UNITED BRIGHT LTD v. SECRETARY FOR JUSTICE

CACV 211/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 211 OF 2012

(ON APPEAL FROM HCMP NO. 382 OF 2011)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

1.  On 19 June 1939, Hong Kong government sold the land known as New Kowloon Inland Lot No 2690 [“the Lot”] at public auction. The Conditions of Sale contained, amongst other terms, the following:

“ (2) the purchaser will not be allowed to erect any buildings on the lot except detached or semi-detached houses of European type designed for the occupation of one family.

(3) The purchaser shall not at any time during the term of years for which the lot is leased erect on any part thereof a house with a compound of less than 7,000 square feet including the site of the house.

(4) The purchaser shall develop the lot to the satisfaction of the Director of Public Works and for this purpose shall provide a general layout plan showing the buildings which it is proposed to erect for approval by that officer before any buildings are commenced.

(5) No alterations or additions to the buildings will be allowed after plans have been approved, except with the consent in writing of the Director of Public Works.

(6) The design of the exterior elevations and the disposition and height of any building to be erected on the lot shall be subject to the special approval of the Director of Public Works and in no case may any building to be erected on the lot exceed 2 storeys.”

2.  The land was subsequently divided into different subsections.  The subject matter of this appeal is Section F of the Lot.  The plaintiff, as owner of Section F, intends to carry out a re-development by erecting a residential block with 37 storeys of residential flats above several floors of car-parks and recreational facilities on the land.  However, before it can do so, the plaintiff would need to obtain a modification from the government (and pay the necessary premium) in respect of the conditions mentioned above insofar as they are still applicable to Section F.

3.  In these proceedings, the plaintiff contends that the height and other restrictions in those conditions are no longer binding because of a previous modification by a letter of 15 May 1957 from the Registrar General.  The letter was in these terms:

“ Sir,

H.K.I.L. 2690, Secs. A, B, F, H & J

     I refer to your application addressed to the Director of Public Works and have to inform you that Government has approved the modification of the Conditions of Sale No. 3939 so as to permit of the erection of flats on the above Sections subject to the following conditions:

(a) Payment of an additional premium amounting to $33,550.00 for each Section within 14 days on demand.

(b) Buildings to comply with the following coverage limitations:

     3 storeys over car port - 55% of lot area

     4 " " " " - 45% " " "

     5 " " " " - 40% " " "

(c) Car parking to be at the rate of not less than 1 car per flat.

(d) Buildings to be in accordance with the provisions of the Buildings Ordinance and plans to be submitted to the Building Authority for approval in the usual way.

2. Except as thus modified all the Conditions of Sale No. 3939 shall remain in full force and effect.

3. Upon confirmation that your clients are desirous of proceeding on this basis, Demand Notes for additional premia will be forwarded to you for settlement by your clients forthwith.

4. On payment of the additional premia an appropriate endorsement will be made on the Conditions of Sale retained in the Land Office whereupon it is suggested that a copy of this letter be attached to the title deeds for each section in your clients’ possession for record purposes.”

4.  In the Court of First Instance, Deputy High Court Judge Sakhrani rejected the plaintiff's contention in a judgment of 31 July 2012.  From that judgment, the plaintiff appealed to this court.  After hearing submissions from counsel, we reserved our judgment.  We now hand down our judgment in the appeal.

5.  Mr Yu SC (appearing with Mr Lam for the plaintiff in this appeal but not below) identified in his skeleton submissions the following as the issues in this appeal:

(a) The Judge’s approach to construing the Lease Conditions, by having regard to correspondence in the 1950s to which only Van and Fong (the authorised architect) and/or the Government were privy, was wrong as a matter of law.

(b) Adopting the proper approach, the Judge ought to have held that the erection of flats on Section F was subject only to the conditions set out in Clause 1 of the Modification Letter, and not Special Conditions (2), (3) and (6) of the Conditions of Sale.

6.  Though counsel put the first issue at the forefront of his submissions, in his reply Mr Yu submitted that on the facts of the present case the correspondence in question did not provide too much assistance on what did not otherwise appear on the face of the letter of modification.  We shall therefore proceed to examine the question of construction first by reference only to the Conditions of Sale and the letter of modification.

7.  Apart from the admissibility of the correspondence between the parties for the purpose of construction, Mr Yu did not dispute that the approach in Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 is applicable in respect of construction of Government Leases as well as the letters of modification.  Nor can this be disputed in view of the application of that approach recently by the Court of Final Appeal in Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 and this court in New Mercury Holding Corporation v Secretary for Justice CACV 73 of 2013, 15 April 2014.

8.  In Fully Profit, supra, Ma CJ said at paragraph 15:

“We have been referred to the very well-known statement of principle regarding the construction of contracts contained in the speech of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society, to which can be added the judgment also of Lord Hoffmann NPJ in Jumbo King Ltd v Faithful Properties Ltd.  What emerges from these cases – and other authorities on contractual interpretation – is the overall importance of context when construing contractual terms.  The statements of principle in Investors Compensation Scheme and in Jumbo King refer time and again to the relevant background against which the relevant contract and contractual terms must be viewed.  It is in my view not particularly helpful in most cases to refer to the “ordinary and natural meaning” of words because, as very often experience tells us, there can be much debate over exactly what is the ordinary or natural meaning of words.  The surer guide to interpretation is context.  Here, I would just add that in the area of statutory and constitutional interpretation, it is context that is key; context is the starting point (together with purpose) rather than looking at what may be the natural and ordinary meaning of words.”

9.  Since the letter of modification of 15 May 1957 was to release the lessees from certain obligations or restrictions set out in the Conditions of Sale, the original restrictions in those conditions must form part of the relevant context for the construction of the letter.  Mr Yu accepted that the conditions set out at the beginning of this judgement are relevant.  The combined effect of these restrictions was that the only structure that could be built on each lot were detached or semi-detached houses of European type designated for the occupation of one family with a compound of not less than 7,000 square feet (in each house) not exceeding 2 storeys.  Further the design of the exterior elevations and the disposition and height of the building had to be approved by the Director of Public Works.

10.  In other words, the erection of multi-storey buildings with a number of flats (with each flat, possibly less than 7,000 square feet each, to be occupied by different families) was not permitted.

11.  Mr Yu placed emphasis on the control as to the density of development in the land as the purpose of these restrictions.  No doubt that was one of the important considerations for having these restrictions.  However, from the point of view of the Government as the lessor, there could be other considerations.  We need not speculate. Obviously, quite apart from planning considerations, if the land were to be occupied by larger number of family units, there would be more administrative work in terms of monitoring and enforcement of the lease conditions.  Moreover, as discussed below, there was also an economic consideration in terms of the premium to be extracted for modifications.

12.  Though there was also a height restriction of 2 storeys in Special Condition (6), it was an additional restriction to the main restriction that the design of the exterior elevations and the disposition and height ["DDH"] had to be approved by the Director.  It meant that the Director could not approve a house of more than 2 storeys.

13.  Turning then to the letter of modification of 15 May 1957, it was stated clearly in the letter that the purpose of the application was for a permit for “the erection of flats” on the lot.  As explained above, without such modification, the lessees could not build a multi-storey building consisting of a number of flats there, not even a block of flats of 2 storeys.

14.  The letter did not specifically address any modification of height restriction.  However, under paragraph (b), it was provided that the buildings (which could be blocks of flats) of 3, 4 or 5 storeys must comply with certain coverage limitations.  Thus, by implication, the modification must have released the 2-storey height restriction as far as buildings of 3, 4 or 5 storeys were concerned.  But there was no provision for any general release as to the requirement for the approval of the Director in respect of DDH.

15.  In Ying Ho Co Ltd v Secretary for Justice (2004) 7 HKCFAR 333, Ribeiro PJ held that the DDH clause in that case conferred a discretion on the Director the exercise of which is only limited by the principle of non-derogation of grant.  In other words, the exercise of the discretion must not undermine the contractual rights granted to the lessee under the Conditions of Sale.  Subject to that, the DDH clause did require the approval of the Director in respect of the height of a building to be constructed by the lessee.  That was so notwithstanding that no specific height limit was set out in the conditions.

16.  It is also noteworthy that in that case, the conditions also provided for site coverage under Special Condition 9(b) and there was no height restriction in there.  Counsel for the lessee relied on that to argue that height was contractually unrestricted. That argument was rejected by Ribeiro PJ at paragraph 122:

“ I do not accept the premise of that argument. Special condition 9(b) is concerned with defining various permutations involving the reciprocal relationship between height, site coverage and plot ratio, with a view to regulating permitted density at the Lot. It shows how certain variations in height and/or of site coverage result in different permissible plot ratios. It stipulates that the permissible plot ratio does not increase any further by virtue of extra height in respect of buildings which reach or exceed the height of 61 metres. Special condition 9(b) is not concerned with, and has nothing to say about, absolute height limits. It is therefore not correct to say that sc 9(b) leaves the DDH clause with no role to play since sc 9(b) permits building to unrestricted heights. On the contrary, the height limit issue is not addressed except by sc 9(e) which, on its face, provides that the building’s proposed height is subject to the Director’s approval.”

17.  Though the Conditions of Sale in Ying Ho were not the same as those in the present case, the overall scheme of the provisions relating to the DDH clause and the approval by the Director was similar.  In respect of the Lot, Special Conditions (4) and (5) also provided for the need to obtain the approval of the Director before development.  The DDH clause in Special Condition (6) has to be considered in such context.  We do not see any reason why the DDH clause in the present case should not be construed in the same way as the DDH clause had been construed in Ying Ho.

18.  Thus, as the learned judge correctly pointed out in his judgment, quite apart from the specific restriction of 2 storeys in the latter part of Special Condition (6), the DDH clause itself operated as an independent restriction in terms of the height of the buildings to be erected on the Lot.

19.  As we have seen, there is absolutely nothing in the letter of modification of 15 May 1957 which suggests that the DDH clause was modified in any respect.

20.  Mr Yu contended that one must have regard to the changes in the Building Ordinance in 1955 as part of the relevant context for the letter of modification in 1957.  In particular, counsel referred to two aspects of the legislative changes in 1955 to support his contention that the modification in 1957 should be construed as removing the height restriction in the DDH clause:

(a) for the first time, the Building Authority was given the statutory power under the Building Ordinance to disapprove plans which were in contravention of the town planning regime under the Town Planning Ordinance; and

(b) due to the repeal of certain sections in the old Building Ordinance of 1935, the changes in 1955 allowed buildings of more than 5 storeys to be built.  Under the statutory regime under the Building Ordinance 1955 (including the Building (Planning) Regulations 1956 ["the BPR 1956"]), height of buildings was limited indirectly through the concept of volume, see Reg 20 of the BPR 1956.

21.  Based on these changes in the statutory regime under the Building Ordinance, Mr Yu submitted that one should construe paragraph (d) of the letter of modification as displacing the power of the Director under the DDH clause in Special Condition (6).  In a nutshell, counsel said, as from the date of the letter of modification, all aspects of town planning and building control which were previously achieved by the DDH clause were to be undertaken by the Building Authority under the statutory regime of the Building Ordinance.

22.  With respect, we cannot accept these submissions.  The differentiation between the Director qua Building Authority in the exercise of the statutory powers under the Building Ordinance and the Director qua land agent for the government in administering the DDH clause is well established.  The question was considered by the Privy Council in an appeal from Hong Kong in Hang Wah Chong Investment  Ltd v AG [1981] 1 WLR 1141.  In that case, the court was concerned with another Conditions of Sale issued in the 1930’s which contained a DDH clause similar to the one before us.  At p.1145-6, Lord Edmund-Davies said:

“ The vital question is whether for the purposes of [the DDH provision] he can properly be regarded as being entitled to act in his capacity of land agent for the Crown. It is not open to serious doubt that those conditions relate directly to the landlord's interests, economic and otherwise, and their Lordships conclude that the Director was entitled to act, and did act, in that role when granting his qualified approval to the applicants' plans in 1976.”

23.  The case concerned the right of the Director to demand a premium for the approval of plan pursuant to a DDH clause.  It was held that the demand for premium was within the power of the Director as land agent of the government as lessor.  In other words, even if one accepts that the power under the DDH clause and those under the Building Ordinance could be exercised primarily for town planning purpose, this would not render the DDH clause otiose or ineffective in terms of the reliance on the same by the Director as a basis for demanding a premium to protect the economic interest of the government as lessor.  Thus, a DDH clause serves the interest of the government as lessor beyond the public interest in planning control. Once this is appreciated, it is not possible to suggest that the DDH clause had been displaced by the planning control in the statutory regime under the Building Ordinance.

24.  It follows that the legislative changes in 1955 per se could not have the effect of abrogating the DDH clause and the director could at all times up to 1957 rely on that clause to demand a premium for the approval of the height, disposition and design of a proposed building.  Mr Yu however submitted that this was changed in 1957 by reason of the letter of 15 May 1957.  We have already alluded to the absence of any express provision to such effect in the letter.  Nor can we see any basis for saying that the terms of modification has that effect by way of necessary implication.  The reference in paragraph (d) to compliance with the provisions of the Buildings Ordinance cannot carry with it the implication that henceforth the DDH clause had no further effect.  As demonstrated by Hang Wah Chong and Ying Ho, there is no reason why the DDH clause cannot co-exist with the statutory regime under the Buildings Ordinance though they, to a certain extent, overlap in respect of the control over the use of the land.

25.  In this connection, we do not derive much assistance from Mr Yu’s citation of the judgment of Litton PJ in Jumbo Gold Investment v Yuen Cheong Leung (2000) 3 HKCFAR 52 at p.59.  In that judgment, His Lordship dealt with the question of risk of enforcement of a lease condition in spite of knowledge on the part of the Director of Public Works of building erected contrary to it whilst approval had been given under the Buildings Ordinance.  That is a separate issue from the one we have to consider.

26.  Nor do we find the very brief judgment of Finlay J in Polorace Investments Ltd v Director of Lands HCMP 703/1996, 1 May 1997, to be of much avail to Mr Yu’s case.  At the highest, that case only decides that the provision for what can be described as site coverage could not be interpreted as a height restriction.  Putting it to its highest, the plaintiff may rely on it to contend that paragraph (b) in the letter of 15 May 1957 does not impose any height restriction.  However, the judgment had nothing to do with DDH clause.  The question of the right to demand a premium under the DDH clause had been raised but struck out, see the earlier decision of the Court of Appeal in [1997] 1 HKC 373.  Thus, the judgment of Finlay J does not have much bearing on the question before us.

27.  We conclude, even without regard to the correspondence which Mr Yu contended to be inadmissible, that as a matter of construction the DDH clause had not been abrogated by the modification in 1957.  In light of that, we agree with the judge that the court should not grant the relief in the originating summons and the appeal must be dismissed.

28.  The correspondence in question was recited by the judge at paragraphs 8 to 21 of the judgment below. It would appear from such correspondence that due to the objection from one of owners in the other sections of the lot, an application for modification was stalled at one stage.  That problem was resolved in 1955 after the sale of his interest by the person who objected.  The application was then met with difficulty in terms of water supply.  It was only in late 1956, after the Diamond Hill Service Reservoir had been completed, that there was renewed consideration to the application.  The relevant letter for the renewed consideration was a letter of 5 October 1956 from the Public Works Department which could no longer be located.  Based on the subsequent letter of 11 March 1957 from Mr Duff, the architect acting for the lessees, to the Superintendent of Crown lands and the internal minutes M33 kept by the Director of Public Works, the terms proposed were exactly the same as those set out in the letter of modification of 15 May 1957.  As such, we agree with Mr Yu that the letter of 5 October 1956 did not add much to the materials for the exercise of construction.

29.  But the case of the Director was that what happened in October 1956 was not the consideration of a fresh application.  Rather, it was the renewed consideration of a pending application which had been made in 1955.  And the application was, as described in a letter dated 16 June 1955 from Deacons (as solicitors for the lessees) to the Registrar General for permission to erect “buildings containing not more than four flats on each of the six sites”.  The architect acting for the lessees was the same architect who pursued the application with the Director subsequently in 1956 and 1957.

30.  This appears to be the basis on which the matter was argued before the judge.  And that was how the judge considered the application, see paragraphs 41 to 45 of the judgment below. There was no submission before the judge that the application considered in 1956 was a fresh application.  This finding was not challenged in the Notice of Appeal and it is not open to Mr Yu to argue on a contrary basis in the appeal.

31.  The judge referred to earlier correspondence and also the internal calculation of premium by the Public Works Department in coming to the conclusion that the modification was limited in extent.  Counsel appearing for the Plaintiff at the court below (not Mr Yu nor Mr Lam) did not refer the judge to the authorities now relied upon by Mr Yu to advocate a restrictive approach in the admissibility of such correspondence and calculation: Slough Estates Ltd v Slough Borough Council [1971] AC 958; Opua Ferries v Fullers Bay of Islands Ltd [2003] 3 NZLR 740; Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 and Cherry Tree Investments Ltd v Landmain Ltd [2013] Ch 305.  However, counsel had objected to the admissibility of the correspondence and internal calculation on the basis that they were either declarations of subjective intent or facts in the course of negotiations. 

32.  Irrespective of the merits of Mr Yu’s contention based on those cases, we agree with Mr Fung SC that it must be open to the court to have regard to the correspondence in order to identify the subject matter of the application.  In Slough Estates Ltd v Slough Borough Council, supra., the House of Lords held that the court could have regard to the correspondence to ascertain the subject of a planning application when the planning permission was not complete or self-contained on its face, see Lord Pearson at p.967H to 968C.

33.  In the present case, the letter of modification of 15 May 1957 addressing Mr Duff started as follows:

“ I refer to your application addressed to the Director of Public Works and have to inform you that Government has approved the modification of the Conditions of Sale No 3939 so as to permit of the erection of flats on the above Sections …”

34.  Thus, it was meant to be read together with the application by Mr Duff on behalf of the lessees.  It was an application for permission to erect flats (as opposed to houses of European types as prescribed by Special Conditions (2) and (3)).  Insofar as there is any ambiguity as to the subject matter of the application in terms of whether it embodied an application for the modification of the DDH clause, the Director was entitled to ask the court to take account of extrinsic evidence including correspondence in that application to resolve the same, see Chitty on Contracts 31st Edn paragraph 12-123; Lewison, The Interpretation of Contracts 5^th Edn paragraph 11.03.  We do not read any of the authorities cited by Mr Yu to cast doubt on this on well established proposition.  And that was the extent to which the judge made reference to the earlier correspondence.

35.  The same can be said with regard to the judge’s reference to the internal calculation of premium. Mr Yu criticised the judge in placing reliance on that calculation in the absence of evidence of knowledge of the same by the lessees.  As stated by the judge at paragraph 53 of the judgment below, the judge was keenly aware of the lack of such evidence.  He dealt with it as follows:

“ 53. There is no evidence that the detailed calculations in arriving at the agreed premium of $33,500 were ever shown to the lessees or their professional advisers, Deacons or Duff. However, although they may not have seen the detailed calculations of the premium amount which was agreed and charged, they must have known that the premium was calculated on the basis of the Government policy in force at that time.

54. The lessees knew of the terms of the proposed modification as they were set out in the letter dated 5 October 1956.  The terms have been set out above at paragraph 21.  The types of building that were mentioned were buildings of 3, 4, and 5 storeys over carport and the coverage limitations set out therein.  It seems to me that the professional advisors of the lessees must have realised that the amount of premium proposed and agreed for the modification was on the basis that buildings of up to 5 storeys over carport could be erected after the modification although they may not have had the detailed calculations that were mentioned in the internal minute M33.”

36.  These paragraphs have to be read together with what the judge had said earlier in respect of the Government policy as to setting of premium and common knowledge as to the same in the professional circle:

“ 47. The Government’s policy at the time of the modification granted by the Modification Letter in 1957 was that in the case of a pre-war Crown lease a premium of 50% only was charged (rather than the full value) of the difference between the value of the land subject to the restricted use and the value of the land after modification.

48. There is no dispute that the Government’s policy was known to the professionals as memoranda were circulated by the Government to professionals on the Government’s policy on premiums for modification. An example of this is the Land Office Circular Memorandum No. 39 dated 8 December 1972 to all solicitors. By this memorandum they were informed that the policy of charging premium at 50% of the amount by which the value of the land is increased as a result of the modification was to be changed to charging premium at the full value by which the land is increased as a result of the modification.

49. The professional advisors acting for the lessees in 1957 would have known of the Government’s policy at that time of the Government charging premium at 50% of the amount by which the value of the land is increased as a result of the modification.”

37.  We do not find any flaw in such reasoning.  Since the judge was concerned with the aim of the modification as opposed the meanings of the conditions laid down in the letter of modification, he was entitled to refer to extrinsic evidence to resolve the same.  The admission of such evidence for this purpose is on a different footing from the admission of evidence for the interpretation of the terms of a contract, see Prenn v Simmonds [1971] 1 WLR 1381 at p.1385 and Chartbrook Ltd v Persimmon Homes [2009] 1 AC 1101 at paragraph 42. In the former, Lord Wilberforce said:

“ It may be said that previous documents may be looked at to explain the aims of the parties. In a limited sense this is true: the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact. Cardozo J. thought so in the Utica Bank case. And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go: it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention: the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways.”

38.  Thus, it is permissible to refer to objective facts known to both parties in ascertaining the aim of the transaction.  In the present context, the objective facts as founded by the judge in respect of the premium, are as follows:

(a) There was a known Government policy for the setting of premium relating to a modification by reference to 50% of the increase in the land value upon modification;

(b) The professional advisors of the lessees had knowledge of such policy;

(c) The premium was calculated in accordance with such policy by reference to a relaxation of height up to 5 storeys as opposed to a complete abrogation of the DDH clause;

(d) Though the advisors had not been supplied with the details of the calculation, they would have no difficulty in working out whether the amount demanded by the Government by way of premium was consistent with the policy and the extent of relaxation;

(e) The lessees agreed to pay the premium accordingly.

39.  Mr Yu further submitted that there was no expert evidence on the increased value of the land and it could not be inferred that the premium demanded (and agreed upon) was only on the basis of a relaxation of height up to 5 storeys as opposed to the full abrogation of the DDH clause.  We do not accept that this should detract from the utility of such evidence for present purposes.  Insofar as the valuation of the increased value of the land is concerned, the internal minutes containing the calculations are evidence on the same.  We accept it is not independent expert evidence.  However, there has not been any challenge that these were calculations by person with the requisite expertise in the Government.  And the purpose of this exercise is not to challenge the quantum of that valuation. Rather the purpose is to see whether the premium was calculated in respect of a relaxation of height up to 5 storeys or a complete abrogation of the DDH clause.  The court does not need expert evidence to know that there was an  immense difference between a relaxation up to 5 storeys and one for the complete removal of the DDH clause.  The lessees in 1957 could not have been mistaken as to the extent of relaxation.

40.  Hence, we do not find the judge to be in error in having regard to the correspondence and the calculation of premium in ascertaining the subject of the modification.

41.  In light of the above conclusions, it is not necessary for us to consider at length Mr Yu’s submission that one should not have regard to extrinsic evidence in private correspondence or minutes in the interpretation of a document registered in the Land Registry.  By way of obiter, in deference to the submissions advanced before us, we will say as follows:

(a) We agree with Mr Fung that there is no principle of law which proscribes any reference to extrinsic evidence (viz those not accessible to those who were not immediate parties to the transaction) in aid of interpretation of a document which has been registered in the Land Registry in Hong Kong.  There are many cases in this jurisdiction where the courts have referred to such materials in aid of interpretation of documents affecting land which had been registered at the Land Registry.  In a dispute arising from deed of mutual covenants, parties often referred to extrinsic materials in order to ascertain the effect of a particular provision, see for example Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279.  Likewise, in the context of the interpretation of Government Lease, see Fully Profit v Secretary for Justice (2013) 16 HKCFAR 315; New Mercury Holdings v Secretary for Justice CACV 73 of 2013, 15 April 2014;

(b) We also agree with Mr Fung that the nature of the documents and transactions in question in Slough Estates Ltd v Slough Borough Council [1971] AC 958, Opus Ferries v Fullers Bay of Islands Ltd [2003] 3 NZLR 740 and Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 are materially different from the letter of modification with which we are concerned.  In those cases, the courts were concerned with public documents which were intended from its inception to address the public at large rather than the immediate parties to the transactions.  Here, the letter of modification governs the rights and obligations between the Government and the lessees (and their successors in title);

(c) We do not agree with Mr Yu that there is a material distinction between the reference to objective factual circumstances at the time of the transactions like the physical state of the properties or the ways in which a portion of a property had been used and the background revolving around the dealings between the parties in determining the admissible evidence on the factual matrix for the interpretation of the documents registered in the Land Registry.  In all those cases, there is a risk that the subsequent third parties/ successors who acted on the registered document would be affected by materials unavailable to him which might have an impact on the interpretation;

(d) The registration system under our Land Registration Ordinance is different from those in England and Australia.  As it is, what we have in Hong Kong is still a registration of documents without any guarantee as to the titles conferred by such documents.  Due to such significant difference, the rationale in Cherry Tree Investments Ltd v Landmain Ltd [2013] Ch 305 and Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 cannot be applied, at least not with equal force, in Hong Kong; and

(e) In the Hong Kong conveyancing and related context, an intended purchaser or third parties intending to act on a letter of modification is expected to make inquiries with the Lands Department if there is doubt as to the effect of such a letter.  It is unrealistic and unimaginable that a purchaser, faced with a letter of modification in terms of the letter of 15 May 1957, would simply act on the basis that the DDH clause had been abrogated by it without at least making such inquiries.  Hence, we do not see any potential  for injustice in allowing evidence of relevant factual matrix to be admitted in accordance with the general law as set out in Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 and Fully Profit v Secretary for Justice (2013) 16 HKCFAR 315.

42.  For these reasons, we dismiss the appeal with costs.  We would also grant a certificate for two counsel.