GLORY DUTY INVESTMENT LTD. v. SECRETARY FOR JUSTICE

1998, No. MP 1968

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. This case gives rise to a short point of construction of a covenant in a lease. The lease was granted on 29 July 1938 in respect of a term of 75 years, with an option to renew for a further 75 years, commencing on 19 August 1935.

2. The covenant I am asked to construe reads -

". . . the said Lessee doth hereby covenant . . . that the said Lessee . . . will not erect on the said piece or parcel of ground any buildings except a house or houses of European type the design of the exterior elevations and the disposition of which shall be subject to the special approval of His Majesty's Director of Public Works . . . and shall as regards height and in all other respects comply with the Buildings Ordinance 1935 . . ."

3. By an originating summons, the plaintiff asks for a declaration that "the reference to the Buildings Ordinance 1935 . . . is a reference to the Buildings Ordinance from time to time in force", or a declaration that the reference "is otiose, unenforceable and no legal effect.".

4. By the covenant, any building on the land, as far as design of the exterior elevations and the disposition is concerned, must be approved by the Director of Public Works. I am told that no such officer now exists by that designation, but I am not asked to deal with this problem. If one exists, the answer probably lies in Chapter 1, or actions taken under it.

5. Further, by the covenant, the design of exterior elevations and the disposition, as regards height and in all other respects, shall comply with the Buildings Ordinance 1935. In this context, I take "disposition" to mean the relative position of the constituent parts.

6. That is the extent of the covenant. That is the only way to construe it grammatically.

7. To make sense of the words used, the covenant must be read as if it were set out as follows -

". . . the said Lessee doth hereby covenant . . . that the said Lessee . . . will not erect on the said piece or parcel of ground any buildings except a house or houses of European type the design of the exterior elevations and the disposition of which -

(i) shall be subject to the special approval of His Majesty's Director of Public Works . . . and;

(ii) shall as regards height and in all other respects comply with the Buildings Ordinance 1935 . . ."

8. If one is to pay any respect to syntax, the covenant cannot be read as saying -

". . . the said Lessee doth hereby covenant . . . that the said Lessee . . . will not erect on the said piece or parcel of ground any buildings except a house or houses of European type -

(i) the design of the exterior elevations and the disposition of which shall be subject to the special approval of His Majesty's Director of Public Works . . . and;

(ii) shall as regards height and in all other respects comply with the Buildings Ordinance 1935 . . ."

9. So, in my view, the covenant does not refer to the building generally; only to the design of the external elevations and disposition of it. The covenant is concerned with design, size and layout; nothing else. It follows that many of the problems that Mr Merry saw in incorporating the terms of the buildings law as it was at the date of the execution of the lease, such as the requirement of having a fireplace in the kitchen and other anachronisms, do not exist.

10. It must also be realised that the covenant does not say that the law relating to buildings as it is from time to time does not apply to buildings on this land. Indeed, it could not say that. The current law does apply, but the parties have agreed that their rights and obligations inter se, as concerns the design of the external elevations and disposition of buildings, shall be as stated in the law at the time of the execution of the lease.

11. The question of construction before me may be stated thus -

Does the provision in the covenant requiring that the design of the external elevations and disposition of a building erected on the land "shall as regards height and in all other respects comply with the Buildings Ordinance 1935" mean that there must be compliance with that Ordinance as it stood when the lease was entered into, or as it is in force 'from time to time'.?

12. Counsel are agreed that, where an agreement incorporates terms from some other source, the incorporated terms must be construed as if they had been written out in full in the agreement under consideration. If, then, this exercise were done in this case, the covenant would read "the design of the external elevations and disposition . . . shall as regards height and in all other respects comply with the following provisions . . .", and the provisions of the Buildings Ordinance relating to the design of external elevations and disposition as contained in that Ordinance when the lease was executed would be set out in full.

13. Mr Merry accepts the principle of this approach, but says this leaves open the question of what terms have been incorporated. I do not see why. If one carries out the exercise mentioned, the terms are clear; they can be nothing but a reflection of the relevant terms of the law as it then stood. Mr Merry also says this also leaves open what those terms mean in the context of the contract. I accept that, of course, but I do not see how this gets the plaintiff home.

14. I asked Mr Merry, if this exercise were carried out, how one would have thus incorporated into the covenant a provision saying something like ". . . but subject to any changes in these requirements that may be introduced by amendments to the law governing the erection of buildings." He conceded that there would no such provision, but what would be incorporated would be whatever were the terms of the Buildings Ordinance, or any other law governing this subject, when one looked at the covenant. In other words, what would be incorporated in 1938 might be very different from what was incorporated in 1950 or in 1999. It is not possible to identify, on this argument, the absolute terms of the covenant, only the terms of that covenant at a given time.

15. Of course, there is nothing wrong with the parties to an agreement providing that the contents of their agreement should change according to the changes in some other document; that is, by saying something like "subject to the General Conditions of Contract as amended from time to time" or "as contained in This and That Ordinance, as amended from time to time", but, if that is the intention of the parties, they must say so. I do not think I can say it for them. I cannot say to a party - "You agreed that the contents of your contract would not be known to you at the time you entered into it, but would be subject to change by some other person over whom you have no control", unless that party clearly accepted that. There is no basis here for saying that the parties clearly accepted that position.

16. In Smith & Another v South Wales Switchgear Co Ltd [1978] 1 WLR 165, the theme running through the speeches is that, for the purpose of ascertaining which of several editions of general conditions of contract was applicable, one looks at the version that should have been supplied if a party had asked to see it. In the case before me, if the lessee had asked to see the version of the Ordinance with which the size and layout of the building must comply, he would have been given the version then currently in force. If, instead, he was told - "Can't show you that. It may be changed from time to time by the legislature. You have to comply with the Ordinance in force at the time you erect a building.", I imagine he might have expressed some indignation and said - "You mean you are unable to tell me what my absolute rights are under this lease, just that they might change from time to time." Or, if he were given a copy in 1938, but he lost it, and asked for another copy in 1950, I think he might legitimately complain if the two versions differed. I appreciate, of course, that it is the lessee in this case which is seeking to say that the terms of the lease were a moving picture rather than a snapshot, but that does not change the principle of the proper approach.

17. It is of some interest to note that, in England and Wales, where the principles of the construction on contracts are the same as Hong Kong, it was thought necessary to make specific statutory provision to achieve the effect sought by Mr Merry. There, the Interpretation Act 1978 provides, in essence, that, where there has been a repeal and re-enactment, a reference in a deed or document to the enactment repealed shall be construed, unless the contrary intention appears, as a reference to the provision re-enacted. There is no such provision in our law.

18. I have been referred to a provision in the Revised Edition of the Laws Ordinance. This says -

"Whenever in any Ordinance, or in any document of whatever kind, any reference is made to any provision of any Ordinance affected by or under the operation of this Ordinance, the reference shall, where necessary and practicable, be construed as a reference to the corresponding provision in the revised edition or in any booklet published [hereunder]. . ."

19. This provision does not help. The relevant provisions of Building Ordinance 1935 are not "affected by or under the operation of" the Revised Edition of the Laws Ordinance. That Ordinance did not make the amendments to the Buildings Ordinance 1935; that allows only the rectification of "clerical or printing errors". This provision is there to deal with the alteration of numbering, and to ensure that the reference is made to the corresponding provision as renumbered. It is not the equivalent to the English provision I have mentioned. In any event, I do not see it as "necessary and practicable" to read a clear reference in a contract to the law at one time as a reference to a changed law at another time.

20. It may be, for all I know, that it was the common intention of the parties that the building restrictions should vary according to the law current from time to time. After this lapse of time, it may be impossible to say. In any event, this would be a matter of rectification, not construction. All I can do is construe the parties intention from the way in which they expressed it, assisted by the factual matrix. There is nothing in the factual matrix, such as it is, that tells me that the parties intended something other than what they said.

21. Accordingly, I must read the covenant as incorporating the terms of the Buildings Ordinance relating to the design of the external elevations and disposition as it was when the lease was executed, and, having done that, there is no way that I can see of construing those terms as incorporating a term saying "as amended from time to time". To incorporate such a term would amount to rewriting the lease, and, even if this were to make it, perhaps, more sensible and convenient, I cannot do that.

22. In the result, the application is dismissed.

23. There seems no obvious reason why costs should not follow the event. I make an order nisi that the plaintiff pay the defendant's costs.