Real Honest Investment Ltd. v. Attorney General
Read the full judgment text of CACV 209/1996 on BabelCite. This Court of Appeal judgment was delivered on 18 March 1997.
1. This appeal concerns the rights of the Crown as lessor of a piece of land located at Stubbs Road. It is RBL No. 193 on which an apartment block known as "Interocean Court" presently stands. Interocean Court is a 7-storey building, 85 feet in height, consisting of 14 residential flats.
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CACV000209/1996 IN THE COURT OF APPEAL 1996, No. 209 - Headnote - Restrictive covenant in Crown lease - Height restriction to 35 feet - No modification or variation by deed to remove height limit - Whether exchange of correspondence had the effect of "waiving" the restriction for the purposes of the development referred to in the correspondence or operated as a "general waiver". Held (Court of Appeal): Judge erred. The only "waiver" which was clear and unequivocal was of the height restriction in relation to the particular development covered by the correspondence. The Attorney-General's appeal allowed. IN THE COURT OF APPEAL 1996, No. 209 _________________
_________________ Coram: Hon Litton, V.-P., Godfrey and Ching, JJ.A. in Court Date of hearing: 6 March 1997 Date of handing down judgment: 18 March 1997 __________________ J U D G M E N T __________________ Litton, V.-P.: Introduction 1. This appeal concerns the rights of the Crown as lessor of a piece of land located at Stubbs Road. It is RBL No. 193 on which an apartment block known as "Interocean Court" presently stands. Interocean Court is a 7-storey building, 85 feet in height, consisting of 14 residential flats. 2. The respondent, Real Honest Investment Ltd., acquired the property in July 1993 and proposes to redevelop the lot by demolishing Interocean Court and replacing it with a multi-storeyed residential block of the same external dimensions: that is, a building 85 feet in height. What is in issue on this appeal is the applicability of a covenant in the Crown lease restricting the height of any building on the land to 35 feet. The Government contends that the restrictive covenant prohibits such a development. The argument for the developer, as refined before us, is that the height restriction in the Crown lease has been generally waived, for the duration of that lease, by an exchange of correspondence which took place between the former owners of the property and the Government, before Interocean Court was built. 3. Sears J, in proceedings commenced by the developer by way of an originating summons, acceded to the developer's argument. Pursuant to his judgment dated 10 September 1996 the judge declared that the developer was entitled without the consent of the Crown as lessor to redevelop the lot by the erection of a multi-storeyed residential building exceeding 35 feet in height in place of the present building thereon, notwithstanding any covenants in the Crown lease. Hence the Attorney-General's appeal before us. The Crown lease 4. The Crown lease was executed on 1 May 1923. The covenants, where relevant, state:
The issue 5. It is now common ground (though it was not so before the judge) that in 1948, when the former owner of the lot first put forward proposals to the Government to redevelop the land by erecting Interocean Court, the height restriction in the Crown lease was effective to prohibit the erection of a building exceeding 35 feet in height. So the argument boils down to this: Was the waiver of the prohibition, effected by the exchange of correspondence, confined to the scheme to build Interocean Court, as the Government contends, or was it a general waiver of the covenant for the duration of the Crown lease, as the developer contends? The exchange of letters 6. The general waiver, according to the judge, was contained in two letters: one dated 29 September 1948 from the Colonial Secretary to Messrs Johnson, Stokes & Master, solicitors for the then owner, and one dated 20 October 1948 from the Building Authority to Mr R. Minutti, the architect. The underlying problems 7. To appreciate the context in which the letters were written, some of the underlying problems prevailing at that time need to be understood. 8. There were, in essence, three matters which the solicitors and architect for the owner needed then to address:
How the problems were addressed 9. On 10 August 1948 Mr R. Minutti, the architect, wrote to the Director of Public Works as follows:
10. The Building Authority's reply, dated 25 August 1948 was as follows:
R.B.L. 193
11. As may be noted, there is a slight confusion of thought in the last paragraph of the Building Authority's letter. The height restriction in the Crown lease is unqualified: The "consent of the Governor-in-Council" refers not to the height restriction but to the "one house" limitation. Be that as it may, solicitors for the owner then came on the scene and, on 6 September 1948, they wrote a letter to the Colonial Secretary asking that the matter might be placed before the Governor-in-Council. This letter says:
Rural Building Lot No. 193.
12. A preliminary reply to the solicitors was given by the Colonial Secretariat in these terms:
13. This was followed by a letter dated 29 September 1948 - the crucial letter for the purposes of this appeal - in these terms:
14. There was then a follow-up letter from the Building Authority to the architect dated 20 October 1948:
R.B.L. 193
The effect of the correspondence 15. What emerges from a fair reading of the correspondence leading up to the "crucial" letter of 29 September 1948 is this:
Construction of letter of 29 September 1948 16. It is in the context of the correspondence up to this point that the letter of 29 September 1948 - now the main plank of the developer's case - is to be understood. 17. Sir John Swaine QC, Counsel for the developer, submits that where the letter of 29 September says:
this is to be construed as a waiver of all restrictions referred to in the previous letter, in particular, the 35 feet height restriction. 18. I cannot accept this submission. 19. It is to be noted that the letter was addressed to the solicitors, who had asked for the matter to be placed before the Governor-in-Council. In his reply, the Colonial Secretary was saying, in effect, this:
20. It is, in my judgment, impossible to construe the first paragraph of the letter of 29 September 1948 as a general waiver of any of the rights of the Crown as lessor. 21. The second paragraph of the letter then went on to say that in relation to the "potential restrictions" set out in the letter, the Building Authority would formally intimate its waiver. 22. When the Building Authority followed up this matter with the architect in its letter of 20 October 1948 it was at pains to point out that the waiver was restricted to the "one block of flats as shown in your tentative scheme". It is, in my judgment, impossible to construe the intention expressed in the correspondence as anything other than a waiver limited to the project in hand, to enable Interocean Court as then proposed to be built. 23. The point is reinforced when one considers the next letter written by the architect to the Building Authority as follows:
Proposed Apartment Building on R.B.L. 193
24. Whilst it is true to say that the Building Authority, in its capacity as the Crown land agent, could formally bind the Crown as lessor in relation to covenants in the Crown lease generally - see Hang Wah Chong Investment Co. Ltd. v. Attorney General of Hong Kong (1981) 1 WLR 1141 at 1145 - nothing suggests that, in this case, the Building Authority was doing anything more than relaxing such prohibitions as needed relaxing to enable Interocean Court, as then shown on the plans, to be built. Sears J's judgment 25. At p5 of his judgment the judge said:
26. In analysing the effect of the letters, it is not helpful to simply refer to the authorities concerned as "the government". There were, in fact, two authorities involved. The Colonial Secretariat was responding to the solicitors' request that the matter be referred to the Governor-in-Council for its consent. The Colonial Secretariat's reply of 29 September 1948 to the solicitors was, in effect, to say that it was unnecessary to put any of the matters mentioned in the letter of 23 September to the Governor-in-Council: The Building Authority could effectively deal with the matter and give such waivers as were necessary to be given to enable the development of Interocean Court to go ahead. 27. Upon this analysis of the effect of the correspondence, a conclusion that the Crown as lessor had "waived" generally all its rights to enforce the restrictive covenant, limiting any building to be erected on the lot to 35 feet in height, is in my judgment untenable. Conclusion 28. It is as well to bear this point in mind: The restrictive covenant is enshrined in a deed granting an interest in land for a long term. One would expect, in normal circumstances, that any modification of the covenants to be likewise effected by deed. The matter is, ultimately, one of the intention to be imputed to the parties. It can be tested in this way: Under the terms of the Crown lease the "one house" limitation could be relaxed with the consent of the Governor-in-Council. Assuming that, to construct Interocean Court, such consent were necessary and had, indeed, been sought and given: Would it have been possible to argue that such consent must be deemed to have been given for every other development which might thereafter follow on the same lot, assuming Interocean Court to be demolished for redevelopment? The answer must be No. And yet, the developer's argument with regard to the height restriction amounts to this: Since the letter of 29 September 1948 said that the consent of the Governor-in-Council was "not required" in respect of the height restriction, this must be construed as a waiver of the Crown's right as lessor to impose a height restriction for the duration of the lease. The argument is palpably unsound. 29. In my judgment, the judge had erred in construing the effect of the correspondence. I would allow this appeal and discharge the judge's order of 10 September 1996, with an order nisi that the respondent should pay the costs of the appeal and in the court below. Godfrey, J.A.: 30. I agree; but out of respect for the judge, from whom we are differing, I append a short judgment of my own. 31. The appellant ("the landlord") asserts and the respondent ("the tenant") accepts that the Crown lease here, made by deed dated 1 May 1923, contains a covenant the effect of which, if it is still in force, is to preclude the tenant, a successor in title of the original lessee, from building on the demised land a new block of flats exceeding 35 feet in height to replace an older block of flats (Interocean Court) similarly exceeding that height. The tenant further accepts that this covenant has never been formally varied or modified; i.e., has never been the subject of any deed of variation or modification of the lease releasing the tenant, or any predecessor in title of the tenant, from the burden of the covenant. 32. The tenant nevertheless contends that the covenant has altogether ceased to have effect, and that it is now entitled to build on the demised land a new block of flats exceeding 35 feet in height. It founds its case on the exchange of correspondence to which Litton V-P has referred in his judgment. But this exchange of correspondence, properly construed, operated, as it seems to me, only as a licence to a predecessor in title of the tenant to erect on the demised land the existing block of flats, the rigour of the covenant being "expressly waived" only to that extent. 33. I do not think there can be discerned, from this exchange of correspondence (the clarity of which leaves a lot to be desired) an intention on the part of the landlord, not simply to waive the benefit of the covenant so as to permit the erection of the existing block of flats, but also so as to permit the demolition of that block of flats and the erection on the demised land of another block of flats in its place. 34. A landlord may, no doubt, agree to a variation or modification of a covenant contained in the lease so as to release the tenant altogether from the burden of the covenant. Although in the case of a lease, such as the Crown lease here, made by deed, this would normally be done by deed, the landlord could, I suppose, do so informally, so as to preclude himself thereafter from denying the release. He could do so by contract (i.e. by agreement supported by consideration moving from the tenant to the landlord; not the case here). Or he could do so by promising the tenant, that for the future, he would no longer seek to enforce the covenant; in which case, if the tenant acted to his detriment on the faith of that promise, the landlord would be held bound to his promise (even in the absence of consideration moving from the tenant to the landlord). 35. But for this purpose the contract, or promise, would have to be expressed in clear and unequivocal terms. 36. Here, there was, as I think, a clear and unequivocal promise by the landlord that it would not object to the then tenant's erection of its proposed new building (Interocean Court). But to spell out of the exchange of correspondence between the parties a clear and unequivocal promise to the then tenant that it, and its successors in title, could demolish and rebuild the proposed new block of flats and replace it with another, as often as it wanted, which is what the tenant really contends, seems to me to be quite impossible. 37. For these reasons, as well as for those given by Litton V-P, I too would allow this appeal. Ching, J.A.: 38. I agree that this appeal must be allowed for the reasons given by Litton, V.P. and Godfrey, J.A. I also agree with the order proposed by the Vice-President.
Representation: Mr Robert Ribeiro QC leading Mr Anderson Chow Mr John Swaine QC and Mr Kenneth H.W. Kwok QC leading Mr Wong Hin-lee (M/S Woo, Kwan, Lee & Lo) for the Respondent |
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