POLORACE INVESTMENTS LTD v. THE DIRECTOR OF LANDS

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JUDGMENT

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Liu JA:

1. By an Originating Summons, a developer (the plaintiff) sought a true construction of a restrictive covenant in a Crown lease for No. 1 Homantin Hill Road, Kowloon. The plaintiff also prayed for declarations and injunction against the Director of Lands (the defendant) on his alleged representation with respect to another restrictive covenant in the same Crown lease. Of the six restrictive covenants in the Crown lease, together with the Crown lessee the plaintiff as developer took issue with the defendant on the 2nd and the 6th restrictive covenants. The 2nd restrictive covenant read as follows:

"[The Crown lessee] shall not develop or redevelop the lot ...... in any manner which would result in the roofed-over area of the lot ..... being such that - 100/25 x roofed-over area of 3-storey buildings plus 100/22 x roofed-over area of 4-storey buildings would be greater than the area of the lot ..."

The 6th restrictive covenant read as follows:

"[The Crown lessee] shall obtain the approval of the said Director to the design, disposition and height of any building to be erected on the lot ...."

2. Construction of the 2nd restrictive covenant (the roofed-over covenant) will be entertained in the High Court in April. For the 6th restrictive covenant (the DD & H Clause), the plaintiff relied on the land administration policy thitherto practised by the Hong Kong Government as reaffirmed by, inter alia, the defendant's letter dated 14 January 1995 to the Chairman of Sun Hung Kai Properties Limited which apparently held a controlling interest in the plaintiff. In that letter, the defendant confirmed to the Chairman of Sun Hung Kai Properties Limited that the Government was entitled to charge a premium for granting approval under the DD & H Clause but that he had "reached a decision that Lands Department should continue to apply the existing policy in relation to approval under DD & H Clauses in leases and not seek to collect a premium merely for granting the landlord's approval under this Clause." But the defendant reserved "the right to review the policy in the future, should it be considered appropriate to adopt a different practice." As at the time of the hearing of this appeal, the defendant had not exercised his reserved right to review the land administration policy.

3. The defendant applied by summons to Seagroatt, J to strike out paragraphs based on such land administration policy in the Originating Summons and in the affirmation in support filed by Chan Hong Ki on 25 March 1996. The defendant successfully obtained an order from Seagroatt, J. striking out paragraphs 2 and 3 of the Originating Summons and paragraphs 10, 11, 30, 31, 32, 33, 34, 58(b) and 59 of the said affirmation of Mr Chan. These paragraphs were put forward to support the plaintiff's contentions based on the land administration policy. Paragraphs 9 and 58(a) of the said affirmation were also struck-out. Paragraphs 9 and 58(a) dealt with an alleged promise by the defendant to process submissions of plans without delay.

4. The plaintiff felt aggrieved by the striking-out order of Seagroatt, J, from which it appealed. In this appeal, the plaintiff no longer took issue with the striking-out of paragraphs 9 and 58(a) of Mr Chan's said affirmation. It was submitted by Mr Lee, leading counsel for the plaintiff that whatever the outcome, the expunged paragraphs in the Originating Summons and the other struck out paragraphs in the said affirmation of Mr Chan would be required, wholly or in part, for construing the roofed-over covenant. Mr Lee conceded that no construction was sought on the DD & H Clause. As I have said, the plaintiff called in aid these struck out paragraphs in the Originating Summons and the said affirmation of Mr Chan for the support of its contentions under the DD & H Clause. Upon the dismissal of this appeal, there would seem to be no good reason for resurrecting these deleted paragraphs, but insofar as any facts in them, which may assist in the proper construction of the roofed-over covenant, the plaintiff would not be inhibited from re-introducing the pertinent material.

5. It is the plaintiff's case that for the DD & H Clause, the defendant could not resile from his alleged stance with regard to the prevailing land administration policy. Counsel argued at bar the plaintiff's case under three heads: First, it was claimed that whatever the reason or motive was, be it for the land administration policy or otherwise, the defendant represented to the plaintiff through the Chairman of its controlling company that the Hong Kong Government would not be charging any premium under the DD & H Clause for granting approval. It was submitted that independently of the land administration policy, this alleged representation was itself capable of feeding an estoppel against the defendant. Secondly, the plaintiff raised an estoppel based on Government's subsisting land administration policy as reaffirmed to the Chairman of its controlling company. Thirdly, the plaintiff sought to take advantage of an accrued or acquired right allegedly derived from its legitimate expectation out of the confirmed subsistence of the said land administration policy. The first contention was wholly detached from the land administration policy. The second and third contentions were grounded on the land administration policy.

6. I will begin with the first contention. Broadly stated, an estoppel arises from a representation of fact upon which the representee relies to his detriment. The plaintiff's allegation was that the defendant had promised not to charge premium under the DD & H Clause for approval. Evidently, a promissory estoppel might arguably arise independently of the land administration policy. See Central London Property Trust Limited v. High Trees House Limited [1947] 1KB 130. The recent fertile development of the doctrine of estoppel has reached a point that a party may sue on a non-existing contract and then deploy estoppel to preclude the defendant from denying it. See Amalgamated Investment and Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] QB 84 at p. 131, per Brandon, LJ. Put another way, estoppel may be dexterously engaged as a sword and this result is achieved by suing a defendant on some assumed state of facts and then asserting that the defendant is estopped from denying it. See also the high authority in Australia, Waltons Stores (Interstate) Ltd. v. Maher (1986) 5 NS WLR 407; (1988) 62 ALJR 110 or (1988) 164 CLR 387.

7. The plaintiff no longer maintained before us that the defendant must give approval to whatever design, disposition and height under the DD & H Clause. The alleged representation on which the plaintiff relied for its estoppel was that the defendant promised not to charge premium under the DD & H Clause upon giving his approval to submitted design, disposition and height of a proposed new building. It was common ground that the defendant had not withheld any approval, nor had he reviewed the land administration policy. Matters had simply not reached the stage at which the DD & H Clause needed to be applied in the approval process. The defendant was and remained noncommittal as to his future conduct. The plaintiff had been at pains to procure an assurance from the defendant that when he eventually came to consider approval or otherwise under the DD & H Clause, he would not exact a premium for his approval. This was an attempt to pre-empt the defendant's option under the DD & H Clause so that if the plaintiff should succeed on its contended interpretation of the roofed-over covenant, it would not be further troubled by the possibility of the defendant reviewing the policy on or turning to the DD & H Clause for extracting a premium. The defendant's response to plaintiff's inquiry was less than positive. On 15 November 1995, he replied in these terms: "I do not feel that I am able to give you an assurance that I would approve the building plans attached to your letter under the DD & H Clause in the to be modified lease because I do not yet have other (departments') comments .......... I trust you will appreciate that I have to await detailed comments from other interested departments before committing myself to approve the building plans submitted". Even if the defendant had flatly refused to give such an assurance, his refusal would have been a far cry from an outright advance disapproval of the submitted plans under the DD & H Clause unless a premium was paid. The defendant merely declined to be held down to any position when the time finally came for a decision to be taken on the DD & H Clause. That time had yet to come. Even assuming the defendant's alleged promise not to charge a premium was clear, unambiguous and without any reservation, the defendant had not yet refused to approve without a premium. He had not threatened to disapprove any future application. As a matter of act, he had not even begun his deliberation on the DD & H Clause. There was no breach of the alleged promise. In other words, the defendant had not been shown to have acted in a manner inconsistent with his alleged representation and the plaintiff could not have suffered any prejudice. Therefore, the doctrine of estoppel could not be invoked on the alleged promise.

8. I turn next to the alleged representation grounded on the Government's land administration policy. Even if the land administration policy had been more than "merely an expression of an intention to act" or a statement as to "what [Government's] executive action would be" or even if such a policy could afford some legal basis for raising a claim in contract on estoppel (see contra Rederiaktiebolaget v. R, [1921] 3 KB 500 at p. 503 and R v. Secretary of State for the Home Department and Another, exparte Hargreaves and others, Times Law Reports 11 December 1996), for the same reasons I have given, the defendant had not been shown to have acted contrary to the policy, hence no prejudice was inflicted and the plaintiff could not invoke estoppel. The plaintiff was clearly not in a position to sue on an assumed state of facts that the defendant was at a particular point of time obliged to approve its submitted plans without a premium and then assert that he was estopped from denying it. At no time had the defendant been called upon to consider approval under the DD & H Clause.

9. Thirdly, I come to the alleged accrued or acquired right of "legitimate expectation" in public law, which was said to have given rise to an estoppel as in CCSU v. Minister for the Civil Service [1985] AC, 374 at p. 401 A-C, per Lord Fraser of Tullybelton. In his dealings with the plaintiff or the Chairman of its controlling company, the defendant acted as the Crown's land agent in its capacity of a private landlord. The public law concept of "legitimate expectation" has no application to a private lease. See Hang Wah Chong Investment Co. Ltd. v. A.G. [1991] 1 WLR 1141; Canadian Overseas Development Co. Ltd. v. A.G. [1991] 1 HKC 288 at p. 290 G - H and Secan Ltd. v. A.G. [1995] 2HALR 629. There is a further obstacle to the plaintiff's reliance on "legitimate expectation". Leave would be required under Order 53 Rules of Supreme Court to pursue a public law remedy. The plaintiff could not proceed with its claim on "legitimate expectation" by Originating Summons.

10. In conclusion, the plaintiffs' case is wholly unsustainable and incurably bad insofar as it is based on an estoppel either detached from or by reference to the land administration policy or on an alleged right derived from "legitimate expectation". The paragraphs in the Originating Summons and in the said affirmation of Mr Chan were rightly struck out by Seagroatt, J. Any plain factual or other assertions which the plaintiff requires for its coming contended interpretation of the roofed-over covenant in April may be re-introduced.

11. The plaintiff shifted its ground before us, which was not identical with that presented to Seagroatt, J. although similar legal principles were invoked. It is therefore quite unnecessary to deal specifically with the Grounds of Appeal. The corresponding submissions of Miss Yuen, counsel for the defendant, were received in full without any Respondent's Notice. Leading counsel for the plaintiff was right not to take any point on the absence of such a notice.

12. In conclusion, the order of the Judge cannot be faulted. For all these reasons, I would dismiss the appeal with an order nisi for costs in favour of the defendant.

Mayo JA:

13. I agree that this appeal should be dismissed.

14. On the material which was before Seagroatt J there was no way that any form of estoppel or legitimate expectation could be argued.

15. The letter of 14 January 1995 was carefully framed. When it is read as a whole it did not lend itself to the submissions which were made by Mr Martin Lee Q.C. The letter reads as follows:

"Tel.: 28282719

Fax: 28684707

Our Ref.: (66) in LD 17/KW/PL/84

Mr Walter Kwok

Chairman

Sun Hung Kai Properties Ltd.

46/F, Sun Hung Kai Centre

30 Harbour Road

Wanchai

Hong Kong

Dear Walter

KIL 2411 and Extensions -

No. 1 Homantin Hill Road, Kowloon

26. What is clear is that the writer of the letter is not simply saying that no demand for a premium would be made for approval under the DD & H clause. The statement to that effect is conditional upon a demand for a premium being made in respect of the height and coverage restrictions.

27. Mr Lee advised us at the outset that his clients were attempting to "pin the Director down". This would seem to me to be a highly unsatisfactory manner of proceeding. The only way that the matter can be dealt with sensibly is if all the relevant conditions are considered together. The Director cannot be said to have agreed to deal with the matter in any other way.

28. However even more critical than this was the submission made by Ms Maria Yuen that the Director has not yet made any formal determination of an application. By no stretch of the imagination can it be argued that the Director has made a representation upon which reliance has been placed by the appellants and that they have suffered damage thereby.

29. The claim that the appellants have a legitimate expectation to obtain approval without the necessity of paying a premium is equally unarguable.

30. In a situation such as the present one the Crown is acting in a similar manner to a private landlord and no question of public law arises.

31. Authority for this proposition can be found in several cases. The position is conveniently and accurately encapsulated in the headnote of Canadian Overseas Development Co. Ltd. v. A.G. [1991] 1 HKC 288.

          "Held, dismissing the appeal:

32. As has been pointed out by Liu JA this is not a matter which is capable of being ventilated in the present case as the requirements of order 53 have not been complied with. In particular no leave has been obtained to proceed.

33. The paragraph of the originating summons which remains if this strike out application is successful relates to the construction of the relevant covenants. This is a question of law and can presumably be argued notwithstanding the striking out of the parts of the summons and supporting affidavit ordered by Seagroatt J.

34. I can see no grounds whatever for interfering with his order and in my view this appeal should be dismissed.

Nazareth V-P:

35. As I understood Mr Lee's submissions, he relied upon two general grounds in pursuing this appeal. First, estoppel, and second, legitimate expectation.

36. The estoppel, it was submitted, arose from a clear and unequivocal promise, or representation in the nature of a promise, made by the defendant/respondent, the Director of Lands, in his letter of the 14th January 1995. It was said to be that he, the Director, would not charge a premium merely for granting approval under the DD & H Clause, with the intention that the plaintiff/appellant ("Polorace") would rely on the promise. Polorace, it was submitted, relied upon the promise and suffered detriment in the submission of revised building plans to the Building Authority, thereby incurring substantial professional and other fees and charges.

37. This ground, it became clear, is misconceived. Matters had simply not yet proceeded to the stage of approval being granted under the DD & H Clause, much less the charging of or any attempt to charge any premium for granting approval under the DD & H Clause. No breach of the representation or promise had occurred. There was thus nothing as yet to estop and the ground fails, a fortiori, in the context of the declaratory relief sought, the present hardly being exceptional circumstances that would justify or persuade a court to make a declaration as to rights depending upon the future decision of the Director (see The Supreme Court Practice, Vol. 1, p. 255 para. 15/16/6).

38. That said, it has also to be mentioned that serious doubts arise as to whether the promise contended for can be said to have been made in the letter of the 14th January 1995 (reproduced in the judgment of Mayo JA). I do not find it necessary to pursue this aspect of the first general ground given the force and clarity of the flaw already addressed.

39. The ground of estoppel clearly fails. Before I leave this ground, however, I should add that Mr Lee tenaciously clung to his submission that this ground had to be addressed not simply upon the alleged promise made, but also upon the land administration policy of not charging a premium for granting approval under the DD & H Clause. But how that advanced the first ground or indeed his submission, I have to confess, eluded me.

40. I turn then to the other ground, i.e. legitimate expectation. This was that Polorace had a legitimate expectation in public law arising from the letter of the 14th January 1995 and/or the application of the land administration policy, that the policy of not levying a premium for approval under DD & H Clauses would be applied to it.

41. However, it is clear that in his relevant communications and dealings with the Polorace side, the Director acted as the agent of the Crown in its capacity as landlord. The matter of charging a premium under covenants in the lease is clearly governed by private and not public law, and is not susceptible to judicial review. See Hang Wah Chong Investment Co. Ltd v Attorney General [1981] 1 WLR 1141; Canadian Overseas Development Co. Ltd v Attorney General [1991] 1 HKC 288. This second ground also fails.

42. I can see no reason why the Director should not have his costs of the appeal. The appeal is accordingly dismissed with an order nisi that the Director is to have his costs of the appeal.