NGO CAM AND OTHERS v. NG TAK SHING KENNY AND OTHERS

LDCS 1000 OF 2003

IN THE LANDS TRIBUNAL OFTHE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE Application No. 1000 of 2003

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J U D G M E N T

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1. This is an application made under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap. 545 (“the Ordinance”) for an order of compulsory sale of Lai Sing Court, 13 and 15 Tai Hang Road. 

2. Lai Sing Court is a development comprised of two blocks each of 22 storeys standing on a podium of two storeys.  It was built and completed 35 years ago.  It stands on Inland Lot 7903 and the Extension thereto (“the Lot and Extension”).  There are 176 residential units and 176 car parking spaces.  

3. At the commencement of the hearing, 171 out of 176 owners have become the Applicants which comprised of over 97% of the shares in the Lot and Extension.  

4. There are four categories of Respondents.  The 10^th Respondent is in the first category.  This owner of a flat and a parking space has passed away.  There is not yet any grant of probate or letters of administration.  Her husband was thus appointed the personal representative to represent her estate in this application.  There is evidence showing that, but for the lack of capacity, the husband would have chosen to join the Applicant’s. 

5. The second category of Respondents are the 2^nd, 4^th, 7^th and 9^th Respondents.  They could not have joined the Applicants because of a title defects.  The assignments by which they obtained ownership of their interest in the development and the right to occupy their flats and parking spaces had failed to mention the Extension in the particulars of the Lot.  Their titles could thus be defective.  There is evidence that, but for the title problem, the 2^nd, 4^th, 7^th and 9^th Respondents would have joined the Applicants. 

6. The third category are the 11^th, 13^th and 14^th Respondents.  They were joined because they were the predecessors in title of the second category and they were joined to provide them an opportunity to make representations to the Tribunal, if any. 

7. The last category is the 18^th Respondent.  It was joined because it was the third mortgagee before the mortgaged unit was foreclosed in favour of the 85^th Applicant.  It was not included in those foreclosure proceedings.  Hence it was joined in this application to provide an opportunity for it to make representation to the Tribunal, if need be. 

8. At the hearing only the first named 9^th Respondent Mr. Tse Hau Sang has appeared.  None of the other Respondents have appeared or was represented at the hearing.

9. The first witness for the Applicants is Mr. Charles C. K. Chan, a professional valuer.  Mr. Chan has prepared two valuation reports for the value of the units in the development.  The first report assessed the open market values of the individual units and parking spaces as at 6^th August 2003.  The total value of all the units and car parking spaces as at that date was $391 million.  The second report assessed the open market values of the individual units and parking spaces as at 4^th October 2004.  The total value of all the units and car parking space as at that date was $512 million.  Mr. Chan also assessed the open market value of the whole development on redevelopment basis and, if vacant possession should be delivered up at the expiry of six months immediately after the sale of the property, the value would be at $1,209,000,000.

10. There has not been any challenge by any Respondent to Mr. Chan’s valuation.  There is also no minority owner who cannot be found.  It is therefore not necessary for the majority owner to satisfy the Tribunal that the value of the minority owner’s property as assessed is not less than fair and reasonable and not less than fair and reasonable when compared with the value of the majority owner’s property as assessed.

11. I now come to the existing conditions of Lai Sing Court.  The second witness called by the Applicants is Mr. Wong Chi Ming who is a geotechnical expert.  Lai Sing Court is bounded at the back and at the sides by slopes.  It is supported by two retaining walls in the front.  A search at the Urban Land Register of the Land Registry revealed various Dangerous Hillside Orders that had been issued to the Incorporated Owners under section 27A of the Buildings Ordinance.  Mr. C. M. Wong estimated that a sum of $12.4 million would be required for carrying out the necessary investigations on these slopes and retaining walls and to execute the stabilization works.  He also anticipated that a period of 21 months would be required to complete these works.

12. The third witness for the Applicants is Mr. Richard Wong Kwok Chuen, a chartered engineer.  Mr. Richard Wong has prepared a structural assessment report dated 31 May 2004 in respect of the structural condition of the development.  A summary of his findings are: -

“ (a) concrete spalling and cracks on structural members of the building are found.

(b)  concrete cored compression test results show that 33.3% of the beam and 20% of the column/structural walls have less than the designed strength.

(c) there are serious under-provision of concrete cover in the building with 94.4% of the surveyed beams and 80% of the column/structural wall samples have concrete cover thickness less than that as designed.  Without sufficient concrete cover, the structural frame of the building will be unable to perform its designed structural durability in case of fire. 

(d) carbonation tests revealed that 100% slab samples and 72.2% beam samples show carbonation depth exceeding the concrete cover.  The protection against corrosion of the steel reinforcing bars inside the concrete is lost and the corrosion of steel bars will take place faster.  This will result in more concrete cracking and spalling defects in the carbonated structural elements. It will in turn cause gradual deterioration of the structural integrity of the building. 

(e) the combined effect of inadequate concrete cover and carbonation will escalate the rate of corrosion of the steel reinforcing bars in the structural elements.” 

13. Mr. Richard Wong also estimated the costs for the remedial works would be around $10 million.  He further recommended that there should be a survey of spalling concrete once every two years to be carried out by professional engineers and remedial work should be carried out upon discovery of spalling defects.

14. The next witness is Mr. Benson Wong, a building surveyor.  Mr. Benson Wong has carried out a detailed survey of the conditions of the development including the slopes and a number of units and identified various defects therein.  He recommended various essential works to be done so as to make good the defects.  The estimated costs for carrying out remedial works to the common areas and slopes including the estimated costs of the works recommended by Mr. C. M. Wong and Mr. Richard Wong came to a total of $54,136,979.  In addition Mr. Benson Wong also recommended some preventive and improvement works to the common areas which would require an estimated cost of $5,974,560.  For the individual flat owners, the total estimated costs to remedy their flats to normal tenantable conditions is $10,541,280.  Given full cooperation by all the owners, Mr. Benson Wong estimated that these remedial works would take 19 months to complete.

15. I would also mention that Mr. Charles Chan has opined that the $54 million remedial works would only produce an enhancement in value of the development of $52 million.  Hence the expenditure to be incurred for the remedial works will not produce an enhancement in value equivalent to it. 

16. The fifth witness is the chairman of the Incorporated Owners of the development Mr. Yeung Kam Ming.  Mr. Yeung gave evidence on the premature deteriorating conditions of the development, the unsatisfactory experience in the past of collecting funds from the owners for repairs, the lack of support in the implementation of repairs as recommended by the experts referred to above, and the owners’ attempts to attract developers to redevelop the development.  I do not think the difficulty in collecting funds from the owners for repairs should drive me to make an order for sale as sought by the Applicants.

17. The last witness is Mr. Robert Wong who gave evidence on behalf of all the Applicants.  He referred to a Development Agreement to which all Applicants have subscribed.  He also referred to the fact that but for the title problems the 2^nd, 4^th, 7^th, 9^th and 10^th Respondents would have joined the Applicants.

18. There has been no challenge to any of the evidence called by the Applicants.  On such evidence, I am satisfied that the redevelopment of the Lot and Extension is justified due to the state of repair of the existing development standing thereon.  I am also satisfied that the majority owner has taken reasonable steps to acquire all the undivided shares in the Lot and Extension.  I therefore make an order that all the undivided shares in the Lot and Extension be sold for the purposes of its redevelopment.  I also appoint under section 4(1)(c)(i) Mr. Ma Ho Fai and Ms. Tsang May Ping, partners of Messrs. Woo, Kwan, Lee and Lo, to discharge the duties imposed on trustees under the Ordinance in relation to the Lot and Extension.  I also authorize the trustees to charge remuneration for their services as trustees at the rate specified in a letter dated 23^rd October, 2004 from Woo, Kwan, Lee and Lo to Messrs. Johnson Stokes & Master and exhibited as RW-16 in the witness statement of Mr. Robert Yau Chung Wong dated 10^th November, 2004. 

19. I do not make any order on compensation to tenants under section 4(6) of the Ordinance as no tenant has filed any Form 34 in the Lands Tribunal Rules to seek determination of compensation under the Ordinance. 

20. I further direct that the sale of the Lot and Extension be by auction with a reserved price set at $1,209,000,000 and that the sale be on the particulars and conditions substantially the same as those in the draft initialed and approved by the Tribunal. 

21. On the period for completion of the redevelopment, Mr. Charles Chan has adopted 4 ¹/₃ years bearing in mind the substantial amount of work to be done on the slopes and taking into account of the 6 months stipulated in section 8(1)(b)(ii) of the Ordinance for the occupation by the tenants.  I am happy to specify a period of 5 years pursuant to paragraph 1(a) of the Third Schedule of the Ordinance so as to provide a buffer of 8 more months to cater for unforeseen problems.  I understand that if Hong Kong Land should be able to acquire the Lot and Extension for the redevelopment, the owners would get a share of the profit to be generated by the redevelopment under the Development Agreement.  Furthermore, under the Development Agreement, each of the owners would be given a new flat for them to own.  I therefore do not wish to provide for a long period for the redevelopment as I do not wish to delay the availability of the new flats and the distribution of profit, if any, to the owners. 

22. Finally I give liberty to the trustees, the Applicants and the Respondents to apply but would not make any order of costs.

Mr. MOK Yeuk-chi, instructed by Messrs. Johnson Stokes & Master, for the 1^st to 171^st Applicants

The 1^st named 9^th Respondent in person

Mr. TSE Hau-sang, representative of the 2^nd named 9^th Respondent

The 2^nd, 4^th, 7^th, 10^th, 11^th, 13^th, 14^th and 18^th Respondents, absent