CANADIAN OVERSEAS DEVELOPMENT CO LTD v. ATTORNEY GENERAL

Civil Appeal No.4 of 1991

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HEADNOTE

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WHERE LAND IS HELD FROM THE CROWN, AND THE CROWN LEASE OR OTHER DOCUMENT UNDER WHICH THE LAND IS SO HELD PROHIBITS DEVELOPMENT SAVE IN ACCORDANCE WITH A MASTER LAYOUT PLAN APPROVED BY THE CROWN, THE CROWN'S RIGHT TO APPROVE OR REFUSE APPROVAL OF A MASTER LAYOUT PLAN SUBMITTED TO IT FOR ITS APPROVAL IS GOVERNED BY THE LAW OF CONTRACT AND IS NOT SUSCEPTIBLE TO JUDICIAL REVIEW.

Re Fairview Park

BETWEEN

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JUDGMENT

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Bokhary, J. :-

1. Fairview Park is an extensive residential estate in the New Territories. People have been living on the estate for years. But there remains some scope for further development. This appeal concerns such further development. The appellant company is the developer. The land on which the estate stands is held by the developer from the respondent, the Crown. It is so held under an agreement dated June 20, 1975, in the form of a new grant by way of exchange plus a premium. General and special conditions of the type commonly found in such grants are to be found in this one.

2. The agreement let the developer into occupation. It contains a building covenant. And it provides for a Crown lease in due course.

3. Under the agreement, building save in accordance with a master layout plan approved by the Crown is prohibited. That is the result of Special Conditions 7(a), 7(c) and 14. Special Condition  7(a) - which comes immediately after the building covenant - provides that :

"Prior to the commencement of any work on the [land] the [developer] shall submit for the prior approval of the [Secretary for the New Territories] within six months of the date on which possession of the [land] is given a Master Layout Plan ...".

Special Condition 7(c) prvides that:

"No alteration shall be made by the [developer] to the Master Layout Plan or to the development without the prior consent in writing of the Secretary it being agreed that in the case of minor alterations such consent shall not normally be withheld."

Special Condition 14 provides that:

"The [developer] shall not redevelop the [land] or any part thereof except in accordance with the Master Layout Plan..."

4. Over the years, development took place under successive master layout plans approved by the Crown.

5. By the developer's reckoning - which I will assume for present purposes is correct - 78,335 square feet of gross floor area remain available for development. The developer proposes to use up the same largely by building 8 four-storey residential blocks at or near the town centre of the estate. Apparently, the proposal is viewed with misgivings, if not alarm, by the Owners' Association, which feels that it would have an adverse effect on the estate's amenities. There is also some suggestion that the World Wildlife Fund and others are concerned that it might have an adverse effect on the nearby nature reserve at the Mai Po Marshes. Be all of that as it may, the developer - dismissing such fears as unfounded and in any event irrelevant - has submitted a master layout plan embodying its proposal. That master layout plan is numbered 7 - presumably because it is the first of the seventh generation of the master layout plans for the estate. I will refer to it as "MLP 7''.

6. Approval of MLP 7 has been refused by the Crown.

7. That refusal is what the developer wishes to challenge as Wednesbury unreasonable in proceedings by way of judicial review.

8. On August 20, 1990, Mr. Justice Mayo, on the developer's ex parte application, granted it leave to apply for a judicial review of the decision whereby approval of MLP 7 was refused. That having happened, the Crown applied inter partes to set aside such leave, contending that the matter was one of private rather than public law, so that - whatever remedy may or may not be open to the developer in contract - judicial review is not appropriate. The application came before Mr Justice Jones on December 20,1990. In a reserved judgment handed down on December 31, 1990, he upheld the Crown's contention, and set aside the leave.

9. The developer appeals against such setting aside. Essentially its contention comes to this. When a master layout plan or any alteration thereto is submitted to the Crown for its approval under an agreement such as the one here in question, then the Crown, in deciding whether or not to approve such plan or alteration, is performing an executive duty or function governed by public law rather than performing a contractual obligation and exercising a contractual right governed by private law. That, it is said on the developer's behalf, is at least arguable so that-having regard to the test at the leave to apply stage of an application for judicial review - the leave which had been granted and then set aside should be restored.

10. In my judgment, the developer's contention is incontestably bad. There is clear authority binding on this Court directly against it, namely, the decision of the Privy Council on appeal from this territory in Hang Wah Chong Investment Co. Ltd v. Attorney General  [1981] HKLR 336. In that case their Lordships' Board was concerned with land held from the Crown under what - like the agreement in the present case - amounted to a lease. That document - like the present agreement - contained clauses enabling the Crown to control development on the land in question. They were: Special Condition 6, which defined the sort of buildings which it was permissible to erect on the land; and Special Condition 7, which made the design, disposition and height of any building to be erected thereon subject to the special approval of the Crown. (Pausing here, it is to be noted: that the agreement in the present case also contains a "design, disposition and height" clause, namely, Special Condition 9; and that the Crown disapproves of the height of the buildings to be erected under the proposal embodied in MLP 7).

11. The developer in the case before the Privy Council wanted to redevelop the land. The Crown's stance was that the redevelopment could not go ahead without a modification of the conditions under which the land was held; and it demanded, as the price of such modification, a very large sum of money by way of modification premium.

12. One of the arguments advanced on behalf of the developer before the Privy Council is summarised thus (at p.341E-F) by Lord Edmund Davies, delivering the advice of their Lordships' Board: the Director of Public Works (through whom the Crown was acting) "... was operating in the public domain when saddling his approval of the appellants' building plans with a demand for an extremely high premium which bore no apparent relation to the term of the appellants' application [and was] therefore imposing an insupportable condition on his compliance amounting to an abuse of power...". (Pausing here, it should be explained that the developer in that case was keen to have the matter put in the public domain because it foresaw - rightly in light of the Privy Council's decision -that as a matter of contract no obligation on the part of the landlord not to withhold its consent unreasonably would be implied). Their Lordships' Board rejected the "public domain" argument, dismissing the developer's appeal and holding that the Crown was acting - and was entitled to act- as simply a landlord.

13. Mr Tang - who researched the developer's case most thoroughly and presented it most attractively- has attempted to overcome the difficulty which the Privy Council's decision puts in his client's way. He has attempted to do so by advancing two propositions. The first is that the decision in that case is actually a narrow one which does not cover the present case. The second is that, even if that case as decided covered the present one, there have since been developments in the field of public law which free this case from the application of that one.

14. Neither of those propositions are, in my judgment, arguable.

15. As to the first, Mr Tang cited this paragraph from the advice of their Lordships' Board (at p.342 A-C) : -

"On that view, can it properly be said that it is for the respondent to establish the reasonableness of the demand for a premium? In the light of Viscount Tredegar v. Harwood [1928] Ch. 59 (ante), their Lordships are of the opinion that the question requires a negative answer. But they must not thereby be taken as holding that the requirement was capriciously advanced (and, indeed, appellants' counsel expressly disclaimed any such suggestion) or that, were it incumbent upon the respondent to justify the requirement, he would be unable to adduce good reasons for demanding a premium. It is sufficient, for present purposes, simply to say that, the appellants seeking a concession from their landlords in relation to the development of land leased, the landlords were entitled to make the granting of that concession conditional upon the payment of a premium."

That, argued Mr Tang, shows that the actual decision in that case is confined to demands for payment in exchange for a concession. I consider that argument untenable. The paragraph, as one sees, opens with the formula, "On that view". For what that view is, one turns to the immediately preceding paragraph (at p.341H-J). It reads: -

"The various Conditions of Sale well illustrate the wide range of roles played by the Director in exercising his discretion. As regards some of the Conditions, the Director's role may, almost certainly, be that of protector of the public interest. The vital question is whether for the purposes of Special Conditions 6 and 7 he can properly be regarded as being entitled to act in his capacity of land agent for the Crown. It is not open to serious doubt that those Conditions relate directly to the landlord's interests, economic and otherwise, and their Lordships conclude that the Director was entitled to act, and did act, in that role when granting his qualified approval to the appellants' plans in 1976."

So everything said in the paragraph stressed by Mr Tang is dependent on the decision (embodied in the paragraph immediately preceding it): that the lease conditions on which the Crown based its right to block the developer's proposal were ones which related directly to the Crown's interests, economic and otherwise, as a landlord; and that the Crown servant through whom it acted was acting as its land agent.

16. As to Mr Tang's second proposition, the short answer to it is this. None of the developments in the law properly understood conflict with the decision of the Privy Council in Hang Wah Chong Investment Co. Ltd v. Attorney General (supra).

17. But even if any or indeed all of them did, none of them were the result of any decision of the Privy Council. So no such conflict could remove the binding effect upon this Court of that decision of their Lordships' Board. I do not include in my reference to "developments" in the law this dictum of Mr Justice Mayo in The Home Restaurant Ltd. v. Attorney General [1987] HKLR 237 at p.245 A-D: -

"What I think is necessary in the present case is to analyse the nature of the functions which have been exercised by the Government. When the Government is making grants of land it is in a unique position. All land vests in the Crown. I do not think that it can be argued that the functions it exercises are analogous with those performed by a landlord in the private sector. This is particularly the case when the Government is determining as a matter of policy what conditions to impose in a grant. I have no doubt that it is at the very least arguable that Government is performing a function in the public domain.

 

Any other conclusion would seem to me to be unsatisfactory. I do not think that simply because a party is the holder of a Crown lease and is negotiating with Government in relation thereto, it should be placed in a different situation to anyone else. The real test is not whether the function is a private one or public one but whether the claimant is able to establish that it has a sufficient public interest to maintain a claim under Order 53. I am accordingly satisfied that the respondent is not able to defeat the applicant's claim on this ground "

That observation (made obiter in a case decided on another point) cannot stand in light of the Privy Council's decision in Hang Wah Chong Investment Co. Ltd v. Attorney General (supra) - to which Mr Justice Mayo was referred but which he did not in that case have to consider as closely as we have had to in this one. There is no question of putting a Crown lessee in "a different situation to anyone else" to the Crown lessee's disadvantage. The decision was that the Crown was in the same situation as other landlords so that its lessees were in the same situation as other landlords' lessees.

18. Principal among the cases cited by Mr Tang are the decision of House of Lords in Council of Civil Service Unions v. Minister for the Civil Service [1985] 1 A. C. 374 and that of the Court of Appeal in Reg. v. Panel on Take-overs and Mergers, Ex parte Datafin Plc. [1987] 1 Q.B. 815.

19. In the first of those two cases, the respondent minister had issued an instruction, purportedly under article 4 of the Civil Service Order in Council 1982, for the immediate variation of the terms and conditions of service of staff employed at Government Communications Headquarters with the effect that they would no longer be permitted to belong to national trade unions. She did so without prior consultation with such staff or their unions. The applicant council challenged her instruction. It did so by way of proceedings for judicial review. And it was held that executive action such as that which the minister had taken was not immune from judicial review merely because it was taken in pursuance of common law or prerogative rather than statutory power. On the merits, the minister successfully defended the course which she had taken. She did so by reference to national security considerations. It was held, however, that the council would, apart from such considerations, have had a legitimate expectation that the staff and unions affected would be consulted before the minister issued her instruction, and, accordingly, the decision-making process would have been unfair by reason of her failure to consult them, and would have been amenable to judicial review.

20. The action taken by the minister in that case was executive action. In the present case, the Crown was acting in pursuance of rights and obligations under a contract. And this must be said. The equivalent in this case to consultation in that one would be consideration of the master layout plan submitted for approval. Well, the plan did receive consideration. If the Crown, in circumstances such as the present, were ever to reject such a plan out of hand without even looking at it, then one would not be surprised to hear a court say that there was an implied term that the Crown would give due consideration to any such plan duly submitted for its approval.

21. I turn now to the case concerning the Take-over Panel. The panel, as the Master of the Rolls pointed out (at p. 841 B-C) ".... combines the functions of legislator, court interpreting the panel's legislation, consultant, and court investigating and imposing penalties in respect of alleged breaches of the [City Code on Take-overs and Mergers]". No wonder that its strength was likened to that of a giant by Lord Justice Lloyd (at p.845G). And the question of whether its conduct was susceptible to judicial review boiled down to - as the Master of the Rolls put it  (at p.827A) - whether it was "above the law". It came to that because - as his Lordship pointed out (at p.839A-B) such conduct could not "... conveniently be controlled by established forms of private law". The position in the present case, however, is governed by contract. The Crown is not above the law. It merely enjoys equality before the law. The equality in the present context is with other landlords - some of whom, both here and abroad, are also, it must not be forgotten, very large and powerful.

22. Moving on, I would like to make it clear that my view of the developer's contention would not have been any different if it had fallen to me to consider it free from any authority binding on this Court. In his valiant attempt to make that contention good, Mr Tang was driven to submitting that any action or inaction on the part of the Crown was susceptible to judicial review subject only to some limit which he was unable to describe let alone define. And the logical consequence of the contention being correct was, he felt constrained to concede, this. Even as a refusal by the Crown to approve a master layout plan such as the one here in question would be susceptible to judicial review at the instance of the developer on the ground that such refusal was Wednesbury unreasonable, so an approval of the same by the Crown would be susceptible to judicial review at the instance of persons like the Owners' Association or its members - and possibly even at the instance of organisations like the World Wildlife Fund - on the ground that such approval was Wednesbury unreasonable. More generally, Mr Tang felt likewise constrained even to concede (or contend) that rejections by the Crown of tenders were susceptible to judicial review at the instance of unsuccessful tenderers on the ground of Wednesbury unreasonableness.

23. I am unable to view so uncertain a state of affairs, or so serious an inroad into the freedom of contact enjoyed by the Crown and those dealing with it, as desirable or - I am happy to say - the product of our law.

24. In my judgment, it is clear beyond argument that where land is held from the Crown, and the Crown lease or other document under which the land is so held prohibits development save in accordance with a master layout plan approved by the Crown, the Crown's right to approve or refuse approval of a master layout plan submitted to it for its approval is governed by the law of contract and is not susceptible to judicial review. MLP 7 is such a plan; and the Crown's refusal to approve it cannot be challenged by way of judicial review.

25. I would dismiss this appeal.

Kaplan, J.:-

26. I agree.

27. As the point argued by Mr Tang Q.C. was so far reaching I would like to add a few observations.

28. As my Lord has pointed out Mr Tang attempted to circumvent the effect of the Hang Wah Chong case by reminding us that since 1980 there had been substantial developments in the field of public law. And indeed there have. But perhaps one of the most significant of these has been the sharper focus on the distinction between public and private law. I agree with my Lord that whatever way one looks at the present case it falls distinctly on the private side of the line.

29. Mr Tang was constrained to argue that if a Crown lease provided that the Crown could refuse permission to assign a lease such refusal would be amenable to judicial review. He was further constrained to concede that a refusal by a private landlord, however substantial, would not be so amenable. The logical conclusion to his argument was that the Crown's contractual rights and obligations, whether in the context of landlord and tenant or any other area, would always be subject to judicial review on the same basis as is the exercise of its statutory powers. This proposition is wholly untenable. The Crown is entitled to enter into contracts and leases and to have it rights and duties thereunder determined in accordance with private law.

30. I too would dismiss this appeal.

Sir Derek Cons, V. -P.: -

31. I agree with my Lords. The appeal is therefore dismissed; and in handing down our decision to that effect we make an order nisi that the Respondent do have his costs.