CROWN CENTRE DEVELOPMENT LTD AND ANOTHER v. WONG WAI PING AND OTHERS

LDCS 12000/2021

[2023] HKLdT 73

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 12000 OF 2021

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J U D G M E N T

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Background

1.  This is the applicants’ application for a compulsory sale order issued on 9 September 2021 (“the Application”) under section 3 of the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”). The applicants seek to sell all the undivided shares of the Remaining Portion of Section A of Inland Lot No 1313 (“the Lot”) on which a building known as Yan Shing Mansion, No 29 Morrison Hill Road, Hong Kong (“the Building”) is erected.

2.  According to a set of approved building plans dated 13 May 1965, the Building is a 11-storey block. There are one shop on the ground floor (“G/F”), two non-domestic units on the mezzanine floor (“M/F”) and two domestic units (namely “Flat A” and “Flat B”) on each of the 1^st to the 9^th floors (“1/F” to “9/F” respectively). Flat As are the units in the front facing Morrison Hill Road, while Flat Bs are the units in the rear facing Bowrington Road or more precisely the Best Western Hotel Causeway Bay standing on Bowrington Road. There are also two common staircases and one lift (with the lowest lift lobby on M/F) serving the Building.

3.  The occupation permit of the Building (“the OP”), ie Permit No H34/69, was issued on 25 February 1969.

4.  According to the Deed of Mutual Covenant dated 11 June 1969 registered with the Land Registry, the shop on G/F is allotted 2/23 undivided shares whereas each unit on the upper floors is allotted 1/23 undivided shares. There is also 1 undivided share allotted to the roof of the Building. However, by virtue of a Sub-Deed of Mutual Covenant dated 20 August 1980, Flat A on 2/F is subdivided into 3 units with Unit A3 being allotted 1/5 of 1/23 undivided share and each of Units A1 and A2 allotted 2/5 of 1/23 undivided share. While Units A1 and A2 on 2/F are units in the front facing Morrison Hill Road, Unit A3 is sandwiched in the middle with side window only to the north.

5.  Mr Mok Yeuk Chi (“Mr Mok”), counsel for the applicants, summarized in his opening submission that at the time of the Application, the applicants altogether owned 91.3043% undivided shares of the Lot (which is not disputed) subject to the remaining shares being held as follows:

(a)  The 1^st and 2^nd respondents as joint tenants hold 1/23 undivided share allotted to Flat A on 4/F. However, by the judgment under HCA 1371/2011 dated 26 January 2021 obtained by the 2^nd respondent against the 1^st respondent, there was a declaration that the 1^st respondent’s title to the unit had been extinguished in favour of the 2^nd respondent’s possessory title. The 1^st respondent is a missing owner. By the Tribunal’s Order dated 30 September 2021, service of documents on the 1^st respondent was dispensed with, and after the publication of the required notices on newspapers, the 1^st respondent did not establish his claim before the Tribunal.

(b)  The 3^rd respondent holds 1/23 undivided share allotted to Flat A on 5/F.

6.  The 2^nd and 3^rd respondents each filed an Amended Notice of Opposition (“Form 33”) dated 27 February 2023 raising the following three identical issues:

(a)  Dispute on valuation and the applicants had taken no reasonable steps to acquire their interests;

(b)  Redevelopment is not justified due to age or state of repair of the Building; and

(c)  The Tribunal, in all the circumstances of the case, ought to exercise its residual discretion under section 4(1)(b) of the Ordinance against making an order for sale, on the ground, inter alia, that the redevelopment value of the Lot is too close to or even below its existing use value, and that therefore redevelopment of the Lot would not be beneficial, or sufficiently beneficial, to the minority owners of the Lot, even if the Tribunal were to find itself satisfied with the matters set out in section 4(2) of the Ordinance.

7.  Mr Mok submitted that the last plea on “residual discretion” leads to the following questions which require the Tribunal to determine:

(1)  Whether the Tribunal has a residual discretion to refuse granting an order for sale even if the Tribunal is satisfied that: (a) the redevelopment of the Lot is justified due to the age or state of repair of the existing development on the Lot under section 4(2)(a) of the Ordinance; and (b) reasonable steps were taken by the applicants to acquire all the undivided shares in the Lot under section 4(2)(b) of the Ordinance.

(2)  If there were such a residual discretion as alleged by the 2^nd and 3^rd respondents, whether the alleged ground to exercise the residual discretion in the circumstances of this case is established; such alleged ground is that the redevelopment value (“RDV”) of the Lot is less than or close to the market value (“EUV”) of the Building and therefore redevelopment of the Lot would not be beneficial, or sufficiently beneficial, to the minority owners.

8.  Mr Simon K C Lam (“Mr Lam”), instructed by Messrs Woo Kwan Lee & Lo, is acting for the 2^nd and 3^rd respondents. The 1^st respondent is absent and unrepresented.

The Evidence

9.  For the purpose of the present proceedings, the applicants and the 2^nd and 3^rd respondents have produced the following expert reports:

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 30 August 2022;

(b)  Rebuttal Report dated 30 September 2022.

(2)  Ms Leung Chi Hang Joy (“Ms Joy Leung”), also a Chartered Building Surveyor, on behalf of the 2^nd and 3^rd respondents, filed the following reports:

(a)  Condition Survey Report dated 30 August 2022;

(b)  Rebuttal Report dated 26 September 2022.

(3)  Mr Benson Wong and Ms Joy Leung’s joint statement dated 10 November 2022.

Structural Assessment

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

(a)  Structural Assessment Report dated 22 August 2022;

(b)  Rebuttal Report dated 30 September 2022.

(2)  Mr Lo Kwok Kay (“Mr Lo”), also a Registered Structural Engineer, on behalf of the 2^nd and 3^rd respondents, filed the following reports:

(a)  Structural Assessment Report dated 23 August 2022;

(b)  Rebuttal Report dated 26 September 2022.

(3)  Mr C M Wong and Mr Lo’s joint statement dated 9 November 2022.

Valuation

(1)  Mr Charles C K Chan (“Mr Chan”), a Chartered Valuation Surveyor, on behalf of the applicants, filed the following reports:

(a)  Valuation Report dated 18 June 2021 on the EUV of the Building as at 11 June 2021;

(b)  Supplemental Report dated 31 August 2022 on the EUV of the Building as at 11 June 2021;

(c)  Rebuttal Report dated 29 September 2022 on the RDV of the Lot;

(d)  Updated EUV Report dated 13 March 2023;

(e)  Updated RDV Report dated 13 March 2023.

(2)  Ms Dorothy Chow Yeuk Yu (“Ms Chow”), also a Chartered Valuation Surveyor, on behalf of the 2^nd and 3^rd respondents, filed the following reports:

(a)  EUV and RDV Report dated 29 August 2022;

(b)  Rebuttal Valuation Report dated 29 September 2022;

(c)  Updated EUV Report dated 10 March 2023;

(d)  Updated RDV Report dated 10 March 2023.

(3)  Mr Chan and Ms Chow’s 1^st joint statement dated 4 November 2022.

(4)  Mr Chan and Ms Chow’s 2^nd joint statement dated 29 March 2023.

(5)  Towards the end of the trial, the Tribunal directed the parties to conduct research and submit to the Tribunal measurements of the common area and saleable area of the 16^th Floor of the building known as The Sharp in their closing submissions. The purpose of such exercise was to ascertain or verify if the layout or size of the common area of the hypothetical development proposed by Mr Chan is reasonable or not. Thus, Mr Chan and Ms Chow prepared and produced the 3^rd joint statement dated 11 May 2023.

10.  The applicants also produced their factual witness Chan Ka Yue’s witness statement dated 31 August 2022, whereas the 2^nd and 3^rd respondents did not produce any.

Whether the applicants are entitled to make the Application

11.  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.

12.  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.

13.  The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice (“the Notice”) was gazetted on 22 January 2010 and came into operation on 1 April 2010. 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)”.

14.  As mentioned above, the OP was issued on 25 February 1969, ie not less than 50 years before the date of the Application. The Notice is therefore applicable and the threshold percentage should be 80%.

15.  At the time of the filing of the Application, the applicants owned 91.3043% of the undivided shares of the Lot. We agree therefore that the applicants are entitled to make the Application under section 3(1) of the Ordinance.

EUV as at 11 June 2021

16.  By virtue of the 1^st joint statement dated 4 November 2022, Mr Chan and Ms Chow agreed that the EUV of the shop on G/F was $41,525,000 and that of the 2 units on M/F were $5,870,000 and $3,740,000 respectively, making a total of $9,610,000.

17.  Mr Chan and Ms Chow could not agree on the EUV of the domestic units on the upper floors. By making reference to Flat A on 3/F as a typical unit and to Flat A on 2/F as sub-divided units, Mr Chan arrived at $127,000 per sq m and $157,000 per sq m respectively, giving a total of $117,790,000 for the units from 1/F to 9/F. On the other hand, Ms Chow arrived at a total of $124,370,000 for the units from 1/F to 9/F on the basis of $135,000 per sq m and $164,000 per sq m respectively.

18.  For the reference unit of Flat A on 3/F which has a saleable area of 62.4 sq m, Mr Chan and Ms Chow relied on a total of 17 transactions in the vicinity as comparables:

Ref	Address	Date of Agreement	Age of Building	Consideration	Saleable Area (m2)	Unit Price (/m2)
R1	Flat 4, 7/F, Yau Kwong Building, 418-430 Hennessy Road/ 9 Canal Road West	18 Jun 21	1970	$6,600,000	54.6	$120,879
R2	Flat D, 8/F, Yue King Building, 1 Leighton Road	14 May 21	1971	$8,980,000	53.6	$167,537
R3	Flat A, 12/F, Hung Yip Building, 234 & 236 Wan Chai Road	11 May 21	1966	$5,780,000	41.7	$138,609
R4	Flat A, 17/F, Yue King Building, 1 Leighton Road	29 Apr 21	1971	$10,550,000	57.6	$183,160
R5	4/F, Cheong Ip Building, 350 Hennessy Road	22 Mar 21	1966	$5,750,000	51.7	$111,219
R6	Flat A, 2/F, 8, 8A, 8B & 10 Morrison Hill Road	25 Feb 21	1968	$6,120,000	49.8	$122,892
R7	Flat G, 4/F, Hung Yip Building, 234 & 236 Wan Chai Road	14 Dec 20	1966	$6,650,000	56.1	$118,538
R8	Flat B, 21/F, Yue King Building, 1 Leighton Road	4 Dec 20	1971	$10,000,000	62.8	$159,236
R9	Flat 8, 7/F, Yau Kwong Building, 418-430 Hennessy Road/ 9 Canal Road West	13 Nov 20	1970	$5,200,000	39.2	$132,653
R10	Flat I, 9/F, Hung Yip Building, 234 & 236 Wan Chai Road	16 Oct 20	1966	$5,530,000	41.2	$134,223
R11	Flat C, 8/F, Yue King Building, 1 Leighton Road	24 Sep 20	1971	$9,100,000	53.6	$169,776
R12	Flat A5, 3/F, Wing Tak Mansion, 275 Wan Chai Road	11 Sep 20	1972	$5,150,000	43.6	$118,119
R13	Flat A, 8/F, Sun Tao Building, 12-18 Morrison Hill Road	7 Aug 20	1967	$6,200,000	45.7	$135,667
R14	Flat G, 8/F, Hung Yip Building, 234 & 236 Wan Chai Road	23 Jul 20	1966	$6,700,000	52.9	$126,654
R15	Flat E, 6/F, Yue King Building, 1 Leighton Road	2 Jun 20	1971	$9,998,000	63.2	$158,196
R16	Flat A, 10/F, Sun Tao Building, 12-18 Morrison Hill Road	6 Apr 20	1967	$6,700,000	45.7	$146,608
R17	Flat 5, 7/F, Yau Kwong Building, 418-430 Hennessy Road/ 9 Canal Road West	20 Mar 20	1970	$8,000,000	63.3	$126,382

19.  Mr Chan and Ms Chow had the following agreements and disagreements on the adjustments applicable:[1]

Adjustment	Mr Chan	Ms Chow
Time	Private Domestic (Class B) Price Index published by Rating and Valuation Department (RVD)
Location	No adjustment is required for the comparables adopted
Age	0.25% per year	0.5% per year
Size/Quantum	1% per 10 sq m	1% per 5 sq m
Floor Level	0.5% per floor
View	Building View: 0.0% Open Building View: -3.0%
Noise	Noisy: 0.0% Very Noisy: +2.0% Normal/Fair: -2.0%
Vertical Circulation	Downward adjustments to comparable buildings with the lowest lift lobby situated on the street level
Building Condition & Management	Yue King Building has a better decorative condition and building management	Building condition has been reflected by age adjustment
Lift Provision	Better lift service for buildings served by more than 1 lift	The Building itself, though served by 1 lift, has the lowest number of domestic units being served and therefore further adjustment is not necessary
Lighting/ Ventilation	Upward adjustment for units facing rear lane

20.  The various adjustments applied by Mr Chan are shown in the table below (whereas those adjustments applied by Ms Chow, if different, are shown in parenthesis):

21.  Notwithstanding the above, Mr Chan, after revision of the saleable areas of the comparables, purported to disregard R3, R9 and R10 as comparables because of their smaller size in the range of 40 sq m.

22.  The comparables above can be further analysed in the table below:

Yau Kwong Building			Yue King Building			Hung Yip Building			Sun Tao Building
Ref	Unit	Unit Price	Ref	Unit	Unit Price	Ref	Unit	Unit Price	Ref	Unit	Unit Price
R1	Flat 4, 7/F	$120,879	R2	Flat D, 8/F	$167,537	R3	Flat A, 12/F	$138,609	R13	Flat A, 8/F	$135,667
R9	Flat 8, 7/F	$132,653	R4	Flat A, 17/F	$183,160	R7	Flat G, 4/F	$118,538	R16	Flat A, 10/F	$146,608
R17	Flat 5, 7/F	$126,382	R8	Flat B, 21/F	$159,236	R10	Flat I, 9/F	$134,223
			R11	Flat C, 8/F	$169,776	R14	Flat G, 8/F	$126,654
			R15	Flat E, 6/F	$158,196
	Median:	$126,382		Median:	$167,537		Median:	$134,223		Median:	$141,138

23.  As a result, we note that a majority of the comparables, including R3, R9 and R10, came from four buildings. There appears to be adequate number of comparables from each of the buildings. We agree with Mr Chan that R3, R9 and R10 can be disregarded without affecting the reliability of the remaining ones.

24.  As regards firstly the age adjustments, we note that Mr Chan adopted a less sensitive adjustment of 0.25% per year than Ms Chow’s 0.5% per year. While Mr Chan’s adjustments might be more applicable to evaluating age difference for aged premises, we prefer Ms Chow’s adjustments by reference to the table presented at paragraph 20 above. When a comparable is 3 years’ older in age, the adjustment is -1.5%.

25.  Similarly, we prefer Ms Chow’s proposed adjustment on quantum, as we have agreed that those units which have more significant difference in size have been disregarded as comparables.

26.  However, we do not agree with Ms Chow in her classifying units as “very noisy” in the absence of more concrete evidence. We consider those units all situated in a similar noisy environment.

27.  Also, having walked past the entrance of Yue King Building and the other comparable buildings, we agree with Mr Chan that there should be adjustment for better decorative condition and building management of Yue King Building. This is also manifested from the table in paragraph 22 above where the median[2] of the transaction prices in Yue King Building is significantly higher than those of the others. We are agreeable to the adjustment of -10% proposed by Mr Chan.

28.  Finally, we agree with Mr Chan that there should be adjustment for buildings served by more than 1 lift. Residents in a building which is served by 1 lift would suffer inconvenience when the only lift is under repair and maintenance or not available for use for any reason.

29.  Thus, our determination of the reference unit as at 11 June 2021 is $126,211 per sq m as shown below:

30.  As $126,211 per sq m comes very close to Mr Chan’s assessment of $127,000 per sq m (ie less than 1% difference), we are prepared to adopt $127,000 per sq m as the unit price of the reference unit of Flat A on 3/F as at 11 June 2021.

31.  However, as stated in paragraph 4 above, Flat A on 2/F is subdivided into 3 smaller units. Mr Chan and Ms Chow could not agree on the unit value applicable to these smaller units. Relying on a different set of comparables as shown below, Mr Chan and Ms Chow arrived at a unit rate of $157,000 per sq m and $164,000 per sq m respectively:

Ref	Address	Date of Agreement	Age of Building	Consideration	Saleable Area (m2)	Unit Price (/m2)
S1	Flat E, 8/F, King Tao Building, 94-100 Lockhart Road	27 Feb 21	1969	$4,440,000	24.6	$180,488
S2	Flat A, 11/F, 229 &231 Lockhart Road	18 Dec 20	1969	$4,250,000	27.1	$156,827
S3	Flat B5, 19/F, Wing Tak Mansion, 275 Wan Chai Road	12 Nov 20	1972	$4,320,000	27.0	$160,000
S4	Flat 5, 12/F, Wah To Building, 42 Wood Road	5 Nov 20	1969	$5,000,000	28.1	$177,936
S5	Flat 8, 10/F, Yau Kwong Building, 418-430 Hennessy Road/ 9 Canal Road West	4 Nov 20	1970	$4,460,000	27.8	$160,432

32.  Comparable S1 looks over a rear lane. While both Mr Chan and Ms Chow considered it having an inferior view, Mr Chan applied an adjustment of +3% while Ms Chow adopted +7%. We consider Ms Chow’s adoption of +7% excessive and prefer Mr Chan’s +3%.

33.  On the other hand, Mr Chan considered this comparable enjoying a relatively quiet environment and applied -4%; Ms Chow only applied -2%. We again agree with Mr Chan because the subject subdivided unit is overlooking onto the busy Morrison Hill Road which is traversed by heavy traffic.

34.  Similarly, for comparable S2, we share Mr Chan’s view that this comparable deserved a -2% on noise. This is comparable to the -2% applied by Ms Chow to S4 (which overlooks Cross Lane).

35.  As regards the other adjustment factors, we adopt the same as those applied in determining the EUV of Flat A on 3/F:

36.  Again, we find that our analysis accords with Mr Chan’s.

37.  We therefore apply the unit rate as found to the various units of the Building. The differences in opinion on size and view adjustments  have been resolved above, subject to we agreeing a larger adjustment of -5% for unit A3 on 2/F. The only remaining difference between Mr Chan and Ms Chow was on the internal condition of Unit A on 4/F. Mr Chan considered it in poor condition having regard to certain damp patches inside the kitchen and one of the bedrooms, while Ms Chow considered it fair (Grade 2), ie in condition marginally better than the reference unit. We agree with Ms Chow.

38.  Thus, our determination of the EUV of the various units is shown as follows:

39.  The total EUV of the Building as at 11 June 2021, according to our assessment, is as follows:

Address	EUV
G/F	$41,525,000
M/F	$9,610,000
1/F-9/F (& Roof)	$119,078,000
Total:	$170,213,000

Conclusion on EUV as at 11 June 2021

40.  From the above, it is our view that the total EUV for the Building is $170,213,000. The corresponding EUV and proportionate share of the sale proceeds of the 2^nd and 3^rd respondents pursuant to Part 3 of Schedule 1 to the Ordinance are as follows:

Respondent	Unit	EUV	Pro Rata Share of Sale Proceeds
The 2nd respondent	Flat A on 4/F	$8,202,000	4.8187%
The 3rd respondent	Flat A on 5/F	$8,487,000	4.9861%

EUV as at 9 March 2023

41.  The 2^nd and 3^rd respondents alleged that the RDV of the Lot is less than or close to the market value. Ms Chow updated the EUV of the Building to $154,867,000 as at 9 March 2023 by her Updated EUV Report dated 10 March 2023. This represented some 11% decrease in value from her EUV assessment of $174,408,000 as at 11 June 2021.

42.  We need not go into details of Ms Chow’s updated EUV assessment. As discussed below, we find that the RDV of the Lot should be at $249,800,000, which is some 43% higher than $174,408,000. Thus, the 2^nd and 3^rd respondents’ allegation is not a valid one. Even if there were residual discretion under sction 4(1)(b) of the Ordinance as suggested by the 2^nd and 3^rd respondents (which we disagree), there is no reason for us to exercise such discretion on the alleged ground raised by the 2^nd and 3^rd respondents.

The Law on whether Redevelopment of the Lot is Justified

43.  Section 4(2) of the Ordinance provides that the Tribunal shall not make an order for sale unless it is satisfied that the "age or state of repair" of the Building is justified and that the applicants have taken "reasonable steps" to acquire all the undivided shares of the Lot.

44.  The applicants rely on the guidelines laid down in Top Sail International Limited v Cheng Kai Ming, LDCS 18000/2010 (unreported, dated 15 November 2011 (“Top Sail”) and Charmlink Limited v Lee Tong Hing & Others, LDCS 16000/2010 (unreported, dated 29 November 2011) (“Charmlink”) on the factors that the Tribunal should consider in order to decide whether redevelopment is justified due to age and state of repair.

45.  In Top Sail, the Tribunal stated:

“23. ……, we are of the view that when the requirement of “the age” of the Buildings is considered, we should not restricted our consideration to just the physical age of the Buildings.…… we are of the view that the absence of a specific physical age in the Ordinance indicates that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question.

24. The physical age of a building is clearly one of the considerations…... The physical conditions of a building and the amount that would be required to maintain the building are other factors that the Tribunal should consider, as they would affect the decision on whether the life of a building should be ended or prolonged. The obsolete design of a building should also be considered as it has an important impact on whether it is too old to serve a modern society.”

46.  Such a discretion by the Tribunal was followed in Charmlink:

“30. We are of the view that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question. The relevant factors in the present case are that the Building is over 50 years old and it has passed its designed life. It is also obsolescent in design and not economical to maintain. All these factors point to the fact that the Building has come to an end of its physical as well as economical life. Thus, we find that redevelopment is justified on the ground of the age of the Building.

31. …… It is also within the Tribunal’s discretion to determine in what conditions a building should be redeveloped after considering all the relevant factors concerning the state of repair of the building in question. With the clear evidence from the two experts that the Building is in a poor state of repair and in fact untenantable without substantial repair works to be carried out over a long period of time, we have no hesitation in finding that redevelopment is justified by the state of repair of the Building.”

47.  There is no argument on the principles set out in Top Sail and Charmlink. It is agreed that they are guidelines guiding the Tribunal in the exercise of its discretion.

Structural Conditions of the Building

48.  Firstly, it was undisputed that Mr C M Wong and Mr Lo had respectively conducted the following tests which are summarized as follows:[3]

Type	Purpose
Visual Inspection Survey	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.
Concrete Cover to Expose Reinforcement	To measure the thickness of the concrete cover, which provides protection against corrosion for the steel reinforcement.
Depth of Carbonation (Phenolphthalein Test)	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 Test	To determine the chloride content of the concrete to find the vulnerability to corrosion of the steel reinforcement.
Core Compression Test	To find the actual strength and condition of the concrete by crashing core samples obtained from structural elements.

49.  By virtue of the Joint Expert Statement dated 9 November 2022, Mr C M Wong and Mr Lo agreed that there were over 30 defects on structural members, some of which were severe. It was found that the carbonation depth in all beam samples (100%) and nearly all slab samples (91%) had reached the reinforcement bars. The protection of the passive layer of concrete cover had already been lost and the steel reinforcement is susceptible to corrosion.[4]

50.  Notwithstanding the above, Mr Lo tried to defend that even the open-up inspection of 152 reinforcement bars by Mr C M Wong or his consultant showed only 59% of the slab samples were suffering from mild corrosion (which means bars were corroding along their lengths with loss of section less than 10%):[5]

Corrosion Grade	Extent of Corrosion	Slab		Beam		Column
		No of Bars	% to Total	No of Bars	% to Total	No of Bars	% to Total
1	No Corrosion	0	0%	0	0%	7	8%
2	Partial Corrosion	14	41%	27	93%	68	76%
3	Mild Corrosion	20	59%	2	7%	14	16%
4	Moderate Corrosion	0	0%	0	0%	0	0%
5	Severe Corrosion	0	0%	0	0%	0	0%
	Total:	34		29		89

51.  Nevertheless, by reference to the above table, all test samples, save 8% from columns, suffered from either partial corrosion or mild corrosion. In his oral evidence, Mr C M Wong stressed the importance of:

(1)  loss of sectional area in the reinforcements suffering from “partial corrosion” and “mild corrosion”,

(2)  rust thickness of the reinforcements found in Mr Lo’s test results, and

(3)  the fact that the test locations were taken from structural elements with no sign of structural defect.

In this context, as explained by Mr C M Wong, the test results indicated that corrosion had already begun generally in the structural elements and not just in the structural elements suffering from spalling and structural cracks.

52.  Moreover, the concrete cover test revealed that many spots had measured concrete cover smaller than design concrete cover for slabs and columns, and for beams under 2 scenarios:[6]

Slab	Beam		Column
	Scenario 1: Measurement up to main  reinforcement bars	Scenario 2: Measurement up to stirrups
31%	36%	82%	54%

It was agreed that this means workmanship of reinforcement fixing in terms of concrete cover did not follow the approved plan in a significant proportion of locations.[7]

53.  Based on the above findings, Mr C M Wong concluded that the structural frames of the Building were in need of repair. While the Building was designed and constructed more than 53 years ago, it has exhibited signs that its structural frames have deteriorated to the propagation phase where the protective barrier would be completely lost.[8]  It is futile for Mr Lam to challenge this concept of propagation phase when its meaning is widely understood in the industry. Neither would Mr Lo’s comment that it was difficult to quantify the deterioration rate and extent of defects in the future be of any assistance so long as the deterioration will accelerate and additional defects will appear in more locations. Frequent maintenance and repair works may be required in the near future in order to keep the Building in a safe and functional state.

54.  While Mr Lo considered such defects could be rectified by patch repair and that the degree of corrosion would depend on the presence of water moisture and oxygen, this does not assist his case when there is no effective measure to stop water moisture and oxygen entering the concrete anymore. We agree with Mr C M Wong that patch repair works only tackles locally the areas where repair has been carried out but cannot tackle the problem of rebar entering the propagation phase. Even after patch repair, further defects such as cracking and spalling will still gradually surface because the problem of carbonation, high chloride content and underlying corroded rebars are not remedied by the patch repair. It is a concern that such cracking and spalling will reappear after the patch repair requiring more frequent repair in the future.

55.  Mr Lam suggested in his closing submission that the adverse effect of carbonation would be alleviated by the denser concrete of higher compressive strength. Maybe this would be the case but the fact is that the Building at present is suffering from severe carbonation which, we understand, is an irreversible process. We regret that either Mr Lam or Mr Lo is talking of an ideal world or something which is contingent on further investigations, forgetting that the Tribunal is presented with the structural problem before it now and that a professional opinion has to be provided. With respect, Mr Lo appeared to be adopting certain kind of “wait and see” tactics, but even Mr Lam, in his closing submission, also emphasized that what is relevant is the Building’s present “state of repair”. Further and with respect, when Mr Lo stated that the Building “does not exhibit any sign of deterioration such that the overall structural stability is of concern at the moment” (underline added)[9], he failed to appreciate that the structural report is to assist the Tribunal to decide whether redevelopment is justified structurally, and in that regard stability concern is not the exhaustive test. The Tribunal here is not adopting the role of the Building Authority under section 26 of the Buildings Ordinance.

56.  Apart from the above, one of the disagreements between Mr C M Wong and Mr Lo was on the concept of the design working life of the Building. The design working life of a building is the period of use intended by the designer or the client at the time of designing the building. It is a nominal value, not a scientific determination, which represents an estimated target period of time, as opposed to an actual period. If the design working life of a building is set at 50 years at the design stage, this building is expected not to require major repairs within 50 years, assuming it has undergone normal maintenance.

57.  In Hong Kong, the first code that mentioned the requirement for design working life is the 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.”

58.  According to Mr C M Wong, when 78% of slab samples and 56% of the beam samples of the Building had measured concrete cover less than the required cover in the current design standard, and where ductility had not been duly considered in the design of the Building, the design working life of the Building is shorter than 50 years.[10]

59.  Mr Lo did not agree that the Building had a design working life of less than 50 years because the design of buildings prior to the 2004 Code does not necessarily mean the structure was designed with a shorter design working life. Mr Lo cited the following paragraph from Concrete Code Handbook – An Explanatory Handbook to the Code of Practice for Structural Use of Concrete 2004 published by the Hong Kong Institute of Engineers:[11]

“2.1.2 … In actual practice, the environmental and usage conditions of the buildings could vary from one extreme to another and similar buildings designed to the same durability standard might end up with very different degrees of deterioration after 30 or 40 years. Hence, the specified design life or design working life should be treated only as a nominal value.”

60.  However, these contrasting opinions between Mr C M Wong and Mr Lo had been considered by the Tribunal recently in China Orchid International Limited & Others v Fujitec (HK) Company Limited & Others, LDCS 7000/2018 (unreported, dated 5 May 2023) when they both happened also to be the structural experts in that case. Then the Tribunal remarked in paragraph 133 that it was reasonable for Mr C M Wong to adopt the concept of design working life, which is the reason for having such a benchmark in the first place. This concept of design working life was indeed adopted by the Government in procuring the lowering of the application threshold for certain classes of lots with respect to applications for compulsory order for sale under the Ordinance. Mr C M Wong agreed that the Building would not suddenly become unsafe after the expiry of its design working life but the structural safety margin of old buildings is obviously lower than modern buildings.[12] Again, with respect, Mr Lo had fallen onto the wrong track when he emphasized that the Building is still safe but forgetting that the deterioration of structures is a continuous process.

61.  Having reviewed the above and conducted our joint inspection of the Building on 18 April 2023, we are satisfied that redevelopment of the Lot is justified due to the state of repair of the Building. However, to make the picture complete, we are going to consider the age of the Building. Here, Mr Lam conceded that the physical age itself may carry little weight as it may just be a figure; it is the extent to which the Building, because of its age, has fallen into obsolescence that is important.

62.  Mr Benson Wong, in his Condition Survey Report dated 30 August 2022, in respect of the age of the Building, firstly stated that the Building is now over 53 years of age, having passed the end of its design working life. He referred to a paper of the Sub-committee on Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice – Profile of Old Buildings in Hong Kong dated 19 February 2010 (“the Paper”) which stated the following in paragraph 2 thereof:

“In Hong Kong, the design working life of an ordinary building is 50 years. The older the physical age of a building, the more likely it is fraught with building condition problems requiring attention over time. Rehabilitation will help to extend the working life of buildings. Redevelopment remains an effective tool to tackle the problem of urban decay in the long run.”[13]

63.  The Paper continued at paragraph 8 as follows:[14]

“While building age is certainly not a conclusive indicator for redevelopment, nonetheless, it remains a fact that older buildings are more prone to building maintenance problems. According to the BD’s records, building repair orders served on buildings aged 50 years or above in Hong Kong (representing about 85 of all existing buildings) account for 19% of all building repair orders that the Department has served over the past five years.”

64.  In Mr Benson Wong’s opinion, after the expiry of the design working life and with the structural frames getting older, it is inevitable to have more defects occurring in the structural frames requiring more substantial repairs.

65.  Mr Benson Wong stated further that the Building is also aged functionally in view of the following:[15]

(a)  The design and construction of the structural frames had only complied with the less stringent structural requirements applicable more than 50 years ago resulting in no improvement of the robustness of the structural frames in resisting disproportionate collapse due to accidents;

(b)  The fire service installation is sub-standard due to the lack of the following essential fire service systems:

(i)  no automatic sprinkler system;

(ii)  sub-standard fire hydrant/hose reel system; and

(iii)  no emergency electricity supply system.

(c)  The fire escape arrangement for the Building is unsatisfactory with the following deficiencies:

(i)  no emergency lighting is provided to the required staircases and lobbies of the Building; and

(ii)  the two required staircase exits on upper floors are nearer than 6 m from each other.

(d)  The fire resisting construction is outdated as follows:

(i) the existing concrete cover thickness of floor slab is 12.7 mm and that of beam is 25.4 mm, which is less than the currently required thickness of 30 mm for floor slab and 35 mm for beam;

(ii)  the existing doors to the flats and offices on upper floors of the Building are not fire rated doors as currently required; and

(iii)  the existing electrical installations and wirings installed in the staircases and lobbies are exposed thereby posing fire hazards to the fire escape.

(e)  The fire access arrangements for the Building are unsatisfactory when there is no fireman’s lift.

(f)  The Building has no barrier-free access facilities such as:

(i)  an accessible lift; and

(ii)  an accessible ramp.

(g)  …

(h)  The Building has no lightning protection system installed on the roof to protect its occupants and building parts from lightning strikes.

66.  Mr Benson Wong considered some of these aspects of functional obsolescence are extremely difficult to be rectified unless the Building is demolished and redeveloped.

67.  Turning to the state of repair, Mr Benson Wong had found, inter alia, that the external wall surfaces stained. Defects, including cracking and crazing of rendering, blistering and flaking of paintwork, that are apparent on the external rendering were identified. In addition, infrared thermographic surveys had detected 37 hollow spots of Severity Index I, ie minor delamination of temperature difference less than 2 degrees and/or of potential hollow area smaller than 1 m², most of which appearing on the façades facing the vacant site at 27 Morrison Hill Road to its north and facing the rear towards Bowrington Road.

68.  Having said the above, Mr Benson Wong stated that the actual number of hollow spots and repair areas should have been under-estimated due to the following site constraints:

(i)  The 37 hollow spots detected are scattered throughout the external walls on all elevations.[16]

(ii)  The scanning angle is too steep to enable the infrared camera to produce a decent temperature contour image of the external wall surfaces.

(iii)  There are parts of external walls with view obstructed prohibiting infrared scanning.

As a result, Building Diagnostic Consultants Limited, who carried out the infrared thermographic survey, estimated that about 45% of the external wall surface area could not be properly infrared scanned.

69.  Mr Benson Wong estimated the repair cost at $13,310,345, which is about 48% of the construction cost of $27,947,000 for constructing a new similar superstructure, exclusive of foundation and demolition costs[17].

70.  In comparison, Ms Joy Leung estimated the repair cost at $10,587,383.6, which amounted to 25% of her estimated construction cost of $42,256,020, inclusive of foundation and demolition costs. Nevertheless, during cross-examination, Ms Joy Leung admitted that she had adopted the wrong “construction floor area” (“CFA”) in her calculation:

(a)  Ms Joy Leung obtained her “gross floor area” (“GFA”) from the calculation sheet of the approved building plans;

(b)  Unfortunately, the calculation sheet was formulated under volume regime under the Building (Planning) Regulations[18] instead of the prevailing GFA regime;

(c)  The GFA as contained in the calculation sheet in fact included the area of the whole building enclosed by its external walls and did not contain any area resembling an area which is exempted from being GFA accountable under the prevailing GFA regime, ie Ms Joy Leung had over-estimated the GFA under the prevailing GFA regime or the 1,580.833 sq m converted by Ms Joy Leung from the imperial figure should be CFA instead of GFA;

(d)  Without realizing the difference, Ms Joy Leung multiplied what she regarded as GFA by 110% to derive the CFA of 1,738.91 sq m.

(e)  Ms Joy Leung further admitted that her balcony calculation could be wrong as shown in the green box of Exhibit A1 and the roof structures (inclusive of staircase housing, water tank and lift machine room) should be about 28 sq m so that the correct CFA should be about 1,570 sq m instead of 1,580.83.

(f)  The unit cost of construction at $22,000 per sq m as derived from Rider Levett Buncknall (“RBL”), the construction and property consultancy’s suggested range of construction cost for high rise and better quality residential building from $19,500 to $22,700 per sq m might not be applicable to the Building which was built over 50 years ago.

(g)  Thus, if one were to use the lower unit cost of $19,500 per sq m x 1,580.83 sq m, the resulting construction cost inclusive of foundation and demolition would be $34,826,185 and Ms Joy Leung’s repair cost estimation would be about 30.4% of this construction cost. This is already a considerable sum.

(h)  Ms Joy Leung also admitted that she had been accustomed to providing opinion for fire insurance purpose where the damaged building is unlikely to be completely rebuilt with a new foundation.[19]  Thus, the correct comparison should be with construction cost exclusive of foundation and demolition cost. As Mr Benson Wong explained it, his comparison was to illustrate the degree of deterioration and hence the state of repair of the Building when compared with the modern standards (see also paragraph 183 of China Orchid, supra).

71.  Mr Lam in his closing submission cited examples of the Tribunal adopting an alternative test, ie a comparison between repair cost and EUV of the Building: Ms Joy Leung’s estimated repair cost was only up to 6.98% of Ms Chow’s updated EUV and Mr Benson Wong’s estimate was up to 9.15% of Mr Chan’s updated EUV. However, this begs the question of whether the owners of the Building are ready to spend that much on repair in the first place. For instance, in Wah Ha Property Development Limited & Others v Rosehawk Group Limited & Others, LDCS 25000/2018 (unreported, dated 30 April 2021), the Tribunal found (in paragraph 90) that the repair cost of the development at the Peak is relatively low when compared to its EUV amounting to a negligible 0.67% according to the minority owners’ expert or a mere 2.32% according to the majority owners’ expert. In Bright Full Limited & Others v Hing May Properties Limited, LDCS 36000/2019 (unreported, dated 6 January 2023), the Tribunal found (in paragraph 155) that the repair cost vis-à-vis the EUV of the semi-detached housing development was higher but still less than 5%. Most importantly in this latter case, there was evidence as elaborated in paragraph 154 of the judgment that the repair cost required for each house appears not to be too much as prospective purchasers of such luxury houses would likely spend a similar sum on renovation. In comparison, there is no evidence before us that certain minority owners or the 2^nd and 3^rd respondents in particular would be ready to spend up to 6.98% of Ms Chow’s updated EUV.

72.  Likewise, in Able Wide Corporation Limited & Others v The Incorporated Owners of Good Year Industrial Building & Another, LDCS 1000/2020 (unreported, dated 23 December 2022), the Tribunal criticised (in paragraph 103) the minority owner for putting forward a revitalisation scheme but failed to produce any evidence that she was interested in participating in the revitalisation of the industrial building in question and paying the modification premium which appears to be more than $100 million. The same remark was repeated in paragraph 53 of the subsequent decision on costs (which is reported in [2023] 1 HKLRD).

73.  Mr Mok submitted and we agreed that, the comparison percentages of these top and high-end properties in Wah Ha and Bright Full would only assist the Tribunal to gain another perspective on the question of whether redevelopment of the Lot is justified.

74.  Moreover, Ms Joy Leung was further referred to the second subparagraph of 2.1 of the HKIS Guide to Prepare an Expert Report for Application under Land (Compulsory Sale for Redevelopment) Ordinance, Chapter 545 (“the HKIS Guide”) and was asked whether she used the test of “whether the existing building(s) on the concerned lot has reached the end of its physical life and is not in a habitable condition” to formulate her view on whether redevelopment of the Building is justified, and Ms Joy Leung gave the answer: “yes”.

75.  With respect, the Tribunal pointed out immediately that the HKIS Guide might not be appropriate in the consideration of the age or state of repair of the existing development under the Ordinance. Like what the Court of the First Instance stated in paragraph 50 in Fully Profit (Asia) Limited v The Secretary for Justice [2011] 3 HKLRD 434, such practice note or professional guide merely constitutes the view expressed by one party, professional or otherwise. “It is thus not binding on the court nor does it have any evidential value.”  In any event, as pointed out by the Tribunal in paragraph 58 in Able Luck Development Limited & Others v Pawling Limited, LDCS 11000/2018 (unreported, dated 22 April 2022), “The guide was full of caveat and disclaimer reminding members to exercise their own judgment, and reminding that the guide is not meant to be authority or comprehensive etc.”

76.  For instance, the Tribunal in Fortress Jet Limited & Others v Tang Hoi Yip and Cheung Sau Chan Property Limited, LDCS 3000/2015 (unreported, dated 11 August 2017) held in paragraph 35 that:

“the requirement that the Buildings have to become “dangerous” for giving the order for sale is not consistent with the wording and intention of s.4(2)(a)(i) of the Ordinance where the statutory requirement is whether “redevelopment is justified owing to age or state of repair of the existing development”.”

77.  The same was affirmed by the Tribunal in paragraph 119 of the judgment in Pacific Base Holdings Limited & Others v Lee Hop Biu & Others, LDCS 14000/2017 (unreported, dated 4 June 2020, which is also cited as [2020] HKLdT 20).

78.  Once again, we would like to emphasize that the Tribunal adjudicating whether the redevelopment of a lot is justified due to the age or state of repair of the existing development on the lot under section 4(2)(a)(i) of the Ordinance is not adopting the role of the Building Authority under section 26 of the Buildings Ordinance.

79.  Moreover, the use of the term of “habitable condition” is not appropriate and tends to be misleading. Ms Joy Leung explained that “if a building is considered as “habitable”, it would mean that the condition of the structural frame, the building components, the finishes and the building services installations are in a reasonable condition which are, as a whole, fit for use/occupation and suitable for occupants to carry out activities in it which is a standard that BD will issue OP to certify it is suitable for occupation.”  Of course, Ms Joy Leung was saying that the Buildings Department would issue the occupation permit when the Building was built in 1969.

80.  Maybe Ms Joy Leung was trying to rescue the position when she stated in paragraphs 1.3.6 and 11.6 of Ms Joy Leung’s Condition Survey Report dated 30 August 2022 that:

“The Building is found to meet the current building safety, fire safety and hygiene requirements up to year 1995 … The condition of the Building is similar to the other buildings built in 1995…”[20]

81.  We are totally at a loss why the Building, which met only the building safety, fire safety and hygiene requirements up to year 1995, ie some 30 years ago, cannot be considered for redevelopment to meet present day requirements. The word “current” adopted by Ms Joy Leung is again misleading if she meant that the Building could only meet certain building safety, fire safety and hygiene requirements up to year 1995. On the other hand, the test of “tenantable condition” was accepted by the Tribunal as early as in Intelligent House Limited v Chan Tung Shing & Others, LDCS 11000/2006, [2008] 4 HKC 421 which was one of the first cases where the Tribunal was required to consider whether the requirements under section 4(2)(a)(i) of the Ordinance were satisfied on the basis of the following:[21]

“(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.

(5) Since it is common ground (by reason of the decision in Good Trader which is accepted by the parties to be correct) that the Tribunal is entitled to look at the economic lifespan of the building under this provision, for the ground of “age”, it is again open to the Tribunal to use and adopt the land economic test (hereinafter “the land economic test”) to satisfy itself that redevelopment is justified when: the cleared site value (which is equal to the value of the site[33] with an existing building less the cost necessary to clear it) of the lot exceeds its existing use value, so long as there is sufficient evidence to show that the present existing use value of the lot is declined to such a level because of “obsolescence” (i.e., age). ...

(6) Further, in considering the cost of the “state of repair”, the Tribunal is similarly entitled to look at repair works which are necessary to render the building a tenantable condition, which is reasonably fit for use in the sense that it should be safe and hygienic for occupiers and visitors, and provide a standard of comfort and convenience which is reasonable in the present day circumstances for the type of building in question. Mr Roots[22] emphasizes in his closing submissions that he is not contending that (a) the repairs that needed to be carried out is to make the old building “as new” either by today’s standards or even by the standards when it was built, and (b) modern finishes and installations should replace the types originally provided except where that is required by law or good safety practice.” (underline added)

82.  In Fineway Properties Limited v Sin Ho Yuen Victor [2010] 4 HKLRD 1, it is true that the Court of Appeal (in paragraph 35) had reservation on the application of the concept of “economic lifespan” as stated in (5) above but there was no criticism of other criteria. Thus, no matter whether the term “tenantable standard” or “tenantable condition” is ideal or not, the Tribunal is entitled to

(1)  make a comparison between the old/existing building and a new building or any proposed redevelopment, but not a building of the older days;

(2)  compare the 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.

(3)  look at repair works which are necessary to render the building a tenantable condition, which is reasonably fit for use in the sense that it should be safe and hygienic for occupiers and visitors, and provide a standard of comfort and convenience which is reasonable in the present day circumstances for the type of building in question.

83.  Indeed, during cross-examination, Ms Joy Leung was demonstrated clearly how her formulation of the repair cost had been adversely affected by her adoption of “habitable condition”:

(a)  Ms Joy Leung was referred to the Joint Statement of the Condition Survey Experts dated 10 November 2022 where she confirmed that by using her standard of “habitable condition”, when there is spalled concrete in an internal beam requiring structural repair and after the structural repair is done, she would only allow the cost of patch repainting of the immediate area where the structural repair is done and would not consider allowing the cost of repainting the rest of the room.[23]

(b)  Ms Joy Leung also confirmed that she would reject the inclusion of fitting out works under her “habitable condition”.

84.  With respect, by adopting the standard of “habitable condition”, Ms Joy Leung was immersed in her experience in relation to the Buildings Ordinance or its subsidiary regulations that do not have any statutory requirements on finishes except the following minor or irrelevant matter as far as section 4(2)(a)(i) of the Ordinance is concerned:[24]

(a)  The internal surface of every kitchen to a height of at least 1.2 m from floor level shall be faced with tiles, or rendered in cement mortar, not less than 12.5 mm in thickness, or other non-absorbent material,

(b)  The floor of every latrine shall be not less than 150 mm above the level of the ground outside the latrine and shall be constructed of non-absorbent material and finished with a smooth surface, and

(c)  The internal surface of every latrine to a height of at least 1.2 m from the level of the floor of the latrine shall be

(i)  faced with tiles; or

(ii)  rendered in cement mortar, not less than 12.5 mm thick, or other non-absorbent material.

85.  Particularly, Ms Joy Leung clarified that by adopting the “habitable standard”, her proposed repair would not take into account legislation and regulations which are relevant to that particular aspect but legally unenforceable against an old building. In our view, one of the major drawbacks of Ms Leung’s approach is that it wholly disregards the modern-day standards and expectation on aspects such as safety and hygiene which are actually the important aspects which many new legislations aim to deal with in order to improve the environment and achieve a better standard of living or occupation.

86.  In any event, Ms Joy Leung’s standard of “habitable condition” was specifically rejected by the Tribunal in Century Supreme International Limited v  Kam Chi Kit Charles and Hui Pui Kuen & Others, LDCS 24000/2018 (unreported, dated 21 January 2022) and more recently in Able Luck, supra.

87.  For instance, in Century Supreme, the Tribunal, after reviewing the authorities we canvassed above, stated (in paragraph 90) as follows:

“To conclude, we find Ms Leung’s distinction between essential repairs and improvement works artificial by nature and is in lack of consistency in application. Whilst the respondents challenge the application of the “tenantable standard” in the consideration of the state of repair and the cost of repair, they apparently are unable to suggest any better alternative. In our view, the “habitable standard” advocated by her is basically the bare minimum requirements with limited referential value for the assessment. Such a standard is a disincentive to improvement in living/occupation condition and is unattractive to us. As a matter of principle and policy, the Ordinance was passed for the purpose of assisting assembly of land for redevelopment which is plainly for improvement of the environment. It makes more sense to say that in considering the age and state of repairs, one should put emphasis on or at least be receptive to the up-dating of the environment rather than being gratified by a mere satisfaction of the minimum safety requirement for the public and the occupiers. Having considered all the evidence available with or without the application of any particular test, we are satisfied that redevelopment is justified by reason of the age or state of repair of the Building.”

88.  Then in Able Luck, supra, the Tribunal stated (in paragraph 60) as follows:

“For the reasons explained above including the analyses in Century Supreme which we adopt, we find that the Court of Appeal’s observations in Fineway as properly construed and comprehended does not take R4’s case any higher. We are not persuaded by the rival “habitable condition” standard as contended by Ms Joy Leung.”[25]

89.  Putting aside the different labels of “habitable standard” and “tenantable standard”, we now turn to the evidence about the condition of the Building. That is even after the experts’ proposal for repairs, the Building remains to suffer from a number of major items of obsolescence and defects which cannot be remedied by the repairs.

90.  As stated in paragraph 52 above, the percentage of spots with measured concrete cover smaller than design concrete cover for slabs is 31%. For scenario 1 of the beams (ie measurement of concrete cover to main reinforcement bars) it is 36%, for scenario 2 of the beams (measurement of concrete cover to stirrups) 82% and for column 54%. No repair was formulated to remove this structural defect.

91.  Again, carbonation depth of the concrete cover of all (100%) of the beam samples and 91% of slab samples have reached the reinforcement bars and the protection of the passive layer of concrete cover has already been lost and the steel reinforcement is susceptible to corrosion.

92.  In addition, the Building cannot comply with Clause B10.2 of the Code of Practice for Fire Safety in Buildings 2011 when on all upper floors of the Building the door of one required staircase is nearer than 6 m from the door of another required staircase, which was introduced to reduce fire escape risk. Ms Joy Leung explained that the Building would be able to satisfy the requirement of the means of escape code 1996 before it was revised to impose the 6 m requirement. Mr Lam also tried to come into rescue by suggesting that the nearest fire station is only 5 to 6 minutes away. However, there is no exemption because of the proximity to a fire station.

93.  More importantly, the lowest lift lobby of the Building is at the mezzanine floor. That means residents from the upper floors after reaching the lobby have to negotiate down a flight of steps of 1.067 m in width before they can arrive at the open air on the street. This defect cannot be remedied by the provision of wheelchairs or similar accessory devices which are though capable of step climbing. Indeed, ever since the amendments to the Building (Planning) Regulations in 1997, Regulation 72 stipulates that, where a building is one to which persons with a disability may reasonably be expected to have access, the building shall be designed in such a manner as to facilitate access to and use of the building and its facilities by persons with a disability to the satisfaction of the Building Authority. Going up and down a long flight of steps by wheelchair is surely not satisfactory.

94.  Recently, in China Orchid, supra, the Tribunal made the following remark in paragraph 188:

“While it is true that the structural safety of the Building is not a cause of concern at the moment, it is manifested that the Building suffers from obsolete design/ construction and inherent deficiencies which are not and cannot be remedied by the proposed repair items of the experts.”

95.  And in Pacific Base Holdings Limited & Others v Lee Hop Biu & Others, CACV 426/2020 (unreported, dated 31 May 2021), the Court of Appeal remarked in paragraph 27 as follows:

“Whilst the Tribunal is directed by Section 4(2)(a) of LCSRO to consider if the redevelopment is justified due to the age or state of repair of the existing development on the lot, there is no requirement that the Tribunal has to be satisfied that the building works issues can be resolved before it makes an order for compulsory sale.”

96.  Having considered the evidence before the Tribunal and as discussed above, we are satisfied that redevelopment of the Building is justified due to the age and state of repair.

Section 4(2)(b) – Whether Applicants have taken reasonable steps

97.  The applicants are under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interest of the respondents under Section 4(2)(b) of the Ordinance.

98.  It is not disputed that the applicants, through Messrs Mayer Brown, have made the following offers to the respondents through their solicitors to acquire the units or interests they own:-

Date of offer	The 1st and 2nd respondents’ Unit	The 3rd respondent’s Unit
13 Jul 2021	$10,426,006	$10,477,620

99.  Subsequent to the above, Messrs Mayer Brown received from Messrs C T Chan & Co dated 19 July 2021 that the 2^nd respondent would only accept the offer of $10,426,006 but with condition. Then, by its letter dated 29 September 2021, Messrs Mayer Brown explained to Messrs C T Chan & Co that the offer dated 13 July 2021 above was meant for both the 1^st and 2^nd respondents as joint tenants and on the assumption that, upon acceptance, they both would sell their legal and beneficial interest of the whole of their property at Flat A on 4/F to the applicants. The letter from Messrs C T Chan & Co dated 19 July 2021 was regarded as a counter offer with respect to the sale of the 2^nd respondent’s interest only which was not acceptable by the applicants. As a result, Messrs Mayer Brown, on behalf of the applicants, made a fresh offer of $8,000,000 to acquire the 2^nd respondent’s legal and beneficial interest in the property at Flat A on 4/F.

100.  This fresh offer of 29 September 2021 was met with another counter offer by Messrs C T Chan & Co dated 26 November 2021 which was not accepted by the applicants. Instead, Messrs Mayer Brown, on behalf of the applicants, made another offer of $8,540,000 on 2 December 2021 to acquire the 2^nd respondent’s legal and beneficial interest in the property at Flat A on 4/F which was not accepted.

101.  Subsequently the applicants appointed Messrs Howse Williams to replace Messrs Mayer Brown. Messrs Howse Williams made the following offers to the respondents through their solicitors to acquire the units or interests they own:-

Date of offer	The 2nd respondent’s Unit	The 3rd respondent’s Unit
31 Mar 2023	$10,845,000	$11,235,000

102.  According to the applicants, the latter offers made were twin-offers. The first of the twin-offers to the 2^nd respondent was open for acceptance until the date on which the judgment of the Tribunal would be handed down. The offer stated that the offered price was 1.5 times of the EUV of the 2^nd respondent’s unit, Flat A on 4/F, as assessed by Ms Chow.

103.  The second of the twin-offers was a conditional offer which would arise only in the event that the Tribunal either (1) assesses the EUV of all subject units to be higher than the RDV of the Lot, or (2) assesses the RDV of the Lot to be higher than the EUV of all subject units but the difference is less than 50%. Such second (conditional) offer was to purchase the 2^nd respondent’s interest in Flat A on 4/F for a sum of 1.5 times of the EUV of the unit as assessed by the Tribunal. While the other terms of the conditional offer were the same as that of the first offer, this second offer, if arises, shall be open for acceptance within 14 days from the date of the judgment handed down by the Tribunal.

104.  A similar twin-offers dated 31 Mar 2023 was made to the 3^rd respondent to acquire its unit, ie Flat A on 5/F.

105.  Mr Mok explained that, in essence, the standing offer (which was effective before the Tribunal’s judgment) and the conditional offer (which would be effective after the judgment) would ensure that the offered price of the respective interest of each of the 2^nd and the 3^rd respondents would be 1.5 times of the EUV of their respective units as assessed either by their own valuation expert, Ms Chow or by the Tribunal in the judgment.

106.  Obviously, these offers, whether in the form of twin-offers or otherwise, were significantly higher than the EUV as determined for the respective units (see parapraph 40 above). Furthermore, the first offers dated 13 Jul 2021 were all supported by the advice letters of Savills.

107.  More importantly, the Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578, [2005] 4 HKLRD 363 (“Capital Well”) has emphasized (in paragraph 33) that:

“In making that assessment (whether an offer is reasonable) the Tribunal is not conducting a valuation exercise. It does not need to adjudicate upon any disputes about the correct valuation principles to be applied. It does not itself arrive at any conclusion as to what figure represents the correct valuation. It merely needs to be satisfied that, on the evidence available, the offer falls within the range of what may broadly be regarded as fair and reasonable compensation for the interest in question.”[26]

108.  Bearing in mind the above, we are satisfied that on the evidence available and in the circumstances of the Application, the applicants have taken reasonable steps to acquire all the undivided shares in the Lot including negotiating for the purchase of such of those shares  owned by the 2^nd and 3^rd respondents on terms that are fair and reasonable.

109.  It is noted that Mr Lam had in his opening submissions stated that he would leave it to the Tribunal to decide whether or not, in all the circumstances of this case, reasonable steps had been taken by the applicants to acquire all the undivided shares in the Lot. Mr Lam then made no suggestion at all that the offered price in the twin-offers to each of the 2^nd and 3^rd respondents was not high enough to qualify as a fair and reasonable compensation of the interest of the 2^nd or 3^rd respondents, save and except that the 2^nd and 3^rd respondents argued, by their Amended Notice of Opposition dated 27 February 2023, that, inter alia, the Tribunal had a residual discretion under the Ordinance not to make an order for sale.

110.  However, Mr Lam in his written closing submission dated 16 May 2023 made the allegation that the twin-offers in the sum of $11,235,000 to the 3^rd respondent was unreasonable because the 3^rd respondent, being a corporation, bought Flat A, 5/F on 17 April 2019 for $7,980,000 and paid a special stamp duty[27] of 30% in the sum of $2,400,000. Should an order for sale be made, the 3^rd respondent would have to pay such special stamp duty once again if it were to acquire a replacement property. Thus, the applicants’ latest offer in the sum of $11,235,000 was insufficient to cover the 3^rd respondent’s acquisition cost plus the special stamp duty expenses, not to mention other expenses such as legal fees, agency fees etc.

111.  We agree with Mr Mok that the 3^rd respondent’s pleading on reasonable step did not put forward any positive case. In its Amended Notice of Opposition afore-mentioned, the 3^rd respondent merely stated that “the Applicants had neither taken reasonable steps to acquire nor offered reasonable terms for the purchase of all the undivided shares in the Lot including those of the 3^rd Respondent’s unit”. No reference was made to the so-called special stamp duty whatsoever nor the purchase price of $7,980,000.

112.  Mr Mok argued and we accept that, if the positive case were pleaded properly at a reasonable stage of the proceedings as opposed to being pleaded in the closing submission only, the applicants could have considered covering the challenge perhaps with another offer. Mr Mok further asserted that this late reference to the special stamp duty amounted to an ambush attack which was calculated to unfairly eliminate any possible reaction time on the part of the applicants and is fundamentally contrary to the spirit of a fair trial.

113.  In Grand Power International Limited v Chan Sing Hoi Enterprises Limited [2020] 2 HKLRD 142, the Court of Appeal, in facing with a similar situation, remarked (in paragraph 41) as follows:

“Even if the amended notice of opposition is not to be treated as a pleading by which the 1^st respondent is strictly bound, it can hardly be regarded as giving “fair indication” of the issues likely to be raised.”

114.  Then, the Court of Appeal (in paragraph 42) refused to allow the 1^st respondent in that case to rely on the unpleaded defence. Taking into account the circumstances of the present case, we are going to do the same.

115.  Having ruled the above, we note that in Century Supreme, supra, the counsel acting on behalf of some of the respondents submitted that since the Ordinance involves a serious undermining of the respondents’ property rights, requiring the applicants to take such “reasonable” and “minimal” steps to find out more about the individual circumstances of the respondents is perfectly reasonable. The Tribunal responded as follows:

“34. It appears to us that the so-called individual circumstances of the minority owners are not likely to be something which the majority owner can find out by themselves but are likely things that are privy to the minority owners. We believe requiring the applicant to take into consideration the personal or individual circumstances of the minority owners which can be varied, diversified, sentimental and uncertain and which the applicant may not be able to resolve would likely land the majority owner in an impossible position.

35. As we understand it, a major objective to be achieved by the requirement of taking reasonable steps to acquire all the undivided shares is to prevent pre-mature filing of a compulsory sale application by the majority owner so that if acquisition of all undivided shares could be achieved by way of agreement between the parties, then the time and costs of having to commence a compulsory sale application and to go through the litigation process could be saved.

36. One would see that the individual circumstances of the minority owners in the present case as set out in paragraph 31 above mainly involve their subjective emotional attachment to their properties and their unwillingness to sell. Such sentimental factors of the minority owners cannot be satisfied and their intention to stay on at their premises cannot be achieved unless the majority owner gives up acquiring the undivided shares of the minority owners and hence gives up the redevelopment plan. To suggest that the majority owner would have to give up the very purpose of a compulsory sale application (i.e. give up acquiring the undivided shares of the lots for redevelopment) in order to be regarded as having satisfied the statutory requirements for making a compulsory sale application is no different from putting the cart before the horse and is unpersuasive to us.

37. It is clear that the Ordinance does not require the applicant to take reasonable steps to “satisfy the individual needs of the minority owners” but requires the applicant to take reasonable steps to “acquire all the undivided shares”. With that in mind, we just do not see how the respondents’ complaints could be substantiated. We are satisfied that the applicant has taken reasonable steps in an attempt to acquire all the undivided shares of the Lots on terms that are fair and reasonable.

38. The respondents raise the incidental question of whether, apart from the requirements of (1) taking reasonable steps to acquire the undivided shares; and (2) age or state of repair, there are other considerations (such as the personal or individual circumstances of the respondents) which the tribunal should take into account in deciding whether to grant an order for sale.

39. This question originates from the wording of section 4 of the Ordinance which stipulates that the tribunal shall not make an order for sale unless it is satisfied that redevelopment of the lot is justified due to the age or state of repair and the majority owners have taken reasonable steps to acquire all the undivided shares in the lot. The statutory requirements are expressed by way of using two forms of grammatical negation in one phrase or sentence, i.e. double negative.

40. In our view, such textual expression does not compel the tribunal to make an order for sale once the “age or state of repair” and “reasonable steps” are satisfied. This means the tribunal could refuse to grant an order even though the criteria are met. However, the Ordinance does not indicate upon the occurrence of what events or due to the existence of what circumstances the tribunal should refuse to make an order for sale despite the statutory requirements are satisfied. Since the primary objective of the Ordinance is to facilitate urban renewal and redevelopment of aged buildings, in our opinion that those highly subjective and general factors such as emotional attachments to the properties and fondness of the neighbourhood or local community, stress in relocation arrangements, family plan etc should be insufficient to render an otherwise successful compulsory sale futile and a failure. As for other considerations of the minority owners such as proximity between their properties and the Sanatorium hospital or proximity between their properties and family business in Happy Valley etc, we believe such locational preference could possibly be resolved by the minority owners’ acquiring another property in Happy Valley.

41. In assessing the strength of this argument of the respondents, one can imagine that if the respondents’ contention is right, the chance of the majority owners being able to successfully obtain a compulsory sale order would be slim if not fanciful. The entire redevelopment plan/project of lots through compulsory sale applications would become highly vulnerable at the whim of any minority owner who can effortlessly claim the existence of subjective circumstances or sentiments which the majority owner is not even in a position to prove or disprove.

42. In this regard, we find the Provisional Legislative Council Brief on the Land (compulsory Sale for Redevelopment) Bill has some discussions which are quite relevant. Paragraph 2 thereof stated that the purpose of the bill was to “enable owners holding a clear majority of the shares in a lot which merits priority redevelopment to sell the whole lot, despite legal interests of the minority owners not having been acquired”. Paragraph 3 further acknowledged and noted the problem that individual owners may refuse to sell for personal reasons or demand unreasonably high prices. Taking those problems on board, the Bill was made to address the problem “with a view to facilitating private sector participation in expediting urban renewal”.

43. Weighing everything we cannot find any basis to the assertion that in the scheme of things of compulsory sale applications, the scale should be tilted that much in favour of the minority owners such that their personal circumstances in the nature as described in paragraph 31 above would justify refusal of an otherwise successful compulsory sale application. Whilst acknowledging that private property right ought to be respected and reasonably protected, we equally subscribe to the thinking that protection of such rights shall not be overstretched to extent of fundamentally hindering the operation and undermining the primary objective of the Ordinance.

44. To conclude, we find that none of the personal circumstances of the respondents would have an impact on our determination as to whether an order for sale shall be granted.” (underline added)

116.  Similarly, should we have to rule on the 3^rd respondent’s requirement to pay a special stamp duty in acquiring its unit or an alternative property, we share the view with Century Supreme that the Ordinance does not require the applicants to take reasonable steps to “satisfy the individual needs of the minority owners” which include the 3^rd respondent in the present case but requires the applicant to take reasonable steps to “acquire all the undivided shares”. Thus, the personal circumstances of the respondents including the 3^rd respondent’s paying a special stamp duty in acquiring its unit or an alternative property is irrelevant for the purpose of section 4(2)(b) of the Ordinance.

Residual Discretion

117.  Perhaps in the same vein as the respondents’ counsel in Century Supreme, supra, and perhaps in China Orchid, supra, as well, Mr Lam argued that the Tribunal should have a residual discretion to refuse an order for compulsory sale even though the criteria as stated in section 4(2)(a) and (b) are satisfied, referring to particularly section 4(1)(b)(ii) which provides as follows:

“4(1) Subject to subsection (2), the Tribunal shall determine an application under section 3(1) by—

(a) first—

…

(b) second—

(i) making an order that all the undivided shares in the lot the subject of the application be sold for the purposes of the redevelopment of the lot; or

(ii) refusing to make such an order; and…” (underline added)

118.  In the present case, Mr Lam alleged that the RDV of the Lot is less than or close to the EUV of the Building and “therefore redevelopment of the Lot would not be beneficial, or sufficiently beneficial, to the minority owners”.

119.  With respect, such residual discretion has been ruled out by the Tribunal in Able Luck Development Limited & Others v Public Global Investments Limited & Others, LDCS 7000/2014 (unreported, dated 6 October 2017) (“Able Luck 2014”) in paragraph 170:

“As can be seen from the quotations cited above, whether the statutory criteria stipulated in s.4(2) have been met is the only requirement that this Tribunal needs to consider and once this Tribunal is satisfied that such statutory criteria had been met, an order for sale should be allowed, reserve price should then be set and the minority owners are obliged to sell. There is no room for other consideration on top of the statutory criteria of age or state of repair and reasonable steps taken to acquire all the shares.”

120.  Mr Lam had tried to bypass this authority by suggesting that:

(a)  the ruling of Able Luck 2014 should be read as being confined to section 4(2) and does not cover section 4(1), and therefore,

(b)  the Tribunal should consider whether section 4(1) provides the Tribunal with a discretion when the starting words use “the Tribunal shall determine the application … by” making the sale order or refusing it under section 4(1)(b).

121.  As Mr Mok submitted, and we agree, paragraph 170 of Able Luck 2014 should not be read as having confined its effect only within section 4(2) for at least the following reasons:

(a)  Paragraph 170 did not state that it was making a ruling on the determination of the jurisdiction of the Tribunal only under section 4(2).

(b)  Instead, the ruling was couched in wide terms. The material parts of the ruling in paragraph 170 reads: “whether the statutory criteria stipulated in s.4(2) have been met is the only requirement that this Tribunal needs to consider and once this Tribunal is satisfied that such statutory criteria had been met, an order for sale should be allowed ... There is no room for other consideration on top of the statutory criteria of age or state of repair and reasonable steps taken to acquire all the shares.” 

(c)  Paragraph 170 was a ruling on the limits of the jurisdiction given to the Tribunal generally, that is, under what circumstances an order for compulsory sale should be granted for the purpose of the Ordinance; therefore, unless it is expressly stated to the contrary, this ruling must cover the jurisdiction given to the Tribunal under the Ordinance as a whole, including both section 4(1)(b) and section 4(2). While it is true that in paragraph 168 of Able Luck 2014 the Tribunal referred to the minority’s argument based on the deliberate drafting in a negative sense in section 4(2), it could not have the legal effect of restricting the ambit of the Tribunal’s ruling on the jurisdiction to section 4(2) only (see paragraph 40 of Century Supreme, supra).

(d)  The ruling was grounded on the passages of the judgment of the Court of Appeal in Good Faith Properties Limited & Others v Cibean Development Company Limited [2014] 5 HKLRD 534 quoted in paragraph 169 by which passages the Court of Appeal surveyed the regime set up by the Ordinance as a whole, not confined only to section 4(2).

122.  Recently paragraph 170 of Able Luck 2014 was quoted with approval by the Court of Appeal in Able Luck Development Limited & Others v Pawling Limited [2023] 1 HKLRD 1448 (in paragraph 49).

123.  As regards the words “determine the application” in section 4(1), they can only be given the meaning of directing the Tribunal to “determine” the three matters set out in section 4(1)(a), (b) and (c) which do not provide any proper place to park a discretion to enable the Tribunal to take into consideration of other unspecified matters to refuse a sale order even if the Tribunal is satisfied of the statutory criteria of age or state of repair and reasonable steps under section 4(2). More particularly, the beginning of the material words in section 4(1) is started with the vital words: “Subject to subsection (2)” which means that section 4(2) should be given precedence in the determination under section 4(1)(b) for instance.

124.  In his closing submission, Mr Lam also called in aid of the minutes of the Bill Committee. There were some discussions and the Administration had expressed the view that the criteria specified in the bill were not meant to be exhaustive and factors including undue hardship of minority owners may be considered by the Tribunal. However, there is no basis on which the Administration could proffer that view. There was no Committee Stage Amendment introduced to make “undue hardship” a factor that the Tribunal would need to consider, notwithstanding that the final version of the Ordinance passed by the Provisional Legislative Council contained section 12(1)(a), (b) and (d) which provide power for the Administration to introduce additional factors to these sections by way of new regulation as and when the circumstances so require in future. Even up to the present moment, no regulation has ever been introduced. On the other hand, by para 26 of the Proposed Measures to Update and Streamline the Compulsory Sale Regime under the Legislative Council Panel on Development dated 22 November 2022, it seems that the Administration is going “to remove any lingering doubts on other grounds that the Tribunal shall take into account and thus help expedite the hearing process” by amending section 4(2(a) to confine the factors for justifying redevelopment to “age” or “state of repair”.

125.  Lastly, but not the least, Mr Mok submitted that there are clear limits on how far legislative materials can be used in the interpretation of a statute. As stated in Hong Kong Special Administrative Region v Chung Kwun Yin (2009) 12 HKCFAR 568 (in paragraph 15):

“Whilst as noted above, statements made by officials of the Government in relation to the bill in the Legislative Council may be used to identify the purpose of the statutory provision, employing it in order to ascertain the meaning of the statutory words stands in a fundamentally different position. In England, in Pepper v Hart [1993] AC 593, the House of Lords decided that such statements may be referred to as an aid to interpretation for the purpose of ascertaining the meaning of the statutory language, where the following three conditions are met : (a) The legislation is ambiguous or obscure or leads to an absurdity; (b) The material relied upon consists of one or more statements by a Minister or other promoter of the Bill together if necessary with such other Parliamentary material as is necessary to understand such statements and their effect; (c) The statements relied upon are clear.”

126.  In the present case, the three conditions of Pepper v Hart are not satisfied. There is, for reasons stated above, no ambiguity in the language of section 4(1) or (2) to create any difficulty in its interpretation and its natural interpretation does not lead to absurdity.

127.  And in China Orchid, supra, the Tribunal agreed with Able Luck 2014 (in paragraph 206) and made this observation:

“Even though “discretion” or “hardship” may have been raised during the discussion of the bill for the Ordinance, the fact is that no such “discretion’ or “hardship” was incorporated into the Ordinance in the end, which in fact shows that there should not be such residual discretion as contended.”

128.  Likewise, we confirm our ruling that the Tribunal does not have a residual discretion to refuse an order for compulsory sale under the Ordinance once the two criteria in section 4(2) are satisfied.

Disputes on the estimation of the RDV of the Lots

129.  Both Mr Chan for the applicants and Ms Chow for the 2^nd and 3^rd respondents agreed to resort to the residual valuation method in determining the RDV. This can be done by deducting development cost (including construction cost, professional fees, finance cost etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development.

130.  By their Joint Statement dated 29 March 2023, the two valuation experts agreed that the Lot, on its own, comprises a site area of 178.37 sq m but owing to the narrowness of Bowrington Road at the rear, Practice Note for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers App 152 applies so that a setback of 23.8 sq m is required, leaving a net developable site area of 154.57 sq m.

131.  Thus, because of the small size of the site, Mr Chan and Ms Chow could not agree on the form of the hypothetical development:

Form of the Hypothetical Development	Mr Chan	Ms Chow
G/F	Retail Shop (54.57 sq m), Entrance Lobby & Plant Room
1/F	Retail Shop (114.32 sq m), Lift Lobby & Plant Room	Retail Shop (94.57 sq m), Lift Lobby & Plant Room
2/F	Retail Shop (114.32 sq m), Lift Lobby & Plant Room	Office/ Retail Shop (94.57 sq m), Lift Lobby & Plant Room
	Office/ Retail Shop, Lift Lobby & Plant Room
Upper Floors	3/F-23/F: Office (84.80 sq m each) &                 Plant Room with 12/F devoted                 to Refuse Floor 24/F: Mechanical Floor	3/F: E&M 4/F- 23/F (63.10 sq m each): Office

132.  Apart from the above, the layouts of the upper floors as opined by Mr Chan and Ms Chow were different: Mr Chan relied on that of Golden Resources Tower (formerly known as NovoJaffe) at No 218 Jaffe Road, proposing a whole floor accommodation with lift lobby on one side, ie the northern side, leaving an elongated layout while Ms Chow relied on 333 Hennessy  at No 333 Hennessy Road proposing a more typical layout with lift lobby at the rear so that a more regular floor plate is allowed in the front fronting onto Morrison Hill Road. More particularly for the latter, there would be flexibility in sub-dividing the whole floor into two smaller units on each floor if necessary.

133.  In respect of the difference, Mr Chan commented that Ms Chow’s hypothetical scheme would not be approved by the Building Authority because she had assumed that the whole 3/F which was designed for E&M purposes would be exempted from gross floor area (“GFA”) calculation which is not the case. Mr Chan explained, by reference to item 13 of the extract of Summary of Items Discussed in 1/2017 APSEC Discussion Forum on 13 January 2017[28] that since the service core on 3/F also serves the offices on the upper floors but not other purpose, it should be GFA accountable. We agree.

134.  Also, in view of the difference in opinion on the area of the common lobby in the hypothetical development, Mr Chan had sought professional advice from Mr Ng Cheuk Man Matt (“Mr Ng”) of Messrs Ronald Lu & Partners, Authorized Person, Registered Architect. Mr Ng stated that the common core area of a typical office floor of a small-scale development shall comprise the following:

(1)   A fireman’s and accessible lift;

(2)   A fireman’s lift lobby;

(3)   A passenger lift; and

(4)   A pair of escape staircases and associated smoke lobbies.

135.  In order to take into account the small site area and with a view to maximizing efficiency, there can be an alternative under clause B29.1 of the Fire Code 2011 so that no temporary refuge spaces are required when:

“(b) any floor of a building on a site of an area of not more than 500 m² subject to the area of such floor being not more than 200 m²;

(c) any floor of a building on a site of an area of not more than 500 m² subject to such floor having not more than two units.”

136.  This alternative, according to Mr Ng, is provided under Clause B8.2 of the Fire Code 2011, as a result of which a refuge floor was proposed for the hypothetical development. Then Mr Ng calculated the areas of the typical floor as follows:[29]

•  Saleable Area: 84.802 sq m

•  Common Core Area: 30.256 sq m

•  E&M Area: 1.055 sq m

137.  Mr Ng also added that the size of common staircases is one of the major factors for area of common core area in a commercial development. Theoretically, the higher the floor height, for instance 5 m as proposed for the hypothetical development, a longer staircase is required to connect two floors. However, the advanced scissors staircase, each with 4 flights with 13 steps in each long flight and 2 steps in each short flight, can have the benefit of reducing the size of staircase well when the floor-to-floor height is above 4.8 metres, citing the development of Nathan 562 at Nos 562 & 562A Nathan Road as an example. Mr Ng illustrated that by having such advanced scissors staircase design, some 9.5 sq m (22.875 sq m – 13.375 sq m) can be saved[30].

138.  While accepting Mr Ng’s design is feasible, Ms Chow relied on the opinion of Ms Joy Leung who opined that the common area should be much more than 35 sq m assuming the staircases between two consecutive floors is a straight flight but requiring two staircase wells. For instance, on the basis of the floor plan of the adjoining office building at 31 Morrison Hill Road, ie Morrison Commercial Building[31] which was built in 1991, ie more than 30 years ago, Ms Chow worked out the common area as much as 36.84 sq m (28.72 sq m + 8.12 sq m[32]) which turns out however to be significantly smaller than that of 50 sq m proposed by Ms Chow.

139.  In order to resolve the difference in opinion between the two experts, we drew the parties’ attention to two new developments in the vicinity of the subject, one being One Continental at 232 Wan Chai Road and the other being The Sharp at 11 & 13 Sharp Street East, each lying on a relatively elongated and small site like the Lot. In particular, the floor plate of the upper floors of The Sharp, which is in a triangular shape, is about 137.56 sq m[33] , some 20% larger than that of 113 sq m proposed by the two experts.

140.  Interestingly, the layouts of the typical floor of these two developments resemble that proposed by Mr Chan, ie with the common core lying on one side. The Sharp, in particular, for its reason of having two lifts like that for the hypothetical development, has the common core very similar to Mr Chan’s proposed design. It also happens that The Sharp has also a refuge floor on 11/F whereby no temporary refuge spaces are required.

141.  We are also given to understand that The Sharp, for instance, did not incorporate the advanced scissors staircase design as proposed by Mr Ng, but the common area of the upper floor, inclusive of the entire lift lobby, is agreed by Mr Chan and Ms Chow to be at 38.24 sq m. We agree therefore that the common area on each floor at 30.256 sq m is feasible and can be achieved.

Gross Development Value of Hypothetical Development Model

142.  Notwithstanding the above, Mr Chan and Ms Chow agreed that the GDV of the shop on G/F of the hypothetical development is at $372,500 per sq m or in the sum of $20,327,325 (54.57 sq m x $372,500 per sq m).

143.  However, the two valuation experts could not agree on the value of 1/F: Mr Chan adopted 65% of the unit rate for G/F while Ms Chow adopted 60%.

144.  Having regard to the average unit rate found for the hypothetical development by Mr Chan and Ms Chow at 237,000 per sq m and $243,000 per sq m respectively, we prefer 65% as proposed by Mr Chan, ie $242,125 per sq m ($372,500 per sq m x 65%).

145.  Thus, whereas Ms Chow preferred to assess the value of 2/F by adjusting the unit rate derived from the upper floors, we agree to follow Mr Chan by making a 5% discount from 1/F, arriving at a unit rate of $230,019 per sq m.

146.  In respect of the GDV for the upper floors, Mr Chan and Ms Chow relied on different sets of comparables but arriving at very close figures of $237,000 per sq m and $243,000 per sq m respectively (ie a difference of about 2.5%) both on the basis of a -30% location adjustment to the comparables.

147.  More particularly, Mr Chan relied mainly on whole floor transactions of Golden Resources Tower (formerly known as NovoJaffe) but Ms Chow relied on 12 transactions of smaller subdivided units also of Golden Resources Tower and two sales at 333 Hennessy. However, according to Ms Chow, the purpose of her proposing a so-called flexible design for the hypothetical development was to allow subdivision of units which should, because of their smaller sizes, fetch higher unit rates. But it appears that Ms Chow had arrived at a unit rate with no significant difference when compared with the unit rate assessed by Mr Chan on the basis of the whole floor unit.

148.  Furthermore, whereas all transactions initially adopted by the two valuation experts were sales taken place before 2023, Mr Chan was able to identify two more updated sales of subdivided units in Golden Resources Tower both selling at unit rates higher than any of the transactions (except for one on 15/F which was $367,657 per sq m) adopted by Ms Chow:[34]

Unit	Date of Agreement	Consideration	Saleable Area (m2)	Unit Rate
Office 4, 8/F	7 Feb 23	$10,350,000	29.329	$352,893
Office 4, 11/F	9 Jan 23	$10,550,000	29.329	$359,712

149.  On the one hand, these two latest transactions suggested that the Private Office Price index prepared by the RVD which shows a declining price trend during the period may not be so applicable to the comparable building, ie Golden Resources Tower or the locality (which was admitted by Ms Chow at trial during the examination-in-chief)[35]:

Year	Month	Index	Increase/Decrease when compared with preceding month	Increase/Decrease when compared with March 2023	Average Index for Two Months
2022	5	520.0		-3.88%
	6	531.2	2.15%	-5.91%	525.6
	7	523.6	-1.43%	-4.55%
	8	510.2	-2.56%	-2.04%	516.9
	9	542.8	6.39%	-7.92%
	10	522.8	-3.68%	-4.40%	532.8
	11	512.3	-2.01%	-2.44%
	12	503.2	-1.78%	-0.68%	507.8
2023	1	500.0*	-0.64%	-0.04%
	2	490.3*	-1.94%	1.94%	495.2
	3	499.8*	1.94%	0.00%
	4	508.7*	1.78%	-1.75%	504.3

* Provisional Figures as provided by RVD

150.  On the other hand, these two latest transactions demonstrated that the experts should have marked up their valuations which were prepared on the sets of comparables which occurred mainly in the middle of 2022.

151.  At one point, Ms Chow suggested that there was intelligence that the developer of Golden Resources Tower had offered exceptionally high agency fee of at least 10% in July 2022 to boost up sales when the office market was in the doldrums. Here Ms Chow implied that the developer of Golden Resources Tower had increased the agency fees further for the latest two transactions as a result of which the face values of the two transactions were even higher than those in 2022. Ms Chow tried to support this allegation by referring to the fact that there being no subdivided unit of Golden Resources Tower sold for the period between August 2022 and December 2022.[36]

152.  However, Mr Chan provided information on the whole floor sale of 25/F in October 2022 which achieved the highest unit rate of $399,921 per sq m. We have reservation on Ms Chow’s allegation when she could provide no further evidence to support her allegation[37]; Ms Chow did not even make such comment when she learned of the October transaction beforehand. When Mr Chan was recalled to comment on this late allegation, Mr Chan gave evidence that this high-commission strategy was not common in office market as opposed to first-hand residential projects selling in phases; he particularly stated that if the market were really on the decline, a high selling price would discourage prospective purchasers.

153.  Having heard the evidence above, we agree with Mr Chan. Thus, without necessarily going into the meticulous analysis of the comparables adopted by the two experts, we prefer to adopt a unit rate of $240,000 per sq m save and except for the location adjustment of -30% adopted by Mr Chan and Ms Chow on review.

154.  Initially, Ms Chow, in her Expert Valuation Report dated 29 August 2022, adopted a location adjustment of -20% for her comparables.[38] However, Ms Chow changed her view by her Rebuttal Report dated 29 September 2022 (ie one month later) and adopted a location adjustment of -30% for her comparables[39]:

“NovoJaffe at No 218 Jaffe Road is close to a number of Grade A office buildings in Wan Chai North, including Sun Hung Kai Centre, China Resources Building, Causeway Centre, Harbour Centre, Great Eagle Centre and Central Plaza and various prime office developments along Gloucester Road. Moreover, MTR Wan Chai Station and MTR Exhibition Centre Station are within close walking distance.”

155.  Surprisingly, Ms Chow explained that she adopted -30% for location because (1) time adjustment was required for the period between her date of RDV assessment as at 26 August 2022 and the date of the 1^st joint expert statement dated 4 November 2022 but she noted a deficiency in the price index because there were less than 20 transactions during the material periods for all 3 classes of offices, and (2) she wanted to make up that deficiency through the location adjustments because she thought that during that small period of three months, the office market in that locality suffered a more significant downturn than that in general[40].

156.  With respect, we cannot agree with Ms Chow for her reasons for change of opinion. While there may be Grade A office on Gloucester Road, Jaffe Road on which Golden Resources Tower is situated is a narrow, local street. We cannot see the reason why Golden Resources Tower’s proximity to Grade A offices on Gloucester Road behind can give rise to such a big difference in locational advantage, when in comparison, the Lot or the hypothetical development can also be regarded as close to the business core of Causeway Bay and in particular, the popular Times Square which is a regional shopping centre in the district.

157.  In terms of the distance to MTR station, we would regard the Lot or the hypothetical development being closer to MTR Causeway Bay station than either Golden Resources Tower to MTR Wan Chai station or 333 Hennessy to MTR Causeway Bay station. Indeed, the Lot can be readily accessed from Times Square, where an exit of MTR Causeway Bay station is located, via Russell Street on which Times Square is situated, then crossing Canal Road West underneath the Canal Road Flyover and turning into a short street, Sharp Street West, crossing Bowrington Road on its way before reaching Morrison Hill Road in front of the Lot.

158.  In the above regard, we agree with Mr Chan that the hypothetical development may cater for demand for semi-retail users like the ones found in One Continental. The fact that Hotel Ease Causeway Bay, a 3-star hotel at 39 Morrison Hill Road, is recently converted into a youth hostel is neither here nor there, as the proposed hypothetical development is a commercial development rather than a 3-star hotel.

159.  On the other hand, we disapprove Ms Chow’s approach in trying to conflate her adjustments for time and for location, which are supposed to be two independent adjustment factors. Firstly, when a new office development is built, we are not persuaded that the hypothetical developer would consider building a Grade C office building. We also cannot agree with her rationale that should Grade B office transactions be not adequate in the index formulation, Grade A office transactions or Grade C office transactions should be adopted to make up the deficiency when she must realize that they belong to different classes.

160.  Secondly, we are puzzled by Ms Chow’s proposed novel increase in location adjustment from -20% to -30% to make up for the deficiency of the price index (if it be the case) published by the RVD. There was indeed no evidence that during the short period between August 2022 and September 2022 when Ms Chow prepared her Rebuttal Report (or even November 2022), there was a further drop of office price in the subject locality by 10% which was not reflected in the Grade B office index. If the number of transactions in a particular period are not adequate to provide a realistic benchmark or index, one may adopt transactions of two or three consecutive periods instead so that the number of samples can be increased.

161.  Therefore, at most, we can only agree with a -20% location adjustment and be content to adopt $264,000 per sq m ($240,000 x 1.1) as the GDV for the hypothetical development.

162.  At the trial, we had invited the parties to provide information on any rental information that might be available for Morrison Commercial Building so that if necessary, an income capitalization may be provided as a check. In such regard, Ms Chow happened to find that the 15/F of Morrison Commercial Building was let on 4 April 2022 for a term of 2 years from 1 May 2022 at $17,700 per month inclusive of rates. Ms Chow calculated the rental to be $16,857 per month exclusive of rates and arrived at a unit rental of $280.7 per sq m on the basis of a saleable floor area of 60.05 sq m. If the Private Offices Rental Index published by RVD is abided by, there is little difference between April 2022 and the present day.

163.  However, this Morrison Commercial Building was built in 1991, ie aged for more than 30 years. Whereas Mr Chan proposed 2% per 5 years’ age adjustment (ie 0.4% per year), Ms Chow proposed 0.5% per year. Applying Mr Chan’s age adjustment factor, we get a unit rate of $317 per sq m. Should we apply a yield of 2.7%, we get a unit price of $140,890 per sq m. Even if we apply a further adjustment of 5% for the reason that this Morrison Commercial Building is served by only 1 lift, the unit rate only becomes $148,000 per sq m which appears to be unreasonably low and is even lower than Ms Chow’s own assessment of $245,000 per sq m (before our markup of 10% for location). In this regard, we agree with Mr Chan that this rental transaction was most probably affected by the fifth wave of COVID-19 pandemic when the Government announced on 5 January 2022 that it would tighten social distancing measures, which happened to last until the end of April 2022 when it was a little relaxed[41]. It might have adverse repercussion effect on the local economy. This rental amount is unreasonably low and has to be disregarded.

164.  Notwithstanding the above, Mr Chan and Ms Chow had further disagreements on the adjustments for lighting & ventilation as well as view in respect of the hypothetical development.

165.  Firstly, Mr Chan considered there being +5% for lighting and ventilation for the upper floors when the hypothetical development is located at the front portion of the site, and thereby have windows on both sides, one overlooking Morrison Hill Road in the front and the other towards the racecourse at Happy Valley. Ms Chow did not consider this layout arrangement when her hypothetical development is likened to that of Morrison Commercial Building, the upper floors of which are setback from Morrison Hill Road.

166.  Secondly, whereas both valuation experts agreed that their reference unit on 13/F would enjoy “Open Building View” and the lower floors with “Building View” which is subject to a -3% adjustment, Ms Chow considered that the floor above would enjoy only “Open Building View”. On the other hand, Mr Chan considered that 14/F-18/F would have “Open View” which is subject to a +2% adjustment, and 19/F-23/F would enjoy “Open & Racecourse View” which is subject to a +7% adjustment.

167.  Having conducted our inspection, we agree with Mr Chan and are prepared to adopt the following valuation for the upper floor office units:

Floor	Adjustments					GDV*
	Floor	View	Lighting & Ventilation	Total	Adjusted Unit Rate
3/F	-5.0%	-3.0%	0.0%	-7.8%	$243,408	$20,640,998
4/F	-4.5%	-3.0%	0.0%	-7.4%	$244,464	$20,730,547
5/F	-4.0%	-3.0%	0.0%	-6.9%	$245,784	$20,842,483
6/F	-3.5%	-3.0%	0.0%	-6.4%	$247,104	$20,954,419
7/F	-3.0%	-3.0%	0.0%	-5.9%	$248,424	$21,066,355
8/F	-2.5%	-3.0%	0.0%	-5.4%	$249,744	$21,178,291
9/F	-2.0%	-3.0%	0.0%	-4.9%	$251,064	$21,290,227
10/F	-1.5%	-3.0%	0.0%	-4.5%	$252,120	$21,379,776
11/F	-1.0%	-3.0%	0.0%	-4.0%	$253,440	$21,491,712
12/F (Refuge Floor)
13/F	0.0%	0.0%	0.0%	0.0%	$264,000	$22,387,200
14/F	0.5%	2.0%	0.0%	2.5%	$270,600	$22,946,880
15/F	1.0%	2.0%	5.0%	8.2%	$285,648	$24,222,950
16/F	1.5%	2.0%	5.0%	8.7%	$286,968	$24,334,886
17/F	2.0%	2.0%	5.0%	9.2%	$288,288	$24,446,822
18/F	2.5%	2.0%	5.0%	9.8%	$289,872	$24,581,146
19/F	3.0%	7.0%	5.0%	15.7%	$305,448	$25,901,990
20/F	3.5%	7.0%	5.0%	16.3%	$307,032	$26,036,314
21/F	4.0%	7.0%	5.0%	16.8%	$308,352	$26,148,250
22/F	4.5%	7.0%	5.0%	17.4%	$309,936	$26,282,573
23/F	5.0%	7.0%	5.0%	18.0%	$311,520	$26,416,896
					Total:	$463,280,717

* On the basis of a saleable area of 84.8 sq m per floor.

Marketing Cost

168.  Mr Chan and Ms Chow could not agree on the marketing cost for the hypothetical development: Mr Chan adopted 3% of GDV whereas Ms Chow adopted 4%.

169.  Ms Chow explained her higher marketing cost by referring to the “worsening economic performances and the sharp deterioration of global economic prospects” because of which agency fees payable by developer has to be higher in order to boost sales. With respect, all Ms Chow’s references were related to what happened in 2022 without regard to the re-opening of the global economy after the pandemic.

170.  As stated in paragraph 148 above, the updated sales of two subdivided units in Golden Resources Tower were sold at unit rates higher than all but one transaction in 2022.

171.  We prefer to adopt Mr Chan’s proposed 3%.

Construction Cost

172.  Mr Chan and Ms Chow agreed that the demolition cost for the Building is $2,997,698.

173.  They also agreed that the construction cost for the hypothetical development without the refuge floor is $118,566,782.

174.  Mr Chan gave evidence that on the advice of Mr K C Tang of K C Tang Consultants Ltd, a quantity surveyor appointed by the applicants, the unit construction cost of a refuge floor is approximately 75% of the average unit construction cost of commercial/ office development. We consider this reasonable and therefore agree to Mr Chan’s applying an extra construction cost of $3,758,688 (ie $44,315 per sq m x 113.09 x 75%). This gives a total construction cost of $122,325,470.

175.  Ms Chow had provided no contrary evidence on Mr Chan’s formulation of the construction cost for the refuge floor. In the absence of evidence to the contrary, we accept Mr Chan’s assessment at $122,325,470.

Construction Period

176.  Whereas Mr Chan and Ms Chow agreed that the demolition period is 0.5 year, they could not agree on the construction period. Mr Chan proposed 2 years while Ms Chow, referring to that for 333 Hennessy, proposed 2.25 years.

177.  Mr Chan dismissed it on the ground that the construction of 333 Hennessy was most probably affected by the COVID-19 pandemic. In addition, Mr Chan referred to New Dorset Investments Limited v Chiu Mei Kiu & Others, LDCS 30000/2018 (unreported, dated 9 June 2020) where the experts accepted that, on the basis of a hypothetical commercial development up to 2,930 sq m, the construction period would be just 2 years.

178.  In respect of the captioned hypothetical development of 2,675.55 sq m agreed by the two valuation experts, we are content to adopt the same 2 years as the construction period.

Development Profit

179.  As in most of the applications for compulsory sale, the two valuation experts could not agree on the quantum of the developer’s profit in a residual valuation: Mr Chan adopted 20% and Ms Chow adopted 22.5%.

180.  Again, Ms Chow suggested that in the prevailing market condition of fast changing globally and local economic climate, the risk faced by developers was high. Ms Chow stated, for instance, that the agency fees for sale of office properties had been volatile. She quoted that the developer of NovoJaffe was willing to offer agency fee of at least 10% in July 2022 and 5% to 15% in recent months. She further quoted that high interest rates had dented the demand for commercial properties since 2022.

181.  Having reviewed the above, we are prepared to adopt the developer’s profit at 22.5%.

Interest Rate

182.  Notwithstanding the above, Mr Chan and Ms Chow agreed the interest rate to be at 4.75%.

Stamp Duty and Legal Cost

183.  Mr Chan and Ms Chow also agreed on a stamp duty of 4.25% and legal costs of 0.1%.

Finding on RDV and the Reserve Price

184.  Thus, subject to what we have stated above, we shall follow Mr Chan’s residual valuation model as contained in Appendix AE5 of the Joint Statement dated 29 March 2023[42] in the determination of the RDV which is reproduced at the Appendix to this judgment. We determine the land value of the Lot at $249,800,000 (ie accommodation value of $93,364/m²).

185.  We shall adopt the estimated RDV of $249,800,000 as the Reserve Price for the auction of the Lot.

Other Incidental Matters

186.  The applicants proposed to appoint Mr Anthony Chow and Ms Anna Chow, both being consultants of Messrs Guantao & Chow, Solicitors & Notaries, as the trustees for sale. Based on the information on their background and experience as set out in their letter dated 24 March 2023, we are satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on trustees under the Ordinance. The remuneration package proposed in the said letter appears to be reasonable.

187.  The applicants has prepared a set of draft Particulars and Conditions of Sale of the Lot[43]. Subject to any amendment that may become necessary as a result of our ruling on the arrangement of auction above, the particulars and conditions of sale of the Lot by public auction submitted by the applicants are also reasonable.

Order

188.  We therefore make the following orders:

(1)   This Tribunal is satisfied that the redevelopment of the Lot is justified due to the “age” and “state of repair” of the Building and that the applicants have taken reasonable steps to acquire all the undivided shares in the Lot including those of the 1^st, 2^nd & 3^rd  respondents;

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

(3)   Mr Anthony Chow and Ms Anna Chow of Messrs Guantao & Chow, Solicitors & Notaries, nominated by the applicants, be appointed trustees (“the Trustees”) to discharge the duties imposed on trustees under the Ordinance in relation to sale of the Lot 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 & Notaries dated 24 March 2023.

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

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

(ii)  The reserve price be set at $249,800,000.

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

(iv)  Liberty to the applicants, the 1^st, 2^nd and 3^rd respondents and the Trustees to apply to the Tribunal for further direction(s) under the Ordinance.

Costs

189.  We make a costs order nisi that:

(i)  The 1^st, 2^nd & 3^rd respondents be awarded costs of the proceedings;

(ii)  Costs awarded are to be taxed if not agreed, with certificate for counsel on party and party basis at High Court scale.

190.  Unless any of the parties applies by summons within the next 14 days to vary the costs order nisi, the costs order nisi shall become absolute.