated with subdivided units with obstruction to means of escape, serious water seepage causing deterioration of structural members or overloading problem)

• Items in or on buildings, constituting a serious health or environmental nuisance (e.g. misconnection of drainage systems)

• Major standalone items

• A specific type of UBWs, or items identified in buildings or groups of buildings, targeted for large-scale operations

• Unauthorised alterations to or works in green and amenity features of a building (e.g. balconies, sky gardens and podium gardens) for which exemption from calculation of gross floor area has been granted by the Building Authority

Other Items of UBWs

For other items of UBWs which do not fall within the above list of actionable items for issuing statutory removal orders, the BD may issue statutory warning notices registrable against the property title.”[11]

45.   Dr Wong also gave his opinion that during his professional practice (though not as an authorized person under the Buildings Ordinance), he had never come across an enforcement order from the Building Authority requiring demolition of such unauthorized cockloft which had been constructed for quite some time (instead of a new construction).

46.   In response, Mr C Chan provided two examples where the Building Authority had issued a building order against similar unauthorized cocklofts:

(1)  G/F, 250 Hai Tan Street[12]

On 14 December 2018, the Building Authority issued a Superseding Order of C/TD/003723/18/K (vide memorial 19030500760079) under section 24(1) of the Buildings Ordinance, stating as follows:

“It has been brought to my attention that the following building works have been carried out in or at the above premises:

(i) …

(ii) construction of cockloft extending from the approved cockloft facing Hai Tan Street;

(iii) …

(iv) Construction of solid step on the landing of staircase at cockloft level leading to Hai Tan Street.”

(2)  G/F, 310 Tung Chau Street[13]

On 10 December 2015, the Building Authority issued an order of C/TD/002736/15/K (vide memorial 16011901650418) under section 24(1) of the Buildings Ordinance, stating as follows:

“It has been brought to my attention that the following building works have been carried out in or at the above premises:

(i) construction of a metal staircase providing access to the approved cockloft;

(ii) construction of cockloft extending from the approved cockloft;

(iii) …

(iv) …”

47.   In respect of the building order against G/F, 250 Hai Tan Street, according to the land search from the Land Registry[14], there appeared to be two preceding building order of C/TD/001605/16/K (vide memorial 16072601900091) and C/TD/000139/17/K (vide memorial 17022300870211) dated 24 June 2016 and 9 January 2017 respectively. There was no building notice issued by the Building Authority.

48.   In respect of the building order against G/F, 310 Tung Chau Street, according to the land search from the Land Registry[15], there appeared to be a preceding building order of CFZ/TD/008043/05/K (vide memorial 06011700740713) dated 6 December 2005 subsequent to which a letter of compliance was issued on 5 July 2006. There was no building notice issued by the Building Authority.

49.   Mr C Chan had provided no evidence to show that these cocklofts were newly constructed or otherwise.However, it was Mr C Chan’s evidence that in a case where G/F, 149 Queen’s Road West was sold to the Urban Renewal Authority, a building order dated 31 March 2004 was noted requiring, inter alia, that “a structure at the upper part of G/F (在地下高層加建閣仔)” to be removed. A Letter of Compliance was issued on 20 September 2004. But the owner constructed a new unauthorized cockloft in plywood on steel H bars.  Subsequent building orders were issued in 2010 and 2013 etc in respect of other matters but not the newly erected cockloft which was then never subject to any enforcement action by the Building Authority.

50.   What was the difference between the old and new unauthorized cocklofts? The definition of “building works” in section 2 of the Buildings Ordinance includes “any kind of building construction and building operation”, and “alterations and additions”.

51.   Having reviewed the above, I tend to accede to Dr Wong’s observation. If the Building Authority was care to take enforcement actions against the cocklofts at the high level of G/F Shops at 38 & 44 Ming Fung Street, I cannot see the reason why the building orders issued on 11 May 2018 did not include the requirement for the demolition of the cocklofts.  I also cannot explain the reasons why when the Building Authority came across such unauthorized cocklofts at high level of G/F Shops at 38 & 44 Ming Fung Street, it failed to take notice of similar unauthorized cocklofts at high level of G/F Shops of other units in the Buildings which are visible from the outside.

52.   Quite recently, in 803 Funds Limited v Director of Buildings, HCAL 2215/2020 (unreported, dated 27 May 2021), the prevailing enforcement policy as referred to in §44 above was once again confirmed. At §21 of the judgment, the following was expounded:

“For UBWs which do not fall within the list of Actionable Items, BA may, instead of issuing Section 24 Orders, issue to the owners concerned statutory notices under s 24C or advisory letters requesting them to remove the UBWs voluntarily. In general, advisory letters would be issued save and except the following, for which warning notices may be issued:

(1) existing unauthorized cocklofts on ground floor not constituting obvious hazard or imminent danger to life or property; and

(2) unauthorized internal staircases constructed prior to 2011 and not constituting obvious hazard or imminent danger to life or property.”

53.   In the same case at §44, the Court of First Instance remarked that:

“Such policies are well-known and, as earlier mentioned, have been recognized and upheld by the Hong Kong courts in many cases in the past. It would be unfair for BA to depart from his existing and published policies merely because of the position of Mr Bowring or his wife, or because the present case has somehow caught the attention of the media.”

54.   In view of the above, I consider the unauthorized cocklofts in the present case, whether issued against which a building notices or otherwise, would attract market value which is subject only to quantum.

55.   Apart from the above, the two experts had no agreement on the value of the elevated open yard at the rear of the shops for the 2^nd Building and the 3^rd Building though they agreed the value of open yard for the 1^st Building should be valued at 1/6 of that of the ground floor proper. Mr C Chan considered there should be no difference between the value of the elevated open yard and the open yard at ground level. Dr Wong considered more reasonable to adopt a lower conversion factor of 1/10 for the elevated open yard to reflect the level difference. In such regard, I agree with Dr Wong though I appreciate that difference between the two is not significant.

56.   By their joint statement dated 31 July 2020, Mr C Chan and Dr Wong referred to the following comparables to be adopted for valuation on direct sales comparison basis:[16]

Comp Ref:	Address	Age	Date of PASP*	Consideration	Saleable Floor Area (m2)	Frontage (m)	Headroom (m)	Depth (m)	Effective Area (m2)	Effective Unit Price (/m2)
Ref Unit	Shop A, G/F, 32 Ming Fung Street	1965	4 June 19		55.9 + Yard: 24.8	5.5	3.6	12.6	60.0
A1	Shop C, G/F together with yard thereof, On Hong Mansion, 35-35A Wan Fung Street	1987	4 Sep 19	$10,000,000	42.3 + Yard: 14.7	6.6	3.8	7.4	44.8	$223,214
A2	Flat 3, G/F, Fung Kam Mansion, 37-43 Wan Fung Street	1970	23 Aug 19	$10,500,000	44.5 + Yard: 39.7 + WC at Yard: 4.6	6.2	4.2	10.3	53.6	$195,896
A3	Shop H, G/F, Po Tsui Mansion, 35-45 Tsui Fung Street	1987	25 Feb 19	$6,928,000	31.6 + Elevated Portion at rear: 9.1 + WC at Yard: 2.2 +Roof Deck: 8.7**	3.8	3.7 (2.4 under rear portion)	10.8 (Front portion: 8.4)	39.3	$176,285
A4	Shop B2, G/F, Fung Cheung House, 5-15, 19-33 Wan Fung Street	1972	26 Nov 18	$28,800,000	104.7 + C/L: 68.0	8.6	5.3 (3.1 under C/L)	12.2	121.7	$236,647
A5	G/F & C/L, 52 Tsui Fung Street	1965	28 Sep 18	$9,000,000	41.4 + Yard: 8.5 + WC at Yard: 3.1 + C/L: 25.5	4.0	5.3 (2.9 under C/L)	12.2	50.8	$177,165
A6	G/F, Fung Wong Building Block A, 44 Tsui Fung Street	1962	30 May 18	$8,500,000	42.6 + Yard: 7.142.6 +	3.4	4.6	10.4	43.8	$194,064
A7	G/F, 52 Ming Fung Street	1964	16 Jan 18	$12,000,000	55.2 + Elevated Portion at rear: 9.2 + WC at Yard: 4.3 + Yard: 7.8	4.9	5.5 (Rear portion: 3.1)	12.9 (Front portion: 11.2)	63.3	$189,573
A8	Shop 2, G/F & C/L, Block A, Cheng Fung Mansion,  31-41 Fei Fung Street	1971	4 Jan 18	$10,380,000	51.3 + Yard: 6.0 + C/L: 24.7	3.4	5.2 (2.7 under C/L)	13.6	58.5	$177,436
A9	Shop A, G/F, 64 Fei Fung Street & 54-60 Ming Fung Street	1965	3 Jul 17	$17,000,000	68.8 + Yard: 3.3	7.8 + Return Frontage: 6.51	3.6	15.2	69.4	$244,957
A10	G/F, Fung Wong Building, 8 Ming Fung Street	1965	27 Jun 17	$16,080,000	72.6	5.6	4.3	13.7	72.6	$221,488

* PASP stands for provisional agreement for sale and purchase.

** The roof deck of this comparable was not available for inspection. While there is a minor difference in opinion on its value (Mr C Chan: 1/6 & Dr Wong: 1/10), I just pick the middle of 1/8. In any event, the difference is not significant as the area involved is small.

57.   To arrive at the effective unit price above, the appropriate conversion factor for the ancillary areas of the premises has to be determined. Mr C Chan and Dr Wong have agreed, for instance, that the values of the elevated portion at the rear, the yard as well as the water closet in the yard at 3/5, 1/6, and 1/2 of the value of the G/F proper of the units respectively. However, they were unable to agree on the value of the cockloft by reference to the value of the G/F proper (Mr C Chan suggested 1/8 whilst Dr Wong suggested ¼).

58.   The question as to which conversion factor is appropriate then arises. For a cockloft or M/F inside a shop, it is of course an ancillary area to the shop and its value derives from that of the shop. In Bright Dragon Properties Limited v Director of Lands, LDLR 3/2007 (unreported, 8 August 2014) at §§34-36, the Tribunal agreed that “a relatively higher price will be demanded by the owner if the ground floor shop can form an entrance providing an upper floor shop premises with a direct access from the street and hence increase the value of the upper floor shop premises.”

59.   If Mr C Chan’s 1/8 is adopted, the effective area for Comparable A4 would be 113.2 sq m and the unit price would become $254,417 per sq m (the unit price for the cockloft would be $31,802 per sq m). On the other hand, if Dr Wong’s ¼ is adopted, the effective area would become 121.7 sq m and the unit price would become $236,647 per sq m (the unit price for the cockloft would be $59,162 per sq m).

60.   If the similar analysis is carried out for Comparable A5, the value of the cockloft derived by Mr C Chan and Dr Wong would be $23,635 per sq m and $44,291 per sq m respectively. The similar results would occur for other comparables that contain cocklofts and it appears that Dr Wong’s assessments are more realistic. Therefore, Dr Wong’s assumption of ¼ is adopted.

61.   At trial, Mr Mok remarked that such assumption failed to consider the headroom of the cockloft involved which may affect values. While this is true, it is unfortunate in real life that the comparables (and of course their cocklofts) cannot be inspected internally. Thus, in the absence of evidence to the contrary, a valuer can only assume that the cocklofts are of reasonable headroom for their purpose. This assumption can of course be rebutted by evidence and in such event, the value of the cockloft to the ground floor proper can be adjusted accordingly.

62.   Mr C Chan and Dr Wong had the following agreements/ disagreements on adjustments[17]:

	Mr C Chan	Dr Wong
Time	On the basis of the Private Retail Price Index of the Rating and Valuation Department (“RVD”)
Size	0.1% for every 1 sq m difference
Age	0.1% for every 1 year difference
Frontage	1% for every 0.5 m difference
Layout	Adjustment is made by comparing the shape and configuration of the subject and the comparable transactions. Depth adjustments could not reflect factors such as shape and the presence of elevated portion of the retail shop.	Adjustment is allowed to reflect the difference in depth at 1.5% per 1m difference.
Headroom	5% for every 1 m difference in full headroom	2% for every 1 m difference
Total Adjustment	By Multiplication

63.   The proposed adjustments by Mr C Chan are shown in the table below (whereas those by Dr Wong are shown in parenthesis if they are different)[18]:

Comp Ref:	Effective Unit Price (/m2)	Adjustments										Adjusted Unit Price (/m2)
		Time	Location	Age	Frontage	Return Frontage	Headroom	Size	Layout	Depth	Total*
A1	$223,214	7.8%	0.0%	-2.2%	-2.2%	0.0%	-1.0% (-0.4%)	-1.5%	-5.0% (0.0%)	0.0% (-7.8%)	-14.4% (-45.6%)	$383,645 (243,812)
A2	$195,896	(3.1%)	3.0%	-0.5%	-1.4%	0.0%	-3.0% (-1.2%)	-0.6%	3.0% (0.0%)	0.0% (-3.5%)	23.4% (-22.5%)	$270,219 ($169,708)
A3	$176,285	(-2.2%)	0.0% (20.0%)	-2.2%	3.4%	0.0%	-0.5% (-0.2%)	-2.0% (-2.1%)	0.0%	0.0% (-6.3%)	4.7% (-30.2%)	$173,724 ($161,498)
A4	$236,647	-6.4%	-10.0% (-5.0%)	-0.7%	-6.2%	0.0%	-8.0% (-0.2%)	5.3% (6.2%)	0.0%	0.0% (-0.6%)	-29.7% (-53.2%)	$302,927 ($201,664)
A5	$177,165	(-6.0%)	0.0% (20.0%)	0.0%	3.0%	0.0%	-8.5% (-0.4%)	-1.2% (-0.9%)	0.0%	0.0% (-0.6%)	-11.8% (-47.1%)	$165,442 ($189,915)
A6	$194,064	(-4.5%)	0.0% (20.0%)	0.3%	4.2%	0.0%	-5.0% (-2.0%)	-1.6%	0.0%	0.0% (-3.3%)	-26.6% (-67.0%)	$181,062 ($146,118)
A7	$189,573	-3.3%	0.0%	0.1%	1.2%	0.0%	-9.5% (-3.8%)	0.4% (0.3%)	3.0% (0.0%)	0.0% (-2.1%)	-37.0% (-49.6%)	$171,402 ($292,375)
A8	$177,436	-3.3%	0.0% (5.0%)	-0.6%	4.2%	0.0%	-8.0% (-0.8%)	-0.5% (-0.2%)	0.0%	0.0% (1.5%)	10.6% (-34.0%)	$171,814 ($179,498)
A9	$244,957	0.9%	3.0% (0.0%)	0.0%	-4.6%	-15.0% (-10.0%)	0.0%	0.9%	-10.0% (0.0%)	0.0% (3.9%)
A10	$221,488	(1.7%)	-3.0% (-10.0%)	0.0%	-0.2%	0.0%	-3.5% (-1.4%)	1.3%	0.0%	0.0% (1.7%)

* By multiplication.

Choice of G/F Comparables and Location Adjustments

64.   The Buildings are located in a residential area with the vicinity comprising a mix of commercial/ residential composite buildings. Because of topography difference, Ming Fung Street is laterally divided into two sections – one at a higher level and one at a lower level separated by a retaining wall and safety barrier. Ground floor shops along the subject section at the higher level of Ming Fung Street are occupied by a variety of trades like car repairing workshops or those selling car accessories. The occupiers as at the relevant date were as follows:

Occupier	Address
群光電器行 (Electrical appliance shop)	Shop D, G/F, 26 Ming Fung Street
Vacant (which is now occupied by a restaurant)	Shop C, G/F, 28Ming Fung Street
榮迅車行 (Car rental)	Shop B, G/F, 30 Ming Fung Street
歡樂茶餐廳 （Restaurant）	Shop A, G/F, 32 Ming Fung Street*
洗車佬 (which is now occupied by KF Motor 家輝汽車服務)	G/F, 34 Ming Fung Street
耀華輪呔店/立圖的士管理	G/F, 36 Ming Fung Street
勝記汽車零件行 (Car accessories retail store)	G/F, 38 Ming Fung Street
Motor tyre dealer and retail store	G/F, 40 Ming Fung Street
Car accessories workshop	G/F, 42 Ming Fung Street
聯合汽車零件貿易行 (Car accessories retail store)	G/F, 44 Ming Fung Street
足好運（Foot message parlour）	G/F, 46 Ming Fung Street
聯昌行汽車工程 (Car repairing workshop)	G/F, 48 Ming Fung Street

* The Reference Shop Unit

65.   Owing to the presence of a wet market at the lower level of Ming Fung Street at its junction with Sheung Fung Street to the east, shops along the eastern section of Ming Fung Street comprise more variety of trades including education centres, a grocery store, a hair salon and restaurants.

66.   Mr C Chan just relied on Comparables A3, A5, A6, A7 & A8, ie he just relied on comparables along Ming Fung Street (ie A7), Tsui Fung Street (which is one block to the north) (ie A3, A5 & A6) and Fei Fung Street (which is one block to the south) (ie A8) but not any comparables along Wan Fung Street which lies in another neighbourhood to the east. Mr C Chan arrived at an average of $173,000 per sq m based on these five comparables[19].

67.   Dr Wong did not consider comparables along Tsui Fung Street because it is dominated by car-repairing or engineering workshops and even two coffin shops. Pedestrian flow is also comparatively low. Dr Wong arrived at a unit value of $200,000 per sq m taking into account the comparables along Wan Fung Street as well as two comparables on Ming Fung Street (ie A9 & A10) which Mr C Chan considered dated[20]. However, I consider the trade character of the ground floor premises at Tsui Fung Street resembles those at the subject section of Ming Fung Street to a certain extent. I am prepared to adopt Dr Wong’s fallback location adjustment of +20%.

68.   And for the same reason, I agree to adopt Dr Wong’s comparables at Wan Fung Street but I agree with Mr C Chan’s location adjustment for A4 at -10%.

69.   Comparable A8 was a common comparable. However, during trial it transpired that this transaction was quite close to the date of acquisition by a developer in 2020 in the sum of $10,000,000. This comparable is now subject to a compulsory sale application being LDCS 33000/2020. Notwithstanding this, both experts agreed that they could not verify whether this transaction was affected by the compulsory acquisition. But by reference to the Private Retail Price Index published by the Rating and Valuation Department (“RVD”), sale prices of shops reached towards the peak of the market in early 2018. I cannot see anything special as regards this transaction as comparable. And my view is supported by the analysis in §81 below.

70.   Mr C Chan did not adopt Comparables A9 & A10 because he considered these two comparables dated though they are situated at Ming Fung Street as well. But in view of the relatively small adjustments in time, I am content to have these two comparables included. I adopt the location adjustments of 3% and -10% respectively.

Frontage Adjustments

71.   Mr C Chan and Dr Wong agreed the adjustments for frontages at 0.1% per 0.5m difference but could not agree on that for the return frontage of Comparable A9 which had indeed been sub-divided into various shops. In such regard, I agree with Mr C Chan’s -15% adjustment.

Size Adjustments

72.   Mr C Chan and Dr Wong agreed the adjustments for sizes at the rate of 0.1% per 1m difference. The differences in adjustments arise only because of the difference in the conversion value of the ancillary areas. While I adopt the conversion values proposed by Dr Wong, I am prepared to follow his adjustments for sizes.

Headroom

73.   As regards the adjustment for headroom, Mr C Chan proposed 5% for every 1 m difference in full headroom as opposed to Dr Wong’s 2% for every 1 m difference.

74.   Mr C Chan considered the value of a shop is largely determined by, inter alia, its overall headroom. A shop with higher headroom has larger internal volume as well as a higher shop front, which contributes to higher value of the shop. He preferred simply making allowance on the basis of full headroom but in order to avoid double counting the rear part having cockloft, he purposively adopted a lower unit rate for the cockloft at 1/8 of that of the G/F.

75.   But I am of the opinion that Mr C Chan’s assertion is only true to some of those occupiers who require a grand shop front which may not necessarily apply to local trades shops.

76.   In Chan Kai Yuen & Another v Director of Lands, LDLR 8/1999 (unreported, 1 September 2000), the Tribunal observed that the experts analysed the unit value of the ground floor based on a normal headroom of 3 metres. Then if there be a cockloft, be it authorized or unauthorized, it would provide an extra headroom. Thus, “willing buyers in the market will derive additional benefit out of the headroom space, of 2.1m in this case, and hence are prepared to offer an extra bid for the subject premises when making comparison with other properties without such benefit of the unusual headroom.”

77.   For the purpose of analysis, assuming there be two shops sitting side by side with the same saleable area of 50.0 sq m and full headroom of 5.3m with one having a cockloft at the front and the other having no cockloft.  If the latter one with no cockloft is selling at a unit rate of X and Mr C Chan’s approach be followed, the other unit having a cockloft (which covers half of the ground floor space) will be valued at 50X[21] + 25X/8 = 53.13X. But if Dr Wong’s approach is followed, the G/F value adjusted for headroom, say 3m will be 47.7X[22] and that value of the cockloft will become 25 x 0.954X/4, giving a total of 53.66X. Or else, if Chan Kai Yuen is followed, but assuming the headroom adjustment is 5% per 1 m difference, the G/F value of the shop with cockloft adjusted for headroom will be 44.25X and the value of the cockloft will be 25 x 0.885X/4, giving a total of 49.78X:

For a G/F comparable selling at X/m2	Mr C Chna’s approach	Dr Wong’s approach	Chan Kai Yuen’s approach*
			headroom adjustment: 5% per 1 m difference	headroom adjustment: 2% per 1 m difference
G/F Value	50.00X	47.70X	44.25X	47.70X
C/L Value	3.13X	5.96X	5.53X	5.96X
Total	53.13X	53.66X	49.78X	53.66X

* Assuming value of C/L is equal to ¼ of that of G/F

78.   As we have found the cockloft to be more realistically valued at 1/4 that of G/F, for premises which do not have cockloft covering the whole of G/F, it appears more reflective of the real life to adopt Dr Wong’s the approach which accords with Chan Kai Yuen based on a headroom adjustment of 2% per 1 m difference.

79.   In response, Mr C Chan suggested that for a shop with an authorized cockloft, a new occupier may remove the cockloft if he prefers to have higher headroom for his business. Alternatively, another occupier may prefer to keep the cockloft for, say, storage of stocks. He contended that if the headroom of a shop is high enough to allow the flexibility of whether to have a cockloft to the occupier, the value of a shop with a cockloft and the value of a similar shop but without a cockloft would not be largely different. In Chan Kai Yuen, where the type and use of the subject premises and the other properties in the vicinity are mainly engaged in hardware and machinery trades, the Tribunal also decided to adopt an enhancement of 5% to the adjusted unit rate on the basis of normal headroom of around 3 metres in assessing the G/F area with an extra 2.1m of headroom. Applying the same to the above example, Mr C Chan’s assertion would only match, ie 47.7 x 1.05 = 50.09 if the headroom adjustment is based on 2% per 1 m difference. As can be seen from the above example, Mr C Chan’s assertion would only be true if the occupier is quite conscious of the high headroom where an adjustment based on 5% per 1 m difference is applicable. Thus, Mr C Chan’s assertion may not be wrong but can only be applicable on case by case basis; it is however not applicable to the present case where the type and use of the subject premises and the other properties in the vicinity are mainly engaged in hardware and machinery trades.

Layout

80.   Mr C Chan considered the adjustment on layout should be preferred to the adjustment for depth as the latter could not reflect factors such as shape and presence of the elevated rear portion of the retail shops. I agree but the adjustment for depth is also important. I would adopt Dr Wong’s proposed adjustments save for Comparable A9 which has in effect the benefit of return frontage and been subdivided. The adjustment simply on the basis of depth is misconceived and not justified. Similarly, I consider Dr Wong’s adjustment for depth of those subject shops which are of split level design misconceived when he took it for granted up to the elevated rear portion. In the latter regard, I am content to adopt Mr C Chan’s adjustments for layout.

81.   To conclude, the adjustments for the comparables are as follows:

Comp Ref:	Effective Unit Price (/m2)	Adjustments									Adjusted Unit Price (/m2)
		Time	Location	Age	Frontage	Return Frontage	Headroom	Size	Depth &  Layout	Total*
A1	$223,214	7.8%	0.0%	-2.2%	-2.2%	0.0%	-0.4%	-1.5%	-7.8%	-6.7%	$208,259
A2	$195,896	3.1%	3.0%	-0.5%	-1.4%	0.0%	-1.2%	-0.6%	-3.5%	-1.3%	$193,349
A3	$176,285	-2.2%	20.0%	-2.2%	3.4%	0.0%	-0.2%	-2.1%	-6.3%	8.7%	$191,622
A4	$236,647	-6.4%	-10.0%	-0.7%	-6.2%	0.0%	-0.2%	6.2%	-0.6%	-17.3%	$195,707
A5	$177,165	-6.0%	20.0%	0.0%	3.0%	0.0%	-0.4%	-0.9%	-0.6%	14.0%	$201,968
A6	$194,064	-4.5%	20.0%	0.3%	4.2%	0.0%	-2.0%	-1.6%	-3.3%	11.7%	$216,769
A7	$189,573	-3.3%	0.0%	0.1%	1.2%	0.0%	-3.8%	0.3%	-2.1%	-7.5%	$175,355
A8	$177,436	-3.3%	0.0%	-0.6%	4.2%	0.0%	-0.8%	-0.2%	1.5%	0.6%	$178,501
A9	$244,957	0.9%	3.0%	0.0%	-4.6%	-15.0%	0.0%	0.9%	-10.0%	-23.5%	$187,392
A10	$221,488	1.7%	-10.0%	0.0%	-0.2%	0.0%	-1.4%	1.3%	1.7%	-7.2%	$205,541
										Average:	$195,446

* By multiplication.

82.   As can be seen from the above, the average of all the comparables is $195,446 per sq m but if only Mr C Chan’s comparables are considered, the average will become $192,843 per sq m which is not significantly different. I am prepared therefore to adopt $195,000 per sq m as the unit value of the Reference Shop Unit as at 4 June 2019.

83.   When I proceed to apply this unit value of $195,000 per sq m to the other ground floor units of the Buildings, as discussed in §§35-54 above, there was disagreement on whether the unauthorized cocklofts should be taken into account. Whereas I have concluded that they should have values, I agree their values should be 1/6 (instead of ¼) of that of the ground floor proper as proposed by Dr Wong.

84.   Mr Mok submitted that the valuation experts would not be able to conduct internal inspection of the comparable shops and therefore unable to verify if there be any unauthorized cockloft similar to the units in the Building, as a result of which assigning a value to the unauthorized cocklofts may have double counted the value, if any. However, as I pointed out during trial, although the valuation experts cannot conduct the internal inspection as suggested by Mr Mok, they should be alerted of such unauthorized cocklofts if there are extensions of the cockloft from the rear which is reasonably visible from the outside. As experts, they have the duty to assist the Tribunal and conduct due diligence.

85.   Mr Mok also suggested that what might be visible from the outside may perhaps be false ceiling instead of an unauthorized cockloft. But as pointed out in Chan Kai Yuen and other cases, if the high headroom is so desirable, it is unreasonable for an occupier to install false ceiling without making use of the space above. The chance of the latter should be minimal. Indeed, Mr Mok acknowledged that it was common ground that the subject shops are in a locality where the construction of unauthorized cockloft.

86.   Anyway and as shall be seen below, the extension to the elevated rear portion (ie the unauthorized portion) of each shop extends to some 24 sq m - 25 sq m and the unit value assigned to it is about $30,000 per sq m. The resultant value is just about $720,000 to $750,000 which is less than 10% of the assessed EUV of the respective shops which is within the permissible margin of error in the profession[23]. For instance, Mr Mok also pointed out that out of the 10 shop comparables, A4, A5, A7 and A8 have authorized cocklofts covering the rear part which might be converted to extend to the front part as well. If the latter be the case, only the adjusted unit rate of these 4 comparables might be lowered by less than 10%. The resultant average would have become $188,000 per sq m which is less than 4% of $195,000 per sq m.

87.   Mr Mok submitted further that in the case of a shop with an unauthorized cockloft, the shop’s value is derived from its internal volume and the value of the unauthorized cockloft is not derived from the value of its occupation, but rather on its construction or demolition cost. With respect, this assertion is not so true as value does not necessarily equal to cost in the first place. Otherwise, in the example quoted by Mr C Chan in §49 above, after the old unauthorized cockloft was removed pursuant to a building order, the owner would not have taken the risk and trouble to construct a new unauthorized cockloft in plywood on steel H bars. The value of an authorized structure should include the time cost or convenience and even the risk of enforcement by the authority, if any. For instance, many shops are transacted for investment purposes. The investors would be concerned about how much the tenant or occupier will be ready to pay by reason of their occupation or business being conducted thereon which would likely reflect the value of the unauthorized structure if any.

88.   On the other hand, I agree with Mr C Chan that the elevated open yards should enjoy the same conversion factor as other open yards which is 1/6.

Conclusion on EUV for G/F & Cockloft

89.   My assessment of the EUV of G/F (including cockloft, if any) of the Buildings is as follows:[24]

Unit	Saleable Area (m2)		Converted/ Effective Area (m2)[25]	Adjustments						Adjusted Unit Price (/m2)	EUV
				Size	Frontage	Layout	Headroom	Age	Total*
Shop A, 32 Ming Fung Street	55.9		60.0	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	$195,000	$11,700,000
Shop B, 30 Ming Fung Street	68.2		70.3	-1.0%	0.0%	0.0%	-0.8%	0.0%	-1.8%	$191,490	$13,462,000
Shop C, 28 Ming Fung Street	59.0		61.1	-0.1%	-2.8%	-2.0%	-0.6%	0.0%	-5.4%	$184,470	$11,271,000
Shop D, 26 Ming Fung Street	55.9		60.0	0.0%	0.0%	0.0%	-1.0%	0.0%	-1.0%	$193,050	$11,583,000
Shop A, 36 Ming Fung Street	Front Portion: 25.1	Rear Portion: 39.1	53.1	0.7%	-2.8%	-3.0%	-2.2%	-0.1%	-7.2%	$180,960	$9,609,000
Shop B, 34 Ming Fung Street	Front Portion: 25.1	Rear Portion: 34.9	50.6	0.9%	-2.8%	-3.0%	-2.6%	-0.1%	-7.4%	$180,570	$9,137,000
No 38 Ming Fung Street	Front Portion: 24.3	Rear Portion: 34.1	52.5	0.8%	-1.8%	-3.0%	-2.4%	-0.3%	-6.6%	$182,130	$9,562,000
No 40 Ming Fung Street	Front Portion: 24.3	Rear Portion: 32.1	48.3	1.2%	-4.2%	-3.0%	-2.2%	-0.3%	-8.3%	$178,815	$8,637,000
No 42 Ming Fung Street	Front Portion: 24.3	Rear Portion: 32.1	52.5	0.8%	-1.8%	-3.0%	-2.2%	-0.3%	-6.4%	$182,520	$9,582,000
No 44 Ming Fung Street	Front Portion: 24.3	Rear Portion: 32.1	48.3	1.2%	-4.2%	-3.0%	-2.2%	-0.3%	-8.3%	$178,815	$8,637,000
No 46 Ming Fung Street	Front Portion: 24.0	Rear Portion: 32.1	52.4	0.8%	-1.8%	-3.0%	-2.2%	-0.3%	-6.4%	$182,520	$9,564,000
No 48 Ming Fung Street	Front Portion: 24.0	Rear Portion: 32.1	47.9	1.2%	-4.2%	-3.0%	-2.2%	-0.3%	-8.3%	$178,815	$8,565,000
										Total:	$121,309,000

* By multiplication.

Assessment of EUV of Upper Floor Domestic Units

90.   The two valuation experts had agreed that the unit value of the Reference Domestic Unit, being Flat D, 4/F, 26-32A Ming Fung Street (ie the 1^st Building), as at 4 June 2019 was $109,100 per sq m if it was in fair condition or $105,900 if it was in poor condition (ie a difference of -3%).  In any event, both experts classified the Reference Domestic Unit as in poor condition and there are not material differences between them in the assessment of EUV[26]. They could not however agree on the adjustments on lighting & ventilation and headroom for the other upper floor domestic units.

91.   In respect of the former, Mr C Chan considered that adjustments for lighting & ventilation should be adopted for Flat Fs on 3/F or above for the 1^st Building as they enjoy two aspects while the other units enjoy one aspect only. Although Dr Wong did not agree to such adjustments, saying that there was not too much difference, I note that he himself suggested similar adjustments for Flats of the 2^nd Building and 3^rd Building. For the sake of consistency, I am prepared to adopt such adjustments on lighting & ventilation.

92.   Mr But had referred to Exhibit R3 for argument that the lighting and ventilation of the windows were facing backwards and any sunlight/glare would have been largely blocked by the residential building located on Tsui Fung Street etc. With respect, Mr But must have mixed up this factor of lighting & ventilation with that for view. Sunlight/glare would come from the sky high above and not be blocked by buildings of similar height.

93.   As regards the adjustment on headroom, Dr Wong proposed an adjustment of 2% per 1m difference while Mr C Chan proposed none. Having regard to the minor difference in headroom, and in view of the age of the Buildings where residents would not take the difference so seriously when compared with new developments, I agree no such adjustment is required.

94.   Mr C Chan and Dr Wong had different opinion on the internal condition of Unit A, 1/F of the 2^nd Building: Mr C Chan considered it poor but Dr Wong considered it fair. Having conducted the joint inspection, I adopt Dr Wong’s opinion. But as a side issue, Mr But on behalf of R14 submitted that this unit should be valued on the basis of a commercial unit, pointing to the fact that 1/F, No 48 Ming Fung Street was previously occupied as a clinic. That may be the case but it does not necessarily mean that its value for commercial use should be greater than that for domestic purpose, particularly when there exists a security gate installed at the entrance of the building.

95.   Mr But also referred to the 1/F premises along Sheung Fung Street which are currently occupied for various commercial purposes. But as noted from the joint site inspection, those premises along Sheung Fung Street appear to be the commercial hub of the neighbourhood perhaps owing to the proximity to the public wet market. I do not agree that the highest and best use of Unit A, 1/F of the 2^nd Building is for commercial purpose comparable to those on 1/F along Sheung Fung Street. In any event, both Mr C Chan and Dr Wong agreed that Unit A, 1/F of the 2^nd Building should be valued for domestic use.

96.   Out of the blue, Mr But in his closing submission suggested that all the “uninspected” upper floor units which are owned by the applicant should be classified as “very poor” (instead of “poor”) for the reason that the conditions of such inspected units must have been too bad for any meaningful inspection to be carried out, or otherwise inspection would not have been disallowed by the applicant. However, as submitted by Mr Mok, Mr But did not cross-examine Mr Li or Mr C Chan in relation to this point. I agree with Mr Mok that Mr But is not entitled to make this submission.

97.   Thus, my assessments of the EUV of various domestic units of the Buildings are as follows:

26, 26A, 28, 30, 32, & 32A Ming Fung Street, 1^st Building

Floor	Flat	Floor Area (m2)	Adjustments								Unit Value ($/m2)	EUV
			Age	Floor	Top Floor	Size	View	Lighting/ Ventilation	Internal Condition	Total
1	A	33.2	0%	6%	0%	0%	0%	0%	0%	6.0%	$112,254	$3,727,000
	B	28.1	0%	6%	0%	0.8%	0%	0%	0%	6.8%	$113,101	$3,178,000
	C	28.1	0%	6%	0%	0.8%	0%	0%	3.0%	10.1%	$116,596	$3,276,000
	D	33.2	0%	6%	0%	0%	0%	0%	0%	6.0%	$112,254	$3,727,000
	E	31.0*	0%	6%	0%	0.3%	-2.7%	0%	3.0%	6.6%	$112,889	$3,500,000
	F	30.3*	0%	6%	0%	0.4%	-2.7%	0%	0%	3.6%	$109,712	$3,324,000
2 2	A	33.2	0%	4%	0%	0%	0%	0%	3.0%	7.1%	$113,419	$3,766,000
	B	28.1	0%	4%	0%	0.8%	0%	0%	0%	4.8%	$110,983	$3,119,000
	C	28.1	0%	4%	0%	0.8%	0%	0%	0%	4.8%	$110,983	$3,119,000
	D	33.2	0%	4%	0%	0%	0%	0%	0%	4.0%	$110,136	$3,657,000
	E	28.9	0%	4%	0%	0.7%	-2.7%	0%	3.0%	5.0%	$111,195	$3,214,000
	F	28.9	0%	4%	0%	0.7%	-2.7%	0%	0%	1.9%	$107,912	$3,119,000
3 3	A	33.2	0%	2%	0%	0%	0%	0%	3.0%	5.1%	$111,301	$3,695,000
	B	28.1	0%	2%	0%	0.8%	0%	0%	0%	2.8%	$108,865	$3,059,000
	C	28.1	0%	2%	0%	0.8%	0%	0%	3.0%	5.9%	$112,148	$3,151,000
	D	33.2	0%	2%	0%	0%	0%	0%	0%	2.0%	$108,018	$3,586,000
	E	28.9	0%	2%	0%	0.7%	-2.7%	0%	0%	-0.1%	$105,794	$3,057,000
	F	28.9	0%	2%	0%	0.7%	-2.7%	3.0%	3.0%	6.0%	$112,254	$3,244,000
4 4	A	33.2	0%	0%	0%	0%	0%	0%	3%	3.0%	$109,077	$3,621,000
	B	28.1	0%	0%	0%	0.8%	0%	0%	0%	0.8%	$106,747	$3,000,000
	C	28.1	0%	0%	0%	0.8%	0%	0%	0%	0.8%	$106,747	$3,000,000
	D	33.2	0%	0%	0%	0%	0%	0%	0%	0.0%	$105,900	$3,516,000
	E	28.9	0%	0%	0%	0.7%	-2.7%	0%	3.0%	0.9%	$106,853	$3,088,000
	F	28.9	0%	0%	0%	0.7%	0%	3.0%	3.0%	6.8%	$113,101	$3,269,000
5 5	A	33.2	0%	-2%	0%	0%	0%	0%	0%	-2.0%	$103,782	$3,446,000
	B	28.1	0%	-2%	0%	0.8%	0%	0%	0%	-1.2%	$104,629	$2,940,000
	C	28.1	0%	-2%	0%	0.8%	0%	0%	3.0%	1.7%	$107,700	$3,026,000
	D	33.2	0%	-2%	0%	0%	0%	0%	0%	-2.0%	$103,782	$3,446,000
	E	28.9	0%	-2%	0%	0.7%	-2.7%	0%	0%	-4.0%	$101,664	$2,938,000
	F	28.9	0%	-2%	0%	0.7%	0%	3.0%	3.0%	4.7%	$110,877	$3,204,000
6	A	33.2	0%	-4%	0%	0%	0%	0%	0%	-4.0%	$101,664	$3,375,000
	B	28.1	0%	-4%	0%	0.8%	0%	0%	0%	-3.2%	$102,511	$2,881,000
	C	28.1	0%	-4%	0%	0.8%	0%	0%	0%	-3.2%	$102,511	$2,881,000
	D	33.2	0%	-4%	0%	0%	0%	0%	0%	-4.0%	$101,664	$3,375,000
	E	28.9	0%	-4%	0%	0.7%	-2.7%	0%	0%	-5.9%	$99,652	$2,880,000
	F	28.9	0%	-4%	0%	0.7%	0%	3.0%	3.0%	2.6%	$108,653	$3,140,000
7	A	33.2	0%	-6%	-3%	0%	0%	0%	-3.0%	-11.6%	$93,616	$3,108,000
	B	28.1	0%	-6%	-3%	0.8%	0%	0%	3.0%	-5.3%	$100,287	$2,818,000
	C	28.1	0%	-6%	-3%	0.8%	0%	0%	0%	-8.1%	$97,322	$2,735,000
	D	33.2	0%	-6%	-3%	0%	0%	0%	3.0%	-6.1%	$99,440	$3,301,000
	E	28.9	0%	-6%	-3%	0.7%	-2.7%	0%	3.0%	-8.0%	$97,428	$2,816,000
	F	28.9	0%	-6%	-3%	0.7%	0%	3.0%	0%	-8.3%	$97,110	$2,806,000
											Total:	$135,128,000

* The area includes the flat roof attached to the unit on 1/F converted at 1/6.

34-36 Ming Fung Street, 2^nd Building

Floor	Flat	Floor Area (m2)	Adjustments								Unit Value ($/m2)	EUV
			Age	Floor	Top Floor	Size	View	Lighting/ Ventilation	Internal Condition	Total
1	A	49.7*	-0.4%	6%	0%	-2.5%	0%	0%	3.0%	6.0%	$112,254	$5,579,000
	B	49.7*	-0.4%	6%	0%	-2.5%	0%	0%	0%	2.9%	$108,971	$5,416,000
2 2	A	46.9	-0.4%	4%	0%	-2.1%	0%	0%	3.0%	4.5%	$110,666	$5,190,000
	B	46.9	-0.4%	4%	0%	-2.1%	0%	0%	3.0%	4.5%	$110,666	$5,190,000
3 3	A	46.9	-0.4%	2%	0%	-2.1%	0%	0%	0%	-0.5%	$105,371	$4,942,000
	B	46.9	-0.4%	2%	0%	-2.1%	0%	0%	0%	-0.5%	$105,371	$4,942,000
4 4	A	46.9	-0.4%	0%	0%	-2.1%	0%	0%	0%	-2.5%	$103,253	$4,843,000
	B	46.9	-0.4%	0%	0%	-2.1%	0%	0%	3.0%	0.4%	$106,324	$4,987,000
5 5	A	46.9	-0.4%	-2%	-3%	-2.1%	0%	0%	-3.0%	-10.1%	$95,204	$4,465,000
	B	46.9	-0.4%	-2%	-3%	-2.1%	0%	0%	0%	-7.3%	$98,169	$4,604,000
											Total:	$50,158,000

* The area includes the flat roof attached to the unit on 1/F converted at 1/6.

38-48 Ming Fung Street, 3^rd Building

Floor	Flat	Floor Area (m2)	Adjustments								Unit Value ($/m2)	EUV
			Age	Floor	Top Floor	Size	View	Lighting/ Ventilation	Internal Condition	Total
1	38	48.8*	-1.1%	6%	0%	-2.3%	0%	0%	0%	2.4%	$108,442	$5,292,000
	40	48.9*	-1.1%	6%	0%	-2.4%	0%	0%	0%	2.3%	$108,336	$5,298,000
	42	48.9*	-1.1%	6%	0%	-2.4%	0%	0%	0%	2.3%	$108,336	$5,298,000
	44	48.9*	-1.1%	6%	0%	-2.4%	0%	0%	0%	2.3%	$108,336	$5,298,000
	46	48.9*	-1.1%	6%	0%	-2.4%	0%	0%	-3.0%	-0.8%	$105,053	$5,137,000
	48	48.8*	-1.1%	6%	0%	-2.3%	0%	0%	0%	2.4%	$108,442	$5,292,000
2 2	38	46.5	-1.1%	4%	0%	-2.0%	0%	0%	0%	0.8%	$106,747	$4,964,000
	40	46.5	-1.1%	4%	0%	-2.0%	0%	0%	3.0%	3.8%	$109,924	$5,111,000
	42	46.5	-1.1%	4%	0%	-2.0%	0%	0%	0%	0.8%	$106,747	$4,964,000
	44	46.5	-1.1%	4%	0%	-2.0%	0%	0%	0%	0.8%	$106,747	$4,964,000
	46	46.5	-1.1%	4%	0%	-2.0%	0%	0%	-3.0%	-2.2%	$103,570	$4,816,000
	48	46.5	-1.1%	4%	0%	-2.0%	0%	0%	3.0%	3.8%	$109,924	$5,111,000
3 3	38	46.5	-1.1%	2%	0%	-2.0%	0%	0%	0%	-1.1%	$104,735	$4,870,000
	40	46.5	-1.1%	2%	0%	-2.0%	0%	0%	0%	-1.1%	$104,735	$4,870,000
	42	46.5	-1.1%	2%	0%	-2.0%	0%	0%	-3.0%	-4.1%	$101,558	$4,722,000
	44	46.5	-1.1%	2%	0%	-2.0%	0%	0%	3.0%	1.8%	$107,806	$5,013,000
	46	46.5	-1.1%	2%	0%	-2.0%	0%	0%	0%	-1.1%	$104,735	$4,870,000
	48	46.5	-1.1%	2%	0%	-2.0%	0%	0%	3.0%	1.8%	$107,806	$5,013,000
4 4	38	46.5	-1.1%	0%	0%	-2.0%	0%	0%	3.0%	-0.2%	$105,688	$4,914,000
	40	46.5	-1.1%	0%	0%	-2.0%	0%	0%	0%	-3.1%	$102,617	$4,772,000
	42	46.5	-1.1%	0%	0%	-2.0%	0%	0%	0%	-3.1%	$102,617	$4,772,000
	44	46.5	-1.1%	0%	0%	-2.0%	0%	0%	3.0%	-0.2%	$105,688	$4,914,000
	46	46.5	-1.1%	0%	0%	-2.0%	0%	0%	0%	-3.1%	$102,617	$4,772,000
	48	46.5	-1.1%	0%	0%	-2.0%	0%	0%	3.0%	-0.2%	$105,688	$4,914,000
5 5	38	50.8*	-1.1%	-2%	-3%	-2.6%	0%	0%	-3.0%	-11.2%	$94,039	$4,777,000
	40	50.9*	-1.1%	-2%	-3%	-2.7%	0%	0%	0%	-8.5%	$96,899	$4,932,000
	42	50.9*	-1.1%	-2%	-3%	-2.7%	0%	0%	0%	-8.5%	$96,899	$4,932,000
	44	50.9*	-1.1%	-2%	-3%	-2.7%	0%	0%	0%	-8.5%	$96,899	$4,932,000
	46	50.9*	-1.1%	-2%	-3%	-2.7%	0%	0%	-3.0%	-11.3%	$93,933	$4,781,000
	48	50.8*	-1.1%	-2%	-3%	-2.6%	0%	0%	0%	-8.4%	$97,004	$4,928,000
											Total:	$149,243,000

* The area includes the flat roof attached to the unit on 1/F converted at 1/6 as well as the top roof above 5/F only at 1/8.

Conclusion on EUV

98.     The total EUV of the Building is therefore

$121,309,000 + $135,128,000 + $50,158,000 + $149,243,000 = $455,838,000

and the pro rata shares of R1, R2, R3, R4, R5, R9, R14, R16, R17, R18, R19, R20, R21 and R22’s interests are as follows:

Respondent	Unit	Building	EUV	Pro-rata Share
R1	Shop B, G/F	1st	$13,462,000	2.9532%
R2	Shop C, G/F	1st	$11,271,000	2.4726%
R3	Unit D, 1/F	1st	$3,727,000	0.8176%
R4 & R5	Shop D on G/F and Unit E on 1/F	1st	$15,083,000	3.3089%
R9	2/12 of Unit C, 7/F	1st	$455,833	0.1000%
R14	Unit A, 1/F	2nd	$5,579,000	1.2239%
R16	Shop 38 on G/F	3rd	$9,562,000	2.0977%
R17	Shop 40 on G/F	3rd	$8,637,000	1.8948%
R18 & R19	Shop 44 on G/F	3rd	$8,637,000	1.8948%
R20	Shop 46 on G/F	3rd	$9,564,000	2.0981%
R21	Shop 48 on G/F	3rd	$8,565,000	1.8790%
R22	Unit 38 on 1/F	3rd	$5,292,000	1.1609%

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

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

100.   Complaints had been made by Mr Lee on the sharp and unreasonable practice by the applicant as follows:

(1)  The agent of the applicant asked the relevant respondents to unilaterally sign a provisional sale and purchase agreement and related documents so as to enable the applicant to pick and choose from those unit owners which unit(s) to be acquired;

(2)  The applicant in fact had signed on some of the provisional sale and purchase agreements and related documents but subsequently made use of a clause (which is Clause 10) therein to arrange each of the relevant respondents to sign a cancellation agreement:

「賣方確認買方擬收購九龍鳴鳳街26-48號之每幢物業 （“收購物業”） 全部業權。 即使本合約有任何規定， 買賣雙方同意， 如（一） 買方未能於2018年9月30日或之前與相關業主簽署具約束力合約以購入收購物業不少於80% 業權份數； 或（二）買方代表律師認為收購物業或其任何部份之業權或契約不妥善， 則買方有權選擇如下：

（a）繼續完成交易： 買賣雙方按本合約條款完成買賣該物業; 或

（b）放棄購入： 買方須於成交日或之前以書面通知賣方或其代表律師取消本合約。 在此情況下， 賣方必須在該書面通知日期後之7個工作天內， 將已收之訂金全數無息退回給買方， 之後雙方均不能向對方作出任何追討。」[27]

and

(3) The prices as shown in the provisional sale and purchase agreements and related documents were much higher than the subsequent offers made to the relevant respondents.

101.   In respect of (1) above, Mr Mok referred to Clause A of each of the provisional sale and purchase agreement which was specifically confirmed by the relevant respondent as seller agreed to unilaterally sign the document first and agreed to the agent acting for the seller to organize the collective sale of 80% or more of the undivided shares of the properties in question:

「本計劃是以先行主導形式進行， 賣方在簽署本合約之同時已經清楚了解本合約的內容， 並同意單方面先行簽署此具法律約束力的臨時買賣合約。 賣方同意集體委託大華物業有限公司作為獨家代理協助集合土地內不可分割業權份數達至80%或以上的相關業權共同參與。 當第10項條款達成後， 代理必須在截止日期後14個工作天內公佈結果， 然後將臨時買賣合約交給律師樓檢查和核對再轉交給買方， 買方需於14個工作天內簽署本合約並連同臨時訂金交予賣方。」[28]

102.   Mr Mok submitted that when the respective respondents agreed to sign first in an intended sale of 80% or more of the undivided shares of the properties and endorsed the way the agent organized the collective sale by appointing the agent as their agent,

a.  the way that the agent, who was agent for the seller or else for both the seller and the purchaser, organized the collective sale, could not be regarded as sharp practice on the part of the applicant; and

b.  it is but a natural and direct consequence of the way the collective sale was organized by the agent (which was agreed by the sellers) that the applicant was given the chance to pick the appropriate units to reach the 80% threshold. That cannot qualify as sharp and unreasonable practice.

103.   In respect of the second complaint, namely the use of Clause 10 to obtain the cancellation agreements, Mr Mok submitted the following:

a.  Clause 10(b) provided, inter alia, that after the purchaser (ie the applicant) should exercise the option to give up the purchase, the seller must within 7 days return the deposit to the purchaser without interest;

b.  In each case, a sum of $100,000 was paid to the seller as deposit;

c.  Each cancellation agreement[29], however provided in clause 2 the forfeiture by the seller the deposit of $100,000 and the cancellation of further legal responsibility under clause 3:

「現買賣雙方同意：

(1) ……

(2)賣方於簽署本合約後， 沒收買方根據臨時買賣合約第2(a) 條向賣方所支付之臨時訂金共港幣拾萬元($100,000)。」;

d. The cancellation agreement was supported by consideration independent of the right given to the applicant under Clause 10 of the provisional sale and purchase agreement.

e. Each of the relevant respondents must have regarded the $100,000 as sufficient compensation. There can be no valid complaint of sharp and unreasonable practice.

104.   In respect of the third complaint, namely the price level in the provisional sale and purchase agreements and related documents being much higher than the subsequent offers, Mr Mok submitted that cannot be a valid complaint. Mr Mok referred to the agent organizing the collective sale and the provisional sale and purchase agreement clearly stating that the relevant respondents agreed to the format of how the collective sale was organized by their agent, namely the unit owners signed their provisional sale and purchase agreements and related documents to enable the agent to try to sell the project (80% or more of the undivided shares) to the developers. A unit owner should know that if he was offering to sell at a price higher than the other unit owners, everything being equal, the buyer would likely prefer to accept the other units than his. If his unit was not chosen by the developers, he would face the proceedings under the Ordinance that would follow.

105.   Mr Mok explained it was Mr Lee’s understanding that the agent tried to sell the project to more than one developer and the applicant was willing to pay the price level as shown in the provisional sale and purchase agreement and related documents chosen by the applicant in order to reach the threshold of 80%. However, the applicant was unwilling to offer at the same level subsequently and only made offers at the level according to the Ordinance, namely at a level as assessed by their valuation expert according to the statutory formula. Mr Mok submitted this can hardly be regarded as sharp and unreasonable practice.

106.   Mr Mok referred to Top Harmony Limited v Cheung Yuet Sheung & Others, LDCS 39000/2018 (unreported, dated 15 October 2020) where a similar practice was discussed at §§112-113 of the judgment. The Tribunal then referred to Michael v Salford City Council [2016] UKUT 370 (LC) and considered the price level (ie $10,500 per sq ft in that case) as shown in the provisional sale and purchase agreement comprised “a premium value as the last bit in the jigsaw to assemble the development site”. The Tribunal agreed with Mr Mok in that case that the insistence of the respondents on receiving the average rate of $10,500 per sq ft would have the effect of deterring majority owners to be more generous in making early offers. That would run against the legislative intent of the Ordinance to encourage negotiation and settlement among the majority owner and the minority owners.

107.   I agree again with Mr Mok’s submissions above. Having said that, I must express my concern that the provisional sale and purchase agreements in respect of the unit owned by R18, R19 and R21 were signed or endorsed by the applicant on 4 October 2018, ie after the critical date of 30 September 2018 as stated in Clause 10. However, I also note that it fell within the period of 14 days which allowed the applicant to make up its mind whether to continue the purchase. Then of course R18, R19 and R21 signed the cancellation agreement on 18 October 2018 and forfeited the $100,000. In Ming Shiu Chung & Others v Ming Shiu Sum & Others[2006] 2 HKLRD 831, (2006) 9 HKCFAR 334, the Court of Final Appeal ruled that parties of full age and ordinary understanding would be held to documents which they had chosen to sign unless there was a recognized legal basis for concluding that their apparent consent had been vitiated; or that reliance on that document by some other person fell into some category of unconscionable conduct justifying relief in equity. There has been no evidence of such vitiating factors before me.

108.   On the other hand, I take notice of the following offers made by the applicant to the corresponding respondents as follows:

Respondents	Unit	Building	Offer of 10 May 2019	Offer of 13 June 2019	Offer of 8 June 2020	Offer of 12 March 2021
R1	Shop B, G/F	1st	$17,700,000	$17,700,000	$17,700,000	$19,010,000
R2	Shop C, G/F	1st	$13,940,000	$13,940,000	$13,940,000	$15,870,000
R3	Unit D, 1/F	1st	$5,090,000	$5,300,000
R4 & R5	Shop D on G/F	1st	$14,020,000	$14,020,000	$14,020,000	$16,220,000
	Unit E on 1/F	1st	$4,610,000	$4,800,000	$4,800,000	$5,620,000
R8, R10, R11, R12 & R13	Unit C, 7/F	1st	$3,710,000	NA	NA
R9,		1st		$664,400
R14	Unit A, 1/F	2nd	$6,750,000	$7,740,000	$7,740,000	$8,680,000
R16	Shop 38 on G/F	3rd	$12,960,000	$13,800,000	$13,800,000	$14,050,000
R17	Shop 40 on G/F	3rd	$12,510,000	$12,510,000	$12,510,000	$12,780,000
R18 & R19	Shop 44 on G/F	3rd	$12,560,000	$12,560,000	$12,560,000	$12,820,000
R20	Shop 46 on G/F	3rd	$13,200,000	$14,070,000	$14,070,000	$15,000,000
R21	Shop 48 on G/F	3rd	$12,640,000	$12,640,000	$12,640,000	$12,860,000
R22	Unit 38 on 1/F	3rd	$6,640,000	$7,600,000	$7,600,000	$8,490,000

109.   According to the applicant, the latest offers made in March 2021 were around 10% above the assessment of the share of each unit owned by the respondents done by Mr C Chan.

110.   Also, as stated in §6 above, the applicant has successfully acquired the units or interests of R6, R7, R8, R10, R11, R12, R13, R15, R23 and R24 and has discontinued the proceedings against them.

111.   The Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578, [2005] 4 HKLRD 363 (“Capital Well”) emphasized at §33 that:

“In making that assessment (whether an offer is reasonable) 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.”[30]

112.   On the other hand, in Intelligent House Ltd, supra,where the majority owner relied on its valuation expert to formulate some of the offers, the Tribunal ruled at §334(3) that:

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

113.   On the evidence available, I am satisfied that the applicant has taken reasonable steps to acquire all the undivided shares in the Lots including negotiating for the purchase of such of those shares as are owned by R1, R2, R3, R4, R5, R14, R16, R17, R18, R19, R20, R21 and R22 on terms that are fair and reasonable.

114.   I also agree with Mr Mok that R9 is a missing co-owner and there is no obligation by the applicant to make an offer to him.

Disputes on the estimation of the RDV of the Lot

Hypothetical Development Model

115.   Both Mr C Chan and Dr Wong resorted to the residual valuation method in determining the RDV. This can be done by deducting development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development.

116.   Based on an agreed developable site area of the Lots at 894.65 sq m, both valuation experts had agreed there could be built thereon a hypothetical 25-storey residential/commercial composite development with  retail shops on G/F & 1/F. There is only minor difference in the proposed gross floor area (“GFA”): Mr C Chan proposed 7,548.67 sq m while Dr Wong proposed 7,548.61 sq m. They however differed in detail as follows[31]:

Form of Optimum Development	Mr C Chan		Dr Wong
	Accommodation	Saleable Area (sq m)	Accommodation	Saleable Area (sq m)
G/F	Shops, Access to Plant Room on 1/F, Non-Domestic Common Area and Plant Room	699.65	Shops, Domestic Entrance Lobby, Lift Shafts and Staircases (Non-Domestic) and Plant Room and Management Office	733.07
1/F	Shops, Plant Room, Clubhouse, Domestic Common Area	48.13	Shops, Lift Shafts and Staircases (Non-Domestic), Clubhouse, Covered Landscape Area, Plant Room and Swimming Pool	44.05
2/F-24/F	Domestic	5247.89	Domestic	5,482.03

117.   The particulars of the above differences can be discerned from Dr Wong’s Rebuttal Report on RDV dated 22 June 2020 as follows[32]:

“Common Areas and Plant Room Provision on Ground Floor

4.1.1 Mr Chan has provided detailed breakdown on the proposed composition of his development scheme at Appendix IX of the Savills Supplemental Report.

4.1.2 For Ground Floor, I am aware that an area of 90 square metres was proposed for a residential lobby, 3 lifts and 2 staircases and an area of 100 square metres was proposed for plant rooms. In my opinion, the proposed areas are excessive and it reduces the area available for the retail portion.

4.1.3 For instance, I have check the provisions of the ground floor residential lobby, lifts, staircases and plant rooms in a recently completed development namely Aspen Crest which has been adopted as comparable in the RDV assessments by both Mr Chan and me. It has a larger site area of about 1,000 square metres and is provided with 234 residential units. On the ground floor of this development, it is provided with about 80 square metres for the accommodation of the residential lobby, 3 lifts and 2 staircases, and about 80 square metres for the plant room… Considering the smaller scale of the proposed development, I consider my proposed parameters at about 68 square metres for the residential lobby, 3 lifts and 2 staircases and about 80 square metres for the plant rooms are more reasonable.

Proposed Number of Residential Units, Flat Mix and Common Areas

4.1.4 Both Mr Chan and I have proposed 23 residential floors in the hypothetical development. Mr Chan has proposed a total of 202 residential units, 9 residential units per floor from 2^nd Floor to 23^rd Floor and 4 units on 24^th Floor. My proposed development comprises a total of 224 residential units, with 10 residential units per floor from 2^nd Floor to 23^rd Floor and 4 units on 24^th Floor. The difference in number of residential units accounts for an additional Saleable Area of 54.01 square metres of exempted balconies and utility platforms in the my proposed development.

4.1.5 In Mr Chan’s proposed development, the units on 2^nd Floor to 23^rd Floor are typical units with its Reference Unit having a Saleable Area of 25.48 square metres. He has not provided further details on the composition of the units. In my proposed development, the 10 residential units on each of 2^nd Floor to 23^rd Floor would include 7 smaller units with an average Saleable Area of 20.95 square metres per unit, and 3 larger units having an average Saleable Area of 32.56 square metres per unit. The average Saleable Area of the units in these floors of my proposed development is about 24.43 square metres, which is not significantly different from Mr Chan’s figure of 25.48 square metres.

4.1.6 Although both Mr Chan and I have proposed 4 units on 24^th Floor, our unit compositions are different. In Mr Chan’s proposal the 4 units would have an average Saleable Area of 54.81 square metres, while in my proposed development the 4 units would comprise 3 smaller units having an average Saleable Area of about 20.95 square metres, and 1 larger unit having a Saleable Area of 43.915 square metres.

4.1.7 Mr Chan has proposed a total common area of 75 square metres on each residential floor for the provision of lobby, 3 lifts and 2 staircases, whilst my proposed common area is at 68.87 square metres per floor.

4.1.8 As a result of the above differences, the overall efficiencies of the residential portion are respectively about 78.2% (ie 5,247.89/6,709.9) in Mr Chan’s proposed development and about 81.7% (ie 5,482.03/6,709.88) in my proposed development.

4.1.9 Despite the above differences, Mr Chan and my proposed developments are generally similar.

Provision of Roof Area

4.1.10 Mr Chan has proposed the flat roof area to be sold together with the domestic units on 2^nd Floor. He has adopted a +15% adjustment for the “simplex units” on the 24^th Floor but has not indicated if the top roof in his proposed development is for sale.

4.1.11 In my opinion, part of the roof space can also be sold together with the top floor units and its value should be included in the valuation.”

118.   Firstly, I note that despite the above differences in opinion, the proposed GFA is nearly the same.  It does not matter much between 7,548.67 sq m and 7,548.61 sq m especially they both agreed the construction cost of $242,538,833[33].

Common Areas and Plant Room Provision on Ground Floor

119.   In respect of the common areas and plant room provision on G/F, I understand that both Mr C Chan and Dr Wong referred to those in Aspen Crest as reference. The main argument of Dr Wong was that the site area of Aspen Crest[34] at around 1,000 sq m is larger than that of the Lots at 894.65 sq m and therefore the provision of common areas etc would be larger for a larger scale development. However, I consider this misconceived. When the two developments are of similar scale both providing, for instance, a residential lobby, 3 lifts and 2 staircases, I do not consider there should be any significant difference in terms of the areas of the common parts. While Dr Wong calculated the common area for G/F of Aspen Crest at 80 sq m, Mr C Chan arrived at 85.16 sq m. For the sake of convenience, I just adopt the saleable area of the G/F at 700 sq m in view of the provision of more shopping spaces on the 1/F of the hypothetical development.

120.   Thus, I would also adopt the saleable area of 49.12 sq m on 1/F as proposed by Mr C Chan.

Proposed Number of Residential Units, Flat Mix and Common Areas

121.   The term ‘nano flat’ has never been officially defined, but it is generally understood as flats with a saleable area smaller than 20 sq m (equivalent to 215 sq ft), or a saleable floor area smaller than 15 sq m (equivalent to 161 sq ft).

122.   The following is the reproduction of statistics of completion of small units (with saleable area less than 40 sq m) compiled by the RVD but the media reports that more than 3,000 nano flats (flats with a saleable area less than 200 sq ft) are scheduled for completion between 2019 and 2021[35]:

Year	No of Units
2010	6 742
2011	4 586
2012	4 496
2013	4 688
2014	8 446
2015	5 047
2016	7 162
2017	7 665
2018	8 237
2019	4 174
2020	7 742
2021#	1 065

# Provisional figures (up to 31.03.2021)

123.   In Success Active Limited v Harbourview International Holdings Limited & Others, LDCS 31000/2018 (unreported, 19 April 2021), Mr C Chan, who happened to be a valuation expert in that case as well, explained that seasoned developers nowadays prefer to have larger typical residential units as nano residential units are no longer marketable. In that case, the Tribunal remark that it was appropriate to compare like with like so that Mr C Chan’s 31.83 sq m was preferred[36].

124.   However, the comparables adopted by the experts in that case were in respect of a new development which was yet to be completed. In contrast, Aspen Crest was marketed for sale in 2015 when the market conditions may be more different than today.

125.   Having reviewed the above, I prefer to adopt Mr C Chan’s Reference Unit having a Saleable Area of 25.48 sq m without delving into details on the composition of the units since the exercise of ascertaining the gross development value is more or less an averaging exercise[37]. Similarly, I prefer to adopt the total saleable area of the residential units proposed by Mr C Chan.

126.  In this connection, I also accept Mr C Chan’s common area per floor for the following reasons:

a.  Both valuation experts agreed that the size and configuration of the site of Aspen Crest are similar to that the proposed units for the hypothetical development on the Lots which have a depth of around 1 metre more.

b.  Mr C Chan was of the view that, notwithstanding the additional 1 m in depth, the design of the hypothetical development should be similar to that of Aspen Crest.

c.  According to Dr Wong’s calculation, Aspen Crest has a common area per floor of slightly less than 77 sq m.

127.   As a side issue, however, there was a dispute between Mr C Chan and Dr Wong on whether the GFA and plot ratio calculation of the common lift shafts and staircases on G/F and 1/F are accountable as non-domestic or otherwise. However, I need not resolve this difference as the total GFA proposed by the 2 experts are nearly the same.

GDV for Shops

128.     In determining the GDV for the G/F, the two valuation experts relied on the following comparables:

Comp Ref:	Address	Age	Date of PASP	Consideration	Saleable Floor Area (m2)	Frontage (m)	Headroom (m)	Depth (m)	Effective Area (m2)	Effective Unit Price (/m2)
Ref Unit		New			68.26	6.24	5.08	10.94	68.26
C1	Shop 6, G/F, Fung Wong Building, 6 Ming Fung Street	1965	28 Nov 20	$9,500,000	44.7	4.2	4.4	12.1	44.7	$212,528
C2	G/F, 20 Sheung Fung Street	1970	16 Nov 20	$30,980,000	75.7 + Yard: 15.8 + WC at Yard: 3.4	7.6	5.3	9.6	80.0	$387,250
C3	G/F, B1 Fung Wong Beautiful View Building, 62-64 Tsui Fung Street	1963	12 Nov 19	$8,180,000	41.4 + Yard: 7.6 + WC at Yard: 3.4	4.0	5.5	11.0	44.4	$184,234
C4	Shop B, G/F with open yard, Fung Po Mansion, 92-100 Wan Fung Street	1976	18 Oct 19	$8,000,000	42.4 + Yard: 39.7	4.3	4.3	9.9	49.0	$163,265
C5	Shop C, G/F together with yard thereof, On Hong Mansion, 35-35A Wan Fung Street	1987	4 Sep 19	$10,000,000	42.3 + Yard: 14.7	6.6	3.8	7.4	44.8	$223,214
C6	Flat 3, G/F, Fung Kam Mansion, 37-43 Wan Fung Street	1970	23 Aug 19	$10,500,000	44.5 + Yard: 39.7 + WC at Yard: 4.6	6.2	4.2	10.3	53.6	$195,896
C7	Shop H, G/F, Po Tsui Mansion, 35-45 Tsui Fung Street	1987	25 Feb 19	$6,928,000	31.6 + Elevated Portion at rear: 9.1 + WC at Yard: 2.2 +Roof Deck: 8.7**	3.8	3.7 (2.4 under rear portion)	10.8 (Front portion: 8.4)	39.3	$176,285
C8	Shop B2, G/F, Fung Cheung House, 5-15, 19-33 Wan Fung Street	1972	26 Nov 18	$28,800,000	104.7 + C/L: 68.0	8.6	5.3 (3.1 under C/L)	12.2	121.7	$236,647
C9	G/F & C/L, 52 Tsui Fung Street	1965	28 Sep 18	$9,000,000	41.4 + Yard: 8.5 + WC at Yard: 3.1 + C/L: 25.5	4.0	5.3 (2.9 under C/L)	12.2	50.8	$177,165
C10	G/F, Fung Wong Building Block A, 44 Tsui Fung Street	1962	30 May 18	$8,500,000	42.6 + Yard: 7.142.6 +	3.4	4.6	10.4	43.8	$194,064
C11	G/F, 52 Ming Fung Street	1964	16 Jan 18	$12,000,000	55.2 + Elevated Portion at rear: 9.2 + WC at Yard: 4.3 + Yard: 7.8	4.9	5.5 (Rear portion: 3.1)	12.9 (Front portion: 11.2)	63.3	$189,573
C12	Shop 2, G/F & C/L, Block A, Cheng Fung Mansion,  31-41 Fei Fung Street	1971	4 Jan 18	$10,380,000	51.3 + Yard: 6.0 + C/L: 24.7	3.4	5.2 (2.7 under C/L)	13.6	58.5	$177,436
C13	Shop A, G/F, 64 Fei Fung Street & 54-60 Ming Fung Street	1965	3 Jul 17	$17,000,000	68.8 + Yard: 3.3	7.8 + Return Frontage: 6.51	3.6	15.2	69.4	$244,957
C14	G/F, Fung Wong Building, 8 Ming Fung Street	1965	27 Jun 17	$16,080,000	72.6	2.4	5.3	13.7	72.6	$221,488

Choice of G/F Comparables and Location Adjustment

129.   From the above, it is obvious that apart from Comparables C1 to C4, Mr C Chan or Dr Wong referred to the same set of comparables adopted in the assessment of EUV. In respect of the latter, as can be seen from §82 above, those comparables along Wan Fung Street were not necessarily excluded from consideration.

130.   In contrast, in assessing the GDV, those comparables along Wan Fung Street become more relevant as the sales would show how they may be affected by the new development, Aspen Crest, which was completed in September 2018. On the other hand, I agree with Dr Wong, with the prospective new development in place covering nearly half of the street[38], those comparables along Tsui Fung Street are no longer relevant.

131.   For the same reason above, I consider Comparables C13 and C14 should also be disregarded. In addition, these two comparables are dated.

132.   I would also disregard Comparables C11 and C12 as their environment may no longer be comparable to that of the prospective new development in place. Also, these two comparables are dated.

133.   Thus, I would only adopt 5 comparables, ie Comparables C1, C2, C4, C5 and C6 for consideration.

134.   Comparable C1 is situated next to Comparable C14 (ie Comparable A10 in the EUV assessment above). Both experts agreed that there should have a location adjustment of -10%. However, Dr Wong considered there would be an improvement in the environment when the prospective new development is completed. He proposed an uplift of 10%. Therefore, I would rather adopt nil adjustment in location.

135.   Comparable C2 is situated within the busiest hub in the vicinity opposite the junction of Ming Fung Street and Sheung Fung Street next to a pedestrian crossing. It is currently occupied as a restaurant. I agree with Dr Wong that a location adjustment of -20% is appropriate on the basis that the hypothetical development is completed.

136.   Though situated on Wan Fung Street, Comparable C4 is located close to the end of the street uphill away from Aspen Crest. It is relatively quiet and close to the scene of a tragic explosion at a garage workshop at 63 Wan Fung Street in 2015. I consider a location adjustment of +20% appropriate.

137.   Mr C Chan and Dr Wong had no dispute that the location adjustments for Comparables C5 and C6 are 0% and +3% respectively.

138.   At this juncture, I would like to comment on Dr Wong’s proposition to refer to the anticipated traffic interchange below the junction of Shatin Pass Road and Fung Tak Road in support of his +10% in business environment. I regret that there is no definite plan of the traffic interchange for its completion. According to the MTR document of 29 September 2020 attached to Mr Lee’s closing submission, the traffic interchange will have 2 levels: the upper one is a parking station of tourist buses and according to the MTR document of 25 February 2021, the ground floor level will be used as a public light bus terminal for the existing routes which are now having stops along Shatin Pass Road nearby. It is obvious that the provision of the traffic interchange will be for the purpose of removing the terminal stops of these public light buses routes away from Shatin Pass Road to improve the flow of road traffic on the road. I agree with Mr Mok that it should not have much impact on the business environment of the shops included in the hypothetical development or the convenience of the residential units therein.

139.   Mr Lee also included in his closing submission a quote from the explanatory statement to the Approved Tsz Wan Shan, Diamond Hill and San Po Kong Outline Zoning Plan No S/K11/29 that “(a)n area of about 2.26 ha located immediately to the east of Wong Tai Sin Temple is reserved for the provision of institution and community facilities to better serve the needs of the districts as well as for the development of tourism-related and ancillary uses that would enhance the character of the area as a place of visitor attraction”. With respect, there is no definite plan for its completion and that location immediately to the east of Wong Tai Sin Temple is also far away from the Lots that especially pedestrians or patrons of the tourism-related and ancillary uses have to go uphill to reach the Lots or its vicinity. There is in any event no point of attraction to improve pedestrian flow.

Time Adjustment

140.   The 2 experts had also no dispute on the adjustments for time which, I understand, is based on the latest Private Retail Price Index published by the RVD.

Frontage and Size Adjustment

141.   Mr C Chan and Dr Wong agreed to adopt frontage and size adjustments at 1% per 0.5m difference and 1% per 10 sq m difference respectively.

Headroom Adjustment

142.   As explained in §78 above, I am prepared to adopt 2% per 1 m difference.

Layout and Depth

143.   Again, as explained in §80 above, I am content to adopt Mr C Chan’s adjustments for layout.

Age Adjustment

144.   Mr C Chan adopted an adjustment of 1% per 5 years difference in age but Dr Wong proposed 0.1% per annum with an addition of 10% for improvement in environment upon completion of the prospective new development. While I have already had the latter in mind in determining the location adjustment, I prefer to adopt Mr C Chan’s 1% per 5 years difference in age. In any event, it is generally accepted that the factor of age is not so important for retail purposes.

Sewage Maintenance

145.   According to the Provisional Agreement for Sale and Purchase of Comparable C1, the purchaser would be responsible for the payment of any cost arising from the maintenance order on the manhole or sewage of the building, and the purchaser may not rescind the agreement based on the existence of this maintenance order. Dr Wong considered not unreasonable to adopt +5% adjustment to reflect the cost, time and risk that may be involved. Mr C Chan responded however that there had been no existing building orders or notices on this issue. According to him, such clause might be inserted where the seller has heard of possible maintenance or renovation programme in respect of the building and the purpose is to avoid dispute.

146.   Mr Mok submitted that Dr Wong had provided no evidence to prove the amount of contribution to be required or the extent of work required. Mr Mok also calculated 5% of the transacted price of $9,500,000 to be equal to $475,000 which is unreasonably expensive for sewage repairs to be organized by the unit owners in an aged tenement building comprising a total of 90 shops and domestic units.

147.   Notwithstanding the latter, I consider such a sewage maintenance clause unusual which might be inserted for a purpose. This is especially significant for shop premises as the business operation is likely to be disrupted when there are sewage problems.  The insertion of the clause for better or for worse would have alerted the prospective buyer of an uncertainty. Therefore, I agree to the adjustment proposed by Dr Wong as a matter of contingency.

Assessment of the GDV for Reference Shop

148.     Thus my assessment of the GDV for the reference shop is as follows:

Comp Ref:	Effective Unit Price (/m2)	Adjustments									Adjusted Unit Price (/m2)
		Time	Location	Age	Frontage	Headroom	Size	Depth &  Layout	Sewage Maintenance	Total*
C1	$212,528	7.0%	0.0%	11.2%	4.1%	1.4%	-2.4%	0.0%	5.0%	28.7%	$273,524
C2	$387,250	7.0%	-20.0%	10.5%	-2.7%	-0.4%	1.2%	0.0%	0.0%	-7.2%	$359,368
C4	$163,265	9.1%	20.0%	9.0%	3.9%	1.6%	-1.9%	0.0%	0.0%	47.8%	$241,306
C5	$223,214	9.8%	0.0%	6.8%	-0.7%	2.6%	-2.3%	-5.0%	0.0%	10.9%	$247,544
C6	$195,896	6.7%	3.0%	10.2%	0.1%	1.8%	-1.5%	5.0%	0.0%	27.6%	$249,963
									Average:		$274,341

* By multiplication.

149.   Although the resultant adjusted unit rates for Comparables C1 and C2 appear to be high, they are in fact the best comparables in terms of time and location. I agree with Dr Wong that these 2 comparables deserve more weighting. Therefore, I am content to adopt $285,000 per sq m as the value of reference shop.

150.   Both valuation experts proposed shops on 1/F and agreed that the value of the 1/F shop would be 50% of that of the hypothetical G/F.

 GDV for Domestic Floors

151.     As said, in the determination of the GDV for the upper residential floors, both Mr C Chan and Dr Wong referred to the sales of units in Aspen Crest at 68 Wan Fung Street:

Comp Ref	Unit	Date of PASP	Consideration	Saleable Area (m2)	Unit Price (/m2)
D1	Flat H, 20/F	15 Jan 21	$4,680,000	22.2	$210,811
D2	Flat B, 22/F	31 Dec 20	$6,888,000	35.4	$194,576
D3	Flat I, 9/F	17 Dec 20	$5,638,000	30.0	$187,933
D4	Flat F, 6/F	12 Dec 20	$3,600,000	18.4	$195,652
D5	Flat F, 18/F	4 Nov 20	$3,700,000	18.4	$201,087
D6	Flat A, 16/F	31 Oct 20	$6,350,000	32.8	$193,598
D7	Flat D, 26/F	1 Sep 20	$6,038,000	31.4	$192,293
D8	Flat D, 17/F	4 Aug 20	$4,350,000	19.6	$221,939
D9	Flat H, 21/F	30 Jul 20	$4,800,000	22.2	$216,216
D10	Flat H, 7/F	28 Jun 20	$4,560,000	22.2	$205,405
D11	Flat A, 27/F	28 Jun 20	$6,548,000	32.8	$199,634
D12	Flat B, 17/F	30 May 20	$6,645,000	35.4	$187,712
D13	Flat G, 2/F	12 May 20	$4,130,000	19.9	$207,538
D14	Flat C, 8/F	11 May 20	$4,550,000	20.7	$219,807
D15	Flat H, 19/F	1 May 20	$4,700,000	22.2	$211,712
D16	Flat D, 5/F	27 Apr 20	$4,250,000	19.6	$216,837
D17	Flat C, 19/F	21 Apr 20	$4,550,000	20.7	$219,807
D18	Flat D, 12/F	17 Apr 20	$4,240,000	19.6	$216,327
D19	Flat A, 6/F	17 Mar 20	$6,000,000	32.8	$182,927
D20	Flat C, 9/F	19 Mar 20	$4,450,000	20.7	$214,976
D21	Flat D, 19/F	18 Mar 20	$4,150,000	19.6	$211,735
D22	Flat C, 12/F	17 Feb 20	$4,410,000	20.7	$213,043

152.   As can be seen from the above, the latter comparables are relatively dated. In light of the so many comparables available, I agree with Mr C Chan that only those that occurred in the second half of 2020 are adopted.

153.   On the other hand, Dr Wong was of the opinion that Comparables D4 and D5 are studio flats which were not proposed in the hypothetical development by Mr C Chan and should not be adopted. These two units however, having a saleable area of 18.4 sq m, are not significantly smaller than the other comparables. I do not agree that they should be disregarded.

154.   The two valuation experts have the following agreements or disagreements[39]:

	Mr C Chan	Dr Wong
Reference Unit	13/F
Size of Reference Unit	25.48 sq m	20.95 sq m & 32.56 sq m
Headroom	3.3 m	3.35 m
Year of Completion (assumed)	2021
Time Adjustment	Latest Private Domestic Class A Price Index published by the RVD
Location	0%	5%
Quantum Adjustment	1% per 5 sq m difference
Floor Adjustment	0.5% per floor difference
Age Adjustment	1% per year difference
Headroom Adjustment	1% per 0.25m difference
Age	1% per 1 year difference	1% per annum with an additional +5%
View	Building View: -3% Open Building View: 0% Open View: 3%	Bedrooms for Flat D or G units of Aspen Crest have only a narrow window facing the utility platform of the relevant units, rendering them less desirable where an upward adjustment of +2% is required.
Special Unit	Allow 15% for special unit	The features of roof and flat roofs in the top floor units are separately considered based on the areas of the relevant parts
Adjustment Method	Multiplication

155.   Firstly, regarding the adjustment for location, I agree with Dr Wong that the subject location is better in terms of accessibility. Aspen Crest is built on a sloped terrain where residents have to walk uphill from Sheung Fung Street. It would be much more burdensome and demanding if one walks up from Wong Tai Sin or Diamond Hill MTR station. In terms of transport, Aspen Crest does not have direct access to public transport. Those who take the minibus will have to get off nearby the hospital on Sheung Fung Street[40] and walk past a street without any covered walkway at Kam Fung Street. In contrast, the Lots are located right at the first minibus stop of route 37M without the need to walk any distance.

156.   As regards the headroom of the hypothetical unit, I note that the comparables in Aspen Crest all have a headroom of 3.5m. In this regard, I prefer Dr Wong’s 3.35m which is closer to 3.5m.

157.   Turning on view, I note that both the prospective new building and Aspen Crest occupy an elevated position. Out of the 9 comparables that took place in the second half of 2020, I observe the 2 experts only had dispute on the adjustment for D3 only and the difference is minor. I am content to allow no adjustment on view.

158.   As regards the +2% adjustment for the Flat Ds, for instance, I have reviewed the photo extracted from the news coverage and videos[41]. I do not agree that the relative small window of the bedroom looking onto the utility platform would justify such an adjustment. In any event, only comparables D7 and D8 have such a small window but their unit price appears not to be affected.

159.   For the adjustment on age, Dr Wong suggested an additional upward adjustment of 5% to reflect the market preference to new flats provided with new fittings, finishes and appliances. I, like Mr C Chan, do not agree as Aspen Crest is also a relatively new development. However, Dr Wong provided a lot of media coverage in which the quality of Aspen Crest had been heavily criticized[42]. In Perfect Horizon Limited v Co Sam & Others, LDCS 23000/2018 (unreported, dated 11 September 2020) at §100 where units in two older developments were relied on as comparables, the Tribunal had to review whether 1% for every one year’s difference is appropriate. I allow for an additional adjustment of 3% (ie in the present case, a total of 6%).

160.   In respect of the adjustment for special units, I prefer the approach of Mr C Chan in allowing a robust addition of 15% since the exact areas of the flat roof on 24/F or top roof as proposed by Dr Wong are subject to dispute[43]. Particularly, the flat roof on 24/F up to 95.3 sq m may be difficult to justify.

161.   Thus, my assessment of the value of the reference unit on 13/F of the hypothetical development is as follows:

Comp Ref:	Unit Price (/m2)	Adjustments								Adjusted Unit Price (/m2)
		Time	Location	Level	View	Headroom	Size	Age & Building Condition	Total
D1	$210,811	2.3%	5.0%	-2.0%	0.0%	-0.3%	-0.7%	6.0%	10.5%	$232,946
D2	$194,576	2.3%	5.0%	-3.0%	0.0%	-0.3%	2.0%	6.0%	12.3%	$218,509
D3	$187,933	2.3%	5.0%	2.5%	0.0%	-0.3%	0.9%	6.0%	17.4%	$220,633
D4	$195,652	2.3%	5.0%	4.0%	0.0%	-0.3%	-1.4%	6.0%	16.4%	$227,739
D5	$201,087	2.2%	5.0%	-1.0%	0.0%	-0.3%	-1.4%	6.0%	10.7%	$222,603
D6	$193,598	2.0%	5.0%	0.0%	0.0%	-0.3%	1.5%	6.0%	14.9%	$222,444
D7	$192,293	1.7%	5.0%	-4.5%	0.0%	-0.3%	1.2%	6.0%	9.1%	$209,792
D8	$221,939	2.0%	5.0%	-0.5%	0.0%	-0.3%	-1.2%	6.0%	11.3%	$247,018
D9	$216,216	1.1%	5.0%	-2.5%	0.0%	-0.3%	-0.7%	6.0%	8.6%	$234,811
									Average:	$226,277

162.   I have arrived at an average of $226,277 per sq m which is rounded to $226,300 per sq m. I then follow Mr C Chan’s adjustments for units of different levels as follows[44]:

Average Unit Rate of the hypothetical development
Floor	Saleable Area (m2)	Ancillary Area (m2)	View	Adjustments						Adjusted Unit Rate (/m2)
				Floor	Size	Special	Headroom	View	Total
2/F (with Flat Roof)	23.73	33.01	Building	-5.0%	0.4%	0.0%	0.0%	-3.0%	-7.5%	$209,328
3/F to 5/F	25.48	0.00	Building	-4.0%	0.0%	0.0%	0.0%	-3.0%	-6.9%	$210,685
6/F to 14/F	25.48	0.00	Open Building	-1.0%	0.0%	0.0%	0.0%	0.0%	-1.0%	$224,037
15/F to 23/F	25.48	0.00	Open	3.5%	0.0%	0.0%	0.0%	3.0%	6.6%	$241,236
24/F (simplex)	54.81	25.50	Open	6.0%	-5.9%	15.0%	0.4%	3.0%	18.6%	$268,392
									Average:	$230,314
									Say	$230,000

163.   The two valuation experts have the following agreements or disagreements on other development parameters in the residual valuation[45]:

	Mr C Chan		Dr Wong
Marketing Cost	3%
Demolition Cost for the Buildings	$9,851,600
Demolition Period	0.5 year
Construction Cost	$242,538,833
Construction Period	2.75 years
Professional Fee	6%
Developer’s Profit	15%	12%
Interest Rate	4%
Stamp Duty	4.25%
Legal Cost	0.1%
Land Value	$648,000,000		$896,000,000
Accommodation Value	$85,843/m2		$118,697/m2

164.   From the above, it is manifested that Mr C Chan and Dr Wong happened to agree on most of the development parameters. The major difference is the adoption of developer’s profit. Mr C Chan referred to LDCS 32000/2018, LDCS 39000/2018 and LDCS 2000/2018 (all unreported, dated 30 October 2020, 15 October 2020 and 29 January 2021 respectively) where the Tribunal determined a developer’s profit of 15% but the market condition had not improved since then. With respect to Mr C Chan, the domestic property market condition did have improved since the beginning of 2021 by reference to the latest Private Domestic Class A Price Indices published by the RVD. Therefore, I am content to adopt the developer’s profit of 12% as suggested by Dr Wong.

165.   Indeed, during trial Mr C Chan attempted to work from another residual valuation of a Government tender of a site which is under marketing as One Soho in order to determine the developer’s profit ceiling[46]. Incidentally, he arrived at a developer’s profit of around 20%. While this approach is in theory possible, it in practice involves too many variables as is usually criticized in a residual valuation. For this Government site in Mong Kok, which lies in a complete different location, there is another specialty in that it involves the provision of Government accommodation on the ground or lower floors which render the calculation subject to more uncertainty.

166.   Mr But also referred to the recently announced special time-limited policy by the Lands Department offering an option for landowners to pay a standard premium for lease modifications for the redevelopment of industrial lots[47]. The applicable rate of “Use After Lease Modification (Residential)” in Kowloon East is $100,000 per sq m. Mr But submitted that, aside the issue of certainty and transparency, the policy is an incentive to attract and encourage industrial landowners to apply for lease modification with a view to increasing domestic land supply in Hong Kong and resolve housing shortages. Mr But argued that the policy would become meaningless and redundant when compared with the conventional lease modification process. For such reason, Mr But submitted that there are strong reasons to believe that the standard rate represents the lower end of the land value/ accommodation value of lands in Kowloon East.

167.   But which part of Kowloon East comprises industrial land that has been rezoned for residential purposes? The obvious answer appears to be Yau Tong which the Government intends to regenerate. This is a complete different location from the Lots[48].  A fortiori, Mr But has overlooked that the policy also set the standard rate for “Use Before Lease Modification (Industrial/Godown)” at $40,000 per sq m.  That is, the Government has already marked the difference and whether this policy is attractive or not would depend on this difference instead of the applicable rate for “Use After Lease Modification (Residential)”. I do not consider such standard rate providing any guidance on the RDV of the Lots.

Finding on RDV

168.   Subject to what I have said above, I shall follow Mr C Chan’s residual valuation model as contained in his revision which is reproduced at Appendix 1 to this judgment[49]. I arrive at a land value of the Lots at $805,000,000 (ie accommodation value of $106,642/m²).

Other Incidental Matters

169.   The applicant proposed to appoint Mr Ma Ho Fai and Ms Hung Suet Shan Catherine, being partners of Messrs Woo Kwan Lee & Lo, Solicitors, Notaries, Agents for Trademarks & Patents, as the sale trustees.  Based on the information on their background and experience as set out in their letter dated 23 February 2021, I am 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 reasonable.

170.   The applicant has prepared a set of draft Particulars and Conditions of Sale of the Lots[50].  Subject to any amendment that may become necessary as a result of our ruling on the arrangement of auction above, the particulars and conditions of sale of the Lots by public auction submitted by the applicants are also reasonable.

Order

171.   This Tribunal make the following orders:

(1)  This Tribunal is satisfied that the redevelopment of the Lots is justified due to the “age” or “state of repair” of the Buildings and that the applicant has taken reasonable steps to acquire all the undivided shares in the Lots including those of the 1^st, 2^nd, 3^rd, 4^th, 5^th, 9^th, 14^th, 16^th, 17^th, 18^th, 19^th, 20^th, 21^st & 22^nd respondents;

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

(3)  Mr Ma Ho Fai and Ms Hung Suet Shan Catherine, being partners of Messrs Woo Kwan Lee & Lo, Solicitors,Notaries,Agents for Trademarks & Patents, nominated by the applicant, be appointed trustees (“the Trustees”) to discharge the duties imposed on trustees under the Ordinance in relation to sale of the Lots and the Trustees be authorized to charge such remuneration for their services in accordance with the terms set out in the letter of Messrs Woo Kwan Lee & Lo, Solicitors,Notaries,Agents for Trademarks & Patents dated 23 February 2021.

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

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

(ii)  The reserve price be set at $805,000,000.

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

(iv)  Liberty to the applicant, the 1^st, 2^nd, 3^rd, 4^th, 5^th, 9^th, 14^th, 16^th, 17^th, 18^th, 19^th, 20^th, 21^st & 22^nd respondents and the Trustees to apply to the Tribunal for further direction(s) under the Ordinance.

(v)  For the avoidance of doubt, the distribution of the sale proceeds attributable to Unit A, 1/F, Fung Wong Mansion, Fung Wong Village, Nos 34 & 36 Ming Fung Street should be a matter left to the Trustees.

Costs

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

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

174.   Last but not least, the Tribunal Thanks Counsel for their assistance.

Appendix 1

 

G/F	Retail		700	m2	x	$285,000	/m2  =	$199,500,000
1/F	Retail		48.13	m2	x	$142,500	/m2  =	$6,858,525
2/F	Flat Roof		297.11	m2	x	$34,888	/m2  =	$10,365,574
2/F-24/F	Residential Flats		5,247.89	m2	x	$230,000	/m2  =	$1,207,014,700
								$1,423,738,799
Marketing cost		3%					x	0.97
	Present Value for	3.25	years	@	4%		x	0.88032
										$1,215,745,367
Less
	Demolition Cost		4,478.00	m2	x	$2,200	/m2  =	$9,851,600
	Professional Fee	@	6%				x	1.06
	Profit	@	12%				x	1.12
								$11,695,820
	Present Value for	0.25	years	@	4%		x	0.99024
										$11,581,669
	Construction Cost							$242,538,833
	Professional Fee	@	6%				x	1.06
	Profit	@	12%				x	1.12
								$287,942,103
	Present Value for	1.875	years	@	4%		x	0.9291
										$267,527,008
										$936,636,690
	Stamp Duty @		4.25%
	Legal Cost @		0.10%
	Developer's Profit on Land		12%					÷		1.1635
										$805,016,493
								Say		$805,000,000
							Accommodation Value :				$106,642

[1] See Bundle F1/95-104.

[2] See Bundle E1/84-89.

[3] See Bundle D3/660-661.

[4] See Bundle D1/72

[5]See Bundle C9/2065-9.

[6] See Bundle C9/2172.

[7] This case was also cited in Technic Investment Co Ltd v Appeal Tribunal (Buildings) [2012] 3 HKLRD 245 at §25.

[8] More particulars of the “Buildings Department’s Enforcement Policy Against Unauthorised Building Works” published in 2001 can be found in Technic Investment Company Limited & Another v Appeal Tribunal (Buildings) & Building Authority [2012] 3 HKLRD 245.

[9] https://www.bd.gov.hk/en/safety-inspection/ubw/enforcement/index.html

[10] UBS stands for unauthorized building works.

[11] Cocklofts are not specifically listed as actionable items for removal under a building order.

[12] This was one of the units subject to a compulsory sale application, LDCS 32000/2018, the judgment of which was handed down on 30 October 2020.

[13] This was one of the units subject to a compulsory sale application, LDCS 23000/2020, which remains to be heard.

[14] Exhibit A7.

[15] Exhibit A6.

[16] See Bundle D3/663-664.

[17]See Bundle D3/662.

[18]See Bundle D3/665-667 & 724.

[19] See Bundle D3/724.

[20] See Bundle D3/686.

[21] That is no adjustment for both having the same full headroom.

[22] That is 50.0m² x (1- 2.3 x 2%)X = 47.7X.

[23] See Singer and Friedlander Limited v John D Wood & Co (1977) 243 EG 212; (1977) 2 EGLR 84.

[24] See Bundle D3/688 & 726.

[25] See Bundle D3/688.

[26] See Bundle D3/690, 691 & 728.

[27]See for example Bundle C9/173/2226.

[28]See for example Bundle C9/173/2226 as regards the provisional sale and purchase of the unit owned by R18 & R19 .

[29]See for example Bundle C9/176/2229.

[30] The Court of Final Appeal stated further at §36 of the judgment that: “What the Tribunal must do is to consider whether, in the circumstances of each case, the offer falls within a band of what represents a fair and reasonable assessment of the value of the minority owner’s interest reflecting a proportionate share of the redevelopment value of the whole site.”

[31] See Bundle D3/675.

[32] See Bundle D3/624-625.

[33] See Bundle D3/694.

[34] This site was the subject of a compulsory sale application LDCS 6000/2014 which was withdrawn after trial in October 2014.

[35] See for instance https://www.jll.com.hk/en/newsroom/residential-sales-monitor-july-2019 and https://hk.news.yahoo.com/%E7%A0%94%E7%A9%B6-%E5%8D%81%E5%B9%B4%E9%96%93%E5%BB%BA%E5%85%AB%E5%8D%83%E5%A4%9A%E7%B4%8D%E7%B1%B3%E5%96%AE%E4%BD%8D-%E6%9C%80%E7%B4%B0%E9%9D%A2%E7%A9%8D%E5%9B%9B%E5%BC%B5%E9%9B%99%E4%BA%BA%E5%BA%8A%E8%A4%A5-065551208.html

[36] See §80 of the judgment.

[37] In Pacific Base Holdings Ltd and Others v. Lee Hop Biu and Others, CACV 426/2020 (reported dated 31 May 2021), the Court of Appeal stated at §43 that “the proposed redevelopment could only be presented to the Tribunal on a conceptual level with a high degree of generality.”

[38] The residual method requires the valuer to estimate the market value on completion on the basis of values that are current on the valuation date assuming that the project has already been completed on that day.

[39] See Bundle D3/712 & 716.

[40] Our Lady of Maryknoll Hospital.

[41] See exhibited R1.

[42] See Bundle D3/756.

[43] The resultant end figure of the value of the top floor unit proposed by Mr C Chan is higher than that by Dr Wong.

[44] See D3/735.

[45]See D3/694.

[46] See Exhibit A5.

[47] Pilot Scheme for Charging Land Premium at Standard Rates on Lease Modifications for Redevelopment of Industrial Buildings: https://www.landsd.gov.hk/doc/en/practice-note/lpn/PN%201_2021.pdf

[48] Indeed, a tender for Lot No. 1069 in Survey District No. 3 which is a residential site off Anderson Road, Kwun Tong, Kowloon was awarded on 19 May 2020 to a subsidiary of CK Assets Holdings Limited at a premium of $4,951,000,000 which was equivalent to an accommodation value of $48,933 per sq m. Not less than 1,000 units out of the total number of residential units to be erected within the lot shall be starter homes units to implement the Starter Homes Pilot Project.

[49] See Bundle D3/731.

[50] See Bundle C/2412-2443.