ABERDEEN COMMERCIAL INVESTMENTS LTD v. THE SECRETARY FOR JUSTICE

CACV 128/2024, [2025] HKCA 145

On Appeal From [2024] HKCFI 729

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 128 OF 2024

(ON APPEAL FROM HCMP NO 1178 OF 2022)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  The question which arises for determination in this appeal is whether the Plaintiff, being the registered owner of the premises known as Shop 1B, First Floor, Site 1 of Aberdeen Centre, 13-23 Nam Ning Street, Hong Kong (“the Premises”), is required to obtain the prior written consent of the Director of Lands for its intended use of the Premises as residential care homes (elderly persons) (“RCHE”). The answer to this question depends on the true construction of a layout covenant in the relevant Government land grants, the terms of which are set out at §7(3) below.

BASIC FACTS

2.  The background facts of this case have been set out in the written judgment of Recorder Abraham Chan, SC (“the Judge”) dated 11 March 2024 (“the Judgment”), and will not be repeated here. For the purpose of disposing of the present appeal, the following brief summary should suffice.

Aberdeen Centre

3.  Aberdeen Centre is a mixed residential and commercial development standing on portions of Aberdeen Inland Lot No 302 (“AIL 302”) and the Extension thereto and Aberdeen Inland Lot No 304 (“AIL 304”) (collectively “the Lots”). It is divided into 5 sites, on which are erected some 20 high-rise buildings. Site 1 of Aberdeen Centre, comprising 6 high-rise buildings constructed upon a common podium above a car park basement, straddles Section F of AIL 302 and the Extension thereto and Section A of AIL 304.

The Land Grants

4.  The Hongkong & Whampoa Dock Co Ltd (“the Original Grantee”) was formerly the Government lessee of various parcels of land in Aberdeen known as Section B of Aberdeen Marine Lot No 2, the Remaining Portion of Aberdeen Marine Lot No 2, and Aberdeen Marine Lot No 9 (“the Old Lots”).

5.  By an agreement between the Government and the Original Grantee dated 29 January 1969, the Government agreed, in consideration of the surrender of the Old Lots, to grant to the Original Grantee AILs 302, 303 and 304.

6.  Pursuant to the aforesaid agreement, AIL 302 and AIL 304 were granted to the Original Grantee under Conditions of Exchange No 10511 (“COE 10511”) and Conditions of Exchange No 10513 (“COE 10513”) respectively (collectively “the Land Grants”), both dated 8 October 1973.

7.  The Land Grants contain a number of building, user and layout covenants to be observed and performed by the grantee concerning its proposed development of the Lots. The original conditions in COEs 10511 and 10513 were modified by 3 modification letters dated 10 May 1978, 8 June 1978 and 29 January 1980 respectively. Set out below are the current version of the covenants relevant for the purpose of the present discussion (the “Building Covenant”, “User Covenant” and “Layout Covenant” respectively):

(1)  The Building Covenant

(a)  General Condition 4(a) of COE 10511 states as follows -

“The grantee shall develop the lot by erection on the sites (into which the lot is to be divided as shown on a Layout Plan No. L5d prepared by Messrs. Ng Chun Man and Associates and submitted to and approved and signed by the Director of Public Works on the 8^th day of June 1979 pursuant to Special Condition No. (4) of the said Conditions) of a building or buildings complying with the Special Conditions and in all respects in accordance with all Ordinances, Byelaws and Regulations relating to building and sanitation which are or may at any time be in force in Hong Kong, such building or buildings to be completed and fit for occupation before the expiration of the periods specified in the Schedule below, and shall expend thereon the sums specified in the said Schedule (such sums to exclude moneys spent on site formation, foundations, access roads and other ancillary works).

…

The said Layout Plan No. L5d may be amended from time to time subject to the approval in writing of the said Director.”

(b)  General Condition 4(a) of COE 10513 –

Save for the schedule of specified sums, General Condition 4(a) of COE 10513 is in essentially identical terms as General Condition 4(a) of COE 10511 above.

(2)  The User Covenant

(a)  Special Condition (3) of COE 10511 states as follows –

“Subject to these Conditions, the lot or any part thereof or any building or buildings erected or to be erected thereon shall not be used for any purpose other than for non-industrial purposes, such non-industrial purposes to include user for a service station/garage the positioning of which shall be subject to the prior approval of the Director of Public Works.”

(b)  Special Condition (3) of COE 10513 states as follows –

“Subject to these Conditions, the lot or any part thereof or any building or buildings erected or to be erected thereon shall not be used for any purpose other than for non-industrial purposes.”

It can be seen that Special Condition (3) of COE 10511 is identical to Special Condition (3) of COE 10513, save that the latter omits the words “such non-industrial purposes to include user for a service station/garage the positioning of which shall be subject to the prior approval of the Director of Public Works”. These omitted words are not material for the purpose of the present appeal.

(3)  The Layout Covenant

(a)  Special Condition (4) of COE 10511 states as follows –

“A general layout plan showing the positions, widths and levels of the roads that it is proposed to make, the positions, levels and dimensions of the site into which it is proposed to divide the lot, and the positions and nature of the buildings that it is proposed to erect shall be submitted for the approval of the Director of Public Works within 6 months of the date on which possession of the lot is given. The whole of the lot shall be developed to the satisfaction of the said Director in accordance with the layout plan approved by him, and no alteration shall be made to the positions, widths and levels of roads, the positions, levels and dimensions of sites, or the positions and nature of the buildings shown on the said plan without the prior written consent of the said Director.”

(b)  Special Condition (5) of COE 10513 is identical to Special Condition (4) of COE 10511.

8.  Pausing here, it may be noted that the Layout Covenant, ie Special Condition (4) of COE 10511 and Special Condition (5) of COE 10513, has never been modified, and has been in the current form since the date of the Land Grants.

The Layout Plan

9.  Pursuant to the Layout Covenant, a copy of a revised layout plan referred to in the Judgment as “Layout Plan No. L5d” (“the Final Layout Plan”) was submitted by Aberdeen Centre Limited (the successor in title of the Lots pursuant to an assignment from the Original Grantee dated 19 June 1974), and approved and signed by the Director of Public Works on 8 June 1979.

10.  A total of 6 neighbouring sites (including Site 6 which was to be surrendered to the Government) are shown on the Final Layout Plan. Relevant for the present purpose is Site 1. On the Final Layout Plan, the footprints of 6 buildings (marked “E”, “F”, “G”, “H”, “I” and “J”) intended to be erected on Site 1 are shown. An area sandwiched between Block G and Block H is marked “CINEMA”. On the left margin of the Final Layout Plan is a column which sets out some information concerning each of the sites. Insofar as Site 1 is concerned, the following is stated:

“BASEMENT – CAR PARK

GRD & 1^st FLOOR – SHOP & CINEMA

2^nd – 28^th FLOOR – DOMESTIC”

The Occupation Permit and Certificates of Compliance

11.  The occupation permit for the buildings on Site 1 was issued by the Building Authority (“BA”) on 7 January 1982. Under the occupation permit, the G/F and 1/F are permitted to be occupied for the following purposes:

“1 cinema, 6 entrance halls, 1 residents’ office, 20 store rooms, 2 department stores, 1 coffee shop, shopping areas and ancillary accommodation for non-domestic use”.

12.  On 23 April 1985, the Registrar General (Land Officer) issued 2 certificates of compliance to Aberdeen Centre Limited, certifying that all positive obligations imposed on the grantee under the Land Grants had been complied with to his satisfaction.

The Plaintiff’s intended use of the Premises as RCHE

13.  On 1 July 1992, Aberdeen Centre Limited assigned, inter alia, the Premises to the Plaintiff.

14.  Notwithstanding the designation of the G/F and 1/F of Site 1 as “shop and cinema” on the Final Layout Plan, there is no dispute that during the period from 2012 to 2018, the Premises were in fact let out and used as a “fitness/gymnasium centre”.

15.  In 2020, the Plaintiff wished to use the Premises as RCHE, and sought BA’s consent for the intended change of use. BA had no objection in principle to the proposed change. However, the Plaintiff’s proposed change of use of the Premises was objected to by the Director of Lands (“the Director”)[1], who took the view that such change would amount to an alteration of the “nature of the buildings” within the meaning of the Layout Covenant, and thus required his prior written consent. In a memo from the Director to BA, a copy of which was sent by BA to the Plaintiff’s authorized person under cover of a letter dated 10 November 2020, the following was stated:

“5. According to the latest ‘LAYOUT PLAN No. L5d’ approved by Director of Public Works on 8.6.1979, it is noted that [GRD & 1^st FLOOR] of Site No. 1, where the subject premises is located, were designated for the uses of SHOP & CINEMA.

6. In view of para. 5 above, legal advice on the interpretation of the relevant lease conditions and the said Layout Plan had been sought. In general, a normal RCHE will provide residential accommodation to elderlies for a rather lengthy period of time. Usually, a shop is not expected to provide residential accommodation to its customers. Therefore, it is considered that a RCHE should not be allowed at the subject premises without our prior written consent given under S.C. (4) of Conditions of Exchange No. 10511 and S.C. (5) of Conditions of Exchange No. 10513.”

16.  Subsequently, the Plaintiff, on a “without prejudice” basis, applied to the Director for consent to use the Premises as RCHE. However, the Director considered that the proposed amendment of the Final Layout Plan would require the consent of all (859) individual owners of the Lots. The Plaintiff took the view that it was impractical to obtain such consent, and withdrew its amendment application.

17.  On 23 August 2022, the Plaintiff commenced the proceedings below against the Secretary for Justice (“the Secretary”) by way of an Originating Summons, seeking, inter alia, a declaration that the use of the Premises as RCHE is permissible under the Land Grants without the need to obtain any prior written consent of the Director.

THE JUDGMENT

18.  The Judge held in favour of the Plaintiff, and granted the declaration sought by the Plaintiff. The essential reasoning of the Judge for coming to this view is set out at §§36-49 of the Judgment, the relevant parts of which read as follows:

“[36] … the critical question in this case: does the ‘Shop & Cinema’ marking in the Layout Plan amount in law to an additional user restriction over the Premises?

[37] In my judgment, it does not.

…

[41] Reading the express words of the General Layout Provision in context (including in particular GC4(a)), the following is clear:

(1) The General Layout Provision is in the nature of a positive covenant, stipulating inter alia (a) the development parameters to be set out on the submitted general plan, (b) the requirement that the lots be developed in accordance with the general layout plan (‘the lot shall be developed…’), and (c) the requirement that the plan itself and the arrangements and structures actually developed with reference to the plan both be subject to the DPW’s approval and satisfaction.

(2) Consistent with its express description as a ‘general’ plan concerning ‘layout’, the specified plan is itself focused upon the primary parameters of the physical arrangements and structures proposed – but not yet constructed – for the lots, including in particular roads, the spatial divisions and dimensions for individual sites within the lots, and ‘the position and nature of the buildings’.

(3) Read with the matters immediately preceding it, the requirement for the general layout plan to show the ‘nature of the buildings’ should be understood as a requirement to indicate the overall or general nature of the buildings proposed for the lots, rather than matters of their detailed design or specific permitted uses of different parts of the buildings upon or following their development. This is consistent with the essential character of the plan being (as noted above) of a general nature, showing the overall layout of the lots. It may also be noted that there is at the same time no prohibition within the General Layout Provision on the supply of more detailed information on various aspects of the proposed development, to enable the DPW to have a better grasp of the primary parameters proposed for his ultimate consideration and approval.

…

[45] The Industrial Purposes Prohibition provides a useful comparison in assessing the Defendant’s case in this regard, and in particular the claim that the Layout Plan sets a specific further user restriction by way of its reference to ‘SHOP & CINEMA’.

[46] As earlier noted, the parties agree that the Industrial Purposes Prohibition is certainly in the nature of a user restriction. The wording of the Industrial Purposes Prohibition clearly and directly signals this function, and the provision’s basic form is commonly known and recognised in the government lease context. That the requirement of the Industrial Purposes Prohibition is – in contrast with GC4(a) – plainly intended to continue through the currency of the lease period is further evident from the words ‘any building or buildings erected or to be erected’, with the underscored words capable of encompassing buildings which at the time of execution of the lease were simply not contemplated be it under GC4(a) or otherwise.

[47] Of course it does not necessarily follow that any other user restriction over the Lots could only be within the same provision as the Industrial Purposes Prohibition, or must take a similar form as that provision. Even so, it is a relevant interpretative factor to note that, if there really were an intention to further restrict the use of all or part of the Lots by reference to some other purposes (here ‘SHOP & CINEMA’), that could readily and unambiguously been done by way of an express special condition to that effect, as it was for the Industrial Purposes Prohibition.

…

[49] Further, unlike the clear wording of the Industrial Purposes Prohibition the words of the General Layout Provision itself simply do not themselves refer to any restriction as to the use of the Lots, as opposed to their intended spatial layout and the primary built forms.”

19.  In addition, the Judge referred to a number of other matters which he considered went against the Director’s stance that the development parameters appearing on the Final Layout Plan served as prescriptions / restrictions on the use of the Lots. In particular, the Judge queried, if the Director’s stance was correct:

(1)  whether the reference at the bottom left of the Final Layout Plan to “TOTAL NO. OF PARKING SPACES 503” would mean that it would be contrary to the permitted use of the land to have one more (or one less) than the 503 spaces referred (§53 of the Judgment);

(2)  whether the reference to “AIR-CONDITIONING PLANT RM UNDER” within the area marked “Open Space” in AIL 304 on the Final Layout Plan would mean that any other use without the Director’s prior permission would be in breach of the Land Grants (§58 of the Judgment);

(3)  whether the reference to “SHOP & CINEMA” in the Final Layout Plan designated a strict user requirement such that all the areas that it applied to must somehow involve both “shop” and “cinema” uses, and thus the “cinema” aspect could never be dispensed with absent prior approval, even if the remaining space were used entirely for “shops” (§64 of the Judgment).

The Judge considered such restrictions to be implausible and commercially non-sensible, and these considerations underscored why it was unlikely that the Layout Covenant was meant, via the Final Layout Plan, to provide any sound and workable guide for the purposes of informing the grantees, any of their successors, or the general public, of any prohibited uses of the Lots beyond those barred by the User Covenant.

20.  The Judge accordingly granted the following declaration in favour of the Plaintiff:

“… the use of Shop 1B, First Floor, Site 1 of Aberdeen Centre, 13-23 Nam Ning Street, Hong Kong for Residential Care Homes for the Elderly (‘RCHE’) is permissible under Conditions of Exchange No. 10511 and No. 10513, without the need for prior consent of the Director of Lands”.

THE PRESENT APPEAL

21.  The Secretary’s Notice of Appeal against the Judgment dated 8 April 2024 contains a total of 11 grounds. The principal argument raised by the Secretary is that (i) the Judge erred in law in his construction of the Layout Covenant by failing to pay proper regard to the objective factual background known to the contracting parties when executing the Land Grants, including their subsequent amendments on 10 May 1978 and 29 January 1980; and (ii) had the Judge paid proper regard to the relevant objective factual background, he should have reached the following conclusions:

(1)  “Nature of the buildings” in the Layout Covenant refers to the user designations in the left margin of the Final Layout Plan.

(2)  The designation of “Shop & Cinema” for G/F and 1/F of Site 1 means that the said floors can only be used for the purposes of “Shop”, “Cinema” or both (the use falling under either or both description is permitted). It does not require every use of the said floors to constitute both “Shop” and “Cinema”. The word “Cinema” was added for clarity and for the avoidance of doubt, because one may argue whether a cinema falls under the description of a “Shop”.

(3)  In the Layout Covenant, the sentence “no alteration shall be made to the … nature of the buildings shown on the said plan without the prior written consent of the said Director” means that no part of the Sites may be used in a manner falling outside its corresponding designation as stated in the left margin of the Final Layout Plan without the prior written consent of the Director, thus constituting user restrictions.

(4)  RCHE could not reasonably be regarded as “Shop” and/or “Cinema”, and thus the Plaintiff would require the prior written consent of the Director to use the Premises as RCHE[2].

DISCUSSION

22.  The critical question in the present case is whether the Plaintiff’s intended use of the Premises as RCHE would constitute an alteration of the “nature of the buildings” on Site 1 within the meaning of the Layout Covenant. The answer to this question depends on the true construction of the Layout Covenant.

23.  There is no dispute about the applicable principles for the construction of a written contract, including a land grant. They have been set out at §§31 to 33 of the Judgment, and will not be repeated here. As in any construction exercise, one should have regard to the relevant factual matrix, context and purpose of the instrument as well as the language used.

24.  Insofar as the factual matrix is concerned, Ms Frances Lok, SC (appearing for the Secretary) has taken the Court through some historical documents relating to the exchange of the Old Lots for, inter alia, the Lots under the Land Grants[3] and the proposal to develop the Lots to be used for mixed residential and commercial purposes. The documents that Ms Lok refers to and relies on include:

(1)  Eric Cumine (authorized person acting on behalf of the Original Grantee)’s letter to the Crown Lands & Survey Office (“CLSO”) dated 30 May 1960 expressing his client’s interest to redevelop the Old Lots and enclosing therewith a preliminary layout plan of a proposed development;

(2)  CLSO’s letter to Eric Cumine dated 18 January 1962 attaching therewith certain draft special conditions of the proposed land grant(s), Special Condition (2)(b) of which provided that “[t]he portion of the lot shown coloured red on the plan attached hereto shall be used for residential and commercial purposes only”;

(3)  Eric Cumine’s reply letter to CLSO dated 9 February 1962 stating that the draft special conditions were acceptable to the Original Grantee;

(4)  Eric Cumine’s letter to CLSO dated 9 August 1962 enclosing therewith draft preliminary layout plans (marked SK1, 2, 3, 3a, 4 and 5) “as required under Special Conditions Clause No 3” indicating the “proposed plan of the domestic and commercial portion”;

(5)  CLSO’s letter to Eric Cumine dated 18 September 1962 approving in principle the draft layout plans submitted under cover of the aforesaid letter of 9 August 1962;

(6)  the Principal Government Town Planner’s letter to the Original Grantee dated 14 April 1977[4] approving an amended sketch plan (SK No SHW/77/1A) submitted on 2 April 1977 and suggesting that a master plan be prepared by its authorized person for approval by the Director of Public Works (by that time, there had been very substantial amendments made to the previous draft preliminary layout plans referred to in (4) above);

(7)  Ng Chun Man & Associates (authorized person acting for Aberdeen Centre Limited)’s letter to the Director of Public Works dated 22 April 1977 submitting a revised layout plan (“Layout Plan No L5”) for his approval;

(8)  the Public Works Department’s letter dated 22 June 1977 informing Ng Chun Man & Associates that Layout Plan No L5 had been approved by the Director of Public Works as being satisfactory under the lease conditions; and

(9)  Ng Chun Man & Associates’ letter to CLSO dated 3 May 1977 submitting a further revised layout plan (ie the Final Layout Plan) for approval by the Director of Public Works.

25.  As mentioned above, the Final Layout Plan was approved and signed by the Director of Public Works on 8 June 1979. The Final Layout Plan was similar to Layout Plan No L5, save that some development parameters set out on the left margin of Layout Plan No L5, including, insofar as Site 1 is concerned, (i) the number of domestic flats to be provided, (ii) the total domestic gross floor area, (iii) the total commercial gross floor area, and (iv) the total domestic population, were omitted from the Final Layout Plan. The omission of these development parameters from the Final Layout Plan had been discussed and agreed between Ng Chun Man & Associates and CLSO[5].

26.  In her written submissions, Ms Lok also refers to and relies on the following statements in the notes of a PWD Land Conference held on 24 September 1972 (“the PWD Land Conference Notes”), during which the proposed development of the Lots (to be granted) was discussed:

(1)  “[The Lots] comprise a large portion of the [commercial/residential] zone which will probably (by reason of its location) become the commercial centre of Aberdeen/Ap Lei Chau area …”, and

(2)  “Assuming that all the buildings are developed for ground and 1^st and 2^nd floors commercial with residential above to the full permitted plot ratio as Class C sites, then the commercial floor space would be in the order of 559,400 sq.ft. gross and the residential floor space in the order of 1,492,000 sq.ft. gross”[6].

27.  Ms Lok relies on the above background materials to show that Aberdeen Centre has long been intended as not merely a “non-industrial” development, but specifically a mixed commercial and residential development[7]. We do not consider this proposition to be controversial, but do not see that it can provide any significant support for her argument that the Plaintiff’s proposed use of the Premises as RCHE would require the prior written consent of the Director under the Layout Covenant. As correctly submitted by Mr Edward Chan, SC (for the Plaintiff), it is difficult to see how the use of the Premises as RCHE would, or could, make the whole land and buildings of Aberdeen Centre not for commercial or residential use. We also agree with Mr Chan that Ms Lok’s suggestion that the Plaintiff’s proposed change of use of the Premises as RCHE would “change the existing balance between residential and commercial premises in the community” is far-fetched.

28.  Insofar as the PWD Land Conference Notes are concerned, we do not consider them to be admissible as evidence of the factual matrix for the purpose of construction of the Layout Covenant, in view of the fact that they were internal documents of the Government. It has not been suggested, and there is no evidence to show, that the discussion amongst the government officials at the land conference was made known to the Original Grantee (including its employees or agents) prior to or at the time of the making of the Land Grants. In any event, even if the land conference notes are admissible, the statement mentioned at §26(1) above is general, while that at §26(2) above is based on an “assumption” that the buildings to be erected on the Lots would be developed for use in a particular way. For the same reasons mentioned at §27 above, we do not consider the land conference notes offer any significant assistance to the Director’s construction of the Layout Covenant.

29.  Ms Lok also places some emphasis on the fact that in Eric Cumine’s letter to CLSO dated 9 August 1962 enclosing therewith some draft preliminary layout plans (referred to at §24(4) above), it was stated that those plans were submitted “as required under Special Conditions Clause No 3[8]. The Plans indicate the proposed plan of the domestic and commercial portion” [emphasis added]. We do not see that this statement can support any argument that the information concerning the intended use of different parts of the buildings proposed to be erected on, inter alia, Site 1 as set out on the left margin of the Final Layout Plan should therefore be regarded as information concerning the “nature” of the buildings that is required to be shown in the general layout plan to be submitted to the Director of Public Works under the Layout Covenant, for a number of reasons:

(1)  This statement was made many years before the date of the Land Grants (8 October 1973), even though the draft Special Condition Clause No 3 turned out to be materially the same as the Layout Covenant eventually found in COE 10511 and COE 10513.

(2)  The subjective understanding of the meaning or effect of any particular provision in a contract by a party is generally not relevant to its true construction.

(3)  There have been very substantial amendments made to the draft layout plan proposed to be submitted to the Director of Public Works under the draft Special Condition Clause No 3/Layout Covenant over the years. For example:

(a)  The preliminary layout plans marked “SK1, 2, 3, 3a, 4 and 5” referred to at §24(4) above show the detailed design of the proposed domestic and commercial portions (including 10 types of domestic units each with a specified usable area, as well as the number of flats and the number of shops in 9 proposed blocks), and give a breakdown of the calculation of the population density of the proposed residential development.

(b)  As earlier mentioned, Layout Plan No L5 sets out various development parameters on the left margin, including (i) the number of domestic flats to be provided, (ii) the total domestic gross floor area, (iii) the total commercial gross floor area, and (iv) the total domestic population.

(c)  The information referred to in (a) or (b) above is omitted from the Final Layout Plan.

In short, we do not see that the nature or type of information that the authorized person included in different draft layout plans at different times is of any assistance in determining the true meaning of the words “nature of the buildings” in the Layout Covenant.

30.  Overall, there is nothing in the factual matrix which seems to us to have any particular significance. The background materials that Ms Lok, SC refers to in her oral and written submissions are fairly general. At the highest, they indicate that the proposed development on the Lots was intended to be a mixed commercial and residential development.

31.  Mr Chan argues that the use of the Premises as RCHE is not a pure residential use (but one of mixed commercial and residential use), and refers the Court to the judgment of Sakhrani J in Park Kit Investment Ltd v Cheung Wan Ping (HCA 5349/1998, unreported, 23 November 1998), where the learned judge held that the use of certain premises as an elderly care home was a use other than as a “dwelling” within the meaning of s 115A of Landlord and Tenant (Consolidation) Ordinance, Cap 7. In our view, whether the use of certain premises as a residential care home for elderly persons should be regarded as a residential use, or a commercial use, or a combination of both, depends on the context in which the question is asked, and cannot be answered in the abstract. This question does not arise for determination in the present case. What is clear is that permitting the Premises to be used as an elderly care home would not mean that Aberdeen Centre (as a whole) is turned into a pure residential development, or is used purely for residential purposes.

32.  The context of the Layout Covenant is that of a government land grant. As is to be expected, there are building, user and layout covenants in COE 10511 and COE 10513. These covenants are standard techniques used by the Government to control land development and uses in Hong Kong, and function alongside other controls imposed under the planning regime (under the Town Planning Ordinance), and building regime (under the Buildings Ordinance and Regulations).

33.  The terms of the building, user and layout covenants in the present case are fairly standard. The fact that there are these different covenants with distinct functions, in particular a user covenant (Special Condition (3)) which only prohibits the Premises from being used for industrial purposes, would tend to suggest that the Layout Covenant is not concerned with user, but with the general layout of the development proposed to be constructed on the Lots.

34.  The purpose of the Layout Covenant can be gathered from the terms of the covenant: it imposes both positive and negative obligations on the grantee, namely, (i) to submit a general layout plan (showing the positions, widths and levels of the roads that it is proposed to make, the positions, levels and dimensions of the site into which it is proposed to divide the lot, and the positions and nature of the buildings that it is proposed to erect) to the Director of Public Works for his approval within a stipulated timeframe, (ii) to develop the land to the satisfaction of the Director of Public Works in accordance with the layout plan approved by him, and (iii) not to alter the positions, widths and levels of roads, the positions, levels and dimensions of the sites, or the positions and nature of the buildings shown on the said plan without the prior written consent of the Director of Public Works. It seems clear that the purpose of the Layout Covenant is to enable the Government to maintain control over the general layout of the building development upon the land to be granted.

35.  When considering the purpose of the Layout Covenant, it is also relevant to consider the general purposes or objectives of a layout plan. In the Lands Department (Lands Administration Office)’s Practice Notes for Authorised Persons Surveyors and Registered Structural Engineers Issue No 1/1991 dated 17 January 1991, it is stated that the purposes and objectives of a “Master Layout/Concept Plan” (which expression is defined at §2 thereof to include “Master Plan, Layout Plan, Preliminary Concept Plan, Layout and Master Plan, and General Layout Plan”) are (i) to ensure that the nature and layout of a particular large-scale development are acceptable to the Government, (ii) to ensure that the whole site is developed in an orderly and composite manner, and (iii) to enable the developer to submit his proposals and receive an early indication that the general nature of the development and the proposed layout thereof are acceptable. Paragraph 3 of that document further states that to achieve the objectives of a Master Layout Plan, sufficient information should be provided either in the form of plans, sketches or written statements, and the information to be included will be specified in the Conditions of Sale and will usually include the following:

“(i) the formation levels of the site and the position, widths and levels of any proposed roads, emergency accesses, footbridges and pedestrian ways;

(ii) the nature, height and gross floor area of the buildings proposed including their disposition, location and distribution;

(iii) the vehicular ingress and egress arrangements;

(iv) an indication of the locations for the parking of vehicles;

(v) any communal open space and an indication of landscaping and recreational facilities proposed; and

(vi) the stages or phases of the development.”

36.  In short, the purposes or objectives of a layout plan are, generally speaking, not to impose user restrictions. The purpose of the Layout Covenant, whether considered alone or in conjunction with the Final Layout Plan, is not to prescribe the uses of the buildings (or any particular parts thereof) proposed to be erected on the Lots. In our views, the words “Shop & Cinema” or “Cinema” appearing on the Final Layout Plan are descriptive of the intended use, rather than prescriptive of the permissible use, of the ground and first floors of the buildings on Site 1.

37.  Insofar as the language is concerned, the text of the Layout Covenant has been set out at §7(3) above. The expression “nature of the buildings” in the Layout Covenant is not further defined in the Land Grants. As noted above, the Layout Covenant imposes both positive and negative obligations on the grantee concerning (i) the submission of a general layout plan to the Director of Public Works for his approval, (ii) the development of the land in accordance with the approved layout plan, and (iii) the restriction against alteration of the layout of the proposed development as well as the “positions and nature of the buildings shown on the said plan”. On the face of it, the Layout Covenant does not impose any restriction on the use of the Lots or the buildings thereon. It is concerned with the general layout of the proposed development on the site. Although the Layout Covenant contains a prohibition against any alteration of the nature of the buildings as shown on the layout plan without the prior written consent of the Director, the “nature” and “use” of a building are two different matters. The reference to the “nature” of a building (or buildings) would include matters such as whether the proposed building would be a town house or a high-rise building, or the proposed development would consist of stand-alone buildings or a cluster of buildings erected upon a common platform or podium. For the purpose of disposing of the present appeal, it is not necessary to seek an exhaustive definition of the expression “nature of the buildings” in the Layout Covenant. On any view of the matter, it would be stretching the ordinary and natural meaning of the language used in the Layout Covenant to say that changing the use of the Premises (comprising only a shop on the first floor of Site 1 of Aberdeen Centre) could amount to an alteration of the “nature” of the buildings on the site.

38.  Ms Lok submits that on the true construction of the Layout Covenant, the requirement that “no alteration shall be made to the… nature of the buildings shown on the said plan without the prior written consent of the said Director” means that a person seeking to use part of Aberdeen Centre for a purpose contrary to that stipulated in the left column of the Final Layout Plan is required to obtain the prior consent of the Director.

39.  In support of this submission, Ms Lok makes 5 points. First, she argues that the “nature of the buildings” as stated in the Layout Covenant refers to the user stipulations in the left column of the Final Layout Plan. There are no other particulars of the buildings in the Final Layout Plan that “nature” could conceivably be referring to[9]. In our view, this argument would have some force if, at the time when the Land Grants were made, the Final Layout Plan was already in existence and had been approved by the Director of Public Works. However, the Land Grants were made in 1973, but the Final Layout Plan was only approved in 1979. Although there were various modifications made to the original Land Grants, the Layout Covenant was never modified. There is before the Court evidence of some earlier versions of the Final Layout Plan (including Drawing No L4 and Layout Plan No L5), but they were also submitted and approved after the date of the Land Grants. Other earlier drawings (such as Drawing No LIC) related to some wholly different development schemes. In the circumstances, it cannot not be said that the reference to the “nature of the buildings” in the Layout Covenant must have been intended to relate to the “user(s)” of the buildings as indicated in the Final Layout Plan. In this regard, it is relevant that the general layout plan to be submitted to the Director of Public Works under the Layout Covenant is required to show only “the positions, widths and levels of the roads that it is proposed to make, the positions, levels and dimensions of the site into which it is proposed to divide the lot, and the positions and nature of the buildings that it is proposed to erect”. There is no requirement that the general layout plan should also show or indicate the proposed user(s) of the buildings to be erected.

40.  Second, Ms Lok argues that the Director’s interpretation would ensure that the balance of commercial, retail and residential user recorded in the Layout Plan is maintained after development is completed. This, it is said, is in line with the background and purpose of Aberdeen Centre: a mixed-use development and a standalone, self-contained “town entity”[10]. The reference to “town entity” is a reference to a statement appearing in the PWD Land Conference Notes, §2.2 of which states that “[t]he site is well removed from the main urban areas on Hong Kong Island North and should develop into a well defined town entity…”. As mentioned above, in the absence of evidence that the contents of the PWD Land Conference Notes were communicated or made known to the Original Grantee, they are not admissible as evidence of the factual matrix for the purpose of construction of the Layout Covenant. In any event, the statement relied upon by Ms Lok is general. There is no requirement in the Land Grants that the balance of commercial, retail and residential users recorded in the general layout plan to be submitted under the Layout Covenant should be maintained after development, nor is there any evidence or basis to support the contention that permitting the Premises to be used as an elderly home (as opposed to “shop and cinema”) would have any adverse effect on the purpose of Aberdeen Centre (comprising 5 sites with some 20 buildings erected thereon) as a “mixed-use development and a standalone, self-contained ‘town entity’”.

41.  Third, Ms Lok argues that the Director’s interpretation is objectively reasonable and accords with business common sense[11]. While an interpretation which is contrary to business common sense or would lead to an unreasonable result should be avoided if an alternative reasonable interpretation is available, the mere fact that an interpretation is objectively reasonable or accords with business common sense is not a sufficient reason by itself to conclude that such interpretation is the correct one. The suggestion that after the proposed change of use of the Premises, Aberdeen Centre would no longer be a mixed commercial / residential development is unfounded. There is also no basis for the contention that acceding to the Plaintiff’s interpretation would mean that the moment that development was completed, the owner of Aberdeen Centre could freely change the user of the entire development for one type of use only[12]. Any material change of use requires the approval of BA. On the other hand, there is nothing unreasonable or nonsensical in the Plaintiff’s interpretation of the Layout Covenant.

42.  Fourth, Ms Lok argues that the proposed interpretation is affirmed by comparing the wording of the Layout Covenant with that of General Condition (4)(a) (ie the Building Covenant)[13]. We do not consider that a comparison of the two covenants, which perform different functions, would serve any useful purpose. In any event, the point that is being made by Ms Lok is that the Building Covenant refers to “amendment” of the general layout plan while the Layout Covenant refers to “alteration” of, amongst other things, the nature of the buildings, and it is said that “the word ‘alteration’ usually refers to changes to real world sites and buildings rather than changes to the underlying layout plans, as in the term ‘alteration works’”, and thus “it is clear that the General Layout Provision is referring to changes to the actual positions and nature of the buildings rather than changes to the Layout Plan”. Assuming that this is so, it simply does not follow that the “nature” of the buildings is to be equated with the “use” of the buildings.

43.  Lastly, Ms Lok argues that insofar as there is any ambiguity as to whether the Layout Covenant restricts alterations to (i) the actual nature of the buildings or (ii) the Final Layout Plan, such ambiguity should be resolved in favour of the Government[14]. This argument is based on a false dichotomy. The question in the present case is not whether the Layout Covenant restricts alterations to (i) the nature of the buildings or (ii) the Final Layout Plan, but whether it restricts alterations to (i) the “nature” of the buildings or (ii) the “use” of the buildings (or some individual parts thereof). There is, we consider, no relevant ambiguity in relation to the latter question.

44.  In all, we are of the view the Judge has come to the correct conclusion that the Layout Covenant, upon its true construction, does not impose any additional user restriction over the Premises, and the Plaintiff is entitled to the declaration granted by the Judge (referred to at §20 above). Having reached this conclusion, it is not necessary for us to consider Ms Lok’s criticism of the Judge’s subsidiary reasoning (referred to at §19 above)[15].

DISPOSITION

45.  The Notice of Appeal is dismissed with costs to the Plaintiff, to be taxed if not agreed.