Case Detail

LDLR 1 - 3/2012 (Heard Together)

[2020] HKLdT 12

LDLR 1/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 1 OF 2012

___________________

BETWEEN
	CHAN SHIU CHONG	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

LDLR 2/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 2 OF 2012

___________________

BETWEEN
	CHAN SHIU CHONG	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

LDLR 3/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 3 OF 2012

___________________

BETWEEN
	TSE SUI LUN	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

Before:

His Honour Judge S Lo, Presiding Officer of the Lands Tribunal, and Mr Lawrence Pang, Member of the Lands Tribunal

Date of the Applicant’s Written Submissions:	31 October, 21 November 2019 and 14 February 2020
Date of the Respondent’s Written Submissions:	30 October, 21 November 2019 and 3 April 2020
Date of Decision:	14 April 2020

_________________________

D E C I S I O N ON COSTS

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A. BACKGROUND

1. These proceedings concern the determination of the compensable amounts for the compulsory resumption of the Applicants’ respective properties by the Respondent under the Development Scheme on the Resumption Date namely at midnight of 19 February 2011.

2. After a 5-day trial, this Tribunal handed down the Judgment on 19 November 2018 (“Judgment”) and determined the amount of compensation in respect of the Subject Properties[1] and ordered corresponding payments thereof to the Applicants respectively, namely:-

Subject Property
Amount of Compensation Awarded

Property 1
$8,710,000 in LDLR 1 of 2012

Property 2
$8,080,000 in LDLR 2 of 2012

Property 3
$10,070,000 in LDLR 3 of 2012

3. It was further ordered at para 66 of the Judgment that the matters of, amongst others, professional fees, interest and costs be adjourned.

4. On 14 December 2018, the 1^st Applicant in LDLR 1 of 2012 (together with the 2^nd Applicant in LDLR 2 of 2012 and the 3^rd Applicant in LDLR 3 of 2012) applied to this Tribunal for leave to appeal against the Judgment.

5. By a Decision dated 18 March 2019, the Tribunal refused the 1^st to 3^rd Applicants’ leave to appeal applications with costs to the Respondent.

6. On 1 April 2019, the 1^st to 3^rd Applicants applied to the Court of Appeal (“CA”) in CAMP 54 to 56 of 2019 for leave to appeal against the Judgment. By the CA’s judgment dated 11 July 2019, the 1^st to 3^rd Applicants’ leave applications were dismissed with costs to the Respondent assessed at $96,000.

7. Pursuant to consent application filed on 3 October 2019, this Tribunal had ordered that the matters of interest, costs and professional fees be disposed of by the Tribunal on paper. As directed, parties have lodged and served their respective written submissions and replies.

B. APPLICABLE LEGAL PRINCIPLES

8. To begin with, under the respective section 16A(1A) and section 17(3B) of the Lands Resumption Ordinance, Cap 124 (“LRO”), which are almost identical, the rate of interest for both provisional payment and the balance of compensation is set at the lowest of the interest rates paid on deposit at 24 hours’ call. The stated rate is the minimum rate of interest the claimant is entitled to.

9. Under section 17(3A) of the LRO, subject to the said minimum rate of interest, the Tribunal is to have a very wide but not unfettered discretion to fix the interest rate for compensation. See also Happy Dragon Restaurant Ltd v Director of Lands, CACV 115/2012, unreported, 31 January 2013 at paras 25, 27 and 48; Tsan Luk Yuk Yin & Ors v The Secretary for the Environment, Transport and Works, LDMR 3/2005, unreported, 4 September 2014.

10. Further under section 12(1) of the Lands Tribunal Ordinance, Cap. 17 (“LTO”), the costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid.

11. In Good Faith Properties Ltd v Cibean Development Co Ltd [2014] 5 HKLRD 534 at para 27, the Court of Appeal re-affirmed the legal principles for the question of costs and professional remuneration in resumption cases and compulsory sale cases, namely the “compensation approach” applies and the starting point is that costs should not be dealt with in the same manner as ordinary hostile litigation and that such costs should be paid by the acquiring authority unless special reasons to depart from the usual order for costs exist.

12. However, the Tribunal still has to take into account the Calderbank offers made by the acquiring authority. In this regard, the Privy Council has provided the following guidance on costs in Director of Buildings and Landsv Shun Fung Ironworks Ltd 2 AC [1995] 111 at p 141A-C:

“Their Lordships recognise this is a strict, even a literal, interpretation of the rules. However, viewing the matter more broadly, it is difficult to see why the Calderbank letters should not have consequences as to costs in this case. Parties are to be encouraged to settle their disputes and assisted in their attempts to do so. By accepting the first offer the claimant would have received a significantly larger sum than it was awarded by the tribunal at the end of an enormously protracted and expensive hearing. Interest would have followed automatically, and there is no reason to doubt the tribunal would have made a costs order in favour of the claimant. Had the Crown made a payment into court, assuming this is possible, the claimant’s position would have been much the same, neither better nor worse. It is not as though a payment of money into court would have given the claimant some advantage over and above an offer by the Crown to settle for a like amount.”

C. UNDISPUTED FACTS

13. In respect of LDLR 1 of 2012:

(i)     On 18 December 2012, the 1^st Applicant received from the Respondent an amount of $8,471,000 being provisional payment (“PP for the Property 1”) pending determination of compensation in respect of the Property 1.
(ii)    The 1^st Applicant also received from the Respondent an amount of $154.81 being interest on PP for the Property 1 from 20 February 2011 (ie the date immediately after the Resumption Date) to 18 December 2012 (ie the date of PP for the Property 1) calculated at the then 24-hour call interest rate.
(iii)   By a Calderbank letter from the Department of Justice (“DoJ”), Solicitors for the Respondent, to Messrs Cheung, Chan & Chung[2] (“CCC”), Solicitors for the 1^st Applicant, dated 7 November 2013, the Respondent offered to settle all of the 1^st Applicant’s claim in LDLR 1 of 2012 at a compensation in the sum of $8,843,000 (less payment or allowance already released) with interest thereon payable pursuant to section 17 of LRO at a rate to be agreed or failing which, to be fixed by the Tribunal, together with payment of professional remuneration reasonably incurred by the 1^st Applicant and payment of the 1^st Applicant’s costs to be taxed on High Court Scale, if not agreed. A copy of the letter was lodged with the Tribunal in a sealed envelope (“Sealed Offer for the Property 1”).
(iv)   By a letter from CCC to DoJ dated 20 November 2013, the 1^st Applicant rejected the Sealed Offer for the Property 1.
(v)    By another Calderbank letter from the DoJ to CCC dated 8 March 2018, the Respondent offered to settle all of the 1^st Applicant’s claim in LDLR 1 of 2012 at a compensation in the sum of $9,055,000 (less payment or allowance already released) with interest thereon payable pursuant to section 17 of LRO at a rate to be agreed or failing which, to be fixed by the Tribunal together with payment of professional remuneration reasonably incurred by the 1^st Applicant and payment of the 1^st Applicant’s costs to be taxed on High Court Scale, if not agreed. A copy of the letter was lodged with the Tribunal in a sealed envelope (“Enhanced Sealed Offer for the Property 1”).
(vi)   The 1^st Applicant did not reply to the Respondent in respect of the Enhanced Sealed Offer for the Property 1.
(vii)  On 19 November 2018, this Tribunal handed down the Judgment and awarded the compensation to the 1^st Applicant in respect of the Property 1 in the sum of $8,710,000 (“Compensation for the Property 1”).
(viii) By a letter from DoJ to CCC dated 20 November 2018, the Respondent requested the 1^st Applicant to provide sealed copy order so as to arrange for payment of balance of compensation (ie $239,000 being $8,710,000 - $8,471,000) (“Balance of Compensation for the Property 1”). The Respondent also requested the 1^st Applicant for the proposed terms regarding interest, costs and professional remuneration.
(ix)   By a letter dated from CCC to DoJ dated 26 November 2018, the 1^st Applicant asked the Respondent to pay for his costs of the 1^st Application, to be taxed on High Court Scale, if not agreed, and to pay for reasonable remuneration of the 1^st Applicant’s expert. The 1^st Applicant asked the Respondent to pay for interest on the PP for the Property 1 from 20 February 2011 (ie the date immediately after the Resumption Date) to 17 December 2012 (ie the date immediately before the date of PP for the Property 1) at 6% per annum less the sum of $154.81 being interest already received. The 1^st Applicant also asked the Respondent to pay for interest on the Balance of Compensation for the Property 1 from 20 February 2011 (ie the date immediately after the Resumption Date) to 19 November 2018 (ie the date of Judgment) at 6% per annum, and thereafter at 8% per annum until final payment.
(x)    By a letter from DoJ to CCC dated 14 December 2018, the Respondent tendered to the 1^st Applicant a cheque in the sum of $239,000 in full and final settlement of the Balance of Compensation for the Property 1. By a letter from CCC to DoJ dated 19 December 2018, the 1^st Applicant declined to accept the Respondent’s cheque and returned the same to the Respondent.
(xi)   After the dismissal of the leave to appeal applications of all the Applicants by the CA and by a letter from DoJ to CCC dated 12 July 2019, the Respondent asked the 1^st Applicant to confirm within the next 5 days if he was prepared to accept the sum of $239,000 being the Balance of Compensation for the Property 1.
(xii)  By a letter from CCC to DoJ dated 15 July 2019, the 1^st Applicant insisted his position as to costs, professional remuneration, interest on the PP for the Property 1 and interest on the Balance of Compensation for the Property 1 as per CCC’s letter of 26 November 2018.
(xiii) There were further letters sent by DoJ to CCC, dated 17 July 2019, 22 July 2019 (enclosing therein another cheque in the sum of $239,000 in full and final settlement of the Balance of Compensation for the Property 1) and 23 July 2019 (setting out the Respondent’s proposed terms on costs, professional remuneration and interest).
(xiv) By a letter from CCC to DoJ dated 6 September 2019, the 1^st Applicant rejected the Respondent’s proposed terms on costs, professional remuneration and interest. Again, the 1^st Applicant insisted on the position as stated in CCC’s letter of 26 November 2018.

14. In respect of LDLR 2 of 2012:

(i)      On 27 February 2013, the 2^nd Applicant received from the Respondent an amount of $8,155,000 being provisional payment pending determination of compensation in respect of the Property 2 (“PP for the Property 2”).
(ii)     The 2^nd Applicant also received from the Respondent interest[3] on PP for the Property 2 from 20 February 2011 (ie the date immediately after the Resumption Date) to 27 February 2013 (ie the date of PP for the Property 2) calculated at the then 24-hour call interest rate.
(iii)    By a Calderbank letter from the DoJ to CCC dated 7 November 2013, the Respondent offered to settle all of the 2^nd Applicant’s claim in LDLR 2 of 2012 at a compensation in the sum of $8,493,000 (less payment or allowance already released) with interest thereon payable pursuant to section 17 of LRO at a rate to be agreed or failing which, to be fixed by the Tribunal, together with payment of professional remuneration reasonably incurred by the 2^nd Applicant and payment of the 2^nd Applicant’s costs to be taxed on High Court Scale, if not agreed. A copy of the letter was lodged with the Tribunal in a sealed envelope (“Sealed Offer for the Property 2”).
(iv)    By a letter from CCC to DoJ dated 20 November 2013, the 2^nd Applicant rejected the Sealed Offer for the Property 2.
(v)     By another Calderbank letter from the DoJ to CCC dated 8 March 2018, the Respondent offered to settle all of the 2^nd Applicant’s claim in LDLR 2 of 2012 at a compensation in the sum of $8,500,000 (less payment or allowance already released) with interest together with payment of professional remuneration reasonably incurred by the 2^nd Applicant and payment of the 2^nd Applicant’s costs to be taxed on High Court Scale, if not agreed. A copy of the letter was lodged with the Tribunal in a sealed envelope (“Enhanced Sealed Offer for the Property 2”).
(vi)    The 2^nd Applicant did not reply to the Respondent in respect of the Enhanced Sealed Offer for the Property 2.
(vii)   On 19 November 2018, this Tribunal handed down the Judgment and awarded the compensation to the 2^nd Applicant in respect of the Property 2 in the sum of $8,080,000 (“Compensation for the Property 2”).
(viii)  By a letter dated from CCC to DoJ dated 26 November 2018, the 2^nd Applicant asked the Respondent to pay for his costs of LDLR 2 of 2012, to be taxed on High Court Scale, if not agreed, and to pay for reasonable remuneration of the 2^nd Applicant’s expert. The 2^nd Applicant asked the Respondent to pay for interest on the PP for the Property 2 from 20 February 2011 (ie the date immediately after the Resumption Date) to 25 February 2013[4] (ie the date immediately before the date of the PP for the Property 2) at 6% per annum less interest already received.
(ix)    By a letter from DoJ to CCC dated 13 December 2018, the Respondent demanded from the 2^nd Applicant a refund in the sum of $75,001.52 being the excess of compensation in the sum of $75,000 plus interest repayable (calculated at the 24-hour call interest rate).
(x)     After the dismissal of the leave to appeal applications of all the Applicants by the CA and by a letter from CCC to DoJ dated 16 July 2019, the 2^nd Applicant insisted his same position as to interest on the PP for the Property 2, costs and professional remuneration.
(xi)    There were two further letters, namely a letter from DoJ to CCC dated 17 July 2019, and a letter from CCC to DoJ dated 6 September 2019 (maintaining the same position as per CCC’s letter of 26 November 2018).

15. In respect of LDLR 3 of 2012:

(i)      On 6 December 2012, the 3^rd Applicant received from the Respondent an amount of $9,834,000 being provisional payment pending determination of compensation in respect of the Property 3 (“PP for the Property 3”).
(ii)     The 3^rd Applicant also received from the Respondent an amount of $176.49 being interest on PP for the Property 3 calculated at the then 24-hour call interest rate.
(iii)    By a Calderbank letter from DoJ to CCC dated 7 November 2013, the Respondent offered to settle all of the 3^rd Applicant’s claim in LDLR 3 of 2012 at a compensation in the sum of $10,283,000 (less payment or allowance already released) with interest thereon payable pursuant to section 17 of LRO at a rate to be agreed or failing which, to be fixed by the Tribunal, together with payment of professional remuneration reasonably incurred by the 3^rd Applicant and payment of the 3^rd Applicant’s costs to be taxed on High Court Scale, if not agreed. A copy of the letter was lodged with the Tribunal in a sealed envelope (“Sealed Offer for the Property 3”). By a letter from CCC to DoJ dated 20 November 2013, the 3^rd Applicant rejected the Sealed Offer for the Property 3.
(iv)    By another Calderbank letter from the DoJ to CCC dated 8 March 2018, the Respondent offered to settle all of the 3^rd Applicant’s claim in LDLR 3 of 2012 at a compensation in the sum of $10,466,000 (less payment or allowance already released) with interest together with payment of professional remuneration reasonably incurred by the 3^rd Applicant and payment of the 3^rd Applicant’s costs to be taxed on High Court Scale, if not agreed. A copy of the letter was lodged with the Tribunal in a sealed envelope (“Enhanced Sealed Offer for the Property 3”).
(v)     The 3^rd Applicant did not reply to the Respondent in respect of the Enhanced Sealed Offer for the Property 3.
(vi)    On 19 November 2018, this Tribunal handed down the Judgment and awarded the compensation to the 3^rd Applicant in respect of the Property 3 in the sum of $10,070,000 (“Compensation for the Property 3”).
(vii)   By a letter from DoJ to CCC dated 20 November 2018, the Respondent requested the 3^rd Applicant for the sealed copy order so as to arrange for the payment of balance of compensation (ie $236,000 being $10,070,000 - $9,834,000) (“Balance of Compensation for the Property 3”).
(viii)  By a letter dated from CCC to DoJ dated 26 November 2018, the 3^rd Applicant asked the Respondent to pay for his costs of LDLR 3 of 2012, to be taxed on High Court Scale, if not agreed, and to pay for reasonable remuneration of the 3^rd Applicant’s expert. The 3^rd Applicant asked the Respondent to pay for interest on PP for the Property 3 from 20 February 2011 (ie the date immediately after the Resumption Date) to 5 December 2012 at 6% per annum less the sum of $176.49 being interest already received. The 3^rd Applicant also asked the Respondent to pay for interest on the Balance of Compensation for the Property 3 from 20 February 2011 (ie the date immediately after the Resumption Date) to 19 November 2018 (ie the date of Judgment) at 6% per annum, and thereafter at 8% per annum until final payment.
(ix)    By a letter from DoJ to CCC dated 14 December 2018, the respondent tendered to the 3^rd Applicant a cheque in the sum of $236,000 in full and final settlement of the Balance of Compensation for the Property 3.
(x)     After the dismissal of the leave to appeal applications of all the Applicants by the CA and by a letter from DoJ to CCC dated 12 July 2019, the Respondent asked the 3^rd Applicant to confirm within the next 5 days if he was prepared to accept the sum of $236,000 being the Balance of Compensation for the Property 3.
(xi)    By a letter from CCC to DoJ dated 15 July 2019, the 3^rd Applicant insisted his position as to costs, professional remuneration, interest on the PP for the Property 3 and interest on the Balance of Compensation for the Property 3 as per CCC’s letter of 26 November 2018.
(xii)   There were further letters sent by DoJ to CCC, dated 17 July 2019, 22 July 2019 (enclosing therein another cheque in the sum of $236,000 in full and final settlement of the Balance of Compensation for the Property 3) and 23 July 2019 (setting out the Respondent’s proposed terms on costs, professional remuneration and interest).
(xiii)  By a letter from CCC to DoJ dated 6 September 2019, the 3^rd Applicant rejected the Respondent’s proposed terms on costs, professional remuneration and interest. Again, the 3^rd Applicant insisted on their position as stated in CCC’s letter of 26 November 2018.

D. DISCUSSION

D.1 Issue of interest

16. In reliance on the Court of Appeal case Waddington Ltdv Chan Chun Hoo Thomas & Ors, CACV10/2014 (20 May 2016) at paras 172-186 and recently applied in Snowland Limited v Director of Lands, LDLR2/2014 (31 March 2017) at para 12, Mr Chow for the Applicants submitted that for the issue of interest, the default position that should apply in the land resumption proceedings is that (i) the pre-judgment interest rate should be the norm of 1% above the HSBC’s prevailing best lending rate (6%[5]); and (ii) the post-judgment rate be the prevailing judgment rate.

17. With respect, we do not entirely agree with Mr Chow’s description of “default position” as the Tribunal shall maintain a very wide though not unfettered discretion on the question of interest.

18. Nonetheless, Mr Ng for the Respondent submitted[6] that in respect of LDLR 1 of 2012 and LDLR 3 of 2012, the Respondent is prepared to pay interest on both the provisional payments and the balances of compensation at the rate of Prime + 1% from 20 February 2011 (ie the date immediately after the Resumption Date) up to 7 November 2013 (ie the date of Sealed Offers for the Properties 1 and 3). If that is the present stance of the Respondent, we consider that the same stance for all the 3 proceedings shall also be taken by the Respondent at the time of making the Sealed Offers (ie 7 November 2013) and Enhanced Sealed Offers (ie 8 March 2018) for the Subject Properties. Based on Mr Ng’s submission or indeed concession, we exercise the discretion to fix the interest at the rate of 6% per annum (almost the same as Prime + 1%) from 20 February 2011 onward pursuant to section 17(3A) of the LRO.

19. Indeed, the most important argument of Mr Chow for the Applicants is that all the Calderbank offers were made on the condition that the Applicants shall forgo the interest on the respective provisional payments for the Subject Properties from the Resumption Date up to the respective dates of the provisional payments save the interest already received.

20. According to the respective Calderbank letters from DoJ, the Respondent only offered to pay the respective compensations (less payment or allowance already released) with interest thereon payable pursuant to section 17 of the LRO at a rate to be agreed or failing which, to be fixed by the Tribunal, together with professional remuneration, costs etc. The interpretation of the Tribunal is that the Respondent just offered to pay interest on the respective balances of the compensation under section 17 of the LRO but failed to or did not offer to pay the interest on the respective provisional payments for the Subject Properties save the lowest of the interest rates paid on deposit at 24 hours’ call[7] as required by section 16A(1A) of the LRO. In our view, the Respondent fails to take into account and the Applicants are not obliged to forgo such interest on the respective provisional payments.

21. Alternatively, we consider that the Respondent may simply offer in the respective Calderbank letters to pay the interest on both the respective provisional payments and the respective Balances of the Compensation (but not just the respective Balances of the Compensation) to be agreed by the parties, failing which to be fixed by the Tribunal pursuant to section 17 of the LRO.

22. To conclude, we decide that the Respondent is liable to pay interest at the rate of 6% per annum on the respective provisional payments from 20 February 2011 to the date immediately prior to the respective dates of the provisional payments for the Subject Properties to the 1st to 3rd Applicants. For the interest thereafter, it will be discussed in the latter part of the Decision.

D.2 Whether the Sealed Offers and Enhanced Sealed Offers beat the respective awards of the Judgment?

23. As Mr Ng for the Respondent mainly argued that the Applicants are unreasonable in not accepting the respective Sealed Offers and Enhanced Sealed Offers, it is very important to determine the above question. In order to determine this question, the actual amounts of interest accrued as at the respective dates of the Sealed Offers and Enhanced Sealed Offers have to be calculated. Mr Chow for the Applicants was very helpful to do the relevant and tedious calculations of interest as per para 18 of his written submission dated 31 October 2019. We simply accept the calculations made by Mr Chow for the Applicants in his written submission as it is not contested by Mr Ng in his reply submission dated 21 November 2019 and supplemental submission dated 3 April 2020. The total amounts (ie the Compensations plus the interest calculated) payable to the Applicants are higher than the amounts in the Sealed Offers and the Enhanced Sealed Offers. We therefore find that the Sealed Offers and the Enhanced Sealed Offers made by the Respondent fail to beat the respective awards of the Judgment after taking into account the interest as aforesaid.

24. The Tribunal thus rejects the main submission of Mr Ng for the Respondent that the Applicants are unreasonable in not accepting these offers. It follows that the Respondent shall also be liable to the interest of 6% per annum on the respective Balances of the Compensation (ie $239,000 and $236,000) from the Resumption Date to the date immediately prior to the date of Judgment (ie from 20 February 2011 to 18 November 2018) to the 1st and 3rd Applicants. For the interest after Judgment, we agree that the Respondent shall pay the interest at judgment rate until full payments of the respective Balance of the Compensations made on 14 December 2018.

D.3 Issue of costs

25. Based on the compensation approach as agreed by the parties, we consider that in general, the Respondent shall pay costs to the Applicants subject to whether there is any “special reason” to depart from the general rule which may only exist “where wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant (eg abandoned issues, unnecessary adjournments, or failure to comply with directions of the Tribunal)” or “where the Tribunal can readily identify a situation in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation”[8].

26. Mr Ng for the Respondent contended that the main issue raised by all the Applicants was whether the Subject Properties had redevelopment potential and that this issue took up most of the length and costs, if not all, of the proceedings. It was improper and unreasonable for the Applicants to pursue this issue, and to engage their expert in preparing rounds of expert reports mainly on this issue, which necessitated the unnecessary preparation of rounds of reports by the Respondent’s expert, and the unnecessary preparation of a joint expert statement, and unduly prolonged the length and increased the costs of the trial.

27. With respect, we disagree with Mr Ng’s submission. We consider that the disparity between the Applicants’ claim and the final award alone bears little significance and that the great disparity in the present case only reflects the importance of the issue of redevelopment potential. The Applicants are justified to raise all legitimate arguments to advance their cases though ultimately not accepted by the Tribunal and by the CA upon appeal.

28. Most importantly, the Tribunal had not made any findings in the Judgment that the Applicants’ claims were ‘frivolous’ or ‘unreasonable’. The Tribunal did not rule or opine beyond finding against the Applicants’ claims for redevelopment potential reached on the normal civil standard[9].

29. Mr Ng for the Respondent also argued that as such redevelopment potential issue had been rejected in two previous judgments of Happy Enough and Cheermark, the Applicants should not have insisted on pursuing compensation on redevelopment potential and that the market value be assessed on RDV basis. We accept that we did make reference to these two judgments in the Judgment but we consider that the findings of the Tribunal in different cases with different applicants are, strictly speaking, not binding on this Tribunal especially when the said Tribunals consist of different judges and members. Hence, we are not of the view that any wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the Applicants and do not find any special reason to justify departure from the general rule.

E. CONCLUSION

30. In the circumstances, we conclude that the Respondent shall be liable for the costs of the proceedings including the professional remuneration and now make the order as follows:

(i)      The Respondent shall pay the Applicants the professional remuneration reasonably incurred, namely that of Mr Lee, expert for the Applicants with the amount to be determined by the Tribunal if not agreed;
(ii)     The Respondent shall pay the 1^st Applicant interest on the provisional payment ($8,471,000) from the date of resumption to the date immediately prior to the said payment (ie from 20 February 2011 to 17 December 2012) and the balance of the compensation ($239,000) from the date of resumption to the date immediately prior to the date of Judgment (ie from 20 February 2011 to 18 November 2018) at the rate of 6% per annum and giving credit to previous payments of interest received;
(iii)    The Respondent shall pay the 2^nd Applicant interest on the amount of the compensation awarded ($8,080,000[10]) from the date of resumption to the date immediately prior to the provisional payment (ie from 20 February 2011 to 26 February 2013) at the rate of 6% per annum and giving credit to previous payments of interest received;
(iv)   The Respondent shall pay the 3^rd Applicant interest on the provisional payment ($9,834,000) from the date of resumption to the date immediately prior to the said payment (ie from 20 February 2011 to 5 December 2012) and the balance of the compensation ($236,000) from the date of resumption to the date immediately prior to the date of Judgment (ie from 20 February 2011 to 18 November 2018) at the rate of 6% per annum and giving credit to previous payments of interest received;
(v)     The Respondent shall pay to the 1^st Applicant post-judgment interest on the balance of the compensation ($239,000) at the judgment rate from the date of Judgment to the date of payment of the said balance (ie from 19 November 2018 up to 14 December 2018);
(vi)    The Respondent shall pay to the 3^rd Applicant post-judgment interest on the balance of the compensation ($236,000) at the judgment rate from the date of Judgment to the date of payment of the said balance (ie from 19 November 2018 up to 14 December 2018);
(vii)   The Respondent shall pay the Applicants’ costs of these proceedings (including all costs reserved together with this paper disposal application) with Certificate for Counsel, to be taxed on High Court scale on party and party basis if not agreed.

31. Lastly, the Tribunal thanks Counsel for their assistance.

His Honour Judge S Lo	Lawrence Pang
Presiding Officer	Member
Lands Tribunal	Lands Tribunal

Mr Tony H H Chow, instructed by Cheung, Chan & Chung, for the applicants

Mr Stanley Ng, instructed by the Department of Justice, for the respondent

[1] the abbreviations used in the Judgment will be adopted in this Decision if appropriate

[2] Messrs Cheung, Chan & Chung act for all the Applicants in these proceedings LDLR 1-3/2012

[3] The Respondent did not provide the exact amount of interest in the submissions of Mr Ng for the Respondent but Mr Chow for the Applicants submitted “not more than say $200” in footnote 9 of his submission dated 31 October 2019.

[4] the date immediately before the date of the PP for the Property 2 shall be 26 February 2013 if the date of the PP for the Property 2 is 27 February 2013 as submitted by the Respondent.

[5] HSBC’s best lending rate had increased by 12.5 basis points to 5.125% on 28 September 2018 (ie, almost 2 months prior to the Judgment), but for the ease of calculation, the Applicants are content to adopt the lower figure for the whole of the period, ie 6% per annum.

[6] see para 14 and para 19(1)(a) and (3)(a) of the Respondent’s written submission dated 30 October 2019 and para 7 of the Respondent’s supplemental submission dated 3 April 2020

[7] In LDLR 1-3/2012, the respective amounts of interest paid to the Applicants are $154.81, not more than $200 and $176.49 respectively

[8] Para 29 of Purfleet Farms Ltd v Secretary of State for Transport, Local Government and the Regions [2003] 1 P & CR 20 as approved by the Court of Appeal in the Good Faith’s case

[9] See para 20 of the Judgment where the Tribunal found “[i]n such circumstances it could not be said on the balance of probabilities that the hypothetical development on any of the 3 hypothetical sites would be forthcoming within a reasonably foreseeable time scale”

[10] calculated only in respect of $8,080,000 out of the provisional payment ($8,155,000), as the 2nd Applicant shall not be entitled to interest on the excess, which is conceded by Mr Chow in his written submission.

LDLR 1 - 3/2012 (Heard Together)

[2019] HKLdT 19

LDLR 1/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 1 OF 2012

___________________

BETWEEN
	CHAN SHIU CHONG	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

LDLR 2/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 2 OF 2012

___________________

BETWEEN
	CHAN SHIU CHONG	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

LDLR 3/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 3 OF 2012

___________________

BETWEEN
	TSE SUI LUN	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

Before: His Honour Judge S. Lo, Presiding Officer of the Lands Tribunal, and Mr Lawrence Pang, Member of the Lands Tribunal

Date of the Applicant’s Written Submission:	26 February 2019
Date of the Respondent’s Written Submission:	31 January 2019
Date of Decision:	18 March 2019

__________________

D E C I S I O N
(Leave to Appeal)

_________________

Introduction and Background

1. These are applications taken out by the applicants by summonses filed on 14 December 2018 for leave to appeal against the Tribunal’s Judgment handed down on 19 November 2018 (“the Judgment”). By consent of the parties, the Tribunal shall dispose of this application on paper without oral hearing.

2. The applicant in LDLR 1/2012 was the former owner of 1/5^th equal and undivided share of and in New Kowloon Inland Lot No 1024 Section A Subsection 1 Section B with the right to exclusive use and occupation of Ground Floor including Cockloft of a 5-storey building erected thereon which is situated at No 187A Hai Tan Street, Kowloon (“Property 1”). The building was completed in 1955 and was physically connected with its adjacent building erected thereon at No 187B Hai Tan Street, Kowloon by a common staircase.

3. The applicant in LDLR 2/2012 was the former owner of 1/5^th equal and undivided share of and in New Kowloon Inland Lot No 1024 Section A Subsection 2 with the right to exclusive use and occupation of Ground Floor of a 5-storey building erected thereon which is situated at No 248 Tung Chau Street, Kowloon (“Property 2”). The building was completed in 1956 and was physically connected with its adjacent building erected thereon at No 250 Tung Chau Street, Kowloon by a common staircase.

4. The applicant in LDLR 3/2012 was the former owner of 1/5^th equal and undivided share of and in New Kowloon Inland Lot No 179 Section A Subsection 7 with the right to exclusive use and occupation of Ground Floor including the Mezzanine Floor of a 5-storey building erected thereon which is situated at No 220 Hai Tan Street, Kowloon (“Property 3”). The building was completed in 1956 and was physically connected with its adjacent building erected thereon at No 222 Hai Tan Street, Kowloon by a common staircase.

5. Their properties (collectively “the Subject Properties”) together with many others in the area including but not limited to the properties under consideration in Cheermark Investment Limitedv Director of Lands, LDLR 2/2013 (unreported, 3 November 2015) and Happy Enough Limited v Director of Lands, LDLR 5/2012 (unreported, 17 March 2016) were compulsorily resumed under the Lands Resumption Ordinance (“LRO”) by Gazette Notice No 7187 dated 1 November 2010 for the implementation of the Development Scheme SSP/1/003, 004 and 005 Sham Shui Po (“the Development Scheme”) by the Urban Renewal Authority (“URA”). These properties subsequently reverted to the Government at midnight of 19 February 2011 (“the Resumption Date”).

6. The corresponding Notices of Application were filed on 13 June 2012 asking for determination on compensation for lands resumed under the LRO in relation to the Subject Properties.

7. The Subject Properties and all other properties resumed under the Development Scheme were situated at a parade of old tenement buildings along Hai Tan Street and Tung Chau Street which run parallel to each other, near their junctions with Kweilin Street and Pei Ho Street in the Sham Shui Po district. It is not disputed that developments in the immediate vicinity of the Subject Properties were dominated by out-moded low-rise commercial/ residential buildings with ground floor shops devoted mainly to car repairing workshops, engineering workshops and retailing of engineering accessories.

Legal Principles

8. Section 11AA (6) of the Lands Tribunal Ordinance provides that:

“Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that –
(a) the appeal has a reasonable prospect of success; or
(b) there is some other reason in the interests of justice why the appeal should be heard.”

9. In this regard, a “reasonable prospect of success” means more than just an arguable or fanciful case without having to show the appeal will probably succeed[1].

Issues Under Appeal

10. The main dispute between the parties which has become the issue of the intended appeal is that: the applicants suggest that the Subject Properties should be assessed by residual analysis to take into account their redevelopment value (“RDV”) whereas the respondent maintains that the Subject Properties did not have redevelopment potential so that only direct comparison method should be adopted to assess their existing use value (“EUV”).

Redevelopment Potential

11. The parties have no dispute that the leading case on redevelopment potential in resumption of land is the Court of Appeal judgment of Siu Sau Kuen v Director of Lands [2013] 6 HKC 557, on appeal from the Tribunal’s judgment in LDLR 1/2010 (unreported, 9 March 2012). The starting point is that in determining the compensation for resumption of a property, the claimant is entitled to include the redevelopment value if so justified.

12. The Tribunal adopted a two-stage approach. Stage one is concerned with whether an element of redevelopment value should be included in the compensation to be paid on the resumption of land. This test was re-fined by Fok JA (as he then was) in the Court of Appeal as follows:

“… whether, on a balance of probabilities, the evidence disclosed that redevelopment of the property resumed was likely as at the date of resumption. Such likelihood may be demonstrated by:
(i) actual proposals by the applicant to redevelop the property (or unlikelihood demonstrated by the absence of such proposals), whether on its own or by merger with other properties, or
(ii)evidence of redevelopment in the vicinity of the resumed property (whether accompanied by evidence of redevelopment plans for the resumed property or not), so long as such evidence of redevelopment in the vicinity supported a finding that redevelopment on its own or merger of the resumed property with other properties giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale.”

13. The Stage Two approach is concerned with valuation and was not altered on appeal. It is as follows:

“If Stage One is determined in favour of a claimant, the Court/Tribunal would then proceed to conduct a valuation of the redevelopment potential.”

14. It is the case of the applicants that there was redevelopment potential as at the Resumption Date and that market value of the Subject Properties can be assessed on that basis.

15. Insofar as the Stage One approach is concerned, the applicants solely rely on the second limb of the test, namely there is evidence of redevelopment in the vicinity of the Subject Properties which supports, on a balance of probabilities, a finding that redevelopment on its own or merger of the Subject Properties with other properties giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale as at the Resumption Date.

16. With regret, the Tribunal found in the Judgment that, on a balance of probabilities, the Subject Properties should not have enjoyed the RDV at the Resumption Date. The Tribunal assessed their EUV as the market values.

Grounds of Appeal

17. The applicants complain that the Tribunal had erred on four grounds as set out below:

Ground (1) Unspecified Buildings with the Same Attributes as the Subject Properties not Redeveloped and Wrongly Adopted the Criminal Standard of Proof

18. Mr Ross M Y Yuen and Ms Evelyn L C Cheng (“Messrs Yuen & Cheng”), counsel for the applicants, submit that the Tribunal, in rejecting the redevelopment potential of the Subject Properties, erred in law in relying on the observation that some unspecified buildings in the vicinity that appeared in poor condition have not been redeveloped, and effectively heightened the burden of proof to a higher threshold of beyond reasonable doubt.

19. The Tribunal in para. 21 of the Judgment had the following observation:

“We agree that The Prominence, Harbour Park and Park One are new redevelopments of former old buildings in the vicinity of the Subject Properties. During the site inspection on 28 August 2018, however, we observed that there are still parades of 5 or 6-storey building at Hai Tan Street or Yee Kuk Street not being redeveloped in 2018 even though they all appear in poor building condition. In our opinion, it cannot be true that any building with the same physical attributes of, and sharing the same town planning considerations as the Subject Properties shall all have redevelopment potential as at the Resumption Date…”

20. Messrs Yuen & Cheng suggest that the Tribunal was in fact saying that the absence of redevelopment potential of the Subject Properties can be shown by the fact that even in 2018 some buildings in the vicinity are still not redeveloped despite appearing to be in poor building condition and/or having the same physical attributes as the Subject Properties. Effectively, the Tribunal was asking the applicants to justify as to why some other buildings in the vicinity have not been redeveloped. It is a wrong application of the Siu Sau Kuen test. With respect, we disagree.

21. We consider that the applicants’ entire case rests on the proposition that the Subject Properties share similar physical attributes and town planning considerations as the former old buildings which later became The Prominence, Harbour Park and Park One, and therefore the Subject Properties must all have redevelopment potential. We agree with the submission of Mr Stanley Ng (“Mr Ng”), Counsel for the respondent, that the applicants had the burden to prove such a proposition was correct. Save from making such proposition, the applicants had come up with nothing at all to sustain making such proposition. Mr Ng submits and we accept that the applicants’ expert, Mr Lee[2], had accepted under cross-examination that there was no evidence that any private developers were interested in redeveloping the Subject Properties.

22. While the applicants heavily relied on the presence of The Prominence, Harbour Park and Park One to prove that the Subject Properties must all have redevelopment potential, we do not agree its truism of this proposition as there were still many old buildings sharing the same attributes as the Subject Properties but were not developed.

23. The applicants complain that the question of such buildings not being redeveloped in 2018 was not canvassed in the trial at all:

(1) It was not a ground of opposition of the respondent;
(2) It was not raised as a matter of evidence either in the expert reports or oral evidence;
(3) It was unknown as to which buildings were referred to;
(4) It was unknown as to whether such buildings have indeed the same physical attributes as the Subject Properties;
(5) It was unknown as to whether they are indeed in poor condition when no internal visit had been made to any properties during the joint site inspection.

24. In Checkpoint Limited v. Strathclyde Pension Fund [2003] 14 EG 124, [2003] EWCA Civ 84, an arbitrator on rent review applied his own experience of area in vicinity of demised premises. The English Court of Appeal affirmed that the arbitrator had not acted unfairly. The arbitrator had been required to determine whether Winnersh and Bracknell were in the same market and subject to the same demands, and in relying upon his own experience to confirm that the Winnersh units were comparable. The English Court of Appeal said in para. 41 of the judgment:

“… he was engaged in the proper process of evaluating the evidence before him and properly using his own knowledge to that end.”

25. And in Myers v. South Lakeland District Council [2005] EWCA Civ 498, [2005] RVR 300, the English Court of Appeal emphasised that the Lands Tribunal is not bound to accept the contentions of either party. The whole point of having an expert tribunal such as the Lands Tribunal, is that the tribunal should bring its own expertise to bear on the facts and form a view itself of the monetary value of the amount claimed. The English Court of Appeal said in para. 24 of the judgment:

“… the member was fully entitled, on the evidence he heard, to reach the factual and judgmental considerations which he did.”

26. In the present case, the Tribunal consisting of a district judge and a member was arranged a joint site inspection by the parties spending about 2.5 hours in the morning of the 2^nd day trial. There were not only one, two or three old buildings sharing the same attributes as the Subject Properties but were not developed; there were quite a number being observed during the joint site inspection. This evidence obtained during the joint site inspection shows that the proposition by the applicant is logically incorrect. As we remarked at para. 22 of the Judgment:

“We also consider that the increase in plot ratio of the hypothetical redevelopment model proposed by Mr Lee and the registration of the building orders are neither here or there. Otherwise all similar premises in the entire Sham Shui Po area shall have redevelopment potential forthcoming within a reasonably foreseeable time scale.”

27. There is no merit in Ground (1) as we were entitled to make a finding of facts that as at the Resumption Date, redevelopment of the Subject Properties was not likely within a reasonably foreseeable time scale on a balance of probabilities.

Ground (2) Wrongly Required Actual Evidence or Evidence of Interest of Private Developers

28. The applicants submit that the Tribunal erred in law in requiring them to adduce evidence to show that there was private developer(s) interested in acquiring the Subject Properties either before or after February 2006 when the URA announced the Development Scheme.

29. According to the submission of Messrs Yuen & Cheng, the Siu Sau Kuen test expressly distinguishes two scenarios in which an applicant may demonstrate the resumed property had redevelopment potential. The first one is a situation where there were actual proposals by the applicant to redevelop the resumed property. The second one is a matter of inference to be drawn from the evidence of redevelopment in the vicinity of the resumed property, irrespective of “whether accompanied by evidence of redevelopment plans for the resumed property or not.”

30. We trust that their submission is misplaced. In formulating the Siu Sau Kuen test, Fok JA (as he then was) stated as follows:

“30. … Instead, I would accept Mr Lam’s submission in this court that the test the Tribunal actually applied is to be found in §§37 and 41 of the Judgment, namely: whether the Tribunal was satisfied on the evidence that, at the date of resumption, there were people ready to buy up properties in the subject lot with a view to collecting a site worth developing.
31. … the Tribunal focused on the question of whether there was evidence to establish that there was this redevelopment potential, i.e. existing in the future, at that date. This is made clear in §13 of the Reasons for Decision where the Tribunal said:
‘So, it is not the case that we did not take into account any redevelopment potential that could have been in the future, but it is entirely a matter of where there are [sic] evidence establishing that there was this possibility at the date of this resumption. And, in our case, we found there was no such evidence.’
32. … the reality is that the Stage One test actually applied by the Tribunal was capable of reflecting the development value for potential redevelopment as at the date of valuation.” (emphasis added)

31. In the present case, like the Tribunal in Siu Sau Kuen, we found there was no such evidence, actual or otherwise, capable of establishing that there was redevelopment potential at the Resumption Date. The applicants had provided no evidence of “people ready to buy up properties in the subject lot with a view to collecting a site worth developing.” Certainly, evidence of people includes but does not limited to private developers.

32. A further or alternative complaint of the applicants under this Ground (2) is that this Tribunal erred by drawing the cutting line to five years before the Resumption Date.

33. This complaint is however flawed. Para. 23 of the Judgment reads:

“In any event, the Applicants or Mr Lee simply had no evidence to show that there was any interest from any private developer acquiring the Subject Properties either before February 2006, the month when URA announced the Development Scheme, or after that but before the Resumption Date. There was no sale and purchase transaction in any of the Subject Properties or their adjoining ones for over a long period of time.” (emphasis added)

34. As can be seen, the cutting line remains as the Resumption Date, which is the date of valuation dictated by section 10(2)(a) of the LRO.

35. There is no merit in Ground (2).

Ground (3) Wrongly Required the Redevelopment Scheme to be the Most Realistic

36. Here, the applicants suggest the Tribunal erred in law in requiring the redevelopment scheme put forward by the applicants to be the most realistic when the second limb test of Siu Sau Kuen only requires a viable scheme. The applicants point to para. 20 of the Judgment where the Tribunal observed that:

“On the other hand, we agree that for redevelopment to be viable, the site on which the Subject Properties are situated should be acquired with their respective adjoining sites. For instance, the site for redevelopment for either Nos 187A or 187B Hai Tan Street is merely 92.13 sq m and the combined site area is 184.26 sq m which is still too small for a development like The Prominence, Harbor Park or Park One. Even Mr Lee was of the view that a merger of 4 to 6 adjoining lots would be more realistic…”

37. From the above cited paragraph, it is clear that the Tribunal had already been satisfied that the proposed redevelopment models for the Subject Properties were not viable before making further observation that even Mr Lee under cross-examination agreed a merger of 4 to 6 adjoining lots would be more realistic.

38. In any event, the viability of any proposed redevelopment model has to be examined in a realistic sense. If it is not realistic, particularly not realistic from the developer’s point of view, which the applicants’ expert agreed at trial, it could not be viable.

39. There is no merit in Ground 3 by seeking to substitute the word “realistic” with “viable”.

Ground (4) Wrongly ignored relevant factors and considered irrelevant factors

40. The applicants further submit that the Tribunal erred in law by failing to appreciate that the finding of the likelihood of the Subject Properties’ redevelopment is a matter of inference founded on similarities between the Subject Property and the redevelopment in the vicinity.

41. We are of the view that the applicants are repeating Ground (1) by saying that so long as the Subject Properties share similar physical attributes and town planning considerations as the former old buildings which later became The Prominence, Harbour Park and Park One, therefore the Subject Properties must all have redevelopment potential.

42. We have already rejected this proposition made by the applicants in the above. Further, in para. 21 of the Judgment[3], we found as a fact that the site on which the Subject Properties were formerly situated was different from The Prominence and Park One.

43. As submitted by Mr Ng, the Tribunal had considered the similarities in physical attributes, same town planning consideration and plot ratio in paras. 21 and 22 of the Judgment[4] but did not find that such inference should be drawn on a balance of probabilities.

44. There is no merit in Ground (4).

Conclusion

45. Having carefully consider all grounds of intending appeal submitted by the applicants, we do not think that the appeal has a reasonable prospect of success or there is some other reason why the appeal should be heard, and hence, we refuse to grant leave to the appeal.

Costs

46. Since costs shall follow event, the applicants should pay costs of this application, which are to be taxed on the High Court scale if not agreed.

His Honour Judge S. Lo	Lawrence Pang
Presiding Officer	Member
Lands Tribunal	Lands Tribunal

Mr Ross M Y Yuen and Ms Evelyn L C Cheng, instructed by Cheung, Chan & Chung, for the applicants

Mr Stanley Ng, instructed by the Department of Justice, for the respondent

[1] First Kind Ltd & Another v Liu Keng Chor, The Administrator of the Estate of Li Fung Man deceased & Others, LDCS 12000, 13000, 14000, 15000, 20000 and 21000/2014 (unreported, 13 January 2017) at para. 36

[2] Mr Lee was also the expert in Cheermark’s case and Happy Enough’s case.

[3] “…The Prominence and Park One occupy more prominent corner locations.”

[4] “Otherwise all similar premises in the entire Sham Shui Po area shall have redevelopment potential forthcoming within a reasonably foreseeable time scale.”

LDLR 1 - 3/2012 (Heard Together)

[2018] HKLdT 89

LDLR 1/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 1 OF 2012

___________________

BETWEEN
	CHAN SHIU CHONG	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

LDLR 2/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 2 OF 2012

___________________

BETWEEN
	CHAN SHIU CHONG	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

LDLR 3/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS RESUMPTION APPLICATION NO 3 OF 2012

___________________

BETWEEN
	TSE SUI LUN	Applicant
	and
	DIRECTOR OF LANDS	Respondent

___________________

Before:

His Honour Judge S. Lo, Presiding Officer of the Lands Tribunal, and Mr Lawrence Pang, Member of the Lands Tribunal

Date of Hearing:	27-30 August 2018, 7 November 2018
Date of Judgment:	19 November 2018

__________________

J U D G M E N T

__________________

Introduction and Background

1. The applicants of LDLR 1/2012 (“1^st Application”), LDLR 2/2012 (“2^nd Application”) and LDLR 3/2012 (“3^rd Application”) (collectively the “Applications”) ask this Tribunal to determine the amount of compensation payable by the same Respondent under the Lands Resumption Ordinance, Cap 124 (“the LRO”).

2. The applicant (“the 1^st Applicant”) in the 1^st Application was the owner of 1/5^th equal and undivided share of and in New Kowloon Inland Lot No 1024 Section A Subsection 1 Section B with the right to exclusive use and occupation of Ground Floor including Cockloft of a 5-storey building erected thereon which is situated at No 187A Hai Tan Street, Kowloon (“Property 1”). The building was completed in 1955 and was physically connected with its adjacent building erected thereon at No 187B Hai Tan Street, Kowloon by a common staircase.

3. The applicant (“the 2^nd Applicant”) in the 2^nd Application was the owner of 1/5^th equal and undivided share of and in New Kowloon Inland Lot No 1024 Section A Subsection 2 with the right to exclusive use and occupation of Ground Floor of a 5-storey building erected thereon which is situated at No 248 Tung Chau Street, Kowloon (“Property 2”). The building was completed in 1956 and was physically connected with its adjacent building erected thereon at No 250 Tung Chau Street, Kowloon by a common staircase.

4. The applicant (“the 3^rd Applicant”) in the 3^rd Application was the owner of 1/5^th equal and undivided share of and in New Kowloon Inland Lot No 179 Section A Subsection 7 with the right to exclusive use and occupation of Ground Floor including the Mezzanine Floor of a 5-storey building erected thereon which is situated at No 220 Hai Tan Street, Kowloon (“Property 3”). The building was completed in 1956 and was physically connected with its adjacent building erected thereon at No 222 Hai Tan Street, Kowloon by a common staircase.

5. Their properties (collectively “the Subject Properties”) together with many others in the area including but not limited to the properties under consideration in Cheermark Investment Limitedv Director of Lands, LDLR 2/2013 (unreported, 3 November 2015) and Happy Enough Limited v Director of Lands, LDLR 5/2012 (unreported, 17 March 2016) were compulsorily resumed under the LRO by Gazette Notice No 7187 dated 1 November 2010 for the implementation of the Development Scheme SSP/1/003, 004 and 005 Sham Shui Po (“the Development Scheme”) by the Urban Renewal Authority (“URA”). These properties subsequently reverted to the Government at midnight of 19 February 2011 (“the Resumption Date”).

6. The Subject Properties and all other properties resumed under the Development Scheme were situated at a parade of old tenement buildings along Hai Tan Street and Tung Chau Street which run parallel to each other, near their junctions with Kweilin Street and Pei Ho Street in the Sham Shui Po district. It is not disputed that developments in the immediate vicinity of the Subject Properties were dominated by out-moded low-rise commercial/ residential buildings with ground floor shops devoted mainly to car repairing workshops, engineering workshops and retailing of engineering accessories.

7. There are no factual witnesses. Mr Wayne W K Lee (“Mr Lee”) of the Applicants and Mr Lai Wah Chi (“Mr Lai”) of the Respondent gave their expert valuation opinion in the following reports:-

Mr Lee Mr Lai
Valuation Report 11 March 2013 7 February 2013
Supplementary Report 13 June 2013 4 June 2013
2^nd Supplementary Report 28 July 2017 17 October 2017
Joint Statement 17 January 2018

8. Although all three occupation permits stated that the subject buildings were permitted for domestic purpose, according to the approved building plans, the ground floor of the Subject Properties was designed for shop use. Following the Court of Appeal decision in Cheermark Investment Limited vDirector of Lands and Happy Enough Limited v Director of Lands, ie CACV 165/2016 and CACV 184/2016 both reported as [2018] 1 HKLRD 79, the two experts have no dispute that the Subject Properties should be assessed as shop.

9. There is also no dispute that accessibility of the Subject Properties was good, with public transport such as franchised buses, public light buses and taxis readily available. The MTR Sham Shui Po Station is within 10 minutes’ walk from the Subject Properties.

10. The main difference between the experts is this. The Applicants’ case is that the Subject Properties should be assessed by residual analysis to take into account their redevelopment value (“RDV”); alternatively, the Applicants rely on the existing use value (“EUV”) of the Subject Properties as a fallback which are analyzed in the course of assessment of their sharing ratio in the RDV. On the other hand, the Respondent maintains that the Subject Properties did not have redevelopment potential so that only direct comparison method should be adopted to assess their EUV. In respect of the latter, both experts agree to follow Cheermark Investment and Happy Enough.

Issues Arising

11. Thus it is not disputed that there are three main issues in the present case: -

(i)   Whether the Subject Properties had redevelopment potential within a reasonably foreseeable time scale as of the Resumption Date;
(ii)   If the answer to Issue (1) is in the affirmative, what was the market value of the Subject Properties assessed on RDV basis;
(iii)   If the answer to Issue (1) is in the negative, what was the market value of the Subject Properties assessed on EUV basis.

Redevelopment Potential

12. The leading case on redevelopment potential in resumption of land is the Court of Appeal judgment of Siu Sau Kuen v Director of Lands [2013] 6 HKC 557, on appeal from the Tribunal’s judgment in LDLR 1/2010 (unreported, 9 March 2012). The starting point is that in determining the compensation for resumption of a property, the claimant is entitled to include the redevelopment value if so justified.

13. The Tribunal adopted a two-stage approach. Stage one is concerned with whether an element of redevelopment value should be included in the compensation to be paid on the resumption of land. This test was re-fined by Fok JA (as he then was) in the Court of Appeal as follows:

“Whether, on a balance of probabilities, the evidence discloses that, as at the date of resumption, redevelopment of the property resumed was likely. Such likelihood may be demonstrated by:
(i) actual proposals by the applicant to redevelop the property (or unlikelihood demonstrated by the absence of such proposals) whether on its own or by merger with other properties, or
(ii) evidence of redevelopment in the vicinity of the resumed property (whether accompanied by evidence of redevelopment plans for the resumed property or not), so long as such evidence of redevelopment in the vicinity supports a finding that redevelopment on its own or merger of the resumed property with other properties giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale.”

14. The Stage Two approach is concerned with valuation and was not altered on appeal. It is as follows:

“If Stage One is determined in favour of a claimant, the Court/Tribunal would then proceed to conduct a valuation of the redevelopment potential.”

15. It is the case of the Applicants that there was redevelopment potential as at the Resumption Date and that market value of the Subject Properties can be assessed on that basis.

16. Insofar as the Stage One approach is concerned, the Applicants solely rely on the second limb of the test, namely there is evidence of redevelopment in the vicinity of the Subject Properties which supports, on a balance of probabilities, a finding that redevelopment on its own or merger of the Subject Properties with other properties giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale as at the Resumption Date.

17. In his first Valuation Report dated 11 March 2013, Mr Lee relies on the following redevelopment projects as evidence of redevelopment in the vicinity of the Subject Properties:

(i)   The Prominence at Nos 332-338 Tung Chau Street: the original site contained a total of three 6-storey old tenement buildings accommodating a total of about 46 units. They were acquired by a private developer for redevelopment from May to August 2005.
(ii)   Harbour Park at Nos 204-214 Tung Chau Street: the original site contained a total of six 6-storey old tenement blocks built in 1955 (Nos 210-214) and 1963 (Nos 204-208) accommodating a total of about 48 units. They were acquired by a private developer for redevelopment from about January 2010 till November 2010.
(iii)   Park One at Nos 198 Tung Chau Street & Nos 1-19 Nam Cheong Street: the original site contained a total of nine 6-storey old tenement blocks built in 1958 (Nos 5-19 Nam Cheong Street) and 1963 (Nos 198 Tung Chau Street & Nos 1-3 Nam Cheong Street) accommodating a total of about 66 units. They were acquired by a private developer for redevelopment from about April 2010 till March 2016 when an order for sale under the Land (Compulsory Sale for Redevelopment) Ordinance was issued.
(iv)   Nos 205-211A Hai Tan Street: it was acquired by the URA under the Demand-led Redevelopment Policy. The original site contained a total of five 9-storey old domestic buildings completed in 1963 accommodating a total of about 71 units. They were acquired by the URA for redevelopment from April 2012 till May 2014.
(v)   Nos 229A-G Hai Tan Street: it was also acquired by the URA under the Demand-led Redevelopment Policy. The original site contained one 9-storey old domestic building completed in 1964 accommodating a total of 58 units. They were acquired by the URA for redevelopment from August till October 2012.

18. Indeed, the first three of the above projects were relied on by Mr Lee in Happy Enough in support of his assertion that the property in issue was ripe for redevelopment. During cross-examination, Mr Lee agreed that for The Prominence and Harbour Park, acquisitions by private developers should have started sometime in the past, and the short periods of acquisition as shown from the transaction records cannot reflect the true acquisition time frame. In fact, Mr Lee did not know how long in the past the developers actually took in acquiring the former units for development of The Prominence or Harbour Park.

19. In respect of the two URA projects under the Demand-led Redevelopment Policy, it is important to note that the Board of the URA only approved the framework for a “demand-led” model on 31 May 2011, ie some 3 months after the Resumption Date. Also, only 3 out of 25 applications were selected. As at the Resumption Date, the Tribunal considers that the possibility of any of the Subject Properties having redevelopment potential under the Demand-led Redevelopment Policy of the URA was remote. In any event, there is no evidence that the URA has offered compensation to the former owners on redevelopment basis under the Demand-led Redevelopment Policy[1] given that the Subject Properties were also resumed for the purpose of the URA scheme anyway. These two development projects by the URA serve no purpose in illustrating the prospect of redevelopment in the vicinity in the absence of URA or its award of compensation on redevelopment basis or otherwise.

20. On the other hand, we agree that for redevelopment to be viable, the site on which the Subject Properties are situated should be acquired with their respective adjoining sites. For instance, the site for redevelopment for either Nos 187A or 187B Hai Tan Street is merely 92.13 sq m and the combined site area is 184.26 sq m which is still too small for a development like The Prominence[2], Harbor Park[3] or Park One[4]. Even Mr Lee was of the view that a merger of 4 to 6 adjoining lots would be more realistic. However, the 1^st Applicant was the registered owner of only one unit, ie just one of 10 owners of the 5-storey building formerly standing at No 187A Hai Tan Street and No 187B Hai Tan Street and there was no evidence of any suspected acquisition transaction in the same building and the adjacent building. The same are true for the 2^nd Applicant and 3^rd Applicant in respect of Nos 248 & 250 Tung Chau Street[5] as well as Nos 220 & 222 Hai Tan Street[6]. In such circumstances it could not be said on the balance of probabilities that the hypothetical development on any of the 3 hypothetical sites would be forthcoming within a reasonably foreseeable time scale.

21. We agree that The Prominence[7], Harbour Park and Park One are new redevelopments of former old buildings in the vicinity of the Subject Properties. During the site inspection on 28 August 2018, however, we observed that there are still parades of 5 or 6-storey building at Hai Tan Street or Yee Kuk Street not being redeveloped in 2018 even though they all appear in poor building condition. In our opinion, it cannot be true that any building with the same physical attributes of, and sharing the same town planning considerations as the Subject Properties shall all have redevelopment potential as at the Resumption Date. This is particularly the case when The Prominence and Park One occupy more prominent corner locations.

22. We also consider that the increase in plot ratio of the hypothetical redevelopment model proposed by Mr Lee and the registration of the building orders are neither here or there. Otherwise all similar premises in the entire Sham Shui Po area shall have redevelopment potential forthcoming within a reasonably foreseeable time scale.

23. In any event, the Applicants or Mr Lee simply had no evidence to show that there was any interest from any private developer acquiring the Subject Properties either before February 2006, the month when URA announced the Development Scheme, or after that but before the Resumption Date. There was no sale and purchase transaction in any of the Subject Properties or their adjoining ones for over a long period of time.

24. We also agree with the Tribunal in Happy Enough that the redevelopments to the north of Tai Po Road cannot be considered as “in the vicinity” of the Subject Properties. Those redevelopments to the north of Tai Po Road including the NBY Area[8] are having different characteristics and situated at neighbourhoods different from the areas at which the Subject Properties were situated.

25. We are of the view that none of the Applicants had satisfied the second limb of the tests laid down in Siu Sau Kuen. We are of the opinion that the Applicants have failed to prove in a no-scheme world as at the Resumption Date that the Subject Properties had redevelopment potential for site assembly with other units in the same building and the adjacent buildings within a reasonably foreseeable time scale. There were some redevelopments in the district does not mean that the Subject Properties should have immediate redevelopment potential if there was no URA scheme. Therefore any assessment of the Subject Properties on the redevelopment basis is to be discarded and Issue (1) is resolved against the Applicants. Accordingly the Subject Properties will be assessed on EUV basis.

Issue 3: Market Value of the Property Assessed on the EUV Basis

The Evidence on Valuation

26. The parties do not dispute that the comparables that had been adopted in Cheermark Investment and Happy Enough are relevant in the assessment of the market value of the Subject Properties. We have conducted the site visit and external inspection to the sites formerly occupied by the Subject Properties and observed the comparables together with the parties and their experts on 28 August 2018. We are going to review the choices of and adjustments for shop comparables for the assessment of Subject Properties one by one.

Market Value of Property 1 (Ground Floor including Cockloft, No 187A Hai Tan Street)

27. By reference to the Joint Statement prepared by the experts, Property 1, ie Ground Floor including Cockloft, 187A Hai Tan Street had the following attributes or particulars:

Ground Floor Cockloft (C/L)
Saleable Area: 63.23 sq m + Area under staircase: 3.86 sq m + yard: 24.43 sq m 15.79 sq m
Effective Area* 73.18 sq m
Clear Frontage: 3.47 m
Headroom: 4.86 m
(2.74 m under C/L)
* Effective Area is derived from assuming the following conversion factors:
Cockloft: ¼, Yard: 1/6, Area under Staircase:1/2.

28. The following comparables are agreed by both experts[9]:

Comp Address Transaction Date RVD Index Consideration Saleable Area
(sq m) Effective Floor Area
(sq m)* Frontage (m) Head-room (m) Price/
sq m
1 G/F, 165 Yee Kuk Street 18 Jun 2011 328.2 $9,200,000 81.54 + yard: 13 83.71 2.97 4.98 $109,903
2 G/F, 190 Hai Tan Street 7 Oct 2010 278.7 $10,800,000 104.26 4.77 3.91 $103,587
3 Shop 1, G/F, 156 Yee Kuk Street 9 Sep 2010 270.0 $9,800,000 74.89 + yard: 31.73 80.18 5.16 3.05 $122,225
4 Shop C, G/F, 196-202A Hai Tan Street 19 May 2010 247.6 $9,380,000 95.13 3.85 5.49
(2.74 under C/L) $98,602

29. On top of those, Mr Lee adopts a comparable at Shop 1, G/F of 48 Pei Ho Street. During our joint inspection on 28 August 2018, we found this comparable proposed by Mr Lee was situated close to the junction of Pei Ho Street and Lai Chi Kok Road which is a main distributor in the area. Currently this is occupied by a 7-11 convenience store. We consider this comparable being situated at a much superior location should not be adopted as comparable in our assessment. That it was adopted by the Tribunal in Happy Enough might be solely for the reason that the subject in that case was situated at the corner of Pei Ho Street and Hoi Tan Street. This is no longer the case here.

30. The 2 experts further agree the following adjustment factors:

Time: Private Retail Index published by the Rating & Valuation Department (RVD index)
Frontage: 2% per m of clear frontage difference
Size: 1% per 4 sq m of effective area difference

31. They nevertheless have the following disagreement:

Mr Lai Mr Lee
Location: By making reference to the percentage adjustment in Cheermark Investment Based on professional judgment
Headroom: By making reference to the percentage adjustment in Happy Enough 2% per m of headroom difference
Market Value $116,190 per sq m $141,143 per sq m

32. As regards location, we consider the property in Cheermark Investment, ie No 177 Hai Tan Street was situated at the same portion of Hai Tan Street as Property 1 within a close distance. We opine that the location adjustments as decided by the Tribunal in Cheermark Investment are applicable to Property 1.

33. For the headroom, we share the opinion of the Tribunal in Happy Enough that there should not be a mechanical adjustment for headroom space in the captioned case when the rear portion of the ground floor had lower headroom because of the cockloft. We do not agree with Mr Lee that the cockloft only occupied a small fraction of that of the ground floor; it occupied some 25%.

34. In Happy Enough, the property in question had a headroom of 5.08 m and but half of it had a headroom of mere 2.82 m. Then the Tribunal in that case considered that it is appropriate to make downward adjustments at 8% to Comparable 1 to reflect its higher headroom on ground floor; nil adjustment to Comparable 2 because it has a higher headroom on ground floor but a lower headroom on cockloft and an overall lower headroom too; nil adjustment to Comparable 3 because it has a slightly higher headroom on ground floor only; and nil adjustment to Comparable 4 because it has a lower headroom on ground floor but a higher headroom on cockloft and an overall higher headroom too. In comparison, both the clear headroom and the headroom under cockloft for Property 1 is a little lower at 4.86 m and 2.74 m respectively. We consider it appropriate to follow the adjustments made by the Tribunal in Happy Enough.

Comp
Price/
sq m
Adjustments
AdjPrice/
sq m
Weighting
Location Frontage Quantum/
Size Headroom Time Total
1 $109,903 0% 1.0% 2.6% -8% -7.0% -11.4% $97,374 1
2 $103,587 0% -2.6% 7.8% 0% 9.5% 14.7% $118,814 2
3 $122,225 -8% -3.4% 1.8% 0% 13.1% 3.5% $126,503 1
4 $98,602 0% -0.8% 5.5% 0% 23.3% 28.0% $126,211 2
Average: $117,226 $118,987

35. Thus, the assessment of the market value of Property 1 is as follows:

36. Market Value for Property 1 =

73.18 sq m x $118,987
= $8,707,468.66
Say $8,710,000

37. It is undisputed that Property 1 was, as at the Resumption Date, subject to a tenancy entered into on 4 April 2007 when URA had already announced the Development Scheme in February 2006. The term of the tenancy was originally stated to expire on 4 April 2008 but such date was crossed-out and replaced by 「市區重建局指定收樓日止。」which is translated to “on the date to be specified by the URA to take up possession of the Property.”

38. In Chan Yuk Mui v葉穎麟, DCCJ 2111 of 2007 (unreported, 9 November 2007), the tenancy in question was open ended, meaning for a period up to the time of demolition of the property by the URA. H H Judge Wong held that:

“11. The law on tenancy agreement is clear. The agreement must be certain with the parties to the contract clearly named, the consideration spelt out and the term of the lease clearly specified, otherwise, the tenancy agreement would be void for uncertainty ……”

39. The learned judge also referred to Prudential Assurance Company Limited v. London Residuary Body and Others [1992] 3 All ER 504 where the House of Lords held that a grant for an uncertain term or duration did not create a lease since it was beyond the power of a landlord and his tenant to create a term which was uncertain.

40. Following the above, the presence of the tenancy or otherwise should not affect the market value as determined on the basis of vacant possession. Even if such a tenancy is taken to be a periodic monthly tenancy where one-month notice of termination is required, we consider the effect on value would be minimal and can be disregarded.

Market Value of Property 3 (Ground Floor including the Mezzanine Floor, No 220 Hai Tan Street)

41. Before we carry out the assessment of the market value of Property 2, we consider appropriate to deal with the assessment of the market value of Property 3 first because it was also situated at Hai Tan Street, just one block away from Property 1 to the northwest.

42. By reference to the Joint Statement prepared by the experts, Property 3, ie Ground Floor including the Mezzanine Floor, No 220 Hai Tan Street had the following attributes or particulars:

Ground Floor Mezzanine Floor (M/F)
Saleable Area: 80.72 sq m + Area under staircase in Yard:
1.11 sq m + Yard: 15.16 sq m 20.38 sq m
Effective Area* 88.44 sq m
Clear Frontage: 2.94 m
Headroom: 5.03 m
(2.80 m under M/F)

* Effective Area is derived from assuming the following conversion factors:

Cockloft: ¼, Yard: 1/6, Area under Staircase in Yard:1/6 x 1/2.

43. The same set of comparables are agreed by both experts as follows:

Comp Address Transaction Date RVD Index Consideration Saleable Area
(sq m) Effective Floor Area
(sq m)* Frontage (m) Head-
room (m) Price/
sq m
1 G/F, 165 Yee Kuk Street 18 Jun 2011 328.2 $9,200,000 81.54 + yard: 13 83.71 2.97 4.98 $109,903
2 G/F, 190 Hai Tan Street 7 Oct 2010 278.7 $10,800,000 104.26 4.77 3.91 $103,587
3 Shop 1, G/F, 156 Yee Kuk Street 9 Sep 2010 270.0 $9,800,000 74.89 + yard: 31.73 80.18 5.16 3.05 $122,225
4 Shop C, G/F, 196-202A Hai Tan Street 19 May 2010 247.6 $9,380,000 95.13 3.85 5.49
(2.74 under C/L) $98,602

44. Again, on top of those, Mr Lee adopts the comparable at Shop 1, G/F of 48 Pei Ho Street. As explained above, we consider this comparable being situated at a much superior location should not be adopted as comparable in our assessment.

45. The 2 experts further agree the following adjustment factors:

Time: Private Retail Index published by the Rating & Valuation Department (RVD index)
Frontage: 2% per m of clear frontage difference
Size: 1% per 4 sq m of effective area difference

46. They nevertheless have the following disagreement:

Mr Lai Mr Lee
Location: By making reference to the percentage adjustment in Cheermark Investment Based on professional judgment
Headroom: By making reference to the percentage adjustment in Happy Enough 2% per m of headroom difference
Market Value $110,894 per sq m $126,403 per sq m

47. As regards location, Property 3 is situated close to Property 1 though on the opposite side of the street. Mr Lee argues that this side of the street should have less value because of the one-way traffic from right to left and cars could not stop in front of the shop. However, Mr Lee’s opinion is rebutted by the photographs attached to both Mr Lai’s report and his own reports; cars could stop readily in front of the shop for loading and unloading. We opine that the location adjustments as decided by the Tribunal in Cheermark Investment are applicable to Property 3 as well.

48. For the headroom, we share the opinion of the Tribunal in Happy Enough that there should not be a mechanical adjustment for headroom space in the captioned case when the rear portion of the ground floor had lower headroom because of the mezzanine floor. We do not agree with Mr Lee that the mezzanine floor only occupied a small fraction of that of the ground floor; it occupied some 25%. We consider it appropriate to follow the adjustments made by the Tribunal in Happy Enough.

49. Thus, the assessment of the market value of Property 3 is as follows:

Comp
Price/
sq m
Adjustments
AdjPrice/
sq m
Weighting

Location
Frontage Quantum/
Size Headroom Time Total
1 $109,903
0%
-0.1% -1.2% -8% -7.0% -16.3% $91,989 1
2 $103,587
0%
-3.7% 4.0% 0% 9.5% 9.8% $113,739 2
3 $122,225
-8%
-4.4% -2.1% 0% 13.1% -1.4% $120,514 1
4 $98,602
0%
-1.8% 1.7% 0% 23.3% 23.2% $121,478 2
Average: $111,930 $113,823

50. Market Value for Property 3 =

88.44 sq m x $113,823
= $10,066,506
Say $10,070,000

Market Value of Property 2 (Ground Floor, No 248 Tung Chau Street)

51. By reference to the Joint Statement prepared by the experts, Property 2, ie Ground Floor, No 248 Tung Chau Street had the following attributes or particulars:

Ground Floor Cockloft (C/L)
Saleable Area: 65.28 sq m + Area under staircase: 1.66 sq m + Yard: 24.43 sq m 15.79 sq m
Effective Area* 74.13 sq m
Clear Frontage: 3.15 m
Headroom: 4.93 m
(2.74 m under C/L)
* Effective Area is derived from assuming the following conversion factors:
Cockloft: ¼, Yard: 1/6, Area under Staircase: 1/2.

52. In respect of Property 2, the same set of comparables are agreed by both experts. Again, on top of those, Mr Lee adopts the comparable at Shop 1, G/F of 48 Pei Ho Street. As explained above, we consider this comparable being situated at a much superior location should not be adopted as comparable in our assessment.

53. On the other hand, Mr Lai introduces one additional comparable at G/F, 218 Tung Chau Street with which Mr Lee does not agree.

54. Tung Chau Street runs in parallel to Hoi Tan Street and is only one block to the southwest. It has composite developments with shops on one side and Tung Chau Street Park as well as a temporary market on the other side. In terms of pedestrian flow, it is more quiet and the shops are mostly occupied as engineering workshop. As Property 2 itself also lies on Tung Chau Street, we consider appropriate to have it included in the assessment. Thus, the comparables are as follows:

Comp Address Transaction Date RVD Index Consideration Saleable Area
(sq m) Effective Floor Area
(sq m)* Frontage (m) Head-
room (m) Price/
sq m
1 G/F, 165 Yee Kuk Street 18 Jun 2011 328.2 $9,200,000 81.54 + yard: 13 83.71 2.97 4.98 $109,903
2 G/F, 218 Tung Chau Street 19 Feb 2011 305.3 $8,800,000 90.77 + A/C Plant Room[10] on 1/F: 6.17 91.80 5.48 4.27 $95,861
3 G/F, 190 Hai Tan Street 7 Oct 2010 278.7 $10,800,000 104.26 4.77 3.91 $103,587
4 Shop 1, G/F, 156 Yee Kuk Street 9 Sep 2010 270.0 $9,800,000 74.89 + yard: 31.73 80.18 5.16 3.05 $122,225
5 Shop C, G/F, 196-202A Hai Tan Street 19 May 2010 247.6 $9,380,000 95.13 3.85 5.49
(2.74 under C/L) $98,602

55. Save from the above, the 2 experts again agree the following adjustment factors:

Time: Private Retail Index published by the Rating & Valuation Department (RVD index)
Frontage: 2% per m of clear frontage difference
Size: 1% per 4 sq m of effective area difference

56. Similarly, they have the following disagreement:

Mr Lai Mr Lee
Location: By making reference to the percentage adjustment in Cheermark Investment Based on professional judgment
Headroom: By making reference to the percentage adjustment in Happy Enough 2% per m of headroom difference
Market Value $107,175 per sq m $124,866 per sq m

57. As regards location, Mr Lai applies an adjustment of -5% to the comparables at Hai Tan Street and G/F, 165 Yee Kuk Street. He applies -13% to the comparable at G/F, 156 Yee Kuk Street (ie additional -5% when compared with the assessment of Property 1 or 3). In respect of the new comparable at G/F, 218 Tung Chau Street, Mr Lai applies an adjustment of +5%. To the extent that Mr Lee does not agree to include the latter comparable, he applies adjustments between -2% to -4%.

58. Whereas we have already remarked that Tung Chau Street is inferior in terms of pedestrian flow, we agree with the adjustments proposed by Mr Lai.

59. For the headroom, we share the opinion of the Tribunal in Happy Enough that there should not be a mechanical adjustment for headroom space in the captioned case when the rear portion of the ground floor had lower headroom because of the cockloft. We do not agree with Mr Lee that the cockloft only occupied a small fraction of that of the ground floor; it occupied some 25%. We consider it appropriate to follow the adjustments made by the Tribunal in Happy Enough.

60. Thus, the assessment of the market value of Property 2 is as follows:

Comp
Price/
sq m
Adjustments
AdjPrice/
sq m
Weighting
Location Frontage Quantum/
Size Headroom Time Total
1 $109,903 -5% 0.4% 2.4% -8% -7.0% -17.2% $91,000 1
2 $95,861 5% -4.7% 4.4% -3% 0% 1.7% $97,491 2
3 $103,587 -5% -3.2% 7.5% 0% 9.5% 8.8% $112,703 2
4 $122,225 -13% -4.0% 1.5% 0% 13.1% -2.4% $119,292 1
5 $98,602 -5% -1.4% 5.3% 0% 23.3% 22.2% $120,492 2
Average: $108,196 $108,958

61. Market Value for Property 2 =

74.13 sq m x $108,958
= $8,077,057
Say $8,080,000

62. It is undisputed that Property 2 was, as at the Resumption Date, subject to a tenancy entered into on 15 February 2008 when URA had already announced the Development Scheme in February 2006. Similar to Property 1, the term of the tenancy was stated to expire on “on the date to be specified by the URA to take up possession of the Property” which is translated from「市區重建局指定收樓日止。」

63. Adopting the same reasoning as said in para. 38 to 40 above, we consider the effect on value would be minimal and can be disregarded.

Conclusion

64. We determine the value of the Subject Properties for the purpose of section 10(2)(a) of the LRO should be in the following sums:

Property Market Value
Property 1 $8,710,000
Property 2 $8,080,000
Property 3 $10,070,000

Orders

65. Accordingly, we order that the Respondent do pay:

(i)   the 1st Applicant compensation for the resumption of Ground Floor including Cockloft, No 187A Hai Tan Street, Kowloon in the sum of $8,710,000;
(ii)   the 2^nd Applicant compensation for the resumption of Ground Floor, No 248 Tung Chau Street, Kowloon in the sum of $8,080,000;
(iii)   the 3^rd Applicant compensation for the resumption of Ground Floor including the Mezzanine Floor, No 220 Hai Tan Street, Kowloon in the sum of $10,070,000.

66. The matters of professional fees, interest, costs and any other ancillary and consequential matters shall be adjourned to a date to be fixed by parties in consultation with counsel’s diaries if it needs.

67. Last but not least, the Tribunal thanks all Counsel for their helpful assistance.

His Honour Judge S. Lo	Lawrence Pang
Presiding Officer Lands Tribunal	Member Lands Tribunal

Mr Ross M Y Yuen and Ms Evelyn L C Cheng, instructed by Cheung, Chan & Chung, for the applicants

Mr Stanley Ng, instructed by the Department of Justice, for the respondent

[1] The URA has a comprehensive policy of compensation other than on the basis of market value. Particularly for the domestic premises, owners of affected property may receive ex-gratia allowance, namely Home Purchase Allowance which will top up the difference between the market value of the property being acquired and the value of a notional replacement flat, which is a notional seven-year-old flat of similar size and in similar locality to the property being acquired.

[2] The site area for The Prominence is about 472.50 sq m.

[3] The site area for Harbour Park is about 597.92 sq m.

[4] The site area for Park One is about 801.28 sq m.

[5] The combined site area for Nos 248 & 250 Tung Chau Street was also 184.26 sq m.

[6] The combined site area for Nos 220 & 222 Hai Tan Street was 195.10 sq m.

[7] No 334 Tung Chau Street was wholly owned by a single owner prior to acquisition by the developer of The Prominence. See for instance A1/142, A2/142 or A3/138.

[8] NBY was defined as Nam Cheong Street/Berwick Street/Yiu Tung Street in Happy Enough at para. 75

[9] These comparables were the same as those adopted by the Tribunal in Cheermark Investment.

[10] According to the First Floor Plan, the A/C Plant Room serves only this comparable.

LDLR 1/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDLR 1 OF 2012

________________

BETWEEN

	Chan Shiu Chong	Applicant
	and
	Director of Lands	Respondent

________________

LDLR 2/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDLR 2 OF 2012

________________

BETWEEN

	Chan Shiu Chong	Applicant
	and
	Director of Lands	Respondent

________________

LDLR 3/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDLR 3 OF 2012

________________

BETWEEN

	Tse Sui Lun	Applicant
	and
	Director of Lands	Respondent

________________

LDLR 4/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDLR 4 OF 2012

________________

BETWEEN

	Chan Fai Yiu	Applicant
	and
	Director of Lands	Respondent

________________

LDLR 5/2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDLR 5 OF 2012

________________

BETWEEN

	Happy Enough Limited	Applicant
	and
	Director of Lands	Respondent

________________

Before: His Honour Judge KO, Presiding Officer of the Lands Tribunal

Date of Hearing: 16 August 2013

Date of Decision: 16 August 2013

_______________

DECISION

_______________

1. The applicants have applied for these 5 cases to be “consolidated” in the sense that they should be tried before the same court immediately one after the other.

2. The application is opposed by the Director who is the respondent in all 5 cases.

3. It is common ground that the Tribunal may order consolidation in the sense advocated if there are some common questions of law or fact to be tried.

4. According to Mr Lester Lee (counsel for the applicants):

“8. The 5 properties … are located within 3 block radius from one another and along or adjacent to the same stretch of Hai Tan Street: see map printouts [A/Tab-2].
…
10. All of the 5 applications raises the identical issue as to what is the correct basis of assessment for compensation under the ordinance and, in particular, the extent (if any) of the ‘development value’ of the 5 properties. All 5 Applicants will rely on the evidence from the same expert.
…
12. … in the event that the question of development potentiality is challenged by the Respondent, it is evident that even the factual issues in all 5 applications will significantly overlap.
13. In addition, LDLR 4 and 5 of 2012 both may potentially raise the further identical issue of ‘unauthorised users’.”

5. Mr Lee has suggested an 11-day trial if there is consolidation.

6. On the part of the Director, Mr Chisum Ho, Senior Government Counsel suggests that a direction to the effect that one of the cases be tried first with the other cases stayed in the meantime is sufficient to address the applicants’ concerns. He estimates that 4 days would be enough for the trial of the first case.

7. Having heard the argument, I decide in favour of the Director.

8. The Court of Appeal has recently restated the test to be applied in deciding if a resumed property has any redevelopment potential: see Siu Sau Kuen v The Director of Lands, unreported, CACV 180/2012, 31 July 2013 at para 33-34:

“Whether, on a balance of probabilities, the evidence discloses that, as at the date of resumption, redevelopment of the property resumed was likely. Such likelihood may be demonstrated by:
(i) actual proposals by the applicant to redevelop the property (or unlikelihood demonstrated by the absence of such proposals) whether on its own or by merger with other properties, or
(ii) evidence of redevelopment in the vicinity of the resumed property (whether accompanied by evidence of redevelopment plans for the resumed property or not), so long as such evidence of redevelopment in the vicinity supports a finding that redevelopment on its own or merger of the resumed property with other properties giving rise to a viable redevelopment scheme was likely within a reasonably foreseeable time scale.”

9. So, each applicant bears the burden of satisfying the Tribunal that redevelopment of his resumed property was likely.

10. Mr Ho points out that the properties concerned are situated at different locations and have different characters:

Application Location Size
LDLR 1/2012 G/F (subject to tenancy) & Cockloft,
No 187A Hai Tan Street, Kowloon 73.18 sq m
(yard + space)
LRLR 2/2012 G/F (subject to tenancy) & Cockloft,
No 248 Tung Chau Street, Kowloon 74.13 sq m
(yard + space)
LRLR 3/2012 G/F & Mezzanine Floor,
No 220 Hai Tan Street, Kowloon (no tenancy) 88.44 sq m
(yard + space)
LRLR 4/2012 G/F & Mezzanine Floor,
No 7 Pei Ho Street, Kowloon (subject to oral tenancy) 78.6 sq m
(yard + space)
LRLR 5/2012 G/F & Mezzanine Floor,
No 13 Pei Ho Street, Kowloon (subject to tenancy) 71.05 sq m
(yard + space)

11. What the applicants have hoped to achieve by consolidation is for the Tribunal to consider the sum total of their evidence as opposed to the evidence of each case separately. The Director’s suggestion will facilitate that. If the applicants would consolidate their efforts in their bid to convince the Tribunal that redevelopment of the vicinity of their properties was likely, they can put in all their evidence at the trial of the first case.

12. Mr Lee says that the applicants have agreed to fund the consolidated trial together and it may be difficult for them to make alternative arrangement. But I am not dictated by their agreement. In my view, the Director’s suggestion may turn out to be more favourable to them.

13. As presently estimated, the course suggested by the Director would entail initially a 4-day trial. If the applicants succeed in their argument, the Director will be guided by the judgment in future negotiation/mediation with them. If the applicants lose the argument notwithstanding their concerted effort, the remaining applicants would need to think twice before retrying based on his evidence alone. Even if (for whatever reason) the remaining cases require a trial, much time in the subsequent trial can be saved if the parties would accept the findings in the previous judgment. On the other hand, a consolidated trial is estimated to last 11 days. In my view, it is likely that the Director’s suggestion would mean less costs for the parties and the resources of the Tribunal (in terms of the diary of a Presiding Officer and a Member) can be more fairly distributed.

14. Mr Lee has taken other minor points in the course of his argument. Suffice for me to say that I have considered them all and I do not think they would tip the scale. For example, he suggests that given the prevailing low interest rate environment his clients prefer to receive the compensation as soon as possible so that they may invest the money to earn a better return. In my view, it would be easier for the parties to prepare one case for trial and for the court to find a timeslot for a 4-day trial. This is contrasted with the monstrous task of preparing for an 11-day trial involving 5 cases.

15. For these reasons, I am not persuaded by the applicants to order consolidation and their summonses are dismissed. I shall leave it to the parties to discuss and suggest which case should come on for trial first and what consequential directions (such as filing of evidence) are necessary. They should report back jointly within the next 28 days. Once they have decided which case should go first, I shall then stay the other cases pending the trial of the first case.

16. I see these consolidation applications as a case management initiative and order the costs of and incidental to these applications to be in the respective cause of each case with certificate for counsel. To facilitate taxation in future (if any), the costs of today’s hearing shall be split equally amongst the cases.

(Justin Ko)
Presiding Officer
Lands Tribunal

Mr Lester Lee, instructed by Cheung, Chan & Chung, for the applicants

Mr Ho Chi Sum, SGC, for the Department of Justice, for the respondent

Application	Location	Size
LDLR 1/2012	G/F (subject to tenancy) & Cockloft, No 187A Hai Tan Street, Kowloon	73.18 sq m (yard + space)
LRLR 2/2012	G/F (subject to tenancy) & Cockloft, No 248 Tung Chau Street, Kowloon	74.13 sq m (yard + space)
LRLR 3/2012	G/F & Mezzanine Floor, No 220 Hai Tan Street, Kowloon (no tenancy)	88.44 sq m (yard + space)
LRLR 4/2012	G/F & Mezzanine Floor, No 7 Pei Ho Street, Kowloon (subject to oral tenancy)	78.6 sq m (yard + space)
LRLR 5/2012	G/F & Mezzanine Floor, No 13 Pei Ho Street, Kowloon (subject to tenancy)	71.05 sq m (yard + space)

CHAN SHIU CHONG v. DIRECTOR OF LANDS

Related cases with same parties

Files (4)

Subject Property	Amount of Compensation Awarded
Property 1	$8,710,000 in LDLR 1 of 2012
Property 2	$8,080,000 in LDLR 2 of 2012
Property 3	$10,070,000 in LDLR 3 of 2012

	Mr Lee	Mr Lai
Valuation Report	11 March 2013	7 February 2013
Supplementary Report	13 June 2013	4 June 2013
2^nd Supplementary Report	28 July 2017	17 October 2017
Joint Statement	17 January 2018

	Ground Floor	Cockloft (C/L)
Saleable Area:	63.23 sq m + Area under staircase: 3.86 sq m + yard: 24.43 sq m	15.79 sq m
Effective Area*	73.18 sq m
Clear Frontage:	3.47 m
Headroom:	4.86 m (2.74 m under C/L)

Comp	Address	Transaction Date	RVD Index	Consideration	Saleable Area (sq m)	Effective Floor Area (sq m)*	Frontage (m)	Head-room (m)	Price/ sq m
1	G/F, 165 Yee Kuk Street	18 Jun 2011	328.2	$9,200,000	81.54 + yard: 13	83.71	2.97	4.98	$109,903
2	G/F, 190 Hai Tan Street	7 Oct 2010	278.7	$10,800,000		104.26	4.77	3.91	$103,587
3	Shop 1, G/F, 156 Yee Kuk Street	9 Sep 2010	270.0	$9,800,000	74.89 + yard: 31.73	80.18	5.16	3.05	$122,225
4	Shop C, G/F, 196-202A Hai Tan Street	19 May 2010	247.6	$9,380,000		95.13	3.85	5.49 (2.74 under C/L)	$98,602

Time:	Private Retail Index published by the Rating & Valuation Department (RVD index)
Frontage:	2% per m of clear frontage difference
Size:	1% per 4 sq m of effective area difference

	Mr Lai	Mr Lee
Location:	By making reference to the percentage adjustment in Cheermark Investment	Based on professional judgment
Headroom:	By making reference to the percentage adjustment in Happy Enough	2% per m of headroom difference
Market Value	$116,190 per sq m	$141,143 per sq m

Comp	Price/ sq m	Adjustments						AdjPrice/ sq m	Weighting
Comp	Price/ sq m	Location	Frontage	Quantum/ Size	Headroom	Time	Total	AdjPrice/ sq m	Weighting
1	$109,903	0%	1.0%	2.6%	-8%	-7.0%	-11.4%	$97,374	1
2	$103,587	0%	-2.6%	7.8%	0%	9.5%	14.7%	$118,814	2
3	$122,225	-8%	-3.4%	1.8%	0%	13.1%	3.5%	$126,503	1
4	$98,602	0%	-0.8%	5.5%	0%	23.3%	28.0%	$126,211	2
							Average:	$117,226	$118,987

	Ground Floor	Mezzanine Floor (M/F)
Saleable Area:	80.72 sq m + Area under staircase in Yard: 1.11 sq m + Yard: 15.16 sq m	20.38 sq m
Effective Area*	88.44 sq m
Clear Frontage:	2.94 m
Headroom:	5.03 m (2.80 m under M/F)

Property	Market Value
Property 1	$8,710,000
Property 2	$8,080,000
Property 3	$10,070,000