KAM LAN KOON AND OTHERS v. SECRETARY FOR JUSTICE for and on behalf of THE DIRECTOR OF LAND

HCAL 42/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMINISTRATIVE LAW PROCEEDINGS NO. 42 OF 1997

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J U D G M E N T

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1. This is an application by the applicants for a judicial review to quash the decision of the Director of Lands (the Director) dated 21st March 1997 refusing to extend the lease of Lot No. 1943 in DD 121 upon its expiry by effluxion of time on 27th June 1997, leave having been granted on 20th of June 1997.

2. Kam Lan Koon was originally a religious organisation founded in China for the propagation and dissemination of the teachings of Taoism. After the founding of the new China in 1949, the 1st applicant, being a branch of Kam Lan Koon was established in Hong Kong by members of the Kam Lan Koon and other Taoist followers as an unincoporated association of persons.

3. The 2nd applicant, Hong Kong Kam Lan Koon Limited was incorporated in June 1972 with a view to properly manage and control the business and affairs of the 1st applicant.

4. The 3rd applicant Wong Tung Wing/Wong Ting Wing was one of the founders of the 1st applicant. He was and still is the head of the 1st and 2nd applicants' committee member.

5. In 1964, one Dr. Cheung Kung Leung, a medical practitioner and a believer of Taoism donated a piece of land known as Lot Nos. 533A and 543A in DD 121 (the old Lots) to the 1st applicant.

6. As the 1st applicant was an unincorporated association of persons and was unable to hold land in its name, it was decided that the old Lots were to be registered in the name of the 3rd applicant and 6 other members of the 1st applicant.

7. The old Lots were agricultural land and could not be used to build a temple, application for such purpose was then made to the Yuen Long District Office. An arrangement was made with the Government whereby the old Lots would be surrendered and a new lot would then be re-granted to the 3rd applicant and the other 6 members as tenants-in-common.

8. Under the aforesaid arrangement which was evidenced in a Deed of Surrender dated 6th of April 1966 and a New Grant of the same date, the 7 tenants-in-common had to pay a premium of $2,350.00. The 7 tenants-in-common were -

1. Wong Tung Wing/Wong Ting Wing, the 3rd applicant,

2. Wong Lung,

3. Cheung Yuk-kwai,

4. Cheung Yiu-kui,

5. Cheung Yiu Piu-luen

6. Cheng Chi-ching, and

7. Cheung Kung-leung.

9. The old Lots were subsequently surrendered and in return a New Grant of the same piece of land with a new number, namely lot No. 1943 in DD 121 (the said lot) was made in favour of the aforesaid tenants-in-common.

10. The New Grant was for a term of 99 years less 3 days to commence from 1.7.1898 and it would expire on 27.6.1997.

11. The New Grant contained the following Special Conditions:-

3. The Lot shall be used only for the erection and maintenance of anancestral temple (Chi Tong).

4. The Grantee shall not assign, mortgage, charge, demise, underlet, part with possession of or otherwise dispose of or encumber the lot or any part thereof or any building or part of any building thereon or enter into any agreement so to do, the said lot having been granted on the special terms herein set forth for use for the particular purpose stipulated.

12. Donations and contribution were subsequently obtained from Taoist followers to build a Taoist Temple for "Kam Lan Koon". Despite the aforesaid special condition, the applicants contends that the Taoist Temple on the said lot was built with the full knowledge of the District Officer of Yuen Long who was present during the grand opening of the Temple, Kam Lan Koon in late 1970.

13. In 1971, two of the original 7 tenants-in-common Cheung Kung Leung and Cheung Yiu Piu Luen assigned their 1/7 shares to a Cheung Kung Wing who in turn assigned the 2/7 to Lam Yim King Christina in 1992. On 24th April, 1992, Cheung Yuk Kwai and Cheung Yiu Kui also assigned their 1/7 shares to the said Lam Yim King Christina. Wong Lung and Cheng Chi Ching had since passed away.

14. Of the original 7 tenants-in-common, the 3rd applicant is now the only remaining tenant-in-common.

15. The said Lam Yim King, Christina was, at all material times, the servant and agent of the New World Development Co. Ltd., a well known land developer. The suggestion was that the acquisition by her was made with a view to develop the said lot for future development in the Yuen Long area.

16. In fact, the land in the vicinity of the said lot had been acquired by the subsidiary companies of the New World Development Co. Ltd. and the said lot was the only remaining land lot in the vicinity which had not been acquired by the New World Development Co. Ltd. or its subsidiaries.

17. The applicants contended that there had not been any breach of condition 3 of the Special Conditions of the New Grant as the Taoist Temple built on the said lot could be described as an ancestral temple (Chi Tong). In any event, the District Office of Yuen Long was at all material time aware of its being used as a Taoist Temple. The assignment of their 1/7 shares by 4 of the original tenants-in-common did not constitute a breach of condition 4 of the Special Condition of the New Grant as the other 3 tenants-in-common did not breach such condition. In any event such assignment was null and void.

18. In a letter dated 6th of November 1992, the District Lands Officer, Yuen Long pointed out that conditions 3 and 4 had been breached in that a Taoist Temple was built on the said land and some of the original grantees had disposed of their undivided shares.

19. In August 1996, the 3rd applicant commenced proceedings in Action No. A9538 of 1996 against other tenants-in-common and the said Lam Yim King Christina, seeking to annul the assignment of the shares to Lam Yim King Christina. The action against Lam Yim King Christina was subsequently struck out on the ground that there was no cause of action against her as she was not a party to any agreement under which the said lot should not be alienated. The case itself has not been proceeding because of the difficulties in having proper persons to act for the deceased tenants-in-common.

20. On 21st March 1997, the Land Department wrote to the 3rd applicant, Wong Lung and Cheng Chi Ching that the lease of the said lot would not be renewed upon its expiry on 27th June 1997. The letter stated the following:-

"I note you are the owners of the captioned lot as registered in the Land Registry and write to remind you that the lease expires on 27 June 1997.

The captioned lot is classified as a Special Purpose Lease, as stated in a booklet, namely 'Extension of leases in the New Territories (including New Kowloon)' published by the Government in April 1987. The booklet stipulates that Special Purpose Leases will be extended unless the land is required for a public purpose or is no longer being used for the purpose for which it was granted.

Our site inspection found that the lot is not being used for its intended purpose, an ancestral temple (Chi Tong). Further, according to our record, 4/7th shares of the lot have been transferred, constituting a breach of Special Condition No. 4 of New Grant No. 1150 dated 6 April 1966, under which the above lot is held.

In the circumstances, Government is unable to extend the lease term of the lot. you are therefore required to deliver vacant possession of the lot to Government upon expiry of the lease on 27 June 1997. Arrangements to do so should be made with the District Lands Officer, Yuen Long."

21. On 19th of June 1997, the applicants took out an ex parte application for leave to apply for judicial review against the decision of the Director.

22. There is no dispute between the parties that not every decision of the Government is amenable to a judicial review. Counsel for the applicants concedes that normally the Director is capable of making decisions as a private landlord in connection with leases granted by the Government.

23. The entitlement of the Government to have its right and duties under leases granted to individuals determined in accordance with private law have been well recognised. The Government's decisions on such matters are not susceptible to judicial review.

24. In Canadian Overseas Development Co. Ltd. v. Attorney General [1991] 1 HKC 288, it was decided that the lease conditions on which the Crown based its right to refuse to approve a layout plan submitted by the leasee were ones which related directly to the Crown's interest as a landlord. The Crown's decision was governed by the law of contract and was not susceptible to judicial review. Bokhary J. as he then was has the following to say at pp. 294 and 295:-

"The position in the present case, however, is governed by contract. The Crown is not above the law. It merely enjoys equality before the law. The equality in the present context is with other landlords, some of whom-both here and abroad- are also, it must not be forgotten, very large and powerful.

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

25. Kaplan J. as he then was made similar observation at p. 295:-

"...........one of the most significant of these has been the sharper focus on the distinction between public and private law. I agree with my Lord that, whichever way one looks at the present case, it falls distinctly on the private side of the line.

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

26. Mr. Chong, on behalf of the applicants argued that in deciding whether to extend the lease in question, the Director was not merely exercising a contractual right. The Director was in fact carrying a declared Government policy which affected the public. The power was therefore 'governmental' in nature and of sufficient public character to be amenable to judicial review.

27. It was pointed out by Mr. Chong that all the leases in the New Territories and the New Kowloon would be expired on 27.6.1997. On 19.12.1984, the British and the Chinese Governments signed the Joint Declaration which under Annex III provides for all leases of land in the New Territories and New Kowloon, except short term tenancies and leases for special purposes to be extended to 30.6.2047.

28. Pursuant to the Joint Declaration, in April 1987, the Hong Kong Government published a booklet known as 'Extension of Leases in the New Territories (including New Kowloon)' which laid down the Government policy for extension of leases in the New Territories and New Kowloon which are otherwise not covered by the New Territories Leases (Extension) Ordinance.

29. There is no dispute that the lease in question was a lease for special purposes and thus not covered by the New Territories Leases (Extension) Ordinance.

30. The Booklet- Extension of Leases in the New Territories (including New Kowloon) provides:-

"Leases for Special Purposes

10. Leases for special purposes are those granted, usually by private treaty, for specific purposes such as public utilities, ..................

11. A common feature of most leases for special purposes is a permanent prohibition against assignment of the land............

Policy on extension of leases for special purposes

13. Each lease granted for a special purpose will be examined before a decision is taken on extension. However, in general, leases for special purposes will be extended unless the land is required for a public purpose or is no longer being used for the purpose for which it was originally granted................."

31. Mr. Chong argues that the decision not to extend the lease in question was made under the policy as set out in the said booklet. In making such decision, the Government was not acting purely in the capacity as a private individual in entering into individual contractual relationship with another private individual, the Government was also performing public duty. It was also suggested that the decision of the Government affects not just the applicant, but other members of the public. There was public element involved and hence the decision of the Government in refusing to extend the lease would be amenable to Judicial Review.

32. The law on this aspect appeared to have been considered. Keith J. in Hong Kong and China Gas Co. Ltd. v. Director of Lands [1997] 3 HKC 520 clearly and succinctly set out the following:-

"This argument ...... is based on a line of cases which began with Hang Wah Chong Investment Co. Ltd. v. A.G. [1981] 1 HKLR 336......................

This case was applied in Canadian Overseas Development Co Ltd. v. A.G. [1991] 1 HKC 288.............................. It follows that the decision could not be challenged on public law grounds, and the rights and obligations of the parties to lease were governed by private law, i.e. in that case by the law of contract. Mr. Mok argues that likewise the rights and obligations of the parties arising out of the policy statement should be governed by the law of estoppel only.

What these cases show is that it is the nature of the function which is being performed which is all-important. The mere fact that the decision challenged relates to a Crown lease which is governed by the law of contract is not decisive. The true question is whether the making of the particular decision in question relating to a Crown lease amounts to the performance of a function within the public domain. Some decisions, such as those which the Director of Public Works and the Secretary for the New Territories had to make in the Hang Wah Chong and Canadian Overseas cases did not amount to the performance of a function within the public domain. Other decisions, as the Privy Council in the Hang Wah Chong case recognised, may almost certainly amount to the performance of a function within the public domain. That is entirely in accordance with the decision in R. v. Panel on Take-overs and Mergers, ex p. Datafin Plc [1987] 1 All E.R. 564, namely that the true demarcation line between public and private law involves focusing on whether the decision-making body took the decision challenged in the course of its public functions.

Mr. Mok argued that the decision of the Director of Lands not to extend the lease because the company did not bring itself within the terms of the policy statement was no different from a private developer issuing a policy statement relating to the circumstances in which it would or would not renew the tenancies of its private tenants on their expiry. I disagree. A private developer need only have regard to its own economic interests. However, in deciding whether to extend the company's lease, the Director of Lands had to take regard to a host of competing interest. Essentially, he had to balance the interest of the community at large in having emergency and maintenance gas depot in Tsuen Wan against the disadvantage of the current site being unavailable to other potential lessees at a significant premium in the event of the lease being extended. Ultimately, what the Director of Land had to decide, therefore, was whether these considerations justified a departure from the 'general' policy in the policy statement............In view of the competing interests which the Director of Lands had to balance in context of the application of an important policy statement relating to the extension of large number of Crown lease in the New Territories, I have concluded that his decision whether or not to extend the company's lease was made by him in the exercise of his public functions, and is therefore amenable to judicial review."

33. It was further suggested by Mr. Chong on behalf of the applicants that in implementing the 1987 Policy Statement, the Hong Kong Government was not just discharging a duty as the landlord, but in its capacity as a government. The Hong Kong Government was discharging its international treaty obligation under Article 6 and Annex III to the Joint Declaration between the Government of the United Kingdom and the Government of the People's Republic of China.

34. The British Hong Kong Government of course did not have the right to extend a lease beyond 30.6.1997. To overcome the difficulty arising out of the change of sovereignty, the Joint Declaration makes provision under Annex III to enable all leases.....that expire before 30 June 1997,...........may be extended .......for a period expiring not later than 30 June 2047. Pursuant to the Joint Declaration, New Territories Leases (Extension) Ordinance was enacted.

35. Annex III of the Joint Declaration and the New Territories Leases (Extension) Ordinance have no application to short term tenancies and leases for special purposes.

36. Under the terms of the Joint Declaration, a Sino-British Land Commission was established concerning leases in the New Territories. By Agreed Minute No. 10, the Land Commission provided, inter alia, 'leases for special purposes may be extended, unless the land is required for a public purpose or is no longer being used for the purposes for which the leases were granted originally, for a term expiring not later than 30 June 2047 without payment of an additional premium.' The 1987 Policy Statement was published pursuant to the decision of the Land Commission.

37. The Joint Declaration and the Land Commission are the source of the power which enabled the Government to extend the lease beyond 30 June 1997. The 1987 Policy Statement was declared with a view to carry out the Joint Declaration and the decision of the Land Commission. It is also true to say that in carrying out the 1987 Policy Statement, the Government was discharging its international treaty obligation.

38. That does not mean that in deciding whether a lease for a special purpose will be extended in accordance with the 1987 Policy Statement, the Government must be discharging a public function so as to render such decision amenable to judicial review.

39. I do not agree with the submission of Mr. Chong that in making any decision under the 1987 Policy Decision, the Government must be performing a 'public function'.

40. In deciding not to renew the lease in question, the Director took the view that the land in question is no longer being used for the purpose for which it was granted. The Director also took into consideration the breach of the Special Conditions 3 and 4.

41. The 1987 Policy Statement makes it clear that the question of whether leases granted for special purposes would be extended would be considered on a case-by-case basis. Para. 13 and Para. 15 of the policy statement begin respectively as follows :-

"Each lease granted for a special purpose will be examined before a decision is taken on extension. However, in general, leases for special purpose will be extended..............."

"The extension of lease for special purposes will be dealt with as quickly as possible. However, it will take some years to examine the individual circumstances of all such leases."

42. In my view, the policy statement is only applicable "in general". If there are "abnormal" or "special" circumstances, a lessee of a special purpose lease does not have any legitimate expectation that the policy statement will still be applied.

43. It is not disputed that the said lot under the grant shall be used only for the erection and maintenance of an ancestral temple (Chi Tong), and it is being used as a Taoist temple for public worship. It is also not disputed that of the original 7 tenants-in-common 4 of them has assigned their shares and those shares are being held by Lam Yin King, Christina.

44. The Director was entitled to conclude that there had been breach of the special conditions 3 and 4. The Director was also entitled to conclude that the land is no longer being used for the purpose for which the lease was originally granted.

45. The applicants argued that a Taoist temple is consistent with the term "ancestral temple (Chi Tong). The applicants further argued that as the Taoist temple has been in existence since 1970, the presumption is that the usage is lawful and in accordance with the term of the grant instead of a wrongful use. Reliance was placed on the authorities such as Gibson v. Doeg (1857) 2 H & H 615, Re Summerson [1900] 1 Ch. 112 Hepworth v. Pickles [1900] 1 Ch. 108, Fairfax Ltd. v. A.G. [1995] 2 HKC 617 and A.G. v. Fairfax Ltd. [1997] 1 HKC 17.

46. There have been suggestion of "waiver and estoppel".

47. The applicants argued that the assignment of the 4/7 shares to Lam Yim King, Christina did not constitute a breach of special condition 4 as such assignment was null and void.

48. The applicants further argued that the use of the said lot as a Taoist temple is the use of the land for the purpose for which it was originally granted as the lease in question has been classified under the appendix to the policy statement as "religious" and Taoism is a religion.

49. I find it difficult to accept how the assignment of 4/7 shares in the said lot is not a breach of special condition 4.

50. I also do not accept the suggestion that just because the lot has been grouped under the category of "Religious", its use as a Taoist temple is a use for the purpose for which the lease was originally granted when under the grant, it shall be used only for the erection and maintenance of an ancestral temple (Chi Tong).

51. Nevertheless, I do not find it necessary to actually resolve such issues in determining if the decision of the Director would be amenable to judicial review.

52. I accept that in determining if leases should be extended under the 1987 policy statement, the Director may have to perform a function within the public domain, particularly when the question of whether the land is likely to be required for a public purpose arises or when the decision involved the balancing of the interests of the community at large.

53. In the present case, what the Director had to decide was whether there had been any breach of the special conditions and whether the land is being used for the purposes for which the lease was originally granted. Such decision did not involve or affect the public. It was not a decision made by the Director in the course of his public functions.

54. The application to judicially review the decision of the Director is in my view misconceived.

55. In deference to counsel's argument and in case I am held to be wrong in my primary decision and that the decision of the Director not the extend the lease is judicially reviewable, I propose also to deal with the issue of whether the Director's decision not to renew the lease is so irrational or unreasonable as to justify intervention by the court.

56. Under the policy statement, leases for special purposes in general will be extended unless the land is..................no longer being used for the purpose for which it was originally granted.

57. I accept that "being used for the purpose for which it was originally granted" is not the same as the "permitted use", a point decided by Keith J. in the Hong Kong and China Gas Co. Ltd. v. Director of Land (supra) which decision was subsequently affirmed by the Court of Appeal in Civil appeal No. 10 of 1998 when Godfrey J.A. said at page 8 of the judgment-

"Here, the applicant says that the purpose for which the lease was originally granted was as set out in condition 2; in other words, is to be equated with the permitted use of the land. The respondent says that is wrong; the purpose for which the lease was originally granted was the purpose described by the judge, that is to say, to enable LPG/air to be produced at the site to meet the temporary needs of Tsuen Wan pending the extension of the gas main system to enable towngas to be supplied there. The respondent, supporting the judge, says that the fact that clause 2 of the Special Conditions also permitted the site to be used for other purposes, which included the purpose for which the site is currently being used, does not mean that the site is now being used for the purpose for which the lease was originally granted. I have not found this point altogether easy, but I conclude in the end that the respondent is correct. I think that, as a matter of construction those words in the policy statement the purpose for which the lease was originally granted" mean, in our case, as the judge held, the purpose of enabling LPG/air to be produced at the site to meet the temporary needs of Tsuen Wan pending the extension of the gas mains system to enable towngas to be supplied there."

58. Thus in the present case and in applying the policy statement, the only relevant consideration is what was "the purpose for which the lease was originally granted". The fact that it had been permitted to be used for other purposes by waiver, acquiescence or otherwise is immaterial at all.

59. The purpose for which the lease was originally granted is a question of fact. It may not be the same as the "permitted use" of the land, but the special condition pertaining to the usage of the land must be a relevant factors in deciding the purpose for which the lease was originally granted. The court is also entitled to look at all the surrounding circumstances in deciding the purpose for which the lease was originally granted.

60. Special Condition 3 stipulates that "the lot shall be used only for the erection and maintenance of an ancestral temple (Chi Tong).

61. A "temple" of course is a common term denoting a place for worship.

62. But an ancestral temple is a place to worship the deceased ancestors of a family by the descendants. It is not a religious temple for the public to worship a "god".

63. "Kam Lan Koon", being a religious temple of Taoism simply cannot be an ancestral temple.

64. One only needs to refer to the pamphlet introduction of "Kam Lan Koon" produced by the applicants:-

"Kam Lan Koon is a member of the Hong Kong Taoist Association and this Taoist temple has a long history of more than 160 years since its founding......... Through the effort of the Taoist Priests.........it was not until 1900........when the Kam Lan Koon Taoist Temple was formally built...........and since then the number of believers and followers have increased steadily day after day.

The purposes of the temple of Kam Lan Koon are "Virtuous, Righteousness, Propriety and Harmony with Charity as the principal goal". Since its founding, the temple has always been engaged in getting people to perform good works, doing a lot of charitable and pious deeds..........................

Taoist Kam Lan Koon is a 'Temple of Heaven', which is a place where alms are begged for Heaven and sermons are delivered on behalf of Heaven. According to Taoism, the establishment of a Temple of Heaven is subject to the approval of Heaven. It is established for the purpose of the release of souls from purgatory and the propagation of Taoist doctrines so as to facilitate the release of oneself and others everywhere they exist and the expiation of the sins of the sinful after their death. Kam Lan Koon is also a 'Temple of Profundity', which enables people to communicate with the gods in both Heaven and Earth with the unique planchette writing of Taoism and awakes the people whose souls are one in the world so as to get them out of the transmigrate abyss of misery and facilitate them to get together onto the shore of consciousness. Lui Tso Shun Yeung (the Emperor of Public Blessings), Hierarch :Li To Ming (the Heaven Hierarch of Taoist Ceremony assistance) and Mother Buddha (the Goddess of Salvation) have personally come to the temple for the propagation of Taoist doctrines and left the planchette texts after them, which indicate the methods of self-cultivation and the ways to moral character cultivation and extricate people from mazes. The temple hosts of Kam Lan Koon have also been perfect persons from Heaven, including Temple Host Chan Yan, Temple Host Book Ying Tin and (current) Temple Host Kung Ching Shing. Kam Lan Koon is an important Taoist charitable organisation with more and more temple followers and an increasing number of believers and followers coming to the temple and the preaching work is well under development."

65. A Taoist temple simply cannot be the same as a place to worship ancestors, an ancestral temple.

66. Before the grant of the said lot in April 1966, there had been correspondence between the grantees and the District Office. In a letter dated 30 October 1964 addressed to the District Office, the 7 tenants-in-common stated:-

“ 為 申 請 建 造 家 祠 安 坐 祖 宗 神 位 以 留 紀 念 ...... ， 建 造 家 祠 壹 所 安 坐 祖 宗 神 主 紀 念 先 人 ... ”

"We apply to build a 'Ka Chi" (Family temple) to place tablets of our ancestors to remember them.........................., building a family temple to house peacefully the ancestral tablets to remember our ancestors".

67. In a letter dated 30 march 1965 addressed to the District Office, Yuen Long, Chueng Yuk Kwai and Cheung Yiu Kui wrote :-

“ .... 建 設 本 房 家 祠 ， 以 放 歷 代 張 氏 祖 先 神 牌 慎 終 追 遠 紀 念 ... ...”

"........ to build a 'Ka Chi' for our Fong (stirpe) for the purpose of placing the tablets of the ancestors of the Cheung family in memory of them....................."

68. The present building of Kam Lan Koon was only erected in early 1970. The construction of such Taoist temple was in fact objected to by two of the 7 original tenants-in-common, Cheung Yiu Piu Luen and Cheung Yuk Kwai who wrote a letter of complaints to the District Office, Yuen Long on 27 January 1970 :-

“ .... 數 年 前 將 張 恭 良 張 姚 標 鸞 名 下 之 DD 121 Lot No. 533A 543A 地 段 約 七 仟 餘 尺 ， 同 意 送 出 七 人 名 義 作 為 興 建 張 氏 家 祠 ， 豈 料 事 隔 數 年 ， 渠 等 將 原 意 相 左， 居 心 莫 測 ， 民 等 專 函 奉 達 鈞 座 ， 現 因 未 經 同 意 在 該 地 上 興 建 屋 宇 ............ ”

" A few years ago, Cheung Kung Leung and Cheung Yiu Piu Luen agreed to assign DD 121 Lots No. 533A and 543A, an area of over 7,000 sq. ft. to the 7 persons for the purpose of building a 'Ka Chi' for the Cheung family. After a few years, they have distorted the original intention with ulterior motive. We respectfully inform you by this letter that housing units are being built on the said lot without permission......."

69. Mr. Chong, on behalf of the applicants argued that two of the original assignees have the surname "Wong" and not "Cheung" and this contradicts the suggestion that the said lot was intended to be an ancestral temple. In an internal memorandum of the District Office, such matter was addressed to as follows:- "the two Wongs are residents of the urban area and are claimed to be relatives by marriage."

70. In another internal memorandum of the District Office, Yuen Long, it was also mentioned that "I am satisfied now that this is a genuine request and that the Cheungs are native villagers who, in the ordinary way, have always been able to build such temples for the veneration of their ancestors as the need of the various generations arises...."

71. The aforesaid matters are inconsistent with any suggestion that the District Office, Yuen Long was aware that the said lot would be used for the building of a Taoist temple at the time when the grant of the said lot was made.

72. Mr. Chong on the one hand conceded that he could not advanced the suggestion that the District Office Yuen Long had agreed that the said lot could be used to build a "Taoist Temple" when the term used in the grant was "ancestral temple".

73. On the other hand, he argued that the court should not look at other documents in the interpretation of the Special Condition 3. He suggested that the intention of the parties could only be gathered from the document itself and extrinsic evidence is not admissible to add to, vary or to contradict the written document since the court is only concerned with what the parties have agreed but not what they intended to agree.

74. I do not agree with such a view. Extrinsic evidence is not admissible to add to, vary or to contradict the written document, but it is admissible to interpret or explain a written document and to ascertain the true meaning of the words or phrases used.

"The court is entitled (and, indeed, bound) to enquire beyond the language of the document and see what the circumstances were with reference to which words were used, and the object appearing from those circumstances which the person using them had in view. The court must place itself in the same 'factual matrix' s as that in which the parties were. In Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 W.L.R 989 Lord Wilberforce said :

'No contracts are made in a vacuum; there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as 'the surrounding circumstances' but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.'

He further stated that, just as the intention of the parties is to be ascertained objectively, so also 'when one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have in mind in the situation of the parties'"

(Chitty on Contracts 27th Edition p. 611-612)

75. A Taoist temple is not an ancestral temple and on the facts, I conclude that the land is not being used for the purpose for which it was originally granted. The applicants have not brought themselves within the terms of the 1987 policy statement. The fact that the District Office was subsequently made aware of the building of the Taoist temple in early 1970s and officers of the District Office in fact attended the grant opening ceremony of the Kam Lan Koon in or about November 1970 is not relevant.

76. For a legitimate expectation to arise the applicant must demonstrate that they are within the class entitled to rely on it. (R. Jockey Club, ex p. Ram Racecourses [1993] 2 All E. R. 225 per Stuart-Smith LJ) As the land is not being used for the purpose for which it was originally granted, the refusal to extend the lease cannot be said to be Wednesbury unreasonable.

77. Under the 1987 policy statement, it is stated that "a common feature of most leases for special purposes is a permanent prohibition against assignment of the land (permanent means that the prohibition applies for the full term of the lease). Leases for special purposes are therefore defined as leases which contain a permanent prohibition against assignment".

78. Quite apart from the breach of Special Condition 4, the assigning of the 4/7 shares of the said lot to Lam Yim King, Christina had completely destroyed the very feature of a lease for special purposes. The Director in considering on a case-by-case basis whether the lease in question should be extended in accordance with the 1987 policy statement was entitled to take into consideration such unlawful assignment.

79. On the evidence, the Director is entitled to come to the conclusion that he did- to refuse the extension of the leasee.

80. For what it is worth, I would also rule that the 1st and the 2nd applicants, being unrelated to the grant of the lease, do not have any independent status to seek an extension of the lease, be it in private or public law. The dispute they may have with the tenants-in-common who had assigned their shares in the land is a matter between them only.

81. I am satisfied that the application by the applicants is without merit and has to be dismissed. I also make an order nisi that the applicants are to pay the costs of the Respondent to be taxed if not agreed. The order nisi on costs will be made absolute 14 days after the handing down of the judgment.

WALLY YEUNG

Judge of the First Instance
High Court