Case Detail

LDLR 2/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND RESUMPTION APPLICATION NO 2 OF 2014

_________________

BETWEEN
	SNOWLAND LIMITED (雪倫有限公司)	Applicant
	and
	DIRECTOR OF LANDS	Respondent

_________________

Before: Her Honour Judge KOT, Presiding Officer, Lands Tribunal and Mr. Lawrence PANG, Member of the Lands Tribunal

Date of Filing of Submissions: 13 January 2017

Date of Filing of Reply Submissions: 10 February 2017

Date of Filing of Supplemental Submissions by the Respondent : 2 March 2017

Date of Filing of Supplemental Submissions by the Applicant : 16 March 2017

Date of Decision : 31 March 2017

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D E C I S I O N

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Background

1. On 19 June 2014, the applicant applied for determination of compensation in respect of the Subject Property pursuant to section 10(2)(a) of the Lands Resumption Ordinance, Cap 124 (“the LRO”).

2. Before the applicant issued these proceedings, a provisional payment of $53,485,000 had been accepted by the applicant on a without prejudice basis on 15 November 2011 (“Provisional Payment).

3. By the judgment handed down on 11 November 2016 (“the Judgment”), it is ordered that the respondent do pay the applicant compensation in the sum of HK$97,356,000 (“the Award”) and the matters of professional fees, interest and costs be adjourned to a date to be fixed with liberty to apply for any other ancillary and consequential matters.

4. By an order made on 16 December 2016, it is directed that the dispute over professional fees, interest and costs be dealt with by paper disposal. This is the decision on the issues of professional fees, interest and costs.

Interest

5. The question on the rate of pre-judgment interest had been dealt with in the case of Waddington Limited v Chan Chun Hoo Thomas & Ors, unreported, CACV 10 of 2014, 20 May 2016. It is the findings of the Court of Appeal that:

“172. ... Pre-judgment interest is awarded to compensate a plaintiff for being kept out of its money, on the footing that it is to be taken as having borrowed commercially the amount of its successful claim so that it would not have any shortfall in its funds pending the determination of its action.
...
174. The practice in Hong Kong of awarding pre-judgment interest at a usual rate of 1% over prime rate began with the decision of the Court of Appeal in Komala Deccof v Pertamina [1984] HKLR 219. In that case, Cons JA (at p.223), observed that while that the rate of such interest was a matter for the discretion of the trial judge, it was undesirable to have arbitrary variations between similar cases, and suggested the adoption of a rate of 1% above prime rate as being an appropriate measure to compensate a party for being kept out of his damages. He went on to say that the guideline could be adjusted if experience were to show that this rate was not realistic, and that a different rate could always be ordered in a particular case if there was evidence to justify that being done.
175. Since the decision in Komala Deccof,the courts have consistently awarded pre-judgment interest at the rate of 1% above prime, although there have been occasions when this practice has been departed from. This rate has also been endorsed by the Court of Final Appeal as the ‘theoretical cost to the plaintiff of borrowing the sums withheld’ (see Polyset Ltd v Panhandat Ltd, unrep, FACV No. 28 of 2000, Determination dated 25 April 2002, paragraph 13).
...
183. ... the HSBC Best Lending Rate, which is the commonly adopted proxy for prime rate, has remained at comparatively high levels over that period. The continued publication of this rate suggests that it is still in use for the purpose of fixing lending rates, and cannot be regarded as having been supplanted by HIBOR for such purpose.
...
185. We therefore do not think that the material available to the judge could justify his view that 1% above prime rate is no longer the appropriate standard to use for awarding pre-judgment interest generally, or that such material justified a departure from the conventional rate in this case.
186. That is not to say that there may not, in the future, arise a case in which the necessary evidential foundation will be laid for a consideration of whether or not the time has come to move away from prime rate plus 1% as the starting point for pre-judgment interest.” (emphasis added)

6. In the case Tadjudin Sunny v Bank of America, National Association, unreported, CACV 12/2015, 20 May 2016, it is found that “having regard to the long standing practice of taking 1% over prime as the starting point for the award of pre-judgment interest, any suggestion that this starting point should be changed is something that should be considered only where there is evidence before the court to support such a change” (at §179) (emphasis added).

Respondent’s Submission

7. Mr Ismail submitted that it would not be appropriate for the Tribunal to adopt the interest rate of Prime +1% or the applicant should be denied part of the pre-judgment interest based on 2 reasons:

a. There is evidence in this case to warrant a departure from the conventional rate; and
b. The applicant had delayed in prosecuting its claim contrary to the underlying objective in Rules of High Court Order 1A r 1(b).

8. It is submitted that it is open to the Tribunal to infer that the applicant would be able to borrow money to purchase a replacement shop after the resumption of the Subject Property at less than Prime +1% per annum given the applicant’s major business was property investment and holdings. The applicant was the sole legal and beneficial owner of the Subject Property which, as revealed from the land search document, had never been mortgaged or charged. It also held 9 other landed properties which it acquired before the resumption and rental income was its major source of income. The applicant could use the 9 other properties as security for borrowing. Mr Lee, the director of the applicant, an experienced property investor and not an unsophisticated novice who was also a shareholder and director of the owner in Comparable T9 in this case, could act as a guarantor of loans made to the applicant. All these evidence point to the reasonable inference that the applicant could borrow the amount of its successful claim commercially at interest either at 1-month fixed deposit rate or a rate equivalent to the cost of borrowing.

9. As for the delay by the applicant, the respondent alleged that:

a. The applicant had rejected the respondent’s revised offer of $60,348,000 on 26 March 2013 and stated that it “shall apply to the Lands Tribunal to determine the amount of compensation”. However, it failed to make its application, despite 7 reminders issued by the respondent, until 19 June 2014, ie more than a year later; and
b. The applicant should file its expert report within 90 days from 23 September 2014 but with the consent of the respondent, an extension of time was granted and the report was only filed on 30 January 2015. However, the extension was wasted since Mr Charles C K Chan (“Mr Chan”) of Savills Valuation and Professional Services Limited later changed his opinion of the market value of the Subject Property. The respondent had only been awarded costs for the extension of time at the agreed costs of $500 and it would be unfair if the respondent had to pay the applicant interest especially at Prime +1%.

10. The respondent submitted that the appropriate rate of interest to compensate the applicant from being kept out of the compensation fairly and fully and not be a windfall or profit is the 1-month fixed deposit rate from the date of resumption to the date of judgment and thereafter at the judgment rate until payment.

Applicant’s Reply

11. The applicant contended that the appropriate order for interest in this case should be:

a. The respondent do pay the applicant interest on the Provisional Payment from the date of reversion (ie 18 May 2011) to the date of payment (ie 15 November 2011) at the rate of 1% above the HSBC’s prevailing best lending rate;
b. The respondent do pay the applicant interest on the sum of $43,871,000 (being the balance of the Award less the Provisional Payment) from the date of reversion (ie 18 May 2011) to the date of judgment (ie 11 November 2016) at the rate of 1% above the HSBC’s prevailing best lending rate;
c. The respondent do pay the applicant interest on the sum of $43,871,000 from the date of judgment until payment (ie 3 December 2016) at the judgment rate; and
d. Credit be given to the interest which had previously been paid by the respondent to the applicant (if any).

12. Ms Ngai submitted that it would not reflect adequately the applicant’s loss of use of the compensation money by awarding interest at 1-month fixed deposit rate but instead should be compensated for the loss of return from the use of the money in making investments.

13. On the evidence of Mr Lee, the applicant was trying to purchase a replacement shop in the immediate area for investment after resumption of the Subject Property. It would be wrong to assume that the applicant would keep the money in a bank and just earn interest at the deposit rate and the compensation approach is more appropriate in the circumstances of the applicant in this case (Happy Dragon Restaurant Ltd v Director of Lands [2014] 3 HKC 538 at §§53-55).

14. The applicant, being in the business of real estate investment, was similar to the applicant in the case of Eltron Development Limited v Director of Lands, unreported, LDLR 4/2013, 28 January 2016 where the Tribunal awarded interest at Prime +1%. Ms Ngai urged this Tribunal to adopt the same approach in Eltron.

15. As for the allegation of delay, it is accepted that only 5 reminders had been sent by the respondent. In any event, it is the applicant’s contention that the delay in prosecuting the claim was due to the need to seek senior and junior counsels’ advice between 26 March 2013 and 19 June 2014. And relying on section 6(3) of the LRO which provided that the Director of Lands could also apply to the Tribunal for determination of the amount of compensation in order to expedite the legal proceedings and minimize the amount of interest payable, the applicant should not be the only one to blame for such delay.

16. As for the waste in granting the extension of time for the expert report, it is submitted that since Mr Chan was not the one preparing the valuation for negotiation with the respondent in November 2011, time was required for him to carry out his own independent valuation. There is no waste as a result of the subsequent change in Mr Chan’s opinion since majority parts of the said report, including the majority number of sale comparables and the rental comparables remained applicable. Such report of Mr Chan formed the back bone of his subsequent revisions of the assessed Open Market Value of the Subject Property and never a waste.

Discussion

17. We agree with Ms Ngai that it is unrealistic to award interest at 1-month fixed deposit rate in this case. This is basically the return the applicant will have by leaving the money in a bank. Given the applicant’s nature of business, it is more unlikely than not that the applicant would just leave the compensation money in a bank and not utilize the same in other investment to earn more profits than the 1-month fixed deposit rate interest.

18. If adopting such investment approach, the applicant would have to borrow the money from a bank for such purpose when the compensation money had not been in hand. We do not accept that there is evidence before us that the applicant was in a position to secure a loan at a rate of interest much lower than Prime +1%.

19. The applicant and Mr Lee may well be a successful and experienced investor in real estate property but there is no evidence before us as to their borrowing ability. Even though the Subject Property was never mortgaged or charged, there is no evidence as to how it was being acquired and where the investment sum came from. There is also no evidence as to the net equity of the other 9 landed properties held by the applicant and the net proceeds of the rental income. It would be a gross over-generalisation to conclude that since the applicant was an experienced investor, it would necessarily have been able to borrow at less than Prime +1% at all times.

20. As for the delay alleged by the respondent, we accept the submission by Ms Ngai.

21. Section 6(3) of LRO provides that:

“3. If –
(a) a person to whom an offer has been made under subsection (1)(a) does not accept the offer within 28 days from the date thereof; or
(b) ...
such person or the Authority may then refer the matter to the Lands Tribunal for determination of the amount of compensation to be paid.” (emphasis added)

22. Even though the applicant may have indicated that it would apply to the Lands Tribunal to determine the amount of compensation, when the respondent found that the applicant had taken no action after such indication, the respondent was entitled to bring the matter to the Lands Tribunal. Yet, the respondent had done nothing as well except to send reminders. We find the respondent cannot put the blame on the applicant for the delay in referring the matter to this Tribunal when it was also entitled to do so on the inaction of the applicant. In any event, we accept that 15 months taken to seek counsel’s advice and valuer’s opinion was not unreasonable given the complexity of this case.

23. We also find no merits in the contention of the respondent that there was waste as a result of the extension of time in filing of the valuation report of Mr Chan dated 30 January 2015 to justify a departure from the conventional rate of interest.

24. We do not find any waste as a result of the extension of time. Mr Chan was required to submit such report in answer to the one prepared by Mr Lai at that stage of the proceedings. We also accept that such valuation report of Mr Chan had been used in these proceedings so we do not agree that there was a waste. Save for comparable RC1, all the comparables adopted by the Tribunal for the Direct Comparison Method came from this valuation report of Mr Chan. At §41 of the Judgment, we also affirmed that “we consider (§7.3 of the valuation report) would be just an application of the Income Capitalisation Method in reverse for checking purpose”. For such latter purpose, at least comparables T1 and T3 were found useful for the determination of the market value of the Subject Property.

25. Even if there was any waste, such was caused by the subsequent change of opinion by Mr Chan and not by the extension of time to file the valuation report. Since we have found that such change of opinion of an expert was acceptable (§51 of Judgment), we do not agree that such change of opinion should be a factor that turns on the issue of interest.

26. Having considered the above, this Tribunal is not satisfied that the contention by the respondent justifies a departure from the convention of awarding interest at the rate of Prime +1% or a deprivation of part of the interest to be awarded to the applicant.

Professional Fee

27. Professional fees is part and parcel of the costs of these proceedings.

28. Section 6(2A) of the LRO provides that:

“Where, in the case of land resumed under an order made under section 3 on or after the commencement of the Crown Lands Resumption (Amendment) Ordinance 1984 (5 of 1984), an offer of compensation is made or a claim for compensation is submitted to or by any person under this section, such offer may provide for the payment by the Authority to that person of, or such claim may include a claim for, any costs or remuneration reasonably incurred or paid by him in employing persons to act in a professional capacity in connection with such offer or claim.”

29. Further, section 10(2)(e)(ii) provides that the Tribunal shall determine the compensation payable on the basis of “the amount of any costs or remuneration mentioned in sections 6(2A) and 8(4).”

Respondent’s Submission

30. In spite of the above provision, it is the respondent’s case that the applicant should only be entitled to 50% of the professional fees of its expert, Mr Chan.

31. Firstly, the respondent suggested that the Tribunal found Mr Chan guilty of “deplorable’ conduct in further revising his valuation on 14 April 2016 by referring to §48 of the Judgment as follows:

“48. It is deplored that when Mr Chan began to give evidence on 14 April 2016, he revised his valuation again to $105,132,852 on the excuse that he had reviewed his valuation particularly on seeing the comments on location by Mr Lai[1] in his Rebuttal Report of 13 April 2016 and taking into account the new evidence of Comparable T9. Mr Chan had submitted his revised assessment and marked as Exhibit A2 and A3 respectively.”

32. Mr Ismail elaborated that Mr Chan’s conduct was deplorable in the extreme because:

(a) he had caused Mr Lai’s Rebuttal Report dated 13 April 2016 to be filed since it was to rebut his change of opinion in his Letter of Supplemental Opinion dated 11 April 2016; and
(b) he left the Tribunal with no choice but to admit his further revised valuation.

33. Secondly, the respondent accused Mr Chan of failing to be concerned about, let alone to reconcile, the 22% difference in his valuations based on the Direct Comparison Method and the Income Capitalization Method which difference the Tribunal found a competent valuer would have been concerned about, referring to §§50 and 123 of the Judgment for instance:

“50. In the present case, Mr Chan’s revised valuation as at 11 April 2016 was $92,000,000 based on the Direct Comparison Method but his valuation based on the Income Capitalization Method was $112,163,238, ie a difference of about 22%. This should be a matter of concern for the valuer though it may not necessarily lead to that the value arrived at by direct sales comparison was not reliable and should be abandoned.
123. As we stated at §50 above, a difference in indication of values of about 22% arrived by two valuation methods for cross-checking or otherwise should be a matter of concern for the valuer and such a difference must be reconciled.”

34. Thirdly, the respondent suggested Mr Chan provide only limited assistance or help to the Tribunal because he:-

(a) failed to reconcile the 22% difference in his valuations and in any event, his valuation approach and valuations were not adopted by the Tribunal, referring to §§122 to 131 of the Judgment. The Tribunal adopted:-
(i) its own valuation method in arriving at the Award, namely, to give equal weight to the Direct Comparison Method and the Income Capitalization Method (and not Mr Chan’s approach of using the latter for cross checking purposes only); and
(ii) the average of its own valuation arrived at by both methods (and not Mr Chan’s valuations). Mr Chan never suggested this approach although he changed his opinion on several occasions; and
(b) gave contradictory and even worse, misleading evidence, under cross-examination.

35. Fourthly, the respondent suggested Mr Chan’s last revised valuation of $105,132,852 be exaggerated because it was $7,776,852 more than the Award and $17,420,852 more than the Tribunal’s valuation of $87,712,000 using the Direct Comparison Method. Even accepting that valuation is an inexact science, the reason for such wide disparities was because the Tribunal adopted its own valuation method and valuation based on the Direct Comparison Method and the Income Capitalization Method and totally rejected Mr Chan’s method and valuations. It was not simply a difference of opinion on the choice of comparables or adjustments to common comparables. In fact, the Tribunal found that all the comparables were not reliable. Accordingly, Mr Chan’s valuations, and in particular, the last revised valuation of $105,132,852, were indefensible. The extra time spent and the costs incurred by both parties and the Tribunal in disposing of Mr Chan’s haphazard valuations were relatively significant.

Applicant’s Reply

36. In response, Ms Ngai submitted that the respondent has no basis to ask for any reduction (let alone 50% reduction) in the amount of professional fees actually incurred and recoverable by the applicant. Ms Ngai submitted, on the other hand, throughout the entire proceedings, Mr Chan had been working towards the sole objective of fulfilling his duty to the court as an independent expert by producing all relevant market evidence which he was able to obtain from time to time and providing his most up-to-date opinion only for the purpose of assisting the Tribunal to make a correct determination on the open market value of the Subject Property resumed by the Government.

37. In reply to the respondent’s first ground, Ms Ngai submitted that the Tribunal, had at §51 of the Judgment, ruled that Mr Chan, being an expert witness, should not be disallowed to give his opinion evidence:-

“51. Be that as it may, we do not see any reason to bar an expert from changing his opinion upon trial bearing in mind the underlying objective under O.1A r.2(2) RHC. In particular, we have to accept the change in opinion as produced at Exhibits A2 and A3. In any event, when we discuss the location adjustment for the comparables below, we find the revision by Mr Chan is justifiable in seeing the comments/ criticism made by Mr Lai in his Rebuttal Report of 13 April 2016.”

38. Furthermore, Ms Ngai submitted that the Tribunal had at the trial on 12 April 2016 already ordered the costs of and occasioned by the applicant’s Summons dated 9 April 2016 seeking leave to produce Mr Chan’s letter of Supplemental Opinion dated 11 April 2016 be to the respondent. Ms Ngai submitted that the respondent should not obtain double benefits by asking for a reduction of the professional fees payable to the applicant.

39. In relation to the respondent’s allegations that the Tribunal “totally rejected Mr Chan’s method and valuations” and “the Tribunal found that all the comparables were not reliable”, ie the respondent’s fourth ground, Ms Ngai submitted that, on the contrary, the Tribunal had adopted most of Mr Chan’s opinion, citing the following examples:

(a) The Tribunal agreed with Mr Chan that total adjustment in respect of each comparable should be calculated by multiplication process and rejected the summation approach suggested by Mr Lai;[2]
(b) The Tribunal retained Mr Chan’s application of 1% for 10 sq m adjustment for quantum after the first 50 sq m;[3]
(c) The Tribunal agreed with Mr Chan that full frontage should be preferred in dealing with frontage adjustments;[4]
(d) The Tribunal found that the approach which Mr Lai had adopted in his adjustment for return frontage was wrong in principle and preferred Mr Chan’s opinion;[5]
(e) The Tribunal shared with Mr Chan that comparable RC3 adopted by Mr Lai should be rejected;[6]
(f) The Tribunal shared with Mr Chan that the location of comparable T9 was superior to the Subject Property by 10%;[7]
(g) The Tribunal agreed with the +25% adjustment proposed by Mr Chan when comparing Comparable AC4/RC4 with the Subject Property;[8]
(h) The Tribunal had accepted the 3 Comparables AC1, AC2 and AC 4 adopted by Mr Chan;[9]
(i) The Tribunal agreed with Mr Chan to adopt Comparables T1, T3 and T9;[10]
(j) The Tribunal agreed with Mr Chan that the effect of the resumption should not have increased the value of Comparable T9;[11]
(k) The respective market values assessed by the Tribunal by both the Direct Comparison Method (HK$87,712,000) and the Income Capitalization Method (HK$107,000,000) were closer to the same assessments by Mr Chan but much higher than those assessed by Mr Lai.

40. Ms Ngai considered that the respondent is wholly unjustified in alleging that “the extra time spent and the costs incurred by both parties and the Tribunal in disposing of Mr Chan’s haphazard valuations are relatively significant”.

Discussion

41. The Court of Appeal in Good Faith Properties Limited & Others v Cibean Development Company Limited [2014] 5 HKLRD 534 has reviewed the general approach on costs in compulsory acquisition cases (where land is acquired by the government or public authorities), relying on particularly the judgment of Potter LJ in Purfleet Farms Ltd v Secretary of State for Transport, Local Government and the Regions [2003] 1 P & CR 20 (“Purfleet Farms”) as follows:

“29  ... the costs of a successful claimant (i.e. a claimant who is awarded more than the amount of an unconditional offer by the respondent) should be that he is entitled to his costs incurred in the proceedings in the absence of some “special reason” to the contrary ... special reasons should only be regarded as established where the Tribunal considers that an item of costs incurred or an issue raised was such that it could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation...
...
36  ... exaggeration alone is not enough in the event of a large disparity between the sum claimed and the sum awarded. The matters to which the Tribunal should have regard are (a) the reasons for that disparity, and (b) their effect upon the conduct of the claim. As to (a), if the reasons are defensible, in the sense that there was a legitimate, albeit unsuccessful, argument put forward in support of the figure concerned, there can be no good reason to regard the claim as exaggerated in the pejorative sense necessary to justify a sanction in costs. ...
37  ... if the amount of the “exaggerated” claim is based on the valuation, opinion and evidence of the claimant’s expert witness, it will rarely be appropriate in my view to make an adverse costs order against the successful claimant. Valuation is an inexact science ...
38  ... in such cases, disallowance of a proportion of the claimant’s costs will usually only be justified where the Tribunal is satisfied that (a) no competent valuer could reasonably have regarded the comparable as of real relevance or assistance in the valuation exercise; (b) as a result of its introduction and discussion, a significant amount of the Tribunal’s time has been wasted and the proceedings unduly prolonged; (c) no equivalent or near equivalent proportion of the proceedings has been spent dealing with issues unreasonably and unsuccessfully raised by the respondent; (d) the amount or proportion of the costs disallowed is proportionate to the time wasted.”

42. Indeed, §29 of Purfleet Farms as cited by the Court of Appeal did not include the full context which should be as follows:

“29 ... the costs of a successful claimant (i.e. a claimant who is awarded more than the amount of an unconditional offer by the respondent) should be that he is entitled to his costs incurred in the proceedings in the absence of some ‘special reason’ to the contrary. Whether such special reason exists in any given case is a matter for the judgment of the Lands Tribunal. Plainly it may exist where a special reason for departing from the usual order for costs should only be found to exist in circumstances 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. wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant (e.g. abandoned issues, unnecessary adjournments, or failure to comply with directions of the Tribunal). However, so far as the nature and substance of the case advanced by the claimant is concerned, special reasons should only be regarded as established where the Tribunal considers that an item of costs incurred or an issue raised was such that it could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation. This would apply not only to a claim advanced without any statutory basis but to other examples of manifestly unreasonable conduct which may give rise to unnecessary expense in the course of the proceedings. It means, in my view, that, following the hearing of a compensation reference in the Lands Tribunal in which the claimant has been successful,” (emphasis added)

43. That is, the “special reason” for departing from the general rule on costs in compulsory acquisition cases may only exist “where wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant (e.g. 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”.

44. In light of the above, the conduct of Mr Chan as pointed out by the respondent, though “deplorable” because of the late revision of opinion, did not amount to a “special reason”; for instance, no unnecessary adjournment was required as we observed that all relevant evidence had been in place and produced before the Tribunal by that time. As we explained at that instant and at §51 of the judgment, “we do not see any reason to bar an expert from changing his opinion upon trial”. The Tribunal, being a specialized Tribunal with expertise of a Member sitting at trial, can adopt in evidence any statement, document, information or matter, whether or not it would otherwise be admissible in evidence and attach such weight to it as may be appropriate in the circumstances.[12] The Tribunal is not bound to accept the submission of any party.

45. Neither can we accept that the last minute revision “could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation”. On the contrary, we find the revision by Mr Chan be justifiable in seeing the comments/criticism made by Mr Lai in his Rebuttal Report of 13 April 2016. It was only “deplorable” to the extent that it came only at a very late stage of the trial.

46. The further referral to §50 of the Judgment by the respondent regarding the 22% difference in Mr Chan’s valuations based on the Direct Comparison Method and the Income Capitalization Method respectively indeed supports our ruling that followed at §51 that “the revision by Mr Chan is justifiable” rather than providing a “special reason” for departing from the principle that the applicant is entitled to his costs incurred in the proceedings.

47. As regards Mr Chan’s Letter of Supplemental Opinion dated 11 April 2016, we accept the submission by Ms Ngai that the respondent is seeking “double benefits” by asking for a reduction of the professional fees payable to the applicant because costs of and occasioned by the applicant’s Summons dated 9 April 2016 on the issue had been awarded to the respondent.

48. Furthermore, the fact that the Tribunal did not accept Mr Chan’s valuations in full is not a “special reason” either as this happens nearly in all disputed cases before the Tribunal. At §37 of Purfleet Farms, it was also pointed out that “if the amount of the “exaggerated” claim is based on the valuation, opinion and evidence of the claimant’s expert witness, it will rarely be appropriate in my view to make an adverse costs order against the successful claimant.”

49. Here, what Mr Ismail for the respondent pointed out as exaggeration by Mr Chan at a revised valuation of $105,132,852 is completely misleading. The so-called exaggeration at $7,776,852 was merely some 8% above the Tribunal’s Award of $97,356,000 which is well within a permissible margin of 10% accepted by courts or tribunals[13]. In exceptional circumstances the margin could even be 15 per cent or more[14].

50. In comparison, “Mr Lai has not revised this valuation at $58,692,000 in spite of the preparation of a joint expert statement and supplemental joint statement dated 11 January 2016 and 31 March 2016 respectively” (§47 of the Judgment). This was some 40% below the Award by the Tribunal and appears completely out of range and unreasonable. Even at the beginning of the trial, Mr Lai saw fit to revise his valuation to $57,852,000 which was further wider apart from the Award by the Tribunal.

51. Further, by reference to the examples cited by Ms Ngai in §39 above, we agree that the respondent’s allegation that the Tribunal “totally rejected Mr Chan’s method and valuations” is totally unfounded and without support.

52. The fact that “the Tribunal found that all the comparables were not reliable” cannot be a reason to blame either of the two experts if there were indeed no suitable comparables in the market. This indeed explains why cross checking the valuation by the Income Capitalization Method became necessary and this was exactly the approach proposed by Mr Chan and adopted by the Tribunal. Reconciliation of the valuations arrived by different valuation methods is only a consequential process when the cross checking does not produce a matching result[15].

53. In light of the above, we fully agree with Ms Ngai’s submission that the respondent has no basis to ask for any reduction (let alone 50% reduction) in the amount of professional fees actually incurred and recoverable by the applicant.

Costs

54. There is no argument that:

a. The respondent should pay the applicant its costs of these proceedings reasonably incurred; and
b. costs should be taxed on party and party basis at High Court scale with certificate for counsel.

Respondent’s Submission

55. The respondent contended that the applicant should pay the respondent costs wasted or unnecessarily incurred, namely costs of and occasioned by :

a. The applicant’s unsuccessful argument before the Tribunal that the question of interest should be dealt with at trial together with liability and quantum at the hearing on 13 April 2016; and
b. The revised valuation of Mr Chan when he gave evidence on 14 April 2016.

Applicant’s Reply

56. The applicant contended that since the Award is more than the sealed offer made by the respondent, the respondent should pay to the applicant costs of the entire application except for the summons dated 9 April 2016 taken out by the applicant (which had already been dealt with at trial).

57. The question of interest should be dealt with at trial is part and parcel of the application for determination of compensation in these proceedings. Hence the compensation approach about costs should be applicable in relation to the time incurred in the determination of this question. No costs had been wasted or unnecessarily incurred as a result of the revised valuation by Mr Chan when he gave evidence on 14 April 2016.

Discussion

58. We refer to §§41-42 above about the consideration of costs in compulsory acquisition cases in particular the highlighted part at §42.

59. We do not find the argument on question of interest to be dealt with at trial amounts to any issue raised that “could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation” nor did it amount to “manifestly unreasonable conduct which may give rise to unnecessary expense in the course of the proceedings” or “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”. As for the revised valuation by Mr Chan, we repeat our findings at §§44-45 above.

60. Given our findings above, we do not find any special reason to justify depriving the applicant of any costs in the 2 matters raised by the respondent at §55.

Orders

61. It is order that :

a. The respondent shall pay the applicant the professional remuneration reasonably incurred by the applicant by virtue of section 6(2A) and 10(2)(e)(ii) of the LRO, ie the professional remuneration of Mr Charles CK Chan, expert for the applicant, with the amount to be determined by the Tribunal if not agreed;
b. The respondent do pay the applicant interest on the Provisional Payment from the date of reversion (ie 18 May 2011) to the date of payment (ie 15 November 2011) at the rate of 1% above the HSBC’s prevailing best lending rate;
c. The respondent do pay the applicant interest on the sum of $43,871,000 (being the balance of the Award less the Provisional Payment) from the date of reversion (ie 18 May 2011) to the date of judgment (ie 11 November 2016) at the rate of 1% above the HSBC’s prevailing best lending rate;
d. The respondent do pay the applicant interest on the sum of $43,871,000 from the date of judgment until payment (ie 3 December 2016) at judgment rate;
e. Credit be given to the interest which had previously been paid by the respondent to the applicant (if any);
f. The respondent do pay the applicant costs of this application, with Certificate for Counsel, to be taxed on party and party basis at High Court scale if not agreed; and
g. Costs order nisi that the respondent do pay the applicant costs of this paper disposal with Certificate for Counsel, to be taxed at High Court scale if not agreed. Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.

Angela KOT	Mr Lawrence PANG
Presiding Officer	Member
Lands Tribunal	Lands Tribunal

Ms. Nancy Ngai, instructed by Messrs Deacons, for the applicant

Mr. Anthony Ismail, instructed by the Department of Justice, for the respondent

[1] Mr Patrick Lai was the expert acting on behalf of the respondent in the present case.

[2] §63 of the Judgment.

[3] §64 of the Judgment.

[4] §70 of the Judgment.

[5] §§75 & 76 of the Judgment.

[6] §83 of the Judgment.

[7] §§92 & 93 of the Judgment.

[8] §107 of the Judgment.

[9] §112 of the Judgment.

[10] §§116 & 120 of the Judgment.

[11] §102 of the Judgment.

[12] See Section 10(6) of the Lands Tribunal Ordinance.

[13] See Singer and Friedlander Limited v John D Wood & Co (1977) 243 EG 212; (1977) 2 EGLR 84.

[14] See Muldoon v Maps of Lilliput Limited (1993) 14 EG 100.

[15] “Resolving the differences among various value indications is called reconciliation.” See Appraisal Institute, The Appraisal of Real Estate, 14th Edition, 2013, Chapter 30: Reconciling Value Indications, at p 641.

LDLR 2/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND RESUMPTION APPLICATION NO 2 OF 2014

_________________

BETWEEN
	SNOWLAND LIMITED (雪倫有限公司)	Applicant
	and
	DIRECTOR OF LANDS	Respondent

_________________

Before: Deputy Judge KOT, Presiding Officer, Lands Tribunal and Mr. Lawrence PANG, Member of the Lands Tribunal

Date of Hearing: 11-15 April 2016, 11-12 July 2016 and 26 September 2016

Date of Inspection of Comparables: 14 April 2016

Date of Judgment: 11 November 2016

_________________

J U D G M E N T

_________________

Background

1. This is an application by the applicant for determination of compensation pursuant to section 10(2)(a) of the Lands Resumption Ordinance, Cap 124 (“the LRO”). The applicant is the former registered owner of a property known as Shop A2 on Ground Floor, No 78 Fa Yuen Street, Kowloon, Hong Kong (“the Property”), then being 60/212 of 2/12^th equal and undivided shares of and in the Remaining Portion of Kowloon Inland Lot No 3327 (“the Lot”) on which a 6-storey building (“the Building”) was erected.

2. By virtue of an assignment dated 26 June 1997 registered in the Land Registry vide memorial UB7177913 (“the Assignment”), the applicant acquired the Property which was then subject to a tenancy agreement for 3 years dated 16 June 1997 and a Sub-Deed of Mutual Covenant dated also 26 June 1997. By reference to the plan attached to the Assignment (“the Assignment Plan”), a copy of which is shown as Appendix I hereof, the Property appears to be one of the four shops on ground floor of the same building.

3. Although the Assignment Plan was signed by an architect, it was stated to be “for identification purpose only”.

4. By reference to a witness statement dated 30 January 2015 made by Mr Lee Bing Fai, Stephen (“Mr Lee”), a director and shareholder of the applicant, the applicant’s major business is property investments and holdings. Excluding the Premises, the applicant holds 9 landed properties in Hong Kong, 7 of which are retail/shops and 2 of which are residential.

5. The applicant acquired the Property for investment purpose and had it let out from time to time as a shop unit; the last tenancy of the Property was from 12 July 2010 to 11 July 2011 at a monthly rent of $155,000 exclusive of rates and management fee.

6. Then in about the end of 2007, the Urban Renewal Authority (“URA”) began to implement Project K28 (“the Project”) which covered redevelopment of area in Mong Kok, Kowloon in which the Building was situated. According to a press release dated 21 December 2007, the project covered a site area of about 26,500 sq ft bounded by parts of Sai Yee Street, Nelson Street and Fa Yuen Street. Subsequently the URA made two offers to acquire the Property from the applicant which were all rejected.

7. By a notice of resumption dated 27 January 2011 and published in GN 1102, the Government informed the applicant that the Property would be resumed for the Project after expiration of 3 months from the date of affixing of the notice. The notice of resumption was affixed to the Premises on 18 February 2011 and therefore the Premises reverted to the Government at midnight on 18 May 2011.

8. The Government made the offer of $55,141,000 on 10 June 2011 to the applicant, which includes the value of the Property at $53,485,000. By a letter dated 18 August 2011 issued by Savills Valuation and Professional Service Limited (“Savills”) acting on behalf of the applicant, the applicant accepted the provisional payment in the sum of $53,485,000 without prejudice to its right to refer the matter to the Lands Tribunal in accordance with the Ordinance.

9. By a letter dated 1 March 2013, the Government made a revised offer to the applicant which was also not accepted. Then on 19 June 2014, the applicant filed a Notice of Application to Determine Compensation for Land Resumed under the LRO requiring the Lands Tribunal to determine the amount of compensation payable in respect of the resumption of the Property.

Applicant’s Entitlement to Compensation

10. It is not in dispute that the Ground Floor of the Building was altered in that it was sub-divided into a number of units with the Property being one of them. And it is also trite that no compensation is payable for any unauthorized or illegal structures. The subdivision was inconsistent with the Approved Plan and the Occupation Permit which show that the Ground Floor should comprise only 1 single unit without any subdivision and should be used as 1 shop for non-domestic use.

11. Mr Anthony Ismail (“Mr Ismail”), counsel for the respondent, submitted that the Property is the result of the sub-division which, being an alteration and addition to the Ground Floor not in line with the Approved Plan and in breach of the Occupation Permit, was an unauthorized or illegal structure.

12. In support of this contention, Mr Ismail highlights the partition wall, ie the thick black line as shown on the Assignment Plan dividing the Property from its adjoining Shop C and contends that it appears to be a solid wall when compared to the thick black line right next to the column (which is also in black). According to Mr Ismail, they are clearly permanent and fixed because they existed since the applicant purchased the Property on 26 June 1997 and the structures including the Property were used as shops for commercial gain.

13. According to section 2(1) of the Building Ordinance (“BO”), “building works includes any kind of building construction, site formation works, ground investigation in the scheduled areas, foundation works, repairs, demolition, alteration, addition and every kind of building operation, and includes drainage works” (underline added). Mr Ismail submitted that the Property, being alteration and addition to the Ground Floor, constitutes “building works” which require the approval of the Building Authority (“BA”). But there is no evidence showing that prior approval has been obtained for such partition under section 14(1) of the BO which provides that:

“(1) Save as otherwise provided, no person shall commence or carry out any building works or street works without having first obtained from the Building Authority—
(a) his approval in writing of documents submitted to him in accordance with the regulations; and
(b) his consent in writing for the commencement of the building works or street works shown in the approved plan.”

14. Mr Ismail submitted therefore that the aforesaid sub-division of the Ground Floor and the alleged addition of a solid wall constituted a breach of the Occupation Permit and the Approved Plan of the Building as well as a contravention of section 14(1) of the BO which is a criminal offence under section 40(1AA) of the BO. Hence, the Property was an unauthorized or illegal structure and no compensation should be awarded for such unauthorized/illegal structures pursuant to section 12(c) of the LRO which reads:

“no compensation shall be given in respect of any expectancy or probability of the grant or renewal or continuance, by the Government or by any person, of any licence, permission, lease or permit whatsoever:
Provided that this paragraph shall not apply to any case in which the grant or renewal or continuance of any licence, permission, lease or permit could have been enforced as of right if the land in question had not been resumed.”

15. Mr Ismail also referred to the Government Lease in respect of the Lot. While the Government Lease is generally unrestricted save for the usual “offensive trades clause”, Mr Ismail submitted that any amendment to the Property must be done to the satisfaction of the Director of Public Works, ie the predecessor of the BA. In particular, Mr Ismail relied on the following of the Government Lease:

“... and keep the messuages or tenements and all other erections and buildings now or at any time hereafter standing upon the said piece or parcel of ground hereby expressed to be demised and all the Walls, ... Cuttings ... hereunto belonging and which shall in any-wise belong or appertain unto the same in by and with all and all manner of needful and necessary reparations cleansings and amendments whatsoever the whole to be done to the satisfaction of His said Majesty’s Director of Public Works ...” (underline added)

16. Mr Ismail submitted therefore that the Property was an amendment to the Building that was not to the satisfaction of the Director of Public Works/ BA because the latter did not authorize it or permit the occupation of more than 1 shop on the Ground Floor. It was in breach of the Government Lease and under section 12(b) of the LRO, “no compensation shall be given in respect of any use of the land which is not in accordance with the terms of the Government lease under which the land is held.”

17. Therefore, it is the stance of the respondent that the applicant has not proven that it is entitled to claim compensation because it has not adduced any evidence that the Property is authorized and/or is not in contravention of the Government Lease.

Discussion

18. We are surprised that the respondent has taken the stance above as the Property is clearly registered in the Land Registry as comprising 60/212 of 2/12^th equal and undivided share of the Lot with the right to exclusive use, occupation and enjoyment of a space identified as Shop A2 on Ground Floor of the Building.[1] The existence of the space in question being a three-dimensional quantum cannot be denied by the presence or absence of the partition wall, irrespective of its legality or otherwise. What the respondent had suggested is that the owner of the Ground Floor shop is entitled to compensation for the property as 1 shop but due to the adding of the partition walls sub-dividing the 1 shop into 4, the Government shall not be liable to pay any compensation on resumption. This is ridiculous.

19. Thus, we agree with the submission of Ms Nancy Ngai (“Ms Ngai”), counsel for the applicant, that the applicant being the former owner of the Property since June 1997, holding the legal and beneficial interests therein immediately prior to the reversion should be entitled to compensation under the Ordinance.

20. As regards the allegation of erection of the partition wall in contravention of the BO, this would not affect the value to be attributable to the user of the space at all. This is in particular nothing to do with the entitlement of the applicant to compensation. The applicant is being compensated for the Property and the added partition wall is just one of the walls of the Property. It would be against the intention of the LRO, ie to provide fair compensation for a claimant whose land has been compulsorily taken from him, if the applicant is deprived of its entitlement to compensation for the Property just because of 1 added partition wall. The Property itself is not an unauthorised structure and should be entitled to compensation.

21. Turning to the “thick black line” shown on the Assignment Plan, it, by itself, is far short of evidence that it amounts to “building works” which require the approval of the BA.

22. On the one hand, the Assignment Plan was stated to be “for identification purpose only”. As pointed out by Ms Ngai, there are other discrepancies that the Assignment Plan differs from the Approved Plan and it is unlikely that the Assignment Plan shows the true representation of the on-site situation.

23. Save for the Assignment Plan, no evidence has been proffered by the respondent to show that the partition wall constituted an unauthorized or illegal structure as alleged. Under section 41(3) of the BO, “building works (other than drainage works, ground investigation in the scheduled areas, site formation works or minor works) in any building are exempt from sections 4, 9, 9AA, 14(1) and 21 if the works do not involve the structure of the building.” We find the partition wall was obviously in the Building serving as a demarcation of the boundary of the sub-divided unit and unlikely to have involved the structure of the Building, hence likely to be exempted and no approval from the BA was required.

24. Mr Ismail had invited this Tribunal to draw adverse inference against the applicant since the applicant has proffered no evidence on the issue. However we are hesitant to draw any adverse inference against the applicant. The relevant principles for drawing adverse inference was considered by the Court of Appeal in Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd, CACV 90, 91, 93, 94, 95 and 96/2012 (unreported, dated 17 September 2013). At §111 of the judgment, the Court of Appeal confirmed that “There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party’s failure to produce a particular witness.” But here we take judicial notice that partition wall in or inside the premises particularly on Ground Floor like the Property is usually an exempt structure under the BO. See, for example, OctorichLimited v Liu Sin Ming & Another, HCMP 977/1992 (unreported, dated 1 June 1993) and Dei Chuen Ho Industrial Ltd v Leung Yin Por [1993] 2 HKC 495.

25. In Wing Hong Investment Company Limited v Fung Sok Han & Others, [2016] 1 HKLRD 1, the defendants there also claimed that the plaintiff in that case had converted the ground floor carport into shops in contravention of the BO. Honourable Judge Chan of the High Court found there is no provision in the BO to suggest it is an offence to adopt a user of premises which is materially different from that stated in the Occupation Permit (at §235). Thus the allegation by Mr Ismail on the non-conformity of the Property with the occupation permit of the Building is a non-issue.

26. Mr Ismail also refers to the Court of Final Appeal decision in Director of Lands v Yin Shuen Enterprises Ltd & Another, (2003) 6 HKCFAR 1 (“Yin Shuen”) which draws a distinction between licences etc which are capable of affecting the value of the interest taken and those which are not ( at §45).

27. We find the grant or refusal of the approval by the BA concerning the partition wall cannot affect the intrinsic value of the Property since the need to obtain building approval did not affect the value of the Property as the use for non-domestic purposes is allowed. Section 12(c) of the LRO has no application under such circumstances.

28. With regard to the breach of the Government Lease, we would similarly rule that, in case the construction of the partition wall has “to be done to the satisfaction of” the Director of Public Works, ie the predecessor of the BA, under the Government Lease, it does not fall within the scope of section 12(c) of the LRO, because it does not affect the right of the applicant to the construction if the condition is satisfied (See §48 of Yin Shuen). In addition, we agree with Ms Ngai that this general provision in the Government Lease must be distinguished from requiring the lessee or the applicant in this case to comply with the BO. Furthermore, we find section 12(b) is not applicable since the respondent is not alleging a breach of any use of the land.

29. Thus, in view of the analysis above, we hold that the applicant is entitled to claim compensation under the LRO in respect of its ownership of the Property as at the date of resumption.

Interest and Professional Fees

30. To the extent that the applicant’s entitlement to compensation has been determined, the applicant and the respondent have no dispute that under section 10(2)(a) of the LRO, the basis of compensation should be the market value of the Property as at the date of resumption, ie 18 May 2011. However, they cannot agree on the quantum.

31. Initially, Ms Ngai, submitted that the Tribunal should also deal with and determine the issue of interest under section 17(3) of the Ordinance at the trial. This is however disposed of by our decision handed down on 14 April 2016. That is, we shall proceed to determine the amount of compensation payable in respect of the resumption of the Propertybefore the amount of interest and professional fees under section 17(3) and 10(2)(e)(ii) respectively of the LRO being also claimed by the applicant could be settled.

The Evidence

32. For the purpose of the present application, the applicant and the respondent have produced the following expert reports on valuation of the market value of the Property as at the date of resumption:

(1) Valuation Report dated 21 November 2014 by Mr Patrick Lai (“Mr Lai) for the respondent;
(2) Valuation Report dated 30January 2015 by Mr Charles Chan (“Mr Chan) for the applicant;
(3) SupplementalReport dated 27February 2015 by Mr Lai;
(4) Rebuttal Report dated 28 April 2015 by Mr Chan;

33. Mr Chan and Mr Lai have also prepared a joint expert statement and supplemental joint statement dated 11January 2016 and 31 March 2016 respectively setting out the areas of agreement and disagreement. More particularly, by virtue of the latter, the two experts agree that the market value of the Property would be assessed by direct comparison of sales comparables on the basis of vacant possession despite that, as at the date of resumption, the Property was subject to a tenancy agreement with less than 2 months unexpired.

34. However, dispute between the parties arose when on 11 April 2016 the applicant sought leave to produce Mr Chan’s amended assessment of open market value of the Property with support of an additional letting of a shop unit situated opposite to the Property (hereinafter referred to as Comparable T9) and a so-called cross checking of the market value by Income Capitalisation Method.

35. The respondent objected to the production because it was too late and the Income Capitalisation Method took the respondent by surprise.

36. Clearly this is a late application. However, having heard the submissions of the parties and reviewed the various valuation reports submitted by the experts, we granted leave for the applicant to produce the new evidence which has been inserted into the hearing bundle (Bundle B/84(a)-84(d) refers). We have indicated that reasons for this ruling would be included in the final judgment. This we now do.

37. Firstly, having regard to the underlying objectives in Order 1A of the RHC, the pertinent consideration is “the court shall always recognize that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties” (Order 1A rule 2(2) RHC).

38. The Tribunal considered that the valuation result would highly likely be influenced by the introduction of the new comparable or the justice in the present case could not be up-held because some useful evidence was barred from being disclosed.

39. In the present case, this Comparable T9 is not totally new as Mr Lai later pointed out in his Rebuttal Report dated 13 April 2016 which we granted leave to produce that it is in fact the Reference Shop submitted in the Table at Para 3.3 in the Rebuttal Report by Mr Chan. What is new are the particulars of its letting ranging from the offer letter to the landlord dated 13 July 2011 to a former tenancy agreement dated 16 September 2011.

40. And as explained by Ms Ngai, this comparable is situated at close proximity to the Property and the letting occurred very close to the date of resumption. We consider this comparable has a high probative value and probably hasan important influence on the result of the case.

41. As regards the inclusion of the Income Capitalisation Method, we consider this is not new and do not agree that the respondent should be taken by surprise. In the Valuation Report dated 30 January 2015, Mr Chan, while at §7.3 resorting then to the term and reversion method in arriving at his valuation of the market value of the Property at $89,900,000, added in the end that “(b)y applying a 2.5% yield on the reversionary value (which was derived by the Direct Comparison Method), the market rent would be about $187,292/month ....” We consider this latter would be just an application of the Income Capitalisation Method in reverse for checking purpose.

42. A fortiori, in the supplemental joint statement dated 31 March 2016, there is a section called “Cross Checking of Open Market value by Income Capitalisation Method”. In this section, Mr Chan had already indicated that he would make referenceto rental comparables (T1-T5) [2] for cross checking valuation while Mr Lai remarked that “(t)he rental evidence served no useful purpose in the valuation analysis since the market value of the Property as assessed using the Direct Comparison Method was adopted in assessing the value of the reversionary interest.”.

43. Thus, we are satisfied that the respondent or his expert, Mr Lai, should have been alerted of the application of Income Capitalisation Method by Mr Chan for cross checking purpose; the introduction of, for instance, Bundle B/84(d) only differs from the original application at §7.3 of the Valuation Report dated 30 January 2015 in presentation. Of course, where Comparable T9 is allowed to be added, Mr Chan should be at liberty to make the necessary consequential amendments.

44. In Lingrade Development Limited v Secretary for the Environment, Transport and Works, CACV 295/2008 (unreported, 26 June 2009), Mr Ismail who happened to appear for the same respondent here argued successfully before the Court of Appeal that the Tribunal was entitled to "...award damages based on its own valuation method..." based on the evidence placed before the Tribunal. Thus, even if Mr Chan has not taken the trouble to introduce Bundle B/84(d) and other consequential amendments resulted from the addition of Comparable T9, the Tribunal would be in the position to award damages on its own valuation method based on the evidence submitted.

45. Indeed, such an approach has been consistently applied by the Tribunal (See Hongda Container Limited v The Secretary for Transport, LDMR 7/2000 (unreported, 4 June 2002) and Dr Lui Tat Hing v The Director of Lands, LDLR 1/1998 (unreported, 14 January 2000).

46. Thus, after hearing submissions, we were satisfied that allowing the late application would cause no prejudice to the respondent provided that we gave a further day to allow Mr Lai to prepare a Rebuttal Report which he did on 13 April 2016.

47. At the beginning of the trial on 11 April 2016, Mr Chan, after the amendments as allowed by us above, revised his opinion of market value of the Property to $92,000,000 instead of $89,900,000. His valuation based on the Income Capitalisation Method was $112,163,238. On the other hand, Mr Lai has not revised this valuation at $58,692,000 in spite of the preparation of a joint expert statement and supplemental joint statement dated 11 January 2016 and 31 March 2016 respectively. But at the beginning of the trial, Mr Lai saw fit to revise his valuation to $57,852,000.

48. It is deplored that when Mr Chan began to give evidence on 14 April 2016, he revised his valuation again to $105,132,852 on the excuse that he had reviewed his valuation particularly on seeing the comments on location by Mr Lai in his Rebuttal Report of 13 April 2016 and taking into account the new evidence of Comparable T9. Mr Chan had submitted his revised assessment and marked as Exhibit A2 and A3 respectively.

49. Mr Ismail criticised that the latter was only a pretext of Mr Chan because when he introduced new evidence of Comparable T9, he maintained that this comparable and the Income Capitalisation Method were only used for cross-checking his valuation arrived by the Direct Comparison Method as agreed in the joint expert statement and supplemental joint statement dated 11 January 2016 and 31 March 2016.

50. In the present case, Mr Chan’s revised valuation as at 11 April 2016 was $92,000,000 based on the Direct Comparison Method but his valuation based on the Income Capitalisation Method was $112,163,238, ie a difference of about 22%. This should be a matter of concern for the valuer though it may not necessarily lead to that the value arrived at by direct sales comparison was not reliable and should be abandoned.

51. Be that as it may, we do not see any reason to bar an expert from changing his opinion upon trial bearing in mind the underlying objective under O.1A r.2(2) RHC. In particular, we have to accept the change in opinion as produced at Exhibits A2 and A3. In any event, when we discuss the location adjustment for the comparables below, we find the revision by Mr Chan is justifiable in seeing the comments/ criticism made by Mr Lai in his Rebuttal Report of 13 April 2016.

Particulars of the Property

52. As said, the Property comprised one of the four shop units on ground floor of the Building which is situated at the junction of Fa Yuen Street within the busiest hub of the Mong Kok shopping district. Indeed, it is not disputed that this portion of Fa Yuen Street is famous for selling sportswear, sports shoes etc gaining its fame as “the Sneakers Street”. According to the homepage of the Hong Kong Tourism Board, “Fa Yuen Street is where Hong Kong’s image-conscious youth have come to get their statement-making footwear since the 1980s. They come for the latest designs and limited-edition releases from all over the world...” According to the photo included in the Valuation Report dated 30 January 2015 by Mr Chan, the Property was occupied for selling Nike’s sports shoes as at the date of resumption.

53. Nevertheless, the Property was not exactly situated at the corner of the streets after the sub-division though, by reference to the photos and floor plans exhibited, its frontage to Fa Yuen Street should have been readily visible by pedestrians walking east along Nelson Street[3], for instance from a popular exit of the Mong Kok station of the Mass Transit Railway.

54. The other particulars of the Property, inter alia, are agreed, between the parties as per the supplemental joint statement dated 31 March 2016 as follows:

Saleable Area : 29.16 sq m
Full Frontage : 3.30 m
Floor to Floor Headroom : 5.00 m
Clear Frontage : 2.49 m
Clear Headroom : 4.90 m

Comparables for Direct Comparison Method

55. Pursuant to the supplemental joint statement, the two experts agree the following comparables to be adopted for valuation on direct sales comparison basis:

Ref No Address Date of Transaction Consideration Saleable Area (sq m) Full Frontage (m) Clear Headroom (m)
AC1/RC2 Unit 6, G/F, Hung Tat Building, 55 Dundas Street 24 Mar 11 $24,800,000 9.44 + Cockloft: 7.89 1.80 5.22 From G/F to ceiling Cockloft
Return Frontage 5.3m to a service lane
AC2 Shop 5, G/F, 60 Sai Yeung Choi Street South 1 Mar 11 $71,800,000 13.17 2.70 2.52
AC4/RC4 Unit 72, G/F, Hong Lok Mansion, 90-92 Sai Yee Street/ 72-78 Argyle Street 30 Sep 10 $76,800,000 35.41 7.7 to Sai Yee Street 3.82
Return Frontage 4.7m to Argyle Street
RC1 Shop G7, G/F, Sincere House, 83 Argyle Street 14 Oct11 $34,500,000 18.16 2.46 3.96
RC3 Shop 6, G/F, Golden Hill Commercial Building, 39-41 Argyle Street 8 Mar 11 $35,400,000 17.64 4.04 5.36
* The comparables with the prefix “AC” are those adopted by Mr Chan whereas the comparables with the prefix “RC” are those adopted by Mr Lai.

56. Thus, while two parties have altogether 5 comparables, the two experts have only two comparables in common, being AC1/RC2 and AC4/RC4.

57. The two experts have also set out the adjustment factors that they agreed to be relevant for the purpose of valuation as follows:

Adjustment Factors Mr Chan Mr Lai
Time Private Retail Price Index of Rating and Valuation Department (“RVD”) Private Retail Price Index of RVD
Location -35% to 25% -5% to 5%
Age 0% Not Applicable
Quantum/Size 2% for every 5 sq m for the first 50 sq m then 1% for 10 sq m after the first 50 sq m 1% for every 2 sq m difference
Layout 0% to 10% Not Applicable
Return Frontage -20% to 0% Not Applicable
Frontage Not Applicable 4% for every 1 m difference in clear frontage
Headroom 1% for every 0.3m difference in clear headroom 2% for every 1 m difference in clear headroom
Total Adjustments The total adjustments are multiple of the adjustments for each of the factors The total adjustments are sum of the adjustments for each of the factors

58. Thus, prior to the amendment by Mr Chan on 14 April 2016, his adjustments proposed and those of Mr Lai (in parentheses) are as follows (as extracted from B/84c and B/123A):

Ref No Unit Price
(/sq m) Adjustments Adjusted Unit Price
(/sq m)
Time Location Quantum Layout/ Return Frontage Frontage Head-room Cock-loft Total
AC1/RC2 $2,627,119*
($2,173,532) 3.4%
(3.4%) 10%
(0%) -8%
(-8.9%) 10%
(0%) 0%
(3.1%) -1%
(1.4%) -3%
(0%) 10.5%
(-1.0%) $2,902,966
($2,151,797)
AC2 $5,451,784 3.4% -35% -6% 0% 0% 8% 0% -31.8% $3,718,117
AC4/RC4 $2,168,879 19.9%
(19.9%) 25%
(5.0%) 3%
(3.1%) -20%
(0%) 0%
(-28.8%) 4%
(2.2%) 0%
(0%) 28.4%
(1.4%) $2,784,841
($2,199,243)
RC1 ($1,899,780) (-5.7%) (-5%) (-5.5%) (0%) (1.9%) (1.9%) (0%) (-12.4%) ($1,664,207)
RC3 ($2,006,803) (3.4%) (5%) (-5.8%) (0%) (-6%) -0.9% (0%) (-4.3%) ($1,920,510)
* Mr Chan, in his analysis, disregarded the area or more particularly the presence of the cockloft but by including the full headroom from G/F to ceiling of the Cockloft, Mr Chan allowed corresponding adjustment for the high headroom and the advantages of the cockloft.

Rental Comparables

59. Included in the supplemental joint statement are also the following rental comparables (including T9) which Mr Chan submits are useful for cross-checking the valuation of the market value of the Property arrived at on the basis of direct comparison:

Ref No Address Instrument Date (Tenancy Commencement Date) Monthly Rent (effective) Saleable Area (sq m) Full Frontage (m) Unit Effective Rent (/sq m)
T1 Shop 3, G/F, Grandview Building, 49-69 Fa Yuen Street/ 8-8A Nelson Street 13 Jul 11
(20 Aug 11) $310,000 22.92 6.22 to Fa Yuen Street $13,525
Return Frontage 3.74 to Nelson Street
T2 Unit 6, G/F, 43 Dundas Street 8 Feb 11
(1 Dec 10) $300,000 46.45 3.81 $6,459
T3 Shop 2, G/F, 60 Sai Yeung Choi Street South 31 Dec 10
(8 Jan 11) $144,574 14.63 3.05 $9,882
T4 Shop 1, G/F, Tat Lee Commercial Building, 43A-G Dundas Street/ 2Y Sai Yeung Choi Street South 25 Oct 10
(25 Sep 10) $128,194 10.31 2.74 $12,434
T5 Shop 2, G/F, Pakpolee Commercial Centre, 1A Sai Yeung Choi Street South 11 Oct 10
(1 May 11) $215,000 37.04 3.04 $5,805
T9 Shop 4, G/F, Grandview Building, 49-69 Fa Yuen Street/ 8-8A Nelson Street 13 Jul 11*
(19 Sep 11) $281,944 27.03 3.40 $10,431
* This is the date of the offer letter instead of the date of the tenancy agreement.

60. Also, according to Mr Chan, when he saw the Rebuttal Report of 13 April 2016 by Mr Lai together with his analysis of T9 vis-à-vis the other rental comparables, he found it necessary to revise the adjustments for location in respect of the comparables for Direct Comparison Method as contained in Exhibit A3. Thus, we shall proceed with our comment on other adjustment factors before we consider the location adjustments for the various comparables.

Adjustments of Comparables

Multiplication/Summation of Adjustments

61. There is a dispute between the two experts on the application of the adjustment process: Mr Chan applies the adjustment through the multiplication process whereas Mr Lai adopts the summation process. The Tribunal in Cheer Capital Limited v Unibase Investment Limited & Others, LDCS 5000 & 6000/2013 (unreported, 12 June 2015) came across the same issue and had explained at §§90-94 the reasons why the multiplication process should be preferred when any discrepancy arises.

62. For the sake of elucidating our view, we repeat the opinion of the said Tribunal at §§92-93 as follows:

“92. Indeed, in arriving at the market value, a comparable needs to be compared with the subject property for the similarities and the dissimilarities. If a comparable property is superior to the subject property to which it is being compared, then a negative or minus adjustment is made to take the comparable property from that superior position down to a level equal to the subject property; if a comparable property is inferior when it is being compared to the subject property, then a positive adjustment is made. The amount of dollar adjustment for each element should arise independently as observation from the market reflecting the dissimilarities that affect value, and they are simply added together. The total of the adjustments is then added to or subtracted from the comparable’s sale price to make the comparable equal to the subject as of the date of valuation.
93. When percentage adjustments are applied, the result must be mathematically equal to dollar adjustment that is obtained separately from the market. However, adding and subtracting the percentage adjustments gives an answer that is different from that derived by the principle of adjusting using dollars; this adding the several percentage adjustments together and then applying the end result to adjust the comparables sales would be theoretically and mathematically incorrect because this does not result in moving from basis to basis though we appreciate that such summative percentage adjustments are most commonly used by the valuation profession in Hong Kong perhaps for the reason that this approach is simpler to apply and easy to be understood.” (underline added)

63. As said in the end of the paragraph cited above, we agree that summative percentage adjustments are most commonly used but we do not agree that this summation approach is a conventional approach as suggested by Mr Lai. The summation approach is never recommended in any valuation textbook. We would only comment that the summation approach was easier to apply before the use of computers becomes common but we venture to say that when the application of the computers has entered into our daily life and become more and more user friendly, we shall resort to a calculation that is theoretically and mathematically correct, ie the multiplication process wherever it is convenient to do so.

Quantum

64. It is agreed by the parties that the saleable area of the Property is 29.16 sq m. For the comparables, Mr Chan suggests that 2% for every 5 sq m for the first 50 sq m, ie 1% for every 2.5 sq m whereas Mr Lai suggests 1% for every 2 sq m difference; this means Mr Lai considers more sensitive adjustment is required when the shop area is small. Taking into consideration the Property is situated at a very busy and popular district of Mong Kok, we prefer Mr Lai’s approach though we would retain Mr Chan’s application of 1% for 10 sq m after the first 50 sq m.

Frontage

65. Mr Chan makes no allowance for frontage difference whereas Mr Lai allows 4% for every 1 m difference in clear frontage.

66. In the case of valuation of a shop, it is well understood that a shop with a wider street frontage (and hence, a bigger shop window) is more valuable than a shop of the same area but with a narrower shop front and a greater depth. But as explained by the Tribunal in Tai Ping Restaurant Limited v Director of Lands, LDLR 1/2013 (unreported, dated 8 December 2014) (“Tai Ping Restaurant Limited”) at §48, there shall not be any adjustment for frontage “unless the frontage in consideration is clearly superior or inferior to the norm that the benefits or disabilities which the frontage produces are clearly evident”. In that case, therefore, the Tribunal preferred 2% for every 1 metre difference to 4% for every 1 metre difference proposed by Mr Lai who happened to be one of the valuation experts thereof.

67. Also, in Tai Ping Restaurant Limited, the Tribunal preferred the adjustment for full frontage to the adjustment for clear frontage because the former would not miss the effects of columns on the frontage if any in the frontage adjustment. As explained at §38 thereof:

“38. I consider columns on the frontage of a shop are valuable, but the weight of such columns in an assessment is generally less than that of clear frontage. Subject to the availability of information, different weights should be attached to columns on the frontage and clear frontage respectively in an assessment. Nevertheless, in the absence of detailed assessment, there is no material difference between these two approaches if each could be applied consistently in the valuation. ”

68. Earlier in Good Faith Properties Limitedand Others vCibean Development Company Limited, LDCS 42000/2011 (unreported, dated 31 May 2013) (“Good Faith Properties Limited”), a differently constituted Tribunal also gave its view on the dispute on such frontage issue and agreed with the expert in that case that the columns in shops do have potential to attract customers.

69. In this connection, we appreciate that the respondent had relied on Lee Yun v Director of Lands, LDLR 12/2006 (unreported, 22 December 2010) (“Lee Yun”) and said that it supports Mr Lai’s clear frontage approach. Nevertheless, this case has already been considered in Good Faith Properties Limited above and in the present case, we find there is no evidence that decorations put on the columns and walls to attract customers in the comparables and the Property would constitute unauthorised encroachment on government pavement. Lee Yun should be distinguished on the particular fact of that case.

70. During cross-examination by Ms Ngai, Mr Lai emphasized that his clear frontage approach would take into account the clear passage of the shop front. We consider Mr Lai’s approach having merit if the shop front is very narrow but this is not the case here either for the Property or the comparables. In this regard, we agree that full frontage should be preferred in dealing with frontage adjustments where appropriate.

71. In the present case, the two valuation experts agree that the Property enjoyed a clear frontage of 2.49 m. Apart from AC1/RC2 and AC4/RC4 which both enjoy a return frontage which we shall consider later, AC2 and RC1 have clear frontages of about 2.7 m and 2.46 m respectively which are not significantly different from that of the Property. We are content to adopt 2% for every 1 metre difference as per Tai Ping Restaurant Limited.

Layout/Return Frontage

72. Mr Chan applies an upward adjustment of 10% for comparable AC1/RC2 for the reason that it has a very (inferior) narrow frontage of 1.8 m. On the other hand, Mr Lai considers that both the Property and this comparable are of rectangular shape and therefore there should be no difference in layout, ie such an adjustment is not necessary. However, Mr Lai allows an upward adjustment of 3.1% taking into consideration the difference in clear frontage.

73. By our joint inspection on 14 April 2016, however, we find that this comparable enjoys a return frontage of about 5.3 m to a service lane. In this regard, we consider the frontage enjoyed by this comparable is not so narrow. We consider an upward adjustment of 3.1% as allowed by Mr Lai (though for a different reason) is more appropriate.

74. On the other hand, Mr Chan considers AC4/RC4 superior in layout because it enjoys a frontage to Argyle Street (4.7 m) and a frontage to Sai Yee Street (7.7 m). He applies therefore an adjustment of -20%. Mr Lai adds up the total clear frontage onto both street (3.75 m to Argyle Street and 5.93 m to Sai Yee Street) and applies 4% for every difference of 1 m when compared with the Property (2.49 m), resulting in -28.8%.

75. This approach of Mr Lai must be wrong in principle. Not to mention that we have hesitation to adopt the frontage adjustment of 4% for every difference of 1 m as explained above, this approach of Mr Lai assumes that the frontages to both street would have equal advantage (attraction) which should not be the case in real life. In the present case, we consider the frontage of Argyle Street would enjoy better exposure or attraction than that of Sai Yee Street. In addition, this approach of Mr Lai would have double counted the value of the floor space that lies at the corner; it is the higher value for the floor space that counts in the captioned analysis instead of the mere frontage.

76. In view of the above, we prefer the -20% applied by Mr Chan to the -28.8% by Mr Lai though we would allow another -2.8% to account for the frontage adjustment as discussed in the preceding paragraph.

Headroom

77. Mr Chan applies an adjustment of 1% for every 0.3m difference in clear headroom whereas Mr Lai adopts 2% for every 1 m difference which is equivalent to 1% for every 0.5 m; the difference in opinion is not significant when difference in headroom is small.

78. We note in the present case, the clear headroom of the Property is agreed at 4.90 m whereas the headrooms for the comparables (except AC1/RC2 and AC2) lie between 3.82 m to 5.36 m. While we do not intend to lay down any formula for adjustment, we consider 1% for every 0.5 m would be applicable; but for AC1/RC2, AC2 (and T3) which have headroom significantly smaller, we are prepared to adopt a higher adjustment at 1% for every 0.3 m.

Cockloft

79. Save for AC1/RC2, neither the Property nor the other comparables comprise a cockloft. Applying the adjustment for AC1/RC2, however, Mr Chan disregarded the area or more particularly the presence of the cockloft; instead he assumes the full headroom from G/F to ceiling of the cockloft saying that the occupier had abandoned the use of the cockloft. Mr Chan then allows -3% perhaps to reflect the reality or advantage of this comparable having a cockloft.

80. Upon our joint site inspection on 14 April 2016, we did find that the staircase which, by reference to the floor plan of the premises, used to lead up to the cockloft had been removed. However, we consider this approach of analysis by Mr Chan unorthodox and not pertaining to the reality; there is no evidence that the cockloft had been demolished or unused. More particularly, the fact is that the occupier does not make use of the full headroom from G/F to ceiling of the cockloft as opposed to Mr Chan’s assumption.

81. We shall adopt Mr Lai’s more conventional approach by taking the unit value of the cockloft as 25% of that of the ground floor in the analysis.

Adjustment for Location and the Choice of Comparables

82. Next we come to the area of difference between the two experts, ie the adjustment for location which is farthest apart.Both parties agreed that since the inspection of this Tribunal only took place many years after the date of resumption, many of our observation during the site visit may not reflect the reality at the relevant time. With the above in mind, we are entitled to look at the objective evidence including the photographs, survey sheets and, subject to the limitation above, our own observation of the area, to draw any reasonable inference from them and to decide whose opinion should be preferred.

83. Firstly, we share the view of Mr Chan that RC3 should not be taken as a comparable. It is situated on the other side of Nathan Road, the busy thoroughfare running from north to south that has divided Mong Kok to a certain extent into two districts of different characters. This RC3 is situated on Argyle Street close to its junction with Portland Street where shops in the vicinity are mainly selling building or decoration materials. That can hardly be comparable to the Property either in pedestrian flow or in fame as a popular shopping area. We totally disagree that as small as +5% adjustment applied by Mr Lai would make up the difference.

84. Thus having RC3 excluded, we proceed to look closely at the difference in adjustments for location applied by two experts:

Comparable Reference No Adjustment for Location
By Mr Chan By Mr Lai
as at 7 April 16 as at 14 April 16
AC1/RC2 +10% +20% 0%
AC2 -35% -15% -50%*
AC4/RC4 +25% +25% 5%
RC1 + (unspecified) + (unspecified) -5%
* This -50% was only disclosed by Mr Lai in his Rebuttal Report of 13 April 2016 at §2.19.

AC1/RC2

85. Although AC1/RC2 is also situated on Fa Yuen Street, it is located much further away from the hub of the busiest shopping area or “the Sneakers Street”. There should be an upward adjustment despite we agree that this immediate area has become a popular spot for eateries.

86. Having said that, we cannot appreciate the reason why Mr Chan has changed his view from +10% to +20%. Nevertheless, having carried out the on-site inspection, we agree +20% is appropriate.

AC2

87. Notwithstanding its address at Sai Yeung Choi Street, AC2 fronts indeed onto Nelson Street which is a popular passageway or more popularly a pedestrian precinct leading from Nathan Road or according to Mr Lai, a primary exit of the Mong Kok MTR station. Also, according to Mr Lai, the adjustment of -35% originally proposed by Mr Chan was not adequate.

88. At trial, however, Mr Chan referred to T3, ie Shop 2, G/F, 60 Sai Yeung Choi Street which lies only two shops away from AC2, the latter being Shop 5 of the same building. He compared the unit rental of T3 at $9,882/sq m with $10,431/sq m for T9 which lies across the corner of the Property; he carried on with his own analysis and found, against his initial opinion, the unit rental for T9 is higher than that of T3.

89. Mr Chan finds support of the above analysis from the unit rental of T1 which is a corner shop next to T9; even after allowing for his adjustments, when compared with T9 or otherwise, its unit rental is similar to that of T3.

90. According to Mr Chan, similar finding is supported by the rateable value of the premises for the year 2015-2016, the relevant date for which is 1 October 2014, as follows:

Ref No Rateable Value Saleable Area
(sq m) Rateable Value/sq m
per month
T9 $3,780,000 27.03 $11,654
T1 $5,100,000 22.92 $18,543
AC2 $1,632,000 13.17 $10,326

By reference to the above, Mr Chan stated at §3.3.2 of his Rebuttal Report of 28 April 2015 that “the retail potential of (T9) and the Property is more similar to those of (AC2)...” (emphasis added)

91. In the Rebuttal Report of Mr Lai prepared on 13 April 2016, Mr Lai pointed out the inconsistency when Mr Chan then applied -35% to AC2 in valuing the Property. Further Mr Lai stated:

“Comparable T1 and T9
....
2.7 Though I agree that Comparable T9 was situated in a superior location relative to the Property, I cannot agree that it was similar to Comparable AC2 ... in terms of location.
2.8 In my opinion, I consider the appropriate location adjustment for Comparable T9 should be -25%.
2.9 Based on the above, I consider the downward adjustment of 10% applied by (Mr Chan) for Comparable T9 should be rejected.
2.10 I note that the location adjustment for Comparable T1 was the same as Comparable T9 at the rate of -10% as submitted by (Mr Chan).
2.11 Comparable T1 was situated on a corner site fronting onto both Nelson Street and Fa Yuen Street and in particular that section of Nelson Street fell into the scheme of part-time pedestrian streets. ...
2.12 In my opinion, there should be at least 5% difference in terms of location between Comparables T1 and T9 to reflect the better location of Comparable T1.
Comparable T3
2.13 Comparable T3 was situated in close proximity to Comparable AC2...
2.14 I submitted at Para 6.2-6.11 of my Supplementary Rule 20 Document that Comparable AC2 was situated in a very superior location.
......
2.17 Therefore, I consider the downward adjustment of 35% applied by (Mr Chan) for the Comparable AC2 is not adequate.
2.18 The above submission in respect of Comparable AC2 is applicable to Comparable T3 since they were situated in close proximity.
2.19 In my opinion, the appropriate adjustment for location in respect of Comparable T3 should be -50%.
2.20 Based on the above, I consider the statement in Note (1) under Table B attached to the Letter Report (ie B/84(d)) that “... Comparables ...T3 which are most similar to the subject property in terms of location” should be rejected.”

92. Firstly, we do not agree that the location of T9 is superior to the Property by as much as -25% when T9 is just situated across the junction of Nelson Street and Fa Yuen Street on the opposite side of Fa Yuen Street. This section of Fa Yuen Street is not very wide and jaywalking across the street is not uncommon. In this regard, we share the opinion of Mr Chan as per B/84(d) or Exhibit A3 that the adjustment should be about -10%.

93. In making his remark cited above, Mr Lai failed to observe that when Mr Chan applied the same -10% location adjustment for both T1 and T9, Mr Chan made an additional allowance of -25% on return frontage for T1; this is much higher than the minimum of -5% suggested by Mr Lai “to reflect the better location of Comparable T1”[4].

94. We do not agree that T9 is similar to Comparable AC2 in terms of location but consider the latter about 15% better. As submitted by Mr Ismail, the reference to the rateable values as at October 2014 might not be so appropriate and also we cannot assume the rateable values arrived at by RVD for inclusion in the valuation list are correct. For example, we note the monthly rental as reserved for AC2 since December 2009 was $140,000 per month or $10,630/sq m per month. If the Private Retail Rental Indices of RVD at 117.3 and 133.6 as at December 2009 and May 2011 respectively are abided by, the market rent for AC2 as at the reversion date may be equal to:

which is much higher than $9,882/sq m for T3 as at December 2010 or its rateable value as at October 2014.

95. Therefore, if T9 is better than the Property by 10% and AC2 is better than T9 by 15%, the -15% adjustment applied by Mr Chan to either T3 or AC2 appears to be too small; it should be some -23.5%[5] instead. Then, following our discussion of the various adjustment factors above, the adjusted unit rental for the Property appears to be as follows:

Ref No Unit Rental
(/sq m) Adjustments Adjusted Unit Rental (/sq m)
Time Location Quantum Layout/ Return Frontage Frontage Head-room Total*
T1 $13,525 -1.0% -10.0% -3.1% -25.0% -5.8% -0.5% -39.3% $8,210
T3 $9,882 4.0% -23.5% -7.3% 0% 0.5% 7.9% -20.0% $7,906
T9 $10,431 -1.0% -10.0% -1.1% 0% -0.4% -0.5% -12.7% $9,106
Average: $8,407
Sample Standard Deviation: 623.86**
* By multiplication
** The variance would be even smaller if the adjustment for return frontage for T1 is smaller than -25%.

96. Conversely, if we follow Mr Lai’s suggestion of -25% for T9 when compared with the Property and -50% for T3 when compared with the Property (ie T3 is superior to T9 by some 33%[6]), the analysis becomes as follows:

Ref No Unit Rental (/sq m) Adjustments Adjusted Unit Rental (/sq m)
Time Location Quantum Layout/ Return Frontage Frontage Head-room Total*
T1 $13,525 -1.0% -25.0% -3.1% -25.0% -5.8% -0.5% -49.4% $6,844
T3 $9,882 4.0% -50.0% -7.3% 0% 0.5% 7.9% -47.7% $5,168
T9 $10,431 -1.0% -25.0% -1.1% 0% -0.4% -0.5% -27.2% $7,594
Average: $6,535
Sample Standard Deviation: 1,242.11
* By multiplication

The resultant figures come at larger variances and the adjusted rental derived from T3 at $5,168/sq m is even lower than the rental for the Property reserved on 7 May 2010 at $5,316/sq m[7]. Mr Lai’s suggested adjustments for location appear not to be supported.

97. At trial, Ms Ngai also tried to test Mr Lai’s location adjustment by inviting Mr Lai to take the unit rental of T1 and T3 as they were and work backwards from his other adjustments, assuming T1 is the reference unit. Mr Lai worked out the adjustments as follows:

Unit Rental of T1/T3 Adjustments
Time Location Quantum* Frontage Head-room Total by addition Total by multiplication
1.36865 7.5% ? -8.29% 21.64% 5.24% 26.09% + ? 1.2621% x (1 + ?)
* Mr Lai suggests that rents are more sensitive to size differences relative to price and therefore applies an adjustment of 1% per 1 m instead of 1% per 2 m difference though we find no evidence to support such a distinction.

Thus, the implied adjustment for location ? = 10.81% or 8.44%

98. Likewise, similar exercise is invited by Ms Ngai as regards T3 and T9, taking this time T9 as the reference unit. Mr Lai worked out the adjustments as follows:

Unit Rental of T9/T3 Adjustments
Time Location Quantum* Frontage Head-room Total by addition Total by multiplication
1.05556 8.9% ? -12.4% 1.52% 5.24% 3.26% + ? 1.0192% x (1 + ?)
* Mr Lai suggests that rents are more sensitive to size differences relative to price and therefore applies an adjustment of 1% per 1 m instead of 1% per 2 m difference.

Thus, the implied adjustment for location ? = 2.3% or 3.57%

99. By this backward induction, Ms Ngai demonstrates Mr Lai’s suggested location adjustment around 25% between T3 and T1 or between T3 and T9 has been exaggerated. We agree.

100. In the analysis at §98 above, Mr Lai suggests that the commencement date for T9 at 19 September 2011 should be adopted despite the offer for acceptance was made on 13 July 2011. As such, Mr Ismail had challenged Mr Chan’s adoption of the date of offer for T9 as the relevant date of the deal. We note the offer was made with a cheque for $290,000 (which is equivalent to 1 month’s rent) as deposit payable to the landlord. We believe, in all probabilities, the acceptance was envisaged within a very short period if not on the same day. However, we agree with Mr Lai that landlord or tenant would speculate, on 13 July 2011, upon the increase in rental that would occur in September 2011; nevertheless, the two dates were so close that the difference should not be significant[8].

101. Notwithstanding the above, Mr Ismail also took issue that the letting for T1 or T9 took place after the relevant date of 18 May 2011, citing the common lawPointe Gourdeprinciple that any increase or decrease in value wholly due to the resumption should be disregarded.[9] However, when applying this principle, it must always be borne in mind that, as Lord Denning MR observed in Wilson v. Liverpool City Council [1971] 1 WLR 302 at 309:

"A scheme is a progressive thing. It starts vague and known to few. It becomes more precise and better known as time goes on. Eventually it becomes precise and known to all."

102. As stated in §6 above, URA’s intention to implement the Project was announced to the public in December 2007. We are advised by Mr Ismail at trial that by the time resumption took place in May 2011, only 3 outstanding cases on retail shops were still outstanding requiring the appointment of Mr Lai. That is, if removal was considered, most had already taken place before the relevant date and this is further evidenced by the photographs taken by the respondent on the date of resumption[10] which shown the adjoining units had fallen vacant and had been taken over by URA. The effect of the resumption should not have increased the value of T9.

103. In the present case, even Mr Lai for the respondent is content to adopt comparable RC1 that occurred in October 2011, ie some 5 months after the relevant date. We are of the opinion that the resumption would not affect T9’s probative value as indication of market rent as at the relevant date.

104. Mr Lai also suggests that the transaction price of AC2 was unreasonably high, particularly when compared with a comparable at Nathan Road (which has been however abandoned by Mr Chan). Here Ms Ngai draws to our attention that the transaction was indeed subject to a tenancy for a term of 3 years from 28 December 2009 at $140,000 per month. Even allowing for time movement for rental from December 2009 to March 2011 (ie the date of sale of this comparable), there would be about 10% increase by reference to the Private Retail Rental Index of RVD. Then the initial yield of this transaction was only 2.58% which does not fall out of the range to which we shall revert later.

105. In the above regard, we consider a -23.5% location adjustment would be reasonable for this comparable and it falls somewhere in the middle between the original adjustment of -35% and the -15% as revised by Mr Chan.

AC4/RC4

106. Mr Chan has not revised his location adjustment which has remained at +25% ever since his Valuation Report dated 30 January 2015.

107. Mr Lai’s proposed adjustment is +5% and stated at §6.15 of his Valuation Report of 21 November 2014 that this comparable “was situated slightly away from the commercial hub where the Property was situated”. Having carried out the joint site inspection, however, we opine that the difference in pedestrian flow would not have been “slightly” as at the date of resumption. We agree with the +25% adjustment as proposed by Mr Chan when we are persuaded that the Property was situated at the hub of the Sneakers Street.

RC1

108. RC1 is situated at Sincere Plaza which is well known for selling mobile phones and their accessories. The location also differs in character from the Sneakers Street.

109. Mr Chan considers the location of RC1 is inferior to the Property because the latter enjoyed the synergy effect of the Sneakers Street and the Mong Kok Pedestrian Precinct; however, Mr Chan has not proposed any upward adjustment percentage.

110. Mr Lai, on the other hand, considers this comparable is in a better location relative to the Property: he proposes a minor downward adjustment (as opposed to the upward adjustment).

111. Having regarded to the proximity of this location to another popular MTR exit, the presence of many mini-bus terminal nearby and the various bus stops in front of it, we agree with Mr Lai at -5%.

The Valuation on Direct Comparison Method

112. Thus we have altogether four comparables as follows:

Ref No Unit Price (/sq m) Adjustments Adjusted Unit Price (/sq m)
Time Location Quantum Layout/ Return Frontage Frontage Head-room Total*
AC1/RC2 $2,173,532 3.4% +20% -8.9% 0% 3.1% 6.9% 24.6% $2,708,221
AC2 $5,451,784 3.4% -23.5% -8% 0% 1.2% 8% -20.5% $4,334,168
AC4/RC4 $2,168,879 19.9% +25% 3.1% -20% -2.8% 2.2% 22.8% $2,663,383
RC1 $1,899,780 -5.7% -5% -5.5% 0% 1.7% 1.9% -12.3% $1,666,107

Average: $2,842,970
* By multiplication

113. By reference to the land registration record for AC1/RC2, however, we have pointed out at trial that there appears to be another sale of AC1/RC2 at a much higher value of $35,800,000 on 20 March 2012 when the existing tenancy was due to expire on 13 June 2012 (according to supplemental joint statement dated 31 March 2016). Applying the RVD index as agreed by the two experts, the unit price adjusted for time is $2,703,213/sq m which is substantially higher than $2,173,532/sq m which is unreasonable within such a short period (of one year). On balance of probabilities, it is likely that the sale in March 2011 was underpriced. If this be the case, with other adjustments remaining the same, the adjusted unit price for AC1/RC2 should be $3,368,203/sq m instead of $2,708,221/sq m and the average of the four comparables would become $3,007,965.

114. Then market value of the Property assessed by Direct Comparison Method is assessed as follows:

29.16 sq m x $3,007,965/sq m = $87,712,259
Say $87,712,000

Cross Checking by Income Capitalization Method

115. Although Mr Chan has put forward a total of 6 rental comparables as shown in §59 above for the purpose of cross checking the valuation by the Income Capitalization Method, it is obvious from B/84(d) or his Exhibit A3 that he has not relied on comparable T2, T5 or T6. We consider this reasonable as T2, T5 or T6 all lie far away on Sai Yeung Choi Street where the location adjustment would be subjective, arbitrary and subject to dispute.

116. We have at §95 above found that the average rental for T1, T3 and T9 which lie closest to the Property is $8,407/sq m.

Ref No Date of Transaction Consideration Monthly Rent Provided in Lease Lease Commencement Date Agreed Analyzed Yield
AC1/RC2 24 Mar 11 $24,800,000 $52,500 14 June 10 2.54%
AC2 1 Mar 11 $71,800,000 $140,000 28 Dec 09 2.34%
AC4/RC4 30 Sep 10 $76,800,000 $128,000 20 Sep 10 2.00%
RC1 14 Oct11 $34,500,000 $80,000 6 May 11 2.78%
RC3 8 Mar 11 $35,400,000 $80,000 1 Feb 11 2.71%

117. We also note from the supplemental joint statement dated 31 March 2016 that the two experts have agreed the yields resulted from the 5 direct comparison comparables range from 2.0% to 2.78% as follows:

118. Firstly we find the sale of AC1/RC2 and AC2 took place more than 6 months after the rent commencement date and the analyzed yields therefore do not represent the market yield as at the date of the transaction. At §104 above, we have found that after adjustment for time, the yield for AC2 would be about 2.58%.

119. Secondly, we find the yields for RC1 and RC3 are very consistent and it is obvious that the transaction prices of these two comparables were highly influenced by the yield obtained rather than their respective location. In other words, if the rent of these comparables at $80,000 was for any reason below market rent, the resultant price paid would be heavily depreciated. We are prepared to adopt 2.75% as the market yield.

120. Thus, by the Income Capitalization Method, we arrive at the following:

$8,407/sq m x 29.16 sq m x 12 ÷ 2.75% = $106,973,725
Say $107,000,000

121. This value derived from the Income Capitalization Method for cross-checking need not be identical to that produced by the Direct Comparison Method at $87,712,000 but the result derived by this cross-checking at $107,000,000 is higher by some 22% which lies beyond the usual reasonable range of valuation of 10% to 15%.

Reconciliation

122. There was no dispute that the Direct Comparison Method is the primary method of valuation in usual circumstances. In principle, it is not required to have more than one method for the valuation of a property when there is a high degree of confidence in the accuracy and reliability of a single method. However, more than one valuation approach or method may be used to arrive at an indication of value, particularly when there are insufficient factual or observable inputs for a single method to produce a reliable conclusion.

123. As we stated at §50 above, a difference in indication of values of about 22% arrived by two valuation methods for cross-checking or otherwise should be a matter of concern for the valuer and such a difference must be reconciled.

124. This Tribunal has on many occasions indicated that the Direct Comparison Method of valuation based on market evidence should be preferred but this is the case so long as suitable comparables are available and reliable. In the present case, substantial number of adjustments required under the Direct Comparison Method reduced the quality of the valuations.

125. We have in §§112-114 above found the result of Direct Comparison Method based on wide discrepancy in values, for instance, with RC1 at $1,666,107/sq m and AC2 at $4,334,168/sq m. The other two comparables also suffer to a great extent from a subjective adjustment on location and difference in layout or configuration.

126. In this regard, we consider the adoption of an alternative valuation method, in this case the Income Capitalization Method, is highly appropriate. We also consider T1 and T9 which are situated so close to the Property provide reliable information on the market rent of the Property because much of the subjective adjustment on location can be reduced.

127. Also, we are of the opinion that the yield of 2.75% derived falls within a close range and is reliable as a unit of comparison used to value property investment. In comparison, this is much better than the yield of 3% tended to be adopted by Mr Lai based on RVD’s information. Of the greatest problems of the latter is that it is not location specific.

128. This Income Capitalization Method is particularly appropriate when the income-producing ability of the Property is the critical element affecting value, bearing in mind for instance the applicant’s major business is property investments and holdings[11].

129. In view of the above and since this Tribunal is entitled to award damages based on its own valuation method from the evidence adduced (§44 above), we are prepared to attach equal weight to the two valuation methods in the present case and adopt the average arrived by the Direct Comparison Method and the Income Capitalization Method as the market value of the Property, ie:

130. Standing back, we find this ultimate value conclusion of $97,356,000 is just 11% higher than that of $87,712,000 derived by the Direct Comparison Method. We are satisfied that this ultimate value conclusion of $97,356,000 is reasonable and acceptable.

Conclusion

131. We have determined the value of the Property, for the purpose of section 10(2)(a) of the LRO, in the sum of $97,356,000.

Orders

132. Accordingly, I order that the respondent do pay the applicant compensation for the Property in the sum of $97,356,000. The matters of professional fees, interest and costs shall be adjourned to a date to be fixed, with liberty to apply for any other ancillary and consequential matters.

Deputy Judge KOT Mr Lawrence PANG
Presiding Officer Member
Lands Tribunal Lands Tribunal

Ms Nancy Ngai, instructed by Messrs Deacons, for the applicant
Mr Anthony Ismail, instructed by the Department of Justice, for the respondent

Appendix I

[1] See Exhibit A1.

[2] We agree with Ms Ngai that Mr Lee is one of the shareholders of the owner and landlord of T1 is neither here or there so long as prima facie the tenant is not related and the parties are at arm’s length. By reference to the company search produced as Exhibit A10, Mr Lee owns just 600,000 out of the total of 5,820,000 issued shares (approximately 10%).

[3] This section of Nelson Street ie between Sai Yeung Choi Street South and Fa Yuen Street had been made a permanent pedestrian street since December 2000.

[4] By having a return frontage to Nelson Street, T1 enjoys “at least 5% difference” as suggested by Mr Lai.

[5] (1-10%) x (1-15%) = (1-23.5%)

[6] If T9/Property = 1/(1-25%) and T3/Property = 1/(1-50%), then T3/T9 = (1-50%)/(1-25%) = 1-33.3%.

[7] The monthly rent of $5,316/sq m ($155,000) is not excessive or unreasonable when that for the Property as at 13 March 2007 (ie prior to the announcement of the Project by URA in 21 December 2007) was $140,000.

[8] By reference to the RVD’s index, the indices for the two months were 135.0 and 138.3 respectively, showing an increase about 2.4%.

[9] This principle obtains its nomenclature from the Privy Council decision in Pointe Gourde Quarrying and Transport Company Limtied v Sub-Intendent of Crown Lands [1947] AC565.

[10] See Bundle B/105.

[11] See Bundle A/97.

SNOWLAND LTD v. DIRECTOR OF LANDS

Related cases with same parties

Files (2)

Saleable Area	:	29.16 sq m
Full Frontage	:	3.30 m
Floor to Floor Headroom	:	5.00 m
Clear Frontage	:	2.49 m
Clear Headroom	:	4.90 m

Ref No	Address	Date of Transaction	Consideration	Saleable Area (sq m)	Full Frontage (m)	Clear Headroom (m)
AC1/RC2	Unit 6, G/F, Hung Tat Building, 55 Dundas Street	24 Mar 11	$24,800,000	9.44 + Cockloft: 7.89	1.80	5.22 From G/F to ceiling Cockloft
AC1/RC2	Unit 6, G/F, Hung Tat Building, 55 Dundas Street	24 Mar 11	$24,800,000	9.44 + Cockloft: 7.89	Return Frontage 5.3m to a service lane	5.22 From G/F to ceiling Cockloft
AC2	Shop 5, G/F, 60 Sai Yeung Choi Street South	1 Mar 11	$71,800,000	13.17	2.70	2.52
AC4/RC4	Unit 72, G/F, Hong Lok Mansion, 90-92 Sai Yee Street/ 72-78 Argyle Street	30 Sep 10	$76,800,000	35.41	7.7 to Sai Yee Street	3.82
AC4/RC4		30 Sep 10	$76,800,000	35.41	Return Frontage 4.7m to Argyle Street	3.82
RC1	Shop G7, G/F, Sincere House, 83 Argyle Street	14 Oct11	$34,500,000	18.16	2.46	3.96
RC3	Shop 6, G/F, Golden Hill Commercial Building, 39-41 Argyle Street	8 Mar 11	$35,400,000	17.64	4.04	5.36

Adjustment Factors	Mr Chan	Mr Lai
Time	Private Retail Price Index of Rating and Valuation Department (“RVD”)	Private Retail Price Index of RVD
Location	-35% to 25%	-5% to 5%
Age	0%	Not Applicable
Quantum/Size	2% for every 5 sq m for the first 50 sq m then 1% for 10 sq m after the first 50 sq m	1% for every 2 sq m difference
Layout	0% to 10%	Not Applicable
Return Frontage	-20% to 0%	Not Applicable
Frontage	Not Applicable	4% for every 1 m difference in clear frontage
Headroom	1% for every 0.3m difference in clear headroom	2% for every 1 m difference in clear headroom
Total Adjustments	The total adjustments are multiple of the adjustments for each of the factors	The total adjustments are sum of the adjustments for each of the factors

Ref No	Unit Price (/sq m)	Adjustments								Adjusted Unit Price (/sq m)
Ref No	Unit Price (/sq m)	Time	Location	Quantum	Layout/ Return Frontage	Frontage	Head-room	Cock-loft	Total	Adjusted Unit Price (/sq m)
AC1/RC2	$2,627,119* ($2,173,532)	3.4% (3.4%)	10% (0%)	-8% (-8.9%)	10% (0%)	0% (3.1%)	-1% (1.4%)	-3% (0%)	10.5% (-1.0%)	$2,902,966 ($2,151,797)
AC2	$5,451,784	3.4%	-35%	-6%	0%	0%	8%	0%	-31.8%	$3,718,117
AC4/RC4	$2,168,879	19.9% (19.9%)	25% (5.0%)	3% (3.1%)	-20% (0%)	0% (-28.8%)	4% (2.2%)	0% (0%)	28.4% (1.4%)	$2,784,841 ($2,199,243)
RC1	($1,899,780)	(-5.7%)	(-5%)	(-5.5%)	(0%)	(1.9%)	(1.9%)	(0%)	(-12.4%)	($1,664,207)
RC3	($2,006,803)	(3.4%)	(5%)	(-5.8%)	(0%)	(-6%)	-0.9%	(0%)	(-4.3%)	($1,920,510)

Ref No	Address	Instrument Date (Tenancy Commencement Date)	Monthly Rent (effective)	Saleable Area (sq m)	Full Frontage (m)	Unit Effective Rent (/sq m)
T1	Shop 3, G/F, Grandview Building, 49-69 Fa Yuen Street/ 8-8A Nelson Street	13 Jul 11 (20 Aug 11)	$310,000	22.92	6.22 to Fa Yuen Street	$13,525
T1		13 Jul 11 (20 Aug 11)	$310,000	22.92	Return Frontage 3.74 to Nelson Street	$13,525
T2	Unit 6, G/F, 43 Dundas Street	8 Feb 11 (1 Dec 10)	$300,000	46.45	3.81	$6,459
T3	Shop 2, G/F, 60 Sai Yeung Choi Street South	31 Dec 10 (8 Jan 11)	$144,574	14.63	3.05	$9,882
T4	Shop 1, G/F, Tat Lee Commercial Building, 43A-G Dundas Street/ 2Y Sai Yeung Choi Street South	25 Oct 10 (25 Sep 10)	$128,194	10.31	2.74	$12,434
T5	Shop 2, G/F, Pakpolee Commercial Centre, 1A Sai Yeung Choi Street South	11 Oct 10 (1 May 11)	$215,000	37.04	3.04	$5,805
T9	Shop 4, G/F, Grandview Building, 49-69 Fa Yuen Street/ 8-8A Nelson Street	13 Jul 11* (19 Sep 11)	$281,944	27.03	3.40	$10,431

Comparable Reference No	Adjustment for Location
Comparable Reference No	By Mr Chan		By Mr Lai
	as at 7 April 16	as at 14 April 16	By Mr Lai
AC1/RC2	+10%	+20%	0%
AC2	-35%	-15%	-50%*
AC4/RC4	+25%	+25%	5%
RC1	+ (unspecified)	+ (unspecified)	-5%

Ref No	Rateable Value	Saleable Area (sq m)	Rateable Value/sq m per month
T9	$3,780,000	27.03	$11,654
T1	$5,100,000	22.92	$18,543
AC2	$1,632,000	13.17	$10,326

Ref No	Unit Rental (/sq m)	Adjustments							Adjusted Unit Rental (/sq m)
Ref No	Unit Rental (/sq m)	Time	Location	Quantum	Layout/ Return Frontage	Frontage	Head-room	Total*	Adjusted Unit Rental (/sq m)
T1	$13,525	-1.0%	-10.0%	-3.1%	-25.0%	-5.8%	-0.5%	-39.3%	$8,210
T3	$9,882	4.0%	-23.5%	-7.3%	0%	0.5%	7.9%	-20.0%	$7,906
T9	$10,431	-1.0%	-10.0%	-1.1%	0%	-0.4%	-0.5%	-12.7%	$9,106
Average:									$8,407
Sample Standard Deviation:									623.86**

Ref No	Unit Rental (/sq m)	Adjustments							Adjusted Unit Rental (/sq m)
Ref No	Unit Rental (/sq m)	Time	Location	Quantum	Layout/ Return Frontage	Frontage	Head-room	Total*	Adjusted Unit Rental (/sq m)
T1	$13,525	-1.0%	-25.0%	-3.1%	-25.0%	-5.8%	-0.5%	-49.4%	$6,844
T3	$9,882	4.0%	-50.0%	-7.3%	0%	0.5%	7.9%	-47.7%	$5,168
T9	$10,431	-1.0%	-25.0%	-1.1%	0%	-0.4%	-0.5%	-27.2%	$7,594
Average:									$6,535
Sample Standard Deviation:									1,242.11

Unit Rental of T1/T3	Adjustments
Unit Rental of T1/T3	Time	Location	Quantum*	Frontage	Head-room	Total by addition	Total by multiplication
1.36865	7.5%	?	-8.29%	21.64%	5.24%	26.09% + ?	1.2621% x (1 + ?)

Unit Rental of T9/T3	Adjustments
Unit Rental of T9/T3	Time	Location	Quantum*	Frontage	Head-room	Total by addition	Total by multiplication
1.05556	8.9%	?	-12.4%	1.52%	5.24%	3.26% + ?	1.0192% x (1 + ?)

Ref No	Unit Price (/sq m)	Adjustments							Adjusted Unit Price (/sq m)
Ref No	Unit Price (/sq m)	Time	Location	Quantum	Layout/ Return Frontage	Frontage	Head-room	Total*	Adjusted Unit Price (/sq m)
AC1/RC2	$2,173,532	3.4%	+20%	-8.9%	0%	3.1%	6.9%	24.6%	$2,708,221
AC2	$5,451,784	3.4%	-23.5%	-8%	0%	1.2%	8%	-20.5%	$4,334,168
AC4/RC4	$2,168,879	19.9%	+25%	3.1%	-20%	-2.8%	2.2%	22.8%	$2,663,383
RC1	$1,899,780	-5.7%	-5%	-5.5%	0%	1.7%	1.9%	-12.3%	$1,666,107

Average:									$2,842,970

$8,407/sq m x 29.16 sq m x 12 ÷ 2.75%	=	$106,973,725
Say		$107,000,000

Deputy Judge KOT	Mr Lawrence PANG
Presiding Officer	Member
Lands Tribunal	Lands Tribunal