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由此
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由此- 2 -
LDCS 1000/2010
IN THE LANDS TRIBUNAL OF THEHONG KONG SPECIAL ADMINISTRATIVE REGION
LANDS COMPULSORY SALE APPLICATION NO. 1000 OF 2010
_______________
BETWEEN
GENTWAY LIMITED (雋偉有限公司) Applicant
and
LI KING FONG ( 李琼芳) 1st Respondent
LI NGAN TSOI ( 李銀彩) 2nd Respondent
THE PERSONAL REPRESENTATIVE OF THE ESTATE OF TON SUE QUNE,
DECEASED
3rd Respondent
THE PERSONAL REPRESENTATIVE OF THE ESTATE OF YUE HING NGA (余慶雅),
DECEASED
4th Respondent
_______________
Coram : Deputy Judge Lui, Presiding Officer of the Lands Tribunal
Dates of Hearing : 8 November 2010
Date of Judgment : 15 December 2010
Date of Reasons for Judgment
: 28 April 2011
________________
REASONS FOR JUDGMENT________________
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由此- 3 -
Written Reasons
1. After hearing and reading submissions and evidence before
me, I have granted judgment in favour of the Applicant on 15 December
2010 and made an order for sale under the Land (Compulsory Sale for
Redevelopment) Ordinance, Cap. 545 (“the Ordinance”) with reasons
reserved. I now give my written reasons for the judgment.
T he Application
2. This was an Application made under the Ordinance for an
order of compulsory sale of all the undivided shares of and in Subsections
1, 2, 3, 4, 5 and the Remaining Portion of Section A of New Kowloon
Inland Lot No. 1694 (Nos. 186, 186A, 186B, 186C, 186D and 188, Tai Po
Road, Kowloon) (“the Lots”)
3. There was a 5-storey commercial / residential building (“the
Building”) erected on the Lots with 4 commercial units on the ground floor
of Nos 186 and 188 of Tai Po Road, 4 domestic units on the ground floor of
186A, 186B, 186C and 186D of Tai Po Road, 6 domestic units on 1 st floor
of Nos. 186, 186A, 186B, 186C, 186D and 188 of Tai Po Road, 10
domestic units on 2nd floor of Nos. 186, 186A, 186B, 186C, 186D and 188
of Tai Po Road, 6 domestic units on 3rd floor of Nos. 186, 186A, 186B,
186C, 186D and 188 of Tai Po Road and 6 domestic units on 4 th floor of
Nos. 186, 186A, 186B, 186C, 186D and 188 of Tai Po Road making a total
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由此- 4 -
of 5 undivided shares on each subsection (Total: 30 undivided shares). The
building was completed in 1955 and was served by 3 staircases.
4. The Applicant was the registered owner of all the undivided
shares of the Lots with exclusive right to use all the units of the Building
(“the Applicant’s Units”), except:-
(1) 3/4 of 1 undivided share of Subsection 3 of Section A of
New Kowloon Inland Lot No. 1694 held by the 1st
Respondent and 1/4 of 1 undivided share of Subsection
3 of Section A of New Kowloon Inland Lot No. 1694
held by the 2nd Respondent, both with exclusive right to
use the domestic unit at 2nd Floor, No. 186B Tai Po
Road, Kowloon (the 1st and 2nd Respondents’ Unit);
(2) 1 undivided share of Subsection 2 of Section A of New
Kowloon Inland Lot No. 1694 held by the 3rd
Respondent with exclusive right to use the domestic
unit at 3rd Floor, No. 186A Tai Po Road, Kowloon (the
3rd Respondent’s Unit); and
(3) 1/5 of 1 undivided share of Subsection 5 of Section A of
New Kowloon Inland Lot No. 1694 held by the 4th
Respondent with exclusive right to use the domestic
unit at Portion D 2nd Floor, No. 188 Tai Po Road,
Kowloon (the 3rd Respondent’s Unit);
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5. The average of Applicant’s undivided shares of the Lots was
92.66%. I was satisfied that the Applicant was entitled to make this
Application pursuant to section 3(1) of the Ordinance.
6. The Respondents did not appear in the hearing. I was satisfied
that the notices published in the Chinese and English newspapers pursuant
to the Directions of this Tribunal dated 4 June 2010 of HH Judge M Wong
were sufficient to bring the Respondents to the attention of this
Application.
7. Since the Respondents did not appear in the hearing, I
therefore requested the Applicant to prove its case to justify its application
for making the order according to the Ordinance. In my judgment, even if it
was uncontested, because of the absence of the Respondents, unless the
Applicant could satisfy this Tribunal with sufficient credible evidence that
all the requirements and conditions as laid down in the Ordinance were
duly met, the order of compulsory sale should not be granted. Since the
Applicant’s evidence was not challenged, I therefore directed that all the
witness statements, expert reports and documents filed by the Applicant in
support of this Application be admitted as evidence in the hearing without
calling the makers.
Valuation of the Existing Use Values (“EUV”) as per Part 1 of the
Schedule 1 of the Ordinance
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8. Under section 4(1)(a) of the Ordinance, the first determination
by the Tribunal would have been the determination of dispute, if any, on
the EUV valuations undertaken in the application valuation report filed
pursuant to section 3(1)(a) of the Ordinance. However, since the
Respondents did not appear in the present hearing, pursuant to section 4(1)
(a)(ii) of the Ordinance, the Applicant had a duty to satisfy this Tribunal
that the value of the Respondents’ units as assessed in this Application was
not less than fair and reasonable, and in particular, when compared with the
value of the Applicant’s Units.
9. After reading and reviewing the valuation report dated 27
January 2010 (which was the application valuation report filed pursuant to
section 3(1)(a) of the Ordinance) and the valuation report dated 29
September 2010 (which was a supplemental valuation report for adjusting
his original opinion expressed in the application valuation report dated 27
January 2010) of Mr. Charles Chan, FRICS, FHKIS, Chartered Valuation
Surveyor, I was satisfied that the EUV satisfied the above test that it was
not less than fair and reasonable, and in particular, when compared with the
EUV of the Applicant’s Units. I accepted the opinion of Mr. Chan that
direct comparison method was an appropriate valuation method for these
properties. And I also accepted that the valuation was based on good
market comparable transactions with suitable adjustments. Accordingly, the
EUV of all the units of the Building accepted by this Tribunal were:-
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Street Nos. of Tai Po
RoadExisting Use Values as at 19 January 2010 ($)
G/F 1/F 2/F 3/F 4/F
186 2,850,000 2,890,000 2,730,000 2,130,000
(South Portion)
9,130,000
(North Portion)
7,440,000
186A 1,610,000 1,620,000 1,730,000 1,780,000 1,580,000
186B 1,710,000 1,720,000 1,830,000 1,620,000 1,510,000
186C 1,940,000 1,900,000 2,030,000 1,890,000 1,760,000
186D 1,810,000 1,880,000 2,000,000 1,870,000 1,640,000
188 2,780,000 2,650,000 2,050,000
(Portion A) 740,000
(Portion B) 500,000
(Portion C) 620,000
(Portion D) 310,000
(Portion E) 350,000
(South Portion)
8,100,000
(North Portion)
7,460,000
Total 88,160,000
10. According to the above, the total EUV was $88,160,000 and
the EUV of the Respondents’ units respectively were:-
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(1) The 1st and 2nd Respondents’ Unit was $1,830,000 and
hence, it represented 2.0758 % of the total EUV of the
Lots;
(2) The 3rd Respondent’s Unit was $1,780,000 and hence, it
represented 2.0191 % of the total EUV of the Lots; and
(3) The 4th Respondent’s Unit was $310,000 and hence, it
represented 0.3516 % of the total EUV of the Lots;
Justification for Redevelopment and Reasonable Steps Taken
11. The second determination under section 4(1)(b) of the
Ordinance was whether the order of compulsory sale should be made.
According to section 4(2) of the Ordinance, this would involve 2 statutory
requirements, namely:-
(1) Was the redevelopment of the Lots justified due
to age or state of repair of the Building; and
(2) Had the Applicant taken reasonable steps to
acquire all the undivided shares in the Lots.
12. If the Applicant failed to satisfy this Tribunal that the above
statutory requirements were met, be it an uncontested application, an order
of compulsory sale ought not be granted.
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13. For requirement (1) above, I had taken into consideration of
the experts opinion of Mr. Dennis W C Wong, MRICS, MHKIS, Building
Surveyor and Authorized Person as stated in his report dated 4 October
2010 and Mr. C M Wong, FHKIE, CEng, FICE, a Registered Structural
Engineer and Authorized Person as stated in his report dated 5 October
2010. The experts were of the view that that the existing buildings were in
poor and dilapidated condition, namely :-
(1) A number of cracks and spalling were found in
the structural elements of the Building;
(2) Some of the steel reinforcement in the Building
was badly corroded;
(3) Considerable voids were found in the structural
elements of the Building;
(4) 29% of the structural elements of the Building
were found to have concrete over less than the
design cover and the design concrete cover were
below the current design standard;
(5) 19% of the structural elements of the Building
had doubtful adequacy of concrete strength;
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(6) Carbonation had reached the concrete
surrounding steel reinforcement in 89% of the
tested samples which meant that the steel
reinforcement susceptible to corrosion;
(7) The chloride content in the concrete for 50% of
the tested samples exceeded the acceptable limit
of 0.4%;
(8) The structural and concrete elements did not
provide for sufficient durability and fire
resistance in meeting the current requirements as
stated in the relevant ordinances;
(9) The condition of the facade of the Building was
poor. The rendered and painted surface was
stained and deteriorated due to weathering and
lack of proper maintenance. Serious deterioration
was observed at the side and rear elevations of the
Building;
(10) Delamination was observed on the external walls
of the Building and such delamination would
deteriorate rapidly due to ingress of rainwater to
the voids behind the rendering. The external wall
rendering had come to the end of its effective life;
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(11) Many unauthorized building structures were
erected in the yard of ground floor, the main roof
on external wall without proper maintenance;
(12) Asbestos contained materials were found in some
corrugated sheets at many locations of the
Building and therefore were dangerous and
hazardous to the occupants and the general
public;
(13) The waterproof membrane on the roof was
defective and not performing its intended
function of keeping rainwater from the entering
the Building;
(14) None of the electricity meters and electrical
wirings were protected with fireproof enclosures
and therefore were potential fire hazards;
(15) No emergency lighting was provided to the
staircases and corridors;
(16) No fire hydrants or hose reels system was
provided in the Building;
(17) No equipotential bonding for metal windows for
preventing electrical shocks was installed;
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(18) 25% of the domestic units had been illegally and
substantially altered creating structural, fire safety
and hygiene problems;
(19) Voids under the ground floor slab of the Building
were detected by using Ground Penetrating Radar
Survey. These voids would cause ground
subsidence endangering the safety of the residents
and damages to the underground utilities.
(20) Many illegal drainage installations and
connections had been made to the toilets and
kitchens in the illegally altered domestic units;
14. Mr. Patrick Fung, S.C. leading Miss Nancy Ngai Counsel for
the Applicant, submitted that although extensive repair works could extend
the Building’s life span, as explained in the experts’ reports, the continuous
maintenance costs would be high. Most of the building components and
finishes were at the end of their effective life span and without substantial
repairs, the Building was not up to tenantable standard. I accepted that the
condition of the Building was substantially below the usual standard for
human habitation and the expected 50-year design life of it had been
reached. Without extensive repair, the Building was unfit for habitation.
15. Apart from the professional opinions of the experts, I also
looked at the primary evidence supporting the opinions including:- the
photographs, the survey records and the various tests results (including:-
Covermeter Survey, Core Compression Test, Depth of Carbonation
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(Pheolphthalein Test) Test and Chloride Content Test) in coming my
decision. I accepted the Applicant’s submissions that the expert opinions
were sound and supported by the facts.
16. Further, in consideration of the evidence above, I was entitled
to look at all of the above collectively to see if redevelopment was justified,
even though when each of them, if considered alone, was insufficient to do
so. I was satisfied that the evidence showed that the existing building on
the Lots had reached beyond the design working life of 50 years and the
state of repair was very poor. The Building was unfit for habitation and
unreasonable high costs may have to be incurred to restore them into an
acceptable standard but no evidence seemed to suggest that any reasonable
owners would do so. I was therefore satisfied that the redevelopment of the
Lots was justified due to age and state of repair of the existing building.
17. In Intelligent House Ltd v Chan Tung Shing & Others [2008] 4
HKC 421, this Tribunal formulated certain tests, which included some
economic perspective, for deciding whether or not a redevelopment was
justified due to age or state of repair. The Applicant’s Counsel submitted
that, even without any opposing submissions, it was still appropriate in this
Application for this Tribunal to apply these tests. I disagreed. Since the
correctness of these tests were subsequently questioned by the Court of
Appeal “without the benefit of hearing full argument” in Fineway Property
Ltd v Sin Ho Yuen Victor CACV 95 of 2009 (Unreported), in my judgment,
it was not appropriate to deal with the correctness of the relevant tests
formulated in Intelligent House on “age” and “state of repair” without the
assistance of opposing legal submissions. Further, since I was satisfied
with the facts and expert opinions adduced before me that the
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redevelopment was justified due to age and state of repair of the existing
building, it was no longer necessary for me to apply these tests for disposal
of this Application.
18. For requirement (2) above, I had taken into consideration of
the evidence of Miss Lui Wing Yan. She was a manager of the Applicant
and had knowledge about the intended acquisition of the Respondents’
units. She said that, on 30 December 2009, the Applicant offered the 1 st and
2nd Respondents to purchase their unit for $3,714,750 and $1,238,250
respectively. Since the Applicant had no knowledge of the whereabouts of
1st and 2nd Respondents, it therefore sent the offer by:- (a) leaving the offer
letters at the 1st and 2nd Respondents’ Unit; (b) inserting the offer into the
mailbox; and (c) sending the offer by registered mail. According to the
witness, the Applicant did not receive any reply from them and the offers
sent by mail were returned.
19. According to the witness, on 3 February 2010, the Applicant
made further effort to purchase the 1st and 2nd Respondents’ Unit by making
offers to the 1st and 2nd Respondents for $4,195,800 and $1,398,600
respectively in a similar manner. Similarly, there were no reply and the
offers sent by mail were returned. On 25 October 2010, the Applicant made
a final attempt to purchase the 1st and 2nd Respondents’ Unit by making
offers to the 1st and 2nd Respondents for $4,756,950 and $1,585,650
respectively. Again, there was no reply.
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20. Regarding the 3rd Respondent, the witness told the Tribunal
that a Richfield Realty Limited, an estate agent, said that a Mr. Yee Jay Wee
claimed to be the intending administrator of Ton Sue Qune. According to
Richfield Realty Limited, this Mr. Yee was living in the United States of
America and did not allow Richfield Realty Limited to inform the
Applicant of his address. At that time, Mr. Yee claimed that he appointed
Messrs. Gallant Y.T. Ho & Co., a firm of solicitors in Hong Kong, to handle
his application for administration of the estate of Ton Sue Qune. Although
the capacity of Mr. Yee to represent the 3rd Respondent was yet to be
proved, Applicant still offered Mr. Yee to purchase the 3rd Respondent’s
Unit for a price of $3,000,000 to which Mr. Yee accepted. A provisional
agreement for the sale and purchase was signed by the Applicant and Mr.
Yee on 2 July 2009. However, up to the date of hearing, there was no proof
shown to the Applicant that Mr. Yee was appointed as the administrator.
Further, Mr. Yee’s solicitors, Messrs. Gallant Y.T. Ho & Co. refused to
confirm their instructions to act for Mr. Yee in the sale of the 3 rd
Respondent’s Unit. By reasons of the above, there was no progress of the
sale of the 3rd Respondent’s Unit and therefore it was aborted.
21. On 26 October 2010, the Applicant made a further attempt to
purchase the 3rd Respondent’s Unit by making a revised offer for
$6,169,300. The Applicant:- (a) left the offer letters at the 3 rd Respondent’s
Unit; (b) inserted the offer into the mailbox; (c) sent the offer by registered
mail; and (d) requested Messrs. Gallant Y.T. Ho & Co. and Richfield Realty
Limited to pass the offer to the intended administrator of Ton Sue Qun’s
estate.
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22. About 3 days before the hearing, by a letter dated 5 November
2010, Messrs. Gallant Y.T. Ho & Co. confirmed their instructions to act for
Mr. Yee and a Madam Woon Sen Wong who were both appointed as
administrators of Ton Sue Qun’s estate. However the administrators,
despite having knowledge of the present proceedings, made no attempt to
participate in the same. I agreed with the Applicant’s submissions that,
given factual matrix between the Applicant and Mr. Yee, I had reason to
believe that the 3rd Respondent had knowledge of this Application and did
not intend to oppose it. In the same letter, Messrs. Gallant Y.T. Ho & Co.
also said that the offer to purchase the 3rd Respondent’s Unit for $6,169,300
was passed to the administrators for consideration. I was informed by the
Counsel of the Applicant that, up to the date of hearing, no reply from this
offer was received.
23. Regarding the 4th Respondent, since Mr. Yue Hing Nga was
once declared as a patient under the Metal Health Ordinance, Cap. 136, his
estate was managed by a committee who was then represented by the
Official Solicitor. However, after Mr. Yue passed away, the committee was
discharged without any court order. The Applicant had no knowledge when
Mr. Yue passed away and on 17 July 2009 sent an offer to the Official
Solicitor intending to purchase the 4th Respondent’s Unit for $700,000. The
Official Solicitor then informed the Applicant that they no longer
represented the 4th Respondent. As the Applicant had no knowledge who
the administrator was, the Applicant made offers to the 4th Respondents
by:- (a) leaving the offer letters at the 4th Respondent’s Unit; (b) inserting
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由此- 17 -
the offer into the mailbox; and (c) sending the offer by registered mail. On
30 December 2009, 3 February 2010 and 25 October 2010, the Applicant
offered to purchase the 4th Respondent’s Unit for $840,000, $948,200 and
1,074,500 respectively. However, up to the date of hearing, the Applicant
received no reply from these offers.
24. In my judgment, I accepted that the 3rd Respondent was given
sufficient time to consider the offers but failed to respond. For other
Respondents who had not communicated to the Applicant, either directly or
indirectly, namely the 1st, 2nd and 4th Respondents, I was satisfied that the
notices and advertisements published pursuant to the Directions of this
Tribunal dated 4 June 2010 of HH Judge M Wong were sufficient to bring
these Respondents to notice of this Application and, if necessary, to
respond to the offers made by the Applicant. Having considered the above,
I was satisfied that the offers were duly communicated through all possible
means to the Respondents.
25. According to the Applicant’s valuation expert, Mr. Chan, the
redevelopment value of the Lots, as at 21 October 2010, was $291,000,000.
In carrying out the valuation, Mr. Chan used the residual valuation method
and was of the view that the optimum hypothetical development should be
a composite commercial and residential building. I had carefully
considered and reviewed the steps taken, assumptions made and
comparables used by Mr. Chan in the valuation and accepted that they were
reasonable in the circumstances. I accepted that $291,000,000 was the
open market value of the Lots reflecting their redevelopment potential, on
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their own.
26. Applying the accepted redevelopment value of the Lots for
$291,000,000, this would give the proportionate values of the respective
Respondents units (calculated at the Respondents’ pro rata interest of the
development) as follows:-
Respondents Latest Offers
in October 2010
Proportionate Values
in October 2010
Pro Rata Interest
1st $4,756,950 $4,530,434 3/4 of 2.0758 %
2nd $1,585,650 $1,510,145 1/4 of 2.0758 %
3rd $6,169,300 $5,875,581 2.0191 %
4th $1,074,500 $1,023,156 0.3516 %
27. In my judgment, the latest offers made in October 2010 clearly
represented a fair and reasonable share of the redevelopment potential of
the Lots. By reasons of the above, the offers made by the Applicant to the
respective Respondents were fair and reasonable because they were duly
communicated to the Respondents and were fair and reasonable in
consideration of the statutory formula. Applying the test formulated in
Capital Well Ltd v Bond Star Development Ltd [2005] 4 HKLRD 363, I
was satisfied that the Applicant had taken reasonable steps to acquire all
the undivided shares in the Lots including all the Respondents’ units.
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由此- 19 -
28. By reasons of the above, I was therefore satisfied that the
order of compulsory sale ought to be made.
Reserved Price for the Auction
29. Given my findings above that $291,000,000 was the open
market value of the Lots reflecting their redevelopment potential, on their
own, as at 21 October 2010, I therefore accepted that it should be the
auction reserved price.
The Order for Sale
30. I therefore made an order for compulsory sale in the
following terms:-
(1) All the undivided shares of and in the Lots be
sold by way of a public auction for the purpose of
redevelopment under Section 4(1)(b) of the
Ordinance;
(2) Mr. Ma Ho Fai and Ms. Tsang May Ping be
appointed trustees (“the Trustees”) to discharge
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the duties imposed on the trustees to be appointed
under the Ordinance in relation to the sale of the
Lots and the Trustees be authorized to charge
such remuneration for their services in
accordance with the terms set out in the letter of
Messrs. Woo Kwan Lee & Lo dated 26 October
2010;
(3) For the purpose of sale of the Lots by public
auction under Section 5(1)(a) of the Ordinance:-
(a) the sale of the Lots be on the
particulars and conditions
substantially the same as those in the
draft Particulars and Conditions of
Sale initialed and approved by the
Tribunal;
(b) The reserve price be set at
$291,000,000;
(4) Subject to further extensions which the Tribunal
may subsequently allow upon the application of
the purchaser of the Lots or its successor in title,
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the redevelopment of the Lots shall be completed
and made fit for occupation within a period of 6
years after the date on which the purchaser of the
Lots becomes the owner of the Lots as specified
by Section 9 and Schedule 3 of the Ordinance;
(5) Liberty to the Applicant, the Respondents and the
Trustees to apply to the Tribunal for further
directions under the Ordinance;
(6) There be no order as to costs for this hearing and
the entire application; and
(7) Service of a copy of this Order on the
Respondents be dispensed with subject to notices
being inserted and published once within 21 days
from the date hereof in Sing Dao Daily and the
South China Morning Post on the same day:-
(a) informing the owners of the Lots,
including the Respondents, that an
order for sale of the Lots has been
made by the Tribunal; and
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由此- 22 -
(b) giving information as to the place
where and times during which a
copy of this Order may be obtained.
Deputy Judge Lui
Presiding Officer
Lands Tribunal
Mr. Patrick Fung S.C. and Miss Nancy Ngai instructed by Messrs. Yam and
Co, for the Applicant, present.
In person, the 1st, 2nd 3rd and 4th Respondents, absent.