XCHRX PETER AND ANGELI WONG COMPANY LIMITED v. SILVERERA LIMITED

1995 M.P. No. 1755

H E A D N O T E

(1) The Crown had made representation that flatted development was allowed notwithstanding the restriction of one residence restriction in the Crown Lease Condition. The developer acted upon that representation built and sold flats to different owners. The Crown is estopped. The individual owners have acquired a good title.

(2) The Crown is bound by the law of estoppel if the ingredients of estoppel are present.

1995 M.P. No. 1755

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is a Vendor and Purchaser Summons in respect of an agreement to purchase Flat B on the 3rd floor together with portion B of the roof of Pine Court, No. 18 Dianthus Road, Kowloon together with Parking Space No. 8 on the ground floor and a number of undivided shares in the piece or parcel of grounds in which Pine Court is erected.

2. The requisitions raised by the purchaser are in respect of 3 covenants in the Crown Lease dated 15th November 1971 in relation to New Kowloon Inland Lot No. 4568 to which Pine Court is erected. These are :-

1) One residence covenant

"... the said lessee will not erect or allow to be erected any building or buildings on the said piece or parcel of ground except one detached or semi-detached private residence of European type (the composition of which shall be decided by the said Director)"

2) The alienation covenant

"AND will not alienate or dispose of any part or parts of the said piece or parcel of ground in such manner that at any time during the continuance of this demise the site and cartilage of any detached or semi-detached residence erected or to be erected on the said piece or parcel of ground shall be less than 6,000 sq.ft."

3) The height covenant

"AND will obtain the special approval of the said Director to the design disposition and height of any building erected or to be erected on the said piece or parcel of ground and in no case will the height of any such building exceed 35' ".

3. In respect of the height covenant, the Defendant at the hearing indicated that it will not pursue this matter as the Plaintiff had furnished an architect's certificate to the effect that the height of the building does not exceed 35'.

4. In relation to the alienation covenant, the matter has been dealt with by 2 letters date the 24th July 1995 and 28th July 1995 respectively from the Legal Advisory and Conveyancing Office of the Lands Department to the Plaintiff's solicitors.

5. The letter of the 24th July 1995 stated,

"The covenant not to alienate or dispose of any part or parts of the said piece or parcel of ground in such manner that at any time during the continuance of this demise the site and cartilage of any detached or semi-detached residence erected or to be erected on the said piece or parcel of ground shall be less than 6,000 sq.ft. is not applicable in respect of the sale of undivided shares and individual flats in the building erected on the above lot. I have no objection to dealings of undivided shares in the above lot."

6. The letter of the 28th July 1995 stated,

"The covenant not to alienate or dispose of any part or parts of the said piece or parcel of ground in such manner that at any time during the continuance of this demise the site and cartilage of any detached or semi-detached residence erected or to be erected on the said piece or parcel of ground shall be less than 6,000 sq.ft., as I understand is a restriction against partitioning of the lot and has nothing to do with your present disposal of undivided shares and individual flat in the building."

7. These letters were from the senior solicitor of the Legal Advisory and Conveyancing Office of the Lands Department. I agree with her interpretation.

8. The only remaining issue is the one residence covenant.

9. In HCMP 86 of 1995 Citiward Ltd. v. Tai Ping Wing the vendor & purchaser summons is in respect of a similar covenant in the Crown Lease.

10. In that case it was not disputed that the erection of a building in the flats is a breach of that covenant. The vendor argued that the Crown is estopped because of 3 matters namely:-

1) the Government had stood by and watched the developer build the building

2) the occupation permit had enabled the flats to be sold

3) that a control card was opened up in the Land Registry again allowing the division of shares in respect of the block and the subsequent dealing with the flats.

11. To that contention Rogers J. at p. 4 of the judgment said

"For promissory estoppel it seems to me that there must be at least be evidence of a promise or representation. I cannot say whether a promise or representation exists in this case but there is no sufficient evidence before me for me to say that there is a clear promise or representation. One of the questions which was rightly asked by Miss Yuen on behalf of the Plaintiff was 'What promise was given and to whom?'".

12. The other point raised by the Defendant in that case is that the Plaintiff had written to the Lands Department for their confirmation that the Government will not take action in respect of the above existing flatted development. The reply from the Legal Advisory & Conveyancing Office was as follows :-

"We are instructed by the District Lands Office to reiterate that it is only the current policy not to enforce the covenant referred to in para. (a) our letter of 26/10/94 to Tang Chan & Co. Each case must be considered separately and what is said in one case may not be applicable to other cases notwithstanding that their leases may contain the same or similar covenants."

13. Rogers J. is of the view that by that the Government has clearly reserved its position. It is the current policy not to enforce the covenant but it is not binding itself for the future.

14. Rogers J. then went on to say, "My view of the matter is that the risk of Government re-entry in this case is probably low. But the purchaser is entitled to be cautious. There is a breach of a Crown Lease. This has not been sorted out. It needs to be sorted out. It may well be that many purchasers are prepared to take that risk but to me that I cannot say good title has been made out".

15. In Citiward's case there is no evidence that at the time the old building was demolished and the new building erected there was any representation by the Crown that the covenant of one residence will not be enforced. In the absence of such representation there is no estoppel. The subsequent correspondence was equivocal. The Crown only said it was "the current policy".

16. The facts of Citiward's case are different from the present case.

17. Prior to the redevelopment of Pine Court careful steps had been taken by the developer and there were extensive communications between the owner and the Crown in relation to the extent of permitted re-development under the provisions of the Crown Lease governing New Kowloon Inland Lot No. 4568.

18. On the 4th April 1986 Messrs Chan Lau Wai on behalf of the architect wrote to District Land Office to confirm that the apartment building consisting of flats can be erected and that such flat and/or flats can be separately sold to various families together will certain equal undivided shares of and in the land.

19. The District Lands Office in April 1986 after taking legal advice replied as follows :-

"Further to my letter dated 9th April 1986 I confirm that under current Government policy flatted development with 2 main entrances is allowed on this locality notwithstanding the restriction of one residence in the lease condition. I also confirm that the flats can be sold separately."

20. By reason of the aforesaid confirmation, the architect on the 14th October 1986 submitted building plans to the Buildings and Lands Department. The plans were duly approved and that department further pointed out, inter alia, that

1) "This approval should not be deemed to confer any title to land or act as a waiver of any term in any lease or licence. S.14(2) of the Building Ordinance refers".

2) "The District Lands Officer/Kowloon West has been advised that the plans have been approved under the lease".

21. On the 12th March 1987 Messrs Lo & Co wrote to the District Lands Office contents of which are as follows :-

"We have instructions to deal with the above proposed development on the abovementioned Lot. We refer to the Crown Lease of the Lot wherein it is provided that the Lessee will obtain the special approval of the Director of Public Works to the design disposition and height of any building erected or to be erected on the Lot.

We enclose herewith a copy letter dated 12th December 1986 from the Buildings and Lands Department to the architects of our client specifying in Clause 8 therein that your office has advised that the plans have been approved under the lease.

As the Public Works Department is now known as the Buildings and Lands Department, can we now assume that special approval to the design disposition and height of any building to be erected on the Lot as required under the lease was deemed given when the building plans were duly approved by the Director of Buildings and Lands? Please advise accordingly."

22. On the 18th March 1987 the District Lands Office replied confirming that "the Director of Buildings and Lands is vested with the authority of approving the design, disposition and height clause of Land Leases".

23. So in the present case there are clear representations by the Crown and these representations were made before any step was taken by the architect. The developer had thereby acted upon the representations made by the Crown, a promissory estoppel arose. No doubt in a promissory estoppel the promissor (the Crown in this case) may resile from its position by giving the promisee notice so that the promisee has the opportunity to revert back to its former position but since the house had been pulled down new flats and undivided shares have been sold it is now impossible for the promisee in this case to revert back to its former position. The promise thus become final and irrevocable.

24. The Crown is bound by the law of estoppel. "A representation by the Crown will raise an estoppel against the Crown if the other ingredients of estoppel are present. However, a representation like a contract, will bind the Crown only if it is 1) within the power of the Crown itself and 2) made by a servant of the Crown within the scope of his or her authority". (Liability of the Crown by Peter W. Hagg 2nd Ed. at p. 189)

25. In the present case in my judgment the representation was made within the power of the Crown and was made by Crown servant within their scope of authority. Hence ingredients of estoppel are present and it is too late now for the Crown to resile from its original promise.

26. Counsel for the Defendant submitted that by the letter of April 1986 the District Lands Officer confirmed only that it was under "the current Government policy" that flatted development was allowed and that is similar to the term used by the Crown in Citiward's case. But apparently there is a change of the Government policy because by the letter dated the 29th June 1955 from the Legal Advisory and Conveyancing Office of the Lands Department to the Plaintiff's solicitors the senior solicitor for Director of Lands wrote "..... I confirm that Government policy is not to take enforcement action in respect of it under the lease governing the above lot. ..... I have to emphasize that what I have stated above applies to the above lot only and may not be applicable to any other lots notwithstanding that their leases contain the same or other similar covenants". From that letter the Director of Lands no longer said it is the current Government policy but it is the Government policy.

27. In the further alternative once the District Office confirmed that the flats can be sold, the necessary implication is that the Government will not object to the lot to be made ownership of several instead of one. The position has therefore become irreversible because the ownership is now vested in several instead of 1 person and it will be unjust and inequitable for the Crown at a future date to say to the then owners of different flats that they should demolish the flats which they acquired on the basis of such confirmation.

28. For those reasons in my judgment the risk of a re-entry by the Government is virtually nil. I therefore rule that the Plaintiff has a good title to the property. Accordingly there be an order in terms of paras. 1 & 2 of the Originating Summons.

29. By consent there be no order as to costs.