ANLING LTD AND OTHERS v. HULTUCKTONG ENTERPRISES LTD AND OTHERS

LDCS 1000/2015

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO. 1000 OF 2015

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J U D G M E N T

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Background

1.  This is an application for compulsory sale of all the undivided shares of and in the following lots (hereinafter collectively referred to as “the Lots”) for the purposes of redevelopment pursuant to section 3(1) of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”):

(1)	Inland Lot No 2242, erected thereon a 14-storey building known as Po Wah Building (hereinafter referred to as “Po Wah”) with the street numbers of 46-56 Queen’s Road East, 2A Anton Street and 1A Landale Street;
(2)	Sections A, B and C of Inland Lot No 2244, erected thereon three pairs of 6-storey tenement buildings with the street numbers of 2-4, 6-8 and 10-12 Anton Street (hereinafter referred to as “2-12 Anton”); and
(3)	Sections C, D, E and F of Inland Lot No 2245, erected thereon two pairs of 6-storey tenement buildings with the street numbers of 5-7 and 9-11 Landale Street (hereinafter referred to as “5-11 Landale”).

Po Wah, 2-12 Anton and 5-11 Landale are hereinafter collectively referred to as “the Buildings”.

2.  Thus, with the pair of tenement buildings at 1-3 Landale Street missing in the application (“the Application”), the Lots comprise a site likened to the Chinese character “凹” with its base abutting Anton Street and the right side abutting Queen’s Road East.

3.  Po Wah is served by 2 lifts and 2 common staircases with the occupation permit (“OP”) issued on 26 September 1959.  According to the building plans and the Deed of Mutual Covenant (“DMC”) of Po Wah, there are:

(1)	7 shops on G/F (each being assigned 1/107 equal and undivided share),
(2)	8 residential units on each of the 1/F to 12/F (each being assigned 1/107 equal and undivided share),
(3)	3 Penthouses and Roof (altogether assigned 3/107 equal and undivided shares),
(4)	Portion of the Roof (being assigned 1/107 equal and undivided share).

4.  Each pair of the 6-storey tenement buildings at 2-12 Anton is served by 1 common staircase, the OP of which was issued on 8 May 1961.  According to the building plans and the DMC of 2-12 Anton, there are:

(1)	6 shops on G/F (each being assigned 1/14 equal and undivided share among one pair of tenement buildings),
(2)	6 residential units on each of the 1/F to 5/F (each being assigned 1/14 equal and undivided share among one pair of tenement buildings),
(3)	The Space underneath the Staircase from G/F to 1/F whereby
	(i)	that in 2-4 Anton is assigned 1/14 equal and undivided share;
	(ii)	that in 6-8 Anton is assigned 2/14 equal and undivided share; and
	(iii)	that in 10-12 Anton is assigned 1/14 equal and undivided share;
(4)	the Roof of 2-4 Anton and the Roof of 10-12 Anton is each assigned 1/14 equal and undivided share while the Roof of 6-8 Anton is given no equal and undivided share.

5.  Each pair of the 6-storey tenement buildings at 5-11 Landale is also served by 1 common staircase, the OP of which was issued on 20 September 1957.  According to the building plans and the DMC of 5-11 Landale, there are:

(1)	6 shops on G/F (each being assigned 1/6 equal and undivided share of one tenement building),
(2)	6 residential units on each of the 1/F to 5/F (each being assigned 1/6 equal and undivided share of one tenement building).

6.  At the time of the Application filed on 23 January 2015, the applicants owned:

(1)	81.3084% of the undivided shares of Po Wah;
(2)	94.2857% of the undivided shares of 2-4 Anton;
(3)	94.2857% of the undivided shares of 6-8 Anton;
(4)	80% of the undivided shares of 10-12 Anton;
(5)	91.6667% of the undivided shares of 5-7 Landale;
(6)	83.3333% of the undivided shares of 9-11 Landale.

7.  By the time of trial, the applicants have acquired all the outstanding undivided shares and the exclusive possession of the units given an undivided share except those owned by the following respondents (denoted with the prefix “R” in numerical order):

(1)	R1 owns:
	(i)	1/14 undivided share allotted to G/F of 12 Anton;
	(ii)	1/14 undivided share allotted to 1/F of 12 Anton;
(2)	R2 owns:
	(i)	1/6 undivided share allotted to G/F of 7 Landale;
	(ii)	1/6 undivided share allotted to G/F of 9 Landale;
(3)	R3 owns 1/6 undivided share allotted to G/F of 11 Landale;
(4)	R5, being the survivor of the joint owners of R4 & R5, owns:
	(i)	1/107 undivided share allotted to G/F, Shop A, Po Wah;
	(ii)	1/6 undivided share allotted to 1/F, Shop A, Po Wah;
(5)	R11, being the survivor of the joint owners of R10 & R11, owns 1/107 undivided share allotted to 1/F, Block D, Po Wah;
(6)	R19 holds 1/107 undivided share allotted to 8/F, Block D, Po Wah as trustee for the following:
	(i)	Half share for himself;
	(ii)	Half share for Cheung Tak Kuen (R34) who sold his beneficial interest to the 2nd applicant;
(7)	R24 holds as trustee for the deceased R33, whose estate comprising the interest below where no one is prepared to be appointed and the Tribunal has given appropriate orders to enable the Tribunal to treat R33 as a missing owner:
	(i)	1/5 share of 1/14 undivided share of 2-4 Anton with the exclusive right to use The Space underneath the staircase from G/F to 1/F of 2-4 Anton;
	(ii)	1/5 share of 1/14 undivided share of 2-4 Anton with the exclusive right to use The Roof of 2-4 Anton;
	(iii)	1/5 share of 2/14 undivided share of 6-8 Anton with the exclusive right to use The Space underneath the staircase from G/F to 1/F of 6-8 Anton;
	(iv)	1/5 share of 1/14 undivided share of 10-12 Anton with the exclusive right to use The Space underneath the staircase from G/F to 1/F of 10-12 Anton;
	(v)	1/5 share of 1/14 undivided share of 10-12 Anton with the exclusive right to use The Roof of 10-12 Anton;
	(vi)	1/5 share of 1/107 undivided share of Po Wah with the exclusive right to use Block A, 12/F of Po Wah; and
	(vii)	1/5 share of 3/107 undivided share of Po Wah with the exclusive right to use the Three Penthouses and Roof of Po Wah.

8.  R1, R11, R19, R28 (the mortgagee of R2), R29 (the mortgagee of R3) and R33 have not filed any opposition or taken part in any hearing.

9.  The only “active” respondents are R2, R3 and R5.  R2 & R3 settled on the 1^st day of trial and R5 settled on the 3^rd day of trial.  Consent Summonses were filed.  Their Notices of Opposition and any evidence in opposition relating to the Application were withdrawn.

Whether the Applicants are entitled to make the Application

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

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

12.  The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice was gazetted on 22 January 2010 and came into operation on 1 April 2010 (“the Notice”).  Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%.  Those classes of lots include: “a lot with each of the building erected on the lot issued with an occupation permit at least 50 years before the relevant date (ie the date of the application under the Ordinance)”.

13.  As mentioned, the OPs for Po Wah, 2-12 Anton and 5-11 Landale were issued on 26 September 1959, 8 May 1961 and 20 September 1957 respectively (namely, not less than 50 years before the date of the Application).  The Notice is applicable and the threshold percentage should be 80%.

14.  We are satisfied that the applicants were entitled to make the Application under section 3(1) of the Ordinance.

Determination of the existing use values (“EUV”) of all units contained in the Application

15.  Pursuant to section 3 of the Ordinance, the Application was accompanied by a valuation report (“Application Report”) prepared by Mr Charles C K Chan of Savills Valuation and Professional Services Limited (“Mr Chan”), the applicants’ valuation expert, containing the assessments of the values of all units (which are conveniently termed as the existing use values, the “EUV” of all units) in the Buildings on the Lots as at 2 December 2014.  The report was prepared not earlier than 3 months before the filing of the Application in accordance with section 3 of the Ordinance.

16.  Under section 4(1)(a)(i), if there is a dispute between the parties on the EUV of the units in the Buildings on the Lots, the Tribunal has to determine the values.  Section 4(1)(a)(ii) further provides that, in the case of any minority owner of the Lots who cannot be found, the majority owner of the Lots is required to satisfy the Tribunal that the value of the minority owner’s property as assessed in the application is:

“(A)	not less than fair and reasonable; and
(B)	not less than fair and reasonable when compared with the value of the majority owner’s property as assessed in the application.”

17.  At trial, after the withdrawal of the expert evidence in relation to R2, R3 and R5’s opposition, there was no expert evidence filed by the other respondents in these proceedings; there is valuation evidence of 4 valuation reports[1] prepared by Mr Chan only.  Mr Mok, counsel for the applicants, simply called Mr Chan to prove the applicants’ case.

18.  Mr Chan explained his valuation method and the assessment process to arrive at the EUV of each unit in the Buildings in the Application Report dated 2 December 2014[2].

19.  In his valuation of the EUV of the domestic units of the Buildings, Mr Chan adopted the following methodology:

(a)	He selected 6/F, Block B, No 54 Queen’s Road East and 3/F, No 7 Landale Street (“the Reference Domestic Units”) as the reference units for the purpose of valuing their unit prices;
(b)	The unit prices of the Reference Domestic Units were first assessed by making reference to market comparables served by lifts and by staircases only respectively.  After making what he regarded as the necessary adjustments (for time, location and environment, building age, floor level, top floor effect, size, view, lighting and ventilation, noise effect, physical condition and building management, etc) for all these comparable transactions, he arrived at the unit price of the Reference Domestic Units at $135,000/sq m (as revised)[3] and $129,000/sq m (as revised)[4] respectively;
(c)	He further considered the floor difference, size, noise, and internal conditions of the Reference Domestic Units and the remaining domestic units under the Application and made adjustments to arrive at the EUV of all the domestic units.

20.  In assessing the EUV of the G/F units, by making reference to market comparables, Mr Chan adopted the following methodology:

(a)

He selected G/F, Block C of Po Wah and G/F, No 7 Landale Street as the Reference Shop Units.  The unit prices of the Reference Shop Units were first assessed by making reference to market comparables fronting Queen’s Road East or otherwise.  After making what he regarded as the necessary adjustments (for time, location, size, building age, frontage, layout and headroom) for all these comparable transactions, he arrived at unit price of the Reference Shop Units at $837,000/sq m and $750,000/sq m respectively[5];

(b)

He then used the unit rate of the Reference Shop Units to assess the other ground floor units.

21.  Mr Chan updated the Application Report by a supplemental report dated 10 June 2016 (“Supplemental Report”)[6] in which he revised the EUV of all units in the Buildings after taking into account the inspection of most residential units and the updated property index prepared by the Rating and Valuation Department.  In the meantime, the Tribunal affirmed the market reality approach in valuation in Cheer Capital Limited v Unibase investment Limited & Others, LDCS 5000 & 6000/2013 (unreported, dated 12 June 2015) and Mr Chan decided to review the EUV of various units of Po Wah, including (1) the unauthorised structures in G/F of Block A, (2) the non-domestic use of 1/F of Block A, (3) the enclosed yards for the various shop units on G/F and (4) the enclosed common area on 4/F (ie “Treatment 2” in the Supplemental Report).

22.  Indeed, this same principle was adopted by the Tribunal in Gainfield Investment Limited & Others v Legend Time Limited & Others, LDCS 16000/2014 (unreported, dated 17 October 2016).

23.  About the same time, in Newbigin (VO) v SJ & J Monk (A Firm) [2015] 1 WLR 4817, Lewison LJ discussed “the reality principle” in these terms:

“It is a well-known principle of valuation, not confined to rating, that in principle you must value the property as it stands on the valuation date. This is the principle of reality; or as classicists prefer to call it, the principle that property must be valued rebus sic stantibus. This principle can be displaced by contrary instructions in the statute or contract under which the valuation takes place.”[7]

24.  We agree with the various assessments by Mr Chan and the EUV of the units is reproduced from Mr Chan 2^nd Supplemental Report dated 18 September 2017[8] at Appendix A hereto.

25.  The total EUV is $1,522,802,000.[9]  We are satisfied that the EUV of the minority owners’ units and interest as assessed by Mr Chan are not less than fair and reasonable and are not so when compared to the EUV of the applicants’ units.

Section 4(2) of the Ordinance – Justification and Reasonable Steps

26.  In determining the Application, section 4(2) of the Ordinance empowers the Tribunal to make an order for sale if it is satisfied that:

(1)	the redevelopment is justified due to age or state of repair of the Buildings; and
(2)	the applicants have taken reasonable steps to acquire all the undivided shares in the Lots (including negotiating for the purchase of the undivided shares owned by the respondents on terms that are fair and reasonable).

Section 4(2)(a) - Age and State of Repair

27.  For the age and state of repair requirements, this Tribunal has taken into consideration the expert evidence of Mr Benson Wong (“Mr Wong”), the Chartered Building Surveyor and Mr So Kin Shing (“Mr So”), the Structural Engineer adduced by the applicants.

28.  Mr So conducted structural assessment of the Buildings and prepared 3 Structural Assessment Reports dated 6 June 2016 for Po Wah, 2-12 Anton and 5-11 Landale.  Mr Wong conducted condition survey of the Buildings and also prepared 3 Condition Survey Reports dated 8 June 2016.  None of the respondents had adduced any expert evidence in this connection.  Mr Wong and Mr So found that:

(1)	The Buildings were all constructed more than 50 years ago, with obsolete designs on structural and other requirements, and have now come near the end of their designed lives.
(2)	The Buildings have become obsolete in many aspects both physically and functionally and some of the items of obsolescence carry obvious safety and hygiene implications.
(3)	The Buildings are not in tenantable condition and require a very huge amount of repair costs to be restored to a tenantable condition.
(4)	The huge amount of repair costs, and the inevitable disturbance to the occupiers during the lengthy period of repair, tends to show the deterioration of the Buildings is very serious and has reached a state which is beyond economic repair.
(5)	No reasonable owner would spend the very huge amount to repair the Buildings instead of deciding to redevelop.

29.  We accept the unchallenged evidence of the applicants in these respects and are satisfied that redevelopment of the Lots is justified due to age and state of repair of the Buildings.

Section 4(2)(b) - Reasonable Steps Taken

30.  The applicants are under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of all the undivided shares of the Lots under section 4(2)(b) of the Ordinance.

31.  By reference to the Witness Statement of Ms Fong Wai Yee dated 10 June 2016 on behalf of the applicants, it is undisputed that the applicants had made batches of offers to the various respondents since 10 December 2014, each accompanied by the advice letter of Mr Chan setting out the assessments based on which the offers were made.

32.  The latest round of offers was made on 10 October 2017.

33.  In assessing the reasonableness of the offers, Ribeiro PJ of CFA has laid down the following guidance in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 579:

“33. In making that assessment the Tribunal is not conducting a valuation exercise. It does not need to adjudicate upon any disputes about the correct valuation principles to be applied. It does not itself arrive at any conclusion as to what figure represents the correct valuation. It merely needs to be satisfied that, on the evidence available, the offer falls within the range of what may broadly be regarded as fair and reasonable compensation for the interest in question. It is obviously necessary to recognise that there will often be differences of opinion on that matter……” “36. ......We are of course not suggesting that it is necessary for the offer to “beat” the valuation as if it were a payment into court. What the Tribunal must do is to consider whether, in the circumstances of each case, the offer falls within a band of what represents a fair and reasonable assessment of the value of the minority owner’s interest reflecting a proportionate share of the redevelopment value of the whole site……”

34.  Further, in Intelligent house Limited v Chan Tung Shing & Others [2008] 4 HKC 421, the majority owner relied on its valuation expert (who happened to be Mr Chan) to formulate some of the offers.  The Tribunal ruled that:

“Further, it is not disputed that Savills is a reputable firm of valuers … In our view, it is also reasonable for Intelligent House to rely on Savills’ expert opinion to formulate the purchase prices offered to the minority owners. There is also no reason for us to believe, nor is there such evidence to suggest, that the advices from Savills were not properly made based on professional valuation of the EUV and RDV of the minority owners’ units.” (§334(3))

35.  Of particular interest in the present case is that just before the trial, R24/25 entered into sale and purchase agreement to sell to the applicants the interests of R25 and those held by R24 as trustees for 1 of 5 deceased brothers.  And as said in §9 above, on the 1^st day of trial and the 3^rd day of trial, R2/3 and R5 respectively settled with the applicants for the acquisition of their units.

36.  In the circumstances of this case, we are satisfied that the applicants have taken reasonable steps to acquire all the undivided shares in the Lots; such steps include the applicants’ latest offers to the respondents who have not participated in the trial.

Order for Sale

37.  We are satisfied that redevelopment of the Lots is justified in terms of both age and state of repair of the Building.  We are also satisfied that the applicants had taken reasonable steps to acquire all the undivided shares of the Lots and had negotiated for the purchase of the respondents’ shares in their respective units on terms that are fair and reasonable.  In the circumstances, we agree that an order for sale should be granted in favour of the applicants.

Reserve Price for the Auction

38.  In the 2^nd Supplemental Report dated 18 September 2017, Mr Chan adopted the Residual Method to assess the redevelopment value (“RDV”) of the Lots at $2,055,000,000.  Residual Method is the assessment of land value by deducting the development costs (including construction costs, professional fees, financial costs and profit, etc) from the estimated gross development value of the proposed development, as if completed, as at the date of valuation.

39.  The Lots, with a total site area about 1,187.50 sq m, are situated within a well established commercial / residential area bounded to the southwest by Queen’s Road East, to the north by Johnston Road and to the east by Wan Chai Road which has been zoned “Residential (Group A)” under the draft Wan Chai Outline Zoning Plan No S/H5/27 gazetted on 2 August 2012 (“the Zoning Plan”).  Under this designation, while residential development with the lowest 3 floors for office / commercial use is always permitted, a wholly office development would require planning permission from the Town Planning Board.

40.  Also, by reference to the Zoning Plan, the Lots are subject to a maximum building height of 110 metres above Hong Kong Principal Datum.  A minimum setback of 1m from the lot boundary fronting Anton Street shall be provided.

41.  As instructed by the applicants, and on the basis of a residential scheme provided by Mr Robert Lam, the Authorised Person of the applicants, Mr Chan assumed that the Lots could be redeveloped into a 28-storey commercial / residential composite building with retail / commercial units on G/F to 2/F, communal podium garden on 3/F, club house on 4/F, M&E room on 5/F and residential units on 6/F to 27/F.  Details of the hypothetical residential development with the proposed total gross floor area of 12,322 sq m and plot ratio of about 10.3764 and the residual valuation were set out at Appendix 5 of the 2^nd Supplemental Report[10].

42.  The residual land value is assessed at $2,055,000,000, which is equivalent to an accommodation value of about $166,775/sq m gross floor area.  The residual valuation is reproduced at Appendix B.

43.  In our earlier decision dated 4 August 2017, leave was granted for R2, R3, R24 and R25 to adduce expert evidence on 3 additional areas, namely town planning, traffic impact and plot ratio and gross floor area for the purpose of assessing the possibility of a wholly office development as opposed to the commercial / residential composite building assumed by Mr Chan.  But following the Consent Summons as mentioned in §9 above, all such expert evidence has been withdrawn.

44.  According to the Hong Kong professional valuation standards[11], hope value for such office development can only be included as part of the market value when there is a reasonable prospect as reflected by at least 50% chance of success that the land can be put to use.  A mere chance is not accepted unless the probability threshold can be met.  The reference to “at least 50% chance” was also adopted in various jurisdictions such as in Canada.  In Farlinger Developments Limited v East York (Borough) (1975) 9 OR (2d) 553, 61 DLR (3d) 193, 8 LCR 112, the issue was whether the appellant could reasonably expect a change in zoning permitting development as desired as the basis of determining compensation for the market value of its land which had been expropriated.  Howland JA of the Court of Appeal of the Ontario Supreme Court of Canada held at §38 of the judgment that:

“From these authorities it would seem to be established that the highest and best use must be based on something more than a possibility of rezoning. There must be a probability or a reasonable expectation that such zoning will take place. It is not enough that the lands have the capability of rezoning. In my opinion probability connotes something higher than a 50% possibility.”

45.  In Transport for London v Spirerose Ltd [2009] 1 WLR 1797 (HL) which concerned determination of the market value of land with the prospect of a planning permission[12] for the purpose of compulsory acquisition, the House of Lords held that unless 100% certainty of redevelopment can be substantiated, a discount rate with only hope value should be awarded to reflect the chance that planning permission would not have been granted.

46.  In fact, Spirerose and its line of authorities[13] were discussed briefly in Siu Sau Kuen v Director of Lands [2013] 6 HKC 557.  Fok JA had this to say at §35[14]:

“I would accept … that these [cases] each concerned development potentials or possibilities that already existed as at the relevant valuation date. As such, they do not establish any proposition that wholly future potentialities, i.e. the validity of future redevelopment that could not be shown as at the date of the resumption to be likely within a reasonably foreseeable time scale, should be taken into account or reflected in the valuation. …”

47.  Thus, in the absence of any evidence to support the prospect of office development with permission from the Town Planning Board, we accept that the market value of the Lots reflecting its redevelopment potential on its own, i.e. the RDV of the Lots is $2,055,000,000, which should be the reserve price for the auction of the Lots.

Order

48.  By reason of the above, this Tribunal comes to the following decisions:

(1)	The Tribunal is satisfied that the EUV of the minority owners’ units and interest as assessed by Mr Chan, the applicants’ valuation expert are not less than fair and reasonable and are not so when compared to the EUV of the applicants’ units;
(2)	The Tribunal is satisfied that redevelopment of the Lots is justified due to the age and state of repair of the Buildings, and that the applicants have taken reasonable steps to acquire all the undivided shares in the Lots including those of the respondents;
(3)	All the undivided shares in the Lots, the subject of the application, be sold by way of public auction for the purposes of redevelopment of the Lots under section 4(1)(b) of the Ordinance;
(4)	Mr Chow Wing Kin Anthony and Ms Chow Suk Han Anna, nominated by the applicants, be appointed trustees (“the Trustees”) to discharge the duties imposed on trustees by the Ordinance in relation to the sale of the Lots and the Trustees be authorized to charge such remuneration for their services in accordance with the terms set out in the letter of Messrs Guantao & Chow Solicitors and Notaries dated 3 October 2017;
(5)	For the purposes of the sale of the Lots by public auction under section 5(1)(a) of the Ordinance:
	(a)	The sale of the Lots be on the particulars and conditions substantially the same as those in the draft Particulars and Conditions of Sale to be approved and initialed by the Tribunal; and
	(b)	The reserve price be set at $2,055,000,000;
(6)	Subject to further extensions that the Tribunal may subsequently allow upon the application of the purchaser of the Lots or its successor in title, the redevelopment of the Lots shall be completed and made fit for occupation within a period of 6 years after the date on which the purchaser of the Lots becomes the owner of the Lots; and
(7)	Liberty to the applicants, the respondents and the Trustees to apply to the Tribunal for further directions.

Costs

49.  We make a costs order nisi that there be no order as to costs.  Unless any parties apply by summons to vary, the costs order nisi shall be made absolute upon expiry of 14 days from today.

Appendix A

EUV of Po Wah Building, Nos. 46, 48, 50, 52, 54 & 56 Queen’s Road East, No. 1A Landale Street And No. 2A Anton Street:

EUV of Nos. 2, 4, 6, 8, 10 & 12 Anton Street:

EUV of Nos. 5, 7, 9 & 11 Landale Street:

Appendix B

Residual Valuation

[1] These include the Application Report, a Supplemental Report dated 10 June 2016, a Rebuttal Report dated 21 July 2016, which is no longer relevant and superseded by Mr Chan’s Second Supplemental Report dated 18 September 2017.

[2] D1/1-90.

[3] See Mr Chan’s Second Supplemental Report dated 18 September 2017, D4/744.

[4] See Mr Chan’s Second Supplemental Report dated 18 September 2017, D4/745.

[5] See Mr Chan’s Second Supplemental Report dated 18 September 2017, D4/742.

[6] D1/91-253.

[7] Although this judgment of the English Court of Appeal was overturned by the Supreme Court ([2017] UKSC 14) on the facts found by the English Tribunal that the premises were undergoing reconstruction at the material day, and it was therefore entitled to alter the rating list to reflect that reality, there is no real inconsistency between the two decisions in terms of principle.

[8] D4/747-751.

[9] See Mr Chan’s Second Supplemental Report dated 18 September 2017, D4/728.

[10] D4/755.

[11] Commentary (7) & commentary (8) of paragraph 2.1 of Valuation Standard 3 of the Hong Kong Standards 2012 Edition.

[12] A certificate of appropriate alternative development under section 17 of the Land Compensation Act 1961.

[13] Such as Waters & Others v Welsh Development Agency [2004] ULHL 19, [2004] 2 All ER 915, [2004] 1 WLR 1304 (HL); Raja Vyricheria Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302, [1939] 2 All ER 317 (HL); Cedars Rapids Manufacturing and Power Co v Lacoste & Ors [1914] AC 569, [1914-15] All ER Rep 571 (PC)

[14] [2013] 6 HKC at 567F-G

[15] Market value of 4D comprises of $10,740,000 and market value of encroached common area at $111,000.

[16] The stated figure represents market value in 100% share. Market value of each 1/2 share is $5,160,000.

[17] The stated figure represents market value in 100% share. Market value of each 1/5 share is $1,254,000.

[18] Market value of 4E comprises of $4,700,000 and market value of encroached common area at $111,000.

[19] The stated figure represents market value in 100% share. Market value of each 1/2 share is $1,815,000.

[20] Market values of the two separate units in “Three Penthouse and Roof” are $5,980,000 and $6,860,000 respectively. The stated figure represents market value in 100% share. Market value of each 1/5 share is $2,564,000.

[21] The stated figure represents market value in 100% share. Market value of each 1/5 share is $394,000.

[22] The stated figure represents market value in 100% share. Market value of each 1/5 share is $394,000.

[23] The stated figure represents market value in 100% share. Market value of each 1/5 share is $380,000.

[24] The stated figure represents market value in 100% share. Market value of each 1/5 share is $190,000.

[25] The stated figure represents market value in 100% share. Market value of each 1/5 share is $186,000.

[26] 41 months including 15 months for demolition.