EIGHT-STAR GLORY LTD AND ANOTHER v. THE PERSONAL REPRESENTATIVES OF JOSE CHOW (DECEASED) AND OTHERS

LDCS 14000/2010

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICANTION No. 14000 OF 2010

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BETWEEN

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JUDGMENT

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Introduction

1.  This is an application for compulsory sale of 2 buildings at 78 and 80 Sai Yee Street, Mongkok, Kowloon (“the 1^st Building” and “the 2^nd Building” respectively, and the “Buildings” collectively).

Background

2.  On 18 November 2010, the Applicants commenced the present proceedings under the Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545) (“the Ordinance”) against the 4 Respondents.

3.  At the material time, the Applicants owned all shares of the Buildings, except those held by the 1^st to 3^rd Respondents.

(a)   The 1^st Respondent was the owner of the 2^nd Floor of the 1^st Building;

(b)   The 2^nd Respondent was the owner of the 3^rd Floor of the 1^st Building; and

(c)   The 3^rd Respondent was the owner of the 7^th Floor of the 2^nd Building.

4.  The 4^th Respondent claimed that she was the concubine of the 1^st Respondent, deceased. She said that the 1^st Respondent’s title had been extinguished by virtue of adverse possession.

5.  In December 2010, upon being satisfied that the Applicants had exercised all their reasonable endeavours, and the proceedings herein could not be served in their usual ways, this Court ordered, inter alia, that :

(a)   Service of the proceedings and all subsequent documents thereof upon the 1^st Respondent and the 3^rd Respondent was dispensed with; and

(b)   Notice of the proceedings was to be published in a Chinese newspaper circulating in Hong Kong and it was taken as if they were duly served upon the 1^st Respondent and the 3^rd Respondent.

6.  Up to the date of trial, no one appeared for the 1^st Respondent or the 3^rd Respondent.

7.  Regarding the 2^nd Respondent and the 4^th Respondent, as the matter developed, they settled the matter with the Applicants and the proceedings were discontinued as against them.

8.  To conclude, when the Applicants appeared before this Court at the trial, the application was effectively unopposed.  It was a matter for them to come up with formal proof of their cases. At the end of the trial, we agreed that it was so done.  Judgment was given to the Applicants and we agreed to deliver our brief judgment later. We now do so.

Reasons

9.  Upon consideration of all the evidence, authorities and submissions form Mr. Bernard Man, Counsel for the Applicants, we were satisfied that all requirements under the Ordinance had been proved on balance.

(a)   The Buildings were of more than 50 years old.  The relevant occupation permit was issued on 11 March 1959.  By the time the present proceedings were commenced on 18 November 2010, such statutory requirement had been attained.

(b)   At the material time, the Applicants also owned more than 80% of the shares in the Building.  The Buildings were divided into 9 units, with one on each floor.  Each unit had one share.  On 18 November 2010, the Applicants owned a total of 15 shares out of the total 18 shares.  Hence, it was therefore 83.33%.

(c)   The redevelopment of the subject lands was justified due to the age or state of repair of the Buildings.

(i)   Mr. Benson Wong, in his Condition Survey Report filed herein, opined that :

“7.3 My Opinion

7.3.1 The Building which was completed in 1959 is already 52 years old. I would state that any building of this age will suffer from general wear and tear of its structural frames, components, finishes and service installations, and under normal circumstances, these can be kept in serviceable condition by regular maintenance and periodic repairs. Unfortunately, in the case of the Building, the minimum regular maintenance and periodic repairs have been neglected in the past as a result of which the Building has deteriorated to a state which is beyond reasonable economic repair as signified by the high repair cost. As more rapid deterioration will occur in the future, the necessary maintenance and repairs will inevitably be more frequent and extensive, making the continued occupation of the Building not practical and economical.

7.3.2 In my opinion, the age and/or the state of repair of the Building are justified for redevelopment of the Building which as become obsolete over time and is in a poor state of repair.  Based on my experience as a building surveyor practicing in the field of building maintenance, repair and redevelopment for over 30 years, I would recommend the owners to redevelop rather than repair the Building, particularly bearing in mind that the Building does not possess any historical value or architectural merit, and is merely a building of the past that can be replaced.”

(ii)   Mr. K.S. So, also stated in his Structural Assessment Report herein, that:

“Conclusions

14.1 Based on my investigation, I am of the opinion that the structural frames of the Building are in need of repair as the Building has passed the end of its design working life given that the Building was designed for a design working life of 50 years. According to my investigation findings as set out below, the Building completed 52 years ago has exhibited signs that their structural frames have deteriorated to the final stage of their design working life.

….

14.2 I also conclude that according to the current condition of the structural frames of the Building the deterioration will continue steadily due to extensive carbonation of the concrete. It is inevitable that new defects will occur and previous defects though repaired will recur readily, requiring substantial repairs or even partial demolition and re-construction of some defective structural members 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 members due to substantial loss of cross-sectional areas of the embedded steel reinforcement bars. Although repairs to the structural frames are possible, repair work will need to be carried out regularly in the future and such repairs will be more and more extensive as the Building becomes older. Also, although the cost of repair may be relatively modest, such costs will escalate in the future as the extent and seriousness of the deterioration of the structural members increases with age.

14.3 In view of the fact that the Building was designed and constructed some 52 years ago, and the applicable standards were the LCC By-laws 1938, there are at least 8 aspects where the Building cannot meet the current structural engineering design requirements and accordingly the structural performance of the structural frames of the Building may have been adversely affected.

…”

(iii)  We would further add that the above expert evidence also satisfy us of the Intelligent House test (Intelligent House Ltd. v.  Chan Tung Shing & Ors [2008] 4 HKC 421)

(d)   The Applicants did take reasonable steps to acquire all shares in the subject lands.

(i)   From the available evidence, the 1^st Respondent probably died in about 1975 in Mexico, and no one had been authorized to deal with his estate.  Sub-service order was granted by this Court and no one appeared to defend for the proceedings.

(ii)   The 4^th Respondent claimed to be the concubine of the 1^st Respondent.  She commenced DCCJ 5268/2008 to seek declaration upon the ground of adverse possession, and finally, her claim was settled by the Applicants.

(iii)   As to the 3^rd Respondent, despite enquiries, the Applicants were unable to locate or ascertain him. Through somebody had claimed to be the relatives of the 3^rd Respondent, they never took steps to defend for the proceedings notwithstanding sub-service order having been made and complied with.

(iv)   The Applicants also settled the matter with the 4^th Respondent herein.

(e)   Last, but not least, the value of the 1^st and the 3^rd Respondents’ properties as assessed was (i) not less than fair and reasonable, as well as (ii) not less than fair and reasonable when compared with the value of the Applicants’ properties as assessed.

(i)   Mr Charles Chan, stated in his first report dated 22 October 2010 the following valuation:

“Based on the above, I am of the opinion that the market values of the respective units of the Property as at the date of valuation on existing use basis are as follows :-

Floor	Market Value (HK$) as at 18 September 2010
	No. 78 Sai Yee Street	No. 80 Sai Yee Street
Ground Floor	$33,720,000	$34,470,000
1st Floor	$1,900,000	$1,910,000
2nd Floor	$2,240,000	$2,300,000
3rd Floor	$2,200,000	$2,370,000
4th Floor	$2,140,000	$2,190,000
5th Floor	$1,970,000	$2,240,000
6th Floor	$2,010,000	$2,060,000
7th Floor	$1,840,000	$2,000,000
8th Floor	$1,610,000	$1,830,000
Sub-total	$49,630,000	$51,370,000
Total	$101,000,000

…”

(ii)   Mr Chan revised the valuation in his supplemental report dated 11 June 2011:

“B3.5 Taking into account the reviewed time adjustments, I am of the opinion that the aggregated market value of all units of the Buildings as at 18 September 2010, on existing use basis, is in the sum of HK$102,860,000. The market values of the respective units are tabulated as follows :-

Floor	Market Value (HK$) as at 18 September 2010
	No. 78 Sai Yee Street	No. 80 Sai Yee Street
Ground Floor	$34,640,000	$35,410,000
1st Floor	$1,900,000	$1,910,000
2nd Floor	$2,240,000	$2,300,000
3rd Floor	$2,200,000	$2,370,000
4th Floor	$2,140,000	$2,190,000
5th Floor	$1,970,000	$2,240,000
6th Floor	$2,010,000	$2,060,000
7th Floor	$1,840,000	$2,000,000
8th Floor	$1,610,000	$1,830,000
Sub-total	$50,550,000	$52,310,000
Total	$102,860,000

…”

(iii)   We had a discussion with Mr. Man at the hearing about the above change of valuation with reference to S.3 (1) (a) of the Ordinance and Part I of the Schedule I thereof.

(iv)   Briefly, the legislature asked the Applicants to provide valuation on the date of application.  Such valuation should also be done not earlier than 3 months before the application date.  Could the valuation be changed later?

(v)   Ultimately, we took the view that Mr. Chan only provided the Court with better estimates, on the same date, when he obtained the latest available figures from the Rating and Valuation Department.  Both valuations were in fact referred to the same date, i.e. 18 September 2010.  There was good ground for so doing.  Neither the 1^st Respondent nor the 3^rd Respondent would be prejudiced.

(vi)   In the end, therefore, we allowed the valuation of the 1^st Report to be amended as those contained in the supplemental one.

Conclusion

10.  Having considered the above, we were satisfied that the requirements and conditions as laid down in the Ordinance have been met and an order for compulsory sale sought by the Applicant should be granted.  We made the order accordingly, including that the Buildings are to be sold for the purpose of redevelopment by way of auction under section 4 (1) (b) of the Ordinance, at the reserve price of $136,000,000 under the particulars and conditions substantially the same as those in the draft Particular and Conditions of Sale (as contained in hearing bundle F1 at p.10 to 38) initialed and approved by this Tribunal on 3 August 2011.