Lok on Co Ltd v. Attorney General
|
CACV000154/1982 Landlord & tenant - Demolished Buildings (Re-development of Sites) Ordinance - requirements of re-development order deemed to be covenants in Crown Lease - Crown demanded payment of money in consideration for variation of those requirements - Tenant paid "under protest" to avoid forfeiture but sought declarations that demand was unconscionable and that money should be repaid - Originating Summons struck out as disclosing no cause of action - on appeal, Held that action was properly struck out, as court should not interfere with right of parties to decide on what terms (if any) they would contract. Date of hearing: 15th March, 1983. Reasons for Judgment delivered: 24th March, 1983. J. Swaine, Q.C. & R. Tang (Chu & Lau) for Plaintiff/Appellant. B. Barrow & N. Strawbridge for Defendant/Respondent.
BETWEEN
Coram: Sir Alan Huggins, V.-P., Leonard, V.-P., and Fuad, J. A. Date: 24th March, 1983 ________________________ REASONS FOR JUDGMENT ________________________ Sir Alan Huggins, V.-P. : 1. The appellant Plaintiff sought declarations of its rights under two Crown Leases for 999 years, granted in 1930, of land in Connaught Road West. It had bought the land when there were in existence thereon two old buildings, which in 1972 became dangerous. Demolition orders were made and these were followed by orders under the Demolished Buildings (Re-development of Sites) Ordinance for the re-development of the land. The Plaintiff acquired neighbouring land and drew up plans for the re-development of the whole area. As a result the time limit prescribed in the re-development orders was reached before the work could be completed Under the Ordinance the requirements of the order for re-development, including the time limit, were deemed to be incorporated in the Crown Lease as covenants, for breach of which there was a right of re-entry. Several extensions of time were granted upon payment of large sums of money, but the work was still nowhere near completion. Finally an extension was offered until 29th March 1982 upon payment of a further large sum. The Plaintiff objected to the amount demanded, but decided to pay '"under protest", and it took out an Originating Summons to challenge the right of the Crown to make such a demand. The Attorney General applied to strike out the Summons on the ground that it disclosed no reasonable cause of action, and Mr. Justice power granted the order asked for. 2. The argument advanced by Mr. Swaine on behalf of the Appellant was based upon an appeal to the equitable jurisdiction of the court: it was said that, since the Tenant would have a claim to relief from forfeiture if the Crown re-entered for breach of the "covenant'', the Crown was acting unconscionably in demanding, as consideration for an extension of time, a sum greater than that which might be ordered to be paid by the Appellant upon the granting of relief after a re-entry. With respect I am unable to see the logic in this contention. What the Crown was offering was an act of grace - an extension of the time fixed by the "covenant" for the erection of the building. As consideration for such an act of grace it was legitimate for the Crown to impose such terms - whether reasonable or unreasonable - as it might think fit. On the other hand, it was for the Tenant to agree or not as it chose If it agreed, it was in effect paying an insurance premium to cover itself against the risk that, should the Crown re-enter, the court might decline to grant relief. If the Tenant thought the premium demanded too high for the benefit thus offered, it could have refused to pay. The Crown would then, presumably, have exercised its right of re-entry and the Tenant could have brought an action for relief against forfeiture. In that event the court would have had to decide whether to grant relief and, if so, what terms (if any) should be imposed. Had there been a re-entry it may be that the court would have adjudged that relief should be granted upon payment of compensation and have assessed that compensation at a figure below that which the Crown demanded as the price of the extension, but the two sums would have been for two entirely different, although distantly related, benefits. This court should be slow to interfere with the rights of fully competent parties to contract on whatever terms they think appropriate. There was here nothing which made the bargain offered "unconscionable" in the sense in which that word had been interpreted by the courts of equity, and I thought the judge was right to strike out the Summons. Leonard, V.-P. : 3. I agreed that the appeal should be dismissed and only wish to add that the argument advanced by Mr. Swaine ignores the fact that the right to re-entry is given by Ordinance (Sec. 4(3) of the Demolished Buildings (Re-development of Sites Ordinance) and the right to apply for relief against re-entry is also given by Ordinance (Sec. 8 of the Crown Rights (Re-entry & Vesting Remedies) Ordinance) so that the Court's jurisdiction to give relief is entirely statutory. Although relief may be sought, if the circumstances are such that the applicant for relief would have been entitled to apply for relief had the lessor been a private party and exercised his rights of re-entry, the Ordinances do not enable the Court to give relief unless and until re-entry takes place. Therefore in questions arising out of the breach of requirements to redevelop, deemed by Section 4(3) to be covenants in a Crown lease, the Court had no jurisdiction to grant relief until the memorial of re-entry is registered under Section 4(1) of the Crown Rights (Re-entry & Vesting Remedies) Ordinance. The action of the appellant in making payment so as to prevent re-entry taking place prevented the jurisdiction to grant relief from arising. The appellant is seeking to have the best of both worlds; by payment, albeit "under protest" , he prevented the jurisdiction arising, he cannot now invoke it. Fuad, J. A. : 4. This is an appeal from the decision of Power J. given on the 26th November 1982 whereby he struck out an Originating Summons brought by the Lok On Company Ltd. ("the company") against the Attorney General, under 0.18 r.19 and the inherent jurisdiction of the Court. 5. The history of the matter which gave rise to these proceedings is largely to be found in affidavits (with their exhibits) sworn by Mr. Aloysius Fee-Loong Chu, a Solicitor and a director of the Company, on the 21st July and 14th October 1982. The Company is the registered owner of certain buildings formerly known as Nos. 144-151 (inclusive), Connaught Road West, which had been erected on Marine Lot 414 Sec. J.R.P., Marine Lots Nos. 455-459 (inclusive) and Marine Lot No. 477. Two of these Lots (Nos. 456 and 477) are held under Crown leases, both dated the 19th July 1930. Until 1972, on these lots had been erected pre-war buildings known as No. 147 and 148 Connaught Road West. These were required to be demolished by the Building Authority under s.3 of the Demolished Buildings (Re-development of Sites) Ordinance (Cap. 337) and at that time were owned by Premier Development Co. Ltd., ("Premier"), the Company's predecessor in title. By a Re-development Order of the 29th September 1972, Premier were required to re-develop Lot 456 within a period of 48 months from the service of the Order in accordance with the stipulations contained in s.4(1) of Cap. 337. A similar Redevelopment Order was issued in relation to Lot 477. The two Orders were served upon Premier on 29th September 1972. Thus redevelopment was required to have been completed in September 1976. However, Premier were not permitted to build a domestic building on these lots, and re-development was delayed for it was the subject of an appeal to the Town Planning Board, later referred to. 6. Premier wanted to develop the Lots together with adjoining buildings to provide "a better planned building" and to utilise a greater overall gross floor area. The applicant says that this would improve the neighbourhood as the adjacent buildings were all pre-war buildings (or buildings erected immediately after the war) and were in various stages of dilapidation. Thus it was that Premier resolved to redevelop the two lots together with Lot No. 414 and 455 which it also owned. The combined area of the four lots was 11,660.00 sq. ft. On the 16th November 1977 Premier submitted an application under s.6 of the Town Planning Ordinance for permission to erect a 26 storey composite building upon them, of 113,651.42 sq. ft. total floor area, comprising -
On the 31st January 1978 Premier's application was approved in part, and was made subject to certain qualifications imposed by the Board. 7. On the 25th August 1978, the Company bought Nos. 144-148 Connaught Road West from Premier and on the 16th October 1978 they bought Nos. 149-151 Connaught Road West (which were erected on Lots 457, 458 and 459) from the then owner. At the time of these purchases the Company had planned to redevelop Nos. 144-151 together and to erect on Lots 414, 455, 456, 477, 457, 458 and 459, a commercial/domestic building, but they later decided that the entire development should take the form of a commercial building. And so, on the 1st April 1980, the Company applied for permission to erect a 42 storey composite building comprising shops on the ground floor, shopping arcades on the 1st to 3rd floors and offices from the 4th to 42nd floors. 8. The affidavit continues by saying that since No. 144 and Nos. 149-151 Connaught Road west had been purchased subject to existing tenancies, before development could begin the Company had to obtain vacant possession. The Company filed proceedings for possession on the 30th April 1979 and, on the 30th August 1979, Orders for possession in their favour were made by the Court. The affidavit exhibits a detailed chronology of subsequent events prepared by the Company's architect. It is said that since the Company had made a substantial investment, they were "obviously eager to complete the redevelopment as quickly as possible", and had always co-operated fully with the architects and building contractors to this end. 9. It will be recalled that the redevelopment notices served on Premier in respect of Lots 456 and 477 expired in September 1976, but a number of extensions were granted by the Government, as detailed below -
10. The narrative continues as follows. The Company received a letter (dated 11th August 1981) from the Valuation Branch of the Crown Lands and Surveys Office requiring them to give reasons for the delay in developing Lots 456 and 477, and an estimated date of completion of the development. On the 15th August 1981, the Company's architect wrote to the Chief Estate Surveyor/ Valuation, telling him that the reasons for the delay were (i) that these Lots were now to be re-developed with the other Lots, the building plans for which had only been approved on 25th September 1980, (ii) that the demolition of the existing buildings on the latter Lots had not been completed until 21st October 1980, and (iii) that piling had begun on the 28th April 1981. It was estimated that another 30 months extension was required. By their letter of the 16th November 1981, the Crown Lands and Survey Office indicated that a further six months' extension would be granted, at a premium to be assessed, on the basis that the building contract for the superstructure work would be let during the extension period. To ensure that full consideration could be given when the Company applied for a further extension for the relevant period they were advised to submit a copy of the building contract as soon as possible the building contract was offered to a construction company who accepted the offer on the 18 March 1981 in accordance with their tender. 11. On the 25th November 1981, the Crown duly offered extensions of six months (from 29th September 1981 to 29th March 1982) in respect of Lot 456 at a premium of $626,000.00, and of Lot 477, at a premium of $593,600.00. The Company's Solicitors wrote to the Land Officer on 11th December 1981 seeking exemption from paying these premiums, and this was refused on the 14th January 1982. On the 15th March 1982 they were paid under a cover of a letter which read -
12. The Originating Summons which is the subject of this appeal was taken out on the 7th April 1982. 13. On the 7th September 1982 the Land Officer repeated his demands for the payment of the premiums if extensions were to be granted until the 29th September 1982, and on the 16th September 1982 re-entry was threatened if they were not paid by the 23rd September 1982. The Company just met the deadline for payment and their Solicitor wrote -
14. The following additional facts are given -
15. I now turn to the reliefs sought by the Originating Summons - By it, the Company sought "the determination of the court, on the true construction of the Crown leases ... in respect of Marine Lots 456 and 477 ... as to what if any premium for extension of time for the redevelopment of the....Lots is payable by the Plaintiff to the Crown". The Company prayed "in particular" for the following declarations -
16. It is now necessary to outline the relevant provisions of the Demolished Buildings (Re-development of Sites) Ordinance, Cap. 337 and the Crown Rights (Re-entry and Vesting Remedies) Ordinance, Cap. 126. By virtue of s.4 of Cap. 337, within three months of the service of a re-development notice, the Director may order the owner to re-develop the site in accordance with the requirements of the section, "within such time as he may prescribe". The owner is given a right of appeal to the Lands Tribunal against the order. After the time limited for appeal has expired (or has not been extended) the requirements of the order are deemed to be "covenants, conditions or stipulations" in the Crown lease, and failure to comply with any of them entitles the Crown to re-enter under Cap. 126. The position is the same in respect of an order confirmed or substituted on an appeal. Then Cap. 126 takes over. Section 4 provides that when a right of re-entry accrues to the Crown, a memorial of an instrument of re-entry may be registered in the land Office, and as soon as this is done the Crown is deemed to have re-entered. By virtue of s.8 the former owner is given the right to petition the Governor for relief against re-entry or to apply to the High Court " in its equitable jurisdiction" for such relief if (a) he disputes the right of the Crown to reenter, or (b) he could have applied for such relief had the lease been between private parties. An application to the High Court for relief must be made within six months, whereupon, under s.10, the Court may grant relief as if it were an action between private parties. 17. It must first be noted that the Court's powers under these Ordinances are entirely statutory, albeit that the equitable jurisdiction of the Court may be resorted to in the circumstances provided for. It seems to me that the Court has no jurisdiction to enter into the matters embraced by Cap. 126 unless the applicant can bring himself within the terms of s.8. Moreover, the power to prescribe the time within which a re-development must be completed is reserved by s.4 of Cap. 337 to the Director, with an appeal to the Lands Tribunal. In my view, therefore, the High Court had no jurisdiction to extend that time. On these grounds alone the declarations sought in paragraphs (1) and (5) of the Summons could not have been granted. 18. Mr. Swaine has urged upon us the proposition that the developers are entitled to come to court and obtain a decision as to the terms upon which relief from the threatened re-entry would have been granted, and if those terms would have included the payment of a sum of money to the Crown, the Crown could not lawfully demand a sum in excess of that sum. No authority supports this contention. Mr. Swaine did not suggest that the Crown was acting unlawfully in demanding premiums from time to time for the indulgence being sought by the developers. Although the facts of Hang Wah Investment Co. Ltd. v. The Attorney General of Hong Kong [1981] 1 W.L.R. 1141 were different, the broad principle that where a tenant seeks a concession from his landlord in relation to the development of the land leased, the landlord is entitled to make the granting of that concession conditional upon the payment of a premium, was expressly recognised by the Privy Council. As in that case, in the instant case there was no averment that the demand for the premiums were capriciously advanced. It must be borne in mind that the re-development order was made as long ago as September 1972 and required, in terms of s.4 of Cap. 337, a very much smaller and less costly development than the one the developers ultimately decided upon. Extensions had been granted ever since September 1976. In his affidavit, Mr. Chu recognised that policy considerations were involved. The determination of that policy (which apparently affected the size of the premiums called for) is surely not a justiciable issue. If a person who has a legal right to do something threatens to exercise that right unless he is paid a certain sum of money, it is difficult to see how the amount involved can be made the subject of legal proceedings. The offeree is free to accept the concession or not. What he cannot do, it seems to me, is to pay over the sum demanded (even though under protest), prevent the exercise of the legal right, and then come before the Court and ask for his money back on the basis that it was "money had and received". The position might well be different if the issue of bona fide arises. The Crown's intimation that it would re-enter for breach of the covenant unless the premiums were paid could hardly be classified as a threat, and could not possibly be regarded as extortion or oppression. For all these reasons, there was no arguable basis for the declarations sought by paras. (2)(3) (4)(6) and (7) of the Summons. I would add that since there is no dispute that what became a covenant was in fact breached, to grant the declaration set out in para. (5) would be to defy the express provisions of s.4(3) of Cap. 337. 19. In all the circumstances, in my judgment this was one of those somewhat rare cases where the Court, although asked only to make declarations, was fully entitled to decide the matter in limine. 20. I entertain no doubt that on the material before him power J. came to the right conclusion and I therefore agreed that the appeal should be dismissed. Representation: J. Swaine, Q.C. & R. Tang (Chu & Lau) for Plaintiff/Appellant. B. Barrow & N. Strawbridge for Defendant/Respondent. |