United Bright Ltd v. Secretary for Justice

HCMP 382/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 382 OF 2011

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J U D G M E N T

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Introduction

1.The plaintiff is a developer of real estate.  It wishes to proceed with a proposed development of New Kowloon Inland Lot No. 2690 (“the Lot”) Section F in accordance with its latest building plans, which have been approved by the Building Authority, for the erection of a residential block consisting of 37 residential floors of flats, one recreational facility floor and one refuge floor on top of a 3 storey basement carpark, an entrance lobby and a 3 storey above-ground podium carpark. 

2.The Lot was sub‑divided into 12 Sections: Sections A, B, C, D, E, F, G, H, J, K, L and the Remaining Portion (“RP”).  Extensions had been granted to sections A, E, K, L and RP.

3.Sections A, B, C, D, E, G, K and RP, and the relevant extensions, no longer exist.  These sections have been surrendered to the Government and have been redeveloped under in-situ land exchange, with new lot numbers and lease conditions.

4.The remaining sections that still exist are sections F, H, J and L and Extension on which residential buildings of 5 storeys over one storey of carport have been erected.

5.By its Originating Summons the plaintiff seeks declarations against the defendant that certain Special Conditions in the Conditions of Sale No. 3939 dated 19 June 1939 of the Lot (“the Conditions of Sale”) had been permanently varied and modified by a letter dated 15 May 1957 from the Registrar General to Mr Charles Duff (”Duff”), an authorised architect (“the Modification Letter”).

6.The plaintiff’s case is that the result of the Modification Letter is that there is no height restriction or restriction in the number of storeys and that no further modification is necessary for a development of over 5 storeys.  The defendant’s case is that for the plaintiff to proceed with its proposed development it needs to obtain a modification of the Conditions of Sale.

Background

7.By the Conditions of Sale the Lot was sold at a public auction subject to the conditions therein.  The conditions that are relevant in these proceedings are Special Conditions (2), (3) and (6).  These provide:

“(2) The purchaser will not be allowed to erect any buildings on the lot except detached or semi-detached houses of European type designed for the occupation of one family.

(3) The purchaser shall not at any time during the term of years for which the lot is leased erect on any part thereof a house with a compound of less than 7,000 square feet including the site of the house.

…

(6)  The design of the exterior elevations and the disposition and height of any building to be erected on the lot shall be subject to the special approval of the Director of Public Works and in no case may any building to be erected on the lot exceed 2 storeys.”

8.Mr C.T. Siu (“Siu”), an authorised architect, acting on behalf of Messrs Van and Fong (“Van and Fong”) as prospective purchasers of sites 1, 2, 5, and 7 of the Lot, which subsequently became sections F, G, H and I, applied by letter dated 12 March 1954 to the Crown Lands and Survey Office to “design on each of the sites 2 semi-detached houses not exceeding 2 storeys and assume it to contain four flats”.  Section I was later renamed section J.

9.It seems that by a letter dated 1 May 1954 from the Public Works Department to Siu, the Department was prepared to recommend to the Government a modification of the Special Conditions to permit the erection of flats on the Lot subject to payment of an additional premium and the obtaining of the confirmation in writing from the other lessees of the other sections that they would have no objection to the proposed development.

10.The letter dated 1 May 1954 has not been located but it is clear from a subsequent letter from Messrs Deacons, solicitors (“Deacons”) to the Registrar General dated 1 June 1955 that the letter dated 1 May 1954 contained what I have stated.

11.The available evidence shows that there was further correspondence in 1955 between Deacons, acting for Van and Fong , the lessees of sites 1, 2, 5 and 7 which subsequently became sections F, G, H and I (later renamed J) and the Registrar General of the Land Office in relation to the proposed modification of the Special Conditions of the Lot to enable houses consisting of two or more flats to be built on each site. 

12.It is clear from the further correspondence that apart from one Tsui Wai Sun (“Tsui”) who objected to the modification sought the other lessees were in favour of the modification. 

13.By a letter dated 1 March 1955 Deacons wrote to the Registrar General requesting a modification of the Special Conditions to permit houses consisting of two or more flats to be built on each site despite the objection of Tsui. 

14.By a letter dated 19 April 1955 the Registrar General informed Deacons that in view of the objection of the lessee of one of the sections he was unable to advise the Government to modify Special Condition (2) restricting buildings on the Lot to detached or semi-detached houses of European type designed for the occupation of one family.

15.By a letter dated 1 June 1955 Deacons wrote to the Registrar General informing him that Tsui, the only lessee who had objected to the proposed modification, had sold his premises to their clients and that there was no longer any objection to the modification sought.

16.By a further letter dated 16 June 1955 Deacons informed the Registrar General that their clients had become the lessees of 6 sections namely, Sections A, B, F, G, H and I (later renamed J) which were formerly sites 1, 2, 4, 5, 7 and 8.  Deacons further stated that:

“The modification sought by our clients is in respect of the conditions set out in Conditions of Sale No. 3939 relating to N.K.I.L. 2690 so as to permit the erection of buildings containing not more than four flats on each of the six sites now owned by our clients. As previously stipulated, the compounds including the site of the building will be not less than 7,000 sq. ft. in each case.”

17.By a letter dated 9 August 1955 the Registrar General wrote to Deacons referring to their letters dated 1 June and 16 June 1955 and informed them that owing to the deterioration in the water supply position in the locality the consent for a modification of the Conditions of Sale to permit the erection of flats could not be given at that time.  Deacons was also informed that the Government would re-consider the matter if their clients would re-apply when the Tai Lam Chung water supply scheme was nearer completion.

18.The application for modification of the Conditions of Sale was re-activated in late 1956 as appears from the evidence.

19.By a letter dated 11 March 1957 Duff, on behalf of Van and Fong, wrote to the Public Works Department in relation to his clients’ application for modification of the Conditions of Sale in relation to Sections A, B, F, G, H, and J of the Lot.  Duff stated that his clients were prepared to consider a modification of the Conditions of Sale on the basis as set out in the Department’s letter dated 5 October 1956 in respect of Sections A, B, F, H and J but not in respect of Section G. 

20.The letter dated 5 October 1956 has not been located despite diligent searches.  It is not surprising that some documents have not been located in view of the long lapse of time.

21.However, it is clear from an internal minute M.33 dated 25 March 1957 that the terms of the proposed modification as set out in the letter dated 5 October 1956 were as stated in the minute.  The terms of the proposed modification were as follows:

“(i) Buildings to comply with the following coverage limitations:

3 storeys over car port ‑ 55% of lot area

4 “ “ “ “ ‑ 45% “ “ “

5 “ “ “ “ ‑ 40% “ “ “

(ii) Car parking to be at the rate of not less than 1 car per flat.

(iii) Buildings to be in accordance with the provisions of the Buildings Ordinance and plans to be submitted to the Building Authority for approval in the usual way.

(iv)  The payment of a premium in the order of $33,500 per section.”

22.By the Modification Letter the Registrar General informed Duff that the application for modification of the Conditions of Sale had been approved by the Government so as to permit the erection of flats on the sections subject to the following conditions:

“(a) Payment of an additional premium amounting to $33,550.00 for each Section within 14 days on demand.

(b) Buildings to comply with the following coverage limitations:

3 storeys over car port – 55% of lot area

4 “ “ “ “ ‑ 45% “ “ “

5 “ “ “ “ ‑ 40% “ “ “

(c) Car parking to be at the rate of not less than 1 car per flat.

(d)  Buildings to be in accordance with the provisions of the Buildings Ordinance and plans to be submitted to the Building Authority for approval in the usual way.”

23.The Modification Letter also provided that:

“2. Except as thus modified all the Conditions of Sale No. 3939 shall remain in full force and effect.”

The claims

24.By the Originating Summons the plaintiff seeks declarations:

(1)   that the Conditions of Sale of the Lot section F and in particular Special Conditions (2), (3) and (6) were permanently varied and modified by the Modification Letter and are no longer in force and can no longer be invoked;

(2)   that there is no height restriction in the Conditions of Sale as permanently varied and modified by the Modification Letter; and

(3)  that the Conditions of Sale as permanently varied and modified by the Modification Letter need not be further varied and modified to permit any development on the Lot section F over 5 storeys in height.

The plaintiff also asks for costs.

The main issue

25.The question to consider is the extent of the modification of the Conditions of Sale granted by the Modification Letter.  This depends on the proper construction of the Conditions of Sale and the Modification Letter.  The construction of the documents is a question of law.

The applicable legal principles

26.The applicable legal principles on the construction of documents are well settled and not disputed.

27.Lord Hoffman succinctly summarized the principles in Investors Compensation Scheme Ltd v West Bromwich Building Society and another [1998] 1 WLR 896 at pages 912 to 913:

“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749.

(5) The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A. B. [1985] A.C. 191, 201:

‘ if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.’ ”

28.And in Jumbo King Ltd v Faithful Properties Ltd & others (1999) 2 HKFCAR 279 Lord Hoffman NPJ said at page 296:

“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…”

29.In Leung Ka Lau v Hospital Authority (2009) 12 HKCFAR 924 Ribeiro PJ said at paragraph 37:

“The parties also accept (in my view correctly) that construction of those documents should be approached applying the well-known principles stated in Jumbo King Ltd v Faithful Properties Ltd, where Lord Hoffmann NPJ described the process as “an attempt to discover what a reasonable person would have understood the parties to mean” which involves “having regard, not merely to the individual words [the parties] 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”. Furthermore, as his Lordship stated in Investors Compensation Scheme Ltd and West Bromwich Building Society, the interpretation of a document involves “ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.

30.It has been held that the background facts which are admissible on the question of the construction of a document are limited to objective facts.  As Le Pichon JA said in Ng Chun Kong v First Star Development Ltd [2007] 3 HKLRD 281 at paragraph 28:

“There is no conceptual limit to what can be regarded as background. It includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man and which he would have regarded as relevant save that previous negotiations of the parties and their declarations of subjective intent are excluded. See Investors Compensation Scheme Ltd v West Bromwich Building Society & Others (No 1) [1998] 1 WLR 896 at pp.912H‑913A and Bank of Credit and Commerce International SA v Ali (No 1) [2002] 1 AC 251 at para.39. Evidence of background that is admissible is limited to objective facts.”

31.If there are two rival constructions, the Court is entitled to reject the one which is very unreasonable.  Lord Reid said in L. Schuler A.G. v Wickman Machine Tool Sales Ltd [1974] AC 235 at page 251:

“The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.”

32.It is clear that evidence of previous negotiations and declarations of subjective intent are inadmissible in the construction of a document.

Analysis

33.Mr Cooney SC, with Mr Ismail, for the plaintiff submitted that on the admissible background facts and the legal background it is clear that the plaintiff is entitled to the declarations sought.  It was the plaintiff’s case that Special Conditions (2), (3) and (6) of the Conditions of Sale were permanently removed by the Modification Letter.  

34.Mr Lam SC, with Mr Fung SC, submitted that it is plain that by the Modification Letter permission was granted to the lessees to erect flats provided certain conditions as set out in the Modification Letter were complied with.  The types of flats permitted were as stated in the Modification Letter.

35.In their written skeleton submissions Mr Cooney and Mr Ismail also referred to the inconsistent assertions made on behalf of the Government in the correspondence. In my view, such correspondence is irrelevant in the proper construction of the Conditions of Sale and the Modification Letter which is a pure question of law for the Court.

36.It seems to me that the background facts as set out above are relevant in construing the Conditions of Sale and the Modification Letter. 

37.As Mr Lam put it, correctly in my view, Special Condition (2) is a negative covenant.  It prohibits the lessee from erecting any building on the Lot except buildings of the type mentioned.  Thus, Special Condition (2) only permitted buildings to be erected on the Lot which were detached or semi-detached houses of European type designed for the occupation of one family.  If the lessee wished to build flats on the Lot, that required a modification of the condition.

38.Special Condition (3) is concerned with the size of the compound of a house of the type mentioned in Special Condition (2) to be erected on the Lot.  It provides that the size of the compound should not be less than 7,000 square feet including the site of the house.

39.Special Condition (6) clearly consists of two parts.  The first part is what has been referred to as the design, disposition and height provision (“the DDH provision”).  The DDH provision provides:

“The design of the exterior elevations and the disposition and height of any building to be erected on the lot shall be subject to the special approval of the Director of Public Works…”

40.The second part of Special Condition (6) is a height or storey restriction clause as it provides:

“and in no case may any building to be erected on the lot exceed 2 storeys.”

Clearly the second part limits the number of storeys of any building to be erected on the Lot to a maximum of 2 storeys.

41.On the available evidence the lessees were applying to modify the Special Conditions so as to permit them to erect flats (instead of houses) on the Lot.  However, it is abundantly clear that they were not seeking a modification to permit them to build flats of unrestricted height.

42.The letter from Siu to the Crown Lands and Survey Office dated 12 March 1954 was clear.  The prospective lessees Van and Fong were applying in respect of Special Conditions of Sale (2), (3) and (6).  In referring to Special Condition (6) it was stated in the letter as follows:

“(6)…… and in no case may any building to be erected on the lot exceed 2 storeys.

Under these conditions, could we design on each of the sites 2 semi-detached houses not exceeding 2 storeys and assume it to contain four flats?”

43.It seems to me to be clear that by the use of the ellipsis the prospective lessees were omitting any reference to the first part of Special Condition (6) namely, the DDH provision.  It seems to me that the DDH provision was not something that the parties were seeking to modify by the modification sought.  On the objective facts there was clearly no intention to seek to modify Special Condition (6) so as to remove the DDH provision.

44.By the letter dated 1 March 1955 Deacons stated that their clients were prepared to pay any additional premium for the modification of the Special Conditions.  Despite the fact that one owner at that time was objecting Deacons asked the Director of Public Works to “consider the request for a modification of the Special Conditions to permit houses consisting of two or more flats to be built on each site.”

45.By the letter dated 16 June 1955 it was clearly stated by Deacons that:

“The modification sought by our clients is in respect of the conditions…so as to permit the erection of buildings containing not more than four flats on each of the six sites now owned by our clients”.

That was the extent of the modification sought.

46.As part of the factual matrix is the fact that there was at all material times the published policy of the Government as regards the premium for a modification of Crown leases.  In exacting a premium for granting a modification of a Crown lease, it has been the Government’s practice to charge for the difference between the value of the land subject to the restricted use and the value of the land after modification (Dragon House Investment Ltd & another v Secretary for Transport & another (2005) 8 HKCFAR 668 at paragraphs 28 to 31). 

47.The Government’s policy at the time of the modification granted by the Modification Letter in 1957 was that in the case of a pre-war Crown lease a premium of 50% only was charged (rather than the full value) of the difference between the value of the land subject to the restricted use and the value of the land after modification. 

48.There is no dispute that the Government’s policy was known to the professionals as memoranda were circulated by the Government to professionals on the Government’s policy on premiums for modification.  An example of this is the Land Office Circular Memorandum No. 39 dated 8 December 1972 to all solicitors.  By this memorandum they were informed that the policy of charging premium at 50% of the amount by which the value of the land is increased as a result of the modification was to be changed to charging premium at the full value by which the land is increased as a result of the modification. 

49.The professional advisors acting for the lessees in 1957 would have known of the Government’s policy at that time of the Government charging premium at 50% of the amount by which the value of the land is increased as a result of the modification. 

50.It is also relevant to consider the amount of the premium that was actually agreed and paid for the modification in 1957.

51.The amount of premium charged by the Government and accepted by Duff for the lessees was $33,500 for each section of the Lot.

52.The detailed calculations for arriving at the amount of $33,500 for the agreed premium are contained in a document calculating the amount of premium which is referred to in the internal minute M.33 dated 25 March 1957. 

53.There is no evidence that the detailed calculations in arriving at the agreed premium of $33,500 were ever shown to the lessees or their professional advisers, Deacons or Duff. However, although they may not have seen the detailed calculations of the premium amount which was agreed and charged, they must have known that the premium was calculated on the basis of the Government policy in force at that time. 

54.The lessees knew of the terms of the proposed modification as they were set out in the letter dated 5 October 1956.  The terms have been set out above at paragraph 21.  The types of building that were mentioned were buildings of 3, 4, and 5 storeys over carport and the coverage limitations set out therein.  It seems to me that the professional advisors of the lessees must have realised that the amount of premium proposed and agreed for the modification was on the basis that buildings of up to 5 storeys over carport could be erected after the modification although they may not have had the detailed calculations that were mentioned in the internal minute M33.

55.Mr Cooney submitted that condition (b) of the Modification Letter was no more than a coverage limitation in respect of 3, 4 and 5 storey buildings and that by the modification the lessees were permitted to build flats on the Lot.  It was submitted that in respect of 3, 4, and 5 storey buildings, condition (b) set out the coverage limitations.  As regards buildings in excess of 5 storeys, it was the plaintiff’s case that the parties had agreed that the height control and coverage limitations were to be subject to the statutory control under the Buildings Ordinance.

56.I am unable to accept the submission that the modification resulted in the permanent removal of the DDH provision in Special Condition (6) and that it was replaced by the stipulation for approval of plans under the Buildings Ordinance. 

57.As was emphasised by Mr Lam, the roles of the Building Authority and the Director of Lands are different. The statutory controls under the Buildings Ordinance and the Building (Planning) Regulations are not the same as the control of the Director of Public Works. It must be remembered that the Director of Public Works plays a number of separate roles in relation to land matters including that of the Crown’s land agent.  In acting as the Crown’s land agent and demanding a premium for a modification of a lease he was simply acting as a landlord requesting for a lessee’s request for modification of the terms of the lease.  It is well settled that the Government as lessor of land acts in the capacity of a landlord in a private capacity (Hang Wah Chong Investment Co Ltd v –A‑G of Hong Kong [1981] HKLR 336; Rank Profit Industries Ltd v Director of Lands, FAMV 7/2009 25 June 2009).

58.The regulation of building height and coverage limitations under the Buildings Ordinance is completely different from the grant of a modification of a lease.  As was said by Lord Millett in Dragon House Investment Ltd at paragraph 28, in granting a modification of the user covenants in a lease the Crown in effect made a further disposal of the land for which it was entitled to charge full value.

59.Mr Cooney relied on the legal background at the time of the modification namely, the Town Planning Ordinance (20 of 1939), the Buildings Ordinance 1935 (18 of 1935) (“the BO 1935”), the Buildings Ordinance 1955 (68 of 1955) (“the BO 1955”) and the Building (Planning) Regulations 1956 (“the B(P)R 1956”).  It was submitted that after the modification there was no longer any specified height restriction.  He submitted that it was within the reasonable contemplation of the parties there is to be no specified height restriction on the buildings to be erected on the Lot but that the buildings to be erected would be subject to the statutory control of the Buildings Ordinance.

60.I am unable to accept the submissions on behalf of the plaintiff.

61.Quite clearly, the site coverage limitations for buildings of 3, 4, and 5 storeys over carport are set out in condition (b) of the Modification Letter.  On the plaintiff’s case, the site coverage limitations for those 3 types of buildings are as set out therein but that the site coverage limitations for buildings in excess of 5 storeys are as set out in the B(P)R 1956.

62.In my view, the B(P)R 1956 does not assist the plaintiff.  Regulation 22 dealt with site coverage in domestic buildings by reference to open spaces in a building in accordance with a table. 

63.Regulation 22(1)(a) provided:

“22.(1)(a) Every domestic building shall have within the site an open space at the rear, or partly at the rear and partly at the side, at a level of not less than 6 inches below the floor of the lowermost storey in accordance with Table II

Table II
Location of site	Opened space required
Abutting on one street or on two streets but not forming a corner site.	Not less than one half of the roofed over area of such building.
Abutting on two streets forming a corner site.	Not less than one quarter of the roofed over area of such building.
Abutting on three streets not forming an island site.	Not less than one eighth of the roofed over area of such building.
Provided that where the Building Authority considers it necessary for the proper and equitable development or re-development of an adjacent site, he may require the provision of more open space than that specified in this Table.”

64.The method of calculating site coverage by reference to open spaces in accordance with the table in Regulation 22(1)(a) of B(P)R 1956 is completely different from the method of calculating coverage limitations by reference to specified percentages of the lot area for the 3 types of buildings mentioned in condition (b) of the Modification Letter.  It is wholly absurd to suggest that in respect of buildings of 3, 4 and 5 storeys over car port the parties agreed coverage limitations by reference to the specified percentages of the lot area but that for buildings in excess of 5 storeys the parties agreed coverage limitations by reference to open spaces in accordance with the table in Regulation 22(1)(a) of B(P)R 1956.

65.I would also observe that the BO 1935 was already in force at the time of the Conditions of Sale in 1939.  If the statutory control under the Buildings Ordinance were the same as the DDH provision there would have been no need to include the DDH provision in the Conditions of Sale in 1939. It would also not have been necessary to include the DDH provision in later Crown leases e.g. in the Conditions of Grant signed in November 1992 in Ying Ho Co Ltd v Secretary of Justice (2004) 7 HKCFAR 333. 

66.The discretion given to the Director of Public Works under the DDH provision in Special Condition (6) is very wide.  The design of the exterior elevations and the dispositions and height of any building to be erected on the lot is subject to the special approval of the Director of Public Works. 

67.On the other hand, the discretion in section 9(6)(c) of the BO 1955 given to the Building Authority is limited as it provides that the Building Authority may refuse his consent to the carrying out of any building works which:

“would result in a building differing in height, design, type or intended use from buildings in the immediate neighbourhood or previously existing on the same site”

It is only in those specified circumstances that the Building Authority may refuse his consent to the carrying out of building works.  That is a very limited power or discretion given to the Building Authority to refuse his consent.  It is certainly much more limited than the discretion given to the Director of Public Works under the DDH provision in Special Condition (6). 

68.In my view, it is wholly unreasonable to suggest that for the  premium that was charged the Director of Public Works agreed to permanently replace the DDH provision with the statutory control of the Building Authority under the Buildings Ordinance in respect of buildings in excess of 5 storeys.  Clear express words would be necessary to arrive at that result.  There are none. 

69.The plaintiff also relies on Polorace Investments Ltd v The Director of Lands (HCMP 703/1966, Findlay J 1 May 1997). 

70.In that case the judge was construing a covenant in a Crown lease which he held controlled only the coverage limitation of the types of building mentioned but that there was no height restriction. 

71.In my view Polorace is clearly distinguishable on its facts.  The covenant that was construed in that case provided that:

“And shall not develop or redevelop the lot (including the said extension area) or any section thereof in any manner which would result in the roofed‑over area of the lot or section being such that‑

100/25 x roofed-over of 3‑storey buildings plus 100/23.539 x roofed-over area of 4‑storey buildings would be greater than the area of the lot of section (it being agreed and declared that for the purpose of calculating the permissible roofed-over area the said extension area shall count as half its actual area …

And shall obtain the approval of the said Director of the design, disposition and height of any building to be erected on the lot (including the said extension area.”

72.The Crown lease in Polorace was different.  Here the Court is concerned with the construction of not just the Modification Letter but also the Conditions of Grant and the Special Conditions which clearly contained a height restriction unlike the Crown lease in Polorace.  The Court in Polorace was not dealing with a modification of a Crown lease.  Polorace provides no assistance to the plaintiff.

73.I am unable to accept Mr Cooney’s submission that the height restriction of 2 storeys was removed permanently for all types of buildings by the Modification Letter. The Modification Letter clearly stipulated in the paragraph numbered 2 that except as modified all the Conditions of Sale shall remain in full force and effect.

74.In my judgment the Modification Letter is clear and unambiguous.  The Modification Letter only granted approval for the erection of flats provided the conditions set out therein were fulfilled.  Condition (b) clearly modified the height restriction of 2 storeys in Special Condition (6) for buildings of 3 types only namely, 3 storeys over car port, 4 storeys over car port and 5 storeys over car port with the coverage limitations as clearly set out in the Modification Letter.  It did not seek to modify the Special Conditions in respect of other types of buildings. 

75.Except as modified by the Modification Letter, the Conditions of Sale remain in full force and effect.  In my judgment the DDH provision was not modified in respect of other types of buildings.  The DDH provision in Special Condition (6) still remains as it was not modified in respect of the types of buildings not mentioned in condition (b) of the Modification Letter. 

Conclusion

76.The plaintiff’s claims for the declarations sought are dismissed.

77.I also make an order nisi that the costs of the proceedings are to be paid by the plaintiff to the defendant, such costs to be taxed if not agreed with a certificate for two counsel.

Mr Nicholas Cooney SC and Mr Anthony Ismail, instructed by Kao, Lee & Yip, for the plaintiff

Mr Godfrey Lam SC and Mr Eugene Fung SC, instructed by Department of Justice, for the defendant