BUILDING AUTHORITY v. APPEAL TRIBUNAL (BUILDINGS) AND ANOTHER

Press Summary (English)

Press Summary (Chinese)

FACV No. 15 of 2017

[2018] HKCFA 20

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO.15 OF 2017 (CIVIL)

(ON APPEAL FROM CACV NO. 229 OF 2016)

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J U D G M E N T

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Chief Justice Ma:

1.  I agree with the judgment of Mr Justice Tang PJ and Lord Collins of Mapesbury NPJ.

Mr Justice Ribeiro PJ:

2.  I agree with the judgment of Mr Justice Tang PJ and Lord Collins of Mapesbury NPJ.

Mr Justice Tang PJ and Lord Collins of Mapesbury NPJ:

Introduction

3.  ENM Holdings Limited (“ENM”) operates a private members’ Club, the Hilltop Country club (“the Club”) in Tsuen Wan, the New Territories.  The land on which the Club (Lot number 360 in DD 454 – “the Lot”) is situated is the subject of a grant of a lease to ENM (under its former name of Essential Enterprise Co Ltd) on November 12, 1976, and extensions granted on July 15, 1980 and December 28, 1985.  The terms of the Grant were modified on May 9, 1984 and May 22, 1986.  Nothing turns on the extensions or modifications.

4.  ENM built structures and facilities on the Lot for operating the Club.  The Club is situated on top of a hill and surrounded by Government land.  The only vehicular access leading from the public street at the foot of the hill up to the Club is Hilltop Road, which is on Government land.  Hilltop Road was constructed before 1963, and by 1976 it was also the main access road to other lots in the vicinity.  It is not known who constructed Hilltop Road, but the Building Authority (“the BA”) accepts that the Government was responsible for the upholding, maintenance and repair of the whole of the original Hilltop Road prior to the Grant.

5.  Hilltop Road was formed by the “cutting and tipping” method, i.e. cutting into the natural terrain and end tipping the loose soil fill (extracted from the cutting) onto the natural hillside, with the road being constructed on top of the cutting and end tipping. The end tipping created man-made soil fill slopes and embankments on the downside hill of the road, giving support to the relevant portions of the road.  The BA takes the view that the slopes are an integral part of the embankment supporting Hilltop Road and failure of those parts would lead to collapse of the road.

6.  A long section of the road is shown coloured brown on the plan annexed to the Grant (“the Brown Area”) and this appeal concerns ENM’s obligation to maintain slopes which are outside the Brown Area, but are in the view of BA essential for the support of that part of Hilltop Road situated within the Brown Area.      

7.  Two dangerous hillside orders were served by the BA on ENM under the Buildings Ordinance, Cap 123, section 27A, requiring ENM as “the person who under the terms of a Government lease is under an obligation to maintain the land” to submit proposals for remedial work to be done to two man-made slopes on the side of Hilltop Road.  These orders relate to two areas outside but along the Brown Area called Feature 156(1) and Feature 33(1).

8.  ENM appealed to the Appeal Tribunal (Buildings) (“the Tribunal”). Before the Tribunal the BA contended that under Special Condition 31 (“SC31”) of the Grant ENM was obliged to maintain Feature 156(1) and that under both SC 13 and SC 31 ENM was obliged to maintain Feature 33(1).  The Tribunal, by a determination dated September 17, 2013 (“the Determination”) ordered that the dangerous hillside order in relation to Feature 156(1) be withdrawn.  And in relation to the dangerous hillside order concerning Feature 33(1), the Tribunal held that ENM was liable under Special Condition 13 (“SC13”) of the Grant to maintain only the Northern End of Feature 33(1) because “construction works carried out by (ENM) … caused a risk of landslip, subsidence or falling away at the Northern End of Feature 33(1),” and ordered that the dangerous hillside order be amended so as to limit it to the Northern End of Feature 33(1) only.

9.  On BA’s application for judicial review, with ENM joined as the interested party, Au J by judgment dated October 27, 2016, quashed the determination of the Tribunal relating to Feature 156(1) holding that on its proper construction SC31 obliged ENM to maintain Feature 156(1) and in relation to Feature 33(1) such obligation arose under both SC31 and SC13. Au J also held that the Tribunal was wrong to have proceeded on the basis that BA’s case relating to Feature 33(1) was confined to the Northern End only, and remitted it to the Tribunal to determine whether ENM was obliged to maintain the entire Feature 33(1), because the Tribunal had misunderstood the BA’s case or had failed to give adequate reasons.

10.  On ENM’s appeal, the Court of Appeal reinstated the Determination in relation to Feature 156(1) holding that on SC31’s proper construction, ENM was not obliged to maintain Feature 156(1) or Feature 33(1), but dismissed the appeal in relation to Feature 33(1) because of SC13. By its order of December 1, 2017, the Court of Appeal gave permission to the BA to appeal on the basis that the following questions raised points of law of general importance:

“Question 1

On the proper construction of SC31, whether the maintenance obligation under it is confined to maintaining the paved way and any incidental structures on the paved way such as the matters mentioned in sections 19 to 25 of the Building (Private Streets and Access Roads) Regulations, or whether, on a proper construction, the maintenance obligation encompasses the obligation to maintain everything that is (a) constructed in association with the paved way (b) adjoining the paved way and (c) essential to the supporting of the paved way (including supporting slopes or structures)?

Question 2

Whether the construction of SC31 ought to be different where (a) the paved way had already been constructed when the Government lease was executed or (b) the paved way had not been constructed at the time the Government lease was executed?

Question 3

Whether a grantee subject to SC31 or a lease condition that is substantially similar to it (i.e. containing the phrase ‘uphold, maintain and repair such paved way and everything forming portion of or pertaining to it…’ or words to that effect) is, for the purpose of section 27A of the Buildings Ordinance (Cap. 123), a person whom the BA may serve a dangerous hillside order on as someone who under the terms of a Government lease is under an obligation to maintain natural, formed or man-made land or any earth-retaining structure?”

The Facts

Feature 156(1)

11.  This is on the southern side embankment of Hilltop Road. 

12.  Feature 156 is the name of a hillside slope which has been divided into three sub-divisions. Feature 156 is 85m long, and of a maximum height of 11m, and has a slope gradient of 30 degrees.  Work was done in the vicinity on land sold to developers for house construction.

13.  Feature 156(2) falls within private land and the responsibility for maintenance falls on the land owner. The maintenance responsibility of Feature 156(3) initially rested on the grantee of Lot 1217SA in DD 451 but as this lot was resumed by the Government, the responsibility became the Government’s.

14.  Feature 156(1) lies on Government land to the south of the club. Hilltop Road is located immediately at the crest of this slope.

Feature 33(1)

15.  The second feature is on the west side of the end of Hilltop Road, near the entrance to the club.  It is also on Government land.  Feature 33 is the name of a hillside slope which has been divided into two sub-divisions, Feature 33(1) and Feature 33(2). The maintenance responsibility of Feature 33(2) rested initially with the holder of a Short Term Tenancy which had since been cancelled, and the responsibility became that of the Government.

16.  Feature 33 is 24m long and attains a maximum height of 10m, with a slope gradient of 35 degrees.  There has at all material times been an access road within Feature 33(1), cutting Feature 33(1) into two halves.  There is a footpath leading from that access road to other areas; the footpath is not within Feature 33(1) and was constructed between 1963 and 1964, and was not related to ENM. There were human activities within Feature 33(1), including the presence of squatters and other structures; and a village house was constructed between 1964 and 1973.

17.  In 1981, the Northern End of Feature 33(1) was modified by ENM for construction of a car park platform within the Hilltop Club, but there has been no change since then.[1]  The works were not in connection with any work to upgrade or re-site Hilltop Road.[2]

The Grant and SC 13 and 31

18.  The Grant contained Special Conditions, of which SC 31 provided as follows:

“The grantee shall construct a paved way to the standards laid down in the Building (Private Streets and Access Roads) Regulations over the area shown coloured brown on the plan annexed hereto and shall uphold, maintainand repair such paved way and everything forming portion of or pertaining to itto the satisfaction of the said Director, and the grantee shall be responsible for the whole as if he were absolute owner thereof. Any alteration to the public street from which the paved way is to be constructed, absorbing a portion of such paved way or affecting the gradient thereof, shall not give rise to any claim by the grantee, who shall carry out all consequent alterations to such paved way constructed by him. The Government reserves the right to grant rights-of-way over such paved way to the owners of any other lots in the vicinity now or in the future, or to take over the whole or any portion of the said paved way for the purposes of a public street without payment of any compensation to the grantee or to other owners to whom rights-of-way over the whole or any portion of the said paved way may have been granted.”

19.  The construction of SC31 lies at the heart of this appeal, and BA’s case that ENM is obliged to maintain Feature 156(1) depends on it.

20.  At this point it is also relevant to mention that SC13 provided:

“Where any cutting away, removal or setting back of adjacent or nearby hillside or banks or any building up or filling in is required for the purpose of or in connection with the formation, levelling or development of the lot or any part thereof, the grantee shall construct or bear the cost of the construction of such retaining walls or other support as shall or may then or at any time thereafter be necessary to protect and support such hillside and banks and the lot itself and to obviate and prevent any falling away, landslip or subsidence occurring thereafter, and shall at all times maintain the said retaining walls or other support in good and substantial repair and condition. In the event than as a result or arising out of any such formation, levelling or development any landslip, subsidence or falling away occurs at any time, whether in or from the adjacent hillside or banks and whether the same be Crown or leased land, or in or from the lot itself, the grantee shall at his own expense reinstate and make good the same and shall indemnify the Government from and against all costs, charges, damages, demands and claims whatsoever which shall or may be made, suffered or incurred through or by reason of such landslip, subsidence or falling away. In addition to any other rights or remedies herein provided for breach of any of the conditions hereof the Director of Public Works shall be entitled by a notice in writing to call upon the grantee to carry out such construction and/or maintenance or to reinstate and make good any falling away, landslip or subsidence, and if the grantee shall neglect or fail to comply with such notice within the period specified therein the said Director may forthwith execute and carry out the work and the grantee shall on demand repay to the Government the cost thereof.”

Certificate of Compliance

21.  On April 26, 1984 the District Lands Officer issued to ENM a Certificate of Compliancecertifying:

“all the positive obligations imposed on the grantee in respect of (the Lot) under the general and special conditions of exchange contained in the (Grant) under which the same is held from the Crown have been complied with to my satisfaction.”

Regulation of dangerous slopes

22.  At the time of the Grant, slopes were not regulated: evidence before the Tribunal of Mr Philip Chung.[3]

23.  But in 1980 the Buildings Ordinance, Cap 123, was amended by the addition of section 27A which gave the BA power to declare any natural, formed or man-made land, or any earth-retaining structure as dangerous and serve a dangerous hillside order on the owner of the land or structure or the person who, under the terms of what was then a Crown lease, was under an obligation to maintain the land or structure, requiring that person to carry out an investigation and do necessary work to make the land or structure safe.

24.  The relevant part of section 27A, as subsequently amended in 1990, 1993, 1998, and 2004, is as follows:

“(1) Where in the opinion of the Building Authority any natural, formed or man-made land, or any earth-retaining structure, has due to any cause been rendered so dangerous or liable to become so dangerous that it will collapse, or be likely to collapse, either totally or partially, and thereby will cause, or will be likely to cause, a risk of injury to any person or damage to any property, the Building Authority may by order in writing served on the owner of the land or structure, or on the person who under the terms of a Government lease is under an obligation to maintain the land or structure, declare the land or structure to be dangerous or liable to become dangerous.

(2) An order under subsection (1) may require the owner or person referred to in subsection (1) —

(a) to do such work as may be specified in the order;

(b) to appoint an authorized person, a registered structural engineer or a registered geotechnical engineer or any combination of them specified in the order to carry out such investigation in relation to the land or structure as may be so specified; and

(c) to submit for approval by the Building Authority proposals for work to be done to make the land or structure safe based on the findings of the investigation,

within such time or times as may be specified in the order.”

25.  Consequently, since 1980 section 27A has applied not only to the owner of the land or structure, but also to “the person who under the terms of a Government lease is under an obligation to maintain the land or structure.”

Dangerous hillside orders

26.  In August 2005, a Stage 2 Study Report prepared by Maunsell Geotechnical Services Ltd for the GEO/CEDD recommended a proposed Dangerous Hillside Order for Feature 156(1), and on December 27, 2006, the BA served on ENM a dangerous hillside order (“the 1^st DH Order”) relating to Feature 156(1). 

27.  In August 2007, a Stage 2 Study Report prepared by Scott Wilson Ltd for the GEO/CEDD recommended a dangerous hillside order for Feature 33(1), and on January 25, 2008, the BA served on ENM a dangerous hillside order (“the 2^nd DH Order”) relating to Feature 33(1).

28.  Under the 1^st and 2^nd DH Orders, ENM was required to investigate the two slopes and submit proposals for remedial/preventive work for the BA’s approval.

29.  Mr Philip Chung’s evidence was that the slopes were an integral and essential part of the support for Hilltop Road.  He explained that he would use only the expression “integral and essential support” in respect of man-made slopes formed by cutting or filling and not for the natural terrain.

30.  ENM does not challenge the BA’s view that the Features are dangerous or liable to become so.[4]

The Tribunal’s decision

31.  Before the Tribunal the BA argued that ENM came within section 27A of the Building Ordinance because it was “the person who under the terms of a Government lease [was] under an obligation to maintain the land or structure” in respect of Feature 156(1) by virtue of SC31 and in respect of Feature 33(1) by virtue of both SC31 and SC13.  The Tribunal decided that ENM was not obliged to maintain either Feature 156(1) or Feature 33(1) under SC 31 properly construed.  Accordingly, it allowed ENM’s appeal against the 1^st DH Order and ordered it to be withdrawn.  In respect of the 2^nd DH Order, the Tribunal was of the view that ENM was obliged to maintain only the northern end of Feature 33(1) under SC 13, and ordered the 2^nd DH Order to be amended limited to the Northern End of Feature 33(1) only.

32.  The Tribunal’s construction of SC31 was substantially influenced by the undisputed fact that “(at the time of the grant) both the Government and (ENM) knew very well that there was already in existence a paved way.”  The Tribunal believed “that at the time, both the Government and (ENM) must have discovered that firstly the paved way was substandard and secondly the paved way had not been properly sited.  So in substance, what the Government really required of (ENM) under SC (31) was not to construct a paved way afresh but to upgrade the paved way to the standards of a public street and to position it properly within (the Brown Area).”[5]  The Tribunal then concluded that the expression “‘everything pertaining to’ in SC (31) should mean ‘everything within the Brown Area that pertains to the paved way.’”[6]  And “that the common intention of the parties in respect of (ENM’s) maintenance responsibility under SC (31) was indeed intended by the parties to be limited to the surface of the right-of-way.  That being the case, we conclude that the true meaning of the words ‘pertaining to’ in SC (31) in the context of this case should mean ‘everything that was constructed on the surface of the paved way.’”[7]  That the words “pertaining to” in SC31 should mean “everything that was constructed on the surface of the paved way.”[8]

Decision of Au J

33.  Au J gave leave to apply for judicial review.  ENM was joined in the proceedings as the interested party.  By a judgment handed down on October 27, 2016, Au J quashed the Tribunal’s determination and remitted the appeals to the Tribunal, differently constituted if necessary, for reconsideration in light of his findings. 

34.  On the construction of SC31, Au J was unable to agree with the Tribunal because:

“50. … The Tribunal came to this view based on what it believed to be what the parties ‘must have discovered’ at the time of the New Grant. This ‘belief’ is not supported by any evidence before it. The Tribunal also did not set out in the Determination what is the evidence or basis that it relied on to support such ‘belief’. Such ‘belief’ is also not something which in my view could be reasonably and objectively inferred.”

35.  To the contrary, Au J believed:

“42. … it must be objectively within the parties’ reasonable contemplation at the time of the New Grant that, in constructing the paved way on the original Hilltop Road to a standard and quality required under the Regulations, necessary corresponding construction works might have to be carried out at those hillside slopes along the original Hilltop road.

43. With this context in mind, it is clear to me that the objective intention of the parties is that it was the grantee who would have an obligation to maintain and repair not only the paved way constructed by it, but also other structures formed as a result of the construction works, and which are necessary for the construction and support of the paved way.” 

36.  He then concluded “the words ‘everything … pertaining to’ the paved way are intended to refer to everything that is formed as a result of the paving construction works, and which has become substantially connected to or in support of the ‘paved’ Hilltop Road.”[9]

37.  Au J’s order was that, as regards SC31, the matter should be remitted to the Tribunal for reconsideration of whether Features 156(1) and 33(1) were man-made slopes which resulted from the grantee’s construction works and were substantially connected to or in support of Hilltop Road; and that, as regards SC13, the matter should be remitted to the Tribunal for reconsideration of whether the whole of Feature 33(1) was the responsibility of ENM, because the Tribunal had misunderstood the BA’s case or had failed to give adequate reasons.

Court of Appeal

38.  By its judgment of August 11, 2017, the Court of Appeal allowed ENM’s appeal as regards SC31, and dismissed the appeal as regards SC13.  The appeal to this court is only against Au J’s decision on SC31. 

39.  The Court of Appeal noted that Au J’s construction of SC31 was not the construction advanced by BA before him.[10]  BA’s construction was that ENM should be treated as if it had constructed the original Hilltop Road and the supporting soil filled slopes whereas the judge construed SC31 on the basis that it was within the reasonable anticipation of both parties that ENM might need to carry out construction work on the slopes to upgrade and re-site the original Hilltop road and hence ENM’s liability would depend on whether the features resulted from the construction work actually carried out by ENM, [11] and for this purpose he remitted the appeals to the tribunal for rehearing. Before the Court of Appeal, Mr Mok[12] submitted that SC 31 should be interpreted to mean that:

“the grantee was treated as having assumed the responsibility to construct or to complete the construction of the original Hilltop Road and the supporting soil filled slopes, and has thereby also assumed maintenance responsibility for the road and the slopes, even though the construction work was not carried out by the grantee.”[13] (emphasis added)

40.  He “acknowledged that everything would fall into place if at the time of the grant the original Hilltop Road had yet to be built.”[14]  And “To overcome the fact there was an existing road and the man-made slopes had been formed, he submitted that SC31 should be interpreted to mean that the grantee was treated as having assumed the responsibility of constructing, completing the construction of, the original Hilltop road and the necessary supporting soil filled slopes, even though the grantee had not done so.”[15]  Kwan JA[16] said this was a strained construction and there was nothing to show that the parties had treated or assumed a factual basis different from that which prevailed at the time.[17]  

41.  Kwan JA then concluded that the grantee’s obligation under SC31 was to construct the paved way situated in the Brown Area to the standards of the Regulations, which was the existing Hilltop Road that had already been constructed by cutting and tipping with  man-made slopes and embankments. And that SC31 only obliges the grantee to maintain everything within the boundaries of the paved way being the Brown Area on the plan annexed to the Grant, and any incidental structures on the paved way such as stones, manhole covers and gratings, drains sewers and channels referred to in sections 19 to 25 of the Regulations.[18]

The arguments

Preliminary question

42.  ENM has raised the question whether the BA’s principal argument, namely that the parties must be taken to have contracted on the basis that at the time of the Grant, the access road was required to be constructed, is properly before this court.    

43.  The Court of Appeal gave the BA leave to appeal to this Court on three questions, of which questions 1 and 2 set out, inter alia, the BA’s interpretation, and both Au J and the Court of Appeal considered the BA’s interpretation.  The Court therefore accepts the BA’s argument that the question that requires the Court’s determination concerns the interpretation of SC31, which is a question of law.

The BA’s arguments

44.  BA’s principal argument can be taken from its printed case:

“25. On the basis that the paved way had actually been constructed before the Grant, SC 31 therefore must be read on the assumption (which both parties presumably knew was not true) that the paved way had not been constructed and was required to be constructed.”

This led to what was said to be an overarching submission that:

“26.1 the contractual intention was clearly that the grantee would be required to maintain both the paved way and any man-made slopes that would have been created or come into existence for the construction or support of the paved way.”

Mr Yu SC[19] submitted where parties, knowing the full facts, enter into a transaction by assuming a different state of facts or law as between themselves for the purposes of that transaction, the parties are estopped from denying or challenging the assumed state of facts or law: Prime Sight Ltd v Lavarello [2014] AC 436 (PC), para 47; Springwell Navigation Corporation v JP Morgan Chase Bank [2010] 2 CLC 705, paras 143-144, 156-169; Nokia Corporation v TCT Mobile (unrep, CACV 191/2014, 6 March 2017), paras 20-24; Spencer Bower, Reliance-based Estoppel (5^th ed, 2017), paras 8.67-8.69; Chitty on Contracts (32^nd ed, 2015), paras 4-116.

ENM’s arguments

45.  The approach advocated by the BA requires a strained reading of SC31 by attributing to the parties an intention to contract on an assumed state of affairs (i.e. that the access road had yet to be formed by the grantee) which they knew to be untrue when there is no evidence to suggest that the parties had intended to contract on that basis.  

46.  The construction of SC31 advocated by the BA is also difficult to reconcile with the other provisions in the Grant (e.g., SC13, SC18, SC22 and C28) where clear language was used whenever it was sought to impose upon the grantee responsibilities to carry out repair and maintenance on Government land outside the boundaries of the Lot.

47.  The result contended for by the BA is also objectively unfair in that on any view of the matter, the responsibility for maintaining and repairing all of the man-made slopes created by the formation of Hilltop Road along its entire length would impose a massive financial burden of unknown extent upon the grantee which bears no relation to the benefit obtained under the Grant. 

48.  The Court should not accept a construction of SC31 which would lead to such an unfair result in the absence of clear words to show that such a result was indeed intended by the parties.  This is especially so when at the date of the Grant, it was most unlikely that the parties had applied their minds to the criteria for making private individuals liable for repair and maintenance of hillside slopes situated on Government land given that there was not yet in existence a government department dedicated to ensuring the safety of slopes. 

49.  Even if slope maintenance was on the parties’ mind, they could not have envisaged that the obligation would in time become as onerous as it has become in recent years given that section 27A of the Buildings Ordinance was enacted only in 1980 and since then the factor of safety applied to determine whether a slope is dangerous for the purposes of section 27A has been progressively increased.

50.  The obligation to “uphold, maintain and repair” only extended to “such paved way” as the grantee has “constructed” pursuant to the obligation imposed by the first half of the first sentence of SC31. 

51.  Since a road had already been formed in the Brown Area prior to 1963, the obligation imposed upon the grantee by SC31 to “construct a paved way” should be read as excluding the work required to form the pre-existing road which had already taken place more than a decade before the date of the Grant.   

52.  The principle in Prime Sight does not apply because the parties have not contracted on a false assumption.

Conclusions

53.  SC31 has to be construed in the proper context, with regard to the purpose of the contractual term and the background that is objectively or reasonably known to the parties at the time of the agreement.  The overriding objective is to give effect to what a reasonable person would have understood the parties to mean.  See Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279, 296; Fully Profit (Asia) Ltd v SJ (2013) 16 HKCFAR 351, para 15; SJ v Joseph Lo Kin Ching (2015) 18 HKCFAR 169, para 29; Yung Chi Keung v Protection of Wages on Insolvency Board (2016) 19 HKCFAR 469, para 22; Wood v Capita Insurance Services Ltd [2017] AC 1173, paras 8-15.

54.  The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear: Schuler (L) AG v Wickman Machine Tool Sales Ltd[1974] AC 235, 251. But on the other hand the Court must be alive to the possibility that one side may have agreed to something which with the benefit of hindsight may not have served his interest: Arnold v Britton [2015] AC 1619, paras 20, 77; Wood v Capita Insurance Services Ltd [2017] AC 1173, para 11.

55.  The background and factual matrix are uncontroversial. 

(1) Hilltop Road was built by cutting and tipping at least since 1963. Both Hilltop Road and the Features 33 and 156 (the “slopes”) predated the Grant.

(2) The Brown Area has always been government land.

(3) The slopes which were situated outside the Brown Area were also government land

(4) Government accepted that it had the duty to maintain Hilltop Road prior to the Grant.

(5) It is likely, if not certain, that the Government had the duty to maintain the slopes prior to the Grant.

(6) At all material times other people have been using the road.

(7) There was an access road splitting Feature 33(1).

(8) At all material times there were other people and their structures on Feature 33(1).

(9) There was no regulation of slopes in 1976 (and not until 1980) but there were Building (Private Streets and Access Roads) Regulations for access roads.

56.  What does SC31 mean?  It consists of 3 sentences but only the first need concern us.  The first sentence imposes three obligations: first, the grantee (ENM) shall construct a paved way over the Brown Area to the standards laid down in the Regulations; second, the grantee (ENM) shall uphold, maintain and repair (a) the paved way and (b) everything forming portion of or pertaining to it; third, the grantee (ENM) shall be responsible for the whole as if it were the absolute owner thereof.

57.  The BA relied strongly on the principle that where parties, knowing the full facts, enter into a transaction by assuming a different state of facts or law as between themselves for the purposes of that transaction, the parties are estopped from denying or challenging the assumed state of facts or law: Prime Sight Ltd v Lavarello [2014] AC 436 (PC), para 47.  But this is not a case where the parties assumed as between themselves that there was no paved way, and in our view the principle has no application.

58.  The words “construct a paved way to the standards laid down in the Building (Private Streets and Access Roads) Regulations” are apt to describe the work required to upgrade a (possibly unpaved or not paved to the standards of the regulations) road which had already been formed by carrying out additional work to bring it up to the standards laid down in the Building (Private Streets and Access Roads) Regulations (e.g. by paving its surface and kerbing its verges etc. as prescribed by the regulations which would not require any work to be carried out on the slopes).

59.  If the obligation imposed on the grantee by the first half of the first sentence of SC31 did not include the work that had already been carried out prior to the date of the Grant to form the road by the “cutting and tipping” method, then it must follow that the obligation to “uphold, maintain and repair” imposed upon the grantee by the second half of the first sentence of SC31 could not be intended to extend to an obligation to maintain the man-made slopes that were created in the course of formation of the access road by the “cutting and tipping” method.

60.  The statement that “the grantee shall be responsible for the whole as if it were the absolute owner thereof”, does not assist in the interpretation of the scope of the grantee’s obligation under SC31.

61.  It follows that in our view, ENM is not under an obligation to maintain Feature 156(1).

62.  This appeal does not require us to determine ENM’s maintenance obligation under SC31 in relation to the paved way  and we do not do so.[20]

The Certified Questions

63.  We will deal with the second question first.

Question 2

“Whether the construction of SC 31 ought to be different where (a) the paved way had already been constructed when the Government lease was executed or (b) the paved way had not been constructed at the time the Government lease was executed?”

64.  As we have said SC31 has to be construed in the proper context, with regard to the purpose of the contractual term in the background that is objectively and reasonably known to the parties at the time of the agreement. When the facts are different, the interpretation may well be different.  If at the time of the Grant there had been no Hilltop Road at the Brown Area and it was necessary to build a paved way from scratch, it may be that SC31 would have required a paved way to be built. And if it was built by the cutting and tipping method, it may be that the obligation to maintain the paved way would have included an obligation to maintain the man-made slope formed as a result. However, this is not a question we should answer.  This appeal is concerned with the construction of SC31 in the context of this Grant and Hilltop Road was built before the Grant.

Question 1

“On the proper construction of SC31, whether the maintenance obligation under it is confined to maintaining the paved way and any incidental structures on the paved way such as the matters mentioned in sections 19 to 25 of the Building (Private Streets and Access Roads) Regulations, or whether, on a proper construction, the maintenance obligation encompasses the obligation to maintain everything that is (a) constructed in association with the paved way (b) adjoining the paved way and (c) essential to the supporting of the paved way (including supporting slopes or structures)?”

65.  In this appeal, we are concerned with ENM’s obligation under SC31, in particular, whether ENM is responsible to maintain Feature 156(1) or Feature 33(1).  We have explained why in our opinion, ENM is not responsible.  The question as framed stated that those features were “(a) constructed in association with the paved way.”  As we have explained, ENM’s obligation under SC31 was to construct the existing paved way to the standard laid down by the Regulations.  ENM was neither obliged to build a new paved way nor was it the common intention of the parties that ENM should be liable as if it had constructed the paved way and Hilltop Road by the cutting and tipping method.  As for (b) obligation to maintain everything “adjoining the paved way”, Feature 156(1) does indeed adjoin the paved way, but this does not assist in the construction of SC 31.  As for (c) “essential to the support of the paved way (including supporting slopes or structures),” we are concerned with the obligation to maintain the slope at Feature 156(1).  As we have noted ENM does not challenge BA’s view that the features are dangerous or liable  to become so.[21]  We are prepared to proceed on the basis that unless they are attended to, these dangerous slopes will endanger Hilltop Road.  But this does not answer the question who is responsible to maintain the slopes or in the words of section 27A, whether under the terms of the Grant, in this context, SC31, ENM is obliged to maintain the slopes. We have stated above why we do not think so.

Question 3

“Whether a grantee subject to SC31 or a lease condition that is substantially similar to it (i.e. containing the phrase “uphold, maintain and repair such paved way and everything forming portion of or pertaining to it…” or words to that effect) is, for the purpose of section 27A of the Building Ordinance (Cap. 123), a person whom the BA may serve a dangerous hillside order on as someone who under the terms of a Government lease is under an obligation to maintain natural, formed or man-made land or any earth-retaining structure?”

66.  It is said SC31 or lease conditions substantially the same are used in other government leases.  Given that the answer must depend on the facts and circumstances of each Government lease, we do not think it is appropriate or possible to answer this question.

Disposition

67.  For the above reasons, we would dismiss BA’s appeal.  We would also make a costs order nisi in favour of ENM which shall become absolute unless within 14 days of this judgment, either party applies for a different order.

Mr Justice Fok PJ:

68.  I agree with the judgment of Mr Justice Tang PJ and Lord Collins of Mapesbury NPJ.