Aberdeen Commercial Investments Ltd v. The Secretary for Justice
Read the full judgment text of HCMP 1178/2022 on BabelCite. This High Court CFI judgment was delivered on 11 March 2024.
1. The main issue in this case is whether the marking of certain spaces as “SHOP & CINEMA” within a general layout plan for land under two government leases amounts to a user restriction.
Cited by 1 case · Cites 3 cases
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[2024] HKCFI 729 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1178 OF 2022 _________________
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_______________ J U D G M E N T _______________ A. THE DISPUTE 1.The main issue in this case is whether the marking of certain spaces as “SHOP & CINEMA” within a general layout plan for land under two government leases amounts to a user restriction. 2.The Plaintiff is the registered owner of Shop 1B, First Floor, Site 1 of Aberdeen Centre, 13-23 Nam Ning Street, Hong Kong (“the Premises”). The Plaintiff wishes to use the Premises to provide residential care homes for the elderly (“RCHE”). 3.By its Amended Originating Summons (“the OS”) originally dated 23 August 2022 and amended on 2 March 2023, the Plaintiff seeks a declaration (“the Proposed Declaration”) that the use of the Premises for RCHE is permissible under Conditions of Exchange No.10511 and No.10513 (together “the Subject COEs”) without the need for prior consent of the Director of Lands (“the Director”). 4.The Defendant however contends that, on a proper reading of the COEs, the Plaintiff must obtain the Director’s prior written consent for RCHE use. 5.There was originally also a claim by the Plaintiff for damages for derogation of grant but this was not pressed by the time of the hearing. B. BACKGROUND 6.The factual and contractual background is essentially uncontested. For the purposes of this Judgment, I have taken into account all of the background matters addressed in the parties’ written and oral submissions. What follows is an amalgam of the parties’ summaries of the key background. B1. The Premises and the Lots 7.The Premises are set within a composite building known as Aberdeen Centre, straddling section F of Aberdeen Inland Lot No. 302 and Extension (“AIL 302 sF & Ext”) and section A of Aberdeen Inland Lot No. 304 (“AIL 304 sA”) (collectively, “the Lots”). B2. The Conditions of Exchange 8.On 8 October 1973, three sets of COEs (10511, 10512 and 10513) were executed for the then new Inland Lots of AIL 302, AIL 303 and AIL 304 in exchange for Aberdeen Marine Lot No. 2, Section B and RP and Aberdeen Marine Lot No. 9 (known as the Aberdeen Docks). The Aberdeen Docks were surrendered by the Hong Kong and Whampoa Dock Company Limited (“the Company”) for its proposed commercial and residential development on the new lots, i.e. Aberdeen Centre. 9.The Premises are governed by the terms of COE 10511 and COE 10513. These have been modified a few times over the years. 10.There were initial modifications of COE 10511 on 10 May 1978 after the Director of Public Works (“DPW”) approved and signed Layout Plan No. L5, which was submitted by the grantee pursuant to SC(4) of COE 10511 on 28 April 1978. These modifications included (1) the extension of the building covenant period and increase of the monetary amounts specified in the building covenant, and (2) the revision of the user covenant in SC(3). The building covenant, General Condition 4(a) (“GC4(a)”) of COE 10511, was modified to expressly refer to the permitted development “as shown on Layout Plan No. L5”. 11.A further modification of COE 10511 in respect of GC4(a) was made on 29 January 1980. This was to specify that the intended development was to be “as shown on Layout Plan No. L5d”, being a revised plan submitted by the grantee and approved and signed by the DPW on 8 June 1979. Layout Plan No. L5d is substantially same as the Layout Plan No. L5, the main difference being that the gross floor areas and the number of flats provided are no longer shown on Layout Plan No. L5d. 12.The now prevailing version[1] of GC4(a) provides that:
13.The prevailing version of SC(3) states:
14.SC(4) next provides:
15.The modifications to COE 10513 are similar to those of COE 10511, being essentially the extension of the building covenant period and increase of the building covenant amounts in GC4(a), and the revision of SC(3). 16.Save for the schedule of specified sums, the prevailing GC4(a) in COE 10513 is in essentially identical terms as GC4(a) in COE 10511 (above). In particular, both refer to Layout Plan No. L5d, which for the remainder of this judgment will be referred to simply as “the Layout Plan”. A copy of the Layout Plan is annexed to this judgment. 17.The modified SC(3) in COE 10513 has the same wording as COE 10511 (above), save that the former omits the further words “such non-industrial purposes to include user for a service station/garage the positioning of which shall be subject to the prior approval of the Director of Public Works”. It has not been suggested that those further words affect the meaning of the earlier prohibitory words. Going forward, I will refer to the common prohibition in the COE 10511 and COE 10513 versions of SC(3) as “the Industrial Purposes Prohibition”. 18.SC(5) of COE 10513 is equivalent to SC(4) of COE 10511. These provisions will together be referred to as “the General Layout Provision”. As will be seen, the present dispute centres on the true purpose and effect of the General Layout Provision. B3. The Layout Plan 19.As reflected in the wording of GC4(a), the Layout Plan was approved by Director of Works on 8 June 1979. 20.The words “Shop & Cinema” appear against the Ground and 1st Floor of Site No. 1 of Aberdeen Centre in the margin of the Layout Plan. 21.An occupation permit was issued on 7 January 1982. The occupation purposes of Ground Floor and 1st Floor of Site No. 1 of Aberdeen Centre were stated as:
22.It is common ground that the Lots were duly developed in accordance with the Layout Plan and two Certificates of Compliance were issued on 23 April 1985. 23.It is also undisputed that, notwithstanding the designation of “Shop & Cinema” in the Layout Plan, the Premises were previously let out for use as a fitness/gymnasium centre from 2012 to 2018. B4. BD Application 24.By letters dated 11 September 2020 and 10 October 2020, the Buildings Department (“BD”) was notified of an intended material change in use of the Premises from “Department Store” to RCHE. 25.By a letter dated 6 November 2020, BD stated that there was no in-principle objection to the proposed change in use of the Premises (“the Letter of No Objection”). 26.However, in a subsequent letter dated 10 November 2020, BD referred to a memo from the District Lands Officer ( “the DLO Memo”), where the DLO made these comments:
27.By her affirmation filed on behalf of the Defendant, Ms Wong Nga Chi of the BD denies any suggestion that the BD had refused to permit the proposed RCHE use in the light of the DLO Memo. In effect, Ms Wong affirms that BD stands by the Letter of No Objection. Ms. Wong further affirms that the criteria for change in use of a building for RCHE in commercial premises were met,[2] meaning that:
28.In those circumstances, and pursuing what the Plaintiff describes as an attempted “practical solution” taken “without prejudice to [its] stance that the use of the Premises as RCHE is permissible under the COEs”, the Plaintiff applied to amend the Layout Plan on 30 March 2021. 29.As reflected in a letter from the DLO dated 18 May 2021, the Plaintiff’s hoped for solution turned out to be infeasible: the DLO took the view that the proposed amendment of the Layout Plan had to be consented to by all (859) individual owners of the Lots. The Plaintiff then withdrew its amendment application. C. PRINCIPLES OF INTERPRETATION 30.The primary dispute here turns on contractual interpretation. The governing principles are undisputed. 31.Both sides have cited the Court of Final Appeal in Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 at §15, where Ma CJ said this:
32.I am also guided by Godfrey Lam JA’s summary of principles in Dairy Farm Company Ltd v Secretary for Justice [2022] HKCA 1902, (unreported, CACV 77/2020, unrep., 23 December 2022 (itself a government lease case), at §33:
33.Specifically on government leases, Mr Edward Chan SC for the Plaintiff (leading Mr Li Pak Hei) properly referred me to the observations of Slade J in Earl of Lonsdale v Attorney General [1982] 1 WLR 887, cited with approval by the Court of Appeal in New Mercury Holding Corporation v Secretary for Justice (unreported, CACV 73/2013, 15 April 2014) at §14:
D. EFFECT OF THE GENERAL LAYOUT PROVISION 34.The parties agree that the Industrial Purposes Prohibition under SC(3) of COE 10511 and SC(3) of COE 10513 limits the Premises’s use to non-industrial purposes. In its general form and wording, the provision is a straightforward “user restriction” as found in many government leases. It is also undisputed that the Plaintiff’s proposed RCHE use is compatible with the Industrial Purposes Prohibition. 35.The Defendant however contends that the permitted use of the G/F and 1/F of Site No. 1 Aberdeen Centre (which includes the Premises) is further restricted by the “Shop & Cinema” designation in the Layout Plan, such that RCHE requires the prior written consent of the Director. 36.This prompts the critical question in this case: does the “Shop & Cinema” marking in the Layout Plan amount in law to an additional user restriction over the Premises? 37.In my judgment, it is not. 38.It is convenient to start the analysis with the first provision of the Subject COEs which refers to the Layout Plan – GC4(a). As set out more fully above, GC4(a) provides that the grantee “shall develop” the relevant lot “by the erection on the sites (into which the lot is to be divided as shown on a LAYOUT PLAN No.15d…) of a building or buildings complying with the Special Conditions and in all respects in accordance with [various legislative provisions and byelaws], such building or buildings to be completed and fit for occupation before the expiry of the periods specified in the Schedule…”. 39.The last part of GC4(a), immediately following the Schedule of completion periods, states that the Layout Plan “may be amended from time to time subject to the approval in writing of [the Director of Public Works]”. This reference to amendment clearly contemplates adjustments to the Layout Plan during the periods specified in the Schedule for completing development of the Lots. It is also notable that, in contrast with the focus of GC4(a) upon prospective development at the start of the tenancy, GC4(b) addresses matters of building maintenance “throughout the tenancy”. 40.GC4(a) is a key part of the context of the General Layout Provision, which as noted above is among the Special Conditions for COE 10513 (SC(5)) and COE 10511 (SC(4)). It is common ground that the “general layout plan” referred to at the outset of the General Layout Provision ended up being “Layout Plan No. L5d” as identified in the modified versions of GC4(a), i.e. the Layout Plan.[3] 41.Reading the express words of the General Layout Provision in context (including in particular GC4(a)), the following is clear:
42.Taken in whole, the contractual features above press strongly against the Defendant’s case that the “Shop & Cinema” designation in the Layout Plan amounts to an additional user restriction over the Premises. 43.The Defendant sets great store in the part of the General Layout Provision which states that “no alteration shall be made to the positions, widths and levels of roads, the positions, levels and dimensions of sites, or the positions and nature of the buildings shown on the said plan without prior written consent of the said director”. However:
44.It is in my judgment an unsustainable stretch to contend that even after the development of the Lots in accordance with the approved general layout plan(s) is complete, the same part of the General Layout Provision discussed above continues to operate so as to serve, additionally, as a means of incorporating a set of continuing use restrictions over the Lots by reference to what is set out in the Layout Plan. 45.The Industrial Purposes Prohibition provides a useful comparison in assessing the Defendant’s case in this regard, and in particular the claim that the Layout Plan sets a specific further user restriction by way of its reference to “SHOP & CINEMA”. 46.As earlier noted, the parties agree that the Industrial Purposes Prohibition is certainly in the nature of a user restriction. The wording of the Industrial Purposes Prohibition clearly and directly signals this function, and the provision’s basic form is commonly known and recognised in the government lease context. That the requirement of the Industrial Purposes Prohibition is – in contrast with GC4(a) – plainly intended to continue through the currency of the lease period is further evident from the words “any building or buildings erected or to be erected”, with the underscored words capable of encompassing buildings which at the time of execution of the lease were simply not contemplated be it under GC4(a) or otherwise. 47.Of course it does not necessarily follow that any other user restriction over the Lots could only be within the same provision as the Industrial Purposes Prohibition, or must take a similar form as that provision. Even so, it is a relevant interpretative factor to note that, if there really were an intention to further restrict the use of all or part of the Lots by reference to some other purposes (here “SHOP & CINEMA”), that could readily and unambiguously been done by way of an express special condition to that effect, as it was for the Industrial Purposes Prohibition. 48.If accepted, the Defendant’s position would mean that a route both far more circuitous and less clear was adopted for setting a “shop and cinema” user restriction, compared to the route taken via the Industrial Purposes Prohibition. I see no sound basis for finding such an intention. 49.Further, unlike the clear wording of the Industrial Purposes Prohibition the words of the General Layout Provision itself simply do not themselves refer to any restriction as to the use of the Lots, as opposed to their intended spatial layout and the primary built forms. 50.Instead, as seen above, the wording and context of the General Layout Provision – including the reference to the plan specified within it as a “general layout plan” – indicates that the Layout Plan in the present case was and is merely intended to serve a descriptive function, to enable the DPW to determine and assess what was proposed for the initial development stage following the execution of the COEs. 51.Focusing on the Layout Plan itself, it is hard to see how this could objectively have been intended to function as a clear and reliable legal marker of specific use parameters for the Lots, particularly since such parameters would essentially be in the nature of negative covenants which would (1) serve throughout the currency of the leases, and (2) if breached, give rise to potentially serious legal consequences. 52.Indeed, it may be noted that numerous questions arise when considering the Layout Plan in the light of the Defendant’s case, which together further undermine the Defendant’s stance. 53.For instance, which parts of the Layout Plan go beyond merely indicating the initial development parameters (i.e. what was to be physically arranged and built on the land in fulfilment of GC4(a)), and additionally serve as prescriptions / restrictions as to how whatever was then built is or is not to be used? If the answer is ‘actually, everything on the Layout Plan does that’, then does it follow, say, that the reference at the bottom left of the Layout Plan to “TOTAL NO. OF PARKING SPACES 503” means that it is contrary to the permitted use of the land to have one more (or one less) than the 503 spaces referred; and if so, is that a plausible and commercially sensible requirement? 54.Further, if the response to the preceding questions is that the specific ongoing requirements as regards car parking are addressed separately in other provisions of the COEs (e.g. SC(11) and SC(12) of COE 10513), then does that not reinforce the view that the Layout Plan was never itself meant to serve any function besides describing the proposed primary physical dimensions and features of the land development for the purposes of GC4(a)? 55.SC(11) indeed provides that:
56.SC(12) further materially provides that:
57.It is, to say the least, difficult to reconcile what is specifically and unequivocally provided in the above provisions with regard to the use of parking spaces with the Defendant’s case on the intention and effect of the General Layout Plan as regards user restrictions. 58.And what about the reference to “AIR-CONDITIONING PLANT RM UNDER” within the area marked “Open Space” in AIL 304? Does that restrict the use of the space marked for the air-conditioning plant in the initial development to only such use, such that any other use without the DPW’s prior permission is in contractual breach; and what purpose would that serve to restrict use in that way, by those means? 59.In the absence of any compelling answers to the above questions (and other such questions posed in the course of the hearing), I am unpersuaded that the Layout Plan has the further purpose and effect contended for by the Defendant. 60.I note for completeness that direct consideration of the Layout Plan may be relevant in at least two ways. The first is as a means of testing the coherence and cogency of the Defendant’s reading of what the General Layout Provision intends, and in particular whether such a reading would be clear and workable in practice. As indicated above, my view is that the General Layout Provision would give rise to uncertainty and some startling practical outcomes if taken as a set additional user restrictions for the Lots. 61.The second way in which the specific content of the Layout Plan may be relevant does not strictly arise, given my conclusion on the first. This second aspect would arise if the Court were to accept the Defendant’s contention that the General Layout Provision serves to restrict the proper use of the Lots by reference to what is set out in the “general layout plan” that it requires approval of. On that footing, a further question would then be: what uses exactly are prescribed or prohibited by the general layout plan that has emerged on the facts, i.e. the Layout Plan, as a matter of proper construction of that document. 62.While I express no settled view, there seems to me to be scope for dispute as to just what it is that the Layout Plan would continue to restrict with regard to the “nature of the buildings” on the Lots and their use as ex hypothesi intended by the General Layout Provision. 63.In particular, is the scope of prescribed / restricted use limited to the description “Composite Buildings” (appearing at the top right of the plan), coupled with the depicted shape and dimensions of the buildings as marked on the Layout Plan? Or do the references on the left hand side of the Layout Plan[5] serve to further prescribe and restrict the precise nature of the buildings that must be maintained on the Lots, rather than mere markers of the various intended spaces within the said buildings? 64.Further, if the reference to “SHOP & CINEMA” designates a strict user requirement, does that mean that all the areas that it applies to must somehow involve both “shop” and “cinema” uses, meaning for instance that the “cinema” aspect could never be dispensed with absent prior approval, even if the remaining space were used entirely for “shops”? 65.The foregoing questions underscore how unlikely it is that the General Layout Provision was meant, via the Layout Plan, to provide any sound and workable guide for the purposes of informing the grantees, any of their successors, or the general public, of any prohibited uses of the Lots beyond those barred by the Industrial Use Prohibition. 66.Overall, I consider that the “SHOP & CINEMA” marking in the Layout Plan is clearly not intended to impose a restriction on use as contended by the Defendant. 67.In reaching my conclusion, I have taken into account the various authorities cited by the parties but do not consider that any of those authorities really advances the analysis in the present case. In particular, there being in my view no real obscurity or equivocality in the matter, the New Mercury principle is not engaged. E. DISPOSITION 68.Subject to any submissions from the parties on the precise terms of the order to be granted, which shall be lodged within 21 days of this Judgment, I will grant the Proposed Declaration with costs the Plaintiff and certificate for two counsel.
Mr Edward Chan SC and Mr Li Pak Hei instructed by Woo, Kwan, Lee & Lo, for the Plaintiff Ms Jess Chan, Assistant Principal Government Counsel (Acting) of Department of Justice, for the Defendant
[1] Unless otherwise stated, references to specific COE provisions in the remainder of this judgment are to the prevailing (post-modification) versions. [2] In accordance with the New Buildings Division 1 Manual, Section 4, Practice Note 18. [3] For the full wording of the General Layout Provision, see Section B2 above. [4] “[a] general layout plan showing…shall be submitted…”; note also references to various matters “proposed”. [5] Which besides “GRD & 1st FLOOR - SHOP & CINEMA” include descriptions such as “2nd-27th [FLOOR] DOMESTIC” and “BASEMENT - CAR PARK”. | ||||||||||||||||||||||||||||||||||||||||||||||||||
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