WHARF PROPERTIES LTD AND ANOTHER v. ERIC CUMINE ASSOCIATES, ARCHITECTS ENGINEERS & SURVEYORS (A FIRM) AND OTHERS

H.C.A. 13431 of 1983 and
C.L. 48 of 1985

HEADNOTE

This was a claim against architects for professional negligence. The clients alleged that the architects had failed to ensure maximization of the development value of the clients' site.

HELD : On the facts, the architects had exercised a reasonable degree of skill and care in the discharge of their duties, and the claim therefore failed.

(Observations on the use and value of expert evidence.)

1983 No. 13431

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

BETWEEN

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JUDGMENT

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1. The Plaintiffs in this action (1983 No. 13431) are Wharf Properties Limited and The Wharf (Holdings) Limited ("the clients"). This judgment is concerned with their claim in the action for damages for professional negligence against Eric Cumine Associates, a firm of architects, engineers and surveyors ("the architects").

2. The clients retained the architects to act for them in connection with the development of Kowloon Marine Lot 11 ("KML 11"), the site (ultimately) of the mixed commercial and residential development known familiarly as Ocean Centre and Harbour City and which includes a number of office blocks and the Marco Polo and Prince Hotels. The clients complain about the advice given (and the advice not given) to them by the architects in connection with the development, as a result of which (say the clients) they were denied the opportunity to turn KML 11 to better advantage; but the clients do accept that any proposal for development of KML 11 would have been subject to commercial and legal constraints.

3. As to commercial constraints, the clients owned other property in the vicinity of KML 11 and it would not have been appropriate for the architects to submit proposals for redevelopment which (if carried out) would have adversely affected that other property. For this reason, for example, options such as low cost, high density housing, or the division of KML 11 into sections for the erection of the maximum number of monolithic office blocks, were ruled out at an early stage, although they might have provided better returns.

4. As to legal constraints, KML 11 was subject to the provisions of the Crown Lease dated 12th March 1910 under which it was held, so that (save to the extent to which the Crown could be persuaded to grant any necessary release or modification) any proposals for redevelopment would have to take account of these provisions (which, however, like those of most Crown Leases of that age, were actually not unduly restrictive in character). More important were the constraints imposed by the general law. One such constraints was that KML 11 was within an area which (because of its proximity to the airport) was subject to restrictions precluding the erection within that area of any building over 200 ft. in height. (In fact, this particular constraint is not a bone of contention between the parties). For present purposes, the most important constraints were those imposed by the Buildings Ordinance, Cap. 123 and the subsidiary legislation made thereunder, which (among other things) imposed constraints on the development of KML 11 in respect of site coverage and plot ratio (the plot ratio of a development is the number obtained by dividing the gross floor area of the intended building by the area of the site on which it is to be erected). The constraint as to plot ratio is a bone of contention, and arguments about it have occupied most of the time the Court has devoted to considering this case. The first argument arises because (say the architects) the constraints as to plot ratio imposed by the legislation were tightened by a circular letter ("circular 58") issued by the Director of Public Works to all authorised architects on 20th May 1971 and concerned with large sites, so that any proposals for KML 11 (which was a large site) had to take into account (as the architects did) the provisions of this circular. The clients do not accept this, and so here the first battle line is drawn. But even if the clients are right and the architects were wrong, it does not necessarily follow that the architects were negligent in treating circular 58 as imposing constraints with which their proposals needed to conform. However (say the clients) the architects were negligent; because in fact they knew, or ought to have known, that their proposals could safely ignore the plot ratio constraints imposed or expressed to be imposed by circular 58. Here the second battle line is drawn. If the architects lose both these battles, then, so far as circular 58 is concerned, they lose the war, at any rate over liability : I shall not at this stage consider damages.

5. Although the legislation imposes plot ratio constraints, in some particular instances "exemptions" from them are provided, some by way of administrative concession. The clients say that the architects' proposals put to and accepted by the clients failed to utilize these exemptions to the best or at least the proper advantage, and that this failure was negligent. The architects do not accept this. I shall not at this stage consider damages in this respect, either.

6. With this brief conspectus of the main issues I turn to the legislative background.

7. I start with the primary legislation, which is the Buildings Ordinance, Cap.123. Part II of the Buildings Ordinance is concerned with control of buildings.  It includes section 16(1), which confers on the Building Authority a power on specified grounds to refuse approval of any plans of building works. Three grounds are material to a resolution of the issues in this case, namely (d), (g) and (p). Under (d), the Building Authority may refuse to approve any plans where "the carrying out of the building works shown thereon would contravene" (among other things) "any approved or draft plans prepared under the Town Planning Ordinance". Under (g), the Building Authority may refuse to approve any plans where "the carrying out of the building works shown thereon would result in a building differing in height, design, type or intended use from buildings in the immediate neighbourhood or previously existing on the same site". Under (p), the Building Authority may refuse to approve any plans of building works where "in the case of building works to be carried out on the site which in his opinion ought to be provided with streets having adequate connection to a public street, he is not satisfied that such streets are or will be provided". Ground (p) was not in the Buildings Ordinance at all material times; it was enacted only on 3rd August 1973, after the date of the initial retainer of the architects in relation to KML 11.

8. I turn to the subordinate legislation, made under Section 38(1)(c)(iii), which confers on the Governor in Council a power by regulation to provide for the planning and design of buildings, including (among other things) plot ratio. Such provision is made in part III of the Building (Planning) Regulations ("the regulations"). Regulations 19, 19A, 20 and 21 contain provisions relating to permitted site coverage and permitted plot ratio. The permitted site coverage and permitted plot ratio for any site are to be ascertained by reference to the First Schedule to the regulations. A distinction is drawn between domestic and non-domestic buildings. A distinction is also drawn between class A, class B and class C sites; to put it shortly, a class A site is a site, not being a class B or class C site, that abuts on one street; a class B site is a corner site that abuts on two streets, and a class C site is a corner site that abuts on three streets (an island site is also a class C site). Regulation 22 provides for the permitted site coverage and permitted plot ratio to be exceeded in certain cases. Regulation 23 contains provisions supplementary to regulations 19, 20, 21 and 22. The detailed provisions of the said regulations and of the First Schedule are material and accordingly I reproduce them in Annexure 1 to this judgment.

9. I return to the primary legislation. Section 42(2) provides (so far as is material) as follows : "Where in the opinion of the Building Authority special circumstances render it desirable he may permit a modification of the provisions of this Ordinance". There is, therefore, a power of modification available to the Building Authority under which, in a proper case, he may, be persuaded to relax the constraints otherwise imposed upon building on a particular site. The power of modification extends not only to the provisions of the Ordinance but also to the provisions of any regulations made thereunder.

10. I turn now to circular 58. The background to circular 58 is that for many years the Government had held the view that it was in the public interest to follow a policy of systematic density zoning. The policy was set out in a circular about the density of domestic development from the Director of Public Works (Mr. A.M.J. Wright) dated 1st April 1966 and addressed to all authorised architects. The control of density which it was the object of the policy to achieve in the zones to which it applied was to be exercised by means of lease conditions or by invoking the provisions of what was then section 9(B)(1)(f) and is now section 16(1)(g) of the Buildings Ordinance (see note (6) to the schedules to Mr. Wright's circular). In certain districts buildings were to be subject to further control where (among other things) internal roads were necessary, e.g. in what were called "large sites"(see note (5) to the schedules to Mr. Wright's circular). (At all times the number of such "large sites" was very few.)

11. Circular 58, so far as material, reads as follows :

"1. Density zoning plans and schedules were first issued in 1966 under cover of Mr. Wright's letter dated 1.4.66 to all authorised architects and to other interested parties. This was at a time when little real estate development was in progress, and consequently developers and their professional advisers may have overlooked the implications of pare. 5 of the notes to the schedules. In particular note 5(c) refers to the further restriction which would apply to large sites as it is felt that the considerations adopted by the P.W.D., in dealing with an application in respect of large sites should now be circulated to all interested parties.

2.    In respect of this note I advise you that any site exceeding 40,000 sq. ft. in area is regarded as a large site and for such sites certain additional controls reducing the density below the standard scale may be applied in all zones. In certain cases, and at my discretion, the area of existing or proposed roads within the site may be deducted from the site area and the extent of development of the remaining area calculated on the standard scale.

3.    The intention is to ensure that there should not be an abnormal density of development on large sites where normal road patterns do not exist, and any relevant lease conditions, or provisions of the Buildings Ordinance will, at my discretion, be applied in pursuance of this intention. Generally, in the case of development of sites exceeding 40,000 sq. ft. in area, early inquiry should be made at the Crown lands and Survey Office in order to ascertain the density permitted.

.......................................................................................................

In order to complete the information given in this letter I have attached the following documents as appendices".

12. There were three appendices attached to the circular; Appendices II and III are reproduced in Annexure 2 to this judgment. (Appendix I applies to sites not exceeding 40,000 sq. ft. in area and is irrelevant.) Appendix II contains a new set of schedules relating specifically to large sites (which had not previously been issued). Appendix III contains a set of notes to the schedules which had been revised but which were basically similar to the notes incorporated with the schedules issued with Mr. Wright's letter of 1.4.66. Note (6) in Appendix III warrants particular mention. It provided as follows :-

"Control will be exercised' by means of lease conditions or any relevant provision of the Buildings Ordinance and Regulations."

13. In relation to the exemptions to which I have referred, I must also mention certain Practice Notes and other circular letters issued for the guidance of authorised architects and others. Practice Note 1974.13 (in various editions) deals with the expression "or any similar service" used in regulation 23(1)(iii) of the regulations. This Practice Note provides that in determining, for the purposes of regulation 20, 21 or 22, the gross floor area of a building, the Building Authority may take no account of any floor space that he is satisfied is constructed or intended to be used solely for the parking, or for the loading or unloading, of motor vehicles, or occupied solely by machinery or equipment for any lift, air conditioning or heating system or any similar service (emphasis added). But for this provision, the areas concerned would have had to be included in the gross floor area of the intended building and would therefore have gone to use up some of the plot ratio entitlement of the site. Since the plot ratio entitlement is not used up in this way, it can be used to that extent to produce additional (lettable) gross floor area. The object of Practice Note 1974.13 (in its various editions) was to let it be known what the Building Authority was prepared to regard as included within the words "or any similar service".

14. Practice Note 1975.23 is also material. This is concerned with voids.  The area, which for the purposes of the regulations, is to be treated as the gross floor area of the building, is an area which is not diminished by voids occurring within an area of floor. The definition of "gross floor area" contained in regulation 23(1)(b) does not permit of any such exclusion. However, the Building Authority let it been known, in Practice Note 1975.23, that he might be prepared to exercise his power of modification under Section 42 of the Ordinance so as to exclude some voids from calculation for gross floor area purposes.

15. I must lastly mention circular letters 45 and 48. These contain an indication that the Building Authority might be prepared to exercise his power of modification under Section 42 of the Ordinance to confer a benefit on developers in the case of buildings intended to be used as "bona fide hotels". The benefits are conferred in respect of ground level setting down areas, hotel basement areas and site coverage. As to ground level setting down areas, these are exempt anyway, under the provisions of regulation 23(3); but the developer is given a bonus. He is entitled to build additional gross floor area equal to 5 times that exempt area, as if the relevant area had been dedicated to the public for the purposes of passage pursuant to the provisions of regulation 22(1) (which itself confers a bonus in relation to buildings set back from the boundary of a lot abutting a street when there is dedication of the amount of the set-back to the public for the purposes of passage). The effect of regulation 22(1) is to entitle the developer to incorporate in his building additional gross floor area equal to 5 times the area of the setback, in addition to that which mould otherwise be permitted on the site. As to hotel basement areas, these areas would be accountable in the calculation of gross floor area unless they were used for purposes qualifying for the exemption conferred by regulation 23(3). This would, for example, confer exemption on a basement used for parking. The concession operates to enable the developer to claim, in the case of a hotel basement, exemption from accountability in the calculation of gross floor area whatever the use may be to which the basement is to be put. So, for example, the developer of a hotel including a basement dedicated to retail shops is entitled to have the area of the basement left out of the account in the calculation, whereas the developer of an office or domestic building would not be so allowed. As to site coverage, the bedroom floors of a hotel are domestic and would have to be built so as not to exceed the domestic site coverage permitted. The concession operates to allow the developer of the hotel to build it to the permitted (and greater) non-domestic site coverage (although to the domestic plot ratio). This enables the hotel developer to cover more of his site with his hotel at ground level then he would have been able to do had he been building, say, an apartment block.

16. Before stating the facts, I shall state briefly the legal principles applicable to the case (which are not in dispute) so that the facts may be viewed in the light of these principles.

1. An architect retained by a client to advise a client as to the proposed development of a site owes a duty to the client to do so with a reasonable degree of skill and care.

2. The standard of skill and care required of the architect is that of the ordinary architect holding himself out as competent to offer the same or similar advice.

3. The duty of the architect is a continuing duty, so that, if he discovers he has made a mistake, he is under duty to the client to correct it, or at least to inform the client of the mistake and (if his services continues to be retained) to exercise the same standard of skill and care in attempting to correct the consequences.

4. An architect retained by a client to advise him about the development of a site in Hong Kong is under a duty in particular to advise him with a reasonable degree of skill and care in relation to matters affecting plot ratio (and exemptions and compensatory bonuses available in that connection).

17. In the light of these principles, throughout my consideration of the facts, I have attempted at all times to keep in mind the following (and, in my view, the crucial) question: Did the architects, in the performance of their duties, fall short, either generally or in any particular respect, of the standard of skill and care to be expected of them?

18. I must emphasise that the duty of an architect is merely to carry out his instructions with a reasonable degree of skill and care. If he does so, he is not liable to the client for breach of duty because he makes a mistake, or because he has been guilty of an error of judgment (although of course a mistake, or an error of judgment, may be due to a failure to exercise a reasonable degree of skill and care). Not every reasonable exercise of  judgment is right, and not every mistaken exercise of judgment is unreasonable. Like every other professional man, an architect undertakes to bring to the exercise of his profession a reasonable degree of care and skill; but he does not undertake to use the highest possible degree of skill : see Lanphier v. Phibbs (1838) 8 C.B. 475. Again, like every other professional man, an architect will not be held to warrant that he will achieve the best possible result, which is of course what his client desires (unless, no doubt, the client has expressly stipulated for and obtained such a warranty) : see Greaves and Co. v. Baynham Meikle [1975 ] 1 WLR 1095.

19. And I must emphasise also that the degree of skill and care an architect practising in Hong Kong must bring to the task he undertakes is that degree of skill and care that is usual among architects practising their profession in Hong Kong. In Chapman v. Walton (1833) 10 Bing 56, a case concerned with the liability of an insurance broker for professional negligence, I find, at p. 63, the following passage in the judgment of Tindal CJ :

"The action is brought for the want of reasonable and proper care, skill and judgment shewn by the defendant under certain circumstances in the exercise of his employment as a policy broker. The point, therefore, to be determined is, not whether the defendant arrived at a correct conclusion .... but whether, upon the occasion in question, he did or did not exercise a reasonable and proper care, skill and judgment. This is a question of  fact, the decision of which appears to us to rest upon this further inquiry, viz, whether other persons exercising the same profession or calling, and being men of experience and skill therein, would or would not have come to the same conclusion as the defendant. For the defendant did not contract that he would bring to the performance of his duty, on this occasion, an extraordinary degree of skill, but only a reasonable and ordinary proportion of it; and it appears to us, that it is not only an unobjectionable mode, but the most satisfactory mode of determining this question, to shew by evidence whether a majority of skilful and experienced brokers would have come to the same conclusion as the defendant. If nine brokers of experience out of ten would have done the same as the defendant under the same circumstances, or even if as many out of a given number would have been of his opinion as against it, he who only stipulates to bring a reasonable degree of skill to the performance of his duty, would be entitled to a verdict in his favour. And there is no hardship upon the plaintiffs by this course of proceeding, for they might have called members of the same profession or trade to give opposite evidence, if the facts would have warranted it; and the jury would then have decided upon such conflicting testimony, accordingly to the relative skill or experience of the witnesses on either side, or according to the strength of the reasons which were advanced by the witnesses in support of their respective opinions".

20. The position, then, is that the question of whether or not an architect has exercised a reasonable degree of skill and care in the performance of his duties is a question of fact for the court. The evidence of an expert witness will carry great weight with the court, particularly evidence, not of what the witness himself would have done (which is of limited value) nor of what he thinks to the defendant should have done (which is a matter for the court alone and is inadmissible as evidence from the witness) but of what he can say is general practice among architects. (Of course, if the practice is considered by the Court to be an unreasonable one, it will be of no use to the architect to prove by such evidence that it is general.)

21. The question of the function of the expert witness is considered in Joseph Crosfield and Sons Ltd. v. Techno-Chemical Laboratories Ltd. (1913) 29 TLR 378. (This was a patent action; but, as the judge pointed out at the outset of his judgment, there is in regard to the admissibility of evidence no distinction between patent actions and other actions.) The judge observed that it is not competent in any action for witnesses to express their opinion upon any of the issues, whether of law or fact, which the court or the jury has to determine. He ventured to assert that, if the last 20 years were taken and an examination made of the voluminous shorthand notes which had accompanied the patent actions tried during that period in their usual progress from the court of first instance to the House of Lords, it would be found that a very large proportion of their contents, he would say at least nine-tenths, was devoted to questions which either openly or under more or less skilful disguise were directed to eliciting the opinion of the witnesses upon one or other of the issues in the case. He added that the amount of time wasted by this irregular method of trying patent actions must in the aggregate be fabulous; and he pointed out that the waste of time is not the whole of the mischief, for the admission of the opinion of eminent experts upon the issues leads to the balancing of opinions and tends to shift responsibility from the bench to the Witness box. He added that the evil of that becomes apparent when one considered that whereas the expert witnesses called for the plaintiff almost invariably took a strong view in his favour on each and all of the issues in the action, the expert witnesses for the defendants were equally confident the other way. He pointed out that if the evidence of experts were to be confined to the matters upon which they were entitled to give evidence, between eminent men there would, only occasionally, be differences of opinion, whereas on other questions a contest between counsel and expert witnesses would often be maintained for hours and not infrequently for days together.

22. I drew the attention of counsel, during the course of the trial, to these observations, which are as applicable to expert evidence as to the general practice of architects as to any other expert evidence; and I have borne them in mind in preparing this judgment.

23. I turn now to state the material facts as I find them.

24. The 2nd Plaintiff ("Wharf") was incorporated on 15th November 1986 under the name of "The Hong Kong and Kowloon Wharf and Godown Company Limited". On 12th March 1910, the Crown granted to Wharf the lease of KML 11 to which I have already referred, a lease for 999 years calculated from 13th September 1881; Wharf carried on business as a wharfinger and warehouseman from godowns erected on that land. The Lease contained a reservation to the Crown of the right to maintain sewers and drains under the land, from Haiphong Road and Peking Road to the sea; and a covenant by Wharf in the following terms :

"the said Lessees their Successors or Assigns, or any other person or person, shall not nor will, during the continuance of this demise, use, exercise or follow, in or upon the said premises, or any part thereof, the trade or business of a Brazier, Slaughterman, Soap-maker, Fellmonger, Melter of tallow, Oilman, Butcher, Distiller, Victualler, or Tavern-keeper, Blacksmith, Nightman, Scavenger, or any other noisy, noisome or offensive trade or business whatever, without the previous licence of His said Majesty, His Heirs, Successors or Assigns, signified in writing by the Governor of the said Colony of Hongkong, or other person duly authorized in that behalf ''.

25. Wharf would have witnessed, in 1935, the enactment of the Buildings Ordinance, Chapter 123, and in 1939, the Town Planning Ordinance, Chapter 131. It would also have witnessed, in 1956, the introduction of the Building (Planning) Regulations, which dealt (among other things) with the control of intensity of development by reference to volume, height, and permissible street widths; and, in 1962, Wharf did witness the amendments to those regulations which introduced the concepts of site coverage and plot ratio as more sophisticated controls over intensity of development, for it received advice (in another connection) about these amendments from Mr. Eric Cumine, then a partner in Messrs. Faber and Cumine, architects.

26. By mid-1963, the thought that it might be advantagous to move godowns to outlying islands, and to make the land at Tsim Sha Tsui available for more lucrative purposes, had occurred to the board's sub-committee on property development. The sub-committee proposed, subject to board approval, that Mr. Cumine be asked to prepare "an overall plan for future development", though nothing seems to have come of this.

27. In 1964 the Executive Council decided that density control should be imposed administratively, rather than by way of amendment to the Town planning Ordinance or the Building Ordinance.

28. On 22nd March 1966, Ocean Terminal (on other land which Wharf held, adjacent to KML 11) was opened; within a matter of days thereafter Messrs. Faber and Cumine (Wharf's consultants on the Ocean Terminal development) would have learnt of the circular letter issued by Mr. A.M.J. Wright on 1st April 1966 (to which I have already referred).

29. On 3rd July 1967, plan No. LK1/44 for Tsim Sha Tsui was gazetted, under the relevant provisions (the details of which are immaterial) of the Town Planning Ordinance. This showed KML 11 zoned for commerical, residential and warehousing use.

30. On 17th October 1968, circular letter 45 mentioned above (relating to hotel bonus concession) was issued.

31. In July 1969, the Hong Kong Hotel (also on other land which Wharf held adjacent to KML 11), was opened. The architects acted as such in this development. The lease of the land (KML 91) on which the Hong Kong Hotel was built contained a covenant restricting the use of the land in terms similar to that contained in the Lease of KML 11. The Government inserted on the insertion of a "design disposition and height" clause in the licence which had to be obtained to permit the land to be used as the site of an hotel, which gave the Government considerable powers of control over the development.

32. In September 1969, Wharf gave further thought to the development of KML 11, with a view (among other things) to "obtaining maximum utilization and profit from the land" (see the memorandum of 22nd September 1969 from the Manager of Ocean Terminal to the General Manager of Wharf, Mr. H.M.G. Forsgate, a copy of which Mr. Forsgate sent to Mr. Cumine when, as we shall see, Mr. Cumine was eventually consulted by Wharf in this connection).

33. On 23rd September 1969, circular letter 48 mentioned above (also relating to hotel bonus concessions) was issued.

34. On 6th December 1969, circular letter 49 (relating among other things to density zoning) was issued. Its material provisions were as follows :

Density Zoning
Hong Kong, Kowloon and New Kowloon
                     Plans and Schedules               

8. The density zoning plans and schedules issued by Superintendent of Crown Lands & Survey are to be revised at some future date, and, in the meantime, the Superintendent has suggested that some confusion, which is at present thought to exist, could be removed by requesting you to note that, when the revision takes place, it is intended to replace the existing Note 1 by the following :

'Any development above 20 storeys should not have a plot ratio in excess of that permitted for 20 storeys and such plot ratio shall be calculated as defined in the Building (Planning) Regulations i.e. by dividing the gross floor area of the building by the area of the site on which the building is erected.'

9. In addition, Note 6 will be amended to read -

'Control will be exercised by means of lease conditions or Section 16(1)(g) of the Buildings Ordinance, Cap. 123.'”

35. On 5th January 1970, following a telephone conversation between Mr. Forsgate and Mr. Cumine, Mr. Forsgate sent the architects, under cover of a letter of that date, a copy of the lease of KML 11 dated 12th March 1910, and also a copy of Mr. Wood's memorandum dated 22nd September 1969. Mr. Forsgate suggested in his letter the development of discussions "to the point where a proposal regarding investigation of the potential of our property can be considered and put in writing between us". This was followed by a letter dated 14th January 1970 from the property and Store's Manager of Wharf, Mr. Osman Madar, referring to the proposed development of KML 11; this letter was addressed to Mr. T.A. Roberts, a junior partner of Mr. Cumine, and enclosed relevant plans and drawings for the attention of Mr. Roberts. (I interpolate here that Mr. Madar gave evidence on commission. Mr. Roberts gave evidence before me. (Mr. Cumine did not give evidence. I was furnished with a medical certificate to the effect that he was unfit to do so.) Mr. Roberts did not exhibit a high degree of clarity of thought or expression in giving his evidence; but the matters to which he was deposing took place many years ago and all things considered I found him a reliable witness.)

36. The first matter Mr. Roberts considered was an idea of Mr. Madar; that idea contemplated the construction of an annex to the Hong Kong Hotel over three of the existing godowns. This idea, later described as "harebrained" by Mr. Madar himself, was given the thumbs down by Mr. Roberts, who suggested that instead his firm should "prepare an outline development plan and feasibility report"  for a part of KML 11 (see his letter to Mr. Forsgate dated 18th February 1970).

37. On 6th May 1970, Mr. Roberts submitted his "preliminary development report". He referred to the clause in the lease of KML 11 set out above which would preclude the conduct of offensive trades on the land (this was referred to in argument before me as "the tavernkeeper's clause") and expressed the view that the restrictions imposed by the tavernkeeper's clause could normally "be overcome by a formal application for modification". He expressed what he called "development concept" in (so far as material) the following terms :

''Fundamental to the concept of value is the theory of highest and best use. Briefly, this can be defined as that use which at the time of consideration is most likely to produce the greatest net return to the land and buildings over a given period of time. In your case, however, any redevelopment of your land must be geared to the business generated by your wharfing interests..... and also to the all important element of not denigrating your interests in the Ocean Terminal and the Hong Kong Hotel. In effect your land could be more valuable if one considered a high rise low cost housing development, but then its overall effect would be such as to result in development on the lines of Mirador Mansions, etc, which I feel sure you would not wish to be involved in".

(The reference made by Mr. Roberts to "Mirador Mansions" was a reference to a nearby high density low cost residential development.)

38. Mr. Roberts expressed what he called "planning concept and data" in the following terms :

"GENERAL

Apartments - Residential

In considering the nature, type and location of the high rise apartments, a number of schemes were considered. Eventually, however, the conclusion we reached was that the site was such that high quality European-type flats having an approximate net area of 2,500 sq. ft. per flat would result in the best use of the site. Virtually, with the completion of the Ocean Terminal, Hong Kong Hotel, and Star House, the area has dramatically changed and it is considered that apartments located in such a strategic position and having full advantages of harbour views, would have a higher return because of the willingness of the market to pay a premium for these aesthetics. It will be noted that our internal planning for the apartments provide for both four-bedroom and three-bedroom flats within the site area.

Office – commercial

The location of the office/commercial blocks is determined by its frontage on Canton Road and the necessity to preserve the harbour view for the residential complex. By having the benefit of car parking facilities plus the public transport services at the Star Ferry Concourse it is considered that the area is ideally suited for offices".

39. Mr. Roberts spelt out in terms, in his letter dated 6th May 1970 to Mr. Forsgate enclosing the preliminary development report, the fact that "a more intensified development would result in an increased value".

40. On 7th May 1970, a meeting was held at the offices of wharf at which Mr. Forsgate and Mr. Madar were present on behalf of the architects. Also present on behalf of Wharf were Mr. D.R. Bland, then the Commercial Manager of Wharf and Mr. W.D. Mcluskie, then the Financial Manager of Wharf. At this meeting it was decided to incorporated in the planned development the godowns over which, under Mr. Madar's harebrained scheme, the annex to the Hong Kong Hotel was to have been built. The architects accordingly produced, as an addendum, a preliminary report for the development of this additional area; and, on 15th August 1970, they sent to Wharf a preliminary feasibility report putting forward three different schemes for the relevant portion of KML 11. This report expressed the "development concept" as follows  :

"DEVELOPMENT CONCEPT The highest and best use of the land areas which this report is concerned with must out of necessity take into consideration the following important elements -
(a)	the integration of the Ocean Terminal and its approaches with the proposed development.
(b)	The requirement that the development scheme have planning standards which are such as not to denigrate the continued commercial viability of the Ocean Terminal and Hong Kong Hotel ....
(c)	The requirement of providing in an ever changing real estate market a measure of adaptability. This particular point is important when related to a hotel complex, especially when one considers the number of hotel rooms which are either under construction or in the course of being planned."

41. The three different schemes were then outlined.

42. The report expressed the "planning concept and data" as follows :

"PLANNING CONCEPT & DATA

The very real problem of integration of the elements of development is essentially one of traffic circulation, both pedestrian and vehicular. At present vehicular traffic to first floor level of the Ocean Terminal is by means of ramp approaches leading to the taxi area within the Ocean Terminal. Our proposal is for this taxi area to be converted into a shopping complex (providing an additional rental return to your company) and for access on traffic circulation to be relocated ........ The incorporation of such a provision trill provide a through route for pedestrian traffic to the embankment parade and thus the area at present under consideration will be integrated into that of the Ocean Terminal and Hong Kong Hotel".

43. Detailed consideration was then given to the three schemes to which I have referred.

44. The report (page 18) demonstrated that the architects were of course aware of the special plot ratio concessions available to the developer of an hotel.

45. On 19th November 1970, there was a meeting between Mr. Mcluskie, Mr. Bland, and Mr. Roberts, about the project which had by then emerged as the favourite, namely the construction of an hotel complex on KML 11, utilizing additional plot ratio obtained by using the concessions which I have mentioned.

46. In December 1970, the architects prepared a presentation which suggested a wineglass shaped envelope for the proposed hotel project. (The idea of a "U" shaped building had originally been mooted by Mr. Bland at a meeting held on 22nd October 1970 at which Mr. Forsgate, Mr. D. Nolan (the Secretary of Wharf), Mr. Mcluskie and Mr. Bland were present for wharf and Mr. Roberts was present for the architects : all of them approved Mr. Bland's idea.)

47. In February 1971, Mr. Mcluskie on behalf of wharf orally instructed Mr. Roberts to proceed with the preparation of a preliminary sketch design for the proposed hotel development on KML 11, as Mr. Roberts confirmed in writing on behalf of the architects by a letter dated 22nd February 1971, accepting Wharf's instructions, and setting out details of the architects' proposed fees and charges. (This letter received no reply until 15th March 1972, when, with one proposed modification, Wharf in effect accepted the proposed fees and charges.)

48. In the first half of 1971, discussions (which came to nothing) about the proposed hotel development took place between representatives of Wharf and representatives of Hong Kong and Shanghai Hotels Limited (during the course of which discussions, on 20th May 1971, circular 58 was issued).

49. In the summer of 1971, there was concern in the architectural profession about circular 58. To some, its policy seemed misguided on planning grounds (since it discouraged comprehensive development on large sites); and its interpretation, particularly on matters of enforceability, seemed uncertain.

50. On 4th August 1971, the Hong Kong Society of Architects circulated its members with a report of a meeting, held on 1st June 1971 between representatives of the Public Works Department and of the Authorized Architects Liaison Group, at which circular 58 was discussed and a number of points were raised and agreed. The last of these points was expressed as follows :

"Where any possible difficulty is foreseen you should, in the first instance, discussed the matter with the Crown Lands and Survey Office and preferably follow this by submitting a tentative scheme to the [Building Ordinance Office ] for agreement".

(The discussion with Crown Lands and Survey office would be indicated whenever the developer needed a modification of his lease; for it was that office which would be responsible for considering his request for such a modification.)

51. On 6th August 1971 the attention of Mr. Forsgate and Mr. Mcluskie was drawn to the provisions of Circular 58 by another architect, Mr. J.C. Faber of S.E. Faber and Son, in another connection. (Mr. Mader had received a copy of Circular 58 from Hr. Faber under cover of a letter dated 9th July 1971.)

52. Mr. Roberts also had seen the circular of 4th August 1971 and, on 2nd September 1971, he wrote to the Crown Lands and Survey Office in relation to KML 11. He indicated that his clients, Wharf, were contemplating redevelopment of a portion of the lot for hotel purposes. He referred to the tavernkeeper's clause, and on behalf of his clients, he formally applied for a modification to permit the carrying out of the business of victualler or tavernkeeper; and he requested the early consideration and approval of the office to his application. He sent a copy of that letter to Mr. Forsgate.

53. In November 1971, the architects prepared a provisional programme for the proposed hotel project. In this, the very first item included reference to the preparation of calculation of plot ratio and site coverage figures, and it was remarked that these were "required to accord with large site zoning and concessions for hotel project". This was a recognition of the architects' belief in the applicability of Circular 58.

54. Thereafter, Mr. Roberts held informal discussions with Mr. Paul Potter of the Crown Lands and Survey Office on the matter of plot ratio and site coverage for the proposed hotel development. On 31st December 1971, he reported by a letter of that date to Mr. Forsgate in the following terms (so far as material) :

"1. I refer to the undersigned's telephone conversation on 31st December 1971 relative to informal discussion with Crown Lands on the effect of Government decision as to reduced plot ratio and site coverage for large sites in Zone 1 which was introduced after our original development proposals.

2. It is clear from discussions with them that the intent of such provisions does not really preclude the provision of abnormal density which they are seeking, mainly because of the fact that a speculative developer would sub-divide a large site into areas not exceeding 40,000 square feet. Whilst they appreciate this point, they still are of the opinion that the provisions of reductions for large sites in zone 1 will apply and that it would be difficult if not impossible for Government to change the regulations in our particular case. We could fight but then we are faced with the time element.

3. One point which was rather interesting was the fact that we could submit our plans to [the Buildings Ordinance Office ] based on calculations of plot ratio and site coverage for the whole of KML 11. Bearing in mind my previous discussions with you, this would mean that we would be in a position to accord with the Hong Kong and Shanghai Hotel's brief ..... It would mean, however, that when you develop the remainder of the lot in the years to come, the last area to be developed would be reduced in plot ratio and site coverage by a land area of approximately 10,000 sq. ft. It may be, however, that at that point in time the regulations may undergo further changes and in any case future development would out of necessity have to incorporate open areas."

55. Mr. Roberts told me and I accept that Wharf rejected the idea of treating the whole of KML 11 as one site.

56. On 4th February 1972, Mr. Roberts wrote a letter to Crown Lands and Survey Office chasing for a reply to his earlier letter of 2nd September 1971 asking for a modification of the tavernkeeper's clause.

57. Also on 4th February 1972, Mr. Roberts wrote to the Building Authority, enclosing two sets of plans and calculations relating to the proposed hotel project. He informed the Building Authority of a number of matters including the following :

"The site falls within the provision of large sites and the calculations follows the requirement of your circular letter 58".

58. Mr. Roberts told me and I accept that Wharf wanted to make this point; Wharf wanted an early approval for the hotel project, and did not want, as Mr. Roberts put it, "to make waves". Wharf particularly did not want to be faced with having to comply with a master layout plan imposed by the Government on the whole of KML 11. Mr. Roberts mentioned in his letter of 4th February 1972 that his purpose in presenting the proposals was to seek the approval of the Building Authority at that stage in principle only.

59. On 18th February 1972, Crown Lands and Survey Office replied to the chaser of 4th February 1972 sent to them by Mr. Roberts and warning the architects that it was likely to be several months before they would received further information.

60. It will be recalled that the proposed hotel development was a development of part only of KML 11. In this connection the board of Wharf took the view that the development entailed the formation of a separate company, a 100% owned subsidary of Wharf, which would become the vehicle for the operation of the project and which, following its formation, would take a transfer of the designated land area.

61. In conformity with the proposal to transfer the site of the proposed hotel development to a separate subsidary company, the architects were asked to prepare and did prepare plans which provided for a carve up of the lot and which designated the site of the proposed hotel development as KML 11, Section A.

62. On 22nd March 1972, there was a meeting at the offices of Wharf between Mr. Forsgate, Mr. Mcluskie, Mr. Bland, and Mr. Madar (for Wharf) and Mr. Roberts and Mr. Zee (for the architects). At the meeting, Mr. Roberts expressed the fear that there would be complications over the lease conditions. He anticipated the Government's using the tavernkeeper's clause and the drainage rights as a lever to accept concessions from Wharf. He thought the project could go through, but that there could be conditions attached.

63. On 23rd March 1972, Mr. Roberts prepared a brief resume of the information he had given to Mr. Forsgate at the meeting the previous day. Mr. Roberts reported that he had been advised by the Building Surveyor that the scheme had been studied by the Building Authority and that there was no objection in principle to it; but that there were complications attached to the lease conditions and also to traffic conditions. He also reported that during his informal discussions with the Crown Lands and Survey office (he had again met Mr. Paul Potter), he had been advised that generally the Director of Public Works was against the policy of using marine lots with sea frontage for hotel operations and that Mr. Paul Potter had been requested to investigate and report on the lease conditions and whether, bearing in mind that the area was already zoned for commercial use (under Town planning), it was possible to restrict its use. Mr. Roberts reported that the main issue relative to the lease seemed to be on the basis of possible refusal to grant a modification of the lease to permit a tavernkeeping licence. Another issue relative to the lease was the question of existing rights of way for sewers and cables through the lot.

64. Having expressed his concern, Mr. Roberts made it clear to Wharf that it had powerful counter-arguments available. As to the policy point, Mr. Roberts indicated that he did not consider it a valid point, especially bearing in mind that the lot was zoned for commercial use. As to the lease conditions point, Mr. Roberts stated that he was unable to accept it. At no other time had the issue of a licence been refused. It had been merely treated as an administration matter, attracting a premium in the region of $1,000. He did not consider it could be applied to prevent the construction of a luxury hotel. He was of the opinion that the Government must have some fair, solid and substantial cause for disallowing a licence and that for the Government to reply on its refusal as a means of voiding the Town Planning was not in any way substantial. He further mentioned the argument that, if a high density residential development was built, the problems would be greatly increased and the Government would have no power to prevent the development.

65. On 25th March 1972, Wharf resolved to sell to its above-mentioned subsidary, and the subsidary agreed to purchase from Wharf, the land known as Section A of KML 11, being a portion of land of 126,490 sq. ft. in area, for the, sum of $180,630.

66. Mr. Forsgate was himself of the view at this time that the Government were thinking of thwarting the plans of Wharf for the development of Section A of KML 11 as a hotel : see his letter of 28th March 1972 to Wharf's solicitors, Messrs. Deacons.

67. On 11th April 1972, Crown Lands and Survey Office wrote to the architects in further reply to the latter's letter of 2nd September 1971 asking for modification of the tavernkeeper's clause. Crown lands and Survey Office referred to the provisions of the lease relating to drainage rights under ML 11. It stated that the Government wished to retain these rights as reserved in the Crown Lease.

68. On 24th April 1972, Messrs. Deacons wrote to Wharf to tell Wharf of advice they had obtained from counsel about the tavernkeeper's clause. They summarised that advice (correctly) as follows : "although the matter is not free from doubt there are strong arguments which can be put forward in support of the contention that this does not prohibit the premises for use as a hotel ........"

69. In some notes prepared by Mr. Mcluskie for use at a meeting to be held on Monday 1st May 1972, Mr. Mcluskie noted this in relation to the proposed hotel development :

"We have decided on hotel development in order to retain and improve on the standard already set by the Ocean Terminal/Hong Kong Hotel complex. We intend to construct a 1370 room first-class hotel on approximately 120,000 sq. ft. of KML 11. By existing Hong Kong standards, this is a lavish use of land, but it is felt the higher standard envisaged necessary, and which the site itself commands, is worthwhile. Examination of the plans will reveal the operational facilities for absorbing its own traffic flow and contained within the hotel precincts, surpasses anything yet envisaged in Hong Kong".

70. On 18th May 1972, Mr. Roberts had a further meeting with Mr. Paul Potter.

71. On 22nd May 1972, Mr. Roberts wrote to Mr. Forsgate reiterating the points he had made in his resume of 23rd March 1972.

72. On 20th July 1972, Mr. Roberts wrote to Crown Lands and Survey Office pointing out that the plans for the hotel project had been considerably revised and asking again for an approval of the diversion of the drain and modification of the tavernkeeper's clause.

73. On 12th October 1972, there was a meeting of the Public Works Department Land Conference. Notes concerning density zoning prepared for this conference indicated that it was the policy of the Government when it had the opportunity to limit plot ratios in accordance with revised scales. It was thought the large sites reduction factor (that provided for in circular 58) should continue to be applied.

74. On 25th October 1972, Crown Lands and Survey Office at last indicated that it would recommend the modification of the lease conditions to remove the tavernkeeper's clause on payment of an administrative fee only. But the architects were referred to the Chief Engineer, Highways (Kowloon) in connection with the drainage rights.

75. On 24th November 1972, an Appeal Tribunal, appointed under section 43 of the Buildings Ordinance (which confers a right of appeal to such a tribunal on a party aggrieved by an unfavourable exercise by the Building Authority of a discretion conferred on the Building Authority by the legislation), made a determination to which considerable importance was attached in the argument for the clients in the present case. The appellant before the Appeal Tribunal, was Hung Lee Estates Limited and its appeal concerned an exercise by the Building Authority of his discretion under section 16(1) concerning New Kowloon Inland Lot 53 ("NKIL 53") at Ngau Tau Kok. The exercise of discretion complained of was a decision to reject the appellant's plans under section 16(1)(g).  By a deed poll of 1st April 1972, the then owners of NKIL 53 had carved up NKIL 53 into 5 sections described as Section A, B, C, D and Remaining Portion. Section C (the subject of the appeal) became an area of 39,967 square feet: and so was not a "large site" for the purposes of circular 58. It was argued for the Building Authority that he had properly applied section 16(1)(g), taking the view, as he said he did, that the proposed building differed in height from other buildings in the immediate neighbourhood. It was argued for the appellant that, on the evidence, the Building Authority had applied section 16(1)(g), not on any ground relating to the height of the proposed building, but on the ground that the proposed building would constitute more intensive development than that permitted by circular 58. The tribunal found as a fact that the ground on which the Building Authority refused to approve the appellant's plans for the development of Section C of NKIL 53 was that such approval would lead to over intensive development. The tribunal therefore reversed the Building Authority. He had exercised his discretion improperly. This determination seems to have led (rightly or wrongly) to the confirmation or formation of some gloomy views within the Government about the practical utility of circular 58. However, apart from the introduction (which I have already mentioned), on 3rd August 1973, of ground (p) into the provisions of section 16(1), nothing was actually done to strengthen the practical utility of circular 58 from the Government's point of view. Although the determinations of Appeal Tribunals are not reported, news of them carries to senior members of the architects' profession and I am satisfied that Mr. Cumine and Mr. Roberts learnt soon enough about the determination of 21st November 1972. Neither however thought, or had cause to think, that the determination rendered circular 58 a dead letter. Indeed, on 9th January 1973 the Building Authority itself initially put forward Circular 58 to another developer's architects in relation to another site as if it were applicable and enforceable (see the letter of  that date from the Building Authority to Messrs. Harriman Architects, about the Tramways Depot site, Sharp Street). Within the Government there was much anguished discussion of the problem of controlling over-intensive development. Although a number of Government officers appreciated that this was a Town Planning Ordinance problem, not a Buildings Ordinance problem, nothing was done about it in the end other than to introduce section 16(1)(p) into the Building Ordinance, thus confusing matters still further. For no provision of the Buildings Ordinance could be used for the predominant motive of controlling what the Government perceived as over-intensive development. If the provision relied on, whichever one it was, as invoked by the Building Authority for purposes of density control the developer would have been entitled to have the decision of the Building Authority reversed or quashed. But, having regard to the diversity of views about all this held both with the profession and within the Government, I am satisfied that it would have been reasonable for a competent architect to take the view, at this time (as the architects here did), that his client would be well advised to respect the provisions of Circular 58. He could, no doubt, advise his client to take legal advice about the matter; but I reject the view that not to do so would show the want of a reasonable degree of skill and care. Much wider commercial considerations were also involved. Architects in the real world have enough to do without encouraging their clients to litigate with the Government over doubtful questions concerning the Government's powers. The evidence led on both sides satisfies me that a competent architect would advise either compliance with circular 58 or the submission of a scheme for sub-division, which Wharf did not want to propose.

76. On 20th January 1974, Mr. Roberts wrote to Mr. Mcluskie about the proposed hotel. Among other things he reported meeting the Building Surveyor for the area, and having discussion with him on the basis that the site was govered by the requirement for large sites prescribed by circular 58.

77. In February 1973, Mr. Cumine turned his attention to the northern section KML 11 (to be called "Merrylea"). From his notes dated 5th February 1923 it appears that Mr. Cumine regarded Circular 58 as applicable to this area as a large site. He expressed his view of Circular 58 in these terms (I have amended the punctuation):

"This was an act of adjustment of the Building Ordinance; not, I would say legally (not easy to substantiate). But of course, in any dealings with Public Works Department, the obstructive value of their delays is tremendous and not worthwhile incurring".

78. Mr. Madar gave evidence in similar terms. Mr. Madar said "the Government if it chooses can impose all kinds of conditions and eventually we can argue them out but it is a long negotiation period". The evidence leaves me with the impression that this was the view held by Mr. Forsgate and Mr. McLuskie as well. Mr. Madar says that he told Mr. Forsgate in terms that in his (Mr. Madar's) view Circular 58 "would not stand up in Court" and that "we could circumvent the problem by cutting the site into [areas of ] 39,999 square feet each. " He got a reply which paid more credit to his ingeniousness than to his ancestry. He felt at the time that Mr. Forsgate and Mr. McLuskie had no very strong objection to Circular 58. He said "Mr. Forsgate did not want a very high density development ......... he wanted ....... more open space ......". Mr. Madar said, for himself, that he did not think this was harmful to Wharf's interests.

79. On 8th February 1973, the architects submitted new plans, again for approval in principle, relating to the proposed hotel project. The architects again pointed out that the site fell "within the provision of large sites" and that their calculations followed the requirements of Circular 58.

80. The architects gave further thought to the development of "Merrylea". They proceeded on the footing that circular 58 would apply to their proposals and would be enforceable. They demonstrated, in their preliminary report to Wharf dated 12th February 1973, a clear understanding of the concept of a "site", that is to say, an area of land designated by the owner for an intended building, whether the whole or part of one lot or whether consisting of a number of lots, and offered guidance on plot ratio and other relevant concepts.

81. On 12th March 1973, they submitted a programme for the hotel development referring to large site zoning and hotel (plot ratio) concessions; and on 16th March 1973 they wrote to the Highways (Kowloon) Division about diverting the Peking Road drain.

82. On 9th April 1973, the Registrar General forwarded to Wharf a licence dated 7th April 1973 authorizing the use of KML 11 for the purpose of an hotel.

83. On 13th April 1973, the Building Authority replied to the letter from Mr. Roberts dated 8th February 1973 in the following terms :

"I have studied your proposals and found them to be generally in order under the Building Ordinance insofar as basic planning criteria are concerned and having regard to density zoning - Application to Large Sites as covered by circular letter 58".

84. This is clearly an assertion on the part of the Building Authority of the applicability and enforceability of circular 58. In saying so, I do not overlook the fact that the architects had already, in effect, conceded the point.

85. On 25th April, Highways (Kowloon) Division responded to the architects' letter of 16th March 1973 about diversion of the Peking Road drain, stating that they had no objection in principle.

86. On 28th June 1973, the architects concerned with the Tramways Depot site, Sharp Street, opposed the claim of the Building Authority to be able to apply circular 58. (The Government eventually, on 23rd August 1973, accepted that since the large site rules only applied to residential development and the proposals were for a commercial development on an island site, the rules were inapplicable; and on 23rd November 1973 the Building Authority confirmed to the architects that the rules would not be applied "for this project")

87. On 15th May 1973, the architects formally submitted plans for the hotel project to the Building Authority.

88. On 3rd August 1973, the new ground (p) was introduced into section 16(1) of the Building Ordinance.

89. On 29th August 1973, the Building Authority approved the plans submitted on 15th May 1973.

90. On 20th November 1973, the Building Authority disapproved, under section 16(1)(p), plans involving high density residential development which had been submitted to him by Mr. Roberts for the development of NKIL 53 section A. (It will be recalled that section C was the subject of the Buildings Appeal Tribunal decision of 24th November 1972.)

91. On 7th January 1974, Mr. Roberts again met Mr. Paul Potter, now the acting Principal Government Land Agent. Mr. Roberts discussed with Mr. Potter the Merrylea project. On 9th January 1974, Mr. Roberts reported to Mr. Forsgate by a letter of that date, informing Mr. Forsgate that Mr. Cumine was very keen to be involved in the overall planning for the area. Mr. Roberts added this :

"As you will appreciate at the preliminary stage we are concerned with conceptual aspects, viability and acceptability by the Government planners, before becoming involved with the deeper analysis of the project. Basically, the whole exercise is to sound them out as to what would be acceptable and we shall then proceed from there to a more aesthetic conception nearer to your environmental targets."

Although Mr. Roberts did not say so in his letter to Mr. Forsgate, one of the points particularly mentioned in the discussion which Mr. Roberts had had with Mr. Potter was "an overall plot ratio for both domestic and non-domestic". Mr. Roberts did however make this point in the preliminary report on the redevelopment which he enclosed with his letter. Mr. Roberts also recorded in that report his preliminary impressions arrived at as a result of his discussions with Mr. Potter. He recorded that the Government realised that Wharf intended to redevelop KML 11 and was concerned at what their intentions were; and that the Government would endeavour to ensure, within what Mr. Roberts, in his report, called "the restrictive elements of the lease" that redevelopment should be such as not to introduce large high residential densities such as those associated with low cost housing. In his report, Mr. Roberts recorded specifically as follows :

"One of the main objects of my informal discussion was to determine their agreement in principle to consideration being given to permitting an overall plot ratio and not to a piecemeal plot ratio related to individual areas. In other words, not to subdivide the site, but to grant an overall plot ratio with its distribution to be as per an overall concept of development. This principle was in fact agreed by Mr. Potter and he explained that such a procedure had already been agreed in the redevelopment of Holt's Wharf and Taikoo Docks."

92. As it seems to me, this so called "principle" involves as a matter of necessary implication the fixing by agreement of an "overall" plot ratio which would differ from that which would be achieved if Wharf elected actually or notionally to divide KML 11 into a number of separate sites for site coverage and plot ratio purposes. In my judgment, it also follows as a matter of necessary implication that the net lettable floor area achieved as a result of this approach might fall short of that which could be achieved if Wharf were to decide that it would wish, whatever the concerns of the Government, to achieve the maximum plot ratio on each and every part of KML 11 and was in fact to succeed in achieving that objective. Mr. Roberts suggested a meeting with the Government Principal Town Planner for "agreement on a broad basis", and stated that he would prefer a meeting with Wharf in attendance. Mr. Roberts did not expressly point out to wharf that it was a matter for Wharf whether or not it wished to accept his recommendation, but I am satisfied that up to this point there is nothing in the conduct of Mr. Roberts that can fairly be criticized as demonstrating a want of a reasonable degree of skill and care. On the contrary, I am of the view that his proposals were eminently sensible. Neither side called either Mr. Forsgate or Mr. McLuskie as a witness. Certainly, I have no reason to believe that Mr. Forsgate complains about the way in which the matter was put to him by Mr. Roberts back in January 1974 or for that matter at other time. Nor have I any reason to believe that Mr. Forsgate, who had been intimately concerned with the development of the Ocean Terminal and the Hong Kong Hotel, should have been so ignorant of site coverage and plot ratio matters as to have failed to recognise what I have referred to as the necessary implications contained in the report of Mr. Roberts.

93. On 21st January 1974, a meeting was held between Mr. Cumine and Mr. Roberts (representing the architects) and Mr. Bland and Mr. Mcluskie (representing Wharf). It was held to review Mr. Roberts' preliminary report, which now dealt with the whole of KML 11. The Wharf representatives pointed out to the architects' representatives that, at that time, indications by Wharf could only be in general terms, and that, as the area to be redeveloped comprised a large parcel of prime land, it should be looked at in terms of phased projects. There does not appear to have been any query, nor even any discussion, on the point concerning "overall plot ratio" referred to in the preliminary report.

94. On 18th February 1974, Mr. Roberts wrote to Mr. Mcluskie about the Merrylea project. He referred to a telephone conversation between them that morning (he had had earlier discussions with Mr. Forsgate and Mr. McLuskie about it as well) and attached a draft letter (later to become the letter dated 25th May 1974 to which I shall refer hereafter) indicating the suggested approach to the Government and also the concepts associated with the determination of an acceptable brief. Mr. Roberts dealt with plot ratio in the following terms (so far as material) :

"As you will appreciate the plot ratio obtainable depends to a large extent on the master plan and negotiations with the Government, especially in those areas of concessions to accord with the desirability of the overall scheme ...... however, in order that you may have an approximate indication of the plot ratios based on our recommendation of 55%  non-domestic and 45% domestic ..... we set out below our calculations" (which they proceeded to do)."

I need not here detail those calculations; it is however of importance to observe that they were, expressly, based on the assumed applicability of circular 58 with a reduction of 40 per cent in the site coverage and plot ratio available on KML 11. Mr. Roberts stated his proposal as follows :

"We shall, however, endeavour by the presentation of a desirable and acceptable scheme, to negotiate with Government to obtain concessions for acceptance by them of an overall plot ratio in the region of 8".

This is the first reference in the documents to a plot ratio of 8. The genesis of this is to be found in the discussions mentioned above and in some calculations (described by Mr. Roberts as "back of an envelope" calculations) prepared by Mr. Roberts and based on a notional excision of 25 per cent of the site area for roads. The calculations produced a plot ratio of 7.2, which Mr. Roberts rounded up to 8 for the purposes of negotiation. (The figure of 25 per cent is less than the convential 40 per cent which is taken in Hong Kong as representing the proportion of streets to buildings in built up areas. The principle of excision of part of the area of a site for roads, in calculating plot ratio, is contained in regulation 23(2)(a) of the Building (Planning) Regulations and is reflected in the guidance given in the second sentence of the second paragraph of Circular 58.) There is no doubt that this letter of 18th February 1974 amounted to advice from the architects to Wharf (1) that the large site reduction factor was applicable to the proposed Merrylea project; and (2) that a plot ratio of 8 would be beneficial to Wharf. Ignoring Circular 58, the plot ratio which could have been achieved would have exceeded 8; taking the large site reduction factor into account, it would have been reduced below 8. The proposed plot ratio was, accordingly, a compromise: Mr. Madar's evidence was that Mr. Forsgate felt a plot ratio of 8 was more than wharf could have got if Circular 58 had been applied and that he (Mr. Forsgate) was happy with this figure. Mr. Madar still felt that Wharf should have taken on the Government but accepted that any such action would have taken a long time and that Wharf did not want to take on the Government. He thought Mr. Roberts believed that "a circular letter emanating from [ the Director of Public works] has the force of law". Mr. Roberts said this was not his belief. I find that Mr. Roberts did not believe that the legal status of Circular 58 was the same as that of the Building (Planning) Regulations but that he did believe it was right to act on the footing that the Government did have the powers it claimed to have. I judge that to be a reasonable approach and I judge Wharf to be sufficiently well informed to decide for itself whether to adopt or reject it.

95. Also on 18th February 1974, Mr. Roberts wrote to Mr. Forsgate. In this letter, Mr. Roberts did not go into detail on the matter of plot ratio. He indicated however that "in my informal discussion with Government, it was agreed in principle that consideration would be given by them to permitting an overall plot ratio to be applied with its distribution related to an overall concept of development".

96. The draft letter which Mr. Roberts had enclosed with his letter to Mr. Bland and Mr. McLuskie (and which eventually became the letter of 25th May 1974) was phrased in terms designed to authorise the architects to "enter into negotiations with the Government to obtain concessions for acceptance by them of an overall plot ratio in the region of 8."

97. On 19th February 1974, the board of Wharf took a decision, on economic grounds, not to proceed with the proposed hotel project on the southern section of KML 11 (which had been described as "the Marco Polo Hotel").  The minutes of the meeting recorded as follows :

"Preliminary sketches for alternative development on the Marco Polo site, which had been prepared by the Wharf company, and which made certain assumptions, were tabled with an estimate of construction costs and returns which were explained by Mr. McLuskie. Two of these, the most expensive, but showing the highest returns, will involve negotiations with Government on plot ratio. Mr. Williams (a director) felt that in view of the high value of the land involved and the need therefore for maximization of this, these schemes were the most preferable and it was agreed that they should be pursued".

The board formally agreed that the Marco Polo Hotel project should be abandoned and that an alternative office/shopping complex should be proceeded with as quickly as possible.

98. Mr. Roberts discussed this turn of events with Mr. Cumine. On 20th February 1974, Mr. Roberts wrote to Mr. Forsgate, giving a preliminary indication of the approach of the architects.  As to the approach, Mr. Roberts generally said this :

"Without doubt the all important element is the necessity to ensure continuity on the project. It is imperative that the situation is not reached when further construction on the site is delayed by 6 months or more, cognizance, however, should not be lost sight of effecting economies of cost ....... In other words we want to get the project off the hook as soon as possible".

Specifically, Mr. Roberts added this :

"The preliminary report and sketch plans [which the architects were to prepare] will investigate (among other things) the zoning application to large sites and its effect on plot ratio and site coverage......".

99. On 6th March 1974, the Government executed a Deed of Variation authorising the diversion of the Peking Road drain Also on 6th March 1974, Mr. Roberts submitted to Mr. Forsgate a further preliminary report, this time in respect of the office/commercial complex which was to take the place of the hotel. As Mr. Roberts pointed out in his covering letter of that date :

"From the study of the report it will be noted that out recommendation is for the complex to follows the same dimensional proportions and shape as that adopted for the Marco Polo Hotel. The factors influencing our recommendations are also indicated in the report ".

100. Mr. Madar gave evidence that Mr. Forsgate was in favour of this recommendation "mainly because of the time factor involved."

101. In the report itself, the architects set out what they understood to be their "assignment and brief". They did so in the following terms :

"As a result of the decision to abandon the Hotel Project [ the architects] were requested to investigate, report and submit proposals for the erection of an office/commercial complex on the site of the former Marco Polo, cognizance being given to the necessity of continuity, link features with the Ocean Terminal and future development connected with Merrylea."

In their Introduction, the architects said this :

"As mentioned in the assignment and brief, a major factor in the development of the office/commercial complex is the necessity to create a link with future development on the Merrylea site. This large contiguous site strategically located and with the benefit of harbour views must be viewed in the comprehensive context of the development on the former Marco Polo site."

In their "Conclusion and Recommendation" the architects said this :

"It is clear from our study of the various alternative design concept which may be erected on the site that an office/commercial complex based on planning parameters following the existing shape as that for the former Marco Polo Hotel is the most commercially viable proposal, both from rental returns and planning and aesthetic considerations."

I am not persuaded, on the evidence, that this advice was unreasonable. There is force in the suggestion that the alternative view would have been the better one. That, however, is not a matter which, in my judgment, I am called upon further to consider.

102. The architects set out the factors which influenced their recommendation. Their reasoning is so important that I propose (with immaterial omissions) to set out these stated factors in full.

"(1)

For both schemes of development (hotel and office/commercial development) and in view of the size of the sites, development was governed by the provisions of circular letter 58 ....... In effect as this site exceeds 126,000 sq. ft. We have percentage permitted coverage and plot ratio reduced to 60% of that contained in the planning regulations.

(2)

On the hotel complex, Government through the medium of circular 58 introduced certain concessions under the Building Ordinance which were applicable to bona fide hotels. These concessions were incorporated and formed the basis of the former development ...... As a result of these concessions and related to zoning reductions for large sites we have the following plot ratio and site coverage calculations for the hotel complex [ and the architects set out the result]. For the office/ commercial complex we have the following plot ratio and site coverage calculations [and the architects set these out]."

The architects continued :

"From the comparison it will be noted that relative to the two projects there is virtually no difference in provided development for the two schemes. The reason being the bonus afforded by the former hotel development cancels the increase in plot ratio resulting from an office/ commercial development".

This reasoning, which had regard to circular 58, shows a less than perfect appreciation of the position, and that Mr. Roberts made some errors in calculating the difference in provided development between the two schemes. But, again, I do not think Mr. Roberts was here guilty of the want of a reasonable degree of skill and care.

103. On 12th March 1974, Mr. Roberts sent to Mr. Forsgate an appendix to his preliminary report. The appendix represented the architects' appreciation of the resultant improvement in development potential which would result from the adoption of subdivided areas. Mr. Roberts asked Mr. Forsgate to note the following : "I have made no conclusion or recommendation, the reason being related to the unknown attitude by Government to granting a waiver of the provisions of [circular 58] or the delay which could be experienced in negotiations to effect this waiver. I understand unofficially that revisions to the planning regulations to eliminate sub-divisions of large sites are at present being considered by Government .......... I personally feel that by adopting sub-division we shall lose the advantage of continuity described in the preliminary report .......... Another factor which may not be so obvious is the necessity to obtain Government's sympathy and co-operation in obtaining a concessionary [ emphasis added] plot ratio for the Merrylea project. You may, however, consider these advantages are outweighed when cognizance is given to the additional gross floor area obtained by sub-division".

104. In my judgment, Mr. Roberts, here, is laying it on the line. He is expressing a view, but indicating with clarity that the decision is one for Wharf to take. I do not think that, at this state, either, Mr. Roberts can be held to have been guilty of the want of a reasonable degree of skill and care.

105. The brief under consideration was the sub-division of the site into three areas of development. This means, in effect, the creation of three notional sites out of what was, formerly, one notional site. The preliminary report attached a copy of circular 58. In listing additional factors which should be considered, Mr. Roberts said this :

"Government through the medium of circular 58 has imposed a restriction on the development of large sites. In the event of sub-division into areas not exceeding 40,000 sq. ft., the Government's attitude will I consider be obstructive whether it be by restrictions as to access onto Canton Road, the provision of a complicated internal road pattern or protracted negotiations by the requirement of formal approval to a master plan for the whole area. Evidence of this approach by them to sub-division has in one case resulted in the delay of nearly two years to a scheme at Ngau Tau Kok."

106. This is an important passage in the report. Not only does it demonstrate an appreciation of circular 58 and of section 16(1)(p); it also indicates that Mr. Roberts was aware of the Appeal Tribunal determination to which I have referred. But, in my judgment, it is not a matter for the court to decide what weight Mr. Roberts ought to have given to these factors. The question for the court is whether, in giving such weight as he did to those factors, Mr. Roberts fell short of the exercise of the reasonable degree of skill and care properly to be expected of him. In my judgment, he did not.

107. On 14th March 1974, a meeting was held in the office of Mr. Forsgate. This has been referred to as the "no holds barred" meeting. Among others, there were present, on behalf of Wharf, Mr. Forsgate, Mr. McLuskie, Mr. Nolan, Mr. Madar and Mr. Murdoch. Mr. Cumine and Mr. Roberts attended on behalf of the architects. The Notes of the meeting disclose that the meeting was convened to examine the alternative courses of action available to Wharf from which a choice could be made. Mr. Roberts reported that, since the decision had been made to abandon the hotel project, his office had been engaged on the preparation of proposals for the erection of an office/commercial complex. A preliminary report had subsequently been issued. Mr. Roberts continued by outlining investigations that had been undertaken concerning plot ratio, site coverage and shape of the super-structure above the podium level. Investigation had also been conducted into sub-dividing the site into 3 sites of less than 40,000 sq. ft. each to study the possible advantage to, the plot ratio. Mr. Cumine said that this aspect must be considered along with the Merrylea development and he personally foresaw many problems with Government if this approach was pursued. He also advocated the preparation of master plan for Merrylea in the very near future and he felt that certain concessions could be obtained from Government in respect of plot ratio. On the basis of the Marco Polo structure the comparison of plot ratio/site coverage calculations between hotel usage and an office/commercial complex indicated virtually no difference. Various shapes had been considered for the super-structure and Mr. Roberts recommended the present shape be retained. He gave his reasons. Mr. Madar said that a square or retangular shape building was always considered the most economical to construct and produced the maximum rental area. Mr. Roberts acknowledged this as fair comment, but he said that a square building would negate the previous advantages he had mentioned. He pointed out that the adoption of a square building would in effect mean a return to square one with an estimated construction delay of 8 to 9 months. Mr. McLaren (the project manager, who was also present) said that in his opinion the curved shape of building would produce the maximum rental area but the usage of the lower floors was the essential factor improving the viability of the project.

108. The meeting concluded (and this is in my judgment extremely important) with an instruction from Mr. Forsgate to the consultants (including the architects) to proceed with the architects' recommendation to retain the present shape of the building and to proceed with all necessary action to maintain continuity of construction. The meeting concluded with the new project being given the new name "Ocean Plaza".

109. At this stage, then, the architects had laid down their thinking to the clients; and the clients had accepted it. I reject the suggestion that, in tendering their recommendations, the architects failed to exercise a reasonable degree of skill and care. Once again, I am inclined to think that their recommendations were eminently sensible. I do not overlook the argument that decisions on matters of this sort are matters for the clients, not the architects; but I do not see anything in what took place at the "no holds barred" meeting to suggest that the architects preempted the clients from taking an informed decision.

110. When these developments came to be reported to the board of Wharf, the chairman pointed out that the Ocean Plaza scheme retained the same architectural concept as had been proposed originally for the hotel. He stated that the adoption of this would mean a saving of at least one year in completion in comparison with the situation involved in preparation of new plans and their presentation for Government approval. He stated that the architects felt that this presentation was a desirable concept for the area, and that little space would be gained by a re-design on a square block basis. Height was an inhibiting factor. The board considered various criticisms of these concepts. But the chairman pointed out that the concept presented was designed to break up what would otherwise be a monotonous solid mass of buildings. He confirmed that no final commitments would be made without board approval.

111. On 25th May 1974, Mr. Forsgate addressed to the architects a letter more or less in the terms of the draft which had been enclosed with the architects' letter of 18th February 1984. It read as follows:

"I refer to your two letters dated 18th February 1974 relative to your suggested approach to the Government, and the formulation of an acceptable brief as to the nature and type of development on the above and subsequent lots of our Tsim Sha Tsui property.

Your approach and brief are approved in principle, although as you point out the master plan must, out of necessity, be flexible and related to the existing and proposed development on this and an adjoining properties, and, in particular, the decision made on Ocean Plaza, which does not fully utilize the area involved, but can, we understand, be compensated in Merrylea.

As per our recent discussions I now confirm that you are instructed to prepare for our consideration and approval schematic layout plans ...... Ultimately you may enter into negotiation with the Government to obtain concessions for acceptance by them of an overall plot ratio in the region of 8, and our comment above re Ocean Plaza refers".

112. In seeking these instructions, and in obtaining them on 25th Play 1974, I am of the opinion that the architects did not fall short of an exercise of a reasonable degree of skill and care. On the contrary, I think, once again, that their recommendations were eminently sensible.

113. On 4th June 1974, the well-known property consultants Jones, Lang, Wootton, appeared on the scene. They made a submission to Wharf designed to lead to their being appointed as letting agents for Ocean Plaza. They were unhappy with the design of the building. They stated:

"It is our strong recommendation that the building, as currently proposed, be completely re-designed, and that a purpose designed office building be constructed on the site."

They added :

"We believe that the existing plans which were developed from the requirements for a hotel, are likely to produce an office building with a much lower level of general appeal than it is possible to obtain, and furthermore there would be basic inefficiency which would adversely affect the return on investment for all time and which would far more than outweigh the setback incurred by re-planning the building at this time".

114. They put forward an analysis of a possible alternative development. They commented that, in their opinion, the floor layout as currently proposed would lead to a far less than optimal development. It is not for me to decide whether Jones, Lang, Wootton were right or wrong to ring these alarm bells. Suffice it to say that they were rung, but that Wharf, after receiving representations from the architects, decided to ignore them.

115. On 12th June 1974, the architects wrote to Wharf making proposals as to their fees. In particular, they indicated that, in connection with their professional fees, they would include an item for negotiation with the Government, which would comprehend :

"Upon your approval, to enter into negotiations on your behalf with Government with the ultimate aim of obtaining their concession to acceptance by them on an overall plot ratio in the region of 8."

116. On 10th July 1974, William Ling of the architects drew up some calculations for the Merrylea project, showing a plot ratio of 8. In his notes he mentioned also a completely different project, at Hennessy Road, in which the architects were concerned, and on which, although it was a large site, they worked, not on the plot ratio provided for by circular 58, but on the plot ratio provided for by the Building (Planning) Regulations; but, in my judgment, nothing turns on this.

117. On 12th July 1974, Jones, Lang, Wootton presented their first marketing report on Ocean Plaza. In their report, they recorded "we were to accept the constraint of the existing building envelope and avoid, if possible, any substantial alterations to the structural design. " This, as it seems to me, further demonstrates that the clients, with their eyes open, chose to proceed with the envelope in its original form, notwithstanding the alarm bells earlier rung by Jones, Lang, Wootton.

118. Unhappy differences developed between the architects and the marketing consultants. But, in accordance with their instructions, the architects proceeded with their proposals on the footing of a plot ratio of 8.

119. On 13th August 1974, Mr. Cumine wrote to Mr. Forsgate with some protest over the proposals of Jones, Lang, Wootton, and mentioning both in relation to Ocean Plaza and in relation to Merrylea, that the plot ratio was the subject of negotiations with the Government. Mr. Cumine urged : "that the Ocean Plaza Scheme be not stuffed with shopping and open spaces retained ......... [to] provide added interest."

120. On 16th August 1974, Mr. Forsgate replied to the letter of 13th August 1974 from Mr. Cumine. As to his protest, Mr. Forsgate remarked (among other things) : "I would like you to know that we are always open to constructive ideas, suggestions and advice. Some we take, some we don't; on our heads be it." As to plot ratio, Mr. Forsgate assured Mr. Cumine that his points on plot ratio had been fully discussed and went on : "We realise the implications, but trust that when you have a go at the authorities, we might get away with it all". This comment was made in relation to the points which had been put forward by the architects as to plot ratio. These had regard to circular 58; and a memorandum brought into existence by Mr. Cumine towards the end of August demonstrates this. The syntax and grammar are not conventional; but Mr. Cumine records, in relation to the northern part of KML 11 (that is to say excluding the site of Ocean Plaza) as follows (so far as material) : "Treated as one site. This Part of KML 11 is treated as one site for taking into account the reduction of plot ratio and coverage percentage for sites over 40,000 sq. ft. ...... The plot ratio permitted will be one from negotiations with the Government. We have some basis for the kind of plot ratio they may grant since they have granted Holt's Wharf site a development all over plot ratio of 8.0 ........ There is no development of this site that would make the land values comparable with the smaller sites in the neighbourhood or what the Government had been charging as premium for development when changes lease terms have been modified ........ To achieve some reasonable land value for this incomparable site, the terms of development as stated in [circular 58] which lops off some 40% for the plot ratio as well as the coverage ....... This can reduce the amount of building on this site to about 40% of what we are requesting by negotiation ....... There is a method of developing that has been used to defeat this ruling (this is not in the Buildings Ordinance) that is by carving up the site into small sites. But to resort to this and to get a scheme of no environmental merit would be wrong and not necessary ..... The architects expect protracted negotiations without pointing a gun at anyone ...... They expect to be successful ........ The principal object to this whole exercise is to achieve a set all over plot ratio for the development of this site on special terms. To visualise the amount of the office accommodation the site would produce, there would be possible on this site, is to say that, statutorily, the company could develop almost 7 Connaught Centres lying prostrate on the sitel! It would not be financially acceptable if the full plot ratio is not used ........"

121. This memorandum gives an insight into the thinking of the architects at the end of August 1974. In particular, it demonstrates that their intention was to obtain, by agreement with the Government, an overall plot ratio for the Merrylea site.

122. On 24th August 1974, a site coverage problem arose over the planning of a terrace on the 4th floor of Ocean Plaza, as Mr. Roberts reported to a project co-ordination meeting on that date (and at a subsequent meeting on 23rd September 1974).

123. On 31st August 1974, Mr. Cumine submitted to Mr. Forsgate a "report on Merrylea." It contained a section, section III, entitled "Factors influencing project". This is important. It reads as follows:

"This section relates to the formulation of the various design and planning concepts and its relationship to existing land use, zoning considerations and Government Ordinances affecting redevelopment.

Existing land use is confined to Wharfing and Warehousing operations.

The development scheme as proposed by Messrs. Eric Cumine Associates is based on the draft Approved Town Plan for that area in Kowloon known as KPA No. 1 Plan No. 1/44 and dated 3rd July 1967. This plan permits the developer to erect either commercial, residential or warehousing or in combination. Since these plans were formulated, Government through the medium of the Town Planning Office of Crown Lands and Survey have put forward an amended draft town plan which has designated the development as Commercial and with the prays [the road next to the sea] reverting as a public promenade. Both Wharf and Architects have written objecting to such solution........

Restrictions imposed by Government on development of large sites and as contained in [circular 58]. The basic effect of this restriction is that sites exceeding 40,000 sq. ft. is treated as a large site, where the area exceeds 100,000 sq. ft. and related to Zone 1 the percentage site coverage and plot ratio calculations are based on 60% of the First Schedule to Building (Planning) Regulations ........ From a study of the development calculations ........ it will be seen that We have based our scheme with development on an overall plot ratio of 8. This figure is considerably in excess of that permitted under the restrictions of large sites and as Architects it is our intention to negotiate with Government to obtain concessions to provide for a development based on a plot ratio of 8."

124. On 23rd September 1974, Mr. Forsgate approved these proposals, as confirmed by the architects' letter to him of 25th September 1974, confirming also that on the recommendation of Wharf's solicitors a formal submission would now be made to the Building Authority.

125. On 14th October 1974, Mr. Cumine met the acting Director of Public Works, Mr. Bell. On the same day, Mr. Cumine reported to Mr. Forsgate on his discussions with Mr. Bell. In particular, he reported on his discussion of plot ratio. He did so in these terms:

"Plot ratio. The extent of density control by means of a reduction in plot ratio in large sites is one of the matters for negotiation. It appears that the Government has deemed the harbour front of the Holts Wharf worthy of an integrated scheme and has given a plot ratio which I believe to be 8.5.

We are expecting to come to an arrangement for 8. This is based on the GFA being 1/3 domestic and 2/3 commercial.

He was shown a drawing illustrating a carving up of the site to avoid the large site control reduction operating. This would not be what my clients wanted nor what I would like to be a party to! This would result in a GFA of 3.52m, sq. ft.

With the reduction control operating in density control 2.45m. Present request 3.40m."

126. It will be seen that Mr. Cumine was putting forward to Mr. Bell a proposal for a total gross floor area a little less than could be obtained if the Building (Planning) Regulations were applied (the lot being carved up into a number of smaller sites so as to avoid the operation of circular 58) but a lot more than would be obtained if the large site reduction factor prescribed by circular 58 was to be applied to the whole.

127. On 16th October 1974, Mr. Parsons, Chief Building Surveyor/Kowloon, reported to Mr. Kennard, Principal Government Building Surveyor, on the Merrylea project. Mr. Parsons noted as follows:

"On the basis of a zone 1 class A site, and having regard for the height of the proposed buildings, the permitted plot ratio/site coverage figures are: Domestic 6.8/34%. Non-domestic 12.2/60%. In the architects' Development Report, reference has made to 'restrictions imposed by Government ........ as contained in circular 58 ........'. This letter (which embodies a 40% reduction factor on the plot ratio/site coverage figures quoted above) was effectively declared to be 'ultra vires' by the Appeals Tribunal and consequently section 16(1)(p) of the Buildings Ordinance was enacted which empowered the Building Authority to refuse plans where he thought a site was not adequately provided for in terms of roading. Notwithstanding this, the architects (and they are not alone in this) appear to be under the impression that the circular 58 large site reduction factors are mandatory since, apart from reference to circular 58 in their Report, they have applied these factors to the Ocean Plaza submission, as they did also to the Marco Polo submission. (In the Ocean Plaza case, being a non-domestic building, the permitted plot ratio is 12.2 but the architects have based their submission on 60% of this - namely 7.3 but actually 7.1 - and by so doing have 'given away' five times 126,490 sq. ft. equals 632,450 sq. ft.)"

128. Mr. Parsons considered that the project was acceptable in section 16(1)(p) terms. He recommended that "large site" consideration might stop there. He went on to note:

"The architects on page 8 of their Report suggest concessions to provide for a composite plot ratio of 8 - this being the zone 1 class A over 200 ft. domestic factor, probably having in mind that but for the Airport restrictions development in excess of 200 ft. P.D. would be possible. In this connection a 'concession agreement' already exists, of course, insofar as airport restricted height hotel buildings are concerned, leaving a factor in the commercial/residential complexes for concession consideration. However, no matter the foundation for the proposed P.R. of 8, if the permitted plot ratio factors of 12.2 non-domestic and 6.8 domestic are applied to the gross floor areas quoted in the Report (which combined give a composite P.R. of 8) the following calculation emerges" [Mr. Parsons then sets the calculation out and continues]" In addition to this unused area, there is also the unused area of 632,450 sq. ft. on the Ocean Plaza site - in other words well over 1 million sq. ft. of floor space is being given away in respect of KML 11 as a whole and by the same token in 'accepting' the proposed composite P.R. of 8, no concessions are in fact being given under the Buildings Ordinance."

Mr. Parsons added:

"Whilst on the subject of plot ratio, it is probably helpful to recall that the New World project has a gross P.R. of about 7.7 which compares with a KML 11 (whole) gross P.R. of about 8.5. (In this connection perhaps it is pertinent to recall the KML 11 is virtually lease unrestricted and has no Town Plan obstacles, whereas a substantial portion of the New World site (KPP 24) has lease and Town Plan obstacles). The Sheraton Hotel was granted hotel concessions' including the adoption of the 200 ft. plus plot ratio/site coverage factors."

129. On 18th October 1974, Mr. Cumine addressed a memorandum to Mr. Roberts. It appears from that memorandum that the Merrylea project was now to be known as "Harbour City". Mr. Cumine was anxious to obtain some sort of response from Government and pointed out that "the final thing is of course several people in concert will have to give us a plot ratio figure". Mr. Roberts suggested a meeting be set up with "Crown Lands" to get approval in principle to a plot ratio of 8.

130. On 22nd October 1974, Mr. Forsgate wrote to Mr. Cumine, thanking Mr. Cumine for his letter of 14th October 1 974, and adding:

"We are glad to read that you have made so much progress with the acting Director of Public Works, and trust that your representations on our behalf will be successful.  We confirm our instructions that the name of the project should now be changed to Harbour City Development ......."

131. A meeting was in due course set up with Crown Lands and Survey Office, as the architects informed the clients by a letter of 24th October 1974. The meeting, said the architects, had "been arranged to discuss the plot ratio for the development seeking something similar to what was granted to the development on the Holt's Wharf site".

132. On 28th October 1974, the architects held two meetings with Government officers. One meeting was with the Principal Government Town Planner, Mr. Meyers, and the other meeting was with the Government Land Agent, Mr. Moore. (These two were concerned respectively with planning matters and lease condition matters; buildings ordinance matters being the concern of Mr. Stean, mentioned below.)  Mr. Cumine reported on these meetings to Mr. Forsgate by a letter dated 29th October 1974, in which Mr. Cumine recorded:

"There was not too much discussion since they agreed that the scheme was acceptable to Government ........ They were sympathetic with the requests but they avoided complete acceptance of the plot ratio because the same was still being studied by Mr. Jack Stean of Development".

(Mr. Steen told me in evidence and I accept that he thought the scheme was a sensible scheme and that he would have attempted to impede a scheme which utilised the maximum available plot ratio.)

133. On 29th October 1974, the architects submitted formal plans to the Director, Public Works Department. In their covering letter, they noted:

"As this is an integrated scheme of quality, it is perhaps reasonable for my clients to request a modification of the large site restrictions imposed upon sites over 40,000 sq. ft. This scheme shown has a combined plot ratio of 8, 1/3 being domestic and 2/3 commercial with car parking, mechanical plant and other usual exclusions from plot ratio calculations in accordance with the Buildings Ordinance."

134. The architects asked the Director formally to inform them of  "the acceptance or refusal on this point of the plot ratio and coverage."

135. On the same day, 29th October 1974, the Principal Government Land Agent noted, in an internal memorandum, that he believed "that both the Buildings Ordinance Office and the Town Planning Office are quite happy about the form of development and that indeed the plot ratio is less than that which could be obtained on this site".

136. On 5th November 1974, the Planning Officer/Kowloon made some calculations of his own. He noted the architects' proposal for a maximum permitted non-domestic plot ratio of 12-20 and a maximum permitted domestic plot ratio of 6.80 and gave his own theoretical calculation of 7.32 and 4.08 for these respectively. He also noted a difference in total gross floor area which he said was "due to the fact that the large site reduction rule has not [ s.q. this seems to have been a slip] been taken into account by the [architects']  proposal although this rule was declared 'ultra vires' by the Appeals Tribunal ......."

137. Also on 5th November 1974, the Principal Government Land Agent wrote to Mr. Cumine, referring to the meeting of 28th October 1974, and drawing attention ''from the land [i.e. lease conditions] aspect" to the tavernkeeper's clause and the Haiphong Road drain.

138. On 6th November 1974, the Principal Government Town Planner, Mr. Meyers reported to the Director of Lands and Survey on the project. Mr. Meyers, in his introductory paragraph, said this:

"This site, which comprises about 429,550 sq. ft. was zoned commercial/residential/warehousing on the approved statutory plan for Tsim Sha Tsui plan no. LK 1/44 although on the tentative draft plan [ LK 1/50 ] that is now under circulation the site was zoned commercial with the harbour frontage open space. If this scheme proceeds, this zoning can be changed to commercial/residential in conformity with the wishes of the developer. About 1/3 of the total gross floor in the scheme is for domestic use, and the remainder non-domestic, so C/R zoning would be appropriate. Apart from the offensive trades clause, the leases are unrestricted in terms of user."

In the next paragraph of his report, Mr. Meyers noted:

"The site is in a Zone 1 area and the scheme does not represent full development under the Buildings Ordinance. The large site reduction rules have not been strictly applied. The Appeals Tribunal has recently declared the large site rules to be 'ultra vires' and section 16(1)(p) of the Buildings Ordinance has been enacted in lieu. These rules can therefore be ignored in this context. The height limit above P.D. is 200 ft. P.D. and this has given the developers a maximum of 17 storeys throughout and a composite plot ratio of 8. Although up to 2 storeys 64% coverage over the whole site is obtained, above this level the coverage is only 41.8% The building coverage is acceptable."

139. He suggested that a meeting be arranged, on the same lines as for the Holt's Wharf project, to investigate the project in more detail.

140. On 9th November 1974, Mr. Roberts attended at the Buildings Ordinance Office. He was invited to amend the plans for Ocean Plaza, which had included plot ratio calculations worked out in accordance with the provisions of circular 58. He was invited to substitute in this connection the figures for plot ratio given by the Building (Planning) Regulations. Mr. Roberts did so. This gives rise to the one conflict of oral evidence I have had to resolve. Mr. Roberts says that this was a device to get over the problem he had had over the provision of the 4th floor terrace mentioned above. The officer on whom he attended, Mr. Lau had no recollection of the meeting, but his contemporaneous notes suggest that the only point of it was to cause the plot ratio and site coverage calculations to reflect his belief as to the inapplicability of Circular 58 (on the basis of which they had been prepared). The point made by Mr. Roberts was not put to Mr. Lau. My finding is that, nevertheless, the actual recollection of Mr. Roberts is to be preferred.

141. On 12th November 1974, however, and notwithstanding what had happened on 9th November 1974, Mr. Cumine submitted a drawing (C1) to the Building Authority for the attention of Mr. Parsons, showing the architects' proposed calculations for plot ratio in respect of the Harbour City development, again worked out in accordance with the provisions of circular 58.

142. On 15th November 1974, Mr. Bell wrote to Mr. Cumine. He referred to Mr. Cumine's letter of 29th October 1974 and to his meeting with Mr. Cumine on 14th October 1974. He said this:

"The plot ratio and site coverage shown on your drawings is acceptable and there is no intention on my part to impose any further restriction under the large sites rules."

143. It is to be noted that (save perhaps to Mr. Roberts on 9th November 1974) at no stage had anybody on behalf of any of the Government departments involved indicated to anybody on behalf of the architects that the provisions of circular 58 could be ignored, whatever views were being expressed within the Government. The letter dated 15th November 1974 from Mr. Bell to Mr. Cumine rather suggests the contrary; a reader of this letter would be entitled to conclude that if it had been Mr. Bell's intention to impose further restrictions under the provisions of circular 58, he would have felt himself empowered to do so.

144. On 25th November 1974, Mr. Parsons for the Building Authority wrote to the architects stating that "in principle the calculations attached to your letter of 12th November 1974 are acceptable".

145. On 27th November 1974, Wharf divided KML 11 into 4 sections, sections A, B, C and RP (remainint portion). And on the same day, Wharf assigned section A to Ocean Plaza Limited and section B to Harbour City Limited.

146. On 13th December 1974, the Building Authority approved the plans submitted for Ocean Plaza.

147. On 6th January 1975, Mr. H. McAteer, a Government Building Surveyor, recorded: "I think no-one in the[ Building Ordinance Office ] has ever been happy with [Circular 58] and it has been the source of considerable, trouble, delays and misunderstanding ….. perhaps the greatest confusion has arisen because [architects] and their clients have tended to regard density zoning and the large site reduction factors as requirements under the Buildings Ordinance ........ even some of the Buildings Ordinance Office professional staff have tended to forget that they are not........   in my opinion [Circular 58] should be cancelled and replaced by a new practice note ......."

148. On 19th February 1975, the architects reported to the clients, stating in relation to the Haiphong Road drain :

"no problems anticipated."

149. On 3rd April 1975, Ocean Plaza Limited changed its name to Ocean Centre Limited.

150. On 24th April 1975, Mr. Cumine wrote to Mr. Forsgate about the Harbour City development, referring to a "master scheme" and enclosing the drawings for the scheme. He stated "there would be more supplementary drawings and calculations to accompany this set to be submitted to the Government for an agreement on plot ratio ........ This agreement is essential at this point ....... detail planning of this scheme will have to be done ........ stage by stage upon your giving us instructions."

151. On 12th September 1975, Mr. Meyers, the Principal Government Town Planner, recorded in a memorandum to the Principal Government Land Agent: "The large site reduction factors are not entirely replaced by section 16(1)(p) ....... as they take account of density and amenity as well as road components... .... the reduction factor was originally prepared to give guidance in assuming and determining development potential of large sites in the absence of detailed layouts ........ when considering the development of large sites for which there are no detailed layouts indicating access roads amenity areas, open spaces, etc. which are not count[ed] for [site] coverage and plot ratio calculations, a certain percentage must be assumed and deducted from the area when working out the net building area, and the amount of development. Without this guidance, developers would find it very difficult to assess the approximate development potential of large sites unless detailed layouts are prepared and agreed. The present rules are well known to developers ..... I suggest that the rules should remain ........"

152. On 31st October 1975, the Building Authority approved re-submitted plans for what was now Ocean Centre, including plans showing revised plot ratio calculations based on a plot ratio of 8.

153. On 15th December 1975, the architects submitted to the Building Authority plans for Harbour City. On 16th December 1975, the architects wrote to Wharf stating that they had done so. They also stated "the target in all this exercise is to confirm the plot ratio of the site and this is the agreement we wish to obtain from the authorities".

154. On 2nd January 1976, the architects wrote to Wharf giving an appreciation of the nature and type of residential development for what was to be phase I of the Harbour City project. This appreciation took into account, at the request of Wharf, the fact that the plans formally submitted to the various authorities related to the question of ensuring residential/ commercial development on the site, and to the determination of a plot ratio. It recommended no denigration of Wharf's Ocean Terminal, Hong Kong Hotel and Ocean Centre development and expressed an aversion to the idea of housing for low income groups.

155. On 15th January 1976, the Building Authority approved the plans for Harbour City which had been submitted on 15th December 1975. On 23rd January 1976, the approval letters were handed by the architects to Mr. Forsgate. Mr. Cumine said on that occasion that the architects' present work was over, in that they had secured, among other things, an approval of the plot ratio. On the same day, 23rd January 1976, Mr. MrLuskie, on behalf of Wharf, wrote to the architects referring to the acceptance of the development plans for Harbour City and in particular to the plot ratio (although as it happens he stated it incorrectly). He added:

"We take this opportunity of thanking you for the concentrated effort and successful conclusion to the many prolonged negotiations which you conducted on our behalf."

It is fair to observe that "negotiations" on a plot ratio figure  had never really taken place at all. Mr. Cumine had had a meeting with Mr. Bell and had put forward a proposal for an overall plot ratio. Much work had gone into formulating this proposal and in obtaining the final approval of the Government to the plans for the proposed development: but a "negotiation" on the overall plot ratio figure, properly so-called, was never held.

156. In fact, the exact plot ratio achieved at this stage was 7.855 (There were some inaccuracies, in my judgment insignificant, in the letter dated 9th February 1976 in which Mr. Cumine reported this to the clients.)

157. On 30th April 1976, Wharf agreed with the architects that, for the continuation of the Harbour City project, Mr. B.C. Penman would be the partner in charge of design and administration. Mr. Penman gave evidence before me about his part in the progress of the development, in particular in relation to the architects' approach to plot ratio matters with particular reference to exemptions. I accept him as a reliable witness, and I shall return later to the matter of exemptions.

158. On 18th June 1976, Messrs. Deacons for the clients, initiated further correspondence with the Government about the tavernkeeper's clause as affecting the various sections into which KML 11 had been divided.

159. On 16th September 1976, Mr. Penman made an internal memorandum for a discussion with Mr. McLuskie, referring to the plot ratio, and reminding himself that a plot ratio of 7 .8, not initially utilising the fully permitted plot ratio, left some flexibility for adding areas in the future. (The proposal considered, then known as design 76D, later became 76G: see below.)

160. On 13th October 1976, the architects requested some instructions about Harbour City; and on 18th October 1976 Wharf wrote giving those instructions, which were to proceed with the next stage of design for Harbour City based on what was then known as scheme 76G. This involved 3 curved residential blocks, 6 office blocks facing Canton Road and a hotel at the northern end, with an overall plot ratio of approximately 7.9.

161. On 1st January 1977, Wharf was granted licences which enabled them to operate hotels on KML 11. These were licences granted respectively to Ocean Centre Limited, in respect of section A, Harbour City Limited, in respect of section B, and Wharf in respect of section C and RP. This was the end of the story so far as the tavernkeeper's clause was concerned. But until then the Government was not committed to grant any modification of the lease in favour of these licensees.

162. On 28th January 1977, Mr. Meyers, the Principal Government Town Planner, told a meeting of the Building Committee of the Housing Authority, of which Mr. Forsgate was acting Chairman, that the large sites reduction rules had to applied to the development under consideration by the meeting.

163. On 26th August 1977, the architects submitted to the Building Authority amended plans for Harbour City. The amended plans were based on an overall plot ratio of 8.

164. On 4th November 1977, the period began which was to expire 6 years later on 4th November 1983, the date of the issue of the writ in this action.

165. On 26th November 1977, an Occupation Permit for Ocean Centre was issued, thus bringing to a conclusion the saga which had started with the original propcsal for a hotel on that part of KML 11. And the development of Harbour City proceeded in three phases. Phase I was commenced first. Phase III (there was no phase II) was commenced next (it overtook Phase L and was finished first). Phase IV was commenced last (but during the building of Phase III).

166. On 25th September 1978 the Government executed a Deed of Variation authorising the diversion of the Haiphong Road drain. That was the end of the story so far as the drains under KML 11 were concerned. Again, until then, the Government was not committed to grant any modification of the lease in this connection.

167. Towards the end of September 1978, Mr. Cumine discussed the Harbour City development with a Mr. Peter Woo. Mr. Woo gave evidence before me, which I accept. Mr. Woo was about to become a member of the Board of Wharf. He regarded it as important to find out more about Harbour City. Mr. McLuskie told him of the "negotiated" plot ratio of 8 which was the maximum; and suggested to Mr. Woo that a new negotiation might produce less. Mr. Woo was anxious to discuss with the architects the following questions (among others):

(1) Was it too late to make a change if so advised?

(2) Could the plot ratio be increased?

He met with Mr. Cumine to discuss these questions. He told Mr. Cumine he did not have any particular plans to change the development, but that he did want to know whether it was too late to change if required. Mr. Cumine answered in the negative, but said it would be regrettable. He had worked a long time with the Government on it. Mr. Woo told Mr. Cumine that he understood the plot ratio was 8, and asked Mr. Cumine about it. Mr. Cumine replied that the figure had been specially negotiated with the Government and that Wharf was lucky to get a plot ratio of 8. He said the design was very special. It was a composite development: office/shopping/ apartment/hotel. Mr. Cumine said that to change now would be to jeopardize what had been negotiated. He confirmed that on a negotiation Wharf might obtain less. His advice on these matters was quite unequivocal. After the meeting, Mr. Woo felt the plot ratio point could not usefully be pursued. Mr. Woo told Mr. Cumine that he wanted the earning potential of the site maximized. Mr. Cumine's response was that the plan was as far as Wharf could go. If Mr. Woo had been told that the use had not been maximized, Mr. Woo would have put this before the Board of Wharf with a view to obtaining a Board decision that more should be added. Mr. Woo would have expected the Board to take such a decision.

168. On 11th May 1979, at a meeting of Wharf's, Board, Mr. Woo dealt with a comment that Wharf had only limited experience in property development. He said that Wharf had been and was developing land projects costing hundreds of millions of dollars and that he did not think that Mr. Forsgate (who was present) or other members of the Board would agree that Mr. Forsgate was lacking in expertise.

169. On 15th July 1980, a minute of a meeting of the consultants engaged on the project recorded that the use of the maximum plot ratio had been looked into as a result of which additional floor space could be provided as a link between two of the office blocks up to the 13th floor. Wharf asked for this to be done. It was done. (Later more shops and two mini-cinemas were provided as well.)

170. On 2nd September 1981, an Occupation Permit was issued for phase III of Harbour City.

171. On 4th March 1983, an Occupation Permit was issued for phase I of Harbour City.

172. On 1st August 1983, Ocean Centre Limited assigned Ocean Centre (built on section A of KML 11) to Harbour City Limited. Also on 1st August 1983. Wharf assigned Pentland Court and Trinity Court (parts of Harbour City built on the remaining portion of KML 11) to Harbour City Limited. On 9th August 1983. Harbour City Limited changed its name to Wharf Properties Limited. (This company is the 1st Plaintiff.)

173. On 4th November 1983, the writ in this action was issued. (In the same month, November 1983, Circular 58 was withdrawn.)

174. On 12th December 1983, an Occupation Permit was issued for phase IV of Harbour City. The development was complete.

175. These are the facts. I have reached the clear conclusion upon them (leaving aside for the moment the matter of exemptions) that the architects did nothing to justify the reproach that they exhibited any want of reasonable skill and care in the discharge of their duties. Indeed, in my judgment they deserve rather to be commended for their achievement. I find that Wharf was at all times anxious to get on with the development of KML 11 with the minimum of delay, at the same time keeping all its options open as far as possible. It wanted to maintain its wharfing operations on KML 11 as long as it suited itself to do so. It wanted to maintain the integrity of KML 11 and keep the praya within KML 11 under its own control. It wanted to avoid the constraints which it feared, reasonably, the Government might try to impose on it if it got into a confrontation with the Government over density of development. And it wanted the sort of development which would do it credit even if it involved (to borrow the words of Mr. McLuskie)  "by Hong Kong standards a lavish use of land. " In all this Wharf, with the assistance of the architects, succeeded.

176. I return now to the matter of exemptions, with which I can deal much more shortly.

177. So far as exemptions are concerned the case raises questions of principle and detail.

178. The question of principle arises because, as the evidence shows, there are (at least) two possible approaches to the matter of exemptions.

179. The approach of the architects was (as I find) to claim and utilize only such exemptions as they needed to do in order to achieve the design purpose. The duty of the architects (they say) is to claim and utilize only such exemptions as are required to satisfy the requirements of the design of the building approved by the building owner, as (perhaps) varied from time to time. This approach leaves available an unquantified reserve of unclaimed exemptions which can be claimed and utilized as occasion demands. There is then no risk of "over-designing" the building by claiming more exemptions than can ultimately be justified, a course which might involve exceeding the permitted plot ratio and the risk of refusal, on this ground, of an occupation permit.

180. The alternative approach is to design to the limit of the plot ratio on the basis of all available exemptions (including those open to doubt, leaving the Building Authority to reject the plans, if it objects to the extent of the claim for exemptions). This approach treats as the paramount consideration the achievement of a building of a gross floor area utilizing the whole of permitted plot ratio. The objection is to maximise plot ratio "spot on"; if there is a risk of excess, you can, for example, leave out part of the final floor of a building. At all stages the building owner must be kept informed of available exemptions and advised as to their utilization, and his instructions obtained if for any reason the maximum gross floor area cannot be achieved.

181. The architects' approach, of which Mr. Penman gave evidence, was supported by the architects' expert, Mr. C. Haffner. He said: ''It is one of two or more approaches which would be equally acceptable ........ it is a valid approach ........ the purposes of the exercise on exemptions ........ of getting the building up as quickly as possible in relation to ........ the client approved design would seem to me to indicate that a safe approach to exemptions ........ has a lot in its favour".

182. In cross-examination, Mr. Haffner maintained this position. At the conclusion of his cross-examination I asked Mr. Haffner (who has practised as an architect in Hong Kong for 29 years) whether he had any experience of plans produced by other architects for submission to the Building Authority in relation to exemptions. He answered affirmatively. I asked him about claiming exemptions only so far as necessary to satisfy the Building Authority in relation to a particular design for which the architect was seeking approval. He said "that might well be described as the more normal practice."

183. The clients' expert witnesses, Mr. K. B. O'Sullivan, Mr. S. R. King and Mr. Lei all supported the alternative approach. But in cross-examination Mr. O'Sullivan gave the following evidence:

"Q.	Now, Mr. O'Sullivan, what these architects did was to draw on exemptions as and when they felt they needed them (1) to achieve the design objective; (2) to achieve it within the permitted plot ratio. Do you follow?
A.	Yes.
Q.	Is that fundamentally wrong?
A.	No, no."

184. And counsel seemed to me to recognise, when cross-examining Mr. Haffner, the legitimacy of the architects' approach. He put the point twice. First he said: "Now, in relation to the other matter I want to ask you about, what I call "over-design or "under-design" and I should make it clear what I am putting. It is legitimate to adopt either ........ the "over-design" approach or the "under-design" approach but if you adopt the "under-design" approach you have got to be alert to the need for more flexibility in your concept and design so that you can take up the slack at the end of the day if the client requires you to do so. Do you agree with that proposition?" Then he put this: "You know what I mean by the "over-design" and "under-design" approaches? To produce an envelope which is slightly larger than needed for the immediate application of the gross floor area to which you are planning and the other is to design an envelope which is slightly small to accommodate the gross floor area thrown up by the permitted plot ratio after deducting of course the exemptions that you bring into account at that stage. Now I was putting to you that either of those approaches [is] a legitimate architectural process ........".

185. On the evidence, I am not satisfied that the architects were guilty of a want of a reasonable degree of skill and care in adopting their preferred approach. In these circumstances there is in my judgment nothing left in the claim against them in relation to exemptions, for in the end they achieved (as I find) what they set out to achieve.

186. If I had come to the contrary conclusion, I would have had to consider the question of detail to which I have referred. If the only proper approach had been the alternative approach I would have found almost entirely justified the criticisms made by the clients of the architects' actions (or inactions) in relation to exemptinons. On this basis, the architects' conduct would have been illogical and unsystematic, and I would have unheld the clients' charge of negligence against the architects. I would have found they had failed to exercise a reasonable degree of skill and care in claiming and utilizing the available exemptions. I must add on the matter of detail that counsel for the architects elected not to challenge the detail of the clients' case on exemptions.

187. If I had decided that the architects had been negligent in any of the advice tendered to the clients about the development of KML 11, I would not have accepted the contention that the clients' cause of action is barred by limitation. The architects, if they negligently advised in the clients in the first instance, in my view must be held to have continued to offer that negligent advice to the clients well past 4th November 1977. They would have been under a continuing duty to the clients to correct their own mistakes, and they would have failed to discharge that duty.

188. Although the clients have failed on liability, I must state briefly my findings on quantum.

189. The clients' case was that they could have achieved a development of KML 11 to an overall plot ratio of 10.31. They proved that if the architects had designed a development, of comparable quality to the existing development, using this plot ratio, and taking 6 months longer to build, this (using the income flow method of valuation) would have given them a development worth $1,842.63 million more than the development they got. The figure pleaded as the clients' maximum loss on this basis was $1,748.90 million. I will treat the clients for this purpose as having lost the opportunity of obtaining something worth $1,748.90 million more than they did obtain. The clients accept that in valuing this lost opportunity a discount must be made for the many and various factors which might prevent or hinder its realisation. For example, the particular development which Mr. S. R. King says could have been achieved not only might but on the evidence would have been opposed within the Buildings Ordinance office. But I have had no evidence and have heard no argument which has suggested to my mind that the discount should be massive rather than substantial. I would have assessed the clients' damages at $1.5  billion on the claim generally.

190. If the clients had succeeded on the claim about exemptions but had otherwise failed, I would have held that exemptions could have been claimed in relation to (1) non-accountable areas; (2) hotel bonus; and (3) dedication bonus as follows:

(1)	6,029 sq. m. (Harbour City)
(2)	(a)	1,184 sq. m. (Marco Polo Hotel)
	(b)	1,480 sq. m. (Prince Hotel)
(3)	(a)	5,722 sq. m. (Harbour City)
	(b)	1,839 sq. m. (Ocean Centre)

191. The loss is 16,254 sq. m. of gross floor area. I do not accept the criticism that the ground floor of the Marco Polo Hotel should have been claimed as an exempt basement. In my judgment, the ground floor of the Marco Polo Hotel (which I have inspected) is not a basement but a ground floor, although one has to go down some steps from street level to get to it. Subject to this point, I would have accepted the clients' case about exemptions in its entirety. I would have assessed the damages as I was asked to do, 16,254 sq. m. at an average of $6,500 per sq. m.: $105,651,100.

192. In fact this claim has failed. But I would add by way of postscript that this is not due to any want of skill and care on the part of those responsible for preparing and presenting it. The preparation of the clients' case by their solicitors and junior counsel and the presentation of it by their leading counsel was of a quality it would be difficult to equal and impossible to surpass.

ANNEXURE 1

FIRST SCHEDULE
PERCENTAGE SITE COVERAGES AND PLOT RATIOS

ANNEXURE 2

Appendix II

Density Zoning
Application to Large Sites
Percentage of Permitted Site Coverage and
Plot Ratio for Various Sizes of Site

Size of Site (sq.ft.)

Appendix II (Cont'd.)

Density Zoning
Application to Large Sites
Percentage Site Coverage and Plot Ratios Applicable
to Sites of 100,000 sq. ft. and Larger
Zone 2 (Based on 60% of permitted site coverage and plot ratio)

Density Zoning

Application to Large Sites
Percentage Site Coverage and Plot Ratio Applicable
To Sites of 100,000 sq. ft. and Larger

Zones 3 (Based on 75% of permitted site coverage and plot ratio

Height	All Sites
No. of storeys used for domestic purposes	Max. Site coverage %
2 3 4 4 - 7 8 - 12 13 - 20 More than 20	23 19 17 15 13 11 See Appendix III

Appendix II (Cont'd)

Density Zoning

Application to LARGE Sites
Percentage Site Coverage and Plot Ratio Applicable
To Sites of 100,000 sq. ft. and Larger
Zone 1 (Based on 60% of 1st Schedule to Building (Planning) Regulations)

APPENDIX III

NOTE: