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Ying Ho Co Ltd And Others v The Secretary For Justice

Judgment Cited authorities 20 Cited in Precedent Map Related
Vincent
Judgment Date23 September 2004
Year2004
Citation[2005] 1 HKLRD 135; (2004) 7 HKCFAR 333
Judgement NumberFACV17/2003
Subject MatterFinal Appeal (Civil)
CourtCourt of Final Appeal (Hong Kong)
FACV000017/2003 YING HO CO LTD AND OTHERS v. THE SECRETARY FOR JUSTICE

FACV No. 17 of 2003

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 17 OF 2003 (CIVIL)

(ON APPEAL FROM CACV No. 291 of 2002)

_______________________

Between:

YING HO COMPANY LIMITED Appellants
KWONG FOOK INVESTORS & DEVELOPERS LTD
CHEONG MING INVESTMENT CO. LTD
THE WORLD REALTY LIMITED
YAU FOOK HONG CO. LTD
TSING LUNG INVESTMENTS CO. LTD
DORFOLK INVESTMENTS LTD
ON LEE INVESTMENT CO. LTD
And
THE SECRETARY FOR JUSTICE Respondent

_______________________

Court: Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ, Sir Derek Cons NPJ and Sir Ivor Richardson NPJ

Dates of Hearing: 5 – 8 July 2004

Date of Judgment: 23 September 2004

_______________________

J U D G M E N T

_______________________

Mr Justice Bokhary PJ:

1. During the run-up to the 1997 handover the appellant developers conceived and pursued the idea of making a striking demonstration of confidence in Hong Kong’s future by erecting here what would be the tallest building in the world. But there was a problem which ultimately proved insuperable. Hong Kong’s airport was then at Kai Tak. Its replacement was under construction at Chek Lap Kok. The proposed building would be in Tsuen Wan and some 18 kilometres from the new airport. Even so its height would be so great as to jeopardize the proper operation of the instrument landing system to be installed there. A lot of time was used up by, among other things, unsuccessful efforts to overcome this problem. The developers missed the deadline for fulfilling the building covenant forming one of the lease conditions on which they held the site in question from the Government. Threatened by the Government with re-entry for breach of that lease condition, the developers avoided that by paying over $½ billion in waiver premia and liquidated damages. They paid under protest. And they then commenced proceedings for reimbursement and damages. Having failed in the courts below, they have come finally to this Court.

2. Mr Jonathan Sumption QC for the developers has presented arguments as able as any I have ever heard. But such are the circumstances of this case that I feel unable to accede to those arguments beyond keeping alive that part of the developers’ claim which has yet to be tried. To this limited extent Mr Sumption’s efforts are rewarded with success.

3. The story of the case is told in detail by Mr Justice Ribeiro PJ and Sir Ivor Richardson NPJ whose judgments I have had the advantage of reading in draft. Gratefully adopting their accounts, I turn at once to the questions formulated by Mr Sumption. These read:

“1. Was the Government entitled to withhold approval for [a Master Layout Plan (‘MLP’)] complying with all the Special Conditions of the grant, on the ground that the height of the proposed building exceeded [the height above principal datum] which the Government expected to fix under [the Hong Kong Airport (Control of Obstructions) Ordinance, Cap. 301 (‘the Ordinance’)]?

2. What obligations did the Government owe as to the processing of MLPs? In particular, did they (as the Appellants contend) owe obligations (i) not unnecessarily to act in a way which deprived the grantee of part of the time allowed by the Special Conditions for completing the works; and/or (ii) in the event that they were entitled to and did reject an MLP on account of an aspect of the design, disposition or height not regulated by the Special Conditions, to inform the grantee precisely what criteria it was applying?

3. Was the Government responsible for any substantial (as opposed to de minimis) part of the delay occurring up to April 1996, (i) by purporting to reject MLPs on account of a prospective height limit under the Ordinance; and/or (ii) by taking longer than was necessary to decide what to do about the absence of any statutory controls over height or of any definitive maximum height; and/or (iii) by taking longer than was necessary to reject an MLP which was too high?

4. If some part of the delay occurring up to April 1996 was the responsibility of the Government, what is the legal effect of that state of affairs on its right (i) to demand liquidated damages for the delay, and/or (ii) to re-enter on the expiry of the contractual period for carrying out the works; and/or (iii) to demand waiver premia for not re-entering?

5. If the Government was not entitled to act as in paras. 4(i), (ii) or (iii) above, is it nevertheless entitled to retain the liquidated damages and waiver premia paid to it under the threat of re-entry?”

4. I answer the first four questions against the developers. But I answer the fifth question in such a way as to accord the developers the limited success of which I spoke. I agree with and do not propose to add anything to the reasons given by Mr Justice Ribeiro PJ for answering the second, third and fourth questions against the developers. But I will state in my own words why I answer the first and fifth questions as I do, which I see as consistent with Mr Justice Ribeiro PJ’s reasoning on those questions.

Use of a DDH clause to restrict building height in the interest of safe and efficient aviation

5. The premise of Mr Sumption’s first question is that the rejected master layout plans comply with all the special conditions of the grant. But the building shown in those plans exceeds the height restriction imposed by the Government under a special condition. This special condition makes the design, disposition and height of any building to be erected on the land subject to the Government’s prior approval in writing. Such clauses (commonly called “DDH clauses”) have often been used by the Government to achieve its town planning objectives. A building height restriction having been thus imposed, the premise of Mr Sumption’s first question has to be read subject to the issue between the parties as to whether the restriction was validly imposed.

6. In Crozet Ltd v. AG [1973-76] HKC 97 at p.101G Briggs CJ, sitting at first instance and dealing with a DDH clause, saw no reason why a lease condition cannot be used to enforce Government policy, provided that the policy was within the law. This should not have come as a surprise to anybody. As noted in Roger Bristow: Land-use and Planning in Hong Kong (1984) at pp 26, 154, 161 and 195, the beginnings of our system of town planning through lease conditions as well as statute can be traced back to the middle of the 19th century. Within limits the Government isentitled to use a DDH clause to achieve its lawful town planning objectives including the restriction of building height in the interest of safe and efficient aviation. One such limit is the purely private law one that there must be no derogation from grant.

7. Mr Sumption cited the decision of the House of Lords in Equitable Life Assurance Society v. Hyman [2002] 1 AC 408. Like a DDH clause, the provision concerned in thatcase involved a contractual discretion. The facts may be taken from the headnote where they are set out thus at p.408 C-F:

“The defendant was a representative of the interests of approximately 90,000 policyholders who held retirement with-profits policies containing a guaranteed annuity rate with the plaintiff life assurance society. Under the defendant’s sample policy, which was effected in 1979 and matured in 1998, the society agreed to pay, on maturity, the annuity increased by related bonuses, if any, or alternatively he could take an annuity at the society’s current rate or from another provider. Under article 65 of the society’s articles of association the amount of any bonus was within the absolute discretion of the directors of the society and their decision was to be final and conclusive. From 1994, when the current annuity rate started to fall below the guaranteed annuity rate, the society adopted a policy of declaring in relation to such policies a lower final bonus to policyholders who chose to take an annuity at the guaranteed rate than to those who elected to take one of the alternative options.”

The House of Lords held that the Society was not entitled to adopt that course.

8. At p.459 G-H Lord Steyn said:

“The supposition of the parties must be presumed to have been that the directors would not exercise their discretion in conflict with contractual rights. These are the circumstances in which the directors of the Society resolved upon a differential policy which was designed to deprive the relevant guarantees of any substantial value. In my judgment an implication precluding the use of the directors’ discretion in this way is strictly necessary. The implication is essential to give effect to the reasonable expectations of the parties.”

Lord Cooke of Thorndon agreed with Lord Steyn’s way of viewing the case but said (at p.460 F-G) that the same conclusion could be reached by starting from the principle that no legal discretion, however widely stated, can be exercised for purposes contrary to those of the instrument by which it is conferred. And at p.461A he said that in exercising their powers of allotment of bonuses the directors were not entitled to exercise the same “for a purpose subverting the basis of the policy, fairly interpreted”. The other members of the House of Lords agreed with both Lord Steyn and Lord Cooke.

9. Where a grant of land is concerned, I think that principles such as those identified by Lord Steyn and Lord Cooke in the Equitable Life Assurance case can and should be given effect by preventing, or awarding a remedy for, any derogation from grant.

10. The highrise complex for which the developers eventually obtained approval will utilize the full...

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