Secretary for Justice v. River Trade Terminal Co Ltd

CACV 187/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 187 OF 2003

(ON APPEAL FROM HCMP NO. 4974 OF 2002)

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Coram: Hon Ma CJHC, Rogers VP and Cheung JA in Court

Date of Hearing: 8-9 June 2004

Date of Judgment: 9 June 2004

Date of Handing Down Reasons for Judgment: 7 July 2004

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REASONS FOR JUDGMENT

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Hon Ma CJHC:

1.I have asked Rogers VP to give the first judgment.

Hon Rogers VP:

2.This is an appeal from a judgment of Yam J given on 29 May 2003. The matter before the judge was an originating summons seeking, as the primary relief, a declaration that the defendant had breached Special Condition (16) of the Conditions of Sale relating to Tuen Mun Town Lot No. 393 at area 38, Tuen Mun. The judge dismissed the plaintiff's originating summons. At the conclusion of the hearing of this appeal this court allowed the appeal and set aside the judgment in the court below and gave directions as to the further conduct of the appeal in relation to relief. Reasons were to be given in writing, which we now do.

Background

3.The concept of a terminal for river craft transporting cargoes to and from the Pearl River ports appeared in the report dated December 1989 in respect of the Port & Airport Development Strategy. Following proposals which had been put forward in 1991, the Government issued a prospectus, ("the 1992 Prospectus") to find out whether there would be interest from parties who were capable of developing a terminal suitable for cargo carrying river traffic. This terminal was described in the Prospectus as a "River Trade Terminal". In late 1995, the Government invited tenders for the grant of the right to develop the river trade terminal (hereinafter referred to as the "RTT"). There seems to have been some interest in the development.

4.The Tender Notice had annexed to it General and Special Conditions of Sale. Importantly for the purposes of these proceedings were clauses (16)(a) and (47)(a) of the Special Conditions. Those read:

"(16)	(a)	Subject to these Conditions and in particular sub-clause (b) of this Special Condition, the lot or any part thereof or any building or buildings or structure or structures erected or to be erected thereon shall not be used for any purpose other than as a terminal for the berthing of vessels regularly employed in trading or going within the Pearl River region and vessels trading solely within the Hong Kong waters under Part IV of the Shipping and Port Control Ordinance, the loading, unloading and storage of break-bulk or container cargoes and containers carried or intended for carriage by sea in connection with trade and freight industries within the Pearl River region (which terminal shall hereinafter be referred to as 'the RTT').
	(b)	The lot shall also be used for the purpose of a container freight station but only to such extent and in such manner as in the opinion of the Director will not interfere with or inhibit the use of the lot for the purpose specified in sub-clause (a) of this Special Condition and such ancillary facilities as are necessary for the operation of the RTT.
	(c)	(i)	The Purchaser shall not operate the RTT in such a way as to restrict the use of the facilities of the RTT to any particular customer or customers only;
		(ii)	Subject to sub-clause (c)(i) of this Special Condition, agreements for the reservation of the facilities of the RTT including the reception, berthing, loading and discharge of vessels may be entered into between the Purchaser and any customer or customers.
...
(47)	(c)	The Purchaser shall at no time use or suffer or permit the use of the lot or any part thereof or any building or any part of any building erected or to be erected thereon or on any part thereof for the purpose of loading and unloading of containers to or from vessels other than vessels referred to in Special Condition No. (16) hereof."

5.The defendant was incorporated in February 1996. On 23 February 1996 the defendant submitted a tender accompanied by its Proposal. There were some seven volumes of the Proposal and those included amongst other items which were required under the terms of the Tender Notice:

(1) A Schedule detailing the number, type of vehicles and/or vessels and their respective cargoes and/or containers (in terms of tonnage) holding capacities that the tenderer estimated would be involved in the operation and use of the lot;

(2) An Initial Environmental Impact Assessment Report identifying anticipated deviations from the findings of the "Expanded Development Study of Tuen Mun Area 38-Final Report, October 1990" and "Reclamation and Servicing of Tuen Mun Area 38 for Special Industries-EIA Study" arising out of the tenderer's proposed development and use of the lot;

(3) A Traffic Impact Assessment Report setting out details of the routes, trip frequencies for the modes of transport entering or leaving the lot via land or via sea at any time of the day in respect of the development or use of the lot, ... and details of appropriate measures which the tenderer proposed to take to alleviate traffic congestion in the ... adjoining waters arising out of his development and use of the lot.

6.Under clause 10 of the Tender Notice, the Schedule and Assessment Reports together with such amendments and/or additional information accepted by the Government under the terms of the Tender Notice were to form the basis of the development referred to in the Special Conditions which were annexed to the Tender Notice. These were required to be signed both on behalf of the Government and by the successful tenderer and deposited in the Land Office: see Special Condition (2).

7.The defendant's tender was accepted. In April 1996, New Grant No. 3200 was issued to the defendant. The parties executed the Memorandum of Agreement and the terms of the Tender including the aforesaid Special Condition (16) were incorporated in the Agreement.

8.On 10 September 1999, which was about a year after the commencement of operation of the RTT, the defendant wrote to the Secretary for Economic Services and the Lands Department informing the Government of its intention to handle "small feeder vessels" from the affiliated companies of its shareholders. That letter indicated that legal advice had been obtained that the berthing of small feeder vessels at the RTT was in accordance with the user clause, by which, it is understood, was meant condition (16) of the Special Conditions.

9.By letter dated 28 September 1999 the Director of Lands replied that the legal advice, which the defendant had obtained in respect of the lease conditions that berthing of small feeder vessels was not precluded by the terms of the land grant, was accepted. However by letter dated 21 October 1999, the Director of Lands changed his stance and informed the defendant that he had taken detailed legal advice and had been advised, which advice he accepted, that the berthing of feeder vessels at the RTT was never envisaged in the detailed proposals and that the user clause, Special Condition (16)(a), did not allow feeder vessels to be berthed at the RTT.

10.The present proceedings were commenced in November 2002 seeking 2 declarations, an injunction and damages. The factual basis for the originating summons was that over a period from about September 2001 to the end of 2002, 23 ocean-going vessels were observed to have berthed at the RTT. The defendant has described these vessels as Intra-Asia vessels (since most of them did regularly ply within Asian waters) but this is of little or no significance. The main point to bear in mind is that these vessels were ocean-going ones, meaning that they regularly plied outside the Pearl River region (I shall expand on this aspect later). The first declaration was that the berthing of these 23 vessels at the RTT was in breach of Special Condition (16). The second declaration was that the defendant was not permitted to use the terminal for the berthing of any vessel other than one which is employed in trading or going within, that is to say between ports within, the Pearl River region or one which trades solely within Hong Kong waters. The injunction sought was in similar terms.

The judgment below

11.The judge commenced by making observations as to the wording of Special Condition (16) put forward by the defendant. In particular, he referred to the argument that the wording did not include a restriction that the river craft or vessels should "only" trade or go between ports or places in the Pearl River region. Nor did the condition include words such as "staying exclusively within". He referred also to the use of the words "Pearl River region" which he contrasted with the definition of "river trade limits" in the Shipping and Port Control Ordinance, Cap. 313.

12.Whilst accepting that the objective factual background could be considered the judge excluded from consideration the 1992 Prospectus as being a document which did not disclose the genesis or aim of the transaction. One of the matters to which the judge referred as being a difference between the Prospectus and the Tender Notice was that in Special Condition (10) dredging in the region of the RTT was permitted up to a limit of 9 metres whereas, he construed the 1992 Prospectus as permitting a maximum dredging depth of 6 metres.

13.Perhaps more importantly, in paragraph 28 of the judgment, the judge referred to the statement in the 1992 Prospectus that "loading or unloading of containers to or from ocean-going vessels across the quay phase or pier phase by shore-based container handling equipment will not be allowed". It was pointed out that those words were not included in the Special Conditions nor, for that matter, anywhere else in the Tender Notice.

14.The judge then referred, in paragraph 30, to what he said was the "commercial purpose, genesis and, background and context as dictated by the Tender Notice in respect purposes of building of the RTT". He listed those as follows:

"(i) to facilitate the development of the HKSAR as a 'hub' for inbound and outbound containerised and breakbulk cargos for the trade and freight industries of the Pearl River Region;

(ii) to increase Hong Kong's throughput of containerised and breakbulk cargos by increasing competitiveness and reducing operational costs for the benefit of those industries;

(iii) to reduce marine congestion and the risk of marine accidents in the restricted and dangerous Ma Wan Channel and generally in Hong Kong waters;

(iv) to ease traffic congestion, in particular on the Tuen Mun Highway and at boarder road-crossings, by providing a centralized river freight terminal at the western end of Hong Kong territory which is situated outside the Hong Kong harbour proper; and

(v) to reduce air and noise pollution in the harbour through concentration of freight-handling in one area."

15.It was on the basis of those criteria that the judge came to the conclusion that the lot may be used for the purpose of berthing ocean-going vessels which called at the Pearl River region, which the judge held to include Hong Kong waters, to discharge cargoes which were sourced from or consigned to the Pearl River region. The judge went on to hold that if such vessels could not use the RTT they would be forced to use one of three ways of unloading containers from "Intra-Asia" vessels for ultimate loading on to river vessels (and the reverse) which he considered were undesirable. Those methods would entail that the cargoes would either have to come to (or leave) the RTT by road or have to come from (or go to) Public Cargo Working Areas ("PCWA's") or be transported and loaded or unloaded by mid-stream lighter operations.

16.The judge went on to construe the word "regularly" as applying to cargoes rather than the vessels. It is unnecessary to say any more about the construction put on the word "regularly" than that the interpretation put on it is difficult to understand and not in accordance with any grammatical construction of Special Condition (16). It suffices to say that neither of the parties supported the judge's interpretation in this regard.

The construction of Special Condition (16)

17.In my view the construction of Special Condition (16) is clear and I can see no difficulty which would require reference to materials other than, perhaps the Tender Notice as background information, as an aid to construction. Quite simply the only vessels which were permitted to berth at the terminal are those which are regularly employed in trading or going within the Pearl River region and vessels trading solely within the Hong Kong waters as per Part IV of the Shipping and Port Control Ordinance, Cap. 313. There is also a restriction as to the cargo which these vessels may carry: break-bulk or container cargoes and containers carried or intended for carriage by sea in connection with trade and freight industries within the Pearl River region.

18.The use of the word "trading" in relation both to vessels which are employed "in trading or going within Pearl River region" and to those vessels "trading solely within Hong Kong waters" demonstrates that reference is being made to vessels which are employed for commercial purposes within those areas. Whilst "trade", as a noun, no doubt has a primary meaning of buying and selling or exchanging commodities and goods, the secondary meaning of the noun, given in the dictionary is of passage to and fro. The first meaning for the word as a verb is given in the shorter Oxford English dictionary as "Tread (a path); cross (the sea); fig. lead (one's life)". The second meaning given is "Follow (a course) habitually; use (something) regularly." There is nothing, therefore, which arises in relation to the use of the word "trading" when used in relation to vessels which to my mind denotes anything other than regular or routine passage of a merchant vessel.

19.As with any other contractual term, the Special Conditions must be read as at the date of the relevant contract that incorporated them. As at the date of the Memorandum of Agreement was executed, Hong Kong was not yet a Special Administrative Region, although of course that was envisaged and the setting up of the RTT was accomplished with the approval of the Sino-British Land Commission. The wording of Special Condition (16) clearly draws a distinction between the Pearl River region and Hong Kong waters. The Pearl River region is an area which is readily understandable, even if it is not statutorily defined. There is a statutory definition of "river trade limits" in the Shipping and Port Control Ordinance. That reads:

"'river trade limits' (內河航限) means-

(a) the waters in the vicinity of Hong Kong within the following boundaries-

(i) to the East, meridian 114' 30' East;

(ii) to the South, parallel 22' 09' North; and

(iii) to the West, meridian 113' 31' East; and

(b) all inland waterways in the provinces of Kwangtung and Kwangsi on the mainland of China to which access can be obtained by water from the area defined in paragraph (a);"

20.Using that definition, Hong Kong and its waters would come within the "river trade limits". Mr Yu SC, who appeared on behalf of the plaintiff, argued the case on the basis that Hong Kong waters were within the Pearl River region. Mr Thomas SC, who appeared on behalf of the defendant, also accepted this and suggested that the reference to Hong Kong waters in Special Condition (16) was "mere surplusage". I have to say it appears odd that the term "Pearl River region" as used in Special Condition (16) should cover Hong Kong as well when there is a specific reference to Hong Kong waters in the same clause. However, it is unnecessary for this court to define, at least at this stage, what is the Pearl River region as the term has been used in this clause. The inclusion in this Condition of vessels which trade solely within Hong Kong waters as an additional or alternative category of vessel that would be permitted to berth at the RTT makes clear that such vessels would be permitted even though they might not be regarded as being regularly employed in "trading or going within" the Pearl River region because they remained solely within the precincts of one port thereof namely Hong Kong waters.

21.Undoubtedly in deriving the meaning of Special Condition (16) it is important to give proper weight to all the words used. In this context the word "within" must be considered and given due weight. It is, quite simply, a word which denotes an area inside which something happens. Mr Thomas SC submitted that the words "going within" meant 'going into' so that if a vessel, such as the 23 vessels in the present case, regularly went into a port in the Pearl River region (even from outside the region), then it would be covered by these words. He relied on 2 authorities in this regard. The first was the decision of the Privy Council in The Stettin (1863) Br & C 199. I consider that authority to be of little assistance as it is, in effect, simply a decision on the meaning of the words "ship navigating within the limits of the port to which they belong" as they appeared in section 379(5) of the Merchant Shipping Act 1854. The case is only of any assistance insofar as the word within was understood to mean inside. The clause that was construed in that case was, nonetheless, a different clause.

22.The other authority was Smith v Veen [1955] 2 QB 277. In that case the issue was whether the appellant could rely upon the fact that his ship fell within the words "... ship employed in trading or going within the following limits; that is to say, the United Kingdom, the Channel Islands, the Isle of Man, and the continent of Europe between the river Elbe and Brest inclusive." The ship was registered in Holland and regularly traded within the limits. However, on the relevant occasion it had been engaged on a voyage from Strood in Kent going first going to Ymuiden in Holland and then to Oslo. Lord Goddard CJ dismissed the argument that the ship was going within the stated limits. At page 284, he said:

"This ship was not going within the 'following limits' because she was going to Oslo. If the ship were to go on a voyage and was going to call at one particular port within the limits and could then go on beyond the limits, the provision about home trade ships not carrying pilots would seem to me to be useless, because if it could be said the ship was going within the limits because she was going, for example, to any port on the French coast and need not therefore carry a pilot, and that she was then to be at liberty to go on to America or Australia or anywhere else, section 11(4) of the Pilotage Act would seem to me to have a considerable gap left in it. I think that one must ascertain what voyage the vessel is engaged on at a particular time when the London Pilotage Authority says that she ought to have a pilot. The particular voyage on which the vessel was engaged here was from London to Oslo, and the fact that a ship is usually or regularly employed only between ports in the United Kingdom and ports in the northern parts of Europe which are within the home trade limits does not seem to me to indicate that, if she is going to a port outside those limits, she is a ship going within the limits."

23.This authority is, if anything, against the defendant. It reinforces the meaning of "within" referred to above. In my view, the words "going within" quite clearly in the context of the clause means the travelling or movement inside a defined area. It does not, as was argued on behalf of the defendant, mean the going into an area. In relation to vessels which come to Hong Kong, the construction of Special Condition (16) clearly excludes the berthing of ocean-going vessels which do not regularly trade or go to ports within the Pearl River region. It is in this connection that I consider the word regularly also plays a part. It denotes that the vessel concerned must on a regular basis, i.e. as part of its usual or routine use, be used to trade or go within the Pearl River region. The word "regularly" may imply some flexibility which the words such as "solely" or "exclusively" would not have, but in the context in which it is used it does not have a connotation that a vessel which might call at Hong Kong on an annual or semi-annual basis would fall within the scope of the wording.

24.There is also the further consideration that Section 25(1)(a) and (d) of the Shipping and Port Control Ordinance contains a similar wording to part, at least, of Special Condition (16). This Ordinance is expressly mentioned in the conditions. That section reads:

" (1) Without prejudice to any other provision of this Ordinance, and subject to subsection (3) and section 35(3), this Part applies to-

(a) any vessel regularly employed in trading, or going, within river trade limits;

(b) any vessel employed in sea fishing;

(c) any vessel possessed or used for pleasure purposes; (Amended 46 of 1981 s. 6)

(d) any other description of vessel, whether self-propelled or not, used in navigation solely within the waters of Hong Kong; and

(e) any other description of vessel in the waters of Hong Kong not used in navigation or not constructed or adapted for use in navigation."

25.Section 25 of the Shipping and Port Control Ordinance is found in Part IV of that Ordinance dealing with the licensing of vessels (as to which, see section 26). If the argument on behalf of the defendant is correct that the words "going within" mean 'going into', it would mean that all vessels that regularly come into "river trade limits" would have to be licensed. This, I perceive, would extend the application of Part IV to many more classes of vessel than intended.

26.The point also emerges that because the definition of river trade limits includes Hong Kong waters, subsection (d) would be otiose if a vessel which navigated solely within Hong Kong waters were regarded as being "regularly employed in trading, or going, within river trade limits". Clearly such a vessel would be within the "river trade limits". It would not, however, be "regularly employed in trading, or going, within river trade limits". This consideration would tend to support the construction of Special Condition (16) along the lines set out above.

27.The final part of Special Condition (16)(a) prevents the use of the RTT other than for the loading, unloading and storage of break-bulk or container cargoes and containers carried or intended for carriage by sea in connection with trade and freight industries within the Pearl River region.

28.In construing the meaning of this Special Condition (16), it is, of course, necessary to see whether the construction which is arrived at simply by considering the words produces a sensible construction which would accord with what might be considered to be the purpose of the provision. The purpose of the whole Proposal and indeed the Special Conditions, which form part of the tender process, was to provide a river trade terminal. In other words it was to provide the terminal for river traffic not for vessels which come to Hong Kong, even on a regular basis, that do not form part of the river traffic. Those vessels are, no doubt, catered for by the normal container terminals.

29.In coming to the conclusion as to the meaning of Special Condition (16) I do not consider there is any need to have reference to any of the documents such as the 1992 Prospectus. I would, however, make the following observations. Insofar as the judge found that there was a difference in the depths to which dredging was allowed in Special Condition (10) and the indication in the 1992 Prospectus, I consider that the distinction which he drew is not valid. The 1992 Prospectus draws attention to the fact that the average depth in the area varied from 5 to 15 metres. The 1992 Prospectus made clear that it would be necessary to have a depth of 6 metres throughout the area of the terminal. The passage in the 1992 Prospectus makes clear that, at least at the time the 1992 Prospectus was written, it was contemplated that there was likely to be silting. Hence, any dredging operation would not only have to allow for a margin for error but allow for silting to build up before the next dredging operation. Thus when the Special Condition (10) requires dredging to 6 metres but permitted it up to 9 metres it was indeed following the 1992 Prospectus in requiring the dredging to 6 metres. The maximum dredging to a level of 9 metres does not appear to be something which, on the face of it, would appear exceptional. The suggestion that the inclusion of an upper limit of 9 metres in Special Condition (10) meant that it would be permissible for feeder vessels to berth at the RTT is not in any way justifiable on its face or on any other provision. The upper limit was on the face of it simply that.

30.Whilst I have not found it necessary to refer to the Tender documents as a matter of construction of Special Condition (16), I would make 2 observations in that regard. In the first place, the Tender documents make it clear that the proposed use of the RTT was to be in accordance with the interpretation of Special Condition (16) to which I have referred. The Tender included the seven volumes of the Proposal some of which have already been referred to. These made extensive reference to what was referred to as the "Marine Shuttle Lighter System". In the Traffic Impact Assessment it was said that one of the advantages of the Marine Shuttle Lighter service would be "substantially reduced traffic in the Ma Wan Channel through consolidation of river trade shipments into a small number of larger units." The Marine Shuttle Lighter System is described both in words and in diagrammatical form in a number of places in the Proposal. It is made clear that this system will be used to convey the containers and cargo to the container terminals, the mid-stream loading for the Intra-Asia cargoes and the PCWA's for local areas. It is unnecessary to give more than another brief reference in Volume 2: Initial Environmental Impact Assessment where it is said that:

"This terminal will be able to consolidate transhipment cargoes coming from the Pearl River Delta before sending them to their point of ocean shipment. It will be possible to containerise a high proportion of the shipment breakbulk cargo in the RTT. Onward transport to the main container port facilities is expected to be carried by sea in much larger and better controlled units them for the river trade. It can be within the power of the RTT operator to control the balance of traffic between terminal and port that travels by sea."

31.It is also quite clear from what is said in Volume 3: Traffic Impact Assessment that the Proposal was written on the footing that the cargoes would be moved into and from the RTT primarily by a Marine Shuttle Lighter System. That system would link up with the container terminals in respect of cargoes to and from worldwide destinations and mid-stream in respect of cargoes to and from Intra-Asia vessels and with the PCWA's. Whilst emphasising that it is not necessary to have reference to the Tender documents for the purposes of construing Special Condition (16), it is clear that at the time of its tender the defendant considered that an operation using the Marine Shuttle Lighter System would be commercially viable. Secondly, I derive some comfort from the fact that the defendant clearly put forward a Tender, in the light of the Special Conditions which seems to have accorded with my interpretation of the terms of Special Condition (16).

32.Whilst acknowledging that there was no reference at all to use of the RTT for berthing vessels which came from outside the Pearl River region and Hong Kong, whether they be called Intra-Asia vessels or whether they came from further afield, Mr Thomas sought to argue that the Proposal had been put forward on a worst-case scenario and that the worst-case was the use of the Marine Shuttle service since it was costly and would produce far more traffic, particularly through the Ma Wan Channel, than would be the case if ocean-going vessels were allowed to berth at the RTT. In that regard he drew attention to the Technical Schedule No. 1 Explanatory Statement and Precaution in General. Under the heading "3. Technical Requirements for the Initial Environmental Impact Assessment" it was said that:

"3.1 The Purchaser shall demonstrate that the operation of the RTT and the environmental impact of any alternative design whatsoever proposed are environmentally feasible. The IEIA shall include, but not limited to the following aspects: that

(a) the Purchaser should outline the main types of activities to be carried on in the RTT, the frequencies and duration, the types and amount of cargo to be handled, the likely environmental impact and the mitigation measures that will be provided. The possibility of extending the scope of activities should be specified to predict the worst-case scenario."

33.It is quite clear however when considering the whole of the section in which that lies, namely Part 1: Requirements for Initial Environmental Impact Assessment, that the Proposal to be put forward was required to demonstrate the way in which the RTT was intended to be operated. Hence the reference in 1.1 to providing information on the nature and extent of the potential impact on the environment resulting from the operation of the RTT and the provision of any alternative designs for the RTT. Whatever individuals who were engaged by the defendant might have thought to themselves at the time, it is quite remarkable that the proposals put forward by the defendant (prepared presumably with care and at no mean expense with the help of consulting engineers, amongst others) contained absolutely no suggestion that the RTT would be used for berthing ocean-going vessels.

34.I would refer to the fact which appears to have influenced the judge below that it could be considered a matter of considerable convenience if ocean-going vessels were allowed to berth at the RTT so that containers could be easily moved from those vessels to the river trade vessels. That may well be so. It may well be that it would lead to a more economical method of operating the terminal. That does not mean, however, that the true construction of Special Condition (16) could be influenced by what, whether as an afterthought or otherwise, might subsequently have been considered desirable or in the economic interests of the operator. Nor can it be said that even if the 5 criteria referred to in the judgment below and quoted in paragraph 14 above were valid, that anything which accords with those criteria would fall within Special Condition (16).

35.I would add that since preparing this judgment I have had the benefit of reading in draft the judgments of Ma CJHC and Cheung JA. I note that there is unanimity in the reasoning for the conclusion to which this court has reached.

Hon Cheung JA:

36.I agree with the reasons for judgment of Rogers VP. I would like to add the following observation of my own.

37.The River Trade Terminal ('RTT') was set up for one specific purpose and that was to meet the increasing volume of river trade traffic. The river trade was that of the Pearl River Region ('the Region'). The meaning of Special Condition (16) has to be construed in this context.

38.The words 'vessels regularly employed in trading or going within the Region' refer to activities carried out within a physical locality which consists of many ports. The meaning of these words clearly requires the vessels to trade within the ports of the Region or go from one port to another port within the Region. Although such words do not appear in Special Condition (16), they clearly are so intended considering the context of this case. The condition does not cover a vessel which comes from outside the Region to a port of the Region, namely, Hong Kong and then departs without going to any other ports of the Region. In such a situation, I cannot see how the vessel can be described as being employed in trading or going within the Region. This remains to be the case even if this vessel carries on this activity regularly.

39.The comparison of a vessel coming only to a port of the Region and a man going into a restaurant is inappropriate. This is because after a vessel comes to Hong Kong from outside the Region, in order for it to make use of the RTT, it has to be shown that it will trade or go within the Region. Its immediate departure for a port outside the Region rules out the carrying out of these activities within the Region. As a result, such a vessel does not come within the meaning of Special Condition (16).

40.The words in a document must be construed in its context. If any vessel which comes only regularly to Hong Kong and unload or load cargoes here can make use of the RTT, then there really is no need for the setting up of such a terminal which clearly is intended to be used by vessels engaged in the trading activities of the Pearl River Region. In order to come within Special Condition (16) such a vessel will have to trade or go within the Region.

Hon Ma CJHC:

41.I too agree with the reasons contained in the judgment of Rogers VP. I would, however, just like to summarize the main reasons in my mind for allowing the present appeal.

42.Special Condition (16)(a) (as set out in paragraph 4 above, this being the relevant provision that falls to be considered in this appeal) restricts both the types of vessels that can berth at the RTT and the types of activity that can take place there :-

(1) In terms of vessels, only those vessels "regularly employed in trading or going within the Pearl River region and vessels trading solely within Hong Kong waters under Part IV of the Shipping and Port Control Ordinance" can use the RTT.

(2) As to the only activities that can take place at the RTT, these are "the loading, unloading and storage of break-bulk or container cargoes and containers carried or intended for carriage by sea in connection with trade and freight industries within the Pearl River region".

43.In other words, as far as vessels are concerned, only those vessels meeting the criteria set out in paragraph 42(1) above and which carry any of the activities referred to in paragraph 42(2), may use the RTT. So far, as I have understood the submissions on both sides, this was common ground.

44.The aspect that separated the parties was the true construction of the requirement in Special Condition (16)(a) that vessels should be "regularly employed in trading or going within the Pearl River region".

45.The Defendant's position is that a vessel which is employed to go into the Pearl River region on a regular basis (such as the 23 vessels referred to in paragraph 10 of the judgment of Rogers VP) is covered by those words. The term "Pearl River region" was accepted by both sides as including Hong Kong. Like Rogers VP, I share some scepticism as to whether this is correct as a matter of construction, but it is unnecessary to decide this point in the present appeal. Nor is it necessary to define the exact ambit of the term "regularly employed" in Special Condition 16(1).

46.In my view, the words "regularly employed in trading or going within the Pearl River region" connote the trading and/or movement (on a regular basis) of a vessel within the confines of the area known as the Pearl River region. This is to my mind a natural reading of these words.

47.The arguments to the contrary are unconvincing :-

(1) It was submitted by Mr Thomas that the words "going within" included (or meant) 'going into' the specified region. After all, he submitted, when one uses the expression 'to go within' an area, one commonly means that one is going into an area. I accept that sometimes, one might find the expression loosely used in that way to mean the entering or going into an area, but purely as a matter of word usage, it is an odd way of expressing oneself if this is what is meant. Better, one might say, simply to say 'go into' or 'go to'.

(2) Yet these were not the expressions chosen by the drafter of the clause. This provision, it is to be noted, is contained in a legal document and as Lord Hoffmann NPJ observed in Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279, at 296F-G : -

"Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words."

(3) If Mr Thomas were correct in his submissions, it would mean that as long as a vessel regularly went into a part of the Pearl River region, it would be entitled to berth at the RTT (provided of course that it carried out one of the permitted activities). If this is valid, it is then difficult to see the commercial justification for the restriction in Special Condition (16) on the type of vessel that can use the RTT. Why, it may be asked, should the use of the RTT (the main commercial purpose of which was to facilitate trade in and emanating from the Pearl River region : see paragraph 14 above), be restricted only to vessels that regularly went into the Pearl River region? As distinct from vessels which do not but which nevertheless would load or unload cargos carried or intended for carriage by sea in connection with trade and freight industries within the region? In my view, the restriction in Special Condition (16) on the types of vessels that can use the RTT is put in such terms for a specific purpose. This purpose is to provide a facility for those vessels regularly employed in the river trade within the Pearl River region; in other words, Pearl River region river craft. It is not a facility to cater for ocean-going vessels that happen to load or unload Pearl River region cargoes, even though such vessels may be regularly employed in connection with the trade in this region.

(4) All this is clear as part of the factual matrix of the agreement when one examines the materials referred to earlier in the judgment of Rogers VP. The whole emphasis was on the river trade traffic and river vessels in the Pearl River region. As my Lord has noted, there is not one reference, even in the Defendant's tender, of the possibility of ocean-going vessels using the RTT. Mr Thomas argued that at the time of the Defendant's tender, it could not possibly have been expected to predict the future with any degree of precision. I agree with this submission only to a certain extent. While the Defendant could not be expected to predict the future, the complete absence in the tender of any reference to ocean-going vessels (particularly when the user of the RTT was very much a matter that had to be addressed), coupled with the constant references to river trade vessels, is indeed striking.

(5) I should also add here that if Mr Thomas were right in his submissions, then on the assumption that the Pearl River region included Hong Kong, then any vessel coming into Hong Kong to load or unload cargos carried or intended for carriage by sea in connection with trade and freight industries within Hong Kong (which, I daresay, would cover virtually all merchant ships that visit Hong Kong) could use the RTT. Where, then, is the uniqueness of the RTT?

(6) Finally, I would just refer to the submission that if Special Condition (16) intended to restrict the usage of the RTT to vessels that traded or plied within the confines of the area known as the Pearl River region, this could so easily have been expressed in this way. This sort of submission is often made to reinforce what is advanced as the proper construction of a contractual term (sometimes even a statute) or to undermine what is contended by the other side. Of course, with the benefit of hindsight, it can always be argued that words in a contract could have been better drafted. However, in my view, this argument has real validity only when it is used to counter an unusual or strained construction of words, but is of limited value when the construction against which this type of submission is made, is, upon analysis, a natural or reasonable one. For example, the submission is a forceful one to counter an argument that the word 'cat' means a dog. It is of much less force when one is trying to argue against the construction that 'man's best friend' means a dog. In the present case, even if with hindsight it may arguably have been better to use the words 'trade or ply within', this in no way means that the construction placed on the words actually found in Special Condition (16) was somehow unusual, strained, unnatural or unreasonable. In fact, as we have held, quite the contrary. The words "trading or going within" are to be found, also used in the context of river trade, in section 25(1)(a) of the Shipping and Port Control Ordinance, Cap.313. As Rogers VP has pointed out, if Mr Thomas' argument that "trading or going within" an area means or at least includes 'going into' an area, then all vessels going into Hong Kong on a regular basis would have to be licensed under Part IV of that Ordinance.

48.The process of the construction of contracts has been described by Lord Hoffmann NPJ in Jumbo King Ltd v Faithful Properties Ltd in the following passage at 296 D-I :-

"The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement - evidence of such negotiations is inadmissible - and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail."

49.Here, the true construction of Special Condition (16)(a) set out above is one that does make sense in relation to the rest of the agreement between the parties (setting out the terms of a river trade terminal) and the legal and factual background of that agreement (which is the provision and operation of a river trade terminal at Tuen Mun).

Representation:

Mr Benjamin Yu SC, instructed by Department of Justice, for the Plaintiff/Appellant

Mr Michael Thomas SC and Mr Anderson Chow SC, instructed by Messrs Kao, Lee & Yip, for the Defendant/Respondent