RAIDER LTD. v. THE SECRETARY FOR JUSTICE

CACV 115/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 115 OF 1999

(ON APPEAL FROM HCMP 2523/1998)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. This is an appeal from Findlay J., who on 2 March 1999 resolved in favour of the tenant a dispute between landlord (appellant) and tenant (respondent) concerning the permitted use ("for industrial purposes") of the premises occupied by the tenant, where the tenant manufactures pagers. The dispute is as to whether the tenant is in fact using the premises only for "industrial purposes", or whether, in using them also, as it does, for the purposes of a paging service operation, it is using them for industrial and other purposes. This it is not permitted to do; but if the paging service operation is to be treated as a use ancillary to the use of the premises for the manufacture of pagers, then that use is permissible.

The background

2. On 14 January 1963, the Crown agreed to let to the General Bottling Company Limited some land known as Kowloon Tong Inland Lot No. 415. This letting was effected subject to conditions, of which paragraphs (a) and (b) of special condition 2 are relevant. These read as follows :-

"(2) (a) The lot shall be used only for industrial purposes excluding any trade which is now or may hereafter be declared to be an offensive trade under the Public Health and Urban Services Ordinance, 1960, or any enactment amending the same or substituted therefor.

(b) No building shall be erected on the lot except a factory, ancillary offices and quarters for persons essential to the safety and security of the building, the number of such quarters and persons to be subject to the special approval of the Commissioner of Labour."

I must mention also general condition 10, under which the original tenant became bound to develop the lot by the erection thereon of a building or buildings complying with the special conditions and to replace any demolished building with one of the same type.

3. The original tenant duly complied with its obligations but the building originally erected was eventually demolished and a new building erected in its place.

4. On 12 August 1994, an occupation permit for the new building was issued, describing the new building as "A 33-storey industrial building" and permitting its use "for the following purposes" :

"Ground Floor : Entrance hall, carparking, loading/unloading area, workshops and ancillary accommodation for non-domestic use.

1st Floor : Carparking and ancillary accommodation for non-domestic use.

2nd Floor : Workshops and ancillary accommodation for non-domestic use.

3rd Floor : Carparking for non-domestic use.

5th - 36th floor (inclusive)* : Workshops and ancillary accommodation for non-domestic use.

37th Floor : Workshops, fan rooms and ancillary accommodation for non-domestic use.

* There are no 4th Floor, 13th Floor, 14th Floor, 24th Floor and 34th floor in this building."

5. The present tenant of the 22nd floor of this "industrial building" (one of the floors designated in the occupation permit as being for "workshops and ancillary accommodation for non-domestic use") is a manufacturer of pagers and the operator of a paging service the customers of which are supplied with pagers manufactured by the tenant. The tenant took the premises in order to integrate the manufacture of the pagers (originally manufactured elsewhere) with the operation of its paging service. It now claims that the use to which it is putting the premises in this way is a permitted use. The landlord claims that this use is a contravening use. The judge having found in favour of the tenant, the landlord now asks us to hold that he was wrong.

Conclusion

6. I am of the opinion that the judge was wrong. My reasons are as follows.

7. The new building cannot, consistently with special condition 2(b), serve any purpose other than of "a factory, ancillary offices and quarters ..." A building used as a "factory" is obviously a building used "for industrial purposes". This "factory" (for that is what it has to be) can be used consistently with special condition 2(a) only for industrial purposes. Insofar as the tenant uses its premises for the manufacture of pagers, no difficulty arises. But those parts of the premises which the tenant uses for the operation of its paging service are clearly not being used as a "factory"; and, for that matter, they are not being used for "industrial purposes". It so happens that the pagers supplied to customers of the tenant's paging service are pagers manufactured by the tenant in other parts of the premises. But this is irrelevant. The tenant could perfectly well decide instead to supply for the use of the customers of its paging service pagers manufactured by the tenant, or for the tenant, in other premises, whether in Hong Kong or anywhere else; or even pagers manufactured by a different manufacturer. Yet the purpose for which the parts of the premises dedicated to the operation of the paging service was being used would be exactly the same purpose as it is now. The use of parts of the premises for the manufacture of pagers, and of other parts of the premises for the purposes of the paging service operation, are discrete uses. Neither one is "ancillary" to the other. And the use of part of the premises for the purposes of the paging service operation cannot, by any stretch of the imagination, be described as use as a "factory" (which, in my judgment, as to its true construction, special condition 2 requires) nor even as a use "for industrial purposes". Only a use for manufacturing purposes (and uses genuinely ancillary thereto), will qualify as a permitted use, and the use of parts of the premises for the purposes of a paging service operation is not such a use.

The result

8. I would allow this appeal, set aside the judge's order below, and declare that the use of the premises or any part of them by the tenant for the purposes of a paging service operation is a use in breach of special condition 2. Subject to the provisions of Order 42, rule 5B(6), the costs of the appellant landlord, here and below, must be taxed (if not agreed) and paid by the respondent tenant to the landlord.

Rogers, J.A. :

9. I agree with the judgment of Godfrey J.A. and that this appeal should be allowed accordingly.

10. I wish to add that, in my view, the error in the judgment below arose from an attempt to try to categorise one or other of the uses to which the Plaintiff was putting the premises as ancillary to the other. In my view, they were quite separate.

11. Furthermore, the argument attractively put by Mr. Scott, S.C. on behalf of the Plaintiff, with some encouragement from the Court, that the function of providing a paging service could be equated to a manufacturing process in that the end result was the production of a stream of electrons must be wrong. The same argument might apply to any office using computers or word processors, particularly where those are connected to and communicate with outside agencies. The fact must be that the conduct of a paging service is not an industrial process nor does the operation of such a business dictate that the premises in which it is conducted is a factory.

Ribeiro, J. :-

12. I respectfully concur with the judgments of both Godfrey and Rogers JJ.A. and have nothing to add.