BILLION GLORY PROPERTIES LTD AND OTHERS v. LI BAOZHU AND OTHERS

LDCS 23000/2019

[2024] HKLdT 68

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 23000 OF 2019

__________________________

_________________

D E C I S I O N

_________________

1.  This relates to an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) to sell all the undivided shares of Section C of Inland Lot No 2147 (“the Lot”) on which building known as the Haven Court stands with the address of Nos 2-30 Haven Street & Nos 128-138 Leighton Road, Hong Kong.

2.  After a trial of 7 days in September last year, judgment was handed down on 29 February 2024 (“the Judgment”) which, inter alia, granted an order for sale of the Lot by way of a public auction (“the Order for Sale”) subject to a reserve price of $2,425,000,000 (“the Reserve Price”). Also by the Order for Sale, Mr Anthony Chow and Ms Anna Chow of Messrs Guantao & Chow, Solicitors & Notaries, nominated by the Applicants, were appointed trustees (“the Trustees”) to discharge the duties imposed on trustees under the Ordinance in relation to sale of the Lot.

3.  Pursuant to the Order for Sale, the Trustees held an auction on 17 April 2024 but no bid was received in the auction. That is, the auction became abortive or failed.

4.  By Summons filed by the Applicants on 29 April 2024, the Applicants applied to extend the effect of the Order for Sale for 3 months from 29 May 2024 to 29 August 2024 and for leave to re-fix the Reserve Price. Then by order made on 31 May 2024 by the Tribunal, the Order for Sale was extended for 3 months to 29 August 2024 but leave to re-fix the Reserve Price was refused.

5.  In the meantime, the Applicants applied for leave to appeal to the Court of Appeal against the Tribunal’s refusal to grant leave for the application to re-fix the Reserve Price. Whereas the Tribunal considered this involving the interpretation of the Ordinance which is a question of great general importance or in the interests of justice, such leave was granted to appeal to the Court of Appeal against the Tribunal’s refusal to grant leave for the application to re-fix the Reserve Price.

6.  Perhaps owing to the above, the Applicants informed the Trustees that they are of the view that the Trustees are not under any obligation to arrange for another auction to sell the Lot after the failed auction. Further, the Trustees were informed that they are not going to bid at the auction pursuant to the Order for Sale as extended notwithstanding the effect of the Order for Sale has been extended. The Applicants themselves have no intention to arrange for another auction at the Reserve Price.

7.  As a result, on 15 July 2024, the Trustees applied to the Tribunal in reliance on section 4(9) of the Ordinance to seek direction as to:

(1)  whether the Trustees should proceed to arrange a 2^nd Auction as the Order for Sale has been duly extended to 29 August 2024;

(2)  whether the Tribunal will consider ordering a stay of the Order for Sale as extended, pending determination of the intended appeal by the Applicants and/or further order of the Tribunal.

8.  The Trustees informed the Tribunal that they encountered difficulties in determining whether under the Order for Sale as extended, the Trustees are bound to arrange for a new auction bearing in mind that no bid was attracted at the last auction, the Order for Sale has not been stayed though the Applicants have expressed their position of no intention to arrange for another auction at the Reserve Price. More importantly, if a new auction is arranged and it ends up as a failure again, the costs and auction expenses incurred would be wasted.

9.  On 19 July 2024, the Tribunal directed that “the Trustees should proceed to arrange a 2^nd Auction of (the Lot) at the reserve price” (“the Direction”). The Applicants then on 2 August 2024 sought to set aside the Direction by applying for a review pursuant to section 11A of the Ordinance.

Review Procedure

10.  The Tribunal has the power to review its decision pursuant to section 11A of the Lands Tribunal Ordinance, Cap. 17 (“the LTO”). Section 11A(1) to (4) of the LTO stipulates that: -

“(1) The Tribunal may, within 1 month from the date of any decision by it, decide to review that decision and, on such grounds as it may think sufficient, may set aside, reverse, vary or confirm it.

(2) The Tribunal may act under subsection (1)-

(a) on the application of any party; or

(b) on its own motion,

and on notice to all other parties to the proceedings.

(3) If the Tribunal shall have decided, within 1 month from the date of any decision, to exercise its power of review in respect thereof, such power may be exercised at any time thereafter whether within such period of 1 month or otherwise.

(4) The Tribunal may, in any review, hear and receive any evidence it thinks fit for the purpose of determining the issue between the parties.”

11.  As decided by Lam J in CLP Power Hong Kong Limited v. Commissioner of Rating and Valuation, LDRA 536/1999 & 48 others (unreported), the review process under section 11A of the LTO is a two-stage process. First, the Tribunal has to consider whether an application for review should be entertained. If the Tribunal decided that there should be a review, then the review will proceed. That will be the second stage. At the second stage, as provided under section 11A(4), the Tribunal may hear and receive evidence it thinks fit for the purpose of determining the issues between the parties.

Grounds for Review

12.  By the Affirmation of Tse Wai Hang dated 1 August 2024, the Applicants submitted that the Ordinance does not impose on the Trustees any duty to organize a 2^nd auction. The Applicants referred to section 5(1) of the Ordinance which requires the Trustees to organize a public auction sale (or another permitted method of sale) “where an order for sale is granted”. After the grant of the Order for Sale on 29 February 2024, the Trustees had already held the auction which failed. According to the Applicants, the Trustees had fulfilled their obligation under section 5(1). Further, according to the Applicants, the order to extend the effect of the Order for Sale under section 5(4) is not a grant of a sale order and does not trigger off the operation of section 5(1) for a second time.

13.  The Applicants also complained that the Trustees should not have initiated or taken any step to organize a 2^nd auction upon the grant of the order of the Tribunal on 31 May 2024 to extend the effectiveness of the Order for Sale to 29 August 2024, including asking for a direction from the Tribunal, without having first securing the consent of all the unit owners and/or that of the Applicants. Insofar, the Trustees only obtained the consent of the 26^th respondent to organize a 2^nd auction; the 10^th respondent does not oppose the application for review while the other respondents have been non- responsive.

14.  The Applicants particularly referred to section 10(1)(a) of the Ordinance whereby in the event of no purchaser of the lot in any auction, the cost of the auction is to be borne solely by the Applicants. Thus, the Applicants argued it is important for the Trustees to obtain the consent of the Applicants to organize a 2^nd auction.

15.  Further and/ or alternatively, the Applicants submitted that the Tribunal in the circumstances should not have given the Direction and/or should not have given the Direction without first hearing from the Applicants and the remaining respondents on (1) whether the Trustees are under any obligation to organize a 2^nd auction upon the granting of the order on 31 May 2024 to extend the effectiveness of the Order for Sale to 29 August 2024 and/or (2) whether each of the Applicants and the remaining respondents is consenting to the Trustees’ suggestion of holding a 2^nd auction.

Reasons for Decision

16.  As rightly pointed out by the Trustees in their letter to the Tribunal on 15 July 2024, their duties as trustees have not been released from the Order for Sale as extended. The Trustees have been appointed by the Tribunal (instead of by the Applicants) under section 4(1)(c) of the Ordinance “to discharge the duties imposed on trustees under this Ordinance in relation to the lot”.

17.  Section 5(1) of the Ordinance provides as follows:

“(1) Where an order for sale is granted and the trustees under the order have complied with section 7(1) in respect of the lot the subject of the order—

(a) subject to paragraph (b), the lot shall be sold by public auction in accordance with the conditions specified in Schedule 2; or

(b) if the whereabouts of each minority owner of the lot is known, the lot may be sold by any other means—

(i) agreed in writing by each minority owner and majority owner of the lot;

(ii) approved by the Tribunal in its absolute discretion; and

(iii) in accordance with such conditions, if any, as the Tribunal specifies in directions.”

18.  Thus, by the order made on 31 May 2024 by the Tribunal, the Order for Sale is extant. Apart from where the lot is to be sold by any other means other than auction, agreement in writing by each minority owner and majority owner of the lot is not required. The Trustees retain their fiduciary position as trustees under the Ordinance[1].

19.  In their letter dated 8 August 2024, while the Trustees stated that they are assuming a neutral stance to the Applicants’ application for review, they submitted and I agree that, the Ordinance does not differentiate an order for sale initially granted from an order for sale pursuant to which an auction had been held but found no purchaser and an order for sale that continues to be effective upon being extended by the Tribunal.

20.  The Trustees further submitted, and I agree, that they, being appointed by the Tribunal under the Order for Sale, do not need the consent of all the owners to sell by public auction as provided in the Ordinance.

21.  Order 15 Rule 14(1) of the Rules of High Court (which is applicable in the Lands Tribunal) read as follows:

“Any proceedings, including proceedings to enforce a security by foreclosure or otherwise, may be brought by or against trustees, executors or administrators in their capacity as such without joining any of the persons having a beneficial interest in the trust or estate, as the case may be; and any judgment or order given or made in those proceedings shall be binding on those persons unless the Court in the same or other proceedings otherwise orders on the ground that the trustees, executors or administrators, as the case may be, could not or did not in fact represent the interests of those persons in the first-mentioned proceedings.” (underline added)

22.  Similarly, in Man Mi Sang & Another v Man Shek Tong & Others, HCA 881/2012 (unreported, dated 28 December 2018), the 1^st and 2^nd Defendants as managers of a Tso had great difficulties in looking for potential tenants for the land owned by the Tso. It was particularly difficult to find outsiders who had no connection with the Tso to lease the land. The Court of First Instance found at §105 that there was no custom that required the managers of the Tso to obtain the consent of the members before leasing out any piece of Tso’s lands.

23.  More importantly, the Trustees relied on section 4(9) of the Ordinance to apply to the Tribunal in any case of doubt or difficulty or in any matter not provided for under this Ordinance. The section does not require the consent of all the owners or the Applicants specifically.

24.  The above should readily rebut the complaint by the Applicants against the Trustees in seeking the direction of the Tribunal on 15 July 2024.

25.  As regard to the Applicants’ concern that the Applicants would have to bear the costs of the 2^nd auction, it is provided in the Ordinance that the costs and expense of and incidental to the 2^nd auction will be borne by the successful bidder and all the owners if there be a successful bidder in the 2^nd auction. The Trustees should not assume that there is no bidder other than the Applicants in the 2^nd auction as the 2^nd auction is and remains a public auction open to all potential bidders.

26.  On the other hand, on a purposive approach to interpret Section 5(1) of the Ordinance, the Trustees have a fiduciary duty to see that the Lot is sold by public auction.

27.  As observed by Lam J, as he then was, in the first instance judgment in Man Fong Hang v Man Ping Nam, HCA 7935/1998, (unreported, 11 December 2003) at §167:

“ … It is common ground that the Defendants were under a duty to get a proper price for the sale of the land. It may be more precise to say that the proper price should represent the true market value of the land (see Cuckmere Brick v Mutual Finance [1971] 1 Ch 949 at p. 966F). The duty is not an absolute one. It is a duty to use due diligence and reasonable care in the management of the trust property which an ordinary prudent man of business would exercise. Hence, if the sale were eventually found to be at undervalue despite due diligence and reasonable case, the trustee would not be liable. That is an objective standard. The court would test the conducts of the trustee against that of an ordinary prudent man of business instead of the standard actually adopted by the trustee in the conduct of his affairs. However, the court would apply that test against the facts and circumstances at the time when the trustee had to act and with reference to matters known or ought to have been known to the trustee at that time. Hence, the duty is not discharged merely by showing that the trustee acted in good faith and with sincerity (see Medforth v Blake [2000] Ch 86). The duty is a duty in equity rather than a common law duty (see Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349).” (underline added)

28.  In the present case, the Applicants relied heavily on the fact that the auction on 17 April 2024 failed to attract any bids. However, unlike a normal public auction, it is a common phenomenon that the majority owner(s) is/are the only bidder in an auction resulted from a compulsory sale under the Ordinance when other potential bidders consider not worth the trouble to compete. But this does not distract from the purpose of the Ordinance to attract bids from genuine developers who are not necessarily connected with the Applicants. The purpose of fixing a reserve price based on the redevelopment value before any auction is held is just to safeguard against abuse by an applicant. On the other hand, whether the Applicants would be going to bid at the auction pursuant to the Order for Sale as extended is neither here nor there.

29.  By Tse Kwong Lam v. Wong Chit Sen [1983] 1 WLR 1349 at 1355G, even when a property was sold at auction, it does not of itself render the sale proper. It is thus utmost to see how the Trustees proceed with arranging the auction so as to take reasonable care to secure the 2^nd auction. The Trustees have the burden of proving that they had used their best endeavours to secure the 2^nd auction in due course.

Conclusion

30.  Having stated the above, I consider no ground to review the Direction.

Costs

31.  As this decision is made on papers without a hearing pursuant to the Practice Directions issued by the President of the Tribunal: Review No 1/2009, I shall make no order as to the costs.

LDCS 23000/2019

[2024] HKLdT 50

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 23000 OF 2019

__________________________

BETWEEN

__________________________

_________________

D E C I S I O N

_________________

1.  This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of Section C of Inland Lot No 2147 (“the Lot”) on which building known as the Haven Court (“the Building”) stands with the address of Nos 2-30 Haven Street & Nos 128-138 Leighton Road, Hong Kong.

2.  After a trial of 7 days in September last year (“the Trial”), judgment was handed on 29 February 2024 (“the Judgment”) which, inter alia, granted an order for sale of the Lot by way of a public auction (“the Order for Sale”) subject to a reserve price of $2,425,000,000.

3.  It is undisputed that the applicants had arranged a public auction on 17 April 2024 but no bid was received either from the applicants or from somebody else; that is, the auction became abortive.

4.  By reference to section 5(4) of the Ordinance, if the Lot is not sold with the 3 months immediately following the date on which the Order for Sale is made, ie 29 May 2024, or within such further period of 3 months as the Tribunal may specify in directions given on application made to it by the trustees under the order or the majority owner or any minority owner of the lot, the Order for Sale shall immediately be deemed to be of no effect as if it had been cancelled by the Tribunal.

5.  On 29 April 2024, the applicants filed a Summons, applying the period for sale be extended therefore for another 3 months, ie until 29 August 2024 and a leave be granted to re-fix the reserve price. According to an affirmation filed by the applicants on the same date (“the Affirmation”), Soundwill Holdings Limited (“Soundwill”), a listed company on the Stock Exchanged of Hong Kong and being the parent company of the applicants, had engaged Vigers Appraisal and Consulting Limited (“Vigers”) to make an independent assessment on the value of the properties related, which was required under the listing rules. The public announcement by Soundwill dated 2 April 2024[1] referred on its page 5 to Vigers’ assessment of the market value of the Lot on the basis of its redevelopment potential, as at 29 February 2024, at approximately $2.1 billion[2]. The latter was submitted to be noticeably lower than the reserved price fixed by the Tribunal at $2,425,000,000.

6.  The Affirmation above also intimated that the applicants had obtained the opinion of Mr Charles Chan (“Mr Chan”), the valuation expert acting on behalf of the applicants in the Trial, dated 25 April 2024 which is summarized as follows:

(a) The commercial property market had deteriorated significantly since August 2023, ie the period when Mr Chan had given his opinion on the redevelopment value (“RDV”) of the Lot for the purpose of the Trial:

	Retail Price (psm) (Hong Kong Island)	Retail Price Index (Territory-wide)
August 2023	($420,686)	495.5
February 2024	($197,145)[3]	451.7*[4]
Drop	-53%	-9%

* denotes provisional figures

(    ) indicates fewer than 20 transactions;

(b) As regards the office market, no transaction of Grade A office in Wanchai / Causeway Bay for a consecutive six months from August 2023 to January 2024 while four out of seven months during the period recorded no transaction of Grade B office in Wanchai / Causeway. On the other hand, the price indices for private offices (all districts) as published by RVD show the following:

	Grade A	Grade B	Overall
August 2023	^	476.3	^
September 2023	^	(463.8)	^
October 2023	^	(458.0)	^
November 2023	(426.1)	(456.0)	441.8
December 2023	^	(446.8)	^
January 2024	(409.9)	(439.8)	428.7
February 2024	(401.2)[5]	^	^
Drop	-6% (from 11/2023)	-5% (from 9/2023)	-3% (from 11/2023)

(c) There happened to be three transactions of whole block commercial buildings which turned out to be substantially lower than the reserve price fixed at $2.425 billion in terms of the unit rates:

Property	Subject	88WL 88 Wing Lok Street, Sheung Wan	Harbour East 210 Electric Road, North Point	Golden Wheel Plaza, 68-70 Electric Road, Tin Hau
Date of Transaction	15 August 2023 (Date of Valuation)	2 April 2024	10 Dec 2023	13 Nov 2023
Consideration	$2,425,000 (RDV) $5,007,565,000 (GDV)	$750,000,000	$2,208,000,000	$511,000,000
Site Area	1,221.66 sq m	419.70 sq m	891.87 sq m	321.90 sq m
Class of Site	B	B	C	B
Existing Building	25-storey commercial building (proposed)	25-storey commercial building	25-storey commercial building with 2 basement carparking levels	25-storey Ginza style building
GFA	18,324.88 sq m (proposed)	6,295.50 sq m	13,377.99 sq m	4,828.17 sq m
Date of Completion		2022	2019	2020
Unit Rate (per sq m)	$273,266 (GDV) $132,334 (RDV)	$119,133	$165,047	$105,837

Mr Chan commented that: “Based on the achieved unit rates of the comparable enbloc transactions from $105,863 per sq m to $165,048 per sq m, the unit GDV of $273,266 per sq m for the Property appears to be too high under the current market condition”.

(d) The hope for reduction of interest rate by the US Federal Reserve within the latter part of this year diminishes as time goes by;

(e) Sino-US political conflict intensified when new trade sanctions against China were introduced by the US Government repeatedly with the latest one being Section 301 investigation into China’s maritime, logistics and shipbuilding sectors, affecting adversely the confidence of local and overseas property investors in Hong Kong;

(f) Capital influx from Mainland China, one of the key drivers of the local economy, had shrunk significantly;

(g) Reduction in local consumption had prompted for a new wave of closure of shops and restaurants;

(h) The Lot which is located at the fringe of Causeway Bay, is subject to strong competition of a number of modern commercial/ office developments of much bigger scale nearby, most of which are to be connected to Causeway Bay MTR Station by a to-be-completed weather proof walkway system;

(i) The RDV of the Lot is significantly lower the reserve price.

R7’s Objection

7.  On 29 April 2024, the 7^th respondent (“R7”) who owns 1/379 undivided shares of the Lot with the right to exclusive use and occupation of Shop 44 on G/F of the Building objected to the application for the re-fixing the reserve price in the vein that the court had no jurisdiction to further vary the Order for sale as it was functus officio:

“2) 如政府官地， 若買方認為太貴可選擇不投及等市道好轉再考慮收購！

3) 土地審裁處不能成為申請人或地產商的工具、任意調低之前判出確認的Reserve Price 去迎合申請人的無理要求、欺壓小業主賤賣物業 ……!

4) 若法庭批准申請人申請再多一次拍賣， 但Reserve Price 必須按照Lands Tribunal 現時判決命令的一樣、不能調低。 其實再拍賣只導致小業主延遲收回訟費、對我們不利。 若然有其他買家想買入亦應在2024年4月17日入標、本人不同意繼續延遲Lands Tribunal案件令我們小業主延遲取回訟費。

5) 延期再審除了要付出很多額外費用請專家做報告及再上庭， 增加財政及精神壓力外， 對R7 的最大影響是年邁父母每月都沒有了租金收入， 因為R7 以為申請人會收購， 在3月初與 trustees 林小姐通完電話後就通知租了10多年的租客於4月11號交回44號舖 … 以便交吉， 所以父母的物業是丟空了， 每月都沒有收入 …… 生活也成問題，……”

R2’s Objection

8.  Subsequent to the above, on 10 May 2024, the 2^nd respondent (“R2”) wrote in opposing the application for re-fixing the reserve price as it would be “extremely unfair” to the minority owners that include R2:

(a) 特區政府拍賣土地流標也不在短時間內再推出拍賣， 為何私人土地強拍流標， 小業主就要被大業主迫害要在短時間內要降低底價再拍賣 …… 強迫小業主賤賣土地， 乘機強奪小業主權益！

(b) 如政府官地， 若買方認為太貴可選擇不投及等市道好轉再考慮收購！

(c) 土地審裁處不能成為申請人或地產商的工具、將之前已判出確認的底價調低去迎合申請人的無理要求、欺壓小業主賤賣 ……!

9.  R2 also opposed against the application for time extension of the Order for Sale pending a new reserve price to be fixed by the Tribunal as it would effectively mean that R2 and other respondents cannot be reimbursed timely of the huge costs incurred in the appointment of counsel and experts after the Judgment was handed down. According to R2, she had spent more than a million dollars since the call-over hearing on 2 September 2022. She had become impecunious and relied on loans from finance company charging against her property.

10.  Furthermore, R2 alleged that the economy is reviving after the pandemic and there being no ground to support re-fixing the reserve price:

“新冠疫情過後， 環球經濟包括香港還是在復甦中。 利息一直都沒有再增加， 銀行家現估計美國到今年9月便有條件減息。…… 銅鑼灣區只有極小量買賣成交是清楚反映持貨業主的承托實力。”

R11, R20 and R22’s Objection

11.  On 13 May 2024, the 11^th respondent (“R11”), the 20^th respondent (“R20”) and the 22^nd respondent (“R22”) also objected to the application for re-fixing the reserve price on the following grounds:[6]

(a) The Tribunal does not have jurisdiction to grant extension of order for sale for more than once under section 5(4) of the Ordinance;

(b) The Ordinance does not provide for any mechanism for ‘re-fixing” the reserved price after an aborted auction. Any such order shall be ultra vires; and

(c) Even if the Tribunal does enjoy such power/ discretion to “refix” the reserved price for another auction, such discretion shall not be exercised having regard to fairness and other considerations that may include the materials sought to be adduced by the applicants.

12.  R11, R20 and R22 submitted however that if the Tribunal is confident that the matter could be resolved on or before 29 May 2024, just for the sake of short-term preservation of the Order for Sale and allowing some time for further debate, they would adopt a neutral stance on the grant of one extension for the statutory period of 3 months pursuant to section 5(4)(b) of the Ordinance but not any further extension thereafter. This latter position was joined by the 10^th respondent (“R10”) by the time of hearing on 14 May 2024.

13.  In the hearing on 14 May 2024, I have directed the parties to file further submissions on their corresponding arguments.

The Applicants’ Submission

14.  The applicants, as represented by Mr Mok Yeuk Chi (“Mr Mok”) filed the submission on 23 May 2024.

15.  Firstly, in the hearing on 14 May 2024, the issue was raised as regards whether the Tribunal does have jurisdiction to grant extension of time after the Tribunal had granted a further period of 3 months under section 5(4) of the Ordinance. Mr Mok referred to a stay of the order for sale granted by the Tribunal on 23 June 2008 in Intelligent House Limited v Chan Tung Shing & Others [2008] 4 HKC 421, pending appeal by China Superior Limited, the 13^th respondent in that case, to the Court of Appeal.

16.  In the meantime, Intelligent House Limited had scheduled an auction implementing the order for sale on 28 August 2008, ie in 5 days afterwards while the hearing of the appeal would not be heard until 1 April 2009.

17.  In the Notes of Reasons for Decision (unreported, dated 23 August 2008) at §12, the Tribunal stated its preference to the submission of the leading counsel for China Superior Limited. That is, to give a proper construction of section 5(4) of the Ordinance, coupled with the effect of section 39 of the Interpretation and General Clauses Ordinance, the provision should be interpreted to give the effect that owners of the subject property, whether the majority or the minority, and the trustees for sale can repeatedly apply to the Tribunal for extension of the effect of an order for sale, each time for a period of 3 months.

18.  The Tribunal then remarked at §13 that such an interpretation would not fall foul of the language of section 5(4) of the Ordinance. Instead of leading to the absurd consequence on the rights and effect of any pending appeal from the order for sale, the more liberal interpretation would reconcile the rights of a party to appeal on points of law an order for sale granted under the Ordinance.

19.  Although the Court of Appeal subsequently set aside the stay in Intelligent House Limited v China Superior Ltd [2008] 6 HKC 256, it, at §33, expressed its agreement with the Tribunal that it may grant more than one period extension and in doing so may make such consequential order including the revision of the reserve price, as it may deem fit.

20.  Returning to the present application, Mr Mok submitted therefore that the Court of Appeal had conclusively ruled that

(a) Section 5(4) of the Ordinance permits the Tribunal to grant more than 1 period of extension of the validity of the order for sale; and

(b) The Tribunal has power to refix the reserve price as a consequential order.

21.  Mr Mok further emphasized that section 5(4) of the Ordinance permits the Tribunal to grant validity extensions where the subject lot of a sale order “is not sold”. He submitted there is no further qualification or limitation in addition to the requirement that the subject lot “is not sold” and in the present case, the Lot was not sold because of the failed auction.

22.  Mr Mok submitted therefore the power given to the Tribunal to extend the validity of the sale order upon the subject lot being “not sold” must be intended to permit steps to be taken to enable the subject lot to be sold. One such step to be taken in the event of a failed auction is to grant leave for the refixing of the reserve price.

23.  Mr Mok then referred to Sin Ho Yuen v Fineway Properties Ltd (2011) HKCFAR 497 where the Court of Final Appeal was originally invited to decide on:

“whether, and if so under what circumstances, an agreement between the parties as to the reserve price for the Lands Tribunal to approve can be re-opened at the instance of one party and despite the objection of the other party.”

24.  The Court of Final Appeal stated at §15 the following:

“Suppose a significant fall in property prices occurs after a reserve price has been set (whether by consensus or upon evidence). Strictly speaking, there would be no need to ask the Lands Tribunal to re-open the agreed reserve price and set a lower one, for neither the would-be redeveloper nor anyone else would bid up to the reserve price. The Lands Tribunal would then have to exercise its statutory power to set a new and lower reserve price for a fresh auction. There is, however, no need to go through the pointless exercise of holding an unsuccessful auction. The parties could simply return to the Lands Tribunal and ask it to set a new reserve price. If the Lands Tribunal is satisfied that an auction at the existing reserve price would be unsuccessful, the proper course for it to take would be to set a new reserve price.”

25.  Mr Mok did not accept that the statement was made obiter as in the beginning at §1, the Court of Final Appeal stated clearly that although the parties had achieved a settlement:

“We said that we would nevertheless hand down our reasons for acceding to that invitation because there were a number of things which ought not to be left unsaid.”

26.  Mr Mok also submitted that, in addition to the Order for Sale, the Judgment also granted liberty to the parties and the trustees to apply to the Tribunal for further direction(s) pursuant to section 4(9) of the Ordinance. According to Mr Mok, this provision dovetails with the view of the Court of Final Appeal in case of a significant fall in property prices after a reserve price has been set. The Tribunal has jurisdiction, Mr Mok argued, to reset the reserve price on evidence of a material change of circumstances.

27.  In addition to the above, Mr Mok drew my attention to other provisions under section 4 of the Ordinance, suggesting the scope of powers given by the Ordinance to the Tribunal to give directions are all intentionally formulated to be wide, enabling, encompassing and not restrictive:

(a) Section 4(6)(a)(i):

“Where the Tribunal makes an order for sale, … it may also give such directions as it thinks fit—

(a) relating to—

(i) the sale and purchase of the lot the subject of the order, including (but without limiting the generality of the foregoing) settling the particulars and conditions of sale of the lot”

Mr Mok submitted the wide scope of power given under this section would easily accommodate and include a direction to refix the reserve price in the event of a failed auction.

(b) Section 4(6)(c) provides power to the Tribunal to give such directions as it thinks fit “which are not inconsistent with the other provisions of this Ordinance”. Thus, Mr Mok submitted that the Tribunal must have jurisdiction to direct the refixing of the reserve price after a failed auction.

(c) Section 4(9):

“In any case of doubt or difficulty or in any matter not provided for under this Ordinance, the trustees under an order for sale, or the majority owner or any minority owner of the lot the subject of the order, may apply to the Tribunal for directions.”

Mr Mok submitted the inclusion of the trustees in this sub-section signifies that it is intended to be resorted to after the granting of the sale order. This sub-section must be wide enough to easily accommodate a direction to refix the reserve price in the event of a failed auction.

28.  Mr Mok was aware that similar submissions were made by a minority owner in Pacific Base Holdings Limited & Others v Lee Hop Biu & Others, LDCS 14000/2017 (unreported, 4 June 2020) after the auction pursuant to the order for sale in that case failed but the Tribunal then refused to refix the reserve. On that occasion, the Tribunal did not give a written decision nor any oral reasoning for why the Tribunal exercised its discretion to refuse leave to refix the reserve price. Mr Mok acknowledged that maybe in that case, there was no evidence in support of the application save for the fact that there was a failed auction.[7]

Ground for Re-fixing the Auction Reserve Price

29.  In the present case, the applicants relied heavily on the fact that the auction on 17 April 2024 failed to attract any bids.

30.  It also appears that the applicants relied heavily on a third party bidder for sale of its interest in the Lot, if any. The applicants referred to the public announcement by Soundwill dated 2 April 2024 that at the time of the announcement Soundwill had not resolved whether to bid or not. Page 11 of the announcement particularly referred to the situation if the successful bidder at the auction was an independent third party, “(t)he sale proceeds received from the Possible Very Substantial Disposal will be used by the Group in or towards financing other projects and for general working capital.”

31.  It then stated that: “Based on the above reasons, the Directors are of the view that the Possible Very Substantial Disposal conducted at the final winning bid by a third party bidder is in the interests of the Company and the Shareholders as a whole and that the terms of the sale by the Auction will be fair and reasonable.”

32.  Page 14 of the announcement further stated:

“The Company has obtained an unconditional and irrevocable undertaking from Ko Bee Limited and Full Match Limited (which together held directly or indirectly 74.9% of the issued share capital of the Company) to vote in favour of the resolutions in relation to the Mandate for the Possible Very Substantial Disposal to be proposed in the SGM.”

33.  Mr Mok submitted the announcement above constituted a clear signal that Soundwill or its subsidiaries had taken steps in preparation for selling the majority undivided shares via the auction and the directors were of the view that so to sell was in the interest of Soundwill and its shareholders. Perhaps this may be read in light of an earlier announcement by Soundwill dated 11 August 2022 that by a Sale and Purchase Agreement dated 9 August 2022, its indirect wholly-owned subsidiary had agreed to sell the company who owns the applicants and their assets to United Endeavors Limited whose ultimate beneficial owner was a madam named Tsui Yee. Unfortunately the sale fell through and it was confirmed in a public announcement by Soundwill dated 13 September 2023:

“As disclosed in the announcement of the Company dated 10 August 2023, the Purchaser failed to pay the Seller the Further Deposit as agreed under the Supplemental Agreement. After several rounds of discussions between the parties on a without prejudice basis, the Seller, the Seller Guarantor, the Purchaser and the Purchaser Guarantor agreed to amicably settle the matter and entered into a settlement agreement on 13 September 2023 (the ‘‘Settlement Agreement’’). Pursuant to the Settlement Agreement, among other matters, (i) the parties agreed that the Initial Deposit in the amount of HK$320,881,500 paid by the Purchaser upon signing of the Sale and Purchase Agreement shall be forfeited by the Seller; (ii) in addition to the forfeiture of the Initial Deposit, the Purchaser shall pay to the Group a non-refundable settlement sum in the amount of HK$32,000,000 (the ‘‘Settlement Sum’’) upon the signing of the Settlement Agreement; and (iii) in consideration of the forfeiture of the Initial Deposit by the Seller and the payment of the Settlement Sum by the Purchaser, it is agreed by the parties that the Sale and Purchase Agreement shall be terminated and shall cease to have any effect.”

34.  Notwithstanding the above, Mr Mok submitted that the auction failed because the reserve price fixed at $2.425 billion was higher than what the market found acceptable.

35.  On 14 May 2024, I had reminded Mr Mok that his assertion above may not be adequate support to refix the reserve price in the absence of evidence of market to quantify the difference. Here Mr Mok referred again to Mr Chan’s evidence that the market from August 2023 to February 2024 was most uncertain and difficult, with massive drop in the retail market and a severe lack of transactions in the office market in the Wanchai/ Causeway Bay area.

36.  Mr Mok submitted once again that in the severely contracted, uncertain and dropping market as comprehensively captured by Mr Chan and with Soundwill’s public announcement giving notice that Soundwill might or might not bid at the auction, the failed auction is the best and direct evidence that the reserve price was fixed too high to be accepted by the market on 17 April 2024.

37.  In the hearing on 14 May 2024, I had drawn Mr Mok’s attention to that the valuation date for the residual valuation conducted by me might not be as at 15 August 2023 as alleged because I have relied on a transaction A2 which took place on 20 November 2023 and Private Offices Price Index (Grade B) published by RVD up to the end of 2023[8]. Now in response, Mr Mok stated in his submission that in November 2023, the Retail Price (psm) of Hong Kong Island as published by RVD was $569,236. When this is compared to that of February 2024’s $197,145, there was a drop of around -65% which was even more than the -53% drop between August 2023’s $420,686 and February 2024’s $197,145.

38.  Subject to the above caveat, Mr Mok submitted that it is not necessary to quantify the market drop for the purposes of the applicants’ application for at least the following reasons:

(a) The applicants are not asking the Tribunal to refix the reserve price as at 17 April. That is not the application. Hence, there is no need to quantify what the market value of the Lot was on 17 April 2024.

(b) Instead, the applicants are asking for leave to refix the reserve price. If leave is granted, new valuation evidence will be introduced under the direction to be issued by the Tribunal so as to assist the Tribunal to fix the new reserve price.

(c) The test, as derived from §15 of Fineway, supra, governing whether leave should be granted by the Tribunal to refix the reserve price does not require any quantification of the drop of the market as at 17 April 2024.

(d) Applying this test as derived from §15 of Fineway, supra, the applicants are submitting that firstly, in the circumstances as analyzed above, the failed auction on 17 April 2024 is the best direct evidence that the reserve price was fixed at a level higher than was found acceptable by the market; and secondly, in the absence of any good reason to the contrary, the Tribunal should grant leave to refix the reserve price.

(e) There is no evidence of any good reason why after the failed auction of 17 April 2024, the Tribunal should not refix the reserve price.

R2’s Submission dated 27 May 2024

39.  R2’s submission dated 27 May 2024 again objected to the applicants’ application to refix the reserve price in the absence of evidence of comparable transactions. According to her, the reserve price fixed by the Tribunal on 29 February 2024 should have reflected the prevailing market conditions, there being no justification for revision.

40.  R2 also objected to incessant applications for extension of the period allowed by section 5(4) of the Ordinance alluded to by the applicants as it would be prejudicial to the minority owners who then have to shoulder additional legal costs, financial and psychological burdens.

R7’s Submission dated 27 May 2024

41.  R7’s submission dated 27 May 2024 was very similar to R2’s except that she still failed to appreciate the application of saleable area in preference to gross floor area in valuation exercise as explained in §§159-168 of the Judgment. The application of saleable area does not decrease the actual area of the premises concerned because it would correspondingly increase the unit rate of the sale price for the same consideration paid in the market. The difference between saleable area and gross floor area is likened to the use of Celsius versus Fahrenheit in measuring temperature or the use of metric versus imperial measurement though the application of gross floor area is subject to abuse of unscrupulous sales agent or developers.

42.  All the more, R7 tried to distinguish the situation in Sin Ho Yuen, supra from the present proceedings. In Sin Ho Yuen, supra, the reserve price was agreed by the parties much ahead of the order for sale granted by the Tribunal during which there had been a substantial change of market conditions because of the financial tsunami (as it was often called) in 2008. In the present proceedings, however, the Tribunal determined the reserve price on the basis of the most recent transactions of comparables.

43.  Further, R7 referred to §24 of Sin Ho Yuen, supra, which remarked that: “The object of the statute could only be achieved if the tribunal discharged its function in an effective and efficient manner.” The Court of Final Appeal also stated in §25 that:

“In order that the entrenched right of private ownership of property in Articles 6 and 105 of the Basic Law be not infringed, the protection of minority interest under the Ordinance becomes therefore a key factor. In turn, it behoves the tribunal, in carrying out the scheme of the Ordinance, to ensure that such protection be not diminished, or be whittled down through inefficiency and delay. And there would be diminution if, for instance, the minority owner bore, at the end of the day, an inordinate burden of costs, so that what he got by way of his share of the proceeds of sale was largely taken away by the costs incurred in the legal process.”

44.  According to R7, the applicants’ application for refixing the reserve price here is tantamount to defeat the legislative protection of minority owners under the Ordinance.

45.  In addition, R7 referred to the abortive sale to United Endeavors Limited whereby Soundwill or its subsidiary secured a forfeiture of deposit in the sum of $364 million or thereabouts.[9] In comparison, the outstanding pro-rata share belonging to the minority’s owners of 11.5%[10] to the reserve price of $2,425,000,000 is equivalent only to some $279,000,000[11] which is less than $364 million.

Submission dated 27 May 2024 on behalf of R10, R11, R18, R20 and R22

46.  Now R10, R11, R18, R20 and R22 are jointly represented by Mr Adrian But leading Mr Iverson Wong who submitted their arguments against the applicants’ application.

47.  While Mr But’s submission is quite comprehensive and up to 124 paragraphs, I do not intend to repeat its contents here save to quote it from time to time during the discussions that follow.

Reserve Price at Auction

48.  In Asia Bright Enterprises Limited & Another v The Personal Representative of the Estate of Law King Yin & Others, LDCS 11000/2019 (unreported, dated 15 October 2021), the Tribunal had the following observation at §72:

“The majority owner in a compulsory sale case is usually holding most of the shares in a lot(s) to be auctioned. In each bid above the reserve price made by the majority owner in a public auction, the majority owner would need to pay a marginal price to the minority owner(s) only and the rest will finally go to his own pocket, and such advantage cannot be enjoyed by a third party purchaser or minority owner. This is the limitation of public auction in compulsory sale case. The majority owner and a third party (or minority owner), both as a prospective purchaser in public auction, may not stand on the same ground. Although there are limited examples in the past that there were competitive bids in public auction, such limitation of public auction in compulsory sale case could not be eliminated. I doubt whether the market force as alleged by the applicants can really adjust the selling price in the public auction of a compulsory sale case. Therefore, under the Ordinance, it is still the upmost duty of the tribunal to determine a fair and reasonable reserve price reflecting the redevelopment potential irrespective of the private agenda if any and worries of the parties.” (underline added)

49.  Thus, unlike a normal public auction, it is a common phenomenon that the majority owner(s) is/are the only bidder in an auction resulted from a compulsory sale under the Ordinance when other potential bidders consider not worth the trouble to compete. Thus, a failed auction in a compulsory sale under the Ordinance does not necessarily mean, as alleged by the applicants, that the reserve price was fixed higher than the real market value. Otherwise, the majority owner(s) enjoying the peculiar advantage in a compulsory sale under the Ordinance would be tempted to arrange a failed auction in the first instance and come back to the Tribunal seeking a reduction of the reserve price to its/their advantage.

50.  Mr Mok emphasized that in the public announcement on 2 April 2024, Soundwill disclosed it was to evaluate and had not yet resolved if it (or its subsidiary) would bid at the auction and acquire the lot. It is however neither here nor there so long as the applicants (which are its indirect wholly owned subsidiaries) still enjoy the peculiar advantage in a compulsory sale under the Ordinance.

51.  I agree with Asia Bright Enterprises, supra, that “it is still the upmost duty of the tribunal to determine a fair and reasonable reserve price reflecting the redevelopment potential irrespective of the private agenda if any and worries of the parties.”

52.  In the captioned case, the Tribunal was faced with two different valuations and I had to find a way of distinguishing the two and the ultimate function was to reach my own determination on the basis of the evidence before me:[12]

	Mr Chan	Valuation Expert appointed by the minorities
RDV	$2,000,000,000	$3,496,700,000
Accommodation Value (“AV”)	$109,143 per sq m	$190,817 per sq m

53.  The applicants had tendered that Vigers assessed the market value of the Lot on the basis of its redevelopment potential, as at 29 February 2024, at approximately $2.1 billion, which was noticeably lower than the reserved price fixed by the Tribunal at $2,425,000,000. However, there is no evidence or comparables disclosed together with the Vigers’ assessment to support its valuation as is normally required in an expert’s valuation in court. While not adjudicating on whether a valuation is right or wrong, it is trite that the process of valuing real property has strong subjective elements; it is an art not a science which may lead to the presence of a “bracket” as elaborated in Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84 at 85G-H.

54.  As summarised in K/S Lincoln v CB Richard Ellis [2010] EWHC 1156 (TCC) at §183, for a standard residential property, the bracket may be as low as plus or minus 5 per cent; for a valuation of a one-off property, the bracket will usually be plus or minus 10 per cent; if there are exceptional features of the property in question, the bracket could be plus or minus 15 per cent, or even higher in an appropriate case. In the present case, the difference between reserve price fixed at $2.425 billion and $2,100,000,000 is at most 15%. This appears within a reasonable range bearing in mind the wide range of opinions expressed as to the RDV of the Lot by Mr Chan and the valuation expert appointed by the minority owners and the variety of issues that have been discussed in §§64-101 of the Judgment.[13]

55.  Neither am I persuaded that the three transactions of whole block commercial buildings found by Mr Chan can provide any indication that the market value was or is substantially lower than the reserve price fixed at $2.425 billion in terms of the unit rates. If this were the case, Vigers’ assessment in the sum $2,100,000,000 would be equivalent to some $4,500,000,000 for the GDV or $245,568 per sq m (as can be iteratively derived from a residual valuation). This is still much higher than $119,133 per sq m for the sale of 88WL, $165,047 per sq m for the sale of Harbour East or $105,837 for the sale of Golden Wheel Plaza. In any event, all 88WL, Harbour East or Golden Wheel Plaza are not good comparable at all when they are situated at quite different locations and had much smaller site areas. The compositions between the valuable retail portion and the upper floor portion of these developments vis-à-vis the subject may also be different. See §78 of the Judgment. They fall a long way short of supporting the valuation of some $2,100,000,000 contended for by Vigers.

56.  Here the remarks by the Tribunal in Hofei Estates Limited v Secretary for City and New Territories Administration, LDLR 1/1982, dated 30 November 1982 (which has been reported at [1980-82] CPR 486 ) at §§14-15 are relevant:

“14. Unfortunately, the comparables were not only in different localities, but were also very much smaller than the subject property, have varying development costs and contained other differences. Theses major differences obliged both valuers to make substantial adjustments to the comparables to relate them, for valuation purposes, to the subject property. The adjustments actually made were mostly subjective and unsupported by any detailed analysis.

15. In these circumstances a better approach would have been to have used the residual method. The adoption of the residual method would have enabled the valuers to have tested the value of the subject property in terms of optimum development in relation to cost and reasonable profit margins.”

57.  In spite of the above, it is noted that Harbour East, having the largest GFA in the sum of 13,377.99 sq m which is closest to the 18,324.88 sq m for the hypothetical development on the Lot, was able to fetch $165,047 per sq m, ie some 50% higher than that of the other two smaller development.

58.  As regards the indices referred to by Mr Chan, I had already stated in the Judgment at §114 that “the use of indices is only acceptable when there is little evidence to go by”. The retail prices, for instance, published by the RVD suffer obviously from the lack of data as a result of which the published prices per sq m would be skewed by few transactions not comparable to the captioned location. This is particularly manifest when the retail price in Hong Kong Island quoted for February 2024 by RVD was $197,145 per sq m or $188,145 per sq m as recently amended, I determined that the market rate applicable to the hypothetical shop 3 should be $550,000 per sq m on the basis of comparable transactions.[14] Interestingly, this $550,000 per sq m was much lower than what Mr Chan assessed at $710,000 per sq m.[15]

59.  In any event, Mr Chan was not in the position to provide an up-to-date valuation of the Lot. All the applicants are asking is a leave to refix the reserve price and new valuation evidence will only then be available later.

60.  Having reviewed the above, I am not persuaded that there exist a scenario of significant fall in property prices as envisaged by the Court of Final Appeal in Sin Ho Yuen, supra at §15. The reserved price fixed by the Tribunal at $2,425,000,000 and the assessment by Vigers at $2,100,000,000 come within a reasonable bracket at about 15%.

Jurisdiction for Extending the Order for Sale beyond one 3-month Period

61.  Despite Mr Mok’s peruasive authorities in support of the applicants’ intending application for extending the Order for Sale beyond the statutory one 3-month period, Mr But, leading Mr Iverson Wong, now acting on behalf of R10, R11, R18 R20 and R22 opined otherwise.

62.  Mr But refer to the Hansard and Bill Committee Minutes leading to the “Committee Stage Amendments” (“CSAs”) in redrafting section 5(4)(a) as now enacted where the original provision “or such longer period as the Tribunal may specify in directions” has been deleted. On 16 February 1998 in the Bill Committee Meeting, the then Senior Assistant Law Draftsman (“SALD”) who spoke on behalf of the Government considered it not advisable for the majority owners to be given the chance to pick and choose the most opportune time to set the auction price:

“5. As regards the Chairman’s further enquiry as to whether the reserve price could be revised to take into account of market conditions after the making of a sale order. SALD said that this was a sensitive issue and he considered it not advisable for the majority owners to be given the chance to pick and choose the most opportune time to set the auction price.

…

Clause 5 Lot to be sold by auction

14. As agreed, the Administration would introduce CSAs to allow the Lands Tribunal to extend a further period of three months within which the auction for the sale of the lot had to be held after the date of an order for sale under special circumstances.”

63.  Then in the meeting on 28 February 1998 that followed, section 5(4) had been amended to empower the Tribunal to extend on application the period from three to six months within which the auction for sale had to be held. Again the then Senior Assistant Law Draftsman explained that to deem an order for sale of no effect if no bid was made at the auction was meant to avoid any manipulation of the reserve price on the part of the majority owners and prevent them from picking and choosing the most opportune time to cast their bid. He believed that the majority owners, who were keen in acquiring the remaining shares from the minority owners, would try their best to buy such shares at the auction:

“14. Members noted the Administration's acceptance of the proposal to empower the Lands Tribunal to extend on application the period from three to six months within which the auction for the sale of the lot had to be held. They were however concerned about the existing provisions of the Bill which deemed the order for sale to be of no effect if no bid was made at the auction. Since substantial time and resources would be incurred in preparing for an auction, members felt that the order should not be automatically cancelled if there was no bid at the auction. Instead, the number of auctions to be held should not be limited as long as the reserve price remained unchanged and the auction was held within the specified time frame. As it would normally take about three months to arrange an auction, the number of auctions which could be held within a period of six months could be very limited. In any case, the expenses of the auction were to be borne by the majority owners.

15. SALD explained that to deem an order for sale of no effect if no bid was made at the auction was meant to avoid any manipulation of the reserve price on the part of the majority owners and prevent them from picking and choosing the most opportune time to cast their bid. He believed that the majority owners, who were keen in acquiring the remaining shares, would try their best to buy such shares at the auction.

16. Members pointed out that the majority owners who considered the reserve price too high might choose not to bid at the auction. This was because the reserve price, which was determined by the Lands Tribunal, took into account the redevelopment potential of the lot and could be higher than that expected by the majority owners. In such a case, the majority owners might choose not to bid or would only bid if there were other purchasers bidding at the auction.

17. After discussions, the Administration agreed that as long as there was no change in the reserve price and the conditions of the order, no limit should be set on the number of auctions held within the specified or any extended time which in any case would be a maximum period of six months from the date of the application. CSAs to these effects would be moved by the Administration.” (underline added)

64.  From the above, members of the Bill Committee did foresee that the majority owners who considered the reserve price too high might choose not to bid at the auction. This was explicable because the reserve price, which was determined by the Tribunal, took into account the redevelopment potential of the lot and could be higher than that expected by the majority owners. In such a case, the majority owners might choose not to bid or would only bid if there were purchasers bidding at the auction. After the deliberation at the meeting, the Administration agreed that: “as long as there was no change in the reserve price and the conditions of the order, no limit should be set on the number of auctions held within the specified or any extended time which in any case would be a maximum period of six months from the date of the application.”

65.  Thus Mr But submitted, and I agree, that the legislature has never intended the reserve price to be reset and “reduced” until the lot could be successfully sold. I appreciate that the Court of Final Appeal in Sin Ho Yuen, supra, at §15 did envisage a scenario of significant fall in property prices after a reserve price has been set. It further remarked that there being a statutory power for the Tribunal to set a new and lower reserve price for a fresh auction. Where is the statutory power then? Obviously it is section 11A(1) of the Lands Tribunal Ordinance which provides that:

“The Tribunal may, within 1 month from the date of any decision by it, decide to review that decision and, on such grounds as it may think sufficient, may set aside, reverse, vary or confirm it.”

66.  As regards Mr Mok’s referral to section 4(6)(a)(i), the provision only states the Tribunal may make an order for sale which relates to the sale and purchase of the lot the subject of the order. Certainly it can lay down the reserve price but it appears that this subsection does not empower the Tribunal to revisit the order from time to time.

67.  Section 4(6)(c) is not applicable because it manifestly states that the order that can be made should not be inconsistent with the other provisions of the Ordinance which definitely include section 5(4).

68.  Section 4(9) may be more arguable because it states that:

“In any case of doubt or difficulty or in any matter not provided for under this Ordinance, the trustees under an order for sale, or the majority owner or any minority owner of the lot the subject of the order, may apply to the Tribunal for directions.”

69.  Obviously Mr Mok found support from Sin Ho Yuen, supra, at §17 where the Court of Final Appeal envisaged that a minority owner (or the majority owner(s) as well) can simply apply to the Lands Tribunal, under the implied liberty to apply, to reset the reserve price on evidence of a material change of circumstance. But unfortunately, the section or even the remark by the Court of Final Appeal, if more properly read, concerns the situation, doubt or difficulty prior to the auction or other means of sale. Indeed, section 4 as a whole precedes section 5.

70.  Section 5 deals with the various situations where the lot in concerned is arranged to be sold by auction or other means. Particularly in subsection (4) it deals with the situation where the lot the subject of an order for sale is not sold by auction or other means. It clearly obviates against a matter “not provided for under this Ordinance”.

71.  Similarly, when the Tribunal or the Court of Appeal in Intelligent House, supra, talked about more than one period of extension under section 5(4) of the Ordinance, it was dealing with a situation before an auction or other means of sale could be arranged.

72.  Mr But even submitted that in the event of a “stay of execution” being granted by the Tribunal or the Court of Appeal as the case may be, the stay would stop the order for sale from being executed. According to Mr But, the time for running to the auction would be stopped and therefore an auction would become “resumed” as after the determination of appeal. Section 5(4) of the Ordinance therefore would not frustrate appeals, but facilitates to preserve an order for sale in case an appeal is allowed. Mr But submitted this answers the absurdity feared by the Tribunal in Intelligent House Ltd, supra that the right of appeal to higher courts might be taken away by the strict application of Section 5(4).

73.  Thus, while the authorities relied upon by Mr Mok, including Sin Ho Yuen, supra and Intelligent House Ltd, supra, are persuasive, whether the Tribunal has jurisdiction for extending a compulsory sale order beyond one 3-month period after an abortive sale by auction was never canvassed or argued. I agree with Mr But that these authorities are distinguishable on their facts, dealing with the situations prior to the arrangement of an auction pursuant to an order for sale. They therefore constituted obiter dicta remarks in relation to the present case that I am not going to follow.

Functus Officio

74.  The legal principles regarding functus officio are well established. The history and development of the functus officio doctrine were helpfully set out by Baroness Hale in In re L (Children) [2013] 1 WLR 634, [16]-[19].

75.  The rationale or purpose of the functus officio doctrine is essentially threefold:[16]

(1) It is the only doctrine that is directed at the decision-maker, rather than the parties, or in the case of res judicata, the parties and their privies. The doctrine operates like an injunction pointed at every judge, every arbitrator, and every tribunal. It kicks in when a final and valid decision is made. Upon the rendering of a final and valid decision, the decision-maker is enjoined from reconsidering the decided matter and rescinding or varying the decision in any manner. With finality comes legal certainty, which is essential for the administration of justice and the rule of law.

(2) It lends finality to the conduct of proceedings by marking a definitive endpoint to it. It is essential to the administration of justice to have a clear stopping place, a point of no turning back; otherwise, there would be no end to the case, nor any beginning of enforcement.

(3) It also enables an effective appeal and judicial review. Preclusion from changing a decision is necessary to ensure a stable basis for appeal and judicial review. But for a rule like functus officio that dictates finality and forbids decisions from being easily undone, decision-makers could change their decisions as they like, as many times as they like. With a record for appeal (or judicial review, as the case may be) that could shift like shifting sand, it is hard to imagine how there could be effective review. Indeed, the appeal process itself could drag on indefinitely. Every time that the decision under appeal is adjusted or supplemented, the appeal may need to be reconsidered, and the appeal decision revisited, assuming that appellate reconsideration is not itself barred by functus officio. The appellate process itself will become a never-closing door through which appellants have indefinite entry, coming through whenever the underlying decision is changed.

76.  In the present case, Mr But submitted that the Tribunal is established as a “court of record” under section 3 of the Lands Tribunal Ordinance whereby the Tribunal becomes functus officio after a full trial. Upon the Tribunal’s determination of the reserve price when making an order for sale, such determination is final for the purpose of the entire proceedings.[17]

77.  As explained by Keith JA in Andayani v Chan Oi Ling [2000] 4 HKC 233, 237D:-

“There must, of course, come a time in any proceedings when the court must be regarded as having completed its task. When that time is reached, the court is said to be functus officio. Once that stage has arrived, the court has no further jurisdiction over the case. But when does that stage arrive? The answer given by the common law is when the judge’s order has been drawn up, entered or otherwise perfected. As Slesser LJ said in Millensted v Grosvenor House (Park lane) Ltd [1937] 1 KB 717 at 722:

‘It was not sought to be disputed ... ... ... that it is within the power of a judge at any time before judgment is entered and perfected to alter its terms. This is the effect of two judgments, the case of In re St Nazaire Company (1879) 12 Ch D 88, in which the case it was held, following in In re Australian Direct Steam Navigation Co Millers’ case (1876) 3 Ch D 661, that a judge can always reconsider his decision until the order has been drawn up, and the case of In re Suffield & Watts ex parte Brown (1888) 20 QBD 693, to the effect that ‘so long as the order has not been perfected the judge has a power of reconsidering the matter, but, when once the order has been completed, the jurisdiction of the judge over it has come to an end’ ... ”

78.  Mr But submitted the reserve price (and the EUV too) forms part of a sealed final order made in the proceedings. The Order for Sale embodying the reserve price and other findings made based on evidence before the Tribunal should be the final judgment that binds all owners of the Lot in the Application.

79.  Of course, section 11A of the Lands Tribunal Ordinance, which was stated in §65 above, is perhaps peculiar to the Lands Tribunal proceedings. The Tribunal may, within 1 month from the date of any decision by it, decide to review that decision on the application of any party.

80.  Indeed, there was such an application for review of the reserve price in Perfect Horizon Limited v Co Sam & Others, LDCS 23000/2018 (unreported, dated 11 September 2020). The Tribunal observed that there had been no decrease in value by reference to both the Private Domestic Prices Indices and the Private Retail Price Index. Further, media reported that the domestic property market was vigorous and vibrant as manifested by the sales of units in Pavilla Farm, refuting the allegation of the adverse impact of the COVID-19 pandemic, economic lockdown or anti-gathering etc.

81.  The Tribunal also reviewed other compulsory sale applications around the date, including Orient Sea Investment Limited & Others v Lok Sing Tom & Others, LDCS 27000/2018 (unreported, dated 24 August 2020) and Top Harmony Limited v Cheung Yuet Sheung & Others, LDCS 39000/2018 (unreported, dated 15 October 2020) where the valuation experts concerned conceded that the political environment and economic outlook had improved.

82.  The Tribunal in Perfect Horizon then found no merit in the application for review and refused to exercise its power of review on 16 October 2020.

83.  In the present case, the 1-month period for review lapsed on 29 March 2024. Although it was only in the announcement by Soundwill on 2 April 2024 that Vigers’s assessment of $2.1 billion was disclosed, given the time to arrange the public announcement, it is reasonably expected that Soundwill would have learned the assessment of Vigers few days beforehand. Unfortunately the applicants did not make any such application for review within the statutory time frame. In such regard, Mr But submitted that the reserve price (together with the valuation parameters used) cannot be reopened due to, inter alia, the principles of res judicata and issue estoppel.

84.  Mr But submitted that the “liberty to apply” provision (whether express or implied) as contained in the Order for Sale is only confined to implementation/ execution of an order. As stated in §26 above, the provision was made pursuant to section 4(9) of the Ordinance which states:

“In any case of doubt or difficulty or in any matter not provided for under this Ordinance, the trustees under an order for sale, or the majority owner or any minority owner of the lot the subject of the order, may apply to the Tribunal for directions.” (underline added)

85.  Thus, contrary to Mr Mok’s submission, section 5(4) of the Ordinance does provide that:

“Where the lot the subject of an order for sale is not sold—

(a) subject to paragraph (b), within the 3 months immediately following the date on which the order is made; or

(b) within such further period of 3 months as the Tribunal may specify in directions given on application made to it by the trustees under the order or the majority owner or any minority owner of the lot,

then that order shall immediately be deemed to be of no effect as if it had been cancelled by the Tribunal.”

86.  Indeed, some other provisions in the Ordinance do take care of the situation when the lot is not sold or there is no purchaser of the lot:

“Section 7(3): Where an order for sale is of no effect by virtue of section 5(2) or (4), the trustees under the order shall as soon as practicable thereafter cause—

(a) the registration referred to in subsection (1) of the order and of Schedule 3 (insofar as it relates to the lot); and

(b) the registration, if any, referred to in subsection (2) of the order first-mentioned in subsection (2),

to be vacated under section 20 of the Land Registration Ordinance (Cap 128).

Section 10(1)(a): Where there is no purchaser of the lot, the expenses of the auction or of the other means referred to in section 5(1)(b) by which the lot is sold incurred by the trustees under an order for sale shall be borne solely by the majority owner of the lot”

87.  Save from the above, there are no provisions which were enacted to stipulate the consequences following the event of a failed auction. None provisions says that a reserve price shall or can be “refixed” by then if the lot the subject of an order for sale is not sold.

88.  Furthermore, the general power to extend time under O 3 r 5(1) of the Rules of the High Court (Cap. 4A) does not apply to a stipulation of time under a final judgment disposing of the entire proceedings. Paragraph 3/5/2 of the Hong Kong Civil Procedure 2024 specifically provides that where mandatory time limits are provided by statute it is not possible to invoke the inherent jurisdiction of the court or the provisions of O 3 r 5(1) to extend the same.

89.  Lastly, Mr But submitted that given the legislative intention of the Ordinance under section 5(4) as it stands now, as well as the hardship/ difficulties faced by the minority owners, it is unfair, oppressive and prejudicial to accede to the applicants’ application, which essentially is an attempt to cherry-pick another reserve price favourable to them at everyone else’s expense. It would have serious and adverse consequences on the conduct of future compulsory sale applications. Any “discretion” to refix the reserve price must not be exercise. I agree.

90.  Mr But also drew my attention to the applicants’ deliberate inaction to register to participate in the public auction on 17 April 2024 despite they alleged in the Affirmation that they had the ability to do so. Then the applicants instructed Mr Chan to “comment” on the result of the failed auction on post-mortem basis. With respect, Mr Chan’s conclusion dated 25 April 2024 that the present redevelopment value of the Lot is significantly lower than the reserve price simply re-echoed his opinion of $2,000,000,000 which the Tribunal was not persuaded. Similarly, most of the “Market Commentary” given by Mr Chan was put forward by him at trial already and considered by the Tribunal. See §§179-185 of the Judgment. But if such economic and political arguments have any probative value at all, does it mean that the Tribunal has to take into account the ramification of the Hang Seng Index having recently increase 19% or 3,000 points in one month? According to the latest research by Savills, a property advisor of international fame, dated 24 May 2024, for instance, office prices will rebound in the next 3 months.[18] There are too many noises from the public media that have to be dealt with.

91.  Rather, I agree with Mr But that in determining the applicants’ present application, the most intuitive question to ask is whether it is necessary to refix the reserve price at all because it ‘failed’ to reflect the true ‘RDV’ as at auction which received no bid. But by reference to Mr Chan’s opinion dated 25 April 2024, they are not conclusive evidence of any significant change in the market conditions that renders the reserve price defective as at the auction to justify the reserve price to be re-fixed. I agree.

92.  Furthermore, Mr But submitted that against the peculiarity in an auction pursuant to compulsory sale under the Ordinance, the applicants should not be allowed to complain that the reserve price is too high after deliberately not bidding for the Lot at the auction when in reality they were actually the only willing and potential participant. Mr But suggested, and I agree, that they are simply pulling themselves up by own bootstraps.

93.  At the end, I agree with Mr But that the property market is inherently imperfect and bound to experience fluctuations from time to time. Any attempt of valuers, on behalf of the majority owners or the minority owners, to submit more market updates to the Tribunal after the fixing of the reserve price and assert that the market conditions have change is undesirable. This would cause never ending disturbance to the finality of a piece of concluded litigation; the reserve price could become “perpetually revised” either in a failing market by the majority owners or in a rising market by the minority owners. Mr But referred to Billion Land Investment Limited v Union Joyce Limited & Others, HCMP 2145/2011 (unreported, dated 13 August 2015) which held at §25 that valuation by a valuer was final and binding on parties under a Tomlin Order. While the Tomlin Order also gave liberty for the parties to apply to the court for directions in connection with valuation and generally, the Court of First Instance remarked that whether the final draft of valuation was completed should not depend on whether a party chooses to invoke the liberty to apply provision. “Otherwise, a dissatisfied party can hold up the completion of the valuation exercise by issuing one summons after another for directions.”

94.  Reference to Hansard demonstrates it has been the legislative intent that the sale order must automatically and immediately lapse at most after a total period of 6 months if the lot concerned is not sold by auction. The enactment of the clause “that order shall immediately be deemed to be of no effect as if it had been cancelled by the Tribunal” under section 5(4) of the Ordinance is the clearest indication by the legislature that the parties, especially the minority owners and the Tribunal should no longer be troubled by any further litigation. This, as submitted by Mr But, confers finality and protection to the minority owners against multiplicity of proceedings as a matter of policy. It also ensures a timely final resolution in the interest of minority owners to have their costs refunded because taxation proceedings need to be commenced right afterwards if cost could not be agreed.

Conclusion

95.  I agree with Mr But that the Ordinance literally says nothing about the power of the Tribunal in (1) granting further extension(s) of the order for sale beyond the statutory period and/or (2) reopening of the reserve price if the lot subject of an order for sale is not sold under section 5(4) of the Ordinance.

96.  In any event, I am not persuaded there has been “a significant fall in property prices occurs after a reserve price has been set” as envisaged by the Court of Final Appeal in Sin Ho Yuen, supra, at §15.

97.  Nevertheless, having considered all the circumstances, I am prepared to exercise my discretion to grant an extension of time of three months till 29 August 2024 under section 5(4)(b) of the Ordinance subject to there being no change in the reserve price fixed in the Judgment. That is, I refuse leave be granted to refix the reserve price.

98.  I make a costs order nisi that:

(1) The applicants do pay the 2^nd, 7^th, 10^th, 11^th, 18^th, 20^th and 22^nd respondents the costs in relation to the present applications by the applicants;

(2) Costs awarded are to be taxed at High Court scale if not agreed, with certificate for counsel.

99.  Finally, should any respondent acting in person require interpretation of this judgment into Chinese, he/she should approach my clerk to make prior appointment with court interpreter to arrange for the same.

Mr Mok Yeuk Chi, instructed by Messrs Lo, Wong & Tsui, Solicitors & Notaries, for the 1^st to 3^rd Applicants

1^st Respondent, absent

Ms Bethany Chiu of Messrs Woo Kwan Lee & Lo, Solicitors, Notaries, Agents for Trademarks & Patents, for the 2^nd Respondent

3^rd Respondents, absent

4^th Respondent, absent

5^th Respondent, absent

6^th Respondent, absent

7^th Respondent, appearing in person

9^th Respondent, absent

Mr Adrian But, leading Mr Iverson Wong, instructed by Messrs Cheung, Chan & Chung, Solicitors & Notaries, Agents for Trademarks & Patents, for the 10^th, 11^th, 18^th, 20^th and 22^nd Respondents

13^th Respondent, absent

16^th Respondent, absent

19^th Respondent, absent

21^st Respondent, absent

23^rd Respondent, absent

25^th Respondent, absent

Attendance of Messrs V Hau & Chow, for the 26^th Respondent, was excused

LDCS 23000/2019

[2024] HKLdT 17

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO 23000 OF 2019

__________________________

__________________________

_________________

JUDGMENT

_________________

1.  This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of Section C of Inland Lot No 2147 (“the Lot”) on which building known as the Haven Court (“the Buildings”) stands with the address of Nos 2-30 Haven Street & Nos 128-138 Leighton Road, Hong Kong.

2.  In between the Lot and Haven Street is a longitudinal strip of land, being Section P of Inland Lot No 2147, owned by an associated company of the applicants. As a result, their valuation expert, Mr Charles Chan of Savills Valuation Surveyors and Professional Services Limited (“Savills”), has been instructed to assess the redevelopment value (“RDV”) of the Lot on the assumption that the Lot is a Class B site under the Building (Planning) Regulations with frontage onto both Leighton Road and Haven Street.

3.  The Building comprises an 11-storey composite building with shops on G/F and domestic units on the upper floors (“U/F”) being served by 3 common staircases and 3 passenger lifts. The occupation permit of the Building (“OP”), Permit No H23, was issued pursuant to the Buildings Ordinance on 27 January 1959 which permitted the following:

“ One building with

(a) shops at ground floor for non-domestic purpose

(b) first floor to tenth floor for domestic purpose”  

4.  According to the plans attached to the Deed of Mutual Covenant dated 30 December 1958, there are 44 shops on the G/F, 18 being shops with street frontages and the remaining arcade shops with the rear row of the arcade shops fronting onto the common open yard which is currently accessible. On each of 1/F to 9/F, there are 13 domestic units (ie Block A to Block M) and on 10/F, there are 8 domestic units with Block A to Block B and Block H to Block M. The corresponding undivided shares as assigned to each of the units, totaling 379, are shown as follows:

5.  At the time of the Application, ie 22 July 2019, the applicants altogether owned approximately 84.04% of the equal and undivided shares subject to the rest owned by the respondents (with the prefix R) as follows:

(1)  R1 owning 3/379 undivided shares allotted to Shop 11 & Shop 39 on G/F, but possession of which was taken up by R26 below as mortgagee in possession[1];

(2)  R2 owning 2/379 undivided shares allotted to Shop 13 on G/F;

(3)  R3 owning half share of 3/379 undivided shares allotted to Shop 22 & Shop 23 on G/F (with the other half owned by the 1^st applicant, ie A1);

(4)  R4 owning 3/379 undivided shares allotted to Shop 24 & Shop 25 on G/F;

(5)  R5 owning 1/379 undivided shares allotted to Shop 28 on G/F;

(6)  R6 owning 1/379 undivided shares allotted to Shop 41 on G/F;

(7)  R7 owning 1/379 undivided shares allotted to Shop 44 on G/F;

(8)  R9 owning 2/379 undivided shares allotted to Block I on 3/F;

(9)  R10 owning 3/379 undivided shares allotted to Block C on 2/F;

(10)  R11 owning 2/379 undivided shares allotted to Block M on 2/F;

(11)  R13 owning 3/379 undivided shares allotted to Block E on 5/F;

(12)  R16 owning 3/379 undivided shares allotted to Block C on 7/F;

(13)  R18 owning 2/379 undivided shares allotted to Block I on 7/F;

(14)  R19 owning 3/379 undivided shares allotted to Block C on 8/F;

(15)  R20 owning 3/379 undivided shares allotted to Block D on 8/F;

(16)  R21 owning 2/379 undivided shares allotted to Block H on 8/F;

(17)  R22 owning 2/379 undivided shares allotted to Block K on 8/F;

(18)  R23 owning 3/379 undivided shares allotted to Block D on 9/F;

(19)  R25 owning 2/379 undivided shares allotted to Block I on 9/F;

(20)  R26 being the mortgagee in possession of 3/379 undivided shares allotted to Shop 11 & Shop 39 pursuant to the order of the High Court granted in HCMP 1361/2023 dated 10 February 2023.

6.  While Notices of Opposition (Form 33) were filed by R1, R2, R3, R7, R10, R11, R16, R18, R20, R22, R25 & R26, none of them produce any expert evidence on building condition and structural assessment. Thus, the only disputes were on expert evidence concerning the assessment of the market value of the corresponding units (which is usually referred to by the valuation profession as the Existing Use Value or simply the acronym EUV) and the RDV of the Lot, on the basis of which the reserve price for the prospective sale by auction, should the order for sale be granted, is fixed.

The Evidence

7.  The applicants have filed the following documents in support of the Application:

(a)  the witness statement and supplemental statement dated 29 July 2022 and 12 December 2022 respectively from Mr Lam Kei Sun, representative of the applicants;

(b)  the witness statement dated 12 December 2022 from Ms Leung Mei Ho, representative of the applicants;

(c)  the witness statement dated 12 December 2022 from Mr Chow Chin Pong, representative of the applicants;

(d)  a Building Condition Survey Report by Mr Wong Sai Ning Benson (“Mr Benson Wong”) dated 28 July 2022;

(e)  a Structural Assessment Report by Mr So Kin Shing (“Mr So”) dated 28 July 2022;

(f)  the following reports by Mr Charles Chan:

(i)  the Application Report dated 12 July 2019 pursuant to Part 1 of Schedule 1 to the Ordinance;

(ii)  a Supplemental Report dated 28 July 2022 on the revised EUV of the Building as at 27 May 2019 and the RDV of the Lot;

(iii)  a Rebuttal Report dated 11 November 2022 on the EUV and RDV report both dated 13 October 2022 on behalf of the respondent prepared by Mr Paul Varty (“Mr Varty”);

(iv)  an updated RDV report dated 22 August 2023.

8.  The respondents relied on the following reports by Mr Varty:

(a)  as said, the EUV report dated 13 October 2022;

(b)  as said, a RDV report dated 13 October 2022;

(c)  an updated RDV report dated 22 August 2023.

9.  Mr Charles Chan and Mr Varty had also prepared two Joint Statements, one dated 13 December 2022 with a supplement dated 31 August 2023 and another dated 28 August 2023 (as amended on 31 August 2023).

Live Respondents Remaining on Record

10.  While Mr Mok Yeuk Chi (“Mr Mok”), as instructed by Messrs Lo, Wong & Tsui, Solicitors & Notaries, acted for the applicants, the respondents were represented by the following legal representatives, if any:

Respondent	Property Concerned	Instructing Solicitors	Counsel/Solicitor
R1	Shop 11 & Shop 39 on G/F
R2	Shop 13 on G/F	Messrs Woo, Kwan, Lee & Lo	Mr Ross M Y Yuen
R3	Shop 22 & Shop 23 on G/F	Messrs Peter Mo & Co	Mr Raymond W N Tsui
R4	Shop 24 & Shop 25 on G/F
R5	Shop 28 on G/F
R6	Shop 41 on G/F
R7	Shop 44 on G/F
R9	Block I on 3/F
R10	Block C on 2/F	Messrs Cheung, Chan & Chung	Mr Jonathan Lee
R11	Block M on 2/F	Messrs Peter Mo & Co	Mr Raymond W N Tsui
R13	Block E on 5/F
R16	Block C on 7/F
R18	Block I on 7/F	Messrs Peter Mo & Co	Mr Raymond W N Tsui
R19	Block C on 8/F
R20	Block D on 8/F	Messrs Peter Mo & Co	Mr Raymond W N Tsui
R21	Block H on 8/F
R22	Block K on 8/F	Messrs Peter Mo & Co	Mr Raymond W N Tsui
R23	Block D on 9/F
R25	Block I on 9/F	Messrs Peter Mo & Co	Mr Raymond W N Tsui
R26 (Mortgagee in Possession)	Shop 11 & Shop 39 on G/F	Messr V Hau & Chow	Mr K T Kong

Whether the Applicants are entitled to make the Application

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

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

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

14.  As mentioned, the OP for the Building was issued on 27 January 1959 (ie not less than 50 years before the date of the Application). The Notice is applicable and the threshold percentage should be 80%.

15.  At the time of the filing of the Application, the applicants altogether owned 84.04% of the undivided shares of the Lot. I agree therefore that the applicants are entitled to make the Application under section 3(1) of the Ordinance.

EUV as at 27 May 2019

16.  By reference to section 4(1)(a) of the Ordinance, the Tribunal shall determine an application under section 3(1) by—

first—

(i)  if any minority owner of the lot the subject of the application disputes the value of any property as assessed in the application, hearing and determining the dispute;

(ii)  in the case of any minority owner of the lot who cannot be found, requiring the majority owner of the lot to satisfy the Tribunal that the value of the minority owner’s property as assessed in the application is—

(A)  not less than fair and reasonable; and

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

Assessment of G/F Units

17.  By the Joint Statement dated 13 December 2022, Mr Charles Chan and Mr Varty agreed on the factual information of all the G/F shops as well as the conversion factor for the ancillary areas:

Shop No	Saleable Area (m2)	Encroached Yard (m2)	Effective Area (m2)	Frontage (m)	Fronting Street	Depth (m)	Headroom (m)
1	35.0		35.0	5.2	Leighton Road	6.7	3.5
2	21.2		21.2	3.2 + Return Frontage: 2.7	Leighton Road	6.7	3.5
3	17.6		17.6	3.5	Leighton Road	5.1	3.5
4 & 5	48.5		48.5	6.4 + Return Frontage: 7.6	Leighton Road	7.6	3.5
6-10 & 12	78.6		78.6	6.0	Haven Street	9.9	3.5
11	18.9		18.9	3.0	Haven Street	6.2	3.5
13	18.9		18.9	3.0	Haven Street	6.2	3.5
15	18.9		18.9	3.0	Haven Street	6.2	3.5
17	18.9		18.9	3.0	Haven Street	6.2	3.5
19	18.9		18.9	3.0	Haven Street	6.2	3.5
20 & 21	30.2		30.2	3.0	Haven Street	9.9	3.5
23	18.9		18.9	3.0	Haven Street	6.2	3.5
25	18.9		18.9	3.0	Haven Street	6.2	3.5
27	18.9		18.9	3.0	Haven Street	6.2	3.5
29	18.9		18.9	3.0 + Return Frontage: 4.2	Haven Street	6.2	3.5
30	17.1		17.1	3.0 + Return Frontage: 4.2	Haven Street	5.6	3.5
14	11.3		11.3	3.1	Arcade	3.7	3.5
16	11.3		11.3	3.1	Arcade	3.7	3.5
18	11.3		11.3	3.1	Arcade	3.7	3.5
22	11.3		11.3	3.1	Arcade	3.7	3.5
24	11.3		11.3	3.1	Arcade	3.7	3.5
26	11.3		11.3	3.1	Arcade	3.7	3.5
28	11.3		11.3	3.1+ Return Frontage: 3.9	Arcade	3.7	3.5
32	9.4	2.9	10.9	2.3	Arcade	4.2	3.5
33	9.4	10.4	14.6	2.3	Arcade	4.2	3.5
34	14.4		14.4	2.7	Arcade	5.3	3.5
35	14.2	6.4	17.4	2.6	Arcade	5.3	3.5
36	13.4	7.0	16.9	2.5	Arcade	5.3	3.5
37	13.4	7.0	16.9	2.5	Arcade	5.3	3.5
38	14.2	7.5	15.1	2.7	Arcade	5.3	3.5
39	14.2	7.5	18.0	2.7	Arcade	5.3	3.5
40	LDCS 23000/2019 [2024] HKLdT 17 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LAND COMPULSORY SALE MAIN APPLICATION NO 23000 OF 2019 __________________________ BETWEEN   BILLION GLORY PROPERTIES LIMITED 1st Applicant   (億潤置業有限公司)     HARVEST FORTUNE LIMITED 2nd Applicant   (沛益有限公司)     LEAD PROPERTIES LIMITED 3rd Applicant   (領先置業有限公司)           and           LI BAOZHU (李宝珠) and WONG TAK KUEN (黃德權) 1st Respondent   HUI SUK FONG ALICE (許淑芳), the Administratrix of the Estate of HO WING MUI, deceased 2nd Respondent   LEE CHI MING 3rd Respondent   LEE CHOU SIM 4th Respondent   LEUNG KA WAI, the Administrator of the Estate of PANG LAI WAH, deceased and LEUNG KA WAH, the Administrator of the Estate of PANG LAI WAH, deceased 5th Respondent   LEUNG KA WAI, the Administrator of the Estate of PANG LAI WAH, deceased and LEUNG KA WAH, the Administrator of the Estate of PANG LAI WAH, deceased and LEUNG KA WAH 6th Respondent   LEUNG OI LIN (梁愛連) and LAI CHUNG SHING (黎宗成) 7th Respondent   LEE CHEUNG SANG (李長生), LEE KENG CHUNG (李景忠) and LEE WING TAI (李永泰), the Executor of the Estate of LEE KAI YAU otherwise spelt as LEE KAI YAW, deceased 8th Respondent (discontinued)   DRAGON TOP DEVELOPMENT LIMITED 9th Respondent   (龍高發展有限公司)     LARM KIT FUNG 10th Respondent   YEUNG MEI CHUN 11th Respondent   CHAN HAU LING (陳巧玲), CHAN TAT CHIU (陳達超), CHAN FAN (陳芬) and CHAN TAT MAN (陳達敏) 12th Respondent (discontinued)   YIP KAM 13th Respondent   LAU CHI LING and LAU TIN FAI 14th Respondent (discontinued)   LAM LAI KAM (林麗琴) 15th Respondent (discontinued)   PO LEUNG KUK 16th Respondent   AU WAI WAH 17th Respondent (discontinued)   YEUNG YING KING (楊燕琼) 18th Respondent   CHEUNG PING YUEN (張炳源) and WONG KAM FUNG (黃錦鳳) 19th Respondent   TSO SAU SANG 20th Respondent The Personal Representative of the Estate of CHENG FOK YEE CHING also known as FOK YEE CHING, deceased 21st Respondent   CHOW RICHARD HOI and CHOW JOANNE KAM CHU 22nd Respondent   TSUI CHE MAN (徐之敏), the Administrator of the Estate of TSUI CHE CHUN, deceased 23rd Respondent   TONG SHIU FONG 24th Respondent     (discontinued)   LEE CHI MING and LEE LEUNG FUNG LIN 25th Respondent   MAXCOLM FINANCE LIMITED 26th Respondent __________________________ Before: Mr Lawrence Pang, Member of the Lands Tribunal Dates of Hearing: 4-6, 11-14 September 2023 Date of Respondents’ Closing Submission: 5 October 2023 Date of Applicants’ Closing Submission: 25 October 2023 Date of Judgment: 29 February 2024 _________________ JUDGMENT _________________ 1.  This is an application for a compulsory sale order under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545 (“the Ordinance”) (hereinafter referred to as “the Application”) to sell all the undivided shares of Section C of Inland Lot No 2147 (“the Lot”) on which building known as the Haven Court (“the Buildings”) stands with the address of Nos 2-30 Haven Street & Nos 128-138 Leighton Road, Hong Kong. 2.  In between the Lot and Haven Street is a longitudinal strip of land, being Section P of Inland Lot No 2147, owned by an associated company of the applicants. As a result, their valuation expert, Mr Charles Chan of Savills Valuation Surveyors and Professional Services Limited (“Savills”), has been instructed to assess the redevelopment value (“RDV”) of the Lot on the assumption that the Lot is a Class B site under the Building (Planning) Regulations with frontage onto both Leighton Road and Haven Street. 3.  The Building comprises an 11-storey composite building with shops on G/F and domestic units on the upper floors (“U/F”) being served by 3 common staircases and 3 passenger lifts. The occupation permit of the Building (“OP”), Permit No H23, was issued pursuant to the Buildings Ordinance on 27 January 1959 which permitted the following: “ One building with (a) shops at ground floor for non-domestic purpose (b) first floor to tenth floor for domestic purpose”   4.  According to the plans attached to the Deed of Mutual Covenant dated 30 December 1958, there are 44 shops on the G/F, 18 being shops with street frontages and the remaining arcade shops with the rear row of the arcade shops fronting onto the common open yard which is currently accessible. On each of 1/F to 9/F, there are 13 domestic units (ie Block A to Block M) and on 10/F, there are 8 domestic units with Block A to Block B and Block H to Block M. The corresponding undivided shares as assigned to each of the units, totaling 379, are shown as follows: Ground Floor Shop No (Undivided Share) G/F 1 2 3 4 5 6 7 8 9 10 2/379 2/379 2/379 2/379 2/379 1/379 2/379 1/379 2/379 1/379 11 12 13 14 15 16 17 18 19 20 2/379 1/379 2/379 1/379 2/379 1/379 2/379 1/379 2/379 1/379 21 22 23 24 25 26 27 28 29 30 2/379 1/379 2/379 1/379 2/379 1/379 2/379 1/379 2/379 2/379   32 33 34 35 36 37 38 39 40 1/379 1/379 1/379 1/379 1/379 1/379 1/379 1/379 1/379 41 42 43 44 45   1/379 1/379 1/379 1/379 1/379 Block A B C D E F G H I J K L M 1/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 2/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 3/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 4/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 5/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 6/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 7/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 8/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 2/379 9/F 3/379 3/379 3/379 3/379 3/379 3/379 3/379 2/379 2/379 2/379 2/379 2/379 3/379 10/F 3/379 3/379   1/379 2/379 2/379 2/379 2/379 3/379 5.  At the time of the Application, ie 22 July 2019, the applicants altogether owned approximately 84.04% of the equal and undivided shares subject to the rest owned by the respondents (with the prefix R) as follows: (1)  R1 owning 3/379 undivided shares allotted to Shop 11 & Shop 39 on G/F, but possession of which was taken up by R26 below as mortgagee in possession[1]; (2)  R2 owning 2/379 undivided shares allotted to Shop 13 on G/F; (3)  R3 owning half share of 3/379 undivided shares allotted to Shop 22 & Shop 23 on G/F (with the other half owned by the 1st applicant, ie A1); (4)  R4 owning 3/379 undivided shares allotted to Shop 24 & Shop 25 on G/F; (5)  R5 owning 1/379 undivided shares allotted to Shop 28 on G/F; (6)  R6 owning 1/379 undivided shares allotted to Shop 41 on G/F; (7)  R7 owning 1/379 undivided shares allotted to Shop 44 on G/F; (8)  R9 owning 2/379 undivided shares allotted to Block I on 3/F; (9)  R10 owning 3/379 undivided shares allotted to Block C on 2/F; (10)  R11 owning 2/379 undivided shares allotted to Block M on 2/F; (11)  R13 owning 3/379 undivided shares allotted to Block E on 5/F; (12)  R16 owning 3/379 undivided shares allotted to Block C on 7/F; (13)  R18 owning 2/379 undivided shares allotted to Block I on 7/F; (14)  R19 owning 3/379 undivided shares allotted to Block C on 8/F; (15)  R20 owning 3/379 undivided shares allotted to Block D on 8/F; (16)  R21 owning 2/379 undivided shares allotted to Block H on 8/F; (17)  R22 owning 2/379 undivided shares allotted to Block K on 8/F; (18)  R23 owning 3/379 undivided shares allotted to Block D on 9/F; (19)  R25 owning 2/379 undivided shares allotted to Block I on 9/F; (20)  R26 being the mortgagee in possession of 3/379 undivided shares allotted to Shop 11 & Shop 39 pursuant to the order of the High Court granted in HCMP 1361/2023 dated 10 February 2023. 6.  While Notices of Opposition (Form 33) were filed by R1, R2, R3, R7, R10, R11, R16, R18, R20, R22, R25 & R26, none of them produce any expert evidence on building condition and structural assessment. Thus, the only disputes were on expert evidence concerning the assessment of the market value of the corresponding units (which is usually referred to by the valuation profession as the Existing Use Value or simply the acronym EUV) and the RDV of the Lot, on the basis of which the reserve price for the prospective sale by auction, should the order for sale be granted, is fixed. The Evidence 7.  The applicants have filed the following documents in support of the Application: (a)  the witness statement and supplemental statement dated 29 July 2022 and 12 December 2022 respectively from Mr Lam Kei Sun, representative of the applicants; (b)  the witness statement dated 12 December 2022 from Ms Leung Mei Ho, representative of the applicants; (c)  the witness statement dated 12 December 2022 from Mr Chow Chin Pong, representative of the applicants; (d)  a Building Condition Survey Report by Mr Wong Sai Ning Benson (“Mr Benson Wong”) dated 28 July 2022; (e)  a Structural Assessment Report by Mr So Kin Shing (“Mr So”) dated 28 July 2022; (f)  the following reports by Mr Charles Chan: (i)  the Application Report dated 12 July 2019 pursuant to Part 1 of Schedule 1 to the Ordinance; (ii)  a Supplemental Report dated 28 July 2022 on the revised EUV of the Building as at 27 May 2019 and the RDV of the Lot; (iii)  a Rebuttal Report dated 11 November 2022 on the EUV and RDV report both dated 13 October 2022 on behalf of the respondent prepared by Mr Paul Varty (“Mr Varty”); (iv)  an updated RDV report dated 22 August 2023. 8.  The respondents relied on the following reports by Mr Varty: (a)  as said, the EUV report dated 13 October 2022; (b)  as said, a RDV report dated 13 October 2022; (c)  an updated RDV report dated 22 August 2023. 9.  Mr Charles Chan and Mr Varty had also prepared two Joint Statements, one dated 13 December 2022 with a supplement dated 31 August 2023 and another dated 28 August 2023 (as amended on 31 August 2023). Live Respondents Remaining on Record 10.  While Mr Mok Yeuk Chi (“Mr Mok”), as instructed by Messrs Lo, Wong & Tsui, Solicitors & Notaries, acted for the applicants, the respondents were represented by the following legal representatives, if any: Respondent Property Concerned Instructing Solicitors Counsel/Solicitor R1 Shop 11 & Shop 39 on G/F       R2 Shop 13 on G/F Messrs Woo, Kwan, Lee & Lo Mr Ross M Y Yuen R3 Shop 22 & Shop 23 on G/F Messrs Peter Mo & Co Mr Raymond W N Tsui R4 Shop 24 & Shop 25 on G/F        R5 Shop 28 on G/F       R6 Shop 41 on G/F      R7 Shop 44 on G/F       R9 Block I on 3/F       R10 Block C on 2/F Messrs Cheung, Chan & Chung Mr Jonathan Lee R11 Block M on 2/F Messrs Peter Mo & Co Mr Raymond W N Tsui R13 Block E on 5/F       R16 Block C on 7/F       R18 Block I on 7/F Messrs Peter Mo & Co Mr Raymond W N Tsui R19 Block C on 8/F       R20 Block D on 8/F Messrs Peter Mo & Co Mr Raymond W N Tsui R21 Block H on 8/F       R22 Block K on 8/F Messrs Peter Mo & Co Mr Raymond W N Tsui R23 Block D on 9/F       R25 Block I on 9/F Messrs Peter Mo & Co Mr Raymond W N Tsui R26 (Mortgagee in Possession) Shop 11 & Shop 39 on G/F Messr V Hau & Chow Mr K T Kong Whether the Applicants are entitled to make the Application 11.  Section 3(1) of the Ordinance requires an applicant to have not less than 90% of the undivided shares in a lot before he can make an application. 12.  Section 3(5) of the Ordinance provides that the Chief Executive in Council may, by notice in the Gazette, specify a percentage lower than the percentage mentioned in section 3(1) in respect of a lot belonging to a class of lots specified in the notice. 13.  The Land (Compulsory Sale for Redevelopment (Specification of Lower Percentage) Notice was gazette on 22 January 2010 and came into operation on 1 April 2010 (“the Notice”). Section 3 of the Notice lowered the threshold for compulsory sale in respect of the classes of lots specified in the Notice from 90% to 80%. Those classes of lots include: “a lot with each of the building erected on the lot issued with an occupation permit at least 50 years before the relevant date (ie the date of the application under the Ordinance)”. 14.  As mentioned, the OP for the Building was issued on 27 January 1959 (ie not less than 50 years before the date of the Application). The Notice is applicable and the threshold percentage should be 80%. 15.  At the time of the filing of the Application, the applicants altogether owned 84.04% of the undivided shares of the Lot. I agree therefore that the applicants are entitled to make the Application under section 3(1) of the Ordinance. EUV as at 27 May 2019 16.  By reference to section 4(1)(a) of the Ordinance, the Tribunal shall determine an application under section 3(1) by— first— (i)  if any minority owner of the lot the subject of the application disputes the value of any property as assessed in the application, hearing and determining the dispute; (ii)  in the case of any minority owner of the lot who cannot be found, requiring the majority owner of the lot to satisfy the Tribunal that the value of the minority owner’s property as assessed in the application is— (A)  not less than fair and reasonable; and (B)  not less than fair and reasonable when compared with the value of the majority owner’s property as assessed in the application. Assessment of G/F Units 17.  By the Joint Statement dated 13 December 2022, Mr Charles Chan and Mr Varty agreed on the factual information of all the G/F shops as well as the conversion factor for the ancillary areas: Shop No Saleable Area (m2) Encroached Yard (m2) Effective Area (m2) Frontage (m) Fronting Street Depth (m) Headroom (m) 1 35.0    35.0 5.2 Leighton Road 6.7 3.5 2 21.2    21.2 3.2 + Return Frontage: 2.7 Leighton Road 6.7 3.5 3 17.6    17.6 3.5 Leighton Road 5.1 3.5 4 & 5 48.5    48.5 6.4 + Return Frontage: 7.6 Leighton Road 7.6 3.5 6-10 & 12 78.6    78.6 6.0 Haven Street 9.9 3.5 11 18.9    18.9 3.0 Haven Street 6.2 3.5 13 18.9    18.9 3.0 Haven Street 6.2 3.5 15 18.9    18.9 3.0 Haven Street 6.2 3.5 17 18.9    18.9 3.0 Haven Street 6.2 3.5 19 18.9    18.9 3.0 Haven Street 6.2 3.5 20 & 21 30.2    30.2 3.0 Haven Street 9.9 3.5 23 18.9    18.9 3.0 Haven Street 6.2 3.5 25 18.9    18.9 3.0 Haven Street 6.2 3.5 27 18.9    18.9 3.0 Haven Street 6.2 3.5 29 18.9    18.9 3.0 + Return Frontage: 4.2 Haven Street 6.2 3.5 30 17.1    17.1 3.0 + Return Frontage: 4.2 Haven Street 5.6 3.5 14 11.3    11.3 3.1 Arcade 3.7 3.5 16 11.3    11.3 3.1 Arcade 3.7 3.5 18 11.3    11.3 3.1 Arcade 3.7 3.5 22 11.3    11.3 3.1 Arcade 3.7 3.5 24 11.3    11.3 3.1 Arcade 3.7 3.5 26 11.3    11.3 3.1 Arcade 3.7 3.5 28 11.3    11.3 3.1+ Return Frontage: 3.9 Arcade 3.7 3.5 32 9.4 2.9 10.9 2.3 Arcade 4.2 3.5 33 9.4 10.4 14.6 2.3 Arcade 4.2 3.5 34 14.4    14.4 2.7 Arcade 5.3 3.5 35 14.2 6.4 17.4 2.6 Arcade 5.3 3.5 36 13.4 7.0 16.9 2.5 Arcade 5.3 3.5 37 13.4 7.0 16.9 2.5 Arcade 5.3 3.5 38 14.2 7.5 15.1 2.7 Arcade 5.3 3.5 39 14.2 7.5 18.0 2.7 Arcade 5.3 3.5 40 17.5 9.2 22.1 3.3 Arcade 5.3 3.5 41 17.5    17.5 3.3 Arcade 5.3 3.5 42 21.5    21.5 4.0 Arcade 5.3 3.5 43 13.5 7.1 17.1 2.5 Arcade 5.3 3.5 44 13.4 7.0 16.9 2.5 Arcade 5.3 3.5 45 15.2 8.2 19.3 2.8 Arcade 5.3 3.5 18.  Mr Charles Chan and Mr Varty also agreed the unit rate of both the reference street shop (ie Shop 19 which fronts onto Haven Street at $704,000 per sq m) and the reference arcade shop (ie Shop 37 at $266,000 per sq m) as well as other adjustment factors save for the adjustment for frontage: Mr Charles Chan adopted 2% per 0.5m while Mr Varty adopted a less sensitive adjustment of 2% per 1m. 19.  A wider frontage increases the visibility of a shop unit to passers-by and thus increases the value of the shop. In location where trading potential is high, the sensitivity of shop value to length of frontage is much more prominent. However, I do not consider the subject location having high trading potential as it is situated at the fringe of the commercial hub in the Causeway Bay district. 20.  As well, in Tai Ping Restaurant Limited v Director of Lands, LDLR 1/2013 (unreported, dated 8 December 2014) in respect of resumption of a building at No 600 Shanghai Street, Kowloon, the Tribunal remarked at §48 that: “Generally, we may not make 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 the present valuation, I consider the adjustment rate at 4% per 1 meter difference suggested by Mr Lai is excessive.” 21.  While this observation of the Tribunal has been generally followed and adopted, for instance, more recently in Peace Ever Limited & Others v Chan Sui Ching & Other, LDCS 28000/2018 (unreported, 1 August 2023) at §§97 & 398, Mr Charles Chan, who happened also to be the valuation expert in that case, tried to distinguish and suggested that a more sensitive adjustment is justified because of the better trading environment in the present case. With respect, I do not agree particularly when Haven Street on which Shop 19 is situated is a cul-de-sac. 22.  Mr Charles Chan’s frontage adjustment can also be tested for instance by the combination of Shop 4 and Shop 5 around the corner of Leighton Road and Haven Street, as a result of which the frontage has been doubled from 3.2m to 6.4m. If Mr Charles Chan’s adjustment is adopted, it would increase the unit value by 12.8% which I find excessive.[2] Therefore, I prefer Mr Varty’s adjustment of of 2% per 1m. 23.  Thus, I follow the EUV assessments of the various G/F units as proposed by Mr Varty and determine the EUV as follows:[3] Shop No Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Location Size Frontage Layout Return Frontage Merging Potential Total 1 35.0 15% -6.4% 4.4% -1% 0% 0% 11.3% $783,552  $27,420,000  2 21.2 15% -0.9% 0.4% -1% 5% 0% 18.9% $837,056  $17,750,000  3 17.6 20% 0.5% 1.0% 2% 0% 0% 24.2% $874,368  $15,390,000  4 & 5 48.5 25% -11.8% 6.8% -3% 20% 0% 37.1% $965,184  $46,810,000  6-10 & 12 78.6 13% -23.9% 6.0% -9% 0% 0% -17.1% $583,616  $45,870,000  11 18.9 8% 0.0% 0.0% 0% 0% 0% 8.0% $760,320  $14,370,000  13 18.9 6% 0.0% 0.0% 0% 0% 0% 6.0% $746,240  $14,100,000  15 18.9 4% 0.0% 0.0% 0% 0% 0% 4.0% $732,160  $13,840,000  17 18.9 2% 0.0% 0.0% 0% 0% 0% 2.0% $718,080  $13,570,000  19 18.9 0% 0.0% 0.0% 0% 0% 0% 0.0% $704,000  $13,310,000  20 & 21 30.2 -2% -4.5% 0.0% -6% 0% 0% -12.0% $619,520  $18,710,000  23 18.9 -4% 0.0% 0.0% 0% 0% 0% -4.0% $675,840  $12,770,000  25 18.9 -6% 0.0% 0.0% 0% 0% 0% -6.0% $661,760  $12,510,000  27 18.9 -8% 0.0% 0.0% 0% 0% 0% -8.0% $647,680  $12,240,000  29 18.9 -10% 0.0% 0.0% 0% 3% 0% -7.3% $652,608  $12,330,000  30 17.1 -15% 0.7% 0.0% 1.0% 4% 0% -10.1% $632,896  $10,820,000  14 11.3 10% 3.7% 1.2% 2% 0% 20% 41.3% $375,858  $4,250,000  16 11.3 8% 3.7% 1.2% 2% 0% 20% 38.7% $368,942  $4,170,000  18 11.3 6% 3.7% 1.2% 2% 0% 20% 36.2% $362,292  $4,090,000  22 11.3 2% 3.7% 1.2% 2% 0% 20% 31.0% $348,460  $3,940,000  24 11.3 -1% 3.7% 1.2% 2% 0% 20% 27.2% $338,352  $3,820,000  26 11.3 -3% 3.7% 1.2% 2% 0% 20% 24.6% $331,436  $3,750,000  28 11.3 -5% 3.7% 1.2% 2% 5% 20% 28.1% $340,746  $3,850,000  32 10.9 -5% 4.0% -0.4% 1% 0% 0% -0.6% $264,404  $2,880,000  33 14.6 -5% 1.5% -0.4% 1% 0% 0% -3.0% $258,020  $3,770,000  34 14.4 -6% 1.7% 0.4% 0% 0% 0% -4.0% $255,360  $3,680,000  35 17.4 -4% -0.3% 0.2% 0% 0% 0% -4.1% $255,094  $4,440,000  36 16.9 -2% 0% 0.0% 0% 0% 0% -2.0% $260,680  $4,410,000  37 16.9 0% 0% 0.0% 0% 0% 0% 0.0% $266,000  $4,500,000  38 15.1 2% 1.2% 0.4% 0% 0% 0% 3.6% $275,576  $4,160,000  39 18.0 4% -0.7% 0.4% 0% 0% 0% 3.7% $275,842  $4,970,000  40 22.1 6% -3.5% 1.6% 0% 0% 0% 3.9% $276,374  $6,110,000  41 17.5 8% -0.4% 1.6% 0% 0% 0% 9.3% $290,738  $5,090,000  42 21.5 13% -3.1% 3.0% 0% 0% 0% 12.8% $300,048  $6,450,000  43 17.1 16% -0.1% 0.0% 0% 0% 0% 15.9% $308,294  $5,270,000  44 16.9 19% 0.0% 0.0% 0% 0% 0% 19.0% $316,540  $5,350,000  45 19.3 22% -1.6% 0.6% 0% 0% 0% 20.8% $321,328  $6,200,000                    Total:  $396,960,000  Assessment of U/F Units 24.  Again, Mr Charles Chan and Mr Varty agreed on the factual information of all the upper floor domestic units as well as the conversion factor for the ancillary areas. They also agreed the unit rate of both the reference large domestic unit (ie Block E on 4/F at $149,350 per s  q m) and the reference small domestic unit (ie Block J on 4/F at $153,470 per sq m) as well as other adjustment factors save for the internal condition of four units: Unit Mr Charles Chan Mr Varty Block D, 8/F Fair (0%) which was revised from originally -3% Good (+3%) Block I, 9/F Poor (-3%) Fair (0%) Block K, 8/F Very Poor (-6%) which was revised from originally -3% Poor (-3%) Block M, 2/F Poor (-3%) Good (+3%) 25.  While the parties agreed that it had been some time since the relevant date of 27 May 2019, an inspection in the present day would serve little purpose when the conditions of the units concerned may have deteriorated. As a result, I did not inspect the above domestic units on 5 September 2023. Thus, I cannot but rely on the photographs taken by the two valuation experts for the purpose of assessing the internal conditions of the units in dispute. 26.  At this juncture, I must point out that this is only a comparative judgment by reference to the internal condition of the reference large domestic unit and reference small domestic unit as at the relevant date when Mr Charles Chan made the following differentiation:[4] Classification Internal Condition Adjustment when compared with reference unit Good Above tenantable standard with no obvious defects noted +3% Fair Up to tenantable standard with no obvious defects noted, although some minor defects might be noted 0% Poor Marginally below tenantable standard with no obvious defects or with some minor defects noted: the minor defects noted could be more and/or the extent of the defects noted could be relatively more serious. -3% Very Poor Substantially below tenantable standard with obvious defects noted: the defects noted are more and/or the extent of the defects are serious. -6% Unacceptable Unacceptably below tenantable standard with extensive and serious defects observed. -9% 27.  The photographs of internal condition of the reference large domestic unit, ie Block E on 4/F were taken by Mr Charles Chan on 27 June 2022[5] and Mr Varty on 14 September 2022[6] respectively. They showed the unit was in relatively good condition though both experts agreed it as “fair”. 28.  On the other hand, I agree with the two valuation experts that the internal condition of the reference small domestic unit, ie Block J on 4/F was “fair” by reference to the photographs taken by Mr Charles Chan on 27 June 2022[7] and Mr Varty on 14 September 2022[8] respectively. 29.  I note that Mr Charles Chan was only able to inspect the four domestic units in question internally in January /February 2023[9] which did not differ significantly from that of Mr Varty. 30.  Having reviewed the photographs of the corresponding units in question, I come to the following conclusion: Unit Adjustment for Internal Condition Block D, 8/F[10]  0% Block I, 9/F[11]  -3% Block K, 8/F[12]  -6% Block M, 2/F[13]  -3% 31.  Following from the above, I determine the EUV of the various upper floor domestic units as follows: Block A Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 82.9 -1.5% 0.0% 0.0% 0.0% 0.1% -2.0% 1.0% -2.4% $145,766 $12,080,000 2 82.9 -1.0% 0.0% 0.0% 0.0% 0.1% -2.0% 1.0% -1.9% $146,512 $12,150,000 3 82.9 -0.5% 0.0% 0.0% 0.0% 0.1% -2.0% 1.0% -1.4% $147,259 $12,210,000 4 82.9 0.0% 0.0% 0.0% 0.0% 0.1% -2.0% 1.0% -0.9% $148,006 $12,270,000 5 82.9 0.5% 0.0% 0.0% -3.0% 0.1% -2.0% 1.0% -3.4% $144,272 $11,960,000 6 82.9 1.0% 0.0% 0.0% -3.0% 0.1% -2.0% 1.0% -2.9% $145,019 $12,020,000 7 82.9 1.5% 0.0% 0.0% -3.0% 0.1% -2.0% 1.0% -2.5% $145,616 $12,070,000 8 82.9 2.0% 0.0% 0.0% 0.0% 0.1% -2.0% 1.0% 1.1% $150,993 $12,520,000 9 82.9 2.5% 0.0% 0.0% -3.0% 0.1% -2.0% 1.0% -1.5% $147,110 $12,200,000 10 81.0 3.0% -5.0% 2.0% -3.0% 0.3% -2.0% 2.0% -2.9% $145,019 $11,750,000 Block B Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 87.9 -1.5% 0.0% 0.0% 0.0% -0.4% -2.0% 2.0% -1.9% $146,512 $12,880,000 2 92.0 -1.0% 0.0% 0.0% -3.0% -0.8% -2.0% 2.0% -4.8% $142,181 $13,080,000 3 92.0 -0.5% 0.0% 0.0% -3.0% -0.8% -2.0% 2.0% -4.3% $142,928 $13,150,000 4 92.0 0.0% 0.0% 0.0% 0.0% -0.8% -2.0% 2.0% -0.8% $148,155 $13,630,000 5 92.0 0.5% 0.0% 0.0% 0.0% -0.8% -2.0% 2.0% -0.3% $148,902 $13,700,000 6 92.0 1.0% 0.0% 0.0% -3.0% -0.8% -2.0% 2.0% -2.9% $145,019 $13,340,000 7 92.0 1.5% 0.0% 0.0% 0.0% -0.8% -2.0% 2.0% 0.6% $150,246 $13,820,000 8 92.0 2.0% 0.0% 0.0% -3.0% -0.8% -2.0% 2.0% -1.9% $146,512 $13,480,000 9 92.0 2.5% 0.0% 0.0% -3.0% -0.8% -2.0% 2.0% -1.4% $147,259 $13,550,000 10 122.6 3.0% -5.0% 0.0% -3.0% -3.9% -2.0% 2.0% -8.8% $136,207 $16,700,000 Block C Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 76.6 -1.5% 0.0% 0.0% -3.0% 0.7% 0.0% 0.0% -3.8% $143,675 $11,010,000 2 81.2 -1.0% 0.0% 0.0% 3.0% 0.3% 0.0% 0.0% 2.3% $152,785 $12,410,000 3 81.2 -0.5% 0.0% 0.0% -3.0% 0.3% 0.0% 0.0% -3.2% $144,571 $11,740,000 4 81.2 0.0% 0.0% 0.0% -3.0% 0.3% 0.0% 0.0% -2.7% $145,318 $11,800,000 5 81.2 0.5% 0.0% 0.0% -3.0% 0.3% 0.0% 0.0% -2.2% $146,064 $11,860,000 6 80.3 1.0% 0.0% 0.0% -3.0% 0.4% 0.0% 0.0% -1.6% $146,960 $11,800,000 7 77.7 1.5% 0.0% 0.0% -3.0% 0.6% 0.0% 0.0% -1.0% $147,857 $11,490,000 8 73.5 2.0% 0.0% 0.0% -3.0% 1.0% 0.0% 0.0% -0.1% $149,201 $10,970,000 9 64.0 2.5% -5.0% 0.0% -3.0% 2.0% 0.0% 0.0% -3.7% $143,824 $9,200,000 Block D Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 79.2 -1.5% 0.0% 0.0% -3.0% 0.5% 0.0% 0.0% -4.0% $143,376 $11,360,000 2 83.8 -1.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -4.0% $143,376 $12,010,000 3 83.8 -0.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -3.5% $144,123 $12,080,000 4 83.8 0.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -3.0% $144,870 $12,140,000 5 83.8 0.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -2.5% $145,616 $12,200,000 6 82.7 1.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 1.1% $150,993 $12,490,000 7 75.9 1.5% 0.0% 0.0% -3.0% 0.8% 0.0% 0.0% -0.8% $148,155 $11,240,000 8 70.8 2.0% 0.0% 0.0% 0.0% 1.3% 0.0% 0.0% 3.3% $154,279 $10,920,000 9 56.9 2.5% -5.0% 0.0% -3.0% 2.7% 0.0% 0.0% -3.0% $144,870 $8,240,000 Block E Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 79.2 -1.5% 0.0% 0.0% -3.0% 0.5% 0.0% 0.0% -4.0% $143,376 $11,360,000 2 83.8 -1.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -4.0% $143,376 $12,010,000 3 83.8 -0.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -3.5% $144,123 $12,080,000 4 83.8 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $149,350 $12,520,000 5 83.8 0.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -2.5% $145,616 $12,200,000 6 82.7 1.0% 0.0% 0.0% -3.0% 0.1% 0.0% 0.0% -1.9% $146,512 $12,120,000 7 75.9 1.5% 0.0% 0.0% -3.0% 0.8% 0.0% 0.0% -0.8% $148,155 $11,240,000 8 70.8 2.0% 0.0% 0.0% -3.0% 1.3% 0.0% 0.0% 0.2% $149,649 $10,600,000 9 56.9 2.5% -5.0% 0.0% -9.0% 2.7% 0.0% 0.0% -9.0% $135,909 $7,730,000 Block F Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 79.2 -1.5% 0.0% 0.0% -6.0% 0.5% 0.0% 0.0% -6.9% $139,045 $11,010,000 2 83.8 -1.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -4.0% $143,376 $12,010,000 3 83.8 -0.5% 0.0% 0.0% -9.0% 0.0% 0.0% 0.0% -9.5% $135,162 $11,330,000 4 83.8 0.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -3.0% $144,870 $12,140,000 5 83.8 0.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -2.5% $145,616 $12,200,000 6 82.7 1.0% 0.0% 0.0% -3.0% 0.1% 0.0% 0.0% -1.9% $146,512 $12,120,000 7 75.9 1.5% 0.0% 0.0% -3.0% 0.8% 0.0% 0.0% -0.8% $148,155 $11,240,000 8 70.8 2.0% 0.0% 0.0% -3.0% 1.3% 0.0% 0.0% 0.2% $149,649 $10,600,000 9 56.9 2.5% -5.0% 0.0% -3.0% 2.7% 0.0% 0.0% -3.0% $144,870 $8,240,000 Block G Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 67.9 -1.5% 0.0% 0.0% -3.0% 1.6% 0.0% 0.0% -2.9% $145,019 $9,850,000 2 72.5 -1.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -2.9% $145,019 $10,510,000 3 72.5 -0.5% 0.0% 0.0% 0.0% 1.1% 0.0% 0.0% 0.6% $150,246 $10,890,000 4 72.5 0.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -1.9% $146,512 $10,620,000 5 72.5 0.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -1.4% $147,259 $10,680,000 6 71.4 1.0% 0.0% 0.0% -3.0% 1.2% 0.0% 0.0% -0.9% $148,006 $10,570,000 7 64.6 1.5% 0.0% 0.0% -3.0% 1.9% 0.0% 0.0% 0.3% $149,798 $9,680,000 8 58.8 2.0% 0.0% 0.0% -3.0% 2.5% 0.0% 0.0% 1.4% $151,441 $8,900,000 9 45.6 2.5% -5.0% 2.0% -3.0% 0.9% 0.0% 0.0% -2.8% $149,173 $6,800,000 Block H Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 47.0 -1.5% 0.0% 2.0% -3.0% 0.6% 0.0% 1.0% -1.0% $151,935 $7,140,000 2 47.0 -1.0% 0.0% 2.0% -3.0% 0.6% 0.0% 1.0% -0.5% $152,703 $7,180,000 3 47.0 -0.5% 0.0% 2.0% -3.0% 0.6% 0.0% 1.0% 0.0% $153,470 $7,210,000 4 47.0 0.0% 0.0% 2.0% -3.0% 0.6% 0.0% 1.0% 0.5% $154,237 $7,250,000 5 47.0 0.5% 0.0% 2.0% -3.0% 0.6% 0.0% 1.0% 1.0% $155,005 $7,290,000 6 47.0 1.0% 0.0% 2.0% -6.0% 0.6% 0.0% 1.0% -1.6% $151,014 $7,100,000 7 47.0 1.5% 0.0% 2.0% -3.0% 0.6% 0.0% 1.0% 2.0% $156,539 $7,360,000 8 47.0 2.0% 0.0% 2.0% -3.0% 0.6% 0.0% 1.0% 2.5% $157,307 $7,390,000 9 47.0 2.5% 0.0% 2.0% 0.0% 0.6% 0.0% 1.0% 6.2% $162,985 $7,660,000 10 62.4 3.0% -5.0% 4.0% -3.0% -2.5% 0.0% 1.0% -2.8% $149,173 $9,310,000 Block I Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 53.2 -1.5% 0.0% 2.0% -3.0% -0.6% 0.0% 1.0% -2.2% $150,094 $7,990,000 2 50.0 -1.0% 0.0% 2.0% -3.0% 0.0% 0.0% 1.0% -1.1% $151,782 $7,590,000 3 50.0 -0.5% 0.0% 2.0% -3.0% 0.0% 0.0% 1.0% -0.6% $152,549 $7,630,000 4 50.0 0.0% 0.0% 2.0% -3.0% 0.0% 0.0% 1.0% -0.1% $153,317 $7,670,000 5 50.0 0.5% 0.0% 2.0% -3.0% 0.0% 0.0% 1.0% 0.4% $154,084 $7,700,000 6 50.0 1.0% 0.0% 2.0% -3.0% 0.0% 0.0% 1.0% 0.9% $154,851 $7,740,000 7 50.0 1.5% 0.0% 2.0% 3.0% 0.0% 0.0% 1.0% 7.7% $165,287 $8,260,000 8 50.0 2.0% 0.0% 2.0% -3.0% 0.0% 0.0% 1.0% 1.9% $156,386 $7,820,000 9 50.0 2.5% 0.0% 2.0% -3.0% 0.0% 0.0% 1.0% 2.4% $157,153 $7,860,000 10 69.0 3.0% -5.0% 4.0% 3.0% -3.8% 0.0% 1.0% 1.8% $156,232 $10,780,000 Block J Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 50.0 -1.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -4.5% $146,564 $7,330,000 2 50.0 -1.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -4.0% $147,331 $7,370,000 3 50.0 -0.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -3.5% $148,099 $7,400,000 4 50.0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $153,470 $7,670,000 5 50.0 0.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -2.5% $149,633 $7,480,000 6 50.0 1.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -2.0% $150,401 $7,520,000 7 50.0 1.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -1.5% $151,168 $7,560,000 8 50.0 2.0% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -1.1% $151,782 $7,590,000 9 50.0 2.5% 0.0% 0.0% -3.0% 0.0% 0.0% 0.0% -0.6% $152,549 $7,630,000 10 70.2 3.0% -5.0% 4.0% -3.0% -4.0% 0.0% 0.0% -5.2% $145,490 $10,210,000 Block K Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 44.7 -1.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -3.4% $148,252 $6,630,000 2 44.7 -1.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -2.9% $149,019 $6,660,000 3 44.7 -0.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -2.4% $149,787 $6,700,000 4 44.7 0.0% 0.0% 0.0% 0.0% 1.1% 0.0% 0.0% 1.1% $155,158 $6,940,000 5 44.7 0.5% 0.0% 0.0% -9.0% 1.1% 0.0% 0.0% -7.5% $141,960 $6,350,000 6 44.7 1.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -1.0% $151,935 $6,790,000 7 44.7 1.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -0.5% $152,703 $6,830,000 8 44.7 2.0% 0.0% 0.0% -6.0% 1.1% 0.0% 0.0% -3.1% $148,712 $6,650,000 9 44.7 2.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% 0.5% $154,237 $6,890,000 10 50.6 3.0% -5.0% 4.0% -3.0% -0.1% 0.0% 0.0% -1.4% $151,321 $7,660,000 Block L Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 49.2 -1.5% 0.0% 0.0% -6.0% 0.2% 0.0% 0.0% -7.2% $142,420 $7,010,000 2 44.7 -1.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -2.9% $149,019 $6,660,000 3 44.7 -0.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -2.4% $149,787 $6,700,000 4 44.7 0.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -1.9% $150,554 $6,730,000 5 44.7 0.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -1.4% $151,321 $6,760,000 6 44.7 1.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -1.0% $151,935 $6,790,000 7 44.7 1.5% 0.0% 0.0% -9.0% 1.1% 0.0% 0.0% -6.6% $143,341 $6,410,000 8 44.7 2.0% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% 0.0% $153,470 $6,860,000 9 44.7 2.5% 0.0% 0.0% 0.0% 1.1% 0.0% 0.0% 3.6% $158,995 $7,110,000 10 62.3 3.0% -5.0% 4.0% -3.0% -2.5% 0.0% 0.0% -3.8% $147,638 $9,200,000 Block M Floor Effective Area (m2) Adjustments Adjusted Unit Rate (/m2) EUV Floor Top Floor View Internal Condition Size Noise Lighting & Ventilation Total 1 44.6 -1.5% 0.0% 0.0% -3.0% 1.1% 0.0% 0.0% -3.4% $148,252 $6,610,000 2 44.1 -1.0% 0.0% 0.0% -3.0% 1.2% 0.0% 0.0% -2.8% $149,173 $6,580,000 3 44.1 -0.5% 0.0% 0.0% -3.0% 1.2% 0.0% 0.0% -2.3% $149,940 $6,610,000 4 44.1 0.0% 0.0% 0.0% 0.0% 1.2% 0.0% 0.0% 1.2% $155,312 $6,850,000 5 44.1 0.5% 0.0% 0.0% -3.0% 1.2% 0.0% 0.0% -1.3% $151,475 $6,680,000 6 44.1 1.0% 0.0% 0.0% -3.0% 1.2% 0.0% 0.0% -0.9% $152,089 $6,710,000 7 44.1 1.5% 0.0% 0.0% -3.0% 1.2% 0.0% 0.0% -0.4% $152,856 $6,740,000 8 44.1 2.0% 0.0% 0.0% -3.0% 1.2% 0.0% 0.0% 0.1% $153,623 $6,770,000 9 44.1 2.5% 0.0% 0.0% -6.0% 1.2% 0.0% 0.0% -2.5% $149,633 $6,600,000 10 49.0 3.0% -5.0% 4.0% -3.0% 0.2% 0.0% 0.0% -1.1% $151,782 $7,440,000 Conclusion on EUV 32.  Therefore, the total EUV of the Building is $396,960,000 (G/F) + $1,194,380,000 (U/F) = $1,591,340,000 and the pro rata shares of corresponding respondents’ interest are shown as follows: Respondent Property Concerned EUV Pro Rata Share R1 Shop 11 & Shop 39 on G/F $14,370,000 + $4,970,000 = $19,340,000 1.2153% R2 Shop 13 on G/F $14,100,000 0.886% R3 Shop 22 & Shop 23 on G/F $3,940,000 + $12,770,000 = $16,710,000 1.0501% R4 Shop 24 & Shop 25 on G/F $3,820,000 + $12,510,000 = $16,330,000 1.0262% R5 Shop 28 on G/F $3,850,000 0.2419% R6 Shop 41 on G/F $5,090,000 0.3199% R7 Shop 44 on G/F $5,350,000 0.3362% R9 Block I on 3/F $7,630,000 0.4795% R10 Block C on 2/F $12,410,000 0.7798% R11 Block M on 2/F $6,580,000 0.4135% R13 Block E on 5/F $12,200,000 0.7666% R16 Block C on 7/F $11,490,000 0.722% R18 Block I on 7/F $8,260,000 0.5191% R19 Block C on 8/F $10,970,000 0.6894% R20 Block D on 8/F $10,920,000 0.6862% R21 Block H on 8/F $7,390,000 0.4644% R22 Block K on 8/F $6,650,000 0.4179% R23 Block D on 9/F $8,240,000 0.5178% R25 Block I on 9/F $7,860,000 0.4939% R26 (Mortgagee in Possession) Shop 11 & Shop 39 on G/F $14,370,000 + $4,970,000 = $19,340,000 1.2153% Whether Redevelopment of the Lot is Justified 33.  Section 4(2) of the Ordinance provides that the Tribunal shall not make an order for sale unless it is satisfied that the "age or state of repair" of the Building is justified and that the applicants have taken "reasonable steps" to acquire all undivided shares of the Lot. 34.  In his opening submission, Mr Mok referred to the guidelines laid down in Top Sail International Limited v Cheng Kai Ming, LDCS 18000/2010 (unreported, dated 15 November 2011 (“Top Sail”) and Charmlink Limited v Lee Tong Hing & Others, LDCS 16000/2010 (unreported, dated 29 November 2011) (“Charmlink”) on the factors that the Tribunal should consider whether redevelopment is justified due to age and state of repair. 35.  In Top Sail, the Tribunal stated: “23. ……, we are of the view that when the requirement of “the age” of the Buildings is considered, we should not restricted our consideration to just the physical age of the Buildings.…… we are of the view that the absence of a specific physical age in the Ordinance indicates that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question. 24. The physical age of a building is clearly one of the considerations…... The physical conditions of a building and the amount that would be required to maintain the building are other factors that the Tribunal should consider, as they would affect the decision on whether the life of a building should be ended or prolonged. The obsolete design of a building should also be considered as it has an important impact on whether it is too old to serve a modern society.” 36.  Such a discretion by the Tribunal was followed in Charmlink: “30. We are of the view that the Tribunal has discretion to determine at what stage a building should be redeveloped after considering all the relevant factors concerning the age of the building in question. The relevant factors in the present case are that the Building is over 50 years old and it has passed its designed life. It is also obsolescent in design and not economical to maintain. All these factors point to the fact that the Building has come to an end of its physical as well as economical life. Thus, we find that redevelopment is justified on the ground of the age of the Building. 31.   …… It is also within the Tribunal’s discretion to determine in what conditions a building should be redeveloped after considering all the relevant factors concerning the state of repair of the building in question. With the clear evidence from the two experts that the Building is in a poor state of repair and in fact untenantable without substantial repair works to be carried out over a long period of time, we have no hesitation in finding that redevelopment is justified by the state of repair of the Building.” 37.  For the age and state of repair requirements, the applicants adduced the expert evidence of 2 experts: Mr Benson Wong who is an Authorised Person and a building surveyor, and Mr So who is an Authorised Person and a structural engineer. Their expertise is not disputed. 38.  According to Mr So in his Structural Assessment Report dated 28 July 2022, the Building was designed on the basis of the London Council By-law of 1938 while the current standards for the design of reinforced concrete buildings are those stipulated in the Code of Practice for Structural Use of Concrete 2013. The requirements of the LCC By-laws were however lower than the modern requirements in 7 aspects which could adversely affect the structural performance of the structural frames of the Building. They may include insufficient concrete cover to protect the reinforcement bars against corrosion and fire, inadequacy of the structural frames and foundation to withstand the effects of wind and inadequate robustness against “disproportionate collapse” in the event of an accident. 39.  Mr So also found the following defects in the Building: (a)  Visual inspections showed there being a total of 56 numbers of structural elements in the Building exhibiting defects in the form of spallings and cracks; (b)  Cover-meter survey revealed that 1 out of 6 column samples, 1 out of 6 beam samples and 3 out of 6 slab samples not having sufficient concrete covers to (1) protect the embedded steel reinforcement bars against corrosion, (2) protect the bars against fire, and (3) provide sufficient depth of concrete for the safe transmission of bond forces; (c)  Carbonation depth test results revealed that carbonation has penetrated past the concrete cover of 1 out of 6 samples on columns, 6 out of 10 samples on beams and all 10 samples on slabs. This means the alkaline environment in many of the concrete covers which gives protection to the reinforcement bars in the structural members against corrosion has been destroyed and steel bars in these structural members must have caused to corrode; (d)  Compression tests revealed that the concrete strength of 1 out of 6 tested samples of slabs do not comply with the requirement at the time of construction; (e)  Chloride content tests showed that 4 out of 6 (or 67%) tested samples for columns and all 6 samples (ie 100%) of beams and slabs had the chloride content exceeded the 0.35% limit, which demonstrated an increased risk of corrosion of the embedded steel reinforcement bars in the reinforced concrete structural members; (f)  Corrosion (open up) surveys revealed all exposed bars of columns, beams and slabs exhibited rust of various magnitudes and suffered from reduction in their cross-sectional areas due to corrosion. 40.  It is to note that the structural test samples were taken from areas of structural elements not carrying any apparent structural defects such as cracks and spalling. They were supposed to be chosen from locations that should give a representative picture of the actual state of the structural elements of the Building. On the basis of the above, Mr So opined that the deterioration the structural frames of the Building will continue steadily due to extensive carbonation and excessive chloride content of the reinforced concrete structural members. The process of carbonation and corrosion are irreversible. It is inevitable that new defects will occur and previous defects though repaired will relapse readily, requiring substantial repairs or even partial demolition and re-construction of some defective structural elements in the future when, for example, there are unacceptably high reductions in the structural performance factors in the reinforced concrete structural elements. Although repairs are possible, repair work will need to be carried out regularly in the future and that such repairs will be more and more extensive as the Building becomes older. Also, such costs of repair will escalate in future as the extent and seriousness of the deterioration of the structural elements increase with age. 41.  Mr Benson Wong in his Condition Survey Report also dated 28 July 2022 stated that: (a)  The Building was built in 1959 and was more than 63 years old. It is structurally aged in respect of durability provisions. Its structure is considered to have passed the end of its design working life. (b)  The Building is also aged functionally as it has been suffering from the following aspects of functional obsolescence: (i)  The design and construction of the structural frames had only complied with the less stringent structural requirements applicable more than 63 years ago resulting in no improvement of the robustness of the structural frames in resisting disproportionate collapse due to accidents. (ii)  The fire services installation is obsolete due to the following: -  No automatic fire detection system in lift machine rooms and meter room; -  No automatic sprinkler system in shops; -  Substandard fire hydrant/hose reel system; and -  No emergency electricity supply system. (iii)  The fire escape arrangements for the Building are unsatisfactory when no protected lobby is provided to separate the lift lobby and the three staircases of the Building and no handrails are provided on both sides of stairs in the three staircases. (iv)  The fire resisting construction is outdated when the existing concrete cover thickness of beam is 25.4mm and that of floor slab is 12.7mm, which are less than the currently required thickness of 30mm for beam and 20mm for floor slab. As well the existing flat entrance doors on the upper floors of the Building are not fire rated doors and the existing electrical installations and wirings installed in the typical corridors are exposed thereby posing fire hazards to the fire escape. (v)  The fire access arrangements for the Building are unsatisfactory when it has no fireman’s lift. (vi)  The Building has no barrier free access facilities such as an accessible lift and an accessible ramp. (vii)  The Building has no proper refuse disposal system whereby creating hygienic and fire safety problems. (viii)  The Building has no lightning protection system installed to protect its occupants and building parts from lightning strikes. 42.  Mr Benson Wong also commented that the following defects and deficiencies found in the Building are of the nature and magnitude that cannot easily rectified by simple and piecemeal repairs: (a)  The generally defective external rendering. (b)  The existence of asbestos containing materials. (c)  The defective waterproofing to the main roof areas. (d)  The non-fire rated flat entrance doors. (e)  The exposed electrical installations and wirings in the corridor. (f)  The lack of equipotential bonding for exposed metal fixtures. (g)  The lack of a lightning protection system. 43.  Mr Benson Wong estimated a repair cost up to $48,985,459 or about 25% of the construction cost for a new similar superstructure would be required. Owing to the Building’s poor state of repair, Mr Benson Wong recommended the Building to be redeveloped rather than being repaired, particularly bearing in mind that the Building does not possess any historical value or architectural merit. 44.  The respondents did not take issue on the "age or state of repair" of the Building being justified for redevelopment. The 2 experts were not cross-examined on the issue. More importantly, the respondents have not adduced any evidence, factual or opinion, in relation to the “age” and “state of repair” of the Building. 45.  Notwithstanding the above, R7 submitted in the end of her closing submission dated 5 October 2023 that when the repair cost amounts to mere 3% of the EUV, the Tribunal should consider not to grant an order for sale. With respect, R7 had not considered the Building is aging and suffering from many items of physical and functional obsolescence and inherent structural deficiencies which cannot be remedied by the repairs recommended by Mr So and Mr Benson Wong. In any event, 3% of the EUV is not an insignificant amount and none of the respondents had given evidence that they were willing and ready to contribute to repair the Building back to tenantable condition. For instance, according to Mr Benson Wong at §5.15.4 of his Condition Survey Report dated 28 July 2022, the time for completing the proposed repair works would at least take 27 months.[14] Also, prolongation of the programme is commonly encountered due to extra time required by owners to agree on the way forward. 46.  Having considered the evidence before the Tribunal therefore, I am satisfied that redevelopment of the Building is justified due to the age and state of repair. Section 4(2)(b) – Whether Applicants have taken reasonable steps 47.  The applicants are under an obligation to take reasonable steps to negotiate on terms that are fair and reasonable for the purchase of the interest of the respondents under Section 4(2)(b) of the Ordinance. 48.  By reference to the witness statement of Mr Lam Kei San, the investment director of Soundwill Holdings Limited, ie the parent company of the applicants, dated 29 July 2022, the applicants have made two rounds of offers to the respondents (save for R26) through their solicitors to acquire the units or interests they own: - Offer Offer on 11 June 2019 Offer on 14 January 2022 EUV as at 27 May 2019 as determined above R1 $26,700,000 + $7,900,000 = $34,600,000 $22,770,000 + $6,710,000 = $29,480,000 $14,370,000 + $4,970,000 = $19,340,000 R2 $26,700,000 $22,770,000 $14,100,000 R3 $4,000,000[15] + $12,075,000[16] = $16,075,000[17]  $3,400,000[18] + $10,300,000[19] = $13,700,000[20]  $3,940,000 + $12,770,000 = $16,710,000 R4 $8,000,000 + $24,150,000 = $32,150,000 $6,800,000 + $20,600,000 = $27,400,000 $3,820,000 + $12,510,000 = $16,330,000 R5 $8,400,000 $7,130,000 $3,850,000 R6 $9,750,000 $8,310,000 $5,090,000 R7 $8,500,000 $7,230,000 $5,350,000 R9 $15,200,000 $12,940,000 $7,630,000 R10 $24,350,000 $20,740,000 $12,410,000 R11 $13,150,000 $11,200,000 $6,580,000 R13 $25,300,000 $21,560,000 $12,200,000 R16 $23,350,000 $19,890,000 $11,490,000 R18 $15,500,000 $13,200,000 $8,260,000 R19 $22,250,000 $18,970,000 $10,970,000 R20 $21,800,000 $18,580,000 $10,920,000 R21 $14,8500,000 $12,660,000 $7,390,000 R22 $13,750,000 $11,720,000 $6,650,000 R23 $18,200,000 $15,510,000 $8,240,000 R25 $15,650,000 $13,330,000 $7,860,000 49.  I am given to understand that each of the offers above was accompanied by Savills’ advice letters setting out the relevant valuation assessments and calculations of the apportioned share of the respondents’. In Intelligent House Ltd v Chan Tung Shing & Others [2008] 4 HKC 421 where the majority owner relied on its valuation expert to formulate some of the offers, the Tribunal ruled at §334(3) that: “… it is not disputed that Savills is a reputable firm of valuers. In our view, it is also reasonable for Intelligent House to rely on Savills’ expert opinion to formulate the purchase prices offered to the minority owners. There is also no reason for us to believe, nor is there such evidence to suggest, that the advices from Savills were not properly made based on professional valuation of the EUV and RDV of the minority owners’ units.” 50.  I also note that after commencement of the Application, the applicants have successfully made offers and acquired the interest of R12, R14, R15, R17 and R24. 51.  More importantly, the Court of Final Appeal in Capital Well Ltd v Bond Star Development Ltd (2005) 8 HKCFAR 578, [2005] 4 HKLRD 363 has emphasized at §33 that: “In making that assessment (whether an offer is reasonable) the Tribunal is not conducting a valuation exercise. It does not need to adjudicate upon any disputes about the correct valuation principles to be applied. It does not itself arrive at any conclusion as to what figure represents the correct valuation. It merely needs to be satisfied that, on the evidence available, the offer falls within the range of what may broadly be regarded as fair and reasonable compensation for the interest in question.”[21] 52.  Of particular interest is that when the applicants (ie the 1st applicant to be exact) made the 1st offer to R2 on 11 June 2019 (ie prior to the Application on 22 July 2019), the unit concerned was registered in the ownership of her late mother who passed away on 2 October 2018. Despite R2’s willingness to accept the offer as alleged in her witness statement dated 14 October 2022[22], she was not in the position to deliver vacant possession of the unit to the 1st applicant. According to her, one day before the scheduled signing off the Provisional Sale and Purchase Agreement, ie on 10 July 2019, the 1st applicant attempted to insert various terms (which were written in Chinese)[23], the main one of which was Clause 17(g) of the draft whereby the 1st applicant was given the right to terminate the transaction on 30 April 2020 or to wait for an unlimited period of time if R2 had not yet obtained the probate status by 30 April 2020. As well, R2 alleged that she was requested to deliver vacant possession of the unit to the 1st applicant by 30 April 2020 in any event even if the transaction had not completed. R2 was hesitant to sign the Provisional Sale and Purchase Agreement. 53.  Negotiation with R2 was then put on hold even after the Letter of Administration was granted to R2 on 20 August 2020. And to her dismay, when the applicants made the 2nd offer to her on 14 January 2022, it was in the sum of $22,770,000 which represented a drop of 14.7% from the previous offer of $26,700,000. R2 is however not suggesting that her attempt to accept the offer and the negotiation that ensued had resulted in a binding agreement. 54.  With regret, a clause similar to the Clause 17(g) mentioned above was in issue in Starex Development Limited v Yau So Ching & Others, DCCJ 2372 & 2374/2021 (unreported, dated 13 February 2023) where an intending applicant for compulsory sale inserted a clause that it could forgo the purchase by issuing a termination notice before a certain completion date. Then the District Court held at §31 that the agreements concerned were commercial contract and there was business efficacy in the clause so that it was not unfair, unreasonable or inequitable. See §32 of the judgment. 55.  Furthermore, in Good Faith Properties Limited & Others v Cibean Development Company Limited, LDCS 42000/2011 (unreported, dated 31 May 2013, the Tribunal had decided that there is no requirement for the majority owner to take all reasonable steps to acquire before taking out the application. Instead, with a purposive interpretation of Section 4(2)(b), all reasonable steps before the making of a sale order to acquire the minority owner’s share in the Lot should be considered, be it post- or pre-Application. See §§35-61 of the judgment. 56.  As regards R2’s complaint about water seepage starting from May 2020, it is not disputed that the water seepage does not affect the assessment of the EUV of her unit, the valuation date of which was 27 May 2019. If R2 wishes to make claims on the water seepage issue, I agree with Mr Mok that it will have to form the subject matter of another set of proceedings. 57.  Bearing in mind the above, I am satisfied that on the evidence available and in the circumstances of the Application, the applicants have taken reasonable steps to acquire all the undivided shares in the Lot including negotiating for the purchase of such of those shares as are owned by the respondents on terms that are fair and reasonable. Disputeson the estimation of the RDV of the Lots Optimum Hypothetical Development Model 58.  In fact, the main dispute in these proceedings is on the estimation of the RDV of the Lot, which shall become the reserve price for the public auction when the order for sale is granted. 59.  It is undisputed that the Lot comprises a longitudinal site with frontage of 22.860 m onto Leighton Road and a longer frontage of 53.442 m onto Haven Street[24], rendering a total area of 1,221.66 sq m. With a permitted plot ratio of 15, the maximum gross floor area (“GFA”) that can be built in accordance with the prevailing Building (Planning) Regulations is 18,324 sq m. 60.  Both Mr Charles Chan for the applicants and Mr Varty for the respondents agreed that there was no appropriate land sale for direct comparison purpose. They agreed to resort to the residual valuation method in determining the RDV. This can be done by deducting development cost (including construction costs, professional fees, finance costs etc) and developer’s profit from the estimated gross development value (“GDV”) of the completed optimum development. 61.  Initially, both Mr Charles Chan and Mr Varty opined the optimum development on the Lot would comprise a 25-storey commercial building with retail shops on the G/F to 2/F, podium garden on 3/F, mechanical floor on 4/F and office units on 5/F to 24/F.[25] Then, inter alia, there was dispute between the two valuation experts on whether setback was required under the Approved Causeway Bay Outline Zoning Plan No S/H6/17 the statutory notes of which state that: “For sites on the two sides of Haven Street, a minimum setback of 0.5m from the lot boundary fronting Haven Street shall be provided.” Haven Street, being not only a cul-de-sac, is a relatively narrow street of only 12.6 m in width. 62.  In addition, there was dispute on whether provision of a communal podium garden would be required under Practice Note for Authorized Persons, Registered Structural Engineers and Registered Geotechnical Engineers (“PNAP”) APP-132 and APP-152. 63.  Following from the above disputes, the parties had engaged the opinion of Authorised Persons, Mr Boris Yung (“Mr Yung”) for the applicants and Mr Raymond Chan for the respondents. 64.  Particularly in §11.2 of Mr Varty’s updated RDV report dated 22 August 2023, he stated as follows:[26] “Whilst believe Mr Chan’s scheme is efficient and may serve our purposes for valuation I am concerned with the no of lifts and some questions raised over the bonus plot ratio issue. I have therefore asked Mr Chan to provided me with an Alternative Scheme without any Bonus PR and with an additional 2 lifts, thus providing a total of 5 lifts in the Alternative Scheme... I believe this alternative scheme represents the optimum scheme balancing technical approval issues with commercial marketability. I have therefore based my valuation on this alternative scheme and set out below the Area Schedule of the Alternative Scheme on which my valuation is based.” 65.  Mr Charles Chan and Mr Varty arrived then at the following on the basis of the respective hypothetical development model prepared by Mr Yung and Mr Raymond Chan:   Mr Charles Chan Mr Varty RDV $2,000,000,000[27]  $3,496,700,000[28]  Accommodation Value (“AV”) $109,143 per sq m $190,817 per sq m 66.  In formulating the optimum development model, the applicants relied on a 24-storey commercial development[29] proposed by Mr Yung whereas the respondents relied on a 25-storey commercial development[30] proposed by Mr Raymond Chan on 21 August 2023. The main parameters of the two schemes are set out below: Floor Mr Yung Mr Raymond Chan User Saleable Area User Saleable Area G/F 5 Shops 837.794 m2  11 Shops 936.17 m2  1/F Commercial 537.053 m2  Commercial 937.19 m2  2/F Commercial 633.671 m2  Commercial 997.89 m2  3/F Podium Garden   Food & Beverage 634.06 m2  4/F Mechanical Floor   Mechanical Floor   5/F-7/F Food & Beverage 2,290.203 m2 (762.401 m2 x 3) Office 1,902.18 m2 (634.06 m2 x 3) 8/F Food & Beverage 659.150 m2  Office 634.06 m2  9/F Food & Beverage 607.353 m2  Office 634.06 m2  10/F-13/F Office 2,503.244 m2 (625.811 m2 x 4) Office 8,876.84 m2 (634.06 m2 x 14)   14/F-23/F Office 6,380.610 m2 (638.061 m2 x 10) Office 24/F   Office 634.15 m2    Total:   14,449.078 m2    16,186.60 m2  67.  In gist, the main difference between the two schemes is that Mr Yung proposed a smaller ground floor entrance towards the far end of the Lot along Haven Street which, via a pair of escalators, lead to the office lobby on 2/F so that more shops or commercial space would be provided on G/F and 1/F. In addition, a small lift lobby on Leighton Road, but away from the corner of the street with Haven Street, will serve the commercial spaces up to 2/F. 68.  In comparison, Mr Raymond Chan’s proposal or in fact, the original assumption adopted by both Mr Charles Chan and Mr Varty before the engagement of the Authorised Persons, resembles a schematic drawing usually preferred by the Tribunal. For instance, in Cheer Capital Limited v Unibase Investment Limited & Another, LDCS 5000 & 6000/2013 (unreported, dated 12 June 2015), the Tribunal remarked at §175 that the hypothetical arcade design proposed on the ground floor level could not avoid the problem of making comparison analysis of the long depth of the site because arbitrary adjustments have still to be made to the arcade shops inside. Then another valuation expert in the same case admitted that “the exercise of ascertaining the gross development value was an averaging exercise”. 69.  As well, in Pacific Base Holdings Limited & Others v Lee Hop Biu & Other, CACV 426/2020 (unreported, dated 31 May 2021), the Court of Appeal affirmed, at §43 of the judgment, that “(f)rom a practical point of view, since there is no requirement on the majority owners to submit a detailed redevelopment plan at this stage, the proposed redevelopment could only be presented to the Tribunal on a conceptual level with a high degree of generality.” 70.  Then notwithstanding the “office” description of the hypothetical scheme, Mr Raymond Chan explained in his letter dated 5 September 2023[31] (in response to Mr Yung’s query dated 28 August 2023[32]) that his design for each upper floor, being open plan, would provide flexibility for use by prospective owners/tenants. Mr Raymond Chan further explained that at least 14 to 15 floors can be changed from office to retail use without breaching any requirement on discharge value pursuant to the Code of Practice for Fire Safety in Buildings 2011. While Mr Yung had, in his reply dated 7 September 2023[33], reservation on this arrangement which, according to him, may restrict marketing flexibility, I agree, for instance, with Mr Lee that it can be resolved by specifying the use of floors at the outset of the marketing campaign. 71.  On the other hand, I have reservation on designating the entrance of the hypothetical development to the upper floors at some 38.5m into Haven Street which, as agreed by Mr Charles Chan, is occupied by trades like garages, recycling stores or other low-order shops on the other side of the street at Lei Ha Court, a similar run-down composite building like the Building. I am of an opinion that an entrance so far away from Leighton Road which is a main artery in Causeway Bay might detract the image of the upper floors as a Class B office building agreed and envisaged by the parties.[34] Mr Yung’s proposal of providing access to the upper floors of office buildings via escalators may be more common at prominent locations on main streets but not on a side street, not to mention a cul-de-sac which attracts limited pedestrian flow by itself. With respect, Mr Yung had not provided any comparable development as such in support of his proposal; his so-called comparable developments that include No 228 Wan Chai Road, No 8 Heung Yip Road and No 535 Jaffe Road[35] all have the escalators entrance abutting a main street. 72.  For instance, the new development named Tower 535 at No 535 Jaffe Road comprises a 23-sotrey commercial/office building at the junction of Cannon Street and Jaffe Road, ie neighbouring World Trade Centre. Its escalators’ entrance lies not only on Jaffe Road but is also situated quite close (about 12 m) to the road junction.[36] 73.  On the other hand, at trial, I had invited Mr Charles Chan to provide me with comparable developments in the vicinity that accommodate a large proportion of “food and beverage” uses.[37] Of the 17 developments that Mr Charles Chan provided, only Lee Garden Three at No 10 Hysan Avenue and V point at Nos 2-22 Tung Lung Street have office lobby on 3/F and 2/F respectively. All the others have the office lift lobby on ground level. 74.  Nevertheless, I shall delve into the GDV valuation by Mr Charles Chan in reliance on the hypothetical development proposed by Mr Yung to see if it would yield the highest and best use of the Lot. Firstly, a comparison of the GDV assessed by Mr Charles Chan on the basis of Mr Yung’s proposal[38] and on the basis of Mr Raymond Chan’s proposal is shown in the table below:[39] Floor Mr Yung’s Model   Mr Raymond Chan’s Model   Saleable Area   Unit Rate   GDV Saleable Area[40]    Unit Rate   GDV G/F Retail 814.652 m2  x $596,780/m2  = $499,978,302 936.170 m2  x $463,483/m2  = $433,898,940 1/F Retail 537.053 m2  x $331,000/m2  = $177,764,543 934.940 m2  x $265,000/m2  = $247,759,100 2/F Retail 633.671 m2  x $304,000/m2  = $192,635,984 995.640 m2  x $248,000/m2  = $246,918,720 3/F Podium Garden           631.810 m2  x $265,000/m2  = $167,429,650 Flat Roof on 3/F           387.440 m2  x $44,167/m2  = $17,111,933 5/F to 9/F 3,519.456 m2 (Retail) x $283,000/m2  = $996,006,048 3,159.073 m2 (Office) x $238,000/m2  = $751,859,374 Stores on 5/F to 9/F 37.250 m2  x $144,000/m2  = $5,364,000   Flat Roof on 8/F 111.444 m2  x $50,000/m2  = $5,572,200 Flat Roof on 9/F 48.116 m2  x $51,000/m2  = $2,453,916 10/F to 23/F Office 8,761.354 m2  x $291,000/m2  = $2,514,508,598 8,845.403 m2  x $238,000/m2  = $2,105,205,914 Stores on 14/F to 23/F 122.500 m2  x $144,000/m2  = $17,640,000   24/F Office           631.810 m2  x $238,000/m2  = $150,370,780       Total: $4,411,923,591         $4,120,555,363 75.  With respect, by designating the entrance of the hypothetical development to the upper floors at some 38.5m into Haven Street, Mr Charles Chan for the applicants can only achieve an increase of GDV by mere 7%. Mr Charles Chan had tried to explain that his proposed offices were all located on the higher floors with smaller unit sizes so that the average unit rate appears to be such high. However, as shall be seen in the later part of this judgment, Mr Charles Chan might have overestimated the value of the retail floors and underestimated the values of the upper floor offices of Mr Raymond Chan’s model. As admitted by Mr Charles Chan at trial, quasi-retail uses like gymnasium, beauty salons etc are commonly found on the upper floors of office buildings in the Causeway Bay district.[41] In my opinion, such quasi-retail users might still be concerned about the image of the building as well as the environment at ground floor level. 76.  As well, as pointed out by me at trial, by having 5/F to 9/F specifically designated for “food and beverage” uses, Mr Charles Chan assessed an average rate of $283,000 per sq m which is not significantly higher than the unit rate that would be derived from the average rate of $291,000 per sq m for the upper floor offices. On the other hand, the predominant food and beverage uses render a loss of saleable areas due to the corresponding need to increase the required staircases for fire escape. More specifically, the efficiency ratio of these upper commercial floors would become very low due to provision of extra staircase area so as to satisfy the discharge value under the fire safety regulations. In addition, as commented by Mr Raymond Chan in his Joint Report with Mr Yung dated 15 August 2023, such provision of more food and beverage premises may attract more demand for electricity[42], and therefore a transformer room of larger capacity or size. Notwithstanding the latter, I agree with Mr Yung that Mr Raymond Chan’s single transformer room and switch room totaling 40 sq m is too small. To cover fire services installation, a flexible air conditioning system, lifts and future occupiers’ requirement, I tend to agree with Mr Yung’s proposal of 3 transformer room up to a total area of 150 sq m. Therefore, a further deduction of 110 sq m has to be deducted from the saleable floor area for 1/F[43], arriving at 827.19 sq m. 77.  I also fully agree with Mr Mok’s closing submission dated 25 October 2023 at §11 that it is most necessary to examine what is the volume of market demand for the proposed uses of the hypothetical development of the Lot. He indeed gave an illustration that assuming market demand in terms of volume can only support one shop, while the shop can be physically placed at the top floor or any floor, there will be vacant shop spaces at the other floors. 78.  As said, I have invited Mr Charles Chan to provide me with comparable developments in the vicinity that accommodate such a large proportion of “food and beverage” uses. Although Mr Charles Chan then came back with up to 17 developments, with respect, two are located in North Point which is another district quite different from Causeway Bay while most of the remaining ones are located on both sides of Hennessy Road which is the main distributor in Causeway Bay and the shopping hub of the district. Also, many of the developments have relatively small site of 500 sq m or smaller (around 300 sq m). Only two of them are located further away from Hennessy Road, closer to the Lot and they are found as follows: Ref Development HDH Centre Lee Garden Three Address No 1-5 Irving Street & No 14 Pennington Street 10 Hysan Avenue Site Area 503.258 sq m 2,895.62 sq m Occupation Permit 2021 2017 Floor / Usage G/F: Office Lobby & Shop 1/F: Shop 2/F: Communal Podium Garden 3-8/F: Restaurant 11-24/F: Office Penthouse: Office Basement 5 to Basement 2: carpark Basement 1: Retail G/F: Lobby & Retail 1/F: Retail 2/F: Retail & Restaurant 3/F: Office Lobby, Retail & Restaurant 4/F: Office/Retail 5-11/F: Office 16-29/F: Office Floor actually occupied by restaurants 6/F B/F, G/F, 1/F, 2/F and 3/F 79.  Even so, these two developments are situated on the opposite side of Leighton Road, closer to the shopping hub of Causeway Bay. More particularly, Lee Garden Three accommodates 4 levels of carparks which can provide further attraction to food and beverage patrons. On the other hand, the occupancy of floors designated in HDH Centre for restaurant use did not fare particularly well by reference to the directory produced at trial: only one out of the 3/F to 8/F designated for restaurant use is so occupied. 80.  Having said that, it is of interest to note that Tower 535, as said at §72 above, is designed with escalators leading up to 3/F and with the upper floors onwards up to the 12/F (or the 15/F when floor numbers 4, 13, 14 are not used) designed for both office/retail uses[44]. It is not included in the list of the 17 developments that accommodate a large proportion of “food and beverage” uses. Indeed, by reference to the photo of the directory provided by Mr Charles Chan[45], most of those floors are occupied by skincare, beauty salons, health centres, finance company and others not related to food and beverage. 81.  Perhaps the hypothetical design by Mr Yung is instigated by the prospective conglomerate commercial complex of 100,000 sq m around the corner of Leighton Road and Caroline Hill Road, located two blocks to west of the Lot. That site, comprising an area of 14,802 sq m, being known as Inland Lot 8945, was sold by Government via public tender on 12 May 2021 fetching as much as $19,778 million or an accommodation value of $193,929 per sq m or thereabout[46]. While this sale was referred to by the parties at trial from time to time [47], that site, upon completion of development in 2025, will be connected to Causeway Bay MTR Station by a system of covered elevated walkways via Lee Garden Six, Lee Garden Five, Lee Garden Two and Hysan Place etc[48]. In other words, pedestrians coming to and fro the site will not necessarily cross Leighton Road, for instance, at the pedestrian crossings at the junction of Leighton Road, Yun Ping Road and Pennington Street. The Lot is indeed separated from that Caroline Hill site by Haven Street, Lei Shun Court which is a similarly aged composite building situated at Nos 106-126 Leighton Road and another section of Caroline Hill Road as well. The benefit deriving from or spill-over effect of the prospective conglomerate commercial complex would unlikely be significant and the attraction therefore of having “food and beverage” uses in the hypothetical will be limited. 82.  At one point, Mr Charles Chan tried to justify the provision of so many floors for “food and beverage” uses by suggesting that there will be oversupply of Grade A offices in the coming years. However, when he was cross-examined by Mr Lee, he admitted that the supply of Grade A offices is not so relevant because the hypothetical development being envisaged is of Grade B. Later, Mr Charles Chan also appeared to have contradicted himself when he admitted Grade B offices are not alternative to Grade A offices. 83.  Indeed, by reference to the published data by RVD, the supply of Grade B office in Wan Chai/ Causeway Bay has been dropping significantly from 8,500 sq m in 2022 to 4,400 sq m in 2023 and may drop further to 1,000 sq m in 2024.[49] 84.  At this juncture, it is also useful to provide a perspective of the GDV assessments from 1/F to 9/F by Mr Charles Chan and Mr Varty: Floor Mr Charles Chan’s Valuation Mr Varty’s Valuation Saleable Area   Unit Rate   GDV Saleable Area[50]    Unit Rate   GDV 1/F Retail 537.053 m2  x $331,000/m2  = $177,764,543 937.190 m2  x $495,333/m2  = $464,221,134 2/F Retail 633.671 m2  x $304,000/m2  = $192,635,984 997.890 m2  x $396,266/m2  = $395,429,879 3/F Podium Garden           634.060 m2  x $356,639/m2  = $226,130,524 Flat Roof on 3/F           387.440 m2  x $59,440/m2  = $17,111,933 Sub-Total:   $370,400,527 Sub-Total: $1,102,893,470 5/F to 9/F 3,519.456 m2 (Retail) x $283,000/m2  = $996,006,048 3,170.300 m2 (Office) x $335,000/m2  = $1,062,050,500 Stores on 5/F to 9/F 37.250 m2  x $144,000/m2  = $5,364,000   Flat Roof on 8/F 111.444 m2  x $50,000/m2  = $5,572,200 Flat Roof on 9/F 48.116 m2  x $51,000/m2  = $2,453,916 Sub-Total:   $1,009,396,164 Sub-Total: $1,062,050,500 85.  Again, there is indeed not much difference in the assessment of the GDV from 5/F to 9/F. The main difference in the lower floors assessment is resulted from the reduced floor areas in Mr Yung’s proposal and the higher unit rates adopted by Mr Varty which are derived from a proportion of the G/F average unit rate, a common practice of valuing basements and upper floors when comparable evidence is not available[51]: Floor Proportion of G/F unit rate 1/F ½ 2/F 80% of ½ (ie 80% of 1/F unit rate) 3/F 90% of 80% of ½ (ie 90% of 2/F unit rate) 86.  In view of the above analysis therefore, I doubt if the market demand can support all “food and beverage” uses of 5/F to 9/F. I prefer to proceed with the GDV assessment in the present case on the basis of a conventional commercial building as proposed by Mr Raymond Chan with 5 lifts running all floors with lift lobby on G/F some 25 metres off Leighton Road to the middle of the Lot on Haven Street[52], ie the Alternative Scheme. 87.  As regards the issue of bonus plot ratio as a result of the setback requirement under the Outline Zoning Plan, I am directed to the intention of PNAP APP-108 which states that the Building Authority has the discretionary power to grant concessions in the form of exemption of certain floor areas from the gross floor area (GFA) calculations and in the form of additional plot ratio and site coverage in exchange for dedication of land or area for use as public passage. Here, I share the view of Mr Yung that when the setback is mandated under the Outline Zoning Plan, the Building Department is unlikely to regard such a dedication as substantial gain in public interests to warrant a bonus plot ratio. 88.  Indeed, according to Mr Yung, if bonus GFA has to be obtained, a surrender instead of dedication of the setback area is required, pointing to paragraph 4 of APP-108: “B(P)R 22(2) provides for additional plot ratio and site coverage in return for surrender for the purpose of street widening. Hence public passages intended for street widening shown on town plans or other street improvement plans would be considered in the context of B(P)R 22.” 89.  In Success Active Limited v Harbouorview International Holdings Limited & Others, LDCS 31000/2018 (unreported, dated 19 April 2021) where Mr Charles Chan was also one of the valuation experts, he made the following statement as recorded at §218 of the judgment: ““Mr Lai and the Authorised Person appointed by the 1st and 5th Respondents (the “Respondents’ AP”) proposed the dedication of a strip of land for use as public passage to obtain bonus plot ratio GFA in his New Model. However, such dedication and GFA concession require approval from various government departments, such as Buildings Department (the “BD”) and the Highways Department (the “HyD”), and is only at the discretion of the departments. In the subject case, the Respondents fail to demonstrate that there is “genuine need by the public for such dedication” and such dedication fulfill the requirements as set out in PNAP APP-108… Besides, based on my experience, I understand that BD will approve the dedication for public passage and bonus plot ratio only when HyD agrees to take up the management and maintenance responsibility of the proposed dedicated areas. I have come across a similar dedication in another case and was disapproved by BD. An extract of the letter of disapproval for reference purpose is attached … As a matter of fact, we find there is simply no evidence which supports any prospect of success of the setback. The subject section of Chatham Road North is quiet and has low pedestrian traffic. Moreover, the Property has a frontage of about 19m onto Chatham Road North only. It is meaningless to have the pavement of such a short section widened only. The Respondents’ AP has quoted an example development in Kai Tak area with “similar dedication”. However, this is misleading because the example is irrelevant. The example development located at No 8 Muk Ning Street, namely Kai Tak One (II), has dedicated a strip of land for public passage. Despite the dedication, no bonus GFA was granted pursuant to Section 22(1) or (2) of Building (Planning) Regulations as noted from the relevant approved general building plan and the sale brochure. Even though the proposed dedication has a high chance of being approved, it takes at least 6 to 12 months for negotiation with government departments and there are risks and uncertainties. Yet, I noticed that Mr Lai did not allow any risk factor to reflect the uncertainty. He has totally neglected the foreseeable time delay, extra costs and uncertainty in obtaining approval involved in this proposal. A rational purchaser/ investor would prefer certainty over chance, especially when extra efforts, time, professional fees and legal costs are required for the proposed dedication of land to obtain bonus plot ratio / GFA. A significant discount should be allowed in order to reflect the high level of risk and uncertainty.” (underline added) 90.  Although the facts in Success Active might be slightly different from the present case, I consider the same rationales applicable and therefore I would not take into account any bonus plot ratio as suggested by Mr Raymond Chan. 91.  In any event, the proposal as it was last presented by Mr Raymond Chan or Mr Varty, ie the Alternative Scheme before the Tribunal did not incorporate the bonus plot ratio. I am content not to take such into account in determining the GDV of the hypothetical development. 92.  On the other hand, Mr Yung incorporated a podium garden in his scheme for the purpose of satisfying the requirements of PNAP APP-132 and APP-151. Mr Yung explained that by incorporating such a podium garden, he would have maximized the site coverage for his hypothetical scheme and reduced the number of storeys from 26 floors to 24 floors, thus saving the areas for common parts in some 266.53 sq m. With respect, I fail to appreciate the significant benefit of having such a podium garden in the first place when the hypothetical development is not located at a prime location. There will also be on-going maintenance cost if not construction cost for the podium garden. Mr Yung’s reference to the development at No 228 Wan Chai Road, a redevelopment pursuant to a compulsory sale application in Alliance Fame Limited & Others v Mak Kam To & Others, LDCS 9000/2015 (unreported, dated 4 August 2017) and the development at Nos 25-31 Sugar Street, which was one of the comparables in Chancemore Limited v Yee On Enterprises Limited, LDCS 17000/2015 (unreported, dated 31 July 2017), may not be a good example because of their locational differences. 93.  More particularly, I tend to agree with Mr Raymond Chan that the set-back would result in loss of valuable ground floor areas for the Lot which comprises a corner site. For instance, owing to the extra set-back proposed by Mr Yung, the floor plate on each of the G/F to 2/F would become smaller by as much as 266.53 sq m.[53] But for the set-back approach, these areas could have been applied to the saleable area of shops along Haven Street. The adjusted unit rate for G/F facing Haven Street assessed by Mr Charles Chan (though I do not agree) was between $374,170 per sq m to $930,810 per sq m, that for 1/F was between $326,944 per sq m and that for 2/F was between $299,744 per sq m to $308,176 per sq m[54]. Thus, these valuable saleable areas as assessed by Mr Charles Chan would have been shifted to the less valuable lower upper floors where there will be increase in site coverage and in turn the floor plate. 94.  In addition, as commented by Mr Yuen, the podium garden in Mr Yung’s model would take up common area of some 157.33 sq m which is GFA accountable[55]. Applying the weighted average unit rate of the 2/F assessed by Mr Charles Chan at $304,000 per sq m, it would be a loss of GDV of $47.12 million. In spite of this, Mr Charles Chan did not separately apply an upward adjustment for the existence of the podium garden. While Mr Charles Chan explained that he had not done so because such adjustment would have been reflected in the age adjustment, I do not think so as the agreed age adjustment at 1% per 2 years seems to have nothing to do with the presence of the podium garden or otherwise. 95.  A possible gain in the extra set-back would be, as suggested by Mr Yung, the saving of common area for two floors of some 133.69 sq m per floor. The benefit, as shall be seen later in this judgment, will also be attenuated when both Mr Charles Chan and Mr Varty agreed, as valuation experts, that the increase of floor level would enhance the unit value by 0.5% per floor. When the hypothetical scheme is envisaged to have more than 600 sq m per floor and valued at more than $300,000 per sq m for the upper floors, the two additional floors would add more than 600 sq m x $1,500 per sq m + 600 sq m x $3,000 per sq m = $2,700,000. 96.  Lastly, there was a dispute between Mr Yung and Mr Raymond Chan on the provision of AHU room where air handling unit, commonly called an AHU, is the composition of elements mounted in large, accessible box-shaped units called modules, which house the appropriate ventilation requirements for purifying, air-conditioning or renewing the indoor air in a building or premises. According to Note 3(3) at p 3 of Appendix A to APP-151, AHU and A/C provisions are considered non-mandatory feature or non-essential plant room, the area of which can only be disregarded under regulation 23(3)(b) of the Building (Planning) Regulations if the development can comply with APP-151 and APP-152 by, for example, having a podium garden that improves permeability of a development to its neighbourhood. 97.  On the one hand, Mr Yung argued that there serves a purpose to house the AHU provisions inside an AHU Room on each floor. “The AHU provisions include machines for fresh air intake from exterior and into the A/C system and to supply conditioned air to the units. The machines create considerable vibration and noise. The AHU Room also included pipe ducts in which runs the A/C piping to the roof chillers. Such AC piping runs in pipe ducts to protect them from disturbance and from the elements. The AHU Room houses the machines & associated ducts / pipes in appropriate manner to facilitate regular maintenance.”[56] 98.  On the other hand, Mr Raymond Chan argued that “the non-essential plant such as chiller plants will be placed on top roof and AHU will be mounted at structural ceiling of each floor (in view of the high headroom of 5m) … Also, my proposed AHU in private ceilings can be accessed from the common areas for routine inspection and maintenance causing no disturbance to the occupiers.”[57] 99.  I agree with Mr Yung that “AHU rooms provision is required and common practice among developers”[58]. I also agree with Mr Mok’s submission that Mr Raymond Chan could not produce any example of a commercial or office building of similar bulk which had adopted his approach of housing the AHU provisions at the ceiling. Therefore, I agree with applicants that there shall be the following deductions for AHU rooms: Floor Mr Varty’s Propose Saleable Area/ Effective (m2) Deductions for AHU Rooms (m2) Net Saleable Area/ Effective Area (m2) 1/F 827.19 20.27 806.92 2/F 997.89 20.27 977.62 3/F 698.63 20.27 678.36 4/F*   214.29   5/F 634.06 20.27 613.79 6/F 634.06 20.27 613.79 7/F 634.06 20.27 613.79 8/F 634.06 20.27 613.79 9/F 634.06 20.27 613.79 10/F 634.06 12.23 621.83 11/F 634.06 12.23 621.83 12/F 634.06 12.23 621.83 13/F 634.06 12.23 621.83 14/F 634.06 12.23 621.83 15/F 634.06 12.23 621.83 16/F 634.06 12.23 621.83 17/F 634.06 12.23 621.83 18/F 634.06 12.23 621.83 19/F 634.06 12.23 621.83 20/F 634.06 12.23 621.83 21/F 634.06 12.23 621.83 22/F 634.06 12.23 621.83 23/F 634.06 12.23 621.83 24/F 704.00 12.23 691.77 * Mechanical Floor 100.  A summary of the pros and cons of having the podium garden is set out below though the increase in saleable area by having a podium garden is misleading without taking into account the higher unit rate that can be achieved for the ground floor space: Pros Cons Feature Increase in Saleable Area (m2) Feature Decrease in Saleable Area (m2) Maximizing site coverage for upper floors 266.53 Loss of valuable ground floor areas 266.53 Saving common area for two highest floors 133.69 x 2 = 267.38 Common area on podium floor accountable 157.33 Areas of AHU & A/C Plant Room non- accountable 345.61     101.  Bearing in mind the above, I tend to agree with Mr Raymond Chan therefore that the gain would be hardly sufficient to set off the loss. I agree to adopt the Alternative Scheme which had not incorporated any setback under these APP-132, APP-151 and APP-152 as the basis for evaluating the RDV of the Lot. Assessment of the Value for the hypothetical shop units on G/F 102.  On the basis of the Alternative Scheme, Mr Varty had set out the parameters of his hypothetical shops on G/F as follows with shop no 3 as the reference shop unit:[59] Shop No   Saleable Area (m2)   Frontage (m)   Frontage Onto   Return Frontage (m)   Depth (m)   Headroom (m)   1   70.00   4.168   Leighton Road       16.35   5.0   2   68.15   4.168   Leighton Road   16.35   5.0   3   68.15   4.168   Leighton Road   16.35   5.0   4   68.15   4.168   Leighton Road   16.35   5.0   5   68.15   4.168   Leighton Road   16.35   -   5.0   6   122.21   8.378   Haven Street       20.841   5.0   Entrance to Hypothetical Development       7   77.95   5.368   Haven Street   14.965   5.0   8   95.74   4.84   Haven Street   20.841   5.0   9   100.87   4.84   Haven Street   20.841   5.0   10   100.35   4.815   Haven Street   20.841   5.0   11   96.45   3.715   Haven Street   20.841   5.0   Total:   936.17                       103.  Mr Varty then referred to the following transactions as his comparables and arrived at a unit rate of $956,600 per sq m[60]: Comp Ref: Address Building Age Date of Agreement for Sale Consideration Salable Area (m2) Effective Area (m2) Frontage (m) Depth (m) Headroom (m) Unit Price (/m2) GR1 Shop A, G/F, Lippo Leighton Tower, 103 Leighton Road 1992 21 Mar 23 $36,800,000 69.7 69.7 3.6 + Return Frontage: 7.8 7.6 8.2 $527,977 GR2 Shop B, G/F, Lippo Leighton Tower, 103 Leighton Road 1992 14 Mar 23 $36,500,000 64.4 64.4 3.6 + Return Frontage: 9.2 7.6 8.2 $566,770 GR3 Shops 1A1 &1A2, G/F, Lok Sing Centre, 2-8 Sugar Street 1977 20 Dec 22 $34,000,000 34.6 34.6 5.2 5.7 5.4 $982,659 GR4 Shop A, G/F, 3 Fuk Hing Lane 1969 24 Jan 22 $34,080,000 35.4 + Yard: 3.5 36.0 6.7 + Return Frontage: 5.9 5.8 3.0 $946,667 GR5 Shop C, G/F, Po Foo Building, 84-94 Percival Street 1964 19 Oct 21 $80,380,000 47.6 47.6 4.3 12.7 3.8 $1,688,655 GR6 G/F & M/F, 468 Lockhart Road 1965 9 Sep 21 $71,500,000 62.2 + Yard: 8.6 + M/F: 38.7 73.3 4.1 17.5 2.9 $975,443 GR7 G/F, First Commercial Building, 33-35 Leighton Road 1990 30 Dec 20 $180,000,000 196.7 196.7 12.3 21.2 5.0 $915,099 GR8 Shop 4A, Remaining Portion of  Shop 4 & Shop 5, G/F, Malahon Apartments, 501-515 Jaffe Road 1966 17 Sep 21 $64,500,000 80.2 80.2 6.7 12.1 3.7 $804,239 GR9 Shop D, G/F, Po Ming Building, 96-106 Percival Street 1964 4 Nov 22 $50,000,000 45.9 45.9 4.3 12.5 3.9 $1,089,325 104.  Valuation usually proceeds by way of comparison where the valuer looks for a market transaction that is as close as possible to that which he has to value. He then works on the premise that if the subject matter of his valuation were to be the subject of a similar transaction, it would command the same value as the comparable. Since the comparable will never be identical to the subject matter of the valuation, the valuer will have to make adjustments to the value revealed by the comparable in order to reflect the differences between the comparable and the subject matter of his own valuation. 105.  Comparables GR1 and GR2 were in fact acquired by the same purchaser but are so occupied by two different brands, each selling high-end kitchenware. Although both Mr Charles Chan and Mr Varty agreed to a location adjustment of +10%[61], I have grave reservation on whether either of the high-end kitchenware shops would be willing to relocate to the hypothetical shop 3, not to mention paying 10% more. In fact, in his Rebuttal Report dated 11 November 2022 at §4.3.2.3, Mr Charles Chan acknowledged that: “Lippo Leighton Tower is located along Leighton Road which is a main street with high pedestrian flow” whereas the hypothetical shop 3 is situated on the fringe of Causeway Bay with pedestrian flow diluted by the presence of a school to its right. Notwithstanding this, I agree with Mr Varty’s approach of treating the two transactions as one but I also agree with Chan’ adding back 5% perhaps for the bulk discount. 106.  For Comparable GR3, both Mr Charles Chan and Mr Varty agreed to a location adjustment of -10%. However, when I alerted Mr Charles Chan during cross-examination that this section of Sugar Street was swamped with domestic helpers during weekends that may results in the shops there fetching very high prices, he changed his mind, revising his adjustment to -15% instead. With respect, I consider the adjustment should be at least -30%. 107.  Comparable GR4 was a relatively dated sale. It is situated just off the very busy Jardine’s Bazaar, a street flanked by a range of restaurants and eateries on G/F on both sides. Although both Mr Charles Chan and Mr Varty agreed to a location adjustment of +15%, I wonder if the adjustment would be excessive or even in the other way round. And because of this comparable being a dated sale and the divergence in opinion between me and the two experts, I am hesitant to adopt this as a comparable. 108.  Comparable GR5 was even a sale of earlier date. Mr Charles Chan refused to adopt this as a comparable at all because it is situated at a very popular shopping location on Percival Street close to a busy pedestrian crossing at the street junction between Percival Street, Matheson Street and Russell Street on the latter of which the very popular shopping and entertainment complex, Times Square, is located. I agree with Mr Charles Chan that such location would cater for different trade mix and retail potential, especially when Mr Varty himself applied a location adjustment of as much as -35%. If this comparable has to be adopted, I would apply an adjustment of at least -50% for location. 109.  Not only a dated sale, comparable GR6 is located on Lockhart Road which runs in parallel with Hennessy Road one block in the front. As said, this section of Hennessy Road is amongst the very popular shopping hub in Causeway Bay where Mr Charles Chan and Mr Varty were content to apply a location adjustment of -35% and -25% respectively to this comparable. I cannot agree with Mr Tsui, for instance that it is outside the core of Causeway Bay. Although I would prefer the adjustment proposed by Mr Charles Chan, I would again rather have this comparable disregarded. 110.  Comparable GR7 was another dated sale though it is situated at a more comparable location on Leighton Road, which is however very close to a popular pedestrian crossing that lead pedestrians to and fro Happy Valley where the racecourse and other popular recreational facilities are located. This comparable is currently occupied as a bank[62]. Even if this comparable is adopted notwithstanding its dated sale, I would prefer Mr Charles Chan’s adjustment for location at -20%. 111.  Comparable GR8 was even a further date sale. As well, it is situated on Jaffe Road very close to Tower 535. I would disregard this comparable and even if it be adopted, I prefer Mr Charles Chan’s location adjustment of -15% to Mr Varty’s +5%. 112.  Comparable GR9 is again situated on Percival Street, though closer to its junction with Leighton Street. It is situated right opposite to a Uniqlo store on the ground floor of the popular shopping and entertainment complex of Lee Theatre. Mr Charles Chan refused to adopt this as a comparable while Mr Varty applied a location adjustment of -30% which I consider not adequate. For the time being, I prefer a location adjustment of at least -40%. 113.  Save for the difference in opinion on the adjustments for location, return frontage and layout, Mr Charles Chan and Mr Varty have the following agreements or disagreement on other adjustment factors: Adjustment Mr Charles Chan Mr Varty Time Private Retail Price Index published by the Rating and Valuation Department (“RVD”) Size/Quantum 1% per 10 sq m Age 1% per 5 years Frontage 2% per 0.5 m 2% per 1 m Headroom 4% per 1 m / 2% per 0.5m Adjustment for Time 114.  Although Mr Charles Chan and Mr Varty have agreed to adopt Private Retail Price index published by RVD for time adjustment, it is trite that the use of indices is only acceptable when there is little evidence to go by, but their effectiveness is more diluted the longer the period over which they are used. This is particularly the case in Causeway Bay when, as accepted by Mr Charles Chan during cross-examination, the prices of shops had suffered more significantly than most of the other districts in Hong Kong because of the reduction of tourist traffic from Mainland China. Thus, the downward movement as indicated by the Private Retail Price index would have most probably underestimated the drop in value of shops in Causeway Bay. For this reason, I would treat the adjusted unit prices of those dated sales with caution and even disregard them as comparables. Adjustment for Frontage 115.  For the similar reasons as discussed in the assessment of EUV for shops at §§19-22 above, Mr Varty’s proposed adjustment for frontage at 2% per 1m is preferred. Adjustment for Return Frontage 116.  Here for Comparables GR1 and GR2, the return frontages referred to are rather the continuation of the display window for which both Mr Charles Chan and Mr Varty agreed to apply adjustment of -5%. This is equivalent to just 1% per 1.5 m or 1.8 m respectively. 117.  Only Comparable GR4 can be regarded as having a return frontage because this comparable fronts not only Fuk Hing Lane but also has a secondary frontage onto Jardine’s Crescent which is a narrow street flanked by licensed hawkers’ stall on both sides. To the extent that this secondary frontage is a wall which has not been made use of for shop display or otherwise, I agree with Mr Varty that its value is minimum; I agree with the -5% adjustment applied by him. Adjustment for Layout 118.  In the 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. Whereas the hypothetical reference shop unit has a long depth of 16.35 m or thereabouts, Mr Charles Chan had applied adjustments for layout at -18%, -18%, -17%, -22% and -14% to Comparables GR1, GR2, GR3, GR4 and GR8 respectively. In contrast, Mr Varty had applied much less. 119.  Particularly in respect of Comparables GR1 and GR2, there are two extraordinary large columns which are supposed to be included in the calculation of saleable area. Mr Varty considered such columns not usable at all but I consider otherwise because of their shiny appearance which may attract attention of prospective customers. 120.  As regards Comparable GR3, the agreed depth of 5.7 m is misleading as it did not take into account the depth of a longitudinal tongue-shape corridor leading to the end of Shops 1A1. According to Mr Varty, and as evidenced from the floor plan, this corridor is less than 1m in width. Balancing the depth of 5.7 m and the peculiar layout of this shop, I would prefer nil adjustment for layout. 121.  Similarly for Comparable GR4, the depth agreed by the valuation experts did not take into account the small trapezium area at the back of the shop. I agree therefore with Mr Varty’s proposed adjustment of -10% instead. 122.  While such adjustment for layout may be subjective and depend on professional judgment, I, having reviewed the layout of the various comparables by reference to their floor plans, am prepared to determine the adjustments as follows; Comp Ref: GR1 GR2 GR3 GR4 GR5 GR6 GR7 GR8 GR9 Depth (m) 7.6 7.6 5.7 5.8 12.7 17.5 21.2 12.1 12.5 Frontage to Depth Ratio 1:2[63]  1:2[64]  1:1[65]  1:0.9 1:3 1:4.3 1:1.7 1:1.8[66]  1:2.9 Mr Charles Chan -18% -18% -17% -22% NA -3% 9% -14% NA Mr Varty 0% 0% -10% -10% 0% 0% -5% -5% 0% Tribunal View -18% -18% -17% -22% -5% 0% 9% -5% -5% 123.  Thus, my analysis of the comparables is shown as follows: Comp Ref: Unit Price (/m2) Adjustments Adjusted Unit Price (/m2) Time Location Size Age Frontage Return Frontage Layout Headroom Total GR1 $527,977 1.6% 0.0% 0.2% 6.2% 1.1% -5.0% -18.0% -12.8% -25.8% $425,628* GR2 $566,770 1.6% 0.0% -0.4% 6.2% 1.1% -5.0% -18.0% -12.8% -26.2% GR3 $982,659 0.3% -30.0% -3.4% 9.2% -2.1% 0.0% 0.0% -1.6% -28.7% $700,636 GR4 $946,667 -10.1% 0.0% -3.2% 10.8% -5.1% -5.0% -10.0% 8.0% -15.5% $799,934** GR5 $1,688,655 -6.6% -50.0% -2.1% 11.8% -0.2% 0.0% -5.0% 4.8% -49.2% $857,837** GR6 $975,443 -10.0% -35.0% 0.5% 11.6% 0.1% 0.0% 0.0% 8.4% -28.8% $694,515** GR7 $915,099 -10.0% -20.0% 12.9% 8.6% -16.3% 0.0% 9.0% 0.0% -19.5% $736,655** GR8 $804,239 -4.2% -15.0% 1.2% 11.4% -5.1% 0.0% -5.0% 5.2% -12.9% $700,492** GR9 $1,089,325 -1.3% -40.0% -2.2% 11.8% -0.3% 0.0% -5.0% 4.4% -36.0% $697,168             Average:   $701,563             Average (with GR5 only disregarded):   $682,276[67]              Average (with comparables** disregarded):   $607,691 * As said at §105 above, a 5% has been added back for the bulk discount. ** To be disregarded for dated sale. 124.  In view of the disparate results found from the above analysis, with the most reliable comparables GR1 and GR2 in terms of timing and location fetching the lowest value, I had, at trial, enlightened the parties there are at least two premises in the close vicinity available for sale in the market: Ref: Address Building Age Asking Price Salable Area (m2) Effective Area (m2) Frontage (m) Depth (m) Headroom (m) Unit Price (/m2) A1 Shop B-2, G/F & C/L, Wah Ying Building, 14-20 Shelter Street 1960 $47,000,000 102.8 + C/L: 84.3 123.9[68]  5.1 18.5 2.9 $379,338 A2 Shops G & H, G/F, Po Wing Building, 63 & 65 Lee Garden Road 1967 $168,000,000[69]  122.5[70]  122.5 8.3 15.4 3.9 $1,371,429 125.  Whereas even the sale price of an apparently normal transaction may sometimes not reflect open market value, sales details of properties that are being marketed and unsold are hardly conclusive evidence of value[71]. However, in some circumstances, it might be reasonably expected that some figure below the asking prices can be achieved in due course[72] though to assume that such properties will sell for a particular percentage of the asking price is highly speculative. 126.  As regards the two premises being marketed as afore-mentioned, ie A1 & A2, Mr Charles Chan and Mr Varty also had different opinion on the adjustment for location: Ref: Mr Charles Chan Mr Varty A1 20% 40% A2 -50% -25% 127.  Having conducted the joint inspection on 5 September 2023, I prefer to adopt -40% to Mr Charles Chan’s -50%. This adjustment of -40% for A2 indeed conformed with my view on the location adjustment for GR5 and GR9 above. There being no adjustment for time necessary, the various adjustments applicable to these two marketing premises are as follows: Comp Ref: Unit Price (/m2) Adjustments Adjusted Unit Price (/m2) Location   Size   Age   Frontage   Layout   Headroom   Total   A1 $379,338 20.0% 3.5% 8.6% -1.9% 3.0% 8.4% 47.7% $560,282 A2 $1,371,429 -40.0% 5.4% 11.2% -8.3% -2.0% 4.4% -34.0% $905,143 128.  However, at trial, Mr Charles Chan alleged that according to the agency department of his firm, the vendor would seriously consider to accept any offer not less than $110 million. By the time when the applicants filed in the closing submission, Mr Charles Chan’s allegation was vindicated when newspapers or the press had reported the asking price had been reduced to $108,000,000 or a unit asking price of $881,633 per sq m. Later on 20 November 2023, it had been confirmed that A2 was sold for $98,680,000. Thus the table in the preceding paragraph should become: Comp Ref: Unit Price (/m2) Adjustments Adjusted Unit Price (/m2) Location   Size   Age   Frontage   Layout   Headroom   Total   A1 $379,338 20.0% 3.5% 8.6% -1.9% 3.0% 8.4% 47.7% $560,282 A2 $805,551 -40.0% 5.4% 11.2% -8.3% -2.0% 4.4% -34.0% $531,664 129.  It is of interest to note that this A2 was acquired by the present vendor for $208,000,000 on 26 May 2017 when the Private Retail Price Index published by RVD was 550.0: Date Transaction Price Drop Private Retail Price Index Drop 26 May 2017 $208,000,000   550.0   Nov 2023 $98,680,000 52.6% 500.4 9.0% This analysis confirms that shops in the popular area of the Causeway Bay shopping region dropped more substantially than the Private Retail Price Index which is more or less an average in nature across the territories. 130.  On the other hand, Mr Varty suggested an a +10% adjustment to reflect enhancement of trading potential because of the new development:[73] “I believe that upon redevelopment, together with the development of the Caroline Hill Road site sold in 2022 to a subsidiary of Hysan Development for approx. HK$19.88 BN, and the completion of the pedestrian walkway scheme as shown in Appendix T[74], the trading environment in the vicinity will be enhanced as compared to today.” 131.  With respect, as stated by me at §§81 & 105 respectively above, the hypothetical development when completed will still be located at the fringe of the Causeway Bay, separated from the shopping hub by Leighton Road and situated sideway of the forthcoming conglomerate commercial complex on Caroline Hill Road but separated by an old composite building, ie Lei Shun Court. I agree with Mr Charles Chan that, with a lot of competing developments in the vicinity, the hypothetical development of mere 18,325 sq m in this area might be too small to change the trading potential of the locality. I further agree with Mr Charles Chan that the footbridge system will “cut off” pedestrian flow to the hypothetical development. 132.  Nevertheless I agree that there will be some +5% enhancement in trading potential upon completion of the hypothetical development. Having reviewed the above, I consider the market rate applicable to the hypothetical shop 3 should be $550,000 per sq m and therefore the GDV for the hypothetical G/F is assessed as follows:[75] Shop No Saleable Area (m2) Distance from corner of Leighton Road and Haven Street (m) Adjustment Adjusted Unit Price (/m2) GDV Location   Size   Frontage   Return Frontage   Total   1 70.00 16.672 -5.0% -0.2% 0.0% 0.0% -5.2% $521,400 $36,498,000 2 68.15 12.504 -2.5% 0.0% 0.0% 0.0% -2.5% $536,250 $36,545,000 3 68.15 8.336 0.0% 0.0% 0.0% 0.0% 0.0% $550,000 $37,483,000 4 68.15 4.168 2.5% 0.0% 0.0% 0.0% 2.5% $563,750 $38,420,000 5 68.15 0 5.0% 0.0% 0.0% 20.0% 26.0% $693,000 $47,228,000 6 122.21 16.35 0.0% -5.4% 8.4% 0.0% 2.5% $563,750 $68,896,000 Entrance 24.728   7 77.95 28.728 -5.0% -1.0% 2.4% 0.0% -3.7% $529,650 $41,286,000 8 95.74 34.096 -10.0% -2.8% 1.3% 0.0% -11.4% $487,300 $46,654,000 9 100.87 38.936 -15.0% -3.3% 1.3% 0.0% -16.7% $458,150 $46,214,000 10 100.35 43.776 -20.0% -3.2% 1.3% 0.0% -21.6% $431,200 $43,271,000 11 96.45 48.591 -30.0% -2.8% -0.9% 0.0% -32.6% $370,700 $35,754,000 Total: 936.17               $478,249,000                 Unit Value: $510,857 133.  At this juncture, I note that Mr Varty had referred to the unit rates of the hypothetical shop units arrived at $1,000,000 per sq m and $740,000 per sq m in Lead Harvest Group Limited & Others v Cheong Wing Electric Limited & Another, LDCS 6000/2018 (unreported, 7 February 2022)[76] and Peace Ever Limited & Others, supra[77] in support of his unit rate of $956,600 per sq m. With respect, this reference is neither here nor there as the decision on values of the Tribunal depends largely on the evidence presented in each case; strictly speaking, such decisions on values are not comparables. In addition, they are decisions on the basis of different valuation dates. 134.  But in case settlements by parties have to abide by, Mr Charles Chan and Mr Varty had agreed the unit rate of the reference shop street shop of the Building, ie Shop 19 at $704,000 per sq m as at 27 May 2019 when the Private Retail Price Index was 582.2. Currently the index for September 2023 was 500.4 and if the trend of the market price has to be followed, the same shop would have a unit value of some $605,000 per sq m[78] only. Assessment of the Value for 1/F-3/F (Retail) 135.  While Mr Varty derived the unit value for 1/F to 3/F from a proportion of the G/F average unit rate, Mr Charles Chan referred to the sales of 3 floors, more particularly 20/F, 19/F and 26/F in Emperor Watch and Jewellery Centre at No 8 Russell Street as comparables: Floor Consideration Date of Sale Saleable Area (m2) Current User Floor to Floor Height (m) Unit Price (/m2) 20/F $96,280,000 17 Mar 23 298.6 Medical Centre[79]  3.5 $322,438 19/F $110,000,000 3 Oct 22 298.6 Gymnasium Centre 3.5 $368,386 26/F $130,000,000 22 Aug 22 298.6 Beauty Salon 3.5 $435,365 136.  Emperor Watch and Jewellery Centre comprises a 29-storey commercial building built in 2001 which has been designed with a single shop on each of the upper floors. It is situated at a strategic location opposite Times Square across the street with a variety of popular brand shops on G/F. Notwithstanding Mr Charlies Chan’s calculation of a saleable floor area of 298.6 sq m on each upper floor, sales agents allege each floor having a gross floor area of 4,718 sq ft (438.31 sq m) or thereabouts. 137.  In fact, Mr Varty suggested, and I agree, that Mr Raymond Chan’s hypothetical development was modelled on this Emperor Watch and Jewellery Centre. 138.  While Mr Varty had proposed the unit value of these floors on the basis of a proportion of that for G/F, Mr Charles Chan adopted the following adjustments: Adjustment Factors Adjustment Basis Time Private Retail Price Index published by RVD Size/Quantum 1% per 30 sq m Age 1% per 2 years Floor Level 0.5% per floor Floor to Floor Height 2% per 1 m Whole Floor Unit -3% 139.  In terms of location, Mr Charles Chan proposed an adjustment of -25%. I agree. I also follow Mr Charles Chan’s other adjustments to arrive at the following on the basis of a hypothetical shop space on 2/F with a saleable floor area around 300.00 sq m: Floor Unit Price (/m2) Adjustments Adjusted Unit Rate (/m2) Time Location Size Age Floor Level* Floor to Floor Height Whole Floor Unit Total 20/F $322,438 1.6% -25% 0% 11.0% -8% 3.0% -3.0% -22.3% $250,534 19/F $368,386 -2.7% -25% 0% 11.0% -7.5% 3.0% -3.0% -25.1% $275,921 26/F $435,365 -3.6% -25% 0% 11.0% 10.5% 3.0% -3.0% -11.4% $385,733 * Floor numbers 4, 14 and 24 are not used. 140.  Once again, the above analysis confirms that the prices of shops in Causeway Bay had suffered more significantly than most of the other districts in Hong Kong and the Private Retail Index by RVD is not so applicable. 141.  In such regard, I just adopt the adjusted unit for the latest sale which is $250,000 per sq m and compare with the method proposed by Mr Varty on the basis of a proportion of the unit value for the G/F subject to that I adopt the value for 1/F at 60% of the average ground floor unit value instead of 50% as proposed by Mr Varty: Floor Saleable Area (m2) Unit Value at proportion of G/F Unit Value GDV 1/F 806.92 60% $306,514 $247,332,000 2/F 977.62 60% x80% $245,211 $239,723,000 3/F 678.36* 60% x 80% x90% $220,690 $149,707,000       Total: $636,762,000 * This includes 613.79 sq m for the 3/F and the converted area of 387.44 sq m for the flat roof. 142.  Whereas the average unit rate derived from the above is $258,542 per sq m, this is only marginally higher than $250,000 per sq m derived from comparables adopted by Mr Charles. I prefer to adopt GDV for the 1/F-3/F at $636,762,000. Assessment of the Upper Floor Office 143.  In assessing the GDV for the upper floors, Mr Charles Chan and Mr Varty relied on the following comparables: Ref Address Age of Building Date of Sale Consideration Saleable Area (m2) Floor to Floor Height (m) Unit Price (/m2) O1 Unit B, 16/F, Lippo Leighton Tower, 103 Leighton Road 1992 23 Dec 22 $32,800,000 118.9 3.4 $275,862 O2 Unit C, 3/F, Lippo Leighton Tower, 103 Leighton Road 1992 27 Sep 22 $20,600,000 71.0 3.4 $290,141 O3 Unit A, 17/F, Lippo Leighton Tower, 103 Leighton Road 1992 21 Jan 22 $32,500,000 120.1 3.4 $270,833 O4 Unit B, 7/F, Guangdong Tours Centre, 18 Pennington Street 1994 3 Oct 21 $11,000,000 38.7 3.15 $284,238 O5 Unit B, 1/F, Lippo Leighton Tower, 103 Leighton Road 1992 29 Jan 21 $18,700,000 67.8 3.4 $275,811 144.  Interestingly, Lippo Leighton Tower, Guangdong Tours Centre and Emperor Watch and Jewellery Centre all share the following features with Mr Raymond Chan’s and Mr Varty’s hypothetical development model: (a)  Main lift lobby on G/F; (b)  No escalators that lead from G/F to upper floors; (c)  Two common staircases; (d)  No podium garden; (e)  No “Food & Beverage” uses above 3/F. 145.  And again, save for the adjustment for location, Mr Charles Chan and Mr Varty had the following agreements (or disagreement) on the other adjustment factors: Adjustment Factors Mr Charles Chan Mr Varty Time Private Office Price Index (Class B) published by RVD Size/Quantum 1% per 30 sq m Age 1% per 2 years Floor Level 0.5% per floor Floor to Floor Height 2% per 1 m / 1% per 0.5 m Exclusive Use of  Lavatory Not Adopted +5% Adjustment for Location 146.  In regard of the location adjustment, Mr Charles Chan applied -15% to the office units at Lippo Leighton Tower. This adjustment is completely contrary to his +10% for comparables GR1 & GR2 which lie at the same building. This explains why I have grave reservation on the latter’s correctness in §105 above. Retail premises is supposed to be more sensitive to the location than offices. Here for the location of offices, I prefer Mr Varty’s adjustment of -5%. 147.  Similarly, I prefer Mr Varty’s location adjustment of -5% to the office unit in Guangdong Tours Centre. Adjustment for Exclusive Use of Lavatory 148.  According to the proposal of Mr Raymond Chan, the upper floors of the hypothetical development will accommodate at most two self-contained units of about 317.0 sq m each with exclusive lavatories so as to facilitate the trades envisaged such as gymnasium, beauty parlour, medical centre etc.[80] In such regard, I agree with Mr Varty that adjustment of +5% has to be applied to those comparables, ie Lippo Leighton Tower and Guangdong Tours Centre that have to share the use of the communal lavatories. 149.  I am not persuaded by Mr Charles Chan that for office accommodation of such a large size, it would be undesirable to have exclusive use of lavatories. Mr Charles Chan’s argument is that the provision of exclusive lavatories would reduce the saleable floor area by some 10%. On the other hand, he conceded that for food and beverage uses, it is desirable to have exclusive use of lavatories[81]. Bearing in mind the trades envisaged such as gymnasium, beauty parlour, medical centre etc, I consider the advantage of having exclusive use of lavatories would outweigh the loss of saleable area and the maintenance problem alleged by Mr Charles Chan. Indeed, I agree with Mr Varty that the latter is not a problem at all as it is easy to have agreement with the management office that cleaners can obtain access to the exclusive lavatories. This phenomenon is also well supported by the comparables adopted by Mr Charles Chan in Emperor Watch and Jewellery Centre which happen to have saleable area similar to the hypothetical office unit on 15/F of the hypothetical development proposed by Mr Raymond Chan and have exclusive lavatories. 150.  As well, in Double Top Development Limited & Others v Kentone Limited & Others, LDCS 16000/2019 (unreported, 4 April 2023) when Mr Charles Chan also happened to be one of the valuation experts, he agreed to adopt a +5% adjustment to comparables without exclusive lavatory for the reference office unit to reflect the advantage of having such exclusive lavatory.[82] 151.  As the result, I get the following analysis on the basis of a hypothetical office unit on 15/F of the hypothetical development which would have a saleable area of 317 sq m or thereabout and a headroom of 5m: Ref Unit Rate (/m2) Adjustments   Adjusted Unit Rate (/m2) Time Location Size Age Floor Level Floor to Floor Height Exclusive Lavatory Total O1 $275,862 3.2% -5% -6.6% 15.5% -0.5% 3.2% 5% 14.0% $314,483 O2 $290,141 -4.3% -5% -8.2% 15.5% 6.0% 3.2% 5% 10.7% $321,186 O3 $270,833 0.3% -5% -6.6% 15.5% -1.0% 3.2% 5% 10.3% $298,729 O4 $284,238 -9.3% -5% -9.3% 14.5% 4.0% 3.7% 5% 1.3% $287,933 O5 $275,811 3.6% -5% -8.3% 15.5% 7.0% 3.2% 5% 20.9% $333,455                 Average: $311,157 152.  It is of particular interest to note that all the comparables above are of very small sizes from saleable area of 38.7 sq m in Guangdong Tours Centre to various sizes up to 120.1 sq m in Lippo Leighton Tower. These comparables perhaps limited the choice of design for the hypothetical development if they were to compare like to like. Then the three sales in Emperor Watch and Jewellery Centre came to light and may therefore provide justification for Mr Varty to increase the size of his hypothetical office units. 153.  Thus the applicants had been criticizing Mr Varty’s sudden change of his design from “6 units per floor each about 112.8 sq m” in his first RDV assessment in October 2022[83]  and even his design of 6 units per floor, each of 105 sq m in his Updated RDV Report dated 22 August 2023[84] to 2 units per floor in his joint statement with Mr Charles Chan on 31 August 2023. This may be owing to Mr Varty’s oversight of the three sales in Emperor Watch and Jewellery Centre but as an expert, he should be entitled to change his mind on review when new comparables were available[85]. I agree that Mr Varty was entitled to rely on them as additional office comparables: Floor Unit Price (/m2) Adjustments   Adjusted Unit Rate (/m2) Time Location Size Age Floor Level* View Floor to Floor Height Exclusive Lavatory Total 20/F $322,438 3.9% -20% -0.6% 11.0% -1.5% 5% 3.0% 0.0% -2.3% $315,022 19/F $368,386 -0.5% -20% -0.6% 11.0% -1.0% 5% 3.0% 0.0% -6.0% $346,283 26/F $435,365 1.8% -20% -0.6% 11.0% -4.0% 5% 3.0% 0.0% -6.7% $406,196 * Floor numbers 4, 14 and 24 are not used. 154.  Firstly, while the intended used of the upper floors is quasi-retail uses like gymnasium, beauty salons etc rather than pure office use, I prefer to adopt location adjustment of -20% which is mid-way between the -25% proposed by Mr Charles Chan and the -15% proposed by Mr Varty; as I said earlier at §146, retail premises are supposed to be more sensitive to the location than offices and vice versa. 155.  On the other hand, I do not agree with Mr Varty that an adjustment for view is required. I cannot envisage that the hypothetical development will enjoy a superior view than that of Emperor Watch and Jewellery Centre which lies opposite Times Square. 156.  And thirdly, once again, I consider only the latest sale of the 20/F should be adopted. 157.  As a result, I get an adjusted value of $315,022 per sq m for the latest transaction which is within 2% of $311,157 per sq m arrived earlier. Thus, I am prepared to adopt $315,000 per sq m as the value of the hypothetical office unit on 15/F of the hypothetical development proposed by Mr Raymond Chan. 158.  The determination of the GDV of the office floors is therefore as follows:[86] Floor Saleable Area (m2) Effective Area (m2) Adjustment Adjusted Unit Rate (/m2) GDV Floor   Size   Total   5/F 613.79 613.79 -5.0% 0.0% -5.0% $299,250 $183,677,000 6/F 613.79 613.79 -4.5% 0.0% -4.5% $300,825 $184,643,000 7/F 613.79 613.79 -4.0% 0.0% -4.0% $302,400 $185,610,000 8/F 613.79 613.79 -3.5% 0.0% -3.5% $303,975 $186,577,000 9/F 613.79 613.79 -3.0% 0.0% -3.0% $305,550 $187,544,000 10/F 621.83 621.83 -2.5% 0.0% -2.5% $307,125 $190,980,000 11/F 621.83 621.83 -2.0% 0.0% -2.0% $308,700 $191,959,000 12/F 621.83 621.83 -1.5% 0.0% -1.5% $310,275 $192,938,000 13/F 621.83 621.83 -1.0% 0.0% -1.0% $311,850 $193,918,000 14/F 621.83 621.83 -0.5% 0.0% -0.5% $313,425 $194,897,000 15/F 621.83 621.83 0.0% 0.0% 0.0% $315,000 $195,876,000 16/F 621.83 621.83 0.5% 0.0% 0.5% $316,575 $196,856,000 17/F 621.83 621.83 1.0% 0.0% 1.0% $318,150 $197,835,000 18/F 621.83 621.83 1.5% 0.0% 1.5% $319,725 $198,815,000 19/F 621.83 621.83 2.0% 0.0% 2.0% $321,300 $199,794,000 20/F 621.83 621.83 2.5% 0.0% 2.5% $322,875 $200,773,000 21/F 621.83 621.83 3.0% 0.0% 3.0% $324,450 $201,753,000 22/F 621.83 621.83 3.5% 0.0% 3.5% $326,025 $202,732,000 23/F 621.83 621.83 4.0% 0.0% 4.0% $327,600 $203,712,000 24/F 621.92 + Top Roof: 558.8 691.77 4.5% -2.2% 2.2% $321,930 $222,702,000             Total: $3,913,591,000 Gross Floor Area v Saleable Area 159.  Despite R7 had also appointed Mr Varty as her valuation expert, I regret that she had not clarified her queries on certain technical or professional issues with him in the first place. 160.  For instance, R7 challenged the provision of common area of 3,875.521 sq m[87] as provided by Mr Yung in his hypothetical development excessive. In such regard, R7 seemed fail to pay attention to the common area of 3,793.43 sq m also proposed by Mr Raymond Chan[88], an insignificant difference of about 2%. 161.  Indeed, R7 unwisely made reference to other developments in Causeway Bay, like 333 Hennessy Road[89], Novo Jaffe and Oliv etc but without proper researches. Incidentally, sales of units in both 333 Hennessy Road and Novo Jaffe were referred to as comparables in Crown Centre Development Limited & Another v Wong Wai Ping & Others, LDCS 12000/2021 (unreported, dated December 2022) and while sales of units in Oliv were referred to in Chancemore Limited v Yee On Enterprises Limited, LDCS 17000/2015 (unreported, 31 July 2017) as comparables whereby the Tribunal was informed of the particulars of these three developments:   333 Hennessy Road Novo Jaffe Oliv Hypothetical Development on the Lot Site Area   173.6 sq m   303.48 sq m   287 sq m   1,221.66 sq m   Gross Floor Area   2,603.129 sq m*   4,554.0 sq m*   4,305 sq m   18,324 sq m   No of Lifts   2   2   3   5   Saleable Area of a Typical Floor   47.73 sq m to 76.51 sq m   112.3 sq m   129.43 sq m to 152.45 sq m   634.06 sq m   * This refers to the gross floor area as approved by the Building Authority but not otherwise. 162.  With respect to R7, she was obviously not comparing like with like. The requirement of any common area should not be determined arbitrarily as suggested by R7. It must conform to the type and size of the development – a development of larger size certainly requires more common facilities and therefore larger common areas. It is therefore more reasonable and fair to compare the value of premises in terms of saleable area instead of gross floor area. 163.  All the more, and with regret, in formulating her misconception, R7 had been referring to the wrong information as contained in sales pamphlets used to be adopted by duplicitous estate agents. For instance, she found from those pamphlets suggesting a total gross floor area for 333 Hennessy Road at 29,793 sq ft[90] which is equivalent to 2,767.84 sq m, ie not conforming with the approved gross floor area by the Building Authority at 2,603.129 sq m. Then arbitrarily, she or the estate agent concerned applied 60% to arrive at a saleable area of 17,876 sq ft which is equivalent to 1,660 sq m. This must be wrong as the layouts and sizes of the G/F and the upper floors of a building must be different owing to the application of the Building (Planning) Regulations. 164.  Similarly, and regrettably, R7 referred to another pamphlet suggesting most of the floors in Novo Jaffe[91] having a gross floor area of 2,243 sq ft[92] which is equivalent to 208.34 sq m. As can be seen from the table in §162 above, the saleable area of a typical floor of Novo Jaffe is 112.3 sq m. 165.  At trial, R7 also queried why the valuation experts are relying on saleable areas instead of the gross floor areas. With respect, the term gross floor area has been loosely used by the market and particularly unscrupulous estate agents who intend to mislead the prospective purchasers or tenants. Such practice has been criticized by the courts on numerous occasions. 166.  For instance, as early as in Haw Hong International Limited v Kei Oi Wah, Linia & Another, HCA 3582/1989 (unreported, dated 8 May 1990), where the plaintiff issued a writ claiming rent, management fees and air-conditioning charges under a 3 years’ lease of new ground floor shop premises in Chatham Road to the defendants, the Court of First Instance remarked the following at §3: “… This (plaintiff's) witness conceded that the Defendant were young and inexperienced when they entered into the lease of the shop premises and that they did not have independent legal representation. The witness confirmed that the Defendants had complained that the actual usable area of the shop premises at 110 square feet was much less than the gross area of 295 square feet which included a pro rata calculation of the common areas on the ground floor among the 9 shop premises there. Mr Chan confirmed that the gross or net areas of the No.9 shop space was not included in the lease. Later evidence called by the Plaintiff confirmed the Defendant's allegation that the shop premises had been leased to then on the representation that the gross floor area of the shop was 295 square feet. The Defendants later gave evidence that they did not appreciate that 185 square feet of the gross floor area of the shop was calculated with reference to a proportion of the ground floor common areas, such as, the lift lobby are shaft, the staircase, transformer room, and lavatories. This case highlights the injustice of this common leasing practice in Hong Kong which was criticised by the Consumer Council in 1984 when it recommended that all future sales or leasing of commercial or domestic premises should be based on the usable or net floor area of the particular premises, rather than or some notional or fictional gross area including a proportion of the common area of the premises. (underline added) 167.  And more recently, I had made the following remark in Fullytech Holdings Limited v Tao (TW) Limited, LDPE 1146/2018 (unreported, 2019年3月19日): “21. 在香港， 建築面積原指建築物(規劃)規例第23條(3)(a)段中的總樓面面積（Gross Floor Area）， 即在每層樓面水平（包括地面水平以下的任何樓面）量度所得的建築物外牆以內面積， 以及建築物外牆的厚度。 22. 因此， 這包括所有樓層、樓梯和升降機槽的面積， 但在一般情況下， 停車位、機械房、電力變壓房、垃圾房和其他類似設施的面積， 建築事務監督可以根據建築物(規劃)規例第23條(3)(b)段的規定豁免計算。 23. 但在一般物業交易和相關業務中， 建築面積的定義卻不一定跟從建築物(規劃)規例第23條(3)(b)段的豁免，尤其應用在個別樓層或單位上，個別發展商或投資者會把這些公共設施及公用部分分配，其涵蓋的範圍會因個別建築物而異，沒有一定標準， 因此立法會房屋事務委員會在2010年開始建議一系列措施以規管一手樓買賣，其中包括將傳統上以建築面積改為由實用面積定價等，以令買家更能得知付出價格與所購樓宇面積的關係， 並於2012年通過《一手住宅物業銷售條例》（香港法例第621章）。此條例於2013 年4 月29 日全面實施， 以保障住宅物業買方的權利， 但並不規管非住宅物業的銷售。 24. 在 Montrio Limited & Another v Tse Ping Shun David, HCA 757/2019, (無彙報的案例，日期為 2011年11月29日)一案，與訟雙方同樣是爭論Gross Area 有否構成誤導， 案中的共同專家證人指Gross Area是沒有統一定義， “The developer is at liberty to define the gross area of a particular unit in the building as he sees fit.” 25. 所以本席同情劉建築師初時不願計算涉案處所的建築面積， 但潘先生一直堅持申請人的建築面積計算錯誤， 甚至在複問中要求劉建築師認同， 所以本席要求劉建築師即場計算他認為合適的建築面積， 其計算結果是4,115平方呎，即比申請人的4,117平方呎少2平方呎。劉建築師更同意申請人採納的1/F總樓面面積是366.403平方米, 比屋宇署存檔的366.503平方米還少， 而他亦是根據366.403平方米計算涉案處所的建築面積。” 168.  Thus, as explained by me in court, the term “saleable area” has been widely and commonly used by particularly valuation experts who are members of the professional institutions. In Citilite Properties Limited v Innovative Development Company Limited, HCA 8407/1992 (unreported, dated 21 February 1997), the Court of First Instance had recorded the following: “3. Initially there was also an issue as to the proper construction of the expression "saleable area". Each side adduced expert evidence as to the meaning of those words in a conveyancing contract: Mr Robert Lynn gave evidence for the Plaintiff and Mr S H Leung gave evidence for the Defendant. In his closing submissions, counsel for the Defendant accepted that the words "saleable area" used in a conveyancing contract even without a definition in the contract itself would be understood by a conveyancing solicitor or conveyancing expert in Hong Kong as referring to what is known as the advisory method of measurement for saleable area published by the Royal Institute of Chartered Surveyors (Hong Kong Branch), the Hong Kong Institute of Surveyors and the Consumer Council. This method has been adopted by the Registrar General in the definition of saleable area in agreements for sale and purchase under the Government's Consent Scheme as well as by the Law Society under its Non-Consent Scheme. No issue now arises to the meaning of the expression "saleable area". As to "gross floor area" it is common ground that there is no established or standard definition of gross floor area for property transaction purposes. Although the Building (Planning) Regulations (Reg.23(3)) contains a statutory definition for gross floor area, it is inexact or uncertain in that there is a discretion vested in the Building Authority to disregard certain floor space. 4. The Defendant has also abandoned the issue as to whether the Plaintiff and the Defendant made a common mistake in inserting the words "saleable area" for something else. 5. By the close of the evidence, it emerged that the mistake relied on by the Defendant was a unilateral mistake…” (underline added) Interest Rate 169.  Mr Charles Chan and Mr Varty differed in their opinion on interest rate: Mr Charles Chan adopted 5.5% by reference to the Hong Kong Dollar Interest Settlement Rate published by Hong Kong Association of Banks and the Hong Kong Best Lending Rate published by HSBC:[93] Hong Kong Dollar Interest Settlement Rate published by Hong Kong Association of Banks Date 1 month 3 months 12 months 18 October 2022 2.63316% 4.04488% 4.81726% 30 November 2022 4.43833% 5.30750% 5.67577% 30 December 2022 4.34643% 4.99351% 5.60357% 31 Jan 2023 2.70571% 3.67256% 4.69714% 28 Feb 23 3.03167% 3.79970% 4.78369% 31 March 2023 3.14119% 3.70988% 4.21054% 28 Apr 2023 3.30512% 3.683395 4.40839% 31 May 2023 4.50893% 4.77226% 4.89018% 30 June 2023 4.93405% 4.96774% 5.03316% 31 Jul 2023 5.287445 5.29071% 5.45804% 31 August 2023 3.71691% 4.44661% 5.18905% 30 September 2023 5.39661% 5.27244% 5.50786% 31 October 2023 4.90470% 5.24262% 5.47345% Hong Kong Best Lending Rate published by HSBC 23 September 2022 5.125% 4 November 2022 5.375% 16 December 2022 5.625% 5 May 2023 5.750% 28 July 2023 5.875% 170.  On the other hand, Mr Varty, referring to recent compulsory sale judgments, adopted 5.0% initially. With respect, it serves no purpose by referring to past compulsory sale judgments when interest rate is not a constant in the residual valuation but subject to changes because of the changes in the economic environment. 171.  At trial then, Mr Varty referred to a list of bonds issued by the developers in Hong Kong as of 4 September 2023:[94] Guarantor Coupon (fixed) Tenor Maturity Date Indicative Offer YTM* Henderson Land Development Co Ltd 2.350% 3-5 years 6 May 27 5.16% Hang Lung Properties Ltd 2.280% 3-5 years 5 Mar 27 5.18% Hang Lung Properties Ltd 2.350% 3-5 years 19 Jan 28 4.98% Hysan Development Co Ltd 2.730% 3-5 years 17 Feb 27 4.71% New World Development Co Ltd 3.000% 3-5 years 10 Mar 28 12.64% Sun Hung Kai Properties Ltd 2.700% 3-5 years 26 Jun 27 4.54% Sun Hung Kai Properties Ltd 3.550% 3-5 years 6 Sep 28 4.75% Swire Properties Ltd 3.800% 3-5 years 31 Jan 28 4.71% Wharf Real Estate Investment Co Ltd 1.600% 3-5 years 26 Nov 27 4.60% Wharf Real Estate Investment Co Ltd 2.680% 3-5 years 13 Feb 27 4.56% Hang Lung Properties Ltd 2.750% 5-10 years 24 Jan 29 4.36% Sun Hung Kai Properties Ltd 3.880% 5-10 years 22 Nov 28 4.85% * YTM stands for yield to maturity. 172.  While the above shows the returns that investors expect, the real estate developers would incur costs in issuing the bonds. That said, I am prepared to adopt 5.5% as the interest costs in the residual valuation. Development Profit 173.  As in many of the compulsory sale proceedings, the determination of developer’s profit to be adopted in a residual valuation is subject to dispute or disagreement by experts. 174.  By reference to the Modern Methods of Valuation by Eric Shapiro, David Mackmin and Gary Sams, 12th Ed, 2019, Routledge at p222, the development profits as required in a residual valuation is described as follows: “As for any risky enterprise a profit is required to compensate for risk. Target levels of profit will depend on the nature of development and allied risk, the competition for development schemes in the market, the period of the development and the general optimism in relation to that form of development …” 175.  Developer’s profit is normally included as a percentage of the costs involved, or sometimes as a percentage of the GDV. The level of profit should represent the return that a hypothetical developer will require for undertaking the project and should be commensurate with the risk involved. By para 3.6.4 of the HKIS Guidance Notes on Valuation of Development Land published in 2016, the related risks include marketing risks for sales and lettings, risks of construction difficulties and cost overruns, and delays in obtaining relevant development approvals. 176.  In a residual valuation, developer’s profit is included in a broad brush nature in the absence of a fully researched risk analysis. Thus, the level of return is only meaningful as a comparative figure but must be related to the risky nature of the hypothetical development and to the length of the project. Without a reasonable profit to be factored in, it would mean that the developer would be purchasing a piece of land for redevelopment expecting no return. This should not occur in reality because there are always alternative investments available in the market with fixed or guaranteed return over a period of time, e.g. Government or corporate bonds which are supposed to have no risk. 177.  Perhaps without appreciating this concept, those acting in persons, eg R7 in the present case criticized the inclusion of the developer’s profit in the residual valuation arrived at by the two experts. With respect, there are always risks associated with any investment particularly when the capital to be incurred is rather substantial, e.g. a real estate development. A developer undertaking such development will seek to make a reasonable profit out of his investment. The profit is the gross profit to the developer before meeting the developer’s general overheads and tax. While this profit is sometimes related to the value of the project, it is more appropriate to relate the same to the costs to be injected in the project and is equivalent to profit margin. 178.  Reverting to the present case, Mr Charles Chan initially adopted a developer’s profit of 20% in his Supplemental Report dated 28 July 2022[95]. He even maintained this view when he prepared the Joint Statement with Mr Varty dated 13 December 2022.[96] Lately when he prepared the updated RDV report dated 22 August 2023, he changed his opinion to 25%. 179.  Apart from stating that the developers were expecting a drop in selling price of the project[97], Mr Charles Chan explained his change in opinion on the following grounds:[98] (i)  US-China conflict appears to intensify over time; (ii)  War in Ukraine results in sharp increase in energy and food costs as well as increase in inflation rate and investment risks; (iii)  High inflation environment in US and many other countries prompts for an aggressive plan for interest rate increase; (iv)  Downturn of economy in China as shown by the financial difficulties of many developers in China; (v)  Loss of labour forces as a result of emigration of “Hongkies” and departure of expatriates. 180.  To counter the above pessimistic economic outlook depicted by Mr Charles Chan, Mr Tsui suggested the reverse, saying that the relations between China and the West are improving as a result of high level contacts, the Federal Reserve of the US had opted to maintain the interest rate level at its meeting in late September 2023, the government has implemented the Enhanced Supplementary Scheme allowing employers in different sectors to import labour up to technician level after failed recruitment for 4 weeks etc. 181.  With respect, such economic and political arguments fail to provide a light in the tunnel at least for the moment. All the more, I am however concerned about the so many "economic and political conditions" stated by the parties. In such regard, I must refer to the similar concern raised by the Court of Appeal in Fineway Properties Limited v Sin Ho Yuen Victor, CACV 95/2009 (unreported, 28 May 2010) at §36 that further indulgence of or delving into the macro-economic factor and political climates as enlisted by Mr Charles Chan may end up with a host of references to the works of economic theorists/political commentators whose opinions vary and are sometimes biased.[99] For instance, I fail to see the relations between China and the West are improving when the US, for instance, are still adopting the "small yard, high fence" approach towards China and there are so many sanctions on trades such as sweeping semiconductor export controls. Neither can I find any economic indicator that supports Mr Tsui’s argument that the economy is in an upward trajectory. 182.  While Mr Mok is correct to point out that the property market has entered a period submerged in a pervasive atmosphere of gloom and doom, there is always a limit to the range of risk premium within which that can vary because the real estate developers will, to an extent, finance most of their projects on their balance sheets, eg the debt used to finance the investment comes from corporate debt issues that are guaranteed by the corporation as a whole.[100] As well, when firms use their companywide WACC to evaluate their investments, the equity risk premium has the phenomenon of mean reversion over time horizons from 3 years up to 15 years.[101] Therefore, firms placing a risk premium too high would likely be outbid by their competitors if the project is not specialized or unique. That explains why the level of return is only meaningful as a comparative figure. 183.  On the other hand, Mr Varty had been all along maintaining a developer’s profit of 15%. In his opinion, the subject site lies at the Lee Gardens / Causeway Bay area which is one of Hong King’s must sought after retail and commercial districts. Mr Varty also opined that the market sentiment had improved over the past year, with COVID and the related restrictions gone behind us and a very noticeable influx of tourists in particular from Mainland China.[102] 184.  With respect, I am afraid that Mr Varty’s opinion was too much optimistic by reference to what we understand from the news everyday. Indeed, the Private Offices Price Index (Grade B) published by RVD for the year 2023 shows the picture is not as good as painted by Mr Varty: January 500.0 February 490.3 March 499.8 April 508.7 May 520.4 June 511.7 July 492.0 August 476.3 September 463.8* October 458.0* November 456.0* December 446.8* * Provisional figures 185.  While not accepting Mr Varty’s over-optimistic view, I am of the opinion that Mr Charles Chan’s relatively high developer’ profit was premised on the innovative scheme initiated by Mr Yung. Striking the balance, I am prepared to adopt a developer’s profit of 22.5%. Other Development Parameters 186.  Notwithstanding the above, Mr Charles Chan and Mr Varty had agreed on the following development parameters:[103] Marketing Cost 3% Professional Fee 6% Demolition Cost $19,800,000 Construction Cost $757,727,036 Demolition Period 0.75 year Construction Period 3 years Stamp Duty 4.25% Legal Cost 0.1% Finding on RDV and the Reserve Price 187.  Thus, subject to what I have stated above, I determine the land value of the Lot at $2,425,000,000 (ie accommodation value of $132,334/m2) as shown in Appendix of this judgment. 188.  I shall adopt the estimated RDV of $2,425,000,000 as the Reserve Price for the auction of the Lot. Other Incidental Matters 189.  The applicants propose to appoint Mr Anthony Chow and Ms Anna Chow, both being consultants of Messrs Guantao & Chow, Solicitors & Notaries, as the sale trustees. Based on the information on their background and experience as set out in their letter dated 31 August 2023, I am satisfied that they are proper persons to be appointed as trustees to discharge the duties imposed on trustees under the Ordinance. The remuneration package proposed in the said letter appears to be reasonable. 190.  The applicants have prepared a set of draft Particulars and Conditions of Sale of the Lot of even date. Subject to any amendment that may become necessary as a result of our ruling on the arrangement of auction above, the particulars and conditions of sale of the Lot by public auction submitted by the applicants are also reasonable. Order 191.  This Tribunal make the following orders: (1)  The Tribunal is satisfied that the value of the properties of the 1st respondent and/or the 26th respondent, the 2nd respondent, the 3rd respondent, the 4th respondent, the 5th respondent, the 6th respondent, the 7th respondent, the 9th respondent, the 10th respondent, the 11th respondent, the 13th respondent, the 16th respondent, the 18th respondent, the 19th respondent, the 20th respondent, the 21st respondent, the 22nd respondent, the 23rd respondent and the 25th respondent as assessed by the Tribunal in the Application is fair and reasonable and is fair and reasonable when compared with the value of the applicants’ properties. (2)  The Tribunal is satisfied that the redevelopment of the Lot is justified due to the “age” and “state of repair” of the Building and that the applicants have taken reasonable steps to acquire all the undivided shares in the Lot including those of the above respondents; (3)  All the undivided shares in the Lot, the subject of the Application herein, be sold by way of a public auction for the purposes of the redevelopment of the Lot under s.4(1)(b) of the Land (Compulsory Sale for Redevelopment) Ordinance (“the Ordinance”); (4)  Mr Anthony Chow and Ms Anna Chow of Messrs Guantao & Chow, Solicitors & Notaries, nominated by the applicants, be appointed trustees (“the Trustees”) to discharge the duties imposed on trustees under the Ordinance in relation to sale of the Lot and the Trustees be authorized to charge such remuneration for their services in accordance with the terms set out in the letter of Messrs Guantao & Chow, Solicitors & Notaries dated 31 August 2023. (5)  For the purpose of the sale of the Lot by public auction under section 5(1)(a) of the Ordinance: (i)  The sale of the Lot be on the particulars and conditions of sale substantially the same as those in the draft Particulars and Conditions of Sale as contained in Attachment 4 to the closing submission of the applicants dated 25 October 2023 to be initialed and approved by the Tribunal. (ii)  The reserve price be set at $2,425,000,000. (iii)  Subject to further extensions that the Tribunal may subsequently allow upon the application of the purchaser of the Lot or its successor in title, the redevelopment of the Lot and the Building shall be completed and made fit for occupation within a period of 6 years after the date on which the purchaser of the Lot shall become the owner of the Lot. (iv)  Liberty to the applicants, the 2nd, 3rd, 4th, 5th, 6th, 7th, 9th, 10th, 11th, 13th, 16th, 18th, 19th, 20th, 21st, 22nd, 23rd, 25th and 26th respondents and the Trustees to apply to the Tribunal for further direction(s) under the Ordinance. Costs 192.  I make a costs order nisi that: (1)  The applicants do pay the 2nd, 3rd, 4th, 5th, 6th, 7th, 9th, 10th, 11th, 13th, 16th, 18th, 19th, 20th, 21st, 22nd, 23rd, 25th and 26th respondents the costs of these proceedings, if any; (2)  Costs awarded are to be taxed at High Court scale if not agreed, with certificate for counsel. 193.  Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days from the date of this judgment. 194.  Finally, should any respondent acting in person require interpretation of this judgment into Chinese, he/she should approach my clerk to make prior appointment with court interpreter to arrange for the same.   Lawrence Pang Member Lands Tribunal Mr Mok Yeuk Chi, instructed by Messrs Lo, Wong & Tsui, Solicitors & Notaries, for the 1st to 3rd Applicants 1st Respondent, absent Mr Ross M Y Yuen, instructed by Messrs Woo Kwan Lee & Lo, Solicitors, Notaries, Agents for Trademarks & Patents, for the 2nd Respondent Mr Raymond W N Tsui, instructed by Messrs Peter Mo & Co, Solicitors for the 3rd, 11th, 18th, 20th, 22nd and 25th Respondents 4th Respondent, absent 5th Respondent, absent 6th Respondent, absent 7th Respondent, not legally represented and appeared in person by Ms Lai Leung Yuk 9th Respondent, absent Mr Jonathan Lee, instructed by Messrs Cheung, Chan & Chung, Solicitors & Notaries, Agents for Trademarks & Patents, for the 10th Respondent 13th Respondent, absent 16th Respondent, absent 19th Respondent, absent 21st Respondent, absent 23rd Respondent, absent Attendance of Messrs V Hau & Chow, for the 26th Respondent, was excused [1]  By virtue of section 2(3)(a) of the Ordinance, a mortgagee in possession of any property on a lot shall be deemed to be the owner of the undivided shares in the lot which relate to that property. However, the section does not specify whether the deemed ownership is in addition to or in replacement of the registered ownership. [2]  Of course, when the saleable area has been doubled from 24.2 sq m to 48.5 sq m, the quantum adjustment as agreed by Mr Charles Chan and Mr Varty at 2% per 5 sq m would reduce the unit value by 9.7%, resulting in a net increase in unit value by 3.1%. However, in general, in the absence of change of other factors, combining two units should reduce unit value instead of increasing unit value. [3]  See Exhibit AR 1. [4]  See Bundle F1/19. [5]  See Bundle F3(4)/477e. [6]  See Bundle F2/270-271 and F3(4)/503e-504e. [7]  See Bundle F3(4)/479e. [8]  See Bundle F2/272 and F3(4)/506e. [9]  See Bundle F3(4)/461e-462e. [10]  See photographs at Bundle F3(4)/465e-467e and 489e-490e. [11]  See photographs at Bundle F3(4)/469e-470e and 492e-493e. [12]  See photographs at Bundle F3(4)/472e and 495e-496e. [13]  See photographs at Bundle F3(4)/474e-475e and 498e-500e. [14]  See Bundle D1/93. [15]  Half share. [16]  Half share. [17]  Half share. [18]  Half share. [19]  Half share. [20]  Half share. [21]  The Court of Final Appeal stated further at §36 of the judgment that: “What the Tribunal must do is to consider whether, in the circumstances of each case, the offer falls within a band of what represents a fair and reasonable assessment of the value of the minority owner’s interest reflecting a proportionate share of the redevelopment value of the whole site.” [22]  See Bundle C/38 at §7. [23]  See Bundle A/66 at §7. [24]  The presence of Section P of Inland Lot No 2147 is disregarded as stated in §2 at the beginning of this judgment. [25]  See Bundle F2/379 at §4.1.2. [26]  See Bundle F3(2)/467b. [27]  See Bundle F3(4)/550d. [28]  See Bundle F3(4)/618d which has replaced F3(2)/525b. [29]  See Bundle F4/463d & 466d. [30]  See Bundle F3(2)/513b. [31]  See Exhibit R1. [32]  See Bundle F3(4)/519d. [33]  See Exhibit A1. [34]  In that regard, Mr Charles Chan had applied a discount of -2% to the GDV of the entire building tower. [35]  This site was in fact the subject of compulsory sale in Intelligent House Limited v Chan Tung Shing & Others, LDCS 11000/2006 dated 23 June 2008 which has been reported as [2008] 4 HKC 421. [36]  See Bundle F3(2)/614a. [37]  See Exhibit R2. [38]  See Bundle F3(4)/550d. [39]  See Bundle F3(1)/558a and Exhibit A6 (which replaces Bundles F3(4)/573d). [40]  The saleable areas adopted by Mr Charles Chan were at slight variance with (or marginally smaller than) those adopted by Mr Varty. [41]  See Exhibit A2. [42]  See Bundle F4/466f. [43]  Mr Raymond Chan agreed with Mr Yung in their joint report dated 15 August 2023 that the transformer rooms should be located on 1/F. See Bundle F4/465f. [44]  Its 21/F & 22/F are also designed for restaurant uses. [45]  See Exhibit A7. [46]  It is of interest to note that the accommodation value assessed by Mr Varty for the Lot at $190,817 per sq m was only marginally lower than that for the mega site at $193,929 per sq m. [47]  This sale was also referred to in Lead Harvest Group Limited & Others v Cheong Wing Electric Limited & Another, LDCS 6000/2018 (unreported, 7 February 2022) at §§149-152. [48]  See the plans at Bundle F3(2)/531b & 532b. [49]  See Exhibit R5. [50]  The saleable areas adopted by Mr Charles Chan were at slight variance with (or marginally smaller than) those adopted by Mr Varty. [51]  See Peace Ever Limited & Others v Chan Sui Ching & Others, LDCS 28000/2018 (unreported, dated 1 August 2023) at §§415-416. [52]  See F3(2)/504b. [53]  See Bundle F3(4)/533d. [54]  In the present proceedings, there is no evidence on the loss of ground floor spaces for Nos 25-31 Sugar Street on Gloucester Road which the site abuts as well. [55]  See Exhibit A1 at p 4. [56]  See Exhibit A1 at p 5. [57]  See Exhibit R1 at p 4. [58]  See Bundle F4/469f. [59]  See Bundle F3(2)/516b. [60]  On the other hand, Mr Charles Chan arrived at $710,000 per sq m assuming a reference shop of larger size and different configuaration. [61]  For the avoidance of doubt, Mr Charles Chan’s reference shop unit is at a similar location as that of Mr Varty, though of a larger size at 139.415 sq m. See Bundle F3(1)/562a. [62]  For instance, I cannot imagine that a bank would be content to have its branch at the subject location where the reference shop unit is situated. [63]  The calculation of frontage disregards the length of the return frontage or more properly the display window. [64]  Ditto. [65]  The calculation of depth disregards a narrow longitudinal strip extending some 5 m beyond the main proper of the shop. [66]  The shop indeed comprises two portions which are divided between a wall extending to the full depth. This being the case, the frontage to depth ratio of the portion that lies beside the entrance corridor to the building may have to be doubled to 1:4 or more. [67]  This unit value is about 7% lower than the unit rate of $710,000 derived by Mr Charles Chan before he made the concession on the location adjustment for GR3. [68]  On the basis of Exhibit R3. [69]  As found by both Mr Charles Chan and Mr Varty, the shop was acquired by the present owner at $208,000,000 on 16 June 2017. If the acquisition price is adjusted today by reference to the Private Retail Price index, ie -9.7%, it becomes $187,824,000 which is about 12% higher than the asking price. To an extent, it demonstrates the price of shops in the vicinity has dropped much more than the price index, something doubling the drop of the index. [70]  On the basis of Exhibit R6. [71]  See John H Lee v The Hong Kong & Shanghai Hotels Ltd, LDLA 15/1983 (unreported, 3 August 1983) at §18. [72]  See Bennett v Birmingham Airport Limited [2022] UKUT 00228 (LC) at §§94-96 and Roberts and Bagwell v. The Queen (1955), [1956] 1 DLR (2d) 11 (Ex Ct) [Roberts], 1955 CanLII 312 at 23-24. [73]  See F3(2)/473b. [74]  See F3(2)/531b & 532b. [75]  See Bundle F3(2)/516b. [76]  See §80 of the judgment. [77]  See §409 of the judgment. [78]  Incidentally, this was the unit rate for shops decided by the Tribunal in China Orchid International Limited & Others v Fujitec (HK) Company Limited & Others, LDCS 7000/2018 (unreported, dated 5 May 2023). Why didn’t Mr Varty cherry-pick this unit rate instead? [79]See Bundle F3(4)/589d. [80]  See Bundle F3(4)/596d. [81]  See Bundle F3(1)/572a. [82]  See §48 of the judgment. [83]  See Bundle F2/296. [84]  See Bundle F3(2)/521b. [85]See Tin Kung Investment Limited v Secretary for Transport, LDRW 16/2001 (unreported, 27 August 2004). [86]  See Bundle 523b. [87]  See Bundle F3(4)/505d. [88]  See Bundle F3(2)/531b. [89]  Incidentally, each upper floor unit of 333 Hennessy Road is designed with exclusive lavatories. [90]  See Appendix 1 to R7’s opening submission. [91]  The pamphlet got the spelling for the building name wrong by referring to it as Novo Jeffe instead of Nov Jaffe. [92]  See Appendix 2 to R7’s opening submission. [93]  See Bundle F3(4)/463d. [94]  See Exhibit R7. [95]  See Bundle F1/154. [96]  See Bundle F2/485. [97]  See Bundle F3(1)/514a. [98]  See Bundle F3(1)/515a. [99]  See also the remark of Mr Litton VP of the Court of Appeal (as he then was) in Chan Pui Ki v Leung On & Another [1996] 2 HKLRD 401 at 425. [100]  See §171 above. [101]  https://blogs.cfainstitute.org/investor/2022/07/29/equity-risk-premium-forum-term-structure-mean-reversion-and-cape-reconsidered/ [102]  See Bundle F3(2)/477b. [103]  See Bundle F3(4)/463d-465d. Appendix 1   Residual Valuation                 Gross Development Value                 G/F Retail 936.17 m2          $478,249,000     1/F-3/F Retail 2462.9 m2  x $250,000 / m2  = $615,725,000     5/F-24/F Office           = $3,913,591,000                                     $5,007,565,000     Less Marketing Costs   @ 3%     0.970                                     $4,857,338,050     Present Value in 3.75 years @ 5.5%     0.8181                                       $3,973,788,259   Development Costs                 Demolition Cost   9,000 m2  x $2,200 / m2  = $19,800,000     Professional Fee     @ 6%     1.06     Developer's Profit   @ 22.5%     1.225                                     $25,710,300     Present Value in 0.375 year @ 5.5%     0.9801                                       $25,198,665   Construction Costs           $757,727,036     Professional Fee     @ 6%     1.06     Developer's Profit   @ 22.5%     1.225                                     $983,908,556     Present Value in 2.25 years @ 5.5%     0.8865                                       $872,234,935                                     $3,076,354,659   Stamp Duty     @ 4.25%           Legal Cost     @ 0.10%           Developer's Profit   @ 22.5%     ÷ 1.26850                                     $2,425,190,902                 say $2,425,000,000             Accommodation Value   $132,334