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【案例名称】
REDHILL PROPERTIES LTD v. DIRECTOR OF ENGINEERING DEVELOPMENT
【审理法院】 锟斤拷锟斤拷锟斤拷么锟 / Lands Tribunal
【案件类别】 锟斤拷锟斤拷锟斤拷锟斤拷 / MTR Ordinance Application
【判决日期】 1900/1/1
     
 
【正文】
 
 
REDHILL PROPERTIES LTD v. DIRECTOR OF ENGINEERING DEVELOPMENT

LDMT000005/1983

Property law - Mass Transit resumption - value of resumed property on basis of hypothetical refurbishing - contractual and statutory restrictions - comparative and residual methods - market value gross receipts - allowance for profit and risk - Internal Rate of Return and Return on Equity alternative methods - Held: 1. In exceptional circumstances of this particular resumption residual method of valuation best alternative; 2. Compensation assessed at $16 million - Section 18 Mass Transit Railway (Land Resumption and Related Provisions) Ordinance, Cap. 276; Sections 4, 11, 12 Crown Lands Resumption Ordinance, Cap. 124.

 

IN THE LANDS TRIBUNAL OF HONG KONG

 

Mass Transit Reference No. 5 of 1983

 

BETWEEN REDHILL PROPERTIES LIMITED

 

Applicant

 

AND

DIRECTOR OF ENGINEERING DEVELOPMENT

Respondent

 

_______________

Coram: TRIBUNAL: His Honour judge Cruden, Presiding Officer.

Date: 22nd day of December, 1983

ADVISER: F.Y. Kan, Esq., Chartered Surveyor, appointed under Section 9(4) of the Lands Tribunal Ordinance, Cap. 17.

---------------------

JUDGMENT

---------------------

 

1. The applicant, pursuant to Section 18 of the Mass Transit Railway (Land RESUMPTION and Related Provisions) Ordinance, Cap. 276 (hereinafter called "the Ordinance") has applied for compensation under Item 1 of Part I of the First Schedule thereto consequent upon the Crown resuming the applicant's residential property known as Kornhill East, being Quarry Bay Inland Lot 5, Hong Kong. Notice under the Ordinance of the resumption for the purposes of and incidental to the Mass Transit Railway was published on the 10th dar of July 1981 in No. 28 Volume CXXIII 'The Hong Kong Government Gazette' as Government Notice 2005. Under that Notice the subject property was resumed and reverted to the Crown on the 10th day of August 1981.

 

2. The applicant in its notice of application claimed $36,300,000 as compensation for the land resumed. Both parties before the hearing, under Rule 18, filed their respective valuers reports. These reports disclosed that the applicant had by then reduced its claim to $20,100,000 While the respondent was prepared to offer $14,250,000 in full compensation. At the hearing this difference between the parties was further narrowed as the applicant's valuer reduced his valuation down to $19,060,000 while the respondent's valuer amended his valuation up to $15, 200, 000. In the result $3,860,000 separates the parties.

 

3. The subject property is a rectangular lot comprising 1,734.89 square metres (18,669 square feet). The lot, which was level, formed part of a platform about 92.6 metres above the principal datum level on a hill which rises steeply from the south side of King's Road, Quarry Bay, Hong Kong Island. Erected on the lot was a large three-storey brick residential structure comprising two semi-detached houses. There buildings together with the nearby Kornhill West were built in the early years of this century to house the senior managers of Taikoo Dockyard. Both properties were connected to King's Road below by a 300 metre private access road.

 

4. By the time of the hearing the buildings had been demolished and the ground level had been substantially lowered as part of the works for which the property had been resumed. However, detailed plans of the buildings were produeed, supported by a series of 11 large photographs. These included 2 aerial photographs showing the position of Kornhill East in relation to Quarry Bay, Taikoo Shing and neighbouring properties; 5 photographs shoring the exterior aspects of the building; and 4 inside photographs showing some of the principal rooms.

 

5. From these exhibits it was clear that Kornhill East had been a large, attractively designed building, situated in spacious surroundings enjoying the amenities of a tennis court and swimming pool as well as magnificent harbour views. Because of the elevated site it was relatively isolated from the residential and other buildings in Quarry Bay. This privacy was also further protected as the rear of the property shared a common boundary with the Tai Tam Country Park. From this evidence Counsel for the applicant's description of the property as an Edwardian mansion was not entirely inappropriate. Before leaving this helpful photographic evidence it should be emphasised that, as the plans of the property showed, the tennis court, the major part of the swimming pool and the large areas of lawn visible in the photographs, were not part of the resumed subject property but were built on Crown land. This fact was common ground between the parties.

 

6. The original Crown lessee of the property was the Taikoo Dock Yard and Engineering Company of Hong Kong Ltd. which has changed its name to Swine Pacific Ltd. However, the applicant is the beneficial owner of the property as purchaser under an agreement for sale and purchase from Swire Pacific Ltd. registered in the Land Office on the 16th day of February 1979 as Memorial No. 1660275. The Tribunal was informed that all these companies form part of the Swine Group. The Crown lease was granted on the 28th day of April 1910 for a period of 75 years from the 30th day of July 1900 renewable for a further term of 75 yours. On expiration of the first 75 Years the lease was renewed for a further 75 years. The Crown lease, as was common for leases of that period, imposes few restrictions on the lessee. There is the usual rate and range clause and a prohibition on use for offensive trades.

 

7. Turning to any statutory restrictions, the property under the Town Planning Ordinance, Cap. 131 is designated Residential (B) on the Quarry Bay Outline Zoning Plan LH 219 dated the 29th day of October 1976. Under the Hong Kong Airport (Control of Obstructions) Ordinance, Cap. 301 the property is affected by the Hong Kong Airport (Control of Obstructions) Order dated the 21st day of September 1982 being within the area delineated and described in the plan numbered LM/152 deposited in the Land Office. That Order imposes a  height limit on buildings erected on the property of 91.44 metres (300 feet). Any buildings on the property would, of course, also be subject generally to the provisions of the Buildings Ordinance, Cap. 123.

 

8. In approaching their valuations, Mr. A. G. Doran, called by the applicant and Mr. H.F.G. Beeson for the respondent were both agreed that the correct basis of valuation was that the property, as at the 10th day of August 1981, was suitable and available for refurbishment. The hypothetical refurbishment of Kornhill East contemplated by the applicant, was the conversion of the 2 semi-detached houses into 6 self-contained flats. The applicant obtained reports setting out the necessary steps to complete this conversion from Wong, Tung & Partners, Architects, Ove Arup & Partners, Structural Engineers and Levett & Bailey, Chartered Quantity Surveyors. By consent these reports were produced by Mr. Doran and formed a basis for his valuation.

 

9. I recognise, as a matter of fact, that refurbishment is not an alternative commonly adopted by developers in Hong Kong Generally they prefer to demolish an existing building and rebuild, rather than exploiting an existing site by altering and renovating an old building. However, as a matter of law, this is an alternative open to developers and I accept the agreement of the parties, to determine the compensation payable, on this basis. Certainly there are no contractual restrictions on the applicant under the Crown lease for such a redevelopment. Any refurbishment would, however, have to conform to the height restrictions under the Hong Kong Airport (Control of Obstructions) Ordinance and comply with the relevant provisions of the Buildings Ordinance.

 

10. Because of the relatively few number of residential properties remaining in Hong Kong of the age and character of the subject property together with the unusual nature of the hypothetical redevelopment by refurbishing, the project, if not unique, would certainly have been a rarity. The subject property itself provides some evidence of the first factor for by the time of the hearing, the Kornhill East building had been demolished and the ground level lowered. In the circumstances both parties were agreed that the preferable method of valuation by comparison was, on the facts, not possible. There simply were no truly comparable properties to enable any direct comparison to be made. The valuers were therefore obliged to fall back on the residual method of valuation. Both valuers recognised the potential inherent weaknesses of the residual method. A useful definition of the residual method is to be found in 'Modern Methods of Valuation' D.M. Lawrence & Ors. (6th Edn. ) page 152:

 

"Where the residual method is employed the market value of the property when developed to the best advantage is ascertained and allowance made for the period of deferment; the cost of the necessary works and an allowance for profit and risk is then deducted; on this basis the result should represent the present value of the property in its existing condition."

 

11. In similar circumstances the Lands Tribunal has in the past accepted valuations employing the residual method - Director of Lands & Survey v. Wong Chung-don & Ors. (1977) H.K.L.T.L.R. 43; Hofei Estates Ltd. v. Secretary for City and New Territories Administration C.L.R. No. 1/1982. I accept that in the present circumstances the residual method of valuation is the best of the alternative methods of valuation available.

 

12. Both valuers in adopting the residual method followed the same procedure. As to the factors relevant in the application of the residual method both parties were agreed that:

 

(a) The period of deferment, being the estimated time for completion of the works, was 13.5 months.

 

(b) The total costs of refurbishment were $2,121,000.
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1,577,998 14,432,559 6,506
3,759 567,978 2,406
5,668 49,362 23,598
2,676 4,305 37,574
10,115 1,918 183,759
10,110 652 73,759
1,016 3,521 24,474
14,601 760 4,528
8,342 5,923
 
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