The Judicial Committee of the Privy Council Decisions

Privy Council Appeal No. 27 of 1997

 

Real Honest Investment Limited Appellant

v.

The Attorney General Respondent

 

FROM

 

THE COURT OF APPEAL OF HONG KONG

 

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REASONS FOR REPORT OF THE LORDS OF THE

JUDICIAL COMMITTEE OF THE PRIVY COUNCIL

OF THE 16th June 1997, Delivered the

25th June 1997

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Present at the hearing:-

Lord Lloyd of Berwick

Lord Steyn

Lord Hoffmann

Lord Hope of Craighead

Lord Clyde

  ·[Delivered by Lord Clyde]

 

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1. By a lease dated 1st May 1923 the Crown leased an area of land known as Rural Building Lot No. 193 to Arthur Ogilvie.  The appellant in the present case is a successor to the tenancy.  The period of the lease was for seventy-five years from 24th October 1921.  But the lease expressly provided that the tenant was entitled to a renewed lease of the premises for a further period of seventy-five years on the same terms as before.  The lease has evidently been renewed without any formal grant.  The original lease obliged the tenant to erect a building on the land within twenty-four months of the terms thereby granted at a cost of at least ten thousand dollars.  The lease then imposed the following provision:-

"... the design of exterior elevations and the disposition of any building so erected shall be subject to the special approval of the Director of Public Works and shall not exceed thirty-five feet in height and except with the consent of the Governor-in-Council  first  obtained  not more than one house shall be erected on the hereby demised premises and the whole to be done to the satisfaction of the Surveyor of His said Majesty ..."

 

2. A building was evidently erected on the site.  But in 1948 the then tenant proposed some redevelopment with a view to erecting an apartment building comprising a basement and eight upper floors, rising to a height of over 80 feet.  There ensued certain correspondence between agents for the then tenant on the one hand and the Buildings Authority and the Colonial Secretary on the other in relation to the proposed building.  It was subsequently built with two fewer floors than was originally proposed and it came to be known as "Interocean Court".  The appellant now proposes to demolish this block of flats and erect a new block of flats on the site.  A question has arisen whether, as the Crown contends, the covenant in the lease imposing the restriction to a height of thirty-five feet is still enforceable.  The appellant argued before the Court of Appeal that in the course of the correspondence in 1948 the Crown gave a general waiver of the covenant.  That argument was held to be unsound and the tenant has now appealed to their Lordships' Board.  At the conclusion of the hearing their Lordships agreed humbly to advise Her Majesty that the appeal ought to be dismissed with reasons to be given later.  This they now do.

 

3. The question is one to be resolved by a consideration of the terms of the correspondence.  Certainly a waiver was granted in relation to the critical restriction, but the question for construction is whether that was intended to operate for the duration of the lease and its renewal or whether it was only intended to apply to the building of Interocean Court.

 

4. The succession of letters produced in the case starts with a letter of 10th August 1948 from the then tenants' architects to the Director of Public Works intimating the details of the proposed building as shown on various plans which were enclosed, noting that it would be more than 80 feet in height and requesting consent to the proposed scheme on the general lines which they described.  The reference to 80 feet was presumably a reference to section 88(1)(c) of the Buildings Ordinance whereby no building was to be erected in excess of five storeys in height or an overall height of 80 feet unless with the consent of the Governor-in-Council.  On 25th August a reply was returned indicating that so far as the Public Works Department was concerned there was no objection to the tentative proposals shown on the drawings. The letter concluded:-

"Before proceeding further the question of an alteration to the Special Conditions of Sale must be settled and I have to draw  your  attention  to  the fact that, at present, the height of any building erected on this lot may not exceed 35 feet in height without the consent of the Governor-in-Council.  No doubt you will take the necessary action to obtain that consent."

 

5. The reference to the Special Conditions of Sale in this and in certain of the later letters is to be understood as a reference to the lease.  But the writer of the letter was in error.  The requirement for the consent of the Governor-in-Council in the terms of the lease was stated in relation to the limitation in the building to not more than one house.  It was not expressed as a qualification to the restriction in the building height to 35 feet.

 

6. That error was however not observed by the solicitors for the tenant in the next letter which was written by them on 6th September 1948 to the Colonial Secretary.  After narrating the earlier exchange of letters they stated that it was essential to obtain the consent of the Governor-in-Council to the erection of the proposed building as the height would exceed 35 feet and asked for the matter to be put before the Council with their letter being treated as a formal application for consent.  By letter on behalf of the Colonial Secretary dated 23rd September 1948 it was regretted that a definite reply could not yet be given.  The writer then stated:-

"It appears that there has been some misunderstanding and that the consent of the Governor-in-Council is not required because the proposed building will exceed 35 feet in height but because of a clause in the Special Covenants of Sale for this lot with which the erection of a block of flats conflicts.  It also appears that the Governor-in-Council's permission might be required under Section 87(7) of the Buildings Ordinance as the block of flats will exceed 5 storeys in height."

 

7. In the first of these two sentences the writer is seeking to correct the erroneous view which seemed to have been  earlier taken of the lease as to the matter to which the consent of the Governor-in-Council was expressly related, namely the limitation to one house as distinct from the unqualified restriction on height.  Counsel for the appellant accepted that the reference to a "clause in the Special Covenants" was a reference to the limitation to one house.  But the significance of the sentence goes no further than to clarify the terms of the lease.  It does not indicate that the restriction on height was other than valid and subsisting. To overcome that restriction would require a waiver or a variation.

 

8. The appellant founds particularly on the next two letters.  The first was sent on behalf of the Colonial Secretary and was dated 29th September 1948.  In it the writer stated:-

 

"Further to my letter ... of the 23rd September, 1948, ... I am directed to inform you that further examination of the terms of the lease dated 1st May, 1923, under which this lot is held indicates that the consent of the Governor-in-Council is not required in respect of any of the matters mentioned in my letter quoted above.

 

2. The Building Authority will, however, formally intimate to you or your clients that the following potential restrictions are expressly waived:-

(a)Erection of building exceeding 35 ft. in height;

(b)erection of a block of flats;

(c)erection of a domestic building exceeding five storeys in height."

 

9. The first paragraph of that letter is concerned with the terms of the lease and the matters mentioned in the letter of 23rd September.  That letter had already indicated that the 35 feet restriction was not a matter for which the lease expressly allowed for a consent.  The second matter relating to the lease in the letter of 23rd September was the limitation to one house, but in the letter of 29th September the view is being expressed that after all no consent was required.  That was presumably because it had been realised that on a proper construction of the limitation it did not strike at the proposal to build a single block of flats.  The third matter in the earlier letter did not require consent under the lease because it related not to the lease but to the Building Ordinance; that was the exceeding of the limit of 5 storeys prescribed by section 87(7).  The letter of 29th September promised that a formal intimation of an express waiver of all three matters would be intimated.  The word "however" may reflect the fact that at least in respect of the matter in paragraph (b) a waiver might not be necessary.

 

10. The waiver was contained in a letter from the Building Authority dated 20th October 1948.  The writer stated, under reference to lot R.B.L. 193:-

"Further to my letter of the 25th August, 1948 in connection with your tentative plan for the erection of flats on the above lot, I am instructed to inform you that the following potential restrictions in the Conditions of Sale of the above lot are waived:-

(1) That the building may not exceed 35 feet in height.

(2) That not more than one house may be erected on the lot.

 

 

11. In this connection I would point out that, if the building exceeds the permissible maximum height under the Buildings Ordinance (1935), it will be necessary to apply for the usual modification and, secondly, the waiving of the clause relative to one house pre-supposes that one block of flats as shown in your tentative scheme will be substituted ..."

 

12. It is to be noted that the letter was written expressly in connection with the tentative plan for the erection of flats.  It then becomes difficult to construe it as giving a general waiver for all time of the restriction on height.  Indeed the whole of the correspondence was concerned with this particular development.  The request which was made in the letter of 6th September for consent to exceed the 35 feet limit was sought in relation to "the proposed building".  The terms in which the waiver was promised in paragraph 2(a) of the letter of 29th September were less precisely formulated but the terms of the waiver itself are plainly directed to "the building", that is the particular building then proposed and not with any ideas of a more far-reaching dispensation.  It was argued that while the dispensation was granted in respect of the proposed building extending to nine floors the evident fact that no further waiver was granted in respect of the actual erection of a building of seven floors reflected the generality of the waiver.  But the decision to reduce the number of floors did not in the view of their Lordships call for the granting of any further waiver than that which had already been granted for the development which the then tenants were proposing to carry out.  If it had been the intention to grant a waiver of the restriction on height for any future building at  any time during the future currency of the lease and its renewal that could have been done, but it would require clear language to express that intention.  Having considered the correspondence which passed in 1948 their Lordships have not been persuaded that that was the intention and as a matter of construction of the letters they are satisfied that the decision of the Court of Appeal was correct.

 

13. It was suggested that the description of the restrictions as "potential" showed that they were recognised as being only possible or arguable, but since the development was at that stage uncertain that adjective could well have been intended to reflect the fact that the plan and the proposals were, as they are described in the correspondence, "tentative".  It was also suggested that the letter of 29th September should not be read so as to create a trap for the unwary by stating that the consent of the Governor-in-Council was not required but concealing the fact that some other action by him might be required.  But that argument  can  hardly  stand in a letter which itself promises the granting of a waiver of the critical restriction.  In any event both of these arguments seek to question the existence of the restriction and do not relate to the scope of the waiver.  It should be recorded that the appellant sought to revive an argument which had been presented at first instance but not pursued before the Court of Appeal to the effect that the restriction in question had been spent upon the erection of the first building after the granting of the lease, but their Lordships refused leave for that argument to be reopened in the absence of any special circumstances justifying such an exceptional course.

 

14. The appellant must pay the respondent's costs before their Lordships' Board.

 

© CROWN COPYRIGHT as at the date of judgment.