BRIGHT FULL LTD AND OTHER v. HING MAY PROPERTIES LTD

LDCS 36000/2019

[2023] HKLdT 1

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 36000 OF 2019

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J U D G M E N T

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Background

1.  This is the applicants’ application for an order for sale, for the purposes of redevelopment under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”), of all the undivided shares of and in the Remaining Portion of Rural Building Lot No 648 (“the Lot”) on which there exist a terrace of 5 townhouses, Houses A to E, which are collectively known as Provident Villas (“the Villas”) having an address of No 29 Sassoon Road, Pok Fu Lam, Hong Kong.

2.  Each of the 5 houses is of 3-storey high, built over a covered carport and has its own private garden. There is a communal swimming pool located off the gardens of House C and House D. The Villas is constructed on a hillside terrain abutting the junction of Sassoon Road and Victoria Road where a roundabout is located. Stone Manor, the residence of the late Dr Henry Fok Ying Tung and descendants, is situated on the opposite side of the junction at No 33 Sassoon Road.

3.  Occupation permit (“OP”) of the Villas was issued on 23 November 1981[1] which permitted “5 Nos 3-storey houses for domestic use over carpark with ancillary accommodation for non-domestic use” and “1 single-storey watchman office for non-domestic use”.

4.  By a Deed of Mutual Covenant vide memorial 2419188 dated 10 May 1983[2], each of the houses is allotted 1/5^th equal and undivided share in the Lot. The single respondent is the registered owner of House C which, as claimed by the respondent, was the only house in the Villas which was occupied as at the relevant date[3]. The other 4 houses owned by the applicants, all affiliated companies of CK Asset Holdings Limited or “Cheung Kong”, have been left vacant for some years since 2017 to September 2018.

5.  At trial, the applicants are represented by Mr C Y Li, SC (“Mr Li”), leading Mr Jeremy Kwong and Mr Chester Kwan whereas the respondent is represented by Mr Ross M Y Yuen (“Mr Yuen”).

Issues for Determination by the Tribunal

6.  By reference to the Amended Notice of Opposition dated 13 July 2021[4] and the Agreed List of Issues dated 12 August 2022[5], the issues to be decided by the Tribunal in this case are: -

(1)	Whether the redevelopment of the Lot is justified due to age and/or state of repair of the Villas in accordance with section 4(2)(a) of the Ordinance? In this connection:-
	(a)	Whether the state of repair and the structural conditions relied upon by the applicants are the result of their own neglect and/or the neglect of the manager of the Villas (being a company in the same corporate group as the applicants); if so, whether the applicants are entitled to rely on the same as justification for redevelopment;
	(b)	Whether the Villas, being a luxury residential development in a low-density environment at Sassoon Road with living standard far better than that of the ordinary households in Hong Kong, is not the type of development situated in old and run-down areas which are in need of urban renewal as envisioned by the legislative intent of the Ordinance;
	(c)	Whether it is not justified for redevelopment in view of the reduction of the amount of occupancy on the Lot in that the hypothetical redevelopment scheme involves a reduction of number of houses from the current five houses to four houses as well as a reduction of total Gross Floor Area (“GFA”) from the Villas;
(3)	Whether no order for sale should be made in view of the personal hardship to be suffered by the respondent;
(4)	What was the respective market values (which are commonly coined by the valuation profession as “Existing Use Values” or “EUV”) of all houses in the Villas as assessed in accordance with Part I of Schedule 1 of the Ordinance and the redevelopment value (“RDV”) of the Lot?
(5)	The applicants are put to strict proof in respect of the other statutory requirements under the Ordinance.

The Evidence

7.  For the purpose of the present proceedings, the applicants and the respondent have produced the following expert reports:

Structural Assessment

(1)  Mr Wong Chi Ming (“Mr CM Wong”), a Registered Structural Engineer, on behalf of the applicants, filed the following reports:

(a)  Structural Assessment Report dated 9 September 2020;

(b)  Rebuttal Report dated 29 April 2021.

(2)  Dr Lau Chi Wang James (“Dr James Lau”), also a Registered Structural Engineer, on behalf of the respondent, filed a Structural Assessment Report dated 23 March 2021.

(3)  Mr CM Wong and Dr James Lau’s joint statement dated 30 September 2021.

Condition Survey

(1)  Mr Wong Sai Ning Benson (“Mr Benson Wong”), a Chartered Building Surveyor, on behalf of the applicants, filed the following reports:

(a)  Condition Survey Report dated 10 September 2020;

(b)  Rebuttal Report dated 30 April 2021.

(2)  Mr Chan Kwok Wai Albert (“Mr Albert Chan”), also a Chartered Building Surveyor, on behalf of respondent, filed a Condition Survey Report dated 30 March 2021.

(3)  Mr Benson Wong and Mr Albert Chan’s joint statement dated 14 January 2022.

Valuation

(1)  Mr Paul Varty (“Mr Varty”), a Chartered Valuation Surveyor, on behalf of the applicants, filed the following reports:

(a)  Valuation Report dated 9 September 2019 on the EUV of the Villas as at 31 August 2019;

(b)  Supplemental Report dated 9 September 2020 on the EUV of the Villas as at 31 August 2019;

(c)  Valuation Report dated 9 September 2020 on the RDV of the Lot

(d)  Rebuttal Report dated 29 April 2021;

(e)  Second Supplemental Report dated 18 August 2022 on the Updated RDV of the Lot.

(2)  Ms Sat Wei Ling (“Ms Sat”), also a Chartered Valuation Surveyor, on behalf of the respondent, filed the following reports:

(a)  Valuation Report dated 10 December 2020, on the EUV of the Villas and the RDV of the Lot;

(b)  Rebuttal Report dated 30 December 2020;

(c)  Supplemental Report dated 17 August 2022 on the Updated RDV of the Lot.

(3)  Mr Varty and Ms Sat’s 1^st joint statement dated 29 September 2021.

(4)  Mr Varty and Ms Sat’s 2^nd joint statement dated 16 September 2022.

8.  At the Pre-Trial Review on 26 August 2022, the respondent informed the Tribunal that Mr Albert Chan could not attend the trial due to health reasons and had resigned as the building surveying expert for the respondent. Leave was granted for Mr Albert Chan’s expert reports (including his opinion in the Joint Statement with Mr Benson Wong) to be adduced as hearsay evidence without calling him to give oral evidence at trial.

Section 3 of the Ordinance – Ownership of the applicants

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

10.  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.

11.  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)  a lot with each of the units on the lot representing more than 10% of all the undivided shares in the lot;

(b)  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).

12.  Insofar as each house of the Villas is allotted with 1/5^th or 20% undivided shares of the Lot, ie more than 10% of all the undivided shares in the Lot, the Notice is applicable and the threshold percentage should be 80%.

13.  At the time of filing of the Notice of Application on 29 November 2019, the 4 applicants together owned 80% of the undivided shares in the Lot. We agree therefore that the applicants were entitled to make the Application under section 3(1) of the Ordinance.

Existing use values (“EUV”) of all units as at 31 August 2019

14.  By virtue of their 1^st joint statement dated 29 September 2021, Mr Varty and Ms Sat agreed the following particulars of the 5 houses in the Villas:[6]

House	Saleable Area (m2)	Private Garden (m2)	Flat Roof (m2)	Effective Area* (m2)
A	308.6	31.8	49.9	321.5
B	303.2	38.5	10.7	310.5
C	305.0	38.5	10.7	312.3
D	303.2	41.2	10.7	310.9
E	308.1	39.2	10.7	315.5

* assuming value of garden and flat roof at 1/7 and 1/6 respectively of that of house area.

15.  Mr Varty and Ms Sat also agreed on House A as the reference unit, its particulars and the adjusted unit rate as follows:[7]

Internal Condition	Fair
View	Partial Sea View
Adjusted Unit Rate (/m2)	$293,000

16.  Mr Varty and Ms Sat further agreed on the following adjustments to be applied:

Adjustment Factor		Adjustments
Privacy / House Type	Semi-detached: 0% Terrace: 4%	House A: 0% House B: -4% House C: -4% House D: -4% House E: 0%
Size / Quantum	1% per 50 sq m difference	House A: 0% House B: 0.2% House C: 0.2% House D: 0.2% House E: 0.1%

17.  However, while Mr Varty considered there being no appreciable difference in “view” among the houses, Ms Sat was content to applied the following adjustment for “view”:

House	View	Adjustments
A	Partial Seaview	0%
B	Partial Seaview	2%
C	Partial Seaview (best)	3%
D	Partial Seaview	-3%
E	Partial Seaview (worst)	-5%

18.  Thus, the difference in value because of view between House C and House E would be as much as 8%. This is equivalent to a difference in value of over $7,000,000. House C and House D are situated next to each other but had, according to Ms Sat, a difference in value of 6%, ie some $5,300,000 because of view. Ms Sat could not give any rational explanation other than to keep repeating that the seaview of certain houses was partially blocked by a particular tree.

19.  On the other hand, having conducted the joint inspection on 18 October 2022, Mr Varty was content to revise his observation of the view of House E (which was heavily blocked by the tree in front) and agreed to an adjustment of -5%. Having said that, we are of the view that while the views being enjoyed by Houses A to D are not identical, they face the same general direction and the difference in seaview being enjoyed by them is slight if not negligible. Thus, bearing in mind that 2% difference is meaning some $1,800,000 in absolute value, we are going to adopt the following adjustments:

House	View	Adjustments
A	Partial Seaview	0%
B	Partial Seaview	2%
C	Partial Seaview	3%
D	Partial Seaview	2%
E	Partial Seaview (worst)	-4%

20.  Mr Varty and Ms Sat also failed to agree on the adjustments for “internal condition” of the houses:

House	Mr Varty		Ms Sat
	Condition	Adjustment	Condition	Adjustment
A	Fair	0%	Fair	0%
B	Fair	0%	Poor/Fair	-2%
C	Good	3%	Good/Very Good	5%
D	Fair	0%	Poor/Fair[8]	-2%
E	Fair	0%	Poor/Fair	-2%

21.  In this regard, Mr Li pointed out that there was a difference in time of inspection between the two valuation experts: Mr Varty inspected the Houses A, B, D & E in August 2019 immediately prior to the EUV valuation date, ie 31 August 2019 whereas Ms Sat inspected the houses 15 months later on 17 November 2020. Indeed, in the 1^st joint statement with Mr Varty, Ms Sat revised her internal condition adjustment for House D from -10% to -5% when she realized the different dates of inspection. Then during cross-examination, Ms Sat conceded further that the internal condition for House D should be “Poor/Fair” instead of “Very Poor” and the adjustment applied was revised accordingly from -5% to -2%.

22.  Mr Varty and Ms Sat had their own definition of grades of conditions:

Grades	Mr Varty[9]	Ms Sat[10]
Very Good	Above tenantable standard and no obvious defect and good decorative conditions	Substantially above tenantable standard and without defect
Good	Above tenantable standard and no obvious defects	Above tenantable standard and with limited minor defects
Fair	Up to tenantable standard with a few minor defects	Up to tenantable standard and with minor defects observed, but without obvious defects
Poor	Below tenantable standard with some minor defects	Marginally below tenantable standard and with more minor defects observed, Besides, the extent of the defects is relatively more serious.
Very Poor		Substantially below tenantable standard with obvious defects noted while the extents of the defects are serious.

23.  That is, on the basis of the above grading, Ms Sat had given 4 different grades of internal conditions for the 5 houses, with a 10% difference between House C and House D. On the basis of the agreed unit rate about $293,000 per sq m and an effective house area of more than 300 sq m, this 10% difference amounts to $8,800,000. Even after the further concession by Ms Sat, there was still a 7% difference between House C and House D amounting to more than $6,000,000.

24.  It is submitted by Mr Li that it is unthinkable that a prospective purchaser of House C would pay $7,000,000 premium more just because of the internal decoration as it exists. “This is especially so in the case of houses, as a purchaser of this kind of house would invariably carry out internal decorations anyway to suit his/her own personal taste. In other words, the purchasers of old buildings in general, and luxury houses of this kind in particular, would simply not be concerned about the internal condition as it exists.”[11]

25.  Also, Mr Varty accepted that the condition of the houses (save for House C) had deteriorated as compared with what he saw at the time of inspection.

26.  By reference to the Supplemental Witness Statement dated 14 October 2022 by Mr Chung Siu Hung (“Mr Chung”), the Director and beneficial owner of the respondent, at §12:

“The condition of the 4 Houses before 2018, when they were occupied with tenants, were in much better condition than now after having been left vacant and neglected for over 4 years. My neighbours back then were mostly foreign tenants of families with children, as I often saw children enjoying the common swimming pool.”

27.  Bearing the above in mind, and having reviewed the photographs of the houses taken by Mr Varty on 16 August 2019[12], we agree with Mr Varty’s adjustments for internal conditions.

28.  Thus, our assessment of the EUV of the Villas as at 31 August 2019 is calculated as follows:

House	Effective Area (m2)	Adjustments					Adjusted Unit Rate (/m2)	EUV
		House Type	View	Quantum	Internal Condition	Total
A	321.5	0.0%	0.0%	0.0%	0%	0.0%	$293,000	$94,170,200
B	310.5	-4.0%	2.0%	0.2%	0%	-1.9%	$287,433	$89,247,947
C	312.3	-4.0%	3.0%	0.2%	3%	2.1%	$299,153	$93,425,482
D	310.9	-4.0%	2.0%	0.2%	0%	-1.9%	$287,433	$89,362,920
E	315.5	0.0%	-4.0%	0.1%	0%	-3.9%	$281,573	$88,836,282
							Total:	$455,042,831

29.  Therefore, in accordance with Part 3 of Schedule 1 to the Ordinance, the pro rata share of the respondent’s interest is 20.5331%.

RDV of the Lot as at 18 August 2022

30.  Both Mr Varty for the applicants and Ms Sat for the respondent agreed to resort 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.

31.  By virtue of their 2^nd joint statement dated 16 September 2022, Mr Varty and Ms Sat agreed the valuation date for the RDV at 18 August 2022. A summary of their respective assessments is shown below:[13]

Valuation Date	Mr Varty	Ms Sat
1 September 2020	$496,600,000 (AV: $358,491/m2)	$739,000,000 (AV: $533,478/m2)
18 August 2022	$480,700,000 (AV: $347,013/m2)	$865,000,000 (AV: $624,436/m2)
Updated after their 2nd joint statement	$479,600,000 (AV: $346,219/m2)	$780,000,000 (AV: $563,075/m2)
Upon Trial	$453,700,000 (AV: $327,522/m2)	$711,000,000 (AV: $513,365/m2)
Revision at Trial	$448,900,000 (AV: $324,057/m2)	$704,000,000 (AV: $508,212/m2)

32.  In their first round of RDV reports, both experts proposed a hypothetical model of four 3-storey houses. However, Mr Varty proposed a private swimming pool for each house, whereas Ms Sat proposed a communal swimming pool.

33.  In their 2^nd joint statement, Mr Varty agreed with Ms Sat on the hypothetical development model as follows:[14]

Site Area	1,847 m2
Proposed GFA	1,385.25 m2
Design and User	4 houses each of 3 storeys, with 1 carport and a communal swimming pool
Saleable Area (for each house)	346.31 m2
Stairhood	15.00 m2
Garden / Terrace / Yard	92.88 m2
Flat Roof	18.80 m2
Roof	85.00 m2
Effective Area	377.43 m2
Car Park Area	250.00 m2
Outdoor Pool Area	60.00 m2
Open Pool Deck Area	100.00 m2
Orientation	South-west
Facilities	Lift inside House
View	Partial Seaview
Available Parking Spaces in each carport	2

34.  However, there is great difference in the adjusted unit rate of the reference house due to difference in the comparables adopted and the different adjustments applied thereto. Mr Varty arrived at $589,891 per sq m whereas Ms Sat arrived at $844,776 per sq m in the assessment of the GDV.

Choice of House Comparables and Location Adjustments

35.  More particularly, Mr Varty and Ms Sat adopted the following comparables:[15]

Comp	Address	OP	Date of PASP*	Consideration	Saleable Area (m2)	Stairhood (m2)	Garden (m2)	Flat Roof (m2)	Roof (m2)	Effective  Area  (m2)	Unit Rate (/m2)
RC1	Unit 10, 2/F & 3/F of Lower Block, Bisney Crest, 57 Bisney Road	2017	25 Jul 22	$124,500,000	245.71	23.94	0.00	0.00	107.08	262.09	$475,028
RC2	Unit 1, G/F & 1/F of Lower Block, Bisney Crest, 57 Bisney Road	2017	31 May 22	$102,000,000	245.86	0.00	33.56	16.45	0.00	254.19	$401,275
RC4	House 16, Villas Bel-Air, Bel-Air On the Peak, Island South, 16 Bel-Air Peak Rise	2007	5 Mar 21	$240,000,000	362.16	13.78	31.30	53.47	68.40	386.56	$620,861
RC6	92B, Pokfulam Peak, 92A-E Pok Fu Lam Road	2015	10 Dec 18	$271,000,000	405.98	16.12	100.82	0.00	115.37	439.22	$617,003
RC7	92E, Pokfulam Peak, 92A-E Pok Fu Lam Road	2015	21 Mar 18	$233,000,000	349.04	16.12	49.22	0.00	97.57	371.45	$627,272
RC8	92A, Pokfulam Peak, 92A-E Pok Fu Lam Road	2015	8 Jan 18	$285,000,000	439.70	16.12	84.29	0.00	125.46	471.45	$604,518
RC9	House 11, 15 Shouson, 15 Shouson Hill Road West	2019	25 Jul 22	$435,000,000	439.03	7.14	172.55	0.00	104.18	481.70	$903,052
RC10	17N, Shouson Peak, 9-19F Shouson Hill Road	2012	3 Jun 21	$194,580,000	256.39	8.12	44.69	0.00	53.86	271.59	$716,448
RC11	11G, Shouson Peak, 9-19F Shouson Hill Road	2012	20 May 21	$310,128,000	334.76	8.17	95.89	0.00	69.67	360.47	$860,343
RC12	11B, Shouson Peak, 9-19F Shouson Hill Road	2012	16 May 21	$295,282,000	334.50	8.17	111.10	0.00	69.67	362.75	$814,010

* PASP denotes Provisional Agreement for Sale and Purchase.

36.  In Union Carbide Asia Ltd v Hong Kong Lands Co Ltd [1982] HKDCLR 75 at §§43-44, the Tribunal remarked that:

“43. However, in the meantime we propose to allow an expert, notwithstanding the contrary English practice, to put in a list of comparables without being obliged to prove their contents as he would have to in a court. We would, of course, expect an expert valuer to take normal professional care to ensure that the comparables he uses are accurate. Notwithstanding that such comparables are admitted in evidence, it is always open to the other party to attack their accuracy.

44. Where an attack casts doubt on the accuracy of an expert's comparables that will affect the weight the Tribunal will give to them. It is always open to a party to prove that a certain list of comparables is inaccurate. The best way of doing so would be by strictly admissible evidence. Similarly, where a party's comparables are attacked it is always open to that party to defend them by adducing strictly admissible evidence as to their accuracy. We would emphasise that an attack on the other party's comparables can still be made, but such an attack will go to the issue of weight and not, as in England, to the different issue admissibility.”

37.  Comparables RC1 and RC2 were adopted by Mr Varty only. Ms Sat refused to adopt them as comparables because they are not houses but duplex apartments. Indeed, in Mass Transit Railway Corporation & Others v Hsu & Sons Limited [1982] HKDCLR 93, 103B, the Tribunal accepted the experts’ evidence that:

“… where other factors are similar, single units houses will usually command higher rents than town houses and town houses, in turn, will usually command higher rentals than flats, Further, while it is true many town house gardens are overlooked by flats on higher floors, they still have more privacy than flats sharing communal gardens. Single unit houses, of course, enjoy the most privacy and exclusiveness.”[16]

38.  We accept the same observation is applicable in the present case when the unit rate for these two transactions (rather than as comparables) were less than 20% or 30% respectively from the lowest unit rate for comparable RC8, for instance. They should not be much relied upon because of their house type and considerable size differences when compared with the hypothetical unit. We agree with Ms Sat that these two transactions should be disregarded as comparables.

39.  Comparable RC4 was also adopted by Mr Varty only. Ms Sat refused to adopt it as a comparable because it is situated within a large scale residential estate with club house facilities, actually in another locality. While we agree with Ms Sat that any adjustment that is applicable thereto is dubious for this difference, we are prepared to keep this as a comparable for the time being because we are aware of Mr Varty’s concern that most of the other comparables were outdated.

40.  Comparables RC6, RC7 and RC8 are common comparables adopted by both valuation experts. These houses comprise three of the five terraced townhouses within the same development like the Villas. This development is situated at a relatively secluded location off the Pokfulam Road at the outskirt of the Pok Fu Lam Country Park. RC7 and RC8 are situated at the different ends of the terrace and therefore semi-detached houses like House A or House E of the Villas.

41.  In terms of location, we refuted Ms Sat’s argument that this development is close to busy traffic along Pok Fu Lam Road. We are not persuaded that the nullah running some distance beyond the boundary of the development could create much nuisance as suggested by Ms Sat who alleged basically of the noise arising from the fall of water from the hill. We agreed with Mr Varty that this development is situated at the better location and adopted his proposed adjustment of -5%.

42.  Comparable RC9 is another common comparable adopted by the two valuation experts. It comprises one of the nine detached townhouses within a development on Shouson Hill Road West[17], a very popular high-end residential locality that overlooks the toll gate of Aberdeen Tunnel and Gleneagles Hong Kong Hospital. This has been traditionally a luxury residential area with a range of single detached houses belonging to wealthy families. However, the former exclusiveness has decreased with the gradual redevelopment of single dwellings to blocks of townhouses.

43.  On the other hand, as stated by Mr Chung, Sassoon Road is the home to the Li Ka Shing Faculty of Medicine of the University of Hong Kong. Indeed, the Lot is situated next to certain campus buildings of the University of Hong Kong further uphill. Mr Varty and Ms Sat suggested adjustments of -25% and -5% respectively.

44.  As a matter of valuation practice, comparables needing large adjustment should be avoided, especially when such an adjustment is based essentially on intuition, impression or more euphemistically called professional judgment. Here Mr Varty suggested an adjustment for location as much as -25% accounting for the difference in the quality of living environment, accessibility, and general popularity and prestige of the area. In support of his suggestion, Mr Varty had carried out altogether three pairing analysis in support of his proposed adjustment for location between Pokfulam Peak and the Shouson Hill Road locality. The first pairing analysis is reproduced below:[18]

Address	92B, Pokfulam Peak, 92A-E Pok Fu Lam Road (ie RC6)	19B, Shouson Peak, 9-19F Shouson Hill Road	11A, Shouson Peak, 9-19F Shouson Hill Road	19E, Shouson Peak, 9-19F Shouson Hill Road
Occupation Permit	2015	2012	2012	2012
House Type	Terrace	Terrace	Detached	Terrace
View	Open	Building	Limited Seaview	Building
Lift	With Lift	Without Lift	With Lift	Without Lift
Date of Agreement for Sale	10 Dec 18	18 Feb 19	1 Jul 18	21 Apr 18
Consideration (each with 2 Car Parking Spaces)	$271,000,000	$240,000,000	$287,800,000	$262,260,000
RVD Index	309.2	314.4	334.8	327.3
Cash Rebate	0.0%	0.0%	0.0%	8.5%
Consideration adjusted for Cash Rebate	$271,000,000	$240,000,000	$287,800,000	$239,967,900
Remarks	80% of Purchase Price payable within 90 days		Free Furniture	Free Furniture
Facilities	Private Swimming Pool	Private Swimming Pool Clubhouse with Communal Swimming Pool	Private Swimming Pool Clubhouse with Communal Swimming Pool	Private Swimming Pool Clubhouse with Communal Swimming Pool
Saleable Area (m2)	405.98	300.78	330.05	298.98
Effective Area (m2)	439.22	319.77	359.08	324.73
Unit Rate (/m2)	$617,003	$750,539	$801,493	$738,977
Adjustments
Time	0.0%	-1.7%	-7.6%	-5.5%
Building Age	0.0%	3.0%	3.0%	3.0%
Size/ Quantum	0.0%	-2.4%	-1.6%	-2.3%
Facilities	0.0%	-2.0%	-2.0%	-2.0%
Lift	0.0%	1.0%	0.0%	1.0%
Management	0.0%	0.0%	0.0%	0.0%
View	0.0%	10.0%	0.0%	10.0%
House Type	0.0%	0.0%	-4.0%	0.0%
Free Furniture	0.0%	0.0%	-1.0%	-1.0%
Payment Term	0.0%	0.0%	0.0%	0.0%
Total:	0.0%	7.6%	-12.8%	2.5%
Adj Unit Rate (/m2)	$617,003	$807,580	$698,902	$757,451
Difference		-23.6%	-11.7%	-18.5%
Average Difference		-18.0%

45.  Further, adopting 92E, Pokfulam Peak (ie RC7) and 92A, Pokfulam Peak (ie RC8) as the basis of reference, Mr Varty arrived at locational differences of -25.3%[19] and -23.9%[20] respectively.

46.  At first glance, Mr Varty had applied a lot of other adjustments in order to derive a resultant adjustment as his location adjustment. The so many other adjustments required may cast doubt on the reliability of his analysis. Fortunately, as we shall see, many of the adjustments were either agreed with Ms Sat or preferred by us. The only exception is that of view. For instance, Mr Varty agreed that the view of RC7 is likely blocked by trees in front and accepted the adjustment proposed by Ms Sat, ie a concession up to 5%. In addition, we have reservation on whether the proposed adjustment on view as much as 10% is appropriate or could be smaller.

47.  Ms Sat cast doubt on Mr Varty’s analysis because it was confined to 1 development each at Pok Fu Lam and Shouson Hill, namely Pokfulam Peak and Shouson Peak respectively. However, they are exactly the comparables adopted by both experts where the task is to find out the approximate or appropriate adjustment for location between them. While the result may not be ideal, we prefer an adjustment of -20% for location for comparables in the Shouson Hill Road locality.

48.  Again, comparable RC10 was initially adopted by Mr Varty only. It comprises one of the 31 townhouse units within another development that is served by a club house fitted with swimming pool and gymnasium facilities in the Shouson Hill Road locality[21]. Ms Sat did not adopt this transaction as a comparable for the reason only that, when compared with the hypothetical house, it provides no lift service inside the house. However, we consider this factor duly adjustable with fairly ease. Indeed, this house is within the same development as comparables RC11 and RC 12 which are common comparables agreed by both experts. We see no reason why RC10 should be singularly excluded just for the reason that it does not have lift inside the house. During trial, Ms Sat adopted this comparable as a fallback. We are content to adopt an adjustment for location at -20% for these comparables.

49.  Further, Mr Varty and Ms Sat had the following agreement/ disagreements on other factors of adjustment:[22]

Adjustment	Mr Varty	Ms Sat
Time	On the basis of Private Domestic Price Index (Class E) published by Rating and Valuation Department (“RVD”)
Building Age	0.5% per year difference[23]
Size/Quantum	1% per 50 sq m difference on the basis that smaller size house fetches higher unit rate	1% per 50 sq m difference on the basis that smaller size house fetches higher unit rate but nil after rounding. Larger size house fetches higher unit rate for extreme case, eg House 7 of 15 Shouson[24]
View	Building: +15% Open Building: +10% Open: +5% Mountain: +5% Limited Seaview: +5% Partial Seaview: 0% Full Seaview: -15%	Neighbouring Buildings: +10% Limited Sea & Neighbouring Buildings: +8% Open Greenery: +5%
House Type	Detached: 0% Semi-Detached: +2% Terrace: +4% Duplex: +25%	Detached: 0% Semi-Detached: +5% Terrace: +8%

50.  On the basis of the above, the following table shows the various adjustments applied by Mr Varty (whereas those applied by Ms Sat, if different, are shown in parenthesis):[25]

Comp	Unit Rate (/m2)													Adjusted Unit Rate (/m2)
		Time	Age	Size	Location	Facilities	Lift	Manage- ment	View	House Type	Free Furniture	Payment Term	Total
RC1	$475,028	-2.4%	2.5%	-2.3% (-2.0%)	0.0%	2.0% (0.0%)	1.0% (0.0%)	0.0%	0.0%	25.0%	0.0%	0.0%		$475,028
RC2	$401,275	-5.2%	2.5%	-2.5% (-2.0%)	0.0%	5.0% (0.0%)	1.0% (0.0%)	0.0%	0.0%	25.0%	-1.0%	0.0%		$401,275
RC4	$620,861	-10.2%	7.5%	0.2% (0.0%)	0.0%	-2.0% (0.0%)	1.0% (0.0%)	-2.0% (0.0%)	-15.0%	2.0% (5.0%)	0.0%	0.0%		$620,861
RC6	$617,003	-4.7%	3.5%	1.2% (1.0%)	-5.0% (5.0%)	-2.0% (0.0%)	0.0%	0.0%	5.0% (12.0%)	4.0% (8.0%)	0.0%	0.0%		$617,003
RC7	$627,272	-9.9%	3.5%	-0.1% (0.0%)	-5.0% (5.0%)	-2.0% (0.0%)	0.0%	0.0%	5.0% (12.0%)	2.0% (5.0%)	0.0%	-2.0% (-1.0%)		$627,272
RC8	$604,518	-8.5%	3.5%	1.9% (2.0%)	-5.0% (5.0%)	-3.0% (0.0%)	0.0%	0.0%	5.0% (12.0%)	2.0% (5.0%)	0.0%	0.0%		$604,518
RC9	$903,052	-2.4%	1.5%	2.1% (2.0%)	-25.0% (-5.0%)	-4.0%	0.0%	0.0%	10.0%	0.0% (4.0%)	-2.0%	0.0%		$903,052
RC10	$716,448	-8.8%	5.0%	-2.1% (-2.0%)	-25.0% (0.0%)	-2.0% (-2.0%)	1.0% (5.0%)	0.0%	15.0% (12.0%)	4.0% (8.0%)	0.0%	0.0%		$716,448
RC11	$860,343	-9.2%	5.0%	-0.3% (0.0%)	-25.0% (0.0%)	-4.0%	0.0%	0.0%	7.5%	2.0% (5.0%)	-1.0%	-2.0% (-1.0%)		$860,343
RC12	$814,010	-9.2%	5.0%	-0.3% (0.0%)	-25.0% (0.0%)	-4.0%	0.0%	0.0%	6.5%	0.0% (4.0%)	0.0%	0.0%		$814,010

Size/Quantum

51.  The differences between Mr Varty and Ms Sat on quantum adjustments are owing to rounding and are minor. For the sake of this assessment, we simply adopt Mr Varty’s adjustments.

Facilities

52.  Mr Varty applied adjustments of 2% and 5% for the lacking of communal swimming pool or other facilities in Comparables RC1 and RC2. While both these comparables are located within the same development, we are at a loss as to the reason why there should be a difference between the two. Certainly when they are not adopted as comparables, this difference between 2% and 5% is no longer the issue; the respondent did not even bother to comment on it.

53.  Similarly, Mr Varty applied an adjustment of -2% to Comparable RC4 because the development Bel-Air comprises an estate type of residential estate which comprises a range of clubhouse facilities as well as communal swimming pool. Again, the respondent did not bother to comment on it but for the time being, in view of Mr Varty having applied adjustments between 2% and 5%, we consider an adjustment of -4% more appropriate.

54.  As regards comparables RC6, RC7 and RC8 all within a luxury development called Pokfulam Peak where each of the 5 houses thereat has its own private swimming pool, we prefer Mr Varty’s proposed adjustments which were also conceded by Ms Sat at trial.

55.  Comparable RC9 also comprises one of the detached townhouses within an estate with clubhouse and private swimming pool. Both Mr Varty and Ms Sat agreed the adjustment at -4%.

56.  Comparables RC10, RC11 and RC12 are all situated within another luxury townhouses estate with clubhouse and communal swimming pool. Comparables RC11 and RC12 each have its private swimming pool as well. Again, Mr Varty and Ms Sat agreed the adjustments at -2%, -4% and -4% respectively.

Lift

57.  Mr Varty made allowance of +1% for the benefit of having an internal lift but Ms Sat allowed +5%. Mr Varty explained that 1% would be equivalent to 346.31 sq m x say $600,000 per sq m x 1% = $2,000,000 and above and the installation of an internal lift would have to sacrifice some saleable for making such provision.

58.  On the other hand, Ms Sat explained that she adopted the analogy of buildings where the top floor units in high-rise buildings are inaccessible by lifts. With respect, such an analogy is totally different in scenario in the present case as regards the installation of an internal lift in a luxury house. Ms Sat tried to rescue her position by suggesting that with an ageing population, the popularity of having a lift within a house has grown tremendously. While accepting that a lift has practical use in a house, we are afraid that Ms Sat had missed the point that the major reason for installation of an internal lift is to provide a feeling of sumptuousness rather than for the reason of the ageing occupants. 5% adjustment would mean something like $12 million. It makes no sense to suggest that just by installing a lift inside his/her house, owner could increase the value of the house by $12 million. In such regard, we agree that Ms Sat’s 5% is excessive and we are content to follow Mr Varty’s 1%.

Management

59.  Mr Varty made allowance of -2% for the more extensive management services being provided at Bel-Air On the Peak, ie comparable RC4. We consider this reasonable.

View

60.  There is quite a difference in opinion between Mr Varty and Ms Sat on the view which might be enjoyed by the hypothetical development and Comparables RC6, RC7 and RC8 all at Pokfulam Peak: Mr Varty proposed an adjustment of +5%[26] while Ms Sat proposed +12%.

61.  Certainly we were unable to go inside the comparables and verify the difference. The photo taken by Ms Sat as included in the Inspection Bundle did not assist much as the photo was taken at some distance away at a level lower than the development. We were however informed by Mr Varty that there is a trail behind Pokfulam Peak on the hill where photos might be taken. In any event, Mr Varty supplemented with 2 photos taken by a drone immediately in front of the houses at Pokfulam Peak which show the view that might possibly be enjoyed by the comparables.[27] Having reviewed the photos, Mr Varty agreed that the view of RC7 is likely blocked by trees in front and accepted the adjustment proposed by Ms Sat; Comparables RC6 and RC8 likely enjoy an open view. We are prepared to adopt an adjustment of +7% for the latter.

62.  There is also a difference in adjustment for comparable RC10: Mr Varty proposed an adjustment of +15% while Ms Sat proposed +12%. We prefer the adjustment proposed by Ms Sat.

House Type

63.  While Mr Varty accepted that “where other factors are similar, single unit houses will usually command higher rents than town houses and town houses”, he pointed out that the Tribunal in Mass Transit Railway Corporation & Others v Hsu & Sons Limited, supra, did not spell out the difference in value.

64.  While the applicants’ predecessor in title happened to obtain the approval from the Building Authority for a proposed redevelopment of 4 blocks of 3 storeys over 1 podium level of residence back in October 2010, no sketch plans for the hypothetical development were provided by the parties save a sketch layout prepared by Ms Sat at trial[28].

65.  By reference to this sketch, the layout of the hypothetical houses is very much in the same pattern of the existing 5 houses with a distance of up to 3 metres separated from each another. The benefit of privacy and exclusiveness of a single unit house is not as much as it should be.

66.  At trial, we tried to explore the possibility of an alternative layout but Ms Sat responded that in that case, the seaview from some of the houses may have to be sacrificed. Again, Ms Sat fundamentally changed her opinion on the adjustments for RC9, RC10, RC11 and RC12 to 4%, 8%, 5% and 4% respectively.

67.  Having reviewed the above, we agree with the house type adjustments proposed by Mr Varty save that for duplex. We share the view of Ms Sat that whether an adjustment of 25%[29] for duplex is adequate is in doubt but we are prepared to adopt it de bene esse.

Free Furniture

68.  Mr Varty and Ms Sat agreed on the adjustments for the free furniture provided by the developers in the some of the comparables. We consider them reasonable.

Payment Term

69.  In their joint statement dated 16 September 2022, Ms Sat agreed with Mr Varty on the adjustments for the special payment terms allowed by the developers in, for instance, comparable RC7 and RC11 where 80% of the purchase price and 70% of the purchase price respectively could be paid within 360 day or 300 days after the date of letter of acceptance.[30] Mr Varty allowed -2%.

70.  However, at trial when Ms Sat presented a consolidated table for the easy reference of the Tribunal[31], she changed her mind and allowed -1% instead without any explanation. This is very undesirable.

71.  Having regard to the HIBOR for 1 month as at 21 March 2018 for RC7 at 0.80857% and as at 20 May 2021 for RC11 at 0.08357%[32], we are prepared to adopt -2% for comparable RC7 and -1% for comparable RC11.

72.  Thus, our assessment of the typical rate for the hypothetical development is as follows:

Comp	Unit Rate (/m2)													Adjusted Unit Rate (/m2)
		Time	Age	Size	Location	Facilities	Lift	Manage-ment	View	House Type	Free Furniture	Payment Term	Total
RC1	$475,028	-2.3%	2.5%	-2.3%	0.0%	2.0%	1.0%	0.0%	0.0%	25.0%	0.0%	0.0%	26.0%	$598,535
RC2	$401,275	-5.1%	2.5%	-2.5%	0.0%	5.0%	1.0%	0.0%	0.0%	25.0%	-1.0%	0.0%	24.5%	$499,587
RC4	$620,861	-10.1%	7.5%	0.2%	0.0%	-4.0%	1.0%	-2.0%	-15.0%	2.0%	0.0%	0.0%	-20.2%	$495,447
RC6	$617,003	-4.7%	3.5%	1.2%	-5.0%	-2.0%	0.0%	0.0%	7.0%	4.0%	0.0%	0.0%	3.4%	$637,981
RC7	$627,272	-9.9%	3.5%	-0.1%	-5.0%	-2.0%	0.0%	0.0%	12.0%	2.0%	0.0%	-2.0%	-2.9%	$609,081
RC8	$604,518	-8.5%	3.5%	1.9%	-5.0%	-3.0%	0.0%	0.0%	7.0%	2.0%	0.0%	0.0%	-2.9%	$586,987
RC9	$903,052	-2.3%	1.5%	2.1%	-20.0%	-4.0%	0.0%	0.0%	10.0%	0.0%	-2.0%	0.0%	-16.2%	$756,758
RC10	$716,448	-8.8%	5.0%	-2.1%	-20.0%	-2.0%	1.0%	0.0%	12.0%	4.0%	0.0%	0.0%	-13.5%	$619,728
RC11	$860,343	-9.2%	5.0%	-0.3%	-20.0%	-4.0%	0.0%	0.0%	7.5%	2.0%	-1.0%	-1.0%	-21.5%	$675,369
RC12	$814,010	-9.2%	5.0%	-0.3%	-20.0%	-4.0%	0.0%	0.0%	6.5%	0.0%	0.0%	0.0%	-22.3%	$632,486
											Average (excluding RC1, RC2 & RC4):			$645,484

73.  As expected, the resultant adjustments for RC1, RC2 and RC4 as proposed by Mr Varty fell well out of tone with the others and have to be disregarded. The average adjusted rate for the remaining comparables is $645,484 per sq m.

74.  The adjusted result for RC9 appears, at first glance, to be out of tone as well but on review, this is the only remaining comparable that took place in the 2^nd half of 2022 and is the common comparable adopted by both valuation experts. In such regard, we are prepared to adopt this as one of the comparables.

75.  Of note, of the 3 common comparables from Pokfulam Peak, Ms Sat applied a lower weighting of 0.5 to House 92B (ie RC6) for the reason that the transaction was dated December 2018 and applied 0.25 weighting respectively to 92E (ie RC7) and 92A (ie RC8) which were transacted even earlier in March and January 2018 respectively. During cross-examination, Ms Sat further explained that she would rather treat these 3 comparables as 1 combined comparable so that their total weighting came up to 1.

76.  With respect, we have difficulty in agreeing with Ms Sat’s rationale of treating RC6, RC7 and RC8 as a single transaction unless these 3 transactions were between related parties or for some reasons interconnected. If Ms Sat considered these 3 transactions coming from the same development and was afraid that the result would be over-biased, she should have likewise adopted the same approach to the transactions of Shouson Peak, ie RC10, RC11 and RC12.

77.  On the other hand, if we follow the approach of Ms Sat treating RC6, RC7 and RC8 as a single transaction, we would arrive at a higher average of $660,470 per sq m. But for the same reason that these three transactions were dated and less weight should be placed on them, we prefer to adopt $645,484 per sq m as the unit rate for the new redevelopment.

78.  Thus the value of each hypothetical house is assessed as follows:

Effective Area: 377.43 m² x $645,484/m² = $243,625,000

79.  The experts also agree on the following development parameters:[33]

Marketing Cost	$43,500,000
Professional Fee	6% on Cost
Demolition Cost	$3,606,326
Demolition Period	9 months
Site Formation Cost	$1,191,315
Cost of Slope Works etc	$7,500,000
Cost for External Works	$12,051,675
Cost for Car Parks	$3,200,000
Cost for Outdoor Pool	$1,260,000
Stamp Duty	4.25%
Legal Cost	0.1%

80.  However, their opinion differed on the following:

	Mr Varty	Ms Sat
Interest Rate	4.5%	4.0%
Construction Cost	$148,819,180 (AV: $347,013/m2)	$131,593,065 (AV: $624,436/m2)
Construction Period	27 months	24 months
Developer’s Profit	20%	15%

Interest Rate

81.  Obviously the HIBOR has been rising nowadays and is at rates over 3.5% in October 2022. Surely we are prepared to adopt Mr Varty’s proposed 4.5%.

Construction Cost

82.  In fact, Mr Varty and Ms Sat agreed on the construction cost on the basis of the RLB cost data as at the 2^nd quarter of 2022. However, Mr Varty suggested a further 10% for the assertion that the access roads are narrow and steep. Mr Varty was of the opinion that as a result contractors are likely to increase their bids up to 10% to allow for partial road blockage during construction works.

83.  We had carried out the joint inspection on 18 October 2022 and had even walked across Sassoon Road to the opposite construction site at 30 Sassoon Road. As pointed out by us at trial, we are not persuaded that access to the Lot is restricted especially when there is a lay-by beside the entrance to the Lot[34]. Thus, we consider such 10% not being substantiated and determine the construction cost as follows:

$136,814,910 + 1.8% as time factor to reflect the present date cost = $139,277,578

Construction Period

84.  Ms Sat estimated 24 months based on the scale and quality of development. She expressly referred to Bisney Crest where by counting from the consent to commence work in March 2016 to June 2017 when occupation permit was issued, the construction period of superstructure with a slightly larger scale took only about 15 months to build. There would be sufficient cushion of 9 months for foundation work and any eventualities.

85.  As above-mentioned, we had walked across Sassoon Road to the opposite construction site at 30 Sassoon Road which appears to have approximately half of the size of the Lot. We noted a notice dated 4 May 2020 affixed on site permitting to erect hoardings, walkways or gantries issued by the Building Authority pursuant to Building (Planning) Regulation 65. In the absence of evidence to the contrary, we can safely assume that the developer of that site began to commence works soon after that date.

86.  On site, we also noticed a Consent to the commencement and carrying out of building works dated 10 December 2021 issued by the Building Authority pursuant to Building (Administration) Regulation 32. According to our observation, foundation works were still in progress. We are not persuaded by Ms Sat’s explanation that there might not be much relationship between permit to erect hoardings and the time when the developer commenced building works.

87.  On the basis of the above, we consider the time allowed for the construction period by Mr Varty for 27 months more realistic and should be preferred.

Developer’s Profit

88.  By reference to the Modern Methods of Valuation by Eric Shapiro, David Mackmin and Gary Sams, 12^th Ed, 2019, Routledge at p222, the development profits as required in a residual valuation is described as follows:

“As for any risky enterprise a profit is required to compensate for risk. Target levels of profit will depend on the nature of development and allied risk, the competition for development schemes in the market, the period of the development and the general optimism in relation to that form of development …”

89.  In connection with the above, Mr Varty had prepared a table to show the time taken to sell the house units in developments which were adopted as comparable:[35]

Development	Address	OP Date	Sale Arrangement	First Hand Transaction Record		Total No of House	Total No of House Sold
				House No	Date
Bisney Crest	57 Bisney Road	28 Jun 17	Several Tender during 21 Aug 20 - 30 Sep 22	G-1/F Unit 1 2-3/F Unit 18 2-3/F Unit 17 2-3/F Unit 19 2-3/F Unit 16 2-3/F Unit 10	31 May 22 31 May 22 1 Jun 22 8 Jun 22 13 Jun 22 25 Jul 22	5 Houses 16 Duplex Units	6 Duplex Units
Pokfulam Peak	92A-E Pok Fu Lam Road	14 Jul 15	Several Tender during 17 Mar 17 - 29 Nov 18	92C 92A 92E 92B	30 Mar 17 8 Jan 18 21 Mar 18 10 Dec 18	5 Houses	4 Houses
15 Shouson	15 Shouson Hill Road West	26 Mar 19	House 6 & 7: Tender on 26 May 22; House 11: Tender on 25 Jul 22	7     11	26 Jun 22     25 Jul 22	15 Houses	2 Houses
Shouson Peak	9-19F Shouson Hill Road	17 Jan 17	Several Tender & Price List during 2013-2021	11F 19A 19D 19C 11D 9 17G 11F 19F 19E 11A 19B 11B 11G 17N	2 Dec 13 2 Dec 13 15 Dec 13 24 Oct 14 20 May 16 13 Jul 16 3 Oct 16 21 Mar 17 9 Apr 17 21 Apr 17 1 Jul 18 18 Feb 19 16 May 21 20 May 21 3 Jun 21	31 Houses	15 Houses (excl 5 internal transfers)

90.  From the above, it demonstrates that the houses of these developments were sold very slowly and mostly beyond a substantial period after the respective occupation permits were issued.

91.  Although upon cross-examination, Ms Sat accepted that the developer’s profit could be revised to 17.5%, she insisted that there were many property transactions of value over $200 million in the past 3 months. We are not persuaded. By reference to the Private Domestic Price Index (Class E) published by RVD below, indices with parenthesis show there were fewer than 20 transactions in the corresponding months:

2022	Private Domestic Price Index (Class E)
3	(301.2)
4	305.6
5	(310.8)
6	(306.5)
7	(301.8)
8	(294.7)
9	(289.3)*
10	(281.9)*
11	(273.7)*

* Provisional figures

92.  In the above regard, we are prepared to determine the developer’s profit at 20% as proposed by Mr Varty.

93.  We determine the market value of the Lot at $531,300,000 (ie an accommodation value of $383,541 per sq m) as shown in the Appendix of this judgment. This is about 17% higher than the EUV assessed at $455,042,831.

SECTION 4(2) OF THE ORDINANCE – JUSTIFICATION AND REASONABLE STEPS

Age and State of Repair

94.  Section 4(2) of the Ordinance provides that:

“(2) the Tribunal shall not make an order for sale unless, after hearing the objections, if any, of the minority owners of the lot the subject of the application under section 3(1) concerned, the Tribunal is satisfied that –

(a) redevelopment of the lot is justified (and whether or not the majority owner proposes to or is capable of undertaking the redevelopment) –

(i) due to the age or state of repair of the existing development on the lot; or

(ii) on 1 or more grounds, if any, specified in regulations made under section 12; and

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

95.  Having referred to the relevant section of the Ordinance, we would like to point out that Mr Chung’s evidences as regards personal grievance/ hardship are not within the ambit under Section 4(2) of the Ordinance and are totally irrelevant. Similarly, while urban renewal is the spirit behind the legislation, hardship is again not a matter provided in the Ordinance that we have to be satisfied before giving an order for costs.

96.  On the alleged neglect in repair by the applicants, Mr Yuen had made his point in his opening submission. He refered to the judgment of this Tribunal by another panel given in Fortress Jet Limited and Ors v Tang Hoi Yip and Cheung Sau Chan Property Limited and Ors LDCS 3000/2015, in particular paragraph 41 which commented that “if the majority owners try to jack up the cost by deliberately not maintaining their units, such cost … may be disregarded.” It is sufficient for us to say that there is no evidence in support of any deliberate act.

97.  Mr Yuen seeks to extend the consideration to costs arising from negligent failure to maintain the property. We do not see any justification. The consideration in Fortress Jet was on a deliberate act which, if proven, may distort the state of repair of the property. In any event, what the respondent is complaining is that the Houses of the applicants have been left vacant for years. Prima facie, it would not affect the state of repair of the Houses over the effect of natural aging, which is inevitable.

Whether development of the Lot is justified due to age and/or state of repair of the Building

98.  In Top Sail International Limited v Cheng Kai Ming, LDCS 18000/2010 (unreported, dated 15 November 2011), the Tribunal held that age and state of repair were two separate grounds and even though there may be considerations common to both, the Tribunal should still consider them separately. However, even though the section speaks of “age” or ‘state of repair” in disjunctive and it had been held in Intelligent House Limited v Chan Tung Shing & Others [2008] 4 HKC 421 at §165(3) that they should be separately considered:

“On the grounds of both the “age” and “state of repair” of the old building, the Tribunal is entitled to look at all of the above factors or tests collectively to see if that justifies redevelopment, even though when each of them is considered alone, it is insufficient to do so.”

Structural Assessments

99.  Whereas the OP for the Villas was issued in November 1981, the structural design was based on Hong Kong Building (Construction) Regulations, 1976.

100.  The Villas are of reinforced concrete structures. The main vertical load bearing elements consist of shear walls and the horizontal structural elements are conventional slabs and beams.

101.  Mr C M Wong had carried out the following tests on the Villas:

Test	Purpose
Visual Inspection	To record the defects on structural members such as cracks and spalling.
Open-up Inspection	To observe the current corroded state of the steel reinforcement by removing the concrete cover.
Removal of concrete covers to expose reinforcement	To measure the thickness of the concrete cover, which provides protection against corrosion for the steel reinforcement.
Depth of Carbonation (Phenolphthalein) Tests	To measure the depth of carbonation within the concrete, using phenolphthalein solution, in order to determine the amount of protection provided by the concrete cover.
Chloride Content Tests	To indicate the chloride contents of the concrete to find out the vulnerability to corrosion of the steel reinforcement
Rebound Hammer Test	To indicate the compressive strength of the concrete through measurement of the hardness of the concrete surface.

Visual Inspection

102.  Dr James Lau agreed with Mr C M Wong on the total area of defects recorded by him:[36]

Structural Element	Total Ares of Structural Element Inspected	Total Area of Defects Recorded	Ratio
Slabs	1436.0 m2	2.36 m2	0.16%
Beams	526.5 m2	2.34 m2	0.44%
Columns	103.2 m2	0.32 m2	0.31%
Shear Walls	1,119.4 m2	2.85 m2	0.25%
Total:		7.87 m2	0.24%

103.  Dr James Lau calculated that the total area of 7.87 sq m that needs to be repaired only constituted 0.24% of the total area of structural elements that were inspected by Mr C M Wong whereas the total area of defects found in House C was mere 1.24 sq m.[37]

Open-up Inspection

104.  Mr C M Wong inspected the conditions of 118 reinforcement bars (“rebar”), the findings of which are tabulated below:[38]

Corrosion Grade	Condition of Corrosion	No of rebars in Vertical Structural Elements	No of rebars in Horizontal Structural Elements	Total
1	No Corrosion	20	12	32
2	Partly Corrosion	30	52	82
3	Mild Corrosion	0	4	4
4	Moderate Corrosion	0	0	0
5	Severe Corrosion	0	0	0

105.  From the above, Mr C M Wong considered the Villas in fair conditions while Dr James Lau considered the conditions good because in his opinion, rebars with corrosion grade 1 to 2 are acceptable. Dr Lau added that the 4 rebars with corrosion grade 3 are all located on one single spot on the G/F carport ceiling under House A which comprises altogether 5 rebars.

106.  Whereas Dr Lau suggested that the repair of this spot was included in Mr C M Wong’s patch repair programme, Mr C M Wong denied as no defects were noted before the open up and therefore no patch up repair for this location was included in his estimation of patch repair cost.

Removal of Concrete Covers to Expose Reinforcement

107.  The results of Mr C M Wong’s investigation are summarized in the following table:[39]

Element Type	Design Cover (mm)	Spots Checked	No of Spots where Actual Cover is smaller than Design Cover	Percentage of Cover smaller than Design Cover
Slab	15	18	5	28%
Beam	40	19	5	26%
Column	40	2	2	100%
Shear Wall	25	11	0	0
Total:		50	12	24%

108.  The locations of the two columns tested were one from G/F to 1/F at House B and the other from the Carport to G/F near House D.

109.  Mr C M Wong did not find any major defects such as structural cracks nor large structural deformations in his inspections. He referred this to be a matter of workmanship.[40] Mr C M Wong did not recommend structural strengthening work for the structural elements. His recommendations were concerned only with patch repair of surface defects such as cracks and spalls on the concrete cover. In other words, Mr C M Wong was not worried about issues such as structural strength for individual structural elements nor structural instability of the houses.[41]

110.  Mr C M Wong further explained that the comparison of the actual cover with the designed cover is mainly to assess the workmanship of the structural works. The concrete cover is one of the major parameters that affect the durability of the structure. To assess this durability, the actual cover should be compared with the cover specified in the Code of Practice for Structural Use of Concrete 2013 (the 2013 Concrete Code), which was a complete review of the Code of Practice for Structural Use of Concrete 2004. Some new features of the 2013 Concrete Code include:

(a)  a set of enhanced values for the elastic modulus of concrete that may be used for checking the overall building deflections;

(b)  the use of grade 500B and 500C steel reinforcing bars conforming to CS2:2012;

(c)  refinement of beam-column joint design;

(d)  refinement of reinforcement detailing for beams and columns;

(e)  new ductility detailing requirements for walls, etc.

111.  Mr C M Wong was of the opinion that the actual covers to all exposed rebars in the slab elements were inferior to the requirement of the 2013 Concrete Code. That said, Mr C M Wong accepted that the government had never issued any papers or guidelines to draw attention of the public or the building industry that there is any concern of any old building with floor slab concrete cover below the latest standard.

112.  On the other hand, Dr James Lau was of the opinion that the concrete covers in general were larger than those required in the original design. That was particularly correct for the concrete covers in shear walls, which are the major vertical bearing elements.

Carbonation Depth Measurement

113.  The results of Mr C M Wong’s 18 carbonation depth measurements are summarized in the following table:[42]

Element Type	Floor	Average Actual Cover to the outermost reinforcement (mm)	Average Carbonation Depth (mm)	Distance from the outermost reinforcement (mm)
				Positive	Negative
Slab	2/F	16	19		-3
	G/F	17	16	+1
	Roof	13	20		-7
	G/F	13	6	+7
	Roof	18	18	0
	2/F	21	30		-9
Beam	Roof	32	41		-9
	2/F	26	7	+19
	G/F	32	1	+31
	2/F	14	15		-1
	G/F	32	4	+28
	Roof	25	33		-8
Column	G/F to 1/F	29	10	+19
	Carpark to G/F	15	6	+9
Shear Wall	1/F to 2/F	28	11	+17
	G/F to 1/F	33	18	+15
	1/F to 2/F	20	18	+2
	1/F to 2/F	28	13	+15

114.  Whereas 6 spots were found having the carbonation depth going pass the depth of the concrete covers, they were particularly localized near House E. In contrast, there were a number of test results with very shallow carbonated depths.

115.  In Mr C M Wong’s opinion, there were 6 out of 18 spots with carbonation depths exceeding the actual concrete cover provided. He regarded such percentage of 33% not insignificant. Mr C M Wong further noted that for all the test samples of slabs and beams at roof, carbonation had reached the rebars.

116.  Dr James Lau pointed out that during patch repair, the carbonated concrete cover would be removed and replaced by new concrete cover. However, in Mr C M Wong’s proposed patch repair work, only the locations with visible defects or identified by hollow sound during hammer tapping would be repaired.

117.  On the other hand, Mr C M Wong agreed that carbonation in concrete is a gradual and continuous process by which “all of a sudden” failure is unlikely. In such regard, Dr James Lau opined that by replacing the carbonated concrete covers with new and fresh concrete covers of alkaline in nature, the new alkaline concrete covers will give the repaired structural members a new lease of life.

Chloride Content Tests

118.  Mr C M Wong had conducted the chloride content tests on 18 locations with 4 tests per location. Of the 72 test results, none of them had a percentage value higher than 1.0 (ie high risk); only 5 tests (about 6.9%) had a percentage greater than 0.4 which can be classified as moderate risk.[43]

119.  Mr C M Wong agreed that, on the basis of the above, the chance of chloride attack causing large scale rebar corrosion in the Villas is extremely low. He further agreed that the presence of chloride in the 5 samples having a moderate risk was probably caused by the contamination of salt water or by cleaning agents used by the occupants on those spots.

120.  We agree with Mr Yuen’s submission that chloride content is not a concern for the Villas.

Rebound Hammer Test

121.  Mr C M Wong found that the concrete strengths derived by rebound hammer tests were all significantly higher than the design strength concrete of 21 MPa. Concrete strength is not a concern for the Villas.

122.  In any event, both Mr C M Wong and Dr Lau agreed that the total estimated repair cost for the Villas was $105,000 out of which, $77,189 was meant for hammer tapping tests by the contractor and only $26,988 was meant for concrete repair.[44] In respect of the latter, a factor of 1.5 had already been applied to the defective areas of the structural elements as safety margin.[45]

123.  In view of the above findings, we agree with Dr James Lau that the concrete in the Villas had not deteriorated much over the years and because of the high current concrete strengths as identified by Mr C M Wong, the factors of safety of the building structures and individual structural elements are higher than those required by the original design.

Age

124.  The Tribunal in Intelligent House v Chan Tung Shing and Others [2008] 4 HKC 421 accepted the submissions below on “age” under section 4(2)(a)(i) of the Ordinance:

“145. …

(1) The Tribunal is entitled to look at any factors or matters that are directly or indirectly related to the elements of “age” or “state of repair” of the existing building.

(2) While looking at these factors or matters to decide whether redevelopment is justified, the Tribunal is also entitled to look at any comparison made between the old/existing building and a new building or any proposed redevelopment.

(3) It is open to the Tribunal to consider and look at the obsolescence of an existing building in terms of its functional items or facilities, since this is something related (directly or indirectly) to the “age” of the building. The older a building is, the more obsolete and outdated its facilities are.

(4) Further, the Tribunal is entitled to compare these facilities of the old building with what a modern day building could correspondingly offer whether as required by the present day regulations or law, or because of the advance of technology, or because of the rising expectations of the public for proper, safe and hygienic habitation and residence.”

125.  Mr Albert Chan tended to refine the consideration of “age” in the following aspects:[46]

(1)  Current physical and functional conditions;

(2)  Maintenance and housekeeping standards; and

(3)  Reference to both legislative regulations at the time when it was built and the current legislative regulations, and their different implications.

126.  Mr Albert Chan agreed that with the advance of modern technology and the rise of public expectation, upgrading to existing facilities may be undertaken but should also be carried out progressively in a well-planned schedule by striving balance between users’ needs, scope and extent of works, costs and disturbance to occupants, etc. He objected however to describing an existing building as being ‘obsolescent” simply by direct comparison to current legislative requirements. Considerations should be made to the existing physical and functional conditions of the building and their maintenance and housekeeping standards.[47] We agree with the latter.

127.  We further agree with Mr Albert Chan that external walls simply finished with plastering and painting cannot be regarded as non-acceptable or out-classed by buildings nowadays. Likewise, overall untidy appearance in elevations arising from piecemeal and individual replacement of windows cannot be criticized as obsolescence.[48]

128.  On the other hand, Mr Benson Wong identified 6 main aspects of functional obsolescence, some of which have safety and hygiene implications:[49]

(a)  The structural frames of the Building cannot meet the current standards against corrosion attack in the aspects of chloride contents and concrete cover when compared with the requirements of the 2013 Concrete Code;

(b)  The lack of the following essential fire service system:

(i)  Manual fire alarm system; and

(ii)  Hose reel system;

(c)  The design concrete cover for both the top and soffit surfaces of floor slabs is 15mm which is lower than the minimum thickness of 20mm as currently specified in Code of Practice for Fire Safety in Buildings 2011 (“Fire Code 2011”) for fire resistance of the floor slabs in the houses.

(d)  The fire access arrangement for the Villas is unsatisfactory as there is no Emergency Vehicular Access provided.

(e)  The lack of a lightning protection system installed on the roof to protect the Villas’ occupants and building parts from lightning strikes.

(f)  The lack of building management systems which are commonly provided nowadays:

(i)  CCTV surveillance system for the access driveway, pool and other external areas;

(ii)  instant fault signal and control system for major service installations; and

(iii)  Timer or sensor control of artificial lighting to external areas.

129.  In response, Mr Albert Chan did not agree that the Villas are aged functionally. We agree with him.

130.  In regard of chloride contents, as stated in §118 above, Mr C M Wong found none of the samples had a percentage value higher than 1.0 (ie high risk). Only 5 tests (about 6.9%) had a percentage greater than 0.4 which can be classified as moderate risk. And in respect of concrete cover, as stated in §114 above, the 6 spots that were found having the carbonation depth going pass the depth of the concrete covers were particularly localized near House E. In contrast, there were a number of test results with very shallow carbonated depths.

131.  Mr Benson Wong referred in particular to the Code of Practice for Minimum Fire Service Installations and Equipment 2022 (“FSI Code 2022”) in stating that the Villas is obsolete. He referred to Para 4.22 of the FSI Code 2022 which requires for

(i)  Fire alarm system

(ii)  Fire hydrant/hose reel system

(iii)  Portable hand-operated approved appliance

132.  However, with respect, we find these provisions or requirements only applicable to “Domestic Buildings - low rise (over 3 storeys in height)”. By reference to the OP for the Villas issued on 23 November 1981[50], the Villas was described as “5 Nos 3-storey houses for domestic use over carpark …”. It appears that the Building Authority did not agree that the Villas comprises over 3 storeys in height. Neither do we.

133.  In such regard, Mr Benson Wong tried to refer to a relatively new development of 77/79 Peak Road which, he said, also comprises 3-storey houses over carpark but has to follow Para 4.22 of the FSI Code 2022. We have reservation on Mr Benson Wong’s allegation by reference to the layout plan and the cross-section plan he produced.[51]

134.  Our reservation is affirmed by the photographs[52], the layout plans[53] and OP of the development[54] produced by the respondent in response. The OP for 77/79 Peak Road in fact describes it as:

“(i) One 2-storey single family house (House1) for domestic use over 1-storey of carpark …

(ii) One 3-storey single family house (House 2) for domestic use over 1-storey of carpark …

(iii) One 3-storey single family house (House 3) for domestic use over 1-storey of carpark …

(iv) Four 3-storey single family houses (House 4, 5, 6 & 7) for domestic use over 1-storey of carpark, residents’ recreational facilities and ancillary accommodation for non-domestic use.

(v) One 2-storey single family house (House 8) for domestic use over 1-storey of carpark …

(vi) …”

135.  Obviously by reference to (iv) above, this development should be regarded as “over 3 storeys in height” and the Villas is distinguishable. In respect of the latter, Para 4.21 of the FSI Code 2022 is applicable instead and requires only portable hand-operated approved appliance. The Villas is not functionally obsolete in terms of fire safety installation.

136.  As regards Building (Planning) Regulation 41D to which Mr Benson Wong referred where emergency vehicular access (“EVA”) is required, by reference to the Practice Note for Authorized Persons and Registered Structural Engineers APP-136[55] at para 7, it is expressly emphasized that pursuant to the regulation itself “the Building Authority may exempt a building from complying with any or all of the EVA standards specified in the MOA Code if the Building Authority is satisfied that compliance with the requirements is:

(a)  Impracticable having regard to the topographical features of the area on which the building is situated; or

(b)  Unwarranted on the ground that the purpose for which the building is to be used constitutes a low fire risk.”

137.  By the Guidance Notes on Exemption / Modification Consideration of Part VI of the MOA Code, it is expressly stated that for domestic buildings of 3-storey or below, the “width of EVA may be relaxed to not less than 4.5m depending on the topographical constraint”. As confirmed by Mr Benson Wong, the driveway of the Villas is 5 metres wide[56].

138.  Having regard to the topography of the site and its surrounding environment, it does not need to take us to be the Building Authority to accept Mr Yuen’s submission that the EVA requirement will be exempted on the ground of the low fire risk.

139.  As regards concrete cover, Mr Benson Wong noted that the relevant concrete cover thickness for the floor slabs of the Villas applicable at the time of Structural Plan approval was only 15mm but since then, the fire resisting construction requirements have increased the concrete cover of the floor slabs to 20mm thick which is applicable to both top and soffit surfaces of a floor slab. Therefore, in respect of the fire resistance of the structural frames, the concrete cover thickness of the existing floor slabs in the Villas do not comply with the current requirement of the Fire Code 2011 which is tabulated as follows:[57]

Solid Reinforced Concrete Construction	Minimum thickness in mm for FRR of
	240 mins	120 mins	60 mins
Thickness of concrete	170	125	100
Concrete cover to all reinforcement -
simply supported	55*	35	20
continues	45*	25	20

* Reinforcement consisting of expanded metal lath or a wire fabric not lighter than 0.5kg/m2 with 2mm diameter wire at not more than 100mm centres or a continuous arrangement of links at not more than 200mm centres should be incorporated in the concrete cover at a distance not exceeding 20mm from the face.

140.  By the definition of the Fire Code 2011, FRR stands for fire resistance rating which is the period of time that a building element is capable of resisting the action of fire when tested in accordance with ISO 834, BS 476: Parts 20 to 24 or equivalent. Fire resistance ratings are designated by three terms, to represent the make up of the element of construction, i.e. X/Y/Z, where:

• X - Stability fire resistance rating (minutes)

• Y - Integrity fire resistance rating (minutes)

• Z - Insulation fire resistance rating (minutes)

141.  As pointed out by Mr Yuen, however, by reference to the approved building plan for the Villas dated 23 August 1979, it was approved by the Building Authority that the 15mm cover at that time could withstand a fire resistant period of 1 hour. We are persuaded that it could not be the case that the 15mm cover cannot suddenly withstand a fire resistant period of 1 hour despite the change in standard.

142.  Indeed, in the Supplementary Rebuttal Report filed by Mr C M Wong dated 22 October 2022[58] which was prepared in response to Dr Lau’s late submission dated 14 October 2022[59] (which should be criticized and not encouraged), Mr C M Wong fairly explained at §2.2.6 that:

“… for a period of FRR longer than 60 min, the concrete cover may be thicker than the cover required for durability for some types of structural elements. For a residential building which normally requires FRR of 60/60/60, I agree with Dr Lau that, as of today, the concrete cover thickness required for FRR is less stringent than that required for durability under the current codes. However, as I pointed out in Section 8.3.3 of my Structural Assessment Report[60], the design cover of 15mm for slabs of the Building[61] is much less than that required in HK Concrete Code 2013, especially in the bathroom and kitchens areas. The 15mm provided for the slabs is also inferior to the current requirement of 20mm under Fire Safety Code 2011, although the governing criterion is durability.” (emphasis added)

143.  Thus, from the above, it appears that the main issue for the more stringent requirement of 20mm in the prevailing codes is on durability instead of on fire resistant.

144.  In Hong Kong, the first code that mentioned the requirement for the design life is Code of Practice for Structural Use of Concrete 2004 (“2004 Code”). In 2013, this code was updated (“2013 Code”) but Clause 2.1.5 remains unchanged as follows:

“The design working life should be clearly identified. This Code of Practice assumes a design working life of 50 years, which is deemed appropriate for general buildings and other common structures. Where, the design working life differs from this value, the recommendations should be modified as appropriate.”

145.  §2.1.7 of the 2013 Code provides as follows:

“Durability, workmanship and materials

The structure shall be designed such that deterioration over its design working life does not impair the performance of the structure below that intended, having due regard to its environment and the anticipated level of maintenance (see section 4). In order to achieve an adequately durable structure, the following should be taken into account:

(a) the intended or foreseeable use of the structure;

(b) the required design criteria;

(c) the expected environmental conditions;

(d) the composition, properties and performance of the materials and products;

(e) the properties of the soil;

(f) the choice of the structural system;

(g) the shape of members and the structural detailing;

(h) the quality of workmanship, and the level of control;

(i) the particular protective measures; and

(j) the intended maintenance during the design working life.

The environmental conditions shall be identified at the design stage so that their significance can be assessed in relation to durability and adequate provisions can be made for protection of the materials used in the structure.

It is assumed that the quality of the concrete, steel and other materials and of the workmanship, as verified by inspections, is adequate for safety, serviceability and durability”

146.  Further §4.1.1 of the 2013 Code explained durability:

“A durable structure shall meet the requirements of strength and stability throughout its intended design working life without significant loss of utility or excessive unforeseen maintenance. This is dependent upon the integration of every aspect of design, materials and construction. A durable concrete element

is one that is designed and constructed to protect embedded metal from corrosion and to perform satisfactorily in the working environment for the design working life of the structure.

The required level of protection of the structure shall be established by taking into consideration the following:

(a) its intended use;

(b) design working life;

(c) maintenance programme; and

(d) environment.

The guidelines given in the following clauses are based on a design working life of 50 years.

The environmental conditions to which the concrete will be exposed should be defined early in the design stage. The design should take account of the shape and bulk of the structure, and the need to ensure that surfaces exposed to water are freely draining (see clause 4.2.2). Adequate cover to steel has to be provided for protection (see clause 4.2.4). Consideration may also be given to the use of

protective coatings to either the steel or the concrete, or both, to enhance the durability of vulnerable parts of the structure.

Concrete should be of the appropriate quality, which depends on both its constituent materials and mix proportions. There is a need to avoid some constituent materials which may cause durability problems and, in other instances where conditions are particularly aggressive, to specify particular

types of concrete to meet special durability requirements (see clauses 4.2.5, 4.2.6 and 4.2.7).

Good workmanship, particularly curing, is essential and dimensional tolerances and the levels of control and inspection of construction should be specified. Use should be made of suitable quality assurance schemes where they exist (see sections 10 and 11).”

147.  As said, the concept of design working life of concrete did not exist when the Villas was built. On the one hand, the requirement for durability was not necessarily compromised. More importantly, the 2013 Code provides for “the use of protective coatings to either the steel or the concrete, or both, to enhance the durability of vulnerable parts of the structure.” The Villas was built in November 1981; it has at least 9 years to go towards the end of the design working life.

148.  Similarly, a lightning protection system or the building management systems suggested by Mr Benson Wong can be easily improved with minimal costs. We are not persuaded that the Villas is suffering from functional obsolescence.

149.  Mr Benson Wong then referred to Intelligent House, supra and adopted “tenantable condition” as the necessary standard of repair that needed to be carried out at the Villas. Including the complete replacement of the external rendering, Mr Benson Wong formulated the necessary work items and assessed the costs of works as follows:[62]

Item	Works	Cost
1	Preliminaries	$2,679,353
2	Structural Frames	$105,000
3	Building Facades	$4,697,290
4	Pitched Roofs (Common) Flat Roofs on G/F (Private) A/C Plant Area on Roof (Private) Watchman Office Roof (Common) Metal Door on Roof (Private)	$726,000 $134,300 $47,000 $29,800 $40,000
5	House Internally	$1,682,970
6	Aboveground Plumbing	$130,000
7	Aboveground and Underground Drainage	$391,000
8	Electrical Installation	$1,750,000
9	Fire Services Installation	$870,000
10	Air Conditioning	$1,600,000
11	Swimming Pool and Other External Features	$782,970
	Repair Works Sub-Total:	$15,666,283
	Contract Contingencies 10%	$1,566,628
	Repair Works Total:	$17,232,911
	Professional Fees 7.5%	$,290,000
	Supervision Fees: 1 COW for 9 months@$40,000 per month	$360,000
	Total (including Fees):	$18,882,911

150.  It is the respondent’s case that Mr Benson Wong had exaggerated the required items for repair. These include the complete replacement of the building façade (item 3), the pitched roof and the flat roof (item 4). Indeed, Mr Benson Wong had engaged a specialist to perform infrared thermographic survey on the external façade of the Villas. Only 52 spots of “minor delamination” as defined under “Severity Grade I” were found:[63]

Elevation	Severity Grade 0	Severity Grade I	Severity Grade II
Face A	Nil	24 nos	Nil
Face B	Nil	12 nos	Nil
Face C	Nil	1 no	Nil
Face D	Nil	15 nos	Nil
Total	Nil	52 nos	Nil

151.  Under this “Severity Grade I”, the specialist stated “No immediate action was considered necessary, but routine monitoring is recommended.” [64]

152.  Even Mr Benson Wong admitted that patch repairs would suffice to bring the subject components back to tenantable conditions. Mr Benson Wong’s proposal also included certain improvements to the facilities of the swimming pool and other external facilities (item 11) which, in the opinion of the respondent, are at the option of the owners given that some of the existing facilities are already in tenantable condition. The total cost estimate of these 3 items is around $4 million.

153.  At the request of the Tribunal upon the joint inspection, Mr Benson Wong provided a breakdown of his estimate above as follows:[65]

Item	Works	House A	House B	House C	House D	House E
1	Preliminaries	$610,147	$594,532	$262,137	$607,280	$601,965
2	Structural Frames	$21,000	$21,000	$21,000	$21,000	$21,000
3	Building Facades	$1,035,858	$1,035,858	$553,858	$1,035,858	$1,035,858
4	Pitched Roofs (Common) Flat Roofs on G/F (Private) A/C Plant Area on Roof (Private) Watchman Office Roof (Common) Metal Door on Roof (Private)	$145,200 $78,200 $11,900   $5,960   $10,000	$145,200 $18,700 $11,900   $5,960   $10,000	$145,200 $0 $0   $5,960   $0	$145,200 $18,700 $11,900   $5,960   $10,000	$145,200 $18,700 $11,900   $5,960   $10,000
5	House Internally	$419,320	$397,060	$5,000	$449,920	$411,670
6	Aboveground Plumbing	$26,000	$26,000	$16,000	$26,000	$26,000
7	Aboveground and Underground Drainage	$87,450	$87,450	$41,200	$87,450	$87,450
8	Electrical Installation	$384,000	$389,000	$174,000	$390,000	$404,000
9	Fire Services Installation	$174,000	$174,000	$174,000	$174,000	$174,000
10	Air Conditioning	$400,000	$400,000	$0	$400,000	$400,000
11	Swimming Pool and Other External Features	$158,520	$159,590	$140,330	$158,520	$166,010
	Repair Works Sub-Total:	$3,567,555	$3,476,250	$1,538,685	$3,550,788	$3,519,713
	Contract Contingencies 10%	$356,756	$347,625	$153,869	$355,079	$351,971
	Repair Works Total:	$3,924,311	$3,823,875	$1,692,554	$3,905,867	$3,871,684
	Professional Fees 7.5%	$290,000	$280,000	$120,000	$290,000	$280,000
	Supervision Fees: 1 COW for 9 months@$40,000 per month	$81,980	$79,882	$35,358	$81,595	$80,880
	Total (including Fees):	$4,296,291	$4,183,757	$1,847,912	$4,277,462	$4,232,564

154.  From the above, it is manifested that the so-called repair costs required accrue to individual houses instead of the Villas as a whole. Even assuming Mr Benson Wong’s estimates are entirely correct (which are also subject to the challenges by Mr Albert Chan)[66], the repair cost required for each house appears not to be too much as prospective purchasers of such luxury houses would inevitably spend a vast sum of money for decoration and repair according to his/her own taste. Indeed, according to Mr Chung, he spent a sum of about $2,800,000 when the respondent acquired House C in March 2006. This included, inter alia, replacing and improving the drainage pipes, changing and replacing the new air-conditioning system and adding on some split type air conditioners, rewiring, changing the windows to aluminium windows, making some changes to layout, redoing the flooring, ceiling and wall tiles etc. While his evidence was not challenged by the applicants, on the basis of the RLB Tender Price index[67], $2,800,000 in March 2006 would have become:

155.  In fact, the repair costs estimated by Mr Benson Wong at around $4,200,000 for each house (except House C) is not unreasonably high and is less than 5% of the EUV of each house.

156.  Having reviewed the above, therefore, we do not consider redevelopment of the lot having been justified due to the age or state of repair of the existing development on the Lot. The Application shall be dismissed.

Costs

157.  We make a costs order nisi that the applicants do pay the costs of these proceedings (including any reserved costs) to the respondent, with certificate for counsel, to be taxed on the High Court scale if not agreed. Unless any parties apply by summons to vary the costs order nisi, it shall become absolute upon expiration of 14 days from the date of this judgment.

158.  Last but not least, we thank Counsel for their able assistance.

Appendix